CORNELL UNIVERSITY LIBRARY GIFT OF Prof, J. W. Jenks CORNELL UNIVERSITY LIBRARY 3 1924 092 545 411 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924092545411 HEARINGS BEFORE THE INDUSTRIAL COMMISSION ON THE SUBJECT OP TRUSTS AND INDUSTRIAL COMBINATIONS, IN PURSUANCE OP AN ACT OF CONGRESS AUTHORIZING THE APPOINTMENT OE A NONPARTISAN COMMISSION TO COLLATE INFORMATION AND TO CONSIDER AND RECOMMEND LEGISLATION TO MEET THE PROBLEMS PRESENTED BY LABOR, AGRICULTURE, AND CAPITAL, APPROVED JUNE 18, 1898. WASHINGTON: GOVERNMENT PRINTING OFFICE. 1899. liO MEMBERS OF THE INDUSTRIAL COMMISSION. Senator JAMES H. KYLE. Mr. S. N. DEXTER NORTH Senator BOIES PENROSE. till July ,, 1899. Senator STEPHEN R. MALLORY. Mr. ALBERT CLARKE Senator JOHN W. DANIEL. after July 1, 1899, Representative JOHN J. GARDNER. Mr. ELLISON A. SMYTH. Representative WILLIAM LORIMER. Mr. JOHN M. FARQUHAR. Representative L. F LIVINGSTON. Mr. EUGENE D. CONGER. Representative JOHN C. BELL, Mr. THOMAS W. PHILLIPS Representative THEOBOLD OTJEN. Mr. CHARLES J. HARRIS. Mr. LEE MANTLE. Mr. M. D. RATCHFORD. Mr. ANDREW L. HARRIS. Mr. JOHN L. KENNEDY. <■! . (V (,) \ ^ \Q. J INDUSTRIAL COMMISSION. TRUSTS AND INDUSTRIAL COMBINATIONS. Washington, D. C, April 7, 1899. TESTIMONY OF MR. F. B. THURBER, President United States Export Association. The commission met at 10.45 a. m., Vice-Ctiairman Phillips presiding. Mr. F. B. Thurber, President of the United States Export Association, appeared and tes- tified on the subject of industrial combinations. Mr. Thurber. Mr. Chairman and members of the Industrial Commission: In the first place I wish to thank you for hearing me to-day, because it will not be possible for me to be here next month. That was the reason I requested to be heard to-day, if possible. In order that I might be reasonably brief and not take up more of your time than necessary, I have put on paper substantially what I have to say. It may suggest some questions concerning the subject in hand. With your permission I will read it to you. I thought that my remarks would come within that department which Mr. Jenks has been working up for you in regard to the organization of industries into trusts, etc. I might say incidentally that I met Mr. Jenks at Albany, N". Y. , some weeks ago. and he told me you had employed him to work up this question of the organization of industries into trusts and its effects upon commerce and the pub- lic interest, and expressed the wish that I put together the ideas which I had expressed from time to time upon the subject. (Reading:) THE ORGANIZATION OP INDUSTRY — ITS EFFECT UPON LABOR, CAPITAL, AND THE PUBLIC INTEREST. For many years as a merchant, and more recently as President of the United States Export Association, I have studied the effect of aggregations of capital commonly known as " trusts " upon our commercial, industrial, and political sys- tem. I may say that when I began it was with a strong prejudice against them. I believed that they would tend to oppress the public with high prices and also that their political influence was to be feared. I had no conception that they were a natural economic development consequent on the development of the great forces which now control the world — steam, electricity, and machinery — or that there was any rational basis for their existence. Biit a careful study of their effect, ranging over a period of years, has materially modified my opinion. The best horse vnll shy at an umbrella if it is opened in his face too suddeiily, and the economic results of these great forces have been so sudden and startling that it is perhaps natural that even intelligent men should " shy '' at them until, like the horse, they can smell of them and see that they are not dangerous. The " trust " is a result of these forces. 3 4 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. COMBINATIONS AMONG RAILROADS THE FIRST TRUSTS. The first prominent development of the trust organization in this country was in the consolidation of numerous lines of railroad into trunk lines, and there was a fear in the public mind (in which I shared) that these combmations and con- solidations would result in exorbitant rates for transportation and to tne aetri- ment of the public interest. What the result has been is shown by the tollowmg extract from a report adopted by the National Board of Trade at its annual con- vention in 1896: . , , ^ -1 10 * l-\,r. -.^^cJ- " The average charge for sending a ton of freight 1 mile on 13 of the most important railroads in the United States during 1865 was 8.08 cents; m 1870, 1.80 cents; in 1875,1.36 cents; in 1880, 1.01 cents; in 1885, 0.83 cent; m 1890, 0.77 cent; in 1893, 0.76 cent; in 1894, 0.746 cent, and in 1895, 0.730 cent. Since 1895 the figures have not varied so largely, but have shown a constant tendency downward. These railroads performed one-third of the entire transportation ot l«y5, and from the figures given it appears that 0.73 cent would pay for as much transporta- tion over their lines in 1895 as could have been obtained for 3.08 cents dO years rtQ T*l i PV This' reduction, amounting to three-quarters of the average rate of 1865, was exceeded by the reduction in price of but few even of those articles m the manu- facture of which new inventions have worked the most radical changes. The entire transportation performed by the railroads of the United States during the 13 years ending June 30, 1894, was equivalent to moving 136,799,677,833 passengers and 807,935,383.838 tons of freight 1 mile. Had rates averaging as high as those of 1 883 been collected on this traffic, the railroads would have earned .$3,639,043,459 more than they actually received. THE STANDARD OIL TRUST. The next most prominent aggregation of capital in the commercial world is known as the Standard Oil Company, and the effect upon the price of oil is illus- trated by the following statistics, compiled by the United States Government, showing the wholesale export price for refined petroleum for the period extending from 1871 to 1898: Prices of refilled illuminating oils per gallon exported from the United States, 1S71 to 189S. (The prices represent the market value of article at time of exportation.) Year. Cents. Year. Cents. Year. Cents. 1871 25.7 24.9 2.3. ,5 17. .3 14.1 14.0 31.1 14.4 10.8 8.6 1881 -. 10.2 9.1 8.8 9.2 8.7 8.7 7.8 7.9 7.8 1890 7.4 1873 1882.. 1883 1891 - 7.( 1873 1892 5.( 1874: 1884 1893 --- 4.9 1875 188,5 .- 1894 4.:. 1876 1886 1895 - 4.! 1877 IKsr.. 189B 8.b 1878 1888 1897 6.3 1879 1889 1898 5.7 1880 - This great decline in the price of oil is attributable partly to the increase in production, but more largely to improvements in manufacture and transporta- tion, which were only attainable through the aggregation of capital in this industry. THE SUGAR TRUST. Among the more prominent of the recent so-called trusts is that of the Amer ican Sugar Refining Company, which is a corporation formed under the laws o) the State of New Jersey for the purpose of consolidating the sugar -refining inter ests of the country, and until recently, when additional capital flowed into this channel, it did about 85 per cent of the sugar-refining business in the Unitec States. The effect of this is shown by the following table, giving the price o both raw and refined sugar, with the different margins during the'^0 years prioi to the consolidation and 9 years since. TRUSTS AND INDUSTRIAL COMBINATIONS: — THURBER. Average price. Year. Centrif- ugals, raw, per pound. Granu- lated, refined, per pound. Differ- ence, per pound. Year. Centrif- ugals, raw, per pound. Granu- lated, refined, per pound. Differ- ence, per pound. 1879. Cents. 7.423 8.206 8.251 7.797 7.423 5.&57 5.729 5.336 5.245 Cents. 8. 785 9.602 9.667 9.234 8.506 6.780 6.441 6.117 6.013 Cents. 1,362 1.396 1,416 1,437 1,083 0.923 11,712 0,781 0. 768 1888 Cents. 5.749 6.433 5. 4.51 3. 863 3. 311 3.689 3.2.58 3. 631 Cents. 7.007 7.640 6.171 4.691 4.346 4.842 4.119 4.140 4.539 Cents. 1 258 1880 1889 1.207 7"(l 1881 1890 1882. 1891 1883 1892 1 035 1884 1885 1886. 1887a 1893 1894 1895... 1896 Average, 9 years 1.153 0.884 0.882 0.908 Average,9 years 6.807 7.905 1 098 4.291 5, 272 0.981 a The trust was formed in 1887. Since 1896 prices have been affected by changes in the tariff, and during the past few months by increased competition consequent upon the construction of new refineries, which have reduced margins to an absolutely unremunerative point. The figures for 1897 and 1898 are as follows: Year. Centrif- ugals, raw, per pound. Granu- lated, refined, per pound. Differ- ence, per pound. 1897 ^ 1898 Cen ts 3.5.50 4.240 4.370 Cents. 4.500 4.970 4.940 Cents. 0.9.50 730 March 30, 1899 0.570 This reduction in price has been effected partly by increased production and largely through buying the raw material cheaper than when a lai'ge number of separate refiners were competing for the product. Large economies were also effected by closing inferior plants and enlarging and extending superior ones. The American Sugar Refining Company has bought its raw material cheap, biit it has given the public the benefit of such purchases, merely retaining as its profit about one-third of a cent per pound, which, considering the nature of the business, is a reasonable one. It employs more labor and pays higher wages than was employed and paid before the organization of this industry. EFFECTS OF THIS INDUSTRIAL EEVOLUTIOX ON LABOR AND PROFITS. These illustrations are but types of many in the evolution of industries, which is the result of the great forces before mentioned, and which have revolutionized the entire economic situation. That there have been instances of hardship and injustice attending this revolution can not be doubted, but it is equally certain that the total results have been beneficial to the public at large and to the inter- ests of the laboring classes especially, who constitute the majority. At some stages of this evolution this remark was, perhaps, not true. The action of these forces was so rapid that men were thrown out of employment faster than wants were created and industries widened. Labor, however, soon followed the exani- ple of organization which capital had set, and during the last decade the organi- zation of labor has progressed faster than that of capital, and has forced a division of a larger share of the profits of industry for labor than at any previous period of history. In other words, the profits of capital have been steadily decreasing, while those of labor, and especially of organized labor, have steadily increased. At no previous period would a dollar buy so much of the necessaries and comforts of life as at present. While this is admitted by intelligent laboring men, ihany of them contend that opportunities for earning a dollar have constantly dimin- ished; and they are now seeking, by the advocacy of shorter hours for labor, to make employment for a larger number of persons. I believe that this is a worthy 6 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and beneficent aim. It is better to have a larger number of persons employed for 8 hours than a smaller number of persons 10 or 13 hours. Unrest ot laDoi m a free country is not a dangerous phenomenon, but rather a safety valve, ana one which capital can afford to encourage. At the same time it must not be torgotten that education of the masses has created new wants, and that these wants^ nave grown faster than the means of gratifying them. The problem should be viewed from both sides, and only what is reasonable should prevail. Wherever uniini- ited power exists it is usually accompanied by tyranny, whether of labor or capital. There are labor trusts as well as capital trusts, and in all the annals ot combina- tion there are no greater illustrations of tyranny than the attitude ot some ot tJie labor organizations toward laborers. This, however, was the inevitable outcome of organization and of the evolution which is now going on throughout the world under the operation of the great forces that now control the world— steam, elec- tricity, and machinery. Under the operation of these forces the world has been growing richer. All the resources of nature are being developed. Capital ha,s increased faster than the opportunities for its profitable employment, as is evi- denced by the steadily decreasing rate of interest. I used to think that combina- tions of capital would abrogate competition, but experience has shown that, instead of abrogating competition, it has elevated that force to a higher plane. If a combination of capital in any line temporarily exacts a liberal profit, immedi- ately capital flows into that channel, another combination is formed, and compe- tition ensues on a scale and operates with an intensity far beyond anything that is possible on a smaller scale, resulting in the breaking down of the combination and the decline of profits to a minimum. TENDENCY OP PROFITS TO A MINIMUM ILLUSTRATED BY THE SUGAR AND COFFEE INDUSTRIES. A striking illustration of this is found in the sugar and coffee industries to-day. Arbuckle Brothers had attained a commanding position as roasters and sellers of coffee, and they also sold but did not refine sugars. Because the American Sugar Refining Company would not sell to them cheaper than to other buyers of sugar, they decided to go into the sugar -refining business, whereupon leading spirits in the American Sugar Refining Company, seeing that the margin of' profit in the coffee business was good, decided to go into roasting and selling coffee. The result has been that this contest of giants has reduced the profits in both industries to a minimum, if not to a positive loss, making it hard for smaller manufacturers and dealers to live, but saving millions of dollars for consumers that would otherwise have inured to manufacturers and dealers. COMPETITION AND PUBLICITY SAFEGUARDS TO CONSUMERS AND STOCKHOLDERS. The only trusts which have succeeded for any length of time have been those which have been conducted on a far-sighted basis of moderate margins of profit, relying upon a large turn over and the economies resulting from the command of large capital intelligently administered. The truth of this is illustrated by innu- merable failures in trust organizations to control prices, recent illustrations of which are the strawboard trust, the starch trust, the wire-nail trust, and the old steel trust. There are trusts, so called, in nearly every branch of business, and there is good and bad in all, but the good so far predominates that such aggregations of capital should be encouraged, accompanied by safeguards against abuses. The only additional safeguards needed are for stockholders and investors, whose interests are often sacrificed through lack of publicity. The average investor is the chief sufferer. So far ;is the interest of consumers is concerned, it is amply protected now— first, by competition, as I have sliowu. and second, by the common law. which, if invoked, will nullify jiiiy contract in restraint of trade and subject any unreasonable combination to indictment for conspiracy. Special "trust "' statutes are not necessai-y, although many have been enacted' ()VEE( 'APITALIZ ATION . The evil of overcapitalization is oftc^n condeniDed. a,nd no doubt it is an evil, but it hurts its authors as often as it docs investors, although, perhaps, not to the same extent. It is very difficult to estimate actual values where earning power is such a large factor, and this, as is well known, ^-aries greatly with the chano-- ing conditions of trade. At present trade is good, money is easy, and we see great activity in the formation of " trusts " with enormous capitalizations whose TRUSTS AND INDUSTRIAL COMBINATIONS: — THURBER. 7 value only time can prove; but it is safe to say that there will come periods of business depression when it will not be possible to earn dividends, and these securities will find their level. A large capitalization can not increase earning power, but it may serve to con- ceal the percentage of earnings on the actual cost of some properties and furnish counters with which to juggle in the stock market. In many industrial proper- ties the "good will," which is a property created by brains, industry, time, and population, is the principal value. Unlike a railroad or gas company this can not be reproduced, and the sole measure of capitalization is its earning power. What other measure can there be to the capitalization of a newspaper or ordinary industrial company? Never before has there been so much necessity for caution and investigation on the part of investors. This is illustrated by the following from a recent circular of Messrs. Watson & Gibson, a leading firm of bankers and brokers in New York: OPINION CONCERNING INDUSTRIAL STOCKS. " The maniifacture of securities goes on so rapidly now that ' the Street,' liter- ally the street, is full of them, as the stock exchange can not list them as fast as they come out. There never has been such a ' curb ' market before. The list is a long and growing one. Wall street has got to educate itself in a variety of industries. It used to study railroading and transportation only, paying but lit- tle attention to the methods, details, and statistics of individual industries. In the near future we must inform ourselves in a general way, at least, as to steel billets, barbed vrire, freight oars, paper bags, baking powder, electric and air power cabs, passenger and freight elevators, hard-rubber goods, typewriting- machines, smelters, cigars, cigarettes, beet-root sugar, pumps, potteries, etc. Our horizon is widening; we are getting espansion in Wall street, and getting it all at once. Bankers and brokers are looking over these new candidates for loans and marginal accounts, and are proceeding with great caution. They are not so enthusiastic as the promoters of these various consolidations, and therein lies the safety of the situation. If bankers and brokers had joined promoters in their mad craze to overcapitalize, and had aided and abetted them in enticing the pub- lic in on easy terms of marginal purchases, the situation would by this time have become dangerous. The industrial stocks will have a checkered career. Some will be admitted into the inner circles of credit among bankers, some will stay outside in the cold, many will appeal sooner or later to speculative favor, and finally the test of time will separate the sheep from the goats. It will be difficult to find skilled managers who can successfully conduct the new combinations, and great crashes will come within a year or so that will wreck the whole market. There will be as many Cordages as Standard Oils, and probably more, but we are not yet in their shadow.'' STOCK COMPANIES PROMOTE A WIDER DISTRIBUTION OF WEALTH. The fact remains, however, that stock companies are industrial partnerships, usually composed of a large number of small partners as stockholders, and that both profits and losses are much more widely distributed under this organization of industry than under former conditions. I vtHI give you an example of that. There were 9 sugar-refining firms con- solidated into the American Sugar Refining Company. There was an average of 3 partners to the finu, making 37 persons interested. As soon as it was put into an industrial corporation the number of stockholders began to increase until rrow they are numbered by the thousands. INDIVIDUALITY NOT IMPAIRED BY TRUSTS. The theory has been advanced that the oi'ganization of industry into " trusts " dwarfs individual effort and diminishes individual opportunity. I do not think this is true any more than the enlistment of bushwhackers in the Regular Army dwarfs effort and diminishes opportunity. The bravest, wisest, and strongest natiirally become officers in the organization of industry, and those less capable become the rank and file, with opportunity for promotion based on merit. Luck and opportunity, doubtless, have something to do with leadership, biit the fact remains that steam, electricity, and machinery have forced the organization of industry, and it is now a contest of nations for the trade of the world. We can not all be generals or admirals in industrial organization, but we can try for it, and it is better to be a good private than to be an eminent bushwhacker. 8 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Representative Gabdnee.) That is a matter upon which one hears com- ments frequently— the opportunities which exist for going into business, it is a common thing to hear men say, "I can not put my son into business. Combines, department stores, trusts, etc., absorb everything." Now, do I understand you to mean that, in the evolution of the world's industry, natural conditions have grown up in all countries which will operate without regard to particular local institutions— in other words, that the evolution is an irresistible one?— A. That is my idea; and I think there is a place for everybody in this new organization of industry, as much so as when it was entirely in the hands of individuals. A man may not be able to put his son into business in a small way on his own account, but he can find a place for him in some large institution which will enable him to have as much scope for his energies and efforts as he would have if working on his own individual account. Q. It shifts the opportunity, but does not destroy it; that is your theory?— A. That is my theorv. (Continues reading.) The popular hostility to trusts is due principally to lack of knowledge of their economic effects, and these are gradually becoming better known. There have been just enough abuses attending them to give an excuse for sensational journal- istic denunciation, and this has caused undue prejudice. A great politico- economic question like this should be considered dispassionately, and all sides of it carefully investigated before conclusions are reached. As before stated, the result of my many years of study of it has been to materially modify the views I entertained in the beginning. The editor of the United States consular reports for August. 1898, in discussing industrial centralization in Europe, says: THE PRESENT A PERIOD OP CENTRALIZ.^TION IN INDUSTRY. "Our period is distinguished by its tendency to centralization, not only in the State, but likewise in industry and commerce. Large firms are competing with small shops to such an extent that the latter are disappearing one after another. The factory has displaced the workshops. Everything is being done on a large scale. Everything is becoming colossal. That is not all. "We see now even the gTeat factories, not finding themselves suflEiciently strong alone, and fearing their reciprocal competition, renouncing their own autonomy and combining among themselves, and this tendency is everywhere manifest. The French charge d'affaires at Berlin calls attention to their centralization in Germany; the French consul at Glasgow mentions the same phenomenon at Glasgow. These facts are significant. They certainly indicate one of the tendencies — perhaps, it might be said, one of the necessities — of our epoch. It is certain that production is passing through a serious crisis. Competition has occasioned a considerable decline in prices, and in order to retain markets certain industries have been obliged to work under unprofitable conditions. To avoid final ruin, they have agreed either to limit the production, to maintain prices, or to conclude complete consolidation. Hence the* cartels, the syndicates for production, the associations. We neither approve nor blame this new procedure; we simply record it, remarking that some- times certain laws are developed, whatever may be their consequence." TRUSTS TEND TOWARD SOCIALISM. Q. Perhaps this is the right place to ask whether, in your study of combinations and trusts, you have discovered, together with a tendency toward the development of monopolies in all industries, a tendency toward governmental control of such monopohes: or, in a word, is there a direct tendency to ultimate socialism of some kind, or government ownership of all things?— A. The tendency is undoubtedly m that direction. One of the most intelligent socialists in New York, in an article written for the New York " Independent," welcomed the advent of trusts as a step toward ultimate socialism. Q. (By Representative Livingston.) Is it the purpose of trusts and combina- tions to bring about that result?- A. I do not think it is. I do not think they have that intention at all. Q. (By Mr. North.) Is that the effect, in your judgment?— A. I think it is a step m that direction. That is the tendency, but the end is a long way off Q. (By Mr.FARQUHAK.) Do you think that these combinations tend to the destruction of individualism, as we regard it?— A. No; I do not think thev destroy individual character, but they may destroy individual occupation. Q. Do they destroy individual opportunities?— A. No. TRUSTS AND INDUSTRIAL COMBINATIONS: — THURBER. 9 Q. How can there be concentration without, at the same time, the destruction of opportunities? — A. It is .just like organizing a militia or an army. I touched upon that, I think, a few moments ago. Q. (By Representative Livingston.) What you say would be true if all individ- uals were taken into the organizations; but if the great masses are left out, what is the effect?— A'. Judging from the extent of concentration at the present time, I think it must become general. It is certainly proceeding so fast we can hardly keep track of it. Q. (By Mr. Farquhae. ) Is it not a fact that the reason given by the unemployed for their condition is that they are shut out from employment? Is not that the particular explanation, both in Europe and America?— A. Oh, yes: I think it is the reason usually given. (Continues reading.) INDUSTRIAL CONDITIONS IN GREAT BRITAIN. The London " Contemporary Review '' for March, 1899, contains an article on the tendency toward industrial centralization in British industries, a recent illustra- tion of which is the Bradford Dyers" Association, Limited, embracing twenty-two firms, with a capital of S22..500,000, and controlling 90 per cent of the local dyeing trade. A similar fusion of interests in the Lancashire bleaching trade, with a capital of 830,000,000, is contemplated. The fine cotton-spinning trade has begun to organize. Thirty-two firms with a capital of $20,000,000 in stock and .SI 0,000,000 in debentures have been organized. In the cotton-thread trade, J. & P. Coats and four other firms consolidated with §2y,000,000 of capital and debentures, and fifteen other firms have been organized into a combination with 813,750,000 of stock and debentures. All the large establishments engaged in making paper for newspapers have consolidated their interests. In the engineering trade, twentj'-four firms have consolidated, with a subscribed capital of over §70,000,000. Armstrong & Co. absorbed Whitworth & Co., and have a capital of $31,000,000; and similar consolidations have taken place in metallic bedsteads, spring mat- tresses, cased tubes, spun mounts, rolled metal, brass wire, metal tubes, iron and brass fenders, china furniture, electrical fittings, marl for pottery ware, common building bricks, and cofBn hardware. In most of these organizations the employers and workmen are also confeder- ated, a feature not common in this country. The employers agree to employ only union labor; the men agree to work for no firm outside of the combination, and for none which cuts prices. A minimum wage is agreed upon, and there is a sliding scale for increases. Q. (By Representative Livingston.) "What is your observation with regard to organizations of capital, are they arbitrary in their action? — A. Just as much so as organizations of labor. I think human nature is the same in both cases. Q. You say organized labor is arbitrary in its demands, and admit the same of organized capital? — A. Yes. Q. You do not refer to organization itself, but to the result of organization? — A. Yes. (Continues reading.) Not only is consolidation going on in manufac- tures, but also with distributive firms. The capitalization of incorporated stores and trading companies in the grocery, provision, oil, and drug trades during 1896-97 was $90,000,000. One company has a capital of §5,000,000, and one of §12,500,000. Thesei. establishments have branches all over the country which are driving individual retailers to the wall. Lipton's Company has 72 branches in London and 181 in the provinces. One tobacco company has 100 branches. In the grocery, tobacco, chemical, and drug branches of the shop trades, the traders are grouped in local associations and federated nationally for various purposes of mutual defense. The main purpose being to prevent extensive competition. The department store has achieved a greater development in England than in this country, and retailers complain of it as much there as here, and the Scotch retailers have been making an effort to find a remedy through tax legislation. "While within the limits of a hearing like this it is impossible to discuss exhaustively all the varying phases of so large a subject, I have endeavored to present the thoughts which have come to me in a somewhat extended observation and study of the phenomena attending the great economic revolution now in process of development, with the hope that they may suggest some points which are worthy of further consideration, and which may aid in arriving at wise conclusions. The following lines from some philosophical poet will be appreciated by the leading minds in the so-called "trust" organizations, who have been the main- stay in our churches and have founded most of our hospitals and universities, and, 10 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. possibly, by the proprietors of "popular" journals who make a business of denouncing and vilifying them : " The siijns is bad when folks commence A-flndm' fault with Providence, And balkin' 'cause the earth don't shake At ev'ry pranoin' step they take. ISTo man Is great 'tel he can see How less than little he would be Ef stripped to self, and stark and bare He hung his sign out anywhere. " My doetern is to lay aside Contentions and be satisfied: Just do your best, and praise or blame That follers that counts ,iest the same. I've alius noticed grate success Is mixed with troubles, more or less. And it's the man who does the best That gits more kicks than all the rest." INDUSTRIAL CENTEALIZATION A NECESSITY. I am not interested in trusts, except as a student of their politico-economic fea- tures, but I am satisfied that we must have this organization of industry if -sve ■would keep up -with the procession in the march for the world's trade. There are 1,440,000,000 people in the world, of which we have 75,000,000, possessing a larger purchasing power than any similar number elsewhere and a larger producing power, because we command the great forces of nature and of brain power embodied in machinery to a greater extent than any other nation. WE MUST EXTEND OUR FOREIGN MARKETS. With a consuming power of 75,000,000 we have a producing power of 150,000,000. Our problem is to keep our labor and capital continuously and remuneratively employed by preserving our home market and reaching out for a place to dump our surplus among the other 1,365,000,000, each of whom has some wants. Q. You say our object should be to keep our home markets. Suppose we pro- duce more than we can consume, what then? — A. We then sell it abroad for any price we can get. Q. Does that hurt anybody? — A. I do not think it does. Q. Does it not hurt the j^roducer? I want to know your exact opinion on that. Suppose we produce more wheat than we can consume, and throw it on the mar- ket anywhere; is the price raised or lowered? — A. Undoubtedly, if we produce too much, i.e., if we produce in excess of the consumptive demand the world over, the price is reduced, because the price of our wheat is made in Liverpool. Q. If we should limit production at home, would that enable us to extend our markets abroad? — A. My answer to that is, that we should endeavor to preserve our home markets so far as possible and to extend our foreign markets at the same time, in order to relieve the home markets of our surplus. If we produce a sur- plus, whether of natviral or manufactured products , that surplus presses down on the market and reduce.s prices to an unremunerative point, and in manufactures causes the closing of factories and the discharge of laborers. The great problem is to keep our labor and capital both employed. Q. In preserving our home markets are we not competing with foreigners and prejudicmg them against ns? Do we not suffer on that account?— A. Foreign buyers purchase from ns when they can do so to better advantage than elsewhere. While trade follows the flag to some extent, it follows the price list to a much greater extent, and we must do all that we can to extend our markets so that our factories can run continuously. As the producing capacity of our factories is greater than the consuming capacity of the United" States, we must look abroad for our markets, else our factories can not run and furnish emplipyment. Q. Do I understand you to say this, that, as we are an o-verproducing country, not only in the manufacturing line but in the agricultural line, it should be the policy of this country to extend its markets? — A^ Yes. FOREIGN MARKETS TO BE EXTENDED BY BUILDING UP AN AMERICAN MERCHANT MARINE. Q. Now, how can that be done and at the same time keep up our home mar- kets? — A. Give us an American merchant marine; let our own sliiiJM distribute our own goods. A merchant does not hire a competing merchant's wao-ons to TRUSTS AND INDUSTRIAL COMBINATIONS: — THURBEB. 11 listribute Ms goods, and every steamship company works for its own country just as a railroad works for its terminal points. I blew $75,000 into the Brazil steamship Line, because I thought it was a shame that an American merchant should have to send his letters to Brazil by way of Liverpool ; and I lost every ;ent of it, because the policy of our Government at that time was to pay only iea postage, which, on a new route, is nothing. That policy applied on land ivould stop two-thirds of the mail routes of the United States. We had $96,000 IS a mail pay or subsidy from the Brazilian Government, and our Government jave 83,300. It did not pay the boat hire in landing the mails at the nine points ;ouched at. Q. Then you think it necessary, in order to extend our trade and benefit our jroducers, that we have American bottoms? — A. I do. PRODUCTS ON WHICH PRICES ARE FIXED IN FOREIGN COUNTRIES. Q. (By Representative Gardner.) On what products or manufactures of the United States are the prices fixed in any other country? For instance, it is said ;hat Liverpool fixes 'the price of our wheat; is that true of any other American product or manufacture? — A. It is true of our agricultural products generally, [ think, except perhaps cotton, of which we are the chief producers. It is true of most natural products that are x>roduced in all parts of the world, but it is not true to any great extent of our manufactures. We make thousands of articles in this country so much more useful for the purposes of mankind than what is aow being used elsewhere, that if we only bring them to the attention of con- sumers in all parts of the world they will buy them. The peasant who has been plowing with a crooked stick or reaping with a sickle, the implements employed by him and his forefathers for hundreds of years, is entirely satisfied until he Bees a moldboard plow or a modem harvester. Q. (By Representative Livingston.) If our agricultural products are larger md their prices are fixed abroad, and the prices of our manufactures are not, will fou tell me what advantage the manufacturer has in controlling prices that the igriculturist ha.s not, thus enabling the foreigner to fix the prices of the one md not of the other? — A. I will explain that to you. Take, for instance, a moldboard plow Q. Take raw cotton and manufactured cotton? — A. I am explaining the differ- 3nce between a manufactured article, where fashion comes in, or some use, some patent, or something that gives the manufacturer the control of the price, and an igricultural product. I contend that §1,000,000 of manufactures exported are of more value in actual profit to the country than .$.5,000,000 of natural products. A.S a rule, 81,000,000 of manufactured products will pay as much profit as 55,000,000 of natural products, because the margin of profit is fixed by the man- ttfacturer to a great extent, owing to the peculiarities of his goods, the wants of 'ashion, and aU that, which have a very important bearing. (Continues reading. ) SPECIAL EFFORT SHOULD BE MADE TO SPREAD A KNOWLEDGE OF OUR PRODUCTS ABROAD. There are natural wants and educational wants. The former are principally ihose of the stomach, and in supplying these we have to compete with the fertile ands and cheap labor of the whole world. The educational wants are those of 'ashion or convenience. This is illustrated by an incident which happened while : was on a trip around the world some years ago. On the voyage from Bombay ;o Suez, while going down the Red Sea with an English cotton manufacturer who lad moved his plant from Manchester to Bombay, and was manufacturing cheap iotton there for the Eastern market, he told me of the great increase in the num- 3er of spindles in Bombay, and said that they would soon supply all the cheap lottons used in the East. I had just come from China, where American manu- ■acturers were taking the market for fine cottons, because our fabrics were not oadedwith clay, and I said: " Well, if India supplies the cheap goods and America he better goods, what will the Lancashire manufacturers do for a market?" ' Oh," said he, "the mother country will open up Africa and make it the fashion o'wear breechclouts." " Well," said I, •' that is an educational want." Mr. Chairman and gentlemen, ' ' there is many a truth spoken in ,jest," and upon he educational wants depends the prosperity of our country. Paris supplies the vants of fashion in woman's dress, the educational want in that line: England, the ashions in men's apparel. We have thousands of inventions so much more con- 'enient and useful than those now used by the people of the world that all our Qanufacturers have to do is to show them and they will find a market. But the 12 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. peasant who has been plowing with a crooked stick or reaping with a sickle is satisfied until he has seen a moldboard plow or a modern harvester; tne stnaent, with the olive-oil lamp or the tallow dip, until he has seen the Pe^oi*'}!™' S&% acetylene, or electric light; the wooden-shod clodhopper or the sandal-snoa vn- ental, with his footwear, until he has seen that artistic and comfortable tnumpb of machinery, the American shoe. tt -j. ;i qj. j. The same methods which we employ in introducing goods m the United btates we must employ abroad. Publicity is the great factor; and this must be reached by the printing press in the language of the various countries, by the personal representation of educated experts able to overcome the barrier ot language imposed at the building of the Tower of Babel, by cutting canals and laying cables, by the upbuilding of an American commercial marine which will carry our flat,' and our goods on every sea, and by the estabhshmg ot international banks with a currency which will command the confidence of the great commercial countries of the world. Then will the Star of Empire, first progressing westward, shed its effulgence over the whole world. With it, in time, will come a universal coinage, a universal system of weights and measures, and a universal language; and Tennyson's dream of -'the parliament of man, the federation of the world," with the English speaking race, led by the universal Yankee nation, as the evangel, will be realized. Bvit don't let us shy at the bogy of the organization of capital, now called "trusts." which are an evolution of commerce, as natural and resist- less as the tides. Steer them! Don't try to stop them, for they are necessary to economical production and distribution. Eegulate them, temper them with the organization of labor, and work out •' the greatest good to the greatest number" on a basis of what is reasonable. THE RELATIONS OF LABOR AND CAPITAL THE GREAT PROBLEM. The adjustments of the relations of labor and capital under these new condi- tions is one of the great problems to be solved. Time will not permit discussing them here; but I would recommend every thoughtful man, whether he be. an employer or an employee, to read a book recently published on this subject, enti- tled, The Laborer and the Capitalist, by P. O.'Willey. It is a powerful^ argu- ment for harmony, and a prominent clergyman recently said of it that it was capable of doing more good than any other book except the Bible. Our motto should be, " Labor and capital — allies, not enemies; justice for both."' TRUSTS REDUCE THE PRICE OF RAW MATERIALS. Q. (By Mr. C. J. Harris.) Did I understand you to say that the effect of trusts is to reduce the price of raw materials? — A. Yes: as a rule they buy their raw material cheaper than the individual. Q. In what instances did you say that had been done? — A. The American Sugar Refining Company furnishes a remarkable illustration of that. When a large number of refineries were competing for the raw sugar they naturally bid against one another and paid a much higher price than would have been paid by a smaller number of buyers. With a small number of buyers there is less com- petition for supplies. Q. Am I to understand, then, that these corporations eliminate competition in the purchase of raw products and supplies? — A. Yes; they undoubtedly do, to some extent. Q. What is their effect on the producers of raw material? Is it beneficial or othervsase? — A. It is otherwise. Q. Then there is one large class you eliminate by trusts, do you not?— A. Yes; but, on the other hand, taking the instance of raw sugar, we find that the price in 1879 was a little over 7 cents, while in 1896 it was a little over 3 V cents. Now that undoubtedly has been to the detriment of the sugar producer^ — Q. And the beet producers of our country?— A. Yes, and against their interests, too, although they are in a measure free from the dictation of the refineries, because a large part of what they make is suitable for consumption without fur- ther refining. Q. Does not the same condition of affairs exist in regard to the corn producers and the whiskey trust? — A. I do not think the whiskey business is sufflciently con- centrated to have that eff'ect; but if it were more concentrated, the effect,"then, would unquestionably be the same. Q. It certainly does in the case of the Standard Oil Company and the oil well producers, does it not? Is not the Standard's control of the industry sufficient to prevent the raw producers, the oil well men, from enjoying any competition to speak of? — A. I think that is true to a great extent, but there has been some com- TRUSTS AND INDUSTRIAL COMBINATIONS: — THURBER. 13 etition even with the Standard Oil Company, notwithstanding it is such an all- mbracing organization. Q. Would not any capitalistic combination controlling three-fourths of the rade m an industry be able to effect the removal of competition?— A. Undoubt- dly, as to the purchase of raw material. Q. Then we come to the middle class of the country; we will say there are a lundred men owning refineries in different parts of the country, living in those ommunities, having their homes there and their plants here and there— do not all hese capitalistic concentrations, or whatever you may call them, remove all hese dividends and center them in some large capitalist city like New York?— L. No, I think not. There is a striking illustration of this in the condition of he small coffee roasters in the instance that I cited in this paper where there ame a contest between the American Sugar Refining Company, who went into ofEee roasting and distribution, and the Arbuckles, who went into sugar refining, t made it very hard for the smaller men. As I said here, " The result has been hat this contest of giants has reduced the profits in both industries to a minimum, f not to a positive loss, making it hard for smaller manufacturers and dealers to ive, but saving millions of dollars for consumers that. would have otherwise Dured to manufacturers and dealers." Q. Are you not looking at these trusts in the light of their money-making capa- ity rather than of their benefits to the community at large?— A. No, I think not. am not interested in them pecuniarily. I have tried to look at them from an bsolutely impartial point of view. I may not succeed in doing that, but the um of my feelings is, that the trusts have greatly rediiced cost of production and esulted in a benefit to the consumer. They are absolutely in the interest of the onsumer, though, as far as the producer is concerned, I think they are antago- istic, because, as was brought out a little while ago, there is a less wide market or the producer. Q. (By Mr. North.) Are not the producer and consumer one and the same? — L. They are, to a certain extent; all producers are consumers to sonae extent; lut the producers of raw sugar are scattered all over the world. When they could end here and have a dozen buyers, they could get a better price, perhaps, than hey can now when there are only two or three buyers, because these two or hree can get together and fix the price they -nail pay. The result is that the raw upplies are bought cheaper than they could be without consolidation. THE SUGAR TRUST AND THE WHOLESALE GROCERS. Q. (By Mr. C. J. Harris.) Can you, as a wholesale grocer, buy sugar of any- ne but the American Sugar Refining Company? — A. Oh, yes; the American Sugar tefining Company is the largest producer; then comes, perhaps, the new refinery f the Arbuckles; and then the Doschers, Mollenhauer, and the Union Refinery, 'or three years past we have had three sources of supply, now we have five. Q. Suppose you bought of some other company than the American Sugar defining Company, would there be any effect on your business as far as they are oncerned? — A. Not the slightest. There is no dictation or coercion. Q. Can you still retain the same rebates, or commissions, or whatever you call lem? — A. Yes; precisely. In this respect there has been a misapprehension on 36 part of the public concerning the American Sugar Refining Company. Com- etition in the distribution of sugar became sometime ago so intense in the gro- 3ry trade that the dealers were distributing it, not only without profit, but for :ss than the actual cost of doing the work; so the grocers got together — they have [ways been more or less associated — and asked the American Sugar Refining ompany to assist them in securing a fair reward for the work they were doing. ; was pointed out that it would be to the interest of the company to have the •ade in a solvent, rather than an insolvent, condition and they were asked to lake an arrangement, fixing the price at which the grocers should sell, and pro- iding for a commission or rebate to them for doing the business. They hung off )r a year or more, and it was only when the margin of profit was absolutely ■iped out that the grocers by keeping after them finally succeeded in securing ich an arrangement. Immediately some of the newspapers came out with the large that there had been a great grocers' trust formed in the interest of the merican Sugar Refining Company; whereas, the truth is, the grocers had had le hardest possible job to talk them into making the "factor system," as it is illed. Even now it costs the average grocer, I think, about 4i per cent to do isiness, and he does not get more than about 4 per cent in the distribution of igar. Q. As a matter of fact, do you not buy all your sugar from one refining com- ),ny? — A. I am now out of the grocery business, but I am publishing " The 14 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. American Grocer," a newspaper, and I speak from actual knowledge when I say that all of the wholesale grocers buy as they choose from the different concerns, They are not confined to the American Sugar Refining Company. It they buy, for instance, from Doscher, or MoUenhauer, or Arbuckle, it does not prejudice them in the eyes of the American Sugar Refining Company. RELATION OP THE AMERICAN SUGAR REFINING COMPANY TO OTHER REFINERS, Q. Is there any truth in the statement that MoUenhauer and these other refiners have really some connection with the American Sugar Refining Company?— A. I do not think there is the slightest. I will tell you what they all do: they just follow the system of the American Sugar Refining Company as closely as possi- ble, and there has been enough of an outlet, in view of the demand, for the out- put of aU, except the American Sugar Refining Company, which, however, has had sufBcient outlet to keep, perhaps two-thirds of their capacity going, and they have been satisfied with that, because it was a great deal better for them to run at two-thirds of their capacity for a margin of profit than it would be to reach out and try to grab all, when they could not succeed. Q. (By Mr. North.) How is the price of sugar fixed? — A. It is fixed by the refiners. They prepare a regular schedule every day. Q. In consultation with one another? — A. I do not know whether they have any consultation or not. I know whenever the American Sugar Refining Company puts up a schedule the other refineries will, in most cases, immediately follow suit. Sometimes they will have a little surplus stock they want to work off and will leave their price the same; or, if the American Sugar Refining Company lowers its price, sometimes the other companies will go a little lower still if they have a surplus they want to market. Q. Notwithstanding what you say, that there are four or five sources of supply, there is still no competition in fixing the price? — A. Yes; I think there is compe- tition to the extent that if one refiner has a surplus stock he will put dovsoi his price in order to make it move, and then the others will have to follow suit or else be left with their stocks on hand. To show you how much competition there is at the present time, I would point out that since the Arbuokles got their refinery started, the margin between raw and refined sugars has gone down from 0.95 to 0.57 of a cent. Q. (By Mr. C.J. Harris.) If the Arbuckles and the American Sugar Refining Company carry out your trust principle, they will undoubtedly unite, will they not? — A. They will, if they follow their own interests. Q. What would be the result, then, on the price of sugar? — A. Immediately you would see the margin go up from 0.57 to 0.95 again. Q. There would really be no limit to which they could not raise it, would there?— A. Oh, yes. I used to have the idea that where a monopoly was created there would be no competition, and that excessive prices would be charged and the public oppressed; but my observation has been that whenever any combina- tion attempts to get more than a fair, reasonable profit, new capital immediately flows into that line of production, with the result that prices go down. Take, for example, the production of starch, strawboard, and wire nails. The wire-nail manufacturers formed a combination and doubled their price right away, Within six months new factories had been created and were running, and the price was " knocked into a cocked hat." The manufacturers have never been able to get a living profit out of the business since. METHODS OF THE AMERICAN TOBACCO COMPANY. Q. In regard to tobacco— you are familiar with that in the grocery line— unless you handle the AmeTican Tobacco Company's product exclusively, what is the result?— A. They had a rule that they would give 10 per cent commission or rebate to people who handled their goods exclusively, and only 2+ per cent to those who did not confine themselves exclusively to their manufactures That was equivalent to making people handle their goods exclusively Q. Is that legitimate, according to your ideas of trusts? Is that not in restraint of trade?— A. I think it was within their right to offer an inducement to a dealer to handle and push their goods exclusively. You see it was open to anv other dealer to come in. ■' Q. (By Representative Gardner.) What is the condition now?— A I think it is the same now. That is my impression, although having been out of trade for some 3 years, I should not like to speak definitely on that; but I do know this TRUSTS AND INDUSTRIAL COMBINATIONS: THURBER. 15 that they would sell to anybody and offer a premium to a person who would pur- chase and push their goods and not sell any competing brands, i.e., they would give 10 per cent to him and only 24 per cent to those dealing also in other brands. PROFITS AND CAPITAL OF THE SUGAE TRUST. Q. (By Mr. North.) Are you in position to give the Commission any more definite information than your paper contains regarding the profits of the Ameri- can Sugar Refining Company?— A. Only as measured by the dividends that they have paid. Q. Is that the full measure of their profits?— A. No; it is understood they had accumulated a large surplus which they are now using as a fighting fund in th^ contest with the Arbuckles. Q. You do not know what that is?— A. No; I think nobody but the directors know. Q. How many stock dividends have they secured?— A. I think no stock divi- dends. Q. (By Mr. Smyth.) All the dividends are public?— A. Yes; every stockholder of record, of course, participates. Q. (By Mr. C. J. Harris.) What is the capitalization?— A. I think it is now 175,000,000. publicity in the business of trusts desirable. Q. (By Mr. North.) Do you think that it would be to the public advantage to have a public statement of the security and financial condition of the Sugar Trust and other combinations of the same character? — A. Yes; I think it is a crying need. I think that these great organizations, having the privileges they do, should be put under authority. Q. Governmental authority? — A. Yes. They are public corporations. They are created by the law, and the law should protect the public against abuses, whether of undue prices or the buncoing of stockholders. You are going to see, within a year or two, a crash in these industrials, in which the resources of thousands and thousands of people who have put their money into these secuii- ties will be wiped out; and the only remedy that I can see is such control as will require publicity. Q. You favor that? — A. Yes. EFFECT OF TRUSTS AND COMBINATIONS ON LEGISLATION. Q. (By Representative Livingston.) What eifect have these trusts and combi- nations had on legislation? — A. Well, I do not know. I am not any more com- petent to judge of that than any member of this Commission, because I have not given it any special study. There is no doubt about one thing, viz, that there has been a whole lot of " striking " legislation proposed in order to sandbag these trusts, and that whenever they are attacked in that way they will fend oflE by bribery or anything of that sort. I have not, however, observed that trusts have been active in the way of getting affirmative legislation in their interests. Q. Do they not always do so when a tax system, or financial system, or any- thing else that affects them is planned? — A. Undoubtedly. For instance, in the formation of the tariff bill you, as well as myself, know that all these large inter- ests employed the very best talent and ability they could to present their side of the question; and we have recently had a discussion in connection with the Canadian reciprocity negotiations in which there has been a great deal of hard talk against the lumbermen for the influence they exerted to prevent the Commission arriv- ing at a conclusion; but I do not think it is wrong for our lumber interests to pre- sent, as fully, fairly, and forcibly as possible, the effect of the proposed arrange- ment on American lumber interests. Certainly the Canadians were not backward in presenting their side, and in former reciprocity treaties there has been nothing reciprocal about Canada. Q. Are not these combinations, which are being organized and concentrated, able to affect legislation, while the consumers of their products, scattered all over the face of the earth, have no show in that legislation? Do they not in this have an advantage over the majority of the people? — A. I think that all large organizations employ the best talent, and have their cases presented more ably than small ones, but your general question, I think, is answered in the central basic fact that these organizations do reduce the prime cost to the consumer. They have done it, and 16 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I think will continue to do it, and unless there is some instance where they have combined unreasonably and have enforced unreasonable profits I can not say that I see any reason for condemning them. They may have an adverse and malign influence on legislation, but I can not say that I have seen it. When tariH ques- tions have been pending they have undoubtedly presented their interests to the very best of their ability, but I do not see that industries that are m trusts should have any less degree of protection than industries not m trusts. Q. It was the effect we wanted you to come to, not the facts. We know they lobby, and pay a large amount of money for it. I asked you this question: What effect have they had on these affairs— have they gained anything or lost?- A. I have not noticed any effect against the public interest m that respect. CHARACTER OF MANY ANTI-TRUST BILLS. Q (By Mr. North. ) Do I understand you to characterize the anti-trust legisla- tion of the several States as ■' striking legislation?"— A. I say there have been, undoubtedly, a great many instances where legislative " strikes "were attempted, and where these large organizations have been obliged to fend off. Q. I would like to have you be a little more particular about that. Do you mean to tell the Commission that you regard the anti-trust legislation of the sev- eral States as " striking legislation? "—A. I do not mean to be understood in that way in its particular sense. I do say this: I think it is the experience of every large organization that there are measures introduced for the purpose of being bought off, and that frequently that is done. Q. Is that the case in our existing legislation, in your judgment?— A. I could not point to a.ny specific case, and it is only a general opinion of mine. Perhaps it may not be well founded, but that is my opinion. Q. (By Mr. Farquhar,) One of the most stubborn fights that has occurred in the New York legislature was against a telephone company, and, as you well recollect, the Board of Trade of New York formed a large committee at its own expense to go to Albany. Was there, so far as you know, a single tinge of the so-called legislative " striking" when that fight was made against the monopoly? — A. N-o; I think that was an efl:ort of a public body to reduce rates. I can give you some specific illustrations: I was chairman of the gas consumers' organization in New York when the price of gas was very high — §3.75 a thousand feet — and we felt that the price of gas was too high, and introduced bills to legislate it down, and finally got it down to §1.25. Then we felt that that was a reasonable price, and stopped. But each year since then there have been bills introduced, by men whose reputation in the legislature was that they were " strikers," to reduce the price of gas further, and the people who were in this association with which I was connected have said that they thought the price of gas was reasonable, and that we ought to do what we could to throw our influence the other way. There were sis bills introduced in the legislature of New York this year to reduce the price of gas, some to §1 and some to 90 cents, and I consider that " striking legis- lation," from the character of some of the men who introduced it, while others were honest men seeking popularity. I know that the gas companies have been approached with the information that they could stop certain bills if they would pay for it. Q. Do you argue in your own mind that no good can come out of it in that way? — A. I am not too certain of anything. METHODS OF REGULATING TRUSTS. Q. (By Mr. North.) You say you think it is necessary that the trusts should be regulated by law. Is it possible, in your judgment, to regulate them by law? — A. I think that you can pass laws requiring reports, which will give sufflcient information to investors to provide against abvises in the manipulation of stocks, which is the chief thing, I think, that is necessary. You will have gathered from my statement that I do not think that the so-called trust statutes which have been enacted are necessary. I think that competition and the common law are sufficient to remedy any real abuses that may be attempted, and that the legislation, both national and State, which is directed against trusts is unnecessary. Q. But you do believe in the system of publicity and inspection?— A. Yes. See how our banks are supervised and inspected. There is a perfect system. I do not see why that should not be applied to all corporations. Q. Do you believe that should be applied by the General Government or by the several State governments?— A. Where the business is an interstate business, it would, perhaps, have to be done by the Federal Government. TRUSTS AND INDUSTRIAL COMBINATIONS: THURBER. 17 Q. Is not every business where the prodnct goes into more than one State an interstate business?— A. Yes, with some qualifications. You know, in the sugar- refining case, a suit was brouglit against E. C. Knight & Co., of Philadelphia, sugar refiners I think, under the United States trust laws. It was decided in their favor, because they were conducting a business within the State of Pennsyl- vania. To be sure, their product was shipped all over the United States, but I believe that case was decided on the ground that it was a State institution. I do not know that I am sufficiently familiar with that decision to have in my mind all the varying grounds on which it was decided. Q. (By Mr. C.J.Harris.) I understood it was because it did not come under the interstate clause. — A. That was my understanding. THE CAPITALIZATION OF TRUSTS. Q. (By Mr. Smyth.) Do you think it would be wise to limit by law the capitali- zation of trusts so that it should not exceed .?■=), 000, 000, ,'jy,000,00O, and so on? — A. I am not clear in my mind what is feasible. You see, the earning power is the thing they capitalize on. They say, how much can this concern earn? Well, it has earned so and so during the last so many years, and will, therefore, stand so much capitalization. If they can figure that it has earned 10 per cent, or is capable of earning 10 per cent, they will capitalize at that. The common stock is, -as a rule, a bonus, that is, it is not considered that it represents the actual cost of the thing. Q. (By Mr. North.) Fictitious? — A. Yes. It maybe founded on the earning power, however. The American Sugar Refining Company's common stock has paid 13 per cent right along, and the preferred only s per cent, yet I have no doubt that the preferred stock represents about all (jf the original cost of the plant. Q. (By Representative Gardner.) Do you know anything on that point? It is a very ticklish one to assume anything on. You say you have no doubt, but do you know, or have you reasons to know? — A. I have no knowledge on that point. I only know it is a common opinion in the trade that that is the case. taxation of trusts and co.iibinations. Q. (By Mr. North.) "Would you be willing to subscribe to the proposition that all the profits of a trust or combination, in cases of a certain dividend, should be subject to public taxation? — A. I do not know why you should treat the trust organizations' business any different from others. Q. Is it because it is quasi-public in so far as it is a monopoly or tends to a mo- nopoly. Is it not different from that of private corporations or individuals doing business in the ordinary, old-fashioned way? — A. In commerce there is no siTch thing as monopoly in this day and generation. That is one idea that -has been exploded. Capital is so plentiful that the moment any institution, no matter how big, begins to exact a liberal profit, immediately fresh capital flows into that channel and competition results on a scale that would not have been possible among smaller organizations. Q. Then, do I understand you to answer my question in the negative? — A. Yes; I should say that I do not "see any reason why business done by corporations should be taxed in any way different from that done by individuals. Q. Even these quasi-public and quasi-monopolistic corporations? — A. Yes: and if you find that they are oppressive, that they are charging the public more than they should charge it and making enormous profits, that might be a subject for legislation, either through the taxing power or in any other way. But take the American Sugar Refining Company. People say: '■ Why, they have lieen paying enormous dividends on an inflated capitalization." So they do; bat they do it on an average profit of a third of a cent a pound: but the bu.siness is one the machin- ery of which is not fitted for anything else. If you would subject it to sale— the real estate, machinery, and so on— it would only bring a song; and t think that they are entitled to a good, liberal profit when they give the public the long end of it, as they have done. They have given the public all the Ijenefits of their advantage in buying, and have only retained their average margin right along— about a third of a cent. If they had grabbed the whnl(j thing, why I .should feel differently about it; but we must all come down to what is reasonable. Q. (By Representative Gardner.) If I understand you, your theory is this: that the elements of competition, viz, capital and individuals with knowledge, 83A 2 18 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. skill, and so on, are practically inexhaustible, and that therefore no monopoly, charging exorbitant prices, can remain without competition for any considerable time?— A. Competition certainly -wall come. Q. That is your theory?— A. Yes; and the facts go to show it. TRUSTS AND COMBINATIONS PROMOTE THE PUBLIC WELFARE. (By Mr C. J. Harris.) What is going to be the effect of trust organizations on the great middle classes of the community, the men who have formerly been owners of plants, and their sons after them, and what is going to be the effect upon the traveling salesmen?— A. Speaking in a broad way, the effect will be beneficial; although there is a constant displacing and transition m the whole situation. Individuals may be prejudiced as they were m the evolution tor instance, of our transportation system, beginning with the stagecoach and the railroads. It is the old, old story, over and over again, of constant transition and individual hardships; but in the " demnition total" of the whole thing, as Mr. Mantalini said, it is, in my estimation, for the public good, and, what is more, it positively can not be prevented. This state of things has been produced, as I have said, by the forces of steam, electricity, and machinery. EFFECT OF TRUSTS ON THE DISTRIBUTION OF WEALTH. Q. Suppose the Standard Oil fortunes, running anywhere from $10,000,000-to $300,000,000, which have been showered upon ten or a dozen men, had been divided up among two or three hundred at a million or two apiece, would not the people in general in this country have been a great deal better off, in your estimation?— A. I do not believe they would. You have to have large concentra- tion of wealth in able hands to accomplish results. Q. Is it not the aim of all sociological writers, who are endeavoring to improve the condition of society, to show that wealth should be as evenly divided as possi- ble? Do not their methods consist in the division of real estate among the^ thou- sands, and money and other kinds of property in the same way? — A. You can not have e(iuality in the distribution of wealth. It will inevitably be unequal. If all wealth were equally divided to-day, to-morrow would see a tendency toward inequality again. I saw this thought well expressed in a book by Prof. Isaac F. Russell some time ago: "Equality of wealth would not exist during the period of time required for its distribution. Before midnight some Esau would have sold his birthright for a mess of pottage or some gamliler would have staked his last dollar on the throw of a die or the turn of a wheel." Q. (By Mr. North.) That is your general answer to the socialistic argument, I take it? — A. That equality is impossible. Q. (By Representative Q-ardneh.) And is not that the very thing that socialism is aiming at? Q. (By Mr. Farquhar.) Is it not generally said Ijy all historians of this country that the source of our great national prosperity has been our individualistic ten- dencies; or, in other words, is it not their opinion that the genius of this country is against centralization? — A. No. Q. Is it not the great freedom of the community in making its own way and its own living the standard that has made American wages? — A. I think you are speaking now in favor of my position — the freedom of opportunity. Q. I simply would like an answer. — A. I think it is. I think that freedom of ojiportunity is a most desirable thing, and I think that opportunity is not abridged, as has been suggested by many students, by this new organization of industry. Opportunity appears in a little different way, but opportunity still exists. REASONS FOR THE REDUCTION OF FREIGHT CHARGES. Q. You spoke, in what you have read here, about railroad freight going down to 0.7-.' of a cent in l«fl."j from 3.08 cents in 1805. Do you credit all that to the con- trolling of freight rates by trusts and combinations?— A. No; but I credit it to the enormous mechanical improvements that were promoted and made possible by the aggregation of capital in tlic industry. CJ. What was the increase of railroad capitalization from ]s(i."i to 189.5 ; was it proportional to the decrease in freight cliarges?— A. No; I do not think there was that amount of increase. There has always been a lot of water, as you know, in our transportation system, but I do not think that the water had anything to do with the decline in rates; it was the mechanical possibilities that were developed by these consolidations. Q. In other words, you would answer that it was simply the roadbed and the rolling stock and equipment that brought the lower rates? Is it not a fact that TRUSTS AND INDUSTRIAL COMBINATIONS: THURBER. 19 the building of a second look at Sault Ste. Marie reduced the freight rates on gi-ain from Duluth to Buffalo from 11 cents to 11 cents?— A. Yes; I think it was; that and mechanical improvements, with the increased tonnage thus made possible. Q. The exti-a large tonnage, or carrying power, of all the craft that were built as soon as the great look was completed? — A. Yes, undoubtedly. Q. So these trusts and combinations had nothing to do with it, and the cause lay entirely outside of any centralization of capital? — A. It had nothing to do with it in that particular instance, I think, but look at the prices of transportation on the Great Lakes since the Rockefeller capital went into the whaleback transpor- tation. Of course, those whalebacks could not have passed through the old locks, and the enlargement of the locks gave an opportunity for the further employ- ment of this capital. The economies that have been realized in transportation on the lakes through the increased size of vessels and all that have been something enormous. Q. Is not the development of the lake channels of trade, through river and har- bor improvements and better terminal facilities for handling grain and ore and everything of that kind with the resulting comjoetition between water and rail, the reason that rates have come down? — A. Water competition has undoubtedly had a great deal to do with it. At the same time you will admit, I think, that great mechanical improvements, such as the manufacture of Bessemer steel, and the consolidation of railroads, making possible through freights and through lines, as compared with the fragmentary lines we used to have, have had an equally' great influence. Q. Do you think a consolidated pool in the matter of railroad rates sanctioned and regulated by law would be a benefit to the producers of this country as compared with the open competition we have now? — A. I think that a pooling law under supervision of the Interstate Commerce Commission is extremely desirable. Q. So you believe in State regulation? — A. I do, of all these public agencies. Q. And do you believe that trusts or combinations are unsafe unless regiUated by the State? — A. I think state regulation would be better for the trusts and better for rhe public. INDUSTRIAL STOCKS AND SPECULATION. Q. Another question that you have left quite open suggests itself here. In Eng- land, as you know, 10 years ago and throughout the past decade, limited com- panies have sprung into existence like mushrooms. Is it not a fact that. to-daj% the intention of the promoters of trusts, the main jaart of those formed witliin the last 3 or 4 months, has been to get their stocks into the New York exchange in order to give them an opportunity to gamble on unknown profits and unknown capitalization? — A. I have no knowledge of that. Q. Do you not think that Wall street will ultimately reap the benefits instead of the consumer br producer in the speculation on these stocks of the great trusts? — A. Wall street is a very interesting community by itself. It contains the gam- bling spirit of this country, and whether stocks go up or stocks go down, as among the really active professional stocks, it does not matter a great deal. It is simply one of them skinning another. The real evil in this overcapitalization consists in inducing outside small investors, people who are not speculators, to buy, under such favorable conditions as now exist, securities upon which, when bad times come, dividends can not be earned. Then these smaller investors are practically wiped out unless they can hold over. Indeed, he who buys on a margin is pretty sure to to be wiped out. Q. (By Repre.sentative Gardner.) Does not that result from imprudence jtist the same as the wasting of money in any other directiim? Would that happen if the countryman, or other man, who has a little money and knows enough to know that he does not know anything about it, and ought not to gamble, would stay out of Wall street?— A. Speculation, I suppose, is inevitable; I do not know how to regulate that. TRUSTS AND PANICS. Q. (ByMr.FARQUHAR.) I should like to ask whether, in your opinion, these trusts or industrial combinations are for good or evil, as you see tliem to-day?— A. I believe they are powerful agencies for good, but there is much that is bad which we should try to eliminate; there is " good in all, biit none all good." Q. Is there not a question lying back of this, viz, that, as a result of this over- capitalization and control of natural monopolies as well as of manufactures in general, a crisis may come upon us, such as we have had three or four times in this country? — A. Oh, we are sure to have these periods of panic and reaction, but 20 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. how far this overcapitalization, this excessive capitalization, may enhance them or make them come more frequently, I do not know. Q. (By Mr. North. ) But have you not already gone on record on that point in having stated that yon believe a panic to be inevitable from these things?— A. What I mean to say is, that I do not know how much a panic would be influenced by this overcapitalization, but I do believe this, that we are likely to have these periods of commercial depression, mth all the resulting phenomena of idle mills, etc.. more frequently in the future than we have had them in the past unless we can widen our markets and keep up activity in our industries. Q. But did not I understand you to say before that they would be intensified b)' this form of industrial combination? — A. As regards panics, do you mean to say? Q. Business crises, depressions, and prostrations. — A. I do not wish to be under- stood as thinking that the cause, for the reason that I am not clear that excessive capitalizations are the cause of commercial panics. The real cause is our ability to produce more than we can consume, resulting in the shutting down of our factories and the throwing of labor out of employment, and accompanied by all the phenomena of a commercip.l crisis which sometimes runs into panic , causing the withdrawal of money from banks, and all that. Q. In your jvidgment is it advantageous to the industries of the country to be so capitalized and put ujion the New York stock market that they will be subject to all the speculative tendencies which influence that market? — A. I think that excessive capitalization is unfortunate. I believe in having things as near actual values as possible, but I do not see exactly how you are going to prevent over- capitalization. Q. That is not quite my point; I may not have made it clear. What I mean is this: Does not, in your judgment, the tendency to consolidation bring all the industries of the country affected thereby within a speculative and gambling field? — A. Yes, undoubtedly. Q. That was the point I was after. — A. Yes, undoubtedly. Q. That is, it is an economic disadvantage to the country in your judgment?— A. Yes, I think it is. Q. (By Representative Livingston.) As an illustration of what you have just said, what produced the recent wonderful change in the Wall street rate of interest, from 3 per cent to 13? — A. Simply demand and supply. Q. Is it not a fact that bankers in Wall street got frightened, that they were not willing to advance money on the kind of stocks that were being dealt in, and that this fear ran money up to 13 per cent? Was not that the cause of it?— A. I do not know that it was; it may have been. I really do not know that I am competent to answer that question. THE REGULATION OF TRUSTS RESUMED. Q. (By Mr. Conger.) Am I to understand that you believe the general effect of these trusts or mdustrial combinations is the public good, but that vou would favor their regulation by law? — A. Yes. Q. Would you favor the enactment of a Federal law which would prohibit interstate commerce and the use of interstate commerce instruments, such as checks and drafts, to those corpoiations not complying with prescribed rules for filing reports or for inspection by the Government, the theory being that puljhcity will do more to right abuses than anti-trust laws which would annihi- late the trust or combination of capital itself?— A. Thatis a pretty long question. I think a man would have to study on it a long while before lie could give an intelligent answer to it. Q. Take the first part of it: would you favor a Federal lav.- that would prohibit interstate commerce or the use of interstate commerce instruments to those trusts that do not comply with a law requiring the filing of reports— in other words that regulation which you seem to favor?— A. I do not knuw whether that would be a proper penalty or not. I think that you can make penalties that perhaps would not interfere with the movement of commerce and at the same time would accomplish the object of giving the necessary publicitv. You can make cumula- tive fines, for instance, for first, second, and third offenses, and make them so heavy that it would be inipossiljle to disregard them. RESTRICTION OF CAPITALIZATION RESUMED. Q. Would you favor the enactment of laws prohibiting the capitalization of corporations beyond the amount of money or actual value of propfrty invested'— A. Iwouldnot. That brings us to the great difficulty again. Take, 'for instance, a newspaper that has an earning capacity of $50,000 a year, and its whole plant is TRUSTS AND INDUSTRIAL COMBINATIONS: THURBER. 21 not wortli 810,000. Yon would not capitalize that, if you were putting it into a corporation, on any basis of the actual value of the plant. Take almost any private business that is put into a corporation, and its actual tangible merchan- dise assets with its real estate, etc., is not a fair measure for its capitalization. A fair measure for its capitalization is the earning power of the property. Can it earn 10 per cent on a capital of slOO,000? If so, SIOO.OOO would be a fair capital for it. Q. Would you favor a law which would prohibit the capitalization of that , property for more than its present value, on your basis of figuring the value? In other words, do you think that it is right and in the interest of the public good to allow the property which is to-day worth §100,000 to be capitalized for !530i),000 or 8350,000'' — A. I think you may base your capital on your earniiig power. I think that excessive capitalization is an evil, but I do not see how you are going to prevent it, unless you can pass some general lavr, based (m the earning power of the property, that the capitalization shall not exceed so much on its earning power. Perhaps it might be reached in that way, but 1 have not thought enough upon it to be an authority on that. Q. Woiild you favor that law if it could be enforced?— A. I am in favor of any reasonable Q. Restriction on capitalization? — A. Restriction on overcapitalization. TAXATION OF STOCK V. TAXATION OP INCOME. Q. (By Representative Livingston.) If the gross income of all organizations of the kind were at first taxed liberally, would not that have a tendency to lessen such organization, make men careful about organizing capital, and do away with the evil of watered stock? — A. A liberal tax on the amount of the stock might have that effect, but I do not think one on the income would. New Jersey has become the home of most of these great organizations, because her organization tax on the big companies is much less than on the smaller ones. In New York State the organization tax is pro rata , and so New Jersey has secured all the big companies. Q. "What, then, do you think a tax should be based on — on the gross income or on the net income? — A. No; I should think that an income Q. You think on the stock? — A. I think this overcapitalization might be reme- died if you -would put the organization tax as high upon large companies as it is upon smaller; make it pro rata; that would tend to keep down capitalization. Q. If there were a tax on the gross receipts or the net income of the capitaliza- tion of these companies, would not that help also to keepi it down? — A. On the income? I do not think so; I do not think it would. Q. I do not want to commit you to an income-tax policy. — A. What I can not see is how an income tax would affect capitalization. Q. Would it not suppress wild schemes whose success is very imiirobable? You wish to tax both ways, do you not — to tax the stock and then the gross business? — A. I think a tax on income would be a wrong princixjle, because it would be a tax on good management, etc. But if you are seeking to remedy over- capitalization, I can see how, if you will put your organization tax so much per thousand, it would kill overcapitalization. EXPLANATION OF VARIATION IN THE PRICE OF SUGAR. Q. (By Mr. A. L. Harris. ) I wish you wouldreturn to page 4 of your address just for a moment. I see that in 1 881 refined granulated sugar was selling at about 9.66 cents. It then decreased to about 6.01 cents in 1887, when the trust was formed. Immediately after the formation of the trust, in 1888, 1889, and 1890, there was an increase. — A. Yes. Q. In the price of refined sugar? — A. Yes. Q. In 1891 it began to decrease, which, as I understand, you have said was on account of these new competing companies coming in. I would like you to explain how it is that there was a constant decrease until the time of the forma- tion of the trust and an increase from the formation of the trust until competing companies came in. — A. Precisely; I will explain that to you. During the period from 1884 to 1887 the sugar-refining industry had gotten down to an unremunera- tive point. If you will look at the difference between raw and refined during those years you will see it was down to 0.71, 0.78, 0.76, and so on, whereas it had been much higher in the previous years: and you -will notice that after the formation of the trust the difference ran up from 0.76S to 1.2.")8 in 1888. Now, the sugar- refining industry had gotten down to the point where 14 refineries had failed, and it was owing to this demoralized state of the industry, making it absolutely 22 HEARINGS BEFORE THE INDUSTRIAL, COMMISSION. necessary that something be done, that the sugar trust was formed. Then, as you see, for 3 or 3 years they did exact a larger margin of profit, and the price advanced as you have pointed out. But when they got the business into working order, had improved their buying arrangements, and closed up old and inferior plants and enlarged and improved others, you will notice that not only the price goes down steadily, but also the margin between raw and refined sugars. Q. (By Mr. Farquhar.) Were there not just as large profits to the American Sugar Refining Company as there were before they acquired the Philadelphia plants and some others?— A. I think there was a year or two, when they charged more than their regular average; but they soon got down to their regular average, about a third of a cent net, which they have carried all the way through until this more recent competition; and now they are down to 0.57 of a cent, out of which the entire expense of refining must be paid, and that is probably as much as 0.57 of a cent. Q. Is that the result of the competition of these other refineries you speak of?— A. You know the Arbuckle fight, the coffee and sugar fight, is a very interesting one. Q. (By Mr. A. L. Harris.) Suppose these other organizations had not come into existence, do you think their profits would have been as they have been?— A. Oh, no; they would have kept their margin right along; they would have kept their third of a cent right along. THE WIRE-NAIL TRUST. Q. I want to call your attention to one thing more, and that is the wire-nail trust and the wire trust. Has not the price of wire increased about 1 cent on the pound within the last year, since the trust perfected its organization? — A. My understanding of it is that wire and all iron products have increased. Q. Even steel? — A. Steel of all kinds; but that is due to the industrial situa- tion, I think, and not to the effect of trusts. All our mills are running day and night and can not keep up with their orders. We have always seen that, when there is an active demand, exceeding the supply, prices advance. Q. And you think that is owing to supply and demand, the natural law of trade? — A. Yes; that is my feeling about it; but at the same time I do not say that new steel combinations have not had some influence upon it. I do not know that they have, but I do know that the supply and demand has more to do with it than anything else. COMPARISON OP THE EFFECTS OF TRUSTS ON CONSUMERS AND THE PRODUCEES OF RAW MATERIALS. Q. (By Representative Gardner.) At one point of our examination here this morning we seemed to reach the conclusion that prices were reduced to the con- sumer and in turh forced down on the producer. It was asked if the consumer and the producer were not one and the same, and it went at that. Now I wish to ask the witness, as an expert, if he feels competent to answer as such, whether the trust or monopoly buying raw material from one class of persons, but selling to another, does not turn at that point where society is divided into two classes, the consumer and the producer, the price being re'duceil to the consumer and forced down on the producer? The farmer and the miner produce almost all materials that are in the fullest sense raw materials. The producer and the con- sumer, therefore, for the purpose of my question, are not the same, because mil- lions of our population who are consumers are not producers in that sense. Therefore, do the operations of the trusts in combining to put down prices to the consumer and in combining to force thein down on the producer have a peculiar, specially depressing effect on those two classes, viz, the farmer and the miner? Q. (By Mr. Farquhar.) Why not make it " injure"? Q. (By Representative Gardner.) Well, callit "injure".— A. I think that where the number of buyers is reduced to so small a number that there is not competi- tion for the raw material, it tends directly to lessen the sum which the producer of that raw material receives. IS THE TRUST A NEW ELEMENT IN TRADE DEPRESSION? Q. One word more in this same line. Remove the influence of the trust in that direction, and would there be, m your judgment, any other organization besides the trust, such as the wool exchange, the cotton exchange, or other board of trade TRUSTS AND INDUSTRIAL COMBINATIONS: THURBER. 23 ■ in the cities, that would exercise some like influence in depressing the price to ; the farmer and taking the difference for their own profit? That is, is the trust a J- new element of depression, or does it merely take the place of the cotton exchange, ; the wool exchange, and other boards of brokers?— A. It may in some industries go '■; directly to the producer, ignoring the middleman, and the producer may get as - much for his product as he did before and only the middleman be injured. Q. You do not exactly comprehend my question. My qiiestion was meant to : be this: Assuming that the trust buys directly of the producer, and at the lowest ■;■ possible price, does it even then depress the price below where the woolen exchange * and cotton exchange or some other board would have depressed it in the absence ■■ of the trust? ■ Q. (By Representative Livingston.) Are not these organizations just as bad in effect as the combines? Q. (By Representative Gardner.) I want to know whether the wool board and the cotton board that, we read, are fixing the prices of our wool and cotton in ^ Liverpool are not just the same depressive agencies to the farmer that the trust is? I want to know whether the trust is an additional depressor or whether it just takes the place of a former one? — A. I do not think that a general answer can be given to that question. I think it will be necessary to take each specific ■ industry by itself and observe its operations. Now. I am familiar, of course, with the sugar industry. There is no doubt that the producers of sugar in all parts of the world did not receive as much for their sugar after the consolidation of our sugar-refining interests as they did before; and it was due, in my opinion, to the facjt that there were not so many competing buyers. Q. The sugar trust, then, did depress prices to the producer of sugar? — A. I ■- think so. Q. But as to whether trusts do that for the producers of wool, cotton, and corn !' you are not prepared to say? — A. No; I should think you would have to take each individual industry and examine it by itself according to its condition. THE STANDARD OIL TRUST AND PRODUCERS. Q. (By Mr. Phillips.) How would you answer the same question in regard to ^^ petroleum? — A. My impression is that the Standard Oil Company as a whole has been liberal with producers, and paid them as good prices, perhaps, as they , could have obtained from a larger number of refiners. Certainly, in the organi- ; zation of that industry, the result has been beneficial to consumers and to pro- ' ducers alike. Q. Take, for instance, the pipe-line system through which the oil is chiefiy con- veyed from the wells to certain stations. The price of pipe was 50 or 60 cents a ". foot when the lines were built, and they charged 20 cents a barrel for piping the oil. The same sized jjipe is now bought for from 13 to 1.^ cents, and still they are charging the same price per barrel a.s formerly. As a matter of tact, the oil can - be piped for 5 cents a barrel. Now, do you consider that a cheapening to the pro- • ducer or the consumer? — A. I should say that it was a question of the value of the c service that they are rendering. Now, as compared with the freight by rail, the - construction of pipe lines has effected an enormous saving; and they could not have been constructed by individuals, but only by some large aggregation of cap- ■; ital. I do not know whether 20 cents is a fair price or not; I have no idea about i it; but I do know that the railroads felt that they were greatly injured by the con- ■ struction of pipe lines, because it reduced their receipts so much. THE EFFECT OF TRUSTS ON WAGES. Q. (By Mr. Ratchford.) I wish to ask if you have any instance in mind in I which ascertain trade has paid its employees a certain price for their labor under ,' the system of open competition and then, when the trade was organized as a trust, ' advanced the prices of its product enormously and at the same time reduced the ' wages of its employees? — A. I have no recollection of an instance where a trust has advanced the prices of its products and decreased the wages of labor. There . may be such instances, but I have none in mind. I do know that the Standard '; Oil Company, the American Sugar Refining Company, and others have never 'had trouble with their labor. They pay good wages and get good service and everybody makes money; and at the same time the consumer gets the product at a reasonable price. Q. (By Mr. Sm'/th.) Do you think the American Sugar Refining Company has increased the rate of wages since it became a trust? — A. There is a staternent, the rsworn evidence of its secretary. Mr. Searles, before the Lexow committee, in ! which he showed that they had absolutely increased their labor, not in all depart- .ments but as a whole, and that they were employing more men than did the 24 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. separate refineries which were consolidated. I do not think that is trne in all cases, however, because where industries are spread out and running uneconomi- cally, one of the first things that these combinations do is to reduce expenses m every possible direction. They reduce the number of their employees, it they do not their wages. Thev out off their advertising expenses, diiuxnish their selling agencv expenses, etc.; so that it does throw people out of employment for the time being, undoubtedly, and forces a constant transition m employment; but the eif ect of all these great organizations is to widen the market and create more employment, and in the end, speaking broadly. I believe they are beneficial. GENERAL PRINCIPLES THE SAME FOR ALL TRUSTS. Q. (By Mr. Ratchpord.) Is it not a fact that in your advocacy of trusts to-day you have singled out what are Imown as the most economical trusts— the Standard Oil Company, the American Sugar Refining Company, and our large trunk lines? Is it not a fact that these three have an economic side to them that is not true of other trusts? Oi', in other words, that if there be any benefit rendered to society from any form of a trust, the three you have singled out are rendering the greatest possible benefits by the way of cheap products? Is not that the fact? — A. I think the same principles apply to those as apply to others. Q. Apply to all of them? — A. The same principles apply to all. Q. Do you .believe that the others practice those principles as well as those you have singled out? — A. Perhaps not. COMBINED EFFECT OF THE CENTRALIZATION OF CAPITAL AND THE GRGANIZATIOX OP LABOR. Q. In your paper you have argued in favor of the centralization of capital to the end that the prices of our products may be reduced and our markets thereby extended, and at the same time you have advocated the organization of labor, and stated very emphatically that organized labor has been able to secure higher wages than had been paid heretofore. That being the case, does it not tend to counteract the cheapening of the products and to cripple oar ability to gain for- eign markets? — A. If it were carried to extremes perhaps it would; but there is reason in all things, and I contend that all these great mooted questions should be solved on a basis of what is reasonable and fair. It sometimes takes a great deal of investigation to find out what that is. EFFECTS OF TRUSTS ON THE DISTRIBUTION OF WEALTH RESUMED. Q. In your judgment, does not the centralization of capital in the hands of a few carry with it the concentration of povei'ty and discontent among the many? In other words, if the wealth of our country is concentrated in the hands of a few persons by reason of organization or other means, does not that deprive the masses of the people of their share of that wealth and cause poverty and discontent among them?— A. As a hypothetical question I should say that perhaps an even distribu- tion of wealth is desirable. As regards trusts, however, they are absolutely dis- tributors of wealth rather than concentrators. The number of small partners engaged in these trusts as stockholders far exceeds the number of partners who owned the firms, factories, or companies that were put into them. As I have stated in my paper, wealth is very much more widely distributed under the trust form of industrial organization than under the old system of individual firms, etc.; very much more. Take, as an illustration, the American Sugar Refining Com- pany; it has thousands of stockholders now where there were formerly 27 partners. Q. The arguments set forth and the questions asked are simply leading to this proposition; Is it or is it not beneficial to curb the powers of organizations and associations that render impossible the greatest and fullest distribution of wealth? That is the question, it seems to me.— A. As a hypothetical question, I should answer yes: but I am contending that these organizations are doing just the oppo- site of what your questions seem to imply that they are doing. We differ on the facts, evidently. State op New York, Cminty of New York: I swear that the statements made by me of my own knowl■•<■: Plate Company controls over 240; the Federal Steel Company controls enough e: establishments to fill a space of several inches in the newspaper columns. - •'- REMEDIES FOR THE EVILS OF COMBINATION. '»;- Q. (By Senator Mallory.) You have given this subject, so far as it affects the t'l^r interests of your association, considerable thought. Have you given any consid- eration to the question of the remedy for this existing or anticipated evil ? — A. L-" Well, that is the hardest question to settle. We can analyze the situation and !■<&■ appreciate the evils, but the remedy is for the most wise lawmakers themselves to discuss. :t"l- Q. Have you thought of any ? There have been certain suggestions made as to different methods of treatment, legislative or otherwise. Has any suggestion of li-r. that kind commended itself to you as feasible? — A. Well, the majority of travel- ing men who have communicated with me, although they have been united in npc regard to redress, saying that trusts must be done away ^vith, and the condi- tions must be remedied, and all that; only a few have suggested remedies; one r!i- man wrote me in regard to the law of the Swiss Republic, which has existed for 400 years, and gives the people the right to withhold charters from trusts or trade i» combinations in restriction of trade. Q. (By Mr. Jenks.) May I ask if that means this — that in case any combina- tion asks for a charter, the question has to be referred to the people to vote upon ? — A. You have made a special study of this question. Q. I do not know what special law was referred to ; that is why I asked the question. — A. I will see if I can find that card ; I think the gentleman made ref- , erence to the law, which has been in operation in the Swiss Republic for 400 1 \. years ; that is a Republic of 400 years' standing. I think he refers to the ref- ■ f erendum law. j[ Q. (By Senator Mallory.) That would involve, of course, an entire change in jj. the corporation laws of the United States and every State. Another method has " been suggested, or a statement at least of another method has been made by J., somebody, both in the newspapers and here, viz, that of cutting down the '„, tariff, of authorizing the President to do so, as in cases of reciprocity. Our * J Supreme Court has held that it is constitutional for the President, under the "' direction of Congress and under certain circumstances, to remit certain tariffs; , and, in the event that these combinations become oppressive, it is also proposed f '! that the President be authorized to remit the tariff on the articles covered by a * combine if it becomes oppressive. That has been suggested ; there are others. 36 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. I did not know but that you had something to say on that.— A. The travehng men are not students of legislative affairs. They have a thorough conception of what is good as affects business and are very good judges of political conditions and political situations, but this is a subject that the best lawyers have spent much thought upon, and it may be a little too deep for business men. Q. It is a subject that this commission is very deeply mtexested in. ihe com- milsion is desirous of getting all the assistance it can I do not think it is one that is purely legal ; it is one upon which we ought to have the best talent ot all the business intlrests of the country.-A. In trying to answer your question I will submit a couple of letters ; possibly it will be advisable tor me to omit the names. In answer to question 14 [reading] : "The trust will cause m the near future the greatest disruption ever seen in our country ; it is making extreme rich and extreme poor. The bone and sinew of our great country, the middle class, is fast disappearing. Owing to the close competition, the mechanic can not go into manufacturing on his own account with a small cajiital, as he could. It is not conducted vnth the same capital as of old. That condition we contend, is deplorable. Many of our rich men to-day would not have succeeded had they to contend mth the present condition." He winds up [reading] : ''The political party that will dissolve trusts gets my best efforts and vote. He has always been an advocate of a certain party. 6. The great difiaculty is how to do it, so far as the Federal Government is con- cerned. How can the Federal Government reach them ?— A. Here is a letter from a very intelligent man. I will omit the information m regard to the proposed trust in his business because they have not succeeded in obtaining it yet; it is spoken of as one of the prospective trusts (reading): "It is my opinion, and it is shared in largely by men ^A-ith whom I come in contact in all kinds of business, that the day is near at hand when the disastrous result of the trusts will be felt everywhere. Another effect that the trusts are having is m making thousands and tens of thousands of socialists, and the time will come in the near future when all classes of business men, laborers, and mechanics, regardless of formal party affiliations, will vote with the party that is against them. While I have no sympathy with socialism, believing their principles to be all wrong, I recognize their rapid increase, and if our lawmakers are wise, it is my opinion that they will stop the formation of more trusts and in some way do away with those already formed." That is the opinion of an old traveler, a very intelligent man. But the remedy— I would hesitate to suggest anything for fear it would not be the right one. Q. Well, we have the Interstate Commerce Commission which has supervision over railroads. The only reason that Congress could establish the Interstate Commerce Commission, with the power it was intended to give it, is the fact that the railroad corporations are public corporations intended for the public weal and the public benefit. That is the only basis on which Congress could interfere. That does not exist in the case of the corporations we are considering here, private corporations. — A. It seems to me that they can only be affected by conspiracy laws and by restricting corporate powers. It is a subject I do not care to get into a discussion on. Q. (By Senator Mallory. ) I have only troubled you because I thought it might have occurred to you to suggest something. — A. If I had been under the impres- sion that I was to be asked that question, I should have — I came here to give facts and figures as a business man — I should have consulted some of my friends among the lawyers, and possibly should have gleaned some information from the aggre- gate result of their opinions and might have submitted that ; but I should have hesitated even in that case, because of the importance of the question and the importance of the situation. People ask for redress, and the lawmakers vsrill have to discover some way of giving it. Q. (By Mr. Phillips.) Have you expressed definitely the reason why so large a number of the traveling salesmen have lost their employment ? What is the reason for these conditions under trusts that did not exist before ? — A. The simple reason is that with competition salesmen are necessary for every house in theii' line; with the syndicating — with the combination — salesmen are no longer a necessity. An agent — a bookkeeper — could be sent out by the trust to collect orders, or the business could be done by mail. If it is a commodity that is a necessity, and that commodity is in the hands of one syndicate — one trust— the dealers have got to buy from that trust. Q. (By Representative Bell.) And the trust gets a higher price for the article even after disposing of all this help? — A. Yes. Q. And the public is injured and not benefited?— A. Yes ; that is right. TRUSTS AND INDUSTRIAL COMBINATIONS: DOWE. 37 THE SAVING BY COMBINATION RESUMED. Q, (By Mr. Phillips.) If the chair understood you correctly, you said that trusts really cheapened things; that manuf actiuing is cheaper than without trusts. Do you limit that to a large number, under one control, in various parts of the country that have gone into a combine or trust ? Do you believe, in other "words, that one central organization can run 40 different manufacturing establish- ments in 10 or 15 States as cheaply as the owners could in each of those States, provided their works were large enough to manufacture a reasonable amount of goods? — A. Why, certainly, they can produce for less money with the syndi- cate, by cutting off expenses; first, the salaries of traveling men, and, second, the salaries of officials. For instance, Jones, Brown & Robinson is a concern that will sell out to the American Windbag Company, and the American Wind- bag Company will ultimately sell out to the American Wind Syndicate, and so on ; it is a wheel within a wheel. Somie salesmen were disposed of by Jones. Browu & Robinson, and then there wei'e some salesmen who represented the American Windbag Company who were dispensed with when the company went into the American Wind Syndicate. At the same time there was a dropping of of&cials, of Jones. Brown, and Robinson. They received a big price for their plant ; probably two or three times what it was worth. It may be possible that Jones was president of the American Windbag Company or a director when they sold out to the American Wind Syndicate. Certainly it reduces expenses. Q. There are certain industries not subject to the expenses of traveling sales- men that perhaps could not be riin as cheaply as by individuals who look spe- cifically after their own plants. I have heard it stated that the largest trust in the country is not producing as cheaply as those of much smaller capacity can pr'oduce. Their whole plants are run by employees. Their production and their manufacturing is all run from one central office, and all who manage these head affairs are employees ? — A. I can understand very readily how a trust would pay a less profit than individual concerns, on the ground that much of the capital is water. If I had a plant, a business which was worth intrinsically §100,000, and an agent of the trust would come to me and say, " Mr. Dowe, we will give you •5300,000 for your plant : we will give you §100,000 in common stock and §100,000 in preferred stock," andif I thought I was strong enough to buck against the trust, I would decline. They may finally think that I am a pretty good judge of my business ; that I will be quite a factor in competition, and will interfere with the immediate advance of prices, and they will agree finally to give me §200,000 in cash. Now, I have made, besides the salary of those who are identified with me in this §100,000 plant that they bought for §200,000, a profit on §100.000 of 10 per cent ; they will expect to make 10 per cent on §200,000 and somebody will be defrauded. But I can readily understand how it would be diflacult unless the prices were advanced to make 10 per cent on §200,000 where we used to make it on §100,000. CAN TRUSTS survive FOR ANY LENGTH OF TIME? Q. Do you believe any trust could exist for any length of time provided other people could organize and pursue the same line of industry on the same terms and conditions of transportation?— A. No, it would assist in breaking them up verv rapidly. The salesmen would be willing to go into the business, if they had the "capital back of them, and they certainly would have a knowledge of the busi- ness. Since I made a personal argument previously, I will make one again. I sell printing presses. Suppose the manufacturers of printing presses should go into a combination and should say, "Mr. Dowe, you know the technical points of the business, but we can not pay you §5,000 a year ; we will give you §3,500 and a house position." Well, I might be egotistical enough to believe that I could organize a company of my own, and I would get some friends to put up money and would go to New Jersey and capitalize a million dollar company with about §30,000 to begin with and ultimately sell some stock. Of course, my friends and others interested with me would approach other friends. The representatives, the agents of the printing-press syndicate, would receive instructions to undersell me under all circumstances. No matter what price I might make they would be told to go under it, and I would soon be wiped out of existence. Q. If there was a law to prevent your company from underselling at any given poiiit where you had a market for your goods, and keeping the price up at other points- if there was a law to prevent that — to prevent what might be called destru(3tive competition — would anyone be willing to take your stock if they could get in on terms of equality ? That is the proposition.— A. Yes ; that is a pretty 38 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. hard proposition. I appreciate the fact that some of these ofacers that are thrown out— that have sold out their interest in the concern absorbed by the trust—will remain idle a certain length of time, but some of them will be energetic and pro- o-ressive and will be factors in competition with some of the very trusts they sell out to. I appreciate that, but whether they can be on a basis of equahty or not, that is a question. . ^i ^ 4.1 j. j. . Q The opinion very largely prevails among business men that the trusts will go down of their own weight ; that they can not be managed as economically as smaller companies can manage their own affairs.— A. It is the behef of the tray- eling men that trusts are largelv water and are organized pmnarily for specula- tive purposes, and that they will go down on that ground. If they were handled as honestly and economically as ordinary businesses can be handled by the owners they would last many years. , ^.^ r,, ^ •, i j Q. (By Representative Bell. ) Has not the Standard Oil Trust, lasted now ±01 over thirty years ?— A. The Standard Oil Company and the South Improvement Company. , „., „ Q. (By Mr. Phillips.) Do you believe that the Standard Oil Company is pro- ducing oil as cheaply, refining oil as cheaply, and marketing it as cheaply as others could do and would do if they had the same opportunity ?— A. If they had the same opportunity others could produce as cheaply, but the Standard controls such a large proportion of the product that they virtually make the price for crude oil. ATTEMPTS TO INFLUENCE WITNESS. Q. (By Mr. Kennedy.) Has anyone sought to influence you in regard to the testimony you might give before this commission— made any sort of threats ?— A. Well, you might call them implied. It was said to me that it is dangerous for a man who depends upon selling goods for a living to take the stand that I have, I met a gentleman in New York, a lawyer, who intimated that it would be danger- ous; it may have been his personal opinion and it may have been from higher authority. Q. Has he any connection with the trusts or combinations? — A. Well, not directly. Q. Indirectly? — A. He may have, possibly. Q. Is he attorney for any of them? — A. No, the man is an assistant in the office of a lawyer who has had some interest in trusts, but I would not want to say that his opinion is any other than his own, that it would be dangerous for a man of no greater influence than myself to assume to oppose these gigantic affairs. Q. Did he think that you might be crushed ? — A. Yes, he said I could be crushed as easily as a caterpillar. Q. (By Senator Mallory. ) Do you understand that by authority ? — A. No ; the young man stated that I might be crushed out. It was the opinion of the gentle- man that I might want to find work in some other line than the printing press, and if I sought it of a trust I would more than likely be turned down. Q. (By Mr. Phillips.) The printing-press firm for which you work is not in a combine or a trust? — A. No, there is no trust in the printing-press line. There is a trust among the typefounders, the American Typefounders' Company, and the Continental Paper Company, and others. There is a trust about to be organized on writing paper, and a letter I received to-day from a gentleman who is well known as a printing-ink salesmen says: "As yet they have been unable to form a trust in my business. It is the most peculiar business ever known, I think, and I do not think they will unite, for they have been making frantic efforts of late to do so. As you probably are aware, I sympathize deeply with those poor fellows who have got the wrong end of the stick." Q. (By Representative Bell.) What eiSect did this trust have on paper?— A. They advanced prices from one-quarter to one-half cent a pound for newspaper, with the excuse that the war news demanded an increased quantity, but they continue to charge the advanced price. Q. They keep up the price ?— A. Yes; they have not reduced the price, and now the excuse is that they cannot pay dividends at the old price; but the first excuse was that it was owing to the (luantity used for the war news. Q. (By Mr. Conger.) Are you acquainted with the fact that the price of news- paper is the same now as it was a year ago when the war was on ?— A. Yes, it is the advanced price ; the price advanced owing to the war as they explained it. Q. The price advanced in the early part of last year, 1898, and has not gone back?— A. No; where paper was sold in carload lots, the price was If of a cent. The price is now 3J to 2i and sometimes a fraction over. TRUSTS AND INDUSTRIAL COMBINATIONS: DOWE. 39 DISCUSSION OF TRUSTS AT THE CONVENTION OF THE TRAVELERS PROTECTIVE ASSOCIATION. Q. (By Mr. Ratchford.) In voiir paper you referred to the action of the Louisville convention on a resolution which was introduced, and justified the action of the convention in tabliim- it upon the ground that certain members were m the employ of trusts. Is that correct ?— A. Yes. _ Q. Are you aware that the newspapers of the country state that the commer- cial travelers at their national convention voted down a resolution against the trusts?— A. I am sorry such a statement was published, but that was an error. Q. Was it contradicted ?— It was not contradicted; it was allowed to pass. It is very difficult to get a correction after a story goes broadcast through the country. The papers will state it as an item of news, but will correct it, if insisted upon, in very small form; there were headlines given to that report in all the newspapers in favor of the trusts. It was given as a news item with the expressed surprise of moderate newspaper men that such should have been the case. I was a delegate to that convention, bu^ I was late arriving there. I started from New Orleans to attend the convention and I missed connections twice. I got there the last day. I was given the privilege of the floor, and asked the commercial travelers' delegates to send to me all the information they could col- lect. After having asked for that information, the subject of the resolution came up; I was placed in a position where I had to keep my mouth shut, and take no sides, but after the convention a number of our delegates met in room No. 210 of the Louisville Hotel, and condemned the action of the body in tabling that resolution as a cowardly act. Q. How many delegates were there in that convention? — A. I believe it is claimed there were 30i). Q. Who were the delegates employed by the trusts who favored the tabling of that resolution? — A. They were principally men from Illinois, and numbered about .5 or 6. Q. Five or 6? — A. And some of them were employers, by the way, and not commercial travelers. Q. Can you state whether or not there was any other influence that operated in the tabling of that resolution? — A. Nothing, except there were two resolutions, one more radical and more emphatic than the other. The less radical resolution was submitted by request of Mr. Phelan, I believe, chairman of the railroad committee of the Travelers' Protective Association, who is employed by a large Chicago firm. The first resolution, which was discussed for an hour or two, was very radical. The less radical resolution was the one submitted by request of Mr. Phelan, and he was not able to be present at the time of the discussion on this subject. Q. Would you care to state as to what percentage of the members of your con- vention are opposed to trusts, m your judgment? — A. I have already made a statement that I have received 3 communications from men favoring trusts, one unsig-ued and the other one an employer, and not a commercial traveler. Q. You would not care to make a broad statement? — A. How can I tell? I assume that the traveling men of the country are a unit. One can judge very clearly the sentiments of the class from the opinion of those who have commu- nicated with me or have talked with me or my assistants, all being opposed to trusts, of course. Q. I will put it in another way. Do you know of any organization of laboring men in the country that is more pronounced against trusts than the commercial travelers ? — A. No. Q. Or any such organization that favors them? — A. I do not, except the com- binations themselves. Q. (By Mr. Kennedy.) This Louisville convention to which you were a dele- gate was not a convention of the organization of which you are president? — ^A. No ; a number of the members of the Travelers' Protective Association are members of our association. The ex-president and the secretary of the New York division and a number of prominent officials who have been identified with that associa- tion are also identified with the one I am president of. Q. How many traveling men's associations are there in the United States? — A. About 33 or 33 leading associations. The largest association is the Utica Com- mercial Travelers' Mutual Accident Association, located in Utica, with nearly 20,000 members. I think at the convention before the last one it had about 30,000. Q. What is the membership of the one that took this action at Louisville, that you spoke of? — A. Thirteen thousand; they are not all traveling men, by the way ; they have also employers and buyers and insurance men. They will take as 40 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. a member anybody who travels occasionally, and if a raan travels a day a year he can be a member of that organization. It is an accident association. Q. Was it the influence of the employers largely that brought about this action? — A. The tabling of the resolution ? Q. Yes. — A. I think it was. I would not want to say that positively, but it was a matter of self-interest, the men evidently wishing to stand in with their houses. I would like to state my position a little more clearly. If I was employed by a trust at my present salary or a greater salary, and I believed that by opposing trusts or the formation of trusts 1 would lose my position, I would resign as presi- dent of the Commercial Travelers' League. I would not be present before you to-day. It is a matter of policy; a man cannot interfere with his bread and butter, you know. Q. (By Mr. Phillips.) Does this league of which you are president embrace these other confederations to which you have referred ? Are they all embraced in it ?— A. Oh, no. Q. Is it a sort of federation, or is it not? — A. It is not a federation ; it is an association. Q. It is a single organization? — A. It is a single organization, with the leading commercial travelers of the United States identified with it. Q. Have you stated the number of members at the convention f — A. Yes. Q. Was this resolution at the Louisville convention fully discussed before it was tabled? — A. There were such attempts made and an argument on parliamentary procedure. There was quite an animated discussion. The chairman assumed the floor, the vice-chairman taking the chair, and argued the question pro and con, and said that the traveling men of this country must be either for trusts or against them, one or the other ; but it was urged by the gentlemen, principally from Illinois, that it would prejudice them with their employers, would place the asso- ciation in a bad light, and would interfere with the securing of members, and that as a nonpolitical body they had no business to take up the question and it was tabled as a matter of expediency. COMMERCIAL TEAVELERS' ASSOCIATIONS — CHARACTER AND OBJECTS RESUMED. Q. (By Mr. Farquhar.) How many organizations of traveling men are there in the United States?— A. About 32 as near as I can tell you — about 33 leading organizations. Q. Has your association any State organization connected with it ? — A. It has its headquarters in New York. We have an oflace on Seventeenth street, and we hold quarterly meetings of the board of directors at the Imperial Hotel in New York, the headquarters of the league. It is an organization that has a nominal fee for membership, $1 a year, and it is merely for the purpose, as I said before, of doing work which the other organizations can not undertake, which would hardly be policy for other organizations to enter into. It is not a large one, but it is influential. We have as members Mr. Aldrich, of Detroit, one of the best known traveling men in the country, three ex-presidents of the Travelers' Protective Association ; Mr. James Lee, of St. Louis ; Mr. Watterstein, of Richmond, Va.; Col. Stephen B. Corhss, of Albany ; Mr. Titus, president of the Springfield asso- ciation, and many men of that stamp. Q. And these are all associated in your league ?— A. It is not a federation ; it is simply an association, to unite the more positive and, I will say, more capable traveling men of the country. Q. In other words, your league is a selection of the more aggressive men of all the associations?— A. Yes; that is the idea precisely. Q. Your general aims and objects then are, for instance, to act in matters of transportation and legislation and the general well-being of the traveling men of the country ? — A. Yes. Q. With the social features added, I presume?— A. No. Q. None whatever ? — A. None whatever. Q. Are there any of those organizations of traveling men that have beneficial features to tlieni ? — A. Accident ? ' Q. Accident or A. (Interrupting.) Most of them are either accident or life insurance organizations. Q. Life insurance ?— A. Or (jrganized for social reasons. Q. Can you give us any idea how many members there are altogether in the 30 organizations in the United States ?-A. Well, I can only give a guess at about 07,000, which exceeds the statistics — the census of 1890 — by ') 000 Q. (By Mr Phillips.) Do any of these organizations belong 'to the American Federation of Labor ? — A. No. TRUSTS AND INDUSTRIAL COMBINATIONS: DOWE. 41 SOME MOVEMENTS WITH WHICH COMMEKCIAL TRAVELERS HAVE BEEN IDENTIFIED. Q. (By Mr. Phillips.) Is there no connection or line of sympatliy between the employers and yourself?— A. Well, there has been on previous questions; it remains to be seen what sympathy there will be at present. If you will permit me, I will cite a few matters that we have been identifiecl with. The first matter which the league took up was opposition to the autiscalping law, on the ground that it interfered with personal jirivileges and constitutional equities, and that matter is now dead. We assisted to elect Judge Parker to the court of appeals in New York, and to that extent we interfered with political matters, but we believed the gentleman who was on the opposition ticket would hardly declare in favor of our side should he be elected, and we used our influence to assist the election of Judge Parker, and I think that his majority was over 70,000. I authorized the issue of many thousands of circiilar letters. There was an article— a letter -svi-it- ten by Mr. Bond of Albany, a lifelong Republican. He came out against Judge Wallace and told his reasons — that his decisions had been favorable, as a rule, to corporations, and that we would not have any show of favorable decisions if he was elected. I had several thousands of those sent oat. Then we asked for a mileage-book law in New York State, and after several conferences with the powers that existed at the time the Krum 500-mile mileage- book law was passed. There was a hearing before Governor Black, at which time I was the principal speaker in favor of the measure. The railroad people had pres- ent a delegation of conductors. In fighting against the antiscalping law it was intimated that we were in af&liation with the brokers, and to show that that was not the case we advocated interchangeable mileage. I worked for it faithfully. Delegations appeared before the different passenger associations. Mr. Daniels, general passenger agent of the New York Central, who was against us on the antiscalping law and the Krum mileage-book law, of course in the interest of the New York Central and the West Shore, had a number of speakers before Grovernor Bhick at the time of the hearing. He has become very friendly to the traveling men, although 2 years ago he said he would never consent to inter- changeable mileage. He said last November that all men could change their minds, and if the trunk line association would not consent to interchangeable mileage, the New York Central interests would. They first issued a book, good on all roads leased or connecting with the New York Central in New York State. They have increased the value of their mileage book, and it now covers over 6,000 miles of road, good in Pennsylvania on the Philadelphia and Reading and reach- ing western Pennsylvania by Buffalo. Rochester, and Pittsburg. Now, I am glad to say, Mr. Daniels is one of the best friends we have. We put up a good and consistent fight, and he is now giving us more concessions than any other railroad man. The matter of interchangeable mileage in New England has been in the hands of a committee in Boston, composed of delegates from the various chambers of commerce, travelers' associations, etc., constituting what is known as the interchangeable mileage committee of New England. Q. (By Mr. Parquhae.) Have you any trouble now in any of the States of the Union in respect to the commercial travelers' license ? — A. No ; that was the first fight with which I became actively identified, from 1883 to 1884. I opposed the taxation of commercial men in the Southern States and Territories, and, partly at my suggestion, Charles R. Skinner, the present superintendent of piiblic instruc- tion of New York State, who was Congressman from Jefferson County, made a fight against the tax in the District of Columbia. I think that was m 1884, and it was the death knell to the taxation of the commercial men. Q. Under the Brad well decision '.' — A. Yes. SUMMARY OF WITNESS'S POSITION ON TRUSTS. Q. (By Mr. Jenks.) Would you say that this is a fair summary of the position you take regarding the effects of trusts : You believe that their general effects are : (1) To reduce the cost of manufacturing, (2) to increase the price to the con- sumer, and (3) to lower the general standard of labor by driving men out of higher- priced positions into lower-priced positions ? — A. Yes. Q. That substantially covers the ground that you take in your paper, does it not?— A. Yes. 83A 4 42 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. COMMERCIAL TRAVELERS OPPOSED TO THE ANTISCALPING LAW. Q. (By Mr. Kennedy. ) Are the traveling men generally, outside of your organ- ization, opposed to the antiscalping law as proposed in Congress and in the differ- ent States? — A. Yes. Q. Can you state briefly what benefits the brokerage system has given to the traveling men?— A. Well, merely a reduced cost, a reduction in expenses; that is all there is to it. If a man is obliged to pay S cents a mile to the railroad com- pany for a short journey, and if he can buy a ticket for 3! cents a mile from a broker, who buys it from a railroad company at a lower price and possibly with a com- mission besides, why should he not? I really believe that the brokers would not exist if it were not for some of the railroads supporting them, the weaker lines especially. If we can save something in our traveling expenses, naturally in the end it would make us more valuable to our concerns and in line for an increased salary. Now, if the railroads will grant us interchangeable mileage — that is what we have been working for so long — we will have no use for the brokers. They were the victims of the situation, and the antiscalping term as applied was a mis- nomer. It should have been called antieverybody. It was against the rights ot the people to make a man a criminal, as the law in New York State did as it was originally proposed — to brand a man as a criminal — if he sold a railroad ticket. We contend that when we buy a railroad ticket it is our property, and we can sell it for what we see fit. It is a question which has been discussed pro and con, and I am satisfied that the lawmakers are of the same opinion as traveling men to-day. They understand it better. Of course the railroads, the large lines, put up a very positive, a very aggressive fight until they were defeated. Testimony closed. THE SUGAE COMBrSTATIONS. Note.— The Sugar Refineries Company t the Sugar Trust) was organized August 6, and ready for , work in Novemb 3r, 1887. It controlled practically all of the sugar-refining interests in the United States, excepting 2 refineries in Philadelphia ana 1 in San Francisco. Its aiithorized capitaliza- tion was s50,fX)0,0(.)0. The different companies coming into the trust surrendered their stock to a board of 11 trustees, and received hack trust certificates. Profits were to be divided on the trust certificates. On the allegation that the trust was an illegal combination the people of the State of New York brought suit against the North River Sugar Refining Company, one of the members of the trust, to annul the charter of the corporation, on the ground that in surrendering its active man- agement to the board of trustees of the trust it was acting ULTRA VIE ES. The ease was decided under the common law in favor of the State, and the decision was upheld by the court of appeals. As a result of this decision of the courts of the State of New York the American Sugar Refin- ing Company was organized Januai-y 10, 1891, as a single corporation, in New Jersey, to take the place of the former sugar trust. The capital of the new company was $50,000,000, $35,000,000 com- mon stock and jc^5,(X)0,(H)0 preferred stock, the latter to receive 7 per cent cumulative dividends before any was paid on the common stock. During the years 1890 and 1891 active competition with the American Sugar Refining Company sprang up on the part particularly of 4 large refineries in Philadelphia and vicinity, the Frank- lin Sugar Refining Company, the E. C. Knight & Co. Refinery, the Delaware Sugar Refinery, and the Spreckles Sugar Refinery Conipany — large companies, which together produced about one-third of the total product of the United States. After nearly 3 years' active competition the American Sugar Refining Company purchased these companies, and a large proportion of the capital stock of a fifth, the Baltimore Sugar Refinery Company. Of $35,000,000 of new stock which had been authorized $23,546,000 (one-half common and one-half preferred) was issued for purchase of these companies. In the latter part of 1896 the American Sugar Refining Company bought nearly all of the minority stock of the Baltimore Sugar Refinery Company m order to avoid difficulty with the minority interest. At the time that it was proposed to buy the Philadelphia refineries the United States filed a bill in equity to prevent the sale of these refineries to the sugar combination. The case was, however, decided against the Government on the ground that this purchase was not in restraint of interstate commerce, and that the case therefore was not properly under the Sherman law of 1890. In 1896 Arbuckle Brothers, producers of coffee, began the erection of a sugar refinery. The American Sugar Refining Company soon afterwards bought a majority of the stock of the Woolson Spice Company, Toledo, Ohio, in order that they might enter into the coffee business. Competition between the American Sugar Refining Company and Arbuckle Brothers continues at present in both sugar and coffee. The other chief competitors of the American Sugar Refining Company are Claus Doscher, the Mollenhauer Sugar Refining Company, and the National Sugar Refining Company. The dividends on common stock of the company since 1891, the date of the formation of the Sugar Refining Company, have been as follows ; One dividend of 4 per cent was declared in that year; 1893, 10^ per cent; 1893. 31^ per cent, and since 1894 12 per cent has been declared each year m quarterly dividends. On preferred stock 7 per cent has oeen declared yearly to date. The stock of the sugar combination has been sold on the New York Stock Exchange since Feb- ruary, 1889. Sales of preferred stock of the present company began In January, 1891. The stock has fluctuated greatly from time to time, common stock having sold as low as 57^ in January, 1890, and above 160 in 1899. The prices have fluctuated so much that the stock has become one of the leading speculative stocks of the exchange. Washington, D. C, June 10, 1S99. TESTIMONY OP MR. STEPHEN N. BUYNITSKY. The commission met at 11 o'clock a. m. Saturday, June 10, 1899, Vice-Chair- man Phillips presiding. Mr. Stephen N. Buynitsky, of Washington, D. C, assistant chief of the customs division of the Treasury Department, testified as follows : Q. (By Mr. Jenks.) Will you be kind enough to give your full name and address? — A. Stephen N. Buynitsky. I am at present assistant chief of the customs division of the office of the Secretary of the Treasury. Q. How long have you been in the position which you now hold? — A. I was promoted to that position in April last. Q. For how long have yon been in the customs division of the Treasury Depart- ment? — A. For twenty-three years. 48 44 HEARINGS BEFORE I'HE INDUSTRIAL COMMISSION. Q. What has been your special work in connection with duties on sugar?— A, It has been my special duty to ascertain the rate of drawback to be paid on exports of sugar and sirups from imported raw sugars which pay duty, the ratio ot duty to be paid on raw sugar used in the production of sugar and sirup exported, less 1 per cent of deduction, as provided by law. THE TARIFF ON SUGAR. Q. Because of your expert knowledge of the sugar tariff the commission desired you to explain what the action of the tariff is. Will you explain the tariff on sugar, telling us in the first place about the duty on different grades of raw and on refined sugars and then about the drawbacks ?— A. Paragraph 309 of the tariff act of July 34, 1897, reads as follows (reading): "Sugars not above number sixteen Dutch standard in color, tank boctoms, sirups of cane juice, melada,- concentrated melada, concrete and concentrated molasses, testing by the polari- scope not above seventy-five degrees, ninety-five one-hundredths of one cent per pound, and for every additional degree shown by the polariscopic test, thirty-five one-thousandths of one cent per pound additional, and fractions of a degree in proportion ; and on sugar above number sixteen Dutch standard in color, and on all sugar which has gone through a process of refining, one cent and ninety-five one-hundredths of one cent per pound ; molasses testing above forty degrees and not above fifty-six degrees, three cents per gallon ; testing fifty-six degrees and above, six cents per gallon ; sugar drainings and sugar sweepings shall be subject to duty as molasses or sugar, as the case may be, according to polariscopic test; Provided, that nothing herein contained shall be so construed as to abrogate or in any manner impair or affect the provisions of the treaty of commercial reciproc- ity concluded between the United States and the King of the Hawaiian Islands on the thirtieth day of January, eighteen hundred and seventy-five, or the provi- sions of any act of Congress heretofore passed for the execution of the same." That is the whole of paragraph 209, schedule E. Q. What would be the amount of the duty on the ordinary raw sugar used by refiners in their business ? What degree of test do you ordinarily take as a basis of calculation ? — A. The sugar that is most commonly used for refining purposes I understand to be 94, 9.5, 96, and 97. Evidently 96 is the best refining sugar. Now, the duty on that will be 0.95 for the first 75 degrees ; and 0.035 multiplied by 31, from 75 to 96, in addition to the 0.95, will make 1.685. Q. So that the tariff upon raw sugar of 96 degrees test is 1.685 cents? — A. Yes; 1.685. AMOUNT OF REFINED SUGAR OBTAINED FROM A HUNDRED POUNDS OF RAW SUGAR. Q. How much sugar of that grade does it regularly take to produce 100 pounds of refined sugar? — A. According to the data collected by the special commission of the Treasury Department in 1898 the average quantity of refined sugar pro- duced from 100 pounds of sugar testing 96 was 93^ pounds. Q. Is that the regular figure that is officiaRy employed by the Treasury Depart- ment?— A. Yes; in the computation of the particular rates of drawback on the refined sugar imported. Q. Have you figured out, or can you tell, us what the regular tariff would be on enough raw sugar to produce 100 pounds of refined granulated sugar ?— A. I have not made any such calculation, but it is easily made from these figures here. (Witness produces paper.) Here is circular No. 183, of October 13, 1898, fixing the rates of drawback on sugar and sirup. The product of raw sugar of 96 degrees is rated here at $1.79 cents per 100 pounds of refined; that is, sugar refined from raw cane sugar. We have 3 c(.ilumns, 1 for sugar refined from raw cane sugar and another for that refined from raw beet sugar. The rate on that refined from raw cane sugar, 96 degrees, is given at 81.79 per 100 p(_)unds exported. [189K. Department Circular No. Wa. Division of Customs.] Dli,U\'l!ACK ON SUdAR A\D .STRLTP. Treasury Department, Office of the Secretary Washington, D. C'., Ociohcr 12, 1S9S. To offlcem of the cusiomt; and otlu'i-n concerned : On the exportation of sugar and sirup refined wholly from raw su"-ar imported under the act of July 34, 1M!I7, a drawback will be allowed equal in amount to the duty paid on the sugar used in the manufacture, less 1 per cent of such dutv THE SUGAR COMBINATIONS: BUYNITSKY. 45 Jj 1- When the exported sugar is '-hard refined," commercially known as loaf, '« cut loaf, cube, granulated, crushed, or powdered, testing by thie polariscope 99.5 degrees or above, and is refined wholly from one grade of raw cane or beet sugar, used separately, the rate of drawback thereon for each 100 pounds exported, and the corresponding charge on the record of importation, for the kind of raw sugar identified, shall be as shown in the following schedule for each degree of polariza- '•is tion, and for fractions of a degree in proportion: 01 f «ll Schedule of ratex for hard refined migai-n. lb REPINED PROM RAW CANE SUGAR. Polarization of raw sugar used. Rate of draw- back on each 100 pounds ex- ported. Charge recordof importa- tion for each 100 pounds exported. Polarization of raw sugar used. Rate of draw- back on each 100 pounds ex- ported. Charge recordof importa- tion for each 100 pounds exported. Degrees. 99 Dollarx. 1.k:s 1.82 1.80 1.79 1.77 1.7B 1.74 1.73 1.70 1.68 1.60 1,64 1.62 Povnds. 102.23 103. 70 104. &5 106. 23 107. 27 108. 98 110. 12 111.33 112.58 113.90 115.28 116. 72 118.2.5 Degrees. 86 85 Dollars. 1.60 l.,58 1.56 1.33 1.51 1.48 1.45 1.42 1.39 1.36 1.3:3 1.29 Pounds. 119.85 121 54 98 .... 97 84 96 83 124 39 95 82 126 36 94.. 81. 137 59 93 80. 79 78 77 76 75 128 89 9:;.. 91.. 90 89 130. 38 131. 75 133.33 88 ... 87 REPINED FROM RAW BEET SUGAR. 98 1.82 1.80 1.79 1.78 1.76 1.75 1.74 103.71 104.66 106,24 107.88 108. 98 110. 76 112.63 91. 90 89 1.72 1.70 1.69 1.67 1.65 1.63 113 91 97 115. 26 96 117 37 95 - 88 118. 87 94 93.- 87 86 120.44 122.10 92 2. When sugar of one kind, but of diflierent grades, is used in a "melt," the quantity of each grade so used must be shown in the drawback entry, and the drawback on hard refined shall be computed on the basis of the several percent- ages identified and the rate prescribed for each grade. 3. When cane and beet sugars are mixed in refining, the drawback entry must show the quantity of each kind and grade of sugar used in the manufacture, and in liquidation of entries the drawback on hard refined, for the several percentages of each kind and gi-ade of raw sugar used, shall be determined in the same manner as if the sugars identified had been used separately, 4, When duty has been levied and paid on imported sugar under the provisions of section 5 of the tariff act, such duty, computed on the basis of the amount "charged " in the foregoing schedule for each kind and grade of raw sugar iden- tified, shall be used in determining the rate of drawback due on hard refined sugar, in addition to the duties otherwise imposed by the said act. 5. When " soft refined" sugar is exported, the drawback thereon shall be appor- tioned to that on hard refined made from the same kind and grade of raw sugar, on the basis of its polarization and an assumed polarization of 100 degrees for hard refined. For determination of drawback, all refined sugars polarizing less than 99,5 degi-ees shall be regarded as soft refined, 6, The preliminary entry must show the marks and numbers of the shipping pajckages, with their average gro.ss and net weights, and the kinds of refined sugar contained therein, describing the same, separately, by their commercial designations, 7, The drawback entry must show the (luantity and polariscopic test of each kind of sugar exported, and samples shall be taken as ordered by the collector to 46 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. be siTbmitted to the appraiser for verification of the declared test, but in no case shall the test used as the basis of allowance of drawback exceed such declared test. 8. In the sampling and testing of exported refined sugars, the same general rule shall apply as in the case of imported refined sugars. The regulation round tin sample box shall be used for preserving the samples, which, in the case of soft refined sugar, must be firmly packed full, and the cover placed thereon at once. The sugars shall be sampled with a trier specially provided for the purpose, and the sample shall be drawn from the middle of the package. Such percentage shall be taken as in the judgment of the sampling officer may be necessary to afford a fair representation of each kind of sugar in the shipment, and all samples must be sent promptly to the appraiser for report of test. 9. The drawback on sirup .shall be as follows : On sirup valued at 3 cents per gallon or less, 1^ cents per gallon ; on sirup valued above 3 cents and not above 14 cents per gallon, the driiwback shall equal one-half the value of the sirup; on sirup valued above 14 cents per gallon, 7 cents per gallon. 10. The values herein nrmed are the values "in tank " at the refinery, in condi- tion as tJiVoirii finally from the centrifugal in the regular process of sugar manu- facture. When, after such process, the sirup has been passed through filters, or subjected to treatment, other than mixing m the vacuum pan, whereby its char- acter and value have been enhanced, the fact must be .shown in the diawback entry, and a deduction must be made therefor of 4 cents per gallon, in addition to the usual deduction from the price " tree on board," to find its value as a basis for determining the rate of drawback. When the sirup is exported in condition as thrown from the centrifugal, in the sense herein explained, such fact must be declared in the drawback entry. 11. When the exported sirup has been produced by boiling wholly imported molasses for the purpose of extracting sugar therefrom, the drawback on svioh sirup per gallon shall equal four-fifths of the duty paid per gallon on the imported molasses used, and the remaining duty shall be applied as drawback on the sugar product, when exported, on the basis of the quantity of sugar extracted : Provided, That in no case shall allowance be made on a quantity of sirup in excess of 50 gal- lons for each 100 gaJlons of imported molasses identified, and that when the sugar jiroduct, or any part thereof, is exported, the total quantity of sugar produced from the imported molasses identified must be declared in the drawback entry. 12. To find the quantity to be charged on the record of importation when the exported sirup has been refined from raw sugar, divide the drawback allowed on the sirup by the duty paid per pound on the raw sugar identified. 13. Values declared in drawback entries, as herein provided, must be verified by the collector and quantities by United States weighers and gangers prior to liquidation of entries. W. B. Howell, Assistant Secretary, Q. Will you explain again just what that is you are giving?— A. That is the rate of drawback allowed on 100 pounds of exported refined sugar obtained from raw cane sugar testing 96 degrees. Q. Is the drawback supposed to be the full amount of the duty that is paid for bringing such sugar into the country?— A. It is the full amount" of the dxity paid on sugar brought into the country and used in the production of refined sugar less the proportion of duty reserved for the sirup. ,^- ^es. Let us take up that afterwards. What is the duty upon enough sugar of 96 degrees centrifugal to manufacture 100 pounds of granulated suo-al- ^ If I understand the figures you have given, would not that be arrived at by^adding to 11.68.5, which you said was the duty on 100 pounds, the duty on 7J- pounds V-^A Yes ; that is, take 10 000 and divide it by 0.925 and you get figures representing the number of pounds of raw sugar used in refining. Q. Then the duty is calculated on that? Now, can you give us those fio-ures' I should hke to find out, if possible, just what amount of i aw sugar in the ouinion of the Treasury Department, is used to produce 100 pounds of refined —A 108 1 pounds. ' Q. Then the duty upon that amount?— A. To find the duty on that numhpr of pounds, 96 degrees. I multiply 108.1 by 1.685. ^ numbei ot Q. Yes?— A. 183.148. C^. What was it?— A. 1H2.148. THE SUGAR COMBINATIONS: BUYNITSKT. 47 Q. Then, what is the duty at present iipon 100 pounds of refined granulated sugar ?— A. The duty iipon refined sugar imported? Q. Yes.— A. It is §1.955. THE DIFFERENTIAL DUTY ON REFINED SUftAB AND RATES OF DRAWBACK ON EXPORTED. Q. What is the difEerence between the duty on 100 pounds of granulated sugar and upon the amount of raw sugar that it takes to manufacture that much refined ? Do you get that by subtracting ?— A. That difEerence was calculated at the time by the Senate committee at S1.S3.5 per 100 pounds. Q. According to the figures you have just given, how much would it be?— A. 1.83148. Very nearly l.s3.i, which would be the duty on refined sugar of 100 degrees. •Q. Yes.— A. Carry that, say, from 75 to 100 at the rate prescribed of 0.035 to a degTee, and it would make the duty on refined sugar testing 100, if such were imported, just 1.825. Q. That is the difEerence that you make also between the present duty on refined sugar and upon a sufficient amount of raw sugar to produce that ?— A. Very nearly. You see I make it 1.82148 instead of 1.835. Q. Yes. — A. It is very near. Q. How much then, according to your figuring, is the differential duty on relmed su.gar per 100 pounds or per pound at the present time? — A. 135. Q. There is a differential duty in favor of the refined sugar. — A. Of 125. Q. Of 125 ; yes. — A. It is supposed to be equal to the duty which would have been paid on the whole quantity of raw sugar necessary to produce 100 pounds of refined sugar. Q. "Will you repeat again what you have just said? — A. This differential duty is exactly equal to the duty which would have been paid on the quantity of raw sugar necessary to produce 100 pounds of refined. Q. Yes. Did you not say that it took 108.1 pounds of 96-degree test to make 100 pounds of the refined sugar ? — A. Yes. Q. And what is the amount of the duty upon the 108.1 pounds of 96 test? — A. 183.148. Q. And what is the duty upon refined at present? — A. 1925. Q. 1935. It is substantially equivalent to the other difEerence you make out. So you make the difference upon this amount substantially equivalent to the other? — A. Wait a moment ; pardon me. It is 195. I made a mistake in saying 1935. It is 195. Q. 195: and then what will the differential be?— A. 13.8.53. Q. Does it not amount to this then that at the present time there is what we may fairly call a protective duty upon refined sugar? — A. Yes : of 12.853 ; and that, I understand, comes from the improved methods of refining which now yield more sugar from 96 than they obtained at the time when the schedule was enacted. Q. This present schedule was made in 1897, was it not? — A. The schedule of rates of drawback was made in October, 1898. Q. In October, 1898 : and when was the law passed? — A. The law was passed July 24, 1897. THE EFFECT OF IMPROVED METHODS OF PRODUCTION. Q. So you think this differential in favor of refined sugar comes about by the improved methods of production that have been adopted since 1897 ? — A. Since 1896, perhaps, because the schedule of 18!)7 was, of course, based upon statistics collected the year before. Q. Was the proportion of d2i pounds of refined sugar to 100 pounds of raw sugar settled upon by the Treasury Department in 1898?— A. Yes ; in 1898. Q. What had the "figures been before that time ?— A. The figures before that time ? Q. Instead of 93^ pounds, it was what?— A. Instead of dividing by Q. (Interrupting) 93J?— A. 93i^: we divided by 93. Q. That was the only point ?— A. It showed that more raw sugar was required to make 100 pounds of refined sugar than is now required. Q. D3 you think the present rate is more accurate than the former was ; that is, that 93 V is more nearly accurate than 93?— A. I think both are exactly the same in accuracy. If they could produce 93 pounds then, ttie schedule then was accu- rate. If they now produce 93i, the schedule of rates of drawback is also accurate. Q.' Yes. Of course, it is expected that there will be regular improvement in 48 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. methods of production. When the law has been passed and the rate has once been fixed, it is likely, if that law stands for 10 years, to be somewhat beiimd the times?— A. Most likely. . . , , , „ ,, , ^ io„„ Q As the old law was. Now, is it not your opmion that before the law ot 1897 was passed it would have been more nearly accurate to have the basis of reckon- ing 92* instead of 93? That is, did not the change m the methods of production come before the change in the law ?— A." I believe it more safe to prevent the growth of that differential within a short time by making it a little less than accu- rate ; then in time it will become accurate. But whether it is wise legislation to provide for possible improvements in manufacture I do not know, because it would then also be wise legislation to provide for possible unfavorable circum- stances. AMOUNT OF REFINED SUGAR OBTAINED FROM A GIVEN AMOUNT OF RAW AGAIN CONSIDERED. Q. The reason I asked you the question in this form was that you were quoted at the time the act of 1897 was under discussion as saying that, m your judgment, it would have been somewhat more accurate, according to the conditions at that time , to have assumed 93 as the product of 100 pounds of raw sugar instead of 92 ?— A. I recollect having been quoted that way. Not having had any opportunity of correcting the statement at the time, I dropped the matter. But I found among my papers a memorandum drafted by me, June 39, 1897, wherein I said : " In a statement printed in the Congressional Record of the 36th of June, 1897, reference is made to recent interviews with me, in regard to the Treasury tables of sugar drawbacks, and 13 statements are attributed to me." As these statements are deduced from informal conversations upon the subject, none of them are accurate, and some are misleading, as shown by the following notes : I am reported as having said: " Nos. 3 to 5: That 8 refiners submitted statements to the committee, and that the tables were constructed by taking an average of these 8 statements." Note. — I said that the basic proportion of 92 pounds refined to 100 pounds raw sugar testing 96 degrees was verified by the average of the statements. '• No. 7: That the statement containing over 94 pounds came from Cunningham, of Texas." Note. — I stated that a Texas refinery, whose name I did not recollect, which reported a yield somewhere near 94 pounds, uses Louisiana sugars, which are known to give better results in refining than imported sugars. "No. M: That I never believed the refiners' statements and that I always estimated 93 to 93f pounds of hard refined could be made from 100 pounds of 96-degree sugar." Note. — I said that I would have preferred 93 pounds to 100, as a safer basis. Q. When you say '• as a safer basis," what do you have in mind — a safer basis for the Treasury Department? — A. Safer for the Treasury Department ; safer against over allowances. [Reading.] "No. 11: That though their (the refiners') statements were made under oath, I would not believe them." Note. — I said (in reply to a remark of the interviewer) that "when refiners' statements are made under oath I have to believe them, unless I am prepared to prove perjury." A man claiming to be a lawyer, as I do, should not say that he would not believe any man's statement imder oath. When asked. If the xiarties are interested do you take their statements? I say, when they are under oath and I am not pre- pared to prove perjury, of course I have to take them. Q. Now, before the law of 1897 was enacted, you said you would have preferred, as the safer basis, to take 93 pounds instead of (13? — A. Yes. Q. At the present time the Treasury is taking 93.1 pounds for a basis ?— A. Yes. Q. I suppose that you would say that you would now consider it safer to take 93, or possibly 93+, on account of the improved methods of production?— A. That is, for the purpose of preventing an overallowance in some special cases ; but the rates were based on averages, which is safe enough, and I myself signed'the com- mittee report in 189H because I thought it safe enough. Personally, I mi°-ht have preferred a different Avay of getting the result, but as a member of the co'inmittee I could have no objection to the average rate of 93, which was safe enouo-h. It proves now it was safe enough. We have advanced only one-half pound in two years. Q. Then, at the present time, with the changes we have made, you think that a basis of 93^ is certainly favorable enough to the refiners? — A. Yes. THE SUGAR COMBINATIONS: BUYNITSKY. 49 litj Q. And that probably no injustice would be done them now if a somewhat higher rate were taken, say 93 ; but, of course, one has to be sure to be fair to ;,; them. Is that your idea?— A. Yes. HI Q. You think that in a great many cases no injustice would be done if you 4, should adopt a basis as high as 93, or possibly 93i ?— A. I can not tell what results ;,,. might be reached by certain new combinations of degrees of raw sugar. You see 11, the refiners use different combinations and are always experimenting upon the j' best results to be obtained from the various mixtures ; but that is a very compli- „: cated calculation, which the Treasury Department can not make. ,,; Q. It is, I presume, true that a great deal also depends upon the raw sugar itself, it having been found that raw sugar from different places is likely to give somewhat different results ? — A. Exactly. , , Q. Sometimes they may get as low as 90 pounds of refined to 100 pounds of raw, and sometimes possibly as high as 94 or 9.5?— A. I do not know about 95 ; that is a little too high ; but 94 is possible with certnin sugars. The Louisiana raw sugars ,,. give better results in refining than any others. ;[ Q. So that from an especially good grade of raw sugar you may get as high as 'jT 94? — A. Yes. Q. And this 92+ is supposed to be a fair average? — A. A fair average. Q. Did you say that Louisiana sugars are, on the whole, the best the refiners I . use ? — A. It is so reported. Q. Can you give us any information with reference to the quality of sugars tliat come from other places. Which is the next best ?— A. No ; I can not give you any ^^ information on that point, "because this Louisiana sugar was simply brought to ■ ' my attention by Seilator Caffery. In connection with my duties it has not been _ necessary to inquire into the different grades of sugars from different places. V Q. Do you know anything with reference to the comparative quality of the ■• sugars that come from Cuba and the Hawaiian Islands? — A. I do not ; I can not tell you. Q. To come back to what we were speaking about a moment ago, the special ■ point that I wish to be perfectly certain about is tliis, that in the present admin- istration of the Department, according to your figuring, there is a differential '' duty in favor of refined sugar of 13.5 ? — A. I beg your pardon, 13.25 ; 13.35 instead of 12.5 ; 13i instead of 13*. THE DUTY ON SUGAR NOT IN.JURIOUS TO CONSUMERS. Q. It is the opinion, of course, of a good many people that our sugar refiners do not need so high a duty as that. In the opinion of some, on account of the advan- i; tages that they get from combination in manufacture they need no differential I duty. Have you any suggestion to make as to any law that might be passed to prevent the abuse of this differential duty in case the President or any one else t should think there was an abuse ? — A. The differential duty in itself can not be •i abused. Q. Explain a little more fully. — A. I can not see how it could be abused. Q. "Will you tell just what you mean by that. I say that some people think that the protection that the refiners get is really injurious to the consumers of sugar and I ask you whether you have any suggestions to make. — A. No ; I have ; not. I do not believe that it is injurious ; that is not my belief. I think it is not ', injurious, because I find that under that very slight protection the refining interests of the United States have been growing and that the success of the refiners in I their business redounds to the benefit of the public — of the sugar consumer. I am one of the greatest consumers of sugar in the United States. I use more sugar than double the per capita sugar consumption of the United States. I know very well that 20 years ago I had to pay 10, 11, and 13 cents a pound for refined sugar. - Now I pay only 5 cents ; I pay as much now, and have double the quantity to consume, so I do not see that a differential has done any wrong to the public. TRUSTS OB, COMBINATIONS MAY BE INJURIOUS. But I see that a combination of the manufacturers of any article, call it trust or industrial combination, may become a menace to the welfare of the country if they abuse their power by using it in certain ways ; as, for instance, if, after crushing the competition of small manufacturers by underselling their goods, they attempt to raise the market prices of the monopolized products on the one hand and on the other crush the workingmen employed by them in order to reduce the cost of production. Then they may become public enemies. Q Yes. — A. How to prevent or punish such a possible crime against the Com- monwealth is a puzzling and troublesome que.stion. In saying this, of course I 50 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. speak of something with which I have no official connection; we do not know anything in the Department about trusts and combinations. Q. Of course not.— A. I speak as a citizen of the United States who reads the papers and tries to understand them. It is possible that a combination of manu- facturers may bec(jme a menace to the Commonwealth, but how to prevent it and how to punish it is a puzzling question; and the newspapers, notwithstanding the great ability of our newspaper men, have not yet satisfactorily solved that problem. One way suggested is by legislation by the different States; another wav is by legislation < if the United States. Having had much to do with tariffs, it naturally suggested itself to my mind that tariff legislation might m some way be an instrument for preventing the abuse of combination; and in anticipation of coming before the commission I drafted a little bill, not as a perfect meas- ure but as a suggestion, that might be of some use later. I will read it. Q. Yes; I shall be obliged if you will read it.— A. (Reading) : A BILL. To provide for the redvictiou of import duties in certain cases on articles, tlie manufacture of whieli is controlled by combination of manufacturers. Be it enacted Tyy the Senate and Hon.fe of Representative!^ of the United States of America i)i, Congrens a.sKei)thc(L That whenever the President of the United States shall be satisfied that the manufacture of any article subject to import duty under the law then in force is monopolized, and the price thereof to the consumer is controlled by a combination of manufacturers of the same, and that such com- bination results in the lowering of the wages of its operatives and an inflation of the price beyond a reasonable profit over the cost of production, he shall pro- vide by proclamation for the reduction, during a specific period, not exceeding 5 years, of the duties imposed on such article bj' such law to the extent of not less than per centum nor more than 20 per centum thereof, and thereafter the duty which shall be collected by the United States upon the article designated in such proclamation shall be the duty so reduced. Q. If I understand the purj)ort of your bill, applied to the su.gar combination, it would amount to this: That if, in his judgment, the President of the United States thought the sugar combination injurious to the consumers of sugar through- out the country, it would be within his discretion to reduce the tariff on refined sugar to the extent of 30 per cent for 5 years? — A. Yes. Q. (By Senator Mallory.) I notice that you make both of these conditions necessary, viz, an increase in the price of the article and a decrease of wages. Do you think it would be dangerous if it gave him the power to issue such proc- lamation on the existence of one condition, an increase of the price, for instance, or a decrease in wages. Either of them by itself is an evil. Is not an increase of the price to the public an evil of considerable importance in itself ? — A It is not an evil if it is comparatively slight. Suppose they sell sugar now at 5 cents and to-morrow find a way of producing it at a cost of 4 cents and continue to sell at 5, the consumer is not unfavorably affected. Q. No; that is not the (iuestion. — A. Their income is greater and they derive it from a legitimate source— from an improvement in manufacture. Why should we punish them ? Q. Would that be an increase of price? — A. It would be. Q. Would that not be simply allowing the price to remain at what it was before ?— A. But it would be a price above the cost of manufacture. Q. Oh, yes.— A. If they reduce the i^ost of manufacture by introducing machin- ery or some new methods, there is no reason why they should not reap the bene- fit of it so long as the public pays the same price ; but if they reduce the cost of manufacture at the expense < if the operatives, then the law would intervene. The public might not lose anything, but the operatives would, and in that case the law would intervene and open a free— a comparatively free— market to importation, anf refined and the amount of sirup resulting from the operation, they took the duty on the number of pounds of raw sugar found to be necessaiy and apportioned it between the refined sugar and the sirup according to the quantities and the market prices. It may be rea- soned in this way: If a pound of refined sugar is worth 4 cents and a gallon of sirup 6 cents, they will find what part of tlie value of the imported material is contained in the sugar and what part in the sirup and divide the total amount of drawback due. or duty due as drawback, between the sirup and the sugar in proportion to the values of imported material found to be contained in the prod- uct. It is a double proportion and complicated, but it is only arithmetical: and in this way they constrrrcted these tables. Under the former tariff, the duty being- ad valorem , the whole drawback was figured on the number of pounds of raw sugar used, and the number of pounds was calculated in accordance with the principle I have just explained, of distiibuting the duty between the sugar and the sirup in proportion to the values of the materials foiind therein. These tables will therefore show you that on sugar 96' test the duty of 1U7.47 pounds was attrib- uted to the refined sugar. Under the present ratio, the duty being specific, the drawback has been calculated in dollars and cents, but the system ot distributing the drawback between the sugar and the sirup has been the same. Now here you will find a column entitled "Charge record of importation for each 100 pounds exported." Now for each 100 pounds of refined sugar made from 96° test the charge to the record of imjiortation is 124 pounds. That covers all the sugar used in refining and all the sugar which goes into the .sirup, and the figure is very ample in order to prevent reference to importations that have been exhausted by export- ing. One hundred and twenty -four pounds is a very high figure, but inasmuch as the present committee, or the latest committee on the drawbacks, found it nec- essary to get the average drawback on sirup, instead of so much per pound on the sugar contained in the sirup, they found it possible to make the average here. The drawback on sirup is as follows: " On sirup valued at 3 cents per gallon or less, the drawback shall be l-j cents per gallon; on sirup valued at 3 cents and not above 14 cents per gallon, the drawback shall be one-half the value of the sirup; on sirup valued above 14 cents per gallon, the drawback shall be T cents per gallon.-' They made very elaborate calculations showing that these averages exactly meet the postulates of the system ot distributing the duty between refined sugar and sirup. On reading the very elaborate report there was no doubt in my mind that it was correct. Q. The information was. I suppose, largely gathered at the reflneries ?— A. Yes. They went to the refineries and examined the books and had statements made to them: the refineries opened their books to the investigation of the committee freely, and there was no secret about it. COUNTERVAILING DUTIES EXPLAINED. Q. Will you also explain for us the subject of countervailing duties?— A. Yes. It is one of the most delicate and difficult duties imposed upon the Secretary of the Treasury by the existing law. 1 See Circular No. 183, p. 44. 52 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. [1898. Department Circuhr No. 199: Division of Customs.] additional duties on sugar imported from, or the product of, countries paying bounties on the export thereof. Treasury Department, Office of the Secreta-ry, Washington, D. C, December 13, 189S. To Officers of the Customs ami others concerned: Section 5 of the act of July 34. 1897, provides as follows : That whenever any country, dependency, or colony shall pay or bestow, directly or indirectly, any bounty or grant upon the exportation of any article or merchan- dise from such country, dependency, or colony, and such article or merchandise is dutiable under the provisions of this act, then upon the importation of any such article or merchandise into the United States, whether the same shall be imported directly from the country of production or other^^■ise, and whether such article or merchandise is imported in the same condition as when exported from the country of production or has been changed in condition by remanufacture or otherwise, there shall be levied and paid, in all such cases, in addition to the duties otherwise imposed by this act, an additional duty equal to the net amount of such bounty or grant, however the same be paid or bestowed. The net amount of all sucli bounties or grants shall be from time to time ascertained, determined, and declared by the Secretary of the Treasury, who shall make all needful regulations for the identification of such articles and merchandise and for the assessment and collec- tion of such additional duties. In pursuance of these provisions, the following amounts of bounties respec- tively paid or bestowed, directly or indirectly, on the export of sugars by the countries hereinafter named, are hereby declared for the assessment of additional duties on sugars imported from, or the product of, such countries or their depend- encies, viz: argentine republic. On sugars produced in the country since January 30, 1897, and exported with benefit of drawback, 6 centavos per kilogram. AUSTRIA-HUNGARY. Ou sugar under 93 per cent and at least 88 per cent polarization, 1.37 florins per 100 kilograms. On sugar under 99i per cent and at least 93 per cent polarization, 1.46 florins per 100 kilograms. On sugar at least 99i per cent polarization, 3.10 florins per 100 kilograms. DENMARK. On refined sugar produced wholly from beets grown in Denmark, 1.13 crowns per 100 kilograms. FRANCE. Eaw sugars of the standard of 65 to 98 per cent for beet-root sugars or of 65 to P/i' cent for French colonial sugar per 10 J kUo„a-a-.n'i of refined sugar, 100 per cent. 10.83 francs. o ^ f Sagar candies oalcalated at their le.^al e;iuivalent, per 100 kilograms, effective weight, 11. ol francs. Refined sugars in loaf or crushed, clear, hard, and dry, per 100 kilograms, enlective weight, 11.51 trancs. ^o^""^ > Raw and refined sugars in grains or crystals of a minimum standa,rd of 98 per • '^J^® "'^M'* °^ '■"'^"'''^ T^?'' ^'J?"' '"f"^ ''' calculated by deducting from the polar- ization of the raw sugar twice the glucose, tour times the ashes and U cer cent for loss 111 refining. « i^ On raw sugar at least 90 per cent polarization, and on refined sua-ar nnrl Pi- per cent and at least 90 per cent, 3.50 marks per 100 kiloo-rains. unuei THE SUGAR COMBINATIONS: BXJYNITSKY. 63 On candy and sugar in white, hard loaves, blocks, crystals, etc., at least 994 per . cent, 3.55 marks per 100 kilograms. 3. On all other sugar at least 98 per cent, 3 marks per 100 kilograms. THE NETHERLANDS. On raw sugar produced in the country from beets, and testing less than 98 per cent, 2.2354 florins per 100 kilograms of hard refined (100 per cent). On raw beet sugars testing 98 per cent or above, three-fourths of said bounty VIZ, 1.7655 florins per 100 kilograms of hard refined. On refined beet-root sugars, 0.2946 florin per 100 kilograms of hard refined (100 per cent) in addition to the above bounties. On refined sugar from other materials than beet-root raw sugar produced in the country, 0.2946 florin per 100 kilograms of hard refined. The output of refined sugar from raw is computed by deducting from the polar- ization of the raw sugar twice the glucose, four times the ashes, and 1-1 per cent for loss in refining. RUSSIA. On sugar testing not less than 99 per cent per pood (36.113 pounds avoirdupois), 0.50 rouble. One rouble equals 514 cents. On sugar testing not less than 88 per cent per pood, 0.44 rouble. On sugar testing not less than 75 per cent per pood, 0.38 rouble. Every invoice of sugar must be accompanied by a certificate of the United States consular officer at the port of shipment to the United States, naming place and country where the merchandise was produced, and, in the case of refined sugar, naming also the country of production of the raw sugar, molasses, or sirup used in the refining. The liquidation of entries of sugar not accompanied by such certificates shall be suspended, and the estimated duties shall include an amount siifficient to cover the additional duty to which siich sugar may be apparently liable. The conversion of the several foreign currencies mentioned above into Unilcd States money will be governed by the provisions of section 25 of the act of August 28, 1894. The question as to the net amounts of the bounties indirectly bestowed by the Government of Belgium on exported sugars is under consideration. Pending the ascertainment and determination of said amounts, entries of sugars imported from, or the product of, that country will be subject to the provisions of circular No. 174, of October 19, 1897 (synopsis 18481). L. J. Gage. Secretary. When you consider that the countries paying export bounties on sugar have been trying for years to conceal from each other and from the world at large the ways in which such bounties are bestowed, and when you consider that the legis- latures of the different countries have used their own language in legislating upon that matter, you may conceive in a slight degree, at least, what the difificulties which confronted the Secretary of the Treasury in ascertaining these facts must have been. Some of the foreign countries have recently, comparatively recently, concluded that there is no use concealing, and in addition to the concealed bounty have given straight bounties on exports. Germany, Austria-Hungary, and France have done so. The concealed bounties most levied were the result of the taxation of sugars, on the basis of production, from beet roots, which was less than the actual production. Now, for instance, if the product of 100 pounds of beets is 7 pounds, the tax will be levied on 6 pounds, and 1 pound will go free. When the sugar is exported the whole of the tax is remitted. You say. Where is your bounty? We levy a tax on 6 pounds of sugar consumed here, and remit the tax on 6 pounds. But where is the other pound ? That pound was not exported : it was more profitable to the producer of sugar to sell free sugar at home at the price of the taxed siigar and to export the taxed sugar with a remission of the tax. They did that in Belgiiun. in France, in Germany, in Austria-Hungary, and, I am sorry to say. in my old country, Eussia. I felt a little delicate about showing up that concealed bounty in Russia because my former liege and sovereign might have taken exceptions to such action, and so I washed my hands of the whole thing. I .submitted the case to the Assistant Secretary, and stated to him that I 54 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. might be suspected of undue partiality toward my old country. I said, " There are the facts ; you decide for yourself." He decided there was a bounty. Q. You gave him the facts in detail ?— A. Yes : he said there was a bounty, and so we proclaimed it ; and there it is, and a big one, too. In Russia all sugar testing less than OU per cent is ..") of a rouble per pood ; that is, in Russian, pood. That, however, is the unit we had in Russia, equal to 106.130 pounds of sugar. Testing not less than 99 per cent, this corresponds to about 3."") cents— '3o cents on 6 pounds; that is a very big bounty. The ofacial correspondence of the Secretary of State shows that the Russian Government denies the existence of any bounty. These figures were reached by the Assistant Secretary by taking the difference between the cost of production and the price for exportation. The price tor exportation was, by these figures, lower than the cost of the production. Q. Were you able to find out the cost of production there then?— A. Yes, the cost of production is generally so much per pood. Q. How iniich is it per pound?— A. It was about 3 roubles, or 3^ roubles, pei Xiood. Q. Can you give us the cost of production in English figures ?— A. I am sorry, but I can not— I can not doit; I will not undertake to figure from memory; I have a very poor memory for figures. Q. Then" you were able to find that Russia also gave an export bounty?— A. I. was not. Q. You were able to get the figures for the Department? — A. I was unable. Q. Then the Department was able to find it? — A. Yes, the Department was able to find it, but I was not. Q. Then these contervailing duties are simply additional duties imposed here to even or balance export bounties paid by foreign countries ? — A. Yes ; they place sugars imported from countries not paying bounties on the same basis as countries that pay export bounties. Q. So as far as the question of protection on sugar is concerned, do the coun- tervailing duties have anything to do with it ? — A. They have nothing to do with it ; there is really no protection in that. Q. Have you anything further to bring out with reference to these counter- vailing duties? — A. I might say that the bounties we have spoken of were deter- mined and proclaimed after a very careful and minute investigation in most cases and after conferences with the representatives of the country afllected. The representatives all came to see the Secretary and pleaded their side. TREATIES AFFECTING IMPORTATION OF SUGAR. Q. Are there any reciprocity treaties that affect the tax on imported raw sugar ? — A. I do not know of any reciprocity treaty except the Hawaiian. Q. What are the conditions at present with reference to the importation of sugar from the Hawaiian Islands?— A. I do not know that the accession has as yet changed the conditions ; we are waiting for further action by Congress. Q. Will you tell us just what the conditions were in order that we' may get it on record?— A. I thought the Hawaiian treaty was appended to this new tariff, but I see it is not. We used to have it appended to the publication. Q. Will you state what it is, so that we can get it on record? — A. I will read you the section of the tariff act which applies to the Hawaiian treaty. I have not the provisions of the treaty. Q. Will you read again that part of the section that you read before ?— A. Yes. Paragraph 309, Schedule E, tariff act, July 31, 1897, reads as follows : " Sugars not above number sixteen Dutch standard in color, tank bottoms, sirups of cane juice, melada, concentrated melada. concrete and concentrated molasses, testing by the polarisoope not above seventy-five degrees, ninety-five one-hundredths of one cent per pound, and for every additional degree shown by the polariscopic test, thirty-five one thousandths of one cent per pound addi- tional, and fractions of a degree in proportion ; and on sugar above number six- teen Dutch standard in color, and on all sugar which has gone through a process of refining, one cent and ninety-five one-hundredths of one cent per pound • molasses testing above forty degrees and not above fifty-six degrees three cents per gallon ; testing fifty-six degrees and above, six cents per gallon ; sugar drain- ings and sugar sweepings shall be subject to duty as molasses or sugar as the case may be, according to polariscopic test: Provi'ded, That nothin"- lierein con- tained shall be so construed as to abrogate or in any manner impair or affect the provisions of the treaty of commercial reciprocity concluded between the United States and the King of the Hawaiian Islands on the thirtieth day of January THE SUGAR COMBINATIONS: SMITH. 55 eighteen hundred and seventy-five, or the provisions of any act of Congress heretofore passed for the execution of the same." Q. So that provision still remains in force?— A. Yes. affidavit. Washington, D. C. I swear that the statements made by me of my own knowledge in the foregoing- report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. S. N. BUYNITSKY. Sworn and subscribed before me this 13th day of September, 1899. [SEAL.] JaS. N. FITZPATRICK. Notai-y Public. Washington, D. C, Jvne 13, 1S99. TESTIMONY OF MR. G. WALDO SMITH, Presideni of the Wholesale Grocers' Association of New York Citij. The commission met on Monday, June 13, 1899, at 3 p. rn., Vioe-Chairman Phillips presiding. Mr. G. Waldo Smith, of New York City, president of the Wholesale Grocers' Association of New York City, being first duly sworn, testi- fied as follows: Q. (By Mr. Jenks). Will you kindly state your full name and address to the stenographers ?— A. G. Waldo Smith. My present address is College Point, Long Island, N. Y. Q. What is your business ? — A. Wholesale grocer. OEGANIZATION and object of the wholesale grocers' ASSOCIATION. Q. You are also connected, I believe, with the Wholesale Grocers' Associa- tion?— A. Yes. Q. In what capacity ? — A. As president. Q. You will tell us briefly what the nature of this Wholesale Grocers' Associa- tion is? — A. It was formed 11 years ago, to improve the condition of the trade in all ways possible. It is a voluntary association ; not incoporated. That was the simple purpose — to improve the condition of the trade. Q. In what different ways has it gone to work to do that 'i — A. First by putting a limit on some goods that were sold at cost, such as sugar, Royal baking powder, and bakers' goods — that is to say, they were sold at net cost. They were about one-third of the aggregate of the business, and bankruptcy stared us in the face. We would buy .$1,000 worth of sugar and could not get .^l.OOO and 1 cent for it. We finally agreed that we would buy sugar and sell it at a quarter of a cent a pound advance. That lasted for a year and a quarter. Q. About what time was this arrangement made ? — A. About 10 years ago last October. Q. Was this arrangement made by the oificers of the Wholesale Grocers' Asso- ciation ? — A. No ; it was made at a meeting of the whole association. Q. Was it a formal agreement, put in writing? — A. No ; I do not think it was. We agreed to it in the organization informally and passed a resolution verbally. Notice was then sent out to those who were not there, stating what we had done. Q. Please go on. — A. We maintained that price for a year and a quarter. Then a new house came in and cut the price and reduced the profit to one-eighth of a cent a pound. Q. What house was that ?— A. Todd & Co. , a very small house. That went on for 6 or 8 months, and they began to out the price and paid no attention to that agreement, so that we were reduced to the original status of handling goods for nothing. That was the end of that arrangement. Then we passed a resolution that we would never limit the price again ourselves. We could not maintain it. The one hundredth man made the price and the 99 men had to consent. Q. Has the Wholesale Grocers' Association had any other arrangement with reference to the sale of sugar ? — A. Not as an association. 56 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE FACTOR SYSTEM. Q. What have your arrangements been since ?— A. Some of us then went to the refiners. Tliere was practically only one refinery at that time — the American Sugar Refining Company. Q. You say that there was practically only one refinery at that time? — A. Prac- tically only one, and we asked them what they could do to help us. Q. One moment, please. You say that there was practically only one at that time?— A. The Revere at Boston was the only other one I knew of. There was nothing in New York or Philadelphia, but since then they have been coming in. Mollenhauer came afterwards and quite a number of others. Q. And since then have come the Arbuckles and quite a number of others?— A. Yes; they all came in afterwards. Q. Very well. Will you please tell us what arrangements you made with the American Sugar Refining Company?— A. We asked them to adopt certain defi- nite fixed terms of sale. Q. You said that a number of you went to them to make that arrangement. Was it the Wholesale Grocers" Association, or did a number of you go to them as individuals?— A. Oh, we went as individuals. They came from Boston, Provi- dence, and Newark, different ones at different times. Q. This was, of course, done by consultation and arrangement among your- selves? — A. Yes. Q. About what proportion of the Wholesale Grocers' Association were repre- sented by this meeting or by this committee that asked the American Sugar Refin- ing Company to make such an arrangement?— A. Perhaps I had better tell the story. I will get at it quicker. Q. Very well.— A. We— that is, Mr. Thurber. who has sinse gone out of busi- ness, Mr. Leggett, Mr. Nichols, Mr. Seaver, of Boston, Mr. Howard Spur, of Bos- ton, and others whose names I do not recall, and myself — went to Mr. Havemeyer and Mr. Searles and asked if somi way could not be invented by which we could get a profit on sugar. We were closeted with them discussing the matter for six afternoons, and it was settled as a result of our talk that they would bill us sugar at 5j9j cents and that if we maintained the price at 5^^ cents, say, for 3 months, they, at the end of that time, would give us a rebate of 18| cents a hundred. This was to be uniform to all buyers, wlulesale and retail, manufacturers, and every- body. It was simply the terms by which they would sell their sugar. Q! They would sell at the same price to everybody? — A. Yes; everyone the same. Q. Regardless of whether or not they were represented by you? — A. No; it was no concern to us at all. It was to cover New York as far as Poughkeepsie, New England, and New Jersey. Q. How about the grocers who were beyond these limits? — A. They came in afterwards. They saw we had a good thing and asked for the same thing. Q. Will you go further, telling us the nature of the agreement, if there was anything further? — A. There was never any agreement. They simply said to us: " If you will prove to us that you want it, why, we may consider the matter.'' And we proved to them by getting all the grocers of that entire territory of New England and New York, as I have said, and a portion of New Jersey, all except three, to sign a petition that they would adopt the system. Q. That was considerably over 90 per cent, probably about 99 per cent? — A. Ninety-five per cent was their ultimatum, and we got practically the whole. There were only 3 of them who did not sign, and they were in Europe, and no one was authorized to sign for them. It was practically unanimous. Q. Will you please tell again clearly what the nature of the terms of sale was to be ? — A. In place of granulated sugar being sold and billed at 5 cents, they would bill the sugar at 5,\ and we would pay ."j-i^, and on condition that we sold at no less than that they, at the end of 3 months, would give us a rebate amounting to 18,1 cents a hundred pounds. Q. When were you to pay for this sugar ? — A. We were to pay for it in 7 days. We could get 30 days, but we could get one off for cash in 7 days. Q. Thirty days was the time ? — A. Yes. Q. And you got one off for cash in 7 days? — A. Yes. Q. How long did that custom or plan last ?— A. It has lasted practically until the present time, although there is no enforcement of it in any way. The whole- sale grocers simply buy at a certain price, and if they sell at less they get what they are paid and do not get this rebate. Q. In case a person was not willing to abide by it, and did not maintain the price, what would be the penalty ?— A. The penalty would be the loss of the rebate at that time, but for 4 or 5 years there has not been any penalty. Q. At that time it would be the loss of this rel)Hte of isj cents ? — A. A hundred pounds ; yes. THE SUGAR COMBINATIONS: — SMITH. 57 EFFECT OF COMPETITION AMONG THE REFINERS. Q. At this time you say yoti are selling sugar under substantially the sanae terms ? — A. Yes ; but it is now purely voluntary, because, on account of the com- petition between the refineries, they can not enforce anything. Q. How long has the competition between the refineries existed?— A. I should say since last August ; perhaps a little later ; along in September Doscher and Arbuckle came in. The Doscher concern is known as the New York Company. Q. Since last August or September ?— A. I should say about August or Sep- tember. Q. Do you recollect about what time the Doscher and Arbuckle refineries were btiilt and put in operation ?— A. About that time. I was in their offices occasion- ally, but I can' not &s the exact date. I know it was last summer, for, living on Long Island, I was passing by their factories on the ferryboat. Q. As soon as their refineries came into full operation did the price of sugar begin to drop?— A. The margin between 96 degrees centrifugal and granulated began to get closer. ;*"Q. About what was the margin betweeen 96 degrees centrifugal and granulated 3 years ago ? — A. I should say about seven-eighths of a cent, although my knowl- edge is not definite. I do not know ; I do not look at the prices close enough. 'ear Q. So that sub.stantially the wholesale grocers are handling sugar' at a loss '— It is difficult to decide whether or not it is an actual loss. They say you handle sugar at a loss. It comes in barrels and is delivered on the sidewalks. It is THE SUGAR COMBINATIONS: SMITH. 67 easier to handle than similar goods and perhaps in that way does not actually cost more than we get. We are all glad to sell it, but certainly it is difficult to tell and no one can determine. I can not determine and I have figured on it with the biggest and best wholesale grocers in New York. I have talked that over with my clerks, " Do we make a cent on sugar or not ?" 1 have not decided that ; I can not tell : I do not believe any human being can settle that sugar question fully and determine whether or not sugar at ISJ cents is a loss. Of course it depends on the length of deliveries and the average loss on bad debts. Our loss averages one-half of 1 per cent on bad debts. You take a wholesale grocer in a town like Albany, a place with short deliveries and short trips to the depot, and he makes some money probably, but in the case of the New York jobber it is doubtful if he makes anything. Q. You have handled sugar as a wholesale grocer for a good many years? — A. For 3.5 years. Q. Do you think there was more profit in handling sugar before the American Sugar Refining Company controlled a very large part of the output? — A. No, there was not. Q. Was there earlier? — A. Never in my life, in the 24 years I have been doing business, have I made any profit until we got that rebate. I might on soft sugars but not on the hard. Any goods that are not of uniform quality always aiford a minimum of profit. Soft sugar is of an indefinite quality ; one may be worth 4J and one may be worth 4f. But granulated is always of a fixed, definite value, and if we buy at 4 cents we can not sell it for more ; everybody knows who buys it what we are ma''iing. It is just the same with a box of soap. We have handled the Royal baking powder as long as I can remember. Our limit was a ,§300 pur- chase. We could handle a $300 purchase and not get S300 and 1 cent for it. I have been woi-king with them for years and finally they gave us the rebate. Q. But the combination in the refining business was an advantage to you as long as you held to the rebate system ? — A. Unquestionably. Q. And since that time it has bsen a matter of neither advantage nor disadvan- tage ; it has been immaterial whether you had it or not ? — A. Except this. Tliere is more or less cutting going on and I have never seen a day since Arbuckle and Doscher came in that I expected there would be any system 2 weeks ahead. It is quite to my surprise that it has been kept up, and it is very honorable of the merchants who have kept up the price. There are a few that cut. Q. Do Doscher and Arbuckle give the same price, the same terms, and rebates ? — A. I have seen copies of the agreement and terms of sale and they fur- nish the rebates exactly the same. WHERE WHOLESALE GROCERS MAKE PROFITS. Q. On what lines of goods are the wholesale grocers able to make reasonable, living profits ? — A. Spices, teas, and coffees. Coffees have been very much cut by the competition between Arbuckle aaid Havemeyer, i. e., the package coffees. In the South and West coffee is almost as bad as sugar. In New York they will not use the package coffees ; they claim they are not as good. As I said before all goods that vary in quality afford a small margin of profit. Q. Why is that? — A. Because they have not a definite, fixed price. My agent says my 18-cent coffee is better than Jones"s 18-cent coffee. If the customer says your coffee and Jones's are exactly the same, we can not charge any more. If they are not the same thing, I am able to charge more. Wherever articles vary in quality there is always a reasonable margin of profit. Wherever they are absolutely uniform, we can not get a profit unless we can get the manufacturers to give us a rebate. Q. As regards these goods that vary in quality, are not your methods of pur- chasing them substantially the same as where there is no variation, or pretty nearly so? — A. We purchase them where we can — in the best market and at the best prices we can make. Q. Does not the rebate system apply to these ? — A. You can not fix a rebate on anything unless there is uniformity of quality and packing. If there are jitst 100 cakes of soap of just the same size, of the same quality, and in the same kind of a box, then you can get a rebate. If there are different sizes or qualities of soap and different sized packages, then you can not get a rebate ; it is difficult. ORIGINAL ADVOCATE OF THE REBATE SYSTEM. Q. (By Mr. Phillips. ) Perhaps you can make a statement to the commission of your own nrotion. If you have any information that would be of benefit to the commission we should be pleased to hear it. — A. Well, I am the original advo- cate, as a wliolesale grocer, of the rebate system — where it is absolutely uniform 68 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and does not involve a contract between the grocers. I believe it is honorable, legal, right, and strictly in accordance with fair dealing and the spirit of the golden rule of doing to others as we would be done by. Now, I believe that any system of doing business that compels the manufacturer, the merchant, or the transportation company to perform a public service without a reasonable and adequate compensation is opposed to a wise public policy and the best interests of all the people. It is right and reasonable that every merchant should get a reasonable remuneration for what he does, and the moment he gets more than a reasonable remuneration, competition is certainly going to come in and cut down the price. The only way that a so-called trust can be maintained is by being reasonable, and if they are reasonable, all interests are served, and the greater the magnitude of the concerns the better it is for the people. I do not own a dollar's worth of stock in any so-called combination or trust, and I can not in fact hear of a great corporation or a trust. NO SUCH THING AS A TRUST. There is no such thing as a trust to-day. I asked 14 lawyers in 14 States if they knew of a trust, and they could not name one. I went to Albany the other day and I used the New York Central Railroad. I was making an address not long ago and I wanted to use the New York Central Railroad as a type. I went over there to find out how many owners there were of that railroad, and I found there were 12,015. I wanted to go up to Albany, and they took me up there in 2 hours and 40 minutes, and brought me back again in the same time. That road having a great combined capital of $200,000,000 and 12,015 owners performed me a great service. The Pennsylvania Railroad, which I used to-day, did me a gi'eat service. Now, I say, that iron and all such industries can be carried on more successfully, more reasonably, and more cheaply by a great corporation. I happened to come across in the pajjer to-day a statement which I knew to be a fact before. George M. Warner, a delegate of the International Machinists' Union, reported yesterday that there was a great demand for machinists everywhere, and that some employ- ers could not find enough men. That is true all over the country. Employment was never so general, so universal, as it is to-day. Of course, there are a few great corporations, but there are positions for everybody who wants them. Will you allow me to make another statement ? THE WANTS OF THE PEOPLE ARE INCREASING. Q. (By Mr. Phillips.) Yes.— A. I had a slight interest, which I sold, in an Ohio steel concern. I used to be familiar with that business. I went in there a few years ago and the first thing I noticed was the absence of men. Everything was done by electricity. Work that required 50 men to perform formerly is now done by machinery. I said to the president, " Where are all the men?" " We do not employ them any more." " What has become of them?" He replied, " I do not know; they areall employed." Employment was never so general asitisnow. The fact is, the cheapness of everything has increased the wants of the people. That is the only solution I can find. Another fact: I am a Methodist, and go to the Methodist Church. I was looking down over the rail the other day and I saw that the whole congregation had $4, $5, S6, and $7 umbrellas; 40 years ago they would have had 50-cent cotton umbrellas; and I noticed that the umbrellas had silver and pearl handles, etc., and they were all poor people, too. There was not a man in that church worth more than $20,000. That shows that the people's wants are increasing. ONE CAUSE OF THE PANIC OF 1893. Q. Is not the great plenty at present brought about largely by the panic of 1893? Were not the works shut down then and manufacturing stopped so that everything became scarce?— A. One of the most potent factors leading to the panic of 1893 was the fact that the transportation companies had worked for nothing. Three billion six hundred million dollars of stocks were not remu- nerative and the people who had been depending on dividends on them for buy- ing houses, horses and carriages, ribbons, shoes, and all the necessities of life lost their incomes. The demands of the people were lessened in consequence of the fearful fight of the transportation companies. That was one of the most potent factors, in my judgment, leading to the hard times of 1898, the fact that the transportation companies had failed to pay dividends. The moment thev began to make dividends again, the ribbons and shoes and trinkets and all those THE SUGAR COMBINATIONS: SMITH. 69 things were wanted, building up trade and starting business, and that has made this great boom of 1899. Dividends are being made. The great trouble is that the stocks of these corporations have been put on the market at inflated prices and the public do not know what they are buying and are going to get fearfully hurt when bad times come again. Q. Do you, then, apprehend an overproduction in the near future? — A. Not in 2 or 3 years, I should suppose, although I am not a prophet ; but I do think the time will come when there will be an overproduction and these great corpora- tions which are overcapitalized will not be able to pay dividends on their stock. That will reduce the earning capacity and the buying capacity of all the people. Q. (By Mr. Jenks.) Do you look upon overcapitalization as a decided evil? — A. Yes ; that is a very serious evil, but it would not be an evil if the original owners of the stock of the great corporation still continued to be owners, but instead of that the public comes in and buys it out, and while they may make dividends for a few years on the overcapitalization, they will get left in time. LEGISLATIVE REMEDIES NOT APPROVED. Q. Can you make any suggestion as to legislation that will check that tend- ency? — A. Mr. Lexow asked me if I did not think the price of wheat, corn, and rye should be fixed by law. I answered that until the legislature of the State of New York controlled the rain, the heat, the sunshine, the movements of the atmosphere, and the production of crops, it could not control the prices of com- modities, or anything that nature produces independently. It is absolutely impossible. I think the more the legislature and the people let these things alone the better they will work out their own solution ; the moment they do anything unreasonable they will be checked. The moment they crowd or overcharge any- body there vsdll be a reaction. Look at the nail trust. A few years ago they ptrt nails up to an unreasonable price. What was the result ? A new man came in and put up factories and reduced the price. The law of supply and demand is inex- orable ; you can not get away from it. Let me make another statement. The antagonism of labor and capital is the most unf(3rtunate thing for labor that can possibly be conceived of. Their interests are identical and uniform. When this building was built, the first man that received the benefit was the man that dug the cellar, and the next man to receive the benefit was the architect's clerk that drew the plan. Then for a year labor took in profit from the capitalist, and from the time the building was finished there have been caretakers here who have been benefited all the time. You take the railroads. Labor is benefited by the building of a railroad from the time it is begun all the way through and after it is finished. The railroads support millions of people ; they require caretakers and operatives ; everybody connected with them is benefited. The capitalist may be benefited or he may not ; but the laborer is sure to be benefited. This antagonism is very unfortunate ; it is dangerous and against the best interests of all the people. Q. (By Mr. Phillips.) Do you think the new industrials have put too high a price on their manufactured materials ? Does not this still apply to the tin-plate and steel combinations and the various other combinations ? — A. I have no defi- nite knowledge. I do have definite knowledge in regard to one matter, but that is all I know of. I do know of one concern that was formed on a basis of 375 per cent value, but that is the only definite knowledge I have. RELATIONS OF LABOR AND CAPITAL. Q. (By Mr. Kennedy.) Do you think that labor is ever unreasonably antago- nistic to capital ? — I do ; but all I know is from reading. Q. You can not say anything specific about it ?— A. No ; all I know is from reading. I have known of cases, of my own knowledge, where strikes have been very disastrous. Q. Is it not always where labor believes it has a grievance and is not getting its proper share of the values created that there is trouble ?— A. I believe that labor is honest in its opinion and thinks it is done a great injustice ; but the laborer to-day gets about two and one-half times as much in food, shelter, and clothing as he got 30 years ago. Q. What would you say, for instance, with regard to the laborer who works 10 hours a day for a railroad company in the track work and gets from 50 cents to SI a day ? — A. I never heard of such a thing. Q. There is labor of that kind all over the country.— A. Not in the East, is there ? 70 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Yes ; track labor does not receive more than 81.2.5 in any part of tlie country, and it gets as low as .j() cents.— A. I did not know that ; I have no definite knowl- edge of that subject. I know I used to hire men in my business for half I pay now, and everything was a third dearer. COMPETITION THE REMEDY FOR THE EVILS OF COMBINATION. Q. (By Mr. Fahquhar.) Do you think it is possible for any combination of capi- tal, however large and however well managed, to maintain a monopoly and keep prices up for any length of time?— A. They will bring down ruin on their own heads very quickly, the same as the nail concern did, and the same as they all have. Q. Do you believe that there is enough capital in the United States to handle three times the amount of business the trusts have to-day and that new capital would come in if it saw an opportunity for profit ?— A. New capital is always ready to come in if there is a profit. Q. Do you believe that under present conditions there is capital ready to take a hand in production if there is any reasonable prospect of profitable investment ?— A. Yes ; for instance, these other sugar companies that have been bought up by Havemeyer. My argument is that millions stand ready to come in if there is any opening. My study of the sugar qirestion is that the whole work of the American Sugar Refining Company, while they have made it pay, has been beneficial. They have reduced the price of sugar to every consumer in America. Their margin of Xjrofit is reasonable ; it has never been excessive. I used to know more about it than I do now ; I have not followed the margin lately, but it has never been excessive ; and buying such enormous quantities they can control the market, in the interest of cheap sugar. Q. Is the cheapening of the price of sugar due to foreign legislation ? Have the advantages in respect to sugar been more the result of foreign legislation than anything else ? — A. You know the tariff legislation does not let in refined sugar. Under the Wilson bill they cotild not compete with one-eighth of a cent margin on refined sugar, and it was difficult to make more than one-half of a cent margin. Under the new bill refined sugar is practically shut out, as I under- stand it. Q. Your statement here is that you do not think there are any inordinate profits going to the American Sugar Refining Company ? — A. There could not be any inordinate profits, and now they are making no profits. It is only a question now of the survival of the fittest among the refiners ; the fittest will survive and the rest will go down. You will find that Mr. Havemeyer will tell you, when he gets here, that they are making no mioney and that nobody else is. Q. In your business, as a wholesale grocer, have you ever found any difficulty on account of discrimination in rates on the railroads? — A. Our business is local. There used to be difficulties of that kind. We do not have much outside busi- ness. Austin, Nichols & Leggett have more than we have. I have not heard any complaint of that kind lately, and I think that has been entirely overcome. The railroad rates are so low now there is no occasion for complaint. Edward Atkinson said it used to cost .$3.50 to move a barrel of flour 1,000 miles, while now you can move it for 25 cents. If yoii do not believe it, take a wheelbarrow and go ahead. Q. (By Mr. Farquhar.) Did you state that all of the baking powders were under the control of one concern ?— A. I think all the cream-of -tartar powders are. Whether the Davis is in it (the alum baking powders) I do not know, but all the cream-of -tartar baking powders are in one concern, with $30,000,000 capital. Q. Have you any means of telling the commission how much that has cheapened the product to the consumer?— A. No; they have a close corporation and have done an enormous amount of advertising and have got practically a monopoly through their advertisements. If such a thing as a monopoly can exist, it is in that. It is a good deal like a patent medicine — there is a margin there. That is the result of advertising in combination. They have made pe(5ple believe it was the only baking powder fit to use by extensive, persistent, and continuous adver- tising. That is legitimate. Others have tried it and failed. Q. Does not the advertishig of all these products lay entirely with the producers of them ; that is, the wholesale grocers or the factors between the consumers and the manatacturers. pay very little for advertising now? — A. They advertise scarcely at all ; the manufacturers advertise their own products and place them. Q. They advertise the quality of their, wares without designation of the parties selling them ?— A. Yes ; it is the same with all grocers ; the retail grocers come to us. THE SUGAR COMBINATIONS: SMITH. 71 Q. Do you think that the ovei-capitalization of these great corporations or combines, as they are called, will ultimately lead to the same condition as the limited companies did in England, that the general public will be caugiit in an era of speculation which will ultimately result in loss; that it will be stock jobbing from beginning to end ?— A. That is entering upon the realm of prophecy. tj. Well, what is your opinion as a liuKiiiess man ? — A. I think it is the rule that we have times of inflation ; and I think that in the course of time we will have a reaction from this movement in some form or another. Q. ^ Is it your opinion that half the companies now being organized are stock- jobbing companies, and have nothing to do with cheaper rates to the consumer? — A. I think most of them have been formed of necessity to meet competition and to reduce the cost incidentally. Must of them have made money on their stock, but still I think the object was to reduce the cost. When the American Sugar Refining Comjiany was first formed there were 7 refineries that had oflices in Wall street next to each other, and if oixr broker went down there to buy sugar A would perhaps undersell B at less than cost. Mr. Frazer, of Philadelphia, of Harrison & Frazer, one of the largest manufacturers, said to me S years ago, "Until the formation of the trust we had not sold a barrel of sugar in years that we did not lose money on. Just as soon as that was formed we followed their price, and now we are making a profit.'' Mr. Frazer told me that in the presence of several other wholesale grocers in Philadelphia. That is what it is going to be now : it is a question of the survival of the fittest. Somebody has got to go. Who is going I am not able to say ; but it is going to be ruin. It is a fight to the bitter finish. Somebody has got to die, that is all ; there is no help for it. It is very unfortunate that these refiners got into line. It is a great mis- fortune. This is my opinion, as I said before. I have no information of any name or nature. COJIBINATIONS DO NOT PERMANENTLY DESTROY COMPETITION. Q. (By Senator Mallory.) Is it your oiiinion thac combinations of capital, or corporations, for the purpose of controlling the production of any particular article do not destroy competition? — A . They may teraj)orarily until the fact is developed that there is a margin of profit to be got by somebody, and immediately somebody makes an investment and cuts the price. Q. That is the point of my question. You believe that they will not destroy it permanently, but only temporarily ? — A. They will not destroy it for any length of time. The only exception to that would be some article like patent medicines — some highly advertised article, of which the people vnll not have anything else. Q. Do you know anything of the workings of the Standard Oil Company ? — A. ISTothing, except what I have read in the newspapers. I have no knowledge of any name or nature. I only know this fact, that I used to buy oil at §1.35 a gal- lon and sell it at 81.50, and that I could not get as much as I could sell. Now, I can buy 4 gallons for what I used to make on 1. Who has done that I can not say. Q. So far as refined oil is concerned, that is very much cheaper now than before the organization known as the Standard Oil Company ; but the point I want to get at is whether any combination — I will not take the Standard Oil Company as an illustration, because I may be doing them an injustice — for the purpose of con- trolling any particular product can be so powerful as to limit and crush out all possible competition. Your general proposition is that no matter how large a combination may be, it will not prevent competition as long as competition will pay. Now, is it possible for the combination to be so large that it can crush out all possible effort to compete with it?— A. Yes ; that may be true; and it is cer- tainly true that great aggregations of capital, that can command the very best Ijrain power in the world, can undersell inferior aggregations of capital and inferior brain power ; and that is all right. That, of course, can be done and should be done ; it is legitimate and right ; the best interests of the people are subserved by it ; it should be understood that a reduction of 1 cent on oil is a saving and a reduction of §3,000,000 a year to the people of the United States. I used to sell it at .$1.50. Q. (By Mr. Phillips. ) You do not attribute that to the fact that it was monopo- lized ?— A. No ; the reduction is the result of handling. Q. New discoveries ? — A. New discoveries. Q. New methods and the brains that have been brought to bear upon them ?— A. Yes ; largely the new methods of handling. It is the great aggregations of capital that use the force of gi-avity to bring it here instead of cars, and the ability that has been brought to bear upon it that has reduced the cost of transportation and distribution. 72 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Phillips.) Will it be possible in the case of some of the new com- binations that have been formed lately, such as those in the iron and steel trade and the tin-plate industry, where they have an aggregate capital of |2.5,OOO,O00 to $30,000,000 and are generally supposed to be making very large profits at the present time, will it be possible to induce capital to come in and compete? WiU it not be very difacult to get large capital to venture in and compete with such an aggregation of capital or such a combination ? — A. I had a slight interest in a steel factory in Ohio, and the moment that was sold by the original owners they immediately formed another company and commenced building new factories. There is one thing I am quite familiar with. I have been in Mexico and seen them mill corn. They grind 3 hours to grind enough for supper. I have been in Egypt, and everybody in those countries grinds his own flour when he needs it. I used to live on a farm, and the best part of my life was going to the mill. I used to ride to the mill and spend a day there. I used to go in the morning and stay all day and have 10 cents for my lunch, and have a good time. That was the old way. " Now, Mr. Pillsbiiry, witifi his great aggregation of capital, grinds a barrel of flour for 30 cents. I have seen them work 3 hours in Mexico, Egypt, and Asiatic countries to get flour enough to make bread for supper or a day's supply for the family. They grind the wheat by pounding it with a stone. Now the great aggregations of capital do it for almost nothing, and they are satisfied if they can get a profit of 3* cents on each barrel of fiour. That is one of the advantages in great capitalization. The New England artisan could not live if we had to trans- port flour at the old prices. Q. (By Mr. Ratchfoed.) Is it your opinion that without this large capitaliza- tion those old methods would still continue? — A. No. Q. Then why state that as an illustration? — A. No ; I say we never go back; nothing ever moves backward in this world. Q. (By Mr. Kennedy. ) Do you believe that the movement that is now going on in the industrial world will end in one combination in each particular industry, controlling that industry? — A. That is in the region of prophecy again, and I am not a prophet. I can hardly conceive it possible, except in baking powder and such things, where they are advertised and popularized in the public mind. They can not do it in iron and steel ; it is too widely spread, too easily found. Q. They can in the tin-plate industry at the present time ? — A. I have no defi- nite knowledge of that ; I doubt it very much, although I have no knowledge. I heard Senator Vest say in the United States Senate a few years ago that before anybody could get any profit the people of the United States would have to pay $50,000,000 in protection. I think he was mistaken. It has been proved so, has it not? Q. If it were possible to attain a condition in which overcapitalization and aU transportation favors given to certain industries were eliminated, what, in yonr opinion, would be the effect on these industrial depressions that occur periodic- ally? — A. I do not know whether I can give you an intelligent answer. It would take a wiser man than I am to fathom that. I think, on general principles— indeed, I have a profound conviction — that these things can take care of themselves better than legislation can take care of them, and that they will work out their own success or their own destruction in' their own legitimate way. Testimony closed. Washington, D. C, June IS, 1899. TESTIMONY OF PEOF. ERNEST MAS, NEW YORK CITY, N. Y. The commission met at 11 a. m., June 13, 1899, Vice Chairman Phillips presiding. Prof. Ernest Mas, 106 Fulton street. New York City, N. Y., after being duly sworn, testified. C^. (By Mr. Jenks.) Will you be kind enough to state your name and address to the commission ?— A. Ernest Mas, 106 Fulton street, New York. Q. What is your business ?— A. I am consulting chemical engineer of the Glucose Sugar Refining Company, of Chicago. Q. What is your present relation to the Glucose Sugar Refining Company ?— A. I am under a 5-year contract for the exclusive use of my services as a chemist and chemical advisor. Q. Are you under salary of this company ?— A. I am under a salary, and under monthly compensation and a commission of 1 per cent on all proceeds of the by-products turned out by the Glucose Sugar Refining Company. THE SUGAR COMBINATIONS: MAS. 73 Q. That is, on all by-products which they turn out you are to receive 1 per cent of the proceeds ?— A. That is, on all the by-products extracted from the germ of the product of the coi'n. THE MANUFACTURES OF THE GLUCOSE SUGAR REFINING COMPANY AND THEIR USES. Q. Will you explain to us briefly the nature of the manufacture of glucose sugar from corn, and state what the chief by-products are ? — A. From Indian maize or corn there are a great many products and by-products. The main product is corn flour. The second product is glucose ; that is what is called sugar. Glucose sugar results from the transformation of the starch in the corn by chemical process. The next product is dextrine, the next corn oil, the next corn cake, and finally a rubber sirbstitute which is a product of the vulcanization of corn oil. Q. Will you kindly explain the uses to which these various products are put in ordinary manufacturing and trade 'i — A. I have never had anything to do with the commercial part of the enterprise. My knowledge is purely scientific and technical. Corn flour, of course, is an edible, and on acci_)unt of its cheapness is used for mixing with other flours — with wheat flour. Q. So far as you know, then, corn flour is largely used to adulterate, as you might say, wheat flour? — A. We might say as a cheapening agent. Q. As a cheapening agent for wheat flour? — A. Yes. Q. Is this corn flour you speak of the same as flourine ? — A. Flourine is a mere proprietary name for it. Q. But it is really the same thing? — A. Identically the same thing. Q. If you will, please continue giving us the uses of these other by-products ? — A. Starch is used for laundry purposes, as a size, and for cotton mills. Q. This starch that you secure in the manufacture of glucose sugar is sub- stantially the same as ordinary commercial starch used for all other purposes ? — A. It is commercial corn starch. The next product, which is dextrine, is used for adhesive compounding, making mucilages and also sizes. The corn oil, which is to-day the most important by-product in the manufacture of glucose, has some legitimate uses in the manufacture of soft soap, but it is most largely used for mixing with other oils, ovnng to its emulsifying power. It is highly prized in Norway, where it can be mixed with cod-liver oil. It has a fine flavor, which makes it desirable for mixing with olive oil. Q. You say it is used in Norway in the manufacture of cod-liver oil? — A. They mix it with cod-liver oil. Q. And when it is mixed with cod-liver oil it is ordinarily sold as cod-liver oil ? — A. No ; I presume we get part of it again here in bottles. Q. Labeled as cod-liver oil? — A. Very likely. It is also used, owing to its peculiar flavor, as an edible oil in competition with olive, and it is exported largely as a substitute for cottonseed oil. Q. When it is used as an edible oil, it is used to take the place of olive oil ? — A. It is used for blending with olive oil. Q. Just for blending oil? — A. And sometimes for reducing the original cost of olive oil. Q. What is the comparative cost of corn oil as compared vsdth the cost of pure olive oil ?— A. The high grade of olive oil can not be had in this country for less than SI per gallon, while the highest grade of refined corn oil made under my process sells at 4 cents a pound. It is sold for 4 cents a pound, which means about 30 cents per gallon. Q. When this is used for blending with olive oil, where is this blending process usually carried on, in this country or abroad, or both ? — A. It is carried on by exporters from the old country to the United States— exporters from Italy, France, Spain, and Prussia. Q. That is, corn oil is sent to those countries, blended there with olive oil and is returned here as olive oil ?— A. No ; as a blended oil. Q. As a blended oil?— A. It is mostly a table oil without a name, Table oil, compounded oil. Q. Does it ordinarily, in your judgment, go on the market to the retailers as a blended oil, table oil. or does it go as olive oil ?— A. It goes mostly under the name of table oil. There is no pretense of selling this mixture as pure olive oil, but as it is extremely difacult to analyze a mixture of corn oil and vegetable oils, I could not tell positively, as a chemist, whether a mixture of olive, corn, and lin- seed oil, for instance, exists in a given proportion ; it can not be determined by qualitative or quantitative analysis. _ 6 You spoke of a mixture of corn oil and linseed oil ; in your judgment, is that mixture a common one?— A. When I first refined oil, some 4 years ago, for 83a 6 iOaam^imtMi^^mmim&m 74 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the American Glucose Company I was rather struck by the similarity of the characteristics between the poppy oil, which is worth 80 cents per gallon in Bel- gium, and corn oil, and it occurred to me that by a proper refining process we could produce a corn oil in the United States so similar to the poppy oil that it might naturally take its place for painting purposes, for mixing with white zinc and white lead, and I think we have succeeded in preventing the export from the old country of poppv oil, at least to a considerable extent, simply because poppy oil is worth from 80 cents to $1 per gallon and the same class of corn oil is sold in this country for 30 cents per gallon. Q. As far as a mixture of corn oil and linseed oil is concerned, the similarity of the two oils is such that it is an impossibility for any chemist to determine the presence of corn oil in linseed oil, and as the price of corn oil is much lower than the price of linseed oil the two oils are frequently mixed in order to reduce the cost? — A. Yes. Q. Under those circumstances do they go on the market regtilarly as blended oil ?— A. It will be impossible for me to tell whether the large producers of lin- seed oil are making use of corn oil, biit I doubt it. I believe manufacturers of linseed oil are selling pure linseed oil, but before the product reaches the con- sumer the two are blended with a view to reducing the cost. Q. That is, the blending is done, then, not by manufacturers of linseed oil but by large dealers ? — A. And by buyers of corn oil. Q. And by the manufacturers of paint also ? — A. Perhaps, by manufacturers of paint and putty. Q. Is corn oil as good practically for the purpose for which it is used as the lin- seed oil when blended in this way? — A. It has no injurious effects on the finished product ; it cheapens the cost, and is a slower drying oil than linseed oil. The main application of corn oil is in the production of substitutes for Brazilian rubber (which is exported from the banks of the Amazon) by a process of vulcanization which I have suggested to the Glucose Sugar Refining Company. Vulcanized oils are produced which can be sold for about 6 or 7 cents per pound, while the rubber from Brazil is worth SI per pound. Vulcanized corn oil can be mixed with pure Para rubber in any proportion. The resulting mixttire is much softer, less elastic than pure rubber, but almost equally acid proof. It is largely used to-day for cheapening bicycle tires, rubber boots , and in fact, almost all articles made from rubber, the difference in price being such, from 6 to 7 cents for corn rubber to 81 for the pure rubber article, that the mixture greatly reduces the cost of the finished product. Q. You think yourself that the product is. on the whole, not so durable or quite so good in most particulars ? — A. It is not so good ; it is not so resilient. The main characteristic of rubber is its resiliency or elasticity ; it is not so elastic, but I presume it is almost as acid proof as vulcanized rubber is. Q. You yourself have had a great deal of experience in connection with the manufacture of these different products by the Glucose Sugar Refining Company and other companies ? — A. I first suggested the manufacture of rubber substitute to the Glucose Sugar Refining Company. Q. That is, you were the first person that suggested that in this country?— A. I made the suggestion by letter, but I did not believe this process could be patented. WITNESS FIRST EMPLOYED BY AMERICAN GLUCOSE COMPANY IN CONNECTION WITH THE REFINING OF CORN OIL. Q. Will you, before explaining in detail that matter, give us a little of your experience in the manufacture of corn oil and of these other products — that is, tell us what different establishments you have worked for, what your relations with them have been, and how you came to be employed by the Glucose Sugar Refining Company?— A. Prior to the consolidation of the plants manufacturing glucose in this country I was the chemist of the American Glucose Company in Peoria. Q. In Peoria, 111.?— A. Illinois. The problem of refining corn oil had been under consideration for 10 years by that company. Q. They had been before that time manufacturing simply raw oil ? — A. The raw corn oil. Q. And they had been considering the question of refining it? — A. Of refining it, and the chemical treatment of corn oil. Q. But they had not yet succeeded in finding a process?— A. They had not suc- ceeded in finding a process of treating corn oil chemically. The problem was submitted to me in 189ri, 4 years ago. THE SUGAR COMBINATIONS: MAS. 75 Q. That is, the problem of finding a process of refining this oil?— A. And the utilization of corn oil, which was at the time without known industrial applica- tion, except in the manufacture of soft soaps. I went to Peoria from New York, and after a chemical examination of corn oil I undertook the solution of that prob- lem. I went back to New York and after 1 month of investigation found out the process by which corn oil could be treated chemically, by which corn oil could be refined and rendered colorless. I returned to Peoria with my samples, which were simply laboratory samples. The president of the company at the time, Mr. William Hamlin, of Buffalo, asked me if I could produce the same results in 1,000 gallons quantity. I was satisfied that I could obtain the same results in 1,000 g-allons quantity, and a refinery was erected under my plans and personal supervision. It was the understanding under my contract that, in the event of the oil not being equal to the laboratory sample, I would not receive any com- pensation for my services ; but it was under.stood also that if the refinery proved a success, and if the oil could be demonstrated to be equal to the laboratory sam- ple, I would be given 15 cents royalty per barrel. The factory was erected : it was 9 months before I could complete the refinery. At the end of 9 months the first attempt at producing 1,000 gallons was made under my own supervision and in the presence of two chemists of the company. The result was that the oil made in 1 ,000 gallons quantity was far better than the laboratory samples which I had brought with me from New York. An agreement was entered into by which I was to receive Lj cents per barrel royalty, and as the company at the time contracted to make 100 barrels, it meant simply ORGANIZATION OF THE GLUCOSE SUGAR REFINING COMPANY. Q. (Interrupting.) One hundred barrels in what length of time V — A. A day. It meant 815 dollars a day royalty. Two months after — it was less than 3 months — a very little time after the refinery had been proved a success and when I expected to receive my l.j cents per barrel, I was informed of the consolidation which was taking place, in fact the consolidation of all the glucose plants in the United States under the name of the Glucose Sugar Refining Company. Q. This combination included all the plants in the United States 'i — A. All but one. The consolidation took place before I had received 1 penny of royalty, and, if I am well informed as to the financial aspect of the transaction, the American Glucose Company, for a nominal consideration, sold their plant in Peoria to the Illinois Trust and Savings Bank of Chicago. The Illinois Trust and Savings Bank turned around and sold the plant for another consideration, which was not a nominal one ; and I found myself at the time with a contract on my hands which was worthless, from the fact that the American Glucose Company was out of existence. Q. This plant was sold to what company ? — A. The refinery which I erected in Peoria passed as a part of the assets of the new combination. CONTRACT WITH GLUCOSE SUGAR REFINING COMPANY. Q. That is the Glucose Sugar Refining Company ? — A. Yes ; the Glucose Sugar Refining Company. I had no recourse against the American Glucose Company, which was out of existence. I had no contract with the Glucose Sugar Refining Company, which was the new combination, so I found myself with a contract which I have here ; yet when I thought it was proper for me to notify the com- bination about the existence of my contract with the American Glucose Company I was requested to go to Chicago to talk the matter over and demonstrate the value of my process. The result of that trip to Chicago was a contract with the Glucose Sugar Refining Company for 5 years. The terms of this contract with the Glucose Refining Company, which I will now call the Sugar Trust from this very moment, were, first of all, that for a period of 5 years from September 37, 1897, 1 was to receive an annual compensation of fly ,600 a year for my professional services, to be paid monthly in installments of .SoOO, but I was to act as consult- ing chemist of the coiupany and counsel on all questions bearing upon the manu- facture, uses, treatment, and application of corn oil. Q. If you did not work for any other company A. If I did any other work for any other company it would be a violation of my contract. The contract on that point reads thus : " Ernest Mas binds himself not to act as consulting chemist of any other com- pany or firm or individual in the United States engaged in the manufacture or refining of corn oil, or in the manufacture of starch or glucose or proposing to engage in any such manufacture, or to enter into the employ of or render any 76 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. services to or become in any way identified with any such company or firm or individual ; but said Ernest Mas shall be free to act as consulting chemist or in any other capacity for any company or firm not falling within the above prohi- bition and to engage in any other business than that of manufacturing or refining corn oil or the manufacture of glucose or starch." '■ In the next place, I bound myself to continue my laboratory experiments and researches in the production and refining of corn oil, and I also bound myself to give the Glucose Sugar Refining Company the exclusive use and benefit in the United States of all the results of my experiments and discoveries in that direc- tion during the period of 5 years. Q. Perhaps you can sum up and give us in a word or two any other special points there may be in your contract ?— A. In the next clause there was this : I was to receive an annual compensation of $3,600, and in addition to that I was to receive also 1 per cent on all the proceeds of corn oil turned out under my process. A very significant stipulation of this contract which I have faithfully carried out is that I had to waive and release all claims against the American Q-lucose Com- pany which I may have had under my contracts, and the Grlucose Sugar Refining Company was assuming every responsibility of the American Glucose Company. It also guaranteed me against any claims which the American Glucose Company might have against me for professional services or otherwise. Q. Now, after this contract was made you continued your laboratory experi- ments, making regular reports to the Glucose Sugar Refining Company? — A. In accordance with the terms of this contract I made practically an assignment to the Sugar Trust of all my processes, and started my experinaents again in New York City, and have from that time sent laboratory reports every month cover- ing the results of my investigations during the month. I declined three proposi- tions made to me by other concerns owing to the existence of this contract, and I received exactly on the 1st of each month, for a period of 14 months, a check of §•300 covering my monthly compensation as per contract. Q. That sum you say you have received for 14 months? — A. For 14 months consecutively I have received $300, covering my monthly compensation. COMPANY DID NOT LIVE UP TO THE CONTRACT. Q. When did that period of 14 months end ? — A. I have never received a monthly statement of the oils sold. There is a clause in our contract which specifies that monthly statements shall be rendered by the Glucose Sugar Refining Company to Ernest Mas, showing the amount of prepared or refined oil sold, and payment shall be made monthly to Ernest Mas, based on the amount of said oil sold, upon the basis of 1 per cent on the amount of .such sales, as per contract. Q. That is, they lived up, for a time at any rate, to the part of the contract which stated that they were to pay you $300 a month, but they did not render these repoi-ts on the corn oil manufactured ? — A. They did not render the reports on the corn oil manufactured. I have never received a monthly statement for the oil sold, so I made a demand for monthly statements from the company, but I have not received any report yet. Q. At what time did you make this demand for a statement ? — A. Four months after our contract was made I made the first one by letter; I did not receive any reply, but received on the 1st of each month $300 for my salary. I waited until the end of the year, thinking that, perhaps, I would then receive all the state- ments for the months past. So at the end of the year I made another demand fo: my 1 per cent commission as per contract, which I have not received as yet. Q. That was at the end of the year ISD.s ?— A. It was at the end of the year 1898. I received my last check on the 21st of December, 1898. Q. Since that time you have had no further salary from them? — A. Since that time many peculiar things have happened. I did not know when I entered into a contract with the Sugar Trust what was in store for me. I thought that my attributions would be those of a chemist, when, to my great surprise, I received one day from the company, instead of my monthly statement, a very" significant letter. This letter is signed by the president of the company : "I inclose some literature which we are having prepared to offset newspaper talk about the unwholesomeness of glucose, starch, etc., and would like to have you sign the petition and also to interest as many of your friends as possible in doing the same. (Signed) C. H. Matthiessen, president Glucose Sugar Refining Company " ■ See contract at ond of testimony. THE SUGAR COMBIXATIONS : MA8. 77 WITNESS REFUSED TO SIGN TESTIMONIALS. Q. What was the nature of this petition he wished yott to sign? — A. First of all there was a copy of the bill introduced in the Senate of the United States by Mr. Mason on the subject of mixed flour. I did not at first understand what all this meant. I kept all those papers ; I did not sign any testimonial, and I do not pro- pose to sign any. I do not consider that the attributions of a chemist are to sign testimonials, but to attend to his business as a chemist. Q. Did you think that these testimonials that you were asked to sign would give a false impression to anyone who might read them ? — A. It was my impres- sion that I could not consistently sign a testimonial which was evidently intended to counteract a legislative measure. Q. That is, a law has been passed providing for the prevention of the adultera- tion of foods, and they asked you to sign a testimonial which would say practi- cally that there either was no adulteration or that the adulteration was not injurious. Was that the nature of the testimonial? — A. It was practically to state that flourine, or whatever it is — glucose — in fact, all the by-products manu- factured by that branch of the sugar trust, called the Glucose Sugar Refining Company, were all right. Q. That all their products were of legitimate uses, or articles of food? — A. I did not think I could sign that paper, and I did not sign it. Q. You could not concientiously , as a chemist, sign the paper ? — A. I do not wish to commit myself too far in this matter. I did not feel like signing that p?.per, simply because I was not satisfied, and I am not yet satisfied, that flourine is equal to wheat flour, that glucose is as good as sugar, that corn oil is as good as linseed oil, that corn cake is as good as flaxseed cake, and that the rubber substi- tute made from corn oil is as good as rubber. Q. They practically asked you to sign that statement which would have declared that the products of the Glucose Sugar Refining Company were equal to the genuine products you have mentioned ? — A. It was practically that. The next bill which I received was from Mr. Brosius. This was to prevent adulterations or branding or imitation of foods, beverages, candies, drugs, or condiments in the District of Columbia and Territories, H. B. 9154. I did not pay any attention to that either. Q. For the same reason? — A. For the very same reason. The next one was from Mr. Pearce, of Missouri. Q. That is, the bill was introduced by him; btit you received these bills, I under- stand, from the president of the Glucose Sugar Refining Company?— A. And the request to sign the testimonial to the effect that the goods manufactured by the company were, to use the words of the president of the company, " In order to offset the newspaper talk about the unwholesomeness of our products." I have not signed these papers yet and I do not intend to sign them. THE PATENT ON RUBBEE SUBSTITUTES. Q. Were there any other requests made by the Glucose Sugar Refining Com- pany that you thought, as a reputable chemist, you could not accede to?— A. Here is another one; my attention was called in the month of December, 1898, to the fact that a party in Ohio, Mr. William K. Leonard, of Piqua, Ohio, had invented a process for the transformation of corn oil into rubber substitutes. I immediately notified the company that my attention had been called to that patent, but not knowing who the jjatentee was, I told the company that I was not prepared to make any comments as I had not seen a copy of the specifications which I had already sent to Washington for, but that I could challenge the valid- ity of siich patents at any time. ,. T X- Q. That is, you had seen a notice that this patent had been appUetl tor .'— A. (Interrupting.) I had notified the company. Q. But in your judgment there were no grounds for issuing such a patent, because the process was already known ?— A. The process has been known for about 50 years in the old country, and is public property, and I did not think it could be patented at all, so I wrote to the company that I was ready as the chemist of the company to challenge the validity of that patent. I did not know who was the patentee at the time, and I do not know who the patentee is to-day, and I am very much surprised to see that a patent is granted to the sugar trust, or at least that branch of the sugar trust which is named the Glucose Sugar Refining Company. . . ., , tvt -4- Q You say the patent was granted to that organization .'—A. JNo; it was granted to Mr. William H. Leonard, of Piqua, Ohio. 78 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. But you think the patent is practically controlled or owned by the Glucose Refining Company ?— A. I have no information regarding what is really patented, but I see that the specifications of this patent are practically worded m the very same terms as my chemical report sent to the company 8 months before. Q. If 1 understand, then, this matter which is connected with the patent is this : that you had made a special report to the company on the manufacture of a substitute for rubber from corn oil?— A. Yes, this was made on October 26, 1897. Q. That some months after this process was patented by some person unknown to you ; that when vou received specifications of the patent you f oimd that these specifications were worded almost exactly the same as your report to the com- pany had been ? — A. Almost exactly the same. Q. That nevertheless you believed the process is one that could not properly be patented because it had been known for some 50 years?— A. That is exactly the case. Q. You believe, then, that the president of the Glucose Sugar Refining Com- pany, to whom your report had been made, secured this patent which you believed to be illegal?— A. 1 can not say that positively, but I can say this Q. You believed it to be so, from the fact that the specifications of the patent were substantially the same as your report to your president ? — A. It looks that way. Q. That is the point that I understood you were making ?— A. It looks that way. Now, what surprises me more than anything else is this, a request from the company to me as chemist : " Please send your next laboratory report in the form of an affidavit covering your investigations as an expert in the maniifacture of rubber substitutes, the date of your experiments in New York, the date of the first commercial production of the same." There are 1.5 or 16 inquiries which I .shall not name. Q. It amounts to this, I judge, from what you say : they ask you to make an affidavit to show this was not patentable ? — A. They wrote me to make out an affidavit so as to be ready in the event of any legal action that might be resorted to by parties interested in the Leonard patents. Q. You having had a long and thorough experience in the manufacture of rubber substitutes they wanted your next laboratory report in the form of an affidavit, in such a way that they could defend the manufacture of this rubber substitute against any suit that might be brought by this patentee ? — A. I knew the Glucose Sugar Refining Company was contemplating the manufacture of rubber substitutes and wanted me, of course, as a chemist, to assist them; but I did not wish to commit myself again by signing a paper which I could not conscientiously sign because the process could not be patented, and so notified the president of the company that I was ready to go to Chicago whenever my services were needed, or to appear in case that any action should be taken by the patentee of the rubber substitute process. EFFECT OF THE GLUCOSE SUGAR REFINING COMPANY ON PRICES. Q. You can perhaps now tell us something with reference to the control that the Glucose Sugar Refining Company has over the market : in the first place, you said, I believe, that the company included all of the plants of the kind in the country, with the exception of one, when it was first organized ? — A. Except one; 90 or 9.1 per cent of the production of glucose in the United States. Q. Is that condition substantially the same at the present time ? Do they stiU control 95 per cent of the oiitput ? — A. From 90 to 95 per cent. Q. What has been the effect of this control of the combination upon the prices of the product ?— A. Before answering that question it seems to me I ought to mention one fact, the result of my not signing' those testimonials. It was simply this : I have not only failed to receive my monthly statements, but from the very day when I declined to sign those papers I have not even received my monthly check. So I find myself to-day with a 5-year contract with the Glucose Sugar Refining Company, binding me not to ;4ive my services to anyone else. I have assigned all my processes to the branch ( if the Sugar Trust which I call the Glu- cose Sugar Refining Company ; I have instructed the chemist of the company how to refine corn oil, and from the 1st of January I have not received a single dollar of compensation. PRESENT REL.mONS WITH COMPANY. Q. (By Mr. Kennedy.) Have you taken any legal action against the company?— A. It is my intention to do so when I see I Inive been waiting long enouo-h. I intend to take such steps as soon as my legal adviser says the time has conie. ' THE SUGAR COMBINATIONS: MAS. 79 Q. (By Mr. Jenks.) Then, if I understand you, the situation is about this : In your own belief you were cut off from receiving any further salary because you declined to sign some testimonials which you could not conscientiously sign? You believed you ^vere living up to the terms of your contract fully and com- pletely, and that signing testimonials was no part of vour work as a chemist, particularly testimonials which you believed would mislead the public ?— A. I could not sign conscientiously, that is it. Q. (By Mr. Kennedy.) Have you had any formal notification by the company of the severance of your relations ?— A. The company has informed me that I could not enforce my contract. I replied to the president of the company that this contract is in force until the 27th of September, 1903, and that it is entirely out of the power of the president of the sugar trust and any man's power to cancel this contract without mutual consent. QUESTION OF PRICES RESUMED. Q. (By Mr. Jenks. ) That gives, then, at the present time, substantially what your relation to this combination is, so far as your personal relation goes. Now, may we take up this question of prices ? What has been the effect of the combination upon the prices of the products made by it?— A. When I was first engaged by the American Glucose Company the price of glucose was about 80 cents per hundred. The consolidation took place, and if I have a clear understanding of what a trust means from an industrial standpoint, it is to reduce the expense and consequently to reduce the price of the finished product. A little while after the trust was formed the price of glucose went up to §1.60, or 100 per cent above the the price prior to the combination. The price of glucose to-day, I believe, is $1.35. Q. Whereas before the combination was made it was about 80 cents ? — A. It was about 80 cents. Q. As regards the effects on the prices of the other products ? — A. In the line of corn flour I can not tell exactly, because the applications of this product are so secret that it is impossible to get data. Q. I understand by that statement that there is not an open market for this corn flour ? — A. There is some market for corn flour so long as it is offered as corn flour, but so long as we have wheat we shall not buy corn flour, because we can not produce a quality of bread which is acceptable from corn flour. Q. In your judgment, then, a large proportion of this corn flour manufactured by the Glucose Sugar Refining Company goes into the hands of fiour manufac- turers for mixing with wheat flour, and is not sold in the open market ? — A. Yes ; it is offered in the open market, but not as being equal to wheat fiour. Q. The reason I put my question in this form is this : You said you had been unable to determine the effect of this combination on the price of corn fiour, and I inferred that if the products were sold regularly in the open market you could have discovered that easily. — A. The only thing 1 have been able to find out yet was through a microscopic examination of the Minneapolis flour. I have exam- ined some samples ; I have found some startling results. It is extremely difficult to trace the presence of corn flour in wheat flour. The best experts are often misled by the method of grinding. Microscopic examination shows a difference in texture which has enabled me to detect the ijresence of corn flour in wheat flour. Q. So you have found corn flour mixed in wheat flour in some Minneapolis brands ? — A.. In the samples submitted to me froni Minneapolis. The samples were sent to me without any name, and I can not mention the name of the concern that mixed com flour with wheat. Q. Now, can you tell us the effect of the combination upon the prices of corn oil? — A. Upon prices of corn oil the result has been about the same. Corn oil which used to sell for .s^.B.i per 100 pounds is worth to-day 4 cents per pound. Q. That is, it has gone to .§4 per 100 pounds ? — A; Whether the increase in price is due to my process of refining corn oil or to some other cause I do not know. The dilemma is simply this : If the price is due to the refining process it is admis- sible that the refined product commands a higher figure than the crude. Q. This price, then, of fi2.'2r> was for crude oil?— A. It was for crude. CRUDE CORN OIL SOLD FOR REFINED. Q. And the price of ft4 per hundred quoted to-day — is that for refined oil or for the crude ? — A. It is for the refined. It is supposed to be for the refined, but I find out that samples are submitted to me by my former clients wlio have been charged 4 cents, or .§4 per hundred, and which are not samples of refined oil, but simply crude oil. I have called the attention of the company frequently to that point. 80 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Then this oil that was sold to some of your former clients for 84 a hundred as refined oil when submitted to you for analysis was found to be crude oil? — A. Crude oil. Q. Your inference from that is that the Glucose Sugar Refining Company at the present time is selling crude oil under the name of refined oil? — A. That is the way it looks to me. Q. And getting refined-oil prices for it? — A. In some instances. Q. You say you have received complaints from your former clients to this effect. About how many such complaints have come to you? Can you recall? — A. Oh, about 20. Q. From difllerent sections of the country? — A. From Alabama, Maryland, New York, and many other States which I do not remember. Q. So that this custom of selling crude oil under the name of refined seems to be quite widespread in your judgment? — A. It may be that a mistake has been made, but I have called the attention of the company to the fact. That is all I can do. I have nothing to do with the commercial part of the enterprise. The only thing I could do was to call the attention of the company to the fact that people had been charged refined-oil prices for crude oil. Q. Is it difficult for a person who is not an expert to distinguish between crude oil and refined oil? — A. The consumer of corn oil in large quantities will recog- nize it immediately without being an expert. It can be recognized by what is called the organoleptic test, which is a test by looking at it through a glass. (^. Is this test one that would be applied by the ordinary consumer? — A. The large consumer would apply it. The small consumer would not. Q. Are these complaints that come to you largely from the smaller concerns?— A. From jobbers mostly. Q. What is the difference at the present time between the price of the crude product and the refined product, so far as the market quotations go? — A. I have endeavored to get those quotations from the company, but I have never been able to get a reply on that subject. Q. And these prices are not quoted regularly in the trade pajDers? — A. The prices are fixed. I am satisfied as to that. And that is where I have found out that I had to deal with a trust. I did not know what a trust was until I fotmd out I was dealing with the genuine article. Q. Let us go back to the other point for a moment. What, in your judgment, is the principal difference in value between the crude oil and refined oil? — A. It is the difference between sa.iri per hundred and 54 per hundred. ^ Q. Now, if I understand you, you mean to say that the effect of this combina- tion upon the prices consists simply in their selling crude oil under the name of refined and at the proper prices for refined? — A. The effect of the combination has been this: One hundred thousand bushels of com are used, from which, in my opinion, 500 to 600 barrels of corn oil are recovered. This quantity of 500 or 600 barrels I shall put at 300,000 pounds per day, basing my calculation on 500 pounds to a barrel. The difference in price between .§3.35 and 4 cents gives a difference in price in favor of the new process which amounts to .$4,000 a day advance price for the company on corn oil alone. Q. They have advanced the price enough so that it gives them an added income of .$4,000 a day on corn oil alone?— A. It was not a question of salary which induced me to join the Glucose Sugar Refining Company. It was the question, under the contract, of that 1 per cent which was the inducement offered me to join that concern. Some information has reached me to the effect that last year ,■51.750.000 worth of corn oil, supposed to be refined oil, was distributed in the United States and abroad. This is what I have been able to trace. On a basis of 1 percent, I ought to get out of that ,S17,500 commission, which, with my salary of Sy,600. was shown to me by the president of the ce a sufficient inducement to sign a contract for five years for my services— for the exclusive use of my services. Q. Let us go Ijack to the question of the price for a moment. Was there any market price at all for refined corn oil before the trust was formed ?— A. Corn oil was a drug in the market at the tinxe. It was absolutely impossible to sell it Q. It must have been sold at some price. You were manufacturing refined oil there at Peoria with the American Glucose Company at that time. Do you know what price they received? — A. For crude oil? Q. No; for refined oil. There \vas a short time, if I undersand correctly A (Interrupting.) §3.50. Q . ( Continuing. ) After you had built a refinery before the trust was formed ''— A. fy.i.^ti) for the crude oil. For a while they were receiving ,^:i.50 to §3 75 Q. Now, the difference in price between that day and the'present for the refined oil, provided that any refined oil is sold nov/ at all, would be simply the difference THE SUGAR COMBINATIONS: MAS. 81 between 83.50 and ,$4; is that right?— A. Is it not in that case as it has Ijeen in another case which I have read abont ? It comes from the same tank. If a man msists upon getting 4-cent refined oil, he gets it; if he does not, he gets the crnde and he gets charged 4 cents. Q. The main efifect, then, has been that they are selling crude oil for refined quite generally. Now, can you give us the effect of the combination upon the price of any other of their products? You have spoken of the glucose, which is double in price, and of its effect upon the price of corn oil. How about its effect upon other products?— A. It is impossible, as I have already said, to get quota- tions on what they term flourine unless you are an insider. As to rubber sub- stitute, I can not sign this affidavit to the effect that the process can be patented, because, in my opinion, it can not be patented. Q. What has the effect upon the price of rubber substitute been ? Is there any increase in the price of that ? — A. People do not like it; it has some drawbacks which do not appear at first. Of course, the reduction is such that it is an induce- ment to use rubber substitute in place of para rubber, but I am under the impres- sion that this process is not a success. Q. You are not able to detect in the market any difference in the price of this rubber substitute as time goes on ? — A. In fact, the sugar trust controls practi- cally the entire production of corn oil and rubber substitute in the United States. Q. So that, in your judgment, they fix the price at whatever height they think will bring them the largest net income ? — A. Yes. VALUE OF PLANTS AND CAPITALIZATION OF GLUCOSE SUGAR REFINING COMPANY. Q. You have spoken once or twice with reference to the price at which this corn-oil refinery, that you put up in Peoria, was sold to the Glucose Sugar Refin- ing Company. Can yoii give us any information with reference to the value of the plants that are consolidated in the Glucose Sugar Refining Company as compared with their capitalization ? — A. I can not give a very accurate estimate or approximation, but I believe that §6,000,000 would be a fair price. Q. Do you believe that the iilants they have now could be reproduced for •56,000,000? — A. Not including the real estate. The real estate constitutes most of their value. They are mostly old worn-out plants. Q. Can you give an estimate that you think would be fair and conservative as to the value of all the plants they have, including the real estate, at the present time?— A. 86,000,000. Q. Including the real estate. "What is their capitalization ? — A. 840,000,000. Q. Have you taken any special pains or made any careful study of the value of these plants in order to nrake this estiinate that you put on them of 86,000,000 ? — A. I have seen them as a chemical engineer ; and it is as near as I could make an estimate if I had to furnish one to another manufacturer. Q. Do you know what dividends this company has paid upon its 84< 1,000, 000 capitalization ? — A. I understand that the company is paying 1-i per cent dividend quarterly. Q. Five per cent a year ? — A. Yes. Q. On 840.000,000 capitalization ?— A. On 840,000,000 capitalization. Q. You spoke of having yorrrself built this corn-oil refinery. Can you tell us approximately or accurately how much it cost to build it? — A. Approximately, I believe I could. We put in machinery, apparatus, building, and connections, but I believe that not over 835,000 was invested. Q. Not over 82.5,000. Do you know what price was secured for that when it went into the combination? — A. You mean for the assets? Q. Of this one plant ; yes.— A. It is a matter of public report or record, I guess, that half a million dollars was the price of it at the time. Q. It was put in at half a million dollars?— A. That is what I read; I do not know where I have read it ; I can not tell exactly where I have read it ; and I will only give that as my opinion. RELATIONS OF GLUCOSE SUGAR REPINING COMPANY TO THE SUGAR TRUST. Q. You have spoken several times of the Glucose Sugar Refining Company as part of the Sugar Trust. What reason have you for thinking that the two are con- nected in any way ? — A. I have simply this reason. When I entered into the con- tract with Mr. Matthiessen, after the experience I had before the consolidation, I wanted to know if the corporate existence of the Glucose Sugar Refining Com- pany would last at least 5 years. That was the time of my contract. Mr. Mat- thiessen told me himself that Mr. H. O. Havemeyer was his uncle, and gave me a gentle hint that there was before me the opportunity of my life, of becoming 82 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the chemist of the Sugar Trust. I did not understand at the time what it meant, but I understood with such a guarantee, moral guarantee, as that of Mr. H. 0. Havemeyer I had nothing to fear about my 1 per cent and my salary, so I signed that contract for .5 years. But I have no tangible i^roof of a combine existmg be- tween the Glucose interest and the cane-sugar interest. Q. You say you have no proof of that?— A. I have no proof of that. I infer simply from what I have been able to see during my 20 years' experience. Q. What relations exist between the uses of glucose and the uses of cane sugar which wotild make it advantageous for the two to be combined? Are there any?— A. The glucose sugar does not conflict in any way \\-ith the cane-sugar market. Glucose is worth $1.S."): sugar is worth a great deal more. I believe that the exist- ence of the Glucose Sugar Refining Company is due entirely to that cause, which I may call the law of demand and supply, which calls for an article cheaper than pure cane sugar; and it is with the Sugar Trust as I believe it is with any other concern. When a corporation has established a name for the sale of a pure arti- cle, such as crystallized sugar, and the demands of the trade are for cheapening compounds, the mother house, if I can call it that, creates another house. Q. A related house?— A. A related house under them, whose business is simply to supply the trade which the parent house does not care to supply. So I believe there is a combine existing between the Glucose Sugar Refining Company and the American Sugar Refining Company; there is at least an understanding. Q. That is, there are certain uses to which glucose can be put that, if it were not for the existence of glucose, would have to be supplied by sugar, as, for exam- j5le, the manufacture of cheap candies, or something of that kind? — A. I believe that when we get the new sugar-jjroducing countries to gi^^ng us all the sugar in the raw condition, there will be no reason for the existence of any glucose concern in the United States. Q. That is, you think that raw sugar will ultimately come from Cuba, the Philippines, etc., and be as cheap substantially as glucose is? — A. Then sirups can be made which will be free from sulphuric acid and from all the objections that glucose sugar Q. You think that glucose sugar is objectionable on account of the presence of sulphuric acid ? — A. On account of its mineral acid reaction. The four legs upon which the Glucose Sugar Refining Company stands to-day are, glucose as a cheap substitute for sugar, cora floiir as a cheap substitute for wheat flour, corn oil as a cheap substitute for linseed oil, corn-oil rubber as a cheaij substitute for rubber. I do not wonder that the American Sugar Refining Company do not care to put their names on the barrels of goods manafactured by the Glucose Sugar Refining Company. Q. (By Mr. C. J. Haeeis.) Do I understand you to say that the American Sugar Refining Company puts their name on? — A. No; I say I am not surprised that they do not. To come back to my own personal contract with the company, I have reason to say that the Sugar Trust believes that it is the understanding of our contract that I am engaged as a chemist to sign testimonials in order to offset newspaper talk, to indorse affidavits on legal points which I do not understand, and to work simj)ly to counteract legislative measures. I shall not be a party to such schemes. Q. (By Mr. Kennedy.) Is there anything in that contract which could possibly be construed so that you would be called upon to perform such duties for the Ghi- cose Sugar Refining Company ?— A. If there had been such a clause I would not have signed the contract. EXTENSIVE INTERESTS OP THE SUGAR TRUST. Q. (By Mr. Jbnks.) You will perhaps put a copy of thatcontract in evidence,if you have a copy here . You have explained some of the evils which come from these combinations — the increase of their prices, etc. Can you suggest any remedy?— A. As a chemical engineer, I believe in combines which are intended for econom- ical purposes to reduce the cost of production, but I do not believe in combines the effect of which is just the reverse. We have not reached the time that we may be afraid of the universal trust ; Iiut if that trust should ever come it will not come from the Beef Trust or the Standard Oil Trust. They manufacture a great many by-products, no doubt, but they do not manufacture'one-tenth of the products manufactured by the Sugar Trust. I was at first under the impression that the Sugar Trust was simply manufacturing sugar until such a time as I found out that they were interested in almost anything and everything, from o-hi- cose, I should have said, to rubber Ijoots. I do not Ijelieve that' Mr. Rockefeller will ever have anything to offer to Mr. Havemeyer. and I do not believe that Mr Armour will ever have anything to offer to Mr. Havemeyer ; but I do believe that THE SUGAR COMBINATIONS: — MAS. 83 the time will come when Mr. Havemeyer will be able to sell to Mr. Rockefeller enougb corn oil to revolutionize the entire production of linseed oil in the United btates, and to Mr. Armour all the feed stuff that he may need to run his stock yards. 1 have read about the proposed billion-dollar combine of brewers. I should like to ask a brewer what he would do if the Glucose Sugar Refining Company should tell him that he could not get any glucose. He could not make his beer. ' y. You mean that practically all the beer in the country at the present time is manutacturedwith glucose ?— A. I simply wish to point out that if there is a dan- gerous trust— if there has ever been any danger from a trust— it is the truHt which controls all the sugar, the breweries, the corn flour, the corn oil, and rubber sub- stitute 01 this country. Q. Is glucose used regularly in the manufacture of beer ?— A. Glucose i.s used as a substitute for yeast in the manufacture of beer. Q. Do you think that use is quite general V— A. Almost universal. Q. Do think that the glucose used in the manufacture of beer and cheap can- dies IS deletenous or injurious to health?— A. I am not a physician, and I can not give you an answer that would be of any weight. I have simply conducted experi- ments with the view of finding the action of glucose upon membranes of a vege- table nature, but not upon membranes of the stomach, because, as I say, I am not a physician. The results of my investigation, I consider, belong to the company and I do not feel at liberty to mention that here. Q. The same answer would apply, would it, to the question as to the nutritive power of corn flour as compared with white flour ?— A. I do not question the nutritive power of corn flour. Q. Do you think it is equal to that of white flour?— A. Opinions are divided on that question. I have read the opinion of Professor Wiley, and I have agreed to some extent with his -vdews ; but there is a fact which remains, and that is that it is utterly impossible to make an excellent mixture of white bread from corn on account of its lack Q. (Interrupting.) Are the processes used in the manufacture of glucose and corn oil and in refining corn oil the same processes which you yourself discovered in part ?— A. Most of them. Q. Most of them are used by the Glucose Sugar Refining Company?— A. It would be unwise to patent a process which is based upon a combined application of mechanics and chemistry. Q. So the processes are not patented, but are kept secret for the manufacture ?— A. Yes. A REMEDY FOR THE EVILS OF COMBINATION. Q. I asked you some time ago if you had any remedies to suggest for the evils that you think are associated with some of these combinations. Have you any ? — A. I do not wish to say anything that would be detrimental to the company, but I wish to speak about trusts in general, basing my remarks on personal experi- ence. I believe that there is a remedy. It was suggested not long ago that, pro- viding we can find a proper definition for a trust from an industrial standpoint, from a monopolistic standpoint, goods manufactured, staple goods, or food products manufactured by foreign concerns in the same lines, be admitted free of duty. I do not agree with that view of the situation. I believe there is a better remedy than that, and that is for the United States to put an internal tax on goods manufactured by corporations controlling the trade. Take, for instance. corn oil. A great many people write me, " We want to get a carload of corn oil." I have nothing to do with the commercial part of the institution, but they can not get that corn oil and consequently the demand is greater than the available sup- ply. There is no question, therefore, as to the Sugar Trust controlling entirely all the products and by-products derived from glucose in the United States; and, in my opinion, when a corporation has reached a point where it controls not only the trade but fixes the prices, disregaixls contracts, disregards patents from other people — there is one, for instance (producing paper) — it is time for the Govern- ment to step in. Q. Do I understand you to say in this case ? — A. There is a man that has a patent on corn oil. Q. That they are using regularly ? — A. They do not care anything about that. This man would be a very good witness before the commission. I guess. He is a man of very high standing and integrity — Mr: George W. Banker, of New York. I was saying that when a corporation or concern has reacherepared under processes or methods discovered by the said Ernest Mas and sold by the Glucose Sugar Refining Company during the life of this con- tract. Monthly statements shall be rendered by the said company to said Mas, showing the amount of said prepared or refined oil on hand and the amounts sold, and payments shall be made monthly to Ernest Mas, based on the amount of said oil sold, upon the basis of one per cent on the amount of such sales, as above specified. In consideration of the foregoing contract, said Ernest Mas hereby waives and releases all claims against the American Glucose Compaijy which he may have under his contracts with said company, dated at Peoria August 18th. 1895, and July 1st, 1896, and said Glucose Sugar Refining Company hereby indemnifies and gTiarantees said Ernest Mas against any claims that the American Glucose Com- pany may have under said contracts against said Ernest Mas for professional services, processes, or otherwise. The Glucose Sugar Refining Company agrees to defray all travelling and inci- dental expenses of Ernest Mas when he, at the request of said company, shall visit Chicago or make a visit of inspection to any of the plants owned by this company in the United States. This contract is to continue for a period of five years from its date. In witness thereof the said parties have executed this contract this 37th day of September, A. D. 1897. The Glucose Sugar Refininci Company. C. Matthiessen, President. Ernest Mas. Witness to signatures : S. T. Butler, Treas'r. Washington, D. C, June 13, 1S99. TESTIMONY OF MR. CLAUS DOSCHER, BROOKLYN, N. Y. The commission met at 2.30 p. m. June 13, 1899, Senator Mallory presiding. Mr. Claus Doscher, Brooklyn. N. Y., after being sworn, testified. Q. (By Mr. Jexks.) Will you give your full name and address to the commis- sion?— A. Claus Doscher; 143 Ross, Brooklyn, N. Y. Q. You have been engaged in sugar refining?— A. Yes. Q. How long an experience have you had in that line of business ?— A. I went into the refining business in 1870, and remained in it until 1887. Since then I have not been active until we built the refinery I am now running. Q. At what time did you build the refinery you are now runnmg?— A. We began in April, I think it was, 1897. Q. At what time did you begin operating the refinery so that you could sell the product?— A. The 1st of November last. THE COST OP SUGAR REPINING AND THE PROPITS IN THE BUSINESS. Q. About what was the margin of profit on refined sugars when you arranged to buUd your refinery ?— A. When we arranged to build it ? , , O Yes- when you began to build; when you decided to go mto busmess m that way '?— A. I can not tell just exactly at that time. Do you mean the margm between refined and raw sugar ? . , , , ^ „ mu O No I mean the margin of profit.— A. That is hard to tell. The margin betvsreen raw and refined was all the way from about 70 to 97 cents a hundred. 88 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. How much did yoii say it was ?— A. I do not know exactly, from about 70 to 97 cents on 100 pounds. Q. By raw you mean 96 centrifugal sugars?— A. That is right. Q. And of this margin between the two how much is considered the cost of refining and how much profit?— A. Well, the cost of refining i.^ very hard to tell; it depends a great deal on what sugars you are working ; the better the sugar the less it costs to refine. Q. Supposing you have a good grade of sugar, 96 centrifugal, what is the cost of refining 100 pounds?— A. You see there are so many different things that go in. If you can work full, of course you can work much cheaper, but as a rule I should say about somewhere around 60 cents a hundred. Q. Somewhere between 50 and 60 cents a hundred?— A. As I stated before, it is very hard to tell; one class is cheaper than another; then it depends on how much you can work. If vou can work full, of course you can do better. Q. But if you haVe a good house, a new hou.se such as yours was, and running full, with a good quality of sugar, you would say that the cost of refining was about how much?— A. Well, as far as I am concerned, as far as our house is concerned, I can not tell that. We have not run it long enough, but that is about the figure. Q. About 50 cents?— A. About; between 50 and 60 cents, I should say. Q. What is the margin now between raw and refined? — A. The margin now? Q. The margin at the present time. — A. At the present time, to-day or yester- ay, I believe, it is 51 cents. Since we have been running it has varied, as far as can remember, from 32 to 51 cents per hundred. WHY THE MARGIN BETWEEN RAW AND REFINED SUGAR WAS REDUCED. Q. What reason have you to give for this very great reduction from 70 and 97 cents, when you were building your refinery, to 51 and 83 since then? — A. I have no reason to give there. Q. You see no reason at all for the reduction? — A. Well, we do not make the prices; that is what you are driving at, I presume. Q. Who makes the prices? — A. The American. Q. For what purpose do you think the American Sugar Refining Company put prices down in that way? — A. I could not tell you that. Q. Have you any reason for thinking that the prices are put down in order to prevent your refinery running at a profit? — A. Yes, I have a good reason to laelieve so; 1 have heard a good many rumors to that effect. Q. Have you ever had it repoi'ted directly to you that the officials of the American Sugar Refining Company have said that? — A. By that you mean the officials? Q. I mean the officials. — A. No, I have not. Q. You have never heard that any of the officers of the American Sugar Refining Company said that at all? — A. I never heard them say it, no. Q. That does not answer the question. — A. Then I do not understand your question. Q. I did not ask you if you heard them say it; I asked you if you had heard that they had said it? Have you heard that? Have you heard that any of the officials of the American Sugar Refining Company expressed the intention of making sugar refining so unprofitable that it would drive you out of the busi- ness?— A. No; as I said before, there were rumors and newspaper talk, but I never heard it said. Q. Have you never had it reported to you that some of the officers of the American Sugar Refining Company said that they would put the prices down until it would be unprofitable for you?— A. Just as I stated before, there were rumors about, and it had been told to me and talked about to me, yes. Q. I am not speaking simply of general rumors, but I am speaking of it some- what more directly. I want to know if it has been told to you directly or if you heard that it was said by one of the officials of the Sugar Refining Company?— A.' No, I can not say they have. I have heard it time and again, and I was told that they were told direct by the officials that they would do it. I do not know as I ever heard it said myself. Q. No one ever told you directly that he had heard statements that were made by some of the officials of the company?— A. That is very likely. As I stated before, there has been much talk, but I can not remember it and I do not know where. There are of course a good many rumors, you know. Q. But you are of the opinion that somebody told you that' he had heard some of their officials make that statement? — A. Oh, yes. THE SUGAR COMBINATIONS: DOSCHER. 89 Q. So that it came to yon with simply one person between one of the officials of the sugar refining company and yourself?— A. No; not by the officials. Q. I do not mean that; but vou say that some person has told you that he him- self heard an official make that remark?— A. No. Q. You said that a moment ago.— A. I did not know that. He had said that a party had said that they had been told that by the official. Q. That they had heard the officials say it?— A. I do not think I can say that. Q. You state, then, directly that you have never been told by any person that he had heard any of the officials of the American Sugar Eefining Company state that they would make prices so low that you would find the business most unprofit- able?— A. Yes; that is right. I never heard by anybody telling me directly, com- ing to me and saying they were told so by the officials. Q. Have you been told so directly that the officials made that statement that you believed it?— A. Well, so far as believing it, I do not think that I ought to go on belief or hearsay. Q. It is part of your oath that the facts you state on opinion and belief you believe to be true. — ^A. Yes. Q. And it is accepted here. Of course this commission is simply after general information as to the trust. — A. Yes; that is right. Q. You have your knowledge direct enough so that you believe it to be true that some of the officials of the sugar refining company have stated that they would make sugar refining so unprofitable that it would drive you out of busi- ness? — A. I do not doubt that that has been said, but I can not say that I have been told directly by some party who got it from the company. Q. Still, you have heard it directly enough so that you believe it is true? — A. I believe that is true; yes. Q. You believe it is true that with the old margin of profit that existed when you were building your refinery and before prices began to be cut you could have made a good annual interest on your investment? — A. Yes. Q. About what a rate of interest could you have made do you suppose; what rate were you calculating on making? — A. That I can not tell; that depends upon different circumstances again. But I do know that we could have made a nice profit; there is no question about that. Q. (By Senator Malloey.) "What do you call a good, nice profit? — A. I can not tell that; what we could have made on the investment is a very hard thing to tell. Q. Of course you can not get at it accurately, nevertheless you were intending to make a good profit. What, in your opinion, is a good, nice profit? — A. Well, I do not know as I have any opinion there. Q. (By Mr. Jenks.) Coming back to that other matter, you say that you have heard it said definitely enough so that you believe the ofiS.cials of the American Sugar Refining Company said that it was their intention to make the business of sugar refining so unprofitable that it would drive you out of business. You said you had no doubt of that. — A. I have no doubt of that. Q. Have you any doubt, with reference to this further matter, that they also said that if they should make your factory prove a failure, no others would be likely to interfere for a good many years with their control of the business ? — A. I have heard that indirectly. Q. You have heard that the same as the other? — A. That is rumored, the same as the other ; yes. Q. Directly enough so that you have no doubt of it the same as the other ? — A. Yes ; both of them were the same. Q. That they intended to drive you out, and that if they did nobody else would afterwards be likely to come into that business for a good many years to come ? — A. No ; that is a little hard. Q. That they did not think anybody else would come in for some time to come ?— A. Yes ; I think that is about right. Q. Since you started your refinery and began selling have you conferred with the officers of the American Sugar Refining Company with reference to the prices of raw and refined sugars ? — A. No. Q. Any conference with them at all? — A. None at all. Q. Have you conferred with the other sugar refiners who are not in the Ameri- can with reference to prices? — A. No. Q. Not with Arbuckle, or anybody else? — A. No. Q. Has there been any conference held, or have you conferred with any sugar refiners Y>-ith reference to the testimony that was to be given here before this com_rmssion? — A. No. Q. There has been no conference of that kind that you know of ?— A. No. 83A 7 90 HEARIKGS BEFORE THE INDUSTRIAL COMMISSION. NO PROFIT IN REFINING. Q. Let US come back to the question of refining. Since the prices have dropped as they have, what has been the margin of profit in your refinery? How much per barrel do you reckon you are able to make now ? — A. How much profit ? Q. How much profit per barrel ?— A. I would say we have not made any, so far as I know. Q. Has that been true since you began ? — A. Yes. Q. Did this drop in prices come at the same time you began to refine ? — A. Yes. Q. That was in November, 1898? — A. November the 1st, and probably a week after Q. And the prices were dropped so low that you made nothing ? — A. We have made nothing on refining. Q. What other sources of profit are there in connection with the sugar-refining business? — A. No others, except in buying raw which happens to advance in price. Q. Have you happened to have any stock on hand that advanced in price so that you made something out of it? — A. Yes. Q. In that way you have occasionally had the opportunity to make money on som.ething ? — A. Yes ; we have been fortunate in that. Q. Then you have not made anything in the refining business ? — A. No. Q. And you think that the reason the price was put down is that the American wanted to drive you out? — A. I think I have answered that question once or twice. NO RELATIONS WITH THE SUGAR TRUST. Q. Have you ever had any conference with the American Sugar Refining Com- pany officials with reference to consolidation of interests with them, or any working agreement at all ? — A. No. Q. Have you ever had any communication with them at all with reference to that matter through third parties ? — A. No ; nothing at all. Q. Not with reference to any consolidation of interests or with reference to any working agreement of any Mnd ? — A. No ; not of that nature at all. RELATIONS WITH RAILROADS. Q. In the shipping of your goods are you able to get any advantages from the railroads beyond published rates, lower than the public rates? — A. Do you mean on the railroads ? Q. You ship a great deal of sugar ? — A. Yes. Q. The railroads have certain published rates of freights ?— A. Yes. Q. Are you able to get any advantages that lessen the cost of shipping to you?— A. You mean from the railroads direct ; get a rebate from them? Q. Well, that is one way. — A. No ; we do not get any. Q. You get no rebate ? — A. No. Q. Do the railroads allow any other privileges, as, for example, any free storage at terminal points ? — A. Yes. Q. They do allow you free storage at terminal points ?— A. Yes. Q. Do they allow this to others ?— A. I believe they do. Q. Probably to all large shippers, you think?— A. 'l think they do ; yes. Q. Is this free storage worth considerable to you as a shipper?— A. No; I do not think that amounts to much ; it is merely accommodation. The sugars are sent there, you know, and held by them for distributing. Q. At these terminal points?— A. While they are being distributed there is no storage charge. Q. For how long a time are they held ?— A. O, I can not tell you • I do not know. Q. I believe they count on ao days ?— A. It may be held 30 days ; I think that is about right ; I do not know, but I think about that. Q. Do you have a pretty large amount of storage at these terminal points?— A. Sometimes we have. . ^- -^aaA'^ ^?^nnT°^^,~^- '^''^^' ^"^ ^'^'^''^ sometimes, I suppose, all the way from 2,000 to 4,000 barrels. Q. And they remain there for ;iO days or in the neighborhood of that ?— A Yes ; part of it would be there for ;)0 days and part of it would be sent out directly Q. But there is a good deal of advantage in having that stored there free for so long a time ?— A. Of course it is an advantage ; there is no doubt about that ■ yes. THE SUGAR COMBINATIONS: DOSCHER. 91 Q. Have you any information with reference to any division of sugar freights °^A°rr.i '^^^' York between railroads ?— A. Division in sugar freights? Q. That IS, between different raih-oads?— A. No; I have no knowledge of that at all. GENERAL CONDITIONS OP REFINING IN THIS COUNTRY. Q. In your work in connection with the sugar-refining business, you, of course have studied not only the cost of refining here, but the cost of refining in other countries as well? — A. No, I know nothing about refineries in other countries. Q. Have there been decided improvements in the method.s of refining in this country? — A. Yes. Q. Within the last few years ?— A. It is further back than that. Naturally there have been improvements all the time, of course, but the great improvements that have been made date further back than that, 10, 13, or 1,5 years. Of course in manufacturing there is something improved, more or less, from time to time. Q. Do you think the methods of refining in this country are as good as any- where, so far as you can judge from competition.— A. So far as I can judge, they are; yes. Q. You are inclined to think the cost of refining here is as cheap as in foreign countries? — A. lam. Q. Is there any special advantage in having a large refinery over a medium sized or a small one ? — A. That depends upon circumstances again. If you have a large refinery, and can work it full, why, of course, there is no doubt an advantage. CAPACITY OF REFINERIES. Q. What is the capacity of your refinery ?— A. About 1,000,000 pounds a day. Q. How many barrels is that ? — A. In the neighborhood of 3,000 barrels. Q. Are there many larger refineries in the country? — A. Yes; some larger I believe. Q. What ones ? — A. The Havemeyer is larger. Q. What is the capacity of that, about, in barrels ? — A. Well, you see, they have so many together Q. (Interrupting.) I was thinking of their largest single refinery? — A. The largest single refinery; I can not tell you that. Q. You say the capacity of your refinery is about 3,000 barrels a day in round numbers? — A. About that. COST OP REFINERIES. Q. Speaking in round numbers again, how much did it cost you to put up your refinery ? — A. I do not know as that is a fair question. Q. Is it not ? — A. I do not know whether it is or not. Q. I think that is a fair question. — A. I will tell you. I will put that in another shape for you. You want to know what you can put up a good refinery for. Is that the object? Q. Yes. — A. If you want to put up a good refinery these days, equal to any in existence, it will cost about S3 per pound. Q. Does that mean it would cost about 83,000,000 for a refinery of 1,000,000 pounds capacity? — A. Yes; that is right. Q. So to put up a refinery similar in size to yours it would cost about §2,000,- 000 ?— A. It would to-day. Q. That includes just the refinery itself? You are not taking into account the land? — A. I am taking in everything complete, land, machinery, and everything. Of course the difference would be very decided as to whether the land in itself was worth half a million, as it might very well be if standing in a city or on a remote island. COST ASIDE FROII LAND. Q, Now, what would be the cost, aside from the land? — A. That does not figure a great deal. Q. It figures very decidedly; you had better try to get at»that. — A. Perhaps you had better let it go at that. Q. I hardly think so; it is a very important question.— A. Well, I can not tell you that. Let me see; I can not answer that question. Q. I beg your pardon; I did not understand. — A. I can not answer that ques- tion. 92 HEARINGS BEFOEE THE INDUSTRIAL COMMISSION. Q. Why not ?— A. I am not prepared for it. Q. You certainly liave had considerable experience ?— A. Yes. Q. When you speak of the million-pound refinery you mean, of course, a refinery run at its full capacity y— A. Yes; that is right. Q. Now, this iiuestinn of the land is really a yery important one, because if the place the refinery happens to be, let us say, in Neyi' York City, near the riyer or on a good dock, it may be, with the land, worth hundreds of thousands of dollars more than the refinery standing elsewhere would be worth.— A. Well, you know you haye got to have a river front, so that does not make a great deal of differ- ence. There is no great difference there. Q. Bat you have not got to have it in so expensive a place as that.— A. All water fronts are expensive: there is no great difference. Q. In the neighborhood of New York City they are all very expensive ?— A. Yes. Q. But a refinery built somewhere away from New York City would not be so expensive. — A. That is so. There are other disadvantages there also. Q. Then the question of taking the land out is really a very important one at the time of capitalization ? — A. Yes; I can not very well separate that. Q. How much land, for example, have you with your refinery ? — A. We have close on to 100 lots — between 90 and 100 lots. Q. What is the frontage of a lot?— A. Twenty-five by one hundred. Q. And you say you have how many?. A. One hundred lots, or very nearly that; between 90 and 100. Q. Have you some idea with reference to the value of real estate in that neigh- borhood ? — A. Have I some idea ? Q. Yes. — A. Well, I have some idea; yes. Q. About how much is real estate worth per front foot in your locality? — A. Well, I suppose about |3,000 a lot. Q. About ,$3,000 a lot?— A. Twenty-five by 100— I think that is about the value around there. Q. And you have about 100 lots? — A. Yes. Q. Three hundred thousand dollars for your site? — A. Have you got at it now as nearly as you want to get at it ? Q. So the cost of building a refinery like yours would figure up to, say, some- where from a million and one-half to a million and three quarters ? — A. Yes. Q. You think it would be about that? — A. Not quite — about one million — that depends a great deal Q. (Interru^jting.) I said, yon know, one million and one-halt to one million and three-quarters? — A. Yes; there is a good deal of margin; there is a good deal of margin there. Q. You think you could for probably a million and one-half? — A. I will not build any more; I have enough at present. Q. You can for a million and a half equip a full, up-to-date, good refinery of a million pounds capacity; you think that can be - have or not. (4. The yield, as a rule, is, say, for some grades 03, some 02.1, and 'in that neigh- THE SUGAR COMBINATIONS: DOSCHER. 93 borhood. That is, that yon get that amount from 100 pounds of raw sugar ? — A. Yes. Q. If yoti are going to attempt to figure out the cost of refining 100 pounds of refmed sugar, you would need to calculate on 107 to 108 pounds of the raw sugar, say ?— A. No ; I guess it would be the other way. To take 100 pounds would be the handiest way, would it not? Q. It depends on the matter of figuring ; it is immaterial which way you taxe it. If you take 93 pounds as the amount that you expect to get out of 100 poujids of raw sugar you could figure it in that way. — A. You could figure it in that way ; yes. Q. If you were going to figure the cost of 100 pounds, you would take 108 or 109.— A. Yes ; that is right. Q. What is the price of raw sugar to-day, did you say? — A. The price of raw sugar to-day is 81.69. Q. Thatis, for the96degree?— A. Yes. Q. I suppose that 96 degrees, tested by the polariscope, is a pretty definite thing? This quality, 96 degrees, is about the same always ; it is a good quality of raw sugar, and when tested it is always substantially the same? — A. Yes. Q. So, if you figure on the basis of 96 degrees test it would substantially cover all other degrees, because prices vary in accordance with that test, do they not ? — A. Well, as I have already stated, they vary ; sugars vary, you know. Q. What difference in the quality of sugar is there, aside from the question of the polariscopic test ? — A. You know, when yoir take the common sugars they have more or less impurities. Q. And what did you say the price of refined sugar is to-day ?-^A. I think it is 85.30 net. Q. That makes a difference between the raw and refined of 51 cents, as you said? — A. Yes. Q. Now, if we were to add to this 84.69, which is the cost of 100 pounds of raw sugar, let us say 9 per cent for the value of the amount of raw sugar above 100 pounds needed to produce 100 pounds of refined, making about 43 cents, would that be about fair ?— A. I do not know ; I do not go into figures ; I am not a bookkeeper. Q. But if it takes, to make 100 pounds of refined sugar, 108 or 109 pounds of raw sugar — of course I do not expect this to be absolutely correct ? — A. I do not think they figure that way at all ; it is always figured the other way, so far as I know. Q. It is immaterial ; it is a little simpler way of getting at the cost. — A. Yes. Q. You think that instead of putting the amount of refined obtained from 100 pounds raw at 93 it would be more nearly correct to put it at 93 ? — A. That depends upon circumstances. Q. Of course it depends upon circumstances, but I want to get a fair general average. That is as near as we can come to it ; 93 you think is more nearly Q. On that basis which you have given if we add to the price of 100 poi^nds raw, .S4.69, 74 per cent, which would be the amount to be added on that basis, it gives us 85.04, as the cost of the raw sugar in the 100 poimds of refined. Now if the price is .S5.30, that leaves the margin between the two. 16 cents per hundred. Is that in your judg-ment below the cost of refining?— A. I have no judgment as to that. Q. On the basis of 51 cents margin you think there is no money m it to-day ?— A. No ; I did not say that. Q. You did not ?— A. I said there had not been any money in it on the average. It has only been raised for 3 or 3 weeks. It has never been as high as to-day. you know. It only raised one day last week ; I think Thursday or Friday. Q. There is some money in it on the basis of 51 ?— A. I do not think there is. I think that is getting about even. , „ . Q. So, then, on this other basis you think the real bare cost of refining must be about 16 cents?— A. No; I did not say that. ,. , . , Q. It amounts to the same thing, does it not ?— A. I do not think it does. Q. I take your own figures. You maintain that refining will cost 16 cent^ a hundred ?— A. Sixteen cents a hundred the cost of refining? Q I thought I was taking that from your figures ?— A. You are mistaken. Q. You said, did you not, that it was a fair average to assume that there were 93 pounds from the 'lOO?— A. Yes. On that basis you would get, then, 93 pounds of refined from 100 pounds raw ; that would give almost exactly 107/^ on the other basis ; so I take your price of raw sugar, 84.69, and multiply by the 7i per cent we put on, and add that to the price of the raw ?— A. Seven and one-half ? 94 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. Q. That is what it would amount to, 71 pounds, wliich is to be added to the 100 pound-i of raw to make 100 pounds of refined?— A. Yes. Q. Four dollars and sixty-nine cents multiplied by 7i gives .So and a trifle over— .3.) J, ; that, added to the S4.69, gives ?5.04 ; subtract from S5.20. the price of refined, and vou have left .16. I understood you to say that there is possibly a lit- tle bit of money at the difference of 51 ; the difference there is to-day, which would make according to this 16 cents per 100 pounds, the mere cost of refining, unless you take into account the by-products or something of that kind.— A. There was some surplus. Q. When you reckon it on this basis, you think we ought to count on the sur- plus beyond that?— A. Well, I am not up in bookkeeping— I am not up in hook- keeping. Q. I should judge from your experience that you have given that you are pretty well up in refining? — A. 1 am not up in bookkeeping. Q. It would seem to show 16 cents a hundred, and you think that would he a fair cost of refining ?— A. I told you that refining costs from 50 to 60 cents. Q. I know. That is not merely the cost of refining ; that includes also the loss of raw sugar. That is your way ..i stating the same thing ? — A. I have told you what I considered the cost of refining. BY-PRODUCTS FROM REFINING. Q. Stated on the basis of the figures you gave me, how much by-product is there in refining 100 pounds of refined sugar ; how much sirup, for example? — ^A. Well, about 3 gallons, I think. Q. About 3 gallons in 100 pounds ? — A. Yes. Q. How much is that worth in the market ? — A. About 10 or 13 cents a gallon. Q. Twenty cents or more you would say, then ? — A. I guess that is too much ; however, I can not get at these figures exactly. Q. Of course from what voit have already stated about sugar refining there is more or less variation ; but in general you get out of 100 pounds about 3 gallons of sirup ? — A. About that ; that depends again on the kind of sugar you are working. Q. That is worth about 10 cents by weight? — A. Yes, I guess it is; you had better not say that ; you had better say 13 cents for a gallon. Q. About 13 cents a gallon ; you think that is more nearly correct ? — A. Yes. Q. Are there any other by-products besides sirup ? — A. No. Q. Now, in every manufacturing business, of course, aside from the cost of the plant itself, more or less running capital is required. Speaking in round num- bers, about how much running capital does it take to operate a refinery that would melt about one million pounds ? — A. If you get credit enough you do not need any money, and if you have not got any credit you have got to have consid- erable capital, and that again depends upon the stock you are carrying. AMOUNT OF STOCK CARRIED — AMOUNT OF RUNNING CAPITAL. Q. About how much .stock do you ordinarily carry ? — A. There is no rule for that. Q. Of course, there is no rule; but as a matter of general experience ?— A. There is no rule for that at all. not any at all. Q. There is considerable experience, of course?— A. Y^es ; but no rule for that. Q. Of course it is true you would often be very much ahead and often run very low?— A. That is true, and that is something no one can tell, the same as in any other manufacturing business. Q. There is, nevertheless, a great difference in different kinds of manufacturing as to the amount of running capital that one needs in connection with the busi- ness. In some lines of business one needs much more running capital than one does in other lines ? — A. Y^es. (^. Now, with reference to the sugar business, does that, on the whole, require proportionately a large amount of running capital or a small amount?— A. Now, I am not acquainted with any other business ; I can not tell you what it does reqni3-e to run any other business. Q. Suppose I put the question in another form. About how often do you turn your capital in the business : every 13 months ?— A. I could not tell you ;' I do not know. q. Can you not give pretty nearly the time?— A. I could not undertake it at all. THE SUGAR COMBINATIONS: DOSCHER. 95 Q. On what terms do you ordinarily sell refined sugar ? — A. The rule now is that most goods are sold on T days. Q. On 7 days?— A. Yes ; 7 or 30 days. Q. That means that they are to be sold on 30 days and you will give a cash dis- count for payment in 7 days ?— A. Yes. Q. How much do you give ? — A. One per cent. Q. What are the ordinary conditions of purchasing raw sugar? — A. Oh, there is nothing of that kind given. That is bought right out ; that is all straight. Q. No discount at all? — A. Without any discount. Q. Cash dovrai ? — A. Cash. A. That is the common custom ? — A. That is the custom ; yes. METHODS OF SELLING REFINED SUGAR. Q. How about the methods of selling your refined sugar, now ? Do you have any factors' agi'eements that in case the wholesaler maintains a certain fixed price you will give him a rebate ? — A. Yes. Q. What are the conditions? — A. The conditions are — you know that, I guess, as well as I do — the factor plan — three-sixteenths and 1 per cent for cash and 1 for trade discount. That is what the factor plan is — what the grocers and the American have had and have been working upon for years. Q. And you work under the same plan? Do you require, at the present time, any affidavits from the dealers to the effect that they have maintained prices ? — A. No. Q. On the whole, do you think they do maintain them pretty well ? — A. Do they maintain them ? Q. Yes. — A. I do not think they do. Q. You think they cut a good deal ? — A. I do. Q. What is the eif ect of that on their profits ? — A. Well, I do not know. Q. Who fixes the price for the American market, the New York market ? — A. I think I have said that once before. Q. The American does ? — A. Yes. Q. Are your prices regularly the same as the American prices ? — A. Yes. Q. You let them fix them and then you follow ? — A. Yes. Q. You do not cut first when the prices go down ? — A. Never did. Q. When you first began putting your goods on the market, you put them on at the standing rate that they announced beforehand? — A. Yes. Q. They began to cut and you followed ? — A. Yes. COMPETITION AMONG THE REFINERS. Q. Do you know whether there are any other refiners who are not in the Amer- ican Sugar Eefining Company who have cut first ?— A. Well, the Arbuckles ; they did cut once or twice last winter. Q. What time did the Arbuckles' refinery begin business ?— A. I do not know. It was August or October. Q. A little bit before you ? — A. A couple of months before. Q. When they first started, did they begin to cut ?— A. No ; they did not cut, as far as I know, until last winter some time. Q. The first cut was made about the time you began or a little before by the American, and then some time 3 or 3 months later Arbuckle cut under the Amer- ican some? — A. Yes ; that is right. Q. How long did they keep holding their price below the American?— A. I can not tell you that. We kept it 7 days. That is all we kept it, but I do not know how long the Arbuckles kept it. We followed the Arbuckles, but we only kept it 7 days. Q. When the Arbuckles cut, you followed them?— A. Yes. Q. And then the American ?— A. No ; we did not follow them. Q. How much was the cut that was made by the Arbuckles ?— A. One-sixteenth. Q. Then you followed the Arbuckles for 7 days and went back to the American price?— A. Yes. . . , ^ Q. Then the American followed them down, I suppose, inasmuch as prices kept going down ?— A. No, no ; that was the lowest sugars were selling all that winter. You know raw sugar had been advancing constantly. Q. I am speaking of the margin of difference between the raw and the refined ?— A. Yes. Q. That margin kept getting smaller constantly ?— A. Yes. 96 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. That cut of one-sixteenth did not bring them down to where it is now ?— A. Yes ; I gness it did. I do not know. I do not remember that. I can not tell you. Q. I have the regular market quotation. October 1 the difference between the two was li ; October 8 it was three-sixteenths ; October 15, three-fourths.— A. That was before we worked at all— before we started. Q. So this cut began before you started?— A. Oh, no; the Arbuckles' cut was after that. It must have been— I think it was in December. Q. This cut here was the American's cut, then ?— A. What cut do you mean ? Q. In October,1898.— A. Was there a cut there then ? Q. Yes.— A. I suppose so, if it was then. I do not know ; we were not in the business. Q. There was a cut of from 5| to 5. Are the Arbuckles and the American Sugar Refining Company selling at the same price to-day ?— A. I believe they are ; as far as I know, they are. Q. Have they been so in the main lately, say within the last three months. Have the two sold at the same price ? — A. I think so. Q. This difference between them, with the Arbuckles lower, did not last a great while?— A. No. Q. For a month or two? — A. I do not know whether it lasted as long as that; I can not say. Q. Was this contest between the Arbuckles and the American only in New York, or did it extend all over the country?— A. I think it was general. Q. You do not know of any special cuts by the Ameiican to drive the Arbuc- kles' sugar or your sugar out of the market in any special locality? You think that whenever cuts have been made they have been general always ? — A. No ; I do not think they have ; they sometimes varied a little. Q. Can you give any special instance of their having made a cut in a special locality? — A. No ; I can not do that, but they have sometimes. In different parts of the country where they have refineries we were cut off, you know, and not in others. That has been done, but I can not state now where. Q. When the Arbuckles made their cut, to begin with last winter, did it seem to be because they were short of customers or v^ere they making the cut to get away some special customers of the American ? — A. I presume they made the out because they had too much stock on hand and could not dispose of the goods as fast as they could make them. Q. Unless they could make some special piices ? — A. I suppose that was it. Q. Is that, in your judgment, the reason why the American has been making these cuts ? — A. I can not tell you that. Q. In the case of a great organization like the American, where several refineries are associated, do you think there is any saving? For example, do you think the cost of superintending the refineries will be lessened? — A. I can not answer that question, because I have never had anything to do with their business. Q. I was asking you simply in a general way, expecting you to answer from your knowledge of the refining business ? — A. I understand, but I can not answer. PLACE OF PRODUCTION AND QUALITIES OF RAW SUGAR. Q. Where does most of the raw sugar that you use in your business come from? — A. Well, raw sugars come from pretty nearly all over the world now; a good deal comes from Java, and in fact from all over the world ; a good deal of beet sugar comes from Etiroije, i. e., France and Germany. Q. As regards the qualities of cane sugar from different parts of the world, is there any special difference that you can detect? For example, where does the best cane sugar come from ? — A. Those things allgti by tests ; everything goes by test ; whatever the test is settles it. Q. You donotknowfrom just what country you get the best quality of sugar?— A. No. Q. You have all of it bought by test without regard to where it comes from?— A. All is bought by test. Q. Is there any special difference in value between the cane sugar and the beet sugar? — A. Yes ; there is a slight difference. Q. About how much?— A. I can not tell you what the difference is ; there is a slight difference. I am sorry to say I can not tell you. Q. When it comes to refining, do you get us much sirup out of beet sugar as out of cane?— A. Yes ; that depends on what kind they are ; but some sirup from the ordinary beets is of a poor quality. Q. At the present time there is considerable of a tariff on both raw sugar and refined?— A. Yes. THE SUGAR COMBINATIONS: DOSCHER. 97 Q. Do you recall how much more the tariff is on the refined sugar than on the raw ?— A. No ; I can not tell. Q. What would you say the special evils are, if there are any, that come from a comDination of manufacturers such as we have in the American Sugar Refinino- Company ?— A. I can not tell you ; I can not answer that. Q. Do you think there are any evils in a combination ?— A. I can not tell you ; I do not know. QUESTION OF THE PROFIT IN THE BUSINESS EESUMED. Q. (By Mr. Parquhab.) Mr. Jenks has asked you a question as to how often you turn over your capital in the course of 13 months ?— A. Yes. Q. Can you not give the commission a general idea of that ?— A. I can not give it to you. I would if I could, but I can not do it ; I do not know it. Q. Well, your business, whether on cash or credit, is always inside of 30 days? — A. Supposed to be ; jes. Q. Do you think it would be possible, as a business matter, then, to turn your capital over 6 times in a year, which would give you twice 30 days ?— A. I can not answer that ; I would have to look the matter up. Q. Do you think it is a fair question to answer ? Would it not have been a fair dividend on the capital employed if, when you went into the business, you had made from 12 to 20 per cent ? — A. I do not know that. Q. I simply said would you take that as a fair business question ? — A. No ; I do not think so. I believe that in sugar refining there ought to be a fair return for the money. It costs a great deal of money to start. If anything turns up that makes your plant useless for sugar refining, you have got nothing left that is worth anything for anything else. Consequently there should be a fair return for the refining. Of course, you all understand that. Q. Well, you have a changeable market in your raw products. Do you not think it would be safe to say that a man, in order to invest money in a sugar refinery, ought to have 12 to 14 or 16 per cent assured? — A. I think he ought to; yes. Q. That is what I wanted. Is it not the business rule in New York, especially in New York and Brooklyn, that you could not get an investment of two or three millions of money in a concern — in a business venture — unless it carried from 14 to 20 per cent profit? — A. I think that is a very good basis. Q. That is your experience in your own trade, considering the fluctuations of raw material, that you could not make a safe investment unless you were always sure of that amount of profit? — A. I think it is a fair proposition to consider it in that way. Q. (By Mr. Jenks.) That would be in accord with the general statement you made some time ago. When you started to make the investment in building your new refinery, at the rate at which prices were then, you had expected to get as much return as 20 per cent? — A. I did not make any calculations at all. Q. You simply believed yoti would probalily get that much if you went on with the business? — A. I did not make any calculations at all. Q. But you ought to get that much? — A. If you put it that way, yes. THE DIFFERENT REFINERIES AND THEIR PROPORTIONS OP THE TOTAL PRODUCT. Q. (By Senator Mallory.) I did not understand your testimony as to the con- cerns that are engaged in sugar refining. You have mentioned three — the Amer- ican, the Arbuckles, and yours. Are there any other large concerns engaged in sugar refining in the United States? — A. Yes; there is the Mollenhauer. Q. Where are they located? — A. They are located over there in Williamsburg or Brooklyn; that is a large one, and there are some smaller ones. I do not know where they are now. There is another at Yonkers — the National. Q. Well, of the refined-sugar product in this country, is there any single organ- ization or concern that produces the major part? — A. Yes; the American does that. Q. The American Sugar Refining Company produces more than your own con- cern and the Arbuckles combined? — A. More than all the rest together; yes. Q. (By Mr. Jenks. ) About what percentage of the total amount refined is refined by the American? — A. I can not tell you that. I do not know. AMOUNT OF SIRUP PRODUCED IN REFINING. Q. There is another question with reference to the nature of the refining that is perhaps not quite clear. Out of a hundred pounds of the raw sugar you said it was a fair average statement to make that we could get perhaps 93 pounds of the 98 HEAEING.S BEFORE THE INDUSTRIAL COMMISSION. refined, and that also there would be about 2 gallons of sirup?— A. About 13 cents' worth per gallon. Q. Twelve cents of the value, but I am speaking as to the weight. Do you recall al)out what the weight of those 3 gallons would be?— A. Two gallons of sn-up? Q. Yes.— A. The sirup weighs about 11 pounds— that is, water and all ; that is from the raw. . Q. Well, you have then 93 pounds of sugar and about 33 pounds of sirup which makes about 115 pounds from 100 pounds of raw sugar. There is an addition that comes from the water used in washing the sugar, etc., that adds about 15 pounds to the whole weight ; that is right ?— A. I do not know whether that is right or not. Q. Well, according to the figures you have given it comes to that ?— A. I can not answer that. OFFERS TO PURCHASE WITNESS'S REFINERY. Q. (By Mr. C. J. Harris.) I understood you to say that the business had been unsatisfactory since you started the last time ? — A. Yes. Q. Have you ever had any offers from other companies to combine with them or go out of business at all ? — A. No. Q. Either directly or indirectly ?— A. There has been a question asked by out- siders whether we wanted to sell, but we always said we did not want to sell out ; we did not build the refinery to sell. Q. I did not suppose it would come directly from any other parties ; it would probably be done through outsiders.— A. Well, now, that is something that is difficult to tell, of course. Q. There has been talk of that kind to you by somebody ?— A. They have asked whether we would sell our refinery. witness formerly sold out to the sugar trust. Q. (By Mr. Phillips.) Were you engaged in the manufacture of sugar before the sugar trust was formed, the American trust? — A. Was I engaged in it before the so-called trust was formed ? Q. Yes.— A. Yes. Q. Did you sell out to the American trust?— A. Yes. I did not sell; we all went in together when the trust was formed ; the house I was interested in at that time went in. Q. Do you own any stock in the trust now? — A. Yes. Q. Do you own the original amount you put in the trust ? — A. No, I do not hold the original amount. Q. There was no bargain or agreement that you should not go into the manu- facture again when you sold out to the trust ? — A. I did not catch that. Q. You did not agree that you would not go into the manufacture again when you sold to them ? — A. Nothing of the kind at all was asked or done ; everybody was left free to hoe his own row, or do what he wanted to do. Q. (By'Mr. C. J. Harris.) If you had not started this competition against the American Sugar Refining Company, do you have any idea that sugar would be selling as low as it is now ? — A. I can not answer that question : I think other parties can answer that better than I can ; I think other parties would be more able to answer that than I am. Q. I understand you to say that the decrease in price followed almost immedi- ately after you commenced or started business again ; is that so ? — A. Well, it was not all in one period ; you know the Arbuckles started in before we did : and then the drop started, if I remember right, and went right down all the time. witness receives dividends from suriAR trust, but makes no profits in HIS OWN business. Q. (By Mr. Phillips.) Have you been receiving dividends from the sugar trust since you entered the manufacture yourself? — A. Have I been receiraig dividends myself? Q. Yes.— A. Yes. Q. Will you please state the amount they pay ? — A. They pay 1'3 per cent on the common and 7 per cent on the preferred. Q. Per annum ? — A. Yes. Q. Yet you said you have not made any money in sugar since you entered the business. Has the trust facilities for manufacturing by which they can make a profit when you can not make a profit? — A. I can not tell y(.iu that. THE SUGAR COMBINATIONS: DOSCHER. 99 Q. But still they are paying dividends? — A. They are paying dividends, yes. Q. And you have not been able to pay dividends on yours ? — A. I think I have said here that we have not made any money in refining this year. Q. (By Mr. Farqtjhar.) Was the last dividend of the trust 13* per cent?— A. At the rate of 12 per cent. Q. At the rate of 13 per cent on common stock? — A. Yes, there is one payable now ; on the 1st of July. Q. (By Mr. A. L. Harris.) What company did you belong to at the time the trust was formed? — A. The Brooklyn Sugar Refining Company. DIFFERENT CORPORATIOSS THAT WENT INTO THE SUGAR TRUST. Q. Were you acquainted with the different corporations that went into the original trust ? — A. I beg your pardon. Q. Were you acquainted with the names — do you know the names of the original corporations that went into the trust ? — A. I do not know all of them. Q. Did they operate all of them after the organization of the trust? — A. No. Q. How many of those refineries were sus]pended? — A. I could not tell you how many : of course they closed some of them, I do not know how many. Q. Would you remember them if you heard the names ? — A. I will try to. Q. What became of the Conner & be Castro ? — A. They worked but very little ; they worked some, but very little after that. Q. What became of the North River Sugar Refining Company ? — A. They did not work at aU. Q. What became of the Oxnard Brothers? — A. I do not believe they worked at all. Q. What became of the Moller & Sierck ?— A. They did not work at all. Q. What became of the Bay State ? — A. I do not know ; I can not tell you. Q. You do not know about the Forest City? — A. No. Q. Nor the St. Louis ? — A. I do not know whether they worked any at all or not ; I cannot tell you ; but those right there in our neighborhood, I know they did not work. They were all old houses and were combined and changed, and, of course, they did not work at all. Q. (By Mr. Phillips.) How many refineries were closed down when the trust was formed ? — A. How many were closed down ? Q. Yes ; do you know about how many ?— A. I do not know as there was any of them closed down. You mean afterwards? Q. After the trust was formed.— A. I have said what I knew were closed down : how many more I do not know. Q. What became of those that were closed down? Were they dismantled ?— A. Some of them were. Q. (By Mr. A. L. Harris.) Has the dividend on the common stock been about 13 percent since the organization of the present company?— A. I think it was 10 until they were reorganized. Q. When was the reorganization ?— A. Some of you gentlemen know better than I do. Was it in 1890 or 1891 ? Q. 1892 ?— A. Somewhere around there ; I do not know just when it was. Q. Do you remember the dividend that was declared in 1894?— A. I am not sure, but"l guess it was 13 per cent. Q. Was there an extra dividend in 1894 of 13 per cent in addition to the 10 per cent?— A. There was one; I do not remember how much; I do not remember the date of it, but I know there was one extra dividend once. Q. (By Mr. Phillips.) Would you care to state to the commission how much stock you own in the sugar trust now?— A. I would rather be excused. Q. (By Mr. A. L. Harris.) I would like to ask if you know whether or not the Mollenhaur is connected in any way with the American Sugar Refining Com- pany? — A. I can not tell vou. Q. Or whether the officers of the American Sugar Refining Company own stock in the Mollenhauer?— A. I do not know, sir. Q (By Mr. Jenks. ) Their prices regularly go -s^-ith those of the American Sugar Refining Company the same as yours, do they not?— A. Yes; they have durmg the last few years. , , . ,r Q. Since this last out in prices they have stopped work.'— A. Yes. COMPARATIVE ADVANTAGES OP REFINERIES. Q In the manufacture of sugar are there any special secret processes as there are in other lines of business? Does a refinery of the same quality or grade work the same as every other?— A. Well, about. 100 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. There are not supposed to be any secret processes or anything of that kind?— A. No; I do not know that there are. Of course there are always some that have thorough knowledge of the business. Q. As far as the general process is concerned, with the same managers, they all do the same thing? — A. Yes. Q. Your refinery is the last one of the large refineries that has been built, is it not?— A. Yes. Q. So that the presumption is that you have really as good a refinery as any of them, considering its size?— A. Well, I will call it that; let it go at that. Q. You believe, then, that your cost of refining is really as low as that in any other refinery? — A. I think so. Q. If you can not make any money from refining, then you think it would be a fair inference that the American Sugar Refining Company can not make any money from refining? — A. I do not know what they can do, and besides that you all know when you start a new refinery that there is so much machinery that you are at a disadvantage in the beginning, and that it takes a little time to get all the machinery and everything running smoothly. So, as I said before, we really do not know what we can do; we do not know how cheap we can run, but still we think, after the afEair is started, we will be able to run our own as cheaply as any of them. Q. (By Mr. C. J. Harris.) Is your company a stock company? — A. Yes. VALUATION" AND CAPITALIZATION OP THE §UGAR TRUST. Q. (By Mr. Phillips.) About what was the value of the plants that went into the sugar trust, the American Sugar Refining Company? — A. I do not remember that, and I do not know that I ever knew. If I did I have forgotten. Q. What was it capitalized at? — A. It is now capitalized at .§75,000,000, is it not? Q. Was the addition or increase of capital before or after they bought the refineries in Philadelphia ? — A. I think it was before ; or did they issue a little more stock? I can not tell. Q. Was the original capital §50,000,000? — A. I do not remember ; I think it was; I do not remember whether it was or not. Q. Was it not increased after the purchase of the Philadelphia refiaieries to •575,000,000? — A. I am not sure about that ; I think it was. Q. Do you have any idea of the value of the plants that went in at that time from Philadelphia? — A. No ; I have not ; I never was in a Philadelphia refinery; I do not know wtat they were worth. Q. (By Mr. A. L. Harris.) Compared with your plant, what would be the aver- age value of the plants that went into the original sugar refining company ? — A. Oh, I could not tell you that. Q. Your plant is a new one ? — A. Yes. Q. And has a capacity of 3,000 barrels a day ; and 5 of these which went into the trust you say were old and worthless apparently, leaving of the 15 10 good ones, and you can not say whether their average would be more or less than your new plant ? — A. No : I can not tell that. Q. (By Mr. C. J. Harris.) Would 10 such plants as your present plant supply the sugar trade of the United States ? — A. No ; I do not think they would. Q. (By Mr. A. L. Harris.) When you sold the Brooklyn refinery what was the valuation ? — A. Of the Brooklyn ? Q. When you sold?— A. It was in the neighborhood of 8:5.000,000 ; I do not just exactly know, but it was just a little over $3,000,000. Q. What was the capacity of that refinery at that time ? — A. Now I do not remember just wljat it was at that time. Q. Was it not one of the best refineries then running? — A. I believe it was. It was one of the best, but it was not one of the largest ; but it was one of the more improved and had the most modern machinery ; yes. Q. It was considered valuable proi)erty ? — A. Yes, it was. Q. Was that a cash valuation or stock ? — A. Certificates. Q. You sold for .sy,000,000 in certificates ?— A. Yes: a little over $3,000,000 in certificates ; no cash. Q. At what were those certificates valued at that time?— A. I do not know; some valued them pretty high and some did not. Q. Were they not valued at 50 cents on the dollar?— A. Well, they had been sold, and were sold for 50 cents afterwards, you know. Q. Was that not tlie basis up(m which the purchases were made? Do you know anything about the purchase of the North River Refinery?- A. No; t do not. You mean the figures they got ? THE SUGAR COMBINATIONS: HAVEMEYER. 101 Q. I mean the one that Mr. Searles purchased.— A. Yes. That v>-as the North River. Yes, if I do not mistake, tliey took cash ; they did not \Tant tlie certifi- cates, and they took cash. Q. Do you remember the amount ? — A. No : I do not remember tlie amount. Q. Was not the offer .S025,000 in casli or 8700,000 in stock?— A. I do not remem- ber that, but I believe tliat they took 50 cents in cash; I believe they did, but what the amount vras I do not remember. Q. They took .-.O cents?— A. I think they did. Q. It was turned over to the American refinery from that purchase? — A. I sup- pose it was. Q. And went into the original sugar trust? — (No audible response by the witness. ) Q. (By Mr. Jenks.) Was that, in your judgment, about the basis of the prices paid in certificates for the other refineries, about double what the fair cash value would be? — A. Well that varies, you know, a good deal. Q. Do you consider it about that with reference to yours? — A. No; I do not. Q, You do not believe you got quite double? — A. No; I do not think we got double; I never thought so. Q. You thought your certificates were worth probably more than 50 cents on the dollar? — A. Well, they are worth a little more today; yes. Q. (Bj Mr. A. L. Harris.) You have no knowledge of the amount that the Brooklyn company was turned into the trust for ? — A. I have no knowledge of what ? Q. Have you any knowledge of what the Brooklyn company was valued at when it was turned into the trust ? — A. That is what we were first talking about : a little over $3,000,000. Q. I want to correct myself; the amount of trust certificates that were issued for the Brooklyn company? — A. I have said a little over .$3,000,000. Q. And the cajjitalization; you have no idea of the capitalization when the trust was formed — that 850,000,000? — A. No; I have not. I believe, if 1 remember right, that the companies were all left; they were not changed at all. They were cax)i- talized. I think we were incorporated for 8300,000. Q. (By Mr. Jenks.) That was before you went in? — A. Yes; oh, long before; when we first organized, you know. Testimony closed. Washington, D. C, Jvue 14, 1S99. TESTIMONY OF HENRY 0. HAVEMEYER. The commission met at 11 a. m., June 14, 1899, Vice-Chairman Phillips pre- siding. Mr. Henry O. Havemeyer was sworn and testified. Q. (By Mr. Jenks.) Will you be kind enough to give your full name and address to the stenographers ?— A. My name is Henry O. Havemeyer ; my address is IIT Wall street, New York ; I reside in Greenwich. Conn. Q. You are president of the American Sugar Refining Company ?— A. I am. Q. Will you be kind enough to make a general statement, in the first place with reference to the subject of industrial combinations, and then we will ask such supplementary questions as may seem desirable ? — A. I understood that I would be asked questions on the subject of trusts and corporations, and I have jotted down in a very brief form something I should like to read to the commission. (Reading.) THE ORIGIN OF TRUSTS. The mother of all trusts is the customs tariff bill. The existing bill and the preceding ones have been the occasion of the formation of all the large trusts, with very few exceptions, inasmuch as they provide for an inoriUiiate protection to all the interests of the country, sugar refining excepted. EconTinite advantages incident to the consolidation of large interests in the same line of business are a great incentive to their formation, but these bear a very insignificant proportion to the advantages granted in the way of protection under the customs tariff. There probably is not an industry that requires a protection of more than 10 per cent ad valorem, and it is to obtain what is provided over such percentage in the tarifi: that leads to the formation of what a-re commonly spoken of as " trusts." With a protection to an industry not exceeding 10 per cent, all menace to the 102 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. community from trusts would cease. This 10 per cent would represent the differ- ence in cost of production, and likewise act as a protection against surplus prod- ucts of foreign countries being dumped in our local markets, thereby interfering with the regular and economic working of our industries. Any advantage that might then accrue to such combinations, they would be fully entitled to, and the public would not be damaged thereby, as any expansion of price would be met by foreign competition and relief. THE TARIFF ON SUGAR. I have said that sugar is an exception. The rate of protection on sugar is one- eighth of a cent per pound, which is about 3.V per cent ad valorem, and is not the difference in the cost of refining between this and foreign countries. The least it should have is 8 per cent, or, in specific figures, one-fourth cent per pound. The sugar refining industry of this country, no matter what form its organization, is entitled to adequate protection, if any industry is. There are at least 100,000 people dependent upon it. What it pays, or has paid, to its stockholders in the past represents nothing more than a fair return on the capital invested, considering the extent of the business. The United States tarifiE bill, in assessing about §40 per ton duty on imported sugar, pays into the pockets of a few Louisianans on their annual crop, of 250,000 tons, §10,000,000 ; to the Hawaiian Islanders, probably represented by 150 for- eigners, on their annual crop, oi 250,000 tons, §10,000,000 ; on say 100,000 tons, produced elsewhere in the United States, $4,000,000. Here you have 834,000,000, extracted from the people of the United States for the sake of getting the revenue, which $40 per ton on foreign sugat provides. This is merely illustrative of the whole tariff — every line of it — and its effect upon the people. In fact, the tariff bill clutches the people by the throat, and then the governors and attorneys-general of the several States take action, not against the cause, but against the machinery which the people employ to rifle the public's pockets. THE FORM IN WHICH BUSINESS IS DONE IMMATERIAL. There appears to be in the public mind a distinction between robbery by an individual and that by a corporation. What is commendable in an individual appears to be dishonest in a corporation. I maintain that it is immaterial to the public in what form business is done— whether by an individual, firm, corporation, or even trust. These are merely forms of conducting business, or, in other words, machinery for the operations of business. It is the duty of the Government to see that under the tariff laws which they enact, this machinery can not in its actions result to the detriment or impoverishment of the public. It would have been very easy and proper for the Government to have put a corresponding internal-revenue tax on sugar simultaneously with the imposition of the customs duty, and have these $34,000,000 which now go into the pockets of a few individuals go into the Treasury for the benefit of the whole people. If no ' expense of the Government needed to be prp\-ided for and protection to American industries was desired, the imposition of 10 per cent ad valorem on all manufact- ured products would have settled the matter. There is every reason why, if revenue is desired, that with a duty on raw materials of foreign production, a corre- sponding internal-revenue tax should be levied on similar products, and the pro- tection to manufacturers thereof limited to an additional 10 per cent. THE GOVERNMENT PLUNDERS THE PEOPLE. I repeat that all this agitation against trusts is against merely the business machinery employed to take from the public what the Government in its tariff laws says it is proper and suitable they should have. It is the Government, through its tariff laws, which plunders the people, and the trusts, etc. , are merely the machinery for doing it. The statements made before the committees in Congress and the speeches against the Sugar Refining Company are absolutely devoid of truth— utterly unworthy of credence. The intention of Congress, however, to enact something into law con- trary to what the sugar refining industry properly required resulted, irrespective of the great injury and mjustice done, in the passage of the existing sugar schedule. THE SUGAR COMBINATIONS: HAVEMEYER. 103 PEICES OF SUGaE before AND AFTER THE FORMATION OF THE TRUST. Whether the Sugar Refining Company has been a benefit or injury to the community can be best expressed in the table following, showing the prices for a considerable period prior to the formation of the trust and for a corresponding period subsequent. The difference since its formation shows an advantage to the consumer — ^iiote that, coiisaviei — of over one-eighth of a cent per pound. [Compiled from Willett & Gray's Weekly Statistical Sugar Trade Journal.] Qvotations for raw and, refined for twenty years. 96° centi- grade. Granu- lated. Differ- ence. 1879 7 42:! 8. 25] 7.;'J7 7. 423 5.857 5.729 5. ;*-iy 5.245 8.785 9.602 9.667 9.234 8.506 6.? 80 6.441 6.117 6.013 1.362 1.396 1.416 1.437 1.083 .923 .712 .781 .768 1880 1881 1882 1883. 1884 1885 1886 1887 . Average 1 098 1888.. 5. 749 6.433 5. 451 3.863 3.311 3. 689 3.235 3.2.58 3. 631 3. 553 4.149 7.007 7.640 6. 171 4.691 4. 346 4.842 4.119 4.140 4. 539 4.481 4.976 1.258 1.207 .720 .828 1.035 1 1.53 1889 1890. 1891 1892 1893 1894 .884 1895... 1896 .908 928 1897 1898. 827 966 1.098 966 132 What the Sugar Company has disbursed in dividends has been not because of any extreme protection under the tariff, but out of conditions perfectly legitimate and commendable. Their records show conclusively that no advantage has ever been taken by the company of any protection in excess of the 8 per cent claimed, i. e. , J cent per pound, under the tarifl:. Tariff laws should not afford protection exceeding 10 per cent to any industry, so that irrespective of the form of doing business, individual or corporation, the people — ^that is, the consumers, would.be protected. As the tariff laws are and have been, it is the consumer, i. e., the great mass of the people, who has terribly suffered, to the great advantage of the few in the business community. The Sugar Company undoubtedly tries to do its utmost to enlarge its business, but does it in a way, which they consider the only proper one, i. e., by making the price so low as to defy competition. CORPORATIONS UNDER NO OBLIG-iTIONS TO THE STATES. It is my opinion that corporations are under no obligations whatever to any of the States for their existence. Quite the reverse; the States are under obliga- tions to them. If the plants of these industries consolidated were capable of being put on wheels and moved from State to State, yo:' would find very active bidding for them. It is not an unusual thing for certain localities to guarantee free tax- ation for 20 years, free water, and in some instances give the land to corporations to have them organize under their statutes and locate in their States. Hostility to capital meets with its own condemnation. This is illustrated by the situation in New York, where discrimination against capital has prevented its employment and driven it elsewhere, resulting in a greatly increased tax rate, and a tendency to increase the number of the unemployed. 104 HEAEINGS BEFORE THE INDDSTRIAL COMMISSION. CAPITAL AND LABOR. All I have to say about trade organizations and strikes is that, without violence, they are natural. They have one objection, however— their tendency to reduce all labor to a low level. Business is not philanthropy. Capital and labor will adjust their own relations if they are let alone. Interference always operates against one or the other; that means to the disadvantage of both. There is no such thing as monopoly in these days except that which results from patents and copyrights. The true ■■ communism of pelf " is the customs tarift bill. It says to the people, "Here is the law we have enacted for your robbery. Do not complain of it, but do your utmost to attack and injure the machinery engaged in extracting from you what we legislate snail be taken from you. '• Keep up the clatter while the voters on the tariff bill take advantage of the noise to enact laws that cause your impoverishment and thus contribute to the greed and avarice of the few." SU6AE PRODUCT OF THE WORLD. I submit herewith a statement of the sugar product of the world, since 1894, showing the production and consumption of cane and beet sugars, which may be of interest to the commission. Estimate. Actual. 1898-99, 1897-98, 1896-97, 1895-96. 1894^95, CANE CROP. Cuba Tons. 300,000 60,000 45,000 45,000 30, 000 35,000 100,000 150,000 640,000 175,000 1.50,000 40,000 30,000 80,000 2.50,000 60,(X)0 120,000 220,000 Tons. 2.50,000 .51,022 48,717 52, 000 30,669 37,313 107,362 170.000 623,000 175,000 117,350 35,239 .a5,ooo 95,000 345,000 65,000 100,000 200,000 Tons. 229,208 66,623 49, 289 56,793 31,921 42, 055 110, ,5.37 200,000 393,440 205,914 147,648 48,447 30,000 90,000 315,000 70,000 95,000 190,000 Tons. 392,796 49,948 54,591 42,975 35,836 43,998 102,433 220,000 676,142 250,447 140, 543 44.768 31,000 38,000 260,000 69,000 82,000 170,000 Tons. 735,000 53,467 53,028 37,040 39,658 31.621 96,747 260,000 509,510 200,870 Mauritius - 113,928 38,248 30,000 27,000 325,000 75,000 70,000 Sandwicli Islands 148,000 Total - 2,530,000 3,537,571 2,371,875 2,704,447 3,883,213 BEET CROl'. 1,710.000 i.oiK).ooa .silO.OOO 7.50.000 131,000 155. 000 1.55.000 1,, 852,8.57 831. «67 ,821.235 738. 715 2li5,397 1.25. 658 190,000 1, ,836, .536 934,007 752,081 730.000 2'.)0.000 174.216 201.000 1,617,812 7'91,405 667, 8,53 780,000 230,000 106,829 1.30,000 1,844,586 1,05.5,821 793,611 615,058 343,957 Belgium Holland 84,597 156,000 Total 4.790,000 4,825,529 4, 917, ,840 4,323,,sil9 4,793,530 Total (cane and Tx'ct) 7,320,000 7,363,100 7,2,89,715 7,038,346 7,634,7« Season 1894-85: Tons. Consumption. Visible supply. Ortobci- 4.1894 (Czarnikow) 51;!. 000 Beet crops, 1,'1114-Oj (Lirbti.. 4.793. nKl Cane crops, ]894-!)5 iLii-ht) __ 2,8.32.1100 Total __. 8,12,1 000 Deduft Tisible supply, October 1, 18'.i5 1 , 305. 000 gives 6,831,000 Season 1895-96: Visible supply. October 1, 18il5 (Oziiriiil.-ow). I.:>ll5,n00 Beet ■ Tops, 1 8115-06 ( Licht ) _ . 4, :!'.'4„ UOO Cauu cr(jps, IKO.vy.'i (Lii:ht) 2, 7O4,0i:»l Total - 8, .333.000 Deduct visible supply, October 1, 1896 __ 1,314, 000 gives 7,119,000 THE SUGAR COMBINATIONS: HAVEMEYER. 105 Season 1896-97: Tons Consumption, Visible supply, October 1, 1896 (Czarnikow) - l,214,onfJ Beet crops. 1896-97 (Licht) 4 SIX 000 Cane crops, 1896-97 (Llcht) _ 2,373io00 Total .... -- — >,-- - 8,5CH.0IW Deduct visible supply, October 1, 1897. 1,013,00(1 gives 7,493,000 Season 1897-98: Visible supply, October 1, 11«I7 (Czarnikow).... 1,012,000 Beet crops, 1897-98 (Licht) 4 83:, 000 Cane crops, 1897-98 (.Licbt) .._ 3! .537 ,000 Total 8,:574,ono Deduct visible supply, October 1, 1898 720, 000 gives 7 654 000 Season 1898-99: Visible supply, October 1, 1898 i Czarnikow) 72( I 000 '■Estimated" beet crops, 1898-99 (Licht) 4 790 000 "Estimated" cane crops, 1898-99 (Licht) 2, .>lo,000 Total 8,040,C»0 HOSTILITY TO WE.ILTH. There is a prevailing hostility to wealth. This is perfectly illogical. Everyone wants money. It is the abnse of money, not its possession, which is opposed to the public interest. This hostility finds its outlet in hostile legislation, in unequal and unjust taxa- tion. All this is probably unconstitutional. It is directly against the interest of the very class, I mean the poorer class, whom it is supposed to Isenefit. Corporations, whether directly such or in the form of trusts, are an expedient for uniting the interests of a large number of persons of smaller means into a large aggregation of capital. Attack upon them is, therefore, an attack upon their stockholders. In the case of many well-conducted corporations these stockholders are very numerous and are often persons of moderate means, dependent upon their income for their support. In the absence of all disturbing causes, the direct tendency of a combination of capital is to promote economy, reduce expenses, and diminish price. This does not mean that a person having anything to sell will not get for it the largest price that he can. It means that with the abundance of capital ready for investment which is always found everywhere, the only way to prevent competi- tion is to keep prices below the competitive point. Great public improvements, factories, and other enterprises requiring large capital either are impossible unless through the instrumentality of corporations, or are possible only through the action of individuals themselves possessed of unlimited capital. It is easy to see what in the latter case would happen to the community. One form in which hostile action manifests itself is by legislation which is intended to keep corporations and their products out of particular States. This legislation in some States takes the form of bills which permit citizens to buy goods and with impunity to refuse to pay for them. This is a premium on dishonesty. In other States the attempt is to exclude articles which are of prime necessity. If the producers of such articles were to follow the lead and to combine to keep their commodities out of the State, it is easy to see what would result, i. e., either the people would be compelled to go without, or they would be forced to pay an inordinate price. Trade will always take care of itself. If it is left to pursue ordinary channels, A will see to it that B does not have any extraordinary advantages. It is only when the State interferes that a situation is created of which advantage can be taken against the interest of the community. ONLY TWO FORMS OF MONOPOLY TO-DAY'. In these days there are two forms, and only two forms, of monopoly: One, that which results from a patent and copyright. It is universally recog- nized that this is in the interest of, not against, the public. The other, that which comes from unfair tariff discrimination. Tariff for revenue need not be considered. The expenses of the Government must, of course, be provided for. Tariff for the purpose of equalizing against f orein-n bounties or foreign discrimination does not need to be justified. Beyond " 83A 8 106 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. that there is no excuse for giving to one industry a protection of 100 per cent as against 4 per cent to another. The result is that the Government fleeces the com- munity at large in the interest of some favored industry. THE EFFECT OF HOSTILITY TO COMBINATIONS OF CAPITAL. It must be kept in mind that this is a rich country, not a poor country. It must be kept in mind that the object of everyone is to make the country stronger, vs^ealthier, more important, more influential. The hostile action to vs^hich I have referred, legislation against corporations, if followed to its legitimate results, would make the country less powerful, its peo- ple less prosperous, and would destroy the influence which comes from the rich- ness of the land and its people. Citizens are divided into two classes — the industrious and those who wish to live on the industry of dthers. It is they who are without capital who are hostile to it. This is only another mode of stating the obvious proposition that it is those who are without means who wish to have wealth without work. PROTECTION OF 10 PER CENT AD VALOREM WOULD BENEFIT ALL THE PEOPLE. Q. I should like to ask you some questions in connection with your paper that have a little more direct bearing upon your own special industry. I understood you to say that you thought there should be no tariff above 10 per cent? — A. No protection. Q. The general principle you have in mind is this, that the difference between the cost of manufacture in foreign countries and this country is likely to be not over 10 per cent? — A. Yes ; and the other provision that it is very vital that the industries of this country should be kept constantly going so as to produce at the least co.st. There should be no interruption whatever furnishing any opportune chance for dumping the surplus products of foreigners into this country. Q. You would think, then, that we had better not attempt to take up any industry in which the difference in the cost of manufacture abroad and here is more than 10 , per cent? — A. I do not know about that; it would be a veiy difflcult matter to determine what the difference in cost should be; but I favor a horizontal protec- tion of 10 per cent. There is no law that can be framed to meet every particular case, and it is to the advantage of the great body of the people to beconsidered, and not some particular manufacturer who pretends and can show that his industry is at 15 per cent disadvantage, compared with the same industry in a foreign country. Q. By making dishonest representations to get legislation? — A. It is going pretty far to say dishonest; I .should say that it is of benefit to the whole people that this should be limited to 10 per cent; what the individual suffered would not count. PROTECTION NECESSARY FOR THE SUGAR INDUSTRY. Q. As regards your own special industry, I understood you to say you thought a fair tariff would be one-fourth of a cent per pound instead of one-eighth of a cent?— A. One quarter of acent per pound, 8 per cent ad valorem; that foreigner— the German — is getting it at 3 cents a pound; and 8 per cent ad valorem would be 24 cents a hundred, one quarter cent per pound. Q. This tariff of one quarter of a cent would represent substantially the differ- ence in the cost of maniifaotrire abroad and here ? — A. That is a little in excess of it. Q. Could you tell us about what the difference is?— A. I should say the actual difference is between 12 and 15 cents. Q. Between 13 and 15 cents a hundred?— A. Yes; the difference between the bare cost of refining and living. Q. Will you outline in a general way wherein that difference lies ?— A. The people of this country prefer the sugar in the barrel, which has been the form of package for 50 years. It would be very expensive to change it. It would throw perhaps 50,000 people out of work that are gathering staves and hoops in 15 or 20 of the Western States. The people of the United States are willing to pay that difference. There is only one reason against it, and that is, that the foreign pack- age, the bag, would supplant it, if it came here; because even against the peo- ples' wishes to pay, the willingness to pay that additional amount for the barrel, the drummers and the wholesale and retail dealers would push the cheaper article and finally drive it out. That is the main cause. The other direct difference is THE SUC4AR COMBINATIONS: HAA'EMEYER. 107 to be applied on the total expenses: on the other expenses, siTch as bone black a portion, cartage a portion, and insnrance a portion; the wages, of course, enter to the extent of one-sixteenth, perhaps. Q. In all of these particulars you mention, you think the foreigner has an advan- tage over us— insurance, bone black, wages, etc.?— A. Yes. Q. But the difference between them and you, as you have mentioned, is some- thing less than one-quarter of a cent per pound?— A. Yes. OUTPUT OF THE AMERICAN SUGAR REPINING COMPANY. Q. May we take up for a moment the question of prices of which you have spoken? You have given here quotations on raw and refined sugar for 20 years, and also the world's output for 5 years. Have you put in your tables the output of the American Sugar Refining Company?— A. No. Q. About how much is that?— A. Aborrt 30,000 barrels a day. Q. What proportion does that form of the total output of the country now?— A. I have never been able to get at those figures, but I should say about 90 per cent. Q. Y''ou think about 90 per cent of America?— A. That is not of the capacity, but of the output. The fact is that these refineries are not working full. Q. Does the American Sugar Refining Company itself have a capacity enough to supply the total demand if it were not for the opposition? Your company could easily supply the total demand at the present capacity?— A. The demand, and 20 per cent in excess. THE PRICES OP SUGAR. Q. In this table of prices that you have given you show that the difference in price between the raw and refined has lessened since the organization of the American Sugar Refining Company? — A. Yes. Q. That is the general result. I have had a chart ' made out here that shows the monthly course of prices from year to year, and I should like to have you comment on it, if you will, inasmuch as that is a simpler way to get at the price, than by taking it from year to year. — A. Well, the price of raw has depended upon conditions over which the American Sugar Refining Company or any other sugar refinery has had no control whatever. The large advance in the last year, 30 per cent, is due entirely to the war with Spain, the sugar crop being reduced thereby 300,000 tons, enabling the foreigners to put up the price. Q. The American Sugar Refining Company could, being by all odds the largest buyer, have something to do with that, and in some way it does determine what the price shall be? — A. It has some advantages. It can combine different markets, and so, in a measure, offset the control of these exchanges in the world which speculate in sugar. Q. And by placing large orders with one broker it could probably get a some- what better rate than a competitor who could place only a very much smaller order? — A. That is only in ease the production is very much in excess of the con- sumption, as it was some years ago. Where it would relieve certain districts of the surplus, they might entertain a lower offer from one man than they would from a majority, or a lot of buyers, the advantage being that by selling it to one man the market price would not be disturbed on the remainder, but in the main it has little or no advantage over others in the prices of the raw sugar. Q. Now, let us look for a moment at these prices year by year. I think I have made a little clearer here on the chart just what the condition of affairs is than it can otherwise be seen. If we go back some 3 or 4 years befoie the organization of the trust in the fall of 1887, the difference in price between the refined and the raw, as you have expressed it, is something over seven-tenths of a cent for 3 years, in 1884 a little over nine-tenths, and earlier than that considerably over 1 cent. The trust was formed in 1887 and shortly after prices went up Ij^^ of a cent, or a little over? — A. The margin; we had better use the word " margin," which represents the difference between the raw and refined. Q. The margin between the two? — A. That is the commercial designation of that. THE EPPECT OP COMPETITION. Q. That lasted for 2 years, then the margin dropped a little, to about seven- tenths in 1890 and to a little over eight-tenths in 1891, as shown here; what was the cause of the drop in the margin there? — A. I think the competition with the Spreckles and Harrison refineries in Philadelphia. ■ See general introduction. Chart allowing prices of sugar. 108 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Those organizations began work in the latter part of 1889? — A. No; Spreckles did, I think, but the otlier a little later. Q. And the othei-s came in a little later?— A. Harrison was there; we did not fight him; we could make our dividend without fighting him, but when Spreckles came in with his enormous capacity we either had to fight or make no dividend; we concluded to fight and that is what we are doing now. Q. When were you fighting against him?— A. That fight lasted in tlie neigh- borhood — lasted until we got his refinery — that is about the length of it. Q. Then in the latter part of 1891 this margin went up to a little over 0.92 of a cent, and in 1892 to a little over a cent, and in 189:-! to a little over IjV cents?— A. Yes: it went up to the usual margin we had laid out as necessary for the benefit of the stockholders and the proper conduct of the business. Q. Now, that margin ran, with a slight decrease on the average, all the way through, up until the latter part of last year? — A. Yes. I want to call your attention to one thing, viz, that we are exposed to the Louisiana crop which begins to be harvested about the 1st of December, the profit of the sugar busi- ness being lowest generally between December, the beginning of the crop, and the 1st of March when that crop is ended, and that then the policy of the busi- ness is to increase the margin between the 1st of March and the 1st of December, so that throughout the entire year the average profit, which involves the margin naturally, shall not exceed one-quarter of a cent a pound. That is the course of the business. Q. That is your general way of doing business. As regards this Louisiana out- put, is that connected in any direct way at all with the American Sugar Refining Company? — A. No; except that it is a tremendous competitor during those 4 months. Our meltings are displaced to the extent of that crop. Q. And you lessen your output at that time? — A. To correspond with the crop. Q. Now, as regards this later drop in the margin, that was caused by what competition particularly? — A. That is the new interlopers, the new refineries. What do you call them — these different refiners? There were half a dozen of them who began active operations, and threatened, if we left them to themselves, to displace our meltings to the extent of 50 per cent. Q. You mean the Doscher and the Arbuckle refineries? — A. No; he does not "cut much ice " in the sugar business; he does in the roasted coffee business. There are Arbuckle, Doscher, MoUenhauer, and the National, of New York; there is Nash & Spalding, of Boston; McKean,of Philadelphia: Cunningham, of Q-al- vest^m; Henderson & Cogswell, of New Orleans; and what is known as the Crockett Refinery, of San Francisco. So you see we are in plenty of company. Q. And all of those put together make, in your judgment, about 10 per cent of the total output? — A. I think they could run out 50, in capacity I mean; there is a great distinction between capacity and output. Q. In the output only about 10 per cent at the present time? — A. I should pre- sume that. At the end of the year after the ofiicial figures are made up I maybe able to give you that information, but I have now no way of ascertaining -what these outside refineries do. METHOD OF THE COMPETITION. Q. Now as regards the cut in sugar; did the cut come in the first place from the American Sugar Refining Company or from the opposition?— A. I am not sure. Q. I inferred from your expression a moment or two ago, " These ' interlopers' came hi," that it was perhaps a part of your policy to see to it that they did not stay in the business too long; something in the same wav that you dealt with the Spreckles 's opposition in Philadelphia.— A. It was part of our policy and princi- ples. We did not think they could have any advantage in profit over us, and we let them take the results, whatever they may be. Q. Your policy was, substantially, to put the price down so they would nnt find it profitable to remam m the business?— A. And to secure the continuation of the output of the American Sugar Refinery, which is verv vital to it. Q. If the opposition refiners were to remain in the' business they would lessen the percentage to yoin- stockholders, you say?— A. If they remained in the busi- ness and sold the product— tw(j different things again. Every sale by them dis- places so much of the American Company's product, and this is what we have to look out for — that they do not. Q. If you can make it unprofitable to them they will stop their sales and in the long run the expectation is that the profit will be larger to your stockholders'— A. THE SUGAR COMBINATIONS: HAVEMEYER. 109 That would be the natural inference. Of course it goes without saying if we protect our own meltings it can only be done under a condition of things that makes it unprofitable for our competitors, the real motive being the protection of our own business, and the result being an absence of profit to them. NATURE OF COMPETITION OF GBEAT CORPORATIONS. Q. In your judgment, is there any difference in the competition that exists between a great organization like the American Sugar Refining Company, with comparatively few competitors, and the general competition that we have in other lines of business where there is no one organization that seems to be dominant? Would you say there is any difference in the principle of competition that exists? — A. There is not much difference in the principle, but a good deal of difference in the result. You take a large corporation, and its stock is in the hands of the pub- lic; the public owns the company; whereas in the case of the individual, he owns it all. I think the public , the seventy-five millions of people , if it cliooses to become more or less interested in the American Sugar Refining Company, stands a pretty good chance of knocking out a man who has all his money in one thing. Q. That is, if the public would buy freely the stock of the American Sugar Refining Company? — A. Yes. Q. The public own the stock of the American Sugar Refining Company. I sup- pose they can hold it as long as they hold shares ; they can shift it as they please? — A. I doubt if anybody could buy any of the stock of these outside refineries. You can not tell what they will do. Q. Can you tell us in round numbers how many stockholders there are in the American Sugar Refining Company? — A. Eleven thousand: almost enough to take Cuba, and they would take it if they could. [Laughter.] Of course that is not a part of the minutes. Q. (By Mr. Phillips.) That is just testimony. HISTORY OF THE ORGANIZATION OF THE SUGAR TRUST. Q. (By Mr. Jenks.) The history and organization of the Sugar Refining Com- pany has been gone over so many times in testimony before that it is not worth while to dwell on it at length, but in order that we may have the record some- what complete, will you give a brief sketch of its development, going back to the conditions of the old sugar trust?— A. There were about twenty-five different firms or corporations in the sugar business. I think the evidence before some one of the Congressional committees was that for a period of 5 or 6 years before the formation of the tnist, 18 of those failed or went out of business. Q. Eighteenoutof 25?— A. Notoutof 25; 18 out of about 40. It occurred to some one to consolidate the others, and 18 out of 31, 1 believe, went into the trust, leav- ing 3 or 4 outside, who represented, I think, 30 per cent. Then Spreckles built a refinery in Philadelphia and 2 or 3 years after the formation of the trust, the tru,st or its successor bought the Philadelphia refineries. Q. "Will you explain in a word or two the difference between the trust and its successor and the reason for its going into this other form?— A. The trust was attacked, and the courts decided it was illegal, and a company was organized m New Jersey which bought outright and paid for the different companies, which were the constituent companies of the trust. They then represented, I thmk, over 90 per cent of the output; then other refineries began to be constructed, until now I think they would represent 50 per cent of the consumption. Q. There has been no change in the American Sugar Refinery proper, so far as the acquisition of other refineries is concerned, since 1897?— A. 1897, I think not. Q. In the testimony before the New York senate committee, 1897, a list of these different companies with a capitalization is given. The question is whether that list needs to be supplemented to bring it up to date?— A. I think not. Q. The condition before the formation of the trust was about this: When these 18 different companies failed business was in such a condition, as a whole, that it was considered unijrofitable?— A. Very unprofitable— ruinous. THE ADVANTAGES OF COMBINATION. Q Now can you tell what special advantages— if you can give this in some detail I shall be glad— come from this organization, and in what way you make your savings'— A. The greatest advantage is in working the refinery full and uninter- ruptedly Of course, if you have a capacity of 140,000,000 and can only melt 110 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 100,000,000 somebody has got to cut down materially. The moment you cut down you increase the cost; by buying up all the refineries, burning them up, and concen- trating the meltings in four refineries and working them full, you work at a minimum cost. That enables us to pay a dividend on the common stock. Q. So the chief advantage in the combination was in concentrating the produc- tion and destroying the poor refineries?— A. Precisely. Q. Are there any other special advantages that come from a large combination of this kind: for example, in the way of transportation?— A. I do not know of any advantage in that way. Under the interstate-commerce act we dare not take a rebate. The Sugar Trust and other trusts are in such odium that they are lay- ing for us fellows so that there would be no escape; there is no advantage in transportation. Q. Are those refineries all concentrated in the neighborhood of New York?— A. No. There is one in New Orleans and one in Boston, but the rates from New Orleans, except to points almost contiguous, have no advantage over the New York and Boston rates. Q. So it is simply in the immediate neighborhood of the refineries that you get an advantage in transportation? — A. That is all. Q. Is the business of sugar refining of such a nature that the general processes, etc., are substantially common to all sugar refiners? — A. Yes. Q. There is no special advantage that comes from combination in the way of common use of patents or patented processes of any kind? — A. 1 think no one man knows it all, and if you get a half a dozen men in the business you get ideas from them, and in that way you get a " deadly parallel "' on your business. Q. And you can more probably make improvements? — A. Greater skill and greater ability. Q. Simply a matter of greater skill? — A. Simply a matter of greater skill and greater ability. One man might have it all, though, in a separate and independ- ent refinery. Q. Still, in your own opinion A. My own opinion is, no one man knows it all; all men frequently can learn from others. Q. Is there another saving to be made in the cost of superintendence, or in the amount of wages paid , from concentrating and running refineries at their full capac- ity? — A. It is inappreciable. The economy, of course, the cheapening of produc- tion, is due to the regular and full work. You can understand, if it costs me three-q^^arters of a cent to refine full it would cost me one and one-half cents to refine half. That is exaggerated, of course, simply to make clear the advan- tages of working a refinery full and uninterruptedly. Q. The question was along a somewhat different line. You probably produce as much in 2 refineries running full as would have been produced in 5 or 6 differ- ent refineries without the combination? — A. We produce more sugars in 5 refin- eries now than 34 before, and naturally the difference in the economy is repre- sented in the profits. Q. Certainly. It is also true, is it not, that one source of economy would be that you do not need in these 5 refineries so many laboring men as in the 34 refineries? — A. Undoubtedly. Q. And the benefit of that saving is a general benefit that will be represented partly in profits and partly, perhaps, in the difference in the price of the prod- uct? — A. Difference in price in favor of the consumer, I do not lay gTeat stress upon that matter, however, except as a business proposition. We run our busi- ness for business, and have attempted to keep prices so low as to defy competition. Unfortunately, we have not succeeded and are in it now up to our throats. Q. I understood you to say that the general principle upon which you had made prices was that you woiild take a quarter of a cent profit and give the rest to the consumer? — A. That is it. We felt that any increased profit, even if we could make it — and under the tariff bill we can not make it — would lead to outside com- petition; we would be inviting competition. CAPITALIZATION AND VALUATION OF THE SUGAR TRUST. Q. There has been a gi-eat deal said at different times with reference to the cap- italization of the American Sugar Refining Company .with reference to the amount of certificates they issued for the diflierent plants, and so on. What was the gen- eral principle that you adopted in fixing the valuation of the different plants that came into the organization?— A. Well, \ve bought the stock at what we could buy it for, which was considered the value, according to what we termed value. I would rather have the brand of a refinery as \u\ue than to have a building worth millions of dollars, and that feature which is called goodwill in the brand was undoubtedly well estimated. THE SUGAR COMBINATIONS: HAVEMEYER. Ill Q. That is exactly the question. I wanted to get at the meaning that you your- self attach to the term '■ value" in capitalizing the industry.— A, Well. I do not think we thought much of it then— of defining the value of each particular plant. Some plants we bought probably more on account of the real estate value; others we took because they were going concerns; others we took for their standing; others had very vaMable trade-marks; all of these things figured in; but how we can separate or divide them I can never tell. Q. The question was: Would they contribute to the profit of the new organiza- tion? — A. Yes. Q. Then your general basis o* valuation was the paying capacity of the plant?— A. You know I know nothing about it except so far as my own plant is concerned. We figured up that our plant was worth so much money and they accepted it, and we have always felt we sold it at an inconsiderable price compared with its real value. Q. The real value there again being what one could make out of it?— A. Yes; being the value of the trade-mark, the name of Havemeyer as identified with sugar. Q. As regards the capitalization of the present organization, the American Sugar Refining Company, you would say it is capitalized over its real value?— A. Very much under its real value. Q. And you get at that in what way, by simply taking the price of stocks?— A. It is my idea that if it was not for this clamor against trusts, and the hostile State and national legislation toward the sugar industry, we could sell it for 2 or 3 times the amount of its capitalization, and I have never found a better estimate of what a thing is worth than what people are willing to pay for it in cash. Q. The present output is about 30,000 barrels? — A. Yes. Q. What is the producing capacity? — A. I should say it was nearly 45,000 a day. You mean the capacity of all the refineries? Q. Yes; that is what I mean? — A. That could be run by the company. Q. You mean bj' that that some of them are lying idle? You are not counting any of those that are dismantled? — A. No; only those that are idle and ready to work in case of fire, or any other business contingency. Q. Can you give us any idea as to what it would cost to build new refineries with that capacity? — A. The mere cost of building? Q. The cost of building refineries to give you an output of 45,000? — A. I should say from §30,000,000 to §35,000,000. Of course the land— that depends on where you build — in New York is very expensive; in Philadelphia it is not so expensive; in New Orleans it is not so expensive, and in Boston it is not so expensive. Q. In speaking of this thirty-five millions you were excluding the land? — A. No; I took the land in under normal conditions. The latest refineries I understand cost about two and one-half millions each for 3.000 baiTels; multiply that by 15 and you arrive at the figure I name; I have no other data. Q. So as regards the capitalization of the American Sugar Refining Company at the present time, then, in round numbers, §30,000,000 to §35,000,000 is about what it would cost to build the refineries? — A. As mere buildings? Q. As mere buildings? — A. I think the brand of Havemeyer & Elder would bring thirty -five millions alone. Q. That is the question I have in mind, as to how far this building value should be considered, and how far good will and other matters of that kind? — A. I never separated them. This is the first time that question has ever been put to me, and I have never given it any thought. I do know that when I went in business 30 years ago — you see I am an old-tiraer — the daily melting of Havemeyer & Elder was 300,000 pounds; now it is over 5,000,000. That will, you see, give you some idea of the value of the brand. There is no other refinery in the universe that has probably increased its product 10 per cent. I would rather have the brand of Havemeyer & Elder than half of the other sugar refineries in the countrj'. THE COST OF EEFINIXG SUGAR. Q. The cost of refining has been going down fairly rapidly for the last 3 or 3 years, has it? — A. I do not think it has gone down much. Q. There has been some lessening in the cost? — A. Relatively the difl:erence be- tween working refineries separately and concentrating them represents almost the difference in cost to-day. Q. In some of the sugar papers, e. g., Willett & Gray's Weekly Statistical Trade Journal, it was stated that in earlier years when there was a margin between raw and refined of five-eighths of a cent, it would reijresent the cost, the substantial cost of refining? — A. The cost of refining has nothing to do with the margin; that is 112 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. not the margin. The margin is between 96 centrifugal and granu-lated at 100; the cost of refining is the actual cost of working that sugar. Q. A statement was made to this effect some 5 or 6 years ago: That when the mar- gin was above five-eighths of a cent it was fair to assume that everything above five-eighths was profit?— A. When the cost was about five-eighths, but not the margin. I want to call your attention to something perhaps you do not quite clearly understand. Q. The statement was made, I believe, that all the margin above five-eighths of a cent was to be considered as profit, and five-eighths of a cent to be taken as the cost of refining. That was some years ago. — A. That is not so. Q. That was some years ago. Now, if you will be kind enough to make the statement you were going to. — A. The margin between raw and refined deals with 96-degree sugar, between sugar containing 96 per cent of pure sugar, and granulated, which contains 100. The commercial value of a degree of sugar is 6 cents, and 4 degrees multiplied by 6 is 24 cents; so, for the margin, the differ- ence in sugar, you have to deduct 24 cents. Now, there has never been any cost of refining that I have ever been acquainted with less than one-half cent a pound, and at the time of the formation of the trust it was three-quarters. Now, you have got the whole business. "We maintain that when we reduced the cost we were entitled to the profit, and that it was none of the public's business; we took it and paid it out to our stockholders; it may be business policy to share that with the public sometimes; we did not do that then; we have done it since. We had to increase the output; we could injure our competition by reducing our margin. This is business policy again, not philanthropy. Q. You saj' you have never known the actual cost of refining to be less than one-half cent? — A. No; I doubt very much if any refineries can do it. Q. You think, so far as your own company is concerned, its cost of refining is probably less than others? — A. I do not think we are at any disadvantage com- pared with them; but you must bear in mind that is my individual judgment; I have no means of knowing what they are, so as to compare the two. Q. Your own estimate, really, is this: When we find the margin at 50 cents a hundred A. (Interrupting.) Margin at three-fourths. Q. I was going to say that when we find the margin at 50 cents a hundred the refineries are running at a loss? — A. Yes; that is a fair inference. Q. When we find a margin of 75 cents a hundred, presumably A. (Inter- rupting.) Oh, then it is beneficial. Excuse me — the margin at 75 — there is no great damage done then. Q. Probably some profit being made? — A. Not unless everything is working in concentrated form in the very best manner. Q. When the margin between raw and refined sugar, then, stands at 50 cents a hundred, or lower, dividends can hardly be paid out of profits? — A. Not out of profits resulting from such margins; no. THE QUESTION OF TRANSPORTATION. Q. That is a fair inference, of course. Now a question or two with reference to freights. You say that under the interstate-commerce law the question of rebates is one that is not to be considered. Do the railroads give the larger ship- pers of sugar any advantages beyond their published freight rates in the way of storage, for example, at terminal points and sxich places? — A. I am not very familiar with that, but I imagine they give the ordinary business facilities; it is a high note when a railroad can not give its patrons storage or anything else. Q. I understand that is the custom. I wanted to ask you what the custom was.— A. I wish they would give them a barrel of sugar; it would increase the demand and lower the price. The practice in former years was to give us such facilities as they had; if their stores were empty, or it happened to be a lively sugar season, and sugar would go there, and it was convenient to the trade, they naturally gave us such accommodations as they had. They never built any store- houses for us; but since some of these outside warehouses have been kicking about it, the facilities, I believe, have been very much restricted. Q. Is there any allowance of any kind made for the amount of sugar shipped?— A. No. That is all done away with. Q. They substantially go at carload rates?— A. Altogether at carload rates. Q. Can you give us any definite information with reference to the amount of sugar shipped over the different railroads going out of New York and Brooklyn?— A. I can send it to you. Q. We shall be obliged if you will.— A. That is done under agreement. Q. Will you explain the nature of the agreement, please?— A. To protect THE SUGAR COMBINATIONS: HAVEMEYEE. 113 ourselves against these companies, we had to agree that we would give the rail- roads — that is, the entire sugar industry would give the railroads — each a certain percentage of sugar which had been determined by the commissioner there (whoever he is; some commissioner has it in charge), and they fixed the percentage that each road was entitled to. I think they took the 5 preceding years' business as a basis, and determined in accordance with that the share of each; that ended all this disposition to cut, and I do not think there are any cuts whatever on sugar. Q. Now there is a certain percentage sent to each railroad in accordance with this agreement? — A. Yes. Percentage of sugar freights. [Purnislied by Henry O. Havemeyer.] Per cent. New York Central and Hudson River Railroad 30.59 Erie Railroad Company 2H. 51 West Shore Railroad. 12.63 Lehigh Valley Railroad 14.47 New York, Ontario and Western Railroad 3.15 Central Railroad of New Jersey 3.30 Central Vermont Railroad 3.60 Chesapeake and Ohio Railroad .. 3.75 Total - 100.00 DIFFERENCE IN MARGIN IN DIFFERENT PARTS OF THE COUNTRY. Q. Is the margin between the 96 centrifugal and the refined sugar substantially the same in New York that it is everywhere else in the country, or what is the dif- ference in different sections of the country? — A. The price is the same in all other manufacturing centers as it is in New York; in New Orleans it is a little higher. Q. I was going to ask in reference to California? — A. They are in a row ovet there, and their margin is less ; heretofore they have had at least half a cent a pound protection in freight over the Rocky Mountains, which has naturally accrued to them as refiners when no competition existed. Now they have competition by outside refineries, and I believe competition is even worse there than here. Q. "What interest has the American Sugar Refining Company in the California refineries? — A. They own a one-half interest in the Western Sugar Refinery, the other half being owned by Spreckles. Q. And who owns this new one? — A. Some of the Hawa,iian planters; they were dissatisfied with the price obtained for their sugar in San Francisco, and built a refinery. Q. Does the American Sugar Refining Company have any interest in the pro- duction of raw sugar? When I say interest, I mean financial interest, of course. Does it own sugar plantations, and so on? — A. They have some interest in California. Q. The question was suggested by your remark about Cuba. — A. That is a mat- ter of patriotism; I suppose I ought to have qualified that. Cuba is a country that can supply the United States entirely with their sugar in 3 years, and it is a great pity we do not have it and have sugar at 2 cents a pound instead of 5, which we are paying now. That is, if we could have raw sugar coming in from Cuba free, without tariff, we could sell it at 3, and have the raw at 3; it would have to be refined. AMERICAN SUGAR REFINING COMPANY AND THE COFFEE BUSINESS. Q. There has been considerable said in the last 2 or 3 years with reference to the American Sugar Refining Company going into the coffee business.— A. They are in the coffee business, and in it to stay. Q. Will you explain the circumstances under which they went in and what the effect upon the prices of coffee has been? You just expressed the opinion that you were in it to stay.— A. A going concern at Toledo was offered to the firm of Havemeyer & Elder— a going cofl'ee concern: they bought it; and when it was clearly established to the directors of the Sugar Company that it would be an advantage to them to own that plant they bought it from Havemeyer & Elder. When Havemeyer & Elder bought that plant green coffee was selHng for 10 cents a pound and roasted coffee was selling for l.>. Those who had the management of the business told me that the production of coffee would in thS next few years be on such an enormous scale that I had better keep out of the coffee market as much as possible. Of course, having the plant, it had to be run; we could not 114 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. close it up. We would lose our brands, lose prestige, and lose business, so we immediately dropped the price to the difference between the cost of roasted and green coffee. The cost of roasting, which was 3 cents, plus the cost of green, made it 13; so we immediately gave the consumer the advantage of 3 cents a pound. This was a gain for business reasons. I want that distinctly iinderstood. It is now worth 6 and not long since dropped to 4, and roasted instead of having a margin of 3 cents a pound has now only 2i, so that the benefit the consiuner gets is a price of 8i as against 15. How much of that is chargeable to the opera- tions of the Woolson Spice Company in protection to its business on business principles you can form your own idea. I do not think the fight has begun yet, if there is going to be one in the coffee business. We are trying to avoid it by making a better grade of cofiee and by getting it out of the category it was in. We are trying to be in a field distinctly by ourselves, the same as we are in sugar. Q. When you lowered the price in the first place, was the reduction made because you thought there would be more money in extending the sale than in keeping the price where it was before?— A. We were afraid of the raw market, and having to run the plant we had to get rid of the product as soon as it was made, and the only way I knew to do it quickly was to make it desirable to the consumer, and so we put prices down to actual cost. We were held up by a judge for 8 months on a suit by Ar buckles, btit after that it began to drop gradually until now it is SA. GLUCOSE SUGAR AND THE PRODUCT OF THE SUGAR TRUST. Q. What is the relation, if any, between glucose sugar — I am speaking now of the product — between glucose sugar and the product of the American Sugar Refining Company? How far does that come into competition, if at all, in the market? — A. The sugar itself does not come into competition at all, but the sirup made from glucose has virtually knocked out the consumption of refined molasses in this country; they buy it in preference. Q. What are the special uses to which it is put? — A. Table consumption and confectionery of all kinds, and they use it in the preparation of malt, I believe, for brewing purposes. Q. So it comes in as a competitor with the sirups produced by the Sugar Refin- ing Company? — A. With the residuum of the Sugar Refining Company — molasses. Q. Has the American Sugar Refining Company any interest, directly or indi- rectly, in the Glucose Sugar Refining Company? — A. None whatever. Q. Have you, personally? — A. No; I had a little interest at one time, but I sold it out. Q. So at the present you have none in it? — A. I may have 100 shares, but not over that. THE MEANING OF MONOPOLY AND THE EFFECT OF GOVERNMENT INTERFERENCE. Q. You expressed an opinion in your paper with reference to the inadvisability of legislation for the regulation of business, and immediately afterwards with reference to the nature of monopoly. Have you thought about the matter defi- nitely enough to give us a definition of monopoly? — A. I do not need to give you my own because I am irresponsible; it has been declared by the courts that there can be no monopoly without restriction, and if there is no restriction there is no monopoly. I have a perfect right to manufacture, to sell, and to conduct a busi- ness which represents a particular article or any article in the United States; and there is no reason why I should not, and there is every reason why I should. I say " hands off" to the Federal and State governments just the moment they interfere with the control in any way, shape, or manner. They increase the cost to the consumer in my opinion. He is the important factor: I do not think the middleman or anybody else counts a snap of your finger compared with the great mass of consumers. Q. In speaking of " restriction," in the legal definition of monopoly which you have just given, did you have in mind any particular legal restriction? You would not consider it a restriction if. by virtue of the fact that yon control 90 per cent of the output of sugar, you practically fix prices for the other pro- ducers?— A. No; anybody can go in the sugar business that wants to. Q. Suppose, for instance, these competing sugar refineries were put on this table to take in. You would not take them in?— A. I would take them in pretty quickly, and ge't out of them all I could. As long as I do not restrict, or the Gov- ernment interfere with them, anybody can get into the business. Why is not that a good business proposition? What is harmful in it? That is the way business THE SUGAR COMBINATIONS: HAVEMEYEK. 115 has been done from the year one, and always will be. Jnst as long as yoti inter- fere you increase the cost, and that is a detriment to the consumer. Q. It seems to have been the result of the sugar business the last 12 years that during the 3 years that competitors have tried to get in the prices have been lower to the consumer to a considerable degree than would have been the case if you had not had such vigorous competition.— A. Undoubtedly. Furnishing the con- sumer at a less price is not the only evidence of business. You have got to take care of yourself, and that is quite an important matter. "We are doing that now and the consumer gets the advantage; every time it is the consumer. Q. If you succeeded in the course of the next year in taking up those refineries, as if they were on the table, as you say, then the consumer would be likely to feel the effect of that in the other way, I suppose?— A. To the extent of a quarter of a cent, sure. Q. You expect to limit to a quarter of a cent?— A. Yes; I think under the tariff bill we should not have an opportunity to increase it. There is this distinction of doing business on legitimate grounds and doing it under a tariff bill which permits you to fleece the people. Q. With the tariff we have you can not go beyond that?— A. We can not; but we have been singled out and injured under this clamor that you must do some- thing for somebody; so we have been injured while you are dealing out some of the '-swag" to others. That is it; you can not dodge it, and the people are getting on to it. EFFECT OF REMOVING THE TARIFF. Q. Suppose the tariff on refined sugar, the differential, should be removed, what would be the effect? — A. It would kill the sugar industry. Q. You think if this differential were removed A. It would infiict a terrible and infamous vsrong upon 100,000 people dependent upon it. It is merely truck- ling to a miserable clamor— a bugaboo — this babble about trusts. Q. Will you be a little more specific as to the way in which it would affect them? — A. It would permit America to be the dumping ground of all the beet sugars of Germany. Austria, France, and Russia; it would reestablish the sugar- refining industry of Great Britain, and everything would go to them in the way of labor to supply to 70,000,000 people over 3,000,000 tons of sugar, and it would be taken out of 100,000 people that are living upon it to-day. It would be simply an infamous atrocity. Q. You think the sugar industry is practically dependent upon this one-eighth of a cent differential? — A. It is indispensable. Let there come the slightest cause for any interruption in the refining business here so that prices advance, and we would be inundated at once with foreign product, because one-eighth of a cent is inadequate; we ought to have one-quarter. One-eighth is not what we ought to have. Q. It is only what you could get? — A. No; it is getting something we do not want to have. That was the object of the law. THE CAUSES OF MONOPOLY. Q. (By Mr. Phillips.) Speaking of monopoly, if I understood your paper, you attribute monopoly or trusts to two causes; first, patents, and second, tariffs. Did I understand it correctly? — A. Yes. Q. That they were the outgrowth of two causes, patent rights A. (Inter- rupting.) Yes. Q. (Continuing.) And the tariff levied by the Government? — A. Yes; practical monopoly, not legal monoijoly. Q. Well, now, the Standard Oil Company Trust is admitted, is it not, to be one of the largest that has ever existed? — A. I said with few exceptions. Of course, anything that depends upon the tariff; the Standard Oil Company has not any- thing to do with the tariff; you read the tariff bill, and you will find that there is no tariff on oil. Q. That is what I am getting to? — A. I said the tariff. Q. You said due to two causes, patents and the tariff? — A. Yes. Q. Do you not understand, or do you, that the Standard Oil Company has never been affected in any degree by tariff, and yet it is one of the greatest monopolies of this country or any country? — A. My dear sir, you are entirely off on the subject of monopoly. A. monopoly is something which is carried on, or may be carried on, without competition. The oil business is open to the w(3rld; it is open to every 116 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. citizen of the United States, and the reason they can not go into it is because the Standard Oil Company makes the price so low that it smashes them, and gives the consumer the benefit of it. You have got to take either one position or the other. The consumer is the man to be considered (and the consumer means the great mass of the people, the 75,000,000 people) , because he gets the benefit of the cheap goods, and the more because he gets the advantage when the competi- tion is wiped out, and very properly wiped out. Q. Then you understand that the reason why the Standard Oil Company has become so prominent in monopolizing the oil trade is because it is able to manu- facture cheaper than others. Now, if that be the case, why have they bought out or crushed out all refineries, all pipe lines thus far, with a view just now of start- ing in to do business. If yo"a take their own dividends as a basis you will find that they are making an exorbitant profit ; for instance, oil is selling at a little over a dollar a barrel now, and very frequently for less than §1, and is it not shown by the Standard Oil Company's own dividends that they have been making, for the last 10 or 15 years, more profit on each barrel of oil than they have been paying for it ? — A. You are confounding profits with monopolies. What is the reason I can not own a gold mine with a million dollars in it? It is all mine. I am undertaking to meet the proposition that you made by saying that the Stand- ard Oil Company make refined oil cheaper. That is the reason why they domi- nate trade. Q. Do they make profits because they make oil cheaper, or because they pur- chase their rivals, circumscribe, circumvent them in some way? — A. That is all business. What do you call the brand of Havemeyer & Elder ? You start a refinery and it costs you $10,000,000. Somebody loans that ten million dollars, let us say ; and Havemeyer & Elder, to protect themselves, put down the price of sugar and say to them : " You can not market a barrel of sugar while that brand of sugar is being sold." Q. Do you think that the Standard Oil Company, if the markets had been opened to the world, to the people, if they had not monopolized the pipe-line busi- ness and dominated legislation and got a reduction in freight, got discriminating rates, they could have dominated, as they have ? — A. I think that before the inter- state-commerce law went into effect the Standard Oil Company had advantages which they should not have had , but that is ancient history ; they are here to-day ; they go right from the fields to the consumer ; they furnish oil cheaper than it can be furnished by anybody else, and that is to the benefit of the consumer. It is to the absolute annihilation of the middleman or anybody else in the oil busi- ness, in my judgment, and if it goes into the pockets of the few people it is per- haps so much to be regretted ; but there is where it goes, and likely it would be very nice to have them divide it. But until you find what Carnegie is going to do with his millions I do not think you can get the Rockefellers to tell what they are going to do with theirs. They have got it. Q. Now, you said that they are here; is not the reason they are here because they can do things cheaper? I undertook to say that there no persons engaged in refining, shipping, and transiDorting oil abroad and at home, who are making a very large profit, but that could make a much larger profit if they had the same facilities and markets open to them as are to the Standard Oil Company? — A. I dare say there is a field at present with the competition of the Standard Oil Com- pany, but if it ever got momentous I think the prestige, ability, and great wealth of the Standard Oil Company would knock it out. I may be wrong; I am talking about something I do not know much about. COUNTRY WOULD BE BETTER OFF WITHOUT THE AGITATION ABOUT TRUSTS. Q. (By Mr. C.J.Harris.) Do I gather from your remark that you think it is a pretty good idea for all competitors to be knocked out but the one that controls the business? — A. That is trade and you can not alter it, and the Federal Govern- ment can not alter it, and the sooner you realize it and stop the talk about it the better off the country will be in that respect. Q. What we are trying to get at is whether it is better for the country. We want to know whether that is a good state of affairs to have? — A. Take the price of oil: Do you suppose it is better for the country of 75,000,000 of people to have oil 2 cents cheaper or to establish half a dozen competitors in the business who are in it for the same amount of gore that the Standard Oil Company is, and who increase the price? That is like what we had in sugar. You stop here the work by giving 834,000,000 in tariff on sugar to have a number of people in Louisiana and a few people in Hawaii employed, and see where you are. THE SUGAR COMBINATIONS: HAYEMEYER. 117 AMOUNT OF PROTECTION NECESSARY FOR ALL INDUSTRIES. Q. I judge from your essay, and I should like to know whether I am right or wrong, that you are against protection, except that extended to the sugar trust. Am I right?— A. No; you are all ofE. Q. I should like to have the secretary read that part of the essay. — A. Suppose you allow me to state it; it will be much briefer. I said I did not think any of these industries ought to have over 10 per cent. I thought more was inordinate, because it allowed these combinations of capital to fleece the country. I am in with you for protection every time, but I limit it to 10 per cent; I draw the line at 10 per cent. Q. Is that because 10 per cent fully covers you, or because you think A. (Interrupting.) Eight per cent would cover me; I so expressed it in my paper. Q. I think that has been brought out before, that industries the same as your own were not in need of more than 10 per cent. The same principle would apply to them that does to you. I understood you to say that unless you had protec- tion the refining industry would be driven out of this country. Is that so? — A. True. , CAPITALIZATION OF THE SUGAR TRUST RESUMED. Q. The capital stock of the American Sugar Refining Company is §7.5,000,000, is it not? — A. Yes. Q. It has not been increased since those figures were published? — A. No. Q. What is the output of refined sugar in the United States? — A. I do not know. Q. It was estiraated at some 3,000,000,000 pounds a year or two ago? — A. That is right. Q. I think you estimated it here at 200,000,000 barrels a while ago, did you not? — A. I said the present oiitput was about 30,000 a day; that is not so all the year around. Q. We have had testimony in our hearings which would lead us to believe that ten refineries, at a cost of a million and a half dollars apiece, which would be §15,000,000, could supply the refined-sugar demand of the United States; that the capital to run those would not exceed ten more millions, which would be twenty- five millions. Now, if the consumer is to be considered, and he is the main fac- tor, I would ask you what the consumer gains by paying the American Sugar Befining Company on a capitalization of .$75,000,000 if $35,000,000 will do the same business? — A. If those premises are true — and they are not — you would find that the fellow that made that statement would want about 50 per cent on his stock instead of 13 per cent. I do not think the man who made that statement is abso- lutely correct; I do not think he would be content with 30; he would want 50; I do not know of any advantage to the consumer. With my knowledge of sugar refining, the cost of it and the capital required, no such thing could be done. EFFECT OF COMPETITION ON THE CONSUMER.- Q. Is it for the benefit of the consumer that prices are temporarily put down when competition enters the field until you can crush out that competitor, as I gather from your testimony? Is it for the advantage of the consumer if, when that competition is crushed out, you put up the prices immediately thereafter to such a margin of profits as will cover all these expenses and others — that is, the expenses of the fight, the wear and tear, the buying out refineries, and all that? I would ask you if that is for the benefit of the consumer? — A. Well, I do not know. You would have to find out what the figures were in order to determine whether it was just or not. I think the consumer would have to be subject to such a condition of things if it was a trade condition. Q. I ask this because you have, in your testimony, laid such stress iipon the interests of the consumer. — A. Do you think by lowering the prices merely to crush out the competitor, as you put it, that the consumer is not benefited? Q. I say he may be benefited temporarily for 6 months or a year; but if after the crushing out has taken place you then, as you said in your testimony, resume a margin of profit which you consider is the right thing, and that is the only thing you are governed by, I ask you then whether the consumer will be materially benefited or not?— A. Is he not benefited to the extent of the reduction of prices during the fight? 118 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. He is; btit if lie has to pay double or three times the price after the fight is ended I fail to see where he is benefited? — A. He is not, if he has to pay that. Q. I understood you to say when the war was ended you evened up? — A. Yes. Q. The price you put on was for the benefit of the stockholder? — A. Yes. IT IS PAIR TO GET ALL OUT OF THE COMSUMER POSSIBLE. Q. (By Mr. Parquhar.) Did you state here that 90 per cent of the whole product of this country could be produced in factories that cost $3.5,000,000? — A. I think so. Q. Now, your own capitalization is §7.5,000,000; I presume as a business man yon would say that the difference between $35,000,000 and $75,000,000, or $40,000,000, is good will, brands, and all that sort of thing in your business? — A. You are making statem:ents that are backwards. I did not say that the $35,000,000 were required actually to reproduce the refineries that are already a part of the capital of the American Company; I said we took in 18 plants, the cost of which, together with the good will, brands, and such things which we can not divide into the separate accounts, which I have no way of doing, did represent this $75-,000,000. Q. Well, say it was fifty millions; even it up. That leaves $35,000,000 which seem to stand for good will, brands, etc. Do you think it fair that the consumer should pay a dividend to your company on these brands, good will, etc.? — A. 1 think it fair to get out of the consumer all you can, consistent with the business- proposition. Q. You state that as an ethical position before the commission, and you have to stand on that ethical position for fair play. Now, I want to know if you think — you stated that the consumer received the benefits of this consolidation of industry — it a fair ethical proposition, independent of the business view you put on it, that the consumers should pay dividends on this $35,000,000 of over- capitalization? — A. I do not care two cents for your ethics. I do not know enough of them to apply them. Q. Well, as a business proposition, is it right? — A. As a business proposition, it is right to get all out of business that you possibly can. If you get too much of a profit, you get somebody in competition. What I object to is a tariff bill which allows these consolidations to mulct the public through them. GENERAL EFPECTS OF THE TARIFF. Q. Well, take your position on the tariff bill where you talk about 10 per cent differential; would a 10 per cent differential have brought the tin industry to this country?— A. Well, if it would not, the country would have been better off without it. Q. But, would it have brought it? Do you know?— A. I do not. Q. Would it have brought the glass industry to this country?— A. I would like to have proof to the contrary before I would say it would not. Q. (By Mr. Farquhar.) Do you take into account, as an American— you say you are a protectionist, whatever may be your views of protection— that in mak- ing the tariff' bills in this country or in making any impost legislation we have to take into consideration two great facts, first, the wages paid to American work- men, and secondly the interest on American money? Do you know of any indus- try in this country that 10 per cent ad valorem ever created— any one— even to the making of tacks?— A. Shall I be perfectly frank, anyway? Q. Yes.— A. How about steel rails? Steel rails were exported at the time the steel schedule was under discussion; they were being sent to England and Scot- land. They can be produced for $15 a ton; they are worth $34 a ton; now the reason they are worth $34 a ton is because the people under the tariff are mulcted for the dift'erence. I am not talking about things that are ancient history; I am talking about things that exist. I am not talking as to whether 100 per cent was necessary or not; I am talking about the effect of the tariff to-day, which is the mother of these trusts which are mulcting the people, and there 'is not a line of it free from this abuse to-day. Q. Why not make an open proposition to abolish the tariff on all sugars? Why would not that be a good thing?— A. Why' is it not right and proper that the American sugar industry should have 10 and 15 per cent where you are giving others 50 and 100? Why this outrageous discrimination? Q. Has not your trade been sufficiently protected under the tariff?— A No Q. Why?— A. Because wf only get one-eighth and need one-fourth. Where is the rule of ethics that you were talking about that gives you 140 per cent and 144 per cent on some industries and cuts the sugar industry down to H and 4? THE SUGAR COMBINATIONS: HAVEMEYEK. 119 Q. Do j'on recollect what the price of steel rails was before the tariff was put on at all?— A. I do not know what steel rails were. I have got Carnegie; I can quote him to the effect that he could export steel rails to any part of the world. What did he want a tariff' for? Q. Is that possibly a natural result of previous protection?— A. Oh, yes, of protection; I am with you there every time, but not inordinate protection are you in favor of that I believe. nor THE CONDITIONS OP LABOR. Q. You made one queer expression — a remarkable one — in vour essay here. Speaking of strikes, you say that they lead to a low level. What do you mean; do you mean a low level in economic conditions, social conditions, wage conditions,, or what? — A. Oh, I think it takes the independence out of a man. He can not work for less than what the trade union prescribes. He can not be his own master in anything. That is rather a wide subject; I do not want to pursue that. Q. (By Mr. Kennedy.) Does not your combination take a good deal of inde- pendence out of competitors who were pretty independent previously?— A. You bet we do. But where a man's necessities are so great that he is willing to work for 81.50 a day. he can not do it because the trade union tells him not to work for less than §3. I do not want to go into this subject. I have touched it very briefly, but I would rather have it passed. I do not think trades unions are an advantage to the working class. Q. (By Mr. Ratchford.) If a combination of the laborers of the country is not an advantage to the laborers, wherein or how can it be an advantage to the capitalists of the country to combine and to the country to have them combine? — A. I did not say they should not combine. I have not reflected upon labor. I am perfectly willing to leave labor to its own devices. Q. Nor have I understood you to state that; I simply asked you wherein is the advantage or the disadvantage to labor. — A. They certainly haVe very materially increased their earnings under combinations. Q. Then it must be advantageous? — A. As long as this combination or consoli- dation of capital continues under the tariff I would go in for a consolidation of labor. Q. (By Mr. Kennedy.) Did not you reflect on trade unions very seriously when you said they pulled labor down to a very low level? — A. Perhaps that was an unpleasant way to put it, but I really do not see that these labor unions are any particular advantage to the laboring class. It certainly confines a man to do just as it is mapped out for him to do; he is not a free worker or an independent man in any manner, shape, or form; and he is whistled out at the dictation of the few men by whom he is controlled; and it is extending now in these affiliated inter- ests. You see it is a very wide subject, which I should prefer to drop and expunge it from the paper. Q. (By Mr. Phillips.) But does not the organization of capital compel the organization of labor in order that they may meet on equal terms? Otherwise one dictates and the other submits. — A. Undoubtedly. Q. How can that be done except through trades unions? — A. I do not believe it can. I have already stated that labor, to protect itself, has got to unite, form trades unions; has got to consolidate, or I believe that these corporations would run them out of existence. There is no doubt about it. Q. (By Mr. Kennedy.) That being so, then how will this orgaiiized labor bring other labor down to a very low level? If they have to meet it, it is a good thing for them. — A. Where a man is not independent, where he can not act, it his family is suffering, he can not do it. Where the need of work is absolutely required for him to meet his monthly expenses he may be whistled out for 39 days out of 30 by a board of delegates. It is a very serious question, but I would rather you would not question me about it; I would rather you would expunge the whole matter. Q. Do you not believe in organization when you go into a directors' meeting? — A. I do; but when I go into a board of directors' meeting and do not like it, I get out. A poor man is not exactly in that status. Q. A laboring man can do the same thing? — A. No, he can not; because he can not get positions in labor as well as those whose positions are purely honorary. Q. (By Mr. Phillips.) How are they regulated; are they not regulated by a few men? — A. No, they are not. They can sell out and get out. Q. So can a laboring man; he can resign his position. — A. I will open the Ijas- ket; I will throw up; I will submit. 120 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. OBJECTS OP THE AMERICAN SUGAR REFINING COMPANY. Q. (By Senator Mallory.) Did I understand you to say— perhaps I may have misunderstood you a while ago— that it was your policy to make as much profit out of the consumer as you possibly could? — A. Consistent with business methods. Q. Consistent with business principles. In other words, your idea is that your organization, the American Sugar Refining Company, will, if it can, get the maximum profit out of its business from the consumer. Now, I also understood you to -imply at least that it is the policy of the American Sugar Befining Com- pany to crush out all competition, if possiljle.— A. But that is not so; there is no such testimony. I understand it has been iiut in that form by one of the gentle- men here, but it is not the fact. What I said was that it was the policy of the American Company to maintain and protect its trade, and if it resulted in crush- ing a competitor it is no concern of the American Company; if he gets in the press, that is his affair not ours. Q. And if any one interferes with the business, profits, or competition of the American Sugar Refining Company it is its policy to prevent it if possible? — A. By lowering profits to defy it. Q. And if it results in crushing him out A. (Interrupting.) That is his affair. Q. Not the affair of the American Sugar Refining Company? — A. No. Q. Now, suppose in the natural course of events the American Sugar Befining Company should suppress — we will not use the word crush out — all competition, all opposition. I understand from your theory — business principles — that you would then seek to get out of the public and consumer the largest amount of profit consistent with your idea of business principles? — A. Precisely. Q. Then, if you had the power to charge or impose prices on the public, what would be your idea of the limit that the public could possibly stand? — A. I think it would stand a quarter of a cent to-day. I think we could do it for 30 cents a hundred. I think the country is really damaged by having a number of people in the business. Q. That is not an answer to my question. My question is the limit? What restraint would you put upon yourselves? What would be your restraint? — A. I call that restraint business considerations. Q. Would it not be the utmost limit that the consumer would bear? — A. Until we had competition we should be in that position, but whether or not we would exercise it is quite another matter. WHERE THE PRICE WOULD NATURALLY BE FIXED. Q. In other words, if you had all opposition suppressed the prices would he as high as the public would bear without provoking additional competition?— A. Precisely. That is, in the absence of any tariff bill. If it was not for the tariff bill we would probably be doing as others are doing under it. Harrison had it very much higher; we can not, they can not. Q. If you had, however, the same protection that others have in other lines of industry you would raise it higher than it is now?— A. We did have at one time considerable protection; but we did not take advantage of it, for the reason Ihave named, that we did not think it business policy to raise the price considering the large industry we had to control, and to expose it to outside opposition; but I maintain that we ought not to have had the opportunity under the tariff bill to have done it. I do not think the consumer should be placed in such a relation. Q. On a philanthrophic ground?— A. No, no; but it is to protect the consumer from being mulcted in an inordinate degree under the tarifl: bill. Q. (By Representative Bell) . As I understand the witness he contends, and also establishes in a mea.sure, that the entire procedure is a business proposition, and that he has in view all the time the permanency of his business? — A. Precisely. Q. And in consequence of that you try to hold your prices at a iigure that will be profitable to you by reason of your economical methods of concentration, and at the same time at a figure that would not be very profitable to others who are not so concentrated?— A. Precisely, considering the extent and the vastness of the business. Q. And therefore that it redounds to the benefit of the consumer o-enerally'— A. Yes. " Q. And to your stockholders by reason of their great economical benefit. That is my understanding of your general principles of business?— A. Precisely. THE SUGAR COMBINATIONS: HAVEMEYER. 121 THE BUSINESS PRINCIPLES OF OTHER COMBINATIONS. Q. But I want to ask you if all corporations or the trusts generally follow that principle in the early formation period of the organization? — A. I do not think any of them do, except the trusts that are not dependent upon a tariff hill; I wish that distinctly understood. Q. Now, for instance, the copper trust. The cost of their product has about doubled in the last few years; it is something like 18 or 19 cents now where a few years ago it was 9 to 13. You take the iron and steel business. In that prices have gone up greatly. Farm implements, nails, wire, and everything made of n'on and steel in the last few months have gone up enormously. Now. is it your judgment that in those industries the combinations are following the same lines that your comiiany follows in holding prices down? — A. I should not like to crit- icise anybody else. It is very easy to determine what the price of copper was, what protection there is under the tariff bill, and what the price is now. Copper is produced in other parts of the world. Q. Do yon not think there can be a trust without the tariff bill? — A. Yes. THE S:\rELTERS' TRUST. Q. For instance, recently we have had the .smelters syndicated; they have all gone into a trust. There is no tariff upon smelting; there is no tariff on their product. Now papers from my State, Colorado, where we have more smelters than any other State in the Union, that reached here this morning say that the smelter men have had a meeting and have agreed that if the men do not work after to-morrow by the hour (to-morrow being the day that the N-hour lav/ takes effect in the State of Colorado affecting the mines and smelters) — that if they do not yield to-morrow the employers will draw the fires from every smelter in the State? — A. That is a terrible thing; I would not want to face that. I think I would go out of business if I ever was confronted with any such condition of things as that. Q. That is the report of the meeting of the smelter trust. Now, do you think that that is an advantageous organization where that kind of power exists? — A. How are you going to prevent it? THE ELEVATOR TRUST. Q. You have suggested the fact that the lowering of the tariff would destroy it. Now I am trying to point out a case where the tariff will not touch it, and we must have some other remedy. Recently, before the Interstate Com- merce Commission, one of the managers of one of the large Western roads stated that they do not take freight from the individual farmer; that they can not, and that they never will deal with the individual farmer, or wheat raiser, or corn grower of the West while they can make a contract with a combination of elevators. He further says that they charge the elevators much less than they do the individual farmers and that they can afford to charge them much less. Now there is a combination entirely different from yours. There is one that takes a drawback. I appreciate the position you are in; you say you refuse to take a drawback because of the adverse comment and the conflict against good business policy. I realize the benefit and advantages, for I can see some of the reasons why your company has great prestige following such well- established business principles. But does the ordinary corporation or trust in its formative period do that?— A. Well, there is a very strict law, and of course if it is not enforced it is pretty serious on the fellow that is not in with the rebate. Q. What would you suggest in the way of limiting these trusts that are not affected by the tariff; like, for instance, the elevator trust of Minnesota, or the smelters" trust?— A. They will not take commodities from the farmers, you say? Q. That is, not at the same figure. They are bound to take freight; they are bound to ship a man's grain.— A. I should take it from the farmer in preference to anybody else. As business, I get down to the producer. Q. But the railroads say that they will haul twice the distance for the elevator company that they do for the farmer for the same price.— A. That is against the law, is it not? Can you not get the law on those fellows. Q. I think it is against the law. Yet they had them before the Interstate Com- merce Commission, and when you prove that it is against the law they simply get around it in a different way. You do not believe combinations like that are beneficial to the public, do you?— A. That is so at variance with what my ideas of business principles are that I will have to admit that it is not. 83a 9 122 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. BEMEDIBS NOT TO BE SOUaHT IN LEGISLATION. Q. (By Mr. Phillips.) Do you, then, believe that such trusts as the smelter and elevator trusts are beneficial?— A. Well, I own some stock in the smelter trust, and I am not going to commit myself on that; but I may talk more freely on the elevator trust, as I do not own any interest in that. But I say this: Hands off. The conditions that have arisen here between the miners and smelters will have to be settled among themselves. One of these days, when the laborers get well organized, they will make it all up. These things are fights between capital and organizations of labor; they will settle among themselves. You can not do it bv legislation, gentlemen. QI (By Representative Bell.) The ordinary laborer or farmer can not wait; it means destruction to himself and his family. Your company can wait and some large wealthy company can wait; these weak individuals can not; and that is why people raise such a clamor against these great organizations; it is because they crowd out and cry down the individual citizen. Now, what we want is to find some remedies to prevent these evils for all parties. — A. Why not get the farmers together and form a trust of their own? (Laughter.) I mean it; I mean it, gentlemen. I would sell the grain to one party and establish some fellow to sell it to those elevators and let them share pro rata according to what they con- tribute. There is a way out of it. I never knew a corporation yet to have any- body under their thumbs very long. Q. The economists and great thinkers and writers have always held that the farmers were so numerous and so scattered that it was impossible to hold them together, and that all their efforts would mean failures? — A. Yes; his conditions are so different; his necessities are so different and varied. Q. (Interrupting.) It has been impossible to hold them together. Now, in speaking of the smelters, I get it from the newspapers again that the smelters at Diirango have just shut down, while the smelters at Pueblo are just about to shut down, and the newspapers say that the owners of the smelters in making their argument to the men say: " It makes no difference to us; we had just as soon draw the fires as not, because we make the same profit." If the smelter at Durango shuts down, the ore will be smelted in Pueblo or at Denver; and they hold the same club over the labor at Pueblo, where there are several thousand smelter men. The managers of the smelters say to the men : " If the owners shut down it does not hurt us; it hurts you." They get their part of the profits. Those are some of the things that affect the public and the individual and create this prejudice; and, if possible, it seems to me that the men in these combinations ought to help us to solve these problems so as to avoid these injuries; and I was in hopes you would have something to suggest on these questions. — A. I think the same thing occurred in the sugar business when the trust was formed. "We had to consider whether we should furnish this sugar to the consumer at a cheap price and get out of it a .suitable dividend for the stockholders, or maintain all the different organizations and keep all the men employed. We naturally closed many of the refineries, concentrated the meltings in a few, and achieved the results we sought. But there were a great many men undoubtedly that were left out of employment and had to seek other employment. It is pretty hard. I read in the paper not long ago that along the line of one of the railroads they had established an industry, but found it unprofitable to work it. and after they had been there 10 or 1.5 years and the men had bought their homes, built houses, schools, and churches, the railroad, apparently in cold blood, shifted the industrj- somewhere else and left the men there. It looks like cold blood, but when you come to analyze it it is one of those conditions of trade that there is no human way to prevent. TRUSTS SHOULD NOT BE REGULATED IN ANY WAY, SHAPE, OR FORM. Q. (By Mr. Phillips.) You have spoken in regard to the benefit of trusts, both m your paper and m your testimony, and you say they should not be regulated by law. As I understand, you would take the saine position in regard to a com- bination of railroads. If railroads can in any siMise be governed bylaw or taxed, has not the Government the suine right to tax the great trusts or combinations in industry extending over the whole country and regulate them?— A. I doubt if they have the constitutional power. Q. The States have the iiower, eacli individual Stat(i?— A. I doubt if a State has any power over the sugar company in the regulation of its prices ; I do not think so, Q. Do you believe that the^e trusts should be put more siiecifically under gov- ernmental control than they are, that they should have examination or inspection THE SUGAR COMBINATIONS: HAVEMEYER. 123 similar to the national banks?— A. Not at all. I think the Government should have nothing to do with them in any way, shape, or manner. Q. Yoii think, then, that when a corporation is chartered by the State, offers stock to the public, and is one in which the public is interested, that the public has no right to know what its earning power is or to subject them to any inspec- tion whatever, that the people may not buy this stock blindly?— A. Yes; that is my theory. Let the buyer beware; that covers the whole business. You can not wet nurse people from the time they are born until the time they die. They have got to wade in and get stuck, and that is the way men are educated and cultivated. Q. Then, you think that they have a right to charter corporations and allow them to offer stock to the people — to the whole community — and that the com- munity then has no right to a knowledge of what the earning power of that stock is? — A. Precisely. Take the other side. A lot of men get together in New York City and organize a company, and a capital of $10,000,000 is to be put up. I go into New York City and say, " Gentlemen, put your money up whether you want to or not.'' They do not do it. They are not compelled to buy the stock. The State does protect these people as against any false statements, as against any fraud; but where a man goes into the stock exchange to-day and buys a hundred shares of sugar and pays 160 and it is 110 to-morrow, and he goes to the State and gets down on his knees: " Mother, dear, pay me the difference, and let us put the sugar trust out of existence." I say, hands off; there is nothing in it; hands off; let them settle it among themselves. HISTORY OF THE ORGANIZATION OF THE SUGAR TRUST RESUMED. Q. (By Mr. A. L. Harris.) I understood you to say that when the original American Refiners' Trust was organized in 1887 the refinery property of all the companies in business was not very valuable, that the business was being run at a loss, and that it was taken for the purpose of saving their property. Those are not the exact words, but it was taken to save the money invested? — A. Yes; a great many sold out for that reason. Q. And a number of them quit running and were idle at the time — 18, I think you said? — A. No; I said 18 went into the trust. I do not know how many were idle, but a number were. Q. I understood you to say they were idle. What was the capitalization of the IB or 18 companies that went into the trust before they entered it? — A. I do not know; but that had no relation whatever to the real worth. You know a com- pany might have .510,000,000 of assets and be capitalized for 8300,000. The capital has very little relation to the value. Q. "What I want to know is, if on the original capitalization it would show a profit. You say you do not know'? — A. Yes. Q. Do you know Mr. John E. Searles's'— A. Yes. Q. What position does he occupy in your company? — A. He used to be the secretary and treasurer. He has no position now. Q. What position did he occupy in 1897?— A. The same; he was the secretary and treasurer then. Q. Would his sworn statement be true in regard to the capitalization of the original corporation? — A. Oh, yes; he had the matter in hand; he knows all about it; I do not. CAPITALIZATION AND VALUATION. Q. Now, I see on page 384 of the New York investigation ' that at the time the original Sugar Refining Company was organized in 1887 their capital stock was 86,590,000.- A. Of all of them? Q. Of all of them; that is, of the 15 or 16. He gives: The Havemeyer & Elder Sugar Refining Company, §500.000; the Dick & Meyer Company, $200,000; the De Castro & Donner Sugar Refining Company. 8350,000; the Moller & Sierck Company, $310,000; the Oxnard Brothers Company, $100,000; the F. O. Matthies- sen & Wiechers Sugar Refining Company, $400,000: the Brooklyn Sugar Refin- ing Company, .8::5OO,O00: the Havemeyer Sugar Refining Company, .81.000.000; the Forest City Sugar Refining Company, $300,000; the Boston Sugar Refinmg Company, $650,000; the Standard Sugar Refining Company, $1,000,000; the Bay State Sugar Refining Company, $3-35,009; the St. Louis Sugar Refining Com- pany ,Sr.55 OOO; the Louisiana Sugar Refiniut;- Company, $451), 000; the Planters' Sugar Refining Company, 8350,000; total, $0,690,000. He gives that at .$6,690,000. 1 New York senate investigation, 1897. 124 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Now, if it be true that it was unprofitable to run those companies and so many of them liad to get out, some of them had to go out of existence, liow does it happen that this trust was organized at the time at $5(1,000,000? In other words, how did you reach the capitalization of the trust certificates of §50,000,000 in the original trust?— A. I said that the expressed capital in figures there of these companies lias nothing to do with their real value. Q. I understand that you put in more money; that these difi:erent companies had more money than is represented by the stock capitalization? — A. More money in stock, plant, and assets. Some of tliem had fifteen or twenty millions and they were capitalized at $300,000. Q. I am not able to understand that.— A. Take the capital, for instance, of the Chemical Bank. It has a capital of $150,000, and its capital stock is worth $8,500 a share. Q. I am not able to see how a business that was not profitable can increase in such a rapid way. — A. I think I can illustrate it so that you will understand. You and I are in business and we run our business to suit ourselves. I say let us form a trust; you say no. and you do not care to go in. I go alone and I put up the price a quarter of a cent, and that enables you to make a fair profit. Now, I say to you, what do you want for your plant? You say this plant is worth a million dollars to me, but you will offer it to me for two, and I take it. I can make more money by btijang that plant for $3, 000. 000 with the advance in price than I can by leaving you out, and I give you the entire advantage of your work on that plant. Q. But at the time this trust was organized you did not buy the plants? — A. Yes, we did buy them — bought the whole business; there was not a share of stock in any shape or manner but what went into the trust. Q. In the original trust you issued stock certificates? — A. Yes. Q. How did you reach that valuation by which you could distribute that $50,000,000 among the 16 or 18 ctimpanies that were taken into the original trust?— A. My faint recollection of the matter is that they had a committee of appraise- ment to appraise the value.s, taking plant, location, trade-marks, status of busi- ness, and all considerations, and that they agreed upon an amount for which they would transfer their property in consideration for so many certificates on an aggregate capital of so many dollars. Q. How many of these original companies were dismantled? — A. Oh, I do not know. You are talking about things that occurred 13 years ago. Q. Of course it is plain to you, but it is not to me. — A. I have made the general statement that while 18 corporations went into the affair the whole melting capacity is now being concentrated into ti or T. That answers your question. Q. I do not care about your specifying the exact number. — A. I could not do it. Q. All I want to get at is how you put in and issued stock certificates for plants that were considered worthless? — A. They were worthless under those conditions, but they were not worthless under the conditions that were about to j^revail. Q. You went on with this original trust until 1891? — A. Yes. Q. When the North River suit went against you? — A. Yes. Q. Then you organized in New Jersey? — A. Yes. Q. Then you bought all these concerns and issued stock for them? — A. No; we bought and paid stock and cash. Q. You paid stock and cash? — A. Yes. Q. It was not all stock? — A. We bought the property. Q. Now at that time, as I understand, you were making 90 per cent of the product of this country? — A. No; 67 I think the figures show. Q. Well it was 67 in 1898?— A. It was 65. Q. You had the capacity, I think, of making 90 per cent?— A. We had com- petitors. Q. You had that capacity then?— A. But we could not run it, because we had outside competitors. TESTIMONY BEFORE THE LEXOW COMMITTEE. Q. Shall I read to you your testimony before the Lexow committee?— A. You are confounding capacity with output. You see. we may have the capacity for turning out the sugar and not have an output for it. Q. I will change the question. What is your output?— A. Well, the output may be equal to the capacity. I do not know what this testimony was. Q. But what per cent? — A. I do not know. Q. You have some rather valuable testimony here. I do not know but what, there is a page or two that might be read; and of course, if you care to correct it, it should be read and you should be asked to explain it. You should have that. THE SUGAR COMBINATIONS: HAVEMEYER. 125 opportunity, and let it go into the testimony and be explained. It is only 2 years ago, and you were asked in that commission, by Mr. Lexow, concerning testimony before the Senate bribery committee as to certain facts, this question (reading): ' " I call your attention to the testimony that you gave before the United States Senate committee in answer to Senator Allen: " ' Q. When you sell in this cormtry you control the price? — A. Yes, sir. " ' Q. And it was organized, as I understand it. with a view of controlling the price and output to the people of this country?^A. That was one of the objects of consolidation. " ' Q. And you have succeeded in doing it? — A. Yes, sir. " ' Q. That was the principal object in organizing the American Sugar Refining Company? — A. It may be said that that was the principal object." ■'Q. Mr. Havemeyer. To control the price?— A. Mr. Lexow. Yes, sir, " ' Q. And making money incident to that control? ' " Mr. Havemeyer. Did I say '• control of price" or " control of output? " " Mr. Lexow. Control of the price and the output. •' Mr. Havemey'er. I don't think that is right. " Q. Do you wish to change the testimony that you gave before the Senate investigating committee? — A. I should have read it myself. [Witness reads tes- timony given before Senate committee.] It certainly does appear that at that tim.e that was my understanding of one of the objects of the formation of the American Sugar Refining Company. ■' Q. You say there that it was the principal object: do you mean to say now that your recollection of the object of the organization of the American Sugar Refining Company in 1891 — do you mean to saj' now that your recollection is better as to the main and principal object of that organization than it was in 1894, when you gave this testimony? — A. I would answer by sajung that when I gave that testimony that was in my mind, and I answer now what is in my mind; that is not in my mind now. " Q. Then this testimony was true that you gave before that committee? — A. That is the way that I felt at that time, undoubtedly. " Q. Therefore we start out with the proi^osition that the main object of the organization of the company was to control the product and to control the price of refined sugar in the United States? — A. No, sir; I think that is too broad; the intention was to control the output of their product and the price of their product. ■"Q. That would control, under the circumstances, as you control the com- pany? — A. Undoubtedly. '■ Q. Therefore the organization of a combination of interests, all of which you controlled at the time of the organization, could not have been for the pui'pose of controlling thair output or their price? — A. How could I control the output or the price of any other refinery? It goes without saying that a man who produces 80 per cent of an article can control the price by not producing; the price must advance if he does not produce; and it must decline if he does produce, if he pro- duces more than the market will take; I do not see any significance in contrast- ing the evidence." (By the Witness.) Now that is the gist of the whole matter. Q. Let me go a little further (reading). " Q. You were asked by me as to whether or not one of the objects of the organization of the New Jersey Com- pany was to control the price and the product. You said, in answer to my qvies- tion,that it was neither; that you had no intention of controlling the price or the product. In the United States testimony you state that that was the main object of consolidation; that is to sav. to control the price and the product and the refined sugar of the United States?— A. I am willing to admit either phase; as far as the object is concerned it goes without saying that a corporation that controls 80 per cent of the product does control the' market price up to the importing point if it chooses to exercise that power, for it goes without saying that that same power can be exercised to diminish the price; when you ask whether it was the idea in mind on the formation of the company, I would say that I do not think it was; that testimony wants to be read in connection with what went before it and with the olsjects of that investigation. '■ Q. Then, according to your present version of it, in any event, whether it was your object or not, that object was reached by reason of your controlhng 80 per cent of the product; you di in fact control the product and price in the United States?— A. We undoubtedly do. . " Q. You do it by reason of the consolidation of the interests which can pro- 1 -Rpiinrt and Proceedings of the Joint Committee of the Senate and Assembly Appointed to Investigate Trusts. (Lexow Report) Albany, 1K9T, pp. 109-112. 126 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. duce 80 per cent of the refined sugar of the United States?— A. I do not know what the consolidation of interests has done; we do through the fact that we refine so much sugar. " Q. You have brought under one head and under one direction, through your company, the agencies that produce 80 per cent of the refined sugar?— A. We might do as we did at one time, control 95 per cent of the sugar; and the Supreme Court has decided that it is perfectly legal to do it. " Q. I understand you to say that you produce 80 per cent of the refined sugar? — A. From 75 to 80 per cent. " Q. When you entered upon the sugar-trust arrangement m 1887 you had numerous competitors in the market, did you not?— A. In amount greater, so far as output, than to-day; in numbers, fewer. " Q.That is to say, that each of those 15 companies was undeniably competing in the market for the sugar trade?— A. Do you mean when we formed the trust?. " Q. Before. — A. Yes, sir. " Q. And the formation of that trust removed that competition?— A. To a very great extent. " Q. To the extent of those 15 companies?— A. Not absolutely; the companies were all controlled by separate members, and they had their own views of mat- ters, but practically, yes. " Q. Didn't the price of sugar decline materially prior to 1887— prior to the time of the formation of this so-called trust?— A. A year or two previous it was slightly lower; for a period of 10 years it was slightly higher. " Q. After formation of the sugar trust the price of refined sugar was in- creased? — A. Slightly advanced." This testimony which I have just read begins on page 109 and ends on page 112. I ask you if you have any explanation to make of that? — A. No; that is perfectly, clear; I do not see that that needs any explanation. I stand by that, every word of it. RELATION OF SUGAR TRUST TO OTHER COMPANIES. Q. I have a question or two that I would like to ask the witness. One of them is whether or not the American Sugar Refining Company has any interest in the MoUenhauer concern? — A. I prefer not to state about that. That is a little bit too private. Q. Or in the Nash Company at Boston? — A. Well, the same answer. Q. Or in any of the other refining companies that are now refining sugar? — A. I have stated that they have an interest in the Western Sugdr Refining Company with Mr. Spreckels. Q. Now. you have stated that you have cut down the price of coffee by compe- tition with the Arbuckles? — A. No; I said there had been a drop incident to the large production. Q. If you had not gone into the roasting of coffee, or into the coffee trade, the probabilities are that it would have remained still 5 cents profit instead of 2*?— A. Five cents profit;, yes. Q. Five cents profit instead of 3|. That lias been brought about by the compe- tition — that reduction? — A. Yes. Q. (By Mr. Kennedy.) Can you state whether your recent dividends have been paid irom profits or from the surplus that has been piled up? — A. I am unable to answer that. Q. Yoti do not know? — A. I can not answer any more definitely. Q. It is true that the wholesale grocers make little or no profit "out of the sugar they buy from your company and sell to the retailers? — A. I think they make very little or none now. Q. Very little? — A. They did make .a little before September, 1898, but since then — since the competition of the outl^ide refineries — they have been unable to make any profit of any account out of refined sugar. THE FACTOR SYSTEM EXPLAINED. Q. (By Mr. .Tenks. ) Will you explain to us in brief what your factor system is and how it works at the present time? That will perhaps bring that out a little more clearly.— A, On October 10, 1Mii5, the American company established what is knov.-n as the equality plan. It continued in force until about" March, 1897. The affidavits under that plan were discontinued in the State of Ohio for some time previous to March, 1897. The plan as embodied in the papers herewith included a rebate to the grocer of three-.sixteenthn of a cent a pound, providing he main- tained the price fixed by the American Sugar Refining Company. The competi- THE SUGAR COMBINATIONS: HAVEMEYER. 127 tion resulting from the operations of the outside refineries after September, 1898, rendered this plan inoperative. Although the form of selling sugar continues, the price has been disregarded, so that there is no profit whatever vmder the plan. , 189 . The Americax Sugar Refining Company, P. O. Bo^r No. 'JUoti. Netv York City. Gentlemen: We are in receipt of yours covering invoice for sugar. We desire to be enrolled as your agents and to receive sugar on consignment, in accordance with the terms of your letter, and we hereby agree to faithfully maintain the terms and conditions therein provided on all sugar received by us. Yours, truly, [The American Sugar Refining Company.] New York, , 189 . Dear Sir: We inclose herewith invoice of even date, from which you are entitled to our usual deductions of 1 per cent trade discount on 100-barrel lots and 1 per cent for cash if paid within 7 days. Should you so desire, we shall be pleased, upon receipt of within written request, to constitute you one of o\ir agents, in which case sugar will be con- signed to you for sale as our factor, upon the following terms, the title to remain in us subject to your advances and return to you of your necessary outlay. 1. You are to advance to us within 30 days the amount of the invoice, which will be made up at our daily quotations, less 1 per cent trade discount on 100-barrel lots, with the right to deduct 1 per cent additional if invoice is made cash in 7 days; the advance to be vsdthout recourse to, or reclamation upon us, and to be due in any event. 3. The sugar when sold is to be billed in your name, although in fact as factor for us, and you shall without reclamation upon us, at your own cost, pay all expenses, and assume all risks of the property, and of payment of collection. You are not to incur any expense on our account. 3. None of the sugar shall be sold or disposed of by you, either directly or indirectly, for less than our daily quotations vsdth freight added from refining point to point of sale (as per equality rate book), nor on more liberal terms as to credit or cash discounts. So long as the foregoing conditions are observed by you, we will, upon an affi- davit to that effect, pay you a commission of three-.sixteenths of a cent per pound, and in addition thereto you shall retain the profit, if any, over the advance niRde as above provided. In case of any failure to comply with either of the above conditions no commissions will be payable. Settlements will be made for each month's commissions at the expiration of 3 months thereafter. All commissions payable for the period preceding the 3 months will then become due. Payments will only be made as above. This agency is terminable at the pleasure of either party on written notice. Yours, respectfully. The American Sugar Refining Company. Bought by a corporation. State of , County of - -, being duly sworn, says: I am the of the Com- pany. That company, as factor of the American Sugar Refining Company, claims from the Sugar Company a commission of three-sixteenths of a cent per pound (less 1 per cent where trade discount has been allowed) , upon pounds of sugar consigned by the Sugar Company to it by invoices, the dates of which cover the period from to , inclusive. In compliance with the conditions upon which the sugar was consigned to the company, and to entitle it to the coni- mission, I do hereby make affidavit that none of the sugar mentioned in the said invoices has been or will be sold or disposed of by the company, either directly or indirectly, for less than the daily quotations of the American Sugar Refinmg Com- pany, with freight added from refining point to point of sale, as per their equality rate book, nor on more liberal terms as to credit or cash discounts. Sworn to before me this day of , in the year 189 . 128 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Bought by a firm. State of . Couniij of - -, being duly sworn, says: I am a member of the firm of — That firm, as factor of the American Sugar Refining Company, claims from the company a commission of three-sixteenths of a cent pei- pound (less 1 per cent where trade discount has been allowed) , upon pounds of sugar consigned by the company to the firm by invoices, the dates of which cover the period from to , inclusive. In compliance with the conditions upon which the sugar v.'as consigned to the firm, and to entitle it to the commission, 1 do hereby make affidavit that none of the sugar mentioned in the said invoices has been or will be sold or disposed of by the firm, either directly or indirectly, for less than the daily (quotations of the company, with freight added from refining point to point of sale, as per their equality rate book, nor on more liberal terms as to credit or cash discounts. Sworn t(.i before me this day of , in the year 189 . Q. Why did you stop asking for an afiidavit? — A. Well, some of the States passed laws that counsel held it was in contravention of and we did not further request it. And then again the plan never was very successful; there were so many infractions of it that it was really of no practical effect. Q. (By Mr. Kennedy.) Are you interested in the beet-sugar industry of the country? — A. Somewhat on the Pacific slope; none east of the Rocky Mountains. Q. Do you believe the time will come when the beet-sugar industry will furnish this country all the sugar it will consume? — A. If the peciile of the United States consent to a burden of §40 a ton on imported sugar, I suppose one of these days the beet-sugar industry will furnish the United States, providing Cuba, Porto Rico, and the Philippines are not annexed, or their products imported free. Those countries could easily within the next 3 years supply the United States with all the sugar they require irrespective of the supply from the Hawaiian Islands or Louisiana. Q. (By Mr. Phillips.) That is, cane sugar? — A. Cane sugar. Q. (By Mr. Kennedy.) If that is done, then the beet-sugar industry will have to be suppressed, will it? — A. It will be relegated where it properly belongs, in competition vsdth the cane. I suppose if they attempted to gi-ow beet sugar in Alaska they would want .S3.50 a ton. I do not see why they should not get it the same as they do in Louisiana, where the natural condition of the cane is above the frost line. Q. You stated this morning that you believed in the Federal Q-overnment and the State governments keeping their hands off with regard to these matters of trade. Do you believe in the Government keeping its hands off in regard to such matters as adulterated food? — A. I do not. Q. You think that is a proper place for the Government to step in and put its hands on, do you?— A. I certainly do. There is no way that the consumer can be protected against adulterated food except by law; trade conditions do not control that. Q. Did the American Sugar Refining Company, or representatives of it and of the independent companies, recently go into some sort of an organization on that line? — A. No; not at all. Q. The report to that effect in the New York Sun was not true, then?— A. Not true in any paper; not true at all. Q. Does not the American Sugar Refining Companv furnish cooperage to the independent companies ?— A. We furnished cooperage to Arbuckle, I believe, for 3 years, then an outside company underbid us, and they do the work now. The trust is suffering now. [Laughter.] LABOR, WAfJES, AND CONDITIONS UNDER WHICH LABORERS WORK. Q. (By Mr. Phillips.) Do you employ a large amount of labor in the sugar- refining nidustry , skilled or unskilled, or l)oth ?— A. Almost exclusively unskilled, the lowest kind of labor, getting from %\ .35 to .$1 .r,o a day— Poles, Bohemians— the lowest class of labor in the country. Q. Well, are not the c(mditions under which the labor is performed very delete- rious to health ? — A. No ; it is very beneficial. Q. Do they not have to labor in 'intense heat?— A, Thev do, but they sweat out the beer they drink and it does them good. I guess the' percentage of injury in the sugar refineries is less than in any other Ijusiness. The vapors of su"'ar are benefi(dal to the lungs, and the heat keeps the pores open and sweats them out- keeps the heat out of the system. I am a physical illustratum of the effects of the work, having worked in a sugar refinery myself for .5 y(>ars. THE SUGAR COMBINATIONS: HAVEMEYER. 129 Q. Then you employ what you consider the lowest class of labor ; and even when you are making very large sums of money, vour wages are not high, are they, compared with others?— A. I will tell you what we do: We employ the labor as it presents itself to the bar, and when we find a man that is qualified physically to stand the heat and do the business we give him 10 per cent more than he can get any\vhere else, and we keep him ; and I do not think there is on record any strike wliatever since the Sugar Trust has been in existence ; and it is on account of the business principle again, that, having a good man and paying him more than he can get elsewhere, you can keep him. There is not a man in our department, in my opinion, that can go out of it and earn as much as he can in our refinery. Q. How many laborers does the American Sugar Refining Company employ? — A. Oh. I have not figured that up, but I should say at least 10,000 right around New York, Boston, and Philadelphia. Q. Do the laborers employed in t]ie refineries, as a rule, belong to the unions ? — A. Not the unskilled laborers. The skilled laborers do — the carpenters and mechanics ; but the advantage to them in the sugar-refining company is that they have work the year around, and we can weed out the poor ones. Q. Is there no way to ventilate the works so as to prevent the men working in such intense heat as they do? — A. That is very much exaggerated. The normal heat of a refinery is 90° ; there are places where the sugar is dried where it runs up to 110°. They rather like that heat; they perspire freely and do not feel it. They drink a great deal of beer, and that tends to promote perspiration. Q. Is it essential that they work in such heat? — A. Yes; that is part of the process. Q. You can not cool the atmosphere by any artificial means and get the results you do? — A. No; you can not conduct the business under 90° in some departments. Q. I would say this, that it has been stated that the sugar-refining industry pays quite small wages, and they work in the heat, which is unhealthy, and these conditions A. Oh, that is all false; that is all false. Q. (By Mr. Jenks. ) How many hours a day do your employees work regu- larly? — A. In summer they work in shifts of 8 hours and in winter they work in shifts of 12 hours', with 3 hours for their meals; in other words, in summer they work 8 hours a day and in winter they work 10. Q. They run day and night? — A. They run day and night constantly, and there is always a great clamoring for overtime. Q. You say they work 8-hour shifts in summer and 13 hours in winter. What difference do you make in their wages for the 8 hours in distinction from the 12- hour shifts? — A. I believe they get the same wages; it is hotter. Q. (By Mr. Ratchpord.) Do you find that class of men you name, Poles and Bohemians, better adapted to your work than other classes of labor? — A. No; they are willing to work for less. You can not get an Irishman now. They can generally get more money; they do not apply any more. Q. They are willing to work for less, you say? — A. Yes. The Irishman gets more; all other classes get more. Q. For common labor? — A. Yes. Q. Will facts bear that statement out, you think?— A. Oh, I do not think you can get a laborer for 81. oO a day in New York, 34 days in a month — that is, ^36 a month; I do not know of that. You have to pay grooms in the stable S'M. Q. Then, it is not because they are better adapted for the refining of sugar that you employ them; you employ them because they are the cheapest?— A. Yes; laecause they are the cheapest. Q. And with the wages you pay them they drink a great deal of beer? — A. Yes. We furnish them beer at cost, and they drink a great deal of it, or so much a day. Q. How much a day? — A. Well, a pretty good deal, some of them; I v.-ould not want to say the exact figures. Q. (By Mr. Phillips.) How much does it cost each one a day for the beer he drinks at cost— the cost on the average?— A. Oh, I would be jumping at that; I should think 15 cents. Q. (By Mr. Kennedy.) You own your own brewery?— A. No. We buy beer ot a certain standard, sell it by weight, and give it to the men at cost. Otherwise they would be running out to saloons and getting drunk, and be away from their work, and gambling their money away. We do it as a bu:;iness proposition again. ^ ^ ^. ,,, ■ Q. You have been very frank in some of your statements, and I notice that m a previous investigation you very frankly said that you made contributions to compai"n funds on both sides. I would like to ask you whether or not it is true that the American Sugar Refining Company made large contributions to the 130 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Cuban cause previous to the Spanish- American war? — A. I do not recollect that they contributed a cent. I am quite sure we did not; if we did, it was some insig- nificant sum. THE TARIFF AND FOREIGN COMPETITION. Q. (By Mr. North.) I would like to ask the witness if he has made any state- ment to the commission as to the imports of refined sugar into this country? — A. I have not. Q. Will you state what the imports of refined sugar are at the present time?— A. I do not know. They are a matter of record. I should not think they were anything. Q. You should think they were nothing? — A. Yes. Q. In other words, the American Sugar Refining Company does not suffer from the competition of imjjorted sugar? — A. Not at this immediate time. Q. Why, then, do you state in the paper which you read before the commission this morning that the least protectioii refined sugar should have is double what it gets under the existing tariff? — A. We get under the tainff one-eighth. Sup- pose we are losing one-fourth in our business, we would still want one-eighth to make it good, would we not? Q. Are you losing one-fourth? — A. I will not say that. Q. If there are no imports of refined sugar and consequently no competition from foreign refiners, is that not sufficient evidence that the present tariff is high enough to protect the American sugar-refining interest? — A. It is no evidence whatever, because competition with the American goods opens up outside refin- eries; local men, not foreigners. Q. I do not understand that answer. My question is, if the American Sugar Refining Company has no competition froin foreign refiners, is not that fact suf- ficient evidence that the tariff is adequate? — A. It is no evidence whatever. Q. Now. will you tell the commission why? — A. Because the competition itself is local. If the Government should give us one-fourth cent a pound and give our competitors nothing, then we would be able to live. If they give Louisiana §40 a ton, why do they not give it to us? THE TARIFF AND LOCAL COMPETITION. Q. The local competition has nothing to do with the tariff?— A. The local com- petition has a great deal to do with the condition of the sugar-refining industry, and that is why we do not make any money. Q. The tariff has nothing to do with the local competition?— A. I did not say it had. Q. Well, but your answer implied that it did.— A. I do not think it imphed anything of the kind. Q. (By Mr. Farquhar.) What proportion does the production of Louisiana cane sugar figure in the whole production of the United States?— A. I believe it is about 10 per cent. Q. That seems to be the only feature you have criticised?— A. The Hawaiian Islands another 10 per cent, and then these other beet sugars 5 per cent. Q. However, all of these figure up how much per cent?— A. Twenty-five. Q. Say 20 per cent? — A. Twenty-five. Q. So you have a field for 80 per cent yourself?— A. The sugar-refining industry has; yes. Q. I do not mean that; I mean your own business. I am not talking about any outside refineries; I am talking of what you have said this morning before us. Do you base all you have said about these matters and everything else on this question of 30 per cent? Do, you want all this 30 per cent abolished and placed under the same tariff conditions that control the 80 per cent?— A. I have not mentioned that. Q. I ask the question as a matter of business, would you?— A. I would not give them anything. RAW su(;ar producers should have no protection at all. Q You would not give them anything at all?— A. No, thev are an agricultural product, and it they can not produce under natural conditions I would not give them anything at all. If you follow it to its logical extent and give Louisiana 40 per cent because th(^y claim it, why do you not give Alaska S500 a ton because they claim it? q. Well, that is highly hypothetical.— A. Then I refuse to answer that question. THE SUGAR COMBINATIONS: HAVEMEYER. 131 Q. (By Mr. Conger.) Let us foUowyonr statements to their logical oonclusion, and then reverse them. If yoia would not give Alaska $3r)0,nor Louisiana $40, why should the American refining industry have any, and why should not the refining be done on the other side of the water?— A. There is no reason except the true one, and that is just what has been before the American people, and they voted on it twice. They voted Harrison in in the one case, and McKinley in in another; on a straight free-trade issue, or protection, the American people have declared for protection. It promtes civilization in America; it takes the poor man, gives him good food, schools his children, clothes them, feeds them better, and pays better wages. Thatis the whole and the entire point in which the nation is placed, so far as that is concerned. If you can not take sugar out of the soil of America, there is no reason in the world why you should provide any tarifE or compensation which nature has not provided for, and which it has provided against. Q. So far as this protection is concerned that you have, you want it on your industry. You have given us a very nice argument for protection. It seems to me that the logical conclusion from your argument is that there should be no protection at all upon the refining of sugar, which would remove the base of opera- tion for refining to Europe. — A. My argument is. and has been, that if the Ameri- can public is going to vote for protection on industry, they should limit it to 10 per cent. That is my ai'gument. Q. A moment ago you said they had limited it, that the American people, I think, voted in favor of this? — A. Yes, to manufacturers. I do not object to the local men getting a moderate protection. You asked me what the American people did, and that is what they did; the American people believe that a manu- facturer should have protection. Now, those v/ho are skilled in determining what protection these people should have, in my opinion, have given them inordinate rates. I stand for protection: I favor it; I have never said anything against it; I am in favor of it. Q. (By Mr. Farquhar.) You say manufacturers. Of course in that you mean the workingman and the middleman and all interested in American industries? — A. I think that the proper protection for all the people should be 10 per cent. Q. (By Mr. North.) Are you manufacturing and selling sugar at a loss to-day? — A. I decline to answer that. That is simply a matter of the American Sugar Refining Company. Q. (By Representative Livingston.) You said that you were in favor of mod- erate protection on manufactures. Why not give a moderate protection to the producer of raw material that comes into competition with the foreign stuif ? — A. I should be very happy to. I should think that would be the proper solution of it, but I should consider nature in the matter. If sugar can be produced in Loui- siana for 3 cents a pound, I do not see why you should give them 2 cents a pound bounty. I should think that reasonable protection to all industries is the proper one. I think that is what the American voters have twice decided; but those who have had it in their power, give an inordinate protection, and that is what I claim and still maintain is the cause of all this trust agitation and clamor against it; and the public are mulcted by it. Q. (By Mr. Farquhar.) Has not the bounty in Louisiana been abolished? — A. The bounty is abolished, but they get it indirectly in the form of the tarifE on sugar of §40 a ton. Q. (By Mr. North.) You made this statement here this morning: " Here you have 834,000,000 extracted from the people of the United States for the sake of getting a revenue which §40 per ton on foreign sugar provides. This is merely illustrative of the character of the tariff, every line of it, and its effect upon the people." Now, I would like to ask you if you are not aware that there are many articles sold in this country at prices considerably less than the duty on these same articles? — A. No; I do not know anything about it. conditions in the print-cloth industry. Q. Are you not aware that print cloths are now selling for less than the duty on print cloths; that the domestic price of the print cloths is less than the duty on print cloths?— A. No. Q. Do you decline to answer the question?— A. No; I do not decline to answer it; give it to me again. Q. I ask you if you are aware of the fact that print cloths are selling for a sum less than the duty?— A. No; I am not. ^ . ^ ^ ., , Q. Do you think, in view of the fact that you are ignorant of a point of that kind, that you ought to make a statement such as I have just read?— A. Yes. Q. Although you are not aware of whether it is true or false? — A. What has that got to do with that principle that you have laid down? Where is the print- 132 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. cloth trust? What is the matter with them? Where are they that they do not come in out of the wet and get all of this advantage from the tariff? You are talking about a condition of things that allows them to get it and fleece the public to that extent. Q. I am talking abo^it the condition of things that exists in a great many staple industries of this country. — A. Well, they will soon get on to it; it is progressing fast. Q. Do you not think, in view of the fact that you made this statement without knowledge and in ignorance of the fact, that it would be desirable for you to withdraw it? — A. No. Q. I think that if the question and answer can go together I am perfectly sat- isfied to leave it where it is. (No audible response by the witness.) AN INCREASE IN THE TARIFF WOULD NOT HELP THE SUGAR TRUST. Q. (By Senator Mallory.) I understand that, in your judgment, a tariff of one-eighth of a cent a pound on refined sugar is not sufficient. — A. That is my proposition. Q. There is no money to be made in sugar refining at a tariff of one-eighth of a cent. I understand that one-fotirth of a cent, in your judgment, would be better. — A. Yes. Q. There is no foreign competition, as I understand, and the only competition you have is domestic. — A. That is, at the moment. Q. At present. Now, what I would like to get at is how would an increase of the tariff from one-eighth to one-for.rth of a cent enable you, under existing conditions, to improve j'our business? — A. It would not. Q. What increase^ would? — A. None. Q. No increase in the tariff at all? — A. Not under existing conditions. Q. (By Mr. North.) Why do yovi ask for it?— A. For contingencies. (Laugh- ter.) I have nothing to conceal in the matter; why shoirld I? Why should this business be carried on at a loss, when it can be carried on at a profit? We want to carry it on. We do not want to be inundated with foreign products. DIVIDENDS and LOSSES. Q. (By Mr. North.) Are you now carrying on business at a loss? — A. I have answered that before; I have no other answer to give to it. Q. You refused to answer it before.— A. Well, I refuse to answer it now. Q. How do you carry on business at a loss and still declare dividends?— A. You can carry on business at a loss and lose money, and you can meet and declare dividends. One is an executive act and the other is a "business matter. Q. (By Mr. Phillips.) Where do you get the money, though?— A. We may borrow it; the sugar company has got pretty good credit. Q. (By Mr. North.) How may years can the American Sugar Company keep up that practice?— A. That is a problem to everyone. We would either buy or sell the stock if we knew that. EFFECT OF THE REMOVAL OF THE TARIFF RESgilED. Q. (By Representative Livingston.) I understand that you have practically no foreign competition now? — A. No. Q. Now, I want to understand whether, if this one-eighth was taken off, it would be detrimental to the interests of this country? Have you taken that posi- tion?— A. I think it would, under existing conditions, which are ruinous in them- selves. Q. Now, I want to know definitely whether, if we should take off the tax throw it overboard, make the unportation of refined sugar free to the world your idea IS that this country would be the dumping ground of all the refineries of the world, and rum your business and destroy the labor you have employed and all that?— A. Precisely. ' f j • Q. Now, how can sugar be made iu Germany from beets, or in the Philippines from cane; or m any other part of the \vorld cheaper than you can make it here' is that owing to tin- labor, or wliat is it?— A. Because, in the evolution of sugar refining, refined sugar can be made dire(^tly from the beet without the intermediation of the sugar refinery. Q. Then it is not the (-ane sugar abroad that von fear coming in but the beet? — A. Both. " Q, Both?— A. The cane now amounts to two-thirds of the total product. THE SUGAR COMBINATIONS: HAVEMEYER. 133 COST OF REPINING LESS ABROAD. Q. You do not mean that tlie cane sugar can be refined abroad and shipped in here? — A. Cheaper than it is made in Louisiana and refined in New York. Q. Cheaper than you can refine it?— A. Yes. Q. What is the caiise of that?— A. Labor is cheaper in England. Q. "W ell, there is the cost of transportation to pay V— A. That does not amount to anything. Q. Insurance is heavy?— A. You must recollect that they take the product from abroad merely at a nominal rate here for nothing but ballast: they expect to get freight from this side. The great business in freight is the exportation of merchan- dise from this country. We are large exporters. The charge on freight to this country from either Antwerp, Hamburg, Bremen. London, or Greenock, is purely nominal. All freighters would like a cargo of sugar; that comes in bags that can be compactly and conveniently stowed. Q. You mean the foreign sugar imported comes in bags? I thought it was put in barrels? — A. Yes, altogether in bags: it is generally only the American sugar that is put in barrels. Q. Can you give us the rate from Hamburg? — A. Not to-day; I can not; I am not familiar with it. There has never been an opportunity afforded to the American Sugar Refining Company to denaonstrate to a Committee of Ways and Means the disadvantages the industry is under as compared with foreigners, because there is constantly in their mind the public demand that something should be done to the Sugar Trust, no matter what injustice there is in it. You are not acquainted with it. That is the whole logic of the situation. Q. If you were left perfectly free, would you be willing to face the situation if you were guaranteed that the duty would be taken off? — A. Why, we should be ruined. Q. You would? — A. Absolutely. Why, England can produce it. England is one of the greatest and cheapest sugar-producing countries. They have free sugar and in 2 years they cut their refining industry from 3.000,000 tons down to 1,000,000; just divided it in two. Q. What is the stock of a sugar company of England worth as compared with the American Sugar Refining Company? — A. It is not, worth anything. I do not suppose you could sell a sugar refinery in England. There is one refinery in Eng- land that works a certain brand they have and pays a moderate profit, but the sugar-refining industry is gone, absolutely gone. SUGAR INDUSTRY BUILT UP UNDER PROTECTION. Q. Was the American sugar interest built up under a system of free trade or protection? — ^A. Protection. Why I can recollect when I went down to Washing- ton as an individual, as one of the firm of Havemeyer & Elder — now I want you to bear that in mind — the invitation was: " Come in. What do you want, a cent a pound? You should have it. Of course we will give it to you. You deserve it." When I went down there as a representative of 5 times the capacity of Have- meyer & Elder, because I was in a corporation, the greeting was: " Get out of here. You can not get anything, no matter what it is, now." That is the way with every interest. That is a fact. They simply draw this distinction between what is done by the individual, or a firm, and a corporation. Individual business is everything, and a corporation has nothing to do with it. Q. I did not mean to ask of your particular enterprise? — A. Oh, I thought you did. Q. But I asked you this question: If the refining industry of this country was built up under protection or a free-trade system?— A. Protection, enormous pro- tection. [Without the tariff I doubt if we should have dared to take the risk of forming the trust. It could have been done: but I certainly should not have risked all I had, which was then embarked in the sugar business, in a trust unless the business had been protected as it ivas by the tariff.]' Q. How about the English, was that under free trade?— A. They started before the beet culture became so large as it is. Beets have only been gTOwn within 10 or 15 years. But since they started to cultivate beets so much in Germany, Prance, Austria, and Russia and extract the sugar from the beet itself the importation of beet sugar has ruined the industry in England. It is an illustration of what the American people should avoid. Never allow a foreign country, if it can possibly be avoided, to get its nose into this country and get into its productions. O What do you say about the foreigners letting us get our noses into their country? Do you catch it both ways?— A. Well, I should have to think that out. Q. That is a rule that works both ways.— A. Well, this question has been before ' Added later. 134 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the American people twice and they have voted on the straight issue for protec- tion. I do not say I am individually in favor of protection. As an abstract prop- osition I do not know but what free trade would have as strong an argument as the other. TRUSTS AN ADVANTAGE WHEN NOT INORDINATELY PROTECTED. Q. (By Mr. Ratchford.) Taking your te.stimony as a whole and analyzing it, it strikes me that the existence of these trusts, large moneyed corporations or com- binations, is sought to be justified upon the ground that such trusts or moneyed combinations are an advantage to all the people. Is that correct?— A . "When they are not inordinately protected under the tariff— I qualify it — so that in their operations they can not fleece the consumer. Q. Very well. We will take for an illustration, then, the combination that you are representing. It is not inordinately protected under the tariff. In one of your stateiuents you say that we have already too many men in business in this country. Coupling those things together A. (Interrupting.) What did I say? Q. That we had already too many men in business in this country. — A. You had better point that out if you are going to quote my testimony. Q. I do not wish to misrepresent the witness at all. He now states that such a statement has not been made? — A. I do, emphatically. TRUSTS IN EVERYTHING WOULD BE BENEFICIAL IF LIKE THE SUGAR TRUST. Q. The point I wish to bring out is simply this, that if it be an advantage to the American consumer to buy his sugar from one trust, or combination, or company, would it not be an equal advantage to the American consumer to buy his flour, his coffee, his clothing, and all other articles of necessary use from one combina- tion or company? — A. If they were conducted on the same business principles that the American company has been, I think it would be. Q. Upon the same business principles. I want to ask the witness another ques- tion along this line. Have you in mind, taking into account your very large experience, any man, any comjDany, any trust or corporation who sell their wares or goods in a noncompetitive market and who are not getting the highest possible price that the consumer can afliord to pay for them? — A. Well, I do not know the gentleman's name, but the tariff on print cloths is an illustration of it. He said that his company was not getting the tariff on print cloths, and I have indicated to him that if he forms a trust that there is nothing in the tariff-bill that will prevent him from getting that. So there is an instance of an industry getting less money than is possible. Q. Have you any other instances? — A. The philanthropic work on the part of these corporations is very seldom, but I think you are perfectly right in the idea that they are not in business for their health, for selling their product for any- thing less than they can get. Q. Is it any more reasonable to believe that such would be the case than it is to believe that the laboring men of the country, if they have the fixing of their own wages, would fix that upon a basis that would be agreeable to all? — A. Oh, I do not think they could do that. Q. Neither do you think that the other side could do it? — A. What was the other side to do? I was not quite clear about that; what did you say about the other side? Q. I say neither do you think, from what you say, the other side, the manufac- turing people, could fix a price that would be equitable and .iu.st? — A. No. Q. (By Mr. Farquhar.) In answer to that, you think capital is just as equita- ble as labor? — A. More so. ALL INDUSTRIES EXCEPT SUGAR REPINING ARE INORDINATELY PROTECTED. Q. You spoke of American industries that w(>re inordinately protected by the tariff. Will you please mention a few of them, 3 or 3 of them? — A. I can only do it in a general way. that all those which have a protecti(m of over 10 per cent are inordinately protected. Q. Can you not mention some business, as you have a very close acquaintance with the tariff'? We ha\-e a great many trusts being formed' in New Jersey, and people do not know what they are; and from your wide experience I should like you to name 2 or 3 of the inordinately protected industries of America.— A. Well, I have said already that the re is only one that is not, and that is the sugar industry. All the rest are. That embraces 3 or 3. THE SUGAR COMBINATIONS: HAVEMEYEE. 135 Q. All the rest, you think, are?— A. All the rest are; that certainly embraces 2 or 3. Q. You make a broad assertion, which is hardly as clear as a good manv of your answers have been to-day. Now. in your essay as read here to-day and in your testimony, I presume that you have stated business propositions; that you have no theories to advance, but that it is the practical business of the country that you have presented to us? — A. Yes. I hope the commission will expunge ever^'tliing that is objectionable. [Laughter.] THE TRUSTS A NATURAL EVOLUTION. Q. You are aware that there is a notion in the country that these companies and combinations are very much in the character of commercial conspiracies; that is the general opinion about trusts? — A. Yes. Q. You take this view of it, do you not, that as a business propositiim a trust. or combine, or great capitalized association is simply the survival of the fittest in business? — A. Precisely. Q. Exactly, and on that you rest all your political philosophy, that the best is going to Vidn in the long run? — A. Yes. Q. And the most money is going to have the best of it in any market? — A. I had rather have the brains than the money. Q. You need the brains and management ;is well as the money? — A. Yes. Q. And there ought to be an open field for one hundred and fifty million equal to one hundred and fifty thoiisand? — A. Yes; providing- the Government does not step in and say: "My dear fellow, you are going into business? Yes. Whether you need it or not, I will give you 50 per cent, and I am going to give it to you whether you want it or not. Go after it and fleece the public to that extent.'' You eliminate that from business, and hands off. Every fellow for himself and the devil take the hindmost. Q. Now, another question, not so much on business. Do you think that when you advocate these great combinations and powerful commercial bodies, take it all in all, it is serving the well-being of the people of the United States to have that class of great associations in it? Does it serve the well-being of all? — A. Elimi- nate the advantages under the tarifl: and it is the proper thing. It furnishes to the community, the mass of the people, all products at the cheapest pnssible price, and that is what they are interested in. If I pay a man si. 50 a day, and he can buy from a trust his sugar, his milk, his beef, or anything he uses at prices in all things cheaper than he was able to do before, he saves and makes money as against forcing him to buj' from this wonderful individual you are talking about, that must be supported or maintained by a wet nurse called the Government. I tell you, gentlemen, the day of the individual has passed. Q. (By Mr. Kennedy.) The wet nurse is the United States. Is that what you mean? — A. Yes; I call the wet nurse over 10 per cent of the tariff, although I still have to go on my 8 per cent. Q. (By Mr. Farquhar.) That does not seem to answer the question. "We have in this country, speaking broadly, bills of rights that apply to every individual, and one man's dollar is just as good as another man's dollar unless there is a lien or a judgment back of it. Every man has the right to his liberty and his pursuit of happiness and his business. Now, the broad qiaestion put to the American people is this: Are not the great combinations that you speak of against the well being of the people of the United States and the individuals that are in business of the same character in the United States? — A. If the mass of the people profit at the expense of the individual, the individual should and must go. Q. You have mentioned the fact of the consumer profiting from the lowering of prices. You have also given testimony here that you have only lowered prices when competition hit you; there was neither philanthropy in it nor sentiment. Do you mean to say that about this?— A. I told you that the business of the Sugar Company was conducted on lines that furnished the consumer cheajier sugar than he had been getting, consistent with a fair profit on the capital and the extent of the whole business, and that we had been seriously interfered with lately by the competition of outside refineries. Q. (By Mr. Kennedy.) Has there been any dangerous outside competition'? — A. Oh, most dangerous and ruinous. DIVIDENDS and STOCK OP THE SUGAR TRUST. Q. (By Representative Livingston.) Did you answer or not the question: What were the dividends paid by your company; what per cent? Do you mind answering that? — A. The question as to what we have paid has not been asked. 136 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I think it has averaged about 10 per cent on the entire capital; 7 per cent on the preferred and 13 on the common; that makes an average of 10 on the whole. C^. Now will you mind going a step further and say what your profits for 13 months were? — A. I wish I knew. Q. ( By Mr. Phillips. ) Have you stated the amount of capital stock in the Amer- ican Sugar Refining Company? — A. ST."), 000, 000. Q. (Bv Representative Livingston.) One thing further. Did you pay the last dividends but of the earnings or out of the surplus?— A. I did not mention that. Q. Do you mean to say you would not like to answer that? — A. i mean to say that 1 did not mention it. Q. (By Mr. Phillips.) Do you refuse to answer that question? — A. Ithinkithad better remain as it is, Mr. Chairman. EFFECT OF THE TARIFF ON SUGAE. RESUMED. Q. (By Mr. Jenkr.) I want to see if we can bring out a little more clearly your views with reference to the present tariff and the tariff of one-fourth of a cent a pound which you have advocr.ted. Under present conditions, as you have empha- sii5ed.theie is no foreign refined sugar imported. Do you think that, if the price here were to go ii]), so that you could make what you consider a fair profit for the American Sugar Ri 'fining Conipi<,ny , refined sugar would be imported? — A. It would not with a protection of one-fourth of a cent; it would otherwise, I think. Q. You think it would with a protection of one-eighth of a cent? — A. Yes. Q. That was the point, I think, that was suggested before. Now is it the com- petition that has forced prices down so low? — A. Local competition, yes. Q. The basis on which you fixed the price of sugar so as to return to the Amer- ican Sugar Refining Company one-fourth of a cent profit (which you said was your general principle) , was what you thought in the long rirn, taking possible competitors into account, would pay to the American Sagar Refining Company the greatest net returns? — A. Precisely. METHODS OF CONTROLLING TRUSTS OR INDUSTRIAL COMBINATIONS. Q. We have in connection with the railway system of the country the Inter- state Commerce Commission, and we have reports made to them with reference to the condition of the business of the different railroads. Can you give any rea- son why your business should not be made as open to the public as is the business of any railroad? I am not asking now for a technical legal answer, but for an answer on general business principles, the economic basis. — A. There is always an aversion on the part of business men to expose their business to the advantage of competitors, and it is most probable tliat in case they did give the Government an opportunity to examine their books their condition and methods would leak out to the injury of themselves and the advantage of their competitors. Q. Would they be likely to be injured any more than the railroads are? — A. Yes; railroads run in certain districts. It is difiioult to get a competing charter. Refineries can be built anywhere at any time. Q. Simply because railroads are more of a natural monopoly than refineries?— A. Yes; that is the way to put it. Q. Not. you think, that the people as a whole have any less interest in a sugar refinery as a consumer than they have in a railroad? — A.' I think people as a whole have mo!'e interest in articles that are a matter of food than thev have in matters of transportation. Q. So that, from the standpoint of the general public interest, if that can coimt for anything, there is more reason why the Government should get reports from the American Sugar Refining Company than from the railroads? — A. I think it possibly follows that where a corporation like the Sugar Company, or any other large food producer, takes on a quasi-public character, there is more reason why the public should know in reference to it. Q. You do not consider, then, that the American Sugar Refining Company is of a quasi-public nature?— A. Well, as far as that is concerned, considered from the public .standpoint, it is within their power so to consider it whether I want to or not. The power is there, and I have always maintained that we got this pro- tection law in the ccmfidence imposed in the American public, and they had the power to maintain or destroy it. If we could ever get beyond the senseless clamor against trusts, and could get the proper treatment of them into the deliberate consideration of those who have the matter in charge, I think the industry would be treated fairly. But votes will knock out framers of bills any time, and the votes have always been against us. THE SUGAR COMBINATIONS: HAYEMEYEK. 137 Q. Your own deliberate judgment is that if the inspection could be made fairly and honorably of the books of all corpora cicsns that are of this general nature, and if reports should be made regularly, it would be for the benefit of the people and presumably for that of the corporations concernei ly— A . It would be the means of gi'^'iiig those who had legislation in charge some more accurate data upon which to base their judgment and votes, and I really believe that until some such course is adopted industries in this country are in very great danger of very rad- ical changes. If the Republican party, while it is in power, would gradually reduce this inordinate protection that prevails, it would be a very wise thing. THE EFFECT OF THE TARIFF ON TRUSTS RESUMED. Q. (By Representative Livingstox.) I gather this to be the sense of your state- ment, that we have got protection so much from foreign competition that it has bred a species of domestic competition to the extent that it is about to smother the whole business. — A. That applies to the sugar business. Q. I understand. I want to ask you if it applies to every other protected indus- try in the country; if it applies to the Oil Trust, to all the trusts, every one of them? If I understand, the Sugar Trust, the Oil Trust, and every other trust that is under the protective system in this country has been bolstered up against foreign competition until they have built up a domestic competition which will absolutely throttle every one of them? — A. Unfortunately, you know, the trusts intervene there and knock that argument out. Q. Is not that the difficulty you are laboring under to-day? — A. Oh. precisely. Q. Now if Rockefeller were here I would ask the same question and he would answer the same as you do? — A. Well Rockefeller does not benefit by the tariff at all. I have got the tariff bill here and I looked it up this morning, and there is no tariff on petroleum. Q. You complain that you are not making money. The time was when you did make money. That is true? — A. Yes. Q. Is it the truth that under the protective system of our Government foreign competition has been so fought back and kept back that there has been such a margin of profit at home that we have been crippled or kept back from competing with them only by this competition at home? Is not that the trouble with the whole business? — A. Undoubtedly; but trusts intervene and correct it to the extent of the tariff. Q. You, then, take the position that a trust can intervene also and take the place of the tariff? — A. No, no; you and I fight each other to death under a pro- tective tariff. Now, we get a protection of 'i cents and we heal our differences in 5 minutes. Q. In other words, by combination you get rid of the trouble? — A. By the trust; that is what these combinations are called, aggregations of capital which are usu- ally known as trusts. Q. I put those two things together, first that the protective system has brought such domestic competition that you are compelled to form a trust to keep each others' throats from being cut? — A. That is just the case with sugar. Have I not just told you that prior to the formation of the Sugar Trust 18 companies went out of business, failed, were ruined, and that is the advantage of the tariff? But if you do not stick to real protection in itself, but give these producers 40 to 60 per cent, then they are bent on mulcting the public. The great trouble is the tariff, and there you are. Q. (By Mr. Jenks. ) I judge from your answer to Colonel Livingston's question with reference to the gradual reduction of the tariff that you possibly did not mean in your statement that 10 per cent was to be taken literally, applying all the time? — A. I mean that 10 per cent expresses the real difference between the cost here and abroad. I had to fix some figure, and I said about 10, because I believe that is so. In some cases it might be 15 or 20, and I said in sugar it is 8; but I did not mean to propose anything to be introduced into tariffs that are going to be radical or injurious. There should be enacted into law now some remedy against this inordinate duty or protection. Q. And speaking broadly, you think 10 per cent would be as near it as anything that can be stated in general terms?— A. Yes. methods of controlling trusts resumed. Q. One word further with reference to the question of publicity. If I under- stood you correctly, you would yourself favor any bill that should be introduced that would provide for public reports of all corporations if you thought the law 83A 10 138 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. woitIcI be administered fairly and honestly? — A. "Well, that requires more thought than I am able to give it at the moment. Of course my individual opinion might be one thing, and as a representative of the American Company without being charged with permission to make any statement, it might be another. I can see no real harm in exposing the affairs of a corporation to governmental inspection, providing some means can be provided to protect that exposure from the advan- tage of the conapetitors. Q. (By Mr. Farquhar.) You would say that, on the same line as bank exam- iners do their work, the credit of the concern should not be given away, nor its manner of doing business, but an examination as to the character of the business proper itself is right; is not that it? — A. I will state broadly that where a corpora- tion is dealing particularly in things that are essential to the benefit of mankind- clothing, fuel, oil, sugar, rice, food — anything which is peculiarly, as I have described it, of a quasi public character, it would be beneficial to the public to have them all under governmental siiperintendence. Q. (By Mr. North.) Will you answer one question more? Do you export any product of the American Sugar Refining Company? — A. We export molasses. Q. No sugar? — A. No sugar. Testimony closed. Washington, D. C, June 15, 1S99. TESTIMONY OF JAMES N. JARVIE. The commission met at 2 o'clock p. m., June 15, 1899, Second Vice-Chairman Gardner presiding. Mr. James N. Jarvie, 71 Water street, New York City, was sworn and testified. Q. (By Mr. Jenks.) Will you be kind enough to give your full name and address to the reporters? — A. James N. Jarvie, and my summer address is Glen- ridge, N. J. Q. And your business address is?— A. 71 Water street, New York City. member of the firm of areucklb brothers. Q. You are engaged in the sugar-refining bu.siness?— A. That is one of the departments of our business. Q. You are a partner in the firm of Arbuckle Brothers? — A. I am a partner in the firm of Arbuckle Brothers. Q. How long have you been engaged in the sugar-refining business?— A. Prac- tically since 1897: that is, we started to build a refinery in January, 1897— plans, etc. Q. When did you begin to put the product on the market?— A. August, 1898. THE MARGIN BETWEEN RAW AND REFINED SUGARS. Q. At the time you started to build a refinery and for some time before what had been the margin between raw and refined sugars?— A. About 90 points. Q. And what has been the margin since you began putting your product on the market?— A. When we started to sell sugars the margin was between 80 and 90 points; since we have been selling sugars the margin has gotten down as low as 32 points; to-day, or yesterday, it was 51 points. Q. About what time did this cutting in prices begin?— A. I should say in Sep- tember, 1898. Q. Very soon after you began putting your product on the market'— A. Yes. Q. Did you begm cutting in order to dispose of your product?— A. I don't think we did. We followed the prices made by the American Sugar Refining Company. Q. You have done that regularly— let them fix the prices, you following'— A. We have done that regularly, with perhaps an exception. Where we knew they were cutting prices secretly we made the price an open one. Q. But you have never made a price lower than their open market price, unless you had reason to believe they were cutting secretly?— A. No, never THE MARGIN NECESSARY FOR A PROFIT. Q. . About what do you consider the margin between raw and refined sugar nec- essary for a sugar refinery to make a profit?- What is the lowest margin on which one can i-efine sugar and get out even, without losing money'?— A Well I will have to say from 50 to 60 points. ' ' THE SUGAR COMBIXATIONS : JAEVIE, 139 Q. There is more or less variation in the cost of refining?— A. Yes. Q. "What are some of the cironnistances that affect that?— A. Well, generally the amount that a refinery tnrns out compared with what they can turn out. Q. Speaking generally, then, y(m would say that when the margin gets below 50 cents a hundred the presumption is that the refineries are running at a loss? — A. Yes. Q. At the time that you started in with your refining business you said the mar- gin was in the neighborhood of 80 to 90?— A. Yes. Q. With the margin at 85 or 90, you would say that the margin of profit is about how much? — A. Well, if it costs 50 to 60 cents to refine, it would be the dif- ference between that and 85 points ; that would be from 25 to 35 points. Q. What do you mean by a point? — A. One one-hundredth. Q. The fair presumption woiild be, then, that while the American Sugar Com- pany were selling sugars with the margin from 85 to 90 they were making some- what more than one-quarter of a cent profit? — A. I cannot answer that question. I do not know what it costs them to refine. Q. Since you have been running your refinery have you been in conference with the American Company withreference to consolidation, agreements on prices, and so on? — A. No. COST, CAPACITY, AXD OUTPUT OF REFINERIES. Q. In order that one may be able to make a fair judgment with reference to capitalization, it is necessary to know something vnth reference to the cost of building refineries. What, in your judgment, at the present time would be the cost of building a modern up-to-date refinery that would be able to melt a million pounds a day? — A. I should say 82,000,000; but the location of the building would change that somewhat. If the buildings are on the river front, of course it is more expensive to get foundations, and that might be changed, owing to locations. Q. In this estimate of 82,000,000 you are not including the real estate? — A. No. Q. About how many barrels of output would that be — a million pounds melt- ing?— A. About 3,000 barrels. Q. (By Representative Livingston.) He does not say whether that is daily, weekly, or monthly, or what. Q. (B3' Mr. Jenks.) I had spoken of the daily output; you mean about 3,000 barrels a daj'? — A. Yes. Q. The American Sugar Refining Company was made up of a number of differ- ent establishments working in harmony. In your judgment, are there any special advantages as regards the cost of refining from a number of separate establish- ments working together? — A. Under some conditions there might be. Q. For example? — A. But, if you want to compare it with our business Q. That is perhaps the most definite way; yes. — A. I don't think they can refine sugar and sell it any cheaper than we can. Q. Your establishment, you would say, then, is large enough and so equipped that you can have all the advantages from division of labor, and so on, that they can? — A. We think it is. Q. Can you give us any information with reference to the present tariff on sugar, as to whether it is sufficient to cover the difference between the cost of refining abroad and the cost of refining here?— A. Well, I have been too short a time in the business to express an opinion on that. I should prefer to have others speak on that who have been in the business longer than we have. THE COST OP refining SUGAR. Q. Are you familiar with the cost of refining abroad?— A. I am not. Q. (By Representative Livingston.) What is the cost of refining sugar in your plant? — A. I would rather not answer that. Q But I want you to answer it.— A. I think that is giving our competitors an advantage that you should not ask us to do. I have answered the question that we could refine sugar and sell it as cheaply as the American Sugar Refining Com- pany, and I think that should be sufficient. ^ ^, ^ ^ ■ ^ Q. Why not answer the question as to what it costs?— A. Is not that sufficient answer? „, ^ , ■ -^ j_ Q No sir- it is not.— A. Then I can not give it to you, sir. 0' You said that it costs no more in your plant than it does in the Havemeyer plMit They can not have any advantage of any answer you might make to this question. Why not answer it?— A. Because we might be doing it for less than they were doing it; that would be an advantage. 140 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Suppose they were? — A. I don't think it is necessary to make our business public; we are not a corporation; we are a firm. Q. I understood yon to say, in answer to a question by Mr. Jenks, that there never had been any attempt to reconcile the difference between the Arbuckles and Havemeyer combination. Is that your answer? — A. "Well, I don't think he put it exactly that way; did lie? Q. I put it that way.— A. We have had 50 people make the attempt we pre- sume, for stock-jobbing purposes. Arbuckle Brothers are in the sugar business to stay in the business. Q. I understood that; but so are the American in the coffee business to stay, too. Now, what is the basis of settlement between yoii two? — A. We have no basis of settlement. THE COFFEE BUSINESS. Q. (By Mr. Jenks.) Perhaps you will tell us with reference to the coffee bnsi- ness, since the American Sugar Refining Company went into it, what the prices of green and roasted coffee in the form in which you sell it were at the time you went in and what the prices are now, and what has been the apparent effect on the business of the American Sugar Refining Company going into it. Will you be kind enough to make a brief statement covering that question? — A. The Amer- ican Sugar Refining Company, we believe, bought the Woolson Spice Company in January, 1897, or December, 1896. The price of roasted coffee at that time was about 15 cents; the price of green about 10 cents — that is, the grade it is presumed they were using. The price to-day of roasted is 8i, and the grade they are using is about 6 cents — grade of green coffee. Now, our price of roasted at that time was 15 cents, and the grade of green we are using is now more than 6 cents in value. Our price for roasted is 9 cents; but it is only fair to state that itwasnot the so-called coffee war that reduced the price of coffee. Q. What was it? — A. Why, it was the increased production of coffee all over the world. The coffee crops have increased from 11,000,000 to about 15,000,000 bags in the last 3 years. Q. That would reduce the price of green; how about the margin between green and roasted? — A. On percentage theire is very little difference; that is, 6 cents for green and 9 cents for roasted is 50 per cent; 10 cents for green and 15 cents for roasted is 50 per cent. You must bear in mind that a i)Ound of green coffee only turns out — or 100 pounds of green coffee only turn out H4 pounds of roasted coffee, and there are other things with reference to the manufacture the prices of whioh are fixed. Q. How about the profits at the present time as compared with what they were earlier, at the time the American Sugar Refining Company went into the busi- ness? — A. Much less. PRESENT CONDITION OF THE SUGAR BUSINESS. Q. (By Mr. Kennedy.) May I ask: Are the Arbuckle Brothers making money now out of the sugar business?— A. If you mean to-day, I can not tell you that. I have answered that it took 50 to 60 points of a margin between raw and refined to make a profit on sugar. Now, the margin to-day is 50 points, but it has only been that for the last week, Q. (By Mr. Jenks?) Befoie that?— A. Before that it was 40 points and a few weeks prior to that it was ■-i'i points, so it is rather a difficult question for me to answer. Q. For about how long a time has the margin been below 50 points?— A. I should say several months. Q. (By Mr. Kennedy. ) Then as the American Sugar Refining Company is pay- ing dividends on a large overcapitalization, is it not very i)robable that it is losing money to-day in the sugar business?- A. I do not want to sav anything about the American Sugar Refining Company; I know nothing about 'it bevond published reports; we have no connections with them whatever and know" nothing about their bu.siness other than their being competitors. Q. (By Representative Gardner.) As an abstract question, you would say that a company refining sugar at this time and selling it at 30 to 40 points above the cost of the raw were losing money, would you not?— A. I am under that impression. Q. (By Mr. Jenks.) About what is your output in barrels per dav?— A. At this time from 3,800 to 3,50(1 barrels. p yi ^ Q. (By Mr. Kennedy.) What is your capacity?— A. Under favorable condi- tions, about 4,000 barrels. THE SUGAR COMBINATIONS: JARVIE. 141 Q. Can you state anything about the output and the capacity of other inde- pendent refineries?— A. lean not; I can not say what their output is or their capacity. I don't know. Q. Do you believe that the American Siv^ar Refining ConiDany has an output of 90 per cent of the consumption of the country?— A. I heard it was so stated here yesterday. Q. I want to ask your opinion about it. — A. I don't think they have; but of course I don't know. Q. (By Representative Livingston.) What per cent of the output do you send out? — A. You mean to say the output of the country? Q. The consumption.— A. Tlie consumption of sugar is supposed to be about 2,000.000 tons. It ^^uU vary from that this year; the consumption seems to be larger than last year. C^. What percentage of that do you put out? — A. If we have a capacity — do you mean to say capacity or what we are really selling? Q. What you do, not what you can do. — A. We refine as much as we can sell. Q. (By Mr. Jenks.) Do you recollect about how much it was last year? — A. I can not tell you that. Q. (By Mr. Ratlhford.) I would like to ask the witness as to where he finds a markot for his product — western markets entirely? — A. No; all over the coun- try, east of the Rockies; it dexiends entirely upon railroad rates of freight. Q. In your market, then, extending all over the country, you meet in competi- tion the product of all other refineries in the country, do you? — A. It depends upon the rates of freight entirely. We have sold sugars in San Francisco. NO FOREIGN COMPETITION AT PRESENT. Q. Do you come in competition with the products of foreign countries? — A. Yes; when they are here. Q. When are they here? Where do you meet them? — A. The margin between raw and refined has been so small that there has been no foreign refined sugar here this year. Q. Then you are not affected in your sugar business by any foreign competi- tion'? — A. The margin has been so small that it has been impossible for foreign refined sugars to come in. Q. (By Mr. Jenks. ) Do you recollect about what the margin was at the time the last foreign sugar was coming in? — A. I can not tell you. Q. You have not that in memory? — A. No. WHY THE ARBUCKLES WENT INTO THE SUGAR BUSINESS. Q. Is not the house of Arbuckle Brothers a general grocery house? — A. Arbtickle & Co. was the original house of Arbackle Brothers. They started a wholesale grocery in Pitt.sburg in IS.oy. They came to New York in 1870 and made a specialty of coffee, of roasted coffee in pound packages. Q. You have the Pittsburg house yet? — A. Yes. Q. It is a general wholesale grocery house? — A. Yes. Q. You went into the sugar-refining business simply as an auxiliary or adjunct to your general trade? — A. We went into the general sugar-refining business because in our coffee business we had bought a machine for filling, packing, and weighing coffee, and we thought we could adopt the same for sugar. We started to buy sugar from the refineries, from the different refineries in ISii:^ or ISD-t. to develop that industry. We ran it for 3 or 4 years, and found we could not make any money out of buying sugar from the refineries and putting it up in that way and then selling again to wholesale grocers, as we had to compete with other refineries as to price, etc., and we came to the conclusion that the only way to make any money was to build a refinery of our own. Q. On account of this patent?— A. Yes; which we did. Q. Are you the exclusive o--\'ners of that patent?— A. Yes, we are. Q. Have you had offers from competing companies to take a share in the patent itself?— A. No, sir. „ „ , , t Q. Did the American Company ever make you any offer at all tor the use ot that patent?— A. Not that I am aware of. -^ ^. , ^r Q. The use of this patent gives you a considerable margin, does it not.'— A. JNo, it does not. . . , , . . t, • t j. 6. But for your own trade it is a positive advantage.'— A. It is an advantage because no one puts up sugars in that way but ourselves. Q In that form for the consumers?— A. Yes, the American Sugar Refining Company recently, as well as other outside refineries, have put up sugars in 2 and 5 pound cotton bags to compete. 142 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. RELATIONS WITH THE SUGAR TRUST. Q. (By Mr. C. J. Harris.) Did you have any trouble with the American Sugar Eefining Company in handling their sugars that led you to start this new plant?— A. We could not make any money out of it. Q. Are wholesale grocers who handle this sugar making any money at pres- ent? — A. I think they are. Q. Is there any contract which provides that they shall only handle that con- cern's sugar, or any restrictions of that kind?— A. I don't know of any suoli contract. Q. (By Mr. Faequhar. ) While you were a purchaser from the American Sugar Refining Company you had no arrangement of that kind, did you? — A. No, sir; none whatever. We had no advantage over any other wholesale grocer. Q. Wholesale grocer in New York State or elsewhere? — A. No. Q. (By Mr. C. J. Harris.) Since you have established your works and since you started building what has been the attitude of the American Sugar Refining Company toward you? Will you describe that briefly? — A. I don't know any other attitude toward us than that of cutting the price. Q. Has not their attitude been an attempt to crush you out of business? — A. If the cutting of price is that, yes. Q. Is not that about as good a way as any? — A. I think so. Q. And as effective? If they can compel you to run business for nothing long enough that is about as effective a mode of procedure as could possibly be adopted, is it not? — A. Well, when a great company like that is selling 90 per cent of the total product at a loss and letting outsiders sell only 10 per cent, I do not think the outsiders are going to suffer very much. Q. You do not think the outsiders are going to suffer very much? — A. No; not in proportion. Q. Well, they simply lose on 90 per cent and you make nothing on the 10, so I do not see that it makes much difference between you. For instance, in the Chicago markets, both companies, your own and the American, had quite strong opposition a short time ago, did you not? — A Well. I do not know that — yon mean besides the other outside refineries? Q. I mean from the independent refiners there. — A. The independent refiners, no; I do not think there is any trouble between them in that market any more than any other. Q. There was not? — A. No. Q. Was there not a possible push in the Chicago markets within some months where Arbuckle Brothers came in open competition there with the American Sugar Refining Company? — A. We have been in open competition v?ith them in all markets. Q. There was no particular overdevelopment in the Chicago matter at all?— A. No. Q. (By Representative Livingston.) Dcjcs the American Sugar Refining Com- pany, or Havemeyer enterprise, have any advantage compared with you in freights? — A. I do not think that they have. Q. (By Mr. Farquhar.) Since 1896. say, how many new independent refineries have commenced business? — A. The New York Sugar Refining Company and ourselves. Q. (By Mr. Jenkk.) This New York Sugar Refining Company is the Clans Doscher Company?— A. Claus Doscher; yes. These are all I recollect; I know of no others. COST OP REFINING SUGAR RESUMED. Q. (By Senator Mallory.) What does it cost in this country to refine sugar from the average 'J6 polariscopic test of raw sugar centrifugal?— A. I think I have answered that (luestion by saying from 50 to 60 points, or one-half to six- tenths of a cent per pound. In other words, if raw sugar costs 4^ cents a pound, it will cost over 5 cents up to 5 1',,",,. Q. That is actual cost? — A. Yes. Q. Do you refine raw sugar from beets as well as cane sugar— both?— A. We do. Q. Do you know what it costs in Germany to refine sugar from the same stand- ard of raw sugar?— A . I do not. In Germany they refine sugar directly from the beets. They have a different ijrocess entirely. Q. They refine beet sugar directly, I believe?— A. They do not require any bone black, which is quite an expensive item in the refining of sugar. THE SUGAR COMBINATIONS: — J ARTIE. 143 Q. You do not know, then, whether they make their refined sugar at a cheaper rate relatively than we do?— A. I do not know, but I do not believe they do. Q- In Q-ermany, I believe, they have a bounty on all refined sugar exported?— A., xes. NO FOREIGN COMPETITION AT PRESENT RESUMED. Q. I understood you to say there was no foreign competition at present in refined sugar m this country? — A. Yes. Q. "When was the last foreign competition that you had to compete with?— A. Well, we never have had any foreign competition since we have been in the busi- ness. The margin has been so small that there has been no opportunity to bring in the sugars, that is, any amount of them. A small amount may have drifted in, in some way or other. Q. Do you apprehend that there will be?— A. Not until the margin gets greater than it is to-day. Q. At what figure of margin would there be a probability of foreign competi- tion coming in?— A. I can not answer that definitely; I do not know; we have not been long enough in the business to know that. THE TARIFF. Q. (By Mr.PAEQUHAR.) As a business proposition, is it the price of the raw product of the American Sugar Kefining Company, or is it the tarifE of one-eighth of a cent that excludes foreign refined sugars? Is it the present cost of the raw sugar or the tariff of one-eighth of a cent that keeps out the foreign refined sugars from the American market?— A. I think it is the margin between raw and refined sugars that keeps them out, and I think if that margin were increased by one-eighth of a cent there would be but little come in. Q. (By Representative Livingston.) You mean to say it is the tariff that keeps it out; that is, the tariff is so low? — A. Under ordinary conditions, yes; the tariff being low would not keep it out. Q. Is it not low now? — A. I am not familiar enough to answer that question. GENERAL IMPRESSION THAT IT IS NOT SUFFICIENT. Q. (By Mr.FARQUHAR.) You can not answer that question, whether the pres- ent tariff is insufficient to keep out the foreign refined sugars? Insufficient to keep it out of itself? — A. As I said before, we have not been long enough in the business to answer that; if we had been, I could answer it. I can give you the impression that prevails among sugar men generally. Q. That is what we desire. — A. That the tariff is not sufficient. Cj. (By Senator Mallory.) The reason why there is no foreign competition is ascribable to the low rate at which sugar is sold in this country at the present time, as I understand it? — A. No; Lthink it is ascribable to domestic competition. Q. Domestic competition? — A. Ye.s. Q. (By Mr. Jenks.) Just a little further. You say that the prevailing impres- sion among the refiners is that the present duty on refined sugar, above that on raw sugar, of substantially one-eighth of a cent a pound, is not enough to keep out foreign sugar. Is the prevailing opinion also that this discriminating duty in favor of refined would be sufficient if it were raised to a quarter of a cent a pound? — A. A quarter would help. Q. Would that be sufficient? Is that the general opinion? — A. I think it would. Q. You think that the addition of another eighth would afford effective pro- tection — you think that is the general impression? — A. I think so. IF THERE IS NO FOREIGN COMPETITION, WHY SHOULD THE TARIFF BE INCREASED? Q. (By Representative Livingston.) Right there on that point. If the eighth produces a lot of domestic comj)etition, why would you have a quarter? — A. I did not quite catch the gist of your question. Q. You had agreed before my question that an eighth was not sufficient to keep out the foreign competition, and the reason why it was kept out was the domes- tic competition. Then, if under only an eighth differential on refined sugar the domestic competition is so great that it keeps out foreign competition, why would you suggest a quarter? — A. Well, I would say that the eighth has nothing to do with the domestic competition. 144 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You get out of it in that way. Is not this true, that when these sugai- refineries were combined, constituted, or organized, that the rate on sugar was very high, and that after these combines came into existence it lowered the rate, and that was the trouble with the domestic plants in this country, the lowering of the rate, that is what produced the trouble in this country between the domes- tic enterprises, and brought this throat-cutting and slashing business? — A. No. Q. What?— A. I do not think that had aiivtliing to do \\'ith it. Q. (By Mr. Je:jks.) Do you recall what the tariff on refined sugar was in 1887, when the Sugar Trust was" formed?— A. I do not: I was not in the sugar business at that time. Q. And you do not remember? — A. -I do not lemember. Q. (By Mr. Faequhak.) Is not it the genei-al opinion among refiners that the cutting of rates in refined sugar in the United States was through the combine throttling, as they call it, all c.impetition? Was not that what brought down the rates of refined sugar in this country? — A. Do you mean to say the prices now between refineries? Q. Ye.s. — A. Why. of course it is comioetition. Q. Entirely? — A. Yes. Q. (By Representative Livingston. ) Ask him how that competition was brought about, when you get right dov^n to ic. Q. (By Mr. Farqohab.) Now, the commission would like to know justexaotly how tJiis competition came about, for and ar!,'ainsf the American Company and the American Company as agaiuist ad outside c >ncerns? — A. I shall answer for our own concern ; and 1 have answei ed that the reason why we went into the sugar- refining business was that v/e had a machine that we thought, as a matter of con- venience to the storekeeper and to the consumer . as well as on the lines of economy, would allow us to enter the sugar business. That is the reason we went into the sugar business. Q. (By Mr. Jenks.) And the cutting of prices began with the American Sugar Refining Company? — A. I believe so. Q. And you have regularly fol]ov\red their prices? — A. Yes. Q. (By Representative Livinustox.) Would you mind answering this ques- tion? Will you be able to follow the reductions if they continue for many months?— A. Well, the future is a sealed book. Q. (By Mr. Farquhar. ) In your pi-esent frame of mind will you be able to follow them anyway? — A. We are going to stay in the sugar business. Q. (By Mr. C. J. Harris.) What has been the reduction since you commenced up to the present time? We hear that there has been a serious drop in the price of sugar. NovvT, I would like to know about how much it is. — A. You mean the margin between refined and raw suca.r? Q. Yes. — A. Well. I think I have answered that; I will answer it over again. When we started, in September or August, l8'.)S, the margi!i was between 80 and 90 points, and since then it has gotten down as low as 32 i)oints. To-day it is 51 points. Q. (By Representative Livingston. ) You mean 32 cent-: on a hundred pounds?— A. I mean 33 cents on a hundred pounds. Q. (By Mr. C. J. Harris. ) The American Sugar Refining Company, then, made, during most of its career since it has started, 90 points, you mean? — A. That is a matter of record, but I can not recall it. Q. (By Representative Livingst(.>n.) That is how they got that surplus? WOULD AN INCREASE rN THE TARIFF HELP THE REFINERS? Q. (By Senator Mallory.) I understand that, in your view, the present tariff of one-eighth is too small; that a ({uartei' would be better. Novi^. supposing Con- gress should impose a tariff of 1 cent instead of one-eighth of a ctut. under that tariff would you be able to do business more profitably than y(.iu do now?— A. Well, I have said that the competition at the moment was all domestic. Of course, if you make the difference 1 cent instead of one-eighth of 1 cent per pound, you would practically eliminate the foreign competition. Q. Well, it is practically eliminated now, is it mu?— A. Caused l^y domestic competition. Q. Well, whatever it is caused by, there is no foreign competition?— A. At the uKiinent, none. Q. There would be no foreign competition under an increase, say, of one-half a cent or 1 cent; could not be, I suijpose?- A. I should not think so; mj. Q. Now, what I want to ask is, if the l)usiiiess in ^vhioh you are engaged could be conducted more profitably under such a rate than under one-eighth? ' In other THE SUGAR COMBINATIONS: .TAEVIE. 145 words, would you be able to ma,V.e more money out of tlie business under a tariff of 1 cent or a half a cent than you do under an eighth of a centV — A. That is a question I can not answer. Trade conditions woutd answer that, but I can not. Q. Would you answer A. Trade conditions would answer that, but I can not. THE TARIFF AT PRESENT OF NO ADVANTAGE. Q. Wh-j,t I want to get at is whether you derive any special benefit from this one-eighth of a cent that you are gt-tting now; whether that is really anything beneficial to your business. It is not sufficient, as I understand, to keep out foreign competition. Wlrat keeps out foreign competition, according to your idea, is the domestic competition that reduces the prices, and therefore the foreign refiner can not get in and compete. Now, if that one-eighth does not keep out foreign competition and there is no means of suppressing the domestic competition, what benefit is the one-eighth to you at all? — A. There will not be any as long as domestic competition :_;oes on. Q. Would an increased tariff rate have any efi^eot in suppressing or reducing' the domestic competition? — A. I do not tliink it would. Q. Then there is no 'way, so far as you see. that the present condition can be bettered by any legislation in regard to the business? — A. No: I believe that the less legislation about the matter the better. Let the Ameiican conditions work out their ov^n salvation. THE EFFECT OF REMOVING THE PRESENT TARIFF. Q. One moment. You think that the taking off of that one-eighth duty would affect your business? — A. Well, that is pretty line; I can not answer that question. Q. It has been stated here that it would be absolutely destructive. — A. I can not answer that, Senator. I want to make the commission as fully acquainted with everything they want to know as I can, and I do not decline to answer the question. Q. I understand that. — A. I want to make it perfectly clear. I want to make you perfectly familiar with it. Q. (Bv Mr. Conger.) Would you have gone into the businc-s of sugar refining last year if there had been no tariff or no differential of one-eighth of a cent?— A. I can not answer that question. If you will excuse me, I should like to explain why I can not answer that question. Of course, it takes 18 mouths to build a sugar refinery. Now, our plant would have been ready, and perhaps as a matter of pride we would have gone in whether there was any profit in it or whether there was any duty or difi'erential on foreign refined sugars or not. That is the reason I can not answer. Q. (BvEepresentative Livingston.) If Congress should raise the difi'erential from one-eighth to 1 cent at its next session, the Senator asked you what effect that would have. Is not this true that it woidd completely shut out all foreign competition and quadruple domestic competition?— A. I will not answer about the quadruple part, but I will answer about the other. Q. How would it enhance domestic competition or increase it?— A. It would not increase it at all; the profit would be too great. Q. Too great?— A. Yes; it would be made too great if the competition all came from foreign sugars; but I have answered more than once that the competition is among the domestic refiners, and therefore that will make the price. Q. That exists on the one-eighth?— A. No; not on the one-eighth at all. It exists on the entire amount of sugar sold. The domestic competition to-day is on the 100 per cent of sugar sold in this country. Q. Answer this question. Take the one-eighth off; will that lessen the domes- tic competition?— A. To-day? Q. Yes; take off the eighth.— A. To-day I do not think it would. Q. Free sugar would not lessen it?— A. Not to-day; no, sir. Q. Well, would it do it next year?— A. Well, that I can not tell yau. WAYS OF GETTING RID OP COJIPETITION. Q. (By Senator Mallory.) Do you know of any other way of getting rid of domestic competition than by combination?— A. Yes. O What is it?— A. I think that you would get rid of competition it one man did not want it all— if he were willing to let the others live and get a fair amount of the business. 146 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. I understand the great evil to-day with the sngar-refining business in this country is free competition. In otlier words, for some time past sugar refineries have been doing busines.s at a loss. I appreciate, not only from what you have said, but from what other witnesses have said before us, that there is over-oom- petition. Now, it would seem that no legislation can diminish the competi- tion. We know that by combination competition can be reduced or concentrated in the hands of a few or even of one. Is there any other method by which it can be done that you know of?— A. Why, yes; I could answer by saying it would be lessened if the American Sugar Refining Company should be willing to sell less than 100 per cent of all the sugar sold in this country. Q. That would reduce it?— A. That would reduce competition if they would be willing to sell less than 100 per cent of the sugar sold in this country. Q. That would be relying, of course, I suppose, on the philanthropic spirit of the American Sugar Refining Company. The only way, then, you know of reducing competition is to appeal to the philanthropy of the American Sugar Refining Company? — A. Well. I wotild not want to appeal to it. Q. (By Representative Livingston.) Is it not true, as a general proposition, that the only way to elinrinate competition in any line — whether it is in sugar or any other line — is by combination? — A. I believe it is one of the ways; I do not mean to say it is the only way. Q. The Senator asked you if you could suggest any other way except humani- tarian philanthropy? — A. I have said, a desire on the part of the largest in the business not to want all the business. METHODS OF PACKING SUGAR. Q. (By Mr. Jenks.) Is all of the refined sugar that you sell, or the most of it, put up in barrels, or do you sell some of it in large sacks? — A. The greater part of the refined sugar is sold in barrels. Q. Do you know whether that is customary with the foreign refiners? Do they sell in barrels or in sacks? — A. Mostly in bags or sacks. Q. So that one advantage which they apparently have over their American com- petitors is the package in which it is sold. Do you know about the relative cost of the sacks as compared with the barrels ? — A. Well, I doubt if there is very much advantage in the bags ; it is exceedingly small. Q. (By Representative Livingston.) The waste in sacks is considerably larger than it is in barrels ? — A. Yes, and the cost of the sacks is considerable; they have to put sugar in double sacks : the greater part of the refined sugar brought to this country is put in double sacks. Q. (By Mr. Jenks.) Do you, yourselves, sell any sugar in sacks, so that as regards your own business you could answer definitely as to the relative cost of putting it in sacks and barrels ? — A. We sell some in this country. The sack that is sold weighs or holds just about a htmdred pounds of sugar. Now the sack that comes from the other side holds usually ;M0 pounds. Q. As regards your own sales, yoti say there is no practical saving, or only a very slight saving, between selling in sacks and selling in barrels? — A. Yes. Q. If you should sell in large sacks like those that are used by the foreign refin- ers, would you not make a saving of several cents? — A. It would be very little. It is a package that does not carry well on a railroad and does not handle conve- niently. Q. So that, so far as that one point goes, you think there is practically no advantage that the foreign refiner gets ? — A. No. METHODS OF DOING BUSINESS. Q. (By Representative Livingston.) Will you please explain to the commission how you meet the competition of the American Sugar Refining Company at any given point ? Take any point you please to illustrate how you meet their compe- tition.— A. We sell at the same price, and we believe we make sugars equally good, if not'a little bit better, and we have customers who think the same thing. Q. If you sell at the same price, what inducement do you give buyers for changing their custom and their business instead of holding to the American ?— A. I have said that we make what we think is a little Ijetter sugar. Q. You make better sugar ? — A. Yes. Q. Have you your sugar so branded that the consumer as well as the wholesaler and retailer can discern between the two? — A. The consumer, of course, when he buys 2 and r, pound packages, will know if he buys Arbuckle Brothers' sugar, and the wholesaler will know it. The consumer vtdll not know it, of course, if he buys THE SUGAR COMBINATIONS: POST. 147 out of a barrel, unless he asks the retailer to show him the head of the package, which he does not often do. Q. Do you give the same commission to your agents that the American Com- pany pay?— A. We believe we do. Q. (By Mr. Jenks. ) Perhaps you will explain to us what your method of sell- ing is; whether you give rebates to the wholesale dealers; whether or not you have the factor system, and so on?— A. We sell our sugars through wholesale grocers exclusively, and they get a rebate of three-sixteenths of a cent per pound. If they buy in lots of 100 barrels they get 1 per cent extra, and if they pay cash instead of taking 30 days, they get 1 per cent for cash discount. Q. Are they required to make an afBdavit that they have held the price that has been quoted?^A. Not to us. Q. You never have asked them to make an affidavit?— A. No; not in the sugar business. Q. Do you in the coifee business?— A. No; in the coffee business there are no rebates such as there are m sugar. Q. (By Representative Livingston.) How is that?— A. I say there are no rebates in coffee such as are given in sugar. When a man remits for his bill he remits the net price. Q. Well, if I understand it, the purchaser, the wholesale grocer, has this ad- vantage in buying from you over and above what he would have in buying from the American Company? — A. No. Q, What?— A. No; he does not. Q. (By Mr. Jenks.) In selling your sugars do you employ any traveling sales- men, or do any special advertising? — A. Some, but very little. Q. Do you employ traveling salesmen? — A. No, sir; we do not. We may have one or two men that are not out for sugar. Q. They are out for the general business? — A. The general business. Q. Including sugar? — A. General business, including sugar. Q. And the advertising for your sugar business is mostly advertising in trade journals? — A. Yes: we have advertised but very little. Testimony closed. Washington, D. C, June 16, 1899. TESTIMONY OF MR, JAMES H. POST, BROOKLYN, N. Y. The commission met at 11 a. m., June 16, 1890, Vice-Chairman Phillips presid- ing. Mr. James H. Post, after being sworn, testified. Q. (By Mr. Jenks.) What is your full name? — A. James H. Post. Q. And your residence? — A. Brooklyn, N. Y. BUSINESS OF THE WITNESS. Q. What is your business? — A. I am a commission merchant in sugar and molasses. Q. In what special way are you engaged in the .sugar business; will you exijlain it to us in some detail? — A. We are commercial agents of the MoUenhauer Sugar Refining Company, located in Brooklyn, N. Y., and of the National Sugar Refin- ing Company of Yonkers. N. Y. Q. You sell their entire product? — A. We buy all the raw sugar used by each refinery, and sell the product of each refinery. PRICES OF SUGAR SINCE 1887. Q. Can you give us a statement with reference to the prices of refined and raw sugars for the period covering the time since 1887, when the Sugar Trust, as it was in those days, was organized? — A. Only from the figures prepared by Wil- lett & Gray, which are considered as nearly correct as anyone can secure them. I have a copy of their annual report, if you would like to have it, on both. Q. Yes; I should be glad to. — A. I notice in one of their statements in the report of January 5, which I brought along, the averages as near as artyone can give them. Q. Are these the average annual prices or average monthly prices? — A. It gives the average annual prices. 148 HEARING iS BEFORE THE I^^TDUSTRIAL COMMISSION. Q. For hov: long a period? — A, For a period of 9 years; from 1890 to 1898. Q. Have you any information with rsferenoe to the prices of sugar for a period before the organization of the Sugar Trust in 1887 ? — A. I liave no record in regard to that. Q. What is your opinion with reference to tlie margin between the prices of raw and refined sugars after the organization of the Sugar Trust in 1887; was that margin imn-eased or lessened? — A. I see the average, according to these figures, shows a decrease in the margin of about 14 cents a hundred. Q. That takes into consideration how long a period before the organization of the combination? — A. I think it says 7 years. Q. Do you recollect, yourself, what the course of prices, or what this margin was from year to year, so you coald state whether there was an immediate increase in this margin after the formation of the combination? — A. I can not tell without referring to the reports on file. Q. This decrease begins, I believe you say, in 1890? — A. In 1890; and they give the average before that for a \srhile. It does not give the year ISOO — I believe that is the vear. Q. Can yon compare the figuj es there for the years 1890, 1891, 1892, 1893,,1894, comparing the margins between the raw and refined for a jjeriod of .^) or 6 years, beginning with the earliest figure that you have? — A. Compared with the earli- est, for raw sugar, it is, in 188i), 5J cents. Q. Give lis tiie margins, please, between the ravvr and refined, if they are indi- cated? — A. No, they are not; I will ha^•e to determine each one. Q. If you can? — A. I see in 1889 it was 1.21: shall I give more? Q. If j'ou will, for 3 or 3 years, yes. — A. In lyji) it was 0.78; in 1891 it was 0.78; in 1S9'2 it vv'as 1.0;^. Q. One year more, if you please. — A. 1893. 1.16. Q. For 2 years, the years of 1891 and 1892, the margin seems to be decidedly less than for the year preceding or for the 3 years succeeding. — A. Yes. EE.\SONS POE THE CHANQ-E IN THE MARGINS. Q. Have you any opinion with reference to the cause of tliis lessened margin in these years? — A. There was a change in the methods of the tariff' that accounts for part of it, probably. Q. Can you e.x;plain that? — A. Of course if the tariff was decreased, and it is possible that the changes about the month it occurred would show just about how the average was, you vjould have to go into detail. I do not know the exact date of the tariff change. It was changed in 1891: 3 cents per pound duty was taken ofl"; then. August 28. 1894, there was 40 per cent ad valorem put on. Q. W-da there any change of the duty at that time that would effect the differ- ential lietween the refined and raw?— A. It would effect the average; it may have been 'ivith the longest series the duty was on or the shortest series the month it was off, and tins averagi.' is for the year. So it would not show unless you take it by dates. (^. Was there any further cliange that would account for the increase in price for th"se 2 years? — A. The increase in the nrargin? Q. The increase in the margin, I mean.— A. In 1894 it was 40 per cent; in August. 18.)4, we had an additional 40 per cent duty: that would of course change the average for the year considerably. Q. The increase in the margin came before that time, did it not?— A. The year before. Q. Do you recollect the additional com4oetition that came in during the two years of 1890 and 1891 in the sng,i,r-j-eSning industrv?— A. I think the Mollen- hauer Refinery was organized in l.s90; the National Refining Company in 1893; I think the McCahan Refinery was builfin 1892. Q. The lowe'-ing of prices seemed to be in 1890 first, did it not?— A Yes Q. Covering those 2 years. 1890 and 1891?— A. Yes. Q. Do you remember about wlieii the Spreckles Refino'v of Philadelphia began to work?— A. It was about th;!,t tiuii'. They had lieen building fc>r some years. I think they commenced to work probably in 1890. I h;vve not the dale here. THE MARGIN BETWEEN RAW AND HEFrNEI. SUGAR AT PRESENT. Q. How does the margin betwe^^n ]-aw and refined sugars at the present time compare with the margin of a year ago?— A. In :\Ihv, 1898, the net price of granu- lated was .""i.os and the price of ravv- sugar about 4.:il. That is 77 cents margin. I have it in months if you want it. THE SUGAR COMBINATIONS: POST. 149 Q. At the present time what is the margin?— A. 0.51 of a cent, taking the cen- trifugal as a basis. Q. This date, when the margin was seventy-seven, yon say was what? — A. May 19, 189y, and it did not change very mucii until October or "November. Q. Suppose you give us the margin iii September, then in Octrjljer and Novem- ber?— A. In September it was about 90 cents a hundred. Q. And then you said it began to decrease?— A. In October I think the average was probably .53 cents; I think it was. Q. And what has been the general course: y(5n need not figure it out for every month, but what has baen the general course since that time — since October, 1898?— A. There have been times when it has been as low as 83 cents, and at the present it is 51 cents. Q. Has it been .jl cents to your knowledge since it dropped in October? — A. Yes. Q. What, in your judgment, has been the chief cause of this decrease in the margin? — A. Competition of other refineries. THE WAY THE PRICE OF REFINED SUGAR IS FIXED. Q. In what way is the price of refined sugar particularly regulated; made known? — A. It is usually announced at the oflfioe of the American Sugar Refining Company at 9.30 or 10 o'clock in the morning, and telegraphed to the various brokers all over the country; if the other refiners have changed their prices that is announced, too — or a little later — and also if they change sometimes in the middle of the day, as trade conditions warrant. Q. You speak of the prices being announced by the American Sugar Refining Company. Is it usually true that the prices they fix are followed by the other refiners? — A. Usually so; yes. Q. Almost exactly the same? — A. Yes. Q. The other refiners wait until they know the prices fixed by the American Sugar Refining Company and then they fix theirs? — A. It does not follow that other refiners always change prices when the American does, because there are times when the refiners may have a surplus of refined sugar that they want to continue selling, and there may be times when one refiner has a surplus. The conditions are just regular trade conditions, and vary from week to week. Q. But in the main the others follow the American in your judgment? — A. Yes. Q. When there is a condition such as you have just described — when one refiner has a fairly large stock that he wishes to dispose of — what is the difference in the prices? — ^A. It varies from one-sixteenth to one-eighth. Q. It hardly ever goes above one-eighth? — A. Not above one-eighth. Q. By giving some advantage in the terms of delivery he may take orders without any change in prices? — A. Yes. Q. You would say that in the sale of refined sugar there is what we might call free competition from day to day regularly? — A. Yes. Q. Will you explain just what you mean by that, because you stated a moment ago that regularly the American Sugar Refining Company fixed the prices and the others followed — will you explain what you mean by free competition under these circumstances, where practically all refiners follow the lead of one? — A. The question of preference of course plays a very important part. Some grocers prefer one brand of sugar over others. Very often the preference of brokers plays a very important part. The brokers are employed to distribute the sugars to wholesale gi-ocers and they are paid for doing it, but each refiner has a special broker, and this broker gives more attention to his sugars than to others. When there are changes noted they sometimes get the preference of the first intimation of the changes, and they are all the time wiring different parts of the country for orders and soliciting a little better terms on delivery or little concessions in some way. Q. You are yourself the selling agent for the MoUenhauer Refining Company and for the National Refinery? — A. The National and MoUenhauer. Q. As selling agent for both of these, do you always have the same prices for the products of both? — A. Not always, because, as happened quite recently, the National Refinery had sold its surplus of sugar and the MoUenhauer Refinery was running and wanted to sell more sugar; and therefore our prices for the MoUenhauer was one-sixteenth less. There have been times when changes have occurred in the market, when one of our refiners would say, in order to reduce stock to continue selling at the old prices and when we have sold what we want to we change it. Q. You have your prices for selling, then, fixed by the refiners you are acting 150 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. for? — A. No; we fix them, but of course after consultation with them as to the general policy of selling. We are perfectly free to change them as we think best. We are the ones to fix it, but it is done in consultation v/ith them very often, although sometimes changes have occurred some hours before they knew of it, because we thought it wise to advance or lower prices or to pay a little more for raw. Q. Have you acted at all as selling agents for the American Sugar Refining Company? — A. No; not at all. Q. Can you tell whether the Mollenhauer products are sold at all under any agreement with the American Sugar Refining Company? — A. I know they are , not sold under any agreement with the American Sugar Refining Company. Q. Do you know whether the Mollenhauer and National are entirely independ- ent of the American? — A. Entirely, yes; and I am as familiar with those compa- nies as anybody can be. THE COST OF REFINING SUGAE. Q. Can you give us an opinion with reference to the cost of refining sugar? — A. I know in a general way, although I do not claim to be an expert on that matter. I notice it has been stated here twice at least that it varies from one-half to six- tenths of a cent. Q. Is your opinion similar to that? — A. Yes. I had the general manager of one of our refineries figure it out for me. I supposed that question would be asked, and I asked him to put it down on paper. I will have to read it. Q. May I ask who gave you this statement? — A. George R. Bunker, general manager of the National Sugar Refining Company. Centrifugal sugars contain of — Pure sugar, about _ .per cent. . 96 Impurities, about do 3 Water, about do 1 100 The loss in refining is about, of sugar per cent. - 1 Leaving of pure sugar available do 95 Of this we get of — Granulated and yellow sugars, equal to pounds.. 93| Sirup do sl The sugar is combined with an equal weight of impurities, making about, pounds . _ 5 Taldng value of granulated at 5.375 cents grosser 5.08 cents net and sirup at 2 cents per pound, we have equal to — 924 pounds granulated, at 5.08 cents 84.699 2i pounds sugar in sirup, at 4 cents .10 4.799 Less .348 Expenses to be deducted; Brokerage, about J per cent Government revenue tax, J per cent Office expenses, J per cent Packages Wages, fuel, boneblack Repairs and sundries 4.451 SO. 04799 .10 .30 Granulated, say _ . , _ _ 85. 08 Results ~ '_ ''4! 45 Cost, say . Q. Will you be Irind enough to read the statement?— A. They take 96 test cen- trifugal sugar as a basis, and they figure that there is 3 per cent impurities and 1 per cent water in that, taking 100 pounds as a basis. THE SUGAR COMBINATIONS: POST. 151 The loss in refining is about 1 per cent, which would make tlip pure sugar obtained 95 per cent. By this they figure for convenience that it is equivalent to 93-i pounds of granulated sugar, including the yellows; figuring on a basis of pure granulated sugar. They figure that the sirup would be equivalent to 31^ pounds of sugar in the sirup; that is, combined with impurities, making about 5 pounds of siruj) altogether. For the pvirpose of this calculation they take the sirup as worth 3 cents per pound; that is, the siii;ar in it is worth 4 cents per pound. Taking the value of granulated sugar, when this was made up, granulated at of would be 5. 37."), or 5.08 net for granulated sugar, and the sugar in the sirup at i cents per pound, would give 93i pounds of granulated sugar at 5.08, which equals 4.699; 2i pounds of sugar in the sirup at 4 cents woald be 0.10, making 4.799. The expense to be deducted is brokerage, etc., 0.5 per cent, the government revenue tax, one-fourth per cent (you know there is a special internal-revenue tax on gross sales of sugar), office expenses, one-fourth per cent (all packages cost about 10 cents per hundred, say one-tenth of a cent, for that), wages, fuel, bone black, repairs, and sundries, about 20 cents per hundred, making the net result 4.45, as against 5.08 for the granulated, showing a difference of 0.63 of a cent per pound. Q. According to your statement then, if I understand it, the margin between the 96-degree centrifugal and the refined granulated would need to be about 63 cents in order to refine at a profit ? — A. On the basis of present prices, but on a lower basis of prices the margin would have to be less. Q. On the basis of present prices? — A. That is what he figures his sugar at. Q. Can you separate, without too much trouble, the operating expenses of refining from the loss that comes in the raw sugar, so that you can give us the cost of refining separate from the loss that comes in the changing of the raw to the refined? — A. It is about 35 cents a hundred, the cost of refining, and the dif- ference is the loss — about 28 cents. Q. Has this cost of refining, in your judgment, been substantially the same for some years or is it decreasing? — A. It varies slightly, according to the average raw sugar used, and then there is a slight variation in the results of refineries. Q. But further than that, have there been imjirovements in methods of refin- ing, improvements in machinery or otherwise, perhaps in the organization of the refineries, that have tended to decrease the cost of refining during the last 10 years? — A. Possibly in 10 years, but not in the last 5 years. Q. You think the cost is substantially the same now that it was 5 years ago? — A. I think so. Q. The statement was made here the other day that the aim of the American Sugar Refining Company has been to make a profit of one-fourth of a cent a pound and be content with that. According to the figures you have given that would require a margin of 0.88? — A. Yes. Q. In your judgment is this cost of refining that you have given us substan- tially the same for the refinery that you have quoted, for the American Sugar Befining Company, and for the other competing firms?— A. It is possible that the American Sugar Befining Company, or the Havemeyer & Elder house and the Spreckles house at Philadelphia can refine at a smaller margin than the others. Q. Will you kindly explain why?— A . The fact that they can run them to their full capacity. For instance, the Havemeyer & Elder house is supposed, with the refinery adjoining it, to be under one management, and to make 13,000 barrels of sugar a day; the Spreckles house is supposed to make 8,000 a day. There is some economy in a house of that size, I understand. I do not think it can amount to a great deal; I suppose 3 to 5 cents a hundred would perhaps represent the differ- ence, although that is only my individual opinion; I have no way of telling. CAPITAL NECESSARY FOR BUILDING .iND OPERATING A REFINERY. Q. Can you give us any information with reference to the cost of building refineries, and the amount of capital that is required to rim refineries of the aver- age size under normal conditions?— A. You want the cost separated from the land; of course that plays a very important part? . Q If you can make the separation, yes. Let us take a refinery substantially ot a million pounds' capacity.— A. That is about the size of the Mollenhauer and National- both of them are about a million pounds; that is about the size. O (By Mr. C. J. Harris.) Each one or both together?— A. Both together 2 000 000 pounds. One, the Mollenhauer, is about 1,150,000 and the National about 850 000 per day, a total of 2,000,000 pounds for the two refineries. The buildings and machinery for a plant of that kind, I believe, costs m the neighbor- hood of 81 500,000. At the present time it would probably cost more, on account 152 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. of the increase in the cost of the iron; of course they are largely built without any wood, that is. altogether iron and steel. Q. In your judgment then, to build at the present time a refinery of that capacity, what we would call an up-to-date refinery, with the later improvements, would probably cost somewhat more than §l,5!)0,000? — A. Probably $1,700,000. The land varies in value from $3.'50,000 to iSGOO.OOO, taking those two as a basis. One of them is locati-d right in the city of Brooklyn, near the water front, where land is valuable, and the other at Yonkers, where it is less valuable. Q. Can you now give us some idea with reference to the amount of running capital that is required in order to rvrn fairly satisfactorily a refinery of that capacity? — A. You mean taking one refinery? Q. Yes. — A. It would take somewhere in the neighborhood — carrying the usual stocks of raw with the usual credits that are given on refined sugai' — in the neighborhood of §2.000,000 for each refinery. Q. For each refinery? — A. Yes. Q. About what is the average amount of raw sugar carried; of course it varies greatly? — A. It depends on the market. I suppose the smallest quantity is in the neighborhood of 15 days' supply, which would be 30,000,000 pounds for the two. Q. The largest varies according to your idea whether the market is low or high?— A. Sometimes it is 3 or 4 times that; at present I think some of the refineries have 4 or .5 months' supply of sugar. Q. You would think, then, that a refinery costs, with the ground, in the neigh- borhood of 82,000,000, and ought to have, under ordinary business conditions, a running capital of something like .§3,000,000 in addition? — A. Yes. Q. About those figures? — A. About that; yes. Q. These opinions of yours, I judge, from the way in which you state them, are based on your experience in your own refineries? — A. Yes ; as to others I have no means of knowing. Of course there are credits which are used very largely at times which makes less cash necessary. Q. Owing to the conditions of business you may stock up with four or five times the usual amount so that credit is desirable? — A. Very important. SOURCES or THE SUGAR SUPPLY. Q. Where do you import the larger quantities of your raw sugar from? — A. The two r''fineries that we represent use largely cane strgars; but of course, during the last 3 years, when the product of Cuba has been so small, we have used a large propoition of beet sugars, and they are produced in Europe largely. Q. Can you tell the countries in Europe that send here the largest quantities of sugar? — A. I think this paper ' shows the product of the world and separates the product of each country. Q. Suppose you select the 4 or 5 leading countries that send sugar to the United States — beet sugar first and afterwards cane? — A. "We will say Germany and Aus- tria are the two largest. Q. (By Senator Mallory. ) Can you give the figures of the shipment from Ger- many?— A. No; I see the two countries are not separated here. It is a matter of record at the custom-house, of course. Q. (By Mr. jENiiS.) Of course it is a matter of convenience for us to put it in here; you would say Germany comes first and then Austria as regards the ship- ment of beet sugar?— A. Yes; very little French, hardly any Russian, sometimes some from Belgium and Holland. Q. These are substantially all beet sugars?— A. Yes. Q. Now as regards cane sugiirs'?— A. Well of course in normal conditions Cuba is a great source of supply. Q. Then after that?— A. I suppose you can count Java, where the crop is very large, and then the West India Islands, Demerara, and Hawaii. Q. Have there been heretofore large importations made from the Philippine Islands? — A. Quite large; yes, Q. Is there any difference in the quality of the beet sugars that come from the difterent European countries, or is the quality substantially the same?— A. I believe all beet sugar is substantially the same. Q. And if there is any difference the price, I suppose, evens it up?— A. Yes. 1 Weekly Statiatioal Sugar Trade .Journal. Willett & Gray, 91, !B Wall street, publishers. THE SUGAR COMBINATIONS: POST. 153 COST OF REFINING IN OTHER COUNTRIES. Q. Are you familiar with the cost of refining sugar in Europe?— A. Only from statements that I have seen. Q. Can you give us any information with reference to the apparent cost of refining sugar in Gemiany as compared with the United States?— A. I believe it is considerably less in Germany, because they take beet sugar and make it into refined in one process, just as they are tLsing in Nebraska, California, Michigan, and New York. There is no bone black used at all; it is a filtering process. That, of course, does not give as good a quality, but it answers the purpose. Q. Then you would say that if we wanted to import refined granulated sugar from G-ermany it would be inferior in quality to our refined sugar?— A. Yes. Q. Can you give an opinion that is at all definite with reference to the differ- ence in the cost of refining there as compared with what it is here — how many cents per 100 pounds?— A. Probably 1.5 to 20 cents a hundred pounds less than here. Q. Is the difference as great as that, in your judgment? — A. I think so; yes. Q. Does that include any dift'erence in the cost of the package in which it is put up? — A. Partly. Q. Will you explain to us what the difference in the package is?— A. The prin- cipal call for sugar in this country has always been in barrels which cost from 35 to 3H cents a piece. The foreign sugar is packed in jute bags, and therefore is less expensive. Q. Can you give any information at all as to the cost of those jute bags? — A. No. The refined sugar which is packed in bags in this country is in 100-pound bags, first in a cotton bag, and then a jute bag, which of course adds to the cost. Q. What is the cost of the bags that are used in this country? — A. For the same quantity of sugar, it is practically the same. We sell the barrels and bags at the same price, and in figuring the cost we think there is not enough difference to consider that at all between tlie bags and barrels we use. EFFECT OF THE SUGA.R TRUST ON THE PRICE OF RAW SUOAR. Q. Have you been able to trace any direct influence of the American Sugar Refining Company on the price of raw sugars? — A. They of course have a very large influence on it, because they are such large consumers of raw sugar; but they have not the power of making the price for any length of time for raw sugar. Europe with its larger production of beet sugar fixes the price. They make there, I think, nearly 5,000,000 tons of beet sugar, as against 3,000,000 tons of cane sugar produced in the world. Q. So you would say that the price of raw sugar is substantially fixed abroad? — A. Fixed in London, Germany, and France. Q. How long have you been engaged in the business of buying and selling sugar? — A. Our firm has been jn it for 35 years. Q. And you personally?— A. I have been connected with the firm 25 years— from boyhood up. Q. You have been actively engaged in that firm?— A. For the last 15 years; 10, say. Q. It has frequently been asserted that the American Sugar Refining Company, on account of the large amount it buys, has been enabled to exert a steady infiuence toward depressing the pi-ice of raw sugars. I should like to know if, in your judgment, this tendency has been appreciable from the time the Sugar Trust was formed?— A. I think it must have been, from the large amount of sugar they use. Q. Would you be inclined to think that the price of raw sugar has dropped or has been held, let us say, 10 cents a hundred less than it would have been if there had been the former competition among small independent establishments instead of one gTeat buyer?— A. No; I do not think the difference would have been as great as that; possibly one-sixteenth of a cent, and only for periods of a year. Taking the world as a basis, they can not affect it for any great length of time more than one-sixteenth of a cent a pound, because the product of sugar is not very much more than is required for consumption each year. The production is not increasing as fast as consumption is. I believe statistics show that. Q. You are referring now to the world product, or to the United States?- A. The world product. 83a 11 154 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. EFFECT ON THE PRICE OF REPINED SUGAR. Q. Ill your judgment has there been any restriction of the output of refined sugar in the United States for the purpose of keeping the prices higher than they other-wise would be — deliberate restriction of the output? — A. There is no doubt that at certain periods of the year when the consumption is less than it is at other times the production is curtailed, no doubt as a business principle, to meet the requirements. It is very evident that if we all should make all the sugar we could there would be no way of marketing it at a profit. Q. And in this adaptation of the supply to the normal demand the American Sugar Refining Company, I suppose, of necessity takes the lead? — A. There is no way of telling whether they do their proportion of it or not. I have no way of knowing. Of course we see the public statements from week to week of the meltings, as made up by Willett & Gray, and we know what our meltings are from day to day, but as to whether we are getting more than we ordinarily would have I have no way of telling. Of course, I do not think that the meltings are always stated correctly. I do not think it is possible to get at it, taking the country as it is. Q. This lessening of the output comes regularly, of course; when the price goes do^vn so that it becomes less profitable and more difficult to market then they lessen the output? — A. Naturally, when the profit is good we make all we can, and when the profit is not enough we make as little as possible. For some months past we have made very little. Q. Is your refinery running now? — A. The Mollenhauer is at present. The National will be in a few days. Q. About what proportion of its capacity is the Mollenhauer running now?— A. They are running full just at the present time, but taking the last 6 months I suppose they averaged, taking the two refineries, about one-third of their capacity. Of course it has been unprofitable. METHODS OP SELLING SUGAR. Q. Will yon explain to the commission the methods that are followed by the refineries and by yourself as agent of the refineries in placing your sugars upon the market? The factor system — does that exist yet? — A. That is in existence in some cities and some parts of the country, and up to the last 5 or 6 months has been the principal way of distributing the sugar. Q. Explain to us in brief what this factor system is?— A. I take to-day's basis as an average. The price of granulated sugar is 5J cents. From that we allow to the grocers, without regard to whether they are factors or not, three-sixteenths of a cent a pound, and if they buy 100-barrel lots we allow them 1 per cent trade discount and 1 per cent for cash in 7 days. They can avail themselves of this 1 per cent discount or not, just as they wish. At the end of the 3 months we send them a check for the three-sixteenths of a cent per pound commission, less 1 per cent, regardless of whether they have maintained the list prices or not. Q. The custom used to be to require an affidavit?— A. Some years ago we required an affidavit as a means of protection to the grocers, not to the refineries. You can readily see that the price at which the grocers sell sugars is of very small interest in one way to the refineries, but it is such a large proportion of their business— I think refined sugar is about one-third of their sales— and competition is so keen throughout the country to sell sugar that for a good while they did it without any profit. At their request this method of selling sugar was adopted by the refineries. It not only applies to sugar, but to a good many other articles. It covers also tobacco, coffee, and various articles. We believe three-sixteenths of a cent per pound pays them the cost of distributing the sugar and a little profit. It gives them a small profit, certainly as small as anyone would be warranted in doing business for, possibly l.i or 20 cents a barrel. Q. In your judgment is the price that is fixed by the refineries kept up fairly well by the wholesale grocers, since you have dropped the affidavit system?— A. I am sorry to say it is not, for their sakes, not for ours. Q. Among the grocers themselves, then, you think there is a great deal of cut- ting under these prices? — A. No doubt of it. Q. You say the grocers in a large proportion of the markets are selling sugars practically without any profit at all?— A. Yes; there are certain sections in the country where I think profits are maintained— New York, New England and Pennsylvania, but west of that, excepting in one or two States, I think the profit most all the time is nothing. Q. \ ou think in the eastern States they do substantially maintain the prices?— A. Yes. THE SUGAR COMBINATIONS: POST. 155 Q- ■^'^■6 there any other systems of selling sugar, factor systems, and so on?— A. There are different States that have systems of their own; take Ohio, for instance. It was found under some interpretation of the law that it was illegal to hold three-sixteenths of a cent commission and in that State we deduct from the bill instead of holding it, so that every grocer is allowed three-sixteenths right on the face of the bill. They have recently adopted a plan which they hope will be successful in helping them to maintain the profit on sugar. Q. Can yon explain to us what the plan is?— A. Well, I have two circulars here: they are printed documents and I think there is no secret about it. I am very willing to leave them here if you care to have them. Q. "Will you be kind enough to read them to us first, and then put them on file?— A. They are under date of May 18, and May 26, 1899. They are too long to read. Q. Give us the gist of them; it will be better.— A. The gist of them is that the State has been divided up into certain sections with a committee appointed for each section. They have resolved to maintain a profit of one-eighth of a cent per pound in these sections, and if it is found that any grocery salesman is cut- ting the price of sugar or coffee and it is proven that it has been cut. the com- mittee in that section notifies all the grocers to reduce their price to the price at which this grocer sold sugar, immediately taking away any profit in that section. That is the gist of it, I believe. (The two documents referred to are herewith attached.) [The Ohio Wholesale Grocers' Association Company, Columbus, Ohio, May 18, 1899.] [Please file for future reference.] To Ohio tcholesale grocers. Gentlemen: At a meeting of the wholesale grocers of Ohio, held at Columbus, May 9 and 10, 1899. a new code of rules and regulations was unanimously adopted. A part of article 4 of the new code reads as follows: ' ' The board of directors shall divide the State into six divisions, and shall appoint for each division a local board of three members." At a meeting of the board of directors held in Columbus May 18, 1899, the State was divided into the six divisions as provided in the new code and the following local boards of arbitration were appointed: No. 1 or northwestern district, composed of the following counties: Williams, Ottawa, Wood, Paulding, Allen, Wyandotte, Pulton, Sandusky, Henry, Putnam, Hancock, Crawford, Lucas, Seneca, Defiance, Van Wert, Hardin. Committee of arbitration for the above 17 counties: R. A. Hartley, chairman, Toledo, Ohio; J. M. Sealts, Lima, Ohio; W. T. Hughes, Van Wert, Ohio. No. 2 or northeastern district, composed of the following counties: Brie, Cuya- hoga, Geauga, Portage, Ashland, Holmes, Huron, Lake, Trumbull, Summit, Richland, Stark, Lorain, Ashtabula, Mahoning, Medina, Wayne, Columbiana. Committee of arbitration for the above 18 counties: J. H. Pitch, chairman, Youngstown, Ohio; H. R. Edwards, Cleveland, Ohio; August Dannemiller, Canton, Ohio. No. 3 or eastern district, composed of the following counties: Jeilerson, Harrison, Guernsey, Noble, Carroll, Coshocton, Belmont, Washington, Tuscarawas, Mus- kingum. Monroe, Morgan. Committee of arbitration for the above 13 counties: Eobt. McGowan, chairman, Steubenville, Ohio; Theo. Wiles, Zanesville, Ohio; W. H. Penrose, Marietta, Ohio. No. 4 or southern district, composed of the following counties: Meigs, Scioto, Ross, Hocking, Gallia, Pike, Vinton, Lawrence, Jackson, Athens. Committee of arbitration for the above 10 counties: P. M. Bovie, chairman, Gallipolis, Ohio; George Appel, Portsmouth, Ohio; Vaughters, Chillicothe, Ohio. No. 5 or southwestern district, composed of the following counties: Hamilton, Adams, Warren, Montgomery, Shelby, Clermont, Highland, Butler, Miami, Aug- laize, Brown, Clinton, Preble. Darke, Mercer. Committee of arbitration for the above 15 counties : W. W. Andrews, chairman, Cincinnati, Ohio ; O. C. Morrow, Hillsboro, Ohio ; John K. Mclntire, Dayton, Ohio. No. 6 or central district, composed of the following counties : Franklin, Greene, Logan, Delaware, Knox, Fairfield, Pickaway, Clarke, Union, Marion, Licking, Fayette, Champaign, Madison. Morrow, Perry. Committee of arbitration for the above 16 counties: Fred Shedd, chairman, Columbus; Ohio ; H. H. Eavey, Xenia, Ohio ; C. C. Stoltz, Marion, Ohio. Any complaints or violations on sugar or packaged coffee shall first be referred to a member of the local board of arbitration having charge of the division or district wherein the violation is alleged to have occurred. By order of the board of directors. Orrin Thacker, Secretary. 156 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. [The Ohio Wholesale Grocers' Association Company, Columbus, Ohio, May 26, 1899.] To all tvholesale dealers in siigai\ G-ENTLEMEN: After a full and fair discussion of the whole subject of sugar equality at a meeting of the new board of directors of this association, held at the olHce of the secretary on the 18th, the following resolution was unanimously adopted: [Copy. I ''Resolvetl. That we reinstate the equality plan for the sale of sugar in the entire State of Ohio on a basis that may be agreed upon." Suggestions were then entertained by the board from jobbers located in differ- ent parts of the State, after which the following was unanimously adopted: " Rcwlved, That the executive committee and the secretary publish a new rate book, in which the rates shall be graded gradually, beginning with a one-sixteenth ba,sis in northern Ohio, and as the central part of the State is reached a one-eighth basis, and the southern portion full equality. The same to take effect May 39, 1899." In accordance with the above order of the board of directors the new rate books have been prepared and the secretary has been instructed to send you to-day suf- ficient copies to supply each of your salesmen. The new rate books are to be used precisely as the old, viz: New York card plus the rate in the rate book oppo- site the town where sugar is sold, less local rate of freight, to be deducted from invoice. The committee desires to say further that under present conditions it is impos- sible to get support from the refiners in regulating the cutter and rebater. There- fore, it is left to the honor and good sense of each jobber as to whether or not a profit on sugar shall be obtained in the future. You see to it that your men do right, and carry out the rules and prices to the letter. Confide in your compet- itor, and believe every man honest until he is proven dishonest. All do this and we will have no trouble. The committee adopted a new rule for its guidance hereafter, viz: '■As soon as this office receives reliable information that sugar is being cut or rebated by any house or salesman at any given point, all jobbers who sell goods at the point where the cut has been made or rebate given unll be notified at once to rediAce the freight rate (naming the rate) to that particular point to an amount equal to the cut or rebate gii-en." For example, the price of granulated to-day delivered in Elyria. Lorain County, according to the new rate book is 5. -5.3. 11 any salesman should cut or rebate to a retailer in Elyria, say 30 cents per barrel, and your sale.sman sends you a report to this effect, examine the matter thor- oughly yourself fir.st,andif you are satisfied that a cut has been made, notify one of the members of your local board at once. The local board will then report the same to this office with recommendations, and if it is shown to the executive committee to a reasonable degree of certainty that a cut has been made the price will be fixed to all retailers in Elyria at 5.47, which, as you see, will make a reduction sufficient to meet the cut. So it will be seen that every house will be on exactly the same basis. The dishonest, as well as the honest man, will, of course, take the loss. The jobber should be very careful in making complaint. They should question the salesman who makes the change very carefully and be sure that it is well founded. You can see that if the complaint is acted upon by the committee it will mean a loss to every jobber selling sugar at that point. Any comphiiiits or violations on xiigar or package coffee shall first be referred to a member of the local board of arbitration having charge of the division or dis- trict inliereiii, the violation is alleged to have occurred. (See inclosed sheet for names of committee of arbitration of your district.) It is noiv i)i your luinds. Keep your salesmen straight and "don't jump at con- clusions." Take all of them into your private office and explain the situation. They are interested most of all. Be sure you are right before making complaint to your local board of arbitration. If a report of a cut should reach your ears investigate it thoroughly first. Tiicre irill be nothing to lose and everything to gain bij a little investigation. The plan to meet the rebater as outlined above has been in operation in the Chicagi) district for some time, and it has proven eminently satisfactory. Very respectfully, A. S. Hammond, Chairman, J. E. Weifpenbaoh, J. H. P.VDDOCK. „ „ „ Executive Committee. Oerin Thacker, Secretary. THE SUGAR COMBINATIONS: POST. 157 Q. Do you know how long a time this plan has been in existence? — A. I think only since May 26, or May 18, 1899. Q. Not long enough to see what the efEeot is likely to be? — A. In Chicago they have had practically the same system. Q. Have they had it for some time? — A. They have had it there for some time, and the Ohio plan follows that of Illinois, I believe, although I have never seen it so clearly stated. Q. Do you know whether this Illinois plan has been successful in keeping the prices uniform? — A. It has not been entirely successful in keeping the prices at a proiit; but whenever a cut of one-eighth was made the other grocers met it, and every single grocer would perhaps be glad to come back to one-eighth of a cent profit again; so on the whole it has helped to maintain a small profit on sugar. THE DUTY ON SUGAR — IMPORTATIONS OF SUGAR. Q. In your judgment the cost of refining sugar in Europe is considerably less than it is here. Does the present differential tariff in favor of refined sugar largely cover this difference in the cost of refining? — A. I believe it very nearly covers it. As to just what that differential is I am not able to say. It is a matter of record in the custom laws, you know, in countries that pay a countervailing duty. Q. I said differential duty on refined sugar? — A. I do not think one-eighth cov- ers the difference in the cost of refining between the United State and Europe. Q. So as far as countervailing duties are concerned, that is, the duties that are put on imported sugars to offset bounties which are given directly or indirectly by European systems; you think that this countervailing duty is substantially accurate? — A. I think so; yes. It was left open for some months until they could determine it accurately, and I suppose the 28 or 38 cents on refined is as nearly accurate as they can determine. Q. So that at the present time, so far as these European bounties are concerned, our refineries are certainly protected? — A. I think so. Q. Now, as regards the cost of refining, this differential of one-eighth cent per pound does not quite cover the cost?— A. No; it does not cover the difference in- this cost. Q. Can you express an opinion as to how much would be required to cover it?— A. I think I did state a little earlier 15 to'20 cents a hundred. I think that is as near as one can tell without going into a very difficult calculation. Q. You think, then, that it would not require 25 cents, or one-fourth of a cent a pound, in order to cover the difference?— A. I have an impression that the present protection to refineries, whatever that may be determined to be, is suf- ficient to enable us to compete with Europe. Q. Are there any importations of foreign refined sugars at the present time?— A. Well, from January 1 to May 25 I see the report is 1,602 tons; in 1898 there were 12,34-3 tons, showing the decrease in the 2 years of 10,641 tons. Q. What is the total amount consumed in tons?— A. In this country? Q. Yes. — A. Two million tons, in round numbers. Q. So that the importation of refined sugar here is merely nominal?— A. Yes. Q. Has that condition of affairs with reference to importations been continuous for some years back, or have there been periods of a few years when large quan- tities of refined sugar were imported?— A. Whenever the prices maintained by the refineries here are high enough to warrant buying abroad, it comes over, but as soon as the margin is reduced it ceases to come. Q. The reason, then, for the nonimportation at the present time is the very low margin between the raw and refined?- A. Yes. Q. Would you tell us at about what margin between the raw and refined sugars we begin to receive importations of refined sugar: I mean as a matter of history?— A. No, I can not tell because it is very difficult to arrive at it accurately. It would depend upon the surplus stocks in Europe very largely. If there is a large surplus you will find that instead of lowering their prices they would prob- ably ship it here, and if they only had enough for consumption on hand they would probably market it at home instead of shipping it here, so that it does not follow that the margin between the raw and refined would be the only reason that the refined would come here. . 4. ., j. Q Of course, that would not be the only reason, but, m your judgment, that would perhaps be the dominant infiuence?— A. I think that merchants and manu- facturers of all kinds seek the market where they can net the most money with- out disturbing their own local markets. Could you give your opinion— it would have to be somewhat general— as to the normal margin between the raw and refined at which we might expect imports'— A. I should think that if the margin between raw and refined was three-fourths of a cent per pound refined sugars would come here. 158 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Seventy-five one hundredths expresses substantially the cost of getting sugar from Europe, added to the cost, with a moderate profit, of refining there?— A. Not altogether, because in order to maintain their prices in Europe they would ship their surplus refined here to be sold, even if they had to sell it at a little less than they did there at times. COMBINATION AMONG THE SUGAR EEFINERS A BENEFIT TO THE COUNTRY. Q. From your experience in the sugar business for the last few years, do you consider that a combination of refiners, such as the American Sugar Refining Company, is to be considered on the whole a benefit or an evil? — A. I believe the results show that it has been a benefit to the country at large. Q. And these benefits are shown?— A. In the reduced price at which the con- sumers are getting their refined sugar and in the more steady employment of labor. Of course, the reduction in the margin of profit increases the consumption, and we believe in that way it is very helpful. Q. (By Senator Mallory.) If I understand that qixestion. you regard combi- nations such as the American Sugar Refining Company as the cause of all this reduction? — A. Well, personally, I think that the American Sugar Refining Com- pany has not used the power that it might have used to maintain exorbitant profits. I think it has kept the margin of profit where it paid well for the money invested, but has not soiight large profits over that. Q. I did not quite understand your answer or the question. I understood it to be that in your opinion combinations such as the American Sugar Refining Com- pany produce beneficial results in lowering prices and keeping up wages. — A. hi the way that particular organization has been managed, I believe the result has been beneficial. I am not referring to the efEect of trusts in general, but to that particular one. Q. Has the competition to which the Sugar Refining Company has been sub- jected in the last two years had anything to do with the reduction in prices? — A, It possibly has; but I think, by the policy which has been pursued, that the American Sugar Refining Company has realized that it is important to keep the margin of profit fairly small, and there is no doubt that competition, and there has been all the time more or less competition, has had its effect too. Q. In the event that the American Sugar Refining Company succeeded in sup- pressing all competition do you think that beneficial results would remain?— A. No, I do not; it would depend on who is the manager of it, but it is not natural. I think it would get a larger price if possible. Q. Have you heard or not the statement of the manager here that they were in business for business and not for philanthrophy? — A. (No audible response by the witness. ) Q. (By Mr. Farquhar.) When you made the statement in regard to the mod- erate prices charged by the American Sugar Refining Company does that cover the period between 1887 and the present time? — A. They have been in the organization since that time. It has varied in different years, of course, and things have come in to make the profit of the American in some cases larger than would seem natural, for example, in the purchase of raw sugar. They may be successful in buying raw sugars when the price is low, and they, having enormous capital, are enabled to carry it. There are certain seasons in the year when an advance in raw sugar would materially increase their profits. It would efEect the consumer, but prices advance without their control or without their influence. Q. Does the question of the tariff enter into the matter of the stock?— A. Yes. Q. How?— A. Naturally, when the duty was taken off we carried just as little as possible . When the tariff was going on we probably put all our mone v into sugar, and all our credit, in order to carry as much as possible. Q. The sugar business is conducted on the same business principles as the tobacco business, for instance?— A. Yes; I think it is. There are general princi- ples that they follow. Q. Is there any advantage in having the large capital that the American Sugar Refining Company has in buying stock and the raw material? Is it a rule in the business to carry extraordinary stocks at any time?— A. It is at times, because the cane crop of the world is marketed within a few months — January, February, March, and April- and at that time there is the greatest pressure always to sell, just as the greatest pressure to sell the beet crop would be in the fall. At those times they avail themselves of their immense capital to get as large a supply as possible at the lowest prices possible. Q. Then the Cdinmission should understand from vonr former answer that it is the principle of the American Refining Company tij control the market as much THE SUGAR COMBINATIONS: POST. 159 as possible and to get control of the price at a moderate per cent of profit? — A. I think so; yes. Q. Do you think that they have adopted that line of policy as a matter of safety against opposition or as a business method of getting an ordinary profit out of this large capital? — A. I do not doubt that the fear of competition influences them; it would anybody. They do not want to encourage other competition. The fact that the Arbuckle, the Doscher, and our refineries have been built since the trust was formed shows that capital is very willing to go into a btisiness where there is a margin of profit, and there is considerable risk with it, too, of course. COMPLETE CONTEOL BY ONE ORGANIZATION WOULD NOT BE BENEFICIAL, Q. Then, as another business proposition, suppose you are the head of a con- cern that is able to control 80 per cent of the whole output of the refined sugar of this country, would you regard it as a good business proposition on your own part for your board of directors to control by any possible means the other 30 per cent? — A. I should not think it was good business policy; no. Q. Would you please give your reasons why perfect control is not good business policy? — A. Perfect control of any article of universal consumption is a very dan- gerous thing for any company or any body of men to have. Q. (Interrupting). That is just what I want to get at .A. (Continuing). In my opinion we are all human, and we would naturally use the power it gave us. "We would be restricted only by the fear of competition. Q. "When you say a dangerous power for them to have, you mean dangerous for the people in general? — A. Yes. They might not all be as broad-minded as Mr. Havemeyer in managing the concern ; they might want to exact larger profits. Q. YoTi have noticed, I presume, in the public prints what he has said before this commission — that the profits have come from the consumer, and that it is their intention to control the market as widely as they can. Now, what I wish to know is what effect these independent refineries — there is, 15 to 20 per cent of refined sugar produced outside of the Havemeyer Company— have on the general market, on the consumer? What power through this limited attempt, you might say, have you to control prices? — A. We have not the power to control, but we have the power to influence prices. Q. (By Mr. Ratchford) . Do you think that power is in the interest of the con- sumer? — A. I think it is; it has been so. TOO MUCH COMPETITION IS HARMFUL. Q. If the independent refiners, producing 20 per cent of the sugar in this coun- try, have a beneflcial influence to the consumer, would not that beneficial influ- ence be increased from the consumer's standpoint if the number of independent refineries was double or treble what it is to-day?— A. It might be temporarily, but it is a question how long some of them would last. Some of them would have to go out of business because it would be made unprofitable. While competition is necessary to a certain extent, it can be too great. Q. What would cause them to go out, in your judgment?— A. Well, if there was more sugar made than could be used, we would naturally have to sell it for Q. The operation of the law of supply and demand?— A. It might take 2 or 3 years to do it, and it might take .5 years. It would depend upon how much money each one had to start with. RAW SUGAR INDUSTRY AT PRESENT IN A HEALTHY CONDITION. Q You said, I believe, earlier in your testimony, that the production of sugar was not increasing so rapidly as the demand?— A. I believe that is what the figures of the world show. „ . „ , ,, Q Well, what have the American Sugar Refimng Company, and other cracerns of its kind engaged in that industry, to do with bringing about that condition?— A. In reducing the output? O Either in extending the markets or curtailing the output.''— A. ihe great reason for the curtailing of the output of the sugar in the world has been the war in Cuba and the Philippine Islands. Cuba, some years ago, as is well known, nroduced 1,000,000 tons of sugar per annum. Their output for the last 3 or 3 vears has been 250,000 to 300,000 tons. It is very likely that m the next 5 years Cuba will be producing 1*000,000 tons of sugar. As soon as people feel that investments can be made there with safety there is money to go there to produce 160 HEAEINGS BEFOKE THE INDUSTRIAL COMMISSION. sugar. It can be grown there more cheaply than in any other place in the world, in my opinion. Q. Then, that situation would be present even in the absence of large combina- tions in that industry? — A. Yes. Q. It is due, is it not, in other words, to natural causes? — A. I think it has been an unnatural cause, war. Q. That being the case, then, the raw sugar industry is in a healthy condition?— A. Yes; I believe it is. I think it will be some time, probably 6 to 10 years, before the production of sugar in the world will be such as to reduce the price more than, possibly, half a cent a pound. I think the tendency will be, as Cuba increases her production, to reduce the price of raw sugar and in that way to reduce the price of refined sugar, and this country vnll be greatly benefited by the increase in production. Q. If the sugar industry be in a healthy condition, then, wherein is the neces- sity, in your judgment, for the formation of trusts or combinations in order to regulate production and control prices?— A. They do not regulate the production except in so far as they have the power to make a great deal more refined sugar than can possibly be consumed. Q. Did they not close down refineries? — A. Because they had capacity to make more sugar than the country could possibly consume. Q. Does that not regulate production? — A. Is there any business that is not regulated by supply and demand whether in the form of combination or indi- vidual? I do not know of any. Q. It is true all business is regulated by supply and demand; but in the absence of large corporations and trusts is it true that industries are closed dovsm indefi- nitely, and in some instances dismantled, the business transferred from one com- munity or one city to another? Is that true in any instances except under the operation of trusts or combinations? — A. It might not be transferred to other cities; they go out of business and fail. Q. (By Mr. Faequhar.) Do you know of any United States refiners that have any interests in Cuban sugar lands? — A. Not as refiners. Q. No, I mean companies, the American refiners, companies of any kind, have they any interest? — A. As individuals they have some interests. Some of our peo- ple own a plantation in Cuba, which has just recently been bought with a view of development. In fact, a cable came to us a few days ago offering a large estate that some of our people are going to manage. We believe that means good busi- ness under our Government. Q. Now, do you know or have you any knowledge of Mr. Havemeyer going into that? — A. No doubt Mr. Havemeyer has investments in Cuba entirely independent of the American Sugar Refining Company, just as any other individual might own a great many other things. His money buys it. THE PROFIT IN SITOAR REFINING. J^. You spoke of an ordinary refinery costing a million and a quarter? — A. A million and a half, I think I said. Q. A million and a half; and melting 1,000,000 pounds a day? — A. That is with- out the land, you mean? Q. For a working capital of that refinery you perhaps need about two millions?— A. Yes. Q. So that you take the whole capitalization, and it would be, say, four mil- lions? — A. Yes. Q. Now, out of your intimate knowledge of the whole sugar business, can you give this commission any idea how often a refinery of that kind could turn over its capital inside of 12 months? — A. They could probably do it from 4 to 6 times. Q. Four to 6 times?— A. Yes. Q. That comes from your 30 days' settlement, especially your short credits, does it not? — A. Yes. Q. The immediate return of the capital to your hands?— A. Yes; and the dis- count is made so much to the grocers that it is an inducement to them to discount their bills, because 1 per cent in 7 days is eciuivalent to about 13 per cent per annum if they take ;!(i days' time, and therefore it is best for them, if they can, to borrow— as they do in our large centers— the money at 3+, 4, and 5 per cent, according to their credt. Q. Now, if you are not giving away any confidence here, would you be willing to state to this commission what per cent that capital would earn; I mean in good prosperous times; would it turn over 2 per cent net?— A. Two per cents times would be 12 per cent a year. Q. Yes. — A. It would be more than that. THE SUGAR COMBINATIONS: POST. 161 9. How much more have you an opinion it would be?— A. Well, if the refinery paid 20 per cent a year on its stock (not on the four millions, I do not mean, biit as ours is capitalized at one million, although worth two millions) it would, on two millions, be equivalent to 10 per cent on the investment, which is certainly, in our opinion, little enough for the risk of the business in these times and for the ability it takes to manage it. Q. Well, you could safely say that in good times it would probably go up from 10 to 13 or 20 per cent? — A. Which would vary probably. It would vary, not perhaps altogether according to the profit made in refining, but according to the fortunate purchases of raw sugar, possibly. Q. (By Mr. Jenks.) You speak of the money that is made in the fortunate pur- chase of raw sugar and you have spoken of that quite frequently. You may happen to buy a large stock of raw sugar when it is low and then gain the benefit of the increase in price? — A. It is quite prominent in my mind just at present, because it has quite frequently been the case in some refineries. Q. It is also quite frequent for the reverse process to take place? — A. Yes; a great deal of money has been lost in that way. Q. You have spoken of one side, not of the reverse side? — A. It is possible; yes. Q. From your experience in the business, I judge from what you say, the capi- tal that is handled that way by the American refiners is more frequently handled to make a profit than a loss? — A. Well, there have been conditions in the last 6 years of changes in the tariff, war, and other conditions that have made it possible. Q. (By Mr. Phillips.) Can the refining industry be carried on without any tariff on sugar? — A. I think it would decrease very rapidly in this country and would be moved to Europe, to Cuba, and other countries if it was not protected. Q. How much tariff do you think is necessary to maintain the industry in this country? — A. Well, the figure, as I saw it stated" the other day, is one-eighth of a cent now. I think there is a little more than that protection in it; I think some- where from lo to 17 cents a hundred protection as against Europe. Under the great decrease in the production of cane sugars they have practically had the benefit (that is, Louisiana, the beet States, and the Hawaiian Islands) of this countervailing duty in the prices that they get for their products. Under condi- tions where we were using a very much larger per cent of cane sugar from Cuba, it would decrease somewhat. CONDITIONS OF LABOR IN SUGAR REFINING. Q. Are you informed in regard to the labor employed in the refining of sugar? — A. Only in a general way. Q. And the conditions under which they work? — A. They work under very much more favorable conditions than they did from .5 to 7 years ago. They have very much more thought given to their comfort. I think an average of 3 to 5 cents an hour more money is paid to-day than some years ago. That would be a matter that could be determined, but my impression is that it is about that. Q. (By Mr. Ratchford.) What wages do they get generally? — A. 1 think it averages now practically for the lowest paid labor from 15 to 18 cents an hour, and they have work Q. (By Mr. Farquhar.) How many hours a day do they work? — A. I think in most refineries they work on an average of 10 hours a day, but of course the length of the day varies. Sometimes they work 10 or 12 hours a day for a week and then they are thrown over to 8 hours, but I think they average about 10 hours a day. Q. Ten hours a day. How constant is that employment? — A. Pretty steady. Q. (By Mr. Phillips.) Are the laborers subjected to a very great degxee of heat?— A. There are a few men who are eraployed in the filter house, when per- haps for 2 or 3 hours a day it is necessary for them to be where the temperature is high; but from what I have seen those men are just as well pleased with that work — of course, it is only a short time— as where the men work in the cooler parts of the refinery. There are very few men required in that part of the refinery, of course, because the mechanical devices for handling charcoal are so perfect that very few men are needed. Q. What class of labor or what nationality is employed chiefly in the sugar refineries?— A. I think they are very largely German, some Irish; I think hardly any Italians; there may be a few. 6. (By Bepresentative Bell. ) You spoke of investment in Cuba by individuals engaged in the sugar business. Does that also extend to Hawaii?— A. The refinery that is located in California, I believe, has some interest in Hawaiian plantations Mr. Spreckles particularly. Q, What effect do you think the supply that would come from Cuba would have 162 HEARINGS BEFORE THE INDUSTEIAL COMMISSION. upon beet sugar production in this country? — A. Do you mean if the sugar of Cuba was admitted free? Q. Yes; I suppose it is the idea of the investors that it will be adpiitted free.— A. Not necessarily, because it can be grown so very much more cheaply than cane and beet sugar can be in this country that therefore we would want to have sufficient tariff to enable the cane and beet to compete with the sugars from there. Q. "Why? Would that be from the cheap labor there?— A. No: from the natural conditions of Cuba; they say it is the ideal place to grow sugar. CONDITIONS OF LABOR IN THE PRODUCTION OF RAW SUGAR. Q. What is the labor problem there?— A. Of course, it is very unsettled, but with the moving in of people from this country it will be very much changed. Q. You have no idea that the people in this country will ever go to Cuba to labor in the sugar refineries there?— A. I have an idea that the colored people of this country will find conditions so satisfactory that they will find a very accept- able and profitable employment there. Q. Your idea is that if we Americanize Cuba it will be through the colored people? — A. Under the direction of men who will have to direct them in the grow- ing of sugar. Q. What is the average wages paid on a plantation in Cuba and Hawaii?— A. I think in Ctiba it has been only 60 to 70 cents a day, but under the conditions that are ruling now and from the information I have received recently I think they are getting from §1.2,5 to $1.50 a day for labor in the field. Q. And a man furnishes himself, does he? — A. They did; yes. Q. On 60 to 70 cents?— A. They used to; that is, the food was paid for by them- selves. Q. About what part of the year do these refineries run; do they run con- stantly? — A. I think some of the refineries, of course, run constantly. Those that are the very best equipped are run constantly, except, perhaps, for three or four weeks in the year when they are cleaning up and repairing. The surplus refine- ries owned by the American Sugar Befining Company are only run during the season when the consumption warrants it. A REARRANGEMENT OF THE TARIFF WOULD BE DETRIMENTAL TO THE SUGAR INDUSTRY. Q. Now, it was said here the other day that the tariff was too low, and were it not for the tariff the refiners would have to go out of business. The same man who states that also states that the combination of sugar refineries never could have been built up bvit for the tariff. Is it your idea that a higher tariff than the present would cause an increase in the competition of refiners? — A. I do not think I am familiar enough with the conditions to express an opinion about that. I think there are enough refineries in the country to last for some years. Q. What induces you to believe that the tariff ought to be increased? I think you said it ought to be increased to 15 or 20 cents. — A. I said that I believed that the protection ander the present law is somewhere between 15 and 17 cents a hundred. Q. You did not express an opinion as to whether it was high enough? — A. I did not express any opinion in regard to it. Q. Have you an opinion on that sub.ject? — A. Well, I have. I think that any rearrangement of the tariff would be more detrimental to the business than any increase that would be apt to go to the refiners. I think this continuous discus- sion of the tariff and continuous unsettling of business conditions by this talk about the tariff, taking the average of years, is a detriment to the country. Q. The tariff has prevented the importation of refined sugar, itogether with competition, so far? — A, Yes; in a large measure. Q. And you see no reason why it should be increased? — A. Not unless condi- tions in other parts of the world should make it necessary to increase it. PRESENT CONDITION OF SUGAR BUSINESS THE RESULT OF SHARP COMPETITION. Q. You have declared no dividends on your stock so far? — A. Not this year, no; we always have paid dividends uji to this year. Q. Are your conditions harder this year than they have been heretofore?— A. They certainly are; yes. THE SUGAR COMBINATIONS: POST. 163 Q. That is caused by this very sharp competition?— A. It is; yes. I do not believe there is any refinery in the country that has made anv money in the last 6 months, except possibly that losses have been reduced by having cheap raw sugars which they have been able to market at a little higher prices than were ruling some months ago. Q. Do you have organized labor or unorganized?— A. 1 believe in one refinery it IS organized labor; in the other I believe it is not. Q. Is there any discrimination made between this organized and unorganized?— A. I think not. Q. Do you know about what proportion of the refineries are running now?— A. I know in a general way that the outside refineries are making as little sugar as possible, and the American Sugar Refining Company is making a good deal of sugar. Q. And the independents? — A. Are making as little as possible. Q. Still because it is not profitable?— A. And probably 10 per cent of the coun- try is being supplied by the outside refineries. Q. You are willing the American Sugar Befining Company shall lose as much money as possible?— A. We are willing they should have all the business, so far as we are concerned, at present prices. Q. Do you imagine they will destroy the independent refineries?— A. No: I think it VTill take 1.5 or 30 years at least, and that by that time they will adopt some other method. I think they will adopt some other method within the next 3 or 3 years, maybe the next 6 months. No one can tell. Q. Is your organization a company or a mere firm? — A. A firm. B. H. Howell & Son is a firm, a partnership. The Mollenhauer is incorporated under the laws of New York, and the National is incorporated under the laws of New Jersey. Q. You represent all those companies? — A. "We do; yes. Q. (By Mr. Farquhae.) Does the cheapening of refined sugar to the consumer result from competition entirely within the United States? — A. It does just at present; yes. Q. At present? — A. Yes. Q. And that competition could not be maintained without the presence of the independent refiners? — A. I think not. RELATION OF THE SUGAR TRUST TO THE INDEPENDENT REFINERS. Q. (By Mr. C.J. Harris. ) From your knowledge of the sugar refining business, does the American Sugar Refining Company control directly or indirectly some of these outside companies that appear, to the general outside public, to be inde- pendent? — A. I know positively that they do not control these outside refineries. Q. Not directly or indirectly? — A. Directly or indirectly. I am interested in 3 of them and I know who owns them. I know they do not control the Arbuokle and Doscher, the Nash & Spaulding in Boston, and the McCahan in Philadelphia, and they certainly do not control or own 3 or i? in Louisiana and Texas, and they certainly do not own or control the beet producers, and they do not control the California Beet Sugar and Refining Company, which is owned by Hawaiian plant- ers largely. Q. (By Mr. Phillips.) Is the American Company making any money at the present time, have you reason to believe? — A. My information is that they are not making money. Q. Are they paying dividends? — A. They did declare a dividend a short time ago. Mr. Havemeyer has given a very good reason for that, I think, in his answer. It is very easy for a board of directors to declare a dividend; then the question of paying it, of course, is a business proposition. Q. (By Mr. Farquhar.) One is an executive act and the other is a business proposition? Q. (By Mr. Phillips. ) Do you mean to intimate that they declare it and it is not paid to the stockholders? — A. No; I believe they can declare a dividend out of their surplus and pay it; they certainly are able to pay it. Q. Your judgment is that they pay it out of their surplus, and not out of their present earnings?— A. I think the dividend for the last 3 months will be paid out of their surplus. Q. (By Mr. Kennedy.) Do you know what their surplus is? — A. No; I do not There are a good many thousands of people in thi.'i country that would like to know, especially those who operate in the stock. I do not know as they would like to know either, because then there would not be the uncertainty there is about it now, which is a great source of income to the stock manipulators. 164 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE BEET-SUGAR INDUSTRY IN THE UNITED STATES. Q. (By Senator Mallory.) Can you state tlie relation which the beet sugar manufactured in this country by the direct process bears to the total manufac- tured product in this country?— A. There has been a statement prepared here by Willett & Gray showing the beet crop estimated for this year, taking each State by itself, and it is about as nearly correct as anything I have seen. It shows that there are 11 States in which factories are operated. They expect the product for this year to be 123,000 tons of sugar. Q. One hundred and twenty-two thousand tons. As compared with the produc- tion in this country of refined sugar, that is something less than one-twentieth, is it not?— A. Five per cent would be about 100,000 tons, and this is 125,000, say. Q. This is what I am referring to. Is the beet sugar refined by the direct proc- ess?— A. It shows that Michigan is going to make 33,000 tons; California, 54,000 tons. Q. Can you give any idea of the relative increase, in the last 2 or 3 years, of the product of that kind of sugar?— A. Last year it was only about 34,000 tons, partly in consequence of a drought in California; the year before it was about 41,000 tons. Q. Has it increased very greatly this year?— A. Especially in Michigan and New York, where they have a State bounty, there is a very important increase. Q. What would be the effect of sugar from Cuba in case we annex it— the eft'ect of free sugar from Cuba? Would it be deleterious to that industry in this country? — A. I think in 5 years — it would commence to decrease immediately. Q. As soon as sugar commenced to be imported freely? — A. I think it would decrease here in Louisiana, and in beets, because we can not compete with Cuba in growing sugar. Q. Well, the sugar production of Louisiana is comparatively small in compari- son with the consumption here? — A. It is about 320,000 tons, I believe. Q. (By Mr. Fakquhar.) Do you know whether there is any limit of these State bounties on sugar — beet sugar? — A. I think they are only paid from year to year. It takes legislation each year to pay it. Q. Do you know as to the progress they are making? — A. Not exactly; no. As I understand it, Michigan is the one that is increasing most rapidly, and they pay it from year to year, as New York does. Q. (By Representative Bell.) When was that report made up? — A. It was made up this year, quite recently. Q. Does it credit anything to Colorado? — A. Yes; they expect to make 3,000 tons this year, using 30,000 tons of beets, with 3,000 tons of refined sugar output. In Utah it is 28,000; Calif omia, 54,000. Q. (By Mr. C. J. Harris.) There is only about 100,000 tons that is expected to be made? — A. One hundred and twenty-two thousand. Q. (By Mr. Conger.) Do you know when Michigan first paid a bounty on the production of beet sugar? — A. I think it was 3 years ago. C^. Do you know if the act of 2 years ago guaranteed a bounty for any length of time? — A. I think only for the current year, but there was a kind of an inti- mation made, as near as I can make out, that it would be continued for about 5 years. Q . Do you not know that that act guaranteed a bounty for the period of 7 years?— A. I think it only guaranteed it for 1 year. That is my recollection; but, of course, that is a matter of record and can easily be ascertained. Q. It is a fact that the act has been interpreted to guarantee the bounty for the period of 7 years. It can not be from year to year in Michigan, for the reason that the legislature meets biennially, and the appropriations have to be made at each session of the leg-islature : but the act itself contemplated the giving of the bounty to all factories that were put in operation for a period of 7 years from the passage of the act. Q. (By Mr. Kennedy.) Have you any business relations with the American Sugar Refining Company whatever? — A. Nothing in any way, except as any other commission merchants. We at times as commission merchants have raw sugars to sell, which we sell to them or anybody else that will buy them. y. You do not buy cooperage of them? — A. No; a separate cooperage company supplies both of our refineries. Q. Some of the independents do? — A. The Doscher, I think, does. It is a sepa- rate organization that supplies whatever is required. Q. Do you buy of anybody else?— A. No; of course there are other people who compete for our contracts. Our contract is with the Wideman Cooperage Com- pany. The Arbuckle was with the Brooklyn Cooperage Company, but it is with THE SUGAR COMBINATIONS: POST. 165 the Wideman Cooperage Company now, I believe. And there are other people who compete for it when the contracts are made. They have to be made for a series of years, because it takes quite a plant and quite an arrangement of staves and so on to supply it. DISCUSSION OF THE MARGIN BETWEEN RAW AND REPINED SUGAR RESUMED. Q. (By Mr. Jenks.) Is the margin of difference between the prices of raw and refined sugar substantially the same throughout the country, or has it been dif- ferent in California and the West from what it was in the East?— A. It was larger in the West until quite recently, when the competition of beet sugar, the Hong Kong sugars, and the California beet sugar reduced it materially. Q. I should like to revert again for a moment to the effect of the American Sugar Refining company upon prices, inasmuch as there has been handed to me, since you spoke on that matter, the quotations of raw and refined from 1879 up to date vrith the margin of difference. Perhaps you will yourself state what the result is in round numbers from 18S4 to 1887, and then by yearly periods from that time on. — A. I will read from Willett & Gray's statistics the quotations for raw and refined for 30 years ; only the difference , the average difference in each year , does not necessarily show the exact margin of profit, because the average is made up by itself, and the average for the cost of the refined might be very different, at least it might be one-eighth of a cent; the tendency would be to be one-eighth lower than the figures shown by Willett & Gray; the methods of selling are such in most years that the selling would show a little less. Q. For a period of about 4 years before the sugar trust was organized the mar- gin was substantially what?— A. 1884, it is quoted at .93; 188.j, .71; 1886, .78; IHST. at .76 to .80. Q. And then the sugar trust was organized in the latter part of 1887, and for the next 3 years?— A. In 1888, I see it is quoted at I.2.58; 1889. 1.397; 1890, .73; 1891, .82. Q. Those 3 years, 1890 and 1891, were two years that were explained? — A. Tar- iff changes. Q. For one factor and the Philadelphia competition with the Spreckles refinery, if I recollect right? — A. The Spreckles and Brooklyn refineries, yes. Q. Then for the next year?— A. 1893wasthehighestfigure— 1893, 1.03; 189.3,1.15; 1894, .88; 1895. .88; 1896, .90; 1897, .92; 1898, .83. You can get the exact quotations up to this time, if you wish. Q. Now, these figures seem to show that the average margin from 1887 is con- siderably higher than it was for 8 or 4 years preceding the formation of the trust, do they not? — A. Yes; I see the average for from 1888 to 1898, was .966. The average from 1885 to 1887 was apparently about .75. Q. If we go back to the period 1879 to 1883, the average margin was about how much?— A. Well, for the 4 years, 1879, 1880, 1881, and 1883, it was about 1.40, I should think. In 1883 it was 1.08. Q. Does it appear clearly from those figures, then, that the American Sugar Refining Company, or the effect of that organization has been, on the whole, to reduce or to increase the margin? — A. The effect has been to reduce the margin. Q. Will you explain that, please? — A. As to why it was reduced? Q. As to why there has been a reduction in the margin, if the figures as they appear here seem to show that the margin was higher on the average than for the 3 or 4 years preceding the formation of the combination, and that during the years when the margin has been less, there has been active competition, and during the years when the competition has been less active the margin has been considerably higher than it was during the 3 years preceding the organization? — A. That appears to be the reason — the competition ; and I think the tariff changes had something to do with the average. There was one change in August ; the duty was taken off and put on again ; so that it would take a very lengthy calculation to tell that. Q. But do not the figures seem to show that on the whole the effect, instead of lessening the margin, has been to increase it? — A. Within the last few years it might have. Q. Beginning with 3 or 4 years before the combination ? — A. During those 3 or 4 years of very keen competition, when several refineriss failed and only the strongest were able to survive, the tendency was to drive out all the weak houses ; it got to such a point that they were all very willing to try to come to an arrange- ment that would give them a fair profit. Q. You would say, then, that the margin during the 4 years preceding the formation of the trust was smaller than the best interests of the country, as a 166 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. whole, really would demand? — A. I do think so, because if it had been kept up, it would have resulted in the reduction of the product; and then an increase would have come that it would have taken years to make up again. It would have driven out the weaker houses and prices would have ruled higher naturally because the demand for sugar would be more than could be supplied by those who were the survivors. Q. Then I think I see your reason for your statement that prices have been really lowered by the combination. You believe that, had the combination not been formed, the few survivors would have put the prices considerably higher than the combination has put them? — A. Because the demand for sugar would have been more than they could supply, and would have naturally enabled them to secure a greater price. When there is a great call for any article you can put the price up; when there is not, you have to lower it. Q. That, I think, makes your point clear as to the decrease. The figures, so far as I could .judge, seemed to be against the statement you have made here that the American Sugar Refining Company had reduced the prices, but the ezplana- tion you make is, that had the combination never been formed, the individual sur- vivors, owing to the fact that their production would have been much lessened, would have been forced to put their prices considerably higher than the trust does. It makes, perhaps, your reason clear. — A. That explains it to me; that is why I think so. Q. Your point was not quite clear to me; that is the reason why I wished to have this explanation made. — A. Yes. Testimony closed. THE WHISKY COMBINATIONS. Note.— As early as 1870-71 many of the distillers north of the Ohio Biver entered into an agreement to limit their production in order to keep up prices. November, 1881, the "Western Export Association was formed to limit the outpiit and to assess members in order to pay expenses of exporting the sui'plus stock, and thus to keep up prices. From th5s time on there were freciuent pools lasting for short times each until 1887, when, in order to secure a more stable combination, the Distillers and Cattle Feeders' Trust, formed on the model of the Standard Oil Trust, was organized with a capital of $30,000,000 to be issued in trust certificates. In 1890 this trust was reorganized as a corporation under the name of the Distilling and Cattle Feeding Company, with a capital stock of §35,000,000. The new company had taken over from the trust 81 distilleries and cash and earnings to the amount of 83.837,066, and there still remained in the treasury 34,984 shares as an asset. In the latter part of January, 1891. this treasury stock was issued. The Shut eldt and Calumet distilleries were bought, the stock being sold at 45. In November, 1893, four other distilleries, making practically all of the important opponents, were bought. No bonds or stocks were issued to pay for these distilleries. Instead, the sur- plus was used and dividends lessened. In January, 1893, it was found that the cash on hand was exhausted and that no money remained to pay rebates, which had been promised to pur- chasers. The stock fell shortly from 65.and 70 to about 20. In May, 1893, the attorney-general of Illinois brought suit against the company on the ground that it was illegal. During 1893 S2,o00,000 bonds were issued and placed m escroAV to secure rebates which had not been paid; §1,000,000 worth of bonds was to be used as collateral in making loans for current expenses. In December, 1894, the directors of the company suggested plans of reorganization; the treas- urer suggested another. All of the plans involved a decided lessening of the stock. The suit in Illinois had gone against the company in the lower court and was before the supreme court. In January, 1895, notice was given that over a third of all the stockholders had organized a com- mittee to protect their interest and secure a change of management. January 28, 1895, holders of 1,700 shares applied for a receiver. The company, through the president, consented, and the president (Mr. Greenhut) and Mr. E. P. Lawrence were appointed temporary receivers. January 30 the stockholders' committee mentioned above secured from the court a stay and an order not to turn the property over to these receivers. February 2 Judge Grosscup removed Mr. Greenhut (he was said to be 15,000 shares short of the company's stock) and appointed Gen John McNulta as the chief receiver, representing the court, and John J. Mitchell, president of the Illinois Trust and Savings Company, to represent the stock- holders. Mr. Lawrence remained as a third receiver. A committee was appointed to prepare plans of reorganization. The plan finally submitted early in 1895 provided for Sl,.500,000 first-mortgage 6 per cent 20-year gold bonds (out of a total issue of S2,0fK),000) ; §7,000,000 5 per cent noncumulative preferred stock and §28,000,000 common stock. The plan was in due time accepted, and the American Spirits Manufacturing Company was incorporated in New York, August 22, 1895. After considerable litigation between the receiver with the reorganization committee, and the former president and trustees, the best of the plants (16 distilleries) were taken over from the old organization. In 1896 the case against the old Distilling and Cattle Feeding Company was finally decided in the supreme court of Illinois. The decision of the judge in the lower court was affirmed, the company being declared a trust and its charter annulled. Previous to the rendering of the decision, however, it had gone out of business, the most valuable property going into the hands of the American Spirits Manufacturing Company, as said heretofore. , ^, , ^ ^^ The Standard Distilling and Distributing Company was incorporated under the laws of New Jersey to begin active business July 1, 1898. Capitalization, §24,000,000— $16,000,000 common stock and $8,000,000 7 per cent cumulative preferred stock; there were no bonds. It was thought that this company would get control of most of the spirit-distilling plants outside of those m the American Spirits Manufacturing Company. y, ^^ oen ™v, ti, February 11, 1896, there had been incorporated m New Jersey, with a capital of §7,350,000, the Spirits Distributing Company. „ , „ -j. , ,„., nr,n nm February 3, 1899, the Kentucky Distilleries and Warehouse Company, capital 1(32,000,000, was incorporated in New Jersey. . j. t mnn The names of those interested in these compames suggested union; and m June, 1899, were published plans for the union of the four companies last named, together with certain rye-dis- tilling properties, under the name of The Distilling Company of America, with a capital of §125.000,000— §55,000.000 7 per cent cumulative preferred stock, and §70,000,000 common stock. Washington, D. C, May 13, 1S99. TESTIMONY OF CHARLES C. CLARKE, PEORIA, ILL. The commission met at 11 a. m. May 13, 1899, Vice-Chairman Phillips presiding. Mr. Charles C. Clarke, distiller, testified. , • , Q. (By Mr. Jbnks. ) Will you be kind enough to give your name and residence.'— A. Charles C. Clarke; Peoria, 111. ^^^ 168 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. And your business at present is what?— A. Distilling alcoholic and cologne spirits and rye whisky. Q. How long have you been engaged in the distilling business?— A. Since 1873; actively since 1883. THE DISTILLING BUSINESS DESCRIBED. Q. Will you explain to the commission, in the first place, something about the nature of the business itself, the relation between the distilling and the cattle- feeding business, the raw materials that you have to use, the side products that come from the business, etc.? — A. In the manufacture of alcohol and cologne spirits the principal products used are corn and malt. Of course there are other materials, in the shape of fuel, etc., that are not necessary in the manufacture except for the purpose of producing power. Corn is the basis of the whole pro- duction. Malt is used for its chemical effects in producing glucose out of the starch of corn. Fermentation is used in the process, which changes the glucose produced from starch into alcohol. After this fermentation takes place, the dis- tilling process commences, by which the alcohol and spirits are evaporated from the fermented material and taken care of by condensation. The residue is the slop, which is used for feeding cattle. This is the connection that cattle have with the distilling business. Slop makes a very good feed and requires about 1 bushel of the original material to feed an animal. Q. That is, from every bushel of corn that is used per day in the distillery you can feed one head of cattle? — A. One head of cattle; yes. Q. What is the nature of the main product made in the Peoria distilleries that were connected with the Distilling and Cattle-feeding Trust? — A. Their products are principally alcohol, cologne spirits, gin, and many whiskies. Q. What is the difference between their product and that of the Kentucky dis- tilleries? — A. The products of the trust are the pure spirits that are capable of being marketed iminediately after they are produced, whereas competitive prod- ucts require age and time to perfect them. The alcohol and spirits are refined by running through charcoal, which takes out the essential oils and flavors, leaving nothing but pure spirits to a greater or lesser extent. Alcohol is not quite so pure as the pure spirits, having some flavor left: a little bit of essential oil, but not very much. The pvrre spirit is used for a great many purposes, such as the manu- facture of colognes and essences; in the arts, wherever they need a very fine alcohol; and also in what we call the blending of cheaper grades of whiskies, 1 gallon of whisky being used to perhaps 5 or 10 gallons of pure spirits. The basis of a majority of the whiskies drunk in the United States is pure spirits, which is blended together with old rye whisky and bourbon, as the case may be. THE FIRST COMBINATIONS OP DISTILLERS WERE POOLS. Q. When were the first combinations made among the distillers in the line of business that you are engaged in ? — A. The fir.st combinations that I remember were in 1883. There was one combination in earlier days that I do not know much about ; it was entered into in 1873 ; but the first combination that had any particular influence on the business was in 1882. Q. What was the nature of that? — A. It was a pool — a pooling of the interests to regulate the amount that each distillery operator should sell. Q. Tell us in detail with reference to this regulation of the amounts they put out. — A. At first each distillery agreed to produce so many barrels, the number being regulated by the committee of managers. They also regulated the prices, which were not arbitrary, but agreed on by all memtsers. The pools were very successful at first, but were subject to a sudden breaking up, because it was not possible to control all the individuals that were concerned in them. Q. About how many went into one of these pools?— A. We generally had 70 or 80 distilleries connected with them. Q. How much was the product limited?— A. Sometimes to 40 per cent of the total capacity, sometimes to .50 per cent, but scarcely ever more than .50 per cent was operated. Q. That is, if your capacity was 1,000 barrels a day, you would run ,500?— A. Yes. Q. Is there any loss in that ?— A. Yes ; there is more profit in running a distil- lery full time ; it is at least half a cent a gallon cheaper running at full time than at half time. THE WHISKY COMBINATIONS: CLARKE. 169 EXPORTING AT A LOSS. Q. What special purposes had your association in connection with export busi- ness? — A. We oftentimes found that we were overproducing. We organized our association into what we called the Western Export Association, for the pur- pose of exporting a surplus, which was done at a loss to the whole body, each distillery contribiiting so much to the loss sustained. At times we were assessed a high as 10 cents a barrel. _ Q. Why did you export at a loss? — A. In order to prevent too great competi- tion in this country by the overproduction. Q. Could prices in the home market be so kept up? — A. Yes; they were so kept up. HOW THE POOLS WERE BROKEN UP. Q. You said these pools were frequently broken up. What broke them up? — A. Well, it generally came through one member producing more than he was entitled to: sometimes new distilleries being built created trouble; oftentimes they were broken up by limitation; we allowed them to expire for the purpose of getting them better organized. We could not reorganize them very well when they were in operation, but when they went to pieces and prices suffered to a great extent we often found it easier to get the distillers into the pools than when there was profit in the business. The minute a pool was broken, prices would decline and the business generally — in fact, I might say always — became un- profitable. Q. Did you have any way of bringing pressure to bear on those who went into the pools to keep them from breaking the agreements — any penalty of any idnd? — A. No; there were no penalties. THE ORGANIZATION OF THE DISTILLERS AND CATTLE FEEDERS' TRUST. Q. What was the next form of combination, after these pools, and when was that organized? — ^A. In 1887 the Distillers and Cattle Feeders' trust was organized. This was organized because we found our pools were getting unwieldy and it was hard to control the members. At times we found that they would agree to cer- tain things, but would violate their agreements; and as the trust question had been studied, we thought we could make better profits and create a more stable business by organizing the different distilleries into a trust. Q. WiU you explain briefly the form of this trust organization?— A. A trust agreement was drawn up, which was a copy of the Standard Oil trust agreement to some extent, but changed to suit our business. There were nine trustees appointed, who, in the beginning, put their distilleries into the trust, made them- selves trustees of this property, and put all these distilling companies which they had organized into corporations; they put the stock of the corporations into the hands of the trustees, dividing it pro rata among the different trustees, and appointing one manager from the distilling company that had formerly existed, who generally held a share. The nine trustees, after getting possession of the stock, elected the board of directors for each constituent company that had been put into the trust, and this board of directors consisted generally of the manager of the distillery, who was not a trustee, and part of the trustees. The board of directors received their instructions from the trustees, and the board of directors instructed the manager how to operate the distillery. The method of putting each distillery into the trust was by organizing it into a stock company and placing this stock in the hands of the trustees, who issued in lieu thereof what they called trust certificates, generally increasing the number of shares that were issued to a large extent. TRUST CERTIFICATES ISSUED FOR FOUR TIMES THE VALUE OF THE ORIGINAL PLANTS. Q Can you not tell us definitely with reference to that? Just how much was the increase in certificates over the ordinary stock that the company had had before'?— A I think, on the average, it was generally about 4 shares for 1 of the valuation of the distillery; that is, if the distillery and the personal property that was put in was valued by the trustees at §100,000, they would issue $400,000 83A 12 170 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. in trust certificates. There were cases where only 3 for 1 were issued, and others where, I suppose, there were more than 4. It was controlled by the estimate of the valuations. Q. Who made these valuations?— A. A committee of the trustees valued each distillery, and their valuation was the basis upon which the trust certificates were issued. It was supposed tliat they made the valuation so that the multiple of trust certificates was the same in all cases, and if there was any variation it came in the valuation rather than in a change in the basis. Q. What was the basis of this first valuation; was it the cost of reproducing the plant, or its earning power, or what?— A. As near as the trustees could esti- mate the co.st of reproducing the plant, that was made the basis of the valuation. Sometimes they said they also used the earning power as a basis of valuation. Q. That is, they would first take the cost of reproducing the plant; then, if the distillery happened to be situated in a not very favorable location, they would deduct something, and if the property was well located they would put on some- thing? — A. That is the way I have been told they did it. Q. Then, the amount of certificates issued was about four times the valuation as fixed? — A. As near as I can learn in different cases, that was the fact. Q. That was true in your own case? — A. That was true in our own case. Q. Was the valuation placed upon each of the different plants made public, or did each distiller simply know what was given him? — A. It was intended that the valuation should be kept absolutely quiet and should be known only to the trustees. Q. After the combination had been made in this way and the distilleries were practically under the management of the trustees, you said that each separate company had its own board of directors, who elected a manager to conduct the work of the distillery. How was that manager paid? — A. He was paid a salary for managing the distillery, whether in operation or not, for 5 years; he was paid by the original distilling company, not by the trust itself. Q. Then the board of directors was under the control of the board of trne- teeK? — A. Yes; the board of directors of each distilling company was composed of a part of the trustees and the manager of the distillery. MANY DISTILLEEIES CLOSED BY THE TRUST. Q. What proportion of these distilleries was shut up? — A. I should judge about 75 per cent of them. Q. How many went into the trust? — A. Eighty-one went into the original trust, and I think they did not operate over 10 or 12, except for a short time. They were gradually closed and combined with the larger houses and the houses that were most conveniently situated for producing liquor cheap. Q. But they paid the salaries of those managers whether the distillery ran or not? — A. They were paid right straight along for the first 5 years, whether oper- ating or not. Q. In the distribution of dividends on trust certificates, was any distinction made between the distilleries closed and those running? — A. Anybody who received trust certificates received a dividend as long as they were declared by the trust. They commenced paying dividends almost immediately after the trust was organized, and continued for several years. TREATMENT OP COMPETITORS. Q. What methods did the trust employ toward competitors?— A. They used every effort in the world to induce them to join the trust, by showing them the profits that were to be made both in the business and the probable increase in value of the certificates. All kinds of inducements were laid before those that did not join at first; a great many refused to come in for a good while; one or two did not come in at all. Q. Were prices cut against those that were out?— A. There were very often cases were prices were cut on outside competitors, especially to the regular trade — trade that they considered their customers. Tie methods used were to send a salesman to any known customer of an outside distillery and offer him lower prices than the regular prices made by the trust. These were, of course, secret and not quoted prices. They induced some members to come in by cutting prices to their customers, causing them to fear that they were going to lose the trade. They then joined the trust on the same basis as the rest^ THE WHISKY COMBINATIONS: CLARKE. 171 EFFECT OP THE TRUST ON PRICES AND PROFITS. Q. What was the general effect on prices?— A. As soon as the trust was well organized there was an increase in the price of the product, the business having been conducted at or below cost before the trust was organized. In a short time they put prices up to where there was a very good profit. Q. How much profit as compared with what it was before?— A. I think they put on a profit of about 5 cents a gallon shortly after the trust was organized; that is my remembrance of it; it may have been only 4 cents. Q. Did that affect the sales particularly?— A. It was put on at the time of year when trade is generally lively; in fact, I might say that the trade increased each month at that time, but that was because of the usual demand that comes at that season of the year. It was well timed for a rise of prices. Q. You spoke about the general increase in prices and the way in which goods were sold to the trade. What about special discounts to the distributing agents, the wholesale dealers, etc.?— A. After the organization of the trust there were not many special discounts, although to individual members of the trust who also owned a distributing house there were probably some special prices made, but it was kept quiet and was not generally knovsoi to the trade. Q. That is, some of the managers of the trust sold the products to themselves in another capacity cheaper than to others?— A. It is supposed to have been so. Q. How about the rebate system?— A. That was not inaugurated until after the trust expired. Q. What was the rebate system?— A. That was organized by the successors of the trust. ORGANIZATION OP THE DISTILLING AND CATTLE FEEDING COMPANY. Q. Why did the trust go out of existence itself as a trust?— A. My remembrance is that the New York courts had declared the sugar trust an illegal combination; and in order to avoid the same thing in our State, we organized the corporation known as the Distilling and Cattle Feeding Company. Q. Was this change of form entirely voluntary on the part of the trust? — A. It was done by a vote; almost all the parties holding trust certificates, as well as others, declared in favor of it. Q. Can you give the dates of the organization of the trust and of this change in form? — A. The trust was organized in 1887, and the Distilling and Cattle Feed- ing Company succeeded it in 1890. Q. Was there any change in officers, or in the management and methods of doing business, etc., when the trust went out of existence and the new company was formed? — A. The trustees at the time of the reorganization became directors in the new corporation. The managers of the different distilleries were appointed just the same as under the trust agreement; the salaries were continued and assumed by the new company, and afterwards paid by the new company. Q. What was the relation of the separate distilleries, that had their own boards of directors, to the trust, and what was their relation to the new board of direct- ors and to the new company? — A. They were bought; these corporations were abandoned; they surrendered their charters to the State in which they were organ- ized and became a part of the new corporation. The board of directors ceased doing business, and thereafter the distilleries were controlled by the nine direct- ors of the new company. Q. Did they assign managers directly? — A. They appointed managers directly. THE REBATE SYSTEM OF THE NEW COMPANY. Q. Now, you said that under this new company, the Distilling and Cattle Feed- 1 ng Company, a system of rebates was inaugurated. What was that? — A. There was a system of rebates organized by this new company by which they had two sets of customers. The original buyers from a distillery were given for them- selves a rebate of 2 cents per gallon and extra rebate certificates of 5 cents per gallon to distribute to their customers. These were paid by the Distilling and Cattle Feeding Company, making a total rebate of 7 cents. The trust itself deliv- ered the 3-cent rebate to the distributers and also the 5-cent rebate to be given by them to their customers. Q. That is, to the wholesale dealers?— A. To the wholesale dealers. The whole- sale dealers and also the distributers were obligated to buy all their goods of the trust, or rather of the Distillery and Cattle Feeding Company. That is to say, 172 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the wholesale dealers were obliged, in order to get their rebates, to buy all their goods of distributers supplied by the Distillery and Cattle Feeding Company, and the distributers, in order to get rebates, were also obliged to buy all of their goods from the Distillery and Cattle Feeding Company. GOVERNMENT RECOEDS USED BY THE TRUST. Q. By what means could they find out whether or not they were living up to these agreements before paying the rebates? — A. They retained the right to exam- ine the Government books. Oftentimes they did not make any examination; but wherever there were charges of a violation of the rebate agreement, they refused to pay until they had a chance to examine the Government records of each cus- tomer. Q. What records are kept by the Government that would show all of these facts? — A. There is a regular record kept under instructions from the Govern- ment by each wholesale dealer and jobber in the coiintry; it is called Form 52, and keeps a record of every package of spirits in any form, whether whisky, gin, or any class of liquors produced by distillers. The number of gallons is shown, to whom it goes, and the serial number of the package. This makes an absolute record for the Government at all times by which it is possible to prevent fraud. All wholesale liquor dealers and rectifiers are obliged to keep this record accu- rately. It is often examined by the Government, and is a very accurate record. An examination of these records would shov/ immediately from whom the dis- tilling products had been bought, so that the trust could very easily tell whether the parties had abided by their agreement. Q. Are these records kept by both the distributers and wholesale dealers?— A. Yes; they are. Q. Are retail dealers compelled to keep any records? — A. No; but they are not allowed to sell over five gallons at a time. Q. Who has the right under the law to examine these records? — A. The rev- enue officials of the United States. Q. Then what right had the Distilling and Cattle Feeding Company to examine these I'ecords? — A. That was a part of the agreement concerning the rebate certificates. Q. What was the effect of the rebate system upon the business as a whole, and upon the welfare of the company itself? — A. At first it seemed to be a very good thing for holding the trade. After the customers had once become attached to the trust they did not seem to be inclined to turn their custom elsewhere; at all times, however, there were some men who refused to buy of the trust and bought of outsiders. There were only two large distilleries that were operating outside the trust. Q. What ones in particular?— A. The distillery of H. H. Shufeldt & Co. , of Chi- cago, and, I believe, the Calumet Distillery, of Chicago, were operated outside of the trust. Q. Were the rebate certificates promptly paid by the company? — A. Payment was very prompt after six months; that was the agreement; at the end of each month — that is , six months after the certificates were issued — they were redeemable at the trust office and were paid on presentation. There were very few of these certificates upon which payment was refused, and only then in the cases where violations had been flagrant. A minor violation did not attract much notice, but wherever it was large and the customer discontinued giving his trade to the trust payment was refused. OUTSIDE DISTILLERIES BOUGHT UP WITH THE REBATE FUND. Q. Did this prompt redemption of certificates keep up?— A. It kept up until along in 1893 or 1894, when the trust got into trouble, through the fact that it had to buy a great many competing distilleries, which absorl)ed all its ready cash. I believe they used the rebate fund for buying up the competitors who had come into existence in a few years. I think they bought the Shufeldt Distillery, the Calu- met Distillery, the Crescent Distillery at Pekin, and a distillery in St. Louis, along in 1893 or 1894; but I can not remember the exact date. Q. And they used the money that was really due at the time to holders of rebate certificates to make these purchases?— A. I understood they used the money that had been set aside for rebates for that purpose. They had kept the fund intact for a good many months, but at that time I believe they used it to buy these di.stilleries. THE WHISKY COMBINATIONS: CLARKE. 173 Q. What effect did that have on the distributers and wholesale dealers to whom money was due? — A. The distributers themselves did not seem to worry much about it, but the wholesale dealers and jobbers were very much alarmed, and, I believe, organized a committee to look after their interests. The trust itself— Iwill not call it the trust — the company itself seemed to think it would come out all right, and they issued bonds to protect the rebate holders. These bonds were a mortgage on the trust plants. Q. "What was done with the bonds? How did they protect them? — A. They were placed in the hands of a trust company in New York as a guarantee to secure payment on the rebates. STOCK OF THE DISTILLING AND CATTLE FEEDING COMPANY. Q. Was the stock of this Distilling and Cattle Feeding Company the same in amount as the trust certificates of the old trust? — A. I think it was exactly the same, except that a few shares more were put in the treasury. The original trust certificates were in the neighborhood of $34,000,000, whereas the new company capitalized for !5;j5,000,000, the balance of the stock going into the treasury to be used for the future welfare of the company. Q. What was the basis of a trust certificate itself? — A. It was based upon the stock of the original constituent companies. Q. According to the statement you made before, as I understood, this original stock represented pretty fairly the value of the plant itself, and when the certifi- cates were issued they were issued to something like four times that amount? — A. Yes. Q. What was the form of the guarantee itself? — A. Simply a certificate of the stock of the corporation. The corporations were, all of them, at that time free from debt. Each corporation owned a distillery and the stock of that corpora- tion was all turned over to the trustees. Q. Was it put into their hands as trustees? — A. It was formally assigned to them as trustees and paid for by them with trust certificates, which were issued at the appointed amount of 4 to 1 . Q. (By Mr. F arquhar. ) What was the dividend on unpaid stock to the parties who entered into this trust? — A. There was not any unpaid stock. Q. There must have been unpaid stock, if 4 to 1 were issued. — A. It was a trust certificate that was issued in lieu of the stock of the corporation; for instance, if the corporation put in 1,000 shares of its stock at par value, $100, they would receive 4,000 shares in trust certificates of a par value of $100. They never pre- tended that this was a legal transfer. Q. Did the trustees hold this amount of overcapitalization in the ratio of 4 to 1, or did it go to the credit of the original stockholders who were members of the first trusteeship? — A. The overcapitalization went to the owners of the stock of the constituent companies. Q. Of the separate companies? — A. Yes. Q. (By Mr. Phillips.) They had no treasury stock, in other words?— A. No; there was no treasury stock at the time of the original trust. Q. Was the real and personal property of the constituent companies turned over to the trustees, or was it simply a stock transfer?— A. Simply a stock transfer. Q. Where was the ownership of the property, if not in the trusteeship?— A. The ownership of the property was in the original constituent company. Q. So your trusteeship was simply conditional?— A. The trusteeship was simply conditional. THE authority OF THE TRUSTEES. Q. What were the powers of a trustee over any concern? Were they hmited in writing?— A. His powers were the same as if he were an actual owner of the stock of the corporation. , „ « xt i j Q. (By Mr. Jenks.) Did he have the power of voting that stock?— A. Me had the same power as any owner of stock in a corporation; it gave the trustees pos- session of all corporations through the election of the board of directors. Q (By Mr. Farquhar.) What authority had the trustees for issuing bonds if they had nothing but stock? Did they have authority to market stock through trust companies or otherwise?— A. Perhaps you have not followed me closely enough After the Sugar Trust was declared illegal in New York a company was organized as a corporation covering all plants which were turned over to it. After they became a corporation they had the privilege of mortgaging all the plants. 174 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. Q. But the point I desire to get at is the character of the trustee. Was he simply a trustee in law to transfer stock without having authority to dispose of all stocks and securities and outlying securities, or was his obligation simply a bond of honor? Did his authority amount in law to a possessory right? — A. In fact, it gave him a possessory right; but we have never been able to discover quite what his legal powers were. Q. Was not his authority simply that of a temporary agent?— A. That was what it was supposed to be; and in law it has been demonstrated by a great many deci- sions that it was not a legal organization. Q. (By Mr. Jenks.) When the organization was in the old trust form did the trustees at any time sell or dispose of any of the plants? — A. Not any that I know of. Q. They closed several of them?— A. They closed a great many of them. There was one which they did sell, limiting the right of manufacture to anything but alcohol and spirits. Q. When they were simply holders in trust how could they sell the distillery?— A. They were given authority under the trust agreement to do as they saw fit with the property. SPECULATIONS IN THE STOCK OF THE COMPANY. Q. What was the value in the market of the stock of the new company which grew out of the old Distillers and Cattle Feeders Trust? What was the nature of the fluctuations in value of the stock, etc.? — A. It varied in value greatly. Right on the start in, before it was listed, the value was about .50 per share, and after it was listed it varied in the 40's for some time. From then on it fluctuated up and down and went as high as 70. and I understand as low as 8. There were very violent fluctuations, according to the way the business was being conducted, and the manipulation by the speculating members. Q. Tell us about the speculating members. Who were they? — A. Well, I under- stood they were the directors and the certificate holders. The directors were the men who did most of the speculating, but thousands of men were connected with the whisky business and imbued with the ideas of speculation, and I should not be surprised if almost every wholesale liquor dealer in the United States and a great many retailers took flyers in the stock. Q. Were there any reasons to believe that the directors of the company were speculating, not only with their own money, but with the money that belonged to the corporation itself ? — A. I believe it was shown before the courts that the directors used some of the money of the corporation for protecting margins in speculation. The reorganization committee later made that accusation and sum- moned some of the members in court. It was never brought to a flnal issue, but was settled outside of the courts. Q. That is, they were charged with using the funds in the treasury of the cor- poration for protecting margins on stock held in their names as individuals?— A. No; not as individuals. The stock was bought in the name of the treasurer of the corporation. Q. As an individual? — A. I think as agent of the company, and the money that was used was put up to protect this stock. Q. That is to say, the company was really speculating in its own stock?— A. That is what I have been told, and that was what was brought up in the courts at the time. Q. Did that fact when it came out have any effect on the price of the stock in the market? — A. When that fact was brought out, the stock was very low, and I do not think there was mucli fluctuation. Q. About how long did the company continue in business?— A. From 1890 to the spring of 1895. REASONS WHY THE COMPANY BROKE UP. Q. Will you explain the circumstances under which it went out of business?— A. The owners of the stock in New York became very much dissatisfled with the management and a great number of them combined for the purpose of an exami- nation and sent a special bookkeeper to the oflices in Peoria to examine the books. Some of the shareholders in Illinois applied to the court at the same time for a receivership. Q. Will you tell us just what you know of the complaint that was made against the management?— A. The business was not managed for the benefit of the stock THE WHISKY COMBINATIONS: CLAEKE. 175 holders; the directors used their positions for the purpose of manipulating the price of the stock; they also used money of the company for protecting margins on stock. There were many other charges which I can not remember now. Q. Practically the charges were dishonesty against the members? — A. I will not say that. Q. Unwise action, then? — A. The charge was practically mismanagement of the business. A RECEIVER APPOINTED. Q. What further can you tell with reference to the change in management? — A. The holders of some 1,TOO shares of stock applied to the United States ctiurts in Chicago for a receiver, making the charge that the company was insolvent. On that appeal a receiver was appointed, 3 receivers, in fact — Mr. J. B. Greenhut and Mr. E. F. Lawrence. Q. What connection did these 3 men have with the company? — A. Mr. Green- hiit was president of the company, and Mr. Lawrence, of the old distillery in Chicago, was not connected with the company at this time. I think he was not even a certificate holder. A few days after this appointment, and before he had qualified as receiver, the shareholders in New York accused Mr. Greenhut in court of being a speculator in the stock and brought proofs to that effect. The court removed Mr. Greenhut as receiver and appointed in his place Mr. John McNulta, of Illinois, to represent the court, and Mr. Mitchell, of the Illinois Loan and Trust Company of Chicago, to represent the eastern share owners, leaving Mr. Lawrence in his position. Soon after Mr. Lawrence and Mr. Mitchell resigned, leaving Mr. John McNulta sole receiver as representing the court. MANAGEMENT OP THE BUSINESS BY THE RECEIVER. He took charge of the business and operated it for a short time, pending the reorganization which was being effected by the New York shareholders, who had formed themselves into a reorganization committee. I think General McNulta operated enough of the distilleries to keep the trade going from February, 1895, to November or December of the same year, when he was succeeded by the reor- ganization, called the American Spirits Manufacturing Company. Q. In whose interests did General McNulta manage the business? How did he turn over the property to this new company you speak of — the American Spirits Manufacturing Company? What was done with the rest of the property which they did not take? — A. On the reorganization of the business the shareholders of the old company came in and bought from General McNulta 17 of the best prop- erties for a sum equal to about §10,000,000, which was paid, I understand, in stock of the old company and not in cash. Afterwards General McNulta turned over 4 or 5 more of the old properties for a nominal consideration, by order of the court. The new company, in assuming control of the distillery properties, agreed with the court that they would pay all debts of the old corporation and all receivership expenses, which they have done, as I have been told by General McNulta within the last 3 days. He said that the old company's debts and the receivership expenses had all been paid by the new American Spirits Manufacturing Company. Q. (By Representative Otjen. ) Including the rebates of the old company?— A. He paid all rebates that were declared legal, or that the court allowed. There were some cases in which, when the purchase agreement had been violated, he refused payment; and the court decided that he was warranted in so doing. Q. You have told us that 81 distilleries went into the old trust, and that all the old trust property was turned over to the Distilling and Cattle Feeding Com- pany; now you say that of this new property the American Spirits Manufactur- ing Company took 17 different plants and afterwards some 4 or 5 others. What became of the rest?— A. A great many of them have gone back to the original owners of the real estate. In the first arrangement the real estate was not sold, but was held intact by the original distillers and leased to the organization that composed the trust. Q. They sold the distillery and leased the land?— A. That was the plan, m fact. After the distilleries had been wrecked General McNulta refused payment on a great many of these leases by order of the court. Q. On what ground?— A. That it was unprofitable to the receivership. They reverted back to the owners of the real estate who went into the original com- Q. (By Mr. Phillips.) For what period were they leased?— A. Twenty-five years. 176 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Jenks.) In selling to the trust the distillers retained the land but sold the distilleries v/ith the good will of the business. That is incidental, is it not? — A. Yes. Q. "Was not that counted as part of the consideration in the increased capitali- zation? — A. The good will was counted as part of the increase in the capitaUza- tion. Q. (ByC. J. Harris.) Did not the distillers agree not to go into the distilling business also?— A. Not under the original trust. They only bound us up to 5 years on a salary. Q. (By Mr. Jenks.) "Was any change made in that respect when the new cor- poration took the place of the trust?— A. I think not; under this organization no one was bound not to go into the business except as he was controlled by a salary. Q. Where and by whom is the stock of the new American Spirits Manufactur- ing Company mainly held?— A. A syndicate of New York capitalists have appar- ently been in control of this stock from the time of the organization until the present. NO PROFIT IN THE BUSINESS IN RECENT YEARS. Q. How has the new company succeeded as compared with the old one?— A. Since the new company was organized there has been very little profit in the business. I think there was scarcely a time from 1895 to July, 1898, when there was any profi?t. After the organization they agreed to sell at a price that would be profitable. This continued for about 6 months; but the outside distilleries, that were being built all the time, came into such direct competition with them that they were unable to sustain a profitable market, and up to July, 1898, there had been no profit in the business. CONTROL OP THE MARKET BY THE COMBINATIONS. Q. To what extent did the old Distilling and Cattle Feeding Trust control the market — about what proportion of the output was in their hands? — A. I think it averaged at first about 95 per cent of the production of spirits and alcohol. It decreased a little, as near as I can remember; but I should judge it never got below 85 per cent while the trust was in existence. After the Distilling and Cattle Feeding Company was organized there were more distilleries built, and the percentage outside was greater. Q. About what proportion? — A. At one time the Distilling and Cattle Feeding Company purchased about all the outside distilleries and came very nearly into complete control of the output. "When they made those purchases I should judge they owned over 95 per cent of all the distilleries producing alcohol and spirits. Q. About what proportion of the output does the American Spirits Manufac- turing Company control directly, or what proportion has it controlled? — A. I do not think it has ever controlled more than 60 per cent. ■ Q. Do you think that is enough to enable them to hold prices up? — A. No; they were never in a position to hold prices up to any great extent after they were organized until July, 1898. ANOTHER COMPANY ORGANIZED. Q. "What new circumstances came in then that gave them better control?— A. The outside distillers, which had been rebuilding for several year.s, were compet- ing quite heavily in 1897 and the spring of 1898. In fact, they were absorbing most of the trade and were being operated either at no profit or at a loss. There was a new company organized in the spring of 1898 called the Distilling and Cat- tle Feeding Company, which absorbed very nearly all the outside companies. Q. Did it take the same name as the old company — the Distilling and Cattle- Feeding Company? — A. No; it is called the Standard Distilling and Distributing Company. Q. I think you applied the other name.— A. I may have used the wrong words there. Q. It is the Standard Distilling and Distributing Company?— A. It is called the Standard Distilling and Distributing Company. It was organized by the same influpuciM that ccmtrol and manage the American Spirits Manufactxiring Com- pany. While the directors are different, they are at the present time begininng THE WHISKY COMBINATIONS: CLARKE. 177 to amalgamate; they have controlled and operated the business since that last organization in a very mutual way, in no way competing with each other. Q. It was organized among those who had been former competitors of the trust, but apparently by the friends of the American Spirits Manufacturing Company itself in order to stop competition?— A. Yes; it was organized by the friends of the Spirits Manufacturing Company in order that the two companies might run in connection and stop disastrous competition. METHOD OF ORGANIZATION OF THE NEW COMPANY. Q. What was the method of the organization of this new company? — A. As nearly as I have been able to find out, and from my personal knowledge of offers that were made, each distillery was valued at about what it would cost, and a cash offer equal to that cost was made to the owners. In connection therewith they were to receive also an equal amount of preferred stock in the new company, and in addition to that an equal amount of common stock. That is to say, where they valued a distillery at §100,000 actual cost the owners would receive §100,000 in cash, .slOO,000 in shares of preferred stock, and $100,000 in shares of the common stock of the company. The parties that underwrote this new company received on the same basis. If they put in .$100,000 to pay for a distillery they received $100,000 in shares of preferred stock and $1.50,000 in shares of the common stock of the company. Q. Then in the organization of this new company, if I understand it, the plan was substantially this: Each individual distiller would sell out to this new com- pany for the cash value of his plant in cash, an equal amount in preferred stock, and an equal amount in common stock? — A. Yes. Q. Was the common stock delivered to him at once? — A. The common stock was delivered generally in 1, 2, 3, 4, and 5 years. Q. That is, he received 20 per cent the first year, 20 per cent the second year, and so on? — A. Yes; the rest being held in escrow until the time of delivery. Q. What was the purpose of that? — A. The purpose was to keep an owner of said stock from entering the outside business again. One of the agreements was that if he went back into the distilling business he was not to receive his common stock. Q. He was practically obliged not to go into the business again for 5 years? — A. Yes; not to go into the business again. Q. According to this plan the New York capitalists who advanced the money received the same amount in preferred stock and one and one-half times that amount in common stock? — A. That was it. Q. For their services in advancing the money? — A. Yes: that is what I have been told by parties very closely connected with the company when it was organized. THE AMOUNT OF OVERCAPITALIZATION. Q. Can you testify from your own knowledge as to what part of this was the true value?— A. Only that part which represented the bid for the distillery. Q. But from your own knowledge you can say that this new company offered the distillers a bargain of that kind?— A. Yes; I am certain that offers came in that way, for one came to me directly for the distillery I am operating. Q. (By Representative Ot.jex.) Where did the money come from that these different distillers received?— A. It was underwritten by a syndicate of New York capitalists. The total amount underwritten was .s4,000,000. Q. And what security did they receive on the property?— A. They received in payment for underwriting for every $100 one share of preferred stock and one and a half shares of common stock. The promoters of the enterprise received for themselves for every $100 one and a half shares of common stock. On the whole issue, then, of $4,000,000 underwritten by the syndicate which was used for the pur- pose of buying the distilleries the distillers got $4,000,000 in cash, $4,000,000 m pre- ferred stock, and $4,000,000 in common stock; the underwriters got $4,000,000 m preferred stock and $6,000,000 in common stock, and the promoters of the enter- prise got for their expense and trouble $0,000,000 in common stock. There was therefore a total issue of ^8.000,000 in preferred stock and $1(5.000.000 in common stock to cover §4,000,000 in distilling property sold by the distillers. 178 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. RELATION OF THE NEW COMPANY TO THE AMERICAN SPIRITS MANUFACTURING COMPANY. Q. (By Mr. Jexks.) What has been the relation of the new company since its organization to the American Spirits Manufacturing Company? — A. I understand that they have a running agreement by which the American Spirits Manufactur- ing Company produces about one-third, or rather one-half, as much as the Stand- ard Distilling and Distributing Company. Q. That is, the Standard is about twice as large as the American? — A. The Standard produces about twice as much as the American, and buys whatever the American does not have a demand for. The American Spirits Manufacturing Company has a demand, through one or two distributing houses, for a great por- tion of their product. The balance is taken and paid for by the Standard Dis- tilling and Distributing Company. Q. What proportion of the total product is under the control of these two companies? — A. At the present time they are manufacturing about 75 per cent of the total product of spirits and alcohol. Q. Are there any new distilleries coming into competition with them?— A, There has been one large distillery completed since they were organized and two or three more are in process of construction. EFFECT OP THE NEW ORGANIZATION ON PRICES AND COMPETITORS. Q. What has been your own experience as regards the effect of this new organi- zation upon prices and upon their competitors? — A. The new organization that went into effect in July, 1898, immediately established a scale of prices which were profitable and which continued profitable up to the 1st of May. During the last 3 years, since the large new distillery at Terre Haute went into operation, there has been a constant cutting in prices: but, up to the 1st of May, of this year, they had not fallen below the cost of production. Since then prices have been at a point where there are no profits in the business. Q. Did the new combination cut prices at all, until recently, in different neigh- borhoods, in order to drive out special individual distillers? — A. Prices were first cut, to a great extent, in the Eastern market. The new Terre Haute distillery started in to market its products in New York, Baltimore, Boston, and other eastern markets, and the prices of the product were cut in those markets more than in any others in the United States. Whether the trust cut the prices or whether the new company cut them I am unable to say, but they followed very closely in each other's wake. Q. They have cut down prices, then, until there is practically no profit in the business? — A. The profit at present is practically wiped out of existence on account of the competition that has arisen in the last 2 months. Q. Is it your opinion, then, that the effect of all three of these combinations has very generally been to increase and maintain prices?— A. All the combinations have controlled prices to a great extent and made profits in the business. Q. Profits for their competitors as well as for themselves?— A. For both parties for the time being. EFFECT OF COMBINATIONS ON WHOLESALERS AND RETAILERS. Q. What was the effect of these companies upon the dealers, wholesale and retail, and upon consumers?— A. My observation has been that the wholsesale dealers were at an advantage when the combinations were making money, because the combinations controlled the amount of the product to such an extent that the wholesale dealers were able to get larger profits on their sales. They did not come into such fierce competition with one another. The retail dealers are mostly saloon keepers, and my observation has been that they are fully as prosperous when the distilleries are on a profitable as when they are on an unprofitable basis. The margin of profit is so small, comparatively, that it does not seem to affect the retail dealer. An additional 2 or 3 cents on "the price of a gallon means a large profit for the distiller, but is not observable in the retailers' purchases. It might amount to $3 or $4 a month to a very large retailer, but to a moderate-sized retailer 3 cents on each gallon would perhaps be only $1.20 or $1.30, so that it is not noticeable to the retailer. EFFECT ON THE CONSUMER. Q. How about the consumer?— A. The consumer, as far as I can see, is not affected. Q. Then, if I understand ?— A. (Interrupting.) Whisky goes over the bar THE WHISKY COMBINATIONS: CLARKE. 179 at the same price whether or not the distillers are making money and whether or not the busmess is controlled by a trust. v,9' i.^'^Jl®'^i?^!-E^'^°® °*' whisky goes up, then, so that the business becomes profit- able to the distiller, he sells to the wholesaler at a higher price, and the whole- saler always adds the advance to what he asks of the retailer?— A. Always. Q. But as the retailer asks the same price of the consumer as before, is he not the one who, as a matter of fact, pays the increase in price?— A. It would seem to come out of the retailer entirely. Q. But you think the difference is so slight that he does not feel it much''— A I do not think it is noticeable to the retailer. THE PROFITS OF THE RETAILER. Q. His profits are so big that he can not tell the difference?— A. A gallon of whisky sold over the bar will ordinarily produce to a retailer anywhere from §10 to $20, according to his custom; and a difference of 3 or 3 cents a gallon cuts no figure with him in such a large sale. Q. How much does the retailer ordinarily pay for whisky that he can retail at from SIO to .S30 a gallon? Q. (By Representative Livingston.) Take some special brand of whisky and make it specific?— A. Whisky which the retailer pays $1.50 a gallon for, and which is a very cheap grade, though not above quality of whisky, might pro- duce S8 a gallon at 10 cents a drink. It is sold to men who take large drinks, and will not run over .$» to the gallon. On slO or $13 whisky, the prices range from §1.75 to $3.25 a gallon, and on ,$1.5 whisky from $3,25 to $3. Q. Do you know what the old Commissary whisky is sold for per case, e. g., by Alexander, of New York? — A. By the case? Q. By the case. Most of those people buy by the case and not by the barrel,— A. Most of them buy by the barrel. Q. Not fine whiskies?— A, No. not fine whiskies; I am not talking about fine whiskies; I am talking about whiskies that pass over the bar. Q. Rectified whiskies they buy by the barrel?— A. Very fine whisky costs them more money. I put up a case of whisky in my rye whisky business that goes to the trade at about $4 a gallon. Q. You sell it by the case? — A, By the case. Q. How much? — A, Twelve dollars a case: a case contains about 3 gallons, Q. That is about what Commissary whisky is sold for by Alexander. What does the retail man make on that? — A. Of that class of whisky the retail man sells about 120 drinks to the gallon, which, at 15 cents a drink, would produce $18, but at 13i cents, not quite so much. Very fine whiskies are sold in smaller drinks; that class of trade does not use such large quantities; my experience has been that the drinks run about 120 to the gallon. COMPOUNDING OF WHISKIES. Q. (By Mr. Jenks.) Is is not pure spirits rather than the higher gi-ades of whisky which these combinations, of which we have been speaking, manufac- ture? — A. They manufacture cologne spirits and alcohol. Cologne spirits is the basis of common and rectified whisky: and spirits, while a highly refined pi-od- uct, is the basis of the cheaper gi-ades of whisky. Q. Can you tell us where the compounding is done and something about the profits of the men that compound whiskies? — A. The compounding is done at what we call the rectifying houses. They put the pure spirits into a tub where it is colored with brown sugar and other coloring material and fiavored with high-priced old whiskies and sometimes with flavoring materials. Q. (By Representative Livingston,) Is not the flavoring always done by whiskies? — A. I think it is generally so done to-day, old rye whisky being added, sometimes in large quantities and sometimes in smaller. I have in my posses- sion receipts for different grades that run from 1 gallon up to 20 gallons per barrel, 1 gallon being the very lowest that is used for flavoring. But there are flavoring materials that are used which are harmless in themselves. Though it is claimed some gt them are harmful, I know of none such being used. Not , being a rectifier, I do not know much about the different substances that are used except rye whisky and pure spirits, I produce both of these in my two distil- leries, and am well acquainted with that important part of the business. Q. Can they make apple brandy, rye whisky, or anything else out of it? — A. Anything desired in the cheap grade of brandies is made by using cheap cologne spirits. Such goods go to the cheaper saloons, those outside the district where, 180 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. perhaps, we gentlemen would go to take a drink. I think we are all pretty sure in the best saloons to get a good grade of whiskies, brandies, gins, and such things, but in other saloons COST OF RECTIFIED WHISKY. Q. (Interrupting.) What is the cost of a barrel of rectified whisky on that plan per gallon?— A. It would cost the wholesale dealer .SI. 30 for the original gallon of pure spirits. Q. How much would the coloring matter cost?— A. The cost of the other mate- rials used would be very small, except the rye whisky. The coloring materials and flavoring extracts would cost about 5 cents per gallon. The cost of the rye whisky will have to be estimated according to the amount used. At the present time a good quality of rye whisky (i. e. , well-aged whisky from 3 to 10 years of age) costs, in large quantities, $3.25 a gallon. If 10 gallons, which is quite a large quantity, were used, that would be |10 extra on 40 gallons, which would be 35 cents a gallon. This, added to the original cost of $1.30, makes .$1.55, and the 5 cents extra for coloring materials and flavoring extracts makes $1.60 for very ordinary whisky. There is another method of cheapening it, which consists in the reduc- tion of the proof. It may be put up at 60 proof, which makes it cost 60 per cent of what I have figured, which would be 96 cents. Q. Is not the bulk of it put up in that way?— A. The bulk of it is put up at about 85 or 90 proof, although there is a good deal of whisky made at 60 proof. But that is getting into the business of rectifiers, and I do not know much about it, except what I have learned from rectifiers, being closely connected with them. Q. (By Mr. Jexks.) Then the average price of rectified whisky is about $1.60 per gallon if compounded in the way you have indicated? — A. If it were at proof. Q. Biit 40 per cent less if it were put out at 60 proof?— A. Yes. There is another grade of cheap whisky made from pure spirits and fiavoring extracts, which is sold at what we call 6 cents over the price of spirits multiplied by the strength. For instance, if the strength is 90 and the price $1.30, multiply $i.30 by 90, and add 6 cents, and you have the price of cheap rectified whisky. That is the way it is sold to the jobbing trade direct; not to the retailer. Q. The purpose in x^utting the question in reference to rectifying was to show who gets the profits when the price of whisky goes up. According to what you have said abundant profits go to the rectifiers. Now who, in the main, does the rectifying? — A. The parties we call distributei's generally do most of the recti- fying. They sell mostly to the larger wholesale dealers. Some wholesale dealers do their own rectifying and mixing, and deal directly with the saloon. Both of these parties are known to the Government as rectifiers and paj' the special tax on rectifiers. CHARACTER OF WHISKY USED IN THE DRUG TRADE. Q. Is the liquor sold in drug stores ordinarily bought directly from the trade and sold in the same way, or is that rectified and improved by the druggist? — A. The majority of druggists buy a pretty fair quality of whisky, mostly what we call straight whisky. In the ijrohibition States, where the drug store is practically used as a saloon, they buy the very cheapest grade of whiskies thg,t come to the trade. I am pretty well acquainted with the drug trade, because in my rye- whisky business I have catered to the drug trade, and I believe I sell more straight whisky to that trade than any other distiller in the United States. They are anxious, as a general thing, to get a pure, straight, good whisky. In prohibition States I have found that they do buy these cheaper grades of whiskies. Q, Then, so far as the profits from comi^ounding are concerned, an increase in price by the trust is still borne by the retail dealers? — A. It would seem so to me. Q. And, so far as the rectifier is concerned, any profit that he makes A. As a general thing he fixes his price according to the price he has to pay for spirits. Q. If the general price is higher, he will not make any more or any less than he did before? — A. He is always very anxious to buy his spirits just as cheap as he possibly can, but I have noticed that he is more prosperous when the product is controlled by the comliinations. He objects, though, seriously to any combina- tion, and would rather buy of the outside distillers. Q. Why?— A. Because lie dislikes the idea, of bi-iug controlled in his business. He wants to be placed in a position so that he can say, " I will give you so much for those goods," and not say, " I want so many goods." Besides, he dislikes very much the system of rebates. After 3 or 4 or 5 years' experience wth the rebates of the Distilling and Cattle Feeding Company, the rectifiers are very much averse THE WHISKY COMBINATIONS: CLARKE. 181 to tying themselves up to any combination that is liable at any time to put on rebates. I have met a great many vs'holesale dealers in the last 3 years, and they have all told me that they would buy of me in preference to the trust at the same price. I have never met a single buyer who has said he would buy of the trust in preference to outside distillers. REBATE SYSTEM OF THE PRESENT COMBINATION. Q. Does the present combination have a rebate system the same as the former one? — A. They have to a certain extent. Q. What are their rates? — A. Their rates at the present time are made only to the distributers. They charge them a specific price, on which they give them 1-J cents rebate at the end of o months. Q. Provided they can say they have dealt with no one else? — A. Provided they trade ^^^th the triist houses, i. e.. the American Spirits Manufacturing Company and the Standard Distilling and Distributing Company. They attempted also to put rebates on some of the wholesale dealers who were able to buy in carload lots, but the wholesale dealers objected so seriously that they were unable to force the system upon them, in fact, they tried it on one or two parties and made lower prices, but immediately the wholesale dealer turned to the outside distilleries to buy, and the result was they abandoned the idea of trying to put on a rebate to the wholesale dealers, although all the distributers of the trust houses are get- ting a rebate at the present time. EFFECT OF COMBINATIONS ON THE ORIGINAL OWNERS. Q. What was the effect of these combinations upon the original distillers who went into them? What about your own ease, for example? Why did you go in, and why did you go out? — A. I went into the first trust because I was glamoured with the pictures that were painted of fancy profits, and also because of the inti- mations that, if I did not go in, the trust would get after my customers and make life a burden to me. There were many difflculties. I objected to losing my individuality very much. I was quite a young man at the time and did not like to go into a combination and lose control of my business, but after some time I agreed to do it. I regi-etted it from the day I went in, although I secured very good profits for a long time. Q. Your profits for a while increased decidedly compared with what they had been before? — A. They did not increase compared with what we had been making in the pools; but they increased to more than what they were before the pools were organized. It wiped out our individuality entirely with the trade, and we became merely agents of the trust. They employed me in several different capacities after they stopped running our distillery, none of which were agreeable to me. Q. What kind of work did you do? — A. I was employed as a salesman in cer- tain districts in California, but more especially to induce some recalcitrant mem- bers of the old combinations to come into the trust. It did not take very long to convince them that they ought to do so. Q. What methods did you employ to get them in?— A. The methods consisted in cutting prices to their especial customers who had been doing business with them for years. ■ Q. (By Representative Livingston.) Pretty good argument, was it not?— A. Yes, sir. We went to those customers and offered them spirits at prices which the other men did not want to meet. They were not the quoted prices but private prices made at the time. It took but 3 or 4 days to accomplish what we set out to do. REAL PRICES NOT THE SAME AS QUOTED PRICES. Q. (By Mr. Jenks.) Are the real prices of the product of the American Spirits Manufacturing Company the same now as their quoted prices, with the exception of the 14 cent rebate?— A. The prices that were quoted in the fall of 1898 have not been changed, but the actual prices of the distillery products that we are now selling are some a or 4 cents below the quoted prices. It has come about gradu- ally through the trust and the outsiders getting each other's trade. Q. Then, the real price is the quoted price, less about 3+ cents and the rebate?— A. That will be about the price. . n « -kt .l, Q. The real price is, then, about 5 cents below the quoted price?— A. No; they sell at about 4 cents below. Q. Counting the rebate in, too?— A. Yes. i«Z HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. About 4 cents below is the real price. How long lias tliat been true? — A. Well, it conimenced a little right at the start. The quoted price was always about half a cent below the actual price. Q. What do you mean by the beginning? — A. July, 1898. The price to the trade continued at about half a cent below the cjuoted price up to February 1 . Since the new distillery in Teire Haute went into operation, there has been a gradual cut- ting of xirioes, secretly, to the trade, until at the present time the actual prices of spirits and alcohol are about 4 cents below the quoted prices. Q. How was it under the preceding combinations — the Distilling and Cattle Feeding Companj' and the Distillers and Cattle Feeders' Trust? Counting out the rebates, were th(^ quoted prices the same as the real, or was there a good deal of cutting? — A. Daring the time of the rebates the quoted price was 7 cents higher than the actual price charged by the outside dealers. Of course, the quoted price was the price the trust charged to their customers. Q. Then they took off the rebate of 7 cents? — A. Oh, yes, the rebate certificates were redeemed afterwards, but the outside dealers always sold at 7 cents below the quoted price. THE BONDED WAREHOUSE SYSTEM. Q. (By Representative Livingston.) In what way does the United States Q-ov- ernment befriend these dealers ? — A. They are not benefited in any way that I can see, except so far as they are influenced by Q. (Interrupting.) I mean, what direct benefit, if any, does the United States Government give the distillers of whisky; and if any, how? — A. I think the greatest benefit is in compelling us to keep accurate records, so that we know more about our business than we would otherwise. The Government's action results in the small dealers keeping such close account of their daily productions that they know at all times just exactly what they are doing. Q. That is an indirect benefit. Is there not a direct benefit? When whisky Is put into a bonded warehouse, does not the Government bear the loss on account of evaporation and give you all the profits ?— A. I think you state that question in a prejudiced way. Q. Can you state it in a better way? Q. (By Mr. Fabquhar.) Explain that whole system.— A. The Government allows 8 years in which to pay the tax, and for 4 years of that they do not charge for the evaporation; they regauge the package at the end of 4 years and levy the tax on what they find in the barrel at that time. Q. (By Representative Livingston.) What is the percentage of evaporation in that first 4 years? — A. It evaporates about 9 gallons per barrel of 48 gallons. Q. About 9 gallons? — A. That would be about 20 per cent. Q. When you take it out after another 4 years do you regauge it again?— A. We regauge it again. Q. Who bears the loss then ?~-A. The distiller bears the loss after the first 4 years, and I want to state to the commission that that law has produced the most disastrous results to the distillers. Q. When the 8 years have about expired and you have not sold it, can you not ship it abroad and keep it and then bring it back with certain privileges?— A. We can leave it abroad just as long as we want to, and age gives it value. We can then bring it back and keep it in a bonded warehouse, and we are allowed 3 years to pay the tax. Q. That makes 11 years?— A. Eleven years. Q. (By Mr. Phillips.) About what does it evaporate in the second 4 years?— A. It evaporates less in the second 4 years than in the first 4 years. Q. What per cent?— A. I am working on 7 years; 7 years is the oldest whisky I have m stock and I am losing in the neighborhood of 17 gallons. Q. (By Representative Livingston.) That ripens the whisky, if I understand it? — A. That ripens the whisky. Q. Granting that the Government pays for the loss by evaporation for the first 4 years and you for the next 4, how much is the value of the whisky increased m that time by ripening?— A. Since that law was passed our experience has been that it worked the other way. Q. How do you mean?— A. That the ripe whisky has sold for less at the age of 8 years than they were able to get for it when it was 4 years old in previous times. The law caused an overproduction of the finer grades of whisldes and resulted m lots of 8-year-old whisky being sold for less money than 3 or 3 year old whiskies. Q. Where did you sell any such whisky as that?— A. We sell it all over the United States. THE WHISKY COMBINATIONS: CLARKE. 183 Q. Among the Indians, or where? Do you mean to tell me that the man who drinks whisky in Washington or New Y(jrk pays as much for green whisky 4 years old as for 8-year-old or ripe whisky? — A. Yon misunderstand me; I niean the wholesale dealers in the way they hiiy them. For instance, we will suppose that they buy at the original gauge 3-year-old whisky of the distillers at 55 cents. For 8-year-old whisky they will pay only 45 cents. The reason for that is that the wholesaler pays the tax on the extra evaporation between the fourth and eighth years. He pays the tax on something that he does not get to give to the trade, i. e., the Government receives taxes on nothing. The result is that the price of the old whisky in its original form is less than the new that has been produced, which is very disastrous to the whole trade. Q. Who bears the expenses for the first four years that the whisky is in the bonded warehouse? — A. The distiller. Q. Do you mean all the preliminaries, the help, the rent of the warehouse, etc.? — A. Yes. Q. Why is it put in bonded warehouses? Why not put it in your own? — A. We do not have the tax to pay in the bonded warehouse. Then we really do put it in our own, for we own the bonded warehouses ourselves, and they are only called bonded because they are in charge of the Government. Q. You pay all the running expenses? — A. We pay all the running expenses; but we do not carry even our own keys. Q. (By Mr. Jenks.) Do you carry the insurance? — A. We carry the insurance and every expense connected with the business. Q. (By Representative Livingston.) And then get less for it than before it is ripened? — A. That has been the experience so far. Q. Do you not think that that will break up the bonded warehouse system? — A. We hope Congress will enact a law levying the tax on what is in the barrel when it leaves the bonded warehouse. The present method results in disaster to the men employed in the business, creates a hardship on the trade, and does not ben- efit the Government. Q. (By Senator Daniel.) No matter how old the whisky may be? — A. No. Q. Do you mean it should be taxed at the time it is sold? — A. At the time it goes into the general avenues of trade. That is the only proper way to get a fine and unadulterated liquor on the market. It should be taken out in charge of the Government and the tax paid according to what is found in the barrel. Q. (By Bepresentative Livingston. ) Is the proof of the whisky raised or lovv- ered by storing it? — ^A. That depends upon the condition of the warehoiise. If it is dry and warm, it will increase; if it is cold and damp, it will decrease. Q. (By Senator Daniel.) Decrease in what respect? — A. In proof and strength. We put it in originally at about 100, and 200 is pure alcohol. It will increase from 100 to 135 in 4 or 5 years where heat is employed. Q. (By Representative Livingston.) Can you, then, put in water enough to reduce it to 100? — A. Yes, they allow us to do that. Q. (By Mr. Jenks.) How does the bonded warehouse system affect the product handled by these combinations?— A. It only affects them generally for 5 or 6 months. They care nothing for the bonded period except for the temporary storage; for their product is immediately marketable. Q. (By Representative Livingston.) Are you now speaking of the trust?— A. I am now speaking of the trust production and also of the distillery I operate. Q. Did he not ask you as to the effect of these bonded warehouses upon the trust? Q. (By Mr. Jenks.) I asked how it concerned the trust.— A. It gives them a chance to handle their liquor so that they do not have to pay the tax until the trade demands it, which is generally in the course of 3 or 3 days, but which has been about 3 or 3 months. COMBINATION NOT ESSENTIAL TO ECONOMY IN PRODUCTION. Q. Have any methods besides the cutting of prices in special localities been employed by the combination in order to induce other people to come in?— A. They employ every means they know to induce others to come. in — competition, intimidation, throat-cutting prices. Oftentimes they try to purchase their plants. 6 Do you know of any cases where they have bought out rivals at more than a fair price in order, to get them out of the way?— A. They have almost always had to do that. ,.,,.,.,, „ , 6. Can the individual distiller with a good sized distillery manutacture as cheaply and get as much in the way of by-products, etc. , as the combination?— A. After a certain point he can, but too small a distillery is operated with less 184 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. economy, both in production and in the cost of labor. A reasonable sized dis- tillery can perhaps compete with them, because it can average better in prices. Q. (By Mr. Phillips.) What would you call a reasonable sized distillery?— A, A reasonable sized distillery would be one of 1,500 bushels. That would not pro- duce quite as much liquor and the labor would cost a little more per gallon, but not very much. Q. (By Mr. Jenks.) Can a single independent distillery of 5,000 bushels manu- facture as cheaply and get as much out of the raw material as any distillery man- aged by the great combination? — A. I think that a 5,000-bushel distillery can be operated as cheaply as any, both in respect to production and labor. Q. Does any saving result from combination, so far as the manufacturing process is concerned, provided a man has a distillery of 5,000 bushels? — A. The combination of different distilleries makes no saving to anybody except, of course, that they can stop running some plants and make more profit out of the others. Q. That is to say, so far as they really control the output? — A. Yes, sir; the combined distillers themselves have no particular advantage. The independent distiller can, on an average, sell his goods at the same or a better price than the trust, because the trade is inclined to favor him. The combination can not pro- duce any more liquor per bushel of corn than the independent distiller, nor can their latsor be made any cheaper after a certain limit is reached. A distillery consuming from 3,000 to 5,000 bushels is the most favorable size so far as labor is concerned. Q. Does a great combination among the distillers afford any advantages in the buying of raw materials, fuel, etc.? — A. There is no saving in the buying of fuel or grain. I can buy 1 or 3 cars of corn just as cheap as the combination can buy 100,000 bushels. • • Q. Has the combination been able to secure any better rates in the transporta- tion of their product than the independent distillers? — A. I anr unable to answer that. I know they have received very good rates at times, but I am unable to say whether they received better than I did. Q. (By Senator Daniel.) What rates do they give them? — ^A. I should say the regular tariff. Q. (By Representative Livingston.) What rates do you get?— A. At the pres- ent time the railroads are pretty stifiE on their rates, and I do not believe there is any cutting. There has been cutting in rates, but, I believe, not since the 1st of last January. I should not want to say that I received any rebates; that is against the law. Q. You would not want to say that you did not, either, would you? — A. Well, that would depend upon what court I was placed before. Q. (By Mr. Jenks.) Then, as regards the sale of liquor, you are inclined to think that the independent distiller has an advantage over the trust? — A. I think he has at the present time. TRUST HAS AN ADVANTAGE IN SELLING IN FOREIGN MARKETS. Q. Is that true with regard to both domestic and foreign markets? — A. I think the trust has the advantage in foreign markets. Q. Why?— A. For the reason that when foreigners do buy they buy in large lots, 5,000 barrels at a time, and the only distiller that is able to oflEer 5.000 bar- rels is the large combination. They are also enabled to reach the foreign mar- kets by having agents in so many different countries, which they are able to pay, but which the independent distillers are unable to support. In that way the trust is able to work up and hold the foreign trade in China and Japan, for example, where they have had an agent. The foreign trade, though, does not secure any more profitable rates than we get in this country, but it has the eflfeot of relieving them of the surplus. WORK OF WITNESS WHEN IN THE COMBINATION. Q. (By Mr. Phillips.) You stated some time ago that you were employed in disagreeable work when connected with the combination, such as inducing other persons to come into it. In what other capacity were you employed that was not very agreeable during that time?— A. I did not say that the employment was dis- agi-eeable. The fact of being a mere clerk of the corporation was the disagreeable part. I was employed also as manager of the Kansas City distillery for a while for the purpose of bringing it up to the highest state of perfection. It had been operated at a disadvantage by the trust, and they wanted somebody who had a knowledge of the latest methods to bring it to the highest state of efaciency, They sent me there for 5 or 6 months to bring about that result or demonstrate that the locality was unfavorable. THE WHISKY COMBINATIONS: — CLARKE. 185 Q. You have given us some reasons vrhy you went into the combination, but you have not told us why you went out.— A. I simply sold out my stock certifi- cates in the Distilling and Cattle Feeding Company because it became very specu- lative and the prices were such as to induce a sale. I also sold out about the time that my salary as raanager expired. At its expiration they did not see fit to renew it, and I did not demand it. In that way I became disconnected with the trust. Q. Did you get what would be called an unusual salary while working for the combination? — A. My brother and I owned a distillery that was connected with the trust, and we received jointly 85,000 a year for managing a distillery that was not operating. Q. (By Mr. Jenks.) Did you not have any work to do? — A. I had no work to do after the distillery was closed. Q. It was a fair salary? — A. It was a fair salary for doing nothing, but it was not too large if the distillery had been in operation. Q. (By Mr. Phillips.) Will you say whether you think it more profitable to operate individually or as a part of the combination? — A. I went into another line of business shortly after, called the rye-whisky business, and leased one of the trust's old houses that they were not operating. Of course that business did not compete with them in any way, but it was not active enough to suit me, and later (1897) I went into the spirit and alcohol business again. I leased another distillery for that purpose, and did not build. I found one already built that suited me, and I am operating it outside of the trust at the present time. When the Standard Distilling and Distributing Company was organized they tried to b it through me, but failing in that, they went directly to the owners and iDought it right out from underneath my shoulders; so that when my lease expires, which it will in the course of 4 or .5 months, I vnll be thrown out of that distillery and shall either have to build or go out of the business. Q. (By Mr. Jenks.) They will then be rid of another competitor? — A. I suppose their object was to get rid of me as a competitor, thinking, perhaps, that I would not rebuild. Q. (By Mr. Phillips.) Do I understand that you have now no connection with the combination or trust? — A. None whatever. Q. You are operating at present independently? — A. I am operating independ- ently, and have been for the last 3 years. EFFECT OF THE COMBINATIONS UPON WAGES. Q. (By Mr. Jenks.) What has been the effect of these combinations upon wage- earners in the distilling business? Have they employed as many, on the whole, as were employed before? Have they paid as good wages, etc.?— A. I do not think they employ quite as many in all the distilleries, although wages have not changed in the last 20 years. AH the employees of these distilleries receive very good wages. Their work is not hard and is very agreeable; they all seem to be satisfied. I have never known of distillery employees being dissatisfied with their salary or wages. They seem to enjoy the life, and did not object when the trust was organized. The trust increased wages in some of the minor positions and made them uniform in all the different distilleries. I believe they also at that time increased prices to the coal operators. Q. So Mr. Greenhut testified. What was the effect? Was there permanent improvement?— A. Not with the coal operators or barrel makers. At first, when the trust was having a profitable business, they kept up prices to these different people, both the barrel makers and coal dealers receiving a fair profit; but when they began to have competition they brought everybody down to the closest pos- sible margin, and coal at the present time is cheaper than ever before m the his- tory of the distilling business. We are buying it every day at from $1 to §1.10 per ton in the bins of the distillery. „,.-,,„, ^ , Q (By Mr. Eatchford.) What kind of coal is that?— A. Common coal. q! Lump coal?— A. Bituminous coal. Unscreened, it is sold at $1 a ton; screened, it is sold at ,51.15 per ton. O (By Mr Phillips.) How many laborers are employed m a distillery running from 3 000 to 5,000 bushels per day, and what would their average wages be?— A. A distiilerv of that capacity requires from 40 to 60 men, perhaps 80, including the cattle feeders. The manufacture of spirits and alcohol does not require a very larffe Quantity of labor. O About what is the average wage?— A. The lowest wage is about S'll per week; froni that it runs up to -SSO per week for the more experienced men; the average would be perhaps $18. 83A 13 186 HEARINGS BEFORE THE IKDUSTEIAL COMMISSION. COMBINATION NECESSARY IN THE DISTILLING BUSINESS. Q. (By Mr. Jenks.) From your experience, do you think the present combina- tion is likely to succeed permanently, two former ones having failed? — A. I think competition will, in the end. bring about the downfall of all trusts. Still, I do not think our business can succeed for many years without some form of combi- nation. We seem to be unable to get profits in the business without some form of combination. In fact, we almost always have to sustain losses when there is not a combination. I believe, however, as I said before, that no form of trust can be perpetuated. There will be mishaps in the distilling business the same as in any other. I do not believe that legislation will be as effective in bringing the relief that people want as the natural course of events. I do not believe the people are so much oppressed by the trust's manipulation of prices as by the specu- lation in stocks and the disastrous results that follow to the original proprietors, who cease to be a part and parcel of the business world. SPECULATION AND OVERCAPITALIZATION THE GREATEST EVILS OP THE TRUST SYSTEM. Q. Then you think that this social fact and the speculation in stocks coming from overcapitalization are the two greatest evils in the trust system? — A. It seems so to me. I do not believe the evil results to the public are as great as pic- tured by people generally. I have never been able to see that any trust with which I have been connected has been oppressive to the people, and 1 have not observed that the prices established by other trusts have been at all hurtful to the public at large. As individuals, we buy as much as we are able; and when we find the price of an article is too high we curtail our wants to correspond with the capacity of our purses. Q. Does not that hurt its any? — A. It results in no injury to us; it averages up so that, in the long run, benefits accrue to individuals. There is no form of trust that makes money but that also produces good results to the individuals con- nected with it. Immediately the distribution of their surplus wealth brings good results in other places, which perhaps counteracts the evils of the trust. That is my idea of the question. RELATION OP COMBINATIONS TO THE DISTRIBUTION OP WEALTH. Q. (By Mr. Phillips.) Do you believe that an accumulation of $100,000,000 in the hands of a corporation or an individual can really accomplish in any benevolent work or work for the people at large as much good as it would if left in its natural channels? — A. I think the chances are that one hundred millions could not be produced without the business methods of the combination, or, if it were, that it would be distributed so gradually that you would never notice the benefit of it. Q. But if it were distributed so that we could not take note of it, would not that be more beneficial than the devoting of large siims to benevolent work?— A. I will not dispute the position that large fortunes are undesirable, but I beheve they have never been accumulated in a way that is not beneficial to the people at large. I do not believe there are any disastrous effects to the public except so far as public feeling is turned against the man with a large fortune, resulting in socialistic and anarchistic sentiments. Q. Would not general individual fortunes be much greater if it were not for the vast accumulations of recent years?— A. I believe these large accumulations have been a great benefit to the industry of the country, because they have made possible commercial enterprises and produced results that no single indi- vidual or small company could ever hope to attain. For instance, the Standard Oil Trust has solved the problem of pumping oil from Pennsylvania to Chicago; no single individual could ever have accomplished that with the small sums ordinarily invested in the oil business. Q. Could not that have been done by an ordinary corporation just as well as by the trust? Is not the building of a pipe line much less expensive than a rail- road?— A. Of course, that might have come about: but at the same time I have noticed, especially in our own case, that trusts are always employing men to experiment in new directions, both in worlring up trade and in lessening the cost of production. They have developed trade in foreign countries where there was none before; they have taken up and investigated new patents and made every possible effort to increase the volume of business. (^. (By Mr. Jenks.) Can you point out any specific improvements in the dis- tilling business which the combinations have made and which would not have THE WHISKY COMBINATIONS: CLARKE. 187 been made just as soon by private individuals?— A. There are quite a number of little things. Q. Mention some special ones. — A. One concerns the amount of production. They have always employed a chemist, who has pointed out the mistakes of the yeast makers, and thereby enabled them to secure a higher average production per bushel of corn than was secured by individuals before the trusts came into existence. Q. (By Mr. Phillips.) Is it not a fact, however, that almost all the patents controlled by trusts and monopolies are the work of individuals, and that they do not originate with the monopolies? — A. I think that is true. Q. (By Mr. Jenks.) Then, you are inclined to think after all, that if there is sharp competition anaong individuals new patents will probably be taken out that will ultimately become useful? — A. I think greater benefits are derived from patents when they go into the hands of large corporations, because the ordinary individual is generally unable to demonstrate to the world that his patent is worth anything. Put into the hands of a company, its utility is soon demonstrated. They push it and advertise it and get it to the trade, making people believe it is worth something, whether it is or not. Q. (By Mr. Phillips.) Do you believe that any individual, by his own efforts, unaided by discriminating laws, is capable of earning a hundred million dollars in 10 or 15 years? — A. I do not believe so. I believe such large accumulations are derived, not through the ordinary operations of business, but rather through the multiplication of stock certificates. A fair dividend on the stock gives value to it, but as a matter of fact a hundred million dollars has not been produced. A man may apparently be worth a hundred millions, while his real property is not more than a tenth of that. In fact, this was true of the original Standard Oil Company. Q. But are there not well-authenticated instances of individuals dying in this country who were worth §100,000,000? Why should one man be able to acquire so much more than another, having equal intellect and advantage? — A. It is not the difference in ability; but I do not believe you can get up any form of legisla- tion that vrill stop such things under our present conditions. LEGISLATION WILL NOT CORRECT THE EVILS OF TRUSTS. Q. (By Mr. Jenks.) You have taken the position that stock-speculation, stock- watermg, etc. , are, perhaps, the greatest evils resulting from combinations. Have you any remedy to suggest?— A. Practically, I think these evils correct themselves and that legislation never eliminates them. Whatever laws you may enact to correct these evils and to regulate trusts, they vnll find ways of evading more rapidly than you can follow up with legislation. Q. (By Mr. Phillips.) But do not trusts levy tribute on the people? Do not some of the trusts exercise a more absolute power in fixing the prices of com- modities than any king or emperor could?— A. I believe they do at times; but the minute they attempt to secure an arbitrary profit, you will find other investors going into the business, and then the evil is corrected more quickly than you could legislate it away. That is my idea on the subject; you may take it for what you think it worth. TWENTY-FOUR PER CENT DIVIDENDS. Q. (By Mr. Jenks.) Were there any dividends paid on either the certificates of the Distillers' and Cattle Feeders' Trust or on the stock of the Distilling and Cattle Feeding Company which you say was watered at the rate of about 4 to 1? — A. We received 6 per cent dividends for about all the time I was interested in either the tmst certificates or in the stock of the Distilling and Cattle Feeding Company. The dividends were issued on the par value of the stock. Q. As a matter of fact, then, the actual profits were about 34 per cent?— A. Yes, on the original cost of the plants. , , , ^ • , a Q. Did that continue until the concern went into the hands of a receiver.'— A. Until very nearly that time. , . . , , ,, ^ ^^ -n^ Q (By Mr A. L. Harris.) Upon what basis is stock usually watered? ior example, what was the basis in your combination?— A. Well, they issued four shares of stock for each share of the original cost of the property and the cash put in. TRUST FIXED THE SELLING PRICE FOR DISTRIBUTERS. O In speaking about the rebate system a little while ago you said that the dis- tributer was required not to buy of any other distillery. Was it also made a con- dition that he should not sell below a certain price?— A. Do you mean the distributer? 188 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Yes; I mean the distributer. — A. I am not certain as to that point. At the present time the distributer is obliged to sell at a specific price. That is the pres- ent situation, but not the condition that existed years ago. Q. (By Mr, Jenks.) Does the present American Spirits Manufacturing Com- pany fix the price for the distributer and insist upon his living up to it? — A. "Well, I think they fix the price, but the distributers have an association among them- selves, known as the Distributers' Association, through which they agree to sus- tain certain prices that are regulated among themselves, although they may he dictated by the officers of the trust. Q. (By Mr. A. L. Haekis.) Do you remember the facts relied upon in the case of G-reene v. The United States, in the habeas corpus proceedings, southern district of Ohio, several years ago? — A. I do not remember that at all. Was it connected with our company? Q. It was connected with the Distilling and Cattle Feeding Company, but per- haps it was before you were in it? — A. I have known Mr. Greene all my life, but I do not remember that case. Q. Do you remember that he was indicted along with others in Massachu- setts? — A. Yes; I remember that. Q. He was in Cincinnati and was arrested there, and when a requisition was made upon the Governor of Ohio for delivering him to the Massachusetts ofiicers, he applied for a writ of habeas corpus. Was not the fact stated in the indictment that the distilling company had required the distributer not to sell below a cer- tain price? — A. Yes; I remember the case to a certain extent, but my remem- brance is not clear enough for me to give any definite idea on the question. My remembrance is that it was in the nature of a blackmailing case. I can not tell much about it at the present time; we had so many cases of that kind that my memory is not definite in regard to it. ORGANIZATION OF THE UNITED STATES SPIRITS COMPANY. Q. (By Mr. Jenks.) What do you know about the United States Spirits Com- pany that was said to have been organized in Cincinnati about the middle of 1898 to distribute the country's output of alcohol and spirits? — A. I know of that in a general way. Q. Can you not give some details with reference to that business?— A. I have a mere idea in regard to it; I had a copy of their proceedings, showing the prices to the wholesale trade and the prices to be charged to the retail trade. It came to me indirectly through one of the indi^ddual members. I got it as a matter of infor- mation sp that I would know how to arrange my own prices. Q. Do you know whether they have control, as distributers, of a very large part of the country's, product at present?— A. They only control it so far as the trust gives it to them. The trust places all its product in the hands of distributers, but there are two distributing houses that belong to the trust, so that it is a dis- tributer in competition with these local distributers who do not hold any stock in the trust. H. H. Shufelt & Co.'s plant belongs to the Standard Distributing Company, but the distributing house itself belongs to the American Spirits Manufacturing Company. In New York there is a large distributing house known as the American Distributing Company, which is owned by the Standard Distributing and Distilling Company. They own 3 or 8 more distributing houses in New York, one of which, I believe, is known as the National. They also have a distributing house in Cincinnati known as the Mill Creek Distilling Company. All of these are owned by the trust, which goes into competition with regular distributers; but, at the same time, they all belong to the association of which you were speaking— the United States Spirits Company. COMBINATION OP EYE AND KENTUCKY WHISKY DISTILLERS. Q. Do you know anything of the combination among the distillers of rye whisky and Kentucky whisky for the purpose of controlling all of their produot?- A. I have been informed by many Kentucky distillers that they had been given options on their plants by the Kentucky Distillers and Warehouse Association. I know of one or two transactions being completed and the money paid, and I have read that quite a number of others were consummated also. Q. Being in the rye-whisky business yourself, have you received any such proposition?- A. In no way whatever. I have had mine conversation with the attorneys who were connected with the promotion of this combination, but have received no offers, nor any indication that there would be any offers THE WHISKY COMBINATIONS: CLARKE. 189 THE CONTROL OF PBICES. Q. (By Mr. A. L. Harris. ) If a trust is able to control 80 per cent of the con- sumptive demand for any article or necessary of life, is it in a position to control prices? — A. A trust can control prices on an 80 per cent basis, provided they allow their competitors to get what trade they want and simply take what is left. In our line of business the competitors always seem to have the first choice, our product being a staple article. Of course, in staple articles a man can compete more easily with a trust than in articles which, you might say, are specialties. Any man who makes alcohol can sell it. But when he comes to offer rye whisky, his special brand may have a particular quality that makes a difference in the trade, and for that reason the trust might own 80 per cent of the rye- whisky plants and might, having the best brands, control 99 per cent of the trade. QUESTION OF WAGES RESUMED. Q. (By Mr. Kennedy.) Do the wage-earners in your business have steady employment the year round?— A. For the last 20 years there has been pretty steady employment; it is very seldom that the distillers close down, and wheii they do the men are employed in making repairs. Q. Are there ever very many who follow the business out of employment? — A. Very seldom; there have been a few men who have lost their places through radi- cal changes who have been unable to get back, and who have had to seek other kinds of employment. Q. Are they organized in any instance? — A. Only the engineers; there is no other organization of which I know. Q. Have you stated the propoi-tion of the distilleries of the United States that are now in the combinations, and the proportion that are outside? — A. In the manufacture of alcohol and spirits, about 75 per cent of the production is by the combinations and about 25 per cent by the outside distillers. This is not the pro- portion as to capacity, but the proportion of the amount that is being produced at the present time. I?'or instance, there are about 30,000 bushels being manu- factured into spirits and alcohol by the trust, and about 10,000 bushels by those outside of the trust. PRESENT INDUSTRIAL CONDITIONS LIKELY TO CONTINUE. Q. Do you believe that the evolution now going on in the industrial world will, if unchecked, eventually result in placing the industries of this country in the control of a few thousand men? — A. I do not think so. I believe that the present conditions in trade will continue. New men will be coming into the-different lines at all times in such a way as to produce new competition and create practi- cally the same state of affairs that we have now. Q. (By Mr. Phillips. ) On a larger scale, do you think? — A. I do not think we shall have combinations on a larger scale; but there will be competition on a larger scale. Q. (By Mr. Kennedy.) Is it not generally feared at the present time that all manufacturing industries will fall under the control of a few large combina- tions? — A. I am one of those who believe that there will be more diversification in the future than now; that the small trader will come in and buy a factory because of special aptitude in his line of business. Still I think a multiplication of large combinations will continue for the next 10 years, but even while that continues small traders will be coming in and conducting their bxisiness, and the combinations can not fight the small trader as they do companies more nearly their equals. Q. (By Representative Otjbn.) Can they not do the way they did with the California people — lower the price and crush them out? — A. That results more from a scare than anything actually accomplished. In a staple article a man does not need to sell to the same customer every day. For instance, in former times, before I entered into the trust, I used to have 8 or 10 customers that took all the spirits and alcohol I produced; but during the last 2 years, by changing the policy of my business, as it were, I have sold to at least 150 different com- panies and people, changing my trade very rapidly, and getting fully as good prices as if I had continued trading with 2 or 3 men. Q. (By Mr. Jenks. ) Do you mean that you have been driven out of special markets and have gone into others?— A. That is it exactly, and to other individ- uals, changing my trade quite rapidly. 190 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. EFFECT OF TRUSTS UPON SMALL TOWNS AND CITIES. Q. (By Mr. Phillips.) What will be the effect of combinations of capital and concentration of industry upon the smaller cities and towns when the large cities become the centers of organization?— A. I think that depends more upon the ques- tion of transportation and freight rates than anything else. Q. "What effect will it have on the financial conditions of the smaller places if they do their banking business in New York, Chicago, Philadelphia, etc.?— A. I never could see that that was detrimental to smaller places. I live in a moderate- sized city. After I had e.stablished a credit in Chicago, I could go up there in times of disaster and bring money down to Peoria; and it seems to me to be bene- ficial, rather than otherwise, because the large Chicago bankers, when they have confidence in a man, extend him more credit than my bankers would dare. Q. Do you have any idea that, in the course of a few years, when industries are more generally combined, with central offices in Chicago or New York, money will be taken there very largely and the bank accounts in smaller places dimin- ished?— A. They do that now. Our company, as it was originally organized, always kept a New York account. At first they kept a large Peoria account, which seemed to be beneficial; but I doubt very much whether in the long run such changes in banldng methods as you suggest will be detrimental to the smaller cities. The small city only needs enough capital to do its business with. Any- thing beyond that is unnecessary. THE general effects OF TRUSTS. Q. Upon the whole, do you think trusts detrimental or beneficial? — A. I think they are beneficial so far as they insure profitable returns, but they destroy the individuality of the original proprietors. Q. And of many of the employees? — A. I do not know that it afl:ects their indi- viduality so much, but it does that of the proprietors. They disappear from view so far as their influence in the business is concerned. Q. When a number of plants are put under one management it necessarily relieves foremen, superintendents, and traveling salesmen of a great deal of work, does it not? — A. It relieves some traveling salesmen, but not many foremen. I think a great majority of them are kept in employment. Q. But are not a great many plants closed down? — A. That, of course, is to be expected, but it also increases other expenses; more men are employed in the offices to keep the records and look after the machinery of the large corporation. It always seems to me that it takes more high-salaried men, proportionately, to control a large corporation than a small one. I am speaking with reference to our line especially. Q. (By Mr. Kennedy. ) Do you think that trusts have their most baneful effects upon the proprietors of the concerns that originally go into them? — A. So far as their individuality and personality is concerned they cease to be a factor in the business in which they were formerly a power. They lose their prestige in the business world. Q. (By Mr. Phillips.) Do they not spend most of their time cutting off cou- pons? — A. I can not say that. My observation has been that the majority of them invest in stocks, the value of which disappears. Q. Perhaps they prefer to spend it in foreign countries? — A. In some lines of industry that is true. It has also been true of a great many of the original pro- prietors in the distilling business. A great many are growing old and wish to get out of the business. The most baneful influence that I have seen is upon the young men who would naturally succeed their fathers. They seem to have no place in the world. They wish to do something, but fear to fight the trusts. They do not wish to risk the little money they have. Eventually, I think, they will find a place— possibly in some other line. The risk for their little money seems great. Q. (By Mr. C. J. Harris.) Can't they invest in trust stocks?— A. They have^ not the same faith in trust stocks that some others have; they know how much water they contain. Q. (By Mr. Jenks.) After the formation of the Distillers and Cattle Feeders' Trust were not many of the distilleries that went in abandoned?— A. A great many were. Q. There were 81 that went into the trust? — A. Yes. Q. How many of the 81 were abandoned?— A. I should judge over 60 of them. Q. Then did not many employees of these 60 distilleries have to look for other kinds of work?— A. Yes; but a great many of the 60 had not been oper- ated for scjiue years before, because under our system of pools we paid so much THE WHISKY COMBINATIONS: CLARKE. 191 into tlie treasury for the purpose of giving them time to cease operations. They had been kept quiet in that way, and a majority were dead before we organized the trust. Q. But if they had been owned and controlled by individual distillers would they not have been running more or less all the time? — A. No; on the contrary, I think the majority of the 60 would have been wiped out of existence by competi- tion, and would have rotted down and been sold for old junk and metal; they would have disappeared from view. REASONS WHY THE SUPPLY OF DISTILLERIES HAS EXCEEDED THE DEMAND. Q. (By Mr. A. L. Harris.) What caused the supply of distilleries to exceed the demand? — A. At different times the business has been very profitable, and that has always caused an increased number of distilleries to be built. The large exports to Europe from 1874 to 1879 was one thing in particular that caused an overproduction of distilling plants. We could not make alcohol fast enough to supply the wants of Europe. That condition was caused by the failure of the potato crop in Germany, out of which they make their alcohol. We also sold more or less in France, Italy, and Africa. It would go out in 20,000 barrel lots; that was really the cause of the organization of our first pools; when our trade suddenly stopped we had a great overproduction in distilleries; you can see at a glance why we could not make any money if all attempted to run, and conse- quently we adopted the pooling method. SHOULD TRUSTS BE PLACED UNDER GOVERNMENT SUPERVISION? Q. (By Mr. Phillips. ) If there is anything that has not been covered, anything that you desire to state to the commission now in your own way, we would be pleased to hear it. — A. I do not believe that I have any particular ideas on the subject other than I have expressed. I volunteered something half an hour ago that about covered my views. I might say again that I do not believe the evils of combination can be cured by legislation. Q. Have you any remedial legislation to propose in that regard? — A. No, none whatever; but I believe it would be a good thing to take some action to prevent the watering of stock. Q. Do you believe trusts should be put under Government supervision, similar to that of the national banks, and compelled to make a full public statement of what they are doing? — A. As a private individual, operating a factory, I should not like to have my business subjected to public criticism. Q. Do you think it would be beneficial to the public to have some kind of an ofiicial examination?— A. I think that statements are frequently made for the purpose of influencing public opinion and manipulating the stock market. Such statements should be more carefully reviewed and the public given more accurate information. That would have a beneficial effect in regard to stock speculation. Q. (By Mr. Jenks.) I understood you to say that you thought it had been decidedly beneficial to the distilling business to have the rigid Government super- vision of distilleries that there is now, because it induced the officers of the dis- tilleries to be more careful in their bookkeeping and methods of doing business, etc. Do you think such supervision might be beneficial in other lines of indus- try?— A. I think all large combinations accomplish the same result in their statistical departments that is accomplished by the Government in the records of the distilleries; and therefore you would not be accomplishing anything, except that the records kept would be made public. Q. Are such statistics as reliable and useful as Government statistics?— A. Statistics furnished by large corporations generally show the favorable side of things. Things are generally made to look well on paper for the influence that it will have on the stock market. This is especially true in our business. The statements are always rose-colored, and the disastrous features are never made known to the public. , , . Q. (By Mr. Phillips.) Would they be stated if there were a law requiring it?— A. I am unable to say whether or not such a law would be beneficial; it might if it were not too inquisitorial. That is what the large corporations dis- like; they object to having their private affairs inquired into. Q If it were a condition of their charter, it would be proper and right, would it not' If they receive their charter from the State, should they not be amenable to the State?— A. Of course the law is that anything the State grants it can control or take away. Therefore, if such conditions were made when the charter was granted it might be beneficial. 192 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. AFFIDAVIT. State of Illinois, County of Peoria, ss: I swear that tlie statements made by me of my own knowledge in the foregoing report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. Chaeles C. Clarke. Sworn and subscribed to before me this 9th day of August, 1899. "William S. Paeet, [SEAL.] Notary Public. Washington. D. C.,May 15, 1899. TESTIMONY OF GEN. JOHN McNULTA, Receiver of the Distilling and Cattle Feeding Company. The commission met at 11 a. m., Monday, May 15, 1899, Vice-Chairman Phil- lips presiding. Gen. John McNulta, receiver of the Distilling and Cattle Feeding Company, testified. Q. (By Mr. Jbnks.) Will you be kind enough to state your full name and address?— A. John McNulta, Chicago; ofBcein the First National Bank building. REC'EIVEESHIP OF THE DISTILLING AND CATTLE FEEDING C05IPANY. Q. Will you explain to us briefly what your connection with the Distilling and Cattle Feeding Company has been, and how you came to be put in charge there?— A. I was appointed receiver of the Distilling and Cattle Feeding Company on the 4th of February, 1895, by the United States circuit court for the northern district of Illinois, northern division, in what is known as the Olmstead case, Olmstead et al. V. The Distilling and Cattle Feeding Company. I was appointed in the first instance as the special representative of the court. On the 28th of January Mr. Joseph B. Greenhut and Mr. E. F. Lawrence were appointed receivers, the former having been president of the company. A stockholders' committee intervened and applied for the removal of Mr. Greenhut upon the ground that he had been engaged in stock speculations, was short on whisky stock, and that his interests were adverse to the trust. He was removed. Mr. Lawrence, a director of the First National Bank of Chicago, was retained as the representative of the inter- est by which he was nominated. Mr. John J. Mitchell, president of the Illinois Trust and Savings Bank, on the nomination of another interest, was appointed receiver. I was appointed on the nomination of the court as the special repre- sentative of the court. The triple receivership continued from the 4th of Feb- ruary until the 33d of March, when Mr. Mitchell and Mr. Lawrence resigned. I was continued as sole receiver and am still acting in that capacity, the active business of the trust being, however, substantially closed. There are a few small properties or interests undisposed of and some claims unsettled. The active work, or the most active work, of the trust ran through a period of about 3 years and 6 or 7 months. Q. Will you kindly tell us what your regular occupation was before? — A. I am a lawyer and have practiced my profession for 30 years or more. HISTOEY OF THE OEGANIZATION. Q. Can you give us some detailed information with reference to the Distilling and Cattle Feeding Company; for example, its name, its date of organization, place of incorporation, place of business, etc.? — A. I have made statements, or had statements made from the books, which I have numbered and called exhibits, that I deem more reliable than my memory, and I brought them here. I wish to apologize to the commission for not coming as fully prepai-ed on this matter as I ought. The active work of this trust has been off my hands for some time, and I have other very pressing work which keeps me very close. My hours are long and I have not been able to give the personal attention to it that I should like to have done. But I have had my seci-etary, who went through this work with me and is an expert and who has full knowledge of the books and accounts, aid me in the preparation of these papers. I offer you here Exhibit 1, which gives a list of the distilleries, capital stock, and other matters pertaining to the Distillers and Cattle Feeders' trust, covering substantially the ground covered by your question. THE WHISKY COMBINATIONS: MCNULTA. 193 Srrt S o Q a> , i'S'8 'oo S o o sii Clarke ocertifi are in n arke. 15 ;a og-SS >-B-H,^ C-J ..J C ai fl t^-^ '^j -2 J^ -r r J ■I T'J C-l « S CO C-j L--CF:'C-t a:o:i '^ ^ t -* ro L- ~rh -:t^ O;. CO O :zio S O no ^ fto 5«i ES5S£d "JP r^ © O £cQS|Hm;^=Jc?:ofep3cc "3 ?^ as Sq E-ii-ia26ip: o 6i« fed -R o a?- -O, ^ a^-SF loooSgoofetg.So iTS'C'C J o'^'Xi o fl c c ^^ 4j.d ■ 'd^ji^.y a- mo ■ ioMoodH a: slaS O cd C) tH d .ri 02002^020 '3 ' o.fl o S dr-j ' m o o d ®-^ '^'^ o Q iHiSPHCcoa :ii( d sea .93 Ss3 o.s.s K o d i ;=^- . ■^ o o tjj043 o ^ oo.gbfiSoo a.g.gss i»g ^ ^g-3Q.s^S3 jO ^3 ^ S c3 S^osg»s SOG, rH M^ d e S^^ U QJlOJOJ^^diH j3ja,a,d,d.d « o ooO OO 60 &cbc.g o^o^ag .g.g 6fS-ss ^ SS.2 S,fe £*^ Sa ojl E-lPHMEHpHtH , o o . ;ooo bDttoO ■.g g M sogia.g fcJDO+2-^;z] SgQp.2 ■ «=gdfi rj'+3 ^ 9 «i 5.2 3s 2 5 a £ tj I, .d'S'S.d* eaflE^O >> ; Md „„ I d;^ °^ i::jr3043 303^3 o:j3|g^5 .2 o oo p buMd Sfg fla :Q2|mgW 1 ^ ■ ■ -^ * S (D jdja dxi.g'g S^5.2.d,tj.d t^E^pqt^a3^^0a(l^fr^Mt^ c»- -I _jijrd^-i '-'S '^i< ^.— ' =8.g&g.?Sg-335qf> ig'^S3S.!2hJ„Sd o o(^ rt rfro d ^ Qo^^wg^o^ THWCo-*»ra^t-cooiOi— iMCO"*ira 88SS!SS i-^piQi— nMfO'*'J5^t-ao -^i-iiftcococccocoSSKicoSS 194 HEARINGS BKFORE THE INDUSTRIAL COMMISSION. a © P5 03 O 3-2 l3 So ■ga ie 3 ■c o ^ s ® o ^6 iMWi-H n-li-(i-HWiM(MC'lt-lrHi-(i-l(MWi-H(Mt-l COCO COOOOl OS'— It-Ol"* 80Q00Q00 ill §£i! tHCC ^ ^ d Jn o o g'glo-fHai&g fl>la«-Sc35"S ■4:0 O 550 ;^5a3 =*Qo=T PBE-f 6t2 -S r^ ^ 1- SQ If ij 1/ a u d J- a! S mSPnEH .00^0 6 m':^ g^ ; a-- sS.ag : ^QlSJf^-^a Oj -t^ 1. 1' !■ .ij 0^ ^ d ^ ^ ^ ^ ^ Bill 'y^ " ,^ " -It^ -(^ ^"oHa^ ■= 5.5 P-S? J5 P,d ddS oj+j ■:; '!■ ■:^ '11 ^ a^a^^ ??5 gyg ^SS'-*SSSS2iS;^;5Stegg iS3S THE WHISKY COMBINATIONS: MCNULTA. 195 This exhibit contains the names of all the different houses in the company, 65 of them, the location of each, the name of the secretary of each, the capital stock and number of shares of each, the number of shares held by the trustees and by the other ofBcers, the nature of the transfers, and some remarks with reference to a few of the facts presented there. Q. Has the general statement in this exhibit ever been printed?— A. I think not. The date of the organization of the Distilling and Cattle Feeding Company was February 11, 1890. The transfer of the properties was made, on the books of the Distilling and Cattle Feeding Company, on April 1, 1890. Q. What was the nature of the product manufactured by this organization? — A. The product was spirits and alcohol, with small quantities of gin and whisky and blended goods generally, such as are put up by the distributing house of H. H. Shufeldt & Co. of Chicago. The refuse was used for cattle-feeding purposes. Q. These minor products, then, were practically all manufactured at the Shu- feldt distillery? — A. Practically all of them. Now and then, at the close of the distilling season, they ran off some whisky. THE STOCKS OP THE COMPANY. Q. Can you give us the details with reference to the amount of stock authorized and the amount issued, common and preferred? — A. Common stock to the amount of 885,000,000 was authorized, and the full amount was eventually issued. There was no preferred stock authorized or issued; and there being no preferred stock, there were no dividends or profits of any kind on the same. The treasury stock was eventually all issued. There was nothing in the by-laws covering the issue or use of treasury stock. The total amount of bonds authorized was §8,000,000. One million was issued, and I believe that, at a later day, the authority to issue the balance was revoked; w3, 500,000 of them, however, were put up as collateral for the repayment of money held on rebates. There were no bonds paid off. The total amount of bonds outstanding at the date of the receivership was yl, 000,000, with §3,500,000 held by the trustees as collateral for rebates. The bonds were issued in the spring or summer of 1898. My recollection is that they were 30-year bonds. The rate of interest was 6 per cent. Four hundred thousand dollars of these bonds were issued to take up §300,000 of indebtedness, as I recollect it; i. e., .$400,000 of the bonds were issued for .$300,000 in cash, through brokers. Two hun- dred thousand dollars in bonds were issued for $100,000 in cash to certain officers of the company. There were none of these bonds issued in exchange for property. Perhaps my statements in regard to Exhibit 1 have been misleading to you. THE DISTILLERS AND CATTLE FEEDERS' TRUST. Exhibit 1 gives a list of 65 distilleries, which I believe went in, or were the first 65 houses that went in, to form the Distillers and Cattle Feeders' Trust, and not the Distilling and Cattle Feeding Company. The Distilling and Cattle Feeding Company having bought outright the properties and interests of the Distillers and Cattle Feeders' Trust, and all records of the Distillers and Cattle Feeders' Trust having been destroyed, it is impossible to give any better information than that contained in Exhibit 1. Q. "Was anything at all brought out in court or elsewhere as to why the books of the Distillers and Cattle Feeders' Trust were destroyed; who destroyed them, etc.? — A. I made diligent inquiry upon that subject and demanded the papers from the officers of the old company, but with no satisfactory results. The gen- eral response was that they were lost, destroyed, not in existence, etc. I never succeeded in getting them. When I took possession of the office at Peoria, with all the papers of the Distilling and Cattle Feeding Company, the trust papers were not there, and could not be found. So far as I am aware they never have been found, and I am satisfied they are destroyed. Q. Did you find the papers of the Distilling and Cattle Feeding Company apparently intact ?— A. Yes ; apparently intact, but they had been separated. There was some little controversy between the receiver and the oflicers of the company as to which were the papers of the company and which were the private papers of the individuals. It ended in a dispute about 3 safes which were in the office and which were locked. It was insisted by certain of the officers of the company that they contained only private papers. But the safes were the property of the company, and I proposed to investigate. We got mto something of a rumpus. They refused to open them; and I was compelled to get some locksmiths, who cut one safe open, and prepared to blow the other one open with dynamite, but before it was found necessary to do that an expert from 196 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Chicago succeeded in opening it. In that safe we found a number of papers ■which we decided belonged to the Distilling and Cattle Feeding Company, and kept them and used them. Q. "Were the others turned over to the individual officers to whom they belonged? — A. Their private papers were separated and turned over to them. There were 3 expert accountants appointed — that is, during the triple receiver- ship, 1 nominated by each of the receivers appointed by the court to operate under the direction of the receivers. They operated during the triple receiver- ship, and under my direction during the sole receivership. One of these experts prepared these papers which I present to you to-day. He has had control of the papers, but the trust papers were not found, and could not be found. The stocks of these variou.8 distilleries were not listed, and there is no way of arriving at their market value at the time they entered into the trust or into the Distilling and Cattle Feeding Company. Exhibit 2 gives a list of the distilleries that were finally included in the trust, which exceeds the niimber in the original statement by 20. There is a column giving the date of entering the trust, by which is meant the date on which the distillery was taken into the trust. Under the head of " Distillery " is the name of the corj^oratio]!. Uii Manhattan Distilliirg Co. Monarch Distilling Co _ Meiners Distilling Go Maddux Distilling Co _ . . Martin Distilling Co Missouri Distilling Co . . Miller Distilling Co W. H. McCormick Northern Distilling Co __ National Distilling Co Running Kenton County, Ky - Atlantic, Iowa Cincinnati, Ohio Dayton, Ohio Trebeins, Ohio Peoria, 111 ....do. San Francisco, Cal .. St. Louis, Mo- - Chicago, 111 Gunimingsville, Ohio Peoria. Ill Pekin.IU... Wide Awake, Ky Covington, Ky Canton, 111 Comanche, Iowa Dayton, Ky Portsmouth, Ohio . . . Harrison, Ind Covington, Ky Indianapolis, Ind Pekin,Ill.. Cincinnati, Ohio Piqua,Ohio Albany, N.Y Peoria, HI do do Hamilton, Ohio Aurora, Ind Des Moines, Iowa Independence, Mo. . . Iowa City, Iowa Sterling, 111.. Peoria, 111. Wesley City,IU Brooklyn, Ind Covington, Ky Cincinnati, Ohio do. Peoria, 111 do Milwaukee, Wis . Dayton, Ky Katisas City, Mo- st. Louis, Mo Chicago, 111 B6ardstown,Ill.. Peoria, 111 Milwaukee, Wis - Shares. No . No. Yes. No . No. Yes. Yes, No. No . Yes. No . Yes. No. Yes- No. No. No . No - No. No- No-. No- No - No-, No-, No- Yes- Yes- Yes- No - No. No- No. No- No- No- No-, Yes- Yes- Yes- Yes- No - No - Yes- Yes- Yes- 1,870 846 4,845 2,245 3,687 2,250 1,580 808 363 350 1,380 600 1,250 726 2,690 3,078 21,437 6,887 3,808 5,000 4fl7 Yes- No. 350 6,306 3,744 8,955 23,847 1,374 2,700 3,743 8,408 4,025 150 8,317 1,000 THE WHISKY COMBINATIONS: MONULTA. 197 Exhibit 2. — Name and locality of distilleries ruiiiriiig and not rnmiing at time of transfer to Distilling and Cattle Feeding trust — Continued. No. Date of enter ing trust. Distillery. Location. Running. Shares, Aug. Deo. Dec. July 8, 18,ST 11, 1889 9, 18,ST 16, 1887 July 14, 1888 Aug. 8.1887 June 12, 1888 Nov. 4,1 or 40 distilleries dismantled in this way, would not the presumption be that the number of superintendents was lessened correspond- ingly? — A. Yes: the number would be lessened. The concentration of the work- ing forces would necessarily lessen the amount of superintendence and decrease the cost of production. Q. Were overseers left in charge of the plants that had been dismantled? — A. In some cases there were simply watchmen to keep the building from being destroyed; in some cases the buildings were abandoned absolutely. Q. Is it true that in a number of cases the distilleries were simply suspended for a time and the former managers continued on salaries, with nothing to do? — A. That occurred in some cases for short intervals. But I do not remember any instances in which the houses were kept up for long periods and the managers paid, unless by agreement, as in the case of the 5-year agreement. Q. What was that .^-year agreement? — A. The distillery was purchased and brought into the trust with the understanding that the owner should be con- tinued as manager at a salary of 8300 a month. Q. Did that apply to all of the distilleries that were taken in — the 81 or the 65? — A. My memory does not serve me on that. I should think that in some of the smaller ones it did not; it would apply only to the distilleries that were strong or producing concerns, and which it was necessary to get out of the way solely because they were market disturbers. Some smaller distilleries would not warrant an expense of that kind. Q. Would the manager of a small one be paid a salary correspondingly less, but yet a regular salary? — A. I do not remember; that is a matter of detail for which I should have to go to the records. As to traveling salesmen, there were none for the company proper. The only traveling salesmen were those employed by the house of H. H. Shufeldt & Co. in the distributing business. Its purchase by the Distilling and Cattle Feeding Company did not change their number or affect the rate of wages. There are no statistics on the subject of labor. The labor is comparatively a small part of the cost of jsroduction of spirits and alcohol. Q. Would not the same general observation apply there as in the case of the superintendents, viz, that where distilleries were closed a number of men were thrown out of employment? — A. Yes; I think so. IMPROVED PROCESSES (RESUMED). As to raw material, the principal cost is in corn and barley, rye or barley, or other malt, which is bought in the open market, on the board of trade or in the usual way, in large quantities. The increase in the amount of spirit produced from a given amount of grain by the larger houses in the last 5 years has Ijeen only slight, and that increase is owing to the improved methods, which were open to any one to use. The increase of yield in the small distilleries over that produced by the old and primitive methods, still in use, has been small. Q. Improvements of that kind can hardly be ascribed, then, to the formation of the combination?— A. Not at all; it is the use of the improvements on a large scale. The increase of the yield over that produced by the old and primitive methods, 204 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. still in use in many, indeed most, of the small distilleries, however, is very great. I have another paper which I present to you and which covers that ground. The product during my time— and I think it still runs about the same — was some- where from 4.70 to 4.85; that is, 4.70 to 4.85 gallons of spirits per bushel. Some of the smaller houses get down so low, I believe, as 3i gallons to the bushel. The higher yield is due to the larger capacity, the methods, and machinery. There has been no specialization, each distillery continuing to make its own brands and being known by its brands. The products of certain distilleries are sought for by particular customers. PRODUCTION OP SPECIALTIES BY CERTAIN HOUSES. There are also specialties produced by certain houses. They have a brand of whisky or gin that has become popular — as, for instance, the Shufeldt gin, which became very popular and commanded a higher price in the market than any other brand. The other houses, however, are spirit houses; i. e., they make spirits and alcohol, but in that you will find that buyers — especially compounders — often call for brands from a certain distillery, and that not always the distillery nearest to them. Q. Did the popularity of the Shufeldt gin continue after the distillery was pur- chased? — A. Yes; and increased. But these gentlemen were not after gin just at that time; they were after the plant as a spirit-producing plant. Q. Does not your last statement practically shut out the question of good will in the purchase of a plant? — A. The good will, no doubt, had a money value; but they would not, I think, have bought it for the good will alone. It was bought in order to control the oiitput from it. Q. The main thing was to get rid of the competition? — A. Yes; to get rid of the competition in spirits, not in gin or whisky. The gin and whisky were simply an incident. If they had made gin and whisky, and that alone, and kept out of the spirit business, I do not think they would have been disturbed. I think they might have continued in the field of the regular whisky manufacture, i.e., the old-style product. THE MANUFACTURE OP GIN. Q. (By Mr. Phillips.) From what kind of material do they make gin, particu- larly the excellent quality of which you have been speaking? — A. I might answer that question from the standpoint of a layman, and say that the whole thing has just one base — pure spirits, chemically, common alcohol. Q. (By Representative Otjen.) It is a question of mixing, is it not? — A. Yes; it is a question of mixing, of preparing it. The base of the whole thing is pure spirit, or chemical alcohol, not commercial alcohol. There is a distinction between high-proof spirits and commercial alcohol. Commercial alcohol is not so highly refined as spirits; i. e., it has more of fusel oil and acids in it. The Shufeldt gin is a carefully prepared high-proof spirits. In the preparation they have a formula which is a secret with the house, or at least was a secret until they showed it to me as an ofificer of the court; but I soon forgot it, so that in substance it remains a secret yet. With absolutely pure spirits, distilled water, juniper berries, and other vegetable material they make an infusion, and that infusion is the gin. I became convinced, in .studying the question vnth the chemist, that it was a purer spirit and a better gin than anything that was imported. In other words, it is pure ethyl and distilled water, compounded with juniper berry and other vegetable juices, which give it its medicinal properties. Most if not all the gin made in this country is made in this way. Q. (By Mr. Phillips. ) Is not pure gin made directly fr(^m juniper berry?— A. That is the theory, I think, that is generally advanced, but I understand it is not the fact; it would be worth less than if it were made of pure corn or any other grain. Starch is the basis, and there is little, almost no starch, in the juniper berry, while it is abundant in corn and as pure as it can be got. The starch is converted into sugar by the use of the malt, and then the sugar is converted by yeast into the spirit globule, which is evaporated by heat. Now, where they get the pure globule, or purify it, leaving it as they do in this process without the other chemical elements that go with it, or where the pure ethyl is obtained, I do not know. The chemists claimed to me that 16 chemical elements come out of the still in the vapor. The ethyl, or the pure spirit, is the one they want. Now, in the spirit made from corn by the modern process they get it in its purity; and in going over that question I was led to believe that in Holland, where they make gin, they do not make it out of the juniper berry, or by our process, but out of grain, or potatoes, or something that has starch in it. But there the juniper ber- THE WHISKY COMBINATIONS: MCNULTA. 205 ries and other vegetable materials are grovmd up and cooked with the mash, and are put through the still by the old process without any purification of the spirit. . <^- (By Mr Jenks.) When the Shufeldt distillery was purchased by the Distill- iJ^S and Cattle Feeding Company did they not also purchase this secret process?— A. Yes; the man that had the secret process stayed there; and they were entitled to it and got it. Q. Have they made that process generally known to the other houses of the com- pany?— A. I think not. When I went into the place which they call their labora- tory I had the man show me how he did it, his formula, the berries, roots, and herbs that he used. He toldme the proportions of each, how they separated them, and how they used them; it was not known outside: they kept the secret closely. Q. Does not the American Spirits Manufacturing Company control that process now, and can they not use it in every one of their distilleries, if they want to?— A. Yes; if they want to, but I don't think they will do it. They have not as yet. Q. Do you think it would overstock the market with that particular kind of giu? — A. Well, it is a matter of value that appeals to them. There is no reason why they should give it away that I know of. One plant makes all the gin that they need of that kind. I do not know what they have done with it. There are other distilleries that make gin, but I think nothing anywhere near as good as Shufeldt gin; they certainly had not up to the time of my investigation of that matter. HIGHLY REFINED SPIRITS USED IN THE MANUFACTURE OF GIN. Q. Then you do not think that the claim that the great combinations enjoy special advantages in secret processes of manufacture holds true in this particu- lar case?— A. I do not think it does in the case of Shufeldt gin, but that is lim- ited somewhat to this infusion. The production of the spirit which is the base of Shufeldt gin is common to them all, and is generally done by double or treble distilling. They have triple-distilled spirit which they call "Sunbeam." There is but very little water in it. I do not remember now, but I think it contains 96 per cent of spirit. There is just enough water to hold the spirit in liquor form and prevent it from going to vapor. In order to demonstrate to me that it was absolutely pure, or as pure as it could be made, the chemist dropped a piece of pure white quicklime into a tumbler full of it, letting it fall easily, so as not to splash the spirit. The quicklime had no more than settled on the bottom than the tumbler was empty, the lime having absorbed the water, allowing the spirit to go off in vapor. Nothing remained in the tumbler but the damp slaked lime, which still retained its pure white color. This experiment also showed the dif- ference between the modern process of distillation and the old one, where fusel oil and everything that coraes from the still goes into the liquor and ultimately into the stomach of the man who drinks it. I agreed with the chemist in the conclusion that gin made from pure spirits is the best, and that the cheap, so called, common rotgut corn whisky, made fronr refined spirits, is the prrrest whisky that man can make. It is a mere question of palatability and age. It is unpalatable in the beginning, but is improved by age, so that in the end it is the best and is free from anything that is injurious. At least, that is my opinion, and it is also the opinion of a number of chemists with whom I conferred on the subject. Q. The question is suggested to me whether this was the commissary whisky of war times? — A. I was not posted on distillation at the time of the war: I was at the other end of the line: but I am inclined to think not. Most of the whisky furnished the Army was produced prior to the time when the new processes for extricating the fusel oil and the acids were applied. Most of the old commissary whisky was just weakened, rectified, high wines; yet I do know that under the conditions many of the men in the Army estimated it to be good. I have been informed that some of the best made during the later part of the war was by the modern process. Q. Have you anything further with reference to the specialties of different plants? — A. I know of nothing further that I can give you on that point, unless you call my attention to something. I know of no figures or data that would go to show that there has been any loss in efficiency through lack of the stimulus of competition. Competition has certainly been strong except for very short periods. The central office has kept track of the various distilleries — that is, the central office of the Distilling and Cattle Feeding Company kept track of the various distilleries, by means of daily reports which covered all journal entries of the purchase of grain or shipment of goods, and which showed the daily production, every bushel of grain distilled, etc. The quality and character of the output depended largely on the trade, the customer giving notice if the goods received by 206 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. him were satisfactory. Tlie company also had inspectors visiting and checking the various plants, and samples of goods vi^ere sent to the head office from time to time. THE DISTRIBUTERS OF THE DISTILLING AND CATTLE FEEDING COMPANY. The Distilling and Cattle Feeding Company sold only to special agents who were known as distributers. A list of these distributers is given on the back of the rebate voucher used by the Distilling and Cattle Feeding Company. A copy of the rebate voucher and a list of the distributers is given in Exhibit 4, which I present to you here. Exhibit 4. [Face of voucher.] Peoria, III., - No. Subject to the conditions named herein, and for the purpose of securing the continuous patron- age of the within-named purchaser, the successors and assigns of the same, for its products, the Will pay to - DISTILLING AND CATTLE FEEDING CO., Six months from the date of this purchase voucher. , purchaser , dollars (S - , of- -) Being a rebate of 7 cents per proof gallon on proof gallons of the Distilling and Cattle Feeding Company's product purchased this day. This voucher will be valid and payable only upon condition that the above-named purchaser, the successors and assigns of the same, from the date of this voucher to the time of its payment, shall have bought their supply of such kinds of goods as are produced by the Distilling and Cattle Feeding Company, and all com- pounds thereof, exclusively of one or more of the dealers named on the oack hereof, until further notified, and shall also have subscribed to the cei'tificate on the back hereof. Distilling and Cattle Feeding Co. By J. B. Gbebnhut, President. When due forward to the Gennan-Amen'can National Bank of Peoria, III., where this voucher is payable without exchange or other charge. Stamped across face: Not transferable nor negotiable. [Back of voucher.] It is hereby certified that from the date of this voucher to the maturity thereof the within- named purchaser, and the successors and assigns of the same, have purchased all of their supply of such kind of goods, and their compounds, as are produced by the Distilling and Cattle Feed- ing Co., exclusively from one or more of the dealei's named hereon. Dated . James A. Webb & Son. New York, N. Y. Curtiss & Co.. New York. N. Y. Thomas B. Kerr, New York, N. Y. Ross & Keany . New York, N. Y. J. L. Hasbrouck & Co., New York, N. Y. Eastern Distilling Co. and Ridgewood Redis- tilling Co., New York.N. Y. Geo. w;Kidd & Co., New York.N. Y. E. N. Cook & Co., Buffalo, N. Y. Columbia Distilling Co. , Albany, N. Y. H. & H. Bemers, Brooklyn, N. Y. Carstairs, McCall & Co., Philadelphia, Pa. Dougherty & Downs, Philadelphia, Pa. Nicholas J. Griffin, Philadelphia, Pa. Charles S. Hahs, Philadelphia, Pa. Boyle & McGlynn. Philadelphia, Pa. Beattie & Hay, Philadelphia, Pa. Einpire Distilling Co. . Boston. Mass D. T. Mills & Co., Boston, Mass. A. L. Webb & Son, Baltimore, Md. James Walsh & Co., Cincinnati, Ohio. Maddux, Hobart & Co., Cincinnati, Ohio. Millcreek Distilling Co. , Cincinnati, Ohio. Union Distilling Co., Cincinnati, Ohio. Hoffheimer Bros., Cincinnati, Ohio. Ellas Block & Sons, Cincinnati, Ohio. Preibcrtr & Workum, Cincinnati, Ohio. The Old 76 Distilling Co., Cincinnati, Ohio, W.W.Johnson & Co., Cincinnati, Ohio. Henry W. Smith & Co., Cincinnati, Ohio. Hirsch.Loewenstein & Levi, Cincinnati, Ohio. Fleischmann & Co.. Cincinnati. Ohio. W. L. Weller & Sons, Louisville. Ky. Terre Haute Distilling Co. , Terre Haute, Ind. Chicago Distilling Co., Chicago, 111. United States Distilling Co. , Chicago, 111. Abel, Ames & Co., Chicago, 111, Empire Distilling Co. , Chicago. 111. The Rivcrdale Distillery. Chicago, 111. Hcmj H. Shufeldt & Co., Chicago, 111. The Calumet Distillery, Chicago, 111. Corning & Co., Peoria, 111. H. Schwabacher, Peoria, 111. John Meiners & Son. Milwaukee, Wis. National Distilling Co. , Milwaukee, Wis, The St. Paul DistiTlery, South St. Paul, Minn. Mound City Distilling Co,, St. Louis, Mo. Teuscher & Co. . St. Louis, Mo. Mound City Distilling Co., Kansas City,Mo. Her & Co. , Omaha, Nebr. Lilienthal & Co., San Francisco, Cal. .1. & A. Freiberg, Cincinnati, Ohio. Mihalovitch, Fletcher & Co., Cincinnati, Ohio. Rheinstrom Bros. . Cincinnati, Ohio. The Cook & Bcrnheiiuer Co.,New York,N.Y. The Wm.Bergenthal Co., Milwaukee, Wis. THE PRICE OF SPIRITS. Q. Were the prices fixed by the Distilling and Cattle Feeding Company upon its products uniform throughout different sections of the country?— A. There was sonif^ difference in ])rice in different markets, because of nearness or remote- THE WHISKY COMBINATIONS: MCNULTA. 207 ness of the source of production, but outside of that their prices were very uni- form. They did not, however, hold the market, except for a while. Other distilleries grew up around them like mushrooms in the night. A number of men sold distilleries to them for stock, and then sold their stock and built more distilleries. In some cases the company bought 3 or 8 distilleries from the same parties, and finally distilleries were built faster than they could buy them. Q. Was the competition resulting from the high price fixed by the company the real cause of the difBculties into which it finally fell?— A. That, together with speculations in the stock of the company, was very largely the cause. The stock was listed in New York, and men interested in it speculated in it and failed to hold its value up. Q. How much was the price advanced under this combination? — A. I do not remember. Q. Have you a list of the prices?— A. I do not think I followed the prices of the stock. Q. I mean the prices of the products?— A. I will give that to you. The stock was down, I think, to about 7i or 8 at the beginning of the receivership, and dur- ing the receivership it went back to about 22 or 33. The distilleries that were bought in by the new company were purchased practically on the basis of 28i for the stock. THE REBATE SYSTEM. Q. Groing back to the rebate system, what, on the whole, do you think was its effect on the business? The rebate certificate you have offered in evidence pro- vided for a rebate of 7 cents per gallon; in addition to that was there another rebate to the distributer? — A. The distributer had 3 cents a gallon. Q. So that 9 cents on the whole was withheld for 6 months. What was the general effect? — A. I do not think its effect was good. It demoralized the trade and created bad feeling among the customers, so that there was a general dispo- sition to get out of it. I think the rebate system was started at a time when the company had almost entire control of the market, and when it looked as though it would get complete control. There was no alternative for buyers except to start distilleries of their own, and so they submitted to it, but always regarded it as a great burden. Q. Did the company institute the rebate system solely for the purpose of con- trolling the output? — A. Yes; they went to a customer, and in terms, either expressed or implied, told him that he might stay in the business if he would let them supply him with goods. Some of the distributers had a very large business. If they desired to continue in it they could do so only under the rebate system, for if they refused they would be left without a supply, the company having sub- stantial control of all the plants. Having once got in, however, the system became burdensome, because it was not long until new houses commenced com- peting and underselling the company in the market. Q. Is the feeling among wholesalers with reference to the rebate system so hostile that, on the whole, they will give preference to independent distillers who operate without this system? — A. I think it hardly possible ever to start the rebate system again, at least within the memory of the men who had experience with it. Q. You are informed, then, that the American Spirits Manufacturing Company has not adopted the rebate system? — A. They have never thought of that, and I do not think they ever will. My understanding is, from conferences I have had with the officers, that they vsdll not attempt it. There are two things that they will avoid — first, the rebate system, and, second, any attempt to control the market in order to hold the price above what it ought to be. THE MARKET MAY BE CONTROLLED BY CHEAPENIXG PRODUCTION. On the contrary, they will seek to control the market by cheapening the cost of production. That is the only way, in my opinion, they can ever do it; and I do think they can do it in that way. Q. Do you remember whether the old Distillers and Cattle Feeders' Trust, so far as the officers are concerned, made any attempt along that line?— A. Not very much; I did not find any conspicuous evidence of it in the records. The tendency seemed to be the other way. They tried to increase the price and corner the market. Q. That is, it was the officers themselves who tried to push prices up as well as the stockholders?— A. Yes; after the concern reached the point where they con- trolled a large proportion of the output of spirits. I think that is really where they made their mistake. If they had depended on controlling the market by cheapening the product, they would have secured control and kept it. If the present company continues to do that, the chances are they will get it yet. 208 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. METHODS OF DRIVING OUT COMPETITION. Q. Did you find any evidence that the company sent agents into special local- ities to make prices low enough to the custonaers of competitors to drive them out of business? — A. I think that is probable; that is one of the common tricks of the trade, and those gentlemen are experts at it. But I must say that these distributers are as a class the ablest and straightest set of men I ever came in contact with. They are intelligent and honest. Q. Of course my question applies to the company and not to the distributers.— A. The company resorted to the same methods to get trade. Q. Did you find other sharp practices for the purpose of getting rid of com- petitors besides that of cutting prices? — A. I do not think any methods were employed outside of the ordinary ones among competitors, but I did not go into the details of that question. There had been a very sharp fight in California, and special rates were offered there by the company. When I took charge there was an outside distillery that had been built up by parties who had sold their original plant to the trust and who were establishing a trade and securing customers out there, so that the distributers of the Distilling and Cattle Feeding Company were being crowded out of the market. It was one of the first problems I met, and one of the first I acted upon, which I did, of course, considering the circumstances, in a very mild and equitable manner. METHOD ADOPTED BY THE RECEIVER. Q. Have you anything further with reference to cutting prices? — A. No; nothing more. That method is practiced right along. To be entirely frank, when I dis- covered the condition of affairs in California I called in men of experience in that line and wanted to know what would settle these gentlemen and bring them down to work. They said, " Take their customers: " so I gave an order to take them, and lowered prices. They cut just below my rates. I had a large stock on hand and proposed to take the customers. They didn't get the customers in the end and soon came to terms. That is the ordinary method of doing business. Q. (By Mr. Kennedy.) The independent houses came to terms? — A. Yes; they had some trade there. They were trying to get trade by underselling. Q. They were just following the practice of the trust"? — A. Just exactly, sir. Q. (By Mr. Jbnks.) Then the Distilling and Cattle Feeding Company simply beat them at their own game? — A. That, of course, seems to be the fact. It was merely the question of holding the goods on hand until they depreciated in value or letting them go off on some other market. I thought better to just cut prices right then, and did so. I knew the opposition would have to shut up their distil- lery in a few weeks if they kept on, for I should have emptied all the warehouses on the market. They soon came to the conclusion that it would be best to hold prices above the cost of production. That is a common method of settling con- troversies of such a character. Q. You think it better to sell at a fair price?— A. Yes; not an exorbitant price, but one that will give a fair living profit. "When a man produces goods and sells them below cost of production he is not doing a fair business, and the only way to make him do so that I know of is just simply to cut a little below him. In this case I deemed it expedient. My competitor soon found that he was spending his capital and that I was taking care of property which I should have had to sell at marshal's sale ultimately, if not otherwise disposed of, and which would not have brought one-half the market value. Q. (By Mr. Farquhak.) You mean that your competitor was either spending his own capital or cheating his creditors? — A. Yes. Q. (By Mr. Kennedy.) You sold below the cost of production, then, in order to bring him to time?— A. Yes; I sold below the cost of production, but there was nothing secret about it. It was open , and I made it perfectly plain to him . When he fixed his price, I made a price, I think, 3 cents a gallon under his and notified him that when he came down to that price I would go 2 cents lower, and keep going until I had empted the warehou.ses. He seemed to think that I would do it. I held this trade alone, however. Q. (By Mr. Jenks.) Was this method followed by the old trust in order to drive competitors into combining with themV— A. I think it was. Q. The result, then, in certain cases was the same as in this case where you and your competitor practically agreed upon prices?— A. That is it. Each man knew of the product of the other companies. He saw what was a reasonable profit and knew what prices must be secured in order to obtain that profit. By common consent we agreed to sell in that way. The competitor had his customers and supplied them; we had ours and supplied them. If he took our customers by cutting prices, we took his in the same way. THE WHISKY COMBINATIONS: MCNULTA. 209 RECEIVER AND COMPETITORS FIXED PRICES ACCORDING TO THE PRICE OF CORN. Q. So you practically combined on prices?— A. Yes; practically so. Later on there was a joint agreement. Q. .When you say " joint agreement," do you mean between you and all your competitors?— A. Yes; nearly all of them. Q. Then, allowing for difference in freight rates, you kept prices substantially unrform throughout the country?— A. Yes. The prices were not arbitrary; we had an agreement by which the price was fixed according to the cost of produc- tion. The average cost differed in different plants, probably from one-half to U cents. We took an average and tried to obtain from U to 3 cents profit. The cost of production was based upon the price of corn at the time. As corn went up the price of spirits went up, and as corn went down the price of spirits went down at the rate of one-half cent a gallon for every 3 cents variation in the price of corn. All agreed to abide by that, and, as a rule, they did. It fared well for a while, but they did not stand long to the agreements. Q. If prices had been fairly maintained upon the basis which you fixed, what dividends did you calculate to pay?— A. I have no recollection on that, but I was not calculating to pay dividends. It was a question of handling the goods and getting out of business as soon as possible. My calculations were not based at all upon dividends upon the capital, but wholly on the cost of production. Q. But were not the other parties to the agreement counting on making some money, so far as their plants were concerned?— A. You can calculate that on the cost of production; the amount of capital does not cut any great figure; if you make from 1 to 1^ cents a gallon on spirits you can compute what the profit will be. It varies, of course, according to the cost of production, and that varies according to the price of corn. We followed the board of trade price of No. 2 corn on the Chicago market. If No. 3 corn went up 2 cents, the market price of spirits went up one-half cent. I think that is the rate; my figures may be wrong, but the method is all right. The profit would be determined according to the number of bushels mashed, and would bear no relation to the amount of stocks or shares outstanding in the distillery that mashed. Q. (By Representative Otjen.) About how long did this understanding as to prices continue in operation, or was it lived up to? — A. It was made some time in February of 1895 and continued until some time in July, probably about ~) or 6 months, when the stock speculations in New York broke it up. Q. Did you find the arrangement beneficial? — A. I think it was, or I should not have gone into it. I was an officer of the court; I studied things in all aspects as an officer of the court charged with the preservation of the property intrusted to my care. I think it was beneficial and fair. I think it was honest. I think I was performing my duty in looking after that trust property. It made some profit for the interests I represented, but not much. Its best effect was in preventing heavy losses, which without it would have been inevitable. They had an umpire who watched the markets; and when corn went up, he raised the price of spirits to correspond by sending out telegrams. In other words, I was the umpire, and being the officer of the court and having no interest, the other men thought I would likely be as fair about it as anybody else. When the price of corn rose I sent out telegrams to all these men that spirits had gone up, and when it fell I notified them that spirits had gone down. In a word, I fixed and named the price. Q. (By Mr. Kennedy.) Did the market keep you pretty busy sending tele- grams? — A. No; the markets did not fluctuate often. A 2-cent fluctuation at that time was very rare; there was no complaint. I followed the market and the results were satisfactory, but the profits were only moderate: they probably did not average more than a cent a gallon. The important thiiii;' it did was to prevent the sacrifice of the large stock on hand. HOW THE PRICE AGREEMENT WAS BROKEN UP. Q. (By Representative Ot.jen.) Will you explain in what way the stock specu- lation broke up this arrangement?— A. Yes; one of the independent distillers who went in with us and found a fair market was induced by the shorts on the stock market to make an option to sell his distillery and break up this commercial arrangement. They paid him for this option and to apply i;ai the purchase of his distillery at a high price, S.3U,000. He invested this money with them on the short side of the market in the Distilling and Cattle Feeding Company's stock, and then made a cut in prices to break up the receivership of the v,-hisky trust so that the goods on hand would produce no assets and the price of the stock go down. When this arrangement was completed he cut loose and commenced selling 210 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. goods on the market at a loss, intending to malie more out of the stock sold short than what he lost on his business. The balance of us held fairly well together. He cut the price as much as 3 or 4 cents for a time. I cut 2 cents below him; but he soon run short of goods. The stock market dropped for a while and then rebounded above where it had been before, causing him a heavy loss in the stock market and also in the business. I sold to his customers below his lowest prices and in a little while I persuaded him to come back again. Q. You persuaded liim to come back? — A. Yes; moral suasion. Q. (By Mr. Jbnks.) Do you remember the date of this? — A. It was some time in July, 1895. There was a break at the time in the stock market; but it recov- ered again — at least, I think it did. I did not follow the stock market; I attended to my receivership and endeavored to find customers for the goods on hand and to transfer the property and get it out of the hands of the court. The big fight was made in trying to prevent the sale of the property under an order from the court and allow the new company to organize. I was using my friends in holding the trade and everything together until the new company could get organized and until the court ordered the sale. The heaviest part of the iighting was in the courts to prevent the sale, because if the receiver of the courts had to go into the new distillery year it would have been destructive. There was the problem of feeding cattle which had to be met. It would have required not less than 20,000 cattle to eat up the slop that otherwise would be wasted. The sale was made on the 14th of August, 1895. Some of the distilleries were still running. The point I had made was to get the property out of the hands of the court and into the hands of the new company with the trade intact, so that they could take the cus- tomers and go ahead and buy the plants and run them. I will give you a list of the plants they bought. QUESTION OF DISTHIBUTBRS AND REBATES (RESUMED). Q. Was the number of middlemen lessened bj' the combination? — A. As a rule, anyone who purchased a carload of goods at a time and a reasonable number of carloads per month could be made a distributer, so that I do not suppose the number of middlemen was lessened at all. The list on the back of the vouoher (Exhibit 4) is a list of the large dealers in the country. A small dealer could not become a distributer for the company. The company dealt only with the large dealers throughout the country. AH of them who wished to, and most of them did, got in as distributers. The company fixed the price at which it would sell to the distributers, the distributers themselves determining the price at which they would sell to their customers. The terms are shown on the rebate voucher in Exhibit 4, and the forfeiture of the rebate voucher depended upon exclusive buying from the Distilling and Cattle Feeding Company, or its agents, and not upon the question of price. The rebates allowed were 2, 5, 6, 7, 8, and 9 cents for the exclusive trade. My recollection is that at one time there were only 2 rebates, although there may have been 3. The 2-cent rebate was a rebate to the distributers, tor which no voucher was issued; they were simply credited with 2 cents on each gallon purchased during the month, and at the end of 5 months this was refunded. The distributers sent a list of their sales to the office of the Distilling and Cattle Feeding Company, giving the name of the purchaser and the number of gallons of goods, the Distilling and Cattle Feeding Company issuing one of these vouchers on each purchase, the voucher being payable at the oflice of the company in 6 months. I offer here Exhibit 5, showing the amount collected and refunded in rebates for the years 1892, 1893, 1894, and 1895. Exhibit 5.— Statement of rebates for years ending March 31, lS9f, 1S93, 1894, and 10 months ending January 31, 1895. Year ending March SI, 189^. Gallons. U, 768, -ig;! 93, at cents SI 329 164 45 49,330.31, at Scents.. 3'94B 42 2.3, 9a3, 798. 10, at 7 cents i nrK'afio'sr 69,07.5.29, at 6 cents ../.V^'^V ' ■" """" ' 4' 144' 52 315,894.03, at Scents... lo' 794 711 .520, .544. 70, at 2 cents ' in' 410 89 Shufeldt, 2,961,40.5.6(1. 162 ,3,37' 88 Eiverdale, 978,234.01 """ 77'887'85 Norebate, 2.064,941.83 -"---".--"--V.-.'.";!-'.^.".."."".!.".";'."."..'.".";'". ' 43, 61)1, 717. 93 ._ 3,279,06218 Less amount relundea ._ 44 031.21 3,23.5,031.37 THE WHISKY COMBINATIONS: MONULTA. 211 Exhibit 5. — Statement of rebates for years ending March 31, 1893, isru, 1S94, and ten months ending January 31, 7595— Continued. G-allons. Yi^ar ending March SI, IS'.iS. 37, a33, 697. 84, at 9 cents _ S3, 360, 033. 81 ild, 5.53. bi, at 8 cents ._ 9,084.39 811,881.36, at 7 cents .56' 831 69 207,481.96. at 3 cents . . "^ 414964 Shufeldt, 3,460,561.60. ' 2,'i4''»oS Eiverdale, 947,219.41. ' : '^' " Ts'finsOB No rebate, 3.313,338.63 ""."^-^"^sjj'^^"^"^^" ':/::"/:://::://:::::. ">•"""•"» 45,087,634.37 3 737 323 08 Less amotint refunded __ ' ,52' 175' ,37 3, 685, 146. 71 Gallons Year ending March SI, 189k. 27, 510, 388. 05, at 9 cents -iS 47,5 0.34 92 36,937.19, at 8 cents ;.".".:::".; " 3' 9.54' 98 1, 159, 664. 04, at 7 cents . 81176 48 239, 814. 30, at 2 cents 4'796'29 Shufeldt, 2,588,768.66 _ .....".'"." '."'.".'\" 170,'727^54 Riverdale. 958,911.04 83 593 30 Norebate, 1,313,667.43 "..y.".".!!;".".".'.".".!'.'.".^"'.":;.'."'.".". ' ' 33,708.1.50.70 2,819,183.51 Less amount refunded 27,817.55 2. 791, 365. 96 Gallons ^^^^ months, ending January 31, 1S95. 9, 352, 108.' 54, at 9 cents §841,689.77 456.146.92. at 7 cents 31 930.28 5,320,261.83, at 3 cents 104,405.34 Shufeldt, 1,434,691.15 92,897.49 Eiverdale, 585,431.15 30,060.10 Norebate, 1,308.795 30 18.347,424.79 1,100,983.88 Less amount refunded _ 13,480.34 l,il87,503.64 Further information regarding rebates is as follows: The 2-cent rebate was 3 cents paid to distributers at the end of 5 months from the date of purchase, this rebate being a continuance of the rebate inaugurated under the old trust arrangement, and was continued until January 38, 1895, the date of the passing into the hands of the receivership. The .5-cent rebate applied only to the distributers' customers or wholesale deal- ers, being allowed to them on their purchases from distributers, and due 6 months after date of purchase. This was instituted on May 2.5, 1890, and continued until November 2.5, 1891, when there was an advance of the voucher rebate to 7 cents. This continued until about the last of September or first of October, 1894. The exact date of the discontinuance is not obtainable. There was no regular 9-cent rebate, it being made up of the 3-cent distributers' and 7-cent customers' or wholesale dealers' rebates. SELLING PRICE OF SPIRITS. Q. (By Mr. Jenks. ) What have you to say to the question of the average selling prices of the chief products? — A. Exhibit 6, which I present here, gives the aver- age net price received for spirits for each quarter, from April 1, 1891, to January 31, 1895, and also the average cost of production during those years. Exhibit 6. — Average net price, i. e.. without the ta.r, of spirits %>er gallon for each quarter and each year; also average cost of production for each year. Fiscal years 31 mding March 10 months ending Jan. 31, 1895. Present 1891. 1892. 1893. 1894. price. First quarter: Apr.l to June 30.net prices Second quarter: July 1 to Sept. 30, net prices Third quarter: Oct.l to Dec. 31, net prices Fourth quarter: Jan. 1 to Mar. 31, net prices Cents. 13.30 1.5.88 18.04 18.73 Cents. 20.48 31.2:1 20.80 17.20 Cents. 15.93 16.71 20. 01 .31.77 Cents. 14 63 13.39 16.09 16.96 Cents. 1.5.64 24.30 18 22 9. 7:! Cents. ' 1,3.' 56 Average net price for each year 16.41 19. 87 18. ;j9 15.42 18. ai Average cost of production for each year 13. 36 15.05 12.81 13.71 13.17 212 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. PRODUCTION AND COST OF SPIRITS. Q. Does that period cover the time of the Distilling and Cattle 'Feeding Com- pany?— A. It does. Exhibit 7, which I present here, shows the production and cost per gallon at the various running houses of the Distilling and Cattle Feed- ing Company for the years ending March 31, commencing in 1891, and continu- ing until the beginning of the receivership. It is impossible to give the aver- age monthly price paid for the raw material used, there being no statistics kept on that point. It would take several months to complete reliable data. Q. Have you any figures that cover the period before the Distilling and Cattle Feeding Company was organized?— A. During the period of the trust? Q. Yes.— A. I have no such statistics; the papers are all gone. Exhibit 7.—C(iiiip(iratire statement : Oallons produced, cost per gallon, and profit or loss for fiscal years ending March 31, 1S91, 1892, 1893, 1894, and 10 months ending January 31, 1895. Fiscal year ending Mar. .31, 1891. Fiscal year ending Mar. 31, 1892. Name. Gallons produced. Cost per gallon. Profit or loss. Gallons produced. Cost per gallon. Profit or loss. The Manhattan DistiUei-y 3,137,434 3,227,650 7, 172, .544 6, 677, .580 3,307,762 2, 347, 676 881,194 5,248,813 99, .574 235,021 814,573 608, 178 1,256,832 1,456,995 4,068,161 2,855,788 2,776,181 978,056 Cents. 12.77 12.70 12.30 12.36 16.30 12.82 16.44 1.3.39 18.29 14.44 16.90 21.57 15. 40 14.83 12.36 13.40 14.19 U 11.30 $306,232,79 2,427,485 322,784.54 2,718,022 771,57.5.13 5,417,988 701,116.96 5,642,524 257,586.28 1 5,087,576 245,611.10 ! 2,098,887 \ 65,697.78 ' 1,305, .519 1 1 1 532, 391. .50 : 3,906,460 8,031.29 t 68,143 5,363.20 1 17,870 39,781.18 632.229 Cents. 14.35 14.38 14.10 13.85 15.27 15.07 13.80 15.51 17.06 31.03 19.72 14.92 15.25 23.86 16.66 14.68 14.81 ; 15.85 $143,580.28 163,187.72 The Great Western Distillery The Woolner Distillery 407,431.00 365,459.07 The Monarch Distillery The Barker Distillery 322,857.22 124,351.26 The Hamburg Distillery 63,271.12 The Star Distillery The Crescent Distillery The Consolidated Distillery The Storre Distillery 218,800.44 2,274.86 The Maddux & Hobart Distillery. . 2,892.21 13,201.73 The Shut eldt Distillery The Calumet Distillery 2,854,264 2, 537, 616 229,823.22 117,847.16 36, 0.58. 46 87,044.55 134,717.89 449,313.76 300,210.07 109,563.82 27.706.37 78,781.72 981,016 1,471,904 3,862,340 2,506,907 1,973,134 51,128.54 The Phosnix Distillery 745.71 The Missouri Distillery 77,842.88 237,729.70 The Willow Springs Distillery — The Nebraska City Distillery The St. Paul Distillery The Des Moines Malt House The Riverdale Distilling Co Independence Distributing Co., old- Independence Distributing Co. ,new The Monarch Distillery, No. 5 161,089.04 m, 802. 95 4,774.25 23,178.06 5,027.81 Total 47.149,012 13.36 4, 479, .568. 39 45 509 884 1.5 05 2,786,100.07 The Manhattan Distillery . The Northern Distillery . . The Great Western Distillery . The Woolner Distillery .-. The Monarch Distillery . . . The Barker Distillery The Peoria Distillery The Hamburg Distillery J 1, .548, 445 The Enterprise Distillery \ 46. 8.50 The Star Distillery 366, 893 The Crescent Distillery ' 1,237,488 The Consolidated Distillery ' 3,383,2:12 The .Storrs Distillery , 219, k98 The Maddux & Hobart Distillery. . 1 482, 4!io Note.— The operation of the Nebraska distillery for 1895 would show a loss of a few 1 dollars exce pt for the fact that about 320,000 gallons were tax paid in advance of new 1 showing theprofit above. THE WHISKY COMBINATIONS: McNTJLTA. 213 Exhibit 7 .—Comparative statement: Gallons produced, cost per gallon, and profit or loss for fiscal years ending March 31, 1891, 1S9J. 1893, 1894, and 10 months ending January 31, i&95— Continued. Name. Tlie Latonia Distillery _ _ The Shufeldt Distillery The Calumet Distillery The Riverdale Distillery The Phcenix Distillery The Missouri Distillery The Central Distillery The Wabash Distillery The Willow Springs Distillery The Nebraska City Distillery The St. Paul Distillery The Des Moines Malt House Th 6 Riverdale DistillingCo Independence Distributmg Co., old. Independence Distributing Co. , new The Monarch Distillery, No. .5 Total 51,774,832 Fiscal year ending Mar. 31, 1893. Gallons produced. 122, 739 471, 91U 767,493 008,314 536,880 695, 714 552, 921 719,288 738.363 254, 961 Cost per gallon. Cents. 16.55 13.69 13.83 19.61 14.03 14.03 12. 03 11.81 12.33 12.53 12. 81 Profit or S33,251.81 316,260.15 90, 194. 94 8, 568. 31 50.18 90, 379. 98 1, 900. 47 276, 781. 85 305, 889. 89 43, 079. 79 138, 116. 92 561. 70 43, 611. 25 29, 401. 71 3, 815, .524. 1 Fiscal year ending Mar. 31, 1894. G-allons produced. 755, 803 3, 672, 601 888,403 183,956 867,848 2,588,237 1,152,745 518,252 1,731,257 30,510,848 Cost per gallon Cents. 15. 74 12.86 18.41 16.13 15. 95 11.83 11.43 14.92 12.19 12.71 Profit or loss. S30, 127. .30 162,018.99 712. 94 39,470.66 3,338.13 13,345.19 76, 780. 47 56,758.33 2,386.66 55,408.68 6. 698. 82 3, 704. 03 10, .531. 43 37,863.73 1,005,467.74 Name. Ten months ending Jan. 31, 1895. Gallons produced Cost per gallon. Profit or loss. The Manhattan Distillery The Northern Distillery The Great Western Distillery The Woolner Distillery The Monarch Distillery The Barker Distillery The Peoria Distillery The Hamburg Distillery The Enterprise Distillery The Star Distillery... The Crescent Distillery The Consolidated Distillery The Storrs Distillery The Maddux & Hobart Distillery . . . . The Latonia Distillery The Shuf eldt Distillery The Calumet Distillery The Biverdale Distillery The PhCBnix Distillery The Missouri Distillery The Central Distillery The Wabash Distillery The Willow Springs Distillery The Nebraska City Distillery The St. Paul Distillery The Des Moines Malt House The Riverdale Distilling Company. . . Independence Distributing Co., old.. Independence Distributing Co., new. The Monarch Distillery, No. 5 189, 057 309, 150 441,706 337, 913 249,143 414, 020 065,830 31,502 490, 236 281,545 601, 361 445,032 866, 665 404, 110 243,860 908,334 Gents. 13.34 11.70 12.00 11.94 12.68 13.72 12.92 12.26 14. 52 14.26 22.39 13.56 12.40 10.96 12.96 12.06 §1 48, 830. 04 1 52, 617. 04 1 153, 128. 55 .56, 838. 83 19, 289. 25 4,380.89 .523.50 4, 498. 71 4, 190. 51 30, 335. 71 12, 209. 76 147,283,38 695. 19 3, 474, 90 13,305.39 1 86, 989. 37 5, 218. 05 1 35, 735. .30 1,113.01 17, 551. 37 1 849. 08 1.51,8.51.28 ' 22, 756. 70 1 33. 780, 50 1 77, 932, 99 1,079,14 15, 009. 93 Total 14,378,463 13.11 563, .303. 33 1 The above houses show an increase of profit in proportion to amount of their product as they were enabled to withdraw prior to the advance of tax, August 28, 1894. CHARACTER OF THE STATISTICS. Q. (By Mr. Kennedy.) Do these tables which you are presenting contain Gov- ernment statistics in regard to this trust that have never been published and are official? — A. I think there is only one part here that is Government statistics — that is the part shovjring the amount of the production of spirits. The other sta- 214 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. tistics are taken from the books, papers, and bills of the Distilling and Cattle Feeding Company. Q. Were they gathered under your direction? — A. No; before I took charge, at the time when the receivership began. As receiver I took possession of the ofSoe and all the books and accounts of the company. I had all the books and accounts examined by experts to determine the operations of the company from its organ- ization up to the time of the receivership. I examined into their methods of business, and the character of the business, and particularly with reference to the question as to whether there had been any misappropriation of the funds of the corporation, I was representing, as the officer of the court, the stockholders and the creditors with a view to ascertaining the facts. These data were taken from the books by the experts. I took them first for my own use, and have had one of the experts in charge (Mr. E. H. Harrison) make these exhibits which I am pre- senting to you. Q. (By Mr. Jenks.) You consider these statistics entirely trustworthy, being taken from the books of the company? — A. They are entirely reliable. Q. Have they ever been xrablished before in such form as this? — A. I do not think they have ever been published in any form. I do not see how they could be. There may be some things that have been published, but I do not see how the cost of prodtrction. for example, could have been iiublished. The Govern- ment has nothing to do with the cost. Q. (By Mr. Kennedy.) Of course the Government has nothing to do with that; but were not most of them gathered under a sort of Government direction, you. being an officer of the Government? — A. Yes; in that sense they were. I got all of this information as an officer of the United States circuit court, being appointed receiver to take charge of this property and control and direct it under the orders of the court. The papers and books of the company were thoroughly examined, but not with this particular ob,iect in view. Exhibit 7 shows, as I have said, the gallons produced, the average cost, and the profit or loss at each distillery and for the whole country. Exhibit 8 shows the sales of product by months. Exhibit 8. — Comparative statement of sales by mouths for the fiscal yean March 31, 1889, 18UU, 1801, 189:3, 1893, 1894, ""d 1895. Year ending March .31— April. May. June. .July. August. 1889... - 1890... 1891... 1892.... 1893 1894 1896 2,661,6.53.98 3,803,991,00 3, ,536, 9,35. .34 3,176,058.99 3,963,127.81 2, 816, 194. 63 1,839,089.44 3.086.291.97 3,214,901.00 3,990.639.44 2.8S7.27.5. 08 3, 769, 601. (i6 2,02:!, 336.62 2, 034, .595. .54 2, 202. 226. .53 2,787,2(K).W) 3, 245, ,521. 78 3,1+9.808. .51-. 3,009,451.46 3, .536, .589. 87 2,:i8li,045.22 2, .392, 344. 48 3,048,064.00 3, .565, 996. 69 3.265,7.30.30 2,935.453.81 2.130,943.28 2.412,09.5.42 3,639,794.64 3,498,448.00 3,543,978.02 3,414,721.64 .3, .507, 063, 86 1,745,623.40 2.877,134.18 Total 20, 674, 950. 18 31.590.641.31 19,370,903.43 19,730,626.95 31,316.763.69 Year ending March 31— September. October. November, December. 3,0.54,48:3.00 3, 283, 149. IX) 3. .595., 510, 33 3, .820, ,S04. 66 4.048.4,58.21 2. 720. 478. ,53 269, 727. 01 13, 678, 630. (X) 4,191,1.59.00 4.010.1:10.90 4, :!78, 478. 88 4, .529, 890. 90 3, 610, .508. 64 936,402.89 2,920,040.24 4.2IK1, 894. (K) :!. 849, 1,57, 09 4,250,375.40 5,078,36,3.39 3, .531, 403. 76 1,882,428.94 3,886,944,00 3,899,673,00 4,446,361,30 4,878,393,65 6,336,009.35 3,426,97.5,56 1,896,889.03 1890... 1891... 1892 - 1893 1894 1895 Total 20,791,610.72 35,247,101.27 25,718,653,81 26.670,214.88 Year ending March 31 — .January. 4,473,782.00 3, 4i!0,375.IX) 3, 768, 572 76 4, 170, .589. 78 2,004,4.54.33 2, 947, ■183. 4;! ],823,o;j7. 18 February. March. Total. 2, 975, 875 00 3,208, 5;!2. OlJ 3,;ill,i)18.,59 4,103,093. 15 3, 0:39,, 5: (3. (kj 3, 317, :105. 45 3, :i91, 1.55.62 :), 1)16, 346, 45 :i.:.'76. 9:3.5. m :3, 887, 462. 43 4,173,:337,84 ;i, iiOO, 2:30. 96 3.:i6li, :!08.,58 1,4:14,104.84 35,867.211.29 40, .832, 220. 00 44,738,171.71 4.5,881,717.93 46,087,634,87 33,708,150,70 23,072,885,25 1890.. 1891 1892 - 1893..: 1894 - 1895 Total 3:3,208,19:3,48 32,276,410.44 31,459,722.09 267,967,791.24 THE WHISKY COMBINATIONS: McNULTA. 215 Exhibit 9 shows the statistics of the Internal-Reventie Department as to the mimber of proof gallons of whisky produced in the country. Below that is a, statement of the number of gallons of spirits and alcohol, and a small amount of whisky and gm, that were produced by the Distilling and Cattle Feeding Company during the same years. I call your special attention, however, to the fact that the statistics of the Internal-Revenue Department are not simply for spirits and alcohol, but cover everything that can be classed under the head of whisky or alcohol, namely, all the Kentucky bourbons, Pennsylvania ryes, fruit brandies, and every form of liquor that was covered by the 90-cent and .$1.10 tax. Exhibit 9 is worthy of your consideration. This exhibit shows the bushels of grain used during 1890, 1891, 1S93, 1893, and 1894, a total of 126,787,596, of which there was used by the Distilling and Cattle Feeding Company 45,804,333; and the total gallons produced. 548,493,834, of which there was produced by the Distilling and Cattle Feeding Company 314,597.314. The average yield per bushel of the whole is 4.336. The average yield of the Distilling and Cattle Feeding Company's dis- tilleries is 4.685. Exhibit 9. 1. CoinjXD-afive stcttement of material tt.-icd and .sjjn-ff.s- produced in the United States during the fiscal years ending Jnnc 30, ISOO. 1891, IS'J.-', 1893, and 1894, "s per report of Commissioner of Internal Revenue, lSfi4. Years. Bushels used. 25,203,901 26,347,641 26.489,827 29.030,409 19.716,818 CTallons produced. Yield p. T bushel. 1890 107. 61S.120 114.176.077 112. S12. 7Zi 126, 545, 017 .'<7, 340, 897 4 270 1891 4 333 1892 4 357 1893. 4 359 1894 .. 4 429 Total 126,787,596 548, 492, 834 4.326 A report showing the increase in yield by modern methods as compared with earlier and more primitive methods in the seventies — 1870 to 1880 — is asked for. The distilleries calculated their yields in quarts of high wines at that time. Twelve to 14 quarts was a good yield, meaning 3 to 3+ gallons. At the time of the organi- zation of the Distilling and Cattle Feeding Company they were making a finish yield of 4.75, or a yield in high wines of 4.90, meaning 4.9 gallons. The finish yield now is, perhaps, 4.90, and the yield in high wines 5.05 gallons. Since the organi- zation of the Distilling and Cattle Feeding Company there has been little gain, except by the use of copper in all parts of the distillery in place of the old wooden tubs. 3. Comparative statement of material used and spirits produced by the Distilling and Cattle Feeding Company during fiscal years ending March 31, 1890, 1891, 1892, 1893, and 1894. Years. Bushels used. Gallons produced. Yield per bushel. 1890 8,481,699 10,012,421 9,858,873 11, 025, 683 6,425,657 39,8.i2.7:38 47,149,012 45,509,884 51, 774, 832 30,510,848 4.675 1891 4.709 1892 - - 4.616 1893 4.696 1894 --- 4.748 45,804,333 314, .597, 314 4.685 Q. During that time the Distilling and Cattle Feeding Company was producing considerably less than half of the total output of the country, was it not?— A. Yes; less than half of the entire output; but that Government statement covers the whisky, which they were not manufacturing. It does not show their propor- tion of the spirits and alcohol. 216 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. PROFITS OF THE DISTILLING AND CATTLE FEEDING COMPANY. Q. Can you give us their percentage of the production of spirits and alcohol?— A. I have nothing here that shows what the percentage is. Exhibit 10, which I present here, gives the dividends paid by the Distilling and Cattle Feeding Company: Exhibit 10. — Divideiids paid on outstanding stock. April 1, 1890. to March 31, 1891- April 1, 1891, to March 31, 1893. April 1, 1892, to March 31, 1893. Amount. $1,260, 053. « 1, 890, 022. 35 874, 876. 30 Per cent. 4 24 In the beginning these were monthly dividends. Later they were quarterly dividends, all profits being declared in the nature of dividends, and no redistribu- tion being made to former owners, dividends being on outstanding stock. Later, instead of declaring dividends, they purchased pro^jerty; about $4,000,000 was invested in distilleries. These profits were invested in the distilleries which I have already mentioned, in answer to a former question, as being purchased, viz- Riverdale, $300,000: Calumet, $500,000; Shufeldt, $1,600,000; Star and Crescent $700,000: Central, .$850,000, and Nebraska City, $425,000. The distilleries in Peoria, and certain of the better properties, were enlarged and kept up. I know of no charge for the annual depreciation. The plants which were not used were dismantled and the buildings disposed of to the best advantage possi- ble. The supreme court of Illinois declared the organization of the Distilling and Cattle Feeding Company a trust. Q. (By Mr. Jenks.) Were these distilleries on ground owned by the trust or company, or were they all on leased groundV — A. They were nearly all on leased ground. Their plan of operation, in substance, was to acquire ownership of the buildings, and lease the ground for a term of 20 to 25 years, for which they paid rent at the rate of 6 per cent on an estimated value of the ground, which was revised every 5 years. Q. Did they continue to pay rent on the ground after the distilleries were dis- mantled? — A. Yes; they paid that until after the receivership. Soon after that I applied for and obtained an order from the court to abandon those properties, or a large number of them; they had no value. Q. (By Mr. Phillips.) What became of the ground?— A. It reverted to the owners of the fee. Q. Original o^.^^lers■:'— A. The original owners of the fee. Then there were claims set up for the rent of the ground during the remainder of the period of the lease; and I think one, at least, or two of those claims are still pending. That demand was resisted on the ground that the contract was void, being in violation of the trust laws and a restriction of trade. That was my answer in those cases, and they have not yet come to an official issue in the courts on any one of thein. COURT decision ON THE DISTILLING AND CATTLE FEEDING COMPANY. Q. (By Mr. Jenks.) Did the court of Illinois decide that this company was an illegal combination?— A. It did. I have the case right here, and will refer to it. Distilling and Cattle Feeding Company r. People, 156 Illinois, 448. In the organ- ization of the Distilling and Cattle Feeding Company it was sought to evade the law which Xvas infringed by the Distillers and Cattle Feeders' Trust, whereby a number of distilleries put their stock into the trust, or rather put their stock into the hands of trustees and took the certificates of those trustees instead of their stock. Finding that that was in violation of the law, they then adopted another method, and organized a corporation under the general law of Illinois. The Dis- tilling and Cattle Feeding Company bought these properties, taking stock for the purpose; that is, there were $35,000,000 of certificates of the trustees of the Dis- tillers and Cattle Feeders' Trust that were converted into S35,000,000 of stock of the Distilling and Cattle Feeding Company. The point is made that the new effort to form a trust was faulty, because they took stock instead of money. As I understand it, they now make new corporations and buy outright plants of old corporations by selling the stock of the new. I do not see a particle of difference between the one and the other. Q. (By Mr. Jenks.) What was done in this special case? Was a share of stock issued for each trust certificate that was delivered? — A. Yes. THE WHISKY COMBINATIONS: MCNULTA. 217 Q. Simply an exchange of one for the other? — A. Yes; of one for the other, dollar for dollar. Q. Then the trustees who had been elected hy the certificate holders were reelected by the new stockholders as directors of the new company? — A. They were substantially the same set of men, though there may have been a few changes. In a word, the Distillers and Cattle Feeders' Trust converted itself into a corporation, kno.wn as the Distilling and Cattle Feeding Company, by get- ting articles of incorporation and getting stock in that corporation in lieu of the old trust certificates. Q. (By Mr. Phillips.) "Was that decided to be illegal? — A. Yes. The main question, however, is not that; it is the attempt to control the trade of the country; in other words, the cornering of the market, the reaching out beyond the legiti- mate limits of one manufacturing enterprise. Q. (By Mr. Jenks.) Was the decision made under a special trust law of Illinois or the common-law doctrine of restriction of trade? — A. The trust law of Illinois. It was a proceeding in quo warranto, a judgment of ouster; judgment was ren- dered by the circuit court and an appeal was taken to the supreme court. Pend- ing that appeal a bill was filed by the officers of the company for the appointment of a receiver, on the ground of the insolvency of the company, its inability to pay its debts, and the insufficiency of its assets. It is not clear that they were rely- ing upon the fact that it manifestly would have been unable to meet its obliga- tions when due. If it had been closed up under any other process than it was, the assets would have been insufficient to meet the obligations: but, as I will show later, the assets proved abundant. WHAT WOULD BE THE POSITION OP OTHER TRUSTS IN ILLINOIS. Q. (By Mr. Phillips.) "Would such corporations as are now being made, and have been for the last year or more in New Jersey, in your opinion be declared illegal under the trust law of Illinois? — A. I think they would not stand the test of the trust law of Illinois; and I do not think the expedient resorted to in pay- ing for stock in money would help them a particle; I think they are all illegal. Q. Under your law? — A. Under the laws of Illinois. It is merely a question of pushing the cases to a final decision before our courts. They are all in contra- vention of the law. I am of the opinion that they would be illegal, irrespective of the statute, at common law. Q. Is it your opinion that the Sugar Trust and the Standard Oil Trust would be declared illegal under the Illinois trust law?— A. I do not know enough about either of them to pass an opinion; but from the general feeling as to the way they are operated, I should say they would. It would be too much to venture an opinion upon a state of facts that I do not know. Q. (By Representative Livingston.) How would these trusts of which you have been speaking stand under the Sherman law; would it cover them?— A. I think it would, but of course only such of them as come under Federal jurisdic- tion. I think it is more a matter of the enforcement of the law than the making of the law. ALL trusts not DANGEROUS. Nevertheless, I do not regard all of these industrial trusts as dangerous, as some people do, because I do not 'think it is possible for them to exist and hold up prices for any long period of time, as in the case of this distilling company, and as it would be in any enterprise that can be started with a small amount of capital. As I said to you awhile ago, they may start a trust and buy up a hundred or two hundred distilleries or factories in any other industry, but the only way they can keep them in operation is by keeping the cost of production below what it can be kept by small concerns. The moment they reach out for more than a reasonable profit on the cost of production, that moment other plants will be created faster than any trust can buy them up. I brought out m my state- ment this morning the exceptional advantages of Peoria. There is one 12,000- bushel distillery there— the Great "Western, the new distillery. They can mash and put in spirits every day, when running at full capacity, 13,000 bushels of Q (By Representative Otjen.) About 50,000 gallons?— A. Nominally 60,000 gallons or a trifle under. When it comes out of the still it is higher than when it goes into the barrel; there is a considerable loss. My opinion is that they can pat distilleries at Peoria and absolutely control the spirit market of America, and, bar- ring discriminating customs laws, of the world, by cheapening the product; but they can not do it by cornering the market and raising the price. 83A 15 218 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Jenks.) Do the several corporations which have sold their entire properties to the central, or so-called trust corporation, remain in existence? — A, Do you mean all the old corporations? Q. Yes. — A. Some of them remain in existence, but many of them have died out, and are forgotten. Some of them held their organization until along toward the last. RELATIONS BETWEEN THE TKUST AND THE COMPANIES ENTERING INTO IT. Q. Was that under the trust form? — A. Yes, under the trust form. The prop- erty yet owned in these companies, or most of them at least, that I now think of (my memory does not serve me just at this moment, for it is some time since I have been working on these details), became part of the Distilling and Cattle Feeding Company's property. The buildings alone belonged to the company and stood on leased ground. The owners of the fee were generally the owners of the old plant. They continued to receive their rental. Now, in case of some of the old plants, one that I have in mind in particular, there was a purchase of the buildings and a rental of the ground, and then a rerental of the buildings back to the original owners. That is a little complicated; let me give it to you again. Suppose A and B owned a piece of land with a distillery upon it. The Distilling and Cattle Feeding Company bought the buildings and machinery for, say, $3.50,000. Thej' had a lease upon the ground for 2.5 years, the usual lease. They then leased the buildings back to A and B, the original owners, for ,S1 a year, in the meantime paying the annual rental on the groiind of, say, .'53,o6o — I do not remember what the amount was, but it was not less than that — in quarterly installments, but getting a dollar. In the lease of the buildings back to the orig- inal owners there was a stipulation that it should be used only for a specific purpose. Q. (By Mr. Phillips.) Was the specific purpose not to distill?— A. Well, in the case I refer to, to distill only rye whisky. Q. (By Mr. Jenks.) That is, not to come into competition?— A. Yes; not to come into competition. To be explicit, it was the Clark Distillery at Peoria. After awhile, and during my administration of the trust, the Clark Distillery, in the hands of the original owners, then the lessees, did start to make spirits and I at once applied for a restraining order upon them, held them up, and refused to pay them any more rent. We have not got that thing quite satisfactorily adjusted yet. Q. Was the restraining order granted? — A. Certainly. Q. Did it stop them for the time being? — A. Yes; because they had rented it for a specific purpose. The order still stands. We have not either of us come to a square issue before the court, because we are not certain on either side where we will land. Q. Can you give further particulars regarding the work of the original organi- zation and its effects?— A. The original organization made contracts with the owners of the various distilling properties, leasing the ground on which the dis- tillery stood, and making a practical purchase of the building. They also con- tracted with the owners to pay them, as managers, certain sums in salaries for 5 years. At the end of 5 years, which came after the organization of the Distil- Img and Cattle Feeding Company, the majority of these contracts were disoon- tmued. The rentals -^vere dependent upon the value of the land, which was fixed by a commission of 3 at the end of each 5 years. PLAN OP organization OP THE DISTILLING AND CATTLE PEEDING COMPANY. I offer you here Exhibit 11, which is the articles of incorporation, bill of sale, and the by-laws of the Distilling and Cattle Feeding Company, covering some points that may be interesting to you. Exhibit 11. application for license. State op Illinois, Peoria County, s$. Isaac N. Pearson, Secretary of State: We, the undersig-ned, Joseph B. Greenhut, Adolph Woollier, and George J. Gibson, propose to form a coi-poration under an act of the general assembly of the State of Illinois, entitled "An act concerning corporations," approved April THE WHISKY COMBINATIONS: M^NULTA. 219 18, 1873, and all acts amendatory thereof, and for the purpose of siich organization we hereby state as follows, to wit: 1. The name of such corporation is, Distilling and Cattle Feeding Company. ^ 2. The object for which it is formed is to cany on a general business of distil- ling, redistilling, and rectifying high wines, alcohol, spirits, gins, and whiskies of every kind and description, and deal in the same, in the State of Illinois and elsewhere, and owning the property necessary for that purpose; also to engage in feeding and dealing in cattle and other live stock; also malting, dealing in malt, and doing any other business incident to the main purpose of this corporation. 3. The capital stock shall be 885,000,000. 4. The amount of each share is glOO. 5. The number of shares, 350,000. 6. The location of the principal office is in Peoria, in the county of Peoria, State of Illinois. 7. The duration of the corporation shall be ninety-nine years. Joseph B. Greenhct. Adolph Woolner. George J. Gibson. State of Illinois, County of Peoria, .ss,- I, J. S. Stevens, a notary public in and for the county and State aforesaid, do hereby certify that on the 30th day of January, A. D. 1890, personally appeared before me Joseph B. Greenhut, Adolph Woolner, and George J. Gibson, to me personally known to be the same persons who execiited the foregoing statement , and severally acknowledged that they executed the same for the purposes therein set forth. In witness whereof I have hereunto set my hand and seal the day and year above written. [seal.] J. S. Stevens, Notary Public. State of Illinois, department of state, Isaac N.Pearson, secretary of state, to all to whom these presents shall come, greeting: Whereas it being proposed by the persons hereinafter named to form a corpora tion under an act of the general assembly of the State of Illinois, entitled "An act concerning corporations," approved April 18, 1873, in force July 1, 1872. and the amendments thereto, the object and purposes of which corporation are set forth in a statement duly signed and acknowledged according to law, and this day filed in the office of the secretary of state: Now, therefore, I, Isaac N. Pearson, secretary of state of the State of Illinois, by virtue of the power vested in and the duties imposed upon me by law, do hereby authorize, empower, and license Joseph B. Greenhut, Adolph Woolner, and George J. Gibson, the persons whose names are signed to the before-mentioned statement as commissioners, to open books for subscription to the capital stock of Distilling and Cattle Feeding Company, such being the name of the j)roposed corporation as contained in the statement, at such times and places as the said commissioners may determine. In testimony whereof I hereto set my hand and cause to be affiled the great seal of state. Done at the city of Springfield this 31st day of January in the year of our Lord 1890, and of the Independence of the United States the one hun- dred and fourteenth. I. N. Pearson, Secretary of Slate. subscription op stock. Isaac N. Pearson, Secretary of the State of Illinois: The commissioners duly authorized to open books of subscription to the capital stock of Distilling and Cattle Feeding Company, pursuant to license heretofore issued, bearing date the 31st day of January, A. D. 1890, do hereby report that they opened books of subscription to the capital stock of said company and that the said stock was fully subscribed; that the following is a true copy of such sub- scription, viz: We, the undersigned, hereby severally subscribe for the number of shares set opposite our respective names to the capital stock of Distilling and Cattle Feeding Company, and we severally agree to pay the said company for each share the sum of $100, as the same shall be called for. 220 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Names. Shares. Amount. Names. Shares. Amount. Joseph B. Greenhut Warren H. Corning 43, 7.50 43, 750 43,750 43,750 43,7,50 $4,37.5,000 4, .375, 000 4,375,000 4,375,000 4,37.5,000 43,750 43,650 43,360 500 $4,375,000 4,365,000 4,335,000 Henry M. Kingman 60,000 H L Terrell ELECTION OF DIEECTOES. That on the 11th day of February, A. D. 1890, at 307 North Jefferson avenue, Peoria, 111., at the hour of 10 o'clock a. m., they convened a meeting of the sub- scribers aforesaid, pursuant to notice required by law, -which said notice was deposited in the post-office, properly addressed to each subscriber, 10 days before the time fixed therein, a copy of which notice is as follows, to-wit : To : You are hereby notified that the capital stock of Distilling and Cattle Feeding Company has been fully subscribed, and that a meeting of the subscribers of such stock will be held at 307 North Jefferson avenue, Peoria, 111., on the 11th day of February, A. D. 1890, at 10 o'clock a. m., for the purpose of electing a board of directors for said company, and for the transaction of such other business as may be deemed necessary. Joseph B. Q-rebnhtjt, Adolph Woolnee, Geoege J. Gibson, Commissioners. That said subscribers met at the time and place in said notice specified, and proceeded to elect directors, and that the following persons were duly elected for the term of one year, viz : Joseph B. Greenhut, Warren H. Corning, Wm. N. Hobart, Lewis H. Greene, H. L. Terrell, Adolj)h Woolner, Peter J. Hennessy , Nelson Morris, H. M. Kingman. Joseph B. Geeenhut, Adolph Woolner, Geoege J. Gibson, Commissioners. State of Illinois, County of Peoria, ss: On this 11th day of February, A. D. 1890, personally appeared before me, a notary public in and for said county, in said State, Joseph B. Greenhut, Adolph Woolner, and George J. Gibson and made oath that the foregoing report by them subscribed is true in substance and in fact. [SEAL.] N. E. D. HuGGiNS, Notary Publie. State of Illinois, Peoria County, ss : I, Francis G. Minor, clerk of the circuit court in and for the county of Peoria, and State of Illinois, and ex-ofHcio recorder of deeds in said county, do hereby cer- tify that the annexed instrument was filed for record in my office on the 13th day of February, A. D. 1890, at 9.19 o'clock a. m., and has been duly recorded in book 3 on page 64, in said recorder's office. In witness whereof, I have hereunto set my hand at my office in Peoria, the day and year above written. F. G. Minor, Clerk and Recorder. By J. P. DuRKiN, Deputy. CHAETEE. state of Illinois, Department of State, Isaac N. Pearson, Secretary of State, To all to whom these presents shall come, Greeting : Whereas a statement, duly signed and acknowledged, has been filed in the office of the Secretary of State on the Slst day of January, A. D. 1890, for the organization of the Distilling and Cattle Feeding Company, under and in accord- ance with the provisions of "An act concerning corporations," approved April THE WHISKY COMBINATIONS: MCNULTA. 221 18, 1873, and in force July 1, 1873, and all acts amendatory thereof, a copy of which statement is hereto attached; and. Whereas a license has been issued to Joseph B. Greenhut, Adolph Woolner, and George J. Gibson as commissioners, to open books for subscription to the capital stock of the said company; and, Whereas the said commissioners have, on the 11th day of February, A. D. 1890, filed in the ofBce of the secretary of state a report of their proceedings under said license, a copy of which report is hereto attached; Now, therefore, I, Isaac N. Pearson, secretary of state of the State of Illinois, by virtue of the powers vested in me by law, do hereby certify that the said Dis- tilling and Cattle Feeding Company is a legally organized corporation under the laws of this State. In testimony whereof I hereunto set my hand and cause to be affixed the great seal of State. Done at the city of Springfield this 11th day of February, in the year of our Lord 1899 and of the Independence of the United States the one hundred and fourteenth. I. N". Pearson, Secretary of State. This is to certify that the articles of incorporation of the Distilling and Cattle Feeding Company (capital stock $35,000,000) was filed for record in my office on the 13th day of February, A. D. 1890, at 9.19 o'clock a. m., and was duly recorded in corporation record, volume 3, page 65, official records of Peoria County, State of Illinois. Dated at Peoria this 7th day of November, A. D. 1994. [SEAL.] John Johnston, County Recorder. BILL OF SALE. Whereas the holders of certificates of the Distillers and Cattle Feeders' Trust did, by resolution, on the 11th day of February, A. D. 1890, authorize and empower the trustees of said Distillers and Cattle Feeders' Trust, on certain conditions, to sell, assign, convey, transfer, and set over to the Distilling and Cattle Feeding Company, a corporation organized under the laws of the State of Illinois, all the property, real, personal, and mixed, of every nature, kind, and description, and all moneys and bills receivable belonging to or under the control or in the hands of said trustees; Now, therefore, in compliance with the direction of said certificate holders, and in consideration of the receipt of §35,000,000 of the capital stock of the Distilling and Cattle Feeding Company, the receipt whereof is hereby acknowledged, we, J. B. Greenhut, Adolph Woolner, P. J. Hennessy, H. M. Kingman, Nelson Mor- ris, W. H. Corning, L. H. Greene, H. L. Terrell, and W. N. Hobart, trustees of the Distillers and Cattle Feeders' Trust, do hereby sell, assigTi, convey, transfer, and set over to the Distilling and Cattle Feeding Company, its successors and assigns, all our right, title, and interest in and to all property of every nature, kind, and description in our possession or under our control as trustees as aforesaid, and we also hereby agree to see that the various corporations holding the property represented in the Distillers and Cattle Feeders' Trust and interested therein legally and properly convey to said Distilling and Cattle Feeding Company all the property of said corporations, including all leasehold interests, and also to cause all leases held by said various corporations to be duly and properly trans- ferred to said Distilling and Cattle Feeding Company; and the said Distilling and Cattle Feeding Company, in consideration of the sale, transfer, assignment, and conveyance of all the property aforesaid by the said trustees and by the various corporations interested in said Distillers and Cattle Feeders' Trust and repre- sented therein, does hereby agree and bind itself, its successors and assigns, to assume all the outstanding contracts of the trustees aforesaid, and also of the various corporations conveying property to said Distilling and Cattle Feeding Company as aforesaid, and to see that they are faithfully carried out and executed to the same extent as the various corporations making said contracts would be required to do, and also agree to accept said property leases, leasehold interests, and all herein required to be conveyed, assigned, and turned over to said corpora- tion, in full payment for all the capital stock of the said Distilling and Cattle Feeding Company, turning over to said trustees an amount of stock equal at par value to the amount of said outstanding certificates of the Distillers and Cattle Feeders' Trust, and the balance of said" stock being retained in the treasury of the said Distilling and Cattle Feeding Company for such use as the stockholders and directors thereof may deem for the best interests of the corporation. 222 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. In witness whereof the said trustees hereunto affix their hands and seals this 13th day of February, A. D. 1890, and the said Distilling and Cattle Feeding Com- pany, by its president, hereby duly signs and executes this agreement on its part the day and year aforesaid. J. B. Greenhut. Adolph Woolner. Nelson Morris. Henry M. Kingman. P. J. Hennessy. Attest: Geo. J. Gibson, Secretary. SEAL.] W. H. Corning. [seal.' SEAL.] H. L. Terrell. "seal.' SEAL.] William N. Hobart. seal.' seal.] L. H. Greene. [seal.' "seal.] Distilling & Cattle Feeding Company, J. B. Gbbenhut, President. BY-LAWS OF THE DISTILLING AND CATTLE FEEDING COMPANY. Article 1. — Meeting of stockholders. The annual meetings of the stockholders shall be at the office of the company on the Wednesday nearest the 15th day of April, in each year, at the hour of 12 m. , and on any subsequent day or days to which such meetings may be adjourned. At the first annual meeting 9 directors shall be elected by ballot, 3 of whom shall be elected for 3 years; 3 shall be elected for 2 years, and 3 shall be elected for 1 year. At each annual meeting thereafter, 3 directors shall be elected by ballot, who shall continue in of&ce during 3 years, and until their successors are chosen and qualified. The term of office of each director shall begin on the 1st day of May following the date of the annual meeting. In case of the death, resignation, refusal, or inability to act of any person as director, a majority of the board may fill such vacancy until the next annual meeting of the stockholders, when the vacancy shall be filled for the unexpired term by a vote of the stockholders, separate from the class to be elected at the regular election. The said election shall be conducted by two judges appointed by the board of directors, or if such appointees are not present, the vacancy or vacancies shall be filled by the presiding officer of the meeting. Stockholders shall be entitled to one vote for each share of stock held by them, respectively, upon the books of the company, to be voted by the holder in person, or by his or her duly authorized proxy or attorney. All questions shall be decided by vote of a majority of the stock present or represented. In case the annual meeting of holders of stock should not be held on the day fixed therefor, or should be finally adjourned with- out completing the election of directors, such election may be held subsequently at a special meeting of stockholders called as hereinafter provided. The presi- dent and board of directors may call special meetings of the stockholders of this company at its general office, at such time as they may see fit, designating in such call the purpose of such special meeting. Notice may be given the stock- holders by mail or telegraph 10 days before the time for the holding of such special meeting. No business shall be done at such special meeting except such as may be designated in the call. Special meetings may also be called as pro- vided by law. Article ^.—Officers. The board of directors shall elect from their number a president, one or more vice-presidents, as they may determine, and a treasurer. They shall also elect a secretary, who may or may not be of their number. Such officers shall be elected by ballot, and a majority shall elect. They may also elect or appoint such officers, agents, or factors as they may deem necessary. Article i.— Meetings of director.^. Regular meetings of the board of directors shall be held each month, on such day of the month as the president may designate, by giving notice of the same 3 days previous to the date of such meeting by mail or telegraph. Special meetings of the board of directors may be held upon the call of the president, and it shall be his duty to call special meetings upon the request of 4 or more of the directors. Written or printed notice of all special meetings of directors, with a brief statement of the object thereof, shall be served on each of the directors per- sonally, or by mail or telegraph, at least 3 days previous to the time of meeting. THE WHISKY COMBINATIONS: MCNULTii. 223 Article 4.— Order of business. The order of business at all meetings of the board of directors shall be as fol- lows: (1) Keadmg minutes of last meeting; (3) considering all commtinioations to the board; (3) reports of officers of the board; (4) reports of committees- (5) untmshed business; (6) original resolutions and new business. Article H.— President. The president shall, when present, preside at all meetings of the stockholders and of the directors. He shall, together with the secretary, sign all obligations contracts, deeds, and leases in behalf of the company, upon the direction of the directors only. The president shall also generally have the powers and perform the duties which, by law and general usage, appertain to the office. In case of the absence or disability of the president and vice-presidents, the directors shall appoint another one of their number to perform his duties ad interim. Article G.— Vice-president. In the event of the absence or inability to serve of the president, the vice- presidents shall perform all the duties of the president, in the order of their desig- nation. Article 1.— Secretary. It shall be the duty of the secretary to prepare and keep proper books of accounts pertaining to his oflSce, the stock, certificate and transfer books. He shall give notice of all the meetings of the stockholders and of the board of directors, and he shall keep records of the proceedings of the same. He shall carefully preserve and keep in his custody, in the office of the company, all letters, contracts, leases, assignments, and other instruments of writing, and documents not properly belonging to the office of the treasurer, and shall perform such other duties as he may be charged with by the board of directors. The board of directors may appoint one or more assistant secretaries, with such powers and duties as may be fixed by the board from time. Article 8. — Treasurer. The treasurer shall keep full and accurate accounts of the receipts and dis- bursements, and take and preserve vouchers of all moneys paid out. He shall deposit all moneys received by him in the name and to the credit of the company in such bank or other place or places of deposit as the board of directors shall designate, and for that purpose shall have power to indorse all checks or other negotiable paper drawn payable to his order or to the order of the company, and shall disburse all the moneys of the company received by him as directed by the board, by checks, which shall bear his signature as treasurer and also the signa- ture of the president or other officers designated by the board. He shall render a full and accurate statement of the accounts and of the financial condition of the company at every annual meeting of the stockholders for the fiscal year next pre- ceding such meeting, and a correct summary statement of the accounts and finances at every regular meeting of the board of directors, and he shall likewise produce vouchers and make special and comiilete reports whenever required to do so by the board of directors. He shall also perform such other duties as he may be charged with by the board of directors. The treasurer shall execute a bond in the sum of $100,000, with such surety as the directors shall approve, con- ditioned for the delivery to the president, or according to the order of the board in case of his decease, resignation, or discharge, all moneys, bonds, evidences of debts, vouchers, accounts, books, writings, and papers belonging to the company received by him or in his possession, charge, or custody, and for the faithful per- formance of all the duties of his office. The board of directors may appoint an assistant treasurer, who shall give such bond and shall have such powers and duties as may be fixed by said board from time to time. Article 9. — Government papers. All papers required by the Internal-Revenue Department of the United States Government may be executed in the name of the company by the president, or any of the vice-presidents, secretary, or treasurer, and by such other persons as may from time to time be designated by the board of directors for that purpose. 224 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Article 10. — Certificates of stock. Bound books of certificates of stock of tlie form and tenor determined by the directors shall be placed in the custody of the secretary, and all certificates of stock shall be signed by the president and secretary and countersigned by the treasurer. Article 11. — Transfer of certificates of stock. The certificates of stock shall, upon surrender and cancellation thereof, be transferred upon the books of the company, at the request, in writing, of the holder tliereof named in the surrendered certificate or certificates, or of his legal representative, or of his attorney duly authorized by a written power of attorney filed with the secretary of the company. In case of loss or destruction of a certificate of stock another may be issued in lieu thereof upon satisfactory proof of such loss and the giving of a satisfactory bond of indemnity. No certificates shall be transferred upon the books of the company within ten days next preceding any meeting of stockholders for the election of directors. Article 13. — Fiscal year. The fiscal year of the company shall begin on the 1st day of April and terminate upon the last day of March in each year. Article 13. — Amendments. These by-laws or any of them may be altered, amended, repealed, or added to at any regular meeting of the board of directors, by a majority of the board. Exhibit 12 is a list of the salaries at the general offices of the company. At the commencement of the receivership the salary of the president was $10,000 per year; that of the vice-president was. I think, $6,000; the secretary received $6,000, and the secretary of the president, ,S3,400. Exhibit 12. General salary account for March, 1895. Names. Amount. N. E. D. Huggins W. McLean _ T.E.Magee N.K.Beasley W.C.Beasley S.D. Reynolds C. A.Brons A. Schoen, one-half month J.S.Higgins .-. B. S. Gi-een, one-half month Stella Werschutz O.A.Myers D. G-reen A.V.Bobins Carrie M. Gill .-. John S. Stevens E.S.Ea8ton& Co -... A. Werschutz B.Todd O.P.Stevenson. B.P.Cain Walter Barker, from March 13 Total S375. 00 300. 00 300.00 300.0(5 125.00 100.00 100.00 50.00 100.00 a.m 100. 00 308.33 100.00 65.00 6B.67 416. 67 80.00 3,5.00 40.00 50.00 50.00 300. 00 3,073.33 Position. Secretary to receiver. SuperA'isor of distilleries. General bookkeeper. Manager distillery department. Chief clerk distillery department. Bookkeeper distillery department. Bookkeeper and telegraph operator. Bookkeeper distillery department. Do. Do. Stenographer and assistant to general bookkeeper. Manager rebate department. Chief clerk rebate department. Clerk rebate department. Clerk and stenographer rebate department. General counsel. Buying grain for distilleries. Office boy. Doorkeeper. Night janitor and watchman. Day janitor and messenger. Manager for receiver, $8)0 per month. Sala.ries of managers for March , 1895. Names. Amount. Distillery. John H.Francis E S Easton S300.00 300.00 300.00 ITO.OO .3(.I0. 00 30(1.00 300.00 ;!:i3. 33 41(1. (i7 300.00 Monarch Distillery. Manhattan Distillery. Hamburi^ Distillery. Great AVestern Dis'tillery. Woolnei' Distillery. Star and Crescent' Distillery. Central Distillery. Consolidated Di,stillerv. H. H. Shufeldt & Co. Distillery. Wabash Distillei'v H. Schwabachei- W.F.Wolfner .J.H.Francis, jr S J Woolner 0. L. Porin P. .J. Hemiewsy .John Biggs Total 3,950.00 THE WHISKY COMBINATIONS: MCNULTA. 225 A PLAN FOR RAISING THE PRICE OF CORN. Exhibit 13, whicli I think has a bearing vipon this subject — at least it was one of the important matters to me relating to the whole distilling business— is marked "An argument in favor of developing industries which will enhance the price of corn," to which I ask your attention. When this subject was fresh in my mind I worked up the question of the relation of the distilleries to the farming interests of the country. I did it from the standpoint of a farmer, because my own per- sonal interests are in that line, substantially all the savings of a life of hard work being invested in farms. I am specially interested in that question, and I have touched particularly upon the revenue tax, the methods of conducting the distil- ling business, the revenue laws, and certain laws which seem to me to need revision. Exhibit 13. An argument in favor of developing industries wltich ivill enhance the price of corn. [Copy.] Chicago, January 2, 1897. S. M. Rice, Esq., JliUs Building, New York. Dear Sir: In your favor of the 31st ultimo you say: " I have taken the liberty of using some of the material in your (my) letter of November 16, in reference to the free-alcohol matter, without, however, mentioning your (my) name. I think the arguments presented are very strong and ought to be of weight with oiTr legislators." At the time of writing that letter it did not occur to me that you desired to make use of my views upon this question in the way of presenting them to Con- gress as information, to enable the committee of that bodv to reach a correct con- clusion in making modifications to our existing laws; otherwise, I would have written more fully and covered more points, and should at the same time have expressed my willingness for you to use my letter in its entirety over my signature, which you are authorized now to do with this letter. If it shall appear tiiat my opinions, reached from an experience in the management of a large number of distilleries as an officer of a United States circuit court, are of any value, I will cheerfully give them for use before any committee of Congress and upon any point that may be suggested. The questions involved are of vital importance, not alone to the distilling inter- ests, but to the gi'ain-producing sections of the country — the tax on alcohol and spirits being, in effect, a tax on corn, barley, rye. and other grains used in their production. It is well known that grain in the vicinity of Peoria and other large distilling centers commands a higher price than m the markets of the country; that the large consumption of grain in the production of spirits and alcohol enhances the prices of the cereals used throughout the whole coimtry. Each barrel of alcohol exported is the product of from 16 to 20 bushels of grain, and, going abroad, car- ries with it also the value of the labor, etc., expended in its production. The product has also incidentally required an additional consumption of grain and other material of home production by the people engaged in its manufacture. The export of alcohol and spirits does not, to the slightest extent, decrease the export of grain. The policy of taxing alcohol in every form in which it is used for beverages to the highest revenue-producing point is, I think, a correct one. The suggestion that the tax should be the same on alcohol or spirits produced or used for similar purposes, in whatever form, is an equitable proposition, involv- ing equality of taxation to all men upon articles of home production for similar use. It seems to me this proposition needs no argument to siipport it. The tax should be a specific sum on every jjroof gallon of alcohol used as a beverage, no matter m what form it may be used, whether as brandy, whisky, rum, gin, wine, beer. or compounded or mixed drinks or beverages. I think, however, that the present and past inequality on this point, resulting from existing laws, arises from the lack of information upon the part of the public, and probably upon the part of many of the Representatives in Congress, as to the technical method of producing alcohol and ignorance as to the readiness with which the amount of spirit contained in any kind of a beverage can be ascer- tained. The amount of alcohol in a barrel of beer, wine, or any other beverage can be ascertained with the same facility and as accurately as it can be in a barrel 226 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. of whisky. There is substantially the same quantity of stimulant or intoxicant obtained at retail for a given sum whether it be invested in native wine, beer, whisky, or other drink containing alcohol. It seems to me the making known of some of the leading facts that are under- stood bu.t by comparatively few people not in the business would secure the pas- sage of more equitable laws, which would remove the conspicuous inequality in the taxing of the whisky, wine, and beer production of the country. In many cases the amount of alcohol produced in the juice of the grape or wine by ordinary fermentation not being sufficient for the purpose of the wine maker, regular distilleries are established, and the alcohol produced by the ordinary methods of distillation from grapes is then added to the fermented wine, thns completing what is known as a fortifying process. This distilled alcohol, as well as the alcohol produced by fermentation, is free from taxation. This vdne used as a beverage carries from 8 to 10 and often as high as 1.5 to 17* per cent of alco- hol, while the ordinary whisky in form ready for use as a beverage carries only from 40 to 50 per cent of alcohol. The wine goes upon the market as a beverage wholly free from tax, while a like quantity of alcohol in whiskies and various compounds and beverages used as stimulants and intoxicants, made from spirits, bears a tax of SI. 10 per proof gallon, with a considerable additional burden by way of expenses imposed in the carrying out of rules and regulations supposed to be necessary for the collection of this tax. The standard whisky of commerce stands at about 100 proof, or 50 per cent alcohol and 50 per cent distilled water — much of it when sold for immediate use being 15 to 20 points below proof. Beer contains 2^ per cent to 6 per cent of alcohol produced wholly by fermentation — that in common use having about 3 per cent of alcohol; so that for the purposes for which these articles are used, 1 quart of the best whisky is equal to about 3 to 4 quarts of wine and 15 to 16 quarts of ordinary beer. Beer is taxed, regardless of its alcoholic strength, §1, less 7-Ji per cent, per barrel of 31 gallons. A barrel of ordinary beer contains over 2 proof gallons of alcohol. The practical difference in whisky, wine, and beer is the same that exists between "whisky straight " and " mixed drinks." The effect of the law is to tax " straight drinks " and let " mixed drinks " go free. I am assured, by those who know, that there are a few who swallow " whisky straight " containing 40 to 50 per cent of alcohol, but most men find it necessary to dilute it with water until it is brought down to about or below the standard of 15 per cent wine. The difference between whisky, wine, and beer is wholly in the per cent of alco- hol contained in each and in the character of the dilutant or watery substance mixed with the spirit. The alcohol in each is chemically the same. A given amount of alcohol will produce substantially the same result in whichever form it may be taken. The dilutant or watery substance in the best beer, however, furnishes a nutriment or food in addition to the stimulant and intoxicant con- tained in the alcoholic portion of it, and that in wine and whisky simply reduces the alcoholic strength to a point where it is made palatable. The argument that, because native wine is produced from the native grape, it should be relieved from its just proportion of the public burden is wholly unten- able. Native corn, rye. and barley are entitled to the same patriotic consider- ation and generous treatment accorded to any other product of our soil. If any preference is given, it should be to those cereals which are the mainstay and principal source of the wealth of tair nation, and to the men engaged in produc- ing them, who are the main reliance of our nation for its strength and greatness. Then, too, equality of taxation on these articles would not add to the cost to the consumer, but would simply lessen in a small measure the profit of the pro- ducers, which by reason of combination and agreements between them is now very large. Indeed, owing to these combinations and agreements, few, if any, invest- ments in this country have yielded larger dividends, and none has drawn a larger amount of foreign capital as a direct investment in the ownership of producing properties than have the breweries of this country. The gTeat brewers, by improved methods, cooperation, and association for some time past have been prosperous and have become and are able to stand upon an e(iuality with the corn, rye, and barley growers, and to bear an equal shareof the public burdens with them. The importation of cheiip foreii^n wines is practically prohibited by a tariff of 50 cents per gallon. This tariff gives our wine producers ample protection, and it should be no hardship for them to pay a tax on all alcohol produced by them for use as a beverage. New native wines in large quantities at the points of production are now sold from 10 to 15 cents per gallon, indicating a margin of profit sufBcient to bear a just proportion of ta,x to put them on an equality without any increase of (jost to the consuuicr. THE WHISKY COMBINATIONS: MCNULTA. 227 With an equal tax on wines carrying 10 per cent of alcohol, ordinary native claret and white wines would pay 33 cents per proof gallon, ok 4 to o cents per so-called quart bottle; and beer, if not over 3 per cent alcohol, would pay $3 to §3.10, instead of §1 less ?J per cent per barrel of 31 gallons, and proof, or the best whisky, as now— S48.40 per barrel of 44 gallons. I have not had time or opportunity to make a careful estimate as to what would be the financial effect of this equality of taxation upon the revenues of the Gov- ernment, but in a rough, offhand way, I conclude it would increase the revenues between $40,000,000 and 850,000,000 yearly. In other words, I estimate that the unjust discrimination made by the Government in favor of the wine and beer producers is equivalent to a loss of revenue to the Government of from .§40,000.000 to §50.000,000 yearly. After securing equality of taxation on all alcohol in whatever form produced for or used in beverages, next (if not first) in importance is to secure practical legislation for free alcohol for use in the arts and sciences and for exportation. There are. or were, laws upon the statute books, expressly passed by Congress, intended to cover both of these objects. Notwithstanding this, there was not and is now no alcohol free from the tax of §1.10 per gallon permitted to be fur- nished for the arts and sciences, and the more than a thousand avenues in which it could be drawn off and consumed for such purposes have been and are siibstan- tially closed. Notwithstanding the provision of the law for free export alcohol, its transoceanic exportation has practically long since ceased, because of thq regulations govern- ing its handling, storing, and shipping, and the inability of our people to compete with advanced methods and governmental regulations of competing foreign nations. That free alcohol should and can be provided for, to be used in the arts and sciences, I think can be clearly demonstrated, and without endangering or decreas- ing the revenues of the Government, but greatly to their benefit, and to the advan- tage of the corn and barley isroducing sections of our country. Such provisions would result in making an immense increase in the demand for grain, doubling the quantity now used for distillation for all purposes, and thereby increasing the market value of our grain crops. Radical changes should be made in the present internal-revenue laws and regu- lations to make them conform to present conditions, and to put our people upon an equality in placing their products in the market of the world with other nations. I do not mean \>y this that any of the safegiiards in use that are necessary for the protection of the revenue should be v.nthdrawn; but experience has demon- strated that many things are required to be done by the law which insure no additional safeguards, but cause great embarrassment and place heavy burdens upon the product, obstruct, and often — as in the matter of exporting— result in the prohibition of trade. As the receiver of the United States circuit court, operating a number of the distilleries of the Distilling and Cattle Feeding Company, and the representative of a coordinate branch of the Government, I received all the courtesy from the internal-revenue officers that could be extended by them within the limits of the statutes. I found, however, much difSculty and many embarrassments by the limitations of their provisions, which in my opinion are not only wholly iise- less, but impose burdens upon the traffic. These provisions ought to be removed, as they can safely be eliminated. Free alcohol, to be used in the production of a large number and variety ot articles where its use is indispensable, would put our people on an even footing with other nations in our market and in the markets of the world for such prod- ucts. By reason of the heavy tax we are now prevented from using alcohol for manufacturing purposes. In other words, the provisions of the law imposing this tax of $1.10 upon an article that costs to produce but from T to 15 cents, varying with the price of grain, acts as a prohibition of the use of it in many branches of industry. The removal of this tax, and allowing alcohol free to the arts and sciences, would result in its production for these purposes where it is not now used at all, and with free alcohol the production of a great variety ot articles that can not now be produced in this country would be rendered possible and their importation from countries where free alcohol for their manufacture is allowed would cease. There are more, I dare say, than a thousand important uses- requiring large consumption to which alcohol could and would be put, it free, where it is now prohibited by the tax. , , -, • Corn is admittedly one of the best, if not the best, of alcohol-producing grains, and corn can certainly be produced as cheaply or cheaper here than m any other part of the world; and with the enormous and improved machinery and appli- 228 HEARINGS BEFORE THE INDXJSTKIAL COMMISSION. ances now in use for its distillation our alcohol ought to compete successfully in all of the markats of the world where it is not excluded by a prohibitive tariff. In nations where it is so excluded by a prohibitive tariff, or one that imposes a burden that can not be borne, the alcohol produced by those nations and coining into our country should have a burden placed upon it equal to the burden placed upon our alcohol when going- into their country. To be more specific, our alcohol was largely used in Europe for fortifying wines and for making different com- pounds and beverages; the wine so fortified with American alcohol, or large portions of it, was imported into our country for use by our people. These foreign \vines are now being fortified by alcohol produced elsewhere, and as I understand it, no change has been made in the tariff upon them because of this change of condition. The manner of keeping, holding, and transporting alcohol required by the law is obsolete; is a heavy burden upon the producer, putting him at a great disad- vantage; is practically prohibitive of exportation; is no benefit whatever to the Government, and gives no additional safeguard in protection of the revenue. On the contrary, in my opinion, it does not give as good a safeguard as could be obtained by the use of tanks and tank cars and the like. A simple change in the existing regulations is all that is necessary to permit this to be done. The present cumbersome and expensive method of the Govern- ment, which requires spirits to be put into barrels of small capacity, should be done away with. While United States storekeepers are now obliged to watch, say, 20,000 pack- ages, they would only have to watch 3 or 4. It would, in effect, simply change the existing old-fashioned primitive warehouse into a modern one. The present warehouse capacity of 20,000 barrels, requiring stamps for each package and the watchful care of each barrel, could be all concentrated into 3 or 4 packages, which in effect these tanks would be. The ability of distillers to make and store great quantities of alcohol in tanks would enable them to manufacture very largely when corn is plentiful, and the operations of distilleries could be of such magnitude as to have an appreciable effect on the price of corn when the farmers most require it; that is to say, when corn is abnormally low. The increased use of corn, used in this shape for export- where we have no export business now and no other way of utilizing the corn- would in a great measure tend to consume the surplus of a large crop and in this way increase the price of the entire crop. It needs no argument to prove that the surplus of a product makes the price of the product. When corn is high the distiller need not distill, nor does the farmer then require the aid of the distiller to get him a good price for his crop. I have no hesitation in saying that the rebate of the tax on alcohol, for the pur- pose of the arts and manufactures, together with the tank privilege and the right to ship in tank cars, would create entirely new industries in this country, all of which are impossible under existing laws and regulations. The enormous benefit to the agricultural interest to be derived from these changes in our laws can scarcely be estimated. Another important factor is, that fresh alcohol and high-proof spirits, which is a refined alcohol, unlike whiskies and brandies, deteriorate and depreciate in value by age when in contact with wooden casks. The market requires new, clear, unstained alcohol and high-proof spirits. The holding and shipping of alcohol and high-proof spirits in wooden packages, notwithstanding all that can be done by glumg on the inside to prevent contact with the wood, causes a very considerable loss in the market value of the product, often running from 5 to 20 per cent in the course of a few months, and in addition thereto a heavv loss on the package. Much of this loss by deterioration could be saved by different methods of hand- ling, m the storing in distilleries, and in transportation, and I can see no reasons, and, indeed. I am confident there are none, why a change should not be made. There are many other reasons that ' iccur to me too numerous to be recited vnthm the scope of an ordinary letter why modifications in the internal-revenue laws should be made, but I think that those that I have given sufficiently illus- trate the leading and important points to be covered. You are at liberty to use this letter in any way you may see fit. Lest, however, the question might arise as to whether my interest might in any way influence my judgment. I think it well to state the fact that I have no interest whatever as stockholder, attorney, or representative of any distillery, brewery, vineyard, or other establishment producing, selling, or handling alcohol, in any form what- ever, except as receiver of the United States circuit court in the different circuits where the case is now pending in the settlement of the affairs of the now defunct Distilling and Cattle Breeding Company, or so-called " Whisky Trust," and some THE WHISKY COMBINATIONS: M^NULTA. 229- of its property, but with no distillery in operation or intended to be hereafter operated under my charge, and that what I have written is of my own suggestion and not upon the request of anyone for my opinion on the subject. It is but fair for me to state, however, that I am very much interested in the production of grain, substantially all of my accumulations from a busy life being invested in farm lands. Probably, for that reason, I in a great measure view the subject from the standpoint of a farmer while analyzing it as a lawyer. I have iitilized the knowledge gained by practical experience as an officer of the court directing the operation of distilleries and disposing of their products, the latter amounting to a large proportion of the entire alcohol and high-proof spirit out- put in the United States. Let me summarize my views and recommendations: First. An internal-revenue tax to the highest revenue-producing point on all alcohol used as a beverage in whatever form produced, whether it be whisky, wine, or beer. The tax on each should be so much per proof gallon. Second. The privilege to store spirits in tanks and to ship spirits for export in tank cars. Third. The rebate of the tax on alcohol used for all purposes except for use as a beverage (the Government providing such regulations as will safeguard and insure the collection of the tax on all alcohol used as a beverage as efficiently as it is now done). Fourth. A discrimination against the products of every Government that dis- criminates against our products, whether by bounty, tax, or other burden. Very truly, yours, John McNulta. suggestions foe changes in laws affecting the distilling business. Q. (By Mr. Jenkb.) Can you sum up briefly your objections to the laws which concern the distilling business and your suggestions for changes? — A. In the first place, the restrictions upon the distilling business come down from times when there was trouble and complications that no longer exist. Great loss, or great expense, is incurred on account of the manner of handling the spirits that is required by the rules of the Department, i. e., barreling instead of shipping in metal tanks. Handling in metal tanks in the warehouses would save a great deal of waste. As regards the tax, I should say that the raethod of the Government in collecting it is radically wrong and that the amount of the tax is too great. Q. (By Representative Livingston.) Is it above a revenue producer? — A. It is above a revenue-producing point and manifestly unjust upon the face of it. Spirit product that costs from 8 to 15 cents, according to the price of corn in the market, bears a tax of .$1.10_, which is manifestly too great. From a revenue- producing point of view it fails to accomplish what is sought to be accomplished by it. A parallel case would be for the railroad companies to charge 10, 15, or 20 cents a mile for a passenger. They would get some passengers, but there would be very few. The statistics of the Department show that 70 cents a proof gallon produced the largest amount of revenue. I am satisfied that a tax of 50 cents per gallon would produce more revenue to the Government than .§1.10 does, just as I believe that 3 to 2i cents per mile would produce more revenue to the railroads than 10 cents, and for like reasons. THE RESULTS THAT WOULD FOLLOW. C^. (By Mr . Jenks. ) Do you think the consumption would be largely increased?— A. It would be largely increased, not in the use of the spirits as a beverage, but in the use of the product in manufactures. The exports of the country, on account of the methods adopted by the Government, are practically cut off. This country ought to furnish the world with spirits. There ought to be easy and cheap facili- ties afforded to the producer to export his goods in whatever form they can best be disposed of in the markets of the world, whether in bottles, barrels, tanks, or cases of any kind. There has been an act passed by Congress permitting exporta- tion in tin cans for Asiatic countries, so that they can be taken on the backs of men or horses over the mountains. The transportation ought to be permitted in tanks like oil tanks, and not in barrels. It ought to be permitted to be kept in the warehouses in tanks and not in ban-els. It ought to be permitted to be sent on shipboard in tanks. Germany, I understand, ships a large portion of her product of alcohol in that manner. There is a loss in soakage in the barrel and a heavy loss by evaporation. The case of the experiment of the chemist that I spoke to you about this morning illustrates that. Spirits is a very volatile product, and 230 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the higher the proof the more volatile and the greater the loss. Triple distilled, or, as some call it, extra fine spirits, is so volatile, as I described to you, that a little piece of lime will evaporate a whole tnmbler of it. There is a loss in -wood that is porous beyond the soakage that is allowed for in barrels. By carrying the product in air-tight metallic tanks, the loss from soakage in the barrel would be saved. The barrel in most places after it is used is also of very little value. There is a loss on account of the discoloration of the finer product, such as Is required for making the Shufeldt gin. Put it into a plain wooden barrel that is not incased — paraffined is another name for it — and in forty-eight hours its com- mercial value is impaired, absolutely destroyed for that purpose. Put it in a cop- per tank, and it can be kept for an unlimited period of time, just as in a glass bottle. By the easy method of getting it out, by the reduction of the amount of tax, a great many avenues for the use of these spirits would be opened that are now closed. Manufacturers who would use large quantities of it are now absolutely prohibited. In countries where manufacturers are allowed free alcohol theii' goods are given an advantage when competing with like manufacturers in our country. I once had a list worked up, and it seems to me there were something over 2,000 things that alcohol could be used in, and would be used in, at a reason- able cost, but in which its use is now prohibited because of the high price. A tax on the product of corn is equivalent to a tax on the corn itself. One bushel of corn produces 4.85, practically 5, gallons of spirits. The tax of the Government on that is .$5.50. That is equivalent to a tax of $5.50 per bushel on corn, dropping the fractions. That prevents corn from getting to points of consumption that it otherwise would go to. It is prohibitive. The same is true of barley malt and the small grains they use. The difference between a tax of .$1.10 and one of .50 cents a gallon touches almost entirely the manufacturing interests and does not affect its use for beverages, where it is converted into beverages. CHANGE IK TAX WOULD NOT AFFECT THE USE OF SPIRITS IN BEVERAGES. Q. (By Represenative Livingston.) Do you mean to tell me that people will drink whisky taxed at si. 10 about as liberally as they would if it were taxed at 50 cents? — A. Yes; its use as a beverage will be just aboirt the same. The differ- ence between §1.10 and 50 cents is 6(3 cents, which is 15 cents a quart or 7i cents a pint. Now, that is nothing on a drink. A man pays so much for a drink of whisky, irrespective of whether the tax is 50 cents or ,$1.10. But to the manu- facturer who uses it in large quantities it is prohibitive. Now, I would not advo- cate an immediate drop from $1.10 to 50 cents. I do not think that we could convince anybody that such would be the result, but I do say that Congress ought to drop the tax from $1.10 to 70 cents and try it. Seventy cents was the revenue- producing point many years ago. Since then there has been an extensive growth of manufactures in this country which can use spirits, and I believe the increase of manufactures would so increase the demand that 50 cents would yield the largest amount of revenue. NO SUCH thing as ADULTERATION OF WHISKIES. Q. Is there a stronger tendency to adulterate when the tax is high than when it is low? — A. Sir? Q. Are there not more whiskies and liquors adulterated with a high tax than with a low one?— A. No; I think not; I think not. I do not think" the loss of revenue comes in that way. I think it is in the failure to pay the tax. Q. Would not more adulterated whisky be drunk at .$1.10 than at 50 cents?— A, No; I think not; I think not. I think the minds of the people are filled with false notions about the adulteration of whisky. I had my head chock full of that idea when I started in on my investigations, but I soon got it all out. I think a man who can drink whisky at all— I am unfortunately one of those who can not— need have no apprehension about getting impure whisky. The Distilling and Cattle Feeding Company had a compounding house in New York, and the Shufeldt house in Chicago was a compounding house. I went through both of them, studied their methods, examined their compounding processes, and reached the conclusion that there is no such thing as an adulteration of whisky. It is a myth; it is purely imaginary. There is nothing to adulterate with except brown sugar and distilled water, and if you add glycerine and prrme juice you have covered the whole field. It is pure spirits. The distillers recognize a difference between com- mercial alcohol and spirits. High-proof spirits is simply refined alcohol. There might be an adulteration by putting in common alcohol and making whisky of that. There are some impurities in that; but there is only half a cent a gal- THE WHISKY COMBINATIONS: M'NULTA. 231 Ion difference in the cost of the production, which is not enough to warrant the operation. There is absolutely nothing than can be used as a substitute for alco- hol in compounding beverages. In the large distilleries I saw nothing to lead me to a suspicion that the Government ever lost a fraction of a dollar in its revernie. My relation with the Department — the Internal-Revenue Bureau — was very cor- dial. They extended every courtesy, and where it was a matter of mere rule of the Department and not a provision of law that intei-f ered wi+h me and was a restraint upon me in doing my work the rule was always suspended; and in turn, of course, I did all that it was possible for me to do in seeing that the interests of the Government were subserved. Q. The number of gallons obtained from a bushel of corn being always the same, the revenue produced is essentially the same, is it not ? — A. Yes ; but I do not think the amount of production from a bushel has anything to do with it. The amount produced is always above the amount required by the Government. Q. Do I understand you to suggest prominently two amendments to the present law, one relating to the protection of the business abroad, and the other to the high tax which prohibits manufacturers from using alcohol who would otherwise do so ? ILLICIT MAXUPACTURE OF WHISKY. A. There is no cheating of the Government in the big distilleries. I am satisfied that there is not the loss of a dollar of revenue in any of the large distilleries. In the multiplicity of little distilleries, as shown by the effect of the product in the country, there is but a very small per cent of the tax paid. A SI. 10 tax makes moonshine distilleries ; it makes little distilleries with capacity so small that they can not have guardians and watchmen put over them. These small distilleries use from 5 to 20 bushels a day, and produce from 3+ to 4 gallons. Their yield is less than in the large distilleries. It is physically impossible, from a financial standpoint, for these distilleries to compete with the Great Western at Peoria. If they pay their tax to the Government they will never sell 1 gallon of whisky in competition with a 12,000 bushel house. Q. (By Mr. Kennedy. ) Would not they lose the other way around if the tax was oO cents instead of SI. 10? — A. These small distilleries could not afford to manufacture it at 50 cents ; the risk and expense would be too great. As it is now, if they are reporting to the Government, they report, say, 2 gallons out of every 10, or 1 gallon outof 5, and they then have a $1.10 margin to make on every gallon they fail to pay on. They get their goods out in jugs and cans, and spread it in small quantities. I went over this matter with the officers of the revenue, and there is a loss, I think, admitted by the revenue department, and shown by statistics, of not less than SIO.000,000 a year, and which others claim to be over twenty. I am satisfied that fifteen millions would be a moderate estimate of the loss. On a 50-cent tax or a 70-cent tax— I do not think you can come to a 50-cent tax now — you will get revenue from all that spirits. It will interest you to com- pare the tax paid by one of the large Peoria distilleries with that paid by several hundred distilleries in some of the States to the south of us, say Virginia and North Carolina. I figured it out once, and I think I found that one distillery in Peoria paid, or would pay on full capacity, about three times as much tax to the Government as 3,700 distilleries here to the south of us pay. Q. (By Mr. Phillips.) What is their capacity compared with the large one?— A. Their capacity was greater, of course ; the capacity shown was greater. In the districts where these small distilleries operate the products of the other dis- tilleries have no market. Q. (By Mr. Kennedy.) Can you say whether better whisky is made at the distilleries in Peoria than at these 2,700 in the South V-A. It depends a good deal on where the man comes from who drinks the whisky. A man down thpre would say that whisky was the best ; and, of course, there are some of those dis- tilleries that do make fine whisky. But, gentlemen, I am not myself a judge of whisky. I say to you that I do not think I have drunk a pint of whisky m all my life. COMMON opinion OF THE BUSINESS. There is another point that ought to be inquired into. This whole business is regarded by a very large percentage of the people as being disreputable, if not quasi criminal, and there is a tendency to treat the men who are engaged m it as a class of people not worthy of much consideration. Now, I think it ought to be decided whether it is legitimate or not legitimate. If illegitimate or improper, it ought to be prohibited, and every man that engages in it should be prosecuted as a criminal If legitimate, it should be encouraged and protected and be given the 232 HEARINGS BEFORE THE INDUSTRIAL, COMMISSION. sanie rights and the same treatment that other lines of business are given. It ought to be fostered ; it ought to be given the same treatment under the law It has become disreputable because of its antecedents. OUR LAWS OUT OF DATE. At the time of the whisky troubles and frauds during the war laws were enacted that are still on the statute books. Rules have come down from tlie time when to be a distiller was almost conclusive evidence of the fact that a man was living upon frauds committed upon the Government by cheating the revenue' that he was a smuggler, a briber, and a perjurer. That is no longer the case, and I say those laws do not fit. There probably was corruption in the old time. The men who were committing those frauds lived by perjury, by bribery of Q-overn- ment officers, by crime. Men no longer do it. Nevertheless, you go to tlie Department and you find those same rules there. CHARACTER OP THE REVENUE OFFICERS — THEIR RESPONSIBILITY. I do not think there is a more honest set of men serving the Government than the revenue officers, but they are mindful of the old trouble, and it is almost a sacrifice of reputation for a Government officer to decide, in close or doubtful cases, on the side of the distiller. I have had 2 or 3 cases of that kind where large sums were involved, a distiller being short, and it being plain why he was short. Dealing with an officer of the court the revenue officer has not, of course, the same apprehension; but suppose that he wipes off a tax of §.50,000 or $100,00() from a distiller improperly taxed, the inference in the minds of a great many people is that he has received a fee, that he is bribed, no matter how honest he may be. These questions involving property rights ought not, gentlemen, to be left to the final adjudication of the officers of the Department; but a man in the business ought to have a right to settle them in the courts, and let an independent judge say what the rights of property are, and construe the law. Let the Depart- ment in the construction of the law follow the judiciary of the country; let it be subordinate, not superior to the judiciary. You have got to change it, got to revolutionize the whole methods in order to do simple, straight justice, and let this business run as the banking business or the grocery business does. In my various callings and work I have come in contact with strong men, men who have handled large business interests in this country, but I never came in contact with a brainier set of men than those in the distilling business, nor, on the whole, with a more honest set of men, absolutely desiring to do right. Now and then there is a tricky one, and when you do find such a one he is one of the slipperiest eels that can be found anywhere, and is well known. JUDICIAL FUNCTIONS SHOULD BE TAKEN PROM REVENUE OFEICERS. I would place the power to decide on the rights of these people in the hands of the courts. Give these men straight, fair, simple justice and do not leave them dependent xipon the decisions of an administrative officer, where, if the justice of the case demands a decision in their favor, he will hazard his reputation and prospects in life by rendering it. Q. (By Representative Livingston.) That can be done in the district court where the property is located, can it not?— A. It can be determined in the dis- trict or circuit court just like any other right. Let a controversy between a Government officer and an individual be settled by the same courts that would settle the rights between us. But a man is at the mercy of the officer, and the offi'cer is at the mercy of the clamor of the crowd, of public opinion. He does not have the moral courage to go out and lose his reputation in order to do jus- tice, and it should not be required of him. He would lose it sure ; he could not decide a question involving as much as some of these do, fifty, a hundred, two hundred thousand dollars. At times the taxes paid by the Distilling and Cattle Feeding Company ran over $100,000 per day. If any Government officer decided favorably to the distiller a case involving such an amount, rumor would say that he was getting a share of the rake-off. Q. (By Mr. Phillips.) How often do questions arise involving such large sums of money ? How do they arise between an officer of the Government and a dis- tiller t—A. Well, one that occurs to me concerns the capacity tax, which requires that the capacity of the distillery shall be estimated and the tax paid on the capacity, whether the amount actually produced is equal to the capacity or not. THE WHISKY COMBINATIONS: MONULTA.. 233 NATURE OF THE CAPACITY TAX. Q. (By Representative Livingston.) Whether it makes it or not?— A. Yes, whether it makes it or not. It is just as we used to hear it talked of when we were boys. It is one of those games they call, "Heads I win; tails you lose.'' They measure the capacity of a distillery, and the distiller is bound to pay on the estimated product of spirits. The company made an experiment along a new line with molasses or some other ingredients in one of their plants. They had produced by the ordinary grain process a given cajiacity and paid on it to the Government. They made this experiment by leave of the officer of the Grorern- ment under the sui^ervision of the revenue officers ; and when they ended the experiment they did not get much spirits ; the experiment proved a failure, but the capacity tax went up. They had two cases like this — I do not remember what the deficiency was, but I think about 830,000 in either case — left for me to pay. 1 said, ■• Here we did not get any of these spirits ; they were not produced ; there is nothing to pay on. Cajjacity is nothing ; the capacity is all left. There is just as much capacity there as there was before they ran the distillery, and you can have it." This capacity business is like a barrel that is all bunghole. After delaying along, I suggested that the right way to settle the thing was to put it in the hands of the court and let the court decide whether we had a capacity, and what the intent of the law was. There were two of the cases. One of them was submitted to the United States circuit court, and on the hearing the court promptly decided that it was not the intent of the Government, notwith- standing the language of the act, where no fraud was committed, and where everythxng was open and honest and aboveboard, to collect that tax, and no tax was due. The other case did not get to the court for reasons I need not explain to you, notwithstanding the good will of the officers of the Government. A special act of Congress is required to give the needed relief. It is all wrong, gentlemen, and it is an oppression upon this industry. Q. (By Representative Livingston.) Was that decision the reason why the other case did not get to the court? — A. Yes; they would certainly have got a like decision in the other case, as it ran on all fours with the first one, and the officer submitting it would have been severely criticised for establishing a bad precedent. Q. (By Mr. Kennedy.) I would like to ask you if the internal-revenue figures in regard to the production of whisky are based only on the whisky that pays the tax. Is the moonshine whisky brought into the computation ? — A. No ; the moon- shine whisky does not appear in the list of the Government. They do not get hold of that, but still the experts in that line can tell pretty near how much moonshine whisky is run. INCREASE IN THE PRODUCTION OP SPIRITS. Q. Do not those statistics show a steady increase in the production of whisky from year to year ? I mean the whisky upon which the tax is paid. — A. Yes ; but, as I remember it, not in the ratio of the increase in population. Q. It increases, then, notwithstanding this excessive tax you speak of ? — A. Yes ; but the people who consume it increase more rapidly in proportion. Q. If the tax were put down to 70 cents, do you say there would be a large increase in the production of whisky ?— A. Yes ; there would be a very large increase in the production of spirits. I do not think there would be any increase in the consumption of whisky proper ; i. e., drinkable whisky. 6. Would it be in excess of the amount that is illicitly distilled now ?— A. Oh, yes, in excess of everything now. In the first place, they would collect the reve- nue upon a large part that does not now pay. Then there would be an increase in the output. I do not think they would stop all the moonshine whisky business on 70 cents, but I do think they would stop it all on 50. Q Do you say that this excessive tax does not interfere with the quantity of whisky consumed by di-inkers, but that it has interfered with the amount of whisky that goes into the arts and manufactures ?— A. Yes. Q Therefore, what you have said is not a temperance argument after all ?— A. I do' not think it affects the drinker, at least materially ; it may to some extent, but for the ordinary drinker at the bar not at all. It might affect the man who buys his whisky by the jug or by the bottle. You can very readily calculate the effect The present tax is SI. 10 a gallon. If you put the tax down to 70 cents there is a difference of 40 cents, which is 10 cents a quart and 5 cents a pint ; but when a man wants to get a pint bottle of whisky he is not going to stop on 5 cents, if he can get the 5 cents. 83A 16 234 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Farquhab. ) Can you give the commission any idea what you think the increase in production would be provided the tax was so low that the product could enter into manufacturing? — A. There is nothing to base a calculation upon, i. e., there are no definite figures. I attempted that and I did make a rough calculation, but I forget what it was. It was at the time that I prepared this argument on the price of corn. It was very large. There are more than a thousand things that are manufactured, as I calculated then, into the making of which alcohol goes, that are now not made, or if made at all, to a very limited extent in this country, but that are made in other countries where they have free alcohol and the free use of it. It would be so large, I think, that at .50 cents there would be a large increase in the revenue over what we get at the rate of gl.lO. In other words, the amount of production would be over two and a half or three times what it is now, and the most of that increase would go into the manufac- tures and benefit the establishments concerned. COST OF COLLECTING THE TAX. Q. (By Representative Livingston.) What does it cost the Government of the United States to collect the whisky tax ? — A. I do not remember ; that is a mat- ter of figures, which can be obtained from the reports of the Commissioner. Q. I asked the question because I thought it might suggest an amendment to the law concerning the collection of the tax. Suppose the tax should be levied on the sellers, the wholesalers and retailers, would not that reach all the whisky to be taxed, including the moonshine stuff, and reduce the cost of collection 50 or T.5 per cent ? — A. My investigations and experience would not warrant me in passing on that question ; it is one I have never considered. It seems to me it would be a very complicated and very intricate matter to determine how to col- lect the tax without having an evasion of it and allowing goods to get on the market unpaid ; and you could not at all times and in all places discover, l3y inspection, what goods had and what had not paid the tax. There are experts in the revenue who have followed that subject. Q. You understand that no package would pay a tax or be branded, and no stamps would be bought ; but whenever a drink of whisky was offered for sale it would pay a tax. My question is th is : Could not the Government collect the same amount of revenue that it collects under the present system with 75 per cent less cost? — A. The theory now is, and I am disposed to concur in it, that the product should not get out of the hands of the Government officer until the tax is paid. Q. That is the theory. — A. And in the large manufacturing concerns I do not think it does. The Government has got its hands on it and has absolute, physical possession of the entire product until the tax is paid. Then it goes out in such form that the party gets the stamp of the Government, so that there can he no cheating, and the officer who sends it out must account for those stamps. It is checking one by the other, and I shoiild want to investigate pretty closely before I would recommend to let up on that line. You would have to chalk every glass. When it is not very dangerous, the inclination of man— the ordinary man— is to cheat the Government if he can. In the case of these large distillers the penalty is very heavy. If one of them is toujid cheating the Government, he forfeits his distillery and loses an immense fortune. But if a man with a little distillery, which he can take around on a mule, is caught and his distillery forfeited, there is a stoppage of revenue for a week or two, and then he will get another one. So that, in one man's hand, both being of the same temperament, it is tolerably safe because of the consequences that will follow, where it is not in the hands of the other man. I wish I could answer your question more satisfactorily, but it is a subject that I have not studied. Q. When you come to consider the cost of collection under the iiresent system, do you not have to consider the expenses of the district omrts, the United States marshals, and the commissioners who have been trying these moonshiners and illicit distillers from Virginia to Texas?— A, I would reduce that cost by taking away the inducement of the moonshinei' to carry on his trade. I would make the whisky so cheap on the market that he could not.afford to do the work. He might better chop wood ; he could make more money. Q. (By Mr. Phillips. ) Before proceeding further with this discussion, it might be well to finish the general questions regarding the Distilling and Cattle Feeding Company. PBOPBRTY OF THE DISTILLING AND CATTLE FEEDING COMPANY SOLD. A. August 14, 189.5, the receiver of the Distilling and Cattle Feeding Company sold at public auction certain properties of the said company for S9,800,000. These properties were purchased by the American Spirits Manufacturing Com- THE WHISKY COMBINATIONS: M^NULTxIl. 235 pany, and consisted of: Shufeldt Distillery. Chicago: Central distilleries, St. Louis'; Star and Crescent distilleries, Pekin, 111.; St. Paul Distillery, South St. Paul, Minn.; Riverdale Distillery, Riverdale, Cook County, 111.; Hamburg Dis- tillery, Pekin; Northern Distillery, Peoria; Manhattan Distillery, Peoria; Mon- arch Distillery, Peoria; Great Western Distillery, Peoria; Woolner Distillery, Peoria; Peoria Distillery, Peoria; Willow Springs Distillery, Omaha; Consoli- dated Distillery, Cincinnati; Maddux-Hobart Distillery, Cincinnati; The Wabash Distillery, Terre Haute; The Latonia Distillery, Milldale, Ky.; and the office building of the Distilling and Cattle Feeding Company at Peoria. The price paid was a lump sum; there was no particular price for any distillery. The American Spirits Manufacturing Company was organized by a committee of the stock- holders. The amount realized on sale of these properties, it is estimated, will exceed all liabilities and be about 810,500,000. There are some claims still in liti- gation and until they are finally disposed of the receivership can not be closed up. I am continuing to act as receiver merely pending the settlement of these claims. Q. (By Mr. Jenks.) You say that the amount of property turned over to this new company, the American Spirits Manufacturing Company, is, in your judg- ment, about ten millions and a half? — A. Yes ; about ten millions and a half. Q. Would that amount be realized if these properties were sold in open mar- ket separately to different individuals ''. — A, I think it would ; I think that would be a fair valuation for distilling purposes. Q. What is the capitalization of the American Spirits Manufacturing Com- pany? — A. It is thirty-five millions, the same as the old Distilling and Cattle Feeding Company. Q. Is part of it in preferred stock and part of it in common stock ? — A. Yes ; 838,000,000 common and 87,000,000 preferred. Q. So that here, again, we should be substantially right in saying that perhaps a third of the stock would represent a fair cash selling value ? — A. The American Spirits Manufacturing Company made an assessment upon the stockholders of 84 a share, and that assessment added to the amount turned over to them by me as receiver of the Distillmg and Cattle Feeding Company, to that ten million and a half, and the value of the remaining distilleries not sold to the reorganization com- mittee, would be a fair cash value of their assets at the time, NO EXPOETATION OF SPIRITS. Q. There are one or two questions further that have been suggested along this line. Has there been much exportation of spirits of late years ?— A. Very little ; practically none. Exportation has been stopped by the friction created by the Government. EFFECT OF HOSTILE LEGISLATION. Q. It has often been suggested in connection with these larger combinations in trade that it has been necessary for them to protect themselves against hostile attacks in our legislatures, that considerable expenditure has been made for that purpose, and that they have also made quite large expenditures for instigating and securing legislation favorable to them. Did you find any evidence along either of these lines in taking up the work of this trust ?— A. I found no evidence of any- thing of that kind, except in common report. Q. You found nothing in that regard at all ?— A. Nothing that showed. There were some cases that looked as though there might have been expenditures of money for the prevention of sandbagging legislation, but nothing definite. There is a general belief, however, among the men operating that it is necessary to make up a fund of that kind. A large portion of this, however, I am satisfied is fraudu- lent. While sums are doubtless collected for the prevention of the destruction of the business by hostile legi,slat:on, I am satisfied that the collectors of it are the main beneficiaries. It is very rare that the distilling interests have to fight an act of the legislature in our State and I have not in the other States that I have gone through seen anything of it, notwithstanding the fact that sand- bagging bills are introduced at nearly every session. . ^, ^ ^ i, You spoke this morning with reference to the increase m price that followed the organization of the Distillers and Cattle Feeders' Trust, and said that you thought the price was put so high that it ultimately resulted m the destruction of the trust itself ?— A. Yes; the price of its product. 236 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. WHO BEARS THE BUEDEN OF AN INCBEASB IN THE PRICE OF SPIRITS. Q. Now, when the price of the product is put up in this way, considerably above the ordinary competitive price, who bears the burden, in your judgment?— A. The consumer, in manufacturing; the retailers, when sold by the glass; the consumer, when sold by the bottle or jug. Q . That is , the man who drinks the whisky V — A . No ; the man who uses the spirit; it is not a beverage, you know. Only a very small percentage of all this product is converted into a beverage. That is, of this high proof spirits, a very small proportion is converted into whisky. The larger proportion of it is used in manufacturing, and is the alcohol of commerce. Q. Supposing, let us say, a third goes for consumption — that is, for making the beverages that are used in ordinary consumption — wotild you think that it was the consumer of that who bears the burden, or would it be the retail dealer ? — A. The man who drinks the whisky, when sold by the bottle; the retail dealer when sold by the glass. Q. YesV — A. To the man who is drinking it by the glass it does not make a particle of difference — the price is the same to him. Q. Would it be the retail dealer or the wholesale dealer? Where does this tax fall? — A. It would be divided along the line, of course lessening the profits of the retailer and the wholesaler. The man who drinks by the glass at the bar would not be affected; and a matter of 3 or 4 cents a gallon would not greatly affect the man who buys by the small bottle. He would pay some of it, but the man who buys a larger quantity, i. e., by the gallon, or by the barrel, would pay it. Q. Part of it would stop with the retailer? — A. Yes; the retailer would bear the greater portion of it on an average, and would receive the greatest benefit of a reduction in the taxes on alcohol and spirits for manirfaoturrng pui'poses, and for the export trade, which is an important factor. Q. The question is suggested as to whether the price of whisky, even for the con- sumer by the glass, was not cheaper under the old revenue tax of .50 cents long before this revenue tax of $1 was levied? — A. No, I think not; my experience does not go back to anything anterior to the tax, save by way of the general state- ment that everything produced from grain was cheaper then. Before the war, in 1860 and 1861, corn was 7, 8, 9, and 10 cents a bushel; we used it in lieu of coal, because it was cheaper; and whisky was very cheap, but the yield of spirit per bushel was. however, much less. I estimate that it cost then only from 7 to 13 cents a gallon to the retailer, but he sold it under conditions different from what they do now. The tax is only a part of the burden laid on by the Government; the compliance with the rules and requirements which are necessary entails a large expense to the distiller. The country is different now; then, out West, it was miles between houses; now there are houses and farms everywhere, and we are getting toned up higher and we are selling things for 3 or 3 cents ; they would not stop to take 2 cents then. It would be 5, 10, 1.5, or 30 cents a drink for whisky, regardless of the revenue tax on it. EFFECT OF THE COMBINATION ON ITS MEMBERS. Q. Judging from your observation, since you have been acting as receiver for this company, what do you think has been the effect on the individual distillers of going into this gi-eat combination V Have they, on the whole, been benefited or injured ? — A. I think they have lost money in it. Q. You think they have lost?— A. I think it has been a detriment to every man that touched it, except probably a few individuals. Q. Can you explain more fully just where they lost ? Did they lose during the first two or three years, or was it when the combination broke up?— A. No, 1 think they thought they were ahead for a while. In the first place, they thought no distillery could compete for the trade, big or little ; it was theirs ; they owned it s and in the next place, they got a lot of certificates, the value of which was probably two or three times the value of the distilleries which they represented, but it said dollars on them and they felt rich and carried them along. At fii'st the certificates went up and up, and by and by down and down until they got to be worth almost nothing, so that they went from the poor little distilleries that they actually owned, but which produced some income for them, to a lot of paper trash that depreciated to a lew cents on the dollar and finally left them out of business. Q. (By Mr. Kennedy.) Was not Mr. Clarke's testimony to the effect that they gave the value of the distillery in cash and the value again in preferred stock and the value and a half in common stock ?— A. When he made that statement he was doubtless referring to the later organization. THE WHISKY COMBINATIONS: M^NULTA. 237 Q. (By Mr. Jenks.) There went into this combination, of course, a good many distillers who were favorably situated with good plants, and who had been mak- ing money ; but there were a good many more who were not well equipped and who were not making much money. What was the effect on owners of the better distilleries V— A. Of the better distilleries ? Q. Yes ; what was the effect as regards their profits and the advantages which they could get from such a combination ?— A. There were a few of the leading men who went into this combination who made profits and accumulated large fortunes ; they had large fortunes before the break. Some of them lost very heavily, principally in stock speculations ; but I should say that, of the small concerns that went in, the rule was loss. Some who went in got certificates and immediately converted them into cash before the market fell and invested the proceeds in other classes of property. They did well, but those who held on to their certificates lost. Q. They lost rather than the large ones V— A. Yes; I think from the start ; most of them started in with something and got out with nothing. Q. (By Representative Otjen. ) Did they receive dividends on their stock ?— A. Yes, they received dividends. COMBINATIONS FOR CERTAIN PURPOSES VERY DANGEROUS. Q. (By Mr. Farquhar.) You have already touched upon some phases of indus- trial combinations in a part of your testimony. What is your general view 'of the present forms of combinations that are being chartered in New Jersey and elsewhere? — A. I am not familiar with the facts of their organization, but I regard any organization or combination to control or corner the markets of the country for the purpose of raising prices as very dangerous, no matter what line it is in. They are undertaking to combine in some lines in which I think it is impossible of accomplishment. In those cases the real sufferers will be the men who buy the stock, i. e. , those who invest m most of the industrials. But where large capital is required, as in iron and steel, and where competition can not be easily brought about, combinations will be very dangerous and be very injurious to the country. The safety of the Government requires that they be suppressed. The one will be a temporary the other a permanent injury. But those enterprises that cheapen the cost of production and reduce the price to the consumer will be beneficial. To prohibit them, if it could be done, would be to give their trade to others at a greater cost to the public. Q. Do you suppose that most of the injury will come from the fact that they will issue stock and then catch the willing public, what they call the " gudgeon," on Wall Street, and that those will be the ones who will suffer ? — A. Those will be the ones. They will foi-m a combination and issue new stock for two or three times the amount of the old, and in a little while the combination will all go to pieces, just as the whisky trust did, and the m.en who have got the stock will lose the money. The men who effected the organization will have their profits. The motive in most of these industrial combinations is to "fleece the lambs." Q. Is it not possible in some of the great capitalistic combinations in this coun- try, for instance the Carnegie Steel Company and the Standard Oil Company, for the owners of plants to keep on a business basis, maintain a large capitalization, and do a fair business ? In other words, does the matter of overcapitalization affect the product at ail. provided the business is done legitimately and through the ordinary market y — A. The overcapitalization only means a smaller income from the capital or a larger demand from the consumer. The kind of organiza- tions that you speak of, in my opinion, if permitted to go on, -will absolutely con- trol the markets of the country and get whatever they please to demand for their product. They can control the output. We have got to keep our people work- ing ; we have got to do something to dispose of the product of their labor. I think the remedv for that is more markets ; we must go into the markets of the world in the line that I have suggested in the spirits manufacture. I think that Illinois alone, or Illinois and Iowa, at least the corn belt, will furnish the whole world with spirits, if somebody will take hold of it and break the line and let them out. The remedy is to make a market for the product of our workshops. A combina- tion of immense interests, like those of iron and steel, can not be met by home competition. It is not in the nature of man to keep down the price of his prop- erty when he can hold it up so long as there is a market. The only way it can be met is to invite foreign competition, but that is quite as harmful as it would be to leave our workmen unemployed and produce financial distress. The right way is literally to crush such combinations by the authority of the Government. They are inimical to public safety. 238 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You stated in your testimony that the cause that led to the end of the whisky trust was the fact that they had got control of the market by buying up competitive plants and then raised their product to a price that invited compe- tition by the erection of new plants, causing overproduction, and therefore they went to pieces. Is that so? — A. Yes. Q. Does that hold good in any industrial pursuit in this country where they have a large capitalization ?— A. It does not hold good where the capitalization is very large, as in the iron business. We can raise $.5,000 or .$20,000 to build a distillery where we can not raise fifty millions to start an iron mill. You can find thousands of men in Iowa and Missouri that will start distilleries where th^re is a profit of 40, .50, or 100 per cent ; but you can not get the men anywhere to start iron and steel mills that cost forty or fifty millions. WHAT THE PROFIT IN SPIRITS SHOULD BE. Q. What would you call a safety per cent of dividend in the spirits trade?— A. In the spirit trade ? Q. Yes. — A. They ought to have from a cent to a cent and a half a gallon; in some cases possibly 2 cents per gallon. The commercial arrangement that I told you I went into I think was fair ; it was within these limits. They should make a fair profit. Every man should have the right to a fair profit for his labor and his capital, and a cent or a cent and a half a gallon would be a fair profit, irre- spective of the amount of capital he had in it. LITTLE ADVANTAGE IN EXTENDED COMBINATION. Q. How often does the spirit trade turn over its capital in a year? — A. I did not go into that. This report of dividends will indicate to you the profits on the stock. There is a report of those dividends and then other funds — earnings that were used for purposes of increasing their plants, and that was on a capitaliza- tion of about thirty-five millions. The cash value of the properties in actual use would have cost much under that, say half of it, so that you would double the per cent of dividends upon an actual cash basis. Q. (By Mr. A. L. Haeris.) It is chiefly an economic question. If you have o distilleries with an output of 5,000,000 gallons a year each, would they produce the 2.5,000,000 gallons more economically than one distillery equally well located could produce the same amount? — A. They can not do it under like conditions. The concentration of the ijlants to a practical limit cheapens the cost of production. Q. Would the five have no advantage in buying raw material over the one in the open market ? — A. No: not that I see. Q. If they were distributed over the entire country, and the number increased from .5 to 25, say, and produced a hundred million gallons a year, would they not have any advantage over the one equally well located? — A. Not on the cost of production. Q. Would there not be an economic advantage in the cost of production ?— A. Up to a certain point the more you concentrate the more you reduce the cost of management. You get to a point where, of course, you can not go any further. What that point is, I have not had experience to determine; but you could deter- mine it. As a rule, the point of most efficient operation would be reached when they absorb the product of the country all around them; when expense is increased by ijringing in the material from other districts. I do not think, unless there were exceptional conditions, that any manufacturing business would be well located if located all in one spot. Of course, the matter of transportation is an impor- tant one. Q. In asking the question, I had in mind the combination of plants that are scattered all over the United States.— A. There is absolutely no use of combining where they are scattered all over the cnnntry. If combinations are formed it is to get a corner on the market and better somebody's fortune. There is no prac- tical advantage in it; not a bit. For instance, the distilling people had distilleries in Peoria, Nebraska City, Pekin, St. Louis, Cincinnati, over across the river in Kentucky, and in a st in leakage, we can not compete. The goods must be emptied and distributed quickly. Another danger in the spirit business — I do not know that you are aware of it — lies in the fact that a large part of the business is always done in high-proof goods. If a carload of such goods lies a day or two longer at the depot and is not emptied immediately, the profit is lost. Of course a large organization can regulate this much better than a small one, and in that way the trust has a certain advantage. Q. You mean to say that they have an advantage in being able save a part of the leakage which' you must lose?— A. They ought to, if they manage wisely. OTHER ADVANTAGES. Q. Do you think of any other advantage which they have over you?— A. They have an advantage in being able to run their distillery more regularly after once starting. A distillery can not lie idle with a contract to feed cattle. Q. Do you feed cattle in connection with your establishment ?— A. We have a drying plant. But this is only a recent invention, and a good deal of the slops runs away which might be used to feed cattle. If all plants were united it would benefit the whole trade, which could then be regulated perfectly. An uncon- trolled supply is just like turning on a faucet until the tub overflows ; the goods go to waste. The allowance by the Government on goods kept in bond is hardly large enough, and the tax on leakage is exacted when goods are kept in bond. The article of spirits is therefore entirely different from anything else. If you have oil or other articles you have no tax to pay, but only the article itself to deal with, while in spirits you often have to pay taxes on something which you do not .get. Q. There seem, then, to be four advantages thev have over you. Are there any others?— A. These appear to me to be the main" points. The important fact is that they are larger, and can make larger quantities, I do not think they can make it very much cheaper. A tO.OOO-bushel distillery might reduce the cost a little— that is, produce goods cheaper than a 4,000-bushel house. Q. Do you think a 10,000-bushel distillery would be able to make a larger amount out of a given quantity of grain than a 4,000-bushel one?— A. No; I think we have an excellent ilistiller who gets as high a yield as anybody, but a plant using 10.000 bushels may be operated a little cheaper. Q. Would there be a little saving on labor?— A. Yes; such a plant maybe operated on the whole a little cheaper than a smaller one. THE WHISKY COMBINATIONS: LUYTIES. 255 ADVANTAGES POSSESSED BY COJIPETITORS OF THE TRUST. Q. What advantages have yoii over the trust and how do you expect to stay in ^'^r^ rlil^'"'^®^? '~^" ^^ ^^® ^■''®* plS'Ce, they have this enormous amount of capital. Q. That is, the capital upon which they are trying to pay dividends '?— A. As Mr. Cook explained to you, a million and a half or two millions could make all the spirits wanted in the LTnited States and just as good in quality or even better. We have an advantage in our distillery being entirely new. Great progress has lately been made in distilling in the United States, and the newer the distillery the better the product. Since the old trust ceased to exist very much better spirits have been made ; and, as we have an entirely new plant, we can easily compete in quality. Q. Then I understand you to say that you have aij advantage in a brand-new plant, while they have some old plants':— A. Yes ; and another advantage is that spirits ai-e only a part of our business. We have no particular expense in selling, for we use part of the goods in our own blending business, and distribute the remainder to the trade without much extra charge, while their business is spirits pure and simple, and all the expense of selling falls on that one branch of the business. Q. You are so situated, then, that you make your distillery a feeder to your other business ? — A. Something like that. One who is a distiller only and who should try to sell in competition with the trust would be a much less formidable competitor than we are, because our distiller is sure that he can always get rid of a certain amount to us as distributers who use a large amount in our business, and who will pay him the price which others get ; so, too, we get it with much less expense, not considering the capital or the high salaries which the trust has to pay. THE QUESTION OF SAljARIES. Q. That is another question. You have stated several times that they have to pay dividends, or at least propose to pay the dividends on a highly inflated capital. Now, do you have an advantage in being willing to take dividends only on the capital put in ? — A. Certainly. Q. And, as regards salaries, do you think they pay higher salaries for their man- agement than you do ? — A. I do not know. One can not tell exactly. Such a large organization is usually more expensive to run than a smaller one, unless the busi- ness gets too small, when comparatively the expense is again high. Q. Is it not implied in what you have said that this great combination pays its officers, who are perhaps not all practical distillers, very high salaries ? — A. There are two sides to that question. I do not believe, for instance, that an efficient manager of a life insurance company, who handles so many hundred millions, is highly paid when he receives §100,000 salary. I am sure he is cheaper than a poor manager at a small salary. Q. The question is, how is your business going to live ? Is it partly from the fact that you are getting more efficient service in proportion to the money you put into salaries than the trust does in proportion to what it so expends ? Q. (By Representative Otjen.) That is, how are you going to compete? — A. The hardest kind of competition is that with a trust, because they have officers with little responsibility. Q. But you spoke a little while ago of the efficiency of the trust's management. Now, do you think that in a great organization which controls a large number of plants it is possible to get as definite and efficient management as in a single distillery? — A. Oh, I really believe that there is no business in which there is so great a necessity for combination. When all distilleries were independent, it was impossible for them to make money. They did not act together until necessity compelled them to do so. Q. (By Mr. Jenks.) As regards the way in which you are going to compete with this organization, do you think that, on account of the more efficient management which you have because you are yourselves particularly interested, you will be able to produce more?— A. That ought, perhaps, to be one way. Another advantage consists in the fact that we have only about seven or eight houses which have to invest but a small amount each, and in conse(iuence the business is done without much cost to the different firms. Such a combination as we have formed is a strong one. If the trust fights, it does so at its own expense. However, it does so now in New York; and if we can not live, it can not live or make money either. That is my idea, in which, of course, I may be mistaken. 256 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE OBJECT OF THE BLENDING PROCESS. Q. You spoke a little while ago concerning your blending btisiness. Can you tell a little more about the way in which distillers use proof spirits in blending and improving liquors, and how they manage to make part of their profits thereby y — A. The general idea about "the use and the healthiulness of whiskies is entirely wrong. Kentucky whisky does not cost very much more than spirits, but unless it is aged for a considerable time, or distilled with great care, it is cer- tainly very much less healthful than carefully made spirits such as we make now, blended or flavored with the finest whiskies made in the East, and which, on account of the small quantity used, can be ripened in the bonded warehouses. The prevailing ideas on this subject are much confused, and most people do not know anything about it. WHO BEARS THE BURDEN OF A RISE IN THE PRICE OF SPIRITS. Q. We have had similar testimony before, but I asked the question in order to find out your opinion as to who it is that bears the burden when the price of spirits rises. Will the burden be on the consumer, and will the distiller make more profit out of it?— A. I do not quite agree with Mr. Cook in respect to that. Q. Did the profit not increase with a 15-cent rise '! — A. When we had a 20-cent rise we had the newspapers full of it. The price was increased .5 cents at a time, and many of our customers came to us and wished to buy at the old price. We tried to obtain the full increase in price, but could not, and so took whatever part of the increase we could get. Mr. Cook had the same experience. Every- body wanted us to hold a certain quantity for them and deliver it as they needed it. We did so in order to keep the trade, but after the price dropped 18 cents the stock was left on our hands and we had to bear the loss. Q, In this case, then, the wholesaler lost? — A. Yes; the wholesaler lost. Q. If the price had gone uj) equally high, what would have been the effect on the consumer? — A. Do you call the consumer the man who buys by the barrel? Q. No; the man who drinks it. — A. It makes no difference to him. The con- sumer always pays the same jjrice, but the dealer is induced to buy an inferior quality for him. Q. What induces the retailer to buy a cheaper article? — A. Judging from my own experience, not only here, but also in Eurcjpe. there is no country in which the business of liquor dealers, generally speaking, is as bad as it is in the United States. They are so overburdened with taxes. On the other side the wine mer- chants' trade is generally considered the " first." If you go to Bordeaux, London, Bremen, Hamburg, or Stockholm, you will find them to be the principal and most prominent men in town; but here dealers in wines, etc., are poor, comparatively speaking. There are some men who have made money out of it, but usually they have made less out of the business than out of certain speculations. Their posi- tion can not be compared with that abroad. Their taxes are too high. Q. (By Representative Otjen.) Doyourefer to the sl.lOtax? — A. To both local and national taxes. When they put this new law in force, or when they increased the beer tax, the wholesalers were in a position where many people owed them money, while the retailers had to pay a tax of SSOIJ, and they were so situated that they could not pay any more. When they could not jsay, the wholesaler lost money. Q. If retail dealers, generally speaking, sell a poorer quality of goods, when the price of spirits riSes, does not the burden, as a matter of fact, ultimately rest upon the man who drinks the whisky ? Does he not get poorer whisky at no lower price? — A. The retailer is forced to sell a pnoivr article to make a living. If you jjut a man in a position where he can not live, he naturally looks for some way in which to better himself, or indemnify himself. Q. (By Mr. Jenks.) That is all, Mr. Chairman, I care to ask now. Q. (By Representative Otjen.) Does any commissioner cure to ask a question of the witness ? the spirits business in GERMANY. Q. (By Mr. Phillips.) Perhaps he might have some statement of his own.— A. I find that the business of spirits has been troubles( une all the world over. For instance, in Germany they have regulated it, though not quite as Mr. Cook explained here. They foundmany distilleries in existence! with competition great, Init as the Government there takes a little different view of the matter— the whole Government is a little mcjre paternal than ours — they said: You have got a distillery, and you must run it or you will l)e Ijankrupt. The country con- sumes just so much spirits, and your propen'tion of it is just so much. We will THE WHISKY COMBINATIOKS : LUYTIES. 257 require you to pay 50 marks per hundred hectoliters on your proportion, which we shall fix, and if you make any more you must pay 70 marks. Q. Does the Government fix the output?— A. Yes; it does. Those people are put on a living basis, and if they can export any of the surplus above their fixed proportion the tax is refunded. Q. Is that a rebate ? — A. Yes; you see that makes the duty low. Spirits is cheap all over the world. We can make it very cheap from corn, but Hamburg spirits is made from potatoes, and is still cheaper. Q. (By Bepresentative Otjen.) Do you mean that Germany does not pay a bounty, but simply gTants a reduction of the taxes?— A. It is simply a reduc- tion ; and many people are anxioiis to get rid of their surplus product by export under the rebate law, as they can not afford to pay the high duty of 70 marks and a dividend to the stockholders. The German method of regulating the spirit trade is as follows : The Gov- ernment considers it a necessity to facilitate making spirits all over the country on accoiint of the by-products, the feed, etc., which are often more important than the spirits. Each of the distillers is allowed to make a certain quantity and pay a tax of 50 marks per 100 liters of 100 per cent. This means 200 liters of 50 per cent alcoholic strength or proof, as we call it in the United States. If they make any more than their allotted quantity, they must pay 70 marks per 100 liters of 100 per cent. This difference keeps the small distillers going, and allows them to conapete with the larger distillers, who have to pay the higher rate of tax on any surplus. Q. (By Mr. Kennedy. ) Is it true that the German Government will not per- mit anybody to conduct business at a loss for the purpose of driving out com- petitors? Are you familiar with that? — A. No, they do not do that; but they look into the matter with a great deal more care than we do here. They are always ready to hear people the same as you do here, in order to see whether trade conditions can be improved ; and there is one thing I know the German Government would not do. REGULATION OF CORPORATIONS. They would not allow new corporations to start up and hold out glowing prom- ises to stockholders, sell their stock, and when an actual report comes to be made present an entirely different condition of affairs from what had been represented. They hold the people who manage corporations to stricter account than is cus- tomary here. Q. (By Mr. Jenks.) Do you mean that the Government holds every promoter responsible for the truth of what he puts out?— A. Yes: more so than they do here. Q. Can you tell us something with reference to the reports which the German Government requires every corporation to make ? — A. I could give you that very easily, for I have an intimate friend who is a large woolen manufacturer. I know, for example, that the minority of a corporation has much greater power there, and that if anything wrong is going on a single stockholder can make trouble. He has more to say than the people have here in that respect. Q. It has been mentioned many times, and you and Mr. Cook have intimated also, that in case of the whisky combination the directors of the company have speculated in their own stocks. Do you know whether anything of that kind would be permitted under the German laws?— A. No, it would not; they would get after them with a sharp stick; they would not allow that. In general I agree with Mr. Cook perfectly. There is no business in which the existence of a com- bination, or trust as you call it, is more beneficial and has become more a matter of necessity than in this line, on account of the enormous tax and on acc(junt of all the difficulties connected with it; and there is no business in which a better and more careful or conservative management is recjuired, looking to the com- mercial interests of the business and keeping away from speculation, and if this business, or the combinations in it. have not been a success, it is on that account. I think the spirits combinations were about the first ones to start, because they became necessary before combinations in other lines of business. If it has not been a success, there is no doubt in my mind that the people managmg it, or some of them looked more for profit in other directions than in legitimate business, and were not satisfied with the moderate profits which could have been made. SUGGESTED LEGISLATION. Q Can you suggest any legislation that you think would tend to improve the m^affement of this business and help people wishing to enter into it to carry out their purpose ?— A. I happen to be a director of a bank in New Y'ork, and I 258 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. know that a banker or bank has some advantages over an individual, because everybody can not start a bank. Running a bank is a privilege ; and since people who start corporations sell their stock in Wall street and have it officially quoted there also have an advantage over individuals, I believe the Government ought to make some provision requiring them to assume more responsibility. For instance, under the banking laws none of the directors can borrow money unless a majority of them approve. Q. That is, none of the directors can borrow money from the bank?— A. Yes; and another thing, the director must hold the stock in his own right ; he can not borrow money on it when votes are taken. He must swear that he possesses it in his own right. Another arrangement which, though it does not keep all mis- management out of the business, prevents a great deal, is a careful and efficient examiner. Q. Yes.— A. Now. I heartily believe in this whole business of trusts ; but it will become necessary for the Government to proviile such legislation as each case requires and to look more carefully into the affairs of trusts, so that their actual condition will be more in keeping with the glowing statements which are sometimes made in print. Q. Substantially, then, do you not favor putting all these great combinations, according to their situation, under restrictions similar to those under which the banks are placed ?— A. I believe they ought to give greater security for the advan- tages which they possess. For instance, when a man gets tired of business in a combination he can sell out and go to Europe : but when an individual wants to quit he can not do it, for he can not sell. Now. I believe there would be no injustice in requiring large corporations, in return for the advantages which they enjoy, to submit to careful examination and publish clearer statements. A sound corporation should not only be willing to be examined, but should be anxious, and it would save many people from serious loss. IJIPORTANCE OF SPIRITS PRODUCTION AS A SOURCE OF REVENUE. Q. Have you any further general observations ? — A. Nothing just at present. Q. (By Mr. Kennedy.) Have you some memoranda? — A. I have one. I have a memorandum here which shows the important part which spirits play in the revenue. It is one taken from the statistics, which you can easily secure, and which shows how the revenue of the United States, as Mr. Cook says, has greatly improved. In the collection of the revenue from spirits enormous progress has been nrade, but I believe it is very difficult to improve the revenue without hurt- ing the honest man and helping along the rogue. The average annual produc- tion of all spirits for twenty years has been about 93,000,000 gallons. The annual production of rye whisky has been 9,000,000, and of bourbon whisky, part of which is not much better or not as good as spirits, 20,000,000. Thus the spirits production is the main and most important part. And then another thing which must be considered in spirits production is that by-products are produced, which are dried or fed to the cattle. The making of this dry food is so very important that in Germany, for instance, and in Holland, the whole spirits production is carried on for the sake of the by-product, because it is required for feeding cattle. EXPLANATION OF THE DRYINCi PROCESS. Q. Will you explain that drying process? — A. The spirits is extracted by fer- mentation and distillation and a thick refuse is left. Tliat is put in a patent drier and baled and sent to Europe for feed. Q. (By Mr. Jenks.) What is this dry-process product called in the market?— A. The product made from the refuse of the distillery is sold under the name of dried slop. This slop is allowed to settle in the tubs, and {hen the thickest part of it is put into a so-called patent drier and aftei'wards pressed and packed. The value to the distillery is about 5 cents per bushel of grain used, so that it is quite an important item, and it has the advantage that the slops can also be so employed in summer, when the cattle can not be fed on slo])s. A further advantage is that the distillery need not be run on account of the cattle which it has contracted to feed if the prices should go very low. However, even if the slop is dried, there is always a certain quantity left to be used for feeding. The great value of the drying process is. as mentioned before, that the distillery does not depend solely on the cattle feeding for the use of the slops, and that it can change the quantity produced, provided the market for the spirits should become unfavorable. As far as we can learn, most of this dried slop is shipped to Germany, where feed is comparatively dear. This is only a recent invention, THE WHISKY COMBINATIONS: — LXJYTIES. 259 and some of the distilleries have not capacity enough to dry all their slops. Driers are pretty expensive arrangements, but where they are in use cattle feed- ing can also be carried on in a small way. If a distillery is feeding cattle, it is impossible to stop production when the price of spirits is low ; but if the slops are dried, the production can be regulated according to the demand for spirits. Q. (By Mr. Kennedy.) I should like to ask the witness if he has submitted all the memoranda that he cares to ? — A. I do not know that I have anything more to say. I may add one thing, viz, that while I believe in the forming of corpora- tions or combinations, I do not believe that any business has been attended with greater evils than this one, and I also believe they could have been avoided. THE DISADVANTAGE OP THE BONDS REQUIRED BY THE GOVERNMENT. Q. (By Mr. Jenks.) The chief evils are the two that you have mentioned, i. e., the pushing of prices too high and the speculation in stocks ? — A. The managers seem to think they can make raore money in some other way than by attending to business as they ought. To return to the question of export again, Mr. Cook said it was very easy to export; but unfortunately our Government is very severe on the spirit exporters, and they suffer perhaps for the sins of our fathers. Enormous bonds are exacted. For instance, when I exported a thousand barrels of spirits to Hamburg last year, I had to give two bonds of S100,000 each, and everybody is not ready to sign a bond for §100,000 to the Government. It is a great drawback to the export business. Q. (By Representative Otjen. ) How does the amount of the bond compare with the value of the goods '? — A. The value of the goods does not play any part. The duty is certainly 1,500 per cent. The tax on a barrel of spirits containing 90 gal- lons is §100. The value is SIO ; so for a value of §10 you must give a hundred- dollar bond. A thousand barrels would require two $100,000 bonds ; you must have 2 bondsmen who can each qualify in real estate for $100,000. This is very troublesome, but necessary under the present law. AFFIDAVIT. State op New York, County of New York, $s : I swear that the statements made by me of my own knowledge in the foregoing- report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. Henry E. G. Luyties. Sworn and subscribed to before me this 8th day of August, 1899. [SEAL.] H. Adolph Winkopp, Notary Public. STAI>^DAKD OIL COMBINATIONS. Note.— About the year IS72 leading refiners of oil began to combine for the purpose of making the business more profitable. The combination was by means of purchase of stocks and inter- ests of various companies, aiid until 1882 the combination 'wsis solely by stock ownership in the hands of a liTnited number of individuals, who controlled the corporations as agencies in a com- mon business. In 1882 these owners entered into the trust agreement. The companie.s whose stocks they owned in whole or in part were not then compeMng companies. The individuals named as trustees had controlled them by virtue of absolute ownership of a majority of their stocks. Under the trust the stocks were placed by their owners in the hands of the trustees, who exercised all the powers of the owners. Inexchanj?e for the stocks the trust issued trust certificates, and the profits were divided on these. When the trust was dissolved in 189.2, the .same conditions existed as beftire the trust was formed. The individuals, then trustees, con- tinued to control the companies by vu'tue of absolute ov/nership of a ma.]ority of their stocks; consequently the corporations named have been, many of them since 1873, separate agencies carrying on business as a unit f jr the individuals who arc their common stockholders. In June, 1899, a new corporation was orgrantzed in New Jersey, with a capital of §110,01.10,0(10, to combine into a single, more compact organization the separate companies which had been of late years controlled through ownership of a majority of their stocks by the few individuals who had formerly been trustees of the Standard Oil Trust. This new company is intended to unite again in compact form all of the separate companies which have been working together ever since the formation of the trust Washington, May 11, 1S99. TESTIMONY OF MR. JAMES W. lEE, Former State senator of the State of Pennsylvania. The commission met atll a. m., Mayll, 1809. Vice-Chairman Pliillips presided , and introduced Mr. James W. Lee, who testified in regard to trusts. PERSONAL HISTORY — THE INDEPENDENT OIL COMPANIES. Q. (By Mr. Phillips.) Will you give your name, place of residence, and busi- ness? — A. James W. Lee. I reside at Pittsburg, Pa. I am at present engaged in practicing law. I am also connected with the independent pipe lines and inde- pendent oil companies. There are four companies. I am president of three of them and attorney for the fourth. Q. Will you please name these companie.s?— A. The first company to be organ- ized was the Producers' Oil Company, Limited, with its general office at Warren, jfa. The second to be organized was the Producers and Refiners' Oil Company, Limited, with its general office at Titusville, Pa. The third was the United States Pipe Line Company, which is organized e.xclusively for the transportation of oil, both refined and crude, by means of pipe lines. One terminus of its pipe line is at Oil City: the other is intended to be finally at New York. The fourth company is the Pure Oil Company, which has the right to engage in the pro- duction, transportation, manufacture, and marketing of oil and its products. ■That company was organized 3 years ago last November, and was the last to be organized. All four are owned by substantially the same persons, and operated together. Q. Where were you admitted to the bar?— A. I was admitted to the bar in 1869, at Franklin. Venango County, Pa., which is cne of the original oil counties. Q. Did you practice law in Franklin after being admitted there ?— A. I practiced law in Franklin until ."j years ago, when I removed to Pittsburg. Q. Who was your partner in the law business there?— A. My first partner was Mr. S. 0. T. Dodd. now of the Standard Oil Company of New York. I was after- wards in partnership with Mr. George S. Chriswell, now judge of the county, and Mr. Hastings. Q. Have you ever held any public office ?— A. Only two I was mayor of the city in 1875, and served two terms, of 4 years (.vich, in the State senate of Penn- sylvania, beginning in 1879. 83a 18 261 262 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. EARLY HISTORY OF THE OIL BUSINESS.' Q. Had there been any attempts at legislation in regard to free pipe lines, or unjust discrimination, before yon were elected, and had you any part in such legislation while m the senate^— A. If you will permit me, probably it would be interesting to the commission to have a very brief statement as to the beginning and growth of the oil business, especially that branch of it that relates to trans- portation. Q. We should be pleased to hear you. — A. The first oil was discovered, as is generally known, by Col. S. L. Drake, who drilled directly for it in 18.5'..), and ever since Q. (Interrupting.) On Oil OreekV— A. On Oil Creek, which is a tributary of the Allegheny River. The first well was probably about 18 miles distant from the river. Then oil was developed along Oil Creek to the south. A production of 200,000 barrels was reached in 1861 and 18(i3. The means of gettmg it to market at that period was by loading it into bulk boats on Oil Creek, building temporary dams and cutting them, thus producing an artificial flood, and running the boats out on the flood into the river, and then by the river to Pittsburg, where the refineries were. THE FIRST PIPE LINES.' The first pipe line, I think, was constructed in ISli") or 1866. It ran from Pit- hole, on the left of Oil Creek, down Oil Creek about .5 miles to the Allegheny River. It wh,s built to carry the oil to the river; there it was loaded into boats and so conveyed to market. From that time the business of transporting oil by means of pipe lines increased. The oil wells spread first north to Tidioute, in Warren County, then south into Clarion County, then into Armstrong and Butler, and finally into Allegheny and Washington. In 1875 and 1876 they extend 'd north to McKean County, where the largest development of oil took place, and farther north to Allegany Connty. N. W By about 1880 they spread over a region some 31)0 miles long and 40 miles wide. As the field extended it became necessary to employ pipe lines. They were first built extensively in 1871 and 1872. The capital was very small at first. The company which is now the National Transit was started under another name, with a capital of about §4,001); and it grew very rapidly until the capital reached millions. By 1877 the number of barrels that it transported reached about 15.000,000 a year, I think. I may not be entirely accurate in these figures, but it was a very large amount. Other pipe lines were started, bttt the united pipe lines soon came into control of the people who are now known as the Standard Oil Company — the Standard Oil trust. Small lines were built in various parts of the oil field, to convey the oil to the railroads. There were no lines leading to the seaboard till 188:). THE RAILROADS AND THE STANDARD OPPOSE THROUGH PIPE LINES — LEGAL OBSTACLES. A pipe-line law had been passed, which limited the laying of pipe lines to cer- tain counties. Efforts were made, from 1870 on, to ob.ain a general State law, which should allow the laying o) pipe line-; and give the right of eminent dom'al" to companies organized for that purpose. That was opposed by the railroads, and also by the Standard Oil Company when it c ime into existence That bill was introduced in successive legislatures, beginning with ISiO. It failed each year until 1883, when it was finally passed. 1 was present in the legislature in 1879 when the bill failed, and again in 1881 when it faiied. In 188 ! it was passed only by agitation. The people who were interested in having it iiassed — the oil people — held mass meetings throughout the agricultural counties of eastern Penn- sylvania, and got tlie farmers to send petitions to their own representatives to vote tor the bill. Then it (lassed in the House by a meager ma.iority. Q. Were you present in that legislature? — A. I was present in that legislature and attended a number of mass meet.ULCS that were held. I remenilievat oneniass meeting small handbills were circulated through the audience, saying thiit it this bill became a law their orchards wonld be destroyed, their springs would be pol- luted, and death wouhl lurk under their doorsills. ' Of course that was a very effective way of frightenin.g people who were not a all acquainted with thatineaus of transportation. But it is a good deal safer and a great deal more economical than any other method of transportation. I do not think that there has been a single life lost in transporting oil by means of Dipe lines in tw^Mity years; and there wer; a great many livrs lost in transporting it by railroad prior to that time, I Sue Mr. I....vl(>, p.4il.j. sSi-e Uv. |-!nyli.,pp.-IIKI..H:i. STANDARD OIL COMBINATIONS: LEE. 263 RELATIONS OP THE STANDARD OIL TRUST TO THE RAILROADS. Q. (By Mr. North. ) Were those the real objections to the passnge of the bill ?— A. No; the real objections were that it would give to people who desired to enter the business the opportunity of doing so. The real ob.ieotion was that it would interfere with the Standard Oil Company's exclusive right to operate these lines, and their power to secure unfair advantages over all competitors by combinations with the railroads. If any proof on that subject is desired, I would like to submit it right now. 1 have heard the statement under oath. Mr. A. J. Cassatt, who was the vice-president of the Pennsylvania Railroad, in his testimony given before the master in a case that was instituted in Pittsburg in the supreme court of Penn- sylvania, gave his testimony in regard to that subject. (Reading.) "Q. Did you understand at that time that these railroad companies and the United Pipe Lines had united with the Standard Oil Company in order to force the transportation com- pany out of the refining busmes^s?" The Empire Transportation Company was a company whicli owned a large number of tank ears. The president of it was Joseph D. Potts. Mr. Potts was probably as fully acquainted with the subject of transportation as any man who ever lived in the United States : a man of very great ability and with very wide knowledge of that subject. (Reading.) -'A. I believe they did ; I believe that was the object of their onslaught upon us." That is the testimony of Mr. Cassatt. (iETTINU RID of THE EMPIRE TRANSPORTATION COMPANY. Q. (By Senator Daniel.) Who was prosecuting ? — A. The Commonwealth of Pennsylvania, against the Pennsylvania Railroad. The Standard had a combina- tion with three trunk lines to force the Pennsylvania Railroad to exercise its option to bay the cars of the Empire Transportation Company and to stop the refining oi oil, so as to give the Standard Oil trust a monopoly of the business. That is on page 177 of a book that was published by the Government.' It was an investiga- tion before the ommittee on Manufactures in 188S. Q. (By Mr. NORTH.) Of the Pennsylvania legislature ? — A. No: of Congress. (Reading.) •• (^. Was it after the Standard had threatened to withdraw its patronage from your road ? — A. Well, they had not threatened to Virithdraw their patronage from our road at the time, but they had piotested very strongly against the Empire Line being interested in that New York refinery I spoke of before, and had complained that the Empire Line was giving facilities to that refinery, on account of their interest in it. they did not give to them, and had been endeavoring for several months to get us to insist uj^on the Empire Line going out of that refining business." That is the testimony of Mr. C.issatt on page 178. Joseph D. Potts testified before the same committee of Congress, on page 361. He was the president of the Empire Transportation Company. (Reading.) " Q. I will call your attention to this subject. Do you not know, and did you not also at that time, through railroad officials or other sources, that the Standard Oil Company complained of the impropriety of a transporting line, upon which they were dependent for their supply of oil, being also engaged at the same time in competi- tion with them in refining? — A. Yes, sir ; that was the point that was made." And at that time the transportation company's cars were purchased by the Penn- i-ylfania Railroad, and their refining plant by the Standard Oil Company, and they went out of business.' METHODS USED TO PREVENT THE PASSAWE OF THE PIPE-LINE BILL. Q. (By Mr. Phillips.) What methods, if any. were used by the Pennsylvania Railroad and the Standard Oil Company, or either of them, to preventthe passage of the pipe-line bill in bS8a ?— A. All methods that are usually known, I think, in legislatures. PRODUCTION OF CRUDE OIL BY THE STANDARD IN 1883. Q. (By Mr. Farquhar. ) How much control of oil production did the Standard Oil Company have m 18s:3, compared with all others'!"— A. Of oil production? Q. Yes. — A. X think about ') per cent.-' (^. Five per cent of all'?— A. Yes ; you are speaking of production now. They had none directly. I think : it was through companies that were supposed to be, as they term it, alfiliated with them, such as the B'orrest Oil Company, and proba- bly the Anchor Oil Company, and one or two others. 1 House Eepoi-ts, Fiftieth Co'iKi'e '■'i, First Session, Vol 9. 2 Compare Mr. Arclibold,p..5i;3. 3 For recent years, see p. 5(31. 264 HEAKINGS BEFORE THE INDUSTRIAL COMMISSION. THE standard's POWER BASED ON RAILROAD DISCRIMINATIONS. Q. Then what 5'ou say is that the fonndation of the strength of the Standard Oil Company, after the passage of the act in 1883, lay in their means of making combinations, particularly of pipe lines, and securing the whole control? — A. Their great power lay in the discriminations which they obtained from the rail- roads over all other persons. That is found in the testimony before the same committee, on page 191.' THE standard's METHODS OF PItEVENTING THE LAYING OF PIPE LINES. Q. ( By Mr. Phillips.) What methods did thej' tate, if any, before the passage of this through pipe-line law. to prevent others from getting through to the sea- boaril';' — A. It was impossib'e to get the line to the seaboard without having the right of eminent domain. It would be useless to attempt it ; because any one owning a little piece of laud could absolutely prohibit the pipeline's passing over it. The original pipe-line law only extended to certain counties, and as the oil business grew it went beyond the counties to which the law applied. It was diffi- cult to la_\- lines even within the oil-producing counties. Q. (By Mr. Phillips.) Were there other attempts to lay lines to the sea- board; and how did they undertake to circumvent them? — A. 1 understand that when atiemrits were made to lay lines to the seaboard tracts of land were purchased— strips in front of the pipe-line stations— so that the line could not be built witheut crossing them.'-' By this means the Standard could prevent the laying of any pipe line, and I think did prevent it : so that it became absolutely necessary, in order to lay a line td the seaboard, that a coii^oration organized for that purpose sho^ild have the right of eminent domain. the standard's CONTROL OF TRANSPORTATION. 1,1!. (By Representative' OT.JEN.) You said that in IS80 they controlled 5 per cent of the production. What per cent of the transportation did they control at that time? — A. I think they controlled 90 per cent of it. Q. Even at that time ?— A. Yes. A number of smaller pipe lines were laid through the oi! country, and these were rapidly absorbed by the National Transit or the United Pipe Lines, which was a Standard organization. So that in 1883 they practically had command of all the transportation of crude oil. Q. (By Mr. U. J. Harris.) Has it been their policy to control all new lines that have been laid since then? — A. Yes. (j. No matter what the cost?— A. No matter what the cost. AMOUNT OF THE STANDARD'S REBATES FROM THE RAILROADS. Q. (By Mr. Phillips.) Did they obtain rebates from the railroads?— A. They obtained rebates from railroads. That is probably quite an old subject, and it is fully gone into here in the testimony of Mr. Cassatt. That is easily accessible to the commission. They got their power by means of rebates. They got a rebate not only on the oil they shipped themselves, but on the oil everybody else shipped; a very e.xcessive rebate. The rebate was so much that nobody could stay in the business. Q. How much did that rebate amount to in any given perit)d of time?— On page IHl of the report of the (Committee on Alanufactures Mr. Cassatt said that at that time it was 80 cents a barrel. Q. In round sums, do you )mow how much thev obtained, in the course of a year or such a length of time, from all the railroads?— A. I should say it would run into the millions; probably as high as eight to ten millions a year.-^ " Q. In rebates? — A. I think so. (4. Has there been any testimony taken heretofore on that subject to your kno\\'":edge?— A. It is very fully given in this testimony that was taken before the Committee on Manufactures in l;!88.i <^, Is the precise sum stated in that testimony?— A. The precise sum is stated on page 1!J1 (reading): " CJ. I mean the tariff rate?— A. One dollar and ninety ceil Is. q. What was the actual rate?— A. If shipped to the Standard Oil Com- p.iny at that time it would be 80 cents a barrel." It was just one-half, and it was even higher than that. I think it was higher than fJil.lCi a barrel. ' House Reports. Pii'tieth C'o!J2;rosa, first session, vol. !i. = See Mr. Emery, p. ImI ; also Mr. Bovle, p. tsi,. 'See p.:i8?; Mr. Ardibold, pp. SU-,?!!;; Mr. Emery. pp. 6lj0, 661. STANDARD OIL COMBINATIONS: LEE. 265 THE standard's CONTROL OF TRANSPORTATION. Q. (By Representative Otjen.) What percentage of transportation do they control now?— A. They control probably about 88 to 90 per cent of it. Q. Abont the same as in 1883 ?— A. Yes. There have been times when they controlled practically all of it. THROUGH PIPE LINES A BENEFIT TO THE OIL INDUSTRY. Q. (By Mr. Farquhar.) Was the establishment of these pipe lines to the sea- board a positive advantage to the oil industry of Pennsylvania as a whole ?— A. I think so. EFFECT OF TRUSTS UPON THE CONSUMER. Q. (By Mr. Phillips.) How, in your opinion, do trusts affect the consumer'.'— A. I think the trusts themselves seek to create the impression that the organiza- tion of trusts and the introduction of what they call '■ the economies of manufac- ture " reduce the price of the manufactured article to the consumer. I think that is, in fact, wholly erroneous— that instead of decreasmg the price to the coiKumer they increase the price to the consumer until it becomes absolutely extortionate. One would suppose that that would be the case from the mere fact that these trusts are organized for the purpose of securing a complete monopoly of the busi- ness in which thej^ are engaged. They permit' no one else to engage in the same business if they can prevent it. They pay enormous prices for other establish- ments in the same line, for the purpose of closing them up and thus obtaining a complete monopoly of the business. When they have accomplished that, or ap- proximately accouiplished it, they have absolute control of the prices to the con- sumer : and I do not believe that any body of men anywJiere, and especially when organized for the purpose of profit, can be trusted with the inordinate power of absolutely fixing prices to the consumer. One would expect that they would fix extortionate prices in order that their profits might be high. PRICES AT COMPETITIVE AND NONCOMPETITIVE POINTS.' I believe that it can be shown, in fact, that this has been the effect of the creation of trusts ; and especially of the trust which was the first, and to this day is the greatest, the Standard Oil Trust. Now, that they do charge extortionate prices, it will be a very easy matter for this commission to prove, by simply getting the prices at which they sell refined oil at all points where they are without competi- tion, and comparing them with the prices they obtain where there is a competitive market. I think it is always well to deal in the concrete rather than the al3stract, and I will give an example which the commission can readily verify. In New York and Brooklyn and Jersey City, in 1895 and 189B — in March, 1896— they were selling oil to the local merchants, and to what are known as the wagon trade as well as retailers, at V and 9 1; cents a gallon. The Pure Oil !, cents a gallon, the price of crude petroleum was §1.30 a barrel. That is a ti-ifle over 3 cents a gallon. Crude oil is always measured by barrels of 4'J gallons each. Three cents a gallon would be SI. 26. When they put the price at 5J- cents a gallon, crude oil was $1.1.5 a barrel. In other words, they reduced the price of refined oil by .?1.6s a barrel, while crude declined only 15 cents.' Now, 91 cents a gallon was an inordinate price for refined oil in New York, and 5J cents was below cost ; they could not make the oil. transport it to New York, and sell it for that price and get cost for it. The condition is the same in Philadelphia, where there has been competition for 2 years. Q. (By Mr. North.) How long did that continue '.'-A. We pat additional wagons on in a small way, and I do not hesitate to say we have lost money in New York every month since we started three years ago last March. Q. Prices remain the same as they fixed :"- A. Practically the same : they are a little better now, although crude oil is no higher. Crude oil was $1.15 in 1896 ; it . is now $1.13 ; yet the prices of refined are a little higher now than then. But I do 1 See also Mr. Monnett, p. .3)7; Mr. Westgate, p. .3B7; Mr. Clark, pp. .331, :S3r, 3.50; Mr. Emery, pp. 659 6'iil,ii'i:.'. 2 Compare Mr. "We.sgate, p. 365; also Mr, Arohbold, p. ■>X. 2G6 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. not hesitate to say that by the r-ompetition which we introduced at least $3,000,000 has been saved to the people of Greater New York during the last three years. Q. ( By Mr. Phillips, j How about Philadelphia?— A. The situation is the same in Philadelphia. The Pure Oil Company has been doing business in Philadelphia since the lyth day of June. IS9G. And prior to that time another company, which our company succeeded, had been doing business there for years. The price of oil in Philadelphia is even lower than it is in New York.' Q. (By !\lr. C. J. Harris.) This saving to consumers would not probably have been made without the competition ?— A. Oh. no : I think the price would have been maintained throughout this entire period at y> cents. Q. (By Mr. Farquhar. ) This commission understands that these prices are carried by both competing companies m New York at a loss?— A. Certainly at a lo.ss. Their purpose is to drive competition out: and unless the company has a considerable capital it will be .ss. ' WHY THE remaining INDEPENDENTS REFUSE TO SELL. Q. (By Representative Livin(jston.) What stands in the way of absorbing the remaining companies? The fact that they produced enough to meet the demand. or are they trying to work at lower figures because tliey are not willing to sell? — A. Because they are not willing to sell ; that is one reason. Q. (By Mr. Fai^.quhar.) Do you mean by that that there is so much profit in the mdependent lines that they can ask two prices and will not sell?— A. No ; we refused to sejl at 11:3— that is, 12 per cent above cost— when vv^e expected to go into the hands of the sheriff and be sold out. We maintain those companies largely as a matter of sentiment, and as a protection to the independent producing interests. Q. Do they stay out of sentiment or feeling toward the consumer, or is it because there is a large profit, present and prospective, in keeping them out of the Standard Oil Company ? — A. No ; men naturally want to remain in the business that they have selected and with which they are acquainted; they are satisfied with moderate profits, and they do not like to be driven out of their business. There is an American pride in being able to maintain a place in a business that a man feels that he is entirely competent to carry on. and has adet;uate capital to carry on if he has a fair chance. Q. (By Mr. Farquhar.) Is it not a fact that the independent companies of this country are making money, and making a sufficient percentage on their capi- tal, and is not that one of the reasons why they do not sell ? — A. That is true just at present ; but this proposition to purchase them was made after they had been doing a losing business continuously for twenty months, and in that twenty months had lost S'.'OO.OOO among them in actual money. Then they declined to sell.- PKACTICAL EXPERIENCE OF MEMBERS AND MEN OF THE STANDARD OIL COMPANY. Q. You mentioned the fact some time ago that you thought those who vi-ere interested in the independent companies, and had been brought up in the business, and had long experience in it, are better managers than the agents that the Stand- ard Oil Company employ in refining, or transportation, or selling. Is it or is it not a fact that in their ;icquirement of these plants, the Standard Oil Company has usually taken the expert mixers and refiners of those concerns into the work- ing force of the Standard Oil Company itself ? In other words, under the con- trolling spirits of the Standard Oil Company to-day, have not the men in the field had as wide experience as any independent company can have? — A. No, I think not. I think, with the exception of one trustee, none of the trustees have had any experience. Q. What is the experiencp of Mr. O'Day?— A. He has had experience as a pipe- line man. Mr. Archbold, I think, has had quite a large experience as a refiner. I think he is a competent man in that business. Q. When they absorbed the Galena Company, did they not take the best opera- tives of that company into the employment of the Standard Oil Company? — A. What Galena do you refer to? Q. The Ohio. — A. That is located at Franklin. I think the same men are in that company that have always been in it. 1 Page 220, vol. 9, H. B.. first session Fiftieth Congress, IS!<7-88. 2 See pp. 292, 29.3; Mr. Phillips, p. .593; Mr. Archbold, p. .530. 2 72 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. PEESBNT CONDITION OF REFINERIES THAT WERE REPORTED AS INDEPENDENT IN 1888. Q. (By Mr. A. L. Harris.) Please turn to page 438 of that report.' How many of those companies in that list are in existence at the present time? — A. I can not speak of Cleveland. Of New York. Borne, Scrymser & Co. have been absorbed by the Standard, and I think Lombard, Ayres & Co. They are marked there, though, as affiliated with the Standard then. Pittsburg: Bear Creek Refining Com- pany is a Standard works now, I understand; Ida Oil Works is a very small works; and the Globe Refining Company, I think, is Standard. Oil City: The Keystone Refining Company was wrecked and torn down ; Standard became the purchaser of it at sheriff's sale, £ think. The ground is bare now with the exception of a few tanks. Q. (By Mr. Phillips.) By whom was it torn down?— A. By the Standard. Q. (By Mr. A. L. Harris ) As you go on please state what has become of the different companies that have gone out of existence and how they went out of existence, whether acquired by the Standard Oil Company, etc. — A. Reno: The Mutual Oil Company was purchased by the Standard in May, 1895. wrecked and torn down: nothing left standing but a chimney as a monument of disaster; I am not sure but the chimney is down now. Franklin: Those are small refineries; they are not running. I think; I think the most of them are shut down. I do not know anything about those at Buffalo, Toledo, Findlay. Lima, Bradner, Smith's Ferry, Boston, or Baltimore. Bradford: Those are not in existence now; I do not know what became of them. Parkersburg: One of the refineries that was in existence at that time has been absorbed by the Standard. Marietta: I am not informed as to those refineries. Titusville: Rice. Robinson & Witherop are run- ning now as an independent company. John Schwartz's refinery was practically destroyed by the flood. He then united with the National Refining Company in the Union Refi.ning Company. That was bought by the Standard in 1895 and torn down. The International Works (J. P. Thomas) was absorbed and purchased by the Standard in 189.5. It was practically a new works and in fine condition, but it was torn down. The National Oil Company was united with the Union, and the Union was purchased and torn down by the Standard. The same is true of the Western Refining Company; they went into the Union; they united those refineries, leaving but two practically of that number now in existence at Titus- ville, and one that has been erected since by the Manhattan Oil Company, known as the Oil Creek Oil Works. Clarendon: I am not familiar with those; they are small works: I think one of them is still operated by the independents; I think the other is not in operation now. San Francisco: I am not informed as to that. Philadelphia: Bosshart & Wilson are not in business. As to the others I am not informed. Florence, Colo. : I am not familiar with them. This list was made, I see, in 1888. BONUSES FOR IDLENESS. Q. (By Mr. Phillips.) Have you any information in regard to the paying of a large bonus or premium for refining works to remain in idleness, or have you any information in regard to their paying sums of money to persons to stay out of the business ? — A. I know that within the last five years, and prior to that, they leased a number of refineries, and simply shut them down and allowed them to remain idle. As to persons receiving money to remain out of business, I have no personal, absolute knowledge of that subject ; only common rumor. Q. Do you know as a fact that they have leased works that have been shut down for a period of years ? — A. Yes, I know they have. Q. And paid large sums of money ?— A. Yes, I know that has been done. CONSUMERS WOULD PAY LESS IP THE STANDARD OIL COMPANY DID NOT EXIST. Q. (By Representative Livincjston. ) What, in your opinion, would be the price of oil to the consumers if the Standard Oil Company should be abandoned ?— A. I believe that the average price to the consumer, all over the United States— all over the world— would be very much less than it is to-day, at the same price for crude oil.- Q. Why? — A. The reasons are that anyone who is permitted to take whatever he chooses is never moderate in his taking. They have the ability and power to take from the consumer just what they please, where there is no competition ; and ' Houi^o Reports, first session Fiftieth Congress, I887-8S, vol. U. ■^ .See pp. 37,5-3(7; Mr. Monnett, p, ;S17; Mr. Westgate, pp. 371, .373, 360-370; Mr. Arohbold, p. 531; Mr. Emery, fi:J!l, 631, 632; chart of prices in Introduction. STANDAED OIL COMBINATIONS: LEE. 273 I do not think that anybody would be moderate under suoh circumstances. I do not believe that anybody should be trusted with unlimited i^ower to fix prices. Q. YoiT think, then, that competition would so rule and control the independent companies that they would be forced to sell oil for a lower price than the Standard now charges ?— Yes ; I have not a bit of doubt about it. PKOFITS OF THE INDEPENDENTS AND OF THE STANDARD. Q. That being true, what interest has the independent company in forcing the disintegration of this company? — A. Just this interest: they stand always in mortal dread of being entirely wiped out. They do not know whether they can live six months or a year; they always have to tight for their lives, and they do not make tair profits even now; they have not made what would be called fair man- ufacturing profits at any time in the last five years. Q. (By Mr. North.) What do you call fair manufacturing profits?— A. They would be entirely satisfied to do this business at 10 cents a barrel on the oil that runs through their refinei-ies. I think the Standard makes $1.50 to $3 on every barrel that goes through its refineries. Q. About what per cent? — A. That would be about 10 tents a barrel on the amount the independents refined. Q. What per cent of profit on the investment? — A. With oil at §1 a barrel, that would be about 10 per cent. Q. Which j'ou call a very good manufacturing profit? — A. Yes, I should say so. I have heard independent refiners say they would be entirely satisfied to enter into a contract for any number of years, to make 10 cents a ba-rrel on every barrel of crude oil they refined; and with oil at $1 a barrel, that would be about 10 per cent profit. ' the foreign market— the pure oil cojlpanv. Q. Have you any knowledge of the price at which the Standard sells its product abroad? — A. The Pure Oil Company was organized in IHli.") for the purpose of aiding the independent refiners — organized in an open meeting held at Butler, January 2-1, 1895. The purpose was stated to be to organize a company that would take the oil from the refineries at cost ; they were willing to refine oil at cost if they could live that way. They were willing to say they would continue in the Ijusiness and give it to the new companj* at cost, without making a cent. This company was organized for the purpose of taking that oil at cost and marketing- it abroad. Q. (By Mr. Phillips.) Please .state what means the Standard had taken to destroy the market abroad that these independents were working on?— A. They had made the market abroad so bad that oil was sold in New Yors for a number of months below the cost of the crude at the refinery, without anything for refin- ing it and without anvthing for transporting it from the refineries to New York. The refiners had lost large sums of money. Then they said they could not con- tinue unless they were aided by the producers. We formed the Pure Oil Com- pany for the purnoEe of taking the oil at cost, in order to enab'e them to stay in the business and"not be driven out by the Standard Oil trust. There was an open meeting, held m the opera house at Butler, and the stock of that company was subscribed there to the amount of §65,000 in a few minutes. It went on until it now has a capital of So7o,000. with an authorized capital of §1,000.000, and that company has been buying oil from the independent refiners and marketing it abroad. ' They have a station erected at HamLurg. Germany: their own tankage, their own tank cars. They have one at Rotterdam, Holland; their own tankage, barrel houses, pumping outfits. They are erecting one at SJannheim , on the Rhine in Germany, and they rent a plant at Amsrerdam, Holland. Those plants were established, one of them two years ago last October, the other a year ago the ist of April, and the third is m process of erection. The oil is transferred to those plants by means of tank steamers, pumped out and distributed just as the Stand- ard distributes it throughout Germany. discrimination prevented in GERMANY. I want to say here, and I say it with a blush for this country, that everyone can do business in Germany on an equal footing, and nobody has any advantage over another. It ought to be true in the United States. It is a sad thing. Q. (By Senator Daniel.) Please explain that a little.— A. They do not permit any'discrimination; they will not allow it. , , ,. , 6. By whom?— A. The Government will close up an establishment and keep it froin doing business if they enter into discrimination. 1 See Mr. Boyle, p. 441. 274 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Representative Livingston.) You mean to say they prevent trusts and combinations? — A. I think they do; at least they prevent trusts and combinations having any advantage over an individual. Q. (By Mr. North.* Or fixing of prices? — A. They will not permit that; they will not permit anybody to do business at a loss. (j. For the sake of destroymg a competitor? — A. Yes. They will not allow that. GERMAN BUSINESS OF THE INDEPENDENT REFINERS — COURSE OF THE STANDARD. Q. You have not quite answered the question I originally asked you. — A. What was that? Q. 1 wanted to know how the foreign prices of the Standard Oil Company com- pared with the domestic prices. A. Prior to that tune the independent refineries sold nearly all the oil they marketed in Germany to a man by the name of Poth. He frequently said he could not do business in Germany at a loss — wliich we have found to be true— and of course that gave hmi a right to say what he could pay for oil. He got rich oat of the purchase of oil from the retiners in a period of a few 3'eai'S. Q. (By Mr. Phillips.) Independent retiners? — A. Independent refiners; and finally he sold out to the Standard Oil Company. After he had done it he was overwhelmed with grief when he found the refiners had stood by him. He went home and died within three days. He is dead, and his business is carried on by the Standard (Jil Company.' Q. Did they take any means to buy tankage? — A. They would often tie up all the tankage at a given })oint. and they sold oil abroad at low prices tor a period. y. (B}' Mr. North. ) At lower prices than they were selling for in this country at the same tim: V — .\. Yes.* QUALITY OP EXPORT OIL. Q. (By Mr. Jenk-;. ) What is the quality of export oil compared with what is used here?— A. The od for export, while it is called a second-grade oil, is really about as good a burning oil as the very highest quality. The refiners tell me they would as soon burn what is called export oil as '■ water- white. " It does not barn quite as white, but it is a good quality of oil.' MARKET CONDITIONS IN GERMANY AND ENGLAND. Q. (By Mr. North.) Are yon able to carry on competition in foreign countries without those disadvantages which you encounter at home? — A. A great deal better in foreign counlri's than in America. Compel ition is preserved in Ger- many to a very much greatpr extent than in the United States. It is in England, too. (^. (By Mr. Phillips.) Is the Pure Oil Company making a profit?— A. The Pure Oil Company is luakmg a profit ; doinic a proiitable business. V,;. (By Mr. North.) Selling at market rates abroad?— A. Selling at market rates and doing a g0("l business. DIFFERENT RESULT,^ OF PURCHASES OF INDRPF.NIjEXT PLANTS BY THE STAXDAED AND BY OTHERS. (,). (^yMr. Ratchfoud.) Yoa stated that lOU or more of these companies were absorb d by the Standard Oil ( 'mnpany. Has there been any such thing as trans- fer ot property or plant from one of thes,' independent concerns to another at any timf? — \. Vei-y freqiieiitiy: that is, interests will bi' sold. .t was generally an unprofitable price. Men could not produce oil and get cos;, for it, and maintain the production. Q. (By Representative Otjen.) Still some men could? — A. Yet the general industry could not do it at the price that prevailed for ten years prior to 1S95. So I say the effect of the trust upon the producer of the raw material has been to compel him to take an unremunerative price for the oil product. You might ask why he did not sell his product elsewhere. The pipe line rrins to the well, the oil is taken into the pipe line, and as they had absolute control in the refining busi- ness, or almost so, they were able to iix the price at which they would take that oil. There were no outside purchasers of that oil ; if they produced it there was no other place to put it.-* Q. The pipe led to the lines connected with the refineries of the Standard Oil Company?— A. Yes. 1 Se ■ p. .otT, and Introduction. " r^impare Mr. Archbold, p. 533. ^ See IJ. i^Jn. * Compare Mr. Lock-wood, p. 403; Mr. Archbold, pp. 533, 538-540, 553. 280 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Representative Livingston.) You had no other connections ? — A. There •were no other connections. There were some few independent refineries ; but they bought all their crude from the Standard Oil Company and paid them 30 cents, local pipeage rate. OTERPKODUCTION DID NOT DEPRESS THE PEICE OF CRUDE OIL. Q. Prior to 189.5, for 10 years, you say the oil averaged about 80 cents.— A. Less than 80 cents. Q. Since that about .SI. 05. — A. Yes. Q. What had overproduction and underconsumption to do with those prices during that period';' — A. I think, nothing. There was a time when there was an overproduction. In 1881 the Bradford field was opened. The production in McKean county, known as the Bradford field, averaged very close to 81,000 barrels a day during 1881. That created a heavy stock of oil, until, in August, 1884, there were .39,000,000 barrels of oil in stock. Q. That must have depressed the price. — A. The price of oil was higher in 1884, as you will see by the tables, than it was subsequently, when the stock was reduced one-half and the production was smaller, ' Take the year 18y4 and compare it with 1897. Q. In 1880 it was .$1.24 and 1884 it was §1.13 or .sl.l.T: there was a decrease between 1880 and 1884 of 10 cents a barrel? — A. The average was higher in 1884 than in 1880, as given by months in this table. Then take 1887 ; the production was not as great in 1887 as it was in 1884. Q. And yet the price was L>wer? — A. Tiie average price in 1887 was about 66 cents a barrel. The stock was then 31,0(10,000; it had been 39,000,000 in 1884. The production was, I think, about the same in 1887 as in 1884 ; I can tell in a moment by looking. RESTRICTION OP PRODUCTION IN 1887. Q. (By Mr. Jenks. ) Was there not an effort made to restrict production at about that timeV— A. There was an effort made, and it succeeded. By arrange- ment with the Standard Oil Company, in INW? the producers purchased from the Standard 6,000,000 barrels of oil at a fi.xed price of H'i cents, and shut in their pro- duction to the extent of 17,500 barrels a day,'- Q, (By Mr. Phillips.) Reducing it that'much?— A. Reducing it that much. THE CONDITIONS THAT JIADE THE HIGH PRICES OF 1870. t^. I would like to bring your attention to the price of 1870, .84.90 a barrel; in 1890 you got 81.07 highest and 72 cents lowest. What was it that enabled the producers of that oil to live at .$1.07, when in 1870 they got ri-l.'M'f — A. In 1870 the producers made a great deal of money. They had a good market. Buyers came into the field to seek the producer, and to buy the oil directly from him and pay him. Some days it would go up half a dollar a barrel when "there was com- petition for it. Many people were getting it for independent refineries. They would go right to Oil Creek to meet the produ(;ers, and say : '■ How much petro- leum have you— a thousand barrels'.' I will give you .84 for it;'" and make a con- tract right on the spot. Open competition for the oil made that price. THE Cost of DRILLING WELLS H.iS DIMINISHED, BUT NOT THE COST OF TRANS- PORTATION. Q. Has the cost of production been very greatly lessened since that'^— A. Yes : they are drilling wells at very much less cost than in 1870. Q. The pipe system reduces the cost of transportation?— A. No; transportation has not lessened. Q. I mean from the line out'.'— A. The line runs to the well. The price of local transportation has never been changed since the Standard Oil Company intro- duced their lines. When they laid their first lines 2-inch pipe was worth about 35 cents per foot ; last year it was worth cents per foot. They charged 30 cents then, and they charge 31) cents now ; there has never been any decrease in the cost to the producer, or to any one who desires to have oil transported by local pipe lines." Q. What is the surplus in barrels at present';'— A. The surplus stock of oil is a littU) over 11,000,000 barrels in Pennsylvania oil and about 14,000,000 barrels in Lima oil. A year ago Lima had more than 33,000,000 barrels surplus. Pennsyl- vania has increased its surplus about a million barrels the laSt year Q, The market is not glutted with that oil?— A. No ; the stock is not more than should be carried for safety. > See p. .517, foi- average prices and stock at the end of each year, = See p. 27 STANDARD OIL COMBINATIONS: LEE. 281 CRUDE OIL HAS BEEN PRODUCED AT A LOSS, ON THE WHOLE. I want to say one thing in regard to the producers. I have been intimately acquainted with them since I was a boy ; I have lived among them ; they have been my clients ; I have been familiar with their business. 1 have never known a more energetic, able, and determined lot of men than the producers of petroleum, and yet, as a body, they have not grown rich, but rather poor. There were individual instances of producers becoming wealthy — many of them — but they were engaged in a speculative business, in which there are always chances of certain persons becoming rich. 1 believe the great body of producers have put money in rather than taken it out.' THE TOTAL PRODUCT IN 1870, 1890, ]8iJl. Q. What was the total product of the oil wells in 1870 and the total product in 1800?— A. The production of Pennsylvania oil in 1890 was about 85.000,000 bar- rels ; I think the production in 18T0 was not over o.ooii.ooi) barrels.- That is from recollection. I am a little way from the exact fact, but not far. I think the production was about 90,0l)() barrels a day in 1 S'M. In 1891 it ran up above 100,000i barrels a day by the discovery of the McDonald field, which was very prolific. CAUSES OF CHANGES OF PRICE OF CRUDE OIL. Q. I want to get a basis for an opinion as to what produced this rapid decline of prices from 1870 to 1890 ; that is the reason I asked this question. — A. That was entirely arbitrary ; there was nothing to reduce prices so destriictively as that. Q. Did the consumption increase as fast as production? — A. I think consumption kept pace with production. Q. Is there any way of showing that? — A. The export tables will show that it is true as to export oil, and I think it is certainly true as to home consumption. Q. (By Mr. Farijuhar.) How do you account for the abnormal prices of 1876 and 1877 ? — A. Thei^e was an open competitive market, and the Standard Oil Com- pany was not really a factor in it yet. Those prices were the effect of speculation in the open exchanges. Q. You mean to say those prices were entirely speculative prices, and not product prices? — A. People bought oil for manufacture as well Q. (By ilr. Phillips, i Had not the discovery of fourth-sand oil under third-sand deposit something to do with lowering the prices very materially about 1873? Were the very high prices of 187i> and 18T7 the result of a reaction from the very low prices that preceded? — A. I think the discover)' of the Butler field, which was a very prolific field of oil, had something to do with the lowering of the prices in 1873, 1874, and 1875. Then there was a reaction. Oil went as low as 46 cents in 1873 or 1874. Q. I have known it to be sold as low as 40 cents. — A. Yes: since. A manufacturings COMBINATION CAN DEPRESS THE PRICE OF RAW MATERIAL. Q. You said a moment ago in your opening remarks that the refineries con- trolled the prodiicers of the raw material; is that not true with all refining and manufacturing? Take flax, take cotton, take hemp, anything you please; does not the manufacturer, in the last analysis, control the price of the raw product just as these refineries control the price of crude oil?— A. But if there are a great many persons in the manufacture, there is competition between them, and that affects prices. Q. Provided there is no combination there?— A. Yes: but where there is a com- bination the price is fixed arbitrarily. The combination simply fixes the price and the producers must take it. REFINING BY PRODUCERS— OWNERSHIP OF OIL WELLS. Q. If these producers should refine their own oil, what would be the result?— A. Then they would have to meet the Standard Oil Company in the refining markets. Q. W ould the Standard Oil Company have to go out of existence if the pro- ducers should refine their owq qil?— A. If they refined it all, certainly; but the Standard people are producers. Q. (By Mr. North.) To a considerable extent?— A. About 33 to 3.5 per cent, I should say, of the entire production.' Q. (By "Representative Livingston.) Will you please tell us how many inde- pendent'wells there are?— A. I think there are from fifty to sixty thousand wells 1 See pp. 279, 2S'i, 2o3; Mr. Boyle, pp. 41.3^17, 119. ^ gee p. 539. ' See p. 561. 282 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. in existence. Over one-half the iji-oduction is owned by men who own less than 10 barrels a day apiece, so you can see the extent of the independent production. Q. There is no way for tliose independent producers to refine oil. is there?— A. They are attempting' to do it in the companies that I represent. They are attempt- ing to transport it, anl their independent refineries are attempting to refine it. The stock of the Prod iioers' Oil Company, Limited, and the Producers' and Refiners' Oil Company, Limited, is owned chiefly by producers. Q. (By Mr. Kexn'-:d\'.) It seems to me this independent question is becoming a little bit mixed. When you say •' independent producers of oil," do you include these individual companies? — A. I include all companies that are not under the control of the Standard Oil Company. Q, Then you say the Standard Oil Company produces only about 35 per cent of the oil that is produced? — A. Twenty-three to 35 per cent. Q. That is, these independent iwoducers produce 50 per cent of the oil?— A. Probably 75. THE EXPORT TRADE — CONDITIONS AND EFFECTS. Q. (By Mr. Farjqhak.) In what form were your first exports to Europe? Was it refined petroleum or crude? — A. Both refined and crude were exported. Q. In what year was oil exported first? — A. I think oil was exported to Europe as early as 1870; probably before that. Q. What effect does the export trade in oil have on the market? — A. It gives a market for just the kind of oil they use, and to that extent widens the market. Q. (By Mr. North.) You get a drawback on tin plate?— A. We have never transported any oil in cases. Q. Does the Standard Oil Company transport any oil in cases? — A. To some extent, but I think largely supplying their Eastern market from Russia and mat' ing tin cans ' Q. Drawback lias at one time been a large source of revenue to them? — A. It has enabled them to manufacture their cans here, getting a drawback on the tin they use in the manufacture. Q. (By Mr. FARfjUHAR. ) Has not this export trade equ xlized the profits between the producers in this country and the sales in their home market and Europe more than ever in the prices there? — A. It has helped to do it. Q. Suppose you were in a measure restricted to prices that you would call not living prices, would you not have the expi_>rt market in Europe with equal prices there, as you say? You could not live if you had to sell 60 per cent ot your product at a loss and made a small profit on the other 40 per cent ? — A. It would not take long to waste our capital at that. Q. So yon say yon must hold a place in the home market as well as the Euro- pean? — A. I think that the foreign markets do help the independent interests to maintain their foothold, and the Standard seems to have a greater facility in crowding out independents in America than there. Q. Does this foreign market tend to maintain the domestic price? — A. I think it does. Q. This foreign consumption seems to be enlarging all the time; does that not go against the idea of a monopoly on the part of the company which produces only 25 per cent of the whole crude product of America? — A. They produce only 35 per cent, but they virtually control 5U per cent more, because they fix the price on that additional 50 \)er cent. Therefore 1 do not think the foreig'n market does minimize the effect of the Standard Oil Company monopoly. WHY THE PRODUCTION IS KEPT TP, THOUGH MOST PRODUCERS LOSE. Q. You wish to say that the producers of this country do not receive a fair price for their product? —A. They certainly have not. I do not think that the counties which have ijroduced oil are as well oft' as they would have been if they had never produced a barrel of oil; yet about ^00,000,000 barrels of oil have been taken out of those counties. - Q. (By Mr. Kennedy.) At an average cost of what?— A. I think the average cost of taking it out has been about SI ; and for ten years, when production was great, they got very much less than that. Q. (By Mr. Phillips.) Perhai« you might explain to the commission why the production could keep up under thesecircumstances.— A. It is a speculative business. One man would come in and drill a well, get a thousand-barrel well and grow rich. The h' ipe of that sort of thing led men to put a great deal of monev into drill- ing these wells, Thry all hf;]ied to get large v.-ells ; thev did not find them. More money has been put into the business in ten years thaii has been taken out of it. 'See Mr, ArfIibold,p..5.K. =See pp.:.'«l,2>!; also Mr. Aivbbold, pp.OuS.oliB. STANDARD OIL COMBINATIONS: LEE. 283 Still people make money often, though prices are low. There are wells that run as high as 15,000 barrels a day. Of course a man who has a well of that kind will make a large amount of money. CAUSES OF CERTAIN FLUCTUATIONS OF PEICE. Mr. Jenks. I want to see if you have made clear the causes for three or four of the most important fluctuations. I understood you to say that the South Improve- ment Company was formed in 1872, and that within the next two years there was a great fall in price. What influence did the South Improvement Company have in the way of forcing those prices down, if any? — A. I think it had the effect of forcing prices down, because they had combined with the railroads and controlled transportation to a very great extent, and the producers became frightened.' Eighteen hundred and seventy-three was the panic year. You will remember the panic had some effect on prices. At that time, also, there was a new discover}', in Butler county. That promised to be a very prolific field ; and it proved to be. Q. Those two factors worked together'.-' — A. Yes. Q. Then in ItiTO and 1877 there was a decided increase in price. You state that was partly due to speculation':" — A. Principally to speculation, and partly to the fact that the Butler oil field had been largely worked out and the Bradford field had not yet been opened. Q. There was In the year 1883 quite a decided rise. Do you remember about that? — A. While that was quite a decided rise, yet it was limited. I think the highest price was Q. It was not so high as it had been before?— A. S1-34J per barrel. Q. What time was that in the year? — A. I don't recollect just now. It was the average for the year. That was largely due to the giving out of the field known as the Cherry Grove field, which was opened in July, 1883. The wells were very large, but they did not last a great while. In the fall of 1883 they commenced to decline, and because of that decline the prices went up. Q. (Bv Mr. Phillips. ) Did not the Bradford field decline at that time very material] y?— A. A great many people thought the Bradford field was giving out. 1 think that was owing to the decline of the Cherry Grove field and also the declme of the Bradford field. Q. m the years 1888, 1889 and 1890, did that increase come largely from the limitation of the production by the Standard Oil Company?— A. My recollection is that the stock of oil was reduced from 31,000,000 barrels in August. 1887, to about nine or ten million in 1889. That, of course, would account for that rise, although it ought to have been much greater. Q. There is another decided increase in 1895.— A. In 1893 the price was decid- edly low. The McDonald field ran as high in 1891 as 81.000 barrels a day, and at onetime 91,000. That caused quite a reduction in price; that was a natural reduction. Q. In 1894 the prices were f!0.95f highest, and SO.SOf lowest; in 1895 it went up to .S2.60. That was a tremendous rise.— A. That was entirely arbitrary. The Standard advanced the price 25 cents per day for a period of about seven days, running the market from 81.13 to 82.60 per barrel. Q. (By Mr. Fabquhae.) Was that helpful to producers?— A. It helped the pro- ducers that had oil on hand to sell. Q. Still, in the succeeding year, it only went down to 81-50, so that was but a year's holdings of oil.— A. It went lower than that, I think -to §1.05 at the lowest. THE COST OP PEODOCTTON OF CRUDE OIL. Q. ( By Mr. North. ) Are we to infer from your testimony that the Standard Oil Company arbitrarily fixed the price of crude oil at a figure which it knew to be below cost of production?— A. Yes; that is undoubtedly true, for in 1887 the price was maintained at 65 cents for months. Everybody knows it can not be produced for that. That is awav below cost of production. Q. (By Mr. Phillips.) As a whole?— A. As a whole, I mean, it can not be pro- duced for that. , j_ i J i.- Q (By Mr. North.) Will you state your judgment as to the cost ot production at the present time?— A. It would.of course, be only an opinion. I think it can be produced now, and the amount of production maintained, at from §1 to 81.20 per barrel; but without much profit. 6 The cost would vary according to local conditions?— A. Yes. Q ( By Representative Otjen. ) And the flow of the well?— A. Yes. Over one- half of the wells now being operated produce less than half a barrel of oil per 1 Compare Mr. Arohbold,rp.-540,553. 284 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. day; over 25,000 wells produce less than half a barrel a day, wells actually work- ing every day. Q. (By Mr. North.) Are not all those wells producing at a loss? — A. In some places, where they couple them up, one man will operate probably thirty or forty wells; then there is some little profit at the present price of oil, but very little. In some oases they operate them at a loss. I have asked some of them why they continue to do that, and they said, with the hope that prices will advance so that these wells will become profitable. Q. (By Mr. Jenks.) These prices that you give are prices at the wells? — A. At the wells. THE COST OF PIPING. Q. Piping is still 30 cents?— A. Yes, local piping. Q. Could you give any estimate as to what the cost of piping is now?— A. I think the cost of pipage would be between 7 and 8 cents a barrel.' THE SHUT-IN MOTEilENT OF 1887." Q. (By Mr. Phillips.) Senator Lee has referred several times to what was called the "shut-in" movement in oil, or limiting the production. It might be interesting and profitable if he would state what led up to that "shut-in " move- ment, and what action, if an}', was taken in regard to the labor employed through- out the oil fields? — A. The price of oil was below the cost of production during the year lSy7. The average price that year was about 00 cents a barrel. The Standard Oil Company said that they wanted to treat the producers fairly, but that they had an excessive stock of oil on hand — 31,000.00 ) barrels— deteriorating in value, and that if we wanted to have a better price production must be de- creased, so that they could use up that stock of oil, and take it off the market, and save loss by wastage. A number of the leading producers met a number of the Standard people at Niagara Falls, and. after discussing the subject, the producers agreed to limit their production, in order that the Standard might dispose of that excessive stock of oil. I met with them, and I remember the contract by which the producers purchased from the Standard Oil Company 6,000,000 barrels of oil, to compensate them f oi' limiting the production, and also to compensate the labor they employed ; because it would cut off the revenue of the men who were en- gaged in that industry. Mr. Phillips, who was in that movement, insisted that we should set aside 2,000,000 barrels of oil to compensate the laboring men who were in the industry, and who would be thrown out of employment by cutting off the drilling of wells. Q. The (executive board of the Producers' Protective Association? — A. Yes; it was the executive board of the Producers' Protective Association that took that action, and the reason for_ doing so is well expressed in the preamble of this con- tract. I will read that, it is on page 09 of that same book— Committee on Manu- facturers, lyS-i: "Whereas there has accumulated, in past years, an excessive stock of crude petroleum, which is deteriorating in quality, and a portion of which each year becomes sediment, valueless for any purpose, and the carrying of which excessive stock reiiuires the expenditure of vast sums annually; and whereas in consequence of the existence of said stock the price of crude petroleum has for the past year been largely below the cost at which the same was produced; now, in order, as far as possible, to preserve the said stock from further waste and to conserve the public interest and our own, this agreement witnesseth: "•■ * ■- '" Then the producers agreed to reduce their production 17,.i00 barrels per day, and purchase 0,000,00:t barrels of oil from the Standard Oil Company at 02 cents. They were to give the profit of 2,000,000 barrels of it to the well drillers and pumpers who would be thrown out of employment, and to keep the profit on 4.000,000 barrels. That oil was sold separately; and the laboring men actually realized about So0,000 more profit for their share than the lOToducers did out of the 4.000.000 barrels. Q. How was the money distributed?— A. That was distributed through their organization, the Well Drillers Union, They were allowed .^1 a day for the time they were unemployed by reason of this movement. Q. (By Mr. Jenks.) The Standard Oil Company was itself in this movement?— A. The Standard Oil Company put up a million isarrels and the independent pro- ducers put up a million barrels for the laborers. Q. (By Mr. Phillips.) Have you anything else to say in regard to produc- tion?— A. No; I have not. I believe that if there had been fifty concerns engaged ' See Mr. PUllipB, p. 594; Mr. Emery, ji. i;i;i;; Mr. Rogers, pp. .IH], .588, 589. 2 See pp. UiT, -M); Mr. Boyle, pp. 4;.>8-i:K, 4ti(l-ili2; Mr. Arclitold, p. 540. STANDARD OIL COMBINATIONS: LEE. 285 in the manufacture of petroleum, just as wide markets would have been obtained, and that while the consumer would not have paid any more for his oil, the pro- ducers would have realized a much better price and would have had a handsome profit. As it is, I think they have not made any profit.' Q. (By Kepresentative Livingston.) Where is the balance of that money now? — A.^ I think the Standard Oil Company could explain that. I think they have realized in the neighborhood of five hundred millions in profits or more. THE PIPE LINE COMPANIES — CUSTOMS OF THE BUSINESS. Q. (By Mr. Jenks. ) Will you explain to us briefly the system of the pipe-line service and the use that the producers can make of the pipe lines? Tell how they give a ready market. — A. The oil is gauged by gangers, who run it into the line for the oil company and give the producer a ticket showing the amount of oil • that is run in that day. That is telegraphed to the pipe-line of&ce, and they keep books showing the amount of oil due each producer. Any day a man can call at the pipe-line office and sell whatever amount of oil stands on the books to his credit at the price that the pipe-lino company fixes. If he desires, when he gets a thousand barrels, he can take out a certificate. That is, a certificate saying that he is entitled to 1,(100 barrels of crude oil from such and such a line. Q. (By Mr. North.) That certificate is negotiable? — A. Yes. It can be sold on the open market. Q. (By Mr. Jenks.) Then it practically amounts to this, that any producer can every day receive cash for what he has put in? — A. Yes, that is it; and it is true of ail pipe lines. The- must buy whatever is offered to them; not by law, but as a custom of the business.'' LDIITED ACTIVITY OF THE INDEPEXDRNTS IN EOEEIGN MARKETS. Q. (By Mr. Kennedy.) Have the independent companies followed the Standard into the E,' stern markets? — A. Only in a very limited way. The independents have not sold oil to any extent in India or China or South America or Africa. Q. The Standard Oil Company has worked up the markets in all those countries, has it not?— A. They do sell oil in all those countries, yes. That is so far away from horae that with our limited amount of oil it would be unsafe to enter into comjpetition with them, there. OIL EXCHANGES — NEW YORK AND OIL CITY'. Q. (By Mr. Farquhar.) Do you care to say anything about the New York Oil Exchange? A. No; I think not. When the exchanges were in existence and doing business, the Oil City Exchange always fixed the prices. EFFECT OF THE STANDARD'S ENTERING THE PRODUCING FIELD. Q. (By Mr. Phillips.) What effect, if any. upon the production of oil, has been produced by the Standard's having entered the producing field in recent 3'ears?— A. On production? Q. On producers or production. — A. I think it has tended to reduce the price of crude. They were very able competitors, and they could go into very deep fields to drill by means of their money, and could drill very deep wells and help keep the production high. Q. Have they or have they not monopolized a large amount of the prospective oil territory under lease?— A. They have leased it in very large blocks in West Virginia, paying an annual rental and holding it for future development. Q. Has that in any material way prevented producers from obtaining leases?— A. Undoubtedly, to whatever extent they secured the territory and kept others from coming into it; and with their large means they have been able to secure and hold very extensive blocks of territory. THE STANDARD PAYS GOOD WAGES, BUT NO BETTER THAN THE INDEPENDENTS PAY. Q. (By Mr. North.) Are you familiar with the course of wages among the workingmen in the main?— A. Yes. Q Will you tell the commission how their wages compare to-day with those prior to the organization of the Standard Oil Company?— A. I do not think wages are as high as they were before the Standard Oil Company began business, but I do not think it is owing to that tact. It was a new industry, and in a new indus- iSeeMr. Archboia,p.o40. = See Mr. Bojle,p.l2i. 286 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. try of that kind wages are always high. They have paid, and do pay, very good wages. Q. The Standard Oil Company?— A. Yes; but not any better than the independ- ent producers pay; in some oases not so good. But they— I want to do justice to them in that regard- 1 think do pay good wages. Q. (By Mr. R.\.rL;aFOBD.) The claim has been made by the Standard Oil Com- pany that they pay the highest rate of wages to all branches of labor employed, including pipe-fine men, traveling salesmen, etc. Is this claim, in your judgment, correct, or otherwise?- A. I think they pay a certain class of men in their employ very high wages. To men that are looking after departments of their business I believe they pay very high salaries. To ordinary labor I think they pay just what the independent producers pay, and others engaged in the same industry. Q. Traveling salesmen?— A. I have no knowledge on that subject. THE STANDARD OIL COMPANY MANUFACTUEKS 90 PER CENT OF THE OIL. Q. (By Mr. A. L. Harris.) Can you furnish this commission with a list of the independent refineries now doing business? — A. Yes. Q. With the amount of output, substantially? — A. Substantially. Q. You have not that amount? — A. No. Q. Can you furnish the commission with the list of refineries now operating either by or with the Standard Oil Company?— A. NTo; I could not do that. Q. What changes have been made since April, 1888, as defined on page 350 of the book from which you have quoted? — A. You mean what refineries have gone over to the Standard? Q. Yes, — A. I think that they control 90 per , 444: Mr. Phillips, pp. 598, 699. STANDARD OIL COMBINATIONS: LEE. 287 RAILROAD DISCRIMINATIONS. Q. (By Mr. Farquhar.) You said that the Standard Oil Company had been able to secure discriminating rates from railroads for the transportation of their products. Can you state to the comm.ission any cases in which it has been proved in open court, or before the Interstate Commerce Commission, that they did receive discriminating rates from railroads? — A. Yes; in the case of a bill in equity filed in the supreme court of Pennsylvania, on page 191 of the report of the Commit- tee on Manufactures, IXSS,' you will find the testimony of Mr. Cassatt. that they had received 80 cents a barrel from the Pennsj'lvania Kailroad. Q. Was this a sporadic case, or was it general? — A. It continued until the Standard wiped out all the refiners between Titusville and Pittsburg at that time. Q. At that time?— A. Yes. Q. How long did that last ? — A. It lasted probably about a year. Q. Would you say now that they still receive a discriminating rate from the roads? — A. That I have no proof of ; but 1 was attorney in a case brought against the Pennsylvania Railroad by Logan, Emery and Weaver, when the general freight agent of the road said there had been no discrimination ; the president of the road said the same, and a number of their chief officers ; but when we subpoenaed their auditors, they came and testified that there had been discriminations. Those dis- criminations ran from 8 cents a barrel np to '-'8 cents a barrel. The amount of them in one year, as against Log in, Emery and Weaver, was something over §24,000. They were testified to by both auditors, and the auditors' statements were brought in showing the exact amount.- Q. (By Mr. Jenks. ) When was this? — A. My recollection is that the suit was tried in 1889 or 1890. They compromised the suit and paid .$30,000 for these discriminations. Q. (By Mr. Fabquhar. ) Do your independent companies own tank cars? — A. Yes : the independent refiners own tank cars. The Producers' Oil Company, Limited, own 48. Q. Has there been any discrimination on the part of railroads in hauling these cars? — A. Yes. Q. As between the independents and the Standard ? — A. Yes. Q. State as explicitly as you can where it has occurred and when. — A. It has occurred on nearly all the roads, and those questions are in litigation. The Inter- state Commerce Commission assessed against the Pennsylvania and other roads a sum equal to S86,0l)0. Suits brought by the independent refiners against the railroads, for the recovery of that money, are now pending in the circuit court at Pittsburg.* Q. Yon spoke some time ago about the rebate. Will you state the average price of the oil when the 80-cent rebate was given? — A. It fluctuated, of course ; but it it was from §1.50 to S3..j0 a barrel. Q. (By ,\lr. A. L. Harris.) What was the character of the rebates at the time you speak of in the Pennsylvania oil district? What I mean is this: What was the amount of the rebate, and whom did that rebate go to in that district? — A. That reb:tte was in the shape of checks, I suppose, or cash, and it has been esti- mated to have amounted to ten millions of dollars. It went to the Standard Oil Companv chiefly. I suppose. I do not know how it was divided. Q. (By Mr. Phillips. ) Is it or is it not in the testimony of Mr. Cassatt— was it not given, and the length of time, with the receipts of amounts?— A. It is in tes- timony on pages 243 and 2-13 of the work on trusts. - Q. Can vou give the commission the exact amount in dollars ? — A. It is esti- mated to be. from October 17, H77, to March 31, 1870. ,810.1.'i.">.218.'' Q. For how many months?— A. From October 17, 1877, to March 81, 1879; a year and five months. Q. (By Mr. A. L. Harris.) Was it paid to the railroad and then paid back to the Standard Oil Company ?— A. The independent shipper would ship his oil and pay the open rate— we will .say. ijl.80; and ;-'0 cents of this freight that he paid was handed over to the Standard Oil Company. They got the rebate not only on the oil they shipped, but on the oil he shipped. No one could stand that. I do not say that 80 cents is the amount, Ijnt they did that in some instances. Q. (By Mr. Jenks.) Governor Harris has asked yon if you could furnish a list of the refineries that are in your com-ianv. Woiild you be willing tp add to the list of those establishments also the capital stock of each one and the market value of it before it came in ? Do you think you could get it?— A. Yes. Q. I presume it may be a matter of record— and the capital in case any firms 1 Hou.se ReDOi-ts, Fiftieth Congress, fli-st sensirai. rol. 9. Sue the text. 2 See p. 393( also Mr. Archbold, p. "uii: Mr. "Westgate, pp. 379, 3S0. 3 Compare Mr. Archbold, p. .511. Mr. Emery, pp. titiU, 6S1. 288 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. came in that were not corporations. Were any of them bonded ? — A. I think they were principallj' out of debt. Q. So that there would be no bonds to put into a list of that kind. Did any of them have preferred stock as well as common stock ? — A. I think not ; not any of the refining companies. Q. Would you be willing to give the details in reference to their stock? — A. I think they would be entirely willing to submit them to the commission. i^i. You will be kind enough to :idd that to the list? — A. Yes. Q. You said this morning that you knew of a number of refineries that had been purchased by the Standard and dismantled ? — A. Yes. Q. Can you give us a list of those ? REASONS FOR DISMANTLING REFINERIES. Q. (By Mr. Faequh ae. ) What are the usual reasons for dismantling a plant ?— A. ThtJSe plants were under contract with the Producers and Refiners' Oil Company, Limited, to take oil from them. I can conceive two reasons for dismantling them; First, to prevent them from being in the trade as competitors; second, to injure the Producers and Refiners' Oil Company. Limited. The Standard declined to sell any of the material to the other independent refineries. They paid large prices for them and wasted the material ; at least, they dismantled them, and refused to sell them to other independent refineries.' Q. Wlien the commission hears representatives of the Standard Oil Company, that question of the commercial and legitimate reasons for dismantling may come before us. I should like your position on it. — A. I think it was done to take them out of competition, and to injure the only competitor that was in that field. I know of no other reason. They were good plants, well located. There would certainly be no reason for paying a high price for a plant and merely tearing it dov/n, unless there was some design of that kind. ONLY A JIODERATE RI>E OF PRUE WHEN PRODrCTION OF CRUDE OIL WAS LIMITED. Q. (By Mr. Livingston.) Seventy-five per cent of this oil is produced by inde- pendent oil companies outside of the Standard Oil Company. If they could by consent and agreement reduce the i^roduction of oil one-half, what effect would that have on the independent companies? Would it largely increase the price of crude oil? — A. They did enter into an agreement to reduce the production 17, 500 barrels a day, and it did not largely increase the price of crude, though it reduced the stock from :!1,000.000 to 9.000,000.- Q. It did not? — A. It did not; it increased it to some extent, but not to the anticipated extent. DISADVANTAGES TO EMPLOYEES OF H.WINQ ONLY ONE POSSIBLE EMPLOYER."'' Q. (By Mr. Phillips.) Have you any further remarks to make or information to give in regard to the effect on labor? y. (By ReiM-esencativre LiTiNosTox.) Do you mean to say that it is lesseping the price of labor? Is that the idea? — A. I am not speaking so much of what has been done by trusts, but my opinion is this; That when all the xjeople that are, skilled in any branch of industry come to be employed by a single concern, and there is nowhere else to go to seek that kind ot employment, they are largely under the control of that one institution, both as to their wages and as to every- thing else, and that such a condition is hurtful t>) labor, because there is no com- petition then for labor in that given line. Suppose all the men that are skilled in refining, for instance, are employed by one institution, and a man is discharged hj that institution for some fanciful reason; there is nowhere for him to go to get employment. Now, I think that is a positive injury to labor. If fifty con- cerns were in the business, when a man ceased for any reason to be employed by one, he could go to another. If there is only the one employer, that man is driven out of that industry altogether, ;;nd must seek something new. He can not be as profitable either to himself or to the public in any new capacity as he would be in a capacity in which he is highly skilled. Maybe he has attained such an age that he can not go into any new business; then that man's labor is lost to the world. I know of instances where a trust has discharged a man because he had had some difficulty with, we will say, the general manager of a particular plant, and the managei' immediately reported that man to all the other institutions and said, " This man is not to receive employment." For a year — in the case I have in mind; I do not care to give names-— he was out of employment and could not get it. That was his business; he knew it; he had been in the business for ten years; ' See Mr. ArohboW, p. .->7:.'; Mr. Westgate, p. 370. = See pp. ;.;r7, 28U, ASi; also Mr. Arolibold, p. 540. ' See Mr. Archljold. p ni.i. STANDARD OIL COMBINATIONS: LEE. 289 and he oould not get employment in any other institution connected with that trust. Now, I think that all those questions come in; and that the trust is always hurtful to labor because, just as it controls the price of the crude product, it will absolutely control the labor in that given industry. Suppose you have a trust with regard to all industries: then there is no place for a man to go. If he is thrown out of employment, where will he go to get workV Every man ought to be able in this country, rich as it is, to have a chance for employment. So I think that in that way it affects labor. There is another way. Under these conditions men are made subservient; their manhood is to some extent destroyed. They are not the same independent class of Americans that they would be if they felt that, if they were discharged by this employer, they could go to some other and get employment. It belittles men and injures them in every way. Therefore, I think the trusts are hurtful to labor. LABOR ORGANIZATIONS. THE STANDARD OIL COMPANY AND ITS MEN. Q.^ (By Mr. Kennedy.) Do you believe that combinations such as you have been talking about make the organization of labor more logical and necessary to the welfare of the working men?— A. If they do not organize and keep organized I do not know what will become of them. Q. (By Representative Otjen.) Are the men employed in the oil industry gen- erally organized ? — A. There is an organization known as the Producers' Protective Association,' organized for the purpose of protection. They have not had any meetings in recent years because they have been devoting their time to the busi- ness part of the defense of their industry. They have not had any time to look after anything else. Q. (By Mr. North. ) Are the employees of the Standard Oil Company organized into a trade union? — A. I do not know. I want to say for the employees of the Standard Oil Company that, as far as I know them, they are competent, polite, and a good class of men. So far as the producers are concerned, they have no fault to find with the class of men they employ to do their busmess. They are really good men. They have to employ that class of men. Q. (By Mr. Kennedy.) Is it a fact that the Standard Oil Company's employees are comparatively well paid and well treated, and are alwaj'S loyal to the Standard Oil Company? — A. 1 know nothing about the qi^estion of loyalty. We have never attempted to inquire into that, but Ithink they are reasonably well paid. POWER of TRUSTS OVER THEIR MEN. THEY HAVE PAID FAIR V,"AGES THUS FAR. Q. (By Mr. Batc'b:ford.) It is claimed by a great many laboring men and labor organizations that a trust which controls a number of establishments, hy reason of that large control of industry, is able to close down one or more of them in order to reduce wages or to lengthen the hours of labor or to bring about some undesirable condition for the working people, and at the same time suffer no loss in their product, because they can transfer their business to some other establishment for the time being. What is your opinion on that phase of the question? — A. 1 should think that would be true, for the reason that if they have a complete monopoly of the business, it does not make any difference what their output is. They can clooO half their establishments, and put out half the product, and double the price on it. They can put the price where they please ; their is nq power to control them anywhere. Q. Have you any recollection of any instances in which that took place, or in which there is reason to believe that it was the cause of the trouble? — A. No, I do not recollect any at present. Trusts have not been long in existence, except in a few instances. It was necessary for these trusts to have the good will of their employees; and they have paid them fairly good wages and have not been in trouble with their labor. Q. It is claimed by the friends of trusts pretty generally that they treat their workmen better, pay them higher wages, and grant more agreeable conditions generally than do individual employers or smaller companies. What is the truth about that? — A. I think there is nothing in that. Q. Generally speaking? — A. Taking them all into consideration, I do not believe that is true. STABILITY' OF EMPLOYMENT. Q. (By Mr. Farquhar.) Does a trust usually give more stable employment than individuals and smaller corporations? — A. I think that the length of the period that they have been in existence has not been long enough to determine > See Mr. Boyle, pp. 428, 429, 441-M6, 449; Mr. Phillips, p. 5§9, bottom. 290 HEARINGS BEB^ORE THE INDUSTRIAL COMMISSION. that question. A great many individuals and companies iiave had employees for ten to fifteen and twenty and thirty years. The trusts have not been in existence so long as that. Q. Is it not usual among the employees of the Standard to say. "As long as you behave yourself and attend to your business you will stay?" Is not that always the inducement held out to foremen and others in the Standard to keep tlieir men?— A. Oh, they follow the business rule. W hen the exigencies of the business require it. they cut their employees without giving much reason for it. I do not know that they do that very thing; I do not charge them with that. TRUSTS DISPLACE LABOR. Q, (By Mr. C. J. Harris. ) When they dismantle a factory, what becomes of the men that have worked there?— A. They find some other employment if they can. Q. (By Mr. Ratohpord.) To What extent, if any, does the operation of the trust displace men— traveling salesmen, foremen, or superintendents; labor of auv kind?— A. I think it very largely displaces labor, but I do not know that it decreases the cost, because t think they add to the salaries of men that are in charge. They pay very high salaries to leading men. I think that the liberal payments, instead of being given tu a number of men, are given to one or two, and they cut the laboring forces. I think it would do away with a great mauy traveling men, because the trust can fix their own price, and people must come and pay it. Q. You seem to be pretty positive that labor is displaced in the operation of a trust? — A. I have not a bit of doubt ot it. Q. (By Representative Livingston.) Has the Standard Oil Company done any reducing of the v/ages of their employees in years gone by? — A. They did, during the depressed period, reduce wages. Q. During what period? — A. During the panic of 180.d, and subsequent to that. Probably not more than others ; I do not know about that. THE INDEPENDENT REFINERIES ARE INDEPENDENT. Q. (By Mr. Je.vks. ) Do the four different companies of j'our organization work together in harmony ? — A . Yes. Q. Have you been able in your organization, since you came together and are working in harmony, to dispense with the labor or services of many of your higher priced men, your traveling men, and so on? — A. We never have employed any traveling men in this country. Tli© refineries are all independent; they are not at all connected with our companies. Each refinery is an entirely independent concern. They simply buy oil from us, and we buy oil from them, just as we would buy it from anybody else. Q. (By Mr. Phillips.) Do they own stock in these pipe lines?— A. They own stock in the various pipe lines, and also in the Pure Oil Company. While they own stock, they own their refineries independently. There are the Independent, the Pena, the Continental, the Germania, the Crystal, the America, the Emery Manufacturing Company, the Columbia, and the A. L. Confer ; they all own their plants. Sometimes two or three persons own one. In the Independent Refining Company. I think, there are only three persons ; in the Continental I think there are but two. There are several others owned by one or two persons, and they are all independent.' RELATIONS OP THE REFINERIES TO THE INDEPENDENT COMPANIES. Q. (By Mr. C. J. Harris.) Your companies do not pretend to be a trust, do they ? — A. Oh, no ; we are trying to keep away from trusts as far as we can. Q. (By Representative LiviNrisTox. ) If I understand, each of these independent companies owns stock in the general company ? — A. Yes ; in the United States Pipe Line Company, and also in the Producers and Refiners' Oil Company, Limited. Q. And you view that pipe line as the agent of those other companies ?— A. No; as an independent company in which various persons own stock. The companies stand each on its own footing as to dividends. Q. Who pays the incidental expenses of this independent pipe line ?— A. The company itself. It charges l.T cents for local pipage to the refiners. Tliey have 15 cents pipage to pay the expenses, and if anything "is left, that is the profit. Q. (By Mr. Phillips.) Was there or was there not a movement on foot to unite the various pipe-line companies and the refineries ? — A. There have been sug- ' See pp. ;i;u,;;ri; also Mz-. Emery, p. 858. STANDARD OIL COMBINATIONS: LEE. 291 gestions of that kind. It lias been thought that we should be stronger if we were united into one organization. Q. (By R.ei)resentative Livingston.) You charge 15 cents for piping, and out of that you pay all your cxirrent expenses?— A. Yes. Q. You have a monopoly on that; you are a kind of a trust, are you not? — A. No: the Standard is competing with us in the fields we are in : they rob us ol that feature. I should think. Ten per cent could hardly be claimed to be a mouopolj-, and we are notilO per cent even : we are about 5. Q. (By Mr. Phillips, ) If these various companies became united, should you be willing, as an officer in each one of the four, to submit to thorough inspection of the books and accounts, and the piotits that such an organization might make? A. We should be very glad if the Government would inspect us and everybody else ; we should be glad to suffer an inspection in order to have some other people inspected. SOME REFIXERIES HAVE AC+EXCIES. THE MOST OF THEIR OIL IS SOLD THROUGH MERCHANTS. Q. (By Mr. Farquhak. ) How do these independent companies put their burn- ing and lubricating oils on the American market? — A. Each refining company markets its own oil. They get orders, and some of them have stations. For instance, one company I know has a station at Rock Island. 111., and one in Chi- cago ; and through these stations it markets almost all its refined product. Q. Have these independent companies permanent agencies for the sale of their oil? — A. Some of them. Q. Or do they drum for their custom ? — A. Some of them have permanent agents in certain places, shipping the oil to them and having facilities for storing it. Q. Do yoii know whether the greater part of their product is put into the field through their own agents or through other oil houses in those cities ? — A. I pre- sume that the greater part of their product that is marketed in the United States is sold through merchants or others who are in the business. QUALITY OP THE PRODUCTS OP THE STANDARD OIL COMPANY AND OF THE INDEPENDENTS. Q. That being the case, the Standard Oil Company and your independent com- panies come into open competition there for the market? — A. Certainly. Q. Do j'ou know of any better qualification tor the sale of oil. independent of monopoly, than the quality of the oil and the prices ? — A. The quality undoubtedly should affect the price. Q. The Standard Oil Company, coming in with a better quality of oil and sell- ing at an equal price with the other, would limit the field ? — A. If they made a better quality of oil. Q. I say, presuming that they do ; I made the question in tha't way. — A. Well, they do not. Q. Is it not a fact that no company, whether a monopoly or not, can hold the American market unless it sells a'better oil at an equal price? — A. No ; I should not say that would be true, absolutely. RAILROAD FAVORITISM. Q. You said this morning ' that some of the railroads have taken the buying of lubricating oil out of the hands of the purchasing agents, and that the oil is bought by one of the officers— the vice-president or the president of the road. Is it not a fact that in the economy of the equipment of the railroad, if you ran a poor lubricating oil you would lose by it more than the little cent or two that you might save on the gallon ?— A. Undoubtedly. Q. Would it not ultimately ruin the machinery and ruin the road?- A. Yes. Q. Without any favoritism question to speak of in the selling between these people ? — A. I would not say that. Q. Do you not think that years ago, while favoritism did prevail in purchasing lubricating and burning oils on railroads and among large consumers, there was a favoritism and a large one. and that now the economy of railroads is such that even in their stationery and printing, where management used to be left with local agents and division superintendents, it is now concentrated in one head or function in the management of the road ? Isn't it the same with the purchase of oil? A. No ; I think oil is made an exception. Q. You do?— A. Yes. 1 See p. 288. 292 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Can you deny that while temporarily the advantage might be given, for per- sonal reasons, to the men who canvass, or to the company that offers to sell the oil, in the course of a year or two, tlie best product will stick — that is, at an equal price with any other ?— A. That would be true if they were looking solely to the interest of the road ; but if they had some ulterior purpose in purchasing, it would not be true. Q. I am discussing the purely business proposition. — A. As a purely business proposition that would be true ; and if a man was doing it for hknself , it would be all right. Q. So there is no monopoly that can be held in any product, in the United States or anywhere else, as long as j'ou put the product or article on the market at an equal price ? — A. I do not think that is true. Q. Why is it here, in textiles and things of that kind that this country pro- duces, that the product is the finest? And will they not hold the market for years against all other producers?— A. That may be true. It ought to be true always, but I am afraid it is not. Q. (By Representative Livingston.) Do you sell your oil in States where they have an oil inspector? — A. Yes. Q. You have no trouble with the laws of Georgia? They have an inspector, and you sell your oils there without let or hindrance ? — A. Yes. Q. Does the Standard ? — A. Yes. Q. They are supposed to stand the same test? — A. All have to. I think that with the general public they are on an equal footing. So they are to a large consumer that is purchasing for himself ; but in the case of an officer of a railroad, there may be some reason why he wants — Q. To shut out? — A. To shat out competitors in favor of them. Q. But that is a good business reason, isn't it? — A. Not always, I am afraid. Q. Usually? — A. I do not think it is usually. Q. Would you not try to gain the European market, to shut them out of it by putting down the prices in Europe? — A. I think they could purchase just as good oil for one-half the price they are paying. If that is the case, your argument would not hold. FREIGHT RBBxlTES. Q. In reaching the market — I use the State of Georgia as a mere illustration— in reaching the market of Georgia, what advantages are granted to the Standard Oil Company over your companies ? Any ? — A. Yes. we think so. Q. In the way of rebates ? — A. We think so. Q. Have you established that? — A. It has been established in a number of cases : yes, Q. Brought to your attention? — A. In Georgia? No. sir. Q. Well, I only used that as an illustration. Has it been brought to the atten- tion of the Interstate Commerce Commission? — A. Oh, yes; and they have assessed damages for thattreigbt discrimination. Q. They have collected it ? — A. It is in process of collection now ; they are still fighting.' Q. (By Mr. Farquhar, ) I think the commission would be much obliged if you would furnish it with the names of these cases that have come into court, where there was sworn evidence to sustain these allegations, where they occurred, the defense made, and whether cases are now in process of litigation. — A. I will do that. NONE OF THE PRINCIPAL RAILRO.VDS BUYS LUBRICATING OIL FROM THE INDEPENDENTS. Q. (By Mr. Phillips.) Do any of these independent refiners secure a market for lubricating oil on any of the principal railroads of the United States to-dav, or could they if united?— A. They do not now, and I doubt v,'hether they oouldit united. It is a very doubtful question. THE INDEPENDENTS REFUSE TO SELL OUT TO THE STANDARD OIL COMPANY. THE REASON. Q. (By Mr. Kennedy.) Would you state as your belief, judging from the ex- perience of the past, that the Standard Oil Company would, if it could, to-morrow purchase all these refining companies, paying for them more than their real value ?— A. I do not know whether they would do that now or not. They have offered to do it in the past. They made that offer in the fall of 1894 and in Janu- ary, 189ri.^' 'See p. 287; Mr. Ai'clibolcl,p.516. -Seup.ari; Mr. Phillips, p. 593; Mr. Arclibold,p, 580. STANDARD OIL COMBINATIONS: LEE. 293 Q. Do you believe that if such an oflEer should be made the independent com- panies would refuse it?— A. I think they would. They have done it. Q. So then the public must suppose that the independent companies have a good thingin the way of business?— A. No.that doesn't follow. The people who are interested in these pipe lines have a very large interest at stake in their produc- ing properties. They own about 75 percentof 80.000 barrels of oil a day; in other words. 60,000 barrels of oil a day. That amounts in a year to about 30,000.000 barrels of oil. We believe that the price of that oil is largely dependent upon having an open competitive market for refined oil. Their pipe lines will give them an open competitive market, and therefore they would not give them up. They had rather have them wiped out, if they must be. We were at a point where we expected them to be wiped out; but we were willing to suffer that rather than to sell them. We passed an act of the legislature that we could not sell them, and nobody could sell them, but they got that repealed. The Standard had that repealed, and a little while afterwards it purchased the Crescent pipe line. That law, prohibiting independent pipe lines from consolidating, was passed in 1883, at the same time when the free pipe line law was passed. That continued to be the law imtil 1895, when the Standard Oil Company secured its repeal. They had got a bill passed to repeal it two years before, but the governor of Pennsylvania at that time vetoed the bill. They got the repeal bill through again in 1895, and the governor signed it. So that the independent people who secured the passage of this bill were like Cortez when he went to Mexico. They were willing to burn their ships, and either stay in Mexico and fight it out or fall. THE INDEPENDENT ORGANIZATION INCLUDES THE OWNERS OP 40 OR 50 PER CENT OF THE CRUDE OIL PRODUCTION. Q. (By Mr. Jenks. ) Did I understand you to say that about 75 per cent of the producing capacity of the Pennsylvania oil field was in your organization? — A. No ; about 75 per cent is owned by independent producers, not afiiliated or associated in any way with the Standard Oil Company ; some of them are not our stockholders. Q. About what per cent of the oil-producing fields do you have in your organ- ization? — A. I think possibly about 40 or 50 per cent. Q. (By Mr. Phillips. ) That is, stockholders? — A. Yes. Q. But the lines themselves do not own anything? — A. No, the lines themselves do not. IN the long run, the price must be high ENOUGH TO PAY THE LEAST FORTUNATE PBODUCEE WHOSE OIL IS NEEDED TO SUPPLY THE MARKET. Q. (By Mr. Ratchford. ) Speaking of the advantages of the larger concern, I want you to make a comparison as to the large and small producers. We will suppose, for instance, that A has oil wells producing 10 barrels per day, B pro- duces 10,000 per day ; how can A compete with B in the open market ?— A. He cannot ; but he ought to have an equal chance, for that very reason. Q. The cost of developing a well is about the same whether it flows or whether it is dry ? — A. Yes. Q. Is not the advantage of B over A as great as the advantage of the Standard Oil Company over B ?— A. You are comparing the manufacturer with the producer. Q. Admitting that A produces 10 barrels per day and B produces 10,000, are the advantages of B over A as great as the advantages of the Standard Oil Company over B, as the larger producer of the two ?— A. I do not see how you can make that comparison. You are comparing two entirely different things : you are com- paring the manufacturer with the producer and one producer with another. Q. The point I wish to bring out is simply this ; Inasmuch as the cost of boring a well is the same, or nearly the same, whether it yields much or little, the indi- vidual who is fortunate enough to make a good strike, with a few additional laborers to rim it, can handle 10,000 barrels as cheaply as the man who is not so fortunate, handles, perhaps, only 10 or 100 barrels ; and because of his greater output he can, if he will, sell at a smaller margin of profit.— A. He can ; but the price is usually fixed by the man who has the smaller well, for this reason : If he does not get a price that returns him at least the cost of production, he must quit. The price may not be fixed, if it is fixed arbitrarily, at a price which enables him to live But if it enables a man who produces 10 barrels a day to live, the man who produces 10,000 per day from a small number of wells is simply getting i. fortune. 83a 20 294 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. I understand you to say the small producer fixes the price. — A. No; but the price must be fixed so that he can produce, or the small well must be abandoned, Q. Is that price fixed by mutual arrangement?— A. No, it is fixed arbitrarily by the Standard Oil Company.' MOST (IIL COMES PROM VERY SMALL WELLS. Q. (By Mr. Phillips. ) Is it or is it not an ascertained fact that the greater part of the production is coming from small wells and the great number of small pro- ducers '.■'—A. Over a majority of that production is from wells that produce less than a half barrel a day. THE REMEDY: FORBID DESTRUCTIVE COMPETITION. Q. What is your idea as to the remedy? — A. That is a very difficult question, I want to be understood as givmg simply my own view about it. The most'difiS- cult thing is to find a remedy for the evil. Q. (By Representative Livingston.) It is no trouble for a man to know he is sick. — A. No; you can diagnose the case a great deal better than you can apply the remedy. I suppose the real evil ought to be reached. The real evil is not so much in the aggregation of capital. No one objects to a man's being rich, if he acquires his money honestly. No one objects to his engaging in business. We object to his driving others out of business, and doing it by the use of unfair methods. No one objects to large aggregations of capital engaging in business, if they do it fairly and honestly, and are willing to enter into fair, honest competi- tion. I would try, if possible, to prevent them trom abusing their power. I would make it a criminal offense; say, in a few words, that any person or corporation that engages in destructive competition shall be guilty of a misdemeanor and be punished with fine and imprisonment both. Q. (By Mr. Farquhar.) You mean that as a national law or a State law?— A. We could not apply a national law, except to interstate commerce. It would have to be a State law where it concerned commerce within the State. Q. How would 3'ou define " destructive "' ? — A. I would leave that to the courts and juries; they will find a way out. That is a question of intent; and that always enters into a criminal offense. If a man starts to sell a product, not for the purpose of getting a market for his own goods, but to drive somebody else out of the business, that is destructive competition. Let the jury find that intent from the evidence. Let them find it from the price, if they please. If the price is away below the cost, and they maintain that price for a long period, not just for a single sale, that is destructive competition. That is a crime — one of the highest crimes ; nothing in this country has done so much damage in recent years as destructive competition, entered into deliberately. It is one of the most deliberate ofiEenses that can be committed. No man need engage in it ; he can easily avoid the pen- alty by avoiding the crime. That is one way.- LIMIT THE CAPITAL OF M AXQFAC.'TURIXIJ < 'ORPORATIONS TO §1,000.000. If I had the dping of it, I would never charter a corporation, except for public purposes, with over §1,000,00(1 capital. That is large enough in any business to secure a perfect division of labor. I think that ought to be the limit of commer- cial companies. There is not much danger in this country from a company with yl, 000, 000 capital. One man said to lue : " This is our business. I can lose SlOO.OOO and spread it over half a million and not feel it. Your company can not lose SI 00,000 ; it does not have it to lose; we will drive you out of business.'' AS TO in=ASI-l'UBLK: COMPANIES, REGULATE THEIR CHARGES. Q. (By Mr. A. L. Harris.) Would you include transportation companies in that bill also 'j'— A. Is o, I would call that business public or quasi-public. I think that all telegraph coniiuiuies, all electric-light companies, where they are in cities or where they deal directly with the public, all traction companie's. should be put under severe regulation. The price of those goods can be regulated because they have a fixed unit. Fix the price of the thousand cubic feet of gas. Fix the fare for the carriage of jiassengers. You have no way of getting at a" commercial com- pany. If you can limit their capital to §1,000,000. you will have a remedy. If you do not do that, you must do something else, or else the country is going to he ruined by these large aggregations of capital. STANDARD OIL COMBINATIONS: — LEE. 295 NO ANTITRUST LAW CAN BE OF SBKVICE, UNLESS IT LIMITS THE SIZE OP CAPITALS, OR MAKES DESTRUCTIVE COMPETITION A PENAL OFFENSE. Q. Would you reach the trouble better by what is commonly called the anti-trust laws, or in the corporation acts-of the different States?— A. They would have to be real anti- trust laws ; you would have to say that no company should have more than $1,000,000 capital. You can have a perfect division of labor with si. 000, 000 capital ; and all political economists say that is all that is desired by the" aggrega- tion of capital. That is not what the trust desires. The trusts desire to get into position to squeeze somebody ; drive somebody out of business : whereby they can levy tolls on the public generally. That is what the trusts are for. Q. (By Representative Livingston.) You recommend State laws controlling and regulating trusts ; what would you recommend us to do with the State of New Jersey, that starts them ?— A. I do not know what you could do with the State of New Jersey. I do not suppose any legislation could be secured in New Jersey. This will probably have to be reached by securing a healthy public sentiment first. Q. If one State in the Union is allowed to issue charters just as she pleases, and do as she pleases, and those charters are operated in all the other States, how are you going to legislate ■;*— A. You couM say in the State of Georgia that no trust should be possible in that State. Suppose a dozen States should pass laws that no trust should be possible or no corporation should do business in those States with a capital of over 81.000.000; that would enable independent companies to go in and do business in those lines. I do not ob,iect to the amount of capital. I only limit it to 81,000,000 because a company with .81,000,000 capital can not engage in destructive competition. It might be mean in a small way, but it could not do much damage. A company with 8100,000,000 or 8500,000,000 capital can drive everybody out of that business: and the question is, Will they not do it? There is no way of curbing their power e.xcept by restricting their capital, or else making it a penal offense to engage in destructive competition. THE DUTY ON OIL IS PERHAPS MEANT TO PROTECT THE FUTURE. Q. Have we any import duties on oil? — A. Yes, there is an import duty of 10 cents a barrel. Q. How does that help ? — A. There is no oil imported into this country. It does not help anybody, because there is no oil imported. Q. Does not keep anybody out? — A. No one. Q. Why is it put on? — A. I do not know; for the protection of the future, perhaps. OVEKCAPITALIZATION LEAliS TO EXCESSIVE CHARGES. Q. In addition to large aggregations of capital, is not the public also in danger on account of overcapitalization? — A. Undoubtedly. Having overcapitalized these trusts, they will want to show an earning power to the holders of stock ; and in order to do that they must collect extortionate profits from the consumer if they have a monopoly. That will tend, to drive the directors or trustees of these trusts into obtaining from the public excessive profits. Q. (By Representative LiviN«'^TON.) Do not all overcapitalized organizations go into bankruptcy inevitably?— A. I think a great many of them will. TRUSTS KILL IND1\IDUAL ENTERPRISE. Q. (By Mr. Eatchford. ) What effect, in your judgment, has the organization and operation of trusts and the large moneyed corporations upon the personal ambition, the individual enterprise of the American people?— A. I think it is very rapidly stilling it. CJ. Could you state whether or not, in your judgment, large numbers of indi- viduals are kept out ot business by reason of those things?— A. No question about it. Q. You spoke of destructive competition; can you conceive of any way m which that destructive competition could be brought about more forcibly and more fully than by the tearing down and destroying of the rival establishments?— A. No; I do not know a more flagrant means of destroying competition than by pay- ing exorbitant prices for competing plants in good condition and tearing them down. That is a notice to everybody that they do not propose to have com- petition. 296 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. That probably works great hardship to the communities in which these plants are torn down?— A. Undoubtedly; it is a waste of that much capital, which it has taken years to build up. If a man burns his own house he is guilty of arson; if he de3troys a new plant out of mere animosity and desire to injure somebody else, I do not know why he should not be guilty of an offense. INCOME TAXES AND INHERITANCE TAXES. Q. (By Representative Livingston.) Instead of preventing combinations of over a million dollars, as you suggested, suppose you levy an income tax of 50 per cent on the profits? — A. I am afraid they would lie about the profits. Q. Would not that be a fairer way to do it?— A. I would be willing to do any- thing to wipe them out and give the people a fair chance. I think that would do the work if you could enforce it. Q. (By Mr. Farquhar. ) Would any State court regard that as constitutional, or any European court? — A. I have no hostility to any individuals. I simply would like to see some limitation put upon the powers of trusts in the interest of the people themselves. Q. (By Representative Livingston.) It would not be class legislation if Con- gress should lay a tax on the incomes and profits of all trusts and combinations?— A. I should dislike to see any law passed that would recognize their existence. Q. (By Mr. Phillips.) Wliat would you think of an inheritance tax, levied in some graded proportion to wealth? — A. I am afraid that would be open to ob.ieo- tion unless it was uniform; and if it were uniform it would be avoided very largely, would it not, by people making gifts prior to their death? aOVERNMENT VISITATION DESIRABLE, BUT NOT SUFFICIENT. Q. (By Mr. Farquhar. ) Have you any other remedy for destructive competi- tion than the limitation of capital to .$L, 000,000? — A. Government visitation might alleviate the evil, but that would only result in publicity. They do not seem to care much about that : they are largely defying public opinion. Q. (By Mr. Phillip.s.) Would you be in favor of Q-overnment inspection of corporations ? — A, I think that ought to be done ; the power of visitation was a common-law right in England to the founder of a corporation. He had the power of visitation, and as the State creates the corporation it certainly should have the power of visitation. It has an iindoubted right to do it. PRACTICABILITY OF PUNISHING DESTRUCTIVE COMPETITION. Q. (By Representative Otjen.) If you make destructive competition a criminal offense, how would you enforce the penalty against corporations? — A. I would make it apply to any person, corporation, or agent of a corporation. You cannot imprison a corporation, but the fine would apply to it. Q. You would simply have to enforce the penalty in the shape of a fine?— A. Make all of&cers guilty of the offense. They are willing to risk anything, violate any moral obligation or rule ; but there is one thing they do not like to do— they do not like to take any risk of imprisonrnent. Q. It would be competent to fine a corporation found guilty of destructive com- petition, but would it also be competent to imprison the president or directors ?— A. The law can say that any corporation, and all the officers thereof, and all the agents or employees connected with the corporation engaged in the destructive competition, shall be guilty of a misdemeanor, and on their conviction shall be fined §oOO and undergo imprisonment of one or two years in the penitentiary. Q. (By Mr. Ratchfoed.) Do you believe the law should define exactly what destructive competition means?- A. Leave that to the courts and juries, the SHERMAN ANTI-TRUST LAW. THE INTERSTATE COMMERCE COMMISSION. Q. (By Mr. A. L. Harris.) Have you any suggestions to make as to amend- ments that would make the Sherman anti-trust law more effective than it is now?— A. I have not, at this time ; I would like to look that over again. Q. Will you please do that and see whether it can be made a basis for a future remedy ? — A. I think the law has had some good effects. Q. Is it possible to bring it under the jurisdiction of the Interstate Commerce Commission in any way ?— A. That is a pretty difficult question. That is a ques- tion a great many people have considered ; I have been thinking of these questions for perhaps thirty years. I have been brought into pretty close contact with them for that period. STANDARD OIL COMBINATIONS: MONNETT. 297 THE OIL TRADE IN CANADA. — RAILROAD DISCRIMINATION THERE. Q. (By Mr. Jenks.) Do we export oil to Canada?— A. Yes ; -we sell a great deal there. Q. Does your company sell any in Canada ?— A. Yes. Q. Have you come in contact there in any way with discrimination in railroad rates ?— A. There has been conflict there. There has been some trouble about railroad rates there recentlv.i Q. Has your own establishment come in contact with that?— A. Yes, I think they have. Q. Can you give the facts about that ?— A. No, I do not believe 1 can now. District of Columbia, Comity of WafshiiKjfdn, sx.: I swear that the statements made by me of my own knowledge in the foregoing report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. J. W. Lee. Sworn and subscribed before me this 9th day of September, 1899. Wm. Calvin Chase, Notary Public. Washington, D. C, AIvy 16, 1S90. TESTIMONY OF HON. PRANK S. MONNETT. Attiiriieii-geriei'ul, State of Ohio. The commission met vX lO..'!!) a. m., Vii-e-Chainnan Pliillips la-esidint;. Hon. Frank S. Monnett. attorney-general of the State of Ohio, testilieil. Q. (By Mr. Jenks.) Will you be kind enou.nh to state your full name and address? — A. Frank S. Monnett, Columbus, Oliin. Q. You hold the position of attorney-general of the State of Ohio at the pres- ent time? — A. Ye.s, Q. In the carrying out of your official duties have yuu found it nece.ssary to bring suits against some of the great industrial combinations? — A. Yes. suits filed by the state of OHIO against insurance companies. Q. What ones in particular? — A. We filed the first suits against eleven insur- ance C'lmpanies, which included British, Canadian, and American companies, charging them with being in a state combination through local boiirds, or through a coaimunication between local boards, amounting to a state organiaa- tion; and also with being in an interstate combination at Chicago through a state organization. These cases have been pending, and are now in the ham Is of the court with 800 pages of printed testimony (>f the various witnesses, if the menibfTs of your commission care to have any of them, we can furnish you with the official copy of the testimony, and from that you can get the names of such witnesses as are available on the lines you want. SUIT against the STANDARD OIL COMPANY OF OHIO. Tlie next suit that we had was the State of Ohio ex rel. attorney-general against tlie Standard Oil Company of Ohio, which, I believe, has been pi-mling since ISDl. A decree was rendered March ,'2, 1S92, against the Standai-d Oil Canpaiiyof Ohio, it having been charged with being a iiiember of the Staudarrl ( )il Tiust, or lieing one of the constituent companies of the Standai'd Oil Trust. By an ordei- of the supreme court of the State in November, Iso;, I was riirectei! to bring it (the Standard Oil Comjwuy of Ohio) lieforc the court for contempt, t-hargiiig it with having viulated the decree rendered March 3, 1892, in not Avitluliavving ii-om the trust in !.;ood faith, but in simply shifting or modifying the forniei- system of doing business, so as still to get the benefits of the trttst (■i:imbination or arrange- ment. In accordance with that order from the supreme court I filed a complaint in contempt, a copy of which I will furnish your cnmmission.'-' to which com- 1 See Mr. Westgate,-,ip.3rs,:!TK,37R: Mr. Gall, pp. 07.5-677, il,sii.i;s2-iis.-,. ■^ State of Ohio e:r rel. Tlie Attorney-General, plaintiff, v. TIk; btandard ( Jil Company, defend- ant. History of the case, p. 31. 298 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. plaint the court gave an order for seiTice upon the defendants, and the defend- ants thereupon came into court with an answer attempting to justify their conduct subsequent to the decree, to which answer we filed a reply with some twenty-nine interrogatories addressed to the president of the Standard Oil Company, who is also the chairman of the liquidating trustees, and also the chairman of the former nine trustees of the Standard Oil Trust, Mr. John D. Rockefeller, of New York, formerly of Cleveland, Ohio. Mr. Rockefeller answered these printed interrogatorie.s under oath in part and demurred to part, wliioh, under our cdde, he had the right to do, and part he refused to answer on the gTOund that they were irielevant. The court overruled the demurrer or the refusal to answer the main inter- rogatories: tJiat was objected to, and they then came into court with a supple- mental list of an8v.'ers. Thereupon we took additional — rather, Mr. Rockefeller's— testimony in the way of depositions under a master appointed, and of that testi- mony I will give such data as your commission desires. In their testimony, as disclosed by the interrogatories, and by Mr. Rockefeller in person, and the secretary, F. B. Squires, of Cleveland, we were able to find data that warranted the State in filing sitits against such constituent companies of the original trust as were doing business in Ohio. SUITS AGAINST COXSTITDENT COMPANIES OP THE STANDABD OIL TRUST. We filed independent suits against The Buckeye Pipe Line Company, a constitu- ent company, which is the transporting company of the crude product; against The Ohio Oil Company, known as the " producing " company, which makes leases or contracts witli the owners of oil in the rock, usually farmers: against The Solar Refining Company, which has functions ^'ulistantially the same as the Standard (Jil Company of Ohio, which is a refining company: and against The Standard Oil Company of Ohio, anew. FOUR CAUSES OF ACTION. In these suits substantially four causes of action were made. In the first instance we charged them witli violating the public policy of the State, our pro- cediire being based upon the constitutional right of the attorney-general to institute proceedings in qnn inimudo against any corporation that offends against the existing statutes of the State or against the jiuljlic policy of the State, and with confederating and attempting to evade the decree of the supreme court in the decision of March 1. \H\^'i. against the Stand;\r(l Oil Company proper. D01NC4 A TELEGRAPH BUSINESS. The second cause of action was based upon what is known as our ' ■ antitrust act," the Valentine-Stewart act, which was passed a year ago and took effect July 1, 189H. On taking the testimony at Lima, Ohio, in the case i.if the Buckeye Pipe Line Comxiany, it was disclosed that they had a telegraph system, which, from a lawyer's standpoint, it was conceded, a company, doing a business of the nature they were, might have as an incident to tlieir business, taeing a means of commu- nication between their different posts; l)ut in the testimony it was disclosed that they were exchanging business with the Western Union Telegraph Company, had stated monthly balances, and were acting as common carriers of telegraph mes- sages in Ohio tor whosoever applied to them. It was testified that they had produced election returns and other news in advance of the regular- system. As they were exercising this franchise outside of their corporate authority, we made it an additional cause of action against them, charging them with exercising this iiUra rin'K power. We have taken testimony to establish this, which I can fur- nish the commission. Under the Ohio law it would i)e necessary for them to have a special chartpr for that class of business. It was disclosed and is in evidence, as claimed by the State, that in the relation- ship existing between the constituent companies (to which I will refer later), there were separate telegraphic contracts for the Ohio Oil Company, the Buckeye Pipe Line Company, and the Solar Refining Company, differing froni the contract they had with their customers or the public generally. They used the Western Union blank contract for the oi-dinary telegraphic service, but had a separate contract and u separate account with each of these constituent companies, raising the legal presumption, as we claim, from the evidence, that they have a system organized about as follows: STANDARD OIL COMBINATIONS: MONNETT. 299 THE ORGANIZATION OP THE BUSINESS DESCRIBED. They have a purchasing or '■ producing " company, the Ohio Oil Company, which makes the original contract with the owners. The oil is then turned over to the Buckeye Pipe Line Company, known as "the crude product" company, which, in conjunction with the other pipe line companies, owned by Standard people, makes a complete system, and which, as we understand it, constitutes a single system, the Buckeye Pipe Line Company having the Ohio field, but doing business in Indiana als(j, which, subsequently to this suit, they turned over to the Indiana Pipe Line Company, also one of the constituent companies of the original trust combination. Then from the '■ crude product " or transporting department, with its telegraphic system, connected with all departments and all pipe lines, the oil is transferred to the respective refineries which are at Whiting, Ind., a suburb of Chicago, at Cleveland, Ohio, at Lima, Ohio, and at Parkersburg, W. Va. The Buckeye Pipe Line Company delivers the crude oil to the refineries. The refined product, the kerosene and the gasoline, is transported to dealers and cus- tomers through another constituent company, the Union Tank Line Company, which has a system of tankage stations, i. e., distributing points, such as county seats, and cities of from '6,000 to ."),000 inhabitants and upward. They have con- tracts with railroads, which yon can go into more fully than we have, and which will disclose the nature of the relationship to the railroads. This company gets a rate for their tank line, in shipping to the tank stations by the carload or train load, with an allowance for loading and unloading their own product, while for barrel lots and part carload lots the rates vary. According to the trust investi- gation of Ohio the charges for shipping by part carload lots are as much as 400 per cent of the charges for shipping in carload lots and delivering at tank stations by the Union Tank Line. THE POWER OF THE TRUST DEPENDS UPON ITS CONTROL OF THE TRANSPORTATION SYSTEM. The state claims this whole system of transijortation to be an advantage which the Standard Oil Companies have as shippers, and by means of which they defeat competition. In other words, the secret of the power of the Standard Oil Trust wUl be found to be the discriminations or favors that they secure by controlling or monopolizing the transportation of the crude product and the discriminations they receive by various devices in transporting the refined oil, e.g., the discrimi- nating rate in favor of carload lots and train loads, with allowances for loading and unloading their own product. When other shippers adopt similar methods, the Standard invents still other methods to evade fair competition.' Q. You understand this discrimination to be, in spirit at any rate, a violation of the interstate-commerce act? — A. The interstate-commerce act applies to inter- state commerce; I refer to State commerce, namely, to Ohio and Ohio roads. On examination you will find the railroads are permitted to give a different and more favorable rate for carload lots or in tanks than in barrels. The argument that they adduce is that the return of gasoline barrels contaminates all other ship- ments: that they can not ship any other freight in such cars. If you examine the freight charges in cases where a competing pipe line has been constructed along a railroad, that formerly had a fixed rate, you will find that instead of the com- petitive pipe line which parallels the railroad lowering the price, it has abso- lutely raised it, showing that the independent shipper is discriminated against. He can not compete because rates have been raised, and he must pay their price if he ships through the pipe line. ORGANIZATION OF THE TRUST. Starting with the Standard Oil Company of Ohio, shall I explain how it entered the trust, and give the names of the other constituent companies, with the capital stock of each? . ,^, Q. Have you also the dates of the organization of these different companies, with thenamesof the leading officers ?— A. Yes: I can furnish them. The Standard Oil Company of Ohio was organized originally the 10th day of January, A. D. IHTO, and is commonly known as The Standard Oil Company. It had $1,000,000 stock. It increased that stock the 13th day of February, A. D. 1873, to $2,500,000. On the 13th day of March, A. D. 1875. it increased its capital stock by State authority to S3 500 000 It remained in this condition from 1875 to the 3d ilay of January. A. d". 1883. It had 35,000 shares of stock at a par value of slOO a share, which would make the par value of the total .83.500,000. ' Compare Mr. Archtold, p. 543. 300 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Mr. Rockefeller's testimony is ambiguous as to whether they transferred the stock directly to the Standard Oil Company of Ohio first, or whether, as owners of the stock, they transferred that to the trustees of the Standard Oil Trust; but in anv event all the stockholders agreed to the trust contract of 1S,S3. Two days afterwards they modified it. The company in Ohio had originally 9 directors of the Standard Oil Company and they were afterwards reduced to 7: the 7 continued to vote the 9 shares. The theory of the Standard Oil Company was that a cor- poration could maintain its existence by 7 directors holding each a share of stock. They did this to comply with the statute. Seven directors could elect a president and 'secretary and necessary officers, and the i-emaining stockholders would be at liberty to assign their stock to trustees. Othei- companies did the same, thus organizing and maintaining a trust. In other words, they argued the corporation would not be responsible for the acts of the individual stockholders, and that theory ran through the entire organization of the trust; viz, that stockholders could" act independently of the corporation. The suit was begun by my prede- cehH(5r, General Watson. The ;W,99:j shares had passed out of the hands of the stockholders into the hands of the 9 trustees. THE CONSTITUENT COMPANIES. There were three classes of companies that entered into the combination. Fiist. they had fill the stockholders and members of the following 14 companies; The Acuie Oil Company (New York); Acme Oil Company (Pennsylvania); -Vtlantic Refining Company of Philadelphia: Bush & Co., Limited; Camden Con- solidated Oil Company; Elizabeth Acid Works; Imperial Refining Company, Limited: Charles Pratt & Co.; Paine, Ablett & Co., Limited: Standard Oil Com- pany (Ohio); Standard Oil Company (Pittsburg); Smith Ferr>' Oil Transporta- tion Company; Solar Oil Company, Limited; Stone & Fleming Manufacturing Company, Limited. All the stockholders and members of these corporations and limited partnerships were required to sign an agreement to turn in their stock (exoejit enough to preserve State organizations), as I have explained to you. A second class of companies consisted of the interests of W. C. Andrews, John D. Ai'chbold, and a long list known as the individual owners, who signed the original trust agreement. A third class consisted of corporations. '^5 in number, which assigned a (.-ontrolling interest in the coinijanies to the trustees. They were: The American Ln bricating Oil Company; Baltimore United Oil Company; Beacon Oil Company; Bush and Denslow Manufacturing Company; Central Refining Com- pany, of Pittsburg: Chesebrongli Manrrfacturing Company; Chess Carley Com- piiny: Consolidated Tank Line Company; Inland Oil Company : Keystone Refining Company ; Moverick Oil Company: National Transit Company; Portland Kerosene Oil Company: Producers' Consolidated Land and Petroleum Company: Signal Oil Works. Limited: Thompson & Bedford Company. Limited; Devoe Manufac- turing Company; Eclipse Lubricating Oil Company, Limited; Empire Refining Company. Limited; Franklin Pipe Company, Limited; Galena Oil Works, Limited; Galena Farm Oil Company, Limited; Germania Mining Company; "Vacuum Oil Company: H. C. Van Tine & Co., Limited: and Waters-Pierve Oil Company. These 39 companies, with the long list of individuals, are all that entered into the original Standard Oil Trust; The respective stockholders, part- ners, and individuals, on an appraisement agreed upon, received new trust cer- tificates for their proportionate interests in the stock or assets transferred to the trust. APPRAISEMENT OP TPIE BUSINESS OF THE C<.>NSTITUEXT C(),'\IPANIES, <,>. Will you tell us, first, how this appraisement was made and what its basis was?— A. "Well, the consideration for the tran.sfer and conveyance of the money, property, and business of each of Hio Standard Oil Companies was trust certifi- cates of the Standard Oil Trust, issued by the trustees of the trust, eijual in par value to the appraised value of the money, pr(.pe]ty, and business so transferred. The stock was to be delivered to trustees jirovided for in the trust .iig'eement and thei]- successors, and no stock was iwer to be issueil by any of the contracting companies except for money, property, or business equal at iea,st to the par value of the stock so issued, nor was any stock issued by any of said companies for any pni-pose, except to the trustees herein provided for, to be held subject to the trusts hereinafter specified. There wa.s not any watered stock. They entered the trust at the actual app}-iiiscd value; the appraisers were interested men, and it would have been of no advantage for tliem to iufiate it. They attempted to get actual value, and on that basis the\' issued tnist certificates. STANDARD OIL COMBINATIONS: MONNETT. 301 Q. Probably the selling value at ordinary sale? — A. It was placed on the income value— its selling value. The trust agreement provided for 9 trustees to be elected. The first three were John D. Rockefeller, O. H. Payne, and "William Rockefeller, and they were elected to hold office until the first Wednesday of April, 188.-). The next three were J. A. Bostwick. H. M. Flagler, and W. G. Warden, to hold oflfice until the first Wednesday of April, 1884; and the next three, Charles Pratt, Benjamin Brewster, and John D. Archbold. to hold office until the first Wednesday of April, 1883. The trustees were thus a continuous body. In the beginning there was one-third for 3 years, one-third for 3 years, and one-third for 1 year, who held office until their successors were duly elected and qualified. The 39 original companies were subsequently merged into 20 companies. A list of the 20 companies and the capital stock, the nominal capital stock as they now exist, is about as follows: Companies Anglo-American Oil Co.. Limited Atlantic Refining Co Buckeye Pipe Line Co Eureka Pipe Line Co Forest Oil Co Indiana Pil^e Line Co National Transit Co Xew York Transit Co Noi-thern Pipe Line Co Noi-tli western Ohio Natural C-ras Co. Ohio Oil Co Solar Refining Co Southern Pipe Line Co - South Penn Oil Co.. Standard Oil Co. , Indiana Standard Oil Co., Kentucky Standard Oil Co., New Jersey Standard Oil Co. . New Y ui-k " Standard Oil Co.. Ohio Union Tank Line Co Capitalization twenty corporations . Excess.. Appraised value. 913. Ml. 49 941,(«'<.1.5 547.(1.1.5.16 r,2S. 813. 11 014,053.91 79B,71;J.97 H99.3(KI.OO 7n7,(ili7. 00 390. 7611. 00 X'HO, 37S 04 711.; 93 87 27!). 018. 28 031,6.54.87 o;».,518 61 11(14.800.78 083,943 3(1 772. 1.SO. 29 426.014.72 057,187.41 Capitaliza- tion. 131,6:31,312, H3 103,233,701). (Kl .So,0(X),flOO 5, 000, 000 10, 000, 000 .5,000.000 .5, 500, 000 1,000,000 ;;5,453,200 .5,000,000 1, 000, 000 3, 278, .500 2, 000, 000 .500, 000 5,000,000 3. ,500, 000 i,eoo,o(« I, 000, 000 10, 000, (WO 7,000,000 3,500 000 3,500.000 19,:W7,613,63 The capitalization of these 20 comxmnies i.s ?:102,23:;.700: the excess of value over and above their capitalization at the date of this inventory was 819.3'.); ,612.6a. THIS IXVEXTORY BASED UPON THEIR OWN TESTlMaS''i'. Q. Will you make it clear what you have based this inventory upon nud who took the inventory? — A. It was taken by the representatives of the trust certifi- cate holderi-, I think. Q. (By Mr. North.) On what basis was that ;ippraisai made: do you know that?— A. I asked Mr. Rockefeller the followin.L; quostion: '-Give the .surplus money in the hands of each and every constituent company, corporation, and limit(3d partnership as represented by trust certificates of the Standard Oil Trust on or about January 1. 1892, and how much after the pa.yment of their last divi- (iends; stating when .such dividends were declared and paid and the total amount of each, and 'whether said dividends were turned over in each and every ci.isc to an official representing the Standard Oil Trust." And this was the answer he gave: " I have not in my possession or power (l,U;a showing the surplus money in the hands of each and everv cimstituent company, co-.i)oration, and limited partner- ship, as r(iiresented by trust certificates of the Standard Oil Trust on or about January 1, 1892, nor the amtnmt of such surplus money in their hands after the payment of their last dividends. During the year 1892 a careful inventory and appraisement was made of all the asfiets of said compaines, and i,Ue result was found to be as follows:" (Th- above figures are taken fr.om this complete answer.) , . . , „,. Q. That was their own appraisal?— A. That was their nwn appraisal. We were obliged to take that, as they refused to produce their books. There is a mat- ter now pending before the c(3urts of Ohio whether or not it invades constitutional privileges if they are required to disclose their books for such purp: ises. We have asked for the books, or original testimony, so far as it bears ripon our litigation. 302 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. DIVIDENDS AND THE VALUE OF THE TRUST CERTIFICATES. I then asked for the last dividends of said companies, prior to November, 1897. The copy of the record of the Ohio supreme court proceedings, that I leave with you, will give you the list of the companies and amount of dividends paid by each. Some of the companies pay quarterly dividends, some annual, and others, appar- ently, have declared no dividends for the last year. LIST OF DIVIDENDS. The last dividends of said companies prior to November 9, 1897. were as follows: Anglo-American Oil Co.. Limited, June 15. isn:_ .$506,480.00 AtlanticBeflmngCo.,Mar. 15. 1897 1,999,600.00 Buckeye Pipe Line Co., Sept. 15, 1897 3. 999, 780.00 Eureka Pipe Line Co., Sept. 15. 1897 .599,868.00 Forest Oil Co., Oct. 30,1891 387,100.00 Indiana Pipe Line Co., Mar. 15. 1897 999,450.00 National Transit Co.. June 15, 1897 2, 545, 475.00 New York Transit Co. , Mar. 15, 1897 1, 999, 600. 00 Northern Pipe Line Co., Sept. 15, 1897 333,344.25 N. W. Ohio Natural Gas Co., Sept. 15, 1897 39,497.30 Ohio Oil Co., June 15,1897 999,887.50 Solar Refining Co. , June 15, 1897 147, 334. 50 Southern Pipe Line Co., Sept. 14, 1893 300, 000.00 South Penn Oil Co. , June 15, 1897 3. 498, 900. 00 Standard Oil Co. (Indiana) , Mar. 15, 1897 . . - 699. 300.00 Standard Oil Co. (Kentucky) , Mar. 15, 1897 1, 998, 000. 00 Standard Oil Co. (New Jersey), SeiJt. 15. 1896 3,499,775.00 Standard Oil Co. of New York, June 15. 1897 1, 749, 725. 00 Union Tank Line Co. — no dividends declared. No dividend, the company claims, has been paid by the defendant company since the distribution of surplus made on March 17, 1893. Prior to August 5, 1891, the defendant company was the owner of a large number of tank cars, most of which had accumulated under the management of the trustees, which were rented to other companies. Its stockholders and directors determined that it should dis- continue the transportation business, and on August 5. 1891, the defendant com- pany sold its tank cars to the Union Tank Line Company, and received in payment therefor the sum of ,$3,500,000. Of this sum, on March 17, 1893, it handed over to the trustees .$3,319,540 for distribution by them among the holders of trust cer- tificates, this being the distribution referred to in the answer filed by this com- pany, and. the company claims, the only distribution or payment made by the defendant company to the trustees since the former decree of this court. This sum, or the balance remaining thereof after settlements of contracts, agreements, and accounts by said trustees, as shown in their resolution of May 16, 1893. was distributed to the holders of the trust certificates. The surplus since accumu- lated in the hands of the defendant company amounts to $700,000, which is invested in Government bonds. The answers to the preceding interrogatories are all we have to show to whom, in every case, dividends were paid. They were paid in each case by the company declaring the same to its stockholders'of record, the liquidating trustees receiving dividends from companies other than this defendant ujion that portion of the capi- tal stock of the said several companies which is held by them, awaiting reissue to the dividend owners thereof on surrender ol trust certificates, Q, (By Mr, Jenks,) They are not all quarterly?— A, No," Q. Can you give the distinction? — A. I can not give you the distinction. IwiU furnish you with a list of the entire dividends, at the last payment, including the quarterly, which amounts to .something o\i^r $34.000,000. ' According to that, the value of trust certificates is to be estimated at about 480 or 500 per cent, and since they have it in their power to control the retail price of oil, they can, by rais- ing or lowering it, make a dividend at about what they please. They have raised the retail price of gasoline and oils at noncompetitive points since this suit was instituted, and it has the effei^t of increasing the value ojf their trust certificates, lean give you the dividends that have been declared since 1893. Q. Could you furnish us the jirices at conq)etitive and noncompetitive points?— A. Yes; I will do that later. Just prior to the date of General Watson's decree they organized a Union Tank Line Com])any, and they took out of the business STANDARD OIL COMBINATIONS: MONNETT. 303 of the Standard Oil Company of Ohio the assets formerly ijsed in the transporta- tion of the refined products," amounting to §3,500.000, so that these constituent companies now have their respective departments. As I narrated in the oijeniii;^- of my testimony, although substantially the same men are in control, the com- panies have different functions. On March 17. lyti'3, they turned over to tlie trustees of the trust for distribution, after the decree of the court against the trust (which is one of the things we claim to be a violation of the order of the court) the §3,500,000 assets so acquired; and that was distributed among the holders of the trust certiticates after the courts ordered them to withdraw from the trust. They were interrogated firrther as to what they have since done with the accu- mulations of the Standard Oil Company. They have attempted to account for their accumulations by charging off in profit and loss accounts by way of depre- ciation in the plant. Tliese figures I can furnish you. Mr. Squires claimed (he refused to produce the books) and gave as his conclusion February 7, 181)5. that $330,019.86 was charged ofi' for depreciation of plant December 31,1894, and on or about May 13. 1896, they charged off .§1.200,000 more for depreciation of plant. They hold §700,000 in Government bonds. Q. Is that amount charged off for depreciation supposed to include the dismantling of any plant they had purchased and x)ut out of operation? — A. No. The Stand- ard Oil Company, as a " going " concern, had accumulated assets all these years, according to our theory. They only redeemed 51 and a fraction per cent of trust certificates, or enough to have the control, and they continue as they always have.' These Standard Oil trust certificates are still on the market, and are nourished in some way, or they would not be paying these trust-certificate dividends. The other 19 companies must at least be nourishing them. The Standard Oil Com- pany of Ohio had to account for the distribution of its income. It had this theory, viz, that it has earned nothing since the decree, but will not produce the commer- cial books to corroborate it. BOOKS BfRNED BY THE T1«;ST.- Q. How about the charge of burning their books? — A. We adjourned on the night of February 15. on Thursday, and they were required to appear before the court on the following Tuesday to show reason why they should not abide by the order of the master and the decree of the court and produce their commercial books. We received an anonymous communication that they had burned their books. We snbpu?naed certain parties and had them testify as to the fact. The information to the State, after following up the matter. w;is that they had burned 16 boxes of books. I give you Mr. McNirney's testimony toucliing upon the subject. Attorney-General Monnett then read extracts from the testimony of Mr. John McNimey as to the burning of the books. The direct examination of Mr. McKir- ney in full is as follows; John McNihxby, of lawful age. being liy me first duly sworn, as hereinafter certified, deposes, and says as follows; Q. (By Mr. Monnett.) State your name and residence to the notary.— A. John McNirney, 85 Oregon, Cleveland. Ohio. Q. What is your business. Mr. McNirney? What company are you working for?— A. The Standard Oil Company. Q. How long have you been working for chem, and what time?— A. Three years next September, as car builder and repairer. Q. On what street is their car-building works?— A. On Broadway. I beheve. Q. Where are the general offices of the Standard Oil?— A. As I understand, on Euclid avenue, what they call the Standard block: and they have got another general office for the shop on Broadway. . t, t Q. Then part of the works is on Independence street, is it not?— A. I beJieve it is. Now, I don't know anything about that. I know that the v.-orks where I work is on Broadway. Q. In the car shops?— A. In the car .shops; the hill shop. Q. You may state whether or not you were called, on or ab(jut Saturday the 19th of November, to the general offices to do any work in the way of removing boxes or books, or anytiiing.— A. Yes; I was. ^, e ^ O You may state just what that work was, and commence with the hrst. What time of' day did you get there?— .V. We got there about U o clock m the °O^What was the first thing you did? What did you help do?- A. The first thing we did was to lower a lot of books from tne fifth story to the ground floor. 1 See Mr. Arrhbold, p. 574. '' Compare the te.stimony of Mr. Archbold, p. 543. 304 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Lower them? — A„ I didn't say books; I say boxes. I don't know what was in the boxes. To lower a lot of freight boxes — supply boxes. We call them sup- ply boxes. Q. Did you help pack the boxes or anything? — A. No, sir. Q. 'Whom did you lower them to? What teamsters, if you know any of them?— A. There was a teamster there, but we was going to take the books — -I say boxes- out in front; but, as I understood, the janitor objected and said we must not take them out in front; we iiuist take them out in the rear of the building. Q. You lowered these boxes with a tackle from the rear window? — A. No; on the passenger elevator. Q. Y(.iu towered them with that? — A. With that; yes, sir. Q. What was done with them aftei' that? What teamster? — A. We took them up again. When they objected, we took them upstairs again. Q. Then what was done with them? — A. Then we lowered them from the back window down in the yard in the rear. Q. What kind of a device did you use to lower them with? — A. A tackle. Q. What teamsters, if any, gijt them? — A. I could not tell you. I could not swear to the name of the tedjuster. I know him, but in our capacity we don't t'ome in contact with the teamsters very much. Q. Was Edward O'Hearn one of them? — A. I could nut swear that was his name. I would not swear that was his name. I know him personally, but I don't know his name. I meet liim every day, but I don't know Avhat his name is. Q. You would know him if you haw him? — A. Yes. Q. A black-mustached man, about your age? — A. An Irishman. Q- A little heavier set?— A. Yes. sir: I would know him if I saw him again. I ^et.' him every daj'. I don't know his nam.-. Q. Was there any other man assistiii;;? — A. Yes, sir. (^. Who assisted you? — A. Moran. 'rj. Morau; what is his business? — A. He is a car builder and laborer. Q. Do you know a man by the name of Gabeline? — A. Yes; 1 know him. C^. Did he assist yon? — A. I believe he was at Q. Where was he; at the offices or the carworks'? — A. At the general offices. Q. Do you know a man by the name of Shafer? — A. Yes. Q. Was he assisting in any way? — A. I believe he was there, too. Q. At the general offices? — A. At the general offices. Q. What did they do? — A. They assisted to lower the boxes. Q. After they were removed and taken down the tackle, then where were they taken to? — A. I believe they went to the warehouse. Q. Did vou ever afterwards see them; and if so, what did you do with them? Did you atcer that see the same boxes? — A. I siiw the books; I don't swear they are books, bp'-ause I don't know what was in the boxes. Q. Where were they when you saw them the next time — the same boxes?— A. In the warehouse. Q. You mp.,y state . then, if yi m had anything to do Vv^ith the i ijieni ug or burning any books about that time. — A. Yes. sir; we did burn some of those books nest Monday. No; we didn't burn them all; I don't think we liurned all we took out. I did not keep no track, and wasn't interested, and clon't know how many boolcs we burned. Q. Did you have more than one burning; were you at it more than once?— A. Yes, sir; twice. The first lot we burned in the car-shoij furnace. Q. What sized books were those? — A. Large and small. Q. Give the size of the biggest ones, the tliickness.— A . Thathigli [indicating]. Q. That would be Ji f(H't high?— A. Well. I don't know. I say about 30 inches. tt|. The books were about Oo inches?— A. TIp^ chest about '^0 'inches, and tliey come U[i to the top. Q. About how thick were tli.ey?— A, All sizes; I didn't i ay no special ;itte)ition. We born(-d some big box^s and some sjiiall ones. I woaldn't sv>'oar how big they were. Q. You held this way: jibout 8 inches high and li inches wide.— A. We didn't p;iy much attention, because wc! had to get them inthere quick. I know they were iarge, heavy 'oooks. almost as much as a man coulil lift, some of them; what I call ledgers — lai'ge books. Q. Didyiiu burn up loose papers?— A. Yes, sir; we burne saclis. Those sacks were 'all letters: copying books, I sliould think, or something like that. Loose papers, ^^'aste paper, I say. STANDARD OIL COMBINATIONS: MONNETT. 305 Q. Letter-press bodks and letters and waste paper?— A. I should sav waste paper. Q. How many chests were there originallv. about: do yon remember how many made a load?— A. Sixteen, I believe, made a load; 16 chests. Q, At the furnace, who helped yon throw them in? — A, Moran. Q. What is his position?— A. Car builder and repairer. Q. What is his first name, do you know?— A. 1 couldn't tell that; vou know, although I know him 3 or H years, yet I don't know his name. We work with them every day and don't know their first names. Q. Is he your boss':-- A. He is a young fellow: he used to cut bolts: he was a kid, about 30 years: he used to cut bolts. Q. Were there any of the books that were not burned that were concealed down there in that package or hid away? (Objected to.) A What I know— I don't think we burned all the books, because we took more than we burned, as far as I know. 1 don't know anything about that. Q. Who else about the offices up there— at the general' offices— assisted in this in any way besides Moran; do you know?— A. In the burning of the books? Q. Either at the offices or in the burning of the books; what other parties? — A. I don't Imow their names. Q. What part did Gabeline— did he help take them out of the boxes?— A. No: he didn't help to take anything out of the boxes. He did not know what was in the boxes. Q. He just helped move the boxes up at the offices? — A. Yes, sir; we were short- handed, and they sent a party from the car shop to assist us load the boxes at night. Q. Were the boxes themselves loaded at night, after they were taken down by the tackle'? — A. The boxes were locked when we went there — all nailed up and locked, securely locked; I don't know whether they were securely locked; some of them had no locks on. Q. You desci'ibed, if I understood you, as having taken them down, or a part of theol down in the elevator first, and then the elevator man . — A. The janitor objected, and v\'e had to take them up, if I understood that. Q. The reason you had to take them back again and he would not let you come down the front way. you had to take them out of the back window? — A. Yes, sir; that is the reason we had to lift them to the third story and lower them out of the back. We could have done very quickly if we could have taken the boxes in the front. Q. What street, then, was the wagon backed up on'? — A. There is no street there; it is a yard. Q. How many different teamsters do you think had a hand in hauling the stuff? — A. Now. I think there was about three; I don't know the name of the teamsteis; the first load I don't know anything about. They took the first out on Friday — took that up to the offices, and vv-e destroyed that load in the morning. I don't know who brought that load up. Q. Was it Saturday morning that you destroyed them'? — A. Yes; Saturday morn- ing, and O'Heam. I guess, was the man's name that took the 3 loads on Saturday night. Q. Were they the same boxes each time, and return the enrpty boxes'? — A. No, I would not say the same boxes; they have lots of boxes — any amount of them, hun- dreds of boxes. Q. What kind of sacks were those'? — A. Gunny sacks; common ones. Q. About how high would they be when they were full? — A. About that high [showing] . Q. About 3 feet high? — A. Potato sacks; what commissioners use for potatoes. Q. Gunny sacks, such as commissioners use for putting potatoes in? — A. Yes, sir. Q. The first time you burned them, about what hour did you commence burning them dov.'n there in the car shops? — A. I don't know about the hour; probably 8 o'clock. Q. Saturday morning'.' — A. Half past T or 8. Q. On Saturday morning was the first? — A. Yes, sir. Q. Then when did you commence on the second time? — A. We commenced then about — Monday we commenced about 10; maybe half past 10. Q. The same parties present each time?— A. Yes, sir. Now, not all the parties, because only 3 of us fired the pump-house boilers. Q. Why did you change from the car-shop furnaces to the pump-house boiler? — 306 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. A. As I nnderstood it, liecanse they put the steam down — the books would not burn. Q. How do yon mean — putting the steam down? — A. In the car shops they flre with shavings from the cooper shop and car shop; there is nothing but bones and shaving and small stuff goes iir there. Q. It don't keep a steady fire? — A. Yes; the shavings keep a steady fire; but when books went in they didn't burn rajjid enough to keep steam up, so the steam went down. Q. And then you had to go over to the other shops. What kind of furnaces have you at the second sliop? — A. Just a conimoii — I guess Sterling boiler; I don't know the name of the boiler. I know we fired the boiler from about 10 oclock, I gness, till half past 1 — we put these books in. Q. Large, solid books burn fast or slow? — A. I judge they burned kind of slow. Paper burned all right and kept up good steam. Q. But the heavy books in the first furnace practically put the fire down so low that yon could not run? — A. I don't know; but that is what I understood. Q. How far is the second furnace froxn the first one — the same building?— A. No; there is the pump house on the river, and the car shop is on the hill. Q. The last books were burned by the river in the pumj) house? — A. Down by the river. Q. Who all did you see up there at the general offices besides the two you have given? Moran is one yon have given and Gabeline is another. — A. He don't know anything about the burning of those books. Q. Moran helped you at the general offices; Moran helped you each place at the general offices? — A. Through the whole transaction. Q. Through the wliole transaction? — A. Yes. Q. From whom did you get your orders to go up to the general offices and do the burning? — A. The car-shop foreman. Q. That is this Mr. Moran?— A. No, Q. Who is the car-sliop foreman? — A. His name is George Fields; he is the car- shop foreman, or was at that time, because the master car builder was away at tha^t time, and he was acting as master car builder. Q. When did he give you these orders, with reference to the first that you started out: on the same day, on Friday? — A. What orders? Q. To go after these books, or to go up to the general offices? — A. Yes, he gave me orders to go up to the general offices and get these books. Q. About what time of day was that on Friday? — A. On Friday, I should judge, about half past 9 or 10 o'clock in the morning. We got up here about 11. I should say, as near as — I would not swear to the exact time, because I don't know, though it was before dinner time when we got up there; the clerks were all there yet Q. The clerks were all in the office yet? — A. When we got up there. Q. Was anybody in the office when you were moving these boxes out?— A. They were all in there — all the clerks. Q. Did anybody up there give you directions about getting them out other than Moran? Who gave you directions about where to get the boxes up at the offices? — A. They had the boxes tagged for distribution. Q. What places were they tagged to— to what places were you to take them?— A. Well, now, I couldn't tell that; I don't know whether they were tagged for the car hill shop, or just Charles Hogan, for distribution. Q. Who is Charles Hogan? — A. He is general snperintendent, as I understand, Q. Tagged to hiui. Where does Charles Hogan hold forth?— A. What is that? Q. Where does Charles Hogan have his headquarters, at the Broadway or Inde- pendence street shop?— A. I believe his headquarters is at Broadway. Q. What kind of a looking man is he?— A. A fi.ne looking man. Q. Black-mo ustaohed man?— A, No. He is a young man; he has got no mous- tachu at all; smooth -shaven, clean-faced; aot a very oldish man. He is superin- tendent. He can tell you more a))rint tlxose books than I can. Q. That is Charles Hogan? — A. Charles Hogan. Q. I wa". informed he could, hut we were not able to subpoena him yet. Q. (By Mr. .Ienks.) Yon believe these books that were burned were the ones you required Mr. Squires to produce?— A. That is the fair legal presumption from the tt'stiniony, crmsidering the size of the books, the size of the boxes, the nitm- bin-, the circumstances, and the refusal to produce them afterwards, although Mr. Kline in open court stated that they had not destroyed them, that they had them yet, and that they would not produce them on the reqiiest of the chief jnsti(;e of the court. They absolutely refused to produce them, and relied upon •it i " if- ! ■J •■$ -^ "^5 J>^-^ ^■ ..v:- ^^ V 'S, -■§ ^■^ $ I -,:; > ^ ^ ^t J: ■V^--^ < ■^ nV ?5:^^^N■;;^ "J ife^''* <»;'-? 'rr/ ,f ^ s -■; v. i^V ^ I* \ • -•> M V . < 2 s X r if/i X STANDARD OIL COMBINATIONS: MONNETT. 307 their constitntional privilege to refuse to auswtr. The exact testimouy as to the btirning of the books I will furnish you for your own couclusions. The only pur- pose in bringing it in here is to show you we are adopting their exiilanation at- to their profits, the way they distribute them, etc., the reason being that we du not have the substantive evidence which they keep from the public. Q. You have spoken of the trust certificates — perhaps you can furnish us a copy of those. — A. Yes: I also hand you this list of dividends declared by the Standard Oil Trust and the amounts. It is part of Mr. Rockefeller's testimony. DISTRIBUTION OF THE TRUST CERTIFICATES — SALARIES. Q. (By Mr. Phillips.) For what period?— A. Covering from 1893 to date, if you wish them. If you care to have it, I will furnish you a copy of a share of trust certificates that were issued to the original stockholders, Mr. Rockefeller receiving more than any other man. He received, January 1, 1882, for his stock in the Standard Oil Company of Ohio alone, 191,700 trust certificates. His inter- ests in the Standard Oil Comjiany of Ohio netted him in trust certifi<'ates alone, at that time, a par value of 1519,170,000, Mr. Rockefeller receives $.30,000 a year salary, as I understand it, from the Standard Oil Company of Ohio, which was the amount he received originallv as chairman of the trustees of the Standard Oil Triist. The trustees of the trust held 466.380 shares. They also held more rhanhalf of 3.j,000, about 33,814. M]-. Rockefeller seems to have held the majority of these, or the balance of power — that is, of the 17,500 shares he holds '.J.58,-1 shares. 3(R. ROCKEFELLER HAS ABSOLUTE ('(iXTROL. Q. That gives him, individually, absolute control'.' — A. Yes; it is a scheme whereby, when these 30 companies were once in the trust under the control of the 9 trustees, Mr. Rockefeller could control the trustees. It is practically a 1-man power for the whole organization, and when you look at it, he, as an indi- vidual stockholder, assigned to himself as a trustee, and then as a trustee assigned to him.self as liquidating trustee, which he is still. He has, with his henchmen, the power to fix his own salary and those of the trustees, and when sifted to the bottom I think it is a fair deduction to say that he has control. Q. (By Mr. Jexks.) If I understand you, he does not need the aid of his "hench- men?" — A. Not for part of these companies. Before a man could have his trust certificates reconverted into constituent stock and get out of the trust he would have to hold S66.000 worth. In other words, the men who hold the larger amounts and who are the trustees, are able to convert their certificates and still hold the balance of power in the 20 constituent companies, having the voting power now as they had before. They have, to all intents and purposes, the oppor- tunity, at least, to absolutely ccjntrijl the 30 compianies as much as they had before the decree: the decree has not bothered them except in bookkeeping, Q. Will you make it a little clearer how the organization of this company brings that" about? — A. I understand that the owners of the original constituent stock, in turning it all over to the 9 trustees, got in return a fractional part of the stock of every one ot the other companies. When they came to convert their trust certificates l:iack into coiistitr.i-'nt stock they did not own a distinct portion in any one co]npany. but a pnition in all the 3(i. They might have enough trust certificates to secure, we will say, 3 sliares in a large company and but 3 or 4 in anjr others, but not enough to secure more than fr:ictional shares in the small companies, from which they could receive no dividends, fractional shares not paying dividends.' Therefore, there is no inducement to persons holding trust certificates to turn an investment paying 35 per cent on their original purchase into something for which they can get nothing, viz, scrip or fractional shares. Such persons are forced to stay ih tlie trust, or hold trust certificates; but the larger owners can get theirs recon^-erted. and tlie>', being so few in number, and being trustees, are still in command. AiKlUNT OF DIVfr)E_sI>S PAID BY THE TRUST. Q. You stated that the holders of the trust certificates were receiving 35 per cent on these certificates. — A. I will give yoa the exact figures. I should say that the 973.500 original trust certificates only represents a part of them, for they had it in their power under this contract to issue practically what they pleased,'- December 15, 1898, the liquidating trustees, that is. Mr. Rockefeller, representing 1 See Mr. Rogers, pp. 583, 587. '■ Sye Mr. ArchboW, p. 543. 308 HEAKINGS BEFORE THE INDUSTRIAL COMMISSION. the Standard Oil Trust certificates, held their meeting ISTovember 3, 1898, at 36 Broadway, and December 15. ISiiS. adopted the following resolution: New York, December 15, 1S98. At a meeting of the liquidating trustees of Standard Oil Trust, held November 3, 1898, the following resolution was adopted: Resolved, That there be divided, from the income of the stocks still remain- ing in the hands of the liquidating trustees, a sum equal to three dollars ($3) upon each share of said trast: also a further special sum equal to four dollars (§4) upon each share of said trust, payable on and after December 15, and that the transfer books be closed from o p. m., November 16, to 10 a. m., December 16, 1898. ■ Enclosed please find check on National City Bank of New York for your pro- portion of the distribution . in act;ordance with the above resolution. No acknowledgment. (Signed? Wm. T. Wardwell, Assistant Treasurer . The following is the form of the check; No. A B 2'>-id. New York. December 15, 1S98. NATIONAL CITY BANK. Pay to the order of Geo. Rice forty-two dollars. Trustees to liquidate Standard Oil Trcst. By H. M. Plaqlee, §42.00. Treasurer. Being quarterly payments, these dividends would be at the rates of 12 and 16 per cent per annum , which would be nearly 30 per cent for that year on the origi- nal basis of value. According to this, 35 per cent would seem to be a fair deduc- tion. In 1892, after distributing §3,121,725 surplus, which they had on hand, among the holders of 97'J,500 shares, they distributed $3.21 on each $100 of sur- plus. On March 15, June 13, and September 15, 1892, they paid $3 a share upon the trust certificates. On May 20, September 15, and December 15, 1893, they Ijaid S3 a .share, and on March 15, June 15, September 15, and December 15, 1894, S3 a share. Q. (By Mr. Phillips.) Is S3 a share generally a quarterly payment on $100? That amounts to ,§3,000,000 per quarter, $12,000,000 per annum.— A. Their divi- dends at one place were given at $24,000,000. That included the dividend on stock. 51 per cent of the trust certificates having been turned back into stock, while 49 per cent are still held as trust certificates.' That is the dividend annually on the trust certificates. Q. Three dollars per share each quarter? — A. Yes. On March 15, 1895, they paid $3 a share, less the income tax, which, I suppose, was returned to them; on June 15, 1895, they paid $3 a share, less 6 cents per share, in anticipation of the income tax, the income-tax case being then in the hands of the court; on August 21. 1895, they paid $3 a share, and on November 20, 1895, they paid $3 a share and $5 extra. The next quarter, March 17, 1896, they paid S3 a share and $10 extra. Q. That would be $13,000,000 in that quarter?— A. Yes: that quarter. On August 4, 1896, they paid $3 regular and $7 extra; on November 5, 1896, $3 regu- lar; on November 18, 1896. $3 regular and $2 extra; on February 17. 1897, $3.07 extra; on May 19, 1897, $3 regular and $7 extra; on November 17, 1897, $3 regular and $5 extra. That takes it up to the time for which I asked data. I have sum- marized here somewhere the total dividends paid up to that date. I think I can get that for you. I have summarized it in a statement to the court. salaries, etc. What the 20 constituent CI )mi]anies paid out to directors and their respective officers we have no means of ascertaining, except for the one Ohio company. It is probable their salaries run from $40,000 to $50,000 for the president of the larger companies. Of course, under the decree of the court, they have to pay these sal- aries through some other device than the trustees. They must now pay them through the constituent stock companies. Mr. Rockefeller, on cross-examination, said he recouves his income or dividends from his holdings, ,iust the same now as he did when they were in the trust, but in a different form. ' He receives them as holder of a certain number of sliares in the 20 companies, which he says are now resolved into constituent stock, while before that he received it in dividends on 1 aee Mr. Archbold, p. 574. STANDARD OIL COMBINATIONS': MONNETT. 309 trust certificates. Mr. Corrigan's testimony and the pleadings set forth that Mr. Rockefeller held, since 1893, a large block of these trust certificates as collateral security and was the beneficiary of the income for his protection. As I said, that was in a separate sirit, and will be found in the testimony of Mr. Corrigan. VALUE OP TRUST CERTIFICATES BASED UPON INCOME. The present value of the certificates based upon income is 500 times 972,500. As a prominent judge puts it: " There is no expert who is better qualified to testify as to the value of a plant than the shrewd manipulator and buyer in the open market," for he gathers all the information that governs the market. Consider- ing the fact that three-sevenths of the trust certificates have not been reconverted, ^ in connection with Mr. Rockefeller's testimony that he gets his interest just the same now as he did before, the present value of the aggregate stock of the com- panies and the trust certificates may be fairly estimated at $486,350,000, provided they have not issued, as they could under the trust agreement,' more than the original amount of trust certificates. If that is all of the trust certificates that are out, they would now be worth, instead of $97,350,000, their original estimated value, at least 5 times that amount; and if the constituent stock is worth, in the hands of the trustees or the holders, the same, being in a different form only, that would be the stock value. Q. (By Mr. Jenks.) Have you anything further in regard to evasions or profits that you can furnish? — A. No; you can make your deductions from these fig- ures, I guess. THE PURpHASE AND DISMANTLING OP COMPETING PLANTS. Q. Can you give us any information on the question of the purchase by the Standard Oil Company of competing companies and the dismantling of their plants? — A. The refining plant at Whiting, Ind. , has absorbed the business of the plant at Cleveland since 1893, making a fair deduction from Mr. Squires's testi- mony that they charged off the 3 items I have heretofore given you. They have reduced their ijien more than two-thirds in Cleveland and transferred them to other fields. If you will call Mr. D. W. Brown, of Cleveland, and Scofield, Shurmer & Teagle, you will get the data on this subject. I am only giving the conclusions. After establishing the new plant at Whiting, they got a freight rate to southern fields, e. g. , New Orleans, of 23 cents a barrel, as against one of about 33 cents and a fraction from Cleveland; in other words, Scofield, Shurmer & Teagle, compet- ing from Cleveland, were handicapped by the difference between 33 cents and 33 cents in freight rates, almost 50 per cent more freight in sending to a distributing point in the South. The commercial wisdom of their establishing a plant at Whiting and shipping at a lower rate over the Illinois Central is very apparent, for no other competitor could start from Whiting or ship from there. While they would not dare, under the interstate-commerce law, have a different rate for different people from Cleveland or from distributing points, they managed to get different rates by changing their refineries to noncompeting points.'' As to the dismantling of the plants at Marietta, I think I can give you the data from Senator Davis's testimony. They practically dismantled all the competing concerns there and at Parke^sburg, and left nothing but a burnt-out crater. The last one to go was the Argan Refining Company, which they could not dis- lodge because its owners, Mr. Rawn and Mr. Peabody, were the directors of the Baltimore and Ohio Southwestern Railway, and the oil trade was a source of large profit. One of the opportunities for discrimination in freight rates con- sists in the bookkeeping arrangements between the Standard Oil Company and the railroads concerning the price to be charged up against the roads for lubricat- ing oil furnished by the Standard. As they did not furnish the lubricating oil to the Baltimore and Ohio Southwestern under Mr. Rawn, they could not freeze out or exterminate the Argan Company; hence they bought the plant, paying $13,000 a year to remain idle, and are now dismantling it.=' They have taken up the pipe line leading to the plant. Although the Argan continued selling oil, apparently m competition with the Standard Oil Company, it was in fact the Standard Oil Com- pany's own plant. The Argan people get $13,000 annually, besides a bonus that was paid down. I think the plant is to remain idle for 10 years, but at the end of 10 years at the rate of the present disintegration, it will continue to remain idle. I advise you, rf you will allow the suggestion, to get ez-Senator Davis, of Mari- etta ■ he is a very intelligent gentleman and can give you the data with reference to the destruction of competing plants at that point. Mr. Peabody was the other 1 gee -p 543 2 See Mr. Westgate, p. 376,'middle: Mr. Eice, Mr. Page. 3 Compare Mr. Davis, pp. 351. .361; Mr. Avchbold, p. 544. 83A 21 310 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. man who had an intei-ewt in the Argan. They furnished the lubricating oil to the Baltimore and Ohio Notithwestern from the Argan. The Argan was able, with that advantage, to compete with the Standard, which could not destroy them. Q. Have you any information in reference to the prices paid by the railroadsto the Standard for lubricatuig oil?— A. No; I can not give -you correct data; you can get railroad men on that point; if you call Ira Rawn, of Cincinnati, you can get the information; Mr. Peahody died about 6 weeks ago. After the Corning field was opened up. above the Ma'cksburg field, they raised the transporting price of the pipe line to 17 cents. At 1? cents it was unprofitable for the owners of those fields to ship oil to Parkers burg or Marietta.' In gaining control of the transportation department, yoir will find, gentlemen, lies the secret of the main- . tenance of discrimination in favor of commercial trusts. TRAXSPORTATION COMPANIES EXERCISE PUBLIC FUNCTIONS, AND COULD BE CON- TROLLED. If Congress would enact lav/s, or if the executive officers would bring these companies before the courts, they could be punished, for it is to be remembered that the right of eminent domain can not be exercised by corporations except as granted to them. The right of eminent domain is authority for a corporation to take private proj)erty for public puri>i_>ses. If, after it is once so taken, the cor- poration having that governmental function vested in it were held down to the same strictness in its exercise that the Government holds all other of&cers exer- cising similar functions, there would be very few of these industrial combina- tions. It is a plain proposition that these trusts must necessarily link themselves with sovereignty, and it is entirely inconsistent with the fundamental principles of the Government that corporations so obtaining private property should use such property in any other manner than for the public good. If an assayer, or a man commissioned to coin money, who is only exercising a governmental func- tion, should clip the coin and make it light weight, and profit by the difference, he would no more be violating the principles of the franchise he is exercising, in a moral or commercial sense, than these men who take public projTerty, as a pipe- line company or a railroad company, for the purpose of a common carrier, which they can get only through power from the State, and afterwards use it for private ends. The remedy is simple; it is one in which the courts have never once fal- tered when it is presented to them. When a corporation exercising governmental functions, such as the right of eminent domain, does not return the contractual relation to sovereignty required of it, viz, that of a common carrier, its charter should be taken from it, or, if that be too drastic, the franchises it is now exer- cising should be taken away. Whenever a common carrier or railroad company undertakes to water its stock or to discriminate between one town and another, or whenever it undertakes to get advantage through a tank-line freight rate as compared with a barrel rate or other means of shipping, it could be easily made a ground for forfeiture; it is all under legislative control. It is a violation of the fundamental contract they made when they accepted the charter. It is not true that it is due to a difference in talent and ability that such men as the trustees of the Standard Oil Trust have been able to defeat their competitors; it is a matter of a criminal abuse of the commercial privileges ttiey have received. The fail- road company or the pipe-line company has no more right to abuse the power granted it by the State in its charter than the man who is coining money on con- tract for the Governnnait has to coin 50 cents of metal into a dollar; it is just as much a crime as the violation of any other governmental function exercised by an executive officer. GOVERNMENT SHOULD MAINTAIN COMPETITION. Q. Would you favor the regulation of raf es by the Government itself? — A. 1 have answered that. While I am not a believer in Government ownership, with the present limited civil service, I do say that the remedy is for the Q-overnment to maintain competition. The competition of giants with one another will regulate their conduct, but a pigmy can not compete with a giant. There is no one man so strong that, if the Government does not assist him, he will not find a competitor. Q. Is it your idea that the pipe line companies should be forbidden to discrimi- nate , or that the Government should hold the rates down to what is reasonable?— A. If a pipe-line company charges 20 cents , when it costs less than one-tenth of a cent a barrel per mile for shipping, it is an abuse of a governmental function, and the ' See Mr. Davis, pp. 352, 35.3. STANDARD OIL COMBINATIONS: MONNETT. 311 company ought to have its charter taken away for fxt-essive charges. Personi^ obliged to compete under such circumstances are like farmers wlm should have to pay So to S5 a load for hauling their wheat, while someone else has the public right of hauling his for a dollar. Q. Have you any specific suggestion as to how that rate could be held down? — A. The Cudahys, at Chicagci, would run a pipe line: they have lieen for years tiy- ing to get a pipe-line privilege in Indiana and Ohio. One of the independent men, of New York, said he would give S4'3,000 for 3 miles of line to connect ujj his lines with the seaboard. Wherever a common carrier is undertaking to thwart a com- petitor the Government oiight to interfere. If the owner of a public utility is obliged to submit his rates to open competition there will be no more oppression in that department than in any other. GtUOSS RECEIPTS AND PROFITS FROM THE BUSINESS IN OHIO. To illustrate, the Buckeye Pipe Line had a gross income in 1898, ending May 1, from the Ohio fields, as I understand it — and this is the sworn report of Mr. Theo- dore M.Tole— of about .s(),7r,3,094.64. Q. What is Mr. Tole's official position in comie(;tion with the organization? — A. He is called the tax agent of the Buckeye Pipe Line Company. He is of New York. You will find him also making reports for the other Standard companies, although these companies claim they are not a trust and have no connection with the trust. They have a facility of having the same tax agent and the same attor- neys and the same telegraph companies and other common agents, that give it a colorable union, to say the least. The gross receipts were s(j. ?(;;:!, 01)4.64. The uni- versal rate everywhere, except on oil right from the field at Corning, has been 20 cents a barrel. In 1897 their gross receipts, at 20 cents a barrel, were .^(3,800,83:!. 19. Their gross receipts for 1896 were .'5.5,941, .j67. 85. The total gross receipts for the.se 3 years are S19.49.j,4!I.j.G8 for the Ohio business. Counting the shi^jping price at 30 cents a barrel, the total amount received from the Ohio fields for 3 years would be 97,473,47.5 barrels, or over 30,000,000 barrels a year. This, based upon the gi-oss receipts returned for taxation, is the amount shipped through the Buckeye Pipe Line. The leasor gets 60 cents a barrel for one-sixth, of the oil, and at that rate the landowners received out of their Klondike of wealth, for the 3 years, 89.747,000. We have no means of knowing what additional royalties or sub- contracts they make. At the rate of S4 a barrel, the noncompetitive price of oil, the gross receipts for Ohio would be about .8130,000,000 a year. Q. This is refined oil you are speaking of?— A. This is the refined oil at their noncompetitive price of selling. They get 8 to 11 cents. I will assume in this that when the Buckeye Pipe Line Company give us the gross regeipts for Ohio business their oath is correct, and that they get 30 cents a barrel for all the Ohio oil shipped. The Ohio landowners, for the 3 years, receive a little over $3,000,000 annually. It ,takes about 4 barrels of crude oil to make 3 of refined, and the shrinkage of 1 barrel, or one-fourth, is made into by-products, such as parafiftn, axle grease, etc., for which they get as much as the refined oil,' so that they practically average, as experts tell me, S4 a barrel, making, at this time, about 8130,000,000 gi-oss from the Ohio product. '■' Figuring it in round numbers, all over 31 to 4 cents per gallon is net profit; it can be delivered at that price in Ohio. In fact, they cut it down to 4 cents a gallon whenever they have competition. They get 8 to 11 cents when there is no competition. The value of all the farm products of Ohio (I mean by farm products wheat, wool. oats, barley, live stock, etc.) taken from the tax-return valuations is between ,8r)3 ,000 .000 and 853,000,000. The oil combination's profits, if ourt deduction is correct, are about equal to the coni- bined incomes of the farms in the State. In other words, by their system of non- competition, consumers, on the one hand, pay that much more, and the producers, on the other, receive that much less than they should. They drive the producer and consumer that far apart. There is no secret in the refining of oil: there is no patent on shipping; it is simply in stealing the powers ( if the Government, thereby controlling transportation. The State is now seeking to take away the charters of such comijanies as abuse their powers and franchises in this way. BASIS OF THE LEGAL PROCEEDINGS IN OHIO. Our action is based upon the statutes of Ohio and upon the cases of Daroy v. AUein (Coke's Reports), and Richardson v. Buhl et al. (77th Michigan, 633;; the Salt Company against Guthrie (3.5th O. S., 666), and Emery r. Ohio Caridle Com- nanv (47th OS.). It is no new principle. That will lie the remedy. Under our Ohio law when a corporation violates its charter by iiHra i-ircv acts, or is exer- J See Mr. Archbold, p. .570. - t^ee p. 31.1, and Mr. Archbold, p. SU. 312 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. cising a franchise contrtoy to the statutes, the State revokes the charter, the courts appoint 3 trustees, who have the functions and powers of a receiver, who take charge of the business and wind it up and sell it to law-abiding investors. The iniquity of the Oil Trust in Ohio is for the owner or the one producing the oil and getting barely the lowest competitive price for it to be paying at the same time a trust price for the refined product; and it is no answer to say that a small number of people get the best wages because they are hired by the trust, when the great body of the people are contributing in receiving a mere pittance for crude oil. EFFECT OF THE STANDARD OIL COMPANY ON WAGES. Q. Can you give us any data regarding the effect of the Standard Oil Company on wages? You called attention to the fact some time earlier that it threw a great many people out of employment through the destruction of competing plants.— A. That yoti will get from men who have the actual data. It necessarily throws all the men out of employment when they dismantle a plant. Q. The specific data on this point you have not.yourself ?— A. I can give you the original testimony later, when it is printed; but if you will get Mr. Davis and Mr. Butts, of Marietta, and Mr. Rice, formerly of Marietta, they can give you the exact data and the losses. I have given you the facts concei'ning the Argan Com- pany. The trust shuts out all competition in the payment of wages, because while men may go into the oil field and buy oil they can only ship it thro ugh the trust's transportation department. There is no competition in selling, for there can be no competition where the Standard is the sole buyer. If you select an oil field anywhere in Ohio, you can not get to a refinery except through their pipe lines. It is true they furnish you a market, but if you do not take their price you can not start up; you can not refine; the moment you refine and go to ship you find yourself blocked; they will destroy your plant by reducing the value at a given point and raising it at noncompetitive points, so that they will be no losers themselves. I have a few statistics on the prices of oil at competing points and noncompeting points which I will leave with the commission if they care to have it. RELATIONS OP THE STANDARD OIL COMPANY AND THE PRESS. Q. Can you give us any information with reference to the influence of this company on public sentiment? It is asserted, is it not, that they control the press more or less completely? — A. Well, in view of the fact that some newspaper reporters are here, I presume it would not be a very wise thing to discuss that. The Standard Oil Company of Ohio, after this suit was begun, through Henry M. Apthorpe, of Cleveland, and Mr. Jennings, of Columbus, organized what is known as the Jennings Publishing Advertising Agency. At the time we took our testi- mony at Marietta we found several men who had received marked copies of cer- tain papers in Ohio making a fervid defense of the Standard Oil Company; and while they did not try to abuse the court, they were abusing the attorney-general and other officers of the court, which meant, in fact, the court. It was said that capital was being driven out of the State; that the Standard Oil Company was liberal in wages; that they had given largely to charity, and that they were also about to donate something to one of the State universities. I was handed a con- tract while I was examining a witness at Marietta, a typewritten contract, that they had negotiated the week before for one of the Marietta papers. Q. That is, to purchase the paper outright? — A. No; the earlier part of this contract referred to advertising the paraffin and other by-products of the com- pany, and then they had 6 or 8 lines which contracted for space on the editorial page, where their matter was to appear as news, and if it did not so appear, or there was any mark of advertising about it, the papers were not to receive any pay. For such matter as would be furnished them, by boiler plate and other means known to the newspaper world, they got from 30 cents in the larger cities down to 4 cents a line in the smaller ones, for ik^ws items; and then if the county papers were assiduous in defending the merits of tlie trust's charitable undertakings they would take thousands of copies of theiu and send marked copies to proper parties. K yon have run acr( )ss some of y( lur constituents who are being oppressed by the price (jf oil, they should be satisfied thoroughly l)y marked copies of Gun- ton's Magazine and the Sandusky, Ohio, papers.' Q. (By Mr. Phillips.) You do not mean to say that Grunton's Magazine is in favor of trusts, do you? — A. If you want to get the best, get Q-untou; I think Mr. Tole's speech was theve. A leading daily in the State has been having a great many articles in favor of trusts on one page, while on other pages appeared articles demanding antitrust legislation, although Ohio has perhaps as stringent a law as any State in the country. They were demanding more legislation and 'Soep.lKl; Ml-. Li«kwood,p. yiili: Mr. Rogers, p.. W7: Mr. Boyk-. pp. 4114.487. STANDARD OIL COMBINATIONS: MONNETT. 313 investigation. Now, you might say they imagined our trust investigation last winter was done to put off ultimate action. We find that investigations similar to this are very useful in enabling a legislature to get down to bed-rock facts, as in the short session of legislatures no committee can do what you are doing, and when legislation is backed up by public sentiment the law can be enforced. I have aimed not to be partisan in this matter, but I feel that the operation of some of the trusts in Ohio has been so against the average citizen that anything that can be done to relieve them ought to be speedily done. STANDARD OIL COMPANY AND POLITICS. Q. Have you any information as to attempted influence of the Standard Oil Company in politics, aside from what you have already explained and aside from any connection with the press? — A. Well, I expect it would not be advisable for me to discuss that. Mr. Harris lives in Ohio; he may give you the names of con- tributors; I suppose we could all give names of people we suspect collect these funds, but I do not want to testify on that.' Q. It may be that you can file official papers with us or give us transcripts of testimony in the case of the alleged attempt at bribery of the attorney-general of Ohio? — A. I can give you just what I file with the court, when the testimony is through. I shall be glad to give you an official transcript of whatever is taken. METHODS OF DRIVING OUT COMPETITION. Q. Can you give us any official information with reference to any other trust organization in the State of Ohio besides the Standard Oil Company? You have already spoken briefly with reference to combinations of insurance companies; can yoti tell us with reference to any others? — A. Before I leave the Standard Oil Company it might be interesting to the commission to speak of the means which they adopt for driving out competitors. Mr. W. H. Clark,- of Newark, Ohio, tor 7 years an employee of the Standard Oil Company in their retail department, would give, I think, full information to the commission on the subject. After he left their employ they arrested him, charging him with embezzlement: they only found this charge against him, as his testimony showed, after he commenced sell- ing independent oil for an independent company. He has had the same experience as the testimony before «ur trust committee showed that all competitors have. His sworn testimony is that he sold 4 grades of oil for the Standard Oil Company out of 1 tank: that he turned the faucet to the right for 1 kind, to the left for another: and that if that did not suit the customer he went to the front end of the wagon and switched the faucet there a little.* The Standard Oil Company cor- roborated that a little, except that they said they gave a higher grade of oil than that called for. if they did not have the grade desired, at the same price. That was their defense to it. They have a plan of sending agents around — I think competitors call them buz- zards — where there is competition, to follow up the competitor's wagon, take the nam of the customer and the amount of oil sold, and mail it to the central office of the division. A special agent of the Standard Oil Company is then sent out who fol- lows up the competitor, making tests. He will clean up the lamp of the customer of the competitor, make a test, and then leave their own oil of as high a grade as the competitor's. If they can not succeed in that way they then commence cut- ting rates, and the rates are cut until they are below a living price or until they have driven out the competitor. Then the man who is inspecting and following the competitor goes to another town where they have competition. When they have driven out competition in a given town the oil goes back again to the old price. They sold oil for 4 cents at Dayton, where they had competition, while at Urbana it was 8. These towns are but a short distance apart. You will find when you get experts upon it that they have not only had,the same grade of oil at different prices in the same town at the same time, but that they have had as much as 50 and 60 per cent difference m towns 30 miles apart. THE TRUST PROBLEM STATED BY LORD COKE. The experience has been substantially, I think, as Lord Coke put it in that orig- inal proposition. I would like that to go into my testimony. He laid down the proposition that every court from that day to this has substantially followed. I cite that case, which is approved, and which is a very good analysis for a com- mission or a court to go by. It is the old case of Darcy against AUein (Coke's Reports, Part XI, 84 b). He says: (1) " That the price of the same commodity 2 Pom^rr' tratimony'of W. H. Clark and B. A. Mathews. See also Mr'. Archbold, p. 544. 3 See Mr. Clark, pp. 331, 332, 338; Mr. Mathews, pp. 493-494. 314 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ■will be raised, for he who has the sole selling of any commodity may well make the price as he pleases." (2) "The incident to a monopoly is, that after the monopoly is granted the commodity is not so good and merchantable as it was before, for the patentee, having the sole trade, regards only his private benefit and not the commonwealth." (:i) " It tends to the impoverishment of divers artificers and others, who before, by the labor of their.hands in their art or trade, had main- tained. themselves and thii^ir families, who will now of necessity be constrained to live -in idleness and beggary." Q. (By Mr. North.) What is the date of that case? — A. It is an old case, two centuries old; it has been cited liy all our authorities. It is an analysis of the effect of trusts; you have the benefit of all the courts in England and this country who have followed that decision. POSITION OF THE ENGLISH COURTS. Q. Are there any analogous English cases? — A. Oh, yes; they commenced in Queen Elizabeth's time by the sale of franchises, by which one person could buy and sell exclusively all of one commodity; and in the case of salt and iron, where court favorites having exclusive control had become so rich and arrogant in dividing with sovereignty, the courts, independent of parliamentary acts and independent of precedent, revoked their charter, or individual franchise, for it was then called a franchise. Since then, if you look dovsm through the reigns of the Georges and Victoria, you will find that they have had parliamentary legis- lation and court decisions down to date against monopolies. Under some par- liamentary acts they have sustained a limited monopoly. In transportation you will find England has sustained what we call pooling, but under our decisions pooling is as obnoxious as any trust. The steamship companies have succeeded in getting a parliamentary act relating to pooling in rates that has been sustained. Q. (By Mr. Jenks.) In the Mogul Steam Navigation Company case? Q. (By Mr. North.) Have you any knowledge of the methods of the German Empire in that case? — A. No; nothing more than a text-book knowledge, the same as you have access to. You have access to all that. Q. (By Mr. Jenks. ) Can you take up the case of some of these larger companies that you have brought suit against? — A. "Well, I have brought suit against the brewery trust of Cleveland. v PRESENT STATUS OF TRUST LITIGATION IN OHIO. Q. (By Mr. Phillips.) Before passing to that, would you be willing to give to the commission the present status of the litigation against the Standard Oil Com- pany in your State? — A. The Standard proper of Ohio, as I said in the beginning, has a decree against it; it is an adjudication that it is a trust in Ohio; that it is a scheme or system whereby the stockholders or a majority of them entered into this combination, and that their act is the act of the company. The corporate fiction will be ignored when the acts of the stockholders accomplish corporate oppressions, and so far as this 1 company is concerned, which was only 1 party to the original contract, it is a denotinced contract. The violation of the decree, their failing to withdraw from the trust, is what the contempt proceedings were instituted for under the order of the court. We have taken the testimony of Mr. Rockefeller by interrogatories, also parol testimony of about two days, and the testimony of F. B. Squires and that of John D. Archbold. We took the testimony of numerous other witnesses outside of this suit. The company refused to give substantive testimony from their commercial books, and the officers so refusing are now before the court under a charge of contempt. The evidence is being printed and submitted, and the case will be heard probably in the second week of June. The punishment for ^^iolation of the original decree can amount to any fine that our supreme court sees fit to infiict commensurate with the wealth of the client or the defendant. It could amount to $700,000 if the court chose to inflict so much of a penalty. I think it is deserved, and I am maintaining that the punishment in contempt. Isesides a fine, could extend to taking the charter away without any further action. But as there is no precedent for taking a charter away as punishment in contempt, we have an independent action for that purpose against the Standard Oil Company of Ohio, charging them with additional offen- ses. Now the later suits were commenced for the purpose of forfeiture of the charter and the testimony taken in those proceedings is quite voluminous. We have a suit pending against the Buckeye Pipe Line Company under the charges I have related to you, with a large amount of testimony taken, and wit- nesses ai-e before the court for contempt for refusing to answer questions submitted to them. So that the executive department, the attorney-general's office, has ju'esented the testimony up to the point where the court will have to decide what they can be compelled to answer. Their defense is that it is STANDARD OIL COMBINATIONS: MONNETT. 315 violating the Federal Constitution as well as that of the State to compel them to disclose their acts of a private nature. We contend that when the sovereignty inquires into the acts of its creatures it does so in accordance with the visitorial power which is reserved to the State, and that it is simply a legal anomaly to say that the government can create a creature and then not control it, just as the national banking act permits the National Q-overnment to investigate the banks. So that if the contempt proceedings are heard in June — and I think they will be — and if we are sticcessf ul and the oflEicers of the company are held in contempt, they will incur the penalty. Mr. Rockefeller's testimony has dis- closed the amount, more than half, of the trust certificates that the stockholders have redeemed up to the filing of the petition, in November, 1897.' We should then be in this condition: We should have the transportation department for the crude petroleum of all the other companies that do business in our State under control, and it should be in the hands of a company that would permit competi- tion and an open and equal chance to all producers. Q. (By Mr. North.) As a resiilt of vpinning your pending suit? — A. Yes; the Standard Oil Trust or the Standard Oil Combination covild not exist without the control of the transportation of the crude petroleum; and this suit aims at the very heart of the trust, namely, the transportation department. It would effectually control it. It needs no further legislation. The National Congress can not regulate it so far as Ohio is concerned, because it is an Ohio creature, but so far as interstate business is concerned you would have jurisdiction over that. The remedy is primarily with the attorneys-general of the various States where the charters are granted. The attorney-general of New Jersey could solve this question in sixty days if he would take the charters away from New Jersey com- panies that are violating the public policy of the country, viz. that no creature ' of the government can use its power to the injury of the government or to the injury of the people. Q. Do you believe that the Federal Government can accomplish anything hrough the jurisdiction over corporations created by one State and doing business n a great many others? . WITNESSES IN TESTIFYING SHOULD NOT BE HELD TO INCEIMINATE THEMSELVES. A. You have been having that fought out in the Supreme Court of the United States in the Stock-yard Cases. They held they could not. The Addyston Steam- pipe Case, that is now being argued, is on the same jioint; but all corporations, like the Union Pacific, that have been created by the Federal Government and are doing interstate business, are reached by the Sherman antitrust act. Michigan, I think, has adopted an antitrust act similar, to ours this year, but introduced a clause like that in the interstate-commerce act, which provides that any witness testifying concerning a trust shall not be held to criminate himself, and the testimony so given can "not be used against him. The United States Supreme Court has said that this exemption can be given to a witness, and that any testimony that he has given is a privileged communication, the same as it would be before a Congres- sional investigation like this. That will prevent a witness from stating, as they do in case of material testimony, among other objections, that it tends to crimi- nate them. The Standard Oil Company refuses to give testimony now in Ohio because the testimony would tend to criminate the officers.- But that Michigan clause will forbid the witness from using that constitutional prerogative by making it a privileged communication, and all trust laws should contain that - Q. (By Mr. A. L. Harris.) Which State report is that oil case in?— A. Forty- nine, O. S. Whereupon the commission took a recess until 2 p. m. Washington. D. C, Tue>>iUiy, Maij IG, lS99—p. m. Hon. Frank S. Monnett again on the stand and examination resumed: Q. (By Mr. Phillips.) Does any member of the commission desire to ask any O (By Representative Ot.ien.) What did I understand to be the income, the nrofits of this trust in Ohio during the year?— A. The gross receipts from non- competitive prices would be 120-odd million dollars; and, takmgthe best mforma- tion as given before our various investigations that the refined oil could be delivered in Ohio for less than 4 cents per gallon, it would make a net profit on +TiP Ohio oil which is about 40 per cent of all the oil produced in the United States, in the neighborhood of .S50.000,000-$50,000,000 to $53,000,000.' 1 See Mr. Arolibold. p. 574 = See p. 307, top. ' Compare p. 311, and Mr. Arohbold, p. 544. 316 HEARINGS BEPOEE THE INDUSTRIAL COMMISSION. OIL CAN BE RETAILED IN OHIO AT 4 CENTS. Q. Did I understand you to say that it is your opinion that the oil could be sold in Ohio at 4 cents a gallon; that that is about the cost price of oil?— A. It can be retailed at 4 cents in Ohio at a profit. Q. At 4 cents? — A. Yes; 4 cents. There is testimony placing it at a point even below that. Is that too low a price? Q. That is the refined oil?— A. That is the refined oil. There was testimony that the cost was lower than that; but that is for the refined oil. Q. In places outside of Ohio there would simply be in addition the cost of trans- porting it? — A. Yes; the cost of transportation depends usually upon the arrange- ments from the distributing centers with the Union Tank Line Company. Q. Of course in some places it would be higher than in others? — A. At water points like New Orleans and New York, where they meet the competing water lines, the rates are much lower than they are e. g. , 150 miles north of New Orleans. Q. Is that true of such places as Detroit, Chicago, and Milwaukee?— A. Yes; as compared with such points as Duluth, Detroit, Milwaukee, Buffalo, and Cleveland, you will find, if you investigate any transportation department, that the rates on all commodities at inland points are much higher, as a rule. In other words, the low through-freight rate is made up by charging excessive local rates; and that is true of oil as well as of other commodities. The competition — from testimony before our railroad commission last winter — of the Canadian Pacific, a subsidized government road, compels our roads, in order to compete, to make a cheaper rate per ton per mile than they have had where they did not come into direct compe- tition with the subsidized railroad, and when tliey are practically below cost at a competing point they must make that up at inner shipping points, so that there is discrimination against inland States like Ohio, Indiana, and Illinois, so far as the local shipping is concerned, to keep up the general average. THE CHARGES OF BRIBERY AGAINST THE STANDARD OIL COMPANY. Q. (By Mr, Kennedy.) I should like to ask the witness whether he has any knowledge of attempts by the Standard Oil Company to interfere with judicial proceedings against them by resorting to bribery? — A, As I said to the commis- sion this morning, the bribery charges made against them are made officially in a complaint in the Supreme Court, beginning with General Watson, naming the Ijartles, and bringing the case down to myself, I will furnish the commission the data that we have alleged and set forth therein, with their answer and motion and my supplemental complaint, and when the testimony is taken, which will no doubt be kept in record, I will furnish the commission that also, if it is desired. To go into the merits of the pending case i do not believe advisable, ' It is a mat- ter purely with the court — a cpntempt matter — and will be furnished from our olfice just as it transpired, Mr, Vfatson, I suppose, will be ordered to testify before the commission at an early date, I can give you the testimony that was adduced, showing that they purchased competitors' clerks at times to furnish them, clandestinely, information as to the working of their competitors. At Cleve- land, Ohio, a Scofield, Schurmer & Teagle man was to get so much a month for furnishing their rivals information. He was to furnish the amount of oil shipped, the names of the customers, the cost price, and all the details every evening to the Standard Oil Company, These arrangements were made by John Squires and afterwards by F, B, Squires, according to sworn testimony, - Q, Were they successful? — A. The one I have described was partially successful. The man who was bought up in some way — I do not know how — was found out. At least, he gav-e up the information to his employer. Testimony might be fur- nished to you of the witnesses in reference to Jennings's advertising agency. That system is in vogue all over tlifi State; wherever they can successfully do so, they employ an agent or employee of a rival company." There is one instance where an employee at the railroad station was to leave the information at a given saloon near the depot, where the Standard Oil agent gathered it. They jump onto the wagons that are hauling oil and ascertain the destination of their rivals' oil. This information is all furnished to the Standard Oil offices. They get such information free from the agents of the railroads, if they can, and if theycan not they get it from others, I do not know whether you call it proper, and whethet a man is at liberty to sell his time and inform the Standard Oil Company of what is going over his railroad. I suppose there is no criminality about that; yet it would be liad ethics in a postmaster to permit such information to be furnished through his employees. The Squires's bribery of a clerk was the only case of hiring rivals' clerks to furnish the data. This was brought out in court in a contest between Scofield, Schurmer & Teagle and the Standard Oil Company. Mr. Brown, of Cleveland, can give you the names and further details on that subject. 1 See Mr, Archbold, p. 544, = See also p, 356; Mr. Archbold, p. 573, STANDARD OIL COMBINATIONS: MONNETT. 317 EFFECT OF PIPE LINES ON" FREIGHT KATES. Q- ,X,9^ spoke this morning about railroads in Ohio which have pipe lines paralleling them, and which are in league with the Standard Oil Company, to the detriment of independent small. producers. I do not understand that you were specific m regard to these railroads. Can you be now?— A. I did not put it in tliat way. I said that only as a deduction, viz, that where a pipe-line company had been run parallel to a railroad company— I was speaking of the conducting of the whole business— that the records would show that the freights for shipping oil were raised after they had a competitor in a pipe line. The natural result would ordinarily be that severe competition by the pipe line would bring railroad rates down lower than they were before. You can draw the inference from this that through some arrangement the rates, instead of being lowered by competi- tion in these particular cases, were raised. I am basing that, of course, upon testimony. Q. Do you care to say what railroads?— A. I think when that came out that the Erie was spoken of; the C. & M.. down by the Maxburg oil field, was one of the companies; and the Lake Shore, I think, was charged with that in a contest in which Virgil P. Kline was fighting the Lake Shore for discrimination in rates. REDUCTION IN THE PRICE OF OIL NOT DUE TO THE STANDARD OIL COMPANY. Q. (By Representative Otjen.) It is claimed by the Standard Oil people and their advocates that by their combination and improved business methods they reduce the price of the oil product. What is your information upon that subject? — A. That is the favorite argument of Mr. Dodd and others. Calico ran down from 7.) cents to U cents per yard, and they might as well have credit for it; and we used to haul wheat by wagon for ,$10 a load across Ohio, where they now ship it for a small fraction of a cent per ton per mile. I think that they, like every other producer, had to keep within reasonable bounds in their prices, hnt they have been profiting at the rate of millions out of noncompetitive rates, notwithstanding the price wa^ reduced. I think they are not entitled to the credit of the reduction because of improved methods or the great amount of oil discovered, any more than of the reduced price of any other commercial commodity. I present here a table which shows the Standard Oil Company's prices of kerosene and gasoline from tank wagons on the same day in different towns in Michigan and Ohio, where they had competition and where they had not. The figures for towns in Michigan are taken from the sworn testimony furnished our trust commission last winter. The figures for Ohio towns were prices in 1896. Names of towns and State. Conditions of trade. Price of kerosene Price of gasoline. Detroit, Mich Adrian, Mich Ann Arbor, Mich CUfford, Mich... Howell. Mich Grand Rapids, Mich . . Monroe, Mich Ealamazoo, Mich Bay City,Mich. Lansing, Mich Coldwater Mich Jackson, Mich- Saginaw, Mich Mount Clement, Mich , Marlette, Mich Muskegon, Mich Battle Creek, Mich Benton Harbor, Mich.. Cleveland, Ohio - Sidney.Ohio Dayton, Ohio. Xenia,Ohio Hamilton, Ohio Oberlin.Ohio -- Troy.Ohio .- Youngstown, Ohio Canton, Ohio Warren, Ohio - Gallon, Ohio Newark, Ohio... Competition No competition . do do do. -. Competition No competition. Competition No-competition . Competition No competition . Competition No competition . . do do Competition No competition. . Competition No competition. . Competition No competition . . ....do ....do ....do.. Competition ;;"do!!" ;";"; No competition . . .. .do.. Cents. .5.5 8 7.7.5 8 8 .5.5 7.5 6.5 7.75 ti 8.35 0.5 6 8 8 8 0.25 7. 25 4. 75 8.75 6.5 8 7.5 7.5 6 6 5.75 Cents. 7 6.25 8.75 8.5 6 10 6.5 318 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Since this table was first published, at Newark, Ohio, and since we took testi- mony exposing the Standard Oil Company's practice of charging 3 or 4 different prices for oil ont of the same tanks, competition has come in and the price of oil has been reduced to 4 cents. Q. It is your opinion, then, that the lowering of prices has been due to other causes than any which could be attributed to the Standard Oil Company?— A. The Standard Oil Company has taken advantage of each improvement for refining or handling oil. There was an advantage in getting an increased profit out of the by-products. They seized upon, as every other commercial institution would, the improvement that would bring profit out of the by-products. Then there has been a great improvement in methods of boring for oil, and the pipe-line sys- tem, which was originally introduced by other parties than the Standard Oil Company, has simplified the method of transporting the crude product. The tank-oar system has been a big improvement in saving the use of barrels. If the Government protects these giants, it must keep competition open so that they will compete with one another just the same as small men compete with one another. The eternal law of competition will prevent the excessive profits and greed that the Government does not seem able to prevent when a monopoly is fostered through exclusive grants in the transportation department. COMPETING COMPANIES IN OHIO. Q. (By Mr. A. L. Harris. ) What companies are competing with the Standard Oil Company in Ohio now." — A. There is only a limited competition; I think Scofield, Schurmer & Teagle; and a man by the name of Peter Shull. at Mansfield, has an independent agency, but only a limited territory. Scofield, Schurmer & Teagle originally had a contract whereby they were limited in the amount they were to sell to what wo^ild enable them to live.' Q. They have comijetition with more than that? — A. They have competition, but it is not a successful competition either with regard to the pipe lines or the tank line. Neither is competition in rates successful, according to the claims of competitors. Q. How do they get clear of the competition of the small companies in Ohio?— A. If you take the testimony of Senator Davis, you will get more accurate infor- mation on that question. I have to do more with the legal phases. One way is that which I have narrated. They have what their competitors call "buzzards,'' who follow up competitors, as I have explained; and they have had for a long time several rates, or various favorable rates, with the railroad companies. They soon became strong enough through this means to control a part of their terri- tory and to sell at a noncompetitive price, or a price high enough to enable them to establish a competitive fund. In this way and through their advantage in the transportation department they were able to undersell and run out small men. Q. Have they followed up the fields in Ohio? — A. Yes; I understand they have, which is perfectly logical so far as that enterprise is concerned. They have expert prospectors who are always on the ground the minute that a field is dis- covered. With their system of transportation, under their own control, they determine the value of the well and can get pretty nearly the lion's share for their portion . STANDARD OIL COMPANY CONTROLS THE PRICE OF THE CRUDE PRODUCT. Q. Even in the new field they substantially control the price to the producer of the crude oil? — A. Certainly, certainly; Senator Davis will give you an account of the plan whereby they shut out the producers in the Corning field by raising the freight rates 17 cents per barrel.^ They ship and condemn oil according to their own methods and fix the price according to their own standard. The oil market price, which is under the combination's control, is sent out from Oil City every morning to the oil fields. Q. Is there any indication at present of the old system of rebates that they once had? — A. On the Lake Shore? No; they have various freight rates. You will find, when you get into the transportation department, that favorite railroads get some advantages. They do not need to resort to the old-style rebates. They 'can charge their own prices, which amount to rebates, when they own the pipe line or own a controlling interest in the railroad. Q. (By Mr. Parquhar.) What portion (if the crude product of the United States does the Standard Oil Company itself own?— A. Well, according to the testimony, they control, either directly or indirectly, from 90 to 97 per cent of all the crude product. That, of course, I get only from the testimony: I have no means of gathering the data. ' Compare Mr. Arohbold, p. 545. = See p. STANDARD OIL COMBINATIONS: MONNETT. 319 Q. Of that 90 per cent, do you know how much they own? — A. How mnch they own? Q. Own. — A. No; I do not personally know. Ninety per cent is the estimate; i. 6., 90 per cent is the lowest estimate of the amoxmt they control. Q. That is, you mean by the expression "control" that they huxe control in. purchasing the crude oil from others. But the (luestion I asked was, Do you know, can you approximate, how much the Standard Oil Company directly tiwn of the crude-oil product? — A. No; I can not furnish you with that data. Q. Would you think it was half?— A. I should think it wiis a great deal more than that. Q. (By jMr. Phillips. ) That is. in the Ohio field?— A. I know it is a greater per cent than that in the Ohio field. If they have control of the transportation from a new field, they do not need to own any of it. so far as the producer is concerned. If they determine how much they are going to pay for it and are not satisfied, they can fix the producer's price at whatever it costs to produce, simply living- wages, and let him bore and worry over the cost of getting it from the rock. Q. (By Mr. Fabquhae.) As a business proposition, is it not in testimony that they only own 73 per cent of the whole product? Q. (By Mr. Phillips.) Does not that refer to the Pennsylvania and the Vir- ginia fields — to what is knovsm as the white-sand oil — and not the Ohio? ' EELATIOX OF THE STANDARD TO INDEPENDENT COMPANIES IN* FOREIGN MARKETS. Q. (By Mr. Faequhar.) I understand that, but you speak of their control. Is it not true that the independent companies, independent pipe lines and others, have and exercise a certain freedom in selling their oils in foreign markets and otherwise, independent of the Standard or independent of its practices? — A. When you come to the question of their relationship with the steamship com- panies, the interests they have in them, the arrangements they are enabled to make through acts of the British Parliament, the way they head off the Russian oil, etc., you will have to get ■witnesses that know. All you can observe is the result. There is a little book, recently published, which will explain the way they manipulate the English oil market and give you the details more accurately than I can give them.'- Q. (By Representative Otjen. ) What is that? — A. It was handed to me while Mr..A.rchbold was on the stand in New York. I do not remember the name now, hut can furnish it to you. Q. (By Mr. A. L. Harris.) Is Cook the author?— A. No; it was a little red book, a pamphlet about 4 by 6 inches, and contained all the testimony as to how they managed to control the Russian oil market, i. e., I mean prevent the Rus- sians controlling the English market, Q. (By Representative Livingston.) Whose testimony is it; I do not under- stand?— A. It is simply a pamphlet, prepared by someone, that is circulating in England. It gives the history of the Standard Oil Company's control of the English market. Q. I would like to know something official. Of course we can not receive that- book as an ofBcial statement.— A. I can not give you that book's source of information. Q. Which line of steamers is the Standard Oil Company interested in?— A. You can get hold of all the information relating to their entire system of water transportation, as w(5ll as their svstem of land transportation. There are wit- nesses that can furnish you that. If you get some of the independent oil dealers in New York that are competing by water (there are 8 or 4 firms down there) , they vsdll inform you. Q. (By Mr. Phillips.) Are they all independent refiners?— A. They are inde- pendent refiners; they have not their pipe lines quite through to seaboard.' They have been able to have their system of pipe lines, like the Standard, but they have competitors there. Of course there is no way of controlling a water highway except through the methods of shipping, viz, classification of freight. Q (By the Chairman.) Does any member of the commission care to ask any- thing further?— A. It would be impossible by means of my investigation to reach anything outside of what we came in contact with ourselves, but you will find it all There are people, or witnesses, who will furnish you that. 6 (By Representative Livingston.) Do the independent refiners have any arrangement with the transportation companies by which they can compete across the water with the Standard Oil Company?— A. That I can not furnish you- you can get that, however. I understand they ship oil "camel-back" and 1 Compare Mr. Boyle, p. 489; Mi-. Archbold, pp. 56(1, Ml; Mr. Lockwood, pp. 402, 403. 2 Compare Mr. Archbold, p. 546. 320 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. almost every other way in the old country. In some places they have a fair com- petition, and in others, we think, they do not. So far as Ohio and the United States are concerned the secret of the difference between their success and that of the others lies in their gaining control, as the testimony has shown, through the powers they receive from the Government and through the transportation companies. That is ray theory of it. COPIES OF STOCK AND TRUST CERTIFICATES. Q. (By Mr. Jenks.) You said this morning that you could furnish a copy of the trust certificate issued to the certificate holders under the old trust form. Can you also furnish us a copy of the stock certificates that they issue at present to the stockholders? — A. I think so. [Showing book.] Here is a lithograph copy of" the Standard Oil Company's capital stock certificate after they increased to $3,500,000. Do you care to have it read? That is one of the stock certificates. Q. Make that a part of your testimony with one of these other similar forms.-^ A. There are two of these here, and then I have here also a printed form of the trust certificate. They do not always put the exhibits in connection with the tes- timony, and you have to look for them at the close of the testimony. Here it is on page .51 of Part II of the Record in the case of the State of Ohio ex rel. the Attorney-Greneral v. the Standard Oil Company. Well, Mr. Rockefeller's own personal one is here, and Ihat will give you an idea. (Reading) — STANDARD OIL COMPANY. No. 301. Capital, 83,800,000.00. 9244 shares Incorporated under the laws of the State of Ohio. This certifies that J. D. Rockefeller is the owner of ninety-two hundred and forty-four shares of the capital stock of the Standard Oil Company, transferable only on the books of the com- pany in person or by attorney on surrender of this certificate. "Witness the seal of the Company and the signatures of the President and Secretary, at Cleve- land, Ohio, this 28th day of November, 1892. (Signed) -J. D. EocKEffELLER, President. (Signed) P. B. Squire, Secretarij. [SEAL.] [Standard Oil Company,] [Cleveland, Ohio.] (Reading.) Know all men by these presents : ' That we, -John D. Rockefeller, Henry M. Flagler, William Rockefeller, John D. Archbold, Ben- jamin Brewster, Henry H. Rogers, Wesley H. Tilford, and O. B. Jennmgs, trustees for winding up the Standard Oil Trust, by W. H. Tilford, our attorney in fact, and John D. Rockefeller, of , do hereby constitute and appoint John Bensinger, of New York City, our true and lawful attorney for the purposes following, to- wit : Whereas John D. Rockefeller has placed in the hands of said attorney assignment No. A 365 for If l-ifj of the amount of corporate shares held by said trustees on the first day of July, 1892, in each of the companies whose stocks were so held. Now the said attorney is hereby autliorized to secure from each of said companies transfer upon their corporate books of said stock and stock certificates for whole shares, and scrip for fractional shares thereof, and when the said certificates and scrip are received from all the com- panies referred to the said attorney shall deliver the same to JcJtm D. Rockefeller, and the said assignment No. A 365 shall at the same time be delivered to the said trustees. And the said attorney hereby agrees to obtain the said certificates and scrip and to deliver the same and the said assignment as above specified. (Signed in print,) Johx D. Rockefeller. Henry M. Flagler. William Eockefellbb. .John D. Arohbold. Ben,tamin Brewster. Henry H. Eooers. O. B. Jennings. Wesley' H. Tilford. (Signed m ink,) W. H. Tilford. Jttvrney in Fact. John D. Rockefeller, per Geo. D. Rogers. -John Bensinger. Q. This is the form of the stock certificate in lieu of the trust certificate?— A. They authorized him to transfer that, and then he received from the constituent companies, the 20 companies I mentioned to you this morning, his share of each of those. All those forms are here, if you care for them. The correct trust cer- tificate is here also. I do not suppose you care to have the legal intricacies; they show how they get out of the trust and how they got into it. On page 125 there is a copy of the Standard Oil stock certificate. (See p. 306.) That was the original trust certificate, or copy, then, of 34,993 shares, or 35,000 shares less the 7 shares. STANDARD OIL COMBINATIONS: jrONNETT. 321 THE CONTRACT WITH THE NEWSPAPERS. Q. That will be suflficient, I think, along that line. You spoke this morning also with reference to the contract that was made by the Standard Oil Company or its representatives with some of the newspapers. Can you furnish us with a copy of that contract or give us its substance?— A. Mr. Cook gave the first testi- mony at Marietta on this point. The testimony that was afterwards given was in reference to the Xenia Herald's contract. George W. Cooke, of Marietta, has given the essential parts of it here, I notice, in his testimony; and I think I can furnish it to you from this record. Q. Will you be kind enough to quote that accurately as it was given in the tes- timony? — A. I thought I had the page showing some of the publications for which he received pay. Here I see his exhibit (reading): "Whether the Standard Oil Company of Ohio is in a trust or out of a trust is a question for the courts to decide; but whether the consumers of oil are getting a better quality at less cost and handling with greater safety than formerly is a question for the people to decide. In the commercial affairs of life it is things, not words, that count in making \ip the balance sheet of loss or gain, of benefit or injury. Monopoly and octopus, combines and trusts, are haughty words, but the best goods at lower prices are beneficial things. It is nruch easier to say harsh words than it is to make good things cheap." — Lima Times Democrat. Q. This material was furnished by the company? — A. Furnished him by the company. I see here on page 83 of the typewritten copy of Mr. Clark's testimony (reading): "The publisher agrees to reprint, on news or editorial pages of said newspaper, such reading notices set in the body type of said paper and bearing no marks to indicate advertising, as are furnished from time to time by said Jen- nings's agency, at a rate of per line, and to furnish such agency extra copies of paper containing such notices at 4 cents per copy, or to mail the same to a list of sul3scribers furnished by said agency at 4 cents per copy." To ba fair to the company, a little bit of newspaper controversy arose. They claimed that in that there were '3 words left out, and it proved to be so, for afterwards when we obtained the original contract the words " acceptable to the publisher" were left out; in this testimony here those words do not appear, and therefore it was claimed in the Jennings suit that this contract was not correctly copied. But although the printed form did not contain the words "acceptable to the pub- lisher," it made no difference in effect, for the subject-matter published must have been acceptable or it would not have been published.' COMPETITION WITH THE STANDARD (RESUMED). Q. (By Mr. Phillips. ) Some time after the discovery of the limestone rock, or what is denominated as Lima or Trenton limestone rock oil, did or did not the price settle to Vj cents per barrel, more or less, for a year or so after it was discov- ered?— A. That I do not know. As to such details the active dealers can give you them. The temporary glutting of the market would reduce the profits until it became regulated again. Q. During the time of the Standard Oil Company's control independent pipe lines have frequently been built in the different fields, have they not?— A. Yes. Q. Do you know by what methods they undertook to compete with these inde- pendent pipe lines? Was it by reducing the pipage of the oil, or by putting a pre- mium on the oil piped, or both? Do you know?— A. Sometimes they temporarily raised the price to producers so that in the producing field the competing pipe line company could not pipe the oil temporarily at the price ; and in other cases they would watch that pipe line company's refining customers and would break them up when they sold the refined product. Mr. Davis has had sad experience in that line; he can give yon the details of that. OTHER COMBINATIONS' fROPITS NOT SO GREAT AS THE STANDARD'S. Q. Do you know of any other company, corporation, trust, or monopoly in recent years that has made such a vast sum of money as has been made by the Standard Oil Trust?— A. The nail trust ran up the price of nails, until the company cleared a large amount of money in a few months. , ^ ^ .ah., ■-, ^ ^ O I mean made it in hand, accumulated the fortune.'— A. The nail trust ran up nails from S(i cents to 9iS and something, and they cleared §7,OU0,U00 m a shorter time than the Standard would have made a similar sum. Q. .1 have alluded to the larger accumulations.— A. Oh, no; none that I know of. , 1 See p. 313; Mr. Lockwnod.p.a'.K); Mr. Boyle, p.4H7: Mr, Rogers, p. 587. 322 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Can yovi summarize briefly wliat methods they have pursued? You have passed over a number of them. Could you summarize to this commission what methods they liave pursued to secure this fabulous sum of money? Q. (By Bepresentative, Livingston.) You mean the nail trust? Q. (By Mr. Phillips.) No, no; the Standard. — A. You will have to obtain those facts from the men who come in contact with their methods; beginning with the Pennsylvania road and the freight blockades and the pipe line fighting, and com- ing' up to the fights they now have in the courts. It would be impossible for me to give you accurate data. I expect Mr. Phillips here can give you some points on that fight. There are several witnesses you can get upon that point. I suppose Mr. Lee could have given you something; 1 understand he has testified. STANDARD OIL COMPANIES IN DIFFERENT STATES. Q. (By ilr. A. L. Harris. ) In what State did the Standard Oil Company get the charter under which it is operating now? — A. The Standard Oil Company of Ohio is chartered under Ohio laws; the Standard Oil Company of Indiana is chartered under Indiana laws. There is also a Standard Oil Company of Penn- sylvania. The Buckeye Pipe Line Company is of Ohio. The Union Tank Line Company, a more recent incoi-poration , operating in combination with the others, is a New Jersey corporation. I suppose there are ten or twelve States represented. If you want to know why we let the trust Mve in Ohio, it is Ijecause we can not help ourselves. (,). (By Mr. Farqiuhar.) You jiroceeded against the comj^any under the Ohio law? — A. The Standard Oil Company, not the trust. I will write out a list of the companies for you. They are in different States but all act together to acoom- lilish a common result, viz, to make the trust certificates valuable. The original contract was denounoedjby the court, but it still bears fruit in dividends collected by holders of trust certificates. DISCRIMINATIONS IN FREIGHT RATES WITHIN A STATE. Q. (By Mr. A. L. Harris.) I thought they were incorporated in the different States? — A. On page 26, in this report, Mr. Harris, there are some tables in refer- ence to the advancement of freight rates growing out of the competition in oil. This is our Ohio trust investigation report and shows where they increased the freight before and after a certain period from 161 cents in 1888 to 19 cents in 1898. On the Rock Island road they increased the rates from 18i in 1888 to 391 in 1898. These tables can lie furnished you, and they will show you the discrimination again,st independent shippers. The freight was increased for the independent companies, when compared with the rates in force when the Standai-d was shipping by rail- road. Q. (By Mr. Faequhar.) In your investigation of these affairs did you ever find that the railroad charter regulates freight charges? — A. We have a statutory freight regulation; a maximum rate. Q. Maximum rate? — A. They can not charge m(n-e than so much per ton per mile for certain specified commodities; in that sense, I mean. Q. In what sense?— A. The fixed rate is as high as 5 cents a ton per mile. The competitive rate for coal to Duhith has been as low as one-seventh of a cent a ton per mile, so that the statutory rate of many years ago has practically given no protection to the shipper in recent years. Q. If an Ohio road delivers coal 'at Lake Erie at ,i lower rate for a long haul than for a short one, provided it must do this to get the extra tonnage needed in order to pay dividends and make profits for the road, if it still keeps under the maximum rate, do you call it discrimination?— A. What I referred to especially may be illustrated by facts. The town of Nelsonville, which is jicrhaps 60 miles below Columbus, has received the same kind of groceries or freight from Balti- more at a rate no greater than they were charging from Columbus. In other words, the wholesale grocers of Baltimore ^vere able to compete with those of Columbus because of the discrimination in the transportation of freight. By means of through freight rate discriminations like this great terminals such as New York and Chicago are placed upon a competitive basis with the inland cities. That is the most extreme case that we have. There was another case where the total charge for shipping coal from the Hocking field to the Dayton asylum was the same as the rate, over a road controlled by the same company, to Sandusky city, anil through, I think, to Duluth. But these figures on coal discriminations c;in be furnished you from freight-rate tables, i. e., within the State; there is no law Efgainst discriminating on long and short hauls. We contended, by a bill STANDARD OIL COMBINATIONS: MONNETT. 323 before the legislature, which was defeated liv a strong lobby, that the rate for btate roads ought to be based upon the interstate rate, and that we ought to have the same rate per ton per mile on our State business that the Interstate Commerce Commission requires on interstate business. We fought for that very strongly, but were defeated. Our theory is that while it is necessary to maintain corpora- tions by an income suificienc to bring ])r(iper return for investment, and while it IS conceded by everybody that corporations are a necessity and that we should not be hostile to them, the State commerce should not be levied upon in short hauls in order to reimburse companies for their losses in competing at waterway terminals. Or. in other words, they ought so to distribute their cliarges as to equalize them between the inland cities and the terminal points. Q. Can a railroad, chartered in Ohio and under an Ohio maximum freight-rate law, make rates independent of the interstate-commerce rates themselves?— A. Yes. Q. The same as the constitution of New York with the New York Central?— A. Yes. Q. (By Representative Livingston.) I suppose the Standard Oil Company and independent refiners get special rates on the oil that they ship?— A. That is a pretty severe charge to make against any railroad. Q. I am not making any charge; I am asking you a question.— A. I suppose the independents do not get the same rates as the Standard does. Q. Which do not get as much?- A. The independents do not get as favorable classifications of freight. The Standard is always getting rates through some special classifications, or allowances for loading and unloading, or in contracts for lubricating oil, etc. Q. Oh, yes: they could get all the oil facilities. I believe the independent refin- ers are fighting the Standard Oil Company? — A. That may be, but at many dis- advantages. I do not think they haye an opportunity to fight; it is not a fair contest. Q. It is a contest of some kind? — A. Yes. PRICE OF OIL WOULD BE KEDUCED WERE IT NOT FOR THE STANDARD OIL COMPANY. Q. If the standard Oil was destroyed would the price of oil to the consumer be reduced? — A. Most assuredly.' Q. Would not that reduce the price from the independent refiners to the con- sumer also? — A. I presume it would. Q. What interest have the independent refiners in fighting the Standard Oil Company? — A. Because there is a legitimate profit to be made in the business, and all they ask is that the government keep its hands off, and not use its power to assist the Standard people. Q. You are against the protection of the Standard Oil Company by the gov- ernment? — ^A. I am against any corporation getting assistance from the govern- ment to the exclusion of others. Everybody is entitled to the same privilege. TRUST FOSTERED BY THE GOVERNMENT. Q. Do you call that protection or subsidy? Or what would you call it? Is it help? — A. It amounts, to this; Does a sovereign State have the right to delegate governmental functions to a transportation company, be it a railroad company or a pipe-line company, and when such a company has received such powers through its charter and by exercise of the right of eminent domain has condemned private property for public uses, ought the State to permit it to devote that property to private ends? It is manifest that this contract with sovereignty requires such a corporation to give every man the same opportunity to use the railroad or pipe line. There are no powers delegated by a government such that one man can take advantage of another, if the governmental functions so granted are fairly exercised. The board of directors of a railroad who are exercising the right of eminent domain have no more right to give you or me a rebate, to the injury of another shipper, than the county treasurer would have to charge us 1 mill or 2 mills and in turn give me back half my taxes. It is .iust as much an offense for men to exercise these governmental functions wrongfully as it would be for a taxing ofBcer to give rebates in taxes. That is our position. Q Your position is that, it being a public franchise given by the State, all the cities of the State are equally interested?— A. That is it exactly. The board of directors of a railroad company is exercising governmental functions as much as a Congressman is. As I said this morning, if a man is coining a dollar for the 1 see p. 317; also Mr. Archbold, p. 546. 324 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. government lie lias no more right ^o cut it in two and put half in his pocket than a board of directors has to organize a railroad and exercise the right of eminent domain over private property and then afterwards abuse the right thus granted by fostering a monopoly. And there is where, if you allow me, the modern remedy that is being advocated of absolute government ownership is a mistake, because the government owns them now in the sense that the government can con- trol. They get their life from the government; they have sovereignty breathed into them by the government; they can not exist without the government; they can be destroyed by the government at any time. Q. Is the only wrong which you charge against the Standard Oil Company that of discriminating against some of the cities of your State as compared with others? Is that the only wrong they are guilty of in seeking discriminating freight rates? Is that all the wrong? — A. Oh, no; that is the basis of their getting the advantage. We say they get the advantage from the government by char- ters, the powers of which they abuse. That is one of the wrongs, but that is not the only offense committed by them. THE REMEDY FOE THE EVILS OF THE TEUST COMBINATION. Q. How would you remedy that wrong if you were on this commission and were asked to suggest a remedy? — A. If I were on this commission, I should say that so far as State charters are concerned, that is a matter for State control; an offense against a State charter is a subject for State punishment. The States originally ceded to the Federal Grovernment certain powers only, and reserved unto themselves all that they did not so cede. One of the powers reserved to themselves is that of granting charters to incorporated companies, and this is peculiarly within their rights. When you come to corporations that are doing interstate business, then your commission can step in, and you have the right tO' investigate that and Congress to control that by Federal legislation. Attorney- General Grriggs was right, and so were President Harrison and President Cleve- land, when they enunciated the doctrine that the remedy is peculiarly a matter within the State's control. Q. I have brought you right down to the point again. Would you do that by levy and sale, or by condemnation of the stuff when you catch it on the train, or how would you reach it? Suppose, in interstate commerce, that a Standard Oil tank was going across from New York to Virginia, and we knew it and seized it in Pennsylvania, and that, after that, the tank of oil, being in possession of the marshal or sheriff', was condemned or confiscated. Would that be your remedy?— A. The Sherman Act was pretty nearly that drastic; it would be a good remedy. The Sherman Act has been sustained, and it has gone that far. H a desperate remedy is required for a desperate case, and that proved to be hard, and you enforced it on the dealer, the roads would get a modification of the law; but I do not think anything is too severe to stop the abuse that is going on. Q. Suppose the tank was condemned and, the engine and cars hauling it were all condemned and confiscated; would you think it would break up the evil?— A. I should think it would break it up, but I do not believe it necessary to be that severe. I would not interfere with all innocent shippers on the train. You may have mail and express and through freight. Here a punishment of an especial character is needed; take the property that is involved in the offense. If it is the buyer, why, stop the buyer; if it is his oil, stop the oil. Q. That would be a punishment upon the party that owns the oil, but none on the railroad? — A. Then, where you have your through railroads or interstate roads, take the charter away. BETWEEN THE FEDEEAL AND THE STATE GOVERNMENTS AN ABSOLUTE REMEDY IS BVBE PRESENT. Q. That goes back to the State authority?— A. It goes to the United States if you have a Federal charter. The Union Pacific has a Federal charter. Between the Federal Q-overnment with a Federal charter and the States with a State charter there is an absolute remedy ever present and never divested from the people; it is constitutional; the legislature can not take it away. In our State private property is ever held inviolate by the constitution. The attorney-general, to illustrate, is a constitutional officer, and it is his duty to appeal to the courts to forfeit every charter the powers of which are abused, independently of the court's ordering him to do so. That is, he does not have to get a form of written order from the governor, or the legislature, or the court. By the constitution the power is vested in him to bring before the highest tribunal any corporation so offending, as mitch (STANDARD OIL COMBINATIONS: MONNETT. 325 as the prosecuting attorney is vested with power to bring a criminal before the grand jirry. We have many such cases now pending before the courts. I take it that the Supreme Court of the United States and the supreme courts of the States will do a corporation no harm when doing right, and if they are in the wrong they will be punished. It is the legal and constitutional way to try these matters, and they shorrld not be subject to mob rule. Q. (ByMr. Farquhar.) Are the independent producers chartered corporations in your StateV— A. Why, the Argan was. I do not know, but 1 think Scofield, Schurmer & Teagle are a partnership. I do not know of a single independent one that is alive.' Q. You spoke of the remedy. I don't think it is clear to the commission exactly what you may call the gravamen of the complaint of the independent producers? — A. The Standard, by means of controlling transportation, causes the producer to receive always less than the true value for his oil. This is effected by discrimi- nation in rate tariffs. The Standard has been able to determine the price of crude oil and the rates for shippingit, and the independent producers of the State demand protection so that they can obtain equal shipping facilities , which they do not now get. Q. What more protection can they get than the farmer who is selling 50-oent wheat in the West? Do not these independents with their oil sustain the same relation to the railroads as the farmer with his wheat? — A. When the wheat shipper is at a noncompetitive point on a railroad and when the company, in order to meet competitive rates at a point like Duluth, charges such a price that he can only receive .50 per cent of the value of his product in the markets of the world, he is injured in just the same way as the oil producer by excessive charges for transportation. Q. (By Mr. Farquhar.) And without remedy? — A. He has his remedy. Q. What is his remedy? — A. The Federal court held last year that the interstate commercial rate can not be so low that tribute must be levied upon State com- merce in order to maintain traffic; or. take the converse of the proposition, you can not make the State traffic so high and the interstate so low that the State shipper is contributing to the interstate shipper. The remedy that I suggest must be finally adopted is this: That the State and interstate rates must be so adjusted that the burdens will be equalized. Whenever you have accomplished that you have demonstrated the fundamental principle that the public highway is con- trolled by the public; the railway is a substitute for the highway. The public owns these highways, and there must be an honest classification of freight rates, and a fair allowance for loading and unloading, and the roads must not abuse this principle in order to grant favors to certain shippers. There can be an absolute destruction of vested interests by classification of freights and by charging exor- bitant local rates. Four hundred per cent more on a ton per mile basis is required to carry freight from Columbus, Ohio, to Cardington, Ohio, than from Columbus, Ohio, to Cleveland, Ohio. Q. (ByMr. Ratchford.) I should like to have you revert to the subject of the proposed law in Ohio and explain the main features of it a little more fully to the commission. You were touching upon it a little way back and then went to another subject. — A. You have the Ohio statute here; I can take it up briefly. We have passed an antitrust law, and it went into efiiect July 1, 1898. We have quite a number of cases pending under it. There are the cases of the beer trust, the Standard Oil Company, the Buckeye Pipe Line Company, the Solar Refining Company, and others. PROPOSED LAW FOlt THE REGULATION OF FREIGHT RATES IN OHIO. Q. I have reference to the law looking to the regulation of freight rates. — A. The general proposition was to amend our maximum freight rates, bring them down somewhere near the commercial competitive rate, and then make the inter- state rate per ton per mile the basis or measure of the per ton per mile rate for Ohio business; in other words, to apply the long-and-short-haul clause of inter- state commerce to Ohio business, and not permit discrimination against inland noncompetitive towns and in favor of competing towns like Cleveland and Cincinnati. That is all there was of it. It was a per ton per mile for local busi- ness the same as a per ton per mile on through business, exactly. Just to make it perfectly clear to the commission, the bill proposed that the same tonnage rate per mile he charged for a 10 or 30 mile haul as for a 50 or 100 mile haul. It allowed a variation of 10 per cent only for a shipment of less than 20 miles. Q. Did the railroad companies oppose that?— A. They opposed that violently. ' See Mr. Archbold, p. .54-5. 83A 22 326 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. Q. What was the position of the coal companies? — A. I do not think they appeared before the commission. Mr. Rend was there on the trust investigation; he was an nnwilling witness; we caught him and suhposnaed him. Q. Do yon know whether the coal men of Ohio ever complained against this discrimination in freights? — A. Yes: thej- have now filed complaint in nij' office; I think Collins and Fahy are among them; they are now out gathering testimony on this. In order to maintain the coal trust, coal cars of the independent coal pro- ducers were side tracked. That is the complaint. I will furnish you testimony here from the gentlemen who were disci'iminated against. While they told us they were getting the same rate they said thej' did not get the same conditions. They could not get their coal delivered in time to fulfill their contracts with customers. By such means the independent coal producers' customers were destroyed. I have given Mr. Jenks tire names of the gentlemen; I think that they will testify on these points, and give you a little data, because one of them was an employee, at the tinre, of one of the leading railways involved in the matter. Q. What were the principal objections raised by the shipping companies against that law? — A. The most intelligent reason given was, I think, by the gentleman representing the Erie or the Lake Shore; he stated that if the freight rates were all adjusted on that liasis he believed it w(juld l)e exactly fair, but that certain manufactures were now built irp, and certain centers prosperous on the other system, and it would demoralize and derange towns and industries, and that it would create panic in one place and flush times in another, before it would be possible to get back to the normal condition of affairs. The Pennsylvania Com- pany has a gross income of §15,500 per mile; if it could distribute that gross income in that way it would make no difference to the company ; it has to have that much— $15,500 — to pay dividends on its stock and pay for repairs, taxes, and employees, it makes no difference to the railroad company itself where that comes from, and they would just as lief distribute it equitably between local and through ship- pers, but the moment they attempt that trouble arises on account of the great competing centers like Chicago and Duluth. where the companies come in contact with the Canadian Pacific and the water ways; and they can not undertake it, because, when they meet water, they have to make water rates. Q. Have you any reason to believe that the producers of coal in your State were induced by any coercive means to keep their hands out of that fight? — A. Well, the ways of the lobbyists are so mysterious we do not have an opportunity to find out. Q. However, you are of the opinion they favor equalization of rates?— A. I think so. yes. I think every independent producer would favor equalization of rates. We do not want Baltimore to compete with Columbus in shipping gro- ceries to Nelson ville; we do not want the wealth of Ohio poured into New York or Chicago; we want our share of it; and we would have it if we had no discrim- inating rates. By discriminating in transpoi'tation you can dry up the most fertile valley on the face of the earth; you can reduce all the little cities along the fine of a railroad to villages, and give this wealth to the great centers, by discrim- inating in railroad rates alone. Q. (By Mr. Phillips. ) Are there not a number of chartered companies in Penn- sylvania controlled by producers that are operating in your State, for instance, the Empire Oil Company and perhaps the Victory Oil Company? They may have been chartered in New Y^'ork State; but are there not a number of chartered com- panies controlled by producers doing business in your State?— A. As far as the oil business is concerned my opinion is based purely upon conclusions of testimony taken; they d< i not practically compete in their respective territories; for instance, the Standard Oil Company of Ohio has its territory and the Pennsylvania Oil Company sells in a portion of Ohio, but practically they do not compete, because they are all one system, although they claim they are acting independently. They never wage a war between any of these diflierent companies. I never heard of one.' WHAT WILL BE THE EFFECT OF PRESENT INDUSTRIAL DEVELOPMENT ON GOVERN- MENT? Q. (By Mr Ken.nedy.) I should like to ask you if it is your opinion that the evolution which is now going on, if unchecked," will lead to a control of the indus- tries of this country and to control of the GtJvernment by a few hundred or a few thousand men?— A. Well, that is mere conjecture. I feel as though we are under a republican form of government. We have as socialistic a form of government as man has ever been able to invent; and as soon as the people have an oppor- tunity to control matters in the way I suggest— to take away charters, as well as grant charters— a condition of affairs will never rise wherebv the monarchical I Wt'f Mr. Archboia,p.64:5. STANDARD OIL COMBINATIONS: iMONNETT. 327 institutions you suggest ^vill be substituted for our rppublicuu form of govern- ment. Monarchies represent primogeniture and the principles of tving up property in a few hands. All this is what brought on our Revolution. I do not think we will drift back into these abuses, although we have made rapid strides in the last 2 years toward these monarchical ways. I believe it has gone about as far as it will go. Commissions like your own' honorable bodv are getting the facts impartially: Congress and the people will know of the evil: you will diag- nose the disease. There have been a good many patent medicines advertised to cure governmental ills, but they do not reach the disease. I think when you go through with this investigation and procure data you can give us more light on these questions. I know this from 3 years of experience in my office. I know, so far as the State is concerned, that it has absolute xiower to regulate many of the abuses you refer to, namely, the abuses of governmental powers exercised Ijy creatures of the State. Q. Would not the result which I suggested be realized if other industries were controlled in the way that a few men in the Standard Oil Company control the oil production of the country? — A. Yes: that would be the result. The social- ists are advocating that this abuse be continued, and claim that it will demon- strate the possibility of Government ownership. When a few men get possession of all public utilities the socialists propose taking them away. That is their theory. The Government ought to own all public utilities, and ultimately the only way to demonstrate the possibility of such a system will be to allow a few people to demonstrate it fiiist. Men with power, like Rockefeller and others, will demonstrate the feasibility of central ownership -and control, and then the Gov- ernment can take their place. Q. That is the point I wished yoiir opinion on. — A. If we always had men like Rockefeller to run such things it might be better for the public than govern- mental ownership. GOVERNMENT OWNERSHIP OB CONTROL AT PRESENT WOULD BE DANGEROUS. Q. Would it be preferable to have the Government control these public utilities or to have a few men, the representatives of the corporations, run the industries per- taining to them and run the Government too? — A. The Federal Government has 100,000 employees now and it almost raises a panic every time we have a Presi- dential election, so great is the demand for spoils. I do not know what would happen if you added any more to that. It looks to me as if, under the present civil-service rules, the Government ownership of any or all these utilities would create such a public disturbance that our institutions would be in danger. LOCAL GOVERNMENT OWNERSHIP SUCCESSFUL. We have a great many instances of public ownership in Ohio; 76 per cent of the waterworks plants are owned by cities, and many electric-light and gas plants. Local powers are granted to cities, giving them the opportunity to buy street rail- ways; that can be followed up by rights to maintain interurban roads. The experiment has been successful, as no doubt you know, in the old country. Glas- gow, Vienna, and other cities owning their public utilities. I have been converted to that theory, viz, that cities should be given the right to determine for themselves what public utilities they desire to own or control. It will furnish a check to further abuse of municipal franchises operated by private companies. FRANCHISE TAXES IN OHIO. Q. (By Mr. Farquhar.) I suppose you have in Ohio a law the same as the Ford franchise bill of New York, taxing that class of property?— A. We are pioneers on that principle, yon know. We have the Nichols law, where we take the stock valuation as the tax valuation, and not the value of physical tangible property. Other States have been following our law. Michigan has been following it even extending it to railroads: we have not proceeded that far. We substitu.ted the excise tax— one-half of 1 per cent for an additional tax upon railroads. Since I have been in public office we have had a fight on that, but the law passed. We drew from the Pennsylvania Company §96,000 additional tax under the excise law we collected $450,000 under the excise law, the one-half of 1 per cent on gross receipts. That is what New York is doing now, except that New York proposes to make it 1 per cent. 328 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. SUIT AGAINST THE BREWERY TRUST. Q. (By Mr. Jenks.) Take up the suits against some of these other combina- tions, outside of the Standard Oil Company. — A. Yes; we have other suits; one against the Cleveland and Sandusky Brewing Company, which is now operating a trust; some 10 brewers have placed their property in a pool and paid a promoter S30,000 for mortgaging their property back to themselves, and attempting to raise the price of beer over their competitors. The trust is on the same plan as the other trusts; we have testimony that 1 man asked .S.j.OOOjOOO for his plant whioli was only worth two and a half million; they would not buy, and then undertook to destroy his business. They would not cut the prices of beer; but wherever there was a competitor with a long established business and possessing the good will of the business, they would buy him out. If the plant was worth |10,000, they bought it for fifteen or twenty thousand, if it could not be obtained for its true value; and then put their beer in the place of the independent dealer's beer. They went out and bought up his customers, and almost raised a commercial and industrial war among the saloon men in the barrooms of Cleveland. We com- menced suit 3 weeks ago against this brewery trust , under the Valentine-Stewart act. THE TRUST PROMOTER. Q. You raised one point that you did not bring out clearly, viz, the question as to the ijower of the promoter. — A- The Standard Oil Company trust is not run by a promote];. Other trusts will take a firm of attorneys and draw up one of these contracts and start out and get options on the leading industries that are making a profit in any one craft or business. The owners will sign options to sell their plants for a given amount to an individual, who becomes in fact a trustee. When he gets all the options he can on competing plants they then organize a corpora- tion, usually in New Jersey, and this individual turns these plants all over to the trust, and claims it to be an absolute sale to a new company. The courts in Missouri have recently walked right through that fiction and held that trusts can not be disguised by one Corporation buying the plants for the purpose of deeding them to one man, who deeds the same to a company formed for the purpose of buying in competing plants. A promoter works it up; the new company issues bonds — first-mortgage bonds — and sells them, and the promoter pockets the profits. In this particular case he received y3(),()00. Q. That is a matter of evidence? — A. That is a matter of evidence. It is from a statement gathered by attorneys preparing the testimony for our contest. It is the testimony of men who have made affidavit. It amounts to this: 10 companies are paying a man s^O.OOO to get them to c<5mbine their interest into one company. It is a mere myth, it is a South Sea bubble scheme; but there are always men glad to try it. Q. In the (Mse of the brewers' combination thiit you have spoken of what was the amount of stock they issued, as compared with the valuation of the plants?— A. They issued preferred stock, usually for aliout the amount of the actual value of the constituent plants. Q. That is true in this ,'n, D. C, Junes, 1S99. TESTIMONY OF W. H. CLARK, NEWARK, OHIO. The commission met at 2 p. m., June 8. is'.lli. Vice-Chairman Phillips presiding, llr. W. H. Clark testified. Q. (Bv Mr. Jenks.) Will you kindly give the connnission vour full name and address ?— A. W. H. Clai'k, Newark, Ohio, '.'03 North Fifth street. Q. Have you been engiigedin selling i )il for the Standard Oil Company ?— A. Yes. Q. At what different places have you been engaged in this business? — A. Mari- etta, Urbana, Springfield. Columbus, and Newark. Q. For how long a time ? — A. I went to work in ISO:!. Q. And lia\-e been working all the time between is'.i:; and now? — A. Solidly, up to Peliruary 7. METHODS USED IN BREAKING UP THE Bi:SINESS OF COMPETITORS IN MARIETTA, OHIO. Q. What kind of work have you been doing at these different places? What has been your experience with the Standaixl Oil Company and what are their methods of doing business? — A. I was first employed at Slarietta, Ohio, as oflce boy. ■ . STANDARD OIL COMBINATIONS: — CLARK. 331 Q. At what time?— A. In the fall of 1893, I think. I went there as office hoy and was later proninted to warehouseman or cooper. There we had qnite a time. We had the Producers' Refining Company, the Argan Refining Company, the George Rice Oil Company, and the Marietta Oil Works to contend with. While there Mr. Curtis, an oil driver, a colored fellow, was buying of the Argan. We got Mr. Frank Davis to compete with him. i. e., with the Argan price ; we had Mr. Davis put his oil down clieaijer than the Argan Oil Company. Q. Was Mr. Davis an oil dealer before? — A. No ; he was furnished a horse and wagon and I hired him by the week. Things wrnt on that way for a time. After awhile Ml-. Curtis gut tired of his business and came to us and told us that if we would make some arrangeiut'nt so that he could buy oil of the Standard Oil Com- pany he would. We made the arrangement and took a mortgage on Mr. Davis's wagon. We put up a bluff, foreelost'd the mortgage, and let him go, Q. As soon as Mr. Curtis came to terms with you, did you stoj) the business of Mr. Davis? — A. Yes. and the price went up. Q. Can you tell us about the price at which you sold, while Mr. Curtis was sell- ing the oil of the coinpetii\g companies, and then what the price was afterwards ? — A. The oil was 7 cents while Mr, Davis was selling, and when he quit oil went up to li cents. Q, And further ? — A. Aftrr Mr. Curtis bought of us a little while he went back to the Argan again. I forget the name of the man who managed the Argan, but he went back again. Mr. B. A. Mathews, Columbus, Ohio, sent down Mr. Ebright under a salary, ami we placed the farmer racket. We went out and got a big cart and barrel with a faucet in it, and went around selling cheap oil.' Q. Who was Mr. Mathews ? — A. He was manager of the Standard Oil Company stations of the Ohio Southwestern. Q. And was Mr. Ebright a man that had been sent down by him to do this work for you against Mr. Curtis? — A. Yes. q! About how long did Mr. Curtis keep up competition, the first time, before he yielded? — A. I think it was about three or four months. Q. What was the result of the competition, the second time, by Mr. Ebright? — A. Why. we cut the price again and Mr. Curtis had to come back to the Standard Oil Company again. After I left Marietta I went to Springfield. Ohio, and took a country tank wagon. While at Marietta v,'e sold our oil all over the surround- ing country. We had probably 15 or 20 towns; we sold up the Muskingum as far as Beverly, up the Ohio as far as Newport, and down the Ohio as far as Frost, on the B. and O. Railway. We had two storage tanks, besides our gasoline, and we sold 8 grades of oil. DIFFEREXT GRADES OF OIL SOLD OUT OF THE SAME T.VNK. Q. Two storage tanks from which you sold 8 grades of oil?— A. Yes : we had 8 different prices. We sold O. S. T., i. e., Ohio State Test, the Prime White, the Water White Q. Can you give us the prices of these different grades?— A. I can not remem- ber them iicjw ; there was about one-half cent difference. We had to change the prices to suit the customer. We had the Red Star, the Water White, the Crystal Light, the Eocene, the Hyperion, and the Silver Light, while at Marietta. Q. Do yon say the difference of price between these different grades was about one-half cent on an average ?— A. Yes ; we would begin about I! cents a gallon and run as high as 104 cents. Q. If you were selling a man this oil at lOi cents and he thought that price too high, did you agree to sell him a lower grade at 9 or n.l cents, and furnish it out of the same tank?— A. Yes ; and furnish it out of the same tank under a different name,' , a ^^ Q. Was that generally by the orders of the Standard Oil C lunpany .^— A. \ es. PUTTING GASOLINE IN TURPENTINE. Q What men. for example, ga^-e you the order to
  • ' and a Cleveland company, but I do not remember the name. Q. Did you at any time cut pri< cf, lielow cost against some of these other com- panies? — A. Why. we would cut m ease we had to: we would sell as low as 4 cents, and still charge other (■ust(nners i cents. Q. You said that, in order to dri\e the Argan out of bu.siness. you sold to Mr. Curtis at Marietta cheaper than they could furnish oil to him ? — A* Yes. Q. Wei'e you doing the same thing here ? — A. Yes. Our instructions were : Get the tra.de I'egaidless of juices. Q. Had yon much opposition in Springfiidd? — A. Yes. Q. Do you know who were the independent companies selling there ? — A. There was only one in Springfield, the Charles Ludlow (Jil Company : but afterwards it "was consolidated with the Standaid Oil Company. Q. Can you tell anything else of your experience on the tank wagons? Q. (By Mr. Kexnedy, interrnpthig. ) How long were you engaged in that work, st'lling several different grades of oil out of the same tank? — A. About 7 years. Q. Did y( m feel that you wi^re engaged in dishonest work while doing that ?— A. I sjioki^ to them about it ; they said it was not for me to say what to do, but to do what wa.s said. That is the reply they gave me. ' Compai'i' p. I'.Kl '' Compare p. 4!W. STANDARD OIL COMBINATIONS: CLARK. 333 Q. Did the Standard Oil Company pav j'ou well, while in their employ?— A. Not very well. Q. (By Ml. Jexks.) What wages did you get in these different positions? — A. When in Springfield I got s;3ri a month, hut went to work in the moming at 4 o'clock, and many a night worked until 9, 10. or 11. before getting in." I had 1 trip through Lawreni-eville. North Hampton. Tremont, Terre "Haute, and Eowlebville. Q. (By Mr. Kexxedy.) Did you leave the employ of the Standard Oil <,. uui- pany becau.-^e you felt you rouhl not engage in this d'ishonest practice ? J[.\MV GRADES OF OIL 'ONLY N()>1INAL. Q. (By Mr. Fauquhar. interrupting.) You speak of selling different grades of oil out of 1 tank. How do you construe the word geades? Is it a title or a condition? — A. It is a brand on the barrel. Q. And that is all it was ? — A. Yes. Q. So you men we-re selling different names instead of different grades, with only 1 grade in the tank? — A. Yes. We called it a grade, but still it was only a name. Q. (By Mr. Phillips.) There are different grades of oil sold, are there not ? — A. Yes ; the Standa}-d (_)il Oomiiany. I believe, makes 3 grades altogether. Q. (By Mr. Jexi:s, ) There are 3 grades of refined oil. You have not known of any more ? — A. No. Q. And how many different grades do they pretend to have which the}' .sell at different prices? I think you named 8. — A. Yes : I have .seen a dozen grades sold at different stations. Q. And you think they sell at as many as a dozen different i^rices at different stations from these 3 actual grades? — A. Well, there '.vas just about one-half to one-fourth cent's ditftTenee in the price sometimes: Silver Light was always one-half cent more than Water White : Red Star was one-fourth cent more than Water White ; lait they all came out of the same tank,' Q. Would they sum: 'times be selling undei' as many as a dozen different names atone station? — A. Tliey sold under 8 names at each station ; but when we got to Columbus and Urbana ^v<' dinpped Hyperion and the southern names, and pxit in the new names. There were about 8 grades at eu(.:h station. Q. Out of 3 real gi-ad"s thev sold about S nominal giades on an average? — A. Yes. Q. (By Mr. Phillips.) What are the 3 grades that the Standard Oil Com- pany makes, to which you refer? Can you name them? — A. I think the correct names are Diamond White. Water White, and Eocene. THE TEST OF DIFFERENT UKAI'KS. Q. Can V"U tell what the test of these different oils is?— A. The Diamond White is I'.'iO degrees (ii)en cup and 130 closed cup. The State test is 130 degrees, and 130 degrees is what we test it ourselves. There is about 10 degrees diff'erence in each one. The fire test of the State will run 130 degrees on each one. Of course, the cheaper the oil the lower the test : the belter the oil the harder it is to ignite.' Q. How did you happen to leave your position at Springfield. Ohio?— A. Mr. Mathews came "there and raised mv salary and sent me as cashier to Columbus, Ohio. Q. What salary did you then get';'- A, I was getting s:;.-| ; he raised me to .s4o and sent me to Columbus. COMPOI'XIJIXG OILS AT COLL'MBUS. OHIO. Q. What was your business at Columbus, cashier at the works':'— A. While I was there I had charge of tlie works and all the shipments.-' I took care of all the money. reeei\-ed orders, and sent out bills. We did considerable mixing in Co- lumbus. "When a person wanted a barrel of boiled linsi-ed oil and we had none, we had an agitatiw he;iled up to 135 degrees and put in ::! gallons of Japan dryer ; that made boiled linseed oil. When a person wanted miners" oil \i-e would get 3 barrels of cottiuiseed oil and mix it with 3 barrels of miner^; stock and make miners" oil out of it.'-' .,-,„-,-,■ - x^ -, 6 Then in this Columbus establishment instead oi selling merely refaned petroleum you also sold other kinds of oil?— A. That was the habit over all that district • tlie oil was shipped from there ; all paraffin oil came from Cleveland in blank heads. If a person wanted rubbing oil for furniture, ozone, paraffin, iSeer,4H+. 2,Slm'P. 4S.5. 334 HEARIKGS BEFORE THE INDUSTRIAL COMMISSION. diamond parafiiii, golden machinerj', or a good straight machinery, we got it in blanli heads : turned out whatever they wanted and charged prices accordingly, Q. In connection with the sale of these different kinds of oil, do you mean to say you regularly manufactured linseed oil there or sometimes had the genuine boiled linseed oil?— A. No : we never had any of that. Q. (By Mr. Phillips. ) Was the genuine linseed oil worth more per gallon than that which you manufactured?— A. In boiling and handling the oil a certain per cent is lost. We took a low oil with a little Japan dryer, but the dryer being- thicker than the linseed oil, does not mix, so we put it in a range that held 5 bar- rels and heated it up to 135 degrees, when the dryer would come to the top and we would mix it ; that would make it a dark color and it would go off for linseed oil all right. Q. Was it as valuable as boiled linseed oil? — A. No. Q. (By Mr. Jenks.) How much monej' was saved by this mixing process, do you suppose? — A. Any v/here from ~) to (i cents per gallon. Q. Besides boiled linseed oil, what others did you make iir this same way?— A. To make the miners' lamp oil we took 3 barrels of cotton-seed oil and 2 barrels of miners' stock and mixed them.' Q. Was that for the purpose of saving on the cost? — A. Certainly; parafiSnwas worth 10 cents, extra golden machine IS or 13 cents, and light rubbing oil was worth 14 cents. We just branded the oil to sirit the customers, and gave them what they ivanted.' CJ. And gave substantially the same thing? — A. The same thing in every barrel. Q. (By Mr. Ratchfokd. ) I should like to get to the process of compounding the miners' oil. Do you say it was 3 barrels of linseed oil and 3 of other oil? — A. Three barrels of cotton-seed oil and two of miners' stock. Q. What did the oil generally sell for after the mixing took place? — A. Miners' oil varies. Sometimes it is as low as 33 cents and goes up to 34 cents. The miners' stock, I think, costs about 6 or d-} cents; the price of the cotton-seed oil depends, of course, on the market; the American Cottonseed Oil Company, of Cincinnati, regulates the market. Q. What do you understand by miners' tar? Do you handle any paraffin wax?— A. We handle it only in pound cakes and 30-pound slabs, but we do not use it for that purpose at all — it would not do. Q. (By Mr, Jexks. ) In the position you held at Columbus as cashier you know, of course, about the details of the business, i. e,, how this mixing was done; but did you yourself take part in it? — A, No; but every day I would have to go out m the warehouse and make a report for the time, Mr. Adam Paulus would come to me and say he wa,nted to mix up some miners' stock and would like a number of barrels; I would deduct them from my stock report each day so that the report showed what we sold and what we had left in stock; it showed every empty barrel left at the station at night.' Q. To whom did you make your report? — A. I made it to the general office in the Wheeler Building. A boy would come down and get it every day. Q. Did I understand you tb say that the mixer did that work as his regular business'? — A. No ; he mixed oils, but when he did not have that work to do he would take care of the machinery. Q. Was it your business to furnish the different kinds of material he wanted?— A. He would order so many barrels and I would see that he got them. These barrels were dumped into the kettle and he sat there and stirred it up. I would stay there to see that he dumped it in. I would charge him up with so much oil, and g'Lve him credit for the empty barrels he had taken. Q. Aftei' this oil had been mixed did it come into your hands again, being the different oils of the stock you had to sell ? — A. Yes. Q. (By Mr. Faequhae.) Have you had any experience outside of yom' work for the Standard Oil Company in compounding oils? — A. No. Q. Do you know any of the other formulas of the coinpounders of oil in the United States? — A. Well, I have been around refineries, but I never noticed that they compounded at all . Q. Are you aware there is such a business in refineries ? — A . In my talk with otlier people I find they never compound as we did. Q. But you don't know anything about compounding outside of what you saw in the works of the Standard Oil Company? — A. I do not. METHODS OF MEETING CM.IMPETITION AT COLUMBUS. Q. (By Mr. Jenks.) Have you anything further to say with reference to yoiu' experience as cu.shier in Columbus? — A. We had our secret proo^ss there as at other x'laces. We had our rebates at Columljus, which made oil about 1 cent a 1 Sec p. 4!I5. STANDARD OJL COarBlNATIONS: (XARK. 335 gallon clieaper, on account of the Cleveland Refining Company being there as a competitor.' When they came there it was pretty hard work for the Standard Oil Company, so they hired Mr. E. W. Shoemaker to start the Shoemaker Oil Com- pany. Sir. Shoemaker came up and the Standard Oil Company had painted on Charlie Cair's wagon in hig letters, '-Shoemaker Oil Company.'' We often got orders, the same as Down & Milliken. at Washington Court House, for carloads of oil; they had to buy cheaper, so the Standard cut the old prices at Washington Court House ; that is, they out prices and sent it to Shoemaker at reduced prices, and branded it Shoemaker Oil Company. Q. That is. it was supposed that they bought from the rival of the Standard Oil Company when they were buying from the Shoemaker Oil Company V — A. Yes. Q. (By Mr. Phillips.) And was' that used by the Standard Oil Company to supply both y — A. Yes ; Mr. Mathews said that he stood their share of the loss, and if there was any loss the Standard Oil Company stood it on these cut prices. itr. Shoemaker drew a straight salary and loaded his wagon at the Standard's warehouse. Mr. Clarence Tolan, who was his bookkeeper, boarded with me at Jlrs. Dickson's, on North High street. He was bookkeeper and cashier at the Shoemaker Oil C' >m\)any and I was cashier and bookkeeper down at the Standard Oil Company's works. We were tngether all the time, boarded ti>gether, and went together. Q. Were both of yon receiving pay from the Standard Oil Company '? — A. Yes. Q. Did you say that Shoemaker was paid a salary'? — A. Yes. Q. Do you know that for a fact':' — A. Mr. Mathews swore to it as a fact before Mr. Monnett, in Columbus. Q. (By Mr. Phillips.) About what was the magnitude of the business while you were cashier theie '.' What would your footings show each day in a month '? — A. Well, lots of days it ran lip to STOO" or .ssoo. I' have known one wagon, that of ilose Gradwohl. to take in i<20() in 1 day.'- Q. Have you anything further with reference to the work at Columbus'.' — A. I do not think of anything more. Q. (By Ml-. Phillips.) Do you know about how much the competitors of the Standard Oil Company sold in Columbus?— A. Clarence Trimble told me that we were about on an even basis. Mr. B. A. Mathews hired a boy to go and see how much oil they were shipping out each morning. He woidd go down to the station every day' and watch the tank cars which they got, and watch their business, too. Q. (By Mr. Jexks.) Did he report to you every day ?— A. He W(rald take account of the tank oars and sition t< i find out ? Were you in a position where you would have been likely to find out if they w(n-e deceiving the pubhc the -=ame wav as tlie other people did ?— A. We always made it a point to go around and see what they Kot; that was always our instructions, .just the same as thoua-h it was our Imsiness. I probably have got some of the Columous letters with me n.iw. I have one here dated May -'S. 1896 [reading]; "W. H. Clark, Urbana a month ; his name was Clarence Trimble.' Q. (By Mr. Phillips.) After sending in these reports, what instructions did you get about meeting this competition? — A. Well, in some cases we were not ordered to do anything, but the next time we had any business transactions we were to attempt to get their trade; and even if it cost us a dollar or two we were to try to get hold of it. Q. (By Mr. Jenks.) You say if it cost you a dollar or two. Do you mean that you were to cut prices that much ?— A. Sometimes we would buy empty barrels, but we would cut that much sometimes. If we had to pay more than market prices for them, we would say that we would take them in' at so much apiece. I do not mean barrels of oil, taut empty barrels. Q. That is. if they would take your oil instead of that of your competitors you would take the barrels at an exorbitant price ? — A. Take them all : yes.' Q. Do you recollect any other methods you employed in order to crush com- petition ?— A. There is nothing that I think of at Columbus. Q. (Mr. Phillips.) Do you know of any other instances of selling under assumed names excepting the ones you mentioned at Columbus?— A. Only at Columbus. Q. (By Mr. Jenks.) How long were you at Columbus ?~A. I went the 30th of March and staid until the 1 6th of Decembei . STANDARD OIL COMPANY'S METHODS AT URBANA. OHIO. Q. Then what change did you make?— A. Then I was jiromoted to be manager of the Standard Oil Company at Urbana, Ohio. Q. You say you were promoted. What increase of salary did you get?— A. They did not increase my salary at first, but paid my board until March ; then they raised me .?15 a month. (^. That is, you had had $;i."i, then $40 and board, and then you were raised to 85.5?— A. Yes. Q. Will you tell us with reference to your experience at Urbana ? As manager you really had full charge of all their business? — A. Pull charge: yes.' ' S6ep.49U. ' STANDARD OIL COMBINATIONS; CLARK. 337 Q. Did you receive instructions directly from Mr. Mathews? — A. I rei-eived instructions directly from Mr. Mathews; and when any business around there had to be seen to I was the one to look after it. Everything fell to me: but things ran along smoothly. I had no competition. Charlie Ludlow did not come out. He bothered us once in a while, but we did not pay any attention to him. Finally Mr. "William Helmick, who had formerly been in the oil business there under his father. Mr. John Helmick, but who, after his father died and left him some money, bought a farm and went to farming, came there. When he saw he could not do anything farming he sold his farm and invested his money in the oil business for the Cleveland Reiining Company. Q. Do you know how large an investment he made ? — A. I do not know the amount. I know the first shipment he got in was 300 and some dollars, and I remember he told me his bill. Finally Mr. H. S. HoUingsworth, of Columbus, caiue over. He takes care of a good deal of the business for Mr. Mathews at present as well as then. He came over there, and he and I went out to Mr. Helmick's house and tried to scare him out of it. We told him we were going to cut prices and everything, and Mr. Helmick was kind of nervous. Finally Mr. Welsh, of Springfield, came up. Q. Was Mr. Welsh another employee of the Standard Oil Company'.-'— A. Yes; he was a cooper man, and worked at the cooper shop in Springfield. All three of us talked with Mr. Helmick about oil, and about selling us the oil at the price he paid for it. He refused to do that at first. Finally we worked a blufl: on him about cutting the price, and did cut it a little in one or two places where he was selling. He had to dispose of his oil the best way he could. Q. In these places where you cut did you cut below what he had been paying for the oil Y—A. Yes. Q. Then I suppose you threatened to cut still further? — A. Yes; to cut still fur- ther if he stayed in the business. Q. How much did you say you would cut? — A. I think oil was selling at whole- sale in IJrbana for 8 cents, and I believe "we cut to 6, cents, or about that. I know it went down about 1+ to 3 cents. Q. And you made threats to cut it still further ? — A. Yes. Q. How low ? — A. We told him we would go 1 cent a gallon further. Finally he quit the business and went to the poorhouse. His sister from Iowa came and took him out, and he is out there now. Q. (By Mr. Phillips. ) Was that caused by the purchase of S300 worth of oil ? — A. He had most of the trade; he was a citizen there and the people liked him. He could have handled the trade there and made an honest living. When he came he put up a building. We would not take the building off his hands, and would not help him out any at all. We just closed in on him like any other person; and when you close in on them pretty hard, you know what happens. Q. (By Mr. Kennedy. ) Did yriu not say you started up there and had no com- petition until he came?— A. Yes; we had no competition to speak of until he came in. Q. (By Mr. Jenks.) And when he came, he put up this buildmg and began buying oil, and you agreed, if he would quit, to take his oil off his hands?— A. We were willing" to agree to do that, but he would not do that. We worked a bluff on him. His wife was on the stair steps in the hall and stayed there and cried. We had quite a time when we were there. Q. You did not, then, take any oil off his hands ?— A. I think we got about 4 or .■) barrels. We just painted th(jse over and shipped them out in the name of the Standard Oil Company. . ^ ^^ ^. , Q. But he must have disposed of the oil he had at some price ?— A. Me ilisposed of it all over town; wherever he could drop ."i barrels he dropped it. Q He must have sold his building for something ?— A. No: he did not get any- thino- out of his building. The council of Urbana does not allow over 1 barrel of oil or gasoline at any one place; more than that must be '.'(lO feet from any build- ing He had to build his building away out of town . so that it was no good to him. Q. So you think that, owing to your competition and threats, he practically lost all his money ?— A. He lost it all. ^-, ■ , ^r. ^^ -i ^ n-i n O (By Mr Kennedy.) In other words, you think the Standard Oil Company drove that man to the poorhouse ?— A. I think that is what caused it.> O fBv Mr Farquhar.) Had this man had any experience m buying oil before that'— A His father had been buying oil for 20 years of the Standard Oil Com- nanv" and had their tanks there. He was in the business probably 30 years. 6; bid this son have experience ?— A. He worked for his father all the time and '^Q^'^Did they come in opposition to the Standard Oil Company ?— A. They came 1 See pp. 490-499. 338 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. lliei e and the Standard Oil- Company bought them out. Finally the old man died, leaving his money to his son vi-ho then started up. Q. But he did not know his business?— A. He knew the oil business. Q. (Bv Mr. Kennedy.) Did you not say this man had failed as a farmer just previous to his going into the oil business?— A. Well, his wife did not like the farm. He did hot make much money, and was not doing much on the farm. His vnfe did not like it and whs in town all the time. He could not stand it, and so he sold his farm, Q. (By Mr, Phillips,) And put the money into the oil business?— A, And put it into the oil l)usiness, Q, You spoke of his gi ling ti ■ the poorhouse. How did he come to go to the poor- house ? On account ot J Hiiing in health, or from not getting any employment?— A. You see Urbana is a kind" of a little town : it has two strawboards there, and Barley, Kent & Co, Q, (By Mr, Jenks.) Y^hai is their business?— A. They make furniture. There is not much work, so he did not get anything to do. That is all he could do, Q, Was the man strong, so that he might have worked ? — A, He could have worked, I do not suppose lie was stout enough to do hard manual labor, but he could do work, like driving around and waiting on the trade, Q, Probably he could not go into this furniture establishment, or any place like that, to get regular ^vork ? — A, No ; it was too heavy for him, Q, Have you anything further with reference to your experience as manager in Urbana?— A. No : I stayed there until fall, then I went to Newark, Ohio, Q, (By Mr, Phillips.) ' How mucli did the Standard Oil Company's trade amount to, in Urbana, a montli? — A, We would run by the month, I suppose, about 40,(100 or r)0,000 gallons;' our line went ;is far as Mechanicsburg on the east, West Liberty on the north. Tremont on the south, and St. Paris on the west, making quite a scope, Q, (By Mr, Kennedy. ) Did you also sell several grades of oil out of the same tank in Urbana? — A. Yes. Q. (By Mr. Jenks.) Were the general methods there the same as at other places? — A. Yes. MANY" DIFFERENT PRICES FOR OIL AT NEWARK. OHIO. Q. Then you went from there to Newark? — A. Yes, Q, Was that in the nature of a promotion also? — A. They promised me a raise when I went to Newark; they changed my salary to 80,35 i)er day; that made more money than what I was getting, on account of the days, Q, So you did get an inc7-ease in salary there? — A. Yes, Q, What position did you take at Newark? — A, I was manager at Newark,' Q, Was your business the same generally as it was in Urbana? — A, Yes; but Newark was a larger station than Urbana, Q, How much more business did you have to oversee there? — A, Our Newark business ran about 80,000 gallons per month,' • Q, Can you tell us with reference to your experience there? — A, At Newark the business was much harder tlian it was at Urbana on account of the fact that we had from L'O to '.'.) prices. We sold J. P. Lamb & Co. gasoline at 7 cents; Mr. J. M. Brown, in the store beside them, we charged 9* cents. We charged Mr. Ran- kin 6 cents for oil, and drove right down to Showman Brothers and charged them "li cents,' We then dr<)^-e to Mr, Hagmeier and made him a ticket out the same as the others, but we always rebated him, I think I have his receipts here now. Here is one, Q, Will you read it? — A, (Reading,) " February 2w, '99, Mr. Clark, when agent of Standard Oil Co. , has paid me a great many rebates on goods which were receipted for when given. Geo. J. Hagmeier." Q. About how much of a rebate did you make Mr. Hagmeier? — A. One cent on gasoline and 2 cents on oil that he picked up.' Q. When ycju were selling to others at T cents you billed his at 7 with a rebate. ,so yon leally s(jld him at 5? — A. Yes. Q. Did you make that to Mr. Hagmeier on direct instructions from the office ?— A. Mr. Mathews himself was in the office in November ; he told us in Newark ; he told me t'. whs buying outside oil, and then he would either come ovei' or send Mr. Holliniiswoj th. his secretary. They would tell uk^ to go and make the avrau.u'ement — authorize me to go and make the arre what the price was and charge them that price. PB0CEEDINI4S AG.il.\ST THE .^liENT OP SCOFIELD, St'HUEJIER & TEAGLE, OF CLEVELAND. Q. Did anything come up at Newark besides driving these competitors outy— A. Nothing except" that Mr. Al. Donaldson started there for Scofield. Schurmer & Teagie, of Cleveland. After he had been in business awhile and seemed to be doing pretty well, I went down and bought his building while he was away. I had a man,"Mr.iletburg, break a lock off, and we went in and threw his tanks and barrels out and loaded the building, the whole thing, on a dray, and hauled it off. When he came back he had no warehouse.' Q. Had he leased this building V — A. Yes. Q. (By Mr. Phillips.) Had his lease expired? — A. No; the lease was on yet, but I had the man sign a contract that no oil should go on that lot. Q. Would he not have recourse on this man for the oil and the damage done him? — A. He just got scared and sold us his wagon, all the oil he had, the desk in his office, and everything. We got the whole shooting match. Q. Who fixed the price? You say you went down there and bought it. Did you have the discretion to fix the price, or ^^'as it done under orders from Colum- bus ? — A. I suppose the man wanted 85 ; Mr. Mathews did not say just what he wanted to pay. He wanted to know what price I could buy it for. Finally Mr. HoUingsworth said if I would get him out he would give me 2 weeks' vacation on salary. Q. So that you had discretion to get rid of a rival? — A. It cost §3.50 and the Standard Oil Company paid for the building. Q. Did Scofield, Schurmer & Teagie establish a new office? — A. No; they dropped it. His writing desk is now in the Standard Oil Company's office in Newark. Q. How nmch did you say you paid for the building? — A. I paid S2..10. It was just a shed warehouse. It was a poor thing, but it was worth more than that. Q. (By Mr. Kennedy.) Did you ever in any of these cities sell oil to any cus- tomers below the usual rate except for the purpose of driving out competitors'?— A. No. Q. Did ytju ever bestuw favors on any individuals? — A. No. Q. (By Mr. -Ienks.) What inducement did you give tlie owner ot this shed to sell it for S3. .30? One-^vould not suppose that that was enough to induce a man to eijtei' into any such business as that. — A. Well, I got to talking around him, and kept around him. CJ. Wa,^ he a special friend of yours? — A. Yes; v,'e had a lot of repairing of oil tanks. The wholesale storage tanks got to leaking and I gave him all the work. The Standard Oil Company always paid for the work, and I gave him what work I could and helped him out. Q. So that he did not merely get this ci )nsider;ition of §3..')0 for his shed, but also, practically, a promise of work from time to time. He was also a good friend of y(jurs and h:' did it for friendship's sake more than anything else? — A. Yes; for fiieudsliip: but it was not what the buililing was worth; the building was wortli a dozen times that. Q. (By Mr. Phillii's.) Did he know you -were going to take possession of this building the way you did, when he was out of the city? — A. Who, Donaldson? No; he did not know anything about it until he came back and found everything gune. Be;;ides. he had Mr. Charles Scssor working for him. He stayed in the office and 'Sir. Sessor dro-^-e the wag(jn around town. Finally. Mr. HoUingsworth and I made arrang(inients to hire Mr. Sessor at §10 a week, and put him around right on Al's tr;ide. Mr. Sessdr had worked for him, and knew his trade and where to go to. We told him that if he could not get the regular jsrice at any time to take what he could get, and keep the cans full all around while he could. Q. (By 5Ir. Jenks.) What pay did he get before? He got T5 cents a day to fol- I Hec pp. r,ii;>,5ii:). STANDARD OIL COMBINATIONS: CLAEK. 341 low the oil wagon on a bicycle. Then I hired Roy Jones at 75 cents to follow Al around and see where he stopped. Then the next day, Mr. E. G. Mathews, our canvassing agent, would go to those houses and explain to them how good the oil was and clean their lamps and fill them up, and have them send our wagon around there to let them try this oil at the reduced price. Q. Did you have any instructions to pay this boy 75 cents per day to go around and follow up competitors ?— A. Yes ; and I had to bring the boy around to Mr. Hollingsworth, who had a talk -with him before we hired him.' Q. Who went with you to take this building when you bought it? — A. I went down the street and got a crowd of fellows and brought them up. Q. What did you pay them? — A. A dollar, I think, for the whole bunch. Q. Cash or drinks ? — A. Both. I think; I gave them a dollar and went with them. Q. Did you get your vacation ? — A. I have iicrt got it yet ; yes. I guess I have got it now. Q. They said you were to get 3 weeks" vacation if you got rid of the competitor. Why did you not get your vacation: you got rid of him? — A. They said I was too busy. The man at Washington Cnurt-House rode out on his bicycle and got hit by a train. We had to send Mr. Milliken down there until they could order a man from Zanesville. I did not have any extra man. Q. They did not express any disapproval of your methods at all? — A. Oh, no ; they were well pleased with it. Q. Did they express positive approval? — A. I have a letter here from Mr. Mathews complimenting me on the way I got rid of him. This is a special pun- ishment they award, that they have for their friends. Q. (By Mr. Kennedy) . I suggest that the witness state the substance of the letter, if he can not find it. Q. (By Mr. Jenks. ) If you can not find it, will you state what the letter said. — A. (Quoting :) "I wish to compliment yoii on the way you got him out of busi- ness." It was a very short letter — just a little short piece on the top of it. Q. If you can hand me the letter afterwards, will you do so? — A. Yes, it came to me typewritten afterwards ; it was just a short quotation.' Q. Now, in reference to this business in Newark? — ^A. He complimented me on pipe fitting. I did some pipe fitting under Mr. Paulis's supervision. I got the compliments both at once. I was surprised. Q. Have you any further instances in mind of driving out rivals or any other special methods employed at Newark? — A. No; we never used any methods except our cut. Q. Except what? — A. Except having different prices for different people. We used that more in Newark than anything else. Q. Do you recall how many grades of oil you were selling there — that is. nom- inal grades? — A. Three; that was all. We had 3 storage tanks, one 14,000-gallon tank, one 18,000, and one 4.500. Q. You did not pretend to have more than 4 grades of oil? — A. No; we had 1 gasoline and 3 grades of oil. Q. I understood you to say a little while ago that in most places where you were selling oil you had as many as 8 different grades? — A. We had three grades; that was all we had. We sold Diamond White, Prime White, O. S. T., Water White, Crystal Light, Silver Light, Eocene; and when we had a man who wanted oil from Cleveland we painted the barrels red and branded them, I believe. I know they sent us a stencil from Cleveland. Q. They sent you a stencil from the Cleveland ofBce?— A. And it was marked Standard Oil Company, Cleveland, and we had those barrels painted red. I for- get what name we put on for him. Q. And you filled those barrels out of the same tanks and put the Cleveland brand on and sold it with that brand?— A. Oh, yes; each of those brands. Some had the same brands and some different brands. Q. (By Mr. Phillips.) Did you sell the same brands at Newark as at the other places?— A. We dropped the Hyperion at Newark and put the Diamond White on the cheap list. Q. (By Mr. Jenks.) Will you tell us again with reference to the amount ot trade you had at Newark as compared with the amount at Urbana?— A. We had about a third more, I suppose. At Urbana they ran about 50,000 and at Newark it was 80.000.'* ^, ., , ^. ^ ^ ^, Q. (By Mr. Phillips.) That is, 80,000 gallons per month;'- A. Eighty thou- sand gallons. , , , . , „ . X Q. (By Mr. Jenks.) When you left Newark where did you go?— A. I went back to Urbana. 1 See p. 50.5. = See p. 502. ^ See p. 499. 83a 23 342 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Was the change in the nature of a promotion this time? — A. No; IVIr. Hurst, who had been agent at Newark, wanted his place back, and Mr. Mathews gave it to him. Q. He had been manager there before, and you took his place? — A. I took his place. He went away somewhere, but he returned and wanted his place back. I got my place back at Urbana. Q. You went back as manager at Urbana? — A. Yes; I went back as manager at Urbana. Q. Were your wages cut down? — A. No; they remained the same. Q. As you had at Newark? — A. Yes. Q. Was there anything different in carrying on the business at Urbana the sec- ond time? Did you have any new experience? — A. No; not during the time I was there. I went back and staid 6 weeks. Q. Only 6 weeks that time?— A. Only 6 weeks, and everything went along quiet. Q. Then where did you go? — A. I went back to Newark again. Q. To what position? — A. Manager of the Standard Oil Company. Q. Had Mr. Hurst left again? — A. He went on the mail force, carrying mail. Q. Working for the United States Government? — A. Yes. Q. Were your wages the same the second time at Newark? — A. Yes, but they paid board for me for 6 weeks when I came back. Q. So there was a little increase for a time? — A. Yes. Q. How long did you stay this last time at Newark? — A. About 2 years. Q. And up until last February? — A. Yes. COMPANY'S METHODS ADOPTED BY C>WNEKS OF TANK WAGONS AT NEWABK. Q. Did anything new happen during your last I'sidence at Newark with refer ence to the methods of buisiness? Are there any yjiecial instances that you have in mind? — A. Notliing, except that the tank wagons occasionally made a little kick, and we would give a little reduction and then cut it off again. Q. Explain a little more in detail what you mean by that. — A. When one of the customers would kick, we would cut the price to him half a cent a gallon; in fact, we cut the price to all the wagons a cent a gallon. We sold them gasoline cheaper than we sold the stores. Oil sold at the same price. Q. The tank wagons were not owned by the Standard Oil Company ; you sold a little directly to the wagons ? — A. We simply sold to them. Q. And they would retail it oiit? — A. And get what they could for it. Q. These tank wagons had how many grades ? — A. They had 3 spaces. Q. They would have that many grades of oil? — A. No ; they had 2 spaces for oil and 1 for gasoline. Q. Di I you know whether they were in the habit of giving different names in the same way you had done when you ran the oil wagons? — A. My man there, Mr. King, was, you might saj'. the head of these fellows. More of them paid attention to whatever he said than to any one else. He was an employee of the Standard Oil Company for a year and a half or 2 years. Through him they got to selling any kind a person wanted. If you wanted 15-cent oil you could get it ; if you wanted 10-cent oil you could get it. Q. They adopted the methods they learned from the company ? — A. Yes. Q. I suppose that is a method anyone might develop for himself? — A. Mr. King said that if he could work it for other peoiile he could work it for himself. HOW WITNESS CAME TO LEAVE EMPLOY OF STANDARD OIL COMPANY.' Q. Will you tell us how you came to lea^'p the employ of the Standard Oil Company? — A. Well, I came in one evening when Mr. B. C'. Lockwood was there. Q. Who is Mr. E. C. Lockwood ? — A. He is a kind of general man from Cleve- land. Q. Standard Oil Company manager?— A. Yes. tie goes around and inspects the stations and property ; he looks ovor everything aboiit a station and makes a rejiort on its cimdition, wliether the yard is clean, etc. Q. Special inspector. Is that about it ? — A. Yes. Q. Sent about ? — A. He has 3 States that he travels over. Q. Is this blank form which you have here i m which he makes his report, so fai' as you know, the general one he sends from each station? — A. Yes; that is the one sent from each station. Q. Will you offer this in evidence here? — A. 1 will leave you the copy. We had one taken every '3 (jr :i months at that station. When he came there to make the inspection, I came in at night and had workeil a little hard and was tired, > Sf'o p. aoi. STANDARD OIL COMBINATIO]«rS: CLARK. 343 and I suppose cross. Anyhow, he came in there all di-essed up, and I was not m a very good humor. He began to tell me how to do things ; how to do this and that thing in the yard. Q. How to do what?— A. He wanted to tell me how to blue barrels, count staves, weigh oil, and all that sort of thing. I had done that for 7 years and I did not think he could tell me. Q. Did you know who he was ?— A. I did not £now at all that he held a position, so I told him he could not: He said I might lose my position by it, and I told Ijim I did not care about that. I gave him a good jawing and never thought all the time that he was a person connected with the oil company. I did not know who he was. In consequence I got a lay-off. I never got a discharge, and I never have gone back. Q. How was that done ? By Mr. Mathews ? — A. Yes. Q.' Have you a letter ?— A. I have the letter in my pocket. Q. Will you be kind enough to read it? Q. (By Mr. Phillips.) Give the date of it, please?— A. (Reading inspection report.) Exhibit. 1. inspection report. Station , Newark, Ohio. Date, October 3, 1896. No. 1 : Is date received written or stamped on each empty barrel ? Old stock of Hurst's on hand not dated. No. 3 : Are shipping tags, also date, left on until barrel is used ; and ii no ship- ping tag, is shipper's address written on barrel ? See above. No. 3 : Are oldest barrels worked up first ? Demand has been such that all new and most of old stock has been used. No. 4 : Are all cripples worked up currently ? Same cripples on hand as when Hurst left. Mr. Clark states that he has worked up cripples coming in while he has been here. No. 5 : Are light machine barrels steamed out as soon as received ? Yes. No1- ife tr^elfpTolerlffiSn None filled or prepared by hand ac- Z.l\ ire an"ung^stretremoved Xba/rriS^' ^usy shipping day and when weak at the bungholes ? J ^^^ Daireis usea. No. 9 : Are barrels painted good color? Paint dull account, I think, of paint, as Hurst had some trouble. No! n ; i^: Ss pr^ote^rfSuedT-' \ ^^ P-P^^' ^ee above. No. 12 : Are tank wagon or warehouse buckets and gauges on filling tanks correct ? Verified by Mr. Cragin and Mr. Henderson. No. 13 : Are same buckets or measures on tank wagons or at warehouse used for both oil and gasoline ? No. No. 14 : Are tank-wagon faucets in a leaky condition ? No. No. 15 : Are the tank wagon and dray kept clean ? Were as clean as weather past week would permit. No. 16: Are the horses properly cared for? Had not been curried this a. m. Stables not cleaned. No. 17: A. What is their average feed? 6 to 89 to oats. B. Cost of oats, 33 cents ; corn, 35 cents ; hay, $9. C. Cost of new shoes, $1 ; resetting, 50 cents. ^ D. Have you been able to get any better prices on hay, feed, or shoeing ? Price is 60 cents better on shoeing. E. What check is there that full quantity of feed pur- chased is received? City weight ; Hurst has been paying $1.50. No. 18 : Any leaky valves around plant ? No. No. 19 : Any leaky joints or pipe around plant ? No. No. 30 : Any leaky tanks around plant ? No. No. 21 : Is glue trough and kettle and vicinity kept clean ? Yes. No. 33: Is sawdust on hand to dry up any oil that might leak or spill on the floor? Yes. ^ _ No. 33: Is ground kept dry around tank-car unloading place, ? Grrounds were wet, due to a leaking connection on a car being unloaded. Had Mr. Clark throw dry dirt on ground and place a bucket u,nder tank. No. 34: Is ground kept dry around tank-wagon loading place ? Yes. No. 35; Are shovels kept over all sand barrels? Yes. No! 36: Are gates and doors properly locked up when agent is absent? Yes. No! 37: Is pump room in good condition ? Yes. No' 38- Are pumps well packed and in good clean condition? "ies. No' 39- Any unfilled orders on hand that should have gone out? No. 344 HEARINGS BEFORE THE INDUSTRIiL COMMISSION. No. 30: Any deliveries on previous days that have not been reported? No. No. 31: Does tank wagon, dray, or any of the buildings or tanks need painting or repairs ? No. No. 83: Is the warehouse, oifloe, and yard kept in orderly and clean condition? Warehouse much cleaner than kept by Hurst. Yard and office clean. No. 33: What time did the agent get around in the morning? 6 a. m. No. 34: How much time does he take for dinner? 30 minutes. No. 35: What time does he leave at night? 5.30 to 9 p. m.. No. 36: Are they keeping sample of each tank car received properly labeled and kept in the dark three months before dumping ? Saniples on hand not labeled. Instructed Mr. Clark that they shovild be. No. 37: Is oil inspected before tank car is dumped? Yes. No. 38: Is there anj- old lubricating oil or specialties on hand. If so, give us memo, sho^ving filled dates on barrels. See inventory, a decrease over last inven- tory. Mr. Clark has sent out some of the old boarders. No. 39 : Any barrels not properly gauged ? Test at least ten barrels and give agent's gauge and correct gauge of each. None pre^jared or gauged. Account yesterday being shipping day. No. 40 : What prices paying for coal ? -SI. 35. grade nut. Have you been able to get any better figures ? Not on quantities purchased. No. 41 : How many barrels of each grade prepared ? None. How many filled of each grade? None. No. 43 : Are weeds cut down in the yard? Yes. No. 43 : Is agent sending in competition report ? Yes. General remarka. Make a careful and personal inventory of all stock and material on hand and return attached to this report. See inventory. H. S. HOLLINGSWORTH. It is just a check, you know. I will leave that. Q. We will put it in the testimony then and make it a part of the record, so you need not read it all over. — A. When he came there to make the check we got on the outs. I would not help him at all, and I kind o' threw things in his way. Every time I could I would do it, either the oil or the barrels or anything, so that iie could not inspect it. Finally I got a letter from Mr. Mathews at Colum- bus. Exhibit 3. February 4. 1899. W. H. Clark, Esq., Ncinirk. Ohio. Dear Sir : Owing to the difficulty in getting matters checked up at the Newark station, we have decided to discontinue yo^^r services for the present. Imme- diately upon receipt of this please turn over all papers, keys, and everything belonging to the company to the bearer, Mr. W. W. Hughes, who will take full chiu-ge of the station for the present. I (to not wish you to consider this as a discharge, for the reason that if every- thing is in proper condition after we have thoroughly checked up the station there will be no difficulty whatever in having you reinstated. Yours, verj' truly, B. A. Mathews. So I am not discharged at all. Q. Hci\v long was this after you had had the inspector there?— A. I think it came in about 3 or 3 ilnys, just L.ng enough for him to write after I had told Mm what I thought. He said he could not check up the account of the barrels wMe I was there. Q. Have you had any further suggestions from the Standard Oil Companythat yon might be taken ba,ck into their employ again?— A. They have been talking around. My brother-in-law worked fur 'them at the same" time I did. He had cliarge of the office tJiere, and they were df)wn there to see him the other day and wanted to know what I A\'<)uld work for them for. Q. Who was that?— A. Fonts.' Q. Who is he?— A. I think, Mr. B. A. Mathews's man. Q. A man who works with Mr. Mathews?- A. Yes. Q. He Wii.ntod tti know \i'hat you w(.)uld work for?— A. I told him I vv^otild work for sr)l)(l a ! per cent estimated or computed from the gauges. Q. That is, when they are btiying oil from you ? — A. Yes ; when they are buy- ing from us. Q. Is that practically the universal custom in the case of all pipe lines ?— A. We have not had, for a number of years, any pipe line in the country but the Standard. Q. They buy from you and pay you a certain amount, less 3i per cent which they claim as wastage V — A. Yes. Q. (By Mi. Phillips.) Is it a fact that the Standard Oil Company have a large amount of sediment or surplus? — A. Yes. Q. Do you suppose that is accumulated from this 2i per cent? — A. Of course I have no definite information as to that. It is supposed that we buy a part of it and that they also charge or assess for insurance on fire losses. It occasionally happens that a tank of oil is burned up. Q. Is that assessment made on the producer in the particular division or lo(-ality? Q. (By Mr. Jenks.) How is the assessment calculated?— A. By reducing the credit balances. If you have 1,000 barrels, and 1 per cent would take up the total loss, they charge it up. Q. (By Mr. Phillips.) Have they any legal authority to make an assess- ment? — A. I think it is mutual : 1 do not know whether or not it would stand in litigation : I have never known of anyone objecting to it. Q. Havp you ever known of any person bringing a suit to recover? — A. No; they object, of course, hat 1 have never known of anyone making a claim tor it. ' See p. iSi, top. STANDARD OIL COMBINATIONS: DAVIS. 355 ,q„*^;Ja,^/?'S^'!i,*^®i^' *liat tl^is is generally quite a small amount on each pro- f«^n I'a w fw i7 '^'' """^ ^""f justified in going to law in regard to it, but there IS no law that could assess ? — A. No. Q. But they do do it, nevertheless, generally ?— A. Yes ; I understand so. THE NECESSARY CAPACITY OP A REFINERY. Q. (By Mr. Jenks.) How large a refinery did you have? What was the capacity?— A. Well, about 8,000 barrels a week was our capacity; of course we could increase it at any time if the trade demanded it. Q. Is a refinery of that size, properly built and equipped, able to refine oil as advantageously as one considerably larger ?— A. Well, it would be confined to 1 or 3 branches of the refining business— that is, the manufacture of illuminating and lubricating oil. But if one had a gasoline plant connected with the refinery it would add very materially to the profits. Q. That is to say. in connection with every refinery there are a certain number of by-products which can be used to very great advantage as soon as your plant is large enough so that you can afford it ?— A. Yes. Q. Do you have to have special facilities for that use ?— A. Yes. Q. What do you do with these by-products that you have ?— A. We sell part of them to Scofield. Schurmer & Teagle, of Cleveland— parafBns and benzines We have a good market for our surplus there, but never at a profit. We would just about get nd of it without carrying it in stock. We never were able— at least we never seemed to be able— to get any profits out of by-products. Q. Can you give any definite idea at all as to how much more profitable your establishment would have been had it been large enough for you to make the best use of the paraffin and other side products which you were compelled to dispose of substantially at cost ?— A. I have never made any estimate of that. It would be a mere approximation if I should, not having gone into it. I should have to make some little calculation, which I think would be foolish to attempt, because it would only be an approximation. It might differ quite a little froni the real facts, if they were determined. Q. If you had had double or treble the amount of capital in your plant, with additional facilities for making use of the by-products, do you suppose that, sell- ing your illuminating and lubricating oils at the same prices as before, the added profits from by-products would have enabled you to pay dividends on the capital and keep your establishment running, whereas the experience you did have com- pelled you to close down ?— A. Yes ; I think so. I think if such a profit had been secured the business could have been continued successfully. standard oil company's monopoly of by-products. Q. (By Mr. Phillips.) Is it, or is it not, a fact that the Standard Oil Company has practically a monopoly of all these by-products, so that if your business had been increased you could not have found a market for any of them ? — A. The by-products would have gone up to consumers, of course. We should have no occasion to sell by-products if we could manufacture them and put them on the markets. If we were selling crude by-products, with our regular product, to a customer, and we introduced a special arrangement for using these by-products in their crude state, we could not make any profit from their immediate sale, and of course we should lose that customer. Q. If you had facilities for manufacturing a very large amount of lubricating oil, does not the Standard Oil Company so monopolize that trade with the railroads that it would be practically impossible to market in competition with them ? — A. The railroads are large consumers of low-grade lubricating oils, and unless you can get some connection with the railroad companies that consume them in large quantities, it is almost impossible to get around to the small dealer and market at a profit. The Standard companies isractically have got such control that you must either get some railroad in with you or sell your by-products to some of their concerns, to be compounded into their grades and marketed. Q. Is it not conceded by, what we call the independent or outside refineries that the Standard Oil Company has practically a monopoly of the lubricating business, especially among all the prominent railroads ? — A. Ye.s. Q. Would ,any big corporations, independent of the Standard Oil Company, be .safe in investing .s.")()0,000 or 81.000,000 in manufacturing lubricating oil? Would there be any certainty of finding a market for it ? — A. I think it would be a rather hazardous undertaking ; that is my judgment. 356 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Jenks.) If I understand what you say on that point, the substance is this : That a very large establishment that can put in the needed facilities for making the best use of the by-products has a decided advantage in the manufac- ture, but that, owing to the fact that the Standard Oil Company has apparently such close relations with the railroads and with the producers of these'by-products, it is nevertheless a hazardous investment to make, owing to the difficulty in marketing? — A. "We look upon it in that way and have not made such an invest- ment in our concern. Q. But the advantage in the manufacture itself, you think, undoubtedly exists? — A. Yes; I think so. THE COMPOUNDING OF OILS. Q. Can you give us some idea with reference to the way in which the different grades of oils are compounded? — A. I do not know whether I can make myself understood about that. Most refineries have a department of that kind. They have a person who becomes expert in compounding mineral oils with animal oils, and in the filtration and extraction of oils from the paraffin. There is a very great difference in these different grades of oil in the markets. One consumer, in many cases, may pay 5 or 6 times as much for a particular grade of oil as some other consumer. For instance, 1.5 cents a gallon would be a fair price for some consumers; and for some grades of oil they get 75 or 80 cents, owing to the par- ticular machinery that is used. Q. If I understand you, then, the manufacture of lubricating oils is very largely a matter of compounding? — A. Yes. Q. And that is an art in which there is a chance for experience and the devel- opment of skill ? — A. Yes. Q. But nevertheless the art of judging accurately the quality of lubricating oils is a somewhat difficult thing ? — A. Yes. VARIATIONS IN THE PEICE OF LUBRICATING OIL. Q. So that if a person is disposed to get 2 prices, or 3 or 4 prices, for the same quality of oil from different consumers he might be able to do it? — A. Yes. Q. Have yon any reason for believing that any of your competitors were in the habit of getting different prices for the same grade of lubricating 'oil? — A. Yes; we have become satisfied of it by coming in competition with them. The grades of oil we were manufacturing in the same town would often be selling at 23 and 23 cents a gallon, while they would be selling to the very same people with whom we came in contact for 70 and 80 cents — in a small way, of course. Q. Who were those competitors ? — A. The principal one was the Argan Refin- ing Company. Q. What was the source of your information on this matter ? — A. We were located in the same place and our plants were close together. Our men inter- mingled, i. e., they would work at one place for a few weeks and then change about, so that we became somewhat f amiliai; with what our comiietitors were doing, as they seemed to be willing to get information about us. Q. Your information, then, on this difference in prices came from men working for you who formerly worked for the Argan ? — A. Yes, or vice versa. METHODS ADOPTED BY COMPETITORS TO SECURE INFORMATION. Q. YdU intimated just now that your competitors sometimes secured informa- tion with reference to your methods of doing business in ways that were ordina- rily not considered normal. What were some of the methods employed ? — A. On one occasion we had an office boy who became shipping cderk, and attended to making shipments of oil by river and by rail. That young fellow was approached by an agent of the Standard Oil Company, who offered to pay him for a report from day to day, giving the names of the pers(jns we were shipping to, the points shipped to. and the invoice price of the product.' Q. What was the result of that offer? — A. Well, the young man was very much surprised, but was loyal to us. He came and gave us alt the information that he had. We advised him to go further and get further information, but the other people weakened. I guess they suspected we were getting onto their schemes ; they never accomplished it, so far as we know, unless it was done without our knowledge. Sometimes in the evening, after we closed up. the office man would be the last one to leave. They held conferences once or twice right in our office and tried to induce liiiu, for a consideration of a suit of clothes, or so much per month, or something of that kind, to give them that information. ' See Monnott. p. 310; Mr. Arohbold, pp. oTo, ,574. STANDARD OIL COMBINATIONS: — DAVIS. 357 Q. In this special case you think they failed to get the information they ■wanted on account of the fidelity of your assistant ?— A. I think so. _ Q.^ Do you know any other case in which they did get information along this line? — A. I did not have any positive information, but we believed that every barrel of oil shipped from our works either by steamboat or by rail was in some way reported to our competitors. That was only a m.atter of belief and conjec- ture; but the circumstances pointed strongly in that direction. UMDEEBIDMNG OF COMPETITORS. Q. What were the circumstances that pointed in that direction? — A. Why, when we would make a shipment of oil and send invoices, their traveling men would frequently come in contact with that particular shipment ; the people that we shipped to would write us saying that they had a quotation at a lower price , and in many cases we would have to meet that price or lose the customer. We would have to make a deduction on the invoice, or make an allowance on the next shipment, or something of that kind. Of course, it created a great deal of dissatisfaction. We would have to keep a man on the lookout all the time, traveling from one little town to another to see the small dealers. Q. That is, then, I infer, practically a universal custom with those people ; wherever you had a customer they would follow you up ? — A. Yes. Q. (By Mr. Phillips.) As a rule, did they sell lower than you offered to sell? — A. They offered it, and we ultimately would lose a customer unless we reduced the price. Q. (By Mr. Jenks.) What was the effect of this operation? Did it redu.ce the price of oil to the consumer? — A. I think not. Q. Why not? — A. The dealer would not change his price ; he would continue to sell the oil and if he bought it at the same price offered by the Standard he would have advantage of the difference in iDrice. The dealer would get the advantage of the difference in price. Q. Do you think, then, that the price of oil was lower to the dealers and that they made better profits than they would have made save for this action of the Standard Oil Company? — A. Yes. Q. (By Mr. Phillips.) Was that only in particular localities? — A. Yes; in localities where we were seeking a market. It may have been so in other locali- ties, of course, but I have no information on that. GENERAL EFFECT OF THE COMPETITION. Q. (By Mr. Jenks.) What do you think has been the ultimate effect of this competition which you said finally compelled you to go out of business ? Have you any reason to believe that prices have increased?— A. Generally, I think they have been restored to a more uniform condition ; in many localities they would get the same increased price. Q. So that the general' average of prices is probably higher?— A. Yes. Q. This cutting prices was ordinarily to satisfy customers at particular places?— A. Yes. Q. And was not a general cutting? — A. No. COMPOUNDING OF OILS (RESUMED). Q. To go back to the question of mixing oils. Did you say that nearly all refineries have a special department for that work and a special mixer?— A. Yes. Q. And that a good many different brands are made in practically every refinery? — A. Yes. , , . ^ tuc i. Q. Is all this to satisfy, so far as possible, the taste and desires of different customers?— A . Yes. And were you in the habit of making special brands for special cusuomers.-'— A i do not think we did in lubricating oil, but we did in illuminating oil. Sometimes we found the same name used on oil that was manufactured oy other concerns, apparently for the purpose of getting out under our brand. We ha.d one brand that was considered superior by many consumers. O What was that?— A. It was called the Champion. q! And you had reason to believe that brand was sometimes used by your com- petitors ?— A. Yes. , ■ ^ -n ., A A7 Q. And put on an inferior grade of oil?— A. Yes. 83A 24 358 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Have you any specific instance in mind of an attempt of that kind or an attempt to make your cnntomei-s believe that your oil was not up to the stand- ard? — A. Yes : I think of one particular case, that of the Cleveland and Marietta Railroad. They were customers of ours and we branded all of our oil under the brand that we were shipping it at. We siipplied them with lubricating as well as illuminating oil. In one case we were informed by the pirrchasing agent that their inspector had discovered 5 or 6 gallons of water in some of the barrels of the last shipment v\'e had made. We at once took the matter up and investigated it, and found that every barrel we had shipped out — at least every barrel of that particular invoice — was accounted for by having oirr brand on it. The other barrels, which it was claimed had water in them, had no brands at all. We had no information as to where tliey came from, but some one undertook to deprive us of that customer by sending a shipment of ;-purious oil and then trying to make the particular officials think it was our product. Q. Did you say there were i barrels that had water in them ? — A. Yes ; I think there were 4 or ."i barrels. Q. Did you think that somebody stole 4 barrels of your oil and put this spuri- ous oil in the place of it? — A. I do not know ; I know ours had all been counted up and distributed along the line, and it was difficult to go to each point and to each agent that distributed it and find the barrel with the shipping mark. The 4 or .5 barrels of spurious oil had no marks to show where they came from. It may have been ours, but I do not see how it could have been unless somebody opened the barrels and put the water in. Q. So there must have been ."ome fraud in that special case? — A. There was no doubt of it in our minds : we investigated it very carefully, and it resulted in establishing ou.r reputation with that particular road, so that as long as we con- tinued in the business we had their entire trade ; the way it happened it turned out fortunate for us after all. Q. What would have been the effect had you not been able to establish your case ? — A. It would have ruined us. Q. You would have lost that trade ? — A. Yes. THE COST OF PEODUCINa OIL. Q. How does the cost of producing compare now -with what it was a few years ago ? — A. It is less. Fuel is somewhat less, owing to the locality, of course. Coal has been cheaper for 3 or 4 years than it was 10 years ago ; and where natural gas is used the uniform price, I think, throughout tlie country is 7 cents for each barrel of crude oil. Some of the chemicals that are used in the manufacture of oil are quite a little less. Sulphuric acid was 2i cents, and is now about 1 cent a pound ; but that is n( it a very material part of the cost. Q. So that on the ^^ hole you think the cost of refining oil has decreased a little of late?— A. Yes. Q. Do you have any difficulty in getting the material which you have to use at good prices ?— A. Ko ; not at all. In the case of the last we bought we had a con- tract by the year with the Standard Oil Company. We bought our sulphuric acid and other chemicals from them. Q. Is it generally true that refiners of 'lil, Avho are competitors of the Standard Oil Company, have to Ijuy material, for example, sulphuric acid, from them?— A. Yes ; generally. Q. Do you not think they might be put at something of a disadvantage in that way?— A. Yes; possibly. Although the lii,st we bought from the Standard Oil Company was chea])cr than people conld get it elsewhere. Q. (By Mr. Farquhab.) Is it not generally the case that sulphuric acid and other materials used in refining oil can bo purchased from the Standard Oil Company cheaper than in any other market?— A. Yes ; I think that is right. COJIPOUNlilXK OP (>II,S REIJUIKES KNOWLEDGE AN'D SKILL. Q. Is the compounding of oil a, S(dentific operation or simply a haph:izard one ?— A. Well, thei-e is a great deal that is haphazard ; it is now becoming more a custour to go into it carefully and sc.ienlihcally ; but fj'om niv observation of refiners genci ally there is as niucli haphazard work in the compounding of oils as in any otiier business in manufacturing. q. If you were engaged in the compounding of lubricants would it not 'be your custom to .send to the scientific schools f(,r a firll analysis before marTketing the product itself ?— A. It is sonKitimes required, but we do not always do it ; it entails nifue (.!■ li'ss expense that all want to avoid, if possible. STANDARD OIL COMBINATIONS: DAVIS. 359 Q. Is it not generally a fact that many refineries have mixers or compounders now? Are mixing and compounding considered scientific attainments ?— A. Yes. Q. Is not the compoimding of lubricants and ilkiminants taught in every scientific school m the country?— A. Yes ; and.in a great many colleges. Q. Is it taught at Cornell University, for instance?— A. Yes; and at the Ohio State University at Columbus. RAILROADS PREVENT FAIR COMPETITION. Q. In your business with the railroad companies, how close were the prices of the Argan or other competing companies to your own? — A. Well, our experience soon led us to understand that any price we might make to the railroad compa- nies that they had control of would cut no figure ; we had no means of knowing •what they got ; for instance, if they were getting 12 J. cents a gallon and we offered it for 6 cents, we could not get that. We knew they were selling at 13+ cents to other people ; of course, we do not know just what controlled it, but we were not able to get the trade.' Q. (By Mr. Jenks.) Did you, as a matter of fact, make the price lower to the railroad than to other customers ?— A. For a few times, just to satisfy ourselves that that was the condition of things ; after that we paid no further attention to that particular trade. Q. (By Mr. Farquhar.) What official of the Baltimore and Ohio Southwestern Railroad controlled the purchase of lubricants? — A. They had a purchasing agent, who was not alway.s the same party, but it seemed that a higher authority conti-oUed their sending c)ut requisitions for the oils they needed. A complete change was brought about in their methods of doing business, and soon after it was known that the officers of the road controlled considerable stock in the Argan Refining Company. Q. Were the parties interested in the railroad also interested in the Argan ? — A. They finally acquired, as we believe, at least 50 per cent of the stock of the Argan Refinery. Q. The oils, of course, were called standard? — A. Yes. Q. Do you claim that the Argan was better or poorer oil ? — A. \t was intended to be substantially the same grade. (J'. Was it left to the purchasing agent to make a decision himself? — A. Oh, yes. Q. Then do you vidsh to impress upon the commission the idea that prefer- ence was given to the Argan Refinery because the railroad officials were interested in it? — A. Yes; that is my belief . Q. Have you no knowledge? — A. None whatever, except the circumstance which led us to that belief, the general condition of things, and the fact that we were not favored with a part of their business. Q. Can you tell the commission, from your own knowledge, whether the Stand- ard Oil Company offered better terms than you did to the railroads ? — A. No. Q. (By Mr. Phillips. ) Did you say that you offered to sell at a much lower rate, and that they refused to purchase your oil ? — A. Yes. Q. Is that the reason why you think there was unfair competition? — A. That is it exactly. Q. Do you believe it or know it ? — A. We believe. Q. Because they would not purchase your oil, of eciual quality at a much lower price than they were pajang others ? — A. The influence did not stop at that par- ticular point ; but the fact that it was known along the entire mileage of that railroad and its branches that they were getting their illuminating and lubricat- ing oils from this particular concern we believe influenced the dealers along the line, because they could get it in small quantities and without very much trouble. The same people' being interested in the railroad and the Argan Refinery made, we believe, quite a difference in our trade along that line ; we may be mistaken about it, but it so appeared to us at the time. Q. (By Mr. Farquhar. ) Do you not usually find that it is a pretty difficult thing- tohold a customer where you have competition of that kind ? — A. Yes ; and especially when the matter is in the hands of a purchasing agent. Q. Do you have any faith in the old saying that "The purchasing agent was bought on both sides " ?— A. I do not know. They laughed at the statement, and so far as our concern goes we did not try to influence our trade in that way at all. It was on its merits, for what its value was ; and so far as I know, we had no string to the purchasing agent of any company that dealt with us. ' See Mr. Lee, p. 2«8; Mr. ArchboM, p. 516. 360 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE STANDARD OIL COMPANY AND THE PRICE OF OIL. Q. (By Mr. Phillips.) It has been claimed that there has been a gradual decrease in the ijrice of refined oil in the last 2(1 years, or since the Standard Oil Company began manufacturing oil. Now, is it or is it not a fact that that decrease" is obtained bv using quotations from New York, chiefly on export oil? Is it or is it not a fact that benzine, which is now higher in price than refined oil, was, in the early history of the refining business, dumped into the week, and that the tar was not even used as fuel? — A. Yes. Q. Are not the by-products as valuable now, in many instances, or even more valuable than the refined oil itself ? — A. Yes. Q. And by-products that were formerly considered useless? — A. That is true, and when that condition prevailed there were great fluctuations in the value of the cr^ide oil. As I remember, oil was at one time down to ;^7 and 40 cents a barrel, and at another time, when they were manufacturing just one grade of oil, it sold as high as 20 or 30 cents a gallon. There were great fluctuations as to the price of refined and crude oil. That may account for a part of this decreased price. Q. (By Mr. Fakquhar.) Do you not think that the fluctuations in the price of oil in 1 y'T2 were really due to overproduction, or do you think they were caused by monopoly? — A. No ; I think the cause was overproduction and the facilities for handling this crude oil. Q. It was not a qiiestion of monopoly? — A. We knew nothing of monopoly at that time. Q. It was just a question of overproduction, when everybody was trying to sell and get the market ? — A. Yes : that, I think, influenced the price very considerably. THE profits of THE STANDARD OIL COMPANY. Q. (By Mr. Phillips.) Do you believe that the Standard has, in a great many instances during the last 10 or 20 years, made more profit per barrel for every bar- rel of crude oil handled and manufactured into refined oil than they have paid for the crude oil itself? Is it right to infer, as some do, that they make more profit to-day on every barrel of oil that is manufactured than they pay for producing it ?— A. I hardly think that they do, but they do make, as is shown by their statements, a very considerable amount out of their transportation of the oil through the pipe lines ; they are very profitable. Q. Take them together ? — A. Oftentimes the entire profit on a barrel of oil will be made on the transportation of it instead of the manufacture. Q. (By Mr. Jenks.) Have the rates for piping decreased? — A. That I do not know about. The Standard system has only been established at Marietta about 10 years, and I know nothing of what may have occurred before that. Q. Has there been any change in the charges for piping in your remembrance ? — A. Only at particular periods when there has been a contest over the control of a particular field, or something of that kind. I think they are paying 10 cents a bar- rel more for crude oil at Scio to-day than they are at Marietta or Pittsbur|f. The quotations show 10 cents a barrel more. Q. Ik the price of crude oil at Marietta the same it has been for some years?— A. Oh, it has fluctuated some in the last -t or 6 years, but not so very much. COST OF PRODUCING CRUDE OIL NOW AND FORMERLY. Q. What is the cost of producing crude oil now compared with what it was 5 or 10 years ago ?— A. It has increased very much. The material, i. e. , casing, tubing, and machinery, that goes into the production of oil, has increased in some instances, I should think, 90 per cent. Q. (By Mr. Phillips.) Since when?— A. In the last 3 or 4 months. Q. Prior to that was it cheaper than it had ever been before ? — A. Oh, yes; very much cheaper. All materials going into the production of oil in the way of iron pipe, tubing, casing, boilers, and machines were very much reduced. Q. (By Mr. Jenk?.) The price of these materials has gone up, and there has not been much increase in the price of crude oil? — A. No, no. Q, Do you know whether the Standard Oil Company itself is interested in the production of these supplies or not? — A. No; I have no information other than the general su])position of people who are consuming those products. Quite fre- quently you will find that their business relations indicate that they are some- what interested: but I have no knowledge of my own as to that. STANDARD OIL COMBINATIONS: DAVIS. 361 Q. (By Mr. Farquhar.) Do you mean that there are parties interested in the Standard who are also interested in the tnbing works, etc.?— A. Yes. Q. But the Standard, as the Standard, has nothing to do with itV— A. No ; I suppose not. Q. (By Mr. Jenks.) Did yon say that your chief competitor in the refining busi- ness was the Argan Company?— A. Yes. Q. Your chief competitor, then, was the Argan and not the Standard?— A. The Standard had a very large plant at Parkersburg that covered part of the same territory that we both covered. Q. But so far as yoii knew you were hampered as much by the Argan as you were by the Standard ? — A. Yes. RELATION OP THE STANDARD TO THE ARGAN REFINING COMPANY. Q. Was the Argan owned by the Standard at that time ?— A. No. Q. But it has since been bought by the Standard ? — A. Yes. Q. What has been the history of the Argan since then ? — A. Why, the Argan Refining Company was leased sometime within the year,! should say, by one of the branches of the Standard Oil Company — the Southern Refining Company, I think — on a basis of 6 per cent On $200,000 for ten years, or, in other words, 81,000 a month for ten years. They had employed quite a number of people, traveling men and office men, and just recently they left Ohio and went into West Virginia. That was about the time, I think, that Attorney- General Monnett commenced quo warranto proceedings, claiming that they were a part of the Standard Trust. They immediately moved their business office to Parkersburg, which is about 12 miles from Marietta on the Virginia side of the river. Since then it has been understood that the people who owned the stock of the Argan Refining Company had capitalized it and sold out their entire interest, to the same people that leased it ; so that they have in some way discotmted the 10-year lease by cash payments, and the Argan Refining Company has now practically aban- doned its office at IParkersburg. j Q. Is it understood that the purchasers of this stock are the managers of the Standard Oil Company to some extent ? — A. That is the supposition. I think if you have access to the testimony, taken by Mr. Monnett at Marietta, of Mr. Cram, who was the manager of the Argan Refining Company at the time this lease was made, you will find that he testifies as to just what was done in this leasing process. Since that time it is generally believed that the stock has been purchased by the same parties who made the lease. Perhaps you will not find that in this testimony. NO SUGGESTIONS AS TO LEGISLATION. Q. (By Mr. Phillips.) Have you any suggestions to make in regard to legisla- tion regarding trusts and combinations ? Do you think it is a question that can be dealt with properly by law ?— A. I have not given it the close attention that other gentlemen have, but I realize that it is one of the most difficult things to deal with or control by law. I have no suggestions on that line. I do not know how remedial legislation is possible; vested rights are acquired by innocent holders in different corporations and they are thrown together, so that I can not see how you can possibly separate them. There may be some way of doing it. Q. Are you at all familiar with the pipe-line business in Pennsylvania and Ohio, and especially in regard to the opposition the Standard has made to inde- pendent pipe lines ?— A. No ; I never came in contact with that except in a very moderate way. ^ Q. You are not, then, familiar with the early history of the Standard m Pennsyl- vania ? — A. No ; I am not. Q. And their methods there in regard to pipe lines, purchasing refineries, etc. ?— A. No ; I have no information in that direction. Q. (By Mr. Kennedy.) To whom do you sell your product now?— A. The Q. Yes.'— A. The oil produced in West Virginia I sell to the Eureka Pipe Line, and that produced in Ohio to the Macksburg division of the Buckeye Pipe Line. Q. Are they both Standard Oil lines?— A. They are in the same office and the same bookkeeper makes out the check which is given by one of their agents on Q. (By Mr. Phillips.) Are both owned by the Standard?— A. Both are in the same office. , -, ^ ■ i^ ■i.-i \ ^t Q. (By Mr. Kennedy.) Do they pay you th e market price tor it ■■'— A. Yes. ' Compare Mr. Monnett, p. 3U9; Mr. Archbold, p. 644. 362 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. KEOULATION OF THE MARKET PRICE OP OIL. Q. (By Mr. Farquhar. ) How is the market price regulated? — A, When you have oil to sell yon go to the agent, who, before he gives you a price, wires to Pittsburg, where the books are kept, to see what your credit balance is ; that is, the iminber of barrels of oil credited to your account and the particular grade. When he gets that information he will give you the price ; that is, the price is posted. You may or may not accept his offer. Q. What influence have the independent producers of this country on the price of crude oil 'i — A. They have influence only in special cases, and I do not recollect any of those in particular. I do not think tliey have any influence over it at all in our part of the country. Q. None at all? — A. Not at all. Q. (By Mr. Phillips.) Is the price of oil there fixed by the board of exchange or by the Standard Oil Company ? — A. By the Standard Oil Company. Q. Both crude and refined? — A. They do not fix the price of refined, but they do the crude. Q. They make the quotations in New York, do they not? — A. I think they do. Q. Do they make the quotations in all the oil fields for the crude ? — A. Oh, yes ; wherever they have the purchasing agent. Q. And is it wired to the agents what the price shall be each day or week, subject to change at any time by them? — A. Yes : the holder of credit balances on their ledgers may be a producer in Indiana, Ohio, West Virginia, or Pennsyl- vania and may sell to any of their agencies. It does not make any difference what tine. I have often been in the office when producers from Indiana would come in and ask for their credit balances and get their checks just the saflie as men who produce oil 'within a mile of where the business was transacted. C^. (By Mr. Farquhar.) Is it the New York branch or the Pittsburg branch that rules the market ? — A. It is the Oil City market ; that is the one. Q. Of the Standard ? — A. That controls the price of crude oil. Occasionally it is sold at quotations given by brokers when there is a little fluctuation. I have known it to be so for a few days, within two years, I think. When I would go in to sell some of my crude oil they would say : " If you will allow us to put this on the exchange to-day, you may have the benefit to-morrow of the average exchange price instead of taking the specific or grade price at the time." I fre- quently would get a cent, a cent and a half, or 3 cents a barrel more by putting it on the exchange. At other times the exchange was lower than the Standard market. THE POSITION OP INDEPENDENT REFINERS. Q. Is it y(.iur opinion that the independent refiners of this country are making money ?— A. I do not know outside of the firm I am interested in myself. Q. Scofield, Schurmer& Teagle, of Cleveland?— A. Apparently they are. Q. Do tiiey own oil wells?— A. I really do not know. Q. They are refiners pr(jper of the oil and the by-products ?— A. That is what I understand. Q. Is it not quite a wealthy firm ? — A. Yes. Q. Has it not always lieen an independent firm?— A. That has been the suppo- sition. Q. Do not large profits naturally accrue to a firm like that?— A. Yes. Q. Because a .s'ood many refiners have gone out of business, is it right to say that the Standard Oil Company drove tliem out or bought them out— gave them a good price to get out?— A. Why, take, for instance, our own concern right there under our eyes. I could havQ Q. (Interrupting.) Could you not have sold out in pretty good shape if you had desired?— A. I was never approached on that. I would be very glad to, hut I think I could have put up a refining plant a,s good as the one that was practically sold for SL>()0,Olli) for about §7."i.()()l). Q. (By Mr. .Jenks.) That is the Argan ?— A. That is the Argan. Q. (By Mr. Farquhar.) Of course, that includes good will and everything else that gries into an establishment of that Irind. But, from your own experience, do you know whether it is cu.stomary for the Standard, when they find a good, Strong refining plant, to crush it out or buy it up at a pretty good figure?— A. They have not done that in a great many instances. They did not buy out Mr. Rice's ])l,int. , Q. ( By Mr. Phillips. ) Is it. or is it not. a fact that the Standard bought a large number of refining plants at a good price, and wrecked them?— A. Yes. STANDARD OIL COMBINATIONS: DAVIS. 363 Q. (By Mr. Farquhae.) Is it not sometimes a good business proposition to dismantle plants when you have been getting good transportation facilities and getting the same quantity of oil and other products and attach to another pipe line, and let them g(3. leaving nothing but the bare walls?— A. Yes. Q. As a business proposition, any man will do that?— A. Yes. Q. (By Mr. Kennedy.) What is the market price of crude oil to-day?— A. The last quotation I saw v/as $1.13 at the wells. Q. A barrel ? Q. (By Mr. Phillips.) White sand oil?— A. The white sand oil. COST OF PRODUCTION (RESUMED). Q. (By Mr. ICennedy.) Can you state to the commission what the cost of pro- duction IS ?— A. That varies a great deal : that is one of the uncertain quantities. I have spent a good deal of money in sinking wells with no return, but occasion- ally have been fortunate enough to get a well that was very cheaply produced and that gave a very satisfactory return. It is impossible to tell just what the cost is. Q, In regard to the wells that are productive, can you sav what the cost per barrel for the crude product is?— A. That varies as to the field. Q. What is it in your field?— A. The nearest wells to Marietta are only about 400 feet deep and are very productive, while the Berea sand wells, in the Macksburg field, vary from 1,600 to 2,300 feet; therefore you can see that there is quite a little difl^erence in the cost of wells in different, fields. You have to use a great deal more casing in some instances tlian others — 3 or 4 strings of casing fre- quently. In our fields you use but one. because of the surface drilling. Q. (By Mr. Phillips.) The cost of drilling is about s.5,000 or ?6,000 to the well- in different localities? — A. Yes. Q. And some are more uncertain than others ? — A. Yes. Q. (By Mr. Kennedy'.) What is your own individual production ? — A. My own individual production ? Q. Y''es. — A. That varies considerably. It is now about 100 barrels a day. Q. You have been in the business a good manj' years ? — A. Y^es : I have several times thought I was in the business, but when I came to settle it up I found I was not — I was behind. Q. Is it not possible for you to compete now, if the Standard Oil Company does fix the price of the product? — A. Y''es, it is, where I get sufficient production to pay the expense of operating. Q. (By Mr. Farquhar.) In a general way, do you think the exportation of petroleum over the whole world has been a great benefit to this country ? — A. Yes ; I do. Q. Do you think it has been one of the great factors in holding the balance of trade in favor of the United States? — A. Statistics show that, of course ; there is no question about it in my mind. Q. (By Senator Mallory'. ) Did you not state, some time back, that the managers of the railroad at Marietta, beiri;- interested in the Standard Oil Company, influ- enced the dealers along the line of that road? — A. The managers of the railroad company, being interested in the A.rgan Refining Company, made it appear to the ordinary village merchant that they were controlling that particular trade.' In many cases they control the output of the coal mines that supply fuel for opera- ting the road, and the managers a,nd operators do their i^urchasing from the com- panies that are doing the work. In that way they secure indirectly control of the railroad company or the merchant. Q. Do you mean the railroad employees ?— A. The coal producers, the coal operators. Q. Purchase of the dealers?— A. They were, in one instance, sujipljing the rail- road company with their fuel and operating mines producing the coal, and of course they supplied them, or some one connected with them ; not only the t'oal, but also the supplies that ^rent into producing the coal. Q. What I wanted to get at, or understand, was the influence which you referred to as controlling these dealers to their detriment?— A. That was one. Wherever they had control, or were connected v.ith the producing of coal or other things that were associated with the management of the road, they seemed to be able to cut us off. Q. Do you say they had no direct influence ?— A. Not that we could put our hands on ; we onlv inferred it ; the circumstances impressed upon us the fact that it was going on. 364 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. But you f oimd it to be a fact that your business was being cut off all the time in various directions from various causes? — A. Yes; we attributed part of it to that influence. Q. To that influence ?— A. Yes. Q. (By Mr. Kennedy.) A former witness before the commission said that lie believed a new system of rebates to railroad companies had grown up. It is this : They furnish lubricating oil to the railroad companies, who pay them a great deal more for it than it is worth in the market. Do you know anything on that subject ? — A. No ; I do not ; I have no information on that subject further than I have related. WAGES PAID IN THE PRODUCTION OF CRUDE OIL. Q. How do wages in the oil business compare with wages in other industries?— A. What branch of the oil business : the drilling ? Q. Yes ; the drilling. — A. I think the wages for drilling have been fairly kept up. An expert driller commands from .^4 to S") a day for his services in our fields. The tool dressers get about S3 to .S3. 50 a day ; I believe that is about the range in our country. Q. How about the pumpers? — A. That of course depends upon the amount and the number of v^ells they have to care for. Their wages run from SJ^O to §70 a month in our field. Rig builders, i. e., the people who put up the derricks, are getting fairly good prices. The contractors, the men who do the drilling and fumi.sh the machinery, are getting from 60 to 80 cents a foot for drilling. Q. The Standard has very little to do with fixing the wages in the fields ? — A. Yes ; so far as the drillers are concerned, except when they may be interested in drilling wells, as they sometimes are. I know of one piece they bought which, only had one v/ell on it at the time. Now I think they have 20 on that property. Of course they were interested in the drilling of those wells, which is usually done by contract. Q. Is there any form of organization among the woi'kingmen in the oil fields in your country? — A. Not that I know of. HOW OIL LAND IS HELD. Q. (By Mr. Farquhar,) Is it generally the custom to lease oil lands or purchase them outright ? — A. The custom with whom V Q. With the operators who sink wells? — A. In a great many instances they lease on a royalty interest to the lessee, but they frequently buy. If they can make a satisfactory price they will buy the fee and the royalty interest as well. Q. The rirle is to lease, is it not ? — A. Yes : generally. Q. (By Mr. Phillips.) Do they pay the rental until such a time as they care to drill upon the lands? — A. Yes: if it is producing, they bu.y the right to continue operating and are at the entire exjieuse of producing the oil and pay a royalty of one-eighth; one-eighth is the custom all through that country. ' Q. (By Mr. Farquhar.) What is the usual time of oil leases?— A. Prom 10 days up to 30 years. Q. Twenty years? — A. Most of them, or as long as oil is found in paying quan- tities. Q. (By Mr. Phillips.) Do you mean by 10 days simply the time to begin oper- ations? — A. Yes; that is it. Q. Then the lease holds as long as oil or gas is produced in paying quantities ?— A. Yes. Q. Have you anything to state yourself that we have omitted that will be of benefit to the commission ? — A. No ; I ilo not think of anything. HOST BUSINESS JIEN FOLLOW LIKE CUSTOMS. Q. (By Mr. Ratchpobd.) Do you know of any business method practiced by any of these refining companies that would not be jiraoticed by others if they had the same power?— A. I have given that snbjec.t a great deal of careful considera- tion, and I have never discovered it yet. Q. You have never discovered any ? — A. No. Q. Is it your opinion that these rival companies, battling against each other, use every means at their command to gain control of the markets ?— A. I think that is the rule ; yes. 1 See Mr, Monnett, p. 311; Mr. Archbold, pp. S39, 640. STANDARD OIL COMBINATIONS: WESTGATE. 365 Q. What effect has this in the end on the consumer?— A. It affects different localities differently, I believe. When you get far away from the oil centers, and give one or two concerns the opportunity to increase the price, it is my experi- ence that they are going to do it, and do it right straight through. AFFIDAVIT. State of Ohio, County of Washington : I swear or affirm that the statements made by me of my own knowledge in the foregoing report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. Theo. F. Davis. Sworn and subscribed before me this 18th day of September, 1899. [SEAL.J Henry G. Bohl, Notary Public in and for Washington County, Ohio. Washington, D. C.,June 9, 1800. TESTIMONY OF MR. THEODORE B. WESTGATE. Refiner of oil. The commission met at 10.50 a. m., "Vice-Chairman Phillips presiding. At 13.20 p. m. Mr. Theodore B. Westgate, oil refiner, of Titusville, Pa., appeared and testified. Q. (By Mr. Jenks.) Will you give us your full name and address? — A. Theo- dore B. Westgate, Titusville, Pa. Q. You are a refiner of oil? — A. I am. Q. How long have you been engaged in the business? — A. About 13 years. Q. Are you also interested in the production of crude oil? — A. To a small extent. Q. In what way? — A. I am producing a little. Q. As an independent producer? — A. Yes. It is so little, however, that it is hardly woi^th mentioning. y. Do you have your own refinery at Titusville? — A. Yes. Q. Are you associated with any of the independent producing companies? — A. Yes; I am. INDEPENDENT OIL COMPANIES — EFFECT ON PRICES. Q. What ones? — A. The Producers and Refiners' Oil Company, Limited, of which I am one of the managers. That is a transportation company. I am also a director in the Pure Oil Company, which is a marketing company. Q. We have had some testimony here before with reference to the Pure Oil Company and its competition with the Standard (Jil Company in New York City, Philadelphia, and .perhaps other places. Can you give us any information with reference to the effect on prices of the competition of the Pure Oil Company? — A. Upon our opening up an agency in New York City the prices immediately dropped. We did not drop them, but the Standard Oil peojjle did, and without any corre- sponding decline in crude oil. I can not tell you the exact figures, for I have not mv papers here. I can give it to you later, if you wish. There was quite a material drop. [Supplied August 19, WM). -'On March 20, IsiMi. the day the Pure Oil Company commenced selling Water White oil in New York City, our price and the Standard's was 9^ cents. On March 3(; the price was cut by the Standard to 8 cents. This price was gradually dropped, until on April 4 it was 7i and 7 cents.'"] ' Q. (By Mr. Phillips.) So much so as to take away the profit? — A. Yes; entirely. Oil was sold at .a loss by the Pure Oil Company in New York City. Q. Do they still continue to sell at a loss?— A. Yes; it is still sold at a loss there. Q. (By Mr. Jenks. ; Do you recall any other places beside New York City where the Pure Oil Company went in as a competitor and followed prices down until it was selling at a loss?— A. Philadelphia, Pa. ■ Compare Mr. Lee, p. 263; also Mr. Archbold, p. .528. 366 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. DIFFERENT GRADES OP OIL MANUFACTURED. Q. Will you tell us regarding the different qualities of oil that you refine and the difference in prices of those various qualities? — A. Taking the prices to-day as a basis? Q. Yes. — A. Do you wish me to state the qualities — that is, the brands — as I put them out? Q. Yes; if you will. — A. My highest grade of oil now is Sunlight, double refined. That is worth at the refinery to-day, in bulk, 4+ cents per gallon. My next lower grade is Headlight oil, wliicli is one-fourth of a cent less per gallon. These grades of oil are water-white oil. My next grade of oil is Diamond Safety, which is one-fourth of a cent per gallon less than the last grade. My next grade is Silver Star, which is not water white but iprinie white. The first three named are water white, 150 fire test; the Silver Star is prime white, 150 fire test. I make 120 water-white oil, which is worth 4 cents a gallon. Export oil to-day is worth 3.90 at the refinery. Q. Are these all the different grailes you make? — A. Yes. Q. And there is a difference in price between them? — A. Yes. METHO.D OP BRANDING. Q. In branding these oils do you vary the brands at all to suit the whims of the individual customer when the oils are of the same grade? — A. Yes; I do; but I do not sell my Sunlight, double refined — my high-grade oil — under the brand of Diamond Safety; neither do I sell my Diamond Safety oil under the brand of Sunlight. A customer in northern New York may want his special brand put on my Sunlight, double-refined oil, and may call it Arc Parlor or Silver Star. Another man in Massachusetts may call it Starlight. There are oO or 40 different brands that can be placed upon the same grade of oil with all due credit and due justice to the refiner as well as to the purchaser and consumer. Q. In that way you vary the brand to suit the wish of your individual customer, although you do not put a brand that would iinply a high-grade oil upon what is really a low grade? — A. No: I bill it out under the name of Sunlight. I do not take the brand on the barrel. It goes in my invoice as Sunlight, doable refined. Q. But you let him sell it under whatever name he chooses? — A. Under what- ever he chooses: under the name of the Standaid Oil, if he chooses. I have no names used by the Standard. In northern New York my Sunlight, double refined, put in yellow barrels and branded, American Oil Works, Limited, Sunlight, double refined, 150 water-white oil, was giving such entire satisfaction that they immediately began to copy the brand . Q. You say "they?" — A. I mean the Standard Oil Company. They put their name on tlie outside of the circle, i do not think I lost any customers by that. It only went to show that I was gi^■ing a high grade of goods; and anything that is worth imitating is certainly a good article; it was not injurious to me.' Q. (By Mr. Phillips.) Was their quality as good as your own that was upon the market? — A. That I do not know. I received empty barrels of theirs from Potsdam which my customers had picked up, and which vreut to prove what my salesmen had testified to and written me. METHODS OP STANDARD OIL COMPANY IN MEETING COMPETITION. Q. Can you give us any further information with reference to the methods of competing employed by the Standard Oil Company which you may have gathered in your business? — A. Sometimes the competition is very agreeable and runs along smoothly, and then all of a sudden there will be an outbreak, not in all localities, but in some particular locality. Whether that is occasioned by my refinery put- ting in too large a per c-ent of refined oil. I do not know. I wish you would bear in mind that I have no understanding with the Standard Oil Company as to how much oil I shall put in any district. They, however, keep a very acsurate record of every barrel that the independent refiners put into each city, town, and hamlet. Their traveling men have to report each night concerning the customers in every town, whether or not they are their customers, whether they buy oil, and if not, why not, and whether or not there is any independent oil there. They keep closely in touch with the business. That is one reason why they are such a suc- cess, because they know what we are doing. I have found severe competition at times, so severe, indeed, that I have been obliged to sell oil under cost to certain customers. That is, after a customer has proved to me that he is an established customer, it is certainly to my advantage to endeaAdr to protect him just as long ^ Compare Mr. Archbold, p. CA'.l STANDARD OIL COMBINATIONS: WESTGATE. 3G7 as I can. We are very cautious, however, about that, because we have so many times finally lost customers whom we have protected for 6 months or a year. They turn us down, and the Standard makes some arrangement for the handling- of their oil. I have in mind such a case at Peekskill, N. Y., which took place within the last year. We had such a case as that at Albany some 8 years ago. I am thankful to say those oases are not in the majority, because we endeavor to use our customers so that at times of pressure they will stand jiart of the loss and we stand part. We can hold, perhaps, a majority of the trade. I have letters here which I could read you regarding the severe competition that exists and that has existed in diiferent parts of the State of New York and the West. I would further state that my company has two agencies, one in Auburn, N. Y.. and one in Syracuse, N. Y. The prevailing price for 150 water- white oil in Syracuse during the past v\dnter and early fall was 7.V cents per gallon. The prevailing ijrice for the same grade of oil in Auburn, 2't miles s. .uth, was about 2 cents less per gallon. If you would ask me the reason, of course I could not tell you. It is simply theoretical. I have demonstrated this, however, to my satisfaction, if not to yours, that if I sell a limited amount of oil, very limited, say a tenth of the consumption in Syracuse, there are nine chances in ten that the prices will not be cut. But it is difiEerent if I attempt to get one-third or one- half of the trade, as I did have in Auburn. I wish to state, however, that the people who owned the distributing concern in Auburn had received this cut before I took hold of the business. It is not my policy to go in and get too much trade in any one locality. It is to my interest to distribute my btisiness, and I find it better not to attempt to compete in that way. With some customers, where I am not marketing by the tank-wagon system, as I do in country towns and other places, I have a very heavy competition at times, what might be called an unjust, illegal competition. Q. Is it your general policy not to attempt to drive the Standard out of any of its markets, but rather to get into some markets and secure only a small per cent of the trade, but not enough so that they will think it worth while to out prices against you, and in that way to make your profits? — A. That has been my method during the last ■") or 10 years. Q. (By Senator Mallory.) What were you going to say was the reason for the difference in price between Syracuse and Auburn? — A. The reason, which, perhaps, I did not make plain, was" that I Vi-as selling a larger percentage of the consumption of oil in Auburn than I was in Syracuse. Q. If you pass a certain limit then they cut?— A. What that limit is I do not know. I have estabhshed it in my own mind. Were I to go into Albany to-day and establish a tank-wagon system, there is no doubt that tor the first few weeks th(>re would be a cat in prices; but if with the first advance of the market I main- tained a sort of halt-normal condition and desired simply to pirt out enough oil to pay running expenses a^nd make a small profit, the probabilities are that prices would be maintained at an advance in time. A CUT IN PRICE EASILY PRECIPIT ^.TED. Q. Has that lieen your experience to such an exti'ut that you can put it down as a rule to be governed by in your business?— A. No: there are no rules in the oil business. I wish to state, however, that sometimrs even 1 barrel of oil will precipitate a cut by the Standard Oil Courpany. A friend of mine shipped sim- ply 1 barrel of independent oil with an independent br:>.nd on it to Salisbury, Md.. (I believe it was Salisbury). He sent it there f.s a present. A friend had told him that tliey were getting very poor oil there. The oil arrived, and the party to whom it was shipped, being a consumer and not a retailer, and having just bought a barrel of oil and put it on tap, in order to get rid of the barrel of oil presented him sold it to a darky, who put it on his wagon. 6. (By Mr. .Tenks.) You mean the oil of good quality?— A. \es; the good qualitv: the independent oil. The darky put it on his wagon and went to ped- dling 'it through the town with the brand on the li;.,rrel. The Standard Oil Company at once began to investigate. Then they shipped m a carload of the best oil the citizens said, that ever arrived in Salisbury, and made a heavy cut on the price of the oil: but, of course, there was no fight. The oil was not sent there to compete with the Standard Oil Company, but they are very alert; they will know unquestionably to-morrow morning what all my shipments were to-day. They know in New York City where that oil is billed to. They may not get it at the Titusville freight office, but if not there, they get it at the junction points, either Buffalo or one of the others.' We know that because our customers have been apprised of the fact by some Sta ndard traveling agent who has approached ' See Mr Monnett. p. 31B; Mr, Davis, p. .350: Mr. Arclibold, pp. r,T:S,574: Mr. Emery, p. 615; Mr. Gall, p. 684 . 368 HEARINGS BEPOEE THE INDUSTRIAL COMMISSION. them and said, " We understand there is a car of oil on the way for you from Titusville." The customer does not know it is on the way. He knows he has ordered it, but he has not yet received the invoice. So you see our business is entirely given away by some one. I can not say .positively it is the railroad com- panies. It is not the men in my office, because all the men in my own oflace are members of the firm.' EXA.MPLES OF COMPETITION. Q. Can you give one or two specimen cases of the competition that you have in mind? — A. You understand, now, that this is simply my side, or rather my cus- tomers' side of this business. I have not evidence here, nor in my possession, that the Standard Oil Company, or their agent, said this. I believe, however, that he did say it. This letter is from Shortsville, N. Y.; it is from onaof my customers, Thomas & Harrington [reading] : [Office or Thomas & Harrington, dealers in fine groceries, dry goods, boots, and slioes. 20899.1 Shortsville, N. Y., March 2S. 1899. T. E. Westgate, Esq. Dear Sir: We take tliis opportunity of writing you to explain the situation in the oil business. Mr. Cady is here, and we have told him just how things are. One of the merchants here wrote a letter to Buffalo in answer to an inquiry from the Standard people asking why there was not more Standard oil sold here. His letter was sent to New York, and they telegraphed to Buffalo to send a man to Shortsville at once. Their agent came and went to Mr.Hall, whom we supply with oil, and tried to get him to take some in the carload, but he refused, saying he could buy of us, and the agent made the following reply: " We have tried to treat Thomas & Harrington right, and have offered them oil less than they can buy elsewhere, but they still refuse; now we are going to force them to buy of us." The next day they cut the oil to 7 cents. We have held the price up to 10 cents, but our trade is leaving us and we must meet them. Now, under the circum- stances, what is the very lowest price you can put in a carload of diamond oil for? Answer at once. Yours, respectfully, Thomas & Harrington. The oil supxilied to Mr. Hall was American Refinery oil — my oil. Q. (By Mr. Farquhar.) Did you furnish them the oil at a rate so that they could compete with the Standard Oil Company? — A. Yes; I furnished them oil so they would not lose money, but there was no profit in it. Q. (By Ml-. Kennedy.) No profit for you? — A. I can not tell you what price I got for it. I think it was one-fourth. We figured that we could give him from one- fourth to three-eighths of a cent ])er gallon on our oil. We are doing a fair busi- ness there — all that the Standard Oil Company will let us do — and customers find that we can not cut prices from half a cent to a cent a gallon and be able to stand it without a loss. The fact that we can run on such small margins is due to the magnitude — the great volume — of the business. Q. (By Mr. Jenks.) If, under the pressiire of competition, you make a cut of three-eights of a cent a gallon, are you taking all your profit away? — A. Yes. Q. And your ordinary margin?— A. I wish you to understand this, however. We will say that the price of crude oil is o cents per gallon, and refining is one- half a cent per gallon. You would say, then, not being acquainted with the busi- ness, that if I sold water-white oil at 4 cents per gallon Iwould be making one- half -a cent per gallon profit. You mu.st take into -consideration that there is a waste of from .5 to 7 per -cent in refining; there are products, such as tar, that to-day is worth about 2{|- cents per gallon. Tar has been as low as three-fourths of a cent per gallon. In figuring the prices of the high-grade goods, therefore, we must not forget that there are low-grade goods of very inferior value, selling at even less than the price of crude oil. Benzine a year ago was less than crude oil; to-day it is worth moi'e than water-white oil, being the most valuable product we have: that is, in the illuminating oil business — not in the lularicating oil business. You see, then, 'that we have to take all of these things into account. In Fulton, N. Y., we have a customer by the name of W. S. Crandall. He is simply a retail peddler of oil. perhaps worth a few hundred dollars. He has been my customer for.") years. He wrote me on April 7 the following: "The Standard Oil Com- pany has put another retail peddler on the road. There was already 1 here, and tins makes 3 retail peddlers they have here now drumming the trade. They have had 1 here for a year. He came April 1, IH'.IH; about 3 weeks ago he approached ^ C'( >rapare Mr. Emery, p. Gl.'j. STANDARD OIL COMBINATIONS: WESTGATE. 369 my man and wanted to lure liim, and offered him considerable more than I wonld pay hun and a bonus of $100 if he would go to work for Mm. He would give him a bond, with a contract to keep him employed for 10 years; but he could make no impression on him, for he would not leave me. Now they have hired another man, and both the retailers and the man that wholesales are telling the people that they have a car of ximerican oil on the road that will sooq arrive, and that thev will be prepared to furnish the same oil at less than we are selling it." I should have said, previously to this, that the Standard has repeatedly tried hard to get this man away from me. Of course that is all right; there is no harm in that. If they can give him good goods in a general way on a margin of pj-ofit, that is straight business. Ten days after receiving this letter. May 20. 1 received another letter from Mr. Crandall. which I do not need to read, but he stated in that that a carload of oil — our oil— had been received by the Standard agents in Fulton and wanted to know if we had shipped it to them, and told me about what the qualities of the 2 grades of oil were. I immediately rei>orted that we had not shipped a car of oil to Fulton to the Standard Oil Company or anyone else but himself. I asked him to get the date of the inspection on the gallon end of the barrel, and that would give me a way of finding out to whom I shipped that identical car of oil. He did that on May 36, and wrote me that he looked at the barrels and found that they were inspeited by my inspector on April 3. The only carload of oil that I shipped out on April 3 in barrels was to the Merchants' Refining Company in Buffalo. I shipped it in a Western New York and Pennsyl- vania box car. This oil arrived in Fulton in a New York Central car. so that it was transferred in Buffalo. Now, I am not prepared to t,;iy. gentlemen, that that identical oil in those barrels was my oil. They might have taken nry oil out and put their own in at Buffalo, but in all probability they would not do that, because it is expensive business. It probably was my oil. I know very little of the Mer- chants' Refining Company. They are a small company, and I understand that they buy Standard Oil goods. I did not know that at the time I sold this carload of oil to them; but that is the method they adopted to get the American Oil Works oil in there to compete with my man. They could not do it with their own goods. We certainly had one man in Fulton, N. Y., who had the spirit of oiir forefathers. Q. What has been the effect ? — A. He says in another letter that the other man now follows his man around and endeavors to get the trade either by fair means or otherwise. They offer to cut the price from 1 cent to 4 cents a gallon, and to give them what they claim is the same oil my customer is dealing out to the people of Fulton. ' Q. Do you think their intention is to drive your man out, if possible, by selling your oil cheaper than he can sell it, and then afterwards put in their own?^A. And drive him out of the business 't Q. Yes. — A. In this particular case his consumption is so small that it is not myself that I care so much about as I do about him. Besides, it would establish a precedent which would keep him or other men from undertaking the same line of business in other places. The canceling of 6 or 8 cars a year that this man might handle would have very little effect on my business, it simply affects him. COMPETITION ON THE PACiriC COAST. Now, these letters that I have read and this evidence I have given is hearsay, and in a court of justice might not be admissible. I have, however, a letter from Portland, Oreg. , which I will give in evidence, which is to mj' mind evidence of the most flagrant violation of honest competition that I have met with. That is on paper. They are very cautious usually about what they do in the way of mak- ing threats. This letter is, as you see, from the Standard Oil Company. Port- land agency, George C. Flanders, special agent, Portland, Oreg. This letter is written to a firm in South Bend, Wash. I perhaps had better state now that I have been shipping oil in barrels from Titusville to a Mr. Copenspire, in South Bend, and that he had been selling a few carloads of oil in South Bend. It seems that the Eichnor Brothers, of South Bend, had written a letter to the Standard Oil Company at Portland, Oreg., describing the condition of the oil business there, in reply to which the Standard Oil Company, over the signatm-e of Mr. George C. Flanders, special agent, wrote as follows (reading) : Portland, Oreo., March .?S. 1S94. Eichnor Bros., .S'o»i// Bend, Was]i. Gentlemen : Your favor of the 34th instant, giving us information regarding Sun Light oil duly received and contents carefully noted. It seems that the con- sumers of coal oil in South Bend have a curious idea as to what kind of an oil 1 See Mr. Archbold, p. 550. 370 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. constitutes a first-class buruing- oil. We will state for your information that never a drop of oil has readied South Bend of better quality than what we have always shipped into that territory. They can name it " Sun Light,"' "MoonLight," or " Star Light ; " it makes no difference. You can rest, assured that if another carload of '• Sun Light'' oil arrives at your place it will be sold very cheap. We do not propose to allow another carloiid to come into that territory, unless it comes and is put on the market at i me-half its actual cost. You can convey this idea to the young man who imported the carload of '• Sun Light " oil. Thanking you kindljr for this information, as well as past favors, we remain, Yours, truly. Standard Oil Company. By Geo. C. Flanders.' Q. (By Mr. Jenks.) Have yon any otlier information to give with reference to their methods of competing? — A. I think of one method of meeting this which one of my customers in the Bast tried some T or 8 years ago. He was a German. He had good Bismarck blood in him, I judge, from what I will recite to you. I had sold him a number of carloads of oil, and the Standard agent of Jersey City came to liim and said, ''We must sell you the oil that you are jobbing herein Hoboken." He said, "No; I prefer to buy independent oil. ' The agent said, "We will name you a low price, and wo will fix a marketing price so that you will make a good thing out of it." He said, " Na: I jirefer to run as I am run- ning." The Standard agent then said, "If you continue in this, we will so cut the price here that we will drive you out of business." He said, " You mean to make me lose all the money that I have made?" The agent replied, " Yes." He said, "If you will do that, do you know what I would do to you?" And con- tinued, " 1 would go over to your warehouses and I would blow them up with dynamite; that is what I would do." He told me that in less than 3 days the Standard Oil agent was over to see him and a price was fixed; but he still con- tinued to handle oil from my refinery.' Q. That is, by an agreement between the Standard Oil Company's agent and himself? — A. Yes. Q. Is your source of information the man himself? — A. Yes; his own mouth. Q. Have you finished with this special point? — A. Yes. Q. (By Mr. Farquhar.) I would suggest that the name of this man be given.— A. Charles Frey. Q. (By Mr. Jenks.) Was it at Hoboken or Jersey City?— A. He was at Hobo- ken, ami the Standard Oil agent was from Jersey City. Q. Does this cover substantially what you have to say with reference to methods of competition, aside from the question of freight rates, that might come up?— A. I think what I have stated is sufiicient. Q. (By Mr. Jenks.) You have had othei' experiences of somewhat similar nature, I suppose, but these are typical ones? — A. Yes. purchasino and dismantling independent refineries. " Q. Do you know whether the Standard Oil Company, for the purpose of getting control of prices in certain sections of the country, has bought up competing oil refineries and then dismantled them? — A. Yes; it has. Q. What special instance have you in mind? — A. Two large refineries in Titus- ville were bought up in the year iN'l.") by the Standard Oil Company, not simply to get the refineries, but to get the stock which they held in the United States Pipe Line and the Producfi's and Refiners' Oil Company, Limited. They wished to assume or get control of these pipe lines: they did no't care a snap for the refin- eries. They made that statement. They made a proposition to all of us to buy out all of the refineries if we would put our pipe-line stock in; and 3 of the largest refineries sold, 2 inTitusville, the Union Refining Company and the International Oil Company, Limited, and S. Y. Raniage, of Reno.'' You may ask, perhaps, if that did not lessen our own independent competition, those being drawn off and the refineries dismantled. The Standai d dismantled them, and the iron v'as mostly sold for junk. It did, certainly, give us that much more field — that which these special independents had been working in; but it did not give their patronage to the Unite'd States Pipe Line and the Producers and Refiners' Oil Company, Lim- ited, who needed it; it took it away. At that time Ave were having a wry crucial test in the refining business and pipe-lining. It did not give us the patronage whicii we, as pipe-line men, desired and urcded. It costs comparatively little more to run 100,000 barrels (jf oil a month thi'ough a crude pipe line than it does 7.5. 000 or (iO,000. It is always best to run full volume, and it took away not only their patronage, but their inflnenc(> in our inde]>endcnt enterprises. ' Sue Mr. Archbold, p. .'i.'JS. ■' See Mr. Ai-c.libold, p. .ViO. = Soe Mr. Emory, p. urili. bottom. STANDARD OIL COMBINATIOiNTS : — WESTGATE. 371 Q. (By Mr. Phillips.) Were they buying crude oil through those independent lines and also shipping refined? — A. They were. Q. Those refining companies? — A. They were 3 of our largest refineries. Q. (By Mr. Jexks.) So, as a matter of fact, the business of the independents was seriously damaged by these 3 refineries selling out to the Standard Oil Com- pany? — A. Yes; it was. Q. Have you any information with reference to the prices that were paid for those refineries? — A. I have not. Q. What were the oftei-s that were made to you? Were they what you would consider high under ordinary cii'cumstances? — A. The offer did not come to me in person from the Standard Oil Company, but through those who did sell and who had been in direct communication with the Standard people in New York. The price was not high; it was simply a constructive price — a cost price. Q. That was all there was of it?— A. That was all I was offered for my plant. Q. Have you any knov/ledge with reference to transactions on the part of the Standard Oil Company at any other time in the way of buying up refineries and dismantling them to get rid of competition? — A. I know from hearsay, before my oil days, that such things were done to quite an extent. I have no personal, direct knowledge. Q. Your own knowledj;-e is pract'cally limited to this experience in Titusville?^ A. Yes. EFFECT OF THE STAXDiED OIL COMPANY ON PRICES. Q. Some other witnesses have spoken with reference to prices and the eifect of the Standard Oil Company on prices. This chart,' representing prices of crude and refined petroleum, shows the way the prices of petroleum have fallen. Will you tell us what, in your judgment, are the chief reasons for the decline in price of refined oil, as compared with the price of crude oil, since ISTO? — A. In the early days of refining, the by-products — what we term by-products, such as benzine from which gasoline is made and tar — were entirely worthless. They were either run into the creek at night or run into holes dug in the ground and burned. Their value then as a fuel was not realized, and refiners were buying coal and wood to refine oil with , when they were running into the creek what they might»have used for fuel. I might say that the percentage that we now take out in these products — I do not know what they took, but it was practically about the same — is some- thing like 20 per cent of the crude product. About one-fifth of the crude oil prod- uct was entirely wasted, which to-day, in 1899, is worth a high price; for instance, benzine is worth more to-day than water-white oil, as I have already stated, and tar is worth nearly as much as crude oil. These prices fluctuate; tar has been WDrth i cents a gallon daring the past 8 years, but it has been down as low as three-fourths of a cent a gallon. Q. So that in this way about 30 per cent of the crude oil, which formerly was an absolute loss, is now saved and made as valuable, on the average, perhaps, as the refined oil itself? — A. Yes. Then, too, the cost of refining has lessened very much. Approximately, oil can be refined for one-half cent per gallon — I refer now to illuminating nil and gasoline — wliereas I am told that in the early days it cost about 21 cents a gallon.- The quotations ^ which have ueeri placed before you were based upon refined oil at the seaboard in 1898; that is to say, oil in barrels. In 18a8 refined-oil laarrels were worth, in Titasville, 88 cents apiece. In the early days barrels were worth from $2 to 8^, which makes a difference of from 2 to 4 cents per gallon in the value of a barrel, which wotiLl knock oif considerable of this advance in price, as he has arranged his schedule. Q. As a matter of fact, when we find oil quoted by the barrel, the value of the barrel is included in ' the quotation?— A. Yes. The schedule is right, no doubt; but if the logic the witness uses is right, why should the Standard make the price of refined oil in 189.1, when crade oil was 81 -So a barrel, 4.9 cents per gallon, and in 1898, when crude oil was only 90 cents a barrel, 5.7 cents per gallon? You see, there is a difference there of 80 points. If they are cheapening, if they are tending to lower the price, his table is all right, but I do not see the logic in the point that he makes. These prices are simply on export oil. Suppose we take last year's average price. Refined oil was 5,7 cents per gallon; if for some reason the Standard Oil Company sees in foreign countries a necessity for cutting the price on export oil 1 cent a gallon, making it 4.7 cents per gallon, they would simply have to advance the prices on home products 1 cent a gallon on the balance of the products to make up for that deficiency, and therefore you can not determine prices in the oil business generally upon the prices of export oil alone. ^ If his logic is true, he is giving all the benefit to the foreigner, because these prices he 1 See chart of prices in Introduction. = See Mr. Lee, p. 276; Mr. Rice, p. 735. 3 See testimony of Mr. F. B. Tiiurber, p. 4. < See Mr. Lockwood, p. p. ;«i, 398; Mr. Archbold. p. rat- Mr. Emery, p. 016. 372 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. uses for the chart basis are on export oil: there is very little export oil used in the United States, supposedly. If his logic is true, he is helping the man over on the other side, and yoii and I have to pay higher prices for water-white, lubri- cants, and gasoline. Do you see tiie point I make? PRICE OP EXPORT OIL NOT A CRITERION OF PRICES IJJ THIS COUNTRY. Q. Do you mean that he uses figures which simply represent one quality usually sent abroad, and that the table therefore does not represent the average price of refined oil to the consumers or the wholesale dealers in this country?— A. Yes; this is export oil and represents about 44 per cent. About 44 per cent of the crude product is export oil. Q. Your general conclusion, then, is that the figures cited in this table, or repre- sented on the chart, are untrustworthy for the purpose of drawing any conclusion as to the general level of prices to the consumer or to the wholesale dealer in this country? — A. That is certainly my conclusion. I believe, however, that the Standard Oil Comp'any is employing the very best brains engaged in the manu- facture of oil. They have certainly brought forward a great many inventions in the refining of crude petroleum. I certainly believe that. A man can not help bttt see that they are improving every day. They are doing a great deal to bring out the very best there is in crude oil and make the most of it. That is their business. They probably do more than any man or any firm. Probably Mr. Van Sickle, who was an independent refiner in the sixties and seventies, brought forth more original ideas at that time that are still being used than any one refiner. He was a very practical man. Q. Yoii would be inclined to think, then, that on the whole this decline in prices that has come through improvements in methods of production is due, fn part, to the work of the Standard Oil Company and in part to the inventions of the independent refiners, and that the honors might fairly be distributed between the two? — A. You must not forget that with this decline in the prices of refined oil there has been a very heavy decline in crude oil: wells are bored and handled so much more cheaply. Originally 1 man with 1 pump, boiler, and engine would pump 1 well; to-day little wells doing a half or quarter of a barrel are har- nessed up to 1 big drive power, with 30 and 80 and even 40 other wells. So yon see the expense of operating is so greatly reduced that the cost of producing has become nominal compared with what it was 10 or 20 or 80 years ago. Q. At the same time, in accordance with this table, the price of crude oil has not declined materially since 1879. In that year it was selling at 88 cents a bar- rel. Was it not SI. 05 in 189.5?— A. What is i't now? Q. So the price of crude oil, on the whole, seems not to have declined very much since 1879 and 1880, and of course the price of refined has also declined very much less since 1880 than it did between 1870 and 1880, acc(3rding to this chart. Would it be right, then, in your judgment, for us to infer that the chief improvements in the methods of production were made between 1870 and 1880 rather than since 1880 — improvements in the methods of refining? — A. Between what years? Q. Between 1870 and 1880, I will say, instead of since 1880?— A. That would be simply speculative. Q. it was during those years that the chief difference was made in the cost of the refined product. (No response.) Q. (By Mr. Phillips.) Have the Standard Oil people any superior methods of refining that are not known to the independents? — A. If they have, we do not know it. Of course, if we did know it we would use the same; they do not give out their information, certainly not. Q. Do you believe you can get out the whole value and make as good oil as they, both in by-products and refined material? — A. I believe the independents put out as good goods in every way as the Standard Oil Company does, certainly. FREIGHT RATES AND TRANSPORTATION. Q. And as economically in proportion to the amount they put out? — A. I believe we do; yes. Q. (By Mr. Jenks.) The question of freight rates and the apparent advantage of the Standard Oil Company in that respect has come up a number of times. Have you any information that you can give us concerning the freight rates that you secure, and the influence of the Standard Oil Company upon the railroads, or the special advantages they get in the way of freight rates? — A. With reference to oil rates, I have no reason to state that we are paying any higher rates per hun- dv(^d than the Standard Oil Company is. They are not shipping anything from Titusville, but there are other given points, such as Olean and Buffalo. Buffalo would take a little higher rate, however; but I know that they are underhilUng STANDARD OIL COMBINATIONS: WESTGATE. 373 tlieir cars. Since the establishment of the Interstate Commerce Commission the raih-oa,ds. I think, have been very carefvil about giving rebates on oil, or perhaps on any other traffic: they may do it; I know of nothing of the kind. UNDEEBILLINQ OF CABS. t But I have seen freight receipts in New York from one of my former custom, 'rs wherein a car of 7,000 to 7,200 gallons was billed from Olean at 34,000 pounds. Now, that car weighs, according to the basis on which we have to figure, 6.4 pounds per gallon — from 44,800 pounds to 46,080 pounds. I give you the weight of 7,000-gallon tank cars of oil. Were I to bill that car or those oars I v.-ould'have to bill it as I have stated, at actual weight — 44,800 or 46,080 pounds. They also prepay their freight. Perhaps I should not say that, for I do not know it; but my customers, who have received oil from theni, state that the Standard prepays all freight on oil, and I believe they do. Now you see what a difference it makes when this oil is billed at 24.000 pounds. They may be paying the same freight rate per hundred, but you see what a disadvantage I am working under if I have to bill 44.800 pounds where they can bill it at 24,000 pounds and get it through. I have seen 3 of these freight receipts, and my opinion is that every car that goes out of Olean, or any other of their refineries, is billed on this same liasis; and I believe that is where they are getting the remarkable leverage: and I believe, also, if I were paying on the same basis they are. or they were put on the same I am, we would not have to make such cuts or else go out of the town. Q. Why not bill at still less than that? — A. Twenty-four thousand is the mini- mum capacity, the minimum car weight, in billing oil. Q. Then you believe it to be true that the general custom that is followed is to bill every car at the rainimum weight, although the car itself may lie very much larger and heavier? — A. Yes; at the minimum weight. I know one other inci- dent. It is just hearsay, but the case of these receipts only confirms what I am about to say. A certain party in New York bought a few tank cars of crude oil from the Standard Oil Company, which were shipped from Olean. The cars arrived and the freight bills were presented for collection, because they were buying it f . o. b. ; they bought it f . o. b. Olean; it was certificate oil put into tank cars: it was not refined: the freight bills were presented to the buyer, who noticed, to his surprise, that the cars were billed at 24,000 pounds; and the cars held from 6,000 to 6,600 gallons, which would be 38,400 pounds on a 6,000-gallon tank. Q. (By Mr. Phillips.) Of difference? —A. No; that is what I would have to pay; they were billed at 24,000 pounds, whereas they actually weighed 38,000 pounds and more. A few days later this buyer got a corrected bill from the rail- road company billing them at actual weight with the regular rate, which he paid, of course. I do not believe these were errors. The 3 cars I speak of in central New York were not billed at the same time; they were billed at different times, and those things could not be errors. Every railroad has or should have what we call a tank-car book, giving the number and initial of all the tank cars in the United States and Canada, with the gallonage and the weight, figured at 6.4 pounds per gallon. Q. (By Mr. Ratchford.) 6.4 per gallon? — A. Yes, joer gallon; 6.4 pounds per gallon. Therefore, I say these things can not be errors on the part of the billing clerk. It only confirms my belief. It is my belief, of course, that they are getting their goods put through, when in tank cars, at 24,000 pounds. whil(- I am paying on the same car for practically 50 or 100 per cent more than the weight for which they are paying. Q. (By Mr. Jenks.) Do you recall the dates of these receipts? How long ago was this? You say you have seen separate receipts: have you any idea about when that oil was shipped?— A. It was about 3 years ago. Q. So you think that, within 4 years at any rate, you have located 3 specific cases in which the Standard Oil Company has had its oil underbilled, 1. e., at 34.000 pounds, where a fair billing would have been at least 44,000 pounds, and probably more? — A. Yes.' RAILROADS DO NOT CAKE TO HANDLE INDEPENDENT OIL. Q Have you other information with reference to freight rates in connection with the oil business?— A. In reading these 3 letters I wish to show to the com- mission that for some reason independent oil is not a commodity that the rail- roads are desirous of handUng. This one is from the commercial freight agent of iSeeMr.Archbold,pp.550,551; Mr. Eioe,p.7.31; Mr.Page. 83A 25 374 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the New York. Chicago and St. Louis Railroad Company; he is in Pittshurg. IJe writes (reading) : Pittsburg, Pa.. April lr>, 1898. Subject: Rates on oil, Titusville to Vermont points. Mr. T.B. Westgate, Manager American Oil n^orka. Titusville, Pa. Dear Sir: Referring to conversation the writer had with you a short time ago in regard to rates on oil from Titusville to points in Vermont — I regret exceedingly that at the present time we can not name satisfactory rates on oil from Titusville to Vermont points. We hope, however, to be able to do so in the near future and will advise you just as soon as possible. Yours, truly. W. H. Richards, Commercial Agent. Howes. Here is a letter from the New York Central Fast Freight Line, F. L. Pomeroy, general manager, Buffalo. He is the general manager of the Red Line, White Line. Blue Line, Canada Southern Line, and Midland Line (reading): Buffalo, N. Y., December 5, 1898. Messrs. American Oil Works, Limited, Titusville. Pa. Gentlemen: I have your favor of the 2oth instant asking for rates on oil in tank cars and barrels from Titusville to Montreal, province of Quebec, and in reply would say that oil is not a commodity that we are permitted to handle hy our fast-freight lines; therefore I have no authority to make or discuss rates on this commodity, but would refer you to Mr. S. Goodman, assistant traffic manager. New York Central and Hudson River Railroad, New York City. Thanking you for the business which you are giving us of other kinds, which is fully appreciated, I am. Yours, truly, F. L. Pomeroy, (Jeneral Manager. freight rates according to the red-line tariff book. I wish to offer in evidence a Red Line tariff book. ' The Red Line is one of the lines of which Mr. Pomeroy is general manager. I take it that these lines are a sort of a wheel within a wheel for some purposes. I aia now billing oil at Titus- ville to certain points via the Red Line. This, as you men who are acquainted with the railroads understand, gives in alphabetical order the names of towns in Pennsylvania, New York, and the Eastern States and their freight rates; that is, it gives what rate it takes; for instance, Abbington, Mass., takes a Boston rate. Referring to the sheet that this D. A. V. M. Line provides me with, I find the Boston rate on oil in carloads is 2?,\ cents per hundred; in less than carloads, local, it is 33 cents a hundred. I am prohibited shipping carloads to certain points named in this; that is, carloads of oil. Other classified freight goes through and oil in local lots goes to some points; but to points on the New York, New Haven and Hartford (e. g., the first one I read, Abbington, Mass.). I coixld not ship oil unless I paid 33 cents. I would have to pay an arbitrary price. This occurred,! should say, about 3 years ago, when the New York, New Haven and Hartford came into certain hands.' We suppose it is controlled by the Standard Oil Com- pany. Our territory is being narrowed each year by the roads which are in some way made servants, in my opinion, of the Standard Oil Company. Q. If I understand you, this Red-Line rate book that you have shows that you (•an ship ordinary kinds of freight at Boston rates to all these local points.— A. Yes. Q. When you yourself attempt to get rates do they simjily say they will not ((uote you any rate at all for carload lots of your product?— A. 1 enjoy freight rates to some of these points. There are exceptions; for instance, (reading): "Agents take special notice: Petroleum oils to points via Syracuse, on the Ogdensburg and Lake Champlain Division of the Central Vermont Railroad and points beyond, can not be taken at rates named in this tariff. Shipments of 1 East-bound Red Line Tariff, No. 40, Marcli, 1899. 2 See ijaragragh 1 of Vice-Pi-esideut Hall's affidavit in footnote to the testimony of Mr. Page. STANDAED OIL COMBINATIONIS : WESTGATE. 375 petroleum oil destined to points on the New York, New Haven and Hartford Railroad (New Haven and Old Colony systems) can not be taken at rates named in this tariff. Siioh shipments will be subject to arbitrary rates from the various junction points of the Boston and Albany Railroad." Now to points like Malone, which, on other freight, take a Boston rate, on oil of 23i cents a hundred, I am compelled to pay 26.1 cents per hundred. As I go beyond Malone to Rouse Point, I am obliged to pay MS cents per hundred. Q. Although through freight, ordinary freight, will be sent for 384 cents?-T-A. Fifth-class freight is 30 cents per hundred. Oil is listed a little higher than fifth- class. I can ship anything to most any of these points speciiied unless it is desig- nated here as arbitrary. Q. (By Mr. Phillips.) Why, in your opinion, did they make that difference — prohibit shipping to some points and allow Boston rates to others? — A. To keep us out of that territory. Q. Would the difference be so great as to consume your profits largely? — A. It, in some instances, prevents us from selling in those localities and causes the consumer to pay a higher price for his goods, because the Standard probably will sell a little bit under us, getting the benefit of the high freight rate which I have to pay from Titusville and which they do not have to pay from, say, a New York point north or a distributing point somewhere, such as Albany. I wish to show in connection with these, which I term exorbitant freight rates, that this Red- Line traffic book quotes a Boston rate to Adirondack Junction, on the St. Law- rence and Adirondack Railway, which is within 9 miles of Montreal. Now, if I could ship oil there, as I should, on the Boston rate, which is 33-J- cents, I could make a good, fair profit; but I hold in my hand a telegram from Samuel Good- man — I believe he is the assistant traffic manager of the New York Central — ^in reply to a telegram, which reads as follows: " 5, 6, 1899. To American Oil Works: There are no through rates on oil, Titus- ville to Montreal, or for other points you name. Tariff from Buffalo to Montreal, Adirondack Junction, or Beauharnois is 35 cents per 100 pounds via TJtica, M. and M., St. L. and A. C. P., or I. Grand Trunk. " S. Goodman." He says that he quotes me a 3o-cent per hundred rate from Buffalo to Adirondack Junction. That was the point named in the Red-Line traffic book, to which I should get through from Titusville on 334 cents a hundred, if taking a Boston rate, which is named here; but instead he quotes me 35 cents a hundred from Buffalo there. Added to that, my 8 cents per hundred from Titusville to Buffalo makes a 43 4-cent rate per hundred from Titusville to Adirondack J auction. I fig- ured that out in miles and in ton rates. I will give the distance from Buffalo to Utica as 201 miles and from Utica to Adirondack Junction as 333 miles, making a total of 424 miles; the freight at 25 cents per hundred on oil would be $7 per ton, which would be SO. 0165 per ton per mile. Now. the New York Central's average receipt per ton per mile on oil in 1890 was .so. 0073: in 1889, .$0.00712; in 1888, S0.00753. The estimated cost of handling oil in 1S90 was 80.00549 per mile; in 1888, ;i;o.00557: the rate he has quoted me is nearly 3 times the average receipt per ton per mile as given in their schedule in 1S!I0, l.syo. and 1888. This computation is on page 100 of a pamphlet containing a case in the circuit court of the United States for the western district of Pennsylvania, which I can give you. This was the testimony that I referred to that was brought before the Interstate Commerce Commission in 1NW8 in Titusville. The State of Vermont is the State where I have had the most trouble in marketing goods, and I wish to read a letter here from a division freight agent; he is a soliciting freight a.gent for the Lake Shore and Michigan Southern Railway Company (reading): Cleveland, Ohio, Aptil --'. /.v.'/,7. The American Oil Works, Tiinsville, Pa. Gentlemen: Referring to our conversation of some time since relating to car- load rates to Vermont points, I have lookeil into this matter very carefully and find that the following rates are the best at the i)resent time. Burlington, Vt., 444 cents per 100 pounds, via Rutland. St Albans, Vt., 50.', cents per too pounds, via Rutland. Richford, Vt., 544 cents, per 100 pounds, via Malone. St Johnsbury, Vt., 364 cents per 100 pounds, via Bellows Falls. Newport Vt., 38-i cents per 100 pounds, via Bellows Falls. 376 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The less than carload rate to St. Johnsbury, Vt., and Newport, Vt., is 33 cents per 100 pounds. Note the attached letter we have from Mr. Chittenden, of the Central Vermont Railway. f onrs, truly. W. F. Andrews, Soliciting Agent. Return the letter. I _ wish to state here that St. Johnsbury and Newport, Vt.. are booked in this Red Line traffic book as taking Boston rates. They should therefore give me a rate of i'ii cents per hundred on oil to those points. This is not the Red Line, however, but the Red Line prorates with the Lake Shore. I think all work together for good except in the oil business. H>' does not name that to me; he has not named it. Maybe he knows that the less than carload rate in the Bed Line book is 33 cents a hundred, but for some reason or other he can not name nie rates on carload lots into those points excepting as I have given them to you. You see that debars us. Such outlandish rates debar a manufacturer from going into territory where they want a good grade of oil. a light oil. Vermont is a good oil State; that is. for selling oil; and it curtails the business. CJ. (By Mr. Jenks.) You think that the Standard Oil Company simply comes into that territory from other shipping points where tlie rates are very much more favorable? — A. It must be. Theycertainlyarenoi piiying such rates. Tliey do not countenance PJiy such thing as that. FREIGHT RATES TO THE PACIFIC COAST. While speaking of freight rates I wish to mention that a few years ago we enjoyed to the Western coast — Western terminals — a freight rate on oil in car- loads of 78.1 cents per 100 pounds. Q. Yoii mean to the Pacific coast':' — A. Yes; the Pacific coast; what they call terminal points on the Pacific coast. After the establishment of the Standard's refinery at Whiting, near Chicago, the freight rates from Titu.sville, Oil City, Warren, and Pittsburg to those points on the Pacific coast were abrogated, and they would not give us a through rate, but we must bill to Chicago at 111 cents per 100 pounds, and then from Chicago west we added THA cents per 100 pounds. Q. So that before the establishment of this refinery you had a rate to the Pacific coast, at terminal points, of 78-; cents, and afterwards your total rate through was 96 cents? — A. Yes: that was after the refinery was built near Chicago, at Whiting, Ind.' I have a letter in my hand from Charles T. Hallowell, general freight agent. Green Line systetn. (Letter referred to is as follows:) Oil City, Pa., Axyril 1:\ 1809. American Oil Works, TituaviUc. Pa. Dear Sirs; On request of Mr. Westgate we made apxilication to Delaware and Hudson for rates to points on that line north of Whitehall, and have only just received Mr. Wadsworth's letter quoting the following rates per hundred" from Whitehall, which must be added to our Boston rate of i3,', cents from Titusville: Tank cars. Barrels. Chubbs Dock. New York- Dresden - Putnam Wrislits Delano Addison .Tunctit pa Crowiujoint Port Pleury We.stport Yrarlhams MiUs'i Wliallcnbui-K Ekkcx Willsboro - - - Port Kent - - Plattsburg --- Beekmantown Sciofci WestCliazy --._ (.'hazy .- - - ( 'ooi'vi Kville - - - Rou.^c I"'"jirit- Ml H xns ,1 un(.'t.ion_ 5 4 4 (i S i) s 1(1 8 1(1 8 11 9 11 9 11 9 11 9 1;; 10 i;i 10 i;-i 10 i:i la 14 13 i:h 10 n 13 H 13 II- 12 14 13 a Station without afj'piit, li-cijilil ]i]-c]iaid. 'Sec Mr.]\lonnett,ii.:ili!); Mr, Uic<', ji.7:)l; Mr. Page. STANDARD OIL COMBINATIONS: WESTGATE. 377 We have again written Mr. Wadswortli. calling his attention to the tact that tlie rates quoted are ahont 'U cents per ton per mile, which is in excess of what other lines would charge for a similar distance, and will advise von if he makes any further concessions. For points on the branch from Saratoga to JSTorthcreek onr Boston rate will apply, as shown in group 3 of oil circular No. 2^. Yours, truly, Chas. T. Hallowell, General Ayeirt. We have also called Mr. Wadsworth's attention to the fact that we asked for rates from Scheuei'tady and not Whitehall. I received a letter written April 19, 1S99, from Mr. Hallowell. in which lie says that Mr. Wadsworth, the general freight agent. Delaware and Hudson, will not make any concession, so that if we ship oil to those points we must uay the enor- mous rate of 3^ cents per ton per mile above Whitehall, whicli, as a railroad man signifies, is an enormous rate, and far beyond what anv other road would charge. (The letter of April 19. 1899, above referred to. is as" follows:) Oil City, Pa., A2]rU 19, 1S99. Ameeican Oil Works, TitusviUe. Pa. CtE.xtlemex: As advised you in our letter of the 12th instant, we again wrote the Delaware and Hudson people fn regard to rates you had asked for on that road, and now have letter from Mr. Paul Wadsworth, G. F. A., April 17, advising that he can make no better rate than that already named you for points north of White- hall, and also states that our oil circular rate of 23+ cents per 100 pounds from TitusviUe can not apply to points between Saratoga and Northcreek, and those points will take the following arbitrary per 100 pounds additional: Tank cars. Barrels. Greenfield. IT. Y Cents. 8 6 r 9 8 13 1.3 1.5 16 18 Cents. South Corinth . . 6 Hadley _. _ Corinth,- 7 Stonycreek 11 12 The Glen . . 14 15 17 We regret that we have not been able to make better terms with them, but it would appear that it will not be possible to do any better. Yours, truly. CH.iS. T. Hallowell, General Agent. Q. Do you mean that you are charged 14 cents per hundred more for oil to Whitehall, or to one of these local points you have mentioned, than, in accord- ance with this Red Line traffic book, is charged for ordinary freight? — A. No; it takes an arbitrary rate. Q. You sini] ily think the charge is excessive? — A. The chaise is excessive; and, in fact, we are daily being narrowed down by the railroads. I can not get to New Haven, or Providence, R. I., with oil on a Boston rate, according to this Red Line trafiSc book. This Red Line traffic book on all other goods takes a Bos- ton rate to Providence and New Haven. What is the cause for it? CHAR.VC'TER OF OIL AS FREIGHT. Oil is a good freight to handle. Mr. Motheral. who is a confidential man of the Q-reen Line in Oil City, gave statistics in 1«SH. before the Interstate Commerce Commission, relating to the loss and rifk in handling oil by freight, which I will read from page ISO of the pamphlet of testimony taken in cases 153, 154, and 163 before the Interstate Commerce Commission: ' ' Int'T.state Commerce Commission. The independent Kefiners' Association, nf TitusviUe. Pa., and the Independent Eeflners' Asso- ciation of Oil City. Pa., v. The "Western New York and Pennsylvania Railroad Company, the New Y^ork, Lake 6rio and Western Railroad Company, the Delaware and Hudson Canal Com- pany the Fitchburg Railroad Company and the Ilo.ston and Maine Railroad Company, No. 153. Also the same complainants v. others, cases 154 and 183, testimony. 378 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. " Q. What is your opinion, from your own experience of the business, relative to the risk of fire from the transportation of oil by the two different methods, by tanks and barrels; which is the greatesty "A. It is greater in tanks. '■ Q. How much? What relative portion would you say? "A. From 1882 to 1887, 5 years, the loss on oil in barrels was twenty-seven one thousandths of 1 per cent; the loss in tanks was forty-tliree one thousandths.' " Q. That is the result of actual experience? " A. That is a statement made up from our office a year or so ago. I looked it up again to-day." So you see the loss in transportation of oil is almost infinitesimal, and my opinion is that, if we could keep about upon the same basis — not my refinery alone, but all refineries and all shippers of oil —as the Standard Oil Company, we should not be having this terrible experience that we have had at times. We could get prices, because they would not have the means to cut us. Q. (By Senator Mali.ory.) Can you indicate what basis that is? — A. I referred to that a few moments ago when I .stated that they were underbilling. I have evidence where they have underbilled — i.e., oil that would weigh 4i.l)U0 pounds was billed at 24,000 pounds. Q. (ByMr. Kennedy.) What did you say the wastage is in piping oil? Did you state that? — A. I did not say. Q. Just the wastage of tanks? — A. You mean this railroad? Q. Yes. — A. These figures that 1 gave concerning the transportation of oil in tank cars are given by Mr. Motherall. probably one of the best-posted traffic men in the country, because the G];een Line, up to that time, undoubtedly handled more oil freight than any one road. Q. Have you any figures there in regard to wastage in pipe lines? — A. No. From what I have read and from what my experience has taught me, the railroads do not cater for the independent oil trade. Until within the last 3 years we had very few railroad men soliciting oil trade; we have vei'y few now; a few local lines solicit; but I do not remember of a New York Central, a Vermont Central, a New York, New Haven and Hartford, or a Boston and Albany man asking me for freight, and I ship in the neighborhood of from 12,000 to 14,000 barrels a month, going in directions that would be over their lines. During the construction of the United States Pipe Line, when we had a few tous of iron to haul to Athens and various p.iints, and it was published in tli" papers that tanks were to be eret'ted and that pipe was to be laid, theie wer? traveling freight agents after us every day to get the shipment of th:)?e goods (iver their line — Lehigh, Brie, and other ways. We CiiuJd ship iron, but the oil — we must not handle it. That is probably the j)assword that goes over. In connection with that ]Miintreal business, I wish to state that we enjoyed, up to last fall, I think it was in (October, a 2'i cents per hundred rate from Buffalo to Montreal, P. Q. Q. (By Mr. Jenks.) Had you been shipi^ing oil to Montreal regularly for some time? — A. We had. Q. For how long? — A. Four years and o^•er. Q. At what rate did you say from Buffalo to ^[cmtreal? — A. It was 21^5 at one time, but it was advanced to 2o. CANADIAN REFINERIES PURCHASED BY STANDARD — ADVANCE IN FREIGHT R.VTES. Q. For most of the time it was 2:i cents from Buffalo to Montreal? — A. Yes^ but at the time the Standard (3il Company came into possession, either by pur chase or lease, of all the refineries in Canada, at Petrolia and the other oil points' the freight rates from Buffalo to Canadian points immediately advanced; the rate from Buffalo to Montreal advanced from 2i! cents a hundred to -i') cents per 100 pounds. I got caught on that. I was not very sharp. They did not notify me of the advance. I sold a man a car based on the 23-cent rate, and it cost me 35. I was out the 13 cents per hundred.-' Q. (By Mr. Phillips.) Did that 12 cents mutevially affect your prices?— A. Twelve cents a hundred is ne^rily 40 cents a barrel. If 1 can make 10 or 15 cents a barrel on oil I am doing a good liusiness. It practically cuts me out. I can not sell oil in Montreal under these conditions. That is why I wired Mr. Goodman to get to M(nitreal via New York (Vutral, via Utica and Mtilone, and this Adirondack division, but they did not want the trade. (2- So you are practically shut off at this time? — A. Yes. <-2- Since the Standard made the purchase of the oil fields and oil refineries in Canada? — A. Yes. I S.v. Mr, Bi.-c. pp. 716,717, 2 See Mr. Gall, p. (iS.1. STANDARD OIL COMBINATIONS: WESTGATE. 379 Q. (By Mr. Jenks.) What are the railroads that made these Canadian rates? — A. The Grand Trunk running from Buffalo to Montreal and the Michigan Cen- tral ' prorating with the Canadian Pacific from Buffalo to Montreal. Q. Then, when joxx were asking for freight rates around this other way over the New York Central, you were merely looking for another way to get to these same places? — A. I did not know but I could find the bars down and slip some oil in; but they put them up. Q. Then you asked for rates to Adirondack Junction? — A. Yes; that is the one I gave in evidence. Q. That is some distance this side of Montreal? — A. Yes; 9 railes. Q. But it was for the purpose of letting you into that Montreal market? — A. That was the idea. Q. Were you going beyond the New York Central line in asking for rates to Adirondack Junction? — A. I was not; I could pay a switching charge of 9 miles and get it in. Q. Do these increased freight rates through Canada still continue? How long is it since the rate was put up from 28 to So cents? — A. I believe it was in October last. Q. And the rates are still held ? — A. I understand that the independent oil men in Montreal brought the matter up before the parliament, and that the railroads were either compelled, or advised to withdraw that tariff; and, according to the paper which I saw, a Montreal paper, the railroads had withdrawn the tariff — that is, they had withdrawn the printed tariff, but the rate still remains the same, if I wish to ship a car of oil in there. I think they have some very strong evidence in the matter; but I am not posted. I am not prepared to give it to you.'' Q. (By Senator Mallory.) You have not attempted to ship any in there recently? — A. Yes; I have a party up there and I have tried to sell, but he could not buy because the rate was too high. What we shippers would like is this, that oil be classified. To some places we pay more than fifth class, and occasionally a little less than fifth class. If I were asked what class oil should be in, I should say it should be sixth class; but if we had a fifth-class rate on oil our Boston rate would be 30 cents per hundred, and we are paying 23.} per hundred. We at one time enjoyed a rate of 78 cents per barrel to Boston, which would be UM cents per 100 pounds; but as the web grows tighter the rates go up, and our territory is made smaller. Q. Is there more risk in the transportation of oil than ordinary merchandise? — A. Mr. Motherall stated that the loss of oil in barrels in shipping was twenty- seven thousandths of 1 per cent. Q. (By Mr. Jenks.) Is it not to be concluded, then, from your testimony, that there is not much more risk connected with the shipping of oil than ordinary merchandise? — A. There certainly is some more risk. Q. (By Senator Mali.ory. ) Does that include loss by fire? — A. Yes. <^. Bat not leakage? — A. No; I think the commission should insist upon this commodity being classified. It certainly is of magnitude enough to be classified, and you can see from the evidence I have given that there must be a "nigger in the fence " if we can not get to certain points in a certain tariff book. We can get to certain points and not to others, and in one case can get no rate whatever. Q. (By Mr. Jenks. ) Your i ibjection is not so much against high rates as against rates that are not at all uniform to places that seem to be similarly located?— A. That is true. Q. And you also believe that the Standard Oil Company has its goods under- billed, constituting practically a direct discrimination against you?— A. That is ti'ue. LITIGATKIN CONCERNING FREIGHT RATES. Q. (By Mr. Phillips.) Have you had any litigation with the Standard Oil Com- pany, or any case before the Interstate Commerce Commission, with regard to freight rates, or discrimination in freight rates?— A. Yes, we have. We, the Inde- pendent Refiners' Association at Titusville and Oil City, in ISSS had a hearing before the Interstate Commerce Commission.-' . We were awarded the claims that we demanded, or asked for. The claims were these- That we should have the same rate per barrel on oil shipped m a package as the Standard Oil Company— i. e. , that they were paying on a barrel of oil shipped in tank cars, or that they should quote us a rate per barrel, instead of giving us a rate per 100 pounds. After many days or weeks of session the commission decided 1 As to the Michigan contract, see Mr. Gall, pp. 675, 676. ■■' See Mr Gtall, pp. 67."i-67", nsd, B83-6a5; Mr. Archbold, pp..'>/3,.'j..); Mr. Page. 3 See rases cited, p. 87"; see also Mr. Archbold, p. 5.51, bottom. 380 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. in our favor, and awarded us in their best belief, what we asked for. Our awards amonnted to something like RSS.OOO. We have been all this time, 11 years, trying to collect this, and we have a case coming up soon in the circuit court of the United States. Western Pennsylvania district, in Pittsburg, bearing' on this.which has been decided in our favor two or three times by various courts. Q. (By Senator Mallory.) What road was thaty — A. They were the Western New York and Pennsylvania Railroad Company, the New York. Lake Erie and Western Railroad Company, the Delaware and Hudson Canal Company, the Fitchburg Railroad Company, the Boston and Maine Railroad Company, and the Lehigh Valley Railroad Company. Q. Were these companies responsible in the case you speak of ? — A. They were; yes. Q. What is the status of that case to-day V — A. The status of that case is a dor- mant one. They decided we should have this reparation, and also that oil should be shipped per barrels — that is, instead of charging us4(l0 jjounds, as they do now per barrel, it should be taken at o'20 pounds, actual weight of the oil, because the tank cars (the Standard Oil Company have their individual cars, and we have a few) are shipped full and come back empty, and also that the empty barrels should be shipped back with no charge, because if the oil was shipped in barrels the cars could be iised to load freight back, whereas the tank cars come back empty. But they did not comply with the order given. Q. The case, as I understand, has been appealed to the circuit court? — A. Yes. Q. Has it made any progress in the circuit C(mrt since it was appealed?— A. No, it has not. Q. Is that what you mean by lying dormant ? — A. Yes, lying dormant; it comes up this fall. Q. (By Mr. Phillips.) What coiirt was it tried in before it was appealed to the Interstate Commerce Commission, if any? — A. I have not looked up whether it was a civil action or not. Q. (By Mr. Jenks. ) Do you expect a final decision in the case this fall ? — A. We do; yes. Q. (By Senator Mallory.) Can you state in a general way the territory in which you deal ? — A. Yes ; my territory is quite well defined. It is mostly in the State of New York. I sell some in Vermont and New Hampshire, and occasion- ally a car scattered through different States ; but that is simi)ly a catch order. Q. Do you ship to foreign countries at all? — A. Oh, yes ; nearly 50 per cent of our product goes to foreign countries. Q. Do you deal with the South at all? — A. Not at the present time. The rates are high South. Q. Do yi3u deal with Cuba at all? — A. No. NUMBER OF INDEPENDENT COMPANIES IN PENNSYLVANIA. Q. (By Mr. Kennedy.) How many independent refining companies are there in Pennsylvania? — A. I should say 13 or 15. Q. Are you connected with only one or several of them? — A. Simply one. Q. Have not the independent companies some sort of a combination to protect their interests as against the Standard Oil Company ? — A. The only association we have ever had was that of the independent refiners of Titusville and of Oil City at the time of this suit, or this hearing. We have common interests in the United States Pipe Line, the Producers and Refiners' Pipe Line, and the Pure Oil Company. Q. That is the only kind of a combination you have? — A. Yes. THE PIPE-LINE SYSTEM. Q. (By Mr. Phillips.) Have you any specific knowledge about pipe-line sys- tems, the history of them in Pennsylvania, and the independent pipe lines prior to the organization of tlie United States Pipe Line and the Producers and Refiners' Pipe Line?— A. I have some knowledge, but I think nothing that would be of any special benefit. I could tell you about the time since we organized the Producers arid Refiners' Line, of which I am a director. We have had considerable trouble with the Standard Oil Company, who have bought up the production on our line, which caused us to lay lines more remote, but I suppose that is in the course of business. They paid high prices, howe^'er, for these properties, and it was a good thing for the individual producer that we were in there, becauswhe sold out his property at a very high price. That has been done to quite an 'diknt. usjwiie STANDARD OIL COMBINATIONS: WESTGATE. 381 Q. Prior to the organization c if the Producers and Refiners' Pipe Line Comijany were you getting your oil through the Standard lines?— A. We were buying oil from the Standard'. Q. What pipage did you pay them/— A. Twenty rents per barrel. Q. What are you paying now for getting oil delivered at your refineries?— A. We are paying the market price, 15 cent.s per barrel pipage. Q. Do you get at this lower rate as good oil as you did when getting it from the Standard Oil Company?— A. The majority of the oil is better. We get poor oil from 1 district, near Oil City; each refiner has to take Ms portion: that is very inferior oil, black oil. Q. Does that go through the Producers and Refiners' Pipe Line'? — A. Yes. it does: about 4.000 barrels a month comes through that line. Q. Is it mixed with other oils? — A. No; it is delivered separate, Q. What kind of oil did you get through the Standard pipe lines before you owned this line?— A. We got oil which was not of as high a grade, not as rich in illuminants as we are getting from the Producers and Refiners' Line. Q. And paid practically ."i cents a barrel more for piping than now? — A. Yes. Q. And the oil was not of as good quality? — A. No: it was not. Q. (By Mr. Kennedy.) Can you state what percentage of the oil of Pennsyl- vania is refined by the independent companies? — A. I have not the actual figures or data at my command, but I should saj- about one-tenth. Q. The Standard Oil Company refines all the rest of it, 90 per cent of it? — A, I believe they must have refilled it or shipped it abroad. Q. And the business is profitable, I suppose, to all these independent compaiiies, is it not? — A. It has been at times. COMPETITION WITH THE STANDARD IN FOREIGN COUNTRIES. Q. (By Mr. Phillips.) Will you state to the commission what method the Standard Oil Company took to circumvent your markets abroad, after the laying of the United States Pipe Line for shipping refined oil through to New York as well as crude? — A. The prices in our foreign markets, in Germany and Holland, were out very low. so that we were obliged to sell export oil to the one buyc' (we have had but the one buyer. Philip Poth) very low; in fact, at ruinous prices, It was only by the strictest economy that a number of refineries were kept out of the hands of the sheriff during the crucial time that we had in la'J3 and 1894. Q. Did Poth handle your oil for a considerable length of time? — A. He handled it tor a number of years, and until a sh(jrt time after the Standard Oil Company purchased these other large refineries that I spoke of a short time ago. Then I understand that the Standard officials approached him and told him that we were on our last legs and that he had better get his money out of his stuff while he could. They paid him big money for his plant, and it was turned over to the Standard Oil Company entirely: his two sons-in-law were retained in the business. He had promised by all that was true and good to ,st:ind by the independent com- panies. We had sold him refined oil away below ttie cost of crude oil; but he got frightened when the Standard approached him in this wp.y. and as I say he sold out. The shock was so great that he died within 2 v.'eeks: we then est;iblished the Pure Oil Company — that is, we refiners and producers — and have been market- ing our own goods in Germany.' Q. Did they also rent or buy the tankage abroad, so it was very difficult for you to dispose of all your oil? — A. They did some of that; yes. Q. Were you compelled to build tanlcage and establish stations before market- ing oil in Germany'? — A. We were compelled to do so. Q. Has your business there been a profitable one?— A. Our returns have been very satisfactoi'y in Germany. Q. What were your profits while Mr. Poth was acting as your agent?— A. There was very little in the refining business, .just in marketing abroad. We sold him oil f. o. b. New York. Q. You did not have any profits he made, if he made any, in Germany'?— A. Certainly not; prices have been good there. Q. But you sold a good many cut cargoes, did yoxi not?— A. Yes. Q. That is, below cost'? — A. 'Below cost. some. Q. Have you sold any out cargoes since to your agencies abroad, in the Pure Oil Company'? — A. No. Q. They are quite uniform, are they?— A. Quite uniform: yes. 1 Compare Mr. Lee.pp. 37o,;i74; Mr. Emery.p. 61T 382 HEARINGS BEFORE THE INDUSTRIAL COMMISSION, RELATION BETWEEN STANDARD OIL COMPANY AND THE INDEPENDENT COMPANIES.' Q. A former witness stated before this commission that if the Standard Oil Company were to offer the independent companies a price far beyond the value of their plants they would still refuse to sell out. Is that the feeling of the independent companies of Pennsylvania? Would they not sell for more than the value of their plants if offered that by the Standard Oil Company? — A. Now, if you will define that I will answer you directly; do you mean SIO more? Q. There was no specific sum named; it was said they would not sell to the Standard even if offered more than the value of their plants. — A. If they were all like him they would not. Q. Have the Standard people made any attempt to purchase stock or circuin- vent these independent pipe-line companies in any way in order to get control of them? — A. Yes; from the suits that have been in progress with John J. Carter and the Producers' Oil Company. Limited, it would seem that is what they are trying to do. Q. Do you remember the capital stock of that company and how much they purchased? — A. The capital stock is §000.000. Mr. Carter originally owned §3,000 worth of stock; he purchased about §300,000 worth more. We believe it was for the Standard Oil Company. I can not testify that it was, but from all outward appearances it looked that way. Q. Did they attempt to get control of this independent company after pur- chasing this stock? — A. They did. Having the ma;fority of the stock, they ex- pected to elect the managers of the company. But the company, being organ- ized in Pennsylvania under the special act of 1874, called the copartnership law or act, Mr. Carter would have to be voted in by a majority in number and inter- est in the Producers" Oil Company before he could vote that stock, and our people declined to vote him in. He has been in litigation with the company for the past 3 years or more, trying to get in. The courts have finally decided — the supreme court — that he was in error, and that the company must buy his stock at the appraised value. The appraiser was appointed, and that appraising has been taldng place for the past 5 or 6 months. They are arriving at values, as the com- pany are obliged to buy the stock that Mr. Carter owns. He has been voted into a portion of it, I believe. Q. Have they bought stock in any other company? — A. It I remember cor- rectly, they have secured something like $400,000 in the United States Pipe Line, Q. How much of that stock has bet'u sold, and what is the capital? — A. I believe the capital is §3,000,000, and. if I remember rightly, the stock that is out is about §1,200,000. Q. Did they attempt to get anyone on the Imard of managers in the United States Company?— A. They have 1 director in the United States Company ; ye.s. Q. Have they recently been purchasing stc)ck in that company? — A. Not to'my knowledge. Q. (By Mr. Kexxbdy.) That would be a legitimate way of getting control of those companies, would it not?— A. Yes; that is one way, but perhaps you or I do not care to t^o where we are not wanted; that is the only way I look at it; you do not de.sire to go into a company if you are not wanted there. Q. If they get control of these companies, do you have any idea they will run them at a profit to the stockholders?— A. It they would run it, they would run at a profit; that is the way they run. TRANSPORTATION SYSTEJI THE CAUSE OF EXISTING EVILS. Q. (By Mr. Phillips.) Have yon any statement you desire to make that we have not covered by asking questions?- A. This question of the aggregation of capital is, of course, a large one for a small man to handle, but I do not fight the Standard Oil Company. It is not my business to fight them. I do not believe the Standard Oil Company, with their millions, could or would drive me out of busi- ness, if I had the same advantages (and that every American citizen should have) that they have on the transportation lines. If they do not ha.ve that advantage over me, it makes no difference how large the company is; if they are run on right lines, it matters little. Q. (By Mr. Jenks.) If I understand you, tlien, the evils that come from the Standard Oil Company would be done away with if the interstate commerce act conld be enforced in both spirit and letter?— A. That is what I mean; in short, I mean that oil should be listed as other freight is. And my opinion is that it would be a good idea to have a railroad examiner just as you have a bank exam- iner for national banks. If I have a grievance and think Jones or the Standard ' Sci- p ;!70' Ml-. Lhg, p. ;.'7n; Mr. Archljolfl, pp. 577, sr.S; Mr. PliiUips, pp. fiSO, gill), 5G5, 590; Mr. Emery, p. K5(i. STANDARD OIL COMBINATIONS: WESTGATE. 383 Oil Company is getting cheaper rates from a common point to Montreal than I am, let me file a complaint and have one of these examiners investigate the books of the railroad companies. It takes but a moment to find ont where a grocery- man or a wholesale-oil man is buying oil. You are not giving away a man's business by going to a railroad company and ascertaining the freight rate and che weight of his oil. The customer is not injured. I say that the complainant should do this because all men are human, and this is such a big business in shipping that we might not get justice even if a commissioner were appointed. Q. Do you mean by that that it would be possible to buy up an inspector?— A. ^es. Q. Unless the complainant were to have the privilege of going also? — A. Cer- tainly. There are so few refineries that 3 or 4 railroad examiners would, in my mind, be sufScient. Of course other shippers might demand the same thing, but I believe, the way things are, conditions are such that something of that kind is necessary. It strikes me so, because I do not believe that we are getting justice: and I do not believe we can get it unless a thorough investigation is made. Q. (By Mr. Phillips.) Do you think there should be laws allowing the inspec- tion of freight passing over the railroads? — A. Yes; I do. Q. Have you anything further to suggest in remedial legislation for monopo- lie-^? — A. I do not believe they are harmful v.'hen on right lines. I believe that illegal or illegitimate competition ought to be banished in some way, whether by legislation I do not know. Q. (By Mr. Jexks.) By illegitimate competition do you mean special favors shown by the railroads, and also this special cutting of rates in particular locali- ties, of which you have already given us examples?^A. I mean the cutting of pi'ices below cost of production. The oil business and every other business should be run on its own merits; if the Standard Oil Company, or Armour, or my little works can not get trade by holding out good goods and by good, honest competi- tion, by manly efforts, we are not worthy of the trade; we should certainly have something that will protect us. Q. (By Mr. Ratchford.) By honest competition do yon mean that evei-y man shall be allowt d to place his goods upon the market with the oiiportunity to make a reasonable profit? — A. Yes; I do. Q. (By Senator Malli:)RY.) Do you also" mean that public carriers are created for a public benefit, and should not be permitted to show favors to one set of pro- ducers as against another set? — A. I can write a letter to Montreal, Quebec, solic- iting trade, for instance, and send it for 2 cents. The Standard (")il Company pays 3 cents for the same kind of a letter. When I ship a carload of oil there that weighs •i4,0Ul) or 48.000 pounds. I pay freight on it accordingly; but from what I have seen, from what I have told you gentlemen, I am satisfied that their car goes through billed at 24,000 pounds', although it holds the same quantity as mine does. That is what I want; the majority of companies maintain that that is what I deserve. AFFIDAVIT. State of Pennsylvania, County of Venango, .s-.s-.- I swear that the statements made 1 ly me of my own knowledge in the foregoing- report of my testimony before the Industrial Commission are true, and that all other statements I believe to be true. (Signed) Theudore B. West(;ate. Sworn and subscribed before me this 7th day of October. 1899. [seal.] Chester L. Kerr, Notary Public. 384 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "Washington, D. C, June 17, 1S99. TESTIMONY OF MR. M. L. LOCKWOOD, Imh'pencleiii oil producer. The commission met at 10.55 a. m., Vioe-Cliairmaii Phillips presiding. Mr. M. L. Lockwood, being duly sworn as a witness upon the subject of the oil indus- try, testified. Q. (By Mr. Jenks. ) Will you kindly give us your name :.ind address:— A. M. L. Lockwood, Zelienople, Butler County, Pa. Q. What is your connection with the oil business? — A. I am an oil producer. Q. For how long a time have you been in that bu.siness? — A. Since 1865. Q. Are you an oil refiner also/ — A. No. Q. You have, I believe, a statement ready to make to the commission. If yon will kindly give us that, we will afterwards ask any questions that seem desirable. Mr. Chairman and Gentlemen of the Industrial Commission: Robert Lockwood came from England with Winthrop in 1630. One hundred and forty-seven of his descendants, one of whom was my great-grandfather, par- ticipated on the side of the colonies in the war of the Revolution. I refer to this that there may be no question as to my Americanism. It seems to me as though this reference is proper from the fact that it has become the custom of the monopolistic classes and all those who are fawning for favors at their hands to stigmatize as anarchistic and un-American any expression not in harmony with the present monopolistic condition of affairs. I am a native of the State of New York. I left the farm in Erie County of that State in 1865 and went to the oil regions of Pennsylvania, and have been engaged in the work of producing oil ever since. early railway discriminations. Away back in the latter part of the sixties some of the refinery men in the oil regions who did not have the ear of the railway managers were unable to get a freight rate over the railroads that would enable them to sell their oil in New York and the export cities at a profit. They were obliged to sell the refined oil to the men who afterwards helped to cj-eate the Standard Oil Company, for these men even at that early date seemed to have an advantage In freight rates that enabled them to market oil at a profit when no one else could. The facts which I shall present to you I desire not to be construed as against men, for I believe that the Standard Oil people are no better or worse than any other set of men would be, armed as they have been with practically exclusive advantages over the railways of the country. But the facts which I shall present to you I desire to be construed against an accursed system of railway discrimina- tions which has made this great curse, the Standard Oil Trust monopoly, a possi- bility — against a system that has enabled the Standard Oil Company people to drive into obscurity, bankruptcy, or servitude the men whose energy and enter- prise developed the great oil-producing and refining industry of America,' for before the blighting c iirse of railway discrimination was turned against the oil refinery men they prospered and grew rich in the refining business. They doubled the capacity of their refineries, adopted new and better processes, and were going forward in a business that promised much for themselves and their descendants. But when the conspiracy between the Standard Oil Company people and the railways was consummated all men not included within the favored few were condemned to financial obscurity or ruin. No business ability however great, no better process however superior, could triumph, when the highways over which you must go to market were closed against you and manipulated in the interest of your competitors. As long as there were open and equal rates over the highways of the country, many growing and prosperous refineries were built at every favorable point— at Franklin, Reno, Oil City, Rouseville, Petroleum ('enter, Pioneer, Titusville,Wai'- ren, Pittsburg. Cleveland, and Corry. The competitive contest in the business forced hundreds of the best minds to the study of better and more economic proc- esses in refining, and the most i-apid strides were made in perfecting and cheap- ening cost. Many refinery men made many buyers of crude oil. and the producer selling his ciil in the cinnpetitive market was enabh>d to obtain a fair share of the profit in the business. The consumer bii>'ing his oil from ccimpetitive sellers was enabled to i-cceive the benefit of e;ich aii(l eveiy economy in the process of producing and refining piitroleum. 1 S<'.,' Mr. Archliolfl.p. .')."i:!. STANDARD OIL COMBINATIONS: LOCKWOOD. 386 THE SOUTH IMPHOVEMENT COMPANY CONTRACT. In 1873 the men who had been intrusted with the management of the liigiiways, the railways of the country, understood so imperfectly their duty as common car- riers to the public that they entered into a contract with the men who afterwards created the Standard Oil Company. This coirtraot was known as the South Improvement Company contract, and was between a corporation of that name and five trunk railways — all of the railways that entered the oil regions of Pennsylvania. This contract j)rovided that the railways should increase the freight to about double what they had been charging on all oil shipped; that they should pay back in rebate to the South Improvement Company an amount about equal to said increase of freight rates: that they should pay to the South Improvement Com- pany a like rebate on all of the oil that anybody and everybody else shipped; that they should make any other change in freight rates necessary to insure the South Improvement Company's success in business. This contract provided, in sub- stance, that they should break up and destroy all refinery men outside of the South Improvement Company by high rates of freight; and that they were to keep watch and- report to the South Improvement Company all the business and shipments which any of these outside refineries should make.' Now. Mr. Chairman and gentlemen, I desire here to say that everything that the railway companies publicly contracted to do for the South Inrprovement Company in 1873. the railway companies have since secretly and persistently - done for the benefit of the Standard Oil people,- as I v/ill prove to you, I shall prove it, too. in the face of the fact that whenever any of the Standard Oil Com- pany's people or their agents or the railway people who knew the facts have been subpoenaed to testify they have almost invariably refused to answer, shield- ing themselves bf-Mnd. that provision of law which provides that you shall not force a man to testify to that which will convict him of a crime. The men who developed the oil regions of Pennsylvania were of the best fami- lies of the Republic. The ancestors of many of them helped to win our inde- pendence as a nation, and when the provisions of the contract of the South Improvement Company became known, it created such a furore in the oil regions as has seldom been seeii. Men saw the principles of equal rights destroyed, the highways over which their products must go to market being in the hands of a set of brigands, who had pledged themselves to rob the people of an average of more than SI a barrel on all the oil they produced, and give it to the 13 men vv'ho constituted the South Improvement Company. The public press of the oil regions at that time had not yet been subsidized and it gave the alarm. Men came together and consulted, meetings were called, and the more that was learned of the xjrovisions of the South Improvement Com- pany contract the more awful the crime which was attempted against the rights of the people developed to be. Massmeetings at Franklin, Oil City, Titusville, and Parkers w-ere attended by bhousands. Men determined that if the raiUvays were to be used to destroy the great American right of equality they would have no railways, they would ^ear up their tracks and burn their bridges. SOUTH IlIPBOVEMENT COMPANY CHARTER REVOKED. The railway companies became alarmed. A committee of the producers and refiners v/ent "before the legislature, then in session at Harrisburg, and secured the repeal of the charter of the South Improvement Company. The railway officials made fair promises to give everybody equal rates, and the producers and refiners , thinking that they had won a victory and their rights would be respected, went about their bu.siness.'' Right here I desire to state that the battle of the proilucers in the oil regions has been continuously and persistently conducted upon that same principle. They asked no favors beyond this, that they should be accorded equal rights over the highways of the country. . . -i-. But it soon became apparent that the railway companies were not keeping taith; that in fact they were doing for the Standard Oil Company people seoi-etly just w)iat they had nublioly contracted to do for the South Improvenient Company. The independent refiners were fast being driven to the wall, while there was evidence of the greatest prosperity among the Standard Oil peoples refineries. Very few of the facts of this period have leaked out, as when the Standard Oil Company people or the railroad people who knew the inside facts were subpoenaed ^Por a copT^ tUs contract see the report of the Hepburn committee of New York, pages 418 to m; VrWittLth Congress, first sessibn. House Reports, vol. 9, pp. 3.5r-3bl. A part ot it is reprinted in this volume, pp. 81(V616. . ,..•■. m,- Tr„io,nr r, mc; 2SBPP 4(!0- Mr Archbold,p.553; Mr.Boyle,pp.4;iH.,'o; Mr. Jimeiy.p.blo. 3 See producers and reflnera' contract, p. 449. Hepburn committee report; or Fiftieth Congress, first session, House Beports, vol. 9, p. 381. It is reprmted m this volume, p. 640. 386 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. to testify they almost invariably , under the advice of their counsel that their evi- dence might incriminate them, refused to answer. But by the evidence in the case of the Standard Oil Company against W. C. Soho- field, at Cleveland, Ohio, we learned that the profits of refining, including rail- road rebates for i of these years, was an average of more than §2 a barrel, a profit in refining which, if economically managed and honestly capitalized, amounted to more than 400 per cent annually; while at the same time the refinery men who did not have the favor of the railroad companies were being driven into bank- ruptcy and ruin, while the producers, much of the time, were forced to take a price for their oil below the cost of production, and the consumers to pay two prices for the oil that they burned in their lamps. STANDARD OIL COMPANY SECUEES CONTROL OF THE PIPE LINES. I have a record of 26 pipe lines built in the early part of the seventies to trans- fer oil from the wells to the railways. ' These pipe lines were mostly built by pro- ducers in their struggle for deliverance from monopolistic control. The Standard Oil Company people , having secured control of the United Pipe Line and American Transfer Company, began a campaign to bankrupt, destroy, and absorb the pipe lines built by the producers. The Standard Oil people, having a large rebate on all the oil they shipped and on all the oil that anybody else shipped - through any of these diflferent pipe lines, could go into the field and pay a little more at the wells, and could sell oil at a little less at the seaboard than any other shipper, and still only use a small fraction of the large rebates which they were receiving from the railway companies; growing rich themselves while they were bankrupting and absorbing the pipe lines built from the meager means which the producers were able to wring from the grasping greed of this great monopoly. Finally the pro- ducers and refiners came to understand that the highways of the country— the railways — were in the hands of a set of highwaymen, who, every time they went to market, would rob them of all of their profit and a part of tlieir principal and hand it over to the Standard Oil Company people, helping to fasten that monop- oly upon us. Mr. Chairman, if you must be robbed it does not make any differ- ence to you whether Dick Turpin does it through the instrumentality of a pistol, or whether John D. Rockefeller does it through the instrumentality of a railroad. There could be but one end to that kind of business — bankruptcy and financial ruin of the independent pipe lines. For the sworn evidence to prove all of the above statements, I desire to present the commission extracts from the evidence before the Interstate Commerce Commission, before the courts, and before both State and national investigating committees. RAILROADS PAY REBATES TO THE STANDARD OIL COMPANY. I have stated that interested parties refused to testify, but there is always some way for the truth to come out. There arose a little unpleasantness between the Pennsylvania Railroad and the Reading Railroad, and we were enabled by sub- poenaing the assistant comptroller of the Reading Railroad, itithecaseof the' Com- monwealth of Pennsylvania against the Pennsylvania Railroad and the Standard Oil Company, to bring into court the settlement sheets showing their settlements for the transportation of oil. Some of these sheets showed that there had been rebates paid to the Standard Oil Company to the amount of $1.10 per barrel. Mr. A. J. Cassatt, third vice-president of the Pennsylvania Railroad, being sub- IMjenaed to testify in regard to these settlement sheets and the rate on oil,' was asked the rate per barrel. The answer was: •' ij;!. 90.'' Question. "Whatwasthe actual rate?'" Answer. " If shipped by the Standard Oil Company, 80 cents a barrel." The open accepted rate was $1.90: but, after deducting the rebate of §1.10 which the Standard Oil Company people received, the actu;il rate woidd be 80 cents. Now, further investigatiim showed that, through the terminal charges of corporations in which the Standard Oil Company was largely in control, the rail- way companies only actually had yri cents a barrel to divide between themselves for the transportation of this oil for the Standard Oil Company, while an outside refiner and shipper would be obliged to pay $1.90 per barrel. Question.'' "I understand you. Mr. Cassatt. that this 33+ cents paid to the American Trans- fer Oompanyis not restricted to oil that passed throu.gh their linesV" Now, mark his answer, because itis a remarkable one. Answer. " No, sir ; it is paid on all I Srn Mr. Arobbold, p. 55;!; Mr. Boyle, pi>. 41!!, i;'J). i£]-426. '^ See Mr. Page, Mr. Rockefeller. » Soo page 0H8of the transcript of testimony in the case of the State of Pennsylvania i'. Penu; sylvania Railroad Company, United Pipe Lmes, and Acme Oil Company. Reprinted, p. IW. House Reports, vol. 9, Fiftieth Congress, first session. ■" Ibid., page 691. 1 STANDARD OIL COMBINATIONS: LOCKWOOD. 387 oil received and transported by us, as I liave befor,. stated." Question.' •■Now l^\ T, , • "^ ''' drawback paid of §34,000-S41.000 less the .STOOD, the Buffalo Philadelphia, and New York proportion. (Part of this oil was shipped over a road that was not m the combine.) Could you tell who that drawback was paid to ? ' Answer^ ' ' Forty-nine cents pier barrel went to the American Transfer Company and the Standard Oil Company under the arrangement which I We already explaiiied. " The testimony of J. D. Archbold showed rebates paid to the Standard Oil Company of GU cents a barrel." It was impossible about that time and during the growth of this monopolv for outside shippers to get any cars for transporting their oil. The testimony of W L. Fox, who owned a pipe line, Warren Gray, and others shows that the railways refused to allow the independent shippers cars, and that they were unable to move their oil.-' Q. (By Mr. Fakquhar.) What year was that?— A. That was in 1H78 I think 1 wish to present here an extract from a letter of Mr. Daniel O'Day to Mr Cas- satt, accepting the commission or rebate. Now, I suppose you know that Mr O'Day is the general manager, almost the generalissimo, of the Standard Oil Com- pany. A very large percentage of the brains of that concern is done up in that little Irishman's head. It reads as follows : "I here repeat what I have once stated to you, and which I ask you to receive and treat as strictly confidential, that we have for many months received from the New York Central and Erie Railroad certain sums of money, in no instance less than 20 cents per barrel on every barrel of crude oil carried by each of these roads. I am constrained to say to you that in justice to the interests I represent we should receive from your company at least 20 cents a barrel on each barrel of crude oil you transport. '•In submitting this proposition I feel that I should ask you to let this date from the 1st of November, 1877, but I am willing to accept as a compromise (which is to be regarded as strictly a private one between your company and ours) the pay- ment by you of 20 cents a barrel on all the crude oil shipped, commencing Febru- ary !•, 1878. " I make this proposition with the full expectation that it will be acceptable to your company, but with the understanding on my part that in doing so I am not asking as much of the Pennsylvania road and its connections as I have been and am receiving- from the other trunk lines. "■' Now here is an extract from a letter of A. J. Cassatt to Mr. R. W. Downing, comptroller of the Pennsylvania Railroad. Q. (By Senator Malloey.) What court was that case in? Was it in the supreme court of Pennsylvania? — A. It was taken before an examiner of the supreme court'. The extract is as follows: "I agreed to allow this commission from and after February 1, until further notice, after having seen receipted bills showing that the New York Central Railroad allowed them a commission of 35 cents a barrel, and that the Erie Rail- road allowed them a commission of 20 cents a barrel on Bradford oil and 30 cents a barrel on all other oil, and that they had been doing so continuously since the 17th of October last. " Of this, however, you saw the evidence yourself in the bills which I submit- ted to you last week. Please therefore prepare vouchers in favor of the Ameri- san Transfer Company, per Daniel O'Day, for this commission of 20 cents on shipments during February, March, and April, and hereafter make settlements monthly."' = In the same report will be found a letter from Mr. A. J. Cassatt to Mr. Daniel O'Day, dated May 15. I87N. in which he says: " Your favor of February l.i has been received, and direction has been given to allow you from and after February I, 1878, the commission therein asked for, until further notice.' The statement of the Pennsylvania Railroad shows that the 20 cents a barrel igreed to amounted during the months of February and March, 1 878, to §68,753.50, vhich was paid over to the American Transfer Company by the Pennsylvania lailroad for the benefit of the Standard Oil Company's people. I have a vivid ■emembrance of that time. I was interested in a pipe line that was competing vith the American Transfer Company for the oil produced in Clarion County. I ' See page 702 of the transcript of testimony in the case of the State of Pennsylvania .■. Penn ylvania Railroad Company, united Pipe Lines, and Acme Oil Company. ^ Ibid., page .510. See, m this volume, Mr. Eookefeller's afHdavit. 2 Ibid., pages 35-45. and 65-79. 4 Ibid., p. 7.52. "Ibid., p. 7.34. •Ibid., p. 734. 388 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. do not believe that at that time the American Transfer Company had over $60,000 invested in all their pipe-line system, and yet in 3 months they received in rebate from the Pennsylvania Railroad Company alone .S68,7.):3.oO. I remember what a hard time we had in keeping alive, financially, the old Atlantic Pipe Line Com- pany. The American Transfer Company was paying a little more for oil at the wells than we could get for it after we had piped it and loaded it on the cars. I can imagine now how financially easy the old Atlantic Pipe Line Company would have been if the Pennaylvania Railroad Company had poured into its coffers $80,000 or §40,000 a month. Remember, this ,S(i8,7r)y..")0 was from the Pennsylvania Railroad alone. What the Erie and the New York Central were paying then I do not know, for there is no record; but men who have studied the evidence in the Hepburn conrmittee's report claim that the evidence shows that the 5 trunk rail- ways paid to the Standard Oil Company people §11,000,000 in rebates in 16 short months.' Reverse these conditions and the Atlantic Pipe Line Company would have driven the American Transfer Company into bankruptcy just as the Atlan- tic Pipe Line Company was driven. Railway discrimination means ruin to any enterprise that is discriminated against, and it means monopoly for any enter- prise discriminated for. DESTKUCTION OF INDEPENDENT PIPE LINES. Upon the question of the destruction of these independent pipe lines, Mr. W. T. Shidey, testifying before the .Hepburn committee, said, in answer to a question as to whether the Hunter and Cummings Pipe Line, which was one of these inde- pendent lines, was shut out of the market; " Yes, sir; they were shut out of the market practically.'"-' The history of the Hunter and Cummings Pipe Line was the history of all the independent pipe lines in the oil regions. By railway dis- crimination they were practically shut out of the market. Concerning the effect which the Rutter circular — providing for a rebate for certain pipe-line compa- nies — had upon all the pipe lines not in the United (Standard) Pipe Line pool, Mr. E. G. Patterson testified before the Hepburn committee as follows: (Ques- tion. — " To whose benefit did the 30-cent rebate provided for in the Rutter circu- lar inure? " Answer. — ' • Entirely to the United (Standard) Pipe Line. The result of it was that the United Pipe Lines absorbed 80 per cent of the 20 lines that were then in existence in the country." ■' To which I desire to add that they ultimately absorbed them all. The testimony before the Interstate Commerce Commission in the Titusville and Oil City independent cases goes to prove that the railways had turned their terminal facilities for the transfer of oil from the cars to the sea- board in New York over to the Standard Oil Company, so that the independent oil refiners could not use their tank cars in transferring oil to the seaboard, and had to ship their export oil all in barrels. ^ Q. (By Mr. Jenks.) Do you recall the date of these cases? — A. They were about 1878 and 1870. Then came the discrimination against barrel shippers and in favor of tank shippers and in the interest of and for the benefit of the Standard Oil Company, and when the Interstate Commerce Commission ordered the railway companies to stop this discrimination they ignored the order." The evidence goes to prove that the railway companies adopted a system of false billing in the iiiter- e,st of the Standard Oil Company and against the independent refiners. The evidence further goes to prove that after the independent oil refiners had spent many years in building up a trade for their, oil in the New England States the railway companies, in the interest of the Standard Oil Company, put up the railroad rates to New England to the independent refiners and shut them entirely out of that market. The work of years was destroyed in an hour by an act of these railway conspirators.'' All of this evidence, hundreds and hundreds and hundreds of pages of it, goes to prove without a shadow of a doubt that the railway companies all through these years were doing for the Standard Oil Company secretly just what they had publicly contracted to do for the South Improvement Company in 1878.' NO REMEDY FOR RAILWAY DISORIMIN.VTION IN THE COURTS. Now, what is the remedy? There is practically no remedy in the courts. They are too slow and expensive. These great railway combinations, in cooperation with tlie trust organizations, can " razoo " a man up and down through the courts, from one to another, for 10 long years, until he is financially exhausted and his business ruined. Why, gentlemen, the Cox case, which related to 1 Sei' Mr. Lei!, pp. ,264. x's; ; Mr. Arclibold, pp. 514-.518; Mr. Emery, pp. 600, (ilil. "Hepburn Ciinimitlee Report, p. 2794. 3 Hepburn CiMiimittee Report, p. IWri. ■1 Titusville and Oil t'ity Independent Cases, p. ;iO. ' See Interstate Comnieree Cinnmission's Report. 1888, eoncerning tank and barrel rates on oil. " Titusville and Oil City Independent Cases, pp. 'MS, 284. See, also, in this yohime.pp. SIl-ST?. ' See Mr. Arelib. )ld, p. ;">;'):!, STANDARD OIL COMBINATIONS: LOCKWOOD. 389 anthracite coal shipments, with all the power and influence of the Interstate Commerce Commission behind it, has been before the conrts for 11 long years, and is yet unfinished. This evidence goes to prove that these railway discrimi- nations and favoritism were continued in favor of the Standard Oil Company and against the independent refiners even after the interstate commerce law was upon the statute books.' Now, then, in the face of all the wrongs which I have enumerated to you, the Oil Producers' Council, a body elected from the different producing districts, began criminal action in isrt) against the Standard Oil Company and the Penn- sylvania Railroad for conspiracy against the public. This action was brought in the courts of Clarion County, Pa. The case was brought in the names of Col. J. A. Verra and myself. The case was prepared at enormous labor and expense. The evidence was at hand to prove the facts, some of the conspirators were before the court and the jury, with almost a certainty that, with the evidence at hand, they would be convicted and sent to the penitentiary to pay the penalty of their crime; and then 3 members of the supreme court of Pennsylvania took original jurisdiction in these criminal cases and took the indicted conspirators away from the courts of Clarion County and hung the case up.' The late Franklin B. Gowen, a man of great integrity and ability, who was a member of the constitutional convention of Pennsylvania in IHT.'j, said before a committee of Congress here in Washington: " That if that constitutional con- vention did anything efiEectually it was when it took original jurisdiction in criuiinal cases away from the supreme court of the State.'' And yet when the men who had entered into a conspiracy to monopolize the great oil producing and refining industries of that State had been indicted and were before a jury of their peers, we find members of the supreme court ready to stretch, aye, violate, the constitution in order to protect them from just punishment. The producers and refiners, exhausted and impoverished, fighting for their right to do business in this free country, found not only the railway companies, in league with the Standard Oil Company, against them, but members of the supreme court ready to do the bidding of the Pennsylvania Railroad and the Standard Oil Company and protect indicted conspirators from just punishment for their crimes. Read the record of the Matthews case ' against the Standard Oil people for con- spiracy to blow up his refinery and ruin his business. Read the evidence of Mat- thews; read the evidence of his partner, whom they had bribed and debauched to betray his associate. Read the evidence of this man, whom they had spirited about from the Atlantic to the Pacific, keeping him under cover, under an assumed name, at Boston and elsewhere — keeping him under cover for four long years, that his evidence might not be had by the courts ; keeping him until the load of crime in his heart became too great for him to bear, and conscience forced him to go back to Buffalo and confess to Matthews. Note how Matthews, struggling with poverty, yet determining that justice should be done, had spent the few remaining thou- sands he had left in these litigations, and how finally his little refinery was forced into the hands of a receiver, and he was financially ruined. Read it all, for I say to you that no honest man can read the record of his case without feeling that there was a crime committed against the State. And that's not all. Matthews had verdicts for S2T0.O0O against the Standard Oil Company people in his civil damage cases, and the creditors of Matthews, under this receivership, had to settle these .S370,000 verdicts for ftl7,300.* And this is not all. These great monopolies and the political bosses— who are but the creatures and servants and instruments of these great monopolistic combines — these bosses secure, in my opinion, nomina- tions of judges, and then, through the help of the party machinery and a liberal supply of corruption funds, succeed in electing them; and there, in our higher courts, men, elected by corruption funds, sit to dispense their kind of justice to the American people. The remedy is not in courts. You can not reach these fellows in the courts, rhey will circumvent you. They will break up any man who honestly attempts to bring them to judgment. The thought is fast becoming fixed in the minds of the common people that these great railway combinations, extending as they do from the Atlantic to the Pacific and from Canada to the Gulf, these great com- binations of corporate capital, are gradually packing our higher courts with men who will do their bidding, or rather with men who are m sympathy with the present monopolistic condition of things. THE INTERSTATE OOMMEEOE ACT. Now then, in 1878 the producers of petroleum in Pennsylvania had the old A.nglo-Saxon confidence in the justice of th e courts and in the power and omnipo- SeeMr.Archbold,p..553; Mr.Boyle,pp.427,43«; Mr.Emery.p.tiiB. « See Mr. Arohbokl, pp. 555, 556. 83a 26 390 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. tency of the law. If we could get a law enacted by Congress prohibiting railway discriminations we thought then there would be no more trouble. We paid $1 ,000 to a retired railway attorney of great ability to draft us an antidiscrimina- tion railway bill. The conditions were that it should be such a bill that when enacted into law the railroad companies could not drive a train of cars through it, I shall never forget the report which that committee made when they came back without bringing that bill from Washing-ton. They found Judge Reagan, of Texas, chairman of the Committee on Commerce, and took the bill to him. He read it over and said; " Well, my God ! this is just what we heed down in Texas." You all know what a magnificent light Reagan and the friends of that measure made in Congress for its passage. We always thought that the Cuilom amend- ment in the Senate very much weakened it, but at last it was passed, and we had the interstate-commerce law. But do you know that these great railway and trust combinations do not seem to care any more for that law than though it was not upon the statute books? On every subterfuge they evade and violate it. If they can control the appointment of Attorneys-General and Supreme Court judges they do not care what the law is. They have become bigger than the Government itself. They dare to threaten the Interstate Commerce Commission and ignore its orders, and that commission of this great Government seems pow- erless to perform the duties provided for it in the law that created it. ' Four or five years ago the Atchison, Topeka and Santa Fe Railroad went into the hands of a receiver, and about the first thing the receiver found out was that the officers of the road had paid out over S~, 000, 000 in rebates to trusts, monopolies, and favored shippers. And, while this was a State prison offense, there did not seem to be any disposition on the part of the Attorney-General of the United States to bring these great criminals to jtidgment. These great railway combi- nations and monopolistic organizations "seem to overshadow the Government and direct and control the action, of its officials. Q. (By Senator Mallory. ) Was not that before the passage by Congress of the law which subjected the party who received a rebate to liability under its provi- sions and which bound all parties concerned in the rebate business? — A. It was at the time the Santa Fe road failed, in 1m'.):3-94, long after the interstate-commerce law was in operation. Behind the power of railway discrimination the Standard Oil Company, the Sugar Trust, the Steel Combination, the Big Four Beef Combination, and the rest of these trust organizations feel so secure in their power to throttle competition and plunder the producers and consumers of America that the stock of these com- panies, some of it from 5i) to 90 per cent water, is selling to-day at from 300 to 400 cents on the dollar. THE CASB OF GBOBGE EICE, OF MARIETTA. The greatest battle in the record of time has been fought by George Rice, of Marietta, Ohio, for the right to do the business of his choice in this free country. What is the record in that case? In the latter part of the 70 's the railway man- agers, in order to crixiple Rice in the interests of the Standard Oil Company, doubled the freight on oil at Marietta, where Rice's refinery was. Biat the raise was only on oil; no other freight was raised. It was also only at Marietta. Ten miles below, at Parkersburg, on the Ohio River, the Standard Oil Company had a refinery, and the rate was not raised on oil from there, nor was it raised at Wheeling, above Marietta. The railroads raised the rate on Rice's oil at Mari- etta, but no raise was made anywhere else. There is evidence to prove this statement. - What further? The railroads over which Rice had been shipping to the south- ern markets raised the rate to him from '30 to 213 per cent over and above what the Standard Oil Company had to pay. Finally they refused to give Rice any rates at all.^ What further? The railroads paid the Standard Oil Company rebates on the oil that Rice shipped.' ' For the evidence to prove these statements, see Proceediugs before the Interstate Commerce Commission in the Titusville and Oil City Independent cases, pages 25G and 267. See also Com- plaint of the Interstate Conimci'ce Cominission to the Unitecf States circuit court in the Cox case. See also Contentions of Kailroad Companies in the Rice case, page 2 of their brief. 2 See report of the comniii.ti?e of the Ohio legislature ou railroad freights, pages Ti, 41, 42, 124, 141, 162, 106, and 170. " See testimony in the Rice case before the Interstate Commerce Commission, numbers 51-w, pages 147, 148, and 149. See also Rice's complaint, page G. < See the report of the committee of Congress ou trusts in 1888, pages .">75, ,576, .577, 678, and 583. See also, in the in-csent volume, Mr. Archbold, p. ~i'A<: Mr. Rice, pp. 706-70SI Hi v^ s X CJAxC c Cot V lil ■^ ■"•- 'k T o '\ "S., > ro '^- .. v:,h^ ^ % f*s, ■ v;i r< ^. \ . i:>$i: „ -v^; ■~^ %55i ^-. . ■ ^ 'S; ^ o '^ i; ; 1 ''X ^^ -"- -■ ■ •'•■-' - -J 1 S.o ^ jS O li^! .*^ •i'*--''5 ^ -■ "♦^ — '^ £'--■ 1o JT^ 0) > t^ i^ -J s: ^♦~M a -- STANDARD OIL COMBINATIONS: — LOCKWOOD. 391 Q. (By Mr. Kennedy.) How muchV — A. I have given yon the reference so you can tell. I did not go into that. What further? The railroad companies discriminated against Rice in favor of the Standard Oil Company to an amount equal to §199 per car on cars carrying 100 barrels.' I hope I am not asking too much when I ask the members of this commission to read these -id pages - giving the history of George Rice's exertions to do busi- ness over these American railways. Every statement therein made is supported by sworn evidence before the Interstate Commerce Commission, before the courts. and State and national investigating committees. When you have read this report of crime and seen how the rights of American citizens are destroyed by these railway companies, I would suggest, and I think it proper, that when John D. Rockefeller appears before you, you ask him whether, if the railway com- panies had treated him as they did George Rice, he thinks that he could have succeeded in business. Q. (By Senator Mallory.) What is that [referring to book in witness's hand]? What book is that? — A. Three chapters of H. D. Lloyd's great book called Wealth V. Commonwealth. It does not seem possible that, under this great Government, based upon the doctrine of the equal rights of man, such outrages could be possible. Yet this great Government, through its Congress and its commissions, seems powerless to prevent the wrongs which I have enumerated. THE REMEDY FOR RAILWAY DISCRIMINATION. What is the remedy? Take the railroads away from the corporations; make them public property; let the Government own and run them; make them high- ways over which the "people can go to market upon even terms. The 311,000,000,000 of capital combined in the railways of the Republic, organized under joint tariff and passenger associations, has throttled the law of competition and constituted one gigantic railway trust, controlling the highways of the people, dictating who shall and who shall not do the business of the country, and condemning this man to poverty and that man to riches. The holders of this $11,000,000,000 of capital, ■R'ith those holding the capital of the trusts and monopolies, have constituted themselves the political dictators of this country. They furnish millions of dol- lars for corrupt political campaign purposes. They assume to own the votes of all the men in their employ, and he who becomes politically obnoxious to them is blacklisted and turned out to starve or to hunt a new occupation. Shrewd poli- ticians, backed by this combination of capital and this power, have constituted themselves political bosses. These political bosses are but the creatures and servants and instruments of this great corporate power, and these bosses are dic- tating the nominations of legislators. Congressmen, Senators, and judges satis- factory to their masters. In this way they are controlling legislation and escap- ing punishment for their crimes. It takes a strong man, Mr. Chairman, well anchored in the confidence and afEeotions of his people, to triumph politically against this combined capital and power, and just in proportion as these gi-eat trust combinations are enabled to absorb the wealth produced by the people and impoverish them, just in that proportion will the people become subservient and cowering because the fear of hunger for wife and babies makes cowards of us all Can the Republic survive with these railways in the hands of corporations which are fastening these monopolies upon us? These corporations, m justifica- tion of their management of the highways of the people, the railways, set forth that they are moving the freight of this country cheaper than the freight of any other country upon the globe. True; but out of their own mouths they convict themselves of a great crime. I hold in my hand a receipted freight bill for the shipment of a carload of oil-well supplies from Harmony Pa., to Unity, Fa , a distance of 49 miles. The cost was $46.60 for this carload of 16 tons or i>3.91 a ton for the 49 miles, or .SO. 0593 per ton per mile. I have freight bills showing that I have paid 80.0433 per ton per mile in carload lots. A large percentage ot the freight of the American people is moved in less than carload lots. I have here receipted freight bills for 1 and 3 ton lots, and I find that I paid §0.13o7 per ton ^^O^TBvMr JENKS.) Have you any evidence to show that, over the same road for the same distance and the same kind of freight, any lower rate has been given 1 See exhibit, page r,H2, report of the Fiftieth Congress on combinations and trusts. 2 jj, D.Lloyd, Wealth v. Commonwealth. 392 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. to anybody else? — A. No; I have not. It is a small matter and I am only shipping occasionally, you know. A large percentage of the freight of the country is shipped by men who ship a car this month , a car next month, etc. Q. These freight bills are for fifth and sixth class freight, which I think oil- well supplies are. Does not everybody pay the same freight? — A. For small ship- ments r suppose they do. Now. statistics show that all the freight of this country, including everything, is moved at the average rate of $0.0085 per ton per mile. These facts convict the railroad managers of a great wrong, for these freight bills show that the people are being robbed for the benefit of the stockholders of the railroads; and the statistics show that the stockholders of the railroads are being robbed for the benefit of the monopolies, trusts, and favored shippers. Here is the problem: If the people are obliged to pay upon their shipments of freight, as these freight bills show, from $0.0432 to $0.1357 per ton per mile for the movement of their freight, and all of the freight of the country is moved for $0.0085 per ton per mile, how much less than $0.0085 do the monopolies, trusts, and favored shippers pay in order to bring this average from $0.1357 per ton per mile down to $0.0085 per ton per mile? The ansvv^er to this question will answer the oft-repeated question of why so many of our railroads are in the hands of receivers. A proper answer to this question will answer why it is that so many of our railway managers are becoming multi-millionaires while the railroads are becoming bankrupt. The record of the last 35 years has demonstrated that as long as the railways are in the hands of corporations they will use them for the benefit of their friends, or inside combinations, and for the purpose of destroying the great principle of equal rights, which is the foundation stone of our Kepublic. Take the railroads away from these corporations, and give every man an equal right in the transportation of his products. I know the independent oil producers and refiners of America, and if you will establish equality over the railways, with a guaranty that that equality will continue, I feel safe in saying that in less than 15 years the independent oil producers and refiners will drive the Standard Oil Company into a secondary position in the oil trade of the coxm- try. These great trust combinations do not know the first principle of econom- ical management. By virtue of the great flow of wealth which has come to them from railway rebates and trust possessions, they have not been obliged to study the principles of econonry a moment in their lives. By this monopoly process they have, been able to take more money from the people than they absolutely know what to do with. Reestablish the equalitj' of our people with respect to the railways of the country and there will be no more coal-miners' strikes; sol- diers and deputies will not be called upon to shoot down American citizens like dogs in order to force them back under monopolistic control, for then the miner can ship his car of coal just as cheap as the biggest coal combine in the land. Men do not strike and go out and starve except as a last resource. Establish the equality of our people over the railways of the country and then the coal miners, when they become dissatisfied for any reason, will get together and form a little coal company of their own instead of striking. They will lease MoCoomse's or McLaughlin's farm, open up a coal mine of their own, and ship their coal, the product of their own labor, to market upon equal terms with the biggest coal combination in the land. How could these great overcapitalized and extrava- gantly managed coal combinations stand such competition as that? They could not stand it at all; it would be mighty hard on the big coal combinations, but it would be justice and a wise national policy. With absolute equality over the railways of the country, so that every butcher could ship a car of cattle just as cheaply as the Big Four Beef Combine, that combine could not hold the monop- oly of the meat trade of America for 24 hours. Under Government control, the letter of an oil producer, a coal miner, .jr butcher goes to its destination with the same speed, at the same cost, and with the same precision as the letter of an Armour or a Bookefeller. Send their oil. meat and coal to market upon the same terms of equity and it will not be long before these monopolistic combinations will be getting rid of their 825,000 a year lawyers and managers upon the plea that their business will not stand such high-priced men. These managers will soon be engaged in building up businesses of their own, and the lawyers in a better busi- ness than advising their principals just how far they can go without getting behind the bars. G0V3SBNMENT OWNERSHIP AND CO.XTROL OP THE RAILWAYS FEASIBLE. How can the railways be taken away from the corporations? The public welfare demands it, and the power exists under the right of eminent domain of the State. The States can condemn the railways for the public welfare just as the private STANDARD OIL COMBINATIONS; LOCKWOOD. 393 lands were ooudeinned upon whioli the railways were built for tlie public welfare. Pay the corporations for them just what they are truly worth, and in this trans- action let there be no injustice either to the people or to the stockholders. But, someone will say, how could the Government pay the interest on the immense public debt which this purchase would create? Mr. Chairman, the people in this land, who are the Government, are paying it to-day. These railway companies are taxing the people under exorbitant freight rates for the payment of the inter- est on all of their corporate debt, money dividends upon watered stock, and hundreds of millions annually for the benefit of trusts, monopolies, and favored shippers._ The railways are the peoples' highways, and under Government ownership they are only changing their managers. One of the greatest judges that this land ever produced, in my judgment, once said that " a public highway can not be private property." An important reason for Government ownership consists in the fact that the bonded debt of the United States for the purpose of acquiring the railroads could be placed at from 1| to 3 per cent less interest than is novi' being paid upon their bonded debt. This great reduction in interest would be an important factor in cheapening the cosl; of transportation. But a greater and more overshadowing reason for Government ownership is that then we should be able to shake off the grip of these monopolies from the throats of the people. But some verjr good men, however, fear the power of patronage which Government ownership would give the party in power. I do not fear it. That can be controlled by civil-service laws. But even if Government owner- ship should be a source of strength to the party in power, that party would have to be responsible to the people for a just, wise, and fair administration of this great public property in the interests of the people. Under corporate manage- ment, all of the power and influence of these great railway corabinations, together with that of the men whom they control, is thrown into the balance in favor of this party or that party, according to whichever will secretly agree to serve them the best. They hold the balance of power in many of Llie States, and can elect the candidates of the party whose bosses will guarantee the great- est subserviency to their will. The jiarty that obtains control by virtue of this influence is n^jt held responsible to the people for' the maladministration of these public highway.s. as they would be under Government ownership. It is because these .sll. 000.000.000 of railwa.y capital, together with all the men which it con- trols, are in politics clear up to their armpits, and it is because this capital and these men are in politics for corrupt and selfish purposes, irrespective of the public welfare. That capital of ,311,000,000,000, together with all the capital of the trusts, is corrupting our public affairs and debauching our public men. That constitutes one of the most important reasons why the peojjle should take the railways away from the corporations. The record of the last 'i') years has demon- strated that the Government must own and control them or else they v,'ill control the Government. In the oil regions of Pennsylvania there is left a set of nien who have never bowed the knee to Baal, but have Ijattled on continually for their rights as Amer- ican citizens in the use of the railways of the country. It has Ijeen a long battle; some of them who buckled on the armor in 1873 have been claimed by the hand of death; some of them have gone down under the blandishments and money of the Standard Oil Company: many of them have become bankrupt and been reduced to servitude and even obliged to go to work for that great monopoly in order to obtain bread for their families; s.jme of them, with a deep sense of the gi-eat wrong that has blighted all their hopes and darkened all their future lives, with a deep sense of the great wrong that has driven them from the highways of the country, and chained them to the ]-ock helpless while that great monopoly robbed thern, have been driven to the grave of a suicide and to the insane asylums; but there are enough left to keep the faith and battle on for commercial liberty and equality. They have never faltered , but have battled, as best they could with- the means at their command. They first built the 3ij pipe lines to which I have referred and then found that it was railway discrimination. They then went to the courts, and when the courts failed them, they went to Congress for the inter- state commerce law. When the interstate commerce law failed them, they attempted to hew a way for themselves by building a pipe line to the ocean where commerce is free, thinking, hoping, prajdng that somewhere beyond our borders they mif-ht find a government where the equal rights of man are maintained upon the' hio-hways. We have found it in the great Empire of Germany, where the Government owns and controls the railways. The poorest man m Germany can ship a barrel of oil from one end of Germany to the other just as cheaply as the Standard Oil Company can. In Germany the independent oil producers- and 394 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. refiners of America are not only able to compete snccessfuUy with the Standard Oil Company, bnt in addition they are enabled to earn flattering profits upon their entire capital. Give its national ownership of the American railways, which will insnre and perpetnate equal rights, and we will soon give the people of America their oil at competitive rates. The people of Ameiioa will not then be obliged to pay 40 per cent dividends on Standard Oil Trust stock, at least 50 per cent water, because there will be plenty of capital ready to serve them at 6 per cent profit upon the actual amount invested. I take no stock in the idea that inordinately great capital produces cheaply; where monopoly begins there improvement ends; it is competition that drives men to economy, improvement, and invention; it is nronopoly that demands great profits. While competition was putting refined oil into tank stetimers for the competitive markets of Germany at 3 cents a gallon, monopoly, backed by railway favoritism, was forcing the people of Texas and Arkansas to pay 2.j cents a gallon for the oil that they burned in their lamps.' The attorneys of the Standard Oil Company, by a liberal use of the public press and a system of comparisons, have imposed upon the American peojjle the thought that the Standard Oil Company has furnished them their oil cheaply. If the people have been served cheaply by this great monoiioly what is the meaning of the .S.jOO.000,000 which it has ga!-nered? It is not the purpose of trusts to serve the people cheaply. It is their purpose to create monopoly and then force pro- ducers and consumers to pay dividends on billions of watered capital. Before the Sugar Trust had fully fastened its fangs upon us I bought good granulated sugar for my family use at fjiS.OO a hundred. To-day the Sugar Trust is forcing the American people to pay from $.5 to SO a hundred upon the same grade of sugar, a difference. I am told, of more than $200,000,000 annually. Two hundred million dollars, produced, by the American peopls. are by tliis jjrooess transferred from the pockets of the people to the coffers of the Sugar Trust; and then Havemeyer says, ''What are you going to do about it?" How can this be prevented? First, by assuming control of the railways and guar- anteeing to every man equal rates on the transijortation of his products, and then by enacting a law forcing the great trusts and monopolistic combinations to fix a price upon their goods which, freights considered, will be the same in every town- ship and hamlet of the land. When the price is changed at any point it must he changed everywhere. Make a violation of this law by the managers of corpora- tions a State's prison ofiiense. Corporations are the creatures of the State; the State has created them and has the right to control them in such a way that they will not be detrimental to the i^ublic welfare. Such a law would prevent the trusts and combinations from putting up the price in one section of the country, where there is no competition, and forcing the people there to pay the cost of destroying competition in another section. Such a law would prevent' the corpora- tions from forcing the people to pay for a war of annihilation against growing competition. It would protect and encourage competition upon every hand and cure the evils which are upon us. Say to all of our people — mine, manufacture, produce — the products of your labor shall go to niarket at rates equal for all, and you shall be prote'cted in a fair competitive combat. Do this, and the great over- capitalized and unwieldy trust combinations will wither and go down'before the energetic, intelligent, and active competitive capacity of the American people. Q. (By Mr. Kennedy.) I gather from the statements which you have just made that you believe freight discrimination and favoritism to be the motlier of all the great trusts of this country?— A. I do, largely, yes; that is really the foundation; a trust must be protected in some way; the brains of the country are not in the heads of a few men. The protection which has created the Standard Oil Com- pany, the Big Four Beef Combim.', and trusts and monopolies of that class, is that of discrimination in freights. (After a recess from 1 to 2 p. m. the examination of Mr. Lockwood continued.) METHODS BY WHICH THE STANDARD OIL COMPANY SECURED CONTROL OF THE PIPE LINES. C^. (By Mr. Jenks. ) I understood you to say that there were (|uite a number of different pipe lines in the earlier days in Pennsylvania that were either forced to suspend operation or were bought up by the Standard Oil Company and united. How many pipe lines did you mention?— A. I have a record of, 1 think, about twenty-six. Q. Ca,u you tell us the methods by which the Standard Oil Company secured control of the pipe-line industi'y?— A. Well, in those early days their policy was to go to the wells and bid more for the oil than anyone else could pay. For the 'Seep.aiK; Mr. Arohbold, p. 5.58; Mr, Emery, p.61G. STANDARD OIL COMBINATIONS: LOCKWOOD. 395 last 15 years they have addpteil a policy of paying what they call a. pvemium on oil that IS accessible to the conipetiiu^- pipe lines. When a new pipe line starts into a particnlar district then the oil of that district becomes very vahiable, the Standard Oil Company Avill put a premium on it, say. of 20 or 30 cents a barrel. When they have finally succeeded in driving out or buying up the coinpetinp- pipe line the oil is no longer any more valuable than other oil, and then tbey take the premium off. Let me give you an illustration: In 1s«7 the Craig, Elkiiis & Kim- ble Company built the Western and Atlantic Pipe Line. Thev made the^'r first shipment of oil on October 11, 1SS7, At that time the Standar.V Oil Company was paying (iO cents a barrel for crude oil at the wells. The Western and Ati.mtic Pipe Line did not fairly gyt started in business until the s]iring of 18SS; but by that time the exchange market for crude oil, under the growing competition, was 88 cents per barrel, and the white-sand oils of Butler. Armstr(mg, Allegheny, and Washington counties, into which the Vf estern & Atlantic Pipe Line ran, had become so valuable that the Standard Oil Company was paying a premium of •-20 to '35 cents a liarrel, which, added to the 88 cents, gave the jiroducers of those counties 81.08 and 81.13 a barrel for their oil at the wells. Refined oil was selling in August of that year for 71 cents a gallon, including the barrels, in New York City and export points. In November, 1889, the Stand- ard Oil Company was paying us S1.30 a barrel for oil at the -wells, and refined oil was selling in New York City at 7* cents a gallon. Competition was putting crude oil up to the producers and refined oil down to the consumers. I have a very vivid remembrance of this time, because I was opening up some territory on the Little Connequenessing Creek, in the western part of Butler Countv. Pa., in what is known as the 100-foot rock. I had leased the Cable, Charley Young, Edward Young, Eyeholtz, and Hayes farms. I was getting some magnificent wells. One on the Eveholtz farm started ofE at 125 barrels an hour. I had 1 well on the Charley Young farm that averaged 1,000 barrels a day tor a long time. I think I drilled about 40 wells on this property. Competition was giving me all this oil was worth, as compared with what the consumer was paying for it, and I was getting rich. I was getting from .81.10 to .SI. 30 a barrel. About this time it became evi- dent there was a 100-foot oil belt extending from the western part of Butler County down into the eastern part of Beaver County, Pa. I worked night and day, and never stopped for anything, until I became interested in about 3 nriles of this oil belt. Starting on the southwest I got the Fogle. Kanelf, Shrumm, Trautman, Allen. Passavant, Coker. Pankee, McCurdy, Eyeholtz, Getman, Eichenower, and Moyer farms. I was interested in V. nailes of this oil belt solid; I had it all. I thought I would make a million. I got some grand wells; one on the Trautman farm started off 1.300 barrels a day. About this time the Standard Oil Company gave the Elkins and Kimble crowd their jirice, and bought their pipe lines and refineries. The very next day the premium came off from that oil. It was not any better then than any other oil. As soon as there was no competing pipe line its superior qualities were gone, and from that day competition was gone. The price of oil gradually fell to 53 cents. They kept the market below 60 cents for one whole year. I did not sell a barrel of oil for one year above 60 cents. The average, I think, was about 56 cents. The next year I was obliged to sell all my oil at less than 70 cents a barrel, and below the cost of ' production. This condition continued for two years. The Standard Oil Company practically confiscated all of that magnificent proijerty, and instead of having |l,000,000, which I should have had, if I had been able to secure my share of the profit that was made on that oil, I absolutely had to mortgage my property to get money to pay my debts contracted for tlie tubing, casing, engines, boilers, rope, tools, and men. All of the value of that immense property, that would have made any man a millionaire, was transferred to the coffers of the Standard Oil Company. Q. (By Mr. Kennedy.) What did you ,say was the price per barrel when it started?— A. .81.30. Q. And what was the price of refined oil?— A. The price of refined oil at the time I started was T^ cents a gallon in New York City. Q. The cost of refined did not go down at all compared with the cost of the crude?— A. No; it did not. You can see from the dates I have just given that dnr- ing the period of competition when that pipe line was in existence , the price of crude oil went up and that of refined oil went down, I think, a fraction of a cent. The history of that case is the history of the manipulation of the • Standard Oil Com- pany over and over again. If the oil producers are lucky enough to find and open up a great field the Standard puts the price down and practically confiscates the profits. Of course the Standard Oil Company's newspapers will be full of 396 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. cock-and-brJl stories about the increase of production and increase of stocks of oil, but the facts are, tliat during the year which I have described, when the pnce of crude oil was pulled down from 81.30 to 53 cents -a barrel, the entire increase would not have supplied the consumptive demand of the world for 3^ months.' All of this talk about production and stock was a mere subterfuge to take from the producers the wealth they had created and transfer it to the coffers of the Standard Oil Company. Q- (By Mr. Jenks.) Does that practically cover the explanation of the way in which the pipe lines were absorbed by the Standard Oil Company and the effects upon producers? Q. (By Mr. Phillips.) About 38 in number? — A. Yes; I have a record here of the number and names of them, if it would be of any benefit. Q. It is, perhaps, not worth while to name them here, if you can give us the reference to the book. [Bookheld by the witness.] — A. Now, this is in a biograph- ical book in which there is a speech delivered by myself on the free-pipe hill question 30 years ago. DOES THE STANDARD OIL COMPANY AT PRESENT RECEIVE FAVORS FROM THE RAILROADS? Q. In your testimony this morning you gave a great many instances of special railroad rates that were secured by the Standard Oil Company a good many years ago, and showed how, in your judgment, by vir-tue of these special rates, the Standard Oil Company had been built up. You cited us also the authorities by which these statements could be verified. Have you any information or any proof that the Standard Oil Company is at the present time getting any special priv- ileges from any of the railroads? — A. The evidence in the Titusville and Oil City Independent cases goes to prove that. Q. (By Mr. Jenks.) How long ago were these cases brought? — A. They were brought in Q. (By Mr. Kennedy, interrupting.) Did you not say 1893 this morning? — A. It was about then; they were along after the interstate-commerce law was enacted. The evidence all goes to prove that the railroad companies are manipulated in some way so that the Standard Oil Company gets an advantage, and the great fear among the independent producers and refiners is that, after they have gone on and extended their trade and spent money to build up stations in which to do business in any section of the country, by some scheme the railroad companies will put up the rate on them and shut them out of that district, jirst as they shut them out of the New England States in the case which I cited this morning. It is the fear of railway discrimination that paralyzes men. Q. (By Mr. Jenks.) We have had some evidence offered tending to show that the Standard Oil Company is at the present time receiving special favors. Have you yourself anything of a definite nature to offer in that direction? — A. No. I am an oil producer and I do not get in touch with the railroad people so much as the refinery men do. I have no doubt that they are getting a great advantage to-day, and probably at the end of 4 or 5 years we will find out just what that advantage is. At the time when they were getting §1.50 and sometimes more in rebates they persistently denied that they had any advantages, taut ultimately the ' truth came out in some way and we saw then why it was that they were triumph- ing- over the indeijendent companies. Q. Have you any information at the present time with reference to the freight rates on oil over the Canadian roads? — A. No; I have no information on that subject. , Q. Did j'ou not give us some instances this morning of very high rates which you liad paid on some of the roads that run from Pittsburg to Union City? — A. To Unity Station. Q. You showed that these rates were very much higher than the average rates throughout the country. Have you any proof of discrimination in rates between different persons or different companies by those railroads? — A. The road that extends to Unity is a coal road. It was built into that district to take out coal for, I think, the Buffalo and Cleveland Coal and Gas Company. I was told, while operating in that district, that the ]-ate of freight on coal to anybody outside of that c< impany was so high that it was impossible for them to compete "at all in the market at Buffalo and in Canada. Q. Were the rates on coal diffei'ent to members of the company from what they were to outsiders, or were the rates the same to all parties, the members of the company getting their profits simply from the high rates that put money into 1 See table of stocks and prices, p. 547. STANDARD OIL COMBINATIONS: LOCKWOOD. 397 their pockets as railroad owners?— A. I really do not know the inside working of that coal road. All I know is that the men who own coal farms there can not ship their coal. They are powerless to do any biisiness in competition with the coal combination. Q. Of course that might have been true, even though the owners of the road were paying the same rates, because what they were paying out in one form they were possibly getting back in another. Have you any information to show that this railroad has been acting contrary to law in making discriminations? — A. I imagine that on the class of freights which I ship everybody pays the same. Q. Is there very much freight shipped over this road besides coal?— A. There has been quite a development in the oil and gas business in the region, which has made that road necessary for shipping oil supplies and pipes. Q. You speak of this railroad running from Pittsburg to Unity. Is it a small line or a large road? — A. It is a part of the Allegheny Valley system, which is a branch of the Pennsylvania Railroad. PIPE LINES OF THE INDEPENDENT COMPANIES. Q. (By Mr. Kennedy.) Did you not say the independent companies had their own pipe lines to the seaboard? — A. After the purchase by the Standard Oil Com- pany of the Elkins, Kimble & Craig pijie-line system, when oil got down so low that it meant bankruptcy and ruin to all of us, the independent oil producers went to work and tried to hew a way out for ourselves by building a pijje line through to the seaboard. The first movement was in building what was known as the Producers and Refiners' Pipe Line Company, Limited. I think that was built into the McDonald field, with the expectation of piping oil to the railroads and then shipping it in cars to the independent refineries at Oil City and Titusville. As soon as that was completed and business began, a system of discrimination was set up against them in some way. I do not remember just how it was, but it resulted in the producers having to lay a line from the McDonald field, where the first little line was started, through to Oil City and Titusville and the refin- eries. After they had done that the discrimination began against the refined oil again. As long as these refinery men were taking the inferior oils of the Stand- ard Oil Company which had been in tanks until the finer parts had evaporated, there was not much discrimination against them, I unuerntaiid. but after they were able to get good fresh oil from the weils shipments of refined oil were blocked. Then we undertook to lay the seaboard line from Titusville to New York, or Jersey City. Q. Have you a line there ? — A. The line has been built down into New Jersey, but the railroads have blocked us. The managers bought a piece of land in fee simple that went under where a highway, a wagon road, passed. In the h iwer courts I believe we got a verdict in favor of our right to lay the line under there andtransportoil,but they finally carried the case up to the supreme court in New Jersey, and after we had laid our line. I think, 60 miles farther on, that court reversed the decision and forced us to stop. I do not know, but I think we are still putting oil through there, but it is sui),iect to the final decision of the court. The verdict vcas revei-sed Ijy which we had the right." Q. Does the line go to the seaboai-d?— A. It g(j(s down now from New Jersey over the Central Kaili'oad. Q. (Bv Mr. Phillips.) From what point ?— A. From the end of the pipe line, I think 80 or 90 miles : it may not be as far as that to the tanks at the sea- board. This line that the Producers and Refiners Company has built is a double line. They transport the refined oil from the refineries at < )il City, Bradford, and Titusville through to the end of this pipe Ime, as they do the crude oil, and then it goes on board the cars to the sealioard. The refined oil is there put into steam tank vessels and sent to Germany, where the independent pro'lncers and refiners have built 3 large .stations, each one of theiu, I think, t-apable of holding 70.000 barrels of oil. The crude oil is refined at the seaboard. In Germany there is no railway discrimination. x, r.^ i n r^-i Q. What I wish to get at is whether the railr(3ads now give the Standard Oil Company any advantage over vou in getting oil to the seaboard; but I judge, bv what yon'say, that, with the p(jssible exception of the Jersey Central, no road can do it —A. No road except the Jersey Central Railroad has anything to do with our oil from the time it leaves the well until it gets to the seaboard. ~ O Tliey cannot, then . give the Standard Oil Company any advantage over you?— A No not on export oil ; we are on even terms with the Standard Oil Company, with tiie exception, I think, of about T cents freight per barrel. Q (By Mr Phillips). It does not exceed try."— A. No, it does not exceed that. 1 See Mr. Emery, pp. 050-65.5, Ijij2; Mr. Phillips, p. 593. 398 HEARINGS BEFOEE THE INDTTSTRIAL COMMISSION. SHIPPING EEFINED OIL THROUGH PIPE LINES. Q. A great deal has lieen said about the Standard Oil Company's methods of doing business. Were they ever able to, or did they ever, ship refined oil any dis- tances through pipe lines?— A. Not to my knowledge: they have always claimed that it could not be done; that it would injure the quality of the oil. Q. What has been proved by this pipe line runnirig through to New Jersey?— A. It has been proved that it can be done successfully. You can ship 110 fire test, which is export oil, and put through right behind it 150 fire test, and separate the oil at the end of the Ime without making a change of more than a barrel, which is within 20 or 30 feet of the column of oil. Q. Is that an improvement by the independents over the Standard Oil Com- pany's methods of handling oil?— A. Certainly; very much. Q. (By Mr. Kennedy. ) Then the independent companies do have some advan- tage over the Standard Oil Company in getting their oil to the seaboard?— A. In that connection. Q. (By Mr. Phillips.) Does the Standard Oil Company refine a percentage of theirs at the seaboard after pumping it through in a crude state?— A. Yes; I understand their export oil is nearly all refined at the seaboard. PRICE OP OIL SHIPPED TO GERMANY. Q. (By Mr. Jenks.) Did I understand you to say this morning that the inde- pendent refineries were supplying refined oil in Germany at 3 cents a gallon?— A. In the contest for that trade the producers sent shiploads of oil to Germany at from 2 J to 3 J cents a gallon; one cargo of oil, I believe, was sent at 1,H, cents a gallon. Q. Was that for the purpose of starting the German trade?— A. Yes; it was to get into the trade. Q. They were then selling oil in Germany considerably cheaper than here? — A. I think so; a good deal cheaper than it was sold to American people generally.' RELATIONS BETWEEN INTERSTATE COMMERCE COMMISSION AND THE STANDARD OIL COMPANY. Q. Did I understand you to say that the independent oil producers were chiefly instrumental in starting the idea of the interstate-commerce law? — A. Yes. Q. And also that since the interstate-commerce law had been in force the Stand- ard Oil Company, in particular, and the railroads, who were opposed to any restrictions upon their powers, had succeeded, in your judgment, in defeating largely the purpose of the law? — A. Yes. Q. And in that connection, did you make the statement that the members of the Interstate Commerce Commission have been threatened? — A. Yes. Q. In what way have they been threatened? — A. That their powers would be tested. Q. You do not mean, then, that the members of the Interstate Commerce Com- mission had been personally threatened? — A. Oh, no; they simply questioned thfeir authority and threatened to test their powers. Q. From the connection in which you used the expression I was not certain but that you meant to say that the members had been personally threatened. You meant simply that the Standard Oil Company and the railroads had asserted that they thought they could defeat the law? — A. That the Commission did not have the power to perform the duties provided for it under the law. Q. And they proposed to te.st that in the courts? — A. Yes; in the courts. There was one case taken into the courts by the Commission. Yon i-emember the Cox case; that was 11 years ago, and it has not yet been finished. THE PRESS SUBSIDIZED BY THE STANDARD OIL COMPANY. Q. You made the statement also that the press had been subsidized by the Standard Oil Ciompany. Have you any positive information of special cases in which the Standard Oil Company has sulisidized the newspapers? — ^A Well, they have bought out the Oil City Derrick, and have hired Pat Boyle to run it. He runs it in their interest. I do not know just what the arrangements are, but the 1 Soe Mr, Loe,p. ~74. STANDARD OIL COMBINATIONS: — LOCKWOOD. 399 paper is conducted in tlie interest.of the Standard Oil Company, and attacks the independent producers and their movements. *^' ^?^?S"'n?^^>'"H?®-) ^"^^^ ^^^^^'*? ^^"^^ ^een any action brought against that paper tor libel?— A. Yes. I think that Senator Lee sued them for libel" they pub- iispe':l some very damaging statements, and he brought suit against them. I think benator Emery also brought suit against them for what they stated about mm.' Q. Were either or both of these suits carried to a conclusion?— A. I am not cer- tain as to how those cases ended. My memory is that they were settled in some way. but I do not know just how. Q. (By Mr. Jenks.) Have you any other specific cases in mind besides the Oil City Derrick?- A. Well, the Titusville papers, particularly the Titusville Herald seemed to be under their thumb, and the Pittsburg papers have now reached a point where they take all of the oil information that they publish from the Stand- ard people. The Standard publish what they want to in the reports and in the daily papers. - Q. Your statement, then, means substantially this, that there are several papers m the section of the country in v.-hich you live that regularly make favorable reports with reference to the Standard Oil Company's methods and unfavorable reports with reference to the methods of those opposed to it?— A. Yes. Q. More particularly the Oil City Derrick?— A. More particularly the Oil City Derrick. Q. But you have no direct personal knowledge that the paper is owned by the Standard Oil Company, and you make your assertions largely upon the nature of the material that is published by that paper?— A. That is the source of the knowl- edge I have of the transaction. Q. (By Mr. Phillips.) Has the Oil City Derrick generally been favorable or unfavorable to the independent movement?— A. It is bitterly opposed to the inde- pendent movement and attacks the credit and reputation of the men who are exerting themselves for an outlet. Q. You do not remember the termination of their suit at Warren in regard to the libel case? — A. Now, I am not sure as to that. RAILWAY DISCRIMINATIONS RESUJIED. Q. (By Representative Bell.) Have you ever read Larrabee's book on rail- roads? — A. Yes. Q. What would you say as to the merits of it? — A. Well, I think it is a full exposition of the railroad question in this country. Q. Does not he develop the fact that as early as 1876 there was a. tendency in the United State.'- to interfere in political affairs? — A. That is, a tendency of the railroads to manipulate political isarties? Q. Yes.— A. Yes. Q. And to fill judicial positions with their sympathizers? — A. Yes. Q. Now. you spoke of the Standard Oil Company building up their trust through railroad discriminations. Was there any reason whatever at that time for creat- ing the trust or anything that would enable them to build up the trust other than railroad discrimination? — A. I do not think there was. The men who were refin- ing oil were men of ability and business capacitj'. At least equal to the business capacity of the Standard Oil people, with the exception that the Standard Oil people recognized that it was a question of advantage in freight rates instead of a question of superior goods; that superior goods could not go over the railways unless the railways let them. Q. They raised the price on crude oil from about 40 to 80 cents a barrel, and then if an independent company shipi^ed a barrel of oil did they not take 40 cents of that and hand it over to the Southern Improvement Company? — A. From 40 cents to 81.10. Q. And that had the effect of destroying not only the competitors, but of destroy- ing the value of all the independent oil wells in the United States?— A. Very largely. Q. And the market fell off?— A. Very much. Q. And forced them out of business? — A. In a great many cases. Q. Have you given any attention to the coal fields of Pennsylvania?— A. No; I have not, except in a general way. Q. Is it a fact that the railroads of the United States refuse to let any private individuals operate a coal field?— A. Yes; I know that to be the case in Allegheny County. 1 See Mr. Boyle, p. 487. 2 See Mr. Boyle, pp. 40i, 487; Mr. Rogers, p. .587; Mr. Monnett, pp. 312, 321. 400 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Tliey have an independent coal comijany, which is a kind of a wheel within a wheel, gotten up among the railroad stockholders? — A. Yes; and that company is the only one that can snccessf ull5' ship coal over that special railroad. Q. If they give you a rate, do you ever have any trouble in your country in getting cars? — A. Why, in those early days and throughout the time of the inde- pendent refiners' struggle that was one of the principal ways in which the rail- roads discriminated in favor of the Standard Oil Company. They refused to give cars to men who had oil to ship. For instance, if a man wanted 30 or .30 cars, perhaps 2 or 3 days after he needed them 1 or '3 would come, and he would not be able to get his oil into the market at the time he expected. Q. What have you seen in the way of discrimination against towns? Has any- thing of that kind come under your observation? — A. Well, not pe;';;0Tially, but in the investigation of this question I have found that towns are built by rail- roads and that towns are practically destroyed by railroads as far as their com- merce and industry are concerned. Q. Is it the tendency of private ownership to create commercial centers, great centers? — A. Yes. Q. Like Chicago? — A. And Nev.' York. Q. Now. what, in your judgment, woulil be the effect of Government owner- ship or Government control that would require all railroads to carry freight for one man at the same price as they carry it for all others, the distribution of popu- lation being taken into consideration? — A. I think that it would be especially beneficial. It would give individual enterprise an opportunity. Men would have the courage to enter into business enterprises that they do not dare to enter under the present system. Q. As I understand you, there is a timidity about building up enterprises in your part of the country for fear of discriminations in favor of some strong com- pany and against the men that are starting the new enterprises? — A. Yes. Q. These men are afraid to meet competition? — A. Yes; the great, overshadow- ing fear that men have in the oil country in starting in to compete for the oU trade and the refining business is that the railways will design against them and shut them out of the markets; that is tlie trouble. If there was a guaranty that everybody would be treated equally by the railways, the men of the oil regions have the courage, the ability, and the resources to go in and do this business. Q. Now, what has been the experience in your part of the country with regard to the individual farmer marketing his product and the elevator companies ship- ping the same product from the West? — A. We do not have anj^ elevator companies in our section. Q. N<:i; not in your section; I refer to the elevator companies in Chicago and the West. How does the freight rate from Chicago to New York correspond with that from Pennsylvania to New York? — A. Well, from the information that I have gathered on inv estigation of the subject, the rate from Chicago to New York is sometimes much less than it is from Pittsbiirg to New York. Q. That is, the elevator companies and the l>eef companies can reach the mar- kets in New York for less than the individual farmer in Pennsylvania? — A. Yes; I believe that. Q. Is that a general principle nfjw established with regard to the beef combines, the elevator combines, and all like combines? — A. I think it is. RELATIONS BETWEEN RAILROADS AND THE SOUTH IMPROVEMENT COSIPANY RESUMED. Q. (By Mr. Ratohford.) Did I understand you to say this morning that the South Imprrivement Company made a contract with the railroad companies in 1872?— A. Yes; in 1873. Q. Was that a contract to transport their products at certain prices?— A. Yes, at certain prices; they raised the prices. Q. Would you care to state those pric'_'s?— A. I can not stat-e the prices without referring to the testimony in those cases. Q.' (By Mr. Phillip.s.) Have you reierr(-d to where that testimony can be found? — A. I have referred to the sworn testimony. Q. (By Mr. Ratchford.) Can you state who 'composed this Soiith Improve- ment Company? Was it composed of the independent prodiioers and refiners?— A. The South Improvement Company was (;( imposed of 13 men. Ten of them were afterwards the prime movers in the Standard Oil Comuaaiy combine.' Q. It ajipears that the contract to which you refer was not carried out on the part of the railroad company.— A. No; publicly it was not. I wish you would let 1 «ea Mr. Emoi-y. p. 019; Mr. ];irc. p. 09(1. STANDARD OIL COMBINATIONS: LOCKWOOD. 401 me answer that. That contract was so abhorrent to every idea of American right that the men in the oil regions went into revolt. Tliey wonlcl not stand it: they created such an excitement that the legislatnre took up the question and repealed the charter of the Sonth Improvement Company. Q. Did the producers bring action again.st the railroad company? — A. There was a settlement of the difficulty at the time, in which the producers, i>t a com- mittee of the producers, entered into a contract with the railroad company that henceforth there should benii discrimination for or against anybody; that every- body was to have eijual rights. I have given the reference to that contract; ' it is on record. Q. Is the South Improvement Company still in existence V — A. The charter of the South Improvement Company was repealed by the Pennsylvania legislature in 1872, and the company, of course, went out of existence ; but as you will note, by referring to my statement, everything that the railroad company contracted to do publicly for the South Improvement Company in iKT'i they have since secretly and persistently done for the benefit of the Standard Oil Company. If the South Improveraent Company had been allowed to go on, they would have created a monopoly and controlled the oil business just exactly as the Standard Oil Company, enjoying the same advantages which the railroad companies had contracted to give the South Improvement Company, was- afterwards able to do. THE CASE OF MR. RICE RESUMED. - Q. In referring to the case of Mr. Rice, of Marietta, against the Standard Oil Company, did you say that the railroad companies increased the rate on Mr. Eice's product, charging him an exorbitant price? — A. Yes. Q. And that in doing so they paid a certain percentage of the amount received from Mr. Bice to the Standard Oil Company?— A. That is right. N(;)W let me answer that a little further. Rice got the crude oil for his refinery from the Maxburg field, which, I think, ij something like 70 or 80 miles from Marietta. Rice had a little pipe line and a car. He obtained a rate. I think, of 15 cents a barrel from the Lake road tor his car, running it back and forth. He was extending his business, and the Standard Oil Company got after that railroad and told those men that he had to be stopped. When the road went into the hands of a receiver, Daniel O'Day went to the receiver and threatened that unless they would carry the Standard oil for, I think, 10 cents a barrel and cb.arge Rice 35 cents a l,arrel— I am not quite sure as to these amounts, but I can fix that— they would lay a pipe line and ship all their oil by pipe line to their refineries in Marietta. The evidence shows that the receiver made that arrangement, and out of the 35 cents that Rice paid he turned over iO or 25 cents in rebates to the Standard Oil Company. It is in evidence : it is on record ; it can all be seen. Q. Do you believe that it was the result of a demand on the part of the Standard Oil Company? — A. Yes. Q. Following that question, now. a little further, have you not stated that the railroad comnany finally refused to ship Mr. Rice's oil at any price?— A. Yes; that was afterwards. Rice extended his pipe line to the Muskmgum River, I think, or some river that runs in there at Marietta, and got some flatboats. The refusal to give Rice any rate at all was when he attempted to get his oil into the southern markets. n -, a. j r^■^ Q. Do you believe that was also the result of the influence of the Standard Oil Company?— A. I have no doubt of it in the world; not the least. Q. Now, if the Standard Oil Company found it advantageous to get from the railroad company a certain percentage of the money paid by Mr. Rice for his shipment how could it be advantageous for it to influence the railroad company to give Mr Rice no transportation?— A. The profit of this monopoly has been enor- mous The 8500.000,000 which it is said they have accumulated is an immense amount of wealth, and they have gotten it by working the railroads to destroy all competitors so that they could force the consumer to pay a large price tor their oil The 25 cents rebate which they got on Rice s oil was only a drop in the bucket compared to the profits that they could obtain by shutting Rice out of the market and selling their oil in Rice's territory-. , ^, , , ,.,. ,, ,, O I take it from that that the company obtained the best conditions they could and'that when they could improve them they did so. Is that it.-'— A. The standard Q^Yes^— A. They are always looking out for the Standard Oil. I See p. 38.5 ' See p. 390. 402 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. PRODUCTION OP INDEPENDENTS AND STANDARD COMPARED. Q. (By Mr. Kennedy.) Can you state approximately what per cent of the refined oil of this country is turned out by the independent companies? — A. We calculate that they are handling about 4 per cent. Q. Only 4 per cent? — A. Only 4 per cent. You know it is an immense business. Q. (By Mr. Phillips.) That is, taking the Ohio oil?— A. The Ohio oil and the Pennsylvania oil and all the different grades.' Q. (By Mr. Kennedy.) Can you state what per cent of the oil you refine is sent into the German market? — A. I am not one of the managers of that enterprise. I know that the larger percentage of the oil is exported. Q. Then, I gather from your testimony that the business you do in this country is done at a loss, and that the companies are enabled to live and make a profit by the advantages they have in the German market; is that so? — A. Yes; the inde- pendent producers and refiners went into the New York City market to supply the consumers, but the Standard immediately brought the price down there and they hold it down so that there is no profit. I think I am not revealing any trade secrets when I say that the independents have lost money continuously in New York and Philadelphia in their attempt to supply those cities with oil; but the profit which they make in their export business, in their trade in Germany, in which they have an equal show all around, is sufficient to make up those losses and still show quite a favorable earning for the amount of capital invested. STANDARD OIL COMPANY'S METHOD OF COMPETITION. Q. (By Mr. Phillips.) How does the Standard meet competition at the different points in the country? Have you any specific knowledge of discrimination against the independent producers at any particular point or points? — A. When the independent producers come into a district to sell refined oil the Standard brings the price of oil down in order to try and make them lose money. Another plan which the Standard Oil Company people — I always like to use that word ' ' people " because it is such a hydra-headed concern that if you do not you may not hit the right thing — follow is to inmmidate merchants and prevent them using or selling anybody's oil except their own. Of course, I have read of a good many instances of that kind, but I have in mind a special instance. In 1888 I was in the Panhandle of Texas, at Wichita Falls, and bought some land there from a gentleman by the name of W.W.White. He was quite a prominent merchant. He had a large store and fitted out the wagon trains that went over the plains. While I was there he told me of his experience in the oil btisiness. He had been buying his oil from the Standard Oil Company, but one day a man came along with some specimens of oil that were very much finer than any he had been able to get, and the price being satisfactory, he purchased a carload of oil from him. After 3 or 3 weeks the oar of oil arrived, and the next morning the Standard Oil Company's representative from Fort Worth appeared on the scene and chal- lenged Mr. White's right to buy anybody's oil except theirs and declared that they would not stand it. He finally threatened to establish a store and run White out of business if he insisted on selling any other oil than theirs. White was a con- servative, closefisted fellow, and, of course, the prospect of having to lose his business was sufficient; and it was settled and agreed that he could sell this car of oil if he would agree not to buy any more of it and to buy only from them. THE STANDARD OIL COMPANY' AS A PRODUCER OP OIL. t^. Has not the Standard Oil Company become quite a large producer of oil?— A. Yes. Q. They own a very large percentage of the Ohio oil fields which produce what is called the Lima oil? — A. Yes. Q. Did they purchase that after the price of Lima oil had fallen to, say, 10, 15, or 30 cents'? — A. Yes. Q. When they entered that field and purchased a large body of it, was it very cheap'? — A. Yes. Q. And did they fix the prices?— A. I remember that very well. When the first oil was struck in Ohio the independent people, who were interested in it, went out and found a market for it for fuel and manufacturing purposes, and were enabled ' See Mr. Archbold, p. 5S0. STANDARD OIL COMBINATIONS: — LOCKWOOD. 403 to get from 40 to 50 cents at tlie wells. That is wliat it would net them after tliey had paid the expenses of delivering it. Finally the Standard Oil Company reached out after this new field, and by manipulation of the railways they interfeied with the independents and got c(3ntrol, and pulled the price of that oil down to 15 cents a barrel. They held it at 15 cents a barrel in Ohio until they broke the hearts of the producers, and then bought nearly the entire country upon that basis.' HOW THE PRICE OF OIL IS DETERMINED. Q. Is the price of oil ikiw determined by the exchange, or is it fixed absoTntely by the Standard?— A. I do not remember the date, but it is unite a number of years since Joseph Seej), the purchasing agent, gave notice that the price of oil upon the exchange would not be the price that thev would pay for oil, and that they would fix the price for credit balances, that is. what the producer had and wanted to sell, at what the markets of the world would warrant. Since that time the Standard has fixed the price. Often there has been a wide divergence between the price of oil on the floor of the exchange and the price fixed by the Standard Oil Company for credit balances. STANDARD'S METHOD OF PURCHASING OIL PROPERTY. Q. You have explained about the reduction of the price of oil in Ohio. Has not the Standard bought a large amount of producing property in the Pennsylvania and Virginia fields, and were not those purchases made at an extremely low price as a rule? — A. I think that their policy has been to depress the price of oil and to discourage men who had oil properties and who were loaded with debt until a point was reached where they could go to them and buy up their property. They , bought a very large amount of property. It was just before the great rise which occurred after they had bought all the property they could. Q. What was the date of that?— A. I think it was 1896 or 1897. After they had bought all the property they could the market went up very high, as high, I think, as $3.60, and prices remained high for quite a long period. Evidently they had in mind the idea of depressing prices and obtaining this property, but the law of supply and demand will ultimately make itself felt. For instance, the lovv' point at which they had maintained ulie price of oil had impoverished the producers and stopped their development, and as a result of thaflong depression the stocks ran down in the storage tanks to 4,000,000 or 5.000,000 barrels. Then that movement in which they fixed a very extreme, fictitious price was begun for the purpose of getting everybody excited and getting producers out into the field to develop new territory and increase the supply of oil. Q. And did that great advance shortly after the purchase of the territory aid them in paying for it? Did they not advance the price of refined oil also? — A. Oh, very largely; very largely. I can not give the exact figures, but I have them here; I can give the commission the benefit of these figures. Q. You think, then, that they assessed the world to pay for that property? — A. Yes, 2 or 3 times over; yes, 40 times over.- ' Q. When they have bought out pipe lines they have, as a rule, depressed the price of oil? — A. Always. I gave that, I am sure, to the commission. Q. Upon whom would the payment for these pipe lines fall? — A. Four or five times more than the amount would come from the producers. I gave the com- mission a statement as to how they pulled the price down from $1.80 to 53 cents a barrel. Q. Do you think, then, that when they buy a large amount of property they are enabled to assess the consumers not only in this country, but abroad, to pay for it? Is it in their power to do that? — A. They practically control the markets of the world and are working them to get all out of them they can. Q. When they buy out a pipe line at a high price and depress the price of oil A. (Interrupting.) The producer has to pay for that pipe line many times over. Q. Has any member of the commission any further questions to ask? Have you any brief statement you wish to make?— A. I have nothing further. Testimony closed. 1 See Mr, Monnett, pp. 318, 319; Mr. Boyle, p. iSV; Mr. Archbold, pp. 560. 561 - See Mr. Archbold, p. 561; Mr Phillips, p. 693. 404 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Washington, D. C, September 6, 1899. TESTIMONY OF PATRICK C. BOYLE, Proprietor and publisher of the Oil City Derrick. Tlie oommissioii met at 10.30 a. m., September 6, 1899. Vice-Chairman Phillips presided and introduced Mr. Patrick C. Boyle, of Oil City, Pa., who, being duly sworn, testified regarding the oil industry. THE OIL CITY DERRICK THE ORGAN OP OIL PRODUCERS. Q. (By Mr. Phillips.) Please state to the commission your name and resi- dence. — A. Patrick C. Boyle, Oil City, Pa. Q. What business are you engaged in? — A. Just now I am an editor and publisher. Q. Of what paper?— A. The Oil City Derrick. Q. You are the editor and publisher of that paper? — A. And proprietor. Q. Who are the owners and stockholders? — A. Well, there are five stockholders. I own all of the stock but enough to qualify — all but four shares; there are tour other stockholders owning one share each, enough to qualify them as directors. Q. Are any of the Standard Oil Company interested at present, or have they been, in the Oil City Derrick? — A. They are not now and have not been for very many years. I have been the proprietor of the paper for a great many years. Q. Were they not the original purchasers of the paper before you came into possession of it? — A. When I came into possession it was known as the Derrick Publishing Company, and W. J. Young was manager; that was in 1885. Q. Was W. J. Young managing it in the interests of the Standard Oil Com- pany? — A. Not as I understand it. He did not conduct it in the interests of any particular party, but employed editors, and they printed the news, as other papers did. Q. Is it not publicly and fully known to be the organ of the Standard Oil Com- pany? Is it not so considered throughout the whole oil field? — A. It may be assumed to be the organ of the Standard Oil Company, but it is not. It is the organ of the oil producers. It is the firm and steadfast friend of the producing interest, and has been from that day to the present time. I am speaking of my personal connection with it. Prom 18T0 to 1885 I knew very little about the paper, but up to 1879 and since 1885 it has not been the organ of any special party. Q. Has there ever been any adverse criticism of the Standard Oil Company in the Derrick? — A. Oh, unquestionably; any number of them. Q. Within the last 10 years? — A. Oh, I can not recall any particular time. Within the last 10 years there has been no occasion for adverse criticism of the Standard Oil Company. There unquestionably would have been if there had been any occasion for it.' Q. Since you have been manager it has always been very friendly to the Stand- ard Oil Company? — A. I can not say that. It is very friendly to the entire oil trade. As the Standard Oil Company is a part or division of that trade, it is friendly to that as well as the other interests. Q. Has it not been adverse to all the independent movements that have been started since you have been manager and editor? — A. No, sir. Q. And especially the independent pipe lines? — A. Only to those involving an unnecessary outlay of money and a taxation of the producers. It has stood hand in glove with the producers except those who would impose a tax on them for useless service. Q. Do you consider it imposing a tax on the producers for the refiners and pro- ducers to build a pipe line into a given field for their own benefit? — A. So long as there was an efficient service already performed at the same cost I should consider it a hardship to have a duplicate. Q. If you owned a refinery would you consider it a hardship on yourself and stockholders to lay a pipe line to gather oil from the fields? — A.. We have taken the position that the producer would not be benefited by the duplication of the pipe line, and in that position we have been sustained by the results. Most of the pipe lines erected 10 years ago have never paid a cent in dividends. 1 See Mr. Lockwood, pp. 398, 399 STANDARD OIL COMBINATIONS: BOYLE. 405 WRY THE WITNESS IS BEFORE THE t'OjnusslON. Q. You may proceed in your own way to make a statement of whatever facts yon have to the commission, but there is one question I will take the liberty to ask before you proceed. By whose solicitation did you ci ime before this commission to Kive^ testimony?— A. 5Iy own. Q. Your own solicitation. Did yon have any conversation with the principals of the Standard Oil Company before coming Ij'efore this commission? — A. None whatever, before or since. I should like to state in way of explanation that it was the outrageous testimony whirU I hrul heard here liy previous witnesses that impelled me to ask the privilege of coming before you as an observer and as a person in a position to know the facts ;ind to make some statements concerning the oil industry. EARLY HISTORY OP THE OIL INDUSTRY. There was an oil busii\ess in existence before Drukt drilled his experimental well in 1859. The manufacture of shale oil l)e,gan aboirt 1S4() in France, 10 years later in England, and ;) years later in America. While America was perliapsthe latest among the Angln-Saxon races to embark in the new industry, it made up in enterprise what it lacked in precedence. With the discovery of petroleum in 1859 the coal-oil industry of this country within a year or two practically ceased to exist, and plants constructed for the distillation of oil from shale were con- verted into rettneiies for the crude petroleum. By this means the refining indus- try was fully established, when petroleum appeared to claim the attention of commerce. The product, crude from the wells, found a ready market at remu- nerative prices. Petroleum was produced from gravel beds, salt wells, and oil springs long before it was obtained by the artesian process, and a considerable commerce established by Kier, Badijer, Ferris, Peterson, Lockhart, and others when the Drake well came to increase the production. It was not at once used in the arts, but a demand wa,s found for it among the ai^othecaries, and for many years it was kno^^^l to the pharmacopoeist as a liniment. Artesian borings were first applied in America by salt producers. At this point I should like'to pre- sent petroleum in the original package. That is the way it appears. [Present- ing small bottles of crude petroleum] . The first is from the Kiers Avell, and the second is from a well in Kentucky — from the American oil well on tlie Cumberland Biver. Prof. S. F. Peckhain describes at some length in the Tenth Census reports the process employed by Colonel Ruffner, the pioneer salt-well driller, in 1808. Colonel RufEner is given credit Ijy this writer for having devised drilling tools not diflieriug materially in fonm from th(5se now in use. The jars, an essential imple- ment in the oil-well driller's outfit, is said to have been devised., and first used by Colonel Ruffner, and every salt-well borer since his time has laid claim to the use of this indispensable imijlement. As a matter of fact, drilling tools, substan- tially the same in form, were employed by the English coal hunters a hundred years before. This, however, Roes not detract in the least from the credit due to Colonel Ruffner, who unquestionably had never seen nor heard of an English rook-boring outfit. Many of the early oil wells were drilled after the manner of Ruffner and those who succeeded him with light tools, depending from the end of a flexible pole, which rose and fell by hand power manually applied. Oil, often in very^onsiderable quantity, was noticed in salt wells, in some of which the flow was so free as to interfere with the operation for brine. The demand for salt, about 1810 to 181t, along the western slope of the AUeghenies from New York to Alabama was so great as to excite adventure in many parts, and salt wells were bored simultaneously in widely separated localities on the Ohio, Monon- gahela, Allegheny, and Kanawha rivers and their tributaries in large numbers, and with what might pass for spontaneous effort. Every district so explored has its traditions of oil discoveries, and, singular to say, the later oil developments in almost every instance have been faithfully outlined by the salt wells. In the absence'of surface indications, at one time much in demand, all the earlier oil developments were conducted in the vicinity of salt districts, with the single exception of Oil Creek, and here it was found exuding from crevices in the rock or from gravel bed deposits. Rev. S. J. M. Eaton, one of the most intelligent observers among the early writers on oil topics, reports the first shipment of petroleum from the region of Oil Creek to consist of two 5-gallon kegs, conveyed to Pittsburg on horseback by a Mr. Carey, one of the fir.st settlers in Venango County. Gen. Samuel Hays, another pioneer settler of Venango County, at a later period purchased the oil product of the county, 16 barrels in all, represent- ing a year's production, which was conveyed to Pittsburg by raft and sold to. 83 A 27 406 HEARINCiS BEFORE THE INDUSTRIAL COMMISSION. apotlieciiries at a dollar a gallon. Previous to 1830 the production of oil from salt wells, added to a somewhat extensive dipping interest at various places in several States, had reached a very considerable amount; so large, indeed, that the supply seemed inexhaustible, and a writer in the Pittsburg Gazette in 1828 agitates the use oi petroleum for street-lighting purposes. THE FIRST PLOWING OIL WELL. The first flowing well anywliere was the famous American well, near Berkes- ville, on the Cumberland River, in Kentucky. It was drilled for brine in 1829, on the land of yiv. Lemuel Stockton, who passes into history as the first of his race to literally •■ set the river on fire." Niles' Register (1839) says: "Some months since, in the act of boring for salt wells, in Cuniljerland County, Ky., a vein of pure oil was struck, from which it is almost incredible the quantity of the substance issued. The discharges were by floods, at intervals of from 2 to 5 minutes between each flow, vom.iting fortli many barrels of pure oil. These floods continued for 3 or 4 weeks, when they sub- sided to a constant stream, affording many thousand gallons per day." Another writer says: " The oil found its way into the Cumberland River, was set on fire, and is said to have burned on the surface for a distance of 40 miles below." In lSo3 Professor Siliman describes a visit to the oil springs near Cuba, N. y., and the manner of collecting the oil fronr the surface of the water. Charles B. Tergo, in his Geography of Pennsylvania, 1843, describes the oil spnngs on Oil Creek, from each of which from 2 to 10 barrels of oil were col - lected in the season by the proprietors. In 1845 petroleum obtained from Peter- son's salt well, at Tarentum, was experimentally used as a lubricant at the Hope Ccjtton Factory, in Allegheny. Two years later, Thomas and Samuel M. Kier produced oil from salt wells in the vicinity of Peterson's wells, and Samuel Kier, deeming the oil more important than salt, set about to find a market for it. A description of his efl'orts in this direction is set forth in the Derrick Handbook, pages !>4.) and ',)4T. Ni one who is familiar with the history of the petroleum industry can withhold from Kier the credit of being the first trader and one of the earliest manufacturers of mineral oil. His eiforts in behalf of an infant industry merit more than passing notice, and his contribution to it should be per- petuated in permanent form by a grateful people. ORGANIZED ATTEMPT TO PRODUCE PETROLEUM. The first organized efl'ort to produce petroleum appears to have been set on foot in 1853 l)y Jacob D. Angler, of Titusville. The first recorded lease, the one under which he operated, contained these stipulations, to wit: ■•Agreed, this 4th day of July, A. D. 1853. with J. D. Angier, of Cherrytree Tnwnship, Venango County, Pa., that he sliall repair up and keep in good order the old oil spring on land in said Cherrytree Township, or dig and make new sprin^■s, and the expense to be deducted out of the proceeds of the oil, and the balance, if any. to l)e equally divided, the one-half to J. D. Angier, the other half to Brewer, Watson & Co. , for the full term of 5 years from this date, if profitable. ■■ Brkwer, Watson & Co. "J. D. Angier." The royalty or rental fixed in the above lease served as a model for the oil leases later on, and the terms were ailopted to a veiy considerable extent during the earlier periods of development. Under this agreement Angier proceeded to dig ditches and pits, and in so doing frequently struck pockets of oil in the gravel a few feet belnw the surface. W]ieii the ditches were first opened from 4 to 6 gallons were collected per day from the suriao- ot the water, but the labor required to keep the oil flowing consi\med the entire pi-ofit, and after a few months the experiment was abandoned. Angier appeared to have been unfoi-tunate only in his location. A slight change of a very few rods north and westward would have brought him to theVicinity of what was suiisequeiitly known as the bonanza district, where, in 1877, oil springs were devehjjied at a deptli of 15 feet in a bed of gi-avel confined above and below by a casing of clay, impervious to water, from which, in the course of a very few months, thousands of barrels of oil were obtained. The next o,'4:i,nized effort to ■ )1 itain oil from the springs was by George H. Bissell a,nd Jonatha,u G. Eveleth, who in bS54 purclia.sed 135 acres in Cherrytree Town- ship, Venango County, fronj Brewer, Watson & t'o., upon which the subsequent expi-riments of Drake were conducted. Preliminary t(j the boring of the Drake STANDARD OIL COMBINATIONS: BOYLE. 407 well a lease, dated December 30. 1857, v/as effected by and between the Pennsyl- vania Eock Oil Company, and E. D. Bowditcli and E. L. Drake, conveying the same land purchased by Bissell & Eveleth from Brewer. Watson & Co. As the first oil lease under wlricli operations were actually conducted it is worthy of notice. The lease in substance makes acknowledgnient of the payment of §1 in hand, then is mentioned the demise and let of the lands, ■• owned' or held under lease by the said company in the county of Venang(3, in the State of Pennsylvania, to bore, dig. mine, search for. obtain oil, salt, coal, or other minerals existing in and upon said land, and to take a,nd remove and sell such for the exclusive use and benefit, for the term of I.5 years, with the privilege of renewal for the same term. Rental, one-eighth of all the oil collected from the springs in barrels fur- nished or paid for by lessors. The lessees may elect to purchase the said one-eighth royalty at 4.5 cents a gallon, but when such election be made it shall remain. On all other minerals, 10 pel.' cent of the net profit. Less(ies agree to prosecute opera- tions as early in the spring of 1858 5,s the season will permit, and the failure to work the property for an unreasonable length of time or failure to pay rent for more than 60 days, the lease to be null and void." By agreement, February 12, 1858, the lease was amended so that 12 cents for every gallon of oil should be payment in full for all lental; the amendment also gave the lessees the privilege of renewal for 25 years. SUCCESSFUL PRODUCTION IX THE OIL CREEK TERRITORY. The experimental boring, begun in 1858. was not carried to a successful conclu- sion till the latter part of August, 1859. The excitement attending the success of Drake's experiment finds a parallel in the gold discoveries in California, to which it is second only in degree and not importance. The fact that the oil could be obtained by artesian bo^ring with so little labor and expense was sufficient to create a demand for territory in the vicinity and to inspire others to follow his example. During this aud the year following wells were completed in various parts, embracing the entire length of Oil Creek, south of Titusville and extend- ing to Franklin, below its mouth and Tidioute above. The produced oil did not go begging for a market; rather buyers came begging for the oil. Col. A. C. Ferris claims to have purchased the first thousand barrels produced from the Drake well, which he distributed among the New i''ork refineries. The early writers. Gesner, Hodge. Redwood. Antisell and others inform us that the art of refining coal oil had attained to an advanced stage before petroleum was com- mercially known. Both Gesner and Antisell published lists of patents covering almost every process of manufacture as practiced by the oil refiner of the present day, all known and many of them issued prior to 1860. Steam was freely used in distillation and suggestions offered for various processes of continuous distilla- tion. In 1860 Joshua Merrill took out letters patent for a process for " cracking "' oil, which demonstrates that chemistry was abreast of the drill, in devising useful methods of manufacture. TRANSPORTATION AND MEASURES OF OIL. The one problem left unsolved was that of transportation. The oil district, then 30 miles distant from the nearest railway points, was dependent upon teams for an outlet. Oil was conveyed by wagons from Titusville to Union Mills (now Union City) and lirie, by raft and barge to Pittsburg, by way of Oil Creek and the Allegheny River. Oil refineries rose as if by magic throughout the region. Before the industry had closed its first year there is said to have been upward of a dozen so-called refineries in Erie. 50 miles distant from the fields of production. One of the difficulties met at the outset was the scarcity of packages. The demand for barrels outgrew the supply, and any cask fit to retain fluid was impressed into the service of the oil producer. The unit of measure at the outset being the gallon, sales were made on that basis, therefore the size of the package was not a necessary condition to trade. But later on, when the barrel became the unit discrepancy in the size of barrels became a matter of embarrassment to the producer. The resources of the seaport towns were drawn upon for coopers, and as a consequence men from the Eastern States were among the first to recog- nize the importance of establishing barrel works in the new oil fields. The whaling industry at that time unprofitable, owing to the extended voyages and hardship of the chase had a fully developed cooperage industry, and mechanics drawn from this trade found employment in the oil-producing country. The capacity of the barrel became a matter of comment among producers about the time of the advent of the whale-oil men, who brought casks of enormous size with them, 408 HEARINGS BEFORE THE INDUSTRIAL COMMMISSION. which, in periods of siarpliis production were offered and accepted as ordinary "barrels. Therefore the necessity for a uniform barrel was early apparent. As the result of these discussions. 40 gallons became the trade-customs barrel for crude oil, and this continvied from 1860 to 1866, when representative producers got together and issued the following: " Whereas it is conceded by all producers of crude petroleum on Oil Creek that the present system of selling crude oil by barrel without regard to the size is injurious to the oil trade, alike to the buyer and seller, as buyers with the ordi- nary sized barrels can not compete with those with large ones, we therefore mutually agree and bind ourselves that from this date we will sell no crude oil by barrel or package, but by the gallon only. An allowance of 2 gallons will be made on the gauge of each and every 40 gallons in favor of the buyer." It will be seen that the barrel by resolution differs from the barrel by adoption only in the addition of 2 gallons for tare or waste. Later on, after the establish- ment of pipe lines, buyers began to demand,42 gallons net with the addition of 2 per cent for tare, which is the accepted barrel of to-day, although the construc- tion placed upon the barrel by the Government during the period of excise, April 1, ISO."), to March, lyOli, was "any vessel containing not m.ore than 45 gal- lons and not less than 28 gallons.'' This amount was subject to a duty of §1. The railroads, for transportation purposes, when bulk shipments began, con- strued the barrel to be 45 gallons, and so it remains, but the barrel of commerce is 42 gallons. NTJMBEE OF WELLS IN OIL CHEEK REGION PREVIOUS TO 1869. The development after the striking of the Drake well was necessarily slow, and its history is somewhat obscrire. We can do no better than quote from the Der- rick's Handbook, page 788, in regaft'd to this period: " There is a great deal of uncertainty in the early records of field operations. No systematic effort at collecting the statistics of rigs, drilling wells, and com- pleted wells was made, except by sjjasmodic efforts now and then, until May, 1875, when the Derrick commenced to publish its regular monthly report of oil developments." On Noveml>er 21 , 1860, the Venango Spectator published a report containing the names and location of 74 producing wells in the Venango oil region. These wells had a combined daily production of 1,165 barrels, and were distributed from the head of Oil Creek to its mouth and along the Allegheny from Tidioute to the Hoover well, 3 miles below Franklin. In this report the output of Drake No. 1 is given as 12 barrels, and No. 2 at -V) barrels a day. A year and a half later. May 18, 1863, the Oil City Register made a careful esti- mate of the entire field and gave results as follows: ■■ Number of producing wells, 75; numbei' of wells that had formerly flowed and pumped, 62; wells drilling, 358; total, 495." On January 1, 1869, according to Cone and Johns, in Petrolia, there were 1,186 producing wells in the region. About 15(1 of these wells produced less than 3 barrels. There were 200 cif which the production was less than 5 barrels a day. Of the entire number on the producing list, 724 were completed in 1868 and the remainder during the preceding years, as follows: 1867, 148: 1866, 92; 1865, 99; 1804, 4(i: lH(i3,29: 1862, 20: 1861, 17; 1860, 10; 1859. 1. The total number of wells drilled in the region from 1859 to 1869, as given by Henry E. Wrigley, in the Second Geological Survey, was 5,560. This would show that 4,374 vvells had been completed and abandoned as dry or unprofitable during the first ten years of the industry. Before the closing of Professor Wrigley s report the oil business had become firmly established and thoroughly systemiitized in all its departments. PLOWING WELLS AND THEIR DISASTROUS EFFECTS. At the close of 1 860 fully 500 teams found employment in the transportation of oil from the wells and the movement of supplies, in addition to the ilats and Itarges employed on the creek and river to the number of 100 or more. In 1861 flowing wells appe;i,red to vex the producer and embarrass the trade. The first flowing well, whii^li was also the si-cne of ttw first tragedy in connection with oil development, was struck in April by Little & Merrick, on the J ohn Buchanan farm, Rouseville, 3 miles above tlic mouth of ( )il Creek and 12 miles below the Drake w(!ll. The sight of a flowing well was so unusual as to iittract many spectators, who crowded about the derrick to the numbia- of some hundreds, and while they were looking on in amazement at the phenomenon before them, fire was com- STANDARD OIL COMBINATIONS: BOYLE. 409 municated to the floating gas by a near-by boiler, when a terrific explosion occurred and in the resulting fire 17 persons lost their lives, among them being the Hon. Henry R. Rouse, ex-member of the legislature and one of the leading spirits in the oil development. In June following, the Funk well, about midway between the Rouseville and the Drake wells began to flow, and in September of that year. Phillips & Co., No. 3 on the Tarr farm, about midway between the 3 flowing wells, began to gush at the unheard of rate of 4.000 barrels a day. In December the Woodford well. 400 feet from Tarr No. 2, was flowing at the rate of 3,000 barrels a day. The efilect of the flowing wells upon the oil trade was little short of disastrous to the small pro- ducers, and for the time being were not a little embarrassing to the owners thereof. The scarcity of barrels and the absence of tankage made it extremely difficult to save the oil. but as fortune would have it, all these flowing wells were located on the banks of Oil Creek and the barges became available to store the surplus production. One of the effects of the enormous production was to smash the market which, at the close of 1860, was not very strong, having declined from $20 a barrel in January to S3 in December. January, 1861, prices opened at .§1.75; the market continued to soften until the advent of the gushers, when it went off to nominally nothing, 5 and 10 cents a barrel being offered. The conditions of the trade at the close of 1861 was very much worse than it was at the beginning, and this period, owing to overproduction and the political disturbances due to the opening of the rebellion, was one of the worst known in the history of the business. One of the results of the flo\ving wells was to create a corner on oil barrels, coopers refusing to sell except for cash, and the value of a barrel at this time expressed in terms of oil was as 20 to 1 . CONDITION OF THE INDUSTRY IN 1862 — CONSTRUCTION OF THE IFIRST PIPE LINE. Unremunerative prices checked production, and the spring of 1862 witnessed a gradual rise in the price of oil. The suspension of specie payment and the rapid advance in the price of gold caused a general advance in the values of all kinds of commodities. Petroleum was in good demand and better prices began to prevail. Oil at the wells rose from 10 cents a barrel in January to Si in June and S'-.50 in December. The most. reliable estimate of the average for the year is yl.Oo per barrel. The development wtjrk in 1862, while not large, was exceedingly important in the discovery of large wells. Oijerations for the most part were confined to the Upper Allegheny — that is, Tidioute, Oil, and French creeks. Smith's Ferry, 100 miles in a bee line from the Drake well, marks the first important extension of the oil development. The cost of sending a barrel of oil to New York from the producing field in January of this year was i$7.45; the cost of delivering a barrel of oil in Pittsburg by steamboat, .^2: teaming from Oil Creek to Meadville. i^2.2,5. The producers, appreciating by this time the value of good resolutions, held a town meeting and resolved to sell, no oil at less than S4 per barrel. A bill was this year introduced in the legislature for a pipe line from the upper oil farms to the mouth of the creek. A charter was granted under the title of the Oil Creek Transportation Company to carry oil in pipes or tubes from any point on Oil Creek to the mouth or to any point on the Erie Railroad. No line was built. In March of this year the first shut-in movement for the lietterment of prices was inaugurated, owing to the stagnant condition of the trade. Stopcocks were turned ,on the wells, i>roduction ceased for a considerable period, and the movement was carried to a successful conclusion. Congress during this year imposed a tax of 10 cents per gallon on refined oil and proposeil to tax crude oil 5 cents per barrel; but the producers, conscious of the power to be attained by uniting, held a town meeting in Titusville, where resolutions were adopted and Congress petitioned to lay a tax on refined oil only, and for the benefit of the refiners recommended a drawback on all oil exported to foreign countries. Con- gress assenting, laid a tax of 10 cents a gallon on refined oil and absolved the pro- ducer from any levy whatever. t -m- -d The first successful pipe line was constructed du.ring this year by .J . iVL. Harrows, to convey oil from the Densmore wells on the Tarr farm to his refinery, distant about 1,000 feet. This was the first pipe line, " correct in principle and success- ful in operation.' ^ ^ i i. m -c About the same time a pipe line 2i miles long was constructed from Tarr tarm to the Humboldt refinery. Cast-iron pipe with lead joints was used as a con- duit Great loss resulted from leakage at the joints. After an experiment of some months' duration, the loss from this source proving greater than the cost of 410 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. transportation by team, the enterprise was abandoned, and no other attempt was made to solve the great problem of hydraulic engineering until Van Sickle's experiment. 24 years later. Railways were extended into the region this year— the Oil Creek road sonth from Corry to Titnsville and the Atlantic and Great Western eastward from Meadville to Franklin. By means of the latter the Cleveland refining interest received its first great impulse, since it was possible to receive oil by rail direct from the wells without transshipment, and the advantage thus derived gave them a trade position later on which was practically impreg- nable. ' On the other hand, Samuel Downer, availing himself of the advantage of rail transportation, located an oil refinery, the largest of its day, at Corry,, a point most admirably adapted because of the facilities afforded by two competing rail- roads. DEVELOPMENTS IN IWCo AND TB.\-NSPORTATION BY BOATS. The production of the large wells had greatly declined and the total yield for 1863 was hardly one-half t'aat at the beginning of lS(;-,> ; developments throughout the year "did not materially add to the production. The development work of the year was neither large nor inipurtant. though not entirely lacking in sensational f(?atnres. as attested iDy the striking of the Noble and Delameter well on the Farel farm. Upper Oil Creek, which started with an initial production of 3,0'M barrels, and- maintained an a^verage of 1,000 barrels per day throughout the year. This was followed in midsummer by the Maple Shade well on the Hyde and Egbert farm, which st-.irted with sii initial production of 1 ,000 barrels per day. During this year the pond fresh obtained its highest development. A conserva- tive estimate of the numlier of "boats plying on Oil Creek at this time would be 300, and upon the Allegheny Kiver 700, making a total of 1.000 boats employed in transpiorting oil . The p;)nd fresh was unique in that it was an artificial flood, made by confining the water in several dams, all of which were cut at a given time, letting out vast quantities of water and creating a boating stage that continued from 2 to 8 hours, during v/hich hundreds of boats would float out with the tide and reach the Allegheny River. The pond fresh had its days, when Avater was comparatively plentiful, as many as two a v/eek would be arranged when water was plentiful, but during the dry season it was generally limited to one — Friday usually being the day selected. It was not unusual for '^'O.OOO to (iO.OOl) barrels of oil to pass out of the creek upon one of these artificial freshets. If a source of convenience to- the trade it was also a source of annoyance because of accidents occurring to boats and the consequent loss of- oil. A careful writer has estimated that fully one-seventh of the oil jjroduced v,'as wasted by the oil freshets, leaky barrels, etc., which loss, as a rule, was incurred by the shipper. The poml fresh was a source of considerable expense to shippers and boatmen, and to meet the cost of creating the artificial rise a tax upon the boats or oil shipments -.vas levied by an agent of the mill men who controlled the water. The method of collecting the tax, though somewhat simple, was exceedingly laborious, an agent passing along the creek from point to point making the collections before the boats started. It frequently occurred that when collections were difficult the fresh was delayed often as much as a day. The fall of this year was exceedingly dry. and the mill men. taldng advantage of it, rai-ed the price of water upon shippers. The difficulty in making collec- tions at this particular time caused the insertion of the follovidng notice in the Oil City Register. October 2!). lw(i:!. signed, A. S. Dobbins, superintenden-^. "A statement in regard to the cost of a pond fresh in dry weather, or when all the dams are needed, may be interesting to those who have to pay for them, and will ser\e to explain why 4 cents per barrel per pond-fresh tax is charged this season instead of 2 cents for the same purp(jse the last season. I here give the cost of the dams and other ueces^;ary expensi.'s of the pond fresh this year: Kingsland's dam. $200; Pearson's dam. .'512; Stanton's, S20; Childs, Benedict & Rouse's, $'M; Tallant's, ii'y. Newton's, $20; Langworthy's, $7; Tryan's, $20; Lyt- tell's, $10; Hide Creek, $29; for superintendent's horse, expenses and hire of the S men to cut ]-e not men of capital. One would put in his labor, another supply an eugin'il barrels. Q. (By Mr. Phillips.) Thatw;,,s in 1871'?— A. That is in 1871 ; yes, sir. A.D. "White, reporter for the Petroleum Producprs' Assdci.ation, for the lower district, issued the follo\^ang report for July in Parkers Landing district; ■■There are 441 producing wells, of which (',;; jiroduce all the oil, and average 10 iV ban-els per day, while the daily average of all wells is .""),l barrels. The average depth of the wells is 1,060 feet, and the ii,v(^i'iige cost of completing a well $.5,200." Hints of speculation by pipe lines in the pi^oducfcion of oil increased; there were m(ji'('. than hints; there were rumors, and in some instances the result of that being that oil was not held the same by any two of the existing lines. There were scaicely any two of them that offen-d the same prices for oil. The price was dependent very largely upon the reiiuta-tion of the line for integrity. Those lines having a reputation for integrity— that is to say, oil put in 'their custody STANDARD OIL COMBINATIONS: — BOYLE. 421 would be found when wanted— got the highest price. Those lines which were sometimes considered short got a lower price. Q. (By Mr. Phillips.) Did the producers ever lose any oil through these pipe lines to which you refer, to your knowledge?— A. To my personal knowledge, no; except the difference in the valuation of their product: there was a difference in valuation, but I know of no loss. Q. No embezzlement of oil that was left in the lineV— A. No embezzlement of oil. I have no personal knowledge of that. Bumors were circulated in midsum- mer of 1S71, that the vai-ious pipe-line interests of Pennsylvania were about to merge their holdings into a single combination, the whole to be under one man- agement. No merger ever took place, or at that time; no merger took place at that time. Operations this year took a very wide range. Bradford appeared for the first time in the oil reports. A correspondent of the Petroleum Center Record, writ- ing under date of September 29 concerning a trip made to Eratlford, says: '• Bradford is a village of 300 inhabitants, and is altogether a very desirable point for the coming oil excitement which we feel sure is bound to break out in the vicinity. The Bradford well is down 90 feet and being pushed as fast as possible. It is located near a well sunk in 1,S64, which had an excellent showing and pro- duced some oil, but was abandoned. About 3| miles south of this point Col. J. K. Haflfey has a well drilling, and the indications are good for finding oil. North of this latter point are the two Job Moses wells, one of which is producing about 2 barrels and the other drilling deeper. The oil from' the Moses wells sells for §33 a barrel (for lubricating purposes)." It is important here in this connection as pointing out that the discovery of the Bradford region, which was developed say 10 years later, or less than 10 years later, the greatest field ever discovered, was long before actual developments ever took place there. The existence of oil, the presence of it, was known in that field for at least 8 years, and wells- actually sunk even before the Butler and Clarion county fields were fully developed. Q. (By Mr. Phillips.) It did not become a factor in the oil business until 1876 and 1877, did it? — A. 1876, I think it was, or 1877; yes, sir; 1877. Q. It becamie a factor? — A. It became a prominent factor, a leading factor at that time, but the possibilities of the field always pointed to it as a field for wild- cats, for some place that producers could occupy their time, and led to over- production, great overproduction. Operations in Clarion County had reached a point near the mouth of Turkey Run, where D. L. Kistler and others found a ten- barrel well. S. L. Kier, the pioneer petroleum merchant, developed a 3()-barrel well on the Faust farm, near St. Petersburg. Marcus HuUings well, on the Ash- baugh farm, near St. Petersburg, was reported flowing 2.50 barrels a day, and 300 wells were reported in various stages of operation between Alum Rock and the mouth of the Clarion River at the close of October. These were all pioneer wells at that time. history op the south improvement company.' The year 1873 is conspicuous for the remarkable progress in Butler and Clarion counties. Starting from a point at the Clarion River, remunerative developments penetrated to a point beyond Antwerp, more than 5 miles, and southwestward to Millerstown and Greece City, in Biitler County, a distance of l.j miles, with the prospect of further extension at both ends. The increase in production was rapid, owing to the large capacity of the wells developed in all of the new fields. In addition to a very large production of crude oil, there was an unquestioned over- capacity of pipe lines, and an overproduction of refining plants, so that these two divisions of the business, refining and transporting oil Ijy pipes, became unprofit- able. This is the year of the South Improvement Company, a movement which found few supporters in the region and was very generally execrated by the trade, and died, so to speak, "a-bornin." Of all the nraltifarious movements having for their object the betteiment of trade conditions, this one is perhaps the least understood. The movement was a combination of the railroads and certain refin- ing interests. It had its inception with certain Philadelphia and Pittsburg refin- ers, with an agreement for coopeiation on the part of certain CU'veland refiners. But philosophical minds, viewing the subject from this distance, are agreed that it had its origin, as a matter of fact, with the railroad interests, rather than the oil interests. Refiners, ever satisfied with a fair profit, had l)een able and were willing to accept their chances with the trade, but with the railroads the case was slightly different. ' See Mr. Lockwood, pp. SSJ, 4.:>J: Mr. Archbold, pp. .540, a:>:',; Mr. Emery, pp. 605-618, 618-632, 644, 64.0; Mr. Bice, pp. 669-«»4. 83A '^8 422 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The development soutliward from 1870 brought about conditions through which some of the important railroads of the country might be deprived of a share of the oil-carrj-ing trade. The Pennsylvania Road, however, was not affected by the transfer of activities from the A^enango region to that of Butler and Clarion corinties. The Allegheny Valley Railroad, on the one hand, serving as a feeder for rail shipments, and the Allegheny River serving the Pittsburg refiners, on the other, with barge shipments, the products ultimately coming to the Pennsylvania Railroad for export and interior shipments, gave them not only a fair but the lion's share of the carrying trade. The northern railway lines — namely, the Erie and New York Central — were naturally affected by the transfer of operations to distant fields which they could not reach with their existing connections. The first-named road was materially aided by the Kathering lines of the Pennsylvania Transportation Company, operated by Henry Harley, taut the New York Central and its connecting lines were left without petroleum feeders of any description. This resulted some years later, and after the failure of the South Improvement Company to establish itself, in the creation of pipe lines by the New York Central interests. Therefore, at the close of 1878 all the principal railway lines touching the oil regions at any point were served by feeders or pipe lines specially pro- vided. From this period developments were so rapid that no attempt will be made to trace the j)rogress of the business chronologically, except by movements in the order in which they take place. Now this leads us up to the time of the South Improvement Company, when the overprodirction of the pipe lines and the competition of the railroads were so veiy sharp, and it sought to correct all the difficulties that the region has ever been troubled with in the way of discrimination in freights. - Q. (By Jlr. Jexks.) Have \-ou anything further to state with reference to the South Iiuprovement Companyy — A. I have here about 1 ,000 pages touching the whole question — the history i if the proposed movement. Q. You could, perhaps, make a brief statement concerning the South Improve- ment Company, and then give us additional information? — A. I have nothing further on that branch of the subject, unless I refer to the Derrick's handbook, about what was done. The first move was to meet and combat the South Improve- ment Company. The producers combined, and the combination took in the oil interests of their class; well-owners, producers, and the railroads — that is, the Oil Cret-k Railroad and the small railroads of that region — felt satisfied. Q. I understood you to say that the railroads themselves organized an associa- tion and made special discriminations in rates, and that the South Improvement Company Avas organized afterwards'? — A. Yes; but its inception was with the rail- roads through the carrying trade. Q. Then it is your idea that the railroads suggested the formation of the asso- ciation called the South Improvement Company, and that they then offered it special rebates, or more favorable rates than they were giving to other refiners? — A. That is my idea; and it is, further, my idea that it originated in Pennsylvania. The Standard Oil Company has been very much maligned in connection vnth the South Improvement Company. Q. (By Mr. Phillips. ) Yon said that the Cleveland and Pittsburg refiners were in this mo^•ement, and then that the refiners after defending it were opposed to it? — A. I said the local refiners. Q. (By Mr. Jexks.) Tlien the association was made up practically of Pitts- burg and Cleveland refiners for the purpose of getting differential rates from the railroads? — A. It was the purpose to make dilferential rates, but it was never carried out. Q. (By Representative Livingston.) Were any advantages given by the rail- roads to any oil producers or refiners? — A. I am not aware of any. Q. (By Mr. Fabquhar.) Was this South Improvement Company incorporated by the legislature of Pennsylvania? — A. It was incorporated under some other ■" name; I think they purchased one of the numerous cliarters under the old consti- tution, piior to 1873. I do not know just what name the charter was first issued under; 1)ut whatever it was. they had, among other things, power t(j change the name of the corporation. It was a charter issued by the State of Pennsylvania. Q. (By Mr. Phillips.) A special charter? Q. (By Mr. Farquhak. ) Tliat is the very question I wanted to ask. Was it a special enactment that giive authoritv to this South Improvement Company? — A. Yes. Q. It was incorporated for the purpose of refining, transportation, sales, and everyl^liing else? — A. That is the way I understand it, and I think to operate railroads also.' ' Sue Mr. Emery, pp. G(lli-(i(lS. STANDARD OIL COMBINATIONS: — BOYLE. 423 Q. Wliat interest did the Pennsylvania Railroad have in the Sonth Imiirove- ment Company? — A. The conviction was general in the oil region that the Pennsyl- vania Railroad was really behind it. It never jjassed beyond suspicion; there was no proof of it. Q. (By Mr. Jexks.) Then, if I understand you, when this agreement came to the knowledge of the public, there was so great an outcry on the part of the other refiners that the company itself was abandoned and its charter annulled by the legislature? — A. That is substantially the whole story; it rose and fell within 6 months. Q. And nothing fuitlier was attempted? — A. Nothing further was then at- tempted. . Q. (By Mr. Phillips. ) Are you aware that after the South Improvement Com- pany charter was annulled and the subsequent contract with the producers and refiners of oil by the railroads was made, giving equal rates to all without rebates or other discriminations, that G-eorge R. Blanchard, second vice-president of the Erie Railway, testified before the Hepburn committee, in 1S79, that said contract only lasted" two weeks? ' — A. I have no knowledge on the subject at that particular time; I am not familiar with the investigations of the Hepburn com- mittee, but I understand that such an inquiry was made in 1879: I can not testify as to exact date. Q. If this were a fact, would it not leave the same^rates prevailing that pre- vailed under the South Improvement — that is, the same discrimination? — A. No; I can not say that. I merely recall now my own assent; and I wish to substi- tute for that, that I do not know. EEBATES IX VOGUE BEFORE THE TIME OF THE SOUTH IMPROVEMENT COMPANY. Q. (By Mr. Parquhar. ) Is it a fact or not that every one of the pipe lines, up to the time" of the establishment of the South Improvement Company, gave rebates and drawbacks? — A. I believe it is; they gave special rates to favored customers. Q. Without an exception? — A. I can not testify so broadly as that, but I have heard it variously stated that such was the case, and I know one particular instance. Q. (By Mr. Phillips.) You know one particular instance? — A. One instance came to my knowledge in such a way that it was impressed on my mind. Q. But you have no personal knowledge that there were such rebates? — A. Yes; I have personal knowledge of that— my knowledge of the contract. Q. Of the different pipe lines?— A. Not of the different pipe lines. I said it had been variously stated, and that I know of one particular case. HISTORY OF THE CONSTRUCTION OF PIPE LINES. Q. You know of only one particular case in which rebates were given?— A. Yes. We now come to the question of pipe lines. The first line, as I said this morning, was the Vansickle line, 5 miles in length, extending from Pithole to the Miller farm. . , , Q. About what distance?— A. About 5 miles. Simultaneously with the startmg of that line, another line was begun from the same point, that is to say, Pithoie, and extended to the Allegheny River, 7 miles in length, called the Pennsylvania Tubing and Transportation Company. The next enterprise in order was the Pickett & Sherman pipe line, extending from Pithole possibly 104 miles. About the same time Barley & Abbott constructed a pipe line from BenninghofiE Run to the Shaffer farm, a distance of 2 miles. The next enterprise was Warren's line from Pithole to Henrys Bend. From this small lines of 1.1 to .) miles in leno-th but more generally 3 miles than 5, were extended from year to year. There were very few '> miles in length, but at various times they were all differ- ent concerns. Tidioute had its systgm of pipe lines, and the Empire Transpor- tation Company was operating Pickett & Sherman's line, and several distinct gathering lines" in different parts of the field at the same time. The first pipe lines were laid in what is called Parker's district, in Isc,!), Possibly there was a small beginning in 1868. In 1869 pipe lines began to be recognized as carriers. The first" line there was the Parker, Thompson & Company; the next was the Karns About the same time, however, Martin & Harms, of Petroleum Center, built a line known as the Foxburg line, subsequently named the Mutual Pipe Tifie Th»n followed the whole Mutual Pipe Line system extending out to St. Petersburg and running throughout Clarion County, throughout the entire field. iSee II. Wl. 424 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 10 or 13 miles. The Mutual became quite an extensive concern. The next in order was the Grant Pipe Line, at Parkers Landing, a small gathering line, get- ting its oil from the Black and Milford farms, at Parkers Landing, and termi- nating at the river and railroads. Previous to this time and during the Pithole developments and those immediately following it around Fagundus, Vandergrift & Forman started a system which was later extended to the Cranberry district. Pine Grove Township, and the Milton farm, and, with the opening of the large wells in Bear Creek Valley, to the river at Bradys Bend and throughout the producing district in Butler County, .and subsequently to Concord Township, in Butler County, on the development of what became the Greece City field. This line formed a nucleus of what is now known as the United Pipe Line System. The next in order was the Belief Pipe Line Company, starting at Millerstown and terminating on the Allegheny River. This pipe-line development brings us down to the period 1874-7.5, and what I have named thus far had been constructed on one side of the river: that is, on the side of the Butler and Armstrong develop- ments. On the other side there was equal activity. Marcus Hulings constructed the Antwerp Pipe Line, taking oil in opposition to the Mutual Pipe Line. Later on the American Transfer Company commenced to compete for business. Then came the Atlantic Pipe Line. All these lines would average about 10 miles in length — from 7 to 10 miles in length; possibly the Atlantic might exceed that, for the reason that they had two termini, one on the river and one on a branch railroad. Two of these lines subsequently constructed trunk lines from the Clarion field to Oil City, and delivered oil there, which was at that time a com- mon point. Common points were points of common shipment where stated rates were given. The aim of the pipe line, so far as possible, was to reach a common point, to get the advantage of the freight rate. The oi'iginal pipe lines were merely transporters of oil, but through the exigencies of operation they became buyers of oil; not in their corporate capacity, but by some arrangements outside of the corporation.' Each one of them had a purchasing department and the prices in all lines varied to some extent. Very rarely was the same price stated at the same time on two lines. This condition existed up to 1877. AQBBEMENTS WITH RAII,ROADS FOR THE ESTABLISHMENT OF THROUGH FREIGHT RATES. The result of this enormous competition and overcapacity of pipe lines was that no line was able to earn by its legitimate function sufficient to sustain itself. Therefore, the purpose of the association you speak of by the railroads was to establish a through freight rate. These pipe lines w^re in some manner connected with one or the other of the four leading railway lines, and the rate of freight was established from the wells to the seaboard, or from the refinery, wherever it was, to the termini. In 1874 Mr. Rutter, general freight agent of the New York Cen- tral Railroad, issued a new freight tariff in which it was expressly stated that all shippers receiving oil from pipe lines would have rebated to them 33 cents a barrel.''^ This was the beginning of the rebating assessment or charge. Considerable tumult was occasioned by this circular; meetings were held, resolutions adopted, and an attempt made to influence the I'ailroads to abandon the rate; at all events that is where the rebate charge of 20 or 33 cents a barrel, about which testimony has been taken by other commissions and which was given to pipe lines, started. Both the pipe lines and the railroads wanted the oil, and their principals, or whoever they were, whatever railroad was back of them, were satis-' fied to divide the freight tariff with the pipe lines in order to get oil freight for the railroads. Q. (By Mr. Jenks.) Did all those who shipped oil over these lines generally receive this 33 cents rebate? — A. Yes; all shippers who patronized the pipe lines within the pool, but not all pipe lines either — I want to correct myself on that point, because through the active competition, about 1873 or 1874, a pooling arrangement was entered into by the pipe lines; it was an attempt on their own part to get the pipeage. Failing in that tKey failed to make a success of their organization with the pipe line association. Then they brought out the Rutter circular, in which I think all the railroads concurred. If the circular is of any interest you will find it already published in the investigation before the Manu- facturers' Oammittee in 1888. It would be loading down your records to quote it again. THE C'ONSOLID.VTION OF THE PIPE LINES THE RESULT OF EXCESSIVE COMPETITION. This condition existed from 1874 until some time in 1877, when there was a con- solidation of certain pipe-line interests. This consolidation grew until about all ' See Mr. Lee, p. 'Mx = Bee p. UOC, bottom. Soo the circular iu full, p. 041. STANDARD OIL COMBINATIONS: BOYLE. 425 the pipe lines in the region -^'ere members of one firm known as the United Pipe Line Company. The organization was effected some time in 1877 or 1878. The United Line started, as I understand it, with a capital of .§3,000,000, and acquired by purchase the property of the Columbia Condnit Company and the Empire Line, these two being the strongest, and a lot of smaller lines. Q. Do you think the cause of this combination among the pipe lines was the extraordinary competition that existed among them practically making the busi- ness unprofitable ? — A. There is no question about it. It was the overcapacity of pipe-line enterprises, or the eagerness with which individuals rushed into it. Nearly every person within a mile of the railroad handled his own oil. so far as it was possible. By getting the small lines in that way they formed the nucleus of other lines. Having to take a little capital here and there, they g'ot into the pipe-line business. The pipe lines were not equal in strength and capacity or integrity. This period of the overprodiiction of pipe lines resulted in a great deal of embarrassment to the trade. It is a matter of public information that some of the lines were not able to make deliveries on demand. Suits were entered in the courts for false statements after the pipe-line law of 187i went into effect. That was the cause of the consolidation of the pipe lines. It was a necessity. The business could not have existed had it not been done. Q. (By Mr. Phillips.) Was not there more than one suit entered of the kind of which yoti speak? — A.. I recall but one at this time. Q. Yet there was a multitude of pipe lines at the time when the suit was entered for false statements? — A. I say that from information, because I have the information here. I only speak of what I know. This leads up to the consolida- tion of the pipe, lines. When this consolidation took place^ during the period of the greatest tribulations among the pipe lines, from 1874 to 1876. the daily pro- duction fell from 29,937 barrels in 1874 to 24..")04 barrels in 1876. It rose in 1877 to 35,988 barrels, and in 1878 to 41 ,544 barrels. From that time on until the high- est production in 1897, which was 96,357 barrels, there was an annual increase in production. Q. Was not the production in 1878 larger than you have named there, being after the Bradford field was opened up? — A. Eighty-one thousand ban-els.' Q. Did not the Bradford at one time produce 80,000 barrels per day?— A. That was said to be the case; it was about 1880 or 1881. The year 1878 was the period of the earlier developments. I have heard it stated as a matter of fact that the United Pipe Line, which began business on a capital of 83,000,000, afterwards increased it to five million, but paid no dividends for 3 years after its organization, or until after the opening of the Bradford field. THE OWNERS OF THE UNITED PIPE LINES. Q. Who were the owners of the United Pipe Lines then; and who are they now?— A. I can not say who they were then; the National Transit Company owns it now. Q. Did the Standard Oil Company control the IS ational Transit Company when it was organized? — A. I can not say as to that; I do not know that they did. Q. Do they probably now?— A. The National Transit Company? Q. Yes. — A. It is a part of the Standard system. Q. And was from its inception?— A. I do not know who the owners were. Q. It is the Standard's system, then?— A. -Yes. Q. (By Mr. Farquhar.) Can you state at what time the Standard took an interest — an immediate pecuniary interest in this pipe line; what year?— A. Well, that would be very difBcult to answer. I should say about 1877. Q. (By Mr. Jexks.) It was the refiners practically who organized the United Pipe Lines system?— A. Yes; the Standard was an aggregation of firms. It was not a Cleveland concern alone. What we know of the Standard is that it was an aggregation of the strongest refining concerns in the country. Q. And they organized themselves into a pipe-line system?— A. Well, they were in it. , , .^ 1 ., Q (By Mr. Phillips.) They controlled it then and control it now, do they not?— A. It is a part of what is known as the Standard system. That is as near as I can answer you. I guess there is no secret about that, O (By Mr Farquhar). What pronortion of interest did the Standard Oil Company have in the United Lines in 1877?— A. Well. I have heard it estimated that in 1877 they took a little more than one-half, because m tiie formation of the United Pipe Lines, a number of pipe-line owners retained their interest and became ofl&cers in the United Pipe Lines. ' See table of production, p, 517. 426 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. So tliat the establishing of the pipe line was a mutual arrangement between the refiners? — A. It was a mutual arrangement. Q. But principally of interest to the Cleveland men?— A. Principally of interest to the Cleveland men. Q. (By Mr. Phillips.) They were the largest holders?— A. Well, I am not pre- pared to sav that, because I do not know. Q. (Bv Mr. Farquhak.) But the parties in Cleveland interested at that time in the so-called Standard were the same parties as are now interested in the Standard companies?— A. I believe so, with very tew exceptions. Q, ThisVa.ndergTift &FormanComp.^ny?— A. Yes; Mr. Vandergrift was presi- dent of the line. He was the first president of the line and remained the president. Q. The Rockefellers were in there as managers?— A. I never understood that t"; -v v.'cie. Q. (By Mr Phillips.) Was not Vandergrift president of this line for some years? — A. I believe he was: I know that he was. Q. You do not know when he re-signed? — A. Yes: I do. He left the service about INS."). or within a year or two of that time. Q. And about the sarue time resigned his position as director of the Standard Oil C )mpany? — A. I never understood that he was a director of the Standard Oil Company; I am receiving now my first information on that point. Q. I have been informed that he was acting in that capacity. — A. It is needless for me to say the information is not common in the oil country or I certainly would have heard it. Pie was cimnected with the Imperial Refining Company. Vandergrift & Forman and John Pitcirn were very large holders in that; it passed to the Standard Oil Company. Q. (By ]Mr. Farquhar.) But tha"t was chiefly Pittsburg money and not Cleve- land? — A. It was all Pittsburg money or railroad money in the Imperial Refin- ing Company. THE pall in prices AND ATTEMPTS TO LIMIT PRODUCTION'. In 1883 I find the largest daily output. That was the period of the development of the Bradford field. It was H'J.:-;5S barrels. The sudden increase could have but one effect upon prices, and there was a downward tendency. Prices dropped of necessity because there was more oil than the world would take. I will run over hastily the period when this depression made itself most manifest. In 1866 there was an agitation for a shut-down movement with the object of bettering the condition of the producers. In ls(i3 right after the period of the flowing wells we have noticed that there was a movement to turn the stopcocks on the wells and retai'd production. In 1S72 there was an agitation for a suspension of opera- tions both ln'fore and after the agitation concerning the South Improvement Company. The first practical shut down went into effect that year — a shut down that was very successful and included both productiim and drilling. It was almost absolute, as nearly absolute as anything human can be. Q. What effect did that have on the price of crude oil? — A. It raised the price of oil. Q. (By Mr. Ratchfokd. ) Was that the main object of that agitation? — A. The object of the combination was to increase the price of crude oil which had been de))ressi^d by competition. Q. (By Mr. FaR'^uhar.) How long did that .shut down last? — A. Thirty days. Q. Do you know he )W many barrels were ccjiuxnised in the shut di >wn? — A. Well, I said it was almost total. Q. Total? — A. Yes; the daily pi-oduction then was 17,000 barrels: it was practi- cally total. Q. This was an agreement between all the producers in that field? — A. An agreement lietween all the producers in all the fields. q. In all the fields?— A. In all the fields. Q. (By Mr. Phillips.) Do you know about the eft'ect of that afterwards? Did it induce a large amount of drilling and increase tlie production? Do the facts show that there were a great many moi-e wells drilled immediately after the shut down than before, through anticipation that prices would remain liigli? — A. That effect was apparent, but it does not account for the great decline in production during tln^ next year. There was an impetus given to drilling for tlie next 3 m )nths after the shut down that made itself serimrsly felt in prices; but the decline that took place in 1.S7;i was due to the largi> wells in the neighborhood of Millerstown. At that time we had, to vex the tr.ide, sevei'al points where they were getting \vells avei'aging from 700 to 1,400 barrels a day. I am speaking now of initial production. Take what was known as the Troutman, ]\Iodoc, Mil- leistown, and Buena Vista — that section has been productive of very large wells. STANDARD OIL COMBINATIONS: BOYLE. 427 PHODUCTION INCREASED BY DEEPENING OLD WELLS. Q. Was not tliat enlarged prodiiction cansed by the foni-tli sand minning through under the third ;-,aud belt, so that it was only necessary to deeiinn the wells about 60 feet? Were not a large number of third-sand wells deeneiied to fourth sand at comparatively little cost at the period to which you particularly refer? — A. That period comes later. Fourth-sand discoveries were made in 1S73, but the development had no considerable effect until 1874. Its presence was felt in 1873 in the Karns City district, in the Tack and Morthead wells. Q. That was the reason that the others were deepcneil?— A. That was what caused the wells to be deepened. Prom that time forward during thp next year the most remarkable development ever seen in the oil region ^s-as sprung upoii the trade. No one was in condition to receive it. All that was needed was to drill lets than a hundred feet, from (i.") to 8.5 feet— that is, one day's drilling— to deepen a well from one rock to another and oftentimes quadruple its capacitv. Q. The increase by deepening those wells was about 13.U00 barrels per day, was it not?— A. I have no doubt but the rapid development of the field lasted for about 6 months. Most of the wells were not deepened before midsummer, 1874, because we found the production of 1874 only 3,000 barrels greater than the pro- duction of 1873: that is, the daily production. THE SHUT-DOWN MOVEMENTS OF 1873 AND 1874. Now, about 1878 there was a disposition on the part of the producers in every section outside of that in which these large wells ^vere found to suspend operations. The remuneration was so small as to leave no inducement to continue, except for a big well. In 1874 an independent shut-down plan originated in Clarion County. I will not call it independent because it was local. The region at large did not participate to any great extent. In the northern extremity of the Clarion fields at this period some very large flowing wells were found, and prices were naturally off that year, the competition among the pipe lines not leaving them anything. So there was an agitation for a shut down, which was only effective locallj^ In 1876 a plan was started for pooling the surplus oil as a means of advancing the market; but conditions improved so rapidly about midsummer that it became unnecessaiy, anel there was one of the greatest bulges in the mar- ket ever known since the trade had become established on what might be called a firm footing. The advance to s4 a barrel in the fall of 1876 was responsible for nearly all the ills that followed for the next 10 years: it called the attention of persons not permanently engaged in the oil business to the great amount of money to be obtained through drilling wells. Prices did not continue long at .S4. In the fall of that year a peculiar development was started in the region of Bullion. I say peculiar, because it was to one side and out of the uaual line of oil belts. This field, not great in extent, was yet large enough to add within 2 years 3.000,000 barrels to the production. Bradford coming on at the same time, gave the producers about the worst quarter of a year they ever had, and it might be extended to a quarter of a century, because prices have scarcely recovered yet. ORGANIZATION OF THE PRODUCERS' PROTECTIVE UNION. In 18 77 and 1879 what was called the Producers' Protective Union was started in a small way as a result of the effect of the Bullion development on prices. It was the work of a few producers at Elk City, in Clarion Cminty. who thought that lay uniting their interests and susijending operations they might induce their friends and neighbors to join them until they formed an unbroken chain. David Armstrong formed the first union and within a short time became the head of an organization taking the name of the Petroleum Producers' Union. This move- ment continued for two years. When once fairly stai'ted Mr. B. B. Campbell, who was called to the presidency, carried the organization along for a greater period than any others of a similar nature that had ever been formed up to that time. Organizations since that time have lasted for longer periods, but up to 1879 no similar movement had lasted two years. SUITS AGAINST MEMBERS OF THE STANDARD OIL COMPANY AND PIPE LIMES. This movement, which started as a protective concern, developed rapidly into an ao^oressive organization. Thej' undertook to fight the transportation compa- nies and the railroads. Suits were started in the Supreme Court of Pennsylvania to annul the charters of pipe lines, and criminal actions instituted against some 428 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. of the owners of the pipe lines, members of the Standard Oil Company. The object of tliesc' suits was never developed. The aim, if it was to improve their condition, failed of its pnrpose. Q. Where were the suits bvonght against members of the Standard Oil Company and the pipe lines? — A. A suit against members of the Standard Oil Company was instituted in Clarion Coiinty; the proceedings against the pipe lines were in Venango County. Q. Was that suit tried in Clarion County or was it removed from Clarion County? — A. It was not tried anywhere and was not removed from Clarion County. Q. Did they not take an appeal to the sujjrenie court at Philadelphia? — A. No doubt they did, but, as I understand it, the suit was settled outside of court. Q. Yes. but after an appeal was taken? — A. I am not clear on that point.' Q. It was a suit for conspiracy, was it not? — A. It was called a suit for con- spiracy, but it hardly was a conspiracy from the fact that it was never tried. CONDITION OF PKODUC'EES NOT IMPROVED BY THE COMBINATION. Q. Oh. Certainly not. You li ive covered the ground very fully; you have said it was a criminal suit? — A. The condition of the producers was no better after the termination of that combination than it was before. The jiroduction continued to increase, and prii/.i-'s were falling with the additions to the stock. In 1879 the dcdly i^rodtiction was 5-1, 306 barrels and the price 851 cents. When the move- ment was started in 1S7T the daily production was :;").98y barrels and the price S'J.Sy^. That was the average for the year. That is what makes me say the con- dition of the producers was no better at the end of the combination than it was at the Iseginning. The great increase in drilling had not ceased to any extent; stocks had accumulated and production increased. In 1881, during the development of the white-sand pools in Warren County, an individual shut-down occurred among the heavier operators. It was partially successful. ' THE PRODUt'EKS' ASSOCIATED OIL COMPANY. In ]8S4- there was an attempted combination of producers to restrict drilling. The movement, while very general, was only partially successful. That was the year of the Thorn Creek development, the period when very large wells were found in a small area. The persons engaged in engineering the shut-down of 1884 — that is, the combination of 1884 for the iniprovemont of prices and the betterment of the condition of the producers — claimed and alleged that the failure was due to the want of cooperation on the part of the Thorn Creek operators, for it was car- ried out very generally through other sections of the field. One of the results of this was the formation of what is known as the Producers' Associated Oil Com- 15any , which is in existence to-day. This was a company formed by all the compa- nies, all the existing proilucing companies, taking some of the shares. The capital stock, I believe, was Sl.OOO.OUO, and the shares were parceled out to existing producing companies. It became necessary to purchase property in order to curtail x^roduction or stoii the drilling. Purchasing was resorted to by the Asso- ciated Producers' Company, and all the shareholders participated in the profits accruing. It was considered a very wise arrangement at that time, and the fact that it is still in existence and doing business would attest that it was in every way. In connection with that I want to state another movement, born of it. It v.-as a drilling contract, known as the boundary-line contract, entered into by the operators connected with a subsequent shut-down. It was the contract of the shntdiiwn combine of l^i8T and was an agreement between the producers and the Standard Oil Comioany for mutual benefit. It provided for redircing production one-tliird and for relinquishing certain holdings in oil, 6,000,000 barrels, I think. Q. What year was that? — A. 1887-88. In consideration of the receipt of 5,000,000 barrels of oil the producers on their part agreed to susjaend active drilling operations and to restrict their xn-oduction atT least one-third for the Ijeriod of a year. RELATIONS OP THE PRODUCERS' ASSOCIATION TO THE STANDARD OIL COMPANY. Q. (Ijv Representative Livincjston.) Will you explain to the commission what yon mean by the jiroducers? Does that take in all the producers — the Standard and tlic independent companies? — A. No; I refer now to the Producers" Asso- ciation itself, the association in existence to-daj'. Q. What is the name of the organization? — A, It was the Producers' Protective I S.M.- Mr.Loikwood.p. SSii; Mr. Archbold,p.55.3; Mr. Emery, p. 663. STxVNDARD OIL COMBINATIONS: BOYLE. 429 Association, and it is in existence and organized to-day. It was organized pre- vioiis to ls«T. Q. That does not cover the independent companieM? — A. No; not necessarily. It is an organization for the betterment of their condition as producers, out of which came these independent companies which you refer to. They resulted from this agreement. I shall lead up to that presently. Q. (By Mr. Smyth.) Entirely separate from the Standard Oil Company?— A. Yes; the organization is entirely separate from the Standard Oil Company. Q. (By Representative Livingston.) OppositiouV— A. It is not in opposition. They are in harmony in many respects: the proceedings state that. Q. How are they hitched together? If they are in harmony, what hitches them up? Q. (By Mr. Smyth.) What is their relation?— A. The remunerative feature that existed in the original contract between the Standard Oil Company and the Producers" Protective Association Q. (By Representative Livingston.) Have yon copy of that contraot?—A. The contract is published in the voluminous report of the investigations of the Manu- facturers" Committee in ls!8s. Q. "When you speak of producers do you mean the Standard Oil Company and the Protective Association? — A. Yes, if you please; speaking of both sides during that one year. Q. (By Mr. Phillips.) You spoke of the receipt of .5.000,000 barrels of oil. On what terms was that oil turned over, and what was the price of oil at the time this shut-in movement, as it is called in the oil country, began? On what terms, if any, was that oil turned over to the producers? — A . The oil was turned (jver to the producers on condition that thej' suspend drilling operations as far as prac- ticable and restrict their production at least one-third. The price at which it was turned over was Oi cents a barrel. The existing price at the time it was turned over was 10 cents a barrel more. The Standard sacrificed 10 cents a barrel on the oil when they turned it over to the association. Q. That might possibly be; when the papers were drawn np it was in anticipa- tion, but the day the contract was made it was 6i cents? — A. I can only testify to the facts as thej- appear, and that is as they appear now Q. (By Mr. FARQniAE.) You testified as "to the agreement, that is all? — A. Yes, and the price vrhen the transfer was made; oil was 71 cents. THE EXTENT OF THE COMBINATION. Q. I wish you would state very explicitly how wide this combination was, what class of producers it took in. and what control it had over the market and the con- sumer. — A. Well, I should say that the agTeement was far-reaching; it took in every class of producers they could get in. They made strenuous efforts to bring people into it, and I believe great sacrifices were asked on the part of the Stand- ard Oil Company, or rather demanded, to enable some large producers to join it. Q. (By Representative Livingston.) Now, then, if I understand that answer, you mean to say that they endeavored to get everybody into it they could? — A. Yes. Q. Did they get them all in? — A. No. Q. Why not? — A. Well, I think it might be said to be due to energy, enterprise, or hoggishness — anything you care to call it — that some people would stay out. Q. (By Mr. Phillips.) The Standard peoijle were as anxious to have other peo- ple in as the Producers'? — A. It was mutual. Q. (By Mr. Faequhar. ) Who made the first propcsition?— A. That I am not prepared to answer; I do not think I ever heard it stated or saw it in print. Q. Did not the proposition originate with this very company of which we have been speaking — the Producers' Protective Asscjciation? Did it or did it not? — A. Well, as a matter of opinion, I should say it did. Q. As a matter of C(.Jinmon belief?— A. Belief at the time; yes. Now, as to the other branch of your question THE EFFECT OF THE COMBINATION UPON THE CONSQMER. Q. (By Representative Livingston.) The other part of the question was: How was the consumer benefited by it?— A. The condition of the producer was bettered by it. Crude oil advanced 2U or 20} cents a Ijarrel. We will now see what refined oil did. I should say that the parallel of increase was regular; that, taking the annual average, the advance to the producer was no greater than the advance to 430 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the refiner and the advance to the public. Refined oil sold in 1887 at 6f cents retail, and the average for 1888 \va,s 7i. Q. What was the advance, then, on refined oil? — A. About three-fourths of a cent. Q. A gallon? — A. A gallon. The price was not advanced to the consumer in proiiortion to what it was to the producer. Q". The producer of crude oil?— A. Yes, of cru.de oil. Q. (By Mr, Fabquhar.) Do you propose to say that the Standard Oil Company stood the difference? — A. Somebody stood it. Q. "Well, what is your judgment?— A. If we hold that the Standard Oil Company produces three-fourths of the refined oil they certainly stood three-fourths of it. Q. (By Representative Livingston.) The Standard Oil Company was involved in that original proposition. It would seem that they were working for their health along about that time? — A. It did seem so to me; I thought so. Q. N'ow, then, what was the ulterior purpose? If they were standing that loss, in the end they hoped to gain. Do you know how, in the end, they hoped to he benefited by the arrangement, after standing the loss? — A. That question involves an opinion on my part that I do not think I would be justified in submitting. I do not know that I can answer it in any intelligible way. To answer it would be to give an opinion only. Q. In the end they would put down competition and regain all they had lost?— A. No, sir; that is not it. I can not agree with that, but I can agree with one branch of it. The betterment and the benefit of the producer is always the con- cern of the Standard. If you kill the goose, where are you going to get the golden egg? Q. There are more geese. — A. Oh, no. The supply is limited. Q. (By Mr. Smyth.) Was the cost of refined oil lessened at that time? — A. I do not think there was any material change in that feature of it. Q. They could not have recouped their loss by reducing the prices in that way? — A. No, I think the recoveries have been fully made in oil and its by-products. Q. I understood you to say that the price was advanced to the producer, but was not advanced in proportion to the consumer. Now, was the process cheap- ened in the meantime? — A. I think not. Q. (By Representative Livingston. ) The witness seems to be an intelligent one all along this line, and I do not see why we should not insist on having his opinion as to the nature of this recoupment? — A. I can state it as a matter of opinion. Q. Well, that is all. — A. I am very willing to state my opinion. Q. Where would they recoup and how? — A. Well, the betterment of the trade 'would leave a condition of harmony that could not exist where everybody was working at unremunerative prices. THE combination THE RESULT OF TOO MUCH COMPETITION. Q. Now, that word " harmony ; ' do you mean by that the killing of competi- tion? — A. What word? Q. The word " harmony." Do you mean by that the removal of competition?— A. My dear sir, this whole trouble was brought about by competition, too much competition in drilling, too much drilling. Q. That is what led to the combine. Yoii needed a combine to control it?— A. It led to the combine, and that leads me to the question of one of the move- ments connected with the shut down of lH8r and 1888. In the drilling contract it was provided that the members of the association were not to drill a well along any line within a stated distance — that is, closer than would give an area of 30 acres foi' each well. Q. That lessened production? — A. The aim was to lessen production, and there- fore it benefited the trade. Q. Now, I want you to use another word for that word harmony. You said trade was improved because it produced a kind of harmony among all the par- ties interested here. You mean that it took all the competition out of the way?— A. Well, I can not say that competition was destroyed. Q. I do not mean to say it was, btit ciippled or lessened? Q. (By Mr.FARQUHAR.) Hypnotized? Q. Hypnotized? — A. I will adopt that term, "hypnotized," Q. Was it not lessened? — A. Oh, unquestionably. THE LABOEBB SUFFERED BY THE RESTRICTION OP COMPETITION. Q. If it was lessened, who suffered by it, the produces or the consumer?— A. Neither— labor. Q. Labor? — A. Labor lost it all. STANDARD OIL COMBINATIONS: — BOYLE, 431 .Q, That burden was put on labor?— A. The burden was put on labor; but let me say that in addition to this 5,(iOO,OUO barrels of oil Q. Did you not say that crude oil increased 2!) cents a barrel, and refined tliret - foin-ths of a cent a giillon? Now. how did the laborer bear that charge? Was not the increase paid to the producer, and the 2fi cents a barrel by the consumer? — A. As far as the difference in price would be represented by the "difference in cost. Q. Then the laborer did not bear that loss, but the consumer? — A. True from your standpoint and true from mine. Q. You have got two ways of looking at that? — A. Yes. Q. You know what the Scripture says: "He that seeth double"'? — A. Yes; I neglected to state that in addition to tiie .T.OOil.OOO barrels l.iloO.OOO was set apart in the agreement for labor. To that extent labor did not suffer. Q. (By Mr. Phillips.) Was not that 2.000.000?— A. Yes; the Standard set aside 1,000.000 and the association 1.000,000 to the labor, and the profits of the 3.000,000 barrels compensated them to that extent.' EFFECT OP THE COMBINATION UPON THOSE WHO DID NOT GO IN. Q. (By Mr. Kennedy.) You said that about all of the producers went into this association, and I infer that enough of them entered into it to accomplish the object that they had in view. Is that true, and is it true that those who stayed out did not affect that object? Q. (By Representative Livingston. ) Ask him if the man who did not go in was not hurt. Would it not have been better for him had he gone in? — A. The ones who stayed out made a lot of money by it, because they went on drilling and secured large wells, and most of them got rich. ]Many of them got rich by simply taking advantage of the prod ticers' necessities. It was necessary to do something at this time. Producing oil was not a remunerative business, but at the prices at which oil was left at the close of the year it was remunerative. Nearly the entire num- ber of operators in the Washington oil field, then the greatest field we had, sta5-ed out because they were getting very large wells. One person drilling along the line woulil start another, and in this way an endless chain was formed around the group of wells. It was just like setting up a row of bricks and starting the end one — all the rest go. THE COMBINATION AND LABOR. Q. (By Mr. Phillips.) Well, did labor work in perfect harmony with that movement throughout the oil country — with that particular feature of it — and agree to go into the thing? There was harmony between the Standard and the laboring people, was there not? — A. So far as I have heard, there was. Q. (By Mr. FARyuHAR.) Do you chink they could help themselves, whether they went in or not?— A. Oh, yes, they could. Q. Was labor organized at that time?— A. One of the first steps of the laborers, the well drillers, and the tool dressers.- was to combine themselves in an organi- zation. It was my observation, and I examined it very closely and took a great interest in it, watching it from year to year, that the drillers could have made a failure for the producers had they been so determined. Enough of them could have got together to start drilling on their own account. Q. (By Representative Livin(4sti>n. ) Then, it is your observation that labor m that instance was not damaged by the conil;ination?— A. Not by that particular combination, but what you rel'erred to a while ago was the drilling contract. Q. (By Mr. Phillips.) Was not the price of labor put up after this shut-m to the scale agreed upon in the movement?— A. Yes, there was a scale adopted. Q. (By Representative LiviNdSToN.) Who paid thar.'— A. The oil producers. Q. Did they pay it in the price of tlv oil?— A. That is m the construction account: it goes into drilling the well, that is. building the superstructure o\-er the well! It just adds that much to the cost of drilling wells. Q. That does not have anything to do with the cost of oil?— A. No, not at all. It diverts the producers' profit to the extent of the advanc(-d cost. Q. (By Mr. Kennedy.) What did j-ou say was the period of that shut-down.-'- What was the amount of oil set asijle by the producers and the Standard Oil Company for the benefit of labor?— A. One million each, but the 0,000,000 origi- nally came from the Standard. , . ., x, ■ , ^ • -^ O That oil w-as sold for the benefit of the laborers.^— A. After this shut-m; it was' sold tor their benefit and distributed by their organization. ■ Soe p. 284. 432 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. How did the money thus distributed to them compare with the amount they would liave earned had the work continued in that field? Q. (By Eepresentative Li vixgrtox. ) Did they lose anything by the combination? Q. (By Mr. FaR(,>ithae. ) Subsefjuently?— A. I have not right at my tongue's end the amount that each individual driller received, but for the most part the driller constantly employed (what we call constantly employed) will perhaps work iOO days a year and make Si ,000. Q. (By Mr. Phillips.) Did not the laborers get more out of their oil being sold first at a' higher price than the producers did? — A. I believe that is true. Q. (By Mr. Kexnedy. "i What I want to know is. did they receive anything like the amount of money they would have received had operations continued?— A. About the only w:],y I can get at a reply to that is to state that there were nearly 800 fewer wells drilled during the year of the shut down than the year previous, and labor would lose the amount to be secured from drilling 800 wells, provided the same number would have been drilled in 18S.S as in 1SS7. Q. (By Mr. Phillips. ) Then did labor receive compensation in addition to what they got in the shut-in points? — A. It seems to me that labor received some addi- tion in the way of increased compensation. It would be very difficult to state the precise loss of labor in drilling at that time. Drilling was very active in the Lima fields in Ohio, and gas drilling was very active also during all that period and furnished a new outlet for labi5r. But the married men living in distant portions could not get away, and they were the ones who would have made the trouble, if th'^re was any, in that association. CONDITION OF THE OIL INDUSTRY AT TPIE TIME OF THE COMBIMATION. Q. Were there not about 31,000,000 barrels of oil in tank on top of the ground when that shut-in movement was inaugurated, and was it not deteriorating in value and the price very low, as you said before? Was it not the object of the Standard and the producers to i^revent the deterioration of that oil and in the end to get a remunerative price, and also to advance the price of labor? — A. The con- ditions precedent to that movement were worse than any that had ever existed bel'oie. Gj'eat stocks had accumulated in the Bradford field, the accumulation having started just 10 years before that period and still c; intinuing with a prospect of increase. The Washington field had been opened 3 years before and the largest wells found anywhere were there. A very prolific district had been found in Butler County, Rebold and Cxlade Run, where wells were obtained producing 3,000 barrels a day, and at the same period another development was going on at Saxon- burg. That was the condition when this agreement took effect. It was entered inti.i heartily on both sides for the betterment of their condition, and I believe they were both benefited liy the movement. The sti icks were reduced 10.000,000 barrels and upward. I liave a leaflet showing precisely the amount and I will hand that in later. Q. (By Mr. Ratchfoed.) 1 understand you to say that this shut down was brought about for the benefit of the industrvand pax-ticularly the producers?— A. Well, that the industry miglit survive would be my way of putting it. Q. But from your standpoint are not prices cut for the same reason? — A. No; I do not believe so. Prices are cut because the trade will not take the supply at the existing prices. Q. I understood from your previous statement that prices are cut for the pur- pose of improving trade conditions, and I also take it from your remark that prices are advanced for the same purpose. Now, I want to know what the pecul- iar trade conditions are which can be relieved by methods directly the reverse of one another? — A. I am very willing to answer that question, but iuy explanation will be simply an opinion. In answer to the first part of your qirestion, I will say that prices are cut in periods of overproduction for the "purpose of finding a market for the surplus .goods. (;)ne of two things can be done — the oil may be sti 'red in tanks and carried at great expense until it can be put on the market at remunerative prices, or prices maybe made to the foreign consumer that will induce him to take the surphrs. I have no doubt that all c'ompanies manufactur- ing oil find it necessary at times every year to hold out inducements to the trade to take surplus goods off their hands. There is a period, from May irntil Septeni- l)er. when there is a decline of one-third in the consumption of oil. If there is an I iverproduction of crude during this period of underconsumption, it becomes necessary to convert it into money, for it would seem like folly to add millions of barrels tii the existing stock during 1 or 5 months when there would be no sah.' for it. These various branches of the oil business are dependent on one STANDARD OIL COMBINATIONS: BOYLE. 433 another, the producer on the refiner, the refiner on the producer, and the con- sumer on both. The success of any one branch depends on the success of the whole. The division of labor has not been carried out anywhere so fully, I think, as in the petroleum business. Q. That is your answer to the whole question?— A. Yes: that is the only way I can answer it. There is only one of two things to do— to find a market at "a lower price or hold the oil for higher prices.' Q. If production continues'.-' — A. Assuming that production remains at a point above the consumption. THE COST OF PRODUCTIOX AND THE PRICE OF OIL. Q. Is the oil trust, combination, or whatever it might be called, in the habit of introducing its products into foreign markets by selling them at prices below cost? — A. Well, I do not know that it is sold below cost. It is the aim of busi- ness people to get cost where they can. Q. You are not in a isosition to say whether oil is sold below cost or not? — A. They may sell at a very low margin of profit, and I believe they often are induced or, rather, compelled to do so. Q. Have you ever known them to sell, in any particular case, in order to improve the market, as low as .j cents per gallon? — A. I never have. Q. If it has been done, do you believe it was below cost? Have they been able to produce it at any time for 5 cents to your knowledge? — A. Well, that involves an opinion on my part. I am not a manufacturer, and can not tell what the cost of producing is. I have heard — what are you leading up to by that question? Q. I am seeking to corroborate or cast doubt upon testimony that has been given. — A. I should say that 5 cents a gallon would be a very low cost for dis- tributing oil under the existing conditions in this country. THE PURPOSE OF THE STANDARD IX SELLING AT OR BELOW COST. Q. It has also been said that the Standard Oil Company has sold oil below cost in cities in the United States where the competition of other companies has had to be met. — A. I can only say that I have in my business sold advertising space below cost in order to have it occupied. I have heard that other business men do that in order to get off surplus stock. You have to sell below cost in order to get cash; and every spring and fall we carry one or two pages of advertising matter for merchants' clearing sales. They are all below cost. At a j)eriod of depres- sion in trade, I should not be sui'prised if a business concern were compelled to sell at less than cost. Q. I do not think your illustration is a fair one, because it was not your object to crowd out the fellow who was paying regular rates. I understand, however, that it has been the object of the Standard Oil Company to drive out the man who was disposing of his product at a fair price. — A. I have heard a good deal of that, but I have never seen any of it. Q. After the control of a market has been secured by the Standard Oil Com- pany through very low prices, is it not true that prices have advanced to a very high figure?— A. Assuming the facts to be as you present them, I should think it would be a very natural result. Q. (By Mr. Phillips.) Has not the Standard Oil Company followed up new, independent producers, from one place to another, where they have found a market, and reduced the prices there so as to drive them out? Are there not a great many instances of that kind on record?— A. There are none in the oil country. My observation is limited to the oil country, and there are none there. Q. (By Mr. Farquhar.) Are you prepared to make any statement as to the dismantling of plants by the Standard Oil Company?— A. None at all. I have no information of that kind. The things we hear about have certainly not occurred 'within the range of my vision in the oil country. OIL PRODUCERS H.IVE NOT BEEN INJURED BY THE STANDARD. Q. (By Mr. Phillips.) You may proceed in your own way.— A. I have here a paper I should like to put in evidence showing that the producers of oil are not beggared in their business relations with the Standard Oil Company. It covers the years 1860 to 1898 and has not been presented before. It shows the amount of oil produced, the average price, and the valuation by years ; the total produc- tion and valuation by decades and for the period, and also the number and cost of wells drilled. 434 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Exhibit I. — Yearly production ami valuation. Total valua- 1 ^t ,„, Amount of Average Total valua- oil produced. price. tion. '" ■'-■"• oil produced,; price. tion. Barrels. ' 186(1- Iran, (1(111 .X9.60 Sll.240.flflO.n(l 1 188] ,.;7..561.376 . s(1.8;>! §23.496,073.04 18B1 2.118,(I(JU . 52 1.101,360,(10 1882 30,221, 2ljl , *8'. 23,723,680.88 18B2 3 ()r)(j 0(111 1.05 3.2(18,800.00 |! 1883 ■ ,23.302,021 1.05i- 24.671,014.73 I8B3 2, 031. 0(10 3.15 8,287,6.50.00 |i 1884 ' ,23. 052. 20(1 .83! 20.(130,102.53 I8tH 2,11(3.200 8.15 17 247.030.00 1.SS5 21..)28.lj21 . 88::- 19,025,913,81 I8b5 2 +i(7 700 ,5(1 lb 4.50 813 0(1 ].S,SK 20.(103.04:1 71; 19,988,665.74 iswi 3.r)!)7..')00 3.; 5 13, 4'.l(l,(;25, 00 18.'<7 22,8,3,4:)0 .(id; 15,239,436,06 3,347.30(1 2.40 s 033,520.00 1 1NS8 16,0(15,800 ,87 14,708,124.30 1888 - 3,710.800 4.21o,( 3. (>2! 13,-160,775.0(1 l| 1889 ., 22.340,825 1 . 04> 21,036,772.78 Total.' 211,544,250 206,623,341,56 Total. 27, 844, .J 10 111,142, 603. ( -i 1890 30,(167.307 1 .86! 1891 -- 35.839.777 .(-16; 26 (145 804 ('iil 1ST" r>,(.;.-.fl.()Oo 3.90 22, (.70, 100, ( 23,967,830,87 isn r,.7'.i.j.(«K) 4.40 25 408 000 00 1892 33,42.-),8<. .551 18,:551,861.73 1X72 ii,ri30,l(io 3.75 24.521,625 00 1 1893 , 31. 36.', 8:10 ,(54 20,072,249.60 1,ST3 '.(, 803, 78(1 1.80 17 80S 814,8(1 h 1894 3(1.781,024 .83'/ 25,779,861,35 1874 I(l,!l20,!l4,i 1.15 12 ..65 086 75 < 1.895 . 30.0.59.139 1.3.ii 41. 871, 236. .50 1875 11,987,514 1.24} 14.9:-)i.423 (.1 11 1896. 3f.970.222 1.19 40, 424.. 564. 18 isrti. 9. 120, (i( 111 23 -to;, 123. 51 1897 1 35.165.090 ..8; 27.,5(.a.244.6() 1877 13,337,363 2. 3(1;- 31.026.312, lis 1898 : 31.647,860 ,91; 28,830.112.43 1878 15,381,641 1.17t 18,015,747.02 18TH r.(, 8!U, 288 . .S5t I7,0:M.484. 10 Total. 293,220,986 253,113,285.00 Total. 1(18,545,306 207,8:12,617.4; Grand --I total. 671,245,042 778,771,847.08 1880 26, 245, 571 .04; 24,703.643.76 d Wells rilled. Cost per well. 84.000. GO 3, (HKI.OO 2,0(10.00 2,01H) 00 Tot 820, f al cost. Value of crude oil. Isilll-l,s7(j 5,0UO 20,259 32, 132 43,490 00,000.00 8111,142,603.00 1S7U J8KII eo,877,0UU,0U 64,264,000,00 86, 08(1, 000, (,KJ 2(17,892,017.47 206,62.3,341.56 253 113,285.00 tl Tot£ 1(H1.881 232,131.000,00 778,771,847.03 If one-fonrtli of all the oil prodticed 5vent to the land interests they would i-ecei5'e Sl!M . 61.13. U(1'3. lea'x'ing §.").S4,i)r8.s.s,") for the oil producers. Deducting the cost of drilling,' there still remains ."j:).")! ,9.i7.8«5; the cost of lifting the oil, at an average of 25 cents a barrel, would be .'?.'8T.9S;l,471.3.5, lea^'ing §363,1)68.413.75 as the profits of the producing business for the last thirty-nine years, or an average of S(J,7()8,430.86 per year.- DRY 5VELLS AND THEIR COST. Q. Do your figures include dry wells? — A. They include 15,000 dry wells. Q. Is the cost of territory included — the bonus? — A. 1.5,000 dry wells are included which never produced any oil and which cost the producers about 830,000,000. Q. Is that your idea of the proportion of dry wells? Would not the percentage be much larger than that? How many 5vells were drilled altogether? — A. 100,881. Q. How many dry wells? — A. Fifteen thousand. Q. That does not correspond with the experience of a great many as to the per- centage of dry wells, does it? — A. It is consistent with the statistics available. We are liable to be mistaken, but our work is subject to revision. These are not our own figures in every case, but we 5-ouch foi- those that are. We can take the figures from 1875 and vouch for them; beyond that we are dependent on the early stati.stioian. Q. Has tile inspection of the oil country been sufficient to give you a record of all tlie dry wells? I can readily see that the striking of a good well would he reported; but has there been an organized attempt in the oil country to ascertain: the facts as to the many thousands drilled and abandoned? — A. During the first 10 years of the business there were probably a thousand men in the oil region will) had been through it from the beginning to the end. Of these personal observers 900 probably had been over all parts of it. Mr. Wrigley was counnis- sioiied in 187 J to make a survey of the field and report as to the extent of the oper- ations. His report carries us down to about 1875. From that time the news- ' 8ee. M?-. Emery, p. 661. 2 Compare Mr. Archljold, p. .539. As to sources, see p. STANDARD OIL COMBINATIONS: BOYLE. 435 papers have taken it up and published reports; are subject t<_i public inspection and criticism, are as nearly official as tbev can be made. and, whether right or wrong, they The figures for the first 10 year's THE RENTAL OK BONUS FOE LAND NOT AN ELEMENT OF COST. Q. I understand that yon do not include the bonus or rental paid for ),,.lding the ground in these figures; but are there not many instances where pe^^(l^s pay a very large bonus for a prospective territory that does not prove ^■alualJje■:' Do not such payments amount to many millions of dollars? — A. We have considered that question very fully, and have adopted the view that the bonus or rentiiJ paid on account of speculation should not enter into a question of this kind. While it is true that it operates against the profits, the amount needed to produce a given quantity of oil consists in the cost of drilling, the rental of the well, and the expense of lifting the oil; any other expense is purely speculative and is inc-urred for the purpose of giving the individual producer aii ad-santage. Q. But is it not necessary, in order to pursue the business, to pay this bonus or rental? Could any firm or individual become a large producer without paying a bonus or rental when the ground had only a prospective value?— A. But it sliould appear as a bonus and not as the cost of operating. Q. But is not the proc^ucer out that many million of dollars, eqiial perhaps to the cost of drilling? — A. It is not compulsory, while the cost of drilling and lifting the oil is; the lease is speculative and does not enter into our figures; it curtails the producer's profits; when he sees fit to invest in that way he takes the chances. AVERAGE DAILY PRODUCTION AND PRICE, 18TO-1S0H. I should like to offer here a table of figures which purports to give the average daily production by barieis from 1870 to 1898. inclusive; Exhibit II.— Trend of prices of crude and r< fined oil. 1S70-1S0S.^ Since 187(1 the daily production has increased 450 per cent; the price of crude oil has declined 7.5 per cent, and the price of refined about 75i per cent. In 1871 we exported petroleum and its products to the amount of 152.195,617 'See p. 547. where it is shown that this table includes only As to sources, see p. iSb. •Pennsylvania oil;" pp. .561, 5138. 436 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. gallons, and of the -value of S36,663,835. In 1897 our total exports were 994,397,757 gallons, valued at $59,057,547. In other words, our exports increased over 500 per cent in 36 years, but the increase in valuation of the total product was but a little over 61 per cent. In 1871, 133,178.84:3 gallons of illuminating oil sent abroad brought §33,493,351, while in 1898. nearly six times as great an amount, or 771.350.636 gallons, brought bvit 848.343,916. The total exports of petroleum for the year 1898 amounted to 986,480,610 gallons, valued at 852,551 .048. The decline during the past year (1898) reached 7,817,147 gallons in amoixnt. and 86.506.499 in value. For 1896. our exports of petroleum and its products were 931.795.033 gallons, valued at 863.764.378, and for 1895,853,126.130 gallons, valued at .850.334,435. In 1888, 680.000,000 gallons of petroleum were within $6,000,000 of the value of nearly a billion gallons exported in 1897. PEICES OF CRUDE AND REFINED OIL, 1891-1899. I have another paper which I wish to offer in evidence now, and which is pre- pared to show the comparative prices for 4 years before Mr.Seep's agencj', and for 4 years after. Exhibit III. — Crude and refined prices compared. On the 33d of January, 1895, there was posted in the various offices of the Seep Purchasing Agency throughout the oil regions the following important notice: "NOTICE TO oil PRODUCERS. " The small amount of dealing in (Certificate oil on the exchanges renders the transactions there no longer a reliable indication of the value of the product. This necessitates a change in my custom of buying credit balances. Hereafter in all such purchases the price paid will be as high as the markets of the world will justify, but will not necessarily be the price bid on the exchange for certificate oil. Daily quotations will be furnished you from this office. "Joseph Seep. "January 33, 1895." This marked a radical departure in the methods of buying and selling oil and determining the price of crude petroleum. It tended to make the deal between producer and refiner a direct one, and tcj eliminate the speculative broker as a factor in determining values. The price of speculative oil, in the shape of certifi cates hawked about on the floor of the oil exchanges, was no longer to rule the real market as established directly between the man who had oil that he wished to sell in the lines and the agents of the refiners who desired to buy it. The change was rendered imperative by the gradually diminishing volume of busi- ness in the oil exchanges and the practice of some of the larger producers, who, by the purchase (if a few thousand barrels of sxieculative oil on the floor of the oil exchanges, were able to manipulate the market a few cents in their own favor and at the same time dispose of a large amount of credit-balance oil at the advanced figures. This order put a sudden stop to the frequent practice of establishing a fictitious value for oil by interested parties who desired to effect sales or purc'liases of the commodity. It. however, did not eliminate the petroleum broker or put a check on speculative dealings in oil. This business is pursued as usual, but instead of the credit-balance price being determined by the price of certificate oil, as in times past, all speculation is based upon the price paid from day to day for credit balances in the direct dealing between the producers and refiners. But the broker has ci'ased to be longer a factor in the business. The manifest absurdity of bas- ing the price of the entire amount of daily production on the few thousand bar- rels of (jil that changed hands ot'casionally on the floor of the oil exchange is a thing of the past. In the following tables are shown the average price of a barrel of oil in the exchanges, from month to month, as compared with the price of a gallon of refined oil in New York, for the four years immediately in'ccc^ding the time when the new rule of the Seep Purchasing Agency went into effect. STANDARD OIL COMBINATIONS: BOYLE. 437 Refined pi-iijes ate quoted in cents and decimal, parts of a cent. Date. i Average I ^v^™g<: ■TOi^barrei gallon, 1891. January February March- April --- May June -- July August September October November December Average 1892. January - February March April-- May June -- July August -- September October November . December Average Cents. 71| 71 695 B6J 63| .59} 66i 62i 60^ .54 .52! 54i .541 olS •51 ■- 531- Cenlx .42 7.48 7.31 7.18 7.20 7.13 7.02 6.70 6.42 6. 45 6.40 6.44 6.93 6.45 6.43 6. 32 6.10 6.06 6.00 6.00 6.08 6.10 6.03 5. 80 5.45 1893. January --- February - - March April May June July- - August September - October November - December -, Average . 1894. .January February -- March April -- May - June - - July August September - October November - December- - 6.117 Average . Average price crude oil, Average price re- fined, per gallon. New York. per barrel. Cents. Ceu fs. 53J .5.33 an 5.30 651 5.;-<4 68.J 5, .52 58i .5.20 60} .5.21 .57i 5.15 o8J- 5. 18 64i- 5. 1.5 70t 5.15 73< 5.15 78-8 .5.15 64 5.35 80 .5. 1.5 80i 5. 15 81t .5. 15 84} 5. 15 86 .5, 15 88i 5. 15 83i 5. 1ft 80i 5.15 83 5.15 82| 5.1,5 m .5. 15 911 5. a It must be remembered that the prices quoted above include the cost of the bar- rel. Eefined oil in bulk is 2. .50 cents less than the above figures. For example: In 1891 the producer realized an average of 66 J cents perTiarrel for his crude product, or 1.59 per gallon, while the refiner, after paying cost of transportation, manufacturing, etc., delivered it on board the tank steamers for export abroad at 4.35 per gallon. In 1894 the producer received nearly tv^o cents a gallon for his crude product, while the refiner realized but 3.67 cents per gallon. SEEP AGENCY PRICES. The following table shows the price paid for crude petroleum by the Seep Pur- chasing Agency, .since 1895, with the corresponding price of refined oil on the dates when changes in the price of crude were made: Changes in price of crude oil by Seep Purchasing Agency and corresiionding changes in price of refined oil al about the same date. Date. 1895. January 33 - January 24 February 9 March 8 March 14 - ■ March 16---- Aprils April9 April 10 - --■ April 11 -- April 13 - April 15 83A 29 Ai^ency price for crude. per gallon. Cents. 0.99 ] . 00 1.03 1.05 1.07i 1.10 1.20 1.27 1.35 1..50 1. 75 2.00 Refined, per gallon. Date Cents. 1 5.90 5.90 6. 05 6.60 6.85 0.85 7. .50 8.00 8.00 9.00 9.00 11.00 18>.)5, April 16 Aprill7 --. April 18 - April 19 -- April 20 April 22 April :30- May 1 - — May 2 May 3 May 4 May 6 AgeiK-y prirefoi Kefined, (•riide, per gallon. per gallon. 2. BO 2. 40 2.' Jo 2.00 1.90 1.80 l.TO 1.60 Cvitls 11.50 n..50 11.50 10 75 10.75 10. (XI 9.15 8. 25 8. 25 8. 2.5 8. 25 1 1. .55 7. 75 438 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Changes in. jirice of crude oil by Seep Purchasing Agency and corresponding chamirs in price of i-ejiiieil oil at about tlic sunn' date — Contiinied. May 7 May9 May 10.- May 13 May 20. May 24.- May 27 May 28.. May 39 May 31 June *.. June 7 June 18. - - June 19 June 21 June 29 July 1 Julys Julys July 12... July 15. July 19.. July 25 - July 26. July 27 July 28 November 5 . . November 7 . . November 11 . November 12 . November 18 . November 14 . Novunil;er 15 . November U> . Novi'inber 21 . Noveniljer 27 . November 29 . November 30 . December 2... December 5... December 10. . December U . . December l... December 19 . December 20.. December 21 . . December 24.. December 27 - - December 30. . January 2 — January 17.- January bs_. January 20 - January 22 . . . January 11 . . . February 18 . February 20 . February 24 . February 20 . March 4. March 9. March 10 March 12.. .. March 14-. . March 17.. March 23.. March25 March 20.- . March 27 April 2 1.50 1.65 l.tiO 1.65 1. 67 .^ 1.65" 1.60 1.57} 1.55 1.50 1. 47,! 1.45 1.50 1.55 1.60 1.55 1.50 1.47J 1.45' 1.47i- 1.50 1.52i 1.45" 1.37J 1.30 1.25 1.30 1.33 1.38 1.40 1.42 1.45 1.48 1.50 1.65 1.50 1.47 1.45 1.40 1.38 1.43 1.48 1.50 1.47 1.40 1.35 1.40 1. 45 1.50 Vents. 7.75 7.75 7.75 7.7s 8.50 8.50 8.50 8.00 8.00 8.00 7.85 7.65 7.65 7.80 8.10 8.10 7.95 7.80 7.80 7.65 7.65 7.65 7.65 7.66 7. 65 1 7. 10 7.2,5 7. 25 7.75 7.75 7.75 8. ,50 8.50 8.. 50 8 25 8.00 7.75 7. 75 7., 50 7,, 50 8.00 8.00 8. 00 8.00 '.50 ' 'ill 20 I 1896. Api'il 7 April 9 April 24 May 11 May 14 May 18- May 19-.-- May 22 May 25 May 20 June5 .Tune 10 June 12 .June 15 .June 16 June 2^:1 — .June 24 June 25 July 13 July 14 July 15 July 16 .July 23 -. July27 .JulySl August 12 August 27 August 31 Septembei" 4 Septeuiber 10- .. September 23 - . . September 25 . - . Octobei- 1 October 13 - October 27 November 10 . . . November 18 . . . November 19 . . . November 23 . . . November ,24 . .. November 27 _ . . November 30 ... Decemlter 7 December 9 December 14.... December 16 Decembei' 17 December 23 December .2S January 1. . . .January 18.. January 23. . February 1 . February 2 . February 16 March ,22 Miirch 23-... March 24 March 26 March 30.... April 3 April 5 April 5 April April 15 .4pril 28 April 30 May 3 May 5 Mn,v 18 Agency price for I Refined, crude, I per per gaUon. gallon. 'n a fs. 1.22 1.20 1.25 1.22 1.20 1.17 1.15 1.13 1.10 1.09 1.10 1.14 1.16 1.18 1.20 1.18 1.16 1.15 1.13 1.10 1.07 1.03 1.06 1.08 1.06 1.04 1.06 1.08 1.10 1.12 1.15 1.18 1.16 1.14 1.17 1.20 1.17 1.16 1.13 1.10 1.08 1.05 1.03 1.01 .99 .97 .95 .93 .90 .88 .85 .87 .90 .91 .92 .93 .94 .95 .96 .93 .91 .88 .85 .84 .83 .81 .83 .86 .89 ' Remained at this figure until November 6. ■^ Ranged from 7. ,50 to 7.65 cents. 3 April 17,6.80,-,,nts. * On .January 20. '■> Ranged from 6.25 to 6.30 cents. » Ranged from 6.40 to 6.,55 cents. STANDARD OIL COMBINATIONS: BOYLE. 439 Changes in price of crude oil bij Seep Purchasing Agency and corresponding changes in price of refined oil at about t/ie same 4ate — Oontinued. Date. Mayas June24 June 28.- June 29 -- July2- July 13 July 14 - July 19 July at) Augusta - September 9 . . September 23 . October 14 October 15 October 18 --.. January 1 February 16 . February 17 . February 23 . February 25 . February 26 . February 28 . Marcbl Marcli.8 March 9 March 14 March 17 April a April ai April 22 April 23 May 5 May B May 7 May 11 May 12 May 19 May aO June 7 June 11 June 15 June ai June aa Agency price tor Befined, crude, per per gallon. gallon. C'ant^. C'e);f.s\ .87 6.15 .85 6.15 .83 6.10 .82 6.05 .80 6.00 .79 5.95 .77 5.85 .75 5.75 .73 5.75 .71 5.75 .69 5.70 .70 5.80 .68 5.50 .67 5.50 .65 ' 5.40 1 .65 5.40 .67 5.40 .68 5.40 .70 5. 50 .73 5.60 .78 5.85 .80 6.20 .82 6.05 .80 5.90 .79 .5.90 .78 5.80 .77 .5.75 .75 2,5.75 .74 5.60 .72 5.60 .71 5.60 .75 5.80 .80 6.00 .85 6.00 .83 6.00 .82 5.95 .84 8.05 .86 6.15 .87 8.15 .86 8.15 .85 8.15 .86 8.15 .87 6.15 1898. June 24 June 27 June 28 July 11 July 19 July 20.... July 21 .July 22 July 25 July 26-,-- July 27. August 15 August 18 August 22 September 16 .. September 23 - . September 27 . . September a9 . . October 4 October 6 October 7 October 13 October 17 October 20 November 15 . . iSTovember 16 .. December 9 December 19 . . . 1899, January 1- January la January 13 January 30 February 28 . . . June 28 June 30 July 8 - - - - July 11 ---- July 14 July 18 July 31 -- August 29 August 31 Agency price for ' Refined, crude. per per I gallon. gallon. Cent. .90 .92 .94 .96 .93 .92 .90 .92 .94 .96 .97 .98 OO 02 04 06 05 07 08 10 12 15 18 16 15 17 19 1.19 1.17 1.16 1.15 1.13 1.15 1.17 1.19 1.21 1.23 1.25 1.27 1.30 1.35 Ccnt.H, 6.15 6.15 6.25 6.25 6.30 6.20 6.20 8. 10 6.20 • 8.30 6.40 6.40 6.50 6.50 3 6. .50 6.75 6.85 6.85 8.95 7.00 7.10 7.20 7. .30 7.40 7.30 7.30 7.30 7. ,50 7. ,50 7.40 7.40 7.40 '7.35 7.20 7.35 7.40 7.50 7.60 7.70 7.80 7.90 8.10 1 These figures prevailed until the close of the year. ' Banged from 5.70 to 5.75 cents. 3 September 19, 6.65 cents. ■• In April dropped to 8.95 cents. W hen there has been a large amount of surpliis production seeking a foreign outlet, reduced prices have been the invariable result for both crude and refined. Increased consumption is always gained at the expense of price. Foreign com- petition has been keen, and prices for refined for the four years from 1891 to 18Qr^ were hammered down to the lowest notch. When refined oil gets above a certam price per gallon, its use becomes almost prohibitive to millions of our foreign consumers. The re.sult of higher prices is immediately shown in a faUmg off in the foreign demand. , . , , ' A careful inspection of the above tables will show that the relative ratio between the price of refined and crude oil has been better maintained during the years that the practice of basing prices upon the actual conditions of supply and demand has prevailed than during the years immediately preceding the adoption of the new order of things. The speculator devoted his efforts to bearing the market whenever there was any immediate prospect of a temporary increase m new production without any regard to the foreign demand for refined or the actual value of refined oil in the markets of the world. The producer was absolutely Takina- the year 1899 for illustration, it will be observed that the price of refined ■oil has advanced from 7,50 cents a gallon at the beginning of the year to 8,10 440 HEARINGS BEFORP: THE INDUSTRIAL COMMISSION. cents at the present time, a gain of 60 points. During tlie same period the Seep Purchasing Agency price for crude oil has advanced from §1 .19 to $1.3T) pei- barrel, or 16 cents. During March and April, when crude oil was $1.13 per barrel, refined dropped as low as Q^.9') cents per gallon. On June 28, when refined had advanced again to 7.30 cents, crude oil was marked up to 81. lo, and a few days later, when refined had advanced to 7.5i) cents, the crude-oil price had been raised to .§1 .31 per barrel. HOW THE PRICES OF OIL ARE FIXED. Q. (By Mr. Phillips.) You say " it tended to make the deal between producer and refiner a direct one:" but does the producer have any part in the bargain? Do they not post the price each day that they will give? Can it be considered a deal when the producer has nothing to do with fixing the value of his commodity?— A. Would you suggest that I say "option" — that the producer has the option? Would you advise me to change that? Q. Provided he has another place to sell. — A. He is not driven to that necessity, When he becomes reduced to that necessity, it may be as you say. Q. Do they not fix the prices S,lso of the refined? Do they not post that in New York and Europe, the same as the crude? — A. I believe the prices are posted: they are reported every day and posted somewhere, but whether or not they do it I can not say. Q. When the Seep Agency advanced prices, as they did lately, did not the Standard advance the refined 10 or l.T hours later, the same day or the day follow- ing? — A. I have no knowledge of that, but I dare say refined would go up in pro- portion to the advance in ciude. Q. They fix both prices, the crude and refined? — A. Mr. Seep states here that the markets or the demand of the world fix it. We are giving Mr. Seep's version of it. Q. (By Mr. Farquhar.) Does Seep post the European market? — A. No. Q. What market does he post? — A. The crude-oil market. Q. Of America? — A. Of the United Pipe Lines and the National Transit Com- pany. Q. (By Mr. Jenks.) You speak of the export price fixing the price of all oil and of the markets of the world fixing the prices when Mr. Seep is purchasing. Is it true that the relation between the regular export price in New York and the price Mr. Seep is paying the producer is a constant one? — A. I believe it is.' Q. You think the relation between these two prices is substantially the same all the time? — A. Inevitably. The purpose of this paper is to lead up to tli^t question. Q. (By Mr. Phillips.) Did not the Standard Oil Company completely control the price of oil 4 years before Seep's Agency? What does the statement that they ' ■ would pay what the markets of the world would justify '' mean? Was there sufficient business done on the exchange by others to affect the Standard in any way?— A. To affect prices, there was. Q. To any considerable extent? — A. To an extent sufficient to influence the market one way or the other. I have an instance in mind now of a gentleman coming to Oil City and advancing the market 3 cents by dumping ( >n it a half thousand barrels of his own oil . Q. Was that a common practice? Did not a brief period of time elapse in that transaction?— 'A. It was just an instance of marvelous mention, you might say. Q. The gentleman only had time to walk from one jilace to another? — A. He took that time. Q. (By Mr. Kennedy.) Who was the gentleman?— A. Mr. Michael Murphy. Q. (By Mr. Smyth.) That was a case of pure speculation? — A. Yes. It was possible for anyone with money and nerve and oil to do the same thing any time. Q. (By Mr. Phillips.) It would be risky for a producer to pursue that course, would it not? — A. I would not want to be the man to try it. BY'-PRODUCTJS AND THE PROFITS OF OIL BEFININ(J. Q. Is it fair to compare the price of crude oil with that of export oil to show what the profits are. without taking into consideration the by-pioducts, such as lubricating oil, which is sold in this country and other places? — A. That question has occurred to my mind a number of times, and the conclusion I have arrived at is that when we have an article of export or commerce the foreigner makes the price; Manchester fixe.^ the price for cotton; Liverpool, for wheatl Q. Does the foreigu(u- make the price of oil in Denver, Minneapolis, and the s(juthern cities and towns? — A. If oil could be transported Isy telephone .or placed ' See Mr. Lee, pp. .'iTG, .'«!.'>; Jlr. Westsate, pi). ;in, :!7;;: Mr. Loi-kwoocl, pp. :in4. 398; Mr. Arch lu.ld, p. .5.51); Mr. Emery, p. til«. STANDARD OIL COMBINATIONS: BOYLE. 441 there without labor, it would be sold as cheap in Denver as in New York; but since labor enters into it, the oil at Denver is produced at Denver and the eastern oil is hardly brought into competition with it. Q. Does not the Standard make a very large profit out of the by-products — benzine, tar.lubricatinj; oil, etc. — which you do not fake into consideration when simply comparing the price of refined oil with what they pay for crude? I may be misinformed or mistaken; what is your view in regard to that? — A. Well, the way it has always appeared to me is this; The by-product is something of a gift of nature. In marketing the by-product labor and capital have been employed; the producer has nothing to do with these by-products; he sells his product as a whole, and they are only created by labor in the process of manu- facture or by chemical jjrocess. In other words, tliey cost something; they possi- bly cost something near as much as they produce in many instances, but that there is a profit is very complimentary to the refinery and to the chemist who has made it possible. There was a time in the refining b usiness when there were no by-products. The only by-product that I knew anything about when I went into the oil business and that had a ready market was benzine. That was sold as a dissolvent for paraffin, went into the wells as benzine, came out and went into the ijroducers' tanks, and was sold back to the refiners as crude oil at 400 and 500 per cent over cost. Now, that is the only by-product that we had in the beginning. Chemistry has advanced the art of refining, and at every step labor and capital are employed in the preparation of by-products, and I dare say there is a profit. There should he a profit in them. Q. Well, provided there is a profit, and you admit that there is and a large one, in the by-products now, is it fair to take the price of the refined export oil and compare it with the price of the crude? In your opinion are not the by-products the source of one-half of the profits of the Standard Oil Company or other people engaged in shipping oil abroad? — A. Well, it occurs to me that with the profits on oil at export prices, we should have no oil business, because with the production of the present voluine no refinery could undertake to carry on the business and run it for the profits on burning oil alone. The oil w(juld necessarily be so high that there would be no inducement for the consumer to buy it. It has been stated here in my presence by some person on the stand that 10 cents a barrel was a fair profit, but he was taking into consideration the by-product.' No refiner can take 10 cents profit, and that alone. Q. (By Mr. Farquhar. ) Does not the Standard Oil Company dispose of the hy-prodiict to other manufacturers? For instance, is not the petroleum residuum which enters into dyes sold at a cheap rate to manufacturers outside of the Stand- ard Oil Comjaany? — A. Yes. Q. And in the long run it makes very little difference in the tables you have presented here in respect to the crude oil itself?— A. That would be my view of it. Q. Do you know whether the Standard Oil Company has entered into the manufacture of by-products such as dyes, magenta dyes, and others, or is that done by different corporations and individuals who have taken up the by-product business? — A. By separate concerns. Q. (By Mr. Phillips.) How about the paraffin or wax that enters so largely into sperm candles; do they manufacture the paraffin or wax?— A. There is a large percentage of wax and they sell wax to other manufacturers. THE producers' PROTECTIVE ASSOCIATION BUILDS REFINERIES. The volume of matter involved in this subject is so great that I have necessarily skimmed over it. The complete examination of this subject would require more time than the commission can give co any one witness. Therefore, we have Jumped from the movement in the 70"s to the present time, but I should like to go back now to the shut-in movement and the- matters growing out of that. After that period of 12 months' suspension of operations the Producers' Protective Association cr)ntinued in force, and their next step was to promote the erection of refineries in competition with their benefactor, the Standard Oil Company. Q Did you not say that that was a mutual arrangement? Were not the pro- ducers at liberty to do as they pleased after that?— A. That agreement was car- ried out for 1 year; it was limited to 1 year, and at tlie expiration of that time the parties did as they agreed; their mutuality ceased. They fell apart. The Stand- ard Oil Company pursued its course as a transporter of oil. The Producers' Association proceeded, as I have stated, to promote the erection of refineries, and stated as an inducement, that there was so much profit in the by-products that 1 See testimony of .T. W. Lee, page 273 442 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. they could afford to give the burning oil away. A refinery was built on that proposition by impractical men and failed. There was no reason why a refinery where it was built should not have succeeded; there is on'e there now in success- ful operation. Q. How many were built after that shut-in period? — A. Only one. Q. Were there not a large number before, called independent refineries, whicli united their interests? — A. Yes. Q. The producers did not spend money in building refineries? — A. They sup- plied the money to build that one refinery. Q. No large per cent of it? — A. It was contributing financially. THE ORGANIZATION OP NEW PIPE-LINE COMPANIES. Q. Had they a right to do that? — A. They had a perfect right to do it ; but, to show the object of the organization still further, they proceeded about 1890 or 1891 to organize pipe-line companies. The first company organized was the Pro- ducers' Oil Company, Limited, with a capital of $600,000. oSTo one questions their right to do that. It was organized at a very opportune time, at the period of the greatest production that has ever occurred — the opening of the McDonald field. They entered the McDonald field, but they got away from the production that was likely to be overwhelmingly large. They kept on the outskirts and limited themselves to such wells as they could handle with their capacity. That was the first point where they entered actively into competition with the United Pipe Line in the transportation of oil. At this time the McDonald field rose within 3 months from practically nothing to a daily jjro.duction of 80,000 barrels, and the production was limited to a territory about 6 miles long by 2 miles wide, a very narrow strip for so large a production. That flow continued for but a single day, but the average was above 60,000 barrels a day for months. The Producers' Asso- ciation, which had been formed for the betterment of the oil trade, did nothing to improve the condition of the McDonald producer. It gave him competition at once useless and expensive — expensive to the extent of $600,000 of the producers' money embarked in it, which has never paid a cent of interest from that time to this. The one concern was obliged to shoulder the entire responsibility for car- rying the oil in that district, and would have done so regardless of the presence of the association of producers. INTEREST OP THE STANDAKD IN THE PRODUCERS" OIL COMPANY, LIMITED. Q. Did not the Standard Oil Company purchase a large percentage, a majority, of the stock in the Producers' Oil Company, Limited, of that 1600.000 capital of which you speak? — A. I know of some purchases by Colonel Carter. Q. Did not that find its way to the Standard Oil Company, and in the suit pending was it not proven that the Standard Oil Company furnished the money to purchase the majority of that stock? — A. I did not understand it so, but I do not know. Q. Did they not pay as much as two for one in order to get control? — A. I have no information on that. The only sales I know of were at par: I know of some few sales at par. Q. Was that a direct corporation, or what was the nature of the organization?— A. It was a limited partnership. Q. Mr. Carter attempted to be elected a director in it, did he not? And is it not a fact that the matter was taken into the courts with the result that it was decided that he could not become a director or have the power to vote that stock, and that therefore he failed to secure control of the company'? — A. I know there was a suit and a decision. Q. You do not know that the decision was adverse to Mr. Carter or the persons who stood back of him?— A. I assume that it has been from the subsequent proceedings. Q. Are they not now appraising the value of that stock? — A. I understand they are now appraising the value of the stocks. The Producers and Refiners' Oil Com- pany, Limited, proving ineffectual for the purpose intended, obtained additional capital through a combination with refiners to the amount of $250,000 and built a connecting line to that one to supply oil to the refiners, making a capital of $850,000. That has never paid a cent of dividend. It has been in operation nine years and has never paid a cent to the stockholders. The market price of oil has ranged from 1 to 9 cents higher per barrel in that line as compared with the Seep Agency prices. ' The producers got the benefit of that. Yet the refiners to whom the oil was sold paid the existing market price, or a price less than the one paid to the produ(-er. ' See p. 414; Mr. Phillips, ,5lif-'i(«l. STANDARD OIL COMBINATIONS: BOYLE. 443 THE ASSOCIATION CONSTRUCTS A PIPE LINE TO THE SEABOAED. Q. Was there another line built after the second one to which you refer?— A. The United States Pipe Line was built to the seaboard. Q. By whom?— A. By the same association. A million dollars were embarked in that. Other capital was added to that, probably four or five hundred thousand dollars, making upwards of S3,000,00n invested in transportation as a result of that movement, and upon which the stockholders have never received a dollar except- ing a 5 per cent dividend paid liy the United States Pipe Line at a time when it was paying nothing on its fixed indebtedness. Q. Do you not believe that they would have reaped a large profit had it not been for the opposition of the Standard?— A. Not at all. I believe that investment was useless, the capital wasted, and the producers wronged. Q. When this company commenced to sell refined oil in New York City did not the Standard put the price down there to less than the cost of refining? '—A. What- ever was done there, was a matter of merchandising on both sides. They were not producers or refiners — they were merchants. Q. Did they not do the same thing in Philadelphia?— A. I believe that to be a common practice wherever there are sales. Each person having a commodity for the market places it at the best advantage to himself. SELLING AGENCIES ESTABLISHED IN EUROPE. Q. Did they not obtain a market in Europe and establish a selling agency there?— A. I was leading up to that. Q. Did not the Standard buy that agency and obtain all the tanks available in Germany and leave the independents without any chance to market their oil? Did they not buy out a man by the name of Poth, who was handling the independent oil abroad? — A. I understand they did. Q. Was not the agency sold before his death? — A. I know nothing about that; I cannot answer that question. Q. Have you any knowledge of that? — A. No. I have no knowledge of it. _Q. Do you know that the Pure Oil Company, as it is called, built storage tanks abroad and established agencies of their own? Are they not now doing busi- ness in that way, independent of the Standard's opposition, and where they can not be discriminated against in prices? — A. I know of the existence of the con cern called the Pure Oil Company. THE PRODUCERS' ASSOCIATION BECOMES A TRUST. Q. You do not know then that these companies have established agencies abroad and are now marketing their oil? — A. Oh, yes, that is a matter of common information; but I was about to say that when the Producers' Protective Asso- ciation started in to protect their business in an associated way I suppose they were incorporated. Thej' started out with the pipe line, under an arrangement in which they could limit their responsibility and say who they would admit to partnership. That being ineffective they formed a combination of refiners and secured .^250,000 additional capital. Then came the construction of the United States Pipe Line, and after that the establishment of the Pure Oil Company. But the Pure Oil Com- pany did not come until aftcf the Oil League was formed and it became necessary to complete the trust. This thing began in a most untrust-like way, but ended up in a trust as complete as could be formed. The creation of the Pure Oil Com- pany was necessary in order to control all these other properties. The Pure Oil Company, with the nominal capital of .si, 000,000, and an actual capital of ,S400,000, is trying to swing this §3,000,000 concern, and will eventually if the voting trustees have the power. '^ Q. (By Mr. Jenks.) Will you explain the evolution of that trust a little more in detail? — A. That is a trust. Q. Explain just what you mean by that. Do you refer to the method of its formation? Q. (By Mr. Phillips.) Do you mean a trust or a combination? ■Q. (By Mr. Farquhar.) With respHct to the form of control you regard it as a trust?— A. In that respect I regard it as a trust. It is a combination, a series of combinations, but the properties are all managed by voting trustees. The prop- erty is in a trust; three-fourths of the property of the United States Pipe Line, or the proportion which this organization controls, is in a trust.' Q. (By Mr. Phillips.) Do von know the reason why a voting power was put there'' Had not the Standard bought several hundred thousand dollars' worth of 1 See Ma-. Lee, p. 265: Mr. Westgate, p. 365; Mr. ArohboW, p. 528. 2 See p. WW. 3 Sec pp. ■ttl3,4(j4,'188,,507,508; Mr. Phillips, pp. 589-598; Mr. Emery, pp. 657-650. 444 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the stock of the United States Pipe Line and did they not propose to con- trol it? Was it not essential to the existence oi: the United States Pipe Line that the stock shonlcl be put in trust? — A. If we start by admitting that proposi- tion we must indorse all that has been done before in the way of combination; that of itself is a virtual admission that the Standard Oil Company was right. Q. (By Mr. Farquhar.) You mean to say that this action of the company has vindicated the action of the Standard Oil OompanyV — A. Entirely. THE PRODUC!ERS" ASSOCIATION COPIED THE METHODS OP THE STANDARD OIL COMPANY. Q. (By Mr. Smyth.) Yoit consider that this company copied in a measure the plans and proceedin^^ of the Standard Oil Company? — A. Not exactly: that was open; this is secret. Q. (By Mr. Phillips.) Do you mean that the Standard Oil Trust was not one of the most secret organizations in existence in the management of their business and in making statements to the stockholders? — A. I suppose they have not opened the pages of their books to the public. Q. Have they ever issued any statement to the stockholders? — A. Not being a stockholder, I can not say. Q. You are a newspaper man? — A. They have never issued any to me; I have never asked for any. Q. Was suit ever brought by a stockholder in that trust in order to get knowl- edge of their business and to have a statement made of how the funds were being handled? — A. I think the suit failed, and properly, because the purpose of the suit was to work an injury to the company. It was not brought in good faith. Q. Then you think that a man holding stock in the company has no right to know anything about the amount being earned or whether or not its means are being squandered? As a rule, do other corporations exist without making a state- ment to their stockholders? — A. If the act of the Pure Oil Company in excluding Colonel Carter is justified, I do not see how other concerns can be censured for what they have done. THE INDEPENDENT OIL MOVEMENT HAS NOT REDUCED PRICES OF REFINED OIL. Q. (By Mr. Jenks.) What has been the effect of the independent oil movement upon the prices of refined petroleum to the consumers? You state that these vari- ous independent organizations that were compelled to go into a trust made no profits and declared no dividends, and that you regard the investment of that money as a practical waste, because they had been of no service to the oil pro- ducers? — A. Yes. Q. What has been the eifect of this independent movement on the prices of refined petroleum? — A. It has had no effect whatever. Q. You do not think it resulted in reducing the prices of petroleum at all? — A. None whatever: it only gave members of this ccniipany and the independent refiners in the creek regions the opportunity to get immensely wealthy. They are making money faster than evei- before. The producers are making a little more money than previously, to the extent of the premium which the producers will not pay the patrons, and the stockholders receive nothing for their investment. EFFECT OF THE MOVEMENT ON THK PRODUCERS. Q. Do you know how far the stockholders of these combinations are themselves producers? — A. A very large per emit are producers. Q. Do you know what proportion of the producers whose oil they are buying are themselves stockholders? — A. I do not. Q. Then you would say that the general result of this independent movement has been to increase the price of crude oil? — A. Only to n \'ery few, to persons interested in tluit line and connected with its service.' Q. To others, too? — A. To others, no: its effe<-t has not been felt to any extent anywhere. Q. Does it l)eiiefit all of those whom it reaches? — A. To that extent and by this means: It is a method of " robbing Peter to yay Paul." It is taking money out of the pipe line to pay tlie producer in the way of advanced prices for his oil; it ■ performs its service by piping oil for less tlian published rates or established rates, whatever they niaj' be. 1 See p. 44;J; Mr. PhiUips, p. .WS-tlOO. STANDARD OIL COMBINATIONS: BOYLE. 445 Q. What is the rate?— A. The pipage rate is understood to be 15 cents a barrel.' Now, when the preniinni has been as high as 9 cents a barrel, that wonld mean as much as 9 taken from 15, leaving the pipage charge 6 cents. EFFECT OP THE INDEPENDENT MOVEMENT ON KEPINERS. Q. I understood you to say, further, that this independent movement had resulted in making refiners in that region rich?— A. It did. Q. Will you explain how that was brought about?— A. If I could, I would be in the refining business myself. Q. You think it has not resulted in the lowering of the price of refined (jil?— A. No; they claim that their success has not resulted in lowering the price of refined oil, not in the region, at least, where we are. That oil which goes abroad is restricted in every State of the Union. Q. (By Mr. Phillips.) That is, both as to the Standard and to the others?- A. Yes; it is necessary liy reason of the laws of this country. CJ. Are not these companies now making money? — A. The refining companies? Q. The indepejident refining companies? Would not their stock be very desir- able at the present time? — A. The refiners' stock? Q. No; the stock of these various independent companies? — A. It would be if they managed on business principles. I believe there is money in piping oil if the business is run for the benefit of the lines, tor the plant itself. There must be money in it. _Q. Did they not establish the first pipe line to the seaboard to handle refined oil? — A. That cuts no figure. Warren, as we have shown here, piped refined oil a distance of 3 miles in 1865, and in tank cars they have taken refined oil from one point to the other. And what is a tank car but a pipe line on a limited scale? If you confine oil in an iron vessel, it makes no difference whether it is a con- tinuous pipe or in a closed tank and agitated .the result is the same. THE OPPOSITION MET BY THE NEW COMPANIES. Q. Would not these companies have gained a good deal more if they had not been opposed by combinations in New Jersey and could have gotten through to New York? Would not their profits have been much larger if they had had free pipage through to New York, as the Standard Oil Company had? — A. If there was only the one proposition, a person might answer that. Q. Have others the same right to go through to New York that the Standard Oil Company has? — A. Undoubtedly they have the right. Q. And is it fair or just that they should be prohibited from exercising that privilege of eqiiality? — A. Let me answer that by comparison in this way: I think it would be just as fair as for one of two producers bidding for land to outbid the other and take the land away from him. If it is unfair to prevent a pipe line from going into a market already occupied, it is unfair for one producer to com- pete for land and take it from another if he has. with his neighbor, superior wealth and ability to control it. Q. One is exercising the right of eminent domain? — A. And he is performing for that right an adequate service to the public. Q. Would you say, if one railroad could supply the whole marjsiet of New York, that all other railroads should be prohibited from going there? — A. If the money to construct those roads was to come from the passengers who weie exi^ected to patronize them and then to pay their fare, too, I shouM say yes. Q. Do you undertake to say, then, that these independent companies which the Standard is so anxious to control, and in which they have iiurchased stock which would seU to-day at a very large profit, are robbing tlie people or doing an injus- tice? — A. • ' Robbing " is a hard word, and I di > not care to use it in any connection. The fact remains that the money embarked in the enterprise is unremunerative. Q. You stated they were taking money from some persons and giving it to others? — A. That was only a comparison; just a remark. That is a very cnmmon expression: " Robbing Peter to pay Paul." Q. You have no direct knowledge of these people having done injustice to any of the stockholders, have you?— A. I have no knowledge that they have done full justice to the stockholders in returning them interest on their investment in the pipe lines. I have no knowledge of that kind. There are s:j,000,000 invested in that enterprise. Q. You have knowledge of the fact that they have been employing every honorable means to get through to the city of New York, and that they have 1 See Mr. Archbold, p. .553; Mr. Bogerg, p. 581. 446 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. lessened freight rates a very great deal by getting into New Jersey, have you not?— A. I have: yes. Q. (By Mr. Jenks.) You have said that yo a do not think the independent move- ment has reduced the price of refined oil. What has been the price of water-white oil tor the last few years, since the organization of the independent companies, as compared with what it was before?— A. I have no means of knowing; we do not have water- white oil in export. In the sale of water- white or any other class of oil there is a special contract, according to the district or location. Q. You have no recwing was the price of refined petroleum, per gallon, duty paid, at the close of each month during the year IsC)."): Gent.s.| Cents. September's . s.", ' March 39 83 October26 W , April 2(i id Novembpr80 8K May 31 _ '0 December 3s 93 January 2.") _ . _ 93 February 33 - . 93 June 3H 70 July 36 ._-. ™ AugustSO - 70 The following were the imports of petroleum, including coal oil, of which but little is now brought to market, the last four years: Barrels. Barrels. if^u-iao 33, 000 ' 1H63-64 49, 031 1863-63"! 30.000 lS(;4-C."i_. .__ 50,93.5 448 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The price of this article has been very low dxiring the entire season, but did not undergo much change. The supply has been larger than the previous year, as is shown by the statistics of the trade, there being an increase in the foregoing exports from New York alone of over 7.000,000 gallons. Previous to July, '1868, there was a tax of 10 cents per gallon on refined; since that time it has been free of that tax, so that in comparing the prices given this must be remembered. Q. Have you facilities for obtaining, conveniently, the prices of water-white oil at Pittsburg or New York, covering the same period as those of export oil?— A. Not any more than the commission itself. These figures. I should say in expla- nation, were obtained some years ago when I was making an in"vestigation into the movement of oil. The Cincinnati Chamber of Commerce seemed to be the only one that had given attention to it and kept a correct i ecord from 1860 to 1869. and up to the present time. (ii. You think that Cincinnati would be as fair a point as could be chosen in determining the price of water-white oil? — A. It is the only point at which a cor- rect record has been kept, a correct record of the prices of all c(^mmodities. Q. I understand you to say that the prices of water-white oil in these local markets do not vary with the prices of export oil? — A. I said it was a matter of special contract in the variotis markets where it was offered. I do not know that I can add to that because, in the various cities, the prices have varied according to the quality of the oil; but water- white, as a standard quality, is always water- white wherever it is offered; the elements that enter into that are transportation; it may cost more to sell oil in Ohio than it does at the ijoint of manufacture, if it is manufactured in Pittsburg. Q. Certainly. If we could find one standard market where they have kept a record of the prices of water-white oil from, say, the early seventies or sixties up to date, would that, in your judgment, show us fairly well what the effect of the combination has been upon the American consumer? — A. It undoubtedly would; it would show you the trend of prices — what the American consumer has been obliged to pay. Q. You think a record of that kind would be fair to all parties concerned? — A. Yes. Q. Fully as much so as the record of export prices? — A. Fully as much so as, the export prices, taking into consideration the difference in the quality of the oil. Q. From what you have said I infer that you believe that a great many elements come in to affect local prices that d(j not affect export prices. — A. Undoubtedly. Q. For example, home competition? — A. Well, and a better quality of oil; the higher the grade of oil the more the cost in manufacture, transportation, and other things besides competition. Q. But if we were to take some one market and keep a record, comparing prices there with the price of crude oil. you would consider that a fair test? — A. Yes; and I believe Cincinnati would be as fair a market as you could get. Q. (By Mr. Phillips.) Would that be a fair test if there was no competition in Cincinnati, and there was no other market? — A. Undoubtedly. Competition has very little effect in regulating prices through a long series of years. You take a series of thirty years and competition has had very little to do with it; it will go down to a stable price, and that must be a remunerative one for people to remain in the business. Q. Taking a period of thirty years, as you have suggested, do you suppose com- petition would appear there on the whole, as it would in, let us say. New York and Pittsburg? — A. I have no reason to doubt that it would. THE ESTABLISHMENT OF OIL EXCHANGES. Q. (By Mr. PABressing circumstance which affects the petroleum industry; And whereas the effect of our "shut in" of production for H months, while not as advantageous as we had hoped, has nevertheless put the price on a higher plane than that upon which it had previously rested, and, as we believe, has pre- vented the commodity from sinking to even lower prices than we had experience of in recent years, and we had, therefore, to limit the production by a moderate restraint of drilling, as demanded by the interests of the producers of petroleum until the stocks are reduced to an amount consistent with the healthy relation between supply and demand, and, as a result, the receipt of remunerative prices to the producers; Now, therefore, we, the undersigned, producers of petroleum, do hereby agree to and with each other that we will not drill any wells for the production of petroleum on any farm or tract of land owned by us, except along or adjacent to exterior boundary lines of our respective properties, to a greater extent, exclusive of boundary-line wells, than one producing well for each 20 acres and each frac- tional part of 20 acres: provided that additional wells may be drilled with the consent of the local assembly of the Producers' Protective Association for the dis- trict in which the particular property may be situated and of the general execu- tive board of said producers' association, or, in case such consent can not he obtained, upon tiie allowance of the arbitrators, or a majority of them, one to be chosen by the person or persons desiring to drill, one to be chosen by the local assembly of the Producers' Protective Association for the district in which such property is situated, and the third by the two so chosen. And we further respectively agree that all conveyances made by any of us of oil territory during the continuance of this contract shall be made expressly sub- ject to all the conditions of this agreement. This agi-eement shall continue in force until the 1st day of May, ISSK, but may be abrogated before that date by the votes of a majority of the general assembly of the Producers' Protective Association, and such general asseiiibly shall be con- vened to consider the question of abrogation upon the demand of one-third of the local assemblies of said association. .\TTBMPTS TO IMPROVE THE Cl INDITIOX OF THE BUSINESS IX l.SST AND 188S, We have the various movements known as shut-in or sliut-d(jwn movements for the lietterment of the oil ju-oducers from 18;i( up to 1887 and 1888, omitting that of 1884, which was only partially successful. I will read a few notes I have made on the subject for the purpose of connecting this association with suljsequent enterprises in which the producers' association started new pipe lines and refin- eries, the Pure Oil Company embrai-ing the whole movement. (Reading:) The shut-down mcjvement of 1887 and 1888, in which the Standard Oil Coni- pajiy cooperated with the pr(3ducers and did much to make the movement a suc- cess, was no doubt the most successful action ever inaugurated by the produi'ers. Having its in(^epti<)n among, some of the heavy operators in the Washington Oounty field, it extended over the whole region and embraced all but a very few of the cjperators. Its scope was wider and its effect greater than any similar movement. The mutuality of interest among all branches of the trade rendered its success certain. Thus we find that the producing, refining, land, and working interest all cooperated to make the movement a success and enhance the valiie of STANDARD OIL COMBINATIONS: BOYLE. 461 the product of the producer. The Taylorstown operators, controlling 0.372,1 acres of producing territory, early in June entered into an agreement to restrict pro- duction. At this period the reduction of stocks '\\'a.s going on quite rapidly, but the market was in the sixties, with the consumption 8.000 barrels a day over the production: hence the conditions were favorable for the inception of the move- ment. On August 3. at Bradford, there was a meeting of representative in-o- ducers at the invitation of H. L. Taylor, of Buffalo, at which time it was developed that the organization pending was so nearly completed as to insure a successful undertaking of the work mapped out, and the meeting decided to postpone action for a short time. About the same time the P. P. A. held a few secret meetings in Bradford in the interest of the shut down. The movement became the subject of much discussion in the newspapers, and its probable outcome was very thoroughly discussed. The sensational press got in its work on this movement early in the game, and among other things given publicity by the Cleveland Leader in connection with the shut-down movement was a series of propositions which implied that the sole object of the movement was a battle against the Standard Oil Conrpany, which allegations were promptly denied by Mr. Kirk. The Derrick criticised the action of one man in Butler County who was alleged to be hustling to get down all the holes he could while the preliminaries of the shut down were being arranged. In Butler County, in the Reibold pool, he had two wells doing 2,900 barrels a day. The Derrick made a couple of attempts to interview him on the subject of the shut down, but he maintained a strict silence upon the subject. Early in Sep- tember there were meetings of the P. P. A. at Bradford, and a conference of large producers at Pittsburg, which included D. O'Day, of the National Transit Company. The operations in Butler County attracted special attention, and a special to the Derrick from Butler asserted "that the operator was a shut-d(jwn man in name only. The leading producers, about the middle of September, had another conference at Pittsburg with officials t.f the Standard, presumably on matters connected with the shut-down movement. It was learned from Wash- ington County that McKeown and Willets. two of the largest operators in the field, had refused to have anything to do v.-ith the movement, contending against the shut-down movement as a means of bettering the conditions of the trade, which had been depressed from overprodiiction for 10 years. Some peisons asserted that the shut-down movement would have the effect of bringing in new producers, with the result of defeating the very object of the project. The dis- cussion in the 'Derrick of the shut-down movement covered a wide scope, and many diversified opinions as to how to better conditions were expressed, but the general trend of opinion was largely in favor of the shut down. The production from the three wells in the Riebold pool amounted then to 5,000 barrels daily, and on September 29 a meeting of the P.P. A. was held at Emlenton, at which mat- ters pertaining to the shut down were considered but not made public. At this same meeting and among the Emlenton producers it is said there was a decided change of sentiment toward the Standard Oil C(jnipany, it being asserted that but for the Standard the Pennsylvania oil would be selling at .")0 cents per barrel. On October 2 the 4 wells at Reibold were making .5.400 barrels a day. which might he called a pretty strong showing for a man working for the success of a shut-down movement. There is }io intention of stating that his actions were contrary to contract: evei'vthing was open and understood. At the middle of October, N. F. Clark, one of the leaders in the shut-doviii movement, stated that 80 per cent of the producers had joined the P. P. A. and vrn-e ready to get into the shut dov.^n : he also found that more than two-tliirds of the oil was produced by the small producers. During the month of October the executive committee of the P. P. A. made strong efforts to get all the producers of oil into line, but still the giishers continued to arrive on schedule time at Rei- bold, and on October 20 another was added to the list, making an aggregate pro- duction of 5 520 barrels from 6 wells. The first authentic news that the shut down would be a success came out October 2H. when it was learned that the movement would go into effect on November 1, and that its essential features were as follows: The shut down was to include the shutting m of not less than one-third of the production of the operators in the agreement, the cessation of drillin"- operations, and the general cooperation of the producing element. The Standard Oil Company entered into the agreement to help make it successfiil. The company set aside 6,000,000 barrels of oil. The profits upon .1.000,000 barrels of this that "is. the advance above 62 cents, they proposed to donate to the pro- ducers ' while the profits on the other 1 ,000,000 were to accrue to the oil-well work- ers thrown out of work by the shut in and shut down. This result Avas arrived at only after prolonged and energetic negotiation on the part of the producers, but 462 HEARINGS BEPOKE THE INDUSTRIAL COMMISSION. onoe all the elements of the business were combined it was practically assured that the movement would be successful. This looked like a one-sided proposition wherein the Standard was not likely to be much of a winner, but, that being the agreement brought home by the producers' committee, they returned to the region with the sole idea of organizing the producers and making a success of the move- ment. How well they succeeded in handling the question is best evidenced by the fact that there were then 14,000 producers, and that they succeeded in enlisting 85 per cent of the number into the movement. BUSINESS ASSOCIATIONS ORGANIZED BY THE PRODUCERS' PROTECTIVE ASSOCIATION That continued in effect until October 31 of the year following, both sides to the agreement faithfully carrying out every condition. The Producers' Protec- tive Association continued their organization, which at the start was secret. I think the restriction extended so far as not to permit the naming of any officer of the concern: anyone holding an office in the association was not allowed to be known by name outside of the organization itself. Altogether it was one of the closest corporations ever organized for business purposes. They continued to hold their meetings and discuss the conditions of the trade, which were not per- manently bettered by this shut-in movement, owing to very large developments at McDonald within two years of the termination of the shut-down agreement, where an enormous production took place in a very short time. While operations were progressing in McDonald, the Producers' Protective Association proposed to organize business associations fostered by their own association. They were instrumental in organizing at least three or four, of which the first was the Pro- ducers' Oil Company, Limited, which had a capital of $600,000. This went into business in Allegheny County, in the vicinity of the McDonald oil field, but on the edges of the field, and did not participate to any great extent in relieving the producers of the overproduction existing there. After a period in which no very considerable success was achieved, another company was organized, known aa the Producers and Refiners' Company, in which certain refiners, cooperating or combining with the associated producers of the Producers' Oil Company, sub- scribed 11250,000 additional capital, which was invested in pipe lines furnishing an outlet from the McDonald field, or the terminus of the Producers' Oil Company, Limited, to the refineries at various points in Pennsylvania. The next step in the movement was to combine these companies by a sale of one to the other. The Producers' Oil Company, capitalized at $600,000, was absorbed by the Pro- ducers and Refiners' Oil Company, capitalized at $350,000 ; in effect, the weak company took and assumed the property of the greater concern. From this time the Producers' Oil Company practically went out of existence, though I think the organization was maintained and all the property of the Producers' Oil Com- pany, Limited, was not disposed of at that time; some of it remained, and perhaps still remains. This proving unsatisfactory, another consolidation was made about 1894, by which the Producers and Refiners' Oil Company undertook to absorb the United States Pipe Line Company, a company organized with a capital of $1,000,000, with two systems of pipe lines, and according to the terms of the purchase, the stockholders of the United States Pipe Line Company — the only straight and real corporation connected with the whole concern, iDecause it is incorporated under the pipe-line act of Pennsylvania, and none of the others are Q. (By Mr. Philups.) (Interrupting.) The others were limited partnerships?— A. The others were limited partnerships. Q. Are you not mistaken about the two first companies undertaking to absorb the United States Pipe Line Companyv The United States Pipe Line Company was formed before the Producers and Refiners' Company, and they only worked in harmony with the United States Pipe Line Company at this time. Is not that correct?— A. I am giving this largely from memory, and I may be in error. I have a paper here describing the whole process, and it may be just the other way. It may be that the United States Pipe Line was absorbing the other con- cerns, but there was an absorption attempted.' Q. Are you quite certain there was at that time? 'Were they not simply mak- ing running rates and agreements?— A. I will proceed and then afterwards read the answer of J. J. Carter in a suit in equity. Here is a paper which recites the whole transaction. Q. (By Mr. Kennedy.) An official paper?— A. I do not believe it has a seal; it is a copy of the official paper. Q. (By Representative Livingston.) A certified copy '^— A. No. Q. (By Mr. Farquhar. ) Is there a statement to show where the original papers can be found?- A. Oh. yes; the original papers can be found. ' See p. '171. STANDARD OIL COMBINATIONS: — BOYLE 463 THE ORGANIZATION OF THE PURE OIL COMPANY. Q. Is there any verification of the correctness of this copy? — A. No; there is no verification of this copy, which is merely a copy of the petition to dissolve an injunction. Whatever the attempt vras — to consolidate, or combine, or absorb one of these pipe lines or the other at the time — it failed through the activity of one of their own stockholders, who went into court and prevented this consolida- tion. That being the case, another company was formed, known as the Pure Oil Company. The Pure Oil Company was formed on or about the 24th of January, 1895, at a meeting of producers at Butler. Subscriptions were received to the amount of about §50,000 toward the organization of what was called the Pure Oil Company. The stated purpose of this company was to market the products of the refineries and pipe lines. It was to be the commercial organization of the trust then in process of formation, and it has since been sought by a reorganiza- tion of that concern which took place about 1.S97 in New Jersey THE PURE OIL COMPANY CALLED A TRUST. Q. (By Mr. Phillips, interrupting.) Why do you call the Pure Oil Company a trust? Was not that a straight corporation like the Standard and others that have since organized? — A. I quote here from Mr. David Kirk, the first president. He calls it a trust, and it is so called here. It is cited as a trust agreement. Q. It was organized under the laws of New Jersey as a corporation? — A. Mr. Kirk calls it a trust. Q. Does Mr. Kirk's calling it a trust make it a trust? — A. I think the organiza- tion makes itself a trust by the aj)pointment of trustees for the conduct of the business. Q. It is only a voting trust, and have not voting trusts existed in all ages, in Europe as well as America? — A. I am not contending against the legality of the trust; it is merely a statement of fact based on information obtained from David Kirk. The reorganization took place at Taylor's Hotel in Jersey City in 1897, and the powers of the organization increased from that moment. They have attemipted to take in all the corporations combined with them, to combine into one concern. The attempt was made several times, as I understand it, to absorb all the old interests in which the Producers' Protective Association is concerned, and they are still attempting it with a very considerable show of success, as I am informed. (The witness then read Exhibit B, filed with a bill in equity in a suit entered by Mr, David Kirk, at Pittsburg, Pa. See below, page 464. ) Q. (By Mr. Phillips.) Did the McCalmont Oil Company have anything to do with this as a company?— A. Possibly David Kirk may have acted as trustee for the McCalmont Company; as president of the McCalmont Oil Company he may have been trustee of that company in some subscriptions of this stock; that is the only explanation possible at this time. Q. The agreement itself, then, shows that the trust to which you refer is a vot- ing trust for the election directors, does it not':'— A. It has a tendency to show that. I believe, if you will indulge me the time, we will accomplish more Q. (By Representative Livingston.) What is the point you wish to bring out?— A. I will get down to that by reading one clause and submitting the rest for your consideration. The clause I particularly wish to call your attention to is one that provides for the dissolution of the trust and the conditions under which it may be done: '■ Fourth. This agreement may be canceled, and the trust hereby created dis- solved only by the winding up of the Pure Oil Company, or by the consent, in writing, duly executed, of the equitable owners of four-fifths of the shares held in trust hereunder, and of fcjur-fifths of all the other shares of the company, after providing in full for the redemption or purchase at one hundred and ten dollars per share, in cash, of all the preferred and common shares of the company at the time outstanding. " ' ' , .„ ,. The purpose of this clause is in effect to make the trust perpetual; but it dis- solved the shares under that agreement, costing originally.?."), are compelled to be sold at §110. They agree in this to repurchase at 110 when the shares previously Q. (By Mr. Phillips). I think perhaps that is a mistake.— A. It is here. It is part of Mr. Kirk's Exhibit B. ^, ^ , , t, ^ Q (By Representative Livingston.) Do you mean to say that A and B, two merabers of the company, turn in SI 10 for their own stock or outstanding stock?— A. It states outstanding; it puts the redemption of all stock at 110, the original cost of the stock being 5. 1 See modified form on p. .011, footnote. 464 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Phillips.) Does not that mean 10 per cent? — A. I am only reading what it states. Q. Is that a certified copy? — A. Oh, no: it is a copy of the record in Allegheny County, in a snit entered by Mr. Kirk, the retiring president. PKESENT STATUS OF THE PURE OIL COMPAlSfY. Q. (By Representative Livingston.) What is the condition of that company now? — A. It is in existence and largely in control of this three-million corpora- tion. There is an authorized capital of ten million with possibly $400,000 paid in. It then substantially controls the other combinations, in which upwards of three millions are invested. ' Q. (By Mr. Kennedy.) What is the voting power of the five trustees? — A. I have stated that it is the power to vote all the stock represented in the trust. Q. Not for the transaction of other business? — A. For the election of directors. It is stated in the second clause: "At all meetings of the company for the election of directors or for any other purpose, to cast the entire number of votes which, as holders of said shares, they would be entitled to cast.'" Q. That is a true copy of the original? — A. It is a true copy, and the original may be obtained in the court at Pittsburg. Q. (By Mr. Smyth.) Your opinion is that the company controls all these com- panies? — A. Substantially: it has come to be known as the Pure Oil movement. Q. (By Mr. Phillips.) Were there not more than five trustees? — A. It is neces- sary to say that there have been some changes in the organization since then. At a meeting not long ago in New Jersey, I am informed, an attempt was made to reconstruct the by-laws, and in this they may have changed the voting power. This represents the condition of affairs in 189?. I submit the whole: Exhibit V. Trust agreement, and by-laivs and rules and regulations of the Pure Oil Trust. EXHIBIT B. THE TRUST AGREEMENT IN FULL. This agreement, made and entered into by the Pure Oil Company, a corporation organized and existing under the laws of the State of New Jersey; David Kirk, Jerome B. Akin, Marcus L. Lockwood, Walter A.Dennison, Charles H. Duncan, Theodore B. Westgate, Wm. L. Curtis, James W. Lee, and David Kirk, trustees for the McCalmont Oil Company, severally subscribers to and owners of the cap- ital stock of the said Pure Oil Company, and Thomas W. Phillips, Lewis Emery, jr., Kufus Scott. Clarence Walker, Louis Walz, James W. Lee, David Kirk. Marcus L. Lockwood. Jerome B. Akin. Charles H. Duncan, Hugh King, Michael Murphy, Adolphus A. Hoch, Ferdinand Reiber, and Walter A. Dennison, parties mutually agreed upon to exercise the trusts created hereiTuder: Witnessetli, That whereas the Pure <,)il Company is formed for the purpose of engaging in directly and of aiding other companies and parties engaged in the production, transportation, storage, manufacture, and sale of crude petroleum and its products, and in any business incident thereto, and it is desired to enlist therein the cooperation of othei' parties, and to procure capital to be invested in the shares of its caiiital stock, and in such other ways as may be desirable, which investments are to be scjlicited from xiarties not now interested in the company: and Whereas it is advisable, equitable, essential, and intended for their safety and advantage of all interests that the control of the said Pure Oil Company shall be secured permanently, as to prevent and render imposi-dble at all times the diversion of its resources and business from their intended use and courses, in opposition to monfijjoly in the business, and to ]iermanently protect and maintain wliat are known as the " independent interests " in the petroleum industry, and to maintain the policy agreed on for conducting the business of the comiiany in the interest and for thp protection of all i-ights in the c(3mpany. created by mutual agreement of shareholders, or by operation of law: theretore the said parties hereto, in con- sideration of the sum of one dollar by each to the other jiaid, the receipt of which is hei-f^jy acknowledged by each, and in further consideriition of the mutual ben- efits received, to be rei-eived, or expected from the agreements, covenants, and trusts hereinafter cont:iine miles of 4-inch pipe, and 32 miles of 6-inch pipe, a total of 153 miles of pipe, or over 11 miles of pipe for every square mile of territory, and all this merely to carry the product from the wells to the mains of the company, which had been previotisly laid from the Washington field to the grand depots at Olean. in New York, on the trunk line to New York, and to Colegrove. connecting with the trunk line to Philadelphia. Neither do these figures include 70 miles of 6-incli pipe from Greggs station to Bear Creek, as an additional outlet deemed necessary, owi-ng to the possibility that the increasing prodiiction might become greater than the capacity of these two main lines to carry. " The field itself is but about a year old, and all this work, or by far the greater part of it, was done between the middle of July and the beginniiig of November, 1891. The plant is completed, with the exception of laying such lines as may be necessary to connect new wells as they come in: the pipe-line business has assumed its usual routine under the facilities provided by the gigantic system established: ami while the output of the field is still large, it is handled without the slightest ripple of excitement. Not only the iron tankage with a capacity of 3,000,000 bar- rels of oil stand there, but the mighty piimps at the statiSome time after the close of that move- ment one of the persons connected with it made a demand upon the Union Pipe Line for a rebate and gave his reasons, which will appear from the following correspondence. I am reading now from a letter head of the Bear Creek Refining Company, Limited: re:? ATE. B. B. Campbell, chairman. R. P. Crawford, treasurer. Bear Creek Refining Company, Limited, refiners of petroleum. City office, corner Etna and Eleventh streets. Pittsburg. Pa., October 22, 1884. The following correspondence demanding rebates on pipage passed between R. P. Crawford, treasurer of the Bear Creek Oil Refining Company, and Mr.O.P. Swisher, of the United Pipe Lines Company. Then the correspondence was trans- ferred from Mr. Swisher to Mr. Henry McSweeney, solicitor for the United Pipe Line: Letter No. 1. Under the above letter head, with a Pittsburg date line, on the date above mentioned, Mr. Crawford writes: Mr. O. P. Swisher. Dear Sir: I am informed that your former attorney, Mr. Hancock, has been superseded by Mr. McSweeney. I wish the latter to get the inclosed. If not addressed properly, please see that it gets in the proper hands. Yours, sincerely, R. P. Crawford. Letter No. 3, written under the letter head of the Bear Creek Refining Com- pany, on even date with the above. Mr. Crawford writes: H. McSweeney, Esq. Sir: I met Mr. J. R. Campbell three weeks ago on a train to Oil City. I told him I was anxious to get an old unsettled matter fixed upon a matter of over- charge of pipage on oil from some small producing wells near the mouth of Clarion River. Mr. Campbell told me to write you on the subject. In the days of the old Mutual Line (G. R. Hanns, manager) we found oil on a lease obtained from Hon. Thomas Mellon and R. Galey, sr., about one mile from the mouth of Clarion River. We had completed our arrangements to lay our own pipe lines to the railroad. Mr. Harms came to see me, and he agreed to 15 cents pipage for all the oil from the lease above referred to, but not to extend to any other leases. The pipage at that time was settled monthly. I have the papers to show such settlement. The Union, Empire, United, and National Transit have, in suc- cession, fallen heir to the arrangement. It has been investigated several times — by Mr. Hatch for and in behalf of the Union (afterwards the Empire) Line, by the pipe lines when operated in the pooling arrangement, and by Mr. Waller in behalf of the United, after the purchase by the latter of the Empire Line. The wells are called Mellon (or Andes) and Brett. The last paid by the United was, up to and including the runs for April, 1879, as follows: April runs, Mellon, 903.66 barrels, at 5 cents $45. 18 April runs, Brett, 133.01 barrels, at 5 cents 6. 65 The charge of 20 cents pipage being in excess, we claim an allowance of 5 cents per Ijarrel on all oil runs since that date, and to continue as long as we produce from that particular territi iry , The wells have run down to a small business, but small as the claim may appear I must get it settled, either amicably or by law I much prefer the former, but one of my partners is a lawyer (B. B. Campbell), and, like all lawyers, is ready for the job. I write this in a spirit of kindness and fairness, as one business man should to another, and trust it will receive your prompt and careful consideration. R. P. Crawford, Trustee. STANDARD OIL COMBINATIONS: BOYLE. 477 To wliicli Mr. McSweeney makes reply under date of Oil City, October 23, 1884. R. P. Crawford, Esq., Pittsburg. Pa. Dear Sir: Your letter of the 3'Jd instant claiming overcharge of pipage is received. Please send me copies of all papers upon vifhich you base your claim, as well as a full and specific statement of the amount alleged to be due yuu, etc. As soon as I hear from you I will carefully examine your claim and ad-sise you as to the result. Tours, truly, H. McSweexey. Letter No. 4, written on the letter head of the Bear Creek Refining Company, Limited: Pittsburg, Pa., November U, ISS4. Mr. H. McSweeney, Dear Sir: I answer yours of 33d ultimo as follows: I inclose sheets marked Nos. 1 and 3, sho^dng runs from Mellon or Andes wells (two numbers) , and from Brett wells, upon which there is due 5 cents per barrel: Andes or Mellon, 25,199.65 ban-els, at 5 cents §1 , 359. 98 Brett, 3,061.84 barrels, at 5 cents ^ 103.09 Total 1,863.07 I also inclose sheet No. 4, showing a few runs from each Mellon and Brett, running backward of runs upon which the 5 cents per barrel overcharge was paid, to give you a start toward tracing it. As to the contract, I refer you to Charles P. Hatch, Roanoke, Roanoke County, Va.,, formerly manager of the Empire Pipe Line, also John T. Galey, who was stockholder in the contemplated pipe line from these wells. Thomas F. Galey, Pollock post-office. Clarion County, Pa., can give John's address. I do not know where Gr. R. Harms is at present. The last 1 heard from him he was at Cincinnati, Ohio. There is no doubt about this claim being a just one. It is just what Mr. Hatch called it, " an overcharge," and knovsring all about it, I say the same thing. I think Mr. O. P. Swisher could tell you something about it, if he will be kind enough to freshen his memory. Hoping to hear from you soon, I am, yours, respectfully, R. P. Crawford, Superintendent. Letter No. 5, on letter head of Bear Creek Refining Company, Limited: Pn:TSBVs.Q, Pa., November i5, 18S4: H. McSweeney. Dear Sir: In making up the account for overcharge pipage, which I mailed to you yesterday, I left out the old Galey well, which was included in the con- tract. It is a very small producer, and if the others are settled I will let it go. I sold it last spring and have nothing to do with it now. I wish to say to you frankly that we made a mistake agreeing to 15 cents per barrel pipage from those regions, as we should have built the line, which would have been but a fraction over 1 mile, and pumped our oil to the railroad at less than 5 cents per barrel. But the contract was made, coinplied with for years, and now I only ask for compliance and continuance of same. Respectfully, R. P. Crawford, Superintendent. Letter No. 6, on letter head of the Norfolk and Western Railway Company, Charles F. Hatch, general freight agent: Roanoke, Roanoke County, Va., November ?4, ISS4. H. McSweeney, Esq., Solicitor National Transit Company, Oil Citij. Veuango County, Pa. Dear Sib: I have your favor of 20th, referring to the matter of the claim of R. P Crawford against the National Transit Company on account of alleged overcharge on pipage of oil produced from wells drilled on lands leased from Hon. Thomas Mellon and Robert Galey, on Clarion River, about 1 mile from the When the Empire Transportation Company purchased the Mutual Pipe Line in 1873, we found among others was a contract, entered into by Messrs. Martin 478 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and Harms, owners of the Mutnal Pipe Line, and R. P. Crawford and others npon the subject mentioned, by which the Mutual Pipe Line agreed to transport the oil from the wells mentioned at a rate of 15 cents per barrel. This ag'i eement was. an oral one and there was no written agreement embodying it. but the facts were conceded upon the representation of Mr. Crawford, as well as Mr. Harms, representing the respective interests. Following this the Mutual Pipe Line and its successor, the Union Pipe Company, continued to transport the oil mentioned at the 15-cent rate. The Union Pipe Company was the name given to the pipe-line interests m the lower country belonging to the Empire Transpor- tation Company. "When the Empire Transportation Company sold its pipe-line property in 1877, all papers and agreements were turned over to the representatives of the Standard Oil Company, or the United Pipe Lines, and, if my recollection serves me right, I gave their representative a statement showing the special con- tracts and rates for the transportation of oil, among which, I think, was the one to which you refer. There is no doubt that the agreement referred to was made between Mr. Craw- ford and Messrs. Martin and Harms, and that it was fully observed, as they owned the pipe line, and that this oral agreement was fully respected by their successors up to the time of the sale of the pipe interests of the Empire Transportation Com- pany in 1877. The reason for this contest rests upon the fact that, at the time Messrs. Martin and Harms had built their pipe lines, the parties owning the wells on the Clarion River, mentioned above, projected the construction of a short line ■from the wells to the railroad, and the agreement entered into, establishing a 15- cent rate, was a compromise under which Mr. Crawford and others abandoned their project of constructing the Clarion line. Yours, very truly, Charles P. Hatch. Letter No. 7, dated Oil City, November 20, 1884: R. P. Ckawfobd, Esq. Dear Sir: Your favor of the 14th instant, in relation to the alleged overcharge of pipage, was duly received. I will investigate the matter and advise you of the course this company will pursue as early as possible. Yours, truly, H. McSweeney. Letter No. 8, on letter head Standard Oil Company, 44 Broadway, S. C. T. Dodd solicitor, dated New York, September ]5. 1884: H. McSweeney. Esq., Oil City, Pa. Dear Sir: About the year 1879 R. P. Crawford, B. B. Campbell, and others caused a quo warranto to be filed against the United Pipe Lines, asking for a for- feiture of its charter upon this ground, among others, that it had made discrimi- nations in its pipage charges. About the same time actions were brought in the supreme court of the State against the Standard Oil Company and the United Pipe Lines and various railroads, the biirden of the complaint in each case being discrimination. A criminal action was begun in Clarion County against J. J. Vandergrift, J. D. Rockefeller, and others upon the charge that they had con- spired with the railroads to give and receive discriminations in freight. B. P. Crawford was a leading man in all these proceedings. When I investigated the facts, so far as the United Pipe Lines were concerned, I discovered that the only discrimination of which it had been guilty was in reference to several contracts which it had inherited, one of which was the contract to which you refer, between R. P. Crawford, or the Bear Creek Oil Company, and the Mutual Pipe Line Company. The parties v/ho were making all this fuss about the discrimina- tions were the only parties receiving any benefit from the discrimination. They claimed that t]ie discrimination was not only contrary to public policy but was absolutely criminal. I agreed with them so far as the public policy was con- cerned, and I directed the United Pipe Lines to repudiate all such contracts. R. P. Crawford applied to me frequently in relation to this matter, and I always gave him the same reply, that we would charge the same rate of pipage to every man, and would recognize no contracts whatever for a less rate. I do not think that we ought to depart from this line of policy, and particularly not in favor of R. P. Crawford. I would be glad to have him bring suit. If such contracts are good in law I would like to have it so established at the suit of R. P. Crawford or B. B. Campbell, the parties who so few years ago were endeavoring to put us in the penitentiary for the very thing for from which they now claim the benefit. Yours, truly, S. C. T. Dodd. STANDARD OIL COMBINATIONS: BOYLE. 479 Letter No. 9, dated Oil City, Pa., December 17, 1884: R. P. Crawford, Esq., Plttdmrg. Pa. Dear Sir: After a careful consideration of tlie rdatter I have decided that this company must decline to recognize the claim made by yon < m account of alleged overcharges of pipage. Yours, truly, H. McSweeney. SoUcite Line. PREMIUMS AND REBATES COMPARED. Q. What is the difference between putting a premium on a given field when the oil is sold and allowing a rebate to another? Was that done to evade the law? — A. I think I have already given my view of tlie qufstion of premiums. I have stated that they are of the nature of a bid when there is competition for a particular grade of oil.' Q. You do not know of your own knowledge, then, of any premiums being paid where the oil was not any better in one field than another? — A. Oh, as to the quality of the oil I am not competent to speak. I am a producer only in a very small way, and I do not care to testify as to the quality of the oil: but I know that the practice of paying a premium was at one time general over the whole region. Q. (By Mr. Smyth.) Who paid those premiums? — A. The purchasers of the oil. Q. It was the custom of the trade at that time? — A. Yes; anyone buying oil was obliged to pay a xremium. Q. (By Mr. Phillips.) Did the National Transit Company or the Standard pur- chasing agency pay this premium on all credit balances? Have they not made it a rule to buy all credit balances at the market value, whatever it was, on the' exchange? — A. I think that rule was abandoned in 1895. Q. Well, for a great many years previous to that it was the custom? — A. Pre- vious to 1895 they did buy at the ruling price of the exchange. price of crude oil DETERMINED BY THE PRICE OF REFINED. Q. Now, they fixed the price themselves, but the time to which we alluded there was this great discrimination? — A. If I am expected to answer as to my under- standing of the point of their fixing the price. I will say that I do not understand that they fixed the price. The price was fixed by demand, the price of crude oil being reflected in the price of refined. Q. Who reflects both the price of crude and refined? — A. The consumer makes the price. He is the man who states what he will pay. Q. (By Mr. Smyth.) You stated that it was largely caused by the export demand? — A. Yes; wherever the consumer is. Q. In your judgment the price is fixed by the foreign demand? — A. Yes. Q. (By Mr. Phillips.) Then, when the Standard Oil Company marks refined oil up 10, 15, or 20 points, that is fixed by the consumer, is it?— A. My reply was to a different question' entirely. I think it is taking advantage of a witness to put it in that way. I have not testified on that branch of the question. Q. I do not wish to take any advantage of you.— A. I stated a little while ago that in my opinion the premium is the result of a bid for oil where there is a demand. In districts where there is a demand for oil a premium is usually placed on it just as a premium is placed on leases where there is a demand for land. The producer is carrying out the same idea in competition. Q. For 15 or 20 years past has there been any special demand by outside refiners? Have not the Standard Oil Company and the National Transit C!om- pany handled the great bulk of it?— A. You have just mentioned a great line in the Washington field, the Western and Atlantic: that was a demand. It brought capital in large quantities. It employed several millions of dollars. PRICE OF OIL DETERMINED BY THE DEMAND AND SUPPLY'. Q. (By Mr. Smyth.) Do you think that the fluctuation in the market price of oil is caused by the demand for oil, or is it the result of manipulation on the part of the refiners?— A. It is unquestionably the demand for oil. Q. A larger demand for oil, in your judgment, causes an advance in prices?— A Yes Q. And when the demand slackens the production decreases?— A. The supply 1 See pp. 57b, 577, 5M2. 480 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and demand regulate the price. In the documents which I read this morning the complaint of the producers, from the first movements down, has been over- production, and it has been generally admitted that the piice is determined by supply and demand. Q. (By Mr. Phillips.) Has that law worked well in the case of the Standard Oil Corapany? Have their profits gone down on account of overproduction? Has the business not been continually profitable to them, regardless of this law of sup- ply and demand? Do you know any one year, of your own knowledge, in which they have lost money? — A. I know nothing about their commercial business at all. Q. (By Mr. Smyth.) I do not suppose they would admit it. — A. I do not sup- pose anybody would. Q. (By Mr. Farquhar.) It would simply be a matter of rumor? — A. Yes, Q. Have you, of your own knowledge, ever known of a siiigle statement issued, giving away their business to anybody? — A. If it were generally-known that any company was losing money its stocks would tumble very rapidly. Q. Have you ever known of any statement being given out by the Standard under any of the three organizations in which they have been? — A. I never have. THE VALUE OF THE STOCK OF THE STANDARD OIL COMPANY. Q. (By Mr. Phillips.) What was the capital stock of the Standard Oil Com- pany 6 or 10 years ago? Was it moi'e or less than $100,000,000? — A. I think a little less. Q. How much less? — A. Three or four millions, possibly.' Q. Do you know the highest point or about the highest point that stock evei reached on the market? — A. I ha^'e heard it stated that it was very close to 500. Q. Five hundred millions of dollars? — A. Yes. Q. Then the law of supply and demand has not affected them very materially in a great many years? — A. Is that for the purpose of showing profits in their business? Q. I presume that the stock would not be there unless it was earning that; it would not reach that pi-ice without having the earning capacity. — A. I might say in the same connection that opposition companies show even a greater increase in values. The stock of the Tidewater Pipe Line Company is quoted at from 1,000 to 2,000, I think. Q. (By Mr. Smyth.) Will you give us the particulars there? What is the capi- tal stock?— A. The capital is $10,000,000. Q. What is the market value? — A. Two thousand. Q. (By Mr. Phillips.) Is not that absolutely under the control of the Standard Oil Company? — A. No. Q. Have they not running rates or agreements with the Standard Oil Com- pany? — A. There may be agreements, but it is controlled by themselves. Q. Are they not limited as to the amount of oil shipped through their lines? — A. By agreements — possibly there are agreements there.' Q. Without an agreement with the Standard have you any idea, from your knowledge of the business, that the stock would have gone to that price? — A. Well, that involves an opinion that I do not care to express. I have no knowledge on the subject. SUITS against THE PENNSYLVANIA TRANSPORTATION COMPANY. Q. (By Mr. Kennedy.) You stated yesterday that you knew of one particular pipe line that had been sued on account of misrepresentation in regard to the quantity of oil on hand. Will you now state the name of that pipe line and the circumstances surrounding that suit? Q. (By Mr. Phillips.) And the date of it?— A. The pipe line was the Pennsyl- vania Transportation Company, and it was some time in the summer of 1876. The suit was brought in connection with the gauging movement, in which false reports had been made about the quantity of oil in the storage tanks, a discrepancy of some 50,000 barrels. The examination of the gavigiug tanks was a public one. It was a test or an examination of the integrity of th(> pipe lines at the time, and all lines were examined by agreement of the oil exchanges. A statement was issued by the gangers of the Pennsylvania Transportation Company that it had 50,000 barrels in excess of the actual quantity on hand, making a misrepresenta- tion to that extent to the trade. Suits were entered against the gangers, involving the president of the line and the superintendent. Criminal action was brought, I think, in Kittanning, but the case was never tried. But it was common in those days, the early pipe-line days, under the wildcat pipe-line systems, for pipe lines 1 See Mr, Emery, p. 630; Mr. Rice, p. 738. STANDARD OIL COMBINATIONS: BOYLE. 481 to be short. Subsequently to 1874, when the pipe-line law, requiring the publish- ing of statements of the condition of the line and its responsibility, went into effect, a great number of them were caught. One was the Atlantic Pipe Line which was found short 6,000 barrels on one occasion. Q. (By Mr. Kennedy. ) Do you know of any such shortages in recent times? — A. No; there have been no such shortages. There have been suspected shortages. There have been several gauge movements organized by the oil exchanges to verify the statements of the National Transit Company. There was one very prominent one in 1884, when the stocks amounted to nearly 40,000,000 barrels. An examination of the thousands of tanks in which this oil was stored in various parts of the region proved the correctness of their statement. The report of the gaugers was accepted by the various oil exchanges, and the public mind quieted as to the rumors of shortage. THE CAPACITY OF THE NATIONAL TRANSIT PIPE LINE. Q. (By Mr. Phillips.) Have you any knowledge of what it requires to fill the National Transit Line, and of the residuum in the bottom of the tanks which would not be called merchantable oil? — A. No. My knowledge of that would be hearsay and estimation altogether. I doubt if that experiment has been con- ducted. There have been estimates based on the capacity of the line.' Q. Would it take three million or four million? — A. I laave heard it estimated higher than that. Q. Higher than four million? — A. I have heard the quantity required to fill the line estimated at more than four million barrels.' Q. Do you know about how much oil was in the United Pipe Lines when oil took such a sudden advance, about two or three years ago? — A. Well, I think the capacity of that line was fully represented in transit. Q. Do you know about how much oil they had on hand at that time? — A. We ought to be able to show it to you. Q. We should be very much obliged for that information for about April, 189.5.— A. The amount of the stock in April, 1895, was 4,545,784 barrels. Q. Do you know how many certificates of the Standard were outstanding at that time? — A. I can not tell that. Q. Do you know the amounts that were on hand at that time belonging to other people? — ^A. I can not state that. Only the monthly pipe-line report will show that.' Q. Have you not the pipe-line report there for that month? — A. I am reading from the stocks. This book runs by shipments. Q. Does it not show the credit balance for each month? — A. I do not think so. Q. Are not the certificates shown? — A. I think not; simply runs, shipments, and stocks. Q. Well, you stated that you have heard it estimated at between four and five million barrels. Could that and the indifferent oil in the bottom of the tanks be delivered to the purchaser, if there were a purchaser?— A. If all production were stopped at a given hour and everything entirely shut off they would probably not be able to continue operation beyond a day or two at the outside; but the pro- duction at this period was upward of 85,000 barrels a day, and that going con- stantly into the line equaled the shipments required to meet the demands of the trade. Q. To meet the demands?— A. That going into the line constantly, day by day, met the demands of the trade. SHORTAGES IN PIPE LINES. Q. Did the Standard own all that went in day by day at that time?— A. As I stated before, we have no means of showing that except by the statement pub- hshed everv month. To return to Mr. Kennedy's question, I will say that reports of this kind were not at all infrequent in the days of wildcat pipe Imes, but they were not alarming to the trade when maile. It was a condition that was met with anywhere, but it shows at the same time that the pipe hues then ran very close to shore. They used oil wherever they had it and expected to make it up in the future. A report of the Atlantic Pipe Line was posted in TitusviUe, March 17, and quoted bv the Oil City Derrick, March 18, 1N76, under the head of " Titus- viUe Doings. Pipe Line Returns." (Reading;) . From our special reporter. TitusviUe, March 17. The Atlantic Pipe Line, with headquarters at St. Petersburg, and no connection with the associated lines, makes substantially the subjoined report in round numbers. It will be seen that ' See pp. .583, .584. 482 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. a shortage of 6,000 barrels appears, the actual loss in handling over and above the 2 per cent deducted for this cause by each line in the regions.' This, however, is amply covered by the purchase from reliable parties of 15,000 barrels, paid for and ready for delivery when required . Notwithstanding the very large percentage of certificates in proportion to the total stocks, the line is in the most prosperous condition, and by the 1st of May is expected to be entirely free of debt, with the whole cost of construction fully liixuidated. During February the receipts were above the usual average, footing up to 55.000 barrels. The statement for the month is as follows; Barrels. Total amount of crude oil in the pipes and tanks of the company, February 29,1876 84,045 Total amount of crude oil for which the company was liable on the 29th of February, 1876 90,000 Represented by certificates . . - - 78, 000 Represented by credit balance 13, 000 Purchased from re'lialjle parties and paid for oil to be new from the wells- 15, 000 Total amount of crude received during the month 55, 500 Then follows a line of figui'es showing that there was an existing shortage at that time of about 6,000 barrels on less than 3,000 barrels a day of biisiness. And that was a very common experience in the days of wild-cat pipe lines. ••IMMEDIATE SHIPMENT "' EXPLAINED. Q. (By Mr. Phillips.) Have you anything else to say? — A. There are other points of interest upon which the public mind has been befogged that I should like to discuss. The question of premiums has already been discussed. Now there is another one which occured during the period of the Bradford develop- ment that created a great deal of discussion, and that was immediate shipment. Q. (By Mr. Smyth.) What was that? — A. Immediate shipment. Q. Immediate? — A. An order known as " immediate shipment. " Oil was pro- duced so rapidly at one period in the Bradford field that the tankage system of all the pipe lines, as well as the private tankage of the country, was insufiScient to take care of it; and the clamor to have their oil cared for compelled the pipe lines to issue an order for immediate shipment. That is, they would take oil for immediate shipment, and then the purchaser might come into the market owning tankage and having cars to ship his oil to market, and would be able to purchase it at a lower price than the regular prices offered in the oil exchanges. That was called an immediate shipment order. And the point upon which the public mind was befogged at this time, is the supposition that it was the only time when immediate shipment ever went into effect. The first immediate shipment went into effect in the fall of 1873, following the 30-day shut down, or very close upon the heels of the 30-day shut down. Epizootic, which was then a new disease among horses in our region, was epidemic, and there was a compulsory shut down of almost 30 days more foUo'^A'ing the shut di.iwii by agreement. It was during this period that the Empire Pipe Line established the order of immediate ship- ment. The field gangers were instructed by orders from the general of&ce at Parkers Landing what oil to ship and the quantity, regardless of the practice customary at the time; the office directed the quality, the quantity, and the time the oil should be taken, precisely as was done 6 years later in the Bradford field and also in Butler County. V.'HY 3.000,000 BARRELS OF OIL WAS SET APART FOR THE BENEFIT OP LABOR BY THE STANDARD. Q. (By Mr. Kennedy.) You spoke yesterday about several million barrels of oil having been set apart by the Standard ( )il Company and the producers for the benefit of the drillers, I lii'lieve?— A. For benefit of the oil-well workers, the drillers and tool dressers, etc. Q. Was that the natural result of a philanthropic impulse on the part of the Standard Oil Company and the producci's. or was it for the purpose of keeping those workers from engaging in work in other fields and developing them? A. Well, I might say that both motives suggested in your (piestion operated. The purpose was to do justice to labor on the one hand, and give it an inducement Q. (By Mr. Phillips.) And to have cooperation on the other? A. Yes, for their cooperation. Q. (By Mr. Kennedy.) Tliere was an idea though of keeping them out of the other fields? A. Oh, yes; that was the central idea. " See p. 3.54. STANDARD OIL COMBINATIONS: BOYLE. 483 Q. That was the central idea? — A. Yes, because the practical men can always obtain the necessary capital where there is any inducement for the drilling of wells. Q. That, rather than philanthropy, was the motive? — A. The idea was to prevent labor engaging in other employment to their detriment. Bat I will say this for the producers in the oil regions, that labor is nowhere better oared for than it is there, or more loyal to the producers; that is true of both the producers and the Standard. Labor has no kick there. Q. Are they organized? — A. Yes, there is a well drillers' organization. I believe it is in existence, but I do not think they hold meetings very often. Q. (By Mr. Phillips.) Was it not generally stated that it would be a great injustice to labor to shut down for a period of a year without any compensation, leaving them out of work? — A. That was stated; but I will say furthermore that it was the custom in previous shut downs to take care of labor. Q. (By Mr. Kennedy.) Your testimony is that the central idea was to keep these men from engaging in the work of developing wells elsewhere? — A. Well, if placed upon their own resources without the means of livelihood, nothing would be left but to engage in the first movement that offered. The laborers shared in this entire movement, as a matter of justice to labor, I think, as much as any- thing else. That is the view that I have always taken. NUMBER OF HEN AFFECTED AND THEIB WAGES. Q. (By Mr. Ratchford.) Are we to understand that labor received compensa- tion during the period that it was thrown into idleness by the shut down?— A. They received compensation, yes. Q. Equal to their wages? — A. Well. I shall have to answer that by an explanation. The labor in the oil country is for the most part contract labor. While the drill- ers receive so much per day, the competition is so great that they are rushed with their work. The aim is to drill a well in as short a period as possible. The inter- val between wells is often extended, so that it is very difficult to arrive at any estimate of what the drillers' year would be. It might be estimated at 200 days, and wages at the prevailing prices for first-class men at about si ,000 a year. Q. (By Mr. Phillips.) At that period it was about ijS to §3.50? — A. Yes. Q. Ahd when it closed it was advanced to .S4..50? — A. An advance took place. Q. (By Mr. Ratchford.) Are you prepared to state how much they got, what the average pay offered them was?— A. I believe it will appear in the testimony of the secretary of the Well Drillers" Union, in connection with the report of the committee of CongTess in 1888. That subject is fully gone into there, and I believe some figures are to be found in that report. Q. Will you state the number of men involved?— A. The number of men, as stated in that report, was, I think , about 3,000. I think it was more than 2,000. The testimony of Henry Webster will throw some light on that question. Q. (By Mr. Kennedy.) It is so extraordinary for corporations to care for the interest of workmen in this way that I should like to have a better understand- ing in regard to it. You say that the motive of philanthropy on the part of the Standard and the producers was one consideration and that keeping the men out of work in other fields was another consideration. I should like to ask you which you consider overbalanced the other, the matter of philanthropy or the matter of self-interest on the part of the oil interests?— A. Inasmuch as it was a business arrangement, I think that the business consideration had a great deal to do with it. It was purely a business consideration, and you might call it a sel- fish one in that respect and to that extent. Q. (By Mr. Farquhar.) Have not the parties taken credit for sympathy and philanthropy in granting the terms that they proposed to the drillers?— A. Oh, yes; there is some credit taken in that way. labor organizations not prominent in the oil industry. Q. (By Mr. Kennedy.) Do the Standard Oil Company and the independent companies look -nath favor upon labor organizations?— A. So far as I am informed on the subject, I believe they do, although so far as labor organizations apply to the oil industry, we have very little of it. It is a matter ot individual contract, and the wage is dependent usually upon the skill of the operator. For that reason we have very little of the union of labor there. The question ot uniting enters less, perhaps in the oil industry than any other, because all meii are not placed exactly upon th4 same plane. Now, in drilling, you can take a firm employing a dozen drillers and half a dozen may receive 50 cents a day more than the other halt. It 484 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. is a matter of skill, but when it comes to the operation of lifting oil, the wage is pretty generally uniform on that. The pumpers receive uniformly from $40 to Sijo a month. Q. (By Mr. Clarke.) You have stated that, when there was a curtailment of production, through a cessation of drilling new wells, labor was the one interest which suffered? — A. In that connection, yes. Q. Do you mean the labor that would have otherwise been employed in drilling new wells? — A. In drilling new wells. Q. Or all the labor in the oil industry? — A. I mean to say it was the labor employed in drilling 800 fewer wells than were drilled the year previous. In that connection I said there were yoo fewer wells drilled during the year 1888 than there were the year previous. The labor suffered to the extent of the wage involved in drilling 800 wells. Q. (By Mr. Phillips. ) Less what they received in the sale of the oil? — A. In the sale of oil? Q. I believe you said yesterday that they received more than the producer did in the way of profit? — A. Well, it was my impression that they received consider- able m:ore; their oil sold at a higher rate; it was sold at different times. Q. (By Mr. Clarke.) If then, that curtailment was for the interest of the oil producers, it benefited certain portions of labor as well as injured certain por- tions? — A. It certainly benefited the producers. Labor was benefited equally with the producers, in my opinion, because drilling did not entirely cease, and drillers could get permission from their union to engage in drilling on gas wells and wells ovitside of the prescribed territory. The prescribed territory was lim- ited to the oil produced from the sedimentary rocks — that is. New York, Pennsyl- vania, southern Ohio, and West Virginia. In the oil produced from the Trenton rock was not included that of Ohio and Indiana. I presume during this period ."50 wells a month were drilled in the country at large for gas, furnishing constant employment, 4 men to a well, for 200 men. I think that is not overestimated. PRESENT CONDITION OP THE OIL INDUSTRY. Q. (By Mr. Smyth.) What would you say was the present condition of the oil industry? — A. I should say that it was exceedingly satisfactory to the oil pro- ducers. Q. Both to the independents and the Standard? — A. Both to the independents and the Standard; all the interests together are satisfied with existing conditions. Q. (By Mr. Ratchford.) How is it as compared with some periods that we might name, say, for instance, 3 or 5 years ago? — A. There was a brief period 4 or .5 years ago when it was better. Oil temporarily ran up to §3 a barrel. Q. You say that was 2 or 3 years ago? — A. Well, it was equally favorable 2 years ago. THE OIL interests IN COLORADO. Q. You made a statement yesterdaythat I should like to have you explain. The statement was, I believe, that were it not for the cost of transportation, oil might be sold by the Standard Oil Company in Denver, Colo., as cheaply as at the initial point of production, or the refinery. — A. Yes. Q. Are you familiar with the oil interests of Colorado and their relation to the Standard? — A. Only in a general way. Q. Are you aware of the operations of the Standard in that State?— A. No. Q. The commission has testimony bearing upon that subject to the effect that the producers of Colorado have found it to their advantage to sell all of their crude product to the Standard Oil Company. Do you wish to say anything on that?— A. Well, I have not understood that the Standard were manufacturing oil in Colorado. Q. (By Mr. Fakquhar.) They are the producers of the manufactured oil?— A. I understood them to be the purchasers of the manufactured and the distributers (if the oil. I am not familiar with the prices of crude oil in Colorado. The field is so distant that there is no relation between their product and ours. There is no intercourse between tlie oil fields of the east and those west of the Mississippi River. One does not enter into any consideration with the other, so far as I am aware, and therefore we pay no attention to the product of that region. If it entered into competition with us in the east, we should have reporters there and know all about it, but until it does that there is no occasion to b6 at the expense of getting reports. STANDARD OIL COMBINATIONS: — BOYLE. 485 Q. (By Mr. Phillips.) Are tliey not prohibited, in a sense, from refining oil in the western field? Is not oil confined to fuel products, sold for fuel, and sel- dom refined? — A. I do not know as to, that. I am not familiar with the operations west of the Mississippi River. SOURCES OP STATISTICS OFFERED IN EVIDENCE. Q. (By Mr. Jenks.) I wish to ask one or two questions with reference to the sources of the statistics, etc.. that you have submitted, so far as that does not appear on the papers themselves. Have you been actively engaged in the oil busi- , ness either as a producer or a refiner? — A. I am a producer now to a small extent. Q. How long have you been in the business as a producer? — A. In and out of it always. , Q. So that a part of the information you have given is your own personal experi- ence? — A. My own personal experience and observation. Q. Have you been associated with any of these different producers' associations of which you have spoken? — A. Never with any of them. Q. You have always been entirely independent? — A. I was never a producer to the extent that woiild entitle me to belong to them, because most of these asso- ciations elect their members. Q. You have not been a refiner of oil at all? — A . No. Q. As regards the statistics we find in this book.' from what sources in the main are they? For example, the export prices come from where? — A . They come from the Government reports here. Q. And what is the source of the figures you submitted with reference to the profits of the produce'rs of oil, the amount produced, the price, etc.?— A. They are deductions made from the figures given in these reports. Q. That is. you have taken the ofiicial Government figures and made your deductions from them?— A. No; we get no ofQcial fig-ures on crude oil from the Government. Q. The figures you get from the Government are on the export oil? — A. Yes. Q. Where do the figures on the crude oil come from?— A. From the pipe-line statement. Since 1874 the statistics have been posted. Every transportation company is required by legislative enactment to post their statements. Q. Then, the infoi-mation that is given concerning profits is really a deduction based upon these figures of the pipe lines and upon the official prices?— A. And upon the official prices; yes. Q. Have you any other papers whose sources are different from those you have mentioned?— A. Different in what respect? Q. I mean coming from different sources.— A. Oh, yes; m arrivmg at the con- clusions here. ■ . . -rrr t Q. At the conclusions you have given in your testimony .'—A. We have ran- sacked every source of information— the trade journals and State Geological Sur- vey; the State made an exhaustive research into the early development. Q. You have cited them?— A. These papers were made up from the daily press at the time— the daily publications of eastern cities. Q In every case in each of these documents do the sources of information appear? That is the special point I wish to get at.— A. Oh, we might cite them from the Derrick Handbook. They all come from the Handbook. Q. So if the Derrick Handbook is cited we can find the original sources, can we? — A. Yes. , , .-, ^ ., , ^ j O. And the Handbook itself will tell where you got the figures .^— A. On crude oilyou will get it from the statistics of prices in the daily press, which gives the annual price and the average price. ,, ^ •„ • j.-u Q When you cite the Derrick Handbook, however, that will give us the sources from Which the Derrick Handbook got its information?— A. Oh, yes ; we can fur- nish the information. METHODS OF COMPETITION EMPLOYED BY THE STANDARD. O With reference to the question of special cuts made by the Standard Oil Company for the purpose of selling its oil in certain localities, I believe you said yesterday that you had no specific knowledge at all excepting your observation m your Sediate locality ?-A. We iiaye information as to the periods when the cuts were made and the amounts ; we know of that ; we have all that. 1 The Derrick's Handbook of Petroleum, Oil City, Pa., 1898. 83a 32 486 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. I refer to special cutting of rates to drive out competitors ? — A. Do you refer to crude oil';' Q. No ; refined. — A. I liave no further information whatever on tliat. Refined oil enters into our calculations in the oil country to a very small extent. METHODS OP THE STANDARD'S COMPETITORS. Q. Have you any specific information writh reference to the methods employed by the Standard Oil Company for obstructing the completion of the independent pipe line to the seaboard? ' — A. I never understood that: but I have information on the other side concerning the stopping of operations Ijy the >Standard Oil Com- pany. In 1874 the National Transit Company undertook to lay a pipe line from Parkersburg to Maoksburg. and they were stopped at several points by Mr. George Bice, who obtained a lease across the track of their right of way; that is, Mr. Rice employed a man to take rights of way across the track of the pipe line, a man by the name of Ogle. Q. What is the source of your information — Mr. Ogle himself? — A. No; I was present. Mr. Ogle first informed me that he was engaged in the work and he showed me his contract. Q. "With Mr. Rice? — A. No, with the farmers; he made contracts with the farm- ers for getting these exclusive rights. An exorbitant sum was named for this exclusive right, when tlie pipe line was to be laid. He had the exclusive right of it, but no consideration passed to him until the work was done. Q. And he himself informed you that he was doing this work for Mr. Rice? — A. Yes; he informed me that he did it in Mr. Rice's name. The work was done in Mr. Rice's name. Q. The special purpose being to shut off the National Transit Company? — A. To shut it off from its destination. Q. Did Mr. Rice intend to build a pipe line? — A. No; not under those contracts. He built a pipe line, but not under those contracts. Q. ^By Mr. Kennedy. ) Did Mr. Rice succeed in preventing the building of that pipe line? — A. No; the line was laid; Mr. Rice was outbid. That is the only case that has come under my observation. Q. (By Mr. Jenks.) It has been stated here that the Standard has sold differ- ent grades of oil at the same price. Have you any knowledge of the methods of the Standard in selling refined oil? — A. No; that would come within the domestic trade department; it does not enter into our business at all. INVENTIONS AND IMPROVEMENTS IN PRODUCTION. Q. You mentioned a number of very valuable inventions that have been made in developing the oil regions. — A. Yes. Q. In your judgment, have the most important improvements been made by naen working with the Standard or the independents? — A. Well, so far as the Standard and the independents are concerned, neither has a monopoly on genius. Everybody buys from inventors wherever they can. The Standard is undoubt- edly' entitled to more credit than it has received for its achievements in refining Lima oil. Q. The chief movements along that line have come from the Standard? — A. They have come from the Standard in the manufacture of Lima oil. Q. (By Mr. Phillips.) Did not George Van Vleck and some others make very good oil? — A. I am very glad you asked that question; their process was not a new one; it was a very olnients have been made concerning the railroad dis- criminations in favor iif the Standard Oil Company in the early days. You have yourself made some statements of the kind. Have you any knowledge of discrimi- 'SeeMi'.L TpT: Mr.PUiUii«.p.5li:i; Mr.Emi'ry.pp.GSIMj.w.iiii:.': Mr. Archbold.p, STANDARD OIL COMBINATIONS: BOYLE. 487 nation in freight rates, say, within the last lo years?— A. No; but I have some rec- ords here to show where raih-oads went into contracts with pipe lines to fnrnish them rebates of 10 cents a barrel on all oil shipped except shipments on a certain line. Q. Within what period?— A. Oh, that was 30 years ago. Q. You have matters of record of that kind in general?— A. Yes. Q. Have yon any instances different from those bronght out before the Congres- sional committee? — A. All I have is the averments of the Pennsylvania Transpor- tation Company in its litigation with the Oil Creek Railroad. Q. You have not anything in that line within the last 10 years? — A. No. Q. In your judgTaent, have theve been any special discriminations made in favor of the Standard Oil Company or in fa^'or of the independent refiners, particularly ■ttdthin the last 10 years? — A. I am told there is not; I do not know anything about it. I am told there are no discriminations anywhere. THE STANDARD OIL COMPANY AND THE NEWSPAPERS. Q. You have heard the charge, of course, that the Standard Oil Company has at different times used its influence with the press to further its own interests, by having special articles put in as editorials, for example, that were paid for as advertisements and matter of that kind. Have you any knowledge on that sub- ject? — A. Yes; I have some knowledge of sucb a business arrangement with cer- tain nev/spapers in Pittsburg. Q. Can you give us some information? — A. Only concerning existing contracts for advertising their products. The Standard has at various times been viciously attacked by persons associated with the Producers' Association, and they have replied, and the replies have been paid for v.'hile the attacks were received free. Q. By what papers? — A. By all of them. Not one of them will receive a line from the Standard Oil Company except at advertising rates. I do not know of a single paper in Pittsburg that will receive a line in contradiction of the most out- rageous and infamous lies. Q. You mean to say, if I understand you, that the Standard instead of buying up the papers is practically blackmailed? — A. I have not said so; no. Q. You did not intend to make any charge? — A. No; but I make this assertion: The Standard does not receive the same courtesy from the press that other corpo- rations and individuals do. Q. With respect to your own paper — it is, perhaps, a fair question — does the Standard receive the same courtesies that the other producers do, the other oil interests? — A. Exactly the same. I have rendered a bill to no man for a courtesy since my connection with it. Q. Bo'th parties are treated the same? — A. Both parties have been treated alike." WITNESS PROSECUTED FOR LIBEL. Q. Have you been attacked legally in your paper? — A. Oh, yes. Q. Can you give us some account of that? — A. Some little account, I guess. [Witness produces bulky package of papers.] Q. You can, perhaps, state the substance of that and put in the exhibits. [Laughter.] Mr. Smyth: No; let us have the whole thing. A. I have a great many records here, gentlemen. Q. (By Mr. Phillips.) Court records?— A. Yes; they are all court records. Q. (By Mr. Jenks.) Can you make a brief statement as to these legal proceed- ings? — A. If you ask me a particular question concerning any particular suit, at a given time, I can, but to go into the general question Q. How many suits have you had for libel?— A. Oh, half a dozen, I suppose. All by the same persons and the same influences. Q. Who are those persons?— A. Well, the officers and members of the Pro- ducers' Protec tive Association. , Q. What has been the result of those suits?— A. Conviction was obtained m two of them, in two others there was a confession of judgment, and m one other a failure to convict. Those suits were all taken into a foreign county where their own element was the strongest, where prejudice was the greatest. I do not think anything- more infamous was ever practiced on the press since the first newspaper was published than the proceedings of these men who call themselves gentlemen in tryinp- to muzzle the press by dragging it before hostile courts and juries. They did not possess the decency to give me a trial at home m my own courts where I could stand up with my neighbors and be judged by them according to iBoep.i04: Mr.Monnett,pp.31'2.321: Mr. Lockwooa,p.390; Mr.Bor"'!' 'I's.p.-'jST. 488 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. my own merits. The very judge in one instance who attempted conviction was a partner of at least two of the men who brought suits, and yet he had the hardi- hood to sit there in judgment, just filled with prejudice, poisoned \\'ith it. Q. (By I\Ir. Phillips.) Will yon name that judge?— A. No, I do not care to name that judge. No, I will not name anybody in connection with these suits, except where it becomes necessary. Q. Yon can perhaps give us a citation of the cases? — A. I have not the citations here. Senator Lee, in his capacity as president or director or oflicer of one of these companies, sned me for some expressions in my newspaper. In that case there was a confession of judgment. A. D. Wood, an officer, treasurer of all these companies, sued me for expressions in the newspapers, and on the first trial of that case before a hostile court and before a packed jury, I was convicted, but obtained a new trial on the judge's charge. Upon the second trial there was a failure to convict. STANDARD OIL COMPANY A BENEFIT TO TPIE COUNTRY. Q. (By Mr. Smy'th.) Are we to nnderstand f rem your testimony that you do not consider the existence of the Standard Oil Company detrimental to the develop- ment of the oil industry in Pennsylvania, Ohio and other States? — A. It certainly has not been; it has been very beneficial to the industry as a whole; the organiza- tion effected by the Standard Oil Company could not be duplicated in the whole world. Q. Do yon consider the existence of the Standard Oil Company to be a marked benefit to the American people? — A. It has been a very great benefit in the devel- opment of an industry that requires organizing capacity and great mercantile ability. I give them no credit for manufacturing. Others manufacture just as cheaply and as well; but where others fail is in their organizing ability and their mercantile capacity. The Standard Oil Company are the greatest merchants on earth.' Q. Do yon not consider the Standard Oil Company a trust ? — A. Not now. Q. Why not now? — A. The trust has been dissolved and the companies have gotten back into their original positions. The trust agreement nnder which they operated prior to 1893 has been dissolved and a number have returned to their individual organizations and are operated as separate concerns. Q. Is there any trnst in existence now in kerosene oil? — A. The Pure Oil Trust is a step in that direction, not wholly accomplished, but then it is hoped to be accomplished. Q. That is the company that you were talking alsout before ? — A. Yes. THE STANDARD OIL COMPANY HAS MANY' COMPETITORS. Q. That is the only organization in opposition to the Standard Oil Company? — A. Oh, no; there are several. There are a great niany companies in opposition to the Standard Oil Company, but it is the only one that cojiies the Standard's organization from beginning to end, even to the trnst. After the Standard relin- quished the last, the Producers' Protective Association picked it up where they left off and are attempting to carry out, mider various nom de plumes and pretenses and fictions of the law. just what the Standard did in a public, open way. Q. I understood you to say that the Standard Oil Company controlled about 80 per cent of the outi>ut? — A. Well, I should think that would be a very liberal estimate for them.' Q. The other 20 per cent is controlled bv how many companies? — A. I should think .50 or 60. Q. Fifty or 60?— A. Yes. Q. Independent and selling their products? — A. Yes. Q. Both in this country and abroad? — A. Yes. Q. Have they rivals in selling their oil for export?- A. Well, the Pure Oil Com- pany is selling in rivalry. Q. Any others? — A. I am not familiar with that branch of the business. WHY THE STANDARD IS SUPERIOR TO OTHER CONCERNS. Q. You think the great profits of the Standard Oil Company have come from its superior organization? — A. That states the case precisely; from their great mercantile ability, their commercial ability. Q. In other words, in putting their oil on the market they have hired the best brains they could find? — A. Yes; they have experience of their own to start with, and they licep adding to their mejital talent right along. ;' See ili-. Arohbold, p. 5iii). STANDARD OIL COMBINATIONS: BOYLE. 489 Q. (By Mr. Phillips.) Do you not think, if the oil fields had been opened to competitors without monopoly and without discrimination, that talent equal to what is exhibited by the Standard now would have been developed? Do you not believe that the difficultj- with the region was too much competition — overcom- petition? — A. Competition, in fact, resulted in what the Standard has accom- plished: it was a weeding out, a survival of the fittest, that made the Standard. Darwin's theory of the survival of the fittest was never better illustrated than in the organization of the Standard Oil Company; it represents the best element in all branches of the trade. Q. Since it was organized have they kexit the best element or have they pro- scribed men of equal ability by their methods? — A. Well, there are men in the oil business who have superior abilities to any men in the Standard Oil Company for certain purposes. There are men who can beat them in producing; but your question leads to but one answer. "What they have done answers you. What you ask has been done by the Standard Oil Company. If there were others who could do that, the only reply is others did not. It is a case of Columbus and the egg over again. Lots of people could sail the ocean and do now, but only Columbus sailed in 1493. Q. Now, do you want to inform this commission that 20 years ago the fittest got together afid that there would not have been competition equal in ability if it had not been for the monopoly of pipe lines and rates? — A. Can you tell me why the others did not go in together? That is the best answer to your question; if you can tell me why they did not get together I will answer your question. Q. Before the free pipe-line law was i)assed did they have an opportunity to get together? — A. Exactly the same opportunity that the Standard had. Q. I mean after they got to the seaboard? — A. I am stating why they did not before that time when the region was in a state of chaos. Transportation was in a topsy-turvj' condition, the Standard came in with three millions of capital and organized one pipe line that did the business of 15 or 20. That was all that was represented in the transportation department at that time. Q. (By Mr. Smyth. ) Was there any risk — was it considered experimental in any sense? — A. It was considered a very great risk. Q. Was the risk such that other people did not go in?— A. That was the very reason why other people did ncjt go in, the amount of money required, and the risk involved. Q. The Standard Oil Company has blazed the way there?— A. They blazed the way; they had energy and courage and ability. Q. (By Mr. Phillips.) Did they stait the pipe-line system, which has become the mode of transporting oil? — A. They merely developed it; others started it. Q. And when others got there they controlled the line to the seaboard and con- trol it now and limit its output?— A. Oh yes, they do it, but that is merely an incident in the business. It cuts no figure; it is a source of vexation even to its stockholders; they are not agreed in matters of policy. the standard as a producer of crude oil.' Q. (By Mr. A. L. Harris.) I wish to know what per cent of the 80 per cent which the Standard Oil Company consumes in refining is produced by it.— A. Well, in Pennsylvania, I think 25 per cent is conceded to them. Q. Where do they get the other 7.j per cent?— A. By purchase from the producers. Q. In the market from the producers?— A. In the market from the producers. Q. Is the price satisfactorv to the producers?— A.. It seems to be .satisfactory. There is no complaint now on the question of price; the price is higher now than it has been for a year or two. Q. They are open competitors with others?— A. Oh yes, there are other buyers in the field. , i, ^ ■ ^.i Q. (By Mr. Phillips.) What part of the Ohio field do they control; that is, the crude oil of Ohio?— A. What proportion? ,.-,., , , , ^„ Q. What proportion, about, in Ohio?— A. Well. I should think it would be 50 per cent, at least. „, . „ ,, ,, „ , ,. ,, O They control therefore much more of the Ohio field than they do ot the Pennsylvania and West Virginia fields?— A. The Ohio oil does not come m com- petition to a very great extent with West Virginia. T ■, J XT O You stated a moment ago that the original trust had been dissolved. Have they reorganized under the New Jersey laws recently?- A. I believe they are in process of reorganization; that is the opi'nion at the present time^. 1 See Mr, Archbold, pp. 660, 561. 490 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. At the present time where do they get their corporate powers? — A. From the individual companies. Q. Organized in different States? — A. Organized in different States for differ- ent purposes and witli different managers. PRICE OF CRUDE OIL NOT CONTROLLED BY THE STANDARD. Q. (By jMr. Sjitth.) You do not agree, then, that the Standard Oil Company controls the price of crnde petroleum? — A. No. Q. Have they any means of controlling prices and forcing producers to sell?— A. The only means to force the producers is by increasing their price. Q. Paying over what seems to be the market value? — A. Paying over what seems to be the market value at the time. Q. Do you believe that has been done? — A. It has been done. Q. They buy crude oil in the open market? — A. Yes. Q. (By Mr. Phillips.) Is there any pnrchaser of orn.de oil in the Standard lines to-day excepttng the Standard themselves? — A. Well, I can not answer that ques- i;ion; I am not familiar with the Standard's business; I do not know from whom they buy or to whom they sell. In a general way, I knowr they buy all oil offered to them, but I do not know to whom it is sold. • THE PRODUCERS OP CRUDE OIL ARE PROSPEROUS. Q. (By Mr. Smyth.) Is there any complaint from the prodiicers of crude oil of lack of buyers? — A. No: none whatever. Q. Are they making money to-day? — A. The producers are prosperous to-day. Q. Are they satisfied with the price they are getting? — A. They are satisfied with the price so far as we have olsserved. Q. Then the fact is the Standard is the only buyer and you maintain they are paying a fair, legitimate price for the oil? — A. I think they pay all it will bear, and that condition has existed since 189.5, as I have submitted the figures to show. ' Q. Since the Standard Oil Company is the only buyer, what would become of the product if they did not buy? — A . It would mean failure. Q. Insolvents by hundreds? — A. On every hand. Q. Great want? — A. Great want would undoubtedly result from it. THE STANDARD HAS MADE THE OIL INDUSTRY WHAT IT IS. Q. You want this commission to understand that in your judgment the Stand- ard Oil Company has been a large factor in developing the oil business, and that without the Standard it could not have attained the present enormous propor- tions? — A. I do not wish to be understood as saying anything different. But for the Standard Oil Company you w(.)uld not have the oil business that exists to-day. Q. It would be on a smaller scale? — A. On a smaller scale, with competition such as existed 30 years ago. Q. (By Mr. Phillips.) Was not that in its infancy? If one railroad had con- trol of all the business they could bring disaster and ruin by stopping? — A. I do not know what you call infancy in a business 20 years old. Q. The xiipe-line business did not come into existence for quite a number of years after the discovery of oil, as explained yesterday? — A. The pipe-line busi- ness cuts a very small figure in the general success of the Standard Oil Company; it is only one of the lines upon which it has been successful. Q. Could it exist without the pipe-line system? — A. Oh, no; but it is only one of the means of their success. Their great success is due to their ca.pacity to find markets. Q. Is not the transportation the principal factor in their great success? — A. I do not know that it is. I am not going to split hairs and express an opinion on that ground. The principal result is that to-day the business is greater than any other business in any other country. It is due to the organization of capital and the intellect and industry of the persons who manage it. Q. (By Mr. Smyth). You think brains come in there too? — A. Brains come in more than anything else. That is what I mean to say. The Standard Oil Com- pany was unknown when the pipe lines were organized; they came as strangers into the l)nsiuess. 1 See pp. 437-440, STANDARD OIL COMBINATIOXS: MATHEWS. 491 Washington. D. C, Septcnther s. ISKK TESTIMONY OF B. A. MATHEWS. At a meeting of the Industrial Commission, held at its offices in the Bliss Build- ing, on September fS. A'ice-Chairman Phillips presiding-, Jlr. B. A. Mathews appeared, at 4.-'.) p. m., and, aftei- being duly sworn, testified concerning the oil industry : Q. (By Mr. Jenks.) Kindly state your name and address. — A. B. A. Mathews, Columbus. Ohio. Q. What business are you engaged in? — A. I have cha.rge of the marketing of the products of the Stamlard (Jil Company in a portion of Ohio. Q. What is the official statement of your position? — A. I bear no official title. Q. General manager for the State of Ohio, you are ordinarily called? — A. 1 am what is generally understood as a manager, but bear no title. Q. How long have you been in the position you now hold? — A. I have been in Columbus about six years. Q. Have you been in your present position, managing the business, for that time? — A. I have been managing the business for central and southern Ohio for six years. I have been engaged as manager in other departments previous to that. Q. I understood you had some statement to make with reference to certain statements that ^Ir. Clark made regarding your actions with him and the busi- ness. You may make that statement as you please. COXXECTION OF W. H. CLARK WITH THE STANDARD OIL COMPANY. The Witness. IMr. W. H. Clark, of Newark, Ohio, who has given testimony before this commission,' was hired, when a youth, to work at Marietta as office and warehouse boy, at a salary of .S15 per month to learn the business, and as fast as he became proficient in the work was promoted in salary and position, until he became local agent at Newark, at a salary of .53.2.5 per day. While at Newark he became short in his accounts, was discovered and discharged, which is the only incentive that I can discover for the series of untrue and malicious statements made by him before the commission. I have looked over his testimony carefully and desire to answer his statements seriatim the "farmer story" — TESTIMONY OP WILLIAM EBRI6HT. His statements about competition and variation in prices at Marietta are untrue.- His position of office and warehouse boy did not bring him in contact with the trade; he could not be informed; therefore would know nothing about methods of marketing oil or prices. Davis, the peddler referred to, has never been in the employ of the company, and the "farmer story" has been refuted by Mr. Ebright. I have a certified transcript of his testimony, which I submit. Exhibit 1. Certified transcript of poiiioiis of tesiiiiiomj of William Ebriglit, seircted by B. A. Mathews, taken in tJie case of The State of Ohio, ex- ret. F. S. 3Ionncit, v. The Standard Oil Compain/. Q. Didn't you play the farmer there? — A. No, sir. Q. Didn't you have a barrel and a wagon and play the farmer? — A. I had a barrel and got a wagon until I got my cans. Q, Didn't you sell the oil as an independent dealer— as a farmer?— A. No, sir. Q. What were your instructions about selling oil? Where were you to sell?— A. I was to sell to everybody I could. Q. Were you not to cut the prices?— A. There was no cut in the prices; they were the same. Q. Was you not there to run out Curtiss, the colored man?— A. No, sir. Q. When you drove him to buying oil of the Standard Oil Company, then you left?— A. No", sir; the wagon was still there— I sold out to another man. Q. That was after Curtiss went to buying from the Standard Oil Company?— A. I don't know this man. I See p. 330. 2Seep.;531. 492 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You knew after you got there who you was running out? — A. I didn't see that I was running out anybody. I hereby certify that tlie above is a true and correct copy of portions of the tes- timony of William Ebright. selected by B. A. Mathews, taken before me, the undersigned, in the case of The State of Ohio, ex rel. F. S. Monnett, r. The Stand- ard Oil Company. [SEAL.] L. B. PuGH, Noiary Public. UNTRUE THAT EIGHT GRADES OF OIL ABE DRAWN FROM TWO TANKS — THE PACTS. His statements that we market eight grades of oil at eight different prices from two storage tanks at Marietta, aijd that the manager (meaning me) gave him such instructions, are false.' Not being agent, no instructions would be given him concerning prices. The facts are, we have three grades of oil at Marietta and eight names — Ohio State Test and Prime White are two names for the same grade of oil, both sold at the same price. Ohio State Test is a brand adopted by some of the trade when Ohio passed its inspection law, while others adhered to the pre- viously well-known trade name, Prime White, thus creating two brands for the same oil. Water White. Red Star Water White, Silver Light, and Crystal, are four names for the same grade of oil, and are sold at the same price. These four brands are trade names, having been established by custom in different localities to meet the requirements of the local demands. Eocene and Hype- rion are not the same oil, but are two different grades of oil; Eocene being manu- factured in Cleveland and Hyperion at Pai'kersburg, the Eocene being sold at one-half cent per gallon above the price of Hyperion and kept in storage at Marietta, while Hyperion is shipped direct to the trade from Parkersburg refinery. There are a few points near Marietta where it pays better on account of saving in freight to give the buyer Eocene (a better oil) under the Hyperion brand, rather than make the shipment of Hyperion from Parkersburg at a lower cost for the oil. Water White was furnished to one of the jobbers at Marietta under the brand of " Crystal Oil," and sold to him at the Water White market, and was his trade-mark brand. UXTELTE THAT THE WITNESS ADULTERATED TURPENTINE WITH GASOLINE. His statement about mixing gasoline with turpentine ' is absolutely false and malicious. Instructions to all my people have been to give the purchaser what he buys, both in quality and quantity. The officers of the company have always impressed me with the importance of this principle; further, a buyer can deter- mine adulteration of turpentine with gasoline instantly by the use of an ordinary hydrometer, which all druggists keep. The falsity of Clark's statement about the alleged " trick'"! taught him is emphasized by the position he held of warehouse and office boy, the agent being the only one who received instructions. I have the affidavit of W. A. Reed, local agent at Marietta at the time Clark was there, which I submit, marked Exhibit 3. Mr. Reed is not in our employ at the present time. Exhibit 2. The State of Ohio, WnsJiingion County, .s-.s; W. A. Reed, of lawful age, being duly sworn, upon his oath says : I was local agent for the Standard Oil Company of Ohio, at Marietta, during the entire time that W. H. Clark worked there. He was an office and warehouse boy, and not in a position to know how the business was carried on. Referring to the testiuKiny of Clark before the Industrial Commission, given in Washington on June N. IS!)!). I would state that it is not true that Mr. Frank Davis was ever in the employment of the Standard Oil Company. Davis wished to go into the oil-peddling business, and we sold him a wagon. We sold Davis his oil outright at the ruling market prices, and he sold it at retail in competition with other peddlers ami retail grocers at Marietta, and at the prices fixed by him- self, the Standard Oil Company having nothing whatever to do with regulating his or the retail price. Davis continued this business until his death, when his father sold the wagon to a man named Twiggs, who soon after sold it to the Pro- ducers' Refining Company, which ran the wagon until it discontinued business. I Scop.. 331. STANDARD OIL COMBINATIONS: MATHEWS. 493 Curtis was also a peddler, buying and selling oil in the same way at Marietta. It is not true that he purchased his siipplies from the Argand Refining Company. He bought his supplies from the Producers' and the Rice companies until those companies shut down, after which time he purchased his oil from the Standard Oil Company. It is not true that we played the farmer or any other racket with Mr. Ebright. Ebright was another peddler, who bought and paid me for his oil supplies the same as any other peddler, and sold the oil thus purchased at retail in Marietta. I had nothing whatever to do with retail prices of oil in Marietta, which were regulated entirely by the competition between the peddlers and the retail grocers of that city. The statement is absolutely false that we sold oil from the same tank at differ- ent prices, representing it to be of different grades, or that we mixed gasoline with turpentine, or practiced any deception of any kind whatever with regard to the quality of our products in selling the same. W. A. Reed. Subscribed and sworn to by said W. A. Reed before me. thi.s 31st day of August, 1899. [SEAL.] Frank Panhorst, Notary Puhlic, Washington Countij. Ohio. STATEMENTS AS TO DECEPTION OP CUSTOMERS. His statements about instructions given G-eorge Blazer, and cause of his leav- ing Springfield,' are malicious falsehoods. I have the affidavit of Mr. Foley and Mr. Foutz. which I submit, marked Exhibits 3 and 4. Mr. Foley was the local agent at the time Mr. Clark was there, and he is still the local agent at Springfield. Exhibit 3. The State of Ohio, Clark County, ss. C. W. Foley, of lawful age, being duly sworn, upon his oath says: I am local agent of the Standard Oil Company at Springfield, Ohio, and was while W. H. Clark was employed there. It is not true that I ever had any con- versation with Mr. Cragin, who is now dead, or anyone else with reference to informing Blazer or any other person about drawing different grades of oil from the same tank and charging different prices for it. It is not true that we ever sold any oil at this station in that manner. All our grades of oil were sold for precisely what they were, and no deception of any kind was practiced upon our customers as to the quality or price of the oil furnished them. It is not true that Blazer quit the employment of the company because he was required by that employment to deceive customers as to the quality or price of the oil sold. The only reason given by Mr. Blazer when he quit, was that the work was too hard for him. C. W. Foley. Subscribed and sworn to by said C. W. Foley before me, this 39th day of August, 1899. [SEAL.] W. B. Homer, Notarij Public, Clark Coiinti/, Ohio. Exhibit 4. The State of Ohio. Washington County, ss. R. A. Fonts, of lawful, being duly sworn, upon his cath says: I reside in Marietta, Ohio, and went to Springfield and had an interview with George Blazer. He stated that he resided at Springfield, Ohio, and worked for a short time for the Standard Oil Company while W. H. Clark was there. He stated that he never said to Mr. Clark or anyone else that if he could not work for an honest company he would quit, and for that rea.son must leave the Standard Oil Company's employment; or that he was leaving or had left the Standard Oil Com- pany's employment because he could not conscientinusly draw different grades of oil from the same tank. He also stated he left the employment of the Standard 1 See p. 333. 494 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Oil Company because he did not like tlie tank-wagon work, and for no other rea- son. He made the above statement to uie, but declined to make affidavit. R. A. FouTS. Subscribed and sworn to before me this 4th day of September, 1899. [SEAL. J O. C. MiDDLESWART. Not(ii-y Public, Washington County, Ohio. His statement that we drew four different grades of oil out of the same tank, and charged four different prices,' is absolutely false. Mr. Clark, as well as all other tank-wagon drivers, was not allowed to discriminate between one buyer and another, but was to charge all customers the same price for the same grade of oil. The proof of this: In making his retiu'ns at night to the cashier his total sales had to be accounted for on the basis of the ruling market. Therefore he could not cut the price to any buyer without paying it out of his own jpocket, and it goes without sajdng that no retailer would pay more than the market. I have the affidavits of Mr. Toland and Mr. McMahon, both tank-wagon drivers at the time Clark was at Springfield, the only two men who were doing the same kind of work that Clark did at Springfield, showing their method of conducting the business, which I submit, marked Exhibits 5 and (J. Exhibit .j. The State of Ohio, Lawrence County, ss. W. W. McMahon, of lawful age, being duly sworn, upon his oath says: I worked for the Standard Oil Company as tank-wagon driver at SpringiieM during the time that W. H. Clark worked there as tank-wagon driver. I never had any instructions from Mr. B. A. Mathews, manager, C. W. Foley, local agent, Mr. Cragin, or anyone else connected with the Standard Oil Company, to deceive any customers by turning the faucet in different directions to draw dif- ferent grades of oil out of the same tank. All of our gTades of oil were sold for precisely what they were, and no deception of any kind was practiced upon our customers as to quality or price of oil fur- nished them, and all customers paid me the same price for the same grade of oil. W. W. McMahon. Subscribed and sworn to by said W. W. McMahon before me, this 31st day of August, 1899. [seal.] W. D. Henry, Notary Public. Exhibit 6. The State of Ohio, Clark Comity, ss. C. M. Toland, of lawful age, being duly sworn, upon his oath says: I am now and was in the employ of the Standard Oil Company as tank-wagon driver at the time W. H. Clark worked as tank-wagon driver for the Standard Oil Company at Springfield, Ohio. In accordance with instructions received from B. A. Mathews, manager, my prices have always been uniform, selling one grade of oil at the same price to all dealers, and I have never deceived my cu.stomers by turning the faucet in differ- ent ways in order to draw different grades of oil from the same tank. C. M. Toland. Subscribed and sworn to by said C. M. Toland before me, this 39th day of August, 1899. [SEAL.] Geo. S. Dial, Clarle County, Ohio. rebates — hours of labor. His statement with reference to rebates' at Springfield is untrue. We did not allow Mr. Clark, while at Springfield, to make rebates. His statement concerning hours of labor ^ is misleading and untrue. Our tank- wagon work is planned with the view of a day's work constituting ten hours. In making drives to country towns, from H to 14 miles, it is understood that when a driver returns his day's work i.s completed. QU.VLITY not determined BY FIRE TEST. His stalcments about fire test governing the (luality of oils'* are not true. One hundred and twenty degrees of fire test, by Ohio law, is the equivalent of 150° U.'omparsin). 3:!1,33:J. ^ See p. :>:K. sgee pp. 333,848.34H -i See p. 333. STANDARD OIL COMBINATIONS: MATHEWS. 495 by the Tagiiabue open cup. Concerning oin- tliree grades, there is no difference in the fire test of the same. His statement that there is 10° difference is false. They are all 150' fire test by the Tagliabiie open cup, or 120' fire test by the Ohio State test Foster cup, -which is the State test required by Ohio. The fire test of oil required by Ohio statutes does not represent quality, but simply safety. Oil may be exactly the same fire test, but different in illuminating- power.' The quality of an oil is distinguished by its illuminating quality. . His statement that he was promoted to the position of cashier at Columbus and had charge of the -work around warehouse is false and absurd, for the reason that his position was simply shipping clerk, under a superintendent, who had entire charge of everything around the works. -' BOILED LIXSEED OIL NOT ADULTERATED. His statement concerning boiled linseed oil - is false and malicious. The dryer used in boiling was a pure linseed oil dryer, which cost 10 cents per gallon more than linseed oil, and increased the cost, instead of decreasing it, and improved the quality, instead of adulterating it, as testified by Clark. MINER'S OIL; ITS COIIPOSITIOX — LQBRIOATIXG OIL. His statement that miner's oil is made by compounding cotton-seed oil -with 40 per cent petroleum '' is false and malicious, because the Ohio law prohibits such a large percentage of petroleum being used. The law is rigidly enforced on gravity and smoke qualifications, which would absolutely prevent more than 14 per cent of peti'oleum. Miner's oil is known to the Ohio State officials to be cotton-seed oil compounded with petroleum. The price of miner's oil is regulated by the price of cotton-seed oil, and runs about 2 cents per gallon below. It was malicious for Clark to state that a dealer would pay 34 cents for miner's oil, when the dealer could buy cotton-seed oil for 24 cents. His statement that lubricating oil is received in blank heads at Columbus and shipped out to meet the requirements of the trade without regard to contents^ is untrue and absurd, because if the barrels came unbranded it would be impossible for the warehouseman to tell the contents, and an order for cylinder oil might be filled with a barrel of se-wing-machine oil, or vice versa, if Clark's statement were true. I have the affidavit of Adam Paulus, referred to by Clark as "mixer," which I submit. (See Exhibit 7.) Exhibit 7. The State of Ohio, FranJdin Count ij, ss: Adam Paulus, of lawful age, being duly sworn, upon his oath says: I am in the employment of the Standard Oil Company of Ohio, and am the per- son referred to in the testimony of "W. H. Clark before the Industrial Commission at "Washington. While Mr. Clark was employed at Columbus I did the mixing of linseed and cotton-seed oils. It is not true that our lubricating oils came from Cleveland in blank heads, but all barrels were branded to designate the contents of the package. In preparing boiled linseed oil it is not true that we used a cheap japan dryer, but we did use a pure linseed-oil dryer, which improved the quality of the linseed oil. Heated the oil to 22.5° instead of 125', as stated by him. In compounding miners' oil it is not true that we used 3 barrels of cotton-seed oil to 2 barrels of miners' stock, being a percentage of 40 per cent of the latter. "We only used 1 barrel of miners' stock to 6 barrels of cotton-seed, or about 14 per cent. It is not true that Mr. Clark had charge of the stock from which these com- pounds were made, or that I had to go to him to get it. The wap.-ehouse and stock were in charge of a superintendent, from whom I received all my instruc- tions. The stock I got out myself, as directed by the superintendent. Adam Paulus. Subscribed and sworn to by said Adam Paulus before me this 29th day of August, 1899. „^ , ,^ [gg^L-i W. A. Marsh. Notary PiihVic, Franklin County, Ohio. 1 See Mr. Emery, p. 626. 2 gee p. 333. s gee p. 334. 496 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CUT PRICES AND REBATES. In reference to his statement concerning cut prices and rebates at Columbus,' as he was only a shipping clerk (and absolutely without knowledge regarding marketing matters) , his statements are purely malicious. On the general ques- tion of competition Y\'e always seek to protect our trade, and when any competitor makes a cut price for the purpose of taking our business away from us. (quality considered) we do not hesitate to meet it. DAILY DELIVERIES FROM TANK WAGONS. The statement that Mr. Gradwohl took in as high as S-00 a day with his tank wagon- is untrue. The largest delivery made by any tank wagon is about $100 per day, and would not average over $.oO per day. To deliver 3,000 gallons, or S300 worth, a day would average one 5-gallon bixoket every minute, ten hours per day, which would be a physical impossibility. I have Mr. Gradwohl'.s affidavit, which I submit . (See Exhibits.) Exhibit 8. The State of Ohio, Franklin Coujitij. ss: Moses K. Gradwohl, of lawful age, being duly sworn, upon his oath says: I am a tank-wagon driver in the employ of the Standard Oil Company at Columbus, Ohio, and was there at the time Mr. Clark was shipping clerk, and am the ■' Mose Gradwohl'' referred to in his testimony before the Industrial Commission at Washington. It is not true that I ever took in .s200 a day from my wagon. The largest day's delivery I ever made was about SlOO, and my average daily deliveries about 650. Moses K. Gradwohl. Subscribed and sworn to by said Moses K. Gradwohl before me this 30th day of August, 1899. [seal.] Charles S. M. Thrumm, Xotary Public. Franldin County, Ohio. STATEMENTS AS TO ARRANGEMENT WITH COMPETITORS AT COLUMBUS, COMPETITIVE BRANDS, AND PRICES OF EMPTY BARRELS. His statement with reference to having an arrangement with competitors to advance markets at Columbus ^ is false. Strong competition still exists, which in itself contradicts his statement. He had no knowledge on the subject, being only shijiping clerk at the works, located a mile and a half away. Therefore he would know nothing of what was going on in the office. His statement naming competitive brands of oil 8.,t Columbus is untrue,' their brands being Ohio State Test, Prime 'White, Peojile's Headlight, Suncene, 'Water "White, and Diamond Light — not Penoline, Safety Light, and Electric Light, as stated by him. Ohio State Test, Prime "White, and People's Headlight cover one grade of oil; Suncene and 'Water "White another; Diamond Light a third, showing clearly their trade requirements. His statements concerning the hiring of a boy to watch tank cars and being paid by him " are false. His statement that we took empty barrels at an exorbitant price in order to hold trade on oil-* is false. He had nothing to do with the purchasing or handling of empty barrels, and had no knowledge whatever about empty-barrel prices. Our price at Columbus is strictly uniform on empty barrels to all customers. His statement that he was manager at Urbana-' is untrue. His position was simply local agent, three-quarters of his time being occupied in driving a tank wagon. He did not have full charge of all the business as stated. THE CASE of WILLIAM HELMICK. His statement about 'William Helmick at Urbana is untrue.'' Mr. Helmick bought only one carload of competitive oil, and after he had sold about haK the car he became satisfied that he would lose m()n<^y on account of leakage and poor quality. "We helped him oirt by purchasing the other half of the car, and he dis- iS.M;pp. 334,:CK. ^Seepp. a3,5.:i3b. ■> See p. 337. = BL'e p. 335. < 8i>e p. 1330. STANDARD OIL COMBINATIONS: MATHEWS. 497 continued jobbing- oil, biit remained in the oil business as a peddler for about two years thereafter. We did not at any time drop the price while he was in business. On the contrary, what little oil Helmick marketed was sold by him at a cut price No threats were made by Mr. HoUingsworth or Mr. Welsh as stated by Clark. I have their affidavits, which I submit, and also the affidavit of W. H. Hurley. Exhibit 9. The Sta^te of Iowa, Louisa County, ss: H. S. HoUingsworth. of lawful age. being duly sworn, upon his oath, says: I am in the employ of the Standard Oil Company, at Columbus, and have been for several years. It is not true, as stated by W. H. Clark in his testimony before the Industrial Commission at Washington, that I ever made any threats of any kind to William Helmick, either alone or in company with Mr. Welsh and Mr. Clark, or either of them. H. S. HOLLINGSWOETH. Subscribed and sworn to by said H. S. HoUingsworth before me, this 30th dav of August, 1899. [SEAL.] • W. H. Hurley, Notary Public. Exhibit 10. The State op Ohio, Champaign County, ss.: William Welsh, of lawful age, being duly sworn, upon his oath says: am agent of the Standard Oil Company of Ohio at Urbana, and am the per- son referred to in the testimony of W. H." Clark before the Industrial Commis- sion as a cooper man from Springfield, Ohio, where I did formerly work for the company in the cooper shop. It is not true that I ever made any threats of any kind to William Helmick, of Urbana, Ohio, either alone or in company with Mr, HoUingsworth, or Mr. Clark, or either of them, but the statement of Mr. Clark in that respect is absolutely false. William Welsh. Subscribed and sworn to by said William Welsh before me, this 28th day of August, 1899. [seal.] W. M. Rock. Notary Public. ChannKiign County, Ohio. Exhibit 11. State of Iowa, Louisa County, ss : I, W. H. Hurley, a resident of Wapello, Louisa County, Iowa, on oath state that I am a notary public in and for Louisa County, Iowa, and at the instance of H. S. HoUingsworth did request one William Helmick to make . a deposition in regard to his relations and transactions with the Standard Oil Company of Ohio, at Urbaiua, Ohio. He was shown a copy of the testimony given by W. H. Clark before the Industrial Commission at Washington, D. C. He declared that the testimony, as shown him, in reference to himself was false and untrue, and partic- ularly referred to the causes as therein set forth in regard to his going to the poor- house, and that it was not brought about through any agency of the Standard Oil Company, but declined to make affidavit as to said falsity until he had communi- cated with the above referred to W. H. Clark. I state further that he made the above statement in the presence of myself and H. S. HoUingsworth. The copy of testimony referred to as having been shown to the said William Helmick is hereto attached and marked "Exhibit A." W. H. Hurley. Subscribed in my presence and sworn to before me by W. H. Hurley this 1st day of September, A. D. 1899. [seal.] J- Don. Daerow, Notary Public for Louisa County. [Here follows a copy of the part of Mr. Clark's testimony in question.] State op Iowa, Louisa Count y., is: I, H. S. HoUingsworth, first being duly sworn on oath, state that the above is a true copy in part of the stenographer's report of the testimony of W. H. Clark 498 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. before the Industrial Commission at "Washington. D. C, and is the copy that was shown Wm. Helmiol:: wlien he was requested to make a deposition as to truth or falsity of the statements therein contained. H. S. HOLLINGSWORTH. Subscribed in my presence and sworn to before me by H. S. HoUingsworth this 1st day of Septeiuber, A. D. 1899. [seal.] W. H. Hukley. Notary Public. Exhibit 12. The State of Ohio. Franklin CoHnli/. ^s : H. S. HoUingsworth, of lawful age, Ijeing duly sworn, upon his oath says: I reside at Columbus, Franklin County, Ohio. I have read the testimony of W. H. Clark before the Industrial Coiumissioji at Washington, D. C, in which he states that Wm. Helmiciv, formerly of Urbana. Ohio, has been unable to earn a liveli- hood in consequence of having been driven out of the w^holesale oil business at Urbana, Ohio, about four years prior to the present time. Deponent further saith that said Wm. Helmick, after quitting the wholesale oil business, continued in the retail oil business for a period of about two years, to the best of his knowl- edge and l)elief , and bought his supplies from the station of the Standard Oil Com- pany, at Urbana, Ohio. Subsequently, said Wm. Helmick retired from the retail oil business, and removed to Louisa County, Iowa, where, on or about August 31, 1899, I found him employed in the canning factory of Baxter Bros., at Wapello, Iowa, at his trade, that of a tinsmith, working at hard labor from ten to eighteen hours per day. I was informed by said Wm. Helmick and by Mr. Colby, the super- intendent of the factory, that he, said Wm. Helmick, had first been employed in his present capacity in 1898. Further deponent saith not. H. S. Hollingsworth. Sub-ici'ibed and sworn to by said H. S. HoUingsworth before me this 4th day of September, 1899. [SEAL.] H. IST. Standart, Notary Puhlic. Helmick's so-called warehouse that Clark refers to was simply a temporary shed made of refuse, old car lumber. It had no value except tor kindling woo&, and Helmick afterwards used it for that purpose. I have Mr. Thomas Powers's af&da- vit, which I submit. (Exhibit 13.) Exhibit 13. The State op Ohio, Champa icjih County, ss. Personally appeared befijre me, a notary public in and for said county, Thomas Powers, of lawful age. who, being duly sworn, deposes and says that he is a resi- dent of Url3ana, Champaign County, Ohio, and has been engaged in the business of draying for the past seventeen years; that he was acquainted with WiUiam Helmick, of Urbana, Ohio; that about three years ago he hauled apart carload of oil to a shed belonging to said Helmick, situated m the north part of the city of Urbana, near the city limits. The said shed was built of refuse Imnber and material, and in his opinion said shed was not worth more than ten dollars. Thos. Powers. Subscribed and sworn to by said Thomas Powers before me this 28th day of August, 1899. [SEAL.] W. M. EOCK, Notary Putitir, Cha)iqMign County, Ohio. Mr. Helmick did not lose any money during the few days he was trying to whoL3sale oil, therefore it is absurd iind maUcious for Clark to State that any action of ours drove Hidmick to the poorhouse. The loss of his money was due to an entirely different cause. I have the affidavit of N. P. Cone, which I submit. (Exhibit 14.) Exhibit 14. The State of Ohio, Cliainpaii/it County, ss: N. P. Cone, of lawful age, being duly sworn, upon his oath savs: 1 am a town- ship trustee of Urbana Township, Champaign Ci^unty, Ohio, and have been for STANDARD OIL COMBINATION!^ : MATHEWS. 499 eight years. I am acquainted with William Helmirk. formerly of Urbana, Cham- paign County, Ohio, and have been for twentv-five years past. I knew of his domestic troubles, having been informed of them bv himself, and have frequently heard him complain of the extravagance of his family. On March 3(i, 1S!»8, I signed an order committing said William Helmick to the county infirmary of Champaign County. Ohio, upon the report of several reputable citizens of Urbana, Ohio, of his destitute condition. The affiant further makes oath and savs that he believes the cause of destitution of said William Helmick to have been the extrava- gance of his family and other domestic troubles as complained of by him, and due to no other cause. N. P. Coke. Subscribed and sworn to before me by the said N. P. Cone this 29th day of August, 1899. [SEAL.] W. M. Rock. Notary Public, Cliaiiipai(jn County, Ohio. AMOUNT OF OIL SOLD AT UKBANA AND AT NEWARK. His statement that the business at Urbana ran about 40,000 to .jO,000 gallons per month' is false, the average being only about one-half. His statement that he held the position of manager at Newark ' is false. His position was that of local agent, same as at Urbana, three-fourths of his time being occrrpied in driving tank wagon and draj-. His statement that the average monthly output at Newark was 80.000 gallons ' is not true, the correct figures being less tiian one-half that amount. AS TO SELLING GASOLINE AND OIL AT DIFFERENT PEIOES TO DIFFERENT CUSTOJIEKS. With reference to variation in prices at Newark on stove gasoline,' the same situation was true elsewhere on account of the marked advance in price of gaso- line. Many dealers at the time of the advance were under contract for a period of time ; consequently the advance only applied to those who were not under con- tract, but as contracts expired the advance in price was c.harged to them as well as others. Answering the general statements made by Clark relative to selling refined oil at cut prices at Newark,' all dealers were treated alike. His statement that at Newark we charged Mr. Rankin 6 cents for oil and Showman Brothers 7-J- cents is false. The facts are Showman Brothers bought their oil in bulk from the tank wagon, while C. C. Rankin bought oil in barrels and paid 1+ cents per gallon more than Showraan Brothers paid for the same oil; btrt we allowed Rankin 7.5 cents when he returned the empty barrel, the equivalent of 1^ cents per gallon, which made the net cost to both dealers the same. His statement that Hagmeier, a dealer at Newark, was rebated 1 cent per gal- lon on gasoline and 3 cents on oil ' is false. Clark was given special permission to pay a rebate which was one-half cent per gallon, on both oil and gasoline, under a contract. Mi'. Clark paid the one-half cent himself, and then testified here that he paid 1 and 3 cents. He also presented a letter from George J. Hagmeier stating that he had received rebates, and I have an affidavit from Mr. Hagmeier showing how that letter was procured. (See Exhibit 15.) Exhibit 15. State of Ohio, Licking Comity: Before me, a notary public in and for said county, personally appeared George J. Hagmeier, who is well known to me, and being first duly sworn, deposes and says, that he has read the testimony of William H. Clark, given before the Indus- trial Commission at Washington, D. C. , wherein said Clark read a certain note or statement purporting to be signed i)y him. That on or about the 18th day of February, 1H98, said Clark came to him with a certain note or statement, which said Clark had previously prepared, and which said Clark requested affiant to 1 See p. :£!*. 500 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. sign. That to the best of this affiant's recollection, said note or statement was in the following language and figures, to- wit: "Feb. 18th, 1898.— Mr. Clark, Ag"t Standard Oil Co., has paid me a great many rebates on goods which were receipted for when given." Said Clark thereupon said to this affiant, and assigned as his reason for request- ing affiant's signature thereto, that he, said Clark, was short in his accounts with said Standard Oil Company, and that said shortage had been occasioned, in fact, hj the payment of the rebates in said statement mentioned to this affiant, and that he desired to use said statement in accounting to said company for said shortage in his accounts. That said Clark assigned no other reason for desiring affiant's signature to said statement, and thereupon, and in order to assist said Clark in straightening his accounts with said company, affiant signed said state- ment as presented to him by said Clark, and in substance as above set forth. And further affiant saith not. Geo. J. Hagmeiek. Sworn to before me and signed in my presence by George J. Hagmeier this 2d day of September, A. D. 1899. "Walter A. Irvine, [seal.] Notary Public in and for Licking County, Ohio. I have another affidavit from Mr. Hagmeier regarding rebates, which I sub mit. (See Exhibit 16.) Exhibit 16. State of Ohio, Licking County, ss : George J. Hagmeier, of lawful age, being duly sworn, upon his oath says: 1 am a merchant operating the Pittsburg grocery stores, at different points. At the Newark branch I have had numerous business dealings with the Standard Oil Company through its former local agent, "W". H. Clark. Under contract for a large quantity (my entire consumption for a certain period) , I have received a rebate of i cent per gallon on both oil and gasoline. It is not true that I ever received a rebate of 1 cent per gallon on gasoline and 2 cents per gallon on oil. I never received more than the -I cent per gallon as per contract as aforesaid. Geo. J. Hagmeier. Subscribed and sworn to bv said Geo. J. Hagmeier befor* me, this 30th day of August, 1899. [seal.] ' David M. KsIjL.'er, Notary Public. no frauds or tricks in lamp tests. His statement that we used a trick in making lamp test is untrue.' Competitors marketed an oil from Ohio crude, which was full of sulphur, at a reduced price; and as the dealers mixed this high-sulphur oil with our oil in their storage tank, and as the consumers were complaining about the quality, we were compelled to ask the dealers to keep our oil separate, that they might know whose oil was pro- ducing the trouble when their customers complaineii. It seemed impracticable in some cases for the dealers to have two storage tanks, so we were compelled, at a very large expense, to put on canvassers to visit the consumers and prove to them, by actual demonstration, that the standard quality of our oil had not been changed. Similar tests were made with the retail storekeepers, and it is the height of folly for any man to say that the people could be humbugged by the turning up of one flame higher than the other. That you gentlemen may fully understand the falsity of the statement made by Clark in relation to the drawing of several grades of oil from one tank by a "twist of the wrist,'' I wish to say that we have a tank wagon at Newark with three compartments, showing conclusively that we carry three grades of goods. He states that D. J. Hull, H. S. HoUingsworth, E. G. Mathews, "W. "W. Hughes, and "W. A. Reed, all employees of the Standard Oil Company, had knowledge of frauds as testified to by him in making lamp tests. '^ Mr. "W". A. Reed is not in our employ and was not at the time Mr. Clark testified. I submit the affidavits of all these gentlemen to prove the falsity of Clark's statements. 1 See p. Si ■>. "- See p. 347. STANDARD OIL COJIBINATIONS: MATHEWS. 501 Exhibit 17. The State of Ohio, Cliampaign Comitij, ss: D. J. Hull, of lawfnl age, being duly swovu. upon his oath says: 1 am in the employment of the Standard Oil Company of Ohio, and have been for several years. I have read the statement of the testimony of W. H. Clark before the Industrial Commission at Washington with reference to testing Ohio and Penn- sylvania oils, and giving my name as one who could corroborate his statements. I desire to say that his statements as to the method of these tests are aljsolutely false. I never heard of any instructions or any practice of the character stated by him. When these comparative tests are made, lamps of the same size, burn- ers of the same kind, wicks of the same make, and chimneys of the same make are always used, and at the beginning of the test the height of the flame in each lamp is precisely the same. I never knew of any deception being used in these tests. D. J. Hull. Subscribed and sworn to l)v said D. J. Hull before me, this 2«th day of August. 1899. [SEAL.] W. F. Rl\u, Xotary Public. Exhibit in. The State of Ohio, Franklin Cdinifij, ,s'.s.- H. S. Hollingsworth, of lawful age, being duly sworn, upon his oath says: I am in the employment of the Standard Oil Company of Ohio, and have been for several years. I have read a statement of the testimony of W. H. Clark before the Industrial Commission at Washington with reference to testing Ohio and Penn- sylvania oils, and giving my name as one who could corroborate his statements. I desire to say that his statements as to the method of these tests are absolutely false. I never heard of any instructions or any practice of the character stated by him. When these comparative tests are made, lamps of the same size, burners of the same kind, wicks of the same make, and chimneys of the same make are always used, and at the beginning of the test the height of the flame in each lamp is precisely the same. I never knew of any deception being used in these tests. H. S. HOLLIXGSWOETH. Subscribed and sworn to by said H. S. Hollingsworth before me, this 2Hth day of August, 1899. [seal.] Erxest T. Hare, Xoiary Public. Fnnikliii Counitj. Ohio. Exhibit 19. The State of Ohio, Franklin County, ss: E. G. Mathews, of lawful age, being duly sworn, upon his oath says: I am in the employment of the Standard Oil Company of Ohio, and have been for several years. I have read a statement of the testimony of W. H. Clark before the Industrial Commission at Washington with reference to testing Ohio and Penn- sylvania oils, and giving my name as one who could corroborate his statements. I desire to say that his statements as to the method of these tests are absolutely false. I never heard of any instructions or any practice of the character stated by him. When these comparative tests are made, lamps of the same size, burners of the same kind, wicks of the same make, and chimneys of the same make are always used, and at the beginning of the test the height of the flame in each lamp is precisely the same. I never knew of any ileception being used in these tests. E. G. Mathews. Subscribed and sworn to by said E. G. Mathews before me, this 2,sth day of August, 1899. ^ ^ „ rgE^Li Erxest T. Hare. Notary Public. Franklin County, Ohio. Exhibit -'ii. The State of Ohio, Licking County. ■•<■■<: W W Hughes of lawful age, being duly sworn, upon his oath says : I am in the employment of the Standard Oil Ci .mpany of Ohio, and have lieen for several 83a 33 502 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. years. I have read a statement of the testimony of W. H. Clark before the Industrial Commission at Washington with reference to testing Ohio and Penn- sylvania oils, and giving my name as one who could corroborate his statements. I desire to say that his statements as to the method of- these tests are absolutely false. I never heard of any instructions or any practice of the character stated by him. Wlieu these comparative tests are made, lamps of the same size, burners of the same kind, mcks of the same make, and chimneys of the same make are always used, and at the beginning of the test the height of the flame in each lamp is precisely the same. I never knew of any deception being used in these tests. W. W. Hughes. Subscribed and sworn to bj^ said W. W. Hughes before me. this 30th day of August, IsOil. Frederic M. Black, [seal.] Aotary Public. Exhibit 31. The State op Ohio, Washington County, ss: W. A. Eeed. of lawful age, being duly sworn, upon his oath says: I was in tlie employment of the Standard Oil Company of Ohio, as its agent in Marietta up to November 1. 1898, but since that time have not been connected with the com- pany. I have read a statement of the testimony of W. H. Clark before the Industrial Commission at Washington with reference to testing Ohio and Penn- sylvania oils, and giving my name as one who could corroborate his statements. I desire to say that his statements as to the method of these tests are absolutely false. I never heard of any instructions or any practice of the character stated by him. When these comparative tests are made, lamps of the same size, burners of the same kind, wicks of the same make, and chimneys of the same make, are always used, and at the beginning of the test the height of the flame in each lamp is precisely the same. I never knew of any deception being used in these tests. W. A. Reed. Subscribed and sworn to by said W. A. Reed, before me, this 31st day of August, 1899. [seal.] Frank Paxhoest, Notary Public. Washington County. Ohio. lubricating oils. Concerning his general statement on lubricating oils.' he refers to our trade- mark brands on which there is no competition and for which we have a regular schedule, the price varying only in accordance with the quantitv used and the cost of delivering same to customers. Inasmuch as no competitor can sell these oils, there is no necessity for our making any different price other than our schedule. THE alleged purchase OP A WABEIK.IUSE TO DRI\-E A COMPETITOR OUT OP BUSINESS. His statements concerning the purchase and removal of an alleged warehouse at Newark, in order to drive out a competitor,-' are false. After the so-called warehouse was purchased, Donaldsou, the person whom Clark claimed we drove out of business by the purchase of a shed from its owner (without Donaldson's knowledge), continued in business by renting a barn. Further, Clark purchased the shed unknown to and unauthorized by me or Mr. Hollings worth, and moved the building to his (Clark's) own private li )t, for his (iwn private use, and paid for by him, and not by us. We derived no benefit from the ti-ansaction, and I criticised Clark severely when the subject came to my notice. This so-called warehouse, emphasized so largely by Clark, was only an old shed, about 4 feet by i feet, with capacity for ' Si.-r pp. ;«l, sill, 5(15. 2 Seu p. 340. STANDARD OIL COMBINATIONS: MATHEWS. 503 simply one barrel of oil. I have photograph of shed and Mr. Hollingsworth's afQdavit, which I siibmit. Exhibit 33. The State of Iowa, Louisa County, ss : H. S. HoUingsworth, of lawful age, being duly sworn, upon his oath, says: I am in the employ of the Standard Oil Company of Ohio, and have been for several years. With reference to the purchase of a warehouse at Newark, which W. H. Clark, in his testimony before the Industrial Commission, mentions, I desire to say that I did not authorize this purchase, nor did I know of it before it was made, and it is not true that I offered Mr. Clark a two-weeks vacation on salary, or any consideration of any kind whatever, if he would get Donaldson out of the busi- ness. The first I knew of the transaction, Clark had purchased the building for S2.50, and moved it on to his own private lot. and Clark stated to me that he bought the shed on account of needing it for an outhouse. The so-called " ware- house" was about 4 feet by 4 feet, with a capacity for storing a single barrel of oil, and in my judgment $3.50 was an excessive price for it. The purchase of the shed did not drive Donaldson out of the business, for he rented a barn afterwards in which to store Ms barreled oil. H. S. HOLLINGSWORTH. Subscribed and sworn to by said H. S. HoUingsworth, before me, this 30th day of August, 1899. [SEAL.] W. H. Hurley, Notary Public. Referring to his statement concerning Mr. King, and others at Newark, run- ning tank wagons,' it is very misleading because the term generally applies to our method of delivery to the retail trade, whereas they were peddlers who ran their own wagons, bought their oil from us and made whatever price to the consumer they desired and were practically regulated by the price made by retail stores. We had nothing whatever to do with fixing such prices— these peddlers all work- ing for themselves. 1 Ki-e II. :I4-;, 504 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CIRCUMSTANCES UNDER WHICH MR. CLABK LEFT THE STANDARD. ]Mr. Lockwood was not a manager ' nor a sipecial inspector, but simply a travel- ing auditor, whose duty it was to visit stations, check up stocks, balance cash, check accounts, and see that our agents were conducting the business honestly. Mr. Clark's reports were not received regularly, and after I had requested him repeatedly to give the matter prompt attention (and he had failed to do so) , at my request Mr. Lockwood was sent to Newark to check Clark up. He did so, and after balancing the cash (which is the first thing an auditor does) he found it short. This was reported to me and I suspended Clark until Mr. Lockwood had completed his examination. Further investigation disclosed the fact that col- lections had been made by Clark and not reported. Some of these items were made good by Clark from day to day by payments to Mr. Lockwood on the theory that they were errors. They, however, became so numerous that Mr. Lockwood finally refused to receive any more payments until he had completed his exami- nation, when, according to custom, he would make a final report and leave the adjustment to the officers of the company. From the time I suspended him np to date I have never tried to reengage him, directly or indirectly, through Mr. Fonts or anyone else.' I submit Mr. Fouts's affidavit showing that he has not. Exhibit 38. The State of Ohio, Fr'aiiklin County, ss: R. A. Foutz, of lawful age, being duly sworn, upon his oath says: I am in the employ of the Standard Oil Company, and am the person referred to in the testi- mony of W. H. Clark before the Industrial Commission. It is not true, as stated by him, that since Clark's discharge by the Standard Oil Company I have asked him to reenter the company's employ, or ever asked him how he would work for the company again. I am a traveling man and have no authority whatever to employ for the company, and I have never had any talk of any land whatever with Mr. Clark upon the subject. R. A. FouTS. Subscribed and sworn to by said R. A. Foutz before me this 38th day of August, 1899. [SEAL.] E. L. Pease, Xotary Priblic. Fianklin County, Ohio. Nor is there any truth in his statement concerning our methods of deducting from his salary errors which others made. ■ The inspector's report referred to, ' a copy of which he filed with you, is not a part of the auditor's work, nor did the auditor have anything whatever to do with it, nor was it made out by him at that time, nor at any other time; consequently Clark's statements concerning it are false. The blank referred to is the one that I require filled out by a special agent as occasion re(iuires. Since my arrival in "Washington I have examined the inspector's report submitted by Clark, and find that it is signed by H. S. Hollingsworth," who made the inspection and filled out the blank. The final rejjort of our auditor showed Mr. Clark's shortage to be 8331. .'ji. He made good 8131. '.)3. The balance, 8109.64, was paid in full by his bonding com- pany after they had examined the report and found it correct. He was finally arrested by the bonding company, wlio had signed his bond as agent. Q. (By Mr. Phillips.) What became of him after his arrest'?— A. He was arrested on a charge of embezzling 8109.64, which is a sunr largely in excess of the amount, 885, required under (')hio laws to constitute a felony. He was bound over by the examining magistrate. It appears that the aggregate was taken in small sums, and at different times, no one amounting to S8,"i, or sufficient to con- stitute a felony under the Ohio statutes. Therefore, I understand the grand jury failed to indict, on the ground that the off:enses could not be joined together, and no felony had been committed; (jnly petty larceny. DIFFERENCES OP PRICE. Q. (By Mr. Jenks.) One or two questions as to the general method of doing business. You state in your testimony that wherever you have known of rivals cutting rates you intended to meet them t(j protect yourself. It is true, I sup- ' See 1). :U;.', •■! Sc.. p. :IU. ■■< Sec p. -Ur,. ' See p. '.US. "Sec Ml-. J iollingsworth's .signature, p.:j44; also date of iiispeetion report, - yeaj'sand i months 1)efi>re Mi-. Clark -was dismissed. STANDARD OIL COMBINATIONS: MATHEWS,. 505 pose, that you had some special contracts, and in that way sold at somewhat different rates to different dealers? — A. Occasionally we have a special contract, the consideration being that the dealer buys his entire supply from us. But these contracts are very limited in number, and the concession very rarely exceeds one- half cent a gallon. Q. So that it would be possible that Mr. Clark would have received instruc- tions from you to sell the same quality of oil to different dealers at different rates under these contracts you had made?— A. As 1 stated, we had contracts on stove gasoline, two or three of them, in Newark, at a time gasoline advanced, and the advance did not apply to these dealers until the contract expired. That made two different prices at Newark on stove gasoline at that time. Q. You would not be likely, then, you think, to have contracts with different dealers in the same place, covering the same time, under which the same grade of oil would be sold at different prices?— A. There might be an exceptional case of that kind. Q. The different prices being granted, as you have suggested, in consideration of the buyers purchasing their entire supply of you ? — A. Yes. Q. Do you recollect special instances, for example, of instructions to sell Capitol cylinder oil to these different parties, Mr. Lingafelter and the Newark Water Works, at 33 and 31 ? — A. I do not remember. These contracts on lubricating oil are largely conditioned upon the quantity of oil purchased by the consumer and the expense of delivering.' Q. Some slight variation on that account made from time to time? — A. Yes. Q. (By Mr. Smyth.) Such a variation as that might arise in any business, might it not? — A. Certainly. Q. (By Mr. Clark.) That, you say, is confined to lubricating oil?— A. These are lubricating prices. Q. (By Mr. Jenks.) The variations in prices, I understand you to say. are much less than 1 cent a gallon? — A. On illuminating oil, I do not recall any case where it is more than a half cent. WATCHI^'(i rivals" business. Q. Reference was made by Mr. Clark.- and reference has also been made l:iy other witnesses,'* to the way in which the Standard Oil Company has secured information regarding the business of its rivals. You yourself have referred to it; it is your custom to have reports from your different agents? — A. We ask our salesmen and our agents to keep their eyes open and keep us informed of the situation in their respective fields. We ask our agents, as they visit, the trade, to make reports to us of whom the different parties are buying; principally to know whether our agents are attending to their business or not. If they are letting too much business get away from them, it looks as if they were not attending to their business. They get it from what they see as they go around selling goods. Q. (By Mr. Jenks.) Where competition is fierce do you engage anyone to follow the competitor's wagon about to find out what prices he sells at and to whom he sells?'' — A. No, sir; I do not recall any case of that kind. Q. Have you yourself secured reports, or has there been any case that you know of in which reports of rivals' business have been secured from employees of those rivals?" — A. No, sir; never. Q. You instruct your local agents, I infer from what you state here, as to the prices at which they are to sell lubricating oil to different dealers? — A. The prices they are to receive represent either an arrangement or contract made with the different firms for oil at certain periods at these prices, and the arrangement is made with the understanding that we are to have the entire business for a certain period, possibly a year. Q. (By Mr. Smyth.) Have you not under these contracts reduced the price dur- ing the year when you had a contract, say o'3 cents for Cai^itol cylinder oil — have you not voluntarily reduced the price one-half cent? — A. Notwithstanding the contract, we may have done that on a declining market. Q. (By Mr. Jenks.) In the selling of lubricating oils to railroads, do yim, in in the same way, instruct your agents as to the prices they are to charge? — A. I do not have anything to do with railroad oils; they are handled by our people in Cleveland. Q. You have no knowledge on that subject at all? — A. I have no knowledge on that subject. 1 See pp. 3.39, nlti. '■' See pp.. 31:3, 31li. 35H. 3(;«. ' See pp. 31(5, 3.56. 2 See pp. ;33.-). :33B, 341 . " See pp. 313, :34] . 506 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Phillips.) Is it your custom to put down oil in one locality, where there is competition, as a rule? Do you make that a rule? — A. No, sir; we never do it unless the competitor makes the cut in price first and forces us to it. When the competitor makes a cut in prices we d(.i not hesitate to meet the price to hold our business. Q. You do not take the lead in the State of Ohio, under your jurisdiction, then, • in cutting prices when there is an independent refinery that ships oil into that locality? — A. No, sir; we do not.' Q. (By Mr. Ratchford.) In what capacity are you serving the Standard Oil Company now? — A. I have charge of a marketing department of the company. Q. For the State of Ohio? — A. The central and southern portions of Ohio. Q. You have presented a dozen or more affidavits from the gentlemen whose names are signed. Are all those gentlemen employees of the Standard Oil Company? — A. Not all of them: probably three-fourths. Q. Have the affidavits come to you voluntarily from these men ? — A. Yes. Q. Without any solicitation ? — A. Simply uj^on being shown the testimony and being asked if correct, and whether they desired to make affidavit. It has all been voluntary on their part. Q. I see the affidavits you have read are similar both in language and appear- ance. Were they gotten up in your office or some office of the Standard Oil Com- pany and sent to the employees? — A. Some of these affidavits — not all of them, but a number of them, were gotten up in my office, covering the points of Clark's testimony, and were then submitted to the person concerned, and he was asked whether the facts contained in the affidavit were true, and if they were, whether he was willing to sign it. Q. (By Mr. Sjiyth.) I suppose that was largely a matter of convenience? — A. Yes. Q. (By Mr. Ratchford.) Were there any affidavits asked from employees who refused to give them ? — A. No. Q. They gave an affidavit in every case ? — A. Yes. sir; everyone. (Testimony closed.) Washingtux, D. C, September S, 1S99. TESTIMONY OF MR. JOHN D. ARCHBOLD. At a meeting of the United States Industrial Commission, held in Washington, D. C. , September 8, 1899. Vice Chairman Phillips presiding, Mr. John D. Archbold, after being duly sworn, testified on the subject of trusts, as follows: Q. (By Mr. Jexks. ) Will you kindly give your name and address to the stenog- rapher? — A. John D. Archbold, New York City. Q. What is your relation with the Standard Oil Company? — A. I am vice-presi- dent of the Standard Oil Company of New York. Q. How long have you been connected with the Standard Oil Company?— A. Since IK?.'). Q. Have yoiT. in anticipation of this examination, prepared any special state- ment for the use of the commissiim? — A. I have. Q. I shall be glad if you will give that first, and then we will question after- wards. — A. The general statement in answer to specific inquiries is not quite ready, and that will be furnished you within a few days. Q. You mean in answer to the general schedule? — A. Yes. Q. (By Mr. Smyth. ) I think it would be well to ask Mr. Archbold just at this stage to give us some detailed account of the organization of the Standard Oil Company— its different departments. We do not want the names of the indi- viduals, but your transportation department — how is it managed? — A. That will all be furnished — all a part of the statement just in course of preparation. Q. (By Mr. Jen'ks.) You will give a general statement in your own way of the points you care to bring out. The Witness. It would be a matter of preference to me. and I think it would make what I have to say more intelligible to you all, if I might first be allowed to answer the criticisms of the witnesses who have appeared, and so let my answers lead up to a short general .statement which I might make at the last. i('f. pp. W.Ml STANDARD OIL COMBINATIONS: ARCHBOLD. 507 The Chairman. Certainly. The Witness. Shall I proceed? The Chairman. Yes. J. W. LEE THE HEAD OP A TRUST. The Witness. I answer first the testimony of Mr. J. W. Lee of Pittsburg. It is rather remarkable, gentlemen, that the first witness to appear before yon as a special critic of onr business on the ground of its being a trust, should, at the outset, have acknowledged himself to be not only a member of, but the real head of a trust. This Mr. Lee specifically does acknowledge,' and I may say tor your information, that Mr. Lee and his associates have gone a step further than any other company that I know of, in that they have bound themselves together, not only by the ordinary trust ties, but in a voting trust, made up of a ma.jority of the stock of their principal companies, with a view to perpetuating their faction in power indefinitely, and practically disfranchising the minority. I make this statement, gentlemen, not as a criticism, but as rather a striking evidence of the irresistible tendency toward combination. VOTIXG TRUST CONTRACT OF THE UNITED STATES PIPE LINE COMPANY. I hand you a copy of the voting trust of the United States Pipe Line. The original trustee under it was a Mr. Wood, who has since died. He has been suc- ceeded, under this voting trust, by three trustees, viz. Thomas W. Phillips, L. Emery, jr., and Hugh Kin^. Agi-eement made April 2ii. 1893. is as follows: "Whereas each of the undersigned is a subscriber to the capital stock of the United States Pipe Line Company, and is now a stockholder thereof, and each is interested pecuniarily in the oil business either as refiner, producer of crude, exporter, owner of terminal facilities at or near tidewater, or dealers in petro- leum and its products for domestic consumption; "And whereas we have each of us entered into the organization of the said United States Pipe Line Company for the purposes expressed in its charter, and with the further intent and purpose to secure and furnish to each of us an inde- pendent outlet for our products, both crude and refined, not controlled or influ- enced by others hostile to our respective business interests, and to secure cheaj^er and better transportation facilities and available markets for our respective products; "And whereas, to that end, xhe owners of several oil refineries located in thb interior and at the seaboard, in which said refineries some of the undersigned are owners in whole or in part , have by agreements based upon lawful and sufficient considerations entered into contracts to furnish to the said United States Pipe Line Company the product of said refineries for transportation, and said company has also contracts for crude oil for transportation from the wells, and for furnish- ing terminal and export facilities at tidewater, as by said contracts and agree- ments will fully appear; "Now, therefore, in consideration of the premises and of good, lawful, and sufBcient pecuniary and other considerations mutually and severally received, and in order to secure the successful completion of the oil-pipe lines projected and now being laid by the said United States Pipe Line Company, with storage tanks, terminal, transportation and export facilities, and to each of us in his busi- ness, the benefits of the several contracts, agreements, plans of operation, secured or being negotiated, made or in contemplation, and to keep the control of the stock of the United States Pipe Line Company in hands friendl)' to the interests of the undersigned as aforesaid, we the undersigned do bind ourselves, each for himself, severally and not jointly, and each to the others jointly, to the following- stipulations, covenants and agreements, each in the sum of one hundred (100) dollars for each share of stock now held by each subscriber, the amount of which is by him now placed opposite his signature hereto, to wit: " 1. We and each of us agree, in manner aforesaid, that all of our interests as subscribers to the capital stock of the United States Pipe Line Company, and our rights under our respective contracts of suliscription. and all of our stock as soon as paid up, the certificates therefor and the receipts for the installments paid, be vested in and issued to A. D. Wood, trustee, who shall hold the same for each of us proportionately in trust for the term of five years from the first day ' Compare Mr. Phillips, pp. 5S!l. .'I'.lL TjII.t 508 HEARINGS BEFORE THE IMDUHTRIAL COMMISSION. of April, 1H!)3, at which date, unless this agreement should be extended for a fur- ther term, said trustee shall assign and transfer to each of rrs the stock and cer- tificates so held, unless sooner terminated by a vote of three-quarters of the stock so held in trust. " 3. We further agree and bind ourselves that each of us, not more than 30 days prior to each regular annual meeting of stockholders, or before any lavyfully called special meeting thereof, will make and mail or deliver to said trustee a power of attorney or proxy to vote for each of us at such meeting or any adjournments thereof, and in case said trustee shall not receive said power of attorney or proxy, in time for use at the same, each hereby constitutes the said A. D. Wood attorney in fact to make and sign said proxy or power of attorney in ( lur names for each of us, empowering him, the said trustee, to vote at said meeting or meetings for each. " 3. It is further agret'd that upon reqirest in writing of any of the undersigned to said trustee, that he as the equitable owner of said stock or interest in capital, desires to pledge the same for a loan of money to the said equitable owner, the said trustee shall, within 4y hours after receiving notice of the name and location of the lender of said money, acquaint a majority of the board of directors of said request and of the name and address of said proposed lender, and shall within thirty (30) days thereafter either lend or furnish to the said applicant an equal amount of mfjuey, upon the same time, at the same rate of interest, upon the security of said stock or interest in capital, or else shall in proper legal form assign or pledge the said stock or part thereof, to the lender designated by the said equitable owner of said stock, "4. It is further agTeed that no sales of stock so held in trust shall be made by the equitable owner thereof during the continuance of this trust. 'o. In the event of the death, resignation, or disability of the trustee herein named, his successor .shall be appointed 1 >y the vote of three-quarters in interest of the signers hereof. The said successor, when appointed, shall have all the powers and shall perform the duties of the trustee herein desi,gnated, failing to do which, he, or the trustee hereby appointed, may be removed by a three-quarter vote of the stock in interest hereof. " In the e^'ent of suit being brought to enforce this agreement, or for the stipu- lated damages for breach tliereof . the same shall be in the name of the said trus- tee and for the benefit of all not delinquent, as hereinbefore provideil. •■ The said trustee, who shall be a .stockholder in the United States Pipe Line Company, shall not be held liable, personally, except for gross negligence or for the violation of this agreement in its letter or spirit. He shall, before entering upon his duties, accej)t this aj)i:)ointment in writing, and at the same time enter into a bond or obligation of five thousand (.T.OOO) dollars that he will faithfully discharge his duties in accordance with the terms and spirit of this contract. " It is further understood and agreed that in voting said stock the parties hereto and said trustee shall vote for persons as dii-ectors, interested in the business of refining, producing, and exporting oil, ;is herein stated and as near as may for members of each in proportion to the interest of eaidi class of capital. "In witness whereof the said parties have hereunto set their hands and seals the day and year first above written. "I, . named as trustee in the foregoing instrument, do hereby accept the duties of the trust, and bind myself ti i perform the same in accordance with law and the letter and spirit of said agreement, in the sum of five thousand (•"),000) dollars, to be paid upon breach hereof. ■■ . [L.S,] ■'April , IWK!." VOTING TRUST AUREEjrENT OP THE PURE OIL COMPANY. I present, also, as being, perhaps, more easily irnderstood. a printed copy of the trust agreement in full, the voting trust m full, of tlie Pure Oil Company.' ■' This agreement, made and entered into by the Pure Oil Company, a corpora- tion organized and existing under the laws of the State of New Jersey; David ' A later modified form of this trust agreement, involving many verbal changes and some important oiies, is furnished to the commission by Mr, J. W. Lee. It is ;is follows: Tills agTeement, made and entered into by the Pure Oil Company, a corpora- tion organizeil and existing under the laws of the State of New Jersey, David Kirk, Jerome B. Akin, Marcus L. Lockwood, Walter A. Dennisoii. Clias. H. Dun- can, Theodore B. Westgate. Win. L. Curtis. James W. Lee. and David Kirk. STANDARD OIL COMBINATIO^fS : ARCHBOLl). 609 Kirk, Jerome B. Akin, Marcns L. Lockwood, Walter A. Deimison, Charles H. Duncan. Theodore B. Westgate. Wm. L. Curtis, James W. Lee, and David Kirk, trustee for the MeCalniont Oil Company, severally STihsi'ribers to and owners of the capital stock of the said Pure Oil Company: and Thomas W. Phillips, Lewis Emery, jr,. Ruf us Scott, Clarence Walker, Louis Walz, James W. Lee. David Kirk, Marcus L. Lockwood. Jerome B. Akin, Cht^rles H. Duncan. Hugh King, Michael Murphy. Adolphus A. Hoch. Ferdinand Reiber, and Walter A. Deimison, parties mutually agreed upon to exercise the trusts created hereunder. ' ' Witnesseth. That whereas, the said Pure Oil Company is formed for the purp( ise of engaging in directly and i )f aiding other companies and parties engaged in the production, transportation, storage, manufacture and sale of crude petroleum and its products, and in any business incident theretcj, and it is desiied to enlist therein the co-operation of other parties, and to procui'e capital to Ije investeil in the shares of its capital stock, and in such other ways as may be desirable, which investments are to be solicited from parties not now interested in the company: and 'whereas, it is ad\'isable, equitable, essential, and intended for the safety and advantage of all interests that the control of the said Pure Oil Company trustees for the McCalmont Oil Company, and Thomas W. Phillips. Lewis Emery, jr., Rufus Scott. Clarence Walker, Lewis Walz, James W. Lee, David Kirk. Marcus L. Lockwood. Jerome B. Akin, Charles H. Duncan, Hugh King, Michael Murphy. Adolphus Hoch, Ferdinand Reiber, and Walter A. Dennison, parties mutually agreed upon to exercise the trusts created hereunder: . Witnesseth. that whereas the said Pure Oil Company is formed for the jjurpose of engaging in, directly, and of aiding other companies and j)arties engaged in the production, transportation, storage, manufacture and sale of crude petroleum and its products, and in any business incident thereto; and it is desired to enlist therein the cooperation of other parties, and to procure capital to be invested in the shares of its capital stock, and in such other ways as may be desirable, which investments are to be solicited from parties not now interested in the company, and. Whereas it is advisable, equitable, essential, and intended for the safety and advantage of all interests that the control of the said Pure Oil Company shall be so created as to prevent and render impossible at all times the diversion of its resources and business from their intended use and course, in opposition to monopoly in the bu,siness. and to protect and maintain what are known as " the independent interests" in the petroleum industry, and to maintain the policy agreed on for conducting the business of the company, created by mutual agree- ment of shareholders or by operation of law; Therefore the said parties hereto, in consideration of the sum of one dollar by each to each of the others paid, the receipt of which is hereby acknowledged by each, and in further consideration of the mutual benefits received, to be received. or expected from the agreements, covenants, and trusts hereinafter contained, and from the undertakings and business to be promoted, do hereby agree and consent to the various acts and things hereinafter set forth; provided, however, that no party hereto shall be bound to do any act or thing or be responsible for the results or consequences of any act or thing done (jr omitted to be done, except so far as relates to such act or things as he himself exi)ressly undertakes to do and perform; and do further agree as follows; First. The capital stock of the Pure Oil Company as authorized in' its certifi- cate of organization, is to be one million ($1,000,000) dollars, represented by two hundred thousand (200,000) shares, of the legal par value of five (§5.00) dollars each, divided into classes, and to be issued, held and transferred, subject and according to law and the l.iy-laws, rules and regulations adopted and approved by all the shareholders of the company, a copy of which is hereto attached and referred to. Second. The said David Kirk. Jerome B. Akin, Marcus L. Lockwood, Walter A. Dennison, Chas. H.Duncan, Theodore B. Westgate, Wm. L.Curtis, James W. Lee, and David Kirk, trustee for the McCalmont Oil Company, are the owners of all the sharesof the capital stock now subscribed, amounting to three thousand (:3.(I00 ) shares, of which they hereby transfer to the said Thomas W. Phillips, Lewis Emery, ir. Rufus Scott, Clarence Walker, Louis Walz, James W. Lee, David Kirk, Marcus L. Lockwood, Jerome B. Akin, Chas. H. Duncan, Hugh King, Michael Murphy. Adolphus A. Hoch, Ferdinand Reiber, and Walter A. Dennison, sixteen hundred (1 600) shares, being more than a majority of the shares of the company now sub- scribed, and agree that one-half of all the shares hereafter subscribed and issued shall be transferred in like manner to the said parties and their associate trustees. as any may be appointed, to be by them held in trust, for -20 years from orgauiza- 510 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. tioii of shall be secured permanently, as to prevent and render impossible at all times the diversion of its resources and business from their intended nse and course, in opposition to monopoly in the business, and to permanently protect and maintain wlia.t are known as the ' independent interests ' in the petroleum industry, and to maintain the policy agreed on for conducting the business of the company in the interest and for the protection of all rights in the company, created by mutual agreement of shareholders, or by operation of law ; therefore the said parties hereto, in consideration of the sum of one dollar by each to each of the others paid, the receipt of which is hereby acknowledged by each, and in further consideration of the mutual benefits received, to be received, or expected from the agreements, covenants, and trusts hereinafter contained, and from the undertakings and busi- ness to be promoted, do hereby agree and consent to the various acts and things hereinafter set forth; provided, however, that no party hereto shall be bound to do any act or thing, or be responsible for the results or consequences of any act or thing done or omitted to l)e done, except so far as relates to such act or thing as he himself expressly undertakes to do and perform ; and do further agi-ee as follows: "First. The capital stock of the Pure Oil Company, as authorized in its certifi- tion of the eonrpany, for the uses and purposes herein proposed, and subject to the terms and conditions as follows: 1 . The equitable ownership of the trust shares and all interests therein shall be subject to the terms of this trust agreement. Such ownership of the shares or interests therein may be sold at the will of the holder, but no sale, transfer, or conveyance of such ownership or interests shall give to the purchaser any rights other tliau are provided for in the by-laws, rules, and regulations of tlie company, and in accordance with this trust. Tlie trustees hereunder shall at all times be recognized as the legal c)^\^lers and holders of the trust shares, to carry into effect the purposes of this trust, and all equitable owners of the trust shares or interests therein shall specifically agree in writing to the terms of this trust; and no trans- fer of any such shares or interests shall be made, or be effected, if made, until the transferee of any such e(iuita1)le ownership or interest shall have agreed in writ- ing to receive and hold the same subject to the provisions of this trust. 2. At all meetings of the company for the election of directors, or for any other purposes, to cast the entire number of votes which, as holders of the said shares, they would be entitled tn cast. 8. Each trustee at such meetings shall be entitled to cast an equal number of all the votes which all of the trustees would be entitled to cast in the aggregate, if present, except as hereinafter provided. 4. In case of differences of opinion among the trustees present at any such meetings as to how such votes shall be cast in regard to any matter or thing to be voted on, they shall be cast as the representatives of four-fifths of all the shares held under this trust may direct in writing, if so demanded in writing by any of the trustees. 5. Any trustee unable to attend any meeting of shareholders and to personally cast the votes he would be entitled to cast if present, may authorize any other trustee to cast the vote which he would be entitled to cast if personally present, which authonty shall be in writing, approved by three-fifths of the trustees other than himself. 6. When none of the trustees can be present at any meeting of the stockholders, legally held, they may be represented in proxy l)y an attorney appointed in wi'it- ing, executed by three-fifths of the trustees. 7. The trustees may exercise such consent in writing as in their opinion it may be right and proper for them to do in the interests of the Pure Oil Company, and of the owners of the shares held by them in trust; provided that no such consents shall be executed against the objection of the equitable owners of 10 per cent of the shares held by them in trust, unless after the question of executing such con- sent .shall have been submitted in person, or by writing properly addressed, to the sever;il equitable owners of the shares held in trust, and approved in wi'iting by such <.i\vners of three-fifths of such shares. y. The number of triistei's may be increased or diminished at any time, and one- third of the trustees shall retire each year and their successors in the trust elected at each annual meeting of the company. Those of the trustees whose names first occur in alphabetical oi-der shall retire at the next annual meeting, and so on, and their successors shall be elected in the same manner as directors are elected, but nothing herein shall rcniler any trustee ineligible to reelection. Any trustee may be removed, without ;issignment of cause or reason therefor, by three-fifths of the trustees and the written consent of the eipiitable owners of three-fifths of the shares held in tnrst liercundei-; and upon such lemoval, or on the filing of such STANDARD OIL COMBINATIONS: ARCHBOLD. 511 cate of organization, is to be one million (Sl.000,000) dollars, represented by two hundred thousand (200,000) shares of the legal par value of five (S5.00) dollars each, divided into classes, and to be issued, held, and transferred, subject and according to law and the by-laws, rules, and regulations adopted and approved by all the shareholders of the company, a copy of which is hereto attached and referred to. "Second. The said David Kirk, Jerome B.Akin, Marcus L. Lockwood, Walter A. Dennison, Chas. H. Duncan, Theodore B.Westage, William L. Curtis, James W. Lee, and David Kirk, trustee of the McCalmont Oil Company, are the owners of all the shares of the capital stock now subscribed, amounting to three thousand (3,000) shares, of which they hereby transfer to the said Thomas W. Phillips, Lewis Emery, jr., Rufus Scott, Clarence Walker. Louis Walz, James W. Lee, David Kirk, Marcus L. Lockwood, Jerome B. Akin, Charles H. Duncan. Hugh King, Michael Mirrphy, Adolphus A. Hoch, Ferdinand Reiber, and Walter A. Dennison sixteen hundred (1,600) shares, being more than a majority of the shares of the company now subscribed, and agree that one-half of all the shares hereafter subscribed and issued shall be transferred in like manner to the said parties and their associate trustees, as any may be appointed, to be by them held m trust for written consent with the secretary of the company, and on the notice in writing- delivered to the party so removed, or sent by registered letter to his proper address, the rights, duties and obligations of such party as trustee shall immediately cease. 9. In case of the death, resignation, or removal of any of the trustees, the trust shall be exercised by the remaining trustees until the vacancy be filled by the appointment of new trustees for that purpose, on the nomination of the equitable owners of a majority of the shares previously represented by the trustee whose place is vacated, with the consent in w^riting of the equitable owners of three-fifths of the shares held under this trust and the approval of three-fifths of the trustees. 10. No trustee has any such beneficial interest in this trust personally as to entitle him to maintain any action at law or in equity to enjoin, delay, hinder,, or prevent his removal from the trusteeship . or to recover any damages on account thereof from the cojnpany or the trustees, or from the individual stockholders by whose action he may have been removed. 11. The trustees shall appoint a chairman and secretary, who shall hold these offices for one year, and until their successors shall be qualified; and shall keep regular accounts, showing the ownership and residences of the various equitable owners of the shares held by them in trust; and shall execute and deliver to such several owners certificates in due form, approved by the directors of the company ,- evidencing the number of shares held by them in trust for each of the several owners ; and shall make such transfers of any of the shares as they may be requested to do by such several owners, on the surrender of such certificates representing such shares, properly indorsed, assigning for transfer, subject to the terms of this trust, any of the shares thereby reiwesented, in the manner prescribed for making such transfers. 12. The trustees shall immediately advise the company by writing, addressed to the secretary, of any transfer of ownership of any of the shares held by them; and shall, on written request of the treasurer of the company, certify to him the names and residences of all equitable owners of shares held by them in trust; and shall sign warrants for the payment to such owners, severally, of any dividends to which they may be entitled to on the shares so held in trust. Third. This agreement may be changed at any time only with the consent in writing of the Pure Oil Company, three-fifths of the persons acting at the time as trustees hereunder, and of the equitable owners of three-fifths of the shares held in trust hereunder. Fourth. This agreement may be canceled, and the trust hereby created dis- solved, only by the winding up of the Pure Oil Company, or by the consent in writing, duly executed, of the equitable owners of three-fifths of the shares held in trust hereunder and of three-fifths of all the other shares of the company, after providmg in full for the redemption or purchase at one hundred and ten dollars per share, in cash, of all the preferred shares of the c(3mpany at the time out- standing. Fifth. The said Thomas W. Phillips, Lewis Emery, jr., Bufus Scott, Clarence Walker, Louis Walz, James W. Lee, David Kirk, Marcus L. Lockwood, Jerome B. Akin, Chas. H. Duncan, Hugh King, Michael Murphy, Adolphus A. Hoch, Ferdinand Reiber, and Walter A. Dennison hereby accept the trust herein con- ferred and imposed on them. In witness whereof the parties hereto have severally signed this agreement as of the day of , A. D. 189—. 512 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the uses and purposes herein proposed, and subject to the tennsand conditions as follows : " 1 . The equitable ownership of the trust shares and all interests therein shall be subject to the terms of this trust agreement; such ownership of the shares or interests therein may be sold at the will of the holder, but no sale, transfer, or conveyance of such ownership or interests shall give to the purchaser any rights other than are provided for in the by-la^^-s. rules, and regulations of the company, and in accordance with this trust. The trustees hereunder shall at all times be recognized as the legal owners and holders of the trust shares to carry into effect the purposes of this trust, and all equitable owners (if the trust shares or interests therein shall specifically agree in writing to the terms of this trust; and no trans- fer of any such shares or interest shall be made, or be effective if made, until the transferee of such equitable ownership or interest shall have agreed in writing to receive and hold the same subject to the provisions of this trust. ■■2. At all meetings of the company for the election of directors, or for any other purpose, to cast the entire number of votes which, as holders of the said shares, they would be entitled to cast. "3. Each trustee at such meetings shall be entitled to cast an equal number of all the votes which all of the trustees would be entitled to cast in the aggre- gate, if present, except as hereinafter provided. "4. In case of differences of opinion among the trustees present at any such meetings as to how such votes shall be cast in regard to any matter or thing to be voted on, they shall be cast as the representatives of four-fifths of all the shares held under this trust may direct in writing, if so demanded in writing by any of the trustees. ■■ 5. Any trustee unable to attend any meeting of shareholders and to person- ally cast the votes he would be entitled to cast if present, may authorize any other trustee to cast the vote which he would be entitled to cast if personally pres- ent, which authority shall Vje in writing, approved by three-fifths of the trustees other than himself. "6. "When none of the trustees can be present at any meeting of the stock- holders, legally held, they may be represented in proxy by an attorney appointed in writing, executed by three-fifths of the trustees. "7. The trustees may execute such consents in writing as in their opinion it may be right and proper for them to do in the interest of the Pure Oil Company and of the owners of the shares held liy them in trust, provided that no such consents shall be executed against the objection of the equitable owners of 10 per cent of the shares held by them in trust, unless after the question of executing such consent shall have been sul imitted in person , or by writing , properly addressed to the several equitable owners of the shares held in trust, and approved in writing by such owners of three-fifths of sucli shares. "H. The number of trustees may be increased or diminished at any time, or any trustee may be removed, without assignment of cause or reason therefor, by three-fifths of the trustees and the written cfinsent of the equitable owners of three-fifths of the shares held in trust hereunder; and upon such removal, or on filing of such written consent with the secretary of the company, and on notice in writing delivered to the party so removed or sent liy registered letter to his proper address, the rights, duties, and oljligations of such party as trustee shall immediately cease. ■■ !). In case of the death, resignation, or removal of any of the trustees, the trust shall be exercised by the remaining trustees until the vacancy be filled by the appointment of new trustees for that purpose, on the nomination of the equitable owners of a majority of the shares previously represented by the trus- tees whose place is vacated, with the consent, in writing, of the equitable owners of three-fifths of the shares held under his trust and the approval of the three- fifths of the trustees. " 10. No triistee has any such l)eneficial interest in this trust, personally, as to entitle him to maintain any action at law m- in e(pnty to enjoin, delay, hinder, or prevent his removal from the trusteeship, or to rec(jver any damages on acconnt thereof from the company or the trustet^s. or from the individual stock- holdeis by whose action he may have been removed. " 11. The trustees shall appoint a chairman and secretary, and shall keep regu- lar accounts showing the ownership and residence of the various equitable owners of the shares held by them in trust, and shall execute and deliver to such several owners certificates in due form, approved 1 ly the directors of the company, evidencing the number of shares held by them in' trust for each of such several owners, and shall make such transfers of any of the shares as they may be requested to do by such several owners, on the surrender of stich certificates STANDARD OIL COMBINATIONS: ARCHBOLD. 613 representing snch shares, properly endorsed, assigned for transfer snbjeet to the terms of this permanent trust, any of the shares thereby represented in the man- ner prescribed for making such transfer. "12. The trustees shall immediately advise the company, by writing, ad- dressed to the secretary, of any transfer of ownership of any of the shares held by them; and shall, on written request of the treasurer of the company, certify to him the names and residences of all equitable owners of shares held by them in trust; and shall sign warrants for the payment to such owners, severally, of any dividends to which they may be entitled on the shares so held in trust. " Third. This agreement may be changed at any time only with the consent, in writing, of the Pure Oil Company, three-fifths of the persons at the time acting as trustees hereunder, and of the equitable owners of three-fifths of the shares held in trust hereunder. " Fourth. This agreement may be cancelled, and the trust hereby created dis- solved, only by the winding np of the Pure Oil Company, or by the consent, in writing, duly executed, of the equitable owners of four-fifths of the shares held in trust hereunder, and of fovrr-fifths of all the other shares of the company, after providing in full for the redemption or purchase, at one hundred and ten dollars per share, in cash, of all the preferred and common shares of the company at the time outstanding. "Fifth. The said Thomas W. Phillips, Lewis Emery, jr., Rufus Scott, Clarence Walker, Louis Walz, James W. Lee, David Kirk, Marcus L. Lockwood, Jerome B. Akin, Charles H. Duncan, Hugh King, Michael Murphy, Adolphus A. Hoch, Ferdinand Reiber, and Walter A. Dennison hereby accept the trust herein con- ferred and imposed on them. • ' In witness whereof the parties hereto have severally signed this agreement as of the 6th day of November, A. D. one thousand eight hundred and ninety-five. "Pure Oil Company. "David Kirk, President. " C. H. Duncan, Treasurer. " Incorporators : David Kirk, Jerome B. Akin, Marcus L. Lockwood. Walter A. Dennison, C. H. Duncan. Theodore B. Westgate, James W. Lee, David Kirk, trustees for McCalmont Oil Company ; W. L. Curtis, Thomas W. Phillips, David Kirk, Marcus L. Lockwood, Clarence Walker, James W. Lee. "Trustees: Walter A. Dennison, Jerome B. Akin. C.H.Duncan, Adolphus A. Hoch, Ferd. Reiber, Louis Walz, Rufus Scott, Lewis Emery, jr., M. Murphy, H. King." DID NOT ISSUE CIRCULARS AdAIXST FREE PIPE LINE LAW. Mr. Lee charges that we fought the passage of the free pipe bill in the Penn- sylvania legislature, and that we caused " dodgers'' or small handbills to be cir- culated, saying that if the free pipe bill became a law the orchards would be destroyed, springs polluted, death lurk in their doorsills.' I want to deny this in toto. In those early days to which he referred we were in favor of the passage of the free pipe law in Pennsylvania. We greatly desired it. We were entering the pipe-line business, fully understanding its great importance to the future of the petroleum trade, and it is not likely that we would be prejudiced by any such action as Mr. Lee claims. Q. (By Representative Livingston.) You deny the issuing of the circular?— A. I deny the issuing of the circular in tutu. I never heard of any testimony of that kind. • Q. (By Mr. Smyth.) Do you know whether such circulars were issued V— A. I do not. Q. If you did not issue them, who did?— A. I do not know that they were issued. EMPIRE TRANSPORTATION COMPANY. He refers, in the way of criticism, to our course regarding our relations with the Pennsylvania road in connection with the Empire Transi)()rtation Ciouipany refinery.'^ I may say, in a word of explanation, that at the time specifieil the people prominent in official relations with the Pennsylvania road engaged in the petroleum business on their (jwn account. We, deeming that outside of the regular province of the railroad company, of which we were large patrons, dis- continued our shipments over the Pennsylvania road, transferring them to the ' See p. 3li~; Mr. Emery, pp. Ii5!i, 6li0. '' See p. 263. 514 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. other great lines. This loss of traffic finally brought the Pennsylvania ofScials proper to a negotiation regarding this special refining business, to which I have referred, and those negotiations resulted in our purchase of those refineries and our again becoming a patron, in the way of transportation, of the Pennsylvania Railroad. That is the exact history of the case simply told. I will refer now to Q. (Interrupting.) Are you willing to state what the negotiations were? — A. I would be glad to if I had it in mind ; but it is a transaction of nearly 20 years ago, and I cannot, from memory, give any really exact outline of it. Q. Were there considerable advantages offered to the Standard Oil Company over other shippers? — A. There were no advantages offered to the Standard Oil Company. The advantage was in favor of their own people, as we felt it to be, and was the prime particular reason for our discontinuing our shipments over it.' Q. After these negotiations did the Standard Oil Company enjoy secret rates or better rates than other refiners? — A. I go into that fully in answer to the specific charges to that effect. Q. (By Mr. Farquhae). Were the Pennsylvania Railroad holders of oil par- ticipants with you in transportation at the same time you made arrangements with the Pennsylvania? — A. No, their relations ceased. Q. (By Mr. Jbnks). You can furnish that account more in detail, can you not? — A. Undoubtedly, if you desire it. The Empire Line and Q-reen Line were corporations doing freight business over the Pennsylvania Railroad, the stocks of which were owned by the officers and managers of the railway. Through these companies the railway became inter- ested both in transportation of oil by pipe lines and in the refining of oil. The Standard Oil Company claimed that the railway discriminated in freights in favor of its own refineries, and refused to ship over that road. This led to negotiations for the sale of the pipelines and refineries to persons interested in the Standard. This sale took place October 1, 1877. Tlie railway first purchased from the Empire and Green lines all the pipe lines and refineries which they owned, which it was empowered to do by virtue of an existing contract, and then conveyed the pipe lines and refineries to the Standard parties. ME. EMERY'S ESTIMATE OF $10,000,000 EEBATES. Mr. Lee goes quite into detail with reference to allegations regarding preferen- tial railroad rates to us during that early period of the oil business.^ I want to answer all his charges made at different times during his testimony as is indi- cated, and by referring to the various pages at once and as definitely as possible. He treated first the well-worn statement regarding deductions, originally made by Mr. Emery, or alleged to be made by him, from the testimony of Mr. Cassatt, an official of the Pennsylvania road, covering alleged rebates paid to our company for a certain period. I have here, and desire to submit and leave with you, a statement of the analysis of Mr. Cassatt's testimony in that regard, prepared by our counsel at the time, showing the utter falsity of Mr. Emery's statement. Mr. Emery's statement was made on an absolutely false hypothesis throughout. There never was any foundation for it. It was one of those catching statements which take hold and travel fast. It has been denied over and over again; but the people who have agitated these questions have adopted it as one of their stock features in trade, and keep on repeating it. I desire to submit this analysis, but I will read: " The assertion that Mr. Cassatt testified that $10,000,000 was paid to the Stand- ard Oil Company as rebates from October 17, 1877, to March 31, 1879, was first made by Mr. Lawis Emery, and in examination before the Committee on Manu- factures of the Fiftieth Congress, May, 1888, he shows how he deduced these fig- ures from the testimony referred to. I quote from page 341 : "Q. You were also the authority, were you not, for the statement which is referred to in Mr. Dodd's book that it was proved daring that examination that in a period of, I think, 17 months " The witness (interrupting). Seventeen and one-half months. " Q. (Continuing.) The four railroad companies had paid to the Standard Oil Company $10,000,000 as rebates on the oil carried by them, were you not? — A. Y^'es, sir. " Q. Look at that paper [handing paper to witness] and state whether you made an analysis — an examination of the testimony given by Mr. Cassatt, the Standard Oil Company people, and other railroad officers in that suit, in order to 1 See statement of G. R. Blanchard, p. ti43, footnote. ■■' See p. 2tJ4, 3HT, Compare also Mr. Emery, pp. 660, 661. STANDARD OIL COMBINATIONS: ARCHBOLD. 515 ascei'tain what the total amount of money jiaid over as discrimination during that period of 17| months was? — A. I did." The witness then presented a paper prepared by himself, which, if true, showed a rebate to the Standard Oil Company of (U! cents per barrel on refined oil, 2'^ cents on crude oil from 1 distiict, 2&i cents on crude oil from another district, and 33J- cents per bax-rel on crude oil paid to the American Transfer Company. He added these figures, divided them by y, and claimed 55 cents as the average rebate to the Standard. He then took the total consumption of oil from October 17, 18TT, to March 31, 1870. to wit, 18.550,377 barrels, and multiplying by 55 cents produced 810,155,318, which, lie claimed, showed was the amount of discrimina- tory rebates paid to the Standard in 17 months. Mr. Emery did not pretend to have any personal knowledge of the sub.ject. He pretended to compile his figures from the e-i-idence of Mr. Cassatt. That evidence is published in the same volume which contains Mr. Emery's evidence. To reach this result Mr. Emery had to make these absurdly false assumptions : " I. That all oil consumed was shipped eastward over four trunk lines, and was all shipped by the Standard Oil Company. " II. That all these trunk lines paid the same rebate as the Pennsylvania Kail- road Company. • ■ III. That the shipments of oil of the class on which the rebate was Qil cents was equal to the shipments of oil of the class on which the rebate was 36| cents." Eliminate these gratuitous assumptions from Mr. Emery's statements, and his conclusion is shown to be ridiculous. These gratuitous assumptions are as nothing, however, compared to the gratui- tous falsehoods embraced in the figiires given. The claim is that a discriminating rebate, averaging 55 cents, was paid to the Standard Oil Company from October, 1877, to March 31, 1879, by 4 trunk lines. The evidence of A. J. Cassatt, which is referred to for the truth of these state- ments, refers only to 1 trunk line, Pennsylvania Railroad, and shows : " I. That the Standard Oil Company shipped no oil over the Pennsylvania Rail- road until July, 1875. That the Pennsylvania Railroad was then interested in refining in competition with the Standard, and not only allowed the Standard no preferences, but discriminated against it to such an extent that the Standard stopped shipping over the road in March, 1877. " II. That in October, 1877, the Pennsylvania Railroad and the Standard entered into an agreement by which the Standard Oil Company was to have a commission of 10 per cent on all freight furnished by it in consideration of the Standard agreeing to equalize oil freights on the 4 trunk lines. "III. That this agreement did not effect a discrimination even to that extent as against other shippers over the Pennsylvania Railroad prior to May 1,1878. because said shippers had contracts extending to that date, which were excepted in the contract with the Standard. " rv. That the Pennsylvania Railroad was willing and offered to carry oil for all shippers on the sanie terms with the Standard, excepting only 10 per cent commission, for which it demanded like considerations. "V. That it did continue to carry for all shippers who did all their business over its line as low as for the Standard, commission included. " VI. That shippers not using the Pennsylvania Railroad were able, after May 1, 1878, to get oil east by the Erie Canal lower than by rail, and shipped their oil by that route, in consequence of which the Pennsylvania Railroad shippers were paying greater freight rates than other shippers. " VII. In consequence the Pennsylvania rate was reduced to those who contin- ued to ship by that line 44^ cents on refined, making the net rate 81, said 44* cents being paid as rebate. "VIII. For the same reason, namely, to meet canal rates, in July. 1S7S. the rate to those who shipped by rail was further reduced 30 cents, the 30 cents bemg paid as a rebate, and refunded back to May 1, 1878. "IX. That these rebates were paid to all shippers who shipped entirely by rail, and were for the express purpose of putting them on an equality with those who shipped by canal. , . , "X. The same is true of the rebate allowed on crude oil during the same period, except 10 per cent paid to Standard and 22!!: cents paid to the American Transfer Company, the latter being the pipe line's share of a throuRh rate. ., -, "XI. That the rebates which were paid from May 1, 1878, to equahze rail and canal shipments were discontinued December 8 of the same year, when the canal was closed. , ,, , ,< , >-a •• "XII. All payments of rebates entirely ceased March 31, 18v.:». The result of the testimony is that while there was an agreement for a 10 per 516 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. cent commission between the dates referred to there was in fact no discrimina- tion against shippers by the Pennsylvania Railroad: that the rebates paid were paid to all shippers over that line, and that they were paid to ptit shippers by that line on an equality with shippers by canal. Q. (By Mr. Smyth.) Yon will make that a part of your testimony, will you?— A. I will make that a part of my testimony, and I hope it will be in the record of the proceedings of this commission as simple final answers to these lusty old lies about the 810,000.000 rebates. Q. (By Representative LiviNciSTOM.) You say now, in your place as a witness, that there never have been any rebates in favor of the Standard Oil Company?— A. I am proceeding with the statement. Q. I understand" you deny everything that has been said here before about rebates? — A. I will go right into that and be glad to answer questions about that. AS TO FAVORITISM IN BUYING LUBRICATING OILS. Mr. Lee makes the statement that the railroad companies are now systematically robbed by their own officers through the making of discriminatory contracts with the Standard Oil Company for lubricating oils.' I had never heard of this allega- tion brought out here by Mr. Lee and some other witnesses until told before you. I want to deny it absolutely and entirely as being utterly untrue, and I challenge him to produce a scintilla of evidence in support of their allegations. Q. (By Mr. Jenks.) Perhaps you will note that Mr. Lee says that he does not state that to be absolutely truei but it is a matter of belief with him. — A. It is the same old method — he does not know it to be true, and he can not say it is true, and I challenge him to make any showing of any such thing at any place or any time. Q. You say it is not true? — A. I say it is not true. NO DISC'BIMINATOEY- RATES. In answer to questions as to whether the Standard Oil Company is now receiv- ing discriminatory rates, he does not answer directly, but goes back to the 1889 case,' in which the Standard Oil Company was in no way involved; was not, indeed, in the case referred to by Mr. Lee, and the same is true in a number of other cases also. It was not shown that there was any discrimination in favor of the Standard Oil Company, and as a matter of fact the Standard Oil Company were not given any such discriminatory rates. I make that answer more specifically with reference to the case of the period to which he referred, in answer to the testimony at that time. Q. (By Mr. Smyth.) If there had been any such rates, you would have known it? — A. I should have known it. Q. It would have been impossible for any such rates to be in existence without yoirr knowing it? — A. It would. Further, the cases referred to in Mr. Lee's testi- mony '' as pending in the United States court to recover discriminations are really cases to recover freight which the railroad charged refiners on barrels. The Inter- state Commerce Commission decided that railroads carrying both in tank cars and in barrels should carry barrels free; and the railroads, refusing to accept such a. decision, are testing the (piestion in the United States court. It is fair to say that the same charge for carrying barrels was made against the Standard Oil Com- pany, and if the refiners are sui-cessful in recovering the Standard Oil Company will have a claim for a very large amount. Q. (By Mr. Jenks.) Against the railroads?— A. We shall be in the same posi- tion as the other shippers if it is decided in the interest of the refiners. Q. (By Mr. Smyth.) You will claim a rebate of the freight on the barrels of the refined? — A. Yes; we are in the same position as they are on that question. I may say, in my personal opinion, it is a most unjust decision for a)iy court to make; but it is not for me to decide it. In answer to inquiry as to whether the Standard Oil Company were paid rebates on shipments of other people, Mr. Lee answers in an untruthful and disingenuous way. and refers finally to the Rice Case as the only possible sirpport of his asser- tion. ' The Rice Case will be fully answered in connection with the testimony of anotlier witness. ' THE standard HAS STRICTLY OBEYED THE INTERSTATE-COMMERCE LAW. It is fair to say here, however, and I will make this statement covering the entire question of freight rates prior to the passage of the interstate-commerce ' Sre 11, aiS. Sec also Mr. 1 htvis, i>. IfiH: Mr. Riri>, pp. (i!)y, 71)0: Mr. Piitio, pp. T.W-TiVJ. ■-SiM.p,:w ■' S.N- p. r,r,i;. STANDARD OIL COMBINATIONS: ARCHBOLD. 517 law, in 1887, that the shipment of oil or any considerable freight over the roads was a question of special contract. While tariffs were nominally issued, every shipper knew that a special contract could be had, and it was universally the rule that special contracts were made for the Shipment of any considerable freight. Since the passage of the interstate-commerce law we have strictly obeyed it. I want to say further in this connection that during the period before the passage of the interstate-commerce law every and any rate of freight was uniformly con- sidered in the fixing of prices at which the oil was sold. I want an exhibit Q. (Interrupting.) Are your books open to verify that statement? — A. To the • very utmost. I have thought it worth while, in view of the hard downing of this old ghost, to go into some considerable collateral proof to show the falsity of the charges in reference to discriminatory rates. I now beg leave to submit to you, and I of course will leave them with you Q. (By Representative Livingston.) (Interrupting.) If you will pardon me just now — is there a suit pending or anything of the kind on the part of the Interstate Commerce Commission against the Standard Oil Company for rebates now, or has there been since the passage of the act? — A. There have been various actions instituted regarding some special features of the carrying law, but I do not know that there are any now pending. I think they have all, so far as relates to our interest directly, been adjudicated. LETTERS FROM RAILROAD OFFICERS DENYING THAT THEIR ROADS GIVE PREFEREN- TIAL HATES TO THE STANDARD. I submit here, in answer to direct queries — and they are only a small part of the entire number I might have had for the asking — letters from prominent railroad officials representing the railroads in this country. North, South, East, and West, answered on their own part and over their own signatures, with refer- ence to the charge of discrimination in any way. These letters are of the most "specific character on this subject. I thought it best not simply to rest on our own denial on the charge of discrimination, but to leave these with you as collateral evidence of the falsity of these statements which our enemies and competitors in the business are continually making on this question. I will, with your permis- sion, read a list of these letters, and I will siibmit a naap,' colored in lines, show- ing the different sections of the country reached by the railroads which are rep- resented in these letters, and which deny any preferential relations with the Standard Oil Company:- [Standard Oil Company, 26 Broadway, New York.] Dear Sir: During May and June of this year the Industrial Commission (a body appointed by CongTess) had a hearing in Washington. Before this body appeared a number of oil producers and refiners who testified, generally, that it was their behef that the railroads of the United States were giving the Standard Oil Com- pany and its interests many advantages on its shipments of petroleum and its products as compared with those, of other oil shippers. We are now and have been, as you know, large shippers of petroleum and its products over your rails, and we would be glad if you would write me a letter stating as fully as you can whether or not, since the passage of the interstate- commerce law, you have in any way given to the Standard Oil Company or any of its representatives any lower rates of freight, either by direct tariff, rebate, underbilling, or in any way given to it or its representatives any advantages in the carriage of its shipments over your rails as against any other oil shipper. In other words, have not the Standard Oil Company and its interests paid the same rate per 100 pounds on its shipments, whether in tank cars, carloads, or less than carloads, as you have charged other shippers between the same points, and has there been since the passage of the interstate-commerce law, or is there now, any arrangement or device by which the Standard Oil Company have m any way received any advantage in the transportation of its oil, per 100 pounds, as com- pared with any other shipper over your road between the same points? If you yourself, hat^e not full knowledge of the matter referred to, we would be glad if you would confer with your traffic department before answering. It may be that we will show this letter and your reply to the Industrial Commission, and would like for your reply to be as full and explicit as possible. Kindly reply at your earliest convenience and oblige. Yours, truly, Howard Page. 1 Omitted. ^ See Mr. Emery, pp. 642, 643. 83A 34: 618 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I will not weary you, unless it is your desu'e, by reading all these letters, but I will read two or three of them. I will first read the list: Atchison, Topeka and Santa Fe Railway, Paul Morton, second vice-president, Chicago, 111.; Baltimore and Ohio Railroad, Oscar G. Murray, first vice-president, Baltimore, Md.; Boston and Maine Railroad, W. F. Berry, second vice-president and general manager, Boston, Mass.; Chicago and Alton Railroad, C. A. Chappell, vice-president and general manager, Chicago, 111.; Chicago, Milwaukee and St. Paul Railway, A. J. Earling, second vice-president, Chicago, 111.; Chicago, Burlington and Quincy Railroad, Thomas Miller, general freight agent, Chicago, 111.; Cleveland, Cin- cinnati, Chicago and St. Louis Railway, E. E. Cost, freight traffic manager, Cin-' cinnati, Ohio; Delaware, Lackawanna and Western Railway, W. H. Truesdale, president. New York City, N. Y.; Erie Railroad, G. Q. Cochran, fourth vice- president. New York City, N. Y.; Great Northern Railway, D. Miller, second vice-president, St. Paul, Minn.; Lake Shore and Michigan Southern Railway, W. H. Newman, president, Cleveland, Ohio; Louisville and Nashville Railroad, S. R. Knott, first vice-president, Louisville, Ky.; New York Central and Hudson River Railroad, S. R. Callaway, president. New York City, N. Y.; Northern Pacific Railway, C. S. Mellen, president, St. Paul, Minn.; Pennsylvania Rail- road, W. H. Joyce, freight traffic manager, Philadelphia, Pa.; St. Louis and San Francisco Railroad, D. B. Robinson, president, St. Louis, Mo.; Southern Pacific Company, J. C. Stubbs, third vice-president, San Francisco, Cal.; Southern Rail- way, J. M. Culp, traffic manager, Washington, D. C; Union Pacific Railroad, H. G. Burt, president, Omaha, Nebr.; Wabash Railroad, S. B. Knight, general freight agent, St. Louis, Mo.; Western New York and Pennsylvania Railroad, E. T. Johnson, general freight agent, Buffalo, N. Y. I will read, if you please, first, as representing the different sections of the country, a letter from the New England States, Boston and Maine Railroad: [Boston and Maine Eailroacl, traffic department.] Boston, Mass., August 18, 1899. Dear Sir: Replying to your esteemed favor of the 15th instant, you ask me to state whether or not since the passage of the interstate commerce law the Boston and Maine Railroad have in any way given to the Standard Oil Company, or any of its representatives, any lower rate of freight either by direct tariff, rebate, or underbilling than has been openly quoted to all other shippers of oil, and I am pleased to be able to state that we have not. Yours, .truly, W. F. Berry, Second Vice-President nnd General Traffic Manager. Mr. Howard Page, S6 Broachray , New York, N. Y. {Chicago and Alton Railroad Company, C. A. Ctiappell, vice-president and general manager.] CHiCAao, III., August 17, 1899. Dear Sir: I take pleasure in stating to you, as I have frequently stated to others, and am willing to state before the Interstate Commerce Commission, or any other authority, that, in my judgment, the Standard Oil Company has obeyed the interstate law better than any other large shipper in the country. So far as the Chicago and Alton is concerned, the Standard Oil Company has not only declined to accept concessions of any name or nature, but has used its influence with the railroads to maintain agreed and tariff rates, and there haS been no arrangement, device, or any other plan by which the Standard Oil Com- pany received less rates than other shippers. The rates granted the Standard Oil Company have been the same that all other oil shippers have had, whether in tank cars, carloads, or less than carloads. I have frequently stated to the Interstate Commerce Comhiission, and to others, that if all the large shippers of the country would cooperate in the enforcement of the interstate law, as the Standard Oil Company has done, we would have an ideal condition. Yours, very truly, C. A. Chappell, Vice-President and General Manager. Mr. Howard Page, Standard Oil Company, Neio York. • STANDARD OIL COMBINATIONS: ARCHBOLD. 519 [Louisville and Nashville Railroad Company, office of the first vice-president.] Louisville, Ky., August 10, 1899. Dear Sir: Please refer to your favor of the loth instant. Having been since January, lySS, in one position or another, charged with the direct supervision of the traffic affairs of the Lonisville and Naslrville Company, and having been for several years prior to that time directly connected with that department of the company's business, I feel I am in position to speak most authoritatively upon the subject mentioned in your letter. I beg to say that the Louisville and Nashville Railroad Company has not in any way given the Standard Oil Company, or any of its representatives or allied inter- ests, any lower rates of freight, either by direct tariff, rebate, refund, underbill- ing, or any other subterfuge or device, than it was at the same time extending to any and all other shippers handling the same or similar traffic and subject to the same rules, regulations, and conditions. In other words, the Standard Oil Com- pany has been required to pay and has paid to the Louisville and Nashville Rail- road Company the same charges for the same transportation rendered as any other shipper, and there is no arrangement between it or any of its agents and the Louisville and Nashville Railroad Company by which any advantage accrues to it over any other shipper handling similar traffic between the same points over this company's rails. Yours, truly, S. R. Knott, First Vice-President. Mr. Howard Page, Standard Oil Company. Neiu York. [The Atchison, Topeiia and Santa Fe Railway System, Great Northern Building, 77 Jackson street, Chicago, second vice-president's office.] August 17, : Gentlemen: It is with a great deal of pleasure and satisfaction that I write you in regard to the general belief that the railroads of the United States are giving the Standard Oil Company and its interests many advantages on its shipments of petroleum and its products as compared with shipments of other oil producers. For nearly four years I have had charge of the freight business of this company, and never in all that time 'has the Standard Oil Company's representatives asked for, or received, better fates than other shippers of oil secure. From my own experience I know that the Standard Oil Company does not ask for rebates, and I know further that the chief aim of the freight representatives of your company has been to have the railroads of the West absolutely maintain the tariff. I wish that other large shippers would take the same position in regard to this matter that your company does. If the terrible pressure from gigantic shippers for inside rates could be relieved the transportation problem of the country would be a very easy one to solve. The position of your company in not asking for special rates, and in declining to receive rebates, and its effort to keep the rates on oil and its products up, has been a common topic of discussion among western traffic men ever since the interstate commerce law became enacted. I take this occasion to thank you, on behalf of the railroad I represent, for the broad-gauged position that you have taken in this matter. "Yours, truly, Paul Morton, Second Vice-President . Standard Oil Company, Kvw York City. [Great Northern Railway Company, office of second vice-president.] St. Paul, Minn., August :?3, 1899. Dear Sir- Replying to your favor of the 15th instant, I herewith hand you a letter from our general traffic manager, Mr. F. B. Clarke, under date of the 21st instant, which, I think, covers your inquiry fully so far as this company is con- cerned. 520 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. * I have no hesitancy in stating that since my connection with this company, in November last, the Standard Oil Company have paid the full legal tariff on all shipments made by it over this line, and there have been no arrangements by vs^hich any less rates were secured. I can also make the same statement with regard to the shipments of the Stand- ard Oil Company over the Missouri, Kansas and Texas Railroad during my con- nection with that road, from May, 1893, to November, 1898. If there is any further information desired, kindly advise and I will take pleas- ure in furnishing same. Yours, truly, D. Miller, Second Vice-President. Mr. Howard Page, Standard Oil Company, Neiv York City. [Great Korthern Railway, traffic department.] St. Paul, Minn., August 21, 1899. Dear Sir: Referring to the inclosed inquiry from the Standard Oil Company with respect to the rates charged on shipments forwarded over the Great Northern Railway since the passage of the interstate commerce law. My connection with this company dates from December, 1896, since which time I know personally that the Standard Oil Company has paid our company full tariff rates on all shipments we have carried for them. I have made inquiry of those connected with the general freight department who were in the service prior to my connection with the company and who have had opportunities to know what rates were being charged on the shipments of the Standard Oil Company, and have received assurances that the Standard Oil Company has always paid our company the full published tariff rates on. their shipments, and that we have yet to receive the first intimation that the Standard Oil Company desired less than the published tariff rates charged other shippers of the same class of goods. Yours, truly, F. B. Clarke, Gencrtd Traffic Manager. Mr. D. Miller, Second Vice-President. [Brie Railroad Company, 31 Cortlandt street. New York.] AUC4UST 29, 1899. Dear Sir: In answer to your letter of the 15th instant to President Thomas, 1 desire to say, in his absence, that the Standard Oil Company has evinced the strongest disisosition to cooperate with the railroad companies to the extent of paying fair and reasonable rates for transportation of all of its products based upon and in conformity with the interstate commerce act, and based on my own knowledge and information obtained from other officers of this company that said Standard Oil Company has not been afforded lower rates of freight upon such traflic than the tariff's open to and offered for the carriage of like products between the same points to any other shippers of oil over this company's lines. Yours, truly, Geo. G. Cochran, Fourth Vice-President. Mr. Howard Page, S6 Bruddioay, City. [Delaware, Lackawanna and Western Railroad Company, office of president.] August 33, 1899. Dear Sir: I noted with some interest that during a hearing before the Indus- trial Commission in Washington during May and June of this year certain par- ties appeared before that body who testified in a general way that they believed that the railroad companies of the United States" were giving the Standard Oil STAND AKD OIL COMBINATIONS: AECHBOLD. 621 Company, or its interests, many advantages on its shipments of petrolenm oil and its products over those accorded other shippers of similar commodities. These statements or this testimony, if it may be so considered, is so much at variance with the facts and the truth as I know them to be that I feel compelled to write yon and state the facts as I know them to exist, and to say that I am willing yoti should make such use of this letter as you may desire in refuting the false statements referred to. This company has not since the passage of the interstate commerce act, so called, given the Standard Oil Company or any of its interests or anyone for it any reduced rates or advantages of any character whatever on its shipments Of petroleum oil and its products different or in any way more favorable than was at the same time accorded other shippers of similar commodities. As I am advised by our people, no one for the Standard Oil Company has since the passage of said act ever solicited any concession in any way, shape, or form from the regular, established rates, rules, and regulations governing the transportation of petroleum oil and its products. Furthermore, I take pleasure in certifj-ing that at the time of the passage of the interstate commerce act and until 1894 I was in charge of the Minneapolis and St. Louis Railway, and from 1894 until 1899 was vice-president and general man- ager of the Chicago, Rock Island and Pacific Railway Company in charge of its freight traffic; that during my connection -with the Minneapolis and St. Louis and the Chicago. Rock Island and Pacific railways, as aforesaid, neither of those companies ever granted to the Standard Oil Company or anyone in its interests or for it any concessions from the regtilar, established rates on its shipments of petroleum oil and its products, nor did any official of the Standard Oil Company, or anyone else in its interests, ever ask special rates or advantages on its ship- ments, as against those accorded other shippers of the same commodities. Should it be found necessary or desirable to have the foregoing statement of facts put in the shape of an affidavit or deposition I shall be very much pleased indeed to put my knowledge of this matter in that shape and place it at your dis- posal for such use as you deem best. Yours, truly, W. H. Teuesdale, President. Mr. Howard Page. Standard Oil Company, 36 Broadway, City. [Cleveland, Cincinnati, Chicago and St. Louis Railway Company.] August 28, 1899. Dear Sir : I have your letter of the 1.5th in relation to certain testimony that was given before the Industrial Commission during May and June of this year regarding shipments of petroleum and its products. If I mistake not, this company is the recipient of a fair share of the traffic shipped by your company in all directions, and we can most positively state, and are prepared to support same by an affidavit, that we have not, since the inception of the interstate law, paid the Standard Oil Company or any of its agents or branches in any manner, shape, or form one mill for the purpose of infiuencing business via our line, and that the Standard Oil Company have paid full tariff rates on all shipments over the line of the Cleveland, Cincinnati, Chicago, and St. Louis Railway, whether in tanks, carloads, or less than carloads. I do not know what further I can say on this subject, only that if the other large shipping interests would pursue the same policy as the Standard Oil Com- pany in relation to the strict maintenance of published rates, it would eliminate the strife and contention among the railroad companies which often produces unhealthy competition and ruinous rates. tt. -p n Very truly, yours, ^- '> ■ Oost. Mr. Howard Page, 26 Broadway, New York. [Chicago, Milwaukee and St. Paul Railway Company, office of second vice-president.] Chicago, August IS, 1899. Dear Sir • In the absence of President Miller your letter of the 15th instant has been handed to me. In reply I desire to say that since the passage of the inter- state commerce act the Chicago, Milwaukee and St. Paul Railway has carried a 522 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. satisfactory shai-e of the business of tlie Standard Oil Company to all competitive points reached by its lines , and I also desire to say that the full , lawfully published tariif rates have at all times been exacted, and that no concessions or deviations from such lavyfuUy published rates have been granted by this company in any manner or by any device virhatsoever ; nor has the Standard Oil Company asked for any concessions or siiggested any deviations from the lawfully published tariffs. I wish, further, to state that there has been no discrimination practiced by this company in connection with the business of the Standard Oil Company and that of other shippers of petroleum and its products. Yours, truly, A. J. Earling, Second Vice-President. Mr. Howard Page, Standard Oil Company, 2i: Broachray. New Yorlc Citi/. [Ctiicago, Burlington and Qnincy Railroad Company, general freight department.] Chicago, Augustus, 1S99. Dear Sir: Answering your letter of the 15th instant, I have to say that there never has been a request made by anyone representing the Standard Oil Company since the passage of the interstate-commerce law for a reduction in our tariff rates, directly or indirectly, either by tariff, rebate, underbilling, or otherwise, and no concessions have been made by this company of any character whatsoever on the business transported by us for account of the Standard Oil Company. It has all been done at published tariff rates, which are open to the inspection of everybody. Yours, truly, Thos. Miller, General Freight Agent. Mr. Howard Page, Standard Oil Company, New York. [The Baltimore and Ohio Railroad Company.] Baltimore. Md., August 23, 1S99. Dear Sir: Replying to your favor of August 19, in relation to rates charged to and collected from the Standard Oil Company on their shipments of oil over the road, we invite your attention to next-attached communication from our manager freight traffic, Mr. Wight. With reference to the Cleveland, Cincinnati, Chicago and St. Louis road, as you know, it has been a number of years since my connection -with that company was severed, and it is therefore suggested you take the matter up direct mth them. Yours, very truly, Osc.\R Gr. Murray, Firxi Vice-President. Mr. Howard Page, Standard Oil Company, New Yorlc, N. Y. [The Baltimore and Ohio Railroad, office of manager of freight traffic.] Baltimore, August 31, 1S99. Dear Sir: With return of attached letter from Mr. Howard Page, of the Standard Oil Company, would advise that since the interstate-commerce law became effective the Baltimore and Ohio Railroad has not to my knowledge given the Standard Oil Company or any of its representatives any rate less than pub- lished tariffs on oil, whether in tank oars or barrels or by any subterfuge what- ever, all such tariffs being filed with the commission and the rates named therein being applicable on all shipments, whether made by the Standard Oil Company or its competitors. Yours, truly, C. S. Wight, Manager Freight Traffic. Oscar G. Murray, Esq., First Vice-President. STANDARD OIL COMBINATIONS: — ARCHBOLD. 523 [Western New York and Pennsylvania Railway Company, general freight department, Mooney- Brisbane Building.] Buffalo, N. Y., August 39, 1S99. Dear Sir: I am in receipt of your letter of 33d instant, relative to testimony- given by Oil Creek producers and refiners before the Industrial Commission in Washington. In reply to your letter would say that on any shipments of petroleum or its products forwarded by the Standard Oil Company, from or via Western New York and Pennsylvania Railway, the Standard Oil Conipany have not and are not obtaining any advantage in any way. shape, or manner as compared with other shippers of petroleum and its products. The shipments of the Standard Oil Com- pany are charged exactly the same rates and the same weights as the shipments of any producer or refiner between the same points, and no lower rates are given the Standard Oil Conipany, or to any of its representatives, or through any other party, either through tariff, rebate, underbilling in quantity or in weight, or through any device whatever; and the charges on such shipments against the Standard Oil Company have been upon exactly the same basis between the same points as charged any other refiner or producer since the interstate-commerce law was put in force. If it is desired I am willing to appear before any United States commissioner in Buffalo and make afiidavit to the above facts. Yours, truly, Edward T. Johnson, Oeiieral Freight Agent. Mr. Howard Page, S6 Broadway, Neio York City. [The Wabash Eailroad Company.] St. Lotjis, August 18, . Dear Sir: I note that in the course of the investigation before the Industrial Commission, during May and June of this year, evidence was submitted to the effect that the Standard Oil Company had received advantages in the shipment of petroleum and its products as compared vsdth other oil shippers. I do not understand that specific reference was made to any railroads thus favor- ing the Standard Oil Company, but I would like to testify in defense of the Wabash Railroad Company that we have not contributed in a discriminatory manner to the Standard Oil Company, and that we have not since April 5, 1887 — when the interstate-commerce law became effective— deviated from our published tariffs in the way of rebates or irregular departure from said tariff in a single instance in the handling of shipments of the Standard Oil Company. We have had but one tariff, which applies alike to all oil shipments handled by the Wabash Railroad Company from that period up to the present time. Yours, truly, S. B. Knight, General Freight Agent. Mr. Howard Page, Standard Oil Company, 26 Broadtuay, New York. [Union Pacific Eailroad Company. ofBce of president.] Omaha, Nebr., August 35, 1899. My Dear Sir: Returning to Omaha after an absence, I find your letter of the 15th instant. In replv permit me to say that as far as my personal knowledge is concerned, and from" all the information I am able to obtain from other officers of this com- pany, the Standard Oil Company has at all times since the passage of the inter- state-commerce act evinced the strongest disposition to cooperate heartily with the railroads to the extent of paying fair and reasonable rates for transportation of all of its products. I am unaware that the Standard Oil Company has been m any manner afforded lower rates of freight than the tariffs open to and offered for the carriage of like products for any other shippers of oil over this company's lines. ' ' Horace G. Burt, President. Mr. Howard Page, Standard Oil Company, New York City. 524 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. [Northern Pacific Railway Company, office of the president, St. Paul, Minn.] New Yokk, August S3, 1899. Dear Sir: In reply to your favor of August 15, 1 take pleasure in saying that so far as the Northern Pacific road is concerned it has not in any way allowed you any rebate or concession on your shipments of oil as compared with any other shipper of oil between the same jjoints; and there is no arrangement or understanding, expressed or implied, by which you receive any concession or con- sideration not open to every other shipper of the same commodities between the same points upon our line. The same is also true, so far as I can recall, with regard to the relation of your company with the New York, New Haven and Hartford Railroad, during the time I was connected with the same as second vice-president, in charge of its traffic. Yours, truly, C. S. Mellen, President. Mr. Howard Page, S6 Broadway, Neiv York City. [Southern Railway Company, office of the traffic manager.] Washington, D. C, Aug^ist Si, 1899. Dear Sir: Replying to your favor of the loth instant: Since the organization of the Southern Railway Company I have been in charge, as traffic manager, of its traffic interests, including the establishment and promulgation of all rates used by it in the transportation of pi„ssengers and freight over its line of railway, and I am prepared to say, unhesitatingly and without qualification, that the Southern Railway Comj)any has at no time given to the Standard Oil Company, or any of its representatives, any lower rates of freight in the carriage of shipments made by that company over our rails, either by direct tariff, refund, or otherwise, than to any other shippers of similar commodities. Our rates, as issued from time to time, are published and filed with the Inter- state Commerce Commission, and with the several commissions of States traversed by the Southern Railway, and the Standard Oil Company has in no instance been given the benefit of anything less than the rates so published and filed with these commissions, and which are the same figures as are charged all other shippers of petroleum and its products. The policy pursued by the Southern Railway Company is to treat all of its patrons alike, and to fully observe its obligations under the law, and this policy applies as well to shipments of petroleum as to other classes of freight between points on our line. Yours, truly, J. M. CuLP, Traffic Manager. Mr. Howard Page, 2(i Broadway, Neiu Turk. [St. Louis and San Francisco Railroad Company.] St. Louis, Mo., Augnst :.'5,1S99. Dear Sir: Absence from home has prevented an earlier reply to yours of the 15th instant. Since the passage of the interstate commerce law there has been no time that the Standard Oil Company, or any of its subordinate companies, have enjoyed any lower basis of rates on the business handled by oar line than that which has been charged all other oil companies doing business with us. This statement is made absolutely, and without qualifications of any kind or character. In all of our dealings with the Standard Oil Company we have found it to be the rule that they have never in any instance asked us for any lower basis of rates than was enjoyed by any other company. Yours, very truly. Howard Page, Standard Oil Company, AVic York City. D. B. Robinson, President. STAKDARD OIL COMBINATIONS: ARCHBOLD. 525 [Southern Pacific Company. Office of the third vice-president.] San Francisco, August 23, is:in. Dear Sir : I am in receipt of your letter of August 15, in which you refer to the Industrial Commission which recentlj' met in Washington, and before which appeared a number of oil producers and refiners, who testified generally that it was their belief that the railroads of the United State.s were giving the Standard Oil Company and its interests many advantages on its shipments of petroleum and its products as compared with those of other oil shippers. I respond to your invitation to state the facts bearing upon this question in its relation to the Southern Pacific Company, not only because I believe the Standard Oil Company is entitled to it, but I believe that it is my duty to my own com- pany and to the railroad interests of the United States that these facts should be published. Since the passage of the interstate commerce law. the Standard Oil Company . has not solicited nor received from the Southern Pacific Company any lower rate of freight for the transportation of oil or of the products of petroleum, or any- thing else in which the Standard Oil Company deals, than the lawful, published tariff rates, which at the same time were given to every other shijaper of like commodities for similar and contemporaneous service, nor has the Standard Oil Company, in its use of the transportation lines of the Southern Pacific Company, employed any device such as misrepresentation of the contents of packages or cars or under-billing in weights in order to avoid the tariff or to gain advantages over its competitors. I say that the Standard Oil Company has not employed these devices because it has not been detected in any such attempts, and our system of inspection has been such that I do not believe such attempts could have escaped detection. In other words, according to my ob.^ervation and expe- rience, and I have full knowledge of its transactions with the Southern Pacific Company, the Standard Oil Company has obeyed the law in its spirit as well as letter. Yours, truly, J. C. Stubbs, Third Vice-Presideiit. Mr. HowAKD Page, Standard Oil Company, J6 Broadiray, Nctv Yort:. [The Lake Shore and Michigan Southern Sailway Company.] Cleveland, Ohio, August 17, 1S99. Dear Sir: Replying to your favor under date 15th, relating to rates charged Standard Oil Company on traffic as compared with charges on similar traffio from other shippers. The Lake Shore Company does not now, and has not heretofore, so far as can be ascertained from the records for a period of years, charged the Standard Oil Company any less rate per hundred pounds on its property, whether oil or prod- ucts, in tanks or barrels, carloads or less, than charged to the trade in general on such property; in other words, the Standard Oil Company has not received any lower rates on the vast traffic handled by that company than other shippers of the same commodities, regardless of quantity. I would further state that the Standard Oil Company, nor its representatives, have at any time asked that we g-ive them any form of concession, but, on the other hand, have insisted that the full authorized tariff rates be charged on its shipments, and that all other shippers of similar commodities be treated likewise. The conditions in that respect do not differ from the practice during the time I was connected vnth. the Chicago and Northwestern Railway, as the Standard Company insisted then, as it does now, on application of the tariff rates on all shipments of petroleum and its products. Very respectfully, yours, W. H. Newman, President. Mr. Howard Page, Vice-President Standard Oil Company, Nev) I orlc City. 526 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. [New York Central and Hudson River Railroad Company, Grand Central Station,] New York, August 17, 1899. Dear Sir: Referring to your letter of the 15th instant, you may state explicitly, for this company, and also for the Lake Shore and Michigan Southern Railway Company, of which I was president and am now a director, that no discrimination in the matter of rates has been, since the passage of the interstate law, extended in favor of the Standard Oil Company over either of these lines. So far as my knowledge goes, no application has ever been made by any of the officers of the Standard Oil Companj' for any discriminating rate. Yours, truly, S. R. Callaway, President. Mr. Howard Page, The Standard Oil Company, New Yorle City. [Pennsylvania Railroad Company, General Office.] Philadelphia, August S8, 1899. My Dear Mr. Page: In reply to your inquiry, in which jou call my attention to statements in the newspapers relating to the inquiry of the Industrial Commis- sion, in which statements witnesses say that the railroad companies pay rebates to the Standard Oil Company and permit preferences by under -gauging tank cars and by paying fictitious prices for oil supplies. I beg to say that if said assertions are meant to apply to this company, in its relation to the Standard Oil Company, they are wholly groundless and without foundation in fact. Yours, truly, W. H. Joyce, Freight Traffic Manager. Mr. Howard Page, 26 Broadway, Neiv York City. NO PREFERENTIAL RELATIONS SINCE 1887. DISCRIMINA.TIONS INJURED THE STANDARD. Q. (By Mr. Smyth.) Y'ou state very plainly that there were no rebates or advantages in rates given to the Standard Oil Company. Have you been given any advantages with reference to quicker movement of freight — immediate dis- patch? — A. None that I am aware of. Q. Y''ou have not asked for any? — A. We have not asked for any. I do not know of any such preferential arrangements. Q. (By Mr. Jenks. ) Is this a general statement you make that covers the entire period since the passage of the interstate commerce law? — A. Yes. Q. That the Standard Oil Company has in no way had any preferential rela- tions in freights? — A. That is my answer. Q. Preferential relations would seem to cover it? "With reference to the period immediately preceding that, you state that before that time for some years the freight rates to all large shippers were made by special contract, and that you did have special rates then? — A. Yes. Q. Did I understand you to say further that so far as the Standard Oil Com- pany was concerned the prices to consumers were based upon freight rates in part, so that consumers received the benefits of any benefits you had?— A. I make that statement very broadly. Q. You make that statement very broadly, then, that the Standard Oil Com- pany did not receive any benefit in preferential rates?— A. On the other hand, I think the old system in vogue among the railroads prior to the passage of the interstate-commerce law was altogether contrary to the interests of the Standard Oil Company. I repeat again that the strongest evidence of that lies in the state- ment that I have made here, that the greatest prosperity has come since the passage of the interstate-commerce law. Q. (By Representative Livingston.) In your answer a moment ago you said, " Not in any way covered by interstate-commerce law." ' Are you getting rebates in any way not covered by this law?— A. "We are not. There may be local ship- ments, as between some points within a State where tariffs are not isssued, that I am not familiar with at all,= but ngt to my knowledge in any way that would See p. 517. 2 See pp. 771 and 703, footnote. STANDARD OIL COMBINATIONS: ARCHGOLD, 627 debar any other shippers in the same business, if there was another shipper there, having the same thing. Q. There is some specific testimony that in some place on the Pennsylvania Central, between two given points, the charge on a tank of oil was 81..80, and that the Standard Oil Company got, or the railroads gave back, the 80 cents and put the SI into their treasury, and with the independent company kept the whole §1.80. — A. I do not know of any such case. Q. Would that be a violation of the interstate-commerce law? — A. If within the State it might not be; but I have never her.rd of any such case as you say. Q. You say they charge them all the same rates?— A. Every shipper could have had the same thing. To my own knowledge I do not know of the case you spe- cifically refer to. Q. (By Mr. Farquhar.) Are there not many railroads not under the interstate- commerce law, whose lines are within a State, and which are not in the intei state- commerce business? — A. There may be. but I do not know. I do not know, on our part, of any arrangement that woidd be exclusive in connection with any such railroad, if there is such. Q. (By Mr. Jenks.) Have you any further reference to make to this freight question? — A. I think that is all. Q. (By Mr. Kexxedy.) In one of these letters your correspondent spoke of your policy in refusing rebates. Have any of the railroad companies offered the Stand- ard Oil Company rebates in consideration of securing their business? — A. Well, that would be a very difficult question for me to go into. That the Standard Oil Company during the past 10 or 11 years, since the passage of the interstate- commerce law, have not secured large amounts of rebates is true; but that they may have been offered rebates at times is undoubtedly true; but I have no specific cases to state. It is one of our duties to keep looking after our competitors a little bit, and we are so shining a mark we could not if we were so disposed, but we would not, even if we could and if we were desirous, which we are not. Q. (By Mr. Smyth. ) You state positively that you did not accept them in general and h&ve not accepted thein? — A. We have not and do not expect to accept them. Q. (By Mr. Jenks.) Your statement applies also to your shii^ments within a State? — A. Yes; and I speak of them in a general way — that we have no rates that would debar any other shippers from the same basis.' Q. (By Mr. Farquhar. ) Under the old rule of special contracts, is it or is it not a fact that the Standard or any other great company never needs to solicit special contracts from great roads, but that the railroads, competing among themselves, offer the shipping contracts and then cut below their original contracts them- selves? — A. Unquestionably. Q. That was the character of all traffic business before the interstate-commerce hill? — A. It was. Q. (By Mr. Smyth.) That was proved by the case of the Pennsylvania Railroad you have spoken of when you shipped by the Erie Canal? ( Question not answered. ) Q. (By Mr. Phillips. ) Do we understand you. Mr. Archbold, that large shippers never solicited low rates — that they were always solicited on the part of the rail- roads? — A. I answered that question by saying that a business as large as ours is sought for by railroads. I do not say other shippers do not solicit rates; I have no doubt they secure them. Q. (By Mr." Jemvs.) In one of the letters you read a statement was made to this effect — that the Standard Oil Company, by not asking for rebates and adhering strictly to the established or published freight rates, had aided in keeping the freights up. Is it your opinion that the railroads, generally speaking, feel that the Standard Oil Company is aiding them in keeping their freights up. so as to make them good paying railroads?— A. That is true, and the railroads will say so if they are frank enough to say so. Any of you who have contracts with the great railroads in this country, if you will talk with them on that subject, will find that to be the case. Q. (By Mr. Phillips. ) How will keeping the rates up affect the general pub- lic? Is that in their interest?- A. It is to the interest of the general public to have a uniformity of rates under the interstate-commerce law, as the pubhc con- sider it. . , n A T Q. (By Mr. Smyth.) You are in favor oi the interstate-commerce lawi"- A. 1 am, most decidedly.* t ,t ■ , Q. (By Mr. Ratchpord.) Mr. Archbold has made hnnself very clear, 1 thmk, on the question of rebates on the shipments of the Standard Oil Company. We have received specific testimony to the effect that the Standard Oil Company received rebates from the shipments of other companies. What do you know of that?— A. I will treat on all that matter later if you will allow me. > See p. 774. = See p. 593. 528 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE CONSUMERS GOT ALL BEBATES AND MOEB. Q. (By Mr. Phillips.) You stated, if the Chair remembers, that since the pas- sage of the interstate-commerce law your profits liave been greater than they were prior to that. Now, was that due to the passage of the interstate-commerce law, or on account of the larger business and less competitionV — A. Well, I think that one of the causes — a number of causes may have combined in the growth of the business — but one of the causes is the better settled condition of business inci- dent to the passage of the interstate-comnaerce law. I think that my assertion that the consumer was given cut rates of freight is not only true, but that the effect was greater than I have stated it; for, in the strain, the anxiety, that the manufacturer was necessarily under lest Ms neighbor, his competitor, might get a lower rate than he was getting, tliey were always all very anxious sellers of oil. I think that oftentimes the price was made lower than it needed to be because of the belief or expectation that lower rates of freight were either prevailing or might prevail. I think the business was sacrificed on that acooiint. Q. But you do not wish to leave the impression that yotir greater income or greater profits are due to the interstate-commerce law? — A. Oh, no; business has grown. Q. And competition has not been so great? — A. Oh, I think competition has been quite as vigorous. PRICES OP REPINED OIL IN NEW YORK, AND OP CRUDE, IN 1896. Mr. Lee made the statement," as to the course of prices for domestic refined oil for New York, or Greater New York, during the period from March, 1896, to July, 1898, I think it was, that the Pure Oil Company, the company with which he is related, having made its advent in the market of Greater New York in March of 1896, found the price which we were charging to the people of that great metropolis to be 9+ cents a gallon, and that because of their advent and of their supposed competition we dropped the prices on them until in July of the same year it was 54- cents. He spoke of this not only as illustrating our method of attack as against the competitor, but, I believe, claimed some credit from the people of Greater New York to the Pure Oil Company because of their advent there. I will read from the list prices of the period named as they prevailed at the time and show that, to all the trade in Greater New York and its vicinity, in March, 1896, our selling price averaged for the month 7.98 cents, as against his statement of 9i cents. Q. In that immediate territory? — A. In that immediate territory. Q. (By Mr. Phillips.) Was that immediately before or at the time of the advent of the Pure Oil Company? — A. Their advent there was in March, accord- ing to his statement. Q. Can you give us the statement of the month prior to that? — A. I made it only for the period covered by him in his testimony. I can give you the other. And I will also quote from that statement as showing the relation between the two — the crud,.e-oil prices as they prevailed. In March the average price of crude oil per barrel of 42 gallons at the wells was .':il.42. In April our price was 7.31 cents, the average price of crude oil being $1.23. In May the average price of refined was 6.94 cents, and the average price of crude was $1.14. In June the average price of refined was 6.72 cents, and the price of crude .$1.1.5. In July, the average price was 6.23 cents, and the price of crude $1.09. It is only an illustra- tion of the carelessness which marks the statements which our compietitors make, with reference to any feature of the business in which they want to make a point. Q. (By Mr. Phillips.) One question there; did you sell any oil in March as high as 9 cents? — A. I give the average prices. Q. Was there any other selling price? — A. I should say not, because there could not be an average of that. Q. It could be sold at 10 or 11 cents in the beginning and 3 or 4 cents at the close? — A. The following month would show that. ANY GREAT VARIATION IN PRICE IN ANY LOCALITY WOULD BE SPEEDILY KNOWN AND WOULD Bte DISHONEST. Q. (By Mr. Jenks.) You give these average prices for Greater New York. The statement has been made at different times that it is your habit in dealing with the customers of competitors to find (nit the individual cirstomers and make special cut rates to them. It might easily be, therefore, that your average price would be what you have given, and that to a good many special customers, with ' See p. 265. See also Mr. Westgate, p. 365. STANDARD OIL COMBINATIONS: AECHBOLD. 529 whom the Pure Oil Company was trying to deal, it would be 5i cents? — A. I can not make any definite statement, but I would I'eply that it would be utterly impossible for us to have any great variation in price to any special customers in any locality. It would be speedily known, and it would be dishonest, and I want to say that dishonesty will 'not win in any businei-s. "We have got our hold on the trade in 80 years Iseoause we treated the trade honestly and not dishonestly. Q. You would be safe in saying that in March, 1896, no oil was sold to any cus- tomer for less than 6 or 6+ cents? — A. Oh, not for less than 6|. RAILROADS V. U. S. PIPE LINE — NO FIGHT OP THE STANDARD'S. Mr. Lee makes a statement regarding the difficulty of his pipe line, the United States Pipe Line, in crossing railroads and securing right of way to the seaboard, and makes a general statement implying that we have instituted and carried out great obstruction to their progress. ' I want to make general denial of this state- ment. We have not at any time had any different relations with reference to any obstruction or effort at obstruction of their line than would attach to any competitor in a line of business engaging against another. With reference to the special features referred to by Mr. Lee, and which he attempts, by implication at any rate, to connect us with, in the crossing of the Delaware and Lackawanna Railroad in New Jersey, 1 want to say that the contention in that respect was entirely at the hands of the railroad, and not at our hands in any possible respect They went there surreptitiously and endeavored to force their way, on a Sunday, over a line where they had no right, either by private purchase or by public fran- chise. Having accomplished the crossing of the road in that surreptitious way, they stationed there an armed force to prevent the railroad company from asserting its rights and taking out their lines, and kept that force there for a long period. The railroad went about it in a peaceful way, in the courts, and the final result is that the decision is against the line, after the case has been carried up finally to the supreme court of the State, and they must, of course, remove their line. But any statement on Mr. Lee's part, or any other witness, that we had anything to do with that matter, or with reference to any of the difficulties interposed in their progress to the seaboard, is absolutely false. Q. (By Mr. Phillips) Did your company own in fee simple the tract of ground, and was a roadway reserved by the landholder? Was that purchased by them? — A. It was not my case, and I am not conversant with the details regarding it. The fact that after having been fought in the newspapers and in the courts for a term of years, seeking the sympathy of the judges as well as the public, the supreme court of the State has ruled against them is the best evidence, I think, that the right was against them. I want to say with reference to our pipe lines, that we never endeavored to cross any man's right of way without first seeing him about it. Q. Still did they not go through the railroad on their own ground, and was not this the final decision, that they had not the right to lay a pipe line where a man had reserved a right of way under the ground?— A. It was not only decided that they had no right there, but they were ordered to remove. THE STANDARD NEVER HAD SO LOW A FREIGHT RATE. I want also to present a statement showing the rate of freight which Mr. Lee's United States Pipe Line enjoys from the Central Railroad of New Jersey on the crude oil and refined oil also transported over that line from the terminal pomt of their pipe line to the seaboard; it being a lower freight, I think, than the Stand- ard Oil Company ever had for an equal distance at anytime in the history of their business. (Witness here reads a letter from the Central Railroad of New Jersey. ) Central Railroad of Neiv Jersey's rate to United States Piioe Line, Hampton Junc- tion, N. J., to Bayonne, N. J. [Distance, .53! miles; mileage, i cent each way, equals 78 cents per car; empty car returned free. Weight per gallon, crude oil, OJ pounds; refined oil, b,; pounds.] Crude ... Eefined . Bate per barrel of 50 gallons. 0. 0693 . 0769 Actual weight per barrel of 50 gallons. Rate per 100 pounds 0. 0308 . 033(10 Rate per oar of 120 barrels. S8.30 9.33 Rate per car, less S7.43 iSeep 3(J7. Compare also the testimony of Mr. Phillips, p. 593; Mr. Emery, pp. 650-655; Mr. Boyle, p' 486. 530 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The above shows that this oil is being carried 53| miles in tank cars, averaging 120 barrels or 20 tons to the car, at a gross average revenue to the railroad, on the crude and refined oil, of Si'. 93 per car, and out of this revenue the railroad returns the empty car free.' The contract between the railroad and the pipe line is for 100 years from Jan- uary 1, 1894, and provides for various rates from different points along the line of the Central Railroad of New Jersey to tidewater. The oil is now (and has been for three years) shipped from Hampton Junction, and the above rates are being paid. The contract further provides the right upon the part of the Pipe Line Com- pany to abrogate the arrangement upon 5 years' notice at any time during the 100 years. The railroad has no right to cancel, excepting" for violation of lea§e. Q. (By Mr. Smyth. )'The lease is on record?— A. Yes; it would seem that if there ever was a preferential contract, that is one of them. Q. (By Mr. Jenks.) You say this is on record? — A. It is not a lease; it is a contract. Q. (By Mr. Phillips. ) You do not assume to say that it is an illegal contract?— A. I am not a lawyer; I am not passing on the legality of the question. EFFORTS TO BUY OUT THE INDEPENDENTS — ADVANCES FROM THE OTHER SIDE. Mr. Lee claims at great length and with great particularity that we have at different times done our best to buy them out, offering them large inducements in the way of extraordinary prices for their properties, and have done our best to get them out of the business by purchase.'' I want to say that any approaches on that line that have been made have come from Mr. Lee's side to us; and I want to say, now that he has forced the question, that approaches of that kind have been made by pretty nearly every person in connection •with, his company, evei*y prominent person in connection with his company, at various times, including not only Mr. Lee, but Mr. Phinips,Mr.Nichols, Mr. Murphy, Mr. Jennings, Mr. King, and Mr. McDonald, and, as I said, pretty much every gentleman prominent in the affairs of that company. I want to say further that we have persistently declined the considering of any such combination with them on the ground, first, as we have said to them at various times, of its illegality; and, second — and this would have been enough in itself — our unwillingness to enter into any business relations ■with them because of our lack of faith in them. We have had experience with the gentlemen, different ones of them, at different times, and we should have known if there had been no legal difficulty in the way of such combination that it was impossible for us to enter into any such relation with them.^ I am making the broadest possible denial to Mr. Lee's statement that we have gone after them with reference to their purchase or combination; and I am making in return a statement that they have up to this very day, within the period of your sitting here, approached us on this question. Q. (By Mr. Phillips.) Do you mean to include all of them?— A. I mean to include the gentlemen I have named and others I have not named.-* Q. Have any persons or any agent or gentleman from whom you bought prop- erty approached individual members, coming direct from your office, to solicit the selling of an interest to you? — A. No; I say broadly that the approaches have been made from your side, and the answer is as broad as I can make it.* Q. You have no knowledge of a person coming from your office after soliciting you to make a transaction with these people? — A. I have knowledge of persons coming to our office who came there at the instance of different people in that connection, to raise a question about it; you came there — many of them — if that is what you mean. THE INDEPENDENTS PROPOSED A DIVISION OF THE BUSINESS. Q. Was not that to have a stop put to the litigation that was going on in New Jersey, and to have a right to live as a comjiany? — A. I do not know what you mean by that. (By Mr. Rogers.) May I have the privilege of prompting Mr. Archbold? (By Mr. Phillips.) Certainly, you have the privilege. (By Mr. Smyth.) I think so, certainly. (By Mr. Phillips.) Any information of that kind is entirely admissible. (After talking with Mr. Rogers.) A. I answer broadly again, after conference with Mr. Rogers, that we have never sent anybody for any purpose. ' Compare Mr. Phillips, p. 601; Mr. Bmery, p. 653. 2 Si.e pp. 370, 371. Compare Mr. WestKate, pp. 370, 383. 2 Cionipare the testimony of Mr. Phillips, pp. 508, 594. ■' Soo Mr. Phillips, p. 594. '• Sue Mr. Westgate, pp. 370, 371. STANDARD OIL COMBINATIONS: AKOHBOLD. 631 Q. (By Representative Livingston.) Those propositions, were they written or veAal? — A. Oh. no; they were all oral. Yon do not get that comi)any into mak- ing written propositions; they are too crafty. Q. (By Mr. Phillips.) Do yon say, Mr. Arohbolcl, that yon were approached by a large per cent of those persons in an unfair and nnjust way? — A. Oh, I did not say so; I do not say so. It may have been entirely fair and. jnst in their view; bnt their proposition, in our view, was illegal and not to be entertained. Q. Was not that after yon had purchased a large amount of stock, a controlling- interest, in the Producers' Oil Company, Limited, and also purchased a large amount of the United States Company's stock, and was it not to make some fair, honorable , and just contract that would leave these companies the privilege of living and doing business years ago when they were very badly crippled by opposition fi'om the Standard Oil Company , by the lowering of prices of oil in Europe and other places? — A. Using your own case, Mr. Phillips, as an illustration — and you can hardly find fault with that — I do not think that at the time you came to Mr. Rogers or myself you raised any question whatever with reference to any possible minor- ity ownership in any of these companies. What you and they proposed was sim- ply that a division of the business be made, so that you would have a percentage and we a percentage, in order to cooperate in the marketing of the oil ahd in all that pertained to the welfare of the business; is it not so? ' Q. Was it not to get the privilege of handling the capacity of the lines then existing, and to cease further opposition, and to do away with the opposition which was very badly crippling these companies; and had you not at that time lowered the price of oil in Germany, so as to make it entirely unprofitable to the refiners? They lost very large sums of money, and you had bought out a per cent of the refineries that were engaged in these independent lines ? — A. Nothing of the kind existed. Our business was entirely satisfactory, was on a profitable basis in Germany and elsewhere, so far as I am aware; and we had no special desire that a combination should be made, as is evidenced by the fact that we were unvsdlling to entertain it. And I now further state that we were unwilling to entertain it not only because of its illegality, but because of our lack of faith in the indi- viduals connected with it. There can be no question abotit that.- Q. Well, do you know that- at that time a Mr. Poth was managing the business of the independent refiners in Germany? Did he not sell out to the Standard Oil Company the tankage procured in Germany, so that these companies could not do business ? Did they not have to reestablish connections and send agents there, and build tankage in which their oil could be received and distributed in Ger- many? For a number of years, did not you put the prices there so that there was no profit? And during that period did not you buy out some of the largest refin- eries that were connected with these companies?— A. My answer, Mr. Phillips broadly is that none of these questions have anything to do with this company, with that proposition, "tou came to us seeking these propositions. That is my statement and you dare not deny it. That is true, every word of it. CHAEACTBE OF MEN PROMINENT IN THE STANDARD. In answer to the query regarding gentlemen prominent in the Standard Oil Company, Mr. Lee saw fit to speak of them in a most depreciatory way.' It is not amiss for me to ask these gentlemen to think for a moment of J. D. Rockefeller, WiUiam Rockefeller, H. M. Flagler, William. G. Warden, Charles Pratt, J. W. Bostwick, Benjamin Brewster, Henry H. Rogers, W. .H. Tilford, and James Magee, and I might mention scores of others prominent in the Standard Oil con- nection, whose business genius and boundless energy have been given to the building up of the petroleum industry. Will you think of these gentlemen m comparison with the men who have appeared here to defame them? I might go further and speak of the beneficent use these gentlemen are making of their substance, but they require no such eulogy at my hands. ■, ^-i r^ In answer to the query as to what would be the effect if the Standard Oil Com- pany were abandoned or dismantled, Mr. Lee said that the prices of refined pro- ducts would go lower all over the world.-" I -will not occupy your time by any lengthy argument in refutation of this most absurd proposition, that if we were really out of existence, and put out of existence that which represents to-day two-thirds or three-fourths of the active capital, energy, and equipment employed in the manufacturing and distribution of oil, the prices would go lo-wer; but I ■mil call your attention to what Mr. Lee says in practically the same breath, as showing his utter inconsistency. He gives it as his opinion that if the Standard 1 Compare the testimony of Mr. Phillips, p. 593. 2 Compare Mr. Phillips, pp. 593, 594. s See p. 271, under the heading "Practical experience.' « See p. 273. 532 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ^'ere out of the way prices would be lower, and in the same breath testified that he wanted them out of the way because for 5 years he, in his own business, has not made a fair profit. And the utter inconsistency of his testimony is shown by this question and answer: " Q. (By Mr. North.) What do you call a fair manu- facturing profit? — A. They would be entirely. satisfied to do this business at 10 cents a barrel on crude oil that runs through the refinery; I think the Standard Oil Company makes SI. 50 to $2 on every barrel that goes through their works."' If it is true that the Standard Oil Company make |1..50 to l|2, and they can not make 10 cents, they are not good people to serve the public. EEPINBD piL FROM OHIO CRUDE AS GOOD AS THAT PROM PENNSYLVANIA. He says that the quality of Standard oil has deteriorated because of using Ohio, crude, and that the reason is that Lima oil contains arsenic and sulphur.^ I want to say of the gentlemen connected with the companies represented by Mr. Lee, that they have from the very beginning of the great production of oil in Ohio and Indiana, because of their small interest in competition -w^ith it in the Pennsyl- vania region, done their very utmost to depreciate and discredit the standing of the products of Ohio oil in the markets of the world. They came to New York, and before the New York Produce Exchange made a very vigorous effort to have the exchange rule that refined oil produced from Ohio crude should not be a good delivery in the markets of the world. Their course has been utterly indefensible in respect to the great interest involved in those States, and nothing but the most active effort on our part has saved to those States the markets which are to-day giving them the profit that is iniiring to them in the production of the oil in those States. And I want to say that this is in spite of the fact, which they must have known or could have known, if they had any intelligence on the subject what- ever, that after the sulphur element in the Ohio crude was conquered — and it was a very difficult work to conquer it, which we applied ourselves to successfully— the average of the refined oil produced from the Ohio crude has been and is quite equal to that produced from the Pennsylvania crude. That is now admitted by all buyers and in all markets, and it is known to consumers where they know any- thing about it at all." The talk which the agents of the Pure Oil Company and which the Pure Oil Company have made, and continue to make, as to the superi- ority of their products over even that which we make from the Ohio crude is entire nonsense; it is not true. I want to call attention to Mr. Lee's testimony, given somewhat in detail, indi- cating that we obtained higher prices for oil abroad than we do in this country.'' If that is so — and I do not admit that it is so, but admitting for the sake of the argument that it is — it is a pretty good argument that the consumers in the United States are being very well troated by the Standard Oil Company. FOREIGN GOVERNMENT CONTROL — POPULATION AND OIL ' CONSUMPTION OP GEE- MANY AND PRANCE. He makes a long talk about foreign governmental control,'' which is about as silly as anybody ever listened to, and I will not take the time to comment on it. He makes a statement regarding the comparative population and oil consump- tion of Germany and Prance, and I refer to this statement only to show how exceedingly careless he is in respect to statements made before this body on mat- ters in which he seeks to influence your minds and that of the public. (Reading.) " Q. Abroad, where the oil of the independent refineries goes, which is not of such a grade as can be consumed in the States here, does it come into competition with the oil sent there and sold by the Standard? — A. Yes; the Standard is doing a very large business in Germany. Germany is the largest oil market in the world; although the population is about the same as France, it uses probably twenty times as much oil as Prance. I think I am not far wrong in that." ° The relative population of Germany and Prance, by the last census of 1891, was: German population, 49,421,803; French, 38,343,192. The consumption of oilinthe year 1898, the last year of record, in barrels of 50 gallons, was, in Germany, 3,3.57,397, and in Prance, 1,688,146. Mr. Lee said it was twenty times as great in one as the other, and that their population was about the same. I submit this statement to you. 1 See p. 273. See also p. 277. Also Mr. Phillips, p. W2. - See p 27H. 'Compare Mr. Emery, p. 024; Mr. Gall, pp. 072, 681. ■• See p. 270. Compare Mr. Emery, pp. (ilO, o;fl, o:K, and chart of prices in introduction. " See pp. 370, 277. See also Mr. Emery, pp. 010-018, " See p. 278. Compare also Mr. Emery, p. 633. STANDARD OIL COMBINATIONS: AKCHBOLD. 533 PRICES OF COAL AND MINERS' WAGES. He makes the statement that the Standard fixes its own price at which it buys coal, and is thus enabled to oppress not only labor in its own line of business, but also the coal labor. > The statement is entirely and absolutely untruthful. The Standard buys its coal on competitive offerings, and if the price is so low as to compel low prices for labor it is the result of competition. He claims that prices were fixed by the South Improvement Company, ' when he knew well that the South Improvement Company never did any business. PRICES OP CRUDE OIL. He goes into an elaborate argument to prove that the prices paid for crude oil have been unremunerative to the producer.'-' This charge, which is more specif- ically, and I may say hysterically, made by Mr. Lockwood, I will reserve for fuller answer until I reach Mr. Lockwood's testimony. THE standard's MANUFACTURE OF CANS AND CASES. ■ In answer to a query Mr. Lee says that the Standard are largely supplying Eastern markets with Russian oil and making their tin cans abroad.-' I want to submit, gentlemen, a series of statements on this interesting snb.iect. Our busi- ness in the canning of oil, for the markets where the oil must be put into tin cans and packed into wooden boxes for the market, has been a very important feature from the beginning. It is a business in which we have perhaps expended as much or more industry, in keeping and maintaining the markets, as in all the other sections of the world combined, because in those markets we have found our great competitor, Russia, most active. In answer to Mr. Lee's statement that we have practically abandoned this business, and that we are buying Russian oil in bulk and making tin cans abroad in which to put it and send it to the market, I present this statement, being a memorandum of our manufacture of tin cans for the 5 years beginning with the year 1894 and ending with 1898: Ntimber of 5-gallon cans manufactured, five years, 1S94 to 1S9S, inclusive: also cases. Years. Cases. Cans. Equiva- lent in boxes of tin plate. Years. Cases. Cans. Equiva- lent in boxes of tin plate. UNITED , STATES. 20,496,942 18, .517, 421 22, 998, 0.53 26,220,579 23, 325. .3.36 40,993,884 .37,0;J4,841 45, 996, 106 52,441,1.58 46,650,671 843,387 ,761, 938 946,298 1,078,895 959,767 TAJIPICO. 1897 .53,044 210,2.52 106, 089 420, .504 2,182 1894 1898 Total.. VENICE. 1896 8,651 1896... 263,298 526,593 10,833 1897 1898.. 807,775 704, 249 734,449 1,615,5.50 1,408,49a 1,468,898 Total -- 111, 558, .330 223,116,660 4,590,285 33,2.38 28,977 30,220 MEXICO 114, 024 70,120 124,411 162,6.30 93,976 228.045 U0.240 248, K-a 3,25. 260 1.^7, 9.53 4, 693 2,885 .5,119 6,692 3, 866 1898. Total.. SAVONA. 1896 1897 1898 Total.. TOTAL. 1894 1895 1896 1897 1898 Total-. 2, 248, 472 4,492,947 93,455 1895 647, 946 785, 995 763, 827 1,295,912 1, .571, 990 1,627,255 1896.. 1897 26,636 1898.. 33,308 31, 379 Total .. 565, 161 1,130, .321 23. 2.55 2, 197, 578 4, .395, 1.57 90,823 244, a53 240,022 243,950 266, 905 201, 864 488, 707 480, 045 487, 9(11 633, 810 403, 728 10,0.'i5 9,876 10,087 10,981 8, .306 1894 20,855,318 18,827,563 24,823,146 28,19.3,403 25, 379, .504 41,710,6.36 .37. 655, 126 49, 644, 291 .56,:«>,80(i 5(1,659,009 1895... 858,135 1896 774,699 1897.. 1,021,328 1898.. 1,160,035 1,043,189 1, 197, 095 2,394,190 49,265 118, 027, 9m 236, 0.56, 868 4, 8.56, 386 1 See p. 278. 83A 35 See p. 27\). ^ See p. 283. 534 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. About 3,500 men are steadily employed in this industry in the United States. In 5 years we maniifactured in the United States 233,116,660 tin cans, which were packed in boxes holding 3 tins each, the requirement being in boxes made from our native pine. The boxes were made mostly from Canadian pine, but made in this country, lumber being brought here and the labor being employed here. This busines.s involved the u.se of lll,r).')S,330 wooden boxes, holding, as I say, 3 cans each. And we used in this manufacture 4,590,285 boxes of tin plate. The only business that we do outside of the United States in the manufacture of tin cans is where we are compelled to do it by the exigency of freight; in Mexico City a small 1 in.siness, in Vera'Cruz a small business, arid a small business in Tam- pico, Mexico, also, the amount of which is entirely inc(msiderable. We also do a little canning — a very little — in the exportation of bulk oil and the manufacture of tin cans in Italy, at Venice and Savona, v.'here the tariff and customs make it necessary that we' do the canning there. And there are employed in this great industry, at the minimum, in steady, remunerative labor, 3,500 good Americans. RUSSIAN AND AMERICAN EXPORTS OP OIL IN CASES. I present here also a statement made up to show the exports of refined oil in cases from Batoum, Russia, from 18'.)4 to 18!is, inclusivi\ I present this statement for the purpose of having you understand something of the menace which attaches to this business at the hands of this great Russian competitor. Our aggregate in all this great business with the East, which we have made such a fight to retain for the American petroleum industry, is now 100,000, dOO cases for the 5 years, as against Russia's 53,000,000: but for the year 1898, perhaps I should read to you, as showing the change in the matter, their shipment was 10,738,603, as against our 33.479,745. I also present a statement which you, gentlemen, at your leisure, will find great interest in studying, showing the enormous exportation of this particular pack- ing of oil in tins and cases to the markets of the world. It is a business, as I say, which is competed for by these foreign countries most vigorously, on which our hold is uncertain, and which requires the utmost vigilance and encouragement on the part of everything pertaining to the business from America: E.rports of refined oil in cases from Batoioii. Russia, during years 1S94 to 1S9S, inclusive. [Cases.] To- 1894. 1895. 1896. 1897. 1898. Total. 6 255. 800 6 Balg:aria and Servia ;J87,.524 305,645 446,383 95,000 1 . 845, 627 1,100,169 327.004 75. 840 907. 648 1,315,339 1,522,356 170 840 China Egypt -- England and United King- 725, 5(« 803, asi 1,:3.56.285 847,298 l,l:.'5.131 845.824 500 3,816,028 20 346,0,54 974, 971 1 1.52, .510 16,860 31,107 .5,860,244 4,912,559 .500 India -- Italy. 3,776,0,59 4, .582, 22B 3,498,488 :j, 948, 895 18,631,698 20 311,064 647, 680 1.58, 183 380. 000 1, .505, 6.56 261,461 .50, 099 83, .526 614,214 l:)6,22:5 162,600 271,880 519, 884 166,828 12,1.50 42,:ai 43,610 1,933,213 :> 784 416 Java Manila Malta 901,881 79,109 402,974 43, 611) Ronmania.. Portugal 195,474 51,547 45, 000 3,740.690 :2:i919 ,35,0,35 20,000 45,000 Turkey Greece 2,681,176 40, 481 18,7011 3,001) 1,967.07:! 73, 164 79, i:i5 33,209 ;3, 3:13, 633 51,117 114,036 2,873,901 :.>5,900 121,720 13, .598, 473 233,581 :i58,616 55,309 Suez Canal Total exports 8,6:28,414 101,. 594 11.405,650 l.oli, 6,s:i 10,469,273 94,3.59 11,449,0:59 94,499 10,650,919 177,684 53,603,301 634,819 Total shipments 8, 730, 008 11,562,;«) 10, .5(3, (83 11,643,638 10,738,603 53,128,120 STANDARD OIL COMBINATIONS: ARCHBOLD. 535 Total petrohn I m py-od! lets e.ipoi'ted from United States in eases during years 1894 to 1S9S, inetiisire. [Cases. ] To- 1894. 2B,6(J(J ;. 5(1(1 1S95. 1896. 1S97. 1S9H. Ti.tal. Great Britain: Standar(a Oil Co. . _ Others.- 16, 900 17, 106 18, .5,20 14,101 9,3,1:37 2 .500 Total :"». (1(1(1 100 W.'.iWI 17. 106 18.530 14,101 Holland: Standard Oil Co 100 500 700 Others Total 100 100 500 700 Belgium : Standard Oil Co 28(1 2S0 Others . -. Total . 2,S(I 280 German North Sea: Standard Oil Co 19,000 20, 0(H1 16,300 18,000 21.000 94 300 Total 19,000 20,000 16,3(50 18,000 ,21,000 94,300 Sweden and Norway: Standard Oil Co 24. 205 2,900 7,50 400 38, .345 Others Total 24, 2!15 3,900 7.">(l 4O0 28,345 Denmark: Standard Oil Cb 1,350 1.250 Others Total 1,350 1,250 Russian Baltic: Standard Oil Co 1,150 1.500 1,0.50 3,700 Others - .-- Total 1,1.50 1,500 1,050 3,700 France: Standard Oil Co .- Others 37,400 30 13,500 28,000 18, .303 100 97,233 100 Total 37,400 30 13,500 28,000 18,403 97,333 Portugal: Standard Oil Co 128. 445 1:^.245 200, 833 24, 913 163,407 :?4, 432 249,919 30. 735 130,891 30,010 868,494 Others -- 123, a34 Total 136,690 225. 7-14 187.839 ;.'80. 6,54 160,901 991,828 Gibraltar: Standard Oil Co Others 77,060 28,810 65,923 100 54,259 38,720 264,773 100 Total -- - 77,060 28,810 66.023 54. 2,59 38,720 :;ti4.872 Italy: 1,145,764 715,904 .348, 000 ;!U3, 275 97.0(12 313,706 5,012 2,884,648 Othpi-^ 1(12, 014 Total. 1,145,7(W 715.904 348,000 459.277 :!17.717 2,986,663 Malta: 27, .500 27,500 Others Total. 27, .500 27,500 Greece and Greek Archi- pelasro: Cl+Q-nHoT-rl Oil Co 131,281 193,400 118,700 167,000 153,737 763,108 Total 131,281 193,400 118,700 167,000 153,737 763,108 536 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Total petroleum products exported from United States in cases during years 1894. to 1898, inclusive — Continued. To— 1894. 1895. 1896. 1897. 1898. Total. Turkey: Rtandard Oil Oo 88,800 35,900 124,700 others 88,800 35,900' 124,700 230, 095 32,850 161, 4.32 236,058 660,435 Total 2.30,095 32,850 161,4:32 236,0.58 660,435 North coast of Africa: Standard Oil Co 175,821 167,544 74,200 5,000 80, 526 5,426 83,004 581, 095 10,4^6 Total 175,821 167,544 79,200 85,9.52 83,004 591,521 Indian Archipelago and Islands in the China Sea: Standard Oil Co 298, 081 47,300 173,634 13,230 373, 627 215,639 82,271 1, 143 252 60,630 Total -.-- 345,381 186, 864 373,627 215.6.39 82,271 1,203,782 West coast of Africa: Standard Oil Co 85,641 26,132 122,693 6,327 1.54, 066 23, 129 190,089 12,193 79,6.57 7,093 633 046 74, 874 Total 111,773 139,020 178,095 202, 382 86,750 707,920 East India: Standard Oil Co,.,- :3, 0,1. 929 353. 800 3, 0.54, 529 6,000 2,818,933 12,000 3.561,390 6,000 2,6:31,349 15,138,130 277.800 Total 3,325,729 3,060,629 2, 8:30, 9:33 3, 567, ,390 2,631,349 15, 415, 930 Java: 1,511,2:36 1,603,130 1.772.67(1 1,434,081 l,321,8a3 7,042,950 Others. Total 1,.511,2:)« 1,603,130 1,772,670 1, 4:14, 081 1,3.31,833 7,643,950 China: Standard Oil Co - 3,9,51.031 289, 525 2.293,24H 4,791.618 6,:3.52,811 4,915,962 22 :i:i4 670 Others - 289, ,525 Total - 4, 24(1, 556 2,293,248 4,791.618 6,:r>2,811 4, :)73. 299 4,915.963 5, 467, 215 23,t;,34.195 Japan: Standard Oil Co Others 3, 619. 571'. 2.H2,(i:i7 2.li(i;,214 4,095,7.jS 311.1 ("J. 062 ,•.'82. 037 5, .1(37, 215 Total. 3,901,613 345. 471 24,19(1 2,6(17.214 4,095,758 4.::73.2!I9 :iO.'H5,099 South coast of Africa: Standard Oil Co Others. --- 4.81. («» 13.00(1 ■■».. 974 1 1 , 24:; 599.051 15.415 470.1(13 11.. 50(1 3,344,637 18,377 Total . East coast of Afi-ica: Standard Oil Co Others Total Islands in the Indian Ocean: Standard Oil Co Others _ Total . Arabia : Standard Oil Co . Others Total . 2Gl,Mr. l,r>lll) STANDARD OIL COMBINATIONS: ARCHBOLD. 537 Total pefrolrii III j^rodncfs e.vpoiied from United Statex in camv during years 7,W^ to ISi'iS, inrliifiive — Continued. To- l,Hfl4. 1895. 78. 713 4. T,«6 189li. 44, 473 1,,52B 1897, 78, 488 mil 1898. Total. Sandwich Islands and Is- lands in the Pacific : Standard Oil Co 36,4:fl 15,343 69,944 1,000 308,048 32,765 Othei-.s Total 51.774 83,499 j 45, '.198 78, 588 711,944 330,803 Australia: Standard Oil Co l,lir).2,s,s '.I2..5PB 1,1)02, OliO i:«.ii:r. l,179,71:i li:;. mill 1,268,503 109.1110 1,219.4:21 LS u 5 5,7S9,0.54 094.471 Others Total - 1,211,874 192, 975 17. 515 1,135.1114 1,292,713 1, 4,37, 663 1,401), 171 0.4.'-3..525 New Zealand: Standard Oil Co Others-- 21 IS, 528 10, 1,80 279, 3;S 276,010 2:33, 523 1,1 90, .368 27, 695 Total - - 210, 490 218. 708 279. 3:B 276, 010 233. .5,22 1,, 218. 063 British North America: Standard Oil Co Others 16,260 1,891 17,433 1,743 15,1176 1,215 5,:SI1 l,8:ffi 6. -125 2,400 60,495 9,077 Total-- 18, 151 19. 176 16, 291 7,129 8, 825 09.. 572 Mexico: Standard Oil Co 8, .563 12,095 «. 6.58 7.423 8,999 3,9.30 2,617 41, 622 :i, :197 26. 041 .32,234 91, 111 Others -- Total - 20.6.58 16.081 12, 929 44,239 29. 4:» 123, .345 Central America: Standard Oil Co-- 100,019 34,429 lll5.s:^7 29,391 1.36,181 21,313 120,386 18,710 1.10,001 13,657 Others ] 17 500 Total- 140, 448 135. 228 1.57.494 1.39,096 153,668 725,924 Cuba: Standard Oil Co ,500,004 8, 9.39 393,2.55 1,9.54 2.55, .334 2,109 267,0.33 3, 095 194, 1,50 17,1382 1,609,775 33,479 Others Total 608,943 :195.2II9 2.57,443 370. 137 211.. 5.32 1 043 2.54 West Indies: Standard Oil Co Others 425. 5.37 115, 379 4.58,483 66,785 493,390 65, 145 ■441, 599 61,453 421,550 65, 489 2.240,459 324 261 Total 490,916 525. :-'68 558, 4;i5 .503,0,53 487,0.39 2 564 710 Northeast coast of South America: Standard Oil Co 249,833 .55,618 223,400 .51,968 247.. 525 ,57, 237 228, 019 68, 172 284, 584 54, 751 1,2:3,361 Others - 282, 746 Total 305,4.51 275. :!68 304,702 291,191 339,335 1 .516,107 Brazil: Standard Oil Co Others 1,5.39,303 9,779 l,490.:^70 7.744 1,596, .327 9, 445 2,m,7:io 6, 557 1,9.88.763 ,s.919 8,7:!2,493 42. 444 Total 1, .549. (1.82 1,. 504, 114 1,605,772 2,118,287 .360, 199 873, 197 1.997.682 2811,892 789, 738 8. 774, 937 Southeast coast of South America: Standard Oil Co .567, .506 301,576 5:!9,:!44 5112, 821 518,283 759, ;» 2,;;06,324 Others 3, 220, 693 Total 869, IK2 1,042.105 1,277,1543 l,:.':i3.396 1,070.6:30 5.493,918 West coast of South Amer- ica: Standard Oil Co 185,308 108,022 316,4.33 17:1,340 274, 755 155,:iH5 289, 283 107,4.50 3.53, .5.39 97, 025 1,41 9. .318 041,222 Total :'!!3,.330 489, 773 4:!0,140 20.767,4.HII 1,419,381 .390, 7:i:) ,23. IK2. .514 1, 017,210 4511, .504 21,006,:378 ],4]:i.:307 2.000.540 Grand total: 20,209,828 1,787,5.52 16. 672, 480 1, 1«5. 5.31 102.398,680 Others 7,463,041 21,997,380 17,838,011 22,186,861 25,359,724 23,470,745 109,861,721 538 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Smyth.) Is there any competition from America? — A. There is practically no competition from America. I do not knCw but these gentlemen do some small amount of business. It is almost inconsiderable from the fact that we do not even know that they are doing it. Q. The principal comiietition comes from Russia? — A. The principal competi- tion comes from Russia, and now from the far East, as I will explain a little further along. There is getting to be a large production of oil, especially in the Dutch East Indies, but I will go into that in another place. I may add, gentlemen, jast by way of a word of explanation, that I think in all those countries to which we send oil we have our own active American agents on the alert for the American oil and the American industry; and this gentleman comes here and states that we are not doing this bn.siness. CONDITION OF THE OIL REGION. In answer to the query, or in pursuing the argument, rather, that the Standard had so governed prices for oil as to have made it an unremunerative business in the oil country, Mr. Lee made a most astonishing statement, that the counties producing oil are not as ■,vi-'ll off as though they had never produced a barrel of oil.' That section prior to the opening of the oil industry Was a ctimparative wilderness, noted, if it was noted at all, inincipally for its hemlock and buck- wheat. The oil production lias made it a world-renowned center of marvelous activity. It has taken thory a population of tens of thousands, I may say hundreds of thousands, of prosperous, happy, contented people, the like of which probably does not exist in the same territory in any place on God's footstool. The oil pro- duction has built towns and cities and railroads. It has given employment- steady, remunerative employment — to thousands of American Vi'orkingmen through all this period; and for a man to stand up, who comes from that sec- tion, with a knowledge of conditions as they exist there, and make such a state- ment, is, as I say. utterly incredible. CAPITAL, PROFIT, STOCKHOLDERS, OF THE STANDARD. Q. (By Representative Livinosto.y.) In connection with this statement you have just made, will you give us the amount of capital invested in the Standard Oil Company, and a list of all the stockholders, and the profits on that invest- ment? — A. The figures with reference to all the questions are being made up, as Mr. .Tenks knows. Q. A list of the stockholders? (By Mr. Jekks.) A list of the stockholders, I may say, was not asked for in the general schedule. Q. (By Representative Livingston.) Well, I am asking for it now?— A. lean not answer as to that. Q. (By Mr. Phillips.) Would you be willing to meet the commissioner's request and furnish a list of the Standard's stockholders in the trust as it for- merly existed, and the combination as it now exists? — A. I could not answer now without further conferring in reference to that statement. Q. (By Representative Livingston. ) Will you promise the commission that you will confer with the authorities, and if these things are not inconsistent and impracticable, yon will furnish them? — A. If they are not inconsistent and impracticable, I sliould be glad, of course, to give aiiy statement that might be asked. Q. (By Mr. A. L. H.^lBbis.) Would not this be the best testimony in refuting the stateui'mts made by Senatrir Lse, to give the taxable property of those coun- ties previous to the discovery of oil and at the present time?— A. I think it would be very interesting. Simply as an illustration of the point I make of th(^ absurdity of Mr. Lee's statement, I present for your information a statement of the value of Pennsyl- vania crude oil as compared with that of other States, the total production from the beginning of the industry to the year ly.JS, inclusive, and figured on a very conservative basis. I See p. 283. STANDARD OIL COMBINATIONS: ARCHBOLD. 639 Total pnuhictidii and nilnc of Pen ii.-3. 1864. 1865. 1866. 1867. 1868. 1869. 1870. . 1871. 1873. . 1873. . 1874. . 1875. 1876.. 1877.. 1878. . 1879.. 1880.. 1881.. 1882.. 1883.. 1884.. i88r. 1888. 1890. 1891. 1894. 1895. Total. Avi'Vane '• Proiuetion. '"','.,, '.'j.}"'' Total value. i i. -it wells. rsnrn'i, S, .",llfl lai. iiiKi .■-Ml.'^.IIIKl .•ln,'.!).(iiiii :,'.ii:i], 11(1(1 ^', 111'., :.'((() :->, 4nr 71 (d 3..V.I7..~il((l 3, :mt.;;(hi 3. 715. ,■<(«( 4. L']r).(i(((i 5. irei.ajn 5,7'.i.-i.mn a.wt.i !(((! 0, ««, 7S(; 10. iW). 1145 11.HS7..-.14 0. U). OOH l3.3'!7.:-;ir; 15 :M.(i4] iH .s'.i4 a."* -•'■,. :.>45. 571 27. .5(jl.:!7(i 21 . .')2S. ICl ^'It.olK.O.'.'l (.).'.: Id 21 . iViS. 6,->] 2(1. 1)03.045 22,,S73,450 ll'i, (105 KH(l 22,:H9,K,i5 3(1. OB5.H()7 35.742.12; 31.332. 30(1 31 . 25li. 2.^5 a I, OHO, 116 3(I.«I1,SI)H S.!. 908, 041 35.170,367 31.645,151 S.20. (10 0.60 .52 1.05 3 15 S. 15 II 50 3. 75 2.40 3. 03 5. 60 3.90 4. 40 3 75 l..'<(l 1. 15 J 25 2. .5.S 2 -30 1.17 ..% .94 .00 . .S4 ^,]7(l 6. :'4(I. 110. 3, 2IW. .^' 2S7 i;.247; 10.450 13.400, ■I.OO'i 13.4.-S, 23 001. 22.070. 25 J-'ks 24. .521. 1T.,S(I.S. 12. .5115. 1+.SW4. 23..5;)1. 31.sril. 17,000, 17 1-ni. hi t'>i'. 17.0(17. 24.700. 20.110. IN. 045. 1K..W,S 15.325. 14. 7(l.s. OIHI 0(1 000 00 130.(10 XOIl. 00 0,50 (10 O.'iO 00 843.00 025. 00 520.00 354. 00 (100 00 .11 HI on 000. 00 025 00 .S14.80 986. 75 392. 50 3,20.02 2>f)7 57 510 07 0K7. OH (■(30. 74 100 00 010. .59 112 26 023.60 ISO. 4.H HOO 05 .211.50 Land hitei-- est.^ >.'1.2.50. (10 iSO.OIIO.OO 13,107.00 I 401, 100, (Kl I 1,035, O.-.O. ,.'5 1.24. SO 21.0(;.N, ,S35 .5(1 20. 157. 304. .29 23.947.2 IH, 60(i,( 2(1, (HI4, ( ,91 41.704. -10.350, 27, 432, I 00 091.30 021, 12 241.44 021.80 .508. 70 X8I). ,20 0S7 41 2, ( 15 l,o.-:i 1.0(1 l.osi IS f.5.s. 1 ii-H "00.00 102. .50 2.1(1 00 1.005.203.13 2, 220, 101.. ^5 1.570.74.'^. 31 l.xr;i(l4(i i|(i 2. 041, 115, 75 3, O.S4.,537.20 2, ,240, 505. on 2. l:!K, ia5, 06 3,(1.'<3, X.54, ,50 2,02K 306.20 2, 125, 951,. 12 3.0K7,517.7S 2..514.0;)O.45 2,:iOS, 14.-t 31 2.301.1011.1:1 1,01^,051 44 1 s;iK,515 ,54 2.020.1(14.44 3, ,200, 003. 04 2, 993, 403. 13 I 2.;B3,.261.42 2, .500, 502 04 3,223,1.55,18 5,213.002,72 5,043.821,10 3,429,110,78 3,599,0'!.5 02 Wnl-kili-r iut'-rr'^t value,! .'1. 'JCJI 2, SI 17! 7. 25! 15,0;ii, 14.4:12, 11.S(I4, 7.O."). ll.«0'. ,20, 1153, lii,.ili 22.301 21.4.50, 15, 5:-;2. 1(1 095 13, 111, 2(1,580, 27,.';'.ii. 15. 7.H.. 14 '170. 21,, 5:-'-.. 20,408, 14, ,s,sl l?'o04! 13,40:1 12,800 18,:)S2 22 887 ,20 053 In, :!:!■' 17,5113 m.m :«,:;o(i 24,003 25,197 ,750 0(1 000,110 :ioii. 00 ioo, 00 (103,75 151.25 :.rc 03 206. 87 :i 0.00 .;oo. 75 500 00 3"7 50 750.00 121 87 112,05 :::i^:, 41 3-13 44 91(1, ;;7 700 :)7 054 97 451 72 0:-;2 15 77:1, -10 050 27 0,24. 48' 9:i.H 15 0:>H. 17 7INI. ,12 51:0 06 IIOK 76 7:3 1(6 on.:.'5 ;-:2i.oo H211. 04 51,s.4K osi;. :.-o oiii.ns 7-17.69 775. 48 451,49 662,04-^,042 l.ia3 769,948,397,37 96,243,549,67 673,704,8-17.70 1 See explanation below. Compare Sir. Boyle, pp, 434, 435. This table shows during this period, and this is an interesting statement. I am sure, that there has been taken from the oil fields of Pennsylvania 662,048,643 barrels; and that the avera,ge for all that period of the prices paid at the 55'ells for the oil is §1.163, or a total value of sr6-»,!)4.s.:^,!i7.37. ROYALTIES To LAND05\'NERS. Q. (By Mr. Smyth.) That amount had lieen paid to the producers for crude oil? — A. This amount has beiJU paid to the producers for crude. oil. Now, a:-i has probably been brought out to you in the course of this icstiiii'niy. the nil-produc- ing business is done largely on a basis of what is called I'l lyalty. That is, th^ , iper- ator takes a lease of the land and p;iys to the landowner, who is usually a farmer in that section, a certain frei'-i-oya-lty inter^'st for the rightto occupy and drill the land. Q. (By Mr. S.myth.) That right to occujiy doe-; not interfere with the :i,2;n nl- tural pursuit of the farmer? — A. No; it is held as free as possilile from that interference. That royalty right of payment has varied iluriu.g the history of the business from one-half of the oil found to the present ruling basis of one- eighth, 5vhich basis prevails perhaps to-day through the larger part of the 540 HEARINGS BEFOKE THE INDUSTRIAL COMMISSION. oil-producing country. Of the v^nde produced one-eighth goes over to the land- owner: ' and for that he does nothing, as I say, but furnish the surface on which to drill. Q. (By Representative Livinustox.) Now, will you go further and give us the average profits you have made on all those wells? — A. Now, what I want to say is, that figuring for the whole period that the payment was one-eighth and not the high amount that has prevailed through most of the period, the payment in royal- ties alone to the people of that section on the oil produced would amount during that period to the sum of isfl0,24a.r)-t9.07. Q. (By Mr. Smyth.) You think these counties are worse off than before the oil wells were drilled?— A. If you have traveled through them you will not think so. Q. (By Mr. Clarke.) What is the population of that region?— A. It would be a mere guess on my part. Mr. Boyle or Mr. Lee could answer more intelligently than I. I have not lived there for seme years; I would say about 350,000. SOUTH IMPKOVEMENT COMPASY. Again. Mr. Lee refers, in answer to a question by Mr. Jenks, to the South Improvement Company, as though it was actually doing business;- which was not true. Q. By Mr. Phillips. ) The South Improvement Company did fix rates, did they not? — A. Never to do business. Q. But they had rates fixed? — A. There was a contract entered into, but abol- ished before it became operative. Q. But there was another contract, and is it not in sworn testimony that that contract was in existence only two weeks afterwards, and did or did not the rates fixed by the South Improvement Company prevail after the Standard Oil Com- pany came into existence? — A. I have no knowledge of any relations on the part of the Standard Oil Company succeeding to the South Improvement Company whatever. I have been an opponent of the South Improvement Company, as you well know. I have disapproved of it in theory, and practically disapprove of it to-day. I want to say that the statements that that which was the South Improve- ment Company is continued in the Standard are not true; if they had been true, I would not have been in it. THE SHUT-DOWN MOVEMENT. Mr. Lee refers to the shut-down movement,'' so called. It was entered into at the request of the producers, who alleged they were suffering from low prices incident to a large accumijlation of stock. Our relation to it was entirely the result of the urgency of the producers, who were represented by a committee; they expressed the greatest satisfaction with our course. I want to present for your knowledge, in support of my statement in this respect, the testimony of Mr. Thomas W. Phillips, given before the Congressional committee inquiring on this subject in 1888, page 112. I will read the concluding part: " We are certain that there would have been much bankruptcy in that region had this movement not been made. I will state further, in justice to them, that this was not a movement on the part of the Standard Oil people. It was a move- ment conceived by the producers themselves. They aj)proached the Standard people in regard to this matter, and after long negotiation, which you have here in testimony, the contract, which you also have, was formulated and signed." Q. (By Mr. Phillips.) I assert the same thing to-day. — A. That answers Mr. Lee's statement. Mr. Lee says: "I believe if there had been .")() concei-ns engaged in the manufac- ture of petroleum, that just as -wide markets would have been obtained for the article, and that while the consumer would not have paid any more for his oil, the producers would have realized better prices, and have had a handsome profit, whereas I think they have not made any profit."' I present here a statement showing in detail the list of oil refineries in the United States, with their capacity, av< -raging a life to this time, the first of this year, the end of December, 1898, of 14 years, and numbering 66 in all. iSeeMr.Moimett,p.311; Mr, Davis, p. 304. » Sl'o pp. 277, 284, 288. 2 See p. 283. (Jompare pp. 619, 044. i yoe p. 285. STANDARD OIL COMBINATIONS: ARCHBOLD. 541 Cdjjcicitii's of oidside rejiiiei-ics.^ Year built. Name and place of refinery- 1883- 1887 Number and capacity of stills. 1888. 1883; burned and rebuilt 189U. 1883 Franklin, Works, OiU'ity.Pa.: Indi-pcnilcntEefiningCo., I liiiiitccl. I C'ontiin.'nlal Refining Co., I luiat'-il, 1^ PcunRcfinint; Co., limited I Eotisevillr, li(frmania Retln- ( iug ( 'o. Mcdiuh.rkville. Crystal Oil Rcfluing (_'n. Reno. Empire Oil Works Pa , Relief Oil 1880. 1887. 1887. 1883. Petrolia, I. Dougberty Karns City, Bech Bros Norristown, Montgomery Oil Works. Beay er, Beaver Oil Woi-ks Industry. Scott Oil Co Kendall; Pa. : Emery Manufacturing Co Kendall Refining Co . Eldred, Pa. , United Oil Ci > Titusville.Pa. : 1881. 1885. 1887 1885 and 1889 . 1892 1897. 1886 I North Warren fining Go 18a5. 1880,. 1679. 1890. 1887. 1884.. 1881. 1881. 1877. Clarendon : Tiona Refining Co Fidelity Oil Works . . . . Bolivar, Bolivar Refinery . Pittsburg, Pa.: Miller Oil Works Waverly Oil Works Union Oil Works Freedom, Pa.: St. Clair Oil Co Freedom Oil Works Washington, Pa. : Beaver Refining Co Leader Refining Co Coraopolis, Pa. : Pittsburg Refining Co . . . Penn Petroleum Works . Murray sville. Pa., Philadel- phia Co Philadelphia, Pa. : Grew, Levick & Co Delaware Oil Co Bossardt & Wilson . Total still ca- pacity. 1, mil 1, 800; 1, 3.-|ll; 3. 5011; 3, 2.511; 51 II I I 3, ^llll I Ml; ], laill i :')ii. 1, .51)0 J ,'i, 500 I 3, 350 , mil 1, UOi) 1, IB 1,1(W 3, 100 I 8, BOO; 3, 1.35 1, 150; 3, 100 1, 80 3,000 3,340 1,500 l,:iiio 150 1, .51 III 1,100 le IIX) 200 130 50 5,175 a50 80 Remarks, Naphtha plant. Do, Pressing plant. Robert Foggan r American Oil Works ' Titusville Oil Works Oil Creek Oil Go Climax Gasoline Co Pennsylvania Paraffin Works, East Warren : Cornplanter Refining Co . Ore w-Le vick Co Seneca Oil Co Wilburine Oil Works Warren Re- Naphtha plant; pressing plant. Naphtha works, par- atfin and tar stills. Make lubricating oils. Lubricating and re- fined. 1 1, 2511, 1 1, BOO; 1 1 :i,5ii 1 K15 J 3,015 Naphtha works. 1, 750; 1 1, 500; " 3, .3.511; 1, 1, 1, 2 ,51 K) 1 ;.'K0 1 1(11 'i 135 1,2.50 920 0,50 Do, Paraffin plant. 1 1 :i,)i 1 1 95(1 Naphtha works. 4, :!.50; 1, ,350 1,0.511 f 3, 1.50; 1, 125; T. 100 || 100 :,'. 3511 1 1511 150 :ii)0 300 j 975 Filtering works. 3,125; 1, 51 III; f 2, 235; I I, 1, ,S35 Bl 10 1,11111 875 Do, Do. Lubricating works. Filtering works. 3, 100; 1, 3, 1, 50 100 50 3.50 300 50 Do. Wax plant. l 3, 300; / 1, 3.50; 1. , 500 , 35 , 40 4,-/ ;iiKi ,50 [Barrel factory, naph- I tha works, t;ir stills. Do, 1, 101) 4, 3110 f 1,3',50; *, I'm I , "47 r 1. 1.50; , 3:.l 80 6.50 350 8IKI ^Tar still,naphtha and \ paraflin works. 1, ,50 80; 1, f 2, 80; \ 1, 300; 1 3, 300; 1, 1, 330; 3, 1,025 400 785 1,450 470 ' 26 of these refineries are said, in a letter from Scofield, Shurmer & '1 eagle, of Cleveland, to be according to their information, either out of business or absorbed by the Standard Oil Com- pany. Mr. Archbold verifies that the list is correct as dated, December, 1898, though some "may not loe in operation or may not have been at some given period; " that the Standard is a minority stockholder in the Tidewater Oil Company, New York, but in no way controls it. It win be noted that these two statements arc not contradictory. 542 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Capiieitics of outride (v/riier/rx— Continued. Year built. 1874. 1863- 1864. 1893. Number aufl Name and place of refinery. capacity of Htills. Philacelphia. Pa. — Continued. Philadelphia Lubricating Co.... Marietta, Ohio: Ohio Oil Works 1883. 1883. Marietta Oil Workh . .. Producers' Refiiiinu^Co. . . BufEalo, N. Y., Crystal Oil Works. Cleveland, Ohio: Na tional Refining Co isr.i. 18B4. Cleveland Refining Co — Oi-eat "Wcstpi-n Refinei-y. jMei'i'iam &: Morgan 1, :.',')li: 1, 100 f 1, ir.ii; 1, 100 1 1, 600; 1, 300 1, 22'-, l,rili ). l.'il) 1. 300; -'. ,s,-| I 3, 7.5; 1, 110 2, 100; 1, 85 I 1, 65 2. 300; .H. 80 1889. Toledo, Ohio: Paragon Refining Co 180.) ' Crai.i:r Oil Co isil.i ■ Diamond Oil Co. l.SHO ! Welker , Ohio, Manhattan Oil i.'o. Florence. Colo.: 1887 Florence Oil Co 1887. Western Oil Co . 1879 San Francisco. Alameda Re- finery. 1898.. , Los Angeles. Franklin Oil Co. 1,896 .-.; Oelum.Cal., Union Oil T',, .... 1896 ' Pu"nte,Cal..PuenteOil Co... 1897 I Ventura, Cal.,Ventura Oil Co. Nc"iY York: 1879. 1889. Tide Water Oil C. Columbia Oil Works. .Bdgewater Oil Co.... Total (66 in all) . Total capacity of outside steam stills Total capacity of outside tar stills \ Grand total outside' ca- pacity I i, 400; 8. 500 1 3, 80(1 4, .5.51 ; ] . 600 3, 400; 2. 400 If. BOO ;;. i.iio. 5. 1110 [ 2. ■,':,: 2, 65 1, 7,'): ::, 78 2, .500; 4, aio 2. .570 fl, lOIIO; 1, ;:(I0 1, 4(X); 1, 80 8, :)5 3, ,50; I, 1(10 1, 1.50; 3, 1,50 3, 350 3, 60 (18, 800; 16, (iflO 13, 6.",(1;17, 600 3, 4."i(l; 1, 3.50 4, (i.50; 4, 700 7, 4(n Total still ca- pacity. Remarks. 2.50 1.50 47 ( i Naphtha works. No crude stills; and pitch. 2.800 3.000 7.30(1 1,700 .'S.IK! 1, 960 200 600 .500 130 4:1,1.50 5,400 2, 800 1:15,079 — ^"-^= 19,825 1,355 146,359 Tar stills, was works. Do. fHave tar and reduc- \ ing stills. The average time since the above refineries commenced operations is now 14 years. CMMI!I>;.\.T1( INS .VXD L.4.B0R. Mr. L-.-e make ; a very lalnred eft'ovt to show that trusts and combinations affect labor injuriously.' The best lefutation possible of this statement is the record of our own experience, tli;^ fact being that tor all the years 5ve have been engaged in business we have had scavQely any serious difficulty with the vast body of men employed. On the other hand, we assert most positively that, as a whole, there never was a more zealous body of employees than have I'leeu connected with our interests. We have been practically without strikes; our labor is well paid and conttsnted in every department, and I submit that our experience in this regard is the lipst possible proof of the advantage of labor and capital working together on intelligent lines, where the rights of each a,re fairly considered. I am a firm believer in the right, and, indeed, the duty, of labor to organize, as I am in favor of the combination and organization of capital. Of course it is true that the labor organizations often do very unwise and arbitrary things. They fall fre- quently into the hands of leaders who are demagogic and lack the qualities of 'See pp. :;88, 389, 390. STANDARD OIL COMBINATIONa: ARCHBOLD. 543 intelligent leailership, and tliey are badly influenced also by political demago.nues. whose sole stock in trade is often their ability to talk loudly u.^ainst capital and the employing class; and, above all. they aie too much influenctd by the bad advice of an element in the public pri-ss that is utterly depra,ved and (lenuiKogic and which teaches them altogether false ide;,s :is t" their duties. Thev are taught that it is no sin for them to cheat capital. They will, however, learn l>(?t- ter as time goes on. Capital, on its side, has in;<,dc and is making grievous mis- takes in the treatment of labor; but the two are moving together on irresistible lines toward organization and a better mutual understanding, and one of these days labor will realize, as the employing clasts already know's. that the howling of a demagogue is hurtfu] to all'coin'cmed, and a better era of understanding between the employer and the employee will be brought about. MR. lee's REMED1J:s. At the end of his testinrony Mr. Lee suggests remedies.' They seem alnrist too frivolous to demand attention. His views on destructive competitif'U. the limitation of capital, etc., seem altogether too absurd to call for special atten- tion. I may say. in oonchtsion, that he has taken good care to organize his nwn company or embryonic trust in the very State (New Jersey) which he '-riticizes so severely, with a view, undoubtedly, to make his capital quitt^ unlimited if he finds it will float. OPERATIONS OF THE STANDARD IN OHIO. I turn next to the testimony of Iilr. Monnett, the attoir.ey-gener;il of the State of Ohio. I want to say, by way of pieface. before answering directJy the points presented by Mr. Ivionnett. tliat we ar^^ inteiested in Ohio, in whole i.a- in part, in a number of' corporations, duly chartered 1,'j- the State, and all cai-efully observ- ing the obligations imposed on them by their charters. The at'tual amount paid in taxes is in the neighborhood of S'-nO.OliO. The aggregate amotint piaid in wages to about 4.7(10 employees in the State by this corporation is over ;?;!, 5.50.000 per annum. The further distribution of money in the State for fuel and supplies of all kinds would amount to a vast suia. I submit for your conti deration whether we are not a valuable client of the St,ate and en titled to p; otection rather than persecution. That Mr. Monnett's course has been an efi:ort at the most malignant possible persecution, and probably worse. I will tndeavor to show in taking up his testimony. ' Mr. Monnett makes a statement that there has been great discrimination in favor of the Union Tank Line or Standard Oil Company.-' The rates fixed 1 'V the railroads in connection with tank car lots and single barrel or part car lots have been the same to all, a.nd carried with them no discrimination whatever in favor of the Standard Oil Company. In other words, I deny the allegation particularly. ALLEGED BURNING OP BOOKS. Regarding the alleged burning of books at Cleveland, Ohio,-' I \i-srA to deny the fact of any such burning absolutely. At the time of the original in(;uiry on the subject we offered to produce every employee who could have any knowledge on the subject, who would each have denied the statement as to the burning of the books. The attorney general refused to have them sworn at the time, and at the time Mr. Monnett gave this testimony he knew that Mr. Squires, tlie then secre- tary of the Standard Oil Company of Ohio, had made an affidavit in the litigation pending in Ohio that the books were in his possession. Any denial that I have made regarding the matter, or any statement that I have made in reference to the testimony in connection with it, is true, and it is not true that I have made any retraction, as ?,Ir. Monnett states, with reference lo any statement that I have made. Mr. Monnetfs reiteration of this matter, after all that has been shown regarding it is most reprehensible. I would like to cliaracterize this in strcmger terms, but I bow to the wi.sh of the commission. AMOUNT OP TRUST CERTIFICATES ISSUED. Mr. Monnett endeavors to carry the impression that more Standard Oil Trust certificates were issued than otrr statements have shown. ^ The allegation is made 'Without a scintilla of truth to sustain it. It is contrary to all the evidence that ■was offered in the case, and it is utterly destitute of the truth. The stock and 1 See pp. 394-396. 2 See p. 399. s gee p. 303. "See pp. 307, 309. 544 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. transfer books of the trust were placed in tlie hands of Mr. Monnett's associate, Mr. Kincaid, during the Ohio investigation, who examined them thoroughly and expressed himself as thoroughly satisfied. DISMANTLIXG- OF WORKS. He speaks with feeling with reference to our having dismantled some works at Mai'ietta.' I want to call attention to 3 at Marietta, Mr. Rice's and Mr. Davis's,- and I do not recall that we have dismantled any there. I do not know of any works there that we havr dismantled. Q. (By Mr. Farqtjhar.) This commission, in some of its testimony, has had considerable stress laid < m the dismantling of the works by your Cf)mpany, and the delocalizing, traiisfei-iing of business from towns and other places and the concentration into larger plants. Would you give the business reasons of the Standard with respect to any of these changes? — A. I shall be glad to, and I have it in another place. I think you will find it amply treated. THE STANDARD'S OHIO BUSIXKSS. Mr. Monnett makes a statement which, even to a person unfamiliar with the oil business, is quite unintelligible, to the effect that somehow from the business of Ohio oil we make .$l'-.';i,ouO,000 a year.-^ It is entirely ridiculous. As I say, it is exceedingly difficult to know what he has in his mind. It certainly had no rela- tion to the facts. I have had prepared a statement which shows the total sales in the State of Ohio of refined-oil products for ISllS to be .$979,71)8.56. Q. (By Mr. Jesks.) That includes all by-productsV — A. Yes: I will ask you to discount his statement at least .^119.000,000. Q. (By Mr. Clarke.) That is the sales by your company? — A. These were the total sales. bribery case in OHIO. I must speak somewhat guardedly, in the nature of things, about what Mr. Monnett saw fit to say about the conduct of bribery cases in Ohio.'' With refer- ence to the so-called " bribery" case in Ohio, I desire to say that affidavits have been filed with the supreme court of the State of Ohio denying specifically all of Mr. Monnett's charges of attempted bribery and all of his allegations in relation thereto, and askmg the court to appoint a commissioner to investigate the charges. The court has not yet acted upon the subject. If they do not, we will then see whether there is not some other method by which Mr. Monnett can be compelled to answer on this matter. Q. (By Mr. Farquhar.) What is the supposed amount of bribery?— A. The newspapers have it about $400,000. Q. (By Mr. Smyth.) Paid to whom— to Monnett?— A. To Mr. Monnett; yes. I say we have answered the matter and our answer is before the supreme court. With reference to what our final attitude will he it would be unwise for me to state now. We court an investigation. Q. (By Mr. Ratcheord.) Are you prepared to say that such a proposition might not have been made without your Imowledge, or do you deny A. We have denied it to the very uttermcjst. Our answer is now in court. Q. The answer of your company?— A. The answer of our company. I want to speak a word regarding the recommendation by Mr. Monnett of Mr. W. H. Clark, of Newark, Ohio, as a competent witness."* In recommending this witness to you Mr. Monnett must have known that he was an untruthful, dis- honest, discharged employee, and his imposing him upon you as a witness was an insult alike to you, to our interest, and to the country at large. COMPETITORS IN OHIO. Mr. Monnett testifies, in answer to a question by Mr. Harris, as follows: "Q. What companies are competing with the Standard Oil Company in Ohio now?— A. There is only a limited couipetition — I think the Scofield, Shurmer & Teagle 1 See p. 308. = Compare pp. .SIS, Bill, fM; Mr. Davis, pp. 351,361; Mr. Rice, p. 687. 2 Compare pp :il 1,315. 'See pp. :i]:!, :ili;. « See p. 313. STANDARD OIL COMBINATIONS: ARCHBOLD. 645 people; and a man by the name of Shnll, at Mansfield, lias an independent agency and only a limited product. The Shnrmer & Teagle people originally had a con- tract whereby they were allowed to live— to sell and live.'" Mr. Monnett again refers to the absence of competition in Ohio and repeats that he does not know of a single independent chartered corporation left in the State of Ohio.'-* However, he attempts to carry the impression that we are attempt- ing to deceive the public by operating through different names in the State. He quotes the Penn Oil Company. => I do not know what he means by this, as we have no such company operating in the State. I now submit statements showing a partial list of our competitors in Ohio, composed of pipe lines, refiners, and producers, covering corporations, partnerships, firms, and individuals. The list is only partial, but it gives some indication of the utter lack of knowledge, or worse, that actuated Mr. Monnett in his statement.^ I will give you a summary of the incorporated companies engaged in the State of Ohio; not in the southern part, but in the Lima district. There are 139 corporations. Q. (By Mr. Smyth.) Not controlled by the Standard Oil Company?— A. Not to the. interest of a dollar. They are, of course, all creatures of the State of Ohio, and if not chartered under the State they are all registered under the laws of Ohio and paying taxes in that State. There are partnerships, 258. Q. Not owned or controlled by the Standard Oil Company? — A. Not to the extent of a dollar. Q. Not agents? — A. Not agents of the Standard Oil Company in any way or sense. Q. (By Mr. Phillips.) Have you any interest in these companies, in producing with them? — A. None that I know of. Q. You have alliances with producers in the Pennsylvania field? — A. Our busi- ness in Ohio is done in the name of the Ohio Oil Company. Q. The point I wish to make is this. Have you not an eighth, a quarter, or a third in the leases in Ohio, as you have in Pennsylvania? — A. Not in these that I am presenting. Q. In Pennsylvania and West Virginia you have? — A. Not that I know of. Q. Are you not interested a quarter or an eighth? — A. We may be to a small extent. Q. (By Mr. Jenks.) But not at all in any of these? — A. It is such a trifling exception as not to be an exception, if at all. Of individuals there are 1,340, 159 corporations, 258 partnerships; and there are of refining concerns not in the remotest degTee related to the Standard Oil Company 8 active large concerns chartered by and doing business in the State of Ohio, which makes a grand total of concerns doing business in competition with us of 1,665 in the Lima district against Mr. Monnett's 1 concern that he could name and 1 business man that had a station at Mansfield. Q. (By Mr. Phillips.) What per cent of the Lima field do you control in pro- duction? — A. I have that here. Q. (By Mr. A. L. Harris.) I had in my mind, when I asked Mr. Monnett the question, the refining companies, not the producing companies. — A. He answered also regarding the producing companies — regarding them all. Q. I asked the question with reference to the refining companies, and I think that he intended to make the answer to my question. — A. His answer mentioned producing companies, and he spoke about the Penn Company being a producing company, but claimed that was ours. Q. Is that a refining company? — A. It is a produ.cing company. Q. (By Mr. Ratchford.) The witness has stated that the Standard Oil Com- pany has virtually no interest in a number of producing companies he has men- tioned. Have they no interest in the refining companies? — A. None whatever, I believe. Q. No relations with refining companies? — A. None whatever. Q. (By Mr. A. L. Harris.) How many refineries outside of the Standard are in operation in Ohio now?— A. I have just given them. I do not think this covers them all, but the larger ones. This was made the first of the year. They are: Craig Oil Company, Cleveland Refining Company. Diamond Oil Company, Man- hattan Oil Company, National Refining Company, Producers' Refining Company, Paragon Refining Company, and the Sun Oil Company. This is made up vi^ith i See p. 318. 2 gee p. 32.5. » See p. 326. ■■ Detailed list filed with commiesion. The reflners are included in tlie general list of compet- ing refiners given above, pp. 54i, 54'i. 546 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. reference to the Ohio field. I might say also that the business done by these com- panies, and in which we had not one dollar of interest, direct or indirect, or one iota of control in any way, it.,<;-Ki e,i;;i,ted for the 5 years from 1894 to 1898, inclusive, 14.(;47.!)49 barrels. I am rfiuinded there are some Cleveland refineries in compe- tition with onrs, not included in this list. By the way. these Cleveland refineries are included in the general li<("- of refineries which I gave in answer to Mr. Lee's tpstimony. I have furthei- a sr.iiplenientary list of competitive producing com- pa.nies. made up of or^aidzations. corporations, partnerships, and individuals operating in southern Ohio, ajvirt from the Lima field, aggregating 16 corpora- tions, 8 partnerships, 09 individuals, or a total of 93 in that section, which should be added.' AGITATION OF THE OIL-TEST QUESTION IN ENGLAND. Mr. Monnett shows his vindictiveness as against the American oil industry by applauding a scurrilous XJamphlet put out by one of the yellow journals of London at the instance of the Russian oil dealers as against American oil.'-^ There was not a word of justification for the statements made, and a committee of Parlia- ment, who have gone into the subject most thoroughly with reference to possible legislation on the oil-test (urestiim in England, have upheld American oil as against all the outrageous tdiargps made by the Russian industry and given pub- licity through this scurrilous pamphlet. I vidsh to say one word on the magnitude of the Russian oil industiy and its menace to our American industry. Nowhere during the past year have they made so determined an effort against American oil as they have in England, and they have retained a journal of the lowest order to make these scurrilovrs attacks. The name of the journal is the Star, and this 13amphlet is published undoubtedly at their instance, although it is anonymous in its character. Even the Russian people who put it out would not put their names to it. I have here a further statement of the Russian oil industry, giving statistics in detail, which I am sure you will find of great interest. Q. (By Mr. Jenks. ) Can you give us a reference to the official statements of the committee of Parliament to which you refer? — A. I will get that for you.^ Q. (By Mr. Faequhae.) You state the Star article is on the side of the Russian industry? — A. They applaud the Russian oil and decry American oil; that is the purpose of the publication. The thing is to cry down the American oil. Q. And you claim they injure the Standard? — A. That is where they — yes; we are the large distributors. Q. What is the test?— A. 73 Abel. Q. What is the equivalent of the test? — A. About 120. I might add a further li,st of the Ohio companies organized since November, 1898, and not yet published. I will put them in.^ PEICBS OF CEUDE AND EEFINED OIL, 1870 TO 1898. Mr. Monnett endeavors to make a statement that the dismantling of the Stand- ard Oil Conrpany would reduce prices of oil to consumers.'' I wish to answer this by giving statistics showing the record of cost and prices for a period. The world-wide facilities employed by the Standard Oil Company and its affili- ated interests for the distributii:)n of refined oil would involve years of effort, 'and a similar amount of capital to replace, and would immeasurably increase the cost of oil to the consumer. Q. (By Mr. Jenks. ) The price of refined oil in the table is the average export price? — A. Yes. Q. Exi)ort prices fix the price of domestic refined? — A. Substantially so.-' Q. Can you furnish to the commission also a list of prices of refined water- white oil in the oil markets of New York, Chicago, and Cincinnati? — A. If you will give me a memorandum of that I will. 1 Placed on file with conuiiissioii. ■J Sec p..S19. 3 On file with commission. I See p. 333. Sue also p. 317; Mr. Thurber p. 4; Mr. Westgate, pp. 371, 373. '• Compare Mr. Westgate, pp. 371, 373: Mr. Lockwood, pp. 394, 398. STANDARD OIL COMBINATIONS: ARCHBOLD. '■'',' Peiinsi/lrcuiia oil, stocks, and ]jrices. 547 Year. 1870 . 1871 . 1872. 1873 . 1874 . 1875 . 1876 . 1877 . 1878 . 1879 . 1880 . 1881 . 1882 . 1883. 1884 . 1885 . 1886 . 1887 . 1888 . 1890 . 1891 . 1893 . 1894. 1895 . Avei-ay:t^ daily pi-odiiVt. If 15 17 Is. 075 fiOS 644 ,206 114 004 338 303 120 921 679 846 058 869 376 191 328 296 .334 820 815 a57 206 Average price per T)arrel .S3. 00 . ];■> .24; . r>7i- . ai .17; . S3; .88; .71; . 06 i 87 .04; .86; .66;- . .55; .64 .83} .35^ .19 .781 ■ 9U Export price, refiped, per gallon. Stocks in- creased. CV/ifs. 26; 24-} 23; 18i- 13 13 19i 15; 11), «; 0; 6; 6.07 5.24 5 10 7. ;>6 6.08 3 91 6. 31 Stock.s lie creased. Biirn'h 2113,872 ""'552'223" 541.134 ' 2,080.402 3113,008 1,4S7,463 j. 3,036,051) L S. ,102, ,S4K 8,615,0-17 1. ,'<,574.ll!)3 ' 1,3,H1,421 I 1,1.57,32; O.II-;7, 719 2,052,155 4, 4,SK.67K 1,230,069 7.52, 101 Ban- els. 'iS6 5, 439 5, 461 3, m:i. 171, 5 01], 7! 699,' 1.6(10. 5,284. 5. 774. ] , 174, Total .storlc-:. B(0-/v/,s'. 544, 626 532.(1(111 1,(W.J23 1, (125, 1,57 3. 105, lilBI 3,5.50,20(1 2. x:U. 730 3, 127,^37 4,615,3(10 8.552,256 1;. 1-15.1(14 25, 7(d.(151 34.:!:J5.U4 35,W5,,5(i5 36, ,S72 892 33.5:;!!,0:j8 :B,3(i7,S98 28,357,112 L-^. 604, 474 10,904,793 9, 295, .514 15.34,3,2,3:^ 17.305,389 12.111,183 6, .336, 777 5,101,005 0, .55(1, .583 10, 7K!I,6.52 11, 5U, 7,53 Since 1870 the daily production has increased 450 per cent, the price of crude oil has declined 7.5 per cent, and the price of refined about 7.""),} per cent. Average prices received for deliveries of standard white illuminating oi\ York City, Chicago, III., and Cliwinuati. Ohio, during years 1SS5 inclusive. Is at New to ISO:-.), [Prices given are cents per gallon in bulk, exclusive of the package; 2; cents per gallon added will gi-^e average price, including barrel.] NEW YORK CITY. Month. January ... February . . March- April May.. June July August September. October November . December.. Total year . Year. 1885. 1886. 1887. 1888. 1889, 1890. 1891. 1892. 1893.1 1894 i 1895, 1896. 1897. 1898. 1899. 6.16 6.09 5.96 6.03 6. 00 6.02 5.88 6. 08 6.11 8.a5 6.51 6.47 6.21 6.40 5.63 6.47' .5. .521 6.1: 5. 90| 5. 80 ! 5. .59, 5. 76| 5. W. 5. 45 5. Oill 5.21 4. 73' 4. 85! 4.71 .5. 62| 4.67 5. 4l: 5.41 5.43 5.77 5. .54 5. 56 5.47 4. 52 4.73 4.611 4.81 4.671 .5.03 4.94 5.10 5. .30 5.62 5.49' 5. .57 5.44i 5.44 6. .55! 5.17 .01 .5.011 5.01 4.82 4,81 4 81 4.78 4.72 4.83 4.77 5.01 4, 4.87 4.63 4. .54 4.40 4.3:3 4.72 4.81 4.81 4.85 4.87 4.69 4.47 4.44 4.42 4.48 4.44 4.18 4.13 3.96 4.08 3.97 3.99 3.70 4.67, 4.16 3.86 3. 77 .3.88 3.77 3. .57 3. 08 3.:J9 3.25 3.26 3. 4.09 4.3' 3.61 .5. 30i 5.01 4.87 5.42i .5.33 5.10, 5.07! .5.09 4.66 4.48 4.:m 3.71 4.03 4.00 3. 73| 4. 02 4. 26! 4. 73| 4.29 3. 88, 3.87 3.871 3.8] 3.78i 4. .50 4.42 4. .5(1 6. .53 4. 9(;i 4,55| 4. 4!) 3. 79! .3. 8(l| 3.81 4. 65 5.061 4.78 4.071 4. 5(i| 1896. 1897. 1808. 4.99 .3.30 3 05 4.8:- 3.:fl 3 09 4. 78 3.4:; 3.80 4.41: 3. .5;- 3 62 4.09 :<..54 3, (i2 4.40 :!, .55 3 m 3. 6(1 3. m 3, 96 3.47 H.Vl 4,05 :i, :32 3. 14 4,02 3, 7(1 :i 04 4 22 3.74 3, 05 4.10 :j.44 :3.25 4.15 :3.96 3.31 ,3.79 4.28 4.34 4.01 4.08 4.05 3.98 548 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Average prices reoeircd for deliveries of standard ivhite illuminating oils at New York City. Chicago. III., and Cincinnati. Oliio, daring years 1S85 to 1899, inclusive — Oontinued. CHICAGO, ILL. Month. Year. 1885. 1886. 1887. 1888. 1889. 5. 13 5. 23 5.17 .5' 117 5.07 5.02 5.20 5. 25 5.23 5. 08 5.21 5.16 1890. 1891. 1892. 1893. 3.51 3.63 3.57 3.47 3. 75 3.70 3.65 3.69 3.64 3. .56 3.63 3.80 3.57 1894. 1895. 3.17 3.69 4.08 4.85 3.91 4.06 3.64 3.25 3. 26 3.74 4.41 4.89 3.96 1896. 4.99 4.52 4.12 3.89 3.75 .3.47 3.18 3.25 3.31 3.24 3.09 3.13 3.65 1897. 3.06 3.00 3.99 3.03 3.84 2.79 2.77 2.79 2.80 3. .53 2.78 2.80 2.93 1898. 3.77 3.82 2.97 3.09 3.04 3.04 3.03 3.03 3.19 3.43 3.49 3.50 3.29 1899. January February 4.83 '1.88 5 07 6.08 0.00 5. 56 5. 37 5.19 5.03 4.38 4.97 4. 95 4.93 4.88 4.96 5. 23 4.88 4.90 4.71 4.74 4.68 4.70 4.59 4.52 4. .53 4.50 4.79 4.92 5.31 3, .51 5. 40 5. 13 5.03 4.93 4.92 4.70 5. 03 5.35 5.18 5.01 .5.03 4.05 4. 83 4 34 4 8] 4 (14- 3. KZ 3. 72 3.74 3. :i.s 3. 28 3. ,28 3.12 3.:34 3, 29 3.:w 3.411 3.40 3. .58 3.69 3.57 3.54 8.34 3. .51 3.15 3. ,51 3. 72 3.47 3. .54 3.36 3.80 3.81 3.60 3 ,53 April 5. on 4.(13 4. HIi ■5- "'" 4.81 4.94 4.82 4.56 4.30 4. .33 4.34 4.97 4.18 4.59 4.111 4.08 4 06 4.06 3.89 4.13 3.97 4.03 4.04 May - June July 3.62 3.63 September October November December r,. .51 5.70 6.04 e.09 Total year 5.40 4.67 5.14 4.01 3.48 3. .57 CINCINNATI, OHIO. Month. January ... February . . March April May June July August September - October November _ December.. Total year . Year. 1885. 1886. 1887, 5.81 .5.73 3,20 5. 10 4. 112 4,75' 4,71' 4.70 4,68 4.66 4.61 4. 69 4.61 4 «:! 4.44 4.47 4.41 4.4;) 4. 3:,> 4. 25 4. 20 4. 2:i 4. .52 4. 65 5.13 4.96 4.40 .. 1889. 1890. 1891 . 1893. 1 1893. 1894. 1895. 1 1896. 5.04 5. 24 5. 13 4. 8i; 4. 7r. 4.06 4. 05 4. 43 4. 76 .5.08, 4.91 4.74 4.86 4.95 4.96 4.90 4.80 4.81 4.75 4.93 4.98 4.96 4.8] 4.94 4.65 4.40 4.40 4.30 4.20' 4.20 4. 20i 4.17' 4.12 4. 02 4.02 4. 02 3.09 3. 77, 3,511 3,40 3,4K 3, 35 3,30 3, 62 3, 47 3,33 3,34 3,:S3 3,33 3, 32 3. 32 3, 32 3,33, 3,33 3, 31 1 3.34! :!, 33 3.25 3.31 3.:B 3, .33 3, :M 3, m 3 m 3, ;S3, 3.16: 3,05' 3,03| 3.05! 3. 06 3. (»' 3. 07 4.87 4.89 4.18J 3. .52 3. .31. 3.18 3.06, 3. 09 3. OK 3.07 3.02 3.07 3. 1)6 3.02 3.05 3.03 3.06 3.09 3.11 3. 30 3. S2 5. 95i 5. OK 4.87 4.32 3.81 3.83 3.84 4.18 4.82 4.70 4.31 3.99 3.84 3. 40 3. 07 3. 15 3. 09 3.07 2.081 3.8:^ 2.85 1897. 1898. 2.67 2.82 2.83 2.67 2.83 3.98 2.05 3.93 2.69 3.91 3.62 3.91 2.8(1 2,91 2.8(1 3.89 2.65 3.06 2.6i 3.:« 3. 65 3.32 3.64 3.46 3.07 3.71 3.44 3.43 3.40 3.40 WhereniDon the commission, at 1 o'clock p. m., tocfk a recess until 2 o'clock. INDEPENDENTS WANTED TO COMBINE WITH THE STANDARD. Q. (By Mr. Phillips.) Will you continue your statement'?— A. I will, with pleasure. I desire to make a word of explanation. Senator Lee has called my attention to the fact tliat in his opinion my t(-stimony indicated that his approach to us with reference to their business was witli a view to selling their properties. I did not mean so to state. His approach to us was with a view to combination. I supposed I had so clearly stated it; I make this statement in the fear I did not. Q. Was it in regard to comliination, or was it just not to be interfered with in getting a line through to Now York— the right to live, rather than the combina- tion; was it not put in that form':'- A. My understanding of it was. as I have stated, a combination. ' ME. THEODORE F. D.WIS. I take up further the testimony of Mr. Theodore F. Davis, of Marietta, Ohio, It IS a, trifle dilBcult for us to understand why this gentleman should have appeared before you; lie certainly has had no e.xperieuce in the refining of oil, or as an owner of a lennery, that would at all ipialify him to appear before you as a witness on this important sulijcct. He has had an interest in a little alleged refinery at Marietta, which he l)(>ught when he wa,s somewhat in politics. He immediately a.pproaclied ns to sell the property. We declined to buy it, on the ground that it was valueless as a working plant and had no value as competition; ce above, pp, 530 and 531. STANDARD OIL COMBINATIONS: ARCHBOLD. 549 and I had forgotten that there was such a thing until his appearance here. Immediately after his appearance before yoii he evidently thought he had again made himself prominent enough to succeed in selling it, and he came to me in New York oifering to sell this property. I will submit a letter from him on the subject, and my reply thereto, which covers all that need be said of this case. I think the only possible explanation on this matter -with reference to his appear- ance is, that be came at Mr. Monnett's invitation as one of his combination. His letter was written after his interview with me; my reply, as you will see, imme- diately followed it. His letter is dated July 13. 1,899; his appearance here before yon was on June 9, 1899. "I called on yoix about 2 weeks ago with letter of introduction from and I presented the matter of negotiation for my refinery property at this place. You made memorandum of it and stated that you would present the mat- ter to your people soon after the 4th of July, and as I have not heard from you, presume you have overlooked it. I have permitted one option to expire and have declined the proposition of another party to negotiate for them, not intimat- ing why I do so, which is my appointment with you in regard to the matter. Please indicate your desire in regard to whether you are inclined or desire to further consider the negotiation. I, as stated, much prefer dealing with your people than with others, yet do not want to let the favorable conditions pass by. Hoping to hear from you soon, " Very truly, yours, Theo. F. Davis." To which I replied, under date of July 18; " I am duly in receipt of your favor of July 13. I beg to return you herewith the schedule of refinery property which you left with me. The property is of such a character as to be without value to us, and we do not care, therefore, to buy it. "Appreciating your expression that you prefer to sell the property to us rather than to other buyers, I am, " Truly, yours, Jno. D. Archbold." I do not suppose it is at all necessary to take up any further statements regard- ing this gentleman. I have an interesting letter here regarding him from his partner in the refinery business, but I will not read it unless you ask it to be read. ' Q. What do vou say about reading this letter? — A. It is a personal letter, but I can read that part of it referring to the matter. It is from Mr. Macdonald, and he authorized me to use it if I cared to. Some parts of it are so personal that under suggestions made here I would not read them. Q. (By Mr. Clarke.) What is your purpose?— A. Nothing, except to show the character of the gentleman in relation to the refining trade, appearing here as one having knowledge. Mr. Phillips. Without objection, the letter will be read, omitting the personal parts. The Witness. The letter is dated at Newark, Ohio, July 17, 1899, and is from George T. Macdonald. (Witness at this point read the letter.) MR. T. B. WESTGATE — THE PURE OIL COMPANY IN NEW YORK. I have to answer next concerning T. B. Westgate. Mr. Westgate begins by going over substantially the same ground with reference to the aavent of the Pure Oil Company in Greater New York,i which has already been covered in the testi- mony of Mr. Lee. IMITATING BRANDS AND COLORS. He makes a statement charging that the Standard Oil Company inaitated his Tallow barrels and used his brands so that they might get trade which he had built up by the use of these barrels and brands as a special trade-mark.'^ I have carefully investigated that question, and I find it to be the fact that instead ot our having attempted to use Mr. Westgate's brands the real facts are he used our brands The yellow brand, as defining a certain special quality of oil, had been m use by us in that territory for many years before Mr. Westgate appeared there, and when he came he adopted our yellow barrel so as to facilitate his chances for 1 See p. 36.5. Compare Mr. Lee, p. 26.5; Mr. Archbold, p. 528. = See p. 366. 83A 36 550 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 'getting business. I deriy empliatically that we have ever used his barrels and brands, and assert that he did use ours. Q. (By Mr. Jenks.) That he used your brand?— A. That he used our color. I deny his statement with reference to both, and charge in turn that he used our barrels. Q. (By Mr. Smyth.) How about the charge of using their brands?— A. It is absolutely untrue; absolutely and unqualifiedly untrue. Q. (By Mr. Jenks. ) The statement was made here, I believe, that you had used the brand " Sunlight Doubly Refined." but put your name on the outside of the circle, which would not be an exact imitation, but would be using the name that he was using for his oil?— A. No; I deny the whole matter in toto. Q. You had yourselves been using barrels of that same color before he began selling in that territory? — A. I know so, because I had to do business in that sec- tion and with the company who made the yellow barrels, ahd knew all about it. COMPETITION AT FULTON, N. Y. Q. In regard to the statement aboiit Fulton, N. Y.?'- A. The facts are that he first enticed away from us the man Crandall, to whom he refers. He began a campaign against our trade by cutting prices. We, in self-defense, finally put on another seller of oil to compete with him and to regain lost trade. CHARLES FREY, OF HOBOKEN — ALLEGED PRICE AGREEMENT. He goes with great particularity into the case of Charles Frey, of Hoboken, N. J., whom he characterizes as a German with Bismarckian blood in him, who had threatened us vnth dynamite, etc' I carefully investigated the case, having talked personally with our Jersey City agent, who was our agent at the period mentioned by Mr. Westgate. He denies emphatically ever havingmade any such threat toward Mr. Frey as Mr. Westgate testified to, or ever having had any under- standing with him as to prices in connection with the marketing of Mr. West- gate's oil or any competitive oil, as Mr. Westgate testifies. As a matter of fact, the man Frey was a customer of ours to a considerable extent, having bought, in the year 1890. his principal supplies from us; he was a man of violent temper, an avowed anarchist; he has not been in the business for a number of years now, although Mr. Westgate's testimony.would carry the impression that he has con- tinued to help him in the sale of oil at Hoboken. The last known of him was that he was running a saloon in Brooklyn. UNDBRBILLING OF TANK CARS. Mr. Westgate alleges at great length and with some particularity the under- billing of tank cars, citing, as a special case of which he had special knowledge, shipments from Clean, to points eastw^ard." I beg to present to you here letters from the officials of the Western New York and Pennsylvania Railroad and the Erie Railroad, being the only two lines out of Glean, on that subject. I willread first, if you please, the letter of Mr. Edward T. Johnson, genera] freight agent of the Western New York and Pennsj'lvania Railway Company, dated at Buffalo, August 10, 18'.)!), addressed to me. " My attention has bi'en called to the testimony of Mr. Theodore B. Westgate (who I think is a refiner from Titusville, Pa.), before the Industrial Commission of Washington, in which he testified that it was his belief that shipments of the Standard Oil Company from Glean, N. Y., in tank cars, were billed at a weight less than the actual contents of same. " In answer to Mr. Westgate's testimony I would say that I have investigated the matter, and of my own knowledge am positive that there is" no arrangement of this kind now, nor has there been at any time heretofore, between this company and the Standard Gil Company, or any of its representatives. On the contrary, I do know that on all oil shipments from Olean, where the weights have been per 100 pounds, we have charged and collected freight on the full capacity of the tank cars, based on, first, 6.3 pounds to the gallon, subsequently on 6.4 pounds to the gallon, the change at Glean being made at the same time that it was put in force over the entire Western New York and Pennsylvania B;iilway. Where the weights havH been per barrel we have charged and collected freight on basis of maximum number of barrels that the tank couhl contain. It is possible that in ' Hen pp. :m. 309. 2 Sec p. 870. '■> See p. rj7:j. See also the testimony of Mr. Rice, p. 731 ; Mr. Page, pp. 770-776. STANDARD OIL COMBINATIONS: ARCHBOLD. 551 view of the hundreds of cars of oil that are shipped from Olean some clerical errors have been made by which the weight of a car on the freight bill may have been misstated, but if so it has been by clerical error only, and not by any arrangement with the Standard Oil Company or any of its representatives. " The above is the situation now, and has been the case for at least 15 years, during which time we have had full knowledge of all traffic matters pertaining to shipments from Olean, and the above statement applies from all other points on this road as well as from Olean, N. Y. "If it will be of any service to you I will be glad to put the above in the form of an affidavit, or will appear before any United States commissioner and testify in regard to same. " Yours, truly, "Edwd.'T. Johnson, " General Freight Agent. ^' For the Erie road, dated at New York, August 29, 1899, addressed to me by Q-eorge G. Cochran, fourth vice-president: " Referring to Mr. Harriott's letter to you of the 28th inst., in regard to weights on oil. •' I was traffic manager of the Erie lines from January, 1893, until March, 1896, and concar fully for this period in what Mr. Harriott says. The weight of 6.4 pounds per gallon was maintained from the date of its adoption; previously, the average weight applied was 6. .8 pounds per gallon. ■• Yours, truly, ■• Geo. G. Cochran, " Fourth Vice-President." Also the letter of Frank Harriott, general freight traffic manager of the Erie road: " In regard to the testimony given before the Industrial Commission in Wash- ington, June 8, 1899, by Mr. Theodore B. Westgate, of Titusville, in which he alleged that on shipments of the Standard Oil Company from Olean, N. Y. , tank cars were billed at less than their actual weight, and in this way an advantage was given the Standard Oil Company over other shippers, I beg to say that for 3 years I have been in charge of traffic matters, covering shipments from Olean and other points on the line of the Erie Railroad, and I can state positively that there is not now, nor has there ever been, an arrangement between this company and the Standard Oil Company, or any of its agents, of a nature testified to by Mr. "Westgate. On the contrary, I know that on all shipments from Olean, as well as from all other points on the Erie Railroad where our tariff rates are ' per 100 pounds," we have charged and collected freight on the full- weight capacity of the tank car, based on 6.4 pounds per gallon, and in a few instances where rates have been ' per barrel.' we have charged and collected freight on the basis of the maximum number of barrels that the tank car held: and this has been true on all shipments made by the Standard- Oil Company, as well as by all other shippers. " You are authorized to use this letter in any way that you think best, and if I can furnish you any further information, I will be glad to do so. " Yours, truly, " Feank Habkiott, " General Freight Traffic Manager." I desire to submit also a pamphlet",' a book known as the Tank Gauge Hand- hook, which covers by number every tank car with its full capacity that is in use in our business, and which is in the hands of every railroad organization over which we make shipments; and I want to state positively that we have no under- standing, and never have had, with any railroad, with reference to the under- billing of any car. Q. (By Mr. Jenks.) You state you have in your freight business paid full weights according to the schedules given in this pamphlet?— A. According to the schedules given in this pamphlet. Q. These two railroads from which you have supplied letters are the only ones out of Olean?— A. They are the only ones out of Olean. The concluding part of Mr. Westgate's testmony, with reference to railroad discriminations, is covered in the statement already made in reference to the same question in Mr. Lee's testimony;' namely, that the cases pending in the United States court are to recover freight which the railroads charge all shippers on barrels. The Interstate 1 On file with commission. 2 See Mr. Lee,pp.2«7,a9;3; Mr. Westgate, pp. -379, 380; Mr. Archtiold, p. 516. 552 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Comraerce Commission decided that railroads should carry barrels free, and the railroads, refusing to accede to such a decision, are testing the question in the United States court. A final decision will interest us to a larger extent than all other shippers. THREAT TO CUT PRICES AT SOUTHBEND, WASH. Q. (By Mr. Jexks.) Mr. Westgate presented a letter from Portland, Oreg., which he put in evidence, with reference to some statements made by the special agent of the Standard Oil Company. The essential part of it is this: " You can rest assured that if another carload of Sunlight oil arrives at your place, it will be sold very cheap. We do not propose to allow another carload to come into that territory, unless it comes and is put on the market at one-half its actual cost. You can convey this idea to the young man who imported the carload of Sunlight oil." Signed by George C. Flanders, of the Standard Oil Company.' The ques- tion is whether in competitive territory your people are authorized and instructed to make statements of that kind? — A. If any such statement was made, it was a foolish statement by a foolish and unwise man, and in our thousands of employees we do have some. The statement had missed my attention, if it was in my copy, or I would have investigated it. Q. I will give you a specific reference to it: It is, Portland, Oreg.; George C. Flanders, special agent. — A. I will say again the gentleman had no such instruc- tions; any such statement as that was unauthorized and unwise. (The following letter, with the annexed newspaper clipping, was subsequently submitted by the ■s\'itness:) 26 Broadway, New York, October 27, 1899. Dear Sir: Referring to the letter submitted to the Industrial Commission at Washington, written by George C. Flanders from Portland, Oreg., to a merchant at Southbend, Wash. , and to which you called my attention. While the Stand- ard Oil Company does compete with other merchants for business, it is done, though, on the basis of a fair margin of profit, and Mr. Flanders did not have any authority to write that oil woujd be sold on the basis mentioned in his letter. The letter referred to was written some years ago (in March, 1894), and was intended to be written in a jocular manner to deny a claim that he was selling an oil infe- rior in quality to that sold by others. The Standard Oil Company is at times unjustly accused of doing this, as is evidenced by the inclosed article taken from a Los Angeles paper, and a wrong construction might at times be put on a letter written to refute a claim of this kind. Yours, truly, H. M. Tilford. J. D. Archbold, ,i() Bi'oadway, New Yo7'Jc. assassination kerosene. Pomona, Oci. 6.— [To the Editor of the Times:] To my positive knowledge 90 per cent of the kerosene sold in Pomona, Pasadena. Riverside, and Anaheim is a dangerously low-test oil. To sell kerosene for domestic use under a test of 120 in the Eastern States is punished by long terms of imprisonment and from $350 to $.100 fine. There are no laws regulating this matter in southern California. The result is human life is sacrificed and many homes destroyed. This oil is shipped into these towns by the Standard Oil Company and sold to the grocers, who in turn sell it to the public as the best Eastern kerosene. By actual tests I find the lowest grade used about the buildings of the Santa Fe Railroad Company is 150 fire, and that sold by the Standard Oil Company to the grocers of those to\vns as follows: Elain. in cans and cases, 118 to 121) fire; Pratt's Astral, in cans and cases, 98 to 104 fire; Pearl, in cans and cases, 98 to 104 fire; Eastern, in bulk, 98 to 104^ fire. The meaning of the fire test is at what temperature Fahrenheit will the oil ' throw off an explosive gas. An ordinary lamp often attains a temperature of 120 degrees.' Therefore, any oil that will throw off this gas under that temperature is termed by oil men "Assassination oil." With these facts in view, is it any won- der that lamps explode and human life is sacrificed? In the name of humanity, can not the public be protected from this dangerous imposition? H. S. Walker. 1 See pp. .369, .370. 2 See Mr. Emery, pp. 624^620; Mr. Mathews, p. 495, top. STANDARD OIL COMBINATIONS: AECHBOLD. 553 PROSPEROUS OIL PRODUCERS. I will take up the testimony of Mr. Lockwood. Mr. Lookwood says;' "The Standard Oil Company have driven into financial obscurity, bankruptcy, or serv- itude the men whose energy and enterprise have developed this great oil producing and refining industry of America." I hand you a statement, made so much in detail that I -will not attempt to weary you with its reading, of producers who have been prom.inent in the business in what is known as the Pennsylvania oil- producing section — the section Mr. Lockwood was treating of. Q. (By Mr. Smyth.) How many names? — A. There are hundreds of them; I have not figured it up — about 800.^ Q. (By Mr. Kennedy.) Is Mr. Lockwood's name in the list? — A. I suppose it is. Q. Are they arranged alphabetically? — A. Yes: I see they have omitted Mr. Lockwood. 3 ■ SOUtH IMPROVEMENT COMPANY. I deny emphatically Mr. Lock wood's statement that everything contemplated to be done for the South Improvement Company has been done for the Standard Oil Company.* As a matter of fact, the South Improvement Company never did any business, as Mr. Lockwood well knew, and the special features of exclusive freight contracts, which were contemplated in the South Improvement Company, were not attempted to be perpetuated by the people of the Standard Oil Com- pany. It was at once recognized that that special feature was not defensible, and it was abandoned absolutely. = PIPE-LINE CONSOLIDATION — COST OP PIPAGE. Mr. Lockwood refers to the small pipe lines which sprang into existence in the early history of the oil business.* They were inadequately capitalized in many cases; they were inefBcient, and gave the producers such poor service that the remedy which was proposed, consolidation, was very gladly welcomed by the producing class as a whole. The result was the pipage was reduced from 40 cents, which was the prevailing price through the life of the small lines, to 30 cents, and after consolidation to .20 cents.' i^. About what time was the cost of pipage reduced to 20 cents? — A. Shortly after the consolidation of the United Pipe Line system. Q. Has the price lowered since? — A. The price has remained at that figure. Q. There has been no reduction in the cost of piping for many years, 20 years or so? — A. ISTo. It was considered a minimum price and has been considered a fair price." Q. (By Mr. Smyth.) A universal price to all?— A. A universal price to all comers. ^ Q. The cost of building, controlling, and managing, I presume, has lessened?— A. It has lessened and increased. If you figure from to-day's standpoint it will be higher of course. The long, distances involved in laying the lines to some of the fields, notably the field that Mr. Rogers spoke of— the West Virginia field— of course require extensive operations. NO DISCRIMINATIONS SINCE THE INTERSTATE-COMMERCE LAW. Mr. Lockwood's statement that dis.criminations were continued in favor of the Standard Oil Company after the interstate-commerce law was passed,' I desire to meet with absolute denial, and challenge him for any such record. He makes this statement, and then attempts to give it color by referring to a ridiculous case which he and some of his copatriots had brought in Clarion County. Pennsylva- nia, 9 years before the interstate-commerce law was passed. In connection with this case he goes to the length of accusing the supreme court of the State of Pennsylvania of violating the constitution in order to prevent a conviction of the Standard Oil people. The statement is so outrageous for a gentleman of his call- ing that it carries its own answer, and perhaps should have no further comment. THE MATTHEWS-BUFFALO CASE. Mr. Lockwood goes at great length into that so-called Matthews-Buffalo case." This case as first instituted attracted a great deal of attention. It has been made much of in the sensational press, and has been made much of by careless writers, J See p 384- also Mr. Lee, pp. 279, 281-283. ' Lockwood Oil Company is mentioned. ^ On file with commission. * See pp. :«5, 388 sSeeMr Bmery.pp 619,644; Mr. Eice, pp. 706-709, 711; Mr. Arohbold,pp.55M59. B Qoa nr, ^fi 388 ' See p. 413. ssIISFr Lee\p;284; Mr. Rogers, pp. 581, 588, 689; Mr. Phillips, p. 594; Mr. Emery, p. 666. » See p. 389. 534 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and I am very glad, indeed, of the opportunity to put this presentation on record in answer to the charges that Mr. Lockwood has made about this case and the sensational statements regarding it which he gave to the ptiblic through your hands. We shall be glad to go down, as repeated, exposing the sensational charges that have been made in connection with it. I will, therefore, with your permission, read this statement: "Mr. Lockwood attempts to make much of the so-called Matthews-Buffalo case. "And indeed, gentlemen, this case has been more often and more thoroughly exploited in the way of jnisrepresentation, not only by men of Mr. Lockwood's type, but by careless writers of magazine articles, x:>amphlets, and books, than any other case, unless it be that of Rice. It is high time that a simple, succinct statement of the case should be made, and I am glad to make it. "The simple facts are that in 1881 Matthews, AVith two others, were in the employ in confidential capacities of the Vacuum Oil Company, of Rochester, N. Y. The executive officers of this company were Messrs. H. B. and C. M. Everest, of Rochester, who, with their friends, represented a large ownership in the stock of the company, and were by contract fully in control of the management of the business of the company. Messrs. Everest were not at that time, nor have they ever been, interested in the stock of the Standard Oil Company. The Standard Oil Company were owners in the stock of the Vacuum Oil Company, but had no direct relation whatever with the management of its affairs. While still in the employ of the company Matthews and his two associates conspired together to leave the employ of the Vacuum Oil Company and establish a like business at Buffalo. To this end they had entered into a partnership arrangement, had pre- pared themselves by using the Vacuum Company's patents for castings of the material to be used in construction, had thoroughly familiarized themselves with all methods of manufacture and with the patrons of the Vacuum Companj , and in every way prepared themselves to take advantage of the various business proc- esses — many of them covered by patents owned by the Vacuum Company. There is plenty of indisputable evidence that they did not expect their venture at Buffalo to really succeed on its merits, but they believed that by so imitating the brands and processes of the Vacuum Company they would induce the latter to buy them out at a high price. As I say, there is islenty of e\'ldence, even including that of one of the parties who was to join with Matthews, a man named Miller, that they expected to be bought up by the Vacuum Oil Company or the Standard Oil Com- pany. Efforts were also made by the Matthews party to entice away other important employees of the Vacuum Company. After the business was gotten under headway at Buffalo, and the infringements became evident, various suits were broilght by the Vacuum Company against Matthews and his associates.. During this period Miller, one of the Matthews party, solicited reemployment with the Vacuum Company, and finally, after considerable discussion, was reem- ployed. Later, having some disagreements with the Vacuum Company with reference to the qiiestion of his employment, he again coquetted with Matthews and the Buffalo party, and as a result of his statement before the grand jury as to what his intercourse had been with Messrs. Everest, and of other statements made before the grand jury, the nature of which was never disclosed, an indict- ment was found by the grand jury charging Messrs. Everest and all the directors of the Vacuum Company, namely, Messrs. H. H. Rogers, A. M. McGregor, and myself, with conspiring against the business of the Buffalo company. The evi- dence produced in the case clearly indicated a carefully concocted effort on the part of Matthews and his associates as against the Vacuum Company, and the tjalance of the testimony was tremendously in favor of the Vacuum Company. At the conclusion of the evidence for the prosecution the judge held, as he could not have held otherwise, that not a scintilla of e-\'idence had been produced against the so-called Standard people, namely, Messrs. Rogers, McGregor, and Archbold, and directed the jury to acquit them, which they did. "As I have stated, the balance of the evidence in the case was so much against Matthews that it seems an act of gross injustice that the judge should have allowed the case against Messrs. Everest to go to the jury. The result of the trial was that the .jury, plainly influenced by the cunning plea of the district attorney in behalf of tlie individual, Matthews, as against the so-called rich corporation, ren- dered a verdict against Messrs. Everest. Six of the jurors made affidavits, copies of which I attach hereto, that they only agreed to a verdict on the basis of the minor charge presented in the indictment, that of the enticing away from the Buffalo works of the man Miller by the Messrs. Everest. The judge imposed a fine, the largest permitted by the statute. As a matter of simple justice, the ver- dict should have been set aside entirely. All talk about the blowing up of the STANDARD OIL COMBINATIONS: ARCHBOLD. 556 Buffalo works, which has been so much exploited by the yellow journals and by careless writers, is the purest fiction. There never was anything of the kind. "With reference to Mr. Lockwood's statement' that Matthews had verdicts against the Standard Oil Company people for civil damages for $270,000, I may saj' that the statement is as false as every other feature which he presents. An action was brought by Matthews for §20,000, and a sympathy verdict for that amount was rendered by the jury. Judge Baker promptly set the verdict aside as being excessive and on the ground that the jury were guided in their action by prejudice, passion, or sympathy. "Matthews brought further action for $350,000, which he never brought to trial. Any careful student of the case who will go thoroughly into the literature of the matter, which can be easily presented, will, after this lapse of all these years, reach no other conclusion than that Matthews and his associates, lay and professional, were engaged in an effort at extortion." The following is the copy of the affidavit of six jurors, referred to above: State of New York, County of Erie, ss: Nicholas Demerly, of the town of Boston, John J. Kinney, Bernhard Schlebus, R. B. Musan, George W. Havens, John Ueblueher, being severally duly sworn, each for^himself, deposes and says: That he was one of the jury that served on the trial of H. B. Everest and C. M. Everest for conspiracy in the Erie County Oyer and Ter- miner in May, 1887: that the said jury rendered a general verdict of guilty against both of said defendants. And deponent further says that, as he verily believes, it was not the intention of said jury, in rendering said general verdict, to pro- nounce the defendants guilty of an attempt or conspiracy to blow up or burn the works of the Buffalo Lubricating Oil Company, Limited, but the conviction was, in the mind of deponent, based upon the enticement of the witness. Miller, from the employ of said oil company, and he believes that the other members of the jury convicted the prisoners on the same ground. And deponent further saj's that he believes the ends of justice will be met in this case by the imposition of a fine upon the defendants, and he therefore begs to recommend to the court that the sentence of said defendants be that they pay a fine only, and that they be not sentenced to imprisonment. Nicholas H. Demerly. Nicholas Demerly was sworn to before me this 21st day of April, : Subscribed and sworn to before me this the 21st day of April, 1888. Ryal C. Payne, Notary Public. John J. Kinney. John J. Kinney sworn to recommendation only. Sworn and subscribed before me this 31st day of April, 1888. Jno. W. Fisher, Notary Public Erie County, N. Y. Bernhard Schlebus. Subscribed and sworn to before me by Bernhard Schlebus this 30th day of April, 1888. „ , „. ^ S. M. Welch, Jr., Notary Public in and for Erie County, N. F. R. B. Mason. Subscribed and sworn to before me this 2d day of May, 1888, by R. B. Mason. S. M. Welch, Jr., Notary Public in and for Erie County. George W. Havens. Subscribed and sworn to before me this 2d day of May, 1888, by George W. Havens. „ o rt„,„ Prank S. Coit, Notary Public in and for Erie County, N. Y. John Ueblackee. Signed by John Ueblacker in the presence of John F. Knapp. 1 See p. 389. 556 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. State op New York, Erie County Clerk's Office, ss: I, Otto H. Wende, clark of said county, do hereby certify that I have compared the annexed copy of affidavit and copy indorsements thereon with an original and its indorsements entered and on file in this office, and find the same to be true transcripts of and from the said originals, and the whole of each thereof. In witness whereof, I have hereunto set my hand and affixed the seal of said county, at Buffalo, this 29th day of August, A. D. 1899. Otto H. Wende, Clei'le. Q. (By Mr. Jenks.) You have detailed records of the court which are at the disposal of the commission if they desire them? — A. Yes. Q. (By Mr. Farquhar.) After the finding of the court with respect to con- spiracy in destroying the works, in the several actions for damages, I understood you to state that "Matthews did not recover at all? — A. After Judge Barker set it aside there never was any further case brought to trial. There was an action pending for §250,000, which was never brought to trial. Q. (By Mr. Jenks. ) Did Matthews make any settlement of any kind with those against "whom judgment was awarded? He received no settlement at all? — A. I do not know what his relations were with his lawyers. It seems, as far as I have recollection of the matter, that after the decision, in the final settlement of the matter, his lawyer partners got most of what was left. I do not know that that is a very exceptional thing, but it is true in that. threaten the interstate commerce commission. Mr. Lockwood makes the ridiculous statement that the "combines" had threatened the Interstate Commerce Commission.' He evidently, in making this statement, desired to be understood that they had threatened it bodily, but this, I believe, he afterwards disavowed.* the case op GEORGE RICE. Mr. Lockwood goes at length into the Rice case, and attempts to enlist the sympathy of the commission regarding Rice.' I now desire, first, to present to the commission a full statement of the original Rice case, made by Mr. D. O'Day, before the committee of the House of Representatives in 1888,'' pages 273 to 276, inclusive. This statement covers the exact facts regarding the much-talked-of Rice case. I would like to read Mr. O'Day's testimony, if I may make it a part of my testi- mony. I will try and limit it so as not to weary you unduly, reading that which pertains as directly as possible to the Rice case: " Q. Do you remember the Cleveland and Marietta Railroad Company? — A. I do. "Q. You remember Mr. Pease was receiver? — A. I met him once: yes, sir. "Q. Did you not have a conference with him upon the subject of making a rate over his railroad for crude oil? — A. Yes, sir; but not for refined oil. "Q. When was that?— A. I think it was in 1882 or 1883. "Q. Where did you desire that oil to be transported; from what point to what point? — A. The arrangement that you speak of was not made with Mr. Pease. An arrangement was made with the managers of the Wheeling and Lake Erie Rail- road, I think, who at that time controlled the Marietta Railroad, which was con- tinued after Mr. Pease, the receiver, was appointed. The arrangement consisted in making a through traf&o with the railroad company of which the Macksburg line was a part. We made a connection from Marietta to a point south, the total arrangement of charge being divided between the railroad and the pipe line. "Q. What rate did you get over that railroad for the transportation of oil? — A. To where? "Q. For the distance it passed over the railroad? — A. A good deal of oil was transported from Marietta to Cleveland. The bulk of it was transferred south to Marietta and Parkersburg. "Q. At what rate? — A. I think the through pipage rate and rail rate was 35 cents, as I recollect it. ';Q. What part of that did the railroad company get? — A. I have forgotten what the divisions were. My recollection is it was 20 and 1.5 cents. "Q. Was it not 10 cents? — A. I can not say, sir; I can not be positive. "Q. I will read the following to you to aid your recollection. It is an extract 1 See p. 390. " See p. WS. ^ Fiftieth Congress, first session. House Reports, vol. 9. STANDARD OIL COMBINATIONS: AKCHBOLD. 557 of a letter to Mr. Rappello, general counsel of the receiver, and signed by P. Pease. He states that — " -Mr. O'Day. manager of the Standard Oil Company, met the general freight agent of the Wheeling and Lake Erie Railroad and onr Mr. Terry at Toledo about February 12, and made an agreement (verbal) to carry their oil at 10 cents per barrel. But Mr. O'Day compelled Mr. Terry to make a 35-cent rate on all other oil going to Marietta, and that we should make the rebate of 25 cents per barrel on all oil shipped by other parties, and that the rebate should be paid over to them (The Standard Oil Company), thus giving us 10 cents per barrel for all oil shipped to Marietta, and the rebate of 2.5 cents per barrel going to the Standard Oil Company, making that company, say, .s2o per day clear money on Mr. G-eorge Rice's oil alone.' " State whether that is a true statement. — A. It is not a true statement. " Q. In what respect? — A. In the respect, first, of the divisions. It may be true regarding that, but I am not sure of that; I do not recall it well enough to know. It is not a true statement that we compelled the road in any sense to do anything of the kind. '■Q. "Were you not under your agreement to have your oil transported from Marietta over the railroad at 10 cents a barrel? — A. We had an arrangement by which the through rate from the wells, which included the pipeage charge, was to be a certain figure, and was to be divided between the railroads and ourselves. " Q. What share did the railroad get? — A. My recollection, which is rather hearsay, was 20 cents pipeage rate and the railroad 15 cents. " Q. And not 10 cents? — A. I do not want to be po.-dtive of that. " By the Chairman: " Q. Does that rate which you give include your local pipeage, too? — A. Yes, sir. "By Mr. Gowen: " Q. Where did this oil strike the railroad? — A. At a place known as Macksburg. " Q. Went from there to Marietta, Ohio? — A. Yes, sir. " Q. Now, I ask you if the rate which the railroad received out of the joint rate was not only 10 cents a barrel? — A. My recollection is, as I said before, 15 cents; I won't be positive of that. " Q. Would you assert your recollection against a jtidicial determination of this question by the court? — A. I certainly should not. ■• Q. Now, did you not make it as a part of that arrangement that this railroad company, or its receiver or manager, shotild charge a certain Mr. George Rice, who was a competitor v/ith you, a higher rate on his oil? — A. No, sir. " Q. You did not?— A. We did not. " Q. Were you not to receive and did you not receive from this railroad or its business a payment to your company on account of the oil they transported for Mr. George Rice? — A. Yes, sir; the railroad company agreed that the rates should cover all oil transported. " Q. What rate?— A. The fixed rate as between the railroad and the pipe line. " Q. That is to say, that when the through rate of 35 cents was charged on the oil which passed through your pipe line and their railroad together, and out of which you received 20 or 2.5 cents, as your recollection may be, they were to charge the same rate to Mr. George Rice, whose oil passed only over their railroad and not through your pipe line? — A. There was nothing special about George Rice; it covered the oil. " Q. But did that other oil which was in competition with you pass through your pipe line? — A. No, sir. DRAWBACK ON OTHERS' OIL RETURNED BY ADVICE OF COUNSEL. ' Q. Did not they, therefore, on that oil which only passed over their railroad and not through your pipe line pay to you the same allowance or rebate that they did on your oil which did pass?— A. They did, but we returned it, through the advice of our counsel, Mr. Dodd. " Q. How long did you keep it?— A. A very short time. " Q It was a hot time for Mr. Rice?— A. I don't think it was; he was a hot man. " Q. The result of that arrangement, if it had been carried out— assuming your recollection to be correct— you would have paid 15 cents to the railroad for your oil and Mr. Rice would have paid 35 cents, would he not?— A. No, sir; he had the privilege oif doing what he did, which he afterwards did do. " Q. He was not using your pipe line?— A. No, sir, we tried to get him to make 558 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. an arrangement witli ns to use our pipe line, but he would not do it; he wanted a better rebate than anybody else. " Q. He had his own means of bringing this oil to the railroad: he did not require your pipe for that sei\'ice';' — A. He re(iuire See p. 403. See also Mr. Monuett, pp. 318, 319; Mr. Boyle, p. 489. STANDARD OIL COMBINATIONS: ARCHBOLD. 561 Production of Pennsylvania and Lima crude oil by Standard Oil Coinpauy and others, years 1S90 to 1S9S, inclusive. [Expressed in barrels of 42 gallons.] Pennsylvania oil. Lima oil. Grand total. Year. Total pro- duction. Standard Oil Co. produc- tion. Stand- ard Oil, per cent of total. Total pro- duction. Standard Oil Co. produc- tion. Stand- ard Oil, per cent of total. Pennsyl- vania and Lima produc- tion. Standard Oil Co. produc- tion. Stand- ard Oil, per cent of total. 1890... 1891— 1892... 1893... 1894... 1895... 1896... 1897... 1898... 30,065,867 35,742,127 33,332,306 31,256,283 30, 696, 716 30,891,868 33,908,041 35,170,367 31,645,1.51 2.618,637 4, 913, 775 4,338,822 6,705,276 7,210,345 9, 119, 920 9,380,654 9,787,353 11,248,443 8.71 13.74 13.02 21.45 23.49 29.52 27.66 27. &3 35.55 15. 014, 882 17, 381, 923 16, 685, 193 17,823,2.55 18,575,603 21, 719, 250 25, 222, 091 22,793,0a3 20,266,328 8, 400, .568 9,319,1.56 7,843,324 7,260,899 6,690,9.51 6, 808, 876 8,031,793 7,497,349 7, 220, 606 55.95 .53.61 47.01 40.74 36.02 31.35 31.84 32.89 36.63 45,080,749 53,124,050 50,017,499 49,079,5.38 49, 272, 319 52,611,118 .59.130,132 57, 963, 400 61.911,479 11,019,205 14,232,9.31 12,182,146 13, 966, 175 1.3,901,296 15,928,796 17,412,447 17,284,702 18,469,049 24.44 26.79 24.36 28.46 28.21 30.28 29.45 29.82 35.58 Total. 292,708,726 65,323,225 22.32 175,481,5,58 69,073,522 39.36 468,190,284 184,396,747 28.70 This is in answer to Mr. Lockwood's statement, as I repeat, that we had bought substantially the whole of the Ohio producing field.' Mr. Lockwood's statement, that when the Standard Oil Company buy pipe lines producers have to pay for it two to forty times over - is so ridiculous as no to call for any answer. In conclusion, gentlemen, it is really difficult to answer seriously a man who indulges in such extravagance of statement as has characterized Mr. Lockwood's testimony. Indeed, it is difficult to believe that he takes himself seriously. We can forgive much in a man in whose veins runs the boiled-down pugnacity of 147 revo- lutionary sires, but when he ruthlessly attacks judges and courts, and claims that the entire railroad and corporate interests of the country find their chief avocation in the " corrupting of public affairs and the debauching of public men,"' I think you will agree vnth me that we must conclude that the "fool killer" has been very remiss in his duty in the vicinity of Zelienople, Pa. MR. rice's connection WITH CONTEMPT PBOCEBDiNQS AGAINST THE STANDARD. In confirmation of the statement which I have made regarding my inter- rogatories -wath Mr. Rice, and his overtures to me in connection with his business,'' I desire also to read for the information of the commission a transcript from the testimony of Mr. Rice given on cross-examination in the suit of the State of Ohio V. The Buckeye Pipe Line Company, taken on the 20th of February, 1899: " First. In relation to Rice's connection with the contempt proceeding against the Standard Oil Company of Ohio. " Q. Mr. Rice, you know that a proceeding for contempt was instituted by the attorney-general of Ohio against the Standard Oil Company?— A. Yes, sir. '■ Q. Did you employ counsel in that case? — A. I did. " Q. Who?— A. W. L. Flagg. " Q. What other counsel did you employ?— A. Mr. Kinkead. " Q. He is now acting as special counsel for the attorney-general?— A. Yes, sir. "Q. How long prior to the commencement of these proceedings in contempt against the Standard Oil Company did you employ Mr. Flagg?- A. Two or three weeks — less than a month. " Q. Did you employ him to assist the attorney-general in instituting and con- ducting the proceedings in contempt?— A. I should say that would be most natural. , . , ,, " Q. Did he come here to Columbus for a consultation with the attorney-gen- eral? — A. Yes, sir. " Q Did you come with him?— A. I guess I came on before. " Q. You had your consultation with the attorney-general before he came?— A. Yes, sir. , ^^ " Q. You three had consulted together?— A. Yes, sir. , ^ ^, " Q. When did you employ Mr. Kinkead?— A. That was about the same time, not just exactly. 1 See p 285 as to holding oil land undeveloped. 2 See p. 403. Compare Mr. Phillips, pp. 392. s See p. 393, middle. 4 See p. 559. 562 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. " Q. Was he brought into this conference by you?— A. Yes, sir. " Q. At that time he was not employed by the State?— A. I do not think he was. " Q. He was your private counsel? — A. Yes, sir. ME. RIOB'S offers TO MR. AECHBOLD. " Cross-examination in relation to Mr. Rice offering to sell his property to Mr. Archbold. "A. He (Archbold) wanted to know what I would take to go out of the busmess, and I told him $3,50,000 and $.50, 000 per year for 5 years; but several years before that he wanted to buy my plant and I offered to sell it for $25,000 and $5,000 for 5 years, and before that time I offered to sell it for .$30,000. I have a perfect right to ask what I please for my plant. * y ,r X X- * * "Q. Did you authorize or request Mr. Orvis to have an interview with him (Archbold) ?^A. No, sir; not at first. " Q. Did you. at any time? — A. I may have done so. " Q. Now, coming to the second interview, did you have another interview in June, 1890, with Mr. Archbold, at his office in the Standard Oil building, at 26 Broadway, in New York?^A. I do not recollect. "Q. Did you then make a similar offer to him?— A. I did not have a second interview with Mr. Archbold. "Q. Did you at that time authorize Mr. Orvis to make an offer to sell your property for $500,000?— A. Yes; I guess I did. " Q. You were to get $350,000 cash, and $50,000 for 5 years?— A. I guess so." " Q. "What were you to give to Mr. Archbold for that consideration?— A. I was to sell out my plant and get out of the business. " Q. "Were you to refrain from bringing any further litigation? — A. That was to settle up the whole trouble; I was to do nothing further — have- no litigation or anything of that kind." ' Q. Have you a general statement to make with reference to the organization of the company? — A. I have a general statement I would like to make. Q. (By Mr. Phillips.) Just proceed with your statement. — A. I desire to say that this is a much pleasanter task to me than attempting to answer the allega- tions of the various witnesses. I did not come here, gentlemen, desirous of mak- ing this answer, although I am naturally under some feeling with respect to these charges so often and unfairly, reiterated against us^to assail anybody harshly— and if I have been led into kny expression that seems harsh at any time during the course of my answers I am sorry for it. It is out of the fullness of what I "believe to be the correct answer, and a desire to make it as positive as possible, certainly not with any disrespect to this commission. It is a much pleasanter task for me to undertake, gentlemen, to say a word more particulary in defense of the organization with which I have passed almost my entire business life, inti- mately related with it, and in which I have the most personal pride. Shall I proceed? Q. (By Mr. Phillips.) Certainly. LARGE CORPORATIONS A NECESSARY RESULT OF GROWING COMMERCE. Trusts, or, speaking correctly, large corporations are the necessary — indeed, the irresistible — result of our rapidly growing commerce. In adopting them we are but following the example of that greatest of all commercial nations, England, under whose commercial charters capitalization and scope are practically unlimited. Any legislative restrictions imposed here would operate alone to the benefit of foreign commercial competitors. The claim that such restriction would help the weak and incompetent of our own country as against the strong and aggressive is too puerile to call for serious answer. I speak to-day especially in defense of the aggregation of capital and experience in the petroleum business, on the ground of its absolute necessity, for the successful development and pro- motion of that business. I am here to defend the Standard Oil Company organiza- tion, also, on economic and ethical grounds. Not to indulge in undue length, I will lay down a number of leading propositions in suppiort of my position, which may serve as texts for more extended discussion, if you so desire. GOOD RESULTS OF THE RISE OF THE. STANDARD. The eaidy years of the petroleum industry were marked by a chaotic and crude condition in all branches of the trade, namely, the production, manufacture, 1 See Mr. Rice, p. 719; Mr. Page, pp. T85, 786; Mr. Rice's affidavit, pp. 793, 794. \ STANDARD OIL COMBINATIONS: AECHBOLD. 563 transportation, and marketing; and the average quality of the refined products was mterior and unsatisfactory. The advent of the Standard Oil Companv aggre- gaUon_ changed this entirely. It brought to the business ample capital, and cSm- bmed into ettective working shape the best possible talent in all branches of the business. It improved quahty and gi'eatly reduced costs. It supplanted old and mterior methods and refineries with the newest and most progressive methods and most perfectly equipped and favorably located refineries. It has been ever on the alert to engage the best obtainable practical and technical talent for the development and improvement of the business in all its branches. It inaugurated new systems of transportation,' which not only gave to the producer the most efft- cient possible service at greatly reduced cost, but a daily continuing cash market for his product on a basis of the best price obtainable in the world's markets. Further, it reached out and occupied the markets of the world for American petroleum. Individual effort could not have accomplished anv such herculean task m many times the same period, and, indeed, the efforts of 'the Standard Oil Company were none too quickly made.« If there had been as prompt and ener- getic action on the part of the Russian oil industry as was taken by the Standard Oil Company the Bussians would have dominated many of the world's markets which have been made to inure so largely to the benefit of the American oil indus- try. Later in the history of the trade Russia and other oil-producing countries have followed in the footsteps of the Standard Oil Company in the general markets of the world, and I now hand you a statement, partial in character, of the oil companies of Russia, the Dutch East Indies, Galicia, Japan, and other countries, which will give you some faint idea of the menace which even now threatens the American oil industry; and when you reflect, gentlemen, that there has been brought into this country during the past thirty years from the exportation of petroleum and its products nearly §1,500,000,000 you will appreciate the impor- tance of this subject. LIST OP CORPORATIONS- AND INDIVIDUAL FIRMS PRODUCING AND REFINING PETROLEUM. iJjfssM.— Production on the Peninsula Apsheron, on the west shore of the Cas- pian Sea: Nobel Bros., capital 15.000,000 rubles (Sr.500,000), bonds f!3,750,000; Rus- sian Petroleum and Liquid Fuel Company, formerly Tagaeffs, capital £1,200,000 (§6,000,000); Anglo-Caucasian Company (Rothschilds); European Petroleum Com- pany; Anglo-Russian Petroleum Company, Limited, capital £120,000 (§600,000) ; Sheibieff Petroleum Company, capital £750,000 (§3,750,000); Baku-IJussian Oil Company, capital £1.500,000 (87,500,000); Mantashoffs property. capital 26.000,000 rubles (.$13,000,000); Societe Caspienne (Rothschilds), capital 6,000,000 rubles (.§3,000,000) , but money invested much larger; Caspian Oil Producing and Trading Company, capital 2,000,000 rubles (§1,000,000); MiAoff Brothers Oil Producing Company, capital 2,140.000 rubles (§1,070,000); Ropes Refining Company, capital 1,300,000 rubles (§600,000); Tsoovianoff, Rillsky. Asadoolaieffl, Zeitlin & Zirk- vich, Caucasian Oil Company, Toomayeff & Co. , Kaplan & Lev. Kascheveff , Liano- zefE, Viziereff, Nagieffi Moosa, O. Leites, Kvarenstron, Lootch, Zeiiialoff & A. Dembot Bros., Hatzasriantz, Pogosoff, Hagan & Zeitlin, Metrofanoff, Beneinson, Egiazaroff, Nedezda, Shagidanoff, Melikoff, Mananoff, L. M. Leites, Sarkiesoff, Chicnaveroff, AdamofE'Bros., Sergaieff Bros., and ten other smaller concerns. Cfrosni. — Oil territory in northwest from the Caspian Sea oil territory: Grosni Company, of Akhverdoff, capital 1,500,000 rubles (.§750,000; Moscow .Oil Producing Company, Grosni, capital 3,000,000 rubles (§1,500.000); Maximof & Co.; Peters- burg Petroleum Company: Btmsanofsky; Belgian Company, at Soupsa, near Batoum, Black Sea, capital 575,000 rubles (§287,500). Galicia. — Anglo-Austrian Petroleum Company, Limited, capital £125,000 (8575,000); Mineral Oil Company, Budajiest (Rothschilds); Anglo-Galician Oil Company, Limited, capital £560.000 (§2,800,000); Galician Petroleum Company, capital 1,000,000 florins (§400,000); and the following oil territories are offered for sale: T. Laszez at Kobyloaka, 71 acres; Mad Jodwigo Biechomka, 56!) acres; Gr. Kropiwnsk at Schodnica, 250 acres; Veadomir Podhorodezki. 425 acres: Mad Malwine Szezpanska, 57 acres; W. Posteuski at Swoboda, 426 acres; Kosimerz Lipinski, 138 acres, and a great many others. -Ro«,j7iaiim.— Roumania Oil Syndicate, capital £500,000 (§3,500,000), bonds §1,000,000; Roumania Oil Trust, capital £710,000 (.§3,550,000), bonds §1,250,000; Holland Roumania Petroleum Company, capital 1,000,000 florins (§400,000) ; Neth- ' Compare, as to pipelines, Mr. Lee, p. 267; Mr. Boyle, p. 4H9; Mr. Emery, p. 604; as to tank cars, Mr. Boyle, p. 412. ' Compare 'Mr. Pliillips, pp, 600, 602; Mr. Emery, pp. 626, 628. 564 HEARINGS BEFOKE THE INDUSTRIAL COMMISSION. erlands Eoumaiiia Petroleum Company, capital 500,000 florins ($200,000) ; Amster- dam Ronmania Petroleum Company, capital 1 ,000,000 florins ($400,000) ; Roumania United Oil Company, Limited, capital £720,000 (.$3,600.000) , bonds $600 J)00; Estate Prince Cantacuzino; Estate Harnia, Campine; Estate Prince Montiosa, Buzen; and many concessions for diilling granted to natives and foreigners. Borneo, Dutch East Indies — Netherlands, India Industry and Trading Company, capital 3.000,000 florins (.$800,000), but $1,750,000 invested; Bolangan Exploring Company, capital 150,000 florins ($00,000) : Kotei Exploring Company, capital 390,000 florins ($120,01)11); Martapoera Mining Company; Tarakan Mining Com- pany, capital 240,000 florins ($96,000) ; Bombay Burmah Trading Company, British Borneo, capital large. Sundriea in East Indies — Doda Mining Company. Celebes, capital 125,000 florins ($50,000); Boela Company, Ceram. Molucca Islands, British India. — Burmah Oil Companv, Limited, Rangoon. 4Z.sace,r;('c)7iaj(«.--Pechelbronn Oil Works, capital 3,000,000 marks ($750,000); Rudolf Biblisheim Company, capital 1,200,000 florins ($480,000); Gute Hoffnung Company; Alsace Petroleum Company, capital 3,000,000 florins ($800,000); the Petrolia Comjjany. Japan. — Mitsumata oil fleld, Ogidaira oil fleld, Kitayama oil field, Tatsuno oil field, Yamatera oil field, and Amase oil field are worked by Nippon Petroleum Company, capital unknown; Tokyo Petroleum Company, capital unknown; Osaka Petroleum Company, capital unknown; Echiqo Petroleum Company, capital unknown; Oriental Petroleum Company, capital unknown. Miyagawa oil field, Nagamine oil field, Hirayeama oil field, Nita or Samata oil field, Akata oil field, Miyohoyi oil field, Abuaradan oil field, Jabani oil field, Ida oil field, Betsuyama oil field, Koshi oil field, Katsubo, Urase, Katsurazawa, Tsubakizawa, Mivjayi, Asoda,Mizuana, subdivisions of KoShi oil fields, are partly worked by individuals and the above companies. In addition there are about 30 more oil fields, of which are most prominent as to their production the following: Niitsu oil field, Shiodani oil field, Koguchi oil field, Niigata oil field, worked by individuals and the above companies. Sumatra. — Royal Dutch Company, capital 5,000,000 florins ($2,000,000); bonds, ($1,200,000). Sumatra Palembang Petroleum Company, capital 7,000,000 florins ($3,800,000); Boissevain Syndicate; Moera Enim Petroleum Company, capital 10,000,000 florins ($4,000,000); Netherlands India Exploration Company, capital 300,000 florins ($130,000); Moesi Ilir Syndicate; Sumatra Petroleum Company, Limited, capital 2,400,000 florins ($960,000); Shanghai Langkt. Tobacco Company, $500,000; W. T. Wisse; Deli Company; Banjoe Asin Exploration Company, capital 120,000 florins ($48,000); Nagel Concession, All Cohen Bengkoelen Conces- sions, Kessler Concessions (about 5,000,000 acres). Petroleum Company Iliran, capital 1,300,000 florins ($480,000) ; Belang Mining Company, capital 140,000 florins ($56,000); Palembang ExploYation Company, capital 350,000 florins ($100,000); Langsar Petroleum Company (Acheen), capital 800,000 florins ($330,000), and many millions of acres under concession to private parties. Java and island of Madoera. — Dordt'sche Petroleum Maatj., capital 15,000,000 florins ($6,000,000); 'bonds, $2,000,000. Rembang Petroleum Company, capital 500.000 florins ($200,000); Japara Petroleum Company, capital 500,000 florins ($300,000); Company Insulinde, capital 3.000,000 florins ($1,300,000); Toan Lok Soiirb. Petroleum Company, capital 300 ,000 florins ($120,000); Eastern Exploration and Exploiting Company; Tegal Petroleum Company, capital .500,000 florins ($200,000); Netherlands, The, India Petroleum Company, c'apltal 700,000 florins ($380,000) ; Java Petroleum Company, capital 1,000,000 florins ($400,000); Batavia Japara Petroletim Exploration Company, capital 300,000 florins ($80,000); East India Exploration Company, capital 300,000 florins ($120,000): Rotterdanische Petroleum Company, capital 1 .500,000 florins ($600,000) ; Gaboes Petroleum Com- pany, capital 600,000 florins ($340,000) ; Sourabaya Petroleum Company, capital 250,000 florins ($100,000); Central Java Exploration and Exploitation Company, capital 240,000 florins ($96,000); Polynesia Petroleum Company, caisital 3,400,000 floi-ins ($960,000): Temajang Rembang Petroleum Company, capital 500,000 florins ($300,000) ; Bantjar Development Company, capital 500,000 florins ($200.000) ; Madoera Petroleum Exploitation Company, capital 100,000 florins ($40,000) ; Archi- pelago Exploration Company of Amsterdam, and many millions of acres imder concession to private parties. It is true lieyond a question that the result to the public of the, operations of the Standard Oil Company has been highly beneficial, and not hurtful, as its enemies claim. As has been already stated, it has given the public goods of vastly improved quality at greatly reduced prices.' It has, by its effective system of dis- tribution, supplied this most necessary article for domestic consumption promptly > See Mr. Lee, pp, 37:3, 277; Mr.Monnett,p.317; Mr. Westgate, pp. 371, 873. STANDARD OIL COMBINATIONS: — ARCHBOLD. 565 and cheaply to the most remote sections of our country and, indeed, to the world. Beyond all this, hov.'ever. it has given to the community at large an opportunity for investment in the business itself, which it could never have had under the old system. Thus there are to-day partners in the Standard Oil Company, as share- holders, to the number of fully 3,500, where less than one-twentieth of that num- ber would have been interested as partners under the old system. NO TEOUBLB WITH LABOR. It has been most beneficial in its effect on labor. There could be no stronger evidence that the labor involved in its vast operations has been well paid and con- tented than lies in the statement that for more than a quarter of a century, since the Standard Oil Company began its operations, it has scarcely had a serious strike of any kind among any branch of its employees — one or two temporary strikes anrong some special classes of workmen in sympathy with other labor organizations who were striking, constituting the sole disturbances. Indeed, it is not too much to say that to the loyalty, zeal, and intelligence of its vast army of about 3.3.000 employees the company is largely indebted for its strength and efSciency.^ I unhesitatingly express the opinion that, when the history of our time is writ- ten, it will appear that the marvelous commercial and industrial evolution which we are experiencing in this great country during the year 1899 marks one of the most important steps of progress in our country's history. It will prove to be of immense value to all classes of our population. The investor, the consumer, and the laborer will all be benefited by it; the investor by the better security which arises throiigh amplitude of capital for the business contemplated, and the com- bination of talent in the various departments of administration; the consumer, through improved processes resulting in better products at lower prices, and more efficient distribution; the laborer, by steadier employment at better wages, and a better opportunity for improvement in condition, if special talent is shown. The outcry, gentlemen, against corporations does not come from the great, busy, industrial classes, but from impractical sentimentalists, yellow journals, and political demagogties; from the latter, perhaps, more than any other. It is a veritable attack upon thrift and prosperity. To listen to their voice to the _extent of imposing restrictive legislation would mean a frightful step backward 'in the commercial development of our country. NATIONAL COKPOEATIONS THE NEXT STEP OF PROGRESS. If you should ask me, gentlemen, what legislation can be imposed to improve the present condition, I answer that the next great, and, to my mind, inevitable step of progTess in the direction of our commercial development lies in the direc- tion of national or Federal corporations. If such corporations should be made possible, under such fair restriction and provisions as should rightfully attach to them, any branch of business could be freely entered upon by all comers, and the talk of monopoly would be forever done away with. Our present system of State corporations, almost as varied in their provisions as the number of States, is vex- atious alike to the business community and to the authorities of the various States. Such Federal action need not take away from these States their right to taxation or police regulation, but would make it possible for business organiza- tions to know the general terms on which they could conduct their business in the country at large. Lack of uniformity in the laws of various States, as affect- ing business corporations, is one of the most vexatious features attending the business life of any great corporation to-day, and I suggest for your most careful consideration the thought of a Federal corporation law. Q (By Mr Jenks.) Have you any further statement with reference to the organization of the Standard 'Oil Company itself?— A. That will be included in the statement Mr. Dodd will submit; or the data regarding the organization, I think, will be in that. PETROLEUM CONCERNS IN RUSSIA AND ELSEWHERE. I want to hand you, in connection with this paper, this most interesting state- ment which I think, perhaps, is the first general compilation of the information that has ever been made in the country here; almost a surprise to us, who are daily familiar with the oil business, as showing a tremendous growth of the for- eign petroleum business. I will only refer by name to the countries m which petroleum is now successfully mined and prepared for market. Capitalization, 1 See Mr. Lee, pp. 28.5, 286. 83a 37 666 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. so far as we are able to obtain it, and the names of the companies which, as I think, are substantially accurate, appear on this statement. Q. (By Mr. Smyth.) Could you give us anything like the proportion?— A. I have the statement which I think shows the proportion of business done. It will be a little surprise to you to see the enormous capitalization of the business attaching to the Russian development, and I may say in a word of oral explana- tion that the business there is getting to be in strong hands. When I mention the name of the Rothschilds, that will be a sufficient guaranty as to the strength of the companj'; and they are growing now enormously in the extension of their business in the various markets of the world. The Nobel Brothers are there competing for the business with tremendous energy. Recently, perhaps within the past year more than in the aggregate time before, English capital and English corporate organizations have engaged in the petroleum trade in Russia to an enormous extent: the largest concern perhaps being the Shell Company, Sir Samuel Samuels, late lord mayor of London. I hand you this list showing firms in Russia, and this showing list of corporations in Q-alicia, a further statement from Roumania, one from Borneo, and sundry places in the Dutch East Indies, in British India, in Japan, and in Alsace, Q-er- many. It will probably be an item of information to many of you that the pro- duction of petroleum is assuming great proportions in Japan. They are now very rapidly progressing, are coming to the front in improved methods of pro- duction, and will ultimately become a formidable competitor to our American industry. The system of petroleum refining in Japan is by corporations and individual firms going out into the different fields and producing and refining. In Sumatra the business has already attained large proportions, and in Java and the island of Madeira.' Q. (By Mr. Smyth. ) Is there any American capital represented in these firms?— A. There is no American capital that I know of. But they have sent out and taken from our oil-producing country here many artisans. Q. (By Mr. A. L. Harris.) Then the Standard Oil Company is not represented in any of those corporations? — A. Not in any way. Q. Not even in the Nobel Brothers? — A. Not a dollar of interest in any way, or relationship or understanding. Q. (By Mr. Smyth.) I suppose English capital being interested in Russian refining is one of the causes of attack on the Auk rican oil in London? — A. Un-. doubtedly. but as I said this morning, I think the attack was undoubtedly made by the people directly and largely interested ik.w in the Russian distribution in the different countries. It may be of inti-rest to read a short letter from our foreign exporters: New York, Si'j)f ember 1, 1S99. J. D. Archbold, Esq., Bnihh'ny. Dear Sir: I beg to hand you herewith the statements you desired, in duplicate, and wish to say that the Russian production is on the peninsula of Ajisheron, on the west coast of the Caspian Sea, and the Grosni district, northwest from the same. We estimate the Russian production at present to be about 160,000 barrels per day, and Grosni about 10,000 barrels daily. The Galician production is about 2,000,000 barrels crude, and Roumania .500,000 to 600,000 barrels, per annum, and the Alsace production about 175.000 barrels crude annually. The Dutch East Indies, about 3,400,000 barrels; Burmah, about 2,000.000 cases refined per annum, and Japan will probably amount to about 3,o00 barrels crude oil per day. Of course we give you these figures as near as we can get to them, and where we give you the output of refined we have no reliable figures as to what it may represent in crude. Yours, truly, C. P. Ackermann. I have here another statement. This covers the information which you ask as to the i^ercentages of these various countries. It is for the year 1897. IJnfortu- nately we have not the full data at hand with which to give you the 1898 figures. This statement shows the business of all countries of the world producing refined oil. Some little percentage of it, as you will observe, is not the production of our country, but is shown in this way because the country named compels, by its tariff laws, the bringing into that country of the crude petroleum for refining there; but the larger items are the production of this country, as you will observe. The total production in the world of refined petroleum illuminating oil, for the year 1897, was 39,338,991 barrels, of 50 gallons each, and was divided as follows. I will give the percentages, if you please. ' List on pp, 563, 5(i4. STANDARD OIL COMBINATIONS: ARCHBOLD. 567 Q. (By Mr. Jenks.) Yes.— A. United States. 64.33; Russia, 33.38; France, 3.3.5; Austria-Hungary. 3.66; Sumatra, 3.33; and the remainder, Scotland, Canada, Java, Roumania, India, Sixain, Mexico, Cuba. Brazil, Germany, Peru, Italy, Japan, and Porto Rico are all fractions of less than 1 per cent, making the grand aggregate of 100 per cent; the great factors, as you will see. for the year, being the United States and Russia; and a rapidly increasing factor, of course, in Au.stria-Hungary and Sumatra. IVoi hVn 2Ji'odnctioii of refined iUuminating oil, 1S07. Product of- Barrels of Tjll gallons. United States __' 2.i,a)S.tt'S Russia -' ii. lUil.Vilo France. ; l.;iT7.T01 Austria-Hungary 1 , ( I4(i , ;3:")9 Sumatra- ! flU.OOn Scotland-- - I 3;fl.8.57 Canada ! 351,813 Java I 230. 3S2 Roumania ! 230,0110 India I 180,88.5 Spain -- - i 157,684 Percent of total. 64. 23 23.28 3.25 3.66 3.33 .84 .64 .59 .59 .46 .40 Product of- Mexico Cuba Brazil - Gernaany - . . Peru Italy-- Japan ! Porto Rico . Total - Barrels of 50 gallons. 104.287 .58,413 35,306 34,822 19, 193 15,136 13,689 8,236 39,338,991 Per cent of total. .27 .15 .05 .04 .02 The population of the world is 1.349.140.091; the production of illuminating oil is therefore equal to 1..) gallons per capita. Q. (By Mr. Clark.) Do you suppose there has been an increase since these statistics were given'.' — A. The business of Russia is increasing rapidly. Here is a further statement of crude oil, the world's production, which may be of interest in looking over in a general way. World's production of crude petroleum, 1897. [Barrels of 43 gallons.] Country. United States Russia Austria-Hungary Sumatra Scotland (1896) . - . . Canada Java Roumania _- India (1896) Japan (Germany - Barrels. 60, 496, 499 .57.094.303 3, 0^7, 617 1,777,, 560 1,316,894 809. 199 726, 373 570, 886 430, 203 283, .571 165, 832 Per cent of total. 47.96 45. 26 1.66 1.41 1.04 .64 .58 .45 .34 .23 .13 Country. France-- Peru Argentine Italy -- --.- Other countries (esti- mated) - --- Total Total production 1896" Increase Barrels. 70,000 68, 4.53 31,000 18,149 200,000 126,136,528 118, 398, 631 7,837,897 Per cent of total. .06 .05 .112 .01 100.00 568 HEAKINGS BEFORE THE INDUSTRIAL COMMISSION. Crude oil production by States, years 1896, 1897. [Barrels of 43 gallons.] 1896. 1897. Increase or decrease. Increase or de- crease. Average value per barrel. 1896. 1897. Pennsylvania 19,795,779 736,606 10,00.5,966 3,365,365 20.575.139 4, B4li. 9.52 l.lM) 4. 325 43 .361,450 1,253,777 113. .571 3,878 250 1,450 170 18,439,180 771,606 13,078,1)11 2,877,193 18, 6.'42, 677 4,110,356 323 4, .377 19 477.499 1,903,411 81,098 3.6.50 500 65, 975 635 1,356,599 35,000 3,072,045 488, 172 1,892,462 536, .596 1,358 .53 24 118.049 8.50. 6:34 32,47.3 250 64,535 455 Per cent. 6.9 4.8 30.7 14.5 9.3 11.5 80.8 1.3 55.8 32.1 51.9 28.6 .30.3 100 SI. 186 1.179 1.180 1.180 .739 .630 .550 SO, 795 .786 .788 Ohio (Pennsylvania oil) Ohio (Lima oil) — .788 .520 .456 .500 4.30 .883 .990 .450 8.00 5.00 .720 4.000 9.16 Colorado - .810 .900 .400 Wyoming 8.00 Illinois - 4.00 .670 Indian Territory 3.30 Total - 60,864,401 60, 496, 499 367,903 0.6 .960 .675 Total value of production, 1896 -- §58, .518, 709 Total value of production, 1897 40,9k;9,611 Decrease.... 17,589,098 Total production in the United States, 18.59 to 1897, inclusive (38 years) 837,494,- 059 barrels, on the basis of 5.6 cubic feet to 1 barrel of oil. This amount of crude oil would fill a pipe line 6.9 feet in diameter, extending entirely around the earth. It would cover a surface if 10,000 square miles to a, depth of 0.3 inches, or fill a reservoir having an area of 1 square mile and a depth of 167 feet. PETROLEUM EXPORTS FROM THE UXITED STATES, 1861 TO 1898. Q. (By Mr. Farquhar. ) Have you furnished the commission to-day with the total exports of the Standard Oil Company, from the first, all over the world out of the United States^ — A. I do not think I have submitted any statement. It may be among these statistical reports given that there are such statistics, hut I hardly think so. I have for periods given the exports. Q. (By Mr. Jenks.) Can you furnish the exports year by year? — A. From the day we taegan. Value of exporin. Total value of petroleum products exported from United States for the years 1861 to 1871 , inclusive, amounted to ,S199, 030, 333 Value of exports from 1S73 to 1898, inclusive (i. e., since the organ- ization of the Standard Oil Company) 1, 346, 846, 381 Value ot exports by Standard Oil Company 1, 136, 401, 021 Standard Oil Company, 90.34 per cent of total. PRICES UNDER COMPETITION — WOULD NOT ADVISE GOING BELOW COST. Q. With reference to the effect of the Standard Oil Company on prices, you. have made the general assertion that through the inteence of the Standard Oil Company, in your judgment, prices of refined oil have been very greatly lessened to the consumers. Is it generally true that the prices at the present time are considerably lower at competitive points than at those where you have little competition? — A. Well, I can. not speak with any precision regarding that matter. I have no manner of doubt that, when we are closely pressed with competition at any point, we try to hold our trade. That is a natural law of trade, to which we are, of course, subject. Q. And your general practice is, if a competitor comes into the market that you have had before, to put down the prices and hold the market? — A. I think. STANDARD OIL COMBINATIONS: AROHBOLD. 569 as a rule, the history of our transactions would be that the competitor forces the tight. Q. About what proportion of the refined oil of the country do you supply?— A. Well, the grand aggregate is there. Q. Can you state generally?— A. I should say that of this country it would be, approximately, the same as the whole; that is, about 82: 80 to S3 per cent. Q. Do you think that an organization that controls 80 per cent of the goods that go into the market mil, generally speaking, have the power, within moderate limits, of course, to fix the prices and force their competitors to follow?— A. It might temporarily have such power. If it exercises it unjustly or arbitrarily it would surely lead to its own downfall. Q. That is, if it attempted to push the prices too high it would call in compe- tition? — A._ It would invite competition. Q. And if there is fierce competition between large institutions, prices cut in any locality— prices will go down how low: to the lowest rates?— A. Personally, I would never advise selling goods at a loss. I expect it is done in some cases. I would not personally advise selling goods at a loss. I think when you get to cost you are low enough. Q. You would say, then, as regards your own methods of competition, that where the fighting is forced by competitors you do not cut prices below your cost?— A. I hope not when they get to that point, because I would rather keep my works going and labor employed there than to shut down, even at the cost point. Q. You would not, temporarily, in a special locality, go below the cost point for the sake of freezing out a smaller rival, with the expectation of keeping or getting control of your market?— A. I do not believe I would. There might be a greatly 'aggravated case where such a thing would seem advisable, but it would be a rare one. Q. You would not say that your company had never done that at all? — A. I would not say that it was never done it at all — no. Q. So far as an organization of the size of the Standard Oil Company is con- cerned, if you put prices down to cost you can afford to hold them there, of course, very much longer than a smaller rival could? — A. I think so. Q. And I presume you are in the habit of doing that to get rid of a competitor at times? — A. We are in the habit of fighting vigorously to hold our ti'ade and advance it. Q. To the extent of holding prices down to cost until the rivals give way? — A. Yes.' HOPES THE STANDARD GETS PRICES SLIGHTLY ABOVE COMPETITIVE PRICES. Q. Now. the general result then is this: By virtue of your greater power you are enabled to secure prices that on the whole could be considered steadily some- what above competitive rates? — A. Well, I hope so. I think we have better mer- chandizing facilities, better marketing facilities, better distributing facilities, and better talent than a competitor can have. Q. I am not asking with reference to your power of making profits, but it is with reference to getting the prices from the consumer. — A. Prices are what make the profit. If we had a better average price, we could get a better profit. Q. You think, generally speaking, that you get prices for oil slightly above competitive prices? — A. Well, I should think so; I could not answer — that is a very general question and very difficult to answer. I could not answer that spe- cifically. I hojje that we do. Q. Of course, in this investigation we are seeing if we can get some general principles on which legislation might be based, and these questions are to bring out, if we can, the power that so great an organization has in fixing prices. Would you say, then, that in the case of an organization that controls perhaps 80 per cent of the' markets of the country, there is a monopolistic element that enters in which enables them to hold prices above the regular rate? Is there a monopolis- tic power that comes merely from the power of capital itself? — A. Undoubtedly, there is an ability, and when that ability, as I have said, is unwiselyused.it is sure to bring its own defeat. Q. If that ability goes to get an exorbitant price, of course it will invite com- petition, but when that ability is kept within modest limits, would you still say that it was in the power of such an organization to get the benefit of the monopo- listic power that comes merely from the power of capital itself ?— A. Well, I should say that that would be a very restricted power, a very restricted limit. The com- petitors in this country are very active. 1 See Mr. Lee, p. 370; Mr. Monnett, p. 317: Mr. Clark, pp. 331, 337, 340, 350; Mr. Westgate, pp. 366-370. 570 HEARINGS BEFOEE THE INDUSTEIAL COMMISSION. Q. What?— A. The competitors are very active; they are alert at all points with their small offerings in the hope to find just such a condition as you descrihe. Q. Certainly.— A. But. as I say, as business is and as it has been for many years, we could not have that ability to any considerable extent as merchants. Q. If the ability were operative only to a slight extent, would it still be enough, do you think, to make a difference between what we may call a moderate divi- dend, say 6 or 7 per cent, and a pretty high dividend of between 15 and 20 per cent?— A. Well, that involves so nice a question that I could hardly undertake to answer it; but generally, as to the effect on the community, I should say Q. Generally on the prices in the United States ?— A. I shotild say that the less- ened cost incident to doing business in a large volume would more than compen- sate the consumer for any ability in getting higher prices. Q. Then that leads to this point, whether the large capital does itself give an organization the power to get a somewhat higher price than it could in the mar- ket provided the competitors were substantially equal in power? — A. Oh, it may be so; but that is a diflicult question to answer. BY-PRODUCTS. Q. In your business has there been any decided increase within the last 10 or 15 years in the by-products that come from the refining of oil? — A. Oh, my, yes; oh, yes. Their utilization has been greatly improved, and the uses of the by-products throughout the world have been enormously increased. Q. Will you give us a few specific illustrations from your own business ? — A. Our leading by-products are the light gasoline and naphtha products, the paraffin product that is used in candle making and kindred uses; lubricating oils for all classes of machinery, as taking the place of the animal and vegetable oils; the vaseline products, and numberless small products that I do not at the moment, perhaps, recall. I have named the leading ones. Q. Can you say whether it would be possible for these various by-products to be secured to as great an advantage by an organization that had in its control, we will say, only half a million dollars? — A. I don't think it possible for them. I don't think they could undertake the ditt'erent branches of the business involved in the producing of these various articles to which I have referred with anything like the advantage that we have in a lai-ge specialization.' Q. That is what you would put down as one prominent advantage that is secured by this large aggregation of capital — the use of the by-products? — A. I do; the • use of the by-products. It may tse rather surprising to know that the by-products of petroleum now equal substantially in value the illuminating oil itself. OIL SOLD BELOW COST IN THE FAR EAST — BUT FOR THE BY-PRODUCTS. Q. If SO large an income is secured at the present time from the by-products, would it be possible for you still to make profits, even though the main product of the refined petroleum were sold sulj.stantially at cost? — A. Well, we may possi- bly, yes, secure a profit. It may be. However, we count the profit from the by-products as part of the whole profits in the management of our business; we take it as a whole. Q. (By Mr. Smyth.) Which is the larger profit, from the by-products or from the oil? — A. Well, I should say — I do not know which is the larger — from the by-products. In estimating t}ie outci nue from a barrel of crude, we consider the whole proposition as to what we get from the by-products and the ruling prices for the illuminating oil. and base our iirices as a whole on that. Of course, it is to our interest somewhat, or in special cases, it not to our interest, these gentle- men who are our competitors in the near-b>- market and do not have to t.ice the problem that we do, more particularly in competition with Russia and in the marla^ts we have reached in the far East, will force us to do the best we can. We have been basing our calculation on the expected output; made the prices for refined oil in competition with them there, which would have given no margin of profit whatever to us here. We have had to do that so as to hold those mar- kets t(]r the general American trade as against the Russian aggression. Q. If I understand you, you say that in the eastern market you have done it?— A. On a very low basis; I should say at below cost, figuring "transportation and the iirdinary charges. Q. And secured your profits from the by-products? — A. Yes; been satisfied with that. 1 Compare Jlr. Leu, p. 2ij'.i; Mr. Boyle, p. 441; Mr. Emery, p. ii;;r STANDARD OIL COMBINATIONS: ARCHBOLD. 571 GENERAL MPRESSION THAT THE MARGIN HAS NOT INCREASED IN SIX YEARS. Q- -^s regards the home market here, the statement was made by yon that the prices had been steadily lower. If we take the margin between crude petrolenm and the refined petroleum, we find that for a number of years past this margin does not seem to have lessened very materially in spite of the increased profit that has come from the by-products?— A. There is a basis below which it is not pos- sible to go very much. Q. How far? — A. I think the experience of our competitors is perhaps the best proof of the fact that with reference to the business as a whole it is pretty close. It has been carried on a pretty fairly close basis. Q. Would you say that the margin of profit now in the refining industry was no greater, if we take the period of, say, the last 3 vears, than it was s or 10 years ago?— A. Well. I could not speak from memory as to 8 or 10 years ago. Q. About 6 years ago, your general impression is A. That it is not. My general impression Is tiiat it is not. I speak of all these matters with some little reservation, from memory. I am just as accurate as I can be from memory. I should not like to be incorrecT. Q. On account of the many assertions which have been made on all sides on this question, I should like to get as close as possible. — A. I will answer you just as well as I can. If I err, I will endeavor to err on the safe side. BUYING CRUDE IN PENNSYLVANIA — REFINED CHEAPER THAN CRUDE? Q. The general question has been asked as to the general effect of the Standard Oil Company upon the price that is paid the producer for crude oil. Do you know about whar proportion of the Pennsylvania product you purchase? — A. Well, I think the percentage of the business done by us as a whole would be per- haps the best illustration of that. Q. Can you recall, offhand, the figures? — A. Perhaps our percentage of the Pennsylvania would be less than y2 per cent, because a larger proportion of the competitive business is done in Pennsylvania than in Ohio. I should say in the neighborhood of 80 per cent. Q. Your purchases in this Pennsylvania field are made through your pipe line. Have you a general purchasing agent? — A. Not through the pipe line. Q. It is through your general purchasing agent? — A. Mr. Joseph Seep, of Oil City. Q. The prices that Mr. Seep there gives are fixed by you? — A. Well, they are suggested, as a rule, by us. Q. He is your general ptirchasing agent, and there are various subagents there?— A. Yes. Q. Do you recollect about how many? — A. I should say forty or fifty. Q. The prices are fixed for it generally, as you say, from your office. As cover- ing the principles on which those prices are fixed, a circular Mr. Seep issued some time ago was produced here, stating that the prices that he would pay would be fixed, in general, by the world's markets.' The implication would be that the prices would not vary probably very frequently or very violently. Has it been true, generally, that prices have kept stable for the crude oil of Pennsylvania? — A. Well, the prices have varied somewhat during the past several years, accord- ing as the outlook was for the production, and as the demand -wsts. It could not be better stated by me than the circular states it. We have before us daily the best infonnation obtainable from all the world's markets, as to what the offerings are, and as to what it is possible to sell for; and we make from that the very best possible consensus of prices, and that is our basis for arriving at the current price. Q. Generally speaking, are the relative prices of the crude oil and the refined oil kept substantially unifoi-ni? — A. We know all about it every day, of course. Q. And is the relation kept substantially uniform? — A. Oh, substantially so. Of course, it is not always the same. Of course, it seeiiis possible sometimes to get a higher price, and wo are glaa to avail ourselves of the opportunity: and sometimes we have to take a closer margin and still buy the crude, and there, of course, we suffer a loss.' Q. Statements have been made here by som ■ of the witnesses to the effect that there have been times when refined oil at the seaboard was selling lower than the crude.-' — A. I should say that is a very exceptional case. I do not recall. Q. Can you suggest any circumstances where that would be the condition of affairs? — A. I do not recall any such period. The answer is already given by me that, in competing with the Russians at certain times for certain markets, we have made prices for refined that were as low as the crude products and have 1 See p. 436. " bee tables, pp. 137^^9. " See Mr, Lee, p. lirn. 572 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. taken our returns on the profits from the by-products; but they have been very exceptional cases, and it is not the case to-day; it does not at all esist to-day. REASONS FOR DISMANTLING REFINERIES. Q. You have at times purchased the plants of your competitors and dismantled them? Instances of that kind have occurred? — A. Oh, my. yes. Q. Will you state the business conditions which, in your judgment, justified that? — A. I endeavored to do that as directly as possible in my general argument. Q. Will you sum it up again? — A. It is this, that we have at times bought refin- eries with the expectation of succeeding to the volume of business done by them. We have universally replaced the capacity of these refineries by better ones and better equipped construction at more favorable points. We would not buy refin- eries and dismantle them for the pleasure of doing it. We have done it because of a carefully considered business proposition, that being in the direction of economy in the business. Q. I will call your attention to the case of some refineries that were bought up at Titusville. Perhaps you can explain somewhat in detail those cases. — A. They were no exceptions to the rule. We had opportunities to utilize some of that property quite advantageously as small refineries. I think one of them was taken to Porto Rico. One was taken to Kansas, where it was put in after the new production; and one to Porto Rico, where we were compelled by the tariff laws to refine. Q. (By Mr. Smyth.) Is the production equal to the demand? — A. Oh, always vastly in excess of it; vastly in excess of it. Q. (By Mr. Jenks.) You made the statement that the dismantling of the jilants at different times had not lessened your output. — A. Oh, no. Of course there has been at all times an excess of capacity as compared vnth the demand. The capacity of the refineries is never run full — on very rare occasions — I should say, never. And the sole purpose in the abandoning of any plant would be to conduct the business at a point where it might be more economically done. Q. Incidentally, in comiection with that, it might be a more convenient way of holding your market in the locality where competition would figure? — A. Pre- cisely. Q. That would enter as one factor? — A. That would enter as one factor; yes. i NOT THE standard's POLICY TO MAKE PRICES SPECIALLY HIGH AFTER THEY HAVE BEEN CUT SPECIALLY LOW. Q. The assertion is frequently made — I do not recollect whether it has been made on the stand — that in certain localities where you are compelled, in order to keep the control of your trade, to put prices down for a time until a rival with- draws from business, prices are afterwards put up above what they were before in order to recoup the losses incurred? — A. Tliere is no such policy in that business. Q. You have no such policy ?^-A. We have no such policy. It is possible that, in the zeal and anxiety to sei've of some overzealous servant, such a case might occur. If so. and if it was known, it would not be apprcired. Q. That is not your policy?— A, Nr.; that is not our policy. We fully reahzS that if we survive with our business we must treat the public very fairly. THE STANDARD DOES 7.5 PER CENT OF THE CANADIAN EEFINIXK— NO RAILROAD DISCKUriNATIOXS IN CANADA. Q. Statements have been made sei ei-al times of late in the papers with refer- ence to special discriminations in freight rates that have bt>en secured In- the Standard Oil Company in C!anada. It iw said that they affect ver\- unfavorably other American refinerieg. — A, I am not familiar with it all. I know there have been such agitatir>ns in the newspapers, but I have considered it as one of the usual class ot such agitations, I will gladly inquire about it. if you wish, and see what information I can ^eeure about it. I do not know of any discriminations in our favor; that is, anyrate,< to the exclusion of other shippers' of like character at all. Mr; Rogers says Mr. Harris asked a question in that direction, as to our being interested in the refining business in Canada. I did not hear him. Q. Will you please tell us about your interest in the Canadian business?— A. We are interi'sted in the Canadian refining business and are doing our best in the business there to get it on a fairly profitable liasis. It has been'very much disor- ganized there for some time, and we have come into relationship tliere with that in the past year or so. STANDARD OIL COMBINATIONS: ARGHBOLD. 573 Q. How large a proportion of the Canadian refining interest do yon control? — A. I think about 75 per cent; about 75 per cent.' Q. Have you of late, to your knowledge, made any contracts with the Canadian Pacific and the Grand Trunk with reference to advancing rates from Buffalo and Toledo? — A. Well, sir, I have not any personal specific knowledge about the matter; I will gladly inquire about it. • Q. Will you look it up and send us a reply? — A. I will. Q. You will get full information on that subject? — A. I will. The advance in rates on American oil from Buffalo and Detroit was made by the Canadian roads in their own interests and is in no way discriminatsry in favor of the Standard Oil Company, but rather to the contrary, for that company pays these advanced rates in full and ships over 75 per cent of the American oil consumed in Canada. DOES NOT KNOW OP ANY RKOBNT CHANGES IN FREIGHT RATES. Q. Aside from the question of special rates or special favors by the railroads, the statement has been made that at times you have been enabled to influence the railroads to put rates over certain lines so high that it would woi-k to the disad- vantage of competitors who had to use those lines more than you did. For exam- ple, Mr. Westgate testified that in shipping oil into Canada he had found himself at a disadvantage on account of this increase in rate of v/hich I have spoken and of which you say you have no knowledge, and that in attempting to ship to Can- ada by another route, through the State of New York, he found that rates from his refinery to the northern part of New York State were very much above the rates that might be considered norraal there, judging by the rates on other goods. For example, he found that on other goods the general freight rates to those places in northern New York were Boston rates; but on oil they were special rates. He felt that he was put at a disadvantage on account of the location of his refin- ery, and that the Standard Oil Company had succeeded in influencing the railroads there to make those special rates to the disadvantage of their competitors.* What would you say on that general question? — A. I do not know. Q. The matter would be entirely within the law, of course? — A. I don't know of any such condition at all. I have no knowledge of the rates — the tariff rates on petroletim — having been changed in New York State or any place else for a long period. I don't know that to be so. It is within the bounds of possibility, but I should be disposed to doubt it exceedingly. Q. You would be likely to know in detail with reference to the arrangement of freight rates? — A. In New York State? Q. In New York State and in Rhode Island. — A. I think I would. I can make inquiry about it. I would say, vnth reference to the question of coming into rela- tionship with the Canadian refining interest, the question of rates was considered in connection with the refining, but, as I say, I don't know of any rates that are not open to all comers. Q. That is not the question. Competitors say that rates over one line have worked to their peculiar disadvantage and not to yours?— A. I don't know of any such condition. I would say that it would be to the interest of the Canadian roads natu.rally to encourage business in their own territory. I don't know about that at all as to any preferential condition with us. REPORTS ON COMPETITORS' BUSINESS NOT SECURED BY IMPROPER OR QUESTIONABLE METHODS. ■ Q. In the testimony of Senator Davis a statement of this kind was made: That a man in his emplov had been approached by a Standard Oil official and offered pay regularly if he'would inform the Standard Oil Company with reference to their shipments.- Does the companv under any circumstances get information from the employees or officials of their competitors?— A. The company does noth- ing of the kind. If any such case occurred— and it might as an exceptionally rare case on the part of an overzealous employee, who, in his anxiety to know about his competition, might do a foolish thing— it is not approved by the com- pany. When Mr. Davis or Mr. Westgate or anybody else says that we m New York get down to our offices to get our reports early in the morning from the spies we have out, it is utterly untrue. We do nothing of the kind. We are not figuring on Mr. Westgate's or Mr. Davis's business; we are figuring on our own uusiuGss " Q. Do you make the general statement that no reports are secured from your 'SeeMr. Gall,p.«7.3; Mr. Page.p 788 2 See pp, 873-379. Compare also the testimony of Mr. Gall. 3 See p. 356. Also Mr. Monnett, p. 316. 574 ' HEARINGS BEFORE THE INDUSTRIAL COMMISSION. agents with reference to the business of competitors? — A. I don't say that. I should say there would naturally be reports, such reports as they could rightfully secure; but that they should secure them by improper or questionable methods of any kind would not be approved by any member of the Standard Oil Company; and I'would be only too thankful to have any such case brought to our attention.' STANDARD OIL TRUST DISSOLVED, BUT THE AGGREGATION HAS WORKED AS HARMONIOUSLY AS BEFORE. Q. You have said that the general information with reference to the organiza- tion of the company would be furnished in the answer to the schedules of inquiries that were given you. But there are some matters that would not be covered in that, particularly. From Attorney-General Monnett's testimony,- the different forms of organization of the Standard Oil Company are brought out somewhat. You had earlier the trust organization; afterward the trust was dissolved, I believe, and you liad a different form of organization. Will you sketch briefly the changes in organization that the Standard Oil Company has gone through since the dissolution of the trust? — A. Would it not be vastly preferable to have that in such succinct shape as Mr. Dodd would furnish it? Q. That is not covered directly in the schedule? — A. I think it would be so much more intelligently stated from the records than I could give it from memory in an oral statement, and I would like "('ery much if you would avcait that. Q. I think it possible that some of the commissioners would like to base some questions on your statement, and then we shall have that for record from Mr. Dodd. — A. Well, briefly stated, the Standard Oil Trust, as such, existed from the year 18S'3 to 1892; formed in lsa2 and dissolved in 1SW3. In 1893, at the time of the dissolution, the majority of the stocks of the various companies concerned or involved in the Standard Oil Trust were distiibuted to the eqiiitable owners, and that distriljution has gone on steadily until this time in the hands of liquidating trustees. Q. Nevertheless, since that time the different Standard Oil companies have worked together in harmony, have they not? — A. The ownership has naturally brought them into harmony of autioji; the like ownership, of course. Q. The general way in which the control has been kept uniform has been this, that the men who were the former trustees have held the majority of stock in each one of these different companies? — A. Exactly so. Q. So that the Standard Oil combination, as we may say, has worked together as harmoniously since the dissolution of the trust as before? — A. It is hardly fair to call it a combination, but you might call it an aggregation. Q. An aggregation? — A. An aggregation. Q. But as a matter of fact it has worked as harmoniously as before? — A. Yes. THE AMOUNT OF TRUST CERTIFICATES OUTSTANDING IS SMALL. Q. Will you explain also briefly — because that was dwelt on also at length by Attorney-General Monnett — the method of distributing the proflts to the stock- holders under the trust and since?— A. Under the trust the proflts, of course, were centralized into tlie hands of the trustees and distributed ratably. Q. Distributed to the certificate liolders? — A, Since then the dividends have gone directly to the owners of the shares of the various companies. They have kept the same in one case as in the other, of course. Q. (By Mr. Phillips.) Have they been paid on the original Standard Trust certificates? — A. To the extent that those remained out, they have. Q. Is there a very large per cent of them remaining out? — A. Not very large. Q. (By Mr. .Jenks.) Do you recollect what pir ceut?~A. I could not state; it is becoming very small. ■ Q. (By Mr. Phillips.) The market quotations are based on the original trust certificates?— A. I supposed the quotations were based in New York on stock. Q. (By Mr. Jenks.) Will you repeat your answer?— A. Well, it covers some equitable ownershi]), as it was. Q. (By Mr. Phillips.) It is largely distributed now?— A. Largely distributed now. Q. On the original trust certificates?— A. No: oh, no; not largely, but to a very small extent only. Q. And was for quite a time after the dissolution?— A. Yes; but it is very rapidly being extinguished. 1 Compare Mr. Clark, p. :B.5, 341; Mr, Westgate.ilUU-ijIi.S: Mr.Emerv.PP. 6U,615; Mr Gall, p. 684. -Sec ]>ii.;aB-:iiir. 3 Sea Mr. Monnett, pp. :)u;i, mis, 1515. STANDABD OIL COMBINATIONS: ARCHBOLD. 575 Q. "When the Standard is quoted in the neighborhood of SoOO,000,000, or $490 a share, do we understand that to be the quotation on the original Standard?— A. On what was represented by the original Standard. Q. On what was represented by the original Standard? — A. By the original Standard Trust. TRUST CERTIFICATES EXCHANGEABLE FOR STOCK OP THE NEW .JERSEY CORPORA- TION REPRESENTING SUBSTANTIALLY THE SAME INTERESTS. Q. When a purchaser buys on the market 100 shares or 50 shares of what is nominally the Standard Trust certificates and takes it to the company to transfer, what do you give in the place of that? If I should buy 100 sliares of Standard Trust certificates and take it to you A. You would be entitled to receive a share or an equitalile interest in the various companies composing the Trust. Q. What form is that now in when it is transferred? — A. It may, if it is so desired, be in the form of a certificate of stock in the various companies. Q. They take it in that way when they purchase, transfer, or sell? — A. They do. Q. Do they take it in a divided form, or do they give them a certificate repre- sentative of these aggregation?? — A. What is the question? What he would be entitled to? What lie would be entitled to would be his interest in the business of the various constituent companies. Q. Yes: and what form of paper do you give for that in the way of a certificate? If I buy 100 shares on the market at. say, 490 or 480 or 500, and take that for transfer, or if a man dies and it is sold and transferred to some other person, what kind of a certificate do you give that person; will it reiiresent all these aggregations? — A. We give him, if he so desire — we could not at all reissue a cer- tificate of the Standard Oil Trust; we won't issue any new certificate of the Standard Oil Trust, that being m final liquidation — we would give him his stock in the various companies, or, as some of us are now doing, holding our stock through the New Jersey corporation, he would hold his interest in that way. We v/ould give him a certificate in that representing substantially the same interests. Q.^ Have you such transfers being made? Q.* (By Mr. Smy'th.) Have you got yours in the new stock? — A. Oh, to a small extent. Q. (By ]Mr. Faequhab.) The question is whether the general Standard Oil cer- tificate of stock is on the Stock Exchange of New York? — A. None on the Stock Exchange. Q. Not at all?— A. No. Q. Then you take up the eight subdivisions?— A. How many— seven or eight. Q. And the New Jersey company? — A. And the New Jersey company. Q. And the stock that is so quoted in the New York market is what? — A. It is the remaining fraction of the Standard Trust. Q. Of the old Trust?— A. Yes. Although, I think, to a very limited extent, the stock of the New Jersey corporation, which substantially represents all, would he also quoted. THE MANAGERS OF THE STANDARD HAVE NOT SPECULATED IN ITS STOCK. Q. (By Mr. Farquhar. ) The stock that is usually seen quoted in the New York market is what we might call little driblets of stock? — A. That is it. Q. Ends of estates and stock that has come from the division of property into their hands; in other words, the Standard stock is not in the market, in the general sense of the term, as a dealing stock?— A. No, sir; the listing of it on the Stock Exchange is carefully avoided, and they have never endeavored to make it a speculative affair at all. Q. Have you never, of your knowledge, at any time, known when your stock- holders and your directors or ofiicers or others have dealt in those stocks?- A. Oh, I think to a limited extent there have been some transactions on the part of the officers in the stoci,.. usually in the way of adding to their interest, perhaps, as opportunity has occurred. I think I have myself. I must myself plead guilty to the charge of having bought 100 shares and then resold them again within the past 10 years. I think that represents my entire stock transactions m 10 years. Q Are not usually the stock transactions confined to the ofacers and the present shareholders of the Standard properties?— A. There are a large number of share- holders 3,500. . rr i J.1 i i mi, J. 1 £ Q These are simply figures. It is the mam fact that we want, ihe stock of the Standard Oil, the great properties, is not stock that is u.sually put into the New York market or any other market, but is property that is confined within a 576 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. circumscribed number — say, 40 or 50 people — who are the main great owners and managers? — A. Undoubtedly, the majority is held within as limited a nu:nber as that. Q. Have you at any time in the history of your company ever sought to make a profit through your stock? — A. Oh, dear: no, sir. Q. At any time? — A. Only in the promotion of the business, in the improve- ment of the stock as a whole, but not as a speculative thing in the stock itself. As I say, I have within the past 10 years personally bought and sold 100 shares. That shows the extent of my operations. Q. (By Mr. Jenks. ) Willa list of the dividends that have been declared on the stock, the value of it, and so on, be furnished in answers to the schedule? — A. Undoubtedly. Q. Those answers have been made? — A. So far as I know: Mr. Dodd has the matter in charge, if that was called for. THE STANDARD OIL COMPANY OF NEW JERSEY. Q. Now, will you take a moment to explain the organization of this new New Jersey corporation out of the others? — A. It is simply that a New Jersev corpora- tion, with a capital of §100,000,000 of common stock and !J10,000,000 ot'preferred stock, is formed that shall be competent to own the stocks of these different cor- porations, to buy from all parties who own stock as they may desire to sell. Q. It is expected that these other corporations will practically throw their stock into that? — A. Not the corporations; the individuals owning the stock. Q. (By Mr. Phillips. ) Then would it not be a case of a hundred-million com- pany absorbing a five-hundred-million stock? What would they give them in value for it? — A. It is substantially the same value that was represented in this Standard Trust ownership; substantially the same value, whether it is one hun- dred, two hundred, three hundred, or four hundred. CJ. This new stock would be ptit out at three or four hundred per cent pre- mium? — A. No; there is no new stock being put out. Q. (By Mr. Smyth.) The capital is to be one hundred millions?— A. Thatisit. Q. And it is simply a reissue under the New Jersey charter? — A. It has noth- ing to do with the issue; there is no new capital sold at all. Q. Simply a reissuing of the present stock to the present stockholders under another name and another charter? Q. (By Mr. Phillips.) Necessarily carrying the same value? — A. In other words, the trust being dissolved and the parties in it receiving their equitable shares in the various companies, bring them and sell them to the Standard Oil Company, of New Jersey. PREMIUMS ON CRUDE OIL MEAN USUALLY" QUALITY'; SOMETIMES COMPETITION. Q. (By Mr. Jenks.) Will you explain to us briefly the system of premiums on crude oil in the districts where the crude oil is purchased? — A. In the producing districts? Q. In the producing districts. — A. The premiums are usually the result of the qtiestion of value in the different parts of the district. I will not say that in some cases they have not been lower somewhat, caused liy competition; where we have had pi-ivate facilities in certain districts to take c'ai e of the oil, and other people have come in and tried to take it away from us. in some cases we may have paid more than we would like to pay. I oaii not say: perhaps that is so; but, as a rule, in the special case of the Franklin oil and the* case of the Lima oil and Soio oil, that is not it. It centers entirely on the question of value. Q. I infer from what you say that at times, in order to dispose of competitors, the premiums have been kept on till the competitors have been bought out and have been dropped afterwards? — A. As I said, when our business lias been attacked we have endeavored to protect it. Q. (By Mr. Phillips.) I am somewhat, familiar with the pipe-line business in the oil fields. Take our district, where an independent line went in a short dis- tance from Oil City; a premium was put on that oil. and no one claimed that that oil was more valuable than Oil Creek oil or other oil. It was not put on there on account of the value of the oil. — A. As I have already said, that may be a case in point; where we have found, after providin.n these s^iecial facilities, which have no value for any other purpose, that our business was attacked by a newcomer, we have, of course, endeavored to protect it. Q. You put on a premium on the oil which the Standard purchased after the American — you will remember that they built a line through to Philadelphia STAND AHD OIL COMBINATIONS: ARCHBOLD. 577 and established refineries there, and it became quite valuable. Now you x>ut on a premium both in Biitler County and in Washington County, those very large fields at that time, did you not?— A. We undoubtedly did. Q. It was taken off when you purchased, was it not? — A. Undoubtedly, and we would do the same thing again. We could not do less and be in the bu iiiess. Q. And you do not do that as a mode of discrimination? — A. We do not; ^ve do that as a matter of self -protection. Q. And when you think you can do it in a legal way you do it, whereas you can not give a rebate: ' — A. That is it, precisely. Q. Now, there is a pipe line in the Scio field in Ohio, and there is an independ- ent line there. '^ and there is a premium existing there? — A. There is, but it is a question of quality. The Sciij oil is of very superior quality. We could not pay a premium for it with the light business that is being done were it not for the quality. Q. But in the case I have referred to in Butler County and Washington County that was not a question of value, but of competition? — A. It was competition, unquestionably. There were very strong competitors, and we were there to fight them, of course.^ THE STANDARD'S STOCK IN INDEPENDENT COMPANIES. Q. (By Mr. Jenks.) Several times in the course of the investigation statements have been made with reference to the very decided interest that the Standaid Oil Company has taken in the Producers" Oil Company, Limited. Statements have been made as to their buying stock in that company and attempting to get control of it. Will you give your version of that? — A. We bought some stock in the Pro- ducers' Oil Company, Limited. We bought some stock also in the United States Pipe Line.^ Q. About what proportion of the stock did you buy? — A. Well, I could not state from memory — a fractional interest in the United States Pipe Line and a larger part in the Producers' Oil Company. Q. A majority of the stock in the Producers'? — A. No, no; I should say consid- erably less than a majority. Q. At any time? — A. That is, in the Producers' Oil Company, Limited? Q. Yes. — A. To the Producers' Oil Company, Limited, we found such difBculty in the way of admission Q. (By Mr. Phillips.) I always understood that it was a little over half, and I want to be corrected by Senator Lee if that is wrong. — A. Senator Lee, I think, is mistaken, as well as yourself. We never owned more than one-half. The gen- tleman who bought oiirs. pending the ownership decision, did own a little more than half; we never did. Q. It was under your control, and you worked in harmony?— A. It was until we sold it. Q. You worked in harmony with the other person?- A. We generally work in harmony -with him. Q. You would in the management, if there had been a change? — A. If there had been a change we should have hoped for a better relationship, but it did not come. We bought that stock and were so opposed in the exercise of ownership that we sold it. We sold it in good faith, and the courts have upheld the owner- ship of Colonel Carter; that has been finally upheld in a most remarkable adjudi- cation. The court held that he was the beneficiary, but because of some by-law on the books of the corporation he could have no voice in it whatever. We have no interest in it whatever, not even a dollar's worth. Our ownership in the United States Pipe Line was bought at a time when we thought that the business ought to become profitable. It was bought as an investment and with a view to having such knowledge as we c),000,000y— A. If it could all be sold at that price. Q. Do you object to stating the amount of dividends you have been paying? — A. That is to go in the statement asked for. (By Mr. Jexks.) I have fvirnished to ]ilr. Arclibold one of the schedules pre- pared by the commission, and that is to be filled out and returned in 10 days. NO REBATES OX OIL OF OTHER COMPANIES — XO C03IPELL1XG EEFIXERS TO SELL TO THE STAXDARD. Q. (By Mr. Ratchford.) Has your company received any rebates on the transportation of oil of other companies? — A. It has not.' Q. "What have you to say as to the charge, so generally made against your com- pany, particularly, I believe, in the Western States, to "the effect that small pro- ducers and refiners are forced to sell their product to the Standard Oil Company? That is a phase of the question which, I believe, has not been touched upon to-day. — A. I think we have gone into it very fully. Q. What have you to say with reference to the chai'ges, so generally made, to the effect that smaller concerns, individual producers and refiners, are forced to sell their product to the Standard Oil Company? This is a charge that is made in Colorado, and I want to give you an opportunity to deny if it is untrue. — A. It is untrue; there is no such compulsion of any kind, either with reference to the producers or refiners. In fact, we buy very little of the product of the small refiner — next to nothing. Q. Your company has made no agreement with reference to such small con- cerns? — A. No. Q. Did the paper you have submitted in e^T-dence here to-day state that certain other companies have received rates of transportation from certain points cheaper than your company have ever received? — A. I stated only the one case in connection vsrith transportation of oils furnished by the Central Kailroad of New Jersey to the United States Pipe Line. I furnished a statement on that.* Q. (By Mr. Kennedy.) There was testimony in Colorado to the effect that a distributing company there took all the products of the two refineries of the Colo- rado field, and Senator Hill, of Colorado, who owns one of these refineries, testified that the distributing company, or merchandising company, which bought all of this refined product, was the Western concern of the Standard Oil Company. — A. They may do so, but it is entirely a voluntary act on the part of the company refining the oil. There is certainly no compulsion about it. Q. You said they do not buy?— A. We do not here at the East — the Standard Oil Company. I did not have in mind the question of a possible purchase in Col- orado of the local production; that might be so. Q, (By Mr. Ratchford.) Is there not such a thing as cutting the prices on that distributing company and forcing them, through business reasons, to dispose of their product to your company? — A. I do not know how we could do so. It might prove they were incompetent buyers. Q, They hold otherwise. — A, Their relation to the company — the distributing company — although I am not familiar with it, must be voluntary; certainly no compulsion about it. AMERICA NOT IN THE MARKETS OF THE WORLD, BUT FOR THE STANDARD. Q. (By Mr. Smyth.) Do we understand from your testimony that you claim the Standard Oil Company has been of vast benefit to the oil industry in the United States and abroad?— A, I believe that it has been of vast benefit to the country. Q, Do you believe it has been a benefit to the American people?— A. To the American people and the American producer of oil. I believe firmly that America would not have been in the markets of the world if it had not been for the Standard Oil Company. OBSERVED the STRICT LETTER OF THE LAW. Q. Do you state, since the passage of the interstate-commerce law, in 1887, your company has not received rebates of any kind from the transportation compa- nies?— A. I think we have observed the strict letter of the law in all that pertains to interstate transportation." ' See pp. 556-559; Mr. Hice, pp. 706-709. ^ See pp. 529, 530. = gee p. 526, bottom. 580 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CAUSES OP THE STANDARD'S PROSPEEITY. Q. Yet, since that period your company lias prospered more than ever before?— A. Yes. Q. How do you account for that? — A. One of the contributing features, in my mind, is the greater stability that has attached to the trade since the passage of the law: the extension of business, growth of business, and better utilization of by-products, and all that; but very largely the stability of business incident to the stability of rates through the interstate-commerce lavr. Q. I suppose the Standard buys the best that is to be had? — A. They are on the lookout for the best. Q. And probably their success is due to their nerve and ability and money? — A. It is, undoubtedly, and to the further fact, which I must repeat, that we treat the trade fairly. "We realize fully that no business can have any permanent success that is not carried on on honest principles, and you will not find customers of ours complaining of our treatment. A NATIONAL CORPORATION LAW. Q. (By 'My. Clarke.) You h:ive stated that you would favor the formation of national corporations. Would you have the capital of these corporations limited by law or by a national commissioner of corporations, or would you have it unlimited? — A. I would have it unlimited, but would put upon its issue such restrictions as to value involved as would fairly protect the community; I mean the general public. Q. You would have these national corporations subject to the supervision of a commission or some other Government authority? — A. Undoubtedly, as is the case under the English corporation law. Q. Do you not think one of the greatest evils of State corporations is the lack of supervision? — A. The lack of supervision, and the entire lack of uniformity as between the States. Q. Do you think the formation of national corporations would overcome most of the objections that are now raised to combinations commonly called trusts?— A. I do. I believe it would do away with the talk of monopoly, make every business free to all comers, within the law and under the provisions as made. Q. (By Mr. Kennedy.) Favoring national charters and national supervision as you say, would you go to the extent of favoring inspection of the books and affairs of each concern, as the national banks are insjpected by Government offi- cials? — A. I have not made a study of the subject so as to make a statement in detail as to what the supervision and restriction should be. I should say that is a question that ought to be very carefully considered before expression is made, and I could hardly answer it to-day. On general principles. I favor all fair super- vision and making of statements that would enlighten the public. ADVANTAaE OP A GREAT AGGREGATION. Q. (By Mr. Farquhar.) Is it not a fact that, since you control the products of petroleum in this country, when you acquire, by purchase or through the agency of your own men, the formula of a better oil and a better way possibly of pro- ducing oil. you can beat all competitors by the fact that you can put it into eifect in every single one of your plants? Has not that been one of the great reasons of your success in carrying your oil under a Standard title all over this country, and accepted as a standard wherever sold? — A. Undoubtedly. Q. An advantage that a smaller concern, independent or otherwise, can never obtain because they can simply work a formula within themselves, whereas you can put it in the hands of fifty or sixty?— A. That is entirely correct. That is one of the great causes of the success of our business, and comes from combina- tion alike of capital and talent. Q. (By Mr. Phillips.) Have you any further or supplementary statement to make, Mr. Archbold? — A. Nothing. Testimony closed. STANDAKl) OIL COMBINATIONS: ROGERS. 581 Washington, D. C, September 0, 1S99. TESTIMONY OF HENRY H. ROGERS, President of the National Transit Compavij. The commission met at 10.30 a. m.. Vice- Chairman Phillips presiding. Mr. Henry H. Rogers appeared and, after being duly sworn, testified as to the oil industry. Q. (By Mr. Jenks.) You may state yoar name and residence. — A. Henry H. Rogers, New York City. THE witness's CONNECTION WITH THE STANDAED OIL COMPANY. Q.' What connection have you with the Standard Oil Company, the Standard interests? — A. I am president of the National Transit Company. Q. Are you connected with the Standard Oil Company of New Jersey?— A. 1 am one of the vice-presidents of the Standard Oil Company of New Jersey. Q. Y'"our position is such that you would be entirely familiar with the questions discussed in Jlr. Archbold's testimony? — A. I think mainly so. Q. You heard the testimony yesterday. Do you agree substantially with all that was said? — A. I do. REASONABLENESS OF PIPE-LINE CHARGES OF THE STANDARD. 0. You have been familiar with the pipe lines, their charges, etc., for several years? — A. I have. Q. About how long is it since the charges on the pipe lines were lowered to 20 cents? — A. I think, as Mr. Archbold testified, it was about twenty years ago. Q. Can you give us any explanation as to why it is that the pipe-line charges have remained substantially the same for twenty shears, whereas the charges of railways and prices in general have decreased very decidedly? — A. You will understand the pipe-line charges of 20 cents are what are termed "gathering charges" — that js to say, the oil is taken from the wells of the producer and delivered to the stations of the pipe line and the tanks. Wherever the oil is found we tod. a line to it. We are frequently called upon to run a line 15 or 20 miles. We never object; we make no extra charge for that. In some instances we pump oil but a very short distance to the tanks, and in some instances we pump it 15 or 25 miles, so that we consider it an average charge, really, rather than an arbitrary charge.' Q. (By Mr. Farquhar.) You mean not an average but an equalizing charge? — A. An equalizing charge, if you please to term it so. Q. (By Mr. Smyth.) Based on the circumstances of the producers in the same field? — A. Yes; and because the producer, if he is a patron of our line, is at liberty to feel that no matter where he finds oil in the vicinity of the pipe line — it may be 15 or 20 miles away; but if he is a patron and has a producing well of paying size, we will spend the.money and run the line to him and take care of his oil. COMPETING PIPE LINES. Q. Is there any competition in the pipe-line business? — A. Yes. Q. What is the comi^etition? — A. The competition in the Butler field is with the Producers and Refiners' Pipe Line. The competition in the Ohio field is with the Manhattan Oil Company, and in the Indiana field with the Cudahy Company. Q. (By Mr. Phillips. ) Is there any competition in the Scio field in Ohio?— A. There is a trifling competition. The production in that field is about 6,000 barrels a day. and the run of the outside lines is probably between 400 and 500 barrels a day. Q. (By Mr. Jenks. ) These competing pipe lines run into the same territory, so that they might equally well take the product?— A. If they had the capacity to handle it. Q. So far as the location is concerned?— A. So far as the location goes. Q. Are the prices of these independent pipe lines in Pennsylvania the same as vours? — A. I do not know. I have hearsay evidence, but that is all. ■Compare pp. .588,.5' cents. Q. That difference goes to the producer? — A. Yes. ])IS(;rIMINATING freight rates in CANADA. Q. (By Mr. Jenks.) We received some information yesteri'ay with reference to the interests ot the Standard Oil Company m Canada: it was said >ou had some refining interests there. About what proportion of the refining in tlie Cana- dian fields do yon do?— A. I am not familiar enough v.'ith that branch of the business to answer. Mr. Archbold, I think, will iuinish that. Q. Have you any information as to an advance of rates from Buffalo and Toledo through to ?Iontreal or other Canadian points in the latter part of IS'J.s or first part of l«!i;)? — A. I never heard of it. Q. You did not hear that any complaint was made by Canadian oil dealers to the railroad committee of the Canmlian Parliament with relei'euce to discrimi- nating rates on the part of the Canadian Pacific and Grand Trunk? — A. 1 heard something about it, but am not posted as to details." ' Krr J),, 576,r>n. Also Mr. Boyle, iJp. (75, 4711. - Si-i- ij.rH'?. Sf'B atsDji IT'.i. •' (J.)m7)ai-r! JIi-, AiTlibold,rp.r,7:J,57:'., Mr. Westu-ite,p.3TS; Mr. G;ai,pp.(i7,5-B77. STANDARD OIL COMBINATIONS: KOGEetS. 583 THE DISSOLUTION OP THE TRUST— FRACTION.\L^ SHARES RECEIVE .\0 DIVIDENDS. Q When the Standard Oil Trust was dissolved, in what form did the certificate holders receive their claims on the various companies that had been comhiued in the Standard < )il Trust?— A. In what form of certificate? Q. Yes.— A_. First, I think, they had to surrender their trust certificates, and receive a certificate that gave them equitable ownership in the.se constituent com- panies, and then that .certificate was exchanged for actual stock in ihe company Q. There were some twenty constituent cnmpanies?— A. Yes. Q. In the case of a holder of two or three shares of stock, would he receive frac- tional shares in each one of these companies?- A. Yes Q. Did these fractional shares receive their dividends the same as others'— A. No. Q. In that case, if a person had held less than twentv shares of the trust certifi- cates he would not receive dividends from the different companies?— A. No; I believe it is for legal reasons. Q. Does that mean that these holders of trust certificates, who have only frac- tional shares in these various companies, have not received any dividends since the trust was dissolved?— A. That is as I understand it. Q. is that a reason why the trust certificates have been surrendered so slowly on the part of many? — A. I could not answer that; I do not know.' AMOUNT OF OIL THAT THE PIPES HOLD — AlIOUXT OP CREDIT BALANCES AND CERTIFICATES. Q. (By Mr. Phillips). About how much oil does it require to fill the pipe liner of the National Transit system in the Pennsylvania and Virginia field? — A. I neves figured it. I can give you that in' ormation if you will give me twenty or thirty days' time; it is a mathematical calculation. Q. One witness estimated the amount sufficient to fill the lines as about 4,000,000 barrels? — A. The amount of residuum in the bottom of the tanks is published every month by the National Transit Company. That is a matter of public record and can be had. Q. About how much oil has recently been standing out in the shape of credit bal- ances and certificates at the end of each month?— A. I can not answer, but we can furnish that trom the monthly .statements published in the office; that informa- tion is given to our Oil City and New York offices every month and published in the Oil City Derrick. Do I understand you would like to have it for a period, Professor Jenks? Q. (By Mr. Jenks). Yes. — A. You are welcome to it. Credit balanceN in Natiinutl Transit Company. [In barrels of crude oil of 42 gallons eacli.] Time. Barrels. ! Time. Barrels. 3,217. r-tii. 16 3, 101), lf>6. 81 3,T94.8T:i.84 2,7r)S,(i,-,4 30 .5,403, iro 38 3,201.3ril,34 r>. 987. 319 .53 .-,..532,o;!l 21 4. .340, 713 15 2, 705, 503. ,20 2, 453, 417. 82 December 31, 1.894 June;30, 1895 _ 1 December 31, 1895 Jun.' 30, 1890 December 131, ]S9(; June 30. 1897 _.. 1,044,2.55.13 78;t, 592. 96 - J 1.809.32.5.78 1 3,275,075,49 ' 4,,215.0KO,28 5,413,4i;.10 December 31, June 30, 1890 December 31 June 30. 1891 1.S89 'mw V.'.'".'.'.'".'.'".'. imV.'.'.'.'.WWV/.'.V i.siia"!'.'."..'.'!".'.".'''" June 30, 1892 December 31, June 30, 1893 December :31, 1897 June 30, 1.S98 4. ,523,0.54 :i9 4.450,^03 02 3, .822. 997 28 December 31, June :W, 1894 June 30, 1899 September 30, 18 99 4, 910, 451.2:3 5,349.392.54 As to the capacity of the lines", that would be a very difficult thing to .say. We probably have 8.T, 000 miles of pipe, or more, scattered all over the country, 2 inches, 2^, 3, 4, .'). 6, and 8 inches in diameter. Now, to figure out ,]ust how many miles there are of each and how much oil it would take to fill it is a great mathe- matical problem. (iiiii}:ii-e Sir. Lee. p. 270; Mr. "Westgatc, pp ;)7I1, :«■.': Mr. Archbold, pp. r);T,.5'W; Mr.Emery,p.0!J6. = ScM.-i)-'V;7 STAXDAKD OIL COMBINATIONS: PHILLIPS. 51J1 compaiiie< from the hostile invasion of the Standard Oil Trust cost about §15,000 in actual money, besides vast labor and trouble. THE PniE OIL COHiPANY KOT A TRUST. Because of the attempt of the Standard Oil Trust to force themselves into these independent organizations, without inritation and against the will of all the inde- pendent members, it wa> thought wise in the organization of the Pure Oil Com- pany to have at least half of its stoi-k put into a voting trust in the names of men of known and tried loyalty to the independent interests. This was done solely for the purpose of securing that company against the hostile inroads of this giant monopoly and to prevent its destruction. The Pure Oil .Company is not a trust in the commonly accepted sense of that term. A trust, as I understand it, is a corporation or combination of corpor;itions with vast capital, organized for the purpose of securing a monopoly in any branch of trade. The Pure Oil Ccmpany is not organized for the purpose of securing a monopoly, but to prevent a monopoly and jireserve competition in the petroleum industry, its promoters believing that by fair competition the highest and best interests of producer and consumer can be sjecured and the public interest best conserved. It was therefore incorrect for the witness yesterday ' to state that the Pure Oil Company is a trust, or that any of the independent producers or refiners are mem- bers of a trust, in the obnoxious sense in which that word is undiirstood, meaning monopoly. The Standard's dividends will show, perhaps, without regard to the surplus they have accumulated, that they have at times made more profit on every barrel of oil they handled than the}' paid to the producer for it. I have known a producer to pay ylOO,000 or more for a limited number of leases, on which wells were obtained which v.'ould flow from 2..")00 to 3,000 barrels per day; and yet the profit that the Standard Oil Trust reaped on each barrel of oil from these wells was evi- dently more than they paid for the oil. As to amount, or as to the principles involved, the tax on tea and other articles, against which our fathers revolted, was nothing in comparison to the tribute the Standard has levied on the oil producer and consumer. THE STANDARD OIL COMPANY'S AVERAGE PROFIT. During the time the Standard Oil Trust has been engaged in the oil business they have made more than Si per barrel on. all oil produced. This is capable of easy demonstration. The entire production of what is known as Pennsylvania oil for 17 years in round numbers is .iOO.OOO.OOO barrels. The market value of the Standard stock is very close to s.jOU,000,000. I believe it has been stated before this commission that it is at least Sl.")l).000,000. This has been made chiefly out oi the profits of the company: and it is practically equivalent to si a barrel on all oil produced since they have been in business. During this period, or from the time the Standard came into power, oil has averaged about 00 cents a barrel; their profit has been more than a dollar per barrel. This does not take into considera- tion their enormous dividends nor their vast reputed surplus.'- PROFITS OP THE. INDEPENDENT REFINERS. Q. (By Mr. Smyth.) That has been the profit of the independent refiners too? — A, No, sir; not by a great deal. Q. You could not give an estimate of the profits made by the independent refin- ers':'— A. Upon this 1 am not well informed. I will say this: For a number of years they lost a very considerable amount of money. They sold what is known as cut cargoes. At the close I will give all the information I can, and will submit a state- ment of all the companies with v/hich I am connected. I have reason to believe the companies will not object. C^. "Will that statement be made to-day':-— A. I should not have time to do that to-day, but will be willing at any time to submit a complete and full statement.'' ' See p. .507, See fiTso pp. .59i!-5!IS: Blr. Bciyle, pp. -14:;, 4ii;!, iSH: Mr Em(-'ry., V- K>z .,„ 'See table of annual production iiiiil average prices nj Pennsylvania oil, pp :),!!!, .>17: proiluc- tionof LimaoilfromlSlJd. p. ."iiU.' fninpareMr. Lee,p.:ii;!i. t • r^ ^Detailed balance sheets of tbe Pui'eOil Companv, the United btiites Pipe Line Company, and the Producer.? and Reaner,s' Oil Company, Limited, were afterwards filed witu the commis- sion; together with a full analysts of prMHts and losses. 592 HEARINGS BKFOKE THE INDUSTRIAL COMMISSION. THE STANDARD OIL COMPA?IY^THE VALDE OF ITS STOOK REPRESENTS PROFITS. Q. (By Mr. Kennedy.) I should like to ask why, if you are able to state the protits of the Standard Oil Company, you are not able to state the profits of your own company?— A. That is very easy to answer, I think. I have given the facts of their stock: it is a very large concern, and we know the market value of their stock: we could not estimate the market value of our stock. For my own part I would not take a hundred per cent. Q. (By Mr. Smyth.) How do you know they have made a profit of a dollar a ' barrel?— A. Their capital stock has been selling at about .$500,000,000, and there has been about .500.000,000 barrels of oil produced since they organized, and the average price of that oil has been about 90 cents. This is saying nothing about the enormous dividends they have paid— I believelast year it was §35, 000, 000— nor anything about their surplus. There is no kind of question of my deduction and figures. Q. That is only an estimate or a guess?— A. It can not be considered so in view of the fact that they built their lines and establishments out of their profits. Q. How do you know that?— A. We have every reason to believe it, because of the capital stock with which the company was originally organized and the divi- dends that they have made. Thej' built it in that way. VALUE OP STOSK IN THE STANDARD AND IN THE PURE OIL COMPANY. Q. (By Representative Livingston. ) Have }'ou any exact way of getting at the market value of your stock or the Standard Oil Company's stock? Are both of them listed on the market?— A. No; they are not. The Standard has always kept its stock from being listed on the ma'rket. though the papers give quotations of it from time to time. Ours is not listed on the stock market; there have only been individual sales: I can give the costs of our Company, though, and the profits; then you can better j udge what the value is. Q. What would you take tor your stock?— A. Now, since we have won against the greatest opposition that ever existed in the commercial world by cutting our way through to Germany and getthig a market there, I consider this stock very valuable, even though we sell at lower rates. Q. What will you take for your stock? — A. I would not, under the circum- stances, take 100 per cent i)rofit. Q. At how much can you buy Standard Oil? — A. I think it was stated yesterday that the last market (juotation is at the rate of about $405,000,000. It has sold within a fraction of §500,000,000 within a year. producers CAN NOT AFFORD TO SULL TMEIR INDEPENDENT OUTLETS. THE STANDARD MAKES PRODUCERS AND CONSUMERS PAY FOR WHAT IT BUYS. Q. (By Mr. Kennedy.) You say you would not take 100 per cent profit?— A. I would not sell now. I will make a statement here in that regard, since the matter is brought up. In our best judgment, i. e., that of the most intelligent pro- ducers, when the Standard buys a pipe-line system and refineries they are charged up to the producers. At the time of one of their largest purchases the price of oil was put down 7 cei;ts per barrel the day the purchase was made, or the next day after. They were then shipping about 00.000 barrels per diiy through the pipe lines: and that 7 times would be 42 — S4,200i3erda3' that they assessed to pay for that. And 1 heard jlr. Archbold say thali the producers would never know what that pipe line cost them. And we do not know to-day: but the price was assessed, and a short time af rerwards oil was dropped again. Now, along that line I could state this, Ihat the Standard has bought very large amounts of property when oil is very low, and especially in 1805. when oil went up from less than a dollar to 83.60. They bought a number of million dollars' worth of producing property. It is fair to say that that property did not cost them anything, because the world, the con- sumer, was assessed for it. In my best judginent the Standard in purchasing either pipe lines or producing properly, since its organization, has not paid any money directly that they have not recouped indirectly. When they buy a pipe line they levy the cost on t!ie producers by dropping the price of oil. They bny large amounts of producing pmperty when oil is low, and then the price to the consumer advances.' They fix both the price at which they buy and the price at which they sell. Q. You consider this stock to be worth a premium of 100 per cent on the par value? — A. Prospectively. You see, I would not sell it, bec:i.use I am a producer of oil, and I am thoroughly convinced, and it is understood by the directors, that I See Mr. LockwiHul, j.. III!; Mi-. AiH-libold, p.OHU.' STANDARD OIL COMBINATIONS: PHILLIPS. 593 if we were to get twice its cost from the Standard we should be assessed to pay it. We do not know how much money the producers liave been deriving throuf>;h the existence of these companies. We would not sell as long as we are producers; we keep the stock for self-preservation. OIL MONOPOLY DUE TO L.ICK OF CONTROL OF EAILKOADS. The Witness (continuing his statement). Mr. Archbold stated before this com- mission' that he was in farvor of the Interstate Commerce Commission. If there had been such a commission with proper authority over the transportation of oil, the Standard Oil monopoly would not be in existence to-day. I am present as a member of this commission with a fall determination to hear impartially, and to endeavor to the best of my ability to suggest such remedial legislation as will be for the greatest good of the greatest number; not only in regard to combinations, but also with respect to all industrial questions. NEGOTIATIONS OF INDEPENDENT PRODUCERS WITH THE STANDARD OIL COMPANY. In regard to the statement that I, in company with others- connected with the independent movement, called upon the Standard Oil Trust seeking a combination with them, I will state that we did call upon them some three or four years ago. It was after they, or their affiliated companies, had bought the large amounts of stock, spoken of above, in our independent companieis. They had bought a num- ber of the independent refineries connected with the independent pipe lines. They had made every possible effort to prevent our marketing oil in Germany and other places. They had bought out Mr. Poth, who was handling the oil of the independ- ent refineries in Germany. They had got almost complete control of the German petroleum installation plants or receiving tanks. The remaining refineries, as well as those who had sold out, had met with great losses in handling oil in Germany, selling what they call "cut cargoes." The object in calling upon them, as far as I personally was concerned (and I believe it to have been the object of the other persons who were with me at the time, and who were men of the highest character), was to obtain from the Stand- ard Oil Trust cessation of hostilities, both in regard to piping the oil and in regard to selling it. It was to secure the right to deliver m New York, without their opposition, the capacity of the then existing lines, which would not exceed seven or eight thousand barrels of oil per day. We believed then and still believe that the opposition to laying our pipe lines across the State of New Jersey to reach the harbor of New York was instigated by the Standard.^ I am informed that Mr. William Rockefeller, a trustee ih the Standard Oil Trust, is a director in l^he principal opposing road, the Delaware, Lackawanna and Western Railroad. The members of the Standard Oil Trust with whom we conversed— and Mr. Arch- bold was one of them— refused absolutely to grant us any concessions, or to allow us, on any fair basis, to ship and market oil without such aggressive opposition as Mr. Archbold admits they employ to defeat competition. But in lieu thereof they proposed to buy our pipe-line system, a proposition which we did not entertain.^ It was then proposed by one of the members of the Standard Oil Trust to buy our producing property. This was also rejected, as we did not desire to go out of the producing industry. No proposition was made to those gentlemen by me or by any gentleman with me, to the best of my knowledge and belief, on that occasion or any other, that any fair and honorable business man could not make to another. I had not then and have not now any conscientious scruples about anything that was said to them, and should be perfectly willing, were it possible, to have all the conversation that occurred repeated now before this commission. THE STANDARD OIL COMPANY DESIRES THE COOPERATION OF THE INDEPENDENT PRODUCERS. In regard to the statement « that they had not entertained a proposition for com- bination because of lack of faith, both in the legality of the proposition and m the men connected with the independent movements. I have this to say; Ihat there has never been a time when 1 should have been willing personally to go into a com- ■Seep..«T. nin^rn?,ar?teSimouy of Mr. Archbold, p.r,29; Mr. Lee, pp.3 i4,;.'07; Mr. Emery, pp. 051.-655, 692. ' CompareteSimouy of Mr. Archbold, p. 529; Mr. Lee, pp. 3 i 4 See Mr. Lee, pp. 271, 292, 293. 6'J4 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. bination with the Standard Oil Trust. In proof of this I will state that in the year isiio I Hold to the Standard Oil Trust quite a larue oil field in Butler County. Pa., uoniio-ed of 7.500 acres "f land held by leas:', wirli 135 producing wells. The chief re, .son lor selling this property to the Standard Oil Trust was that at that time they hail purchased the Union Oil Company's jnterests and those of the Anchor (lilCompany and the .^IcKinney Brothers' property and also the Forest Oil Com- pany's property, these being the largest oil properties in the country. The Forest Oil Conipiiny was negotiating for my property before they sold to the Standard. After having soid their interests they stiated that the Standard would purchase mine if 1 so desired and the price coald be agreed upon. Fearing the power of the Standard, tearing that they might reduce the price of oil, and considering that they had bouaht the largest properties in the oil field. I concluded to enter into iirgotiations with them lor the sale of this property. The negoti,iU(ms con; mued for l wo days at their office. 'JO Broadway, New York. Dur- ing this period, at two or three times when we differed in regard to the value of the property, they a.sked me whether I would act in harmony with them. At each time J al;soluce;y refu.sed to consent to this proposition, and finally stated that if they should insist upon that as a condition 1 would not sell; that I was willing to sell the property, but would retain my individuality; that I 'had nothing to sell but m,y property. They bought the property for :j750.000, which was paid partly in casii and partly in stork. I subsequently sold the stock for a less price than I took it at m payment for the property, not desiring to be connected with them in any way. As further evidence that the Standard Oil Trust desired my cooperation: A few months after tlie sale of this jiroperty, whi.e spending a short time at Lake George with my family. I met Mr. Dodd. the attorney of the Standard Oil Trust, at the Fort Aicllenry House. In tall;ing to my son and myself in regard to the Standard Oil Trust, he s >id that the Standard always sought connection with successful mon, and, turning to my son, said they had sought " your parent.'" This conversa- tion is fixid most distinctly uponmy mind because of the use of the word ■'parent." As a result of these large purchases which the Standard made, the vendors became active in the oroducing departments of the Standard Oil Trust. I pre- sume that it was there that they desired my work or influence. Tliere is not now and (here never was any inducement that the Standard could hold out to me sufficiently strong to induce me to become an active participant in their business. The statement that they declined anj' business arrangement with the independent producers because o! lack of faith in them can not be true and is a gratuitous insult to a large body of business men of high character. For four years they have been trying to force business relations with us by buying large blocks of stock in the companies and go:ng into court to force us to receive them as business associates, and they have so far succeeded as to have a director in the United Stales Pipe Line Company. The statement is, therefore, both false and slanderous. COST OF PIPE-LINB TR.iNSPOETATIOJSr. Q. (By Mr. KEyNEDY.) What is the cost per barrel of transporting oil through till- United States pipe line'.' — A. I am inlormed that with the line carrying half its ci'pacity. al)0ut u.OiiH barrels a day, it is about 5 cents per barrel to the termi- nal in Kew Jersey, and with full capacity of the line it would cost less than 4 crnts. In the gathering in the field I have had personal experience connected with lines, and wu estimate from :! to 5 cents per barrel, and yet the Standard's price is 20 cents per barrel. Q. Twenty cents'? — A. Yes: and it is the same now as when they were organized. i NO RECENT I'VEKTURES TO THE STANDARD OIL COMPANY. y. II was statpil under oath yesterday,- I think, that you had called upon Mr. Archliold for the purpose oi combining with thr Standard Oil Company since the oiL;aiiization of this coniaiission, and you slate positively under oath that this is fals:'— A. [ pos.tively state it is false. I liave had nothing to do with them except as I have set lorth lure. If others have called upon them, it was without my knowlcil^e, advice or approval. TtJH PURt; Oil. COMPANY — ITS VOTING TRUST. (f,. You stated tliat this voting trust, in this company with which you are con- nected, vote simply lor directors and have no voice in the management of the ' (lonii);ii-c ^Tv Uoi^f)-;.;, ]i]).5sl and .'jSH; lUr. tjce,p.:v^-l; National Transit Company's contract, pji (iri.'t, ,,C.li Air, Ihu'TV. p. I'I'I'. STANDARD OIL COMBINATIONS: PHILLIPS. 5'J5 business affairs of the company. Do not the directors, who are their creatures, have the control of the affairs of the company ?— A. Oh. yes: those who are elected. The trustees have a majority of thestock. and they vote with the other stockholders and elect a I'oard of directors. They expect to elect men ol character and ability to conduct the business affairs of the company, just as any other corjioration would be conducted. It is expected that everything will be open to inspection. It will be if I have my way. I do not think there will be any ob.iection to furnish- ing to this commission at any time, or to the State or to the United States, a state- ment of any of these lines, or a full statement of the Pure Oil Company, which will probably absorb the other lines in the manner 1 have stated. Q. Well, is it not true that this voting trust of five members, who vote more than the majority of the stock, do manage the affairs of the company through this board of directors? — A. Yes. The voting trustees are fifteen. The number was made large in order that they might be ^ery representative throughout the oil country. They do elect the ditectnrs. That is the object of it, and 1 have fully stated the reason why it is done, to prevent being crushed by this great monopoly. It was the only means of safety, as we have learned 1 y experience. And I will further state that voting trusts are not uncommon either in Europe or America. It is nothin_g- new to have a voting trust. THE PURE OIL COMPANY'S YOTINU TRITST NOT SIMILAR TO THE STANDARD OIL TRUST. Q. Will you state how this voting trust feature of your company differs from the old Standard Oil Trust's manner of doing business? — A. The voting question? Q. Yes. — A. At the present time? Q. Yes. — A. I know nothing about their methods of later years, except that one suit was brought against them in Ohio to dissolve their trust, and they agreed to dis.solve it. I know of persons holding certificates of the same trust and receiving dividends on them up to a very recent day: but it was also acknowledged here yesterday that they were still paying dividends on these trust certificates. Q. Was not the old Standard < )il Trust, through a voting trust, electing a board of directors to manage the affairs of the trust? — A. No; they were a close corpora- tion, as E understand. Q. A what? — A. What we would call a close corporation. I mean a trust, a body of men associated together in the most secret form, probably, that exists in any busi- ness enterprise of magnitude. They themselves conducted their business, and they would make no statement to the public. The most I heard, at the tirne when they bought this property, from another individual, was this: He said that he had had the privilege to look at vyhat he called their quick assets, and they were enormous. That was in 1890. I do not know about their business affairs since that. Q. Y^ou state then that this voting trust feature of yours is not similar to the old voting trust feature of the Standard Oil Company? — A. Not in any way, manner, or form. It has been fully explained, and the object of it has been fully explained. I have nothing to conceal about my public transactions in connection with that business or anywhere else. Q. I ask because the Standard Oil officers have testified in respect to this that yon began where they left off. '—A. Well, if they said that, they said what is not the truth. The matter is fully before the commission, and the only object of the voting trust is the one I have stated. THE REPRESENTATIVE OF THE ST.VNDARD OIL COMPANY ON THE BOARD OF THE UNITED STATES PIPE LINE. Q. (By Representative Liyix«ston.) I have an allegation here, by a party who sig.is his name to it, that the Standard purchased stock in the name of a spy suffi- cient to place one director on the board of each of "the following companies," and yours is included, the Producers'. What do you know about that?— A. From what do you read? ' (,i. 1 am reading from a letter signed by a man. It does not make a,ny diffi rence who he is now. Has the Standard Oil Company a member on your board of directors?— A. Yes: they have a member on the board of the United States Pipe Line Company. They failed to secure an election in the other company, although they had a majority of the stock, as I explained. One of their members, one that is openly connected with them, though not in a managing capacity, is on the board. Q, Oii ^our board?— A. On the board of the United States Pipe Line. I have stock in it, and I am also a director in it, and I have met with hiui. Q There are several companies here mentioned in which they did purchase stock enough to put one member on the board, among them the Producers and Refiners' 1 Soe ^Ir. Boyle, p. 4S8. 596 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Oil Company and the United States Pipe Line Company. Now, this man charges that the Standard Oil Company and your company and these other two companies are one and the same thing, by a private understanding, to this extent — that you sold stock enough to the Standard to authorize them to put a member on your board and on these other boards. Is that correct? — A. No; it is absolutely false. Q. Do you mean it is false in toto— that you have not any member? — A. No, I said we had a member, but we did not consent; the stock was bought without our knowledge and consent, and he was forced there by law. Q. I understand that. They had purchased stock enough to force a member on your board? — A. And forced him on us. They said they would not be associated with any of these affiliated companies because of lack of faith both in their ability and in their honesty. Q. Of what advantage to the Standard Oil is that member of the board of directors in your company? How can they utilize him? — A. They get all the information. That is, he is called to all the meetings and treated like any other member of the board, Q. Then they find out all your secrets in that way? — A. The witness, Mr. Arch- bold, yesterday testified that it was one object in purchasing the stock — to get information.' We have never had a doubt of their purpose in anj' of these pur- chases; that the purchases were made for the purpose of destroying or crippling our industry and breaking down opposition to them. Q. I will 'show this letter both to yourself and to the representatives .of the Standard Oil Company. [Representative Livingston here produced a letter and handed it to the witness.] Q. I just request, if I am not present when you get through with the letter, that if any representative of the Standard Oil Company be present he may have the same use of it. — A. If any use is made of it by one side the other shall have the same privilege. "MONOPOLIES"— THE STANDARD OIL COMPANY NOT A MONOPOLY BY LAW. Q. (By Mr. Ratohpord. ) In the early part of your testimony you observed that your company is not a trust, but is a combination. Do we understand that it is chartered under the laws of the State of New Jersey, as is also the Standard Oil Company? — A. Just recently the Standard Oil Company has been chartered, as has been testified here. Q. You also define a trust to be a monopoly.'-' Now, I want to ask whether the laws of New Jersey give to the Standard Oil Company any advantage that is not given to your company? — A. Not so far as I know. All these large combines that have been organized under the laws of New Jersey are organized alike, as I under- stand it; some have preferred and common stock, and others just common, etc. Q. The combination or trust has no privilege before the law, as you understand it. That being the case, then the Standard Oil Company is only a monopoly in the State of New Jersey providing they are able to monopolize the business. Is that right?— A. Yes. Q. If that be correct, then it follows that your company will .also be a monopoly, provided you are able to monopolize the business? — A. Both companies have a per- fect right Q. (Interrupting.) They have the same right under the law? — A. Yes. We or- ganized under the same law. (^. What I meant to ask was whether they had any special privileges under the law? — A. I understand all of these great industries organized in the State of Ne'W Jersey are organized under this same law and have the same privileges. THE PURE OIL COMPANY ABSORBS ITS ALLIES — THE STANDARD ABSORBS ITS COMPETITORS. Q. Another statement I understand you to make is that the Pure Oil Company will eventually absorb theother lines. — A. It will purchase a majority of the stock of the independent lines. Q. This is the company you are interested in?— A. I am interested in all of them; I am interested in all four of the independent companies. Q. From your standpoint I want to ask if the absorption of smaller enterprises is not the greatest objection that has been urged against the Standard Oil Com- pany? — A. Certainly; but these independent companies are practically one already. The producers formed one organization , and then another and another. The stock- holders are the same, or very nearly the same. They are simply getting together ' .See p. o?'7. 2 gee p. ."itll. STANDARD OIL COMBINATIONS: PHILLIPS. 597 because the Standard was likely to absorb them in detail. But if organized in this protective form, with a voting trust, it will be impossible tor the Standard to buy the stock and control these companies. It is selt-defense. (^. But is it not in every case the purpose of the larger companies to absoi-b the smaller competitors.'— A. I do not know the purpose of others, but it was the purpose of this Pure Oil Company to unite — if you please, to consolidate — the companies in one. because practically the stockholders were the same. It was not to get control of any other person's business: it was simply to put our own busi- ness in such a form that we could not be destroyed by this giant monopoly. Q. In your experience with the Standard Oil Company has that not been one of its objects— to absorb the smaller concerns'.' — A. The smaller concerns that have been absorbed have been independent and opposition companies. These are not, and the cases are not similar. THE PURE OIL COMPANY. UNLIKE THE ST.iXDARD, DOES NOT DESIRE A MONOPOLY — THE WITNESS WOULD REFUSE TO BE CONNECTED WITH A MONOPOLY". Q. (By Mr. Clarke.) Did your company compete with the Standard Oil Com pany in any operations in the fields? — A. Yes. Q. You would get business away from them if you could honestly and fairh'? — A. Certainly; that is, in an honest, fair manner. Competitors will always do that. Q. You would get away all of their business if you could honestly and fairly, I suppose? — A. It would be veiy difBcult to do that. Q. Well, suppose you could? Q. (By Mr. Farijuhae. ) There is the same object before the two trusts, your company and the Standard? — A. I would not say so. I would say that we only want a fair portion of the competitor's business, not the whole of it. I would not be connected with a monopoly. I would not control a great product and fix the price at which I would buy, transport, and sell. It is too great a respons.bility for any one man to have, and it is a greater responsibility than tyrants as a rule assume toward their subjects. The profits are enormous which have been fixed by this trust. Q. Now, you wish us to understand that if this company should become large and be an octopus you would sell out and be no longer connected with if:" — A. I would not be connected with it. Q. If your comiiany should be large enough to monopolize the business by means of fair competition, you would no longer have anj'thing to do with it?— A. I would not have anything to do with it if it jiursued the methods of the Standard, influ- encing legislation and preventing others from doing business. If it grew natu- rally and the profits were fair, I should be willing to accept them, but I certainly should not want the resi.onsibility of monopolizing a great industry and fixing the prices. I do not think that such a power should be m any hands. I would l5e in favor of throwing it open to Government inspection and of requiring public state- ments and of putting it under any laws that would be fair and just to the people. Q. You would not. then, if you could, by perfectly fair and legitimate means, irrespective of the means of the Standard Oil Compan}', monopolize the oil busi- ness in any way'? — A. I would not. I say I would not have the responsibility of fixing, according to my own judgment, what my profits should be from a great community. I would rather die poor than have it. Q. That would be a matter of your own conscience? — A. Yes. Q. How would It be under the law? Do you consider that it is not legal for any company to gain all the advantages that it can fairly and legitimately?— A. Well, now, I have pretty strong views in regard to competitors and competition, and being a member of the commission, I would rather not enter into this subject and give my views in regard to it now. "trusts'' — DIFFERENT MEANINGS OF THE WORD — THE PRODUCERS' OIL CljMPANY AND THE STANDARD. Q. (By Mr. Farquhar. ) The witness states here that the Pure Oil Company, so called, is not a trust. Will you explain to this commission why it is that your articles of agreement all through characterize it as a trust? There are five arti- cles in your agreement. It explicitly declares in the first article (reading) : "First. The equitable ownership of the trust shares and all interests therein shall be subiect to the terms of this trust agreement. Such ownership of the shares, or interests therein, may be sold at the will of the holder; but no sale, transfer or cinxevaiice of such owne^-ship or interests shall give to the purchaser any rights other than are provided for in the by-laws, ruie sand regulations of the " 83a 39 598 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. company; and in accordance with this trust the trustees hereunder shall at all t;imes be recognized as the legal owners and holders of the trust shares to carry into effect the purposes of this trust, and all equitable owners of trust shares or interests therein shall specitically agree m writing to the terms of this trust, and DO transfer of any such shares or interest shall be made, or be effective if made, unless the transferee of such equitable ownership or interest shall have agreed in writing to receive and hold the same' subject to the provisions of this trust." The objects set forth in the original trust of the Standard are the same objects, with just one exception, as are claimed for this Pure Oil Company. How can it be possible to escape the idea that this Pure Oil Company is a trust? What ex- planation have you to make?— A. It is a voting trust. The company itself is organized under the laws of the State of Now Jersey, and all those trust papers, as 1 understand it. were drawn solely for the purpose of protecting the stock- holders in voting this stock and electing directors. The stock itself was put into a trust, a voting trust, so that it could not be sold or alienated or monopolized, and if the stock were sold the trustees would have a voice in electing directors. Q. How do you explain here in the fourth subdivision of this agreement [read- ing] : "Fourth. This agreement maybe canceled, and the trust hereby created dis- solved, only by the winding up of the Pure Oil Company, or by the consent in writing, duly executed, of the equitable owners of four-fifths of the shares held in trust hereunder, and of four-fifths of all the other shares of the company, after providing in full for the redemption or piirchase at .SllO per share, in cash, of all the preferred and common shares of the company at the time outstanding."' Is not that trust pretty nearly perpetual? Is not that company a perpetuity?— A. I do not so understand it, because it provides for its own method of dissolution. Q. How do you provide for dissolution? Because, under the general laws, that is under the power of the trustees, and you have trustees here who hold the entire property in their hands; they make their own board of directors; the administra- tive power of your whole concern is in men who are creatures of your trustees. How much worse than that is the whisky trust or the Standard Oil? — A. I have defined my metming of the word " trust," and it has been often repeated that the intention in that agreement was only to preserve this stock intact, so that the Standard Oil Company could not monopolize it. I have explained how they attempted to monopolize one of the companies. ADVANTAGE TO PRODUCERS FROM THE EXISTENCE OP INDEPENDENT REFINERS. Q. Do the producers who sell oil to independent refiners get better prices than producers who sell to the Standard?- — A. That varies at different times. In the beginning, when the Standard had so stopped the outlet abroad and had so monop- olized everything and thrown everything in the pathway, the producers got together and made sacrifices for the benefit of the refiners. They were selling cargoes at great loss, and we gave them a reduction in the pipe-line charges. There were other times, when the market was good, when the pipe lines have sold to the refiners at a profit. Now, in this recent advance the Producers and Refiners' Pipe Line advanced the oil 3 cents more than the Standard. The Standard in a few days came up to it; and then they advanced again to Sl.:37 and this line advanced it to SI. 40. They were very anxious, however; to get the oil to win the fall trade. Q. That was simply incidental? — A. Yes; incidental. They have been compet- itors in every way. Q. Now, at the present time, is not the market on all fours to the producers, whether they are sellers to the independents or the Standard? As prices go, does it pay the producers to sell to the independent refiners as well as to the Standard?— A. Yes; they have the privilege of selling to other pipe lines. There is sometimes, as I said, an advance by the one and not by the other. But this line has never paid the producers less than the Standard was paying. It has always kept pace with the Standard in advancing, and very frequently has advanced 1 or '3 or 3 or 5 cents more. We are handling the high-grade oil —Pennsylvania oil. That is very desir- able both at home and abroad. Q. Now, I would like to know what the character of the competition is that caused the United States Pipe Line to put it up 10 cents more. Was it the Standard?— A. That forced the United States? ' Q. Or the refiners or other pipe lines?— A. No; we did not do that. Q. I thought you said they raised 3 cents and then the Standard raised 3.— A. Yes. Q. Was it the presence of the Standard that forced them up? — A.- I do not know how that would be. 1 See modified form, p. 511, footnote. ^ See Mr. Boyle, pp. 443, 444. STANDARD OIL COMBINATIONS: PHILLIPS. 599 Q. Well, it is a business proposition?— A. It is a business proposition that in order to benefit their friends the refiners were perfectly willing to make the advance; furthermore, it was the time of year when they wanted to get this oil to ship abroad and to supply the markets at home. Q. What I want to get at is whether the producers expect greater benefit through this pipe-line company or through the Standard in selling their oil.— A. We believe that were it not for these companies the price of oil would be much less than it is. We believe that as large producers we have reaped great benefit from the competition, limited as it is. It is remarkable what a little competition may accomplish; they do not overlook small things. They have the power of a giant, and they use it as a giant. Q. I want to know if these producers are any better off in connection with this independent organization than they are with the Standard, as far as prices go; then I want to have the question answered, after that, whether the refiner pays the extra profit that is paid into the hands of the producers.'— A. There is no doubt, in my judgment, that the producers are better off on account of this inde- pendent movement. There is no doubt that the independent refiners are better off. If it were not for these pipe lines none of these independent refiners would be living to-day. It is for mutual protection that these people have united. We believe we have received much better prices for oil; the last year ihe refiners have given much better prices than they would have given if there had not been this independent movement. Q. You have stated repeatedly, or, rather, it has been stated repeatedly before this commission, that the Standard has made inordinate profits. Now, is it a fact that the independents are not making as much money, either as refiners or pro- ducers, as the Standard people are? I am not talking about commercial reasons at the seaboard. I am speaking about the field, because the producer is not con- cerned with anything outside of the Pennsylvania field and Ohio field. — A. Ithmk that as far as production is concerned they are substantially on a par: but as tar as the selling is concerned the Standard have an advantage, because thej' have an accumulated capital to handle all the by products with, and so on, as the others have not. Q. So we come to this plain business proposition, that the producer is just as well off dealing with the Standard as he is with this Pure Oil Company. — A. No, indeed; I would say not. Q. Why is he not';' — A. Because when there is no opposition they pay much less prices. My .iudgment is. while we could not prove it, that the price of oil has been so much better that we have already paid for the plant out ot the increased prices that the Standard has paid for oil on account of this opposition. Q. You said one minute ago that the advance made by the independents was 3 cents, and was met by the Standard with another advance. — A. How do we know but the oil would be 50 or 60 cents to-day if it were not for this organization? Q. That is entirely hypothetical. I want to know if they are any better off. — A. I said that they are better off; the producers are better off, probably by 25 cents per barrel, on account of this opposition to the Standard. PROFITS IN THE OIL BUSINESS. Q. These men that are engaged in the independent movement have made money out of the oil business?— A. A- great many of them are quite well to do, but a majority of the producers are comparatively poor. Q. Many of them are millionaires?— A. Some of them have made a great deal of money. Q. So these men who are cooperating with you are millionaires and the Stand- ard is simply a greater aggregation of millionaires?— A. I do not know the wealth of those gentlemen, but very few are considered millionaires. I am quite sure they would have much more wealth if prices had not been depressed by the Standard. Q. Of course that is a business question, just like railroading. The largest cor- poration is going to make the most money.— A. I have given facts and figures here which will convince anybody, I think, that the Standard have been making more profit on each barrel of oil than they have paid for it. Now, that affects toth the producer and the consumer. Q What I wanted was to find out whether these producers are able to get their share of the proper profits that belong to them?— A. The producers could not have received their share of the profits when it is a fact, as has been shown, that the Standard makes more on each barrel of oil than they pay the producer for it. ' See Mr. Boyle, pp. U2, 444. 600 HEARINGS BEFORE THE INDU8TKIAL COMMISSION. CAPITALIZATION OF THE INDEPENDENT COMPANIES — VALUE OF THEIR STOCK. Q. (By Mr. Smyth.) Will you tell us what is the capital of the Pure Oil Com- pany— the amount it is capitalized at? — A. Something over §400. OUO; but thei-e has been an application to increase it. It is my recollection that the authorized cap- ital originally was ,sl.0O0,00O, yaiT.OUO of which was paid in. Q. What was the value of the different companies associated with or controlled by the Pure Oil Company?— A. None of them are controlled by it as yet. It is a marketing company; bat there is an effort, which we presume will be successful, to combine a majority of the stock of the others, as 1 have explained, into this Pui'e Oil Company, with an increased capital. Q. What would be the aggregate value of these companies? — A. There is about $3,000,000 invested in all these companies to-day, as 1 understand it. Q. Then you propc-se to increase the capital of the Pure Oil Company? — A. Yes; it has been proposed to increase it. Q. Has it been decided to what amount? — A. It has been thought we would probably increase it to .-,aO,000,000. Q. Now, in your judgment, tlie value of that stock would be about $20,000,000?— A. No, not at all. Q. I understood you to say a short time ago that you would not take a hundred per cent advance for your stock? — A. 1 should not feel like taking a hundred per cent for my stock in all these companies, because I think I am benefited m various ways by getting a lietter price for my productions. Q. (Interrupting.) Now, you think that this Pure Oil will be a competitor in the market for the benefit of the consumer? — A. For the benefit ot the consumer and the producer. THE FOREIGN MARKET — THE STANDARD WAS NOT THE PIONEER. Q. Can you tell us what portion of the products of these companies with which you are connected goes abroad? — A. About 40 per cent of the crude we handle, I am informed by the president of the company. ' Q. How long have you been exporting 40 per cent of your crude? — A. About two or three years. Q. Was your company the first to export oil, or was the Standard Oil Company the first to open up the market? — A. Oh, they were not; there was a large amount of oil shipjied abroad before the Standard existed. Q. One must have been first. — A. The Pure Oil Company was organized in 1895, and the Standard Oil Trust, I am informed, was organized in 1882, and of course shipped oil abroad before the Pure Oil Company; but millions of barrels pi oil was exported before the Standard Trust existed. Q. They did not go into the refining business as the Standard Oil Company for a number of years after the discovery of oil? — A. No. Q. You do not consider the Standard Oil Company the pioneer in building up the export business?— A. Not at all; no. Q. At the same time they had a large proportion of it to meet? — A. Oh, certainly they did, l3ut they were not the pioneers. Q. And covered the world, as we learned yesterday from Llr. Archbold? — A. Yes; but others preceded them in almost all countries. I do not believe, as was stated by Mr. Archbold yesterday, that they have better, talent than others engaged in the same busmess.'- AGAIN THE QUESTION OF MONOPOLY. Q. Now, the charter of the Pure Oil Company is taken in the State of New Jer- sey, and the charter of the Standard Oil Ci anpany is now being taken there. You spoke of the Standard Oil Company as the Standiird Oil Trust. Yet you deny tliat the Pure Oil Company is in any manner a trust; how do you distinguish them?— A. The Standard is a monopoly. The Pure Oil Company is not. Q. How can the Standard Oil Comjiany be a monopoly when the Pure Oil is not? The Standard Oil Company handles only 80 per cent of the product.— A. It does not require all of any commodity to make a monopoly and fix prices; anyone knows that. They do have a sufficient control to make a monopoly. Q. You stated just now that you had advanced the price of the crude oil to the producers, and then the Standard had. So you were not alone in fi.xingthe prices?— A. That was in one locality, and in advancing crude oil. Q. But, as a fact, it was done? — A. Yes; that is, where our pipe lines went; and I may say the advance was universal over the field. ■ See Mr. Lee, pp. 275 , :;?s. a syg p, r,(j-j^ STANDARD OIL COMBINATIONS: PHILLIPS. 601 FREIGHT RATES AXD REBATES — THE INDEPENDENTS HAVE NOTHING TO CONCEAL. Q. Mr. Archbold stated that he was distinctly and clearlj- in favor of the inter- state-commerce law, and since the passage of that law in isy? he affirmed and gave positive testimony that no rebates, no special rates of freight, no advantages of any kind, had been offered by any railroad company or transportation company or canal, or accepted by the Standard Oil Company or asked for by them. Do you say the same for the Pare Oil Company and the companies with which you are connected? — A. Yes; to the best of my knowledge and belief there has been noth- ing of that kind. Q. No special rates have been given to your company at all? — A. No; not unless you consider contracts made when we could not get through to New York. Of course there was a rate through to New York when our pipe Ime reached a certain point in New -Jersey, and when it reached a certam further point there was a lower rate, etc. The freight was very large, and it was the only way we could get oil through to the market. It was an open rate.' Q. It was a special rate to j'our companj'? — A. No; it was an open rate. They probably had no other shipper of crude oil from that given point, but it was in proportion to the rate from other shipping points, from Oil City, for instance, through. Q. Wasn't it less than by competing lines? — A. Not that I know of. Q. Could it have been without your knowledge? — A. Yes, possibly. Q. You could not say from your own knowledge?— A, I will say that there are other witnesses that will come here and give you the facts. We are perfectlj' willmg to aid you and show whatever there is in the whole business. We have nothing to conceal whatever. Q. Would you be willing to give a list of the dividends paid by your compa- nies? — A. Yes. I am assuming this, that we would be perfectly willing to have all our companies, and certainly 1 should be willing to have anything that I am in, open to State and governmental inspection; and if it was doing any injury I would not ob3ect to having it either abolished or restricted.'-' Q. You stated positively that, to your knowledge, no rebate has been received or accepted by any of 3'our companies since the passage of the interstate law? — A. Not to my knowledge. Q. Do you know of any such rebate being given to the Standard Oil Company? — A. Personally I have no absolute knowledge on this question, but have been told and believe they have received such rebate. I will qualify my former statement. Pipe lines may have sold to independent refiners at special rates, as stated hereto- fore. Q. To that extent it was a special rate extended to the Pure Oil Company? — A. No; it was to the refiners. The Pure Oil Company is a marketing company. THE FOREIGN MARKET — RUSSIAN OIL — DISTRIBUTION OF PETROLEUM WOULD HAVE BEEN WIDER IF THE STANDARD HAD NOT EXISTED. Q. When you entered the German market yon found the Standard already there? — A. Yes. 9. And you got in and competed with them?— A. Yes; we entered into compe- tition, as anybody had a right to, and we tound the competition a very bitter one. At least the refiners did. Q. Did you find the Russian competition there?— A. There is very little Russian oil sold there now. Q. In Germany, as far your knowledge goes?— A. There is very little Russian oil shipped to German}'. Q. But there was a very large amount of Russian oil shipped to Germany before the Standard went in?— A. They were not the pioneers. My own judgment is that there would have been a better distribution of oil, better both for producers and for consumers, and they would have been more fairly treated, if there had been competing companies instead of this monopoly. Q. You do not think the Standard Oil Company has been a benefit'.-'- A. The Standard Oil Company? I don't believe I should be willing that one railroad should control 80 per cent of the passenger trafflc and the freight traffic of this country and have the absolute power to fix rates. I think we should have had wider distribu- tion of petroleum, and the public would have been better served, and the pro- ducers would have been better remunerated, if it had not existed. Q. (By Mr. Farquhar). Do you believe that any of the independent refiners or ' See Mr. Archbold, pp. .539, 530; Mr. Emery, p. (153. 2 gee p. 591, tootnote 3. 602 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. producers of this country, any number of them, could ever have reached the field that the Standard have all over the world unless they combined? — A. Yes; the markets of the world were largely reached before the Standard combination.' PROFITS OF THE STANDARD OIL COMPANY AND OF THE PURE OIL COMPANY. Q. (By Mr. Kennedy.) Can you state what profit the Pure Oil Company makes per barrel of oil? — A. I will have the officers present that. I have not gone over it in detail. We have no public records of the amount. Q. You have private records? — A. Yes; but I liave not examined into this mat- ter. I will present the exact figures.- It has varied at different times. We have met with great losses, and sometimes we have made some profits. 1 would state this, that the profit would be less than 10 cents a barrel at the present time. Q. While the Standard profit is more than a dollar a barrel? — A. It seems tome that the data given shov/ conclusively that the profit is more than a dollar. Q. And the Standard can make a profit of a dollar a barrel and you can only get a profit of 10 cents? — A. We have met with this great opposition. We expected to make more than that perhaps after a time: but if we should average 10 cents a barrel and could do one-fourth of the business the Standard does, the company would get enormously rich. Jf a party of capitalists had purchased the right from the Standard in the State of Pennsylvania — where we could not get any free pipe line for a long time— to manufacture and sell one-fourth of the oil that the Standard did when they were organized, they could have made two or three hun- dred million dollars very readily had they been willing to exact the prices the Standard did. It would have been a splendid investment to have bought the right from the Standard to do business m this country without their opposition. THE STANDARD OIL COMPANY HAS AN ADVANTAGE IN THE USE OF BY-PRODUCTS. Q. You have stated that the Standard Oil Company has raade more profit from a barrel of oil than the Pure Oil Company. Is that in any measure due to the fact that they use the by-products? — A. Yes; that has considerable to do with it. VALUE OF STANDARD AND PURE OIL STOCK — PROFITS. Q. (By Mr. Smyth. ) You wish us to understand that your company, on a profit of 10 cents per barrel, is to be considered worth 200. whereas the Standard Oil Company, on a profit of a dollar a barrel, is only worth 46.1? — A. I have tried to explain that before. I am a producer of oil, and as a producer I would not sell my stock for twice the amount; and then I do anticipate very fair profits in the near future. Q. Do you think the Standard Oil Company makes a thousand times the profits you do?— A. For a long time we made nothing, as has been testified, and I think some of the witnesses testifying in the interest of the Standard charged us with using people's money in some of these companies and not paying them any return;' but we do not know how much the return has been in the advanced price of crude oil. Whereupon the commission took a recess until 3 o'clock p. m. Washington, D. C, September 11, 1899. TESTIMONY OF MR. LEWIS EMERY, JR. The commission met on Monday, September 11 . 1899, Vice-Chairman Phillips presiding. Mr. Lewis Emery, jr., appeared at 10..J.5 a. m., and, being duly sworn, testified as follows: personal statement. The WiTxicss. Mr. Chairman and gentlemen of the commission, in advance I desire to beg your indulgence in giving my testimony from this fact, that I have been absent from my home, in the State of California, for the past two years. Under the extreme weight of business and cares I broke down in health, aiid it was only on the ir)th of August that I returned to this part of the country; and since that 'Compare Mr. Archbold, p.. leS; Mr. Emery, pp. 626, IK«. " See Mr Boyle p. 415. ^ Field with the Commission. STANDARD OIL COMBINATIONS: EMERY. 603 time I have been very busy with the many points in business that were left for me to decide. J have not been able to give the questions that are propounded to me to-day the full attention that I should have done. I desire the privilege, with the consent of the commission, of referring to my memoranda, or to some of my colleagues, that I may refresh my memory, for this reason, that I have this question for the years from 187a to 1898 in my memory exceptmg my testimony in 1888 before the Committee on Commerce in the city of Washington. I desire to say that I hold no animosity toward the Standard Oil people or any association. They were thirty-four years my companions, and I only meet them here to-day upon fair and equitable terms. They believe in their method of doing business, and I believe in mine. We agreed to separate. Many of the stockholders of the Standard Oil Companj- have been associates of mine all these years in the ownership of property, and I own property with them at the present 'time. We simply differ on methods of transacting business. Therefore I feel that there is no one here in this room who will say 1 tell an untruth because I may differ from him or because of testimony that I may give in answer to the questions you may ask. Q. (By Mr. Phillips.) Where is 3'our residence?— A. Bradford, Pa. Q. Your name in full? — A. Lewis Emery, jr. Q. What is your occupation, and what has it been?— A. My occupation for the past thirty-four years has been in the production and refining of oil. CONNECTION WITH VAEIOLS OIL COMPANIES. Q. (By Mr. Kennedy.) I should like to ask your present connection with the independent companies— producing companies, pipe-line companies, and the Pure Oil Company?— A. I am connected with them. Q. In an official connection?— A. I am not an official, except that I am trustee of some stock. Q. (By Mr. Livingston.) How do you stand in relation to all these companies?- A. I am a stockholder in three of them. Q. Which three?— A. United States Pipe Line, Pure Oil Company, and the Producers' Oil Company, Limited. Q. Any connection with the Standard? — A. No: none whatever. EARLY HISTORY OF THE OIL BUSINESS. Q. (By Mr. Phillips.) You can proceed in your own way and make a state- ment to the commission as to the facts. — A. The discovery of oil was in 1S59, in the vicinity of the city of Titusville. The commodity was new and practically unknown to the commercial or scientific world.' The oil was transported from the welis down Oil Creek, near which the first well was drilled, by teams, or by pumping the oil into boats, or, rather, at that time it was. carried in buckets into flatboats made of inch lumber. These flatboats ran down Oil Creek to Oil City, Pa., and from there the oil was transferred into larger bulk boats and carried down the Allegheny River to the city of Pittsburg. The first refineries for putting this oil into a merchantable condition were in the State of Pennsylvania, the natural and most economical place for the manu- facture. The business was free and untrammeled from 1859 up to 1872. The transportation by boat gave way to transportation by pipe line and by rail. The production of oil in 18ti5, at which time I came into the business, was about 6.000 barrels a day. In the meantime the refineries had dotted the Oil Creek Valley and the Allegheny Valley and reached as far south as Cincinnati and Louisville and as far north as Portland, Me. In 1873 we find these refineries all in active operation, north and south from the points named. From 1^59 up to 18Go the oil was drawn in barrels by teams from the interior of the district. Pithole and Cherry Creek and numerous other places I could mention, each team carrying, according to the condition of the road, from 'S to 7 barrels. A barrel of oil was about 4."iU pounds at that time. Then, in I860, the pipe lines were introduced. This business was tree and open to all the railroads, all the people, and all the world up to 1873. If the commission will kindly refer to this little pamphlet which I have prepared:''' THE first pipe LINES. " The first successful effort to transport oil from the well to the railroads by pipe line instead of in barrels by teams was made in 1865. ■ 'See pp. 405-407.' -Lewis Eaiery, jr., to the Industrial Commission, IS! 9. ^ gee pp. 409, 413. 604 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. ' ' The idea of transporting oil by a pipe to the Allegheny Hiver originated with Thomas C. Bates, of Syracuse. A company was formed with a capital of IJIOO.OOO, Joseph Casey as president, and Thomas C. Bates as vice-president. Colonel Brack- ett and S. M. Spencer completed the arrangements, and David Kirk was appointed superintendent. The laying of the pipe was commenced in November. J 8(55. and the first oil was piped on the 10th of December, 188.5. From that time to January 23, LS6.). the company piped 20,0U0 barrels of oil. The pipe was 6 inches in diam- eter, extending from Pithole to Oleopolis, a distance ot 7 miles, and run entirely by gravity. It had a fall of 360 feet between the field and the river. This com- pany was known as the Pennsylvania Tubing Transportation Companj'. "Another company was organized in the spring of 180.5 — the Rochester and Oleopolis Petroleum Company — with a capital of 8100,000. "The Miller Farm and Pithole Pipe Company commenced to lay pipe August. 186.5, and completed its line in October, 186.5. The length of the Ifne was .5i miles! It was a 3-inch line, ami originally four pumps were used, but afterward only one pump was found necessary to do the work."' To give you an idea of how crude men's ideas were at this time I will mention that it was thought necessarj' to place a pump at the foot of each hill in order that the oil might be carried over that hill into the next valley. In a distance of 5 miles there were four distinct relays of pumps. It would have been held absurd to ihink that oil could be pumped 4 miles. Now we put oil into a pipe and pump it a distance of 100 to 1.50 miles with one stroke of the pump. "The men who were intere.sted in this enterprise were: M. E. Van Sycle. of Jersey City; Henry C. Ohlen, of New York; Charles Hickox and Charles W. Noble, of Cleveland. Ohio. " The Titusville Pipe Company was organized by H. E. Pickett and G. J. Sher- man, of Titusville. They commenced laying pipes in January. 1866, and com- pleted the line in April, 1866. There were two lines of 2-inch pipe from Pithole to Titusville, 9+ miles. The line cost sf.'D.UOO. " Harley & Co. line, from Bennihoff Run to Shaffer, 2 miles, was built in 186.5. " The Vandergrift & Foreman pipe line, from Bradensburg to Oil City, in 1866. " A charter granted in 1864 to the Western Transportation Company, from the Noble & Delemater well to Shaffer. THE BEGINNINGS OP PIPE LINE COMBINATION. " In 1866 the whole of the Van Sycles line, from Miller farm to Pithole, fell into the hands of William H. Abbott and Henry Harley. '■ The Avery & Hedden line, from Shamburg'to the lililler farm. "In IsiiT Abbott & Harley acquired control of the Wesiern Transportation Company. Under its charter they combined the Western and their own two lines as the Allegheny Transportation Company. The first board of directors, in 1869. were Henry Harley. president; W. H. Abbott, secretary; Jay GoUld. J. P. Harley, and Joseph Douglass; T. W. Larsen, treasurer; William Warmcastle, general superintendent. " Harley effected a combination, reorganized the Allegheny and Commonwealth as the Pennsylvania Transportation Company, \vith a capita"! of almost 82.000,000, and .500 miles of pipe to Tidioute, Triumph, Irvineton. Oil City, Shamburg. Pleas- antville. and Titusville, centering at Miller farm. Among the stockholders were: Jay Gould, Thomas A. Scott. William H. Kemble. Mrs. Jame,= Fisk. and George K. Anderson. This enterprise absorbed a swarm of small lines, and \yas con- sidered the acme of pipe-line achievment. "The Star Pipe Line was built by Vamlergrift & Foriiiaii m IsiiT, " In 1871 the Commonwealth Oil and Pipe Line Company \yas organized in the intere.st of the Oil Creek Railroad. "Under the act of 1874 of Pennsylvania, Vandergrift & Forman organized the United Pipe Lines, into which a number of lines were merged. "I de,sire here to submit, as the initial :icts of Pennsylvania, that eventually merged the oil business of the United States into a monopoly— the Standard Oil Trust " ■ Q. ( By Mr. F.a.ri^uh.\ r. ) In the detailed statement vou have made of the organ- ization of these various lines, I fail to find in the case of any of these lines any of the memljers, the chief officers, or directors of the Standard '(Jil Company itself.— A. We have not come to that yet. O. You mean to state now that the initial one of the carrier combinations started after the United Pipe Line was formed?— A. Yes: that is what I propose to sh(J\V. (4. That was in is;4?— A. Oh, no; the act was of 1^74; the organization was back in 1871. STANDARD OIL COMBINATIONS: EMERY. 605 Q. Was not the United Pipe Line afterwards the Commonwealth Line?— A. No. Q. Are you referring to the old line of Vandergrift & Forman the vear they made the .iunction of the oil hnes in the United Pipe Lines in IfSTS?— A." We will come to that again. 1 can not answer that question until I come to it. I intended to show the consolidation of all these lines under the proper period.' THE PENNSYLVANIA RAILROAD PERMITS A PIPE-LINE LAW FOR EIGHT COUNTIES TO PASS. "The charters for oil-transportation companies, granted by the legislature, were few in number and only to a favored few, the legislature steadily refusing to enact a general law. In 1x72. after the exposure of the South Improvement scheme, the legislature was constrained by the popular indignation thus aroused to pass a free- pipe law covering the oil-producing counties— Erie, Crawford, Forrest. Warren, Venango. Butler, Clarion, and Armstrong. Under that law 18 lines were built from the producing districts to the railroads, the length varying from 5 to 30 miles. "- I desire to make a remark here. In 1872, when the people of the oil field were so aroused over the report of the South Improvement Company's organization, they demanded from the legislature the repeal of the South Improvement Com- pany's charter and the passage of the free-pipe law, giving pipe-line companies the right of eminent domain. Myself and niany others went to Harrisburg and asked the legislature to give us such a law. We met Mr. Scott, of the Pennsylvania Rail- road Company — people all-powerful in the legislative body at that time, and I do not think their strength is in any way lessened at the present. I asked Mr. Scott, president of the Pennsylvania Railroad, to permit this law to become general. He refused. He said that he would permit us to have a law for the eight counties named, but he would not permit us to have a law by which we could run our pipes to the city of Pittsburg. Our hope was to get a law by which we could reach competing lines of railroad and the Ohio River, so that we might transport our product by water. He said he would permit a law to pass for the eight counties named, but he would provide in the law that no pipe should go withm a mile of the State line, or within a mile of any railroad but the Penn- sylvania. The oil-producing people would not accept that provision in the bill. By force of circumstances, and almost a resort to arms, it was finally conceded that we should have the eight counties, but we were not permitted to have Alle- gheny County, that we might get to Pittsburg for the competition named. This IS personal experience. RISE OF THE MONOPOLY. "After the adoption of the new constitution, the Wallace Corporation Act. carefully excluding from its provisions transportation of oil. was passed by the legislature, and in less than two years the old South Improvement combination, now known as the Standard Oil Trust, had, by a corrupt bargain with all the railroads, forced all but one of these lines built under the act of 1873 into bank- ruptcy, and. practically, sale to itself." This is where these were consolidated— the Vandergrift & Forman, but they were forced in by the monopoly. Q. (By Representative Livingston.) Explain what you mean by monopoly; whether the word is used advisedly or not.— A. It was at that time. Perhaps I might sav the won! mouop ily there would be a little premature, because it had not accoinphshed all its plans to get absolute control of the business. Q. (By Mr. Kknnedy.) Has it ever had absolute control of the business?- A. Absolutely so. Q. Competition wiped out entirely?— A. Entirely so; there was a time when I did not know of a living independent refiner. Q. (By Representative Livingston. ) The word monopoly means the Standard?— A . It does. Q. We would rather hereafter you would say the Standard Oil Company.— A. It will not suit when I get a little further along. Q. There are so many monopolies that I do not know which you are speaking ot. Q. (By Mr. Kennedy.) Is there any monopoly now?— A. If you will allow me to go on I will get to these things; there will come a time when you can shoot all the shot at me you want to; but to answer that iiuestion would be a little premature until you have heard all my argument. Q. i withdraw that question. 1 See p. 630. '' See pp. m, 124. 606 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ' ' The old oil fields are now entirely at the mercy of the monopoly; and upon the development of the new Bradford district, the monopoly through its transporta- tion — the United Pipe Lines and the American Transfer Company^took posses- sion of that field also. Since 1^76 the whole oil district, covering nine counties (and with the Pennsylvania Railroad or one of its branches within from 1 to 20 miles of every well) , has been under the complete dictation of this trust. A brief statement of the history of this trust, its methods and policy, its influence upon the crude and refining industries and upon the oil regions generally, together with certain inferences to be drawn therefrom, may enable the commission to form some estimate of its future, and possibly to suggest some relief from its baneful infiuence. Twenty-nine years ago the Standard Oil Company was a corporation located at Cleveland, Ohio, with a capital of less than a million dollars." SIZE OP THE STANDARD OIL COMPANY IN 1870. Now I wish to digress; I wish to show the holdings of the Standard Oil Com- panj'. I propose to give the commission the testimony of Mr. Flagler, which I heard at the time, and which is of record in this book. The book is the report of the investigation of the sugar trust and the Standard oil trust by the Committee on Manufactures of the House of Representatives in 1888. (House Reports, Fif- tieth Congress, first session, vol. 9.) Mr. Gowen asks the question (p. 288): " Were you a stockholder of the Standard Oil Company of Ohio, as well as an ofScer? — A. Yes, sir. ■' Q. From what time? When did you first become such? — A. From its organi- zation. '• Q. In what year was that? — A. I think early in 1870. ■' Q. Were you not connected in any manner with the oil trade or with associa- tions or corporations interested in or connected with the oil trade prior to the formation of the Standard Oil C'ompany of Ohio? — A. I was a member of the firm of Rockefeller, Andrews & Flagler. ■■Q. Where was it located? — A. Cleveland, Ohio. "Q. What was their business? — A. Refining oil. • ■ Q. That was a private partnership, was it not? — A. Yes. sir. "Q. Did it engage directly in the business of refining? — A. Yes, sir. "Q. Did that firm erect refining works, or did they buy them from some one else? — A. They bought works from two firms, one of which. I believe, was Rocke- feller & Co. and the other Rockefeller & Andrews. They succeeded those two firms. "Q. Were you interested in either before you became a member of the new firm? — A. I was not. '■ Q. Were you in business with them or connected with them in any way?— A. I was not. ■ ' Q. When your own firm came into existence, or after it had gone into business, what was the extent of its refining capacity?— A. As well as I can recollect, 600 barrels a day of crude oil. " Q. Your firm practically, therefore, formed the Standard Oil Company of Ohio and turned its works over to that company?— A. Yes, sir. "Q. And accepted stock in that company in consideration of its theretofore private ownership in the firm? — A. Yes. sir. " Q. What was the capital of the Standard Oil Company of Ohio?— A. One mil- lion dollars." That is as far as I need to go; and I want this commission to bear in mind now that the Standard Oil Company of Ohio owned, in 1870 and 1871, 600 barrels refin- ing capacity. I will call your attention later on to their ownership in 1879. in testimony before the Hepburn committee, which was appointed by the New York State legislature. I will leave that part of the subject for the present. EAILEOAD MAGNATES BECOMH STOCKHOLDERS IN THE STANDARD. Soon after this it was reorganized, when Scott, of the Pennsylvania Railroad; Vanderbilt, of the New York Central Railroad: .Jew.^tt, of the Erie Railroad; Watson, of the Lake Shore R:iilroad, and other railroad managers became inter- ested in it as large stockholders. With the inuueuoe thus gained it attempted the establishment of the South Improvement Coinpanv. This attempt failed. Just there I desire to call your attention, on page 6 of this pamphlet, to the incor- poration of the South Improvement Company. STANDARD OIL COMBINATIONS: — EMERY. 607 CHARTER OF THE SOUTH IMPROVEMENT COMPANY. AX ACT to incorporate the South Improvement Company. Section 1. Be if puacted by the senate and hoit<:e of representntices of the Com- mon n-ealth of Pcnnxijlrania in general aKxeinblij met, and if in liereby enacted hv the author ifij of the same. That S. S. Moon, R. D. Barclay, John A. Fowler, or a majority of them, their associates, successors, and assigns,' be, and they are hereby, authorized and emiiowered to f(_irm and be a bodv corporate, to be known as the South Improvement Company, which shall be. and is hereby, vested with all the powers, privileges, duties, and obligations conferred upon the act to corporate the Pennsylvania (_:ompany, by the act of the legislature of Pennsylvania, approved the Tth day of April, A. D. ISTO, and the supplement thereto. Sec. 3. That the stockholders of said company, lij- and with the consent of the holders of not less than two- thirds of the shares of stock, be, and they are hereby, authorized to change the name and title of the said company and designate the location of its general office, which changes shall be valid after the filing of a cer- tificate in the oflice of the secretary of the Commonwealth, signed by the President and attested by the seal of the said company. James H. Webb, Spealcer of flie H<>nnc of Repi'esentafiren. William A. Wallace, Speaker of the Senate. Approved the 6th day of May. A. D. l«n. Jno. W. Geary. charter of the pennsylvania company. I desire to have this act read, because I was asked this morning by one of the commissioners what power they had under the South Improvement Company charter. 1 should like to reply to that question before the commission, if I dare, what a very eminent judge said in our section of the country relative to the powers of this company, but as it is not perhaps preliminary, I will tell the story after- wards. I desire to have Senator Lee read this incorporating act. I do that because I wish this commission to hear the unparalleled privileges granted under the char- ter and why they sought it; and I desire to follow this along and show you that years after that time they acquired the same charter under a different head. Charters were for sale. They were manufactured by the legislature of the State of Pennsylvania for that purpose. I know; I have spent seventeen years of my life there. AN ACT to incorporate the Pennsylvania Company. Section 1. Be it enacted by the senate and liouse of re present afives of the Com- monwealth of Pennsylrania in gene rat nsnembly met, and it is hereby enacted by tlte aiifhority of the same. That Andrew Howard. J. S. Swartz, G. B. Edward. J. D. Wellsto. and J. T. Malin, their associates, successors, and assigns, or a majority of them, be, and they are hereby, authorized to form and be a body corporate, to be known as the Pennsylvania Company, and by that name, style, and title shall have pei"petual succession and ail the privileges, franchises, and immunities inci- dent to a corporation; may sue and be sued, implead and be impleaded, complain and defend in all courts of law and equity, of record and otherwise; may purchase, receive, hold, and enjoy, to them, their successors, and assigns, all such lands, tenements, and leaseholds, estates and hereditaments, goods and chattels, securi- ties and estates, real, personal, and mixed, of ^vhat kind and quality soever, as may be necessary to erect depots, engine houses, tracks, shops, and other purposes of said corporation, as hereafter defined by the second section of this act; and the same from time to time ma y sell , convey, mortgage, encumber, charge, pledge, grant, le^se, sublease, alien, and dispose of, and also make and have a common seal, and the same to alter and renew at pleasure, and ordain, establish, and put in execution such by-laws or ordinances, rules, and regulations as may be necessary or conven- ient for the government of the said corporation, not being contrary to the consti- tution and laws of this Commonwealth, and generally may do all and singular the matters and things which to them shall appertain to do for the well being of the said corporation and the management and ordering of the affairs and busmess of the same: Proriilid, That nothing herein contained shall be so construed as to give to the said corjioration any banking privileges or franchises or the privilege of issuing their obligations as money. Sec. 3. That the corporation hereby created shall have power to contract with any person or persons, firms, corporations, or any other party, howsoever formed, 608 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. existing, or that may hereafter exist, in any way that said parties or any of them may have authority to do, to i uild. construct, maintain, or manage any worker works, public or private, which may tend or be designed to include, increase, fa- cilitate, or develop trade, travel, or the transportation or conveyance of freight, live stock, passengers, or any other traffic, by land or water, from or to any part of the United States or the Te'rritoriesthi-reof : and the said company shall also have power and authority to supply or furnish all needful material, labor, implements, instruments, and fixtures of any and every kind whatsoever, on such terms and conditions as may be agreed upon between the parties, respectively, and also to purchase, erect, construct, mamtain. or conduct, in its own name and for its own benefit, or otherwise, any such work, public or private, as they may by law be authorized to do (including also herein lines for telegraphic communication), and to aid. cooperate, and unite with any company, person, or firm in so doing. Sec. 8. The companj' hereby created shall also have the power to make pur- chases and sales of or investments in the bonds and securities of other companies, and to make advances of money and of credit to other companies, and to aid in like manner contractors and manufacturers, and to receive and hold, on deposit or as collateral or otherwise, any estate or property, real or personal, including the notes, obligations, and accounts of individuals and companies, and the same to purchase, collect, adjust, and settle, and also to pledge, sell, and dispose thereof on such terms as may be agreed on between them and the parties contracting with them; and also to indorse and guarantee the payment of the bonds and the perform- ance of the obligations of other corporations, firms, and individuals, and to assume, become responsible for, execute, and carry out any contracts, leases, or subleases made by any company or companies, individuals, or firms whatsoever. Sec. 4. The company hereby created shall also have power to enter upon and occupy the lands of individuals or of companies on making payment therefor or giving security according to law for the purpose of erecting, constructing, main- taining, or managing any public work, such as is provided for or mentioned in the second section of this act, and to construct and erect such works thereon, and also such buildings, improvements, structures, roads, or fixtures as may be necessary or convenient for the purposes of said company, under the powers herein granted; and to purchase, make, use, and maintain any works or improve- ments connecting or intended to be connected with the works of the said com- pany; and to merge or consolidate or unite with the said company the improve- ments, property, and franohisps of any other company or companies on such terms and conditions as the said company may agree upon: and to fix and regu- late the tolls or charges to be charged or demanded for any freight, property, or passengers traveling or passing over any improvement erected, managed, or owned by,the said compan}', or on any merchandise or property transported over any road whatever by the said company, and to make, from time to time, dividends from the profits made by the said company; the several railroads managed by said comijany shall continue taxable, as heretofore, in proportion to their length within this State, respectively: and the said Pennsylvania Company shall be tax- able only on the proportion of dividends on its capital stock and upon net earnings or income, only in proportion to the aim )unt actually carried by it within the State of Peunsj'lvania, and on its earnings or income derived from its business beyond the limits of this Commonwealth shall not be liable for taxation. HOW THE NATIONAL TRANSIT COMPANY (STANDARD) GOT THE SAME CORPORATE POWERS WHICH THE SOUTH I.MPROVEIIEXT COMPANY HAD HAD. 1 simply wanted the commission to understand the powers given under this incorporation. I desire to call your attention, incidentally, now to page 151 of this pamphlet: ' ' When the popular excitement raised against the South Improvement Company, which resulted in the repeal of the act to incorporate it. had subsided, the trust, for the purpose of its transjiortation business in Pennsylvania, secured a franchise substantially as follows: '•An act to incorporate the Overland Contract Company was approved March 33, 1871." That is the act for transporting oil by pipe line throughout the State of Penn- sylvania; and the provisions of the Southern Railway Security act, or the Over- land Contract Company act, are the same as the Pennsylvania Company, or the South Improvement Company act identically. It is simply the same act with another head. I can refer you, if you choose, to some twelve or fifteen similar charters. The body of the act has been read under another name. Q. (By Mr. Kennedy.) Can you refer the commission to the full text of the act? — A. That is the identical act. STANDARD OIL COMBINATIONS: EMERY. (i09 Q. The one j'ou read, incorporating the Pennsylvania Company?— A. Yes. What I mean to say is that this act as read by Senator Lee is the identical act under which the National Transit Companv is organized and from which they get all their privileges; and there is nothing not set lorth in that act. Q. Do they get their powers and privileges trom this old corporation withotit having to go to the secretary of state for any charter?— A. The National Tiansit Company people bought this charter under which the National Transit Company is organized on ilarch >', issi, for .sie.ioO. The provisions of that law are just the same as the provisons of the South Improvement Company act— one and the same, in every word, letter, and line. Q. (By Mr. FARyuHAR. ) How long was the South Improvement Company in existence?— A. About three months. Q. And immediately after, the other company was organized with the same rights and privileges, but not the same title. How did they come to g..-: the privilege when they applied?— A. It is another company. Q. And contemporaneous? — A. No; in lysi. Q. Whenwas the South Improvement Company act repealed?— A. March 2."), 1872. Q. Then how was it possible for another company, except by an entire reenact- ment, to take all the privileges of the South Improvement Company? — A. The body of- the South Improvement Company act is just the same as the body of the Southern Railway Security Company act. As I have said, there were twelve or fifteen other charters of the same character, with tlie same body. THE OIL BUSINESS WAS FREE TO ALL AT FIRST. Now, from 1872, of which I have given you a history, up to the purchase of this charter in !>«!, I will endeavor to show you what relations the South Improve- ment Company hav^e had to the Standard Oil Company: and I come simply now to the South Improvement Company charter. I must travel along to 1874 before I can give you the connection. I have occasion, however, to refer to this; but bear in mind you are speaking of the Standard Oil Company', and perhaps I may be speaking of the National Transit Company, which is one of the lines of the Standard Oil Company of Pennsylvania. I desire you to understand this franchise carried with it all the powers and privileges exercised by the South Improvement Company, of unlimited capital and power. Q. The question is, did other companies of Pennsylvania have just as good privileges at that time? — A. No; the business was in everybody's hands 'at this time. It was just as free for you to go into the oil business and ti'ansport your oil down the Allegheny River and on the railroads as for you to go and fish in the Potomac. You could put your money into a well or pipe line, or anything you wanted to. It was absolutely free and open to everybody. There were no encroachments, no hampering at that time. Q. Was there any attempt on the part of any of the other refiners and producers to get a charter of equal privileges with this South Imi^rovement Company.'— A. Not to my knowledge. Q. Prom 1872 to 1881? — A. I do not know about that. DRAWBACKS AND REBATES MADE THE TROUBLE. Q. Was it the lack of taking advantage of combination at that time that handi- capped the parties who did not combine as these parties had? — A. A man was at that time, I believe, and undoubtedly is at this, disposed to obey the laws of the country. The old constitution of the State of Pennsylvania, the new, and I think every other constitution of anj- of the States of the Union, prohibited undue dis- crimination. It was against the law. The whole difficulty arising to-day i 3 due to the discriminating rates. The rail- roads of this country are responsible to-day for the existence of these trusts, because they gave the favored shippers such drawbacks and rebates that finally the Standard Oil Company, with its privileges, drove the entire^ oil industry into its own hands. I do not say for a moment but that these people had the right to GO this if they wanted to, but I do say that when they did do it they were violators of the common law, and that I wonld not connect myself with them on that ground. I was an original. I was there; I had my refineries: I built my pipe line m ]K(i8 and in 1870. long before I knew anything of these people. I did not see fit to place my fortunes .in their hands. Dollars and cents— yes: it would have been millions to me if I had, but I did not feel that I cou'd surrender my principles under the arrangement, or the law. set forth under theSouth Improvement Company. But the most damnable thing that followed was the contract. While it has been given 610 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. in evidence upon this floor that the Standard Oil Company are not responsible for the acts of the South Improvement Company, but the contract that followed— that was framed in Cleveland and brought to the Pennsylvania Railroad and they accepted it. and the contract was signed by J. Edgar Thompson, president of the road at that time. Q. Were not all the railroads wildcatting at that time, anyway" — A. No, sir. I do not doubt but railroads were giving discriminating rates; I have exjiressed myself firmly upon that question. You know it — as a business man, you know it; and I will show you before I leave this floor that discriminations have been made right up almost to the present time. THE CONTEACT BETWEEN THE SOUTH I3IPR0TEMENT COMPANY AND THE PENN- SYLVANIA RAILROAD COMPANY. Now. I desire to call your attention to the contract between the South Improve- ment Company and the Pennsylvania Railroad, dated January IH. 1873, and I propose to show you before I quit that this contract went into existence abso- lutely and was signed liy the president, although it has been denied upon this stand that it ever went into operation. Page :ii of my pamphlet Q. (By Representative Livingston.) For what i^urpose?— A. It is to show you the contract that was made between the Pennsylvania Railroad and the South Improvement Company. Q. Is that a verified statement you read? — A. I will read the contract itself, signed by the Pennsylvania Railroad. Q. That is a verified copy, is it? — A. Oh, it is in the investigation of 1871, and it is all in the Congressional report of IS^c*. and the Hepburn committee's proceed- ings, and in all investigations that have been going on. It seems to me that inves- tigations don't amount to a cent. It is printed; in all the libraries in the United States it can be had, or in any town library — the history of this very business I am relating. [See Fiftieth Congress, first session. House Reports, vol. 9, pp. SIT. J "Agreement made and entered into this 18th day of January, in the year 1873, by and between the South Improvement Company, a corporation organized and existing under the laws of the State of Pennsylvania, party hereto of the first part, and the Pennsylvania Railroad Company, on its own behalf and on behalf of all other railroad companies whose roads are controlled, owned, or leased by it, or with, which it has sufficient running arrangements, which other roads are herein described as the connections of the said Pennsylvania Railroad Company, party hereto of the second part, witnesseth: " 'Whereas the party hereto of the first part has been organized for the purpose, among other things, of increasing, facilitating, and developing the trade in and the conveyance and transportation of petroleum and its products, and for that purpose proposes, among other things, to expend large sums of mone3rin the pur- chase, erection, and construction of, and maintaining and conducting works for storage, distillation and refining, warehousing and transportation, and in various other ways, upon the inducement, among other things, of this contract; " And whereas the magnitude and extent of the business and operations pro- posed to be carried on by the party hereto of the first part will greatly promote the interest of the party hereto of the second part, and make it desirable for it by fixing certain rates of freight, drawbacks, and rebates, and by the other pro- visions of this agreement, to encourage the outlay proposed by the party hereto of the first part, and to facilitate and increase the trans]5ortation to be received from it. DIVISION OF PETROLEUM TRAFFIC. "And whereas it has been agreed liy and between the party hereto of the second part, for itself and its connections, the Erie Railroad Company, for itself and its connections, and the New York Central Railroad Company, for itself and con- nections, that the business of transporting by railroad crude petroleum and its products toward the Atlantic coast, from the points of production and refining on their lines of road, shall be allotted by the party hereto of the first part to the said three companies in the proportion of 4.t per cent of the whole to the Pennsylvania Railroad Company, for itself and its connections, including the Philadelphia and Erie Railway, the Northern Central Railway, the Allegheny Valley Railroad, Camden and Amboy Railway, the Pennsylvania Company, and all other railroads which are or may be controlled, owned, and leased by it or with which it has or may have sufficient running arrangements; 271 per cent of the whole to the Erie Railway Company, for itself and its connections; and 37.V per cent of the whole to STANDARD OIL COMBINATIONS: EMERY. 611 the New York Central Railroad Company, for itself and its connections, and that the transportation beyond Cleveland and Pittsburg over the railroads of the said companies and their connections, in other directions than toward the Atlantic coast, west from said points of production and refining, shall be allotted bv the party hereto of the first part in the proportion of one-third thereof to the party hereto of the second part, for itself and its Western connections, and the remainder to other railroads." That means this; that all oil going to the At'antic coast shall be divided as set forth, 2)i per cent to the Erie, 371 per cent to the New York Central, and 4i5 per cent to the Pennsylvania, leaving the balance of trade, which was apportioned to be about 10 per cent,' to the Western country, and it should be divided between three roads. Do you understand? That is to say, the 10 per cent going to the West for the Western consumption, the rebate agreed by the railroads to pay to be upon the same basis, andi shall be divided third and third, the Pennsylvania Railroad paying into the hands of the South Improvement Company 37 i per cent, etc. That is the division. " Now, therefore, this agreement witnesseth, that the parties hereto, for them- selves and their successors, in consideration of the premises, of the mutual execu- tion hereof, and of the mutual advantages hereby conferred, have covenanted and agreed, and do hereby covenant and agree, each with the other, as follows: "ARTICLE FIRST. "The party hereto of the first part covenants and agrees: "1. To furnish to the party hereto of the second part, for transportation, such a proportion of the crude petroleum and its products owned or controlled by the party hereto of the first part as shall give to the party hereto of the second part 45 per cent of all the crude petroleum and its products sen* from the points of pro- duction and refining toward the Atlantic coast by the said Pennsylvania, the Erie, and the New York Central railroads and their connections, and 33 J^ per cent of that which is sent west of Pittsburg and Cleveland by those railroads and their connections. " 3. To provide suitable tankage at the points where petroleum is produced on the railroads of the party hereto of the second part and its connections in which to receive crude petroleum preparatory to shipment, with the necessarj' pipes, pumps, racks, and other appliances for its convenient transfer bulk into railroad cars. '■3. To deliver to the railroads of the party hereto of the second part and its connections at the places of shipment and to receive from them at the places of destination all crude petroleum and its products transported over their railroads for the party of the first part. "4. To provide at the places of destination on the seaboard necessary and suit- able yards, wharves, warehouses, sheds, tanks, pipes, pumps, and motive power for the reception of petroleum and its products and loaaing vessels therewith." I want you to follow this contract right there. I propose to show to you that this contract has, in fact, been carried out to the letter from the day of its inception, in spite of the repeal of the South Improvement Company charter. "5. To provide, maintain, and operate the works necessary to refine crude petroleum upon the largest scale practicable, and with such skill and on such a system of organization and division of labor as will secure both efficiency and economy; and for that purpose, and for the purpose of developing and increasing the petroleum trade of the country, to provide and maintain all suitable and necessary means and facilities. RECORDS OF THE TRANSPORTATION OP ALL PETROLEUM AND ITS PRODUCTS. "6. To keep records of the transportation over the railroads of the party hereto of the second part, and its connections, and, so far as it can obtain the same, over the Erie and the New York Central railroads and their connections, of all petro- leum and its products "-;- That they may ship under this contract— bear that in mind— of all petroleum and its products. "Showing the number of barrels of 45 gallons each in bulk and the number of barrels of 47 gallons in barrels carried by eaeh road, with the points of receiving and delivery and the amount of freight received by each road, for such transpor- 1 Note.— 37,!H-271-|-45=100. 612 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. tation, which records shall at all reasonable times be open to the inspection of the duly constituted representatives of the party Iiereto of the second part."' That is to say, the railro ids are open, absolutely, to the inspection of this com- pany; that they had the right to go in at any time and take down from the place o;' deposit those books and look over them and see that which X ship or anybody else ships. ■' JIi)nilily abstracts of all such records shall be regularlj' sent to the party of the second part. " See how complete. That an abstract of those books must be sent to the office of this company that they m-iy look into the business of G-overnor Harris, Mr. Phil- lips, or Mr. FarqvThar — anybody, it does not matter whom. That was the power given; and [ simply say, if you will take the evidence of the investigation of 1871 and 1873, take the investigations of the Hepburn committee, take the investigations of the State of Penn-;3dvania, and every scintilla of evidence produced, and you will find that this contract has been carried out to the letter, even up to the present time. There is no secrecy in my business to-day. My lousiness is known every twenty-four hours, just exactly what I do. I make that assertion because 1 can produce the evidence. Q. (By Mr. Fari.iuhar. ) Possibly these parties entering into contracts with the railroads are a little afraid of the railroads themselves cheating? — A, That might be so. ■'7. To pay the party of the second part weekly for all transportation over its roads and its connections of petroleum and its products such gross rates and half rates of freight as are hereinafter specified, less the rebates and drawbacks herein- after provided to be retained by the party hereto of the first part for its own use. EEB.ITES .^ND DRAWBACKS TO THE SOUTH IMPROVEMENT COMPANY ON Af^L OIL ■ SHIPPED BY IT OR BY OTHERS. "ARTICLE SECU.N'D. "The party hereto of the second part covenants and agrees: "1. That the party hereto of the second part will pay and allow to the party hereto of the first part for its own use, on all petroleum and its products trans- ported over the railroads of the party Hereto of the second part and its connec- tions, for the party hereto of the first part, rebates, and on all transported for others, drawbacks, at the rates hereinafter provided, except in the case specified in article third." Not only what they ship themselves, but what every individual shipped; what- ever oil was shipped at that time. '■2. To deliver to the party hereto of the first part, for all petroleum and its products in packages, trans (jor tation over the railroad of the party hereto of the second part, and its connections, by whomsoever shipped, and consigned to the party of the first part, at the warehouses of the party of the first part, at the sea- board and inland, at the depots of the party of the second part, at the places of destination, and to deliver all petroleum and its products, in bulk, owned by or consigned to the said party of the first part, at any point required on the line of the railroads of the party of the second part and its connections. OPEN RATES. •■ ;l To transport and deliver petroleum and its products over the railroads of the party of the second part, and its connections, at gross rates, which shall at no time exceed the following, without the consent of both parties hereto; "From any point on the Oil Creek and Allegheny River Railroad to Oil City, Union, Corry, Irvineton, which are herein designed as ' common points,' on each barrel of -15 gallons in bulk and on each barrel of 47 gallons in barrels, 30 cents. ■'Oil cnide piiroleinn. From any common point (for each barrel of 4."j gallons) to— Cleveland _ go. 80 Pittsburg ] " ' " ^ . .... .80 New York . _ _ _._.!!!!_.!'!"!! 3. 56 Philadelphia "" 2.41 Baltimore ' " ' ' 2. 41 Boston 2.71 1 Party of second part is the PeniisylvaniK Eailruad Company. STANDARD OIL COMBINATIONS: EMERY. 613 "All other points except those on the Oil Creek and Allegheny River Railway to the places of destination last named, the same rates as from the ' common points.' "On refined oil, benzine, and other products of the manufacture of petroleum. From Pittsburg (for each barrel) to- New York S3. 00 Philadelphia l.ss Baltimore.. __. 1.85 From Cleveland (for each barrel) to — Boston 3. 15 New York ..___._ _.. ..... ... 2.00 Philadelphia .. 1.85 Baltimore ... 1.85 From any common point (for each barrel) to — New York.. 3.93 Philadelphia 3. 77 Baltimore 3.77 Boston... .. 3.07 "From and to all points intermediate between the points aforesaid, such reason- able rates as the party of the second part shall from time to time establish on both crude and refined. "From Pittsburg, Cleveland, and other points to places west of Pittsburg and Cleveland, such reasonable rates as the party of the second part may deem it expe- dient from time to time to establish. REBATES AND DRAWBACKS. "4. To pay and allow to the party hereto of the first part on all petroleum and its products transported for it over the railroads of the party of the second part and its connections the following rebates, and on all transported tor other par- ties drawbacks of like amounts as the rebates from the gross rates, the same to be deducted and retained by the party hereto of the first part for its own use from the amounts of freights, payable to the party of the second part. " On the transportation of crude petroleum. [Rebate per barrel.] From the gross rate from any common point to — Cleveland $0.40 Pittsburg -. .40 New York 1.06 Philadelphia 1.06 Baltimore - -- 1.06 Boston ... 1.06 " From the gross rate from all other points and the six places of destination last named rebates the sa^me as on the rates from the common points. " On the transportation of refined oil, benzine, and other products of the manu- facture of petroleum. From the gross rates from Pittsburg to — New York $0.50 Philadelphia -^O Baltimore — -- -''^ From the gross rates from Cleveland to — Boston -50 New York -50 Philadelphia - -50 Baltimore ... - - ■ 50 From the gross rates from any common point to— New York 1-p Philadelphia — 1-33 Baltimore - 1-32 Boston ...--. - 1-33 83a 40 614 HEARINGS BEFOKE THE INDUSTRIAL COMMISSION. Now I will refer to page 43. "From the gross rates to and from all points intermediate between the above points a rebate or drawback of one-third of the gross rate shall be paid. " From the gross rates from Pittsburg, Cleveland, and other points to places west of the meridians of P:ttsburg and Cleveland a rebate or drawback of one- third of the gross rates shall be paid. TO CHARGE ALL OTHER PARTIES NOT LESS THAN THE GROSS RATES ABOVE. '■ 5. To charge to all other parties (excepting such as are referred to in article 3) for the transportation of petroleum and its products rates which shall not be less than the gross rates above specified, and should at any time any less rate be charged, directly or indirectly, either by way of rebate, commission, allowances, or upon any pretext whatsoever, the same reduction per barrel shall be made to the party hereto of the first part from the net rates provided for them on all transportation for them during the period for which such reduction shall be made to others. " B. To permit the party hereto of the first part, if in its judgment the currents of trade should so require, temporarily to increase or diminish the jiroportion, as herein provided, to the party hereto of the second part, for itself and its connec- tions, as the whole business of transporting petroleum and its products, as between the party hereto of the second part, the Erie Railway Company, and the New York Central Railroad Company. The party of the second part in such case to receive from the party hereto of the first part, in full payment or indemnity for the excess or deficiency, one-half the net schedule rates on such excess or deficiency, the other halt to be paid pro rata to the said other companies whose apportioned quan- tity of transportation shall thus be varied ; but such diversion of business shall not at any time exceed 1 week, nor be repeated without an interval of at least 60 days " That provision means that if it became necessary, in order to crush out any particular individual, they had the right to exercise the privileges of clause 0; but it should not be done for more than one week in each interval of sixty days. ' ' Unless with the consent of the party hereto of the second part. Also that when- ever, from time to time, as aforesaid, a temporary diversion of a part of the appor- tioned transportation of the party of the second part to the other railroads afore- said, or to either of them, shall become necessary, cars of the party of the second part may be loaded by the party of the first part and sent away over such other railroads, or either of them, but the cars so sent away shall be returned, without unnecessary delay and in as good order as when taken, to the railroads of the party of the second part, and mileage at the usual rates paid for their use while absent. "7. To furnish with as much regularity as possible at all times good and sufB- cient cars and other means suitable and necessary for the safe and prompt trans- portation of all crude petroleum and its products, either bulk or in barrels, which the party hereto of the first part shall desire to send from one point to another (and which shall be supplied with as much regularity as possible) on or over the railroads of the party of the second part and its connections. ALL DETAILS OP SHIPMENTS BY OTHERS TO BE REPORTED TO THE SOUTH IMPROVEMENT COMPANY. "8. To make manifests or waybills of all petroleum or its products transported over any portion of the railroads of the party of the second part or its connections, which manifests shall state the name of the consignor, the place ot shipment, the kind and actual quantity of the article shipped, the name'of, the consignee, and the place of destination, with the rate and gross amount of freight and charges, and to send daily to the principal office of the party of the first part duplicates of all such manifests or waybills." Now, do you understand that? Sending in waybills and everything connected with that shipment. The name of the shipper even must be in that report. SUCH REPORTS STILL MADE TO THE STANDARD. Just here I want to give you a sample. I want to state from personal experi- ence the carrying out of that contract within a brief space of time. It grew out of this: I shipped a carload of oil. I will not call the name of the road. I shipped a carload of lubricating oil and refined oil— rthat is to say, ,i mixed car— from Bradford, Pa., where my little refinery is located, to Dubois, which was a station down in the coal country, in Elk county. Q. (By Mr. Clarke.) When was this?— A. A little less than a year ago. I loaded this oil. and there was a gentleman who owned a sawmill in that section, and who had been an old acquaintance of mine for thirty-odd years; he was an employee of the road and is upon the road to-day. He runs the fast passenger STANDARD OIL COMBINATIONS: — EMERY. 615 train upon that road. He says: "I want two barrels of oil sent down to my mill." I put those two barrels of oil on top of a carload of stuff. 1 took the pre- caution not to put the oil in that car until after business hours. The car was sealed by the officer of the road. It was to have left the yard the next day. but through some mistake it did not leave. The engineer got off his engine, and, without taking off his overalls, he came up Main street to my office, and he said: "Who in the devil is giving- away your business?'' I said: " V/hat's the matter'i"' Said he: •' When I got off my engine at Dubois, said" (calling the engineer by name): " ■ You are buying oil from Emery. You have bought two barrels of oil from Emery. I was advised this morning by the agent at Dubois that I had been derelict in my duty in not selling you that oil — in permitting Emery to sell it. 1 am threatened with discharge.'" The gentleman turned around to him and said: "How the hell do you know I bought any oil from them; and if I have, what busi- ness is it of yours?" He left. Now, I swear that that oil was put in that car on the top of those barrels without a single man's knowing anj'thing about it excepting the man who put it in and my son. who has charge of the business. I saj- again that is only one instance of the carrj'ing out of this part of this section I have read. I have no doubt, and I know in my own mind, that my business is fol- lowed to this day under the provisions of that section, the same as it was in 1873. I speak not for anyone else, except as I speak of the evidence as set forth in 1871 and 1880. Those cases are numerous. It is not the only instance. I could give you a hundred others if necessary and the time could be taken, and I say that although the charter of the South Improvement Company was repealed and the provisions of this contract were annulled, they have been constantly carried out and are, in my opinion, being carried out at this very moment.' Now I am coming to the most interesting article of all in this contract, and I call your particular attention to it: EQUAL OPPORTUNITIES TO " ,1NY OTHEE PARTY WHO SHALL FURNISH AN EQUAL AMOUNT OP TRANSPORTATION." "ARTICLE THIRD. " And it is hereby further covenanted and agreed by and between the parties hereto that the rebates hereinbefore provided for the party hereto of the first part may be made to any other party who shall furnish an equal amount of transporta- tion and who shall possess and use works, means, and facilities for carrying on and promoting the petroleum trade equal to those possessed and used by the party hereto of the first part. " I desire to have questions asked upon that point. It has been claimed that any- body—yes, everybody — could enter the oil business. It is true, but they must enter the business as set forth in the articles on pages 44 and 4i5 of my pamphlet. "And it is hereby " I am reading article fourth. Q. (By Mr. Kennedy.) Why not give it to us. Senator?— A. It is a question that has been denied upon the stand time and time again. Q. (By Mr. Farquhar. ) The statement was made on this stand that the Stand- ard Oil Company enjoyed no other or greater privileges than were enjoyed by any other company.— A. That is true under that section. Now, here is a contract that provides for the shipment of petroleum, all of it, at that time; or rather, had the provisions of the contract been carried out as set forth in the charter, as well as in the articles of agreement, how in the world could anybody else have that which they possessed themselves— all the oil, all the rebates, and all the transporta- tion? Would it have been possible for you to go into the business and possess an equal amount of oil, equal facilities, equal refineries, unless you had behind you a railroad company as strong as the railroad combination itself? It was impossible, absolutely impossible, for any set of men to go out and get equal contracts, because they had got all of the roads then leading to the Atlantic coast and into the western country. There was no chance whatever for a man with a single pipe line. I was a manufacturer. I had my refinery at that time. I did not have equal facilities, and I could not get them. I was one of the hundreds that went to the wall under that contract, although it is safli by witnesses and everybody else that it was repealed and went out of existence. You know, gentlemen, as well as I when the fading of the business commenced. It faded from 1873, and it went out of existence in 1877, although the contract was repealed; and 1 may say How in the world could I get equal facilities when all the railroads were in that combination? It was a moral impossibility; nobody had an equal show. Is that an answer? ' See Mr. Wps" -;ate, p. 367, bottom. {jl6 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE WITNESS PAID THE OPEN OR QEOSS RATES. (j. Well, a little further. Can you give testimony to this commission as to the rates which you paid there at that time?— A. At which time? Q. At the time meationed here. How much more did you pay, or did you pay the open rate?— A. We paid the open rate. Although you see it did not go into existence, I can produce yoa bills showing that I was charged $3.00 from my refin- ery on this oil. I say it did go into active operation in so far as freight was con- cerned. Q. Have you before now or at any time produced any of these bills?— A. No. Q. Have they ever asked you?— A. No; and X want to say this, that the bills at that time — now, I may be a little too fast in saying I can obtain them. We paid the open rate of freight, whatever it was at the time. That is what I say, and we went out of business in the latter part of iy73; we were compelled to go out. But what I am dwelling upon is the fact that it was laid open to the people of the country at that time. I went to Mr. Cassatt and made my complaint and said, "I can not do business." He said to me personally, "If you will give me the same amount of freight that the Standard Oil Company do we will transport goods at the same price. " Q. Did they ever make a proposition for you to transport all your oil over their lines? — A. Not at that time. Q. Did they ever? — A. I went into the business the second time at the instance of the Pennsylvania Railroad, and they then drove me to the wall a second time. "AGAINST LOSS OR INJURY BY COMPETITION." Now I will read article 4: "And it is hereby further covenanted and agreed by and between the parties hereto that the party hereto of the second part shall at all times cooperate, as far as it legally may, with the party hereto of the first part, to maintain the busi- ness of the party hereto of the first part against loss or injury by competition—'' By competition! Think of it! Didn't care anything about the other fellow! ' ' To the end that the party hereto of the first part may keep up a remunerative, and so a full and regular business, and to that end shall lower or raise the gross rates of transportation over its railroads and connections, as far as it legally may, for such times and to such extent as may be necessary to overcome such competi- tion. The rebates and drawbacks to the party of the first part to be varied pari passu with the gross rates." Practiced to this day. That provision is being carried out, and I desire to be questioned on that point. Anyone in this land of ours, supposed to be a land of liberty and of free trade, excepting the tariff part of it — that system extends to (J-ermany and foreign countries generally. UNFAIR TRADING PREVENTED IN GERMANY — INDEPENDENTS CAN DO BUSINESS THERE. Q. (By Mr. Kennedy.) Right there, Senator, some of your business associates have testified before the commission that at the present time in Germany yon are on an eciuality with the Standard Oil Company? ' — A. Thanks to the Government of Germany, we are, so far as our business goes, because Germany by law prohibits unfair trading and owns every mile of railroad in the great Empire excepting two in the south, and no such thing as discrimination is known. They go further. They invite you to come to the Reichstag and make complaint, or to its officers, and I did in ISy.j. Oil was selling on the Rhine at 1| to 3 cents a gallon below the price on the Elbe. Our agent, who was afterwards purchased, was in a grievous situation, and we were putting up oil here and sending it to Europe practically for nothing. I have sold oil at my works to take care of that trade, competing with the Standard Oil Company or the Deutsche- Americanische Company, as low as a cent a gallon — losing twenty, twenty-five, or thirty thousand dollars on a cargo of oil to maintain our agency in that country. Complaint was made by our agent, Mr. Poth. He handled at that time from four to six hundred thousandbarrels. I traveled with him to Berlin and went personally before the entire ministry of that country, and in English I presented the case, and he interpreted my testimony to them and asked for help. We have been praying here from 1873 to this time, by the investigations of 1871 , 1888, and the State of Ohio, and every State of the Union ' See Mr. Leo, pp. 373, 374, liill. STANDARD OIL COMBINATIONS: EMERY. 617 where these people are known. We have sued for it in every legislature of the country. Texas has waked up and she says: " Get out; we won't have you." The Reichstag of that country gave notice that there must be no unfair trading in that country. Q. (By Mr. Clarke. ) No what?— A. No unfair trading. It must be on a fair, competitive basis. If it deviated from that, investigation would follow. Nolevy- ing of tribute upon the Elbe citizens and advantages given to the Rhine. Prices were the same to all. Q. How did they give that notice?— A. I can not tell you. Q. How do you know they did give notice?— A. I beg your pardon. I do not know that there was notice given. Q. You do not know of any legislation on the subject?— A. Oh, no, I do not; but I understand, Mr. Clarke, that there is a law in Germany prohibiting unfair trading. I never read it. Q. Can you tell me if there have been steps taken to obtain such information?— A. Now, I do not know but there has. 1 do know this, however, and I read the bill. There was a bill introduced into the Reichstag which was applicable entirely to the question of petroleum. It was considered and came up, but never has passed, to my knowledge. There may have been something passed since that time, however. But suffice it to say we find the markets of Europe on even tenure, and we are in competition, as Mr. Kennedy stated. THE DEUTSCHB-AMERIKANISCHE COMPANY BOUGHT OUT THE GERMAN AGENT OP THE INDEPENDENTS. , But when I went there in 1S96 the Standard Oil Company, the Deutsche-Ameri- kanische Company, had bought the last vestige of tankage in Germany they could get hold of. There was nothing left. I was sent there on three days' notice by my company, with which I was connected at that time, the United States Pipe Line Company, to look up the situation. We were here with our fifteen refin- eries, with our pipe line running as far as it could toward the coast — ^we could not go any farther because the Standard Oil Company would not let us; but when I went to Germany in April, 1806, I went there on the report that Mr. Poth, with all his tankage on the Rhine, on the Elbe, at Flushing, Rotterdam, and Amsterdam, had been handed over to the Deutsche- Amerikanische Company. I do not know but the control belongs to the Standard Oil Trust of America. They had purchased a man that we had supplied that oil to for four or five consecutive years, on whom we were dependent to take care of that market, that we might have the necessary money to run our refineries.' They had bou,-;ht it — nothing left. Where in the world we could place a single cargo of oil I did not know. Fortunately enough, I succeeded in selling three cargoes of oil to the Drennehaven Petroleum Company, which was then a Russian organization. NEW CONNECTIONS FOR THE INDEPENDENTS. Q. Russian? — A. Yes. That three cargoes amounted to about 90,000 barrels. I immediately went to Holland and let a contract to Mr. King for the construction of tanks. The city of Hamburg welcomed me there. They convened their con- gress in extra session and passed a law that they would furnish me ground upon which to build my tanks; and the contracts were let and the tanks finished in October, thank God, and our vessels went into the harbor with our petroleum. Prom there I went to Amsterdam, and they were constructing those tanlis for us, because they wanted competition in the business. No competition is shut out in that country; no discriminating rates on the railroads in Germany; none on the canals. CONTRAST BETWEEN CONDITIONS IN GERMANY AND CONDITIONS IN THE UNITED STATES. I say to-day, with my years of experience in that country, it is one of the best governments on the face of the earth, because it looks out for the individual and offers him a helping hand. Do you get it here? No. I am asked to come here to-day to go into matters I have been connected with from boyhood; not to injure Mr. Henry Rogers or Mr. John D. Archbold, my friend for thirty years, or any others connected with it. God knows I would not ' Compare Mr. Lee, pp. 273, 371; Mr. Westgate, p.381. 618 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. harm a single hair in their heads. I will tell yoti iny side of the s1;ory, from thirty- four years of experience in the business, tmd from participation in the politics of the State of Pennsrlvaiiia -which perhaps is a credit and perhaps not. Whatever I may do or say here, it is not from malice of the heart, though perhaps it may he a mistake of the brain. Q. (By Mr. Kennedy.) I asked yon that question because I thought you said this practice of exclusion was being followed m this country, Germany, and else- where.— A. I did not say that it was followed in Germany: or. rather, it was attempted in Germany, but is not permitted there. We ask you to prevent it here. This Standard Oil Company is the parent trust of America. We m the oil business have had the experience of the struggle \Yith monopoly from 1ST2 to this time. Now, whose toes are being pinched? iNot the oil interests alone. It is not the ignorant only who are complaining. It is not the strikes of the coal men or of the railroad men or of the factory men alone. It has come to the intelligent part of this country. I wish to help you m every possible way to remodel our laws so we can all live, and if you don't the results are going to be very serious. SIGXINU AND EATIFICATIOX OF THE SOUTH IMPROVEMENT COMP-iXY CONTRACT. Now, I did not intend to go off into these remarks not pertinent to the question. I do not know that it is necessary for me to read the rest of my pamphlet; hut I desire to return to page 48. and I will end it up by saying this contract was signed— look at page 4a and you will see the name of P. H. Watson. Q. (By Mr. Farquhae. ) Did you intend that article 5 should he left out of your testimony?— A. No. let the contract go in, if you choose to have it. Cut out what you want to. I do not care, except as to the vital points. I just do not want to take up the time to read the rest of the contract. 1 simply want to show you that this contract was signed and this original copy has been in evidence — P. H. Watson, for the South Improvement Company, president, and the Pennsylvania Railroad, by J. Edgar Thomson, president. Q. (By Mr. Phillips.) Have you read all you desire of that contract? — A. Yes; I want to show that this contract was executed. Now. I understand that it has been stated on the witness stand here that this contract was never executed or went into effect.' Q. (By Mr. Farquhae.) That statement was made broadly here. — A. Now, P. H. Watson testified in Washington, in 1872. on the 5th day of April. Mr. Wat- son was president of the South Improvement Company, as I have shown in this agreement, and in this book of mine. I desire to read you (reading): "Q. Was there a ratification by the company of your contracts v/ith the railroad " Q. Will you state the book and the page? — A. Well, now, this is an investigation in 1871 here in this city. Q. Before Congress? — A. Yes; the Congressional investigation. Q. What session and what committee? — A. Well, I can not tell you the session. It is dated Washington, D. C, April :>, 1872. if anybody knows the Congress and the dates; and it is in the archives, I know. Q. It is an official document? — A. Yes. Q. That is all I want to know. — A. Mr. Watson was testifying as to the South Improvement contract that was agreed upon between the Pennsylvania Railroad and the two Northern roads, the New York Central and the Erie. This is the con- tract which I have read a portion of. This book is precious. Nobody could buy it for .So.OOO, and I do not want it to go out of my hands, because it is history that is scarcely in existence. (Reading;) " Q. Was there any ratification l3y the company of 5'our contracts with the rail- road company? '' Now, this refers to the South Improvement Company. (Reading:) "A. Yes; they were approved by the board of directors, as appears in the min- utes and as I am informed, it having been done at a meeting at which I was not present. " That is all I need to read. They were executed — " it having been done at a meet- ing at which I was not present" — by the board of directors. The contract was executed and when it was executed it was in force. It has been stated in testi- mony in 1888 — I did not take occasion to refer to this at the time: I did not think it was of so much importance. But i say that the South Improvement contract was executed by the board of directors, as stated by the evidence of Mr. Watson, but he was not present. That is an answer to the testimony. ' Compare Mr. Archl lold , pp. 510, CifA STANDARD OIL COMBINATIONS: EMERY. 619 OFFICEES AND STOCKHOLDERS OF THE SOUTH IMPROVEMENT COMPANY. Now, then, who were the officers and stockholders of the South Improvement Company? This is the testimony of William G. Warden, in Washington, March 30, 1873 [reading] : ' e, , " Q. Can you give the list of the stockholders of the South Improvement Com- pany?— A. I can give them from the minutes. They are as follows, Mr. Warden being secretary: William Frew, 10 shares; W. P. Logan, 10 shares: John P. Logan, 10 shares: Charles Lockhart, 10 shares: Richard S. Warinjv-, 10 shares; W. G. War- den, 475 shares; O. F, Waring, 47.5 shares; P. H. Watson, 100 shares; H. M. Flag- ler, 180 shares; O. H. Payne, 180 shares; J. A. Bostwick, 180 shares; William Rockefeller, 180 shares, and John D. Rockefeller, 180 shares." THE MEN WHO ORGANIZED THE STANDARD OIL TRUST, Q, (By Mr, Phillips,) A good many of those afterwards became shareholders in the Standard Oil Company?— A. The people who organized the Standard Oil Company were as follows: H, M, Flagler, O, H, Payne, William Rockefeller, H. Bostwick, and J, D, Rockefeller. All these persons were stockholders of the Standard Oil Company at the time it went into existence, and they were the men who formed the South Improvement Company. I say that under oath; I know the people. The people who composed the South Improvement Company were finally the people to organize the Standard Oil Company of Pennsylvania. DIFFERENCE BETWEEN STANDARD OIL COMPANY AND STANDARD OIL TRUST. Q. The Standard Oil Trust?— A. The Standard Oil Trust. Let me explain the difference. There are, I think, in the United States some 33 Standard Oil com- panies under regular organization. For instance, it is the Standard Oil Company of New York, the Standard Oil Company of Pennsylvania, the Standard Oil Com- pany of Ohio, the Standard Oil Company of Delaware, of ilaryland, of North Caro- lina. South Carolina, Texas, California, and whatnot; but the Standard Oil Trust, as I understand, controls the whole. So distinguish the difference between the Standard Oil Company and the Standard Oil Trust. I have reference now to the Standard Oil Trust. (Whereupon the commission took a recess until 3 p. m.) Washington, D. C, September 11. 1899— Monday, 2:>. m. Commission reassembled at 3 p, m. pursuant to adjournment, Mr. Phillips presiding, Lewis Emery, jr,, again on the stand, and examination resumed. HOW THE national TRANSIT COMPANY (STANDARD) GOT THE SAME CORPORATE POWERS THAT THE SOUTH IMPROVEMENT COMPANY HAD H.4.D. Q. (By Mr. Phillips.) Senator Emery's testimony will be resiimed, and he will proceed to make his statements in his own way. — A. Mr. Chairman and gen- tlemen of the commission, there seems to be some misunderstanding relative to the charter under which the South Improvement Company was organized and the charter under which the National Transit Company is organized, it being one of the several companies of the Standard Oil Trust, I desire to say that all the privileges granted in the South Improvement Company's charter were also granted in the charter of the National Transit Company. Both are in the same terms. Each is what is known as the Pennsylvania Company charter. I desire to prove my assertion. I will refer first to page 15i of the book that you have before you. ' (Reading: ) "When the popular excitement raised against the South Improvement Com- pany, which resulted in the repeal of the act to incorporate it, had subsided, the trust, for the purpose of its transportation business in Pennsylvania, secured a franchise substantially as follows: An act to incorporate the Overland Contract Company was approved March 33, 1871," This was just previous to the act of incorporation of the South Improvement Company. The South Improvement Company's charter was' passed on the 6th of May, 1871, and the Overland Contract Company's charter, under which the National 1 Mr Emery's pamphlet, "Lewis Emery, jr., to the Industrial Commission, 1S9B." 620 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Transit Company is now organized, was passed March 32, 1871, before the passage of the South Improvement Company's charter. I desire to get that plain before the commission. (Reading:) " Letters patent were granted them April 5, 1871. On May 16, 1871. they changed their name to the Soiithern Railway Security Company. They owed the State of Pennsylvania one-quarter per cent bonus on their capital stock, and for this debt, after a compromise had been effected, it was sold by the sheriff of Dauphin County to John W. Simonton and Marlin E. Olmsted for |16,351 on March 8, 1881, upon a judgment entered September 13, 1881." This judgment was entered by the Commonwealth of Pennsylvania. (Reading:) "April 18, 1881, said John W. Simonton and Marlin E. Olmsted sold it to Clement A. Griscom, Thornton Pike. Elihu Roberts, W. H. Curtis, William R. William- son, J. W. Simonton, and M. E. Olmsted. On April 14, 1881, under this charter, the National Transit Company was organized." I read from a book in the supreme court of Pennsylvania, eastern district. No. 357, January term, 1897: "National Transit Company and -J. C. McDonald, appellees, versus The United States Pipe Line Company, appellant. Appeal by the defendant from the court of common pleas, McKean County, sitting in equity, October term, 1896. Paper book of the appellant. J. W. Lee, W. E. Burdick, solicitors for the appellant." I desire to read from this book, and whatever I read from it, so far as this char- ter is concerned, is a transcript of the record of the department at Harrisburg, certified to by the secretary of state, so that the evidence I shall read is absolute and can not be questioned. I first desire to read on page 429 of this book: " Commonwealth v. The Southern Railway Security Company. Resolution of company fixing the amount of capital stock. Southern Railway Security Com- pany, in account with the Commonwealth of Pennsylvania. " Mind you, this charter lay for a long time in the archives of the State. It was discovered, and it was purchased by the parties I have named. (Reading:) ' ' Southern Railway Security Company, in account with the Commonwealth of Pennsylvania, debtor, for bonus on charter, per act of May 1, 1868. Amount charged in settlement in May 30, 1873. |35,000. Capital stock, g;7,788.150 appears through certificate herewith filed. Bonus of one-quarter of 1 per cent on said capital stock, ^18,470.37, making a total debtor charge .543,470.37. Credit by pay- ment in the charter March 16, 1871, §13.'). By settlement of May 8, 1873, hereby superseded, |3,5.0U0. Deducting the credits, ,535,135, from 543,470.37, due the Com- monwealth, 118,345.37. Attorney-general's office, Harrisburg. April 35, 1870. Settled and canceled. Harrison Allen, attorney-general. "Treasurer's office, approved. W. E. Hitt. for W. Macldey, State treasurer. B. F. Newcombe, treasurer Baltimore and Ohio. Indorsed, bonus on charter, account of the South- ern Railway Security Company, resettled April 5, 1875. " Now, I do not think it is necessary for me to go further with this, only as show- ing the sale, and I have shown you already that this identical charter was bought from the State by J. W. Simonton and Marlin E. Olmsted for $16,351. This is a copy of plaintiff's exhibit in this suit, called Exhibit A. This is offered by the National Transit Company. (Reading) : "ISTational Transit Company charter. An act to incorporate the Overland Con- tract Company and to define the powers thereof. Be it enacted by the senate and house of representatives of the Commonwealth of Pennsylvania, in general assem- bly met, and it is hereby enacted by the authority of the same." Mind you, now, the same persons got the charter in this one as in the other, "_S. S. Moon, R. D. Barclay, John A. Fowler, or a majority of them, their asso- ciates, successors, and assigns be, and they are herebv, authorized and empowered." Same incorporators as the South Improvement Company, vou will note. Approved the 7th day of April, A. D. 1870. Statements as made herein were specially and particularly set forth.' THE PENNSYLVANIA COMPANY'S CHARTER. Now follows ' ' an act to incorporate the Pennsylvania Company " under that head which I have shown you was changed to the name of the Southern Railroad Secu- rity Company, and finally was changed to the National Transit Company. (Read- ing:) "Be it enacted by the senate and house of representatives of the Commonwealth of Pennsy vania in general assembly met, and it is hereby enacted by the authority of the same. That Andrew Howard, J. W. Swartz " Please refer back in my pamphlet and notice that I am not making any state- ment incorrectly, and follow me and see if the act is not just the same as that of the South Improvement Company. What I desire to show to this committee is 'See pp. 607, 609. STANDARD OIL COMBINATIONS: EMERY. (;;2i that the privileges exercised by the National Transit Company are the same as those set forth in the charter of the South Improvement Company. They are enjoying all the privileges and immunities that were granted by that law. Q. (By Mr. Ratchfokd.) What page is that?— A. Seventh page. Q. (By Mr. Phillips.) You can read the two paragraphs to identify it. — A. I do not want any mistake because I am making the statement very broadly. This is it, the same identical charter, page 6, to the South Imjjrovement Company. Q. You will leave this with the commission to show that it is the same? — A. I will file this book under the seal of the court. Q. It is quite long and will take time to read it?— A. I will read the second sec- tion if you w^ill please follow me through. This which has been repealed is the same as this. If there is any difference 1 want you to state it. (Reading;) •'That the corporation hereby created shall have power to contract with any per- son or persons, firms, corporations, or any other party, howsoever formed, existing, or that may hereafter exist in any way that said parties or any of them may have authority to do. To build, construct, maintain, or manage any work or works, public or private, which may tend or be designed to improve, increase, facilitate, or develop trade, travel, or the transportation and conveyance of freight, live stock, passengers, and any other trafBc. by land or water, from or to any part of the United States or the Territories thereof; and the said company shall also have power and authority to supply or furnish all needful material, labor, implements, instruments, and fixtures of any and every kind whatsoever, on such terms and conditions as may be agreed upon between the parties, respectively, and also to purchase, erect, construct, maintain, or conduct in its own name and for its own benefit or other- wise any such work, public or private, as they maj' by law be authorized to do (including also herein lines for telegraphic communication) , and to aid, cooperate, and unite with any company, person, or firm in so doing. " Section B. The company hereby created shall also have the power to make purchases and sales of, or investments in. the bonds and securities of other com- panies, and to make advances of money and of credit to other companies, and to aid m like manner contractors and mantif acturers, and to receive and hold, on deposit or as collateral, or otherwise, any estate or property, real or personal, including the notes, obligations, and accounts of individuals and companies, and the same to purchase, collect, adjust, and settle, and also to pledge, sell, and dispose thereof, on such terms as maybe agreed on between them and the jiarties contracting with them; and also to indorse and guarantee the payment of the bonds and the per formance of the obiigations of other corporations, firms, and individuals, and to assume, become responsible for, execute, and carry out any contracts, leases or subleases made by any company or companies, individuals or firms whatsoever.' Please return to section first; I want to get rid of reading as much as possible. I will read the first section. (Reading:) " Section 1. Be it enacted by the senate and house of representatives of the Com- monwealth of Pennsylvania in general assembly met. and it is hereby enacted by the authority of the same, that Andrew Howard, J. S. Swartz, G. B. Edwards, J. D. Welsto, and J. T. AJalin. their associates, successors, and assigns, or a majority of them, be, and they are hereby, authorized to form and be a body corporate, to be known as the Pennsylvania Company, and by that name, style, and title shall have perpetual succession, and all the privileges, franchises, and immunities incident to a corporation; may sue and be sued, implead and be impleaded, com- plain and defend in all courts of law and equity, of record and otherwise; may purchase, receive, hold, and enjoy, to them, their successors and assigns, all such lands, tenements and leaseholds, estates and hereditaments, goods and chattels, securities and estates, real, personal, and mixed, of what kind and quality soever as may be necessary to erect depots, engine houses, tracks, shops, and other pur- poses of said corporation, as hereafter defined by the second section of this act, and the same from time to time may sell, convey, mortgage, encumber, charge, pledge, grant, lease, sublease, alien, and dispose of, and also make and have a common seal and the same to alter and renew at pleasure, and ordain, establish, and put in execution such by-laws or ordinances, rules and regulations as may be necessary or convenient for the government of the said corporation, not being contrary to the constitution and laws of this Commonwealth, and generally may do all and singular the matters and things which to them shall appertain to do for the well- being of the said corporation and the management and ordering of the affairs and business of the same; provided, that nothing herem contained shall be so construed as to give to the said corporation any banking privileges or franchises, or the privilegeof issuing their obligations as money." Now gentlemen, they were afraid of repealing the Constitution of the United States, or else they would have put in the privilege of issuing money; they have put in everything else. €22 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Claekb.) How do you know that. Senator? — A. "Why, by the read- ing of the act. They have got the right to do anything else; they claim they have; that is what it reads — to do anything thej' have a mind to. (4. (By Mr. Farquhab. ) Is it a rule to withhold from corporations banking privileges? This same clause is inserted in the charters of all corporations which are not banking corporations?— A. It is within the province of the United States to authorize the issue of money. Q. Is it not a fact that all of onr State laws, in the act of incorporation, contain this clause that would shut out banking privileges?— A. Not being a lawyer, I do not know. IDENTITY IN TEEMS OP THE SOUTH IMPROVEMENT COMPANY'S CHAETEE AND THE EXISTING CHAETEE OF THE NATIONAL TEANSIT COMPANY — POWEES IN OTHER STATES. Q. (By Mr. Kennedy.) What does this mean? Does it mean anj^thing more than any other corporation might do, or business man? — A. Oh, no; I only want to show you that the same law that was repealed, known as the South Improvement Company law, was identical with this. This is one and the same thing; the privi- leges that they had under that iaw in 1872 they have at the present time under this law. That is all; that is what I wanted to say. Q. (By Mr. Faequhar.) One point on that. Senator. These are privileges granted by the State of Pennsylvania? — A. Yes. Q. There are twenty or more organizations of the Standard Oil Company. Could any of the other organizations of the Standard Oil Company take up these privileges? — A. Could they? Q. Yes; under the State of Ohio, for instance. — A. This law says they can; they may go into any other State. It says so. 1 do not know whether they can legally or not; but that is what it says. The Pennsylvania Railroad runs — the Pennsyl- vania Company runs through a portion of Ohio, does it not? Q. (By Mr. Harris.) That is under a separate organization. One is called the Pittsburg, Chicago and Fort Wayne. — A. I understand that the Pennsylvania Railroad enjoys all these privileges, although they may be in foreign States, under the Pennsylvania Company's charter. I will submit that to the lawyers. We have lawyers. Q. (By Mr Farq0HAR.) The only question is this: Whether the Standard Oil Company, with all its franchises, could enjoy all the privileges which are conferred by this charter in the State of Pennsylvania in any other State? — A. Subject, I suppose, to the State law. I think that would be perhaps the proper answer to it. Q. (By Mr. Phillips.) Please proceed. — A. Now, gentlemen, 1 have gone back to correct this. I want to show just exactly the identity of these two laws, one repealed and the other in existence, because the question was raised by two or three of the commissioners whether the one charter was like the other. I think I have proved that to them satisfactorily by reading from this booU, and I will leave that book with the commission when I go. Q. (By Mr. Farqdhae. ) Would it not be well to suggest that you furnish the commission chronologically with the dates, if you can, of these various oharters'?-- A. The origin of them? Q. The origin of them, the change of name, and the year and month, if you pos- sibly can, so that we may see the connection and the interest that follows from the beginning clear down to the end? — A. I am prepared to give you all of that. , Q. (By Mr. Phillips.) I think that the commission would like to have you before you go away. Q. (By Mr. Farquhae. ) I know you can, because I find the dates on page 151.- A. This book contains a vast amount of knowledge on everything that 3'ou have asked, compiled in legal form and with an affidavit of the secretary of the Com- monwealth as to its correctness, so you may not be misled or go astraj'. AMOUNT OP AMERICAN OIL USED IN EUROPEAN COUNTEIES. Q. Where you have spoken of the opposition and interference of the German government, could you give the commission an approximate statement of the oil sold in Germany at that time by the Standard, by all the Russian companies, and by the independents? — A. I can gi^'e the statistics. Q. That probably is in your mind? — A. No, I can not do it here. I can give you the statistics of the sales in the German Empire; 1 know roughly what they are now. I know that the German Empire consumes, at the present time, 6,000,000 or 7 000,000 barrels a year of the American production. STANDARD OIL COMBINATIONS: EMERY. 623 Q. (By Mr. Phillips.) About how much is furnished by the Standard Oil Com- pany and l)y affiliated companies, and how much by this companj' you have organ- ized?— A. I knew the statistics two years ago. About 6,000,000 barrels of the American product was consumed in Germany; Great Britain was using ;J, 000, 000 barrels: France was using about 2,000,000 barrels; Norway and Sweden were con- suming about 1.200.000 barrels; Denmarlj, about 600,000; Holland and Belgium, I forget. ' Q. What proportion of the oils of the Russians and the Standard 'were sold there through lag.i and ISiK;.-'— A. The Standard sold all the American oils in these mar- kets with the exception of what was taken in by our independent companies. I think the largest exportation we have ever made— in fact, in 1804, 1 think, we sold over there about 400,000 barrels, and up to the time Mr. Poth was purchased by the Americanische— I think our sales were about 700.000 barrels. ATTITUDE OF THE RUSSIANS TOWARD COMPETITION AND REGULATION IN GERMANY. Q. You spoke of regulations made by the German government there. Did those cover the competition between the Standard and the Russians? — A. In what respect? Q. In respect to fair competition. — A. The Russians were in just as bad a posi- tion as we were. They were independent at that time. Q. Would you care to state whether, if the Standard then had the market there, both the independents and the Russians were desirous of having this free compe- tition? — A. I do not understand you. Q. That is, are we to understand that the Russians, aswell as the independents, wanted rectification from the German government of unfair competition from the Standard? — A. i do not know what the Russian government did. I know that when I was in Europe I went on to St. Petersburg and had a conference with Mr. Nobel, and also with the prime minister. Their views were .just the same as ours, that they were under an unfair competition and would like to see it rectified. I went there to see if something could not be done, and I brought American in- fluence to bear on the Reichstag to see if something could not be done to correct it. The whole question was laid before the prime minister of Russia and Mr. Nobel to find out from the Russians if the conditions existing in the trade were the same to all. GERMAN REGULATIONS — GOVERNMENTAL EXAMINATION OP ACCOUNTS WOULD BE A GOOD THING HERE. Q. (By Mr. Kennedy. ) Did you get a charter in Germany from the imperial government? — A. No; the right to sell only, and then we are required to file our organization or charter. We only get a license to become merchants, that is all. Q. Are your business affairs then subject to the supervision of the German officials?— A. Oh. yes. Q. Inspection of" your books? — A. Yes; whatever the law is we have to conform to it. I do not know whether that is the law; whether they can go to our books or not. Whatever the law is, that is the situation in which we are placed. We are glad to have them examine our affairs. Even in this country 1 wish some- thing of that kind could be established, that all the books of these corporations of every kind should be examined. Q. Would you like to see the nationalization of the corporations doing inter- state business in this country?— A. Well, I heard this question brought forth the other day in the evidence of Henry Rogers. I am not prepared to say; I have not studied the question. I do not know about the English law controUing corpora- tions or about the capitalization or the constitution of business in England, except to a limited extent. CHARACTER OP EXPORT OIL AND OIL FOR DOMESTIC USE. Q. What is the quality of the oil exported from this country to Germany and other European countries?— A. 78" Abel, or 112 fire test. Q. What is the quality of oil generally consumed in this country?— A. About 120" to 150". , . -Kx ■. ■ ... .• Q. So it is an inferior grade of oil sent abroad?— A. No; it is oftentimes a very much better oil than we get here under 150'. Let me explain. 1 Compare Mr. Lee. p. 278; Mr. Archbold, p. 'I'i:! 624 HEARINGS BEFORE THE INDUSTRIAL COMMISSIUN. METHODS OF DISTILLING- OIL— THEY ABE THE SAME AS IN 1860. I want to state here particularly, and I want you to understand my statement as a manufacturer of oil from IStiT to 1899, that the Standard Oil Company are not benefactors and never have been benefactors. If the business had been open to the community, and the people engaged in it with their brains and ability, the development that has come up to this present time, I claim, could have been made twice as quick as they have made it. Why do I say so? Because in the year 1873 our company, known as the Octave Oil Conapanj', was the owner of one of the best refineries on the creek — Oil Creek — right opposite that of & Co. , the company being John D. Archbold, who was on this stand, and others. We had every device at that day for making an illuminating oil of good quality that we have to-day.' We had stills that held from 100 to 3,000 barrels. Mr. Archbold having the' largest still that ever fire was put under, holding 3.000 barrels of crude oil. To distill oil is not difficult. It simply means that if you build a fire under that glass | indicatin g j , supposing it was oil, and you inclose it, the steam comes out — the vapor. That is all we do in making oil. We put it in these great cylin- der stills, and the c^dinder stills of LSTO. 1808, 18(>5, and 1860 were the same as the cylinder still of to-day. There was what was known as the cheese box, which set up like a cheese box, with a grated bottom to make a fire on. But we have gone back to the old system. In spite of the modern improvements these people claim to have injected into the business we are back where we were in 18.59. We put a fire under it, the vapor rises off and gives first the lightest possible oil, the cymo- gene; the very lightest, like carbonic-acid gas, and the moment it comes to the air it is gone. Next we come to the next lightest, gasoline. Then we come to the naphtha, and then we come on down, if you choose, to the heavy benzine. The iightei parts come off first, from which are made the various light products that are in the market, such as you use in the gasoline engines and in the kitchen to cook with and such as are used by chemists and druggists and the commercial trade. Then you come to the illuminating oil. MEANING- OP "110°" OIL— IP PROPERLY REFIJSTED, THERE IS NO BETTER. The first illuminating oil is the lightest, 110° oil. You may recollect that we had in this countiy a general law of the States requiring oil to be of 110° fire test. That means that, putting the oil in a certain kind of instrument, it has to be heated to 110 before it will burn. It may flash at 85 ", but would go out. You go on up to 110° and it burns. That is the burning test, the flash test being at 85 . That is the way oil is tested. It went on for years and years, until the advent of this South Imijrovement Company and Standard Oil Company. That remained a law of the old States, and the law was good. There- was no adultera- tion of it. Perhaps adulteration is not the term. When I say oil is adulterated I mean it is not properly refined; it is not properly broken up by heat: the paraffin is not taken out of it. Oil may retain a vast amount of paraffin, and show under the law 110°, but its burning properties are not good. Oil properly refined under the 1 10° system is the best oil you can put into your lamps. The German govern- ment—the entire German Empire — the Kingdom of Norway and Sweden, Den- mark, all these countries require no other than 110° or 73° Abel. That oil is not inferior. Neither the German government nor any other government on that side of the' world will permit yon to send in an interior article. There is an edu- cated chemist at every distributing depot in that country, who tests that oil and carefully weighs -it, and.gives it the proper fire test; and it.must pass according to the requirements of the law. That is one reason why the Ohio production has been practically ruled out of Germany because of its quality. The great German Empire and other countries are depending to-day. under the laws, upon the Amer- ican product, because Pennsylvania and a portion of eastern Ohio and southern New York and West Virginia produce the best oil in the world. SULPHUR CAN NOT BE GOT OUT OF OIL ; THEREFORE OHIO OIL CAN HARDLY BE SOLD IN EUROPE. Q. (By Mr. Kennedy.) The Standard people on the stand claim they have processes now for eliminating sulphur and other impurities from the oil and mak- ing it equal to the Pennsylvania oil.' Is that true? — A. I say here, as a refiner and a man who has in his employ as good a chemist as there is. that they can not do it, and they do not do it. You can not eliminate sulphur. It will come back in some form. Canada has been working on it tor the last thirty years and spent untold 1 See Mr. Boyle, p. 407. ■' Mr. Archbold, p. 5:3:3. Compare Mr. Gall, p. 11"; STANDARD OIL COMBINATIONS: EMERY. 625 millions, and she has never teen able to accomplish it entirely. It baffles all science to eradicate, and is detected by the chemists in Europe as quickly as pos- sible, unless it may be mixed with Pennsylvania oil. That has l^een done before. The high-grade petroleum oils are used to supply the European countries. As to what goes to India and what goes to China I am not posted; but I do know what goes to the other countries, and they expect to get an absolutely pure oil. The consumption of Ohio oil is confined to the United States and Mexico, and perhaps to some of the other southern countries. I do not know about that, but the mar- ket is not in Germany to any great extent. CHARACTER OF EXPORT OIL AND OIL FOR DOMESTIC USE (RESUMED). Q. (By Mr. Clarke. ) How is the grade of oil determined, if not by the fire test? — A. What do you mean — the smell? Q. Whether the high grade or the low grade?— A. The oil in its grade is desig- nated by fire test. Foriustance, 110° oilis what we term the ordinary export oil, ll'J test; 120° test is supposed to be a bit better in quality; 150° test is the common oil used in this country, and is a little bit better. The making of loO' oilis .just exactly like making what they call patent flour. It is the head of the bolt. I am a miller by trade and acquainted with the making of flour in the modern way and the old way. If you want patent flour, you have to take the head of the bolt or cream of the wheat. You can get a certain limited amount of patent flour out of 100 pounds of wheat: so yon can get a certain amount of 150 or 175 oil out of a certain amount of petroleum. In this country, I will say, we take off what we call the higher grade of oil and the balance is sent to Germany and other countries. But in order to get these high-test oils up to what they should be, we make the others not as good as if we had just sold the whole thing together. Just so with your flour. If you sort out the best part of your wheat, the next grade is not as good, although it passes as good family flour, and this passes as export. In answer to Mr. Ken- nedy, the standard has not been changed in Germany. They have the finest lamps m the world. They are the greatest inventors on illuminants, and they have con- tinued to hold their grades the same as twenty-five or thirty years ago. We want to send that class of oil into these countries, and they are satisfied with it, because it comes within the reach of the man who wears wooden shoes; it is a commodity they must all buy, and is lower in price than the higher grade. Q. (By Mr. Kennedy.) It is a tact, then, that the oil exported to Germany is inferior to the oil generally used in this country? — A. That may be; but I want to say to you, in the United States of America they burn the meanest oil in God's earth, and burn the best oil that is put on the market. In California — I have spent two years there— I have a little hut, and I go down and buy a case of oil. I buy it as Pratt's Astral, a high grade of oil; it used to be the highest grade on the market. I might say here, during my early experience in the refining business, from 1867 to 1872, we manufactured and sold thousands and thousands of barrels of oil to Charles Pratt and other companies for exportation to Europe, and we were obliged to leave the head blank. When it got to New York the quality of oil was put on it—" Pratt's Astral." He bought oil from the Octave Oil Company. My oil was taken by him and sent to Europe. Now let me give more credit to the Standard Oil Company. Q. (By Representative Livingston.) Do they not require, in Europe and in many States of this country, an oil inspection, and require you to come up to the grade?— A. In every little port where oil is sold or distributed there is a man who examines the oil, and it is passed on by the Government inspector. 110° OIL AND 150° OIL. y. What do you mean by first, second, and third grade oil? Does the first have less naphtha or more?- A. It is supposed to be better. One hundred and fifty degree oil is supposed to be the acme of oil in this country. You fill a lamp with it and you may get a little brighter light than you would get from 110°; there is not so much naphtha, not so much gas; but the 110° oil will last m your lamp a great deal longer than the 150°, because there is not so much body m it. The 110° will not give so brilliant a light as the 150° ; that is one reason why Germany holds to that oil test.' „ . ^ , :, , Q Is it not more sub.ject to combustion than the l.;0'-?— A. One hundred and ten degree' oh, yes. It requires 110 degrees of heat to burn 110° oil. and it requires lot) degrees of heat to burn 150° oil. If a lamp is heated to 150° at its top, gas will be created in the body of the lamp, and unless you release that gas it will explode. 1 See Mr. Lee, pp.374, 377; Mr. Mathews, p. 49.5, top. 626 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. If either comes in contact with a flame, will one burn as quickly as the other?— A. The l;"iO' will not burn as quickly as the 110'. Oil is nothing but gas practi- cally. Take a pail of crude oil and i)ut it out here In the sun: in all probabihty by night you will have lost 10 per cent of it. It has gone into the air as gas. C^. (By Mr. Phillips.) Your testimony has not been quite clear about 150° burning quicker than 110'. — A. One hundred and ten degrees oil burns at 110 degrees of heat, and ino^ will burn at loO degrees of heat— that is, the burning test. The higher the test the safer the oil, so far as explosion is concerned. Q. 'Wliich will burn up quicker in the lamp? — A. That does not make a bit of diifereme. The wick is saturated and it burns at all times. Tlie blaze from 110° is not as brilliant as that from ITjO". Q. (By Mr. Kennedy. ) The German does not get as good light from his 110° as he would from l.'JO 'i — A. Tliat is true. Q. They get what they want and they are satisfied? — A. Yea. G-ood 1 10° oil is a good oil. It is the cheapest tor all the inhabitants of this country, and safe enough, because we burned it for yea.rs and years. There was no change in the laws of any of the States, so far as I know, until after 1872, Pennsylvania retains still the 1 10 test; North Carolina, Texas, and a good many of the Southern States have the 110° test; not many of them have changed. The State of Michigan has 175°, if I remember right. RUSSIAN COMPETITION — CHARACTER OF RUSSIAN OIL — PER CENT OF ILLUMINATING OIL OBTAINED PROll CRUDE. Q. (By Mr. Kennedy. ) Do you come into competition in Germany with Russian oil?— A. Yes. Q. Do they have to make that test of 110° the same as you? — A. Yes. Q. Wliat is the quality of their oil?— A. Not so good as that of America — not so good as American 110°. The Russian is of an asphalt basis, while ours is paraffin. Pennsylvania and New York oils are paraffin, and the Ohio is of a paraffin basis. The California oils have an asphalt basis and the Russian oil has an asphalt basis. The American oil will produce an illuminant of 75 per cent For instance, 100 gallons of crude oil of America, of what we call the Pennsylvania, the West Virginia, and New York and eastern Ohio oil, will produce 75 per cent of illumi- nating oil of different grades. If you ran it all straight through, and did not cut them out, yon probably would get out 78 per cent— perhaps 79 per cent; but. speaking as it runs, you can get 75 gallons of illuminating oil from every 100 gallons of crude oil. The gravity of this oil will run from 40 to 52; the Russian oils run from 18 to 30. Its basis Iseing asphalt, they can only get from that, of the ordinary export oil, such as 110, about 3.5 per cent. Q. Does their 110° oil sell for the same money m Germany as ours? — A. No; it does not sell for the same money as our 110°, because it is not as good as our oil. It contains a little sulphur, the same as the Ohio, which is not as marketable as onr good oils are. Q. Russian competition, then, is not serious on that question?— A. It is, because they sell their oil at a less price, and we have to meet it; but we have the advantage of quality, FOREIGN TRADE — THE STAND.A.RD HAS INVENTED NOTHING. Q. (By Mr. Phillips.) Now, I wonld like you to state how widely petroleum was introduced into the world at the time of the advent of the Standard Oil Com- pany? 'Whether they have been very largely A. I want to say in answer to that question, in 1871 or 1872, when we were young and enterprising, we went to the city of Philadelphia and secured a sailing vessel. It was our determination to load that vessel with all the different inventions for burning oil— lamps, oil stoves, etc.— and also to put into the ship our oils in cases or barrels, such as we could carry; and we had arranged with one Captain Dillingham to sail that vessel to the Amazon, and go u i the .Amazon and introduce this product, oil, which was a new commercial commodity, and the result was we did not do it. On came this clash of arms and we did not go. I will read to you why we did not go. Q. Can you state how f ra- it iiad been introduced to the world before that time?— A. 1 must say in answer to that that the production of oil in 1873 was about 1C>,000 barrels of oil per day; back in 1870 it was 15,000 barrels of oil a day.' For all that great quantity of oil, from l«(iO to 1873, a market had grown up through- ont the world, as we knew the world at that time. It was a good while ago, of course. There were in the field at that time upward of 150 refineries, and as I said before, with all the modern improvements that existed, so far as making illu- ' See p 64^ STANDARD OIL COMBINATIONS: EMERY. 627 minant was concerned — I want to give the credit to the Standard Oil Company for this fact that, owninjj the business, practically, it was dependent upon them to bring out all the bj-- products from the residuum. They made a wonderful success of it. But do you suppose that I or any other active man. with brains and capac- ity, could not have done the same thing if we had had the opportunity and been left to ourselves to manage our business? Has not the iron business passed from ail the world to the Sierra furnace, and every other improvement been brought about by. general trade? Can one man in the business claim he was the onlj' brain in it? Nor is it true of the Standard Oil Company. I say particularly they never invented anything. As somebody said, they did not even invent the rebate. They were dependent on the brains of the average man. They have done nothing that any member of this commission could not have done had you had the oppor- tunity to do it, and get your product to market over the transportation lines of the country. THE STANDARD HAD TO DEVELOP THE USE OF THE BY-PRODUCTS. Q. (By Mr. Kennedy.) You were just giving the Standard OilCompany credit for the wonderful growth of the by-products? — A. Yes; because i have to.' Q. Do you manufacture any of these by-products, such as vaseline? — A. I make the crude stock. Q, And sell that to the Standard? — A. Not entirely; I presume they buy some of it. I make all of these products. I turn off from thirty to thirty-five thousand dollars' worth every month. Perhaps 1 have one of the largest refineries in exist- ence outside of the Standard. y. Can you manufacture these by-products just as well as the Standard Oil Company and put them on the market? — A. If we were in like circumstances we could; but, you understand, the by-products are manufactured not only by the Standard, but in a small way by others. For instance, the druggists manufacture their own, and they come to me to buy the stock; but the Standard Oil Company, I mean to sav, were the first, through the agency of somebody else's brains, not their own, to establish these factories. I say to you this product of petroleum is most wonderful. Chemistry knows nothing about it even to this day, and our colleges have scarcely taken up the science of petroleum. We have to depend on Europe for the knowledge we have obtained as to these by-products. Q. (By Mr. Clakke.) I can not see why you can not produce these by- products.— A. We can; I am not complaining about that. Q. (By Mr. Fakquhap..) Do you not sell the by-products to anybody?— A. Certainl}'. Q. All refineries do? — A. Yes. Q. ( By Mr. Phillips. ) Is it on account of the large amount the Standard refines that they have established these different plants to produce these by-products?— A. They, ha\ing control of the business from 1S72, had to take care of them. There was no one in the business to take care of them. Q. What is the chief by-product from petroleum; is it not lubricating oil?— A. No. , Q. What is it?— A. From the by-products of petroleum there enter mto the materia medioa over 300 remedies. Q. Do you speak of coal tar, etc.?— A. In addition to that the beautiful aniline colors are produced from the coal tar you speak of. Thousands of things are made from petroleum; but that has come on with time, just as the time was when we could not make a piece of sheet steel. LUEEICATINC OIL IS NOT A BY-PRODUCT; NOR PARAFFIN WAX. Q. How about lubricating oil? Is it not a very large by-product?— A. No; it would not be termed a by-product, because there is not a lubricating oil produced from the crude. That never sees fire at all, some of the richest. O (By Mr. Ratchford. ) How about parafSn wax?— A. It is one of the products; not strictly called a by-product. The by-products, as a rule, ai^se from that which remains in the still, or the top, which runs anywhere from b to 10 or 13 per cent. From that is made the paraffin oils, red oils, yellow oils, and miners oils. These things coming from the top are strictly the by-products. The petroleum wax comes at a certain point in distillation, if you take it out. You take it out when wax is dear and perhaps leave it in when wax is cheap, whichever pays best \ on can take' out the wax whenever you want to, or break it up by heat, by destructive distillation, and put it into illuminating oil. 1 See Mr. Boyle, ii. M; Mr. Archboia,p..570. G28 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. RELATIVE VALUE OF PRIISCIPAL PRODUCTS AND BY-PRODUCTS — THE STANDARD HAS NO MONOPOLY OF MANUFACTURING BY-PRODUCTS. Q. (By Iilr. Kennedy.) State in dollars, if you can, what your income from the by-products of oil, or petroleum, is, compared with your income from illuminating oil. — A. 1 could not. Q. Could not approximate it? — A. I can not answer the question, because I do not make any parafin oil. I make wax, and what is called petrolatum, or what you know aa cosinoline — all the same thing; all these " lins " are one and the same thing. Q. I think th3 Standard people have testified that one-half their business is per- haps in the by-products.' Would that be so in your business? — A. No; but I have no reason to contradict their statements. I should not put down the by-product or the residuum as being a halt of their business — not by any means, because, as I have said, you get 7.5 per cent of illuminating oil, while you will get 10 to 12 per cent of benzine or gasoline. Q. I mean in value. Q. (By ilr: Farquhar.) The statement is that the by-products amount to nearly half in value, on account of the high price of certain by-products; provided, of course, the Standard or these other manufacturers utilize these by-produots themselves, instead of selling the residuum for others to manufacture. A. I could not affirm or deny that. Q. (By Mr. Kennedy.) Have the Standard pe(5ple a great advantage over you in the development they have brought about of the by-products of petroleum?— A. There are no developments to-day that any man can not enjoy if he wants to. Q. You give them the credit of developing it? — A. I do; because there was no one else to bring it up. The business has been in their hands from 1873 to the present time. Q. (By Mr Phillips.) Your understanding is, the by-products were not so valn- aDle before their advent? — A. I mean they were not developed; they are not devel- oped to-day. VALUE AND USES OF PARAFFIN. Q. (By Mr. Ratchpord. ) It has been stated that as the by-produots of the re- fining of oils are comparatively new products it has coat more to market them, in many oases, than has been derived from their sale. What is your experience in that? — A. I do not think it is true. Q. If that statement is true, I wanted to know whether in your judgment the price of the main product should not be reduced to the people as the value of the by-product increases? — A. Until the general rise of business these things that you term by-products did not bring a high price. I sold wax as low as 1^ cents a pound within the last three years. We had to take what we could get for it. Germany and France were full, the factories were full, people did not want any goods, and there was no market for it. We make abovit 4,000 to 6,000 pounds a day of it; two or three tons of nice bleached wax, white as that paper, and we get to-day, I think, about 3| or 4 cents a pound. It is not high, and really I do not see how you could reduce the price of that commodity very much. Q. The main use to which that wax is put is the making- of candles? — A. Oh, no. Y(ju can not make a joint of a pipe without the use of paraffin wax; you can not string a telegraph or scarcely a telephone line without the use of paraf&n wax. It is used in almost everything where protection is required, because it is a non- conductor. It enters into everything pertaining to electricity. It is not used largely in candles, except in connection with stearin. The Standard mold all the candles of the country, and they mold the public opinion of the country pretty near. They are good molders; no question about that. THE STANDARD RETARDED THE DISTRIBUTION OF OIL. Q. (By Mr. Phillips.) Will you return to that question as to how widely the use of it had gone into the world?— A. I want to say in answer to that that every civilized country where oil is used had its representative in New York. Philadel- phia, Baltimore, Pittsburg, Oil Creek, Portland, Bremen, Hamburg, Paris, Lon- don, and Liverpool, and they were asking for these goods. It was pretty much all over the world before ever the Standard Oil Company was heard of. They retarded the distribution of this commodity. I was willing to go to the ends of the earth to make a market, and other manufacturers were willing to go with me and make a market; but in the first history of this business the Standard Oil Com- pany compelled these men to step over the threshold of their offices to get this commodity. That was the condition. 1 See Mr. Arohbold, p. 561. STANDARD OIL COMBINATIONS: EMERY. 629 THE STANDARD HAS NOT CHEAPENED OIL. And yet they say that they are benefactors, benefactors of the people, for reduc- ing the price of the commodity! Why, I have known a single gallon of oil to sell ■within the territory of the United States at one and one-half times the cost of a barrel of crude petroleum to make it, but you can not get that to-day. The moment you enter the market of Hornellsville, Washington, or Wilkesbarre, if you choose, with oil from an independent refinery, and build your stations and office, down goes the price. Not four weeks ago, when I sent my oil to a certain point, the market was reduced 1 cent a gallon because I came there. It has been well said, "This business belongs to us; you get out." Take up that volume; read the Com- monwealth r. The Pennsylvania Railroad; it gives everything. The Standard Oil Company are not entitled to the credit of being benefactors or of cheapening this product. Wails are coming up from New Mexico and from Texas and from every State in the Union on account of the exorbitant jjrice and poor quality of the petroleum; you have read them. Look at the condition of things. Laws are passed by the several States of this Union against encroachments on the rights of the people, but when it comes to appropriating money to carry out these laws, the third-house men say to the farmer, " If you vote for the appropriation that will put this law into efiect you are going to increase your taxes." The result is they strike out the appropriation that should enable the attorney-generals of the several States to enforce these laws. An attorney-general stated in an article just a short time ago. "I have to put my hands in my own pocket to pay the necessary fees to bring this suit; no appropriation." Whenever legislation can not be stopped against these people, they go to the next resort and stop the appropriation. I do not say they do it, but I say it happens. THE STANDARD CUTS PRICES WHERE COMPETITION APPEARS. Q. (By Mr. Ratchpord.) You made a statement that if you erected stations or tanks in Wilkesbarre, for instance, the Standard would reduce the price of oil? — A. That is true. Q. Can you furnish this commission with a specific instance where this has been done? — A. Oh, yes; 1 can furnish you a hundred of them. Take it in Philadel- phia; I lost Sl.50,000 m one station myself in lowering the price from time to time. My wagon was there with my man on it. Their wagon would come in ahead of me. They would go to that customer and reduce the price, and they would say they would sell him oil cheaper. They employed other fellows to watch where I went. Q. (By Mr. Phillips.) When did this occur? — ^. It has occurred during the years of 1891, 1893, 1893, 1894, 1895, and 1896. It occurred right along until I quit there.' Q. Has it occurred since you departed from that station? — A. Yes; it has oc- curred within the last six weeks — reducing of the price. Q. How about New York City? Has there been any reduction there? — A. I have known New York to sell oil at 6 cents; when the Columbia Company put on their wagon it was 5 cents in 10 da3's. Q. Has that continued to the present time? — A. I do not know; I have been away 3 years. • Q. (By Mr. Clarke.) Did you ever reduce your price to get business? — A. Have to; have to compete. Q. Do you have any competitors besides the Standard? — A. Yes. Q. Do they follow you up? — A. The other competitors? No. Q. Never? — A. Never. Q. Do you try to follow up anybody?— A. Never. Q. Do you ever reduce your price before the price is reduced by your com- petitor?— A. Oh, yes, I suppose so. It is trade. I am merely discussing the methods of keeping people out of business. Q. (By Mr. Kennedy.) The Standard people say the cutting is generally com- menced by the independent people.— A. They know better. Q. (By Mr.-RATCHFORD.) That is the reason I asked the question; they make the broad statement that they never cut except to meet a cut.— A. They know better. Whenever they know your oil is on the way to a particular market they will cut the price before you get there. I have shipped oil to places— started it unknown to them, I thought; but, as in the instance I gave you this morning,-' they knew what I was going to do before I did; and they went ahead and reduced the price before my oil got to the point. 1 Compare Mr. Lee, p. 265; Mr. Westgate, p. 365. - See pp. 614, 615. 83a 41 630 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ABSORPTION OP PIPE LINES AND REFINERIES BY THE STANDARD. (The witness reads from his pamphlet:) '•Soon after it induced Scott, of tlie Pennsylvania Railroad, to surrender the oil traffic in exchange for Western freights, under a general apportionment of freights between the trunk lines. By this means was diverted a greater part of the refining . trade from Pittsburg- and from the oil regions of Pennsylvania to Cleveland, Ohio, It then bought a controlling interest in the United Pipe Lines." Now, that is in answer to Mr. Farquhar's question.' At this time they came in and purchased from the Vandergrift people, who were formerly the Cnited Pipe Line. They purchased from them, as you will see, all this oil production of their lines. " The United Pipe Lines Association moved forward steadily. It bought or combined the Oil City, Antwerp, Union, Karns, Grant, Conduit, Belief, Pennsyl- vania. Clarion, and McKean .divisions of the American Transfer, Prentice, Olean, Union Oil Company's at Clarendon. McCalmont at Cherry (Irove, and smaller lines, covering the oil region from Allegheny to Butler. Then followed, at differ- ent intervals, an association with the other pipe lines, the purchase of the Colum- bia Conduit Company, of Pittsburg, the purchase of all the Titusville independent refiners, who were forced to sell; the Titusville Daily Herald, Bradford Daily Era, and the Oil City Derrick, which were subsidized and then purchased; the purchase of the Union Oil Company's pipe lines in the Stoneham field." I may say right here the Standard Oil Company are not entitled to the credit for building these lines. The leading lines were built by individuals before they came in. They were simply absorbers. Q. ( By Mr. Phillips. ) It was built to the seaboard was it? — A. It had the credit of building the first seaboard line, which is outside of the Standard, '■ the secur- ing of the control of the Tidewater Pipe Line,'^ and of its dependent refineries, and of its associated Western Transportation Line, and the purchase of the Pittsburg Pipe Line and its dependent refineries." EXTRAVAGANT PRICES PAID FOR LINES AND SERVICES. Now turn to the following history on page 57: " At some time dtiring the progress of these purchases, the reorganization on the trust basis, formerly referred to, was effected. The sum of all these purchases amounted to millions of dollars. All, or nearly all, of them were made'at prices grossly in excess of the reasonable value of the material and business sold, the chief consideration being the absorption and accumulation of power, which the monopoly was thereby acquiring. From time to time new persons were taken into this association. As Mr. Dodd, solicitor for the Standard t)il Trust, said in his argu- ment in 1883, or rather in the history of the Standard Oil Trust: • Whenever, and wherever, a man showed himself skillful and useful in any branch of the business he was sought after.' It has paid salaries, fees, and bonuses with imperial pro- digality, some for services, some for servitude, some for keeping out of competi- tion, and some for keeping still. HOW THE STANDARD USES THE RAILROADS. " Its methods of business are in fine harmony with the manner of its growth. It has divided the whole United States into ' oil-consuming districts.' It goes to a distributing railroad company in the West and says : ' If you will receive and carry oil exclusively for me. I will furnish your whole distributing area, but if you receive and carry any oil of any other refiner or shipper I shall have to create in yonr district such a destructive competition as will ruin your rates."' That has been done, and can be proved by a thousand witnesses. "Where there are competing roads it gets their managers together and shows them how it can supply them with all the oil they can distribute, so apportioned between them as to maintain rates on a noncompetitive basis. It never breaks a promise when that promise conveys a threat. If. therefore, it fails to make such exclusive arrangement in any district, and an independent refiner is admitted therein as a shipper on equal terms, it forthwith ignores all freight rates and all values. ])uts the price of oil to the consumer below the original cost, and keeps it there until it drives the independent refiner out of the district.'' Q. (By Mr. Kennedy.) When Mr. Archbold was on the stand the other day he submitted to the commission letters from a large number of the railroad managers ' Page cn.5. Si'6 also Mr. Boyle, p. 425. '' See Mr. Boyle, p. 480; Mr. Rice, pp. 698, 0!ir,738; p. VIM, footnote. STANDARD OIL COMBINATIONS: EMERY. 631 of the United States stating that they gave no favors to the Standard Oil Company, and that the Standard Oil Company asked for none.' Now. that is the evidence that they put in. You make this statement here. Can you give the Commission any evidence aside from your vrord that this is doner— A. I am prepared to answer in full the documents in my statement. Q. Thesejetters referred to the period since the passage of the interstate-commerce law. — A. Yes: 1 do not know anything about that, but I do know that they have paid them right along. Q. Since the passage of the interstate-commerce law? — A. Yes; and I will prove it was paid up to last January. Q> To the Standard Oil Company?— A. I say rebates are paid. Very well; they are not only shippers of oil, not only behind oil, but perhaps behind everything else, as I have stated before. Q. If you have it in order, I will withdraw my question. THE STANDARD 3IAKES ITS GREATEST PROFITS IN AMERICA — THE INDEPENDENTS COULD NOT LIVE WITHOUT THE FOREIGN TRADE. Q. (By Mr. Phillips.) You can proceed in your own way. "It then dictates its terms to the railroad. Where it thus secures exclusion, it establishes and maintains a price to the consumer, without the least regard for gen- eral market values, as high as the conditions will warrant " (that 1 can prove) ; " and where such exclusion is not established, as low as will be necessary to exter- minate the competitor. There are exclusive districts where refined oil is sold at more than SiO per barrel, and there are contested districts where it has been sold as low as §1.3.5 per barrel. As all the export oil must be sold in Europe in compe- tition with the Russian production, the profits are normal. The revenues of the Standard are, therefore, chiefly made between the American producer and the American consumer." Q. (By Mr. Kennedy.) I think it was given in evidence by some gentleman rep- resenting your side of this question that your business was not profitable until you secured the European field — the German and English fields. That seems to be a little at variance with your statement there. — A. It is the only field we were never shut out of. Q. (By Mr. Phillips.) Could you or could j'ou not refine oil here without sell- ing export oil? Is that not really essential? — A. Certainly; I have shown you that the quality is not used in this country that is sold in Europe. Q. (By Mr. Kennedy. ) You say here the Standard Oil Company makes profits chiefly between the American consumer and producer. Now. your people have testified that you have a profit in this foreign market. Therefore if you have a profit and sell in competition with the Standard they must have a profit there, too? — A. Certainly they have. I have stated that since the German government says there must be no unfair trading there has been no particular cutting of prices. That is the situation exactly. THE STANDARD IS ABLE TO KEEP COMPETITORS OUT OF NEARLY ALL DOMESTIC MARKETS. Q. (By Mr. Phillips.) Do you undertake, then, to state that the opposition are making more out of the American trade than the independents are? — A. I simply say it is an impossibility for me to ship oil even to the Mississippi River and com- pete with the Standard Oil Company. I can not go to the Coast at all. and there are a hundred and one accounts I can call to prove my assertion. , What I mean to say is that I can not even go to Elmira and sell in competition with the Standard Oil Company, a distance of 143 miles from my factory. I do not sell there; I do not sell to the nearest town. Q. Why do you not? — A. Because this war is created at once. q. (ByMr.FARQUHAR.) Competition starts in?— A. That is right; but it goes on just as it did in Philadelphia, away below the cost of the commodity. There I lost S54,000, and then I quit. I gave it over to the Pure Oil Company, and it is there yet— all my horses, all my wagons.^ I have gone out of the outside business. I can not do business— that is all there is about it. Seventy per cent of my product goes to Europe now. I make very largely lubricating oils and wax.' The Brad- ford oil is one that does not yield" very heavily in water whites; therefore I have got to send my commodities to Europe. > See pp. 518-.526. 2 Compare Mr. Lee, p. 266; Mr. Westgate.p.3b.5. 632 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. COMPETITION LEADS BOTH SIDES TO CUT PRICES; BUT THE STANDABD DOES NOT ALLOW ANY COMPETITION TO APPEAR WITHOUT WAR — AMOUNT HANDLED BY INDEPENDENTS. •Q. When you are going into the field, do you start to sell below the Standard rates? — A. No; we attempt to maintain rates. Q. And the cutting couies' sometimes from the Standard and sometimes from you? — A. Certainly it does; because we go into a market, and the astute mer- chant says, '■ I am not going to buy from you. I will buy from the Standard Oil Company." What will you do? Of course you will reduce prices. But we do not go into the market. We only handle about 3,000,000 barrels a year, all told, out of 33.000,000 produced. Only about 3,000,001^ barrels of it is not handled by the Standard Oil Company. Q. (By Mr. A. L. Harris.) If your competition does not exceed 10 per cent of the trade at a given point, do they pay any attention to it? — A. Yes; if we go in with a carload of oil, that is quite sufficient to create a war.' OIL CHEAPER IN EUROPE THAN IN AMERICA, BECAUSE OF REGULAR COMPETITION. Q. (By Mr. Farquhae.) Oil for oil, quality for quality, does the European consumer get oils cheaper than the American? — A. Yes. Q. How much cheaper? — A. I can not give you the percentage. In Europe to-day I should say that oil of this quality is 2.5 per cent cheaper than the same quality is sold on the average in this country. - Q. Now. does that arise from the competition of the Russian oil with the Ameri- can product? — A. It arises from the fact that we are in these markets as competi- tors, and Russia is there as a competitor. The competition unquestionably brings that market down. Q. But the independents and the Standard Oil Company sell at about the same rates in Europe? — A. Yes. Q. And you have got to meet Russian competition? — A. No. The Russians sell very low compared with the Americans. They had rather have American oil at one-half cent advance than Russian. It goes farther: no bad smell about it: it is good oil. They must come in and pick iip what they can, and they do; but the distribution of the Russian goods is very small indeed. the avera(;e price in America is hkih, though the price is very low WHERE the standard MEETS A COMPETITOR. — THE STANDARD TRIED THE SAME POLICY IN GERMANY. Q. (By Mr. Kennedy.) There is one point about this that I can not under- stand. Some witness testified that your business was not profitable until you secured the German market. Now, you sell the oil cheaper to Germans than in this country by 2.3 per cent? — A. I do "say that. It has been a good deal more than that at times. Q. (By Mr. A. L. Harris.) Why is that? Is it because the German govern- ment does not permit cut rates to the extent of destruction? — A. No; I do not know that that is it, but until we got firmly established in the business over in Europe there was a determination that we should not go there, and they commenced the same tactics in that country as in this. They sold oil, for instance, on the Rhine at a cent, or 2 cents, or half a cent a gallon cheaper than they did at points where we were not present. In other words, in an adjoining district it would be higher than in the district where we were. Then, again, if they were obliged to cut prices, perhaps below cost, on the Rhine, they would levy a tribute upon the people on the Elbe to make up what they lost here. When I sold oil in Philadelphia as low as 3 cents a gallon it was selling in New York. 100 miles away, at 8 cents. Q. (By Mr. Farquhar.) Would not you have done the same? Was it not a good policy on the part of the Standard, where they had no competition in Germany, and knew they could sell at 2.') per cent less than they could in the American mar- ket, to hold these places there where there was no competition and to keep up prices there? Is not that good in any business?^A. That was not the case until that competition came in. Q. But where they had no competition would they not very naturally get 35 per cent more if they could, to gain as many points as they could on the 2.j per cent?— A. Certainly; I would hold the price as long as I could, but I would not put it beyond a reasonable price. If you had competition in this country, you would get oil, at least on an average, .50 per cent cheaper. ' Compare Mr. Westgato, p. 3(i7. 2 Compare Mr. Lee, p. 270. STANDARD OIL COMBINATIONS: EMERY. 633 PEICE AND QUALITY OP OIL AND GASOLINE IS CALIFORNIA. In the state of California, where 1 have bought oil, I have gone to the markets and paid, in cans, 20 cents a gallon; and the same oil I was sending out of my factory and glad to get 44 cents for it. Q. ( By Mr. Clarke. ) IF'nt up in the same way?— A. Yes. I have gone to Valley Springs, in California, and bought gasoline that was marked on the head "Double deodorized gasoline,'' and paid 25 cents a gallon for it; and when I paid that I was selling those goods by hundreds of barrels a day at my factory at 4"cents. Q. What was the proper charge for transportationV — A. I do not know. The charge on oil from the Atlantic to the Pacific is 75 cents a hundred. Now, who knows anything about what the Standard Oil Company pays? I do not. They may pay .si. 25 or 50 cents or 25 cents. (^. (By Mr. Phillips). If they paid the same as others, what would be the cost? — A. Suppose the goods were worth about 4 or 5 cents at the refinery. If freight is 75 cents, that would be about 5-J cents a gallon; call it, if you choose, 6i cents, with the probable leakage and loss. It should be sold on that coast to-day, with a good profit, at 10 or 12 cents a gallon. (i. (By Mr. Fakquhak.) By the ease or at retail? — A. By the case. I have given the outside limit. Q. (By Mr. Phillips.) How much did you pay at retail? — A. Twenty cents. Q. (By Mr. Farquhar.) Do you know what profit the retailer made out of this? — A. I do not know what the profit was to him, but I do know I paid 25 cents for gasoline, double deodorized, and when 'I opened it up it was made from Lima benzine. Now, double-deodorized gasoline is absolutely like ether; you can take a smell of it and it will make you drunk in 10 minutes. But one snuff of that would knock you down. Q. So you can not tell us what the middleman made on this deal at all? — A. The quality of the goods in America is not as it is in Germany, because the inspector of this oil does not do his duty. I could make charges here that I could prove that would make your hair stand, but I am not going to do it. It is not within your province, I suppose, to know anything of this kind. THE WITNESS CAN COMPETE WITH THE STANDARD IF HE CAN HAVE EQUAL railroad RATES. Q. (By Mr. A. L. Harris.) Do I understand, then, that it is the matter of trans- portation that prevents your competing in this country with the Standard Oil Company as you compete with them in foreign countries? — A. That is exactly it, and that is all there is to it. If this Government can know and will know what the railroad's naanifest is and its charge attached thereto for freight, and will see that there is fair competition in the market, I ask no odds of the Standard Oil Company. I can m.anufacture just as cheap as they can, in spite of their asser- tions. Q. (By Mr. Phillips.) And as good?— A. As good as they can. They have got nothing better in any of their works than I have g:ot in mine, except it be, perhaps, in their fine laboratories, in the manufacture of residuums or the by-products. ■We raise no question about that. The whole question is the question of trans- portation. If you will force the railroads of this country to obey the law, you will have cured this evil. PAYJIENT OF REBATES HAS BEEN PKOVED TO HAVE CONTINUED AT LEAST TO 1893, THE STATEMENTS OF GREAT RAILROAD MANAGERS NOTWITHSTANDING. Q. (By Mr. Farquhar.) That brings the Commission face to face with this matter. You make the assertion, and so have others, in regard to rebates. The Standard Oil Company comes forward with the letters of twenty great railroad managers,' and we can neither verify your statements nor discredit the statements of these managers.— A. I will put you so you have got to say one or the other. Q. The Commission comes to a stone wall there if we do not have verification.— A. Unfortunately my secretary has not brought up important documents that I should have here in this case; but I trust you will rely implicitly on my statements in what I am going to say, because it is my own- ease that I am going to bring before this committee. It is the case of Logan, Emery & Weaver v. The Pennsyl- vania Railroad Company. Here is an abstract from the records of McKean County, from the Appellants' Docket. No. 130. December term, lss7. It is the 1 See pp. .51^-5:30. 634 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. case of A. H. Logan, Lewis Emei-y, jr., and W. R. Weaver, partners under the firm name of Logan, Emery & Weaver, v. The Pennsylvania Railroad Company. Q. (By Mr. Clarke.) Let me inquire if the case grew out of alleged discrimi- nation before the passage of the interstate-commerce law? — A. Yes, it did; but the discrimination lasted after the adoption of the law, and a suit was brought for rebates or difference in freight up to 1888. In the settlement of the case it was agreed between the Pennsylvania Railroad and ourselves that no further suits would be brought, because they paid a certain sum of money to me to settle the case The rebates existed after 1887. and I have the testimony to produce, if necessary, of that fact. I will produce the testimony here, part of it taken in the same case, showing that rebates were paid up to 1888. In April, 1887, the interstate-commerce law went into effect. Q. (By Mr* FaKquhak. ) There has never been a question before this Commis- sion about rebates and discrimination before the passage of the interstate-com- merce law. It is conceded that the old troubles, the wild-catting system of making freights, existed up to 1889, two years after the passage of the act. There are plenty of cases there on file now showing that rebates have been issued. — A. Yes, there is a case in which I am interested now before the Interstate Commerce Commission in which we have proven rebates to 1893. TESTIMONY OF HIGH RAILROAD OFFICERS CONTRADICTED BY SUBORDINATES. I desire to present to this Commission a document tiled with the court in McKean County, February 17, 1890. and also an order from the cotirt, a rule for taking- testimony. I should be glad to have you examine this document, to see that it was filed with the court, because there is very important testimony in it relating to transportation, and that you may be able to identify it in the future. In this suit, of which I have a transcript here from the document, which is subscribed by the county clerk, prothonotary, G-eorge W. Mitchell, we called to the stand George B. Roberts, president of tiie Pennsylvania Railroad, and the question was asked him if his road paid rebates on the transportation of oil. Q. (By Mr. Phillips.) At what time?— A. This was in 1890, when the suit was tried. The rebates that vi^e claimed were paid to January 1, 1888. He replied: ' ' No rebates are paid by our railroad on the transportation of oil. " He was asked the question in various ways, and he said he knew nothing of any rebates; that was against the policy of the road. John S. Wilson, the general freight agent of the road, was put upon the stand. He said positively that no rebates had been paid on their road since the suits of 1879 upon petroleum. Hesaid: "As general freight agent of this road I should know, and I give my oath that no rebates were paid." The auditor of the road, Mr. Taylor— or Mr. Justis; I do ni:)t know which; one was the auditor and the other the assistant auditor— said that rebates had been paid, and if I had my books here I could read you when they were paid and under what conditions. The next called was Mr. Justis. I beli^'ve. and he corroborated Mr. Taylor that rebates had been paiil on the Pennsylvania road. This testimony was taken before a master. ' Q. (By Mr. Clarke.) Can it be produced?— A. Oh, yes, I have the testimony; I have sent for it. Mr. Roberts was examined in the court, but I have not his tes- timony here. The next man that was called in the case was the bookkeeper, Mr. Thayer, who had stood at one desk, he said. 26 years, keeping accounts in a certain department. He was asked whether rebates had been paid to any shippers of oil over the road, and he said they had. We called a large number 'ot witnesses. Q. (By Mr. Phillips.) What were the rebates?— A. The rebates ran from 8 cents a barrel to 3S cents a barrel. Under the anti-discrimination law of Pennsylvania the penalty prescribed was three times the damages, to be collected of the man proved guilty. A large amount of our shipments of crude oil from the oil regions to Philadelphia, where Logan, Emery & Weaver owned a refinery, at what is called Greenwich Point, on the Delaware, were shipped from 01ean,"N. Y. When we came into the court with (jur evidence, exceptions were taken to that part of our claim which related to shipments from the State of New York, on the ground that interstate shipments could not be considered under the State law. DIFFICULTY OF GETTING RAILROAD PEOPLE TO APPEAR IN COURT AND TO ANSWER QUESTIONS. We commenced this suit early in 1887, and it was not concluded until 1890. The railroad people were able at will to send word to the master that they cbuld not ' See pp. C35, B42. Also Mr. Lee, pp. 287, 292; Mr, Archbold, p. 510, STANDARD OIL COMBINATIONS: EMERY. 635 come to-day, but would come some other time. We traveled with our attoruevs 500 miles, simply to go home again. We were bandied about for nearly 3 years in taking that evidence. It was expensive; it was annoying; 'but the court had no power, it seemed, to compel these people to come to the stand. When we got thenx to the stand, certain questions were propotmded, which they refused to answer under the advice of counsel — the screen which all these criminals of this country who are against its laws and the rights of the people get under, "We can not answer that qtiestion because it may incriminate us."' They would not even attend the court in McKean County, and the judge issued a bench warrant and sent the constable to Philadelphia and brought Mr. Q-eorge B. Roberts and Mr. Green and Mr. Downy and others to the bar of justice. PROPOSITION TO SETTLE THE SUIT OF LOGAN, EMEEY & WEAVER. When they got up into the county of McKean my partner said to me : " There is a proposition to settle this case." I did not want to settle. I wanted to fight the thing out. We had compelled the Pennsylvania Railroad to bring their books, and there were three tons of them that they had to bring upon the train to answer the summons of the court. We were more than a year in getting those books into court. Now they were cornered up, and we had absolute proof of f^ to 38 cents a barrel rebates that had been paid. THE WITNESS HAD BUILT HIS PHILADELPHIA REFINERY AT THE SOLICITATION OF THE RAILROAD, BUT THE RAILROAD DROVE HIM OUT OP BUSINESS. I went to Philadelphia to manufacture oil in 1880, at the instance of the railroad of&cials themselves. They had a little bit of a quarrel with the Standard Oil Company after the close of the suits of 1879 — Commonwealth v. Pennsylvania Railroad. They invited the refiners to meet them, and I went there at their own solicitation and built those works. I ran them from 1881, when I built them, up to 1887; but the railroad practically drove me out of business there. '^ SETTLEMENT OF LOGAN. EMERY & WEAVER'S SUIT. Their attorney came to our attorney and said: "We will give you 83.j,000 to quit, and expenses of the suit." My partners had become discouraged and dis- gusted. We took the money. We did not go on with the interstate-commerce suit, because we knew we should never get through. I entered one suit here in the Interstate Commerce Commission, and it was 7 years before I got a decision. Q. What was the amount of your claims ? — A. My claim was ,$107,000. A great portion of that was on shipments of oil from the State of New York. If I had gone on with the suit I could have secured a large sum of money, but I had not the heart to do it ; I was not able to do it. My finances were such that I could not spare the money to go into court and overcome the dilatory tactics of the railroad officials. I simply dropped the case in disgust. I took the 835,000 and they paid the cost of the suit. B. B. CAMPBELL'S TESTIMONY AS TO PAYMENT OF REBATES UP TO JULY 1, 1888. This is a document of the court of McKean County. It is only a few words I wish to read to you. It is the testimony of.B. B. Campbell. Perhaps I had bet- ter read, as I can not leave this with the commission. Anything I have read, or, in fact, the whole testimony or a copy of the testimony in this suit, I can give you if you would like it. • . _ ., " B. B. Campbell in the suit of Logan, Emery & Weaver r. Pennsylvania Rail- road Company. " B. B. Campbell being first duly sworn, testified as follows m answer to ques- tions by Mr. Lee: " Q. You were sworn in this case and testified before?— A. \ es. " Q. And certain questions you declined to answer under the advice of counsel?— A Yes '" Q You received certain allowances on freight shipped over the Pennsylvania Railroad. From what place and by whom was that freight shipped? " (The counsel for defendant objected to the question in the manner m wlijch it is put, for it is assuming the fact that he did. Second, the form of the question is bad. ) iCompareMr.Monnett,p.307,top; p.315. ' ^See pp. 629, 634, 648. 636 HEAKINGS BEFORE THE INDUSTRIAL COMMISSIOJil. " Q. You may state whetlier you received any allowance on freight shipped by the Bear Creek Oil Refining Company, Limited, over the Pennsylvania Railroad, and from what point that freight was shipped, and to what points.— A. Those matters are fully stated in my answer to the qviestion propounded me under a rule of court. The freight from the Bear Creek Oil Refining Company was shipped from Coleman station on the Allegany Valley Railroad as far as the junction, and from the junction I believe to Bolivar over the West Penn, and from thence mostly to Philadelphia; some few shipments were made to- Communipaw and some few to Bolivar. There was some little local trade, but the great majority were shipments of export oil to Philadelphia. •' Q. During what period were these allowances made to you? — A. That is fully stated in my answers to the court, which were, of course, made up and fully stated from October 1, 1884, until July 1, isss." A year and ioxvc months after the interstate-commerce act went into effect. • ■ Q. You may give the allowances by the year. — A. They are already given. From October 1 to September 30, 1885, the rebates were §8, 607. 51; until Septem- ter 30, 1886, §10,313.47; until September 30, 1887, $15,300; until July 1, 1888, 813,980.15; total received, .S48,101.13." Q. (By Mr. Clarke. ) Nearly all of that was before tlie passage of the interstate- commerce law? — A. Yes. There was a year and a half of that time after the passage of the law. Q. The last item given there is the only one which comes in since the passage of the interstate-commerce law, is it not? A. No; the interstate-commerce law- took effect in April, 1887. During the year from September 30, 1886, to Septem- ber 30, 1887, rebates were paid amounting to .sl5,200. Q. From April to September after the law?— A. And all of the last item. We knew that these same rebates were continiied up to this time, and therefore the bringing of our second suit, which was settled for the 835.000; so we dropped the whole thing. OTHER SUITS AGAINST THE PENNSYLVANIA RAILROAD ON ACCOUNT OF DISCEIMIt NATIONS. Now, I desire to further fortify this statement. After this suit was decided a gi-eat number of suits were brought against the Pennsylvania Railroad. There was the Independent Refinery, of Oil City; S. Y. Ramage. of Crown Oak, Pa.; the Germania Refining Company; the Continental Refining Company; the American Oil Company, of Titusville; Rice, Robinson & Fogin, of Titusville; the Seneca Oil Works, of Warren; the Corn Planters, of Warren. All of these companies brought suits against the Pennsylvania Railroad and other roads. This is a dispatch I received to-day. I had other memoranda of this suit, but I wanted to be able to state definitely upon this question, so I sent another telegram yesterday and find it recorded. Of course the court record of these suits can be produced to the commission; but I make affidavit here that this is true and correct to the best of my knowledge and belief. The refiners' claims (this is addressed to myself, care of the Industrial Cominission) — refiners' claims were filed with Rogers Sherman (he was also a witness against the Pennsylvania) up to August 1, 1888 (which was contemporaneous, I think, with this I have read); " Compro- mise and settlement agreed" — that is to say, they compr(3mised these suits and took their money. The amount collected at that time by these several refineries, as I recollect it, was about 884,000. I may be mistaken; it may have been a good deal more, or it may l)e less. Q. (By Mr. Clarke.) Were those suits all settled by the railroad companies?— A. Yes; by the Pennsylvania. " Claims therefore filed with the Interstate Com- merce Commission." DECISION OP THE INTERSTATE COMMERCE COMMISSION, BASED ON PAYMENT OP REBATES UP TO ]89;i Q. How far does that go back? — A. They settled up to August, 1888, and from August, 1888, up to 1893 the Interstate Commerce Commission has rendered a decision that the railroads are responsible to these refineries for 5!86.000. Q. Is that decision reported in their annual report? — A. Yes; you will find it in tliat cji-se. The railroads have refused to pay this ;j;S(i,O0O, and it has gone to the circuit court of the United States at Pittsburg.' The suit is now pending for the collection of this money. I want to clinch this thing right here, and I am going to do it by reading you a letter. ' Seo Mr. Lee,p.;«r; Mr. Archbolcl,p.5I6; Mr. Westgate, pp.SlG.asd. STANDARD OIL COMBINATIONS; EMERY. 637 THE RECEIVERS OP THE BALTIMORE AND OHIO PROPOSE TO MAINTAIN THEIR PUBLISHED RATES AFTER JANUARY 1, 1890. ''Late open public confessions from the receivers of the Baltimore and Ohio Railroad of secret rates, drawbacks, rebates, and other devices." Q. (By Mr. Farquhar.) What are you reading from? — A. I am reading from a" letter addres.sed to the Interstate Commerce Commission by the receivers of the Baltimore and Ohio Railroad. Q, (By Mr. Phillips.) Under what date?— A. December 33, 1898. , Q. 1898? — A. 1898, less than a year ago. (Reading:) "Will maintain rates. Baltimore and Ohio Railroad adopts a new policy." Q. (By Mr. Farquhar.) Who is the author of the letter?— A. It is a letter that was published some short time ago. It is public matter. I do not know who published it. Q. Who is the authority for the letter?— A. Why, Mr. Cowen. Q. Mr. Cowen of the Baltimore and Ohio? — A. Yes. Q. He signs this letter? — A. To the Interstate Commerce Commission; yes. Q. That IS what we are looking for. I want to know the author. — A. (Reading:) "Receivers Cowen and Murray addressed a letter to the Interstate Commerce Commission stating their purpose to adhere to published tariffs and to report to the commission, in lieu of other agency, the failure of other roads to do the same. "Chairman Knapp. of the Interstate Commerce Commission, has received a letter from Receivers Cowen and Murray, of the Baltimore and Ohio Railroad, announcing that after January 1 that railroad mil maintain scrupulously the published tariff and rates filed with the commission, and will appeal to the com- mission for aid in cases coming to their attention of railroads failing to maintain rates to the detriment of their interests. This step is an important one, which will interest largely all other railroads. What the attitude of other roads will be is unknown here. The letter in full is as follows: " ■ Within the territory north of the Ohio River and east of the Mississippi the railroad carriers are transporting the larger part of the interstate traffic at rates less than those shown in the published tariff filed with your commission, which are by statute the only lawful rates. "'While this condition continues there will exist the unjust discriminations and the unjust preferences and advantages between persons, localities, and par- ticular descriptions of traffic, the prevention of which is the main object of the act of Congress establishing your commission. Only by securing the uniform charging of the published rates can the just equality of service and of charge required by law be secured either between persons or between localities. NO AGENCY FOR RESTRAINT. "'Heretofore the Baltimore and Ohio Railroad Company and its competitors within the territory above mentioned have maintained joint agencies or associa- tions under various agreements intended to act as a restraint upon each carrier and to prevent the secret cutting of rates on competitive traffic. It has been the practice for each carrier to report to a joint agency or association any departure from the published rates by a competing carrier, to the end that the facts might be fully ascertained and the unfair competition stopped. "'The Supreme Court of the United States has now fully determined the so-called antitrust act applies to railroad carriers, and in legal effect prohibits any agreement between them which restrains competition in any degree, even though such agreement goes no further than to secure the observance of the restraints imposed by the act to regulate commerce. It is therefore no longer lawful for the carriers to create bv agreement between them joint agencies or associations as formerlv, to prevent the cutting of rates, however unlawful. Without some impartial body to investigate the complamts of one competing carrier agamst another and to check illegal rate cutting, if found to exist, it will be practically impossible for the railroad carrier alone to prevent that form of competition between them, however earnest the gi-eat majority of the carriers may be to stop it. " • The Interstate Commerce Commission not only commands the respect of the railroad carriers for its impartiality, but also in its powers to investigate com- plaints of illegal rate cutting and to put a stop to all illegal practices far sur- passes any association which the carriers have ever created by agreements between themselves. TO SEEK AID OF COMMISSION. " ' We see no reason why the commission should refuse its aid to the carriers in an effort to prevent competition from taking the form of illegal concessions 638 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. through secret rates, drawbacks, rebates, and other devices; and we see no reason why the carriers should not seek the aid of the commission in such an effort hy reporting to the commission any departure from published rates, to the end that the facts may be fully ascertained and the illegal practice stopped. " ' The receivers of the Baltimore and Ohio Railroad Company will maintain, on and after January 1, 1899. upon the lines operated by them, the rates, fares, and charges shown on the tariffs pviblished and filed with the commission as required by law.' " After that day; a practical admission that they have not previous to that time; put your own conclusion on it. [Beading:] '• ' We believe that all, or nearly all of the rail^road carriers within the territory above mentioned, will likewise maintain their published tariff rates from that date.'" Referring to the fact that they did not. [Reading:] " ' To prevent a relapse, however, to the conditions now existing, it is necessary that no important carrier shall long depart from the published tariff rates. Should such a departure occur, to the detriment of the interests in our charge, we shall invoke the aid of the commission to stop it. We hope and believe that many other carriers will do the same. In the anticipation that the other railroad carriers formerly associated with the Baltimore and Ohio Railroad Company in traffic associations will adopt the course decided on by us and above outlined, we have taken the liberty of transmitting to each such carrier a copy of this letter.'" Q. (By Mr. Ratohford.) Is that letter the original? Is that "letter signed by the receivers of the Baltimore and Ohio? — A. It is on file; I suppose it must be; it is on file in the Interstate Commerce Commission. Now, gentlemen, there is an absolute admission on the part of the Baltimore and Ohio Railroad that rebates, drawbacks, and other devices have taken place up to January, 1899. Q. (By Mr. Clarke.) Have you any evidence that connects that with the busi- ness of the Standard Oil Company? — A. Oh. no. These discriminations are not upon oil, but they are upon the tonnage offered by the large corporations — no question about that. Q. (By Mr. Farquhar.) Possibly individuals, too? — A. Individuals as well, possibly. That is the bane of the whole thing, these discriminating rates. Q. Have you done with that? — A. I think the commission can understand clearly from that paper that the Baltimore and Ohio have given these rebates, and they have got tired of doing it, and will obey the law. AS TO B. B. CAMPBELL. Q. (By Mr. Farquhar. ) I would like before we leave this part of it to have presented the evidence of Mr. B. B. Campbell in respect to those rebates. Mr. Campbell was the signing party of the Standard Oil Company and the United Pipe Line? — A. I do not understand. Q. He was the signing party in respect to the suppression of all rebates and drawbacks? — A. ' Yes. Q. The document, as drawn up in 1880, between B. B. Campbell and the Penn- sylvania Railroad Company? — A. Yes.> Q. Did he turn as a witness against the railroad after he received the rebates?— A. Yes. He could not help himself; he kept out of our way for a long time.- Q. Then Mr. Campbell himself was the signer of the original agreement between the railroad and the Standard and all the other producers? — A. No. Q. Well, it is testimony here: I have the evidence here taken bv the Bacon com- mittee.— A. But when I come to explain to you before I complete this argument, I will answer all those questions. Whereupon at 5.05 p. m. the commission adjourned until 10 o'clock to-morrow morning. • Washington, D. C, Tuesdaij. S<-2>t<-),)her l..\ lS99—a. m. The commission was called to order at 10.30, Mr. Phillips presiding. Lewis Emery, Jr., again on the stand and examination resumed. Q. (By Mr. Phillips.) You can resume your testimonv and proceed in vour own way.— A.. You only let me get to 1872, yesterday, and then vou hurried m"e on to 1889 and 1899. EEPORT OF EXECUTIVE COMMITTEE OF PETROLEUM PRODUCERS' UNION, 1872- THE FIRST RUMORS OF THE NEW POWER. I got up to the South Improvement contract yesterday, and I showed you its repeal. I read from a public document as follows [reading]: "History of the 1 See p. 863. 2 See p. 635. STANDARD OIL COMBINATIONS: EMERY. 639 rise and fall of the South Improvement Comijany. Report of the executive com- mittee of the Petroleum Producers' Union, embracing the report of the subcom- mittees on transportation, legislation, investigation, and treasurer's report, at Oil City. Pa., 1872. "On February 20, 1873, rumors were rife in business circles that the railroads, having their main lines or feeders extending into the oil regions, had formed a joint arrangement to advance the freights on crude and refined oils from the fields of production to the seaboard. " With a production of 16,000 barrels of oil per day, and the coming of spring, which always brings renewed enei'gy to operation, and an already depressed mar- ket, this rrrmor created the greatest uneasiness in the minds of all operators and shippers. Nothing definite could be ascertained, and nothing further than the rumor could be heard, and the region settled back to fancied security. " In a few days, however, a second rumor was circulated, that not the railroads, but a company bearing the wonderfully inappropriate cognomen of the • South Improvement Company ' had purchased a right to all petroleum transportation, and were to arrange the rates of shipment of all the oil produced, and that an immediate advance of 50 per cent was but the first advance, with promise of more in the future. THE ADVANCE OF FREIGHT RATES — PROTESTS AND STRUGGLES. " This, however, seemed so quixotic that it did not meet with general credence until it was confirmed by telegTams on the 26th from railroad officials to their agents at shipping points in the oil regions advising them of the new rates, to take effect immediately. An advance of 100 per cent on all freight charges, on crude and refined, was equivalent to a complete paralysis of all operations for and in oil in the entire region. But oil men are made of sterner stuff than to tamely submit to so gross an outrage, let it come from what quarter it would. " The thousands of operators were electrified with indignation, and rose as one man to defy and resist the levying of a tribute so palpably unjust. Meetings were called in all the principal towns and cities. The honor of calling and organ- izing the first meeting is conceded to Tidioute. E. E. Clapp was elected to the chair, and resolutions indicative of the spirit and determination of the producers of that field were passed. It was resolved, inter alia, to shut down all tneir wells until the old rates were restored, or until a new outlet could be found to remove their oil to outside markets, if such a step were necessary. " Delegates were also chosen to attend a mass meeting called to assemble at Titusville on the evening of the 27th, • to consider the necessity of constructing a railroad from Erie, by the way of Titusville, into the oil regions, as a competing railroad, connecting with water communication to New York and Europe, and such other business of interest to the people as might come before the meeting.' " The meeting at Titusville demonstrated the fact that the wealth, determina- tion, spirit, and practical ability of the men of the oil regions would render vic- tory for them in the battle with monopoly an absolute certainty. " The wonderful resources of oil men, when pressed by great dif&culties, here became apparent in the plans and suggestions laid before the meeting. Bailroad routes, with suggestions and estimates of cost, to reach the lakes on the north and railroads not in the combination on the south, pipe lines, and other remedies were suggested, and the feasibility of some, if not all, did much to reassure the mass of people that they v.-oald speedily find a solution of the difficulty. ■' THE SOUTH IMPROVEMENT COMPANY— THE REPEAL OF ITS CHARTER WAS OF NO PRACTICAL EFFECT. I read so much only to show the spirit aroused at the time of the first notice of the formation of the South Improvement Company. Now. if you will turn to page 15 of my pamphlet, you will find an act to repeal the charter of the South Improvement Company. But on page 15i I have shown how a charter m the very same terms was bought by the National Transit Company, which is one of the companies of the Standard Oil Trust. Clement A. Griscomb was president of the National Transit Company; he is not at this moment. He is a director of the Pennsylvania Bailroad. I have explained to you and read to you from my book of the demoralized condition of the trade, at the time when tne South Improvement Company act was repealed, through this tremendous pressure on the railroads on the part of this South Improvement Company. You will see that all this work that was done between these two Northern trunk lines of rail- road and the Pennsylvania in the South was repealed by this act. I propose to 640 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. show that, though the contract was annulled, the South Improvement contract, as well as the contract between the Standard Oil Company and the railroads, the annullment was never lived up to, and the business of the country proceeded just exactly as though the South Improvement Company was in full force. If you will please turn to page 48 (see Fiftieth Congress, first session. House Reports, vol. y. pp. 361,363) [reading]: THE RAILROADS AGREE THAT THERE SHALL, BE NO DISCRIMINATIONS OR REBATES. Agreement between railroads and the petraleiun traije.e.vecntcd the ,?5th of March, 1S7J. ■ That all arrangements for the transportation of oil after this date shall be upon a basis of perfect equality to all shippers, iiroducers. and refiners, and that no rebates, drawbacks, or other arrangements of any character shall be made or allowed, that will give any party the slightest difference in rates or discrimination of any character whatever. That the present rates from Oil City. Union, Corry. Irvineton, Pittsburg, Cleveland, and other competing points shall be and remain in full force at following rates: ox KEFINED OIL, BENZINE, ETC. Per From Oil City, Union, Corry, and Irvineton to — loarrel. Boston SI . 6.5 New York 1.50 Philadelphia 1. 85 Baltimore 1.35 Prom Cleveland to — Boston _ _ 1 . 65 New York 1. 50 Philadelphia 1. 35 Baltimore. . .. _.. 1.35 From Pittsburg to — New York 1. 50 Philadelphia 1. 35 Baltimore 1. 35 ON CRUDE OIL. From Oil City, Union, Corry, and Irvineton to — Boston 1.50 New York 1.35 Philadelphia 1. 20 Baltimore _ _ 1. 30 Cleveland .50 Pittsburg .50 And said rates shall not be lialile to any change, either for increase or decrease, without first giving to William Hasson, president of the Producers" Union, at Oil City, at least 90 days' notice in writing of such contemplated change. In the distribution of cars for shipments, it shall be done without discrimination. On the basis as hereinbefore stated, the parties respectively agree to carry out the arrangements in good faith, and work for the mutual interests of each other. In witness whereof the parties have hereunto affixed their signatures this 35th day of March. A. D. 1873. For the Lake Shore and Michigan Southern Railroad Company, H. F. Clark, president: for tlie Erie Railroad Company. O. H. P. Archer, vice-president; for the New Yi irk Central and Hudson River Rail- road Company, William H. Vandeibilt. vit'e-pivsident; for the Atlan- tic and Great Western Railroad Company, Q-eorge B. McClellah, president: for the Pennsylvania Railroad Company, Thomas A. Scott, vice-president. On behalf of the producers and refiners; Gr. Shamburg, E. G. Patterson, William Hasson, Henry By rom, Wil- liam Parker, John .1. Fisher, Oil Citv \)roducer8 and refiners; J. J. Vandergrift, A. P. Bennett, Williniu M. Irish, William T. Scheide, Oil Ciity producers and refiners: Henry N. Rogers, F. C. Fleming, Josiah Lombard, jr., New York refiners; B. Vaughan, Boston refiners. STANDARD OIL COMBINATIONS: EMERY. 641 Q. (By Mr. Phillips.) Is that the same Mr. Rogers who testified before irs? Is it a mistake in the print, or is it a different man? — A. I do not know whether this is the man. This is in the year 1874; but I think Mr. Archbohl and Mr. Rogers did not go into the Standard Oil Company until 1875. I do not know whether it is the same or not. It does not make any difference. These gentlemen stood on the rostrum with uie three or four years ti.'^hting this very principle. Q. Did he have a refinery on Oil Creek? — A. Yes; he did. Q. (By Mr, Farquhar.') This Rogers had a New York refinery. This is another Rogers; it is H.N. — A. Yes;"l think you are right. Page 5i [reading]; THE OPEN RATES RAISED AGAIN. [The New York Central and Hudson River Railroad Company, General Freight Agent's Office, Grand Central Depot.] New York, September 9, 1S74.. Dear Sir; Conunencing October 1, 1874, the following rates on refined and crude oil shall govern all lines; The rates on refined oil from all refineries at Cleveland, Titusville, and else- where in and adjacent to the oil region shall be as follows; Per barrel. To Boston 83. 10 To Philadelphia 1. 85 To Baltimore ._ 1.85 To New York 3.00 Net rate on Albany 15 per cent less, from which shall be refunded the amount paid for the transportation of crude oil by rail from the mouth of the pipes to the said refineries, upon the basis of 14 barrels of crude oil to the refineries for every 10 barrels of refined oil forwarded by rail from thera (the refineries) to the East- ern points named. Settlements of this drawback to be made on refined oil forwarded during each month. No rebate on these rates will be paid on oil reaching refineries direct by pipes. On crude oil the rates from all initial points of rail shipments in the oil region shall be as follows; Per barrel. To Boston 81 . 75 To New York (net rate on Albanv 15 per cent less) 1 . 50 To Philadelphia - 1-50 To Baltimore 1-50 From which shall be refunded 33 cents per barrel only on oil coming from pipes which maintain the agreed rates of pipage. A barrel shall in all cases be computed at 45 gallons. You will observe that under this system the rate is even and fair to all parties, preventing one locality taking advantage of its neighbor by reason of some alleged or real facility it may possess. Oil refiners and shippers have asked the roads from time to time to make all rates even and they would be satisfied. This scheme does it, and we trust will work satisfactorily to all. Respectfully, yours, J. H. RUTTER, Geveixd Freight Agent. THE AGREEMENT THAT THERE SHOULD BE NO DISCRIIIINATION WAS NOT KEPT TWO WEEKS. Thedateof thatcontractwasthe35thday of March, 1873. I tried to get yesterday a copy of the Hepburn report, but I could not. But in 1879 George R. Blanchard the present manager, I think, of the Central Traffic Association (am I right?), of Chicago was called to the stand by the Hepburn committee. You all know what that was— a committee of the New York legislature. He swore that this contract that I have just read, which is so soundly and so fairly worded, was not respected two weeks.' I put that in as a part of my evidence, and I refer you to the 1 "October 1 1873, * * * I first became general freight agent of the Erie Railroad * * * At that time Adnah Neyhart, of Tidioute, Pa., * * * shipped small q^uantities of refined oil, for which he received a rebate of over §7,000 on his shipments for the prior month, to wit, Sep- 642 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Hepbtirn committee — that this agreement, solemnly drawn and signed by the railroads, that I have raised a question alioiit in my testimony here before yon, was abrogated within two weeks after it was signed, according to the testimony of George R. Blanchard. Does the commission want me to go into the fact and prove rebates and drawbacks from the date of this contract up to 18TTV Q. (By Mr. Clarke.) My understanding is that these rebates and drawbacks are conceded by the railroad companies and the Standard Oil Company up to the passage of the interstate-comnrerce act. If that is so, it is not at all necessary. — A. I can produce every contract. REBATES PAID O.XLY TO MEMBERS OF THE STANDARD OR THE SOUTH IMPROVE- MENT COMPANY. Q. (By Mr. Farquhar.) In that matter of 1880, which concerns the agree- ment of "the Producers' Union, would you have had that agreement at all unless they had made rebates and discriminations from 1872 up to INHOy It is conceded that in all the arrangements the rebates were payable from 1870 tip to 1880.— A. To whom? Q. To all parties. — A. No. Q. Well? — A. Only to those connected with the Standard Trust or the South Improvement Company. If you were not a member of that organization, you could not participate in the drawbacks. Q. But that agreement or purchase which was entered into afterwards, in 1880; Mr. Campbell was president of the Producers' Union at that timey — A. Now, you are getting too far; I will come to that.' Q. Oly, I understand that. — A. I will give you the whole history; but 1 want to know whether you want me to prove to this commission that rebates were paid from 1.S72 to 1887, when the business became an absolute monopoly; when the Pennsylvania Railroad surrendered everything over to the Standard Oil Trust? MAY NOT THE EMINENT GENTLEMEN WHO SAY THE STANDARD HAS RECEIVED NO REBATES FOR TWELVE YEARS BE MISTAKEN? Q. (By Mr. Kennedy.) The other commissioners have said that there was no question about the practice of paying rebates before the passage of the interstate- commerce law. Since then there is some question, and it seems to me that the issue shapes up in this way; The Standard Oil Company people have come here and sworn that they have not asked or received rebates hince the passage of that act. They say they were too shining a mark under that act to get or ask for rebates.' All they desired was that they hold up the published rates and hold others to them. Now, it seems to me the thing for you to do, if you can do it, is to prove that they have taken rebates since that time. If you do that you can convict somebody of perjury. — A. I think that it is clearly proved that rebates were paid. Mr. Rob- erts, president of the Pennsylvania Railroad, went upon the stand in the court of cnmmon pleas of McKean County and testified that his railroad had not paid rebates from the time the interstate-commerce law took effect. Mr. John S. Wilson, whose testimony I have read, the general freight agent, corroborated Mr. Roberts. I have here the testimony in all these cases, and the witness of a hun- dred men, proving that Mr. Roberts and Sir. John S. Wilson were mistaken in their statements.^ You say that y )u have letters here filed by Mr. Archbold from honorable men representing the several railroads of the country. •* I have no doubt of their honesty. I- have no right to even cast a refiection upon Mr. Archbold or upcm his testimony, but I do venture to say that if Mr. Q-eorge B. Roberts, presi- dent of the Pennsylvania Railroad at that time, now deceased, and Mr. John S. Wilson, its general freight agent, will come upon the stand and make oath that tiiiubei-, 1873. Notwitlistandins this rebate the oil shipments via the Erie where so small in proportion to those by its rivals and to the aggregate seaboard receipts that I looked for the n-itsons. ***!*** found the agreement next prior to that time as to shipments and rates was the one already in evidence between producers, shippers, refiners, and railroad com- panies, dated March ;i5, 1S7;J. I asked why that contract was not observed, and was then con- vinced in reply that the agreement of March LT) lasted less than 2 weeks, and that at that early date the Emmre Line was receiving a large druwback, or commission, from the Pennsylvania Railroad." Testimony of G. H. Blanchard; Proci'i.idings of the Special Committee on Hail- roads, appointed under a resolution of the Assembly of the State of New York, 1879, pp. 3393, IBM. 1 See p. 663. a See p. 6,34. = See Mr. Archbold, p. ra: ' .See pp. 518, 636. STANDARD OIL COJIBINATIONS: — EMERY. 643 no rebates have lieen paid since tlie interstate-commerce law took effect, and following their testimony the anditors and bookkeepers of the road go upon the stand and swear that rebates have "neen iraid. and we prove from 8 to 38 cents a barrel, and my claim is settled, and I receive my 835,000 and costs of the suit, may not these gentlemen who have written these letters be mistaken? I would like to see their auditors and bookkeepers put upon the stand, as we put those of the Pennsylvania Railroad. We did not get this information until we brought their books into court. When they saw they were in a corner, they surrendered. I told you that out of a production of i^.ooO.OOO barrels of oil a year the outsiders handle. I think, not over 3,000.000 barrels altogether, including the fields of Ohio, West Virginia. New York, and Pennsylvania. And do you think if these small men. handling this small quantity of oil, go into the courts and prove rebates froui April 4, 1887. when the interstate-commerce act took effect, up to August, 1888'. as we did in my own sriit, and then bring suit before the Interstate Com- merce Commission for rebates from that time up to 1893. and the Interstate Com- merce Commission render a verdict of S8().000 against the railroad;' if these men of the Standard Oil Company, with their ability, as one of the witnesses has stated, or through their great competency, throtigh their great brain, have carried oil to the ends of the earth as nobody else could, do you think for one moment that the Standard Oil Company would allow those small men, who have not the brains or the ability, to beat them on the transportation? UNFAIR FREIGHT RATES. DKCRIMIX.ITIXG FREIGHT RATES, CAUSE ALL OUR COM- PLAINT AND TROUBLE. Bring into the courts of this land the books of these railroads. They are responsible to-day not only for the acts of the Standard Oil Company, but for the oppressive monopolies in every line of business. Go to the stock exchange, where members were levied upon a dollar a head upon every cargo that came from the Western country. Go to the p:i;oduce exchange, where they were levied upon bar- rels of flour that came from the Western fields. The interior mills of the country are paralyzed because of this unjust discrimination; I am a miller, and I make 500 barrels of flour a day. All these trusts, I say, are built up at the instance of the railroads; and I make the broad charge that had they obeyed the law and given equal rights to all shippers there would have been no trusts. There would not have been the dissatisfaction in the country. Go to Duluth, if you choose, to-day, and try to buy a carload of coal that you wish to take out into North Dakota, where I have a wheat farm. The coal is mined by the miners at from 35 to 50 cents a ton, drawn to Buffalo. I think, at a dollar, and loaded on the ship at a cost, as I understand, of less than 81.75. Allow 75 cents for transporting it to Duluth and you have s-,'.50. Three hundred and thirty-four miles from Duluth, by the Great Northern road, where my farm lies, west of Grand Forks 16 miles, bituminous coal is sold at 86 and 87 a ton. I say that the discrimination is the result of the coal combination, and the railroads are responsible for it. EXFORCE THE LAW AGAINST GREAT LAWBREAKERS AS WELL AS SMALL. The milk in the cocoanut of the success of the Standard Oil Company is trans- portation: unfair, illegal discriminations in transi)ortation. Do you think that you can not prove rebates upon oil if vou call the witnesses, with books and papers? The Pennsylvania Railroad had rather pay 8200.000 than permit me, or allow Logan. Emery & Weaver, and the court, to look over that 3 tons of books that were brought up to the court-house in McKean County. It would have sent them to prison. The injustice in this country is that a poor devil goes along the street and steals a loaf of bread when he is hungry, and he is arrested and taken to the courts and sent up for 10 or 15 days. If he steals a coat to keep his body warm he is sent to prison for a year. These great corporations, the men manag- ing them, come into court and say "We won't bring out our books; we wont answer your questions ; because if we do we shall incriminate ourselves. 1 here is the difficulty. The Sherman Act— the Federal act— has been proven constitu- tional by the highest tribunal in this land, and if it was enforced these people would go to prison. You can prove it, Mr. Chairman and Commissioners, if you choose- it is in your p(5wer to prove discriminations, I believe, to this moment, if there is any truth .in the letter of Mr. Cowen and Mr. Murray. 1 See Mr. Lee, p.2W: Mr, Archbold,p.516. "See p. 035, top; Mr. Monnett, p. 307, top. 644 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. REFINERIES ABSORBED OR WRECKED BY THE STANDARD. Please turn to page 78 of my pamphlet, where you will find a list of refineries bought, leased, squeezed out, or bankrupted by the Standard. The list is taken from my testimony before the Committee on Manufactures in IHsy. [Fiftieth Con- gress, first session. House Eeports, vol. 9, pp. 2y2,233.] In this list there are sorae refineiies that went out of' business in 186T. I do not chai-ge their going out of business to the South Improvement contract entered into by the railways; they went out previous to that. But you come up to 1870 and 1871, when some refiners had very large rebates, and otheis very small ones, or none at all. As I said yesterday, the Standard Oil Company have no patent on rebates. These same railroads have been violating the law ever since they were created, by giving rebates and drawbacks: but never so much, previous to 1872, that the average business man could not stand xxp under them. He could not make as much money as his neighbor, and he used to wonder why; and when this exposure came he learned the reason. But the contract of the South Improvement Company, and the verj- large rebate, the 100 per cent rebate, given to the Standard companies, was the means of driving the most of these refiners out of business. Now, then, these refiners were, most of them, in existence at the time of the South Improvement Company, 1S72. a contemporaneous date. I have read to you this morning the repeal of the South Improvement Company charter. I have read to you the fair contract between the producers and refiners and the Standard Oil Company and the railroads. I have also said to you that the con- tract was violated within two weeks, according to the evidence of George R. Blanchard, formerly, and now, perhaps, the Central Traffic Association manager, WHY REFINERS FAILED — TESTIMONY OF FRANK ROCKEFELLER. The re.bates from 1873, that are said to have gone out of existence practically, were so great that the business of the average refiner was silenced. I want to read to you from the evidence of Frank Rockefeller, whose testimony was given before the Congressional committee, July 7, 1876. I read from clause L. " Q. Do you know how many refineries there were in Pittsburg prior to this alleged combination? — A. I have been told that there were sixty odd refineries. ■' Q. How many are there now? — A. I was told by the same parties that there were now less than twenty, and very few doing any business. " Q. (By Mr. Reagan.) What is the cause of that reduction in the number of refiners? — A. I suppose the main cause has been the fact that they could not make money. I have understood that the same lever was brought to bear upon them as upon the Cleveland refiners. We had in Cleveland at one time about thirty establishments, but the South Improvement was formed and the Cleveland com- panies were told that if they didn't sell their property to them it would be value- less; that there was a combination of railroad and oil men; that they would buy all they could, and that all they didn't buy would be totally valueless, because they would be unable to compete with the Southern Improvement Company, and the result was that out of the thirty there were only four or five that didn't sell. " Q. From whom was that information received?— A. From the ofiicers of the Standard Oil Company. They made no bones about it at all. Thev said ' If you don't sell your property to us it will be valueless, because we have got advan- tages with the railroads.' " Q. Give the names.— A. J. D. Rockefeller, H. M. Flagler, and O. H. Payne. "Q. (By Mr. Ross.) Mr. Payne is the son of a member of Congress of that name? — A. Yes, sir. "Q. Have you heard these gentlemen say what you have stated?— A. I have heard Rockefeller and Flagler say so; other parties have told me that Payne had used the same argument with them. " Q. What other parties?— A. I won't give the names now. There are some 20 men in Cleveland who sold out under the fright, and almost any of thehi' would tell you that story. " Q. Give us the names of some of those that sold out?— A. J. W. Faucett, of Cleveland; W. C. Scofield, Joseph Stanley, John Critchley. Those are some of them. " Q. (By Mr. Dunnell.) Do you make the same statement with regard to the shipment of crude oil to the seaboard that you do with regard to the shipment of refined oil? — A. We do no business of that kind." If you will refer to my pamphlet, page 82 (or to Fiftieth Congress, first session, House Reports, vol. 9, p. 334) , you will find that in Pittsburg there were 58 refin- eries in 1877. Thirty refineries had been crushed out and dismantled and no record left. The 28 were what were running and what was left. STANDARD OIL COMBINATIONS: EMERY. 645 Q. (By Mr. Phillips.) What date?— A. 1877. The remaining 38 had been bought or leased by the great monopoly. RAILROAD OFFICIALS STOCKHOLDERS IN THE STANDARD. I do not read now from the same book, but it is the same testimony and it is in the same book, but I can find it quicker in this one. [Reading:] " Q. You spoke a while ago of having personal knowledge of certain railroad ofScials having been stockholders in the Standard Oil Company. How do you know that?— A. I know it from the officers of the Standard Company telling me that they were stockholders. " Q. Who are they?— A. William H. Vanderbilt, -^dee-president of the New York Central, was at one time, also Amasa Stone, of Cleveland, and I have very good reason for believing, though I do not know, that Mr. Devereaux and Mr. Newell, both stockholders at the present time. Mr. Stone sold his stock some two years ago; at the time when he qiiit the railroad he put the stock on the Cleveland mar- ket, and is not, I believe, a stockholder to-day. THE OIL POOL — THE QUESTION, WHO GOT THE REBATES? " Q. (By the Chairman.) Give us the names of the officials of the railroad that you think received the benefit of this rebate. — A. Understand me; I do not say that they did get it. It is merely my opinion. " Q. Give us the names of the gentlemen who you think do reap the henefit of that rebate. — A. I think that Dr. Devereaux gets it, and that Mr. Newell gets it; that Tom Scott gets it, and that Mr. "Vanderbilt gets it, and other officers of those roads, whose names are not in my mind just at present. " Q. What do you mean by a pool — a pool among the railroads or among the oil men? — A. I do not give this as a positive fact, but as I understand the argu- ment, I understand the New York Central, the Erie, the Atlantic and Great Western, the Pennsylvania Railroad, the Cleveland, Columbus and Cincinnati, and the Baltimore and Ohio railroads had a pool or combination for the purpose of shipping oil, and oil only, and in this pool the Baltimore and Ohio gets a cer- tain number of barrels to go over its road; the Lake Shore has so many to go over its road; the Pennsylvania got so many to go over its road from different points in the country, but on oil shipped over these roads by the pool to the Standard Oil Company there is a rebate or drawback from the shipment of so much, which is paid into this pool, over whichever road the oil may go, and the rebate is divided up between the Standard Oil Company and the railroad officials. ■'Q. The railroad officials, do you say? — A. So I understand it; I do not say that of tny own knowledge. " Q. Then it does not go to the railroads themselves? — A. No, sir. " Q. But to the railroad officials? — A. To the railroad officials; yes, sir. . •' Q. How do you think it stands related to Cleveland? — A. We should do the same as we have done in the past years and are doing at the present time. We are shipping our oil at the present time by lake and canal because we can not ship by rail without losing money; by lake and canal we can just save ourselves." This was testimony in 1876, and the contract that I have read was taken October 1, 1874. Have you any doubt of rebate (after this evidence of these men) existing between 1873 and 1876? Why, I could read you volumes upon it. LATEE EKBATES— THE WITNESS COLLECTED REBATES UP TO 1893. Q. (By Mr. Ratchford. ) I want to remind the witness that if he seeks to prove before this commission that rebates were paid 33 or 33 years ago, his testimony avails very little: what we want to know is whether these rebates have been paid last year or the year before. You are wasting your time in endeavoring to prove something of little consequence. I do not understand the Standard Oil Company has disdaimed discriminations in their favor prior to the passage of the interstate-commerce law. I would ask that in order to make your testimony effective and to say the most in the least time possible, you confine yourself to recent years.— A. That is what I asked yesterday morning, whether the question was to be taken up from the beginning, and I understood the object was to trace it from the beginning. The witness on the stand stated that no rebates were paid. I was endeavoring to show that contracts were still in existence and I was about to 83a 42 646 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. If these contracts are still in existence, as yon observe, you will make a point A. I do not mean to say they are in existence except by rebates and the methods of carrying out Q. (By Mr. Phillips.) He stated yesterday that the National Transit Company was organized under precisely the same language as the South Improvement Company, and he is tracing it on from that.— A. I beg the pardon of the gentle- man and the commission, but I was simply following out that which I was asked to do. Q. (By Representative Livingston.) Do you lay down the proposition now that that contract is binding and is being enforced? — A. No. Q. How long since it expired? — A. It was supposed to expire 2 weeks after it was made, so far as the fair rates were concerned, the agreement between all the railroads in this combination to accept the rebate system entirely, and get the opportunity to go on as it had done in former years. I am trying to show you that from that time up to the present time these rebates were participated in, I do not say by the Standard Oil Company, but I do say that we have collected them on oil we shipped, and I suppose they have on theirs. Q. How lately did you collect any rebates?— A. Up to 1893.' Q. That is the way to get at it. — A. I stated it yesterday; I gave the evidence in full yesterday, and produced the papers that rebates had been paid and acknowledged up to 1893. Q. (By Mr. Ratchfobd.) The point is this; what is the use of going beyond 1893? — A. I do not want to if you do not want me to. Q. (By Mr. Kennedy.) These rebates ordered paid in 1893 were for oil carried when? — A. From 1888 up to 1893. because we got judgment up to 1888 in the courts of Warren County, and the balance was carried into the Interstate Commerce Commission. Q. (By Representative Livingston.) It was made mcumbent on this commis- sion by Congress to learn, if possible, whether by combinations, trusts, or corpora- tions legitimate competition was interfered with or lessened in any of these indus- trial pursuits. I want to know if you have any testimony that vnll lead up to the fact that the railroads, as you asserted yesterday, are largely to blame for this discrimination in favor of one oil company or against another? — A. I did not say that. I said that the Standard Oil Company under these former contracts had had rebates, and I said that, though some of these contracts had been annulled, their provisions are practically carried out, and I cited instances where the trade is being affected at the present time. Q. I want that testimony explicit, if you have it, before you get through with your testimony. Mr. Phillips. The Senator will proceed in his own way and come to that at the proper time. HOW THE STANDARD GREW IN 7 YEARS PROM i PER CENT OP THE EEPINING- CAPACITY OP THE COUNTRY TO 90 OR il.5 PER CENT. A. More than 9.5 yjer cent of the refineries that existed in 1873 were driven to the wall before 1877. I can give you the proof of it, but I will make that bald statement. I proved yesterday, by the testimony of Mr. H. M. Flagler, that the Standard Oil Company was formed in 1870 in Ohio. I also proved that in 1873 W. H. Vanderbilt and other railroad magnates became stockholders of it. I also proved that rebates had been paid, and I am prepared to prove that they were paid up to 1879. The testimony was taken befcjre the Bacon committee of 1888. First, Mr. H. M. Flagler swore (Fiftieth Coii,i;TfM.s, first session, House Reports, vol. 9, p. 288) they had a capacity of 600 barrels i)er day of crude oil in their refin- ery, the production at that time being about Hi, 000 barrels a day. That would give them 4 per cent of the refining capacity at that time. At that time there existed in the oil country, spread out from Louisville, Ky. , to Portland , Me. , more than 250 refineries. Mr. Henry H. Rogers and Ja.bez H. Bostwick, deceased, members of the Standard trust, swore, in 1879, before the Hepburn committee, ' See pp. 6(19, 6;^8, 516. ■^ "Q. What are the refiners about here with whom that alliance was made, and are they or are they not all of them ct.tven.d by the Standard Oil arrangement? — A. They would come in and then they would go out; thn-e is no refiner that I know of, with one exception, about New Yfirk, but what has been in the association. " Q. What are the refiners that are now in assoi.dation of the Standard Oil? — A. The people that are woi'king in harmony with us comprise about, I should think, 90 or 95 per cent of the refiners. " Q. Now tell us their names, the leading ones.— A. Some of the leading ones? The Standard STANDARD OIL COMBINATIONS: EMERY. 647 that they owned 90 to 95 per cent of the oil industry of America: that is, its refin- ing capacity.- Bear m mind that in 1870 and 1S71 they owned 4 per cent, and in the briet space ot 7 years they silenced the fires in 9.5 per cent of the refineries except their own. The liistory is here. You ought to have it. Every man ought to read it and know the method by which they accomplished that feat of throt- tling that great industry from 1873 to 1879. S,\ PT ¥'^- Phillips.) Do you desire that that shall be put in the record, so it shall be before the commission? j-^li,^'?'^-'^®^^'^*™*'^*^''''" I^iviKGSTON.) Let him state in his own way how they did that in 1870.— A. My own way is simply the record of this book— the Com- monwealth V. the Pennsylvania Railroad Company, a suit which was for 3 yeto being tried and the testimony being taken. Q. Can you state in a few words how it was?— A. Discrimination. Q. What particular method?— A. No different method; only what I have explained; the railroads paid it to them. Q. If the railroads were guilty of this, tell us how they did it; in the form of rebates? — A. Certainly. For instance, a man owned a refinery or several refin- eries m the oil country; at the beginning of the business the Standard Oil Com- pany did not have any. They gave a rebate to the men that owned the pipe lines of 33 cents a barrel for all oil loaded upon the cars on the railroad. The man that owned a refinery on the creek and owned his own pipe line was not permitted to have that rebate. There was 33 cents against him right there. Q. That was one of the methods by which they drove them out of the busi- ness?— A. Certainly. How could you do business against 32 cents profit? The 33 cents alone would have driven them out; but in addition to that, they got 49 cents more. Q. How?— A. Transportation by the railroad and under agreements. That is the way they got from 4 per cent of the oil industry in 1871 to 90 or 95 per cent in 1879, and the whole country was silenced. IT WAS NOT TO BENEFIT THEIR STOCKHOLDEES THAT THE RAILROADS MADE ALLIANCES WITH THE STANDARD. Q. What did the Standard Oil Company give the railroads for doing that for them?— A. I have just read Mr. Rockefeller's testimony, and he gives the names of the men. He said the railroads did not get it. I read you his evidence; take it for what you choose. He was driven out of the business. Out of the fifty odd refineries in Cleveland, 30 remained, and they were owned by the Standard Oil Company. Q. Well, you do not mean to say that the railroads lose that 49 and 33 cents? They recoup somewhere? — A. I mean to say the stockholders did not participate in it. _ Q. The stockholders lost it? — A. I can answer that question; that there were times when there were rebates of 40 cents a barrel; there were times when there were rebates of 81.06, and times when there were rebates of .81.33 a barrel — rebates paid to these people not only on crude but on refined as well, not only on their oil but on all the oil anybody else shipped.' Q. Now, then, as the stockholders evMently lost that, as you stated A. I do not know. Q. Where did the money go; where could it go? — A. Well, they may have spent it for wine or may have bought a farm — I do not know anything about it. Oil Company; Charles Pratt & Co. : the Sone & Fleming Manufacturing Co. : Warden, Frew t&Co.. of Philadelphia; the Standard Oil Company, of Pittsburg; the Acme Oil Refining Company, of Titusville; the Imperial Refining Company, of Oil City; the Baltimore United Oil Company, of Baltimore." Testimony of Henry H. Rogers; Proceedings of the Special Committee on Railroads, appointed under a resolution of the Assembly of the State of New York, 1879, p. 201.5. Mr. Rogers afterwards testified (p. 2754) that his estimate of im or H5 per cent was made "as regards the r'?fining capacity of the country." On pages a;!J5 and 2696 of the same report Mr. Bostwick's testimony appears, as follows: " If some one man has got 9.5 per cent of a business, of any commodity, I don't care what it is, they are pretty near masters of the situation. "Mr. Stebnb. Do you admit that the Standard has 90 per cent of the business? " The Witness. I do not know that I admit it, but I am just giving an illustration. " The Ch.vir.m.v'n. Mr. Rogers swears that they have from 90 to 95. "The Witness. I will say this much, that parties that are in harmony with one another I believe do 90, if not 95. per cent of the entire oil business." ' See Mr. Archbold, p. 5i 9. 648 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You have no evidence to show where it went? — A. No more than the testi- mony tliat was taken before Congress, which shows where it went. Q. What does the evidence say? — A. I can take Mr. Bockefeller's testimony; it gives the wliole history, and he is not the only witness. I read tliis morning that Mr. Vanderbilt got some of it and Mr. Devereaux got some of it.' THE WITNESS WAS TWICE FORCED OUT OF BUSINESS BY RAILROAD DISCRIMINATIONS. Q. (By Mr. Kennedy.) I would like to have you state to this commission how you disposed of your different refineries. What became of them? You had one in Crawford County, I believe, and one later in Philadelphia. — A. Undoubtedly someone has told you I sold out to the Standard? Q. No; I have no such information as that. — A. In Titusville, Pa., the Octave Oil Company had about eight hundred barrels capacity — eight hundred to a thou- sand — when the Standard Oil Company was formed. We were invited to come into the Standard Oil Company. We were told that if we would go in, we should be allowed quite a large amount of money for our refinery, taken in stock of the company — no money. No money was used in forming this octopus from the start. They only had a capital of $1,000,000, and the system was merely to turn the crank and make stock and take it from your pocket. The contract was presented to our company and it seemed to us illegal and not right, and we refused to go in. We attempted to do business the rest of 1873. These rebates I have named here were against us, although the South Improvement contract had been repealed. We struggled along until the latter part of 1873, and had to quit — shut down our refinery. It cost us §8.5,000 and I think we got .$4.3,000 for it. We were forced out. Q. Was that dismantled? — A. That ran for two or three years, and it was finally dismantled. The oil industry was at one time located in the vicinity of Oil Creek, or at least 95 per cent of the manufactured product of oil was in the State of Pennsylvania at one time, and at the coast harbor at New York and in Philadelphia, but the whole country has been depleted except some in Pennsyl- vania belonging to the independents — demolished. Q. I asked you about the other one. — A. The other one is in Philadelphia. y. Is that dismantled? — A. Yes. Q. (By Mr. Phillips.) When was that established? — A. It was built in 1880 or 1881, and built at the solicitation of the Pennsylvania Railroad, after the close of the suits of 1879, in which they said they were going to do better; but discrimina- tion again drove us out, which I have shown to you in this mass of evidence. I proved there was, on every barrel of oil I shipped to that port and about that works, a discrimination of from 8 to 38 cents a barrel.' Who could do business against it? CARS WERE REFUSED FOR CARRYING THE WITNESS'S OIL. I owned a pipe line in my country, from my wells and other wells down to the railroad, and they refused to furnish lue cars. The Pennsylvania Railroad owned 1,136 cars — tank cars, bulk cars. I used them for a time, until the order came from the Standard Oil trust that I must get no more oil. Previous to this time they had been delivering my oil. The /evidence all shows it, and there is the whole history right before you in that very book you refer to. Q. (By Mr. Farquhar.) A good deal of your own business is right here?— A. It is all there. Q. (By Mr. Phillips. ) You will make that a part of your evidence here?— A. Anything you want to use as evidence, use it, and anything you want to cut out, cut out. Q. (By Mr. Kennedy.) What became of your Philadelphia refinery?— A. It was sold to the Standard Oil Company. Q. Was it dismantled? — A. It was torn down. Another refinery close by, an investment of $4,000,000, that is gone — torn down. Q. (By Mr. Ratchford.) Did they buy it to dismantle it, as far as you know?— A. They undoubtedly did. Q. Dismantlingtookplacesoonafter the sale, didit? — A. Within a year. These cars were sent off into Colorado, Louisiana, and all over the country. A requisi- tion was made for these cars and every one sent out of the State excepting 348, by absolute count. I sent three men in different directions to know what became of the cars so quickly and to make reports back to me. Well, the oil commenced to come into my tanks so that I could not do anything with it, and my property was ' Hoe p. 645. '-^ See pp. «ii4, 6.35; Mr. Lee, p. 2«7; Mr. Archbold, p. 516. STANDARD OIL COMBINATIONS: EMERY. 649 put into the hands of the Producers" Protective Association, because they wanted me to shut down my wells. I had a large production at that time— 3,700 barrels a day— and I was blocked in it. With a great big refinery in Philadelphia and a railroad running through my land, I could not get a single car. Mr. Merchants, of the Rochester and Pittsburg Railroad, told me I could not, and it is in evi- dence: " They are going to take our coal traffic away from us if I draw your oil." I immediately applied to the coirrts against the Rochester and Pittsburg road, and made them bring cars in, such as I could. I got one in a week, or one in two or three weeks, or one in four weeks; but I was deviled to death, until I had to quit. THE WITNESS HAS NOT WISHED TO COMBINE WITH THE STANDARD. Q. (By Mr. Kennedy. ) I want to say to you in all kindness that I think you have made a remark that was rather discourteous and unkind in regard to somebody having told me that you entered the office of the Standard Oil Company in order to see them about buying your property. "When Mr. Archbold was on the stand he did tell about other people having gone to the Standard Oil Company to enter a combination with them,' but your name was not mentioned, and I have no information that you went there at that time. — A. It was brought up in 1888, and ever since I have had to face a charge that I was groping around trying to sell to the Standard Oil Company. Q. (By Representative Livingston.) Do you not think that you had good cause to go around to sell if you could sell?— A. Well, I did not want to. Q. I should have sold a long time since. — A. I would not. I have stuck to my text. I do not like it; it is gross violation of rights. Q. It is a question of sentiment with you principally? — A. No; it is a question of principle. I can not afford this — not now. I may if this thing keeps on — in 10 years longer, if God permits me life. I will go in the face of the law and protect my own rights if necessary. no bitterness in PENNSYLVANIA ON ACCOUNT OF THE REMOVAL OF EEFINEEIES. Q. (By Mr. Farquhar.) In this matter of the Standard Oil Company buying up reiineries and dismantling them or demolishing them, has it not been in Penn- sylvania for a great many years quite an irritating subject with a, great many of the smaller places there that they were abolishing these refineries and the trade passing away from this section? Has it not caused an imbitterment on the part of the people where the local refineries had been established and' were then taken away? Is it not a common saying in Pennsylvania, as against the Standard, that they have changed the business from the Pennsylvania field to New York? Has not this caused an immense amount of hatred, bias, and vituperation toward the Standard Oil Company? — A. No.' Q. You say no? — A. No. Q. In your own former testimony did you not speak of the complaint of the Pennsylvanians that Pennsylvania, and especially Pittsburg, had been robbed of the legitimate work that belonged to it; that the whole labor of the refining had been swept out of the State of Pennsylvania, wages had been taken away from Pennsylvania and had been taken down to New York by the pipe lines? — A. Since that time Pennsylvania has got more refining capacity than in those days. Philadelphia is one of the largest nranufacturing centers. They th'^mselves have come back to Pennsylvania and built up the most enormous works. That was not the condition when this testimony was given, but in these times it is different. PENNSYLVANIA IS THE BEST PLACE FOR REFINING OIL. Q. I am glad to know that. Now, as a refiner and business man, do you not think there were legitimate reasons why a good deal of the refining might better be done in New York, especially in view of the by-products that came into general use, than it could have been in scattered districts in Pennsylvania?— A. No; and I will tell you why. Q. So you think the representatives of the Standard Oil Company were incor- rect when they testified before this commission that it was purely a business matter, and not a matter of prejudice, that they had dismantled this business in Pennsylvania and Ohio and substantially done the work in New York?— A. No; that is entirely wrong. They are mistaken in the answer to that question, from 1 See pp. 530, 531. ^ See Mr. Lee, p. 268. 650 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the very fact that they have come back there to-day and are raanufacturing by-prodncts very largely. They have come back there because fuel is cheap; because natural gas is there in large quantities. There is an abundance of most excellent water, and I believe to-day they are sorry that every single refinery they have is not located somewhere in Pennsylvania. They have come back there and spent millions and millions of money in Pennsylvania since they made that excuse, that it was not the proper place to refine oil.' Q. {Bj Mr. Phillips.) You were about to go into the discriminations up to the time of the passage of the interstate-commerce law? — A. Yes; I have figured the matter up to 1899. Q. Then will you oblige the Commission by taking it up to that time? — A. I have no further evidence. Q. You have already covered that ground, you think? — A. I have given enough. I have some other matters where rebates are collected. Q. Then are you ready for questions in regard to the formation of these recent companies, pipe lines, etc., at this time? — A. Yes. THE WITNESS DETEEMINED IN 1800 TO UNDERTAKE A PIPE LINE TO THE COAST Q. It has been charged here that you and others are connected with a trust in various pipe lines in the oil country — the Pure Oil Company. Will you oblige the commission by explaining that? — A. In 1890, in the latter part of the year, owing to the high rates of freight over the railroads, the transportation of our refined and crude oil was so expensive that personally I determined to build a pipe line to the Atlantic coast, if possible. In a secretive way, as everything had to be done then and has to be done now, I placed in tlie field some twenty expert right-of- way men to secure the right of way for a pipe line. NEGOTIATIONS WITH THE READING. — "WE SHALL DISTURB OUR RELATIONS WITH THE STANDARD." I knew very well that it would be impossible for us to go clear through to the coast with a line, and I went to Philadelphia and saw Mr. McLeod, the presi- dent of the Reading Railroad. I presented my question to him, with a proposition that we would get the pipe, the right of way, to Williamsport, and there connect with the Reading Railroad, and with a right to lay our pipe line, for a time, as we could build it, on a right of way of the railroad. I told him the amount of tonnage that we would give him, and made preliminary arrangements, and he said to me: " You return after a time." I did; I was alone; nobody knew anything about what I was going to do. I met Mr. McLeod and Mr. John Taylor, the general manager, and Lowry Brill, the general freight agent. Lowry Brill is now of the Kew Jersey Central. All these gentlemen came into the room. And, by the way, there was one other man; I do not remember his name; anyway, all the chief officials of the road. I had to reduce my proposition to writing. The rate of freight was agreed upon and the basis of a contract was put in form, and I was to return at their dispatch when they were ready. I never got the dispatch. I returned, and took with me some other gentlemen from the office, and I said: "What is the reason of this?" And they said: " If we give you this contract we shall disturb our relations with the Standard Oil Trust, and we can not do it; " and I was dismissed. NEGOTIATIONS WITH THE NEW YORK, ONTARIO AND WESTERN. From there I went to New York, and had a conference with the members of the Columbia Oil Company of New York, Mr. King and Mr. McDonald, they being independent refiners of the coast. I laid the matter before them, and we went from there to the office of the New York, Ontario and Western Railroad, which runs from Oswego, N. Y.. to New York City. We then concluded. Brad- ford being just here [indicating on map] , to follow the boundary line of Pennsyl- vania bordering on New York, to a place called Hancock, N. Y., where the Erie Railroad crosses the Delaware, and into the small city or village of Hancock, and across to the New York, Ontario and Western Railroad, it being to the north of the Erie Railroad about 1 mile. THE STANDARD TAKES AN INTEREST IN EIGHTS OF WAY. Our men secured this right of way throu.gh the State without very much oppo- sition, because the Standard Oil Trust had not got onto our movements. Finally ' Soe Mr. Lee, p. :.'li8. STANDARD OIL COMBINATIONS: EMERY. 651 it became known; and all at once came in a number of men who were very anx- ious to build a line right exactly where we were building cue, although the Stand- ard Trust owned a line right parallel with the State line, back a little in the country, running clear through to New York City. They did not need the line, because lying in the ditch were two parallel lines running from the oil country, from Olean, to New York; but they did not want us to build a line, and these men, as set forth in this pamphlet, came along and took up rights of way on top of our rights of way. They went to the records of the several counties, and examined the titles to the land that we had got rights of way through; and if there were mortgages against these properties they bought the mortgages. The owner was in debt for the place, and if he had overstepped his rights in law, by holding that mortgage they induced that man to give them another right of way. In the State of New York, beyond the State line, we had about 6 miles to go down to the Delaware river; and they came along and bought strips of land right across our right of way in Pennsylvania— strips of land from a mile to a mile and a half long — throwing us into the courts in every instance where they could.' NEGOTIATIONS WITH THE ERIE. Before we started to lay our pipe I went to the Erie Railroad office in New York, and saw Mr. George M. Thomas — the president of the road, I think he was at that time. I met Mr. Thomas, a perfect strangel- to me, and I told him what we wanted to do. We wanted the right to go under the Erie Railroad at Bradford. "Why," he said, "certainly you can go under the railroad with your pipe." "Well," said I, "we are going down to Hancock, and we want to cross your rail- road or pass under it, either in the deep water of the Delaware or else through the bank of the road, with our pipe." " Well," he said, " we are disposed to assist all progress, and I will take that under advisement, and you can come back here in two weeks. But you go ahead and go under our road at Bradford or any other point that you can." I said I was very glad that he received me so kindly, and that he gave me so much encouragement; that I would commence laying our line on the Ontario and Western Railroad, a mile north of Hancock, within the borough limits. " Well," he said, " you return, and the matter will be fixed up all right." I said: " I am afraid that something will intervene, some power that will overcome you in this matter, and your views will be changed." "No, sir," said he, " the Erie Railroad runs its own business, and whatever I have done will be carried out; but this other matter I shall be obliged to take up in such a way that I shall be certain." I then got up to go, and he detained me. We discussed the question of transportation and business generally; and I went away and went to work, and worked a couple of weeks connecting our line to the Ontario and Western road; bought 11 acres of ground on which to build our storage tanks, and put in the pipe. PIPING REFINED OIL — THE STANDARD SAID IT COULD NOT BE DONE. We laid two lines, refined and crude. That is a thing that the Standard Oil Company never did. They said it could not be done. We pump refined oil .500 miles and deliver it on board vessels in New York, and it comes out just as bright as it did at the refinery. We pump our refined oil. Q. (By Mr. Phillips.) Do the Standard Oil Company pump theirs? — A. No; they said it could not be done, although they are the inventors of everything, and are the benefactors of the world. - THE ERIE RAILROAD IS HELPFUL. I laid that line down to the Erie bridge — the big iron bridge that crosses the Delaware — and I commenced on the other side of the bridge, 120 feet away from the upper side, or the line of the right of way, and I laid the line out toward Pennsylvania. We had had our fights over this right of way, I knew the men that were there taking up these rights of way to have been in the employ of the Stand- ard Oil Company. I knew the men personally, and my men knew them. If necessary I can call their names at this moment. We had overcome, as we thought, the obstacles, and I went back to New York to see Mr. Thomas, and he came from his inner room and took me by the hand and said: '■ You can go under our bridge at Hancock in the deep water if it is advisable, or in the bank," and he spoke to the general manager of the road— his name I forget; he was present at our con- versation; so was Mr. King, of the Columbia Oil Company— and he said: "You 1 See Mr. Lee, p. 264; compare Mr. Boyle, p. 486. 2 See Mr. Lee, p. 267; Mr.Lookwooa,p.398; Mr. Boyle, pp. 413, 445. 652 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. wire Mr. Dnrr, the division superintendent of the Susqnelianna division, to meet Mr. Emery at Hancock to-morrovir morning and go with him to locate their oil pipes, either to go through the deep water of the Delaware, or to pass through the bank of the Erie grade." I took the 9 o'clock train. This was done — this message was sent — I saw the gentleman write it. I took the 9 o'clock train, went to Hancock, and got there about 2 o'clock in the morning, and I immediately went to the Chandley House, near by. I was anxiotis to know whether Mr. Durr was there. I was afraid something would happen; but to my surprise Mr. Durr was there waiting for me. The next morning I took a carriage — my wife was with me — Mr. Durr, my wife, and myself. We rode to the Delaware River, which was not half a mile away, crossed the river, it being low, sounded the water, went upon the bridge and saw where the rocks were, etc., and concluded the best thing we could do was to go through the bank. There were two ends of pipe 120 feet apart. He said: " Mr. Emery, I will make a profile of this and will have it in your office one week from to-day." That was to be on Thursday. I said, "All right." I went home and I started our pipe, and the very first place where we had to lay the pipe was under the Erie track. THE BRIE CEASES TO BE HELPFUL. Q. (By Mr. Clakke.) What'? — A. Under the Erie Railroad track. It was in the switch yard; some four tracks side by side; and it was pretty difficult to go in there. We went there, honestly siipposing we had a right to do so. I had spoken to the superintendent about it, and he did not know anything different. When I returned to New York, previous to this time, he said, " All right." We were work- ing away with our men, and the first thing I knew, down came a force of two or three hand cars, and they jumped on the track and attempted to put our men out of the ditch. I was at my office uptown. They went to the nearest telephone, and I went down there, and they were having a contest. My refinery was close by, and I ordered the whole force out, and we drove off the opposition. We had what we term now-a-days a " scrap." I drove them away, and went on with our w^ork. Q. (By Mr. Phillips.) That was near Bradford, was it?— A. Right in the city of Bradford. The next morning we were enjoined by the court. This was the Erie Railroad that was objecting now, you understand. Q. And was it in the State of Pennsylvania, where you had the right of eminent domain? — A. Yes; I should have said that before. A letter was addressed to me by our attorney. This letter I will put in evidence, because I know all the facts. different lawyers, ebpresentina different railroads, raise the same objections and support them with the same arguments. September 8, 1899. Hon. Lewis Emery, Jr., Bradford. Pa. My Dear Mr. Emery: In reply to your inquiry am pleased to make the fol- lowing statement: The first legal opposition that we met with in constructing the line of pipe of the U. S. P. L. Co. , was an attempt to prevent us from laying pipe under the track of the Erie Railroad within the limits of the city of Bradford, at a point where both the National Transit Company and the Tide-Water Pipe Company had previ- ously laid their lines, and, so far as can be learned, without the slightest objection on the part of the railroad company. We presented our bond and petition to the court of common pleas of McKean County, and were met by attorneys on the part of the railroad objecting to the granting of the prayer of the petition alid the approval of the bond. They had at this hearing a very exhaustive brief, with which they seemed not to be familiar. They apologized to the court for the way in which they presented same, saying that it was prepared by Mr. Elliott, and that they had not had the time to carefully consider the same. I took very full notes of the autlKjrities cited and of the points made by the attorneys for the railroad company. A short time after this I had occasion to appear in the courts of Tioga County, representing the U. S. P. L. Co. in opposing a bill to restrain the company from laying a pipe under the Tioga branch of the Erie Railroad. The attorneys at this hearing seemed to have the same brief as was used in the hearing in McKean County, citing the same authorities and making the same points. Later I repre- sented the U. S. P. L. Co., presenting a petition and bond to the court of Brad- STANDARD OIL COMBINATIONS: EMERY. 653 ford County, for the right to lay a pipe under the track of the Northern Central, at a point south of Elmira, and was again met bv what appeared to be the same brief, authorities, and points. The objections in all the cases were many, and the authorities cited numerous, and what seemed to me strange was the fact that in each there appeared to be the most complete harmony. It is wonderful how the minds and labor of attorneys so far separated should bring out the same objec- tions and support them by the same argument, yet so it was. Very truly, yours, W. E. BURDICK. THE CONTEST WITH THE ERIE, AT HANCOCK. We bought our way irnder every single road from there to Hancock. When we got to Hancock I knew there was something wrong. But I went with my men to connect up these 3 pipes, 130 feet apart, and we were met first with 3 derricks and 3 locomotives, a Hat car containing lumber, and a little brass cannon that had been used for shooting holes through the tank that was run off the track, and a car holding about 75 men. The moment we came there with our men they sup- posed, of course, we were going to connect up these 3 pipes. They threw off the old slabs and stuff, and built a sort of a cob fire over each end of the pipe. They threw off the lumber and built a house on each side of the track, and put 2 men in them with Winchesters. We stayed there 3 months looking one another in the eyes. We'never got under the track. We spent $70,000. THE NEW YORK, ONTARIO AND WESTERN VIOLATES ITS CONTRACT. The Ontario and Western were induced to violate their contract. I should state that we went by the Ontario and Western because we got a contract out of them, by which they would transport our oil down to Cornwall on the Hudson; and there we were going to put it into boats, and draw it down to New York and deposit it in our tanks. That contract gave us the right to construct a pipe line on the right of way to the Hudson, for which we were to pay them a royalty of 3 cents a barrel. We were even cut off from that contract by the same power. MORE LEGAL CONTESTS — THE SAME BRIEF — CONTRACT WITH THE NEW JERSEY CENTRAL. We kept a standing army there at Hancock. We went back 70 miles to the Susquehanna River, and we flanked the enemy until we got down to Wilkesbarre. At Wilkesbarre we had contest after contest in passing under the tracks of the D., L. & W. and the Lehigh Valley and other roads. This same brief came into the court. Seven lawyers, representing different lines, were against us, each one reading the same brief, making the same points. We beat them; and we built our line through, and we connected with the Jersey Central Railroad, a friendly railroad, which had a contract with us to draw our oil for a term of 99 years, with a right to cancel the contract by a certain number of months notice. ^ Q. Who had the right to cancel the contract, the United States Pipe Line Com- pany or the railroad? — A. The United States Pipe Line Company. We stopped there for a time because we were out of money. It cost us more than |150,000 to fight our way to that point; their keeping us from going to Hancock, and the expense of going down to Wilkesbarre, litigation, loss of time, and loss of our business. Then we stayed at Wilkesbarre about li or 3 years, and we concluded we would go on. So we secured a right of way from Wilkesbarre over to a place about 30 miles above Easton. We built that line there to the river and then we went into Jersey. The first thing we had to pass under was the Pennsylvania Railroad. NO FREE PIPE-LINE LAW IN NEW JERSEY— THAT OF NEW YORK HAS BEEN AMENDED AWAY. Q. Was there a free pipe-line law in the State of New Jersey?— A. No. Q. (By Mr. Kennedy.) Is there in New York?— A. Yes. You want me to explain the law to you? , ,, , ^ ^„^r,-^^ ,t -, Q. (By Mr. Phillips. ) No.— A. I think I had better do that. In 1878 New York passed the first pipe-line law that was passed in this country. It was passed under the same pressure as the Pennsylvania law. It was a good, free, open law, and 1 See Mr. Archbold, pp. 5;ifJ. 530; Mr. Phillips, p. BOl. 654 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the Pennsylvania law is copied from it. But someone in 1890, JHst before we got down to Hancock, went in and had that law amended, and it became absolutely inoperative. Q. (By Mr. Kennedy. ) And yon can not get the right of eminent domain under it? — A. You can not get the right under that. The pipe line to Buffalo was laid under the original law. It was a good law. GOOD FORTUNE IN C4ETTING PAST THE PENNSYLVANIA. We had to go under the Pennsylvania Railroad. Fortunately, we found one of the Secretaries of the Treasury of the United States who lived in Trenton — I can not think of his name now — but we searched up a title and we found that he owned an acre of land, just 1 acre, which was used many years ago, during Revolutionary times, for a wharf and a dumping place for very, very old fur- naces, iron furnaces, just back there. He did not know he had it himself until we found his title. We bought it, and paid S.jOO for it, and we went under the Pennsylvania track. Q. Did they have the right of way across this? — A. Yes; but we had a title for the land. We had the title and went under there after a long contest. TROUBLE WITH THE D., L. & W. We got over to the D. , L. & W. , within the borough limits of Washington, N. J., and we bought a farm, the Stewart farm, over which the old Morris and Essex Rail- road passed. The charter was granted in 1836; and an easement had been bought over that land and paid for — had a deed of it. We bought the fee title of the land over which the right of way was given. Our attorney said we had a right to occu.py that land. Sis or 8 months before that we had put in a piece of pipe to test what they were going to do, and they tore it out. So we thought we would not be beaten, and I took .50 men from our line and we went over thei'e in the dead of the night and I placed my men on both sides of the hill. They had a watch- man of the road passing up and down with a lantern in his hand, back and forth. He would come up to the culvert under which we were to pass the roadway, 14 feet high from the ground. He would look down and see that silepce prevailed and go away. About 4 o'clock in the morning we took possession, and when 9 o'clock had arrived on Sunday morning we had two pipe lines buried 4 feet under the earth, and fastened to timbers as heavy as a span of horses could di-aw. We piled rocks on top of them and anchored them with chains, built a house on each side of the culvert of the right of way and took our breakfast in camp. About 12 o'clock some men came along and said; " You get out of here," and came down with their picks and bars. I was there in the pit myself and he said, " You will not get out? " And I said, " No; we belong here. It is our line and we will not disturb the railroad." He said, " You will get out; come along, boys." I said, " Don't be hasty; " but he was a little hasty and I told the boys to take the men by the shoulders and the seat of the pants and take them out and lay them down carefully, which they did. On Monday morning two wrecking cars with 250 men rode in from Hoboken. They made a charge on the little band in the pit and we drove them out. That is all there is about it; we drove them out. Q. (By Mr. Clarke.) When was this?— A. This was in 1891. They wanted to compromise the matter, and wanted to go to the courts, where we wanted to go. They said: "You permit our men to go into this subway, and permit them to remove some earth, and you go through the formality of arrest." I said: "All right." When we got down, and they wanted to move the wagons away, oS the pipe, we said, no. He said: " The wagons are in the way." I said: " They are there on purpose, and I am not green enough to give you any advantage just now. The wagons will stay there. If you want to do any business of that character, go on." We arrested their men, and they arrested our men, and they wanted to know if we would go up and have the trial. So we went uptown, and the sheriff had the men we wanted before the justice of the peace. Each one had his trial and was bound over to the court, and the issue was made up. and we went off to our dinner at the hotel, as I supposed, when men came rushing on horseback and said: " They are in a fight." I jumped into the first buggy I found — I did not know whose it was — andlfound'these traitors, who had promised to take this into court, there with two locomotives standing on top of the track hitched close together. They were running hot stearu and water down into this pit on my men. They went to the fire box and threw hot coals down on them, threw stones, and clubbed us; but we whipped them. I ordered every man out of the pit. I told them if they came back there I would shoot them. We barricaded ourselves, and the STANDARD OIL COMBINATIONS: EMERY. 655 Grand Army of the Republic gave us 48 muskets, and I sent to New York and got 18 Springfield rifles. We bound our pipes in with wire and we tied them dcjwn, barricaded our house, and stayed there for 7 months holding possession, until the court decided we had a right to stay there. The very men who are at the head of this — I knew them — the men who were there on watch were in the employ of the Tide- Water and the Standard Oil Company. We are pumping oil through to the Junction, after the difSculty we had in getting these rights of way through New Jersey. The very same men we found up in New York were oft'ering as high as 85 a rod to the farmers, instead of si. 50, which is our price. The whole community turned out to help us, and defended us because of the public wrong. We built that line through. THE PIPE ENDS 50 MILES PROM NEW YORK— THE FREIGHT RATE FOR THAT DISTANCE. Q. (By Mr. Phillips.) Through to where?— A. Through to the Junction, 50 mUes from New York. From there we have a rate of freight ; not, as was stated here by one of the witnesses on this stand, a discriminating rate. The total price, I believe, as given here for transporting a barrel of oil from the oil regions to the seaboard, by the Standard lines, was 45 cents. We pay for that 50 miles on our refined oil Ir^-^ cents, and on the crude 6-J cents. It is not by the carload, or, as stated by the witness, about S6 or $7 a car. We give them cars that hold from 132 to 150 barrels. That makes about $10 a oar; a great big rate of freight for a haul of 50 miles. The road is very glad to get it. It gives them in revenue $200,000 a year." Q. (By Mr. Clarke.) What road is that ?— A. The New Jersey Central, friendly tons. I commend them. No discrimination, mind you. It is a rate that is open, and not a secret rate. Anybody else can come in at the same price. We pay from that point the 7 cents, if we choose to, and the 6 cents ; and we compete with the Standard Oil Company in the markets wherever we have fair competition and fair railroad rates. THE RAILROADS HAVE WON AT LAST. We have contested this suit in the courts of New Jersey for the last four years; and now a decision has been handed down by the chancellor's court that the contention of the United States Pipe Line against the D., L. & W. Railroad is not valid, and we have notice that we must take thes6 pipes out. The railroads of this country are a barrier to any modern improvements of transportation. Q. What was the ground of the decision; do you know? — A. That they had a title, not only an easement, but the title or the fee in the land, although they did not buy the fee. There were two decisions in our favor by the vice-chancellors, one by Vice-Ohancellor Emerick and one by another — I do not recollect his name. But they were reversed. So our line has got to come out from under that road. It is doing no harm, lying in the midst of a large tunnel, or, I would have said, an open cut. And the old farmer, reserving the right, has egress and ingress to his fields on both sides. Nevertheless, the court is against us. I thought I could produce a letter by which we are given notice that we must remove those pipes immediately. 2 Q. What State was that?— A. New Jersey. Q. (By Mr. Phillips.) The decision of the lower court, if I understand ?— A. Sustained the principle that we had title. Q. Was reversed afterwards?— A. Reversed in the chancellor's court. There is another court which is higher than that — the superior court. Q. Has your company appealed that case?— A. Oh, we have gone through with all of it. Now, then, that is the story of attempting to stop competition m the business. Whereupon the commission took a recess until 3.15 o'clock m the afternoon. Washington, D. C, Tucsdni/. SejAeviher 12, lS99—p. m. The commission was called to order by Vice-Chairman Phillips at 3.30. Lewis Emery, Jr., again on the stand, and examination resumed. Mr. Phillips. Senator Emery will now proceed with his testimony in his own way. 1 Compare Mr. Archbold, pp. 529, 530. = See p. I 656 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE UNITED STATES PIPE LINE COMPANY; ITS VOTING TRUST — THE STANDARD BUYS STOCK IN IT. The Witness. I desire to take up, in conneotion with what I was saying this morning, the subject of competition. The United States Pipe Line Company was organized with a capital originally of §600,000, and at the present time its capi- talization is §3,000,000, I believe. We formed in that company a voting trust. I sho^Tld say that the United States Pipe Line Company was organized under the general corporation act of the State of Pennsylvania. We formed a voting trust for the purpose of keeping the stock out of the hands of anyone that was disposed to attempt to control our operations. There was at the time this trust was formed, I think, about $800,000 of the stock subscribed for, and every dollar of it was in the trust. However, regardless of the provisions of this trust, the Standard Oil Company purchased at an advance on the par value, which is 8100, $386,000 worth of the stock. Before they had purchased it, however, the stock taken had been increased by new subscriptions to about .§1,300,000; but their expectation and attempt was to get the control of the stock. Owing to the loyalty and determination of the rest of the stockholders, they were rrnable to purchase any more stock. That trust is in existence to-day — a voting trust. The Standard Oil Company presented themselves at one of the yearly meetings of the United States Pipe Line Company and attempted to vote that stock. We refused, by unanimous resolution of stockholders, to allow the representative of the Standard Oil Trust to vote that stock, and he was ejected from the room, out of which grew the suit of the National Transit Company and J. C. McDonald v. The United States Pipe Line Company. THE STANDARD GETS A DIRECTOR ON THE BOARD OP THE UNITED STATES PIPE LINE COMPANY. Q. (By Mr. Phillips.) In what court? — A. That was brought in the McKean County court, and was appealed to the State supreme court, but was never heard by the supreme court. The case was not even called up. Our attorneys were notified that the appeal was illegally taken, because an officer of the company had not made an affidavit to the bill of appeal, although a stockholder had made an affidavit. I was absent from home. On that ground the supreme court of the State of Pennsylvania threw it out, although we gave to the court several deci- sions wherein other courts had held that to offer an affidavit made by a stockholder of the company was quite sufficient for an appeal to the supreme court. This is the case. The Standard representative has since been allowed in the meetings; he has listened to the deliberations, and has been allowed to vote upon such questions as he chose to vote on, ever since they have held this stock. Thev still own it.' Q. Was this gentleman elected as a director or not? — A. He was elected by the circumstance of having this stock. We recognized him, and he was elected, and is a director of the company; voted in every time we elect. He knows just exactly what we are going to do, and participates in everything pertaining to the general business of the company. Q. (By Mr. A. L. Harris.) Was he prohibited by the law of the State of Penn- sylvania, or by a by-law of your company? — A. From entering? Q. From entering; from voting. — A. I can answer that question later. I can not just at the moment; 1 can read the plea of our people which is here. I don't know which it was. It was on some ground; we thought it to be a legal ground, and we still think so; but when we were cut off by the supreme court's decision that the affidavit was improperly made, why, of course, our case failing, we could not renew it. That is all there was about it. Our attorneys denominated it a technical matter, and not one of good law. I don't know anything about it. THE INDEPENDENT REFINERIES ARE INDEPENDENT. The stock that these people purchased in the United States Pipe Line belonged, some of it, to three of the largest refinery owners in the association of refiners.' The refineries belonging to the independents have no connection with any of the stock companies. 'The refineries are owned by individual operators, and have nothing in common with the United States Pipe Line, or the Pure Oil Company, or the Producers' Oil Company, Limited, or any other transportation or oil market- 1 Sl'i? Mr. Lee, p. liTI); Mr. Archbold, p. 577; Mr. Phillips, 590. •' Si-.j Mr. Westgatu, p. 1370. STANDARD OIL COMBINATIONS: EMEKY. 657 ing company. Tliey market their oils individually. They are competitors with one another. I go into the market and I meet there my brother refiner, and I put a price upon my goods and he puts a price upon his goods. No objection; free, open competition among all these refineries that are in the field. There are to-day something like 15 of them, which furnish oil to the transportation companies; and we sell oil not only to the Pure Oil Company, doing business in Europe, but we sell oil to England, France, Italy, and every other country, independently of the Pure Oil Company. So do not confound these refineries with what we are going to finally deal with — the trust; because they have no connection with it. They are independent; all competing against one another in the markets of the world. ^ Q. (By Mr. Farquhar.) Do these refineries also sell to the Standard?— A. Oh, yes. I sell the Standard lots of goods, and I make them pay all I can, too, like everybody else. REFINERIES RECENTLY BOUGHT BY THE STANDARD AND DISMANTLED. These three gentlemen that I referred to as owning three of the largest refiner- ies connected with this refiners' association — if you choose to call them such; they are not an association — when they sold their stock they sold their refineries as well, and they received a large sum of money for them. Within less than 8 months fi'om the purchase of these refineries by the Standard Oil Company one of them, belonging to Mr. Ramage, was dismantled and destroyed. The next to be partially dismantled was that belonging to Hon. John Pertig, of Titusville, known as the National Befining Company. The nest was the Continental Befin- ing Company. All these refineries were first class, and built, especially the last two, in modern times, and with every improvement; so was Mr. Bamage's; in fact, he made more by-products, etc., than any other. All these refineries have been demolished and taken from the ground where they originally stood. That has all happened since 1895.- Q. (By Mr. Phillips.) Was any efliort made to buy other refineries? — A. Oh, yes.* These people seemed to constitute themselves a committee. They labored with me, and labored with others. They said that it was the best thing to sell out and quit. The rest of us did not think so, and we are on earth yet. I should have been glad to have gentlemen who are anxious to hear about these modern things hear those representations. THE PURE oil COMPANY — ITS VOTING TRUST HAS BEEN MODIFIED. Q. Now, will you explain something in regard to the Producers' Oil Com- pany? — A. The Standard Oil Company bought a majority of the stock of the Producers' Oil Company, Limited. Its method of operation in purchasing that stock, you have before you already.* Through the same method they purchased a majority of the stock of the Pure Oil Company, Limited. They have not been permitted by the courts to vote it, and it has had to go back into the hands of the original owners, if necessary, by order of court. Q. Will you make some statement in regard to the Pure Oil Company as organized thereafter?— A. The Pure Oil Company is organized under the'laws of New Jersey. Its capital at present, I believe, is S'3,000,000, with 83TT,000 paid in. We are very much afraid that when our United States Pipe Line Trust expires, which will be within the next 15 months, there may be some attempt to get pos- session of more of that stock. We have felt the necessity of combining or putting the stock of the several companies into 'the hands of the Pure Oil Company and forming a voting trust, solely for the purpose of protection. I desire to say that the paper' which was referred to has been amended. First, it isnot a permanent voting trust. Second, three-fifths of the stock voted at any time can dissolve the trust, or can overrule the power of the voting trust. Only one-half of this stock, and ten shares over, is put in trust, and three-fifths of the whole at any time can control the policy of the company. Under the terms of the charter it terminates within 46 years. Therefore it is not perpetual. Q. (By Mr. Farquhar.) Is that one of the new amendments?— A. Yes. 1 See Mr. Lee, pp. 270, 271, 390. ^SeeMr. Westgate, p. 370. ' See Mr. Archbold, p. 530; Mr. Westgate, p. 371. = See p. 508,^wliere the amended form of this voting trust agreement, as well as the original form, is given. 658 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Mr. Phii.lips.) Was it originally formed for over 50 years? — A. No; chartered for 50 years. Q. (By Mr. Faequhar.) The old form required four-fifths? — A. Yes. Q. Section four of section 12 (reading): " This agreement may be canceled and the trust hereby created dissolved only by the winding up of the Pure Oil Com- pany, or by the copsent in writing, duly executed, of the equitable owners of four-fifths of the shares held in trust hereunder, and of four-fifths of all the other shares of the company, after providing in full for the redemption or purchase, at §110 per share, in cash, of all the preferred and common shares of the company at the time outstanding." — A. Yes. Q. Is this redemption feature still maintained, that the trust can not he dis- solved until after providing in full for redemption or purchase at $110? — A. That provision is wiped out by the fact that three-fifths can control or change the by-laws, or change anything pertaining to the organization or management of the company. Q. Well, is this stock-redemption feature still retained? — A. I don't know, sir; I can't answer that question. THE PURE OIL COMPANY IS NOT A TRUST, IN THE INDUSTRIAL SENSE. Q. Now, it has been said here that this Pure Oil Company is not a trust. I called the attention of another witness to the fact that it is specifically mentioned as a trust in your articles of agreement and also of incorporation. — A. Yes. Q. So that you are not afraid to call it a trust? — A. I call it a voting trust. I will submit your question to decision, if you choose, according to the definition of a trust given by the Commercial Year Book of the New York Journal of Com- merce. The definition is, "As popularly used, the word ' Trust' is now applied to any consolidation, combine, pool, or agreement of two or more naturally competing concerns, which establishes a partial or complete monopoly, in certain territory, with power to fix px'ices or rates in any industry. Viewed from the standpoint of the consumer, the informal agreement and the ironclad combine look alike if the one has the same effect as the other upon prices."' Now, there is nothing in the world about the Pure Oil Company that can possi- bly lead up to that definition. There are several other definitions that I can refer to. Q. Let me suggest that there are five true definitions given by Mr. Cook, who is an authority, one of the greatest lawyers in the country, and also by Von Halle. There are five forms of trusts. Q. (By Mr. Phillips.) I would ask the Senator to read the definition, under the Sherman act, of a trust, if he has it there. — A. It needs no argument to show that the Pure Oil Coinpany is not a trust. It lacks every element of a trust. A trust is defined by the antitrust law known as the Sherman act of 1890 as fol- lows: "All trusts and combinations in restraint of trade are unlawful." Another accepted definition is that a corporation or combination of corporations, with vast capital, made for the purpose of securing and maintaining a monopoly in any branch of industry, is a trust. The odious feature is the aim and purpose to secure a monopoly. The Pure Oil Company was organized, not to secure a monopoly, but to prevent a monopoly in the oil industry. The Pure Oil Com- pany is not in restraint of trade, but in aid of trade, and to maintain competition. It expires by the expiration of its charter 40 years from the 6th day of next November. It is therefore neither permanent nor jjerpetual as alleged. It would be silly to hold that a corporation with a paid up capital of only §377,000, opposed by a trust in the same industry with a par capital over 200 times and a market value over 1.000 times as great, could be a monopoly or restrain trade; and unless it is a monopoly, or restrains trade, it can not be a trust. That the power to vote one-half of its stock has been placed in the hands of trustees, to prevent a great monopoly from intruding to destroy it, does not change the character of the cor- poration or make it a trust.-' If the Pure Oil Company should ever develop monop- olistic tendencies, the present holders ^\'ould be glad to have it destroyed. If any antitrust legislation, at any time, brings within its restrictive or destructive provisions the Pure Oil Company, the stockholders of that company will welcome its destruction. NO EFFORT TO COMBINE WITH THE STANDARD. Q. You are a large holder in most of these companies. You are president of the United States Pipe Line Company, and you are a large holder in the Pure Oil ^ Coraniercial Yiuir Book, ISDti, p.G43. 2 See Mr. Boyle, pp. 4i8, 444, 413, 464, 488; Mr. Archbold, p. .507; Mr. Phillips, pp. 591, 594-598. STANDARD OIL COMBINATIONS: EMERY. 659 Company. Do you know of any effort ever having been made to make a com- bine of these various companies with the Standard?— A. No, never; no, sir. Q. (By Mr. Fahquhar.) The commission has been furnished the original form of the incorporation of the Pure Oil Company, and it will be printed as a part of the minutes of this commission. Now, can you furnish with your testimony a copy of the amended one in proper form?— A. Oh, yes; I shall be very glad to.' EFFORTS NOW MAKING TO COMBINE THE INDEPENDENT COMPANIES. Q. That is what I wanted to know.— A. Now, as to the changing of that trust; we have not got the voting trust yet. We, perhaps, are crossing the bridge before we get to it: but this has not been accomplished. It has not been accomplished, so far as the combination of the stock of those companies is concerned. All that is in the shape of a trust, out of about three or four million dollars, is ^377,000. The other is in contemplation, because we fear that when this present trust of ourc — the United States Pipe Line — expires, we shall be in danger, and we are going to put ourselves under cover; that is all. Q. You have incorporated in the State of New Jersey the Pure Oil Company?— A. Yes. Q. Yoti have how much capital paid in? — A. .$377,000. Q. You are still under the operations of a majority of the stockholders bring- ing in other companies? — A. Oh, no; we are simply talking about it and hope to accomplish it. It is not a question that has absolutely been decided, though I expect that it will be done. The amendments have not even been printed; but we are going to try to get this stock in for self -protection, and put it into the vot- ing trust. It has not been accomplished yet by any means. THE INDEPENDENTS ASKED THE STANDARD FOR PERMISSION TO LAY THEIR PIPE UNDER THE RAILROADS — THEY DID NOT PROPOSE TO SELL OUT TO THE STANDARD. Q. (By Mr. Phillips.) Now, will you answer the other question in regard to any effort amongst all these companies to make a combine with the Standard Oil Trust? — A. I was pi'esident and general manager of the United States Pipe Line Company from its inception up to a little over a year ago, and probably I should have been still in the management of it had my health not failed. I was always present at general meetings and had, under our by-laws, the appointment of all committees. During our trouble that I have recited relative to the construction of this line, I appointed a committee, as chairman of the board of directors, to go to New York and see if some arrangement could not be made with the Standard Oil Company by which they would permit us to go under the railroads of the country. We did not go to the railroads. The railroads had nothing to say about it. We went to the Standard Oil Company, but not for the purpose of selling one single share or one dollar's worth of our property. The resolution or motion offered was that the committee go to New York for the purpose of seeing if the Standard Oil Company would not let up and let us go through to the coast. I appointed that committee under that resolution. Mr. Phillips, Mr. Lee, Mr. Murphy, Mr. King, Mr. Jennings of Pittsburg, and some other gentlemen were appointed to go there for the purpose I have named. They had no authority to make any proposition to sell any portion of this property or to make any settle- ment with the Standard Oil Company on any such basis as selling out any part of the company's property. I am sure they did not make any such proposition. - EFFORTS TO GET A GENERAL PIPE-LINE LAW IN PENNSYLVANIA — METHODS OF THE OPPOSITION. Q. In regard to the opposition to laying the pipe line through Pennsylvania it was said by Senator Lee that certain dodgers were circulated in the eastern part of the State.3 Can you state the purport of these dodgers, or have you any knowl- edge of them?— A. In 1868 the legislature of Pennsylvania passed an act for the incorporation of pipe-line companies, as I told you yesterday. We got such a law, through the permission of Mr. Thomas A. Scott,* for eight counties in the northern part of Pennsylvania, and the Wallace act of 1874 repealed that law. Immediately upon the repeal we attempted to get a law passed giving the right of eminent domain for the construction of pipe lines. That was mtroduced regu- larly from 1874 up to 1883— every session during my career in the legislature, both House and Senate, for 10 years. It was my duty to introduce this bill and 1 See D 508 for both forms of the trust agreement. = See p. 262. 2 See Mr. Archbold, pp. 530, .531, 548; Mr. Phillips, p. 593. « See p. 605. 660 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. endeavor to pass it. In 18s3 the bill was pending, and the Standard Oil Company, by its agents, had gone all over the southern portion of the State of Pennsylvania, which is a very beautiful part of the country, as you know, and had said to the farmers that if the pipe lines were laid in that region there would be a general destruction of their property; that their orchards would be destroyed, and there would be general havoc, and the pipe lines would explode and probably destroy life as well as property. At the same time they had thousands and thousands of miles of pipe line in the States of Pennsylvania, Ohio, and West Virginia. In order to meet and counteract the imjjression among the people Senator Lee and myself, night after night and week after week, visited the schoolhouses and court- houses, and every place where we could get a gathering of people to listen to our explanation of the necessity of the passage of this law. Dodgers were issued and pushed under my arm. The effort was to get my attention to them. As I entered the court-house in Lancaster, Pa., there was pushed under my arm a paper which read: " Look out for false prophets." Beneath it read, "These people are endeav- oring to pass a law that will destroy the springs on your farms; it will blow up your houses; it will create havoc in your fields, when the pipe bursts, by killing the grass. The most dangerous of all laws. " We had placed our circulars in all of the seats of the court-house in Lancaster, Pa. , and some miscreant went in there and took all of our circulars setting forth our object and what we were after, and in their place dropped into the seats these yellowpapers, on which was written, " Look out for false prophets." Those dodg- ers were furnished — I don't care what the other witness said.' He was not on the ground to make any speeches in behalf of the oil country. He can not say that those dodgers were not circulated, and if he does he certainly says that which he does not know anything about. I was there through the whole of it, and we went on with that operation week in and week out and month in and month out. We were from 1874 to 1883 getting that law. 810,000,000 IN REBATES FROM OCTOBER 17, 1»77, TO MARCH 31, 1879— THE EVIDENCE. Q. There was one other question on which your testimony was brought into dispute; that of the .$10,000, 000 in rebates that was said to have been paid to the Standard Oil Company in a given time. This, I believe, was denominated a lie or a lusty lie. I think it was in connection with this question. — A. Well, gentle- men, I do not mean to lie ; I do not mean to tell anything but the truth as I under- stand it, and I have said nothing before this commission that I can not prove, and my statements made in 1888 are just as sacred to me to-day as they were when I made them. If I have told any lie I shall beg the pardon of the great United States of America and all my friends therein, and endeavor to rectify any wrong that I have done. My authority for that, which I will produce, is unquestioned, and I defy any- body to prove that my assertions or statements at that time were false. I desire you to turn to page 101 of my pamphlet, which I have given you. I need not take your time by reading over all the evidence. It is before you on pages 101, 102. and 103; you can read it as well as I can, but we will go over to 104; ther? is a recapitulation of the oil business. (See Fiftieth Congress, first session, House Reports, vol. 9, pp. 242,343.) I hold in my hand a book of testimony in the case of The Commonwealth against the Pennsylvania Railroad Company. This testimony can be had, I think, in the Library of Congress. It can be found in the library at Harrisburg, and undoubt- edly at many other places. I had the honor to be one of a committee of three to visit Gov. John F. Hart- ranft and lay before him our grievances; and we invoked the aid of the Common- wealth of Pennsylvania. That good, great, and kind man gave it to us. He required the Pennsylvania Railroad Company to answer the charges made against them with regard to the South Improvement Company contract and other acts, from the commencement of the history of the Standard Oil Company or the South Improvement Company, from 1873 to the final hearing of the suits in 1879. This is the testimony of Mr. Cassatt, first vice-president of the Pennsylvania Railroad, making a clean breast of everything pertaining to the contracts. From his admis- sions and from the admissions of other oificers connected with the road I have computed the shipments of oil during 1878 and the first quarter of 1879, making a grand total of 18, .'350,377 barrels of oil shipped; and from this testimony I have deduced the fact that .55 cents per barrel was paid upon the transportation of that petroleum. I charge the rebates on all that oil to the Standard Oil Company; not only on what was shipped to the coast. As I showed you yesterday, on all oil ' See Mr. Ai-chbold, p. 513. See also Mr. Lee, p. liUS. STANDARD OIL COMBINATIONS: EMEEY. 661 that went west also they had to have their rebate. Again, it was carrying out the provisions of the ohl agreement, the South Improvement contract, although that had been repealed. The drawbacks on that oil are even greater than I have said in this report or in my evidence in 1888. Q. (By Mr. Kennedy.) How much space did Mr. Cassatfs testimony occupy in that book?— A. Some .")() or 60 pages. It begins on page 600 and runs to page 737. Here is my authority, and I have given the pages in my testimony. Let anybody prove that I am mistaken. But SIO.000,000 is nothing compared to the rebates paid; it is a bagatelle. STATEMENTS OF PREVIOUS WITNESS AS TO THIS ESTIMATE OF THE REBATES. Q. (By Mr. A. L. Harris.) I think it was stated that the testimony of Mr. Cassatt has been perverted, and the conclusions drawn are not warranted by the testimony." That is the reason, I suppose, that you were asked to refer to the part of the testimony in which this admission is made. — A. I have given each page in my testimony of 1888. Q. (By Mr. Kennedy. ) I thought there might be a paragraph or a page in which he made the admission. — A. The testimony is not by him only, but by other of&cers of the Pennsylvania Railroad; that was the object, to find out what the discrimination was. Q. I think the testimony was to the effect that this .S-t, 771,000 which the Penn- sylvania Railroad got was all that you could figure from his statement, and all the rest is assumption. — A. Oh, no; tsecause, not only did the Pennsylvania Rail- road Company get it, if he admits they got §4,000,000, in this t^'^'elve or foi^rteen millions they must have participated. Q. He says that is an assirmption. — A. It has been proved; proved by the Hep- burn committee, just as plainly as this is proved. If he admits $4,000,000 was paid to the Pennsylvania Railroad alone, it is more than I gave them. My com- putation is based on the total shipments of oil. I did not say that the Pennsyl- vania alone got it. I say the rebate is so much; even more. Q. I do not think he makes the admission in regard to the amount; but his statement is that Mr. Cassatfs admission was in regard to the Pennsylvania Rail- road's transportation, and not with reference to the others. — A. I have shown the collection of these rebates by contracts. I could produce the three contracts. These railroads were under contract to transport certain classes of oil at certain rates. This all happened from 1872 to 1877. or 1879. I have shown you the 2'3 cents from the pipe line to the car, and the 49 cents was to go for the transporta- tion of oil from Cleveland and common points in the oil country to Ncav York. AVERAGE COST OF OIL WELLS. Q. (By Mr. Phillips. ) It was stated here '' that the cost of drilling a well in 1890, or during the last 10 years, was about §3,000. You are a large operator in all the fields, and we should like to have your estimate of the cost of drilling wells during that time. — A. Of course, I have drilled a great many wells, running into several thousand, and we always keep track of the expense in our office and the cost of each and every well. We have drilled wells in the lower country, which we call deep territory, that have cost us $8,000, $10,000, some as high as $30,000 each, to drill. When you come up to $30,000, that, of course, is accounted for by the fact that you sometimes stick your tools or drop something into the hole, or the well may cave in. Then you are obliged to move your derricks. We have always figured that our lower country wells cost us on an average $8,000. In the upper country we have figured that we could drill our wells for $3,500. We can not do it for that now. That was when you could get pipe for less than half its present price. The reason why wells are so expensive in the lower country is that you have to put in three lengths of casing. Some of that casing runs down into the earth 1,600 feet, 2,000 feet. I have loaded into a single hole 150 tons of iron. I should say this— without going into a close calculation of it, the question being sprung upon me here at this moment— that the average cost of a well in the oil country under the present condition of things is nearly $4,000, in my judgment. Q. (By Mr. Farquhar.) On account of the high cost of iron at the present time?— A. I think it was $4,000 before prices advanced so largely. We can not do it for that now. You can not drill wells at a profit now, at the present price of oil. Iron has gone up 100 per cent and more. Q. (By Mr. Phillips.) What is your estimate of the average production per 1 See Mr. Archbold, pp. 514^516. • ^ See Mr. Boyle, p. 434. 83a 43 662 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. well, taking the wells as a whole, during the period named, from 1890V — A. That I have not in my mind. If you want me to compute that I will look it up. but I can not answer it ofEliand. That is a mathematical problem. THE INDEPENDENT PIPE LINE MUST GIVE UP GOING TO NEW YORK AND GO TO PHILADELPHIA INSTEAD. Q. (By Mr. Claeke.) What is the present status of the United States Pipe Line in New Jersey? Are you running oil there and carrying it part way by railroad to the seashore? — A. Yes. Q. Is that question of the right of way under the railroad in litigation?— A. No; it has been settled by the courts. Q. Settled in your favor?— A. No. We have to take our pipes out. We have got to quit and come to Philadelphia. The right of eminent domain in Pennsyl- vania gives us the right to come to Philadelphia. We have to throw away our expense of upward of §150,000 and turn around and come to Philadelphia with our line. Q. You have to make Philadelphia your seaport? — A. Yes. ' A PIPE LINE SHOULD BE AUTHORIZED. LIKE A KAILROAD, TO GO ANYWHERE BY PAYING THE DAMAGES. Q. You say you can not cross certain railroads in the State and can not get to the seaboard there with your pipe lines: what remedy would you suggest for that state of affairs? — A. Well, I would suggest that New Jersey pass a law to let us go. But I want to say to you that I went to New Jersey — but in order to answer that question, in order to have you understand, I should have to refer to some persons I should not like to. They are very high in office; one is in the second highest office m the United States and the next is in the third highest office in the United States. Q. You think the passage of a free-pipe-line bill by the legislature of New Jersey would give you the right you have long sought? — A. Oh, yes, certainly; because it is only a question of getting through bj^ paying the damages, just as a railroad does. That is what we could not get. I have argued the case long and loud; and my experience there in the State of New Jersey, with the legislature, was one that the public ought to know, but it is so disgraceful I am ashamed to tell it. By the way, I did not answer a question that somebody asked me; I started to refer to this and you got me ofif the track. COMMONWEALTH OF PENNSYLVANIA V. JOHN D. ROCKEFELLER ET AL.— THE CAMPBELL CONTRACT. Q. (By Mr. Kennedy.) I asked you about the testimony of Mr. Cassatt.— A. Exactly; and in relation to that compact, the Campbell contract. The contract is here in my hands now. But I want to say to this commission that the outcome of the suit brought by Pennsylvania against the Pennsylvania Railroad was this — the indictment No. 36, session of 1879, Commonwealth of Pennsylvania v. John D. Rockefeller et al'., court of quarter sessions. - (Here the witness read the indictment.) This was a suit brought by the Producers' Protective Association, or rather a complaint made by them to the Commonwealth of Pennsylvania, which brought suit, and out of this grew the indictment. The case was never tried. They attempted to get a change of venue, and they failed in that. A very stubborn fight was made. They claimed that the oil country was prejudiced, and they could not get justice. They appealed to the sujDreme court of Pennsylvania for relief, and through some process of law they, got it. You lawyers know better than I how they may have obtained it; but the case was drtigged along in the same old style that I have told you about, and finally, on account of discourage- ment and lack of funds, and disagreement of the committee upon the matter, Mr. B. B. Campbell, president of the Producers' Protective Association, settled the case, receiving the sum of .$40,000, which was used in defraying the expenses that had been incurred, and receiving the contract that has been referred to. Probably it is not necessary for me to read that contract. Q. (By Mr. Phillips.) You had better give us the substance of it.— A. You will find, on page 407 of the Bacon committee's report, the exact language of the contract itself. First of all, the provisions in respect to the Campbell admission, and the United Pipe Line, and then the Pennsylvania Railroad Company's admis- sions. I would state briefly that this contract was presented to the producers to accept, but almost by unanimous vote they rejected the settlement, and there ' Sec pp. Hr,(Mir,5. = See Mr. Boyle, pp. fJ", 428; IV]^. L<)ckwood,p,369; Mr, Arcliboia,p.553. STANDARD OIL COMBINATIONS: EMERY. 663 was a sort of a general breakup over the action of the president of the Prodncerw' Union. Q. (By Mr. Farquhar.) That does not agree with the record.— A. The record is right. Q. (Reading.) - JResoh-ed, That the general council of Petroleum Producers' Union approved the action of the president in withdrawing the suits against the Standard Oil Company as wise and judicious.'— A. I am v'cr/glad you corrected me on that. The reason why I said they did not accept it was this; There were only two men who signed the contract, B. B. Campbell and A. N. Perrine. I refused, as did everybody else. B. B. Campbell, being a manufacturer of oil, received the rebates, but there was some question about it. For a long while there was some difiBculty between the Pennsylvania and the northern railroads because Mr. Campbell was permitted to go in and ship his oil. NATURE AND EFFECTS OP THE DIVISION OF TRAFFIC PROVIDED FOR IN THE CONTRACT OF 1884. You are anxious to get something new, up to date. Now, here is a contract that went into effect in 1884. and was recently brought out in a suit for discrimination for a large sum of money, which is now pending against the Pennsylvania Rail- road. The amount sued for is several hundred thousand dollars. Representatives of a large concern in this country purchased oil and shipped it over the Pennsyl- vania Railroad, and sued for rebates, and they have recently produced the contract of 1884. I understand it is in existence at the present time. If I am mistaken about its being in force. I desire to be corrected, but I understand it is in force at the present time. If you desire to have it read I will get somebody to reacl it, but it is what I term a nefarious contract. Q. (By Mr. Clarke. ) Can you answer the question whether that contract pro- vided for rebates? — A. It provides for something that is a great deal worse. Q. (By Mr. Phillips.) "What is that which is worse'/- A. It requires that 26 per cent of the shipments of oil shall go over the roads. The pipe lines can carry it all if they want to, with the exception of the residuum. The railroads need not have made this contract, because the residuum has to go in cars anyway. You can not piimp it. Q. (By Mr. Clarke.) Do you call that nefarious'? Do you see anything writ- ten in the contract that a certain per cent of the product shall go over the road'? — A. Yes. Q. I would like to have you explain wherein that is wrong? — A. I would like to have it read. Mr. Phillips. If there is no objection the contract will be read. A. I confess to you the provisions of this contract have only been communi- cated through another source, and it has never been given to the public, to my knowledge, until it came out in this suit. It is practically new to me, and, I think, will be new to the world. 'Agreements beitnen the Penmylrania Railroad Company and the National Transit Company, dated August .'.'nd, JSS//, being two agreements of even date, as folloivs : " Memorandum of a traffic agreement, made this twenty-second day of August. 1884, between the Pennsylvania Railroad Company, hereinafter designated the Railroad Company, and the National Transit Company, hereinafter designated the Transit Company, witnesseth: " That for considerations mutually interchanged, the parties hereto agree, each with the other, as follows: "First. The Transit Company owns an extended system of local pipes in the oil regions of Pennsylvania and New York, which are grouped into a separate division, known as the United Pipe Lines Division of the National Transit Com- pany. This division will be hereinafter designated as the Transit Company's Local Division. " The business of this division is to collect oil from producer, store it in tanks, and deliver it, as may be desired, to any through carrier of petroleum, which will transport the same to where it is to be re'flned or otherwise disposed of. "The Transit Company also own certain through or trunk line pipes, extend- ing from several points of connection with the aforesaid local pipe division to various refining and terminal points. ""With these latter pipes, which vsrill be hereinafter entitled the Transit Com- pany's Trunk Line Division, it competes in the through carriage of petroleum with all other through carriers, whether pipe or rail. 664 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. " The business of its local division is therefore entirely distinct from the busi- ness of its through titink line division. "It undertakes and agrees that its local division will deliver into cars furnished by the railroad company at any of its regular delivery points and under its regular delivery rules whatever petroleum the owners thereof may desire to have so delivered and as the railroad company may furnish cars to transport, and will make no discrimin"ktion either in its local charges for carriage, storage, and other services, or in the use of any of its local facilities, against such oil, but will at all times treat it in the said respects as favorably .as it at the same time treats any other petroleum which may be delivered to its own tmnk-line division or to any other through carriers. " Second. The transit company agrees that all petroleum brought to the Atlan- tic seaboard by all existing carriers, whether rail or pipe, now engaged in trans- porting such property, or which may hereafter engage in such transportation in conjunction with the transit company's pipe lines, shall be ascertained monthly, and so much of it as shall have been shipped in the refined state shall be reduced to its equivalent in cl'vide oil by considering that one and three-tenths (IfV) §3,1- lons of crude are required to make one (1) gallon of refined oil. It further under- takes and agrees that if of the total so transported the railroad company shall not have moved in its cars twenty-six (36) per centum thereof, the transit com- pany shall cause to be delivered to cars furnished by the railroad company at Milton. Pennsylvania, such quantity of crude petroleum as shall, when added to the amount which has been actually transported by the railroad company to the seaboard in said month, make the total transported by the railroad company in said month equal to said twenty-six (36) per centum. " The railroad company agrees to furnish the needful cars and facilities, and promptly transport the oil which the transit company agrees in this contract to deliver to it at Milton; Provided. That if during any month the railroad company is not able to assign from its oil equipments a suflicient n umber of cars to the traffic of the transit comijany tomove the proportion of oil herein xn'ovided to be delivered at Milton, then during that month the transit company shall only be required to so -deliver to the railroad company such quantity of oil as the raili oad company shall be able to transport, and shall not be required to make up ary deficiency that may occur during said month. " Efforts shall be made by the transit company to deliver so much during each month, as will probably be necessary to make the total carried by the railroad company equal to said percentage. '■Shortages, if not due to short siippl)- of cars, and such excesses as may be found to have occurred in any month, shall lie adjusted in the following month, or as soon afterwards as shall be possible. "Third. It is agreed that the proportion of petroleum which the transit com- jjany is to deliver under the second section of this agreement shall be considered as petroleum transported from Coalgrove. Pennsylvania, via Milton, Pennsyl- vania, to the Atlantic seaboard, and that the railroad company shall be entitled to one-half of the current through rates thereon. " It is agreed that whenever the through rates shall be so low that the railroad company shall suspend the movement of oil by its cars, at other points than Milton, the transit company shall during such susiiension not be bound to deliver to the railroad company any oil at Milton. " Fourth. All joint rates for the joint transportation of oil from any delivery Ijoint of the local pipe division aforesaid to any refining or terminal pioint shall be fixed by the railroad company, subject to the advice and concrirrence of the tran- sit company. " It is agreed that said joint through rates shall be uniform to all parties. The railroad company stipulates that it will make no discrimination whatever, either in rates or fiicilities, against the transit company in- against the oil which the said transit company herein covenants to delivei' to it. " It is agreed that the joint through rates to Pliiladelphia shall always be five cents less per barrel on crttde oil, or its refined equivalent, than shall be currently charged to New York Harbor. " It is agreed that the joint through rates, which shall be so fixed from time to time, shall be as low as shall be curi'cntly made between same and similar points by rival carriers of petroleum, and shall not be higher than an approximate mile- age proportion of rates current on petroleum produced sotith of Oil City, nor than rates from Olean and similar points. " It is also agreed that rates on refined oil and other products of crude oil shall be fixed by the railroad company upon the following basis, viz: "From railroad stations in the oil regions to which oil is delivered bj^ local pipes the rate to any point east thereof on a barrel of refined oil or other products STANDARD OIL COMBINATIONS: EMERY. 665 shall be one and three-tenths (ly%) times the current rate on a barrel of crude oil to the same point. " From Pittsburg the rate to any point east thereof on a barrel of refined oil or other products shall be one and three-tenths (l^y the rate currently charged on crude oil to any such eastern point from rail points south of Oil City: Pro- vided, That one and three-tenths times the charges for moving a barrel of crude oil by rail or through pipe from the local pipe to Pittsbarg shall first be deducted therefrom. ■ • From Cleveland and Buffalo the net rate on a barrel of refined oil or other products to any point east thereof shall be not less than is currently charged to the same point from Pittsburg. ••Fifth. Whenever the teiia barrel is used herein, unless otherwise specified, it means forty-five gallons of crude petroleum, and whenever the term oil is used herein, unless other-\\-ise specified, it means crude petroleum. "Sixth. The transit company hereby agrees that it will not make anymore favorable terms with any other rail line connecting with any of its pipes than the terms which under this agreement are given to the railroad company, or if for any reason it should desire to do so, it hereby agrees to modify this contract so as to give the said • more favorable terms " to the railroad company. '• Seventh. All existing contracts between the parties hereto shall be deemed to have been accomplished and shall become void and of no effect upon the day this contract goes into operation. "Eighth. This contract shall take effect as of the first day of August, 1SS4, and shall continue until terminated under the provisions hereof. It may be termi- nated after August first, 1889, by either party hereto giving ninety days' written notice to the other of a desire that it shall end, at the expiration of which notice it shall cease and determine. •'In witness whereof the parties hereto have executed this agreement under their corporate seals the day and date above written. '•The Pennsylvania Railroad Company, [L. s.] ••By Frank Thomson, ■■ Second Vivi'-Pri'^idcii f. ■■Attest: John C. Sims, Jr., Secretary. •'The National TEj •• By C. A. Griscom, Prei Attest: John Bushnell, Seci-ctary." [l. s.] •'The National Transit Company, •• By C. A. Griscom, President. "Memorandum of agreement, made this twenty-second daj- of August, 1884, between the Pennsylvania Railroad Company, hereinafter designated the railroad company, and the National Transit Company, hereinafter designated the transit company. •• Witnesseth: That for considerations mutually interchanged the parties hereto hereb\' agree with each other as follows: •• Whereas the parties hereto have made an agreement of even date herewath. in which, among other things, it is stipulated that under certain circumstances the transit company shall deliver certain crude petroleum into cars furnished by the railroad company at Milton, Pa. ; and " Whereas it has been propased that the railroad company shall contract with the transit company to the effect that the transit company shall transport through its pipe lines the aforesaid crude oil, which, under the other contract aforesaid, it has undertaken to deliver into the cars of the railroad company at Milton. "Now, therefore, this agreement witnesseth: •■First. The railroad company agrees that instead of delivering said crude oil to said cars at Milton the transit company shall transport the same through its pipes to destination, and the transit company undertakes and agrees to do such trans- portation. It is mutually agreed that the compensation to the transit company for doing said work shall be as follows, viz: " Whenever the through rate for transporting a barrel of crude petroleum from Glean to Philadelphia shall be forty cents, the transit company shall receive eight cents per barrel as such compensation for so much of said oil as under the provi- sions hereof shall be considered as Philadelphia oil. "For each five cents of increase or dhninution in said rates from Clean to Phila- delphia the said compensation on Philadelphia oil shall be increased or diminished one cent per barrel. 666 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "Provided, hoirevc)'. That the transit company shall not be obliged to accept less than six cents per barrel, and shall not receive more than ten cents per barrel on such Philadelphia oil. "It is agreed that the said compensation on the oil, which under the provisions hereof is to be deemed New York oil. shall be one cent per barrel greater than it cur- rently shall l:ie on Philadelphia oil. "Whenever, and frona time to time, as the said joint through rates shall be so low that the said minimum compensation to the transit company of six cents per barrel shall be as much or more than the railroad company's share of said joint through rates, this contract may, at the option of either party hereto, be suspended during all or any part of the time such low rates shall prevail. During such sus- pension the aforesaid other contract shall alone remain in force; but whenever, and from time to time, as said joint through rates shall again be high enough to make the said minimum compensation, under said sliding scale, less than the said share of said joint through rates, this contract shall again resume its force and effect. "Second. The transit company agrees to account for and pay to the railroad comp-xny, on or before the twentieth of each month, the latter "s share of the joint rates on joint business \'ia Milton (as provided in said other contract) during the next preceding month, first retaining, however, the proportion of such share which it is hereinbefore agreed the transit company is to have for its services in ptnnping said oil to the seaboard. " It is agreed that all such joint business shall be considered as having trans- ported from Coalgrove via Milton, Pa., to the Atlantic seaboard, and that it shall be c.onsidered as having gone either to Baltimore, Philadelphia, or New York, or partly to each. The proportion thereof which has constructively gone to New York shall be determined upon the following basis: ■ ' The total amoiint of oil transported in any month by the railroad company to New York shall be compared with fifty per centum of the total oil which the railroad company is entitled to carry in said month under the aforesaid other agree- ment. If the amount which has been in such month carried by cars to New York shall be less than fifty per centum then the difference shall be considered as having been moved by the pipe to New York at New V'ork rates, and shall be accounted for accordingly. The remainder of the oil via Milton shall be accounted for at Philadelphia rates. " This contract shall commence and terminate simultaneously with said other contract. "Witness the corporate seals of said parties duly attested the day and date above written. , "The PEi^xh^YLVANiA Railroad Company, " By Frank Thomson, Preftideiit. "Attest: [L-s.] John C. Snis. Secretary. "The National Transit Cosipany. "By C. A. Griscom. Prenideiil. "Attest: [L.S.] John Bushnell, Scortori/." The Witness. Mr. Chairman and gentlemen, according to this contract, first, the rates must be maintained as established by the pipe lines: that is, the open rate of 45 cents. The contract was made for the purpose of sustaining rates. The outside refineries were compelled before the construction of the United States Pipe Line to ship all their oil by rail to the sea for export. The reason f oi; making this con- tract and guaranteeing about 30 per cent of the tonnage to the coast was to insure the maintenance of the rate according to its provisions. If 26 per cent of the oil was not shipped over the roads, the Standard Oil Company was obliged to make up that in dollars and cents for the payment of the freight at the toll rates. Now, the point is this: The cost of collecting oil from the well to the rail- road or the storage tanks by what we term the gathering lines is from 3 to 5 cents a barrel: say 5 cents.' I speak intelligently on that point, because I am a col- lector of oil by several hundred miles of line belonging to myself. The cost of carrying the oil through to New York, or rather to a point' in New Jersey 50 miles from New York, is about the saim^. We gather oil from the well and deliver it in New York at a cost not exceeding 10 cents a barrel at the present time. Now. if this contract was out of the way the railroads would seek that ' Sec Mr. Li'c,p.»l: Mr. Philliiis, p..-,!i4; Mr. Avelibold, p. ■,,-.:): Mr. Rotri-rs, pp.581, ;WS. 58! STANDARD OIL COMBINATIONS: EMERY. 667 rate, just as they come and seek your freight at the present time, or seek to carry a person or a number of persons to Chicago. But this contract compels them to keep the rate up and compels an outside refiner to pay this enormous rate of freight. The Standard Oil Company deliver all their oil to New York at a cost of not over 10 cents a barrel. By railroad a barrel of oil has to pay 45 cents; and the Standard gets this rate held by guaranteeing 26 per cent of the tonnage to the several railroads which are classed as oil railroads. THE COXTEACT DID XOT REALLY INCREASE THE BUSINESS OF THE EAILBOADS. Now, then, the by-products of petroleum are just about what this 26 per cent would amount to. Among by-products there are benzine and gasoline and tar. There is about 36 per cent they can not pump through the pipe, because it consists of lubricating oil and tar and such things as benzine, etc. The intent of this is to maintain rates, that there may be no competition between the railroads and the National Transit Company as a carrier. That is what I object to, and that is what the contract says. It is a combination which is illegal. Q. (By Mr. Phillips.) Do we understand this, Senator, from your testimony, that there is about this amount in by-products, and therefore they do not ship any crude or refined oil by rail in consequence of this contract? — A. No: the railroad would have to have this carrying anyhow.' They would have to carry benzine; you can not pump it. You can not pump wax. There is 26 per cent of oil that you can not get through the pipe line if you want to. THE RAILROADS H.WE RAISED THE RATE. Q. (By Mr. Clarke.) As I understand you, you are not finding fault with the percentage or apportionment of this freight, but you are finding fault that the price is too high, and that it is an agreement to maintain rates? — A. No; I am finding fault because they cut off this competition; cut it from me in my prod- ucts. The railroads have carried this stuff at 8 cents a barrel. I paid for years 33 cents a barrel to carry this stock through. At the present time the rate on these products is 16i cents a hundred, making 52y\f cents a barrel in bulk. The rail- roads have raised the rates. Then, in barrels, you have to pay for the weight of the barrels; that raises the total to something like 66 cents. That is the rate of freight. Q. Then you do criticise this partly because the rate is too high? — A. I do on that ground. It has been raised from the original 45-cent agreement. REASON FOR BELIEVING THE CONTRACT OP 1884 TO BE STILL IN FORCE. Q. (By Mr. Kennedy. ) That contract was entered into 3 years before the passage of the interstate-commerce law. Have you any evidence that it is still in force? — A. I only know it from the admission of a railroad man who .said that it was. He came to my place and invited me to go to a certain point and establish a loading sta- tion to ship oil by water to New York. "Well , it is the Buffalo , Rochester and Pitts- burg Railroad. I went to Rochester and I met the gentleman. I picked out the loca- tion for our station and made arrangements with him for the transportation of my oil to the Erie Canal. The station was to be built on their own land, with a nominal rental, which was agreed upon, and the transportation from Bradford was to go that way. He then said: "I would like to have you build a pipe line down at a place called Irvings and bring oil down to the Rochester and Pittsburg Railroad and let me draw it to your factory," all of which I agreed to. He said: '• They do not see fit to recognize us as an oil road and I am going to do some of this business." All at once he was recognized as an oil road and he was to get his percentage under this contract. My station was not built, and my pipe line was not built to brmg oil to his road. That was 2 years ago; this contract was in existence at that time. Under these circumstances, I believe it to be in existence to-day. Q. Was that contract made for a term of years? Was any limit named m it?— A. I do not think there was: let us see. I think it is perpetual. AS TO THE RECORD OF TESTIMONY TAKEN BY A COMMITTEE OF CONGRESS IN 1872. Q (By Mr Farquhae. ) In a part of your testimony early this session you read the testimony of Peter H. Watson with respect to the South Improvement Company contract? — A. Yes.- 1 See settlement on p. Tii2. ' See p. 618, 668 HEARINGS BEFORE THE INDUbTRIAL COMMISSION. Q. You.read from a pamphlet here. It, of course, is not official authority for the commission ? — A. That was evidence ; it is on file. Q. But we want to. know where this evidence came from and who took it.— A. It is in the reports of the Congressional investigation of 1870 and 1871. Q. This testimony you have read — I want to correct the date of this. This may be important. Your own reporters may have come here to take your testi- mony here in Washington. They had an interview with the Congressional committee on the i;.5th — with a committee which was a subcommittee. — A. What year was that? Q. 1872, at which time a subcommittee was appointed to take testimony, and subpoenas were issued for Watson and Lockhart. Now, of course, if this is simply a printed pamphlet the question is A. You have your official record here. You have got it in the library — the investigation of Congress. It is here on file, the same as the investigation of 1888. Q. This was in 187.5^1872-187.5 ?— A. It is the same as the investigation in 1888. It should be on file, because it is an investigation by Congress. Q. (By Mr. Phillips.) Is it in the Hepburn report? — A. No, no; it is 1871. The Hepburn report was in 1879. No, it is one of the first investigations ever instittited. Q. (By Mr. Kennedy.) You stated yesterday that you did not know what committee took the testimony. Q. (By Mr. Faequhar.) Your testimony ought to show the commission the official source that it is taken from. — A. If you will give me access to your library here I will find it. Q. (By Mr. Phillips.) I wish to ask Mr. Boyle for information simply on this line. Q. (By Mr. Parqtjhar.) This, as presented here, is unofficial. — A. I refer you to the library. Q. (By Mr. Phillips.) Mr. Boyle will tell you of it. Mr. Boyle. I have been searching for that report all through the books. 1 have not been able to locate it. There were newspapers giving reports at the time of the subcommittee. It was a subcommittee of Congress, of the House,, of the spring of 1872, beginning on the last day of March, 1873, and continuing at various dates for two or three years. Q. (By Mr. Farquhae.) The chairman of the committee seems to be well known — C. W. Gilfillin. — A. I think lie was in Congress at that time. Q. That is the identification you make? — A. I make that identification, that it is a Congressional report and was published at that time. At that time I read the testimony and it is familiar to me now. I was going to get it, but I could not. I know it was an investigation of Congress, and I suppose it is on file, just as these books are on file: it should be. Q. (By Mr. Phillips.) You do not know of your owii knowledge that it is true, but if it is found by this commission on file you want it to be considered a part of your evidence? — A. I was in Washington in 1873 myself, and I know the investigation took place, and I know I have a complete copy of it — a paper file of it at home. I was keeping my scrapbook, and I think I can produce the investi- gation. I think I can produce the book itself. I think I can, and I shall be very glad to do it. Q. (By Mr. Farquhar.) I should like to make a statement from Mr. GilfiUin's own report, whom we know to lie of good repute everywhere. It seems that your own people took this matter to the committee of Congress and you had your own reporters. The question is, was it ever reported officially by Congress? — A. Well, does the Congressional committee go into a room without a stenographer? Q. Sometimes: quite frequently. — A. It is the strangest thing I have heard. Q. I am not discussing where the testimony came from. I think the origin of the testimony — it would be well for one of the parties to see that it is verified.— A. I rely upon that testimony as being valid, and the investigation can be pro- duced. It is dated from Washington, and I know the investigation took place, and I know Mr. GilfiUin was on the commission. I do not know whether he was here on that day or not. SCARCITY (^P COPIE.S OP THE TESTIMONY OP 1«SK, Q. (By Mr. Phillips.) You said that, on your information and belief , as pre- scribed by the oath, you believe it to be true? — A. Just exactly as I believe my own testimony to be true. It is very unfortunate that it is not here; and I want to say to you right here that of this testimony of 1888 there were several thou- sand volumes printed, but I understand there are only 300 of them in circulation STANDARD OIL COMBINATIONS: EMERY. . 669 to-day. I could not get one myself until just by good fortune I got one the other day of a friend who had two. Nobody knows how that evidence was spirited away from here, but it is gone. Q. (By Mr. Farquhar.) 18SH?— A. Yes. There were only 300 volumes sent out. I sent to Congressman Stone of oiir district for one. WHY THE WITNESS, HAVING GOT BOOKS INTO COURT WHICH HE BELIEVES CON- TAIN PROOF OF CRIMES, LET THEM GO UNEXAMINED. Q. (By Mr. Ratchford.) I rinderstand from your testimony you make the broad statement that if the books of the railroad companies could be brought into court some of the officials would be sent to prison? ' — A. If you can send any- body to prison for violating the interstate-commerce act, I say yes. I am not posi- tive whether there is a criminal clause in it or not. Q. If you wish to modify that statement you can. — A. If there is not a crimi- nal clause I do want to correct it; if there is", I will let it stand. I stick to my statement if that is the law. Q. Do I also understand, from the previous part of your testimony, that you caused one or naore of those companies to produce their books in court? — A. The Pennsylvania Railroad. Q. In the courts of Clarion County? — A. McKean County. Q. You state that you produced convicting evidence against them? — A. We did not examine the books at all. Q. Why? — A. Because the case was settled. Q. Why did you settle it? — A. I told you yesterday that my pai-tners got tired of fighting it. We had been at it for 3 or 4 years, and they offered us 835,000, and we settled it. The claim was for §107,000. Q. Settled for $35,000?— A. And costs.- Q. If the discriminating practices by railroads and the rebates that were given by railroads are so injurious to the interests you represent, and to all other inter- ests, why did you settle it for §35,000, or how did you believe yourself justified in settling for any sum? — A. Our association was too poor to carry it on. They could have gone on, and could have. extended that suit for 10 years. Q. And yet you are satisfied, and have been satisfied, that convicting evidence would have been adduced in court had the books been investigated? — A. We got all the evidence we wanted for them to settle upon, and we tried to get the books into court in the early history of the trial; but we could not get an order before the master, in taking this testimony, because he had not the power. When we got them before the McKean County court, the circuit judge having power, we demanded the books and papers. He issued an order and the books came. If my disposition had been followed, even in the depressed circumstances that I was in — if I had had my way about it I would have examined every one of the 3 tons of books. But I had a partner, Mr. Logan, who had lost every dollar in the world in speculation, and he said: " This money will do me good, and I would like to have you let up." Q. You assign, then, as a cause for settling the trouble, the fact that the asso- ciation controlled by you was too poor to fight? — A. And the dilatory action of the court. THE OIL BUSINESS IS MORE PROSPEROUS THAN IT WAS TWO YEARS AGO. Q. (By Mr. Clarke. ) Are you able to state whether the condition of the oil business generally is more or less prosperous now than it was 3 years ago? — A. Oh, it is more prosperous now. from the fact that all the factories of the country are running, and there is an enormous demand for goods, and the production of oil in New York and Pennsylvania is not adequate to the demand. That is one reason for the advance in the profits of petroleum. Every factory and every spindle is running, and every coal mine and every iron mill, and there is an enor- mous demand for the goods. We could sell from my factory five times as much as I am making, if I had it, and at good profits. THE WITNESS HAS RECEIVED NO REBATES SINCE 1872, EXCEPT WHAT HE HAS COLLECTED BY LAW. Q (By Mr. Farquhar.) Have you frequently in your own business enjoyed rebates?— A. Never. Now, let me modify that. In my busmess previous to 1872, 'See p. 613. = See p. t),3.5. 670 . HEARINGS BEFORE THE INDUSTRIAL COMMISSION. in the refinery at Titusville, Pa., rebates were a common thing; but we were young and new in the commercial business, and the fellows in Cleveland and Pittsburg were a little more experienced. We did not seem to make very much money. They were running full tilt with their wells, barrel shops, and every- thing, and we began to look about to see what was the matter. "We went to Pitts- burg, and we learned, to our astonishment, that certain concerns were getting 35 cents a barrel. We were large shippers, and we demanded to be granted the same. That was away back in 1870. We were given 35 cents, and then we got on to the fact that some of the refiners were receiving 75 cents back, and some other refiners were receiving 50 cents. The rate at that time was in the neighbor- hood of §1.50, and oil could be carried at a profit to-day at 35 cents. Prom that time to this — no, I am not guilty. Q. (By Mr. Phillips.) Following that up, have you in recent years received rebates? — A. No. Q. For how many years? — A. Since 1873, excepting rebates we collected by law. Q. Not since 1873?— A. I stated here that the president of the Pennsylvania said they were not giving any, but the auditor and bookkeeper admitted it. MR. LOaAN. OF THE SOUTH IMPROVEMENT COMPANY, WAS NOT THE WITNESS'S PARTNER. Q. I have been requested to ask Senator Emery a question. Mr. Logan, who was one of the parties to the South Improvement Company, is there, I believe, to-day. — A. Yes. ' Q. Now, is that the same Logan that was a partner of yours in Philadelphia in recent years? — A. No: Alfred H. Logan is my partner. The two Logans that were connected with the South Improvement Company, William P. and John P. Logan, are both at the present time living; but Alfred is dead — my old partner. THE REMEDY: GOVERNMENT OWNERSHIP OF ALL MEANS OF TRANSPORTATION, AND ESPECIALLY OF RAILROADS. Q. We have been in the habit of asking persons here whether they had any remedial legislation to propose along any lines of the inquiry. Have you any- thing to propose to the commission in the way of remedial legislation to meet these problems? — A. I will simply state very briefly, because I do not expect to go into an argument on that point. I would simply say this : That I am an abso- lute believer in the government ownership of all means of transportation, and especially of railroads. I was anxious that when the United States Government had the opportunity of taking in the Central Pacific Railroad it should do it. All the railroads of Germany, excepting two in the south, are owned by the Government, and discrimination is not known: nor is there any dissatisfaction in business. They often go so far in that country as to take the canals; but the canals are free. If the waterways and the railroads can be put under Govern- ment control, gentlemen, you will do away with all difficulties that exist to-day. because the prime movers of all this trouble are the railroads. They make the trouble by giving discriminating rates, or giving rates to favored shippers lower than they give to the general public. THE LAWS WE HAVE WOULD SERVE IF THEY WERE ENFORCED BY ACTUAL IMPRISONMENT OF OFFENDERS. I know of no better remedy, because you have laws upon the statute books of the United States that would alter the present condition of things if they were enforced. If you would make an example of these men, if there is a criminal clause in the interstate-commerce act, and put them behind the bars, I think that would strike some terror to their souls. I recollect that, owning a large fiouring mill in southern Michigan and quite a large amount of land in wheat in North Dakota, I desired to ship some of this most excellent hard wheat down to Three Rivers, Mich., and manufacture it, and I wanted a transit rate. It was given me previous to the interstate-commerce act by the then manager of the road. I went back the next year and he said: ' ' I can not do by you as I did last year, becaiise the criminal clause of the interstate-commerce act is such that if I violate it I am liable to get behind the bars, and I am afraid of them. Therefore I can not make a rate by which you can ship wheat from North Dakota and manufacture it and ship it to the East. " Now, I say, Mr. Chairman and gentlemen, that some way has got to be found to cut off the rebate and drawback practices of the railroads. The mass i)f the people in this country are incensed, and that dissatisfaction reaches to the minds of all classes of men. STANDARD OIL COMBINATIONS: EMERY. 671 THE GOVERNMENT COULD MANAGE THE RAILROADS — EUROPEAN EXAMPLES. I am firmly of the belief that if the Governnient woiild take charge of the rail- roads as it took charge of the transportation of the mails it could manage and control the railways and waterways in this country as well as it can control the mails. The example of Germany is before yon: the example of Norway and Sweden. If I recollect right. IS years ago the Kingdom of Norway and Sweden did not own a mile of railroad. Poor as those nations are, they saw English capi- tal coming into that country and building railroads north arid south up to the gTeat Bessemer mines in the northern part of Sweden, and their own manufac- turers were unable to compete, shipping over the same lines of road. Complaint was made to the legislature, and they at once said. "We will own these railroads orirselves," and they bought them from the English capitalists. When I was in Norway and Sweden 3 years ago, while I was there, the Government took the con- trol of them, and they own to-day the jirincipal roads north and south through both of those countries. They have not cared to take the lateral lines east and west, but .they make a rate from the common points of these lateral lines to the water front, and they prorate with the lateral lines belonging to the smaller com- panies. They have brought back into the markets the old ^manufacturers, and they are to-day a happy people, because the Government has -fcaken hold and made the rates equal to everybody— to the Englishman, to the Frenchman, to the Ger- man, and the Yankee, and everybody else. We distribute oil in those countries, and we find no discrimination. Government ownership is my proposition. THE CORPORATIONS ELECT THE LEGISLATORS — STATE OFFICERS AND UNITED STATES OFFICERS IGNORE COMPLAINTS OF VIOLATIONS OF THE LAW. You have upon the statute books to-day one of the beat laws ever written, known as the Sheftuan Act, passed in 1890; but the difficulty in this country is that you can not enforce the law. or at least yoii do not. Complaint of our diffi- culties was made during the Cleveland administration to the Attorney-General of the United States, and no answer was made by the recipient of the letter. And to the present administration complaint was made more than 8 months ago. The letter was pigeonholed. In the State of Pennsylvania we have asked the aid of the Commonwealth, by application to the governor, since the suit 1 have mentioned. The letter was pigeonholed. The power of these monopolies and com- binations is such that they elect or nominate their own men to serve in the legisla- tures. They make their own nominations a year ahead of the time, to x)repare their candidate; and he is schooled to know their wants first and the people's second. I say that if our courts of the State, our attorney-general of the State, our Attorney-General of the United States would put forth the strong arm of the government, under the laws that exist, they could stop these encroachments upon the rights of the people. I say that if they will not do so you must come to the control of these great transportation lines, which are causing all this trouble, by Government ownership. I have been a traveler in every part of the world that I could reach by water or rail; and I have found this country adver- tised from China to the islands of the East as being a country whose people are bound hand and foot by corporate power. As I told you yesterday, we came to Congress, as you saw liere.m 1HT2. We came here again and again. We have come to the Attornej^-General of the United States a half dozen times without result; and it seems to me that the courts are approached without result also. The settlement of litigation before the courts is delayed. Corporations come when they please and stay away when they please. They defy the courts under the plea that they will incriminate themselves if they give evidence. What are you going to do about it? If the Government would stretch out its arm and take this man and say, '■ Answer this question or go to prison for contempt of court."" he would answer. Now, I say Government ownership of railroads would be my remedy unless we can get Attorneys-General of the United States and of the several States that will enforce laws. UNFAIR TRADIXO SHOULD BE PROHIBITED. Q. Suppose that the Government did own the railroads to-day. Would not these great corporations or trusts still have the power to follow the smaller merchants into the cities and towns and sell oil or any other merchandise very low at given points? And could not these corporations, with their great accumulations of wealtli, still pre\'ent the small corporations from doing business and the merchant from selling his goods m various markets?— A. In that case you would want the law I spoke of yesterday— such as. I think, is adopted by Germany— to prohibit unfair trading. You have got to take care of the interests of the common people of this country. If you do not, you are going to have trouble. 672 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Washington, D. C, November 10, 1S99. TESTIMONY OF MR, ANDREW D. GALL, Manager of the Gall-Schiieider Oil Company. Limited, Montreal, Canada. The commission met at 2.10 p. m., Mr. Phillips presiding. Mr. Andrew D. Q-all vv'as introduced as a witness, and, being duly sworn, testified as follows: Q. (By Mr. Jenks.) Will you kindly give your full name and address?— A. Andrew D. Gall, Montreal: a British subject. Q. What is your business? — A. We are engaged in the marketing of petroleum products generally, principally in the Province of Quebec, in Canada. Q. Do yoa handle American oils at all? — A. Almost exclusively. PRODUCTION OF PETROLEUM IN CANADA. Q. Can you give us an account of the production of crude oil in Canada, giv- ing us the different places of production and something as to its extent? — A. The production of oil in Canada is confined almost exclusively at the present time to western Ontario: that is, the Bothwell, Oil Springs, and Petrolia districts, all of which are in western Ontario. The prodirction of oil is largely in the hands of private individuals. The Standard Oil Company, as a company, does not own a great number of wells, but some of the men formerly in the old Imperial do. I will explain that the Imperial Oil Company to-day in Canada is directly the Standard Oil Company. It was the name of the company in Petrolia before the Standard Oil Company got control of the Canadian market, and has been con- tinued under that style. * Q. You say that the Standard Oil Company has gotten control. Do you mean that the Standard Oil Company bought the stock of that company and continues the company under its old name? — A. Yes, under the name of the Imperial. Q. (By Mr. Smyth.) Tlie Standard Oil Company are stockholders now in that company? — A. The Standard Oil Company are stockholders in that company. Mr. Fitzgerald, the former president of the old Imperial, admitted that only a small proportion of the stock was held by Canadians at the present time. Q. They bought that in open market? — A. Well, I do not know. It was a kind of a deal : I do not know whether you would call it open market or not. There were a number of men who were formerly in the old Imperial who have large producing interests in Canada. These men no doubt control between 20 and 25 per cent of the production. The rest is held by the independents or small producers, pumping from .50 to 500 barrels per month. Q. (By Mr. Jenks.) If I understand you, then, the Imperial Company, of which the Standard Oil Company owns the controlling interest, controls about 35 per cent only of the production? — A. Of the production, yes. Q. About how much is the total production of Canada? Can you give us the figures? — A. Yes. The total production of crude oil amounts to about 750,000 to >!ini.O(.i0 barrels per year of 35 imperial gallons each. CANADIAN OIL WORSE THAN OHIO. Q. What is the quality of this Canadian oil; is it like Lima oil in Ohio or white sand oil?— A. We have handled a good deal of Ohio oil, and of course it is not to be compared with the Pennsylvania at all: ' but comparing the Canadian with what we get from Ohio we find that in marketing it at an equal price we can always get a preference for the Ohio product, so tliat I should be inclined to think that people would prefer the Ohio to the Canadian product. Q. (By Mr. S.myth.) You say " we: " do you represent the company?— A. Yes. I might say I am president and managing director of the Gall-Schneider Oil Com- pany, Limited. Q. Do you produce petroleum— do you have wells?— A. No; we have nothing to do with that whatever — it is only marketing it. Q. Do you not refine the crude?— A. We have nothing to do with the refining. Q. You simply buy refined oil? — A. Yes. Q. (By Mr. Jenks.) You handle also crude oil? — A. No, sir; only refined, lubricating, etc. ' See p. Ml; Mr. Lee, pp. I.'T5, 378; Mr. AiThbold, p. «;!;.'; Mr. Emery, p. «21. STANDARD OIL COMBINATIONS: GALL. 673 REFIXIXO IX CANADA ALL DONE BY THE STAXL>_Al!D NOW. Q. About howmiicli oil is refined in Canada, and what propoi'tion of that is controlled by the Standard Oil ComiianvV— A, AY ell, these fignres I am about to give are supposed to be official. They are made by the Department of Agricul- ture. Up to the present time of course all oil had to be insjjected and went through the inland revenue or customs department, and I presume the figures are correct. The quantity of illuminating oil that wa.s produced ajid sold by oil refiners m Canada in 1896 was ll.Cor,1.50 imperial gallons, valued at .'2;1.351,ia2; of benzine and naphtha, 719.4.53 gallons, valued at .STO.TSS: of i>as and fuel oils, 6,788,353 gallons, valued at -t;261,618; of lubricating oils and taf, l,447,4.->5 gallons, valued at SV7,109. The total gallonage for 1896 was '31.176,0ni, and the total value .51,792,890. The total gallonage for 1898 was '.M.l."):-i.iy2. and the value wa.s .$1,723,393. Q. Can you tell us about what proportion of this refined product is refined by the Standard Oil Company?— A. To-day every gallon is refined bv the Standard Oil Company. Q. That is. the Standard Oil Company now has control of all refineries in Canada? — A. Complete control. Q. By complete control you mean they own them all? — A. They own them all.' There is one — there is the old Imperial in existence to-day. Q. How long is it since the Standard Oil Company secured this complete con- trol of the refined product in Canada?— A. That deal was put through in July or August, 1898. Q. Perhaps you can give us a little fuller statement about it?— A. Well, I do nofrknow exactly how it was done. I am sure. It was simply a deal of the Stand- ard Oil Company, and how they did it I do not know. They bought up all the refineries, and they have demolished all of them except the old Imperial plant. That is running now and there is a plant at Sarnia. a little farther from Petrolia. Q. How many independent plants were there before? — A. I have them here. Before the trust got control of the business there were 5 refineries in operation and 4 refineries that were not in active operaticjn at that time, although not closed up by any means. As I stated before, all of these, with the exception of the old • Imperial Company's works at Petrolia, have been dismantled, and most of the material broken up and sold as scrap or moved to Sarnia. I know about the figures they paid for one concern. That was the John McDonald refinery. He told me that he got §65,000 for it and that it was not worth ,$10,000.- Q. You spoke of their having removed part of these refineries to Sarnia? — A. They removed part of the material, X believe, in building up their ov.'n works at Sarnia. AMOUNT OP CANADIAN EEFINED OIL AND AMOUNT IMPORTED. Q. Do you know whether the amount refined at the present time is less or greater than the amount refined by the 5 refineries previously? — A. I do not see how it can be greater. The production of crude has been about the same, and I do not see how it can be greater than the production. Q. You think it probable, however, that they are refining all of the crude oil now. I judge from what you say that possibly this 1 refinery at Petrolia is larger than the others have been at Petrolia, and that the one at Sarnia is a little larger. Have these 2 as much capacity as all the old ones?— A. I guess so; yes. Q. While there has been a concentration of several into one nianageuient. the total output has not been lessened?— A. I do not think it has been les.^'ued. It may have been somewhat increased ; some crude having been sold for other purposes before, they mav have made some change.s which have increased it somewhat, (4. (By Mr. Smyth.) I suppose there is as much crude refined as is demanded?— A. No, sir. Q. There is demand for more refined oil than there is on the market?— A. Much more. Q. (By Mr. Jenks.) How much of the oil used in Canada is refined there, and how much is imported from the United States?— A. For 1898 the percentage of Canadian was 61 . 1 , and the percentage of imported, which is altogether American- no oil is brought from elsewhere— was 38.9 of the consumption m Canada. In 1881 there was only 6.9 per cent of American and 92.1 of Canadian. Q. (By Mr. Smyth.) How do the total ,.'):i(i,;Ml; Mr. Westgate, p.;i(iU; Mr, Emery, p 629 STANDARD OIL COMBINATIONS: GALL. 685 2 cents per 100 pounds. I do not know why it went up on oil. I know why, but there is no reason for it. I offered to gua,rantee them 400 tank cars a year — made the ofier in writing to the Grand Trunk. The reply was this, dated the 5th of July, 1899: "Freight rates on o/Z.— Replying to your favor of the 30th ultimo and previous conversation, I have now had an opportunity of discussing this matter with our general traffic manager and beg to advise you that we are not jirepared to make any modifications on our present rates for oil. '•Yours, truly, J. W. LouD." They simply will not listen to you at all or give you any satisfaction whatever. These same railroads have been built largely with the people's money. The Cana- dian Pacific Railway, for that western extension through to Winnipeg and the coast, have got some 30,000,000 acres of land and about $30,000,000 in money; and the land is yorth all the way from |8 to §10 an acre to-day in Manitoba and the Northwest. It gives you some idea of whether that road cost them very much or not. Q. (By Mr. Smyth.) You do not think this is altogether political action on the part of the Canadian government, influencing the railroads, in the way of retalia- tion, to keep out American products? — A. I do not think anything of that kind. I have not any such idea at all, and I do not think anybody else in Canada has. Q. You do not believe the railroads get all the freight they charge? — A. No; I do not. I think part of it goes back to the Standard Oil Trust; that is my opinion. Q. But you have no proof of that? — A. "We have not. Of course there are lots of things we have got that I could have given you miore information about if I had come before you later; but we have not proved those facts yet. We are sure enough that we have got information, but it is rather a serious thing to do that unless you know you are right. Q. (By Mr. Faequhar.) As far as you know, then, you have to pay practically the same freight as the Standard? — A. The railways say that. Q. So far as you know, I say. — A. So far as I know. CANADIAM RAILROAD LAW — POWERS OF THE RAILWAY COMMITTEE. Q. (By Mr. Smyth.) Is there any law in Canada against rebates by railroads? — A. Well, yes; I do not know what it is, but they have laws governing these things; but the trouble is there, as it is elsewhere, it is pretty hard to handle these things and enforce them. You just fancy a concern of no more magnitude than our own tackling the Grand Trunk and the Canadian Pacific on questions of that kind! Q. (By Mr. Farquhar.) You spoke of the railway committee. Do you know what scope and power that committee has? — A. Well, they have, as near as I know, control of all such matters as freight rates, crossings of railways, and pas- senger rates, and in fact anything of that nature that concerns the general public and the railways. Q. Are their findings and judgments final?— A. No; I think it is merely a court of inquiry. Q. Investigation? — A. Yes, and they can order the railway to do so and so; but I do not for a moment think that if we prove all that we have said, the Canadian Pacific Railway or the Grand Trunk either will obey that decision. We should have to go to work then, I suppose, to have it enforced, which would mean along time, and be of practically no use to us at that time when we got it. Q. (By Mr. Phillips). Enforce it through the courts, you mean?— A. Yes, we should have to begin a civil action against them on the strength of the findings of the railway committee, because I do not think they would pay any attention to the railway committee. combinations few and small in CANADA— sentiment AGAINST THEM. Q (By Mr Kennedy.) Is there any sentiment in Canada against these large industrial combinations?— A. There is, and the Globe newspaper, which is supposed to be the official organ of the present administration, has been hammering away at industrial combinations, particularly the Standard Oil Trust. 6 Have you industrial combinations in Canada similar to those m this country andEngland''- A. Oh, we have not anything of any account. The oil business is a kind of a monopoly, and so is the sugar business; but that is due to the duty, and so on There are a few of what we might call monopolies or trusts, but they 686 HEAEINGS BEFOBE THE INDUSTRIAL COMMISSION. are very insignificant and small. They do not amount to anything outside of the oil business. It is something new to our people there, that kind of thing, and we have to thank the Standard Oil Company for introducing it. Q. Are the people disposed to seek redress through legislation? — A. I think that if the present government do not alter things in some way so that the people will not be at the mercy of these trusts, or the oil trust in particular — well, I think that that will be one means of defeating them at the next election. That is about the only thing that is spoken of ; this freight discrimination and the duty on oil and binder tv.nne and a few things like that. I might say that the present govern- ment said that if it was shown that there was any inclination to a trust, in any manner whatsoever, they would immediately remove the duty on the articles com- plained of. They committed themselves in that way; so I made a declaration to the effect that there was a combination in the oil business, and it was read before the House at its last session. They were going to consider it, and I suppose they are considering it yet. There was nothing done about it. This is the declaration that I made: Canada, Province op Quebec, District of Montreal. I, Andrew Downie Gall, of the city of Montreal, in the Province of Quebec, oil merchant, do solemnly declare that I am extensively engaged in the wholesale trade of coal oil, burning oil, and other oils in the Dominion of Canada; that all the petroleum oil refineries in Canada, at the present time, are under the control of the Standard Oil Company or Standard Oil Trust through the said company having acquired some outright and a controlling interest in others; that since acquiring the said refineries in Canada the Standard Oil Company, which is operating in Canada under the style of the Imperial Oil Company, Limited, has closed up some refineries, demolished others, and is operating only such as it sees fit; that no petroleum oil from Canadian refineries can be obtained to-day unless it is procured from or through the Standard Oil Company or the Imperial Oil Company. Limited, directly or indirectly; that it is quite apparent, and investi- gation will establish beyond doubt, that the said Standard Oil Company or the Imperial Oil Company, Limited, has so acquired and controls said refineries for the purpose of forming, and they have thereby formed, a trust or combination to unduly enhance the price of such oil and to unduly promote the advantage of the said company at the expense of the consumers; that the firm of which I am a member, and other firms engaged in the oil business, are compelled to buy in the United States and import therefrom our supplies of oil to supply our customers and the trade. And I make this solemn declaration conscientiously, believing it to be true and knowing that it is of the same force and effect as if made under oath and by virtue of "The Canada Evidence Act, 1893." A. D. Gall. Declared before me at the said city of Montreal this '21st day of March, A. D. 1899. [SEAL.] B. A. DuNTON, Notary Public. Testimony closed. Whereupon, at 3.55 p. m. the commission adjourned until to-morrow morning at 10 o'clock. Washington, D. C, November 11, 1S99. TESTIMONY OF GEOEGE RICE, Indexiendent oil producer, Marietta, Ohio. The commission met at 11.15 a. m., Senator Kyle presiding. At 11.15 a. m. Mr. George Rice was introduced as a witness, and, being duly sworn, testified as follows: Q. (By Mr. Jbnks. ) Will you give us your full name and address?— A. George Rice, Marietta, Ohio. Q. What is your business?— A. I am a moderate producer of oil at the present time. STANDARD OIL COMBINATIONS: RICE. 687 PAMPHLET PREPARED BY THE WITNESS. Q. (By Mr. Clarke.) Have yoii prepared, printed, copyrighted, and publislied a pamphlet which purports to be testimony given, or to be given, before tliis com- mission? — A. I have. Q. Were you under oath when it was prepared? — A. No, sir. Q. Was it known to any officer of this commission that such a pamphlet was being prepared? — A. Yes; I notified Professor Jenks, and also the secretary, that I was getting up my testimony to be put in pamphlet shape; and I was also directed to send 3 copies here 3 days before the time I should appear, which I did. Q. Were any questions asked of you or answered by you, in the preparation of this pamphlet, by members of the commission? — A. No, sir. Not any of the members that I know of asked me anything in regard to the preparation of it. Q. Was any schedule of questions sent you? — A. No; nothing of the kind. Q. Do you claim any right, then, to issue that pamphlet as in any sense author- ized by this commission? — A. No, sir: I do not claim that they have authorized me in any shape or maimer to issue this pamphlet. I have published it and cojoy- righted it on my own responsibility. Q. Did any member of the commission know or have any notice of the contents, or proposed contents, of that pamphlet before you. printed and published it? — A. Not that I know of: no, sir. Q. You do not claim, therefore, that you have any right to in any wo,jr authen- ticate that by the use of the name of this commission? — A. No, sir; I do not claim any authority from the commission for the use of it. Q. That is all. — A. I have not been authorized in any manner, shape, or form. Q. (By Mr. Jenks.) I understand that you have a statement that you are pre- pared to make of your owm accord in reference to the business of the Standard Oil Company. You may make that in your own way, subject to such interi-uptions as the commission may think desirable. The Witness. My testimony, in the main, is in pamphlet form and I will pro- ceed to read from it. Page No. 3. (the witness read as follows) : " I am a citizen of the United States, born in the State of Vermont. Producer of petroleum for more than .30 years, and a refiner of same for 20 years, but my refinery has been shut dovfn during the past 3 years, owing to the powerful and all-prevailing machinations of the Standard Oil Trust, in criminal collusion and conspiracy with the railroads to destroy my business of 30 years of patient indus- try, toil, and money in building up, wholly by and through unlawful freight dis- criminations. I have been driven from pillar to post, from one railway line to another, for 20 years, in the absolutely vain endeavor to get equal and just freight rates with the Standard Oil Trust, so as to be able to run my refinery at anything approaching a profit, but which I have been utterly unable to do. I have had to consequently shut down, with my business absolutely ruined and my refinery idle. This has been a very sad, bitter, and ruinous experience for me to endure, but I have endeavored to the best of my circumstances and ability to combat it the utmost I could for many a long waicing year, expecting relief through the honest and proper execution of our laws, which have as yet, however, never come. But I am still living in hopes, though I may die in despair." The witness offered, as exhibit, the following: "magnitude of the petroleum INDUSTRY. " The magnitude of the petroleum industry of this country may be inferred by its being first in manufacture and fourth in value of our exi)orts. " Its total production in the United States for 40 years— IH.5i), when discovered, to 1898, inclusive— per Government report, is 886,443,759 barrels of 42 gallons each. There was produced in the past 5 years— 1894 to 1898, inclusive— 279,129,407 barrels (about one-third of total), or an average of .i.-),82.5,893 barrels per annum 1.33 947 barrels per day, inclusive of Sundays. The total average annual exports of values past 3 years— 1897-98— was 990.389,183 gallons, valued at .$55,804,397. Total value of exports, 1864 to 1898, inclusive, §1,445,941,150. " The combined wealth of the railroads and tru.sts are jointly owned and used by railway and trust officials to absolutely control the internal commerce of this great nation and absorb unto themselves for their own private gam the immense profits to arise from ofE all producing interests and manufactured products by higher rates of freight through unlawful rebates or freight discriminations, to be increased as they see fit, through compulsory railway tariff exactions, underhand secret tribute and demands, that must absolutely be complied ^^-ith if shipments are made." 688 HEARINGS BEFOEE THE INDUSTRIAL COMMISSION. There will be several exhibits in connection with that which I have just pre- sented. Witness includes exhibits as follows: "STANDARD OIL TRUST OPFIOIALS PRESIDENTS AND DIRECTORS IN ONE-FIFTH TOTAL RAILWAY MILEAGE OF THE UNITED STATES. ' ' I shall be able to fully prove to this commission a living and prominent exam- ple thereof, as embodied in the Standard Oil Trust, which has thus achieved its great wealth and power by dishonest and criminal methods in the unlawful use of our public highways, and through this means have become the largest owners in railway bonds and stocks; and to-day its ofBcials are presidents and directors in one-fifth of the total railway mileage of the United States, all accomplished since 1872. This state of affairs is absolutely startling to contemplate — appalling, indeed, and as monstroiis as it is infamous. This could not have been done except through one source, the railroads, whose ofiScials have criminally conspired with Standard Oil officials for the past 27 years to give them their great power and unlawful, ill-gotten wealth. •■ In 1887 the interstate commerce act was passed to stop these criminal con- spiracies, but with 13 years' trial it has proved absolutely abortive. "RAILWAY FREIGHT DISCRIMINATION IS THE FATHER AND BREEDER OF TRUSTS, "I understand Mr. Havemeyer says that 'the tariff is the mother of trusts,' while I assert that railway freight discriminations is the father of them, the breeder of trusts, from which the greatest commercial evil of the present day arises. Although the tariff has its material effect, it is in no wise commensurate with the frightful freight discriminations; prominent example, The Standard Oil Trust. " Under the tariff it is not questioned but that everyone pays the same duty, which is not the case in the payment of railway freights, for all competitors of the trusts must pay the enforced full tariff rates, jointly made by trust and rail officials, while trust freights are carried for nothing, one-fourth and one-half of the regular established rates, as is easily proved in the case of the Standard Oil Trust. There is no question in my mind but all recent formation of trusts and combinations, and in which Standard officials are largely interested, are based upon and permeated with the same general plans, and investors therein privately advised that necessarily great advantages will accrue and larger dividends be declared on watered stocks through freight discriminations in the concentration of freight. " The Standard Oil Trust was the first indrtstrial trust organized in this coun- try, the originator and father of them all, from which all the rest have been bred. It is directly responsible for the formation of many subsequent trusts, because at an early date it lent its aid and support in the organization of other trusts, receiving therefrom large sums of money, to the extent of §350,000 from some of them (Cotton Seed Oil trust) for a copy of the secret unlawful trust agreement,' decided illegal by two States (Ohio and New York), consequently all subsequent acts and resolutions changing into corporate form, etc., are regarded illegal. "MAGNITUDE OF THE STANDARD OIL TRUST. ' ' The magnitude of the Standard Oil monopoly, as consummated and centered in the Standard Oil Trust, will be seen from the last enforced public utterance, in February, 1898, in which they really do admit having at least 30 corporations in the trust, capitalized at $103,333,700, of which pipe-line companies represent over one-half — $.53,455,300.' In 1888 they reported 39 corporations in the trust, capitalized at $47,830,300, or less than one-half of the combined 30, and $5,000,000 less than the present capitalization of the pipe-line companies. "At the market price in May of 500, on par of 100, represents a valuation of over half a billion of dollars. " SINCE THEIR PRETENSE OF A DISSOLUTION, MARCH, 1892, THE STANDARD OIL TRUST HAS PAID OUT IN DIVIDENDS $170,730,379. " For the first 10 years of the Standard Oil Trust— 1883 to 1893— it paid out in dividends more than double its entire capitalization in 1888. Since their pretense of a dissolution, March 31, 1893, and including September dividends, 1899, they ■ See Mr. Page, p. 756. 2 gge Mr. Mormett, p. 301. STANDARD OIL COMBINATIONS: EICE. 689 have paid 30 quarterly dividends of 3 per cent, or 90 per cent, and paid 77 per cent in specials (none paid previous to December, 1895) . or a total of 167 per cent, and on a capitalization of only §102,233,700 amounts to the sum of $170,730,279. ' ' ' There could have been paid much larger dividends if net earnings had not been and were not novs^ being used in the purchase of large blocks of producing proper- ties, paid for out of surplus earnings to the extent of many millions of dollars. While this trust accumulated these immense dividends and extra surplus earn- ings, there is not an independent refinery in the country which can even pay a small dividend. No new refineries have been built for several years, owing to this monstrous condition of affairs, and no material additions made to the old ones. The independent refiner is simply ■struggling for an existence, in the hope that an overruling Providence may yet come to the rescue. " The Standard Oil Trust now owns nine-tenths of all the local gathering pipe lines in the oil-producing regions, consequently purchases 90 per cent of all the crude oil produced, and thus absolutely makes the market price for this great product, dictating to the producer the price he shall take for his oil and to the consumer what he shall pay for the products thereof, and take whatever quality of oil they choose to give. This monopoly governs and controls production by its necessities, increasing the price when more oil is needed and reducing it when less oil is required, so that greater percentage of profits may accrue with less capital used between the lowest-priced crude possible and the highest price for the refined and not materially restrict consumption. " The Standard Oil Trust dictates to the railway lines the compulsory tariff rates on petroleum its competitors must pay, while its own is carried at nominal figures, as was fully proven in my own experience when in business. '•1872— ATTACK BY THE TRUKK LINES OP RAILWAY ON THE PETROLEUM INDUS- TRY, BY WHICH THE STANDARD OIL MONOPOLY WAS CREATED, AND WHICH CAUSED THE FORMATION OP THE STANDARD OIL TRUST, UNDER AND BY VIRTUE OP SEVERAL CONTRACTS MADE BY THESE ROADS WITH THE SOUTH IMPROVEMENT COMPANY, WHICH GAVE TO THEM THE MONOPOLY OP THIS GREAT INDUSTRY THROUGH RAILROAD REBATES OR FREIGHT DISCRIMINA- TIONS. COMPLETE CONTRACT. " The origin of the Standard Oil Trust was the Standard Oil Company of Ohio, which was organized January 10, 1870, with a capitalization of SI ,000,000, increased to §3,500,000 March 13, 1875, at which it now stands. January 2, 1872, was the advent of the Standard Oil monopoly, by the directors of the Standard Oil Company of Ohio organizing a fictitious corporation called the ' South Improvement Com- pany,' vtdth a nominal capital of §200,000, whose sole aim and object was to make secret rebate contracts with the railroads, as subsequently will be shown, aijd was exposed in 1879 by the Hepburn investigating committee, of New York; and fortunate it was that these contracts happen to be in writing and are now upon the records to condemn the rqakers of them from time to eternity. The Standard Oil Company received the grossest discriminations in the form of rebates, not only upon its own shipments, but also a like amount on the shipments of its com- petitors.'^ These rebates ranged from 40 cents to |1.06 per barrel on crude petro- leum and from 50 cents to §1-32 per barrel on refined. " "JANUARY ], 1873, THE STANDARD OIL CpMPANY ONLY HAD 6 PER CENT OF THE PETROLEUM INDUSTRY AND ITS COMPETITORS 9.5 PER CENT, WHILE IN 1879 THIS WAS REVERSED. "At this early date in the oil business its competitors had 95 per cent of the petroleum industry, while the Standard Oil Company had less than 5 per cent, so that the Standard Oil Company received 19 times more rebates per barrel from off the shipments of its competitors than it did from off its own shipments. " Henry M. Flagler, secretary of the Standard Oil Trust, testified, in April, 1888, before a Congressional committee* (page 288) that in 1870-71, just prior to the making of these unlawful rebate contracts— January 18, 1872— the refining capacity of the Standard Oil Company was 600 bai-rels a day. The average annual produc- tion of petroleum in the years 1870-71, per Government report, was 5,332,989 barrels, or an average of 14,336 barrels a day, showing conclusively by the testi- mony of one of the highest of Standard ofBcials that the Standard Oil Company had control of less than 5 per cent of this great industry just previous to the sign- ing of these nefarious contracts. 1 See Mr. Monnett, p. 308. 3 See the South Improvement Company contract, p. 612. See also Mr. Archhold, pp. 540, 553; Mr. Rice, p. 692, bottom. . „ „ ^ ■, n c o™ « iu * i *See Fiftieth Congress, first session. House Reports, vol. 9. See p. 606 of the present volume. 690 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "HENRY M. FLAGLEK, SECRETARY OP THE STANDARD OIL TRUST, TESTIFIES THAT WILLIAM G. WARDEN, AN ORIGINAL TRUSTEE OF THE STANDARD OIL TRUST, AND THE LOGANS ' WERE THE GREAT LEADERS IN THE SOUTH IMPROVEMENT POLICY. ' " Mr. Flagler further testifies (pages 289, 290) that "William G. Warden and the Logans, who were directors with him in the South Improvement Company, ' were the great leaders in the South Improvement policy ' and in the next breath denies it by saying that Payne and himself, ' or anyone connected with the Standard Oil Company, had any confidence in or regard for the scheme known as the South Improvement Company," and that ' the company never did a dollar's worth of busi- ness and never had any existence other than its corporate existence,' while Wil- liam G. Warden, its secretary, testifies, on March 30, 1872, before a Congressional committee, that its purpose was to refine oil and get ' all the refineries in the country into the company; ' also gives the names of its 13 directors, as follows: " ' Q. Where did that company intend to refine oil? — A. Their calculation was to get all the refineries in the country into the company. " ' Q. Was it the design of the stockholders to include all the oil refineries in this country? — A. Yes, sir; every one of them. " ' Q. Can you give us a list of the stockholders in the South Improvement Company ? — A. I can give you them from the minutes. They are as follows: Shares. John D. Rockefeller. . 180 William Rockefeller 180 H. M. Flagler 180 J. A. Bostwick ... 180 W. G. Warden 475 O. H. Payne (treasurer) 180 "Above were original trustees of the Standard Oil trust (1882). P. H. Watson 100 O. F. Waring 475 Richard S. Waring 10 Charles Lockhart 10 William Frew 10 John P. Logan , . . . 10 W. P. Logan 10 Original issue (par value, §100) 3, 000 " The original trustees of the trust, as above shown, held 1,375 of the 2,000 shares, or 70 per cent of its capitalization, while the balance of the shares were held by the officials of the Standard Oil Company. '■This proves absolutely and conclusively that ostensibly the South Improve- ment Company was to control all the refineries in the country, but in reality its only official purpose was to make rebate contracts with the railroads. " THESE GROSS REBATE CONTRACTS WERE APPROVED BY THE BOARD OF DIRECTORS OF THE SOUTH IMPROVEMENT COMPANY, COMPOSED WHOLLY OF THE OFFICIALS OF THE STANDARD OIL COMPANY. "Peter H. Watson, its president, testified, on April 5, 1872, before a Congressional committee,' as follows (page 67, Rise and Pall of the South Improvement Company) : " ' Q. Was there any ratification by the company of your contracts with the railroad companies in its formal capacity?— A. Yes, sir. They were approved by the board of directors, as appears in the minutes, and as I am informed, it having been done in a meeting at which I was not present.' •' This conclusively establishes the fact, by the te,stimony of the president of the company, that the above 13 directors of the South Improvement Company approved of these iniquitous contracts by a resolution of its own board of directors, as against the oft-repeated denials of some of these men that they were not in said company or had anything to do with these unpalatable and unsavory contracts; but this clear and indisputable evidence places the responsibility of the inaugura- tion of this villainous and most infam( )us scheme where it i)r()i)erly belongs— with Standard Oil officials. " John D. Rockefeller, president of the Standard Oil Trust, on February 37, 1888, testified, before a legislative committee of New York State, relative to trusts (page 419) that he was nut in it, but Warden above and Flagler below say that he was. 1 See pp. 018, 667. 068. STANDARD OIL COMBINATIONS: RICE. 691 "'Had there been, previous to that, a trust company called the South Improvement Company?— A. No, sir. " ' Q. There was such a company? — A. 1 have heard of such a company. " ' Q. "Were you not in it?— A. I was not.' " H. M. Flagler, secretary of Standard Oil Trust, 3 months later, April 27, 1888, testifies before the Manufacturers' Committee of Congress (p. 389) : " ' Q. Do you remember what was called the South Improvement Company? — A. Yes, sir. " ' Q. We have had in evidence here some facts relating to it. Who composed that company? — A. I can not recall the names of all the gentlemen who were sup- posed to be interested in it. " ' Q. Tell us to the best of your knowledge. — A. The South Improvement Com- pany was a matter brought to Mr. Rockefeller's and my attention perhaps 6 months before it was laiown publicly. Perhaps I shall ramble if I undertake to tell you all about it. " ' Q. Precisely what I want to know is the names of all whom you knew to be connected with it. — A. William G. Warden, Charles Lockhart, William P. Logan, John Logan, J. D. Rockefeller, William Rockefeller, O. H. Payne, and myself, are the only names I recall." " Mr. Scheide, a former prominent official of the Standard Oil Monopoly, testi- fied before the Hepburn Committee (p. 3766), as follows: " ' Q. Was the Standard Oil Company and the South Improvement Company the same at that time? — A. The Standard Oil Company was part of the South Improyement Company. '■ ' Cj. The South Improvement Company at that time was the larger, compre- hending the Standard Oil Company? — A, Yes, sir; it comprehended the Standard Oil Company and a dozen other different firms in Pittsburg and Cleveland.' " These most extraordinary contracts were the sole cause of the creation of the Standard Oil Monopoly, and the subsequent formation of the Standard Oil Trust, and the inauguration of subsequent trusts. " These contracts were signed by the trunk lines of road and Peter H. Watson, representing the-^tandard Oil Company, within 16 days after the organization of the South Improvement Company. " It is a significant fact to note that Peter H. Watson, who signed these con- tracts on behalf of the Standard Oil Company, January 18, 1873, a few months later, July 9, 1872, was elected to the office of president of the Erie Railway Com- pany, one of the trunk lines of this combine, and continued in office for the period of 3 years, until July 14, 1874. "It is also a further most significant fact to note, that at the time these con- tracts were signed by the officers of these trunk lines of railway, they were cog- nizant of the fact they were dealing with a mythical organization, which did not even own a refinery, nor was it in possession of a single oil well. "It is difficult to conceive of a more malicious scheme to throttle competition, under the forms of law, and, if permitted to continue, sooner or later sounds the knell of liberty. "BRIEF EXTRACTS FROM THE FREIGHT CONTRACTS.' " ' To pay and allow to the party hereto of the first part, on all petroleum and its products, transportation for it over the railroads of the party of the second part and its connections, the following rebates, and on all transported for other parties, drawbacks of like amounts as the rebates from the gross rates, the same to be deducted and retained by the party hereto of the first part (Standard Oil Company) ,' for its own use, from the amounts of freights, payable to the party of the second part." " 'And it is hereby further covenanted and agreed by and between the parties hereto, that the party hereto of the second part (Pennsylvania Railroad Com- pany) :' shall at all times cooperate, as far as it legally may, with the party hereto of the first part (Standard Oil Company),'^ to maintain the business of the party hereto of the first part against loss or injury by competition, to the end that the party hereto of the first part may keep up a remunerative, and so a full and regular business, and to that end shall lower or raise the gross rates of transpor- tation over its railroads and connections, as far as it legally may, for such times and to such extent as may be necessary to overcome such competition. The rebates and drawbacks to the party of the first part to be varied pan passu with the ^^fr^^^g^p^^rty hereto of the first part (South Improvement Company)2from time to time shall notify the party of the second part, in writing, of the change required, 1 See pp 610-616 for the most important parts of the South Improvement Company contract. = The words in parenthesis are comment by Mr. Eioe. 692 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. whereupon the party hereto of the second part (Pennsylvania Railroad Company) ' shall forthwith make a corresponding change of such gross rates.' " ' It is further mutually agreed by and between the parties hereto that this agreement shall continue and remain in force for the period of not less than 5 years; and shall not then nor thereafter terminate until one of the parties shall have given 12 months' written notice to terminate it.' " ' South Improvement Company, party of the first part, by Peter H. Watson, president (president of Erie Railway Company 1872 to 1874).' "' Parties of the second part: " ' Pennsylvania Railroad Company, J. Edgar Thomson, president, and for the Pennsylvania Company. Philadelphia and Erie Railway Company, Northern Cen- tral Railway, Allegheny "Valley Railroad, Camden and Amboy Railway. " ' The New York Central and Hudson River Railroad Company, William H. Vanderbilt, vice-president, and for the Lake Shore and Michigan Southern Rail- way Company. " ' Erie Railway Company, Jay Gould, president, and for the Atlantic and Great Western Railroad Company.' " (Original contract, Pamphlet B, p. 7, George Rice.) " Frank Rockefeller, brother of John D., on July 7, 1876, testified before a Con- fressional committee against his brother (per following extracts) , and fully con- rmed the results of the disastrous effects of the above contracts by saying that John D. Rockefeller and Henry M. Flagler told him, ' If you don't sell your prop- erty to us it will be valueless, because we have got advantages with the raikoads' (tactics of Jack Sheppard, Claude Duval): " ' Q. Do you know how many refiners there were in Pittsburg prior to this alleged comlsination? — A. I have been told there were 60 and odd refineries. " ' Q. How raany are there now? — A. I was told by the same parties that there were now less than 20, and very few doing any business. '• ' Q. (By Mr. Regan.) What is the cause of that reduction in the number of refiners? — A. I suppose the main cause has been the fact that they could not make money. I have understood that the same lever was brought to bear upon them as upon the Cleveland refiners. We had in Cleveland at one time about 30 estab- lishments, but the South Improvement was formed and the Cleveland companies were told that if they didn't sell their property to them it would be valueless; that there was a combination of railroad and oil men; that they would buy all they could, and that all they didn't buy would be totally valueless, because they would be unable to compete with the South Improvement Company, and the resiilt was that out of the 30 there were only 4 or 5 that didn't sell. " ' Q. Prom whom was that information received? — A. From the officers of the Standard Oil Company. They made no bones about it at all. They said, " If you don't sell your property to us it will be valueless, because we have got advantages with the railroads." '• ' Q. Give the names?— A. J. D. Rockefeller, H. M. Flagler, and O. H. Payne. " ' Q. (By Mr. Ross.) Mr. Payne is the son of the member of Congress of that name? — A. Yes, sir. " ' Q. Have j^ou heard those gentlemen say what you have stated? — A. I have heard Rockefeller and Flagler say so. Other parties have told me that Payne has used the same argument with them. " ' Q. What other parties? — A. I won't give you the names now. There are some 20 men in Cleveland who sold out under the fright, and almost any of them will tell you that story. " ' Q. Give us the names of some of those that sold out? — A. J. W. Faucett, of Cleveland; W, C. Scofield, Joseph Stanley, John Chritchely. Those are some of them. ' "I also refer to the testimony of John Alexander, W. H. Doane, Charles I. Morehouse, and Isaac L. Hewitt, who sold out one-third to one-half of the cost of their refineries (B. 18-19). 'FREIGHT BATES DOUBLED WITHIN 30 DAYS AFTER SIGNING OP THESE CON- TRACTS IN ORDER THAT THE REBATES MIGHT NOT BE SO DISPROPORTIONATE TO THE TARIFF CONTRACT RATE. "On February 26, 1872, 39 days after these iniquitous contracts were made, freight rates on petroleiim were doubled, and on oil only (South Improvement pamphlet, p. 5) , by which these most extraordinary of rebates would not seem so disproportionate to the tariff rates. " In this connection it might be well to state that the charter of the South Improvement Company was repealed by the legislature of Pennsylvania, under ^ The words in parenthesis are comnaent by Mr. Rice. STANDARD OIL COMBINATIONS: RICE. 693 the intense excitement and universal indignation aroused against it tlirougliout the oil regions from producers, refiners, and shippers of oil. oi^f,nouT rne "On Marcli 2o. 1872, the same lines of railway, under threats of destruction of their properties entered into an agreement with the independent refiners and producers ot oil to g;ive them equal rates and facilities as enjoyed by the Standard Uil company, as follows: ' That all arrangements for the transportation of oil after this date shall be upon a basis of perteet equality to all shippers, producers, and refiners, and that no rebates, drawbacks, or other arrangements of any character shall be made or allowed that will give any party the slightest difEerence in rates or discrimination of any charactei' whatever. * * * * '"And said rates shall not be liable to any change, either for increase or decrease, without first giving to William Hasson, president of the producers' union at Oil City , at least 90 days' notice in writing ot such contemplated change ■• ;ln the distnbution of cars for shipments it shall be done without discrimi- nation, " • On the basis as hereinbefore stated, the parties respectively agree to carry out the arrangements in good faith and work for the mutual interests of each other. •"In witness whereof the parties have hereunto affixed their signatures this 25th day of March, A. D. 1872. •' ' For the Lake Shore and Michigan Southern Railroad Company, H. F Clark president. " ' For the Erie Railroad Company, O. H. P. Archer, vice-president. " ' For the New York Centra] and Hudson River Railroad Company, Wm H Vanderbilt. vice-president. " ' For the Atlantic and Great Western Railroad Company, George B. McClel- lan, president. " ' For the Pennsylvania Railroad Company, Thomas A. Scott, vice-president " " It is important to note the fact that the above 90-day notice was never given in order that competitive shippers would understand that said agreement was honestly kept in full force and effect. " Simon Sterne, counsel for the Hepburn committee, says that ' after the South Improvement Company was broken up these same terms and rebates were, with- out any open contract, substantially continued to the Standard Oil people.' •■George R. Blanchard. then second vice-president of the Erie Railway Com- pany, on October 17, 1879, testified before the Hepburn committee • that this agi-eement. although fully considered and agreed upon, lasted less than two weeks."- So that necessarily the same contract transportation rates and rebates continued indefinitely. "TRUSTEES OF THE STANDARD OIL TRUST TESTIFY IN 1879 THAT THEY CON- TROLLED 9.5 PER CENT OF THE OIL INDUSTRY, WHERE 7 YEARS PREVIOUSLY THEY ONLY CONTROLLED 5 PER CENT. ■' In October, 1879. Henry H. Rogers, present trustee (p. 361.i), and J. A. Bost- wlck, a former trustee (p. 3696), testified before the Hepburn committee of New York that the Standard Oil Company at this early date controlled 95 per cent of the entire oil industry of the United States,^ when just previous to the making of these rebate contracts the Standard Oil Company only had 5 per cent of it, having acquired, by dishonest and unlawful means, within the brief space of 7 years 90 per cent more of this great industry, transforming and completely chang- ing ownership from the hands of the many into the hands of a minor few, wholly through the connivance and conspiracy combination and acts of Standard and railroad officials. "Moreover, while the Standard was thus building up its monopoly the rail- roads were at the same time destroying the value of their own properties, and the nonpayment of dividends and appointment of receivers in many instances were due to these unwise, illogical, and dishonest practices. " The effect of these contracts was to carry Standard oil free and pay it a large bonus besides. Railroad freights were doubled that greater rebates might fol- low, while the consumer of petroleum became the victim, and was forced to pay, indirectly, untold millions of rebates in higher-priced oil and of a poorer quality 1 Cf . p. MO. '^ Mr. Blanchard's statement, with the contest, is quoted on p. 643, footnote. ' See the text of Mr. Rogers's and Mr. Bostwick's testimony, pp. 646,647, footnote. 83a 45 694 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. 1;hrough railway tariff exactions for the sole benefit of a few unscrupulous rail .and trust offlcials jointly interested. ' ' Frank Rockefeller also testifies, July 7, 1876, that such prominent railroad men as William H. Vanderbilt, Amasa Stone, Devereaux. and John Newell, were stockholders in the Standard Oil Company. " ' Q. You spoke a while ago of having personal knowledge of certain railroad officials having been stockholders in the Standard Oil Company — how do you know that? — A. I know it from the officers of the Standard Oil Company telling that they were stockholders. " ' Q. Who are tliey? — A. William H. Vanderbilt, the vice-president of the New York Central Company, was at one time a stockholder in the Standard Oil Company; also Amasa Stone, of Cleveland, the general manager of the Lake Shore road, and I have very good reason for believing, though I do not know it, that Mr. Devereaux and Sir. Newell are both stockholders at the present time. Mr. Stone sold his stock some 2 years ago, at or before the time when he quit the railroad. He put his stock on the Cleveland market and sold it, and he is not, I believe, a stockholder to-day.' ' ' And says he thinks that William H. Vanderbilt, Tom Scott, Devereaux, Newell, and other officials of the railroads received rebates. " 'Q. (By the Chairman.) Give us the names of the officials of the railroads that you think received the benefit of this rebate. — A. Understand me. I don't say that they did get it. It is merely my opinion. " ' Q. Give me the names of the gentlemen that you think do reap the benefit of that rebate. — A. I think that Mr. Devereaux gets it, and that Mr. Newell gets it, that Tom Scott gets it, and that Mr. Vanderbilt gets it, and other officers of those roads whose names are not in my mind at present." "Also further testifies that rebates go into a pool and are divided up between the Standard Oil Comjpany and railroad officials. " ' Q. What do you mean by the pool — a pool among the railroads or among the oil men? — A. I don't give this as a positive fact, but, as I understand the arrange- ment, the New York Central, the Erie, the Atlantic and Great Western, the Pennsylvania Railroad, the Cleveland, Columbus and Cincinnati, and the Balti- more and Ohio roads have a pool — are combined for the purjjose of shipping oil, and oil only — and in this pool the Baltimore and Ohio gets a certain number of barrels to go over its road, the Lake Shore so many to go over its road, and the Pennsylvania Company so many to go over its rOad from different points in the country, and on the oil that is shipped over these roads by the pool and the Stand- ard Oil Company there is a rebate or a drawback from the shipment of so much, which is put into this pool, over whichever road the oil may go, and that rebate is divided up between the Standard Oil Company and the railroad officials. " ' Q. The railroad officials, do you say?— A, So I understand it. I don't say that of my own knowledge. " ' Q. Then it does not go to the railroads themselves? — A. No, sir. •■ ■ Q. But to the railroad officials? — A. To the railroad officials." ' ' It will be quite interesting to figure out in dollars and cents the amount of rebate money per barrel the Standard Oil Company received off the shipments of its competitors under these ironclad rebate contracts, it being made the medimii to pay over into a trust pool the following gross competitive rebates, which were to be divided between rail and trust officials: "REBATES OP §7.60 TO 820 PEE BAEEEL TO EAIL AND TEUST OFFICIALS ON COMPETITIVE SHIPMENTS OP CEUDE OIL. THE AVEEAGE MARKET PRICE OF CRUDE OIL POR THIS YEAR WAS iS3M PER BAEEEL. " On shipments of crude petroleum from any common point. Oil City, Union, Corry, Irvineton, so de.signated by the contracts, the open public tariff rates from said points to Cleveland and Pittsburg, where Standard Oil refineries are located, was 80 cents a barrel, while the underhand, secret rebate was 40 cents a barrel, so that the Standard Oil Company not only received 40 cents a barrel rebate on each barrel it shipped for its own direct use, while it additionally received from off" the shipments of its competitors ' ii share in 19 times this amount, or !J7.60 per barrel, as against each barrel it shipjied. which went into the rebate trust pool, as previously testified to by Frank Rockefeller. " From said points to Baltimore and Philadelphia the open tariff rate on crude petroleum was $2.41, to New York i^'i.M. and to Boston S>^.71 per barrel, while the rebate to each point was i^LOG a barrel, so that the Standard Oil Company not ■only received ,S1.0G a barrel rebate on each barrel it shipped for its own use, but additionally received from off the shipments of its competitors a share in 19 times 1 See Mr. Archbold, pp. DT'.i, 640, 553. STANDARD OIL COMBINATIONS: RICE. 695 tMs amount, or $30.14 per barrel, as against each and every barrel it shipped, which was also dumped into the rebate trust pool. REBATES OP §9.50 TO S23 PER BARREL TO RAIL AND TRUST OFFICIALS ON COM- PETITIVE SHIPMENTS OF REFINED OIL. "On refined oil, benzine, and other products of the manufacture of petroleum these secret rebates were greater, as the following will show: " The open, public tariff rate under these contracts, from Cleveland and Pitts- burg to Baltimore and Philadelphia was 81.85 per barrel; to New York, $2. From Cleveland to Bost. 'U (Pittsburg left out) , .$'3.1,5 per barrel, while the rebates from and to all these points was 50 cents a barrel, so that the Standard Oil Company not only received 50 cents a barrel rebate on each barrel it shipped for its own use, but additionally received from off the shipments of its competitors a share in 19 times this amount, S9..j0 per barrel rebate, as against each barrel it shipped, which also went into the rebate triist pool. " The tariff rates under these contracts from designated common points, such as Oil City, Union, Corry, Irvineton, where competitive refineries were located, was 92 cents per barrel more with less hauls to all seaboard points, as follows: " To Baltimore and Philadelphia, $3.77; New York, .$3.93; Boston, $3.07 per bar- rel, while the rebates fropi and to all these points wereSl.33 per barrel, so that the Standard Oil Company not only received SI. 33 per barrel rebate on each barrel it shipped for its own direct use, but in addition thereto it received from off the ship- ments of its competitors a share in 19 times this amount, or .§35.08 per barrel, as against each and every barrel it shipped, which was also put into this rebate pool to be divided between rail and trust officials. The average market price per barrel of crude petroleum in 1873 was '.So. 64, or 8.66 cents per gallon, while the average market price of refined oil for export in the same year was 34.9 cents per gallon, or 112.45 per barrel, and this is how the Standard Oilmonolopy has made oil so cheap to the consumer. " These most extraordinary revelations seem incredible and beyond belief, but they are the facts as revealed by these contracts, and are plainly the sole cause of the creation of the Standard Oil monopoly, the Standard Oil Trust, and the forma- tion of the present epidemic of trusts. "Hon. Franklin B. Gowen, former president of the Philadelphia and Reading Railroad Company, had this to say before the Interstate Commission January 17, 1888: " ' I remember well, in those halcyon days when Fisk and Gould controlled the Erie Railway and managed the Atlantic and Great Western Railroad, that an oil association made a contract with the railroad company which gave them a rate on oil, based upon the price at tide water, with a guaranty that a fixed rate per barrel profit should be made in handling it. The first year's business over the Atlantic and Western Railroad developed the fact that the hundreds of thousands of barrels transported under this contract brought not 1 cent into the treasury of the railroad for transportation, and that the railroad company had to pay, at the end of the year, 35 cents upon every barrel for the privilege of transporting it in order to make up the guaranty of a fixed profit to the dealer.' "TO TAKE EFFECT OCTOBER 1, 1874. -PLAN BY WHICH A COMBINATION OF RAIL- WAYS FORCE THE INDEPENDENT PIPE LINES OP THE OIL REGIONS TO SELL OUT TO THE STANDARD OIL MONOPOLY AT THE PRICE OF OLD JUNK, AND ALSO GAVE THEM ADDITIONAL DISCRIMINATIONS IN THE SHIPMENTS OP REFINED OIL, IN GROSS VIOLATION OF THE AGREEMENT OF MARCH 25, 1872. " 'After the wholesale destruction of competitive oil refineries by the railroad rebate contracts of 1872, which absolutely gave the Standard Oil Company the monopoly in the manufacture of petroleum and of its rail transportation, achieved so easily and with such great success, that 3 years later (1874) it eagerly sought and again applied to the railroads for help to secure the control and monopoly of the local pipe-line transportation of petroleum in the oil-producing regions, which was easily accomplished bv their mutual and trusted friend, J. H. Rutter, general fi-eight agent of the New York Central and Hudson River Railroad Company. He issued a circular, to take effect October 1, 1874, as follows: ' " ' From which shall be refunded 33 cents a barrel only on oil coming from pipes which maintain the agreed rates of pipeage." . t, , . , " The ao-reed rates of pipeage could not, of course, be maintained by the inde- pendent pipe lines, which had to lower transportation rates in order to offset the exclusive 33-cent rebate advantage given to the Standard Oil Company, by which 1 See the circular in full, p. 641. ^ See Mr. Boyle, p. 424. 696 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. they were enabled to bid 23 cents a barrel more for crude oil and not lose any- thing. The resulting effects were that the old, established pipe lines had to suc- cumb. They could not make money and were forced to sell out their properties at the price of old junk to those joint-interested railroad and Standard Oil con- spirators: "E.G.Patterson, before the Hepburn committee, August 28. 1879, testified as follows: " ' A. The effect of it was that whoever was dealing through a pipe line which wag receiving that 33-cents drawback from a railroad company, absorbed or crushed out the business of any opposition pipe line, by putting its buyers into the field and bidding the whole or a portion of that drawback, more for the product than those who were buying through another pipe line could, not receiving such a drawback.'' " Simon Sterne, in his argument before the Hepburn committee, said as follows: " 'After the Rutter circular appeared the independent pipe lines died off like sheep and were all bought up by the Standard Oil Company.' "As early as 1874 the Standard Oil Company was in possession of all tank cars and the terminal facilities of the railroads at the seaboard. (George Rice book, pp. 38, 39, 40.) " Franklin B. Gowen's argument (p. 13) before the Manufacturers' Committee of Congress (1889) has this to say: " 'At this time the American Transfer Company, according to the testimony of its owner, Mr. J. A. Bostwick (p. 386) , was a corporation having from 50 to 75 miles of local pipeage, a capital of §100,000, and no debt. And yet upon this small capital it received from the 3 trunk lines in 1878 the magnificent income of .83,093,750. or 33* cents upon the 13,750,000 barrels of oil shipped in that year, equal to a dividend of 3,093 per cent annually.' " 1877-1878.— ATTACK BY THE BAIL LINES UPON THE EMPIRE TRANSPORTATION COMPANY, BY WHICH ITS REFINERIES, PIPE LINES, 1,000 TANK CARS. AND 400 RACK CARS WERE FORCED INTO THE HANDS OF THE STANDARD OIL COMPANY AT A RUINOUS PRICE.^ FREIGHT RATES CUT TO 8 CENTS PER BARREL LESS THAN NOTHING DURING THE FIGHT, AND WHEN ENDED, COMPETITORS OF THE STANDARD OIL COMPANY WERE CHARGED §1.90 PER BARREL, WHILE STANDARD OIL WAS CARRIED AT 11 CENTS PER BARREL, NET, IN TANK CARS, LUMP SUM, REGARDLESS OF WEIGHT-1,600 PER CENT DISCRIMINATION. " The transportation tariff rates on refined oil to competitive refineries in 1878 was 81.90 per barrel to the seaboard. The Standard Oil Company, through its well-trained railroad agent, J. H. Rutter, general freight agent of the New York Central and Hudson River Railroad Company, gave it a special freight rate on petroleum, Cleveland to New York, of $60 per tank car, lump sum, regardless of weight, or 60 cents a barrel, average rate, from which there was deducted the transportation charge on crude oil from the oil wells to Cleveland and Pittsburg on the basis of 14 barrels of crude, at 33 cents a barrel, or §4.90, as against 10 bar- rels of refined from Cleveland and Pittsburg to New Y'ork,at 60 cents a barrel, or SO, leaving Sl-10, net, or only 11 cents a barrel paid by the Standard Oil Company, as against §1.90 per Isarrel their competitors had to pay, or 1,600 per cent fj'oight disci-imination allowed them by the conspiracy acts of rail officials.^ "1879, -ATTACK BY THE BAIL LINES UPON THE TIDE-WATER PIPE COMPANY TO CRUSH AND DESTROY IT IN THE INTEREST OF THE STANDARD OIL COMPAN?- THE TRUNK LINES OF RAILWAY AGAINST THE PHILADELPHIA AND READING RAILROAD COMPANY, BY WHIGPI RAIL RATES WERE REDUCED TO ONE-SIXTH OF A CENT PER TON PER MILE AND ' BARELY YIELDED THE COST OF THE FUEL FOR THE ENGINES.' " The fight against the Tide-Water Pipe Company* would have succeeded but for the prompt financial support given it by the Philadelphia a-id Reading Bail- road Company, of which Hon. Franklin B. Gowen was president. " The Tide-Water Pipe Company, first projected sealjoard pipe line, had con- tracted to get its oils to tide water by another and cheaper route to avoid the excessive discriminating freight rates constantly being imposed by the trunk lines of railway in the interest of the Standard Oil Company. " The Tide-Water Pipe Company laid a 6-inch trunk line of pipe. 110 miles in length, from the Bradford oil regions to Williamsport (a station on the Reading Road), and, by a joint trafiS.c arrangement between the Philadelphia and Reading ' Proc-ecdiii(,'6 of the Special Committee on Railroads of the Assembly of the State of New York, 18711, p. If.ii:;. 2 See Mr, Archbold, pp, 513, 514; also p, 643, footnote, 3 See p, 7W, •■Seep.T;*; Mr, Boyle, p, 480; Mr. Emery, p, 630. STANDARD OIL COMBINATIONS: — RICE. 697 and the Central Railroad Company of New Jersey, had secured rates to the sea- board which were to be equal to the rates paid by the Standard Oil Company over the trunk line of railway, and on account of the fight freight rates were cut to 15 cents a barrel in favor of the Standard Oil Company, which barelv yielded the cost of the fuel for the engines. ■■ EXTRACT FROM ANNUAL REPORT OF FRANKLIN B. GOWEN, PRESIDENT OF THE PHILADELPHIA AND READING RAILROAD COMPANY, TO THE STOCKHOLDERS. " ' Within the last 2 or 3 years certain producers and shippers of nil. in order to reach the few refineries in the neighborhood of N"ew York whioh yet remained independent of the Standard Oil Company, associated themselves as the Equitable Pipe Line Company, laid a local pipe to connect ^vith a railway terminating at Buffalo, and shipped from the latter place crude petroleum in canal barges, via the Erie Canal, to the waters of New York Bay. " 'As this avenue of transportation was closed during the winter, it proved ineffectual as a source of permanent supply, and in order to secure an outlet for the entire year, as well to Philadelphia as to New York, certain gentlemen inter- ested in the Equitable Pipe Line associated themselves into a limited company, as the Tide-Water Pipe Line Company, limited, and, having secured the right of way, laid a 6-inch pipe line a distance of over 100 miles, from the Bradford oil region, in ]McKean County. Pa., to Williamsport. the terminus of the Catawissa branch of this company, and a contract was entered into between the Tide- Water Pipe Line Company, this company, and the Central Railroad Company of New Jersey for the transportation of the oil to Philadelphia and New York by rail from Williamsport. " ' This attempt of the producers of oil to secure an outlet independent of the Standard Oil Company and the trunk lines was at once resented by both interests affected, and from the date of the completion of the pipe line to the present, every effort has been made by some of the companies interested to convert the profit- able business of the transportation of oil into a losing one. " ■ The trunk-line rates on oil by rail have been so reduced as to yield at times but about one-sixth of a cent per ton per mile for its transportation, or about one-quarter of the actual cash cost, and for many months motive power which might have been most profitably employed in hauling remunerative traffic has been occupied with an enormous tonnage of oil which barely yielded the cost of the fuel for the engines.' "I also refer this commission to the report of the Hepburn committee of New York, January 23, 18S0. investigating the Standard Oil monopoly, in which those astounding and celebrated rebate contracts of 1872 were exposed. The following ' are extracts of the report: '■ 'In which these roads agreed to pay said company rebates on shipments to different points, ranging from 40 cents to .ss.07 per barrel.' ' " ' '■ The roads transporting the refined oil shall refund to the refiners, as a drawback, the charges paid by them upon the crude oil reaching their refineries by rail; and the roads transporting through crude oil to the Eastern seaboard shall refund to the shippers 23 cents per barrel; both of said drawbacks to be paid only on oil reaching the initial points of rail shipment tlirough pipes, the owners of which maintain agreed rates of pipage." Bj' this agreement the roads carry crude oil from the oil regions to Cleveland and Pittsburg and then carry the refined oil to the seaboard as cheaply as they would from the mouth of the well. Mr. Vanderbilt explains this (Testimony, p. 1596).'^ " ' In June. 1879, the Tide- Water Pipe Line effected a connection -with the sea- board and commenced shipping oil. Opposition, of course, was not to be brooked, and again the Standard called upon the railroads to pirotect them •• against injury by competition," and again the railroads responded. On June 5. at a conference between the 4 trunk lines and the Standard people held at Niagara, the rate on crude oil was made to the Standard over the Erie and Central 30 cents per barrel (from 81, 41)).-' The rates to Philadelphia and Baltimore were made the same. (See statement of Messrs. Rutter and Blanchard, exhibits, pp. Oil, 623.) This reduction was made on the oth of June, to take effect as of the 1st of June.''' " The Standard got the ' plum; ' and as a result it owns exclusively the terminal facilities for handling oil in Philadelphia and Baltimore. ' Report of Hepburn Committee, p. 4. 2 Ibid., p. 4:3, s "From SI. 40" is comment by Mr. Rice. * Report of Hepburn Committee, p. 45. 698 HEjiPvINGS BEFOEE THE INDUSTRIAL - COMMISSION. • '• It owns and controls the terminal facilities for handling oil of the 4 trunk roads. It owns and controls the pipe lines of the producing regions that connect with the railroads. It controls both ends of these roads. It ships 95 per cent of all oil. (Testimony of Bostwick, p. 2696; Rogers, p. 2615; Welch, p. 3678.) "It dictates terms and rates to the railroads. (Testimony of Mr. Butter, p. 3549, which is confirmed by Mr. Vanderbilt and Mr. Bostmck.) '■ They can use the power here given them, and have used it to crush out oppo- sition. ■■ This company also owns all the oil cars run on the Central Road. " It has bought out and frozen out refiners all over the coiintry. " By raeans of the superior facilities for transportation which it thus possessed it could overbid in the producing regions and undersell in the markets of the world. " Resting under the common-law obligation to treat all parties alike, they delib- erately iindertake to protect a certain company • against injury by competition.' • ■ Thus it has gone on buying out and freezing out all oppohition until it has absorbed and monoi)i)lized this great traffic, this great production, which ranks second on the list of exxjorts of our country. "And yet all the trunk roads have grown into ,,uch relations with this oil com- bination that they were forced to forego all these millions they might have earned and look to- the other produce of the country for their revenues. " They bury their I )wn interests in the interest of the Standard Oil Company and join in this war of rates to protect it ' against injury by comijetition,' whose bu,siness and transactions are of such a character that its memliers declined giv- ing a history or description of it lest their testimony lie used to convict them of a crime. (See testimouy of I^Iessrs. Bostwick, Arcliljold. Rogers, etc.) '■.JOSIAH LOJIBABD, E. T. BUSH, GEOBaE P. GEEGOEY, COMPETITIVE OIL EEFINEES AT THE SEABOAED, TESTIFY IN 18:9 WHAT A. J. CASSATT, NOW PEESIDENT OF THE PENNSYLVANIA HAILROAD COMPANY. AND TiJM SCOTT, FORMEE PEESI- DENT, SAID TO THEII ABOUT THE STAXDAED OIL COMPANY. " Cassatt says to Lombard: " 'That the Standard Oil Company was the only party that cotild keep peace between the trunk lines.' " ' He said " I can not trust," or, rather, he said " They are the only people that can keep harmony." " ' I asked M)-. Cassatt if we shipped as much oil over the Pennsylvania Railroad as the Standard Oil Company whether we should have the same rate of freight. He said "JSIo.'' I said •■"Why?" He said because they would not be satisfied. " ' We asked him whether the discrimination against us would be larger if the , rate of freight were high than it would if the rate of freight were low. He said yes; it would be.' "Also said; " ■ That if we built a pipe line he would buy it up for old iron in 60 days.' " ' He said there would be no peace or profit in tue business until we made some arrangements with the Standard Oil Company.' "R. T. Bush to Mr. Cassatt: " ' Q. That is, you asked Mr. Cassatt? — A. Mr. Cassatt, whether we should have as low a rate of f reig-ht as the Standard Oil Company or any other shipper. He said " Ko." We asked him why. " Well, in tiie first place, you can't ship as much oil as the Standard Oil Company.' " Well, if we could ship as much oil '" — IthinkMr. Lombard put this question — " Vi^ould we then have the same rate?" He said " No." " Why? " "Why, you could not keej) the road satisfied; it would make trouble; you would not keep the road satisfied: you could not satisfy the roads; you coirld not satisfy the different trunk lines; " and he remarked, in connection with that, that the Standard Oil Company was the only party that could keep the road harmonized or satisfied.' " Well, you may lay all the pipe lines you like and we will buy them up for old iron. ■■It) Tom Scott: " • Q. (ill back again to'the interview with C-donel Scott and tell us more par- ticularly aliout it. — A. They tried to make us belie^'e and feel, I suppose, that we were getting our due proportion, when for some consideraljle time previous to tliis we had not been able to do any business in advance. We coald only do busi- ness frfJin hand to mouth. We could not sell any refined oil unless we absolutely had the crude oil in our p(jssession in New Y'irk, and Mr. Lombard, one of our number, had sold a cargo of crude oil, I think, of 9,000 barrels, and Denslow & .STANDARD OIL COMBINATIONS: RICE. 699 Bush absolutely stopped their refinery for 3 weeks, consequently, in order to let their oil go to Lombard & Ayers to finish their vessel, because they would only get 3 or 4 cars a day; and we stopped our place for 3 weeks to give them our crude oil, all we could give — our proportion — in order to lift them out and get their vessel Cleared. '"Q. At the interview between Colonel Scott and Mr. Cassatt and yourself, here at Philadelphia, did you gentlemen propose to build your own cars or pro- vide yourselves with oars?— A. Yes, sir; we told Mr. Scott that if they hadn't suf- ficient cars on their road we would like to put some on, and he told us flatly that they had jxist bought out one line and they would not allow another to be put on; that if they hadn't cars enough they would build them. " • Whether we could have — if there was any means l3y which we could have the same rate of freight as other shippers got, and he said flatly "No; " and we asked him then if we shipped the same amount of oil as the Standard, and he said ■•No." and gave the same reasons Mr. Cassatt had in New York. " ' Q. Did he give you the information as to the rate of discrimination'? — A. No, sir. All the information we got on that point was frona Mr. Cassatt, in New York, when he stated that the discrimination would be larger on a high rate of freight than on a low rate of freight, which led us to infer that it was a percent- age discrimmation. That is all the point that I recollect we ever got as to the amount of the commission.' "George F. Gregory to Cassatt: " ' "We asked him if we should have as low a rate of freight — we spoke a good deal of what had been printed in the newspapers in regard to rates, etc., and we asked him if we should have a rate of freight as low as the Standard Oil Com- pany, and he said " No." ' ' ' Mr. Lombard asked him if we could have the same rate of freight that the Standard had if we shipped the same amount of oil. He said " No; you can not." " ' Mr. Cassatt declined to state what the discrimination was. I said to him, " Is it a greater discrimination on a higher rate of freight than it is on a low rate," and he said " Y'es." He said. " Well, I didn't mean to answer that question; but very well," he said, " I have answered it." " ' Q. Please to state what you denominate the squeeze. — A. A squeeze or a scarcity of cars; that is what we called it; a difficulty in getting cars in sufficient amount; that is what I mean. " ' Q. That is. Green Line cars, you mean, from Mr. Brundred, as agent of the Pennsylvania Railroad? — A. Yes, sir." " This ought to be sufficient to briefly summarize how the Standard Oil Com- pany acquired its monopoly of the petroleum industry and still holds it with a bulldog grip, and by its actions considers all competitors as interlopers or out- laws. My pamphlets, here introduced, marked "A.'' " B," and " C," and Newlin's, marked " D," will more fully substantiate it. I also refer this committee to my testimony given in 1888 before a Congressional committee, pages 573, 637, 644, 651,739,746.-' FAVORITISM IN BUYING LUBBIGATING OILS. Q. (By Mr. Jenks.) Have you a copy with you of this testimony before the Congressional committee?— A. No, sir; I have not. You have that volume. Since I have put these in as exhibits I think I had better put these others in as exhibits now. I also present and submit to this commission Exhibit E, the authori;2ed Official Bail way Guide of the United States for September, 1899, which gives, on page 43 and subsequent pages, a list of the 44 unlawful freight associa- tions and freight committees heretofore mentioned by me. You will also perceive on the front page of said guide an advertisement of the " Galena Oil Company "—Standard Oil Trust— in which this trust advertises its goods as follows: " Galena oils are used on nineteen-twentieths of the total railway mileage of the United States, Canada, and Mexico, and are being introduced in Europe." That is to say, the Standard Oil Trust here admit that they furnish their lubri- cating oils to 95 per cent of all the railways in the United States, Canada, and Mexico, and portions of Europe. That is to say, this trust furnished 95 per cent of all such oils as are used by the railways mentioned, for no railroad would use trust and competitive oils in conjunction. These oils are taken by the railroads at most extraordinary prices, ranging from 25 to 75 cents a gallon; and here comes inanotherspeciesof "favored freight discriminations.! ^j. x-, r,^ , Q ( Bv Mr Farquhar. ) That seems quite a large claim m respect to the Stand- ard 'oirCompany in the matter of Galena oils.. What is the character of the ■See Mr. Lee, p. 2B«: Mr.Davis,p.:359; Mr.Monnett, p.309; Mr. Archbold.p.SlC; Mr. Page, p. 756. 700 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. G-alena oils in the market among railroad men and among buyers?— A. Well, I know from hearsay that they furnish different grades of lubricating petroleum, running from 3.j cents u.p to cylinder stock. The higher grades of lubricating oils are generillly cylinder stock— cylinder goods. Q. Has it not been a fact that Galena oil has really held the American market for years as one of the best standard oils— best quality of oil?— A. I do not know anything about the quality. Q. Is it not a fact that the headlight oil is the best oil made in the world?— A. I do not know it to be a fact. Q. Is not its general use a good reason for thinking that it is so?— A. Well, I suppose they would have to make a pretty good quality of oil to get good prices, but at the same time they get greater prices than any competitor could get, and a competitor could hardly get any chance. I know that on general hearsay. Par- ties have been told that they could not sell the railroads of the country lubricat- ing oils, because if they did the Standard Oil Company would hot give them any freight. Q. Do you know whether it is the fact or not that the Standard Oil Company paid exorbitant prices for the Galena formula, for the word?— A. No; I do not know. Q. Have you ever sold oil in competition with the Galena oil anywhere?— A. No; I have sold some, but in a very moderate way. I never manufactured any fancy brands of lubricants at all. I .just manufactured ordinary oil— ordinary lubricant — a cheap grade. Q. (By Mr. Jenks.) You spoke a moment ago about the high prices the Stand- ard Oil Company received from the railroads for lubricating oil. Were you going to support that general statement by the specific prices? — A. No; I can not sup- port that by specific prices, excepting by talking with persons that knew about it who have tried to sell the railroads and have been told. It is only hearsay. (^. ( By Senator Kyle. ) What are the figures that are paid for this kind of oil?— A. Prom 35 cents up to 75 cents a gallon. There are some oils as high as SI a gallon. Q. (By Mr. Jenks.) Your information in reference to high prices is on authority of the Standard's competitors and not on authority of any of the Standard's offi- cials or of railroad officials? — A. No sir; no, sir. Mr. Jenks. Continue, please. DESPBAUX V. PENNSYLVANIA RAILROAD COMPANY', DISCRIMINATIONS 1881 TO 1883 The Witness. By permission of Mr. J. W. M. Newlin, of Philadelphia, who was the attorney for some French refineries, I put in this book, marked •■ D,'' under the title of Despeaux v. Pennsylvania Railroad Company. It is a bill of exceptions in a suit for freight discrimination that occurred in 18s'2 and 1883; but the cases were tried last year, and William Rockefeller and several Standard Oil Com- pany officials testified in Philadelphia. I did not expect that Mr. Newlin was going to give me the privilege of putting it in. In this exhibit there are several important contracts made with the Standard Oil Trust, including a special con- tract of August 33. 1884, made by the National Transit Company and the Penn- sylvania Company, by which the Standard Oil Trust, through the National Tra:tisit Company, was to pay to the Pennsylvania Railroad Companj^ 36 per cent of all the petroleum freights carried from the oil region to the seaboard at tariff rates. ' I have referred to this in my testimony. I will now read a letter of the counsel covering the substance of the case: - Philadelphia, Pa.. November S, 1S99. Dear Mr. Rice: Referring to your request for information as to the facts developed in the taking of testimony in the cases of Fenaille & Despeaux v. The Pennsylvania Railroad Company in the circuit court of the United States for the eastern district of Pennsylvania, and in the case of Ladenburg, Thalmann & Co. V. the Pennsylvania Railroad Company in the coui't of common pleas. No. 4, of Philadelphia County (both of which cases are still pending), I beg to say as fol- lows: In the Fenaille & Despeaux case it was shown that the plaintiff paid local pip- age 30 cents per barrel to Foxburg and other points in that region on crude oil, and that in addition thereto the plaintiij paid to the Pennsylvania Railroad Com- pany 48 cents per bari-el for its carriage, all rail, from Foxburg to Communipaw during the years 1881, 1883, and 1883. It was also shown that the Pennsylvania Railroad Company at the same time and between the same points carried crude 1 Ei.ir the text of this contract see p. 6ti3. '^ See p. 759 for criticism of Mr. Newlin's argument. STANDARD OIL COMBINATIONS: RICE. 701 oil for the Standard Oil Company of New York at a reduction of 33+ cents per barrel. It was further shown in the same case that the plaintiflf paid 30 cents local pip- age on crude oil to McCalmont and other points in the same region, and that the Pennsylvania Railroad Company then oai-ried it to Conimunipaw and charged the plaintiff 33 cents per barrel. At the same time the Pennsylvania Railroad Company was carrying crude oil between the same points for the Standard Oil Company of New York as proven in this way: On May 6, 1881, the National Transit Company made an agreement with the Pennsylvania Railroad Company concerning the shipments of crude oil to the seaboard tinder which these reductions in favor of the Standard Oil Company were effected. I have furnished you a copy of this agreement. It was shown on the trial of the Penaille & Despeatix Case that at the time named a majority of the stock of the National Transit Company was deposited, with other corporation stock, with the Standard Oil trustees, who also held practically all of the stock of the Standard Oil Company of New York, and that upon the basis of the stockholdings of the trust the Standard Oil Trust certifi- cates were issued. The agreement between the National Transit Company provides for a division of the through rate on crude oil from the wells to seaboard between the National Transit Company and the Pennsylvania Railroad Company. The clauses of the contract particularly referring to this are paragraphs 4 and 8 thereof. ' Now, taking Foxburg to Communipaw, the local pipage being 30 cents and the all-rail carriage 48 cents, or 68 cents, and the evidence showing that the transit company under this agreement delivered large amounts of oil to the railroad com- pany at Foxburg, which oil it was shown by the transit company's secretary, Mr. John Bushnell, belonged to the Standard Oil Company of New York, this particular oil was paid for on the following basis: Starting v/ith 68 cents as the through rate from the wells to Communipaw, via Foxburg, one-fourth of 68 cents, viz, 17 cents, went to the local pipe line (i. e., the Transit Cbmpany) "and one-half of the difference between this one-fourth (i. e., 17 cents) and the said public rate (i.e., 68 cents) shall be considered as due and to be paid to the railroad." The charge is worked out thus: Cents. Local to Foxburg .. 20 Through to Communipaw (New York) 48 68 One-fourth to local pipe 17 This leaves balance of 51 One-half of this balance to railroad company is 3o+ The amount paid railroad company by Fenaille & Despeaux was - . . - - 48 Amount paid by Standard to railroad company _ , -' - 351 Rebate to the Standard Oil Company equals 33-i- In other words, while the word "rebate" nowhere occurs in the agreement between the Transit Company and the railroad company, all the railroad company received was the 3.5i cents per barrel. See paragraph 8 of the contract of May 6, 1881. It is to be observed that this paragraph in terms only applies to cases where the through rate from the exit point of gathering pipe shall be less than 40 cents. This is the only provision in the contract, and in terms would apply to McCal- mont and similar shipments, which were 38 cents per barrel. But not only is this the only provision in the contract for the division of the through rate between the transit company and the railroad company,- but, in addition thereto, the offi- cers of both the railroad company and the Transit Company stated m evidence that the railroad company received payment from the Standard Oil Company of New York on the rail shipments from Foxburg to Communipaw under this con- tract, and received what the contract called for. It was further testified by these ofifioials that what the railroad company got it collected directly from the Standard Oil Company of New York, and that the railroad company received no money from the Transit Company on these shipments. t,^ r> i The evidence was to the same effect as to all-rail shipments between McCalmont and Communipaw, Penaille & Despeaux paying 30 cents local pipe rate and 33 cents open rail rate to Communipaw, making 53 cents m all. The evidence further was that the Transit Company furnished to the railroad 1 For the text of these paragraphs, see p. 760. = see section 7 of the contract, p. 7B0, footnote 3. 702 HEARINGS 'BEFORE THE INDUSTRIAL COMMISSION. company crude oil of the Standard Oil Company of New York for carriage between MoCalmont and Commnnipaw, for wliich. the railroad company was paid directly by the Standard Oil Company the amount called for by this agreement of May 6,1881. Hence the railroad company charged Fenaille & Despeaux, between McCalmont and Communipaw, New York, oo cents, and charged the Standard Oil Company 19.87.0 centy a barrel. This is worked out thus: Cents. Local pipe rate 20 Open rate rail lilcCalmont to d Jinmunipaw 33 Thi'Dugh rate 53 One-fourth to local pipe 13. 25 Balance 39.75 One-half of this balance paid by Standard Oil Company of New York to the raili (jad company 19. 87 Under the contract of Jlay 6. ISSl.the railroad company was to be guaranteed one-third of the total movement of oil to New York. Under a subsequent contract between the' National TranMt Company and the Pennsylvania Railroad Company, dated August 2'2, 1SS4, of which I have furnished you a copy, the railroad company was to be guaranteed 26 per cent of the total movement of oil to the Atlantic seaboard, which would include Baltimore, Phila- delphia, New York, and Boston. Prior to 1^-^84 the railroad rates to seaboard. i. e.. New A''ork, were from Foxburg -18 i-eiits.and from ]\IcCalmont 33 cents. There was a difference in favor of Philadelphia of .5 cents per barrel. From 18S4 to 1«87 the rail rate between Foxburg and similar points and Com- munijiaw was 5.5 cents per barrel, and between Clarendon and Kane and similar points and Communipaw wa-s 4.j cents per barrel. There was a difference in favor of Philadelphia of .5 cents per barrel. It was in evidence in the case of Ladenburg, Thalmann & Co. v. The Pennsyl- vania Railroad Company, as to shipments made between 1884 and 1887, under the contract of August 33, 1884, between the National Transit Company and the Penn- sylvania Railroad Company, that monthly settlements were made between the Transit Company and the railroad company, showing the total movement of oil tf) seaboard and the amount carried by the Pennsylvania Railroad Company on account of its 36 per cent allowance, and then the deficiency on the 36 xier cent (and there was always a deficiency) was settled between the transit company and the railroad company in this way: I take for illustration the settlement made for the month ending September 30, INS 4, as .^hown by a copy of the settlement certified to be correct by John Bush- nell, comx)troller of the National Transit Company:' Total number of barrels so transported 1 , 574, 961 Railroad company's share : 409, 490 Amount carried by railroad 325, 596 Deficiency 83, 894 On this deficiency the railroad company was allowed on New York oil, at one-half of the current through rate. 45 cents, equals 33.', cents per barrel, on 43.()i;5 barrels T .", . . 89. 824. 63 Less comiiensation allowed transit companv for pumping the same, at 'J cents ' ' 3, 939. 85 Total 5.894.78 The railroad company was allowed on Philadelphia oil for 4(1.32!) barrels, at -559. STANDARD OIL COMBINATIONS: RICE. 707 iinder its control, tinless you make the following arrangement, viz: You shall make a uniform rate of 3o cents per barrel for all persons excepting the Standard Oil Company; you shall charge them 10 cents per barrel for oil, and also pay them 35 cents per barrel out of the 35 cents collected from other shippers. * * "■ " You may agree to carry all such oil of the Standard Oil Comi^any or of others delivered to your road through their pipes at u) cents per barrel. You may also charge all other shippers 35 cents per b:irrel freight, eve)i though chey deliver' oil to your road through their own gripes: ami this, 1 -ather from your letter and from Mr. Terry, would include Mv. Rice. ■' You are at liberty, also, to arrange for the payment of a freight by tli? Stand- ard Oil Company, calculated upon the following basis, viz: Such company to be charged an amount equal to 10 cents per barrel, le.ss an amount equivalent to 25 cents per barrel upon all oil shipped by Rici:'. the agreement between you and the company thus being that the charge to be paid liy them i^ a certain sum ascertained by such a calculation. If it is impracticable so to arrange the business that the Standard Oil Company shall, in effect, collect the 25 cents per l:)arrel from those persons tising the company's pipes from the wells to the railroad without its pass- ing into your hands, you may properly als.) deduct from the price to be paid i>y the company an amount equal to 25 cents per barrel upon the oil shipped by such persons. ■'Provided your accounts, bills, vouchers, etc., are consistent with tlie real arrangement actually made , you will incur no personal responsibility by carrying out such an arrangement as I suggest. " It is possible that, by a proper apjilication to the court, some person may pre- vent you in f titure from permitting any discrimination. Even if Mr, Rice should compel you, subsequently, to refund to liini the excess charged over the Standard Oil Company, the- result would not be a loss to your road, taking into consideration the receipts from the Standard Oil Company, if I understand correctly the figures. There is no theory, however, in my opinion, under the decisions of the courts relat- ing to this subject, upon which, for the purpose, an action could be successfully maintained in this instance. '• Yours, truly, Edwaed S, Rapello," Now. I will read Judge Baxter's decision [reading] : United States Judge John Baxter delivers the following opinion of the court in Handy et al. v. Cleveland and Marietta Railway Company et al. (Federal Reporter, vol, 31, p, 693. Circuit court, southern district of Ohio, E. D., INHT) : "It appears that the Standard Oil Comjjany and George Rice were competitors in the business of refining oil: that each obtained supplies in the nei.ghborhood of Macksburg, a station of said railroad, from whence the same was carried to Marietta or Cleveland, and that for this service lioth were equally dependent on the railroad, then in the hands of the receiver. " It further appears that the Standard Oil Company desired to • crush ' Rice and his business, and that, ttnder a threat of building a pipe for the conveyance of its oil, and withdi-awing its patronage from the receiver, O'Day, one of its agents, ' compelled Terry,' who was acting for and in beiiali of the receiver, to carry its oil at 10 cents per barrel and charge Rice 35 cents per barrel for a like service, and pay it 25 cents out of each 35 cents thus exacted from Rice, ' making,' in the judg- ment of the receiver, ■ .SS5 per day clear money ' for it • on Rice's oil alone.' "But it is due to the receiver to say that, notwithstanding his admitted ' reluc- tant acquiescence ' in the contract made by Terry cju his behalf, and the indorse- ment thereof bj' Rapello, and the further i;onceded fact that he charged the Stand- ard Oil Company 10 cents and Rice 35 cents per barrel, as aforesaid, he denies that he ever paid to the Standard Oil Company any part of the money ever received from Rice. We will therefore, for the present, accept his affirmation touching this matter as true," In a parenthesis I have stated here " Subse(inent proceedings proved the state- ment of the receiver in this respect was false." ' [Reading:] ■■ But why should Rice be required to pay 350 per cent more for the carriage of his oil than was exacted from his competitor? The answer is that thereby the receiver cottld increase his earnings. This pretense is not true. But, suppose it was, would that fact justify, or even mitigate, the injustice done to Rice? May a receiver of a court, in the management of a railroad, thus discriminate between parties having equal claims ttpon him, because thereby he can accumulate money for the litigants? It has been repeatedly adjudged that he can not legally do so. Railroads are con- structed for the common and equal benefit of all persons wishing to avail themselves 1 See p. u5S. 708 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. of the facilities which they afford. While the legal title thereof is in the coi-pora- tion of individuals owning them and to that extent private property, they are, by the law and consent of the owners, dedicated to the public use. By its charter and the general contemporaneous laws of the State, which constitute the contract between the public and the railroad company, the State, in consideration of the undertaking of the corporators to biiild, equip, keep in repair, and operate said road for the public accommodation, authorized it to demand reasonable compen- sation, from everyone availing himself of its facilities, for the services rendered. But this franchise carried with it other and correlative obligations. Among these is the obligation to carry for every person offering business, under like cir- cumstances, at the same rate. All unjust discriminations are in violation of the sound public policy and are forbidden by law." This was before the interstate-commerce act. (Continuing reading:) "We have had frequent occasions to enunciate and en- force this doctrine in the past few years. If it were not so the managers of rail- ways, in collusion with others in command of large capital, could control the business of the country, at least to the extent that the business was dependent on railroad transportation for its success, and make and unmake the fortunes of men at will. "The idea is justly abhorrent to all fair minds. No such dangerous power can be tolerated. Except in the mode of using them, every citizen has the same right to demand the services of railroads on equal terms that they have to the use of a public highway or the Government mails: and hence, when in the vicissitudes of business a railroad corporation becomes insolvent, and is seized by a court, and placed in the hands of a receiver to be by him operated pending the litigation and until the rights of the litigants can be judicially ascertained and declared, the court is as much bound to protect the public interests therein as it is to protect and enforce the rights of mortgagors and mortgagees. But after the receiver has performed all obligations due the public and to every member of it — that is to say, after carrying passengers and freight offered for a reasoiiable compensation, not exceeding the maximum authorized by law, if such maximum rates shall have been prescribed, upon equal terms to all — he may make for the litigants as much money as the road thus managed is capable of earning. But all attempts to accumu- late money for the benefit of the corporators or their creditors by making one shipper pay tribute to his rival in business at the rate of §2o per day or any greater or less sum. thereby enriching one and impoverishing another, is a gross, illegal, and inexciTsable abuse of a public trirst that calls for the severest reprehension. "The discrimination complained of in this case is so wanton and oppressive it could hardly have been accepted by an honest man, having due regard for the rights of others, or conceded by a just and comisetent receiver, who compre- hended the nature and responsibility of his ofSce: and a judge who would tolerate such a vrrong or retain a receiver capable of j)erpetrating it ought to be im- peached and degraded from his position. "A good deal more might be said in condemnation of the unparalleled wrong complained of, but we forbear. The I'eceiver will be removed. " The matter will be referred to a master to ascertain and report the amount that has been as aforesaid unlawfully exacted by the receiver from Bice, which sum, when ascertained, will be repaid to him. The master will also inquire and report whether any part of the money collected by the receiver from Rice has been paid to the Standard Oil Company, and if so. how much, to the end that if any such payments have been made suit may be instituted for its recovery." Q. (By Mr. Jenks.) This is the formal decision of the court?— A. Simply. Q. (By Senator Kyle. ) What was the outcome of that matter? — A. The court appointed a master commissioner, who is the present elected governor of Ohio, George K. Nash. The court appointed him a master commissioner to investigate this matter, and he found these to be the facts of the case as I have stated them here. Q. (By Mr. Jenks.) Did you collect the money paid over?— A. Yes. It was not very much. I got on to it right quick, so it did not injure me much. As soon as they doubled the rate of freight on me I thought there was something wrong. I immediately went to Cambridge, to the headquarters of the road, inper- son,to see the receiver, and asked him why my freight rates had been doubled. He jjretended to know scarcely anything aljout it. He says: " That is a matter that belongs to the freight agent. I understand there has been an advance; I undei-stand it is necessary that the road should have more revenue." That is the substance of the interview; but he gave me to understand that the rates were going to remain. He did not give me any good reason why they were advanced, but I, of course, thought there was something up, and I went back and got up a STANDARD OIL COMBINATIONS: RICE. 709 correspondence with him to put him down on paper to see where he would land, whether he wonld make any evasions or give me some reasons by which I could find out what the trouble was. He made some replies that were not to the point, and I had counsel at Marietta write to Judge Baxter, who had charge of this road of which Phineas Pease was receiver, asking if a private hearing could not be had before him in chambers upon what these letters showed. He granted the request at once. I went down to Cincinnati with my attorney, and the local attorney of the road went down, and he owned up the whole business right there before Judge Baxter, although this thing had all passed through the hands of ex-Judge Rapello, of New York, City, who was then the leading counsel of the road. That is the way it caiue out. Q. (By Mr. Farquhae. ) Do you know whether it was customary in those days, before the interstate-commerce law was passed, for the receivers usually, under instructions from the courts, to get all out of a road it was possible to get for the benefit of the stockholders? — A. I do not know anything of that kind. I do not think, though, that any receiver of a road should charge any less to a big shipiser than to a small shixiper, because it violates the law, the common law of the land, which no road had a right to do even before the interstate-commerce law, as Judge Baxter here says. It was just as bad before 1887; it was unlawful. As I understand it, the only additional thing that was put into the interstate- commerce act was the penalty clause, by which every shipper and every carrier is subject to a penalty of $5,000 and two years in the penitentiary for each and every offense. And what good has it done? They discriminate every day just as much as they ever did. It has had no effect whatever, and I can show it as I go along here by my own cases before the Interstate Commerce Commission. Q. Has it not been a fact that there were some very great discriminations made by receivers in giving rates? — A. I do not know that. Q. As against all competing roads, and the court itself would sustain them in working for the benefit of stockholders, to get all the reveime it was possible to get out of it? — A. No; I do not think that any honest judge would ever decide that a railroad could discriminate m favor of a large shipper against the small shipper. Q. Is it not a fact that in some cases receivers have discriminated and cut rates on their road? — A. Right there in my own case they did; and here are Receivers Co wen and Murray admitting it themselves, vrhen. they wrote the letter to the Interstate Commerce Commission, December, 1S9S, that they were giving rebates; criminally doing it. Q. (By Mr. Ratchfoed.) Is it not a fact that the managcis of railways gener- ally follow that practice, discriminating in rates to all large shippers and giving them inside prices? — A. Why, certainly. Q. That is your olaservation, is it?— A. Yes, certainly. Q. That being the case, does it not follow that receivers necessarily have to resoit; to the same practice in order to compete? — A. Well, I do not think that receivers of a railroad ought to violate the law. No man ought to ; but in particu- lar, receivers of a road; it does not make any difi'erence how it strikes the road. Q. Do you recog-nize their inability to compete in case they do not resort to the same practice?— A. Very likely they do; but the receiver is specially appointed by the court, and it is supposed that the courts do not want to sanction any unlaw- ful act. I mean to say there is a gn-ater obligation on receivers of a railroad not to discriminate, because they are appointed by the court and are under the juris- diction of the court. Supposing the railroad does lose freight— that is no reason; they must obey the law. That is the trouble with this country— our laws are not obeyed nor enforced. THE STANDAfiD GOES INTO THE GEOCERY BPSINESS. (Reading:) "Threats and intimidations, highwayman tactics, used by the Chess Carley Company (Standard Oil) on my agents, that • competition will not be confined to coal oil or any one article.' Also ' that the Standard Oil Comi>any had authorized him to spend slO.OOO to break up any concern that bought oil from anyone else.'" Now I refer to one of my exhibits, B, p. a4, for that.' Q. (By Mr. Jexks.) Perhaps you can state in a word what the substance ot this is and then put it in as an exhibit; it will save you some time?— A. Well, it is > The exhibit referred to is a printed book of some 27.5 pages, writk-n and TOpyrighted by Mr. Rice Tto title page is as follows: "Standard Oil (Jompany, first decade W,^_ to 1882 proflts, $455 414 155 Standard Oil Trust, second decade, ls,« to 1892; profits, iMU..m,hu. Total profits, $80i;907,832 in twenty years." 83a 40 710 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. merelj' that the Chess Carley Company wrote my agents, Wilkinson & Co., at Nashville, threatening letters, of which I have copies in my exhibits. They had tried to buy them out, and made threats that if they did not come to time they would not only cut the prices of oil, but all the general goods that they sold; that was the substance of it, but I have it all here. Q. I understand from what you have said elsewhere that they did, as a matter of fact, set up a separate grocery store? — A. Oh, no, not at that point; that was at another place: that was in Mississippi. Q. But that was this same company that did subsequently set up a grocery store? — A. Yes. Q. In order to drive the rivals out? — A. That is right; this same company.' (Reading:) ■' Kust-proof oats, meats, sugar, coifee used as weapons by the Stand- ard Oil Monopoly to kill off competition. " B.M.Fraser, general freight agent of the Marietta and Cincinnati Railroad, wires a Standard'official as follows: ' , at Marietta, is inquiring for rates of freight on oil to Chillicothe. Don't you control that field?' Colonel Thomp- son (he was a Standard official) to Mr. Fraser: ' Yes, that is our meat.' (B 85)" Q. (By Mr. Smyth.) "Will you give us the date of that telegram? — A. I do not know whether I have the date. I refer to B 85.- I do not know whether there is a date to it or not; but it is all true, all the same. Q. (By Mr. FAEQUH.i^R.) This occurred in 1881, did it not? — A. I guess along iu there. I calculated that all these things where there were, not dates would come along about in chronological order. Q. Did you get the name that you had left blank in the copy of the telegram?— A. Well, no; I did not get the name. It came over by wire, and a friend of mine, hearing it going over the wire, gave it to me. He was a telegraph operator him- self. (Reading:) " Standard Oil also establishes a grocery house at Columbus, Miss., and sells groceries at cost in order to force merchants to buy their oil. (B 86.)" There is quite an extensive account in connection with that. Q. (By Senator Kyle.) How prevalent is that custom with the Standard Oil Company? — A. It is not so prevalent now, because they are establishing their agencies all over the United States — separate agencies — and they do not have to go into that kind of work.' Q. Threats are made and have been made — they resort to threats? — A. Oh, yes; there is no trouble about that. RATES DOUBLED FOR MR. RICE, UNCHANGED FOR THE STANDARD. (Beading:) •' The Standard Oil Trust makes contract with a merchant of New Orleans to pay him the sum of J^itS.OOO not to handle my oils (B 118), and while I was down there to reestablish another agency I was apprised by wire that my rate^ to Memphis and New Orleans were doubled without previous warning." That was to discourage me from establishing another agency; but I did it, all the same. I went on and got another man to take hold, and when I got back to Cincinnati I stopped off to find out what this meant. I called upon the general freight agent of the road, and he said that the connecting line was all the trouble. You know the initial line makes the rate, and Mr. Fraser was the general freight agent of the initial line out of Marietta, but he made the excuse that the connect- ing line caused the trouble. I did not get any satisfaction, and I said tho.t I would like to see the president of the road, Mr. Orla^nd Smith. I said, " Mr. Smith, why has my freight rate been doubled all at once without any warning?" lie did not seem to know anything about it. but I guess he did. He called Mr. Fraser inand said, " What is this trouble with Mr. Bice about these r;,tes?" Mr. Fraser said: " The connecting lines have been writing us and writing us that they must have their freight rates advanced; they could not see any other way to do." Well, what do yoTi suppose they did? After two or three months' correspondence they restored my rate, but in the following year thi'y pat up a job on me that stood, by which on July If), IHiSli, they set up a rate on my shipments, on all of my ship- ments — they were about all from Marietta — from iS to l(i3 per cent. They never r;iised the rates on the Standard Oil Conri>any 1 cent, which had a big refinery at Parkersburg, I'J miles from Marietta. Tlie tariff rates from both points were exactly equal. On .suljsetjuent investigation I got the attorney-general of Ohio to bring an action, and I bore all the expenses of it, to forfeit the charters of the Cincinnati, Baltimore and Washington Railroad and the Queen and Crescent Road for these accursed discriminations. I spent a lot of m.oney and it took a lot of time , and I got a verdict from the supreme court after a while saying that they should 1 See Mr. Page, p. 7C4. ''The telegrams appear, without date, in the witness's "Exhibit B," p. 85. STANDARD OIL COMBINATIONS: RICE. 711 not do it any more; and it did not amount to anything. They continued to do it ^¥on ? ^"^ under my nose. And it sliut up 19 agencies out of '34 and shut me out of 39 townsm 7H in 5 months; that is what it did. Ami these men here, Orland Smith and R. M. Fraser, are responsible for this collusion to ruin my business Q. (By Mr. Farquhae.) What year was this thing in?— A. In 1886. Q. ( By Mr. Smyth. ) Were the published rates the same from Parkersburs as from Marietta?— A. Yes. Q. You believe that the Standard Oil Company received a rebate?— A. I proved 43 to 163 per cent. I went into court and proved it before a referee. There were 2 suits to forfeit the charters, and the court said they could not do this any more. It was a very fine, sweet verdict. Of course, it had no effect. Q. (By Mr. Jexks.) In connection with the statement that the Standard Oil Trust made a contract with a merchant of New Orleans to pay him the sum of $48,000 not to handle the oil, in the exhibit that is given, vou set out the contract in full? — A. Yes. Q. You are perfectly certain as to the trustworthiness of this?— A. Yes, of course; because I got the facts right from the party, Mr. Ong. I got the con- tract; without a question these are genuine contracts. Q. Mr. Ong gave you the contracts?— A. Oh, yes; they are absolute facts. They are the contracts without a question. These are the genuine contracts." . (Reading:) " October 1.5, 1886. a friend of mine writes me from Cleveland as to inside rates given to the Standard Oil Trust as follows: ' They say that they only get so many tons of freight and so many dollars and cents in payment of so much tonnage. Can't tell whether in barrels or tank cars.' '" (Reading:)' "The general freight agent of the Little Rock and Memphis Rail- road Company wrote me on November 17, 1890, as follows: ' We are hauling your oil. This, of course, we expect, as common carriers, to be compelled to do. It is a fact, nevertheless, that on account of handling your oil the Standard Oil Com- pany will not route any of their freight over our lines. As a consequence, we have none of their tanks."" That is very nice. (Reading:) " By the power and fear of the Standard Oil Trust I have paid 5 cents a barrel more for crude oil than the regular established market price of the trust for additional stock to run my refinery." TANK-CAR DISCRIMINATIONS. "Can't purchase tank cars except for cash, because of my 'supposed contro- versy' with the Standard Oil Company."^ Office of the Milton Car Works, 3Iilton, Pa.. December 6, 1SS7. George Rice, Esq., Marietta. Ohio. My Dear Sir: We have just wired you as follows: " Our financial friends de- cline to advance the money. We can not build them except for cash," which we confirm. ^The contract, as printed in the witness's '"Exhibit B," p. 118, is as follows: '"The Chess Carley Company, of Louisville, Ky., as the first party to this agreement (and a branch of the Standard Oil Trust), hereby agrees to pay to Richard M. Ong. of New Orleans, La., as second part, the sum of S4H.()00 in sixty equal payments, consisting of one payment each month during the five years of this contract, commencing with the month of May, 188.5 A. D. " This said amount of 848.1)00 is in full payment for the purchase by the Chess Carley Company of the entire profits of the business of R. M. Ong in naphtha, gasoline, and refined petroleum for illuminating purposes. R. M. Ong herehy sells to the Chess Carley Company the profits of this branch of his business during the said period of five years, and will make no charge for conduct- ing said business except for drayage when actually incurred for full drayload from warehouse or depot. "R. M. Ong agrees to sell no petroleum for illuminating purposes, or naphtha, which is not supplied by the Chess Caiiey Company, and shall be privileged to sell at same prices with the Chess Carley Company to the same class of trade. The invoices of each month will be payable on the 10th day of the following month less the rebates or commission allowed to wholesale deal- ers by the consent of the Chess Carley Company. And the said One; shall have the right to deduct the allowance for each month of the said amount of §800 from the amount of inyoices for the same month. • .-, ^ ^ "R. M. Ong agrees to conduct this branch of his business in the best manner possible to pro- mote the interests of the first party, and under the general directions of the first party, and save all the margins possible in receiving and distributing said products, and will make no charge for storage in his warehouse. R. M. Ong will sell at same prices charged by the Chess Carley Company for same class of trade. "Chess Carley Company, "By F. D. Carley, President. "R. M. Ong. "New Orleans, La., Februry f«, 1885." " See Mr. Page, p. 765. 712 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Our Mr. Dickerman returned this morning and, after using every exertion, failed to negotiate the deferred payments on your cars. Our financial friends state that they have declined to do this mainly on account of some supposed controversy which they claim you have had vrith the Standard Oil Company and various railroads in the West. They feared you could not use these cars to advantage if the railroads should be hostile to your interests. We regret this very much as we have been to considerable trouble and expense in making arrangements to build the cars, and are now seriously disappointed at the refusal of the parties to take the deferred payments, as they had partially promised to do. We should be very nmch pleased to build these cars for you if you can nego- tiate the notes with your friends and pay us the cash. Please let us hear from you at your earliest convenience concerning your ability to raise the money. Yours, very resi>ectfully, Murray, Dougal & Co., Limited. You see there was a discrimination in the carriage of oil in barrels as against tank cars of about 2'> per cent; and if anybody could afford to buy tank cars- rolling stock for the railroad — of course, shippers ought to furnish railroads all the cars they v^fant and then let them charge what they please — so I paw that it was necessary to get hold of some cars. The way it is generally done is, a person goes and contracts for tank cars and pays down 20 or 35 per cent, and then pays the balance in installments in 4 or 5 years; and they hold the title to the cars. Q. (^ByMr. Farquhar.) Yet this is a business letter from Murray, Dougal & Co.; that if you would, furnish the cash they would build the oars? — A. Yes, hut the trouble was that that would take jiTst so much money out of my business, and, of course, cramp me so much that I could not afford to do it. Q. You went into the building of tank oars afterwards? — A. Yes, I got 10 cars afterwards, late]' on — got the Pennsylvania Works to build them for me and paid 30 or 33 per cent down, and the balance in 5 years. Q. Do you think it was an advantage to the Standard Oil Trust to have the tank cars built? — A. Well, that might be, if everybody got the same rate, if the railroad would furnish the same tank cars; but they did not furnish the tank cars. The Standard Oil Company in the early days bought up all the tank cars from the railroads, and no doubt with the understanding that they must not build any more tank oars.' The railroads have not furnished tank cars to the shippers, who thought they ought to do it, and they had to put box cars on, just as the Pennsyl- vania road did for years and years; and after the interstate act went into effect, the Standard got them to charge for the weight of the wooden package. Q. You made quite a contention there, did you not, for a long time against the tank cars? — A. Why. certainly. It is all right enough if the roads would only furnish that means of carrying, but they will not do it; and they know that the independent refiners of small means can'not afford to buy tank cars. Why should they not do this? It is the duty of the railroad to furnish all the cars that are necessary. It is only a freeze out; that is all.' Q. That is the question we are reaching now. You know the private-car system of the United States to-day; they are used in transportation, refrigerator cars, and everything of that kind, furnished by private corporations. Was it not a positive advantage to have tank cars in the transportation of oil? — A. No, I do not think it was. I think it was the greatest possible evil in petroleum transportation, for the reason that the railroads carried tank cars of oil for the Standard Oil Com- pany at a lump sum tank-car rate. I proved that before the Interstate Commerce Commission, between barrel rat.w and tank-car rates; that I paid four times as much to Birmingham, Ala. Q. Where they were able to furnish tank cars, did not the railroads try to dis- courage the barrel? — A. I can not answer. Why should they? Q. I can not say that. Was it not a condition while you were shipping?— A. Yes, they did. I will say that they did it for the purpose of freezing out the refiners; I will answer that,-' Yes." They did it certainly, because they wanted to discourage the smaller ones; because tlie railroads and the trusts all work hand in hand togQther; each one owns the stuck and bonds of the other, and they are all working in collusion and in conspiracy to freeze out all competition. Q. Did any railroads ever propose that you should put on your cars and they would pull them for so much a mile; did they ever refuse you at all?— A. Yes. I have hail railroads that refused; I forget what the lines were. Q. Some roads did not?— A. Why, certainly; I will tell you something about the tank-car business. In 1878, J. H. Rutter, the general freight agent of the New York Central and Hudson River Railroad, in an investigation before the Hepburn 'See Mr. Page, p. 7IK. STANDARD OIL COMBINATIONS: RICE. 713 committee of the New York legislatiii-e.put in a special tariff sheet of rates for the btandard Oil Company, and in that tariff was a particular special rate on tank cars of 8b0 per tank car, lump sum, from Cleveland to New York, which would be 60 cents a barrel. The outside rate was SI. 90 a barrel to all competitors. They also got a reduction off that 60 cents for the carriage of crude oil from the oil regions to the refineries at Cleveland, 35 cents per barrel of crude. Fourteen bar- rels of crude at 35 cents were allowed for 10 barrels of refined shipped from Cleve- land to New York. That made $4.90 drawback. The freight on JO barrels, at 60 cents a barrel, would be .§6; $6 less .?4.90 drawback is ijil.lO, for transporting 10 barrels of oil from Cleveland to New York. That is 11 cents a barrel as against 81.90, or 1,600 per cent discrimination.' Q. (By Mr. Smyth.) Do you know any railroad in this country that owns tank cars?— A. I think the Pennsylvania Railroad has a lot of tank cars, or did have; but in the early days it was almost impossible for a competitor to get the use of them; the Standard Oil Trust had practically the exclusive use of them. Q. Is it not the custom in all oil refineries, both in petroleum and cotton-seed oil, that the tank cars are owned by the refiners?— A. Yes; to a certain extent I think the cotton-seed oil refiners are o-wTiing their own cars, Q. And the railroad companies do not furnish any cars? — A. I think not. Q. (By Mr, Ratchfoed,) You are aware that the representatives of the Stand- ard Oil Company have stated before this commission that no such thing as rebates were given them A, (Interrupting:) Since the interstate-commerce act? Q, Yes, — A, Yes; 1 Avill come to that, Q, And the clajms that you have just mentioned, referring to the rate from Cleve- land to New York, you should support by the strongest possible testimony that you can present. Proof is what we want, — A, Well, I am going to give it to you as I go along, I am going to give you plenty of proof as to freight discrimination since the interstate-commerce law went into effect. I was coming to that; I have not got to that yet. (Reading:) "I have for years vainly sought Government protection through Congress and the Interstate Commerce Commission, and get it not; also through State legislatures, and get it not; through the courts, and get it not. Soon there will be trouble in this land if such nefarious work does not cease, for anarchy will be supreme. The railways and the trusts are run conjointly on a fraudulent, dishonest, and destructive basis. The channels of trade and transportation are no longer open free to the people at large. Our greatest criminals and corrup- tionists are at the head of these mighty and all-powerful institutions, who also use their vast resources to corrupt our politics. They have no fear of the law, because of the fabulous fortunes so easily and quickly obtained, from which they expect to buy immunity. " It is quite evident our Government is a failure, because of nonenforcement of our laws against this piratical crew who infest our inland commerce under the secret cover of unlawful rebates and commissions and thus rob the people out of hundreds of million's of dollars. '• 'The trusts are worse than the pirates of the seas, for they sailed in the open; and, though they gave no quarter, they did their work under their own pirate ilag, and not under the livery of the law. "I,^have had a number of applications from unknown correspondents to take hold of new oil developments in different States, and have invariably replied that it would be useless, that however prolific an oil field might be, it would be made unprofitable and no money in it, as against the power of the Standard Oil monopoly over the rail lines of this country." Whereupon at 1 p. m. the commission took a recess until 3 o'clock p. m. The commission met at 2.15 p.m.. Chairman Kyle presiding. George Rice again on the stand and examination resumed. Q. (By Senator Kyle.) You may proceed.— A. (Reading.) 'JOHN D. AECHBOLD AND HENRY H. ROGEBS, TRUSTEES OP THE STANDARD OIL TRUST, TESTIFY BEFORE THIS COMMISSION. SEPTEMBER H AND (I. THAT THIS TRUST HAS NOT RECEIVED DISCRIMINATING FREIGHT RATES SINCE THE INTERSTATE-COMMERCE ACT TOOK EFFECT, APRIL 5, 1KK7 = " In 1886 I entered complaints with the attorney-general of Ohio to forfeit the charters of the Cincinnati, Washington and Baltimore, and Cincinnati, New Orleans and Texas Pacific railways for gross oil freight discriminations. The petitions were filed December 23. 1886, and depositions filed November 33, 1887.. ■ See p. 696. = See pp. 526, .527. 714 HEABINGS BEFORE THE INDUSTRIAL COMMISSION. The referee made his report July 3, 1889, and the supreme court rendered its decision March 4, 1890. I proved that the Cincinnati, Washington and Baltimore Railroad Company, the initial line out of Marietta, and governing conn^eoting lines, issued an order to take effect July 15, 1886, by which freight rates were not only advanced, but that my shipments were discriminated against by this road in favor of the Standard Oil Trust from 48 to 163 per cent. "That the Cincinnati, New Orleans and Texas Pacific had so discriminated from 39 to 313 per cent. That the Louisville and Nashville Railroad Company had so discriminated from y.") to 360 per cent. That the St. Louis, Iron Mountain and Southern Railway had so discriminated from 48 to 191 per cent, which con- tinued at least to March 4, 1890, and probably much longer, regardless of the order of the commission (see pp. 583, 583, 584, 585, Congressional investigation 1888). These unlawful freight discriminations had the effect to cloSe up 19 out of 34 of my agencies, and shut me out of 39 towns in 73 within 5 months. " The supreme court of Ohio, after this abundant and most extraordinary proof before them, ignored the people's sacred right of eminent domain, and simply decided that these roads be ousted from charging less rates per 100 pounds on tank-car shipments, as compared vsrith bai'reled oil, which decision proved inef- fective." This suit was to forfeit their charters for these discriminations. DISCRIMINATIONS AT LEAST UP TO 1888. " In November, 1887, before the Interstate Commerce Commission, I proved the following gross freight discriminations, which were exclusively in favor of the Standard Oil Trust and for no one else. The cases were decided February 33, 1888, and the several defendant rail lines pretended to acquiesce in the verdict by simply changing their mode of rating. " The following outrageous and most extraordinary of freight discriminations, exclusively in favor of the Standard Oil Trust, was proved by me and existed at least up to April 1, 1888, that we know of, and from my subsequent complaints and proofs it is exceedingly doubtful if the decision of the commission had any appreciable effect on the railroads."' Now, I have put in exhibits which show discrimination to the extent of 338 per cent. There is a lot of them, and I just merely mention that fact; the exhibits show that the highest discrimination was 333 per cent. LOUISVILLE AND NASHVILLE RAILROAD COMPANY. Per cent discrim- ination. Louisville to — Nashville, Tenn Chattanooga, Tenn Memphis, Tenn _ Atlanta, Ga Selma, Ala Montgomery, Ala - - . . . . Mobile, Ala, Columbus, Ga , Augusta, Ga Pensacola,Fla Cincinnati to Birmingham, Ala CINCINNATI, NEW ORLEANS AND TEXAS PACIFIC (CINCINNATI SOUTHERN). Cincinnati to— Lexington, Kv - 4,9 10,1 9,8 10.7 13.1 11.1 17.3 11.8 11.7 13.1 ,s 31 i. 4 3«.4 37.8 44.8 31.2 53. (i 31.3 38.8 38.8 63 161 Knox YiUe, Tenn 175 261 Meridian, Miss - 267 181 Shreveport, La 209 164 214 Macon, Ga _ 2M ' See Mr. Page, p. 78.'). STANDARD OIL COMBINATIONS: -RICE. 715 NEWPOET NEWS AND MISSISSIPPI VALLEY COMPANY. (Formerly C, O. & S. W.) Mills per gallon charged Standard Oil trust. Mills per gallon charged George Eice. Per cent discrim- ination. Louisville to— Memphis, Tenn __. _ New Orleans. La 4.4 9.7 9 15 15 100 Vlcksbnrg, Miss , 10.7 40 ST. LOUIS, IRON MOUNTAIN AND SOUTHERN. St. Louis to— Houston, Tex — Galveston, Tex . Little Rock, Ark Newport, Ark ._ 257 257 82 83 '• The aoove gross freiglit discriminations continued for at least 1 year of the interstate-commerce act, regardless of the penalty of §5,000 fine and 2 years in the penitentiary for each and every offense. "On May 28, 1888, the Missouri Pacific Railroad, regardless of this decision, were still carrying tank cars by the lump su.m. This same road (1888) in the State of Arkansas were carrying petroleum in iron barrels for the Standard Oil Trust at 284 per cent discrimination in their favor. " In 1889 I made several general complaints to the commission of general viola- tions of the interstate-commerce act by the Southwestern lines of railroads, reach- ing to the Pacific coast, of which the Cincinnati, Washington and Baltimore Railroad Company was the initial line out of Marietta, where my oil refinery was located, and at my request the commission issued notices to 151 contiguous lines as parties thereto to appear and be heard if they so desired. The substance of these complaints was embodied in these notices, as follows : '" It appearing to the commission in the above cases that in addition to the question of reasonableness of rates, the following other questions are also raised, namely : "'1. The question of the like classification of barrel and tank oils, and of the right of the railroad companies to charge for the weight of the barrel package in addition to the weight of the contents. •' ' 2. The question of discrimination arising from the returning of empty tank cars free of charge, and also of the paying a mileage rate on such empty tank cars. " ' 3. The question of whether railroad companies are not obliged to furnish tank cars as well as cars of other description for oil transportation. '"4. The question of the proper clusoification of cotton-seed oil and turpentine as compared with petroleum a.nd its products. ■' '5. The question of discrimination in favor of petroleum and its products when carried in tank cais, resulting in giving a low rate on cotton-.5eed oil or turpentine, or eithei', when carried as back loading; in such tank oars. " • 6. The qu?stion of the duty of railroad companies to furnish shippers with tank cars in cases where the traffic of their lines can profitably or properly be car- ried in such tank cars and is large enough to justify the expenditure. "'7. Long and short haul.' •' The four separate cases were tried together m December, 1889, and thor- oughly done by that astute and experienced lawyer in railroad matters, Franklin B. Gowen, for' many years the pre.sident of the Philadelphia and Reading Rail- road Company. The cases were duly argued, and a partial but insignificant decision rendered, but not until 3 yc-nrs had elapsed, when the commissioners decided that 'All the cases are held open for additional evidence, which so thor- oughly dis"-usted me after having spent so much time and money thereon, that i then determined to proceed no further, and abandoned the apparently hopeless pur- suit of combined and confederated iniquity, ami resolved to have nothing further to do with any future proceedings before the Interstate Commerce Commission. " I fully and clearly proved the following facts : ,„..,,,. „ ^i,„^ "That the Trans-Continental Association, composed of 31 lines of load, had advanced freight rates in 1889 over 1887, when my first complaints were brought, 716 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. to the extent of 83 per cent, which was nnreasonable. Also proved that these lines carried cotton-seed oil, worth 4 times as much as petroleum, at 36 cents less per 100 pounds. That the Trans-Missomi Freight Association charged 25 cents iser 100 pounds more for carrying petroleum than cotton-seed oil. "That the Southern Railway and Steamship Association, of which the Louis- ville and Nashville Railroad Company was a member, advanced freight rates in 1889 over 1887 from 10 to 121 per cent, which was clearly unreasonable. Also proved that the Chicago, Rock Island and Pacific Railroad charged 25 cents more per 100 pounds for carrying petroleum than cotton-seed oil. 'UP TO MARCH 15, 1830, THE STANDARD OIL TRUST GOT Ij- PER CENT OP ITS SHIP- MENTS CARRIED FREE BY A REBATE REDUCTION OP W GALLONS ON EACH TANK CAR. " I also proved that the Standard Oil Trust had an exclusive secret rebate re- duction on quantity shipped, in place of a money rebate, of 62 gallons dediio- tion on each and every tank car, or IJ per cent of its shipments carried free." No one else got that at all; no one else got that rebate or that reduction.' Q. Is that supposed to be on tank cars as compared with barrel shipments? Is that the reason that they themselves gave? — A. I think the only reason I heard for it was for wind in the dome of the car. or something of that kind. There was no good valid reason for it. Q. The question is this, what reason did they pretend that there was for it?— A. I do not know. I never knew what their pretended reason was; there vfas no good reason. Q. "When this matter was brought to their attention, both the Standard Oil Company and the railroad company presumably assigned some reason for it? — A. I do not know what they did assign, probably leakage or something or other. There was no sense in it, anyhow. (Reading:) "This continued until March 15, I8'.)(i, when it was changed to 43 gallons reduction, and continued to September 1, 1893. " Also proved that shippers of oil in barrels should be charged only for the oil shipped, and not for the barrel, to offset the return of empty tank cars that can't bring back other freight (except in extreme cases), while a box car can. Besides a tank car weighs 3,500 pounds more than a box car of same capacity." Why, up to 1888 the Pennsylvania Railroad carried oil in barrels, including the package , for the same rate as so many gallons in a tank car ; and about a year after the interstate-connneroe act took effect they changed it so that the independent shipper would have to pay for the weight of the package.' •Q. (By Mr. Ratchford.) What reason do yoil assign for the change in the rate on shipments in tank cars as compared with the rate for barrels? — A. I think it was done at the instigation of the Standard Oil Trust. Q. Did the Standard Oil Trust at the time of the change have control of all the tank cars? — A. Principally. Almost absolutely. Q. Principally? — A. Of course there were more or less outside refiners that had a moderate amount of cars, but not very many. Q. Then you believe that the reduced rate of shipment in tank cars is not due to the advantage that results to the company from the transportation of oil in tank cars, but rather is a favor for those who control the tank cars? — A. Yes. TANK CARS NOT AN ADVANTAOE TO THE RAILROADS." Q. (By Mr. Farquhar.) But is not the tank car really an advantage in hand- ling the oil? — A. To whom? Q. To the railroad companies, an advantage to all that handle oil? — A. No, sir. I have got the very best evidence from the Pennsylvania Railroad, if you will let me read this. (Reading:) "John S. Wilson, general freight agent of the Pennsylvania Rail- road Company (the highest authority we have), testifies before the Interstate Commission on Jantiary 23, 1888, that he would rather carry powder than oil in tank cars, and that the shipment in barrels is preferable. Hear him: " ' I think, altogether, it is the most undesirable business we do, the carriage of oil in tank cars. There is no stopping it when it once starts. We had a smash up at New Brunswick. We came in collision there with a line of tank cars, the oil got on fire, and I think it ran two sijuares, got into a sewer, ran burning a square or two more, ran on the canal, which was then frozen over, followed the 1 See Mr. Page, p. TCIi. 2 ggg jij. page, pp. 765, 767, 709. STANDARD OIL COMBINATIONS: RICE. 717 ice a square or two beyond, and beside our own direct losses, we have already- paid nearly $500,000 for the destruction there. I regard it as worse than powder to carry. The bridge at New Brunswick was burned down, which cost us $300,000 or $300,000, besides nearly $500,000 paid out for outside destruction. " ' We might run for 10 years and by good luck have no serious accident. Whereas, on the other hand, we might strike another case like that at New Brunswick and lose more money than we would make on carrying oil for 10 years. I would rather carry anything else than oil in tanks. " ' The_ movement in barrels I have always considered preferable for two rea- sons. First, we load barrels in a car that will carry a return cargo. There are no back loads for a tank car. For stock and box cars we can load back and get an increased earning for the round trip. Secondly, if there comes a collision or fire, the packages being separate we are enabled to save some of the tonnage. There is no hope of saving the contents of a tank car if it once gets on fire. Barrels you can sometimes scatter and roll off and break them up.'" ' This gentleman did not stay long with this railroad comj^any after that evi- dence was given. Q. (By Mr. Farquhar.) Well, independent of the gentleman's opinion on that, the railroads have adopted the tank car instead of the barrel for their shippers. — A. Yes; and principally under the control of the Standard Oil Trust. Q. And independent also of the barrel transportation and the tank transporta- tion, the railroads put tanks in the sixth-class classification and barrels in the fifth class. How do you account for that as a practical business proposition? — A. I think that tariff v/as made by the Standard Oil Trust. I think they make up the petroleum tariffs in the Quited States. They make up the oil tariffs at 26 Broadway and give them out to the railroads to carry it as they say, or else they do not get any freight. - Q. (By Mr. Ratchford.) Is not there an advantage in carrying and in loading and unloading tank cars as compared with the barrels? — A. Yes; if your cars arrived at a point where you could gravitate it out, or if you had a short hose attached to them — a short hose into a pipe to which you could put a pump, you could suck it out; and, of course, a tank car carries more oil and saves the weight of the barrel; they carry a larger weight. Q. In every case it is either taken out by gravity or pumped out? — A. Yes. Q. (By Mr. Farquhar.) In nearly all cases it is gravity, is it not? — A. I do not know about that, either. At the refinery at Bayonne, owned by the Columbia Oil Company, I think they take all the oil out by pump; I am quite sure they do; their works, I know, are right down on almost level ground and they could not take it out by gravity. Q. (By Mr, Eatchford.) Do the railroad companies load the oil, or the pro- ducer? — A. The producer. Q. And the railroad or shipping company unloads it? — A. The receiver of the oil unloads it, and the producer or owner of the oil loads it; so that the road has nothing to do with it. It is the same with barreled oil. The refinery loads its barrels into the car and the road has nothing to do with it; and so with unloading. There is no difference in that respect.^ (Reading: ) "I proved that the intermediate rate on petroleum, via the trans- continental lines, in 1889 wa.^ SI. 90 per 100 pounds. The wooden-barrel shipper was required to pay on 85 pounds additional weight, which would amount to $1.61 per barrel more, in gross violation of sections 3 and 4 of the act. The average market price of crtide oil in 1889 was 94 cents. " I proved that there was a charge of SO") per tank car by the transcontinental lines, to return empties from Pacific coast to Missouri River." This is all since the interstate-commerce act went into effect. (Reading:) •' Thomas M. Kimball, general traffic manager of the Union Pacific, testified, June 33, 1887, before the Pacific Railway Commission (p. 1134) , that his road carried the empty tank cars of the Standard Oil Company free, same as the other roads. -, -, ^.-, ^ "(Page 1133:) ' Q. What was the rate allowed to the Standard Oil Company?— A. All sorts of rates, according to point of delivery, and the livehness of compe- tition at that point; 5 per cent, 10 per cent, 15 per cent, and up to 30 per eent. "So this great line, and a Government road, enters the arena to assist the Standard Oil Trust to throttle competition as against the rights of the people who have built the road. iSee Mr. West£Cat.^.pp.377,378. ,, ^ „ „_.,,„_ ,.^,, ,.^. = See Mr. Page.p.rr.r; Mr. We8tgate,pp..373-;3;9: Mr. Gall, pp. 87.5-1)/ ,, 6^2-b8,j. 3 See Mr. Page. p. 7117. 718 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. " I proved that refined oils in bulk were being carried at 6 per cent less than actual weight, or 6 per cent of refined oil carried free for the Standard Oil Trust. Their various lubricants, residuum, etc., carried at 10 to 1.5 per cent less weight, according to gravity."' DISCRIMINATION BY EXCLUSIVE " STOP-OVEE " PRIVILEGES. "I also proved that the several associated lines of railway constituting the Southern Railway and Steamship Association'pool. the Southwestern Traffic Asso- ciation pool, and the Trans-Continental Association pool were grossly violating the third and fourth sections of the act, long and short haul, to the extent of .56 to 225 per cent, which inured to this extent, in favor of the Standard Oil Trust, by prepayment of its freight at the low car lot, terminal rate, with privilege to stop all such cars at high rate intermediate points. ' ' I paid out over $1 ,200 in subpoenas in those cases by an imperative rule adopted by the commission, which was not required in my first cases. " It is fair to assume, because of failure of the commission to properly decide these cases, that the same discriminations not only have continued, but they have even gotten worse, for on May 2, 1890 (B 161) the St. Louis, Arkansas and Texas Railway (applicable to all Southwestern lines) issued a special oil tariff sheet for exclusive benefit of the Standard Oil Trust "' •* — That I know, and I could not get it. (Reading:) " By which this trust could stop off full loaded tank cars at high rate intermediate points and divide same up into less than car lots, to be distrib- uted at several stations, by canning same, which should have paid 3 times the terminal rate. This was an exclusive tank car tariff sheet, not applicable to bar- reled oil in box cars, for the independent refiner who^ould not afford to purchase rolling stock tank oars. ' ' Per letter of the commission, July 12, 1897, these special and most extraordinary of freight discriminations yet continue, and are exclusively in favor of the Stand- ard Oil Trust on petroleum shipments. " 'As to what lines allow stop-over privileges, it is understood that all the lines named on the Southwestern Traffic Association tariffs as parties thereto partici- pate in the stop-over privileges provided for therein.' " That is a quotation from the Interstate Commerce Commission. TANK-CAR DISCRIMINATIONS. (Reading:) "The tank oar has been the greatest medium for the Standard Oil Trust to receive rebates by carloads being carried a,t a lump sum rate regardless of weight, inconceivably lov/ as compared to tariff rates by the 100 pounds. . " The railroads won't furnish tank cars, and if an independent refiner is able to buy a few, thus decreasing his working capital, he is confronted by these present special railroad instructions inserted in the tariff sheets." To show you how the railroads put every possible obstacle in the way to freeze out and keep out competitors, this is what they put in. (Reading:) "The 'Southwestern Bureau,' of which the Missouri, Kansas and Texas Pacific is a member, ovnied by the Standard Oil Trust officials, has this to say at the present time: ' Oil tanks.— Carload, petroleum storage tanks for petroleum and its prod- ucts, intended for permanent 'jil stations "' Intended for permanent oil stations, mind you, gentlemen. (Reading:) " ' Shall be transported at actual weight at the oil rate, when filled with oil that pays the buieaa line's oil rate.'''" That is as much as to say that the railroads have a right to say whether a sta- tion that I might put up is going to be a ijermaiicut one. But if I wanted to put up one it would be practically impossible to get the right of way or a place to put it up, for I was 2 years waiting and trying to get that; or if you did get it and you put your plant up, it was in the discretion of ibe railroad to say whether that was going to be a permanent thing. Anybody would know that it would not be per- manent, because y(/U can't live. The railroad would discriminate and you coiild not survive. It would not be any good whatever. I have aiiother one right here. (Ri-ading:) "Central Freight Association.— Tank gauge handbook No. 4 says, applicable to all roads in the United States at prese^it time: • Petroleum and its product* in tank'ciirs will be delivered only wlwu consigned to parties at points at which they have proper unloading and storage facilities, and when shipments 1 See Mr. Page, pp. 731, 732. ■•'.Sill' GeorK" Rice t'. St. L. S. R. Co.,5 Tntev.state Commerco Commission Reports, 600. The corn- misi^ion there states that Mr. Rice difL not appear at the hearing, tlioiigii duly notifled thereof, nor ollci- any ])roof of discrimination between shippers. The stop-over privilege complained I )f seems to l'ia\-, ■ been al )olislied on .July 25, Lsiili, as to petroleum, though continueatill Decemhei' .5,]S!ls,on sundry other commodities. 'See Mr. PaKc,p. 7IJ9. STANDARD OIL COMBINATIONS: RICE. 719 in tank cars are sent to i^arties who have not such facilities the shipments will be returned to shippers at their risk and expense.' "^ Just think of it. It is all left with the railroad to say whether you can have any show or not, and they do not give you any show and don't propose to do it either. (Reading:) " On May 0, 1891, the Southern Pacific Company issued an exclusive special oil tariff '" Here is something very important. (Beading:) " With these exclusive advantages in favor of the Standard Oil Trust, being the exclusive owner of a peculiar box tank car combination, patented, of two upright iron tanks set inside a box car that thus avoids pajdng $105 a tank car for return of empty cylinders from Pacific coast to Missouri River. This special oil tariff, governing all transcontinental lines, allowed this trust 37 cents per 100 pounds lower rates for petroleum transported in these special patent cars, as against the regular rates. This is discriminatory against the independent tank and barrel shipper by $105 a tank car, and SI -08 per barrel when shipped in barrels. ^ " The present highest intermediate rate on petroleum in less than car lots, Chicago to Pacific coast over transcontinental lines, is 82.70 per 100 pounds, or §10.80 per barrel of 400 pounds to the independent barrel shipper, while the Standard Oil Trust, by prepayment of its freight at the car lot terminal rate of 78i cents per 100 pounds on 320 pounds, or $2.51 per barrel, gets an advantage of 330 per cent over its competitors in freight discrimination." TEMPORARY REDUCTIONS FOE THE PROFIT OF THE STANDARD. " Another method of freight discrimination in favor of the Standard Oil Trust on the transcontinental lines, per tariff of 1888, was to reduce rates temporarily one-half and then raise them again 50 per cent, so the trust, on exclusive secret information, could stock up on the low prices, while its competitors always had to pay the high tariff rates. (B 191.) " Now, I vrill just read some telegrams that passed between Mr. Stubbs, of the Southern Pacific, in which he agrees to allow ithe Standard Oil Trust to stock up with petroleum products at low prices. This is here to show how it is done all at the pleasure of the Standard. This is from the Paint, Oil, and Drug Review of January 25, 1893, and I know all about it, because one of the men that is inter- ested came to see me about it and showed me some of these telegrams.' [From the Paint, Oil, and Drug Review, January 25, 1893.] HOW IT IS DONE — ALL AT THE PLEASURE OP THE STANDARD. How completely the Standard Oil Company has its grip on the railroads is best evidenced by producing copies of telegrams that passed between the freight agents of the transcontinental lines, the Standard Oil Company at San Francisco, and the Standard Oil Trust at New York. How, at the pleasure of the unscru- pulous monopoly, it was enabled to stock up during low freight, and an interest- ing game of seesaw was played on weak competitors. In all cases freights were to be advanced and lowered upon notice from the Standard. A baser trade con- spiracy never went into print. It follows: [Copy of telegram.] San Francisco, November i.'f, isss. J. C. Stubbs, Oeneral Truffle Manager Hoidhern Pacific CoiujMinij, St.Louin: . Tilford says regarding raising and lowering oil rates during the year, as talked before leaving, he thinks it better if you could, without giving particulars to Transcontinental Association lines, get consent to leave oil rates in hands of com- mittee without explaining exactly why, but if your judgment apinuves you might give full particulars to 2 or 3 longest lines. W. Sproule, ^ssif. GenL Frt. Agt. Southern Pac. Co. [Copy of telegram.] San FEANt!lSCO, Norember I4, 18S8. W. Sproule, San Francisco: Say to Tilford that association will probably consent to following agreement: Oil rate from Cleveland to be $1; at this rate he can stock up; after doing so he to 1 See Mr. Page, p. 7UH. 720 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. notify Chairman Leeds, who, after giving necessary notice, will advance rate to §1.25, and continue that rate until such time as Tilford notifies him of reduced stock, when he will again reduce it to $1 to enable him to stock up. J. C. Stubbs. [Copy of telegram.] San Francisco, November 15, 1888, J. C. Stubbs, St. Louis: Tilford received your message, and in reply says he can not afford to pay .$1— that is too much, owing to water competition — but will agree to pay for petroleum and its products 85 cents from Cleveland, and if roads hard up might pos.9ibly raise the rate to 87* cents. Tilford says this offer of his is provided association will agree to advance rate to 81.35, and reduce it from time to time as he may desire, as outlined in your message of yesterday. Please answer. Tilford says please do not advance present linseed or lead rates, as it would interfere with negotiations that he has now under way with Whittier, Puller & Co. W. Sproule. [Translation of message to W. A, Bissell, general freight agent Atlantic and Pacific Railroad.] San Francisco, November 15, 1888. W. A. Bissell, St. Louis: Tilf ord's proposition to the association through Stubbs is that he will pay 85 cents on petroleum and its products from Cleveland; possibly, if roads hard up, he might increase this to 87i, provided association will advance freight to §1.25 when he gives it notice. He would stock up at the low rate, then notify the association when to advance, the advance or decline to be made at certain seasons of the year in accordance with his supply on hand. Do not let Stubbs know of this telegram. W. Sproule. [Copy of telegram.] St. Louis, November 16, ISSS. W. Sproule, San Francisco: All rates will be advanced. Would advise that he accept proposition, otherwise sure rate will be made SI without any conditions; clipper competition will he cared for. J. C. Stubbs. [Copy of telegram.] San Francisco, November 19, 1888. W. H. Tilford, Trustee Standard Oil Trust, :JG Broadway, New York: J. C. Stubbs telegraphs as follows under date of 14th instant: " Transcontinental Association will probably consent following arrangement: Oil rate from Cleveland to be $1; at that rate Standard Oil Company, San Francisco, can stock up. After doing so Standard Oil Company can notify Chairman Leeds, who, after giving necessary notice, will advance freight rate $1.25 and continue that rate until such time as Standard Oil Company notifies him of reduced stocks, when he will again reduce it to 81 to enable Standard Oil Company to stock up." I telegraphed J. C. Stubbs as follows: ' ■ Can not afford to pay §1 ; that is too much, owing to water competition, but will agree to pay for petroleum and its products 87J, cents, provided Transcontinental Association will agree to advance rate to 11.25 and reduce it from time to time as outlined in Stubbs's message; adding request Transcontinental Association not to advance linseed or lead rates." Under date of lOth instant, J. C. Stubbs telegraphs as follows: "All rates will be advanced. "Would advise that Standard Oil Company accept proposition; other- wise sure rate will be made §1 without any conditions. Clipper competition will be taken care of." What do you advise me to say to him? Advise me by wire at once. E. A. Tilford, Praidi'iU Standard Oil Company of Iowa. STANDARD OIL COMBINATIONS: RICE. 721 [Copy,] San Francisco, November 20, ISSS. J. C. Stubbs. Care Southern Hotel, St. Louis: Your telegram, t6th, throtigli Sproule, received. I will raise my offer to 90 cents for petroleirm and its products fi-om Cleveland, association agreeing to conditions stated in your telegram to Sproule, 14th. This is the highest rate we have ever paid. This rate I believe would be a permanent thing and not stimulate clipper shipments or private clipper charters; therefore in long run would prove mutually more beneficial than St. "Will you advocate 90 cents? I think with your vote for this rate, and you personally putting it before association, it would' go through. We will have to ship quite a number of cars during high rate owing to special orders coming in. This should be taken into consideration when I ask that 90 cents be adopted. Please answer. E. A. TiLFORD. [Copy of telegram.] San Francisco, November ,21, 1S88. W. H. TlLFORD, 26 Broarlintij, Neio York: Dispatches received. Since telegraphing you yesterday, I received telegram from A. T. and S. F. B. R., St. Louis, intimating that Transcontinental Associa- tion would accept something less than §1 from us. Therefore, I will telegraph J. C. Stubbs, care of Southern Hotel. St. Louis, as follows: " I will raise my offer to 90 cents on petroleum and its products from Cleveland, Transcontinental Asso- ciation agreeing on conditions stated in his telegram, 14th. This is highest rate we ever paid. This rate. I believe, would Ije permanent thing and would not encourage heavy clipper shipments: therefore in long run would prove mutually more beneficial than SI. Will you advocate (ii) cents? I think with your vote for this rate and you personally putting it before association it would go through. We will have to ship quite a number of cars during high rate, owing to special orders coming in for points where we have no warehouses. This should be taken into consideration when I ask that 90 cents be adopted." I request J. C. Stubbs please answer. I do not know whether my telegram reached J. C. Stubbs, owing to his ljein,i4' in New York City. When you see J. C. Stublis, say I tele- graphed him as above, care Southern Hotel, St. Louis. In your talk advocate 90 cents as outlined above. Do not intimate to Stubbs that I have received any communication from A. T. and S. F. R. B. people, St. Louis. Telegraph me the result of your interview with Stuljbs, Pay charges on Union Tank Line patent car referred to and send expense bill to me. E. A. TiLFORD. [Copy— Subject: New T C. A. rates.] Standard Oil Company, Seal Francisco. JSovember ?1, ISSS. W. H. TiLFORD, Esq., -'0' Broadiray. Neir York: After telegraphing you yesterday afternoon saying that I would telegraph J. C. Stubbs as outlined in "your message of yesterday, I received word, through A. T. &S. F.oface here, from W. A. Bissell, general freight agent of the Atlantic and Pacific Railroad, who is now in St. Loui.s,that he thought the association would accept something less than si from us if our offer was properly put before them, consequently I telegraphed -J. C. Stubbs, as per my translated copy of message to you herewith attached. I was not aware that Mr. Stubbs was in New York and sent my messati,e to the Southern Hotel. St. Louis; therefore I requested in my message to you that when you meet Mr. Stubbs you say that I telegraphed hnn, care Southern Hotel, St. Louis; and also outline to him the substance of uiy mes- sage, incorporating further along in my telegram that in your interview with ]Mr. S., please advocate the 90-cent rate, ^ , • , I will advise you as soon as I hear definitely when the new rates of freight that the Transcontinental Association are agreeing on now will take effect. I heard to-day. through the A. T. & S. F. office here, that IMr. Bissell had telegraphed from St. Louis that he thought the new traffic would go into effect on or about the loth or 20th of next month. Please treat this confidentially, but, as I state before, as soon as I find out definitely regarding the new rates I will duly advise you. Yours, truly, E, A. TiLFORD. 722 HEARINGS BEFOKE THE INDUSTRIAL COMMISSION. [Copy.] '!Xww Yon^, November SS,1SSS. E. A. TiLFORD, San Francisco : General meeting adjourned to meet at Cliioago, Monday morning. Will take up matter then. Will do best I can. Probably can make it 95, which your brother Hunt says you can stand. If you have to address me, care Pacific Hotel, Chicago. J. C. Stdbbs. [Copy.— Subject: Rates on oil from Cleveland to tlie Pacific coast.] Standard Oil Company, Scm Francisco, November S3, ISSS. W. H. TiLFORD. Esq., S6 Broadway, Neiv York. Dear Sir: I beg herewith to hand you copy of my translated dispatch to you of even date, which explains itself. From Mr. Stubbs's dispatch you will see that he seems to think that you have already agreed that I vv'ill stand 95 cents on oil from Cleveland to the Pacific coast. In your dispatch to me of a few days ago you stated you talked with Mr. Stubbs about 90-cent rate, suggesting, however, further along in your message that Mr. ♦Stubbs should telegraph that he could get the 95-cent rate adopted, that I had better accept the same. From your message I would imagine that you simply talked the 90-cent rate, without committing yourself to Mr. Stubbs about a 95; hence my reason for asking you the question as to whether you had agreed to the 95, in my message of to-day. Yours truly, E. A. Tilford. [Copy. — Subject: Error in translation of message.] Standard Oil Company, San Francisco, November :?Jf, 18S8. W. H. Tilford, Esq., Vice-President Standard Oil Company, S6 Broadway, New York. Dear Sir: I am just in receipt of your message of even date saying that you translated my message wrong, reading the rate that I had offered the transconti- nental lines 95 cents, instead of 90-cents. I think whoever translated my message in your office should be disciplined, for the error will prove, I am afraid, quite expensive to us here. I am afraid now the damage is done and I will be unable to secure a lower rate than 95 with the Transcontinental Association lines. I am fully convinced, however, if you had talked 90 cents to Mr. Stubbs when you saw him I could have had this rate put in effect. I will, however, as you suggest, telegraph Mr. Stubbs to-night, care Grand Pacific Hotel, stating that when you mentioned 95 cents to him, that the same was based on an error in translating my cipher message, and that I still hope he will advocate the 90-cent rate. Yours truly, E. A. Tilford. [Copy of telegram.] Chicago, November S6, ISSS. E. A. Tilford, Scot jPraiieisco; I told Hunt your dispatch to me read 90, and he must be in error. He after- wards confirmed my view, and at the same time expressed himself as walling to compromise on 95. J. C. Stubbs. [Copy--Subject: Oil rate.] [Personal.] San Francisco, November 36, ISSS. W. H. Tilford, Esq., Vice-President Standard Oil Company, S6 Broadioay, Neiv York. Dear Sir: I am just in receipt of the following message from Mr. Stubbs: " Chicago, November -36, ISSS. "E. A. Tii.¥OVi.i>, San Francisco: " I told Hunt your dispatch to me read 90, and he must be in error. He after wards confirmed my view; at the same time expressed himself as willing tO com- promise on 95." STANDARD OIL COMBINATIONS: RICE. 723 I telegraphed Mr. Stubbs as I wrote you I would on the 34th instant, and the above message from him. is in reply to my telegram. Mr. Stnbbs's statement as to yon agreeing to compromise on 95 cents does not exactly tally with what you wired me xmder date of the 3-lth instant. (Please see your telegram of that date.) Will you please write me (for curiosity sake) what are the facts as to your inter- view with J. C. S. Of course I understa,nd before my letter can reach you. and you can reply, the 90 or 05 cents rate v.'ill be selected: but as I would like to know for my own satisfaction, hence my requesting you to wi'ite me. I will make up some sort of a message to-night to send Mr. Stubbs in ripply to his of above date, but, as I state in m.y letter of the 2Uh instant, I believe now that nothing will be accepted but 95 cents. Yours, truly, E. A. Tilford. [Copy of telegram.] San Fbancisco, Kovemhe7- 16, ISSS. J. C. Stubbs , Cave Grand Pacific Hotel, Chicitao. To quote Pinafore, Hunt evidently got those babies or rates mixed up. Lines had better give 90 a trial. If later on there's possibility advancing, you know I am always willing. Whittier has large lot clipper oil now arriving and it will be hard for us to meet this competition even if our rate made 90. E. A. Tilford. [Copy.— Subject; Freight rates.] [Personal.] Standard Oil Company, Sail Franciisco. November SS, 1SS8. W. H. Tilford, Esq., SB Broadway. Xeiv York. Dear Sib: I am just in receipt of your day message of even date, saying that Standard Oil Company, Cleveland, and Standard Oil Company, Pittsburg, would probably fill all of my orders by Saturday night, December 33, and that the new rate of .SI. 35 per 100 should go into effect 3-lth proximo, etc. ; contents of the same carefully noted. I have not heard anything this week from the transcontinental roads which are now holding forth at Chicago, as to when they will be ready with their new tariifs. I wrote you some ie\Y days ago that the Atchison, Topeka and Santa F6 people telegraphed me from St. Louis that they did not believe the new tariff would go into effect before the 15th proximo. It looks to me now as though this tariff would not be put into effect before December 30 to January 1, 1889. I am, however, in communication with the agents of the different lines, who are now at Chicago, and just as soon as I learn definitely as to the date when the new tariffs will go into effect, I will joromptly telegraph you. If I find out definitely that they will be ready with their tariff's before December 33, I will arrange to have the present oil rates remain in effect until the 24th proximo, as you suggest. I wish, however, vou \vould impress upon Standard Oil Company, Cleveland, and Standard Oil Company, Pittsburg, the necessity of filling out all our orders at an early date as possible. Yours triily, E. A. Tilford. [Copy.] [Personal.] Office General Freight Agent, Southern Pacific Company, jS'oh Francisco, December 3, iSSS. E. A. Tilford, President, Standard Oil Company, City. Dear Sir: I have advices from Chicago that arrangements for coal-oil rates have been closed, and the new rates thereunder will probably go into effect Jan- uary 1. From Cleveland and Pittsburg 90 cents per 100 pounds, and from New York SI per 100 pounds. The basis of operation of these rates, lookmg to the conserving of your interests, is intendc^d to be communicated in recent advices from Chicago, of which you are informed. Yourf, truly, Wm. Sproule. 724 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. [Copy of telegram.] San Francisco, Decembei' 4, 1888. "W. H. TiLFOED, JG Broadway, New York: J. C. Stiibbs telegraphs as follows fi-om Chicago: "Oil freight rates have been closed. New freight rates thereunder probably effective January 1. From Cleve- land and Pittsburg 90, from New York $1."' This message from J. C. Stubbs means 90 for us to .stock wp with, with §1 .2.5 in effect whenever we want. See my letter of this date. E. A. TiLFORD. [Copy— Subject: Freight rates.] [Personal.] Standard Oil Company, Sail Francisco, December 4, 1888. W. H. TiLPORD, Esq.. Vice-President, Standard Oil Company. Jij Broadway, New York. Dear Sir: I will telegraph you this afternoon as per translated copy of mes- sage herewith attached, which is self-explanatory. I herewith hand you a copy of a letter I have just received from Mr. Sproule, assistant general freight agent of the Southern Pacific Company, this city. This letter I interpret to mean the SO-cent rate is for us to stock up from time to time, and that the S1.2.i per 100 rate Vi-ill be in eifect wJienever we may desire. This §1.25 rate is what Mr. Sproule refers to in the latter portion of his letter, as my ofEer of 90 cents to Mr. Stubbs was on condition that he has the rate of $1.25 put in effect when we might ask him. This letter also reads as if the 90-cent rate and SI rate was to be put in effect January 1. No doubt Mr. Stubbs was unaware that we were stocked up at the present rate ol 824;. The Transcontinental Association adjourned at Chicago yesterday, and I under- stand that Mr. Stubbs is now on his way home. I will see him on his arrival here, and if Chairman Leeds, of the Transcontinental Association, has been notified to put the 90-ceiit rate in effect January 1 , I will Yiiwo the same corrected by wire and the §1.35 rate j)ut in. As soon as Mr. Stubbs reaches home 1 will telegraph you whether it is ivitended that the 90-cent rate should be put in eiiect January 1 or the $1.25. Yours, truly, E. A. TiLFORD. (Inclosed 2.) [Copy— Subject: Transcontinental Assorintion ti-eit:bt rutes from Chicago. U. P. cut to Denver.] [Personal.] Standard Oil Company, San Francisco, Deceiidier .:', ISSS. W. H. TiLFORD, Esq.. Vice-President Standard Oil Company. 2ij Broadiray, Ncir Yo)-k. Dear Sir: I am just in receipt of your 2 dispatches of yesterday bearing on the subject at the head of tliis lettei-— contents of the same carefully noted. I here- with hand you translated copy of my reply, which is self-explanatory. I hardly think the newspaper reports that the Trani-continental Association will allow dif- ferentials in favor of Chicago to such an extent that the local rate fioni Lima and the oil regions tn Chicr,,t;o, added to the rate from that point, would be less than the through rate from CUe^eland to the Pacific coast on petioleum and its loroducts. My telegram and letters to you of yesterday in whicli I inclose you a coiiy of the letter from Mr. William Sproule. assistant .general freight :i'[ the telegrom that he had received from Mr. Stubbs at Chicago, names the rates on petroleum from Cleveland. Pittsburg, and New York. I expect (without knowing) that the rates from the oil regions and Lima will lie the same as from Cleveland and Pittslrarg to the Pacitic'coast. Just as soon as I set- Mr. Stubbs I will advise you what other points— other than Cleveland and Pittsbtirg— tlie OO-cent rate will a]i]ily. If tl'ere is any truth in the news- paper report which you refer to, about the h ical rate a. lio7. See also Mr. Page, p. 770. STANDARD OIL COMBINATIONS: RICE. 729 Senator Kyle. I think it would be better to have a copy of the correspondence furnished, if you can furnisli it, inasmuch as an implication has been made that he in a sense has put j'ou off. Q. ( By Mr. Jenks. ) Will you be kind enough to furnish the commission a copy of the correspondence with the Attorney-General? — A. Yes, I can. Mr. Jexks. If yon please.' THE INTERSTATE COMMERCE COMMISSION DOES NOT DECIDE. Q. (By Representative Livingston.) You said awhile ago that discriminations on this transcontinental line were prevalent and constant. Have you made any effort with the Interstate Commerce Commission to have that stopped? — A. I have in a few of my own cases here. Eight or 10 years ago I made complaint — and the cases have all been held up and have been decided, partially decided — and they do not amount to anything. I have brought suits against the transcontinental lines, with notifications to 15U lines that they should appear and answer: and I proved all these gross freight discriminations, and I believe they are going on just as much to-day as ever.- Q. "What does the Interstate Commission say about it? — A. They do not decide my cases; they do not decide this gross freight discrimination. Q. Do they give you any reason why they do not decide them? Have you any correspondence here that will show that? — A. Yes. here is the decision of this case. Q. (By Mr. Phillips.) When was that decision rendered? — A. April 9, 1893. They were brought in March, 1889, and April 36, 1889. They did not decide them until April 9, 1893. and then they only partially decided them, and left them all open for additional evidence. Q. (By Representative Livingston.) Additional evidence on which side? — A. And of course it so disgusted me that I would not have anything more to do with it; I would not take any more evidence. I had spent a lot of money, and I had a first-class lawyer, one of the finest in the United States, and a railroad man, to see to the cases, and proved all that I charged, and then they hung them up. CONDITION OP INDEPENDENT KBPINERS. Q. (By Mr. Smyth.) You are a producer of oil as well as a refiner? — A. No, I have not refined any oil since May, 1896. Q. Does this persecution on the part of the Standard Oil Company apply to your biTsiness as a producer of oil?— A. No, I do not suppose it does, because I get the same price per barrel as anybody else. Q. They buy your crude oil? — A. Yes. Q. It is only your business as a refiner? — A. Yes. Q. Have you been forced to discontinue your business of refining? — A. Yes, I have been forced to discontinue refining owing to freight discrimination. Q. And your refinery is idle?— A. Yes, idle and rotting down. I have not run it since 1896. It is useless for anybody to try to build a new refinery against these odds. That would be suicidal. Even if I had 81,000,000 or §5.000,000 I would not " buck '" against them. Q. (By Representative Livingston. ) Did they offer to buy your refinery?— A. At one tame we had some negotiations, but not latterly. Q. Why did not you sell to them?— A. Well, they did not want to pay me what I thought it was worth, and I did not sell to them. Q. You either had to take what they offered or quit?— A. Yes; and since that time they have been charging me as a blackmailer because I did not take what they thought it was worth. Q. (By Mr. Smyth.) But there is no obstacle in your way as a producer of oil.'— Q (By Mr. Kennedy.) Are there any refineries in Ohio independent of the Standard Oil Company?— A. Yes; Scofield, Shurmer & Teagle have one at Cleveland. ,, , ^ ^ i ^ Q. Do they refine the Lima oil?— A. I do not know that; I am not sure about Q.' Do you know whether they are doing business at a profit or not?— A. No; I How long have they been in business?— A. They have been in business a good many years; I do not know whether they were doing it at a profit, but on general principles I think there is hardly any refinery making money. Q. They have a large refinery?— A. Yes; pretty good size. > Filed with the Commission. ^ See p. 715. 730 HEARINGS BEFOEE THE INDUSTRIAL COMMISSION. GOVERNMENT OWNERSHIP OF RAILROADS THE ONLY REMEDY FOR FREIGHT DIS- CRIMINATION. Q. (By Representative Livingston.) What is your opinion and the opinion of others similarly situated with yourself as to the real reason why these things are not attended to? You seem to think the authority is broad enough. — A. Yes; I do. The whole trouble is because the officials whose duty it is to execute the law don't do it. Q. Why do they not do it? — A. That is what is the matter — why don't they do it? That I can not answer. Q. Is it political, pecuniary, or what is the trouble? — A. I think the trusts and combinations have their powerful influences. Q. Do you mean in a pecuniary (jr political way, or both? — A. I think they have it politically. Q. (By Mr. Farquhar.) Do yoti not think there is a remedy in the Sherman antitrust act for all of these troubles that have come upon you? — A. Yes; cer- tainly I do. Q. You think the law is sufficient? — A. Certainly. All the trusts and combi- nations could have been destroyed if the Sherman Act had been executed in its earlier days. Q. (By Mr. A. L.Harris.) You know the Knight case was decided many years ago? — A. That was before the Sherman Act. Q. (By Representative Livingstiin. ) Do you mean to say that you have no new suggestions or recommendations to give to the commission by which we can amend that law or bring into life a new law by which these trusts and combinations can be controlled? — A. I do not think any amendment to any law that you have got will do any good; I believe in Governn\ent ownership of railroads. I do not believe there is any other way that you can get out of that trouble. We have had 13 years' trial of the interstate-commerce act and 9 years of the Federal anti- trust act, and have not reached it. Q. (By Mr. Phillips.) Provided the Government did own the railroads and there was absolutely no discrimination in freights, could you refine and market oil in this country? — A. I think I could, but I can not do it now. Of course I could not d(_i it so well as I could before this epidemic of combinations came on several years ago, before these maiumoth combinations got up. Now they come in and cut prices right where you sell and freeze you out. Q. If I understand you, any large combination can follow up the small operator and get the markets? — A. Yes. Q. And absolutely destroy him'? — A. Yes. Q. If there was absolutely no discrimination? — A. Yes, they could do even that without any discrimination and do it by these ill-gotten gains that they have secured in the past. ONLY DIRECT LEGAL ACTION CAN DESTROY THE COMBINATIONS. Q. (By ReiM-esentative Livingston.) Then ownership of railroads would do no good unless the other remedy came with it? — A. What? Q. The destruction of the combinations?— A. Yes. that would help, you know, to destroy them. Of course. I do not see any other -^vay of destroying these com- binations, excepting that the attorneys-general of the various States forfeit their charters. Q. (By Mr. Clarke.) Do we have any power against combinations of foreign countries? — A. I do not know why we ha^-e not. Q. Would you repeal the protective tariff?— A. I would repeal the protective tariff wherever it affects any trust or combination. Q. Well, suppose a trust or combination was formed in a foreign country upon some article or line of merchandise that gives them an opportunity to operate against similar productions in this country as strongly as anv combination does here. Wouldn't you need a protective tariff to protect you against that?— A. I believe in a protective tariff to a certain extent, to the protection of home indus- tries. Q. (By Representative Livingst<.in.) Provided it is an individual industry?— A. Yes, I say to protect the individual more than the trust. The trouble is that the trusts and combinations are getting all the protection, and the people and smaller fellows do not seem to get it. (Reading:) " The Chicago, Rock Island and Pacific Railwav, in which two trus- tees of the Standard Oil Trust, Henry M. Flagler and Benjamin Brewster, were directors, issued on June IS, 1891, a ■ special tariff,' including all connecting lines, STANDARD OIL COMBINATIONS: RICE. 731 in wMcli petroleum and its products from Whiting, Ind. , are made at Chicag-o rates as follows: " ' Current Chicago rates as published in various issues of this company.' " (No doubt practically in effect to-day without a published tariff. ) '•The Standard Oil Trust have at Whiting, Ind., suburb of Chicago on the Lake Shore, the largest petroleum refining plant in the world. "FREIGHT DISCRIMINATION OP 110 PER CENT IN 1897. IN FAVOR OP THE STANDARD OIL TRUST." Now, here is something in 1897: that is pretty late discrimination. Mr. Archbold says you have not had any since ISsr. This is up to 1897. (Reading:) '• In 1897 the New York, New Haven and Hartford Railroad Com- pany, m which William Rockefeller is a director, discriminated in freight rates in favor of the Standard Oil Trust to the extent of 110 per cent, by which 2 cars of naphtha, containing 100,986 pounds, was carried at 48.000 pounds, or 2 carloads for one, applicable to all Standard shipments, this being accidentally discovered.'" ' Q. (By Mr. Jexks.) Where was that proved?— A. Why, it was before the Inter- state Commerce Commission, and I have got here letters from Mr. Coburnin regard . to it, the Liberty Oil Company. Q. What did the Interstate Commerce Commission decide?— A. They have not made any decision yet. I have extracts of the testimony— I do not know but I had better read them— published in the Springfield Republican of March 13. 1898, of different officers of the railroad in regard to it. Q. Perhaps you had better file this with us so that we will have it on file here?— A. I will read a letter here. Q. You might read the letter and we \\ill take references to the Interstate Com- merce hearing? — A. This is a letter from the Liberty Oil Company, which refers to some of the matters. (Reading:) "Chelsea, Mass.. December 15, 1S97. "Mr. George Rice, Astor House, Xew York, N. Y. " Dear Sir: Your esteemed favor of the 14th instant at hand, and your kind feeling toward us in our fight with the Standard Oil Company we certainly appre- ciate. We are still having a very hard fight with the Standard Oil people here in our tank wagon business, but up to the present time we ■ hold the fort.' " But I was going to say right here that I have seen the original waybills of these; Mr. Marchand of the Interstate Commerce Commission showed me the original waybills showing this. Q. (By Senator Kyle.) The ones referred to in this case? — A. Yes. (Reading:) ' ' In regard to the underbilling of Standard Oil Company freight, the paid freight bill of which we hold, will say for yoiu- personal use that the whole niatter with all papers is now in the hands of Mr. Marchand, agent of the Interstate Commerce Commission, who leaves here to-day for Washington, and everything looks fair now that we shall be able to procure a criminal indictment against the Standard Oil Company in this case. Both Mr. Prouty and Mr. Marchand of the commission feel confident that they have a sure case, and we shall push it for all it is worth. ' ' When anything new occurs in this matter I will, both at your own request and at the request of Mr. H. D. Lloyd, keep you posted. " Thanking you for the interest you have manifested in our welfare, we are, Most respectfully, yours. "Liberty Oil Company, C. M. COBURN, Manager.'' (Reading:) " This is a fine expose of what legalized pooling would mean, for this road was a member of the Joint Tariff Association, which comprised all railroad lines east of Chicago— strongest railroad pool ever organized— by which they dictated the rate terms to all the lines west of Chicago on which they would be permitted to get their trafflc to the seaboard. " Another fine feature about this pool was that they excluded petroleum from the regular classified rate-making power, and made it subject to special contract. "On December 14, 1882, the Produce Exchange of New York e.stablished, by resolution, and not changed, a gravity weight in the sale of refined oils of 44 1 SeL' Mr. Page, pp. 7711-77.5: Mr. ^Ve.stgate, p., 373; Mr. Archbold, p. 530. 732 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. degrees, which actually weighs 6.7 pounds per gallon. The railroads to-day have an established weight of 6.4 pounds per gallon, by which the refined oils of the Standard Oil Trust are now carried free, to the extent of 4.68 per cent, through underweight."' Q. That applies also to the oil of all their competitors'? — A. "Why, certainly; of course it does; but their having a large amount more makes it greatly to their advantage, and on their lubricating oils, that are carried at 6f , it is 15 per cent. Q. (By Mr. Smyth.) That statement that you make at the top of the page about the 3 cars of naphtha — was it proved that that was the custom? Was there more than 1 case or was only 1 case proved? — A. They would not be apt to prove more thaiU 1 case; that was the only case that came up. There was not, as I tmderstand, any further proof of any other cases. There would not be; this only got out accidentally, you know. You never can find out anything of this kind except it comes out accidentally. It is fair to presume that all their ship- ments over this line were on this same basis. No question about that whatever. Q. (By Mr. Jene;s.) Do you know what defense they put in? — A. Mr. Howard Page, the agent of the Standard Oil Company, went over to Boston and said that it was a clerical error, and it was corrected. They would do that. Of course, they are very nice men and thej'' would probably do that every time. They proba- bly carried a thousand cars there that same way. (Reading:) "This also applies to paraffin and lubricating oils, fuel oil, and' residuum, which are carried at 17 percent less than actual weight. The Standard Oil Trust own over 8,000 tank cars, which are paid for every 3 years,* through the allowed mileage rate of three-quarters of a cent a mile each way, another form of freight discximination, for the railroads pay to them three-quarters of a cent a mile to haul back a dead weight emptj' tank car that is not applicable to general freight like a box car." Just think of that. Q. (By Mr. Farquhar.) That applies to all owners of tank cars? — A. Yes; but they have got most of the ta^nk cars. Q. Does it not also apiiiy to the private cars of meat companies? — A. Why, yes, of course: it applies to all. But a box car can bring back other freight. (Reading:) " Receivers Cowenand Murray, of the Baltimoreand Ohio Railroad Company, on December 20. 1898, a.dmit that within the territory north of the Ohio River and east of the Mississipxii secret rates, drawbacks, rebates, and other devices were then in vogue."' If you would like to have it read I will read it. Q. (By Mr. Farquhab.) We have had this fully in the testimony by Mr. Cowen himself. He explains his own letter in the transportation part of it.— A. I would like to call your attention to a very important thing. (Reading:) " Section 6 of the interstate-commerce act provides that all original tariff sheets ' shall also state separately the terminal charges and any rules or reg- ulations which in anyv/ise change, affect, or determine any part or the aggregate of such aforesaid rates and fares and charges."' Now, let us see abDut that. (Reading:) "The railroads in gross violation of this section issue and file with the commission general rate tariif sheets for prrblic use, and then side track these by the issuance of innumerable supplements, special oil tariffs, special circulars, commodity 'rates, etc., that are often and indiscriminately filed as a substitute to change, cancel, and amend the original tariffs, and to such an extent is this done that in reality there is no head or tail left of it — very little of the body— but it stands inviolate for public use." Now. that is one of the grossest misuses, you knovr, of the Interstate Commerce Commission by the railroads. Here they come and file a general tariff, and the act savs here that the general tariff shall state everything" that affects the rates, and they do not pay any attention to tlmt and the Interstate Commerce Commis- sion do not enforce it. And why do they not enforce it I should like to know? Q. (By Mr. Kennedy.) Do they not say themselves that they have no power to enforce it'?— A. No power to-do that? It is very queer. They can enforce that, I think. I think it is a very flimsy excuse about this no power. Q. Have not the Interstate Commerce Commission year after year asked to have their power enlarged ^ o that they could enforce their findings'? — A. Oh, yes; I have understood that, but they have plenty of power to do a good deal more than they do, and tliey don't do it. I say that is one thing. I say "here (reading): " The query is. Why is it that for 13 years the Interstate Commerce Commission have neglected their duty and not corrected this gross evasion of the law, and ^ See copy Mr. Page, p. THH. a See Mr, Page, p. 778. copy of their letter, p. 687. See also Mr. Page, p. 770. STANDARD OIL COMBINATIONS: RICE. 733 allowed such special tariffs to be filed, and why is it that all :;eneral tariffs omit this wise pri .Tisiou of the laAv. and why is it that railroads do not comply with the law m any of its essentials, nor are forced thereto?" What IS the reason they .lon't do it? Because we have not got any kind of a country here that enfcuxes it^ laws. (Beading:) •• Charles Francis Adams, president of the Union Pacific Railroad, had tins to say. December 15, 1^!SS. before the Commercial Club of Boston: '"The dishr.Kest methods of rate cutting, the secret systems of rebates, the indirect and hidden payments made to influence the course' of traffic resorted to or deyised duiln.L;- tne last 2 years I do not hesitate to say are unprecedented in the whole bad record of the past.' "The above charges included 8 months' experience of the interstate-commerce act, which was. and is to-day. utteily ignored with no effect on lawless railroad freebooters. " In 18;i-l an ex]iert accountant discovered that ST.000.000 in rebates haE CRUDE PETROLEUII CHEAP TO THE PRODUCER ^yHILE IT MAKES THE PRODUCTS THEREOF IN COMPARISON HIGH PRICED TO THE CONSUMER. "It is ridiculously absurd to say that the Standard Oil Trust has made oil cheap, and all that is necessary to refute such false assertions is to refer to a pam- phlet issued by Solicitor Dodd in IShS. in which he broadly asserts that overpro- ' See Mr, Page, p. TSL 734 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. cluction was the cause of making crude petroletim cheap, but in subsequent speeches he couples the pi'oducts thereof with it. " Petroleum products are as much higher than they should be as the overcharges or freight discriminations this monopoly receives; for all freights are purposely advanced and made that mrich higher in order that greater discriminations may follow, which the consumer is forced to pay in higher-priced oil. To-day, andfor many years back, this monopoly has charged producers of oil in the oil-producing regions 20 cents a barrel for local pipage not costing .5 cents, or 4 times more than it costs, and when crude oil sells at 5i) cents a barrel this charge is 40 per cent of its market value. This is the how of it that this monopoly makes crude oil so cheap to the producer. The Standard Oil Trust admits cost of local pipage of 5 cents a barrel. (B,102.)' "To-day, and for many years back, in conspiracy with the railroads, it has charged the same pipage rates to the seaboard as the railroads charge, and to-day this conspiracy charge is 10 times more than the pipage cost — that is to say, the present rail rate from the oil regions to the seaboard is 16+ cents per 100 pounds, and on 320 pounds in bulk to the barrel equals 52.8 cents per barrel, while the ■ pipage does not cost to exceed .■> cents a barrel - — and this is another way this monopoly has of making crude oil cheap to the producer and high to the con- sumer. "Mr. F.B. Thurber seems to be an outside champion for this monopoly, and says it has made oil cheap, because in 1871 the average price of refined oil for esport was 25.7 cents per gallon, while in 1898 it only averaged 5.7 cents per gallon, and gives the following reasons therefor: " ' This great decline in the price of oil is attributed partly to the increase in production, but more largely to improvements in manufacture and transporta- tion, which were only attainable through the aggregation of capital in this industry.' " This man has no experience whatever in the oil business, but he is the champion of the Standard Oil Trust. They put hiin forward here as an outside man. Q. (By Mr. Clarke.) Do you dispute his statement that it was only attainable through the aggregation of capital in this industrji-? — A. Yes; I do dispute it. (Reading:) " Why is it that Mr. Thurber does not enlighten us and give the reason why refined oil for export was reduced 35 cents a gallon, or I};17.50 per barrel, from 61^ cents, average price in 1861, to 26J cents, average in 1870? I presume his reasoning would be that the Almighty did that, while the Standard Oil monopoly engineered all the balance without His aid or assistance. ' ' Why is it that Eastern home dealers and consumers of refined oil, just previous to the entering of home comiDetition at the seaboard, April, 1896, had to pay more than twice as much for their oil as foreign consumers for export? The price per gallon, in bulk, to retail dealers was 9-i cents a gallon, and for export 4+ cents a gallon, with crude oil 81.20 per barrel, and this is how Standard oil is made so cheap. " Why is it that Mr. Thurber does not enlighten this committee and give the reason why in 1892 refined oils were selling in several of the States, like Texas, Utah, and Idaho, at 4 times the price of export oil for foreign consumption? In Wyoming and Nebraska it was 3 times as much, and m Arkansas, Alabama, Florida, Georgia, Mississippi, Missouri, JSTorth Dakota, Soirth Carolina, South Dakota, Tennessee, and Washington doable the export price." ■' This is all fully explained, gentlemen, in my exhibits here, B 171, etc.: and my own experience in finding out all over the United States, by sending out special circulars in 1892, shows those facts to be absolute, and the details are in my exhibits full and complete. (Reading: ) " The Pennsylvania Railroad Company up to August 28. 1888, carried same number of gallons of refined oil in a barrel (including the package) at same price as bulk oil in tank cars to offset the return dead weight of the return tank car. when liy the power of the Standard Oil Trust and under the interstate-com- merce act, 25 jier cent more freight has been charged since that time. The rate of freight in 1887 was 52 cents a barrel, or 13 cents per 100 pounds. To-day it is 16-V cents, or 27 per cent higher. ' Mr. Rice's reference is to a paragraph of the t.'ontract of Tjctobei- H. Ls*,t:{ iseep. 7:3.s), for division of busines.s between the National Transit Compauy and the United Pipe Lines, parties of the fh'at pai't. and the Tidewater Pipe Company, party of the second part. The paragraph in question, as given by Mr. Rice, is as follows: ''If m any calendar month either party shiiU gather more than its said percentaj^je of said aggre.nate of crude petroleum gathered, as j^-athi-'i'inii' ts herein defined, it shall pay to the other party on the quantity f^rathered in excess of its said x^ercentage an amount per barrel equal to thi'i'e-fourths of the then current full rate per Ijarrel charged for collcrtiug and delivering crude petroleum in the oil-producing regions, commonly called local pip;tKc.' Thi' local pipage is 30 cents a bai-rel, and the sum to l^c retained by the gathering com- ]»any, as payment for the service, on the excess over its agreed proportion,"is, therefore, 5 cents a li.'wrcl. = ScH Mr. Phillips, p. .504; Mr. Emery, pp. 6B0,iiiJ7; Mr. Eogers, pp. 5S1.3SS. = Hue Mr. Page, p. 791. STANDARD OIL COMBINATIONS: RICE. 735 " To-day it costs 25 per cent more to ship the same miniloer of gallons of oil in a barrel than it does by bulk in a tank car, because the railroads will not furnish the tank ears in which to ship it. The competitive independent refiner who can not afford to purchase tank cars is subject to this very important discrimination and can not compete, and he can not help himself. This is the how of it. that the Standard Oil monopoly makes oil su cheap to the consumer. In the case of export it had to sell its oils at a fair living price, owing to Russian competition, while to general consumers in America, for want of cismpetition, it charges. fabulous _ prices, double, treble, and four times as much, owing wholly to the power of this nionoply to dictate to the railroads the high tariff rates their competitors ln^lst pay, while their own goods are carried at nominal figures through the grossest of the gross rebates or freight discriminations. The absurdity of Thurber's reasoning maj' be further illustrated when I state that the cost of refining petroleum from 1871 to ISSO did not exceed 1 cent a gallon, and from isso to 1890 not over half a cent, and from IsilO to the present time it lias not cost this monoply ti;> exceed one-quarter of a cent a gallon, and to the average independent refiner about one-eighth more.' so that improvements in manufacture cut no figure, while the monopolistic and most extraordinary charges for pipe transportation could only be maintained through the power of the railroads. Mr. Thvirber would manifestly have been more correct if he had stated that the price of petroleum products had been greatly advanced by the Standard Oil monoply through the methods stated by me, and that its unlawful aggregation of capital, so necessary to the business, was thus acquired. Mr. Thurber on November 34, lss2. testified before a legislative committee of New York State as follows : "■ The Standard Oil Company is an example. Here is a corporation which, according to testimony recently given in Pennsylvania, began in 18 Ti with $1,000,000 capital, which was subsequently increr.sed to s3..3ilj.000, and on this latter capitalization it paid dividends in 18su amounting to 810,331,812, and it practically controls and fixes the value to the consumer on a staple ranking third in the list of our nation's exports."' " This is only on one corporation. [Keading:] " ' Through its speculative manipulation it has within a few weeks more than doubled the price of crude oil: and its profits thereby are variously estimated at from .820.000,000 to 840,000.000.'" COST OF REFINED OIL, FREIGHT PAID, 3f CENTS. ' ' The market price of crude oil for the past 10 y ears— 1 889 to 1898 , inclusive— has only averaged If cents a gallon, while the local pipeage does not cost to exceed 5 cents a barrel, or one-eighth of a cent a gallon. It does not cost to exceed this amount to pipe same to the seaboard, or an eighth of a cent a gallon more. It can be refined for one-quarter of a cent a gallon, making a total average cost of 2f cents per gallon for the past 10 years of refined oil at the seaboard, which is also appli- cable to interior' refineries, to which, if we add one-half cent a gallon as a fair average freight paid by the Standard Oil Trust, makes the cost 2i cents a gallon delivered to all interior cities and towns; so that one can form some conception when he buys oil of the immense percentage of profits thus to accrue, which can be turned over every 60 days, and conclusively shows how philanthropic this trust is in comparison with the prices the consumer is forced to pay. The process of refining oil is very simple, easy as making steam, similar distillation. "Another method the Standard Oil Trust has of making illuminating oils cheap to the consumer is that where they have no regular established agency they Kive a secret rebate to certain private dealers who have been selling competitive oils ranging from 2.i cents to 81.50 per barrel, according to the opposing strength of the opponent, to thereafter maintain the regular established card-list price made by the trust. "THE STANDAED OIL TRUST RECEIVES 72 PER CENT ADDITIONAL PROFITS IN THE SALE OF PETROLEUM PRODUCTS MANUFACTURED FROM LIMA CRUDE THAN PROM THOSE OF THE BEST GRADE CRUDE. " On September 15. 1895. the Produce Exchange of New York, through the power of the Standard Oil Trust, passed a resolution making the manufactured products from inferior Lima crude petroleum, known as sulphur oil, a good delivery, on a parity with the manufactured products from liest grade crude. The average annual market price of this inferior grade crude forpa,st five years— : 894 to 1898. inclusive— was 59 cents per barrel as against 81 .01+ for the best grade, or the latter 78 per cent higher. Thus it is that the Standard Oil Trust received 73 per cent 1 See Mr. Lee, p. 3T6: Mr. "Westgate, p. 371. 736 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. more profit in the sale of manufactured Lima crude products than from those of the higher-priced crude, wMcli could not be done except through the power of this monopoly to enforce and exact equal price for both classes of goods, and this is another instance of this great trust making petroleum products from inferior grade crude so cheap to the consumer. For the past 5 years — 1894 to 1898, inclu- sive—the total production of petroleum was 279,129,467 barrels, of which Ohio produced 85,306,684 barrels and Indiana 20,608,793 of this inferier grade of crude petroleum, or 38 per cent. " The last Q-overnment report for 1898 has this to say about this inferior grade of crude: " ' The product is characterized by the presence of sulphur compounds, which make it of less value for refining purposes than the eastern Pennsylvania product.' " The refined product from this poor grade crude is adulterated with the products made from the best grade crude, and the results are easily seen by a white film on the lamp chimney that obstructs the light, requires constant attention to turn up the wick to get more light, smokes the lamp, and has an oft'ensive smell. In view of ArchbokVs laudatory remarks on this particular oil ' it will be quite refreshing to refer to a caution circular, issued in 1890 by one of the trust corporations, denouncing said oil. (B, 166)."- This is a very interesting circular,givingv/liat they think about that oil (B 166). It tells what the Standard thought of these oils. Q. (By Mr. Farquhar.) Have they not, under 2 new processes, eliminated the sulphur and a great many other various ingredients from the Lima oil? — A. Par- tially; bub the product from the Lima oil is not near as good as the other oil. Q.' But there has been a great improvement since 1890, since they issued this circular? — A. Oh, yes, there has been a great improvement. They have improved the manufacture of it to some extent. 1 will put in as an exhibit to show viola- tions of the interstate-commerce law. (Reading:) " NONCOMPLIAlSrCE AHD JSrOITENFOBCBMBNT OB" THE INTEESTATE-COMMEKCE ACT PRODUCES EXISTING GEO'SS DISORIMINATHSTG FREIGHT RATES, AS TO PER. SONS AND PLACES, AND TO THE EXTENT OP 211 PER CENT IN VIOLATION OF SECTIONS 3 AND 1 OF THE ACT. ' ' The commission constantly receives and places on file without protest thou- sands of rate tariff sheets that plainly and unequivocally show upon their face gross violations of that all-important section of the act, the fourth section, which says that it shall be unlawful for any common carrier to charge or receive more for a short than for a long haul over the same line in the same direction.^ To-day there exists 311 per cent more traffic rate charge on the short intermediate haul over the long haul, as the following figures show, from statements made to me by the secretary of the commission, July, September, and October, 1899. "On the shipment of petroleum and its products in car lots over the trans- continental lines, comprising 21 lines of railroad, as merged into that unlawful and changed combination now known as the ' Transcontinental Freight Bureau,' the following 2 railroads in the pool are cited as samples of the gross violations of the interstate-commerce act as they exist to-day by this association of railways; Chicago to San Francisco, 2,357 miles, via Onion Pacific, present tariff rate is 78i cents per hundredweight, while the highest intermediate rate to Humboldt, Nev., 1,982 miles, is §1.75 per hundredweight, or 122 per cent overcharge for 325 miles less haul, with a proportionate overcharge on 84 per cent of the total shipments. Ten years ago the intermediate rate overcharge was 56 per cent, now double. From Chicago to San Francisco, via Atchison, 'Topeka and Santa Fe, 2,652 miles, present tariff rate is 78tV cents per hundredweight, while the highest intermediate rate to Bagdad, 2.017 miles, is also 81..75 per hundredweight, or'^122 per cent over- charge for 635 miles less haul, with a proportionate overcharge on 76 per cent of total shipments. Ten years ago the intermediate overcharge was 116 percent. Present fifth-class commodity rates, via transcontinental lines, Chicago to San Francisco, is .^1.65 per hundredweight, while the highest intermediate rate is 81.i^5, or only 12 per cent overcharge. Petroleum products belong to fifth class, but made special. The Standard Oil Trust has at Whiting. Ind. , on the lake shore, suburb of Chicago, the largest refining plant in the Avorld, which is connected 1 Soe Mr. ArcMiold, p. ."iSS. See also Mr. Lee, pp. 275,2TS: Mr. Emery, pp. 624,525; Mr. Gall, pp. 672, fiUl. ' The reference iB to a circular, aic^necl with the name ol the Waters-Pierce Oil Company, in ivhich the following occurs amonp other statements of like tenor: " lilnminating oil produced from OJiio crude is so inferior in burning qualities, and oiXensiye in odor, that it can not readily be sold where known." ^ See Eleventh Annual Report of Interstate Commerce Commission, pp. 37-46. STANDARD OIL COMBIKATIONS : RICE. 737 by Chicago's belt line with railways to all points in the United States. The south- western lines, comprising the ' Southwestern Bnreau.' composed of 10 prominent lines of railway, combined with 3 prominent steamship lines — the New York and Texas Steamship Company and Cromwell Steamship Company — are engaged in an unlawful combination to fix rail and water rates, in violation of the Federal antitrust act, while they grossly violate the interstate-commerce act as to persons and places, and to this extent as samples: From St. Louis to G-alveston, Tex.. 870 miles, via St. Louis, Iron Mountain and Southern Railway, present tariff rate is 33-J- cents per hundredweight, while the highest intermediate rate to Aldine, Tex., 807 miles, is 55 cents per hundredweight, or 64 per cent overcharge for 63 miles less haul, with a proportionate overcharge on 92 per cent of total shiijments. From St. Louis to Fort Scott, 338 miles, via the Missouri, Kansas and Texas, owned by Standard officials, of which John D. and William Eockefeller and Joel F, Freeman, former treasurer of the Standard Oil Trust, are directors, present tariff rate is 23^ cents per hundredweight, while to Parsons, 49 miles farther, it is raised to 30, or 36 per cent higher; continues same to Wagoner, 101 miles farther. At South McAUester, 78 miles from Wagoner, the rate is raised to 55, or 80 per cent more. This rate continues to Atoka, 44 miles from South McAUester, while at Coalgate, 43 miles from Atoka, the rate is again raised to 60. or 9 per cent more, while to Denison, 8 miles from Atoka, it is reduced 8 per cent, or to 55, which rate is maintained to Letitia, 1,088 miles, while the rate to Houston, 1,105 miles, is 33i cents, or 64 per cent overcharge for 17 nriles less haul, with a proportionate overcharge on 98 per cent of total shipments. "THE LOU"G AND SHORT HAUL CLAUSE OP THE ACT ISTOT VIOLATED IN THE SHIPMENT OF GENERAL COMMODITIES IN 5 DIFFERENT CLASSES. " It is a very significant fact to note that in the transportation of general com- modity goods in 5 different classes. St. Louis to Galveston, as promulgated by the pooled ' Southwestern Bureau ' of 10 prominent rail lines and two ocean steamship lines, there is no difference between terminal and intermediate rates. This is in compliance with the law, while in the case of petroleum shipments the railroads adopt the flimsy excuse of water competition and grossly violate the act to the extent of 64 per cent. "St. Louis to Mobile, by the Mobile and Ohio Railroad, distance 644 miles, present tariff rate is 35 cents per hundredweight, while the highest intermediate rate to Eight Mile Station, 636 miles, is 57 cents, or 63 per cent overcharge for 8 miles less haul, with a proportionate overcharge on 98 per cent of total shipments. From Memphis to New Orleans, via the Yazoo and Mississippi Valley Railroad, 445 miles, present tariff rate is 17 cents per hundredweight, while the highest intermediate rate to Norwood. La., 339 miles, is 33, or 94 per cent overcharge for 136 miles less haul, with a proportionate overcharge on 73 per cent of total ship- ments. From Cincinnati to New Orleans, by the Queen and Crescent route, 836 miles, present tariff rate is 23+ cents per hundredweight, while the highest inter- mediate rate to Poplarville, Miss., 756 miles, is 4-lJ,, or 97 per cent overcharge for 70 miles less haul, with a proportionate overcharge on 91 per cent of total ship- ments. These same rates have been continuous for the past 10 years. "From Cincinnati to Vicksburg, same line, 770 miles, present tariff rate is 33^ cents per hundredweight, as against an intermediate rate of 45+ to Brandon, Miss. , 711 miles, or double— 100 per cent more for 59 miles less haul, with a propor- tionate overcharge on 93 per cent of total shipments. "From LouisAdlle to Mobile. 670 miles, via Louisville and Nashville Railroad Company, present tariff rate is 18 cents per hundredweight, as against an inter- mediate class rate of 56 to Flomaton, 609 miles, or 311 per cent overcharge for 61 miles less haul, with a proportionate overcharge on 90 per cent of total shipments, with no change in rates since the partial decision of April,- 1893, except m one instance although directed by the commission to revise and correct these general overcharges. In 1889 the highest intermediate overcharge was 146 per cent, now 311, or 65 per cent higher. „. . ^ ^ i j. ^ ■« j. - "From Cairo to New Orleans, 550 miles, ■s'ia Ilbnois Central, present tariff rate is 39 cents per 100 pounds, as against an intermediate rate of 41 to Mauchac, Miss., 513 miles, or 43 per cent overcharge for 37 miles less haul, with a propor- tionate overcharge on 93 per cent of total shipments. 4-J- ■«. i • 1Q " From Louisville to New Orleans, same line,' 847 miles present tariff rate is 18 cents per 100 pounds, as against an intermediate rate of 3.o to bariye. La., 843 miles, or 94 per cent overcharge on 5 miles less haul, with a proportionate over- charge on 99 per cent of total shipments. ,,•«.. 4. ■ io i. " Louisville to Memphis, same line, 393 miles, present tariff rate is 13 cents per hundredweight, as against an intermediate rate of 34 to Lucy, 379 miles, or an 738 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. overcharge of 183 per cent for 13 miles less haul, v/ith a proportionate overcharge on 96 per cent of total shipments. ■ ' It must be conceded that the lesser terminal rates must be paying ones or there would be no object in the roads allowing such shipments. The Interstate Commerce Commission hold that established tariff rates must be remunerative. Thus it is that the inhabitants of the regions through which these lines of rail- way run are forced by railway tariff exactions to pay 42 to 311 per cent more for the products they buy than they should pay. ■ • By prepayment of freight at the low-car terminal rate the Standard Oil Trust" is allowed to stop off its cars at high-rate intermediate points and thus receive an advantage of 4'3 to 211 per cent over their competitors. It also has the extra privilege to divide up full-loaded tank cars into less than car lots that should have paid 3 times the terminal rate, although, as an owner of tank cars, I was denied this privilege. ■• Comm.on carriers, under section 4 of the act, are not allowed to violate the long and short haul clause of the act without permission from the commission. From December 17, 1895, to August 4, 1896, I made complaint to the commission that it was their duty, under section 13 of the act, to proceed against violators of section 4 of the act (long and short haiil). They would not act, but said that I might. Knowing from the answer that my action would be futile, I did not act any further in the matter. "The State exercises its right of eminent domain to give the right of way to the railroads. The people thus part with their property to these corporations on the faith that they shall exercise the franchises thus granted honestly and with an equal hand. '■ It is a burning shame that these rights and franchises, the gifts of the State, should be administered by railroad magnates to the impoverish rn ent and slavery of the people. '■ The United States Supreme Court, on March 30, 1896, Social Circle Case, fully upheld the statutes and decided that in this case railroads could not charge more for a short than for a long haul over the same line in the same direction. This decision has had no deterrent effect whatever on present railroad violators, as the evidence here plainly shows.'' I will also put in here as an exhibit. (Heading:) "CLEMENT A. GRISC03I. PRESIDENT OP THE NATIONAL TRANSIT COMPANY (STANDARD OIL TRUST), AND AS A DIRECTOR IN THE PENNSYLVANIA KAIL- ROAD COMPANY, MAKES CONSPIRACY AGREEMENT FOR AND ON BEHALF OF ALL TRUNK LINES TO THE SEABOARD AND OP THE TIDE WATER PIPE COM- PANY", SUPPOSED COMPETING PIPE LINE, FOR MAINTENANCE OP PIPE WITH RAIL BATES, 10 TIMES ABOVE PIPEAGE COST EXISTING TO-DAY'. " On October 9, 1S83, to take effect October 1, the National Transit Company, for and on behalf of the Standard Oil Trust, made an agreement with The Tide Water Pipe Company by v/hich it allowed them llA per cent of the total pipe-hne transportation of petroleum to the seaboard. It also guaranteed them S500,()00 per annum profits for 15 years, or $7,500,000. Within 3 months after contract was made refined oils advanced 87+ cents per barrel, crude oil If cents. This contract gave these pipe lines 74 cents a barrel advantage over rail rates (B 97) ,' but what followed? On August 33, 1884, the Pennsylvania Railroad Company, for and on behalf of the National Transit Company and as representing the Tide Water Pipe Company, entered into a conspiracy agreement with all existing pipe lines to the seaboard for the maintenance of equal pipe-line rates with rail rates in the trans- portation of petroleum and its products from the oil regions to the seaboard, which agreement is in practical effect to-day, with or without a contract, as rail and pipe- age rates are the same. The Standard Oil Trust ostensibly guaranteed 26 per cent of all such traffic to the sea. or, in the language of the agreement, -all petroleum 1 Mr. Rif-e's estimate, here referred to, runs as follows: "The competitive shipper of oil is compelled to pay freight, from the oil regions to the sea)juai-d _ 66c. per bhl. "He IS also compelled to pay the 'Trust' for local pipage 20c. per bhl. Total - -^ --- 86c.perhbl. ' ' It will be seen that clause A of pipage contract admits the cost of local pipage to be 6c. per bbl. ' ■ The ' Trust ' admits the cost of pipage to the seaboard to be _ 7c. per bbl. ' ' In this way the ' Trust ' secures an advantage over its competitors in the trans- portation of oil to the seaboard, through the aid and connivance of the trunk imes of railroad, of -. ! 74c. per bbl.'^ For cx} 'lunation of the freight rate.t'l) cents, see Mr. Emery, p. 667. For the agreement of the National Transit Company (Standard) to transport oil to New York for 7 cents and to Philadel- phia for 6. see p. 066. For the same company's contract Implying that the cost of local pipage is about .') cents, .see p. 784, footnote. See also Mr. Lee, p. 284; Mr. Phillips, p. 594; Mr. Emery, p. 666;. Mr, Rogers, pp. .581, ."iKS. STANDARD OIL COMBINATIONS: RICE. 739 brought to the Atlantic seaboard by all existing carriers,' railroads and pipe lines combined, establishing ninch higher joint pipe and rail tariff rates than should be, a complete and perfect monopoly • in restraint of trade ' of all petroleum trans- portation to the seacoast. for eastern home consumption and for export, at 10 times pipage c<3st. in violation of the Federal antitrust act and of the interstate commerce act. (Dl.54.)' " This guaranty in reality guarantied but little. It, however, blinded the eyes of the innocent dupes— unsuspecting railroad directors and stockholders. This 06 per cent was largely covered m the transportation of the by-products of petro- leum that could not be piped, such as benzine, naphtha, and g'asoline. lubricating paraffin oils, residuum, etc.. besides accoanting for and including in the guar- anty competitive shipments. This kind of an agreement is easily accounted for when made by joint interested parties in the trust certificates of the Standard Oil Trust. This is another peculiar method that this joint conspiracy combine has of making crude oil cheap to the producer and the. products thereof high to the consumer. ■•Franklin B. Gowen says in regard to this contract as follows: " ' By which it will be proved that the rate on oil prior to the making of that contract was one-half of what it was before the recent advance, of which we complain, was made. ■■ ■ Our allegation about that contract, gone into in this testimony, although it was not admitted, is this: '• ' The National Transit Company secured a pipe line to tide water. They then became a transporter of oil. '"It was important for them to maintain a high rate on the transportation of that oil, because they made a great deal of profit out of it. •■ ' They could not maintain a high rate on the transportation of oil if that rate was cut under by the railroad company, and we allege, and will endeavor to prove in this case, ••'That within 3 years pi'ior to the making of this contract the rate on the Pennsylvania Railroad Company for oil was one-third of what it now is. '• ' If that had been continued the pipe line could not have made one-third as much money as they do now — could not have made one-fifth as much money as they do now — because the cost would have been the same. ' • ' They then entered into a contract with the Pennsylvania Railroad Company for a division of the rate , and agreed to make equal rates. It became to the interest of both parties to get high rates. " ' The consequence of which is that this contract provides that the National Transit Company shall pay practically several hundred thousand dollars a year as a bonus, over and above fair earnings of the railroad, in consideration of the railroad's maintaining a high price on oil. •• ' Of course, if the National Transit Company could make people using their pipes, or using the railroads, pay 53 cents a barrel for having the crude oil trans- ported, when it only cost them about 5 cents, as we say, to do the business, they would have an advantage of 47 cents per barrel over any competitor at tide water, and, with a view of maintaining such advantage, they entered into this contract with the Pennsylvania Railroad, which contract, as we allege, guarantied to the Pennsylvania Railroad Company 36 per cent of the entire oil business transacted by the railroads and the 3 pipe lines. " ' They then both agreed to maintain equal rates.'" (B, 146.) I will read the heading on page 01. (Reading:) " Railroads allow Standard Oil Trust to lay its pipes in the road's right of way, in consideration of the road ha\'ing only the pipe to transport, thereby losing all its former oil freight.'' The following was offered by the witness as an exhibit: '■ Dan O'Day. general manager of the pipe-line system of the Standard Oil Trust, testified befcjre a Congressional committee, 18«s (p.3H2),that the Chicago and Atlantic Railroad allowed this trust to lay its pipes from the Lima oil fields to Chicago in the roadbed's right of way, for the profit it received in the trans- portation of the pipe, its material, and construction. "After the road granted these most extraordinary of privileges (1888) and after the pipe line was constiticted and the trust's mammoth refining plant at Whiting, Ind., suburb of Chicago, was finished, freight rates from the Lima oilfields to general points of delivery in the various States were raised from 30 to 87 per cent.* (Pamphlet B, pp. 167. 168 G. R.) " The present freight rate, Lima to Chicago, is 10 cents per 100 pounds, or 40 cents a barrel, 8 times its pipage cost^ 1 See the contract, pp. 663-61)6. „„ „„ 2See Mr. Monnett, p.3tl9; Mr. 'Westgate, p.376; Mr. Page, pp. i77, n8. 740 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "THE UNITED STATES PIPE LINE COMPANY HAS BEEN TEYING FOE 7 YEARS TO GET ITS TWO PIPE LINES, CBUDE AND REPINED, FROM THE OIL REGIONS TO NEW YORK BAY, THROUGH THE STATE OF NEW JERSEY. AND NOW MUST ABANDON IT BECAUSE OF JOINT OPPOSITION OP THE RAILROADS AND OF THE STANDARD On; TRUST. " For 7 years the United States Pipe Line Company has endeavored to get its 3 pipe lines, crn.de and refined oil, throng'h the State of New Jersey to tlie seaboard at New York, but has been obstinately opposed by the rail lines and the Stand- ard Oil Trust from orossiny under railroad tracks, although the owner of the fee right, while the roads have an easement only. New Jerses' courts have finally decided that this can not be done. Resulting consequence is that this company's pipe lines are being taken up, Philadelphia made the terminus, and the oil will be barged to New York.' But the Standard Oil Trust have had no trouble, and even her pipe lines lie in the road beds of many railroads. •'Lewis Emery, jr., of Bradford. Pa., producer, refiner, and ti'ansisorter of petro- leum, has this to say, October 5, 1899, to a correspondent: " ' We are very large manufacturers of oil and oil products, and feel the dis- crimination in rates over the railroads very severely indeed, so much so that we are obliged to market 70 per cent of our products in Europe.' " An exhibit will show the favor of railroads to exporters. (Reading:) "ON AUGUST 1. 1899. .50 PER CENT MORE IS CHARGED BY THE RAILROADS TO CAREY GRAIN FROM CHICAGO TO NEW YORK FOR DOMESTIC USE THAN EXPORT POK FOREIGN CONSUMPTION. WITHIN 3 MONTHS, BY NOVEMBER 1, 1899, DOMESTIC RATES HAVE BEEN RAISED .30 PEE CENT AND EXPORT 80, WITH REBATE ON EXPORT QUANTITY SHIPPED." ' ' The tariff sheets on file with the Interstate Commission to take effect August 1, 1899 , show that in shipments of grain, Chicago to New York, the export rate was 11 cents per 100 pounds, while the domestic rate was 17 cents, or 50 per cent higher to eastern home manufacturers and consumers. The present rate on export, November 1, 1899, is 30 cents per 100, as against 33 domestic, or only 10 per cent of a difference. Within 3 months. August 1 to November 1, 1899, domestic rates have been raised 30 per cent, while export rates have advanced 80 per cent, and the difference between domestic and export rates has been reduced 40 per cent within this 3 months. But this apparent advance in export rates vfiW. easily be wiped out in a rebate on quantity shipped, as a substitute for a moneyed reliate, as follows: " Hon. Franklin B. Gowen, president of the Philadelphia and Reading Raih'oad Company, stated this before the Interstate Commerce Commission, January 1", 1888: " ' Mr. Colston. What kind of a train is that? "'Mr. Growen. It is a long train of loaded cars which, though risible to the sight and susceptible of identification by all the other senses, makes no impression upon the manifests of the corporation, and leaves no trace iipon the treasury of the company. This gentleman to whom I allude, in search of statistics, was struck with the fact that in one certain year the amount of grain which left Bos- ton, New York, Philadelphia, Baltimore, and Portland in vessels for Europe, was much greater than the aggregate amount transported over the railways from the West to those ijoints in the same period, and yet he knew that a large' amount of grain transported from the West to the East is used for home consumption and does not enter into foreign commerce at all: and the only reason that he could give for this anomaly in statistical information was supplied by the report of ghost trains as a favored method of transportation by some celebrated shippers who were then supjjlying the European demand for our cereals. ' " Also said: " ' What is a railway? A public highway — nothing else. Just like the rivers. The rivers are public highways. Nobody in this country, the Standard Oil Trust or other inferior character, attempts to put a tourniquet upon them. When the first public roads were made in this country they were turnpike or wagon roads; but they were public highways. No company attempted to make a different charge fm' toll to one man as ag:iinst another for the like vehicle. When the railroad companies were organized they took the private property of the citizen, under the right of eminent domain, because the property was taken for a public highway in trust for the uses of the public : and the first railway companies in this country were organized simply with the right to maintain a public highway and to charge ii toll for its use. It was expected that the transporters should furnish their own cars and their own locomotives or h(jrses, because originally the service iSee Mr. Lee. p. aiV: Mr. Phillips, p. .593: Mr. Emery, pp. 050-655, 602; Mr. Archbold, p. 639; Mr. Boyle, p. 4Hii. STANDARD OIL COMBINATIONS: RICE. 741 on railways was (Imie by horsey. Railroads, are simijly advanced and imin'oved avenues of transportation: but. with reference to the rights of the community to equalitjr of rates, they preserve throughout the same features as the rivers and turnpikes. Now. why should there be any difference now existing? God made the rivers, and man laid the rails, I suppose our friends will say, and hence the Stiindard Oil Company de-erves to have the monopoly of low rates. ■•■The gTOss receipts of the railroads of this country, in round numbers, are ,se00.000,000 per aummi,and I verily and honestly believe that .?100.000.0UO annu- ally are taken out of the pocktts of the people of this country by unju-.t railway discriminaticus and turned over to this privileged class — and this is equal to a tax of S'2 per head paid by the people for the sake of building up the new aristocracy of wealth that in this free connrry a.rrdgate to themselves the position of the nobility of the older eoiintries. And who compose this privileged class and constitute this new order of nobility? Nr;t men of intellect, or genius, or learning, or even of honesT thrift. (>r patient industry. By no means. Cold, caloirlating men, who. by c.ipen bribery and naked rascalitj'. secure the favor of railroad officials, until they wring ytOO.OOO.OOO annually from the mars of the people and th.e overburdened industry of the country. These are our privileged classes: the.--t' aie the men whose patents of noliility are insciilied upon the rec- ords of a railway company — attested by the 1 irtiad seal of the corporation and coun- tersigned by a general freight agent — and when peox^le from other lands visit this country ancl ask to see our great men we do ncit say. This is a man of great intel- lect and genius and learning, or of liaig descent, of kindly character, and great charity; but we say. Behold the new guds, whom ^ve now worship! Behold him whom the railroads delight to honor, and the limits of whose wealth we are only permitted to conjectirre! " ' It is.utterly impossible that there can be any success attending a monopoly of natural products without the aid of unjust discrimination of railroad companies. And only when such unjust div crimination ceases will all people be placed on terms of ecitiality. "' Let us suppose that in France but one corporation handled 80 per ctnt of the wine gniwn in the country. The grape grows all rivei- the country. You see train loads ot -wine in France as f recpiently as you see train loads of oil in Amer- ica. The pri<'e of wine enters largely into and affects the social and financial condition of the French i>eople, just as the price of oil affects the interests nt the people of this country who produce it. I venture to say that if any such thing existed in France as one corporation controlling 80 per cent of the wine manu- facture and traffic of the co\intry there would lie a French revolution within 2i hours of the discovery of the existence of such a monopoly. " 'The system of illegal and unjust railroad rebates or freight discriminations, more thananv other social evil, has been the source of that unequal distribution of wealth Vi^hich to-dav confronts the country with a menace greater tlian threat- ened by any other social wrong or inequality. That the Standard (.)il Trust owes its control of the oil trade of the country entirely through unjust and illegal dis- crimination in charges of railroad freights. That nearly all of its great wealth and power have been thus dishonestly and illegally obtained. That it is far the most conspicuous exami)le among the many instances of the great fortunes made by the favoritism of railway officials."' The Standard Oil monopoly is the originator of the system of devices for rebates in the form of commis'sions, arbitraries, billing underweight, blind bill- ing, dockage, lighter;ige, ttrnuual charges. si)ecial-style tank cars, overloading, billing to intermediate points at the low terminal rate, stopping cars in transrt and delivering small lots at carload rates, 'ghost trains" on which no freight is paid, commissions or rebates on all competitors' shipments, shipinng out from its agencies to surrounding territory and paying no freight thereon, that to-day per- meates all the arteries of commerce exclusively in favor of the trusts, effectually wiping out anrl closing up all competitive industries. . Q. (By Mr. Kennedy.) Will you tell us something about these ghost trams— what they are? That is something new to me.— -A. That is what ]llr. Gowen explains at the beginning of the quotation that I have just put m. (Eeading:) "These freight discriminations in favor of one great trust the Standard Oil trust, have enabled that concern to build, free of cost, thousands of miles of gathering pipe lines in the oil-producing regions, thousantts of huge iron storage tanks several trunk lines of pipe from the oil regions to the seaooard, thousands of tank cars, and tens of thousands of stati.mary plants (represented by local agencies located in all parts of the Union) . which stand as a menace and 1 See p. 7«. See also Mr. Page, p. 78.5. 83a 48 742 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. a threat to all competitors who dare enter their sacred domain in competition with them. " Whoever interferes with the natural laws which govern or ought to govern commerce is a public enemy. No other nation under the sun would tolerate for an instant such a destriictive element within its borders. In monarchical Germany- Baron H.,in one short month, was tried, convicted, and sentenced to imprison- ment for receiving a rebate from a railroad. In England the owner of the Bass breweries was found. to be receiving a rebate, and in 34 hours it was stopped by the railroad commission. What' a contrast, mj' countrymen, does our land present. " ' The time to guard against corruption and tyranny,' says Thomas Jefferson, ' is before they have got hold of us.' "That the Germans appreciate this wisdom is shown by the attitude of the German Government toward the Standard Oil Company. When some member of the Reichstag, alarmed by the apparition of the original and greatest ' octopus,' asked what the Government proposed to do. Count Posadowsky, minister of the interior, showed that the most vigorous and effective campaign possible had already been opened. ' And,' he added 'the Government will oppose abuses on the part of the Standard Oil Company immediately and ruthlessly.' '■ The American, Philadelphia, February 13. 1898, has the following: " ' It is often remarked that it is impossible to make something out of nothing. This is indeed regarded as a truism. But when we look at the growth of the Stand- ard Oil. trust we are inclined to doubt our senses. Self-evident it is, indeed, that we can not create something out of nothing, but something very akin to this have the men behind the Standard Oil trust succeeded in doing. They have not, indeed, accomplished the impossible, but they have found something better than the alche- mist's equation, something more important in the accumulation of wealth without labor than the possession of the philosopher's stone. The alchemists sought to turn base metal into gold and failed; the unscrupulous men who organized the Stand- ard Oil Company sought to turn dishonesty into gold and they succeeded. They have not, indeed, discovered the undisooverable art of making something out of nothing, but they have succeeded in getting projjerty without creating it, in enjoying wealth without earning it.' " 'The New York Sun, in its financial article of September 4. 1899, has this to say: " ' The Standard Oil monopoly has siistained itself by getting possession of all the available crude petroleum wells in the country, and by not raising the price of the refined oil so high as to make other illuminants more desirable it has shut out competition from that quarter."' I thought it well enough to read that because it conres from a strong monopoly paper. (Reading:) "Benjamin F. Butler says this: 'The Parliament of Great Britain undertook to put a tax of a penny a box on friction matches, which would have increased the revenue about §500.000. The people of England revolted to such an extent that the government dare not press it. The match was needed to light the petroleum lamp. What would be said in Great Britain if their government would allow a corporation to put a tax of 500 per cent on the means of lighting the poor man's house and the rich man's palace in England? " 'Under that government it would not be borne, not an hour after it was known. Shall it be said that under a republican form of government, where the people are represented in making the laws, such a monopoly shall obtain, by which men can make fortunes such as were never dreamecl of since the days of the plundering of the world by the prcjconsuls of Rome? " " 'To the great credit of the United States Supreme Court, they have taken a broad and liberal view of the Sherman antitrust act. and decided that it ' applies to and covers common carriers by railroad.' which adds vital importance to the act, and, in brief, decided as follows; While the statute prohibits all combinations in the form of trusts or otherwise, the limitation is not confined to that form alone. All c(jmbinations which are in restraint of trade or commerce are pro- hibited, whether in the form of trusts or in any form whatever. "SINCE THE FEDERAL ANTITRUST ACT TOOK EFFECT, 1890, THERE HAVE BEEN CONSOLIDATED 940 RAILROADS, AGGREGATING- 63,000 MILES, OR ONE-THIRD OF TOTAL. " On October T, President M. H. Vreeland, of the Metropolitan Railway Com- pany, had this to say: ' ' ' Probably in no industry in the world has consolidation been more active in the last 10 yeai-s than in railroads. In fact, railroad history of that period is one continuous record of combinations, amalgamations, mergings, leasings, or what- STANDARD OIL COMBINATIONS: RICE. 743 ever terms lawyers please to give to one and the same thing. In the 9 years since 1890, 946 railroads, aggregating 63,000 miles, have been consolidated.' " Just think of it; 946 diiferent railroads consolidated into a mammoth railroad trust, one-third of total railway mileage, within 9 years (passage of the antitrust act) , forming part and parcel of 44 separate and distinct unlawful associations of rail and water lines combined, acting in entii-e unison with the other lines for the maintenance of railroad rates, which puts into the hands of a few leading men an tmlimited and mighty power of control over transportation rates, which power they have extended to the creation of many industrial manufacturing trusts, by which the price of the products thereof will be entirely regulated by these men through high tariff transportation rates, that greater rel>ates shall accrue to them from off their own and competitive shipments, which completely annihilates competition, destroys competitive industries, and the incentive to embark in new enterprises. In other words, the conspiracy combine of rail and trust officials now dictates to the former competitor the amount of salary he will receive to help them conduct and carry out their unlawful designs. "THE EAILROADS AND INDUSTRIAL TRUSTS ARE CAPITALIZED AT $18,818,551,031. ' ' The aggregate capitalization of the railroads per last official report of the Inter- state Commerce Commission is .sl0,8iy,o54,031. The single State of New Jersey hasgiven life to 15.000 concerns with a capitalization of §8,000,000.000. For the fiscal year ending October 1, 2,000 corporations were chartered in this State, capi- talized at 83.500,000,000. Here is a joint railroad and industrial trrrst company, capitalized at 818,818,554,031, working exclusively in the interest of each other. Conservative authorities estimate that one-half of this amount is fictitious, or 'watered," on which' rail and trust officials have enforced, and will continue to enforce, from off the producer of the soil and mine and from off the consumer and user of general products, through railway tariff exactions, sufficient revenue to pay liberal dividends upon fraudulent issues, representative waste paper, merely vignettes and nothing else. Ruinous freight charges will be levied upon all com- petitive goods outside the combinations in order to freeze them out, while Armour wiU receive rebates on his beef, Havemeyer on his sugar, Morgan on his coal, and Rockefeller on oil and iron, while the dealer outside the trusts must ship at higher prices, without rebates and without favor. Under the liberal laws of New Jersey alone these 15.000 trusts and corporations are operating in every section of Amer- ica, and this State has richly earned the sobriquet of ' The cradle of monopolies.' With all this vast wealth centered in one State, how easy it is to elect and manage all the necessary political power for the control of all needed legislation. " How easy for this combination of railroad and trust officials to so increase and temporarily reduce transportation rates, and thus materially affect net earnings of the railways and of the trusts, by which they get a clutch on their adversaries in stock gambling operations, and without risk, in the purchase or selling of stocks short, according to their well-matured plans and conspiracies." (Reading:) "THERE ARE TO-DAY AT LEAST 44 UNLAWFUL RAILROAD TRAFFIC ASSOCIA- TIONS AND "WATER LINES COMBINED, ^CTING IN ENTIRE UNISON TO INCREASE AND MAINTAIN FREIGHT CHARGES AND DISCRIMINATE IN PAYOR OF THE TRUSTS ON ALL RAIL AND WATER TRANSPORTATION RATES, IN VIOLATION OP THE INTERSTATE-COMMERCE ACT AND OF THE FEDERAL ANTITRUST ACT.' I will put in as exhibits the following : " By the Official Railwav Guide of September, 1899, there exist to-day 44 sep- arate and distinct illegal combinations, composed of joint railroad, lake, and ocean steamship lines, thus precluding excuse for water competition. " These several pooled traffic associations and freight committees (latter new term) represent all the principal railrcjads and water lines in the United States, and some of the Canadian railways, working unitedly and in unison tor the unlaw- ful maintenance of joint freight rates, both rail and water, which is m the ' restraint of trade ' as forbidden Ijy the Federal antitrust act and confarmed by the Supreme Court. " Section 5 of the interstate-commerce act reads as follows: " ' That it shall be unlawful for any common carrier subject to the provisions of this act to enter into any contract, agTeement, or combination with any other common carrier or carriers for the pooling of freights of different and competing railroads or to divide between them the aggregate or net proceeds of the earnings of such railroads, or any portion thereof; and in any case of an agreement for the pooling of freights as aforesaid, each day of its continuance shall be deemed a separate offense.' " 744 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. • ■ The names of these combinations are changed as often as the Supreme Court renders a decision against any one of them applicable to all, but the roads will not submit to the a^'t nor to court decisions. ■' The following steamship lines represent the Association of Lake Lines: "Western Transit Company, owned by ISTew York Central and Hudson River Railroad Company, transports freight to and from Buffalo and Chicago, touch- ing at Erie. Cleveland. Detroit, and Milwaukee. •• Union Steamboat Company, owned by Erie Railway Company, carries freight to and from IBuffalo and Chicago, touching at Detroit and Milwaukee. ■■Erie and Western Transportation Company (Anchor Line), owned by Penn- sylvania Railroad Ci^mpany, carries freight to and from Buffalo, Erie. C'liicago, Milwaukee, and Lake Superior ports, and delivers freight to all railroads. ■■Northern Steamship Company, (jwned by Great Northern Railway, carries pas-^engers and freight to and from Buffalo, Cleveland, Detroit. Duluth, and Lake Superior ports, and delivers freight to all railroads. •■ Lake Erie Transportation Company, nwned by Wabash Railroad. Its steam- ers run between Buffalo and Toledo and deliver freight to all railroad lines. ■■Leliigh A' alley Transportation Company, owned by the Lehigh Valley Rail- road, and its steamers run lietweeii Buffalo and Chicago. "Minneapolis, St. Paul and Buffalo Steamship Company, owned by the Min- neapolis, St. Paul and Sault Ste. ilarie Railroad Company, which is controlled by the Canadian Pacific Railway Company, carries freight between Gladstone and Buffalo and delivers same to all railroad lines. ■'Cleveland and Buffalo Transit Company: Detroit and Cleveland Navigation Company: Lackawanna Transportation Company; Port Huron and Washburn Line: Lackawanna Green Bay Line; Wilson Transit Company; Union Transit Company: Fleming Line. ■' In addition, the following water lines are combined with railroad associations and freight committees; " Plant System of steamers, operating 1 .'2s:5 miles of water lines; New York and Baltimore Transportation Line: Baltimore. Chesapeake and Richmond Steam- boat Company: Merchants and Miners' Importation Company: Detroit and Cleve- land Navigation Company: New York and Texas Steamship Company; Old Domin- ion Steamshiii Company; Cromwell Steamship Company; Atlantic Coast Line; Ocean Steamship Company: Red River Line. '■ This Official Railway Guide also contains the Canadian Freight Association, composed of all the railways and principal water lines of Canada, which are in collusive alliance with our unlawful pooling railway combinations, as represented in said association by the following American lines, such as the New York Cen- tral and Hudson River, Michigan Central, Delaware and Hudson, Boston and Mainp. Central Vermont, !Maine Central. Great Northern, Northern Pacific and Maniti iba, which roads are linked with Canada's water ways, such as the St. Law- rence Steamboat Company, Lake Ontario Steamship Company, Merchants" Line of Steamers, Northwest Transportation Company, Bay of Quinte Line of Steam- ers. Bay of Quinte Railw;iy and Navigation ComiJany. foi'ming a gigantic trust and pool of rail and water lines of America and Canada to increase and maintain, without competition, unlawful transportation rates in the United States, which is in ' restraint of trade.' in violation of the Federal antitrust act. and also in viola- tion of the interstate-commerce act. " The following are the water lines in the above association: '■ The Clyde. New England and Southern lines, Portland Steamship Company, Goodrich transportation Company, Lake Michigan and Lake Superior Transpor- tation Comiiany. Northern Jlichigan Transportation Company. •■(October 1, 1H89, the Transcontinental Association, composed of 31 lines of railroad, including the Canadian Pacific Railway, made an agreement "u-ith the Pacific Mail Company to pay them .§900,000 per annum for the pri-vilege to fix all freight and passenger rates, both steamship and rail, both ways, between New York and San Francisco, 'and that no through freight or passengers shall be taken except at prices fixed liy the party of the fiist part (Transcontinental Association), or by its consent.' (B 1114.) No question of doubt, a similar an^angement is in practical effect to-ilay. "November 28, IWto, this same association agreed witli the Canadian Pacific Railway Company to pay them 8500,000 per annum -to maintain tiie rates and rules ot the Transcontinental Association as in force on the direct United States lines.' Benjamin Brewst^■r and Henry M. Flagler, then trustees of the Standard Oil Trust, wnre also directors in the Chicago. Rock Island and Pacific Railroad, one of the roads in the combine, while Oliver H. Payne, former treasurer of the Standard Oil Trust, was a director in the Pacific Mail Company. (B 196.) STANDARD OIL COMBINATIONS: RICE. 745 " Judge Willis, of St. Paul, Minn., in addressing the new grand jury on Jan- uary 9, 1897, has this to say: •• ■ The government of this State is divided into 3 departments— the legislative, executive, and judicial. All of these departments are proximately connected with the common people. To the legislature any qualified elector may be chosen. In the executive department the same rule of eligibility exists. In the judicial department none but men learned in the law can be selected for the judiciary itself; but in order to link that department closely to the people it has been pro- vided that grand juries should be summoned from time to time, and that to Hi em should be committed the duty and prerogative of scanning the conduct of all members of society and making such accusations as would correct the evils in society which amount in their enormity to crimes. Conseple which may burst into a whirlwind of wrath. ■' ■ The man wdth the hoe,' whose terrible aspect Professor Markham has so powerfully portrayed, may yet hoe his row. throw off his burden, and deliver his fellow;^nan from the toils of the downtrodden and oppressed." Q. (By Mr. Kexxedy.) Do you expect or hope for any deliverance from " The man with the hoe? "—A. Their vote is just as good as anyl:)ody else's, and it is the vote that is going to reii;'ulate it. Q. Do you expect intelligent deliverance from any evils from such a source as that'?— A. Do you not think that there are a great many men with a hoe that have as good intelligence as anybi^dy';" Q. Not the one that is pictured 'by Professor ilarkham.— A. Well, I do not know about that. Q. (By Senator Kyle.) Have j-.ju any further statement that you desire to make'?— A. Mr. Archbold reads a letter from J. M. Ciilp, traffic manager of the Southern Railway Company, in which he emphatically denies that the Southern Railway Company has at any time j;iven to the .Standard Oil Company or any of its representatives ■' any lower rates .--'(■' frei.ght in the carriage of shipments nuide by that company over our rails, either by direct tariff, refund, or otherwise, than to any other shippers of similar commodities." I am unable to give a specific case of freight discrimination over this line in favor of the Standard Oil Trust, but will answer Gulp's specific denial in a more general and comprehensive form by reference 'to the letter of Receivers Cowen and JIurray, in which they say that " within the territory north of the Ohio River and east of the Mississippi" the railroad carriers are makin,g '• illegal concessions through secret rates, draw- backs, rebates, and other devices." The Southern Railway Company is connected with and is a member of the folloTsnng unlawful freight associations: The Louisville Freight Committee, the Southeastern Freight Association, the Southeastern Mississippi Valley Associa- tion, the Tirginia Freight Traffic Association; the Southern Iron Committee, and the Baltimore Freight Committee. Through the Louisville Freight Committee and the Baltimore Freight Commit- tee the Southern Railway Company is pooled with rail lines that cover the territory north of the Ohio and east of the Mississippi, such as the Pennsylvania Railroad Company, the Baltimore and Ohio Railroad Company, the Chesapeake and Ohio, the Big Four, the Illinois Central, and others. Cowen and Murray say that these lines of road were, in December last, gTanting secret rates, drawbacks, rebates, etc. Then it stands tLi reason that the Southern Railway Company followed suit. If any kind of rebates in any shape or form are given, you can rest assured that the Standard Oil Trust gets the lion's share, as fully exposed by me. "PLEASE TUEN ANOTHER SCREW." ' This seems to me an opportune time to show this commission the original letter written by the Chess Carley Company — but I recall I have already shown you that. Q. (By Mr.FARQUHAR.) In the investigation by the Bacon committee of Con- gTess, in 1888. when that questioji was xnit, and you were present and gave testi- mony at the sajne time, Mr. C-fowen presented' this letter of the Chess Carley Company to Mr. Culp. and 3Ir. Cnlp, under oath, .gave testimony, as found in this volume here:' and they also furnished, at the same time, the tariff that was pub- lished and in effect at that time, showing that there was no discrimination against you in any waj' whatever, and that there were equal rates all around the board. — A. At that time: at that particular time? Q. At that particular time; at the time von .^•ave testimony here in respect to this letter written by Hathaway'^— A. He testified that there were no discrimina- tions? C^. There was not any discrimination at all; the testimony showed the published sheet of the regular rate, and the road made an explanation of what was called "putting the screw on."— A, Very lame; very lame explanation. Q. But still it is sworn evidence; it is here?— A. Why, here are lots of letters. Q. Well, here is the letter here in evidence, too.— A. Oh, yes; that is all right; that is all right. iPiftietli Congress, first session, House Reports, vol. fl, p. 524. Sec an extract in the present volume, p. TC4. 7-1:8 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. And there was tlie man subjected to cross-examination at that time, and that stands out in entire antagonism to your evidence here to-day? ' — A. Well, the people can believe Mr. Gulp against me if they want to: that is all.^ Q. Well, what is the commission to do? That is the question. Here is the Congressional evidence before us; what are we to do? There ought to be a ref- erence to this testimony here in the recoi'ds in some way. I want to ask you another question, too: and that is in iei=pect to the testimony that you heai-d at the same time offered by Mr, Carley himself, in his riiidication of this thing, that he had never got a rate at that time discriminating in any way whatever, which is also sworn testimony of a reputable witness outside. — A. Who is a rep- utable witness? Do you call Carley a rejiutable witness? Q. Well, you can not call him otherwise; the Congressional committee took it. — A. They can if they want to. I d- > not Ijelieve it. Q. It is given in the Bacon reprjrt. — A. I would not believe either one of those men; that is my experience wiih them, you know; I would not believe either one of them. Q. I merely desired to call your attention to it. — A. That is all right. Q. Beca^ise many of the exhibits are in sworn testimony. — A. The people can take what they believe of that, and believe what they are a mind to. I am telling the truth absolutely, without the shadow of a doubt. l)y solid exi^erience. There is not any question in reg.ird to it whatever. There is not any question that they raised the rates on me 50 per cent within ."> days. I have had men tell me that they would shoot such a man as that. Theie is not langUHge strong enough to express a man's disgust at the execution of our laws. How any jnan can excuse such men or have any belief in them I can't understand, that will do such out- rageous things. Q. (By Mr. Clarke.) Do you recommend shooting as a remedy ?^^A. Itliinkit will come to something of that kind if you can not get relief. What did our col- onists do over in Boston? They threw the tea uverijoard. did they not, because of oppression? We are .just as much opi>re.-.sed to-day as they were, and more so. UNLAWFUL ASSOCIATIONS. The Baltimore and Ohio Eailroad Company are members of the following unlawful associations. I want to say this because the Cowen and Murray letter has been put in here, and Mr. Cowen has been here on the witness stand and explained it; and I want to show that they are members of what I call unlawful associations in keeping uj) rates. The Baltimore and Ohio Railroad Company, by the official railway guide which I put in here, the best evidence in the world, are members of the Chicago Freight Committee, the Chicag(j Railroad Association, Eastern Railroad Association, Middle States Freight Association, Trunk Line Association, "Western Pennsylvania and Eastern Ohio Railway Traffic Associa- tion, Wheeling Freight Committee. Baltimore Freight Committee, General Man- agers' Association of Chicago, Mansfield Freight Committee. Middle States Lumber Association, Ohio Coal Traffic Association, Sandusk>' Freight Committee. I want to say right here that about every time a decision is rendered by the Supreme Court of the LTnited States again.sr any one of these associations, the others change their names immediately: they are not incorporated, and they can change them very easy, so tbey can get rid of all their past unlawful acts. RELATIONS BETWEEN EAILEOADS AND THE STANDARD. In the late reorganization of the Baltimore and Ohio Railroad Company within the la.st few months. Henry Clay Pierce, of St. Louis, president of the'Waters- Pierce Oil Company, Standard Oil Trust, is made a diivctor. Q. (By Mr. Faequhar.) Do you think that it is well enough for these persons that are large LAvners of stock, I mean Standard Oil stock and all tliat.to make investments in all these other things; is it not natural for business men to do that'.-' — A. It look., rather su.spicious.yon know, when you c(nne to see all these men going into railroads, these big shippers; it looks very .suspicious. Mr. Archbold falsely asserts when he states that pi]iage rates were included in the rail rates on the Cleveland and Marietta Railroad.'-' The absolute truth is that this railroad charged me 3.5 cents a barrel on my iintroleum shipments, while it only charged the Standard Oil Trust 10 cents a barrel; c(nitirmed by the receivers of the rail- road, its counselor, Ex-Judge Rapello. and by the 5i); Mr. Rice, pp. 706-711. STANDARD OIL COMBINATIONS: RICE. 749 Phineas Pease, the receiver of this railroad, allowed the Standard Oil Trust to lay its pipe lines, not only in the roadbed's right of way, bat also across passen- ger bridges, to assist it to convey crtide oil from the Macksbnrg oil fields to Parkersbnrg, "W". Va..::i5 miles, where the trust had a large refining plant, and by this means deprived the road of Standard Oil transportation. In 1885 when I wanted to simply cross once with my pipe line under the tracks of this same road, which I had the legal right to do, in order to reach the Muskingum River and thence barge my oil to Marietta, I was confronted by a telegram from Pease to desist from laying my pipe thereunder. I did not obev. A competing pipe line from Parkersbnrg- tried to reach the Macksbnrg oil fields, and was pre- vented from so doing by this same railroad. But the Standard Oil Trust could get everything they wairced; no oljjection iit all. In November, IsST, 7 or S months after the interstate commerce act took effect. I proved before the Interstate Commerce Commission that I was then paying- more than 4 times as much freight as the Standard Oil Trust on shipments of oil to Birmingham, Ala., where I had an agency. I paid .59 cents per 100 pounds on 400 pounds to the barrel, which was fi2.'.>i>: the Standard Oil Company only paid 16jV cents per 100 on 315 pounds of bulk oil. which amounted to 5'2 cents and 9 mills, as against my S'3.36. The discrimination was 346 per cent. ACC'I'SATIOXS AGAINST THE WITNESS. I want to say just ft little in reply to what Mr. Archbold saiil about me here: (Heading from a paper:) "In reply to Mr. Lock wood. Mr. Archbold dealt at length with the Matthews and Rice cases, which Mr. Lockwood had instanced to show, as he claimed, that the Standard Oil Company controlled the courts. Mr. Archbold claimed in effect that these suits had been brought to compel pur- chase. He asserted that in the Rice case Rice had tried to induce him to buy his plant at Marietta, Ohio, for S5o0,000, when it was not worth $25,000, and had agi-eed to see that prosecution in certain cases was stopped in case the deal was made, claiming that he had sufficient influence to accomplish this result. He expressed the opinion that Rice was employed as an agitator by the enemies of the Standard Company.' Mr. Rice was j^resent in the room, and it is understood will reply later." I want to say right here that no man in this country has ever put up a dollar to aid me in any fight I have had -^vith the Standard Oil Trust or railroads of this country. The statement is false. Q. (By Mr. A. L. Harris.) Did you ever offer to sell out for 8500,000? A.— I did. I will explain that. They offered me ijSOO.dOO yi 1882; and negotiations were started again, in 1880 or 1887, about the time I was trying to get some Stand- ard Oil Trust certificates, which I owned, transferred to my name. They refused to make the transfer. I want to read these extracts just a little bit before I do anything else. This is another account ol Mr. Arclibold's testimony. '•He dwelt particularly on the claim that Mr. Rice had been discriminated .against by the railroads in the matter of rates, and that the Standard Oil Com- panv had "made the railroads divide with them the charge they had collected from Mr.'PLire. Mr. Archbold admitted that their agent had received something like 8250 in this way. but said the money had been refunded to the railroad on the advice of their lawyer. " Mr. Archbold charged jMr. Rice with running^ his business not for the legiti- mate profits in it, but for the purpose of selling out to the Standard people at an immense profit." Mr. Archbold also read to this commission certain extracts from the testimony I gave last February at the Ohio investigation, with the avowed purpose of show- ing that I am a blackmailer. The ground of this accusation is that I asked less for niy refining plant at an early date than subsequently, when I had increased the capacity of my plant to 5 times what it was at the time the lesser prices were given, and I had not included my producing properties. Nnaires to charge me with blacknaail, when they have robbed the stockhold- ers of the railroads hy dishonest and unlawful means, through freight discrimi- nations, out of hundreds of millions of dollars, which has been paid by the public in higher-priced oils, and of a poorer quality. I will read from my evidence given at New York on March 21 last: ■'Before J. Edgar Mills. New York. — The Biackeye Pipe Line Company. "March 21, 1899, 10a. m. " Hearing resumed. " Redirect examination by the Attoexey-Gexeeal: ■■Q. Mr. Rice, there is another branch of the case, of the Buckeye Pipe-Line case, that I will call your attention to briefly. There is a cause of action charging that the defendant company assisted the Standard Oil Company of Ohio in evading the decree, known as the decree of March 3, 1892. and, perhaps, antici- pating your evidence now rather as rebuttal evidence from what has taken place in the contempt pioccedings, I will call your attention to that part of the testimony, and will introduce it here at this time, in which it is said the charge of contempt was a case of blackmail on your part, if I understand the import of Mr. Arehbold's testimony, and to that most particularly where he says that your plant was only v/orth 82.'). 000. Will you now state for the court the history of that attempted settlement and the amount that was offered for your plant actually, and what it is worth'.' I refer to the proposition that was made. Give the history of that entire proposition. '■ I\Ir. Klixe. I note an objection to the question not only as leading and stiggestive, but as irrelevant and incompetent. "A. The charge that Mr. Archbold has made against me as being a blackmailer because of any interest that I may have taken in the proceedings against the Standard Oil Company of Ohio, or in these proceedings, is a malicious statement and false; there is not a word of truth in it whatsoever in that regard. in that respect. In 1883 Mr. F. B. Squire, the present secretary of the Standard Oil Com- pany of Ohio, came to me at Asbury Park, where I was stopping with my wife, and offered me $250,000 for my oil properties, including the producing properties and the refining plant.' This I testified to before Judge O'Brien, of this city, in 1888, in proceedings that I brought against the trustees of the Standard Oil Trust to get tran ..f erred an original trust certificate standing in another man's name into my name. Mr. Archbold was present at the proceedings and heard what I testified to and made no objections, nor was it denied. He at the same time went onto the stand and testified that my plant was not worth to exceed S35-,000 or' $30,000. He also produced an expert to say that it was not worth over ,Si35,000. At this same time that I testified and at which Mr. Archbold was present— in the early spring of 18^7, some 4 or .5 months previous to the proposition to which he alluded and which I will subsequently allude to — I offered my plant to him thi-ough Mr. Orvis, to Mr. Archfcold. for the sum of 812.5,000, and §35,000 a year for 5 j-ears. In 1886 it is true that I did submit a proposition tc ) him to take for my pro- ducing properties and refining plant — the whole oil business that I had — the sum of §2.50.000, and 8.5l),()00 a year for 5 yeais. He considered the proposition and wrote me two letters, of wliich I would like to submit here the copies of them, because they are very short. ■■ Mr. Kline. I note an objection to the copies. ■■ Q. Have you the means of getting the originals? — A. I have not the originals in my possession, but I will swear that these are copies. " Q. Will you read the copies into the records? "Mr. Kline. I note an objection. A. (Reading from paper:) '20 Broadway, New York, November 17. 1886. George Rice, Marietta, Ohio. Dear Sir: I write to advise you that I have not lost sight of our recent interview, but there has been unavoidable delay in ' Sre 5Ir.Pat;e,pp. rs5, TSC; Mr. Rice's affidavit, p. 793. , STANDARD OIL COMBINATIONS: RICE. 751 gathering information which we desire on the subject. We now expect to have this information in a week or so, and will then again commnnicate with you. Behove me, very truly; yours, John D. Archbold.' The second letter: Dated, ' Standard Oil Trust, 36 Broadway, New York, December 13, 1886. George Rice, Marietta, Ohio. Dear Sir: We have given further consideration to the subject of our recent interview and are prepared, if you so desire, to discuss it further with you. Awaiting your advice as to your wish in the matter, and, if favorable, the designation of a time when you will meet with us here, I remain, truly yours, John D. Archbold.' '' I never replied to the letter or never called upon them. Q. (By ilr. Phillips.) What was the price fixed or talked of at that time?— A. S350.000 and S.'jO.OOO a year for .5 years. Now, here is another. (Reading:) " Q. There is another term that you ue.e that I don't quite understand. I wish you would be kind enough to elucidate it more clearly. What do you mean by a refinery and a producing plants What is the difference? What doe.s your property include that you say you were offered S25().000 for? — A. The proposition I made to Mr. Archbold and ti i Mr. Squires both, was to include all the producing properties that I had, which waa some 2(10 acres of fee-simple oil land and from 150 to 200 barrels per day production, and also to include all the machinery and everything attached thereto used in the production, and also to include my lefining plant and everything connected therewitii. tank cars and pipe lines and so on, and the good will of the business. ■' Q. Where was thar 200 acres of oil-producing laud that you say you owned in fee simple located? In the oil district? — A. Yes. sir. ■• Q. Already developed? — A. Yes. sir. '• Q. And has it been oil territory ever since? — A. Yes, sir.'' That is the end of the quotation. Now, I will make somt of my own remarks. My property was fully worth the amount I asked. The mercantile agency of R. G. Dun & Co. for several yeais made a rating of 81,000,000 on this same prop- erty. It seems ridiculous to answer all these statements, but as the charges have heeil made, under all the circamstances. I have done it. In 1884-8.'), and part of 1880. my business had largely increased by my persistent efforts, which was not agreeable to the Standard Oil Trust: so they invoked the aid of Orland Smith, president, and R. M. Fraser, freight agent, of the Cincinnati, Washington and Baltimore Railroad Company, the initial line out of Marietta, so to advance my petroleum freights as to ruin my business, so that this noble and philanthropic trust could easily buy it up for old junk. To the disgrace of these 2 men they readily assented to the nefarious demand, and on July 15, 1886, they did advance my freight rates from 43 to 163 per cent, and did not advance rates at all to the Standard Oil Trust. This had the effect to close up 19 out of 34 of my agencies, and shut me out of 89 towns in 73, within the brief space of 5 months. From that time on my profits were very much lessened by these unlawful freight discrimi- nations, and by the constant attacks and savage outs made by the Standard Oil Trust upon my customers' goods I was forced to yield and quit the oil-refining business in May, 1896, and my refinery has been idle since — rotting down. I will also read some extra cts from the Ohio investigation, but, before doing so, will state that my testimony in said case has been very materially changed by two very important alterations, and of the same particular figure twice repeated, by which it now appears in the official printed evidence that the negotiation for the sale of my properties was conducted in 1897, the very mcJnth that the Ohio contempt pro- ceedings were brought, instead of the year 1887, as I testified. I also testified that the capacity of my refinery was KJO.OOO barrels per annum, which has been changed to 10,000. I am reading now from the record of the Ohio investigation of the Standard Oil Trust. Q. (By Mr. Farquhae.) Is it not strange, don't you think, that Attorney-Gen- eral Monnett would have those changes made? Could it have been on purpose?— A. I am saying that thev liave been changed; I am not charging any one. " I will go back to 1897." cross-examination of me by Mr. Elliott, counsel for the Standard Oil Company, iiage 3i^.j. "I will go back to 1W)7"— it should be '87. If I said 97 it wa.s a mistake. (Beading:) " Q. I will go back to 1897. Did you say to Mr. Archbold in an interview, ■ I believe it is better for the Standard Oil people to make a deal with me, and that by so doing parties will be deterred from encouraging a Une of action against the Standard Oil Company, which I understand that others are about to do?' 752 HEARINGS BEFORE THE INDUSTKIAL COMMISSION". "A. No, sir; I do not recall anything of the kind. I wish to explain right here when those suits were enforced in regard to the transfer of my 5 shares" This is very important. (Witness resuming reading:) " Of trust certificates; they tried to produce evidence, the Standard Oil people did, and it came forth in the trial of the transfer of these 5 shares of trtist certif- icates in my own name. They brought forward 3 men for that purj)ose that pro- posed to swear that I had demanded from the Standard Oil Trust people a large amount of money, and they were the only ones that could settle this matter, and Mr. Bartlett, my counsel — this was indicated to him that such kind of evidence was coming out — and he particularly questioned me before I went on the stand, before the matter came up, to know whether this could be true what he had heard. And I said, if they brought up any matter of that character it certainly would be a lie; it would not be true; could not see how they could back it up. He was considerably nervous over it, and I was myself. I did not know but what they had adopted some kind of a plan to smirch my character, and when it came up Mr. Bartlett objected to any of this testimony going in, and the judge said: ' Mr. Bart- lett. we will allow this to go in, and if they do not connect Mr. Rice with this mat- ter it will all be thrown out.' They went on and brought up 3 agents, one I have known in the oil business, Hill was his name, and I forget the other man's name; and they went on the stand and testified that they had letters that were written pro and con with the Standard officials in* which they said to them they could arrange a settlement between Mr. P^ice and themselves; that they had the whole thing in their hand. I never knew a thing about it. I never heard a word about it, and they admitted that they had no conversation with me. They had taken up their report and it was written on Standard Oil paper, making those threats, and those letters were used against me before the chairman of the committee in Congress to poison his mind against me. There was nothing in them. They were gotten up by these men themselves, and to show the truth of it the judge threw out that testimony and would not allow it to go in. It was all a concocted story to smirch my character: that is what is the matter." Now, I want to read you the letter and correspondence that passed. I want to say right here, I think this correspondence was engineered for the purpose of being used afterwards, as Solicitor Dodd did use it. Here are letters — without g y knowledge parties wrote letters under the head of the Standard Oil Trust, and I never knew a thing about it. It was let in temporarily while the case was on with the understanding that if they did not connect me with it it would be thrown out. It was thrown out, but Mr. Dodd used it against me before the Congres- sional committee of 1888. Now, this is a letter which was written, that I did not know anything about, and I think it was conciicted for the purpose by this man Hill. Q. (By Senator Kyle.) 'Who is Hill?— A. Edgar P. Hill, Nassau street, New York. Q. A man whom you knew'?— A. I knew him once in the oil business. He directs this letter to Mr. Cuthbert. an official of the Standard Oil Company. He says: "Edgar P. Hill, "Att(irxey and Couxselor at Law, " 93 Xi'.^.ian street, Xcw York, March 30, ISSS. " My Dear Cuthbert: lam going to write youaverv plain letter in regard to the matter of Rice and the Standard Oil Company. lii mv judgment the com- pany is making a great mistake in not getting R'ice out of their wav. I know \vhat I am writing about, and-the necessity of ilr. Brewster's being put in posses- sion of such facts as I shall give y(3u some ac(.-ount is urgent. Can vou consist- ently and properly, through Mr. Bushnell. have them reach Mr. Brewster? If you cm without prejudice to your interest, I hope you will do so. If vou can not, say so plainly, and reply to this letter as soon as you possibly can. I shall not call on Mr. Dodd again unless he sends for me. I don't think he appreciates the situa- tion. But to the facts, of wJiich you will see something in the papers before you are many days older. "First. Mr. Rice owns certain shares of the Standard Oil Company stock. An alternative mandamus has or will be soon issued commanding the company to transfer that stock to George Rice, or show caiise why it is not done. If the com- pany tra,nsfers the stock, Mr. Rice will prove to be n,'m(n-e troublesome customer than he is now, unless he is settled with at once. If the company refuse to trans- fer the stock, they will be compelled to, and then its trouble will be greater. The company can not resist the court if it refuses. STANDARD OIL COMBITvTATIONS : — EICE. 753 ••Second. Rice has lieensiimmouedbetVire the Interstate CoiiimerteCoiiimif-rd on, and will be before that comniission to-moiTO'ir, or very soon, to answer interroga- tories already framed, the answers to which will be tronblesome to the company, to speak within botinds. Those interrog.itoi ies had Ijest remain nnansv^ered. ' ■ Third. Legal proceedings are about to be commenced against 2 of the i ai Iroads having large contracts in the past, and at iiresent. with the Stamuird Oil Com- pany in violation of the interstate-commerce law for a forfeiture ot their charters. "Fourth. A law has been framed and will soon be introduced in Cong] .'ss giving Mr. Rice the authority to bring suits in any State against railroads that have made contracts with the Standard Oil Company discriminating against Rice and to his prejudice. "Fifth. It is useless for the company to try to make a settlement with Rice through other parties. It must I),-' done with me or not at all. ^heie are other matters I could call attention to. b'at this is sufficient for the present. I «'rite as I have to you for the sole purpose of having these facts In'MUght to the notice of Mr. Brewster and for no other purpose. Could I have an interview with him I am sure it would be to the advantage irf the compa.uy. Again, let me say that I do not want j'ou to be prejudiced in the least in this matter, and unlets you can see your way clearly to do this don't do it, but return this letter to me and that will be the end of it. so far as you are concerned. Please do not delay your answer. ■• Sincerely, yours, Edgar P. Hill." "Edg.ir p. Hill, '•Attorney axij Couxselor at LAvr. '■ :ij XasscD! st., Xeic York, 2Iarch ~'9, ISS.S. •'My Dear Cuthbert : I have your letter of the 26th instant, for v.4iich you have my thanks. I am very glad indeed that you sent my letter to Mr. B. and I infer that he or Mr. Brewster has it now, as you do not mention its having been returned to you. I shall be fully engaged to-day and to-morrow in another mat- ter, and as soon as that is off my hands I shall ask Mr. Brewster for an interview, and I am confident that good will come to the company from it. I desire to have you understand that I am not acting and will not act in this matter in any spirit of hostilitj' to the company, but, on the contrary, I desire to bring about a settle- ment between the company and Rice, and nothing else. I am the only person who has the handling of this matter, and the Standard Oil Company is simply wasting valuable time iii trying to reach Rice through someone else. That this has- been done I am sure, but it has had and will not have the least encouragement. I shall endeavor to make myself understood by Ttir. Brewster, ami am not without hope of causing him to see matters as they are, and not as they are represented to be by others in whom he places confidence. Mr. Dodd hinted at blackmail on the part of Rice, but that is absurd on its face, as I only ask to be heard fairly in an endeavor to settle a matter between these parties now, and which will be more difficult the longer it is delayed. I can settle the matter in less than a week if a fair and accommodating spirit is shown on the other side. I am well pleased with the situation, and again thank you for the kind assistance you have rendered me. '•Sincerely, vours. Edgar P. Hill." Now, then, Mr. Dodd a few months later writes a letter to the Hon. Henry Bacon, chairman of the Committee on Manufactures, giving him the substance of these letters. He says: "To Hon. Hexry Bacon. " Comm ittcp on Jfnn iif(ictii)\'>: : i "We offer the correspondence on behalf of George Rice with persons conne(_>ted with Standard Oil Company, to show that he threatened to give troublesome evi- dence before this committee, unless settlement was made with him, and parol evidence to show that the price demanded for settlement was sr}5(),oOO. .cYoi^rs "i^- C. T. Dodd, ''Solicitor Staiifhird Oil Trust. "July 12, 1888." These letters and all the evidence pertaining thereto had been thrown out by the court, and he used it afterwards. , ^ .^ ■, t , 4.,, io O (By Mr Phillips.) Did Mr. Dodd know that it had been thrown out?— A Certainly he knew; no question about it. You know it is ridiculous and out- rageous to have to answer all that, but the charges have been made against me, and I think I ought to answer them here. 754 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (By Ml-. Jenks.) Yon never yourself had any comnmnication with Mr. Hill at all? — A. No, sir, not a particle. Q. (By Mr. Parquhar.) Was Hill a broker in New York?— A. No, sir; a law- yer. Now, gentlemen, here is a pamphlet that is issued by the great Standard Oil Trust. I issued a xiamphlet called "Black Death." ' It was in the papers a good deal at the time. That is my original pamphlet, and the Standard Oil Trust issued that kind of a pamphlet with all the vacant places filled up with that scurrilous stuff against me. It is in exact size, same print, same paper, and everything, with the margins filled with a lot of scurrilous matter printed in red ink, and I think it might be well to read it, which will not take long, to show what kind of people they are. Q. (By Senator Kyle.) Did you attack them in your pamphlet? — A. Yes, certainly. Q. This is in the shape of a rebuttal? — A. Yes; I suppose so. Now, they have admitted this, you know, in a suit I had. They have admitted this pamphlet with all this stuff. They say: '■ If tlie Standard Oil Company pay George Rice $350,000 for his refinery, worth .$50,000, can they sell oil any cheaper, or serve the public any better than they do now?" But on the front part they say: "Com- m.on sense pricks this hullabaloo." "Such mis.sionaries as George Rice work mostly for George Rice." "Buy the best and cheapest goods of the agents of the Standard Oil Company." "The black border on the first page means blackmail by George Rice." This is issued by the great Standard Oil Trust, a gi-eat philan- thropic institution, which is worth several hundred million dollars, you know, and they say at the bottom of the second page: ' ■ Buy the ' Standard ' goods. " "If George Rice's goods are no better than his pamphlet, you don't want them." " His pamphlet boiled down simply means • sour grapes.' " [Other similar quotations in pamphlet.] They acknowledged this as their property: that they published it. It is generally known in the oil region that the Oil City Derrick is the organ of the Standard Oil Trust, because they do not publish anything against them. It is all against anybody that attacks the Standard Oil Trust. Q. (By Mr.'PHiLLiPS.) Is it the habit of tlie Oil City Derrick to attack inde- pendent producers? — A. Yes. Q. Producers engaged in opposition refineries? — A. Yes; that is what it does. It attacks everybody that is in opposition to the Standard Oil Trust. Q. Did you ever know of its attacking any member of the Standard Trust?— A. I never did. I never knew of its attacking "anybody in the Standard Oil Trust or that has anything to do with the Standard Oil Trvist. It is knovsm as an organ under the Standard Oil Trust throughout the oil region. Q. You have made sufficient reply to all these matters? — A. I suppose I have. I wanted to reply to these things. I don't like this business, but these things have to be answered. Q. Do you know what the dividends of the Standard Oil Company have been since its organization?— A. Why, say .$170,000,000 since 1892, and the 10 years previous would be $100,000,000— about ,$270,000,000. Q. What is the capital stock sold at?— A. It sold in May at 500 on a par of 100. Q. What would that make the total?— A. Half a billion of dollars. Q. Do you know anything about the surplus?— A. No; I do not. They do not make a statement to anybody. GOVEKXMENT OWNERSHIP OP RAILROADS. Q. (By Mr. Clarke. ) I would like to ask Mr. Rice if he has any further remedy to recommend to this commission than Government ownership of railroads?— A. I do not believe I have, Mr. Clarke. The experience of the past 12 years of the interstate-commerce law shows that the penalty clause of $5,000 and 3 years in the penitentiary for each and every offense is absolutely without effect. I think more drastic measures must be used: and I do not see how freight discrimination can be remedied except by Government ownership of railroads. Q. In your pamphlet you make some allusions to the ease with which certain people can control legislation, especially in the State of New Jersey?— A. Yes; I think that by the centralizing of trusts and combinations in one State, it is much easier to control that State in the way of legislation. Q. Do you not recognize that there would be great danger that if railroads were owned and controlled by the Government there would be gi-eat abuses, political abuses incident to it?— A. No; I do not; for this reason, that I do not 1 Pamphlet entitled "Black Death," by George Eice. STANDARD OIL COMBINATIONS: — -PAGE. 755 know of any instances now of any particular account that any department of the Government is run dishonestly. That is to say. every man is getting his equal just deserts. That is the way I understand it. You do not hear of any com- plaints that the Q-overnment is being robbed, excepting, of course, occasionally; now and then. In a general way the departments of the Government are run honestly, fairly, and squarely. Q. We have heard from you several times to-day that you do not think the Government officials are performing their duty? — A. I do not. Q. Would they be anymore likely to do it if they had control of the railroads? — A. Yes: they would. If they did not do their duty quite so well, they would have no freight discrimination, which I can tell you would be of great advantage to the people of the country; but as I understand it all Government employees do their duty generally. Q. Do you not think that discriminations can be provided against effectively without Government ownership of railroads? — A. No; I do not know how it can be. They pay no attention to this severe penalty clause, and as everything shows, discriminations are aboiit as bad to-day as ever; but of course they are more covered up, and you do not get on to the worst of it. There was an expert that was employed on the books of the Atchison, Topeka and Santa Fe when that §7,000,000 of rebates was discovered 5 years ago. This railroad expert told a friend of mine — this expert who was put on the books — that he was just getting into the ''meat" of it, and discovering this discrimination, and he had got on to it through a certain key, of a pencil mark on the books, which turned out to be the secret. He was just getting into it, when he was shut off, after he had dis- covered rebates to the extent of §7,000,000; and he said he thought more could have been discovered if he had had time to work it out. That was told to me by friends on whom I can rely — that the expert told him, and I have no doubt that it is so. Have I said enough in regard to the existence of the Standard Oil Trust? I pretend to say that the Standard Oil Trust is growing stronger all the time, and that said trust is not dissolved by any means; simply passing resolutions to dis- solve it does not dissolve it by any means. I did not know whether I made that plain enough. Mr. A. L. Harris. I think so. Washington, D. C, Wednesday, December 13, 1899. TESTIMONY OF MR. HOWARD PAGE, Tice-]rresident of the Union Tank Line Company. The commission met at 10.45 a. m., Chairman Kyle presiding. Mr. Howard Page, of New York City, vice-president of the Union Tank Line Com- pany, was introduced and, being duly sworn, testified as follows : Q. (By Senator Kyle.) State your full name, address, and business. — A. Howard Page, New York City. I am vice-president of the Union Tank Lme Company, which is a company that owns the cars in which the Standard Oil Company makes its ship- ments over the various railroads of the United States. I began in the busmess with Chess, Carley & Co. in 1878, and continued with that firm until it became the cor- poration of the Chess-Carley Company, which was in 1881. The Chess-Carley Company was succeeded by the Standard Oil Company of Kentucky, about 1886. Chess, Carley & Co. and the Chess-Carley Company were under the direct control and management of Mr. F. D. Carley, who was the resident partner and manager at Q (By Mr. Jenks.) At what time did you go into the employ' of the Standard Oil Company?— A. The Standard Oil Company of Kentucky was formed about 1886. I was with that company until I came to New York, in 1889, to take a position with the Standard Oil Company of New York. I have Ijeen with that company and the Union Tank Line Company since that time. Q Have you been immediately connected with the transportation business ever since coming to New York?— A. I have, and prior to that time I was m charge of the traffic matters of the Standard Oil Company of Kentucky, and also of the Chess- Carley Company, when I was in Louisville, and was also familiar ^^•lth that part ot the business when I was with Chess, Carley & Co. . . Q And in New York with the Standard Oil Company, you were especially m charge of their transportation business ?— A. As vice-president of the Union Tank Lme 756 H?:ARiNGS BEFORE THE INDUSTRIAL COMMISSION. Comiiaiiy, which, as I have .stated, is the company that owns all the tank ear,s in which tile Stamlavil Oil C'jniiiany uialvcs its shipments throughout the United States, I was familiar and am familiar with the transportation business of tlie company throughout the United States. Q. H( iw 1' )ng have you held your inesent position as vice-piesident of the Union Tank Line t'onipany'.' — A. Since the formation of the company in 1891. Q_. I understand that you have a general statement that >'ou wish to make? — A. I have a meuiorandum nr answer that I wish to offer to the allegations and charges made hy Mr. Rice liefo)v the conunission in regard to transportation and freight arrangements, which he alleges that we have as against hiniseh' and other shippers. I have gone in detail into his testiniiuiy and v.ull now answer the points which I have picked otit. ilr. A. L. H.VEEis. ;\Ir. Chairman, f do not know but there is a iiossibility of sav- ing time. As I umlerstand it, tiiere is nothing that the commission nie tci 1 le believed, and whicJi I think I can answer very satisfai-torily, and w hich -s^e should like to have the opportunity of answering. ilr. A. L. H.iKRis. Thei\- is one particularly that >eu have in mind, I think, that we have no objection to, and that is "putting another screw on." You may make any answer in regard t II. OSS. - Ser ].ji. 699, 700; src also Mr. Lce, p. 2lls; Jlr. Dnvis, p. 359; Mr. Monnett, p. 309. :' Sec p. .516. STANDARD OIL COMBINATIONS: PAGE. 757 trade secured l>y the Galena Oil Company is hi'causc of the Kuiierior and uniform quality of its oils as eompared with the "ordinary oils on the market. As U> the prices paid for the Galena oils as compared witli others, the Galena Oil Company sells its oils to railroads under an agreement hy which the Galena Oil Company always guarantees that the c( ist shall not exceed the cost ( .f oils that the railroad has used before, and niuierally guarantees a reiluction. This guarantee is in the form of a certain cost per train mile for the different equipments which the railroad runs ( )ver its rails. That is, the t'ost per train mile of engines, freight cars, and passenger t'ars is formd from the railroad's own books, and then the (ialena Oil Company guaran- tees that railroad, after tindiug the cost of the use of the other oils, that the cost of using Galena oils will be less, and ne\er more, than by using the other oils. Q. (By ilr. Clarke.) You refer to lubricating oils entirely? — A. Lubricating oils entirely, and signal oils. Q. Signal oils — A. The result of this has been that there has been a great saving in the cost of the lubrication of railroads, and a growing trade to the Galena Oil Company. This saving is produced by the fact that the Galena oil will do more work for the same money than anj' other oils, and expevit'nce has shown that that result has been obtained, and the guarantee is made good. And as regards the amoimt of money that the railroads pay to the Galena Oil Company for the use of its oils as compared Avith the c ist of the ordinary oils on the market, it is shown to be less. Q. (By Mr. Fakqi-h.^r.) Has it not been customary for the last thirty years to demand these tests of all persons that present oils for railroad use? Has it not been the custom (jf the oil trade for thirty years to do as the (ialena does? — A. I do not think any other company has gone into it as a scieni'e as the Galena Company has done. Q. Not as to uniffirmity? — A. Nor do I know that they have ever guaranteed the cost of a train mile for a year or a series of 5'ears, as the Galena company does. It is immaterial to a railroad whether a gallon of oil costs 10 cents or 5 cents, if the 10-cent oil will do work for 3 miles that the 5-cent oil will only do for 1 mile. That is simply the result of the use of the Galena oils. The Galena oils, although they have but one price, and a uniform ]irice, and a higher price than the cheaper grades of oil, will do more work, and the railroad will pay less money in a year by the use of those oils than they pay by the use of the cheaper oils; and they are so guaranteed. Q. (By Mr. Smyth.) Has that fact ever been demonstrated? — A. Absolutely. The demonstration is proved just by what ilr. Rice claims — that the result has been that 95 per cent — I dci not say it is 9.t per cent, but I do say the Galena Oil Company has secured the large and growing trade with the railroads; and it could not have done so had not the oils l)een superior and the results been (jbtained that they have shown. Q. You sav this large trade with the railroads is due to the superiority of that oil and not to influence brought to bear by the Standard Oil Company?— A. Abso- lutely; the superiority of the oils and the economy that they have given to the lines themselves. Q. (By Mr. Jenks.) You make the general statement, then, that in no case does the Standard Oil Company receive a higher cost of lubrication from any of the rail- roads than would be jiaid'to other companies for bad oils? — A. Per mile? Q. Per mile. — A. Absfdutely. Q. You do not deny that the Galena Oil Company does receive more per gallon than might lie giwn'to some of the other companies?— A. For the cheaper grades of oil. Q. But in no case do thev receive more for the same grade of oil than would be given to the other conii.anies?- A. I have tried to make myself clear on that. The guaranty of the Galena Oil Company is to the effect that by using their oils the cost per train mile of the various equipments of the railroads is guaranteed to be no more, and is generally guaranteed to be less, than with the use of other oils. Q. That applies generally to all the railroails to which it is sold?— A. Yes; abso- lutely to all the railroads. GALENA C0MP.\Ny's PRICES UNIFORM— ITS BUSINESS MTLTIPLIED BY 10 IN ELEVEN YEARS. Q. (By Mr. Smyth.) Do I understand you to say that there is a uniform price for this oil?— A The price is the same to everv railroad in the United States. Q Reo-ardless of quantity'?- A. Kegardless of (luantity. Of cfiurse one railroad may use'very much more oil than another, but the price per gallon is the same to all railroads all 'over the Tnited States. The guaranty is not the same, becau.se m run- ning oyer one railroad, for instance, like the Northern Pacific, or the transcontinental 83A 49 758 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. line, the cost is necessarily greater tlian in running over a railroad like the Pennsyl- vania or the New York Central; but the guaranty is that the cost, -whatever it has been, over the road with which they make the contract, shall not be greater, and generally that it shall be less, than the former cost in the use of the particular oils. Q. (By Mr. Phillips.) Do you claim that there is no refiner or person engaged in the manufacture of lubricating oil that can make oil equal to the Galena oil? — A. I can not answer that; I can only say what the result of the Galena Company's oil and its business has been. Q. Yes; but you spoke of their guaranteeing a superior quality of oil? — A. I did not say guaranteeing a superior quality; I said they guaranteed their cost. Q. And above the cheaper oils? — A. Yes. Q. The inference would be probably that all others made inferior or cheaper oils than the Galena. — A. I did not say. Q. You did not say it in so many words. — A. I said that the result of the use of the Galena oils had been a saving to the railroads in the cost, and that they were justified in guaranteeing that cost by the fact that the Galena oils did better work for the same money than the cheaper grades of oil that were offered on the market. Q. Did or did not the monopoly of the lubricathig-oil business, so far as the rail- roads are concerned, grow up during the time when the rebate system was in vogue everywhere? — A. Absolutely not. For 10 years back, during which time the Stand- ard Oil Company has not received a dollar in' rebates, the trade of the Galena Oil ' Company has grown tremendously, and I would say is probably ten times to-day what it was at the date of the passage of the interstate-commerce law. Q. Did they not get this monopoly of the lubricating business of the £Ountry prior to the interstate-commerce act, though it has grown largely since? The railroads have increased by thousands and tens of thousands of miles since that day. — A. I should think I had already answered that Is}- saying that to-day the trade of the Galena Oil Company is ten times what it was 10 years ago, and in the last 10 years ^ve have not received a dollar of rebates; therefore, prior to the interstate-commerce law, when we did receive lower rates of freight than the tariff, as all other shippers did, the trade of the Galena Oil Company was only one-tenth of what it is to-day. Q. But still it was practically a monopoly of that business at that date? — A. It was not. If they only had one-tenth of the business they have to-day, they can not have had a monopoly at that time. Q. Did they not use your oil and other oils ? Has not the use of lubricating oil been growing all the time? Was there or was there not any considerable amount of oil furnished by independent or outside people to railroads prior to the interstate- commerce act? — A. They sold the railroads then and they sell them now. Q. No considerable amount to the raih'oads prior to that? — A. Oh, yes; as far as my knowledge goes, they did, and they try to now and they do now'. Q. (By Mr. Farquhae.) Is it not a fact that the Galena Company, before it ever came into the Standard, established a lubricating busines.s? — A. Yes. Q. Is it 'not generally known and understood that the Galena is the best lubricant ever made in this country? Is it not the general reputation among railroad men and all others? — A. Its success has certainly proved that. GALENA COMPANY HAS NOT SOUGHT MANUFACTUEING TEADE. Q. (By Senator Kyle.) How does it commend itself to enterprises outside of rail- road companies? — A. The Galena Oil Company has made a specialty of the railroad and steamship trade ; it does not try to sell the manufacturing and machine trade. Q. It does not refuse to sell? — A. No; it does sell, and has also a large and growing trade abroad. (l Do not these other private C(3rporations discover the merits of the Galena oil, and if it is cheaper, would they not find this merit out? — A. They use those oils, but as I say, the Galena Company has made a sfjecialty of the railroad and steamship business, and while that does still hold, and it is only too glad to sell the mills, it has not made a S])ecial In-anch of the business in that direction. il I want to get the comparative merits of the Galena oil. If private enterprises are still using other brands outside of the Galena, there must be some merit in those, because all those institutions are determined to get and use the very best oil in their business. Ei.'onomy dictates that. — A. But the Galena oil is an" oil that is com- pounded and made especially for the rei|uirements of the railroads. The oil that is required for an engine and for the axles of a freight train is not necessarily the kind of oil that is required in machinery. Q. The other companies, then, are not catering for that sort of trade; they are not making that kind of oil? — (No answer.) STANDARD OIL COMBINATIONS: — PAGE. 759 OIL SOLD ON LONG CONTRACTS — PRICES ABSOLUTELY UNIFORM. Q. (By Mr. Jenks.) Where you do sell this Galena oil to mills, hoAV do the prices quoted to the mills compare with the prices cjuoted to the railroads? — A. Aljsolutely the same. Q. Not lowei'? — A. Absolutely the same; not lower. Q. At what time did the Galena (.)il Company go into tlie Standard Oil Com- pany? — A. I do not know. Q. Does this fact that the.Cialena oils are sold to the railroads mostly on contract for a year explain the statement that has been made here at different times, that when independent dealers attempted to sell oil to local railroad officials, they \\ere referred invaria))ly to the higher officers of the railroad company? Your own offi- cials also have testified that thej' had no knowledge of the price of oils to railroads because they themselves, the local managers, did not deal with the local ofBceis.' — A. That is generally true, I l)elieve, of the supplies used on railroads. The purchas- ing agent or local division agent of a railroad is not the nran that ).)uys for a large system of roads any article that is used to any large extent, and naturally the local man would not know the price of a contract, that would probably be made by the general manager for a series of >cars, covering the entire lubrication of a railroad. Q. (By Jlr. F.vrquhas.) All those articles are generally bought by contract Ijy the year? — A. The C(Mitracts are generally for from three to five yeai-s, simply because the results and the economies can not always l)e demonstrated in one y^ar. Q. (By Senator Kyle.) They ha^-e no schedule prices on those? — A. They have an absolute schedule price per gallon. Q. For from three to five years'? — A. From three to five years; and they guarantee the cost per train mile of tlie various equipments run, based on the c(jst that has been shown before by that same railroad in the use of the ordinaiy oil. Q. And that price is quoted to all consumers? — A. Yes. Q. Whether railroads or not ? — A. Yes. Q. And yet nobody knows it because it is referred to the head officers of the road or of the company? — A. I do not think that is a. fair inference. What Mr. Jeuks said was that the local man of the railroad does not always know what the prices are that the railroad is paving t(.i the Galena \-er the Pennsylvania Railroad from and to the vari- ous points named in :\Ir. Ne\\din's letter, but on such oil as \vas carried partly by pipe line and parti v by railroad, the pipe line was allowed a share of the through rate the same as the railroad W( aild allow any . it her connecti. >u. The pipe line is a common carrier under the laws of Pennsylvania, and on all oil that is aatliered m the oil fields and piped tow ard the sealioard and dehvere.l to the i eiinsy vania Railroad a,s it was at Hamilton, the rate was the same a- the thr.uig-^i railroLi.l rate and the pipe line got a share of that rate for its haul as the Pemis\lvania Railr.iad got a share for its "haul. The legal and the full explanation i.s m this letter from Mr. Dodd and the attorneys of the Pennsylvania Uadnjad, which I shall present as an exhibit. 1 See Mr. Mathews p. 515, bottom. - ^^e^' p. 700. 760 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I. New Yohk, December 7, 1899. The United States Industbial CoJunssioN. Dear Sies: James W. jM. Newlin, in hi^' Icttevto George Eice, which was given in evidence before the United States Industrial Commission, made two specific allega- tions: First. That during the years ISS], 18S2, and 1883, Fennaille & Despeaux paid the Penns^-lvania Railroad Company 48 cents per barrel for run-iage of oil, all rail, from Foxbu'rg to Communipaw, and at the same time, between the same points, the railroad company carried oil for the Standard Cil Company at a reduction of 22^ cents per barrel. Second. That the Pennsylvania Railroad Company carried oil from McCalmont and other points to Communipaw, chai-ging Fennaille & Despeaux 33 cents per bar- rel, and at the same time, Ijetween the same points, carried oil for the Standard Oil Company of Xe«- York for 19.875 cents per barrel. He further claims that these facts were proven in the case of Fennaille & Despeaux r. The Pennsylvania Railroad Company. We desire to make the most specific denial of these statements: First. That it is not true that oil was so carried for the Standard Oil Company; and Second. It is not true that any evidence of such fact was given in the case of Fen- naille & Despeaux i\ Pennsylvania Railrciad Company or any other case, nor was any evidence given, written or oral, from which any sane man could infer such a state of facts. On the contrary, the evidence given was positive that at the dates mentioned the Standard Oil Company paid the same rates on freight as other shippers and received no dra-\\'backs or preferences. :\Ir. Newlin, after stating these facts were proven in said case, refers to the specific evidence, which was an agreement between the I'enusylvania Railroad Company and the National Transit Company, dated Jla) 6, 1881. I presume a copy of this agreement was handed to the commihsion, ami it is only necessary to say that the most astute and suspicious mind could not distort the language of that agreement into a support of the allegations which Mi-. Ne\\din bases upon it, and Mr. Newlin should have been more cautious in making such allegation, as he had already been heard in the United States court at Philailelphia on his construction of this agree- ment, and after argument the case was dismissed by the court for want of any proof' of discrimination. j\Ir. Newlin claims the discrimination lurks in sections 4 and 8 of the said agree- ment. The agreement was a joint traffic agreement in regard to oil carried partly by pipe line and partly by rail, the through pi]ie line at that time having been com- pleted to a point near Milton, Pa. The fourth section is as follows: "The through rates from the discharging points of the gathering pipes in the region to the destination of the oil, whether the same shall be shipped entirely by rail or by trunk pipe and rail, shall be fixed 1 >y the trunk-line railroad companies, provided they can agree upon the same, and the transit company agrees to accept thereof as the share due to its through pipes,' the jjroportions hereinafter fixed. The through pipe lines include only such lines as receive oil from the local or gathering pipes and do not mclude any part of said local or gathering pi])es." By this section the railroad ompanics were authorized to make the through rate, and a distinction was drawn which has always been maintained between the local and gathering lines and the through pipe lines. "With the local or gathering pipe lines and their charges for gathering oil, the railroad had no connection, except m the single event provided for in 'Section 8. Charges for oil carried by the through lines to Stilton and thence by rail « ere prorated between the pipe lines and railway as provided in section 1 } Section 8 is as follows: "Whenever the through rate from the exit point of gathering pipe shall be less than forty (40) cents per barrel, the local or gathering pipe shall be considered as entitled to a rate equivalent to only one-fourth (\] of tlic rate which shall be formed by the addition of the said through rate to the public rate which the local pipe charges, J , submitted I tlu-ougliits t point of .. _e divideil _ J from Olean 1 divided that Pliiladel- 1 1 II iiniL i| 111 iti, 111 1-1 i,M J. LJj. IV nu.tiirvi. v./i. I jn; .1LIJ.U. mnjUSn raiOS lu hiiuiimftrc uic raiiniiin company slinll receive the siiinr iVom Milton to Baltimore as it shall at'tlie Hume time receive from Milton to Philadelphia on oil destined to the lasl-uamcd point." STANDARD OIL COMBI^fATIONS: PAGE. 761 and one-half (*) of the diffeience between this one-fourth and the said pubhc. rate shall be considered as due and to be paid to the railroad company, but this difference shall never be such as to make the local pipe recei\'e less than ten (10) cents per barrel. ' ' ' The obvious intention of this so-called dangerous section is to take from the pipe line a certain portion of its charges and ,ai\-e it to the railroad when the through rate is less than 40 cents. Referring to ^Iv. Newiin's figures, the first relates to a rate in excess of 40 cents, and he certainly could see, if he has e>-es, that section 8 has no reference to such a case. The second table of ilr. Nevrhn's figures relates t._. a rate less than 40 cents, and if it referred to carrying oil by pipe hue t.7 Milton, or any point on the through lines, and thence by rail to seaboard, it would come within set'tion 8, l)ut it does not so refer. If the Standard had oil carried by rail from Foxburg or Mc(.'alniont, it was not affected by this agreement; if it had (ill carried by pipe line to ililton and thence by rail to seaboard and the total through rate was 33 cents, it paid the railroads 33 cents and the railroads adjusted the charges with the pipe line company under section 8. Further, Mr. Newiin's figures are based on a total misreading of section 8. This misreading consists in confounding "through rate from exit point of gathering p'ipe" and the "public rate which the local pipe charges." In Mr. Newiin's first figures the through rate from exit point of gathering pipe is 48 cents. The public rate which the local pipe line charges is 20 cents. One-fourth of the sum of these rates is 17 cents. Mr. Newlin says one-half ui the difference between this 17 and 68 cents is the amount the Standard paid to the railway company for freight. The contract does not say so. It says one-half of the difference lietween this 17 cents and the "said public rate" shall be paid to the railroad. Referring back to see what "public rate" has been mentioned we find it is " the public rate which the local pipe charges. ' ' There is no other reference to "public rate" in the section. The figui'es which I\Ir. Newliu injects instead of the "said public rate" are made up of the through rate from exit point (jf gathering pipe and the public rate which the local pipe line charges, or 68 cents', while " said public rate " is 20 cents, and one- half of the difference lietween 17 and 20 is li. Therefore, if he had made his fig- ures correctly, he would have sho\Yn that the Standard only paid 1} cents per barrel freight while others were paying 48 cents. But such a reductio ad absurdum would have defeated his purpose. Pursuing the investigation further, it will be found on INIr. Newiin's theory that "one-half of the difference between this one-fourth and the said public rate" fixed the amount the Standard paid for its freight. If the railroad charged others 60 cents per barrel, the Standard would pay nothing. But if others paid 33 cents per barrel, the ."Standard would pay 3.37J cents, and the lower the rates to others the higher to the Standard. All this is alisurd, and the alisunlit}' consists in the misreading and misapplication of the section. It has no reference whatever t(j the freight rates the Standard shall pay. They were fixed by the railroad without discrimination. When others paid 48 cents the Standard pjaid 4S cents, and when others paid 33 cents the Standard paid 33 cents, but if the oil went part of the ^vny tij seaboard by pipe line, uniler this agreement, the pipe line was paid a pro rata proportion for its share of the transpor- tation. To compensate the railroad for a Ljw rate of freight, the pipe line company agreed to take something from tlie pipe rate which the local pipe line charged and pay it to the railroad. Tins only applied when the rate was less than 40 cents, and would increase as the railroad rate diminished below this ])oint, )jui was "ne\-er to be such as to make the local pipe receive less than 10 cents per barrel." Admit for argument that the Standard and the pipe hue are essentially the same, and what is the result? The Standard received from the railroad company a pro rata amount for its share of the transportation by pipe line, and to recompense the rail- way company for an exceedingly low rate for through freight, ai;r(_'ed to pay to the railroad company a portion of its local pipe-line earnings. It may Inn-e been a rebate to the railroad; it certainly wan not a rebate to the Standard. CV)ining next to the agreement of August 22, 1H84,- wdiich superseded the agree- ment of May 6, 1881, a case of payment to the railroad company is much more clearly shown. The pipe line was then completed to seaboard. It could not have reached that point without the consent of the raih\ay company, as no free pipe-line law then existed in the State of New .lersev. It was still necessary to have a traffic contract with the railroad and to deli\er oil to the railroad at different points on the 1 This section appears in tlie same words in Mr. Eice's Exhibit D. 2 For the text of this agreement, see p. 663. For discussion of it, see Mr. Emery, i>p. 663, 666, i>CT; Mr, Rice, pp. 73S, 739. 762 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. through line, that point being Milton, as before, for oil destined for Philadelphia. In addition to agreeing to pro rata rates for oil carried partly by pipe and partly by rail, it was further agreed that if the railroad company did not move 26 per cent of the oil, the Transit Company should pay it the deficiency. Settlements were made with the railroad company, and one of the settlements is referred to in Mr. Newlin's letter, that of September 30, 1884, which shows a payment to the railroad company for such deficiency, amounting to |10,722.22. Many such settlements were put in evidence, all of them showing monthly pay- ments of large amount to the railroad company. None of these were payments for freight, but payments to the railroad company for the deficiency in the amount it carried as specified in the agreement. Attempting to distort a payment of this kind to the railroad company as a dis- crimination in favor of the Standard Oil Company ceases to lie absurd — it is malicious. S. C. T. DoDD. Law offices of Geo. Tucker Bispham, A. H. Winterstein, John Hampton Barnes. Sharswood Brinton Girard Building, Broad and Cliestnnt streets, Ptiiladelpliia. Despuaux v. P. K. R. NOVEMBEE 29, 1899. S. C. T. DoDD, Esq., Standard Oil Company, 26 Braadvay, Xnu York. Deae Sir: I did not find Mr. Sellers in when I called to-day, and am now writing without consultation with him. I will, however, supplement this letter by any sug- gestions which Mr. Sellers may have to make. Mr. Newlin's claim, to which you refer, is based not upon any oral testimony given at the trial, but entirely upon his construction of the fourth and eighth paragraphs of the agreement of May 6, ISSl. This agreement was between the National Transit Company and the railroad (.'ompanjr, and it was in our view of the matter simply a traffic agreement between two transporting companies. ' ilr. Newlin's position, how- ever, was that the National Transit Company was in reality the Standard Oil Com- pany, which owned a large controlling interest 'in its stock, and his argument is based upon that assumption, and his contention is that any diminution or abatement of the charges of the railroad company under this contract inured to the advantage of the Standard Oil Company and was to be treated as if it were an allowance or rebate to the latter company. He arrives at the figures which you give in your letter in this manner: He considers the fourth and eighth paragraphs in the agreement together, and he contends that the provisions as to through rate contained in the latter paragraph, when read in connection with the former, are applicable to through rates, whether the same are greater or less than 40 cents per barrel from Foxburg to Communipaw. Assuming this to be so, Mr. Newlin's calculation is as follows: The eighth paragraph provides: ' ' Whenever the through rate from the exit point of gathering pipe shall be less than 40 cents per barrel, Ihe local or gathering pipe shall be considered as entitled to a rate equivalent to only one-fourth of the rate which shall be formed by the addi- tion of the said through rate to the public rate which the local pipe charges, and one-half of the difference lietween this one-fourth and the said public rate shall be considered as due and to be paid to the railroad company, but this difference shall never be such as to make the local pipe receive less than 10 cents per barrel." The through rate by rail was 48 cents. The public rate of the local or gathering pipe was 20 cents. The calculation, therefore, would be thus: 48 plus 20 e(iuals 68; one-fourth of 68 ecjuals 17; one-half of .51 equals 2.5.^; 48 minus 2h!, equals 22-5. The abo^-e calculation is the basis on which M"r. Newlin's allegation, in his letter to i\rr. Rice, to which you refer, is based. The 19.87.5 cents per barrel is arrived at by Mr. Newlin in this way, the calculation being at the rate of 33 cents per barrel from AlcCalmont to Communipavi" on the same principle as above. Thus: 33 plus 20 equals 53; one-fourth of .53 equals 13.25; one- half of .39.75 equals 19.875. This is the way in which he gets his figures showing, as he says, that the Standard C)il CV)iii]iany was chargeil that amount lonly for transportation. In addition to the olivious replies that the arrangement ^^as a trafllc arrangement, and that such an agreement can not be construed as a rebate to a shipper simply because that shipper happens to be a stockholder, and even a controlling stockholder, in one of the transixirtation companies, there are other answers based upon the language itself of paragraphs 4 ancl 8. 'The assumption that the provision in para- graph 8, when the rate is less than 40 cents, shall be applicable to paragraph 4, which STANDARD OIL COMBINATIONS: PAGE. 763 refers to a rate ahove 40 cents, would seem to be -without warrant. INIoreover, the "one-half of the difference VietA\'een this one-fourth and the said public rate" refers to the difference between the said one-fourth (made up of the through rate by rail to the public rate by local pipe charges) and the rate of local pipe charge — that is, 20 cents. In other words, instead of taking one-half of 51 (see above calculation), there should be taken one-half of 3, being L'O less 17, or IJ. Whether I am right in this last calculation or not, it is nevertheless true, as I have stated above, that there was no e\idence whatever, oral or written, which was intro- duced at the trial, which justities ilr. Newlin's assertion; but that assertion rests alto- gether upon his forced construction of the fourth and eighth paragraphs of the agreement of 1S81, which I have endeavored to explain. If the foregoing is not sufficiently clear to you, let me know and I will endeavor to make it plain. Truly, yours, (tEO. Tucker Bispham. Attached thereto is the following: Law ofBees of Geo. Tucker Bispham, .V. H. Wintersteen, John Hampton Barnes, Sharswood Brinton. Girard Building, Broad and Cliestnut streets. Philadelphia. Despeau.x i-. P. E. R. December 6, 1899. S. C. T. Dodd, Esq., 26 Birirnliray, Xi'ir Yurli. Dear Sir: I ha\-e your favor of the 5th instant. After the plaintiff closed his evidence a motion for a nonsuit was made and fully argued by ^Ir. Sellers and myself on the part i )f the defendant and by Sir. Newlin for the plaintiff. The motion for a nonsuit was granted. Sir. Newlin made a motion to take it off, and this was subsequently argued and the motion denied. The non- suit therefore stands. Mr. Newlin has taken an appeal to the circuit court of appeals, hut there has been some difficulty about settling a bill of exceptions. When this ife finally adjusted I will advise you. Meanw hile the above will give you the present condition of affairs. Truly, yours, Geo. Tucker Bispham. Q. (By ilr. Jexks.) Have these pipe-line and railway companies changed their rates on oil since 1884?'— A. You go back too far for me. I can say that the rate for oil of the Pennsylvania Railroad Company, both for pipe and rail, is the same as it was when I came to New York nearly ten years ago. Q. A copy of the contract was furnished by Sir. Archbold, and fixed the dates pretty definitely ; but you say the rates have not changed for ten years? — A. For ten years. "please turx another screw." Regarding the letter from Chess, Carlev & Co. to J. SI. Gulp, general freight agent of the Louisville and Nashville Railroad, June 16, 1881, in which the expression was used: "Please turn another screw." ^ The firm of Chess, Carley & Co. was a partner- ship in which the Standard Oil Companv of Cleveland had an interest. This was before the formation of the Standard Oil Trust, which was formed in 1882, and the firm of Chess, Carlev & Co., as I have testified, was a partnership in which Sir. F. t). Garley was the resiilent partner and manager. The Standard Oil Company of Ohio had an interest in the Chess-Carle v business, but absolutely no control or direction of that companv's affairs.^ I was 'in the ottice, and the only lioss we knew was Sir. F. D. Carley. I sh(3uld like to refer, in regard to Sir. Carley's control of that busi- ness, to his testimonv taken before the Bacon committee in 1888. On page 52(3 of that committee's report' Sir. Carley testiliol as follows (reailing) : " Q. Were vou a member of the firm of Cliess, Carley & Co.?— A. \es, sir. " Q. At what time'?— A. Through its whole history. ,, v .. t "Q. Over what vears does that extend?— A. I do not rememlier exactly, but 1 think somewhere about IHW) or bsyn we formed that firm. r, , n "Q. When di.l you terminate it?— A. \\'lien we f.irmed the Chess-Garley Com- ^™Q. When was that?— A. Four . ir five >-ears ago. I was jiresident <:)f it until its dis- "Q°^tate whether ornot it was dissolved when it sold its property to the Standard Oil Company.— A. Yes, sir. ^ 1 1;,.,. Afr Ftiktv t) 667 ^ Cimii'are the case of the \'ai'uum Oil Coinpany, p. .W4. 2 See iiT. Rice. pp. 704, 711.5, 7J7, 74s. * Fiftieth Congress, flret session. House reports, Vol. 9. 764 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "Q. Are you connected with the Standard Oil Company? — A. No, sir. "Q. You occupy no position under it? — A. No, sir. "(I "Where did you reside during- the time )'(ju were a member of the firm of Chess, Carley & Co.' and tlie Chess-Carley C(inii)any? — A. Louisville, Ky. "<,j. Had you charge of that busuK'.^s?— A. Yes, sir; I was sole and exclusive man- ager of the Chess, Carley & Co. and of the Chess-Carley Company." The party who wrote this letter (and without tlie knowledge of Mr. Carley) was a ]Mr. Hatha^vay, who had formerly lieen in the Louis\'ille and Nasliville Railroad employ. His explanation (jf this letter was that ■\\-hen errors occurred in the Louis- ville and Nashville Railroad office there was an cxjircssicju used, "that the machin- ery of the office was loose," and it should be corrected or tightened up by turning a screw. In the case referred to, the shipment of a car of oil by Rice to Nashville was billed at less than the regular tariff rate which other shippers were paying, and Hathaway simply called their attention to the error and used the expression referred to. By reference to page -530 in the book of testimony taken before the Committee on ^lanufactures, in 1S88, it will be seen that ^Nlr. F. D. Carley testified as follows (reading) : ' ' This much I know about this letter that Hathaway wrote. He would say to me, 'Mr. Carley, there is another carload gone through to Wilkerson,' or to whoever it might be. I said, ' I do not think it is right on the part of the road. Can not you get them to stop it? I mentioned it to them bet(jre. They said it was the fault of the clerk; that it was clerical.' " Now, on page .524 of the same boiik, I\Ir, J. M. C'ulp, who is the gentleman to whoni the letter was addressed, and who was general freight agent of the Louisville and Nashville road, and who is now traffic manager of the Southern Railway here, testified as follows (reading) : ' ' I desire to say, with regard to that letter, ( ir rather with regard to the rate charged on the shipment referred to in that letter, that it was less tlian the proper rate. It was less than any rate that we had w ith t'hess, Carley & Co., or I belie\'e ever have had. It was a fifth-class rate. Our rate on oil from Louisville to Nashville was higher than fifth class, and I presume the desire of Chess, Carley & Co. was to have at least as high a rate as was charged on their shipments chargei I on this. Had that letter come to me — had I seen the letter — I would have simply understood it that it meant that we should require our agents to charge at least as high a rate as was charged on the shipments of C'hess, Carley & Co." That is the explanation of it, and, in my opinion, a \'cry reasonable one. The facts are, as Mr. Culp has testified, and as 1 rec(3llect the occurrence, that the rate cliargeil on that shipment was less than we were paying at that time and less than we ever paid, even prior to the interstate commerce law. CHESS, CVRTjEV & CO.'s (IKOCERY STORE. ]Mr. Rice alleges that the Standard Oil Company established grocery stores m the South. 1 This was before the Standard Oil Company had any control or direction in Chess, Carley & Co.'s business, as that business was entirely under the control of I\Ir. F. D. Carley. And the estalilishment of that grocery store, as referred to by Mr. Rice, was during the time of Chess, Carley i*c C". (]. (By ?Lr. Jexks.) Sucli a grocery was estid>lished l)y Cliess, Carley & Co. for the jmrpose alleged liy^Ir. Rice? — A. There hus such a store. (^ (By Mr. S^fYTH.) Was there only one? — A. Only one. (j. (By Jlr. .Jexks.) "Was it cstalilislied for the purpo.-c of ilriviiig out a competitor in the oil business? — \. I did not say that. 1 say tliat Chess, Carley ct Co. estab- lished that store to sell groceries and oil, the same as there were stores established selling oil and groceries. (.i. Did Chess, Carley & Co. have stores elsewhere for the pui'iiose of selling groceries and oil? — A. No; it only had that grocery store. Probably the profits of that were not sufficient to justify any extension. Q. (By air. S.MYTH.') Where was that store?— A. Co]uudius, 3Iiss. ; but the Stand- ard Oil ('ompany had no more to do with it than that stenographer. Q. (Ky Senator Kyle.) Have the Stanerience had shown that there was a loss between the amount of oil put into the tank car at the refinery and the amount delivered at the point of dcstinati(3n, an allowance \^•as made, which was very small, at that time 62 gallons, and at another time 42 gallons; but this, as I say, since 1892 has been done away with completely. ESTIMATED AVERAGE ^VEIGHT OP PETROLEUM PRODUCTS. Mr. Rice lefers to the relative charge made by railroads between oil in tank cars and oil in barrels in carloads.^ The railroads receive a ver\- much larger percentage of live weight on oil in tank cars than on oil in barrels. Railroads charge and col- lect freight on tank-car shipments at full shell capacity of the tank car, no matter whether that tank car is loaded to its full capacity or not. The average capacity of the Union Tank Line Company's cars to-day is 140 barrels, and it is on that basis that the railroads charge and collect their freight. Q. (By Mr. Sjiyth.) You do not weigh tlie cars? — A. The weight of the petro- leum in tank cars is taken on the basis of the full shell capacity of the tank, based on an average weight of 6.4 pounds to the gallon.' The reason tor that is that some products of petroleum, such as naphtha, -weigh from ^} to 5| pounds to the gallon; refined oil weighs 6 J; lubricating oil weighs from 7J to 7 J pounds to the gallon; and the average weight of 6.4 pounds represents the actual average weight of the various products of jietroleum as tlicy arc manufactured and as they are shipped throughout the United vStates; and the reason the railroads have made such a rule is to prevent misre] iresentation and the cost that would be involved in weighing every tank car. You can see that it ^^■ould be a very difficult matter for a railroad to get the actual weight of tank-car shipments, because those tank cars are first loaded at the refinery and not in the railroad yard, as ordinary freight is, and then pulled out by the railroad. They could only weigh, therefore, the full tank car with the weight of the car added to it, and that car is probably destined to some point away beyonroducts. iSre p. 716. --Sec pp. 710,717. sy^c iMr. Hice.pp. 731, 732. STANDARD OIL COMBINATIONS: — PAGE. 767 TAXK CARS RETURNED FREE. Q. (By ilr. Clarke.) Those whit'h •\-ou liave referred to are for freight one way, I suppose?— A. The freight rate is cl'iuvgeil, of c(_rarse, only on the freight that is hauled. Q. (By I\Ir. Smyth.) Dues the car (•onie back empty? — A. Tire car comes back empty; the tank car as well as the box car, very largely, simply because the box car when loaded with oil is unfit for use fur sundry nien'liandise'. You will find that every large oil-carrying railroad in the United Stales has the box t'ars marked "oil," meaning that they can be used only for oil. I d(] not mean to say they are never used for any (jther freight. Ijut they are set aside for that purpose. Q. (By Senator Kyle.) Is there any charge for these return tanks? — A. No charge. y. Has there ever Ijeen a charge for return tanks? — A. No, sir; not in my recollection. Q. Have they ever charged the independent companies outside of the Standard Oil Company for the return of these tanks? — A. No, sir. They charge the Standard Oil Company the same rale. I mean to say that since the jiassage of the interstate- commerce law there has been no charge on the return of what is known as regular tank cars, the cylinder tank car, within the United States, excepting to one section.^ Q. (By Mr. Smyth.) There is n(_i freiyht charged on emptv coal cars, is there? — A. No, sir. ADVANT.VOES OF T.VNK CARS. I digress from this questiiin as to the relati\e charge. I have stated that the average capacity of the Union Tank Line car to-day is 140 barrels. The minimum weight required l.iy railroads in the shipment of oil in barrels is 60 barrels, and not 1 per cent of the carloads of oil in barrels in the United States run over 60 barrels, from the fact that even loading 60 barrels in an < irdinary box car requires putting them up on top of the lower tier. This is an expense to the fiwner and to the railroad, and it also causes leakage from the rolling of the barrels on top. The result is that carloads of oil shipped in barrels in box cars average 60 barrels as against the average capacity of tank cars of 140 barrels. Therefore one tank car holds twice as much as a box car when loaded with nil, and the railroads receive their pay acc(3rdingly. Q. It takes less cars? — A. Necessarily. It means one car instead of two for the same freight. It means carrying two cars for one; all expense of handling, and the cost of two cars. Q. (By Senator Kyle.) And the expense of unloading is less? — A. Yes; in the tank carl It is uni\ersally loaded by the shipper and unloadeil liy the consignee. In the box car it is generally loaded by the shipper and very often unloaded by the railroad in their depot.- The tank car never is. Q. (By INIr, Jexks. ) Is the freight rate the same per barrel, whether in barrels or intank cars? — A. It is the same rate per 100 pounds. In barrels, the weight of the barrels is charged for. Q. So, when shipped in barrels freight is charged on 400 pounds? — A. Yes. Q. When in tank cars it is 300 pounds for the same amount of oil? — A. Yes. Q. That makes shipping by tank cheaper than li\' barrel? — A. Absolutely; but the ■barrel is an article of merchandise. A\'hen the oil is sold in barrels, the value of that barrel is added to it. There is no grounil why the railroad should, on an article of merchandise, which the barrel is, receive no pay for the shipment. Admitting the pay on the weight of the barrel, the raihnad then only gets half as much rev- enue on the oil in barrels as on tank cars of oil. T.iRIFFS NOT M.VDE UP AT NO. 2(i BKO.VDWAY. 3Ir. Rice charges that railr.iad tariffs were issued from No. 2(i Broadway. ^^ I deny positively that we have ever made or promulgated any railmail tariff by any Standard Oil Comjaany interest, and I.am positi\e that no railroad tariff was ever promulgated bv any Standard Oil Couipain- interest. "Mr Phillips. I will ask Colonel Clarke to take the chair, as I expect to ask some questions in a short time. I shall lieobligeil to you, Colonel, if you will take the chair. , , . i , Q (By Mr .Ten'ks. ) You sav that no oil tariff has bi'en made or piromulgated by anv of the Standard t »il Conjpanies. I suppose when that statement was made it was not intended to be taken literal! v. \Vouler jirobably does, but that we have ever issued IMr. Eice'sintent certainly was to give the idea that we simph- named a rate and sent it to the railroads to accejit. It is not true. RATES NOT ABRANOED TO FAVOR STANDARD OIL SHIPPING POINTS. Q. Is it a fact, as has been frequently stated, that over lines of railroad Avhere the Standai-d Oil Company has very large shipments tlie rates on oil are frequently made, relati\ely speaking, lower than over other roads where the business i-ivals of the Standard Oil Company have large shipments and where the Standard Oil Company's interests are relatively small, and that this difference in rates to the advantage of the Standard Oil Companj- is brought about 1 ly the influence of the Standard Oil Com- pany officials? — A. That is absolutely not true, sir. In the first place I do not know any railroad on which competit(.irs of the Standard Oil Company ship that we do not ship on ourselves; and the oil rates of the United States from the various oil ship- ping points are on a basis. In other words, the same rates apply from all of the Pennsylvania oil fields,. both East and West, and the same is true of the Lima field; and while ,we may not be located at the very point some competitor is, he has the same rate from his shipping point in that field that we have from our shipping point in the same field. Q. Your main distributing points are, I suppose, ordinarily different from those of your chief competitors. Would >ou he able to set'ure rates from your main distrib- uting points which would affect your business favorably and not affect j'our rivals in the same way? Is that frequentlj' true? ^ — A. I do not think it is, sir. I can only say that we get exactly the same rate from the same point and to the same point that every other shipper pays from and to that point. STANDARD MEN CONNECTED WITH RAILROADS DO NOT GET SPECIAL RATES FOR THE STANDARD. 0- (By Mr. Kennedy.) Are the Standard Oi'l Company oflicials or stockholders ever in a position, as railroad officials, where they can give favors to the Standard Oil Company in its shipments'.' — A. I am glad you asked that question, sir. I do not think it, but I know. ilr. Rice wishes t(.i give that impression,^ and I can say in reply that since I have had any knowledge of railroad rates on the Standard Oil Company's business, no official of the Stamlard Oil Company who is connected with railroads has ever made a rate or arrangement for the Standard Oil Company, nor ha^•e any of those gentlemen who are connected and have interests with railroads ever asked me to give any undue or unreasonable, or in fact any, share of the Stand- ard Oil Cinupany business o\er such a railroad. In other words, the Standard Oil C'ompany's business stands on its own merits; and as I before said, none of these gen- tlemen who may or may not have interests in these various railroads liave evermade a rate or made an arrangement for Standaril Oil Company business. That business is done by me, or by the proper party in whose territory or ilistrict the question may arise. Ci. Should you be sui'e to know -vi hether that was sri or not? — A. I should know. If any of the gentlemen who have large railroad interests, as alleged, made a tariff or arningement with a railroad for our busiuess, I certainly should kn(5w of it. I shduld be advised of it, as I am the proiier department that has a record of those rales, and should have to knfiw, necessarily. Q. (By ilr. S.mytii.) Do we understai'id tliat shipments of tlie Standard Oil Com])any have not been influenceil toward certain lines by the fact that the officera of the Standard Oil Company were reputed to lie large owners of the stock in those lines? — A. In no way, sir; and you can readily see that it the Standard Oil Coni- jiany's business was run on the liasis of favoring tlie individual interests of the differ- ent stocklidlders of the Stamlard Oil Comiiany, the cinnpiany's business itself would necessarily snffer. Q. (liy Ml'. A. L. Harris.) It is true that ofliceis of the Standard Oil Company have otHces in different railroads?— A. It is true that Mr. William Rockefeller, for 1 Sl-l- Mr. Wcslgate, pp. 373-379; Mr. Gall, pp. 67,Vf>77, (;s2-i;s5. See also the testimony ol Mr. W. M. Kid- der anrl Mr. George L. Winlock, pp. 772-775, footnote. - See p. 727, STANDARD OIL COMBINATIONlS : PAGE. 769 instance, is a director in some of the railroads. He i.robably also is a liondlioldcr in the United States, but tliere is no connecti(jn between sucli interests and the inter- ests of the Standard Oil C(jmpany, or the Imsiness of the Standard Oil Company. .iLLEGED TANK-CAR DISCKI.^IIXATIO.N'S. Q. (By :Mr. Olabke.') We will proceed. The Witness, ilr. Kice refers to a rule of the South\\cstern bureau in regard to charging on the weight of a tank, when that tank is intemled for stoi-age, at tlie same rate as on the oil contained in the tank.^ If, as Rice alleges, the Standard C)il t'oni- pany owns nearly all the substations of the country, this' rule is hard on the Stand- ard Oil Company. If the railroads wished to discriminate in fa^•(Jr of the Standard Oil Company, they Avould carry the weight of the tank free the same as tliev do the regular tank car. Do \iiu understand? Here is a tank that is intended to' be used as a storage tank at some substation. It is loaded with oil and sent to that station. The railroad rule refened to charges the same rate per hundred pounds on the \f eight of the tank as on the oil contained in the tank. Xo\\-, (irdinarily on the tank car there is no charge for the weight of the tank. If they wanted to favor us, all they would have to do would be to treat that tank containing the oil as they do the ordinary tank car. Q'. (By Mr. Phillips.) There is one question I want to ask. That is in regard to shijiping oil Ijy barrel and by tank car. Has it not been testified that it is much more dangerous to ship oil in tank cars than in barrels, in case of collision and fire?- — A. It may have l.ieen so testified, sir. Different men have their different opinions; but the answer to that is that the tank car is growing in favor, not only in the ship- ping of petroleum, but in shipping all other liquid products, which are open to the same objection. I think the eeonom}' in shipping in tank cars over shipping in barrels, which is Ijeing shown by the enormous growth in the use of tank cars for a great many liquids, proves that the tank car is a better method for shipping. And the Central Freight Association rule to which he refers is entirely jiroper, as it is intended to prevent the unloading of bulk petroleum in railroad yards or depots without proper facilities, as such unloading would increase the danger of Icjss by fire. The rule simply means that they will not allow a tank car to be held in the depot or in the yard of a railroad to be unloaded b}' imiir(5per means into a tank wagon or into barrels, as leakage or accident might result, to the large loss of the surrounding property, and they simply require that projier facilities should be at the point where the tank car is shipped to.' Tlie Southern Pacific tariff: The rule referred to* was submitted to the Interstate Commerce Commission, who did not order it stopped when they decided the trans- continental case of 1890. Q. (By Jlr. Jenks.) Will you be kind enough to state the rule? — A. That rule was simply the rule by which the transcontinental lines charged for returning the cylinder car, and did not charge for returning what is known as the box-tank car. The box-tank car is a car which has a tank in each end and loading space between. There are other shippers besides the Standard Oil Company that ship and own these ears, and the Standard Oil Company ship both these cars and cylinder cars to the transcontinental points, and they pay exactly the same rates on cylinder cars as other shippers and get their liox cars returned free the same as other shippers. TEJIPORAKY KEDI'CTIOX FOE THE PROFIT OF THE STAXD.VRD. Regarding alleged correspondence from the Standard Oil Company's San Francisco office," I know nothing about this correspondence and can not \erify it. It w<3uld be fair to say, however, that I have full knowledge on all rates paid in California, and I can saiy pcjsitively we pay the tariff rates in force at the time of shipments, wherever made; 'Mr. Rice's charge there was that the rates were put up at one season and put down at another from Chicago and other Eastern points to the transconti- nental points. I can say, and the Interstate Comme^-ce Commission can affirm, that the rates on petroleum 'ami its products from Chicago and other Eastern ]i(>ints to California and other transcontinental points have not been changeil since ilarch 2, 1891. The rates have absolutely been the same for nearly nine years. "cOJUnSSIONS" ON FREIGHT. Regarding commissions on freight business, and charges that the Standard Oil Com- pany make their own conuuissinn:" It is absolutely false, and I state unqualifiedly that the Standard Oil Company has never received, either directly or indirectly, a 1 See D 718 ^ Sec p. 7ls, tottom. 6 See pp. 719-726. -' See pp. 377, 378; Mr. Rice, pp. 716, 7] 7. * See p. 719. « See p 727. 770 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. commission from any railroad in any form since the passage of tlie interstate-com- merce law. Q. (By Mr. Phillips.) Siiould you l)e in a position to linow absolutelj' if it received any? — A. I should, sir. (i. In regard to aU railroads and all transportation? — A. I sliould, sir. Q. .And in regard to divisions and local freights in certain sections, and so on, would it bar others tlian the Standard Oil Company from entering those sections? You would be in position to know all about that, should you, either directly or indi- rectly? — A. I did not catch the last part of your question. I should know if the Standard Oil Company received any Isenefits throughout the United States, and I would unqualifiedly say they have not. AS TO LOCAL K.VTES FAVORABLE TO THE STANDARD. Q. .1 think it has been testified Ijefore this commission that in certain sections of the country, while they may have a through rate of freight up to a certain division of the United States, local rates are made so that independent refiners can not enter those portions, and in that ^\"ay, indirectly, the Standard Oil Company has an advantage, which would be similar, and perhaps superior, to a rebate or a drawback?— A. If you mean, sir, because ^\-e have refineries at the Atlantic seaboard to supply New England and at Chicago to supply the "West, as compared Avith the man who has his refinery in the oil regions and tries to supply both the West and New Eng- land, I admit we have advantages; but I say we pay the same rate of freight from the same shipping point to the same destination as every i:>ther sliipper does.^ Q. And there are no local rates, as far as your knowledge goes, that \\-ould inter- fere with tlie independents entering that subdivision? — A. ^^'hatever the local rate is from any point to an)- point we pay the same as any other shii^jier pays from that point to that point. Mr. Clarke. You may prcjceed. RECEIVERS COWEN AND MURRAY'S LETTER. The Witness. In regard to the letter from Receivers Cowen and Murray to the Inter- state t'ommerce Commission, in whicli they admit paying I'ebates since the passage of the interstate-commerce law,- and which Mr. Rice assumed means paying us large rebates, I would say positively that since the passage iif the interstate-commerce law the Baltimore and Ohio Railroail has not paid us one dollar in rebates, or in anyway made any concession from their tariff rates. jMr. Archl lold filed with this commis- sion a letter from the Baltimore and Ohio .Railroad dated August 21, 1899, confirming this statement. Q. (By Jlr. Kennedy.) A\'<3uld you say that an inspection of the books of the Baltimore and Ohio Railroad Company would not show that rebates or discrimina- tirjns (jr c(jmmissions or anything of the kind had been paid to the Standard Oil Company since the passage of the interstate-commerce law? — A. I would; abso- lutely, sir. (.1 (By Mr. Smyth.) You know Mr. Rice stated that rebates were not paid, but that commissions were given to persons to secure the business of the Standard Oil Company and others? You deny that?— A, Previously I denied that we received commissions in any form fri^m any railroads. That applies particularlv to the Balti- more and Ohio, and any other railroad you wish to point out. CNDEHBILLIXG OP TANK C,\.RS. Regarding alleged underiveighing of tank-car shipments from Boston to Newport, R. 1. : For most of the years 1896 and 1,S97 we were making occasional shipments of naphtha in tank cars from Boston to the Newport (las Company. The shipments altogether amounted to s(.)me fifteen or twenty tank cars during' the entire period. r)n three or four of the cars the New York', New Haven and Hartford Railroad, through clerical error, billed tliest' cars at less than their actual weight. This resulted in an undercharge. A>< soon as it was discovered, the balance due was paid. The railroads transporting these shiiiments, as well as all railroads of the United States, had the actual capaiity of all these cars, and the error occurred through no fault of the Standard < )il Company. I shall hand as an exhibit Tank ( i:mge Book No. 4, which is the fourth book which iias been published by the ('entral I'lvi.udit .Vssociation, giving the capacity of all 'Sec p. 7I1S, footllulL' 1. ::Si..L' pp. 7'2S, 732. STANDARD OIL COMBINATIONS: — PAGE. 771 tank cars of the Union Tank Line Company. The same pul^lication has been in the hands of the railroads for the past ten or fifteen years.' This book contains the num- ber and the capacity of tlie tank cars referred' to )iy ,AIr. Kice. A\'e furnished tliis information to the railroads, and we submit that it is not likely that, having fur- nished the actual capacity of the cars to the railroads, we would go to these same railroads on interstate shipnjents and show a less rate, because it A\ould simply mean that we would know that we were violating the law and furnishing evidence to prove that we had. The Interstate Connnerce Commission, through Commissioner Prouty, investigated this charge at Boston, March 12, 1S9,S, and after the investigation f 10 cents per 100 pounds on the difference, uinounting to (t^^- 'M^as coUectccl. (M On the 19th day of Jlav lh97, this ■omi.anv received from the Boston and Albany Railroad (ft) Ontheiytnaa> oi Ji,i> 1 . , 111 s .,„,', A ,.,o,; ,,,insit^nril fo the NewiH.rt Gaslight Comnanv. Comnnm- at Boston t\\-o U T L. "cars, Nos. 791 .^i and 12sii, consigned to the NeiviHa't Gaslight Company, SnffnTngnfplXi, weight 48,000 pounds, which this comr.any re) ailed fr. ,in Boston to Newport at its rate of 10 cents per 100 pounds; total charges, Hs. Said «ei«ht was that mveii in the waybill of the Boston and Albany Railroad Company as delivered to this e.anpauy and accepted through error of 772 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I refer now particularly to the two cars which Mr. Rice refers to; two cars con- taining 100,986 pounds which were carried at 48,000 pounds.^ Q. (By 3Ir. Jekks.) ^Va^^ this the same case investigated by Mr. Prouty?— A. Yes. Vice-President Hall, who now is president of the Ne^' Haven Road, says this in hig sworn answer: " (h)'On the 19th day of May, 1897, this company received from the Boston and Albanv Railroad Company at Boston two U. T. L. cars, Nos. 7915 and 128ti, consigned to" the Newport CTaslight Cbmpafly, containing naphtha, weight 48,000 pounds, which this company rebilled from Boston to Newport at its rate of 10 cents per 100 pounds ; total charges, $48. Said weight was that given in the waybill of the Boston and Albany Railroad Company as delivered to this company and accepted through error of this company's agent and without any misrepresenta- tion or fault on the part of the shipper. It was subsequently found that the Aveight should have been 100,986 pounds, and correction thereof was made. Its charge of 10 cents per 100 pounds on the difference, amounting to S52.98, was collected." I also offer in connection with that case the testimony taken before Commissioner Prouty at the hearing in Boston March 1 2, 1898, and I would like to read from Mr. Winlock's testimony at that time.^ Mr. Winlock was general agent of the New this company's agent and without any misrepresentation or fault on the part of the shipper. It waa Kubsequentlv found that the ^veight should have been 100,986 pounds, and correction thereof was made. Its charge of 10 cents per 100 pounds on the difference, amounting to SS2.«8, was collected. (i) On the 22d day of July, 1N97, this company received from the Boston and Albany Railroad Com- pany at Boston two U. T. L. ears, Nr)S. 1286 and 7.544, consigned to the Newport Gas Company, contain- ing oil, weight 100, .')40 pounds, which this company rebilled from Boston to Newport at its rate of 10 cents per 100 pounds; total charge, S100.54. 3. Annexed hereto are copies of the original waybills and Boston and Albany Railroad vouchers connected ^\-ith each of the above-specified shipments. All of which is respectfully submitted. The New York, New Haven and Haetfoed Eailkoad Company, By John M. Hall, Vkc-Prcddcnt. State of Connecticut, City and County of Nao Haven, ss: John M. Hall, being duly sworn, says that he is the vice-president of the New York, New Haven and Hartford Railroad Company, above named, and that the foregoing answer is true as he verily believes. John M. Hall. Subscribed and sworn to before me this 2.5th day of January, 1898. AVEEY Clark, Notarg Public. 1 See p. 731. 2 The following are further extracts from stenographer's notes of the testimony taiien at this hearing, a copy of which, verified by the affidavit of Mr. Walter Rogers, the stenographer, was submitted to the Industrial Commission by Mr. Page. The hearing was held before Mr. Charles A. Prouty, Interstate Commerce Commissioner. Mr. J. F. Marchand appeared for the Interstate Commerce Commission; Mr. Samuel Hoar for the Boston and Albany Railroad; Mr. G. L. Winlock for the New York, Ne-w Haven and Hartford Railroad, and Messrs. Hyde & Baxter for the Standard Oil Company. Testimony of Mr. W. M. Kidder, agent of the Boston and Albany Railroad at East Boston: " Q. (By Mr. Maechand.) Mr. Kidder, just explain the method of billing freight for the Standard Oil Company out of East Boston. " Mr. Hyde. We should like to have that restricted to interstate shipments, if you please. ******* "Q. (By Mr. jrAHCHAXp.) Is it customary to incorporate in your waybill the weights of cars received from the Standard Oil Company for shipment of naphtha over the New York, New Haven and Hartford Road? " Mr. Hyde. Ju.st a moment. We should like to have the question restricted to these shipments, if you please. I understand that is the matter in investigation, Mr. Commissioner. "The Commissioner. Yes; but I think you may ask him, Mr. Marchand, what his custom is as to similar shipments, for the>urpose of showing what he did with reference to these particular shipments was in accordance with the ordinary methods of business. " Mr. Hyde. So far as it refers to interstate matters. ***** * * "Q. (By Mr. Marchand.) Is it cu.stomary to incorporate in the waybill the weight of the cars of naphtha for the Standard Oil Company'''— A. Yes, sir. "Q. What is your source of information as to weight?— A. Well, the receipts received from the Standard Oil Company give no weights. My waybill clerk inserted the weights of 24,000 pounds for each tank car. " Q. In the absence of any weight reported by your yard master, from whom, as I understand, you obtain the memorandum of shipment, how do you obtain the weights?— A. As I say, without the weight my billing clerks put in the minimum tank-car weight, which is 24,000 pounds. " Q. Is it customary to ship tank cars of naphtha upon the minimum weight?— A. Yes, sir. "Q. Under what circumstances do you do that?— A. Do that every time where there is no weight shown on the receipt. You know we don't weigh those cars at East Boston at all. " Q. What do you charge to the Standard Oil Company for transporting these tank cars to Boston for reshipment? — A. Six dollars per tank. * * * * * * * " Q. When you want to ascertain the weight or capacity of a car,how do you go about it? I have reference to tank cars. — A. Tank cars? " Q. Yes.- A. Well, the only way to do it would be to weigh them empty and weigh them loaded. ' ■ Haven't you, or hasn't your company— haven' t you, I will put it— in your possession a book published STANDARD OIL COMBINATIONS: PAGE. 773 Haven lium; at Boston, and testified that he had full charge of rates from l'.<.st(jn to all points on the New Haven road. Mr. Winlock says: "I have nothing to say except what ilr. I'age has said, so far as the relations Ijetvveen the New Haven roarl and the Standard Oil Company are concerned, is absolutel>' true. There is no arrangement of any kind between the Standard Oil Company and the New Haven road bv which thev can get any Ijettcr rates, whether it is by a rebate, or by underbilling, or b\- anything (^f that kind, than what everybody else gets. Our rates are published," and pf)sted for evei-ylwdy. These undercharges in weight were errors of our local agents in acc(.'pting tliein as such. They should have investigated the matter more than they did. Instead of blindly taking the weights given )>)• the Bost<:in and Albany Railroad vouchers, thi-y should have taken some means, as thev did in nearl\' every other case, to get at the proper weights. The tariffs to Newport ^^-ere leased on act'ual weight, and Instead of taking this constructi\-e tonnage of the Boston and Albany roait vrhich they useil for purposes of their own, they should have taken, as I said, some means of ascer- taining the weights in every case. The other cases were errors of theirs." Q. (By Mr. Jenks.) I see in the testimony that the weights are taken from the Boston and Albany. I understand your shipping point is East Boston? — A. It is. Q. And the Boston and Albany road takes the oil from East Boston to where it delivers to the New Haven and Hartford? — A. Yes. Q. Is it true, as has been stated, that when oil is delivered to the Boston and Albany road In- your people the billing is done by j-our people directly, and that you furnish the ^-eights to the Boston and Albany?— A. It is not true, sir, as was shown in this late testimony. I will explain it: Our works are located at East Boston on the Boston and Albany road. The Boston and Albany road have to switch any car from Boston to East Boston, where the cars are delivered to the Ne\v- Haven road. That switching charge, as I recall it, is §6 per car; either ii^i or ip6 per car. The Bos- ton and Albany road, like many other roads, wishes to show its tonnage, whether the rates are per car or per hundred pounds; and where the rate is per car, as in this instance, it probably uses 24,000 pounds, which is the usual carload weight; it is the minimum carload weight. They simply put in 24,000 pounds. The testimony shows, and I swear now, that we did not give the Boston and Albany- road 24,000 pounds as the weight of those cars, nor did we give them any weight. We did notify, not only directly, but through this book, the actual weight of all those cars, and it was simply an error of the New Haven road, as shown in the testimony, and as offered by Vice- President Hall, that the New Haven road took in error the constructive weight of the Boston and Albany in their bill, instead of taking the actual weight, which they had in their power to get, and should have got. Q. It is usually the custom of the Boston and Albany in their shipping, to put in the minimum weight, 24,000 pi5unds? — A. It seems to he so in this case. I can not , say what the general custom is, but it is the custom. There is nothing exceptional in the Boston and Albany having a switching rate for switching; it is no more than any other railroad does. Q. As to the regular custom of the Boston and iVlloany in shipping to points in Massachusetts, you would swear somewhat positively that their sliipping rates are based on the full car rates? I am not speaking of interstate traffic. — A. I say this: that, as far as the Boston and Albany rates are concerned, whether within the State of by the Central Freight Association, known as Capacities o£ Tank Cars Used in the Transportation of Petroleum and its Products? — A. No; I never remember of seeing such a book. " Mr. Maechand. I wish to oiler this book in evidence. " The CoMMissiONEE. Mark that. (Book marked 'Exhibit 3, ^V.W.C.') " The CoMMissiONEE. The witness Is shown Exhibit No. 3, being entitled 'Tank Gauge Hand Book N.o. 3.' " The Witness. No, sir; I never saw that book before. "Q. Did you ever see a book like it? — A. No, sir. " Cj. Do you know of any other book which contains the capacities of tank cars which are used by railroads?— A. I do not. ' , , , ^ , " Q. Then, Mr. Kidder, if you wanted to arrive at the weight of a ear loaded— a tank car loaded— you would weigh it first empty, and then weigh it after it was filled'?— A. Yes, sir; that is the only correct wav that I know of of doing it. , „ ^^ j, j, , ^ , " Q. Now, when you deliver tank cars to the New York, New Haven and Hartford road what do you furnish the'Xcw Haven road with?— A. I don't know, sir; I can't tell you. "Q Who does know?— A. Our Boston office; we only bill the cars, you know, to Boston. "Q (By the COMMISSIONEE.) Mr. Kidder, the Standard Oil Company has a large storage capacity for petroleum in I'^ast Boston, has it?— A. Y'es, sir; I don't know the rapacity. "Q. I supriosc vou receive from time to time tank cars loaded there for Iransportation to points on the line of the B<'wton and Albany Railroad'?- A. Yes, sir. * * * * * * * " What I want to know, if vou have any knowledge of this sort, is what the method would be if the Standard Oil people desire to ship a tank of oil from East Boston to some point upon your line to 83A 50 774 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Massachusetts or without the State, we pay exactly the same rates as anyone else pays from Boston to the same destination.' Now, I can not recall and I do not know every local rate on every railroad in the United States, but I do know that we pay the same rate of freight fi-oiii the same jioint to the same point as every other shipper. « " Q. Or understanding with us'?-A. We have no understanding with you at all, Mr. Page, of any Wnd. ^ t * * * " O In other words Mr. Winlock, the rates that you may name us within the State have no con- nection or no bearing in regard to interstate business?— A. None whatever. 776 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. What section? How much is covcvcd from your central distributing point? — A. AVell, I can not say. Of course, it is for Boston particularly, and I know we make shipments from there up to Portland, and I know we make shipments from there down into Massachusetts and Connecticut. Q. Down as far as New Haven? — A. Almost. I mean as far as New Haven. It depends upon what we may have in the Boston tanks, and what the order may be for. You know there are many grades of petroleum, and we do not carry every- thing required at that point or at every shijiping point. <4. Do }'ou supp(jse that your ordinary shipments of petroleum for lighting pur- jioses, at New Haven, for example, would come from East Boston? — A. No; I do not think that we ship to New Haven from East Boston. Q. You would to Providence and Newi)ort, pr(jbably? — A. Newport. In these cases it depends upon the stock and depends upon the situation. I can not answer as to the exact territory that may be supplied from any station, but it would supply the territory as far as its location and its stock was able to do so. Q. How do you supply your shipping station at East Boston? — A. We supply partly by rail shipments and partly l)y steamer shipments from New York and Philadelphia. (j. From your refineries at Bayonne? — A. From seaboard refineries, whatever one it may be. WHY ARE THROUCtH E.\TES KBFCSED OX PETROLEUM PRODUCTS? Q. The statement has been made here bjr some of the independent refiners that in their attempts to ship oil into New England from the West they had found that, although there were through rates on the regular tariff sheets for almost all kinds of goods, there were no through rates for petroleum on the New York, New Haven and Hartford. They stated that in shipping corn, or almost anything else, to Newport or Providence, they would get through rates the same as the Boston rates; but that on petroleum no such through rates were given at all; they had to give the local rate, and this local rate, added to the regular rate from the West, made a rate to New Haven or Newport or Providence very much higher than to Boston. Now, the statement was maile here that that applies not only to New Haven, but generally, and that the shippers of petroleum iji the West are placed at a decided disadvantage on that account. Can you give any reasonable explanation why the railroads should make a special exception i if peti-oleum as to the furnishing of through rates?' — A. Why, I can sav this — that I do not know anvtliing about the corn rates at all. Q. As to what is the general rate? — A, I mean to say that there are many com- modities which the railroads make rates on, on tlie l)asis of through rates and local rates, whereas they may l)e applying through rates on other commodities. I do not know anything exceptional in the matter of oil in New England as comjiareil with corn in the West. I do know that we slrip from the oil regions to New England to some extent, and we jra,y exactly the same rales as the other fellow pays. Q,. Can you mention some of the New England points you supply from the West or from regions of the West? — A. lean not. I can say we do make shipments to New England as -wiAl as Boston. I know also we have made shiiniients from Cleve- land, and also as far as Lima, and wherc-\-er we ha\e made those we pay the same rates as fither people do. Q. Is it >'our rule to make shipments from C!le\eland, Lima, or other Western points to the territory of the New Haven road? — .\. Yes; wi- have. Q. The general fact that you have a distributing |)oint at Boston, from which you can supply this territory tliat is supplied by the "New York and New Haven road, and that they can not furnish through tariffs finm the West, would seem to some of your competitors, at any rate, to give >'ou some ileinded advantage, although no illegal advantage, over them?— A. AVe do not deny that by having our refineries at the Atlantic seaboard and supplying New England from'those refineries we' have an advantage over the man who has t(j take tlie oil from Clexeland (jr the oil region, but we claim no fair adjustment of rates can be made that will put that man on an equality with us in that sitiiation. Q. \Vould you say further that the Standard Oil Company officials have not repre- sented the matter to the New Ha\en road in such a way that they have succeeded in getting the New Haven road to ri'fuse to make through rates on petroleum, while it does make through rates, and those e(jni\'alent to Pxiston rates, on a very large proportion of other gooils that are ship])ed? — A. 1 think that Mr. Commissioner Prouty answered that question by saying that the New Haven road in charging arbi- iSee Mr, Wi'stgate, pp. 37-1, ;W6. STANDARD OIL COMBINATIONS: PAGE. 777 trary rates on oil from Boston as well as from the Hudson Kiver were receiviii)^' more money themselves than they would if they applied the through rate, and for selfish reasons they got the most money they e(_)uld out of the trafhc. Q. (By I\Ir. Smyth.) Is it not a fact that those rates apply to a great many other commodities besides oil; that a larger rate is charged for the shorter distance? — A. As I say, Mr. Smyth, I do not know much about other traffic. I can say specifically in regard to the difference in the rate of corn and oil that I do not know the reasons for it. I can say in a general way that I do not believe the railroads make rates that will injure the business or prosperity of the road. The prosperity of a road depends upon the prosperity of the patrons, and if the railroad makes any rates that are going to prevent shipping (iver their road, it seems to me they are doing what a reasonable man would not do; and mj' experience is that the railroads are represented by as high an order of intelligence in this country as any class that I know of. Q. You have no reason to believe that oil is the only commodity that is charged a higher rate for the shorter distance'.' — A. AI)S(ilutely none. Q. I mean to that point? — A. Xo, sir, I only know, however, about oil. MK. WILLIAM H0(_J-, or would know him if he was in this room. LOW RATES FROM THE ST.VNIIARD's WORKS AT WHITIXli." Q. (Bv Mr. Kexxedv.) I see that your testimony has been sn far in rebuttal of Mr. Rice; there was another witness before the commission who made a statement that I should like to hear \-ou sav something about. He is the gentleman to whom you have just alluded, an interstate-commerce connnissioner. He made a statement before the commission which seemed to show that the Standard < )il C'omiiany had an advan- tage in shipping from its Whiting works down the iMississi]ipi Valley to New Orleans over the independent shippers or letiners of Cleveland, Ohio. I do not know just what the flgures were, but they struck me at the time, if trae, as indicating that the Standard Oil Coinpanv did have an advantage in the rates that were made, a great advantage, o\-er the refiners of Cleveland. As traffic manager of this tank-line asso- ciation, do vou know anvthing about tli( ise rates?— A. I know what the rates are from Cleveland and from Lima to New Orleans. Thev are leased on the local rate to the Ohio River plus the rate from the Ohio Ri\er to Ne^^' Orleans. The rate thus figures out, as I recall, less than half a cent a ton a mile. The haul from Cleveland to New Orleans is over 1,000 miles and has a low rate. As to the rate from Whitmg to New Orleans we have an advantage. 'Whitingissome 400 or 500 miles nearer New (Jrleans than Cleveland. The rate from ^\'hiting , ^ -^ • r, i Q. (Interrupting.) Not that much nearer.— A. Well, 1 do not know tnat it is,^ but it is apprecial .1 v nearer. And the rate from Cleveland t< i Whiting plus the rate from Whitmo- to ^'e'w Orleans is higher than the rate from CUeveland to the Ohio River plus the rate from the Ohio River t., New Orleans. In other \\(ir.ls, I mean to say that we are paying a higher rate in pro])ortion from A\'hiting to .New Orleans when you consider the haul from Cleveland to Whiting. ■ , , , , ^r, (Bv Mr Jexks.) The rate from Whiting, as you say, is coiisi.leralily lower than from Cleveland. Ho vou know ^^•hether the rate from Whiting on other similar prod- ucts, like linseed oii; for example, is lower than the rate 1,-om (. leveland to ^ ew Orleans?— A. 1 do not know Avhat the rates are on luiseed oil eitlu'r from \\ hitmg oi *'°a StatenSil's have been made to this effect-I do not mean to say that these figures are exact but approximately exact-that on linseed oil the ra e from Cl.A-eland to New Orleans would be possibly 28 cents, and from C^icag, , it ^^■ould be somewhat less, sayTsS but that on petr.ileum the difference wf.uld be as great as f rom .jl tr, L'(, .'enls, 1 s,.,. p. 7:il: Mr. Wp«tgate,p.374. , ,, „ -.,„-., -,o ■JS,V' .'ir. Moinu'tt, p. 309; Mr. WcstKute, P- 376; Mr. Rice, W- '30, loh ,oP. 778 HEARINGH BEFORE THE INDUSTRIAL COMMISSION. showing that there would hi' a considerahlo advantage to petroleum as compared with a somewhat similar product, like linseed oil? — A. I can not testify on that; but you can not pick out any tw o commodities and say that because there is a difference on one between two points the same difference should apply to the other. The reasons governing commodities are very nfteii different in the matter of their manu- facture, of the territory that they go over, and the cost in getting them up to that point, and various and sundry reasons, which are good reasons from the railroad standpoint; and as tliey have tlie authority- we accept them as good reasons. Q. (By Mr. Cl.uike.) Are linseed-oil shijiments made in tank cars? (No answer.) Q. (By Mr. FAKQunAH.) Is there a large shipment of linseed oil from Whiting? — A. Without being an expert on linseed oil, let nic call your attention to the differ- ence. Linseed oil is grown very largely in the West. At Chicago linseed oil is nearer the point of production than it is at Cle\'eland. N(jw, there may be very good reasons why the rate from Chicago to New Orleans on linseed oil miglit be higher tlian it is from Cleveland, simply Ijecanse the traffic may stand more. Q. The natural distributing jxiintfor linseed oil is east of Cleveland rather than west of it? — A. The natural distributing [)oint is \vest of Cleveland rather than east, because the oil is grown in the \Vest. CJ. Would not the same reasons hold yood for Buffalo the same as Cleveland? — A. Yes. the Ne\v])ort case. ti. (By Mr. FAKaun.iR.) T ilo not cans I will take the record as it came on that— A. But I will call yays back the investment everv three vears.' I would say that since the formation of the Union Tank Line Company, August 1, 1.S9I, thai company has neverpaid adivitleiid, and that the earniugsof that company for the 8 >-ears, 18!)! to ISH.s, inclusive, have shown an aVeiage yearlv I'etnrn on the capital invested of 4,] per cent ]>er annum. This return has been figured without (4iarging anything off for depreciation, altlKjugh according to master\^ar builders' STANDARD OIL COMBINATIONS: PAGE. 779 rules (on which raih'oads- base their settlements between each other) a depreciation of 6 per cent per year is deducted in case one railroad destroys anothei- railroad's t-ars. The three-fourths of a cent mileage paid the Union Tank Line Company is exactly the same as is paid all other tank-car owners, and there are in the United States between 170 and 180 individuals and companies, entirely outside of the Standard Oil Company, owning an aggregate of 7,420 tank cars, while the Union Tank Line Com- pany's equipment November 1, 1899, was 5,851 cars. I offer a statement giving the names and ownership, made up from the very best records we have, of the owners of cars outside of the Union Tank Line Company, showing an aggregate ownership of nearly 2,000 cars more than the Union Tank Line Company has. -(Following is a copy of the exhibit offered by the witness:) Stati'tiiftil showing tixunher of f'nik ao-.s and oimiers of mine, ofJwr than Utdon Tank Lhii- Conqxinij, hasfd ni>o)i best obtain (Me pvhli si icd iiifurniatio)/. oh of Noiu^ndwr 1, 1899. American Cotton Oil Co Chicago Alcatraz Asi)halt Co ; Sun Franciscd . American Oil Works i Titusville, Pa . Arper,Geo. W . Alexander Co., M.H Archer cV- Douglas Tank Line American Tank Line Anglo-American Provision Co Armour Tank Line Allegheny Valley Kaih-oad American Product Ci > Baltimore and Ohio R. R Baltimore and Ohio Southwestern R. R. Barrett Manufacturing Co Beaher Refining Co Bay Terminal R. R Barber Asphalt Paving Ci > Brazilian Turpentine Co Buckeye Transportation Co Brittan Provision Express Burlington and ■\Ilssouri River R. R Boston and Albany R. R Central R. R. of New Jersey Century Oil Co Cincinnati Oil Works Cleveland Refining Co Climax Tank Line Columbia Oil Co Coliunbia Tank Line Continental Oil Co Continental Refining Co Complanter Tank Line Craig Oil Co Crew Levick Co Crystal Oil Refining Co Cudahy Packing Co Cygnet Tank Line Canadian Pacific Rwy Canada Southern Rwy Consumers' Gas Co Central Lard Co Charlotte Oil and Fertilizer Co Cleveland Linseed Oil Co Cotton Oil Refining Co Crescent Tank Line Crystal Tank Line Charleston and Western Carolina R. R.. Cleveland and Marietta R. R Duffy, James M Dold Packing Co Denver and Rio Grande R. R Emery Manufacturing Co Emery Candle Co Empire Oil Works Ea§le Cotton Oil Co Ellis & Companv EI Paso and Northeastern Rwy Florence Pipe and Tank Line Co Freedom Oil Works Co Fairbanks, N. K 1 We learn that the Bav Terminal Railroad Company has under construction and almost completed lOoSi^tfonal b\00O^gall.;n capacity tank cars built by Haskell .t Barker Car Co., Michigan City. Ind. ■^aii Francisco , Cincinnati Chicago , Cleveland Chicago do Pittsburg Philadelphia Baltimore, Jtd Cincinuati Chicago ■Washington, Pa Toledo. Ohio New York City , Allegheny, Pa Cincinnati Chicago Lincoln, Nebr Boston, Mass New York City Lima, Ohio Cincinnati Cleveland, Ohio Titusville,Fa New Y'ork City Indianapolis. Ind — New Y'ork City Oil City Warren, Pa Toledo, Ohio Philadelphia, Pa Oil City South Omaha, Nebr Cleveland , Montreal Detroit, Mich Toronto, Ont New York Citv Charlotte. N.C Cleveland Baltimore, Md New York City Chicago Wilminy-ton, N.C — Cambridge, Ohio El.lred, Pa Kansas City, Mo Denver, C'olo ■ Bradford, Pa Cincinnati Reno, Pa Meridian, Miss , New York City Alamorgo,N.Mex ... Denver, Colo Freedom, Pa Chicago 780 HEARINGS BEFORE THE INDUSTRIAL COMMISSION/ Statement showing number of tank cars and ovmers of same, other than Union Tank . Company, etc. —Continued. Location. Number. Freret, F. W Germania E-efining- Co Glade Oil Works Globe Tank Line Great Western Tank Line Green Line Guarantee Oil and Gas Co Gulf, Colorado and Santa Fe R. R Grand Trunk Rwy Garden City Dairy Co Gate City Oil Co. .' Goyer, G. W Globe Refining Co Holmes, A. S Holmes & Adams Houston and Texas Central Rwy Heinz & Co ." Hammond Tank Line Independent Refining Co Independent Tank Line Indiana Pipe Line and Refining Co Ivorydalo and Millcreek Valley Rwy International and Great Northern R. R Jobbins, Wm. F Kansas City Tank Line Kentucky Refining Co Keystone Sirup Co Leader Refining Co Le^v"i5 Tar Tank Line Leonard Ot Daniells L()uis\'ille Tank Line Leonard & Ellis Lewis Roofing Co Louisville ("'otton Oil Co Lakeside and Marblehead R. R Los Angifies Terminal R. R Loxingti.in and Eastern Rwy .^fanhattan Oil Co Mi iicr'8 Oil Refining Co jniwaukec Gaslight Co Muir Tank Line Municipal Gas Co Merchants' and Planters Oil Co Michigan Ammonia Works Mutual Refining Co Metz^er Linseed Oil Co Morris Tank Line Mexican Central Rwy Monterey and Mexican Gulf Rwy National Linseed Oil Co '. Nichols Chemical Co Northern Pacific Railway New York Central and Hudson River R. R . Ung Hiller & Co <_)matta Packing Co. Tank Line Pacilic Coast Oil Co Pacific Steam ^^^laling Co : Paine & Co Paragon Refining Co Peerless Tank Line Pennsylvania and Delaware Oil Cn Pennsylvania Paraffine Works *... Penn Petrolatum Co Pennsylvania Tii,r Manufacturing Co Penn Refining Co T. Powell & r.'o.. M. W Producers' Oil Co Provision Dealers' Despatch Peerless Transit Co Pittsburg Kulining Co I*'jc(),s Raihviiy System Portland juid'Ruinford Falls Rwy lied " C" Oil Manufacturing Co [iichjirdson Lul)ricating Co i;e|)!iuno (ihemical Co Pill (lni(K](.', sicrre Madrc and Pacific Rwy. sit!i,\vn<'(.' Oil Co '. . Smith, Levi St. Lr.uis Southwestern Rwy Spcare's Sons, Alden S( )lvay Process Co Southern California Rwy New Orleans, La Oil City, Pa Warren, Pa Marietta, Ohio Cleveland, Ohio Oil City, Pa Terrc Haute, Ind Galveston, Tex ; Montreal I Chicago Atlanta, Ga Memphis, Tenn I Louisville, Kv ' KuIYalo. N. Y I Titusville, Pa I Houston, Tex I Pittsburg, Pa Hammond, Ind ' Oil Citv Boston Cliicagit < 'incinnati Palestine, Tex Aurora, 111 Kansas City, Mo r.(nds\ilie, Ky Pu(.ria,lll "^A'ashiiigtoTi, Pa liock Island, ni Piqua, ( Hiio Louisville. Ky Vii'arrc'n, Pa iJock Island, 111 LiinisN illr, Ivy Marhlebtad, i )hio Los Angeles, Cal lA'xiugton, Ky Lima, Oliiij AUeghi'iiy, Pa Milwaukee, Wis M'arren, Pa Alhanv.N. V Houston, Tex Detroit Cliarleston, S. C <'liii-ago do City of Mexico . Jlouterey, Mexico . Chicago". New Y'ork Citv St Paul, Minn . N(.'W ^'ork City , Cincinnati. S(mth Omaha, Nebr , ian Francisci do. W i 1 k (.'stia rre , Pa Toledo rU'VL'land New York (Utv Titnsvilk'.Pa .' ('orao|iiilis, Pa Chicago, 111 Oil Citv ChicMgo \\'arrL'n, Pa Chicago n(.'veiand,Ohio Pittsburg, Pa Ciirisbad.N. Mex Rumlonl Fa,l!s,i\rc ... Baltimore, Md (Juinev,lll Wilniiiigton, Del El Paso, Tex Lima. Ohio Norlli <;iarcndnn,Pa . TyU'r, Tex Boston, Muss Gcddcs.N.Y L()s Angeles, Cal STANDARD OIL COMBINATIONS: PAGE. 781 Statement shouing number of tank cars and o^cncfn of sanw, other tlnm Union Tank Line Company, etc. — Continued. Name. Southern Cotton Oil Co Swift Refrigerator Line Sayers Tank Line Spencer, Kellogg Sherman Oil and Cotton Co Santa Te Pacific R. B, Santa Fe, Prescott and Phcenix R. R Sonera Rwy Southern Pacific Co., Pacific System Schwarzchlld & Bulsberger , Sherbrooke Tank Line Texas and Pacific R\vy Titusyille Oil Works Toledo Linseed oil Co Trinity Cotton Oil Co Texas Midland U. li Toledo and Ohio Central Extension E. R . . . United Oil Co Union Oil Co. o£ California United States Ammonia Co Warren Refining Co Waverly Oil Works Wallace & Gregory Bro's Western Chemical Co ' Wogan Brothers' Tank Line Wilburine Oil Works Wisconsin Central Lines Western Xew York and Penilsylvania Rwy Wright & Hills Linseed Oil Co Total. Philadelphia , Pa Chicago St. Louis, ]Mo Builalo Sherman, Tex Los Angeles, Cal Prescott, Ariz San Francisco do Kansas City, Kans. Capelton, Quebec. . Dallas, Tex Titusyille, Pa Toledo. Ohio Dallas, Tex Terrell, Tex Marietta, Ohio Florence, t'olo Santa Paula, (.!a]... New York City Warren, Pa Pittsburg, Pa Padueah. Ky Denver, Colo New Orleans, La . . . ^^'arren.Pa Mil\\-Eiukec, Wis ... Buffalo Chicago Number. .50 200 20 20O 75 18 1 2.:) 10 20 24 2 2 37 33 • 27 2 9 30 18 .5 13 12 Q. (Bv ill-. ICennedy.) Do these tank-line companies, outside of the tank hue you are speaking for, t-arry oil for the Standard Oil Company?— A. The [standard Oil Company ship, as far as the}- can, in Union Tank Line cars. They do use outside cars when thex can not set the Union tank cars, and need them. Q. Xow, the testiuionv is that the Standard Oil Company do pretty nearly 90 iier cent of the )jusiness in the United States, and it would Ic.ok a little curious that they could do that business with 40 per cent of the tank-line cars of the country, unless they were using the cars of some other company to some extent. — A. The explana- tion of that is that the tank cars use maki; it profitable to its officers or stockholders.— A. I STANDARD OIL CO.^IBINATIONS: PAGE. 783 think I ha\e made that clear, that the tank ear is a neeesnai\' adjunct in tlie petio- leum business. Q. Well that is . — A. (Inten-uptiug.) Ami is neeessarv in enabling the Standard Oil Company to distribute the products of petroleum ecom imically throughout the United States; and Ijy economically distributing, it has increased its business— the Stantives toward the Staudai-d Oil Company'.' — A. I have testified that my knowledge and belief is that the present owners of the Union Tank Line Company and the Standard Oil Clomi)any are the same. Now, those owners think that the tank car is necessary in the conduct of the general business, and therefore continue in the use of those cars under the name of the Unicm Tank Line Company. Q. Well, that puts a little different light on it; I understooil you to say that they were not the same in all respects'? — A. You misunderstood me; I said that they were different corpijrations. Q. Now, then, do you know of an)- reasons why the officials or officers of the Standard Oil Com]jany should prefer to operate this as an independent company instead of l\v the Standard direct? — A. I clo not. Q. (By ^Ir. Jenks. ) When you speak of the Standard Oil Company are you think- ing of one company or the several Standard Oil Companies? — A. I am speaking of the companj', as it is generally known, as one conrpany. Q. Is this company that you are si)eaktng of in that wm technically and legally one company, or is it several — twent}'-fi\-e different companies? — A. I do not know that I am tiuiiiieteiit to answer as to that. There has been recently formed, as you kno'n', the Standaiil Oil t'onipany of New Jersey, which, as I understand — I had rather cancel that au'-wer. I do not know; that is all. Q. You had intimated some little time ago that there were prol)ably some legal reasons which you yourself did not know about, for having this Union Tank Line Company organized as a separate corporation. Perhaps in tlie same way' there are some legal reasons why the Standard Oil Company, which we speak of sometimes as one, was organized as several different companies. I had thought it possible that as long as the Union Tank Line C'ompany was ser\ing so many different companies it might be a con\-enient matter legally fi ir it to have its separate organization, and I did not know but j-ou had A. (Interrupting.) I am \-ery much \'er the United States, is in a better position to do si.> than if those cars weir owned b\- the Standard Oil Company that was doing the manufacturing or the marketing business. Q. You also had su<;gested that it was largely a matter of bookkeepmg between all these different companies? — A. A\'ell, I did not mean to convey any sucli idea. I did mean to say this, and that is all I can say about it, that the Union Tank Line Company is a seyiaratc corjioration, and serves all these companies in furnishing tank cars tor shipment. •1 (By 3Ir. Ke.xxedv.) Have the tank cars that the Union Line owns been pro- vided with air ]ji-akcs and couplers in compliance i\ith the intirstate-commerce law?— A. Thev have. Q. Consequ'entlv th(.'V are an instruinentalit>' of interstate t-ommerce?— A. The cars are used in interstate ccimmerce, \'es, and would Ijc subject to the general order requiring cars used in interstate commerce to lie equipped with air brakes and couplers. , i- i ■ Q. I asked you those questions because >ou saul in repl>- to a question of mine a little while ago that aou did not know tha't a comjiau)- like that was subject to the Interstate Commerce' Commission. — A. As I understand that, )du refer to requiring cars used in interstate traffic to be equipped with safety appliances, and that is not a part of that law. . . , ■ ■ , t ■ , Q. It is put under the Interstate Commerce Commission s supervision.— A. It is.' Then to that extent they are. 784 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE TANK LINe's ONLY INCOME IS ITS MILEAGE — IT PAYS NO COMMISSIONS. Q. (By Mr. Smyth.) But they are not under the jurisdiction of the Interstate Com- merce Commission in reference to fixing rates, because on those cars the railroads fix the rates. — A. We simply carry the oil and receive the mileage, the same as the rail- roads pay all other tank-car-line owners. Q. (By Mr. Faequhah.) Does not your company stand in the same relation as the other private ears in this country? — A. Exactly. Q. Paying exactly the same as the other cars do? — A. Exactly. Q. (By Mr. Conger.) I would like to inquire if the witness can tell whether the Unien Tank Line C'nmpany pays commissions to the Standard Oil Company for freight carried? — A. They do not. They get nothing from the Standard Oil Com- pany; the only thing that the tank-line' company gets is the mileage they receive from the railroads when they run their cars over the line. Q. I think you misunderstood my question. Does the tank line company pay any of its earnings to the Standard (.)il Company as a ciiinmission for getting its busi- ness? — A. Not one dollar. Q. ^\'ould you care to state the salaries paid to the officers of this tank-line com- pany; are they large? — A. I should .'^ay they are small. I should prefer not to say what my salary is or what the others are, but I would say they are iKjt exorliitant. I am not afraid of its making too large a showing for the Union Tank Line Company, but I think they are small. Q. The point is this: I think it has been testified to before this commission that in the opinion of several vi'ry prominent and highly res]iertalile railroad men this rate of three-quarters of a cent a mile ought to be profitable for the owners of the cars, and the testimony that you have gi\en here this morning seems to me remarkable; I have been trying to gi't at the disposition of tbe earnings of this company. — A. If a car ^\as continued in constant use throughout the year on long tiips, it might be; but I tell you honestly that my statement that 4^ per cent is the average earning on the investment of the Union Tank Line Company is the exact truth, witliout any manipu- lation of the liooks to make a salary or a 1)ig earning. We have been, for instance, in the last 2 )'ears at an expensi' of iS12.5 cm each car for these automatic brakes, air brakes, and tbe automatic couplers; and that |125 i>n each car does not bring us back 1 cent. Q. Ob, that is probaljly true; in addition you testified tliat in your opinion there are conditions surrounding the use of these tank cars that would make the business of owning and njierating them less profitable than the o\Miing and operating of cars in use the year around? — A. Yes. Q. (By I\Ir. A. L. Harris.) What allowance is made by the Standard Oil Company to the Union Tank Line Company for hauling its oil? — A . Nothing at all. The Union Tank Line Company gets its pay and its only pay from the railroads over whose lines the car travels. Q. That is all the pay it gets? — A. It pays none of its earnings tn the Standard Oil Company, nor does the Standard Oil Company jiaj- any of its earnings to the Union Tank Line. '),. (By Eepresentalive Lorimer.) The majority of the stock, I understand, of the Union Tank Line Company is owned by the principal owners of the Standard Oil Company; is that correct? — A. I do not know in detail. I believe, and I have stated, that the owners of the Union Tank Line Company and the o^\ners of the Standard Oil Company are the same. <)_. What this commission seems to be ti-ying to get at is why a corporation of that sort should 1h'. organized and run without a jirofit. Nn the later shipment, claiming the same rate as had been paid on the shipment which Chess, Carley & Co. complained of. The claim was sent, as I understand, in the regular way to the railroads, and, as is customary with railroads, the billing of the car and the correspondence in con- nection with the shipment were all gathered together in c^ne folder, and attached to this folder was this letter written by Mr. Hathaway. That letter was attached to the papers and the claim when it was returned to ilr. Eice with the claim refused. He got that letter in that wny. It showed that the railroail people did not construe it in any such way as Mr. Rice has tried to put it, because if thej^ had they certainly would not have sent it broadcast and attached it to the papers and scut them Ijack to ilr. Rice. Q. Jlr. Culp, I believe, testified that he never had seen the letter personall}'? — A. He testified in the proceedings before the Bacon committee in 1888 that he had never seen the letter, and if he had he would have understood it as has been explained, that it was simply calling attention to an error, and that Mr. Hathaway used the same expression that was current in the Louisville and Nashville office when an error occurred, that the machinery was loose and ought to be tightened uji. Q. There was> apparently no intent on the part of the Louisville and Nashville officials to suppress the letter or destroy it; it was handled in the ordinary course with the papers in that case? — A. Exactly. And I might furthei- add that Chess, Carley & Co.'s offices in Louisville at the time that letter was written were at the corner of Fourth and ilain streets, and the office of Mr. Culp was on the corner of Second and 31ain streets, two squares away; and I think if it had e\'er been intended that an order \mis to be given to the Louisville and Nashville road to advance rates in any such way as Mr. Rice has tried to show, a letter would not have been written that had to go only two squares. It would have been atteurpted in s[ \NY DISTKIBUTINCi POINTS — THE CONSUMER GETS THE BENEFIT. In reference to Interstate Commerce C'ommissioner Prout>''s remarks in regard to the Standard Oil Company, when :\Ir. Prouty appeared before the Commission early in October, which testimony I heard: t'ommissioner Prouty's arguments seem to be to the effect that the Standard Oil Company had advantages, by reas(.in of having its refineries and distributing plants at Chicago and the Atlantic seaboard, as well as at Lima, Buffalo, and other middle-State points, as compared with a refiner who had his works only at Cleveland or in the Pennsylvania oil regions. We'admit that by having refineries and distributing i)lants at Chicago for the West; at Buffalo, Lima, and Parkersburg for the middle States and the South, and at the Atlantic seaboard for the East and New England, we have decided advantages over a I'efiner who has his works only at one point, and who tries to compete with us in selling oil throughout the country. We claim, however, that such an advantage is a fair one, and can not be overcome by any fair or reasonable adjustment of freight rates. We further claim that by having our refineries and distriliuting plants located at various points through- out the country, we can and do distribute more cheaply and sell the oil at a less cost to the consumer, and it is more to the interests of the country at large for the con- sumer of oil to get it at a low cost than it is to try to fix freight rates on any basis that will permit one manufacturer at one point to distribute his products throughout the United States. That, gentlemen, closes all that I have prepared. I am perfectly open and glad to answer any qviestions j'ou gentlemen have. ADVANCE IN CANADIAN FREIGHT RATES, Q. (By Mr. Jenks.) We had some testimony here a little time ago with reference to the freight rates on American oils from the United States into Canada, in which it was said that very lately there had been a very decided increase in the freights on American oil going into Canada. This was thought to be much to the disadvantage of those who had to ship oil from the United States into Canada;' can you explamto us that matter of freight rates? — A. I can say that I know there was an advance in freight rates from Detroit and Toledo and Buffalo and other frontier points on oil from the United States into Canada. I can further add that we pay those advanced rates, and that we ship 80 pei- cent of the oil that is exported from the United States into Canada. We therefore pay four times as much as all the balance of the oil ship- pers together. <;. What proportion of your sales in Canada are shipped from the United States, and what proportion are sales from the Canadian product? I understand that the Standard Oil Company owns practicallj' all of the Canadian refineries.- — A. I do not so understand it, and I ilo not know the relative shipments from the United States compared with the consumption of oil manufactured in Canada. I do know, though, that shipments from the United States into Canada have increased in the last year; in fact, since that advance in rates as cimipared to the old situation.' (.1. Do you know what proportion of the refining industry of Canada is owned by the Standard Oil Company? — A. No; I do not; I do not know that the Standard Oil Company owns any interests in Canada. PENDING SUITS FOR ALLEGED FREIGHT DISCRIMINATION CHARGES ON OIL IN BARRELS, (^ ^Ve have had some evidence with reference to suits that were brought against the railroads liy independent refiners in \vestern Pennsylvania, in which they claimed that the railroads had lieen dealing unfairly with them in the charging of freight rates — suits that are still pending; * can you tell us anything with reference to those suits? — A. I do know that several >'ears agi i — I do not recall how many — the Interstate (iommerce Commission decided that the weight of the barrel, when loaded with oil, should be carried by the railroad fi'ee. In other words, they should not charge for 1 See 5rr. Wo.itgatp, pp. :l7,s, HVfl; Mr..Cion, pp. 676-677, 680, ('.,S2-685. = Si'.- Mr. Gall, p. 673; Mr Arclibolcl, p. .573. "See Mr. (iiUl, pp. 677, OSU. >h!ce Mr. Lee, p. 'JS7; Mr. Wcstgate, pp. 379, 380; Mr. Archbold, p. 516. STANDARD OIL COMBINATIONS: PAGE. 789 the barrel when it contained oil. An order ^\•as entered to that effect, which the rail- roads declined to obey. The Interstate Commerce Commission have since that time gotten some evidence from the plaintiffs in that case as to the volume of their ship- ments in barrels within a certain period, and fixed the amount of damages which they claim the railroads should pay back to those shippers of oil in barrels. The railroads also declined to pay that, and that case is now, I believe, before the United States Court in Pittsburg and is still pending. I would say in connection with it that at the time when the shipments were made in barrels by these plaintiffs and the rate of freight was charged on the weight of the wood, the Standard Oil Company was mak- ing shipments of oil in barrels and paying for the weight of the wood. In other words, there was no difference in the rule or the rate that was applied on the ship- ments of the plaintiffs and upon the shipments of the Standard Oil Company, Q. Was this custom of the roads one that was brought about in any way, to your knowledge, by the action of the Standard Oil Company officials? — A. No. Q. What was it? — A. In the first decision of the Interstate Commerce Commission in regard to the relative rates that should be charged on oil in barrels and oil in tank cars, the commission decided, by Judge Coolej', that the rate per 100 pounds in car- loads, on oil in tank cars or on oil in barrels, including the weight of the barrels, should be alike. The railroads adopted that order. Then on the second case, after Judge Cooley had left the bench, some other commissioner decided that the Ijarrel should be carried free; and that the railroads declined to follow. Q. The commission practically reversed its own decision? — A. They tried to reverse their own decision before the United States circuit court at Pittsbuig. Q. I say, practically reversed its former decisions? — A. Yes. Q. But it was under the first decision that the charges were made? — A . Under the first decision that the charges were made. THE MOST OF THE STANDARD'S OIL IS FINALLY DISTKIBITED IN BARKELS. Q. Do you recall what proportion of the shipments of the Standard Oil Company at that tinie, before the second decision \i-as rendered, v\-as in tank cars, and what in barrels? — A. Your question involves the whole country; and I should say that the shipments, as a whole, of the Standard Oil Company in barrels exceed the shipments of the Standard Oil Company in bulk in tank cars; you must bear in mind that wlien the Standard Oil Company ships its oil in tank cars to a distributing station, it is bar- reled there to a very large extent, and it goes out in barrels, and it is a part of. the barrel sales of oil. I think I am correct in that statement, and it is the best that I can give; that is all. Q. That is so at the present time? — A. It is true still. Q. (By jNIr. Clarke.) Therefore, very much of the oil which is shipped is shipped part way in tanks and the rest of the" way in barrels?— A. It is; when it comes to local country points on the line of a railroad. The rule that the commission made there, if applied to oil, would naturally apply to every other package that might be put around any other commodity that was susceptible of any other mode of shipment. Q. (By Mr. Smyth.) Lubricating oil, I suppose, is shipped in barrels, is it riot?— A. It is shipped in tank cars to some extent — yes. so FAR AS THE WITNESS'S EXPERIENCE GOES, THE STANDARD NEVER DICTATED FREIGHT RATES TO BE CHARGED TO OTHER SHIPPERS. Q. (By Mr. Phillips.) You admit, JMr. Page, that the Standard Oil Company did receive large rebates before the passage of the interstate commerce act?— A. 1 admit that. Q. From your knowledge and lielief and information?— A . My knowledge and belief and actual experience, Mr. Phillips, was that prior to the interstate coniiuerce law we got as low rates as we could. , , ^-i ^, j ■ Q That amounted to verv considerable worth to the Standard Oil Company during that period, no doubt?— A. 'it meant that we got lower than tariff rates, the same as all other shippers; not only shippers of oil, but all other people. ^\ e could get them and did get them. I can add this, that as far as my own experience goes, prior to the interstate commerce law, when we secured lower than tariff rates, it never was m any instance a part of an agreement what the railroads should charge. Any other oil shipper could j^'ct as low a rate as we could, or lower, if the railroad saw fit to give it. We attended simply to our own business. ,,,<.. c-^ , i ^-n r, Q. (By Mr. A. L. Harris.) That was the universal rule ot the Standarrl Oil Com- pany?— A. Which? 83A ol 790 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Not to interfere with the rates of anyone else? — A. I can only speak in that regard, so far as my own knowle EVER RECEIVED A SH.VRE OF THE RATE P.-VID BY OTHERS Q. Do you know of any instance wliere there was a higher rate charged to the inde]jendent refiners than to the Standard, and that Vias divided iietween the St;ind- ard and the raib'oads? Is there any such testimony? — A. I do not know of any instance. I will .^ay no; I do not know i of the Stanilard ( )il Company? — A . Ni >, sir; i know very little about jiipe-liiie matters. Q. Do you know whether the Stamhird Oil ('ompany ever placed a premium on oil in s])ecial fields where there weri' independent pipe lines, and Viy this means caused them to suspend business, or biaiglit them out? — A. I know nothing whatever as to any prices paid for crude oil. (j. Or about the pipe-line business in that i-cganl? — A. No, sir; I do not. Q. Do you or do you not know whether the Standai'd Oil Company oiiposed, after having their ]iipe line to the seaboard, the passage of the free-pipe-line law in Penn- sylvania or in New .Jersi'y? — A. I know nothing whatever about if, sir. Q. Do you know whether the Standard Oil Company o|)posed, directly or imli- rectly, the Tnited States Pipe Line in securing the rigiit of way through the Slate of New .lersey? — A. I know nothing whatever about it. (l Yon do not know about that? — A. No, sir; I am not coimected with the ]iipe- line dei)artnient in any "way. Q. When independent companies shipped abroad did the Standard Oil Company ever obstruct ocean transportation in any way or obstruct them in getting ocean and steamsliip service? — \. .\ot to my knowledge, in any way. 0,. Have you knowledge or information as to the installation plants or receiving tanks in Germany or other countries? — A. I have not, sir. 0. Have you any information in regard to the agents wlio transferred and sold the Standard oil in foreign countiies — Standai'd agencies abroad? — A. I know there are some Standard a,i;encies abroad; \'es. ■ iM r. .Vu'llljiilil, pp. r.,'ili-.559: Mr. Rice, pp. 700-709 STANDARD OIL COMBINATIONS: PAGE. 791 ^ Q. Have you any information in regard to this: tn a man in Germany, or who was in Germany, reeeutly deeeascil, ])y the name of Poth, who handled oil of the indeiiencient companies in (ierman\?— A. Never heard the name before, sir. Q. You ha\-e no knowledge, then, of their purchasing all these installation plants abroad, ahnost wholl\- in Germany?— A. I have no knuw li'df;e. EXPORTS — PRICES HIC4HEE ABROAD. Q. (By Mr. Kenxedv.) Have you knowleilge of the relative value and prices of oil exported?— A. I only know in a general way that the exports (if petroleum products produced by the Standard ()il Company are in excess of their wells within the United States. In other \v(jrds, a large share of the Standanl Oil Company's business is outside of the United States. In regard to the relative prices, I would say that the consumer of oil in the United States gets his oil for \'ery much less than the consumer of that same oil abroad, and that is due principally to the tai't that we have facilities within the United States for cheaply distriliuting the oil to the consumer that the company has not got on the other side. ^tr. Kice refers to the price of oil at Xew York for export as compared with the price of oil in ^Montana and Idaho,' and tries to convey the idea that we sell oiu- oil abroad for less money than to the consumer within the t'nited States. I sub- mit that the price (if export oil at Xe^\' Y(jrk is the ]irice for cargoes at the mouth of the refinery, whereas the price of oil in ^Montana and Idaho must necessarily include expenses of distribution. The freight goes from Chicago, for instance, out to those Western States, and comparing the price to the consumer of a barrel of oil out in the mountain districts of Idaho and Montana with the cargo jirice of export oil at New York is manifestly unfair. Q. Have you any knowledge of the Standard Oil Company selling oil in the German market below the point of profit for the purpose of driving other dealers out of that market and of their being curbed in that practice liy the German Govern- ment? — A. I have no such knowledge, sir. HUSSIAX OIL. I have heard, and I believe, that the German Go-\-ernment issued an order within the last year or so re(|uiring the railroads of Germany, which are under govern- mental control, to burn exclusively Russian oil and not American. Q. (By 3Ir. S.mytii.) Is it not a fact that the great competition you have in Eng- land is A\ith the Russian oil, which is backed liy the Rothschilds? — A. The Russian field is a great c(jmpctitor of the American petroleum field. The iiroduotion of oil m Russia is, I belie\e, to-day equal to that of the United States, and at times has been in excess of it. In fact, I have known of r(?ports of one \\ell in Russia that has produced as much as 100,000 barrels per day, which is as much as the entire Penn- sylvania oil field in certain sections, and the price, I do know, of Russian crude oil is very much lower than the price of American crude oil. Q. "(By Mr. A. L. Harris.) What about its quality? — A. Its quality is not so good as the Pennsylvania oil. It is more like the Ohio crude. Q. (By 3Ir. Phillips.) Do you know whether the Russian oil is exteiisiyely sold now in Germany? — A. It is S(.ild in (Tcrmany, and it is sold in Italy, and it is sold in England. Q. Is it sold to any great extent in Germany? — A. To as great an extent as they can sell it, sir. OCEAN TRAXSI'ORT.VTION FOREIGN 5IARKETS A.M) .VUENCIES. Q. (By Mr. F.VR(irHAii.) Does the Standard Oil Company own its own oce.an lines for transportation of oil to Europe?— A. I am not ver>- familiar with that part of it, Mr. Farquhar; but I kncjw in a general wav that they do own or have an mterest in certain bulk tank shi|is and also some schooners. The tank ships are used for the transportation of the bulk oil from the Uniti-d States to certain points m Europe where there are tank facilities for receiving it, and the ships are used for the ship- ment of case oil to the far East. . . , 1 , iU C.i J ] Q, Can vou tell the commission how many countries m the world the Standard Oil Company sells its oil to?— A. I think it would be easier to name those that we do not, or that we do not try to. I think we sell, sir, all (..ver the world; as far as we can. 1 See p. 734 792 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Will you kindly state the means of transportation tor the Asiatic trade? Is that by steamer or sail? — A. By sail, usually, and against very severe competition of the Russians. They have tank steamers liy which they transport tank oil from Batoum to India, and even to China and Japan. Q. The statement has Vjeen made that the Standard has sold oil in foreign markets — in Asiatic countries — where they have had a return of only one-third of the price of the oil in the market itself; d<] you know anything about that? — A. I do not know as to that, sir. Q. You know nothing about the price of oil and competition of other oils used in Asiatic countries? — A. I only know we have shipped oil there, and still do, as against Russian competition. As to what the prices are there, I do not know; but I do know, from information and belief, as I have before stated, that the consumer of oil abroad pays verj' much more for his oil than the consumer within the United States. y. (By ilr. Smyth.) Testimony has been given here that the Standard Oil Com- pany has over 360 agencies throughout the world, every one of which is in charge of an American citizen.' Do you think that is correct? — A. I do not know. I do know that we have many agencies, but how many 1 do not know. I do know in a general way that we send Americans to take charge of those departments, but how many there are I can not say. Q. (By Mr. Phillips.) Do they exert a very considerable influence on our consuls abroad? — A. I have no knowledge of it, sir. THE STANDARD WOULD MAKE PEICES TO KEEP THE TRADE. Q. You spoke some time ago of the advantage the Standard Oil Company has over others by having refineries at many different points in the United States in the lessen- ing of freights, etc. There are quite a number of the independents that have such advantage, too, in localities; that have advantages, perhaps, over the Standard Oil Compan>' in certain localities. Is it or is it not, has it or has it not been, the practice of the Standard Oil Company where independent oil was being distributed to ship their oil in and sell it lo\\er than the usual price or make it unprofitable for others? Do you know of any such instance as that? — A. I can only say in a general May, Mr. Phillips, that «e doubtless ship the oil from the nearest point and try to sell it. Q. Do you know or do you not know that when the independent refineries recently began to distribute oil in New York the Standard dropped prices very greatly so as to make it unprofitable? — A. I do not know that, sir. Q. Or Philadelphia? — A. I do not knassage of the interstate commerce law was confined to the Louisville busmess and south. Q. You desire to have your testimony limited to your i5wn knowledge, and not to be broader than your own knowledge? — A. I supposed that went without saying. Q. I would like, for the benetit of the commission, to read the syllabus: "[Circuit Court, S. D. Ohio, E. D., Is,s7.] "1. E.\ILRO.\D COMPANIES — RECEIVERS — DISCRIMINATIONS. "The receiver of an insolvent railroad company can not unjustly discriminate in the charges imposed upon rival shippers over his road in order to increase his rev- enues, and, if guilty of discrimination, may be removed by the court therefor. "2. SAME — REMOVAL. " The Standard Oil Company having threatened to store its oil until it could lay a line of pipes to Marietta, unless the receiver of a railroad company should give it a special rate, the receiver agreed to carry its oil at 10 cents per barrel, to charge rival shippers 35 cents per liarrel, and to pay 25 cents per barrel of the sum collected from rival shippers to the Standard Oil Conipany. Held to be such gross and wanton dis- ciimination on the jiart of the rel•ei^'er as to require his removal.'" This is on page 575, Trust Proceedings of 1888. (Testimon}' closed.) suppleme:n^taey evidence. AFFIDAVIT OF GEOKGE RICE IN REBUTTAL OF HOWARD PAGE. City, CoiDilij, and Slate of Xi'u' I'ori', .w.- On this 2d dav of January, 1900, personally ajipeared before me George Rice, of Marietta, Ohio, who, being dulv sworn, iloth depose and ,-ay: That he has rea.l the affidavit of one F. B. ,S(|nire, the secretary of the Standard Oil Company of Ohio, which was presented to your commission by Howard Page December 13, IHiiy. In answer tliereto 1 most positively and unequivocally deny that in 1876, or at any othei- time, I offered or include.l m\' producing properties and pipe lines in the proposed sale of mv (jil priijierties for the sum of :p24,000. The real truth of the matter is that in the \-ear ISTfl Mrs. Ru'e and myselt were boarding in New York at the same place with .said S(|uire, and Mrs. Eice was acquainted with a Sirs. Wearing, who was als(.i an acquaintance ul said Squire. That in some conversation with :\lrs. Waring the matter of the oil busmess c«iie up between them, and snbse.|uentl\' the said S(|uire spoke to dc] hi neiit about his oil interests and sai.l he possibly could sell some of it to the Standard Od Company, it he was so disi « )se., S. \'. Harkness, and H. M- Flagler, about the year 1807. STANDARD OIL COMBINATIONS: ROCKEFELLER. 796 2. Q,.^ What wore the causes leading to its foi'iiiation? — A. The cause leading to its foHnation was the desire to unite ourslt ja-oducts. 3. Q. Did the Standard Oil Company or otliei- affiliated interests at any time l)efore 1887 receive from the railroads rebates on freight shipped, or other special advan- tages? — A. The Standard Oil Company of Ohio, of which I \\-as president, did receive reliates from the railroads prior to LSSO, but received no special advantages for which it did not give full compensation. The reason for rebates was that such was the railroad-' method of busiifess. A public rate was made and collected by tlie rail- way companies, but so far as my knowleilge extends, was ne\-er really retained in full, a portion of it \^'as repaid to the shippers as a reliate. By this methoVl the real rate of freight which any shipper paid Avas not known liy his competitors nor liy other rail- way companies, the amount being in all ca-es a niatter of liargain with the carrying company. Eacii shipper made the best bargain he could, but whether he ^\-as doing better than his competitor was only a matter of conjecture. 3Iuch depended upon whether the shipper had the ad^-antage of competition of carriers. The Standard Oil Company of Ohio, being situated at Cleyelaud, had the advantage of different carrying lines, as well as of water transportation in the summer, and taking adyantage of those facilities made the best bargains possible for its freights. All other companies did the sanre, their success depending largely ujion whether they had the choice of more than one route. The Standard sought also to offer advantages to the railways for the purpose of lessening rates of freight. It offered freights in large quantity, car- loads and train loads. It furnished loading facilities and dischargirig facilities. It exempted railways from liability for fire. For these services it obtained contracts for special allowances on freights. These never exceeded, to tlie best of my pi-esent recollections, 10 per cent. But in almost every instance it was (lisc(5vered sub.se- quently that our competitors had lieen obtaining as good, and, in some instances, better rates of freight than ourseh'cs. 4. Q. If so, in what years were these advantages largest, and from what roads were they received? — A. To the best cif my recollection the greatest rebates were paid from 1877 to 1879. During that time we had an agreement for a s\iecial 10 per cent cent- mission. I think that agreement was made with the Pennsylvania^ the Erie, and the New York Central roads. Large rebates were also paid n)ents by rail ^vith shipments by Erie Canal.' But these rebates were paid to all who shipped by rail. They were not discriminatory rates. I am not now suie whether any other road than the l^ennsylvania collected the full amount and paid these rebates. Tlie Erie and New York ('entral made the same reductions in rates to meet canal ship- ments, but my impressi(jn is that the Erie at least did not collect tlie higher rate from shippers and rebate it as did the Pennsylvania. 0. Q. About what percentage of the profits of the Standard Oil Company came from special advantages given liy the railroads when these were greatest? — A. No percentage of the profits of the Standard Oil ( Vimpanj' came frorji advantages given by railroads at anytime. Whatever advantage it received in its constant efforts to reduce rates of fi-'eight was deducted froiu the price of oil. The advantages U> the Standard from low freight rates consisted solely in the increased \'olume of its bus- iness arising from the low price of its produi'ts. 6. Q. Did the Standard Oil Company or any of its afiiliatcd companies ever receive, imder any name whatever, any income from any railroad for oil shipped over thcjse roads by any of its competitors? If so, give particulars. — .1. I know of no such instance. It seems that some arrangement of that nature was entered into by one of our agents in Ohio, being the same case which has been tcstitied to by George Kice.^ When notice of this agreement was brought to the officers of the company for which it was made it was promptly repudiated, and the money i-eceiyed, some small amount, I think under s;^,00, was refunded. And this was done not because of any acti(m in court or judicial opinion, but promptly as soon as reported, and before we had any knowledge of judicial jiroceeilings. 7. Q. Has the Standard Oil Company received any financial la\iirs trom any rail- roail since 1S87? — A. To my knowledge, none whateyer. iSee Mr. Lockwood, pp. 386, 387. ^Sce Jlr. Rice, pp. 706-709; Jlr. Archljokl, p. .556-559. 796 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 8. (^ Has the ownership of stock in railioad companies by officers of the Standard Oil Coni]iany given the Standard advantages witli those raih-oads over its compet- itors? If so, give particulars. — A. It has not. St-piod\icts, sparing no expense in inti'odudng them to the public. It has not he«sitated to invest millions of dollars in metho' well would shut down and every foreign market would be closed to us. The pipe-line system required other improvements, such as tank cars upon rail- ways, and finally the tank steamer. Capital had to be furnished for them and cor- porations created to own and operate them. Every step taken was necessary m the business if it was to be properly developed, and only through such successive steps and by such an industrial combination is America to-day enabled to utilize the bounty which its land pours forth, and to fur- nish the world with the best and cheapest light ever known, receiving in return therefor from foreign lands nearly $50,000,000 per year, most of which is distributed in payment of American labor. I have given a picture rather than a detail of the growth of one industrial combi- nation. It is a pioneer, and its work has been of incalculable value. There are other American products I'esides oil for which the markets of the world can be opened, and legislators will be blind to our best mdustrial interests if they unduly hinder by legislation the combination of persons and capital requisite for the attain- ment of >o desirable an end. 11. Q. What are the chief disadvantages or dangers to the public arising from them? — A. The dangers are that the power conferred by combination may be abused; that combinations may be formed for speculation in stocks rather than for conducting business, and that for this purpose prices may be temp(jrarily raised instead of being lowered. These abuses are possible to a greater or less extent in all combinations, large or small, but this fact is no more of an argument against combi- nations than the fact that steam may explode is an argument against steam. Steam is necessary and can be made comparatively safe. Combination is necessary and its abuses can" be minimized; otherwise our legislators must acknowledge their incapac- ity to deal with the most important instrument of industry. Hitherto most legisla- tive attempts have been an effort not to control but to destroy; hence their futility. 12. Q. What legislation, if any, would you suggest regarding industrial combina- tions? — A. First. Federal legislation under which corporations may be created and regulated, if that be p(issible. Second. In lieu thereof. State legislation as nearly miiform as possible encouraging combinations of ijerscjus and capital for the purpose of carrying on industries, but permitting State supervision, not of a character to ham- per industries, but sutficient to prevent frauds upon the public. John D. Rockefeller. State of New Yobk, Ounity of Xeii- Yorl; ss: I swear that these statements made by me of my own knowledge are true, and that all other statements I 1 lelieve t(5 be true. Jonx D. Rockefeller. Sworn and suliscribed U> before me this 30th day «i December, 1899. S. JI.\RSH.\LL BCSSELLE, Xotari/ Puhlii; Nre extensive and perfect scale, with improved machinery and appliances, and by locating them in the centers of the trade they were intended to reach, the manufacture of oil has been much cheapened and improved. By spending large sums in the investigation of methods of utilizing Ohio and Indi- ana oils,^ and by" purchase of various patents, they have succeeded in making a superior article of illuminating oil out of what for some years seemed an almost worthless product. 3. By miiting with the business of transporting and refining businesses necessarily collateral thereto, to wit, the manufacture of barrels, tin cans, boxes for inclosing cans, paints, glue, sulphuric acid, etc., and by union of capital and skill, obtaining the best machinery and manufacturing on a large scale, they have cheapened these products. 4. They have obtained and utilized the best scientific skill in investigating and experimenting upon the obtaining of new and useful products from petroleum, and have cheapened illuminating oil and otherwise benefited mankind by the utilization of these by-products. 5. They have used their miited capital in opening up the markets of the world for American petroleum, and have held those markets against the fiercest foreign com- petition. This was rendered possible only by the employment of millions of capital, in the cheapening of transportation at home, across the ocean, and in foreign lands, and by the best and cheapest methods of manufacture. The proofs of these propositions will be found in the statistics of petroleum, show- ing its production, prices of crude and refined, consumption at home, and amount exported to foreign markets. "While the Standard does not produce, refine, and market all the oil, it has been the leader in the business, and competitors hajye suc- ceeded by miiting their capital, skill, and acts and following the same methol.8. It may be asked whether all this could have been accomplished without combi- nation. It could if one man could have commanded the necessary capital and emplo}'ed the proper means and persons. But that was manifestly impossible. It could have lieen accomplished by one corporation instead of many, but no charter could be obtained authorizing a corporatiiDu at once to produce, manufacture, trans- port by pipe line, car, and steamer, and deal in oils, and also to manufacture packages, acids, etc. The theory of the combiuation was that a corporation created by and largely doing business in a State should take its charter from that State. Until charters can be granted by the Federal Government the agency of different corpora- tions will be required in any business like that of American petroleum, which seeks all the markets of the world. S. C. T. DoDD. September 18, 1899. 1 See Mr. Archbold, p. 532; Mr. Emery, p. (124; Mr. Gall, pp. 672, G8I. THE SFGAK COMBI^^ATIOI^S {RESUMED). Boston, Mass., July ]S,1S:)9. TESTIMONY OF EDWIN F. ATKINS. At a meeting of the suboommi-sion on manufactures and general business, held in Boston, Mass.. July IS, ly99. Chairman Smyth presiding, Mr. Edwin F.Atkins appeared at 10. -L") a.m., and being sworn, testified concerning the sugar industry Q. (ByMr.S-MYTH.) What is your address?— A. Thirty-five Broad street, Boston. Q. And your business?— A. Manufacturer and importer of sugar. Q. (By Mr. Parqupiar.) How long have you been in the business?— A. I have been in business since IStiT— in general business— and always more or less con- nected with sugar. When we were refining sugars we imported from all over the world. Q. Have you a refinery now?— A. No: we put our refinery in the American Sugar Company at the time the combination was formed, and since that time 1 have had no active interest in the management of any refinery. Q. (By Mr. Smyth.) If you have any preliminary statement that yon would like to make to the commission RESULTS OF THE WAR WITH SPAIN. A. The developments from the Spanish-American war, and the peace that fol- lowed it, have been such as to entirely upset the foreign sugar business in the way of imports. Since the duties bore equally on foreign sugars imported into the United States from all parts of the world, except the Sandwich Islands, the tariff made little difference in the foreign selling price. After this war started the first thing done was to annex the island of Hawaii. While the Sandwich Islands sugars had come in free of duty for many years past there had not been a very rapid increase, through the fear in those islands that the treaty might be canceled. Since the annexation of the islands they have begun to use every efiort to develop every acre of land that can possibly be brought into the cultivation of sugar, and the consequence is that I look for further material development of the sugar industry in the Sandwich Islands. The second effect of the war was that on Porto Rico. Undoubtedly Porto Rico will be annexed to the United States, probably by the coming Congress, and the sugars from Porto Rico will be admitted into the United States free of duty. Q. (By Mr. Farquhar. ) Do you mean by "annexation" a Territorial condition or a colonial condition? — A. I do not believe that it can be anything except a Terri- torial condition. I do not believe that we can find anyway of carrying on colonies. I think that i.sland as well as the Sandwich Islands must come in as Territories for a period of years, the same as our Western Territories. THE PRESENT TARIFF ON SUGAR. Now, the present tariff assesses a duty upon raw sugar, 96 test, of $1.68^ a hun- dred pounds — 1.68 cents a pound. That bill was framed largely in the interest of the people in the United States who wanted to raise beet sugar. It went through Congress because it was at the same time an easy way to collect revenue, and the country was at that time in need of revenue, so they put on this high rate of duty. The rate as assessed under the Dingley law was, then, about equivalent to 85 per cent ad valorem on foreign sugars. That was the protection which the beet-sugar manufacturer expected to get, and one-eighth cent per pound on refined sugars, as the beet-sugar factories were making, practically, granulated sugar. I have some tables here, prepared 3 weeks ago, before I had any idea of coming before this' commission, giving the value of sugar abroad, on a basis of 4* cents, duty paid, in New York on the 1st of July. Though they were made up quite recently, the market has since changed; but the proportions hold the same. I have taken Germany, Cuba, Java, English colonies, Porto Rico, and Hawaii. Of course there are many other sources of supply, but these are the largest. The United States has framed treaties with the British colonies, Barbados, Trinidad British Guiana, and Jamaica, subject to ratification by the United States Senate, under the power, conferred upon the President in the Dingley bill, of '83a 52 801 802 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. making treaties with foreign countries and rebating duties in the United States to an extent not exceeding 20 per cent, we receiving reciprocal advantages. The power of the President in that matter, under the Dingley Act, expires on the 34th of July, current month. I have made due allowance for the difference of freight rates between places where Imsiness becomes coastwise and those countries from which sugars can be brought under jiags of all nations. Our business with the Sandwich Islands has become coastwise, and although Porto Rico is not annexed and our duties are enforced against its products, the President and the War Department declared the business of Porto Rico coastwise. I tate first the duties under the tariff. In the case of Germany they are §1.685 per 100 pounds plus the countervailing duty of 25.9 cents; Cuba, §1.685, without any countervailing duty; Java siLliS."), without countervailing duty; English colo- nies, alter ratification of the treaties, 81.^-1^, uo countervaling duty; Porto Rico, no duty at all; Hawaii, no duty at all. Now, the freights from Germany are about 8 cents a hundred; from Cuba. 10 cents; from Java, 80 cents; from the English colonies, 10 cents; from Porto Rico, 18 cents; from Hawaii, 27 cents. Then I have figured the insurance from these various countries — the marine insurance— laid down in New York. In the case of Germany, 1 have deducted from the charge the bounty paid by German}', which is 25.9 cents per 100 pounds. That leaves the free-on-board value on the basis of 96 test. Of course the sugars coming in from various countries are of various grades and values, but all hold to the relative value of 96 test. Q. (By Mr. Smyth.) It is the standard? — A. Yes; and the markets rise and fall from that basis. FOREIGN VALUES OP SUGAR CORRESPONDING WITH 4-i CENTS IN NEW YORK. The estimated price, free-on-board values. United States currency, on a basis of 96 test, in the various countries which are our principal sources of supply, calcu- lated from the New York value, July 1, 1899, of ii cents for 96 centrifugal sugar, would be as follows: In Germany, IJi^.Tl per hundred; in Cuba, §2.69; Java, §2.46; English colonies, ,$3.02; Porto Rico, §4.38; Hawaii, .§4.14. The refiner in New York or Boston i.s buying from all these countries. He bids in Cuba at $3.69, or Porto Rico at §4.28, or Hawaii, $4.14— or the same price laid down here in New York or Boston duty paid. Table 1. — Estimated free on board values. United States currency, on the basis of 96° test, in the various countries constituting our principal sources of supply, calculated from the New York value, Jidy J, 'lS99, of 4\ cents for 96° centrifugal sugar. Charges. Duties: Tariff Countervailing Estimated freights Insurance on f . o. b. value Less bounty F.o.b. value Foreign value above Ger- many. Cuba. Cents, i Cents. l.lisr, l.fts,-, it \ None. .080 .020 1 2.044 .259 1 . Twr, ■i. Tl-> .inn . (12.5 4. .50 4. .50 Java. Cents. 1. 685 None. .300 .050 ;.465 4.50 :.46 Eng- lish colo- Cents. None. .100 .028 3.024 4.50 ~3r02~ Porto Rico. Cen ts. None. None. 4.» 4.50 Ha- waii. Cents. None. Noue. .370 .090 4.140 4.50 CUBA CAN NOT COMPETE UNDER OUR PRESENT TARIFF ARRANGEMENTS. The consequence is that if Cuba is made an independent nation Cuba is com- mercially ruined by our tariff. It is impossible for that island to compete under the conditions of our present tariff; no duty on sugar from some countries, a reduced duty on sugar from other countries, and no duty on sugar produced in the United States. THE SUGAR COMBINATIONS: ATKINS. 803 CONSUMPTION IN THE UNITED STATES AND SOURCES OP SUPPLY. As to consumption and supply in 1898 we have the following ourions results: The consumption of the United States was 3,047,001) tons. Now the sources of supply; Of domestic cane we produced in Louisiana and Texas during that year 235,000 tons, and of domestic beet sugars 3S,000 tons; that is, 268,000 tons of domes- tic sugar, of course protected to the extent of the existing tariff. We received free from Hawaii and Porto Rico during the same year 295,000. The crops of Trinidad, Barbados, .Jamaica, and British Guiana, which will have special advan- tages, I supjjose, of '.'0 per cent under the new treaties, produced 327,000 tons in the same year. Of the remaining sources of supply we have Cuba, which pro- duced 300,000 tons; Java, 095,000 tons: the Philippines export 60,000 tons (though the trade was upset by the war) : Egypt, 90,000 tons; Santo Domingo and other West , Indies, 70,000 tons; Brazil, 165,000 tons; all this is subject to the full rate of duty of §1.685 on the hundred pounds. We have the immense sum of 3,170,000 tons. In addition to that is the surplus crop of Europe, 500,000 tons. Table 3. — Consumption and supply. Tons. Consumption of sugar, United States, 1898 3, 047, 000 Sources of supply on basis of crops of 1898-99: Domestic cane ' 235, 000 Domestic beet- .-- - 33,000 Total (protected by present tariff) .-. - 368,000 Free foreign sugar: Hawaiian Islands - 340,000 Porto Rico 55, 000 Total (no duty) 395,000 To have advantage under reciprocity treaties: Trinidad 50,000 Barbados 45,000 Jamaica 37,000 British Guiana --. 105,000 Total (supposed duty 1. 35 cents) - - 337, 000 Subject to full duty: Cuba__.. .--.. - 300,000 Java 695,000 Philippines export 60, 000 Egypt -- 90,000 Santo Domingo and other West Indies - , - - 70, 000 Brazil 165,000 Total (duty 1.685 cents) 1,380,000 3,170,000 Excess of European beet sugars over requirements of Continent and Great Britain on basis of crops of 1898-99, about 500, 000 The present United States tariff will, in case of the annexation of Porto Rico and ratification of the reciprocity treaties as agreed upon, have the effect of tax- ing the consumer and granting a bounty to the producers, as follows, the figures being made up on the basis of last year's crops: ^^ ^ ^x, j, „ ^ * e^-, cqk • The domestic production of 368,000 tons has the benefit of the full duty of |i.o85, equal to .S.^4.74 per ton, or SIO.114,330. Of course these domestic sugars will add the duty to the price of foreign sugars, and the producer gets the tu.i benefit ot the protection. The duty on the Sandwich Islands' 240,000 tons on an average of 95 test including all grades,would amount to $36.96 per ton, or §8 8,0,400. Porto Rico with a crop of 55,000 tons, on an estimated average test of 89, would get the benefit of a duty equal to §32.25 per ton, or .?1,773,750. Trinidad, Barbados, and Jamaica with their crops of 133,000 tons, on an average test of 89, the duty would amount to .'?;33.35 a ton at the full rate, or $3,934,500, and 30 per cent rebate ov that amount would be 6786,900. British Guiana, with 105,000 tons and an aver age test of 96, the duty under the present rates would amount to $37. /4 per ton, oi 804 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 83,963,700, and the rebate of 30 per cent would give g;!)3,540. The sum total of that which may be considered a tax on the consumer for the benefit of the pro- ducer is $32,337,910. Table 8. Domestic production. 268,000 tons; estimated average, 96 test; duty at 1.685 cents per pound = S37.74 per ton §10, 114, 320 Sandwich Islands, 340,000 tons; estimated average, 95 test; duty at 1.65 cents per pound = $36.96 per ton _ ._ . 8,870,400 Porto Rico, TjS.OOO tons; estimated average, 89 test; duty at 1.44 cents per pound ^§33 3."> per ton. .... 1,773,730 Trinidad, Barbados, and Jamaica, 123.000 tons; estimated average, 89 test; dutv at 1.44 cents = $33.35 per ton, $3,934,500; supposed 20 per cent rebate... ... .... ..... 786,900 British Guiana (Demarara), 105,000 tons; estimated average. 96 test; duty 1.685 cents = $37.74 per ton, $3,963,700; supposed 20 per cent rebate.... 792,540 Charged consumer for benefit of producer 32,337,910 CUBA RUINED IP OUE T.IKIPF DISCRIMIN.4.TES AGAINST HER SUGAR. Now, you can see that Cuba, for which we went to war. if it is to be independent, and comes to this country and is obliged to pay the full rate of duty, is absolutely ruined commercially, because the crop of sugar is the only staple product. They raise a great deal of tobacco, but it is insignificant as compared with the sugar, and the future of Cuba depends upon the reestablishment of her sugar industry. She can take care of herself provided she can get into the United States free of duty, or if she enters the United States on the same terms with other sugars; but entering here with a duty of $1,685 per hundred pounds, when her sugars are in ordinary times only worth about $3.35 a hundred pounds — you can readily see that siich a condition as that would mean the absolute ruin of the island of Cuba. THE TARIFF AND THE BEET- SUGAR INDUSTRY — THE AMERIC-i-N FARMER GETS NO MORE FOR BEETS TH.IN THE GERMAN. A great deal has been said about the need of the farmers in the United States having protection, heavy protection, in order to enable them to raise beets for the manufacture of beet sugar in competition with the farmers in Europe. Now, I have gone through the figures with as much care as I could. I have not got suffi- cient data to submit them to you to-day, but I possibly will have a little later. As far as I have investigated I find that the American farmer receives from .$4 to $4.50 per ton for his beets. I find that the German farmer gets almost the same price for his beets, which leads me to infer that the American farmer has been held up for the pity of the public by the beet-sugar manufacturers only to get this high rate of duty. In fact, the farmer does not get it, but the manufacturer of the beet sngar gets it. Now, here is a little paragraph taken from Willet & Gray's circular of June 29; The farmers of Germany received last year for their beets, delivered, $4.38 per ton. I believe that ton is 3,204.6 pounds. This was prior to November; and after that, for later deliveries, $4.52, Holland paid to her farmers 8-1.26 to $4.46 where it was near the factory and $4,06 where it was distant from the factory. Russia paid $4,24; Sweden paid $4,42 to $4,85; Belgium, $3.47 to $6.17, according to the grade of the beet; France paid $4.83 to $5.21 per ton for the beets. There has been a very interesting l.iook written by Herbert Myrick in the interest of the American sugar industry, and I will quote a few paragraphs here in regard to the prices of beets. The Watsonville factory (in California) pays $4 a ton for all beets. He gives a little table here showing the prices paid to the farmers in southern California, showing an average of $4.35 a ton. Then, speaking of the Chino factory in Cali- fornia, the average price for beets was $3,78, and speaking of the Chino factory again, he says the factories have been obliged to reduce their price from $5 to $4 a ton. In Lehi Valley, in Utah, he says, at $4,35 a ton the farmers received $163,000 for the crop, I could go on and (juote a great many other instances, but it is not necessary. The point I wish to make is this : The beet-sugar manufacturers in this country have calli'd and are still calling for a very high rate of duty, in order to enable THE SUGAR COMBINATIONS: — ATKINS. 805 the American farmei- to raise beets in competition with the European farmer. My investigation would show tliat the manufacturers of beet sugar m the United States pay to the American fanner, in spite of the duty, but very little more than the German farmer gets from the German manufacturer. DUTY ON RAW SUUAR AND DUTY ON REFINED— THE BEET-SUGAR MANUFACTURER GETS BOTH. The Dingley tarifE protects the manufacturer of beet sugars — as to the sugar tariff there are two rates of duty. The first is $1,825 on the 100 test: that is, the standard test at 81.08.5, and for every degree up or down 3^ cents, equivalent to §1.8^5 for 100 test. It pays another duty of one-eighth cent per pound where the sugar is above No. 16 in color and called refined sugar. Q. (By Mr. Farquhar.) How do you make the 100 test on that?— A. All sugars pay a duty on the test, whether raw or refined. If it is refined it pays an addi- tional duty of one-eighth cent on the pound. Now, the manufacturer of beet sugar in the United States gets the first duty of bl.83o, and as he manufactures refined sugar he gets another protection of one- eighth cent on the pound, or 13^ cents. Then these beet factories are situated, most of them, west of the Missouri River, and freight to the Missouri River we can figure at about 50 cents — one-half cent on the pound. Q. From the port? — A. Yes; from the coast. So he has an advantage over for- eign imported refined sugar of the two rates of duty plus the cost of transportation to the Missouri River. Where he is supplying the local demand in the region west of the Missouri River it gives him an advantage of S3. -15 on every 100 pounds of sugar he produces, BEET sugar should BE MADE IN THE UNITED STATES FOR Si CENTS A POUND. Now, I notice in the report of the Agricultural Department in Washington on the beet-sugar industry that some figures have recently been made abroad on the cost of the production of beet sugar in the United States. They are looking upon the United States as a possible competitor. They take the theoretical yield of the beet as reported by the United States Department of Agriculture and the experi- ment stations, which reports show the beet in the United States, in most of the States of the Union, as equal to the beet on the continent of Europe. They figure on the actual reports of the prices paid for these beets — the figures that I have given. In that way they get at the cost of production ; that is, the price at which beet sugar ought to be produced in the United States— 3 i cents a pound, I believe, for granu- lated sugar. It may be 3^; unfortunately I have not the data with me. Now, the point I have been trying to make is that this high rate of duty, given at the request of these beet-sugar manufacturers Q. (Bj- Mr. Smyth.) Does not that atfect the Louisiana planter; does it not pro- tect him"? — A. Exactly. I am. illustrating with beet sugar because the other has been brought out to some extent, I think, in your investigations. Now, if beet sugar, granulated, can be produced in the United States at 3,1; cents a pound, according to the reports of the experiment stations, and at the figures given, based on the actual prices paid for the beets and the labor, it would seem that the manufacturing of beet sugar here in this country requires nothing like the present protection. high duty MAKES HIGH SKILL UNNECESSARY — THE LOUISIANA SUGAR INDUSTRY. In practice they have not come up to the theoretical yield of the beets: but they do it in Germany, they do it in Austria and in France, and there is no good reason why they should not do it in the United States, except for the fact the pro- tection is so large it does not pay them to make a wide study of such (luestions as this. . Now, in Louisiana, when they had an enormous protection— the old protection— they went on making sugar in open kettles. , Q. (By Mr. Clarke.) That was before the McKinley tariff?— A. Clear before that. After the McKinley tariff came into force, sugars were made free and domestic sugars were paid a bounty, which was less than the former protection, but a good bounty. When that period came they went to work and began to improve their methods, because they could not get the prices for the sugar and in Louisiana to-day you will find as tine plants as anywhere in the world That was brought about by low prices. When I first went into Cuba some years ago, when prices dropped so low, a new set of men came in there; 806 HEARINGS BEB-'ORE TPIE INDUSTRIAL COMMISSION. and they built some of the finest factories in the world, worked them sci- entifically and got skilled labor, and found they could produce sugar at a profit at a price which everybody supposed would entail a heavy loss. That was the result of the stimulation of low prices. The same thing happened in Demarara; the .same thing happened in Germany. Instead of being discouraged when prices went down to the cost of production, they went to work scientifically and found a way to reduce the cost. Q. (By Mr. Farquhak.) Have you anything to say about withdrawal of the Louisiana bounty? In what condition has it left the industry in Louisiana?— A. Except for a very unfortunate freeze that they had last winter, something unavoidable — the sugar industry in Louisiana was in better shape a year ago than it had been previously. They produced a large crop in 1897-98, and would have produced a still larger crop in 1898-99 if it had not been for the weather. Q. (By Mr. Smyth.) Was not that improved condition due to the protection they had after the Dingley tariff?— A. As regards prices it was. LOW PRICES COMPEL IMPROVED METHODS— CANE AN ARTIFICIAL GROWTH IN LOUISIANA. Q. A change in that tariff would seriously affect their prosperity, would it not? — A. I will not say that. They had not begun to improve their methods until sugars went down to a point where it stimulated them; and the prices in Louisiana during the last year or two would have been considered ruinous 20 years ago. Q. (By Mr. Clarke.) Did not their improvement begin under the stimulus of the McKinley tarifl!?— A. No; there was no duty under the McKinley tariff. They improved their methods when sugar went so low they could make no profit out of it. Q. (By Mr. Smyth. ) Do you think that industry could be prosperous if the duty was withdrawn? — A. No; I do not think so. I do not think the climate of Louisi- ana is adapted to the production of sugar cane. It is an artificial growth there, and they are deserving of the greatest credit for being able to produce sugar there at all. It is only through the very best of work that they have been able to com- pete in spite of the protection. In the case of beet sugar it is another thing. Q. But the duty applies to all sugar, whether beet or cane? — A. Yes. Our climate in the United States is as well adapted to the production of sugar beets as any other place, whereas the climate of Louisiana is not adapted to the production of sugar cane as are the West Indian Islands and parts of South America. Cane in Louisiana never fully ripens. It is always cut before it matures. It does not contain the sugar that is contained in the same cane in the West Indian Islands. the tariff and the sugar 'refiners. A great deal has been said about the protection accorded to the refiner. We will see what they get. I can not give you the exact foreign cost of granulated sugar, but if I say 3+ cents a pound it will be near enough. Now, the first duty that pays on 100 test would be §1.825 per hundred; if that is figured out it amounts to something over 50 per cent. The second rate for refined sugar is 13* cents oh the hundred pounds, and on a value of 3+ cents would be 3| per cent ad valorem. Q. (ByMr.FARQUHAR,) That is claimed to be insufficient, is it not? Considering the duties on refined sugar and the countervailing duties against the bounties in Europe, what is the protection to the American refiner? — A. Our countervailing duty offsets the bounties in Europe. Q. Then that is a protection here? — A. It is a protection against the sugar com- ing from those countries. Q. Sugar refiners claim there is insufficient protection to their business now.— A. I think we can throw the bounty out entirely, and then in addition to that the refiner has one-eighth cent per pound. Q. That is 3^ per cent ad valorem? — A. I believe that is the protection the refiner gets. If you have granulated sugar in Europe for export to the United States at a given price, it pays one-eighth cent a pound over and above what is assessed as regular duty. That one-eighth cent is the protection the manufacturer gets for refining sugar. COST OF refining. Q. Can you give us the rate of profit to the refiner, independent of the tariff?— A. I am not acquainted with the management of refineries at the present time. It would be my experience of 10 years ago, which is a back number now. I know what we figured our cost at that time; we considered it to be about a half cent a pound. THE SUGAR COMBINATIONS: — ATKINS. 807 Bight heve possibly I might call yonr attention to this thing in the discussion that I have seen in the papers about the cost of refining sugar. People seem to figure just the bare cost of refining. Besides the cost of refining, namely, labor, fuel, cliar, office expenses, etc., you must take account of ])ackages. insurance on goods in transit, and interest on money borrowed to conduct your business. It may be that the concern has money enough to condiict its own business, but, the interest on that accumulated surplus ought to be considered. What it would cost the refiner to-day I do not know, but if he has reduced the cost So per cent from those figures as we calculated them 13 years ago, I should consider that he has done very well. THE TAiaFP AND THE BEET INDUSTRY. Q. (By Mr. Faequhar.) Suppose instead of one-eighth cent it was one-fourth cent duty, what effect would that have on the consumer? — A. I think that would depend on the source of supply. If the present competition is waged for a long period they are going to continue to sell sugars at very little, if anything, above the cost of refining them. Q. (By Mr. Smyth.) Do you think such a change in the tariff would stimulate the beet industry in this country? — A. Well, no. I think a man that can not make money under the present protection had better go out of business. Q. (By Mr. Clarke.) Prices would be lower without the present protection, I suppose? — A. Yes. Q. You say low prices stimulated the development of the Louisiana industry? — A. I said it stimulated the improvement in the method of production. Q. (By Mr. Smyth.) They had to cheapen the cost? — A. Or go out of business. Q. They went at it in a scientific way? — A. Exactly. Now anybody ought to he able to go into the beet industry to-day, if there is anything in it at all. and make money whether he knows anything about the business or not. The sugar business is something to be learned. I have been in the business for more than .°>0 years, giving most careful attention to it all the time, to the cost of production in all parts of the world, and I do not think that I have begun to know it yet. CUBA— LITTLE FRESH CAPITAL GOlSd THERE. Q. What is the condition of the sugar industry in Cuba at the present time? You are interested in sugar raising in Cuba?— A. Yes. sir. Before the insurrec- tion 1,080,000 tons of sugar: the crop that has just closed, a little over 300,000 tons. That reduction was brought about by the insurrection and war. Now the people are afraid: they have no money in Cuba, no available money for investment. There is nlentv of money in the "United States, and plenty in Europe, in England, and also 'in Spain. They would go to Cuba and go into the sugar business, but they are afraid of the independence of the island and the withdrawal of the United States. Q. You think it is true that English capitalists are investing m Cuba at the present time?— A. Capitalists have invested in railroads. Q. Any in sugar plantations?— A. I do not know of any. There may have been some. They have invested quite largely in railroads. Q. Since peace?— A. Since peace. Before, these people had interests there, but they are consolidating and extending. Very little fresh capital is going into Cuba; and the reason is. they see very clearly that if Cuban sugars have to pay the high rate of duty in the United States in the future, and sugars are admitted free from the Sandwich Islands, Porto Rico, and the Philippines, and the domestic industry is stimulated by the present enormous rate of duty, they could not compete. DOUBTFUL AVHETHER THE PRESIDENT COULD MODIFY THE TARIFF AS TO CUBA. Q (Bv Mr Clarke.) Supposing Cuba should be independent, and there should be a reciprocal agreement between this country and Cuba, like that which is being arranged with the British West Indies, could the sugar industry m Cuba nrosDer'^- A" Well, before I answer that question I should like to go back a little. Snecial newer was conferred upon the President to make reciprocity treaties for 2 years from the date of the signing of the Dingley Act. That power expires on the 24th of July, this month. Whether the President has a constitutional power to make treaties affecting the tariff I am not able to state; some hold he has but I think in the face of the coming election the President would be very cautious about exercising that power. ^ . ^ • -ui 4. j 4.1, O Congress might extend the time, I suppose?— A. Congress might extend the time by a special act. Congress can do what it likes in regard to the tariff. It is 808 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. a very simple matter to make suggestions, and very good suggestions, in regard to the settiementof tliese matti-rs; in practice it is a most difficult thing to get any partial tariff bill through Congress, particularly if it is a sugar-tariff bill. Q. (By Mr. Fariijihar.) Without opening the tariff question at all before Con- gress, could not this take the form of reciprocal treaties with these countries?— A. I do not think so, sir. Q. I understand in the Dingley bill there is executive authority. — A. It does seem to me, if the President had the constitutional power to make treaties why did Congress take so much care in conferring such power and limiting it? I think, looking back at our treaties for 50 years, that every treaty which has involved the expenditure of money, or has affected the existing tariff, has gone to the House. A 30 PER CEXT REDUCTIUN OP DUTY WOULD NOT MEET THE NEEDS OP CUBA. Q. Without any opening of the question of the tariff by the coming Fifty-sixth Congress, if they took up the reciprocal features and made the extension, it would accomplish all that was needed in this matter? — A. No, sir. Q. What else is needed? — A. Suppose there is a change of 20 per cent. That will reduce the duty on centrifugal sugars from .Sl.fW to .$1.35. That is against no duty from the Sandwich Islands, no duty from Porto Rico. My point is this: Ho country — I do not refer to Cuba especially, I only illustrate with Cuba — no sugar country in the world, in the face of the enormous production, can hold the United States market in the face of discriminating duties, because the selling price of sugar ranges too near the cost of production. Now, the world's price of sugar two years ago ranged at less than the average cost of the worlds production. Some few individuals were able to make money because they thoroughly under- stood their business. These individuals were not confined to any one place— they were all over the world; but I believe the world's crop of sugar was produced at a loss for a jieriod of at least three years. When you make some s^igars free and put a high tariff on others, the effect is to aid, first, the sugars that come in without duty: second, those with a favored duty, and to leave out such as pay the full rate of duty. The result would he that if there is any discriminating duty the enormous natural production will drop the price below the cost of production, and no country can compete in the United States market against a discriminating tariff. I do not say they will not compete for a month or a year, but the effect in two or three years will be to drive them out of business. THE SUGAR DUTIES AND THE CONSUMER. Q. When American refiners claim that one-eighth of a cent is insufficient as a protection, and that one-fourth of a cent will be sufficient, what are we to argue as to the condition of the consumer? Is the sugar cheapened to the consumer, when the price of sugai- is really regulated by the refiners of the United States and nobody else? By what process will you cheapen the refined product for the American people — for the consumers generally? — A. I would take the duty off raw sugar entirely, except countervailing duties against bounty-paid sugars. Q. Mr. Havemeyer claims that would abolish all the refineries and break the business to pieces. —A. Do you think you understood Mr. Havemeyer right on that point? I am very much inclined to think you are mistaken. I say the way to reduce the cost of sugar to the consumer is to abolish the duty on raw sugars. As to the duty on refined sugar, one-eighth cent a pound is so small that I do not think it affects the consLuuer in any way. If you want to reduce the jirofit of the refiner, that is all you can do; take off the one-eighth cent a pound. Q. With free raw sugar, what effect would that have on the refining business in this country? — A- No effect whatever. Q. (By Mr. Smyth.) What wotild be the effect on the income of the Govern- ment? If the duty on the raw material was repealed, what would be the loss to the Government?— A. I could figure that, but it would be a rough estimate. It would be about UMi.imfiOO. Q. In what form would the Government make that?— A. That is a pretty big question. We have tariff taxation and internal-revenue taxation. I think one of the easiest ways the Government can raise a revenue is on refined petroleum oil. There are many articles of that nature where the collection of the revenue would be very simple. Not having given particular thought to the question of revenue, I would only inalt Ort Nov IHc Year and month. $1.09 1.09 1.09 1.09 1.103 1.14 1.14 1.14 1.14 1.14 1.14 1.14 1.052 1.04 1.04 1. 0.36 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1. 053 1.10 1.109 1.138' 1. 142 1. 14; 1.15 1.16 1.15 1.15 1.63 1. ]78 1. 176 1.17 1.17 1.174 1.18 1.18 1.18 1.18 g- I 2 1.190 .190 .19 .19 . 203 .240 .24 .24 .24 .24 .34 .24 .152 .14 .14 .136, .13 $0. 862 .Vi .13 .13 . ,]3 .13 .13 .13 .13 .13 .13 .13 .153 .200 a$0.136 .209 a. 145 .238 a. 174 .242 (1.178 .242 (1.178 .260 (1.186 .260 a. 186 .250 a . 186 .250 a. 186 .263 a. 199 .278 a . 214 .276 a. 212 .270 (1.206 .270 a. 206 .274 O.210 . 280 a. 216 . ?80 (1.216 . 2811 a . 216 .280 &.199 .862 .862 .920 1. 1. 1. 1.088 1.088 1.088 1.088 .706 .6.50 . 6,)0 .032 .604 .604 .604 .604 .604 .604 .604 .604 .607 .607 .607 .60' .715 .635 .67 .812 .831 .831 .876 .876 .9,37 1.008 .998 .970 .970 .989 1.018 1.018 1.018 .927 2 o (tRcliato, (>.-! eeuts. h Kobalc, 8.1 4 cents. (Footnote cimMnuiMl on ij. 817.) THE WHISKY COMBINATIONS: BRADLEY. 817 the output of the American Spirits Manufacturing Company 2 years ago? Is it greater or less? — A. It is larger. Q. Do yon kno-w how many distilleries were running at that time? — A. I could not tell yon; I think, though, about 12. Q. About how many distilleries are running for the production of proof spirits in the country at the present time? — A. I know of but 4 outside of our distilleries. Q. So there are only 9 or 10 in the whole country? — A. There may be other small ones, but I do not know of them. BKVBKAGE WHISKIES — TOTAL OUTPUT — PROPORTION CONTKOLLEI). Q. What is the nature of the product of the Kentucky Distilleries and Warehouse Company? — A. Exclusively Bourbon and rye whisky for aging; beverage whiskies — whiskies to be used as a beverage.' ' Si-e Mr. Clarke, p. 168 ; Mr. Luy ties, p. 2o6. (Continuation of footnott^ from p. 816.) g S T. i }-• o = % =fy. t^ 1^5 'Ph P. en y- ^ iZ $1. 173 ft 1. 142. I. 133| .13 .14 . 155 .15 .15 .15 1.15 1.15 1.258 1.331 1.17 1.17 1. 143 1. 125 1.12 1.12 1.12 1.12 1. 135 1.16 1. 15 ■ 1.15 1.15 1.15 1.15 1.15 1.154 1.21 1.254 1 1.33 1.24 1.23 1. 228 1.229' 1.20 1.2271 1. 203 ].223! 1.2421 1. 237; 1. 212, 1.19 1.191 1.195 1. 1B6, . 233 .233 .240 .255 . 250 . 250 . 150 .250 .250 .356 .431 .270 .270 .243 .225 .22 .22 .235 .250 .250 a. 192 a. 161 a. 152 a. 152 a. 159 a. 174 a. 169 a. 169 0.169 O.109 a. 169 a. 275 a. 350 a. 139 a. 189 160 142 137 137 137 167 167 167 167 167 171 227 6.271 6.071 6.147 C.120 130 c . 110 .25 .25 .254 .310 .3.54 . 154 .230 .140 .128 $0. i .745 .703 .703 .735 .805 .781 .781 .781 .781 .781 1.271 1. 635 .888 .8881 .747! . 6531 .640 . 640, . 640, .640 .710' .780] . 780 $0. 383 .405 .395 .406 .703 .508 .497 .518 .462 .425 .416 .413 .426 .•120 .408 .407 .420 . 395 .389 .382 .399 . 390 .372 . 354 C.108 .129 o . 109 .10(1 d.lOD .127, .103 .123 .142 .137 .112 .090 .091 .096 .095 .797 .797 .797, .7971 .797j .817, 1. 083 1.298 J .339 1 702 .573 . 525| .6161 .508 .4661 . 5921 .470 .573 .662 .638' .522, .415 .419 .438 .438 .349 .347 .357 .379 .376 .399 .435 .530 .507 .500 .461 .430 .421 .444 .469 .51 .500 .446 ,404 .339 .304 .282 .259 to. 505 .340 .308 .297 .032 .297 .284 .263 .319 .356 .366 .858 1.209 .468 .480 . 340 .243 . 245 .251 .258 .241 .320 .408 .426 .448 .450 .440 .418 .421 .418 .648 f .767 \— 198 .172 .066 .025 .055 .078 .046 .148 .001 .057 .162 .192 .118 .076 .115 .156 .179 Year- ami montli. 1896. Jan ltl.215 Feb 1 1.215 Mar . Apr May ... Julie .- July . . Aug Sept.... Out Nov.... Dee .... 1897. Jan Feb . . . Mar — Apr May .. June . - July - - Aug... Sept... Oct.... Nov... Dec ... Jan .. Feb.. Mar . - Apr .- May . June. July . Aug.- Sept.. Oct... Nov . . Deo .. Jau... Feb.. Mar. Ajir . . May. .June . Jul.y - Aug.. Sept.. Oot... Nov.- Deo .. 1.215 1.216 1.215 1.215 1.206 1.196 1, 192 1.185 1. 185 1.185 1.17 1.165 1.165 1.182 1.187 1.187 1.187 1.192 1.203 1.187 1.184 1.182 1.182 1.186 1.192 1.197 1.219 1. 224 1.24: 1. 24; 1.242 1.242 1.245 1.262 1.247 1.240 1.240 1.240 1.240 1.240 1.240 1.240 1.210 1.220 1.226 1.225 .115 .116 • llol . 115' .115 .115 . 1U6 .090 . 092 -.085 .085' .085; . 070^ .066 .065 .082 .087 .087 .087 .092 .103 .087 .084 .082 .082.. .086 .. .092 .- . 097 . . .119.. .124 .. . 142 . . . 142 . - .142.. .142 .. .145 .. . 162 . . .147 ,140 .140 .140 .140 .140 .140 .140 .110 .120 .126 .126 SB . .$0. 538 $0. 269 $0. 269 .538 .538 . 538', .538 . 538 .4961 . 450 1 .431 .398' .398 . 308 .3115 .305 .385! .408' ,408 ,408 .4321 .483 .408' 2S5| ,288 , 2',is! , 285' .274; .260; .227! .209; .244 ,241 . 231 .237 242 '. 242 ,244 ,264| , 294 , 296! ,265 ,394 ,267 .385 ,262 .394 .271 .413 .289 ,442 .289 ,466 .321 ,571 .347 ,595 .324 .682 .336 ,682 .317 ,682 ..302 ,682 .308 ,696 ..331 ,730 .356 ,689 .367 .656 .352 .6.56 .346 ,6.56 .347 . 656 .334 .6.56 .344 .6,56 .329 .6.56 .317 .616 .331 .561! .320 .591 .316 .587 .305 243 .262 .242 .253 .264 .236 ,223 . 222 !l54 ,167 .167 ,102 .080 .068 .143 .166 .164 .144 .138 .187 .143 .127 .123 .123 .124 .153 .145 .224 .271 .346 .365 .380 .374 .365 .374 .322 .304 .310 .309 .322 .312 .327 .339 .186 .243 .275 .282 I Rebate 8.14 cents. 00 . KQ 6 Eebate 8.28 cents. c Kebate 2 cents. dKo rebate. Sl8 HEAKINGS BEFORE THE INDUSTRIAL COMMISSION. Q. About wh;it proportion of the output of companies of this kiud floes your com- pany Qoutrol? — A. That is a very difliciilt qiiesticni to unswer. Q. Will you explain why? — A. We have been in operation such a short time that we have not demonstrated what part of the trade we can control. We have 53 distilleries, whose previous output, as shown by the tax payments on whiskies at these distilleries during the past 5 years, warranis us in believing we may manu- facture there and sell 9,500,000 gallons. In addition to that we are operating 2 very large cheap-whisky distilleries, the output of which is dependent upon trade demands. Our assumption is we shall make there 5,000,000, making a total of 14,500,000 gallons this year. It would appear that the consumption of Kentucky whiskies for an average of 5 years was in the neighborhood of 20,000,000 gallons. So we shall possibly make about three-fourths of it. Q. When you speak of Kentucky whiskies, do you include under that name rye whiskies made in the East also?— A. Oh, no; only those made in Kentucky. Q. You control also some large distilleries that manufacture a somewhat similar product in the East? — A. We do; yes. Q. What are they f — A. The Hannis Distillery, the Mount A'ernon Distillery, the Monumental Distillery, and the Philadelphia Pure Rye Distillery, all in the East, and one, the St. Paul Distillery— rye-whisky distillery also— in the West. Q. Is this St. Paul Distillery the same one that was formerly owned by the Amer- ican Spirits Manufacturing Company ? — X. The same; yes. Q. It was owned, also, earlier by the Di.stilling and Cattle Feeding Company?— A. That was back of my time again. I think that is so. Q. Has it, iu your knowledge, been used for the production of rye whisky, or was it used for the production of alcohol earlier? — A. For the production of alcohol. Q. With reference to the production of these distilleries you have mentioned in the East, can you give us an estimate of their output, so that we can form a pretty definite idea of the proportion it bears to the total output in this country that is manufactured for aging? — A. We shall make about one-sixth of the output of the Eastern ryes; that would be about 2,000,000 gallons. Q. So far, then, as the production of rye whisky is concerned, you come a long way from having a monopoly of the product? — A. We come a long way from monopo- lizing anything'. Q. At the same time, so far as the output of spirits is concerned, you come well on toward 90 per cent of it? — A. Yes. KENTUCKY DISTILLERIES AND WAREHOUSU COMPANY AND OTHEK SUBORDINATE COMPANIES. Q. You are familiar, I understand, with the details of the organization of these different companies into the Distilling Company of America. Will you tell us, to begin with, what the nature of this organization — the Distilling Company of Amer- ica — is, and what its relation is to the cliflerent organizations that came into it? Tell us, in the first place, your general plan of organization. — A. You would like me to begin with the Kentucky Distilleries and Warehouse Company? Q. I would. — A. The Kentucky Distilleries and Warehouse Company was organ- ized about February last for the purpose of purchasing the Kentucky distilleries— solely Kentucky distilleries. I should like to refresh my memory with figures as I go along, if you will permit me. Q. Certainly. — A. (Referring to memorandum.) It was organized with an author- ized capital of $12,000,000 of preferred stock and $20,000,000 of common stock. Q. What was the nature of the preferred stock? — A. Seven per cent cumulative. $10,500,000 of the preferred stock and $18,500,000 of common stock was issued by the company for property purchased and for a working capital of $1,500,000; and the properties acquired by the com]iany through the issue of said stock were and are the Kentucky distillery properties now owned by that company, together with about 90 per cent of the standard brands of Kentucky whisky. Q. Do I understand the distilleries cost in cash $10,500,000?— A. The distilleries and brands cost the company, together with the working capital of $1,500,000, $10,500,000 preferred and $18,500,000 of conmion stock, as 1 have stated. A propo- sition was made to the company to transfer the various Iventucky distilleries now owned by the company, together with $1,500,000 of cash-working capital, for the full-paid stock as stated. Tliis left in the treasury unissued $1,500,000 of preferred stock and the like amount of common stock. Of the other subsidiary companies I have, as I have stated, no knowledge in their beginning. When I came into this mat- ter they were in existence and operating. Their ca})itali7,ation is as follows, or was at that tin)e: The American Spirits Manufacturing Company, $7,000,000 of preferred and $2«,000,000 of common; the Spirits Distributing Company, $1,250,000 of first preferred and $1,575,000 of second preferred and $3,675,000 of common. THE WHISKY COMBINATIONS: BRADLEY. 819 Q. Will you give, in conuection with the amount of the iireferred, the nature of it; for instance, the first preferred, what was the per cent?— v. I thiuk that is 6 per cent. Q. You have not the figures'? — A. No. The Standard Distilling and Distributing Company, $8,000,000 of preferred and $16,000,000 of common. DISTILLING COMPANY OK A3IEEICA. The Distilling Company of America was incorporated about 3 or 4 months ago. It was created for the purpose of jiurchasing the stoclis of the 4 companies I have mentioned, and it has purchased on an average 9.") or 96 per cent of these atoolsis and is to-day the owner of them. The capital of that company is $55,000,000 preferred, $70,000,000 common, of which $23,750,00(1 remains in the treasury of the company. The balance was paid for the stock of the underlying companies and for the Phila- delphia Pure Rye Distillery, for the money subscribed for the purchase of the Hannis Distilling Company's distilleries, and $1,500,000 for treasury working capital. The Distilling Company of America is not an operating company; it is simply a majority stockholder in these subsidiary corporations ; incorporated under the laws of New Jersey. ADVANTAGES OF CONSOLIDATION. Q. What was the purpose of bringing these 4 companies together into this new company, which should not be an operating company but which should simply con- trol the majority stock of each one nf them? — A. It was believed that by securing harmonious operation in this way they would all be much more effective, as they certainly are, than operating separately. For example, the business is very much furthered by preventing the manufacture of spirits in the State of Kentucky and the manufacture of whiskies outside the State of Kentucky — outside of the territory where the alcohol is made; both companies benelit largely from that fact. Also, it was possible to use, of course, more harmoniously the great distributing machinery of the distributing companies for the selling of Kentucky whiskies, and thereby make a great saving in the expenses ; and the benefits are endless. Any great business of that order controlling every branch of the business naturally works to the advan- tage of all. Through all these houses we supply a wholesale dealer with everything he uses in domestic goods, and with the sale of one of course we get the trade of the others; so they are all benefited. CONTROL OF CONSTITUENT COMPANIES — PERSONAL POWER Off DIRECTORS. Q. The officers of the Distilling Company of America are in a position to direct, as much as they think wise, the action of each one of these separate companies? — A. They naturally, as majority stockholders, control the board of directors of under- lying companies; that is to say, they have men who are guided by their policy and advice in the board of directors. Q. You spoke of the officers of the Distilling Company of America being majority stockholders in the company? — A. I mean officially so, of course. ■ Q. Is it trne that the directors have personally a majority of the stock? — A. They do not own it personally, but do control it. The directors have a very large percent- age of the stock, and their friends have a great deal, and they have a very large following. They are men who understand the business thoroughly and have- the confidence of the stockholders, and, of course, control a majority of the stock in that way; but they do nut own it in person. METHOD OF CONSOLIDA'nON. Q. Will you explain more in detail than you have done the plan by which the stocks of these different companies were purchased with stock of the Distilling Company of America?— A. The Central Trust Company of New York received as trustee, or whatever the relation might be, the stocks of these merger or underlying companies in exchange for the stock of the Distilling Company of America, upon a basis which you have there, I believe, which was offered through the public press, giving a certain percentage such as they deemed bcHt for these different stocks. Of course they purchased them not upon an equal basis, because the earning capacity of these different companies was not equal. They tried to do it as equitably as pos- sible and offered as equitable prices as possible upon the basis of their earning capacity. For example, the Kentucky Distilleries and Warehouse Company received 85 per cent of preferred and 15 of common for its preferred stock, and 70 per cent of common for the common stock. That is, 70 per cent of the common stock of the Distilling Company of America for the common stock of the Kentucky Distilleries y2o HEARIKGS BEFORE THE INDUSTRIAL COMMISSION. and Warehouse (Jompauy. The others were proportionate, as their earning capacity Avas estimated. ' Q. In order to carry out this plan of combining these different organizatious into one vou had a committee on organization appointed to attend to the work? — A. Yes. i.^" This committee on organization was appointed by whom?— A. It was largely intiiirnred by those men who owned a s:reat deal of stock. This thing was gotten up, of course, for the purpose of carrying through the combination of these entire properties for the trade reasons I have given you. and these men who were very heavily iuterestcd in the stoek were naturally the movers in that thing. Q. In selectini;- a committee? — A. \ es. promoters' profit. Q. I notice that in the proposition made here, it is stated that there was put into the hands of these organizers $31,250*000 preferred and $46/250,000 of com- I The following is the deposit; agreement under wbirli the consolidation was HtU'ttod : Whereas P. Lewia Anderson and Henry 1). ilacdona, both of the city and .State of New York. hereinafter railed organizers, propose to create under the laws of the State of New Jersey, or of some otlier State to be approved by the rounsel of the organizers, a corporaiioD, to ho known aa The Distilling Company of America (or some other name satisfactory to the organizers), hereinafter called the corporation, th'e object of wliich corporation shall be, among other things, the manufacture, sale, distribution, and warehousinii of wliiakv, .spirits, and alcohol, winch corporation shall have an authorized .apital stock of one hundred aiid tweuty-tive million dollars ($125,000,000.00). consisting of fiftv-five million dollars ($55,000,UU0.OO) preferred stock, evidenced by five hundred and tifty thousand {550,000) ahares of seven ]ier cent. [7^„) cumulative preferred stoek, and seventy million dollars ($70,OUU,000.00) common stock, evidenced l)y seven hundred thousand (700.000) shares of common slock. The charter of the corporation shall contain such other provisions as the organizers and their counsel may approve; and \\''hereas there have heretofore been organized and are now in existence the following companies; (a) American Spirits Manufacturing Com]iany (hereinafter called Manufacturing Co.), organized under the laws of New York, havini^ an issued capital stock of" seven million dollars ($7,000,000.00) five per cent. (5"„) noncumulative preferred stock and twenty-eight million dollars ($28,000,000.00) common stock ; , (b) Kentucky Distilleries and Warehouse Co. (hereinafter called Kentuf the entire capital stock of Hannis Distilling Company of Philadelphia and Baltimore: and (&i St. Paul Distillery; and Wliereas the organizers further contemplate that'the corporation shall be fiirnisbeil with a cash Avorking capital of at least one million five hundred thousand dollars ($1,500,000.00) ; and Whereas the organizers contemplate that the corporation shall retain in its treasury enough of its I)referj'e.l and common stock with which to enable it to acquire, if in its discretion it should so desire (but without any obligation so to do), by exchange or purchase, or otherwise, all of the remaining stock of the Manufacturing Co., of the Kentucky Co., of the Standard Co., and of the preferred stock of the Distributing Co., upon the same or a similar basis to that herein provided for the acquisition of said majority stock of the Manufacturing Co., of the Kentucky Co., of the Standard Co , and of saidmaiiority preferred slock of the Distributing Co. ; and Wliereaa tjie organizers further contemplate that in addition to so much of its preferred and com- nM)n stock that is to remain in the treasury of the corporation for the acquisition uy the corporation of the J eniaining stock of the Manufacturing Co., of the Kentucky Co., of the Standard Co., and of the pieferred stock of the Distributing Co., as hereinbefore recited, the corporation shall also retain in ilM treasury for future purposes twenty-three million seven hundred and tifty thousand dollars ($2'f,750.0UO.OO) of its preferred stock and "twenty-three million seven hundred and lifty thousand dollars ($23,750,000.00) of its common stock; and \\'ln-reas it is farther contemplated that the organizers shall, as a purchase price, receive from and be paid by the corporation thirty-one million two hundred and fifty thousand dollars ($;}1,260,000) of its preferred stock and forty -six million two hundred and tifty thousand dollars ($46,250,000.00) of its com- mon slorlc for all of the said issued capital stock of the Manufacturing Co., for all of the said issued ejipital stock of the Kentucky Co., for all "u) thereof in common stock of the corporation; For every s.iid'oomiHiin share of the Standard Co. sixty ]ier cent (60"^) (hereof in eomiuon .stock of the coi-poration ; . , ^ ,,, ., , For every said share of the first preferred stock of the Distributing <;o. eighty per cent (So",,) thereof in preferred stock and twenty per cent (20",',) thereof in common stock of tlie corporation. For e^■ery said share of second preferred stock ot the Distributing Co. twenty per cent (20%) thereot in preferred stocli and twenty per cent (20"o) thereof in common stock of the corporation. III. This agreement shall iiot become binding, operative, and etlective unless there shall have been deposited hereunder with the Central Trust Company or undei- similar agreements certificates repre- senting a miijoritv of the entire issued capital stock ot the Manufacturing Co., Kentucky Co., Standard Co., and 'of v:uh of them, and of the preferred slock .if the Distributing Co. The Central Trust Cioiipany may. in its discretion, in lieu of the actual dspositwith it ot cert.lic.ates for shaves, accept an aKieeuieiit in writing to make such deposit upon five days' notice from the Inist Company se to do. and the deposit when made shall be deemed to have been made within the time limited or extended ;is herein jirovided. In computing a ma.iority of stock to render this agreement operative theiv shall be inc luded any and all shares as to v Iiich obligations to deposit the same shall be accepted by the Trust Company. . ., .^ ^ , .,. * /• IV "When this agreement h;is become binding, operative. ;ind effective the Ceutrai trust i. ompany shall deliver to the State Trust Cnmiiany all of the stmdc deposited hereunder upon the Central irust Company receiving from the Slate Trust Company shares ol stock of the corporation ai equate and snffleient to pay the said purchase price of the stock so deposited hireunder. . , ., , ... V .June 30th' 1899 is hereliy designated as the date of the expiration ot the time tor the deposit ot the shares hen-unaer, but suc'h time may be extended, not excccdiiig thuty da, s thereafter, hy agree- ment between the ,u-ganiz,rs, the Central Trust Conipar.y. an.l Mm State Irust (^ompany; and .n c.a.se the State Trust C..mp;my shall not within thirty days ;ilter said June 30th, 1899, or alter the expira- tion of any extended time, notify the Central Trust Company that the organizers are rea.ly to com- plete the purchase of tlie sliares so deposited hereunder, the shares deposited hereunder shall be returned by the Central Trust Company without charge to the ,le,„,sit„rs of the same respectively of to the holders of said receipts upon the surrender to the C..ntr;,l Trust Company of said receipts '^ Vl'^FliTpurposes of .-.onvenience copies of this instrument may lie signed, and when so signed all of such copies shall be considered as originals, and .signatures thereto sh;ill be considered the same ;,s thon|happended^toone^co,,y^ Trust Company of shares hereunder shall have the sa,„e force and effect as though the one making such deposit signed this instrument. Dated New York, .lune 21, 1899. 822 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. panies on the basia suggested.' — A. There was a certain amount of this stock which went to the subscribers for the $3,500,000 that was used to purchase the Hannis prop- erties and this $1,500,000 working capital. That stock was divided. I can not tell how that was done. There was a bonus given with the stock, as is always given in these matters, to those who subscribed that $3,500,000. There was $3,500,000 of cash paid into this Distilling Company of America proposition, and the subscribers got the preferred stock and a bonus of common stock. Q. I had understood from the statement you made before there was about $1,500,000 paid in?— A. No; $1,500,000 of working capital, and about $2,000,000 was paid for the Mannis properties. Q. Do you include in that the St. Paul property? — A. The Hannis and the St. Paul. Q. That was $2,000,000?— A. That was $2,000,000. Q. That was paid in cash? — A. That was paid in cash. Q. Was there any other obligation left upon these organizers of the companies, besides turning over this stock, and turning over the Hannis and St. Paul distiller- ies? — A. No. Q. That discharged their obligation? — A. Yes. Q. After they have turned over all this stock of these different companies with these two distilleries the rest is their jTrotit as promoters ? — A. That is right. ANNUAI. EEQDIREMENTS FOR PREFERRED STOCK INCREASED. Q. At about what price is the preferred stock of the Distilling Company of America selling?— A. About 43, 1 think. Q. And the common? — A. About 14. Q. In this organization that was made of these different companies was there a reduction or an increase of the fixed charges for interest, for dividends on the pre- ferred stock, etc., made by the combination^ — A. I do not think I quite understand your question. Q. Taking all the preferred stocks of the original companies, of course, there was a certain interest charge that was required. Under the new company there is apre- ferred stock of A. $31,2.50,000. Q. Sevenpercent. Now, has the charge uponthecompany as a whole been increased by the change or decreased? — A. Slightly increased. Q. Do you recollect the increase? — A. About $250,000 a year, I think; in that neighborhood. The preferted cnpitalization has increased from about $28,325,000 to $31,2.50,000 — about $2.50,000 incr<;ase. I can not say exactly, because I do not know exactly the rate of interest on the old preferred stock; but it is about $250,000, I think. DIVIDENDS. Q. Do you recollect whether the American Spirits Manufacturing Company had before paid its dividends on its preferred stock? — A. It had not. Q. Do you recollect whether the other companies had? — A. The Standard Dis- tilling iiud Distributing Company had, the Kentucky Distilleries and \\'arehou8e Company had paid one dividend, and the Spirits Distributing Company had paid dividends. Q. Three had ? — A. And the other had not. Q. Under the new organization either all would have to be paid or Done. The point is this: Before, the preferred stock was divided into five different parts; two ' See tubular statement as l'ollo^^'s ■ Stock of co-ijvpaihiea constdiddti-d and annual retpiirementa of jn-eferied stock. Companies cons()lidaterl. dfjiosit agreeiiaeDt, p. t'lolijote. MaDiifacturing Cu Keutucky Co Standanl Co Distriljittiuii Co .- Total Preferred sli.ck. Annual ro- qtiireinenl.. Common stock. Stock of Distilling Cotnpan.v of America reqniri^l" for complete exchauo'6. Prel'ern-il I Common stock. I stock. $7,000,000 10,500,000 8, OOU, UOO I 1,250 000 1 1, .575, 000 28, :!2:-., 000 I'er ct. I 5 1 ?! *35n, 000 $28,000,000 735, 000 18, 5011, 000 500, 000 16, 000, 000 75, 00(f \ 31,600 I 3, 075, 000 1,751,600 66,175,000 $3, 600, 000 8, 925, 000 6, 800, 000 1, 315, 000 20, 540, 000 $7, 000, 000 14, 525, 000 10,800,000 ' 565, 000 32, 890, 000 Tlie annual dividend reqiiiromoiit of $20,540,000 7 per cent preferred stock of the new companyis $1,437,800, $313,700 less than the total requirements of the old preferred stocks. THE WHISKY COMBINATIONS: BRADLEY. 823 might and tlie other three might not po-y dividends; but in the reorganizatiou with this added charge, unless all can be paid I assume none can he paid ?— A. Yon must not confuse the subject. The underlying companies are absolutely indepeudent of the Uistilling Company of America. These companies Will declare their dividends upon their earnings if the directors think right, .just as they have done in the past. Of course, it is true the Distilling Company of America vrill not declare a dividend, except for the beneiit of all that part of the holding that was paid for these stocks, but the underlying companies still continue— some to declaie dividends, others not. Q, So far as the miuority stockholders are concerned, they are in the same i)osi- tion as before ? — A. Absolutely; undisturbed. Q. The fluids from which the Distilling Company of America must pay its divi- dends, if at all, come irom the dividends of these different compauies and from the profits of these new companies— the Hannis Couipany and others ?— A. Thatisright; I will .'rr. McNultn.pp. 229-'.;:)4; Mr. Coolc, p. 243; Mr. Luyties, p. 251. 2 Sec Mr. (JIarke, pp. 182, 1S.3 ; Mr. Li-iytie8, p. 2ria. THE WHISKY COMBINATIONS: BRADLEY. 825 the incentive in not crreat enough they will stop of tlic-ir own accord. If yon so to 75 cents, they will not make any to speak of. At 90 cents thev will make compara- tively little. Q. Your judgment would be that with a tax of 7.5 cents and a more complete collection of the revenue, the revenue would be as great' — A. In my judgment, it would be greater. Q. As low as 75 cents ?— A. I think so. The statistics of the revenue department show the greatest revenue per capita was at that rati\ and eiery increase has lessened it ordinarily. It does not come, in my opinion, from the increased use. If a man wants whisky, he buys it, whether at $1.10 or less; but it comes from remov- ing the incentive to illicit distilling and robbing the Government. Q. (By Jlr. Farquuah.) Have you any estimate of the whole amount of this illicit distillation— the increase f— A. No; no one can tell that. We only iudge from the unlimited opportunity that men have to carry on that traffic, and troin the very great number of seizures made of illicit stills, which is only a small percentage of the number of those engaged.' Many of them have been running for years before they are caught. The statistics show that every increase beyond 75 cents bas lessened the Government's revenue; and that, to my mind, shows how great the illicit dis- tilling is. ILLICIT STILLS ALL OVER THE UNITED STATES. Q. How wide is the distribution of these illicit stills? Is it local?— A. Oh, not at all; it is all over the United States. Q. Over the United States?— A. All over the country; greater, perhaps, in the Atlantic States, in the mountains of the Atlantic coast and in Tennessee than any- where else. I simply made that statement because there the greatest seizures are made; but the thing is done right along in New York City. Some of the biggest illicit seizures are made in New York City. Only a few mouths ago one was seized there, making a barrel a day of whisky; and it bad been running for two or three years within two or three blocks of the office of the chief of internal revenue — right in the middle of our city. What is to prevent if the incentive is sufficient? I can run a still in my house on Fifth avenue for five years and defy them to catch me. PROFITS OF ILLICIT DISTILLING. Q, (By Mr. Jexks.) How expensive is it to put up a still that will manufacture a barrel a day? — A. It could be done for $100; but the profits are simply terrific. They make a profit of $30 or $10 a barrel; even selling at the actual cost of whisky to those who pay the revenue. Q. (Bj' llr. Fauquhar.) How large would the distillery have to be to .justify the Government in keeping offlcers there? — A. It is ciLStoniary to run a distillery .-ibout 200 days in the year. It does not run very satisl'aotorily in hot weather, especially these little houses where the facilities are poor. The cost of the Government offlcers would be probabl.Y about $2,500 a year to the Government, and they would have to stay there after the operations had been suspended to guard the whisky that had been made; that would be about $8 per day, and the Government's revenue would be about $40 on the barrel at the present rate. They could well afl'ordto put two men there to guard that distillery if they were making a couple of barrels a day — that would be about 25 bushels — but they do not do it. I have a little plantation in North Carolina where I go to shoot quail. I know a man worth $250,000, and he has no vocation on the earth except running a little still on which by no possible chance could a man make his daily biead if he paid the tax ; and he is a very rich man. It is only about a 20-bushel house, but he is the richest man in that section of the coun- try, and owns about HO,()(lO acres of land. It is not so very valuable land; but he is rich; he is a man very well u]i — a great politician, by the way, and runs the whole county. RETAILING AND CONSUMPTION OF ILLICIT wailSKY. Q. (By Mr. Kennedy. ) Do you know anything about the sale of illicit whisky to the retail trade ? — A. I have a good deal of knowledge on that. Q. Do the illicit distilleries divide their gain Avith those who sell it I— A. They have to give a little of it, as the stuft' is very poor and they have ti > give a bid for the business. They do not give much. I own twb very valuable trade-nuirks, the Old Crow and the Hermitage. These trade-nuirka arc pirated all over the country, and I have a man seeking constantly for the infringers of them among the retail trade. I got one year in New York City over 3,0110 bottles of whisky bearing these labels. At least 80 per cent of that was illicit whisky. Of "ourse, most of these infringements occur in the diA'es, you know. Q. How do you know that? — A. It is the simplest thing in the world. It is very ^ For the numLer nf seizures, see x?. 843. 826 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. poor, lias got a nasty sort of smell, and anybody familiar witli it can tell the instant he puts his nose over it. I know, of course, that was supplied by these fellows to the tenement houses all around the city — to these men in small quantities and bottled; and there, of course, the Government of&cers absolutely lost trace of it. There is no way you can trace it there, and it is a favorite method of distillers of the illicit stuff. I have informed the internal-revenue oiBcers, but they did not seem inclined to take it up. There is no question the country is full of it. Q. Does it reach the better class of retail places? — A. Very little. The quality is too bad for that. I think the great majority or bulk of it is stored in the locality where it is produced, probably. The difficulty of transportation of that stuif, where it is made in the country, would make it probable that its use is confined to the immediate neighborhood of the stillhouse. This stufi' I am speaking about is no doubt made in the big cities, where it is easy to get it into the saloons without discov- ery ; but the thing is going on to an enormous extent ; there is no doubt of that. How much, you ran not tell, until you reduce the whisky tax. That is the only way you can get at it; but you are offering a tremendous premium now for it. You know, I suppose, that during tlie civil war, when you raised whisky to $2, the revenue ceased; the Government got no revenue; practically nothing at all. Q. {By Sir. Jenks.) Tlien it dropped back to 50 cents? — A. Then 50 cents, and it went to a tremendous tigure; and 75 cents was found to be the greatest revenue- producing rate. This is too great a country to watch that thing, you know; you can do it in England; they do it after a fashion, because they cover every few acres with a revenue olHcer; but you can not do it here.' CHEAP WHISKIES. y. You said some time ago that one of your companies, I think it was the Amer- ican Spirits Manufacturing Company, had one large distillery which manufactured cheap whisky? — A. "Well, all these distilleries of the Standard Distilling and Dis- tributing Company make so-called whisky ; it is not whisky ; it is proof spirits, put up in charred barrels so it is colored, you know, and sold for cheap whisky. Q. I was going to ask you to explain that. — A. It is not whisky, technically; technically whisky is not rectified; that is to say, it is not run through charcoal, so that ail the impurities are taken out of it, all the essential or fusel oil; it is the crude distillation for the fermentation of the grain or mash, and depends upon the aging or oxidation that occurs in time to remove these oils and fusel alcohols. That is, strictly speaking, whisky; the other is spirits, but put up in a shape that causes it to be designated whisky in the trade. = Q. Is the price such that it pays to make that stuff in any large quantity instead of making the pure spirits? — A. The cheap whiskies you have reference to? Q. Yes. — A. Those whiskies are usually sold for a very trifle over the spirit price; they do conmiand a little bit higher price ; you see they are in condition to be bought by the retailer and used, as he gets them. The high-proof spirits must be rectified under the rectiiiers' license, changed into other paol See Mr. McNulta, p. 235; Mr. Cook, p. 2i5. THE WHISKY COMBINATIONS: BRADLP:Y. 829 can in one of 500.' That is too easy ; and also yon can sell it mucli cheaper to the foreign buyer if in all the rest of your business you are enabled to dispense almost entirely with the services of siilcsmen, travcliug expenses, advertising, and all these things which eat up profits of n]annfacture. There is no doubt, of course, that all of these things hurt somebody ; somebody is hit. You hnow the salesman is, but to the consumer, who is a thousand to one of those people, it is a benetit. AVe are saving probably iu our business not less than .'t:l,000,UOO a year in the Kentucky end of it alone in salesmen, in their traveling expenses. Q. Could yon give a definite estimate of the number you have been able to dispense with? — A. xibout 300 salesmen. Q. (By >Ir. Faiuhtiar.) And that goes to the benefit of the consumer in lower prices? — A. We are selling our whiskies at 15 cents that before never could be manufactured for 15 cents. Of course the thing is self-evident. We also make better protits, but we do not take it out of the consumer. We get it out of that great middle class, you know. I have taken a, very great interest in this thing, more for amusement than anything else. I do not need it iu my personal busi- ness, but I have gone very extensively into the figures of this whisky business. There is about $40,000,000 lost somewhere between the distiller and the con- sumer iu this country. It goes, of course, in trying for trade, for business. You will see about the town here "Hunter Whisky" advertised in the newspapers and everywhere else — electric lights blazing — and all this costs a pile of money. They have salesmen scouring all over the country. All that thing is wrong; it is preposterous; it does not enable the consumer to get better whisky; it only makes him pay a better price. Coming down here I saw on the street two shoe shops; Douglas was one, and the other I do not remember. They are very great shoe manufacturers. They have shoe stores in every village in the United States, and they are selling right to the consumer, for $2.50 and $3.50, good shoes. I have a pair of them on now, and they are good enough for me. That is what this thing is accomplishing, gentlemen; it is bringing the manufacturer and consumer closer together every luinute, and it will result, .just as all labor-saving machinery has resulted, in the saving to the consumer and the widening of his purchasing capacity. It will enable him to use things which he never dreamed of using before, and, altogether, will lift him from a, labor animal to an intelligent and happy human being, just as all machinery has done. This is one of the great big machines that have come up in the i^rocess of evolution. We are going to do a big export busi- ness in our commodities, if we are only permitted to do it. If they will change the law for us and give us facilities for doing it, and not restrict and hamper us, we can supply the world with alcohol, just as all these other people do with their products. Look at the petroleum industry and see what they are doing. ALCOHOL IX THE ARTS — CAN NOT HE FREED FROM TAX. Q. (By Mr. Farquhar.) You have stated that this matter of transportation was for the benefit of the manufacturers and users in the arts. Do you know about what proportion the consumption in the manufactures and the arts bears to the bever- ages? — A. No; I do not know that. Q. Pharmaceutical? — A. Herein this conn try it is comparatively little. The wood- alcohol people control that branch of this industry, but abroad our sales would be almost exclusively for that use, and they would be very large. Q. (By Mr. Jen'ks. ) Would it be practicable to remove the tax on alcohol wher- ever used in the arts? — A. No, sir; you can not do it to save your life. You would have nothing but illicit spirits in this country. Q. That is attempted in some countries?— A. It is done in England; but you do not want to forget that is a little bit of a country, covered all over by internal-revenue officers. You can not do it in a country like this. Q. If the tax were reduced to 75 cents, do you think there would he an increase in the consumption in the arts here?— A. There is no question about it; and you will find when that question is in Congress your tight is going to be with the wood-alcohol people. an AVOWED MONOPOLY. Q. (By Mr. Kennedy.) Is there any added excellence to either of your brands. Old Crow or Hermitage, since your combinations were eflected?— A. I will answer that in this way : We are able to exist in my private business and to continue our business at least on a large scale. It has been done, ])erhaps increasing very slightly, for the reason that we are protected by trade-marks. We have a great protection, and that enables us to get very great profits— enormous profits. Out of these profits we pay enormous advertising bills. We employ skilled salesmen, and we use all I See Mr. Clarke, p. 183. 830 HEARINGS BEFORE THE INDUSTRIAL (COMMISSION. these eflbrts whii-li have been made to assure this trade, to keep alive aud to go on, We can do it yet just as in the past, but it is an artiiicial thing. The consumer pays for it— every dollar of it — aud, while it lines my pocliets and I am very glad to go on, it is not a good general policy for any industry in the United States. It is all right in my private business, and if you want to pick out a monopoly, and one that is screwing the people down to the last notch, it is that business of mine. Q. You mean where there is a special brand? — A. I mean special brauds sold on their reputation, and the effort to force sales, the advertising, aud pushing and working personally, and all that sort of thing. Q. Well, as a matter of fact, is that special brand, or either of those special brands of yours, any better now than tliey were, say, 1 year ago? — A. No; they are just the same. CONSOLIDATION "WILL EESULT IJn IJIPEOVBI) QUALITY. Q. Well, you have dispensed with the services of 300 salesmen? — A. Not in my private business; that is in the combination. Q. That refers to the brands of that company? — A. Yes; they have been enabled to dispense with the services of 300 traveling salesmen who were originally employed by the old owners of these distilleries. I do not mean to say we discharged those men. Most of those men are still working for the old owners, but when that whisky is sold tlieir occupation is gone. Q. Are those whiskies any better to-day thau a year ago? — A. Very much better. Q. The Avhiskies have improved in quality f — A. Oh, no, not in quality. I thought you meant in a. trade position. Q, I mean the quality of the whisky? — A. The quality of the whisky under our manufacture will improve, but we have not improved any yet. It will be better, and I will tell you why that is so. Under the old arrangement, where the struggle for existence became so fierce between rival manufacturers that they resorted to every expedient in the world to rheapen their production, they put in Kentucky dis- tilleries what are called "cookers." Properly, they are never used except for the manufacture of alcohol where the product is rectified through charcoal, and all the bad flavors are taken out in that way. They pnt them in for the reason that they increased their yield by so doing. The quality of the whisky deteriorated tre- mendously, and of course they did everything in their power in striving to reduce the cost in that way — any old way to get out. We have spent hundreds and thou- sands of dollars ripping the cookers out of the distilleries that we have bought. We have gone back to the old methods of making fine whisky in every single instance. Even these cheap whisky distilleries have not been benefited to that exteut. The product of these distilleries will be very much improved. HOW THE CONSUMER WILL GAIN. Q. What I wanted to get at is this : Do not the retailers still sell whiskies of this combination at, say, 10 and 15 cents a glass, and have the consumers received any benefit from this groat saving that you have effected by dispensing with these middle- men and middle agencies? — A. They will when the goods we are producing are fit to be used. They are still too new. They must have some age before being consumed. Q. (By Mr. C. .J. Hareis.) Y'ou do not mean to say the saloons will make any dif- ference in price, do yon? — A. I beg your pardon; I did not say that. I s.aid the whisky will go toward the consumer at a very much lower price. I do not know what the retailer will do with it when he gets it, but he is still open to competition. He can not escape that altogether. He must, I believe, give some part of that sav- ing to the consumer. And not only that; the great bulk of whisky is not supplied to the consumer through the barrooms. It goes to them through stores in bottles, and there they will largely get the advantage of it. Competition will force it. Q. (By Mr. .Jenks.) The largest proportion goes to them through bottles?— A. Unquestionably. The present concerns in that br.anch of the business in the past few years have grown up enormously. The business in bottled whiskies has grown to a great extent through branch houses or ugents of distilleries. Now, in New York I have such a house, and we are doing an enormous business in this class of whisky. Q. (By Representative Livingston.) It is used by persons especially in the cities and counties where they have prohibition?— A. Yes. Now, nine-tenths — more than nine-tenths — of that whisky is sold in groi'rry stores. Y'ou can go into a barroom and get a drink of it if you ask for it. They use a great deal in the grocery stores, and if you go into a grocery store and ask for whisky of any kind you will get a bottle. If the grocerynian is selling it he bottles it for himself, aud there is where the great dispensation of this stnfC is made, aud not in the barrooms. (i. (By Mr. Kennedy.) When the traveling salesmen place their grievances before THE WHISKY COJIBINATIONS : RICE. S31 the people they are simply uuiking your argument for you?— A. Well, I do not kuow. I think we must consider the interest and benefit of the uiillions and not the inter- est and beimflt of the hundreds. They can seek other occtip:itlonN. The same .argu- ments could have been used toward the sewiug machine or any labor-saving machine, but they are not good ones and never will be. (Testimony closed.) Washington, D. C, Koremher 17, ISKi. TESTIMONY OF MR. SAMUEL M. RICE, President of the DistiUiiKj Company of America. The commission met at 11.35 a. m., Senator Kyle presiding. Mr. Samuel M. Eice, president of tlie Distilling Company of America, -was introduced, and, being duly sworn, testified as follows: Senator Ktle. Please state your name, post-offlce address, and business. — A. Sam- uel M. Rice, No. 27 William street. New \ork City; president of the Distilling Com- pany of America. EECEIVEKSHIP OF DISTILLING AND CATTLE FEEDING COMPANY — REOKGANIZATION. Q. (By Mr. .Ienks.) We h.ive had some testimony regarding the earlier combina- tions in the distilling business, particularly with reference to the Distillers and Cat- tle Feeders' Trust and the Distilling and Cattle Feeding Company. We should like to have yon, if you please, explain to ns the organization that succeeded the Distilling and Cattle Feeding Company. I should like to have you explain, in the first place, the organization of the American Spirits Manufacturing Company, and the way in which it took the plants and business oft' the hands of the Distilling and Cattle Feeding Company. Will you kindly speak freely on the matter of that organization? — A. The Distilling and Cattle Feeding Company went into the hands of receivers in the latter part of January, 189.5. At that time there were three receivers appointed; two of them resigned later and Get. .lohn McNulta became the sole receiver. That was some time in the middle of March, 1895, I think. As receiver he continued the operation of the plants under the direction of the court; it was a sort of business that could not be wound up, the lives of cattle depending upon the operation of the distilling industry. So the United States Government continued in that business, practically, through the court. A reorganization com- mittee had been formed in New York City representing practically all the stock of the company. That committee finally succeeded in having the plan of reorganiza- tion adopted, and some time in the month of August, 1895, under the order of the United States circuit court, certain properties, 17 in all. were purchased by the reorganization committee from the receiver. EVENTS WHICH LED TO THE KECEIA'BRSHIP. Q. Before this reorganization plan had been perfected, before the Distilling and Cattle Feeding Company had been put into the hands of a receiver, was a committee of holders of rebate certificates organized in order to protect the interests of these holders of the certificates as against the Distilling and Cattle Feeding Company? — Yes; the trade became restless; they feared that the rebate money might be misap- propriated, or used for other purposes than the purpose it was originally set aside for. The trade had the impression, it was generally thought, that this was a trust fund, and that it was kept intact for the benefit of the owners of rebate certificates. There was a good deal of criticism at the time, and many dealers throughout the country sought methods of protection. The rebate committee was formed with the intention of getting such information as they could of the condition of the property, and of obtaining some safeguard or protection, if possible, to secure the payment of the money due the rebate holders. Q. Were you yourself a member of the committee?— A. I was a member of that committee. Q. Had they had reason to believe that this money, instead of being kept in a trust fund for the payment of rebate certificates, was being used in other ways? — A. There was a suspicion'at the time that it was being so used, but there was no real knowledge. Q. Did the investigation of this committee elicit any facts on the subject? — A. Not in the investigation of the rebate committee. Q. Did the action of the rebate committee have anything to do with throwing the 832 HEARIKUS BEFORE THE INDUSTRIAL COMMISSION. company into the hands of a receiver? — A. No; but it rather precipitated the husi- ness — hantenod it along. * Q. Wlint were the immediate causes of putting the company into the liauds of a receiver ? — A. The reliate committee was organized, if I recollect right, some time in June or July, 189J ; and the action and investigation and the general information elicited by this rebate committee brought about a protective committee of stock- holders. The stockholders then became a little suspicious of the management, and a protective committee was organized either in September or October, 1894 — some- where along there — and this stockholders' protective committee sent notices to the large holders of stock, and asked for proxies. These proxies were very readily given. In the course of a very short time, this committee had proxies for over 300,000 shares of stock, the entire capital being :!50,000 shares. The stockholders' committee then placed itself in communication with the officers of the Distilling and Cattle Feeding Company, and informed them that they represented a majority of the stock, and that, having heard of the embarrassment of the company, or the alleged embarrassment, they were prepared to tide over such embarrassment until the next annual election; and thej' said they desired a meeting with the officers of the Distilling and Cattle Feeding Company. This was aliout the latter part of January, 189.5. The officers then agreed to meet the committee; but instead of meeting the committee, the presi- deu! went to Chicago, and made application for a receiver, and was himself, upon the application of hoklers of 1,700 or 1,800 shares of stock, I think, appointed receiver, together with, I think, Edward F. Lawrence, who was a director of the First National Bank of Chicago. Those gentlemen were appointed receivers, abcnit the 28th, or somewhere along there, of .January, 1805. Two or three days thereafter,upon action on the part of the stockholders' committee, Mr. Greenhut, who had been appointed one of the receivers, was removed, and in his place was substituted John J. Mitchell, of the Illinois Trust and Savings Bank ; the court itself appointed Gen. John MoNulta to represent the court. That brings ns down to the triple receivership. Q. What reasons were advanced by the stockholders' committee to the court for the removal of Mr. Greenhut and the appointment of Mr. Mitchell? — A. That there was general knowledge that Mr. Greenhut had been speculating in stock of the company. Q. Was that proved as a matter of evidence before the court? — A. I was not pres- ent at the court proceedings. I do not know that any evidence was introduced before Judge Grosscup. He acted instantly and removed Greenhut and appointed Mitchell. Q. Representations were made beforehand which caused them to believe it to be true? — A. Judge Grosscup believed it. Q. So that it was really on that basis that he was removed ; that he had been specu- lating in the stock of the company himself? — A. We presumed so; I have no doubt of that fact myself. Q. That was a generally understood matter by the stockholders, was it — a matter ■of general belief? — A. It was generally suspected. PROPERTY AND CAPITALIZATION OF THE DISTILLING AND CATTLE FEEDING COMPANY AND THE AMERICAN .SPIRITS MANUFACTURING COMPANY. Q. You say the American Spirits Manufacturing Comjiany took over 17 plants. About how many plants did the Distilling and Cattle Feeding Company own? — A. The Distilling and Cattle Feeding Company was the outcome of the Distillers and Cattle Feeders' Trust. The Distillers and' Cattle Feeders' Trust commenced with about — that is, did not commence, but commanded about 80 plants ; that is, 80 plants became the property of the succeeding corporation — the Distilling and Cattle Feed- ing Company— but the plants purchased by the American Spirits Manufacturing Company numbered 17.' Q. Seventeen of the largest and best plants? — A. Seventeen practical plants. Q. What was the capitalization of the Distilling and Cattle Feeding Company? — A. Thirty-five million dollars. Q. And the American Spirits Manufacturing Company? — A. Seven millions of pre- ferred and twenty-eight millions of common ; the same amount. Q. And still they took over very, much less than half of the plants, although the capitalization remained the same. What proportion of the value of the plants did they take over? — A. The explanation of that is this: The 17 plants represented the value, and the remaining pliints represented burden. In other words, the only thing of value that the company owned were these 17 plants. The others had been dis- mantled; they were badly located, and had been simply taken in by this Distillers and Cattle Feeders' Trust because they were disturbing elements, and it was thought wise to take them out of the way. ' See TiTr. Clarke, i>. 175. THE WHISKY COMBINATIONS: RICE. 833 Q. So that they were taken In really to remove them I'lom the competitive field ? — A. I would hardly say that. They were not well situated for competitive purposes. But a man can manufacture goods and lose money and naturally he a party to over- production, and thus cause general demoralization to business. EXCHANGE OP NEW STOCK FOR OLD. Q. About what was the value of the stock of the Distilling and Cattle Feeding Company at the time it went into the hands of the receivers? — A. It was about $8 a share. Q. The American Spirits Jlanufacturing Company, in organizing with the same capitalization, was then organizing with its stock very decidedly belowpar, was it? — A. It had notliingtd do with the stock; it was siniidy an exchange. The reorgani- zation committee simply issued its certificates against the stock of the Distilling and Cattle Feeding Company, and had nothing to do, with tixingthe capitalization. It simply became the agent, and merely gave as much stock as received. It never fixed the capitalization, and in fact had nothing to do with it. Q. You spoke of there being seven millions of preferred stock and twenty-eight millions of common stock. t_»n what terms was the stock of the Distilling and Cattle Feeding Company received in exchange for this preferred and common stock? — A. Twenty per cent was given in preferred stock and 80 per cent in common stock, which makes seven millions preferred and twenty-eight millions of common. Q. Had there been, before the appointment of the receivers of the Distilling and Cattle Feeding Company, other suggestions and other plans of reorganization pro- posed 1 — A. Plans had been proposed by the management and submitted to the stock- holders; but they were not well received, and that, of course — the managers not being able to carry through their own plans of readiustment — naturally lost the confidence of the stockholders. Q. (By Mr. FaR(;ui-iai:.) Was it on account of loss of faith in the officers of the company? — A. Naturally supposed. lean not go into the thoughts of the stock- holders. « MARKET VALUES OF OLD AND NEW STOCKS. Q. (By Jlr. Jenks.) What was the average value of the stock of the American Spirits Manufacturing Company for a year succeeding the reorganization? — A. The preferred stock varied, since the organization, from — this is not accurate — I should say, roughly, from 15 to 40. Q. And the common? — A. And the common from 5 to about 15, or something of that sort. Q. What had been the value of the stock of the Distilling and Cattle Feeding Company earlier than that, before these troubles arose? Had the stock ever sold very much higher? — A. The stock sold at one time in the neighborhood of 70, and there was great speculation in the stock at various times. That seemed to be the principal business. Q. When the Distilling and Cattle Feeding Company was organized, how much stock was issued per $100 of cash value of the plants? — A. I have no knowledge. Q. Were you yourself in the distilling business at that time? — A. Not as a dis- tiller; I was as a salesman and agent and distributer. I was selling spirits, not manufacturing spirits. Q. But you say that the stock had varied from 60 and 70 down as low as 8?— A. Yes. Q. (By Mr. Farqdhar.) Did that occur from the amount of stock thrown on the market or the shrinkage of the real stock itself ?— A. That is a Wall street question ; I can not answer that. Q. Well, your own judgment about the thing? — A. My own judgment is that if there are more sellers than buyers stocks will go down. If there are more buyers than sellers stocks will go up. CASH VALUE OF PLANTS. Q. (By Mr. Jenks.) When the.se seventeen distilleries of the Distilling and Cattle Feedino- Company were bought up by tlie American Spirits Manufacturing Company, was any definite appraisement made of the value of the plants?— A. No definite appraisement. The values were as accurately arrived at as possible by experts of the reorganization committee. Q. About what was the cash value?— A. At the outside, about ten and a half millions represented the real value of these plants. Q So that the stock that was issued in payment for them was supposed to be somethinn- over 3 to 1 of cash value?— A. No; the reorganization committee had 83a 54 834 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. nothing to do with that whatever; they had to bny the practical operating plants of the Distilling and Cattle Feeding Company, so that they could continue in busi- ness — so that the new organization could continue — but the capitalization, or the relative value of one stock us compared with another, can not enter into the calcu- lation. The reorganization committee simply exchanged certificates, and gave as much par value in return as they received. Q. But your presumption was that there were about ten and a half millions of cash valuation, as nearly as you could get at it, and there were thirty-five millions of stock— rather more than three times the face value. — A. No; it was paid for in stock. TIIIO REBATE SYSTEM. Q. You have spoken of the rebate system of the Distilling and Cattle Feeding Company. What was the amount of the rebates that were paid? — A. In a general way the rebate was 7 cents a gallon. Q. Did that all go to the wholesaler, or was it divided between the wholesaler and distributer* — A. The distributer received 2 cents and the jobber 5 cents. Q. Did the rebates vary, or was this the one and only rate ! — A. There were several forms of rebates. I was not fauiiliar with the business at that time except in a gen- eral wa}'; knew very little about it except from general information. Q. That was the most common form of rebates, as you understood? — A. That was the most common form of rebates. Q. Did the American Spirits Manufacturing Company continue the rebate system? — A. No. Q. Has the American Spirits JIanufacturing Company employed the rebate system at all?— A. No.' ... SPIRITS DISTRIBUTINd COMrAX-i'. Q. Besides the American Spirits Manufacturing Company, which has continued to the present time, there are also two or three other companies that united with them in forming the Distilling Company of America, I believe. What other companies?— A. Shortly after the organization of the American Spirits Manufacturing Company, there was formed the Spirits Distributing Company, organized under the laws of New Jersey. Q. Shortly after the organization of the American Spirits Manufacturing Com- pany? — A. Yes; early in 1896. •Q. Will you describe to us briefly the organization of this Spirits Distributing Company? Tell what connection it had with the American Spirits Manufacturing Company, if any. — A. The American Spirits Manufacturing Company had no facili- ties for distributing its product, and it was deemed advisable to have an effective channel of distribution; so the Spirits Distributing Company was formed for the purpose of distributing the product of the American Spirits Manufacturing Com- pany. Its capital was $1,250,000 of first preferred, $1,,575,000 of second preferred, and $3,675,000 of common; the common belonging to the American Spirits Manufac- turing Company. Q. It was owned by the American Spirits Manufacturing Company?— A. Yes, to continue control. Q. What were the terms of the preferred stock- the first preferred and second preferred?— A. The first preferred was 7 per cent cumulative; the second preferred was 6 per cent noncumulative. Q. Were any preferences in the way of voting power given to the preferred stock?— A. None at all. It was intended that the American Spirits Manufacturing Company should retain control through its ownership of the stock. Q. Was the ownership of the preferred stock largely in the hands of the American Spirits Manufacturing Compiiuy?— A. The subscription of the preferred stock was offered to the stockholders; it was underwritten, and such of the stock as was not subscribed was taken by the underwriters, as these things are generally done. Q. So it was really intended to be, and has since been, a subsidiary company for the purpose of distributing the products of the American Spirits Manufacturing Com- pany? — A. That was the purpose. STANDARD DISTILLING AND DISTlMlHiTlNfi COjMrANY. Q. What other companies were united into the Distilling Company of America besides these two, the Spirits Distributing C()in])any and theAmerican Spirits Manu- facturing Company?— A. Along about July, ISilS, I think, there was organized the Standard Distilling and Distriliuting Company, under the laws of New Jersey, with a capitalization of eight millions of preferred stock and sixteen millions of common stock; eight millions of 7 per cent cumulative. ' Shi. .Mr. Tiriullcy, ]>. Kl I, -mhI Incluoto. THE WHISKY CO:^IM^'ATIONS: RICE. 835 Q. That was organized for the purpose of Imyiug up distilleries in dift'ereDt sec- tions ol the country, was it? — A. It was organized for the purpose of punhasing dis- tilleries and distributing plants. THK DISTRIBUTING OF SPIRITS JIDHE PROFITABLE TilAM DISTILLIXd. Q. What do you mean by distributing plants? — A. I say distributing plants. Dis- tilleries and distributing plants. CJ. I beg your pardon'.' — A. The distributing business being tbe more prolitable — the distilling business is practically a business of raw material; is a business which depends absolutely upon the price, at which the product is sold. There is no such thing as brand of spirits and alcohol. It is, as I say, practically raw material, although it is a finished product. It is a basis for the en Mre whisky business; so that tbe distributing channel, when controlled by distilleries, became valuable, not only for the actual distribution of spirits and alcohol in their original form, but for the distribution of prolitable blends, wines, and rectiiicd goods, and so on. Q. That is to say, these distilleries tliat were owned by the .•American Spirits Manu- facturing c'ompany and the Standard Distilling and Distributing Company were for the manufacture of spirits; and the distriliuters, using these spirits as base, com- pounded the liquors of various kinds that went into the trade for the jiurpose of con- sumption. This second part — the compounding part of the business — has for the last few years proved more profitable than distilling 'I — A. It always was more prohtable. It was profitable because of the valuable trademarks and brands. rROrORTION CONTROLLED, OK THE WHOLE OUTPUT OF SPIRITS. Q. What proportion of the output of spiritsot the country did the American Spirits Manufacturing Comjiany control at the time of the organization of the Standard Dis- tilling and Distrilmting Company ? — A. I should say, roughly, about 55 per cent. Q. About what proportion did'the Standard Distilling ancl Distributing Company succeed in controlling in the course of a year — say from its organization? — A. Eoughly, about 35 per cent. Q. So that the two companies together controlled somewhere about 90 per cent? — A. Ninety per cent at that time. Since that time one distillery has been built at Terre Haute, Ind. Q. What company owns that? — A. The Merchants'. Q. Whatisthecapacityofthatdistillery ?— A. I suppose about 4,000 barrels per day.' Q. Does that represent substantially the other 10 per cent I — A. The companies, the American Spirits ilanufacturing Company, and the Standard Company, to-day are "mashing''— that is the technical term— -about 40,000 barrels per day. Q. And besides this Jlerehants' Distilling Company, and the plants represented hy the two comp;inies you have spoken of, there are no other large distilleries? — A. Oh, there are several siiialler ones. There are five or six small distilleries, all of which are practically limited to local markets. There are several in Cincinnati, small plants, which supply the local trade : but so far as they may be regarded as competitive fac- tors in spirits, the one plant in Terre Haute is practically the only one. THE DISTRIBUTING BUSINESS; PROPORTION CONTROLLED. Q. When this Standard Distilling and Distributing Company organized, was it organized through the efforts of men who were largely interested in the American Spirits Manufacturing Company ?— A. I can not say that from personal knowledge, hut no doubt it was. I had nothing to do with that. Q. The thought being that the organization of this outside company and that of the American Spirits Manufacturing Company together would very largely control the output of the country'?— A. It was deemed advisable, as I said liefore, to control more of the distributing branches ; to get hold of the profitable part «t that business. The Standard Comjiany, when organized, and to-da.y, controls sixteen of the largest distributin n- plants in the United States, situated in all large cities. Q How many <'f the large distributing plants are left on rside ?— A. I can give you the method of doing it, which will explain it to you. The spirits produced by the Standard Company and by the American Spirits Manufacturing Company are dis- tributed throuo-h an association called the United States Spirits Association. The United States Spirits Association is composed of 54 large distributers. They were made members of the associa,tion because they were the largest distributers and had nractically control of the business of this country. I would not say all, but very nearly all Out of the membership of the United States Spirits Association the ' See Mr. Biiuilcv, p. 815. 83G HEARINGS BEF0F;E the INUrsTRIAL COMMISSION. Standard brandies numbered Hi. While they uuinbered only 16, the branches of the Standard Company distribnted, I should say, roiif>hly, 66 per cent of the entire output, and the remaining- :i.s distributers distributed 34 percent. That refers to the product of the American .Spirits ,\lanufacturino- Company and the Standard Company, which, rou;.;lily, this year, will be about 40,000,000 gallons. That gives you about the way the business is beini; done. Q. The product of the jMerchants' Distilling Company is distributed, I suppose, by themselves, or by their own distributers ' — A. Distributed as best they can. Of couise it is much more diflicult where you have no organized methods of distribu- tion to lind a profitable market. Spirits can not be sold, as I have stated to you, like corn, like raw material ; and naturally the channels of distribution are very valuable. If you are running a distillery of 4,000 barrels per day capacity, you must have, salesmen, must have methods of selling goods, and if you must sell to small trade you must be prepared to furnish them with a little capital; to carry your customers. You must give them cvedit; and while it is ^ very easy matter to manufacture 4,000 barrels per day, and as easy to sell it, there is some dififlculty about making profit. TO STOP <)\'E]:PRODU(JTiOS — PROMOTERS NOT KNO\'\ N. (■i). You said that the Standard Distilling and Distributing Company was organ- ized (although you yourself werenot actively engaged in it, you have knowledge that it was so organized) by men who were large stockholders in the American Spirits Manufacturing C'ompany, and that it was organized as an allied association? — A. Well, it was part of a general plan to practically control the entire whisky business, as far as control is desired in any business; not a monopoly, but control of the busi- ness, so that you may control the production; so that you can stop overproduction. Q. Overstocking the market? — A. So as to stop overproduction. Q. AVho were the chief promoters of that Standard Distilling and Distributing Company? — A. I can not tell you. Q. You do not know? — A. No. Those matters are never known, but the under- writers are generally found amoug linancial men of Wall street. They do not adver- tise themselves as a general thing. Q. Are you acquainted with any of the details of the purchase of the different distilleries, prices paid, and so on? — A. Nothing whatever. I know nothing about it, excepting what I know from general information. KENTrCKY DI.STILLBRIES AND WAREHOUSE COMPANY — THE KENTUCKY WHISKY BUSI- NESS A HU.-^INKSS Ol'' iniANDS. Q. There was a fourth company that united in forming the Distilling Company of America. What was that? — A. The next comp.my that organized was the Kentucky Distilleries and Warehouse Company. Q. Will you explain that org.anization ? — A. The Kentucky Distilleries and Ware- house Company is capitalized at ten and a lialf millions of 7 per cent cumulative preferred stocli, and eighteen and a half millions common stock. Q. When was that organized? — A. In February, 1899. It purchased 90 per cent of all these standard brands of what are known as Kentucky Bourbon whisky, and took over, I think, and became the owner of 56 or 57 plants. Q. Plants? — A. Yes, distilleries. Q. You say it bought about 90 per cent of the brands. It bought also, I suppose, 90 jjer cent of the output of that kind of product? — A. No. This Kentucky whisky busi- ness is a business of brands. The real value of this business is in its ownership of one class of brands. There is a vast amount of capacity which has no value except for the production of cheap whisky, which might come into competition more or less with spirits; but the real value of the Kentucky whisky is the value of brands, not capac- ity. There was no intention to buy capacity. The intention was to buy good brands. Now, these 56 plants control more than 90 per cent of all the staildard brands of Kentucky Bourbon whisky. Q. Do the establishments that control these brands do largely a compounding business, or a distilling business? — A. Absolutely distilling. They are not com- pounders. They are manufacturers of straight whisky; that is, what is called also aging or maturing whisky.' These whiskies are manufactured, and are then placed in bonded warehouses connected with the distilleries, and are kept there for aging purposes. These whiskies are not fit to use until they are four years of age. The period in which they can remain in the warehouse is eight years. Q. You were yourself an officer of this Kentucky Distilleries and Warehouse Com- pany? — A. I was jiresident. 1 became president of the company at its organization. I See Mr. Clarke, ii. 168 ; Mr. livadley, pp. 817, 818, 827, S28. THE WHISKY CO^itBINATIONS: RICE. 837 Q. That company was organized also, I infer then, as a subsidiary in aiding to eet all those interests togethorf— A. Yes. » & THE RyE-WlIISKY BUSINESS. Q. Now, after those four companies had been organized in this close association, what was there left outside in the whisky business of the country that was valu- able? — A. These small distilleries that 1 have referred to, these small separate dis- tilleries, and the Merchants' Distillery, and a few, very few, brands of any value in the State of Kentucky. Q. Was there left also outside the rye whisky?— A. That is another field. Q. Yes; that is why I asked. Will you explaiu about that other field?— A. The production of what are called rye whiskies is centered in Pennsylvania and Maryland. Eye whiskies are practically identified with those States, the same as New England rum is identified with New England. No one knows why, but it is so. Bum made anywhere else would not have the same value as that coming from New England. So that rye Avhiskies, while they are made in Kentucky and also in Peoria, have no value as rye whisky. There are seven or eight standard brands of rye whisky. Q. (By Mr. SxMYTH.) Owning all these brands, do you have the opportunity of placing them on any whisky you please?— A. No; that is, we could do that, but thgit would not be good business. A brand has its value and retains the value much from the location in which the whisky is made. Those are very valuable things in a brand. It has frequently been done. It has frequently happened that a good brand was not, perhaps, profitable during times of demoralization ; the prices would go down; and the owner of the brand, catching at a straw, would say "Well, I might make this brand somewhere else," and in that way he killed his brand. Locality, sentiment, is what makes the brand. Q. More than quality? — A. Well, all whisky is good; there is no bad whisky. Q. (By Mr. Jenks.) There are ditterences in whisky? — A. The trade says so. Q. Now, about what proportion of the value of the output of whiskies — I am not referring to spirits, but to whiskies particularly — was there left outside in this rye- distilling business? — A. The rye distilleries belonging to this concern are the Mount Vernon and the Hannisville; Jlaryland pure rye, Philadelphia pure rye. In that field that represents about 25 per cent, not more. That is, these rye distilleries represent about 25 per cent of the value of the total rye whisky of the country. Twenty-five per cent of the output of Eastern ryes is represented by these distil- leries. This refers to Eastern ryes. Q. Was it contemplated in the general plan of organization that some of these rye distilleries be brought in also? — A. It was important, for this purpose: The dif- ferent companies were in a position, through distributing houses, to sell a man everything lie wanted except rye whisky. It was then deemed important to secure the best brands of rye whisky and the best blending establishments of rye. That is a very profitable business, and is a very important adiunct. In other words, one of our salesmen goes to a man and says, "Here are your spirits, here are your recti- fied goods, here is your wine, here is your gin; and here is Kentucky straight whisky," and there we had to stop. It became important to get rye whisky — a rye- whisky plant; so the Hannis Distilling Company was acquired. That company controlled two of the best brands of rye whisky, Mount Vernon and Hannisville, and controls the largest blending business of rye whisky in the world ; the inten- tion being that this concern should be able to supply the jobber everything he needs in his business. DISTILLING CO.MPANY OF AMERICA OWNS STOCKS, NOT PLANTS. Q. Now, will you kindly from this point take up the organization of the Distil- ling Company of America, and tell us how the dift'erent organizations were brought together into' one? — A. I think you have the whole thing right before you.' Q. I have the general figures here. — A. That is the whole story, if you have that. A proposition was simply made to the stockholders of the diflerent companies, under which the organizers of the Distilling Company of America agreed to purchase their stock for stock of the Distilling Company of America, as stated in this deposit agreement. I have forgotten the exact percentages, but they are given in the plan. Q. The general plan being that the Distilling Company of America should buy up as much of the stock as possible of these different companies, and should in itself simply control stocks? — A. The Distilling Company of America is merely an owner or stockholder in these various companies. Q. It did not itself buy up the plants of these four different companies? — A. No plants ; it merely owns stocks. Q. With reference to the rye- whisky companies that were brought in, did the Dis- tillino- Company of America really buy plants or stock? — A. Stocks altogether. It 1 See Mr. Bradley, pp. 818-822. 838 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. is simply the owner of stocks. It is not in the whisky business. Its only source of dividend is the stocks. You may call it the rlearing house for the stocks. EXCHANGE OF STOCKS. Q. In buyiug up the stocks of these different companies, did it exchange its own stock, genei: lily speaking, for par or less than par? — A. The percentages are given here, I think. Can I refer to it? Q. Certainly. — A. The organization made the following proposition: Foreverypre- ferred share of the American Spirits Manufacturing Company, 50 per cent of preferred stock of the Distilling Company of America, and for the common stock 25 per cent. For every share of the Kentucky Cimipany, common stock, 70 per cent; preferred stock, 85 per cKut in preferred and 15 per cent in common. Standard Company, 85 per cent in preferred and 15 in common for the preferred, and for common stock, 60 per cent in common. The Spirits Distributing Company first preferred, 80 per cent in preferred and 20 per cent in common stock ; for the second preferred, 20 preferred and 20 common.' Q. The common stock of this Spirits Distributing Company, being all owned by the company, did not need to be jjrovided for? — A. No. Q. In all of these companies, then, there was some scaling down of the capitaliza- tion.' — A. Vcs ; the capitalization was scaled down. Q. In the scaling down of the capitalization, were the fixed charges (that is, what was required to pay the dividends on preferred stock), lessened or, on the whole, was that increased? — A. No; the Distilling Company of America, as I explained, acquired the stocks of other companies, and of course paid for them, so that the total of preferred stock issued to-day is $31,250,000 of the Distilling Com- pany of America that is entitled to a cumulative dividend of 7 per cent. Q. Does the cumulative dividend of 7 jier cent on this preferred stock amount to more or less than the dividends on the preferred stock of the companies that were acquired? — A. I will take a pencil aud wc can get at that very quickly. The pre- ferred stock of the <'onstituent companies amounts to $26,750,000. Q. And part of this preferred stock of the other companies bore a quite low per- centage, did it not — some at 5, aud some even at 2 ? — A. The preferred stock of the American Spirits Manufacturing Company was 5 per cent. The preferred stock of the Spirits Distributing Company was 7 per cent. After some time there was a change made iu that contract, under which the holders of first nreferred were to take 6 per cent in lieu of 7. The second preferred stock was originally 6 per cent noncumiilative; under this special arrangement the stockholders agreed to take 1 per cent of that off. They changed to 6 per cent on the first, and to 2 per cent on the second. Q. If we take the amount that was to be paid on the preferred stocks of the old companies each year, and compare it with the amount that is to be paid on the pre- ferred stock of the present company, is there an increase or a decrease? — A. It is difficult to figure that way, because the Distilliug Company of America owns much more valuable property in aildition to these stocks that it exchanged its stock for. It owns these rye corporations of which I told you, and there was a large amount of cash, $3,000,000, supplied by the organizers of the Distilling Company of America. Q. That is to say, owing to the fact that they acquired these rye distilleries, and also that they have accjuired considerable cash in the exchange, they would be jus- tified iu assuming the additional amount? — A. The common stock that was exchanged amounted to a total of .$l)7,7.")0,000. Of Distilling Company of America the present issue is $46,250,000. Q. (:)f this $46,2.50,000 that was issued ? — A. (Interrupting.) That represents ,the exchange of $67,750,000 total common stocks of the companies for Avhich these exchanges were made. THE ORGANIZKKS' BARGAIN. Q. This $46,250,000, as I understand, was what was given to the organizers in order to make the exchange. — A. Yes, to the organizers for the purpose of making the exchange. Q. If you figure up the amount that was n.Mjuired iu accordance with the terms that were oft'ered to the stockholders of the different companies to make the exchange, would it have used up all of this .$46,2.~)0,000, or was there some left over? — A. I have not figured that up. I c'an figure it, if you like. There was undoubtedly some left over for the organi/ers, after supplying the cash :ind the purchase of the rye plants, of the stocks. It is easily ascertained. I think 1 can figiire the thing out. Q. That is the purpose of the question. This $46,250,000 of common stock and $31,250,000 of ])refcrred stock paid to the organizers was, if I understand, for the purpose of acquiring all the stocks of these four different companies, and what else?— A. For cash. Q. How milch cash? — A. Three millions iu cash and for the acquisition of the stookr of the rye-whisky companies. ' Sec p. 821, footnote. THE WHISKY COMBINATIONS: RICE. 839 Q. You said for three millions of cash. The agreement as printed here provided for a million and a half. — A. Well, that is right. It provided one million and a half additional cash working capital, and other cash which was given for some of these stocks of rye- whisky companies. Q. Y'es. — A. In addition, of course, to the stocks of those. How much stock those organizers paid for those things of course I do not know. I have no knowledge of that. Q. As regards the rye-whisky plants that were brought in, you said the Hannis Distilling Company was brought in. What was paid for thatf — A. I could not tell you; I do not know. Q. And what other was brought in? The St. Paul distillery, I think it was, that was mentioned. — A. I did not mention the St. Paul distillery, because that was part of that agreement, and, as I say, it was not what I call a distinctively Eastern rye- whisky plant, and it was not a part of the explanation I was giving, because we did not get to that point. Q. But was the St. Paul — A. (Interrupting.) The St. Paul was a part of the Ijroperties that were agreed to be turned over by the organizers ; agreed to be turned over to the Distilling Company of America. Q. Do you know what was paid for that? — A. I do not know. The organizers undertook to do so many things for so much stock. In other words, in that case they undertook to do these things for $31,250,000 of preferred and $46,250,000 of common ; and they undertook to procure the exchange of at least a majority of all these stocks, and so much of the stock as was not turned over so much of that stock had to be retained or returned to the Distilling Company of America. In other words, $31,250,000 of preferred and $46,250,000 of common provided for all the out- standing stock of the four different companies ; it provided for the acquisition of the St. Paul Company; it provided for thi- acquisition of the Hannis Distilling Com- pany, and provided for $1,500,000 cash working capital. Q. If one figures out, as I have had done here, what it would take of the preferred and common stock of the Distilling Company of America to acquire all these stocks of these four ditterent companies at the rate laid down in the deposit agreement here — A. Exactly. Q. It amounts to $20,540,000 of preferred and $32,890,000 of common, if we take them all?'— A. Precisely. Q. In accordance with the terms of the agreement. If we take that from the $31,250,000 of preferred stock and the $46,250,000 of common which were given to the organizers, it would leave in their hands $10,710,000 of preferred stock and $13,360,000 of common stock? — A. Whatever those figures show. As I say, I have not figured that. I have no doubt that is correct. Q. Th.at is correct. — A. I have no doubt that it is. Q. On the basis that it is figured out. The point of the question is this : Leaving in their hands this $10,710,000 of preferred stock and $13,360,000 of common stock, the burden that was upon them was to furnish these two distilling plants and $1,500,000 in cash? You said that a moment ago. — A. And the St. Paul distillery. Q. The two; the Hannis and the St. Paul?— A. No, the Hannis Distilling Company owned two plants, the Mount Vernon and tho Hannis. Q. Both were in the Hannis Distilling Company?— A. Yes, and a large blending, works. Q. That was all included in the Hannis Distilling Company?— A. That was all included in the Hannis Company stock purchased. Q. Then for the Hannis Distilling Company and the St. Paul and a million and a half in cash, you said a few moments ago that there was three million in cash that they had to supply.- A. I was mistaken in that; I should have said one million and a half. Q. I understood you to say alterward that you spoke ol the three millions because you thought there was that amount to be furnished. I was going to ask you if you thought that the acquirement of the Hannis Distilling Company stock and the St. Paul distillery was represented bv a million and a half?— A. I can not tell you; I have no idea. ' I do not know what tbey cost. 1 have no doubt that the Hanms and Mount Vernon were the two most valuable brands of Eastern rye whisky ; they were of very large earning capacity ; and they were brands of whisky that we were very desirous to own. How much was paid for them I can not tell. Q. How much do you estimate their value at to-day?— A. 1 should not like to sell them for five million in cash; I think we could get that for them. , , „ . , , O It was the understanding, I supjiose, that after the or;;anizers had iurnished these plants, any surplus stock that they had in their hands was theirs?— A. That is their business ; that is not mine. They didn't do this thing simply for luck or for their health. ^ , i ^ i * mu j Q. Were you one of the organizers?— A. I was not, absolutely not. Ihey under- took to briiio about a very important piece of work. 840 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Of course. — A. And it was iifuestioriable in my mind and questionable in the minds of men who knew a good deal aliout this sort of business whether it could be done. They undertook to do it, and they succeeded in doing It. As a matter of fact, the Distilling Company of America to day controls on an average 92 per cent of all the stocks of these four operating companies. It was a most valuable thing for the stockholders of the operating companies, if it could be brought about, because it made it easy and made it practicable to operate all these companies on the most economical lines, to reduce the cost of production by concentration of plants and concentration of manufacturing and concentration of distributing charges and all that sort of thing. It was a valuable thing for these stockholders to bring about. They could well afford to pay well for doing that work. I have no idea what the organizers made, but whatever they did make I think they were entitled to. Q. The question was as to whether it was in any way easily possible to see what they did make; and with refei-ence to the prire that was paid for the Hannis Dis- tilling Company, that, of course, is a matter of common rumor. I thought perhaps you had definite information on it. — A. I have no definite knowledge, as 1 say. STOCKHOLDBRS NISARLY UNANIMOUS FOR CONSOLIDATION. Q. Was there any serious objection on the part of the stockholders of any of these four companies to going into the combination? — A. It was the most remarkable phenomenon that ever came under my observation, the unamimity with which this thing was done. Q. It was re))orted in the papers in July, after this deposit agreement had been published, that there were meetings of the stockholders of the American Spirits Manufacturing Company, at any rate, in opposition to the plan, and it was thought by some of them apparently, if one may judge from the papers, that it would be unwise for them to go in? — A. There was most vigorous denunciation of the plan and the scope of it and the people connected with it on tlie part of this committee — the American Spirits Mauufacturiug Company protective committee. I read columns upon columns. Q. Yes. What proportion of the stocks of the American Spirits Manufacturing Company were, as a matter of fact, deposited under this agreement witliin the time limited?— A. I cim not say exactly, but I think over 90 per cent. Q. So that this ojiposition, you would say, came from only a very smallminority of the stockholders? — A. My understanding is that tliey represented 1,700 shares of the common stock. Q. Out of how many ? — A. Out of 350,000. It was jiractically unanimous. It was the consensus of opinion almost unaniuiouslj' that this was a good thing for the stock- holders to do, as is evidenced by the fact that they deposited in such overwhelming numbers. NO UNDUE SECRECY ABOUT THE AJIERIOAN SPIRITS MANUFACTURING COJIPANY — IT WAS A WRECK. Q. Statements were made at this time by some of these peoide that they wished a report of the business of the American Spirits Mauufacturiug Couipauy, inspection of books, and a financial statement, and they declaicd that no financial statement had ever been made to the stockholders? — A. No public financial statement. It has always been the custom of the management of tiio American Spirits Manufacturing Company to invite the stockholders to its offices. The books have always been open to those stockholders, bona fide stockliolders; in fact, they have invited the stock- holders to come there and get all the iulormation that the officers themselves had. So long as I was president of the company ^^e were very glad to have the stock- holders come in and to see them. The only difficulty was that too few of them took any interest in it. We were always glad to see the stockholders. Of course, in a case where we questioned the good faith of their application for information, we simply declined it absolutely. Q. Were you in the habit at the annual meetings of making any report at all to the stockholders? — A. We always made a general statement of the affairs of the company. I never maushel houses. If you want him to pay as much tax as these great monopolies or eorpoiations, it is doing him an injustice, and it is driving him out of business." That is the argument that is made. The (Com- missioner says, "How mnch do you think John is producing?" and the reply is, "Well, he can not make more than 2A gallons from his business." He is taxed on 2i gallons. The fact is that these fellows are becoming so expert that they axe pro- ducing 4 and 4J gallons frojii a bushel of corn.-' Q. How mnch do you produce from a bush(l in your distilleries? — A. We are improving all the time; we are producing in high wines a little over 5. 'S^OULD PUT A HIGII-LICENSE FEE O.X EVERY STILL. (}. Yon think they are producing over 4f— A. I think they are producing over 4. The fact is that these stills pay taxes on abont half of what is produced, and the other half is practically illicit whisky. The remedy for that is a very simple one, but still it is a. very difficult thing. The remedy is to charge a license fee for every still, charge them in proportion to the ca.juicity. Of course it wonld cost our com- pany a great deal of money, but it would assist theGovernment in the proper collec- tion of the tax. If you charge every still in the country a license, say, on stills under 10 bushels so much, and from 10 to 100 bushels so much, and from 100 to 500 so much, and from 500 to 1,000 so much, a license from all, and make the license pretty heavy, that wonld be one remedy for wiping out a good de at all times during the usual hours of business open to the exami- nation of every stockholder at said principal office. 83a 56 866 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. That the name of this corporation be at all tinjes conspicuously displayed at the entrance of its principal oflice in this State. And be it further Ordered, until this resolution he duly rescinded, (2) That such office and place of business be in and at the ofjice of the New Jer- sey Registration and Trust Company, No. 52.5 JIain street. East Orange, N. J., and that this company be registered with the said Trust Company. (3) That the New Jersey Registration and Trust Company, being by statute authorized to act in New Jersey as the agent of corporations, be, and hereby is, appointed the agent of this corporation in charge of said principal office, and upon whom legal process against this corporation may be served within the State of New .Jersey, and also the transfer agent of the stock of this company." Q. Does your company at its oflice in New Jersey keep a completi*, full alpha- "betical list of the stockholders, their residence, and the amount of shares held by "them ? — A. I understand so. Q. These books are open to the inspection of any stockholder on demand during regular business hours'!' — A. Yes. capitalization: $10,000,000 common stock for ccst of organization. Q. What is the amount of capital stock of your company? — A. $50,000,000. ■Q. And there has been issued A. $46,000,000. Q. How is this divided between preferred and common? — A. $28,000,000 of common and $18,000,000 of preferred. Q. What is the special reason for issuing $10,000,000 more of common than of pre- ferred, if any? -For what special purpose was that $10,000,000 issued?— A. The property of the original tin platecompanies was purchased by Judge Moore; he turned the companies over to the reorganized company, for which he received so much money, which was in stock. Q. The point is this, If I understand your answer, that this $10,000,000 was turned over to Judge Moore for the purpose of organization? — A. Exactly. Q. And the $18,000,000 of preferred stock and the $28,000,000 of common stock was used in purchasing the plants? — A. It was issued in purchasing the plants. Q. The extra $10,000,000 for the cost of organization was put into his hands; that is right, is it? — A. I do not know just the way you pi^t that. Q. Eighteen million dollars of preferred and .^18,000,000 of common were issued for the purchase of the plants and the supply of any cash that might be needed to run the plants afterwards, and the $10,00li,0O:i was turned over to Judge Moore to use at his discretion ? — A. As a matter of fact, .) ndge Moore purchased the original plants for cash; so much cash; had a cash agreement. Then he organized this company, and afterwards the mill men who agreed to subscribe for stock had the privilege of ooming in and doing no. If a man subscril)e:l (or 100 shares of stock, he got 100 shares of preferred and 100 shares of common ; otlierwise he got cash. But the Judge had the mills bought on a cash basis, and the stock feature was an after considera- tion so far as the mill men were concerned. Q. As you und(?rstand it, then, $18,000,000 of preferred and $18,000,000 of common was used to raise the money to buy the plants directly, and the $10,000^000 was used for the expenses of organization, and put into the hands of Judge Moore, to be used at his discretion for that purpose. Is that right? — A. Yes; that is right. coxDrnoNS before consolidation. Q. What was the situation of the tin-plate trade that led to the organization of the American Tin Plate Company? — A. Well, the competition between the old com- p.'inies had become so strong, the business was fast drilting into a condition where there was little, if any, prolit. There were a number of nulls losing money and very few of them making any, and it was a matter of the mills getting together. So they appointed a commitlee to look Judge Moore up and ask him if he would not take charge and arrange this; got them together, in other words. Q. The initiative was tak<-n by the mills themselves?— A. Yes. The fact of the matter is, the mill men chased Judge Jloore for :i year to get him to take charge of it, whicli he finally did. Q. You say none were making money, and many were losing; had there been many failures among the tin-i)late mills that ,\ on know of ' — A. Jvone at all. Q. The organization wa.s made in order that they might make Larger profits?- A. As a. matter of fact, there were a. number of tin-plate mills carried by steel com- panies and people in other lines, and had been for years before. I do not mean to say all the mills were losing money; on the contrary, the majority were makiug money; nothing great, but a, prolit. I do say a number of them were being carried iiy st((d c'ompanies; one case ])articularly I know of. Q. Anil the competition had been tierce enough so that in the minds of the mill THE TIN-PLA.TE COMBINATION: REID. 867 men there was danger of bankruptcy on the part of some of them ? — A. I am quite sure if the cousolirtatiou had not gone through there would have been 15 companies closed and sevBu or eight thousand men out of work. Q. You think there would have been 15 closed down; out of what numbiT? — A. I think there were 39 companies. Q. That went into the combination ' — A. Thirty-nine. Q. Fifteen of these 39 in that condition! — A. I did not say that. I said a number of them; I believe 15 of them would now be closed down. COUK8E OF PRICES — CONTRACTS. Q. Will you explain what the course of prices of tin plate has been, say, from 1 year before the formation of the American Tin Plate Company to date? — A. I should say tin plate, full weight plates, were worth a year before $3.10; from that they drifted down to as low as $2.60 at the time of the organization. In the last 6 months the larger part of the decline took place. Q. Between the $3.10 and $2.60, the larger part of the decline occurred in the 6 months before the company was formed? — A. Yes. Q. How has the price been since? Perhaps you had better tell us the course of prices from the formation of the company to date. — A. When the new company took the contracts of the old companies, which they had made for the delivery of plates, they assumed contracts, I presume, amounting to about 4,000,000 boxes of tin plate to be delivered at prices ranging from $2.65 to $2.75. During this boom in raw material and all that sort of thing while the ruling market on the. other side was $5.25, delivered f. o. b. New York Q. For how long a period did these contracts run? — A. To the 1st of July last. Q. Are you still working on the basis of these old contracts'? — A. No; they are about cleaned up. We have some old contracts yet which we are delivering to customers. Q. Were the larger part of these contracts for a period of 6 mouths or a year! — A. Fp to the 1st of July ; very few for a year. Q. l^p to what time? — A. Beginning January 1. However, there were sales made after the organization of tlie company, through January and February, at along about $3, $3.25, $3. .50, and $3.75. Lots of these contracts we are still work- iUfi on. Q. If I understand you, the regular prices quoted in the markets and the trade papers did not represent tbe exact condition of affairs with tbe mills?— A. Not what they were getting for plate. Q. Will you pel hajis explain a little further what the course of the market has been from the time the Tin Plate Company was formed to date — that is, the selling price? — A. It has been upward. Q. Could you give us the figures? — A. That started, I think, at $3. Q. Y'ou sa'id tbe prices were about $2.60?— A. We sold some for .$2.75 after the company was organized. Then at $3, $3.25, $3.35, $3,874, $4.25, and the present price is $4.65. Q. When these prices were put up'from $3.87-J- to $4.25, was tliat one immediate change made at ouoe ? — A. That was at the time of the advance of steel from $22 to $37 or $38 a ton . Q. As soon as the price in steel was advanced, you advanced the price? — A. Pig tin and steel went up very rapidly in 30 or 40 days. THE BOX OF TIN PLATE. Q. When you are speaking of these prices, what are they — the price per box? — A. Yes. 14 by 20— 100-pouud plates, f. o. b. the mills. Q, Can you tell us how much steel and how much tin there is in a box of this finished product?— A. In a full weight box there are 105^ pounds of steel and 2^ pounds of tin, making 108 pounds. , ^ . Q. .^o that you make tbe prices on 105* pounds of steel and 2i pounds of tin, and figuring out I'he cost of that will give substantially the cost of the raw material?— Q. Subtract the cost of the raw material from the cost of the full weight box, and you will find the cost of production, plus your profit, the profit of tlie seller or uianu- facturerl— A. There is something to be figured besides, lu roiling steel there is some scrap. Tbere is an allowance for that, to be made. () That could be counted in the cost of production ?— A. Y'es. o' Is that an a,bsolute waste?— A. Oh, no; but there is perhaps 20 per cent waste in rolling $38 steel, and the scrap would sell for $11 or $15, perhaps; I do not know the exact scrap market. ^ , ^ • x, i . Q. So, liguring out the prices in this way to determine the general range of profits, there is this waste? — A. Yes. 868 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Could you furnish the commission with the course of prices, monthly prices, of tinished product, of steel billets and of tiu, for a period running from 1888 to date? — A. I can get them for you. Q. Will you be kind enough to furnish them to nsf — A. Yes.' Table 1. — Average price, by months, of billets and slabs sold by Bellaire Steel Company. [Prices furnished by Mr, Keirt. ] Month. 1888. I 1889. January ITebruary March April May June July August September October November December Whole year. $30.31 28.74 28.49 28.40 28.14 28.08 28.00 27.43 27.93 28.36 27.48 27.55 28.24 $27. 65 28.18 27.32 27.89 26.41 25. 95 26.16 26.32 26. 27 26.57 26.88 27.92 26.95 $32. 01 32.36 33.10 31.01 30.04 28.84 26.00 30.36 30.00 29.68 28.95 28.10 $27. 61 26.00 25.95 25.42 20. 11 25.47 25.75 25.71 25. 56 25. 24 1 24.49 30.04 1 25.75 1892. 524. 50 24.62 24.03 24.04 23.43 22.94 20.66 23.53 23. 73 23.70 23. 67 23.43 23.62 $22. 71 22.32 22.70 22.63 22.22 22.27 21.80 21.13 20.00 19.47 19. 39 18.65 $18. 66 17.59 16.68 16.20 16.00 16.91 16.84 15,93 16.98 15.89 16.60 15.61) 21.26 16.49 $14. 86 14.85 14.88 14.76 15.02 15.62 17.18 18.24 18. 73 20.24 20.05 19.73 17.01 189( ^21. 19 19.19 17.62 17.65 19.08 20.11 19.00 20.17 19.45 19.23 16.90 19.06 1897. $15. 14 16.41 15.61 15.61 15.66 15.46 14.71 16.07 14.61 13.82 1898. $13.93 14.02 14.00 14.04 14.16 15.08 14.84 14.78 14.74 14.91 15.10 14.75 15. 09 14. 66 20. 73 $15. 53 14.98 14.62 16.24 15.27 15,09 17.18 26.49 26.86 33.37 32.39 Month. Table 2. — Average selling price of pig tin in New York. [Prices furnished by Phelps, Dodge & Co., at request of Mr. Eeld.] 1888. 1889. 1890. 1891. 1892, 1893. $37. 00 $21. 80 $20. 80 $20. 60 $19, 80 $20. 60 37.00 2L40 20.60 20.00 19,80 20.60 37. 00 21.00 20.40 20.00 19,80 21.00 31.00 20.80 20.00 20.00 20,20 21.00 19.20 20. 50 20.60 20,20 21,00 20.20 17.80 20.10 21.40 20.60 22,20 19.60 19.00 19.80 21. 00 20.40 21,90 18.60 20.70 20.10 22.00 20.00 21,40 19.00 22.50 20.20 22.80 20.00 20,60 19.80 22.60 20.60 22.40 20.00 21.40 20. 60 22.60 21.50 21.80 19,80 21.00 20.60 22.00 21.60 20.60 19.80 20.60 20.40 1894. 1895, 1896, 1897, 1898, $13. 20 $13, 20 $13.80 13,20 13,40 14.00 13.40 13, 20 14.20 13,40 13,20 14.40 13,40 13,20 14.70 13,40 13,60 16.00 13,40 13,80 16,40 13,20 13,80 15,80 13,00 13,60 16,20 12.80 13,60 17,00 13,00 13,60 18,00 13,00 13,60 18,60 1899. January February March April May June July August September October ^November . ... December ^20, 00 19,40 19,00 19,40 19,80 19.60 19.00 18.20 17.00 16.40 14,40 13,80 $13, 60 13,60 13,80 14,00 14.40 14.20 14.20 14.40 14.60 14.70 14.60 13.80 $22. 00 23.00 23.60 25,00 25,40 25,60 28,50 31,00 31,60 31,20 28.00 Table 3. — Average price of American Bessemer voice tin plates, 14 by SO, full weigM, 108 pounds, delivered in New York. [Prices furnished by Phelps, Dodge & Co,, at request of Mr, Keid,] January . . February . March April May June July August . , , September October . . . November, December . 1897, 1898. $3.40 $3. 15 3.30 3.15 3.35 3.16 3.40 3.10 3,40 3,10 3.35 3,10 3.30 3,05 3.20 3,00 8.15 3,00 3.15 2.90 3. 15 2.95 3.16 3.10 $3.34 3.84 4. 21J 4.2li 4.21i 4. 214 4.71i 5.00 6.00 6.00 5.00 5.00 ' Mr, Reid gives the following estimate of the labor cost of tin plate, in a letter dated December 16, 1899: "In regard to the average amount of wages paid per box of tin, based on 14 by 20 size, I bog to say that the tigure.^ that I give you herewith are the only ones obtainable at the present time and are from one of the largest works now in the consolidated company. They date back since 1893. At that time the mill was a small one and the cost per box would show higher than when the mill was larger and had a greater output. The average price of labor per box in the year 1893 was $1.60. This was during the time of small output. In 1894, after the works bad been increased somewhat, it was $1.33. During the years 1896, 1897, and 1898, up to the time of consolidation, the average price about was $1. This was when the mill had been increased to its present capacity and was getting its maximum output. Please remember these figures were made during the old scale of wages and before the present scale became ojjerative." THE TIN-PLATE COMBraATION: REID. 869 Table 4. — Averatje price of imported coke tin plates, 14 hy r30, full weight, 108 pound delivered at Xeiv York, duty paid. [Prices furnished by Plielx)s, Dodge & Co., at request of Mr. lieid.J Month. January .. February . March April May June July August. .. September October. .. November December $4.75 ^ 4.79 4.74 4.69k 4.53 4.40 4.51 4.58 4.62 4.47 4. 29.', 4.24 4. 47J 4.44 4.37i 4.3o| 4.41J 4.48 4.731 5. 15J 5.40 ■ 5.40 5.10), 1891. 1892. $5.32 $4.85 5.42 4.85 5.30 4.85 5.20 4.85 5.25i 4.85 5.39 4.85 5.37 4.821 5.46), 4.80 5. 3(i 4.80 5.31 4.85 5.28i 5.00 5.28 5.00 ip4. 22 4.40 4.34 4.34 4.57 4.76 5.05 5. .58 5.40 .5.31 5.31 5.34 Until July 1, 1891, the duty was 1 cent per pound. July 1, 1891, to August 28, 1894, tlie duty was 2^^ cents per pound. August 2X. 1894, to July 24, 1897, the duty was li cents per pound. Since July 24, 1897, the duty was IJ cents per pound. WAGES — PAY ROLL — AMALGAMATED ASSOCIATION SCALE. Q. Will you tell us what the course of wages has been to one or two different classes of workingmen in this industry from 2 years before the Tin Plate Company was organized up to date, the same as you did about prices? — A. The wage scale has been advanced since the new company came into existence; the ordinary common labor around the mill about 20 per cent, and skilled labor 1.") per cent: but in adjust- ing scales between different mills there has been an advance greater than 15 or 20 per cent on common labor. The advance in the entire pay roll of the company would amount, I should say, to about $2,000,000.' Q. Annuallyf — A. Annual pay roll. Q. What has been the increase in the number of men? — A. I should say we have on 2,000 more mill men than we had. Q. When you were organized? — A. When the new company was organized; yes. Q'. (liy Mr. Kennedy.') How many more? — A. 2,000; close to it. Q. Have you an agreement with the Amalgamated Association of Iron, Steel, and Tin ^^'orkers in your combination ? — A. We have an agreement to pay them a scale of wages, beginning July 1, to the following Jul.y 1. Q. Is that a sliding scale? — A. It is a scale like this: For every increase in the price per box of 10 cents, I think it is, after it reaches a. certain price, the increase in labor runs 4 cents a box. Q. Are you paying them now on the basis of these contracts that you are filling of old organizations that came into your combination?— A. We are paying the new scale on every box rolled in the mill, regardless of the prices the goods are sold at. Q. So they are not to get an increase when you have finished the old contracts? — A. Thev are now getting the increase. Q. (By Jlr. Jk.nks.) When did that begin?— A. The 1st of July. Q. (By Mr. Farqoiiar.) Does that scale stand for 12 months? — A. It stands for 12 months. THE SLIDING SCALE SLIDES UP, NOT D0« N. Q. At the very high piice you are selling tin at, are the wages of mechanics com- mensurate with the prices you are getting from the consumer?— A. They are the best paid men in the country. Q. Are they sharers?— A. They are getting their full share. In fact, if there was any little change in raw material to bring about a higher cost the only way I see to meet it is to get- it off the laboring man. If there was a further increase in the cost of pio- tin and steel to the figure that we hear talked of as the probable price next year,%he only way the Tin Plate Company could run except at a loss would be to cut the workman. Q. (By Mr. Jbnks.) Cut wages below what they are now?— A. Cut wages below what they are now. Q. (By Mr. Kennedy.) Could you not increase the cost of the product to the con- sumer? — A. We could some; yes. Q. Would not that be as easy a way as reducing the wages of the men ?— A. A $10 advance on steel would mean a good deal. I See Mr. Graham, p. 853 ; Mr. Griffiths, p. 903. 870 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Could you not share it between the cousumeT and the workingman hiHtead of taking it all off the workingmair? — A. "We ave tied up with the workingman until next year; we would have to pay them these wages; we could not change; that is what I was trying to illustrate. Q. (Jiy Mr. FarquhaI!.) So you have a rigid scale for 12 mouths? — A. For 12 months; yes. Q. (Jiy Mr. Jenks.) If I nnderstaud your contract, if you put up the price of the product, the wages of labor are increased proportionately. Suppose trade conditions are such that the price of the product falls below what it was when the contract was made ; does your agreement with the workiugmen provide for lowering the wages pro- portionately ? — A. That stand.s ; their wages are fixed for a year. If there is a further increase in price above the price at the time the scale was made, I believe it was $1.2.5, then they slide up. Q. (By Mr. Farquhar.) First of all, there is a minimum scale agreed upon; if the prices rise there is an arrangement that they are to share four-tenths of that rise? — A. That is it exactly. Q. (By Mr. Jenks.) Can you not furnish us with a copy of that scale? — A. Yes. Western scale of prioes ijoeiriiin;i wages in rollinij mills for the ijear ending June 30, 1900, published by National Lodge, Amalgamated Association of Iron, fileel, and Tin Worlers. TIX-PLATE SCALE. When a box of 100 pounds coke tin plates is selling at $4.25 the scale of prices as appears below shall be paid. On each 10 cents increase in the price per box 2 per cent advance on the prices below shall be paid, and on each 10 cents per box decrease a deduction of 2 per ceut shall be made to said basf, but it is understood that the wage list below is the minimum for the year ending .June 30, 1900. Gauge. Nos. 8to 11 .... Nos. 12 anil 1.3 . Nos. 14 and 15 . Kos. 16 aud 17 . Nos. 18 to 20... Nos. 21 to 24 . . . Nos. 25 and 26 . Nos. 27 aud 28 . No.s. 29 and 30 . No. 31 No. 32 No. 33 No. 34 No. 35 No. 86 No. 37 No. 38 No. 39 No. 40 No. 41 No. 42 No. 43 No. 44 Keller. .Doubling $2.: $1. 1. 1. 1. 3 !H 4 01 4 39 4 94 5 18 5 40 5 03 80 nil .iaw or . crncodile sliL'iirw and ijiib or sbeet j work, per I tOD. 98 03 2:! 52 jX 70 '; 87 ■( OG / $1.26 Shearing tin plate on squaring shears, per ton. 2.22 1.13 .49 2,68 1.01 .52 2.86 .97 .53 3.01 1.00 .55 3.10 1.03 .59 3.39 1.20 .61 3. 60 1.20 .63 3.74 1.25 .66 3.79 1.21 .08 3. S5 1.17 .70 4.14 1.29 4 83 1.33 . 75 5. 06 1.40 .70 5.29 1.45 .77 6, ,VJ 1.49 .78 5.75 1.55 .79 Screw boy, per ton. $0.40 .45 .46 .47 .49 .52 .54 .56 .59 1. Thirteen per cent lees than above prices for iron, except shearman. 2. Twenty per cent added for changed iron and steel. 3. Seventeen per cent added for pickhi-finished iron and steel, except shearman. 4. For all sheets sheared into circles on tin-plate mills where the loss exceeds 10 per cent _'l) per cent extra shall be paid. 5. All plate and sheets cut down to smaller sizes on tin-plate mills to be paid for at scale prices. 6. For all sheets rolled on tin-plate mills, 1 I square feet and over, not cut down to smaller sizes, and for tin plates, worked othi'v than tin-idate style, sheet-mill prices including hii.nds' prices shall be paid, and when working sheets, tin-plate style, the additional percentage of entire sheet-mill eost ovrv tin-plate shall be added to all hands' wages on the n.ill, :ind it is understood when plate worked on a tin-plate mill and is jjot " llrst" pickled, annealed, cold rolled, and thoroughly treated as plate for THE TIN-PLATE COMBINATION: REID. 871 timiiiig purposes loefore leaving the mill where it is worked, it shall be paid for at sheet-mill pri(^e8. ( h'or rules, see Addenda.) 7. Where improved squaring shears are used the company shall pay for opening packs and grinding the knives, and on jaw and crocodile shears the company to pay for opening packs, and in mills where plates are cut into smaller sizes thau 14 by 20 additional pay for shearing shall he arranged, shearman to change and set the knives. 8. Catchers on tin-plate mills to receive 23 per cent of roller's statement, the same to be deducted from the roller's statement and paid by the company. 9. Eight (8) hours shall be a day's work on tin or black plate mills, said mills not to follow out, except when notice to mill crew is given of a change in time of start- ing Friday morning to .Saturday tuorning, aud mills are not to operate on Saturday afternoon or Saturday or Sunday nights. 10. It is agreed that no more than three changes in the classification of sheet and tin-plate mills can be made during the scale year, aud due notice shall be given before such changes. 11. The weight of bar to be marked on the bar when brought to the mill, or scaler for weighing bars be furnished at the option of the company. 12. In each tin mill a blackboard shall be furnished, on which the complete weight of each turn shall be placed within a reasonable time after being made. 13. All tin and black plate shall be weighed by the company after being sheared and opened. The limit of a turn's work of 8 hours shall be as follows : On gauge. 100 pounds. Nos. 8 to 1 1 13. 500 Nos.l2to 13 l-:,.500 Nos. 14 to 1.5 11. ijOO Nos. 16 to 17 10, 500 Nos. 18 to 20 9,500 Xos. 21 to 24 7, 500 No. 25 6,7.50 No. 26 6,350 On gauge. No. 27 No. 28 No. 29 No. 30 No. 31 No. 32 No. 33 No. 34 and lighter . ) pounds. 6,150 5,650 5, 850 5,750 5,550 5, 350 5, 150 4,950 Where 28 gauge is worked in 6 or 8 sheets to the pack 6,150 pounds shall be the limit. On sizes 20J- by 56 and larger an excess of 5 per cent on the limit may be made, but if not made on that turn the per cent can not be made up. Turns below the limit may be made up during the same week for that week, but in making up lost weight on any turn the output shall not exceed the limit over 500 pounds, and when the 5 per cent is made for that turn the 500 pounds can not be made. Scale of prices for Uorewood stacks. Coke B. charcoal . . Charcoal Double roUini Heavy coatin Old style inning. Washing. Catching. Cents. Cents. Cents. n 11 Si 12 12 4 12 12 4 14 14 4 12 12 4 15 15 4 Standard.— A bos of 14 by 20 containing 112 sheets = 31,360 square inches, to be the standard. All boxes M^eighing uver 1*36 pounds to be paid for as overweight. 872 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Amalgamated Association of Iron and Steel TVorkers — Scale of wages for year end June 30, 1S99. Gauges. EoUing (2,240 pounds) . Doubling. Heating. Shearing on ,j aw or cioeodile Mheara (per ton). I $1. 10 } 1.25 1 1.05 .98 .88 .84 .87 .90 1.04 1.04 1.09 1.05 1.02 1.12 1.16 1.22 1.26 1.30 1.35 Shearing on squaring shears (per ton). No8. 8 to 11 $2.04 2.13 2.45 3.24 3.62 4.02 4.28 4.32 4.90 5.00 5.22 5. 54 6.14 6.45 6.87 6.96 7.03 7.40 7.78 7.98 8.18 8.38 8.58 $0.93 .96 1.10 1.46 1.63 1.86 1.97 2.08 2.53 2.66 2.79 2.93 3.12 3.30 3.38 3.42 3.49 3.82 4.30 4.50 4.70 4.90 5.10 $0.85 .90 1.07 1.32 1.48 1.63 1.79 1.93 2.33 2.49 2.62 3.70 2.95 3.13 3.25 3.30 3.35 3.60 4.20 4.40 4.60 4. 8U 5.00 No3 12 and 13 $0.36 Nos. 18 to 20 f .40 I .41 Nos 25 and '^6 ..... Nos. 27 and 28 .43 Nos 29 and 30 .45 No. 31 .46 No. 32 .48 No. 33 .51 No. 34 No. 35 No. 36 No. 37 . . - .53 .56 .57 .69 No. 38 .61 No. 39 .63 No. 40 -- .65 No. 41 No. 42 No. 43 No. 44 .66 .67 .68 .69 OUTPUT. ' The limit of a turn's work of 8 hours shall be as follows : On gauge. 100 pounds. Nos. 8 to 11 13,000 Nos. 12 and 13 12, 000 Nos. 14 and 15 11,000 Nos. 16 and 17 10,000 Nos. 18 to 20 9,000 Nos. 21 to 24 7,000 N-o. 25 6,250 No. 26 5,850 On gauge. 100 pounds No. Ii7 5, 650 No. 28 5, 150 No. 29.. 5,350 No. 30 5,250 No. 31 5,050 No. 32 4, 850 No. :« 4,650 No. 34 4,450 Amalgamated Association of Iron and Steel TVorlers — Scale of wages for year ending Jane SO, ISOS. Gauges. Nos. 8 to 11... Nos. 12 and 13 Nor. 14 and 15 Nos. 16 and 17 Nos. 18 to 20.. Nos. 21 t.)24.. Nos. 25 and 26 N08. 27 and 28 No.s. 29 and 30 No. 31 No. 32 No. 33 No. 34 No. .35 No. 36 No. 37 No. 38 No. 39 No. 40 No. 41 No. 42 No. 43 No. 44 Ivolling (2,240 .Douhlinj pounds). .04 .13 .45 ..-.7 .63 .30 .40 .65 .99 I . 1)4 .97 .43 'eo ..00 ;.40 .60 i. 80 1.00 1.20 .96 1.10 1.46 1.63 1.86 2.07 2.21 2.70 2.84 2.97 3.13 3.33 3.52 3.60 3.65 3.72 4.07 4.22 4.36 4.50 4.65 4.80 Heating. Shearing | Shearing ou ,iaw or crocodile shears (per ton). $0.85 .90 \\ 1.U7 jl- 1.32 1 1 1.-18 ,.. 1. 63 \\ squaring shears (per ton). 1.K8 2.05 2.48 2. 66 2.79 2.88 3.15 3.34 3.46 3.52 3.66 3.80 4.00 4 14 4.30 4.43 4.47 $1.05 .98 .88 .84 .87 .90 1.04 1.04 1.09 1.05 1.02 1.07 1.07 1.06 1.05 1.02 1.02 $0.36 .40 .41 .43 .45 .46 .48 .61 .53 .65 .67 .59 .61 .63 .66 .66 .67 THE TIN-PLATE COMBIXATION: REID. 873 The limit of a turn's work of 8 hours shall be as follows: On gauge. 100 pounds. No8. S to 11 13,000 Nos. 12 and 13 12, 000 Nos. 14 and 15 11,000 Nos. 16 and 17 10,000 Nos. 18 to 20 .- 9,000 Nos. 21 to 21 7,000 No. 25 6,250 No. 26 5,850 No.27 5,6.50 No. 28 5,150 No. 29 5,350 No. 30 5,2.50 No. 31 5,050 On gauge. 100 pounda. No. 32 4,850 No. 33 4, 650 No. 34 4,450 No. 35 4. 300 No. 36 4,150 No. 37 : 4,000 No. 38 3,900 N.I. 39 3,800 No. 40 3,700 No. 41 '. 3,600 No. 42 3,500 No. 43 3,400 No. 44 3,300 Amalgamated Association of Iron and Steel TVorliers- June 30, 1S97. -Scale of wages for year ending Gauges. Rolling (2,240 pounds). Doubling. $0.93 .96 1.10 1.46 1.63 1.86 2.07 2.21 2.70 2.84 2.97 3.13 3.33 3.52 3.60 3.65 3.72 Heating. Shearing. Nos. 8 to 11 .$2.04 $0.85 .90 1.07 1.32 1.48 1.63 1.88 2.05 2.48 2.66 2.79 2.88 3.15 3.34 3.46 3.52 3.53 1 Nos. 12 and 13 2.13 \ $0. 99 ... 2 45 3.24 Nos 18 to 20 3 02 \ 1.59 4. 07 J 4.57 } 1.71 Nos 27 and 28 4. 63 Nos. 29 and 30 ... 5.30 1.76 No 31 5.40 1.78 No 32 5.65 1.88 No. 33 1 5.99 1.98 No 34 6. 64 2.20 No. 35 1 6.97 2.20 No 36 7.43 2.46 No 37 7. 62 2.49 No. 38 7.60 2,52 The limit of a turn's work of N hours shall be as follows : On gauge. 100 pounds. Nos. 8 to 11 12,000 Nos. 12 to 13 11,000 10, 500 10, 000 9, 000 Nos. 21 to 24 7,000 6,250 5, 850 Nos. 14 to 15 . Noa. 16 to 17 Nos. 18 to 20. No. 25. No. 26. (in gauge. X(i. 27... No. 28... No.2!l... No. ;x")... No. 31... No. 32... No. 33... No. 34... ) pounds. 5, 650 5, 150 5, 350 5, 250 5, 050 4,850 4,650 '4, 450 874 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The following advance applies to scale of wages paid by American Tin Plate Company for years 1898 and 1899 : 1898. 1899. Hour. Day. Week. Month. Hour. Day. Week. Month. Cents. 20"' 1 i Cents. 27 m 24 12| 16^ . 1 Carpenters' ln'lpers 15" $60 00 $75 00 l'i\ lij 1 12-i i:j.'.- $12. 50 $15. 87i iiil $1.45 iii 15 lU V2\ 12J 1.40 1.54 l.bTJ 1.25 . .1 a75 ■ afiSJ "Where the rate paid prior to January 1 was $1.50, or less, the new rate is 15 per cent higher; $1.50 to $2, 12 per cent higher; $2 to $2.50, 10 per cent higher. In addition to this, some of the employees mentioned are advanced 25 per cent. In the finishing department, including the tinuers and risers, who do most of the work in connection wi th the tinning or hnishing of the plate, the advance since January 1 has been from 15 to 50 per cent, dependent upon the wages in existence in the dif- ferent mills before the consolidation. PKICBS HAVE NOT RISEN PROPORTIONATELY TO COSTS. Q. You have spoken of the advance in rawmaterial and wages ; has the price of the finished product been proportionate? — A. Proportionate to the advance in steel, \\ ire nails, etc. ? Q. Proportionate to the advance in steel, tin, and wages; your raw material and wages? — A. I would say no; our advance has not been so great ]iroportionately. MOUE OF SELLING — NO DISCRIMINATIONS BETWEEN JOBBERS. Q. Will you explain to us brieily now your general method of selling ; the na-ture of the contracts that yon make for sale.s; persons to whom you sell, and so on; the' general methods of selling the finished product? — A. The product of the American Tin Plate Company is sold from our New York and Chicago offices, sold through what we call our selling agents. There is a general agent in New York, and in Chicago Mr. Graham has charge of it, with sales agents under him. The contracts are made in the usual form — John Smith agrees to sell to Thomas Jones so many boxes of tin plate, price named, delivered f. o. b. mill, terms 30 days, or 1 off for cash 10 days; and that is all, I believe. Q.'You sell regularly to jobbers? — A. To all jobbers except the small retailers- people who buy small lots. Q. Do you have any agreements with any of these persons to whom you sell as to whether they will buy irom other parties or not .' — A. None whatever. Q. Have yuu refused or do you refuse to sell to any jobber — any large dealer of the kind you have mentioned — whose credit is good? — A. We never have; no. JOBBERS' BRANDS. Q. Will you explain to us the arrangements you have with jobbers with reference to special brands f — A. We have no arrangements of that kind. Q. 1(0 you manufacture any special brands of tin jilate? — A. We do. Q. Were these brands acquired from special dealers ! — A. We manufacture certain brands for certain parties. For instance, we manufacture especial brands of terne- plate. They have a ternc]ilate they have been selling for a number of years — Acme brand — or some such thing as that. They will ask us to brand the box so and so, and that we will do for them. THE TIN-PLATE COMBINATION: REID. 875 Q. You do make use of tbpsc special brands for special dealers? — A. Yes. y. Under these oircumstauces do you restrict that braud to these dealers or sell it to others? — A. That is their braud." Q. You do them that favor of restricting that special brand to them? — A. Yes; I think there is a little charge for that. I forget Just the charge there was, and I do not know whether there is one now or not. I pay little attention to that end of it, and I do no't remember. Q. When you give this exclusive use of the brand to a dealer of this kind, do you make this obligation of your company to continue the manufacture of any brand for a special dealer contingeuton his restricting all his purchases of tin and terno plate to your products? — A. As I remember it now, there was some talk of that kind at one time, but we never closed it up. It was never closed.' Q. So, as a matter of fact, you have never enforced any such contract? — A. To the best- of my knowledge, no. CONTKACTS WITH MAL'HIXEKY JIAKEKS. Q. Have you made any arrangements, any agreements, with founders and machin- ists that have been working for you ? — A. We have 6 or 7 machine men and roll makers and housing makers which we have picked out as the best makers in the country. We have a contract with them agreeing to take their entire product of rolls, housings, etc., made for tin-plate work. There are a number of others on the outside from whom housings, rolls, etc., can be procured. - Q. You have an agreement of that kind to take the full product of some 6 or 8 that you considered best ! — A. Yes. Q. Could you give ua an estimate of the number of manufacturers of a similar nature outside with whom you have no such agreement? — A. I presume there are 5 or 6 outsiders. Q. So you possibly have this contract with half the manulacturers? — A. Fully half, yes; I should say two-thirds. Q. But there are still left perhaps oue-tbird of the manufacturers with whom you have no such contract ! — A. Wlio are free lances to do as they please. Q. Have you any agreement with these manufacturers that if they manufacture mills for other parties they shall make no black plate for tinning for any limited period? — A. There is an arrangement, agreement, or understanding that they will not sell tin rolls to mills for the purpose of rolling tin plate so long as they have a contract with and are doing business for us. Q. That understanding is with these few manufacturers from whom you have agreefl to take the largest part, at any rate, of their output; if they sell to anybody else they must do it with the understanding that their machine is not to be used for the purpose of making tin plate? — A. They are free to sell where they please out- side of tin plate. We take all the rolls they make for tin-plate work. VERY FEW PATEN-IS. Q. How far are these products of which you agree to take the full amount cov- ered by patents? — A. I do not think any of them. There may be a few little traps and trinkets, but outside of that I do not think so. Q. Generally speaking, you think not patented at all? — A. Generally speaking. RELATIONS WITH THE NATIONAL STEEL COMPANY. Q. What are the relations that exist between the American Tin Plate Company and the National Steel Company?— A. The only relation existing between them is that part of the directory of the Steel Company are members of the directory of the Tin Plate Company, and part of the Tin Plate directory are members of the National Steel Company's directory. Q. What proportion of your raw material do you buy from the National Steel Company? — A. I should say half; not over half, I should say. Q. Are the products that you buy from the National Steel Company bought under special contracts substantially of the same nature as the others ? — A. We buy from whom we can buy the cheapest; the Carnegie Steel Company, the Federal Steel Company, and the National Steel Company ."whichever sells the cheapest. Q. Owinf to the fact that a number of men are directors of lioth companies do you have a freedom in talking over conditions of business with the National Steel Com- pany that you would not have with the Carnegie Company, so that you would be 1 ,-^eo Mr. Graham, p. 851 ; Mr. Griffith.i. pp. 890^893. 2 tieu Mr. Grahaia. p. 852 ; ilr. Wheeler, p. 8ti4 ; Mr. Griffiths, pp. 888-800. 876 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. assured of getting the raw material fiom themf — A. It is a means of keeping well posted as to iron and steel, what is goius' on in the iron trade. We are always sure wlien we have a friendly relation with the National Company to get steel and not hare to shut down; to keep the mills running. Q. You are sure the National Steel Company will not make a contract to dispose of the whole of their product to the exclusion of the American Tin Plate Com- pany? — A. For instance, last winter the Carnegie Steel Company shutdown 8 or 10 of our mills for a few days until the National Steel Company got to work and gave us some work. Carnegies were oversold for a time and could not make delivery. PLANTS SIIDT DOWN — THE JOHXSTOWN CASE. Q. Will you tell us tlie number of plants of the American Tin Plate Company that have been shut down, dismantleilf — A. There has been one 2-mill plant at Cleveland, two L'-iiiills at Baltimore, a mill in a second story of a building at Brooklyn called the Somers mill; that is all I think of now — a little mill down the Ohio River called the Ohio River mill. To oft'set that, however, we have added 4 mills at Monessen, Pa. ; 1 mill at Cleveland, Ohio, in addition to the other mills ; there are 2 at Cauonsburg. and we have started 10 new mills at Newcastle. We have 20 going, with the Shenango and others that have been started; so we have added 20 or 2.5 against 10 or 12 shut down. The reason they were shut down is they were started by somebody who had a village lot he wanted to sell and that sort of thing. Q. Did you have a plant at .Johnstown that was sh\it down? — A. A 2-mill plant at Johnstown we shut down on account of some such conditions as I have mentioned in regard to these other plants. When the plant was built there, there seems to have been some town-lot scheme behind it. It was a bad place for us, and we shut it down for 5 or 6 weeks, maybe longer. A committee of citizens waited on us and made some concessions with regard to something or other, I do not know how it was done, and enabled us to start up the mill — some coal arrangements. Q. The committee waited on you? — A. Yes. They made some concessions in regard to coal. Q. In regard to the price of coal? What was the general nature of the concession or advantages that they ottered you ? — A. As I remember, it was in regard to the price of coal ; I think we had the Pittsburg rate of freight. Q. Practically they offered to pay out of their own pockets enough to put that plant ia such condition that the establishment would be on an equality with the Pittsburg establishments ? — A. So that ne could operate it at a protit instead of at a loss. Q. They made you an oft'er to put it in such condition you could operate at a protit? — A. Exactly. QUESTIONS (IF UNION LABOR. Q. Did you close any works at Lisbon, Ohio? — A. No; they were shut down a week or two on account of a strike. It was a nonunion mill not working under the Amal- . gamated scale. I do not remember the facts, but I do remember the mill was shut doWn for 2 or 3 weeks ; but it is now oi)erating under the Amalgamated scale, as well as the other mills, with the exception of perhaps one. Q. Do you remember any agreement when the mill was started up that you wolild employ union men, so that it opened as a union mill? — A. As I remember the facts now, when the Amalgamated conference took place in .June the Lisbon mill was a nonunion mill. I think they sent a committee down to Lisbon and the mill was de- clared union and came into the Amalgamated; thatishow it happened. I think the mills were shut down 2 or )-) weeks until that arrangement was niade. Q. (By Mr. Kexnicuy.) Do you say all the mills'in your combination except one are operated by the Amalg.amated Association? — A. That was the mill mentioned by Mr. Graham y.esterday, which has a little peculiar machinery we were experimenting with. He explained the facta yesterday. Q. How many employees in this one mill? — A. I should say 700 or 800. Q. You have no dirticnlty with the Amalgamiited men in the other mills on account of this mill being ncmuniou ? — A. "None at all.' NO DECREASE OF LABORERS PER UNIT OF PRODUCT, OK OF OFFICE FORCE. Q. (By Mr. .Jbnks. ) You have mentioned the number of laborers in your employ and the amount of the pay roll being very largely increased. Have you been able, owing to the more elijcient methods of management and other sources of saving, to lessen the number of laborers per unit of product, say, per hundred boxes; is the number of laborejs less for every hundred boxes you put out now? — A. I think we are working more m(!n now. ' Sie Jlr. Crrabam, p. 801 ; 31 r. GriHilhs, pp. 904-900. THE TIN-PLATE COMBINATION: REID. 877 Q. Aro you working- luore men per unit of product?— A, I think so. Q. Suppose you take your, total output as it was anil as it is now; is the number of men employed now less in proportion to the output .'—A. I think very few, if any less; there have been very few men dropped out of the various works. ' There is au office pay roll with each mill. One case in question is a 4-mill plant where the pay roll m the office was ;pl6,000 lor clerks, and so on. There were some brothers-in-law in there; there are a number of cases like that. We ha,ve got in the Chicauo oltice 150 men, and this has taken in all the office force which was in the variou~s mills; and instead of $16,000 pay roll for a mill like that, we have a pay roll of iierhans $1,200 or $1,800. ' f Q. So you have decreased the office force?— A. There have been no men cut off at all. As the office force at the mill has been decreased they have been taken iuto the New York and Chicago offices. SAVINGS — BUYIXi; — FKEIGlns. Q. What is the chief source of saviug by the combination itself? What are the mam ways in which you save by going into the combination ?— A. There is a saving at the mill in the office force, and there is quite a saving in buying all sorts of sup- plies. ^ Q. By being a larger customer you can get better rates ? — A. Buying pig tin ; pig tin is very high. Large buyers as we are can buy tin at 2 or 3 cents a pound less than the small buyer. Q. Then there are other sources of saving?— A. There are a good many little things like acid; we buy, I suppose, $40,000 worth of acid a month, of acid alone; and we can get it some cheaper than the little companies do. Q. Is the nature of your product such that you can concentrate, making one product at one mill and another at another, and in that way save more than if the plants were working independent .' — A. We can work terneplates entirely at one mill, and use another mill for coke plates. Q. You would not consider that source of saving very large in your industry? — A. Nothing great, except you can give a customer a. little nicer plate. Q. By concentrating one kind of product in one mill is there any saving in labor? — A. None at all, except as I said, the office force ; not in the workmen. Q. Y'ou have two central selling offices to which all orders are sent; are you able to make any material saving by shipping from the nearest plants? — A. Yes; for instance, if we ship from Indiana to New York, the freight rate is 28 cents a hundred as I remember now ; from Pittsburg it is 11 cents ; from Cauonsburg it is 2 cents less, I think. Q. It is your custom to ship from the nearest mill to save the freight? — A. Y'es. FORMER METHODS OF SELLING — THE BIG FOUR — PRICES NOW THE SAME TO ALL. Q. Have you been able to make a saving by lessening the number of commission and traveling men ? — A. I do not think, as a rule, the commission men — ihe travel- ing men — of the tin plate companies are very expensive. For instance, one of the managers or one of the owners, if the inquiries came in by mail, would get on the cars himself and go. Our company handled their business that way, and I take it for granted they all did. For a time it was the rule to pay the New York jobbers, what they call the Big Four, a commission for selling plates. That was finally given up and the only commission paid would be, for instance, where some mill hard up would give tbem a discount for cash, or some such arrangement as that. "We will advance you $.50,000 or $100,000, and you give it back in plate at so much, a box.'' Q. You said the owners of plants or managers did the selling themselves? — A. They did. Q. Are these same managers employed by the American Tin Plate Company — the same who have been managing the separate plants? — .\. Nearly all of them; there are a few that are not; notover half a dozen of them, if any, that are not employed. Q. Do you think there is any gain in having these men put in a position where they can devote their whole time to the mill instead of half of it to the selling? — A. I think we can get a better output, better plates, and it satisfies the customer better. Q. The saving of traveling expenses also, as regards that? — A. So far as the tin plate companies — the 39 companies — are concerned I do not suppose the entire num- ber of companies had 10 of what you would call regular traveling men. Q. Y'ou speak of the large jobbers, the Big Four in New York, that had been prom- inent in the business before the orgauiza.tion of the Tin Plate Company. Are these 4 jobbing houses still doing a regular business in New York? — A. No; one of them is practically out of business. y. Which one is that? — A. Our Eastern sales agent, Mr. Dickerson. 878 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You took one member of the firm and gave him a salary as sales agent? — A. He is our Eastern agent now. Q. Did you take persons from any of the other houses? — A. We took a traveling man that belonged to the lirm of Robert Crookes & Co. as our San Francisco ageut. (,{,. He was a traveling man? — A. What we call a road man at a salary. <}. Do you have any special arrangements with Phelps, Dodge & Co. at the pres- ent timet — A. What kind of an arransrement ? y. With reference to purchases, importing any special kind of material, or any special rates to them in selling your products ? — A. They buy plates at $4.65 in lots of 5,000, 10,000, and 100,000 boxes. They pay cash in 10 days, regular discount. That is the only arrangement we have with them. <.i>. The rates are the same? — A. To everybody; there is no distinction between persons as to the price of a box of tin plate. Q. You have not any arrangement with them as to furnishing you with pig tin?— A. We have this arrangement; so long as they furnish it as low as anybody else, we buy from them. Q. You give them the preference? — A. As long as they keep the prices down. THE TARIFF — EARLY EX rF.RIKNCES. Q. Will you give us your opinion with respect to the relation of the tariff to the tin-j>late industry? I should be glad if you would go back to the first tariff on tin plate and explain your opinion of the relation of that tariff to the tin-plate industry as a whole. How long have you been a tin-plate manufacturer? — A. Since 1891; but active only since 1895. Q. If you would be kind enough to give us the effect of the tariff? — A. To begin with, there would be no tin in this country without the tariff; it would be impos- sible to manufacture it and sell it. Beginning back at the early days in 1891 and 1892, the Elwood mill (with protection at .$2.20) cost $150,000, to make tin plate. The cost, of course, came in through a lot of Welshmen who came over here and had their ideas about light machinery and engines and all th.at sort of thing; there was a lot of machinery broken up. The output was small, and when tin plate was selling in 1893 at $5.85 a box, our plate was costing us $9 to make.' Q. (By Mr. .Jbnics. ) When you first started the industry you imported some Welsh workmen? — A. Yes, the rollers were all Welsh to begin with. Now, there are, I should say, about 50 or 60 per cent. A great many Americans have learned the trade . (By Mr. Jenks.) What was the effect on the industrv of reducing the tariff from$2.20 to$1.20?— A. Well, iu the meantime the American was getting his mill in a little better working order and getting out his plates a little' bit cheaper, and while he was running along there nnder the $1.20 tariff, the workmen came in and asked for a 15-cent raise, as I rememlier it now, and we had a 3 or J weeks' row over that, and the thing finally drifted along and I think they took it up down at Wash- ington and put it at $1.50; that is about the history of it as I remember. Q. Do yon recollect the date when the Wilson tariff went into effect?— A. I think it was iu 1894. Mr. Kennedy. August 28, 1894. PRICKS— IMPORTS. Q. (By Mr. C. .J. Harris.) Do you remember the price of tin plate when the indus- try was first started iu this country, say 1890 or 18S8, or somewhere along there?— A. Well, I think, just offhand, that it was somewhcuM! between $6 and $7. At times it was higher than that. I think at one time tin plate sold as high as $17 a box. ',». (liy Mr. .JisNKS.) What is the price of tin plate now, did you say?— A. $4.65. ',». $!.(:.■',; is there any tin plate imported ?— .A. Nothing except to 'be reexported. y. At what price would tin plate have to hr here in order to enable tin to be imported at a prolit for home coiisinuption?— A, Aoii mean to ask me the price now? Q. You say the price is $4.65. How much higher can you put that price before you THE TIN-PLATE COMBINATION: REID. 879 meet competition from the other side ?— A. Oh, we cau put it on the marliet to-dav I should say, 35 cents to 55 cnts a bos. Q. Higher than it is now?— A. Yes. Q. So you could run it up to -fo 2'j without much tear of meetiug competition from the other side?— A. That is right. Q. (By Mr. Fakqlihar.) Could vou run it to :f.5.37i .'— A. The price of plates f. o. h New York a few days ago was $5.27.1; that is, from tiie other side. WAGES OF \ AKIOUS WORKERS. Q. (By Mr. Jenks.) The question fame up some little time ago with reference to the relation between the price of tin plate and the wanes of the laliorera. You could, then, if I understand you now, still increase the wages of the laborers somewhat uutii the price of tin plate should be forced up to, say. $5.1i5, and make the consumer pay instead of makiug the laborers suffer f— A. Weil, the laborers to-day, as I remarked a few minutes ago, are the best paiil laborers in the country. Our rollers can make in 8 hours' work close to SIO a day under tbe new scale. Ciur entire pay roll, I will say, would be in the neighborhood of $10,000,01)0 iier aunum. Q. Now?— A. Yes; noAr. Q. (By Mr. Kennedy.) How many of these rollers are there and what is it that gives these men such large wages; how many rollers are there in a mill?— A. There is 1 roller to each mill each turn. Q. Just 1 roller? — A. Yes. Then there ig the heater, doubler, and catcher, and the whole crew, as they call it; but the roller is the skilled man and gets the high money. Then next to him comes the doubler and catcher. Q. What wages do they get ?— A. $6 or $7 a day, according to the tonnage. They are allowed to make so many tons in 8 hours, for which they get a tonnage pric«. Q. (By Mr. ..lEXKb.) You say they are allowed to make so much in 8 hours? — A. By the Amalgamated Association. Q. Do the rules of the organization hold them down to that amount? — A. Yes. Q. (By Mr. Clarke.) Does that work require high skill?— A. The roller is sup- posed to be a skilled man. I thiuk if he is real clever he can learn the business in 3 years from the time he starts in. Q. Is it hot and heavy work? — A. It is very hot in the summer time. Q. Is it dangerous to the health? — A. Not especially, no; on the contrary, they are very healthy njeu. Q. (By Jlr. C. J. HARias.) ^^'hen you speak of mills, you do not mean that you have 1 roller for 1 establishment? — A. Oh, no. Q. One manufacturing establishment may have how many mills in it? — A. That is an expression we use. We say a l-mill plant. They would have a roller for each of those mills, on each turn, and perhaps an assistant roller in addition to the heater, doubler, etc. Q. In New Castle you have how many mills? — A. Fifty mills. We have 2 plants there. Q. The New Castle and the Shenango? — A. Y'es; in New Castle. Q. Which is the lai-gest plant you have? — A. The Sheuaugo plant, with 30 mills. Q. (By Senator Mallory.) What wages do the other workers get outside of the rolling mill — the dippers ;■ — A. The tinners? Q. Yes. — A. The tinuers are paid on a scale. They have a union or federation of labor that controls them, aud the same scale is paid in all mills. The price is so much per box, and the tinner to-day wonld make, working his turn, I understand, from $2.50 to $3, aud then his heliier would make$2, or somewhere in that neighbor- hood. Q. Is that about the least wages that any of them get? — A. No. Then there is the packing house and shipping house, and what vre call around the mill the labor gang, which might be, perhaps, 150 or 200 men all the time. Q. They are not skilled? — A. (_>h, no; just common laborers. Q. For the labor that you class as skilled $2 to $2.50 is about the least, is it? — A. Yes; that is, really in the tin house they have no right to be regarded as skilled laborers. In the El wood tin house, for instance, 19 out of 20 of them are boys taken off the farms or off the streets, and all they do toward 0|ierating the machines is just simply to take hold of a pair of tongs and put a piece of sheet in between the rolls, and the other man gets it on the other side with a pair of tongs and puts it on a cleaner. As I say, they were taken off the farms and the streets of country towns surrounding to do this business. Q. (By Mr. .Jenks.) About how long does it take them to become skilled? — A. Two or three months. Q. What did yon say was the wages that you paid to the unskilled laborers?— A. The outside men knocking around the works? Q. Yes.— A. $1.40. 880 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. That is really the lowest you pay for any help ? — A. Yes. Q. (By Mr. Farquhar.) Is that $1.4,0 the wages paid the women and children in your packing house? — A. Oh, no; the women make so much per box, aud the girls make about $1.25 per day. In fact, the work has been so plentiful and steady that they do not want to hire out iu these towns to do housework. They all want a job in the tin shop. Q. (By Mr. Jenks.) Do you employ any children? — A. The laws of the the different States — I do not know exactly as to the West Virginia laws, but West they are not allowed to employ anyone under 16 years of age. Q. But you do employ young persons as young as 16? — A. Yes. Q. What work do they do? — A. Well, they are grease boys around the mill. There is a great deai of grease used in connection with the rolls, and they are working in these boys ibrthis kind of business, etc., and so on. Q. (By Mr. C. J. Haiiris.) Including your whole help, what should you say the average wage was per day? Y'ou say they are the best paid people in almost any line.— A. "What I said was this, that the rolling mill men in a tin plant were the best paid men in the iron- business in the country. Now, then, taking in all the labor and averaging it up — is that what you mean? Q. Yes ; all the employees — girls, boys, women, and men — what would it aver- age? — A. I should say $2.50 per day. WAGES IN AMERICA AND IN WALES. Q. (By Mr. Kennedy.) What would the roller who gets $10 in this country formerly receive in Wales tf — A. My recollection is that their scale over there would be about $3.50 per day, as against $10 here. Q. (By Mr. Jenks.) That is yxjur present scale .' — A. Yes. Q. (By Mr. Kennedy.) Do you know anything about the difference in the cost of living in the two countries? — A. I do not. I do not know how they live over there, but the rolling mill men in this country live just as well as men worth $150,000 or $200,000. They are right up to date; they have got pianos, horses and buggies, and everything of that kind. Q. (By Mr. C.J. Habris.) Lace curtains in the windows? — A. Yes; lace curtains in the windows, all of them. WE HAVE THE MONEY AND THE TIN, TOO. There is one thing I should like to call the attention of the commission to, and that is this: Of coarse you have all thought of it, that there is one thing that tin plate has done; it has kept about $30,000,000, or a little more thau that, now perhaps $35,000,000, from going out of the United States to the other side. That money has been spent here in labor and in buying steel, which it takes labor to make ; and buy- ing acids, which it takes labor to make; and running on down the list, which repre- sents a great many more people thau those actually paid by the American Tin Plate Company. Q. (By Mr. Clarke.) If we sent that money out of the country, what should we get for it? — A. We get tin back, and this goes into tomato cans to be thrown over the fence. Q. By keeping it here we have that and the tin, too, do we not? — A. We have the money and the tin; yes. PRICES REDUCED. Q. (By Senator Mallory.) You have done all this, and at the same time you have produced tin plate to the consumer at a less rate than you did before you established these tin-plate plants? — A. As I understand your question, you asked me if we are selling tin plate now at a lower price per box than before the tin-plate plants were operated on this side? Q. Yes. — A. We are selling, and have been selling, tin plate at $2 per box right along below the price before the mills were operated on this side, and I would say that our price now is from $1.50 to $2 per box — understand, I am not giving you the exact figures — $1.50 to $2 per box below the average price, before it was manu- factured in this country. FIFTY CENTS DUTY TO SPARE AT PRESENT. Q. (By Mr. Jenks.) I understand from what you say in reference to the tariff, that you conld still ])ut the price of tin plate, a box, about 50 cents higher than it is now before- there would be any importation? — A. Oh, yes. Q. On the present basis, then, there is half a dollar out of $1.50 tariif that you would not really need just now? — A. Well, that would do, figuring it that way. I do not know whether you have just got the right idea in figuring it that way. THE TIN-PLATE COMBINATION: — REID. 881 Q. (By Mr. C.J. Harris.) If they should lower the price and introduce their tin here at a less rate — say $4.65 — you would not have any margin, would you f Suppose these other men from Wales lowered their price 50 cents, then you would not have any margiu to play on, would you?— A. None at all. That, of course, is the danger of the other side. Q. (By Mr. Jexks.) Under the present conditions on the other side and on this side, there is half a dollar you do not need?— A. Yes ; hut it is liable to come oif any day in a drop of price in Welsh plate. i.ABOR AND STEEL CHEAPER IX WALES. Q. (By Mr. Farquhar.) Is not the price of raw material just as high to the Brit- ish manufacturers as American? — A. They pay exactly the same. _Q. (By Senator Mallory.) How about steel billets?— A. Well, the steel billets, I will say, they pay a little leas for. Their labor they pay over a third less.' Q. (By Mr. Jenks.) Then the main difference between prices in England andhere is the difference in labor?— A. Exactly. We pay $2 here and they pay about $1.35 there. Q. (By Mr. C. J. Harris.) Just now are not steel billets a little lower over there than they are here? — A. I just said they were. Q. But as a general average ? Of course, this is rather an extraordinary time here. As a general average how would the two countries compare.? — A. Ordinarily they are much lower. THE demand caused THE RISE OP PRICES. Q. (By Mr. Farquhar.) In a business way, how do you account for this great advance in the raw material that enters into steel, and the product itself, from the mine down? Have you studied this advance and what brought it about, what the necessities were, etc. ? — A. What brought it about? The demand. Q. The demand? — A. The demand. The consumption has been greater than the supply for a year. Q. After the supply, what do you look for? Falling rates? — A. I certainly do not expect these prices to hold up always. I think we are all right for this year and next. Q. Do you suppose it is possible to sustain the present price of billets for 6 months? — A. I do; yes. FURNACES AND MILLS INSUFFICIENT FOR THE PRESENT Vi^ANTS OF THE COUNTRY. Q. Will not the fact that there has been an immense forwarding of ore from the northern Jlichigan mines and northern Minnesota mines to Pittsburg and other cen- ters bring down this steel-billet price? — A. Well, they would have to build new steel plants, j'ou know, before they could use the ore. I know of only one that is being built, and some plants enlarging; and to build a new steel plant would take 2 years, perhaps longer, and longer than that if they built their own blast furnace. Q. Is it given as a business reason, as the cause of the rise, that there was a scarcity of the ore itself, or was it the insufficiencyof the mills to fill the demand that came? — A. I think that the wants of the country were greater than the ability of the mills to supply, and have been for a year. Q. (By Mr. Farquhar.) The question is this, for the general public and all of us: Whether you business men see now the turning of these high prices, whether in respect to tin or steel? — A. See a turn in the price? Q. Yes.— A. Coming? Q. Yes; coming. — A. No, sir; I do not. Q. Do you think the present prices will be sustained during this whole season and next year? — A. I think the present prices will run through this present year and at least half of the next year. THIS COMBINATION NOT DUB TO THE TARIFF. Q. (By Mr. Kennedy.) According to your testimony the tariff has established this great industry which employs a large number of workmen at exceptionally good wages, and gives this product to the peojjle at a considerably less price than prior to 1890. That being true, should you say that the tariff has had anything more to do with bringing about this business combination which you have entered into within 1 See Mr. Graham, p. 861. 83a 57 882 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. the past year than it had to do with the estaldiahment of like combinations in the oil trade of this eonntryf — A. It certainly had not. Q. (By Senator Mallory.) I understand that before the formation of this combi- nation of which you are president there was very little profit in the tin-plate business ' in this country? — A. Before our present organizatinn w:is formed? Q. Yes; vrry little prolit; that some were making no profit, and those that were making a profit were just barely making a profit ? — A. Some few were losing money.' EXPORTING TIN PLATE IS FAR IN THE FUTURE. Q. What was the date of your completion of this American Tin Plate Company* — A. I think the 6th of January. The organization was completed in December, but I think the last bunch of companies was taken in on .lanuary 6. Q. Now, from your observation, what is your opinion as to the ability of a combi- nation such as the American Tin Plate Company to manufacture tin plate on an even basis, or a nearly even basis, with foreign manufacturers' — A. \Vell, of course, it is the desire of all big companies to reduce gradually the price at which they can sell their product rather than put it up. Of course, high steel and high pig tin and high labor and high supplies of all kinds, not only in the tin-plate and steel business, are going to keep things up for a time; then these big prices will couie down. (). Well, the higher prices affect the foreign manufacturer as well as you. There is very little difference in the price of steel billets and pig tin to the English and the American manufacturer; so I take it these things are pretty nearly on a level, as far as the raw material is concerned? — A. Yes. Q. Now, what I want to get at is this; Do you think the time will come when you can compete with England and any other tin-plate manufacturing country in the foreign markets — ship your 8ur])lus out of the United St.ites? — A. It is a good way in the future, a Lmg way in the future, so far as that goes. There would have to be a great m.any economies and things brought about. We are handicapped, to start with, on one thing, and that is the labor question, and that is one of the big things in the case of tin plate. Q. Well, to-day, so far as this market is concerned, you are underselling the Eng- lish? — A. As the market stands. '■). I wanted to see if there was a probability that you would be able to manufac- ture at a rate sufficientl.v low to make us anticipate that in that line of manufactures, at least, you would be able to compete in foreign countries in a not remote future.— A. It is in the long futuie, I should say. Q. Then we shall not go into the tin-plate business in competition with the rest of the world for some years? — A. Not for some years. WE CONSUSrE TWO-THIRDS OF THE TIN PLATE OF THE WORLD. Q. (By Mr. Clai:kb.) Do you know what proportion of the world's product of tin plate is consumed in this country? — A. Well, they have something over 400 mills, I think, on the other side, against 300 on this. I underst.and they are operating about the same number of mills that we are. Our production would be 30 per cent more than theirs with the same number of mills, taking them as they run, anderstand; and we shall consume in this country this year over 9,000,000 boxes of tin platej so you can figure about what it is. Q. Should you say we consume 60 per cent at least?— A. That would be my opin- ion, roughly; so I will say that we consume in this country practically two-thirds of what is consumed in the world. Q. The home market is constantly increasing in extent? — A. Constantly increas- ing; and we also consume, as you know, some foreign plates that go out of the country again and bring rebates— in which meats, vegetables, etc., are shipped— ao that the consumption over here would be fully two-thirds. NEW YORK PRICE AND PRICE AT MILL. Q. (By Mr. Jbnks.) Y'ou have said th.at you would furnish us some prices of tin plate for some years back. Would the prices you would furnish presumably be New York prices, or on a basis of prices elsewhere ?— A. They would be New Y'ork prices. Q. And what difl'erence should one make in order to compare the New "i'ork prices with the prices you quote?— A. Eleven cents. The New York prices would be 11 eonts over the mill prices. THE ( OJIPANY AND OUTSIDERS — OUTPUT AND C.\PAC1TY. Q. About what part of the output of tin plate of this country does the American Tin Plate Company control? — A. About 90 per cent. ■ See Mr. Griffltha, pp. 896-898, 900; Mr. Taylor, p. 041. THE TIN PLATE COMBINATION: KEID. 883 Q. How many plants are there outside?— A. 1, 2, 3, 4, 5—1 think 6. Q. Do you know how many mills there are in these plants ' — A. 12, IS, 24, 27. Q. About 27 or 21S mills?— A. Yes. Q. How many have you?— A. We have 300. UNITED STATES TIN PLATE COMPANY. Q. What is the United States Tin Plate Company? Do you know of such a cor- poration? — A. The United States Tin Plate Company, the old United States Tin Plate Company, was a concern at Demmler, Pa., which now belongs to the Ameri- can Tin Plate Company. The present United States Tin Plate Company was organ- ized at Trenton, X. J. The cliarter was taken out by myself, Jlr. Dill, and Mr. Leeds. I believe we were the ones that signed the original papers, in order to protect the name. Q. So it is not an active organization? — A. It is not an active organization. Q. Is there any other similar organization? — A. The United States Tin Plate and Stamping Company. Q. That is the same kind of a corporation? — A. Yes. Q. The corporation is organized simply to protect the name against any rivals that might come in ? — A. Yes. Q. Will you see that the commission is furnished with a copy of your charter and by-laws complete* — A. The charter and by-laws Mr. Dill will furnish you a copy of.' ATTEMPT AT TIK-PLATE MANITACTUKE IN 1874. Q. (By j[r. Clarke.) Was there any tin-plate industry in this country prior to 1890; had there been at any time? — A. There was not. There was an attempt made to make tin plate, I think, at Demmler, Pa., in 1874, but before 1890, as to any quan- tity, no, and a few years before that, n,one. - Q. (By Jlr. Fap.qdhar.) How juuch money was involved in the Demmler plant?— A. I should hardly be prepared to say, but I think not over .$100,000. Q. Do you know whether or not it paid a profit at any time? — A. I hardly think 80. Mr. Cronineyer ran the plant. He was a tin-plate man in the early days, and agitated the thing as h tariff man. He was the man who attempted to make tin plate at Demmler. Q. Do you know whether or not the English manufacturers issued a circular to the trade in this country at that time, saying that whatever price the American manufacturers made they would make a lower one? — A. I do not know. If there was any such circular issued I never heard of it. Q. Those mills were obliged to shut down because they could not make a profit? — A. Well, it was only a small attempt, a little 1-horse plant, you might say. They shut down and went out of business. Q. It was not an object for capital to embark in the business, then, until after 1890?— A. That is correct. CAPITAL OF OUTSIDE CONCERNS. Q. Do you know the amount of capital that is embarked in the business in this country at the present time?— A. I do not know what the .working capital of some of those outside plants might be, but I suppose they are carried by some steel com- pany or somebody — I should Imagine so — and that being the case, I should think there is $2,500,0(J0 outside of the American Tin Plate Company; maybe not over $2,000,000. PREFERRED STOCK AND COMMON STOCK — GOOD WILL. Q. In forming the American Tin Plate Company, upon what basis did you issue the preferred stock and common stock? That is to say, what did you consider that the common stock paid for, and what did you consider that the preferred stock paid for?- A. The preferred stock and common stock did not pay for anything. The pre- ferred and common stock was purchased from Judge Moore, who had bought these plants for cash. ,., ., Q. (By Mr. Clarke.) Then the preferred stock paid for the plants, did it not, practically ?— A. He paid cash for the plants. 6. He paid cash for the plants and you paid him?— A. He sold the stock. q' Did you not consider that the preferred stock practically paid for the plants, for the tangible property?— A. As I have already said. Judge Moore paid for the plants in cash. It was a cash transaction. However, if an owner of tin-plate prop- erty would come to him and say, " I do not care for mine in cash ; I will take so many 1 See appendix. ' See Mr. Griffiths, pp. 887, 899. 884 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. shares in stock," he wonld got from him a share of common and a share of preferred stock for each $100 that he did not take out in cash. Q. No matter how many transactions were involved in it, and hy what circumlo- cution it -was brought about, as a matter of fact, did you not consider generally that the preferred stock paid for tlie tangible property that was acquired? — A. Well, if a mill had $100,000 cash coming to it from Judge Moore and he gave them $100,000 in preferred and $100,000 in conimon stock, that man would know that he was getting preferred stock for his $100,000, and whatever he got beyond might be said to be so much bonus. Q. Was it not considered that the common stock was represented by the good will, the opportunity to do business and make money? — A. I suppose it was. Q. How do you estimate the relative value of the tangible property and the oppor- tunity to make money ? Which is the greater ?— A. Well, it would depend somewhat on the property, the 'conditions, etc. It would be See Mr. Griffiths, p. 811. THE TIN-PLATE COMBINATION: REID. 885 $5,000,000 WORKING CAPITAL. ^ Q. (By Mr. Clarke.) Was any of tlie working capital derived from the sale of common stock? — A. No. Q. None whatever?— A.' Why, the working capital was derived from Judge Moore for all of this stock. Q, (By Mr. Jenks.) Now then, .Judge Moore, as I understand, when he presented this plan to the different tin-plate manufacturers for the organization of this com- pany, was to furnish these plants and so much working capital? — A. Exactly. Q. How much working capital?— A. About $.5,000,000. Q. He was to turn over the plants and $5,000,000 capital? — A. That is it exactly. Q. (By Mr. C. J. Harris.) Have you got $5,000,000?— A. We had about $5,000,000 when we started. * increased costs caused the rise op prices. Q. (By Mr. Farquhar.) In the course of some questions that were asked of you in respect to the low prices of tin, around $2.60, $2.75, $3.20, $3,871, $4.25, and up to $4.65, you gave a general answer that these advances were caused by the demand ' — A. By the advance in the price of raw material. Q. But the demand was the cause of bringing the prices up ? The Witness. The demand for what? Mr. FARQUH.iR. For the plate itself, for the finished product. The Witness. Well, I would hardly put it that way. The prices were put up because the steel, the labor, and the pig tin that went into it, all cost more money. Q. Yes ; I am looking at the reason. Then the second part of the question was this: Did the cost of steel billets advance comparatively as largely as your price for tin plate ?— A. It did. Q. Did the price of the pig tin advance relatively with your prices? — A. Pig tin more than doubled in price. Q. Did your advance in wages relatively follow this rise? — A. Wages were advanced in some cases 15 and in some cases 20 per cent. Q. So that you would answer that your advance from $2.60 to $4.65 is a normal advance? — A. Correct. WHAT induced THE COMBINATION. Q. Now, that is settled. The question was asked you what were the reasons why you went into this combination, and I desire to ask you a question or two there. Did you keep in view the fact that this was a thoroughly protected industry, an industry built by the taxpayers of the United States? — A. Had we that in view? 'Q. With that in view, they claim that a trust or a combination in any business in Europe or here results from' three great factors — lower prices, overproduction, and diminished profits. Did all or any of these three influence you to make the combi- nation ? — A. Diminished profits certainly did. Q. Well, did overproduction? — A. Yes — no; overproduction did not. Q. AVould you answer plainly whether your intention was to eliminate or control competition? — A. Neither. Q. Neither?— A. Neither. It was for the purpose of getting together to do away with foolishness in making prices, and competition, I suppose, would enter into that, although there is comiietition now in the field against us. Q. Did you not answer that it was the fierce competition that drove you to make a combination? — A. Didn't I? Q. Yes.— A. A short time ago I said that competition, perhaps, was one of the factors that entered into it. Q. Yes, and that you made this combination in order that you might make prices stable and secure more for yourselves than you could with open competition?— A. Certainly ; yea. the outside mills can not make tin plate for what the cumpany sells it for. Q. Do you think the general public have shared in any of the economies that you have inaugurated in your production of tin as prices stand to the consumer to-day ?— A. Well, the public are paying more for tin plate than they did before the organiza- tion of the company, but the reason they are doing that is the cost of the supplies that enter in. . ^ ^. ■, ^ ^ ^-l q. You would say, then, that this advance in the price of tin plate to the consumer is not arbitrary on the part of your company ?— A. Not at all. Q. But follows naturally in the course of business? — A. Correct. 886 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Controll»d naturally by the cost of the raw material and by the demand? — A. Not so much demand as the cost of raw material and the price of labor. Q. You would answer that it was not the opportunity to suppress competition that caused your organization? — A. I did not say that. Q. You do not say that?— A. Well, we never for a moment thought that we should not have competition. In fact, there were mills out, and are now, as competitors; but it was to get a number of mills together that would regulate that very much, and not only in buying and selling tin, but in handling supplies, and handling the business in a very mucLi more satisfactory way. Q. Do you not practically now, in your great organization, name the prices of tin plate to the consumer ? — A. We do; yes. Q. You do not find in the market now, with even the free competition that exists against you, that there is any material catting of prices? — A. Not at all. Q. If your organization was not as strong aS it is, of course prices might be cut? — A. No; not so. Q. Why not? — A. For this reason: I think that with the competition we have to-day we can make our own prices, of coarse. I hardly believe that the outside mills to-day, with the facilities they have for handling, uiin make tin plate for what we are selling it for. Now, there may be some mills operating and making tin plate and consuming it, and there may be some mills making tin plates for their own use, in the manufacture of wares, like the Harrisburg mill, for instance, and all that sort of thing; but I do not believe, with the present prices of raw material, they can make tin plate and sell it to the public as cheai> as we can. OUTSIDE NONUNION MILLS ARE NOT CUTTING PRICES. Q. As labor enters largely into the cost of tin plate, do you know that these opposition mills, as we may call them, now pay union wages? Are they on the same basis as you as far as the payment of the scale is concerned? — A. I think that part of them are. I think part of them are nonunion mills running on nonunion scales. Q. What proportion do you think are nonunion? — A. I should say half of them. Q. Do these nonunion mills that jiay nonunion wages endeavor to cut below your rates? — A. In selling tin plate? Q. In selling tin plate. — A. No, I do not think they do. In some cases they sell at a slight percentage above our prices. Q. Quality for quality? — A. Yes. Testimony closed ll'.l'5 p. m. The commission was called to order at 2.30 p. m. by Mr. Clarke, who presided. Mr. Daxiel G. Reid recalled. COST OI- A PLANT AND NECESSARY WORKING CAPITAL. f Jiy Mr. .Tenks.) It ha.s been suggested by some of the commissioners that they would like to know what would be the cost, as near as you can estimate it, of put- ting up a plant to-day, we will say a lO-mill plant, m a pretty good place, say Pittsburg? What would he your estimate of the cost of a 10-mill jilant? — A. It would be a very hard question to answer, for this reason — I might answer it in this way: The cost of a 10 mill plant was $400,000 a year or two years ago. I should estimate now that it would cost 60 to 75 per cent more. Q. You would say, then, that the cost of a 10-mill plant at the present time would be about how much, in round numbers?— A. Well, based on that estimate, I should say $."i00,000 or $G00,ou0. (). Do you include real estate in that? — A. No; I should not include real estate. Q. That (■xclndes real estate? — A. Excludes real estate. ractically the sa,me. Q. There is a brand that is known as tin-plate sheet iron? — A. Well, I mightstate that I went into the business in the first place as a dipper, and at that time we imported our iron and we had to secure a sujiply from sheet mills. Q. I waut to know how you could determine where the product went? You can not tell unless you roll a special kind for tin-plate purposes. — A. You can tell in which direction it would go after it left our mill. That is, we can conjecture as to the uses to which it is applied. Q. Throughout? — A. We might, unless someone is buying surreptitiously for the purpose of deception. We should be dull indeed if we did not know in whicn direction it would travel after it left us, because the gauge would determine that to a very large extent, and the finish that would be solicited would determine it to a very large extent, so it would be calculated to create a suspicion. Q. (By Mr. .Jenks.) Then, black plate that is used for tinning is different in qual- ity and weight from sheet iron used for other ordinary purposes? — A. Yes; very largely in weight, although it is a very common thing to roll wh.it is known as 28 gauge for general sheet-iron purposes, for stove purposes, for pans for domestic uses; and there is a brand of plate that is also largely used as represented in 28 gauge, which is known to the trade .as one cross, or 1 X. THE SHEET-MILL LEASE — ATTITUDE OF MACHINERY MAKERS. Q. (By Mr. Farquhar.) How did you construe the proposition of this 2-y6ars' lease? Is it a stepping-stone to an ultimate stoppage? — A. To a further lease? Q. Yes. — A. I think it was; yes. The foundries and machinists that I speak of were not disposed to extend that lease over the time that is stipulated ; consequently the American Tin Plate Company had to submit to that condition. Q. In other words, there were 2 years that you could not, if you signed this lease, go into the productive industry? — A. That is, as far as tin-plate making was con- cerned; that is very positive. That information, as I stated before, was conveyed without any form of solicitation whatever by the parties that represented this compact. Q. (By Senator Kyle.) And you state that you have very few letters from the American Tin Plate Company touching your contracts or anything else? — A. Oh, I have no communication whatever with the American Tin Plate Company. Have you reference to the foundries and machinists? Q. (By Mr. .iBNKS.) Yes. — A. No, I have no letters whatever. Q. (By Senator Kyle.) It seems to be the policy, then, to send an agent when they want anything done? — A. I would constantly come in contact with these gentlemen that I have been acquainted with for some years and talk with them on the subject, andno later than last Saturdayl was talking with one gentleman, andhe stated to me that there was a disposition on the part of many of those in that compact to furnish the independent mills with the machinery desired. The disposition was there, but they did not want to go on record as being the first ones to break through. They are not securing — that is self-evident] — they are not securing anything like the amount of orders for tin-plate machinery under the trust admini-stration that they secured under the independent administration. DEMAND FOR MACHINERY IS LESSENED — MILLS RUN LESS STEADILY. Q. (By Mr. .Tknks.) You think, then, that if the American Tin Plate Company were not so largely in control of the business the demand for this tin-plate machinery would be very much larger than it is now? — A. I made the remark that it was very much larger under the independent r<>gime than under trust adminis- tration, .and .as a matter of fact the mills of the American Tin Plate Company are not running .as much as they were when represented by the independent mill owners. Q. It simply is a fact that there were more orders for machinery of this kind 2 years ago than thej-e are now? — A. By reason of the fact that they ran much steadier. PLATE NOT MADE UNDER .lOBBERS' BRANDS UNLESS THE BRANDS ARE ASSIGNED. Q. AVhcn the American Tin Plate Company bought the individual plants that were afterwards organized into this one company, what arrangements were made with reference to the individual brands by the different manufacturers, or by the large jobbers? — A. There was nothing stated iu regard to brands that were owned by large jobbers, inasmuch as individual mills have no manner of control over them. As to tlie brands that were owned directly by the mills, they were to go over to the THE TIN-PLATE COMBINATION: GRIFFITHS. 891 American Tin Plato Company. There were very tew brands owned by individual mills. The mills, prior to absorption, very cheerfully and graciously made all brands that were solicited; brands that were owned by individual jobbers. Q. What attitude haw the American Tin Plate Couipany taken in reference to brands owned by individual jobbers? — A. Their attitude is a very formidable and a very aggressive one. Q. Tell us Aihat it is. — A. Notwithstanding the statement made to the contrary,' they are even to-day enforcing the condition that if they make those brands, those brands have got to be assigned to the American Tin Plate Company ; otherwise they will not make them. Tbey promulgated in the first place a memorandum to the trade in which they stated in very positive terms that as a condition of making those particular Tirands that were under individual ownership, or protected by patent or copyright, those brands must be turned over — assigned to the American Tin Plate Ci^mpany ; and iu case the American Tin Plate Company became defunct, or wrnt out of existence, they would revert bacl? to the original owners. But if it should apiiear to their sales agent that the jobbers were having those brands of plate made by any independent concerns, or buying any form or manner of tin plate outside, no matter of what grade, they would consider that sufficient justifi- cation for claiming the brand. Now, they have modified their contract to some extent; but the idea, that is, the coercive or arbitrary idea, is incorporated there. I can read you a copy of a recent contract, or that part relating to the assignment of the brands, and their claims npon the brand if it should appear to them that their conditions stipulated in the contract had not been complied with. Q. Have you a legal form of assignment ' — A. I ha\-e a legal form of their assign- ment; their copy. Q. Can you file that with us? — A. I can let you read it. Q. Perhaps you may read that to us, omitting any special names. — A. There are no names mentioned in this. This is my own cipy. I can read this to you; it will not injure the interests of anyone. Q. We will take a copy of that and return the original to you. — A. There is one where the trade-marks have not been registered, and here is one — they are iden- tically the same— in cases where trade-marks have been registered in the Patent Office. Know all men by these presents, that , of the city of , in the State of , party of the first part, for and iu consideration of the sum of one dollar ($1.00) and of other valuable considerations this day paid and delivered to said party of the first part by American Tin Plate Company, a corporation organized under the laws of the State of New Jersey, whose principal business office is located in the city of Chicago, county of Cook,' and State of Illinois, party of the second part, does' hereby assign, transfer, and set over unto the said party of the second part the exclusive right to use, place, and stamp upon tin plates and torneplates the following brands or trade-marks which have heretofore been used by the said party of the fir.st part as brands or trade-marks: that is to say, . And said uartv of the first part covenants and agrees to and with said party of the second part'to save harmless and indemnify said party of the second part from all actions, suits, payments, costs, damages, expenses, and liability whatsoever which may come to the said party of the second part, or occur, by reason of the use l)y said party of the second part of said brands or trade-marks upon tin plates or terneplates, which may be at any time manufactured by said party of the second part. Witness' the hand and seal of the said party of the first part on this the day of , A. D. 1899. Signed, sealed, and deli\'ered in presence of — ■ LSBAL.J Know all men by these presents, that ■ , of the city of-— -, m the State of , party of the first part, for and in consideration of the sum of one dollar ($1.00) .and of other valuable considerations this day paid and delivered to said party of the first part by American Tin Plate Company, a corjx.ration organized finder the laws of the Sta'te of New .Jersey, whose principal business oftice is located the citv of Cliicago, county of Cook, and State of Illinois, party of the secMjud ]iart, es hereby assign, transfer, and set over unto the said ])arby of the second part the cAClusive ri'^t to use, place, and stamp upon tin plates and terneplates the lollow- inff brands or trade-marks, which have heretofore been used by the said party ot the firlt part, as brands or trade-marks, and which said brands or trade-marks have_^here- tofore been registered in the office of the Commissioner of Patents of the United States of America, as shown by certificates of registration bearing the numbers , — - — ; that is to say, ■ m does ex I ■ Compare Mr. Graham, p. 852 ; Mi'. Eeld, p. 874. 892 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. And tbe said party of the first part hereby covenants and agrees to and with the said party of the second part to save harmless and indemnify said party of the second part from all actions, suits, payments, costs, damages, expenses, and liability what- soever which may come to tlie said party of the second part, or occur, by reason of the use by said party of the second part of said brands or trade-marks upon tin plates or terneplates which may at any time be manufactured by said party of the second part. Witness the hand and seal of the said party of the first part on this the . day of , A. D. 1899. . [SEAL.] Signed, sealed, and delivered in presence of — This agreement, made this day of , A. D. 1899, between American Tin Plate Company, a corporation of the State of New Jersey, party of the first part, and , of , in the State of , party of the second part, witnesseth as follows : 1. First party agrees to manufacture for, and to sell and deliver to, second party, in the regular course of business of first party, and subject to its general rules and regulations, now in force or hereafter to be made, as respects price, time, manner and place of delivery, nnd time and manner of payment, and at the current and regular market prices prevailing from time to time, such quantities of tin and terne plates as second party may require and need in the business of second party during the life of this agreement, provided second party shall at all times comply with all provisions hereoif to be performed by second party, all of said tin plates and terne plates if required by said second party to be branded with such one of the appropriate trade marks or brands heretofore assigned by second party to first party as second party may designate to first party in writing. 2. Second party shall pay to first party for all tin and terne plates which may be ordered by second party, and pursuant to such order tendered by first party to sec- ond party in accordance herewith, at the current and regular market prices prevail- ing at the time of ordering the same, such payments to be made upon the usual terms of credit and discount for cash governing the business of first party at times of delivery, but no order for goods shall be given by second party, which, as to the time of delivery, shall extend beyond the time for which first party may be, at the time of receipt of any such orders, quoting or giving to the trade prices of the kind of goods embraced by such order. 3. First party shall not have the right, except as is herein otherwise provided, to use any of said trade-marks or brands so assigned it by second party, except upon goods to be manufactured for, and upon the order of, second party, but if the second party shall refuse to accept any goods ordered by second party and accordingly manufactured by first party in accordance herewith, then first party shall have the right to sell such goods in the market without removing therefrom any trade-mark or brand placed thereon. 4. First party shall not be required to manufacture for or deliver to second party any goods under tliis agreement if, at the time any goods may be ordered hereunder, or may be required to be delivered hereunder, first party shall have reasonable cause to believe second party is or will be unable to pay for such goods at the time when payment therefor would become due. 5. All goods properly ordered hereunder shall, subject to the other provisions hereof which are applicable, be delivered by first party within a reasonable time, such reasonable time to be estimated in all oases with reference to the conditions affecting the manufacturing business of first party, and the demands of the market for tin and terne plates, and the ability or inability of first party, from any cause or causes whatsoever, including strikes, scarcity of materials used in jiiiinufacturingor otherwise, to make delivery. 6. First party agrees that it will not at any time increase the price of any goods ordered by second party pursuant to this agreement, above the current and regular market prices of like goods, because of the "brand or trade-mark which may be placed upon any goods ordered under this agreement, or for any other cause whatever. 7. In case second p.irty shall at any time during the life of this agrecTuent, order, pundiase, or receive any tin or terne plates marked with any one of the trade-marks or brands hereinabove! mentioned, or other private brand, except from the first party, the latter being at the time in no default in tlie iierformance of this agreement, then first party shall have the right to terminate this agreement, and said trade-marks and brands so assigned to it shall be and become its .abs(dnte property; but if first party shall not be able to meet the legitimate needs of second party for tin or terne plates, then second party shall have the right to purchase from others than first party such tin or terne plates as second party may legitimately require in excess of the amount which first party may be able to furnish. THE TIN-PLATE COMBINATION: GRIFFITHS. 893 s. lu the eveut first party shall be dissolved or cease doing business, or make a general assignment for the benefit of creditors, or this agreement shall be terminated for just cause by second party, or shall be kept during its life by secoud party, then said trade-marks or brands shall revert to second party absolutely. 9. If first party shall fear that any one or more of said trade-marks or brands can not be lawfully used by it, or if any suit shall be brought attecting its right to use the same, then first party may, at its election, be excused from manufacturing or delivering any goods bearing such trade-mark or brand, and, in any event, second party shall indemnify first pai-ty from all damages, expenses, and costs arising from the use of any of said trade-marks or brands. 10. This agreement shall be in force from the day of the date hereof down to the first (1st) day ot .fanuary, A. 1). 1915. In witness whereof the parties hereto have caused their respective names and seals to be hereunder written and affixed on the day and year first above written. By . Attest : , Secreianj. a8e. That is the base on whicb we formulate all our prices, 100 pounds, 14 by 20. The cost of making that plate to us was $2.40 a box; we were getting $2.(30. Now, the American Tin Plate, of course, would take exceptions to that statement. We have what is known as wasters, that is, imperfect plates, whi( h we sold at that time for 25 cents a box less. Substraet the difference of 25 cents from $2.60, and that would make $2.H5 the selling price, and the cost $2.40. And on those common grades of plates we averaged about 5 per cent of wasters. So you see that we were gleaning a profit on the common grade of plate which cost us if2.40 and we were selling at $2.00. Of cnurse. we made the higher grades of plate; we made these special brands lor jobbers that conmianded a higher premium or profit than the coumiou plates. That was when we paid $17.50 for bars. Now, bars, as I remarked before, 1 could not buy to-day, if I could buy them at all, I could not buy possibly for less than $40 a toiL I do not mean to say that the American Tin Plato Company is buying bars at $40 a ton. It was our prac- tice to make our contracts for tin-plate bars for six months. They may possibly make them for a year. I think their president, Mr. Reid, stated that by reason of buying in large quantities they bought much cheaper. They may possibly be paying 130 for their bars per ton. Thirty-dollar bars, with the increase in the general cost of niannfactnring, repiesenting the advance that luts been given the men and the great advance that has l^eeu made in tin that represents the coating upon the black iron, should make tin plate cost .$3.54 u, lio\, which they are selling lor $4.65 a box. Of course, I might s.ay that it is only conjectural on my part as to what they are paying for liars. I did buy some bars a short time ago, 1,000 tons, for .$36 a ton. Now, I know that I cnn nuike coke plates, the common grade of coke plates, with $36 bars aud 32-cent tin— tin is not 32 cents to-day ; it has declined to 26— for $3.84.'' I See Mr. (Sriilinni, pp. S.5:i, SSil ; Mr. Jieiil, ]). H7 1. ' See Mr. Greer, pp. 923, 924. THE TIN-PLATE COMBINATION: GRIFFITHS. 903 Q. (By Mr. Jbnks.) What did you say the market price is?— A. $4.65. Is that all the information that you desire? Q. I think that covers it.— A. Now, I do not say that the American Tin Plate Corapanj could do it. Of course they would say they could not. I formulate these prices from the standpoint of my own experience, added to the advances that have heen made on all the constituents that enter into the manufacture of tin plate. MANUFACTURERS WOULD HAVE STOPPED THE FALL OV PRICES. Q. (By Mr. Eatchford.) I understand you to say that th&re was really no neces- sity for a combination in the tin industry f— A. No absolute necessity; no. Q. The fact that prices have declined so largely, from upward of $.:. a box to $2.60 per box, within a few years prior to the organization of the combine, would not that indicate that there was a necessity? And, furthermore, the fact that prices have advanced from $2.60 to upward of $4 since the organization, would not that tend to prove that the organization, or the combination as it is called, at least has accomplished its purpose to preserve prices and enable itself to maintain wages? — A. Well, they have accomplished their purpose as far as the advance of prices is concerned. There is no question but the American Tin Plate Trust, as long as they govern conditions, will place prices to the full limit. Q. How about wages? — A. They granted a 15 per cent advance to their skilled workmen; 20 per cent was asked." They were in such a position that they could not afford to get away from granting that advance. Q. If prices had continued to decline, is it your opinion that they would inevita- bly have had to fall back on their workmen and reduce their wages?— A. Yes ; oh, yes. Q. There is no doubt about that part of it? — A. No. Q. (By Senator Kyle.) Do you think the price would have declined even had this trust never been formed? — A. No; I think it had reached its limit. Q. Eeached its level ? — A. Yes; because there would have been a concerted action on the part of the manufacturers if this thing had not discovered itself, if this trust had not developed. We had been trying to do that thing, to arrange some method by which we could maintain prices, for 2 years prior to this. It does not make any •difference how much profit you were making in the beginning, of course ; your eyes always looked longingly to the largest amount you did make in the business, and the further you get away from that the greater the longing on your part to get back as nearly as possible to the original condition. That is only human nature. NO MANUFACTURER WOULD ADMIT THAT HE WAS LOSING MONEY. Q. (By Mr. R^tchfokd.) At that limit of $2.60 a box, you state that the manu- facturers were making a fair, reasonable profit ? — A. I stated that we were making 20 per cent during the last 9 months of our manufacturing existence. There was no manufacturer that would admit that he was losing money. Some have told me that they made over 25 per cent last year. Of course, they may have made very largely special grades. There was not that cut in special grades of plate. For instance, when I first commenced to manufacture tin plate in the orthodox way — that is, man- ufacturing from the bars — we sold a high grade of tin plate for $9.50; that is, a special brand ; and we were selling at $9.50 when we went out of the business. There was not that decline in special brands of plate. To even up the small margin on those ordinary grades, the grades that represented the largest amount of tin plate that was made, we generally covered ourselves, more than covered ourselves, in the special grades that we made. PRICES FELL 50 PER CENT ; PROFITS, 80 ; WAGES, 20. Q. (By Senator Kyle.) During this time of the fall of tin plate from $5.75 to $2.60, a fall of over 50 per cent as regards your finished product, what was your fall in wages paid to employees? — A. I can not speak authoritatively, but as far as my recollection will serve me I should say 20 per cent. Q. It did not decline in the same ratio, then, as the cost? — A. No. Q. (By Mr. Jenks.) There had been also a decided decrease' in the cost of your material during that time?— A. Oh, yes. At that time you could buy tin-plate bars for $25 a ton. The lowest price we bought tin-plate bars for was $17.50, during the year you speak of. Some might have made a better bargain and bought them for $16..50. Q. The highest price you said was $25?— A. During the time you speak of, I think it possible that bars could have been bought at that time for $25 a ton. Q. (By Mr. Eatchford.) They are $36 now? — A. That is what I bought them for. 1 See Mr. Graham, p. 853. 904 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. but possibly you could not get tbem now for $36. The market price for billets is $36, and there is generally $2 difl'erenoe between the billet and the bar. Q. (By Senator Kyle.) You were making 100 per cent in the first instance, then?— A. Yes. Q. And at the last, 2(1 per cent profit? — A. Yes. Q. A fall of 80 per cent as regards your profit? — A. Of course; every year we con- tinued in the business our knowledge was expanding and growing. Q. Your wages had decreased 20 per cent? — A. 20 per cent; yes. UNEASIIJESS AND APPKEHENSION OF THE WORKMEN. Q. (By Mr. Jenks. ) You say that since the American Tin Plate Company has been formed they have advanced wages some 15 per cent or 10 per cent for different grades. Are the workmen on the whole, do you think, pleased with the American Tin Plate Company? Do they consider it, on the whole, for their advantage that this tin plate company has been organized? — A. At the present time? Q. At the present time? — A. No; I think that the workmen generally are standing on the ragged edge of desperate thought aud feeling. No; a spirit of uneasiness and apprehension has taken possession of the workmen. Q. (By Mr. Jenks.) What reason have you for thinking so? — A. I come in frequent contact with them, by reason of the mills I am building. The higliest skill in the tin plate mills is exercised by wluit are known as the rollers. There are 816 rollers for the 272 mills that I speak of, Q. That are in the American Tin Plate Company? — A. Yes. I had application for a small plant that I aiu building from 150 rollers out of the 816. By the way, I met a representative laborer in the tin-plate industry a few days ago. He is a man that is looked up to by reason of somewhat superior intelligence, and he sways the thought and sentiment to a very great extent of the men he comes in contact with ; that is, of the men that are represented in that industry. I asked him for an expression as far as he was concerned, and as far as the men he comes in contact with in Pittsburg were concerned. Yesterday afternoon he placed this in my hands. Now, I can not give his name, by reason of the fact that he would not remain in the employ of the Amer- ican Tin Plate Company long if they knew he had written this. If you gentlemen desire me to read this and you think you can spare the time, I will do it. Q. Yes; we shall be glad to have you. You spoke of this man as being an influ- ential man among the laborers and you do not wish to give his name. Does he have any official position in their unions?' — A. He has invariably been selected one of the committeemen. Q. That is sufficient. -^ workman's view. The witness (reading) : "Pittsburg, Xuremln'r 14, 1S99. "Mr. W. H. (Griffiths: ' ' In reply to your recjuest for the views of the tin-plate workers in general in regards to the Tin Plate Trust, otherwise called the American Tin Plate Company, I have to reply that I can not claim to be familiar with the views of all the tin workers through- out the country, but I can give you an accurate expression of the views held by my fellow-workmen of the city of Pittsburg; and, as we number over 1,000 in this city, we may perhaps be considered as fairly representative of the whole. " When the various independent concerns first consolidated, workmen regarded the movement « ith a great deal of uneasiness. Trusts have at'quired a bad name from the workman's point of view. The concentration of so nuich capital into the hands of one dictatorial management naturally gives it power to drive a hard bargain and fiften an unfair one with labor. " It can not, hciwever, be stated with justice that the American Tin Plate Company made any radical changes on its ac(iuisition of the independent mills. The same wages were paid and the same rules and regulations as heretofore existed were con- tinued. The various labor unions that represented its employees were recognized, and the contracts that existed between employer and employee in general observed. This amicable state nf affairs continued throughout the brisk season, and the early fears of the tin workers were in a great measure allayed. MORE idleness THAN K\'ER BEFORE. "Since the commencement of the dull season, however, the tin workers have much to coniiilain of. The coining winter will see more tin-plate workmen idle than ever occurreil before; in the jiast since the starting of the industry in this country. The dull season in the tin-plate trade sets in in the late fall and generally lasts through THE TIN-PLATE COMBINATION: GRIFFITHS. 905 the winter months. The present year it oame earlier than usual and will in all proba- bility last longer. When the trade was in the hands of independent firms large quantities of ware were manufactured into stock against future calls or sold at very small profits to large buyers, who stocked it in their own warehouses against the brisk season; thus the workmen were given employment throughout the slack winter months. But the trust, having complete control of the trade, will neither incur the cost of storage on its own premises nor abate its ironclad prices so that the buyers may lay up a stock for future trade. "The consequences are, a large number of mills have to be shutdown. In the past, before the trust absorbed all the mills, even when orders were exceptionally ticarce, and many mills would be running less than full time in all parts of the coun- try, yet each manufacturer would strive to obtain his share of the demand ; conse- quently the work would be more equally distributed among all the mills, and there- fore the hard times were never felt by the workingmen as they are likely to be felt this year. Never before in the history of the trade have two large plants like the Pittsburg mills been known to close down entirely for want of orders in the same town, thus throwing out over 1,000 work people during the severe winter months, while another plant owned by same company is running its full capacity and actu- ally turning out more work than it is entitled to according to the agreement between employers and employed last July at Chicago.' Of course, this is one of the economies of the trust, but the workers may well exclaim with the frogs in the fable, who on being tormented by some thoughtless boys, cried out 'What is only play to you means death to us.' In like manner the workers can cry out to the trust, 'What is only economy to you is starvation to us.' MILLS KEPT RrXXIXi; WHERE THE A.MALG.\M.\TED ASSOCIATION' AGREEMENT DOES NOT APPLY, OR IS VIOLATED. "To the tin-plate workers there appears much more in this system of economizing than is apparent to the general public. There is a most unjust discrimination in the selection of the mills that are shut down. When our representatives met those of the American Tin Plate Company in conference at Chicago last July an agreement was drawn up Ijetween the parties of which I select two clauses. (1) That the union representing the tin-plate workers should not interfere with the plant operating at Monessen, in the Pittsburg district, where a lower rate of wages was paid than settled for other mills. (2) That no mill should turn out more work than the quantity ^reed upon between the 2 parties to the agreement at Chicago. The mill at Mones- sen is running regularly because a lower rate of wages is paid there, while the Pitts- burg mills are kept idle. Other mills also near Pittsburg (the New Castle mills) are running to their full capacity, owing to the fact that the American Tin Plate Com- pany gets a larger output daily in those mills than contracted for at the Chicago con- ference. ' This latter is in direct violation of the agreement. So that one set of work- men is given more work than the agreement between employer and employees allows them, while another set is left without any work at all. There is, however, more in it than the over-glutting of one and the starving of another crew of workmen. A larger output from a mill means increased profit for the manufacturer, just as a lower rate of wages means it. The only fair inference therefore that can be drawn from the foregoing facts is that the reason that the Monessen and New Castle mills are kept running to their full capacity while those of Pittsburg are closed down owmg to the fact that labor does hot cost so much at Monessen and New Castle as it does at the Pittsburg mills.' Ostensibly we are idle through want of orders, but as a matter of fact we are locked out because we will not work at a lower rate of wages, as do the men of Monessen, nor turn out a larger output, as do the men of New Castle. The managers of the New Castle mills might say that they do not compel their workmen to violate the limit-of-work rule. It is not necessary that they should compel them. They reward them by keeping them working when their fellow- workmen of the other mills in the same district are shut down. The best proof that the above is the true explanation of the shutting down of the Pittsburg mills, is the answer that the general manager of the American Tin Plate Company gave to a deputation from the Cumber- land Md mills, which are also idle, on being petitioned to restart the latter mill. " He replied, 'If you can in any way give the company a concession of 10 cents per box, which is the amount that is required to put you on an equality with New Castle, vour mill will be restarted.'" . ^ . ,, -^ • j ■ Q That was not in respect to wages?— A. As I saw in the papers, it was m regard to transportation; but that was an absurd statement to make, by reason of the tact 1 See Mr. Greer, p. 924. "906 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. that the New Castle mills are 200 miles farther from the East than the Cumberland mills. Witness (resuming reading) . "Yet all these mills that are now closed down used to compete successfully with those now working when operated by independent firms. EEDUCTION OF WAGES INTENDED? "But we are persuaded that the trust has much more than present economies in view. Observant workmen perceive in this method of distributing the work a much deeper meaning than present economy. "The trust, through its officials, calls it one of the exigencies of the state of the trade. The workmen see in it a farsighted policy that is being carried out systemat- ically with consummate skill, the key to which is the utterance of President Eeid, of the company, a few days ago at Washington, D. C. , to the effect that a reduction of "vvages would in all probability be demanded next July.^ "The policy that is now being followed by the American Tin Plate Company is to make the resistance on the part of the workmen to such a demand as feeble as pos- sible. The means adopted to attain this end may be briefly stated as follows: ' ' (1) Shutting out, through the winter months, of a large number of their most important workmen ; (2) keeping at work regularly those whom they have always found pliant and subservient; (3) doubling up in those mills that are in operation, putting two men at one job, promoting the younger workmen, thus insuring a plen- tifully stocked market of skilled labor in case a labor dispute might occur. With these conditions brought about, the trust thinks it can safely venture on demanding the reduction of which we have had ample warning recently. That a few thousand workmen must be kept idle during the severe winter season in order to carry out the plan will not, it appears, prevent the trust in carrying out its policy. We have no legal right to demand our share of the work, and moral right ceased to exist with the advent of trusts. We had thought that the consolidation of all the mills under one control would be helpful to both employers and employees; but we have been effectually cured of that delusion. If the American Tin Plate Company can not practice its economies without the wholesale shutting down of mills, and throwing hundreds of its employees out of employment, if it can not pay dividends on its •enormous issued stock without causing so much human suffering, then -vfe say that the trust is more of a curse than a blessing. "These are the exact views of the idle tin workers of our two Pittsburg plants. We have discussed the matter thoroughly these last few weeks, having ample time on our hands to do so." Of course that is a workman's view. Of course his thoughts and feelings are gov- erned by conditions that are staring him in the face. Q. (By Mr. Ratohfobd). In substance, do you accept the truthfulness of that statement? — A. Well, you understand I am a manufacturer and have been for some years. Yes. In substance, I rather think there is a great deal of truth in the state- ment he makes. CAN THE WOKKMEN HELP THEMSELVES? Q. Now, let me ask you this : The complaint that is made by the writer of that paper is against the treatment received by the workmen in Pittsburg as compared with those in New Castle. Could that complaint not be obviated or removed by a closer organization of these men — if these men in Newcastle were organized and co- operated with those in Pittsburg, as the members of the Amalgamated Association do in other places— they would not work cheaper in New Castle than Pittsburg, and they would not work longer hours and would not produce cheaper material ?— A. Yes. Let me state to you that the workmen in the New Castle mill and the work- men in Pittsburg mills are all Amalgamated Association men. There is only one exception referred to, the Monessen mills. No ; they are not violating any agree- ment of the Amalgamated Association.^ That is a condition ; if this condition still continues, that is a question which they will doubtless consider at their next national annual meeting. It was an industry that gave very steady work to the men, while, as I remarked laefore, there are fully 80 mills closed down at the present time. MEANING OF "MILL."— 80 IDLE OUT OF 272. Q. (By Mr. Jenks) . Eighty of the smallest mills?— A. The Pittsburg mills are not small mills. 1 Compare the testimony of Mr. Eeid, p. 869, bottom. 2 Compare the workman's letter, p. 906, THE TIN-PLATE COMBINATION: GRIFFITHS. 907 Q. (By ih: A. L. Harris.) What do you mean b^- a mill-; do you mean a plant?— A. No; a works or firm might have 4 nulls; there miuht be 2 mills owned by a firm; that was the smallest number under one management. There were 4 mills 6 mills, S mills, 10 mills, 12 milh, 20 mills, and recently n 30-mill plant built at Newcastle. Q. (By Mr. Jexks.) What is the total number of mills owned ))v the American Tin Plate Company?— A. 272, about, comitins some sheet mills thevbounht. Q. Of that number about 80 are now shut down?— A. About 80. ' Q. At what time did the Pittsburg mill cLise?— A. Three or 4 weeks ago. Q. (By Mr. Clarke.) 'Were 2 plants closed down or 2 mills?— A. Two plants con- trolling 22 mills. THE OXLY HELP FOR THE WORKMEN' IS IX STICKIXG TOGETHER. Q. (By 3Ir. Ratohford.) I was going tii refer to another statement of the paper read. The writer claims that the agreement originated in Chicago is not being car- ried out? — A. Yes. Q. And in another case he states, referring to these workingmeu at ilonessen, that they are pliable, and that the independent members of the trade are locked out? — A. Well, he simply hints at a condition; that they are keeping the pliable men there; of course he is looking at it from a workingman's standpoint. Q. That is systematically carried out by the trust in order to accomplish certain ends next year? — A. A"es. Q. If these men to whom he refers are pliable, and will do the bidding of their employer, will they not do so as well under independent management as under trusts? — A. AVell, when distress and hunger visit them, I do not think they would. Q. You do not think they would? — A. No, sir. Now, I shall have to beg your pardon. I am not here as a representative of labor, and I am not here to talk on the labor question. Q. The point I want to make is this, that if these men work concertedly with each other in organization (we understand, generally, that they have such an organization, and a very good one) — if they work concertedly with each other, and maintain their prices, scales, and agreement, it would be impossible for the tin-plate trust to bring about tliese comdtions? — A. Yes; I acknowledge all that, sir. Q. And that, if they diil not work in such concerted form, such a condition might be brought about by independent manufacturers? — A. Yes; I admit all that. Of course in a general gathering of that kind that is represented by such large numbers you will always find some weak ones. COXDITIOXS AT MOXESSEX. Q. (By ilr. Cl.arke.) Let me ask if there is any particular difference in the cost of living at Monessen and at Pittsburg? — A. No, sir. I should say that the cost of living possibly would be a little higher in Ilonessen than in Pittsburg; we generally find it so in small towns. Q. (By ;Mr. Farquhar.) The difference would be in rents? — A. Difference in rents, yes; and then other commodities that you buy, store goods, and so forth. If you will permit me to use the term generally — much higher — oh, yes: a great deal higher in a country place, in small towns, than large places. Q. (By Mr. .Jexks.) Do the men in the plant at Monessen belong to this same association? — A. No, sir. Now, I have very little knowledge of the matter. There was some special method of making black plate, introduced in the !\I(_inessen mills, before the trust took hold, and I understand that the trust wanted to experiment with this for 1 year, and the form of labor that was represented in those particular mills did not come within the circle of the Amalgamated Association ' Q. (By Mr. Farquhar.) Thev do not come within the scale at all?— A. Yes. Now, that was the idea of that, and I undei;stand the American Tin Plate Company were very olistinate in tlieir demands so far as the Monessen ])lant was cimcerned. UXIOX L.ABOR AXD STRIKES. y. (By :\lr. Ratchforii.) What is the history of the trade as regards strikes? Are strikes \-ei'\- frequent or less frequent under the new combination than they were formerly'.'' Have vou had anv trade strikes? — A. Oh, yes; there have been several nominal strikes, 'but not in the mills proper; that is, not in the department that rolls the black plate. There have been tw(i or thiee strikes in the tin-house 1 Compiire Mr. Graham, p. ,siil; Mr. Reid, p. sTli; Mr, Grrrr. p. !I24. 908 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. department. That has been the result of the fact that the tin house, or the labor in the tin house, has resoheil itself tnto an ortjanization, which it never did before the trust came into existence Q. Have these strikes taken place under the trust? — A. Yes. They might have taken place, you know, under individual administration, if the\' had been organized. Q. But practically you had few strikes or none at all prior to the organization of the combination? — A. I only remember one strike during the existence of the busi- ness, and that extended for some 2 or 3 months. Q. Did that take place in your establisliment? — A. No, sir; that was prior to my connection with the general manufacturing of tin plates, that «as when I was known to the trade as a dipper. Q. (By j\lr. Clarke.) You think, then, that the consolidation of the mills under one control has had a tendency to cause labor to organize more effectively than before? — A. N(.i; not as far as the mill labor is concerned, but in the tin house they may. They might possibly ha\e organized if the trust had not become a fact. There never was an organization in that particular department until within the last 6 months, and after that tliey had some little trouble; but the strikes have not been of any coiiseiiuence whatevei'. There were strikes in that particular department, but the trouble did not extend generally; it wciuld only be at this mill, or the other mill, and the matter would be adjusted. Q. (By Mr. Cl.^rke.) Is your labor orgamzelant might be geared, to speak in mechanical parlance, and then again a lO-mill plant might be driven direct. ITnder these condi- tions where \iin ilrive direct yon require more engines and more steam capacity: consequentlv the expense would be greater. t^ Jlore than double?— .V. Well, it would be almost double, because 1 do not think it would be the proiier thing to run more than 2 mills direct, where you could run 4 mills geared with the same steam ]i(iwer. TARIl-l' PmiTECTIOX STILL NEEOEO. (J. In vour judgment has the protective tariff on tin plate been necessary for the development of the industrv here?— A. Yes, positively so. , , ,, ( » Do vou think that at the prt-sent time, with the mdustr>- developed ;is fully as it is, it is'essential that the tariff rate be maintained?— .\. No; 1 should not hke togo on record as saving that the present tariff rate was absoUitely essential. ( ) When the tin-plate manufacturers could make anywhere from 100 per cent to 20 "per cent profit in the industrv, with the tariff where it then stood, would you think it essential that the tariff lie maintained at something like the rate that was put on? TheWiTXEss. ,Vt the |>rcsent tunc? . , , , , :\Ir Jexks nuring this pcri.xl that n'ou have mentioned, when vou made trom 100 per cent to 20 per cent?— .\. Fulh', s.i far as this is cnucerncd I do not think for mie moment that if the :McKinle>- tariff had not become a law the industry would have grown as rapidlv as It has. It v as ccrtainlv the McKinley tariff 1. ill that encourc'cd the industrv at that time, be.-ause until the McKinley tariff bill was talked of there was not a thought given in the direction of erecting tin-plate mills. ' t^ You think, then, it would be fair to say that the tin-plate industry in this coun- trv^is i-ealh- a creation of the Mi'Kinley tariff?— .\. Yes. 910 HEAEIN(4(^ BEFORE THE INDUSTRIAL COMMISSION. Q. Do you think that at the preaent time if the tariff were removed the industry would be destroyed? The WrrxEss. If removed altogetlier':' Mr. Jexks. Altogether. — A. Yes. I tliinli; I stated to you this morning tliat it was possible (luring the last ^-ear, when the prices of material were exceedingly low, tO' make a box of coke plates at f>2A0 that sold at the mill for $2.60. It would cost us to lay that do\vn in New York— well, the minimum cost would be i}l2.78. (;j. At that time? — A. Yes. At the same time they could lay tin, plate down in New York, and were laying it down in New York— the 100-pound coke plate, 1-1 by 20— at $2. IS. 1 Q. At that time'? — A. Yes. That was independent, of course, of any effect that the tariff had. Q. What was the rate of the McKiidey tariff act? — A. Two and one-half cents.. Q,. (By Senator Kyle. ) Specific? — A . Yes. Q. And under the present law? — i^. One and one-half cents. Now, if conditions resolved themselves into the former system, we could not possibly make tin plate without soiiK^ tariff assistance. I demonstrated that by conditions that prevailed last year. THE COMBI.X.\TIOX BKIX(.:s XO BENEFIT TO THE COTNTKY. Q. (By Mr. .Texks.) Yun have sjioken at different times of the arbitrary manner in which, in your judgment, the present tin-plate company does business. Do you think that in such a combination as has been formed there are fair opportunities for savings? Are there really advantages from combination of that kind that might be beneficial to the country? The Witness. Beneficial to the country? Q. Yes. Can you mention some advantages that you think might exist from a combination of that kind? — A. No, sir; I can not. Q. Do you think that there is an opportunity for them at times to make a decided saving in cross freights? For example, supposing they have a tin-plate mill in Chi- cago and another in Pittsburg; they would, I suppose, under present circumstances, fill orders in the neighborhood of Chicago from the Chicago plant and in the neigh- borhood of Pittsburg from the Pittsburg plant? If they were independent concerns, would there be likely to be cross freight that would involve a good deal of extra expense paid to the railroads? — A. Yes. Q. Can you say that when the tin-plate officials mention the savings in cross freight from their combination as a benefit to the country they are speaking reasonably?^— A. No; as a benefit to the country, no; because whatever grist they get from that source goes into their own mill. ch.\r(;b a freight rvte "even if they could h.\ul it fhoh these mills." Q. In tlie other ca.sc it wfjuld go to the railroad? — A. Yes. What I mean to say is, if an liasterii firm — for instance, a Pittsburg jobliing house — buys tin plate from a Pittsburg mill, they are going to charge them a freight rate even if they could haul it from these mills. It is the American Tin Plate Company that is getting the benefit of that .condition. Q. You think the\- do not divide any benefits that come from that condition with tlie consumer? — A. Sot with the ci.iiisumer; the consumer does not derive any; the jobber does not derive any. Q. Did I understand you to say it was the custom of the American Tin Plate Com- pany to cl laige a freight rate to a Pittsburg dealer, a Pittsburg jobber, when they were delivering the goods from the Pittsburg mills? — A. Yes; chargethem a 10-cent freight rate. They charge a 1 0-cent freight rate, and the freight rate from Pittsburg to Phila- delphia would be 16 cents. The jobber in Philadelphia has to pay (i cents more than the Pittsburg jobber if the goods come from Pittsburg. DISADV.\NT.\(iES TH.\T COME FKO.M rOMBIN.VnON. >l. What, in your judguK.'ut, are the chief disadvantages of a combination like the Aineriean Tin Plate Company? — A. Oni'of the disadvantages Avas hinted at in that com- munication that I read to y(_)U this morning. As far as it would affect labor, 1 believe r read the stalement that it is a much more difficult matter to get justice, as far as wage is concerned, from a large corporate body than it would be from an independent plant. Thi'U, again, I do not think that they can study economies generally as closely I Src tabic III' j.rii'os, p. SIH). ■.'See Mr. Gralinni, p. .s.i. THE TIN-PLATE COMBINATION: GRIFFITHS. 911 as if the tirms were under independent management, where a man exercises all the skill and all the knowledge he i«issesses directly upon the scene of action. Q. Do you think those the two greatest disadvantages? — A. Those are tlje two greatest disad^•;^ntages. Q. Do you think" of an\' others?— A. It establishes a bad precedent as far as the general industries of the country are coni'erned. If the>- make a suc<'ess, and main- tain an existence, and are able to dominate the conditions, as they seem to be at the present time, it is an encouiagement for every industry to form themselves into this same body of power. Q. And you think this domination of one power in any one field of industry tends to weaken, on the whole, the I'eal strength of that industry?— A. It sooii debars us of the liberties we prate about so much. Q. (By Senator Kyle.) And very much discourages an individual from going into business? — A. Certainly it does. CAN- PAY DIVIDENDS AT THE EXPENSE OF CONSUMERS. Q. (By I\Ir. Fakquhar.) How is it about paying dividends on large stocks?— A. Well, I do not think they can pay them as readily as they can on small stocks, where capitalization is a legitimate one. Q. But is it not a fact that nearly every one of these combinations has a large sur- plus of common stock that has been given as a bonus, offered share for share as an inducement for parties to go in for preferred stocks that are selling way down at 70; and with over capitalization, how is it possible for them to ever return any divi- dends to the pubhc and their own stockholders? — A. Under the present conditions, the American Tin Plate Company can most assuredly do it, or else the management is fearfully out of joint. Q. (By Mr. Jexks.) By keeping prices at what you consi. Twelve million dollars, good will and all?' — A. Yes. (J. (Bv Mr. Jenks.) Wliat did vou sav the liasis iif' "liH "'^s? — A. About $40,000. ■ <^ How man V mills went into thecomliination?— A. Two hundred and seventy-two. iIeKinley tariff? — \. Yes. Q. Do you think that, exci'pt in that sense, the taa-iff is the father of the tin-plate trust? The Witness. Of the present trust? Mr. Clarke. Yes. — A. Well, it just follows the natural flow of circumstances. It has a relationship, of course, from the statement I made in the morning. Of course, if we had lemained as independent plants, it would have been the father of our busi- ness on the lines 1 spoke of. I am not prepared to state, gentlemen, that you would not have seen any tin-plate mills at the present time, liut I do know that that was the fountain from which all these streams ha\-e flowed. Possibly, in a >'ear or so after the period that 1 spoke of, somebody might have been able and brave enough to build a tin-plate mill and show conclusi\-ely that it was possible to operate tin- plate mills here with a profit. ' 'ou think it is human nature ti:i do that? — A. It is human nature to do the very best you possibl\- can for yourself and those closely connected with you. Q. That is right. — A. Pardon me, there has been an advance of about 72 per cent on the foreign out]iut, on the Welsh tin plate, and about 81 per cent on the ilomestic within the last 4 months. The AVelsh tin plate is vmusually high, by reason of the high price of materials uver there. TIN PLATE IMPORTED. Q. Is the American market — the ITnited States market — very much cut off from the Welsh manufacturers? — A. Very largely; yes. There are some grades there that are made from what is known as open-hearth material, which is somewhat better than our open-hearth material here. The material is known to the trade as Siemens. ' There is more dtlctility and tenacity in the material itself; and that ductility and tenacity is required for some sjjecial purposes. But then that represents a very small percentage of the tin plate. Q. (By Sir. Jenks.) Do you know whether there is any imported, with the idea of receiving a drawback, to be reexported? — A. Oh, yes, yes; the Standard Oil Com- pany very largely follows that practice. Q. The\' buy it cheaply? — A. The\- buy across the water of some large manufac- turers. Q. And they do not buy very much of the American product? — A. No, I will not sa\' that ; I kiiow m 1898 I sold them some myself. Q. But they buy largely abroad? — A. Yes. ' jSIine was an emergency order. \ SI.X-MILL PL.VNT QUITE l..\l«;E ENOUGH. ' Q. (By Mr. A. L. H.vRRis.) What sized plant, measured by the number of mills in the plant, can be operated with the greatest economy, in your opinion? — A. Well, in . my opinion, when vou exceed six mills y(iu ha\'e too much for one man to look after and look after economicallv. The larger your mills the larger your leakage, in con- sideration of the innumerable details that I spoke of this morning. I have been given to understand that across the water four-mill plants could be worked to greater advan- tage and more profit than larger plants. That has 1 leen generally understood and \er)- frequentl}' published.^ Testimony closed. TESTIMONY OF MR. H. F. GOING, Retired canner and niamifiifiiirci- of tin caiix. The commission met at 2.12 p. m.. Chairman Kyle presiding. iVt 3.10 p. m. Mi-. H. F. Going was introduced, and, being dulv swcirn, testified as follows: Q. (By Senator Kyle.) State your name and ad,l Will you be kind enough to tell us what the effect of increases in the price of tin plate has been, according to your business experience, upon the industries with which you 'were connected — in the first place upon the manufacture of tin cans, and afterwards upon the tinned-goods industry? — A. Going back to the earliest period in which I took particular notice of the price of tin plate, I would state that at that time we received all our supplies from England; and as the value of the greenback rose or as gold declined, so did the price of tin plate vary. After it got down to a basis of 9o or $5.25 a box, during the dull period on the other side, we manufactured cans on that basis very cheaply. Later on industrial activity increased on the other side and the demand for iron sprang up ; and as pig iron is the thermometer of trade, prices of tin plate went up in harmony with the prices of pig iron, and values went back to $7, $8, and $9 a box; and so throughout the various years of changing trade, until about the time of the McKinley tariff bill. EARLY IMPERFECTION, AXD LATER IJIPROVEMENT, OF AMERICAN TIN PLATE. Short! y after that we commenced to get occasionally a little lot of American plate; but the American plate was not at first satisfactory, for the reason that it was not rolled by men away up in their line, as they are to-day. It was rather irregular in manu- facture. In addition to that we found that the phosphorus and sulphur had not been sufficiently taken out of the plate, and it was rather brittle. In the stamping up we found it would often crack. But by the improved American methods the quality of plate improved, as well as by the improvement of American machinery, which, as I understand from the report of the president of the Royal Institute of Engineers of England, is so far superior to the English machinery used in the pro- duction of plate that they are left behind in the race. Did they not have the cheap labor on their side they could not hold themselves up in competition with the price of American plate. That was at a period when plate was selling at about ?2. 60 a box at the mills. With the introduction of American machinery there, he stated, and with the low rate of wages paid to their operatives, they need not fear as to the result from competition from anywhere. I hear that they have adopted a great many of our mills over there in their manufacture, and are introducing more. After a while the quality of the American plate improved to such an extent that to-day, with the two side by side at the same price, the average can manufacturer will take the Ameri- can plate. The skill of the workmen has produced a better result; the tin is softer and more ductile; it has a better coating. REf'E.N'T DETERIORATION OF TIN PLATE. It did have a better coating, but I understand lately, since the formation of the American Tin Plate Company, that they are reducing the surface coating to such an extent that the canner now — the manufacturer of cans — has commenced to be a little apprehensive. That coating, as has been stated to you, is done by dipping, and after it comes out of the dipping tank it goes through something in the shape of a machine called a siiueezer. But in the years I am speaking of, when we imported tin plate, there were 5 pounds of pig tin used to 100 pounds of black iron. They have reduced it now to a liasis of about 2.1 pounds. And the action of salt on the interior of the can in the liquor in which the article is preserved, like a vegetable, or the action of an acid in the case of fruits or tomatoes, has oftentimes an injurious effect on that plate because it has such a thin coating. You can almost, as it were, see the pores, if it may be expressed so, of tlie iron through the coating. Q. Do I understand you tn say that this deterioration in the quality of tin, or at any rate the lessening of the thickness of the tin coating of the plate, is new since the formation of the American Tin Plate Company, or did it begin 3 or4 years ago? — A. No; it had already commenced with the tightness of business. The'closeness of coni])etition had commenced it on the other side and extended it here. Q. You have noticed that for the last 4 or 5 years? — A. Yes. Q. You think the quality of tin jilate that is "sold l>y the American Tin Plate Com- pany to-day is not poorer than that which was sold '.i ol- 4 years ago to the manufac- turers — a year ago? — A. That is the case. Q. Y.mliear it is still poorer? — A. The can manufacturers say that the coating now being of such tliinness lias given them considerable trouble, ancl that it is not ei|ual t(j the quality that was furnished them before tl\c trust went into effect, and when ii mill, as it were, had to stand upon its own bottom.' ' Comjjare affidavit of Mr. Greer, p. 926. THE TIN-PLATE COMBINATION: GOING. 917 CAN JIAXUFACTUREKS WANT GOOD TIN PI.ATE. The can manufacturer wants to get the best quality he can for his money, tor the reason that he is responsible to the canner for the value of the can and the value of the contents. He has to pay for both if the can is spoiled through any imperfection in the tin plate. Therefore he is very particular from what mill he gets his sup- plies. A mill in Indiana, called the Elwood, r,as getting quite a reputation for perfection of manufacturing, and other mills in proportion. Some of them that did not stand so well — their product had to be sold for a less price. If you picked out your brand, you were expected to pay 5 cents or a dime more per box in order to get the quality that you wanted. Q. Is it customary for the manufacturer of tin cans to have some favorite brand and regularly to buy that brand so that they can always be sure of their quality?— A. He would always take one certain brand in preference, because he had used it and found it to be satisfactory and was unwilling to change. Q. And was ordinarily willing to pay b or 10 cents a box more?— A. That amounts to very little when you figure that a l)ox of tin plate of 100 pounds would turn out 270 cans. The 5 cents or a dime a box would not make very much difference. But where he had to paj' for the can and contents — the can he would sell probably for 1\ or If cents, and when the contents got into it it would run up to 15 or 25 cents; that was his reason why he was so particular in getting the quality of plate. Q. You think that the ownership of brands and the keeping up of the quality of the brands as it was originally is a matter of great importance to the tin-plate manu- facturer or to the jobber selling to the tin-can manufacturer? — A. It would be more important to the manufacturer of cans, because he would like to adhere to that; but where he has to take what he can get and has no voice in the matter, of course he is not so well satisfied as he would be if he could get what he wanted. SHORTAGE OP C.iXS IN THE SUMMER OF 1899. Q. In your establishment do you manufacture more cans than you need for your own canning industry? — A. At time's. Q. You have a surplus to put on the market? — A. We kept our men working as long as we could, and when we could not find use for the cans in our own canning industrj' we would sell to some party who did not have a can shop. Q. Did you find in your business experience that a decided increase in the price of tin affected the demand for tin cans materially? — A. Not to such an extent as one would think. The man that wants cans wants them in his packing season, and then, like the gentleman from Texas with his gun, he wants them bad, because the articles are of a perishable nature. If he does not have the cans right there his raw material will spoil on his hands. That was the case this summer tu a great extent in Maryland and also in California. The cans could not be furnished fast enough, and a good deal of the raw material had to be thrown away. Q. "What was the reason for that; because there was an unusually large output so far as the material for canning was concerned, or because there w&a a short supply of cans and of tin to make cans from? — A. The increase of business in general through- out the country stimulated a larger demand for goods in cans than had 1 leen the case heretofore. During the dull period the consumption of canned, tinned food goes off considerably, because the purchasing poAver of the average consumer is gauged by his receipts, his wages, and at the low scale of wages under a limited sphere of opera- tion they had to limit their supplies. When the good times came in recentlj- the canner or can manufacturer was overwhelmed with orders. Pre\'i(jus to the forma- tion of the American Tin Plate Company notice had been ■jiven of the formation or of such an arrangement. These individual mills st'ut notices around to their friends . that they believed that there wtxild lie a trust formed, and the>- had better get in under cover. Immediately order.s \\ere placed, to my own knowledge, of from 40,000 to 100,000 and 150,000 l)Oxes each by individual can-manufacturing concerns. When the trust was formed it took in all the outstanding c. infracts, and there were a great many of them. I suppose it was the excejition to fincl a man in the manu- facture of tin cans but what had in a great measure supplied his nccils. Q. For a year? — A. For a year. And the American Tin Plate C^ompany at first shut down a great many mills. I do not know for what purpose; some people thought to get them up iii better shape or something. But when the time came foi- delivery, as specified in a contract— for instance, for March deli^■ery— the can manu- facturer did not get them, and he had to do the best he could. He had to go out and buy somewhere else to supply his needs, and he did not get them sometimes for 30 and sometimes 60 days after. Well, what could he do? He could not really go 918 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. out into the market and buy them for the account of the trust. He did not care about getting in bad odor with tliem. The supposition was that they controlled 95 per cent of all the plate mills in the country. So he did the best he could. That threw some of the manufacturing plants in cans out of the market for a while. For the time being it threw them out of the manufacturing and they had to wait. I refer to examples that I know of. Some of them were shut up for two weeks and some a little longer, because they could not get any plate and the trust was behind in deliv- eries. Gradually, though, as the summer rolled around, the deliveries commenced catching up, and by September there was very little complaint on this score ; but by that time the season practically was over for the manufacture of cans. • J- Do you ascril:ie that large demand for can goods, to any material extent, to the war in Cuba and the Philippines? — A. No; not to any great extent. During the war- in Cuba the Government bought about two hundred odd thousand cases of canned tomatoes, and also other articles. But when you reflect that the canning trades of this country have an output of over .500,000,000 cans, you will understand that the utting a stop to tliat. By marching in |)rocessi(iii witli bauds of music, and showing the political power they held, these journeyincu can makers prevailed upon the legislature to repeal that law. That was the first comliination in the canning or can manufacturing industry. CANNED-OYSTERS C( IMBINATION. In IKilH, ci)in|jetition l)ecame very close among the canned-oyster packers of Balti- ijiore, and Ihey formed an association or coml)ine, industi'ial Combination you may THE TIN-PLATE COMBINATION: GOING. 919 term it, in which the minimum forfeit to he paid was :fil,000. The}- fixed a. stated price to sell their goods by, and they made such prolit that someone who did not share in the sales to the extent that others did commeneeil cutting secreth-, and within a twelvemonth the combination broke up completely in confusion. LABOR. UXIOX HIGH WACIES IIACHIXERY. Shortly after that the operatives in the can shops got together and formed an asso- ciation and called it the Can Makers' JMutual Protective Association. The idea Avas to maintain a scale of wages and to stand together in case of an advance. In 1879 Q. (By Senator Kyle, interrupting.) In case of a decline — to stand together in case of a decline? — A. Well, I do not think they were considering a decline, because we never had had any reduction so far in the wages. Q. What was your statement that they agreed tostand ti igether for? — A. To get an advance, because that was one of the first things they did. They were making then on a basis of S2.50 a day, the journeymen can makers, and the first thing theV struck for, after being in good practical condition, was an advance of 20 per cent, and they ran along up until finallj' thej' got it over a hundred and odd per cent; and they made the mistake then of working only 3 days in the week, because they reasoned, if they could work 3 days in the week and make the same wages that thej- could in 6, what was the use of working the other 3 days? And the other 3 days were used, in many instances, in riding around in hacks and going fishing. We did not get any more output and they did not get any more out of higher wages. '\\'hile some men worked steadily and made $50 a A\eek, others were still satisfied with $15; but they had 3 days' worth of fun and the other men did not have any. That association ran along for some time and affected wages. But finally machinery commenced to show itself in the manufacturing of cans, on account of the frequency of these strikes, and on account of the strength of this combination. Men became restive tmder these influences, and the manufacturer of cans commenced figuring to get away from being dictated to by his employees. And then the ingenuity of man went to work and the first machine, got out by a man named Brooks, was the starting point for all the vast machinery that has come out ?ince. And to-day the men who work in the canning shops of the comitry, making them by the old process, are S(j few that they do not figure in the output. 3Iachinery to-day makes the great bulk of cans. NEW COMBINATION OP OYSTER PACKERS. Now, a combination later on of the packers of Baltimore was put in the shape of these later-day trusts; that is, a stock organization. Each man bound himself to enter into that. That was in 1878, brought about by the dull times that were prevailing in that year. And they went into the I'ombination, or stockholders' organization, to control the sale of the entire output of the canned-oyster industry of Baltimore, which, at that time, was the only oyster-packing port of the United States. The first year their profits were over 100 per cent; the next year, as they had taken in a great many outside concerns that were not really in the oyster business, they had to pay a dividend on a largely inflated basis, you might call it. In other words, they had to pay for idle plants, and the second year the profit was much less. And the third year an opposition came up, which, at the formation of the association, was denominated, as it might be, the tail of the arrangement. We left out one or two concerns, and as they stated at the time these concerns were really the tail and we were the dog, and the dog would wag the tail; but by the third and fourth years the profits at which we had worked had ev(jlved a number of opposition houses, to such an extent that the tail commenced to wag the dog, and we foimd it pi.udentto break up our (xincern and go back to our original condition. Then competition set m for a number of years, and at different times industrial combuiations have been formed )\v the canners of Baltimore, but rarely have they lasted (jver a twelveinoutli or 2 years. THESE COMBINATIONS JIADE THEIR PROFITS BY RAISING PRICES. Q. (By Mr. Jexks. ) In what form have these later ones been, that of pools or agree- ments to hold prices?— A. Pooling and aflidavits to prevent the cutting of prices and S(j on And to-day, and fi.>r a number of vears past, there has been no organization. They fear now that anything of that character would have to be capitalized at a rate that would put them beyond the economical point of production. Q. Has there been at any time a combination between the Baltimore canners and the canners elsewhere, or 'have these organizations been (-(juflned simply to Balti- more?— A Only to Baltimore. There have been no organizations elsewhere. But recentlv within this past twelvemonth, they have commeneeil to get together in 920 HEARINGS BEFOEE THE INDUSTRIAL COMMISSION. California, and they are now discussing a combination of all the New York State canners, and they are getting in line with the general idea that by consolidation economies can be pi-aoticed and bigger dividends paid. (^. From the experience you have had with these combinations in Baltiinore, what is your own opinion of that matter? Is there any special saving by combination, or did you simply make your profits of 100 per cent or less from the added ability that you had to put prices "up on the consumer? — A. Our idea was that by consolidation we could stop the competition. Q. You really expected, then, to get your profits from the increased price and not from any economj^? — A. Precisely. We thought that where we were competing one against another, if we could get together as one seller we could make our own prices; and that was the practical result for a time. .MAXUPACTURERS WOULD PREFER TO HAVE THEIR MEX IN A fOMBINATIOX, PROVIDED THEY COULD CONTROL IT. Q. In these various combinations that the manufacturers made, did they make any attempt — did they express willingness to divide their profits with their employees in the way of increased wages? — A. Never; they were looking solely for their own benefit. Q. AVhen the employees got their increase of wages, it came through their own combination forcing it from the employers? — A. That is all. I would say that at a later day the manufacturers favored a combination that would make permanent figures and stay there, if they could make a contract with the men tor the period of a year, which was the longest, at least. But machinery at that tinre had come in, and finally the machinery practically drove the journej'men out of business. For a number of years they did have an arrangement with the employees that was very satisfactory. They had regular wages paid right along, and they had no trouble. As a general thing, I believe that the manufacturers would prefer to have their men in a combination, provided they could control it. But, before, the combination could not be controlled; the man that would talk the most and was probably worth the least in the combina- tion would probably infiuence the men there, and that would draw the men out tq strike at perhaps the wrong period. Q. These combinations that you speak of were among the canners. Did you also have similar combinations among the can manufacturers of that kind? — A. They did, but they could not hold together as well as the men. They invariably gave in after standing out, for the reason that thej^ had contracted for the delivery of the cans at specified times; and, as I have already said, they wanted those cans very bad, and they had to deliver, and they could not stand out against the men. The men could stand out longer than the manufacturers. Q. (By Mr. Jenks.) Have you any suggestions that you would like to make with reference to monopolies in general, or to combinations? — A. No; I have no suggestions to make. I have not much of an opinion of combinations; I believe they generally fall by their own weight. Q. (By Senator Kyle.) Fall by tlieir own weight? Tell us what you mean by that. That is frequently referred to in the newspaiiers and in the testimony. — A. All the combinations that I have been in «ere not a)_)le to hold themselves together for an indefinite length of time; and if I may judge liy those that I have been in, they do not seem to be able to stand up indeiinitely. POOR TIX PLATE MAKES C.VXNED GOODS IXSLGIITLY. (J. (By ilr. Jenks.) I judge from what you said in reference to the American Tin Plate Company that you consider that its clieck ujion the manufacturing of tin plate was, for a part of thii year at any rate, a detriment to some extent? — A.' I have not the slightest doubt that if any can manufacturer were put into a position where he could only buy his platen from one individual, on general principles he would kick against that. Q. You think he could not count so well upon the quality of liis tin? — A. If he could not import his plate, he would have tn take what In: could get. I/. Anil you think your experience the last year would justify tlie belief that the American Tin Plate Company is not giving tliemso good a quality of tin as they were counting on? — A. That is the report that I have heard — that the quality of the tin ]ilate is not so good as it was before. Q. (By Mr. A. L. Harris.) What effect has ]ioiir tin vnanufactured into a tin can ujion the consumer of the canned goods, wheic acids are affecting the tinning, even if the contents are nnt spoiled? — A. The ircju that forms the boily of the plate is a healthy metal. The doctors give it to us occasionally. That would have no effect THE TIN-PLATE COMBINATION: GOING. 921 on the health of the I'onsuiner. A can that is hermetically sealed has comparatively little oxygen in it or life to start fermentation, and it remains in statu quo for a period of a great many years. It would have this effei't where that coating is very thin, that in opening the tin, you would find the can more discolored inside, from the fact of the coating being so light, than it would be where the tin had been redipped, as explained this morning by the witness before me. The can made of tin plate which had been dipped once or twice and had a better coating would be a much better-looking object on the inside. I think it would have no prejudicial effect on the consumer, even with that light coating. Q. When a man opens his can and finds the contents in that condition, it detracts very much from the value of the goods in the opinion of the consumer? — A. Well, from the point of view of the sight, if you opened a tin and found it very much dis- colored inside it would not look quite so nice as it would ^vith a perfectly bright interior. Q. (By Mr. Farquhar.) Is not the quality determined In' the packers themselves, by unseasonable packing, overripe packing, and a, good many other causes? — A. There are a great many factors that would enter into it. Q. That would enter in independent of this tin matter? — A. If an article was green or overripe or partly decayed, all those are facts that would enter into the health- fulness and sightliness of the article. CAN MANUFAOTUREK GUARANTEES AGAINST DEFECTS. Q. (By Mr. Jenks.) Did I understand you to say that the manufacturer of the tin cans guaranteed the preservation of the goods that were canned? — A. No; but if the preservation of the goods was impaired by the fact of a default in the manufacture of the tin or the can, then he has to pay. Q. That is what I mean; guaranteed so far as that goes? — A. If that can broke in the forming up and there was some little leak not bigger than the point of a needle, the action of the atmosphere getting in there soon starts fermentation, and of course with fermentation come the gases and distention of the tin, and it becomes unsalable. Q. Goods that are spoiled in that way are sent back to the tin-can manufacturer to pay for? — A. They are sent back to him as proof that the defect is there; he examines them, and if he finds that it is so he has to pay for them. CAN MEN DO NOT YET FEEL THE NEED OF NEW LA^^"S. Q. (By Mr. Clarke.) Do your studies and observation of economy in relation to industry suggest to you the need of any change in existing laws for the protection of the people? — A. Well, so far, those laws have not been oppressive. As I said before, the can manufacturer, in the instances that we are speaking of, has so thoroughly sup- plied himself with material that he has not felt the pinch yet. When the time comes that he has to take what is given him and pay the price for it, then he will commence to feel restive, and then possibly feel the need of some legislation that w'ill relieve him from the pecuUar position. Q. If the management of a large consolidation like the American Tin Plate Com- pany is far-sighted and liberal, or if there is considerable competition, will that time come when there would be a pinch and he would need some public relief? — A. I do not think that the>- would say that there was any need for legislation until they get pinched. SOURCES OF TIN PLATE — IMPORTED FOR EXPORT TRADE. Q. (Bv Mr. Farquhar.) '\\'as any part of the output of the Cumberland mill used in Baltimore?— A. Oh, yes; we used materials from different parts of the coun- try — more particularly, though, did we in Baltimore get it from Imliana. There was more tin plate used in Baltimore from Indiana than from elsewhere — and from Newcastle. I suppose Newcastle furnished yiossibly more tin to Baltimore than even the Elwood plant did. Q. Is there any difference between the tin that you use in the domestic trade and the export trade in quality?— A. In the export trade we invariably used the imported article. We did not think it quite so good as the domestic; but as we got a rebate of the entire amount of the duty paid, with the exception of a slight percentage, we used that in preference to the American plate. But the export trade out of Balti- more is not such an item. Out of Cahfornia it amounts in fruits alone, I suppose, to about 500,000 cases of fruit a season. In the salmon industry it will run up probably to three times as much. 922 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. COMPETITION OF GLASS CANS IS NOT FORMIDABLE. Q. (By Mr. Ratciifoed.) To what extent has the industry in which j-ou are eniiaiied been affected by the eartlienware and the glass jar for the purpose of fruit canning? — A. Not to any extent appreciable. Q. Have j'ou any competition from that source? — A. There are certain people that use goods put up in glass packages instead of tin, for the reason that they believe the glass pi-obably is more healthy; but the difference in the selling price is so great that oftentimes the storekeeper will say to them, "Why, here is the same goods in tin at 40 cents a tin for which you pay 00 cents a glass jar," and show them the difference. il. (By 'Mr. Fakquhak.) Is not the glass jar used also almost altogether for the home packing; that is, domestic packing? — A. At home? Oh, no; tliere are a great many tins made, what we call the open tops is not sucli a great iteiu, but still it is considerable. The tin open top cans and the glass jar are the only packages used by the average housewife. The a\'erage housewife thinks, of course, lier own productions superior, and in a great many cases they are. She puts them up in glass; occasionally in tin. Q. (By Mr. Ratohford.) Is it not a fact that glass jars are more extensively used tor that purpose to-day than e^'er before? — A. Yes, and it will be still more the case since they have been able to reduce the price of fruit jars. At first I paid $16 a gross for glass jars in 1868. To-day that same jar can be bought for S4.50. .50 per box to make the plates above referred to. The present market price (.if steel is almost double, and pig tin is very much higher; materials for repairs and general supplies are higher to-daj^ than at the time when the New Castle works were first put in operation; and at that time the prices paid for tonnage and general labor were lower than the prices that are now being paid. The increase in the cost of the raw- materials and supplies used over the cost of the same materials used during the last half of 1893, the time above referred to, without adding anything for increased cost of labor, comes very close to $1 per basis box of finished coke turned jilate. There is no company in existence that started at the time when the New Castle works did but had to spend thousands of dollars in experimenting and discarding useless machinery that was suggested by our Welsh friends who came over to America to teach the Americans how to make tin plate. During the period of excessive low prices for tin plate, which was during the year 1898, coke plates were selling at from $2.50 to $2.60 at the mills. At that time tin-plate bars, pig tin, palm oil, lumber for boxes, and all necessary mill supplies were purchased at the lowest prices that have prevailed during the past 7 years; but no mill in the Pittsljurg district could make a box of coke plate under $2.40 at actual cost, and if Mr. Grifirths was making a box of tin plate at .?2.40 he was doing very much better than any mills we know of witli similar equipment. But for the sake of analyzing his statement we will assume that his cost of $2.40, as stated by him, was correct, and that at the time the American Tin Plate Company was organized he was clearing 20 per (^ent.^ If so it would require him to sell his plates, based on a cost of $2.40, at $2.88 per box net. It would be necessary to allow the buyer 1 per cent cash discount, and prol)ably a commission to some jobber or salesman, 'which would require plates to sell si imewhere in the vicm- ity of 12.95 for coke tin plates, net at mill. If Mr. Griffiths actually did secure 20 per cent profit, based on the cost of $2.40, he must have been selling his plates fully 33 to 35 cents a Ijox aliove the average market price for No. 1 quality coke plates. As to his statement that plates were worth $5.75 per box, no such price was obtained for coke plates 1 >v any manufacturer, unless it may have Ijeen in one or two box lots; no such price was obtainable byanyof the large well-known mills for established brands of No 1 coke plates. If Mr. Griffiths refers to plates that he may have sold before he 1 See pp 897 898. Jlr. Grifflths's statement was not that he made 20 per cent on his cost per box, but that he made'20 per cent pei annum on the capital invested. 924 HEARINGS BEFORE THE INDUSTRIAL COMMISSIOJf. was identified witli and operated the Washington mill, he was compelled to buy black plate for dippinji;, and when coke plates were actually selling at |5.75 per box, Avhich was during the year 1891 and the early part of 1892, black plates were selling in carload lots delivered in Pittsburg and Philadelphia at from 3.7 to 4 cents per pound. A Ijox of plates weighing 100 pounds requires 97 pounds of black plate, which, at ?,.7 cents, would practically be $3.59 for the steel. As pig tin was worth 23 cents to 25 cents per pound, the cost of tinning, Ijoxing, and loss in wasters in a small plant could not ha\e been far from $1 per box; hence we can not see where Mr. Griffith made 100 per cent profit in selling plates at S5.75 per box. As I have said, he could not have secured that price for coke plates at any time while he operated the ^\'ashington mill, and if he referred to plates dipped he could not have purchased the black plate at other mills and paid 100 cents on the dollar and made any such profit as he stated. I am also surprised that Mr. Griffiths used the letter that he read, which was evi- dently written by some "sorehead," with reference to the closing down of mills and the output at the Kew Castle works. First, the statement that the New Castle work- men are required to turn out a larger output than the scale calls for is an absolute falsehood. The workmen at New Castle work under exactly the same conditions as the men at all other mills. ^ The agreement is signed with the conference committee representing the Amalgamated Association, and the same conditions apply as to out- put of all mills. There is this difference, however, that at the New Castle works there are 2 large mills and at the Shenango works 4 large mills, making a total of 6 at Ne'\\' Castle, on which larger sheets are rolled than on the ordinary smaller tin mills, and on which the workmen are allowed a larger production, based on the sizes which they are working, and the same rule applies to other mills of similar size. As to the statement about the mills at Monessen, it is scarcely worth noticing, except that the mills are arranged differently. They are under a patent process secured by IMr. Donner, on which a small concession is allowed by the workmen on account of the method of roughing and rolling the sheets. It is a fact that the American Tin Plate Company, when they assumed the contracts of the various companies at the time the purchase of the individual mills was made, were encumbered with very large orders for future deliveries, many of which extended up to October 1 and a part to the 1st of January, 1900. The entire product of black and tinned plate of the New Castle and Shenango mills was sold fully up to October 1 and a very large portion of tire last quarter's product up to January 1, 1900. The product at the Shenango mill had been very largely sold in advance by the Shenango Valley Steel Company. At the same time contracts for fuel, bars, pig tin, etc., had been made bj' the various companies, which were also turned over. Unfortunately the management of some of the smaller mills that had sold their product in advance had not been cautious enough to cover their supplies, and the American Tin Plate Company was compelled to purchase materials for many of the works at advanced prices, \\ bile the product was sold at low prices. Both the New Castle and the Shenango works have been and are now making ship- ments of thousands of tons of black plate to those known in the trade as dippers in Chicago, Pittsburg, Philadelphia, Norristown, Baltimore, and New York, and these facts ought to be good evidence that "reputable" and "responsible" dippers of tin plate have been and are still securing a supply of black plate from the American Tin Plate Company. It is true that the tin-plate" traile has been handicapped for years by irresponsible dippers. Aljout all the losses the Newcastle works ever sustained was by selling to that class of buyers, and I know of two other manufacturers whose losses were much larger than our own on account of their selling black plate for tin- ning. As good business policy the American Tin Plate Company, as manufacturers of tin plate, have tried to discourage the innumerable irresponsible lirands that have lieen put out, with the view of having kept before the buyers only the American Company's own guaranteed brands or those made for the reputable and well-estab- lished jobbers and dealers. They are very desirous of putting none but reliable roofing plates on the market; and this, which is intended for the protection of the buyers as well as the sellers, does not meet with the appro\'al of a certain class of trade, who would no doubt like td buy )ilates carrying less coating than certain well- known brands at a lower j)rice and have them "branded "Jones's" or "Smith's" AV'^orcestcr giade roofing plates. Formerly the word "Worcester" was known as denoting an excellent quality of plate. It is a fact, however, that during the year preceding 1899 large f|uantities of plates were sold as "Worcester" grade that were very inferior to the genuine coated "Worcester grade ]ilate. We believe a customer in buying a piano or a first-class carriage is better prolet'ted if he feels confident that when he buys a Steinway piano it is niaile by Steinway & Sons, New York ; or if he bu>-s a Biv\vst(^r carriage that it is the genuine Breuster. I know that the manage- ' See p. 906. THE TIN-PLATE COMBINATION: — GREER. 925 ment of the Ameru'an Tin Plate Company is very desirous of furnishing none other than plates of excellent quality and finish to their customers, and I helieve that the general practice in all the mills is much better to-day than it was us a whole during the preceding years, when they were operated under the individual management in accordance with the whims or notions of each superintendent, and he did not have an opportunity tocompare notes with other mills. The practice of the best mills where the hest results were obtained has been and is being adopted in all of the mills as fast as possiljle, and we believe that jilates of a much better and more uniform quality are now turned out by the American Tin Plate Company than the general average o"f the plates under the indei>endent management.' As to the continuous operating of the mills during the winter season ;- during the past 4 years it had been the policy of a majority of the manufacturers, as soon as the canning season was over, which is usually about the 1st of October, to sell direct to the jobbers and large consumers for the next 6, 9, and 12 months' supply. To do it they were compelled to sell at prices that would fully satisfy the jobber. The plates would be stored in the manufacturer's or the jobber's'warehouse, and when the spring trade opened those plates were always a hindrance to the manufacturers in securing a fair price for their product ; and we believe if the mills had not been under the manage- ment and control of the American Tin Plate Company during the past 12 months more mills would have been idle on account of bankruptcy and not being able to run than have been already closed down on account of shortage of tirders by the American Tin Plate Company. Had the intense competition continued, no doiibt a number of the mills would have become bankrupt, as some were actually on the verge of bankruptcy when they were purchased by the American Tin Plate Company. Mr. Griffiths says, in conclusion, that in his opinion "a plant of 6 mills would enable the manufacturer to take advantage of all economies effected by the propei- division of labor, and that such a plant constituted the limit of economical manage- ment by one good man." ^ We also notice he stated "that under present conditions in Wales a 4-mill plant was regarded as the unity of economical management." I have no doubt that ^Ir. Griffiths is honest in his opinion. I will only add that he is a fair sample of the plausible and talkative foreigners who assumed to know all about the manufacturing of tin plate when they first came to America, ilr. Griffiths is a plausible talker, but as a progressive tin-plate manufacturer he certainly is not worth considering. In fact, there are very few, if any, foreigners that have been of much assistance to the American manufacturers in establishing their mills. Nearly all of the old " Welsh" ideas as to hot rolling, shearing, annealing, and tinning were discarded and abandoned by the progressive and wide-awake American manufac- turers. They were tried and found wanting at New Castle, and at Elwood, Ind. The American tin-plate manufacturers have made very rapid advancement, and it has been brought about by careful and intense application of American engineers and workmen, who first made themselves acquainted with the various processes necessary to manufacture and finish tin plate, and then went about adopting the best methods for securing the desired results. The best organized and best conducted plants to-day are officered and managed Ijy live Americans. I desire also to call your attention to the additional fact that up to the early part of the year 1898 there were scarcely enough mills in active operation to supply the demand for tin plate, and the jobbers and the well-to-do class of consumers were ready and willing to purchase plates and accept deliveries in advance of their actual require- ments, which enabled all of the mills to keep in continuous operation. A large number of the mills were completed and put in operation during the year 1898 and the early part of 1899; and the manufacturing capacity is now, and has l_ieen for souie time, considerably in excess of the requirements c if American consumers. In addition to this fact, the unprecedented advance in the cost of steel bars, pig tin, palm oil, boxes, and all mill supplies, such as castings, brasses, and labor, has added to the actual cost of tin plate, and a very large portion, if not all, of the export trade has been lost to the American manufacturers. -\lso the buyers and jobbers of tin jilate, like buyers and jobbers of nails and all kinds of merchant iron, are of the opinion that the present high prices can not continue for any considerable length of time, and hence are not now disposed to go into the market and anticipate future wants, unless at a considerable concession from jirescnt prices; and with the present price of pig tin, steel bars, and lumber for boxes the American Tin Plate C(impan\- can not, without actual loss, reduce the price of tin plate for the jobber to speculate on or for the consumer to anticipate his future re(|uirements until the raw materials mentioned can be secured at a lower cost. Taking the general average selling price of tin plates, as can be shown from the books of the American Tin Plate Company for the year 1 See Mr, Going, p. 916; Mr. Greer, p. 926. - see pp. 905, 90(5. ■• See p. 915. 926 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 1899, the buyers as a w hule have no reason to complain. The jobbers' price as pub- lished in the Iron Trade Review and other papers is not the price whiclr the manu- factnrer secures for tlie plates £. o. b. mill. Formerly under the independent owner- ship and management of the mills there were a number of so-called jobbers or dealers who simply had desk room rented in New York or Chicago and would send out cir- cular letters to consumers and buyer.s of tin plate and offer plates at 5 to 10 cents per box below the market price. They were well posted as to the mills that were some- «hat short of orders and in such 'financial shape that they must accept business in order to keep in continuous operation at almost any price ; and as soon as they secured an acceptance of some of their propositions they would telegraph that they had an order in hand to place and would state the price at which they would place it, request- ing a wire reply. It is needless to say that that class of jobbers or dealers are now out of business; and of course they are very loud in their denunciations of the Amer- ican Tin Plate Company. Under former conditions they were simply leaches and hangers-on to the trade, which it seemed impossible to get rid of under the conditions existing at that time. I will refer to one other statement made by a can manufacturer, J\Ir. H. F. Going of Baltimore,' who is qu(_ited as a large canner of food products, and until recently an extensive manufacturer of cans. He states that the coating has been reduced from 5 pounds to 2 J pounds of tin to 100 pounds of black plate, and that most of the reduc- tion has been made since the American Tin Plate Company was organized. This statement is very misleading. First, no coke plates which are used for canning puriioses made by the Welsh manufacturers or the American manufacturers ever did carry 5 pounds of coating. None other than a very high grade of charcoal carry 5 pounds of coating per box. The facts are that the Welsh imported coke plates for several j'ears used for canning purposes have carried less coating than the American cokes. And, further, it is susceptible of proof that American tin plates put on the market by the larger part of the American manufacturers since the year 1892 have been better coated than the imported Welsh plates. For proof of this I refer you to the largest users of tin plates for canning purposes in America, such as the Pacific Sheet Metal Works, of San Francisco; Norton Brothers, of Chicago, also Baltimore; Black & Krebs, Baltimore; l.\' |iiillinij; up a very (•(iiiiprclu'iisivr linnin^' wdi-ks was the di'siic Id Ikim' Ihal lai'm' imwcr of tiniiiiiL,' in onU'i- lo lill pr(ini|illy our cii.s- loniors' wants williin any reasiHKilili' liinc. Tlu'n 1 fell al llic time llial, if we wailed a little while we sluiuld know a fireat. deal niove alioni naiUini;- black plale in Anieriea than they ever had known in \Vales, Hull, the iirtidnel on Hie other side was not, as fjood as it (Hiylil In be, and thai I heir ideas wei'e, as w e know in kindred things, very old, and llu'y eoidd sei' no reason for ehanLrini; llieni. I fell, therefore, thai if we wailed a little w Idle « (• sliiiidd know a j^real deal more here alioul luakini;- that black plale, and it wonld cost us a .ni'cal di'al less to jiiil a bkic'k-plali' nnll up sul>se(|Menl ly than, it wonld to Jiut it up in a hurry. 1 fell that with I hi' Inn cut i\e <;enius of I he Ameri- can people means would be found lo \ery larnely improve and at the same liiue cheapen that mannlacliu'c of black plale, and so we have been waitinji; from year lo year, anessi'iiier i|uality, as far as the inlrinsic (|ualily is coiicenied, the ,\iiiorieau Kessc- mer is vastly superior in e\«'ry ri'.spccl -in ductility and tensile slren};lli, in Ihe sur- face and in the iiiiisli -in e\cry respect vastly superior to Ihe l'orei<>n qiialil \ . In I lie open-hearlh, or I be Siemens-Marl in, process we lia\ e not improved malerially, I think, over Ihe qualily of Ihe foreign production, nor lias that been used \('iy larycly in .Vmcrica. In \\ ales they were oblii;ed In use those l\\'o si'iiarale materials, the bcsse- mer and the opcii-heailli )iriiducl, aceordiiif;' lo the use you niij;lil want lo put lliat tin plale lo, and the difference was \i'r\ widi'ovcr there; but in .\merica our iics.senicr has heen so \aslly ini|iriived I bal there is mil I hat differeiice lii'l « ecu I he Itesseiiu'r as produced now and the oiicn-bcartb as we would produce it here.' (i. What propoi'tioii of the black plates used in lliiseoiiiilry are llcssemcr and wliat opi'ii-heai'th? — A. Kor tin-plate purpo.scs it issollu^wbal iliUlcull lo say. I could mil, hazard a^ncssat it; it would simply be a gn ess. ' Ihal, we pay M'ly full wages, in our oiiiiiion. We liiivc always ki'pt in close hiiieli w illi our men — willing to listen at any tune lo any fancied grievance on their part and we have coul innonsly paid tbeiii, ilirougli ba.d tinii'S as well tlH good, prelly uniformly good wages. <.J. Do they wiirk by Hie piece, or li\ I lie day, or by Hie wcek'i' A. Ill boHi ways. The minor labor is niosll\' by Hie day or week; Hie liigbesi and skilled labor is usually by the piece. ti. is your labor organizcMl'i' ,\. No. (i. Are men, wiinieii, and minors employed'i' ,\. \'ery few miniU'S, and if HO, in a minor capacity. <^ Some women 'i' .\. Ves; we employ women lo clean Hie plales after tliey arc tinned in the higher gnides. We go lo considerable espense in that respect. i do not lliink Ihe practice oblains in Weslern mills lo tin' extent that it does wiHi us; llicir cleaning is done \'cry largely liy macbinery, but we do ours largely by hand and we think it produces beller resulls. (,i. Iloyoii know bow Ihe wages yon pay coinpare will) the wages Ibid are paid in siniilar plaiils abroad?- \. No; not as to fads. 1 know our wages are very much more than are paid abroad; how much I can not .say. >i ,\re yonr opcrali\es nativi^ to the counlry or have most of Iheni come friiin ■ Mr. lirlmtlis, p. lllli THE TIN-PLATE COMBINATION: TAYLOR. 933 AVales? — A. i\Iiist of tlieiii aiv niitivc to tlu' country. We have a few that came from AVales when wc sUirt(Ml our works, and they have been with us eontmuously ever ance. \Vc have not as nuiny, tlion^li, of foreigners as we had when we started. Q. Have you lia(i any labor difficulties? — A. None wliatever. Q,. Do the wanes of labor in yonr works e.ouipare favorably with the watjes of labor in most of the industrial establishments in your city? — A. Yes, they compare verv favorably. I think I stated that we think we jiay vei'v full wages ini'leed. Q. Yon think that is true of the tin-plate industry and the black-plate industry generally in this country? — A. Yes; so far as my knowledf^e si'es, very full wages are paid, especially in the skilled departments. NO REL.VTioNs wrrn the .\mei!I( \n tin n.,\TE comi'.vnv — sriM'i.iEs of black tl.vte. Q. Do yon sustain any relation whatever to the American Tin Plate Company? — .\. None whatever in any direct .sense. C^. Do you eom]H'te with them'.' — \. We are in a sense their competitors; yes, we are indi'pendcut of them. tj. Do you buy anything from them or they from you? — ,\. No; we have no deal- ings together. tj. liow do you obtain your black plates, and from whom — not necessarily the firms? — .\. W'e have liad our black plate always made for us by blaek-|ilate mills, and ha\e selected those which could do the best work for us and at the time were most favorabh situated as to freights, so tliat the cost of freight on their product to our works would be a mininuim. We have taken, as a rule, the ont})ut of such works, and ha\e beiMi cognizant of their methods and of their cost; and I have arranged in our contract with them to pay them a certain profit upon such costs. Sometimes the contracts have been of a sliding naturi' where the jirospect of the value of materials was in any way nnci'i-tain, and the |iricc of our jiroduct from those mills was based on the cost of materials ahead. We |>ractically took the output of certain blac'k-plate mills which never made tin plates, ami, as 1 saiil lieforc, were favorably loeateil. A\'hen the American Tin Plate (,'ompany was formed, these mills, with our ajiproval, natur- ally end traced the oppyees at any time made any demands r.elating to prices or liours uf labor? — A. Nn clemunds. At various times in a small way they have talked to ns about wages and we have simply talked to them. There have been uniiii]iortant changes — s get the tariff put on? — A. I do not know in what way the tariff was obtained. We had no interest in it particu- larly at that time. Q. You are not aware, then, that the iron workers of this country were the men that were almost mainly instrumental in getting that tariff on? — A. No; I did not know anything about that at all. As far as our fiirm is concerned, we simjjly watched events, believiiig that the tariff on tin plate was to be imposed. Various attempts had been made in the past to impose it. I think they failed on account of the con- ditions at those times not being favorable to the establishment of the industry. I think that when the tariff commission — I think in 18S() Q. (Interrupting.) 1883. — A. 1883. I appeared before it myself at that time and rather advocated the lowering of the duty, because it seemed to be then a tax upon the American consumer, because at that time the conditions did not exist here for fliaking tin plates; but, of course, when favorable conditions existed, I changed my views entirely and have been a strong advocate of a protective tariff ever since. I thmk that under this tariff not only have our immense imlustries been established, but labor has been largely benefited by the tariff on tin plate. Q. Was not the nuiin i-'eas(ju for the'jMcKinley bill, wlien it was discussed, that it was the creation of a nc\\- field of labor and tire devi-lopment of the raw material of this country? — A. I lookeil upon it Q. (Interrupting.) The enipl(_>vment of a larger field for workingmen— was not that the main reason given?— A. I can not recall what the main reason was. I think it came about in a general wav, and I think the estalilishment of the tariff came about from natural causes; tha't we felt the need of n further development of our resources here and we could not do it without the benefit of the tariff. Q. You are not sure, then, whether the tariff was made f(jr the benefit of the man- ufacturers or maile for the benefit of the American woi-lcingnien?— A. For their joint benefit. Q. And thev nuyiit to be joint sharers?— A. They are, I think, Q. Are you' aware that under the Amalgamated Associatidu scale the working- men are reallv sharers, under the sliding scale, with the manutactuvers''- A. I do not know anvthing aliout the Amalgamated Asscjciation's scale. In our tinning works we simply pay, as I have stated, gij(jd wages and wa-vs that we Inu'e estab- lished with our Uien; and they have been satisfactory. WITN:.:s.s's business not affected by the form \TI0N- hi- the ASrERICAN TIN PLATE COMP.VNY. Q As an independent manufacturer, wliat effect, good or bad, has the establish- ment iif the American Tin Plate Company had with yon?— A. Just what effect— m, what wav? „ , , . i • o i Wliat effect on vour business as a mamilacturer.'— A. < »n our business .' 1 can not see that it h;is lue'l any effect en ;!S whatever; it has simjily been a continuation «f the V\'estcrn mills under another organization. 938 HEARINGS BEFORE THE rNDUSTRIAL COMMISSION. Q. You say it was an enlargement. With your present works running full night and day, do I understand that yoii manufacture one-tenth of the whole product of this country? — A. I think I stated that if our works were running full night and day and turned out the ordinary kinds of tin plate A^-e could make one-tenth of the tin plate consumed in the United States. Q. Do you think your opportunities to work up to this one-tenth are good while the American Tin Plate Company is in existence? — A. There is no reason for attempt- ing this large product. We give our attention very largely to the making of high grades, and necessarily we do not get out the product of those grades that we would get out of the common kinds. THE AMERICAN TIX ri,.iTB COMPAN'Y FIX THE PMCE, BTT THEIR ADVANCED PRICES ARE .TUSTIFIED BY THE COSTS. Q. I think you asserted, or seemed to imply, that the American Tin Plate Company fixed the prices to the consumers of this country. Is it a fact or not? — A. I think I stated that the American Tin Plate Company fixed their ' prices, and that any other dealer or merchant or independent manufacturer is entirely at liberty to fix his prices; but, as a matter of fact, the American Tin Plate Company, by taking over all the individual mills practically supply the tin plate of the United States, and they have fixed prices at different periods. Q. You say that practically they are the makers of the going products of tin? — A. I would say that practically they are the makers of prices of current kinds of tin plate. Q. (By Mr. Phillips.) How much have they advanced the price since their organi- zation? — A. I think I stated that at the time of their organization what is known as canners' tin, I. C. 14 by 20, 100 pounds, was selling for $2.65; their present price is $4.65, a difference of $2. Of course, there are very many kinds of tin plate, but we take that as representing the basis of value. Q. Do you consider that an exorbitant price, if they make a profit even at $2? — A. I do not think their profit is any more now than it was then. I think that if you take the foreign market as a basis, where buying and selling is unrestricted and where there is perfect freqdom of action, no consolidation whatever, keen compe- tition, you have an advance over there of $1.50 on that same article. You have a corresponding advance here of $2. Now, the 50 cents must Q. (Interrupting.) In this same kind? — A. In that same period. Q. In that same period? — A. At the time of the formation of the American Tin^ Plate Company this kind of tin that I was alluding to was selling for $2.65, repre- senting practically the lowest price it ever touched at that time or before. That kind of tin is now fixed in price by the American Tin Plate Company at $4.65. The advance in the foreign market has been fully $1.50 a box on the same kind of tin. Q. In that period? — A. In that period; and that 50 cents of greater advance in the American product is entirely justified, within my knowledge and in my opinion, by the difference in labor in the two countries. The difference in labor, as I under- stand it, is very largely against us in rolftng black plate. Q. (By Mr. Farquhar.) To what do you attribute the advance in tin plate in the last year or two? — A. We all know of the great advance in the price of iron and steel and in pig tin, and that, together with the advance in wages and some small advances in minor things like oils, justifies entirely the present price of tin plate. Q. Have you advanced wages in your establishment since the advance of prices?— A. I think slightly, but we paid very good wages before, and we never reduced them when wages were reduced by the A\'esteru mills. Q. So you say the advance is a normal advance? — A. The advance is normal. Q. Eegulated by supply and demand? — A. Regulated entirely by supply and demand. Q. Both foreign and American markets? — A. Entirely so; both markets. Q. You claim there is not an arbitrary piice among you tin-plate men in this coun- try in fixing the present price? — A. I do not know enough about the business methods of the jVmerican Tin Plate Company. I know they have fixed the price. Q. In your o\mi Ijusiness, do you know? — A. In our own business, I was going further to say that we fix our own prices independently always. Q. (By Mr. A. L. Harris.) Do ycju know what per cent of" the product to-day the American Tin Plate C^ompany manufacture? — A. No; I could hardly venture a guess kt that, but they make a large part of it. NO TIN PL.\TE IMPORTED EXCEPT FOR DRAWBACK, l^ Is there any competition in the importing of tin? — A. No; it costs more, with the freight and duty. The American product, without the favor or prejudice of the THE TIN-PLATE COMBINATION: TAYLOR. 939 ; " American Tin Plate Company, or any other dealers or company or manufacturer, is very much less in price than the iijiported tin plate. Q. (By Mr. Phillii's.) There is, then, no importation of tin plate? — A. None what- ever, except in some special lines, the amount of which is inconsiderable. Of course the oil people — consumers of that kind — import the foreign article, because they make it up into cans and export it and get back the duty less 1 per cent. Q. (By Mr. Faequh.4.r.) So that under the present conditions there is no importa- tion to affect at all? — A. None whatever. The selling price of the American product is very mucli less than the cost of importing the corresponding foreign product. SUPPOSE THE TIN-PLATE DUTY WERE REMOVED. Q. Suppose the tariff was abolished ; how would the competing power of foreign tin be with the American tin? — A. Well, the immediate result of the abolition of the tariff on tin plate would be to put the foreign market up. ( j. Then you would expect, on the repeal of the tariff on tin plate, that the Amer- ican product could then enter into immediate competition with the European — that is, European tin could immediately enter into competition with the American? — A. We could not immediately enter into competition with them because our protection would be removed. We should have to adjust ourselves to those circumstances. Those circumstances would be the reduction of wages here immediately and very largely, or the men would be thrown out of work. We should also have to be satis- fied with a very much less profit or none at all. To keep our work going we should also have to liuy certain material for less prices than we can now, which would mean an adjustment of everything in the iron and steel line. You can not disturb the tariff on tin plate unless yon correspondingly disturb it on everything else. I am free to sav that this country, with its wonderful development, is gradually becoming independent of a mere tariff per se ; but I think, as I stated before, that it is very important that we have the benefit of a tariff, where it is not abused, as it keeps out speculative importations at a bad time. Q. You have the home market to yourselves? — A. Yes. Q. That is one reason? — A. And we can supply the whole market. Q. Of course ybu know there is the talk all about us. and some discussions through the newspapers^ that the remedy for these combinations, especially in the tin-plate business, is to take away the tariff entirely. As you are a manufacturer, I think the commission would like to know just about where it would land the tin-plate interest in this country. — A. That is a good question. Q. That is just what we want to get at, the fact, and your own opinion as a practical man. — A. I have had some experience in changes of the tariff. We have had a good many of them before the American industry was established. If the tariff on tin plate were removed or largelv reduced, as I said before, the immediate effect would be a very large advance in the foreign market. In other words, they would take advantage of that advance and it would be continued as long as they had a demand in this country. Then, in the course of time, the American manufacturer would 'commence to adjust himself to those changed conditions. AS TO MONOPOLIZING MACHINERY. Q. (By Mr. Phillips.) Does the American Tin Plate Company seek to control the machinery that goes into the making of plates?— A. I can say nothing on the sub- ject, except that I have seen it in the newspapers. We are not interested as yet in that. . Q. You would be directly interested if you were going to make your own black plate, would you not?— A. We should. ^ ^ , ^ ^ ^ Q. To know whether you could get such machinery?— A. But I have never found any difficulty in getting any made that I was willing to pay for. In our own works we have employed a great deal of machinery' and mechanical knowledge on the part of others. AVe never had any difficulty in getting anything made. ^ ^ ,^ Q Have vou heretofore ever dealt, however, with persons who had absolute con- trol, or very largely the control, of a great industry?— A. We have never dealt with anyone except with those who have made machinery for the tinning works. NO GREAT COMBIN.WIONS IN THE BRITISH TIN TRADE. (4. (By Mr. Earquhar.) Is the manufacturing of tin plate in Great Britain in the hands of a few or many manufacturers?— A. Very many. Q. Very many manufacturers; they have no large aggregations of capital.'— A. None whatever. 940 HEAKINGS BEFORE THE INDUSTRIAL COMMISSION. Q. In the manufacture of tin plate? — A. Mostly small ones, mostly smaller plants; very many. That has been the natural growth of that industry which we faced here before we established the tariff of 1890. Q. Has there not since the American tariff went into operation been formed an aggregate of capital or of interests in Wales to find markets and establish prices?— A. No, sir, I think not; nothing except in a friendly way maybe, but no attempt at any establishment of prices whatever. There is, however, I should state in fairness, though a very minor matter — there is and always has been a combination among some English manufacturers of large tinned sheets. That combination has always existed, to my knowledge, 25 or 30 years I think; it never seemed to do any harm — always existed and still exists; the consumers got used to it. I do not mean to say that it at any time established high prices, immoderate prices; but there is, it is fair to state, in England, amongst manufacturers of large tinned sheets — a very unimportant industry — a combination as regards prices. ^^'ITNESS IS HAKDLY A COMPETITOR OF THE AMEKIOAN TIN PLATE COMPANY. Q. (By Mr. Faequhae.) Do you think that the creation of great aggregations of capital like the American Tin Plate Company is an advantage to the whole trade? — A. I think we shall have to wait and see how it works out. Q. Await the result? — A. At the present their action has been moderate and business-like throughout, as I have said. They have not attempted at any time to fix any higher price for tin plate and have rather kept under the advancing costs. Q. (By Mr. A. L. Haeeis.) Have tliey any economic advantage over you in the manufacture of tin plate through the immense combination? — A. Well, it is not exactly fair to them or possiblj' to us to make a comparison, because we simply tin on a very large scale. We have connection with a large number of mills and have made the product all the way up to tin plate. Q. (By Mr. Phillips.) Do you employ traveling salesmen in handling your prod- uct? — A. We do employ traveling salesmen, but not necessarily for selling our product. It is for business purposes; and then we are dealers — merchants in kindred goods along the line, and have always been, more or less. Q. Do you employ more now than you did prior to the organization of the Ameri- can Tin Plate Company? — A. We employ exactly the same number. Q. And do you come in competition, or do you generally sell at about the same price that they do?— A. Well, as I said, probably three-fourths, or at least 65 per cent, of the entire consumption of tin plates in the United States is east of the AUe- ghenies. Our own market is therefore more immediately around us, and in that sense we do not exactly come in contact or competition with the American Tin Plate Company, or any more than we formerly did with individual mills whose business is more naturally in the western territ( iry. Also, the American Tin Plate Company, being a very large organization, is desirous of turning out product, and probably would like to make the kinds that entail the least trouble. We, as individual makers, are quite willing to take upon ourselves any trouble if the (■(msumer will pay for it, and, as we make high grades, we do not exaeth- make the same things as the' American Tin Plate Company. When it conies to what I might call the calico end of our business— a small product, comparatively, with us— we do come in competition with the American Tin Plate Company, and our prices are about the same. We can not very well get more, although, in our opinion, our product mav be better, and we can not, on account of cost, sell for any less. SOUECES OK TIN. Q. (By Mr. Phillips.) Where do your supplies come from?— A. From Oceanica entirely— from the producing primary markets, which are largely the Straits Settle- ments, some from Banca, and some little from Australia. Q. Nearly all of tlie American tin is secured from where?— A. There is no Ameri- can tin. Q. You use no American tin?— A. It is all imported, jiiostlv from there. There is Aiueiican tin existing, but ^\'e have never been able to get at 'it in a commercial way. COST OF TIN PLATE AS AFFECTED BY PEICE OF PIG TIN. Q. (By Mr. A. L. Haeeis.) Has the price of tin increased?— A. The price of tin has increased enormously, more so than any of tlie ingredients. We use, we may say, iron or steel and tin. The price of tin was about, as near as I can recollect, 13 or'l4 cents a pound a year ago. Two months ago it was 3-1 cents a pound, and to-day, or yester- THE TIN-PLATE COMBINATION: TAYLOR.. 941 day, it was about 27 or 28 cents a pound. If you consider the enormous advance of an article in a natural way, except by speculation prevailing, you will see how much that has increased the cost of making tin plate. If you take what is known as ean- ner's tin, which we are speaking of, you have about 2"j pounds coating to a box of tin, 14 by 20, and 112 sheets. The cost of that tin plate has increased to that extent by the advance in pig tin; but more than that, in our own individual case, the increase has been enormous to us, because we make bright plates that carry 10 pounds and upward, 14 by 20. "We make rocifing tin, a large part of tin and alloy, composed of one-third or one-half tin. Although the price of lead has not advanced materially, you can easily see how very much higher our cost is where we use very much tin in our product. Now, as I stated, the advance of tin is natural, without control in anv sense whatever. It has simply advanced upon its merits, and the statistics show an increased consumption, due entirely to the establishment of the American industry and the enlargement of our product here, the large increase in our production, and at the same time an improvement in the Welsh output. They have sought, under their adverse circumstances, when tliey lost this market, other markets, and they have gradually been increasing their production, reopening their old mills, so the consump- tion of tin has very much increased. Q. Largely caused by the natural la^^■ of supplj- and demand? — A. Entirely so. Q. (By Mr. Faeciuhar.) Are you aware of what nationalities the men are that control the production of tin? — A. I can not state from knowledge. I think they are English. The Dutch settlements pioduce a good deal of tin from the territory of Banca to Billiton. Of course the Australian and the Straits output are very large, also. No doubt they are \ery largely under English control. ^ KEASOSS FOR FORMATION OF AJIERICAN TIN PLATE COIIPANY — N(.) BUSINESS NECESSITY. (J. (By Mr. Phillips.) Do you think there was any necessity for the formation of the American Tin Plate Company? — A. There \vas no necessity as far as the makers of tin plate were concerned. It was the result of bad management on the part of man}' of the mills, who were confronted with a proposal to sell out. It should be borne in mind that the American industry started out under very favorable condi- tions, and there seemed to be before this change of tariff in 1890 a sort of fascination about the article liy which a good man/outsiders seemed to think they should enter the business; consequently, when the American mills commenced to be formed they were put up on a favorable basis probably, and people attempted to work them who had not a sufficient knowledge of the business to work them right. In my opinion probably 7.5 per cent of the individual nulls had no experience wlratever when they started in the manufacture of tin plate; consequently they suffered in that respect, and it was simply, in my opinion, the lack of management on the part of individual mills that necessitated the formation of the present company. In our own case, we have gone through the whole period, always prosperous without exception, and never following the keen competition that existed amongst the "Western mills. Then, again, if the\' faced these conditions they could have remedied this, if they thought they were in danger of excessive competition amongst themselves, by reducing the production at two periods of the year. They could have reduced their production either in July or in December, when the consumption is at a minimum, and pre- vented the overproduction of stock, and in that respect very largely improved their condition. If the)' had gone on in that way, I think we should have reached a time when they could have had the additional relief of exporting American tin plate. I think that while some of the individual mills were poorly managed, some of them were verv well managed, and I think if the truth were known, a good many have made money in bad times. Others did not; pr(jbably on account of conditions and lack of management, through want of knowledge on the subject, and they could not survive. It was the sur\ival of the fittest. PEHSON.VL SUPERVISION NEEDED FOR MOST EFFICIENT MANAGEMENT. 0. Do you believe a large aggregation of mills, a large number of them a,t different places in the country, can do work under one head as economically as individual owners could operate them, looking directly after their own business instead of em- ploying help? — A. I can only give my opinion, and that is that a reasonable mill, reasonable in capacity, operating in one place, can be certainly managed Ijetter and at a lower cost per unit of production than a series of mills that are scattered. The only saving in a large number of mills is in the smaller executive cost. . But I think that is very much neutralized by want of proper superintendence; and tin plate is 'an article that should be watched very carefully, and requires personal supervision. 942 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. We often feel ourselves as if we ought to have a superintendent to watch our super- intendent;' not that there is any necessity for it, but it is an article that goes through so many processes before it is really boxed up, that it should be watched very care- fully. I do not see how that can be done by visiting superintendents. The Ameri- can Tin Plate Company themselves are business men and conduct this enterprise for business purposes; and they are adopting that principle in dismantling outside mills and concentrating their product. SAVINGS OF CROSS FREIGHTS — NO DISCRIMINATION. Q. (By Mr. A. L. Harris.) Does the large combination get any advantage in freight rates? — A. None whatever. There are no advantages to be obtained in freight rates at all, on account of their size. Oh, no; none whatever. They have an ad- vantage in being able to ship from the nearest mill to the consumer; that is all. Q. (By Mr. Phillips.) There is not a great deal of difference, you consider, by entering others' markets and cross shipping, where they would naturally, when com- bined, ship from the nearest point? — A. Oh, the American Tin Plate Company must save a considerable amount over the practice of the individual mills in that respect. They deliver from their most convenient mill. Q. But they lose, perhaps, you think, in efficiency of management as much or more than they make? — A. I have no right individually to make any reflection on the man- agement. I did not intend that. I merely said that in my opinion central mills could be managed more efficiently than a series of mills, and especially in the tin-plate busi- ness, because tin is an article that requires much care if you want to make it right. (Testimony closed.) 1 See Mr. Griffiths, p. 900. IS^ATIONAL STEEL COMPAI^Y. Washington, D. C, Octoher 17, 1899. TESTIMONY OF MR. WILLIAM E. REIS, President of the Xatioiial Steel Coiiqniny. The commission met at 1.35, Mr. Clarke presiding-. At 1.45 ■Mr. Clarke introduced Mr. William E. Reis, of Chicago, 111., president of the National Steel Company, who, being first duly sworn, testified as follows: Q. (By Mr. Jenks.) Will you be kind enough to give your name and address? — A. W. E. Reis, Chicago. NATION.\L STEEL COMPANY — STOCK BOOKS — TRANSFER AGENTS. Q. You are the president of the National Steel Company? — A. I am. Q. When was this company organized? — A. February, 1899. Q. Under the laws of what State? — A. New Jersey. Q. Can you give us any regulation that you yourselves made with reference to the keeping of the stock books and transfer books, and to the degree of accessibility that should be given them? — A. I can give you a copy of the resolution passed by the stockholders. Q. Will you be kind enough to read it? — A. (Reading:) [Extract from the minutes of the .stockholders' first meeting of the National Steel Company.] "Ordered, (1) That incompliance with the laws of the State of New Jersey, this corporation have and continuously maintain a principal office and place of business- within the State of New Jersey, and have an agent at all times in charge thereof, upon whom process against this corporation may be served, and therein keep the stock books and transfer books for the inspection of all who are authorized to see the same and for the transfer of stock. That the books in which the transfers of stock shall be registered, and the books containing the names, addresses, and number of shares, respectively, of the shareholders, shall be at all times during the usual hours of business open to the examination of every stockholder at said principal ofiice. "That the name of this corporation bg at all times conspicuously displayed at the entrance of its principal office in this State. "And be it further ordered, mitil this resolution be duly rescinded, ' ' (2) That such office and place of business be in and at the office of the New Jersey Registration and Trust Company, No. 525 Main street, East Orange, N. J., and that this company be registered with the said trust company. "(3) That the New Jersey Registration and Trust Company, being by statute authorized to act in New Jersey as the agent of corporations, be, and hereby is, appointed the agent of this corporation in charge of said principal office, and upon whom legal process against this corporation may be served within the State of New Jersey, and also the transfer agent of the stock of this company." Q. Does this New Jersey Registration and Trust Company still remain your New ■Jersey agent? — A. It does. Q. And has this resolution been lived up to strictly with reference to the keeping of the books there continuously? — A. So far as I know, yes. Q. Has the National Steel Company any other transfei- office?— A. We have a reg- istrar in Chicago and one in New York. Q. What is the transfer agent in Chicago; also the one in New York? — A. The Merchants' Loan and Trust Company in Chicago and the Guaranty Trust Company in New York. 943 944 HEARINGS BEFORE THE INDUSTKIA]. COMMISSION. CAPITALIZATION — PKEFERREI) STOCK AT TAR, COMMON AS BONUS. (.1 Will you tell us what the capitalization of the National Steel Company is?— A. Fiftv-uine million dollars. Q. And how it is divitled?— A. Twenty-seven nf preferred and ;>L' of common. tj. Will vou explain to us briefly the general method of ort^anization of the National Steel CoinpanyV— A. I do not know tliat I cum; it cnme to me after it was organized; I was not one of the organizers. Q. You are not one of those who got into it tivst'i— A. I e:\ine into it, but I did not create it. (,^ Were vou one of the original mendst-rs; that is to say, was your plant one of those that went in?— A. We puttlie plantin, but I had |ier,sonally nothing to do with the preliminaries prior to the organization of the eompany. Q. So far as your own plant was roncerneil, you can pi'rhajis tell us the general arrangements that were made with refocnce to your coming in; for exaniiilc, did vou trive an option f)n your jilant for casli? — A. Yes. Q. For a rertain amount. And then how did you understand that the preferred stock was to go? — A. We gave an option in this way; we gavi' an option for cash with the i>iivilege to take all cash, or part cash and |iart slock, or all stock at our option. \Vc exercised the option at tlie conijdetion of the company and took all stock. t^ At wliat rates was the stock taken?— A. We took 1 share of jirclervcd stock for eacli $100 of rash, and with each share of preferred stock we got 1 share of i-oiii- mon; so we got a share each of prel'erred anil common for each $100 of value. (.J. The cash value that was gi\-en was estimated, whcji you agrec'd to sell, on the basis of what that plant would be y orth as jnit into an organization of that kind?— A. Well, wc put it in at the same price wc were offered for it by another company. rodu<-ts are steel billets and slabs, 4-inch and larger billets, small billets, sheet and tin-plate slabs or bars, as we call tficm. Wc do not g(i to the con- sumer with any of onr product at all. Q. To whom do you sell'.' — ,\. The Anieiii'an Tin I'lale (Company and other finish- ers of material who go to the consnmci' with the tinishcd ]>rodnct. We do not sell anything in the finished shape. (^ So far as your material is concerned, have yon solil any tn tin-plate companies besides the .Vmerican? — A. We sell to anybody w ho wants lo buy. Q. Have you sold to anybody since your organization bcsidi's the American Tin I'late Conijiany? — A. A'cs, we have. 1^. Could you menticin one? — .\. We are shiiiping bars to ('inciniiati now. oidO — MINlis — BO \ IS. (^ \\v yon yourselves theownersof themines where yougel yourraw material?— A. Partially. o you own your own shijjs for transporting ore? — A. We own II boats, yes. 1^ Do you own any railroads or any inland transportation? — \. No; wedouotown any railroads; only narrow-gauge local roads around the works. il (]!y Mr. Faruuiiar.) What mines are they? — A. The Cliapin Mining Com- |iany in Iron Mountain, Michigan, and the Winthrop mine in Marqueth^ County, at Islipi'ming. |^ flow long have you bei^n tlu' owners of the Chapin mine? — A. Sixty days- probably ; very recently ; wc have been negotiating for it since last fall a year ago. NATIONAL STEEL COMPANY: REIS. 945 Q. You say you have your own transportation line on the lakes? — A. AVe have 9 boats, which will carry about a million tons of ore; a little short of carrying our own products. STEEL WOKKS AND FURNACES — COST OF FURNACES WORKING CAPITAL. Q- (By ilr. Jenks.) How many plants have you in your company? — A. Six, I believe. It depends altogether on what you call a plant; we have 6 steel works and we have 1.5 furnaces. Q. (By ilr. Jexks.) ^\'here are your steel works? — A, Newcastle, Youngstown, Sharon, ]\Iingo Junction, Bellaire, and C'olmnbus. Q,. What is the average output of one of your moderate-sized plants ? — A. Well, our total output I could give you. We are producing about 5,000 tons of steel per day. Q. AVhat is the output of your largest? — A. About 1,800 tons. Q. Can vou give us an estimate as to the cost of building one with an output of, say, 1,000 tons'?— A. I do not think I could. Q. A general estimate along the line j'ou heard with reference to the tin-plate plants? — A. In the first place, I do not think you could build one in 3 years, any- way. We can not get the material. We are building 3 new blast furnaces; I can give you a rough idea of what that would be. Q. Yes. — A. We used to have a table that 100 tons' production, I think, would cost ?100,000. That was a rough way of getting at it. That would go 3 years ago. That is, .500 tons of pig iron a day would cost §.500,000. Q. That was your estimate?— A. That is just a rough way of getting at it. It is like building a house — the result is always a little more. We are building 3 to-day, and I think every one of them will cost us 3 times that. Q. Where are the added elements of cost in the last 3 years? — A. Increased cost of machinery and structure and labor. Q. Added cost all along the line? — A. All along the line. Q. Can you give an estimate as to the relative amount of running capital that is required in a large steel plant as ciimpared with the cost of the plant itself? — A. Oh, I think it would recjuire at least 50 per cent for the working capital. Q. A\'ith 50 per cent of the value of the plant itself for running capital you would operate it easily? — A. You understand, of course, the nature of the business. The ore has all to l)e brought down during the open season of navigation ; it requires con- siderable money t(.j freight it and store it. THE COURSE OF PRICES. Q. Can yiju give us an account of the general course of prices of your product, we will say, for the last 3 years? — A. I think so, approximately. Q. If you have the ', running until July of next year — in some cases an advance of 15 per cent-, and in others 20 per cent. Q. (By Mr. Kennedy.) Most of your skilled workmen are members of the Amal- gamated Association, are they not?— A. No; I judge we arc about evenly divided on that. Q. In making the scale with the Amalgamated Association, do the unorganized workers in the same department in the different works get the wages that are allowed to the Amalgamated men? — A. Steel works are different from tin-plate and puddling mills. There the rate is uniform. There are no two steel works that pa>' the same rate per ton, owing to local conditions and different productions. Q. The sliding scale of the Amalgamated Association would take those differences into consideration? — A. They give more allowance to a more modern mill than they do to an old mill, if you have increased mechanical appliances and increaseil tonnage. Q. What I want to know is, are the unorganized workers given the beuctit of the arrangement you make with the Amalgamated Association? — A. Relatively, yes; the men not in the Amalgamated Association get relatively the same wages that the Amalgamated men do. (.1 The Amalgamated men keep up, practicall}', the wages for the unorganized men? — A. Practically, yes. NATIONAL STEEL COMPANY: — REIS. 947 ADVAXTAOES OF CONSOLIDATION — CHIEFLY OETWNG MINES. Q. (By Mr. Jenks.) What advantages do you get from the consohdation of these different plants under one management? What are the special advantages that come from consolidation?— A. The ability to strengthen our position and the acquisition of ore property and coal property. Q. You say that is substantially the only advantage?— A . That is the greatest advantage. Q. "i'ou get more capital to handle, so that you can secure ^-our coal and vour ore at much better rates?— A. And we are put in'ljctter condition to compete with our competitors. We are onl>- producers ni about 18 per c^nt of the steel that is made. We have some pretty strong comjietitors, and we had to equip ourselves as vv-ell as we could for that business. . Q. Do you have any oppcjrtunity fi )r making any large saving through specializa- tion of the work in difierent plants, or through freight rates thatcome from shipping from a nearer transportation point? — A. ^\'e avoiil cross freights; that is all. Q. There is a considerable saving there? — A. Yes. Q. Is there any saving that comes in the manufacture itself, the process of manu- facture, that you get through consolidation? — A. I think not. Q. (By ilr. Farquhak. ) As to the acquisition of jour mines in northern Michigan, do you regard it as a p(jsi.ti\-e necessity in your busiiiess lo possess the raw material? — A. Absolutely so; yes. Q. Are you nuicli advantaged in the owning of your own mines there and your own transportation? — A. A\'e tliink so. We have control of our own supply to 'that extent. TARIFF ON BILLETS, BARS, AND SHEETS CUTS NO FIGURE. Q. (By Mr. Jenks.) Will you give us your opinion with reference to the effect of the tariff on the steel industry? — A. \\'ell, we have not seen much effect one way or the other for the last 8 or 10 years. Q. Are you exportc-rs of steel now? — A. No, we never have been. We are making material that has been lai-gely exported, but that was before the National was formed. Q. Would you say, then, that at the present time, so far as your judgment goes, there is no need for a tariff on iron and steel and you see no effect from it at all? — A. Not to us individually. Q. On the industry as a \^hole? — A. There are different branches, and 1 am only speaking for one branch, billets, ))ars, and slieet; but I should say that in our partic- ular branch I do not see that the tariff cuts any ligure one way or the other. Q. There is no need for a tariff on that? — A. I sliould say not. Q. (By M]-. Kennedy.) There is no nei.;d to have a tariff on that portion of your products that enter into the manufacturing (jf tin? — A. Of course we are affected by anything that affects that industry, but for us individually we do not need any tariff. Of course if it should Ije taken off the tin industry we sli' not been known to do it on the other side? — A. Not to my knowl- edge. All of it is made on specifications. RELATIONS BETWEEN N.VTIONAL STEEL, AMERICAN TIN PLATE, AND AMERICAN STEEL HOOP. Q. (By Mr. Jexks. ) What relations exist between the National Steel. Company and the American Tin Plate (lompany?- A. Friendly. There are no official relations existing between us. Q. What are the business conditions l)etweeii the two as regards buying and sell- ing; do you furnish them material to any great extent? — A. Yes. Q. How large a proportion of your product do they take?— A. I judge in the neigh- borhood of between one-fourth and one-fifth. Q. Can you tell how many of the directors in your company are directors in the Tin Plate Company?— A. Indeed, I could not. 948 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. M. (Several of theiii, you tliinkV — A. (Jiute a number of them; they are interwoven with each other. (J. Are any of yonr regular ofliceis also othcerH in the Tin I'late Company? — A. Only as to the executi\e rummittee. Q. Vice-iuesiilents, treasurers, etr.'' — \. The treasurer of the National Kteel Com- pany is also the treasurer of the Tin Plate Comjjany. - do you make separate individual contrai'ts with them as you do with other companies that do not have sim- ilar members or directors? — A. Absolutely so. Companv of a similar nature?— A. Yes. Q. Owing to the fact that you have the same men to a considerable extent, the same stockholders in the different com])anies, your relations are rather more confi- dential than \\ith others? — A. \\'e tioije so; that is the object we have — to get a market for our material. (I. As regards the management of the companies, they are kcjit entirely separate?— A. Absolutely. • Q. You deal with theoi as separate customers? — A. .Vbsulutely. Q. (By Mr. Fakiu'hak.) Are those members ordirecturs the main stockholders in your company; are the\' vi'ry large stockholilers? — A. Theyareall large stockholders, so far as I know. You say the directois ; I do ncjt recall all of them. The members of our executi\'e committee, which consists of 7, are all large .stockholders in the different companies. (l So they are conserving their own interests in being on the directorate? — A. Yes. M.WY MORE STOCKHOLDERS TH.'.X BEFORE Ci >XS( HJD.VTION — WOKK.MA.X STOCKHOLDERS. ^l (By ]\Ir. Jexks.) Can you tell about how many stockholders you have?— A. Well, I saw the list at the last dividend in Septend}ei-; I think about 1,100; between 1,000 and 1,100. Q. How does that number compare, if you lia\e any nreans of knowing at all, with the number of st(jckholders in these different concerns before they were combined?— A. (_)h, w.-U Q. (Interrupting.) Larger or smaller? — A. One hundred to one, probably. ij. Very much larger? — A. Oh, yes; the other corjiorations were close corporations before; they were small in number. O- To your knowledge are there any goodly numbei- of workingmen that took stock in the National Steel Crices runmng thnjugh some months or through a" year?— A. "With skilled labor. You will remember that our skilled labor is all controlled by the annual scale. Q- (By Mr. Kenxeoy.) You said that only about half of them are controlled by tlie Amalgamated?— A. By the Amalgamated, but we gi\e the other mills a scale at the same time. STOCK ox TlfE MARKET — DIVIOEXDS. (l fP.y Mr. F.VRifcnAK.) Haye you any idea how much of your stock is on the New York ]uai ket?— y\. There is just alioiit one-third of the preferred. Q. One-thiid of the prcfi-rreil?— ,\. Yes, that is my recollection, on the 30th of Septendjer. (l How much of the common?— .\. That I O,(l00,000. Q. Between your preferred and your common tliere seems to be a difference of $5,000,000?— A. Yes. Q. As it was issued share by share, wliat became of that .¥5,000,000 in making up your account?— A. I know where it went in the accounts, but where the $5,000,000 went I do not know anything about; that was before my daj-. Q. Have you a geneial idea as to what the ?5, 000,000 was for?— A. Oh, I suppose general expenses; that covers a multitude. Q. If it is a fair question, was there such a thing as promotion in your com- pany? — A. I do not know how >-(]u use tlie term promotion. JIi-. ]\I<]ore was instru- mental in bringing these different interests together. Q. (By ilr. ,/i;n-ks.) \\'as he acting at the instance of tlie different manulavturers that approached him and asked him to see if he could arrange the matter foi- tliem? — A. I could not say; I (hd not ask him. I do not know wliat the rest mav have done. Q. (By Mr. Kennedy.) Was the promoter paid in coumion stock? — A. Indeed, I can not say. No, I was not conversant with the conditions at that time. (,l ^Yell, you know by public rumor what the promoter was paid? — A. The general supposition is that the difference between the preferred and c(]mmon stock is used in the promotion of the scheme. That is the ordinary common behef. Q. The difference in the value of the stock cirwhat?— A. The difference in the issue. Q. Oh, the difference in issue; §5,000,000, then?— A. Yes. (-l What is the jiresent market value of vour common stock? — A. .\bout 50 or 51. Q. That would be S2,500,000,' then?— A. If he sold it. You can not tell what he did with it, if he got it. EAKNIXOS — DIVIDENDS ON CO.MMON. Q. (By Mr. F.veqi'hab. ) Does that If per cent quarterly dividend represent the amount oi your profits? — A. That is, up to this time? Q. Yes. — A. No, it does not; our profits have been in excess of our dividends. Q. Has that extra profit gone int(j betterments or in what form is it? — A. Well, we are making improvements. Q. What is the working capital that you set asiments from the mine have been about 7,000,000. It has l)een through two or thiee hands, and idle at times during the depression. 960 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. y,. How much more do you estimate there is tliere? — A. We have in sight, -with- out going below our leet, about 6,000,000 tons. We know, as near as we can know anytliing under ground, that it is there. Q. How much do you estiniate there is in the (jtlier?— .V. Well, it is so much that we never estimated it. Q. What do you considei- the money value of these mineral lauds? — A. That would depend on condition,-^ in the ore )insiness. They are, perhaj>s, to-day worth 200 per cent more than the>- were a year ago to-day. Q. Have you a supply for your works for the next li5 )'eai-K'.' — A. Well, I should hate to even venture an opinion on that. Q. Which lio you considei- the more valuable, the material i)r()perties that you own ' are both of them very valuable. The opportunity to do liusiness a year ag" \\ as not worth as much as it is now. FAILUEKS IN IR(JX .IIIMNG. Q- (By 3Ir. FATirjiHAR.) Is it not a fact that there have been a great many failures in the iron mines tliere, in northern ilichigan and jNIinncsota? — A. That is the rule and not the exception. Q. There have been some of the largest failures, have there not, in this whole country up in that section? — A. Yes; you go back to tlie Gogebic, the first develop- ment there, and it almost bankrupted the cduntrv. Q. And many of those mines for years have been run at a loss'.' — A. Yes. < ,». (Bv Mr. Cr.iRKB. ) Whv was that; do nou know? — A. Whv they were run at a loss? (-1- Yes. — A. Well, the exti'eme competition for aliuiited amountof business doing, low prices prevailing, $9 Bessemer pig iron from the two valleys, .$10 in Pittsburg. Q. (By Sir. Farijuhar.) "Was there not also an important development of new n lines there? — A. The development of the Mesaba region c(jming into competition with the Gogebic and the Ishpeming and Marquette r(.'gi( ms, the Mesaba proposition being simply a steam-shovel proposition in its early history, putting ore on the cars for 10 cents a ton. Q. (By Mr. Clabke.) \\'hen those properties failed, was that at the time when we were importing a great deal of iron and st(-el into this country from abroad? — A. No. Q. ^\'hen did they fail? — A. During the depression and low prices. Q. Can you name the year? — A. From 1802; ISO;!, 1X94, 18!)5; it has been contin- uous right along since 1SH2. Q. During the general dejjression of industry in this country, then? — A. Yes. STRUCTURAL STEEL. Q. Has there been a ver\ large increase in the demand for structural iron and steel in this country within the last 2 years? — A. \'erv largi". Q. Have wooden bridges jiivtty generally given place to steel bridges? — A. Yes. (l Is that true in regard to frames cf jiuildiiigs in cities'.' — A. The larger office buildings, yes. Q. I)(jes not that 'Iciiiand greatly increase the business of the various steel com- panies'.' — A. That branch of the industry takes a great ileal of our tonnage. Q. And to that class of business is iar;_;ely due the advance in the price of the product'.' — A. Unquestionably so. u. We probably have 1,800 more men to-day than we had in March. Q. About how many men arc you employing? — A. About 8,000 at the steel works; that does not go into the ore country or the coal ccumtry. Q. The pay roll has increased more in proportion than the number of men taken on?— A. Yes. IDLE FURNACES — XONB IDLE NOW. Q. (Mr. Kennedy.) I should like to ask if a large number of pig-iron furnaces have not closed down in different parts of Penn.syh-ania in the last 5 or 6 years? — A. Quite a number; yes. y. Quite a number in eastern Pennsylvania, particularly? — A. They have suffered the most. There have been quite a number in western Pennsylvania in the Shenango Valley; quite a number of what we call antiquated plants — not modern — unable to live through the prices prevailing in 1896, 1897, and 1898. They have all started up now. Q. All started up now, you say? — A. As far as I know. I do not know of an idle stack east or west. Q. Have not some of them moved away from the localities where they were oper- ated 5 or 6 years ago? — A. "When a furnace closes down there is not much to move. Q. The business is moved? — A. They can revive it again, such as it is; but they can only live through these high prices. Q. Did the combinations have anything to do with the closing? — A. Nothing what- ever. There is no combination in pig iron. Q. The combination in your trade would not have any influence on them? — A. None whatever. AVe are buyers of pig iron largely. 18 PEE cent of BESSEMER ,STEEL COMPETITORS. Q. (By Mr. Farquhar.) How many great combinations, great corporations, are there in your line of Ijusiness in this countr}-? — A. The Carnegie Steel Company, the Federal Steel Company, the Pennsylvania Steel Company, the Maryland, Jones & Laughlins Steel Company, Wheeling Steel and Iron Company, Loraine Steel Com- pany. These are the principal large ones. AVe are not a trust as you generally hear the word used. Q. I want to know just the line of competition in your business. — A. As I remarked, we produce probably 18 per cent of the Bessemer steel. We are not a monopoly as I understand the term. PUDDLING A THINCt OP THE PAST IN PENNSYLVANIA SOUTHERN WAGES. Q. (By ^Ir. Kennedy.) Are a number of men foririerly in the iron and steel indus- try in Pennsylvania now in the Alabama fields'?— A. Quite a number of iron workers, puddlers, have gone south. Puddling is practically a thing of the past in Pennsyl- vania. Q. Can you say what the wages are in the Alabama field as compared with that part of the country? — A. The Amalgamated Association controls the Alabama mills as well as the Pennsylvania mills. Q. You are not disadvantaged by cheap labor in that industry in the S(3uth?— A. Not in the mills; no. AMERICAZNT STEEL HOOP COMPA:NrY. Washington, D. C, October 17, 1S99. TESTIMONY OE MR. CHARLES S. GUTHRIE, Pi-e.siili'iit of the American Steel Hoop Coiiipuni/. The commission met on Tuesday, October 17, 1899, Senator Mallory presiding; Mr. Charles S. Guthrie appeared, and after being duly sworn, testified as foll(jws: Q. (By ilr. Jenks.) You mm- state your full name.— A. Charles S, Guthrie Q. Eesidence?— A. Pittsburg, Pa., and New York. AMERICAN STEEL HOOP COMPANY ORGANIZATION — CAPITALIZATION. Q. You are president of the American Steel Hoop Company?— A. I am. Q. In what State is this company organized? — A. New Jersey. Q. Will you explain to us what" provisions, if any, have been made by the com- pany with reference to keeping its registration office?— A. The questions 'asked Mr. Eeis would practically co^-er the same as regards our companv. The rule is practically the same with us. y. What is the amount of your capital stock?— A. .s 14,000,000 preferred and 819,000,000 common. Q. Is the general plan of your organization substantially that of the American Tin Plate Company and the 'National Steel Company ?— A. Substantially the same in every respect. Q. (By Mr. Fahquhar.) The authorized capital is how much? — A. $.3P>, 000,000. PRODl'CTS. Q. (By Mr, Jenks.) Will you explain to us the nature of your i^roduct? How does it differ from that of the National Stei-l Company? — A. We manufacture everything in the line of light iron and steel hoops, bands, cotton ties, bars, rounds, half-rounds — everything in that line that goes into the manufacture of hinges and general hard- ware, barrels, etc. — all rolled on very high speed rolls. We get all the raw material from the large producers, like the National Steel Comi.any, vritli the exception of the little open hearth we make ouiselves. SAVINGS OF CON.SOLIDATION. Q. Can you tell us what especial advantages come in your line of business from having a. large organization and the combination of a number of ilifferent plants instead of individual plants? — A. There are so man}^ I can hardly give them all. In the first place, we have very great advantages in manufac.^turing. We make in the neighborhood of 85 to 90 different sizes, which necessitates frecjuent changes of rolls. If we give a mill 1,000 tons of one size, there is an economy of $1 to I1..50 aton. We can not tell the exact figures, but we do know the saving is very great along that line. Aside from that, there is great economy in having all the management in one office; the economy goes through every department and every mill from one end to the other. Then we have the benefit of the good work of one mill to compare with that of another. If one mill makes 12-inch stuff, 10 or 9-iiich stuff, different sizes, and gets out 60 tons and another 40, we can say to the < )ne that got out 40, ' ' What is the trouble, this other mill gets out 60 V" We have an absolute check on the tonnage from the beginning to the end on all the mills, and in that way we think we have accomplished a great deal of saving. In another direction we have savings in freight by preventing shipments from crossing each other. We ship from the mill nearest the consumer. For instance, 953 954 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. we ship from Youngstown west to Cincinnati; from Pittsburg and the Eastern mills we ship east or south. We gain great advantages from this consolidation whicH we can not tell until the end of the year. We are figuring this thing out, and at the end of the 3'ear shall know absolutely what each ton costs to make and what the sav- ings are relatively to the other plants. We have more or less of those data. Q. >\'hat is the date of the orLcanization? — A. The 17th of April. Q. It has often been suggested that from a combination of this kind there would be disadvantages, because, it is said, profits are secure, and the different superin- tendents would liecome careless and not do their «ork sn efficiently and thoroughly as if acting S(5lely upon their own responsibility? — A. I do not think that is so at all. With our company I am sure it is not so. We aim in e\'ery ttepartment to get active young men. Their record is ci>m]iaied with that of the other men, and it is really a merit system. And the man whose mill does tlie best work will be paid and pro- moted accordingly. PLANTS THE OLDER MEN DROP OUT. Q. How many plants have you? — A. Nine. Q. (By Mr. Farquhar.) Where? — A. Union Iron and Steel Company, at Youngs- town. They have mills at (jirard and Warren as well as Youngstown. The Kim- berly Company mills, at Sharon and Greenville, Pa. ; J. Painter Sons & Co. mills, at Pittsburg; William Clark Sons & I'o., at Pittsburg; Jlonessen Steel Company, Monessen, Pa.; Lindsay & McCutcheon, Allegheny; Portage Iron Coilipany, Dun- cansville, Pa.; Pomeroy Iron and Steel Company, at Pomeroy, Ohio; the Isabella Furnace Company, in Pennsylvania. And we have coke works in Blair County which belong to the furnace property. Q. These are different companies that came ti )gcther as your organization? — A. Yes. Q. (By Sir. .Jenks.) Have you kept in tlie different establishments substantially the same men as superintendents? — A. Substantially so. In the organization of this company a great many of the older men dropped out, and we retained the young men familiar with the business and tried to pick out the talent in the companies. MISCELLANEOUS EXPENSES GREATLY LESSENED. Q. In order to check up these establishments one with the other you have frequent reports? — A. Every day; the tonnage from each mill. AVe are working on a cost system, which I hope will be as complete as can possibly be had to check the ton- nage of each mill. In July or August we kept a very close account of the cost per ton, distributed over our product, of our fixed charges; that is, oflScers' salaries, traveling expenses of agents selling — everything outside of labor; office rents, every- thing of that kind; and we got it down to 40 cents a ton. The selling charges alone of any company, as far as I can get it, have never bten less than 50 cents, and usually they figure $1 to sell material. Q. Before the organization? — A. Yes; and now we have our charges down to 40 cents a ton, based on 70,000 tons a month. That includes everything outside of dividends, of course. Q. Since your company was organized have you shut down any plants?— A. None; we are running everything full. THE COURSE OP PRICES. Q. What has been the course of prices in ^'our product? — A. They have advanced very materially; advanced gradual I y with the prices of raw material. When the company was organized we were getting SI. 40 base. Q. AVhat do you mean by l)iise?— A. That was the base price for certain sizes. <.l ^Vhat size do you take for liasc?— A. It depends on what you are making. It varies for bar iron and steel and everything of that kind. I could not give you that without the figures; that is the l)asisof all prices. Above that we have what we call extras; tliat is, for small sizes. We run into wire gauge— about 20 gauge. Of coui-se we get higher prices for rolling \ crv- fight material. It is rolled out into long strips, and we have to get more for it. We have a regular card for extras. When the com- pany was oi'ganized, steel was in the neighliorhood of *18 and ¥19; you have heard what the gentlenii.^n say t)ie price is to-day. It varies anywlu're from $34 to S38. Our sellhig price to-day is $2.15 for iron, and :?1.40 was the price at the organization of the cnmj-iany. Our price to-day for hoops or bands is |)2. 50; that is, $50 a ton. The price of raw material is '$'M to $38, so you see we have not advanced our price relatively as high as raw material. WAGES. Q. (By Mr. FAR(irnAR.) What has been the course of wages?— A. They have advanced all along the line in every department from 15 to 25 per cent. AMERICAN STKEL HOOP COMPANY: GUTHRIE. 955 Q. Are yon working mostly nnion men? — A. Abont one-half. Q. You make with your men a regular annual agreement? — A. A regular amiual agreement. ^ About half of our men belong to the Amalgamated Association. The Pittsburg mills are nonunion mills. We pay them prai'tically the same wages as the Amalgamated men. We make individual contracts with these men. It has been so for a number of years and before the organization. The men are satisfied. Q. (By Mr. Kennedy.) Do the members of the Amalgamated Association very largely control the fixing of their wages in your mills?— A. It is a matter of negotia- tion every year. We get together on the liest basis we can. For instance, the pud- dled iron, bar iron, and that sort of thing is based on the sale card. As the selling price advances, the price of labor advances. It is figured out on the tonnage and the average selling price of our product. If vve get an advance, the men get an advance. It is the same as the Tin Plate Company. Q. Do you have a committee of conference? — A.' We meet the Amalgamatcy exphiinini^' the circumstances yon are ]ilaeed in you get a special rale fi'om the N.Mtional SIcel ('oiiijiany? — A. Yes, and 1 think individual concerns can do ,-d. They have sjolten this from the National. They want tonnage. They want to run their mills full. Their idea is to put out a big tonnage and manufaeture at the lowest cost i)rice. (l. Piy iiaving the same directoiate you ha\'e morefreedom? — .\. Yes, though our relationship with C'arnegie is very close, and frei-juently rte buy a great deal of steel from Carnegie. nOMK M.VUKICT. il. ( r.y Mr. ('i,.\RKE.) As to the economy in production, is there not a greal advan- tage in having an assured home market? — ,\. Oh, yi's; no doubt aboni it. tj. (Hy Mr. F.Miiicn.VR.) Unless you control the home market you could not com- pete in foreign markets? — A. I think not; we should have a hard time of it; our home market is the best of all, and always will be. eCOMOTlON. <.^ (Bv !Mr. K KNNnnv.) Who promoted this combinalion of which you are piesi- dent? — A. It was handled by Judge Moore. Q. Do you know how .Judge Moore was compensateil for this work? — A. I presume in the same way as he was compensated in other cases. (.1 Ki\i' million dollars ilivided between eonnnon and prelVneil stock? — A. 1 do not know that Judge Moore got S;,-., 000, 000. Q. You say you ]iiesume as in olher eases. Do you know in what way that was? — A. 1 do not. Mannfaclnrers, as a ruk', r.'cognizeil the point and Judge ^loore has not had lo go to them; they have come to him; he has iiad a haiipy faculty of organ- izing these companies .so th;il the iiublie lielieve in them. <). You do not have to go to the public, they come to you? — A. It has been so all along the line. TIN PLATE Al^D STEEJ. COMPANIES. "Washington, D. C, Otinhir 17, 1899. TESTIMONY OF MR. WILLIAM H. MOOKE. The commission met on Tuesday, October 17, 1899, INlr. Clarke presiding. Mr. William H. ^loore appeared at 3.30 p. m., and, being duly sworn, testified as follows: Q. (By Mr. Jenks.) Will you give your name and addrijss? — A. William H. Moore, Chicago, 111. SEVERAL CORPORATIONS ORGANIZED BY THE WITNESS. Q. You have been active, I understand, at different times in bringing together into one organization some of these different lines of business — acting as a promoter? — A. I have at different times furnished capital for a number of organizations. Q. Were you the promoter of these three— tlie American Tin Plate Company, the National Steel Company, and the American Steel Hoop Company? — A. I organized them; yes. Q. Did you also organize somewhat earlier the Diamond ilatch Company and the National Biscuit Company? — \. I did. Q. About what time was the Diamond ilateh C(impany organized? — A. I could not state the exact year ; several years ago. The assets of the Diamond ^latch Comjiany in Connecticut were purchased and afterwards transferred to the Diamond ilatcli Com- pany of Illinois. Q. Can you tell about what time that was — within a year or two? — A. At least 8 years ago. Q. With reference to the National Biscuit C^jiupany, when was that company organ- ized? — A. Just before the l)reaking out of the war — the Spanish war; I can not give you the exact time. Q. Will you explain to us the method employed by you in organizing the National Biscuit Company? — A. The assets of the Natio3ial Bistaiit Company were purchased at an agreed price in cash; not the assets of the National Biscuit Company, but the assets of several biscuit companies — the New York Biscuit Company and t\\o or three other companies. They were all large organizations. They were purchased for cash and put together under one organization. Q. Will you explain a little more in detail the way in which they were jxit together in one organization? — A. It is comparatively a simple matter and yet a difficult thing to do. At that particular time these modern organizatii.ms — there were very few of them, and I'apitalists did not understand them, and, therefore, it was very difficult — next to an impossibility — to get this inganization thn mgh. That organi- zation went through successfully, and possibly it has been eiisier for me to organize these other companies later on accumit of the organization of that particular com- pany. GENESIS OF THE AMERIC.VN TIN PLATE CO.MP.VNY. Q. Was the general method followed in the organization of that company sub- stantially the same as that followed in the organization of these later ones?— A. Practically the same as you have heard here to-ilay. In other words— I do not wish to volunteer anj'thing. ■ ^ , Q. I should be vervglad if you would state it in your own way; I w;asgomgto ask you to do so —A. Practically " the same thing applies to the American Tin Plate Company as to the other organizations. If I recall, there were 35 or 40 different Q '^in the American Tin Plate Companv?— A. Large and small; some owned by individuals and some bv corporations, all or many of them having floating indebted- ness some of them mortgages, and practically all of them a number of stockholders 83A 62 " 959 960 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and various inlci-esls to ileal «ith. I had organized the National Biscuit Company — or while I was organizing- the National ]!is<'uit Company a committee of manufac- turers called on me in New Y^rk and requested me \ei'y urgently t(j take hold of the organization. At that time (they stated afterwards) they thought I was not ■\ery enthusiastic about it. I ^\'as \ery busy, and I kiiefl- it was a very difBoult thing to d(]. The result v.-as, it was delayed 2 or o months. As I learned, they had meet- ings at Pittsburg and possibly other places, and they came to me again. So it ran over a period of a year oi' a year and a half from the time they first called on me until the final organization of the company. In a nutshell, I found it necessary to deal with each one of the manufacturers individually and to buy their property on a cash basis. I found it \^'as going to be necessary to have a very large amount of money, not only for working lapital, but also to pay each individual manufacturer, because they did not know me; they did not know much of the organization. They were afraid they ^^"ould get iirto some company where they would be much worse off than before. I finally pjepared myself with the proper amount of capital to pay them in cash and also to furnish the working capital for expenses. Then I organized the comi>any, and I .said to the manufacturers, "Here are so many plants — .3.) or 40 plants. I propose to pay you cash f( ir all these plants if you want it, each or any one of them, and I propose to jiut in so much working capital." Q. How much did you put into the Tin Plate Company? — A. I think it has been stated here. Q. Five millions? — A. Four and a half or five. You have it already stated in the testimony. BOUGHT AND OIVNEI) THE PLANTS PEESONALLY. That amount of money I furnished. In other words, I practically bought and owned the plants persijnally, and the manufacturers did not compensate me for organizing the company. In other words, I was the lawyer and the banker as well. I ohtaineil money from many different sources. I borrowed large amounts of money myself in order t(.) carry it through, and, as stated, there was no prospectus issued. I did not think it the proper thing to is,sue a prospi'ctus, but it was stated in the sub- scription j)aper, mentioning the number of plants: 'MVhereas it is proposed by asyn- dicate to organize a company known as the American Tin Plate Company, with a certain nuinber of plants" — mentioning the names of the plants — "and' with so much capital, and for that amount of capital the syndicate shall receive so much stock, which is all preferred stock" — you have heard' it here — "and also all the com- mon stock." So it went together in one lump sum. There was an extra amount of common stock over preferred stock. You gentlemen know that it is necessary to pay t-omiiiissions, and the exjienses run up very largely, and sometimes you are in danger of falling down. You will find on investigation that hundreds of organizations have fallen down in the last few months. COST OF PEOMOTIOX AND OR(l ANIZATION. Q. If I understand the plan with referem-e to the American Tin Plate Company, it was this; It \\ as stated here that th(.'ie were fl46,000,000 (.>f capital stock issued alto- gether, ftl8,000,000 of prefei red and $28,(100,(11)0 of common, in payment for all these plants and a certain amount of cash, and there \\-ere $10,000,0(30 extra left. Do I under-tand this extra .slO, 000,000 would be considered the cost of promoting the organization?' — A. The cost of promotion and organization. I have in mind a case where it was necessary to give a^vay all the diiimion stock and a good deal more to get it through. In other Avords, in order to organize a company of this kind you must prepare in advance for an amount of money sufficient to carrv it thi'ough. The tin-jilate men wav anxious to have this ci impany' organized. If I handled it I wanted it to go through; I craild not afford to have it fail. Therefore I had to have sutficient eom|iensation to lants. Q. What would have happened if at the last moment all these manufacturers had insii^ted on cash instead of stock for their plants? — A. They would have gotten it. Q. The cash was there for tlieui? — A. It would have been there. Of course it all has to l)e done simultaneously-. The capitalist does not want to put in his money unless he knows the plant is going in, and the capitalist relies on me to see that it is going thriiugh right. Q. (By Mr. Jenks.) There was a general understanding among the manufacturers that went into the American Tin Plate organization that the cost of tlie plants plus the cash capital furnished amounted to substantially |i3G,000, 000? — A. I do not know about tliat. They wi'ie talking originally about compensating nre with a certain amount of stdck, but I cnuld not handle it "that Avay. I had to buy the properties and own them, and handle it as I saw fit. When I g(jt the c(jmpany organized, I put the l)est talent in the tin-plate business into the company. And on that account it is worth a, great deal nmre money, and if you were to take out the talent — in other words, put it tins way: I believe tliat the talent and the good will of the tin-plate business — the trade — is "^^•orth as much as the plants tlieiuselves. In other words, in other lines of business I have in nund the good will is worth several times as much as tile assets — one notable one, the Lipton C'onipan\', wirere £700,000 of assets are selling on the basis of £.5,000,000. Q. In purchasing these plants from the manufacturers A. (Interrupting.) At least let me correct that; I was so told by an English gentleman but ariuw days ago; he said he had to do with it. l.^ In buying these plants from the different manufacturers yon took all of the options as cash options? — A. Yes. < j. So that the value that the manufacturer put on that plaid, if you agreed with him, included the value of the plant itself, as it stood; included the good will that went with tlie business, and included, I suppose, any contracts that he had? — A. Yes; there wei'c certain contracts that he had, and then each manufacturer was sit- uated differt'ntly. S( mie had real estate in lai'gc cities, and there was no rule of three by which you could go. You had to lie governed by circumstances. Q. But then the option, the cash ojition, really included everything? — A. Really inchided everything; there may l)e some exce]>tions, that a manufacturer wanted some stock and put it in himself, in the way of stock, in t'ase the company was oi'ganized. (^ The general statement that has been made heiv to-day, as I understand it, 2 or :! times, is that tlie 18 million of preferred .-^tock and 18 million of common stock i-epresented substantially — tliat is, tlie IS million of preferred .stock represented sulistantially in round nund^ers — the values of the plants, tlie amount paid for the plants. Do you agree with that? — A. I can not say; it may not be exactly. (I. I did not say exactly; I say substantially. — A. I would not even "go to that extent, substantially. That I do not know. 1 simply know that I owne() ilays, 40 or 50 or 60 points lietter. SEI.KCTEIl THE OFFICERS. He knew before — of course he did not know exactly, Imt he knew toward Iheclose that I'crtain ]ieople would lie in the management; I studiously had to a\'oid that, be- cause each nianufacdirer wanted to be the )iresi(leii( of the ciimpany — not every one of them, but (jiiite a number of them — and viee-iiresident, or in the executive cora- mittee; that all had to be kept quiet until toward the close. Tlien they discovered that I liad selected the very best talent in the liii-plate business. <^ You yourself selected the first board of directors'.' — \. I did arbitrarily. Iliad to do it for the protection of the capitalist as well as the manufacturer. il. When it came to the payment for these plants, did you (|uite generally givethe nianufactureis the opportunity of taking, instead of cash," 1 share of preferred and 1 share of common? — A. That was the general rule. TIN PLATE AND STEEL COMPANIES: MOOEE. 963 ACTUAL AND REPUTED CONNECTION WITH OTHER COMPANIES. Q. Have you organized other companies besides these 5 that have been mentioned, the Tin Plate, National Steel, and others? — A. The Union Bag and Paper t!ompany. Q. Any others? — A. I have had applications to organize hundreds of others, from the marshes of Maine to the Pacific coast. Q. These are the only ones that you have carried through? — A. These are the only ones that I have carried through. Q. Is the plan of the organization of the Union Bag and Paper Company substan- tially the same as these others? — A. Yes; practically the same. Q. Is your plan of promoting them the same? — A. Yes. Q. In any one of these last cases have you called in banks and bankers to under- vi'rite the stock? — A. There has been no underwriting, what is technically known as underwriting, in any of these. Bankers and capitalists all over the country, after it was known I had made a success of this organization, applied by wire, letter, and telegram to subscribe for the capital stock. Q. If they have done so, they have subscribed for capital stock the same as any private individual would have done? — A. Yes ; I can not say that bankers and brokers have not been allowed commissions in some instances. I can not say about that. Q. (By Mr. Kennedy.) Have you had anything to do with the bicycle combina- tion? — A. I did not. Q. I understood j'ou had, that is the reason I ask. — A. I have been accused of being connected with quite a number of properties that I have not been. NOT overcapitalized, FOR SlOO PREFERRED + SlOO COMMON SELLS FOR MORE THAN 8100. Q. (By Mr. Farquhah. ) There is a public impression that these companies are capi- talized far l)eyond their worth; a]iy of the companies you have mentioned to-day. — A. That is erroneous, from the fact that in the companies that I have mentioned — take the two stocks together — e\erybody knows what they are getting when they get common stock; they know they are not getting anything tliat regreseiits^ assets. Take the two stocks together, and they have always sold — there might lie deijressed and panicky times, or something of that kind — they liave always sold at a very large premium. That is why they stand so well with the liankcrs, trust companies and societies, and private individuals, that are pretty rapidly absorbing the preferred stocks of these companies. Q. "When you were organizing these companies did any of the parties to the organ- ization know the amount to be set aside for you as promoter? — A. There was no amount set aside for me as promoter. That question is frequently asked, "What do you charge to put the,«e organizations together?" My reply was, "I will not charge you anything; I will buy your properties and formulate a plan, and if you do not want to go into the new plan you can take cash. That is the only way I can do, and I must organize them on the basis that you are a manufacturer, and that you believe in the organization, assuming that you have the right management, and the capital- ists rely upon me to put in the right managers. Q. Then, practically, yi lU as founder or promoter made your own margin? — A. I made my own margin. I owned the properties, and I made my own ])r(jfit in my own way, which apparently up to the present time has been satisfactory to every- body. It is a very difficult thing to organize these companies. It is a very difficult thing to get capital to go into these companies, and the public is discriminating between the good and the bad. It would l^e impussiljle to put anything no^- to the public which was not A No. 1, first class. The public know it right away. Q. Are there organizations of this character, organized b)' other parties, tliat are nothing but stock-jobbing concerns? — A. That I can not say. Q. I mean from your general knowledge?— A. I should not like tntalk about any- body else's business. Q. Without naming anvone, have you any knowledge that there are really organ- izations of this character that are nothing but stock-jol)bing concerns?— A. I have not any personal knowledge; 1 merely know of rumor, newspa)ier talk, the same as you do, exactly, and no other way. REASON FOR ORGANIZING IN NEW .TEKSEY — NEW JERSEY IS THE BEST PLACE. Q. Is there any particular reason why all of your companies should be organized in New Jersey? — A. I think there is. Q. '\\'ill you state them, if you please?— A. Yes; for the New Jersey law is vei-y much Ijetter for the organization of these e(jmpanies, very much Ijetter. 964 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. WE SHOULD COPY THE ENGLISH LAW. Nearly all of these laws of the different States contain some objectionable feature, ^ly idea is that by and by legislation in this country will be practically the same as in' England. Their la\v.s were very severe a long time ago in England against ?ny large comliination or corporation. They flere all repealed, and now you can organ- ize a ciirporation and do almost anything which is legitimate, and the securities of the industrial corporations are selling on the London Exchange, London market, on a liasis of 3 or 4 i)er cent. Capitubsts have said to me frequently in this country, "We do not kn( .w ^\here we are going to put our money. We only get 21 or 3 per cent on a bond, whereas these preferred stocks of the better organized companies, where they do not owe anything, we get on a basis of 7 per cent, and we do not know why it doesn't stand as well as a l.iond." Some of the most (-(jnsei'vative men of this country are arguing that way, and there are some men and some women of minor means, whose incomes are small, that naturally are enabled to have a larger income by being able to buy preferred stock in these companies. il. But when you draw a cmnparison lietween English law and American do you not take into account that you have only one kingihjm to deal with there and one lawmaking power and one supervision, whereas you have all the corporation laws of 45 States to deal with, with no national conti-iil? — A. We have 45 States, but we only incorporate under the laws of one State, and we have a right to sell goods in any State of the L^nion. EACH STATE SHOULD PROTECT ITS OWN COEPOEATIONS. Q. You spoke as if the law of New Jersey was more liberal than that of any other State of the Union for these organizations. Is it fair that the State of New Jersey should give an incorporation with more liberal features and possibly less safeguards than tlie State of Illinois, and that New Jersey could ilo Illinois business? — A. I think not; I think the Illinois law, until recently, the past 3 or 4 years, has been very similar for organization. Q. Well, the State of New York? — A. I do not know very much about the State of New A'ork. All companies look more or less to what the taxation will be, whether it is reasonable or unreasonable. I do not think it is fair for different States to tax these companies and drive them out of the State, and drive them into the State of New Jei-sey. I think the State is working against its own interests. • i. But is not there such a thing in law and justice as a comity between States, so tliat one State ought not to permit an unjustly formed corporation, or one with greater jiowers and more powers to issue stock and sell stock than it can have under its own Ui«-s? Is it not a right that a State ought to have, the protection of its own corporations? — A. I think each State ought to protect its own corporations. I think they will do so rarire and ni(.ire as they understand these organizations and the situa- tion they are in; the same as railroads. NEED OF CORPORATE OKIJAXIZATIOX. My idea is that if it were possil)le to dissolve all the uidustrial organizations we shoulil have the greatest panic this country has ever known. There is the strongest kind of a demand all o\cr the country, in almost every line of business, to organize, and the troul)le is they do not know how. It takes time; it takes education; and I think, incidentally, this connnission is doing the right kind of work; it educates the people and they will understand it better. Q. Do you see any difficulty in the future, the same as o\'(Tcame a great many of the tjUglisli companies under the limited co|iartnersbips or incorporations of vears ago, that may come out of the issuing of sto'ck under the New Jerse\' law that is not covered by any value in the assets or the business?— A. I do not sec any difiiculty; I think the New Jersc)' law is a fair law. I think many provisions of (lie New Jersey law will be adopted by legislatures in other States.' The trouble is thev do not nndeistand the New Jersey law. <,^ Is there any more liberty in the laws of West Virginia than in the laws of New Jersey? — A. I think there is; yes. 1^. Anil «herc you iiave more lilierty you have less safeguards? — .\. A^es; perhaps it l)i'Con]es fashionable to g(j to New Jersey to organize, and there is a lar^e amount of capital, us is well known, in New York, and the New York capitahsts like to have companies organized under the laws of New Jersey. Ordinarily, being a Western man, I would rather lia\c an oiganization in the State of Illinois; liut there has been a good (b.'al of pci-sccution of cor])orations in Illinois, which makes it vmpleasant at TIN PLATE AND STEEL COMPANIES: MOORE. 965 times. I do not think there is as much there now. My experience is that the labor- ing man in all corporations I know anything about favor them; I mean intelligent laboring men. AVe can afford to pay them larger wages. As an illustration, this tin- plate lousiness. If it had run along the May it was, as you heard in the testimony of JMr. Reid, several of these tin-plate companies would have gone into bankruptcy. I know, because I paid them the money to clean up their indelrtedness. A X.ITIOX.VL COEPOR.iTION LAW NOT DESIRABLE. Q. Do you think it \vould be an advantage to have a national law for incorporations which wonld give su])ervisi( in over all the States?— ,V. I think not. I think this is all going to regulate itself; I think it «dll legislate itself— the law of supply and demand. There can not be a monopoly in this country. COXSOLIDATIOX TENDS TO REDUCE PRICES. Q. You do not think that this large capitalized association of .50 millions can arbi- trarily make prices for the consumer?— A. I think not. I think the tendency is toward very much lower prices. In fact, corporations that I know of that have been running for a long time — for instance, the Diannjnd jSFatch Company; matches are sold at constantly reduced prices each year. Of course, the company "could not do it in the first place, because the plants were not in proper shape and proper condition. They are getting in new machinery and improving their plant, comparing the cost of one factory with the cost of another, and in that way they have reduced the ci ist of production; and in that way the prices have been reduced to the consumer. It has got to he so with all of these companies; the companies can not live unless they do business on that basis. All of these companies have got to put their plants in proper shape to meet the severest kind of competition, and if they can not get a fair, reason- able price for their product they can not afford to pay a fair price for labor. IF OTHER STATES MADE LAWS AS LIBERAL, WOULD NEW .lERSEY CORPORATIONS GO TO THEM? Q. (By I\Ir. Kennedy.) You say that you think the New Jersey law is verjr liberal, and that the other States will follow in the wake of New Jersey in this matter? — A. I think the New Jersey law is not only liberal, but fair. Q. You think that the other States will follow, eventually? — A. Adi ipt many of its provisions. (J. Assuming that nearh- all the industries have combined and have lieen incor- porated under the laws of the Slate of New Jci'sey, then other States model their legislation upon this New Jersey law. ^^'hat would be the effect; \vould those i-or- porations give up their organization in the State of New Jersey and go to other States? — A. That would Ije a difficult question to answer; it is frequently done, but I can not answer that. Q. "What do you believe would be the result? — A. You mean if all tlie business in the country organized under the la^s of Ne^v Jerse}'? Q. Yes; it is rapidly being organized under the laws of these three States — New Jersey, Delaware, and West Virginia. Now, it is probable that within a very short time, within a few years if it goes on as it has been going on, all indn.-tries will be organ- ized and incorporated under the laws of one of these States. Then, if the other States, Illinois, for instance, should enact legislation the same as those States, would Illinois be apt to get any of these corporations? — A. I think before that is done the other States will change their laws. I think the State of Illinois is inclined to be a little more liberal now; for instance, the gas companies weie attacked seriously for a few years, and finally the legislature jiassed a law legalizing the incor])oration of this gas company, so that a person investing in the stock should be sure he had something safe and secure. Q. Is it your idea, if there were a dozen different States in the Union «ith laws as favorable as these of New Jersey are, that the American Tin Plate Com]iany and the Steel Hoop Company would continue as Nev,- .Tersey corporations ?— A . Proba- bly in the case of these particular companies, >-es; because it is necessai-y for them to get together and consult more frequently, and as they have already been incorpo- rated under these laws they probably would not be changed, those particular com- panies. It might be diffeient with reference to other companies. That is, as long as the State of New Jersey treats the comjiaines fairly. Q. Well, these corporations are great sources of revenue to the State of New Jeivey are they not?— A. No doubt they are. I do not know exactly what they do, but I 966 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. understand some portion of it goes to the improvement of roads, schools, etc. ; and the laws in the State of Delaware are somewhat similar, in competition with the State of New Jersey. e how it would. (I ( l!> 3Ir. Farql uar.) Is there a lower taxation in the State of New Jersey than iComjBirr Mr. Stet-iirti, p.'.iT.:; " .Xinc-tuntlisof tlio corporations are coiUrolli.'il by boards of directors wliicli eillicr own roperty or plant in the State of New York I should Imve advised its formation under the laws of the ' See iiage 987, footnote. i'HUKKAL, S'rKKh UOJIFANY : STKTSO.N. yd State of New York, as I did in the case of tlie Interiiatioual Paper Compauy, where the principal property was in that State. But the Federal Steel Company routem- plated the acquisition of interests in properties that are situated only in JJinnesota, iu Illinois, in Ohio, and in Pennsylvania. The i|uestion then came, shall we organ- ize in any of these four States. Tliere were sarticient reasons why it was not desir- ahle to organize in any one of those four. I will say briefly that the laws of Penn- sylvania do not permit the ownership of real property by a foreign corporation, and the rate of taxation in Pennsylvania upon a domestic corporatiou is very high. The laws of Ohio, under the constraint of their constitution, impose a double liabil- ity upon all stoclsholders whatever the conditions. The laws of Illinois, as they have been administered and interpreted — not only there bat in the State of Ohio as well — are exceedingly inhospitable to the development of large business enterprises; and the laws of Minnesota also impose a double liability upon stockholders. By that process of exclusion, in oonsecjuence of those four features as well as others, they drove these corporations out; the laws of those four States. Tlien being foot- loose, of course we looked for the most favorable conditions, and at that time I sup- pose the most favorable conditions were those presented by the laws of West Vir- ginia and the laws of New Jersey. The statute of West Virginia lixes a limit on the amount of corporate capital; and, by the way, I should say that the laws of Penn- sylvania did the same until this winter, when they have been enlarged. And that left New .Jersey certainly as available as any other, and there was no reason why we should not go to New Jersey as well as New York, because neither is the home of the corporation. stockholders' right of examination — THE STATUTORY RIGHT ONLY. Q. I notice, with reference to the power that should be given to the board of directors to determine what po wer or what privilege shall be given to the stockholders as regards the business of a corporation, that this provision is made [reading] : "The board of directors from time to time shall determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and hooks of the corporation, or any of them, shall be open to the inspection of the stock- holders ; and no stockholder shall have any right of inspecting any account or book or document of the corporation, except as conferred by statute or authorized liy the board of directors, or by a resolution of the stockholders." What are the special privileges of examination that are conferred by statute iu New Jersey? — A. I forget. I do not pretend to retain them. I never testify as to what a statute contains unless I have got it before me ; certainly where you have to examine similar statutes and provisions of different States. Q. You do not recollect whether the New Jersey law is more or less liberal in that particular than the laws of the State of New York?— A. I do not. I do not think that that was the point. I think the point there was to cut oft' all the right except that which the statute gave, and not leave an indefinite common law or equitaljle power to be exercised, which, it has been held in some cases, does continue in addi- tion supplementary to the statute. It is very difficult for an administrative officer, usually a clerk not of high class who has charge of the books, to know whom he shall recognize and whom he shall repel when a request is made for an examination of his books. Certainly, the mere idle curiosity of a volunteer does not justify the interruption of the business of the corporation, while most respectful attention should be given to anyone who has a real interest. My theory, and I think the theory of most corporation lawyers, is that it is most desirable that the rights should be defined in something that can be read so that "he who runs may read;" and that is the purpose of that; not undertaking to affect the statute, but to say, "you shall have the rights that are given you by statute and you shall have no others." And that is permitted by the general provisions of the corporation law of New Jersey, permitting the articles to define or restrict the rights of stockholders. POWER OP THE CORPORATION TO BUY ITS OWN STOCK. Q. There is a further provision here with reference to the powers of directors in other particulars that perhaps vou can explain iu a similar Avay. It says [reading] : "The corporation may use and apply its surplus earnings, or accumulated profits authorized by law to be reserved, to the purchase or acquisition of property, and to the purch'a.se or acquisition of its own capital stock from time to time, to such extent and in such manner and upon such terms as its board of directors shall deter- mine." Is it usual to make a provision of that kind that a company may purchase its own stock?— A. No; it is not. .... , ^ i, Q Can you explain why?— A. But I have always put it m m any place where the law'permitted me to do it. In the laws of the Stat.- of New York there has been, though I do not suppose it survives in all eases, an absolute prohibition against a cor- 972 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. poration using aay of its own fnuds for the purchase of its capital stock; hut I have never seen in reason and justice why a corporation, out of its surplus, might not be reducing its oiipital stock. Of course, it is entirely improper that any of the funds ot the corporation, other than those constituting- the surplus, should be paid back to the stockholders under a guise of purchase of corporate stock. But when the corporation is solvent and has a surplus, I can see no good reason why that surplus should not be so used. It was intended here to confer this right. Q. To nive the directors the power, if they had a large surplus, to use it in that way, instead of allowing it to remain as a surplus?— A. It is simply a more conve- nient form of reducing capital, which is permitted by all laws. It is another form of doing that. POWER OF THE DIRECTORS TO INCREASE THEIR NUMBER. Q. That is what I wished. Is it usual in the case of corporations to give to the directors so much power as there is here in the way of increasing the number of directors by the board of directors itself? [Reading] : "Tlie number of directors at any time may be increased by vote of the board of directors, and in case of any such increase the board of directors shall have power to elect such additional directors, to hold office until the next meeting of stockholders, or until their successors shall be elected." — A. Well, is it usual? Q. Yes. — A. Yes, with those corporations properly formed. This will show you exactly what is needed. Q. That is what I wish. — A. You start a corporation and it ia exceedingly unhandy at the outset to have 13 or 15 directors. You have a small body, say 3 directors, as in this ease. You go through all the preliminary work and establish yonr corpo- ration and do your work and then you want to complete your original organization. It is a very unwieldy and difficult thing to call together a stockholders' meeting in compliance with all the forms of law for the purpose of an increase. But if you put in such a jirovisiou as that, your directors can immediately increase, and that creates a vacancy which the directors are able to fill until the next annual meeting. That is all the purpose of that. Q. The purpose, then, is really to provide for the convenience of the organiza- tion? — A. At the outset. If it operates badly afterwards the stockholders can ordi- narily overcome that. It is a mere matter of convenience for organization. NOTHING IS UNDUE THAT IS AGREED TO — ABSOLUTE FREEDOM IS BEST. Q. And in your judgment it does not in any way limit the power of the stockhold- ers themselves unduly in the control of their organization? — A. \ycll, that word "unduly " is the word that troubles me. That it limits them I have no doubt. But it is a mere question of what the parties choose to agree to. It is like any bargain; two parties get together and say, " We will do this and this under these conditions," and, having enti'ind into this compact, nothing in conformity with it can be unfair; nothing can be undue. (i. If you will permit me to ex))lain the purpose of a question of that kind. The commission wishes, of course, to find out as fully as it can the ettVct of the diftereut laws in some of the different States along these different lines; and when I ask you the question as to whether this gives undue power as against the stockholders, the (|nestiou has this bearing: In your judgment, is a provision of law of this kind wise or not? Is it best to put so much power in the hands of the board of directors? Is there danger of its being abused? — A. I understand yonr question, and that is where I come to the greatest of all judges of his time, Sir George Jessel, who says that nothing is so desirable as liberty of compact; that the greatest of all liberties is thiWibiTty of compact. Now, there is no such thing as due or undue amongst men of mature mind who are competent, (iivc them absolute freedom of compact. That is not, I say, due or undue. If the parties want to make a corporation of that kind, let them make it. It does not do anybody any hurt except themselves, and " Volenti non fit injuria.'' It can not hurt a man that wants to do it. Therefore, I say again the word "undue" disturbs me. Q. Your proposition is, as a lawyer, that it is wise to give the utmost freedom in all matters of that kind?— A. Alisolutely. This pa.ternal system or idea is at the root of most of the evils that underlie what the public complain of in corporations. They h.ave been coddled into the belief that when they deal with a corporation they have got to have some kind of protection and may rely on some kind of protection that they do not invoke in their dealings with individuals. Every man who deals with an individual inquires as to his credit before he makes up his mind as to whether he will extend to him the facilities of his credit or not; but iu some way, when he comes to the same man organized into a corporation, then he is taught that he can rely on something besides the credit of that institution, can rely on a report or statement it makes, which is fallacious. He may, if the report is untrue, punish JbKUJiKAJj STEEL UOMI-'ANY: STETSON. y i H that man criminally, which he seldom does; bnt that does not pay him for the credit that he has extended. And that false prop and delusive support upon which the public are invited to rely by many of these laws is a real injury, in my honest belief, and is not any henelit. THE DOTY OF THE TEl'STEE IS LIMITED BY THE TRUST. Q. (By Mr. C. J. Hakuis.) The tendency in all this, it seems to me, would be to give the directors, as was said here, an nndue power in relation with the stoclchold- ers. The powers of the stockholders and the directors of a corporation are not on an equality. I understand that the directors of a corporation are the trustees for the corporation ; they have the whole power in the corporation where the stock- holders have not; and for the sake of putting them on an ecjuality, they should be subjected to all those laws which are specially established to prevent a trustee from doing wrong to those whose interests are intrusted to him ? — A. A trustee, as I under- stand it, is never held to any trust other than that created by the instrument appointing him. Q. Yes. — A. Therefore the question is, "What is put into that trust? I agree with you absolutely that a director must be absolutely faithful to his trust and fulfill his trust; but what is the trust? There is the charter, and when the parties came together they expressed their duties and powers and rights there; and the rights of the trustee under his trusteeship and under that instrument are just as sacred as the rights of the cestuis que trustent; the one is just as sacred as the other. legislation can not MAKE THE WEAK STRONG; EXPERIENCE MAY. Q. I do not question that from the legal standpoint that may be true; but my idea is that in these large aggregations of capital where men, women, and children are holding stock the stockholder nowadays may need a little more protection than you seem to be inclined to give him? — A. The legislature can not give it to him, nor can you or I. There is not anything yet that takes incompetents, lunatics, and pau- pers and makes them competent, responsible business men. You can not do it, and you have got to trust to the development that comes from the experience of having your property at risk. Othello's great point was. " I have had losses, too," and I would not give anything for the business qualifications of a man who has not had something at risk. As long as he thinks he is buoyed up by some life-preserver he will not make a success, nor will the coiumunity and the world get on through the efforts of that kind of coddling. Q. You think there would have to be some kind of legislation other than that done through the legislature? — A. Which? Q. What we are trying to find out is whether there is any demand for that sort of legislation? — A. Of course, you have asked me beiore this commission not alone to testify to facts, but also to express opinions. I have these opinions with great posi- tiveness, and I have delivered them, I hope, with courtesy — but certainly with great positiveness. DIRECTORS GENERALLY OWN OR REPRESENT A LARGE MA.JOKITY OF STOCK. Q. (By Senator Malloky.) Do you think now, as a corporation lawyer, that it is good policy to give directors of corporations power to increase their own number without consulting the stockholders? — A. I think so. Q. Yon think that is good public policy? — A. I do, for the reason that nine-tenths of the corporations are controlled by boards of directors which either own or abso- lutely represent a large majority uf the stock. This theory that there is a large body of unknown stockholders that have got particular interests that they want to con- trol and can not do it because they are fettered by a board of directors without any substantial interest is absolutely fictitious. The interest and the agonies are in the board of directors, and they are' not in the stockholders. When it comes to a ques- tion of financial stress, the men that have to go about and put their names to papers are not the stockholders; they are the directors that put their backs under the load and their fortunes at risk, and I would give always— all th.Tt I have in this world is in the form of corporate investments — and I am only too glad to put it at the risk of men who are directors where I am not, for I am a, director in very few companies. Q. Well, that is hardly an answer to the question?— A. It is; pardon me, I should not have said that it is, Senator, but it is intended to be. LIBERTY OF CONTRACT— NOT LIBERTY OF ACTION. Q. The only point I want to get at is your view, and you seem to be under the impression that there is too much law restraining the liberty of action of the gov- 974 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. erning powers of corporations. I think you expressed an opinion to tliat effect?— A. Liberty of contract. I did not say liberty of action— liberty of contract. I would allow the corporations, if tbey so wished it, to contract there again. I would have it— if I may illustrate it, pardon nie, by a story of John Van Buren. When he organized the Manhattan Club in the city of New York, he put all the powers in the board of directors, and some one said to him, " Why do you do this? Up at the Union Club"— which was a social club of a very high order— " they do not do that." He said, " They are different clubs. We will trust the body up there, but we will not down here." And the question, after all, is what are you going to do in any par- ticular body. If a man wants to contract with the directors and protect himself, I will give him that freedom, and I will say that in the absence of a contract exempting the board of directors from limitation, I would leave them under general limitations of law. STOCK BOOKS SHOULD BE OPEN TO STOCKHOLDERS. Q. (By Mr. jENKs.) As regards the provisions of law which permit stockholders to examine the stock books of corporations at any time so that they can find who their associates are, the amount of the holdings of each associate, and so on, do you favor that kind of a law giving that privilege to stockholders?- A. I do, certainly. I think the law of New York, which I assisted in framing, has that provision— that is, that every stockholder and every judgment creditor should have that right. Q. You would not give the power to the board of directors to refuse to permit stockholders to examine the books?— A. No; but I would give the power to the board of directors of providing a convenient hour. Simply say, " You must come at such an hour, otherwise the books can not be examined" — but only for the purpose of convenience. I think that every stockholder and every judgment creditor should have the right of knowing who the stockholders of a corporation are. DIKECTORS GENERALLY FAITHFUL, IN SPITE OP PRIVATE INTERESTS. Q. If I may continue for a moment what you were saying a little while ago as to the powers of the board of directors — you say that the board of directors represents regularly the interests of a majority of the stockholders? — A. Generally. Q. Of course, that is true so far as the stockholding is concerned — very frequently not as far as numbers are concerned, usually not. Would you think that it is often the ease that half a dozen, or not over a dozen, leading stockholders, who hold a majority of the stock among them, may have interests opposed, say, to a thousand or several thousand stockholders, so that the few holding a m.ajority, who them- selves are probably directors, might iind it for their individual interests to so direct the attairs of the corporation that it would bo for their interest and not for the interest of the majority of the stockholders in number? — A. That is conceivable. Q. May I follow that up a little further? Is it particularly uncommon in your judgment? — A. Oh, no; it is not at all uncommon; it is not .at all uncommon ; but I have never, in a case where I have been called in, been conscious that that power was exerted in that way. I think that I have seen men in two different corpora- tions become as keen on one side as they were on the other when they passed into different beards. Q. Doyon thinlc that the danger is one that would call for any limitation bylaw? — A. I do not. I think you would lose on the other side what you might gain on this. You lose efficiency of action. LIABILITV OF STOCKHOLDERS SHOULD BE ABOLISHED. Q. The question is suggested here as to whether you would abolish the limit on the liability of stockholders that we have in most States, I suppose; the limitation to the amount of capital stock held? — A. I would put into every constitution what there used to be in the constitution of Kentuckj' and what thei'e is in the constitu- tion of West Virginia, that there should be no liability. Instead of abolishing the limitation or increasing the liability, I would abolish the liability. Q. Will you explain just what yon mean by that? — A. It is not a question of public policy there ; it is a question of credit. And I have explained that I would drill this into every man : That when he deals with a corporation, he is dealing with it just as he deals with an individual. He has got to find out whether th.at corporation is responsible; and the law, the common law, is abundant and adequate to provide remedies for a man who makes the inquiries and who is told untruly at the time of the particular transaction. This whole question of individual liability has been better stated by Jlr. Morawetz in a letter he wrote mo at one time, in which he said that it was "a pitfall for the unwary and a windfall for the undeserving." FEDERAL STEEL COMPANY: STETSON. 975 WHY INCORPORATIIRS (id T(l NEW ,1E1!8EV. Q. (By Mr. Faiujuhai).) Is it a fact that under the liiws (if the State of New .Jersey a good deal of New York ciipitnl aud Eastern caiiital lias none intu that Statef— A. A great deal of New York capital lias gone into the State (if New Jersey, and the reasons why it has gone there have heen of two entirely distinct clahsos.' The one concerns the iinestiou of taxation. The taxation of corporations in New .Jersey has heen less than that in New York. The other is cdiicemed with the liabilities and immnnities of stockholders and directors in New .Jersey. In New Jersey there is no personal liability of stockholders in addition to the aiiioiiiit paid in for the capi- tal stock ; that must be paid in full. There is a mistaken idea abroad that the law of New Jersey permits stock to be issued as fully paid when it is not fully paid. That is not so. The law of New Jersey merely declares what is the common law anyway and has been so interpreted liy the Court of Appeals of New York, that the judgment of the board of directors exercised iu good faith as to the value of property received for stock — and value is always a (juestion of oiiiniou and not of fact — is conclusive, if there be good faith. That is merely the eommou law. Another is the general immunity of directors from statutory liability. Another, and quite as important iu most cases, is that in New Jersey there is uo limitation ou the amount of indebted- ness which can bo created by a corporation in comparison with its corporate stock. In many States the law says that you shall not create an indebtedness in excess of the total capital stock. That is not prohibited iu New .leisey. I think tliese three particulars of the New Jersey law are ignite as agreeabli< to investors or to proposing incorporators as the comparative immunity from taxation. PTBLICITY FOR CO.MI'A MES ORGANIZED 1C)K PUBLIC WORK, NOT FOR THOSE IN TRADE. Q. Is it or is it not a fact that the corporation law of the State of New .Jersey is framed in nearly all its sections to safeguard the stockholders; supremely to take care of the company as au organized company ; that the law is framed for the benefit of the stockholder of the company and for the company itself and not to protect the pub- licf — A. It I understand you, it is this : That the theory of New Jersey is that which is really the theory of every State that grants a corporate charter, namely, that it is for the benefit of the State that the corporation should be eieate(l. That must be the theory of every act of incorporation, either general or special; that the State, having invited this creature to come into existenee, f^ives it a chanee to live. Q. Now comes the other qirestiou. From all your associations and relations, as far as the public know and this commission know, you have not liecu associated, either you or tliiise who have linanced and carried ou these operations, in what is com- monly called stock ganibliiig. Now, would yon state how it is possible so to amend the laws of Xew .Jersey, or any other State, which are so liberal in providing for com- pany orgauiziug, that the public will lie safeguarded in knowing what the worth of the stocks is. tlieir intrinsic value; that there may lie publicity sufficient to show exactly the state of the comiianies in their linancial concerns ;" In other words, how far should the laws of a State leud publicity to tbe whole opcratiims of every com- pany chartered under it? — A. I think that with reference to companies that are organized for public work, like insaraiice companies .-lud railway companies, that should be done. I think that to put that obligiitiiin upon companies engaged in trade, who have rivals that do not have to make such publications, would be an unjust discrimination; and there is no reason for it whatever, if you are going to permit corporations to engage in trade. That is a way of throttling the infant that has been born at the request of the State. I'-AKE COIIPANIES MAY ORGANIZE UXDER ANY LAW. Q. Now another (|uestioii. Is it not generally known iu Xew York ( ity and all our principal cities where banking and brokerage are carried ou that there are in New Jersey possibly oue-fourth of the chartered companies that are nothing but fakes and wildcat companies ' — A. I do not know. Q. Do you take it from ]mblie reports, I mean t — .\. 1 never pay any attention to public reports. They do not constitute information; they deal with impressions. When you treat of property rights, you ha\e got to get specilic information. Q. Do you think that under the laws of New .Jersey there is a possilillity for fake companies to be chartered and impose their stock ou the public f— A. Not any more than there is under the laws of New York or any other State. That often happens. Y'ou may organize a company and put iu $100,000 or $300,000, as was done under the strict laws of Massachusetts in the Cape Cod Canal Corporation, and it is an improv- ident investment, an unwise investment of capital, and it is gone almost immedi- ately — as soon as it is put in — and yet that corporation is created and abundant liti- gation has ensued under that, although it was as honestly organized a corpora- 83A 63 976 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. tion as you could make under those strict laws. In other words, the question must always couie back to, What is the capital; what are the assets of the particular cor- poration at the time of the particular transaction ? and the fact that at some time or other it had as much money as its capital represents is ot no consequence, for it all may have been lost; it may all have been unwisely invested. Take a conspicu- ous instance under the law of New Jersey, the corporation that was formed for building the Stevens Battery, which General McClellan was in charge of. There was a corporation which was absolutely of no consequence when it got through, and it swallowed up millions and millions by unwise investment. Q. It. was simply a scheme to make money? — A. No; I don't say that. My pomt is this, that nothing is more illusive and delusive than the idea that if a corpora- tion's stock be only paid in in money at the outset it is therefore better off than one that has issued its stock for property that could not be converted for 1 cent on the dollar. The question is what assets the corporation has got at the time of the par- ticular transaction, and that can be ascertained only by present inquiry. A REMEDY FOR STOCK Vi^ATERING. Q. (By Senator Mallory.) Have you any suggestions to offer? — A. I had only one point which I thought proper. 1 have not obtained information, but only impres- sions, as to what was going on in this commission from the public prints. In Janu- ary, 1892, a report was made by a committee, of which I was a member, on the question of corporations, to the Bar Association of New York ; and the third provision of that report is the only one, I think, that I should like to bring before this com- mission for its consideration. As it is addressed to a subject about which a great deal of complaint has been made, namely, stock watering, I should like to indicate a remedy or relief which we thought was desirable [reading] : "Third. To permit the formation of a distinct class of business stock corporations vrhose capital stock may be issued as representing proportional parts of the whole capital without any nominal or money value. "The effect of such amendment would be to provide for the measurement of the interest or shares of the members of such a corporation by a statement of propor- tion, as in case of the part owners of a ship, and not by an arbitrary assignment of money value, which is delusive in the case of every corporation whose capital stock has a market value either more or less than its nominal par value. "Such an amendment, though somewhat radical, is not altogether novel. It embodies a principle adopted in corporation laws in Germany. "It would relieve any possibility of injury to the public from misleading repre- sentations as to the money value of corporate stock, and would also relieve from embarrassment conscientious corporate officers often compelled to deal with legal fiction as to which they have no personal knowledge, as though it were a reality within their own observation." (Proceedings of New York State Bar Association, January, 1892, p. 138.) Q. (By Mr. Farquiiar.) Do you choose to amplify that in any way further than you have presented it? — A. I think that states the case. purpose of issuing large capital stock. Q. Will you state the circumstances that brought this about? How many were concerned in it? — A. That was never acted upon ; it was merely presented as a report and never followed up. But the real desire of corporate management of stockhold- ers is not always fully understood. The real desire of the issue of large capital stock is generally to get a very large common divisor and to get as many persons interested in the enterprise as may be, and the nominal amount of each share is of very slight consequence. Yon will see $100,000,000 of stock issued and the nest day after it goes on the stock exchange it sells for from $10 to $12 a share. Nobody supposes that stock is w^orth $100,000,000. The total stock is only worth $10,000,000 to the public at large, if it expressed its opinion about it, and its par value becomes immediately a fiction. On the other hand, the Central Trust Company stock of New York, say, sells at $1,. 500. That is just as much a fiction; it is just as fictitious to say that it is $100 stock as it was in the otlier case to say that the $13 stock was $100 stock. No one deals with rciferonce to par; they all deal with reference to the fact. Now, as the fact in many of these cases is obscured by this assignment of a nominal or par value, under this theory of freedom of eontract, I would permit a corpo- ration to say, "Here are our shares; we have so many shares and you have such a proportion of the property, bo it worth more or less." Tlien dividends need not be made by per cent, hut as they are in the case of mining companies— so much a share — and there would be no one deceived, and every purpose. would be accom- plished that I can think of (hat is desired by the creation of these large nominal capitals. FEDERAL STEEL COMPANY: STETSON. 977 RAILROAD REORGANIZATIONS CAUSED BY REDUCTION OF RATES, NOT BY OVERCAP- ITALIZATION. Q. (By Mr. C. J. Harris.) Have you been couuected with the legal part of the organization of 8ome railroadiS in this country? — A. I have. Q. Can you name some of them to the commission? — A. The Richmond Terminal, now constituting the Southern Railway, the Northern Pacific, the Reading, the Erie, the Memphis and Charleston, the Hockiug Valley, and the Detroit, Bay City and Alpena, now the Detroit and Macliinac. Q. Any others? — A. There are others, but I do not now recall them; those are what come to me now. Q. I do not know exactly how far you are connected with the business portion of those reorganizations; I suppose mostly with the legal questions? — A. Entirely with the legal; I have nothing to do with, and I have paid no attention to, the business part. Q. Why are these reorganizations made, as a general thing; what are the reasons t On account of their banltruptcy, or failure in business to a certain extent, as they were organized before you took hold of them ? — A. In every case it was the inability of the corporation to earn its fixed charges; not the question of dividends, but fixed charges. It made promises to pay which it could not keep; foreclosure was immi- nent, and it was necessary to make some arrangement by which the interest in the property could be preserved. Q. Was this in some cases from a lack of ready capital, or was it generally from a certain mismanagement or lack of business capacity? — A. 1 should say it came from a lack of income resulting from the ruinous reduction of rates, partly by legislation and partly by the foolish competition of railroads with eacli other. If the rates in this country were a fraction of a per cent higher, no one of these companies that I have mentioned need have gone into bankruptcy. Q. What was the state of their capitalization? That is what I want to get at generally. Are they generally overcapitalized? — A. In none of these cases — now I am speaking of facts — did share capital have anything to do with it, or money. They had created a bonded debt for the money they had borrowed and could not pay. It was money, dollar for dollar. Take for instance a fair sample, the Richmond Ter- minal, its stock declined to a fraction of 1 per cent on the dollar. It did not make any difference what its share capital was; it disappeared; this body of share capital was wiped out. PRINCIPAL OFTEN INCREASED — ANNUAL CHARGES ALWAYS DIMINISHED. Q. In these reorganizations, for instance, this you have just mentioned, was the capitalization, bonds and stock, under the reorganization greater or less than it was before you took hold of it f — A. In some cases they were more and in some cases they were less. U was intended generally for the purpose of inducing those who had been interested before to make fresh contributiuus of cash, which was necessary. That was always the real case. I do not think that more than tliree of those corpo- rations received less than $20,000,000 to $25,000,000 of new cash to help it along and to start it anew. To get those contributions in cash it was necessary to make con- cessions, and in some instances the capitalization, if you so choose, the bonds and stock — I call the stnck only the capitalization — was greater than it was before. But this was for the reason that the old bonds would bear various rates of interest, run- ning from 6 to 8 per ceut. In evu8ineKs A. I will say this: I would give all railroads a right to make any corporate contract that they choose with each other, provided that the contract must be submitted to the Interstate Commerce Coinraission which we have in this country, and should be subject to annulment by the Inter.state Commerce (Uuumission for reason to be assigned. <,>. Now, to come specifically to a case; some years ago the House of Representa- tives was asked to pass a bill permitting railroad corporations to pool their traffic, to make pooling contracts, validating pooling contracts when made, and the difficulty that seemed to intervene to prevent the success of the movement arose out of the restraint which was sought to be imposed through the Interstate Connnerce Com- mission upon the formation of this pooling business. A large number of geutlemen FEDERAL STEEL COMPANY: STETSON. 979 in Congress favored the idea of allowing the Interstate Commercf, Commission to have a veto absolute on the contract; that the advocates of the railroad side of the question would not listen to. They were willing to have power vested in the Inter- state Commerce Commission to disapprove the contract, but to let that contract go into effect and be operative until some power above the Interstate Commerce Com- mission — a couit probably— should sustain the Interstate Cimnierce Commission ; in that case the contract was not to be in effect. In other words, the railroad.s were apprehensii'e that the luterstate Commerce Commission would arbitrarily interfere sometimes and prevent them from getting the beuetit of a reasonable rate. Now, there is a movement in that direction again, I think very apparent, upon that point of giving the Interstate Commerce Commission, or .some other body, absolute power to say, this thing shall not go into effect, and stop it there. What would be your opinion? — A. I would allow the power of contract, and I would let that contract continue until disapproved by the Interstate Comnu-rce Commission or such other body as you might name, for reason. And I would then have it continued until the reasonableness had been tested by the courts. In other words, I should be glad to see the system they have in England. If you could get a system of life judges, such, as they have there, constituting a court on this question, I would leave it to that court absolutely. Q. Turn the luterstate Commerce Commission into a court? — A. Provided they were appointed for life. Q. (By Mr. C. J. Harhis.) Would they not get pretty arbitrary if appointed for life? — A. They do not in Kngland; it has been running there for 40 years and there is no complaint at all, and originally there was more turbulence than we have. Eng- land is so small, it has a smaller mileage and all these points are close together, and they had tremendous difficulty; but they have had no opposition and no trouble, and I do not see why we should be floundering along on this side. But to pass over the greatest amount of property in this country to the decision for its existence of a board which is subject to political determination every four years is simply to kill your greatest property in this country. You give these powers to the Interstate Commerce Commission and you will never have another Presidential election on the silver question or anything else. It will be on the subject of which can grab the railroads. You are entirely changing our system of government when you do it. IF THEliE WERE ANY UNREASONABLE RATES, THERE SHOULD BE SUMMARY POWER TO ABOLISH THKM. Q. Take these 4 railroads in pooling — A, B, C, and D. In their pool, of course, they agree upon a certain line of rates with regard to all sorts of things. Now, they agree upon that, and if A does not keep the agreement none of these others have any legal hold upon him. Now, we can easily see why that is an injustice to the railroads. — A. To which is it unjust; to the one who does not keep his bargain or the others who do ? Q. The others wift) do. — A. To that I agree. Q. That is a contract to be carried out among the railroads as among others, unless against public policy. Now, of course, the thing we have in mind in our inquiries here is, where will the shippers or general public come in? If this pool makes an unreasonable rate and the law permits them to sustain that contract, then the general shipping public is at a disadvantage; and the proposition is that the Interstate Com- merce Commission should come in and say whether those rates are right or not. If they are fair and reasonable, then your contract between railroads is just as goocl as between you and me or any others. — A. I never heard any railroad men ever object to that particular proposition you are now mentioning; nor would I. I think the power to determine whether a rate is reasonable or unreasonable is now lodged in the Interstate Commerce Commission, and should continue there. It is not the point of difference. The Interstate Commerce Commission wants the power to make a rate; not to declare a given rate unreasonable, but to make a rate, and that is the real stress. Of course, if there are any unreasonable rates in this country there should be a posi- tive and summary power to abolish those rates: but now when you come to the other question as to the agreement to make reasonable rates, not to make unreasonable rates, I do not see why that agreement should not continue until the Interstate Com- merce Commission or the other bodv should have been sustained by the courts; but as to the unreasonable rates, I do not say for a minute that such an agreement should prevail. BUT THERE ARE NO UNREASONABLE RATES. Q. (By Senator Mallory.) As the practical workinu of the interstate-commerce law is exhibited to us now, that would practically amount to the railroads fixing their own rates for a number of years?— A. Perhaps, Senator, you have heard of unreasonable rates somewhere; I do not hear of any complaint anywhere over the country. 980 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. The testimony is that there are no nnreasonable rates to speak of now. — A. Those have all disappeared. Q. The poiut is, it is a fact that we can not get a decision on an appeal from the Interstate Commerce Commission inside of 2, 3, or 4 years. — A. Therefore I do not think this great property, the greatest property of this country, should be exposed to the injury that results from that delay. I think il is a great deal better to wait a little longer to get the question decided for them. We are dealing with that on which the country lives — its industry. MAKE THE INTERSTATE COMMERCE COMMISSION A COURT, WITH LIFE TKNURE. Q. My inquiry was made to elicit a suggestion, if possible, of any way of expedit- ing this thing. No one wants to talie advantage of the railroads. If the Interstate Commerce Commission should decide unjustly, it would be declared an unjust deci- sion and the railroads should be vindicated, and vice versa. But the great difficulty with anything of that kind is the tremendous delay. — A. I have endeavored to make a suggestion. My suggestion would be to make the Interstate ("onimerce Comniis- siou a judicial body; but I want to put iu a caveat there, subject to constitutional difficulties; there is a serious matter there. Even if it required a constitutional ameudmeut, I would make the Interstate Commerce Commission a judicial body, appointing its officers for life; and I wonbl let that body determine; and then you have a judicial determiuatiou, and it would not expose us to the delay you have mentioned, and I think everybody would agree to that. Q. (By Mr. C. J. Hakkis.) That would involve that all of the members of the commission should be lawyers? — A. Not necessarily ; not at all. I think they would all have to have, or should have, the judicial attribute of judicial fairness. THE LINE BETWEEN PUBLIC AND PRIVATE CORPORATIONS. Q. You made adistinction some timeago between public and private corporations, and intimated that the railroads, telegraplis, and corporations of that kind were public and that all manufacturing corporations were private; the suggestion has been made many times liere that a corporation, such as the American Sugar Ritining Company, which I have taken as a special example, that manufactures about 90 per cent of the output of sugar, according to the testimony given here, so affects the interests of the public that it shoubl lie considered a public corporation. The com- petition against that is no more vigorous, it is suggested, than the competition against railroads and telegraphs, and therefore any restraints put on railroads might very properly apply to any manufacturing company that controls so lar^e a proportion of the manufacture in any one line as that, for example. Can you draw the line sharply between public and private corporatii)us? — A. I think I can. I think the American Sugar Retining Company is not a public corporation. At the trnst conference I see it reported that Professor Clark, of Columbia, said that combinations might deal with the competition of all the mills that were bnilt, but can not deal with the com- petition of the unbuilt mills. Notwithstanding Mr. Havemeyer's greater familiarity with the matter, I venture to say Mr. Arbncklo will "cut some ice" if he has not done it yet, and you will find that if the American Sugar Refining Company does not keep down the price of its commodity to a reasonable point, Mr. Arbuckle will find great success in that department of his industry. The natural law will work better than the interference of positive legislation. RIVALRY BETWEEN CORPORATIONS AM) INDIVIDUALS. Q. With reference to the degree of publicity that should be given to a corporation like the American Sugar Retining Company, I understood you to say that much publicity would be unfair ou account of the fact that it would have rivals whose atfairs would not be made public. What would you say if there was a general law providing that all corporations should be given an ecjual degree of supervision; it would not be unjust then? — A. 1 am not speaking of rivalry between corporations, but between corporations and individuals engaged in the same business. Q. You think it would be impossible to exercise the .supervision over the indi- vidualf -A. You could not do that; you have no right to do that. If a man is not violating the law you can not in<|inre how he is investing his property here and there, and that is all that inquiry means. You do not go and call on a person and ask how his health is; but what they owe, what they have, and how they made it. THE DEVELOPMENT OF BUSINESS WILL BRUAK ALL FETTERS. Q. Do yon think if at the present time thei'e were such rigid laws it would drive capital out of the corporate form into the hands of men acting as partners or private fi^UHKAL, tilKKL, UUMi'AJNy: STETSUJN. VOL individuals? — A. I do not know that it would. I am not equal in ingenuity to the task of determining bow the positive growth and development of business is going to meet the embarrassments and fetters which legislators are trying to put on it, but it will. It will come in some way or other no matter how many embarrassments are put upon it; it will come in time.. NATIONAL INCORPORATION LAVk^ UNDESIRABLE. Q. (By Mr. Farquhar.) There is some testimony before this commission looking for a remedy in the corporation laws of the States, where in so many States it is impossible to attain uniformity, and the suggestiou has been made and somewhat of an argument made before this eommission that a national incorporation law ought to be passed for the regulation of all manufacturing and other companies engaged in interstate commerce; have you any views on a question of that kind? — A. I have, very decided. Q. We should like to hear them. — A. It is an unnecessary law and therefore a harmful one; that is my judgment; it would be a harmful one. Q. Would it be your opinion that Congress had the power under the Constitu- tion? — A. Under the present Constitntiou I do not think it has the power at all, except as to the matters pertaining to interstate commerce. How far the courts may go in extending that term I do not Ifuow. Q. Do you think it would come under the general- welfare clause of the Consti- tution? — A. I do not understand that the general- welfare clause — notwithstanding the great Chief Justice Marshall— confers any independent grant of power. I think the general welfare is the purpose for which the express powers are to l)e administered. Q. But there is no positive authority conferred on Congress to frame laws cover- ing A. Not independent, because if that were so, we should not need any other Constitution. If Congress were to be the judge of the general welfare that would end it. You might as well say, in the first place, "Congress is hereby created to legislate for the general welfare of the public," and stop there. That would be all of your Constitution. advantages of cohporatk organization. If the commission will permit me, I think perhaps it is proper that I should call your attention to what I think is the best statement of the purpose of a corporation in this country. It is found in Mr. Cook's treatise on the law of corporations having a capital stock (4th ed.), volume 1, page 21, ^ 6, as follows; " In large enterprises the partnership has been found to be clumsy, dangerous, and insufficient. If unsuccessful, it brings ruin upon all of its members, because each partner is liable absolutely for all debts. Any member may bind the firm by his contracit, and each one has an equal voice in deciding its policy. Its capital and credit, and consequently its amount of business, are limited necessarily by the capi- tal and credit of a very few men— the members themselves. The death of a member or the transfer of his interest dissolves the firm. Any member may arbitrarily cause a dissolution at any time, and the insolvency of a member renders the partner- ship property subject to levy of execution for his debt. Upon the death of a part- ner the surviving partners have the sole charge of winding up the bu.siness, and the executor of the deceased partner is not allowed to come in. A partner may with- draw his money only at a sacrifice or by long and expensive proceedings. He can not conveniently sell his interest or borrow money upon it. New partners can not readily or safely be admitted. "The partnership is restricted in its capital, dangerous in its liabilities, narrow in its exclusion of new members, too free in its mode of making contracts, and too con- tracted in its opportunities for withdrawal. It is becoming obsolete as a mode of doing business on a large scale. "In a corporation all this is changed. The members are not liable for the debts. The amount already invested may be lost, but the private fortunes of the stock- holders are not involved. The business is done aud contracts made not by all, but by a select few called directors. A large capital is created by the union of funds from many sources. A person may safely invest in many enterjirises and yet not take part in the management nor watch the business of any one of them. The lead- ing spirit in an enterprise may hold a majority of the stock and may admit asso- ciates, employees, or strangers as holders of a minority of tlie stock, and yet he will retain the management as though he were the single owner of the concern. Persons may easily buy into or retire from the enterprise. Dissolution is not brought about by the death or -withdrawal or dissatisfaction of a stockholder. The insolvency of a stockholder does not affect the business of the corporation. Upon the deat't of a stockholder his executor votes his stock and has a voice in the continuation of the business. A stockholder may sell or pledge his interest readily and intelligibly by 982 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. reasDii of the reports, cliviilenils, aud market quotations of his stock. The corpora- tion IS a protection in that the liability is limited; it is capable in that it renders possible the collection of a great capital; it is efficient because the directors, and they alone, govern its policy and its contracts; and it is convenient because it is easy to sell or buy or pledge or becjueath one's interest in the concern. ''The advantages of incorporation are set forth In the Law Quarterly Review for April, 18:ir> (p. 185), as follows: 'Incorporation secures first of all the benefit of limited liability. It iiirther ]ircserves the continuity of the partnership unaffected by the death, lunacy, or bankruptcy of the members, or by other contingencies. It minimizes the dangers of a dishonest partner by restricting the agency of the direct- ors in articles of which all persons dealing with the company have constructive notice. It facilitates dealing with the shares of the partners by sale, mortgage, or settlement. It affords greater facilities for borrowing, iiion- particularly for raising money on debentures. A shareliolder who lends money to the company is not at the disadvantage of being postponed to other creditors as an ordinary partner is who lends to the firm.'" Testimony closed. Washington, D. C, Octoher 19, 1899. TESTIMONY OF MR. ELBERT H, GARY, President of fite Federal Steel Conqiaiiy. The commission met on Thursday, October 19, 1899, Senator Mallory presiding. Judge Elbert H. Gary appeared at 12.10 p. m., and, being duly sworn, testified as follows: Q. (By Mr. ,Jenks.) What is your full name?— A. Elbert H. Gary. Q. Your address? — A. New York. Q. Y'ou are president of the P''ederal Steel Company? — A. I am. PROPERTIES AN1-) HUSINE8S OF THE FEDERAL STEEL COMPANY. Q. Will you be kind enough to explain to us the nature of the business done by this company and the different companies that were brouiiht together by its organi- zation? — A. The Federal Steel Company is the owner of all the capital stock of the Minnesota Iron Company, the Illinois Steel Comp.iny, the Lorain Steel Company, and the Elgin, Joliet and Kastern Railroad Company. The Minnesota Iron Company is the owner of about 150,000 acres of iron-ore property. It is also the owner of the capital stock of the Duluth and Iron Range Railroad Company, which is a railroad connecting the ore property of the Minnesota Iron Company, located principally on the Vermilion and Mesaba ranges, with Lake Superior at Two Harbors and Duluth. The Minnesota Iron Company also owns the capital stock of the Minnesota Steam- ship Company, which owns about 22 steel vessels running on the lakes. The Minne- sota Iron Company is also the owner of very large ore docks at Two Harbors. The Lorain Steel Company has a manufacturing plant at Lorain, Ohio. It is engaged principally in the manufacture of steel girder rails for street railways, and also to some extent in the manufacture of steel billets. It is also engaged in the produc- tion of pig iron, producing about 500,000 tons of pig iron per year. The Lorain Steel Company is the owner of a terminal railroad at Lorain. I should say that the Federal Steel Company is also the owner of the capital stock of the .Johnson Com- pany at Johnstown, Pa., which formerly belongeil to the Lorain Steel Company. The Johnson Company of Johnstown is engaged principally in the manufacture of frog switches and crossings for street railroads — these eomplicated crossings which you see on the streets — and is also engaged in the manufacture of electric motors, etc. The Illinois Steel Company has plants at North Chicago, West Chicago, South Chicago, Milwaukee, and .Joliet. It is engaged in the manufacture of pig iron. It produces about 1,500,000 or 1,600,000 tons of pig iron per annum. It is engaged in the manufacture of steel rails, billets, plates, rods, merchant steel, etc. The Illinois Steel Company is also the owner of the capital stooli of the Cliicago, Lake Shore and Eastern Railway Company, which connects its plants in Chicago and South Chicago with various railroads running into or near Chicago. The railroiwl runs down into Indiana; it is a terminal railroad, but a pretty extensive railroad. The Illinois Steel Company is also the owner of largo tracts of coal property in Pennsyl- vania and West Virginia. It is also the owner of iron mines in Wisconsin and Michigan. The Elgin, Joliet, and Eastern Railroad Company is called the Outer Belt of Chicago. It runs i'rom a point on Lake Michigan, in Indiana, around Chicago FEDERAL .STEEL COMPANY: — GAKY. 983 about 30 miles from the center of the city, to a poiut on La.kn Michigan at Waukegan, 111. Neither the Federal Steel Coiiipauy nor any of its constituent companies has any monopoly of any line of busiucsM, nor does it seek any. Its plan is to jiroduce and deliver finished products at a miuimuai expense. It takes the ore from the ground, transports it, manufactures it into pig iron, manufactures the pig iron into steel, and the steel into finished products, and delivers these products. The Outer Belt, of course, crosses every railroad which enlcrs Chirago. K((1N(IMIE.S OF CONSOMHATION — FKWER Ol-'FICICRS. Q. Will you explain to us bril^Hy what are some of the economies that have been made by bringing together these ditterent companies engaged in different lines of work? — A. There has been quite a considerable economy in the manageuiuut of the office. That applies more particularly to the emphiyecs or ofHcers, who have received larger compensation in the aggregate than they are getting at the present time. It does not apply, of course, to tlie laboring men. Q. Would you mind developing that a little further— going further into detail? Q. (By Mr. Farquhar.) Have there been many displacements of the skilled employees, or do you maintain your works?— A. I would not say of skilled employees. Q. Skilled ofticers? — A. We are looking for skilled employees all the time. Q. Skilled ofiicers? — A. I might say skilled officers; the ofilicers have been fewer and the aggregate of salaries has been less. Q. (By Mr. Jexks.) The aggregate of salaries?— A. Yes. The number of skilled laborers has been somewhat increased, and the amount paid skilled laborers has been increased, and we are looking for more all the time. THE AMAUiAMATED ASSOCIATION. Q. (By Mr. Farcjuhar.) Are your skilled men usually members of the labor organizations? — A. Some of them are and I think some of them are not. Q. Are you controlled in any way in the payment of wages by the Amalgamated Iron and Steel Association? — A. I think perhaps in the past, at least, the question has been inHuenccnl by those associations. Since the organization of the Federal Steel Company there has been no difticulty of any kind between any constituent companies and the laborers. Wages have been advanced at different times, but the question has been decided on its merits entirely ; the result has been reached by con- ferences, and everything has been satisfactory so far as I know. Q. For this year has the scale of the Amalgamated Association been presented to you as an officer, or anyone under you in the Federal Steel Company, for signature? — A. No scale has been presented to me; indeed, it would not be presented to me. Substantially every question that comes to me for advice comes to me through the presidents of the ditterent com]ianie8. I am inclined to think that, in some cases, the officers of some ol our companies have agreed to what you call the scale, the Amalgamated scale. OFFICERS DISPENSED WITH. Q. (By Mr. Jenks.) Can yovi tell us, specifieally, how much the increase of wages has been in any of these ditterent companies? — A. It has been, on the average, about 16 per cent. Q. Does that apply also to railroads? — A. Yes. Q. You said that a number of administrative officers could be dispensed with ; can you give us any more definite information as to the amount saved, or the number whose places weie no longer needed on account of the ainalganiation of the constit- uent companies? — A. As an illu.stratiou, the Illinois Stiel Company had a president, a first vice-president, a second vice-president, and a general sales agent, and several assistants. The office of one of the vice-presidents and the position of general sales agent were dispensed with. The two railroad companies each bad a corps of officers, and now the officers of one are the officers of the other. That ])rineiple applies in all the companies im down the line until you get to the skilled laborers, and there there has been no change. Q. The saving has been then almost entirely on the higher officials of these differ- ent companies? — A. Yes, in the higher officials entirely. PUTTING THE DIFFERENT COIII'ANIKS IN DLOSE TOUCH. Then there has been a material advantage in dollars and cents resulting from the fact that the management of the Federal Steel Company is iu close touch with all the business of all the companies, knowing the wants and the prices of each of the companies. For instance, the Lorain Steel Company may desire to purchase steel of 984 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. a certain kind; the Illinois Steel Company may at the same time desire to sell that very class of steel; the result is that the management of the Federal Steel Company brings about that sale or purchase or puts the officers of the different companies in close touch, so that the sale is made to the best advantage of both. That is only one illustration of the various kinds of business. EACH CONSTITUENT COMPANY MANAGKD INDEPENDENTLY. Q. As a matter of fact, the business of each of these separate companies is managed entirely independently ; the Illinois Steel Company would sell directly, as an entirely independent concern, any of its products to the Lorain Steel Company? — A. Gener- ally, yes; each one looking out for its owu interest as much as if the ownership of the capital stock was in entirely different hands. Q. Why should they look out for their own interests in that way as much as if the stock were in different hands? Why would it not be advantageous for the Illinois Steel Company to sell at a relatively low rate to the Lorain Company, if they are going to share in the profits? — A. The Illinois Company has no interest in the Lorain Company any more than if it were an independent company, owned by other persons. Each company is seeking to make the very best record it can fpr itself. Q. As I understand you, the stockholders of one are the stockholders of the other? — A. That is true; but that has no influence whatever on the management of the different companies. I am frequently called upon myself to settle disputes or differences arising between the diii'erent; companies. Q. The Illinois Steel Company and the Lorain Steel Company are purchasers of irou ore of the Minnesota Iron Company? — A. The Minnesota Iron Company sells a large proportion of its product to the Illinois and the Lorain steel companies; not quite half, perhaps. Q. Do they buy all their ore from this company? — A. No; the Illinois Steel Com- pany buys more outside ore than it buys from the Minnesota Iron Company, for the reason that the Minnesota Iron Company mines a very high grade of ore — the very best Bessemer ore — and the Illinois Steel Company can take a p.irt of that Bessemer ore and mi.K it witli cheaper ores purchased outside and produce a good quality of iron. On the other hand, the Minnesota Company can sell its proportion of higher grade ore to outside parties at a higher price; and the location of ores, which deter- mines freight rates, also has an influence on this question. RAIMiOAD AND SHIPPING INTERESTS. Q. Is the ore shipped entirely in the vessels belonging to the company? — A. Not entirely. The carriage capacity of these vessels is about 2,000,000 tons. The Miune- sota Iron Company will probably produce next year more than 3,500,000 tons of ore. The Duluth and Iron Range Railroad Company will carry more than 4,500,000 tons of ore next year. THE CONSTITUENT COjMPANIES PROTECT EACH OTHEli. Q. You say the different companies are managed entirely independently, but there is what you might call a community of knowledge between them as to the relative wants of one another? — A. It comes to them through the Federal Steel Company largely. Q. Would that knowledge be rendered so efficient, that one of these companies- say the Illinois Steel Comyiany — would not be allowed to suft'er from the lack of ore, because it would be assured of getting its ore at all times from the Minnesota Iron Company? — A. Both are protected ; tlje Illinois Steel Company is protected by the fact that it may get all its requirements from the Minnesota Iron Company, and the Minnesota Irou Company is protected, on the other hand, by the fact that it may secure customers in the Lorain and the Illinois Steel Company. Q. So the officers of the Federal Steel Company, by furnishing information from time to time to these companie.s, may be assured that all the plants are kept running to the best advantage? — A. If the companies need ore it is furnished them. Q. So long as it is more for (heir advantage to sell any part to outside parties it is done; but lh.it would never go so far as to stoj) work for some one of these com- panies on account of lack of material? — A. No. DIFFUSION OF KNOWLEDGE. Q. You have mentioned these two sorts of economy — the saving in administration and saving through accuracy of information as to the business. Do you recollect any other sorts of economy you make with this organization? — A. In the number of FEDERAL STEEL COMPANY: GARY. 985 offices; in the methods of doing business. For instimce, I do not care what plant one goes into, there are beneficial features in that plant that are not in other plants. In talking with any exjiert in any branch of the business, informaticni is received that will be beneficial if applied or given to an ollicial perhaps very remotely located; and, of course, the eilbrt is to utilize to the very best advantage every- thing that is a benefit in any particular plant, or any ideas or knowledge or infor- mation that one person has that another has not. PEE CENT OF TOTAL PRODUCT MADE BY THE FEDERAL STEEL CO.VIPANY. Q. You have said the Federal Steel Company in no one of its lines of activity had anything like a monopoly of the product of the country. Could you tell ns the per- centage of the output in some of these lines— say the line of steel rails— that the Fed- eral Steel Company has through its companies?— A. The Illinois Steel Company produces about 33 per cent — 30 per cent— of the steel rails that are produced in this country. Q. With reference to girder rails used by the street railways, about how much of the output of that product do you control? — A. Excuse me for interrupting you. The Illinois Steel Company, I should like to say, is also the owner of large coke works in Pennsylvania, and produces a verv large quantity of coke. It will produce next year about 1,500,000 or 1,600,000 tons of coke, I think. Q. Could you tell about what percentage that is of the total production of the country? — A. I do not think lean; I am inclined to think you are better posted than I with reference to the total production of pig iron. But if you know what that is exactly, I can give you items from which you can get the desired information. The Illinois Steel Company and the Lorain Steel Company probably will produce next year about 2,000,000 tons of pig iron, possibly a little more. I presume the total production of pig iron next year will be at least 14 000,000 or 15,000,000 tons; perhaps you know better than I. It probably requires, as a near enough estimate, about 1 ton of coke for 1 ton of pig iron; therefore, if the total ])roduction of coke next year will be 15,000,000 tous, it will be easy to ascertain what percentage of coke the Illinois Steel Company will produce. INFLUENCE OF THF, FEDERAL STEEL COMPANY OVER THE CONSTITUENT COMPANIES. Q. (By Mr. Kennedy.) Is this arrangement you speak of, between the Lorain Steel Company and the Illinois Steel Company and the Minnesota Iron Company, by which the Lorain and Illinois steel companies are assured of raw material all the time and the Minnesota Iron Company is assured that they will take its product, an arrangement by contract between them? — A. There is no arrangement of any kind between these comiianies, directly or indirectly, expressly or im])liedly, or tacitly. The Federal Steel Company, of course, is aware of the ie(iuirements of the Illinois Steel Company, and has more or less influence on the action of the officers of the different companies; and if the Illinois Steel Company is desirous of pur- chasing iron ore it purchases it from the Minnesota Iron Company direct. It gets it just as cheaply as it cau, and the Minnesota Iron Company gets just as large a price as it can. Tliey deal at arm's length between themselves. Of course the officials or the management of the Feiieral Steel Company know the situation and have an influence in bringing these p.arties together, saying to one or the other, "Perhaps you had better do so and so ; " but there is no understanding between these companies. Q. Cau the Federal Steel Comjiany direct them to do so and so?— A. In the same way as you, as the principal stockholder of any corporation, would direct the afl'airs of that company, and no other. For instance, I have no doubt some very large stockholders of the New York Central Railroad Company who are not on the direc- tory influence the management of the company, and yet technically they have nothing whatever to say about it. Q. If it should come to pass that other steel companies than these two offered the Minnesota Iron Company a higher pricfe for its raw product than these companies conld afford to pay, what would be the result? — A. The Minnesota company would sell to the highest bidder. Q. And these two constituent companies of the Federal Steel Company would be left in the lurch? — A. They would shift for themselves. DOES not TRY TO RESTRICT COMPETITION. Q. (By Mr. Farih'Har.) Conld you give this commission the reasons that impelled the owners of these various properties to form this Federal Steel Company, so long as they have no immediate cooperating features in their business? Was it a stock company simply to get the stock together and keep down competition, or what?— A. I have endeavored to give in a slight degree some of the benefits that have been derived. It was for the purpose of taking advantage of these benefits, I think. It 986 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. was iu no instance iutended to keep down competition. There is no possible way in which the Federal Steel Company or any of its constituent companies could keep down competition if it desired. It is in the Held; it is an open business fight all the time. Our company has never attempted to buy the capital stock of any companies for the purpose of getting these comjianies out of the competitive lield. It is not our plan at all. The plan is to have a knowledge of the whole business, and to have control of the comp.inies who do the business from the beginning to the end, so that if there is any proht in any line, in any i>art of thi.s line of business, we shall have the benefit of it. METHOD OF ORGANIZATIOX — CAPITALIZATIOX. Q. Was it an origiual purchase when this Federal Steel Company got the stock of all these conipauies or the properties of all these couipanies? — A. No; the Federal Steel Company made an arrangement with J. F. Morgan & Co. whereby J. P. Morgan & Co. agreed on their ])art to deliver to the Federal Steel Company the stock, or the majority of the capital stock, of these different companies on a certain basis, and the Federal Steel Company on its part agreed when the stock was delivered to give in exchange lor it the stock of the Federal .Steel Company. Now, perhaps in that con- nection I could make a little plainer what Mr. Stetscm iutended to say, if you care to have me. Perhaps I am more familiar with the transaction than he is in some respects. Mr. .Stetson was the counsel of ,J. P. Morgan & Co., and they were the managers of a syndicate, so called. I am not quite so familiar with that branch of the business as Mr. Stetson, but I am more familiar with the value of these prop- erties which the Feder.al Steel Company was interested in. The Federal Steel Company has an anthorized capital stock of $200,000,000— $100,000,000 preferred and $100,000,000 common. The amount of capital stock actually issued is about $53,000,000 of preferred stock and about $46,000,000 of common stock, making about $99,000,000 issued— a little more than that, but not quite $100,000,0 0. The actual book value of the plants and properties, not including the cash, of these constituent companies, was about $45,000,000; the cash on hand which these companies had was about $10,000,000— making .$55,000,000. There w as an increase in the value of these properties, being largely in lands, amounting to about $30,000,000 — a little more than $30,000,000, say $31,000,000— making a total of $86,000,000, which was estimated to be the actual value of the properties of these constituent companies. Now, the Federal Steel Company said to J. P. Morgan & Co., If you will give us the stock of these companies, and with it $14,075,000 in money, making $100,000,000 in all, we will give you $100,000,000 of the capital stock of the Federal Steel Company— $53,000,000 iu preferred and $46,000,000 in common. Then J. P. Morgan & Co. entered into an arrangement with— I am not quite so familiar with that perhaps, but an arrange- ment with the syndicate, whereby the syndicate agreed to furnish such part of this $14,075,000 as was not furnished by the stockholders of the constituent com- panies. Then J P. Morgan & Co. gave to the stockholders of these constituent companies the privilege of bringing to them their stock, together with their propor- tion of cash, and receiving in exchange stock of the Federal Steel Company, which J. P. Morgan & Co. received from the Federal Steel Company. Now, in making that trade, the Federal Steel Company issued its stock and obtained in exchange $14,075,- 000 in cash, besides the stock of these constituent companies, which represented property of the value of about $S5,000,0O0 or $86,000,000, including about $10,000,000 in cash. The stockholders of the constituent companies received for their stock— and by the payment iu cash, iu the case of the Illinois Steel Company, of $20 in money with each share of stock, and in the case of the Minnesota Iron Company, of $27.10 in money with each share of stock, and in the case of the Elgin, Joliet and Eastern Railroad Company, of $17.50 with each share of stock — the stock of the Federal Steel Company, about 1 share of preferred and about eight-tenths of a share of common. In making this exchange and doing this business J. P. Morgan & Co. made a profit of about $200,000; I will not be exact; they paid all the expenses, including about $40,000 for incorporation fees to the State of New Jersey. So that, you see, in the ease of the Federal Steel Company — not comparing it with any other company, but with companies generally, perhaps, or at least with some other companies not necessary to mention by name — the Federal Steel Company instead of issuing for each $100 one share of preferred and one share of common, or a little more of the common, to the syndicate managers or promoters, issued only a sufficient amount of preferred and common stock of the company to make up actually the value, what was considered to be the actual value, of the property of the con- stituent companies; and instead of issuing a lot of surplus common stock issued only about eight-tenths, or 80 per cent, of couuuon stock — common stock equal to about 80 per cent of the preferred stock. Instead of paying a very large price for promotion fees or whatever it may be called, it paid practically nothing; compara- tively a small sum. Q. (By Mr. Jenks.) You mean this contract with .1. P. Morgan & Co. was such FEDERAL STEEt, COMPANY: GARY. 987 that J. P. Morgan &. Co. received something like two or three hundred thonsaod dollars profit in their trade?— A. Not that for promotion purposes; they paid a large sum, of course, for expenses. THE CAPITAL STOCK REPRESENTS THE ACTUAL VALUE OF THE PROPEKTIE.S. Q. There was one point not quite clear; you said there were, on the whole, about $45,000,000 book values, $10,000,000 in cash, and then $31,000,000, you said, increase. That $31,000,000 is not clearly brought out. Why did not that apjiear on the books in the accounting? — A. Let me give you some Dlustrations: The Illinois Steel Com- pany had coal property in Pennsylvania — Connellsville coal property. It was on the books at just what it cost. There was one particular tract of 1,132 acres esti- mated to be worth about $500 an acre. That has recently been sold for about $1,000 an acre — that is one piece. The Illinois Steel Company had one iron mine that cost with improvements about $75,000; they have just been oflered $600,000, all cash. The Illinois Steel Company has in the neighborhood of 858 acres of land within the city limits of Chicago that cost a nominal sum compared with its present value. The Illinois Steel Company has not made money doing busi- ness. It has done business at a loss too long; but it has made considerable money by the fact that it has owned property which has been increasing rapidly in value. The Minnesota Iron Company has one mine that we estimated at the time of this organization to contain about 25.000,000 tons of ore; on a basis of 25,000.000 tons of ore, there was a value in it over and above its cost of, say, $10,000,000 or $15,000,000. As a matter of fact, our recent investigations have shown us that there is at least 75,000,000 tons of ore in sight. That is only one of a number of pieces. That applies to a great many different cases of increase in the value of property. Q. You had these different properties examined by experts and an estimate put on them; the book accounts examined also by experts; and then, as regards this surplus increase, that was added by these exjicrts who were making the valuation; so the capitalization, as you have put it in here, was all on the basi.s of their estimate of the cash value, plus the cash in hand? — A. That is right. Different examinations were made for this reason : in the first place, the Federal Steel Compauy was desirous of so organizing the company that no more should be paid for the properties than they were worth, naturally; in the second place, the stockholders of the other companies were oft'ered the privilege of exchanging their old stock for new stock in the Federal Steel Company. Now, when they took stock in the Federal Steel Company they not only got the benefit of the property of their own company, but were advantajj;ed by the disadvantage of the other companies; and they were jealous of one auiither, and each one examined very carefnlly by committees the properties of the other com- panies. It waa good-natured antagonism. THE CONTRACTS WERE PURLIC. Q. In the case of these different companies that went into the Federal Steel Com- pany there was absolute publicity among the different companies as to the amounts paid for the properties of the other companies? — A. Absolutely so. Q. This contract made with J. P. Jlorgan A Co., the nature of the contract — that was public? — A. Yes. Q. So that the contract between the Federal Steel Company and J. P. Morgan & Co. was known to all the stockholders, and practically open to the public? — A, Yes. Q. (By Jlr. Kennedy.) Then, Morgan & Co. and the Federal Steel Company acquired these properties'? — A. No; the Federal Steel Compauy acquired all the stock — the capital stock. First J. P. Morgan & Co. acquired the capital stock of these constituent companies, and then the Federal Steel Company acquired thestdck of these companies from J. P. Morgan & Co. Q. (By Mr. .Jenks.) You say this matter was entirely public ; perhaps you can furnish us with these contracts, so we can make it perfectly definite? — A. Ithink so.' ' [Federal Sleel Compauy with J. P. llorgan & Co., ayndicatemanagers— Agreement— Dated September 9, 1898.] AS AGREEMENT made tliis 9tli dav of September, 1898, by and bflwciii Federal Steel Company a corporation organized and existing under tlie lawsufthe State ofis'ew .Trreoy (hereinafter called the " .steel companv^'), party of the tirst part, and J. P. Morgan & Co., of the city of New York (herein- after called the" "syndicate managers"), acting in behalf of a syndicate, parties of the second part: Whereas the steel company has been organized with an authorized capital ot $200,000,000, of which one-half is 6 per cent nonciimulatiTe preferred stock and one-half is coiiiinon stock, as shown by the certificate of incorporation of the steel oompaiiv, which was recorded in Hudson County, N. J., on the 0th day of September, 1898, of which stock there have been issued 30 sliares of common stock of the par valueof $100 each lor $3,000 in cash; and . ., , , , "Whereas as hereinafter stated, the steel company desires, by means of an issue of its capit.al stock, to purchase or to acquire certain property necessary for the business of the steel company, and to pur- 988 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CAN CONTROL CONSTITUENT COMPANIES THROUGH THE ELECTION OF DIRECTORS, Q. I wish to go back again to the question aug-gested by Mr. Kennedy a little ■while ago as to the relations existing between the Federal Steel Company and these constituent companies. The Federal Steel Company owns all the stock of these different companies; the Federal Steel Company then, of course, directs or makes the election of the directors of each one of these different companies. It does elect directors in these different companies? — A. Well, of course, it is a stockholder. That is practically the effect; that would be the result in the case of a contest. As a matter of fact, one share of stock is kept in the hands of each director of the different companies; that has to be done under the laws. They will elect their own directors; we do not have to he present. Q. Simply in case of a contest yon would control? — A. Of course, we would control. EACH CONSTITUENT COMPANY LOOKS OUT FOR ITSELF. Q. I wish to go back to the example suggested a little while ago. If the Minne- sota Iron Company could make a better contract with an outsider than it could with the Illinois Steel Company, as you said, it would sell to the outsider?— A. That would not be the result. You see what the practical result would be. Assuming that the Illinois Steel Company offered $2.50 for ore, and the outsider offered $2.60, the Minnesota Iron Company would say to the Illinois Steel Company, you must pay $2.60, and the Illinois Steel Company would be forced to pay that price rather than shut down its mill; that would be the practical effect. chase or to acquire the property or stock of certain companies owning mining, raannfacturing, and producing materials necessary for the business of the steel company; and Whereas, after careful investigation and appraisement, the board of directors of the steel company have ascertained, adjudged, and determined that the value of the property and stock so to beacq^uired is equal at least to the par value of the stock of the steel company to be issued therefor; and W hereas, in order to obtain such property and such stock for tlie necessary purposes of its corpo- rate business, the steel company has desired, and now deems it important, to secure the assistance and cooperation of J. P. Morgan &. Co., bankers, of the city of New York, who, upon the terms of this agreement, have rendered their assistance to the undertaking, and have consented to endeavor to form a syndicate to provide $14,075,01)0 in money, for the purposes of the steel company, and to enable it to acquire the property and the stock of certain other companies hereinafter set forth; and VVbereaa J. P, Morgan & Co. have aided and are willing to continue to aid the steel company by the formation of such a s^ ndicate for such purposes, but only upon condition that a contract be made in the terms hereof; and "Whereas the outstanding capital stock of the Minnesota Iron Company consists of 165,000 sharea, of the par value of $100 each; Illinois Steel Company consists of 186,506.35 shares, of the par value of $100 each ; Elgin, Joliet and Eastern Kail way Company consists of 60,000 shares, of the par value of $100 each : Now, therefore, in consideration of the premiae-s and of the sura of $10 to it in hand paid by Messrs. J. P. Morgan & Co., the receipt whereof is hereby acknowledged — I. The steel company covenants and agrees to and with J. P. Morgan & Co., acting in behalf of a syndicate, substantially as follows: If on or before December 15, 1898, J. P. Morgan & Co. shall make, or shall cause to be made— (a) A transfer of not less than two-thirds of the shares of the capital stock of each of the following companies, viz, Minnesota Iron Company, Illinois Steel Company, and Elgin, Joliet and Eastern Railway Company ; and (&) A payment of $14,075,000 in cash, the new company thereupon will issue to Messrs. J. P.Mor- gan & Co., or to such persons and in such proportions as may be intlicated by them, 56,806 shares of the preferred stock of the new company and 454,265 shares of the cftmmon stock of the new company, and, in addition thereto, such preferred stock to an aggregate amount equivulent to the surrendered shares of constituunt companies, estimated at rates oi exchange severally arul respectively as follows: One and three hundred and iit'ty-five one-thousandths shares of preferred stock of the new company for each share of the Minnesota Iron Coujpany ; One share of such preferred stock for each shaie of the Illinois Steel Company ; Eight hundred and seventy-five one-thousandths of one share of sacli ]>relerred stock for each share of .the Elgin, Joliet and Eastern Railway Company; II. Messrs. J. P. Morgan &. Co. agree in good faith to uso their best eltbrts and influence toward bringing about such transfer and payment, and, in behalf of the h\ ndicate, agree that, as a p;irt of, and in connection with, the proposed trau.saction, and conditioned upon t-lie consummation thereof, any and all shareholders of the Minnesota Iron Comjany, of the Illinois Steel Company, and nT 'lie Elgin, Joliet, and Eastern Railway Company, upon the surrender of their shares to the s.\ mlirali) (together with a cash payment as hnn-iuafter required), shall have fair niid reasonable opi'oriuniiy. for a x>eriod of at least ten days, to acquire and to receivts from the syndicate, preferred slurii iiiil common stock of the Federal Company on the following basi^, viz: ''Each share of Minnesota Company (on ]}nyment by it of $"J7.10 in cash) lo receive 135J ] or cent in preferred stork of Federal Company and 108.40 per cent in common stock of Federal ConipiUiy. "Each share of Illlnnia Company (on payment by it of $20 in cash) to receive 100 per co;it in pi'o- ferred stock of Federal Company and 80 per cent iircommon stock of Federal Compsiny. "Each share of Elgin Company (on payment by it of $17.50 in cash) to receive 87^ per cent in pre- ferred stock of Federal Company and 70 per cent in common stock of Federal Company." Such acfiuisition of new stock'is to be etfected by a deposit of the constituent shares wilh, and ili» making of the cash ])ayment either to, the Ctdonial Trust Company, New York, or to the Old Colniiv Trust Company, Boston (as each depositor shiill elect), in exchange for transferable receipts, nj-on tho surrender whereof shares of tho new company are to be delivered so soon ns the same are re;idy. II i^ iinderstood tluit until the consummatlo'n of the transiiotion in I ended and indicated under Arti- cle 1 heieiif, all dejin.sila of shares and nil ]);iymeuts in connection therewith under this Article II sh'dl be subject to the control of J. P. Morrrnu & Co. III. Messrs. J. P. Morgan & Co., with the approval of Itoswell P. Flower and of Robert Bacon, or ot FEDERAL STEEL COMPANY: GARY. 989 Q. (By Mr. Kennedy.) Suppose it could not afford to pay as much as an outsider would offer? — A. It would have to take care of itself. If, as a matter of fact, the management of the Illinois Steel Compauy was such that it said, "We will pay$2.50 and no more," it would shut down the mill. The Minnesota Iron Compauy 'would not take the $2.50. DID NOT UNITE COMPETING CONCERNS. Q. (By Mr. Jenks.) Now, inasmuch as there has been so much talk with reference to trusts and trust organizatiun in connection with corporations, would you explain to us clearly wherein, in any particular, this differs from the old trust organization? In that the common working stock of the ditterent companies was put into the hands of the trustees, so far as the practical workings are concerned, is there any difference? — A. You refer to the Standard f Q. We will say the Whisky Trust, the Standard Oil Trust, and the Sugar Trust. — A. The Federal Steel Compauy does not own the capital stock of any companies which were in comisetition in any line of bu.siucss one with the other. I under- stand the Standard Oil Company — now, of course, I am uot stating any secrets or giving any knowledge that is peculiar to myself, because 1 have none. I only state what I assume from the public reports in the newspapers, and I assume them to be cor- rect. I understand that the Standard Oil Company purchased from time to time the capital stock of different companies who were in competition one with the other, and that to a degree, at least to some degree, it thereby established a monopoly or obtained substantial control of the business. If that is so, that would seem to me to be a trust, within the meaning of the word as commonly understood. I do not either of them, may pay any and all expenses directly or indirectly connected with, or precedent to, the organization oi" the steel company; and in case of any such payments they shall be entitled to deduct the amount thereof from the cash payable to the steel company under this contract. IV. Messrs. J. P. Morgan A: Co. shall be liable only ratably with other syndicate members according to the amount of their several subscriptions. A list of such members, s'liowing the amount of their several subscriptions, shall be furnished to the Federal Steel Company, and it may and shall look to such syndicate members ratably to the extent of their several subscriptions. This agreement and any agreement in pursuance thereof are and sh.^ll be strictly inter partes; and no stockholder of the Minnesota Company, the Illinois Company, or the Elgin Company shall be deemed to have any rights thereunder. As to any and all such stockholders any rights shall be only those set forth in circulars to be issued i jviting deposits. In witness whereof these presents have been duly executed by the parties hereto the day and year first above written. Fedehai, Steel Company, [L. s.] By Benjamin Yan Dyke, President, Attest : Charles MacYeaqh, Secretary. J. P. ^Morgan .t Co. [l. s.] Acting iu behalf of a Syndicate. To the shareholders of the Minnesota Iron Company, Illinois Steel Company, Ehjin, Joliet and Eastern Sailway Company; Pursuant to arrangements made by a syndicate for an exchange of shares of the above-named com- panies for shares of the Federal Steel Company, the undersigned give notice that in behalf of such syndicate they are each prepared to receive certificates for any such shares for purpose of such exchange on the following basis and sub.tect to the i'ollowing conditions, viz : Each existing share of Minnesota Iron' Company (upon payment thereon of the sum of $27.10 in cash) to be entitled to l.:i55 shares in preferred stock of Federal Steel Company and l'.'J84 shares in common stock of Federal .Steel Company. Each existing share of Illinois Steel Compauy (upon payment thereon of the sum of .-fJO in cash) to be entitled to 1 share in preferred stock of Federal Steel Company and eiglit-tenths of .me share in common stock of Federal Stei 1 Company. Each existicgshaie of Kl^in, .Toliet and Eastern Railway Company (upon payment thereon oi the sum of $17.60 cash) to be entitled to seven-eighths of one share in jireferred stock ot Federal Steel Company and seven-tenths of one share in common stock of Federal Steel Company. Shares of the Minnesota Iron Company, the Illinois Steel Company, and the Elgin, Joliet and Eastern llailway Company, to insure participation in this arrangement, must be deposited with either of the uiMli-i signed trust companies not later than October 1, 1898, snli.j.xt to tlic above-mentioned cash pnMi.eni in respect thereto, and such cash payment must be made to the same trust company not later iImi 11 (). -teller 10, 1898. ^ , , •„ Triiiisr, r„blr ii-i-eipts will he issued for deposited shares, and the cash payment, when made, will he noted on such f'-ceipts. . . ,. , n p ^ '1 h.' I .iiisiniMii;it oil of the projiosed arrangements is dependent upon its acceptance by holders ot at lea-t r ivo-l I i d.s in am nint of the shares of each of the three i:onstituent companies. If. lorinv le.isiiii. I li,- arruigetDent shall not be carried out, the deposited shares and the cash pay- ments wil, he icriinied upon .surrender of our receipts. .1^ X. 1 All slnins f..i- lie o-ii must he assigned in blank and must have proper revenue stamps attached. 'J'he slnircs of i be F.idenil Sti'cl tympany are of the par v;ilue of $100 each, Suitable cash settle- mei ts w'll I >■ nnide af liine, ot delivery of the new stock in respect to fractions ot shares ot such stoci?: ai.cl ilirg to an\ di positor. /-,„„„.„,. " ■' ' Colonial Trust Company, St. rauUUiilding, 2.'2 Broadtnay, Kew York. Olii Colony Trust Company, Amrs Euihiinn, Waslimjton Street, corner of Cuvrt, Boston, Mass. New York and Boston, Seplemlier 10, la'Jl. 990 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. think that if you ehonld buy the capital stock of one of the railroad companies in Washington and also the capital stock of some manufacturing establishment in Washington you would thereby be establishing a trust. Indeed, the laws of Illinois expressly provide that a manufacturing company may own the capital stock of a railroad company which connects with its manufacturing plant, the idea being that one is of benefit to the other and the public is not injured by anj' such purchase or control of interests. Now, as I said before, we have endeavored not to run counter and not to be antagonistic to the spirit of any law of any St,ate; we are not attempting to control prices; we are not seeking a monopoly; we have been oft'ered the capital stock or the properties of a good many different manufacturers engaged in our line of business, but we have not entertained any proposition at all. Q. The question has to do simply with the general form of control. The board of directors of the Federal Steel Company is in such a position that it could, in case of emergency, practically direct the actions of each one of the constituent members and that was supposed to be the purpose of this organization when it was formed?— A. That is right, and it is fair to say that ihe officers of these different corporations, presidents of the constituent companies, are in very close communication with me and listen to my advice from time to time. THE RISE (IF PRICES. Q. Can you now give us briefly n statement regarding the course of prices in the leading products of the Federal .Steel Company from a period a year or two, per- haps, before the formation up to the present time? — A. I can give you some of those prices. Wo all know that prices in manufacturing lines have materially advanced during the last 9 or 10 months, and indeed I do not know that that is confined to manufacturers. I tJiink that is true of the general business of the coun- try. I know it is true of the hotels. The price of pig iron about a year ago was, say, $11; at the present time it is about $23. Notwithstanding we produce a very large(|uautity of pig iron, we have not produced siifiticient to supply our own wants, and have purchased dviriug the last 6 months a good deal of pig iron; we bought some the other day, some of our companies; we bought, we will say, 150,000 tons of pig iron at about +i!2..50. Coke a year ago was about $1..50a ton to one of our companies; our companies have to buy considerable outside coke at the-, present time; we are building some ovens now. The>- were trying to buy some coke not long since and were asked +2. ,50 to $3 a ton for it. Rails, which are one of the largest products of the Illinois .Steel Cumpany, a year ago were selling at $18— very much too low; for 3 years rails sold for very much less than Ihey could be produced for; for the last 3 years they have been doing business at a loss, a large loss. They are selling now at $33, and, of course, you will see at a glance there is not \ery much profit in that— thiit is, if pig iron must be bought at $23.50 cash. It costs something like $8 or $9 a ton to convert pig iron into rails, and you have got nothing left for your invest- ment: and the iiivestuient, of course, is very large. El.-FECTS OF CONTRACTS. Q. It is n case where special advantage came to the Federal Steel Company in having its own sujiply of ores?— A. Yes, certainly. 'I'he contracts for ore were made last year at a low price, and yet, I suppose, when the price is made for nest year, the Minnesota Iron Company will get some benefit. It can not be possible that these other prices of finished products will obtain without the prices of ore increas- ing correspondingly. A ye.ar ago lake freight rates were 80 cents, and now they are $1.25. Our people have contracted for, say, 1,200,000 tons extra, at abont $1.20 to $1.25. (^ Well, you had made your contracts earlier for ore. Had yon also made con- tracts for the supply of fini.shed materials, so that the real prices you are getting now are not the representative market prices?- A. About two- thirds of it, probably less; from ine-half to two-thirds. Over half, mostly, nearly all of the capacity for rails was contracted at Iho low figure. As I say, the price of rails was abnormally low. The average ]irice for riiils for the hist 9 years was $25, and for the last 3 years. $18 ; ^25, when ]iig iron is worth $10 or $12, is a fair enough price. Seu.ator Mallory. Should you prefer to go on with your testimony and finisli now?— A. I do not think it is very material. If it is just as convenient, I should be glad to get through and go back, but I am perfectly willing to stay. I think we are willing fo give stockholders or the public any information concerning our business and onr books and our profits. The commission took a recess until 2.15 j). m. FEDERAL STEEL COMPANY: GARY. 991 2.L5 p. M. Senator !ALiLLORY. The commission will resume its session, ilr. (Jarv is on the witness stand. wa(;es incheased — salaries diminished. Q. (By ]\Ir. Jenks.) I should like to ask you with reference to the course of wages in these different C(3inpaiiies that have beeii organized into the Federal Steel Com- pany from a little time before the organization up to date. If you can give us any specific facts on the question I shall be glad to have them. — A. All the companies — constituent companies, so called — together employed in August, 1899, 21,859 men. In October, 1898, they employed 18,717 men. The monthh- pav roll for Aut;ust, 1899, was §1,393,450.19. For the year that would be $16,721,^02.28. The average price paid common laborers in August, 1899, was $1.70 each. The increase paid common laborers in 1899 over 1898 was 15.6-t per cent; decrease of average pav of nfficers and clerks at headquarters in 1899 from 1898, 6.26 per cent. (Witness introduced comparative statement.) Comparatire statement of employees, and wages rece!red by same, of the Federal Steel Com- pany's amstituevi companies for the )iio)iihs of October, 1898, and Axigust, 1899. Number of employees. Average daily com- pensation. Total monthly compensation. Octo- ber, 1898. August, 1899. Per cent in- crease. Octo- Au- ber, gust, 1898. 1899. Per cent in- crease. October, 1898. August, 1899. Per cent in- crease. Officers and clerks at headquarters . . . General superintend- ence 294 574 7,405 8,076 1,168 1,200 308 639 8,584 9,879 1,276 1,173 4.76 11.32 15.92 22.32 9.25 2.25 S5.27 2.95 2.32 1.47 1.71 1.49 $4.94 2.97 2.63 1.70 1.96 6.26 .68 9.05 15.64 14.6'' 840, 525. 69 50,628.30 516,699.80 3.56,778.97 53, 208. 15 53, 739. 57 345. 6.52. 03 56, 732. 10 651,349.06 .503, 615. 95 74, N79. 00 61, 222. 05 i.a« 1"^ 06 Skilled laborers Conuuon laborers Miners (not includ- ing those in Con- nellsville coke dis- trict) 26.06 41.16 40.73 All employees of the Southwestern Con- nellsvilleCokeCo.. 1.74 16.78 13.93 Grand total 18,717 21,859 1 16.79 1.92 2.13 ' 10.94 1,077,580.48 1,393,450.19 29.31 Total annual wages paid employees on basis of August, 1899, roll, $16,721,402.28. Q. (By Senator Mallory.) I understand from that, then, something I did not un- derstand from j'our first testimony, that your officers, or the oflicers of these companies, higher officers, actually had their salaries decreased all the way down the line? — A. We reduced the number of officers and reduced the salaries ; that is, we replaced some, and there were some of the officers who resigned or separated from the com- panies and were replaced with other men at less salaries. Q. (By ilr. Jenks.) Do I understand that you abolished some of the higher-priced officers a"s well, and that would tend to lower the general average ? — A. Yes. Q. You did not take away anything from the salary of anyone who stayed in the positions that were left? — A. No. Q. (By ilr. FAR(irHAR.) Do you desire to have it in e\idence that you decreased the whoie salary of the official service by lessening the number of employees ? — A. AVell, by reducing also the amount of compensation. constituent companies DEAL WITH EACH OTHER AS l.NDEI'KNDENT. Q. (By Mr. Kennedy.) Is there any arrangement between the,«e different compa- nies making up the Federal Steel Company l>y which, say, the Illinois Steel Com- pany, for instance, could go to the ^linnesota Company and say, "We can make a contract for a large amount of a certain kind of work if we can get our raw material at a certain figure." Would the 3Iinnesota Company make them the figure at which they could take that work? — A. No. Q. They would not — would not make any exceptions?— A. X(3. 83a 64 992 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. BONDED DEBT AN!) CAPITAL STOCK OF CONSTITUENT COMPANIES. (J. Has the Federal Steel Company a bonded indebtedness?— A. Yes; I beg your pardon; what is that (luestion? (,i. Has the Federal Steel ebmpany a bonded indebtedness? — A. No, it has not. il (By Mr. 0. J. Harris.) Have any of the companies a bonded indebtedness?— A. Yes; most of them; the Lorain Steel Company has no bonded indebtedness. Q. (By Mr. Faequh.\r.) Has there been made any guaranty of these bonds by the Federal Company? — A. No. (,i. Then the separate companies take care of their own indebtedness? — A. Yes. Q. (By Mr. Kennedy.) Does that bonded indebtedness affect the stock of the Federal Steel Company? — A. No, if I understand your question ; if I comprehend your question. I do not know whether you mean to ask whether it affects the sell- ing value, the market value, of the stock, or not ; if so, that is a question I can not answer. If anyone can tell what determines the value of stocks on the stock exchange, he knows more about the situation that I do ; intrinsic values do not control values there, selling values, I think, as a rule ; now I will not say as a rule, but always. Q. (By Mr. Jenks.) What is the amount of the capital stock of each of these dif- ferent companies ? — A. Actually issued or authorized? (). Perhaps you can give them both just as well. — A. "Well, the authorized capital stock of the Illinois Steel Company is $.50,000,000 ; the stock actually issued is in the neighborhood of !?18,(i.5O,O0O. The authorized capital stock of the Lorain Steel Com- pany is about $9,000,000, and the amount issued is perhaps $5,000,000; I would not attempt to be accurate. The issued capital stock of the Minnesota Iron Company is about $16,500,000 ; the authorized capital stock is very much larger, but I have for- gotten the exact amount. The capital of the Elgin, Joilet and Eastern Railroad Com- pany is about $6,000,000 or $7,000,000. (,^ The authorized you say there? — A. No, the issued, and perhaps authorized. For the other companies, I do not know that I could state it offhand ; I have for- gotten ; but I can furnish these figures if it is necessary. iSliilniieiil, fiirniKlii'd Inter, shuiriiig the authorized capital Ktocks of the neverai constituent cDtiipiuiin; of the Frdcriil Steel Cumjiami, also the ainotiiil of same issued to October 20, 1899. Name of company. Authorized capital stock. Amount issued. Ji20, 000, 000 50,000,000 6,000,000 6,000,000 3, 000, 000 3,000,000 $16, BOO, 000 18,660,600 6,000,000 6,000,000 3,000,000 3,000,000 Elgin, Jdliet and Eastern Rwv. Co Lia-ain Steel Co. {oi Ohio) : Common Lorain Steel Co. (of Pennsylvania) .... Q. The Johnson Compauv you do not know? — A. The Johnson Company's capital stock is about $2,000,000. Q. Now, as to the bonded indebteiluess of these companies? — A. I can give them. The bonded indebtedness of the Elgin, Joilet and Eastern is about $7,000,000; the Illinois Steel Coiapany about $13,000,000, and the others together, all of them, about $5,000,000. (^ That is, the Minnesota and Lorain? — A. Yes. il Al)Out $5,000,000 altogether?— A. Five or six million. Q. (By Mr. C. J. Harris.) About $2.5,000,000 in all?— A. In round numbers. Of course, when I spoke sometime ago about the actual value of these different properties, I meant the actual net value over and above the bonded indeljtedness; for instance, I said the b()(jk value, not including cash, y\'as in the neighborhood of forty-odd millions; that wa,s over and at«j\'c the bonded indebtedness. FEDERAL STEEL COMPANY: GARY. 993 iStatemetil fiirnishci! later .shoiriiijj the outstandiii;/ ixxiies nf moiir/iif/e bonds of the niiistUiii'nt eompaides of the Federal ,Sleel tjoinpanij,' October '-20, IS'J'.i. Total. Less, held by the is- suing company or by one of the constit- uent companies. Balance outstand- ing in hands of public. Date of ma- turity. Rate of By issu- ing com- pany. By constit- uent com- pany. est. Miiutemla Iron Co.'s prnperties. Duluth and Iron Range H. R. : First mortgage ff6,734,000 5,000,000 500,000 ja,ooo 500,000 490, 000 m, 732, 000 1,000,000 10, 000 Oct. 1,1937 Jan. 1,1916 Mar, 1,1917 or before. Jan. 1,1910 Apr. 1,1913 May 1,1941 $100, 000 an- nually. P.ct. $3,500,000 6 Land grant Total 12,234,000 992, 000 a3, 500, 000 7, 742, 000 ItUnois ^teel Co. Convertible 5 per cent debentures of 1910 2, 959, 000 7,000,000 650,000 02,909,000 6,900,000 5 Original issue ?ii.200,000 Paid off in 1899 and retired 3,241,000 Nonconvertible 5 per cent deben- tures of 1913 100, 000 ^ Total 9, 959, 000 7,417,000 1,500,000 100, 000 50, 000 9, 809, 000 7,417,000 1,500,000 Elgin, Joliet and Eastern Ewv., first mortgage 5 Lorain Steel Co. (of Pennsylvania) , formerly Johnson Co. (of Penn- sylvania) , first mortgage 6 Original issue (1894) J2, 000, 000 Paid off and retired. 500,000 Grand-total 31,110,000 1,092,000 3,5.50,000 26,468,000 a These 33,500,000 of bonds are owned by the Minnesota Iron Company h These 950,000 of bonds are owned by the Federal Steel Company. cOf these $2,909,000 of bonds $37,000 have been called for redemption, but have not yet been pre- sented for payment. MOEE FEDERAL STEEL STOCK JI.VY BE ISSUED, BUT NOT FOR LESS THAN PAE. Mr. C. J. Harris. I was not'quite clear in regard to your testimony this morning relating to the organization of this company. I understood you to say that you paid §100,000,000 in the Federal Steel Company's stock for certain things. You did not say what was done with the remaining $100,000,000? — A. It has never been issued. Q. (By ilr. Jenks.) It is within the power of the direetors to issue that stock at any time they see fit, for the purchase of any properties, or for cash? — A. Yes, or for cash; 100 per cent on the dollar; not otherwise. Q. It must be issued that way? — A. It must be issued at 100 cents on the dollar for every share of common or preferred. Mr. C'. J. H.MiRis. I did not know but that went to the promoters. Q. (By Representative Livingston.) How is that stock issued? — A. That has been issued? Q. Yes.— A. About $53,000,000 of preferred and $4(5,000,000 of common. DIVIDENDS. Q. Do you mind saying whether you have paid any di\-idends on that or not?— A. We have paid dividends on the preferred; we declared a dividend on the com- mon stock, and the payment of that was enjoined by some small stockholder who bought a little stock— perhaps for the purpose, I do not know— on the technical ground that dividends on common stock could not be paid until the end of the year. Therefore there has been no dividend paid on common stock. Q. (By Mr. Jenks.) Has the money been set aside especially for the payment of this dividend? — A. It has been. Q. (By Mr. Kennedy.) What dividends have been paid on the preterred stock? Q. (By Mr. 0. J. Harris.) Regular quarterly dividends, or not?— A. Yes; quar- 994 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. terly dividends — IJ per cent, two times. The dividend on the preferred stock was also enjoined, but, on hearing, the court modified that, and in December, I suppose, naturally, two dividends will be declared — that is, 3 per cent, making a total of 6 per cent for the year. Q. (By Mr. Jenks.) Is the preferred stock cumulative stock? — A. It is not. Six per cent noncumulative. FBDEKAL STEEl's CONTROL OP CONSTITUENT COMPANIES — IN NO SENSE A TRUST. Q. (By Representative Livingston.) What control and what power of direction has the Federal Steel over the several boards of directors of the companies forming the Federal Steel Company? — A. It has no control whatever directly. It has the same control indirectly that any stockholder of any company has. If, for instance, you were the holder of all the stock or a majority of the capital stock of any corpo- ration you would ultimately have control of that company. If your directors were elected for a term you could not get control until the term expired, and if their action was not satisfactory to you, naturally when the time of election came you would place in position a power, a directory, that was satisfactory to you, so that indirectly, or ultimately, you would have the control of the affairs of the company. The Federal Steel Company has that control over all these constituent companies. Q. How many are in your directory of the Federal Steel? — A. Fifteen. Q. Do these 15 men control the majority of stock of the company? — A. I should say no; not by a large majority; they are large stockholders, most of them. Q. Before becoming directors of the Federal Steel,- did they control the majority of stock of the several companies? — A. They did not; not by a good deal. Some of them were small holders, if they were holders at all in the old companies. Q. Here is the very question that lies at the bottom of this. What necessity was there to form the Federal Steel Company when your own directors did not have the control of the 4 subordinate companies and do not now control their real opera- tions — their business management? — A. I have already said they do ultimately con- trol these other companies, because, owning the stock, they have the right at election time to select the directory. It is for the interest of the Federal Steel Company to own the capital stock of these companies just as it would be for our interest if you had a wagon and I had a horse to form a partnership so that we both should have a wagon and a horse. Q. In other words, the preamble of your articles of incorporation ought to have read something like this: "In order to form a more complete or better union of the interests of these several companies, we hereby agree to form the Federal Steel Com- pany. ' ' Would that cover about the requirement? — A. That is a very happy way of expressing the idea, at least. The Federal Steel Company — coming back to the ques- tion you started — I think, is in no sense a trustee; they are in no sense of the word a trustee of the stock of these companies; the stock is_not held by the Federal Steel Company in trust. It is no more a trustee than you are a trustee of the stock you actually own in a corporation. There is no arrangement whereby the Federal Steel Company is to hold that stock for the benefit of any corporation; it is absolute owner and controls that stock just as much as you would if you as an individual owned it; no difference; no secret arrangement about it; no private understanding about it; no pool or any division in any Tvay of business, business interests, or profits. That is strictly correct. Q. In other words, you would put it in this very form — that were it owned by one person, this one person might own four different interests and control them as much as you do now with your Federal organization? — A. Exactly. Q. The stock of these several companies is regularly voted by the directors of the Federal Steel? — A. As I said this morning, it would be in ease it was necessary. Of course, if I supposed the holders of a great interest of stock would not elect a director that was satisfactory — capable, honest, and intelligent — I would make it a point to attend the meeting myself, and, voting the stock of the Federal Steel Company, elect a director that was satisfactory. That question, practically, will probably never arise— I should not think it would. Human nature is such that these people will take care of the interests of the stockholders of the Federal Steel Company. property and revenues of the federal STEEL COMPANY. Q. (By !\Tr. Kennedy.) You have direct control over the earnings of all these companies, have you not? — A. No, except in the same way; we have no control whsib-YL'i: Q. You declare the dividends? — A. No; they declare their own dividends. The Federal Steel Company gets its dividends on this stock just as you get dividends on FEDERAL STEEL COMPANY: GARY. 995 your stock in the company. If the Illinois Steel Company has money which is avail- able to pay dividends, the directory of that company will declare dividends to the stockholders of the company, and the Feiieral Steel Companv, being a stockholder, will get that dividend; and the same is true of the other comi'.auies. Q. (By Senator ilALLOKV.) What revenue has the Federal Steel Company outside of that, if it has any?— A. Well, the Federal Steel Company, you know, in making this purchase, insisted upon the :{)14, 078, 000 in cash . It has that in t'ash— $14, 078, 000. Then these other companies have in cash about 110,000,000. In addition to that the Federal Steel Company has made some increase in its holdings in the purchase of coal lands, and has obtained a very fine profit on that. Q. It has invested some of this $14,000,000 in coal lands?— A. Yes; or in the stock of a corporation which owns and will operate the works on the property. The amount thus invested is or will be propably 82,000,000, and the propertv is supposed to be worth several millions more than it cost. Q. And it has a revenue from that, has it?— A. We shall have; quite large. Q. Now, how are the salaries of the oflicers of the Federal Steel Company paid — from their earnings? The Federal Steel Company, you will remember, owns the capital stock of these companies. — A. That is it ; aiid also gets interest on the money it has, and will have, I hope, a very fine income from this coal property, which is being developed and being improved. Q. (By Mr. Jenks) . At present, then, the property of the Federal Steel Company is in these three forms — part in mines, part in cash, and the rest in stock in these dif- ferent companies? — A. That is right. Q. And it has an income from these three sources? — A. That is right. ULTIMATE COKTEOL OP A MAJORITY STOCKHOLDER. Q. (By Representative Livingston.) Suppose one of these independent companies refuses to obey any action of the Federal board of directors, what recourse have you? — A. Not any, until the next election. Q. Well, do you admit that they are independent, and at the same time they are subject to you in that way? — A. Well, not subject to our orders. They are absolutely independent. I said this morning you might ask that question of the New York Central. Suppose the officials of the New York Central should do business in such a way as to be unsatisfactory to the Vanderbilt family, what would be the result? At the end of the year the Vanderbilt family, or the stockholders, whoever they may be, would elect a directory that would be satisfactory, but in the meantime they would be helpless. vSuppose you own a majority of capital stock in some corpora- tion and you elect a directory for a year. What are you going to do in the meantime during that year if that directory do not do business satisfactorily to you? Q. Suppose you wait until the election comes, and then elect a directory in one of these companies, and the stockholders in that company refuse to acknowledge the directory that you have elected. Then what are you going to do? — A. The Federal Steel Company owns all the capital stock of that company. Q. Y^es. Now, then, how can you say they are independent? I see how it is; it is a wheel within a wheel; I see it. — A. Suppose you owned the majority of the cap- ital stock of a corporation; the presiding officer of this commission owns a minority. Now, you get together at your annual election and you elect Professor Jenks and Mr. Harris and myself three directors of that company. We are in absolute control of that company for a t«rm, although we do not own more than one share of stock each. You own a majority of the company and you can not do anything. We do as we please. You sit by, and at the end of the year you put in a directory that is satisfactory to you; but it is not really a practical question, because Mr. Harris and Professor Jenks and myself have only one share, and if we are men of any sense or any honesty we are not going to disregard the wishes that you and the presiding officer of this company, who are the real stockholders, express. NO LOSS BY not JIEEGING THE CONSTITUENT COMPANIES. Q. Now, let me ask you a practical one. Why did you not mold these four into one to control it as one? — A. I am inclined to think it is better to leave it as it is. Q. You do not mean to say that you could run these four companies as cheaply as if they were all molded into one?— A. Y'es; I think so. We simply give what are now officers of these different companies a different name, but their services are required; there are no superfluous positions, no positions of mere honor; they are working men; the president of each of these companies is a hard-working man. If he was not a presi- dent he would have to be a manager or something else, and the vice-president would have to be assistant manager. They have no extra men. 996 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. You just call them by different names after you have them combined. These officers — presidents, and so on — are stockholders in the Federal Steel Company? — A. Yes; most of them, if not all of them. Q. (By Mr. C. J. Hakbis.) Do you have the same directors in each one of these subordinate companies? — A. No. EEASONS FOE INCORPOEATING IN NEW .IBKSBY. Q. (By Mr. Jenks.) Are there any other points that you would care to bring out? — A. The Federal Steel Company was incorporated in New Jersey because the laws of New Jersey seemed to give all the power and authority that were absolutely needed. Now, as I came from Illinois, for instance, I should have Iseen glad to incorporate the Federal Steel in the State of Illinois, if it had been practicable; but by the laws of Illinois, for instance, a manufacturing corporation is not allowed to hold or own the capital stock of othei- corporations, with some exceptions — one, at least; it may own capital stock of a connecting railroad company — but if the Federal Steel had been incorporated in Illinois it could not have held and owned capital stock in the corporations in ilinnescjta, mining companies, etc., ship companies; and then in New Jersey the amount of capital stock wliich may be obtained is unlimited, whereas in Pennsylvania and West Virginia and other places it is limited. So far as I know, there is no provision in the New Jersey law which may be used to the disadvantage or prejudice or injury of a stockholder. If there is any such, I am not aware of it — I mean rightfully . It was suggested this morning that there are fake corporations in New Jersey. I have not the shadow of a doubt that there are immoral, illegal practices under the laws of New Jersey; but the same is true of other States. Some of the worst corporations and some of the worst cases under cor]iorations have been perpetrated in Illinois and other States — no doubt about that. Certainly the Federal Steel Company, or anyone interested in it, had no intention, in incorporating in New Jersey, of obtaining any rights that were not absolutely honest. It certainly had no disposition, and none of its officers since have had any disposition, to conduct the business of the company to the prejudice or without the knowledge of the stockholders. ^Ve have sometimes been, I think, unreasonably annoyed 1 ly inquiries from stockholders, our stock being largely distributed; still, ^ve have endeavored to take the pains to give such informa- tion as we had — all the information we had — to the stockholders, and be respectful, and give them every opportunity to kno^v exactly what is being done. PUBLIC KNOWLEDGE IS THE NEED. As I have perhaps said before, I did not quite agree with some of the gentlemen that the affairs of a large corporation sliould be kept secret. I think the great bene- fit, if I may be allowed to state it — I think the great benefit to be derived from the law mader whicli this commission is appointed, and the action of this commission, is in ascertaining fully all the facts which are so mucli in the public mind, and dis- tributing the knowledge and information which they receive. That is what is needed; that is what the public sliould know. There are always two sides to these great questions. Very frequently the laboring man is abused, and very frequently the corporation is abused, and very frequently the public is abused, and very fre- quently the public laws abuse the corporation. They sometimes are too liberal in favor of corporations, and at other times they are too harsh against corporations. Now, when you bring all these people together, when such an instrumentality as this ascertains and incjuires in an honest way, and the people ascertain what the facts are, and distribute those facts thoroughly, so that everybody has an opportunity of knowing what they are doing — all classes of people are not so dishonest that they are not going to do the fair thing — you will hear sometimes a harangue by some man who is supposed to be a leader among the labor people which is abusive of corporations, and perhaps some of the listeners believe what is said and are prejudiced against corporations. On the other hand, you will see some man who is interested in great corjiorations pronouncing against the laborer, and he is just as unreasonable, and people 1 >elieve him, a- hen if the opportunity for investigation were made they would not believe it. The result is that both sides are injured more or less. People should be brought together; that is what I think. Laboring men and capital should be lirought together, and we should all know all the facts, and on that evi- dence all of us will properly consider and decide these questions. CORPORATIONS SHOULD NOT TRY TO INFLUENCE ELECTIONS. Q. (By Representative Livingston.) Pardon me for trying to get one more fact. What interest have you heretofore taken in politics and elections, looking to the interest of your company? — A. To whom do you particularly refer? FEDERAL STEEL COMPANY: — GARY. 997 Q. Your company. — A. Our constituent companies? Q. I^mean your company. — A. The Federal Company? Q. Ye.=!. — A. Since I liave had anytlring to do with it, nothing \vliate\er. Q. 5Iade no contribution? Is it' agaiu.st y(5ur by-laws or rules to do so'' — A. No; it is not. Q. Do you anticipate the necessity of one of these days having to do so?— A. I hope not; I do not believe in that; 1 do not believe in a corporation as a corporation attempting to interfere with or influence elections. I think I have been requested once or twice to contribute, but have declined to do so. Q. Now, then, abovit your labor. Are your workmen free to do as they please ? — A Perfectly so. Q. There is no spying or anything of that kind done ? — A. " If there is I should like to know it. If anybody knows of anyime in any of our corporations attempting to influence any of the laborers to vote, I should like to know it. I do not believe in it. SriTS TO EESTK.\IN P.iYMENT OF DIVIDENDS. Q. (By J\Ir. Jenks.) To come back to the question of the suits that you spoke of. Yon said that you had been delayed for some time in the paying out of the dividends on the common stock, and also later in paying a dividend on your preferred stock, by suits that were brought. Have you any knowledge as to whether the persons who brought the suits were large holders or small holders of stock? — A. They were very small holders and very recent purchasers. I was simply going to say that I think the shares were very limited in number, and that the purchases were made alnK)st immediately before the suits were brought. Q. Had you any intimation as to the persons in whose interest these suits were brought? — A. No. Q. (By Representative Livingston. ) If you have your own idea, would you tell the commission why these suits were brought? What was the purpose of it? — A. You want me to guess at it? Q. Yes. — A. I guess it was done for stock-jobbing purposes. I do not think these suits were brought in the real interest of stockholders. I can not imagine that a stockholder, for the benefit of himself or other stdckholders, would prevent a company from distributing some of its surplus assets among tbe stockholders, as dividends. Q. Did the price of stock go down on that? — A. Yes, to some extent. I presume the point was maile and the advantage reaped. Q. (By Mr. Jenks.) Did you have any intimation or knowledge of any persons back of those persons who brought the suit? — A. No; no personal knowledge. NO STOCK JOBBING BY DIRECTORS. Q. (By Representative LiviNGST<_>N.) Did the company take advantage of it, of the move? — A. What do you mean by that? Q. Take up all stock when it went down that you could get hold of. — A. Oh, no. I do not know of any of our people that bought a share; none of our officers, none of our directors, bought a share, I think. Q. (ByMr. Farquhar.) Have you any rule about that? — A. As far as I know there are no speculators in our directory. Q. Have vou anv rules in your directory about purchasing stock and dealing in stock?— A. No. We have very frank interchange of thought and opinion, though, on these questions, from time to time, so that I know pretty well what the different people are doing. I think our directors have from time to time bought our stocks as they declined in selling value, but at that particular time my opinion is that not one of them bought a single share. Certainly none of them were directly or indirectly connected with the suits. In fact, they were all very much annoyed about it, and we did everything we could to get the injunction modified, and we set aside the amount of money so as to be certain to take care of stockholders. That is, when the court enjoined us from paving out these dividend.s ; in the first instance when they brought suit, not having it in mind, they did not enjoin us from setting aside the money, so we set it aside to take care of our stockholders. Q. (By Mr. Jenks.) Did you express an opinion with reference to the tariff— the effect of the tariff on your line of industry?— A. I do not feel competent to express any opinion on the tariff question. It is a larger question, in my opinion, than 998 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. I fully comprehend. That ^mne protection has been and is needed for manufactur- ers, I believe. I should think, from my limited knowledge of the question, that the real question is when to protect and to what extent to protect. I do not think the time has arrived in this country \\hen our industry does not need protection. y. (By Representative LivixIisroN.) How is that? — A. I say I clo not think the time has arrived in the history of our business Q. You mean your company? — A. ^Vhen we could get along without protection. Q. (By Representative Livingston.) Well, could you not afford to lose the whole of that protection? — A. Well, that is a question I should want to study and be more familiar with 1 lef ore I could answer it honestly and satisfactorily to myself. METHODS BETTER .WD LABOR CHEAPER IN GERMANY. The German jieople particularly are in a very advanced stage of manufacturing in steel interests, steel properties. I believe they can manufacture pig iron in Germany cheaper than the}- can anywhere else. They make principally basic Bessemer there, basic metal. They have their ore and their coal right together, and they are making coke in what are called the by-product coke ovens, thereby utilizing all the by-prod- ucts — ammonia, gas, tar, etc. Q. Have they not got that in Alabama? — A. Yes, they are putting them in in this country to some extent. Yes, they have a by-product coke-oven plant at Birming- ham; they have one at Dunbar, and they have one near Harrisburg. Q. Now, there they have coal and they have the iron ore right along with it?— A. Alabama? Q. I should think they could do it as cheaply as they do anywhere? — A. They are making pretty cheap pig iron in Alabama ; there is no doubt about it. I think labor is considerably cheaper in (iermany. I have no doubt you are better advised than I am with reference to that. I do not think they pay more than about 65 to 70 cents for their laborers in Germany, and they have been very materially increased, you know, in the last 3 years. EVERYTHING SYNDICATED IN BELGIUM. They are pretty well protected in Germany and Belgium, for that matter, and England, and perhaps France. There seems to be a feeling on the part of the people, and also on the part of the government, to take care of these large aggregations. There is no such antagonism there as there seems to be in this country ; and at the present time I think the manufacturers are pretty thoroughly protected by syndicate agreements. For instance, I asked a prominent manufacturer in Belgium why he did not produce larger <_|uantitiesand did not keep his mill running full. He said he could not get coke. "Why," I said, "1 understood you to say you owned your own coal and made your own coke." He said, "Everything is syndicated. Our coal property is all syndicated and we have allotments, and I am allotted just so much; I can not produce any more." And there is an understanding with reference to prices there; I do not know whether they call it pooling there or what they call it, but I think there is a pretty unanimous agreement between the manufacturers in Germany, and perhaps between them and England, so that they take care of themselves and they have a uniform fair price. In this country, you know, we are up and down and go to extremes. AS TO THE NEED OF PROTECTION, WHEN WE CAN EXPORT. Q. You are aware of the fact that a great deal of ore, iron ore and steel, especially steel, is being shipped now from Alabama to the Orient. Now, how is it that they ckvvy that across the continent and ship it over to Japan and China, if they need pro- tection? — A. Now, that is largely a question of freight, I think, is it not? There is a limited market for that ore. We sell some rails in Japan; we could not sell rails in England at the present time. Q. Let us understand that now. Do you mean to say that the discrimination now under the tariff does not equal the transportation, or does it give you the transporta- tion in length of time? Do you not lose that discrimination inthe transportation from here to Japan, in the freight? — A. I am inclined tv. think, as I say, this is too large a question for me. Do not understand me to admit even that I am coinpetent to express any opinion on that, because I do not think I can in that regard. I think the tariff on steel prcjduction at the present time is more than the freight Q. (Interrupting.) From here to Japan? — A. From this country to Japan. That Ls my impression; you know a good deal better than I do about that, I am sure. FEDERAL STEEL COMPANY: GARY. 999 THE TAKIFF IN GENERAL. Q. One remedy proposed for tliese trusts is to take away the tariff entirely from them; just turn them loose. Suppose Congress should do' that; what effect'would that have on your industry, for instance? — A. In the first place, you refer to trusts. Q. I mean all trusts, yours .V. Now, that nord has been in the news]mpers so much that I do not belie\-e we have a clear understanding about it; at least, I do not. The -word is used indiscriminately. Q. Make it corporations and let it go; just corporate companies. Now, suppose all the protection we give companies or combines like yours — suppose it was all gone; what effect would it have? — A. Yes; that would have an effect, if you should take "away the tariff. Just where this principle or proposition should be applied requires a great deal of study. But with reference to a great many industries, if you should take away the protection which is now given them, you would permit foreign products to be brought in here to the absolute ruin of these industries. Then what would be the result? In the first place, you have deprived the laboring man of an opportunity to earn a living, and, in the second place, you have given the foreigner an oppor- tunity to come in here and make his own prices; and in that way you have very materially prejudiced the rights and interests of the consumer. Therefore I think, as I said before, I think the tariff question really is — now, I may be entirely wrong; I would not set up my opinion against anybody's — but I think the real tariff question is to determine just how much protection is necessary to enable the industries of this country to continue in business at living prices so as to take care of the workingman and so as also to prevent the foreigner from having the control of this business to the prejudice of the domestic consumer. Now, then, on the other hand, if you make the tariff so high that you create such a monopoly, or if you pass any law which enables the creation or existence of such a monopoly in this country as gives the con- trol of any business to the mailufacturer or to the producer to the prejudice of the consumer, why, then, you have gone too far in that direction. NO MONOPOLY OF STEEL. Q. Have you not done that with your steel company? — A. How is that? Q. Have you not done that with your steel company? — A. I do not think the tariff question has anything whatever to do with the present prices. Q. Have you not got a monopoly of the steel business in the United States? — A. Who? Q. You. — A. Oh, we have no monopoly of any branch of business. I emphasized that this morning. We do not seek any. ANY DISCEIMINATION JIUST BE BASED IIX ILLEGAL ACTIONS. Q. You misunderstood my question. I do not want to discuss the tariff question in its general relation as bearing on all these matters. I asked that question with reference to breaking up these combines and trusts. What would be the effect on your industry? And as to others that are not combined in a trust, what effect would that have on the combines and the trusts? Would that break them up? — A. I am inclined to think it w-ould. Of course if y(3U destroy the C(jrporations you destroy them, that is all. If you call a corporation a combine, if you drive it out of busi- ness, that is the end of it. Q. (Interrupting.) I suppose that if Congress should legislate on that matter there should be some explicit definition of what a trust is, and then we should hold down to that definition all these industries in withdrawing protection from the industries. It would certainly be my idea not to consider a corporation a trust or a combine until it interferes with ordinary competition, and the moment it did that I should call it a combine.— A. I am no't attempting to argue the question at all with you, but I doubt whether you can control the question by the adoption or repeal of tariff laws. In the first place, there is a legal question that perhaps you can answer better than I can. Q. In other words, do away with free charters?— A. Yes; that is one question; but if you could take away our tariff law which was enforced as to some individuals and some corporations, if you could take that away as against otlier corporations, it would be because those corporations were illegal or doing business illegally. You can not do it on any other grounds. You can not make a tariff law applicable to you because you are worth 1500,000, and not applicable to the presiding officer because he is worth $600,000. If the law discriminates so as against the presiding officer or his business, 1000 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. it must be on the ground, I should think, that he is engaged in an unlawful business. Now, when once you reach that question, when you have determined that, you do not need any tariff law. If he is engaged in an unlawful business, you have absolute control over it anyhow, either by State or Federal law. Now, these great aggrega- tions of capital undoubtedly are for the benefit of us all, certainly for the benefit of this country, and cei'tainly for the benefit of the employees generally. But the aggregation of capital may be used in such a way as to do a great deal of harm, and that is the question you are inquiring about, I think; that is the corporation you seek control of. NO REMEDY NEEDED BUT THE ENFORCEJIENT OF EXISTING LAW AG.VINST RESTKAINT OF TRADE. Q. If you admit that there is an evil, then have you got a remedy? — A. I do admit that there is frequently an evil; I do admit that there may be an evil; I do admit that there are monopolies and there may be monopolies, and that they are preju- dicial to the consumer very frequently ; but I think it is equally true that combina- tions in restraint of trade are unlawful. Q. Unlawful? — A. Combinations in restraint of trade are unlawful. They are unlawful by the common law ; they are made unlawful by statutes in various States. Q. Let us see what you mean by restraint. Suppose the combination that you speak of now raises the price of a commodity for a purpose unreasonably, or suppose it lowers it unreasonably for a purpose ; would not that be unlawful? — A. Of course it is. Q. Now what is your remedy, what is your suggestion? If Congress takes that as a rule as to what constitutes an illegal combine, what remedy would you suggest to control them? — A. Is it necessary to go to Congress to get that remedy? Q. I do not know whether it is or not. — A. Assuming that it is, first, for the sake of considering the question, if Congre.ss had the authority, the constitutional right to pass a law and enforce the provisions of that law, then it would adopt simply what I understand to be now the common law and to be what is made the statute law by the enactment of statutes in different States. If the Federal courts could enforce the provisii ms of that Congressional law there would be no trouble. Congress now under the Constitution has the right to pass a law, and has passed a law, which affects this question of monopolies so far as interstate commerce is concerned. Now, if it had the right to pass a law which should apph'to local business, business done in the States, is there any doubt that it would be enforced just as the present law is enforced? Does anybody doubt the efficacy of the Federal courts to enforce the provisions of the Sherman Act, so-called? The difficulty has been that it was attempted to make that law applicable not only to interstate commerce but to commerce within the State, and the Constitution was not broad enough to cover that question. Q. Well, you remember the English decision that a monopoly is where — I will read it to see if it conforms to your idea. This you get from volume 4, page 291, New Commentaries of the Laws of England, by Henry John Stevens, first American edition, New York, John S. Voorhees, law-book seller, 1846. [Beading:] "A monopoly is a license or privilege allowed by the King for the sole buying and sell- ing, making, working, or using of anything whatsoever, whereby the subject in gen- eral is restrained from that liberty of manufacturing or trading which he had before. These monopolies had been carried to an enormous height during the reign of Queen Elizabeth and were heavily complained of by Sir E. Coke in the beginning of the reign of James I, but were in a great measure remedied by statute 21 Jac. I, c. 3, which declared such monopolies to be contrary to law and void." — A. The first part of that refers to a lawful monopoly. There is such a thing as a lawfvil monopoly. C2. Patents are excepted. — A. Our Government gives a patent right; that is a law- ful monopoly, I think. Q. (Reading:) "Except as to patents to the authors of new inventions, and except also patents concerning printing, saltpeter, gunpowder, great ordnance, and shot." Those were exceptions under the English law. Now, then, we have the English law A. (Interrupting.) It is unlawful monopolies you are talking about here. Q. lam talking al lout unlawful monopolies. Congress would have, if it has the right — I am not discussing that question — but suppose it has the right; it can deter- mine first what an unlawful monopoly is and then prescribe the remedy. And for that reason, I ask you, if it should do that, and if it should withdraw the protection from all monojiolies, would that be a remedy? — A. If we were to assume various things to be true, that might be a remedy. I doubt if that would be practicable. In the first ]]lace, it would be impossible, perhaps, to define a monopoly, and certainly it might be difficult to apply it if you did define it; and it you simply, in general FEDERAL STEEL COMPANY: GARY. 1001 terms, withdraw the protection from a monopoly, then there would always arise a dispute as to whether the individual or the corporation was in control of a monopoly. THE NEED IS LIGHT AND UNDEBSTANDING. Q. You would not desire to suggest to Congress, however, in the face of those that trouble us, not to make an effort in those cases to prevent injustice? — A. I still think that the very best remedy is Q. (Interrupting.) To let them go? — A. No; I do not believe in that. One of the greatest questions in this country is to know how to protect both the individual without anything on the one hand and the individual or corporation that has large means on the other hand. That is the great que.stion. Q. If you will pardon me, you recognize the fact that there are two parties in interest in the combine. There is the combine itself; there are the laborers employed in the combine, and there is the public standing on the outside without any relief or anj'thing else. — A. You mean the consumers? Q. Yes. — A. Of course, they ought to be protected. Q. The great public must be protected. Now, what remedy do you have? — A. I was going to say that I tliink the best remedy is plenty of light on the subject, plenty of discussion, a thorough understanding. We have, I think, at the present time, without mentioning any names or corporations, we may have some monopolies in the country at the present time. I think so. Q. (By Mr. Kennedy.) Do you know of any monopoly in this country under this definition which Mr. Livingston has read to you : "A monopoly is a license or priv- ilege allowed by the king for the sole buying and selling, making, working, or using of anything whatsoever whereby the subject in general is restrained from that lilterty of manufacturing or trading which he had before"? — A. I do not recall any. It Avas the custom in the old times actually to create monopolies, to give people the right to make, buy, and sell things, and give individuals an absolute monopoly. AA'e do not have that in this country, as a general thing — of course not; but there are no doubt monopolies in this country at the present time. I think, however, that with plenty of investigation and plenty of discussion they will not succeed in the long run. That is my judgment; thej' will fall by their own weight; they will go to pieces. Tlien, when a corporation gets into a place where it is abusive to the i^ublic, I think competition and opposition will grow up and l)e effective. The danger is always of going so far and so hastily that great wrong will be done. Of course we are all aiming for the greatest good to the greatest number. We want aggregation of money in this country, of course. I have no dou))t that all of you read the speech on this subject by Sir ilichael Hicks-Beach this summer. Q. I should say there are very few people in this country that want large amounts of money aggregated in a few hands in a few localities; the)' want it spread out. — A. AVell, we want it sufficiently aggregated to produce at the very lowest cost the largest quantities, and at the same time furnish employment to the laborer, and to bring to this country the largest amount of foreign money. Q. Not hurting the consumer in the meantime? — A. Not hurting the consumer in the meantime. Q. That is good doctrine. — A. That is a good basis; that is a good place to stop. THE EXPORT TRADE — SCOTLAND — JAPAN. Q. (By Mr. Jenks.) You have some export trade, have you, in the Federal Steel Company? — A. Well, the Lorain Steel Company at the present time is doing some export business. It has taken quite a large contract in Scotland lately. That, you know, is engaged in the street-railroad business, girder rails, etc. The Illinois Steel Company has not shipped any rails nor any billets for some time. The prices over there are pretty nearly the same as the prices here at the present time, and, taking the cost of carriage into account, it would not pay to export. But there is another better reason than that; and that is, that the demand here is so great at the present time that it is difficult to supply it. A few days since I told some of our people I thought they had better take an order for quite a large quantity of rails, to be shipped to Japan at a httle less price than we were selling here. I think it is trade that we should keep up. I believe in doing business for the benefit of all concerned. Q. You think it is worth while to encourage that export trade now and hold your market there?— A. Yes ; we may need that business 2 or 3 years hence ; and, as I have already said, we have got 21,000 employees as against 18,000 2 years ago, and it is just as much our business to take care of them as it is to take care of our stock- holders, in my judgment. We want to keep that business, and we want to keep our trade for future business, and there is quite a large tonnage to go to Japan. 1002 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. (.J. (Bj' Senator ]\Ialloky.) How do you get that over there? — A. We ship them overland to San Francisco. Q. Could you not do it more cheaply by shipping them around? — A. No. • i. (B>' Jlr. Jenks.) Do you recall whether they go through on our roads or by the Canaclian Pacific? — A. Well, that is a matter of arrangement with the railroads, depending up(5n time, etc. I think they would naturally go from the Illinois Steel by one of the Pacifies — the Union Pacific or the Southern Pacific — or the Santa Fe; I think so. ii (By Mr. FARiii'HAE.) Does the protection contained in our tariff cut any figure in tlie price of the rails that you sell in Japan? — A. No. i}. Not a particle, does it? — A. No. Q. (By Representative Lhingston.) Suppose the same protection was in Japan on foreign rails that we have here on foreign rails, would you be able to sell over there at all? — A. No ; probably not. Q. Then you ha^'e a free-trade market on the outside? — A. Well, generally speak- in^', I am for this country as against the world ; so are you. Q. (By Jlr. Farquhar.) Three leagues from the shore you are right in the world for the markets of the world, for the world's prices? — A. Yes. (I. (By Mr. Kennedy.) There are no rails manufactured in Japan? — A. No. Q. (By Representative Livingston.) In some countries there is but little manufac- turing going on. We want to get their trade, and I think it is very fortunate for us. — A. That is what all Europe is doing. They are taking care of their own coun- tries. That is what we should do, of course; that is a business proposition. ENFORCED PUBLICITY ONE OF THE BEST REMEDIES. Q. (By Senator Malloby.) Have you thought or considered at all the question of the publicity that it has been suggested should be given to the dealings of trusts as a possible preventive to injustice being done by them? — A. I have spent some thought on that. 1 believe that is one of the very best remedies. Q. Has it occurred to you to think how that publicity could be secured or enforced on trusts that are not engaged in interstate commerce, for instance? — A. By statute laws. Q. That would have to be by the States? — A. Yes, by the States. POWERS OF CONGRESS. Q. It has been suggested that that could be reached by constitutional amendment to the Constitution of the United States, giving Congress the power to exercise con- trol over all corporations that are engaged in interstate commerce in any way. Under that provision there are very few of these large combines or trusts but could be shown to be in some way, in some lines of business, engaged in interstate com- merce; and they could be reached. If Congress possessed that power, do you think it would be of anv material benefit? — A. My impression is that under the present Constitution no adequate law could be passed by Congress; and I think it would not be practicable to attempt to amend the Constitution, because you immediately raise this whole question of State rights. I think the representatives of the different States, when it came to a test of the question, would be opposed to giving the Gov- ernment the right to take up a question which the States individually now have the right to control thoroughly. But assuming, as I understand your question does, that you had the right to pass such a law, the only difference would be that in that case your laws would be enforced in the Federal courts, whereas at the present time they must be enforced in the State t'ourts. Now, which is the better forum is a question to be considei'ed. I have always belie\-ed that a Federal court was a better forum than a State court for the enforcement of all provisions of law which either court may have jurisdiction to enforce. Whether I have answered your question or not, I do not know. Q. Do you think that Congress now has no power to impose any regulation or restriction upon corporations engaged in interstate commerce? — A. I think it has not except as it is applied to the interstate-commerce business. That is a line, perhaps, somewhat difficult to define, to ascertain. Q. A cori)oration is engaged in interstate commerce; that is a fact. Has not Con- gress, under the interstate-c<3nnnerce power which it exercises under the Constitution, the right to exercise control over that corporation if it is engaged in interstate com- merce? — A. 1 think not. This I understand to be the proposition. You inquire whether, inasmuch as the corporation is engaged in interstate commerce, the Federal authorities may not exercise jurisdiction over the corporation itself, including all its )]usiness, wlietlier it is intei'state-commerce business or not. Now, I think not. I FEDERAL STEEL COMPANY: GARY. 1003 think the fact that a corporation is engaged in interstate commerce does not give the United States the control over the corporation; but it is the interstate-commerce business, that part of the business of the corporation that is interstate, which tlie United States has control over or may interfere with. That is my understanding of it. Q. You think, then, that a court would draw that distinction when it came to construe action taken by Congress undertaking to regulate one of these corporations that was engaged in interstate commerce, and, of course, intrastate commerce also? You believe that a court would undertake to draw the distinction you have drawn, and say that Congress has control over this corporation so far as it affects interstate commerce, and that its power ceases so far as it goes to anything else? — A. I think your inquiry goes a little too far. I do not think the court would say it has control over this company, so far as it is engaged in interstate commerce. It has jurisdiction over the business so far as it is interstate commerce. Q. The Supreme Court has held that under the interstate-commerce and foreign- commerce power. Congress has not only control over interstate and foreign com- merce, but also over the instrumentalities — it uses that expression — but also over the instrumentalities. Under that, it controls the action of a sailor who runs away from his ship, and he can be arrested and looked up until his captain comes and takes charge of him. — A. So it might examine a corporation engaged in interstate com- merce. I do not think it could examine the books of a corporation which related to anything other than its interstate-commerce business. It may be a line somewhat uncertain and difficult to find. Q. (By Representative Livingston) . Your idea is that your company could not be complained of nor classed with these railroad companies? — A. I did not quite under- stand. Q. Your argument is that we could not go any farther in Congress than we have gone with the railroad corporations, where we could control, under the provision of the Constitution, all the mails anywhere — of course, that is interstate, going in and out. Do you think that is as far as we could go with your company — we could con- trol you when you got into another State with your bridges and rails? — A. I think you would have the same control over our company that you have over a railroad ; no more. Q. Not any more? — A. I do not think you could make fish of one corporation and fowl of another. It is the business that determines. Q. If we did, and that interfered wdth your chartered rights under the State in which it was incorporated, of course there would be a fight between the United States authorities and the State authorities of New Jersey? — A. Yes. J. p. MOEGAN & CO. Held conteol op the constituent companies. Q. (By Mr. Jenks) . When you made the contract with the Morgan syndicate, so-called, with reference to the stock of these different constituent companies, did that syndicate have control at that time of a majority of the stock of these different constituent companies? — A. I believe it did. Q. It had the control of each one?— A. That is, the syndicate managers; yes; J. P. Morgan & Co.; they were the syndicate managers; they organized the syndicate to furnish the cash and take stock. Q. You think that J. P. Morgan & Co. themselves, that one company, had a majority of the stock of these constituent companies? — A. Yes. Testimony closed. Whereupon the commission at 3.45 p. m. adjourned until to-morrow morning at 10.30. THE AMEEICAIvT STEEL AND WIRE COMPAK^Y. Washington, D. C, Xorciiihi'r 14, 1S99. TESTIMONY OF MR. JOHN W. GATES, . Chairman of the American Steel and ]Vire Company of Xeiv Jersey. The commission met at 10.40 a. m., Chairman Kyle presiding. Mr. John ^\^ Gates, of Chicago, chairman of the American Steel and Wire Compan}"- of New Jer- sey, was introduced as a witness, and, being duly sworn, testified as follows: Q. (By Senator Kyle.) State your full name and address. — A. John W. Gates; residence, Chicago, 111.; position, chairman of the American Steel and Wire Company of New Jersey. NATURE AND EXTENT OF THE BUSINESS OF THE AMEHICAN STEEL AND WIEE COMPANY. Q. (By Mr. Jenks.) Will you kindly tell us, in the first place, something regarding the nature of the busmess of the American Steel and Wire Company; ^vhat is your raw material, and what is the nature of the products? — A. We are owners of iron mines, miners of iron ore, owners of coal mines, miners of coal, burners of coke. We operate 8 or 9 blast furnaces, 3 Bessemer steel works; we have, either built or in process of construction, 17 open-hearth furnaces, about 22 to 2.5 rod-rolling mills, and 20 to 30 wire mills; and our finished product is plain wire of every shape and kind used in America, barbed fence wire, wire nails, and every kindred article in the wire line. Q. Wire fences? — A. Yes; wire fencing of all kinds, wire clotheslines, wire rope, wire for electrical purposes, and all the various purposes for which wire is used. Q. Are you able to furnish your rod mills and wire mills all of the raw material that they require from your own plants, or do you have to buy some outside? — A. We have been buyers in 1899 of perhaps 40 to 4.5 per cent of our products. We have been makers of from 55 to 60 per cent of our product. Q. Are j'ou also large producers of copperas? — A. Yes; I think we make u. large share of the copperas made in this country. Q. About what percentage do you make? — A. It would be a guess on my part. I should .say that we make two-thirds of it. Q. What proportion of the wire nails do you produce? — A. I presume that varies from 65 to 90 per cent. Q. And with reference to the rods that are used in the production of ^A-ire, what proportion of that product? — A. There are 5 rod mills that are not in the American Steel and Wire Company. Q. And how many did you say you have? — A. I think we have — I should have to count up, if you would like to have me. Q. Well, if you can, give us pretty nearly what it is? — A. (Witness figures) . We have 23. Q. You probably, then, have from 75 to 80 per cent at any rate of the rod produc- tion of the country? — A. I should think we had fully that. Q. Perhaps more? — A. Seventy-five to 80 per cent. Q. The statement was made in the papers, before the organization of the present American Steel and Wire Company, if I recollect rightly, that the Illinois American Steel and Wire Company, which, I believe, is one of your constituent companies, had control of about 75 per cent of the total output of wire rods and nails. Is that a fair statement?— A. Well, no; I do not think that would be a fair statement. I do not think we had. There is what the manufacturers would call the active tonnage and the inactive tonnage. The active tonnage we would call in manufacturing a concern that runs every day in the year regardless of the price; whether it is good or bad, they 1005 1006 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. keep running. The inactive tonnage would be the tonnage that was only opei'ated whea priccH were good. Of the active tonnage, I presume that the American Steel and Wire Company of Illinc.iis had probably 60 per cent; but they did not have 60 per cent of the active and inactive tonnage, for there were a lot of rod mills that did not run at all. THE PRICE OF IRON ORE. Q. Can you give the statinties of prices for some time past, we will say for the lastS or 4 or 5 years, of some of your leading products; for example, the prices of iron ore, the cost of transportation of this ore from the mines to the mills, the prices of steel billets, of rods, and of wire nails? I may say that we have already sent to you a similar re(iue8t that you perhaps did not see. — A. I never saw it. The price of iron ore in 1896 was based on Norrie ore as a base ore, and was fixed at $4. Other ores were sold, taking into comparison the moisture, the percentage of metallic iron, and phosphorus and the various chemical qualities and physical qualities, on a scale up or down from $4. That was for the season of 1896. In 1897 the prices were fixed on the basis of Norrie ore at $2.75. In 1898, about |2.80 to $2.90. In 1899, 82.90 to §.'1 For 1900, I presume, any of us would be willing to pay |2.50 a ton more. Q. (By Senator Kyle.) Do you mean S4. 50? — A. No; I should say that we would be willing to pay 15.50 for ore that we paid $3 for this year. The reason for the great advance is not any combination, consolidation, or agreement; but there never has been until this year, I believe, 10,000,000 tons of pig iron made in this country— certainly not lately. This year, I think, there will be over 13,000,000 tons made. Never until 1899 has the value of ore been fixed at anything more than a few cents per ton in the ground. To-day a mine that will meagure up a million tons of ore of the grade of Norrie would sell for a couple of dollars a ton in the ground, $2,000,000 for the ore in the ground. Three or 4 or 5 or 6 years ago that ore might have brought 40 cents or 50 cents. Never until this year have the owners of ore mines realized the value of ore. They have been mining out their principal. Year after year they liave been taking out ore as long as there was any in sight, not figuring on the value of it, figuring that they wanted to keep in business. This year a tremen- dous tonnage came not only from American consumption but from all over the world, and the consequence is that the price of ore has pushed itself up. There has been no agreement on ore, as far as I know, for the last 2 or 3 months, of any kind, shape, or nature, and yet ore has sold higher than it has sold in a great many years. Q. You have said that the average price in 1899 — I suppose that was from the beginning of the year 1899 up to date — has been from $2.90 to $3? — A. The price of ore is always fixed along in the winter or early spring for the season's delivery, and when I say 1899 ore, I mean the price that was fixed last January. Q. And that contract price runs through until the coming January? — A. Thatinms through the season of navigation. OWNEKSHIP OF lake superior MINES. Q. What proportion of the iron ore output of the Lake Superior region — is that where yours is, mostly? — do you control? — A. Perhaps one-sixth or (>ne-Fe-\enth— somewhere in that neighborhood. Q. What are the 2 or 3 other large controlling concerns of that ore besides yours? — A. There is the Oliver ilining Company, the Federal Steel Company, the National Steel Company, the Republic Iron and Steel Company, and then individual owners. (.^ But those that you have mentioned are the largest? — A. Those are tlie largest proilucers. There is a good deal of the property that is owned in fee by one man or set of men, and others pay a royalty on the mining of that ore. L,\KE FREIGHT RATES, Q. Now, will you take up the question of freight rates? — A. Lake freight rates? i}. Yes. — A. Lake freight rates from the head (jf Lake Superior to South Chicago and lower lake ports ha\'e been as low as 50 cents a ton, and I am not quite sure that they have not touched 4.i cents. Q. Ciui you give them substuntially from ISiXi u]i to date, as you did for the ore?— A. \'ery nearly, for I was president of the Illinois Steel Company for those years. I would say that in IS'.l.'i lake freight was established i>arly in the season at about $1. Before thr close of the season we paid f)1.7ii for large tonnage. In 1896 they attempted toestal)lish the freight rates at 75 cents. I think we chartered some boats at 45 cents— THE AMERICAN STEt^IL AND WIRE COMPANY: GATES. 1007 what we call wild charters. I know we chartered a good deal of tonnage at 50 cents ; I think we chartered some wild tonnage at 45 cents — boats that had nothing to do, and it was simply a question whether they should lie still or take what they could get. In 1897 it was from 50 to 70 cents, as I remember it, varying. In 1898 it was from 65 to 62 cents. In 1899 it has been from 60 cents to ?2. I am president of the American Steamship Line. We have hauled ore at $2, and we have hauled ore at 60 cents. We have loaded our boats on one trip with $2 ore and the next trip at 60 cents, and vice versa. THE AMERICAN STEAMSHIP COIIPANY. Q. What proportion of your transportation are you able to put in your own ves- sels? — A. It has so hai)pened that we have not handleerliai)s gave inducements in the price of one to get people to l)u>- the other. \\'c liave gone on the basis of fixing a profit that would allow a fair remuneration to us on the market price of the material we had to buy; and I think our scale of jirices will figure out to be a fairer scale to both the producer and the consumer than the one that was in vogue 1 or 2 years ago. AVe go on a profit basis entirely; that is, we do not seek to make more profit on a ton of wire nails than we would on a ton of plain wire, or vice versa, considering the amount of capital involved in the manufacture of each article. Q. I still do not quite understand the difference. Here is a very material increase in the difference between steel and smooth wire, also between smooth and barbed wire, but practically no increase in the difference between the prices of wire and wire nails. — A. Well, that was last year. Q. That is the difference between the latter part of last year and, say, midsummer of this year.— A. In 1895, 1896, 1897, and 1898 I was president of the Illinois .Steel Company. ^ I am not conversant with wire prices during that particular period. My time was given to the Illinois Steel Company. I can tell you about the prices of rails or billets perhaps very much better than I could about the price of wire. Q. I was referring simply to the latter part of last year. At what time was the American Steel and Wire Company organized? — A. I think their charter was about th« middle of January. Q. Of this year?— A. Yes. Q. And this difference of prices that I was referring to was simply for a few months before that time? — A. Yes. MONOPOLY OF B.4.RBED WIRE, NOT OF SMOOTH. Q. There has been, as I said before, a very decided increase in the difference of price between barbed wire and smooth wire, and also between steel and smooth wire, but no increase in the differein'e between wire and wire nails; what is the explanation of that? — A. The price of barbed wire has advanced more than the price of smooth wire, has it not? Q. Yes; by 50 per cent. — A. That is no doubt due to the fact that we have a monopoly of the barbed wire. We practically own every patent on barbed fence wire and machinery m existence in the United States, and we claim that no one can manufacture barbed wire without infringing our rights. We paid a great many hun- dred thousand dollars for these patents, a great many hundred thousand dollars more in litigating and sustaining them. We sustained one recently in the Supreme Court. Q. So that, so far as the price of barbed wire is concerned, you have a decided advantage in having practically a complete monopoly of the patents? — A. Yes. Q. That does not apply t(j so great an extent in smooth wire? — A. Xo, it does not. Q. At the same time you did say tliat you contrcjlled a very large proportion, 75 or 80 per cent at any rate, nf the output of smooth wire? — A. Yes. Q. Perhaps more than that. You are enabled by virtue of that large output to fix pretty definitely your prii'es and be sure you get some profit at least out of that? — A. We do not aim to produce anything that does not pay us a profit. M'e go on the principle of making a profit oneverytliing that we make. There may come a time when we may ha\-e to sell at a loss, but at the present time ^^ e arc having a profit on everything. Q. And by virtue of your large output — the large proportion of the total output — you are able to hold your price on tlie smootli wire. And now, with reference to wire nails, ^vhat proportion of the total output do you liave there? — A. No; I do not claim that we hold the price on wire. We do not claim to at all. Q. (Bv I\Ir. Jenks.) Exce|it in so far as the barbed wire business goes, of course? — A. In the barbed wire business if any concern sees fit to infringe our rights we shall 1010 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. begin litigation against them. We have done that probably in almost every circuit court in the United states. Yes<, and been sucee.ssM; but we do not attempt to control the prices of smooth wire or wire nails or anything that we do not have a legal right to control by virtue of our patent monopoly, which, I think, has several years yet to run. COMPETITION IN WIRE NAILS — NO PATENTS. Q. About what pr(.)portion do you have of the output of wire nails? — A. I should say about the same proportion as of plain wire. Q. (By Representative Livingston.) What is. that? — A. Sixty-five to 80 or 95 per cent, somewhere; I can not tell you. Q. Is it not a fact that conipetitiou has ke])t the price of wire nails down, while the smooth wire has ,u;one higher? — A. No; I do not think so. Q. Do you not know it to be a fact that tlie farmers and the mechanics object to the price of wire nails, and will take the other nails just as soon as you put up the price? — A. I think e\ery advance that we have made in the last year has affected wire nails and smooth wire about the same. Q. The iirice of wire nails has not gone up, while the price of smooth wire and barbed wire has douliled almost. — A. We claim a, perfect right to put any price on barl^ed fence wire that would seem justifiable on the ground that we have paid out hundreds of thousands of dollars for patents. We do not claim that right on the others. Q. You have acquired a patent monopoly, and you justify it then? — A. Yes. The granting of a patent gives a man a monopoly, as I understand, if he has a good patent. ^l. (By Mr. C'ON(iEK.) Do >(iu make as much profit on the manufacture of nails as you do on the manufacture vi barl.)ed wire? — A. No, I think not. Q. Why do you not? Why do you not ask a price that will bring you as much profit on the nails as on the barbed wire? — A . Because there are no patents on nail machinery that we know of, and there are patents on barbed-wire machinery pro- ducing this product. (l There is some competition, then, in the manufacture of wire nails? — A. Yes; there is some in the manufacture of Ijarbed «ire, but not very much. It is limited to t\\'o or three, probably tliree more concerns that have licenses. •4. (By Ml-. Jenks.) Is tliere as much profit at the present time for your concern in the manufacture of wire nails as there is in the manufacture of smooth wire? — A. Wli}-, I think about the same. Q. Do you have agreements with independent manufacturers of wire nails, more or less formal, as regards the prices at which the nails shall be marketed? — A. No; we do not; we have no agreement whatever. Q. You furnish t( i those manufacturers of wire nails in various cases the smooth wire from which the nails are manufactured? — A. Yes; sometimes we do. MONOPOLV OF WOVEN WIRE FENCING, AND HIOH PROFITS. There is a, great deal of woven wire fencing made in this country. We claim a monopoly under patents of most of the woven wire fencing. W^e made the past year about 25,000 miles of woven wire fencing under patents that we purchased, and we get a very much larger profit on that than we do on the plain fence wire or even barbed wire or wire nails, for the reason that we own the patents on the machines and the patent on the product. NO MONOPOLY OF WIRE-NAIL JIACHINERY. Q. As to the machinery that is used in the manufacture of wire nails, is any large proportion of that patented? — A. No; I think not, now. I bought the first wire-nail machinery for our company in Germany about 13 or 14 years ago — in Dusseldorf, Germany. At that time all the wire-nail machinery in this country was manufac- tured in Ciermany, but it is now all manufactured here and w'e are exporting that machinery. Q. At the time of what was called the wire-nail pool, some 3 or 4 years ago, the statement was frequently made that the machines for the manufacture of wire nails were practically under the control of that wire-nail pool at that time. — A That was without a scintilla of truth in it; none whatever. (.1. Thei-e was no agreement between that i)Ool and the manufacturers of the wire- nail machinery not to furnish the indei)endent8? — A. I do not know as to that, because I liad nothing to do with it. During the years of the so-called nail pool I was piesident of the Illinois Steel Company. THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1011 Q. Then Ikiw is it that you dt'clare that there w as no trutli in the widely pnbhslied statement that there was such an agreement, and that the wire-nail pool did control the wire-nail machinery? — A. T say that because as far hack as ISHfi and 1886 I went to Germany and bought wire-nail machinery ami had it shipped here, and the makers of it did not claim that there was any patent im it when I bought it there. If there was no patent on what was known as the ^hilmcdie machine in 18S.T or 1886, no w iri'- nail pool or agreement made 10 years later would claim that they had a monopoly on the machine. Q. I understand you to say that the wire-nail machinery is now all manufactured here? — A. Yes; all that is used is manufactured in this country. Q. AVould it be a possible thing for the wire-nail pool to make an agreement with the manufacturers of that machinery not to sell indejiendents on condition that they would take their total output, or anything of that kind? — A. The answer is that any machine shop could make wire-nail machinery. It is not a hard thing to make, and there are no patents on it. Kilby, of Cleveland, who makes I'verything in the line of machinery, and who has made a great deal of machinery, has made a gi'eat many wire-nail machines, and Whitnc}-, (if Xew York, has made a great many, and we have made a great many ourselves in tlie past. Q. When you furnish a manufacturer the smooth wire which enters into the manufacture of wire nails, in those cases where you do furnish the raw material, do you have anv understanding as to the prices at which thev shall sell the wire nails'.' — A. ^^. WIEE-N.ilL PRICES — XO .KIREEJIENTS — QUAN'TrFY PRICES. Q. If they wish to follow your prices that is their own matter? — A. AVe have no agreement whatever. If they wish to sell at a loss, they can do so. I think our prices are different, or terms aie different, from those of any of our competitors. That is my understanding. Q. In the selling of your product, do you make it a practice to sell to jobbers mainly, or do you sell also to the smaller wholesale dealers and retailers? — A. We sell to anyone who wants to buy; we make no distinction. Q. Do you give an advantage' in price to those who Ijuy in car lots? — A. I think we have one price for carload lots, one price for less than carload lots, and one price for larger quantities — 100 or 200 tons. I am i-eally not familiar with that. Q. That is to say, if you made tliis third distinction that you spoke of, there would be an advantage iii price to the very large dealer who took, perhaps, several carload lots in contradistinction to the smaller ones who took only one? — A. Yes; I think we have a jobber's price, a carload price, and a less than carload price. My impression is that the difference between the carload and the less than carload price is 15 cents per 100 pounds, but I can not tell you what the difference is between the jobber's price and the carload price. Q. There is a difference'.' — A. There is a difference. ^Ir. Pearson is here in the room and he can tell vou. He is a very large customer of ours. Mr. Jexks. Will ilr, Pearson kindly answer the question'? Can you tell the difference in price between the carload price and the jobber's price? Mr. Pearson. Fifteen cents a keg. Mr. Jexks. And then the difference between the carload price and the less than carload ? Mr. Pearsox. Fifteen cents, except on a contract; if the jobbers place a contract for 1,000 kegs it is 2^ cents cheaper. The AViTNESs. I am not familiar with the prices. THE ADV.VXCE OF WAGES. Q. (Bv :\Ii-. Jexks.) Will you explain to us briefly the lelatioiis of this company to its wage-earners as regards any increase or decrease in wages since the organization of this oompanv, so we might Compare it with the prices themsehes?— A. On the average, I think we are paying about 40 per cent more than the constitutent companies paid before. , , , , ^ ,n i Q. (By Mr. Jexks.) That is, you think the wages have advanced about 40 per cent since the beginning of the year'?— A. Yes; possibly more. I thmk we have made two advances of 15 per cent each, and one of 10. I am not certain but we have given another of 10; different departments of our works have advanced differently. The men who roll the steel are paid at a scale. For instance, at .$l.o billets they would be able to earn, we will sav, S2.50; with billets at Si'O they would be able to earn $3.50; with billets at $25, perhaps $4.50; at S30, $5.50 up. So that they are 1012 HEARINGS BEFOKE THE INDUSTRIAL COMMISSION. getting two or three times as much. In the general scale of wages, taking all of our workmen in the various mills, I think the average advance would be fully 40 per cent. In some cases it would be 1.50; but I have to take it as an overall proposition, unless I should single out certain departments. I think the average advance would be 40 per cent. Q. (Bj' Representative Livingston.) Has the advance in the rate of wages been proportionate to tlie advance of the prices of your product? — A. I think fully, consid- ering the advance in raw material. DOBS NOT AND WOULD NOT RECOGNIZE THE AMALGAMATED ASSOCIATION. Q. What proportion of your workmen are union men? — A. We have no means of knowing. We make no distinction whatever between union and nonmiion; so I have no idea how many of our men are union and how many are not. Q. You spoke of the fact that the wages were fixed on a sliding scale. Do you make any agreement with your workmen at the beginning of the year with refer- ence to that sliding scale — what the rate shall be, running through the year? — A. Usually; yes. Q. Is that agreement made with the representatives of the union? — A. I think it is made with the men as individuals. Q. (By Mr. Faequh.^r. ) Is it not a fact that the scale of wages in the mills is framed by committees of the manufacturers and of the Amalgamated Iron, Steel, and Tin Plate Association of workmen? — A. The usual custom for fixing the scale of wages is for the Amalgamated Association at their annual meeting to agree upon what they think is a fair scale and to present it to the manufacturers. Now, the manufacturers that employ nonunion labor usually pay the same as those that employ union labor. That is the usual method. If a manufacturer that employs union labor is not satis- fied with the scale he fights it out with the committee — with what is known as the mill committee — and after he gets the mill committee to agree, the men that employ nonunion labor, or the men that do not recognize unions, usually pay the same scale as those that have an agreement with any association. Q. The question was asked by Professor Jenks whether your workmen are paid under the union scale or not. You said you think they agree individually. — A. They agree individually. Q. You do not recognize, then, the Amalgamated Association in your works? — A. Well, we do not as an association. Q. That is what I wanted to know. Q. (By Mr. Ratchfohd.) How many men do you employ? — A. Do you mean including everything in full? Q. Yes; in the iron industry, both mining and manufacturing? — A. Well, if I should guess, I should guess 36,000. Q. Will you explain how it is possible for your company to treat with these men individually as to wages? — A. In the iron mines we pay the going wages, whatever they may be. This year, I think, we made three or four advances in the iron mines. The vesselmen are not employed In* the American Steel and Wire Company; that is ina separate company; butthevesselmen, Ithink, are paid about the same way. The coke men and the coal miners and the coke burners are paid whatever scale is paid in the district. Q. What is it that determines this scale of wages if there is no union to treat with? How is it arrived at? — A. Largely a question of negotiation between the mills, the mill owners, and the workmen. Q. The workmen, acting in an individual capacity, or in a representative capacity?— A. Oh, they generally appoint a committee. Q. Then they have a form of organization, have they ? — A. Not that, in our case, we recognize. They have never asked us that — to recognize them. Q. Is it not a fact that the iron miners have a national organization? — A. I think they have ; yes. Q. And the coal miners as well? — A. I think so. Q. But your employees are not connected with it, to your knowledge? — A. We do not know whether they are or not. We treat with them in an individual capacity. For instance, if they came to us and said that they represented lodge so-and-so, we should know then that they were in an association ; but they have never done that ; they have come and said that they were a committee. Q. To put the question very jilainlj', have you at any time discouraged the organ- ization of your men into a national association, or refused to treat with them as organized men? — A. I do not think we have ever been asked to treat with them as organized men. THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1013 Q. (By j\Ir. Farquhae.) Do you mean to say that you have never been asked to sign an Amalgamated Association scale, by a properly constituted committee of the Amalgamated Association? — A. Are you referring to the American Steel and Wire Company, of New Jersey? To my own knowledge, we never have. Q. Have you at any time, your present company or the company you were con- nected with before in iron manufacturing, ever signed an Amalgamated Association scale with the men? — A. Yes; we have; years ago. Q. That was the Illinois Company? — A. .No. Q. Which company was it? — A. The Illinois Company has union labor to-day, and recognizes its men as union men. I think our mill at Allentown, north of Phila- delphia, had Amalgamated labor at one time. Our mill at Pittsburg, the Rankin mill, had Amalgamated labor at one time. Q. (By Senator Kyle.). Rankin? — A. What is known as the Rankin mill. Our Joliet mill, I think, had union labor at one time, and possibly our St. Louis mills, but they have not had for several years. Q. (By jMr. Farquhar.) Do you wish it understood broadly, then, that you do not recognize the Amalgamated Association in your present company? — A. We have not been asked to. None of them have asked us to recognize them. If you want to, put the question to me as to whether we would recognize thenr if they asked us to. Q. No; I asked the question as to whether you did or did not. — A. We do not and have not been asked to; there has been no request to. Q. You mean to say that these scales have never been presented to your present company? — A. By whom? Q. By the Amalgamated Association. — A. Not to my knowledge; no. Q. (By Representative Livingston. ) Would you do it if they should ask you? — A. No; we would not. tariff needed to keep men employed, and to pay freights. Q. (By Mr. Faequhar.) You laid considerable stress on the advantage that the tariff gave you, while you were before the Finance Committee of the Senate, and subsequently that tariff was framed to suit your people. Were you not aware that the tenor of all the discussions in Congress, and through the press, and everywhere, was that that tariff was built to protect American wages first, and not your product?— A. I think we have made money by having a protective tariff, and I think our work- men have also. Q. (By Representative Livingston.) You said that you received a certain amount of protection; you did not say what.— A. Six-tenths o'f a cent a pound on wire rods. Q. You said "that you have a monopoly on machinery and patents? — A. Not for rolling wire rods. Q. I did not understand whether it was for barbed wire or smooth wire?— A. Not for smooth wire. Q. But then you have a patent on the machinery for making nails?— A. None whatever. Q. I want to ask you if you need that protection any longer to enable you to stand? — A. Yes. Q. You mean to sav that vour syndicate or trust or combination, whatever you might call it — I do not nameit— could not exist without that protection now? — A. I mean to say that if we want to keep the same number of men employed, and give the railroads and transportation companies of this country the same amount of freight, we can onlv do so by having a protective tariff. Q. You could do that by lessening profits on your wares, could you not? \ on could give labor the same wages, but it would come out of the profits you now make? — A. It would depend entirely upon the destination of the goods. If the goods carried a freight rate, as the\' very often do in this country, of from $5 to $15 or ¥20 a ton, we could not, sir. The tariff question, in my judgment, is very closely involved in that question of transportation. Q. Then you need the protection more as an offset against the charges tor trans- portation than you do for anything else?— A. More than for any one thing. exportation AMERICAN AND EUROPEAN WAGES. Perhaps you gentlemen would like to have me state the wages paid liy us in com- parison with the scale of wages paid to workmen in Europe, producing the same Q (By Mr Rwchfohd.) We should like to have the scale of wages paid to your workmen as compared with the scale of wages paid American workmen m the same industries, in the same departments. 1014 HEAEINGS BEFORE THE INDUSTRIAL COMMISSION. The Witness. How is that? Mr. Eatchford. We should hke to have the scale of wages paid to your workmen as compared with the scale of wages paid now to the meuibers of the Amalgamated Association. Mr. Farquhae. That is right. Q. (By Mr. Eatchford.) And also to tlie memljers of the Iron Miners' Associa- tion. — A. I think we pay the same. (J. We should like to make a comparison if you will be pleased to state the scale.— A. I think we pay exactly the same. There is probably one factor that some of the gentlemen are not aware of, and that is our average exjKjrtation. Our average expor- tation for the year, for 1899, has been about 700 tons per day, so that I think the gentlemen would do well to look at the European scale of wages, for they are com- peting with us in the same countries. Q. (By ilr. CoNCiEE.) I wish you would make the comparison of wages paid here and in Europe, as you started to do a few minutes ago. — A. I think we pay at least 60 to 8.5 per cent more on an average. Q. That is in your wire mills'.' — A. Yes; \\ire mills, rod mills, and the various departments. I think our average will l>e not less than 60 and from that to 85 per cent higher. AMERIC.VX AXD ELROPEAX COST OF LIVING. (.),. (By Eepresentative Livixcisrox.) Do not your wage-earners pay from 6.5 to 85 per cent "more for their food and clothing? — A. No, sir; they do not. Q. They do not? You have looked into that, have you? You have thoroughly satisfied yourself? — A. I have studieil the situation on lioth sides of the water for 20 years. There is only one thing practically that is cheaper on the other side of the water for the workman, and that is rent. Q. Their clothing is the same, too? — A. You can buy a j)air of shoes in America cheaper than you can buy the same pair in Europe, and you can buy clothes cheaper. You can buy various goods as cheap and cheaper. The living of the workmen is as cheap in the United States as anywhere in the world, providing the workmen live the same; but the Americans live better than foreign workmen. Q. You mean they buy a higher grade of goods? — A. They buy a higher grade of goods and live better, sejid their children to better schools, and enjoy the comforts of life; but the cost of living is certainly, in my judgment, as cheap in the United States, everything Considered, as anywhere in the world for the laboring man. I have been to all the mill districts, ])ractically, in Europe. Q. Now, can you give us that scale compared with European labor? — A. I made the statemeiit that it was not less than 60 and I think 85 per cent higher in this country than anywhere else in the world. Q. (By Mr. Eatchford.) The scale of wages? — A. Yes. Q. And the cost of living is not any higher? — A. None whatever, sir. WHY AMERICA CAN E.X:POHT DESPITE HIGH WAGES. Q. Will you explain your ability to ex])Ort in such large cjuantities if wages in Europe are so materially lower than they are in the United States? — A. Yes; I am very glad you asked me that question. In Germany the cost of coke is about S5 a ton. The cost of a ton of coke at the ovens in this country until recently has been about SI. 50; therefore the American manufacturers have the advantage in the cost of the fuel over the Germans. They also have an advantage in the cost of the ore over the Germans, so that if to-day the American wages were the same as the wages of the Europeans, and the capacity \\as sufficient in this country, this country could make all the iron and steel manufactured and used in the world, in my judgment- no question about it — paying the same scale of wages, understand. Q. Admitting that the manufacturer in this country has some ad\'antage in the cost of fuel, is it not a fact that the manufacturer in (u'rmany has an ailvantagein the cost of transportation? — A. I think not; I think it is the other way; I think the American railroads are the cheapest transporters in the world; very much cheaper than they are in Germany and England, and I have studied it from a German standpoint and from an English standpoint. I do not think there is any country in the world that trans- ports a ton of freight per mile as cheap as the American railroads. Q. Yes, l)ut the proximity to the markets there — is it not a fact that the manufac- turer is closer to the point of distribution than in this c( luntry? — A. Possibly they^ are closer, but the answer is that the American railroad managers make the American manufacturer as close by making him a rate that will allow him to do business. THE AMERICAN STEEL AND WIRE COMPANY: — GATES. 1015 EXPORTS TO ENXiLANI). Q. (By Representative Living,st(jn.) Have you been able to compete witli the English manufacturer in this same way? — A. Yes; our Loudon office sells perhaps 60 per cent of the wire sold in Great Britain; I think it does. We started our office in London in 1893 and figured at that time that the annual expenses of running the London office, including clerk hire and rent, ought to be about £1,500 a year, i};7,500. In the year 1899 the cojt of operating the London office will be probably £15,000 a year. \Ve are doing an average business in London of 1)15,000 to $20,000 a day. Q. Xow, what is the difference in price of products in London and in your home office? — A. Our export prices in New York and London are practically the same, and the merchants have the choice of buying f. o. b. New York or f. o. b. London. y. (By 3Ir. CoNoEK.) How are you able to make those prices the same in London as New York? — A. I should have said with the freight difference — that is, it is f . o. b. New York at a certain price and f. o. 1;. London with the freight added across. EXPORT PRICES LOWER THAN DOMESTIC — THE REASONS. Q. (By Mr. Jexks.) How does the export price compare with the price to the American consumers? — A. We are selling to the markets of the world at a less price than at home. Q. Will you kindly explain the business reasons for doing that? — A. The business reason for doing that is that by working up a foreign business we can operate our mills more fully, we can make our goods cheaper, and ■whenever the time comes that there is a decline of the home price it will not necessarily affect the foreign prices. There are times when the export prices are higher than the home prices. Just at the present time our home prices, I think, are probably 50, 60, or 70 cents a hundred higher than our export. I do not reallj' know just the difference, but I know there is a difference in favor of export to-day. At times it is the other way. But by man- ufacturing, say, 200,000 tons of wire per annum to export to all parts of the world we cheapen tlie entire cost of manufacture \ery materially. By doing tliat we are able to give the consumer at home a lower price in the long run, and employ per- haps 25 or 30 per cent more workmen, so that in the long run we figure that it will equalize itself. Our home prices and our foreign prices are never necessarily on a parity; one might be higher and the other might be lower; it would depend entirely on circumstances. "business principles." Q. (By Representative Livingston.) If j'ou had the same competition in New York and St. Louis that you have in London and Germany, you would have to sell at a less price here, would you not? — A. Well, if the raw material cost the same Q- Independent of the raw material. — A. It is hard to say that a flour-mill owner would fix the price of flour irrespective of the price of wheat; I have never knowm one to do it. We all base our prices on the price of raw material. Q. Then why do you sell in London lower than here? — A. We sometimes get a good deal more in the foreign market. Q. Jlore than here? — A. Yes. Q. I understood you to say that your price is less? — A. I say at the present time it is less. Q. Then you are not fixing the price, the foreign price, on the cost of the raw material now?— A. We are fixing the tonnage; if we sell 100,000 tons of wire per month, we fix an average price on the 100,000 tons of wire; we go over that on the next month's business. Our foreign prices may be advanced |;2 or $3 a ton. We work perfectlv independent on both sides of the water, and if the raw material advances on the other side we put up the price. If the prices decline < m this side and not on the other side, we would hold the prices right up to the highest point that we could get the business at. We aim to run on business principles and get all the tonnage that we can. Q. Now, that is just the point. Over there you run the price to the highest point possible under competition; at home you do not have that?— A. I beg your pardon; we have plenty of competition at home. Q. Have you patents?— A. Are you talking about barbed fence wire as if it was the chief business of our company? It is 12 or 13 per cent of the business. We have practically a monopoly on that, barring, I think, 3 manufacturers, who are our hcensees— John A. Roebling Sons, Trenton; Janesville Barbed Wire Company; and Dillon & Griswold Wire Company. They are licensees, and they have a right to manufacture under the patents, and they make barbed wire, and make prices as they 1016 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. see fit. AVe pay no attention to the prices they make; their prices may be $1 higher or §1 lower than ours. ii The point I wanted to arrive at is just simply this: Do you regard competition at all abroad or at home in fixing prices? — A. We regard competition in both places, both at home and abroad. If we had a large tonnage of finished product on hand, and the markets were moving slowly, we should reduce our prices )ierhaps at home and abroad the same day. On the other hand, if the prices of the foreign products were advancing on raw materials, we might hold our export prices, or even put them higher. AVe run our business according to supply and demand, considering the cost of production. GERMAN CONDITIONS — SUBSIDIES AND SPECIAL FREIGHT RATES FOR EXPORTS. Q. (By Jlr. Clarke.) Is it not a fact that exports from any country are often sold in the foreign market lower than in the domestic market? — A. Very often; yes. That is certainly true in the (lerman market; and I will say that the Germans receive a subsidy of .'Ji7.25 on every ton of stuff they export, and that subsidy is made up by various allied lines of manufacturing, to encourage the export business. The Ger- mans own the railroads; and when it comes to making the freight rate from one German point to another they will perhaps charge 2 cents per ton per mile, or its equivalent, and if it is an export proposition they will do it for 2 mills per ton per mile, the Government standing the difference. In other words, in the German Gov- ernment everything is based on encouraging the export of goods out of the country and employing the workingmen to the fullest capacity. Q. (By Mr. Jenks. ) Has this export trade from America been increased rapidly in late years? — A. Yes. CONSOLIDATION HELPS EXPORTS. Q. Do you think that the fact that a number of separate establishments have come together into one has had any material effect on the export trade? — A. Multi- plied it by 3. Last year the exports were less than 100,000 tons; probably 60 or 70, not more than 80. This year it will he over 200,000, as a result of consolidation, whereby we can afford to go at the business in a more systematic way. Q. The individual concerns could not have afforded to take these pains to increase it? — A. No question about that. EXPORTS TO CHINA AND .lAPAN — OVERLAND RATES. Q. (By Representative Livingston.) Have you a trade in the East — in Japan and China? — A. Yes, we have a very large trade in China and Japan. I think in the month of August our Chinese trade was larger than that of any other country. In Sep- tember I think the Chinese trade was second. They are just beginning to buy goods in (Ihina and Japan. Q. Do you ship from the Pacific or Atlantic; over the Atlantic or Pacific Ocean? — A. We ship mostly overland to the Pacific coast, and thence by water. The rail- road presidents have seen the necessity of taking care of the through rate, water and rail, and have encouraged the business to such an extent that practically all of the Japanese and Chinese l)usiness of our t'ountry goes overland; and if you gentlemen would recommend a subsidy to Congress, subsidizing shipbuilding on a basis of the tonnage of American products, whether it l)e wheat or corn or manufactured products, you would be doing the greatest favor you could to the entire producing class of this country. SHIP SIBSIDIES. il. Supposing you got the canal, would that help? — A. That would help very much; but remember that other countries subsidize steamship lines and mail lines, and alloAN them to operate cheaply enough to be able to carry the products. As an illus- tration, until within a very short time our shipments to Argentina have been made via London oi- Liverpool, for the reason that Lambert & Hull, who were the main shipowners operating to Argentina, with headquarters in London and Liverpool, have made less ship rates from London and Liverpool to Argentina than it is pos- siVjle to make from New York. We shipped thousands of tons of stuff from New York to London and Liverpool and reshipped it and paid the same rate from these ports to South America that we had to pay from here. That is true also of the Ger- man lines operating to Brazilian ports. They get subsidies, as I understand it, in mail lines; and freight rates from Hamburg, Antwerp, and Bremen to Brazilian ports are very much less than tlie freight rate from New York. Therefore at times we are forccil to make a sacrifice in freight rates in order to sell goods in competition in these countries. THE AMERICAN STEEL AND WIRE COMPANY: — GATES. 1017 EFPOBT FOK A 1V0RLD-WIDE COMBINATION. Q. (By ]Mr. Jexks.) It was report fd some months ago that there had been in serious contemplation, at any rate, a (■(jnibination between the American manufac- turers here and corresponding manufacturers in Cxermany. — A. I went over there for that purpose. Q. Will you kindly explain that to us? — A. I met all the wire makers of England, Germany, Belgium, France, and Austria, and I believe all in Europe, and I advocated an agreement by which we could get 1 letter prices for our product and di\ide the tonnage on an equitable basis. They thought we were entitled — I have no objection to telling you — to about 25 per cent of the business, and they thought they ought to have 75. Before I got away they offered us 45 and wanted 55. 1 did offer to take 50 and give them 50, but they would not do that. SVNDIC.VTES IN GERMANY. Q. Have the manufacturers of steel rods in Germany, or of wire nails, combined? — ■ A. In every line. They have agreements, printed and signed by the board of direc- tors, and they are legal and can be enforced. Q. Is the same true with reference to England and Belgium? — A. Belgium does not cut much of a figure in the wire business. I do not suppose the entire Kingdom of Belgium makes as much wire as our smallest mill. Q. How is it in England? — A. I think they have their agreements in England in nearly all lines. Q. As I understand in reference to Germany, it is substantially a written agree- ment, is it not, a pooling of the prices? — A. In Germany the agreements are usually 3 or 5 year agreements, got up in printed form, submitted to the board of directors of each company, and signed by what are called the managing directors of the various boards, and are legal and can .be enforced. As a rule their prices are from 30 to 35 per cent higher to the home trade than they are to the export trade. The German manufacturers are the only competitors we have to-day. We do not acknowledge England as a competitor in the wire line. Our own company makes, I think, 55 per cent of all the wire made in the world. If the German manufacturer would run his business on the same business basis that we run ours on we should be getting 90 per cent of the export business; but they are subsidized by the various aUied lines to the extent of $7.25 on every ton of wire they export. In addition to that, the rail- roads, which areowned by the (Tovernment, make them a freight rate which will allow them to move their goods for almost nothing from the interior to the seaboard; then with their subsidized ships starting from their ports they have an advantage over us from all directions. I have argued that out and thrashed that out with them for months. I was over there, I think, for nearly 2 months. The coke men are in a sjm- dicateover there; the ore men are in a syndicate; the coal miners are in a syndicate; pig-iron makers are in a syndicate; the rod makers are in a syndicate; the ^\ire mak- ers are in a syndicate; the nail makers are in a syndicate; and everything they have passes through one funnel. Q. (By Jlr. Jenks. ) Everything they all have? — A. Everything that the different allied interests have passes through one funnel. This man is general agent of the rod business, this man on the plain wire, this man on the billet business, and so on down the line. Their entire idea is that they have but one competitor in the world, and that is the United States; and in order to protect their export business and keep any portion of it they must work in harmony. They talk it freely, and say they can not make goods as low, notwithstanding the fact that they pay their work- men about half as much as we pay ours. Q. Indifferent lines of industry— wire mills and iron mills— are they also allied? They have an understanding with regard to the prices of raw materiar? — A. Every one of them. Q. So that there are not merely agreements among the manufacturers in the same line, but different lines that aid one another are also together in one great combina- tion?— A. Yes. Q. The Government recognizes these agreements and will enfori'e them by law?— A. Yes. GOVERNMENT SUPERVISION IN GERMANY — AMERIC.V SHOULD HAVE IT. Q. What supervision does the Government have over these establishments and over these agreements?— A. Well, I imagine the Government has pretty full super- vision over that. Q. You think the Government requires quite detailed reports from these companies with reference to their business?— A. I judge they do, for this reason: One gentleman 1018 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. from over there — he was what is called the managing director or director-general — told me that his works cost him about 25,000,000 marks, and he said he kept charging the cost of his works (hnxn year after year, besides paying 10 per cent quarterly dividends, until he got tliein where they stood on the books at I mark. The Emperor sent for him and asked him it he thought the German Empire could be run on that basis, and he made him put it back to 25,000,000 marks and pay the back tax. So I think they have pretty full supervision. • i. You think, then, that the Government has detailed information with reference to the business itself? Does it also have the practice of taxing oft the surplus profits in this way for the benefit of the imperial treasury? — A. This gentleman that told me is a very reliable man ; in fact, he is the chairman of one of the important lines, liesides l)eing president of his own company. He told me that the Emperor said to him, "If this thing were to continue, where would the German Empire raise its money from ? ' ' Q. So you think that the German Empire does keep control? — A. I think they keep very close control, and I think they know what the various concerns are making; and are encouraging the German manufacturer, particularly in the export business. » i. I judge from what you have said that you think that is a wise plan for the Ger- man Government to follow. — A. I do; I think if this Government would adopt the same tactics, we should be the onl}^ manufacturing concern in iron and steel within the next ten years. Q. You would favor having necessary Government supervision over every large estalslishment? — A. Unquestionably; and I should be willing to give up a large per- centage of my stock to have it so. GERM.VN SVXDTCATES. <.^ (By ilr. Clakke.) Are these various syndicates called trusts over there? — A. i\o; they call them syndicates. ( j. .\re they in the nature of what are popularly called trusts in this country? — A. They are what I would call trusts. Q. (By ]\Ir. Jenks.) The general organization, I infer, is like some of the early pools rather than like the present large combinations. — A. Yes; it is an agreement, signed in some cases by 30, 40, and 50 manufacturers. I have seen some of the agree- ments. AN INTEKNATION.VL TKUST. y. (By >rr. Clarke.) If you had been able to effect an agreement with them such as was proposed, what would that lie — an international trust? — A. I do not know but we should have infringed a little bit, as far as that is concerned; but they talked about putting the prices up pretty high. The (Tcrmans wanted to put Ihem higher than I did. I was in favor of putting the prices up about $10 a ton, and they thought they would stand $30. The only question was that we could not agree on the percentage. Q. If you had an international agreement of that kind, how could our Government control it? — A. They could tax us on our profits. Q. They could tax you, but they could not tax the other fellow? — A. They could make us get a larger percentage — each firm; and we would get it, too, if we had any chauce. TRAVEH.\<; .aien dispensed \\'ITH. il ^Vill you go back to the question of labor for a moment? Have you, by virtue of y(.iur organization, been able to make any material saving in labor by employ- ing less men along certain lines; for example, the traveling men? — A. I think that the oidy point in these large consolidations that has been harmful has been the wholesale clischarge of traveling men. With us, we had practically 200 to 300 men in the constituent companies, and they have been cut down to perhaps 15 or 20. We are working perhaps 30 or 40 per cent more labor than a year ago; but the traveling men are the men that have suffcT-ed. (.1 (By Senator Kyle.) Is that a saving to the general public? — A. I think it is; yes. Q. (By Mr. .Ienks.) Do you pay traveling men on the road now as much as you did earlier, or can you get along with a S(jmewhat cheaper grade? — A. We keep pretty good men and pay about the same in salaries. I do not remember any changes that have been made. THE AMERICAN STEEL AND WIRE C01[PANY: GATES. 1019 HISTORY OF THE FORMATIdX OF THE AMERICAN KTliEL AND HIRE COllrANY. Q. I should be glad now if }0U would explain tu us the way in which these difl'er- ent companies came together. I unilerstand there w ere some preliminary movements for a year or two. — A. I was quite a large stockholder in the Illinois Steel Company and the Minnesota Iron Company, which were two of the companies that went to form the Federal Steel. I made up my mind that I had worked hard for a good many years and 1 would take life easy, lifter the Federal was formed I disposed of my stock in the Federal and practically made my arrangements to go aronml the world. I still had my interest in the wire company — in the American Steel anIr. Ellwood, buying them up independently? — A. I think it was in every instance; there possibly might be one or two options in the name of Lambert & Gates, but most of them were in the name of Ciates & Ellwood. Q. Then you say that these were turned over to Mr. Voorhees, and he practically organized the new company? — A. Yes. Q. And these exchanges were made? — A. Yes. Q. These exchanges of stocks were made, 1 suppose, publicly by advertising through Seligman & Co.? — A. Through Seligman & Co., of Xcw York, and the Illinois Trust Company, of Chicago. Q. Can you furnish us a copy of that advertisement, so that we can put it in our records? ' 1 To the preferred and coinmnii stockholders of the American Steel and Wire Companij: During several months past the holders of a large portion of the shares of the American Steel and Wire Company have been carefully considering the advisability of obtaining by purchase or reorgani- zation other leading wire concerns in the United States, among them the Cleveland Kolling Mill Com- pany, of Cleveland, Ohio, manufacturers of pig iron, Bessemer steel, and open-hearth steel, as well as wire in its various forms, and the Washburn & Moen Manufacturing Company, of Worcester, Mass., and Waukegan, 111. It is believed that there would result greater economy in management and operation, and thereby be of advantage to all the stockholders of the several companies. After a thorough investigation of the several propei-ties and their values, actual as well as relative, the acquisition of the following plants has been assured upon a just and fair basis: Washburn & Moen Manufacturing Company, of Worcester, Mass., and Waukegan, 111. Worcester Wire Company, of Worcester, Mass. Cleveland Rolling-Mill Company, of Cleveland, Ohio. Oliver & Snyder Steel Co., of Pittsburgh, Pa. Oliver Wire Company, of Pittsburgh, Pa. Newcastle Wire Nail Company, of Newcastle, Pa. Pittsburgh Wire Company, of Pittsburgh, Pa. Cincinnati Barbed-Wire Fence Company, of Cincinnati, ohm. Laidlaw Bale and Tie Company, of Joliet, 111., and Kan.sns t:ity, Mo. Consolidated Barb-Wire Company, of Lawrence, Kan., and Joliet, 111. Xewburgh Wire and Nail Company, of Newburgh, N. Y. To accomplish the object suggested, the following plan has been agreed upon: Agreements have been entered into for the organization of a corporation under the laws of the State of New Jersey, to be known as the American Steel and W irc Company. This corporation will have an authorized capital stock of S90,000,000, of which .1H0,000,000will be seven per cent cumulative preferred stock and S5O,000,OOO will be common stock. i ■„„,n„„,„i, ti, „„ This corporation will acquire the above properties either by direct ownership or tliroigh the owner- ship of not less than a majority of the capftal stock, where it is not practicable to purchase the '''A^sradlci'te'has'been formed which will furnish the necessary capital for the above purchases, and in adSn tLreto rrSvidtalthe new nnnpany with a working capital of about m3,000,000, exclusive of the wkini capital of the several concerns which will enter the new corporation. Whatever may 1020 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CAPITALIZATION. The question has coiiie up a good many times in connection with propo.scil legisla- tion regarding these lartrer combinations, as to the financing of these organizations, the question of overcapitalization, the amount tliat had to be paid the promoters for the making of the organization, and so on. Can you give us an idea with reference to the capitalization of the American Steel and "Wire Company, as compared in the first place with the value of the plants, simply as plants, and then also an idea as to the value of patents, good will, and so on that went into the organization? To begin with, what is the capitalization? — A. Of the American Steel and Wire Company? Ninety million dollars. Q. How is it divided? — A. Forty preferred and 50 common. Q. Now, with reference to the value of plants, simply as manufacturing plants.— A. I think the plants stand on the books at about $75,000,000 — the working capital. We have made some little money since we came together, an^l the working capital is perhaps $16,000,000 or $18,000,000 over and above that. Q. Do I understand \ou to say by that that this working capital has been made since? — A. No. Q. That was furnished at the time, I suppose? — A. AVell, we have bought a great many properties since we went together. We have paid out a good manv million dollars; approximately, $6,000,000 to $10,000,000. be nece.ss.ary of this working capital may be used for the purchase of other properties which may be agreed upon hereafter, the entire amount of capital to be furnished by the syndicate being 828,000,000. The syndicate agreements will provide that the Xew Jersey company shall acquire such of the capital stock of the American Steel and Wire Company of Illinois, not less than a majority thereof, however, us may be offered, on the following basis: For each share of the preferred stock of the Illinois corporation the holder thereof shall receive one share of the seven per cent cumulative preferred stock of the New Jersey corporation, and in addition thereto six-tenths of one share of the common stock of the New Jersey corporation; for each share of the common stock of the Illinois corporation the holder thereof shall receive one and two-tenths shares of the common stock of the New Jersey corporation. It is further arranged that the banking house of J. J the prcfrrrcil and common stock uj American .S7rc( anil Wire Cmnpany: \Vc are n<.\v jirepared to receive the deposit of certificates of said stock, under an agreement dated Januarys, Is'.i'.i, ))etwcen Jnhn W. Gates and Isaac L. Ellwood and Frederick P. Voorhecs, iKiuing therefor our ncKiitiablc certitieates of dci«isit, cxehangeable for the .stock of the .Vmerican Sleel and ■\^'ire Coi]i|iMuy (nei\- companyi when received Ijy us for delivery. All stock certificates to lie depos- ited must lie duly endorsed iu I)lank, New York certificates to be presented at llie oflicc of J. & W. Seligman & Co., 21 Broad street. New Y'ork. Chicago ecrtilieatcs to l)e prcseuteil at the oHiee of the Illinois Trust and Savings Bank, Chicago, who will i.ssiie certificates of deposit thcrefoi- on our behalf. . J. & W. SELiGntAN & Co., Depositary. THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1021 Q. When you speak of the value of the plants being in the neighborhood of $75,- 000,000, do we understand by that the value of the plants as working plants, includ- ing the good will, patents, and so on — everything included? — A. Yes. VALUE OP THE PLANTS AS PLANTS. Q. What do you think would be the value of the plants, excluding the good will and the patents — that is, what would be the cost of putting up the jilants now? — A. Well, that is a pretty hard question to answer. Q. Of course we expect only an estimate. — A. They could probably be put up for less than they stand for on the books, but in the meantime the plants in operation would earn a good deal of money before new plants could be put in operation. Q. Of course. — A. How much less it would be very hard to tell ; in the hundreds of engines and thousands of horsepower in boilers, that if you went out to buy them you could not get delivered in the next 18 months. Our plants could not be dupli- cated and got in operation in 3 years. Q. Of course the question is not a practical one so far as any immediate change is concerned, but it does form a basis, nevertheless, of estimating the method of capi- talization. Granting that it would take 2 or 3 years' time, the question is what it would cost to put them up, in round numbers. We have had some witnesses say that the good will of their business was worth more than their plants. — A. An answer to that would be that J. P. Morgan & Co. employed some engineers and sent the engi- neers around to appraise part of the plants — not all of them — part of the plants that became part of the American Steel and Wire Company, perhaps 70 per cent in value; and they appraised them, as I remember, at about $28,000,000. They were appraised at a time when boilers, engines, labor, and everything else would be 60 or 80 per cent less than to-day; so if you were to ask me what was a fair value of the plants of the American Steel and Wire Company to-day I should say probably $50,000,000 or $60,000,000. I should say there might be 110,000,000 or $15,000,000 of stock issued as good will. Q. (By Mr. Jenks.) In this valuation that was put upon the plants by J. P. Mor- gan & Co., what was included? That included also, did it not, the good will? — A. No. Q. That included some of the patents?— A. J. P. Morgan & Co. picked 3 engineers— in fact, asked me to select 3 engineers, and I selected 3 of the best engineers in America, and they went around and examined the plants, and made a statement to Mr. Morgan as to what the plants could be built for, in their judgment. That was in December, 1897, January and February, 1898, when Morgan & Co. expected to finance the deal. Q. So that $50,000,000 or $60,000,000 would be a fair estimate as to the value of the plants in contradistinction from good will, trade marks, and so on? — A. Trade marks and everything of that kind. AVe have a good many patents registered all over the world, and trade marks and things of that kind. Q. I notice in your statement of capitaUzation you say that $40,000,000 is preferred and $50,000,000 is common stock. Was the general plan in the minds of the promoters or the organizers that the bare plants themselves should be represented in the amount of preferred stock, and the good will, patents, and so on, by common stock?— A. I think you would have to ask Mr. Voorhees that question. I do not think I should be competent to answer it. I can not tell you. CAPITALIZATION SHOULD BE BASED ON EAENINGS. Q. (By Mr. Clarke.) Which do you consider the more valuable, the plants or the business 'that has been built up and made to grow out of it— in short, good will?— A Well, my answer is that this country is not as well educated on the value ot good will as England. In England they value good will much higher than m America. It is hard to place a rule there and show what good will is worth in the Umt'; ^ States, ' but in England they have a pretty fairly fixed rule for the value of good will. 1 do not know just what it is. I think in round terms they figure, irrespective ot the amount of money invested in any specific line of goods, that if it will pay 7 or s per cent on the principal, they are willing to capitalize on that basis, ihat is about my idea. For instance, a concern making $70,000 would be capitalized at $1,000,000 or £200,000. That is my idea of good will. England is further advanced m the indus- trial line than America. They have had more experience and they are ol.ler manu- facturers. I do not claim that they are better; I do not think they are as good, but they have a better rule. ..... ii.ii v, ■ Q (Bv Mr Jenks ) Your own opinion is that capitalization ought to he on a basis of earnings?— A. That is my idea. If a street-car line running between the Capitol 1022 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and TreasiH-y Department shciws an earning for 10 years on $10,000,000 and only cost ^riOOjOOO, I would rather buy that street-car line than the one that runs from the Capi- tol to Baltimore that can not show anything over operating expenses, notwithstand- ing the fai't that it cust $10,000,000. The earning capacity of a road is what would guide me A'ery largely in making an investment. For instance, the Pennsylvania Railroad, with 5,000 or 6,000 miles of rails, is probably earning two or three times as nmch as the Atchison, Tojieka, and Santa Fe with tlie same length of line. There- fore, I w(iuld say that tlie Pennsylvania Railroad was worth more per mile from the earning capacity. *}. From the' otliei- point of view you would perhajis suggest that it would be well for Congress to lower the rate of fares on tliis road that gives so little and that gets so much? — A. I think that in time American competition will equalize rates, or fares, and the price of c(jmuiodities and anything else. NATIONAL CHARTERS. I think the American Congress had better encourage and foster all of what some of the gentlemen in the room would be pleaseil to term trusts or monopolies, but which J call consiilidation; I think we should encourage it. I would be very much in favor of having national charters granted. <^!. (By Representative Livixoston.) How is that? — A. I would be very much in favor of having national charteis granted; that any concern that wanted a charter for a company of J^.i, 000,000 or more, would have to go to Washington and pay a sub- stantial sum for that charter, and a suljstantial sum per annum thereafter. If the term of the charter was for 99 years, they have got to pay so nruch for a charter, say S100,000. I would charge them !?1,000J000 a year for 99 years and say to them; "Xow, you put that right in the cost to stait with, because you have got to help pay the exjjensi's of the Oovernment to the extent of $1,000,000 a year." That would stop overcapitalization. It will legalize what some of our friends would term trusts, whicli are obnoxious to some of us, and it would be a good thing for the comitry in general. I can not unay their men accordingly. If necessary, I would have a manufacturing commission, the same as the Interstate Commerce Commission. NO EFFORT TO ELIMINATE COMPETITION. Q. (By Mr. FARiiTHAR.) Is not the spirit of your combination the elimination of competition? — A. No, sir. Q. In what way do j'ou explain it, then? — A. To the contrary, we encourage every fellow that comes around to go into business. We sell them goods and try to make them all make money. We say to them, "Here are our prices; this is what we are getting for our stuff. There are 20 or 30 concerns in the manufacture of woven wire fence in tlie Uniteil States." If they choose to pay the price, we will sell to them. We have the woven wire fence down to where we can make a clear profit, and they can not manufacture. We have said to them, "Come to us with your woven wire fence orders," and they are buying from us right along, and they are making money. We are not doing anything to discourage the small manufacture, and we do not intend to. We believe that we can make money and we want our neighbors to. Q. Have they any means of competition otherwise than you allow, seeing that you control such an immense amount of the product? — A. Yes. Q. In what way? — A. The Federal Steel Company have 3 rod mills. They turn out, I suppose, 600 or 700 tons per day. There are 2 other large rod mills. They can buy rods where they like ; buy wire where they like. We do not, by anj' manner of means, try t(i control. If a man does not buy our goods, and put them into the finished pioduct, we do not try to control him at all. IRON AND STEEL AND ORE PRODUCERS OUTSIDE 'I'lIE FOUR GREAT COMPANIES. (.1. Do not the 4 great iron and steel consolidations now consolidated under the liiws of llic State of New .Tersey, you being one of them, practically control the whole product of the country? — A. No, sir; we do not. Q. What per cent of the manufactures are outside of your control, for instance?— A. In the iron line? THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1023 Q. Yes, iron mid steel line. — A. Let us make a distinction. Let us take up iron first, and then take up steel, because steel makers do not make iron and iron makers do not make steel. I do not think 40 per cent of the furnaces of the United States are owned by the Carnegie, Federal, the National, and (_)urselves. I doubt whether 30 per cent are. There is an answer to your argument right there. Q. How much steel? — A. Well, I shovild say in Bessemer steel perhaps 80 per cent is represented ]>\- the 4 concerns. In open-hearth steel perhaps .lO or 60; but furnaces are building right along. Q. How much of the ore product do your 4 great concerns o\mi in this country? — A . You allude now to the Bessemer ore or Ijasic ? Q. Both. — A. I suppose the 4 concerns own 500,000,000 tons of ore, in round numbers. Q. Practically your 4 concerns are no'\\' mining, transporting, and using nearly all the raw material that enters into the manufacture, are you n(.it? — A. No, sir. Q. What per cent are you less than the ■\\'hole? — A. About 40 per cent of it. Q. Where are these independent mines located? Q. (By Senator Kyle.) Less than the whole? — A. Yes. Take all the furnaces in the South and there must be 25 or 30 furnaces owned by the Tennessee, and Schloss, and the Wcjodward and independent interests. Probably 40 per cent of them own their own ore. I am interested in the ore properties in the South person- ally; not in the company, but personally, several million tons of it. You take the ore of tire ITnited States, and it runs into the billions, and of the billions, 500,000,000 is probably owned by the 4 concerns that you named. Now, take the concerns throughout the East, and they are supplied with their ore from the Port Henry mines on Lake Champlain, and possibly are supplied from Cuban ores or Spanish ore, or Southern ores. When you come to the ore product of the United States it is simply enormous. No man can tell within billions of tons what the total ore crop of the United States is until you develop it. Take the Colorado Fuel and Iron Company, the Cambria Iron Company, and the Lackawanna Steel and Iron Company, Jones & Laughlins, and the Wheeling Steel and Iron Company; all large concerns, not any\vay connected with any of tliese consolidations; they are all large makers of rails and "plates and users of Bessemer steel and everything in the iron and steel line. Q. I speak not of the geological situation at all. I am talking about the output of the American mines; how much your 4 concerns control of that annual output. — A. Annual output of pig iron? Q. Yes, of ore itself; I want to get at the raw material in innnediate ownership or control that would cover all the list?— A. In output? Q. Yes. — A. Probably 60 per cent. Q. Sixty per cent. You speak of the Champlain and other mining properties that are awa\-'from the great (.'enters of Pittsburg, Chicago, Cleveland, and elsewhere, Birmingham, for instance; l)ut do you not practically control all the great centers of manufacture, through the ownership of the mines, and practically through the trans- portation? — A. No. Q. You are safe in saying then that you do control 60 per cent of the annual prod- uct at the present time?— A. Of the 1899 output, 60 per cent. N'll COMBINATION BETWEEN THE FOUR (ntK.\T COMPANIES. Q. As there is no combination on the part of the independent owners of mills and manufacturers, why do vou not even get control of the market itself as to price and everything else?— A. Yi'.u are going on the basis that there is no agreement among the outsiders. Are vou sure of that? Q. It has been irenerallv conceded.— A. I am not willing to concede it. Q. (By Mr. Con<;er.) Was there any agreement between you 4?— A. > one at all. Q. (By Mr. FARCiCii.Ui.) You buy and trade among yourselves?- A. We trade with outsiders as well as they dr). NO .VTTEMPT TO THROTTLE COSIRBTri'ION. Q certainly; but it is still a matter of comment that whde you control your 60 per cent of the annual product you are controlling the mdeiiendent owners, I.ecause if you should control the market price these independents could not.— A. Ilrey could control it to the extent of their own output. , , • „ ^ n Q. Is it not a fact in your business that you name a reas.mable price.' You say ail transactions are Ijascd on profit, and you name a reas,.nal)le price and the whole country agree to that?— A. I did not say that. 83a — ' that we ha\'(.' been always the largest customer of the National Steel (Vimpany, tlie Carnegie Steel (Company, and the Federal Steel Company— cer- tainly tlie Feileral and Carnegie. I would not be quite sure about the National, but certainly the (krnej^ic Steel Conijiany and tlie Federal. A\'e pay them more money tlian anyone else ; there is no doubt nliont that. They liave told ns so. why the high PRICES WILL NOT CHECK CONSCMITION. Q. (By Mr. A. L. Harris.) What effect will the present high prices have upon cojisiinjption in the futun' in the steel business? — A. I have thought that they THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1027 ■would check it ; but in talking with railroad presidents, I have made up my mind that it would not give much of a check, for the reason that up to two or three j'ears ago the railroads were transporting cars that contained 15 to 20 tons of goods of vari- ous kinds, coal, ore, and coke; to-day they are using cars that carry 50 to 60 tons. They have had to strengthen their bridges, tear out the old bridges and put in new ones, tear out the old rails and put in new ones, demolish the old cars and buy new ones ; and that transition state is going on, and I think it will continue for the next year or two. Many men that are perhaps better posted than I am think that it will continue for three years. Certain it is that our railroad presidents and men who have made a study of this thing believe that these high prices are going to rule for two or three years, and they give as a reason that we have got 100,000 miles of railroad that is laid with 60 or 65 or 70 pound rails, and we have sot to pull out that rail and put in 75 to 100 pound rails. We ha\e got to pull out 4,000 or 5,000 light bridges and put in hea^'ier bridges. We have got to have heavier locomotives. It was only a short time ago that the average railroad man figured that 500 to 800 tons (jf dead freight was a very large train load. They are now hauling as high as 2,000 tons to a train load. That necessitates heavier equipment, heavieT motive power, heavier rolling stock, heavier rails, stronger bridges ; and that thing is going on to an extent, the American railroads are making such immense strides over any other portion of the world, that it is hard to tell when this thing will stop. I do not believe any mortal can tell. Some of the wisest men in the iron and steel business have been very greatly deceived. Q. (By Mr. Farquhah.) Are these great purchases of rails by the railroads some- what predicated on this state of facts that you are now forecasting? — A. Yes; I do not think a railroad could buy 100,000 tons of rails and get delivery of them in 1900. They are all sold up now through the year. It is impossible to get them. NO CONNECTION OR AGiEEEMENT WITH THE OTHER GREAT STEEL COMPANIES. Q. (By j\Ir. Jenks.) You spoke of the fact that the American Steel and Wire Com- pany was perhaps the largest customer of the National Steel Company and the Fed- eral and the Carnegie? — A. Of the Federal and Carnegie; I am not sure whether they are of the National. Q. The statement was made here by some of the men connected with the National Steel and the American Steel Hoop Company that while there was no immediate for- mal connection between the two companies, they had so many directors of one com- pany that were also directors in the other that they worked together in unusual har- mony. Is there a similar arrangement between the directors of the American Steel and Wire Company and any of these other companies that you have mentioned? — A. No; the National S'teel and the American Steel Hoop and the American Tin Plate are very close together. Q. Yes; that is what thev said.— A. And therefore probably the largest customer of the National for 1900 will 'be the Tin Plate, and next to them the Hoop. But with the Carnegie and the Federal I am very sure we have always been the largest customer. Q. As far as the Federal Steel and Carnegie companies are concerned, do you have some directors in both? — A. No. Q. The boards are entirely independent?— A. Judge Gary was formerly largely interested in the Wire Company and our general counsel. He is now president of the Federal. And Mr. Buffington, who was treasurer of the American Steel and Wire Company, is now president of the Illinois Steel Company. ^ But the interests are not common interests in any way, shape, or manner. We have no arrangement with them whatever. We have no agreements. We have never been in a room with the Carnegie or Federal or National Steel people since we incorporated, as far as I know, and I do not believe any of our people have. Whereupon at 1 p. m. the commission took a recess until 2 p. m. Washington, D. C, Xoveinher U, 1899. The commission met at 2.22 p. m. John W. Gates again on the stand and examination resumed. NEW demand — HIGH I'RICES AND EXPOKTS. Q. (By Mr. Clarke.) Just before the recess you had testified as to the great increase in the demand for steel for shipbuilding purposes. Is not that true also of the demand for buildings in cities and for bridges?— A. Yes; that is true. 1 One of the constituent members of the Federal Steel Company. 1028 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. C}. Stet'l cars, steel vessels, steel frames for buildings and bridges — all these consti- tute a large new development in business? — A. They constitute, in my judgment, Mr. Chairman, as large a tonnage as the total tonnage of the United States in iron and steel 15 or 20 years ago. Q. Is that business likely to increase rather than diminish? — A. Yes; it is increas- ing every year. Q. (By Mr. A. L. H.\rris.) What effect will the present high prices have upon the export trade of the country in the future? — A. If they continue it will have the effect to curtail the exportation of iron and steel, except that manufacturers in some lines will be willing to export a, certain per cent of their product at practically cost or possibly a small loss in order to operate their works full. PLANTS At'lil'IKED BY AMERICAN STEEL AND WIEE COMPANY, AND HOW .M'QUIKED. Q. {By j\lr. Jenks.) May we go back to the question of organization, and the rela- tions of your company to the different companies that came in; can you give us a list of companies that went together into this combination?— A. I think so. Q. If you can give us the names of the companies which united, you may do so. —A. The American Steel and \\'ire Company of Sew Jersey owns all of the following plants, namely, 12 or ] 4 plants formerly owned by the American Steel and Wire C-ompany, oi Illinois; the Washburn-Moen Company, which had works at Worcester, Mass., AVaukegan, 111., and San Francisco; the Cleveland Rolling Mill Company; the Oliver-Snyder Steel Company, of Pittsburg, formerly called the Hainsworth; the Edith Furnace Com] >any, of Pittsburg; the Oliver Wire Company, of Pittsburg; the wire department of the Shenango Valley Steel Company, of New- castle; the Pittsburg A\'ire Company, of Braddoek; the Cincinnati Barbed Wire Fence Company, of Cincinnati; the Indiana Wire Fence CV)mpany, of Crawfordsville, Ind. ; the Consolidated Barbed Wire ('ompany, of Lawrence, Kans., and Joliet, 111.; the wire department of the Portage Iron Company, of Duncansville, Pa. ; the Worcester Wire Company, of Worcester, Mass.; the Schoenberger Steel Company, of Pittsburg; the Puget Sound Wire Nail Company, of Everett, Wash. ; the Laidlaw Bale and Tie Company, of Joliet and Kansas City; the Newljvirg Wire Xail Company, of New- burg, N. Y. I think that is all. Q. Those are the different companies that united? — A. Some of them were acquired some time afterwards. Q. In what way were these properties acquired — by the purchase of the plants outright, or by the purchase of the capital stock, agreeing to pay the same price for the minority? — A. In some cases by the purchase outright of the plants themselves, the various concerns settling up their assets and liabilities. Q. In the cases in which you bought tiie majority of the stock, or all of the stock, do those companies retain still their independent existence, as is the case, for example, in the Federal Steel Company? — A. In only one instance, I think; that is the Schoen- 1 )erger Sti-el Company, of Pittsliurg. Q. In the other case.s the separate companies ha^c been dissohed, and you have simply taken their plants? — A. Yes. PL\N'TS CLOSED WHY THEY WERE BOl'UHT. <.^. Have y(ju since the purchase of these different plants closed any of the plants?— A. Yes. Q. What ones? — ,\ . We ha\e closed all of the plants that could m it operate econom- ically and increased those that could. Q. Do you recall how many j'ou have closed — what ones? — A. The one in New- burg, N. Y., was closed when we bought it. The Portage Iron Company at Dun- cansville we closed and mo\ed the machinery elsewhere. Puget Sound we closed, that is two, Oawfordsville is three, Lawrence, Kans., is four, Cincinnati is five. Q. Why do you buy a closed plant? — A. In connection with the Newburg Wire and Nail Company plant thcie were some patent I'omplications that caused our patent counsel to think that it was wise for us to buy the plant. We had a partial list of patents, and ue thought it policy t(j acquire the balance, and we could only do it through the ]iurchase of a plant that carried with it the balance of the titles to those patents. Q. Your total output, I presume, has been incivased? — A. Yes. Q. Can you give us an idea (jf wdiat the percentage of increase has been? — A. I should say ]5 or 20 ])er cent over 1898. Q. (By Mr. Conner.) Why did you buy those plants that were closed?— A. There were various reasons. I should have to take each in'. I CDuld go on and give you our reasons for purchasing each one. Q. Similar reasmis, then, existed in the other cases? — A. Usually, yes. Q. (By Mr. Jenks.) Let me ask you about one or t^o more; take the Crawfords- ville company, for instance. — A. Crawfordsville had a cimtiact with our own com- pany, and it was a verj- arduous contract for us to fill, and we concluded that the cheapest way t(i fill it was to buy them out. We really got the plant for nothing and made a great saving by buying them out as compared with that contract. Q. And the plant at Duncansville? — A. The plant at Duncansville had a sliding- scale arrangement with the Carnegie Steel Companj'; as long as the ownership of the plant remained with A. E. Whitney that sliding scale continued. 'Sir. '\\'hitney was on particularly friendly terms with the Standard Oil Comjjany, and they were buying their nails of !\Ir. Whitney, and we thought they were buying them a little too cheap. They were working a sort of a syndicate arrangement, too, and it was a particular nail that could only lie driven by machinery, and the Standard Oil people had nevei' given us a fair opportunitj^, we thought, to demonstrate that «e could make that nail just as well as Whitney could. AVe bought them out and liave been selling the Standard Oil Company their nails ever since. REASONS FOR CLOSINC; PLANTS. Q. (By Mr. Coxoer.) Is there any general reason gi'S'en, or that you could give, for the closing of these plants? Was it the lack of economy in their operation? — A. Entirely so. Wherever v^e bought a plant and found that we could operate it eco- nomically and make more money, we have operated it ; and wherever we found that we could not, we have shut it down. Q. Was the fault or defect in those plants one of location, or in the machinery of the plants? — A. Sometimes it was location and sometimes it was badly constructed machinery, and sometimes it was a combination of both. Q. (By Mr. Jenks.) In times wlien prices are low and profits low one would sup- pose that it would be a regular thing to close some of the poorer plants. In times when prices are as high as they are now and increasing rapidly — you say that you can not begin to meet the demand for your product— one W(3uld suppose that the plants that are not quite so profitable as the others might still pay.— A. They would if we could get the raw- material. We can not get the raw material. Q. So the closing of plants depends in part on that?— A. Yes; it is a combination of circumstances. If we could get the raw material and sell the stuff we should operate the plants day and night; we should hate to stop one on Sundays. Q. Have von dismantled those plants, the one at Duncansville and the one at Crawfords\-i'lle?— A. S(jme we have dismantled and shipped elsewhere; others would be able to start up if we could get the material. In Cincinnati I think we could start up at a day's notice. Salem, Ohio, is another one; we may dismantle that and move it somewhere. Findlay, Ohio, is an old plant; I do not think we will operate that; it is not in shajie to be operated. SAVINGS BY CONSOLIDATION. Q. What would \-ou say were the chief sources of saving that you have made by combining?— A. Well, in the separate maintenance of the various organizations, each concern had to have a president, most of them one or U\o vice-presidents a secretary, a treasurer, and auditor, and so on; and we have done away practically with tliat class of men, and put the operating en'. t^ Do you have any other special source of saving? — A. No; those are the impor- tant items. Q. (By Mr. FAEquiiAR.) Is therc.^ any other one? — A. Our loss from bad debts is very important, I think. 0- (By Mr. Jbnks.) What have y(ju to say about that? — A. Our percentage of loss from bad debts, I shoulil .say, up to date this year, is about oue-twenty-fifth of one per cent. Under the old regime I should say it was one-half of one per cent. Q. How do you manage to make a saving tliere; how does it come about? — A. If a man does not pay according to terms, we are a little more strict with him. Q. You are in a considerably 1)ettcr position to stop his source of supply? — A. We do not attemjit to stop his source of sup|ily, but we might ask hhn to send a check or draft with the order the next time. We should be perfectly willing to sell him, but we should like the money. Q. You, of Course, might have clone that under the old system. How is it that your power is greater under this? — A. Well, under the old system a merchant might quibble with half a dozen manufactvu-ers, and there might be some one particular manufacturer that he would treat fairly, so that he w (luld feel that he had a port in a storm. And in the commercial term men claim shortage, make unreasonalile de- mands, and we do not find those demands to exist to any such extent as they did before. They claimed a shortage, for instance, c)f five kegs of nails 'ou are in a good deal lietter position than you were liefore to bring pressure to bear upon them?— A. We sell our goods on 30 days' time, and the only pressure we could bring to l.iear would be to ask him to send a draft with the order. Q. Or refuse to sell him? — A. We never refuse to sell anyone, I think. Q. Is there any saving that comes from owning these diifcrent sources of industry, mines, ti'aiisportation, and soon, that you did not have before? Are yon so much nKjrc I'ertain of getting your raw material than you were before that you can count that as a distinct ach'antage? — A. That is of very'great ad\antage to us." You under- stand Ave aie less than ii year old — that is, the iVmericau Steid and Wire Company of New Jersisy; but when we have finishcroposition, and my answer is that I think the American Steel and Wire Company of New Jersev have made a fairly satisfactory profit for their goods, and they ought to be willing to allow the railroads a satisfactory profit for limning their business. AVe have gone on the principle of live and let live in regard to that. Q. (By Jlr. Coxoek.) You mean by that that you pay the railroads their schedule rates? — A. Yes. Q. And do not accept or seek for a rebate? — A. If we have a rebate account with any railroad, or anything of that kind, shape, or nature in any of our c<5mpanies, I do not know it. I will say that, if that is what you are driving at. Q. (By Representative Li viN(isTos.) Do you ever receive a commission for a certain amount of freight to be delivered? — A. Well, if any of them have ever got it thcj- have not turned it into the treasury, and I woukt like to catch snmconc with a commis- sion in his pocket or in the bank. Wc have been very liberal in our treatment of the railroads, and we belie\e in it. NO .\GREEMENT Wri'H WIKH-FENCE MAKERS. • J. (By Mr. .Tenks.) The statement was niade some months ago that your company had made an agreement with some 13, I think it was — S(.>me quite large number — of leading fence manufacturers, to furnish them material as cheap as they themselves could manufacture it if they were to set up rod mills, and that then they agreed in turn — I do not imderstand that this was a formal contract — but they agreed to main- tain a price that would assure a reasonable profit to all parties concerned. Was there any such price agreement as that with tlie fence manufacturers? — A. Not that I know of. I think that my statement this morning, that we have no agreement of any kind whatever, to my knowledge, would cover that. Q. Your statement this morning was not intended, I suppose, to cover thc^ making of contracts at different periods or times with different concerns. I understood that was the nature of this agreement : that you had contracted with these large manu- facturers, your leading competitors, to furnish them wire and rods — whatever was needed — at fairly good rates fijr a consideralile period in the future, and that they in turn had given you to understand that they would maintain their piices? — A. The answer to that is that of all the fence — wire" fence — made in the United States I pre- sume we make half, perhaps more. The large maker outside of ourselves has recently moved to Pittsburg and started to erect his (jwn works; so that I do not think there can be any contract of that kind. I have never seen any. <^ That is, he has started to erect his own works for the manufacture of wire? — A. Yes: that is the Page Wire Fence Company. CKO.MOTERS' PROFCrS AND COM.M ISSIONS, Q. I wish to go back again for a moment to the (]uestion of the organization, the causes of organizations, and so on. Y"ou spoke of having arranged— yourself and Mr. Ellwood— for the purchase of these various plants, and of having turned your contract over to Mr. Voprhees, as I understand, who made the arrangements with the bankers. What arrangements, as regards commissions and costs and so on, were made with the underwriters or the bankers for taking care of that part of the business?— A. We made no contracts with the liankers ourselves. I could not answer what the other people did. Q. Do you mean by that you do not kiKjw?— A. I do not know. Q. (By Mr. Conger.) Do vou know how many stockholders there are m your company?— A. AVhy, I should guess there ^vcre l,o(10. That w<5uld be an offhand guess; I do not think I ever counted them. Q (By Mr Jenks.) You, of course, have ))een quite familiar with the organiza- tion, not merely of this company, but (if some others. The statement has frequently been made that in these later organizations anywhere from 15 to 20 and 25 per cent. 1032 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and in some cases more than that, of the common stock was required to cover the cost of organization. That included the pay of the promoter and the commisgiona. Would you think that, from your knowledge of the business of this company, as high, we will say, as 20 per ceiit of the common stock went for the costs of organiza- tion to anybody? — A. I can not state what amount. I presume they made money out of it; they assured me that they made money out of it, very kindly, and I take it for granted that they did make money, but the amount of money they made I have not any more idea of than you. To be very frank with you, I never wanted to know. MErHOD OF CONSOLIDATION — Vj\LU,\TION OF PLANTS. Q. In the case of a good many organizations that have been made, we have been assured that no one concern knew what was paid for other concerns. Was that true in the organization of this company? When you and Mr. Ell wood, for example, bought out different concerns and took options, was it your regular custom to buy each by itself without a general understanding among them all? — A. We negotiated with each company on as favorable a basis as we could, independent of any other company. We never bought a company that we were not willing to take and pay for irrespective of any consolidation. We went on that principle. I was fairly familiar with the wire business. We had a company for many years, called the Columbia Patent Company, that owned a very large number of patents. I was president of that company, and was president of an association — which was possibly contrary to law — a few years ago that sold the products. We discovered that we were infring- ing on some of the various trust laws and we discontinued that business. I had a very good idea of what this plant and that plant could earn, and had had a general idea for a good many years. When Mr. Elwood and myself started out, we started out with the idea that we would buy a certain number of plants, irrespective of whether there was any consolidation or not. We would buy them and pay for them ; and we did so without knowing how far we w'ere going ; and we did not buy any- thing that we did not think was cheap — that is, on their money-earning capacity. Q. As independent plants? — A. Independent plants. For instance, one concern that I call to mind; we knew about what that concern was worth, and we did not ask them to set a price. We told them what we would give them in cash, and they started out by asking us a miillion dollars more than we offered them. We told them we would not pay them any more than we offered, and if they wanted to accept that we would trade with them and pay them the money in thirty days, and they did so. And another concern, I think we paid a few hundred thousand dollars more than we expected to, but they assured us that they had made a certain amount of money in the interim. You see, I had priced these plants a year before. Q. In connection with the organization of the American Steel and Wire Company? — A. Of Illinois ; so that I was familiar with the value, and I had figures furnished by Morgan & Co.'s accountants of their profits for 3 years. Q. Do I understand you to say, then, that so far as this organization was concerned no added prices were given, because it ^vas thought that, by virtue of the organization itself, or of the consolidation, it would be possible to make considerably higher profits than could be made if the plants were to be run independently? — A. That is absolutely correct, and I will make a further statement: There is not a plant that we bought that we could not sell out now or could not have sold at any time since we bought it at from 25 to 40 per cent more than what we paid for it. We bought the plants at what they were worth, in every instance, or we did not buy them. Q. You spoke of buying some of these plants at a cash price or on the basis of cash. We have understood from some other companies that often all of their plants were bought with a distinctly cash option at any rate, and in other cases we understand that they were all bought for stock. Can you make any statement about that? — A. Well, I can not say what our neighbors did., I can say, so far as our own company is concerned, that all purchases made by Mr. EUwood and myself were spot cash and nothing else. There was no exception in any instance. We paid out several million dollars before we thought it was possible to make any consolidation. PHICES UNDUE CONDITIONS OF MONOPOLY. Q. Where you control 85 to 90 per cent of the output in any one line, are you not, in your judgment, enabled to keep your prices somewhat, not so very much, but somewhat, higher than would be possible if you were to control only 30 or 40 per cent of the output — that is to say, is there not in the control of that proportion of the output a certain slight, at any rate, monopolistic power? — A. I should like to answer that question by making a general statement first. Since 1890 the companies that I THE AMERICAN STEEL AND WIRE COMPANY: GATES. 1033 have been interested in have practically controlled the manufacture of barljed fence wice in the Tnited States and manufactured H5 per cent of all that \\ as made in the world. During that time the price has dropped .50 or 60 per cent. It is a (inestion of policy with a large concern that handles its Ijusiness in a broad manner ni)t to try and crowd the mourners. That has ahva\-s lieen the principle that I have worked on, to try and make monej- in a legitimate way. While I do not intend to claim to you gentlemen that I am averse to making all the profits that I can make, I think it IS bad for a concern to try and make S( i mut-li mone>- in one 6 months that they would ruin their business for the next 12 or 18 months. When the manufacture of barbed wire developed in this country, in 1874, 1 was in the retail hardware business. I paid 31 r. Elhvood, who is now my colleague, 20 cents a pound for a carload of barbed fence wire that we have since sold at 2 cents, since we were in absolute control, as he was in control at that time. That barbed fence wire has dropped from 20 cents a pound in 1874 to 2 cents a pound in 1899, 2.5 years. The wages of the laboring men have continually increased, on account of the improved methods of manufacturing, the increased output, and the fact that njost of our men were on a tonnage basis. What we thought was a fair rate per hundred pounds to pay a few years ago has turned out now to be a very high price, on account of the enormous tonnage they can turn out. 1 can best illustrate that by stating that Mr. George T. Oliver, who is now out of business, one of our directors, stated to the Senate Subcommittee on Finance in 1888, in answei' to a question as to what the Ixjss roller of his roil mill got — it being at a time when there was a vacancy in the Chief Justice- ship of the Supreme Court and many applicants for it — that he got $21,000 for his last year's work. Senator Harris, I think it was, of Tennessee, said, "My God, that is more than the Chief Justice of the United States gets;" and ^Mr. Oliver said, "But there is more timber for Chief Justices than there is for head rollers, ' ' and it brought them all down with a laugh. Now, the head roller in a i-od mill does not get to-day $21,000 a year, as he did then. He got then 60 cents pei- ton, out of which he paid the night roller a certain sum and perhaps some assistants, and the balance of it he put in his pocket. But a head roller of a rod mill 12 years ago averageil to make about $20,000, and they average to make to-day, probably, on a 30-cent basis, abcjut half that amount, or $10,000 or $12,000 a year, and pay out just as much as they did then to their assistants. The reason is that the rod mill that was built origi- nally to roll 100 tons a day will now produce 200, 22.5, or 250 tons; and while the head roller now has to pay his night roller and his assistants a large sum of money, still his net yearly amount is probably $10,000 or $15,000 to-day. Q. The fact, of course, that there has been a great decrease in prii-es would not in itself quite cover the question that I have asked. Let me put the matter in still another way. Do you suppose that the prices W(iuld have been as low as they are now pro\ided there had been a greater degree of competition along that line? You say that for several years you have controlled — that is, the concern you have been connected with has controlled — 85 per cent or upward of that product. Supposing that there had been several different establishments controlling anywhere from 15 to 20 or 25 per cent each, with fierce competition among them all, do you suppose that the price would have gone down still \tm-er than it is? — A. \Vell, I should think it would have gone lower. Q. That covers the point, I think. — .V. I should think it would have gone lower in the actual instance. But our control has tieen acquired liy patents, which we have either gone and bought in the open market or jiaid others for, and we have paid out — the wire ci jmpanies, in their various purchases of patents and in the litigation to establish them in the last 20 years— I should suppose, $5,000,000 or $6,000,000. They have paid out millions of money, and if you would elhninate that, I presume that prices might have been lower. 1 am willing to concede that. THIS CO-MBIX.\TION NOT DUE TO STKESS OF COMPETITION. Q. It has been siiggesteil with reference to several others of the larger com))ina- tions that the cause of their coming together was the fierce com)>etition that existeil among them and the fact that they were making very little ni(jney; that they came together to make these savings in order to increase their profits without increas- ing prices. What are the chief causes of the formation of your cinniiain? Was it this same competition?— A. It was because we wanted to be the wire manufacturers of the world. Q. You had political ambition?— A. And perhaps a laudable one. I will say that the Consolidated Steel and Wire Company, of which I was a large owner, made in the last 3 years of its existence between 27 and 28 per cent per annum net. So that ruinous competition could hardly be said to be the reason for driving us together. 1034 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. We Ijelifvc that there is a great deal in the management of the business. We believe that has as much to rto with its success as anything else, and our companies have always ujade money. I start eil in the wire business less than 20 years ago, practically without a dollar, and many of my colleagues are in the same condition. The money we have made we have made out of the wire business, and we have made it by looking after our business closely, working anywhere from 12 to 20 hours per day, and by various improved methods, and pushing for business, and acquiring additional properties, and running our business on what wc think were strictly business principles. Q. (By j\[r. Jexks) . Dn you think you can mention, as a prominent source of sav- ing on the part of these consolidations, that you can secure the best talent more easily than you can in a smaller business? — A. Yes; there is no rjuestion about that. It would not be fair for me to say that we have the best talent in the wire business, because it might be contested; but I can say that we have the same men in the wire business that have made tlieir money out of it. Those men are in it to-day. DIVIDENDS. Q. I sec the statement is made as regards the American Steel and Wire Company that you have already paid dividends on your preferred stock and earned dividends on the common, but have not paid it on account of the fear of legal difficulties. Do the papers state it properly at all? — A. I am afraid there might be a stock speculator in the room. I do not know that there is such a thing in Washington. We have made a dividend on our common stock — a good one. We have not paid the divi- dend because the directors have not voted to pay it. Perhaps I am as much to blame for not voting to pay it as anyone. Q. The question was asked particularly with reference to the statement made regard- ing the legal difficulties. I understood the Federal Steel Company had met some, apparently. — A. We are not willing to state that we are following in the shoes of the Federal Steel Company or anyone else. I will put it on that broad ground that our directors ifid not think it wise to pay a dividend. Q. We have had a good deal of evidence with reference to charters under the New Jersey law, etc. That \\as the reason I asked you the question. — A. I have been opposed myself to payment of diviileads on the common stock, for the reaaon we thought we ought to acquire certain propo'ties, and to put our properties in such shape tliat, wben this tidal wa\'e, which may last 1, 2, or 3 years, has eventually found its level, we I'an "[lay dividends in any kind of times after we start. Testimony closed. Wasjiin(5T(ix, D. C, Xnreriihcr 14, 1899. TESTIMONY OF MAX PAM, ESft., Alt'iniei/ cil lair, Cliinujo, TIJ. The commission met at 10.40 a. m., Senator Kyle presiding. At 3.08 p. m. Max Pam, esq., was introduced as a witness, and, being duly sworn, testified as follows: Senator Kyle. You may state your full name and address. — A. Max Pam, Chicago, Q. (By Mr. Jenks.) What is your ])rofessioii?— A. A lawyer. Q. Are you connected with the .Vmerican Steel and \\'ire (^ompany? — A. I am the general counsel. Q. Have you liccn so connected with the company since its organization ?— A. Since the 1st day of Jul>- as general counsel. I was counsel in Chicago for the com- pan)' from its organization until the 1st of July, when I was elected general counsel. Q. Arc you familiar with the process of organization of the company from the beginning? — A. By information and hearsay. Q. Of your (iwn jiersonal knowledj^c, with reference to tlie financial end of the organization? — A. Not as to details; simply as to the general scope; that is all. Q. \Vere you or are you familiar wilh the arrangements that were made with the bankers, J. & W. Seligniiui? — A. 1 am not. Q. You have heard the general testimony given by :\[r. (4ates. So far as your kufiwledgc goes, do you agree with it?— A. It is substantially correct. Q. Do \'ou recall anv point on wdiich you would care to add any further informa- tion?— A. On that subject? Q. Yes?— A. No, sir. Q. On anything comiected with Mr. Gates's testimony? — \. No; I do not think there is anything further in that respect. THE AMERICAN STEEL AND WIRE COMPANY: PAM. 1035 ADVANTAGES OF INC0RP0EATINC4 IN NEW .TEKSEY. .Q. I want to ask you to explain the differences between the corporation law of the State of Illinois and that of New Jersey, in order that we may see what, in your judg- ment, were the advantages of organizing in New Jersey a corporation of this kind with its main offices in Chicago? — A. The laws of New Jersey are broader in their scope and application to a business that involves as many elements and conditions as this kind of an institution does. They give the power to a corporation to cari-y on every form of legitimate enterprise in any State of the Union, with the exception of rail- roads in the State of New Jersey. It excludes the right to operate railroads in New Jersey. The laws of Illinois (In not permit, in many respects, the exercise of the powers that are conferred by the charter of this coriKii-ati(jn under the laws of New Jersey. Each State has its own corporation laws, and eacli has the right to say that certain corporate powers are or are not in accordance with its public policy. There- fore, a question may arise as to the power of the corporation to act as it did, or to do the business it has done. The New Jersey act is so hroail that the State which gives the corporation life gives it the power to do just what it undertakes to do under the provisions of its charter; and no question can l^e raiseil then by any other State, so far as the power of the corporation is concerned, to act under this State charter. Q. Do I understand you to say that in accordance with the law of the State of Illinois it would be an impossibility to get a charter to permit a company like the American Steel and Wire Companj'" to engage in the mining, transporting, and manu- facturing of steel, wire, and so on? Under the laws of the State of Illinois would that include too many lines of business for one corporation? — A. Yes. The laws of Illinois will not permit the exercise of the powers that tlie laws of New Jersey will. In this corporation, for instance, it is neces.^ar\' to own coal mines in Penn- sylvania. The Pennsylvania statutes provide tliat no nonresident corporation can own, in fee, m(jre than 1 00 acres of its land. Now, a corporation like this owns, or rather controls, thousands upon thousands of acres. If organized under the laws of Illinois it would be absolutely powerless in the acquisition of that property, because the laws of Illinois do not permit a corporation of that State t(j own stock in other cor- porations. Under the New Jersey act this corporation has a right to own the capital stock of a Pennsylvania corporation, which may acipiire property in excess of 100 acres, and in that way it can exercise its (jwnership. POWER OP A STATE (JVER CORPORATIONS CREATED BY .VNOTHER. Q. What restrictions do the laws of Illinois put upon foreign corporations? — A. None, except that they are subjected to the same duties and i >bligations, but can have the same rights, "as domestic corporations. The right t(j do business is guar- anteed under the interstate commerce act; therefore no State legislation can affect it. Q. (By Mr. Faequh.vr.) If the corporation, organized under the laws of the State of New Jersey, should do business in the State of Illinois with a grant of greater priv- ileges than any Illinois ('(jrporation had, and in the same line of business — a compet- ing company, 'you may say — would a suit for injuncti( m, or whatever other form in law it might take there, lie against this foreign company from New Jersey, restrict- ing it from doing business in the State of Illinois on a more liberal principle than the Illinois act? — A. If yi >n mean by that, if the foreign corporation undertook to act contrary to the law of that State," unquestionaljly the State, through its legal officer, would have the right to restrain any exercise of power contrary to the provisions of the laws of the State. For instance, we should have a right under our New Jersey charter to go into Illinois and operate railroads. The Illin(jis law does not permit a corporation like nurs to operate railroads; it must lie incorp.irated especially for that purpose under- the ai-t of Illinois. Unquestionably an.\- person injured, as I said, would have a riuht tn stop the corporation from exercising a )iower which was directly prohibited bv the State. That dcies not involv<' any (luestion of transaction between the States o'r between anv citizens of States. Of course, nothing could be done by any State which would ia"terfere with their corporate right to do that. Q. But your company, the American Steel and Wire Company, could acquire m the State of Illinois, bN'"chartei', the right to build railroads and operate them there?— A. In accordance with the provisions of that State. Q. Provisions of the State of Illinois?— A. Of course that would recjuire compliance with every requirement. That is, the corporation, as a cor])oration, understand me, can not. Individuals <'Ould organize a railroad company- lor the purpose of carrying on the railroad business. A corporation has no such power. Q But the incorporators, for instance, or your board of directors, could acquire that right of the State of Illinois, of course?— A. Any separate individuals, whether 1036 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. directors of this company, or of any company, have a right to go into Illinois and organize for the pupose of operating a railroad, pursuant to the laws of that State. Q. So that even with all the liberality of your charter under the State of New Jersey, you have to conform to the State laws of other States where the restrictions in incorporation are of a more conservative form than they are in New Jersey?— A. I do not think the question has ever arisen as to the extent to which one State can interfere with the exercise of power of a corporation of another State; but I take it, as a broad principle, that a corporation, being purely a creature of the statute, can exercise no greater power than the law-making power gives it, the legislature; and if the legislature of Illinois undertakes to say under what conditions and limitations the corporation may act within the bounds of that State, corporations are confined to them, so long as that in no way interferes with the provisions of the State constitu- tion, or the provisions of the Federal Constitution as to interstate commerce. The legislature has its limitations the same as any other governing body. NECESSITY OF LIBERAL CORPORATION LA^VS — PROGRESS. Q. You mentioned a minute ago, in answer to Professor Jenks, that your reason for incorporation under the laws of New Jersey was their liberality. — A. I did not sa}- that, if j'ou will permit me. Professor Jeitks asked me some of the differences existing between the laws of the two States and I started to give them. Q. And in your answer, of course, you admitted them to be more liberal? — A. You can not run an institution of this kind, in my judgment, with the different elements — mining, coal mining, and all these different elements that enter into a business of this kind — and make it one whole. It has got to be done under powers broad enough to permit it to be done. Take, for instance, another element, which, while I do not think it affects this corporation in the slightest degree, indicates to you how advan- tages are gained by such acts as the legislature of New Jersey has enacted, and which I think all States should adopt if they can for the good of the State. The Illinois law, for instance, exempts from taxation the capital stock of purely manufacturing corporations; that is, where they are for manufacturing only. The circuit court of the State has so construed that law that if the company exercises any other power, like mining (which is necessarily a corollary to a manufacturing business like this) , it is not exempt from taxation. Now, in Illinois, there are any number of wire com- panies outside of this company. They are in the same business, and if the capital stock of this comjjany were under the law of Illinois the corporation would be taxed on this $90,000,000 of stock, while every other corporation there that does not go into the mining business — which does not produce its own ore, as we do — would be exempt from this burden. That would be an inequality and unfairness toward this one com- pany. So, throughout, you will find that there are different elements of disadvantage in narrow legislation. Legislatures, and courts, and executives, and everybody must necessarily make and interpret the law for the good of the whole, in the light of changed conditions as they arise. The State that soonest realizes that position is going to profit by it, beyond question. This country has demonstrated that. Eng- land has demonstrated it in connection with restriction of trade, which is very much like this question. I remember some 10 years ago, when there was a question of the decisions in Illinois and other States, if a doctor, for instance, had agreed to stay out of practice, if he had sold his good will for a greater territory than a few miles, the courts would hold that that was an unreasonable restraint and void. They subse- quently changed that so that the State line would be regarded as unreasonable — any- where beyond the State line. You take it now, and the imaginary State line is entirely wiped out, simply because conditions change. The railroad, the telephone, the telegraph, every scientific production, they make practically no difference between them. They have made it so that it is absolutely impossible to restrain contracts, excepting in particular cases. Within the last 10 years that whole situation has changed. That characterizes this situation, too, as purely economical, and its an economical condition arises it must be met legislatively, judicially, and executively. As they are met, they are bound to conduce to the benefit of the whole country. Q. So that you would say that the laws of New Jersey give capital greater oppor- tunities for centralization than any other State of the Union? — A. I would not say that, Vjecause I am not familiar with all, but it certainly gives this — an encouragement to capital to invest and reach out all over the country in the pursuit of an industry tliat is beneficial t(.i everybody concerned, whether it is the capitalist, whether it is the consumer, whether it is the laborer — everybody gets the benefit of it, unques- tionably. THE AMERICAN STEEL AND WIEE COMPANY: PAM. 1037 I'UBLIC REPORTS ANJ> DEC'I,ARATI1)NS. Q. (By JEr. Jexks.) Do you think of any other special advantages in the New Jersey law compared with the Illinois law? Is thei'e any difference as regards, for example, the nature of the reports to the State? — A. Yes; New Jersey requires reports and Illuiois di )es not. . Q. In reference to the articles of incorporation, that is, as to the declarations that have to be made regarding the nature of the business, the basis for the issuance of stock, and so on; is there any material diffei-ence there? — A. None ; if anything, New Jersey requires even a fuller statement. NATIONAL charters; DESIRABLE, PERHAPS OONSTITrTIdXAL. Q. Jlr. Gates stated that he favored a national incorporation law, providing that corporations of $5,000,000 of capital stock or upward should be, or at any rate might be, incorporated under the United States law. Is it your opinion that a national incorporation law of that kind would at present be cdustitutional? — A. Well, of course, that is asking a good deal, but, in my judgment. Congress would have the power of regulation of c(3rp(irations, which are purely legislati\'e creatures, requiring such limitation in the doing of business as would give it the power to license and authorize. There is some question, I would confess, as to the power of Congress to do that, but I would not say it did not have the power. Unquestionably it would be a good thing if it could be done, because it avoids one great hardship; that is the exercise by each State of its separate right to construe the powers and duties and obligations of each corporation. At the same time another important question would arise, even if a national charter was issued — the question of the taxing power being taken from or \'ested in the Government or the States separately. It can not be, I am inchned to think. Q. (By Mr. Clarke.) The American Steel and '\\'ire Company produces goods for interstate commerce largely, does it not? — A. Yes. Q. There is no question of the constitutional power of Congress to regulate inter- state commerce? — A. None. Q. Might not that power be extended to the production as well as the distribution of goods for that purpose? — A. Except in so far as it affects the right of any man to control his own property, otherwise called "jus disponendi," I say yes; Congress can suggest, but can not control the right of a man over his own property. Q. (I5y Mr. Farquhar.) Do you suppose that under the Constitution of the United States, without amendment, national corporations, being brought under a license, the license always carrying a fee, could be incorporated or created under the taxing power of the National Government? — A. Well, I won't say that it can be done under any special department. My impression is rather in favor of the power of Congress now to issue charters. Of course it can not be done under a special act. I think it could be done under special charter business, though. Q. Special charter?— A. Applying to Congress for a charter to do business over the United States, and Congress could, if it wanted to, give a corporation life, and in doing it make such limitations and conditions as it deemed fit and proper. Q. (By Mr. A. L. Harris.) Under what provision of the Constitution do you base that decision? — A. The general constitutional delegation of legislative power to Con- gress, of course, the giving of charters and grants. Q. (By Mr. Farcjuhah.) All rights rather than reserved rights, you mean, do you not — A. Yes. Q. (By Mr. A. L. Harris. ) I was thinking that the rights, or rather reserved rights, went the other way.— A. The Constitution is preventive; that is. Congress is prevented from doing anything contrary to the Constitution. The legislative body has the right to enact any law that is not contrary to a special constitutional provision. It is an inhibitive document. It is prohibitive of legislation and action, and confines legislative action within the provisions of it, and it is the only working constitution that has expressed the limitation that a legislative body can not act. Q. (By Mr. Farquhar.) And under the taxing law itself, even in the cases taken of the oleomargarine bill, which could never liecome a law, unless a tax was imposed, no matter how infinitesimal the taxing might have been, it did not take away from the State the local taxation of these oleomargarine companies, and their property, real and personal, where they were. Mr. A. L. Harris. The revenue measure. Q. (ByMr. Farqdhar.) So you see a double revenue thereat once; a license would be in the same line as revenue. Do you not think so?— A. Well, I hardly— that is, it 1038 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. would not be strictly so. I think the Cxovernment certainly has the right to issue a license for proper pursuits, and they have the right to consent. Q. The right to issue charters as they did for the Nicaragua Canal Company, the American Company of Nicaragua? — A. Yes; so they would have a right to issue charters for railroads under proper regulations. I think it is done in some instances where railroads cover territ(jries — Congress issues special charters to railroad corpora- tions to operate in these territories and extend beyond the confines of those territories. THE ANTI-THrsT L.iW OF ILLINOIS. Q. (By Mr. Jenks.) Illinois has a special law on the subject of trusts and combi- nations, fdi-ljidding the formation of companies that are supposed to act in restraint of traile? — A. A'es. Q. In your judgment, has that law been effective in preventing, in the State of Illinois, ciiinbinations of capital to any extent? — A. I do not think that law has, no; because no one finds fault with a sound, wholesome law. I think the treatment sometimes given to institutions, pursuing them or attacking them, will ultimately tend to affect the welfare of the State. Q. In your judgment, then, this law forbidding monopolies, trusts, and so on, is in itself a wise law? — A. Unquestionably. Q. And as regards any evil that might come from it, it would be in the unwise enforcement of it? — A. Yes; or abuse of it. Q. Is the law itself drawn in such terms that it would, in your judgment, tend to prevent combinations that might easily result in the savings that have been suggested by JNlr. Gates and others? — A, AVhy, I do not think the law would interfere with an organization or corporation such as ours, because it does not come within any possible suggestion, even, ijf any of its provisions. Q. Do y(3u think that the law would forbid the organization of a corporation that would control, \\e will say, the entire output of any one industry, aside from pat- efits? — A. In other words, can there be such a thing as a corporation that will come under that act? Q. It amounts to that; yes. — A. "Well, I should say, of course that might be done. I have this in mind. For instance, suppose you have a large number of competing institutions, and it is desired to control those competing institutions in their separate organizations, and have them controlled bj' either a syndicate or a corporation that holds stock in all of these corporations, leaving them intact, and place them in a position where they could ileceive the public by leading the public to believe they are competing with each other, when they are not; I can readily see that that would be contrary to the law. Q. But if one corporation were to buy up all of its competitors until it had sub- stantial control of the market, that, in your judgment, wiiuld not be contrary to the law? — A. Si) long as the motive and purpose is to exercise merely a man' s prerogative of doing \\ itli his money what will iiroduce the most good, without being necessarily oppi'essive, by entering into an arrangement in advance to oppress, there certainly could be no objection. Snpimsean histitution could be successfully attacked; a State could not confiscate the jiroperty. It can not take property from them at all. All the)' can saj- is that the organization was imperfect and contrary to the letter of the law, and that tlicy have got to return the property to the owners. Now, whatare the stockholders going to do with it? It can not be contended for a moment that thiise stockholders would not have a right to sit riglit down with the appraisers of their property and say, " We will simply take our property and form a corporation and run our Imsiness. " Suppose tlie courts shoidd so far forget themselves as to appoint a receiver for an institutiim like this, and order the property sold. "Would it be said that the men who have the means and who are in a position to hold a large amount of securities would not have the right to go to tlie receiver's sale and buy that property and save themselves? AVould it then lie said it was a trust, simply liecause they undertook to save their own property? <^ I am asking you in reference to the way in wlrich the law of Illinois is, as a matter of fact, interpreted. Have any oi the larger combinations or corporations lieen held illegal under this law? — A. Well, of course, not in the iast year or two. The old Chicago (las Trust (that is some years back). That was something like what I have stated to you. lieally a cor])oration was formed, holdingstock of differ- ent gas conijianies around (Chicago, and they were apparently competing with each other, but really were not, and one set of men undertook to control the situation. The Supreme Court held (hat to be a trust, and very properly. Another case 1 recall was the C'alifornia I'reservers' Company case. (.1 And the Distilling and Cattle Feed'ing Company?— A. Yes. The Supreme Court THE AMERICAN STEEL AND WIKE COMPANY: PAM. 1039 handed down a decision of the Glucose Company, ^\■hich \\cnt up on demurrer, and in it a petition for a rehearing has lieen filed. That really did m >t involve the ciuestion. There was never a question substantially whether or not a c( irporation had the right, or the directors of a corporation had aright, to dispose of its prcjpevty as a going con- cern without the consent of all of its stockholders; so that the real question \\as not before the court. Q. In the case of the Distilling and Cattle Feeding Company dd you recall in what respects that was considered to be mure injurious, and consequentl}' to come mure directly under the law, than any other very large coriMiration ^yhich controlled a large proportion of the output in any one line? — A. ^ly recollection is that in that case they showed, in writing, agreements and contracts fi ir the control of prices, com- modity, and output, and there was not anj' way for the Supreme Court to do any- thing else than condemn it. (Testimony closed.) 83a^ 67 THE :n^atioi^al shear compact. Washington, D. C, Noi'einher I4, 1899. TESTIMONY OF MR. JAMES C. PEARSON, I'rirate banker, Boxtim, Mdns. The commission met at 10.40 a. m., Senator Kyle presiding. At 3.4.5 p. m. Mr. James C. Pearson, of Boston, Mass., was introduced as a witness, and, being duly sworn, testified as follows: Q. (By Senator Kyle.) Kindly give your full name and address. — A. James C. Pearson, Boston, ilass. Q. And your liusiness? — A. Steel, wire, and nails; and, in this capacity, private banker. ORGANIZATION OF THE NATIONAL SHEAE COMPANY. Q. (By Mr. Jenks.) Have you had any direct connection with the National Shear Company as regards the manufacturing part of the work. — A, Not at all. Q. When was this company organized? — A. I do not know the exact date. What was that date, ^Ir. Stout? Mr. Srorr. September 7, 1S9S. Q. (By ilr. Jenks.) What was the amount of capital stock? — A. Three million. Q. Do you recollect how that was divided between preferred and common? — A. One million preferred and 2,000,000 common, I think. Q. Do you recall how many companies united to form the National Shear Com- pany? — A. About five. There was the Clauss Shear Company, of Fremont, Ohio; the WilUam SchoUborn Company, of New Haven, Conn.; F. J. Wiss & Sons, of Newark; Seymour Cutlery Company, "of Holyoke, Mass., and the Ohio Shear Company, of Elyria, Ohio. Q. Were you j-ourself familiar with the contract under which these different com- panies were taken into the National Shear Company? — A. I was at the time, yes. Q. Ill what way were these companies paid for; cash, or in stock, mortgages, notes, or how? — A. All paid part cash and part stock. Q. You said that you yourself had been connected as banker with this organiza- tion? — A. I simply loaned them money. I had no official capacity Avhatsoever, no more than any national banker would have. Q. The question is a^ked whether they came together under a pmspectus made public, or in some other way? — A. Private. Q. It was an entirely private arrangement between the companies? — A. Yes. teems of loan to NATION.^L SHEAR COMPANY. 0. You say that you ha\-e loaned them iiKjney. In what form; ))y the discount- ing of notes? — A. By discounting of notes up to SL'00,000. Q. Discounting to the extent of S200,000'.'— A. I had agreed to discount to the extent of S200,000, and it amounts to about 81 (-5,0(10, I think. Q. And what special compensation were you to get for that? — A. Six per cent. Q. Anvthing further? — A. Conditional. Q. Conditional?— A. Yes; if I continued the arrangement; if I continued dis- counting their notes on 4 months' paper, in 2 >-ears they «-ere ti > give me a certain amount of .stock. u know whether in the discounting of these notes to this extent or to whatever extent you did, yim were furnishing to the company a large part of its run- ning capital? — A. I Has satisfied it was a majority of the running capital. <.)_. That it was a majority of the running capital? — A. That is, of the cash outside of the stock on hand — working capital — alth(jugh stock on hand, you know, is always considered working capital. Q. Yes; I had considered that. — A. About one-half. They had about as much more stock on hand. (i. So that the company was really raised in this way through you — the money it was using for paying for the stock on hand and furnishing the running capital? — A. Yes. • i. AVas it your understanding that the plants that were taken into the company were to be paid for then largely In- stock besides this, or were you furnishing the money? — A. Part of this money was paid to other factories for coming in. (l I'ai-t of this money you yourself furnished was used to pay tor plants? — A. Yes. Q. And discounting notes of the company? — A. Yes. That is where it was estab- lished. Tile basis they starteil on, y(ju see, was to borrow the working capital. Q. I understand, then, that you thought it was really on an unsound basis, and that is the reason why you withdrew? — A. That is right; that is the reason the nine- months clause was put in there. i.l. Because you were in doubt about it Vjefore? — A. In doubt about it at the timel loaned it ; yes. (,i. If I ma\' sum up, then, the companj' was organized with $1,250,000 of preferred stock and $1,750,000 of common stock, or $3,000,000 in all?— A. That is right. (^ And that was used tii pay for jilant, as you understand — practically all of it? — A. Yes. i.l. Excepting this reserveil for you? — A. Yes. Was it all issued, Mr. Stout? Mr. Stoit. Not all issued. The Witness. I think $400,000 or $500,000 has not lieen issued. 1^. And that the company issued, in addition to that, notes to pay for the plants?— A. Issued besides notes for money to pay for the plants. <^ Do you know whether their notes, any of them, were issued to pay for the plants or not? — A. You nu'an the money they got for the notes? <^ I mean further than that. Whether any of these who came in accepted in jiayuient im' the plants the notes'.' — A. They did ; yes. Q. So that the organization was really started on its credit? — .\. Borrowed money. (^ Even for the plants themselves? — A. For the plants themselves. (]. I understood that you withdrew from this arrangement after 9 months. Was there issued to vou or any of your intimate friends or near relatives, so that it might be SMpposed t(j 1)0 indirec'tly to >'0U, this $200,000 in .stock?— A. It was held in escrow )iy Mr. Cromwell, of New York. ' (.1 That was in the contract? — A. That was t m. Mr. Frederick 0. J. \Viss, Newark, N. J., was introduceii as a witness, and, ]>'Ang duly sworn, testified as follows: Senator Kyle. (Tive your full name, addre-s, and business. — A. Frederick C, J. Wiss, Newark, N. J.; business, manufacturer and merchant. Q. (By Mr. Jenks.) Are you vice-president of the National Shear Company? — A. Yes. (.^ Have you been in the National Shear Company from the beginning'' — A. I have, nominally. METHOD OF ORGANIZATION OF THE NATIONAL SHEAB COMPANY. Q. You can, perhaps, give us definite information with reference to the companies that united to form the National Shear Company. Were there more than five? — A. Only five were taken in; the amount of stock authorized was §3,000,000, as I under- stand from the minutes of the company, from information and from the records shown us. Before I go on I must explain that I am vice-president, but not active in the management, so these things I get indirectly, except where I have access to the books on demand; not voluntary information from the company. (i. You have, I suppose, however, had access to the minutes'? — A. Well, any time I have demanded to see them, I could see them, yes. The organization, under- stand, was purely a matter of contract between the promoter and the bankers, and probably one manufacturer. Q. Who was the promoter? — A. ilr. J. H. Parks. y. Is this Mr. J. H. Parks the man who was formerly president of the wire-nail combination? — A. He was connected with the nail industry, and also, I believe, with several other large concerns. Q. You say Mr. Parks was promoter in connection with one manufacturer; with whom? — A. \Vith Mr. J. H. Clauss, of the Clauss Shear Company. Q. Where is the Clauss Shear Company located? — A. Fremont, Ohio. Q. Will you explain a little more in detail wdiat the method of getting the com- panies together was, if you please? — A. It was by invitation of Mr. Parks, who appar- ently was representing capital, as far as we know. He invited the manufacturers to participate in various meetings, and they could come to no agreement. The pro- moters took it upon themselves to secure options on the factories of the principal manufacturers in the shear line. Some of those options were exercised and some were not. As I stated, the capitalization was Slj, 000,000, of which a certain amount was set aside for each of the factories acquired ; that is to say, if certain factories were not secured, i\Ir. Clauss and ^Ir. Pearson — well, Mr. Clau.'Js and ih: Pearson were to furnish these factories for a certain amount of stock, and if no factories were fur- nished of course no stock was issued. According t(j a copy of the stock book there has been issued §2,410,000, of which a trifle less than $1,000,000 is preferred stock, and the balance common. The preferred stock maybe $995,000. It is very near; practicallv §1,000,000.' COMPANIES UNITED PROPORTION OF THE BUSINESS CONTROLLED. you be kind enough to name the organization'? — A. The Clauss Shear Company, Q. Will you be kind enough to name the five companies that did go into the rganizatioii'?— A. The Clauss Shear Company, Fremont, Ohio; Se\'mour Cutlery Com- >Mr Wisssavs in a letter dated November 17, 1899: ■' Preferred stock ol the National sliear Com- pimy i.ssued, according to a statement dated June 9, 1899, is S955,000. Do not believe that there has been any change since that date." 1044 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. pan y, Holyoke, Mass. ; William Scliollborn Shear Company, New Haven, Conn. ; the Ohio Shear Company, of Elyria, Ohio, which may be sometimes known as the Stand- ard Shear Company; I think they have operated under the name of the Standard. It was the Elyria, and then it changed. I think the Standard was formed, two or thi-ee months previous to the formation of the National Shear Company. These com- panies, together with ouis, the J. A\'iss & Sons, of Newark, N. J., made up the National Shear Companv. Q. Are those concerns, or some of tho.^e that came in, say the Clauss Shear Com- pany and your own, the largest manufacturers of shears? — A. Yes. C^. Do you know what proportion of the entire output of shears is controlled now by the National Shear Company? — A. It is purely a matter of conjecture, and informa- tion gathered from various concei-ns, a good deal liased on the general business con- ditions. I should say, in round figures, 62 per cent, practically two-thirds. I really think it is less than twcj-thirds; jirobably 60 per cent. Q. Had you .succeeded in getting in the other 4 or 5 or 6 companies which it was understood to begin with were to come in provided they could make arrangements, what proportion would you have controlled then? — A. Had the National Shear Com- pany snci -ceded — is that what you mean? Q. Yes; that is what I mean. — A. Oh, probably, I should say, about 90 per cent. Q. A\'hich was the largest company that you were thinking of getting in that was left out? — A. K. Heinisch & Sons Corapanyj of Newark, N. J. (^. Is this the company Avhose output is regularly as large as yours was? — A. The Heinisch and our former output were very nearly alike. I think the Heinisch prob- ably did perhaps 10 or 15 per cent more business than we did; at times they may have fallen behind us ; I do not know; so that really one of the largest manufacturers was out. Q. Are there any other companies that are not in the combination, anything like as large as yours? — A. No. Q. Theyare all small concerns that « ere left out? — A. Simply. We got options, I think, on 90 per cent. I was mistaken; it was between 80 and 90 per cent. CASH VALUE OF PLANTS ONE-FIFTH OF THE STOCK ISSUED. Q. Now, you said there was a contract or agreement made with Mr. Clauss and Mr. Pears. Has there been, since the organization of this combination, an)- specialization of the plants so that one plant will give nearly all its time, all of its machinery, and so on, to the manufacture of one kind of goods, and another one to another, so that there has been any saving in that wav?— A. Not that I know of. U- You think that each one of the establishments runs practically as it did before the combination? — A. Pretty much so. Q. Can you, vourself, mention any other advantages that come from the combma- tion besides the fact that they avoid this destructive compi'tition?— A. There should be decided advantages in the cost of selling, in oflice help, and in buying material, and in adopting at the different works the advantages of each other. il Yes. — A. Th(jse are about the main features. 1046 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Do you know whether the advantages, as a matter of fact, have resulted along that line that were antieipated?— A. I am inclined to think that they have. Q. Along very nearly all the lines that you have mentioned? — A. To a very great extent. Q. 8(1 that on the whole the genei-al principle of combination in your industry is one that you would yourself favor? — A. The principle, yes. THE TARIFF. (.^ (]iy Jlr. F.VE(juH.A.n.) Have you any prcjtection under the United States tariff for )-(iur business? — A. There is a protective duty on shears, yes; but the shears manufactured in this country are entirely different from those imported. There are some scissor.^ \vhich wei-e almost entirely imported before the tariff, and still are imported, which we do not seem to be able to make here on account of the long- standing experience and the cheap labor on the other side, principally (jerman. The class of scis-iors that I am speaking of is the scissors, the small articles with 2 round rings 2.1 inches up to 6 or 7. ^\ow, probably — I should say, roughly — probably 90 per cent of all the scissors sold that are under 6 inches are imported, although there are some of the larger sliears made on the other side. A^'ithout a protective tariff I am inclined to think that there would be a great many more of the larger sizes imported than there are at present. The protecti\e tariff was a great incentive to build up the trade and to increase competition, which ^ould materially reduce the price. Prices during the last 15 or 20 years are probably fully 50 per cent less than they were. Q. Then you would say that the protective tariff, which practically and primarily gave a foundation to your business in this country, at the same time created the ruinous cc^mpetition among the shears manufacturers of this country wdiich was the cause of your failures in business? — A. Yes. 11 Ami also drove you into this combination to save yourselves and 3'our own property? — A. Yes. (l And you lay this idea of combining entirely to the fact of the fierce and ruin- ous competition among American manufacturers, by American manufacturers among thenjselvcs? — A. I should, say so; yes. (j. .\s they were not manufacturers of the fine class of scissors that were imported, of course they do not enter into the coiupetition? — A. No. Q. And in the making of tire American shears and the larger class of what we call scissi ii-s or shears that competition was the thing that brought the prices down in this country? — A. Yes. Q. It was the American c.>m)ietition that brought down the American market? — A. That is right. (..). .\nd ni)t the introduction of tire foreign goods at all, because the foreign goods importeil were noncompetitive'? — A. To a very great extent, }'es. ^rETHOD OF COMBINATION. i.l (By Mr. Clarke.) How do you account for the difference between the cash values of the properties which you purchased and the amount of capital stock which you have issued? — A. Well, that is a question you would have to ask the promoters. i.l. Do you not know what has l>een done with that stock? — A. The stock? ( }. Yes. — A. Well, the people directly interested, I am inclined to think, took the bulk of the stock to themsehes. They voterl all the st(5ck to themselves with the pro- viso that if they did not succeerl in turning over certain factories it should revert to the treasury. As I understand, it was formed by the organizing attorneys. il. What was the reason lor issuing so much stock for so little property? — A. We were not coiL-^ulted ; I do not know anything about it. (I. (By Senator Kyle.) The purpose of it was to pay a dividend on the whole amount? — A. AVell, I do not know. (l (P>y Mr. Farquh.\r.) Was there any promise of dividends by the promoters?— A. Any promise of dividends" (.1. Yes, was there any promise liy the jimmoters themselves? — A. Xo, I do not know that there was. * J. Did they not hold furtli that if you got a dividend, if you got 5 to 1, you would get a di\ideiid of 2 per cent a year or ?,'! — A. We were not consulted at all ; it was a jmre matter of buying anrice under the arrangement which you finally made than you offered to take for cash?— A. I got nominally more but practically not; no. Q. (By Senator Kyle.) They represented to you, of course, that they were going to form this trust corporation at the time they made the bargain with you?— A. \A'ell, they made a good many representations. Q. Did \-ou not know or understand that the trust was to be formed?— A. I knew that they were attempting to form a combination of the principal shear manufacturers. Q. And when you accepted the stock you evidently knew that y(ju were going into such a coriioration?— A. I knew that I was going iii with other.'^, lint \\ ith whom I did not know. < ^ And they evidently represented to \ou, did they m.it, that vou would make more by this operation than you had made i)y your private business conducted in \-our own private way?— A. Well, I do not know that they particularl)- lepresented that. They simply represented how much they could make by the association, and we were led to believe that they had secured options on all the principal manufacturers, and, moreover, that the options would lie exercised. Q. I understood you to say a moment ago that the price of ynur product had l)een raised since the formation of your corporation, aljo\e what it was ))efore? — A. Yes. Q. "Was not that the avowed purpose of the organization of tlie trust combina- tion? — A. I suppose it was; thej- intended to make a profit by advancing prices. Q. Was it n(jt so represented to y.ju? — A. In the meeting of the different manu- facturers the promoters said, we can di.i s' 1,000 ounces of silver as cheap as he can buy 5,000 ounces. But in all manufacturing supplies >ised in the factories, people are anxious to sell goods, the pc(jple that supply them, and they would like the combined sale to 16 factories rather than 1 facte uy. Take the base of what we call hollow ware — tin. There is no particular saving in that, because a small concern that wanted 100 pigs of tin could buy it about as cheap as a concern that wanted 1,000. Q. With reference to the selling of your goods, is there any material saving there in laljor; that is, can you dispense with the services of various traveling men, for example? — A. A\'e have not done so, except, as I said, in closing some of these offices or stores in various cities. y. About how many traveling men do you employ? — A. I do not state these things as facts, because I was not aware what line the commission wanted of me and I have never gone into these details particularly. Each factory employs about as many traveling men as it ever did. Q. (By Senator Kyle.) To the best of your knowdedge? — A. I should guess there were from 75 to 90 traveling men. , Q. (By ]\Ir. Jenks.) And you keep now about the same number that all the sepa- rate companies did before they were combineil? — A. Yes, with one exception. There was a concern in New York City, a stnre there, Rogers & Bros., which I think had 3 tra\eling men that went from there in some way. \\'e closed that store and we let those traveling men go, although our fact(.ii\- took 1 of them. There were only 2 of them. Q. Y^ou simply transferred him? — A . Yes. Q. jVnd let 2 go? — A. Yes; laid off 2 traveling men. That is all I know of. Q. Can you tell us how many stores you were able to close? — A. So far we have only been able to close 1. Q. That is the one you referred to? — A. Yes; on account of leases and other matters. We cdosed this store in New York; that is the only store. There is another to be closed there as soon as we can sublet it. Q. How many do you expect, as soon as your business is fairly running, to close, in I jrder to effect savings in that way? — A. I should say there might be 10 throughout the country. Q. About how many have you altogether? — A. Perhaps 15. Q. So you will be able to close more than half? — A. Oh, yes; oh, yes. Q. You sj)oke of the sa\dng that would come also from the closing of plants that were taken into the combination. How much have you done in that way? — A. We have chjsed 2. Q. How nrany came together into tlie organization t(.i begin with? — A. I think theie were 14 then. Sin<'e I went into the combination there have been 2 added, 2 that were bought. (,l. You spoke of 14 coming in. Did each company have simply 1 plant? — A. Yes. Cl. S(i that 14 came in and you ha^■e 14 now. You have closed 2 and bought 2 since y(ju have been in your company? — A. We took the employees of those that we closed and took their business, their trade-marks, and their salesmen, and made the goods in one factory. We transferred that all to 1 factory because we had lots of waste, spare room, and the other one the same way. Practically the 2 concerns are running, ordy they are under different roofs from those they were under. The workmen are there ami have made the same line of goods that the old companies made. ti. (By Senator Kyle.) What was vour object in closing up these 2?— A. Because we had the spare room in our factories, and it saved power, and lots of expense in INTERNATIONAL SILVER COMPANY: UODD. 1061 running factories; because we had plenty of bricks and mortar and macliiuery and another roof to put the men into. Q. And you sa\ed tlie room? — A. Yes. OUTPUT, AND NUMBER OF EJIPLOYEES, INCKE.\SED. Q. (By jMv. Jenks.) You have not lessened the number of employees by closmg them? — A. No; we are ready to hire more men if we can find them. Q. Can you tell us with refereni'e to the numl ler of yc.iur enipki^-ees, how much they have increased since your urtiunization?— A. Oh, I should think' we had added 10 or 12 per cent, perhaps, all told. Q. And how about the quantity of your output; has that increased? — A. Yes. Q. In about the same propdrtion, 10 or 12 per cent? — A. Yes; increased nmrc. Q. About how much? — A. About 20 per cent. (.]. How do you account for that increase more than in proportion — by working your establishments more efficiently? — A. W'liy, I am talking about the output that the consumers lalvc. Q. Well, does that mean this, that the demand, on the whole, has increased so that you are working more nearly at full capacity now than you were before'? — A. Yes; that is exactly wlrat it means. Q. Before the orsjanrzation, some of the plants were not workin^■ at their full capac- ity?— A. No. Q. And since tlien you have been pushing them? — A. Yes. Q. To what do you attribute this increased demand for goods? — A. If I should guess about it, I should guess what the newspapers sa\' — general prosperity. Q. Is it to be accounted for at all b}' anj- reduction in the prices of the goods? — A. I should .-ay not. H.\D NOTHING To DO WITH THE F0K5I.VTION OF THE ORCiANIZATION. Q. AVlrendid you form your organization? — A. I had nothingtodo with the forma- tion of the organization. Q. M'lien A\as the organization formed? — A. The organization was formed, incor- porated in New Jeisey, November 21, 189s. Q. "W'iien did you yourself l)ecome ccamected with the organization? — A. I became connected with it, I think, in that month. I think it was the 28th or the 29th; along there. Q. Pretty nearly fiom the beginning, then? — A. Yes. Q. Have you Vjeen president substantially from the time when j'ou came into it? — A. From the time I was elected director; at that meeting they elected me pi-esident. Q. That was this same day, was it, November 28? — A. Yes; about that time. Q. So that you have been familiar with the organization really from the beginning of its main work? — A. Yes; I was not familiar with the organization of the company. There w ere already a president and directors, a full board, when I came in. Q. Of the nature that we so often hear of — a dummy board ti > begin with, for the purpose of organization? — A. That I do not know; they were all very respectable gentlemen. THE COURSE OF PRICES — 1893 TO 1899. Q. Now with ref'rence to prices, let us go back a little earlier. You were yourself in business independently before this organization was made? — A. Yes. Q. Sci that you are familiar with prices throughout? — A. Yes. <]. Can von" give us an indication of the general course of prices of these goods, let us say, through the vears 1896, 1897, 1898, up to date?— A. I think there were in those'years, in fact from the vear 1894— if \ou want to go back as far as that. Q. All the better.— A. The year 1894 and the latter part of the year 1893, when we had what wc called the panic, prices were becoming less and k ss all the i\hile. Q. And about how long did that decrease in prices continue?— A. It continued until— why, all through up to the present time, you might sav. No; they did not decrease— thev have not decreased since tlie 1st of Scpteiidier of this year. Q. \yas the' decrease marked at all from 1893 on until the middle of this year?— A. Yes. Q. Can you give us some indication as to the rapidity of this decrease? It seenis to me that ^\e ought to have had silver gi\en to us at that rate?— A. \\'ell, we did prettv near— good goods. The fact was that all of us went on a chase to gfet cu.stom- ers and sell goods at less than cost. We were all selling goods at less than cost, and the way we made money Avas that we sold so many of them. 1052 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. (J. If we should take the prices, we will say the average prices of 1894, and com- pare them with the average prices of 1897, about what percentage of decrease should you say there was? — A. Oh, I should say tliere was from 7i to 10 per cent. Q. In thiise 3 vears? — A. Yes. (,i. And then was there a still further drop through the year 1898?— A. No; that was the druj) from 1894. Q. Down to 1897, when it stopped?— A. Yes. Q. Then the prices lemained about the same through the year 1898? — A. Yes. Q. Beginning with the time of the formation of your organization in November, 1898, what has been the course of i)vires from that date up to, say, June of this year? — A. That is the same. Q. There was substantially no change at all? — A. There was a change in what we call the flat-ware part of it, in February or ;\hufh. Q. What was that (change? — A. Ten per cent rise; making goods relatively cheaper than they were before, on ai'count of the high cost of the material. Q. Y'es. — A. Goods were relatively cheaper after the 10 per cent rise was made, as far as the manufacturers were concerned, than they were before. Q. That is to say, this increase of the price of the product did not increase the profits over what they had been before? — A. N(5, no. Q. (By Senator Kyle.) "What is your ra,\\ material? — A. The raw material in the flat-ware 1 lusiness is what we call nickel-silver. The principal part of it is copper; a mixture of copper and nickel. Q. And the rise in these materials w as what? — A. Rise in copper? Q. What percentage of rise in that time? — A. ^Vell, it must have been about 60 or 70 per cent. Q. And you advanced the cost of your output? — A. Ten per cent. Q. Your finished product? — A. Ten per cent, yes; just 10 per cent. Q. (By I\lr. Jenks. ) Y'ou said there was this increase in prices in February; then I take it from what you said that there was another increase Siimewhat later? — A. No increase in that. That price remained the same. On the 1st of September we increased the price of what we call hollow ware 10 per cent, and, as I say, the base metal of that is tin. Tin averaged in the \ear 1898 about 14J cents a pomrd, and this year it has averaged something over 30.' Q. So that the increase was less in proportion? — A. Y'es; and all manufacturing supplies that enter into a factory have increased anywhere from 33J per cent to 100 per cent; everything that you use. WAGES — UNIOS I,.\BOH — CHARACTER OP IIEX. Q. In the manufacture of your goods — we will take the hollow ware, for example, as typical — how large a proportion of the price or of the value is to be found in the raw material, and how much in labor? — A. Oh, in a rough way, about half. Q. What has been the course of wages during the last 3 years? — A. Well, the last — until we had, as I say, this general prosperity, wages did not increase any. For the last few months the tendency has been ujiward. Our people are what we call skilled workmen; there is no fixed wage price. (2- The price varies all through? — A. It varies all through, according to a man's capability (jr his ability, and it is 10 per cent here and 15 per cent there, if you please. It is a bargain all the time with the individual men. Q. (By Senator Kyle.) Increase? — A. Increase. Q. (By Mr. Jenks.) Y'ou would say, then, on the avera'je, that since the forma- tion of your organization you have advanced wages on the whole as much as 10 per cent? You think that will run through your factories? — A. I should say that would be a little high; take all, I sliould say from r> to 7o per cent was nearer right. (^ You s[ioke of dealing with the individual men. Is there any labor organiza- tion among your emjiloyees? — A. I think tln^re is a skeleton of one. There used to Ije one years a^o; we have not heard much about it lately. (.1 What union was that? — A. I have forgotten the name of it; it was sort of a local union there in our place. Q. Ha\'e you yourself, in dealing with your men, dealt with the union as such?— A. No, no. t^ You deal simply witli individuals? — A. Y'es. (J. (By Mr. Ratcti ford. ) Have you ever been asked by your men to deal with the union? — A. No. Oh, here some years ago, 1.5 or 20 years ago, in our factories we had a cut-glass cstalilishment, and there was quite a union there, and at one time they asked us something al)out ajiprentices; I ha\e forgotten what it \vas. It was 15 years ' Compare the (able of yjrices of tin, p. .SOS, INTERNATIONAL SILVER COMPANY: DODD. 1053 ago, I guess; and I said I would not deal with them; I said I would deal with the employees themselves in the shop, but I would not deal with outside people that came from Pittsburg or somewhere else to talk to me about my business. Q. In other words, you preferred to deal with your men as individuals? — A. Yes. Q. (By Senator Kyle.) Would you receive a committee from your men? — A. Yes, certainly. Q. (By Mr. Ratchford.) Is that your position at the present time toward the organization of your men, toward treating with the union? — A. I have no position at the present time, because that question has not come up. We have never — in our locality where I live the employers of labor and the laborers themselves have always been on remarkably good terms, and in the last 31 years, since I have been in the town in the manufacturing business, we have had comparatively no disputes and no friction. Q. (Bj' Senator Kyle.) No strikes? — A. No; nothing that ever amounted to any- thing. Most of our people are just as good men as I am or anybody else. Q. (By Mr. Fakquhak.) What town do you refer to? — A. I refer to the town of Meriden, Conn. Q. (By Mr. Clakke.) Most of your employees are long time residents there, I suppose? — A. Yes. Q. Own their homes? — A. A great many of them do, and lots of them know a great sight more than I do, socially and economically and all other ways, and have more time to read, I guess, than I do. CAPITALIZATION. Q. (Bv ilr. Jexks.) What is the capitahzation of the International Silver Com- pany?— A. 120,000,000 is the nominal capital. Q. How is this divided into common and preferred?— A. $11,000,000 of common and $9,000,000 of preferred. Q. Is there a bonded indebtedness? — A. Yes. Q. How much?— A. At the present time :?3,900,000. Q. What is the nature of the preferred stock?— A. Seven per cent cumulative. The stock is not all issued. Q. How much has been issued? — A. $5,111,500 of preferred. Q. And how much of common?— A. 39,896,000; §3,900,000 of bonds issued. We still have §117,000 of bonds in the treasury. Q. (By Mr. Fakquhae.) Is the remainder of that stock every-day treasury stock or is it divisible stock to the stockholders?— A. Why, it is stock that has never been issued at all. Q. Under vour by-laws is that classed as treasury stock, roughly? — A. No. Q. For the acquirement of other plants?— A. Only; yes, that can be issued for the acquirement of other plants. Q. Only, you say. That is the condition? — A. Yes. Q. Of its being in the treasury? — A. Yes. METHOD OF ORGANIZATION. Q. (By Mr. Jenks.) Will you give us the general plan of the organization of the company; that is, was it organized through some individuals actiiig as promoters who secured options on plants, or was it by general agreement among the plants con- cerned?— A. I can onlv tell you as far as I know. All my knowledge was through a man by the name of Stewart. I presume he had some arrangement with someljody else. Q. That is, in the case of your own arrangement >-ou bargained with Mr. t^tewart for the sale of your establishment to this company; is that the idea?— A. I bargained with him for the sale of a majority of our stock, with the privilege to the minority t(.) come in at the same price if they wished to. Q. It was a sale of stock and not .jf the plant?— A. That is right. , Q. Does the International Silver Company in the mam own the plants of the dif- ferent companies, or does it own the stock of the different companies?— A. \\ e own the plants of all the companies, real, personal, and eveiytlnng else, with the excep- tion of one small company in Lyons, N. Y., called the Manhattan Silver llating Company, which the attorneys of our company as yet do not exactly know how to merge into the International Company. They have it ni charge. But ah the rest of the companies were purely Connecticut companies, concerns in the vicinity, neigh- bors and friends, and everything was transferred to the Internationa Silver Company. Q. So that in this case, for example, of your own, where you sold the majority of the stock to begin with, «itb the privilege to the minf.nty ol c much cash and so nmch preferred stock, provided the capitalization of the com- pany, the stock issued, with these companies in, shall not exceed a certain amount." That was just siniply the transaction that I had with him. Q. Yes. — A. Knowing as I did — at least I thought I did; you do not always know what you thinlv — I thought on that capitalization that the concern was all right. Q. (By Mr. Farqihar.) This bonded indebtedness you spoke of, was that con- tracted lief ore this combination or after the combination? — A. It was contracted — I think the ni.jrtgaHc is dated December 1, 1898. <.^ (By Mr. Jenkh.) It \\as contiuctcd )jy the International Silver Company itself, after the organization was made? — A. B>' the International Silver Company, yes. Q. Did the conijiany take over a bonded indebtedness from different companies it purchased? — A. Yes. COMPETITORS. O. That was issued in jiart for that? — A. Yes; the International Company, of course, when they bought these plants, assumed all the liabilities and paid the debts. Why, as you might say, this International Company was a sort of family arrangement between a few Connecticut concerns that were all neighbors and friends and knew all about each other. Of course, there are probably 40 or 50 concerns in the same kind of business outside throughout the United States. We did not get after them particularly and they have not been after us. We have got another concern right there in our own town; a competing concern, organized under the New Jersey law. Q. What concern is that? — A. C. Rogers & Bros., right in a competing line of business. There is a large concern in Cincinnati — Reed & Barton, of Taunton; and I could name you probably 40 different concerns in the same line of business. But our company is, as I say, a Connecticut company, with the exception of this small concern out in Lyons, N. Y. NO "good will" in the business. <^ With reference to your own establishment, the International Silver Company, what proportion of the value of your business do you consider is in plants, and what proportion in trade-marks, wdiat proportion in good will — speaking broadly, of course? — A. I do not consider that the International Company has any good will. ^^'e have not been in business long enough to have a good will. Q. When the International Silx'er Company 1 x lught these plants I suppose it bought some good will? — A. It bought the tra(le-marks; it bought the trade-mark of our concern, and we still manufacture goods under that trade-mark and sell them under the name retty delinite estimate? — A. Well, I do not think I could. I do not think that is a question I should like to answer without our balance sheet liefore me. 1 2. Can you, perhaps, send us that information? — A. Yes; I will send it to you very readily. INTERNATIONAL SILVER COMPANY: DODD. 1055 Q. Very well; I will ask you to do that. — A. Yes; I will do that. (The following was furnished by the witness Xoveuil)er 16, iMVlil; "In my npin- ion the proportion of the value of the International Silver Company's property in plants, machinery, merchandise, etc, is from 45 tn 50 ])er cent. I think this is a per- fectly fair and correct statement.") Q. (By Mr. C'l.vrke.) The estaljlishments which consolidated had an established business, had they not? — A. Yes. Q. There was good will attached to that l)usiness, was there not? — A. No; I should say not; not really what you would call iiood will. I presume that the history of the concern that I mana)j:ed \\'as the history of all tlie (.'oni'iTns. We made and lost cus- tomers every day. Human nature is [iretty much alike. The trade simply knew that when they got a piece of goods stamped with our name, it was a good piece of goods; but I do not think they cared anyttiing about the manager of the old Wilcox Plate Company or any of the salesmen. Q. (By Senator Kyle.) It is true that every institution has good will and it is val- uable to the institution? — A. AVell, I do not think it is as true in these days as it was 20 vears ago. The company I formerly managed was called the Wilcox Silver Plate Company. We stamped that name on our goods. Now, if the same salesmen should go out offering good^ stamped John .tones & Co., they could not sell them. I ,«ay there is no good will aliout that. They might lil^e the Wilcox Plate Company. But I sav the goi id will i'; the trade-mark. There is a difference i let\^•een the trade-mark and good will. y. (By Jlr. Cl.\rke. ) You had, and each of these concerns had, a certain number of pretty regular customers, I suppose'.' — A. Why, yes; we have probably got men on our books that buy goods of us that bought them of us 15 years ago, 20 years ago perhaps. Q. It cost something to secure the trade of those customers and to hold it, did it not? — A. Yes; it cost the salaries and expense of traveling men. Q. Is not that good will?— A. V/ell, we have these men traveling all through the entire country. I do not know that it is good will particidarly. As I say, they would not buy our goods if they weri' not stamped Wilcox Silvei- Plate Company. The value is in the trade-mark, and not in the fact that Jon; s, Brown, or Smith runs the concern or is known as niana;4er of the concern. Q. Do you not think that when a concern treats its customers with such fairness that thev like to trade there and they voluntarily send orders there, there is a good will attaching to that establishment?"— A. Y'es; 1 should think so if we sat down in our factories and received orders that waj-. Then I should think there might l>e good will. Q. (By Mr. K.vtchfohd.) Do you not think that it is equally true in a case where one salesman is putting vour goods on the market, and a salesman rejiresenting a rival concern is putting g(iods on the market, and going and soliciting patronage, and yours is preferred; do you not think the same will hold equally good— the braml on your wares does much tijwarda selling your gooils? — A. Yes; that is what does sell our goods. CO.MBIX.iTIOX .MEANT TO MAKE ECOXOMIES .VXD REPRESS COMPETITION. Q. (Bv Mr. F.vrquhae.) You seem to think that there is an open standing compe- tition all the time even against trade-marks and standard goods. What wa,s the purpose of your combination— to repress this competition, or to make economies in manufacturing?— A. That was just what we were trying to do; Iicith. (,). Both?— A. To make economies and put the thing under one administration, just as I said liefore. That is about all there is to it. li. (By Mr. Jen'ks.) Do vou get also what vou consider a ilecided advantage from the common use of th(-se' tra' question was whether it was voluntary on your part to raise wages when the prices inc rease not suppose j^ou would care about opinion v that? Q. You said a while ago that'vou coulil only give a bare opinion here until you con- sulted the books. I thought you would rather give us an opinion than what your books show. The impression was that your opinion would lie delinite enough for the purpose of the commission. As I explained Ijefore, this is a (|ue^tion which is really of much public inteiest, and the commission has, practically, to express an opinion on this matter, and we have gathered « hat information « c could find from a number of establishments. Q. (By Senator Kyle.) Jlav I ask what was ycjur answer to the question a while ago as to the value of your plant, as you operated it befoi-e the organization of this new combination?— A. ^Ye consirPAXIES .ABSORBED BY THE IXTEKX.VTIONAL SILVER COMPAXY. Q. Can you give us the names and loi-ations of the i^lants that went into tliiti organization? — A. I think I can, most of them: The Wilcox Silver Plate Company, the Meriden Britannia Company, the ilerideu Silver Plate Company, in Meriden; the Bar))er Silver Plate Company, the W^illiam Rogers Manufacturing Company, of Hartford, Cimn.; the Rogers Brothers and Rogers & Hamilton, of Waterburv, Conn.; the Middletuwn Plate Company, of Middletown, Conn.; the Derby Silver Company, of Derl)y, Conn.; the Holmes Edwards Silver Company, of Bridgeport, Conn.; the Simpson, Hall & Miller Company, of AVilmington, Conn.; Simpson Xickel Plate Company, of Wilmington, Conn.; Norwich Cutlery Compan}' of Nor- wich; the Manhattan Silver Company, of Ijyons, N. Y. (that is the concern I spoke of wdrere we simply own the stock) ; the Standard Silver Company, of Toronto, Can- ada. I guess that is all. 1:^. That is 1.5'.' — A. I guess that is all; the W'attrous ^Manufacturing Company, Warrington, Conn. WALL .STREET POOL. (,^ During the months (jf March and April the common stock of tlie International Sih'cr Company was selling in the thirties somewhere; soon after the 1st of May the common stuck dropped tn below 1.5, considerably; 11, 12. There was a good deal of talk in the papers at the time about pooling of the common stock. Will you be kind enough to give us a statement as to the circumstances? — A. I can not give you any. The A\'all street end I know nothing about; I have nothing to do with that. I can not give you any information in regard to it at all. I can not guess about it, even. Q. (By Mr. Farqihar.) This is Usted stock on the New York Exchange, is it not? — A. The common only. Q,. Common?— A. Yes. AVell, it is what they call the unlisted ; they call it there, but it is not regular ; it is in unlisted securities. TERMS OF SALE OF WILCOX SILVER PLATE CO.MPANY. Q. (By Mr. A. L. Harris.) When these plants were purchased, in what were they paid for? — A. I do not know, sir. Q. You were not in there then? — A. No, sir. Q. You do not know whether it was cash or stock? — A. No, sir ; I do not know. With the exception of one plant, I do not know what any of them got. Q. In the case > if that one plant, which was your own, did you receive in payment cash or stock? — A. We recei^-ed in payment one-third in cash and two-thirds in pre- ferred stock. y. Preferred stock?— A. Yes, the preferred stock; also one-half of the preferred in common stfick. Q. Well, you had some idea of what the values of these different companies were, the value of the property that yon were obtaining in these different companies, at tlie time, had you not? — A. As I said, my arrangement was — my proposition was— that if the International Silver Company would oljtain possession of these companies— and the Deri >y Comiiany there and the IMiddletown Company were left out; thesf companies wo lia\e Ijought since that— if they would obtain possession of these com- panies on a capitalization of a certain amount, that I would sell a majority of the Wilcox Plate Company stock to this man; what they were paid I cared nothing about. I said, here is the capitalization of these companies; they are all familiar to me, and my judgment is liased on that cai.italization; with these companies in, it wonld be a success; now, you can buv the Meriden Britannia Company for $1,000 or $2,000,000 for all I care. (I And your plant was taken on that proposition? — A. Yes. Q. Would you care to state to the commission what that proposition was?— A. I woulil just as lief as not. .As I have stated, if anyone wants to know, I can tell them. For jiar value of our stock, $2.5 a share, our stockholders got $25 in cash, and S50 in Iireferred and $25 in conmion stock. 'See Mr RcKcrsp. 1068, INTERNATIONAL SILVER COMPANY: DODD. 1059 NO GOOD WILL IN THE BUSINESS. Q. (By Mr. Clarke.) N(nv, what did this $50 in preferred stock and $25 in com- mon stock represent?— A. It represented the stock of the International Silver Com- pany based on this capitalizaticjn which I said I would no in at. Q. You considered that your stock had become wortli that much above par?— A. Yes, I did. Q. Well, what made it worth that much above par?— A. Our previous earnings, sir. Q. Well, that is fj^od will, is it not? — A. No, sir. Q. It is success in business, is it not? — A. Yes. Q. It is havinj; a line of custom well established, which you think you can main- taiu?— A. Well, I should differ with you on that. I suppose that i's a matter of opinion. As I said before, if the Wilcox Plate G^mpany had remained in business as a separate organization ami had stamped our jj'oods Jcihn Jones & Co., simply, we could not have sold them. I say it is our trade-mark, and not because the public like us particularly. Q. Y'our trade-mark was yours, was it not? — A. Y'es. Q. The trade-mark itself diil not cost anything?— A. I think it did. It cost us a great many years of lal)or, and a great many thousand dollars in money, before we could make the people believe that that trade-mark «as a valuable thing. Q. That is just the point I want to bring you to; whether or not the development of your business had not taken some form that other people call good will; you call it trade-mark; it is tlie same thing.— A. As I .say, that is a matter of opinion." I call it trade-mark, and you simply call it good will. DIMIXITIOX 111' COMPETITION — COMPETITION EEM.VIXINCi. Q. (By Mr. F.4.Rcii-H.\R.) In part of your testimony you said that there was quite X fierce competition between \arious firms and curp(jrations in your line of business previous to this combination. Has it been your experience that since you have combined you have eliminated a good deal of that competition? — A. No, sir; we have eliminated wliatever competition there was bet\\een the concerns on that list. Q. In other words, you have 16 plants here, 15 of which were in direct trade oppo- sition to you in the Wilcox? — A. Y^es. Q. Since you Imve combined there are 15 competitors that have gone out of busi- ness? — A. Yes; that is right. Q. Xow, you amswereil a short time ago that you simply made the combination on account of economies in manufacturing, and the control, of course, of larger capital; but is it not a fact that one of your main reasons for going into the combination was to stop this niinous competition, even in your neighborhood, or in the Connecticut manufacture? — A. Cei-tainly it may have been an added reason to those I have given you. Q. Was it not as good, if not a better, reason than simply the economies of manu- facture? — A. I should say not. I should say that the reasons were about equal in that respect. Q. Could you, if you ou an\-''— A. No, sir; lean not express any. Q. (By Senator Kyle.) You stated a moment ago tliat you knew of about 40 con- cerns outside of yours? — .\. I should say about that. Q. Are thev manufacturing a quality of goods similar to your own?— A. Reed & Barton have been in the business longer than any of the firms, and it is understood to the trade in a general way that they manufacture the very liest goods, and have for many years — Reed & Barton, Taunton. 1060 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. So in \(iur judgment,, if yon -were to force the price of j'our finished products above a certain point, the)' would supply youi- trade? — A. Undoubtedly they would. There are a number of very large concerns that are still in competition with us. As I have already stateil, and repeal again, ours is a sort of neighborhood matter, that we thought would be the l)egt thing for friends and neighbors right around us. If you gentlemen ^^■ere selling goods, you ^^•ould find out that there was some competi- tion outride of the International Silver Company, I guess. IJUALITY OF (.iOODS MAINTAINED OR I5IPR0VBD. The International Silver Comiiaiiy owned the original trade-marks of Rogers plate, which wc consider very valuable on spoons and forks. There are about 1,400 Rogers families started up; all sorts of Rogerscs. Q. (By ;\Ir. Jenks.) Is there any special Rogers brand? Any special date which is considered to be the standard, the genuine? — A. Yes; 1847, Rogers Brothers. (I You own that trade-mark? — A. Yes. Q. That is the one you manufacture under? — A. Yes; that is the one we C(3nsider very valuable. II Since the International Silver Compan>' has been in business it has, of course, been using this trade-mark. Has the quality of the goods on which that trade-mark is put been kept exactly as it was before? — A. Yes; I will not say that; I think better. y. You are positive not poorer? — A. Yes.' (i (By Senator Kyle.) You have added something to the Wilcox brand? — A. We can not add to that ; that, Senator, was always up to Al ; that can not be added to; the people in the country for these yi-ars ask for Wilcox, and they buy it. WALL STREET POOL (rESUMEd). Q. (By Mr. Jenks.) You said a moment ago that you and the company knew nothing about the \\'all street end of the business. I suppose that is so. ~ May I ask one further question along that line? Did you yourself, after receiving your common stock, assign part or all of that to a New York banker or bankers before the 1st of May ? — A. Did I myself personally ? Q. You or your firm — the person to whom the common stock was given when you sold out. — A. The common stock was given to — x\'e had ninety-odd stockholders. Q. AVell, personally. — A. That, I think, comes right down to personal matters of Dodd. Q. I tried to make it pointed. — A. I can not answer that unless you compel me to. Q. I really think you ought to. I presume there is no harm in it? — A. No; there is no harm, I suppose. I am a law-abiding citizen, and I should not have interfered with the law. il. The (juestion is, did viju assign it? — A. Why, I do not believe I want to answer that. Q. I think it is rather an important (|uestion, for the purpose of the commission, and that it ought to be answered. — A. \\'ell, 1 think you are coming down to my jirivate affairs. I hive my private affairs anything to do with the public, with a Con- gressional commission? Q. The \\'ay in which the stock of the industrial combinations of various kinds is dealt with, manipulated and so on, in \Va!l sficet, is very important, and the sugges- tion of legislation that may tend to lessen what many people consider to be those evils is an exceedingly i)iq)ortant part of the work of the Industrial C'ommission. The cfiunnission, in consei|uence, feels it imiiortant to have some facts to base rec- ommendations on. — A. \\'ell, supjjcjsing I had gone into the market — if you will allow me to go on in an informal way Q. Certainly. — A. Sujiposing I had gone into the market and bought 500 shares of common stock, at market prices in Wall street, and then uflerwards put it into this pool that you talk about; would that be a proper in((uiry of the commission, if I ke])t my original stock out of the pool and bought odO shares on the street, and then put it in the pool? Would that be a ]icrtiiieut i|ues(iou? Q. My own opinion is, and I presume it is the opinion of the commission, thatany inquiry with reference to a pool in Wall street, in connection with this company, which seemed to have a very decided effect on the common stock, when there was a di'op from considerably over 30 (o 11, 12, or 13, in a few wi-eks, is rather a pertinent re Mr. R(«crs, p. 107L>. INTERNATIONAL SILVER COMPANY: DODD. 1061 inquiry and a proper one.' I am not asking vou the number of shares von as-L.ned or anything ot tliat kind. The question is wliether you did assign stoi^i of that^kind to a banker or a firm- of bankers in New York I.efore the 1st of Jlav''— \ Well I can answer that question. I had just as lief freely ans\\er the ,|uestion that some stockholders did do that thing and that there was such a pool formed (^ You know that'.'— A. That I know from actual knowledge. (^ That would perhapsauswer just as ^yell.— A. Certainly there wasa p.iol formed Anybody knows that. q. Will you be kind enough to giye us the condition of the pool, and the nature ot the pool.— A. Indiyiduals were asked to put some of their stock in this pool with the understanding that the stock should not lie sold for am- less than a stated price Q. And that stated price?— A. I think that stated price was 30, as I recollect it It IS all gossi]), l>e('aase it is nothing to the officers of the International Silver Conipany. Q. That IS, as otticers'.'^A. .\s ofticers of the t'onnecticut company they had noth- ing to do with that. If the stock was not ,s.)ld it was to be returned to the holders Q. That is, if not sold ))eforo the 1st of Mav'?- .\. Yes; I think that was it; the 1st of May or the 1st of June. Anylioily that knows an\tbiug al)Out Wall street will give you that information, I suppose. (I (By Mr. Clarkk. ) What is par of the common stock?— A. $100 a share. This ivas ayery unsuccessftd deal. (_)ne gentleman told me within a week that he lost SI 1,000 in it. ^,^ (By 3Ir. Jenks.) You know from formed on that condition? — A. Yes. (^ Now, how much of the common stock was in that pool?- I do not know whether it was a million or three million. Q. That information is as much as I care tor.— A. Yes; I know it from the fact that some ot c mr <:ild sti ickholders came to me, as manager ( if our ci impany, and wanteil my advice whether— they ha.l been asked to put their stock in this pool. Q. (By Senator Kyle.) This matter is not connected in any way ofKciallv with the International Sih'er Company? — A. No; not in the lea.«t. Q. It is a matter entirely private? — A. Eutirelv private, with priyate stockholders. I simply gave them my private advice, and son'ie of them acted on it, and some of them did not. I think the pool was a failure from the beginning to the end, fi-om the gossip I got. I do not know anything about the facts. ' Neyer inquirul, and do not care to. our o«-n know ledj;e that such a pool was '\. That I do not know. TEE51S OF SALE OF WILCO.X SILVEK PLATE COXl'ANY (RESUMED). Q. ^ (By Mr. A. L. H.vrris.) AVhen you submitted your proposition to the promoter of this company, or promoters of this company, and'agreed to take so much cash and so much in common stock, and so much in preferred stock, was that stock valued at par? — A. Our stock? Q. The stock you were to take in iiayment. A\'as that to be valued at par, dollar for dollar? — A. Yes; so many shares. 1 QUOTATIONS OF INTERX.\TIONAL SILVER CtTMCAXY STOCK.S. The common stock was first 83.', c 11 111 15S 11 ; 17.; 17 iv; Hi) 1062 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. A^'as anything added to the value of your plant on account of the payment you were to receive, or was it the actual cash value of the plant? — A. That is what we valued our business at. Q. Well, I say the plant and the business, good will, etc.? — A. Yes. Q. Nothing else was added on account of that? — A. Our arrangement was simply the price (jf our stock. Our stock was put in practically at the rate of 300. It sold in better times for 375, but the bad times, of course, reduced the value of it. hiiiufacturing Comiiany is known as Faetoiy H of the International Silver Company. Q. Are the diflerent factories designateit in this way, by letters, and a manager ajiiicjinted on salary to manage each of them? — A, Yes. <^ Directly under the officers and the directors of the International Silver Com- pany itself.'— ,\. Yes. 'See Mr. Rogers, p. 107.5; Mr. Watrous, p. 1066. INTERNATIONAL SILVER COMPANY: WATROUS. 1063 Q. You liave heard the testimony given here by Jlr. Dodd?— A. Yes. y. Does your own information and memory ccjiiicide with that as regards the facts?^A. Yes. Q. And as regards the estimates that INlr, Dodd gave, would your estimates in the main coincide? — A. Yes. Q. Did you notice anv discrepancies there at all? — A. No more than to call atten- tion to the fact that the 8l'0,00U,000 is not issued. Q. Mr. Dodd himself called attention to that fact, I lielieve; that the amount was in the neighborhood of $15, 000,000. ^ Have you yourself any information that ycju believe to be trustworthy with reference to the aniount of common stock that fl'ent into this pool that was spoken of? — A. I do not know a thing about it. I have been manager of the AVilliam Rogers ^Manufacturing Ciimpany since 1879. GAIXS BY CONSOLIDATION. Q. So far as the advantages of the combination are concerned, do you think that the advantage that comes from the common use of the trade-marks, of which so much was said, is to be considered one of the chief advantages — perhaps the chief advantage? — A. Yes. Q. You consider that the chief advantage that conies to the combination? — A. Of course there is economy in running the business. Q. But on the whole you think this other advantage, perhaps, the greater one? — A. There is ecoiKjni}' in buying and economy in selling. Q. Do you yourself think that the advantage that comes from eliminating the com- petition among the different firms that came into the combination is an important element? — A. Well, it helps. Q. "Would you consiiler that as important as any of the economies that you have spoken of ? — A. I cdusider that outsiders set the price, and the nearer we come to that price the more we make; but any little jealousy ))etween Hartford and Meriden, by which the profit is thrown away to throw a contract to that particular factory, is almost eliminated no\^■. Q. And you consider that the elimination of competition anting the neighbors, as suggested there, is the most important saving? — A. No; I do not think it the most important. Q. (By ilr. F.\Rqui-HE.) Equally important? — A. Take, for instance, the cases that we put up our fancy goods in. We have them all made together liy one party. While they were maile before Ijy one party, we found one factory was paying 15 and another 19, and 23, and another 14 — no lietter, luit all different prices, and scattered all over. Now we can get a box at a fair price and the same grade; and so with a great many other things. Q. Can you form any estimate as to the saving that comes to the International Silver Company from using these uniform boxes, giving large orders, and putting them all through the hands of one manager? — A. It would he a guess. I di> not know much about it, but I should say it would be up in the thousands of dollars. Q. In a year? — A. Yes. Q. (By Mr. Jenks.) About what has been the expense per year in your factory for these boxes in whic^h you send out goods? — A. I can not tell you that, I am sure. Q. So that you can not give any estimate as to the sa\'ing to the company, nearer than up in the thousan. And pay them acciirdine to merit? — A. Yes. Q. Skill and workmanship''— A. Yes. (.^ Steadiness of habits, etc.? — A. Yes. Q. Are your employees residents of your town principally? — A. Yes; almost all of them live there, in Hartford. Q. Are they Xew Eni;landers, . Q. Has there been any increase of the femaie labor in your experience? — A. No; I think ni.it any more than as the i)usiness increases. There are certain parts of the work that W(jmen can do. <.^ Since the so-called good limes have got here, has there lieen an increase in wages in the Rogers factory? — A. Just the same as always before. When a man comes in, or a girl, they all begin at a certain price, and then if they improve, and are worth it, they get more, (.ir else we let them go and get someone else that can work up to it. After a girl has 1 icen there so long she gets better wages. Q. (By ilr. Ratchfokd.) Does she get the same rate of wages as men for the same work'? — A. No; they do not do men's work. Q. In any case'? — A. No, sir. <^ (By Senator Kyi.e.) You characterize your employees, then, as unorganized labor'.' — A. Yes. Q. As a whole? — A. Yes; I would, as a whole, i'i What are the classes of labor you employ? — A, We have in the departments— we have plating, burnishing, buffing, and packing, Q, About how many men ordinaril}' are employed in these different classes; that is, in round numliers? — A, In the burnishing naachine room there are about 4 machinists and 2 young men, and there may be 20 girls to run the burnishing machines. In the packmg room it is almost all women; we just have the boys to bring in the work, IXDIVIDl'.U, BAHC;.\lXIN(i FOR WA(;ES, Q, In times of prosperity, when the men consider in their own minds that they want an advance in wages, what is the method of getting an increase? Do they talk among themselves and appoint a committee to see you? — A. They come singly, one at a time, and when one gets a raise then another comes around. Q. Your plan is to treat all fairly? If there are 10 men in a room and you raise one man's wages, the men doing the same work ought to be raised also? — A, Well, no; they aiv scattered around doing different work. Take the jDlating room, for instance; they are not all comjietent to do the plating alike; some would do a nicer class of work, and they get the best wages. ( i. T jiresume you regard the state of the market'.' — A. Certainly. <^ And raise in |iroportion'? — A. Yes; if a man does the same work he gets the same pay. <;. In times of general prospcr-ity you expect to have to raise wages of your employees? — .\. We luu-e ah\ays made a habit of raising whether there was prosper- ity or not. So long as he is coni[ietent, he gets a raise when he does certain work. INTERNATIONAL SILVER COMPANY: WATROUS. 1065 Q. (By 5Ii\ R.VTCHFORD.) Do you regard that as an equitable means of adjusting wages? — A. Yes. If a man came in to work in the machine room, and worked around there, sometimes running notljing but a planer, and was not a good machinist at all, and we should start him at ■$2, he would have to be able to do what any othei- machinist did, if he got $:i "When he could, then he would get it. Q. You said that your men came to you singly? — A. Yes. , (}. The first one that comes is speaking for himself?— A. And the others; yes. il He is only representing himself, and yet the wages in that department of the factory, all of the factory, depend on the' result of his interview with the man- ager? — A. Xo. y. While he is only representing himself directly, the wages in the factory depend on the result; is that so? — A. No. Q. If his wages are adyanced it will result in others following it? — A. When they are able to do a certain amount, they get a certain amount. IJ. Voluntarily?— A. Yes. <}. Always fixed l)y the manager? — A. Yes. i}. (By Mr. F.iRQL'H.iR.) In other words, they get paid according to the promotion; that is what \i m mean? — A. Yes. Q. It is skin?— A. Yes. i}. (By Mr. Jenks.) Do you, as manager of this plant, have the authority to increase wages and hire the men indepen _\"ou and ask for an increase, and be folli iwed liy others? — A. That has alwa\'s been tiie method; I mean the rule. Q. But in that we have two rules: First, you claim that men receive pay according to their skill and merit measured by the managers? — A. Yes. l,j. And next, that the men will come and solicit increased wages? — A. Yes. (l Xow, if they receiye pay according to their merit, and their merit is measured by the management, why should they come and solicit it? — A. It has always been the rule for them to t'ome to us; no one else can raise the wages. Q. Are wages ever raised yoluutarily without any solicitation on the part of the men? — A. No; because the work is always NEVER KEDICEI) .VNY W.VOES. Q. (Interrupting.) Are they e\-er reduced on the part of the management? — A. We never have reduced any wages. Q. What? — A. AVe have not reduced any wages. Q. Never have reduced any wages? — A. No. Cl (By Mr. Cl.vkke.) Do not men sometimes think they are entitled to an advance T)efi>re you think they are'.' — \. Yes. If we are paying ?:! for a certain amount of work and a man thinks he ought trj receive more and we do not, of course, he is at liberty to go somewhere else. If that is the rule in the room, and he can not do any niore than anyone else, we could not break the rule for that particular party. MUTl'.^L EEL.iTIONS OF F.iCTORIES. Q. Ai-e some of the other factories in the silver (■ompan\' engaged in producing the same kind of goods that vou produce? — A. Yes. Q. And has there beeii any decrease in your production, or an\- increase of it at any time since the consolidation, }>y orders from headquarters?— A. 1 do not l)eheye I quite understand. ( I Well, is the work at \-our factory dmiinished and taken to some other tact..iry?— A. No. (I. Or vice versa'.'- A. No. . ^i , i 0- Could that be done in your line of business and make an economy tor the whole estabhshment sometimes'.'— A. Just now we liave all g(.>t all we can do. This is the harvest time of the \ear, the three months before {_:hristmas; but of course m quiet times we could, by keeping all the factories running, push 1 lusiness while one of them might be delayed; it would be ecjnomy. 1066 HEARINGS BEFORE THE INDUSTEIAL COMMISSION. Q. I suppose your factories are practically so near together that nothing could be gained by saving in the cost of distribution. One could supply the market just as cheap as another, as far as freight rates go? — A. Certainly. EMPLOY.MENT OF -ffOiHEN IK DIFFERENT DEPARTMENTS. Q. (By Mr. Jenks.) Is the worli that is done in the plant that you are managing the same in its general nature as that that is done in the other plants of the company, or is it different? — A. Some have both hollow and flat, some all fiat, and some all hollow. Q. What is the special branch of work that is done in your plant? — A. Flat ware — spoons, knives, and forks. Q. Is it making the base? — A. No; simply plating and putting it on the marlset. Q. You say that you do only the plating in your establishment? — A. Yes. Q. Would you say that the proportion of the women in your plant was a])out half? — A. I should say it was over half. Q. Is it as much in the other plants? — A, In this particular department do vou mean? Q. Yes; in this particular department. — A. I should say it was. Q. How about the company as a whole? Are women employed to any material extent in the plants where they manufactme the Ijase, for example, of spoons and forks? — A. No. Q. No women at all? — A. "\'cry few. Q. So that you think that the proportion of women in your plant is perhaps larger than it is on the average? — A. Yes. Q. Very much larger? — A. Yes. Q. What special work do the women do in your plant? — A. They run the burnish- ing machines, burnish the spoons, and they pack. Q. Packing and getting ready for the market? — A. Yes. Q. So that in those plants where they manufacture the base on which the plating is done there would be no women employed, would there? — A. Very few. There might be a few to wash up and pack them to ship to us. Q. But in the main it is only in those factories that do the finishing work that women are employed? — A. Yes. (Testimony closed.) Whereupon the commission took a recess until 2 o'clock p. m. [The following interrogatories were subsequently proposed to the witness and were answered by him as here shown. ] ' Q. At what time were salaries voted to the officers and directors of the International Silver Company?— A. March 27, 1899. Q. Have the salaries of either ofiioers or directors been increased since that time? — A. No. Q. What are the salaries (o) of the president, (6) of tlie directors, (c) of the treasurer? — A. The president gets ^12,000; 4 directors get $10,000 each; 1 director gets S7,500; the treasurer, !t>S,000; but all directors are managers of factories and as such draw salaries, but no pay for being a director. Q. Has the International Silver Company paid any dividend on its preferred stock?— A. No. Q. Were the salaries i.if the officers fixed or increased at a meeting when it was decided to pass a dividend on the prefen-ed stock? — A. No. We never paid a divi- dend and never pa.ssed a dividend. Hartford, Conn., November 24, 1S99. WiLLIAJI H. Wathoi'p Washinc^ton, D. C, ]Vediiesday, Noeonber 15, 1S99. TESTIMONY OF MR. N. BURTON ROGERS, Vifi'-preaiih'iit of C. Rogers S: lirox. The commission met at 2.20 p. m., Chairman Kyle presiding. Mr. N. Burton Rogers, of Danbury, Conn., \'ice-president of C. Rogers & Bros., of Meriden, being duly sworn, testilieil as follows: an investi.gation of their books, which was to be conhdential. cj. That is, between tlie different ccmcerns and tlie promoters? — .\. And the pi'o- moters. il It was not to go to the other concerns? — A. The others were not to know any- thing about it. It was practically what they call a blind pool. We submitted to an examination of our liooks, and we all met, we supposed, on an ecjual basis. Xt the meeting each comi>any was represcnteil by a ilivector. At that meeting certain gen- tlemen proiKised that they have additional directors for their concerns. I J. On what grounds did thc.\' make that suggestion? — A. On aocovnit of their being larger holders, or larger concerns, than some others wh-O were represented li.y one director. A proportion thought that was not fair, and they asked for an additional director. That was voted upon and carrieil by one majority, but was after\vards ?escinded and no additional directors were added. A committee was appointed to proceed to the formation of tliis new comjiany, but it was s(jon given out that the matter had been broken up. Previous to this \ve had agreed with the promoters upon the price which we were to have for our concern, and we supposed that we canie to that meeting with every one in the same condition. Afterwards it fell through. Some of them demanded all cash, because there was an opportunity for them to withdraw on account of all the conditions not being complied with. And then \\e heard that there was a new cond.)ination to lie formed, and that this new combination hail accurate knowledge from the promoters of almost everything per- taining to the companies which had agreed to go in and had submitted to an exami- nation" of their books. In the new formation \ve were not asked to participate; but it was formed soon after with three or four left out, or more. Q. Of those who had proposed originally to come in? — A. Those that had pro- posed to come in originally, ami who had gone into it upf)n the supposition that there was to be a combination, and that the>' would be enabled to get sufficient from it to pay them. The comjietition had been so great that there would not be much money in the business if the comjietition diil not cease. Q. Had it lieen thought when this combination was first prijposed that it would include jn-actically all of the large manufacturers of silverwaix"? — A. Yes; all of the principal ones and a nundier of the smaller ones were included in this list. Q. Did the promoters, when they came to you with their offers, have any ])ros- pectus, to show vou, as they stated,' what concerns had given them options, so that you had good i-eason to liel'ieve that all of the large ones were coming in? — A. Yes. Q. Woidd \-ou explain to us in some detail the nature of this pi-ospectus, and the nature of the representations that «ere made to you by the promoters?— A. We gen- eral! v agreed that if all would come in it would be beneficial; but the smaller ones wanted protection; either that tliey should be alile to manage their business, or that they should hold some position in the new cond)ination either as director or salaried officer. We were not offeri.-(l anything except a directorship, because we asked noth- ing. We simplv said our plant, if they wished to buy it, we would sell at .such a figure, and we finally agreed upon the figure; while others had .some provision in their options, either'that they should have a director, or other things pertaining to the business. Q. From the information that vou secured at this time with releience to the values of the different plants that went in, or the prices that were paid for the plants A. (Interrupting.) We had no knowledgi^ of tlie price paid or agreed to be paid to the others. OPTIONS TO DIM.MIES. (.1 You had knowledge, of course, of the offer that they made to you?— A. Yes; that was in writing. I wish to sav that the mode of operation is that they will take, as in this instance, a clerk in tlie promoter's office, a man without any financial 1068 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. responsibility, and to him you give the option; and if all go into that agreement — if they carry it out, they can hold you; if they on their part do not, you have got no one but a dummy to take. Q. So in the case of the formation of the International Silver Company these options were really taken by a pt-rson who was not financially responsible? — A, Not of any financial responsibility whate\ei'; a clerk in the office. AOREED TEEMS OF S.VLE OF C. ROGERS & BROS. Q. What was your opinion as to the prices that the promoters were willing to pay for the different plants? Were they, for the sake of forming the combination, paying in your judgment \ery high prices or simply moderate prices? — A. For C. Rogers & Bros. I can give the exact amount; I do not know what the others were. There was an inventory value, I believe, of over $600,000; that is, the inventory value without good will or trade-marks or anything. 1^. That was simply the inventory value of the plant and of the stock on hand?— A. Yos; free of all indebtedness; that is the way we made this option. Q. Of something over §600,000? — A. Yes; that was the inventory value; but of course there came in the good \\ill. They agreed to pay $500,000 in cash, $.S00,000 in preferred stock, and $1,50,000 in common, which we understood was bonus; a bonus which might or might nre a diviilend was declared it might go to even more. It did sell at 80 or 85 at the beginning ; now it is offered for 65. But that was about the way we reckoned. The common might bring 30, if they were all in at a fair basis — that is, for profits. Q. Were vou given information at this time with reference to the proposed capi- talization aratc concerns. INTERNATIONAL SILVER COMPANY: ROGERS. 1069 Q. You think that, from the organization that was explained this morning, there is quite a material saving in the cost of management?— A. Oh, yes; properly conducted. HISTORY OF THE BOGEKS TEADE-MARKS. Q. Would you think that there is any special saving to come from the common use of trade-marks in this business?— A. Well, in this ease there are several names of Rogers on the market. Q. Will you be kind enough to explain to us this Rogers trade-mark? Give us something of a history of it, and the way in which it is on the market now. — A. Years ago relatives of ours were in the silver-plate lousiness, back in the 30's and 40's. They first started, I think, one of them, AVilliam Rogers, in Hartford, under the name of the William Rogers Manufacturing Company, or William Rogers & Sons. The brothers afterwards — Asa, Simeon, and Williain — went to Waterbury, and started there the original concern of Rogers & Bros. And to such a state of perfec- tion did they get their goods that they were known as being very valuable and very reliable goods. Other silver-plate manufacturers started in spoons and forks, but they were unable to compete with Rogeis & Bros, even at the .same price, because the latter were so reliable. But after a time Rogers & Bros, sold out; it became a corporation. They wanted more money, and after a while they went out and sold their propert}'; but the name remained. One of the brothers tlien went to New York. This was Asa. In connection with my brother, Gilbert Rogers, he started in New York, in John street, under the name of A. & G. Rogers. In the bad times that came on during the war they got a little frightened and stojiped. Then the Meriden Britannia Company came forward to my brother Gilbert, and made an arrangement with him to give him 2 per cent, or something of that soi't, upon all the goods sold with his name on them. Q. That is, the Meriden Britannia Company bought from j'our brother the right to use this trade-mark? — A. Yes; and his compensation was to be 2 J per cent or 2 cents a dozen, I have forgotten which, upon every dozen that was made and sold; and he was to have a position as salesman. Soon after, we heard that they had entered into an arrangement with the origmal Rogers Bros, to use their name. Q. The Meriden Britannia Company? — A. That is, instead of Rogers & Bros., the name which the Waterbury concern had, it was Rogers Bros. ; and they bought the use of that name, as I understand it, from the original brothers, who were to superintend the manufacturing for 10 years. They then dismissed G. Rogers. Of course there was no compensation to come, because they would not sell any. They had got the Rogers Bros., and they went forward and manufactured and sold those goods. In the meantime they had acquired the controlling interest of Rogers & Bros, in Waterbury. Soon after their dismissal of G. Rogers my three hinthers, Cephas, Gilbert, and William, formed the concern of C. Rogers & Bros, in Meriden, and a while afterwards commenced manufacturing spoons and forks and knives, stamping their name on them. The Meriden Brita,nnia Company at once commenced a suit against them, claiming that they had, under their purchase from the original Rogers Bros., the sole right to use the name Rogers & Bros. After a long litigation the courts decided that C. Rogers & Bros, had a right to use their own name as long as they used it right- fully — that is, provided the goods they sold were equal in quality to those put upon the market by Rogers & Bros. ; and that they proved was so, and there was no attempt to disprove" it. We do not to-day know by what right the International has used Rogers Bros., 1847. As we understand it, their right to use it expired after the 10 years. In referring to it we have sometimes thought that we had a right to attempt to stop them as they tried to stop us; and the answer \Aas that they con- trolled Rogers Bros., of Waterbury, and would be enabled to bring it to Jleriden, so it would do us no good. Q. Do you yourself in your own manufacture use the brand Rogers & Bros.? — A. C. Rogers & Bros. Q. C. Rogers & Bros.?— A. "We prefix the C. That was the name of the semov member of the concern, and we have not conflicted with the correspondence, and have abbreviated it as much as possible. Q. You spoke of the International Silver Company advertismg these 1 irands. Do they in advertisements make statements that you think are unjustihed by the facts m Q. What statements do they make, for example, that you think are unjustifialale?- A. Thev rented an office in Maiden Lane; we also rented an office there. Each con- cern put up its name, C. Rogers & Bros, and the International Sd\'er Company, and a notice that it would occupy the premises on such a date. Soon after there 1070 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. appeared on the International Silver Company's sign, that was stretched across the face of the building, a statement that they controlled all the original Rogers brands or trade-marks for spoons, knives, and forks. That, of course, was not the fact, as no one controlleil us but ourselves. VALUE OF THE TEADB-MARK C. ROGERS & BROS. Q. How would you consider that the value of those brands that you yourself use compares with the value nf your plant itself? — A. In the formation of our present company the trade-mark \vas put in at $100,000. In the new corporation of C. Rog- ers & Bros, the inventory value was SHOD, (100. ROGERS TR.\DE-.MARKS OUTSIDE THE COMBIXATION. . (By Mr. Jenks.) Assign it to them'? — A. Assign it to them to be sold on or before Slay 1 for not less than ill). If they did not sell it for 80 or more, they were to return the unsold stod^ to them; and I understood that of the Sll, 000,000 "of the common they got in the neighborhood of ijix, (100,000 or $9,000,000. Q. In their hands mostly in this way'? — A. That is my information, which I con- sider reliable. (,^ This pool was to expire on the 1st of Slay'? — A. Yes. ' debauch. y. When )0U say " deliauch," what do you mean l)y tliat? — A. Sell it lower than it formerly sold in t'omparision with the brand of 1847. Q. The price of 1847 they have held up, but they have cut on the other Rogers ))rands they own? — A. Yes. not think they have. Q. Ha\'e you made any test so that you feel confident on the matter? — A. Yes ; we made tests and found that tliey did not come up to the standard. l^ Is that true with reference to the brand of 1847? — A. We have not tested that. We were rather in the belief that they would not do that. Our reason for testing this other was that the price could not be very profitable that they were obtaining for the goods if they had the full value of silver and material in them. Q. So you made tests of some of these other Rogers Isrands and found that they were not up to tlic standard? — A. Xo ; tliey were not. C. ROGERS & BROS., AND THE ROGERS SILVER PLATE COMPANY. (i How long iias your )ircsent establisliment Ijeen in operation? — A. C. Rogers & Bros, lias lieeii in operation for .34 years. Q. How long have you lieen connected with this concern? — A. About a year. 12- (By Mr. Jenks.) A\'ill you explain what your business was, or whether you had an independent ))usiiiess, liefore your connection with this present concern?— .\. Yes ; the concern which I took up \mis the Rogers Silver Plate Company of Dan- Imr)', and that is about 13 or 14 years old. I ^ms 1;he younger brother, and my other l^rothiTs were stockholders in that, and two or three other members of the family. But aftei' this combination was made, the International, we concluded that we would amalgamate, 1)oth for our protection as against what might take place and to lessen expenses; and we did so, and it is now a corporation. C. Rogers & Bros, was a partnership at will for .">4 years. TIIIE AND PIECE WORK — RISE OF WAGES — NO UNIONS — NO STRIKES. ears. Q. AVhere have you been jiracticing? — A. In New York and New Jersey. (j. Y(3u are familiar \\ith the corporation laws of New Jersey? — A. Yea. Q. Have you written or published anything on the subject? — A. In the first jilace, I \vas chairman of the State commission to revise the oorporati(jn laws of New Jersey relating to financial institutions. I am the author of the (.)fBcial edition of the cor- poration statutes of New Jersey, and author of Dill on New Jersey Corporations, which is the larger publication on the subject. (J. Have you been, in your practice, associated with the organization of some of the larger combinations? — A. Yes. Q. Can you give us any idea as to the amount of work along this line that you have done, the amount of capital organized in j'our office within a year or two? — A. I suppose this vear that we have had charge of the law end of organizations whose aggregate capital W(3uld run from s,i(10,000,000 to SI, 000,000,000. TR.\5rP CORPOR.iTIOXS DEFIXED. IJ. A\'hat do you understand Ii}' what is callecl a tramp corporation? — \. A corpo- ration which, ha^'ing a charter from one State, assumes to carry on its entire function out of that State and to do business entirely in other States. Q. Tender the New Jersey laws would tramp corporations be possible? — A. Were the New Jersey laws strit'tly enforced a tramji corporation would be im]iossible. Q. Will you mention the points of the New .lersey laws which prevent tramp organi- zations from 1 )eing organized in New Jersey ? — X. The distinction 1 )etween what is commonly known as a tramji company and a jiroiier corporation is the fact as to whether or not the stockholders are allf)wed ))y law to meet out of the State which creates the corporation. When States simply grant the charters and ]iermit the entire work of the organizations to be carried on outside of the States, they are tramp organizations, in my judgment. The distinguishing features in Ne\\- Jersey are as follows: First, the stockholders are forbidden l)y law to meet outside of the State, and secondly, by statute and decisions, any act of the stdckholders convened in meetings outside of the State is void. <<2. All stockholders' meetings must be held in the State?— A. All stockholders' meetings nmst b-\' statute lie held not only within the State, but at the registered office; and the courts of Ni'w Jersey have held that stockholders assuming to convene outside of the State, and act as such, thereby render tliemsehcs liable as copartners for the transaction in question. In the next plai'e, the statutes of New Jersey are more emphatic perhaps than those of any other State, in that a company must not only ha^e but m\ist maintain a prini'ipal and registered office in that State. 1077 1078 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE PRINCTPAL-OFFICE FEATfRE OF THE NEW JEESEY CORPOKATION LAW. il What is meant ))y this ]>iincipal oftice? — A. I might pay parenthetically that these strict provisions with ref;Hr(l to maintaining an office and registering it are of recent growth — statutes enacted within the last 3 years, in ohedience to what seems to ))e public demand for more publicitx- on the part of corporations as to maintaining a principal office. There are under tlie statutes the following requirements: Fiist. By the act adopted in 1S!I7, e\ery corporation must state, in every paper it files and in e\ery statement it publishes, the street and number of its office in the State, and the name ot the i)ei'son in.cliarge as its agent; and a misrepresentation in this respect renders all of the ilirectors pers(jnally liable for all debts of the concern. Second. The agent must l)e either a domestic corporation, or, by the statute of 1899, a trust company. This later legislation, which was passed under the banking commis- sion, of which I was chairman, was passed because we recognized in New Jersey the ne<'essity of having all these matters relating to publicity carried on by a corporation which had known responsibility and which was under the direct supervision of the insuiance and banking department in the State. Third. By the statutes of 1896, 181)7, and 1898 the corporation is required, as I have said before, to have an agent in charge of that office at all times during business hours. They are also required — this Ijears directly on publicity — to have a person there who is authorized to transfer stock, and that person, under a penalty of $200 a day, is required to keep three things: First, a book which shall contain the names and addresses of every stockholder, together with the number of shares held by him; second, a book which shall contain the name, residence, and address of every officer of the corporation in question; and ttiird, by the law of 1898, a daily list, posted to date, which shall contain the names, al])habetically arranged, of every stockholder, the amount of his holdings, whence he derived them, and, when he transfers, to whom, together with his address. A failure to keep this list on the part of the agent subjects him to a penalty of $200 a day, and the failure of the officer to proiluce this list renders him ineligible under the statute to election to any office wdiatever in the corporation for the succeeding year. Finally, corporations are compelled to send out from this principal office a statement under oath of every addition to the payment of capital st(|ck made by them and to state how much of that capital is cash and how much is property. Let me explain that this does not simply mean that reports must be made as to when all the cajiital is paid in, but when each and every installment is paid; and a misrep- resentation or failure on the part of an officer to do that renders him liable for all the debts of the concern, and in the State of New Jersey is a tort. PUBLICITY EEQCIEED IXDER THE NEW JERSEY LAW. ( ^ You say they are comiielled to send out a statement under oath. What do you mean Ijy sending it out? — A. They must file it in the office of the secretary of state, and inferentially, although not exjjressly in the statute, they shcjuld obtain a certi- fied copy of each of these things and keep it in the office, open to the inspection of the stockholders. Finally, all of these records are, by the amendment of 1898, made open to the inspection of all stockholders of the company at all times during business hours, and the failure to do this on the part of any one of the officers not only .suljjects him to a penalty, but in my judgment, under the recent penal code, is a misdemeanor, for which he can be imprisoned. Q. You said in accordance with tlie statutes of 1899 these agents of corporations must be trust companies? — A. Yes. tj. Is it contrary to the law or illegal for individuals to act as agents? — A. There is no ]jrohibition against individuals of full age who are residents of the State. There ha\c sprung up a lot of companies whose responsibility I will not say was ques- tioned, but was not known. Thei'c were important functions being carried on by cor- p(jrations whose responsibility was not known in the State, and therefore that power was expressly taken away from them and ex])reKsly conferred on trust companies; the provisi(jns as to trust conq^anies in the State of New Jersey being strict beyond the ordinary. Q. Did you say this power to act as agents for these cori^orations is taken away from individuals? — A. No; it was taken away from companies other than trust com* panics. THE ROVING CHARTER OF WEST VIRIUNIA, Q. In w hat respects do the laws of Delaware and West ^''irginia differ from those of New Jersey in this particular? — A. West "\lrginia grants a charter for a fixed sum for any amount with any ))oweis, the only restriction being a limitation of the capital STATE COBPOKATION LAWS, LTC: — DILL. 1079 to $5,000,000 — what is comiaoiily known as a r(.>\ing charter. The stockholders may meet anywhere on earth. They may have their offices anywhere on earth. They may transact any business they choose outside of the State, and there is nothing that they are obliged to do in the State. Now, the point of that, and all members of the bar will appreciate it, is this: The State which grants that kind of a charter opens the door to fraud. It is a recognized principle of law that the State of New York has no power in its courts to compel a New Jersey corporation, even at the instance of a New York stockholder, to brings its books into New York for examination on the part of that stockholder. Tlie gentleman, who is a member of the bar from New York, will recognize in the late arned or to declare one that is not earned. In other words, so far as the race with honest c-ears. In the next place, the principal thing that draws corporations to New Jersey is, in my judgment, the fact that the taxes are fixed. In other words, they are required to pay one-tenth of 1 per cent — a certain amount, no more and no less, while in other States Q. (By Mr. Farqithar, interrupting.) You mean a franchise tax?— A. I mean the only tax on corporations in the State. Q. (By Representative Livingston.) Is what?— A. It is one-tentli of 1 per cent on the capital paid in on incorpi iration. Q. That is the only tax paid by any corporation?— A . That is right. Now, then, the only oflScial you can deal with in that matter is the State board oi taxation, and as that position in New Jersey is considered an honorary one, you find a fine class of men whom you go and see and who do not come; to see yuu, and the only question that can possibly be discusseil with tliem as to the amount of your tax is the ques- tion of what you have paid in. In other words, in the State of New Jersey you can figure exactly what your tax will be, while in some other States there are three or four boards with half a dozen individuals, all of whom apparently prefer to see you at your room or in your oflSce, rather than at their board meeting, as to what your taxes should be. I do not think that a gentleman, a prominent member of the bar of New York, stated a fact— at least I do n(it agree with him— when he did say 1082 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. that in many States the practice of corporation law, especially the practice relating to taxes, had simply become a practice of corruption. There are also other reasons, if you want them. U- I want to he very candid with you ; I want to understand why it is. I know from the amount of mcjney you mention in your statement that it is no wonder your taxes are low. — A. Yes. < J. What \(iu get fi'oiu corporations and syndicates in the way of charters in New Jersey is astounding to me and to the world. — A. That is right. < I N(_i wonder you can make a uniform tax of one-tenth of 1 per cent. — A. That is right. Q. But what astonishes me is to know that, with such restrictions as you throw around cor])orations and syndicates, holding them down to honesty, they go there so readily. — A. Now, I will give ycju another reason. I have heard this thing discussed by business men ; I have sat in a syndicate, in an actual meeting of a large corpora- tion, where iS.'i, 000,000 was to be paid in and where a discussion arose as to whether they should go to Delaware, where they -would have no tax — because certain classes of corporations, as telephone companies, are totally exempt from taxation there — or to West Virginia or Xew Jersey. West Virginia was turned down without much con- sideration, because they believe, as I believe, that the Supreme Court of the United States is eventually going to hold that corporations organized with a roving charter and which do not, like a live tree, keep their roots in the soil that created them, are sinii)ly partnerships. (j. Your laws require them to keep open books in New Jersey? — A. Absolutely. il What is the penalty? — A. In the first place the penalty is $200 a day on the man who refuses; in the second place the failure to do it renders every officer of the company, including directors, ineligible to office at the next election. Q. Do you know that a great many do not keep open books? — A. I do. i'l. A\'hy do you not push them? — A. Do you ask me, as a New York lawyer, why I do not push them in the State of New Jersej'? THE PLAN FOK PAYINC; IN CAPITAL STOCK IN NEW JBESEY. Q. (By Mr. Jenks.) You said the taxes are levied upon the amount of capital paid in. What provisions are made in the New Jersey law to compel the paying in of the nominal capital? — A. The State of New Jersey differs from some other States, in that you first name in your certificate of incorporation the limit to which you may ever issue stock without an amendment of your charter. You then name as your actual capital the amount with which you will begin business. In other words, it will generally read: "The stock which is subscribed to this corporation by the incorpora- tors for the purpose of transacting business is so many dollars, divided as follows." And then there must follow tlie name of each subscriber, the amomit of his capital stock and his residence, which is not required in other places. Q. That is, the amount actually paid in may be as small as the incorporators please? — A. No; never under $1,000. Q. Never under $1,000? — A. Now, as soon as that thousand is paid in, the incorpo- ratoi's must file a certificate under oath which states the amount that has been paid in, whether it is pro])crty or cash; then if they subsequently get $20,000 — call for §20,000 — making their capital thereby S21,000 authorized, for example, they must file another certificate of similar character; and I may add here parenthetically, in answer to your question, that the statute provides that any officer making a false statement relating to corporations, whether verified or not, shall be deemed guilty of perjury. 'ond the amount that is paid in, but as they go up each step of the stairs they have to file a certificate that they are now, for instance, on the third step — that so much has been paid in. PUBLICI'l'Y AS PROVIDED FOR BY TUB ENGLISH LAW. (.i Can you also state the provisions of the English law regarding publicity so far as it differs from the Ne« York and New Jersey laws? — A. The New Jersey law is laigcly founded upon the Englisli act, but is about 3 years behind it in point of prog- ress. The English law, which in my judgment will have to be passed in all States that desire to stand as propel' charter-granting States, is about as follows: All stock issued STATE CORPORATION LAWS, ETC.: DILL. 1083 by any company, in wlioseever hands it shall be or shall come, shall l)e deemed to be held subject to be paid in full in cash, unless Ijefore the stock is issued a contract shall have been iiled in the office of the company, and open to the public, ^\hich shall show which part of the stock has been issvied for cash and which for property, and which shall disclose the character and value of the property thus taken. The statute then goes on to provide that anybody may have a copy "of that contract on payment of a fixed fee. That is publicity. Q. In providing that the character of "the property shall be named, does the law also require that it shall be located? — A. Now that is just where the English act is lame, and they have got an act in to meet that. That English act \\ as so wordecl that they could file a document which did not fully disclose; consequently to-day there are two acts pending in England for greater publicity. One is before the House of Lords and the other before the House of Commons. I should have brought them with me if I had supposed the subject would come up; but I will try to describe them. One bill — that before the House of Lords — provides, first, that every state- ment contained in the promotion scheme shall be deemed to refer to money unless otherwise stated; second, that every director and officer of the company shall be held liable personally for all statements or prospectuses issued by the company, it being borne in mind at this point that under the English law every company is compelled to issue and file a prospectus. The statute then goes on to say that every director elected, whether he resigns or not, shall be held liable as a director and officer of the company until after his resignation has been filed in the register's office and the new director substituted in his place. So that there is somebody liable all the time for either the making of statements or the failure to make them. The bill in the House of Commons is somewhat similar, but adds this clause, which I regard as very impor- tant, although likely to give rise to a great deal of litigation : Every director and offi- cer of the company shall be responsible not only for statements made, but shall have the same degree of responsibility if the prospectus fails to state any material fact. Now, that is the advanced English legislation, and this country is rapidly following England in that direction. You will pardon me for not having stated those bills more accurately; but I did not know I was to be asked in regard to them or I should have produced them here. Q. (By Eepresentative Livingston. ) Do you not think that if that law was adopted in the United States most of these companies would go out of existence? — A. No; I do not; I can not go as far as that with you, because I think there are good com- panies and bad companies. Q. Of which are there the most? — A. Well, I think if you and I should check down the list, we should find a good many that would evaporate. Q. You would find a good many directors that would? — A. You are right there. If you will tie a director on the cowcatcher of the engine of every train, you will never have a front-end collision. THE EIGHT OF STOCKHOLDERS TO EXAjriNE THE BOOKS OF NEW JERSEY COMPANIES. Q. fB}f Mr. Clarke.) Do the large companies, organized under the New Jersey law, with which you have been professionally connected, keep a set of books in New York also? — A. Yes; almost all of them do. Q. As a matter of practice, which books are most consulted by the stockholders, those in New York or those in New Jersey? — A. Those in New Jersey are consulted by the stockholders. Q. (By Mr. C. J. Harris.) The stockholder could not consult the books in New York except as a matter of courtesy, could he?— A. As a matt«r of law he could not, and as a matter of courtesy it would very much interrupt transfers of property for everybody to come to see them at the New York office; therefore in New Jersey they have either wired or mailed to them every day every transfer, and in the large com- panies that I have had to do with those transfers are absolutely balanced every day at 3 o'clock. Q. (By Mr. Clarke.) As a matter of practice, is there a constant or even a frequent examination of stock ledgers and transfer books by stockholders in these corpora- tions? — A. Do you speak of the companies that I represent? Q. Yes.— A. Yes; there is. You would be surprised at that. Just before a divi- dend was declared l.iv one of these companies there were 77 inquiries in 3 hours in one afternoon, and the day does not go by that wn do not get requests— telegrams and letters— as to what this m'an holds or that man holds. The only question we ask is whether you are a stockholder. If you are, you are entitled to it. Q. In case of the neglect of the stockholder to comply with the law of New Jersey, and of the neo-lect of the New Jersey official to enforce the law, is there anything to pre- vent a stockholder residing in another State from obtaining a remedy or relief in the 1084 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. courts of the riiited States? — A. The question as to whether a United States court ■which is situated in another place than where the principal office of the company is located has jurisdiction, has ne\'cr yet lieen determined. I should say that the rules of the United States courts as to jurisdiction of defendants would govern that; but the l"nite(i States court of the district embracing New .Jersey would have jurisdiction at the instigation of any st(.ickholder. And there is a provision in the law of the State of New Jersej' that the chancellm- may, on application by any stockholder and without any notice to the other side, compel the books to be brought to a designated place and kept there; and the failure tuobey that orderfor 10 days vitiates the charter. CLASSES OF STOCK OF N'EW JERSEY COMPANIES. Q. Have you been or are >'0U familiar with the capitalization of the several com- panies organized under tlie laws of Ne^v Jersey with which you have been profession- ally connected? — A. Yes. (l Jlost of those companies have two classes of stock, I suppose? — A. Yes. < I. Preferred and common? — A. Yes. years ago. Its assets have all been dis]iosed of excepting its good will. For that good will si, 000,000 in cash was oftereil within the last month, although it was a defunct (jrganization. RIGHT OF STOCKHOLnERS TO SEE BOOKS RESUMED. • ^ (By Representative Livi.xoston.) Do you remember the Eamapo case, where 3Ir. Hearst asked to see the books, and was, I think, refu.sed, upon which he bought stock, but is still, I see from a newspajier statement, refused permission to see them? Is that the condition in New York? Uo you have to take out a mandamus in order to see the books? "Was that statement in the papers a fair representation of the condi- tion of affairs? — A. I have not seen it; but almost anj- corporation that does not want to let you S(^e their books will send you to the courts for the privilege. (J. is the Hearst case an example of the practical working of your New York law',' — A. Well, without taking the new spaper account of it, I think that if a corpora- ti(.in does not want you to see its books, you will have to go through ipiite as much liti- gation in New York. There is no such thing in New York as the simple one-man power that exists in New Jersey to compel it. If that case had occurred in New .Icisey they w(.)uld simjily have gone and got an order from the chancelloi' which would not be api>ealalile, and which would have designated a place where within 24 hours those books would have ))een brought and opened wide. The failure to do it would be followed by an absolute annuhuent of the charter. The only question in such a cast- \\'ould be, are yon a stockholder? Tbi're is no such la\\' in New York. (i. (By .Mr. Jenks.) Suppose the case of a member of a competitive company who buys a few shares of stock for the puri>ose of getting information. Is not that person, under the laws of both New .lersey and New York, entitled to that information? — A. There, you see, the burden shifts from the individual on to the corporation. If a man should purchase a few .shares of stock with an intent which I felt confident I could show to the court was bad, I would go into court and get an injunction against him before he could get at me with a demand. Then the burden is on me, repre- senting tlie corporation, to .show that he is bad. Because m New , lersey, in this case, ]>resumptively every man is guilty until he has been declared innocent, and the bur- den is on the man to show that he is inmicent, as he is presumed to lie guilty. It is otherwise in mo.st of the States. il. You say that under the laws of New Jersey the chancellor can at any time order the books of any corporation to lie brought into the State and exhibited to the stockholders?— A. Yes. <^ Is not that in itself a .sufficient jirotection for ino.st of the stockholders where tlii^ real business of the corporation is carried on, we will say, in Ne^^• York City, and \\ here the books lliemselviw are kept in New York City? — A. You and I will not confuse the meaning of the word "lio(.)ks." First, there is the stock book and the transfer book and the list of stockholilers that mast never g(j out of the State. Now, oiAiJi (JUKi-'UKAllUA IjAWS, KTC: DILL. 1U80 if for any u-nt--(in a stockholder (lesire,s to ste the book^i of account, lie k'och direct to the chancellor, who sits in a very informal way, and gets an order. So we will not confuse the word "liooks." 1 understand yciu to mean documents, vouchers, and papers which do not relate to so much of the pulilicity (.f the company as respects stockholders. Q. Suppose we ask the same nuestion, however, with reference to the stock and transfer l.)ooks. "Would it not he a sutlicient ]>rotcction foi- the stockholders if the hooks could, in that way, he brnught into the State? — A. No. (J. Why? Is it not for the information and lienetit of the stockholders that the )>ooks are kept there continually? — A. That is the difference between New York and New Jersey. But I maintain that those books should be like water at the bottom of the pump. If your pump is there, you do not want to get a mandannis before you can get the water. Now, a stockholder who has got two shares of stock ought not to lie compelleil to hire a lawyer and get out a mandamus in order to know \Nho his associates are. The boot should he mi the other fellow. Tliey do not generally wish to pay that. In case of faihn-e the corjioration should pay Si'OOaday, and not compel the stockholder to pay Si'OO a day to get a lawyer. THE TliEATMEXT OF FOKEKIN CORPORATIONS DOIXO BT'SI.XESS IN NEW JERSEY. 1.^. (By 3Ir. Farqvhar.) I should like to read y(.)u section 101 of the general cor- poration act of New Jersey, and ask your opinion about it. — A. Am I to be silenced with my own biook^ ij. (Reading.) "When, by the laws of any other State or nation, any other or greater taxes, fines, penalties, licenses, fees or other obligations or reiiuirements are imposed ujion corporations of this State, doing business in such other State or nation, ur upon their agents therein, than the laws of this State imjiose upon their corpora- tions or agents doing business in this State, so long as such laws continue in force in such foreign State or nation, the same taxes, fines, penalties, licenses, fees, obliga- tions, and requirements of whatever kind shall be imposed upon all corporations of such other State or nation - -were not in a s.il\ent condition. We thought it wise to show both facts and not rely upon the liare statute. We found that a great many Italian bankers, driven out by the laws of New York, liad come 1(),S6 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ovt'V to Jersey City and put up the name "banker." When we drove them out under our banking laws, the\' went to New York and founded a corporation, using the \^<)r(i "trust." Now under the laws of New York you can form the Washington Trust Company, although under the act it may be without any trust feature at all. In New Jersey you can m.it use the word "trust" unless you are under the banking act, havepaid in vourSl,000, and received the approval of the banking commissioner. Now, those Italians would go to New York and organize a New Jersey Trust Com- pany, then turn around and open a little place right near the ferry, and get their fellow-countrymen as they came off the steamers and fleece them. Under that act just as soon as an Italian attempted to do business as a trust company in the State of Ne\^• Jersey we looked him up, and they all went back across the river again. That was another intention of that act. I am free to say that I believe if the laws of New Jersev are carried out they are as restrictive as any others in the Union, although there rnight be some additions made to them. THE LIABILITY OF HOLDERS OF STOCK. <^ (By Representative Livingston.) If I buy stock at 50 per cent, can you assess me under the laws of New Jersey for 100 per cent? — A. Of the company? <,^ Yes. — A. If you actually bought of the company and paid the money into the company to the e.Nteut of 50 cents on the dollar you can only be called upon to pay up the other 50. There is no double liabilit>', as tliere is in Kentucky, Ohio, and some other States. the ta.xation of new jersey corpobations. (I (By Mr. Farquhar.) Part of section 20.3, after providing for an annual license fee and franchise tax, says (reading): "That all other corporations incorporated under the laws of this State, and not hereinbefore pro\'ided for, shall make annual return to the State board of assessors of such information as may be required by said board to carry out the provisions of this act, and shall pay an annual license fee or franchise tax of one-tenth of 1 per centum on all amounts of capital stock issued and outstanding up to and including the sum of $.3,000,000; on all sums of capital stock issued ami outstanding in excess of $3,000,000 and not exceeding $5,000,000 an annual license fee or franchise tax of one-twentieth of 1 per centum, and the further sum of S50 per annum per si, 000,000, or any part thereof, on all amounts of capital stoek issued and outstanding in excess of $5,000,000." Now, can you give any par- ticular reason why such a sliding scale as that was adopted, giving the great moneyed interests an advantage o\'er those with less capital? — A. I will answer that by saying that when that statute was passed we built the house for the boy and that the man has afterwards grown up. In other words. New Jersey is confronted by a new con- dition.. When that statute was passed we never dreamed of $59,000,000 corporations. I can remember the time when I took in a $1,000,000 corporation and was proud; to-day I sneak in at the back door because it is so small. The legislature has not had time to meet and ]>ass on this question; it is new. We have not changed the laws; we ha\e not lui(l time. It simply created a furor in the secretary of state's office when we filed the charter of the Federal Steel Company for $200,000,000. That act was ]iassed when corjiorations were at their normal size. That day has jiassed. Now, what the legislature of New Jersey will do with the new situation I do not know. It is a boy's clothes that the man is now wearing. (I. I want to know whether you think that is an adequate and proper discrimina- tion in any franchise tax? Why should a gi'eat corporation with $30,000,000 or S4((,000,00dl)e taxed less heavily than one with $2,000,000 or $3,000,000?— .\. My experience has always been that if you liuy a man's suit you have got to pay more for it than for boy's clothes; and I do not see wdiy the same reasoning does not apply to the State. <^ (By Representative Livinoston.) To put it for the sake of illustration, it is cheaper at wholesale than retail. • i. (By i\Ir. FARciUiiAR.) That was the cjuestion 1 was going to ask. Why put the relationship of ^vholesaler and retailer on your public franchise that controls such large amounts of money of that kind? These large amounts of money always go into the stock markets; \\c can not escape it. There are only one or two great cor|)orations that can hold their own and that do not care whether they go into the slock market or not, like the ('hemical Bank in New York and others we know. We know llial this money is held within 10 or 12 families in this nation — the con- sumable c'apital. I do not know whether tlicie is any prospect of an amendment of this. I want to kno\\ whether New Jersey discriminated in favor of great capi- STATE CORPORATION LAWS, ETC.: — DILL. 1087 tal.— A. She discriminated before she knew great capital to exist; a new condition of affairs is confronting her. Q. Still, this very premium that is placed on it is an invitation Jor great companies to come into New Jersey?— A. No. The Federal Steel Company paid the State of New Jersey $40,000 for the privilege of coming in and pays about $17,000 a year tax, when it could have gone to Delaware with reduced capital for $.50. It is an induce- ment, yes; but that it is a controlling inducement I do not know. Q. At the same time you must take into account that Delaware chartered stock would pot sell equally well with New Jersey stock; consequently where you would gain in the beginning you might lose in the end.— A. I fulh- agree with you, and am glad to hear so frank an opinion. THE P0WI;K op the TEDERAL (iOVEBNMEXT TO BEGUL,\TE CORPOR.iTIONS. Q. (By Mr. Cl.\rke. ) I should like to ask if you have considered the subject of a Fed- eral corporation law. — A. Yes ; I think there are only two alternatives for this country. I think that your commissi(jn is confronted today with the same situation that existed in early times when the question of banks arose, even so far back as the time of Alex- ander Hamilton. The question, as has been said here to-day, of corporations has, in my j.udgment, gone so far as to come under that clause of the Constitution of the United States which refers to pubUc welfare. The subject to-day has got beyond being a State question ; it is a national question ; and you have got to get down to one of two things. You have got to come down to a statute in each State that will place a foreign corporation on the same level as a domestic, or else go higher up and grant a Federal charter to those corporations which are truly and in the widest sense Federal companies. I notice the tendency to-day of corporations to organize under such names as the Federal Steel Company, the Federal Telephone Company, and the United States and the American. If they are truly what their names designate, they should be under the laws of the United ' States, and I believe that Congress has the power under the Constitution to pass a law creating national corporations. Q. (By Representative Livingston.) And regulating the manner and methods of doing business in the States? — A. Yes; if I understand your question. And I believe further that if you will pass such a law wisely, first, with safeguards in every direc- tion; second, with liberality on unimportant matters, giving each corporation as to its internal management that does not affect the public a right to do as it sees tit, you will find the larger corporations will be seeking the advantages of the national act, just as to-day the State banks and national banks are distinguished by their size and importance. That is the only remedy for the existing condition. Q. You think that, under the Constitution of the United States, considering the power reserved to the States, that can be done? You have looked into it? — A. I have looked into it. I should consider the assumption of any such power by Congress as dangerous from the point of view of those who are opposed to greater centralizatioi> and less State power. As to whether or not an amendment of the Constitution would be required in order to pass certain national corporation acts, I believe that facts can be shown sufficient to bring the subject under the public welfare clause, which, as was said in the ^Marshall case, would leave it entirely to Congress to decide whether or not it was a proper measure, and Congress having in its judgment decided that it was, the United States Supreme Court would be l)Ound to sustain it, because they are the sole judges (if the law and the fact in that respect. Q. (By Senator Mallory.) I do not like to engage in a constitutional argument, but I should like to ask a question on the subject of the general welfare clause. There are two parts of the Constitution m which the words ' ' general welfare ' ' are used. One is in the preamble, and the other is the taxing clause where Congress is authorized to impose taxes for certain purposes, winding up, " for the general welfare. ' ' Now, as I understand it, you contend that the expresision "general welfare" in that part of the Constitution— for that is the only one to which it is applicable — would give Congress power to do anything which, in its judgment, is for the general wel- fare? — A. Permit me to retire behind the plea that I had no expectation, when I came here, of delivering an opinion on that subject; but I was really candidly giving my individual conviction. In the First National Bank case the United States Supreme Court decided, as I understand it, that, under the general welfare act, because the question of finances had become of universal interest, Congress had power to pasa a corporation act. The decision then went on to hold that, inasmuch as it was found by Congress that the question of banking was a national question and a matter of pubhc welfare, the court— having found affirmatively in the first place that Congress could create certain corporations— would not interfere with the judgment that Con- gress had passed on the subject. 8.3a 70 1088 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. <.i. Was it not rather on the ground that tlie national banks as authorized were instrumentahties of government? — A. You are right, and that brings us right down to the point of discussion. Q. The national banks were authorized on the ground that they were instrumen- talities of government, and the incorporation of the Pacific Railroad, which is the only other instance, I l)i'lieve, is on tlie same ground. They were at the time regarded as necessary instrumentalities of government; but when it comes to the pure ground of general welfare, it seems t(j me that this is a new doctrine that I am listen- ing to now. — A. It was so held in the Pacific Railroad and bank cases, that are in my possession to-day; and it is my opinion that trusts and industrial corporations are just as nmch a matter of puljlic welfare as was the incorporation of the Pacific Rail- road. Q. The question is not so much whether they are a matter of public welfare as whether they are instrumentalities of government. — A. I am only advancing a private opinion. I am not a very deep student of the subject. Q. (By j\Ir. Farquh.vr.) The Maritime Canal Company got a charter from the State of Vermont which it was claimed was not wide enough in its provisions. One of its purposes, as you know, was to build the Nicaragua Canal. They then came to Congress and asked for and got a charter. Was not that charter granted because Congress felt that the company was simply a representative of this country in build- ing a canal in a foreign land through concessions under treaty of a foreign and friendly power? — A. Yes. Q. And that is as far as Congress has ever gone in respect to charters? — A. I think that is right. But I think Congress has the power to say to-day "This question has become a national question." If Congress assumes to state as a fact that they are the judges of the propriety of legislation, and pronounce it proper legislation, I do not think the United States Supreme Court can get away from the Marshall decision or the Alexander Hamilton opinion. Q. In other words, you think the commercial and economic forces rule. Take a proposition like that of the unconstitutionality of a river and harbor bill. They are now perfectly constitutional and normal? — A. Yes; that is right. Q. And yet, according to the solenm vetoes of Presidents and the authority of attor- neys-general they were always unconstitutional? — A. That is right. Congress is just as much confronted with the new situation to-day as the State of New Jersey, and if it becomes too big for the State of New Jersey, there is only one power to take it up, and that is Congress. THE TEANSFEE OF STOCK IN NEW JERSEY CORPORATIONS (rBSUMED) . Q. (By Mr. Kennedy.) I believe a gentleman connected with one of these corpo- rations testified yesterday that they kept transfer books in Chicago, New York, and East Orange, N. J.?— A. Yes. Q. And, under the law of New Jersey, the transferring should be done in New Jersey. I should like to ask you if that is just a formal matter, while the real trans- ferring is done either in New York or Chicago? — A. I noticed that the gentleman did not make himself clear. There is no law in the State of New Jersey that com- pels a corporation to do all the transferring in the State. It compels them to have a known place in the State where you and I can take our single shares and get them transferred. They have a perfect right to transfer all the rest of their stock in a half dozen other places if they want to, but every day they have got so to report their transfers that you and I can go there with our single shares and ascertain who all the rest are and where they are. Q. (By Mr. Farquhar.) No matter where they are transferred? — A. They have got to be posted that day in New Jersey. The reason is that very many large' corpo- rations desire to have the public own the stock but do not want them to have any voice in the management. Therefore, if you and I own only 10 shares apiece in •some company, and we do not know who the stockholders are, but the officers do, they can go and get votes and proxies enough to get themselves reelected; whereas, if the others are known, if we can go to the stockholders of the organization, we can win, or at least hold down an election. That is the objection to it. That is the way it is in the Delaware and West Virginia laws; men can perpetuate themselves in office. That is where y- written authority to represent them? — A. We do; in each instance we require it. Q. In what form is that authorization given ordinarily? — A. It is usually a printed form, which follows the statute pretty closely, showing the requirements of the law and directing us to comply with them for the company. Q. Perhaps you would be kind enough to read the funn of authorization? — A. (Reading:) "Ordered, (1) That, in compliance with the laws of the State of New Jersey, this corporation have and continuously maintain a principal office and place of business within the State of New Jersey, have an agent at all times in charge thereof, and upon which agent process against this corporation may be served, and in said office keep the stock and transfer books for the inspection of all who are authorized to see the same and for the transfer of stock. That the 1 » )oks in which the transfers of stock shall be registered and the books containing the names of the shareholders shall be 1 Sent, and on file. 1090 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. at all times, during the usual hours of business, open to the examination of every stockholder at said principal office. "That the name of this corporation be at all times conspicuously displayed at the entrance of its principal office in this .State. "And be it further ordered, until this resolution be duly rescinded, "(2) That such office and place of business be in and at the Corporation Trust Company building, 60 Grand street, Jersey City, N. J., and that this company be registered with the said trust company. "(3) That the C'orporation Trust Clompany of New Jersey be, and hereby is, ppointed tlie agent of tliis corporati<.m for all of the af(jresaid purpases, and the agent of this company upon whom legal process against this corporation may be served within the State of New Jersey, and also the transfer agent of the stock of this com- pany." We require that in each instance. NUMBER AND C.VIMTAUZ,\TI0N OF COSri'ANIES REPRESENTED. Q. Can \-i:iu file with us copies showing just the authorization you have read there? — A. I have between 600 and 700 of these authorizations, one from each of the compaiiies we represent. Q. You require that form from all the companies you represent? — A. Yes. Q. About how many companies do you represent? — A. Between 600 and 700 at the present time. (j. Can y(]n tell us about how much capitalization that represents? — A. I should say between one and two billion. It is something over a billion, but I can not give the xact figures; I know it is over a billion, but we have not figured it recently. THE WORK PERFORMED BY THE TRUST COMP.VNY. Q. Have you displayed, in accordance with the terms of the law, before your office, in a conspicuous place, signs of each one of these companies that you repre- sent? — A. Yes; on the outside of the building, where they can be read easily by anyone. Q. Co you keep in your office the stock and transfer books of every one of these companies? — A. Yes. Q. You yourself are personally authorized to make the transfer of stock of these companies? — A. Yes. TRAXSFERS OP STOCK jrAY BE MADE IN OTHER STATES. Q. May I ask whether any of these companies have transfer offices in other States? — A. A few of them have. Q. Where? — A. New York City principally: quite a number in Boston, and some in Chicago. Q. Where there are transfer offices in other States what record do you keep in your office? — A. We keep the transfer books in our office and the stock register as required l)y law. I can show you that now. Q. (By Mr. Farquhar.) Ha\e they any authority under their charters to have these stock Ijooks elsewhere than in New Jersey? — A. They do not keep the stock books outside of the Stat^i; they merely make the transfer. Q. They have authority under their charters to make transfers in offices outside of the State of New Jersey ? — A. The statute does not gay they shall have only one office. The transfers must be kept in New Jersey and are sent there every night. Q. A\'liy do they have transfer offices in other States? — A. For the convenience of stockholders. Q.^ (By Mr. Jenks.) You have in your offiIen'ks.) You are the registration agent? — A. We are the registration agent. Q. You keep a record of every transfer that is made — a list of sales? — A. Yes. Q. (By Representative Livingston'.) Then if I, as a stockholder, should loan my stock and not recover it, how is that transfer carried on the books? Suppose I bor- row money from the Fourth National and deposit my stock as collateral; suppose I am never able to recover it, how would that stock be transferred? — A. So far as we are concerned, the st( ick would be lost ; there would be a record showing you to be entitled, say, to 100 shares of stock, and if the stock is pledged as collateral, we should not know anything about that. Of course, if you could not reclaim the stock, you would have to assign to the bank and we should make the transfer to them. Q. Suppose I did not do it? — A. It is the bank's fault if it is not transferred to them. Q. The bank takes that risk when they borrow the stock and you are not in it?— A. We know nothing about it. If the bank brought in the stock we would not transfer it. The stock would remain in your name unless you directed us to transfer it. Q. (By Mr. Farquhae.) Or the showing of a power of attorney to transfer it?— A. Yes. Q. Either the party in person that owns the stock or one holding the power of attorney to make the transfer? — A. Yes. JIETHOD OF KEEPING THE TRANSFER BOOKS. Q. (By Mr. Jenkk.) AVhat other books do you keep besides this ledger? — A. This is the stock ledger, which, of course, is kept in slightly different forms to meet the requirements of each company, but generally the book is covered by this one form. Q. Do }'0U, in connection with this business, keep other books of a different nature? — A. We keep the stock ledger and the transfer books. Q. Will you kindly let us see the form of the transfer books, or the form in which they are kej)!? — A. It .shows the date of the transfer and the number; "For value received I, , do hereliy sell, assign, and transfer to shares capital stock of the Company, standing in my name on the books of the company." It is signed by the party and by the Corporation Trust Company, by the officer whose duty it is to make the transfer. Q. (By Representative Livingston.) You do not require a valuable consideration? Is that left out? — A. That is shown on the liook certificate; it is there, "for value received." Q. (By 'Sir. Jenks. ) The amount of value receix'ed is not stated? — A. It is the usual form, " for value received." Q. These two books and the way they are kept show substantially all of your business? — A. Yes; that is, as regards stock. Q. AVhat other business do you have as a registration or transfer company? — A. We maintain the actual business office, putting up the signs you mentioned. The ofBce is kept open during lousiness hours, and there is always an agent on whom process can be served, and it is customary to keep such papers as may Ise necessary. ANNU.VL REPORTS KEFT ON FILE BY THE TRUST COMPANY. Q. AVhat other papers do you or[PAN'IES REI'EESEiVTED BY THE GUARANTEE AND TRUST COMPANY COMPLY WITH THE LAW. Q. (By Representative Livingston.) Have there been many violations of your State law in regard to these companies? — A. Well, of course I am only in a position to answer as to our own companies, and it is our boast that we keep them in good shape and see that they comply with the law. Q. Have any of the 600 companies you represent ever failed to comply with the law of the State? — A. As to holding meetings, no. Q. For any purpose? — A. Not to my knowledge. Of course, when a company will not do as we wish we cancel our contract with it. We do not care to have it. Q. (Bj' Senator Mallory.) How long has 3'our company been in existence? — A. About 4 years. (Testimonj- closed.) Washington, D. C, October 18, 1S99. TESTIMONY OF MR. JAMES MARWICK, No. 27 Pirir street, New Yorl. At a meeting of the United States Industrial Commission held at its offices in the Bliss Building October 18, 1899, Mr. James Marwick appeared at 3.45 p. m. and, after being duly sworn, testified on the subject of trusts. BfSINESS OP THE WITNESS. (i. (Bj' Mr. .Jenks. ) Will you kindly state your full name and business address?— A. James Marwick, 27 Pine street, New York. Q. What is your business? — A. I am a chartered accountant and the auditor of the Corporation Trust Comijany of New Jersey. Q. What is the nature of your work as auditor of this trust company of New Jer- sey? — A. I supervise all the work connected with the transfer business in New York. Q. In New York C'ity? — A. Yes, sir. PURPOSE OF THE NEW YORK OFFICE OF THE TRUST CO.MPANY. Q. Will you explain to us just what the nature of your work is in New York City, or how it is connected with the work of the trust company in Jersey City. — A. The office of the trust company in New York was established to receive certificates— to facilitate the work of the New York Stock Exchange. The broker sends the certifi- cate to the office Q. That is, to your Ne\\- York City office? — A. Yes; to our office, properly signed and .stamped. We give in exchange for it a suiall slip, so that he can recover the new certificate when it is issued. Q. The small slips that are issued are substantially receipts? — A. Just receipts; yes; so that he can identify the new certificate. AVe then make the transfer and make out the new certificate and have it recorded and properly signed in our new-certifi- cate book. The following morning we deliver it to the registrar, who delivers it to the broker. RELATION TO THE NEW .lERSEY OFFICE. Q. Then what relation exists ))etween your office and the work you do there and the work that is done in the New Jersey office? — A. We receive the certificates and send the transfers over to the New Jersey office on the forms which you have been shown. Q. When you speak of making transfers you mean you receive the certificates and send them to the ti-ansfer oflicc and transfer them and tliey are returned to you?— A. We receive the certificate, which is in blank, and write out the transfer and send it over to New Jersey. Q. And then in New .leisey they make the transfer on the books?— A. Each day our slicet is added to the transfer book, which is afterwards bound up; it is complete in every rcsiiect; every day shows the total up to date; it is signed and makes a complete record, and the best record we can have. STATE CORPORATION LAWS, ETC.: MARWICK. 1097 Q. And then you say the rertiticates are returned to the New York office; and to whom — to yonl — A. We send the old certificates witli the new certificates to the registrar, who cancels the old certificates and issues the new ones; then he returns the old certificates to us in New York, so we can answer any inquiry made by the New York Stock Exchange. OLD CERTIFICATES PILED IN THE Jy'EW YOKK OFFICE. Q. And you keep the old certificates in your office? — A. We file every certificate. I can show you any certificate filed in our office that has been out of the office and come back again. Q. So that, as a matter of fact, these old certificates are all of them kept on file in your office? — A. Yes; if any question is asked by the New York Stock Exchange in connection \\ ith these certificates we can reply to it. We hold them instead of the company holding them, for the convenience of the brokers. KIND OF BOOKS KEPT IN THE NEW YOKK OFFICE. Q. Now, in regard to the books that you use in this transfer business, do they dif- fer in any respect from those already shown? — A. [Showing book.] This is my record book, or transfer book. I make a record of the transfer that I send over to New Jersey; this is my record here; this is written up in the corporation office in New York, as a record of what we send over to New Jersey. Then this is posted in a ledger. We post this in New Y'ork and balance up with the New Jersey office every 3 months or so ; we have an exact list in both places. Q. I suppose the ledger you keep in the New York office is exactly the same in all particulars as that kept in the New Jersey office? — A. They differ to a slight extent, but this is the latest form, a self-balancing ledger. EEL.VriON OF THE EASTERN OFFICES AND THE CHICAGO OFFICE. Q. How do some of those companies that have transfer offices, not simply in New Jersey and New York, but also in Chicago, keep in touch with the Chicago office? You have explained about the New Jersey office; how about the Chicago office? — A. We send them a note of every transfer that is made. Q. Do you make daily reports to them? — A. Yes; in the case of one of the large companies, we send a complete report of every transfer in our office, so that they know exai'tly every transfer that is made. COKPOR-ITIONS REPRESENTED AND THE A.MOUNT OF AVORK REQUIRED IN THE BUSINESS. Q. You represent corporations, of course, of different sizes — small corporations and large ones? — A. No small ones in New York. Q. Those you represent in New York are substantially those that you represent on the New York Stock Exchange? — A. Yes. Q. Can vou give us some estimate as to the amount of work required to do the business for a large company ; for instance, the Federal Steel Company? — A. How do you mean? Q. How many clerks? — A. I could not undertake to do the work with less than 6 clerks; but of 'course the work is not the same at all times; sometimes it would not require so many. Q. You mean 6 for one company?— A. Yes; I have been called on to issue in one night $9,000,000 of securities. I have closed my office at 3 o'clock in the afternoon for receiving transfers, but every security was out and new certificates issued by 10 o'clock the next morning for over $9,000,000. Q. How much time do you have to make this transfer on the Stock Exchange?— A. From 3 o'clock in the afternoon until 10 o'clock in the morning. Q. So that for every sale made on the New York Stock Exchange you must have a report made up by 10 o'clock the next morning?— A. Yes; of course we post our books after that. ,,,1-4. Q. You say that in the case of a large company, like the Federal .Steel, it requires 6 clerks to do the work?— A. When I tell you that we have had to get out nine mil- lions of securities in one night you can easily see what it means. ^, o^ 1 Q. Of course the amount of work will vary daily with the conditions on the Stock Exchange?— A. Yes; but we have to be prepared for big days. Q. And so you keep the force employed regularly m order to do that work :— A. Yes q! (By Representative Livingston.) AVho pays for it?— A. The company that the Corporation Trust Company represents. (Testimony closed.) 1098 HEARINGS BEFORE THE INDUSTRIAL COMMISMON. Washington, D. C, October 18, 1899. TESTIMONY OF MR. JAMIS S. GARVIN, AxxixUint Scrn'liirii of the Nev: Jersey Registrntloii and Trust f'ompavi/. At a meeting of the United State;^ Industrial Commission, held at its offices in the Bliss Building, 11.10 a. m., October 18, 1899, Senator Mallory presiding, Mr. James S. Garvin appeared at 2.55 p. m., and, after being duly sworn, testified as- follows on the subject of trusts: THE NEK .JERSEY BEGISTEATION .\ND TJtUST COMPANY. Q. (By Mr. Jenks.) Will you kindly give us your name and ad^lress? — A. James S. Garvin, New Jersey Registration and Trust Company, No. 525 Main street, East Orange. Q. What is your occupation? — A. Assistant secretary. Q. Gf this company you have just mentioned? — A. Yes. Q. About how manv companies does this trust company represent? — A. Between 275 and 300. Q. About what is their capitalization?— A. Between $300,000,000 and $400,000,000, I believe. Q. Hu\'e you written authorization from these companies? — A. We have. Q. Do you receive any companies without this written authorization? — A. AVe do not. Q. Do you keep signs displayed, for all these companies, before your office? — A. We do. Q. Can you furnish the commission a list of the corporations that you represent, with tlieir capitalization? — A. Yes. Q. You have a copy with you now? — A. I hax'e one, but not alphabetically arranged, and I would rather send one. Q. Will you within a day or two? — A. I will.^ Q. Do you keep in your office the stock and transfer Ijooks of all of these corporac tions? — A. Yes. BUSINESS METHODS THE SAME AS THOSE OF OTHER COMPANIES. Q. D(jes your method of doing the work differ particularly from the methods that have been explained here by the two previous witnesses? — A. No, sir; it is substan- tially the same. Q. And the forms of your record books are about the same? — A. Almost exactly. Q. You can perhaps furnish us with the blanks you use? — A. Yes, sir. Q. What measures do you take to see to it that the companies that you represent comply with the law as regards the filing of their annual report? — A. We keep a record of the dates upon which their meetings should be held, and we notify them of the approach of that meeting; we also, immediately after that date, notify them that the report has not been received, if such is the case, and continue to do that every 2 or 3 days until it is either receive' come to my terms, I do; often I simply say good day. Q. Can )(ju furnish to the commission a list of the corporations you have repre- sented within the last 30 days? — A. I think I could. I do not keep a record of them; they come in and organize and get out, and I do not bother about it. Q. They come in and organize, and apjioint you as agent and pay you a fee, and get out? — A. Not in all cases. Q. And you resign the next day? — A. Where a payment is made I do keep a record of it, but where they appoint me, they nright have a business in New Jersey and have their office in their factory. Q. Why in that case should they ask you to be their registered agent; if they have an office el.-'0U seen to it that >-ou have had the list for 10 davs before the election m the case of all the companies that \-ou represent?— A. Only one of the companies has ever liad an annual meeting. Q. AA'hich one was that?— A. The ih^ntyomcrv Textile Company. Q. They have had more than one?— A. Tliey have had two. Q. But you have never represented an^• other company which has had an annual meeting in yuur office?— A. That is the onlv one. Q. Do you know whether the law at j .resent considers it sufficient to have the list out 10 days before the meeting, or whether it requires it to be kept up to date con- tinuously?— A. I do not think the law requires that it lie kept up to date continu- ously; simply before the books cl.ise; 10 days before the election. Q. You think that is all that is required?^A. Yes. Q. And the matter will then lie over until the next annual meeting? — A. After the meeting of the JMontgomery Textile Company I direct the secretary to make up a written list to date. Q. That is right after the meeting? — A. Yes. THE TEANSFEKKINii OF STOCK. Q. Do yi^iu yourself make the transfers of stock of any of the companies that you represent? Have you ever made any transfers of stock? — A. Yes, a few. Q. For what companies? — A. For the Davis International Telegraph and Tele- phone Company, I think. Q. You are the regular accredited agent of that company now? — A. X(_i. Q. You were, earlier? — A. Yes. (J. And during the time you made transfers of stock? — A. Yes. Q. "Why did you sever your connection with that company? — A. Well, in the first instance, they did not think thej' were making enough money, and one man was putting out too much; he discontinueil, and I, of course, discontinued also; he was paying me himself, not the company. y. This was an individual matter, as far as the company was concerned? — A. It was an individual matter 1 iet\^'een him and myself. Q. Is that company still in existence? — A. X(j. Q. Do you regularly keep the transfer books in your otfii'e, of all the companies that you represent for a period, we will say, of 3 months? — A. "\^'ell, some of them use the stock book, that is, the stock certificate book, for that business; not ha\'ing many stockholders. That gives, of whom bought and t(j whom transferred. Q. In that case do you keep the stock certificate book in your office? — A. I have several of them. Q. Have you kept stock certificate books regularly in your office? — A. AVhen I get them from a company I keep them continuously. Q. And then are the transfers of stock made in your office? — A. Sometimes. In one or two instances I recollect of several commg who held st(jck certificates and giving me a letter. y. And asking you to make a transfer? — A. Yes. I write usually in red ink across the old certificate, "Canceled," and put on the date. Then I draw another certifi- cate and forward it to the office of the comjiany, either to the president or secretary, and they sign their names there. Q. And you call that making a transfer in your office? — A. Yes. Q. (By Representative Ln'i.\(.;sTON.) About how many of these books have been sent over to New Jersey to your office within the last 30 days that you are not in the habit of keeping there? — A. None at all. Q. You have not received an\' books lately? — A. Not in the last 30 da\'s. Q. (By Senator iLvLLORY.) Do you know whether the class of companies you have been acting for do nmch transferring of stock, as a rule? — A. No, they do not. Q. Very little of their stork is transferred? — A. Very little. Q. (By'Mr. .Iexks.) Have you Ijeen authorized to make transfers of stock for these companies? — A. Yes. Q. For all the companies firr \\ hich you have kept stock books? — A. A\'here I have held the books I generally get a letter from them; very frequently when they have been there I ask to have resolutions passed directing me. Q. And in that case you keej) a copy, I suppose, of the resolutions? — A. I have not any of them on file; I get that list from the .secretary of slate; he sends it to me, a certificate every day. 8.3a 71 1104 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. IXFOEMATION GIVES TO .ST<3CKH0I,DERS. Q. (By Mv. C'. J. Haheis.) |i(jes the stockholder often not. know anything about the standing of the eonipany? Suppose there should be a stockholder who wished to irtvi stigate, Cduld he get any information in your office in New Jersey? — A. If I was sati'^tieil that he was a stockholder I woul' that the number of transfers made in the companies you represent is very small? — .4. Very small; oftentimes theie are no transfers at all. A gdod many people hold their stock right along. Q. It is sulistantially a private company, you think? — A. Yes. Q. Do you represent any companies where the stock is bought and sold on the New York Stock Excliange? — A. Not that I know of. Q. So that the matter of transfers of stock would not ordinarily occupy more than an hour or two a ^^■eek? — A. Oh, no; in the case of this company it would not take 5 minutes to make out a new ccitificate and cancel the old one. Q. (By Representative Living.ston.) You deal with the little fish? — A. Yon can make a conipany as large as you want. You can make it a million as \\ell as a hun- dred thousand. It roinptly? — A. Yes. Q. You have simply acted as agent for the moment? — A . Yes ; many of them are New Jer.sey people and have their own places; they simply come to me to start the com- panies; after they are started they leave and afterwanls proceed by themselves. Q. That has been true practically of all of the companies organized for Jlr. Whitney? — A. I should say of a large numljer of them. l^ I will ask you al.'io, v.dien you send in that list, to name the companies you have organized for .Mr. \Yhitney? — A. Yes. i.l. (By J\lr. Faequhak.) How many companies have you lepresented since you comnienced tlie l)usiTiess? — A. Well, you mean since I have been an attorney? i.^. Since you commenced this l>usincss of re]iresent4ng I'ompanies, how many liave you represented? — A. Well, I might say 7.i. (-1 UiA\ many do you represent now? — A. I can not tell you that offhand. anies in N'ew Jer.^ey'.' — A. The incorporators. (J. Do yon know that they do pay them? — A. Well, they could not get the certi- ficate if the^' dill not. STATE CORPORATION LAWS, ETC.: RYAN. 1105 NATI'HE OF -SVORK DONE BY WITNESS. Q- (By Mr. Farquh ar.) Do you think the uiethod vou have descril led here to-day, that ot representing a conipan\- for less than 24 hour's and then surreudL-ring it, is' a fair and legal way of doing business?— A. I am afraid v<\u misunderstand me. For the purpose "f organizing they eonie in with a certificate of organization sec-ured from the secretary of state before I .^^ce it, and hold their organization meeting in my < .llii-e. Q. In other words, your \\-ork consists simply in placing with the secretary of state that certification?— A. No; I have nothing to do with that. That is all done before I see the gentlemen. Q. Then it is simply to use your name?— A. They do not use nn- name. Q. (By J[r. Kennedy.) It seems to me they get organized before they name an agent. — A. No; they may have my name put in the certificate. Q. Then they do not use your name for unlawful purpi.st's? — .\. No; since I acquiesce afterwards I do not see that it is unlawful. Q. (By Mr. Jenks.) Do I understand that you have, substantially, an arrange- ment with Mr. Whitney wherel)y he may use your name in an ojganization si'heme so that, when they go into y(jur office with your name printed as agent, you officially work for them l)y letting your name stand as the New Jersej- agent?^A. No; I do not know of any such arrangement as that. He makes use df niy offii'e; he must pay for all clerical work and attend to that himself. I am oftentimes not in the office when it happens. (i You say you are often not in the office when he comes there ti.i do this work, but your office stands there as the New .lersey office for the time l)eing? — A. Yes; it is kept open all day long. (j. So that the provision of the law requiring the office to be kept open during business hours is complied with? — A. Yes; there is always somebody there. Q. You suggested that you had organized a good many companies for Mr. Whit- ney. What other men have vou organized companies for; jlr. Ni iblett, foi- instance'' — A." Yes. Q. Can you tell about how many you have organized for him? — A. Possibly 30 or 35. Q. And in these cases you have ordinarily resigned innnediatt'lv afterwai-ds? — A. Yes. Q. Can you give us the names of s(jme you liave organized for him? — A. "Well, I can not answer that offhand. Q. When you send in the information we have asked for, will you kindly include them also?— A. Yes. WITNESS HAS COMPLIED WITH THE LAW. Q. (By ilr. Faequh.vr.) Section 43 of the corporation law of New Jersey says: "Every certificate, report, or statement, now or hereafter required by any law of this State to be made to any officer or department of this State, or to be published, filed, or recorded, by any corpcjration, domestic or foreign, shall, in addition to the other matter required by law, set forth the location (town or city, street and num- ber, if number there may be) of its principal office in this State, and the name of the agent therein and in charge thereof, and upon whom pro(.-ess against the corporation may be served." i-l Have you complieil with that? — A. Yes, I think I have. tl. Not "think," but have you complied? — A. Yes. Q. (By Mr.- Kennedy'.) What is generally the amount of the capitalization, ."^W,000, 'S50,000, or S1()0,000?— A. It runs from S,=iO,000 and S10l\000 up to S20(l,000. Q. In the incorporation of the Montgomery Textile Company, it seems to me you ought to have some record of your connection with it? — A. Well, I did not say that I had not. I simply say I make the memoranda at the time. I do not pretend to commit the names of the companies to memory. Q. You have a list of all of these companies that you have organized? — A. Yes, I have one. (^ (By ilr. .Jenks.) Will you give a complete list of all of them within 30 (la>'s?— X. I will give you the nanies of all the companies I know anything about, with which I have had anything to do. Q. (By Senator Malloey. j In speaking of resigning, did you mean that you make a formal resignation? — A. I did not exactly mean resigning, but severing my relation with the company. I simply say, "Haye you got an office elsewhere, or do you desire this one'."' Sometimes they "say,' " We liaye one." Of course that settles the business with me. 1106 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. Do vetween you and them, or does it drift along without your ))eing iKisiti've that \ou are or are not representing them? — A. Yes, I know when I do; thev mav think I do nnt, liut I do. For instance, I ask them to do certain thiiiu's, anil they do nf)t do thcui, and if they are not done, I am not and will not until they ilo them. (Testimony closed.) Wasiiixgtom, D. C, Nori'inher IS, 1899. TESTIMONY OF MR. CHARLES N. KING, Smrtary nml general maimgn- i if the Xeir Jirxeii ('iirporatiinis Agettey. The ciimmission met at 10. .55 a. in., Chairman Kyle presiding. Mr. Charles N. King, of Jersey City, N. J., was introduced, and, being duly sworn, testified as follows; >• this corporations agency? — A. Furnishing them with an office, the keeping of their transfer and stijck books, the tiling of their papers as requiied by the statute. make a statement to the State yearly regard- ing their capital is.sucd, for the purpo>,- of taxation. (2. How many different corporations are represented ))y your office? — A. I could not tell >ou exactly, but there are several hundred. tj. Can >ou give us an estimate as to the total amount of capital represented by those companies? — A. No; but it is several hundred millions. <,2. Plea-e mention the names of some of the more prominent ones that have their otHces with \'ou. — A. The Amalgamated Copper Company is one, wiih. a capital of J!75,000,000;the American Car and Foundry Company, with $60,000,000; the Amer- ican Thuail Company; the Pressed Steel Car Company; the American Soda Fountain Compan;,'. il. That is perhaps sufficient. Coulil you have prepared in your office and file with the commission a list (jf the companies that you represent, with the capitalization of each, and will you |je kind enough lo do so? — A. You could get all that at Trenton; their certificates are filed in Trenton, and their capital. Q. "With the name of the agent? — A. Yes. ' for failure to file that report. l^ In the case of a company that you represent, you are certain that either the name of the conqiany or your own name as agent iloes appear in the records in the offii'C of the secretary of slate? — A. Yes. <^ The commission would like to have you file a list of the companies vou repre- sent, v.iih llieir capitalization. I might perhaps give the reason why. It is quite pii^-ihle lh:!t there ma\' be in that list a luunber nf large corporations that we might wish to know something furthei' alioul, and in this way we could get the informa- tion as to what they are — what their capitalization is — more conveniently than by STATE CORPORATION LAWS, ETC.: KING. 1107 sending a clerk to the otfice of the secretary of state.— A. Do I understand that von want a complete list or the large ccinipanies? (.1 Supposing we sav the companies with a capitalization of S25(X()00 and ahoxe that.' Q. (By Mr. Fahquhar.) Is tliere not a system of illegitimate certification in the State of New Jersey by irresponsilile agents, lawyers, and others, who, for a small fee, get the certification of certain couii)anies, and under that certification ha\'e issued stock and sold it in New York City'.'— A. AVell, such a thing may hapi>en; it is never done with our concern. (I I did not speak paiticnlarly of you, hut of your own knowledge. — A. No; not of my own knowledge; I could not state. STOCK .\XD TRANSFER OFFICE. tj. (By Ml-. .Texks.) With lefercnce to these hnndreils of companies that are reg- istered in your office, do you in e\-ery case keep tlie stock and transfer books of these companies in your office? — A. Yes. • ^ In the case of transfers of stock, are the transfers ivgularly made in your office? — A. The statute provides that every cor|i(iration shall maintain a principal office in the State, where (bey can have their stock transferred. A\'e transfer that stock or see that it is transferred. Those books are deli\-ered to us, and they are coming and going all the while. We let them fiut to be written up. Novr, take small corporatii:>ns; they may not haw an\- transfers at all, and others have them every day. There is a list furnished tfi us, either daily or weekly, by the large cnr- porations, and we keep the books posted; but they do have transfers — the statute permits it — in other States. <). Y'es. Of course, then, with reference to these larger companies, where there are frecjuent iransfers of stock, as I understand you, you have transfer books (jf all these in your office. If they make transfers, say in New York City, those transfers are reported to you at least as often as once a week, and you post your bonks up a" often as once a week? — A. You say where they transfer e\-ery day? (^ No; where they occur i-ight along? — A. Nii; soriie of these are taken monthly. It just depends on the activity of the stock and how much time ir takes to keep ;t up. (.1. In case the stock is not very active, in case there are onl}- a few ti-aiisfers every day, in gome cases you post those biH>ks once a month? — .Y In some ea^es, but we have slips and keep them there right up. Q. So that on anj' day it would be possible for a stockholle to any stockliulder at any time. Q. Ten days before'.' — A. Yes; the alpliabetical list is required to be filed 10 days previous to the annual meeting. ADV.VNT.^GES OF NEW JERSEY COKPORATION LAW. (■]■ c-ent. A ciimpuny with $1,000,000 capital, when they file a certifi- cate in New York, would have to send $l,l-'5(l to the secretary of state.' DESIIiAEILlTY OF HAVING A LIST OF STOCKHOLDERS IN A REGISTERED OFFICE. Q. (By Mr. Jexks.) How long have you been engaged in this business that you have now, in c(.innection with this trust company? — A. I think since 1895 in this company; but I first embarked in this business inlKOl or 1892. Q. In anothci- company? — A. Another ci)mpany; yes. (I With reference to these smaller conqianies, wheie transfers of stock are com- paratively selilom made, do you consider it a matter of inq)ortance in the law that the stock and transfer books be kept in a |)ublic otli(T of this kind, in order that the stockholders may Ijc able to see at any time \yho their fellow stockholders are?— A. Well, yes and no. If they had a list there, that would be sufficient; and if they did not, \yhy I think the books ought to be kept there. (^ So that the)- can be found at any time? — A. So that a stockholder can ascertain who tlie stockholders of that comjiauv are, their addresses, aud the iumil)erof shares they hold. ('i In the case of the smallei' jnivate coi|iniatioiis, where there are, we will say, from 5 to 15 stockholders, where there are piaclically notransfei'S of slock, what is the reason for having this list there? Js there any reason ])articularly, oris it sim- ply for unif(jrnjity?— ji. Siqijiosing 14 of that comjiany know all about that corpora- tion aud the fifteenth man docs not know how nlucli the holilings of the other 14 are; llic princi].al office in this State is the i.nly place where he can ascertain that under our laws. STATE CORPORATION LAAVS, ETC.: KING. 1109 il- S(i that you think e^•ell in the ease of tliese smaller private eorporations it is quite important that the provision of the law l)e lived up to rigidly? — A. I think so; yes. IS THE PUBLIC BEl-rER PKOTECTEIl? Q. (By Representative Lrvix(4ST0N.) You said a moment ayn that you thought that in Xe\A' Jersey- the officers are better i)rotected than in New York and other States, and that is one reason why there are sd many charters taken. Is the jiublic better protected in New Jersey at the same time? — A. Yes; for the reasons that I state. If I am right in the amount that these men pay on their stock, and if the fifth man, as I stated there, is lial)le for the other four, that is not si3 in Ne«' Jersey, and that is one great protection. Q. Better protection to the stockholder. The question I asked you was this: Is the public better protected? If these trusts and combines are an evil, you ha\-e to take it for granted that the\- are antagonistic tn the interests of the common jieople. If they were chartered in New York, would the public lie better pnitected there than in New Jersey? — A. I do nut think so. Q. Is there any jirotection to the public any way in the whole Ijusiness? — A. Under the New Jerse>" law? Q. Or any other la\^•s authorizing these comliines and trusts — is there any protec- tion to the public'.' — A. Yes; I think the public are JK-tter protected under our laws. Q. You may state to the commission how. — A. Well, when you speak of the public do I understand the stockholders? Q. No; indeed you do not. They are anything else but the stockholders. I mean a man that does not o\^-n any stock at all; that does not kiiow anything about the company and can not know anything aliout it. — A. \\'ell, wherein would he lie hurt? Q. AVhere do you make your money if you don't make it out of the public? You don't rob eacl\ other and make it out of eat'h other, I hoj^e? — A. Well, if the public become stockholders in tliat corporation, they participate in the earnings of the company. Q. I understand. Take the steel trust, take any trust that you are agent for, all their money is made out of the public? — A. A'es. Q. But how is it that the public is protected under the laws of New Jersey if the stockholders and officers are 1 letter protectempetitors. SHOULD THE AHTICLEK OP INCOHPOBATION DKSCUIBE AKY PROPERTY OR SERVICES KECBIVBD POK STOCK? Q. (By Mr. Jenks.) The suggestion has been made here that it would be a protec- tion to the public if, when a corporation filed its articles of incorporation, it were requireil to state not merely the amount of capital stock, but also for what that capital stock was issued. That is to say, a certain proportion of it v/ould be issued lor cash paid in; a certain proportion for propeit)". It has been suggested that the amount be named that is represented by property, and that there be added to that a list of the proj)erties ^^'ith their location. In the State of New York it is provided also that stock maybe issued for services performed. It has been suggested that the amount issued for services A. (Interrupting.) You can not do that in our State. Q. I know you can not. That the nature of the ser\'ices and the amount paid for those services should also be named. A^'ould you favor any addition of that kind? — A. No, I would not; and I will tell you why. You organize a company to take over a patent. Now, until that patent is exploited, nobody knows really the value of it. The vendor or ow"ner of that patent may think it is worth millions, like Colonel Sellers, and it may turn out to be worth millions and it may not. So how would you do? Our law requires that when this stock is issued and fully paid a statement be filed showing Ikm^- much is paid in in cash and how much in property, and that has to lie filed ^\■ithin ten days after that stock is issued. Q. But you would not favor making a further proviso that when it states how much is represented by property the property itself should be named? — A. No; I would not. Q. With its location? — A. That would be a hard matter to get at in the case of patents. ici In the case of a patent, this suggestion has been made to us — it might simply say so man)- hundreds of thousands, so many millions, stand for such a patent? — A. Or patents? Q. Or patents. In that case the idea is, it should name the speciiic patents that it stands for. — A. Some of them would be required to file a prettj- big statement. Q. True enough, a prett)- big list; ^vliy not?— A. But I think, if you will pardon me, I think that if any stock is issued for services it. should be stated. Q. The amount that is issued for services and to whom jiaid? — A. Yes. Q. In the State of New Jersey no stock is issued for services? — A. Under our law I believe you can not do that. NKW .JERSEY .NOT THE MOST "LIBER.VL" ST.VTE. WHY IT GETS MOST CORPORATIONS. Q. (By Senator Kyle.) Is not New Jerse>- more liberal than any other Statehithe Union in regard to granting charters to sncii corporations? — A. Oh, I don't know. Q. AV hat other States are as liberal? — A. I have understood that West Yirginia is a pretty lil.ieral State. They are so liberal that they don't re(|uire anything down there; but I have always been given to understand that corporations organized in AW'st \^irginia have considerable difficulty in placing their stocks and bonds. (I Why is it that so many are incorporated in New Jersey? — A. I meutioued the lietter protection that New Jersey gives to the stockholders and directors. STATE CORPORATION LAWS, ETC.: XEVINS. 1111 Q. (By Mr. Ratchford.) If the lawg of West Virginia are as liberal as Ihose of Xew Jersey, how do you account for the fact that 90 per cent of the corporations are organized in New Jersey?— A. Bec'ause A\'est Virginia limits them t(j §5,000,000. Q. Then in that particular sense the la\^- is not as liberal; is that right?— A, That is as I understand it. i.l. (By Senator Kyle.) West Virginia is just as liberal as regards the lialiility of stockholders? — A. I guess they are more s(j, because they do not recjuire anything; and I do not know •\\'hat more ymi want than that. NAME OP BESIDENT AUEXT CAN ALWAYS BE FOUND AT TKENTON. Q. (By Mr. FAK(n'HAE.) Are there parties in New Jerse)' that secure corporations and are nominally agents, that go to Trenton and file the papers, and cease to lie agents within 24 or 48 hours after the filing of the jiapers of certification? — A. I think that is possible. i,l (By RepresentatiYe Ln-iNiisTox.) That is pretty liberal, is it not? — A. W'ell, when they file that report of their (■tficers and directors, it sliows who the agent is, and he must l)e a resident of that State, or a corporation. Q. If this agent, within 4S hours after the articles of incorporation have been filed, resigns his position as agent -V. Excuse me one minute. He could not resign until after that corporation Y\'as organized. *^ (By .Mr. Fauouhar.) It is organized l)efore you file them. — A. Xo; not under our statutes. You (.-an oi'ganize, but you can not do any Inisiness until after youha\e filed that certificate with tlie secretary of state. <^ (By I\Ir. Jenks.) After the certificate ha,s been filed the agent may then rcsiun? — A. Yes; Imt they would have to amend their certificate to state who the agent is, or fide an appointment "f a new ag(.'nt. ' definite informati(jn that, as a matter rocess in case [iroi'ess is necessary against that company. You will bear in mind, gentlenien, that his Imsiness is especially witli reference to companies which are organized under the laws of West ^'irginia, but doing Ijusiness elsewhere. To a certain extent, therefoi-e, his function is similar to that of tlie Corporation Agency which ilr. King has testified about, and also other companies situated in New Jersey. Q. In the State of West Virginia tills agent ci the corpoiation must keep in his office a list of the officers-of the corjioiations, so that he can conmumicate with them at any time? — A. He does so; whetlier by the law he is required to I do not know; I do not think he is. Q. Is there any requirement in the laws of West Virginia with reference to the keeping of the stock and transfer Imoks of the company within the State? — A. Xo. Q. Is there any prnvisii.m with reference to the keejiing of a duplicate list of stock- holders within the State? — A. I believe tlrere is not. The list of incorporators, of course, appears in the original certificate of im'orjxn-ation and also in the charter. SITUS OE A COMCANV. oration and find out just where the legal situs of the company is. The legal situs is either that situs which is directly specified in the agreement itself or it is where the actual business of the conqiany is carried on. Q. The place where the actual business of the conqiany i-^ carried on is also filed in the articles of incorijoration? — A. No. Q. How can you find thatouf — A. It issu])posed to be where it is specified ui the charter, and it usually is. Q. But not neces.-iarily? — A. Not necessarily. Vor example, you can have a com- pany oiganized under the laws of AVest Virginia whose principal place of business is in the city of New York. Now, that conq)any is not limited in its corjiorale activity and transactions to the State of New York or the city of New York. It can dol)U.-ii- ness in any State. (,>. \\'hen the articles of incorporation are fileil, is it necessary that it should be stated therein that its principal ottic-e is in tlie State of New York? — A. It is necessary that its principal office be stated. Q. Supposing that we were to take this case that you have slated, where the actual place of liusiness is in New York City, and the aili'cles of incoriKu-alion stated that its ]>rincipal i)lace of bushie.ss was in Austin, Tex.; is there any penalty for that falsi- fication? — .\. I should not consiiler it a falsification, because it may be the intention of the incorporators at the time to have the jilace of business in .\ustin, Tex. But as STATE CORPORATION LAWS, ETC.: NEVINS. 1113 I said 1 >f fore, the laws cif "West Mrginia are nc it specific as to whether the actual ]ilace of business determines the legal situs or whether the specification of aKrecment does; but in most cases, as far as I know, it is \a here it is specified in the charter. Q. It is fair to presume it would be? — A. ^'es. Q. The question is this: Supposing that the incorporates have formed their cor- poration largely for the purpose of speculating in the stcek, and that it would lie a desiralile thing for themselves not to be readily located— not to have their place of business readily located — is there any way 1 >y which the laws of the State of A\'est \'irginia will prevent them from any such fraudulent action?— A. I do not know of any — possibly liy quo warranto pr(3ceeilings. TAXATION. Q. "What are the provisions of the laws of the State of West \'irginia regarding the taxation of corporations; in the first jilace, reganling the prelimhiary tax when the articles are filed? — A. There is no tax on the .stock, as such, under the statute of West Virginia. If the company is a thorcaighly (hmiestic company — that is to say, if it is doing business exclusively in A\'est A'irginia, they pay an annual license fee to the secretary of state of slO a year. They are not t(j do business out of the State. If, however, the company has its principal I'jlace of business, let us say, in New Y(jrk, in that event the comp'any must (lay, upon the filing of the certificate of incorpora- tion, i?5(l to the secretary of state. That is its fee. Q. (By BIr. Farcjuhar.) And how mucli thereafter? — A. That $50 is paid e\'ery year as an annual tax. Q. Regardless of the capitalization? — A. Regardless of the capitalization. The maximum capitalization is S5, 0(10,000. MEETINGS — LIST OF STOCKHOLDERS — REPORTS. Q. (By 3Ir. Jenks.) Is there any provision regarding the holding of the meetings <.if the directors or the meetings of the shareholders? — A. The meethigs (.if a eorjjora- tiuii organized under the laws of West Virginia ma^' be held in any State, provided the majority of the sti ick is represented, and pr(.>vided the meeting is held not less than 21 days after the filing of the agreement of incorporation. Q. It is miderstood, then, that the first meeting of the shareholders must 1 >e within the State?— A. Xo. Q. Not even the first one'? — A. Not unless there is a mutual agreement. Q. "\\'hat provisions are made with reference to the keeping of a list of stockholders for the information of the stockholders themselves, at the annual meeting or other- wise? — A. I think there is no record kept. There is a provision, howe\'er, which is not mandatory, that a list of the styekholders be kept in the office of the represent- ative agent there. This is simjdy suggestive; it is not mandatory; there is no pen- alt}' if it is not obeyed. Then.' is no jirovision there that the name of the company shall be posted in a conspicuous place, which is a very prominent prov!si(.)n of the New Jersey law. Q. There is no provision that a list of the st(jckholders shall be kept and there is no penalty if it is not kept? — A. No. Q. Is there any provision requiring reports to stockholders by directors at their an- nual meetings? — A. I think that is usually provided in the by-laws. If you would like to see a uniform copy of the by-la x-.s y. Is it compulsory? — A. I lielieve not. Q. Can you furnish to the commission any papers or articles or blanks which will show what these customary In- -laws are'? — A. I should ]je very glad indeed to furnish you with coiiies of the forms of our minutes. We have copii's of the usiial Ijy-knvs. Q. (By ilr. C'oNiiER.) I would like to inquire if the comjiaiiy for which the wit- ness is counsel is incorporated under the laws of West Virginia'.' — A. It is. Q. Do the laws of West Virginia re(iuire anv reports to 1)0 filed with the State otfi- cers?— A. No. Q. Are you doing busine.ss in New York City? — A. A little liusiness; yes. I should like to explain the general object of this company. Q. Well, I should like to inquire first if \ou are comiielled to file or do file any reports \\-ith the secretary of state of the State of New York?— A. No; \\e ha^•e not done so so far. q. Do not the laws of the State of New York re-'? — A. About 10 months. Q. Not a year yet? — A. Not a year yet. 1114 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. METHOD OF INfOEPOEATION KEPEESENTATION. Q. That is all. — A. Now, the (jl.>ieft, gentlemen, of this corporation is not quite as exten(leou a special personal fee for acting as your personal legal re])resentative? — A. Yes. Q. Under the laws of the State of ^Vest Virginia any individual, I suppose, may act as this agent? — A. Yes. . (I. .\s well as any companj? — A. In our case Mr. Smith usually appears as attor- ney of record for the company. (4. Instead of the company as such you have the secretary of the company ap- pear? — A. Yes. ilr. Smith is not secretary; he is president. Q. In the State of AVest Virginia the secretary of state is very frequently appointed as State agent? — A. S(j 1 understaml. CORI'OK.VTIONS .VXD TRUSTS — C.VPIT.VL LI.MITED. <^ (By Mr. R..vtchford.) !>o we understand y■ which it is intended a corporation shall be known], for the purpose of [here describe fully and particularlv the purp(jse for which the corporation is to be formeil, and the kind of business to be carried on by it], which corporation shall keep its office or 1 Filed with commission, 1116 HEARINGS BEFORE THE INDUSTRIAL COMMISSION, place of business at , in the county of , and is to expire on the ■ of (presumably 50 years unless otherwise mentioned) , and for the purpose of forming the said corporation we have subscribed the sum of dollars to the capital thereof, and have paid in on said subscription the sum of dollars.' " Now, the amount of money, actual money, which must be paid in before you can get your charter must be 10 per cent of the amount subscribed for in your charter, so that in that respect, if I may make a comparison, I think we have quite an advantage over the new laws of Delaware. Q. And the other 90 per cent would be paid ii'hen? — A. Well, that may be paid later on. Q. It must be paid sometime, must it? — A. Yes; just allow me to continue: "And desire the privilege of increasing the said capital by the sale of additional shares from time to time to dollars in all. The capital so subscribed is divided into shares of dollars each, which are held by the undersigned respectively as follows; that is to say, by : [here insert the name of each incorporator, with his residence, and the number of shares held by him] and the capital to be hereafter sold is to be divided into shares of like amount." Now, there comes in your authorized capital; the maximum amount is $5,000,000. Q. (By ]\Ir. Farquh.vk.) But the paid-in capital need not be the same as the authorized? — A. No. Q. The paid-in capital has got to be how much? What is the least amount of paid-in capital under the laws of the State of West Virginia? — A. I do not know what the least amount is. I think that most of the companies start in with a rather small amount to begin business. If they have an enterprise, the value of which they are perhaps in doubt about, they do not want to start in with an enormous capitaliza- tion; I mean with an enormous subscription. They simply want to organize and go ahead with their business. Q. Is it not the usual rule in West Virginia that the company starts in with 10 per cent? — A. Ten per cent of the amount subscribed for must be paid in; that is statutory. CONSOLIDATION OF COMPANIES. Q. (By Representative Livinoston.) Under the West Virginia law can corpora- tions possibly consolidate if the consolidation will amount to over $5,000,000? — A. No; I do not see how they possibly could. Q. They would still be limited to a capital of $5,000,000? — A. I do not see any reason to put a different construction on the statutes in that respect. Q. (By Mr. F.iequiiae.) Can not one board of directors run five, ten, or twenty of these companies? — A. That I do not know. Q. No law against it? — A. No law against as many companies as you want. PHOPEHTY AND SERVICES FOH CAPITAL — TIME OF PAYMENT. Q. (By Mr. Jenks.) In what form must this capital be paid in — cash, property, or services, or what? — A. The law in that regard is that property can be accepted for cash. Q. May services also? — A. I think services may be. I think we have no decision in direct opposition to such a proposition. Q. Tlie value of this property tliat shallbe taken is determined by the board of directors at their will? — A. I presuuie so. (J. Will >'oii be kind enough to file with the commission here tlie blanks that you use, so that it will show in detail the methods of incorporation of these companies? — A. Yes, I will do that, and I will furthermore send you a blank form already filled out, fj. (By Mr. Ratchford.) I do not think you have answered the question as to the time in which the remaining 90 per cent of the capital shall be paid in? — A. I think that is a matter of discretion with the board of directors. Q. A matter of discretion? — A. I made that answer, not in reference to the West Virginia corporations, but to any corporation. Q. (By ]\Ir. Oonoer.) Is it not a fact then that if a company is organized for 50 years tliey may wait 49 years and II months before paying the additional 90 per cent? — A. I should think it quite likely, but I do not see how" tlun' could do any business unless they had money in the comjiany. Q. They might dn it with the 10 per cent? — A. Certainly. ij.. In other words, it is entirely possible to do business -with 90 per cent water and 10 per ci-iit ])aid in. On the payment of this 10 per cent, is it customary for the inciirporatoi-s to meet and issue this stock? — A. I think it is, but I do not care to say positively. I think they do it. STATE CORPORATION LAWS, ETC.: NEVINS. 1117 INTERSTATE COSTITY. y. (By IMr. A. L. Harris.) Do 1 underwtand that a cdrpuration chartered under the hnv of West ^'ir^.dnia can do l.nisiness in any other State of the Union? In your opinion they can? — A, Well, there is always the implied condition that the State in which they are goinij to do jiusiness jrives them the right to do that. (i. Then each State can protect its own citizens if it desires to?— .\. Yes; I think the Supreme Court of the Tainted States held that a corporation is not a person in the sense of an mdividual; so they can restrict a foreign company, and the company that does business in another State does it at the sufferance, through the amitv anil the comity, of this other State. Q. Then you do not claim by virtue of having a charter in the State of West Vir- ginia that you can go into a State and do business in opposition to the laws of that State? — A. ^'o; we can not confer rights upon a c()rporation to do business in any State which are at \ ariauce with the law of that State. Q. (By :\Ir. FARQUHiK.) The title of your company is the Coi-poration TrustOom- liany of West Virginia? — A. A'es. «). Are you incorporated under the laws of the State (if New York, or under the State of \\'est A'irginia? — A. 'West Virginia. The principal place of business is 'West Virginia. As I said, in that case we pay an annual license tax of SIO. If we had designated New York as the place of liusiness we should have had to pay s.iO. The suggestion may ha-\'e occurred to you that a gi'eat many companies would like to pay $10 instead of SoO. They can not do that; they have got to swear to a very strong, positive, and unequivocal affidavit that when tliey do pay the license fee of $10 the\' are not doing it to avoid paying S.50. I will furnish you a copy of that affidavit. 'ment of the sum of •S25. The fe<' for each additional SI, 000 is 20 ci'uts likewise. Under the recently enacted coqjoration law of Delaware the fee is lb cents for each SI, 000 of the total authorized capital, and in no case less than .S2l). "\\'est Virginia, however, had 1118 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. adopted a different principle in its initial organization charges. It levies no organ- ization tax on the capital authorized in the agreement of incorporation, but in lieu thereof imposes a fixed annual license fee irrespective of the capitalization. This fee is $50 jier annum ^vhen the principal office or principal place of business of the company is to be located outside of the territorial limits of the State of West Vir- ginia. Tills fee must in all tases be ]);ud before a charter is issued. If the corpora- tion is to be exclusively a di miestic West Virginia concern, the principal office or place of business of which is to lie in the State, the annual license tax is $W a year; so that, for example, if a company is organized under the laws of West Virginia and designates New York City as the location of its principal office or place of busines,s, such a company must \iay tlie State of West Virginia annually the license fee of $50; but if its jirincipal oHire or ])lace of business is Charleston, let us say, it would be required to pay only an annual license fee of S]0. The maximum capitalization for all corporations organized under West Virginia statutes, with the exceiiticm of railroad and canal {■onipanies, is $5,000,000. Under the Code (eh. 51!, sec. 'H>) no stock in a corporation shall be regarded as taken, or the person suliscribing therefor considered entitled to the same, until the fust installment is paid. And under section 25 of the same chapter it is expressly provided that at lea.st 10 per cent of the par value of each share shall be paid at the time of subscrip- tion. The payment of this 10 per cent upon the shares subscribed for naturally pre- \-ents and checks reckless subscriptions. Whether or not the value of a certificate of stock is actually realized depends entirely, in the last analysis, on whether the enter- prise for which the company was organized is a success or not. The disjiosition of stock subseiiuent to organization is a matter which the company, usually through its directors, regulates in accordance with what it deems the best interest of the cor- porate enterprise. Whether or not a corporation organized in West ^^irginia has the right to take property in payment for its capital stock has been questioned, and this point was inquired into with some degree of particularity by the Industrial Commission. There is no jirovision in the statutes expressly requiring that stock shall be paid for in cash; and the authorities seem united in the view that unless the statutes prohibit a corporation from doing so it may sell its stock for property (2 Thompson Corp. , sees. 1604, 1605; Clark p. Beavers. 139 U. S., 89-112; Fogg v. Blair, 139 U. S., 119). It has even been held that where the stock is fully paid in cash or property there must be actual fraud in the transaction to enable even crediti.irs to assail it (119 U. S., 345) . The inference, therefore, in view of the fact that the West Virginia statutes do not prohibit payment for stock in jiroperty, and there is no mandatory provi- sion for payment in cash, is that proju'ity can be legally deemed payment for stock. The common-law rule that the transaction must be one of good faith must of course be observed. If the corporate officers act according to their be.st judgment, without fraudulent intent, the selling of stock for pioperty is legitimate and regular. COR7'OR.\TIOX REPRESENT.VTIOX IX WEST VIRGIXH. One of the most important features of corporate regulation under the laws of AVest Virginia is the provision requiring that companies doing business outside of West Virginia shall keep a representative or agent in West Virginia and duly empowered so to act. A corporation organized in AVest Virginia and having its principal office or plai'c of business in another State must have a registered agent in AVest Virginia to accept service of pr(jcess in behalf of the company. The necessity and practical expediency of such a provision is obvious. The stat- ute, furthei-more, on this requirement is not directory, but absolutely mandatory. In view of tlie erroneously ])ublished rejiorts on the testimony given before the com- mission on November 13, 1SH9, in regard to this provision, it will not be inappro- priate to cite section 24, chapter 5t, of the Code of West Virginia, reading as follows: "livery such corporation having its principal office or place of business in this State shall, wdthin 30 days after organization, by power of attoriu'y duly executed, appoint some person residing in the county in this State wdierein its business is con- ihicted, to accejit service on behalf of said c(.)rporation, and upon whom service may be liad of any jirocess or notice; and to make such return for and on ])ehalf of said corporation to the assessor of the county or district wherein its Inisiness is carried on as is required )jy the forty-first section of the twenty-ninth chapter of the <'ode. I'A'ery such corporation having its principal office or place of business outside this State sliall, within 31) days aflei' organizing, by power of attorney duly executed, a])point some person residing in this State to accept service on lielialf of such cor- ]ioration, and upon whom service may be had of any process or notice, and to make return of its property in this State [or taxation as aforesaid. STATE CORPORATION LAWS, ETC.: (SMITH. 1119 "The said power of attorney shall be recorded in the office of the clerk of tlie county court of the couuty in which the attorney resides, and fileil and recorded in the office of the secretary of state, and the admission to record of sncli power of attorney shall be deemed evidence (jf compliance with the requirements of this section. "Corporations heretofore organized may comply with said ici|uirenients at any time within ;> months after the passage of this act. Any corporation failinp; to com- ply with said reipiirenients within (i months after the passage of this act shall forfeit not less than $200 nor more than S.iOO, and shall, moreo\er, during the continuance of such failure be deemed a nonresident of this State; and its property, real and personal, shall be liable to attachment in like manner as the property of nonresident defendants; any corporation failing so to comply within 12 months after the passage of this act shall, liy reas charter as ou might term i)rivate companies, have only one report, as to the total amount of the stock issued and outstanding, upon which to basii their taxable ratio. 'I (By Mr. Con(ier.) I understand that the mininmm capital stock is |12,000, and that at least .^1,000 must be subscriljcd?— A . Yes. Q. Is that iiercentage required in case of an organization organized for a larger amount, say SI, 000,000? — A. The same percentage applies. Q. Under your laws it would be entirely proper for these subscriptions to the capital .stf)ck to be [jaid in services, would it not? — A. Yes, at their fair actual value; or projici'ty, or leases. CAINS TO DELAWARE. (.1. (I'.y Mr, Fariji'Hah.) What is the innnediate or prosiiective benefit whi State derives from liberalizing its corporation law? — A. There are two bene were hfijicd for: First, to induce capital to conu' to Delaware and locate its : 4-1 - 1 4.^ 1....... .. „.,4- : £...„ 4-1... ■-.-- -4: ;i . -i 4.^.— t which your > benefits that ,.«....... ,-, .,..., .,., .^., > v....,e its factories tliei'c; second, to have a return in money for the issuance of its charters. STATE CORPORATION LAWS, ETC.: EDGERTON. 1123 Q. Do you think that the industrial prosperity of Delaware is likelv to lie increased by a law of this kind; or is it not a fact that the liberal law of Delaware has invited foreign corporations to be incor]irirate' closed.) W.VSHINGTON, D. 0., Nomnber 13, 1899. TESTIMONY OF MR. CHARLES E. EDGERTON, Ithaca, X. Y. The commission met at 10.55 a. m., November 13, 1899, Senator Kjde presiding. At 12.50 p. m. ilr. Charles E. Edgerton, of Ithaca, N. Y., was introduced as a wit- ness, and, being duly sworn, testified as follow.s: Q. (By Mr. Jexks.) Will you state your name and address? — A. Charles E. Edger- ton, Ithaca, X. Y. OBSERVANCE Of NEW JERSEY L.iWS — EXHIBITION OF CORPOR.VTE N.\MES. Q. Have you lately visited different lawyers and different officers in the States of New Jersey and Delaware to see their customs regarding the administration of the New Jersey and Delaware laws? — A. I have. Q. ^\'ill you be kind enough to state in your own way what the result of this exam- ination has lieen? Of course you may omit all reference to the business of any wit- nesses who have alread\- appeared here, but in reference to anything you have learned we shall be glad to hear you. — A. My ini|uiry was particularly as to the enforce- ment or observance of those New Jersey corporation laws which are meant to secure some degree of publicity; such as the requirement that the name of a corporation be conspicuously posted outside of its principal office in the State, and that the stock and transfer books of a corporation be kept at its principal office in the State. With regard to the posting of the names, that requirement, I believe, is quite generally observed. It is phy.sically impossible to make each name conspii'uous when 500 or 600 companies are represented in one office. The names are generally posted in legible form, rarely outside of the building, but generally in the public hallway of the building. There are instances in which the reijuirement is not oljserved; cases in which an attorney represents a moderate number (jf companies — half a dozen or a dozen, perhaps in some cases 35 or 40. One man rejiresents possibly 40 or 50 com- panies, and has not at any time had their names posted. His name appears as rep- resentative in the certificates of incorporation of 40 or 50 companies filed in Trenton this year. The signs are not posted, and he himself told me that they had not been posted at any time. Q. (By Senator Kyle.) Not any of the signs?— A. Not any of the signs. Q. (ByMr. Jenks.) You found several instances of that kind?— A. There \y ere sev- eral instances in which I did not find any names posted at the time of my visit. Q. (By :\Ir. Ratchford.) Wliere did you find them? — A. In Jersey City. In two instances at least it was said to me that tlie names had ])een posted, but were tem- porarily removed for the purpose of having a new sign made. STOCK .\NI1 TRANSFER BOOKS .VT NEW .JERSEY OFFICE. With regard to the keeping of the stock and transfer books at the principal oflJice in the State, my belief is that the larger companies, those which have a considerable number of transfers of stock to make, comply in general with that law. Such com- panies, I think, are generally represented by concerns which make a business of the 1124 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. local representation of New Jersey companies in that way. My belief is that these concerns which make a business of the representation of companies do undertake to see that the law is closely complied with, and in consequence the larger companies do comply with the law. A considerable number of the smaller companies of the State, however, are represented by individuals, generally attorneys; and the following of these features of the law is a matter which such men, chiefly occupied with other matters, naturally pay less attention to. I find it to be quite a general feeling among the attorneys of the State who do that business that these requirements of the law are of a simply formal character. They are felt to be desirable, no doubt, for those companies which are strictly public companies, in the sense that the nmnber of stock- holders is relatively large and the number of transfers of stock somewhat great; but in the case of companies which have only a few stockholders, where there are few transfers, if any, from year to year, it is thought that the keeping of the stock or transfer books within the State would be a purely formal matter. It is considered a matter with which the public has no real concern, and therefore it is not felt to be essential that the letter of the law be complied with. In accordance with that view, I found generally among the attorneys of New Jersey whom I saw that the observance of these features of the law is lax. Of some 15 attorneys that T saw and talked with on this matter only 1 told me, in such a way that I took it to be literally true, that all the companies he represents do, in fact, at all times have their stock and trans- fer books in his office. Q. (By Mr. Jenks.) You think, then, in the great majority of cases where one man represents but a few companies, and those arep rivate companies — close corporations — that the stock and transfer books are not kept within the State? — A. I think that is probably true. Q. You base your opinion upon the direct statements made to you by lawyers themselves who were agents of these corporations? — A. Yes. Q. And out of these 15 you mentioned probably 10 or 12 told you they did not keep the stock and transfer books of the companies that they represented in their office? — A. Yes. In almost every case the attorneys spoke of the matter with perfect frankness, and sustained their position, I think, substantially as I have explained it. In their judgment, it is not reasonable to require that all the books be kept in a New Jersey office, because the public has no real concern in the matter. Q. Although they knowthe law requires it? — A. Yes; although they know the law requires it. One attorney went so far as to say to me that he advised his clients reg- ularly that the law was sufficiently complied with if the books were brought into the State if at any time it was desired or requested. That was not, however, the attitude that I generally found. Sometimes attorneys would say that they advised their clients what the law was, and if the clients did not choose to take the trouble to comply with the law, of course that was a matter of their own and at their own risk. But frequently the position seemed to be that it was not really necessary — that it was a formal matter, and not a matter of real interest and real importance that the letter of the law be observed. Q. Did any of these men whom you visited say that they would send over to New York to get the transfer books in order to exhibit them to anyone who had the right to know? — A. Yes; that was said. Q. You would say that was the general feeling among those representatives of smaller companies, that in case a real need should arise they would meet that need by sending for the books? — A. Yes. I asked in a great many cases this specific ques- tion : "Whether they ever did have inquiries from stockholders for such information. The answer I received w'as quite uniformly either that they never had or that it was an exceedingly rare thing. One corporation, which is in the business of representing companies in that way, a Jersey City corporation, started, I believe, last March, had, I think, 54 companies on its books. The treasurer of that corporation told me that, so far as he knew', his corporation had never had such an inquiry from a stockholder. As to the man who told me he had never had posted outside of his office any of the names of the companies which he appeared as the representative of, the fact was that he had simply permitted a certain firm of promoters in New York to make use of his office for the holding of organization meetings of these several companies, and the name of the occupant of the office had been inserted as the New Jersey representative of such i.'ompanies. The nominal re])resentative had in fact had nothing whatever to do, as he hihiself informed me, with the organization of these companies, but had merely permitted the use of his office for that purpose. Q. Do you recall what the charge was for the use of his office and for the use of his name in this way? — A. No ; I did not inquire that. Q. Did he say to you himself that he was in the habit of letting his office out and the use of his name, without taking any active part at all? — A. Yes. STATE CORPORATION LAWS, ETC. :-^SAWYER. 1125 Q. This attorney, as I uuderstaiid, made no pretense of keeping the stock and transfer books?— A. >;o; he had had nothing to do with the companies whatever; he had never had any stock or transfer books of these companies in his office. Q. Ha^e you any further information along that hne with reference to the filing of the annual reports and the care that Avas taken bv these attorneys who were simply individual representatives of the small comianies? ' Did von learn" whether they were in the habit of securing the annual reports of the corporations thev represented, or of paying any attention to it at all?— A. Some of them, when the annual meeting is held in their office, make out the annual report and forward it. Q. Did you learn from some of them that they ha\-e paid no attention t.i that at all, or did you not ask tliat question specifically?- A. I dd not know that I did learn that from anyone. Q. Would you say, then, as a result of this investigation, that individuals who rep- resent the smaller prixate close corporations usually pay little attention to these spe- cial features of the law that have been mentioned? First, as regards the posting of names; second, as regards the keeping of the stuck and transfer books in their office, and, third, as regards looking after the filing of the annual reports? — A. I think that is true, so far as the keeping of the stock and transfer books and the filing of the reports is concerned. The names, I take it, are generally posted. Q. Although there are several excei>tions to that? — A. Tlierc are several cxcejjtions to that. (Testimony closed.) Washixoton, D. v., Xnn'iiihcr 16, 1899. TESTIMONY OF MR. W. L. SAWYER, ,Srri-ii(ii-i/ of the Coi'poralioii Trust Voiiipani/ of Ddmcare. The commission met at 11 a m., Senator Kyle presiding. At 3.40 p. m. Mr. W. L. Sawyer, secretary of the Corporation Trust Company of Delaware, No. b2 Broadway, New York, was introduced as a witness, and, being duly sworn, testified as follows: Q. (By Senator Kyle.) State your full name, address, and business. — A. W.L.Saw- yer, secretary of the Corporation Trust Company of Delaware, No. -52 Broadway, New York, or Dover, Del. We have offices in both places. BUSINESS OF THE COKPOKATION TKU.ST COMPANY OF DELAWARE. Q. (By 31r. Jenks.) What is the business of this company? — A. The business of our company is to furnish the means of meeting certain requirements of the Delaware law. Under the Delaware law every company must maintain a principal office within the State, must keep a corporate sign exhibited on its office, and must have a representative there during the usual business hours; and one of the board of dii'ectoi's must be a resi- dent of Delaware. That is what we furnish the various companies which we organize. Q. You furnish them with a home and facilities for doing that part of the busi- ness? — A. Yes. Q. Is it necessary that the stock and transfer books of a company be kept in the principal office of the company in Delaware? — A. The law is that either the original or a copy be kept there. Q. What is the usual custom with your company; is it to keep the original books in Delaware? — A. No, sir. ■ Q. To keep the duplicates there? — A. Yes. Q. Where are the original books usually kept? — A. Kept in the offices of the various companies. Q. A\'herever they happen to be? — A. Yes; unless we act as transfer agent of the stock, in which event of course as a rule they are always kept in the main office of the company, and as they issue stock they send over for our signature. Q. In case of some of the larger New York comjianies that you represent, that have transfer offices in New York City, are you in the habit of making transfers for them daily, substantially, or very frequently? — A. Yes; quite fre(iuently. Q. In those cases how often dcj you send a rejiort t(j your Dover office of the trans- fers that have been made? — A. We try to keep them up as near to date as possible. Q. How much does that amount to in the case of a large c|iresent do business there to any extent; very few, of course. There are a number of Delaware companies, of course, that have their own ottices there, and of course would not need oui' services. Q. (By Mr. .Ienks.) A trust I'ompany like yours is only for foreign corporations generally'.' — A. Yes. STATE CORPORATION LAWS, ETC.: MYERS. 1127 Q. (By Senator Kyle.) These corporations, Lin to 175, have all lieen organized since the 10th of last March'.'— A. Yes. Q. And all under t}ie Delaware law?— A. Yes. Q. How many other companies are operating beside.s vours?— A. 1 know of the existence of 2 others. Q. Do they have about an equal amount of l)usiness?— A. No, sir. The highest, I believe, is 15 companies, or something of that kind. y. Are they within the limit of I'OO?— A. Of course we have done a good deal in that particular line. I have devoted mv life to the work. I want to make a success of the company, and I suppose I got a little ahead of them. That was because it is the only thing I do. I am an attorney by profession, but I do not get much chance to attend to law practice, and I am devoting all of mv time to the intci-est of the company. We have gone into it for the purjiosc of niaking it a success. I do not want to be misunderstood about the keeping of these books there. As I said, there are a number of companies that have not issued any stock. As i'.)mpared with the total number, 1 suppose I might say comparatively" few have done so; but as I did say, by the 1st of January I think it will be done. I keep at them all the time and keep writing them that if they have not filed duplicate books as required by the laws of the State of Delaware, it should be done at once. (Testimony closed.) Boston, JIass., July 20, 1899. TESTIMONY OF MR. JAMES J. MYERS, Memher of the legishdure of MasxacliuseUs. At a meeting of the subcommission on manufactures and general business, held at Boston, July 20, 1899, Chairman Smyth presiding, Sir. James J. Myers, member of the ilassachusetts State legislature, appeared at 2 p. m., and, l)eing dulv sworn, testi- fied concerning the " antistock- watering laws " of Massachusetts. Q. (By jNlr. S.myth.) What is your address? — A. 53 State street, Boston. Q. What is your <]CCupation? — A. Lawyer 1)y profession, and chairman of the committee on judiciary in the house of representatives for the last 5 years. Q. Do you desire to make a statement to the commission? — A. I recei^'cd a very kind invitation from the commission to come 1 lefore it, .and state some of the facts connected with the passage cif the antistock-watering laws of Massachusetts. I regarded that invitation as equivalent ti.i a command, cuming from this commission, with its far-reaching and wide scojie of duty, and also because of its coming from i\\\ friend Sir. Clarke. Colonel Clarke very kindly called my attention to the topical plan of inquiry of the subcommission, and I saw at once that it was possiljle to state just what I pro- posed to, and I conceive that it comes under Xos. 53, 54, and 55. And as a further limitation, I shall, perhaps, confine myself to the formation, consoliilation, and t'ap- italization of corporations; and I shall incidentally, perhaps, say a few words at the end about that organization which has grciwn up — a trust with certificates of shares issued by trustees. I think I can possil)ly deal with this question by stating what the law of Massa- chusetts is, and by saying als< I that I have taken .some pains since your invitation came to see whether or not either our commissioner of corporati(jns, I\lr. Endicijtt, or the chainnan of our board of railroad commissioners, Mr. Sanford, had any sug- gestions to make. I have consulted them both carefully, ilr. Endicott, commis- sioner of corporations ; has to do practically with the organization of all corporations, except railroad and street railway corporations, in this State. Sl'PEEVLSIOX OF CORPORATION'S IX M.VSS.VCHUSETTS. The laws of Jlassachusetts provide — and I have here a summary of them — for a careful organization of all manufacturing — we will say of all private business corpora- tions; and they provide also, by what is called the "antistock-watering laws of 1894," more carefully than ever liefore, for the public-service or quasi-pulilic corporations, which, in this State, include railroads and street railway companies, electric light, telegraph and telephone, water and aqueduct companies. In the AVest there are one or two others, such as irrigating companies; but with us tlicse are all that can be called quasi public. NATCKAL MONOPOLIES. And right here I want to make a distinction which was much dilated upon and made the basis of much of the agitation of 1894, which culminated in the antistock- watering laws. 1128 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. These quasi-public corporations, or public-service corporations, were conceived to be doing a business which was naturally done by a monopoly. They are called by some of the scientific writers the "natural monopoly" lines of business, because they are best done in that way. It is olivious at a glance that it is not for the interest of any community, no matter what our opinion may be regarding manufacturing — it is not for the interest of any community that it should have several gas companies tear- ing up its streets and competing; likewise with street railways obstructing the streets with their lines; likewise with electric-light companies, telephone companies with their poles, telegraph companies, water companies, and that whole group I named. They belong to the natural monopoly corporations — those which can do the business bestj as it seems to us, when there is but one organization — a monopoly. OVEECAPITALIZATION — HOW DEALT WITH. Massachusetts found in 1894 that while her private corporations were safeguarded in respect to their issue of capital stock and there was no overcapitalization, there were some cases of overcapitalization, her business men believed, in the case of these quasi-public corporations, and there bid fair to be a great deal more of it. Special charters for certain classes of corporations, street railways and occasionally others, were becoming quite common in the legislature; applications for them, I mean. The business men thought there had been overcapitalization in some cases, and that more of it was threatened; and the agitation of 1894, which culminated in our antistock- watering laws, was aimed particularly at preventing overcapitalization. It did not, as you gentlemen will see, deal at all with this question that is now looming up, of business monopoly and the danger of it, because we were dealing with that class of corporations which were recognized as monopoly corporations. What we were aim- ing at solely was the prevention of overcapitalization, and it is to that I must address all my testimony, so far as it deals with actual facts in Massachusetts. Now, what are the laws of Massachusetts? For I think Massachusetts is justly proud of her corporation laws. What are her laws with respect to capitalization? How has she prevented this immense overdevelopment of capitalization, which, at least in many cases, compels the community to pay a dividend upon two or three times the amount actually paid into the enterprise? I think the fundamental idea is supervision, by some trustworthy government officer, of all issues of stock and bonds, and the payment in of the full par value of each bond and each share of stock. MASSACHUSETTS CORPORATION LAWS BEFORE 1894. Now, gentlemen, I believe that in anj' community, any State, where this is done, overcapitalization can not occur. Massachusetts has for a long time had on her stat- ute books a careful provision as to the organization of her private business corpora- tions, which made it necessary for any gentlemen who proposed to start in any private corporation to take certain steps that were carefully watched by the officers of the State. I have here a set of blanks, such as would be used in the organization of any of our business corporations. They provide, to begin with, just like the incor- poration blanks of any State, I suppose, for a statement of the amount of the capital stock and the names of the incorporators. Then when they have made their form of organization complete, they bring that to our commissioner of corporations, and if he iinds it all right, he simply certifies that the organization is correct and he approves the organization. Then the gentlemen go to our secretary of state and get their charter, with an authorized capital stock of anything you please, not exceeding $1,000,000. Prior to this present year, a corporation could not he organized for any of these purposes in Massachusetts with a capital of over $1,000,000 without a special act. This year a law was passed permitting a larger capitalization of any amount; but on talkmg with the commissioner of corporations, I find there has been no appli- cation to do anything of that kind since the law was passed. On examination I find there has only Ijeen a limited number of companies in Massachusetts in which there was a capital stock of over $1,000,000. NO DOLLAR OF STCJC'K WITHOUT a DOLLAR OF CASH OR ITS EQUIVALENT BEHIND IT. Now when that charter is issued, the thing with us is not ended at all; something still remains to he done, and it is this: The certificate must be filed and sworn to by a majority of flic directors, certifying that the whole amount of the capital stock- no matter what — has actually been paid in. If it is in cash, of course that is the end of it: liut if they do not wish to pay it in in cash, they must pay it in property STATE CORPOEATION LAWS, ETC.: MYERS. 1129 which is satisfactory in value to the commissioner of corporations; and not until they have satisfied him that they have paid in e\ery dollar in cash, or in value in actual property, do they get a further certificate showing the paynii-nt in of the cap- ital, which is as follows: "I hereby certify that I am satisfieil that the valuation given within is a fair and reasonalile valuation for the pi-operty described, and I hereby approve the within certificate." When this is filed they'are entitled to do business as a corporation; when every dollar is inside the coffers of the treasury of the corporation. The>- must file that within 30 days of beginning to do business, or there is a personal lialjility of every stockholder. So you see that every one of these corpciratious — and that has lieen the case for many years — must start with actual value liehind every dollar of stock that goes out. There is no escape from it unless they wish to incur personal lialjility as partners in a firm. Our courts have so held. XO ['REFERRED STOCK. There is a provision for the issuing of s]iecial stock — we have no such thing as pre- ferred stock and common stock. Our court has once intimated that it might be done, but the commissioner of corporations tells me he has never permitted it to be done, because it was a mere suggestion that it might l)e done. We had a provision for the issue of special stock, and that provision is this: That as long as any special stock is outstanding, the common stockholders are liable for every debt of the corporation; so that practically it is almost never done. It is a provision .simply for con\'enience, or a temporary measure. .\GIT,VTION AGAINST OVEHCAPITALIZATION OF QUASI-PUBLIC COMPANIES. Now in that condition we found the law of Jlassachusetts in 1894, when the busi- ness men's organization said, "We are going to have our great transportation, light, communication-liy-electricity corporations heavily overcapitalized unless we do some- thing. That means trying to earn dividends on money never paid in; and since these are natural monopoly corporations, the rates will not be kept down by compe- tition. ' ' Then they said, ' ' Something must be done if we are going to put quasi- public corporations on just as safe and sound a basis as private corporations." Gentlemen, the phrase won: " Where competition ceases, supervision should begin." That agitation began in 1893, when the boards of trade, merchants' associations, and other business men's organizations established a committee to sit during the recess of 1893-94, which made a certain report to the legislature in 1894. Upon that a special committee of the legislature was appointed on that question of capitalization of quasi-public corporations. The business men came before us and said, "Some- thing must be done now to guard against this threatened evil." There was an agita- tion and there were a great many hearings of that kind, which I will not bother you gentlemen with, but as the outcome of it certain laws were passed. These are called our ' ' antistock- watering laws. ' ' THE AXTIST0CK-W.4.TERIXG LAWS OF 1894 — STOCK AND SCRIP DIVIDENDS. In cleaning the thing up we tried to begin at the bottom. We were dealing with the monopoly public-service corporations; we found the others substantially safe as they were. We first said this: "No telegraph, telephone, gaslight, electric light, steam-railroad, street-railway, aqueduct or water company, established under the laws of this Commonwealth, shall declare any stock or scrip dividend, or divide the proceeds of the sale of stock or scrip among its stockholders; nor shall any such company create any additional new stock or issue certificates thereof to any person unless the par value of the shares so issued is first paid in cash to its treasurer." Then we provided: "All certificates of stock or scrip issued in violation of the preceding section shall be void; and the directors of the corporation issuing the same shall be liable to a penalty of SI, 000 each, to be recovered by indictment in any county where any of them reside; but if any such director proves that before such issue he filed his dis- sent therefrom in writing with the clerk, or was absent, and at no time voted there- for, he shall not be so liable. ' ' We passed three acts, exactly alike in their methods, but dealing with different classes of corporations. AVe passed one act that dealt a\ ith gas and electric light companies (Acts of 1894, chap. 4.50) ; another that dealt with those companies engaged in transmitting intelligence by electricity (Acts of 1894, chap. 4.52) ; and in that l)ill 1130 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. we also dealt with aqueiluet and water companies. We had another bill that covered railroads and street railfl-ays (Acts of 1894, chap. 472) . Xow, it is a study of this' last that will show just how we undertook to guard against any overcapitalization there; and I asked Mr. Sandford, chairman of the railroad com- mission, if he had any sufryestions te of the board shall, within 3 days after said vote, befiled in the office of the secretary of the commonwealth before the certificates of stock or the bonds are issued ; and no company included in the terms of this act shall apply the pro- ceeds of such stock or bonds to any purpose not specified in such certificate. ' ' There is also a provision for the penalty, that "any member of the board of directors, or any treasurer or other officer or agent of any gas or electric light company, who knowingly \'otes to authorize the issue of, or knowingly signs, certifies, or issues stock or bonds (Mjutrary to the provisions of this act, or who knowingly votes to authorize the application of, or knowingly applies the proceeds of such stock or bonds contrary to the pro\'isions of this act, or wh(j knowingly votes to assume or incur, or know- ingly assumes or incurs, in the name or behalf of such corporation, any debt or liability, except for the legitimate purposes of the corporation, shall be punishable by fine not exceeding SI, 000 or by imprisonment not exceeding one year, or by both such fine and imprisonment." This made it absolutely incumbent on the officers of that class of corporations to get the consent of the commissioners. The commissioner certifies the purpose to which the i)ro(.'eeds are to be applied, and any officer of the company who goes out of that track is liable to the penalty. There is a further section, which provides that "Any court having jurisdiction in equity may, on the application of the board uf gas and electric light commissioners, or of the attorney-general, or of any stockholder, or of any interested party, enforce all lawful orders of said board made in pursuance of the provisitjns of this act, and all provisions of law herein con- tained respecting such companies." Now, we feel that this was very necessary to be done. We know, if the judgraenif. of the commissioners is c(3rrect, that it has pre- vented any overcapitalization in Massachusetts. The next act, chapter 452, dealt with the telephone and telegraph companies. The provisions were the same, except as to the board. As the supervising state authority, we used the conrmissioner of corporations, because it was to him that they must eventually turn. It came under his duties, but the provisions were exactly the same. Then we came to the railroad C(jmpanics, and chapter 472 deals with the question of the issue of stock and bonds Ijy street-railway companies; but the provisions are exactly the same as chapters 450 and 452. There is the same careful supervision of the issue, huwever the company may be organized, special charter or otherwise, capital of no matter how much; it shall not issue until the railroad commissioners lia\'e heard it and investigateil it, and vi.ited it is reasonable and requisite for the purpose for which it is authorized. There, again, is the same provision for the issue, the same stejis of filing certificate, and i)rohibition of the use of the money for any purpose not designated. There is the same penalty on the board of directors if they fail in any particular or misappropriate the money to any other purpose, or issue any 8tf)(4<: (jr bonds for- any purpDse not distinctly provided, or if they knowingly incur risks and obligations in violation of the spirit of this section; the same provision regarding the court of c(|uity. STATE CORPORATION LAWS, ETC.: MYERS. 1131 FOREIGN CORPOEATIDNH. Now you will i^ee that provided f(.ir a pretty careful supeivisiou of the issut' of all tlie stoelv and l)onds of these companies, but thiMv were other ste|)s necessary to make it still safer. This is a somewhat incidental matter, )}ut still I think it should be dealt with rio;ht here. AVe feared there might be some abuses through foreign cor- porations. Suppose some fcjreign corjioration got possession of one of our local corporations and then issued its own obligations on the faith of these underlying obligations; call them debentures or what you \vill. Q. (By Jlr. Clarke.) When you speak of foreign corporations you mean any organized outside of the State'.' — A. Yt's; so that we do not have our hand on their organization. You see we did not have to deal with the whole question of moiK^p- oly, but with only one or two phases of it. '\\'e were guarding against our people having to pay dividends on overcapitalization. The best we could do is found in chapter 476 of the acts of 1894, and it is in this form. We made it narrow in its application, but so far as v\e went tried to co\er the ground. It was deemed a little drastic at the time. "If any foreign corporation which owns or controls a majority of the ca))ital stock of a domestic street-railway, gaslight, or electric-light cor])oi-ation" — we only needed to deal with these three — "shall hereafter issue stock, l)onds, or other eviilence of indebtedness, based upon or secureil by the jiroperty, franchise, or stock of such domestic corporation, unless such issue is authorized l)y the law of this Common- wealth, the supreme judicial court, sitting in ecjuity, may, in its discretion, dissolve such domestic corjioration." That was all there was to it. It was a little more drastic than that when it came to us, and I think there was a provision that they should be dissolved. We felt that it might happen that the majority of the stock might get into the hands of speculators, who might want to break it up, and inno- cent stockholders might suffer; so we said the court ma\-, "in its discretion, dissolve such domestic corporation." Section 2 said: "It shall be the duty of the attorney-general, whenever lie is satis- fied that such issue has lieen made, to institute proceedings in said court for the dis- solution of such domestic corjioration and the prciper distribution of its assets." Now, I Iielieve that has abscslutely protected us against any attempt to do that thing in this State. THE LAW EVADED BY JIEANS OF TRt'STS. I ought til say right here that it is true, lately, seeing the\' could not put the majority of the shares of a gaslight or street-railway company or of an electric-light company into a foreign corporation, issuing new stock on the shares, they have resorted to the device of trustees, who take the stock of several street-railway com- panies or se\-eral gas companies, put them in a jiot, and issue certificates, giving the organization a certain name. It is of course an evasion, right or wrong I do not undertake to say, but it is an evasion of the law which I was just speaking of. It does accomplish through the medium of trustees what could not be accomplished directlv Ijy the foreign corporation, and it does make it possible to issue S,i, 00(1, 000 of certificates on S2,000,000 of securities. That is a method of evasion that will trouble vou gentlemen a good deal to deal with when you c>)me to frame legislati(jn. I think it would be possible to frame legislation. I am not sure that it would not be a pretty delicate matter to do it constitutionally, but I think legislation c'ould be framed to meet the difficulty. PURCHASES, S.iLES, AXD LEASES. Then we found that there might lie overcapitalization, or, what is e(iui\alent to overcapitalization, an overcharge'on the public liy means of consolidations or leases or purchases and sales, particularly between railroads and street railroads. Accord- ingly, we found ourselves obliged to pass anotlief act, which piovided that no pur- chase, sale, or lease of the franchises or proi)ert.\' of that class of corpisratioiis, whether such lease, sale, or purchase was authorized b>- general laws or sjiecial act, sliould he valid or binding until the consolidation should have been approved by the board of railroad commissioners after a public hearing, of which due notice should have bei'n given. That was to guard against any overcharge; for instance, in the t-asc of a street- railway company making a lease to another stieet railwa>', the latter t'OULpany pay- ing, to' illustrate, 10 per cent instead of 6 per cent as a rental, and then, of course, having to collect it. It becomes a fixeil charge and has to be collected out (if those who are carried, and results in loading 4 per cent upon the ]>ublic. It is iK.rt an overcapitalization exactlv, but it is the same thing ; it is an overcharge for the benefit 1132 HEARINGS BEFORE THE INDUSTRIATi COMMISSION. tif those h(jl(ling the securities. Such a purchase and sale is not i^ermitted to go on without the approval of the railroad connnissioners. There was a hearing yesterday 1 let'ore the railroad commission on the consolidation of .I of our street-railway companies. Ever\thing has to be done in a mo.st pains- taking manner. An expert values the property, and each of these 5 companies is permitted, their assets having been shown up and their earnings having been shown up, to go into that ciuis(jlidation and recei\-e shares in the new company. But the railroad commissioners say, "so many and no more." As a matter of fact, in this case it is share for shareor substantially that; but no shares are allowed to issue with- out the value behind them. There is one further act that may be spoken of. Thei'e was a special act permitting the issue of stock by a street-railway company for the pui-pose of changing its motive power; but that, again, had to he supervised by the railroad commissioners. Xow, I think, gentlemen, that we have coN'cred everything in the way of our anti- stdck- watering legislation, strictly so called, which guards against the issue of a share of stock without a full - with any attenqit to capitalize any actual accumulated profits. Now, of course, if accumulated pnitits are dealtwith in that way, the community must get the benefit by selling the stock at auction. She would be pretty sure to say that opportunities for business and expectation of profits could imt he capitalized. She would lie pretty smx' to say, if the question came II]) in that way, "The must we will allow to be done is to capitalize these accumu- lated profits. We will not allow the capitalization of opportunities and expectations." That is what she does say. The railroad connnissioners when they are considering STATE CORPOKATIOX LAWS, ETC.: MYERS. 1133 valuations for the eonsulidation of these street railways do not capitalize opixirtunitio. They do not capitalize expectations. They proceed on the theory that the cai)ital stock should be limited to the value paid in, actually existing. THE POSSIBILITY OF 0VERCAPIT.\ LIZATIOX .\ CHIEF INCENTIVE TO COMBINATION. Now, a question conies up which goes a little beyond guarding against i)vcrca])ital- ization, which was the one evil that ^Massachusetts was deahng with in these anti- stock-watering laws, and that is the alleged evil of exci'ssive i-mnbination, amounting to monopoly. What light do our laws throw upon that point? Supjiose that evi'ry State W"uld dn as JIassachusetts has dune, and suiipo^e that every State could lie provided with just as careful and intelligent public uthcers tu supervise tlie issue. I want to make this suggcstinn. I apjireciate fully that there is a fundamental advantage in the reduction of cost, and that reduction of cost is secured often by con- solidation and combination; but the desire for cheaper productinii, e'coiKjmy of pro- duction, is not the motive powder in what is now going on. Tlie iiKitive power, the mainspring, is not the desire for economic production, but it is the desire to get pos- session of the overcapitalized securities; and if the oiiportunity to get possession of the overcapitalized securities was taken awa)', which is the same tluug as sajing if you supervise the issue of the securities so that there could not be this overcajjital- ization, you at once take away the real mainsj)ring of much (if what is now going on, wisely or unwisely. For if you say to the gentlemen who are making any great trust you please, ' ' You can only issue stock to the extent of the actual valui's that are paid in," no matter whether in New Jersey or Massai'husetts, you at once take away the principal inducement to them to do the business. They say, as a reason for induc- ing capitalists to aid the enterprise and financiers to finance it, it is going to effect a reduction in cost. That is true, and so far as that is the motive I myself doubt whether it would ever be desirable to interfere with it. But so far as the real motive is overcapitalization, simply using the other as an argument to get people into it, I have a feeling that it is somewhat doubtful. I have a feeling that if a remedy for this great amount of combination that is going on is t(j be sought, it may be sought, among other things, in doing away with inducements; in other words, by making it impossible for them to get that reward. Then only such oond^ination will grow as is inspired by the desire for cheapness of production, and not that which is inspired largely by the desire to make two shares of stock where you put in one — one of pre- ferred" and one of common — unload both on the community, and let the community suffer the consequences; combining more and more, and thus producing some of the alleged evils of this excessive trust development that is going on now. Of course, the trust, so far as it is an organization made up ( if certificates issued by trustees, has to be dealt with on a different basis; but so far as the great New Jersey corporations are concerned, it seems to me if New Jersey said to the corporations formed there, "You mav issue capital stock, preferred or common, to the amount of the actual values as fomid by our trusted officers and no more," that very many of the great organizations that are now made would never be made. They \vould not do it for their own health, and thev are not public spirited enough to do it for the sake of economic production. They are d. ling it to get two shares where they put in SI; that is the motive. I believe that the ten.lency can be checked if it is possible to get the States to sa\' that so far as corporations go "the State will not give this 1 lonus to promoters by pemiitting them to issue shares far beyond values. I lielie\-e that if that power is taken awav from them ahogether, including the opportunity to accom- plish it bv trust, if that "can be done, sulistantially all, or a very great jiart at least, of the objectionable development woulil be ternunated. NO LONGEK ,VNY LIMITATION OF CAPITAL STOCK, PROVIDED IT REPRESENTS .UTl.VL ASSETS. Q. (By ilr. S.myth.) You say the limitation of capital to one million has been removed", ancl by general statuti? the amount can be made larger'?^.\. Yes. Q. Is there any limit to the amount in Massachusetts? — A. None at all. q. It must be a show down of hands that the assets are there?— .\. "i es. Q. Who appoints the commissioners you speak of?— .V. The governor. RESULTS OF DIFFERENCES BETWEEN THE L,\WS OF DIFFERENT STATES— M.VSSACHrsKlTS LORES SOME T.V-XES. Q. Now, have you found that the restricted requirements with reference to^charteis have tended to drive the formation of corporations away from :\Iassachusetts'?— A. Of course so far as our own quasi-public corporations are concerned, they prat'tically must 1134 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. be incovjMivatcil here under the laws as they stand. It is perfectly true that a ^reat many of i>ur business men, when they wish to form corporations for certain jmrposes, legitimate enough, liut do not wish to i>ay in their capital stock, go elsewhere. They go to Maine, New .Jersey, New Hampshire. Jt does drive tliem away when they are going into any enterprise where they do not wisli to [jay in tlie full value of the cap- ital stock, and that gives a loss of income to INlassachusetts; but if all the States applied the same law it would work equally fair to all. Q. These other corporations, sucli as textile cor] jorations, can have a factory in this State with a charter from another State? — A. Oh, >'es; we allow corporations from other States to d(j business here by filing certain j^ajiers agreeing to admit service of jirocess here and to appoint an agent. (.1 So these restrictive acts have temled to lesse]i the income of the State of ilassa- chusetts? — A. I supjiose that it has a very little. I do not know how much it has tended to lessen the income. We get a certain small income from foreign corpora- tions doing business here; the |>roj)erty is here to be taxed, and, of course, all the property which they own in this State is taxed, no matter if they are outside. Probably it does lose us something; I have not considered that enough to say. Q. To make the ^Massachusetts laws fully successful would re(|uire the enactment of similar laws in all the States? — A . To make it entirely eiiuitable, it would be fair that every State should do the .same thing. NEW JERSEY GETS A LARCJB l.Xt'OSIE BY .M.VKINIi C'OBI'OE.VTIO.XS. r the incor])oration of any company with more than $1,000,000 of stock. I think it is a corijoratiou established under the laws of New .lersey; but possibly not; pf)ssibly a tiust arrangement, just as wasthe case with certain railways. TRi:.STS. tj. Your la«s would not permit a trust, of course? — A. We can not prevent put- ting the stock of com|]anies in the hands of individual trustees and issuing certificates of stock ujion these shanss. You could not ]>ut these shares of a domestic corpora- tion in the hands of a foreign corporati(]n; that would be obuoxions to this act; but when that act was |iassed this development of the trust, the jmtting of the stock in the hands of tiuslecs, had not apiieart^d upon the horizon, and we did not guard against having the shares of (i companies put in the hands of :> geullemen as trustees. (I. A\'as not this after (he decision of the court of ajijieals of New York in the case of the .\nierican Sugar Kelining Company, whereby they set aside the whole trust STATE CORPORATION LAWS, ETC.: MYERS. 1135 matter? — A. I am not sure whether that iw so or not; but at any rate we did not undertake to go beyond the case of fnrei^^n t'orjiorations, and not mere trustees, t;et- fing control of the stock of our corporations. \\'e did not go Ijeyond the require- ments of tlie case. INVESTJIENT AXD SPECl'LATIOX. Q. "Wherever this American \^'riting I\hii:hine Companj' is incorporateil, in New Jersey or elsewhere, it is outside of the State of Massachusetts; but they come and advertise inside yi.nir State. You are permitting in ^Massachusetts stock gambling, irrespective of your laws. Can ym sluit them out? — A. We have never tried it. Whether we can or not, I prefer to hope the other States A\ill take w ise action rather than call on us to enact exclusive kinds of legislation. That would be something I should wish to consider very carefully before, as a law yer, I expressed anj- opinion as to how far you could interfere with doing business in that way. If .3 gentlemen see fit to buy up the stock (if several corporations and <.iwn that stock, I do not see a ^'ery easy way of dealing with it. If, having bought it up with money of 20 gentlemen, these 3 gentlemen see fit to issue shares of proportionate interest, as we do here in companies that we form, for instance, it is pretty hard t< i frame any way of dealing with them that would be legal ov meet the apprll^•al of our Ijusiness men. I think it would have to liethe subject of a regular public crusade, s" to speak; a public upris- ing, as the antistock-watering laws were. Q. Your statement as to the laws of [Massachusetts is instructive and interesting, but if the corporations of every other State can come in and sell, it is no protection to your people? — A. "\^'e recognize that our people, as investors, are exposed, but it gives me a chance to saj' to you, gentlemen, that our laws were framed not so much with a view of protecting our im'estors, though that was an incidental question, as for the purpose of guarding our great communities against excessive charges for transportation, or for such necessaries as light or electric communication. It is to guard them against that subtle o\'ercliargc Avhich comes from overcapitalization. The men who were in this were largely people who patronized the great railroads and did not want to pay excessive rates of freight, and who patronized gas companies; and the investor side was not so much in question. \W realized it, but we never have sought to protect our people against the consequences of their own folly, if they see fit to go into speculation. OVEECAPIT.VLIZATIOX AS LE.VDINI) TO OVERCHARGE. Q. You seem tij argue, or it is implied at least, that overcapitalization becomes a burden on the people. The street railway, for instance — that where they attempted to make a diviileml of 12 per cent where legitimately the>- ought to have 8, it is 4 per cent taken out of the people themsehes'?— A. that was the view which pre- vailed. That was the exjiressiijn in the movement. In stating the matter to the commission, I ^\as really trying to be the witness, and state the facts with perfect candor; not desiring to color it at all, until I made two or three suggestions in the last moment or two. Q. Take a street railway in the I'ity of New York capitalized at two million; that street railway has extended its e(|uipiuent and track to almost twice what it was when it was capitalized at two million, but still remains at the same old fignire. The rail- way, of course, does now three times the amount of business; its dividends — no one knows what they are, and it did not neeil to overcapitalize to mulct the public, liecause it held its original capital and is now probably giving three times the dividends it gave at fiirst. Look at the Chemical Bank of New York to-day; see the enormous rate of their shares ; and vet vou can not change the capitalization by law or anything else. So a companv ma\- hold its cajiitalization, ^vithout extra capitalization, and still draw fr(.im tlie pec'ijile this patronage and ha\-c the heavy dividends. Does that stand as a business proposition on both ends'?— A. ( )ur corp( .rations are all required to make sworn returns to the commissioner of curporations. We therefore know just what dividends thev pav under all ciivuinstances, and the presumption was that the people, in the case of ipiasi i>ublic corporati(.)ns, would by public opinion compel, in a way, by their discontent and clamor, a I'cduction of rates if the rate of dividend became very, very high. When the rate of divideml on any of our public-service corporations— gas companies, for instance — gets iqi to\vard high-water mark, imme- diately the consumers besin to comijlain, and our laws pri)\-ide that they may go to the Massachusetts electric light comiuissioners and file a petition for a reduction of rates; and the commissioners, having the supervising power, would go pretty far in that; and the gas company, if it has maile large pix.lits, or the electric light company, may be requested to name'lower figures. (Jur railroad commissioners, while they have 83a 73 1136 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. not absolute control, have advii?nry iiower, and a.« a matter of fact I do not know that the advi>'ory power has ever been disregarded. They may advise regarding rates. They even di i advise regarding workingmen's trains ; and their advice is usually equiv- alent, to a (.•! imniand, for if their advice \Aas disregarded the probability is the next year would see a bill in the legislature calling attention to that, and perhaps aimed at the corporation in such a way that it would seek to accomplish as much or more for the community in s(jnie other way. I make tliis reply only liy way of explanation and without any intention of arguing the other side, but to state it as the gentlemen stated it to us. • i. Have yiiu any means of knowing the actual earnings of your street railways in ^hissachusetts? — A. "We ha^'e the railroad commissioners' report, which shows the earnings of every street railway' in the State and a careful summary of everything. MUNICIPAL (IWXEESHIP OF NATrKAL MONOPOLIES — HONEST, INTELLlCiENT SUPERVISION SO.METI.MES BETTER. Q. Have j'ou any municipal ownership of j'our natural monopolies in ilassachu- setts? — A. Especially of water companies. I think ilassachusetts probably leads all the States in her municipal owni-rshiji of water plants, and lately we have established not municipal but metroiiolitan ownership of a great plant that is to cost about ?.':!(!, 000,000, to supply water from "Wijrcester County (and it is contemplated to run over into Hampshire County) for this great metropolitan district. My own city of Cambridge owns her water plant, has a water board, and collects special water rates. The most of our large cities have municipal ownership i.if water. There have been a fe\\' attempts at municipal (J^^"nership of gas and electric light. AVe have no munic- ipal ownership of transportation or telegra])h or telephone that I know of; I think it is limited to water and to some cases of light. AVe have a general law that pro- vides that municipalities may go into the electric-lighting business. (i Do you think in municipal ownership there is an opportunity to counteract overcharging Ijy I'ri^'ate or quasi-public companies? — A. A great deal, a very great deal, has l>een mged upon us. Perhaps I am not one of those \\ho get very enthusi- astic. I have been inclined to think tliat, as a rule, with judicious sujiervision of rates, with supervision as to all the issues of the capital stock, so that there is not a fictitious dollar to earn interest on, and with careful supervision of the returns, and power to supervise charges and rates, it would lie well to go slow in respect to actual o\\nersliip. If you are going to hand these over to unrestricted monopoly or owner- ship, it is another thing; but in the case of the jmblic-servic'e natural-monopoly cor- poraticjn, I belie\e that with honest and intelligent supervision by the State, monopoly is not a menace. But that supervision must be intelligent and" must be honest; for where this monopoly begins, and it begins at once in the natural-monopoly corpora- tions, here competition ends and supervision should Ijegin. The two should together cover the field. MUNICIPAL OWNERSHIP Ci;(j\\ , provided there is more money in that, is it not a probability that there should Ije municiiial regulation and possilily municipal ownership? — A. It has always seemed to me the moment 5'ou get good, honest, economic service, then municipal ownership is a very ilesiraljle thing in these natural monopolies; but since you are not able to get lionest and intelligent pul)lic service, Ijut are obliged to have' a good deal of log rolling and political pulling in order to handle things, it has seemed to me there is strung argument for supervision instead of absolute ownership. I should come to absolute ownership, perhaps, just as soon as I got honest and intelligent public service in the administration of these monopolies; but if you are goingto have a great monoi>oly of that kind, with its vast amount of money "and large number of employees, used for political ends, it would be a menace to the'peopleand not a help. <|. Y(.u say it would lie a danger, then, to have the pubhc service a subject of political control? — A. No; to my mind there is that danger always attending public ownership unless you get the thing well cleared up beforehand. I do not mean to say there aiv not many of our conniiunities where it could be done satisfactorily; it is certainly done with absolute safi'ty in my own city; it is done safely with the great metropolitan system of Boston. I do not think there is a comndssioii more free from p(.ilitical influence than the water commission. I do not think the water board of my own I'ity is in the least to be charged with anything political. I think public ownershiji should coine slowly and in a way not to demoralize. STATE CORPORATION LAWS, ETC.: JLYERS. 1137 Q. (By ^Iv. Sjcyth.) Do you kn(l\^• of any instances outside of those you have men- tioned where they have been safely and eeouomically administered? — A. Thecitj' of Boston has had its own water supply for a loni; time and I have never heard of any scandals. And there was the Jlystie "Water Company, which supplie' Ijc some danger, but that is one of the thing.s that each man approaches with a little of his own natural bias. I think when one is inclined to favor public ownership of these instrumentalities it is easier for him to believe there will not be trouljle; if he is pretty skeptical about it he is apprehensive of trouble. PROTECTION OF INVESTORS; IF MEN WILL BUY, THEY WILL. Q. (By ilr. Farquhar.) A few minutes ago we called your attention to the fact that with your restrictive laws you c( add not safeguard your citizens from being taken in by these overcapitalized corporations of other States; what protection could you offer, do you think? — A. I have found it pretty hard to iirevent pieople from Ijeing foolish enough to buy what they want to buy. If e\'ery State in the Union will see to it that these mischievous and misleading influences are not created, well and good; and if they create them, I do not see any way of preventing a careless man from buying shares in si mie fake copper mine organized in some far-away State, or in some fake manufacturing scheme that will go all to jiieces for lack of sound management, or for lack of market, or for lack of capital enough paid in. As a lawyer, I do not see how you are going to prevent a man's spending a hundreil dollars of his money for a pretty piece of "engraving, unless it is an absolute, palpable fraud, if he is so fooUsh as to do it. Q. It may be your view that the only way to save the public from great harm in that is to have several of these trusts"go to pieces and discredit the whole s\'stem before the ijeople. Is that your idea?— A. It may be that will be the only way to teach the lesson. Q. (By :Mr. Smyth.) You think experience will be the best teacher? — A. So far as the investing public is concerned I confess I do not see anything to prevent them fi-om buving. I see wavs of guarding the public generally against the indirect con- sequences of overcapitalization, as I have said, so far as overcharges are concerned, and, incidentallv, so far as .undesirable combination is concerned; but when it comes to guarding them against buying and selling, I do not see any way of doing it. THE tendency TO COMBINATION IS NATVR.VL, BUT IS UNDULY STIMULATED WHEN A PROFIT C-VN BE MADE BY OVERCAPITALIZATION. Q. Do you think for the last I.t or 20 years it has been the trend of matters, with the excejjtion, of course, nf is;i2 to ISii-T, to run into this combination?— A. Yery much. Q. ilen do it as a natural tendencv in business rather than something artificial?- A. I think it is lioth. I think it is a natural tendency of business, and I think that natural tendencv is undulv stimulated by the opiiortunities of the corporate or trust organization. As far as it' would naturallv tro, in the interests of business and cheap production, one would hardh' care to oliject to it. It is only when its speed is greatly accelerated by mep anxious to secuie overcapitahzation and profits that it is a bad thing. INVE.STORS CAN NOT WELL BE PROTECTED IF STOCK IS PERjriTTED TO BE WATERED. Q. (By "Mr. Clarke.) Since the public have so largely liecome investors in the stock or securities of private business corporations, do y(.iu not think the time has come when some wav ought to lie contrived to protect investors as well as purchasers of the thin-'s produced by these corporations?— A. I always welcome every move- 1138 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ment tdward protecting the community against oppression and fraud in the purchase of vahieless tilings, yet I do not easily see the way to do it. (.1 You think it is a consummation devoutly to be wisheil? — A. I do; but I think if the stuff is once jiermitted to lie createi.l it is going to be more difficult to find a way to forbid anybody «ho wishes to spend his money in that way to buy it. Pre- ■sent it from being issued in the start and turn on the light, but lea\e the free Ameri- can citizen to buy if he will. If he wants to be gulled, I do not think it is going to be easy for the legislature to i)ie\'ent him. DIFFICULTIES OF ST.\TE REGULATION INTERSTATE CO.MiVIEECE. Q. I suppose 3'ou recognize the great difficulty of bringing all of tlie 45 States of this Union up to the higli standard of preventing overcapitalization? — A. I do not see how it is going to tie p)Ossible to do it short of a miracle in the way of public opinion. (.1. I presume you rec(jgnize that it will be extremely difficult for the authorities of any one State to efficiently supervise the issues of stock in corporations whose busi- ness is in some remote part of tlie Union. For example, if Florida in the southeastern part of the Union should undertake to giant a charter and supervise the issues of stock to a company like the Federal Steel Company, whose property' is in Illinois, Ohio, and Minnesota, do you think the State officers in Florida, ho\\ever efficient, able, and honest, would be able to grapple with the iiroblem? — A. I very much fear they would not always. Of course smne of the far ^Wstern States would be in even a worse predicament, because they are not as well equipped perhaps with men com- pjetent t(j deal with it in some of these States as Florida. Q. Sini'e tlie business of these great condiinations of business is so largely concerned with interstate commerce (I have in mind companies which own railroads as a mere incident to their manufacturing, but these railroads extend over more than one State) has your attention been given to the idea that the very extent of the business of these private corporations might make them amenable t(i Federal legislation under the interstate-commerce law or something of that sort? — A. I have never undertaken to get at the bottom of the jiresent constitutional po^^er. I do not belic^-e the matter will ever be dealt with satisfactoi'ily b)' 4.5 or more different States. If it is to be dealt with in any wholesome or healthy way, I do not believe it can lie done by get- ting the different States to do what ^lassachusetts has done, because when several have done it the temptation will be so great to some small State to stand out and get all the reward. Q. (By Mr. Faequhak.) Just as New Jersey did? — A. Suppose all except Delaware and Idaho had done it and the efforts of all the combinations were brought to bear on Delaware and Idalro; we should never get sui'h legislation through, in my opinion. (Testimony closed.) LEGISLATIOX— PUBLIC CONTROL. Washixuton, D. C, Dercmher 1:2, 1S99. TESTIMONY OF MR. JOHN R. DOS PASSOS, Attoniei/ at Ian; X,,. 20 Bnind xtiret, Xn- Yuri: The commisi^idii met at 10.35 a. m., Yice-Chairman Phillips presiding. John R. Dos Passos, esq., was introduced as a w-itness, and, having duly affirmed, testifierl as follows: I\lr. Phillips. Governor Harris, of Ohio, has kindly consented to be in the chair to-day. I shall be pleased if Goverm.ir Harris will take the chair. Q. (By IMr. Jexks.) Will you kindly give ynur full name and address'? — A. John R. Dos Passiis, New York, No. 20 Broad street. Q. What is your profession? — A, I am a lawyer. Q. I understand that you have already prepared some general statement that you would like to make to the commission with i-eference to legislation? — A. An oral statement; yes. Q. A\'e shall be glad if you will gi\'e that in your own way. — A. Thank you. LAWS SHOULD BE PEEP.VEED BY COJIJIISSIONEES — TOO MANY LAWS. Mr. Chairman ,vnd Gentlemen of the Cojijiismox : I appear before you this morning to make some observations upon the legal and historical aspect of the ques- tion of the aggregation of capital, whether that capital be represented in money, in goods, or in labor. Because of its immaturity, I am here to endeavor to rescue this subject from the domain of law, where it does not belong, and place it in the field of speculation and thought and political economy, where it does belong. I appear here as the representative of no corporation, of no aggregated interest, or of no individual, and the opinions and \ie\\ s which I shall have the honor to express are entirely my own; I alone am responsible for them. They are made without con- sultation with anyliody, and whatever criticism may arise from the oljservations which I shall address to you must therefore fall upon me alone. I congratulate the countrj' that this great and interesting, not to say absorbing, question has fallen at last into a legitimate place of discussion, and that this commis- sion, composed of individuals chosen from all the walks of life, is to sit here and to hear everything that anybody wishes to say, and to report their conclusions upon the facts in shape for definite action. I regard it as of the greatest importance to this country that questions of this kind should primarily pass through the ordeal of a commission. If they are left in the hands exclusively of politicians very much is said of an extravagant, emotional and sensational character, and the results which accrue from such a method of inquiry and examination are, in a general way, unsat- isfactory to the reasonaljle, thinking peoiile and the important business interests of the country. Whatever is filtered through this commission, I believe, after its exhaustive and laborious study (it the (juestions involved, will be of service to the whole country. And permit me to remark at the outset that, in my o)iinion, it would have been very much better for the interests of this country if, instead of pass- ing the interstate-commerce law, the Congress of the United States had, in the first instance, appointed a commission to inquire into the needs and necessities of the . transportation and railroad interests before they rushed to pass a bill, which is the most remarkable (liece of legislation that has evuntry wants it, and therefore we shall vote for it." Now, I assert that that law should ne\'er ha^■e been jiassed; the matter should have been submitted to a commission such as is liere, and then if the commission felt that the necessities of this C(jmitry requireil a law, they ^N'ould have prepared one which would have been consistent with the public interests and which would have done justice to all persons interested in tlie great problem of railroad transportation. Another oljservation in respect to this ri.immission, to which, it seems to me, I should be ungrateful and remiss if I did not allude. It is not often that I am in the position to commend legislation, but I can commend this statute not only in its sub- stance but in the language used therein. Certainly the language of the act mider which you are appointed and are working is most admirable. It is brief and charges you with the two great propositions that arise out of this great suljject, namely: ' ' Sec. 2. It shall be the duty of this connnission to investigate questions pertaining to immigration, to labor, to agriculture, to manufacturing, and to Ijusiness, and to report to Congress and to suggest such legislation as it may deem )jest upon these subjects. "It shall furnish such information and suggest such laws as may be made a basis for uniform legislation by the various States of the Union in order to harmonize con- flicting interests, and to "be equitable to the laborer, the employer, the producer, and the consumer." Yet is not this act an e.-^traordinary commentary upon the way laws are made in this great country, which we in our moments of admiration and enthusiasm are prone to-day to call the leading nation of the world in its civilization, in its pi-ogress, and in all the elements which make up a great nation? Is it not a remarkable comment upon that civilization that 9 or 10 yeai-s after a law has been ]Missed by the Congress of the United States- a commission is createil for the purpose of inquiring whether any and what laws are necessary upon the suljject? Making the laws first and inquir- ing into the subject and necessity afterwards. Plutarch states that a Locrian stood up in the temple with a rope around his neck, prepared to be strangled if his pro- posed law was not adopted. I say to you to-day, not in any spirit of sensationalism, but from a sincere belief and conviction, that if the laws of this cijuntry could be piled together in some place capable of holding them — the laws wdiich have been enacted since IStS, when, under the guise of law reform, ill-considered codification was introduced into this country and a weed planted into our judicial and legal system which has overgrown and hid- den from view the real and simple purposes nf justice and law — I say that the man who could put a match to this accumulation of verbiage, duplication, and multiplic- ity of laws ^-I'ould be entitled to a monument at tlie hands of the American people for ridding them of statutes and useless books (not excluding tw" that I have written myself) and bringing them back to a conditi(.in where they could look upon the question of making laws in the serious as])ect in which it sliould be considered when legislation is contemplated. Let me make one more observation ln'fore going into the questions which I shall discuss. The great question, or the gieat ciy, rather, when public matters are dis- cusserld and it is assuuieii that he bargains with some gov- ernment for citizenship; that is the acceiited origin of society. He says to Uie government, "I will give you my allegiance, 1 will give you my fealty in retuiu for protection," which organized society, a necessary condition of human existence, accepts and affords him and his pnjperty protecti(.in. This is a crude description of the social compact. Now, what does this compact mean? It is called political or civil lilierty, which a celebrated authority defines to be "the natural liberty of mankind so far restraineil l)y human laws as is necessary for the good of society." Here is a distim-t and clear contract on the part of the go\-ernuient not to intrude upon or molest the natural liberty of man except in cases of plain and paramount necessity. No\v, mark you. E\'ery law that you make is, as it were, a nail in the c(.)flin of natural liberty. The oliject of government is not to make laws; the object of gov- ernment is to avoid making laws — the very reverse to-day of a legislator's habits. And no law should Ije or can be made wliich looks to the combined interests of the citizen and the government unless these primary principles are adhered to. First, you must 1 >e convinced that a real necessity requires a law t(.> be made. You must examine into the causes; you must know the mischief that you seek t(.i avoid and prevent before your hand takes the pen to write a law which takes away the natural liberty of mankind. If these principles were only thought of, and all questions which ^lere to l)e tlie subjects of law should be impartially and thoroughly considered, much unnecessai'y legislation would be avoided, and the condition of this country, so far as its legal affairs are concerned, would be very much better. Gentlemen, but one more word preliminarily to the main subject, which I shall now touch. MEANING OP "trust. " Before we discuss any subject it is necessary that we should understand each other as to terms — we should agree as to the issue involved — the primary matter which we are brought together to consider, and hence there is a necessity- to have a definition. A definition is an absolute prelude, a sine qua non, to a discussion under- standingly of any subject, whether it is legal, moral, religious, or otherwise, because without definitions men could never get together. They would not understand each other. Now, there is the word "trusts, " used in the discussion of the question of aggre- gated capital, and that W(.>rd is used so frequently in this country that it has become a svnonym for aggregated capital — has Ijecome a phrase representing all of the forms of combined capital. ' We must exclude fri.im this discussion words and phrases that are useless and mean- ingless or we can make no intelligent progress. A trust, according ti.i Judge :-^tory, an authority on equity jurisprudence, isau eiputable interest which a man has in personal or real property; and the history of trusts, if anybody is disposed to go back to study the origin of them, will ))e found to have arisen out of an evasion of some of the principles of the feudal law. But in the sense in which a trust has l.)een u-sed, so far as it has been technically and legally used for the last two hundred years, it means, as Judge Storv has said, "an ei]uitable right in personal or real jiroperty. That is, it; assumes that the trustee, who is the person controlling or the physical custodian of the corpus of the real or jjersonal property, is the legal owner and the real owner, while the person really interested is called the cestui que trust, or the Ijeneficiary. He, the latter, is the actual owner. The trustee is the one gi\'en the legal title, but he has no duty except to carrv out the terms (jf the trust, whereas the actual owner is the beneficiary; and although the title is not in him, he can call upon the trustee at any time, according to the terms of the trust instrument, to account for and fulfill the mission of the trust. . , , , . , In applying that word "trust " to the (jnestion of aggregated cajntal, about which I shall speak, it means this: Assume that six peisous desire to become the owners of six companies; thev get togetherand they make what is called a trust deed oratrust agreement. That trust agreement recites the terms under which the securities are held; that is, the stock, the shares of these six constituent companies, are taken and placed in the hands of a trustee, who has no actual or real ...\\nershipj except that he is the custodian— the shares belong, accordingl>-, to the trustee, to administer the trust. ' That was the object of a trust, so far as it applied to corjiorate transactions. Let me 1 Sec Mr. Allen, p. 1178. 1142 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. trj- to make this perfectly clear. All of tlie stock of the six corporations is deposited with, say, one person, and that person issues a receipt, called a trust certificate, by which the i)ersnn receiving the trust certificate is entitled to a defined interest, as therein stated, in the properties of those six companies, whose shares have been loil.L'ed with the trustee. A trust was not a novel proi" isition when it was introduced into dealings in cor- poi-ation sliares. It was the application of an old principle of law to new conditions. The object nf it was this: To kee]) people who had no business to know from know- ing the secrets of that trust. That is the oVjject of a trust (a perfectly innocent and a perfectly laudable object, in my estimation).' If they had formed one corporation and put the six constituent companies into one corporate body, it would have been heralded to the world, and the world \\ould have had the right to go into the county clerk's office, or the office of some officer entitled and authorized to receive those piapers, and to look at them. The object of the creation of the trust was to avoid that publicity, and therefore they had a trust agreement, which was deposited in the safe of the trustee, and nobody knew anything about it, except the beneficiaries — that is, the persons holding the trust certificates. Now, if the learneil chairman here had had an interest in one of these companies, he would have received a stock or a trust certificate, and that trust certificate would have entitleil him to receive, at the proper time, dividends, and ultiujately to receive his proportion of the principal. That wnuld have been the right of the holder. The beneficiary, or the cestui que trust, or holder of the trust certificate, had at all times the right to walk into a court of ecpiity and demand that all of the business conducted by the trust should be opened to his eyes and should be accessible to his inciuiries. The only two large industrial corporations which resorted to that system, ^\hich I will call ancient procedure and ancient law, were the Standard Oil and the Sugar Trust.- Through the enforced decrees of courts, which declared such trusts monopo- lies and against public policy, they gave up the form of trusts and they assume(t the form of corporations, and when the Sugar Trust divesteil itself of this exterior gar- ment, and wdien the Standard Oil Conijiany divested itself of it« exterior garment know n as a trust, it did not affect the vital body, it did not affect the corpus; it did not affect the real, substantial objects involved in the trust, but they simply put on other suits of clothes, and appeared in the community in the new garments. The word "trust " must therefore Vje discarded in the discussion of these questions, now and forever; l)e(ause the courts have set their seal of condemnation upon it, and they require that peojile who have in \iew the aggregation of capital shall now con- summate it through the instrumentality of a corporation; and in discussing these questions we nmst dismiss this word " trust" as meaningless and useless.' HOW CiEEAT A CAlTfAL IS PERXICIOIS? — IX WHAT HANDS? — PUT TO WHAT USE? We then arrive at the question as to what was the meaning and intent of Congress in the appointment of the commission, and what is the meaning and intent of the pulilic discussion, which has gone on from one end of this comitry to the other, upon the question ot aggregated capital. It means, so far as I comprehend the question — and I want to state it as broadly as p( )ssil )Ie, so that not even the most dilettante critic can find fault with the definition — that certain organizations, or certain people, or certain writers, contend that the agi;regation of capital is pernicious or detrimental to the public \velfare and the public good, and tliey therefore ask this commission, as they have asked the courts, under the legislation which is already existing, to come forward and help to fore\'er stifle this evil. Now, gentlemen, I want you to oliser\'e that the advocates of legislation against aggregated capital have not )Hit their views into definite form, and there is the diffi- culty in discussing the question. Let me try to give to their vague theories a "local haliitation and a name." Let me stri\e to make a jiostulate for the people Avho oppose aggregated capital that will foi-m a liasis of discussion — historic, moral, legal, or i-eli^rious, if you ]>lcase. Let me create an issue. Aggregated capiital is wrong, is )iernicious. What is meant by that? There are three things that mu.st be looked into in aiiproaching this question; namely, (1) the amount of capital intended, (2) the person in whose hands the capital is vested, and C!) the use to whii-h the capital may be ])ut. Now, let us follow this arrant;ement and see whether there is any intelligent basis made by these advocates, ami 1 will put them all in one class — newspa]iers, political or'ianizatious, writei's, and e\'erybody else; is there any inlelligeiit or sulficient infor- mation vouclisafed which covers these three inqiortant points? IS.'.- Jlr. .Mien, p. 117S. - See the pliui ef nrKiiiiiziitien nl llicAVliislcyTrast, p. P.is. .\k io Hic Xatiuuiil Lciifl Trust, see p. 1186, As Icj rwirgarnziitiiiTi (jI the Amcriciil) ('etteii oil Trust, SL'e Von Halk', Trusts or Industrial (Jumbina- tiens in the fnilcil Sliitcs, p. 'Z-M. "■Si'c .Mr. Allcu.p. 117U. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1143 First, the amount of the capital; l^e^•ond, the person who is to use the same; and third, the use to which the capital is to be put. Now, let us see as to the auKjunt of the capital. How much capital is pernicious? Is a million dollars capital, aggregated in the hands of a corjioratiou, pernicious; or is 2 millions; or is 5 millions; or is 10 millions; or is 50 millions; or is 100 milli(.ins? You can not discuss cjuestions of proposed legislatinn unless you have fixed princi- ples, and information to go by. You, sitting here as intelligent inquirers into the truth, going to the bottom of tilings, must have facts. You can not predicate legisla- tion upon doubt and uncertainty. You must be alile tn say that a million dollars is pernicious, or 5 million dollars, or 20 millions, or 50 millions, or 100 millions. Which is it? Those who oppose aggregated capital have never yet, so far as my oiiservations are concerned, or so far as my research has gone, ans^^ered that (|uestion intelligently, or answered it at all. In fact, that is a problem which this body is left to solve upon mere hj'pothesis. Then the second one; the person in whom the capital is vested. Is 100 millions of dollars more pernicious in the hands of a corjioration than in the hands of a partner- ship; is 50 millions of dollars more pernicious in the hands of a partnership than in the hands of an individual? Will the oiiponents of aggregated capital answer these cjuestions to this commission? They need not trouble themselves with answering them to me. Will they answer them to this commission? Are you prepared to say, gentlemen, that you will allow an individual in this com- mmiity to have 100 milli(_in dollars, but will deny the same right to a corporation? Now, let us see where that will lead you ti.i. Let us follow this question down to a legitimate business result, and that is all I ask. Don't let us get into the realm of spec- ulative discussion because I am here to "talk facts." Are you prepared to say that yon will give an individual the right to hold 100 million dollars in his one pair of hands and you will ileny that right to a conioration? Now, let us see where that would lead, if you have reached such a conclusion, which I do not Ijelieve that you have. The capital of a corporation is divided into many parts — shares and bonds, or one or both. The corporation capital would not be owned by 1 person; it would not be owned by 10 persons; it would not be owned by fewer than 1,000 persons; in many cases it would be i pwned 1 )y 10,000 persons — 10,000 shareholders or bondholders of small capital and small means, who put their money into that concern for the pm-- pose of reaping a reasonable rate of interest through the instrumentality of dividends, and in their belief that the aggregation should result in something profitable. Ni iw, suppose you deny 10,000 people the right tn participate in aggregated capital, and you afford that right"to 1 individual w-ho can congregate in his hands that vast and enorm- ous sum of money. Would that be just or logical? I am giving no expression of my own hrmible opinion about these questions; I am simply opening up this subject, and showing you how difficult your mission is — to propose laws in the absence of such vital knowledge. Yerv well; now, let us go another step: Third, what is the use to which the money can be put? Is it pernicious that 100 million dollars should be invested in railroads? Is it pernicious that 100 million dollars should be invested in transportation, canal companies, insurance companies, banks, and real estate; is that what they say? '\\'e have no light on this question. Has anybody appeared before this honorable com- mission who advocated laws which were calculated, as they say, to choke to death this modern monster called "aggregated capital" without giving some information upon this point? Has anv1jod'\' come liefore this commission and given it data which will enable the reasonable mind to come to an honest conclusion in respect to the use to which capital should be limited? Will you say that a corporation can not put 100 million dollars in the organization of a manufacturing 1 )usiness? Will you say that it shall not put KIO million dollars in real estate? A\'ill you say that a corpora- tion formed in New York with 100 million dollars for the purpose of irrigating the lands in Texas or in Arizona is illegal, and at the same time allow 100 million dollars to go into the hanking business or into the insurance business? Where is the line of demarcation to Ijc drawn; wdrere will von Ix'gin with the chalk, as Jlr. Bui-ke says, and mark the line that separates the pernicious from the commendable or proper employment of capital? These vital points are not answered, so far as I have lieen able to see, and they must be answered liefore vou can make any intelligent law; and the reason— ami I shall approach that hereaiter— whv similar la\vs have not been executed is that they never were comprehensivelv studied bv the legislators and the subjects profoundly discussed; but the legislators madlv dashed to the work, threw ink upon paper, and called it a statute anu do not; it is utterly immaterial, sn far as m>- persrmal interests are concerned. But I am here before yon to-day as a citizen of the United States, proud of the country, desir- ous of doing everything to preserve its institutions intact, in their original spirit, to advance it in the estimati(jn of the world, and in our own estimation. .VOIIKEGATED CAPITAL NOT PERKlCIOl'S UNLESS ACCO.MPANIED BY JIOXOPOLY. Now, let me again try to formulate sijme postulate for tliese people. They say that aggregated capital held by a corporation fcjr the purpose of manufacturing or business or commerce is pernicious and detrimental to public interests. I can nijt undertake to gi\'e tlie language which has been used by some of the orators in portraying the dreadful future which is in store for this country if aggi'eguted capital is permitted to exist. Adopting this formula: "Is agi;rcgated capital in the hands of corporatioM detrimental to the interests of society?" (_)n what grounds?' Q. (By Mr. Jenks.) Can you give us any authority in writing or any book, or cite us to an\' la^^• of any State, that will uphold that proposition you have just laid down? — A. Which proposition? <^. That aggregateil cajjital in corporate form for manufacturing purposes or com- mercial uses is detrimental to society? — A. I can only say they do not put that in the statute, but if you will go back to the speei'hes anterior to the passage of the Sherman Act you will find that was the aim. Q. The question was this, Whether in any statute passed by any of the States, or the United States, this pro])ORition seems to be upheld? There may have been some speeches beforehand in which it was, but in all these statutes was not the proposi- tion laid down that this aggregated capital must in itself become a monopoly? — A. I am going into that. Q. (By Mr. Farquhah.) Is that not covered in the Texas case? — A. Yes, the Texas case; but let me answ er. The legislation is drawn in general terms, but the theory of the authors of the legislation does not appear. Heaven forbid! Because there would not be room enough in the law libraries to put it in; but if you will go to the language of the courts which construe the statutes, and if you will go to the language of the legislators when they passed them, then you will find an answer to that ques- tion; and if you will go to the platforms of the various political parties, and if you will go to the speeches of the various political orators, yon will find a perfect answer to that (|ucstion. Q. (liy Mr. .Jenks.) Can you cite us to any decision of any court that attacks aggi'egated capital in corpniate form used for manufacturing or commercial purposes, unless the court goes further and finds that this capital is employed for the )iurpose of securing a monopoly? — A. No, I do not recall; but I do i-ecall this, that one of the objerts (if your delil^eration is to furnish the means by which the aggregated capital shall be forever squelched. That is what I am arguing about. Never mind the past. I will show yriu that the present laws do not amount t(j very much; not that I am speaking contemptuously of them, but I mean that these very laws, which I shall sho\\- you, are aimed against the la^^•s of nature. When you legislate against the moon, )'ou are getting a j iretty difficult ]iroposition to carry out — when you ask an in- jimction to compel it to rise a little earlier or to go down a little later. No, sir; I do not find any cases which hold that aggregated capital is pernicious to society, unless it carries in its train a monopoly, and thai is just where I am going now. 'l (By ^Ir. Sri.Msox.) The cirporation statutes of a great many States do limit the amount of capital of corporations under the theory that the large amount is not taxed? — A. Yes, that is true; that is exactly true. irE.\xixi;s OF "monopoly." It is said that aggregated ca]iital is pernicious because it creates a monopoly, and therefore we must ad\'ance one ste]i further in the disc\ission, and try to discover what a monopoly is.' Uefinitions are the thing that you gentlemen want; they are like the landmarks on a dark night whe}i you see the white stones along the road as you ar(.> drix'iug j'our hois(.'s through perilous paths difficult to disccner ^^'ithout some mark to go by. But if you allow yourselves to lie overwhelmed in a sea of speculation, without any chart, without any definite notion of where you are going, simply drifting around, you will accomplish nothing. Therefore, arguing this mat- ter as a lawyer, I am lookini; upon (piestions of definition as of primary imiiortance. 1 Sl'l' Mr. Allen, 11.1179. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1145 No^v, "monopoly" has a logal, it ha^ a grammatical, and it lia^ a historical mean- ing. The legal and grammatical meaning of the word monopoly is the same; it must be. A monojioly, according to the dictionary, is the exclusive privilege ot traffic — "the exclusive possession of anything as a commodity or a market." It is an exclusive privilege, resting in the hands of one person or corporation, t(j the exclusion of everybody else; and to comprehend a monopoly, you must lie able to understand that there can exist no monop.jly unless it is exchisivc. That is the whole basis of it. ^ This word monopi.il y receiveil a significance, and a great emi)hasis, in the time of Elizabeth, She gave out, as Hume will tell you — aud"I am not going into that part of history, except to refer to it, so that if anybody wishes ti i pursue the subject he can do so — Hume tells us that i.^ueen l^lizabeth gave out these exclusive monopolies to various courtiers in return for favors. She did not incorporate com- panies; the\- were not heard of, not thought of, not dreamed of in her time; but she took John Smith and John Jones, and she said, "Hereafter, you are to have the exclusive privilege of manufacturing or selling toljacco in the Kingdom of England, and nobody else can do it;" and every dictionary will tell you that that is the pres- ent meaning of monopoly. AVe lawyers, brought up on the milk of Blackstone, absorbed a prejudice against monopolies to such an extent that when you mention monopoly to a lawyer it is precisely like waving a red flag Ijefi.a-e a bull. It is a fundamental' basis of a lawyer's education to oppose monopolies. But there have existed in this country, with but few exceptions, to which I shall refer, no monopolies since its organization, and therefore the use of the word monopoly, in the legal and in the grammatical sense, must be discarded from this discussion; it has no business here; it has no technical meaning when applied tii aggregated capital. ^ But there are two monopolies which may still exist. There is a monopoly in paterts. The people of the Uniteil States have seen fit to say that when a man invents a process, which goes through the ordeal of the Patent Office, and is regarded as being a practical invention, he shall have the pri\ilege for 17 years ot using it for his own sole and exclusive benefit. In all their furious denunciati(.ins, in all the extreme criticisms to \vhich the oppo- nents of aggregated capital have gone, I have not seen any suggestion that we should repeal the patent laws. So that if someone were to discover a process liy which he could make a loaf of l.iread out of a stone fi >r 1 cent, and he would ruin every baker in the world and ruin every miller in the world, there is not one \-oice which would be raised against the granting of such a patent. And yet the patentee would, Jove-like, armed with thunder, have in his hands all that tremendous power, directly from the Government of the L'nited States itself; before which power the monopo- lies granted by Queen Elizabeth to her favored courtiers would sink into absolute insignifican(.'e. That is the kind of monopoly that exists; and in your deliberations, gentlemen, you must verj- carefully weigh this (piestion — as to how far you can restrict the use of capital in the aggregated form on the one side; and at the same time allow these extraordinary patents, becoming nuire and more extensive as science advances, to be issued 1 >y the Gi ivermnent on the other. There is anotlier species of monopoly, and that is a monopoly in the form of a special charter granted by a legislature or ))y the National < iovernment. That is a mono])oly in a certain seu'^e. But it is of no great importance in this discussion, because, by force of constitutional provisions, every special charter which has been granted within the last, I should sa\-, 2.> or 3(1 years — I do not want to be put down as if I weie actually accurate, but within the last 2.t or 30 years — I think evei-y constitu- tion has given the legislatuie absolute authority to peremptorily revoke charters, so that no gi-eat detriment can occur to the conmumity through their instrumentality. - And, as a matter of fact, almost every State, if not all, has laws which enable people to become incorporated companies through their general laws; and it is unnecessary to apply to the legislatures for special charters, except in extraordinary cases and when a'special application seeuis to ilisclose a peculiar merit in the enterprise. So there is nothing to call for special remark about special t'liarters. We come, therefore, to the consideration of another kind of monopoly — one grow- ing out of existing conditions, and the nreaning of which one can not find in his dic- tionary; and we must discai'd legal, grammatical, and historical monopolies from this part of the discussion. Driven out of the position that aggi'cgatcd capital is a tech- nical monopolv, its opponents have assumed another one, and there has been created what I shall call a resulting monopoly, a monopoly in fact, and that I a\ ould define to be this— that while aggregated capital or individual A\-ealth or partnership wealth iSce Mr. Allen, p. ll.so. 2 As to the power of the legislature of Delaware, see Jlr. smith, p, 1120, 1146 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. was not seeking, through the instrumentality of a Ucense or a special prerogative from the Government, to exercise certain privileges, to the exclusion of all other peo- ple, )'et that the influence of their wealth was so great that it amounted to a virtual monopoly. This is a monopoly in fact — a monopoly which results from a condition of things existing. Now, that is the monopoly with which we have to deal, and which you have to discuss, and about which you have to undertake to legislate. That is a monopoly in fact, a new monopoly not alluded to liy an 3' legal writers so far as I I remember, or so far as I have been able to find, but a new meaning to the word "monopoly" which has grown out of this modern cry against corporate capital, and it is claimei.l that if the aggregation of corporate capital is accomplishing the same thing as a technical monopoly, it ought to be suppressed. HISTORY OF PARTNERSHIPS, LIMITED PARTNERSHIPS, CORPORATIONS. This brings me to another proposition, and that proposition is this. That the aggre" gated capital of which I have just spoken is the natural result of commercial condi- tions; not only the natural result, but the necessary result of existing conditions. And when you undertake in your deliljerations to legislate about this monopoly in fact, remember that I claim here — I may be wrong, my individual judgment may be wrong — but I am going to give you the reasons for it, and you will see whether they appeal to' your judgment or mit. I claim that aggregated capital is the necessary and natural handmaid of advancing commerce; that we should never have reached the colossal developed condition in which we find ourselves unless the instrumen- talities of aggregated wealth had aided it. Now, that is my argument, and I am going to prove it in this way. I am going to show 5'ou the history of general and limited partnership; I am going to show you the history of corporations. I am not talking at random; I am talking by the book. I am talking by the card of history. If history piisjudges; if we can not consult his- tory with any degree of safety, then all of my argument must fall to the ground, and the fabric which I am emleavoring to raise here must crumble into dust. The question of partnership is the one which I will first discuss. The communion of goods among two or three or more men can be found clearly and satisfactorily so far back as Grecian history. You will find that in Greece they had what was called a communion of goods. Two men figured that their individual efforts would be made more satisfactory by the combination of putting their goods together, and they formed what was called the communion of goods; that is the equivalent of the Greek word in English, "comnmnion." Partnerships existed and held their way down through the various gradations of universal historj' and society until we reach our English history, from whence we draw all our laws and our customs and institutions, and, in fact, almost everything else of value in our national life. These partnerships answered their purpose as long as partnerships were found to be fit and proper instrumentalities; and when they did not why something else was discovered. A partnership was all \ery well so long as it could furnish nutriment for advancing mercantile and commercial affairs; but you can see at once, when I explain the dis- advantages of partnerships, that when we began to develop and unfold this colossal country (and this development is alone answerable for all the alleged sins of aggre- gated capital) , when we got to large affairs the partnerships would not answer. There were three distinct characteristics in every general partnership. In the first place, each partner was lial)le for the debts; that fact circumscribed its operations and utility. John .Tones and John Smith entered into a partnership, and John Smith was answerable fm- all the debts, so that John Smith might have put $100,000 into the partnership and John Jones would bring the firm in debt to the amount of $500,000, and John Smith «as liable ; that was one of the disadvantages of partner- ship. Another disadvantage was this, that when one of the partners died the business was at an end. Death dissolved the partnership, just as it does marriage, and although the firm niiglit ha\e been in the midst of a flourishing liusiness, the death of one of the partners immediately canceled it and stopped it, and prostrated the business. Gf course, I remendier that lawyers have unilertaken to provide for the continua- tion of a partnei'ship after the death of one or more of the partners, but about this attemirt. at continuation tlie average man argues in this wise : "Well, I don't want to continue after my death ; I ha\e a widow and children," and all that; and there were innumerable difficulties that you gentlemen understand yourselves from prac- tical experience. Gf course, when you undertook to grapple the problems of advanc- ing American commerce \\ith the instrumentalities of a partnership capital it would not answer at alb LEGISLATION PUBLIC CONTROL' DOS BASSOS. 1147 Then there was another element a,i;ainst the partiiersliip, and that is that t.(ju could not bring a suit against the partnersliip without suing earli of the parties, wliieh was very disadvantageous. You could not sue one partner only fcir a partueiship debt; you had to join them all, and serve them all, it you wanted an individual judgment. These disadvantages and the increasing demands of comnievce re(pured us to ad\ance a step farther, which we did. In Pennsylvania, I think, the first step was taken to\\ard tlie introduction of a new and expanded system of capital, and it was called a "limited partneiship." These were originally drawn from the customs and laws of Italy, and then transplanted into France, where they were knoA\u under the name of en commandite, and they were subsequently introduced into th.e I'nited States. Let me explain what a limited partnership was. I do not mean that you do not know, but I want to explain it as a part of this discussion. A limited partneishi]i was a methoil by which a man entering into a commercial or manufacturing business could limit his liability. If two gfutlemen \\'ished to enter into a partnershi]i, and one did not waiat to engage in active liusiness, he t'ould advance, say, S;100,000 to his associate, who was the general partner, and escajie lialjility, liy filing a certificate in the proper clerk's office that he was a special j.artner, and making a pulilication in the newspapers and having it put on the sign tliat he was a special partner. The result of which was that he was enabled to engage in a busim-ss without individual lial)ility beyond the sum that he advanced in the inception of the enteri)rise, and the whole respon.sibility was thrown on the general partner. Now, in France, and in Pennsylvania also, to a certain extent, I believe, they allowed shares — certificates of stock — to lie issued against the interest of the partners, so that this partnership became a s]iecies of quasi corporation. The limited partner- ship only existed for the time mentioned in the articles of copartnership, but the interest of each partner might be segregated into shares and negotiated in the form of a certificate of stock. They allowed them to be issued very largely in France, and there were some very extensi\e litigations there, which ynu will find ivi.'orded in Trouhat (Law of Limited Partnership) , if anybody has a desire to investigate the subject. Yet you can see that the s>-stem of'hmited copartnership furnished but a very meager contribution to the advancing wants of commerce. The ingenuity of the Americans was great enough fin- the occasion, and out of those necessities there came the commercial corporation. The commercial corporation as it exists to-ilav was never developed in any substantial form jirevious to the year 1850. You will find that the first book on corporations was published m 1793 by Kyd. But it was altogether limited to questions of municipal corporations; and if you take the books of Watkins and ( xrant on corporations, and all the other literature on corpo- rations, you will find that up t(j and even in the first American book of Angel & Ames, which was publisherm a i 'orj .. .ration and do business with an unlimited capital. , ^- ■ i. Now, one of the mo.st imp..rtant elements in the discussion of this question is to understand what a corporation is, and therefore I come to another, the third defi- nition, I think, which I have used this morning, and I will take Blackstone s: A ci ir- poration is an artificial person created for the preserving in perpetual succession certain rights, which being conferred on natural ijcrsons only, W(juld tail mtlie proc- ess of time." 1148 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. ADVANTAGES OF A COEPOKATION. Let US see what the esaenci' of a corporation is and how capital and business shifted from a general partnership, at first into a limited ]"iartnership, and from a limited partnersliip into a c(jrporation. Take the legal history of partnerships, limited part- nerships and corporations, im the one side; take the history of commercial expansion; take the history of territorial expansiim: take the history of railroad expansion, on the other, and you will see what necessary aids they were to each other, and how, as handmaids, they marched together toward the goal of commercial, territorial, liter- ary, moral, and religious (le\elopment which the Almighty has destined us to reach in this c(juntry- A corjioration has certain functions, and let me show you what they are: First. It lias perpetual succession; that is, its existence is unbroken and uninter- rupted down to the time when it is to expire by limitation. You can now incorpo- rate a company for 1,000 years, if you wish, or .'lO, ^\hich is the period generally fol- lowed. A corporation may consist of 1,000 individuals; many of them do. To-day the New York Central and the Pennsylvania have each many thousand stockholders. They die; their descen!is]i, neither a geJieral nor a limiteil one. What is the second? The second quality of a corporation is that a stockholder is not liable for the debts of the corp( nation. This «as, therefore, as you gentlemen can see, mieof the mo."t attractive forms of carrying on business. It enables you, ;Mi'. Chairman, it enables ilr. Phillips, and enaliles every gentleman in this room to agree to go into a business and t(j put in five or ten or fifteen, a hundred thousand dollars, or any other sum, and you know the limit of your liability. This was the feature that appealed to business men. They knew that when they went into a eor- pcirate enterprise their responsibilities w ere^ bmited, which could not be in the case of ]iartnersliip. And another thing, M'hich was of the highest importance, was the transmutability of their interests. They t-ould sell or transfer their interests in the corijoration to others. K\ery contriliutor to the capital stock of a corporation received a certificate of stock ; that certificate of stock he put in his pocket ; it was personal property, and he SI lid it in the markets or he ga\-e it to his children, but it was there in a tangible, neat, and easy form, for him to use as an admission tliatat all times he had an inter- est there, and that his liability \\as fixed by that certificate of stock. This could not 1)6 done in a copartnership. A sale could not l)e made, because it was predicated upon personal and peculiar reasons. In the development of large enterprises cer- taiidy nothing could be liajijiier than the conccjition of a corporation; certainly nothing could be better. The men who originally went into them, who were the ])ioneers in the formation of our commercial and our manufacturing corporations, and our railroad corporations, and our insurance corporations, who have all long since passed away, \^'ere shrewil, bright and skillful merchants. In adopting this sN'stem of Ijusiness it enabled each man to sleej) easily ; it enabled each man to limit his lialiility ; it enabled him to have his certificate of ownership in his pocket, and enabled the corporation itself, which was an entity, a legal entity, to carry on a great enter])rise, without any regai'd to who the stockholders were, or whether they were dead or alive, except as they contributed to its success through the instrumentality of i.lioosing proper boards of directoi-s and officers to manage its concerns. Nriw, in regard to the capitalization. They raised their capital ))y the issuing of shares of stock and l)onds. In this connection I have U> speak about something that is of the utmost impor- tance in this discussion and its effect upon your laliors — something that I regard as one of the greatest and cleverest devices ever created by man to collect and aggre- gate capital. I allude to railroad and c(ir])oration mortgages, by which thousands of ]iei-s(jns poured their money, sujall or large, through \arious channels, into one com- nidii treasury 0,000,00(i, does not care to put that amount of money as a loan in one |ilace on one piece of iimjierty; as they say, it is puttmg too many eggs in one 1 )asket. He \\ould gi i to a million — probaljly he would go to two millions — but when you get up to four or five millions it is not a practical thing. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1149 Now, see what the ingenuity of man has acoomplinhed, and an Amnican, tor), because I lielieve that the first railroad mnvtuaiic secured liy l)onds as collateral emanated from Philadelphia. It is necessary to know \\-hat a railn.acl or coriKiratioii mortgage is, and how it is arranged. A company makes a mortgage, say, for s.iO,- 000,000 on its property to a tru.stee. Who would", or could, advance s.5(i|000,000 in one transaction'? Why, the wealth of the Astois, the Vanderliilts, the Rock( I'ellers, and Pierpont 3Iorgan, and all those families, and men whose wealth lias now l)eciime common talk, and is s])iiken of every ilay as lieing so colossal, even the ciimbined wealth of all of these families would lie but a dru)! in the bucket, as it were, if they should undertake lo carry out without nthei' aid the ,i:i,uautic corporation enterprises developed in this ciiuntry. Hence they create a c()rpo]-ati(jn mortgage, which secures bonds; one mortgage of, say, S100,0()0."000: you will find plent\- of them now; lionds are made, sold, and distrilmteil all oyer; oOO in your hands, 500 in his, 10,000 here and 10,000 there, and thmngh that instrumentality — of a railroad bond or a corpcira- tion bond — all this colossal capital is raised, \\'hich enables us to carry on these extraordinary railn.iad, industrial, and commenaal enterjjrises, using the money of the many and not of the few. OVERCAPITALIZATION — WHAT IS IT? And in this connection I wish to speak on the subject of overcapitalization. In reading a Imok, which is supjiosed to contain the proceedings of the Clucago Trust Conference (a conference held in Chicago this autumn), I find that a great deal has been said al)Out the subject of overcapitalization. Capitalization is of two kinds; there is a capitalization based upon the actual value of the property and a capitaliza- tion based upim the earning power; these are the two methocis. You will find two classes of people in this country — one in favor of the former nrethod and one in fa\'or of the latter. They both have their adherents. I confess that my mind is somewhat of a blank about the matter, because arguments can be made in individual cases that prevent the adi^ption of any uniform rule, and with the experience that I have had in creating corporations and in putting them in legal shape I have no opinion defined, certain, and fixed of the question as to how the capitalization should be based; because I say that each case presents peculiar circumstances, \\hich absolutely make it impos.sible to adupt an unvarying rule. If you capitalize a property for ^^■hat it is worth, a manufacturing business or a railroad liusiness, the apjiraisers whom you will appoint enable you to fix the value of that property at, say, ?50,000,000. Now, on the other hand, you have a property that is worth only i^n, 000,000, but by what is called good will and trade-marks, or individual skill, etc., it earns more money than the property of 850,000,000. Yon gentlemen have seen that illustrated in your daily business li\es. Now, how shall these two interests be capitalized.? You have been asked to lay down an arbitrary pirinciple and rule by A\hich capitalization is to be predicated upon the actual value auct there is to be no water. Well, it is so easy for men to get up and make statements ( m a political platform; they are under no ol iligations to anyl.iody but their consciences, and they can cut themsehes loose from history and experience; they can sail off into the clciuds ami lay down any proposition, no mat- ter how ditficult, vague, and impracticable. IXFL,\.TED CAPITALIZATION SOMETIJIES NECESSARY. ^luch complaint has been made against overcapitalization of railroads. Let me give vou a little bit of history in regard to railroad building in this cnuntry. Some of these railroads were partially subsidized by the Government — the Pacitii' roads, for example — but all of these vast transcontinental lines, which made it possible for us to reach California and the far AA'est in a very short period, were built by English capital; and when I sav English capital, I mean the financiering was done through the English houses, with their German and other foreign connections; but it was not American capital; we did not have the money, and we could not build the raih'oads. Now, sirs, as you sit in your chairs in judgment fixing a basis of capitalization, you must remember" the contemporaneous history whiih surrounded these large opera- tions. Now that the roads are built, now that the country is ileveloped, now that you have these flourishing cities all (.i^cr the c..intinent growing larger every day, it is very easy to forget the past; l)ut \\-hen you sjieak of the enormous capital of the railroads, the enormous capital of these transcontinental lines, remember how they were liuilt, and tell me if there w as any other method of building these roads than the plan adopted by the railroad builders or contractors of this country, situated as they were at these times'? And what was their situation? Here was, say, a contem- plated line from New York to Chicago, 25 or 50 years ago, or from New York or 1150 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Chicago to San Francisco, or to New Orleans, or wherever your imagination will lead you; how were you to raise the money? Not from tlie Government. It -was not the policy I >t this Government ti i give the money. The savings Ijanks would n(.it lend you the money; liesides, at those times they did not have it. It was raised hy private suhscription. And how could you get the money? "What did you do? You had to go around with the engineer's maps and with the estimated earnings that Avere to he produced from the operations of your loail. And how did you approach capital? "\Vi luld I come to you, sir, as a capitalist and say, ' ' "Will you take 10,000 of these bonds at par," on an incomplete road, AAdien you did not know whether it would earn one dollar of interest or not? X( i, sir. Put yourself in tlie position of the railroad contract- ors of this c(jimtry when you are talking about inflated capital, and see how it could have been a\'oided. \\'liat did they do? "Why, they offered a hundred shares of couiiiion stock as a laonus, or some other bonus, and they sold the bonds at 50, and 60, and 40, or whatever they could get for them. And there was no other way of doing the liusiness. And nidess they had sold the lionds your country would not have ))een developed. Xow, before you dissolve, call before your coinnjission those men Avho talk about ovei'capitalization, and examine them; get at the facts; go to the bottom of things, and then tell the people of this country how this overcapitalization came to be made, and the exact facts and circumstances that existed and surroundeil the creation of our railroads, and don't forget to tell them what these railroads have done for the - are not theories of political econom)-, but are facts— because I do not intend to enter int(_i the sphere of ]ii)litical econoiiiy in this discus- sion; it is not my province. The provint'e of a lawyer is to keep to the facts as far as it is possible, and that is what I am trying to do. First. The natural laws of trade, the natural laws of commerce, form a sufficient and perfect barrier to prevent or break up most monopolies. That, I say, is not a proposition of political economy ; it is a proposition of fact, which I shall prove, other- wise it is entitled to no weight. Every effort — and I know of several within my own knowledge — that has been made to "corner" an article of commerce, has failed. You remember the pools in wheat and corn. Two colossal attempts to corner the breadstuffs of the world were made in very recent years; and you know the result. Men can choke the arteries of commerce for the time l)efng, but the natural stream of trade will soon overflow their plans, and e\en \\ hen they think they are in possession of the supreme power, the laws of trade are taking it a\'\ ay from them. Before you undertake, therefore, to legislate against monojiolies, be sure that you have defined what a moniii>oly is, and be sure that you do not overlook the historical facts, which show that e\ery attempt e\er made to corner or monopolize bread- stuffs or any other article i )f commerce, of this, or anj- other country, has failed, and reacted upon its authors, and they have been ruined. " Leave the nat'ur-al laws of trade alone, and they will take care of themselves. You may be in the hands of a monop- olistic p(i\ver for a little while, but the re\-ulsion will come, and when you make general laws, aimed to sti-ike at a single and isolated case, \ou do more harm to the community than a temjiorary monopoly works, formed by bad men with the evil design to throttle the commerce of the country. "Hard cases make bad laws." Second. There is another principle to which I invite your attention in regard to monopolies — that « herever business is conducted in such a way as to cease to be con- servative it becomes a maik for other capitalists, and the legislator can leave it alone to the outside world to take care of. Do I make myself plain? Here is a vast corporation, with a capital of !?.50,000,000, and it owns e\'ery business of that kind in the world, or in this part of the world. If the managers undertake, with all that powei- in their hands, to depart from c(3n- servative principles — if they undertake to raise prices, the outside capital which is at hand ^\ill respond. That capital is invited into the field, and you have the competi- tion which the opponents of aggregated capital regard as essential to just business conditions. Take one — perhajjs the most remarkable instance of this \iew — the so-called "sugar trust." It owned pi'etty much everytliing when it started, and what was the result? First one refinery and then an(jther sprang u\>, until you find a bitter and deadly fight and competition going on \vhich must satisfy the bitterest opponents of aggregated capital. Is there not the most munlert)us warfare going on in that industry? Are there not new refineries springing up, and isn't it impossible to keep them fnjm springing up? Do you want laws to effect results which nature brings about so well? AVhile you are thinking of making statutes, the natural laws of trade are silently working and pulling things to ]iieces. I am constantly reminded of the comjiactness and strength of the Standard tlil Company. I admit that gly and demand, which operate in regard to monopoly. Keeji the money market as it is to-day, anrl you will have no more industrials built on old lines. You will become functus officio by virtue of natural conditions. Your commission will cease to be necessary b\' virtue of the ver^' laws of trade A\hich -s-ou are asked to guide and control. Not that I ^^•ish to see )0U go out of existeni'e; I would continue you and your suc- cessors forevei', A conoiiission of inquiry is the instrumentality that stands between extravagant and demagogic demands and good, sensible, business judgment, and the true interests of the people. It is the tribunal through \^■hich every question of cur- renc-\' or interstate commerce, and other great public subjects, sh(juld pass. Con- clusions filtered through a commission must be based upon facts and not speculation; and when this period arrives, the people will not si'e any Sherman antitrust acts, or multitudes of other laws which exist unexecuted, upon the statute books, and make the law a bj'word and a reproach. The inability of courts to carry them out and 83A^ 74 1152 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. give tliL'iu effect is licrause they are not based on any rea,«(inable or sensible principle of legislation. Again, nor do yon, gentlemen, want to interfere with combinations of capital, made successful l)y ability, skill, and good business judgment. If a combination, through good management ijf its directois, without violating any law, either moral, religious, or civil, is able to reach success in business, you dnn't want to be urged on by feel- ings of en\-y or prejudice to cut it down or to uproot it. If you lind, in considering this question, that the combination of skill and good judgment in business has brought about a surccssful residt, I sa>- all things jirompt you to encourage it, rather than to discourage it, and if you can do nothing I letter, you should let it alone. THE NATURAL LAWS OF COMMERCIAL RELATIONS DEFY IIUJUN LEGISL.-iTION. There is another proposition «hich I wish to suggest to you, that it is neither vi'ithiu the power nor is it the policy of the (government at this stage of develop- ment to seek to put down or impede aggregated capital. As to its power, I shall sav a few words later on. As to its interest and policy, I I'ontend that the Govern- ment should encourage e^ery organization, e\'ery combination, and every individual vhosc efforts are used toward the lienefit of commerce or Ijusiness, or \\diich directly or indirectly ameliorate the burdens of life. It is not true business judgment to pull down industrial structvn-es at the bidding of a few — shall I call them speculative pol- iticians? — who have no actual l)usiness experience, who have no accurate knowledge of the laws of finance, economy, or commerce, l)ut whose whole stock in trade con- sists (jf a pack of vituiJerative epithets and a string of generalities, which they use to encourage demagogism among the masses of the people. And this brings ine to an(jther point, viz, the futility of legislation made against the natural laws of trade or business. I maintain that the history, the legal and judicial history, not only of this coun- try, but of England, shows that all laws that have been made to prevent combina- tions < if lalior, to prevent combinations of manufactures, to prevent combinations of produce or breadstuffs, or to pre\ent what I may in a word call the free and unlim- ited exercise of commercial relations, or to prevent speculation in cereals or stocks, have been ineffectual and aborti\e, every one of tliem, and I defy anybody to point me out in English or American history any statutes, which have been passed to pre- vent these combinations, that ha\e proved effective. And the simple reason is that the laws of trade, the natural laws of commercial relations, ilefy human legislation; and that is all there is in it. Wherever the two clash the statute law must go down before the operati(.ins of those natural laws. I ('(juld lieginbackas far as the reign of the Edwards in English histm-y, and trace the statutes that have Ijeen passed against combinations of lalior, against the combinations of the owners of produce, combinations of the purchasers of or dealers in breadstuffs, and I can show you that in evei'y instance these laws have been abortive. Whoever has the desire can find ple)ity of these instances in history. I will select a few examples of. the truth and fomidati(jn of m\- remarks. First. The laws against forestalling, regrating, engrossmg: The offense of forestalling was described by statute passed in the reign of Edward VI to be the buying or contracting for any merchandise or victual coming in the way to market, or dissuading persons fr( im bringing their goods or provisions there, or per- suading them to enhance the )irice when there, any of \\ hich practices makes the market dearer to the fair trader. Regrating was described liy tlie same statute to be the buying of corn or other dead victual in any market and selling it again in the same market or within 5 miles of the place. This was supposed to enhance the price of pro\dsions, as every successive seller must have a successive }irotit. Engrossing was the getting into one's possession or buying up large quantities of corn or other dead \ictuals with intent to sell them again. These offenses are all described in Blackstone's Counueutaries, and are thoroughly familiar to the legal profession. In res]iect to the offense of engrossing that author says: "This must of course be injurious to the public by putting it in the power of one or two rich men to raise the ]irice of provisions at their own discretion." All the statutes of Edward VI in regard to regrators, fore.stallers, and engrossers, as ^^■ell as many other similar stat\ites which infringed upon the freedom of commerce, were repealed in 177L' as iletrimental to trade by a statute of (Jeorge III, the pream- ble ami substance of whiidi is shown in the following extract: " Whi'reas it hath been found by experience that the restraints laid by several stat- utes u])on the dealing in corn, meal, flour, cattle, and sundry other sorts of victuals by i)re\'enting a free trade in said commodities have a tendency to discourage the LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1153 growth and to enhance the price of tire same, which statutes, if ]iiit into I'xecutiou, would bring great (hstress upon the inhabitants of many parts of this Kingdom, * * * be it therefore enacted that an act made in the third and fourth >'ear of Kmg Edward the Sixth, entitled an act for the Imying and sellins' of butter and cheese: and als(.i an act made in the fifth and sixtli year of King Eilwanl the Sixth, entitled an act against regrators, forestallers, ami engrossers; and also an act made in the third year of Philip and IMary, entitled an act for keeping milch kine, and for breeding and rearing of calves; and also an act made in the fifth year of t^ueen Elizabeth, entitled an act touching badgers of corn and drovers of cattle to be licensed; and also an act made in the fifteenth year of King Charles the Second, entitled an act to prevent the selling of live, fat cattle by butchers, and so much of an act made in the fifth year of Queen Anne, entitled an act for cdutinuing the laws therein mentioned relating to the poor, and to the buying and selling of cattle in Smithfield, and for suppressing of piracj-, as relates to butchers selling cattle alive or dead within the cities of London and A\'estnunster or within 10 miles thereof, and all the acts made for the better enforcement of the same, being detrimental to the sup- ply of the laboring and manufacturing poor of this Kingd(jm, shall be, and the same are hereby declared to be, repealed." And in this connection, I Vjeg to call your attention to what was known as the "Bubble act," which was passed in the reign of George I.^ The "Bubble act" grew out of the South Sea speculation, and in some aspects it was one of the most remark- able instances of speculation in the world, almost outrivaling Law's famous French scheme. The "Bubble act" was passed about 1718, and it undertook t(j prevent a recurrence of the losses to the English nation sustained through the instrumentality of the South Sea bubble. I won't st(jp to explain what the Sijuth Sea bubble was. You gentlemen know, or if you do not, it is easy to find a. history of it in any ordi- nary library. But the statute, the bulilsle act, was passed to prevent pi'ospectuses being issued of a kind which would sechice capital into si)eculation. It was supposed that so many people had lost money through the instrumentality of these prospec- tuses, which were gotten up in the most glaring form, that it was necessary to haT,'e a law; and they passed that law of George I, in which they made it a crime for anybody to print and publish or circulate any descriptions of enterprises for the purpose of alluring capital to subscribe. That statute remained in existence more than a hun- dred years. I think it was repealed hi 1H.37. There was but one application made to the court under it, and that was made to Lord Ellenborough in 1808. I have brought the law report here because it illustrates the first trust, what they call a trust, a common-law trust, which was the method followed in that instance. The attorney-general, at the solicitation of a private per- son, asked the court for an information, which is a criminal i>rocess in the nature of an indictment, issuing at the instance of the attorney -general. It seemed in that case that the "promoters" fif the enterprise were endeavoring to raise money to float the "London Paper ^lanufacturing Company," a concern that would answer to what they now call the "Paper trust," and also" the "London Distillery Company for mak- ing and rectifying genuine British spirits," which would answer to the present com- bination popularly called the " Whisky trust. ' ' These were perfect! y legal occupaticms and perfectly legitimate industrial enterprises; but the prospectuses were contrary to the "Bubble act," and some person, prompted by feelings of malice or en\y or what not, some illegitimate influence operating upon him, applied to the court to put in existence that statute 87 years after it had been passed. It had never once been heard of before, had become a dead-letter statute, and Lord Ellenborough said sub- stantially, "Well, the people of this country have forgotten all about the existence of that statute, and the complainant comes into court in such a peculiar position that I will not grant him any relief;" and that was the last that was ever heard of that statute, which was the culmination of the South Sea bubble. The crime that these men were charged with, or attempted to be charged with, was this: that they claimed in the prospectus that every person who subscribed to the capital would get a share which was transferable, and relieve him from all lia- bility beyond the amount of his subscription; and as there was no corporation act in England at that time, the representation was false, because they were all partners, and that was the basis on which an application was made to the court. This case in 1808 illustrates that the stage of commercial progress had not been reached which justified the creation of corporations, and, being in advance of com- mercial necessity, it was stamped as illegal, although the businesses mvolved were perfectly legitimate. It was sought to be carried out through the form of a trust, but neither the courts nor the statute condemned that form; they merely condemned 1 9 East's Reports, p. .517 1154 HEARINGS BEFOEE THE INDUSTRIAL COMMISSION. the transaction liecaniJt' the age had not yet sanctioned stock certiiicates. ^ The age had not yet learned to li k )k upon the importance of transferring interests in industrial enterpri."cs, one of the most important and necessary elements of commercial affairs, without wliioh to-day the wheels of finance would he stopped. Mark the importance and interest of that t:ase. Tlie "trust" was not attacked — now the sole cause of dis- content — but the transferal lility of shares — now universally aoquiescerl in. Second. Combinations among victualers or artilicers to raise the price of provi- siims, or any commodities, or tlie rate of labor, were also in many cases severeh' punished by particular statutes. (See 2 and 3 Edwd. YI, c. 15.) All of these statutes were repealed as futile and contrary to the true commercial progress of England. Third. Bhjnopolies wei'e also attacked. Queen Elizabeth granted them, but in the beginning of the reign of .Tames I Sir Edward (Joke boldly and justly assaulted them, and in consequence a statute was passed in the same reign declaring monopo- lies to lie contrary to law and void. The Queen granteth and the Parliament taketh away; and blessed is the name of that Parliament. Eourth. I now call your attention to "Sir John Barnard's act,'' which grew out iif an enormous speculatidu in stocks. After the East India Company had gotten iinder way and t!ie Bank of England was established there was an enormous siDecii- latioii in stocks, and Sir John Barnard's act was jiassed for the purpose of preventing these speculations. "Well, that act was to fiii'e\-er rid the English nation of tlie curse (if sjieculation. A lii\-ely and commendable purpose. But, alas, what was the result? S)>eculation increased. There was not a solitary conviction ever had under it, so far as I can ascertain, and il remained on the statute books down to the early part of the leign of the piesent <^ieen, when it was repealed, and I quote the preamble to the repealing clause to sho^\' what a confession the British Parliament was forced to make as t(i the inelhcacy of such legislation: ■' Whereas an act was ])assed in the sc-venth year of the reign of King George the Second, chapter 8, to pivvent the practice of stockjobbing, and by another act, passed in the tenth year fit tlie said King's reign, chapter 8, the said first-mentioned act was maile ])erpetual; and whereas the said acts hiipose unnecessary restrictions on the njaking of contracts for the sale and transfer of public stocks and securities, and it is therefore expedient to re] leal the same: Beitenacted * * * the same are hereby repealed." Sta.iutes prohibiting stock speculation were also adopted in New York and Penn- sylvania, liut ha^■e long since been repealed, after lingering ineffectualh- upon the .statute books. Tlie law in New A'ork, which \vas in existence from ]isl2 to 1858 without any deterrent effect upon the su]i]iosed evils it was passed to prevent, was not only repealed in the last-named year, but the repealing law, recognizing the necessity to coniniert'O of stock trading, went further and absolutely legalized "short sales." Fifth. The most notable example, iKjwever, of this species of legislation is to be found in this c'our industrial pros- perity, and vour financial body, you are not apt to listen to a deiuainl to destroy it, to cut it down, The destruction of corporations means the end of your i)res(-nt com- mercial system. 1166 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. Q. (My Mr. Phillips.) Do we understand you to state that this commission is asked to cut this d(.)wii?— A. I say that if your legislation results in your saying this, that von believe that aggregated capital can exist in a corporation, but you would not allow it to exist in a trust, then you are accomplishing nothing. That is what I mean. WH.\T ARE THE MISCHIEFS TO BE REMEDIED? I was alMiut to make two more suggestions. We are taught by men who have made a study of those natural laws, which furnish the foundation for human legisla- tion, that there are three things to lie I'onsidered when you are about to make a new statute. The first is that you must consider the old law. What is the old law? Second, «hat is the misclrief that the old law does not prevent? And third, wliat is the remedy proposed? First. You know that courts of eijuity, under the principle of the doctrine of public policy, possess the right to stop these commercial organizations or aggregations of capital wdii-n they are considereil pernicious. You have the Sherman statute; you know its history; y(5u ha-\'e the statutes of the various States, and you know their histories. Then what is the mischief Avhioh is to be supplied or is to be remedied? That is the question that this commission must address itself to. What is the mischief which you wish to remedy? Are >'ou to-day satisfied that since the inauguration of these industrials they have been pernicious and detrimental to the people of this country? Can each member of this commission put his hand upon his heart and say, as a good citizen, that the records of this commission are full of evidence which show that these industrial enterprises are evil? Can you, in face of the extraordinary C(jinmer- cial dc\elopment of this country, in face of existing favorable financial and industrial conditions, say that you are convinced that there are evils whicli spring from these industrials? If so, you must stop them. I say to-day that there has not been a spe- cific statement which an intelligent man could answer, pointing out in a concrete manner the supposed evils which have flowed from the inauguration of these enter- prises. You say overcapitalization; well, that is a question of detail, that is a ques- tion about which men may possibly disagree. If you think that corporations should be capitalized upon the basis of the actual value, why you will find a great many people who will agree with you. If you find, on the contrary, that they should be capitalized on the basis (if the profits, you will find many more people who will agree with yriu. If you think this question should remain untouched, to be left with the parties themselves who are making the organizations, because jou believe that this question of ca]iitalizatii>n, one way or the other, is not a fundamental question, but is influenccfl and controlled by the operation of natural laws and of particular condi- tions, then leave it alone. But tliese are questions of detail that do not go to the substaiu'e or root of this matter. Perhaps it will be said that individuals have appeared before you who have suffered from aggregated capital. That may be. The individual cases may be serious, they may l)e grievous, they may appeal to our sympathies, but in the great progress of commercial dexelopment some must go under, some must suffer, some must becrushed, and that has been an inevitable rule from the beginning of the world. If you had sat as a commission years ago, when the sewing machine was introduced, you would have had hundreds of supjdicants coming before you asking legislation against it. ^ Individuals do suffer and must suffer from the consequences of the general march of coimnercial and manufacturing devebjpment. In that war, the batteries of science and skill and commercial development wound and kill their own countrymen and allies. A great philosopher, .Jciemy Bentham, was the author of the phrase and tlie ex)iounderof the great principle of "the gicatest good for the greatest number"— the (udy way liy which you can successfully cany on government. Society is so constituted tliut s(jmemust suffer. It is the sacrifice that the few are forced to make for the good of the whole. Take the police and the school relation, in which you are interested. A man lives in a village, and lias bis own governess to teach his children, and also has liis own man in the house, and he says to tlic authorities of the village: "Yon impose a tax on nie for jmblic schools; I don't necil them; nor do I want your police; I have a man who docs that very well for me, and I don't need the police and 1 won't ]jii,y the tax." Well, where does sucli a man stand? He must go under, because tlic general neeils of the comitry require connnon schools, and thev require a police force; and there is no principle of legislation that can be formulated withmit your .-itepjiing upon the foes (jf some innocent people, who must suffer for the good of the whole, findoubtedly .some individuals — perhaps a great many — must suffer LEGISLATION — PUBLIC CONTROL: — DOS PASSOa. 1157 from the establigliment of industrial oombinatioiis. Tlie little trrocer, the small hab- erdasher, the middleman-, the salesman, the traveler, may lia\e just cause of e(_)ni- plaint; but the Government is not made to adjust these things or to remed)- sut^h evils. We are not living in the millennium. We are not governed liy al)stra("'tions, nor is the State influenced by sympathy. CHICAGO TRUST COXFEREXCE — I'ONCLUSIONS OF ITS CHAIEIIAN. There was a conference in Chicago some time ago called the Chicago Trust Con- ference. It was supposed to have assembled licfure it all the leading thinkers on these subjects. They had before them two of the most eminent of our oratorical speakers, and they each gave their views. And what ^as the result? It is contained in a red- colored little pamphlet which I have before me. I have read that book industri- ously to find light on this great subject. As chairman of that coufereni'c there \vas an able law ver, ilr. Howe, whom I have the pleasure of knowing, a lawyer from Xew Orleans, a clean-cut, tried, careful, prudent man; and let us see how the results (jf those deliberations were filtered through his brain. As chairman he stated •\\hat the results of that (inference were, and see what he has announced. He says: "It seems to me — simply as an individual, of course — that almost every paper or address we have heard has made some ailmissions or concessions \\ hich may form a basis for some conclusions, and if you will allow me I ■\\ill formulate some of them, as follows: "1. That combinations and conspiracies in the form of trusts or otherwise in restraint of trade or manufacture, which by the consensus of judicial opinion are unlawful" — see how carefully that is stated— "which by the consensus of judicial opinion are unlawful, should "be so declared l>y legislation." Why, the sugar trust was an illegal creation in New York aninions on that subject, which I will submit to you in a few minutes. Then he says, in the third place: "The objects of the corporations should be con- fined within lindts definite and certain. The issue of stock and bonds, which has been a matter of so much just criticism and complaint, should lie guarded with grt'at strictness. If mortgage bonds seem to tie required, they should be allowed only for a moderate fraction of the true cash value of the projierty that secures them." I dissent from that because it will throttle the opeiations of ciir|ioratiiins without a resulting benefit to the public. As a rule of protection for iuxestors and creditors I think it is superfluous. But I may be w rong in this yiew. "As for issues of stock, they should be safeguarded in cvei'y i)ossil)le way. They should only be allo\veil either for money or for property, actually ri'cei\-ed by the companv, and dollar for dollar." (That, I say, is all right. This principle is already well established.) "And when the property is so conveyed it should be on an honest appraisement of actual value, so that there may he no watering (jf stock. 1158 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "4. And finally there should be a thorough system of reports and Government inspection, especially as to issues of bonds and stock and the status and value of propert\'. Yet at the same time, in the matter of trading, business, and industrial companies, there are many legitimate secrets which must be respected by the general puljlic. ' ' In short, we need frankly to recognize the fact that trading and industrial corpora- tions are needed to oi'ganize the activities of our country, and they are not to be scolded or be behed, but controlled, as we control steam and electricity, which are also dangerous if not carefully managed, but of wonderful usefulness if rightly har- nesseil to the car of jirogress." Now, here is an intelligent formulation, the results of the Chicago Trust Conference, exiii-cssly called together for the purpose of giving an expression of views upon this grave subject of aggregated capital. The mischief, gentlemen, which results from combined corporate capital is ]Dointed out and defined in tliese f(jur statements, and one can argue on the basis of them. The\' are clear and conservative statements and present ground for fair argument and discussion. They are not so radical in their terms and consequences that if adopted in toto any material or substantial impediment would result to commercial expansion or development. HASTY LEGISLATION MISSES ITS MARK. I have t«o more views to suggest, one in regard, to the jurisdiction and one in regard to the remedies that already exist. No man who is a student of the history of this country and who is a lover of the form < if government which prevails here can look without great solicitude upon the remarkable development of capital which has a])]ieared to us so viv'idly in the last 10 or ].i years. I do not mean to assert to you, gentlemen, that aggregated capital is an unmitigated virtue, without accompanying vices. A^'hat I have been endeavoring to imjiress upon yuu is the necessity of going slowly in your acts. I have been endea\oring, l)y invoking historical analogies, to shovv you how easy it is to make hasty legislation, and that the fruits of hasty legislation not only bring the courts of justice and the administration of the law into reproach, not to say contempt, but fail to accomplish the jiurpose at which the legislation is aimed. Now, what can more forcibly illustrate the strength of that remark than the anti- trust law of the United States? I do not supjiose that the author of that law ever concei\ed the idea or intention of affecting hy that piece of legislation the railroad interests of the country. And yet we have this remarkable result, that the industrial and manufacturing corporations, as contradistinguished from the railroad corpora- tions, ha\-e escaped the law, as we see in the case of Knight,^ the sugar refining case from Pliiladelphia, ^^■here the court held that, although the effect of combining ^gar- refining businesses was to create a monopoly in the manufacture of a necessary of life, yet it could not be suppressed under the iSherman Act of 1890, because it was not a restraint of interstate trade or conunerce. But, strange to say, the railroad corporations, which, I think, were not intended to be endiraceil in the law, were made the sufferers by that legislation. And in the two decisions in the ]\Iissf)Uii case, and in the freight cases about which you know, and to the reports of which I need not refer, the Supreme Court held that the language of the act of 1890 ajiplied to railroads, and contracts vyhich were generally conceded to be fair and bcneliciai to the public were set asiile as illegal. I have no criticism to make on these dccisidus. But see tlie paradoxical result! A scheme of legislation which aimed at manufacturing and industrial cor] >orati(3ns is declared not applicable to them, and railroad cdrporations, which were not intended to be covered, are held til be within the language and s[)irit of the statute. This shows what results accrue from hasty, ill-considered legislation. T do not claim here that there are not great anil grave (|uestiiins surrounding the aggi'cgation (if capital, in any form it may assume, whetherit is helil by an individual, a partnciship, or a corpciration. It is a matter of prcifound solicitude to every citizen of this cnuntry, a matter of profound importance in the development of this country, in all its operations; but I say that the subject has nut apiiroached a ri)>e and mature condition. 1 say that if you fake the vague, indefinite, and crude th(jughts which U]) to this time characterize the discussion nf this (|iicsti(in, and put tln'm in the cru- cible of legislation, nothing tangiljle, practical, anil beneficial to the iieople will come friini the experiment. That is all. You must keep your eyes upon this modern iiclo|ius, whether it is in individual i>r corporate form; but until aggregated capital coiinnits some indisputable blow against the liberties of the ]ieople, until it strikes at ll5(iU. S. Kc|iiirls, 1. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1159 the foundation of our institutions, or until it interferes with the administration of justice or legislation in some positive way, I say that it is futile and unnecessary to enact any la\^-s, because you have no defined, fixed, intelligent purpose in view, and without such purposes you are absolutely at sea, and the very laws that you make will strike at people whom you never contemplated they would reach, and probably, if not certainl}', permit the aggregations of capital, intended to be readied, to entirely escape. LEGISI,ATIVE AND JUDICIAL COKRUPTIOX. It may be that the effects of combinations, or the effects of the aggregation of wealth or capital, may affect and corrupt the legislative and judicial powers of the Government. There is the great danger, in my opinion. But no law that you can frame can reach this supposed evil by anticipation, because you dij not know ^\•hat form it may take. For direct cormption, the existing penal laws of the nation and the States ,are amply sufficient, and need notliing in the form of newer laws. Judicial or legislative corruption, however, is often provoked by demagogism, which presses corporations to seek for their just rights ]>y illegitimate means. It is a public saying, mifortunately, in this country, that no corporation can get proper and neces- sary privileges \A'ithout a lobby. I wish you, gentlemen, to ponder deeply o\er that aspect of the question. A corporation goes to a municipal legislative body and wishes a certain privilege, which, if granted, wdll lienefit the public, yet the railroad men and the men who control corporations will tell you that it can not be obtained by legitimate methods. Now, there is no use disguising the fact that occult influences are used sometimes by large corporations, of necessity, to obtain things which are of the greatest importance to the public; and if you can stop that end of it, you remove one great temptation to judicial or legislati^'e corruption. If demagogism is eliminated from the discussion of these questions of aggregated capital, there is no doubt that a solution will be found entirely satisfactory to the true progress and interests of the country. In concluding this branch permit me to repeat, that it appears to me that all we have to-day to found legislation upon is the opinions of men \vho are not qualified to speak with any intelligent authority; we have the vague and indefinite criticisms of people who have not studied these questions from the standpoint of actual experience or the honest conviction resulting from deep research. Whene\'er these critics appear before this commission, if they will hazard that step, if they undertake tn make state- ments, you are likely t( > insist upon proc^f, upon statistics, upon real arguments and facts, and that is the way you can build the foundation for a law which will lie satis- factory all aromid. IF NEW LAWS ARE NEEDED, WHAT .lURISDICTION SHALL THEY COME FROM? Assuming that you gentlemen should come to the conclusion that some further law was necessary, you are confronted with a question as to the jurisdiction — as to whether it should be a national or a Slate law. This involves some study as to the nature of our Government and the true relation of the States to it. This Govern- ment is not a national government. It is a federative government. "\^'hatever p(jwers this federative government has are given to it l)>' the Constitution. The Con- stitution of the T'niteii States may be divided under tw(.) great heads, namely, that part which w-e carried almost bodily from the English law and that part which resulted from the purp(jse of a federation. If you will take occasion to study this great instrument you will find that the ex- pressions of individual rights in Magna Cluiita are almost copieil in the Ci institution of the United States. Aiid if ^-ou examine the three foundations of the English Government to-day— the JIagna'Charta, the Petition of Eight and the Bill of Eights— yiiu will discover that all of our mles of liberty, justice, and right have been drawn from these sources. AVhatever is new in our Constitution is the result of the associa- tion of the 13 States, li\' which they agreed, for the purpose of nnitual and iierpetual miion, to delegate to the < Icneral (Tovernment certain specified powers. The idea of the Constitution of the United States \\-as that the General Govern- ment should never interfere with any of the internal affairs of the States. The Government wanted just power enough to jirotect itself fmni exterior influences and to hold the States together, and it did not propose to interfere with the rights of the States to govern themselves as to their internal affairs any more than the respective States imdertook to interfere in the domestic relations or private affairs of an)- of its citizens. If you keep that idea in mind von can intelligently approach the question whether the Federal Government has the right to interfere in the general questions of aggregated capital. 1160 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The necessity for some such provision as the jn-esent " commerce clause " in the Constitution was the real cause for calling the convention which led to the adoption of our present Constitution, ^^'lien we se|iarutcd from England the "reat difficulty was the want of uniformity in the commerce and na\'i,t;ation Un\s. In the Articles of Confederation, which prcccdclc. That clause of the Constitution of the United States by which Congress was given the power to regulate commei'ce. — I say this with great confidence — was ne\er intended as an absolute authority for the General Government to interfere or meddle with the internal affairs of the States. The phrase "regulate commerce" does not mean to restrain commerce, and never was intended to have such meaning. There was no thought of interfering with the development of the country in placing this language in the Constitution. The framers only undertook to sa\' this: That the States should not deprive each other of that free and a).>solute intercourse l)etween themselves \\-hich must necessarily exist for the purpose of accomplishing the purposes of the Union. That wa,s the intention. They said all of the navigal.ile waters nmst be (]])en to all the States — no impediments placed in the great highways and roads, and no restricticnis made upon trade and commerce as between them. The citizens of South Carolina, sn far as the navigable waters and roads and e\erytliing that appertained to commerce were concerned, should enjoy the same equalities and privileges that a citizen of New York possessed. In the first case which arose in the Supreme Court of the I'nited States — Gibbons u. Ogden^ — under this commerce clause of the Constitution, the question was this: Liv- ingstone and Fulton, who were then applying steam to water navigation, had received from the legislature of New York a grant for the exclusive use of steam in the nav- igable waters of New York State for a term of yeai-s. Well, that was a privilege that nobod}' envied, because Livingstime and Fulton were applying a new and great discovery to the propulsion of boats, and the State ga\'e them the sole privilege of enjoying this valuable invention. But they had no sooner fiblained this grant from the istate of New York than another individual started a line nf steamboats from New Jersey and ran over to New York, and he was seized. He ^\s.fi under a license of the United States Government regulating the coasting trade, and the question arose in the Supreme Court of the United States whether the State of New York had the power to grant such an exclusi\e privilege to the exclusion of citizens of other States navigating under coasting licenses. The opinion of Chief Justice Marshall delivered in this case has been universally rcail and studied, and he held that it was one of the objects of the commeri'c clause of the Cdustitution to open the navigable waters to all citizens of other States, and that the grant to Livingstone and Fulton was inoperative. "The genius and charai'ter of the wlioh/ Government seem to be that its action is to be applied to all the external concerns of the nation and to those internal concerns which affect the States generally, but not to those which are com- pletely within a particular State, which do not affe<'t other States, and with wdiich it is not necessary to interfere for the purjiose of executing some of the general pow- ers of the (iovermnent. The completely internal commerce of a State, then, maybe considereil as reserved for the State itself." This language of Cluef Justice Marshall furnishes the keynote to this much-discussed clavise of the Constitution. Of course, the Supreme Court of the United States — 1 sa>- it \vith great regret — has l)een remarkably harassed and annoyed in its decisions upon this clause. I do not think any man can sit down and study the decisions of that I'ourt upon the interstate- commerce clause without rising from the reading with a feeling that they are very inconsistent in some respects; and Judge Bradley, in one of his decisions" — and cer- tainly Judge Bradley was a \ery able law ycr — expressed a rt'gret that the court had strayeil .so far away from the principles of ( libbons /■. ( )gden, fi'om which I have just quoted. The judges of the Siqireme Court of the United States are human, and they are more or less susce])tible to the influence of outside opinion and discussion, as others are. Law, after all, is nothing but the expression of custom. Desjiite the fact that Icgislatui'cs undertake to put in statutfiry foi'm laws for the govenmient of the peo- ple, that which is the great law and that which is the univei'sal law is the law of cu,stoiii; and the Supreme Court judges, like all other human l)eings, are susceptible to the influences that i)rev;ul at the time they write (heir decisions — honest, high- toned, intelligent, proud (jf their position in every wa>', but still human, as you can sec if you take the legal-tender cases, where tliey made two decisions, one in favor of 1 a Wlieaton's Kep., 1. ' lA'len|i r. Muliilr, r27 IT. s. Rcji., 640. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1161 legal tenders and one ajjainst them, and if you take the income-tax casen and other instances — few, I am glad to say — yi m will see that that court is influenced ^erv largely by the prevailing popular opinion. They breathe the same air, they sleeji in the game air, they live under the game influences as other people do; and when a ques- tioii of law is presented there they are susceptible, more or less, to the atmosphere which prevails, and everybody must recognize that. I say, therefore, that Congress should not put upon that court mmeeessary bur- dens, aa they have done by tlie Sherman Act. It was a crude jiiece of legislation at best, and that court has endeavored, in an honorable and conscientious way, to extricate itself from it, as much as it can; but it would have been much better, in my judgment, if that law had ne\er been enacted, because it unnecessarily attempts to deprive tlie State of power which they alone should exercise; it is another innovation of the General t government — it is another unnecessary step toward centralization. Gentlemen, the strict States' rights doctrine has been largely ol iscured since the war of 1860, because many issues which were in\'olved in it disappeared, when that unhappy epoch in our history closed. But the subject of the relation of the Federal Go\-ernnient to the States is one of the profoundest importance, and it should always be kept alive and green before us, when legislation of the kind involved in this discussion is contemplated, I do not assert these views as the result of political and partisan bias, liut they are influenced by independent thought and conviction. As ilr. Gladstone saj'S, the fabric of our Constitution is one of the greatest that has e\er been devised l>y human minds. If we can preserve it, as it has been handed down to us, there is not "the slightest doubt about our political equality and our progress and development." States' rights is not a party question. It has disappeared from the realm of partisan politics, and when you are inquiring into the legality of business carried on by manu- facturing corporations incorporated under State laws, and the question of restricting or limiting them, you must be warned not to encroach upon the authority of the various States; and it is very important that conscientious study should be best(5wed upon this important subject before Federal legislation is granted. It is unfortunately true that lately we are tending to nationalization. It is true that in great emer- gencies people are turning to the National Government for help, for assistance and support; but it is equally true, in my humble judgment, that such appeals should be disregarded, and that the fabric of this (Tovernment never can be sustained, in its pristine vigor and glorj', unless we keep the identity of the State governments per- fectly estalSlished as against the Federal power. And now that that great bone of contention, slavery, has disappeared, we have a chance to look at the question from an independent and unbiased standpoint, uninfluenced by sectional or partisan politics. The question of States' rights involves the \^•hole theory i )f ( air Government, and the perpetuation of our republican institutions. It is essential, in considering the sub- ject of making laws, to endeavor at all times to maintain the individual autonomy of citizenship. We begin with the household, family and domestic affairs, and we say to the village, or town, or city, or State, whichever undertakes to invaile the privacy of these relations, "You must keep your hands off." As citizen members of villages, towns, cities, or municipalities, we claim the general right to legislate for ourselves, with only so much interference from the State as is necessary for the general good of the whole people; and when we come to State citizenship we claim that the Federal Government has no power over us except that which has Ijeen delegated to it by the Constitution. In any legislation inaugurated by the Federal Government it is there- fore essential that tliere should be no encroachment upon the rights of the States as they are preserved in the Constitution. In State legislation, as against municipalities, cities, to«ns, and villages, it is e(juall>- important that the rights of these sinaller communities should not be invaded, and the same reasoning applies to the invasion of individual, domestic, family, or business affairs by the National or State Government, or any of the minor municipalities. Looking at the suliject, therefore, in the light of every fact which I have been able to discover, I see no reason why there should be any national legislation in respect to this question of aggregated capital. In regard to State legislation, \-ou are charged with suggesting a basis for homo- geneity of laws upon this subject'. Nothing ajipeals to me so strongly as that jiropo- sition. The draftsman of the act which createil y(jur commission had in view the possibibty of vour reaching a conclusiim u]>on which you could not conscientiously recommend national legislation, and he has carefully given you the power to make recommendations bv which homogeneitv on this subject between all the States could be established— similar laws framed on the same line— the States to take up this great question and legislate ip a uniform v ay. A recommendation emanating from this 1162 HEARINGS BEFORE THE INDUSTRIAL COMMISSION, commission ought to have the profoundest weight in all the States, especially if it is accompanied l)y reasoning which appeals to intelligent men. Therefore I submit that if you recommend legislation at all, it can only be in the shape of proposals to the different States. And if it is true that any corporation in this comitry — I do not care which corporation it is — is in possession of franchises, or is in ]>ossession of rights, or is the holder of privileges which are not shared by other corporations or individuals, then I say if you are satisfied of that fact, level your legislation against it siieciiically, and do it clearly, and the people will applaud you and the courts can intelligently sustain you. As I see the subject, witliout having the whole light before me as you have, sitting here patiently, as you ha\'e l)eeii, for months, and gathering in all the statistics, facts, and opinions, it seems to me that the legal remedies in the various States are ample to-day to redress all grievant'es which may exist, and about which I now wish to talk. TIIEEE INTERESTS, THE PIELIC, THE STATE, THE STOCKHOLDEE. There are three classes of persons who are interested in the remedies appertaining to aggregations of capital: First, there is the public; second, the State; and thirdly, the stockholdei-s, and creditors who may be classified with the stockholders, because their rights are somewhat similar. Xow, let me first take up the question of the public. There has been much talk, and it has received sanction from the very respectable authority of Judge Howe, in his formulation of the results of the Chicago Trust Conference; there is a strong demand in favor of more publicity in respect to these industrial corporations. Well, let us inquire what interest the public has, in what I shall now term corpor- ate wealth and corporate interests. The public — and I mean liy the public those persons who have no pecuniary or contractual interest in the corporation — is that class of pers(3ns i\ho are interested in corporations, and solely and because corpora- tions are created l)y public statutes, and whose interests can not extend beyond know- ing that the corporation is faitliful to its charter — to its obligations to the State. I take issue with the advin'ates of publicity here, and I deny that it is necessary in the broad sense in which it is demanded. 1 say that no man «'ho is not interested in a corporation has a right to know anything about it. It is none of his business. I put that proposition \'ery lioldly. I may i >e wrong, but my views are definite — subject to I'hange, but at tliis tune well fixed. I repeat, that if you guard the rights of stockholders and persons who have contractual relations with corporations, and the State continues its paramount authority over the corporations — as I shall show you it pos,«esses — and that the corporation kee|)s its contract with the State by strictly following its charter, then, and in such events, the public has no more business in its private concerns than it has in the private affairs of your household, Mr. Phillips; or your fortune, or j'our own business. Q. (By Mr. Jenks.) Are you using the word "right" there in its legal sense? — A. Or contractual. Q. AMu'n you said that they had no. more right than a private individual, you meant right in the strictly legal sense? — A. I use "right" as distinguished from authority. I mean, as a question of morals and as a question of ethics, they have no right, any more than you have to inquire mto my private business.' Q. You aie notusing it, then, in the strictly legal sense? — A. No, no; I am not. I see what is on your mind. Q. (By Mr. Phillips.) Will you allow me a question now? Then would a cor- poration lia\-e a right to offer its stock to the public A. (Interrupting.) I will come ti ) tliat ; I will take care of that. I do not have any apprehension. I will take care of that part of it, and I am glad you asked the question. y,. I am asking for information, you understand. — A. I will come to it; I will give it. The line between the exercise of governmental rights — now I am speaking as if the State were offering to make a law controlling corporations — I say that the questions as to where and when the State should legislate, and where and when it should not; as to when juivate rights intervene arid the State ,''ield, are questions of the greatest delicacy. And I do not know that I can do Ijetter than to quote to you from Mr, Burke, wlm, in my opinion, is an authority on any subject which lie has touched, at any time and in any place. But it is clear that when you come to the questiiin as to whether the State shall legislate about what concerns your domestic or business relations, I sa>', unless the necessity is overwhelming, it ought to keep its iSi'c)i|i. lli;7,ll(;.s, 1171,1177; Mr. Allen, p, llSil. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1163 hands off. You ought to allow the autonomy of household affairs and the autonomy of business to be run in accordance with the wishes of the individuals concerned, and the Government has no more right to interfere with your business than it has to go into your house and ask you what you are eating or to dictate what a'ou shall eat. The line between where tl'ie Government comes in and \\-here the State— tlie le to anybody who Ixiys on the faith of the declaration of the dividend. y. Can you conveniently ascertain that fact unless the public has access to the b(joks?— A.' "What do yon n'lean, the stockholder or the creditor? Q. xl stockholder.— A. A stockholder has the right. I will come to that ni a mm- ute. I am taking it up now in a regular wa\-. I am dealing now with the outside public before they get into the corporation, and I affirm that it is utterly impossilile for you to conceive of a case wliere the public is s\vindled or where the public loses money by corporate action unless there are adequate civil ami criminal remedies. 1 Burke on the Thoughts and Details of Scarcity, at p. 116, Eiyington editii 1)11 of isos. 1164 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. "Whether they are enforced or not is another (juestion. Now, so much for thepulslic. If the solieitude of tliose diijionents of aggretiate1 lenborough said to a man who was in court in this case which I cited from Fast's Reports:" You have not clean hands; you came into this suit specula* tively; you have iDOught into this corporation for the purpose of making this examina- tion; " and in such instances as these the courts refuse to allow examinations of cor- porate books to be made. But every bona fide holder of stock has the right to open the books of the corporatism, and e\cry court in this country will aid him to do it, and if they do not, if there is anything incomplete in the remedy in that respect, I say make it so, make it so; it ought to be so; but if you study the question I say that you A\'ill lie satisfied that a complete remedy already exists. If you want homogeneity in the rules of the different States, make it. Therefore, so far as the stockholder is concerned, his rights are amply protected at law or in equity. Now, let us come to the State. Here is where the principal question arises, and I will not differ with the most radical exponent of the doctrines of antiaggregation of capital upon this question. The State is the creator of the corporation. The State dictates the terms upon which the corporate charter is granted. The charter makes the corporation a quasi-public body. The State has the absolute right not only to make examinations, but it has the right to extinguish the charter, as you would extin- guish the flame of a candle. It can destroy the life of a corporation at any moment, because the condition in the constitution of all the States now is that the States reserve the right to revoke all charters. Not onlj' that, but the State has what we call in equity a -^dsitatorial power. It has the power through its attorney-general of visiting a corporation, inciuiring into its methods of doing business, and making a thorough examination of its liooks and of its accounts and its business, if sufficient justification exists to warrant such a course. So that the States are not deficient in power, and the cry of publicity, in my estimation, is entirely unwarranted by the law and facts. But if you were to make a law by which the whole public could pass through the office of a corporation and look at its affairs as you would pass through a street a]id look through the windows into an office to discover what was going on there — I say that such a lii-ense to the general public would be infringing the rights of tlie corporation— it would be infringing individual rights; you would be guilty of transcending the power of go\-ermnent, unless you had, as I say, some overwhelmmg, powerful, good, substantial motive to do it. With the law as it is to-day, giving the State transcendental powers over corporations, protecting stockholders and creditors and tlie public as well, I lieUeve that the cry of publicity has no foundation to rest upon.' THE CiKEAT CORPOE.VTIOXS .\RE OWNED BY THE MEN OF SM.VLL ME.IXS. Now, one more thought. Some persons, I think, have an idea that these aggrega- tions of capital should be extinguished — wiped out. They make a warfare against capital, and their idea is apparently to externnnate it as being something not only offensive to the snied, liut to the eye and to the touch, something repulsive to the senses, something wdiich should be blotted out of existence, as unholy and perni- cii.ius, and vile and evil. Where will such legislation lead to, gentlemen? Have they thoiight? Certainlj' they have not, or they would not for one moment dream of leg- islation of that kind. AVh)', who constitutes the c(.>r|iorations, and where would such legislation k'ad? Legislating against corporations! Yon are legislating against your- selves. To-day e\-ery large corporation in this country has thousantls of stockhold- ei's, and e\('ry substantial lilow ainred against corpm-ations is a blow aimed against the middlemen, the men of small means, the conservative men, the thousands and thousands of stockholders who have investeil their money in these corporations, the 1 SfC p, lies. LEGISLATION PUBLIC CONTROL: DOS PAtSSOS. 1165 yiiung and old, the widow and tlu' infant, tlie ti-untee and thr executor. D.) tliesc people unaguie for one instant tliat they ytrilu- a l)lo«- at tlie millioniure, in hatterina down eorpoi-ations? Do they imagine that thev are h^tiipping- these great luilhonaires of tlieir wealth when they legislate against eorporatujns? 'Ne\ ei'l The millionaires can take care of themselves, and do it. They do not hold their milhons and nulhons of dollars in these large corporations.' And \xhen you hear of this hankint; house, or that banking house, taking 10 or lo or 20 milhons of bonds or stocks, why, it only means that that is the sonrce thrfiuuh which the things reach the public. The great banking interests, tlie great piomoters nf these connnercial enterprises, retain but comparatively' small interests in these colossal industrial corporations, and when legislation is made against them, remember that you are striking at your fellow- citizeus whom you ai'e meeting everyday; the man of conservative wealth, or the man who has put his little sa\ings into corporations to enable him to support his family and children. It is a cruel mistake, not to say blunder, to discuss these ques- tions upon the lines of wiping out I'apital and exterminating it. This is as senseless as impossible. One more thought and I shall close. In connei'tion with this crusade against aggregated capital, it is fashi(jnable to cry (jut against individual wealth. There is not in the political history of this i-ountry any appeal so demagogic, unnatural, unfounded, and unsustainable, as that whicl'i is "made against wealth." The instinct of envy, or the worst passions of prejudice, or demagogism and ignorance, lie at the base of such appeals. Because you and I have not been fortunate enough tcj accumu- late wealth is no reason why we should undertake to criticise and find fault with those who have gotten it legitimately, much less seek to depri\-e them of it. Eespect for the goods and property of others is the basis of human society. It is demanded by social duty; it is inspired by gi.iod manners; it is inculcated by divine rule, and should be rigidly enforced by civil law and authority. The professional politicians of this country should understand that the free and unlimited opportu- nities, iirducenjents, an-. A\'ho are the men A\ho occupy tlie elegant residences on Fifth a\enue and on other avenues of the great cities of the country? Not men wdio were born ■ Sec p. 966, and footnote. -'Lecky's History, Englaud in tlic Eighteenth Century. 1166 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. into the \\ orld with large means, but men who from their infancj' were thrown out upon their own resources, and hy hard work, skill, and luck have acquired fortunes. It should be a matter of pride to point out these men as types of American citizen- ship and as proper incentives to young people of the present age. Any onslaught, premeditated or othenvise, made upon tlie property of such a class of people is not only senseless and ridiculous, but it aims at the whole root of the social organization. The American nation is neither in its decline nor in its dotage. Men may climb into prominence on the steps of temporary argument and unfounded appeals to pas- sion and prejudice; demagogism may temporarily capture the multitude; but the American j leojile can not al ways be deceived. Those who seek to allure the laboring and agricultural classes, or others, into the approval of schemes which have not the sanction of good sense, history, judgment, and constitutional law will sooner or later come to grief. Now, gentlemen, I think I have trespassed enough on your time, and I will now close, with my sinceie thanks for the patient manner in which you have listened to me. SPECULATIVE OEGAXIZATION — OVEKCAPITAHZATION. (.J. ( liy Mr. Jenks.) You have been speaking particularly of the corporations that you think have been organized for the carrying on of legitimate liusiness for the ijenetit of the public at large, as well as nf the stockholders and managers? — A. Yes. Q. Ill your judgment, are there corporations that are organized primarily for spec- ulative ]iurposes instead of for legitimate purposes? — A. Not any of the large ones. Q. It is your opinion that there are some that are organized for that purpose? — A. I think there are a great manj^ men \\ho have gotten together these various manufacturing interests and have maile large sums of money by doing it — if that answers your question — and who have had no interest in the business ]ireviousto bringing them together. (^. And who cease to have any interest in the management of the business if it is continued? — .V. I could not say positively as to that. I should not suppose it would be good business to keep them. Q. There is, then, you think, a class of men who have made it their chief business to promote the organization of those larger combinations simply for the sake of the profit they can make in getting them together? — A. Yes; I think that is so. Q. Do you think that in the organization of these larger combinations there has been enough of this speculative activity on the part of the promoters to form any- thing like a serious menace to the financial stability of these corporations? — A. I do not want to reflect, of course, upon an>- corjiorations Q. (Interrupting.) Certainly not. — A. A\'hich have been formed. Q. And not upon any individual? — A. No. I think this, that the aggregations of corporations are like partnerships. If they are not formed on a conservative basis, they will go down, and you will have failures on the part of many of these corpora- tions whicli have already been formed, because of overcapitalization. n. You think, then, that within the last L' years there has been so much over- capitalization that it is likely to result in the near future in something like a specula- tive Wall street crisis?— .\. I think this: Of c'jurse, there can not be a failure of a coriioration which is organized on a basis of preferred and common stock, because preferred and common stock give the stockholder no right as a creditor, and as long as the corporation can go on and pay its debts it is all right. But while there may be no failnivs in the sense of bankruptcy — technical, legal bankruptcy — there would be a failure on the part of the owners of the preferred and counnon stock to receive dividends. PUBLIC S'I'ATEMEXTS OF WHAT TS EECEIVED FOR STO( K WILL NOT DIMINISH Sl'ECUL-V- TIVE PROMOTINO, BUT WOULD OIVE INVESTORS SOME PROTECTION. (I You stated that, in your judgment, it was fair and ])roper that stock should be issued for cash, as 1 understood it? — A. Yes. Q. And also for property, and alsateiits, for trade-marks, brands, and for good will. Do you sec any harm in having the articles of incorporation state how much is issued for each of these thing.s? — A. In most cases, no; in gome cases, yes. In England they require that everything should be stated in the prospectus under the companies act, I"or instance, the man who promotes the comiiany must state how mnch he makes; it must be stated how much the owner received in .shares, in stock. ,\n(l I do not know of any reason whv that should not be done here. LEGISLATION PUBLIC CONTROL: DOS PASSOS. 1167 Q. Do you think that if that were done here it would tend to diminish the lorma- tion of speculative companies? — A. Not in the slightest. They form 10 over there where we form 1; and if you will go into a London solicitor's otfice, where I have been many times, you will find a class of men tliere who will draw up a pmspectus in a way that will simply make you dizzy, as the boys say; and they find means to beat that devil around the bush. So that 1jy one subterfuge or another, pardiiiuil)le, legal, they arrange everything just as they want it. But, as a matter of fact, as you know, the prospectus under the companies act must state everything, so that the public knows just as much about the interior as the men who are putting it out; and I frankly say, I see no reason why it should not be done here. Q. You think, howe\er, that the making clear to the public just what the nature of the organization is will not protect the honest, legitimate, well-meaning investor? — A. It will not protect him when the enterprise itself is not good. Of course, you can not devise any plan liy which the State can guarantee every man that goes into a stock speculation that he is going to make money. If you can, I should get at that, because I have been caught myself so i iften that I should like to 1 le reimbursed. But I mean that so far as keeping the public out is concerned, if you have methods w hich prevent fraud, which we have here, and enable you to punish the authors criminally and civilly, you have gone about as far as you can go. For instance, you may get OTit a prospectus to-morrow for a gold mine. You and I look at it, and then I say, that is going to be a great thing; you say, it is not. I will go in and you stay out. I may make money, or I may not, and you do not make the gamble. After they have gone 100 feet down, they strike nothing but mud, or they may strike a great bonanza. Q. With reference to a manufacturing business, which is quite tlifferent from the minmg business in many ways, the statement of the valuation that is placed upon the plants, which are running plants, and which anybody can inspect, the amount that has been paid for patents, for trade-marks, and so on — if these were stated in the prospectus, would it enable an investor who wished to put in considerable money to form a better judgment, in many cases, than he can now as to the probable future of the st(3ck?— A. Yes; I think it would. Q. In that way you think it would be something of a protection? — A. I think it would; I do not see any objection at all to that. PHOTECTIOX OF STOCKHOLDERS. Q. Is it a fact, as is so freciuently stated,' that a large proportion of the corporations as they are now organized can be so managed, and are so manage your mind that there must be a bonus.. The bonus is predicated upon what will be the results of the combination. For instance, a man says, "I am making $5,000,000, I am making 10 per cent, but if I combine, the effect of the combination will enable me to make 15,000,000 more." The great secret of all manufacturing combinations is the economies they effect. Q. In your judgment is it true — it is often asserted — that in addition to the saving that comes from the economies there is -also an additional source of profit in their added i«jwer over prices — the poi\"er to raise prices? — A. "Well, I think the very min- ute they g(j to raising their prices tliey invite competiti(jn. You have that assurance. If you « ill look at it and study it jou will find that is the case. Q. The sugar combination has been at work 12 years and more. Do you know during how many of those years there has been active competition? — A. I think within the last 4 or 5 years there has been acti\e competition of some kind. There have 1 )een two or three competitors. That is a matter of public history, though, and easily gotten at. Q. The reason I asked the question is this: You spoke as if you thought this com- petition A\ould come in so readily and st> promptly that the people would not he likely tn lie injured. If \ve van judge from the testimony given here, during some- thing like 3 or 4 3'ears (jut of 12 there has been acti\e competition, but more than half of the time the competition has been very slight. I use this illustration because you have used it. — A. Yes. Q. In the light of these facts, do you think we could rely upon competition alone as a sufficient regulative for too high prices? — A. I think that with conservative management, with the fact before every man that if he put prices up he would invite it, that would he sufficient to control the management. PATENT MONOPOLIES. (.),. You have spoken also of the fact that there is a monopoly wherever a patent has lieeii issued, and as if in a good many cases that monnpuly might demand very high prices. A\'ould you suggest any amendment to the patent laws to prevent that kind (>f monopoly ? — A. No, I would not; because I do not see the value. I know this, that the poor, unfoitunate man who invents a patent rarely reaps the benefit of it. Q. Should you be inclined to think, then, that a law A\lnch should not permit any monopoly in a patenteil article, but should give to the |)atentee simply a royalty on every article manufactureil under that jiatent, no matter liy whom, would be wise or pioper? — A. No; I do not. I do not see any reason why you should take away the incentive which the ] latent law gives I ly dividing the amount which the man is to receive by ])]acing liefore him that royalty. ^ly idea is never to tear down an old iKiuse unless you feel pretty sure that you are going to put up a better one. ody else. But the diffi- cult}' with that is that we have the Constitution of the United States, which requires uniformity, and you have to run acre iss the question how far you are ti i tax individuals who own the stock of the corporation. il. It does not require uniformity in the case of an excise ta.x? — A. An excise tax? le, to individual dit^cretion.' Nothing, certainly, can he laid down on the subject that will not admit of exce|ition,«, manv permanent, some occa- sional. But the clearest line of distinction which I could' draw, whilst I had my chalk to draw any line, ^^-as this: that tlie State ought to confine itself to what regards the State, ur the creatures of the State, namely, the exterior estal)lishment iif its religion, its magistracy, its revenue." Xow, if we levy a large tax on coriioratinns in one form or another, either property or excise tax, is not the State entitled, and ought it not, to inquire pretty closely into their affairs, even to tlie point of publicity, in order to see that the tax is fairly levied? Is not that a reason for the State's exacting publicity? — A. A\'hy, the>' do that now. Q. They do that now?— A.' They do that now in all States. Y(ni can not escape the tax collector. In a corporation he has the right to op'en your bo(jks, and he levies a tax and you are compelled to pay; there is no way of escaping him. Q. Well, I should fancy it is not quite as l)urdensonie in all Shites as it is in some. I do not suppose any uniform law can yet lie recommended 1))' Congiess or )iy this commission that would establish an)' new principles, Ijut rather one to bring all States up to the highest standard? — A. Yes. (,J. And then Burke also says in that quotation: "Its military force by sea and land; the corporations that owe their existence U) its fiat; in a «-ord, to everything that is truly and properly public, to the public peace, to the public safety, to the public order, to the public pri isperity . ' ' It is the very pi lint I would make. Corpora- tions are a fair subject for tlie State to meddle with. — A. Undovdrtedly.. P.VKTI.i.L RESTEAIXT OP TE.VDE IS AGAINST THE COMMON LA^\-. Q. You then mention at another point — I want to go into the law of restraint of trade. What you said, if I am right, was tliat there is no such thing as monopioly now in the world in a strictly common-la\v sense, and then ynu said that even in a practical sense there is no monopoly. There are some, hciwever, that are in iin-i5m- plete restraint of trade. The courts do not only concern themselves with a com- plete restraint of trade; and tliis is the thing I want to ask, if the common law did not put down combinations that were only partially in restraint of trade. — A. Yes; on the ground of public policy. In the Addyston Case, which has just been decided, the acts would have been held illegal under the common law, and it did not neeil that statute at all. Anybody interested in the Addyston Case I'ould see that, because that was the most absurd — I may say to the gentleman who drew the agi'cement that it was a flagrant violation of pnl)lic policy — that agreement. Q. That case was exactly what I had in mind. I had it noted down here. Now, in both the common la\\- and liy our Supreme Court, recently, the principle has been reaffirmed that a combination which is only partially in restraint of trade is never- theless obnoxious to the common law? — A. Yes. Q. But that being so, it is urged by the opponents of trusts, if it is true that there is a practical — I do not say complete monopoly, but a practical partial monopoly, practical partial restraint of trade, resulting from some of these large cimibinations, it is not only the duty of the legislatures to pass laws to prevent it, but is it nrit already the right of the courts to apply these principles as of common law? — A. "\\^ell, they do. Q. Exactly; they do that. You diIaryland Railroad. Then you go a step further and you put half the shares of the :\Iarylanil Company again into the trust of three individual trustees. Those three individual trustees have half of that, plus one share. Will they not control the real property which represents the value, that is, actually, the Jlary- land Railroad?— A. Yes ; that has been done in two instances recentlv, one of which is fast going out and the other is just being considered. I know of two corporations and I think it a very good thing, for the reason that it makes the management per- manent and leads them to have a permanent policy. Q. But that is a question of merely 2 and 2 make 4; and they could go on and make new companies after new companies, just like Chinese boxes, one inside of the other, until you got at first one-half, then one-fourth, one-eighth, one-sixteenth, finally one thirty-second of the st(3ck of the real corporation to control it. That could be done? — A. Yes; and if the stockholders show as little interest in properties as they do now, it will continue to be done, and if you go to a stockholders' meeting you will find that it is so. Q. You do not think there is any reason for any law attempting to regulate it? — A. On the contrary, it is ^'ery Ijeneficial to have permanent uniform management. Q. For instance, it is possible, of c( >urse, to pass a statute that you can not give irrevocable proxies — that is, you can not separate the voting power of stoi'k from the real ownership. — A. That exists already in some States. Q. That does in the simple case of proxies; and so that rule in regard to the transfer of stock under trust. You would not be in favor of any such restriction? — A. I would not. FREIGHT DlSCEI.MIX.\TIONS — POOLIXU :S THE KEIIEDY. Q. (By J\Ir. Kennedy.) Many witnesses ^^•ho have come before this commission have spoken about freight discrimination. Railroad presidents have admitted the evil. Some of the witnesses claim that these trusts have been built up through the benefits they receive from these railroads in the May of rebates, freight discriminations, etc. I should like to hear from you as to a legal remedy? — A. I think so far as discrimina- tion is concerned it ought to be abolished, and I think if you will grant to these railroads what they want — the right to pool — and give them the right to operate their roads in a reasonable way, that those things will disappear. That seems to me to be a practical way of remedying that evil, and I believe railroad men are in favor of that view. Q. You concur with the railroad people, then? — A. Yes. Q. (By Mr. A. L. H.vrris.) Under what restrictions would you grant that privi- lege? — A. AVell, I ha-se not thought exactly about that. I should ha\e to studjthat over. It depends on the form of the contract largely. ADDYSTON PIPE C.\SE. Q. (By I\lr. Clakke.) In youropinion has the decision of the Supreme Court in the Addyston pipe case turned upon the illegality of corjioration partueiships, or aggre- gations of capital, or does it turn upon the abuses of the powers of that particular corporation? — A. It was not a corporation. It turns upon an agreement; that was the question there. If you will read the decision— I have not had time to read it entirely; I have it in my hands — you will find that the decision of the court rests upon the construction of that agreement. There was no partnership; simply an agreement to share business in certain territories, and ilo it in a way offensive to the common law. That I understand to he the agreement, Q. Well then, m your opinion, the decision is against their undertaking to do things which were unlawful at common law? — A. Yes. Q. Rather than upon the fact that thev combined?— A. Yes; and under the fact that they combined to do it, because the court held it was clearly within the Sherman Act; that was a proceeding instituted by the United States under the Sherman Act. Q. You see nothing unlawful in combining to do a legitimate business?— A. No, I do not. I do not distinguish between combining to do business and capitalizing themselves and combining into one corporation. It would be a question of form. 1176 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. EXISTING LAW GIVES REJIEDIES ENOUGH FOE SPECULATIVE PKOMOTINQ. (,J. (By ilr. Faequhae.) Do you lielieve that there is an inchistrial stock on the New York Stock Exchange that resentation, the evils of uiisrepresentation or misstatement; they are ample to pro- tect the public, because if j-uu are going to undertake to supply them with brains (,-i. (Interrupting.) We >. A'ou mean pu])lislied in the newspapers' — A. Published in the newspapers. • J. You would not be satisfied that it shnply be filed in the office of the secretary of state'? — A. I should be satisfied. I say that if you thouglit, after y(5u had reflected about it, that it v as well to publish it, I do not see how anybody could complain. I think, as I explained liefore, that it is a reasonable request that nolHjdy sliould deny who wants to do a legitimate business.' (Testimony closed.) Whereupon, at 4.50 p. m., the commission adjourned until to-morrow morning at 10.30 o'clock. Washington, D. C, Janaiirtj 6, 1900. TESTIMONY OF MR. CHARLES CLAFLIN ALLEN. AtUirticji al lair, Si. Loiii.i, Mn. The commission met at 11 a. m., ^'ice-Chairman Phillips presiding. Charles Claflin Allen, es(i., was introduced and, after being duly sworn, testified as follows: Q. (By ^Mr. .Tenks.) Will \ou give vour full name and address, please?~A. Charles Claflin Allen, St. Louis, :\Io.' Q. Please state vour linsiness. — A. I am a lawyer. Q. How long have vou ))een practicing law?— A. Something over 22 years. Q. You have, I understand, a statement and argument prepared t(j present before the conmiission. You will make that, please, in your (nvn wa\'. The Witness. 3Ir. Chairman and gentlemen of the conumssion: I wish to state that while in some respects it would have been more agreeable to make my argument in an extemporaneous form, as is mv custom in making legal arguments, I felt that the importance of this ipiestion necessitated that I should endeavor to i>lace my ideas as far as possible in writing. I have therefore j.repared a written statement of mv views, which, with your permission, I will now present. ^ ^ \V\wn the telegram from 3Ir. Sackett, the secretary of your commission, was handed to me 3 weeks ago, and I read your invitation to make an argument concerning the legal aspect of trusts, mv hesitation in accepting the honor thus conterred upon me was not influenced by any aiiist iiooln, soon led to the invention of the trust, or rather, to the application of the principle the consumer. i\Ir. Jexks. Perhaps I had better postpone the (juestioning on that line mitil we come to it.' The A\'iTXEss. I have not discussed it at great length, but I have made suggestions as to its being a danger, and under that suggestion I would consider that I was trying to answer your last question. Mr. Jexks. Yes. The WiTNESs (continuing rea' charter to make orilinances for the better rule and government of the companv, so that they are consonant to law and reason, made an ordinance, that every brother of the same society, \\ ho should put any cloth to be dressed bv any cloth worker not being a brother of the same society shall put one-half of his'cloaths to some brothei- of the same society \\-ho exercised the art of a cloth worker, upon pain of forfeiting 10 shillings, etc., and to distrain for it, etc., and it was adjudged that the ordinance, although it had the countenance of a charter, was against the common law, because it was against the lil)ert\- of the subject; for every subject, by the law, has freedom and liberty to put his cloth to be dresse.l Ijy what cloth worker he pleases, and can not be restrained to certain persons, for that m effect would be a monopoly; and therefore such ordinance, by color of a charter, or any 83a 76 1184 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. grant by charter to such effect, would be void. 2. The sole trade of any mechanical artificer, or any other monopoly, is not only a damage and prejudice to those who exercise the same trade, but also to all other subjects, for the end of all these monop- olies is for the private gain of the patentees; and although provisions and cautions are added to moderate them, yet, res profecto stulta est nequitise modus, it is mere folly to think that there is any measure in mischief or wickedness; and therefore there are three inseparable incidents to every monopoly against the commonwealth, sc. 1. That the price of the same commodity will be raised, for he who has the sole selling of any commodity may and will make the price as he pleases. * * * And the poet saith. Omnia Castor emit, sic fit ut omnia vendat. * * * "The second incident to a monopoly' is, that after the monopol}' granted the com- modity is not so good and merchantable as it was before : for the patentee having the sole trade regards only his private benefit and not the commonwealth. 3. It tends to the impoverishment of divers artificers and others, who before, by the labour of their hands in their art or trade, had maintained themselves and their families, who now of necessity will be constrained to live in idleness and beggary; Vide Fortescue ubi supra; and the common law in this point agrees with the equity of the law of God, as appears in Dent. , cap. xxiv, ver. 6, Non accipies loco pignoris inferiorem et superiorem molam, quia animam suam apposuit tibi — you shall not take in pledge the upper and the nether millstone, for that is his life ; by which it appears that every man's trade maintains his life, and therefore he ought not to be deprived or dispossessed of it no more than of his life; and it agrees also with the civil law. * * * " 3. The Queen was deceived in her grant; for the Queen, as the preamble appears, intended it to be for the weal public, and it will be employed for the private gain of the patentee, and for the prejudice of the weal public. * * * ' ' 4. This grant is primje impressionis, for no such was ever seen to pass by letters patent under the great seal before these days, and therefore it is a dangerous innova- tion, as well without any precedent or example as without authority of laws or reason." MONOPOLIES BY PUBLIC GRANT IN THE UNITED STATES. But, Mr. Dos Passos says, and a great many people honestly and earnestly contend, that there are no monopolies in the United States. To the extent that there are no royal grants of special privileges to manufacture or sell goods, this is conceded; but it is difficult to understand \\herein a royal grant differs in fact, or in legal effect, from the more than royal grants which have been in times past bestowed by the United States Government, and by the States, and by municipal corporations, in the form of franchises for street railroads, conduit companies, and companies using or vending electricity for what is called a public use. If illustrations are needed, bear in mind the subsidies granted by Congress to railroads; (jr turn to the laAvs of Missouri of 1899, and see the statute in direct contravention of the general policy of the State, as otherwise expressei.l in its laws, whereby all except one of the street railroads of St. Louis, whose estimated value at their highest basis of estimate prior to consolidation was 130,000,000, were consolidated under such a scheme that bonds were issued for $46,000,000, and stock for $45,000,000, making a total capitalization of $90,000,000. And this was in a State which bears the reputation, outside its borders, of having the most pronounced antitrust legislation. Or, for illustration of municipal franchise monopolies, not* the case of the National Subway Company of St. Louis, which was granted the privilege of using the streets of the city for its conduits, and given the privilege of renting those conduits to others, with nothing reserved to the city except a petty franchise payment, and without power in the city to regulate or control its exercise of its public franchises. And this was approved by the supreme court of Missouri as a contract witli the t'ity which could not be violated, although the laws of the State, as interpreted in other cases, prohibited the use of public highways in the city, or ]irivate owneiship in what was in the streets, except subject to the nmnic- ipal regulations. OTHER MONOPOLIES RECOGNIZED BY THE COURTS AS E.X;ISTING. But while these monopolies, derived from public franchises, abound in all parts of the country, it is unnecessary to refer to them in order to show that the existence of monopolies in this c(]untry has been repeatedly recognized by the courts, both State and national. Fortunately for this country, its jurispiiidence is founded upon the common law, whose elasticity and whose strength have always proved equal to reaching and holding new conditions within the fundamental principles of law embodied within its system. So, when it was shown to the United States Supreme LEGISLATION PUBLIC CONTROL: — ALLEN. 1185 Court, in Munn v. Illinois (94 U. S., 113), that 14 warehouses in Chicago, controlled by about 9 business firms, charged prices which were agreed upon between the differ- ent elevators, the Supreme Court held that this was a "virtual monopoly," and Mr Chief Justice Waite, speaking fdr the court, in its opinion said: "Looking, then, to the common law, from whence comes the right which the Constitution protects, we find that when private property is 'affected with a public interest, it ceases to be juris privati only.' This was said In' Lord Chief Justice Hale more than 200 years ago in his treatise De Portibus :Maris, 1 Horg. L. Tr., 78, and has been accepted with- out objection as an essential element in the law ever since. Property does become clothed with a public interest when used in a manner to make it of public conse- quence, and affect the community at large. When, therefore, one devotes his prop- erty to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled liy the public for the common good, to the extent of the interest he has thus created." Efforts have been made to minimize the infiuence and effect of Munn v. Illinois, and it has been criticised in some respects, but in spite of slight and criticism it is the law of the land to-day. It has lieen approved in two cases (Budd i: New York, 143 U. S., 517, involving the New York grain elevator law, and Brass r. North Dakota, 153 U. S., 391, involving the Dakota warehouse law) . In spite of the storm and the stress which has been raised in the efforts to reduce its effect, for the benefit of pri- vate interests, it still stands hke a light -house on a rocky shore. It illustrates more clearly, perhaps, than any other case in this country, the perpetuity of the common law. Mr. Spelling, in his work on Trusts and Monopolies, section 130, says; "In the case of State r. Standard Oil Trust (Ohio, 30 N. E., 279), much was said in favor of the objects of the Standard Oil Trust and what it had accomplished. But the court remarked that it might be true that it had improved the quality and cheapened the cost of petroleum and its products to the consumer; but such was not one of the usual or general results of a monopoly; and it was the policy of the law to regard not what might but what usually does happen. Experience shows that it is not wise to trust human cupidity where it has the opportunity to aggrandize itself at the expense of others. "The claim of having cheapened the price to the consumer is the usual pretext on which monopolies of this kind are defended, and it is well answered in Richardson v. Buhl, 77 Mich., 632 (43 N. ^V., 1102) . After commenting on the tendency of the com- bination known as the ' Diamond Match Company, ' to prevent fair competition and to control prices, Champlain, J., said: 'It is no answer to say that this monopoly has, in fact, reduced the price of friction matches. That policy may have been necessary to crush competition. The fact exists that it rests in the discretion of this company at any time to raise the price to an exorbitant degree.' Monopolies have always been regarded as contrary to the spirit and policy of the common law." Some of the clearest and at the same time strongest utterances concerning the exist- ence and character of monopolies in this country are ti > be found in the decisions of the Supreme Court of the United States. In United States v. E. C. Knight d.., LSe U. S., 1 (1894) , Mr. Justice Fuller, writing the majority opinion, though holding that the American Sugar Refining Company did not violate the antitrust law of 1890, because the monopoly was a monopoly in manufacture and not in interstate commerce, nevertheless concedes the existence of a monopoly (p. 11), and says (p. 16): "All the authorities agree that in order to vitiate a contract or combination it is not essential that its result should be a complete monopoly; it is sufficient if it really tends to that end and to deprive the public of the advantage which flows from free competition." In the same case, Mr. Justice Harlan, in a very exhaustive and learned dissenting opinion, says (p. 2.5) : "But a general restraint of trade has often resulted from com- binations formed for the purpose of controlling prices by destroying the opportunities of buyers and sellers to deal with each other upon the basis of fair, open, free com- petition. Combinations of this character have frequently been the subject of judicial scrutiny, and have always been condemned as illegal because of their nci'essary ten- dency to restrain trade. Such combinations are against common right and are crimes against the public. ' ' Mr. Justice Harlan cites and analyzes a number of t'ases from other States, which sustain the proposition above quoted. Among them arc: Morris Run Coal Co. r. Barclay Coal Co., 68 Pa., 173, 8 Am. Rep., 159; Arnot /•. Pittston & E. Coal Co., 68 N. Y., 558, 23 Am. Rep., 190; Hooker v. Yandewater, 4 Denio., 352, 47 Am. Dec, 258; Stanton v. Allen, 5 Denio., 434, 49 Am. Dei'., 282; Saratoga Bank v. King, 44 N. Y., 87; Central Ohio Salt Company >: Guthrie, 35 Ohio St., 666; Craft v. McCon- oughy, 79 III, 346; People v. Chicago Gas Trust Co., 8 L. R. A., 497, 130 111., 269; 1186 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. India Barogiess which has been made by this countrv; a progress which has brought the United States to a position where it is threatening the manufacturing industries of nearly every European nation, and where it may claim, in many respects, if not in most, to be the leading nation of the world. One of the difficulties in taking a position against unlawful combinations is the possible danger rif an assumption concerning the basis of the existing evil, which, if acted upon, might tend to interfere with legitimate develop- ment. Nevertheless, the fact remains that as the statutes stand to-day, and as they are interpreted by the courts, the corporations, even the pri\-ate corporations, though the creatures of the State, are too far independent r>f the State and too little within the regulation and inspection of the State. If this be true of private corporations, how much more forcibly does the criticism appl\- 1. 1 quasi-public corporations, such as railroads, telegraph and electric companies, street railroad companies, and others whose basis of success rests upon a public franchisi-, Hert' will be found a most potent factor in the dangerous conditions which face us. Quasi-public corporations, operating under municipal franchises, which thev obtain for nothing— so far as the public treasury discloses— have the right to occupy pul>lic highways. They are usually incorporated under general statutes very indifferent in their description of the powers to be conferred; they get from the public their privilege, and yet are usually greater than the public in any contest which arises. ' See Mr. Dos Passo'*, p. lli'>2. 1190 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. THE POWEK OP TRUSTS RESTS ON THE POWER OF KAILEOADS. It is in tlie railroad ci luipanies that the greatest danger hes. Having obtained from the respective States the p(.)\ver of eminent domain, and having established under their public franchises what the courts have denominated public highways, and all this liecausc they are run the(jretieaHy in the interests of the public, they have become a principal medium of establishing tlie greatest trusts in the United States. Look at the history of the Standard Oil (Company in connection with the railroads, as it is disclosed in public proceedings of various sorts — the courts of Ohio, investiga- tions of legislative Ijodies, and of Congress. Who could not acquire a large aggrega- tion of capital if his only competitor wcic recjuired to pay 35 cents a barrel for the transjiDrtation of oil, of \'\ Inch 2.5 cents a barrel was to be turned over to him?' It ia imp(issi)ile to go into a cnusideration in detail of the acts, even of the Standard Oil Com{)any, in connection with railroad rates, to say nothing of the action of number- less other trusts or attempted trusts in the same regard. INIuch of that history is before this commission in the form of evidence. Other phases of it can be ascer- tained in the reports of the Interstate Commerce Commissic apparent that the rule of political economy invoked on 1 Svc Mr. Rice, pp. 706-7011; Mr. .Vrchbolci, pp. .■i,%-,559. LEGISLATION PUBLIC CONTROL: ALLEN. 1191 behalf of the wealthy manufacturer has been iufluenced b>' the unlawful and unjust attt of the railroad company, in which the manufacturer participates. Therefore, practically speaking, the quasi-public corporation upon \\ hich the public has l)i'sti iwcd its franchise for the public weal, has disturljed pro tanto the laws of political econ- omy in a natural state. Furthermore, several of the largest trusts, notably the Stand- ard Oil Company and the coal companies, have, by c(jml)ination, obtained a practical monopoly of the source of supply by owning a large proportion, if not nearly all, of the valuable coal mines. In this class of cases the discrimination in lates has been most marked. And in furtherance of the tendency toward conilnnatiun, these coal companies have not only had the benefit of special rales, but they have combined with the railroad comjianies themselves in such a way that the railroad companies have in many instances become the virtual owners and ojierators of the coal mines. This in itself is a terrible menace. Here is a railroad company organized under defined statutory provisions as to its powers t(i act as a railroad company alone. It is not a coal-mining company, and under the law has no right to be. ' Yet in one form or another the railroad company owns or c(jntrols the coal mine. C'cnisider the natural consequence of this. The same dead hand holds the source of supjily and the means of transportation. And this dead hand is galvanized intt) a power to hold anything by the free donation from the ])ulilic of the franchise. Yet the friends of trusts,' incluiling Jlr. Dos Passos, would try to make this commission believe that there is no right in law or ethics to withdraw the galvanic battery anund to have engageil in selling coal from mines along its line. And the vice-chancellor saj-s: "Now, why has the rule been established, that railway companies must not carry on any business other than that for which they were constituted? It is liecause these companies, being armed with the power of raising large sums of mone>', if the\' were allowed to apply theii' funds to purp(.)ses other than those for which the>' were constituted, might acquire such a preponder- ating influence and command (j\'er sc^me particular branch of trade or commerce as would enable them to drive the ordinary private traders out of the field, and create, in their own favor, a practical monopoly, wherel^y the inteiests of the public would be most seriously injured." If the development of the railroad comjiany into a mine-owning company «ere the only form of acts ultra vires of which railroad t'ompanies were guilty, the situa- tion might perhaps 1 >e endured with a certain degree i if equanimity . But when the pub- lic see the same hands, the same capital, the same power which controls the railroad company controlling the sources of siqiply in oil or minerals, or both, and see that same management and control ext(,'nd to the banks which furnish the funds and control the uKjuey market, and to the quasi-public corporations which furnish public utilities, sucli as gas and water, the public, not unnaturally, pause ami reflect, and wonder how long it will be before the creature is more powerful than the creator. POWER GIVES POWER :MONOPOLY BREEDS MONOPOLY. On December 23, 1899, the St. Louis Post-Dispatch published an article which stated in effect that the Standard Oil C;omi>anv was responsible for the recint panic in Wall stieet, which cost innocent stockholders ?SO,000,000 in one ilay and forced the .great American (iovernment to conie to the rescue. .Vccording to the account, Mr. Anthony K. Brady, representing the New Amsterdam gas interests, was opimsed to the Standard Oil control. This tremend( lus financial fight was represented as being made by the Standard Oil people in order to force their rivals to throw over the New Amsterdam Gas Company by attacking the st(jcks of all the corporations in which Mr. Brady and his friends were interested. It was stated that in order to aci'onqalish the purpose certain banks were used to effect an artificial money stringenc /, and that foreign exchanges were juggled by the same financial agencies. Whether or not thi? 1192 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. report was true is of less consequence than the fact that such a report was possible. If not true, it at least illustrates what might, and perhaps may yet, come to pass in a much more exaggerated form. To the thoughtful reader it must have suggested the idea that a comparatively few men, with their enormous wealth, could make and unmake fortunes in a which they are accustomed. That each State has the power to impose the conditions upon which a foreign cor- poration may do business in its territory is practically undisputed. :\Ir. Edward Keasbey, in an article in the 12 Harvard Law Review, page 1, savs: "The Supreme Court has * * * repeatedly decided that a State may impi..«e"such conditions as it jileases u]i"n the doing nf any business within its borders, and that unless the con- dition be complied with the prohibition is alisolute." (Citing Allge\-er /■ Louisiana 165 U. S.,578.) \ P o . The fourth proposition al>o\e suggested is based upon the idea that the way to pre- vent combinations is to reach the people who enter into tliem. After all, while the corporate entity is the thing to which the law technically lodks in dealing with a corporation ordinarily, the stockholders are the living representatives of the fictitious being. Furtliermore, the combinations which are in restraint of trade, and which tend to create a nwnopoly, necessarily implv individual intent. There is in the idea always the suggestion of a moral factor, a living being, capable of thinking, and feel- ing, and acting upon his thoughts and feelings. In deahng with boycotts the courts have always held them to be essentially con- spiracies within tlieuiseh-es. The term "boycott" is equivalent to conspiracy. If this be true concerning laljoreis, who conspire by Iwjycott U> injure other laborers or other people, it is quite as indisputable that a combination among capitalists, for the purpose of fixing prices and limiting outputs, and thereby depriving others of their respective rights, is a conspiracy. If, then, the effect of that conspiracy is in general restraint of trade and tends to produce a virtual monopol}-, the laws should be so framed as to interfere with those who, having stocks in local' corporations, enter into agreements contrary to the law. The fifth suggestion is predicated ujion the powca- of Congress to legislate concern- ing interstate commerce. Plainly, a State lias the right to prescribe upon what con- ditions foreign corporations shall do business within its territory, except as that right is liniiteil by the interstate commerce clause. Now, a corporation having no natural rights, a foreign corporation has no inherent right to do business in another State. That it may now ship goods into such other State, under the interstate commerce clause of the Constitution, is due t(j the existing acts of Congress, or to the silence of Congress on the subject, and the inferential rights that arise therefr(jui. But if Con- gress speaks, and prohibits such corporations from going into the State prohibiting them, what legal right of such foreign corporation is infringed, and under whal constitution? In the Original Package Case (Leisy r. Hardin, 135 U. S., 100) it was decided that a statute of Iowa, which prohibiteIr. Chief Justice Fuller, in stating the groimds upon which the decision was founded, said: "Whenever, however, a particular power of the General Government is one which must neces.sarily be exercised bj' it, and Congress remains silent, this is not only not a C( mcession that the powers reserved by the States ihay be exerted as if the specific power had not been elsewhere reposed, but, on the con- trary, the only legitimate conclusion is that the General Government intended that power should not be affirmatively exercised, and the actii.m of the States can not be permitted to effect that ^\'hich would be incompatible with such intention." In other words, the Supreme Court of the I'nited States decided in that case that the silence of Congress was reservation of the l)0^^■er, and any action of the State dur- ing that silence w hich affected interstate t-ommerce was so far void. Congress having passed an act to remedy the disturbance of the State police power caused by the Original Package decision, that act came up for consideration in the i--ase of In re Rahrer (140 U. S., 545) . The act pr(jvided that liquors transported into a State should be subject to the operation and effect of the Isma of such State, to the same extent as though produceil in such State. Mr. C'hief Justice Fuller in that case said: " The C(jnstituti(3n does not provide tliat interstate C(jmmerce shall be free, taut, by the grant of this exclusive power to regulate it, it was left fice, excejit as Congress might impose restraint. Therefore it has lieen determined tliat tlie failure of Con- gress to exercise this exclusive power in any case, is an expression of its will tliat the subject shall be free from restrictions or impositions upon it by the sevei-al States. (Robbins c. Shelbv Taxing District, 120 U. S., 4S9.) And if a law passed liy aStatein the exercise of its'acknowledged jKjwers, comes into conflict with that will, the Con- gres.s and the State can not occupy the position of equal opposing sovereignties. Becauhe the Constitution declares it supremacy, and that of the laws passed in pursu- ance thereof." 1196 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. So also in the recently decided ease of United States v. Addyston Pipe and Steel Company, Mr. Justice Peckham said: "Under this grant of power to Congress, that body, in our judgment, may enact such legislation as shall declare void and prohibit the performance of any contract between individuals or corporations where the natural and direct effect of such a contract will be, when carried out, to directly, and not as a mere incident to other and innocent isurposes, regulate to any substantial extent interstate commerce." The Supreme Court having thus so clearly laid down the rule that interstate com- merce is not necessarily free, but is subject to regulation and limitation by Congress, there is no reason why the plan suggested in point 5 aljove may not lawfully be car- ried into effect. The same argument applies to the sixth suggestion, but in addition it may be said that the right to enjoin that which is by statute of the United States declared to be unlawful has been repeatedly recognized by Congress. In the interstate commerce act of 1889, the antitrust act of 1890, and the tariff act of 1894, Congress empowered courts of equity to restrain violations of the statutory prohibitions against monopolies and trusts. In addition to these statutory precedents there has always existed a power in courts of equity to enjoin acts ultra vires, at the instance of the Attorney-General, when such acts were injurious to public right. An instance has already been cited, in the English case of Attorney-General r. Railroad Company (1 Drewry & Smale, 154) , where the chancellor enjoined the railroad company from carrying on a coal business as being contrary to its charter and in violation of public right. And the authority is well settled by a number of decisions, English and American. That Congress has wide and ample powers to legislate concerning matters which affect interstate commerce can not be doubted. Said Mr. Chief Justice Marshall, in McCulloch V. Maryland (4 Wheat., 400) : "The Constitution of the United States has not left the right of Congress to employ the necessary means, for the execution of the powers conferred on the Government, to general reasoning. To its enumeration of powers is added that of making ' all laws which shall be necessary and proper for carrying into execution the foregoing powers and all other powers vested by this Constitution in the Government of the United States or any department thereof.' * * * * It must have been the intention of those who gave these powers to insure, so far as human prudence could insure, their beneficial execution. This could not be done by confining the choice of means to such narrow limits as not to leave it in the power of Congress to adopt any which might be appropriate, and which were conducive to the end. * * * * To have prescribed the means by which Govern- ment should, in all future time, execute its powers, would have been to change entirely the character of the instrument, and give it the properties of a legal code." Gentlemen of the Industrial Commission, you have before you a difficult and deli- cate task. You have had under consideration a variety of topics besides the subject of trusts, but surely you have had none of greater importance. Notwithstanding the able argument which you have heard in favor of aggregated capital, it must be appar- ent to you that there is something in the question of trusts which was not covered by that argument. How far that omission has been supplied and how far the objections •have been answered is a matter of small consequence if out of this argument you can derive one thought or suggestion which helps you to reach the true solution of the problem confronting you. In what has been said there has been but little effort to consider the future of trusts from a strictly economic or commercial point of view. Doubtless, the remark attrib- uted to Attorney-General Griggs is true, and, in an immediate, direct, financial sense investors in many of the so-called trusts will be the worst sufferers. Some of the trusts are already shaking, and the explosion which is almost certain to come in a year or so is likely to be loud and disastrous. But this temporary and local condition does not affect the main question. Those which exi)lode fir.st are likely to be the least dangerous. But, if the position taken in this argument is true, the temporary success or failure of individual organizations is of little concern, compared with the vital question of the wrong done to the public by combinations, which are unlawful, or which, in the furtherancte of justice, should be made unlawful. The laws of trade are more potent than the statutes of the State. Political economy will ultimately evade the effect of judicial decisions. But if the public are willing to create artificial beings with power to disturb the laws of trade and the rules of political economy, they must be pre- pared to suffer the fate of the maker of the Frankenstein, which used its senseless, unfeeling power to destnjy its maker. That this argument has been so largely made up of quotations is not accidental. An examination of the authorities discloses such a wealth of ideas, expressed in the LEGISLATION — PUBLIC CONTROL: — ALLEN. 1197 choicest and most accurate language, by judges of the greatest distinction, speaking ex cathedra, that no one could hope, by the expression of his own ideas merely, to furnish a fitting substitute for the originals. Besides, that which is quoted stands not as the opinion of an individual, but as the recorded wisdom of the judiciary, binding upon all men alike. From those decisions it is obvious that there is such a thing in this country as a trust, within the definition first stated in this argument; that there is such a thing as a monopoly, which the courts condemn and declare void; and that there is, in the language of statutes and in the principles of the com- mon law, sufficient vitality to meet and cope \vith unlawful combinations. If some unlawful combinations have continued to thrive, in spite of adverse decisions, it indi- cates that there are shrewd lawyers off the bench as well as learned judges on the bench. Nevertheless, the history of antitrust legislation and litigation shows, that while the trust evil has not been overthrown, the trusts themselves have been driven to adopt ever-changing forms to escape detection and punishment. The laws were first formed to encourage aggregations of capital in the hands of corporations. The ^gregations of capital have advanced beyond the design of those who first created the corporation laws. The laws are following close after them. In so far as the aggregations of capital are the result of natural economic laws, legislation ought not to interfere with them; but in so far as they are essentially unjust and oppressive, they will ultimately be crushed by the slow-moving power of public authority as the expression of public opinion. Whereupon at 1.05 o'clock the commission took a recess until 2 o'clock p. m. Washington, D. C, iSalurday 2i- »»., Janiiary 6, 1900. The commission met at 2.20 p. m., Vice-Chairman Phillips presiding. Mr. Chakles Claflix Allen again on the stand and examination resumed. MONOPOLY DOES NOT NECESSAKILY IMPLY CONTROL OP NEARLY' THE WHOLE PRODUCT OF THE COUNTRY. Q. (By Mr. Jenks.) You stated in your argument that an organization like that of the Federal Steel Company, which was made up of corporations not engaged in the same line of industry, but of corporations that contribute one to another in the way of furnishing raw material, did come under your definition of a trust.' I wish you would explain that somewhat more fully, because that did not seem to me clearly brought out. Let us suppose that no one of these corporations, before the combina- tion, produced more than 30 per cent of the total output of the country. Now, if half a dozen of them — mines, steamship companies, rolling mills, wire mills — we will say, combine, do they come under your definition? — A. They do. Q. Will you explain why and how? — A. I define a trust as being a combination of financial interests formed with the intention of creating a monopoly. I used the word "intention" instead of "purpose" because the word "purpose" has to my mind a suggestion that there is in the conditions of formation or the articles of agree- ment of formation an expression of that purpose. I sought to get beyond the formal expression of the pupose in the constating instruments. Q. Would you consider that an organization that did not control over 30 per cent of the output would come under your definition of a monopoly? — A. Perhaps, and perhaps not. Each case must necessarily be considered in the light of the specific facts environing it. I endeavored to say that there were many consolidations of interests which no doubt follow natural economic laws. There are undoubtedly many others which do not in themselves create or immediately and appreciably tend to create a monopoly. Therefore, as I said in the beginning of my written statement, if a combination had not in it the intention of creating a monopoly, it does not come within my definition of a trust. I want to add, however, that, hypothetically, if I saw a great railroad company forming a combination with the original producers of an entire region, though only a part of the entire country, and with a steamship com- pany whose facilities were necessary for the continuation of the shipment from the source of supply to the point of consumption, and especially if I saw added to that various financial combinations which collaterally aided in the combination, I should say that for the purposes of mv definition that was a trust. Q. You would think that it would be possible then that, although the output of this combination did not exceed 30 per cent of the total output of the country, it nevertheless would control so large a part within the locality that there would l)e a virtual monopoly of the product, would you?— A. Yes. If you will permit me to 1 See p. 1182. 1198 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. go back of the days of trusts and illustrate by something in my own experience, and give you the results of my investigation at that time, I can, perhaps, illustrate what I mean. In a certain manufacturing line, before the word "trust," in its later sense, was, so far as I know, invented, facts were presented to me upon which it appeared that in a particular industry in which mj' clients were engaged it was desired to combine for mutual interest, under such conditions that those engaged in the manufacturing industry, in the particular line, included all of what we may call for brevity the Mississippi Valley. By a usage of the business, as it appeared, these particular man- ufacturing companies never invaded territory east of the Allegheny Mountains. There were other manufacturing industries of the same kind east of the Allegheny Mountains whose market was within that limit; but the market of my clients and that of those with whom they wished to combine was completely within the Uinits which we will call for brevity between the Alleghenies and the Rocky Mountains; and there was in existence besides this a trade usage, which did not amount to an agreement, that those east of the Allegheny Mountains would not invade any terri- tory west of the Allegheny Mountains, and those west of the Allegheny Mountains would not invacle any territory east of the Allegheny Mountains. The effect, how- ever, was undoubtedly to create a pool, as those combinations were then called, which was in general restraint of trade by controlling prices and limiting output, and I so advised. Q. The matter did not get into the courts? — A. Did not get into the courts. I use that not to state what I have done, but merely to illustrate what I believe to be the underlying principles, irrespective of the modern statutes and irrespective of the mere use of the word " trusts." ARE TRADE UNIONS .MONOPOLIES OR TRUSTS? (J. Did I understand you to take the position in your argument that the attitude of the courts had been substantially the same as regards monopolies, without material change, for the last 2 or 3 centuries? — A. That is my understanding of the authorities from my investigation. Q. You called attention to the fact that ^tithin your definition would be included trade unions? — A. Yes. Q. And you called attention to some of the earlier English decisions in which trade unions were considered monopolies and were forbidden? — A. Yes. Q. Do the courts still in either England or the United States take that attitude with refei-ence to trade unions? — A. The attitude of the courts in this country and the attitude of the courts in England, as I understand it, have not been entirely harmo- nious in that particular. There has been, I believe, an unmistakable tendency toward the recognition of the necessity if not the legality of the combination of labor, and it is predicated upon the conditions which exist by reason of the combination of capital. I remember, incidentally, that Mr. Justice Holmes, in the well-known case of A^egelahn r. Guntner, in the 167th Massachusetts, in a dissenting opinion on the question of the extent to which it is necessary for strikers to go in the matter of boycott, delivers quite an interesting essay on the tendency of the times as being toward the conflict of the two great forces, and he declines to recognize the illegality; but it is to 1)6 noted that Mr. Justice Holmes's decision was a dissenting opinion. Q. Is it not nevertheless true that the courts both in England and the United States do recognize that trade unions are legal combinations for the protection of their mem- bers, for the purpose of securing higher wages than could be secured without the protection of the union? — A. I think there are statutes in England, and the courts have certainly trended that way. There are also some statutes in America which are inclined to exempt trade unions from the statutes which declare invalid and, in some cases and for some purposes, criminal, combinations in restraint of trade. Q. Have the constitutionality of those statutes been called in question? — A, I am not clear in my recollection. I have a faint recollection at the moment that there has been some adjudication upon that in Illinois, but I am not sure and I am unable to answer that question; generally speaking, they have not been. Q. (By Mr. Farquhar.) Isn't there a wide difference between the trade union, regarded w ith its trust features, and a capitalistic combination, in one or two very radical points? First of all, can not a trade-uiiionist or a workingman join a trade union without regard to the amount of capital that he contributes, and has he not one vote and only one? — A. Yes; but will you permit me to qualify that answer? I look upon capital as stored labor. Q. I am looking more to the status, to find out where the workingman stands and the capitalist stands. Fii'st of all, is there not an open door for a man to join a trade union, where he has an equal voice with all others in the union? — A. There are so LEGISLATION PUBLIC CONTROL: — ALLEN. 1199 many phases of trade unionism with which I am not in detail famihar that it is wry difficult for me to answer that. I should assume that in my sim- ply coming together and voting, because they have undoubtedly exercised the power of exclusion to a point where others were deprived of a privilege. <2. Only in the exclusion feature; simply modified by the apprenticeship law or s(jmething of that kind? — A. They have, sometimes. Q. Is there a union in the \Nhole United States that has not got its open door t(i the good workingman and the fair man to come in? That is the point I wish to get at. There is no close monopoly in the union ; it is not the syndication of wealth to control the rights of other parties and every man's rights. Are they not subserved. in the organization itself and every man a unit in voting? — A. I do not think the rights are always subserved. Q. Oh, human nature, of course, fails .sometimes; I grant it. Q. (By Mr. RATCitFOED.) Do you hold that the trade union is a combination of financial interests? — A. It may be and it may not he. I shotdd saj- that if it is formcil with the intention of creating a monopoly, it is a trust. Q. Admitting for the time being that one of the purposes of a trade union is to increase wages, there are still other purposes — the purpose of shortening the hours of labor, the purpose of providing for the sickness and death of its membeis, the pur- pose of affording a decent burial to its members, the purjMise of foimding a home for disabled mendiers, etc., all intended to improve the social and moral condition of ils members. Taking all of those things into account, do you still hold tliat the trade union, even though its purpose be to inciease the rate of wages, is a <'ombination of financial interests?— A. I am not quite able to go so far as you do. I did not mean to .say so. The mere increasing of wages is not in my judgment sufficient of itself to create a monopoly. The other elements which you have mentioned are absolutely, not only not objectionable, but most praiseworthy, and shoul Seu p. 1185. LEGISLATION PUBLIC CONfTROL: — ALLEN. 1201 forth that he used the ele\ator ahiidst entirely for the purpose of storiiifr urain which he had purchased, but did from time to time purchase grain to ship to Chicago and sell in the market under contracts previously made. He did, however, engage in the warehouse Ijusiness to the extent of taking grain for storage when other pei-sons offered it and he had room. Undei- the statnte, which was vtivy gcneial in its terms, and which was to the effect that any owner of a wareh(juse who stored grain for com- pensation should he subject to the regulation of 2 J cents, I think, |ii-o\ided under the statute, his warehouse \vas subject to regulation because he had applied it to the public use under the general statute. Xotwithstauding the peculiar facts of that case, which would seem to be a very extreme application of J\lunn v. Illinois, Munn c. Illinois was sustained by a majorit\- of the court. Q. It has been substantially uniformly held, if I understood you, that it is within the pow-er of the legislatures so to control the railroads, street railways, telegraph hnes, and so on, all of these quasi-public corporations, as even to fix rates for them?— A. Yes. Q. But if I understand you, in these elevator cases, all (if them, it is simply an extension of the principle to elevators 1 lecause elevators are supposed also to be trans- porting agencies? — A. Precisely. Q. Now, the expression that I called up was, "When property is clothed with a public interest." ^A'ould you judge that this late Dakota case" would justify the extension of that expression to corporations tliat should have S(.) nearly a monopoly of some necessary of life that the public were very nmch intereste per cent of the output of a necessary of life like sugar, that does in itself constitute a virtual monopoly; and, if I under- stood you, you thought that the courts under the common law would probaljly stand ready to dissolve that corporation l)ecause it was a monopoly, and to hold it an illegal combination? — A. That is carrying the idea of the common la^\' tij an extreme extent. I should hesitate somewhat to go quite so far. If the corporation is legally organized and is conducting its business lawfully, it is a serious question whether the courts have a right to dissolve that corporation. THE IXTEXTION TO CHEATE A M(.)NOPOLY IS ESSENTIAL TO THE IDEA OF A TRUST, AND IS TO BE SHOWN BY EVIDENCE. Q. How are you going to draw the line between lawful and unlawful corporations? You used such expressions as unlawful corporations, unlawful monopolies, and so on, a great many times, and your words seemed to involve an assumption that all corpora- tions that were large enough and controlled enough of the output to have a virtual monopoly were, merely Ijy reason of that fact, unlawful. Did you intend to take that position? — A. I think' if you will analyze what I said a little more closely you will find it does not go quite s( > far. Q. That is what I wanted to find out. — A. The idea I had in my mind is very well defined in the Missouri case which I have referred to, where it is possible to trace into the incorporation itself the intent to create a monopoly. There the facts were different from what they would subsequently be made, no ilouljt. If the intent can he shown evidentially, I think the ultimate c( inclusion follows of the right to dis- regard the incorporation, to annihilate it, as contrary to the law against combinations. That was shown in the Lead Company case by the fact that the constating instru- ment or agreement between stockholders, whereby they \ested all their rights in the trustees, conferred upon them specifically the right, and instructed them, as I recol- lect it, to form a corporation to carry out the purposes of the trust. There was the evidence furnished that the corporation was a continuance of the trust. No doubt manv corporations might be formed which would not have in them the evidences of a trust, and therefore the court coul will reach a little further than a gi\'en line is (.>f less consequence, from my point of \iew, than whether they can he made hy any form of law, even b>- constiliitional amendment if necessary, to reach tliat further point, which is essentially a (juestioii of a fundamental abuse of power. Q. (By Mr. Cl.vkke.) 1 jndjiv, hy wh.at you have said in this answer, that you consider the intent in some (if ilie^e coi-poi-ations inferential from the existence of the comlMnation itself, even when it is not dcciareil in the articles of agreement. Is it not your understanding that the decision of the Supreme Court in the Addyston pipe case turns upon the aJ)uses \^■hich wi're clearly set forth in the agreement itself? — .-\. Yes; it was plainly a deci.sion based u|>(in a spci'itic agreement which the court held to be in res1i-aint of trade bet\\ecn the States, and as limiting the supply and increasing ]>rices in conm-ction with interstate conmierce. il. You have said that you would consider the Keiieral Steel Cumpauya trust. You have no evidence that there is anything in their articles of agreement that pro- poses to set up a monopoly nv to control production or prices, either generally or within a limited field, have you? — .\. I am quite sure that you will find nothing in any answer of mine that pretends to have any personal knowledge of anything con- nected with the Federal Steel Comjuuiy. 1 was answering a hy|)Othetical case in which Professor Jenks made use of illustrative terms; and even in that case I think I discriminated some\\hat. I have nothing to sa>' with reference to the Federal Steel Company, because I have not adeijuate intVirmation. Q. The mere fact, then, that a corporation carries (jn a variety of liusiness, the dif- ferent kinds ))eing contributory and he1])ful to each other, does not in your judgment constitute a monopoly or a tnist? — -\. Not necessarily, as you stated. Q. (By Mr. A. L. H.\i!kis.) As to the drawing of the line between the lawful and the unlawful comlmiations of cajiital, is not that largely a (|uestion of fact? — A. Absolutely. ^VIIA•^ IS 1NTEHST.\'I'E CO.MMEJiCE? Q. (By ilr. .Iexks.) ^o far as I am able lo judge, the differences of opinion with reference to the powers of the I'nited States courts over interstate commerce turn almost entirely upfin the definition of the term. You have used the expression several times and have cited se\eral casi-s in connection with it. ^Vill you go into the matter a little further than you did in your argument? Will you tell us just what y(jumean by interstate commerce? — A. I will try, though you have opened up a field that might lead lo my reading you a longer ]ia]ier than I read you this morn- ing if I were to attemjit to cover the whole tojiic. 1 understand the formation of the Constitution of the United States to have been based ujion two necessities: First, the necessity and the overwhelming demand of the people at that time that State sovereignty should not be given up; ami on the other hand, the recognition by the framers of the Constitution that it was not p(issible to have a I'nited States in fact without so defining the powers as to make a unified boily for all purposes for which one nation was needed. Thi' evils which had been found in the original Confedera- tion were principally deriveil from the want of central authority. It was manifest even in the ilays of the foi-mation of the Constitution that to organize what were then 13 States, with possibilities of moiv, and to let each have control of connnerce between the States, would lie to make 13 indejiendent sovereignties which would fall a])art as the members of the original coid'ederation had fallen apart. Therefore, the clause known as the interstate-commerce I'lause, giving Congress jurisdiction over interstate conmierce and all commerce with foreign nations and the Indian tribes, \\as made a part of the powers specifically conferred upon Congress, that there might be one nation for the |)urposes of commerce. I understand the inter|iretation of that clause by the Supreme Court of the Cnitcd States to have followed along a line which interpreted the power to be absolute in ('ongress the instant the question becaiiK' one of conimei-i'e betwi'eii two States. Now, commerce lietween two States may go on in a great variety of ways, and 1 could not attempt to enumerate them from memory, but I will endeavor to express myself by saying that everything which is held to be ilistinctly within the purview of commerce between the States is held by the Supreme Court of the rnited States to be retained in the powers of C'oiigress until ('ongress s)ieci(ically releases the limitation and itself defines regulations. coNciuEss siiour.n defi.xe intekstate com.merce. (J. Ill your fifth suggestion you .say that Congress should provide by statute that a corporation organized under the laws of one State under conditi' judge from j'our own answer a moment ago, noliody knoi\s exactly what interstate commeice is. The question is whether Congress can aid in clearing up that matter in its legislation itself? — A. Oh, undoubtedly. I believe that the particular funi-tion of Congress at this time is to clear up doubt b>' saying what it means and leaving unsaid what it does not mean. Q. That is, when it is legislating with reference to interstate commerce, it should define in the statute itself ]>iecisely what it means ))y interstate commerce for the purposes of that statute? — A. That is what I mean. Q. You think that it will attempt to define interstate ci mimerce on that principle? — A. Oh, undoubtedly. WHAT IS INTERSTATE COMMERCE (HESf-MED). Q. (By ^Ir. Stoison.) When a man in New York sells goods to a man in Pennsyl- vania which are paid for in New York, is that interstate commerce? — A. The sale is made in New York, the goods are shipped from New^ York to Pennsylvania, the payment is made in New York; my recollection is that the cases tend to hold that that is a contract made in New York to be executed in New York; but for the pur- poses of my point here it ought t(.) be interstate commerce. 1^ A man in New York sehs goodsto a man in Pennsylvania, but payable in Penn- sylvania; in other wi >rds, the title only passes in Pennsylvania. Does that make any difference in your mind? Is that more clearly interstate commerce than the other? — A. I'nder existing decisions, I think it is; from my point of view it ought not to make anv difference. il 1 do not thhik .so.— A. But under existing law it is, as I understand it. Q. Under existing law, of course.— A. I understand there is a distinction. (}. Then the law to-dav is that the test is whether the title jiasses after or before it leaves the home State?- A. Yes, I believe that is the main test. *i (By Mr. Phillij's.) Is an individual or a (xirporation engaged in interstate com- merce in manufacturing goods in one State aud sbipi.ing them to another?— A. Yes; yes, that is interstate commerce. statutes AKE VALU.VBLE, even IX ESFORCIXc; PKIXCtPLES OP THE COMMON LAW. (i. (By Jlr. Sti.mson.) You said that combinations of corporations in the same line of I lusiness alwavs tend to create a monopoly— that is, they seek, they have a tendency, to maintain jjrices and limit output— and such you said have been ,l {V,y Mr. Stimson.) And docs that amount after all to more than codifying coumion law? — A. Well, it is pro tanto codification, if ynu will; but while I am not an advocate of general codification, I am a believer in a certain amount of codifica- tion to carry out that same idea which I just sought to exjjrcss, namely, that if you want to ha\e the courts intelligently determine what the law shall be about the system of ele\'alors in Chicago, it is wiser to define the obligations of the managers or owners of tlie elevators than to leave the courts to probe Ijaek to C'oke's time and find a little wharf case to a])ply or not to apply, according to the individual judge's view of whether it fits the case or not. But on the other hand, I have sought in my written statement to emphasize the fact that the strength of the common law lies in the fact that w hen the statutes are silent the t-ourts will go back to tho.se primeval times and, taking a case ijased upon the simple methods of that time, will apply it to the complex methods of these times. (J. In other words, such anlitrust laws are valuable for the purpose of informing the public as to what the law is, an' are for various reasons objectionable and olmoxious to the law. Do you mean to go as far as that? — A. I am going to stand on the defini- tion, sir. I realize it is rather an extreme ground, but I exjiressed it along the lines which I have just been following as being, in my judgment, a matter whii'h is properly construed a function of the National (Tovernment; of the United Suiles Con- stitution — under proper legislation, you understand. Q. Will you carry that lieycjnd the case of being a trust? What I mean is, >our statute in ilissouri, as we have just read, provides that a coriioration of another State which is a trust within the meaning of the law of ilissouri, or belongs to a trust, shall not do business in ilissouri and shall not enforce its contracts in Missouri. Now, suppose that the laws of ilissouri require that stocks shall be paid f(jr at par, ui cash, and that stockholders shall be individually liable for delits, and that the laws of ilaryland do not contain either of these pro\isions; would you recf)nunend that the State action should go als(j to the extent of going into that and seeing what was the organization of the corporation that was coming in to do business? I see Senator Hoar has recommended that in public and pri\-ate \ery fre(|uently of late, and that is why it is in my mind. — A. The fact that Senator Hoar reconnnended it would give it very great weight with me in the first instance. I think it ought to have in it, sir, those elements ^^•hich I tried to express, as I remember, in my fifth ]ioint of general restraint of trade. Is that not it? !Mr. Sti.msox. Yes. A. In every single c(irporation for home use, or for the man\' purposes for which a corporation may be furmeil; but if the intent, or purpose, or the effect — if y(.)U will get away from the mere intent or pur] jose — is to be in general restraint (jf trade, I would liave it in that way. GRADUATED TAXATIOX THE POWER TO IXX'ESTIGATE .VS DERIVED FROM THE ROWER TO T.VX. Q. Then on the seventh and last recommendation— " Let Congress exercise the power of taxation vested in the Federal G(.i\'ernnient ; a more far-reaching power than that exercised under the interstate-commerce section of the C^onstitution." In the first place, I beg to ask whether vou think that a tax by the United States upon State corporations, determined, let us say, by the amount of their capitalization, would be constitutional? — A. I think it would. 'ond the mere paper amount of stock and debt; how can it tell what the value of tin- corporation stock and franchise is unless it goes into the earn- ings, for instance? — A. I fear I mismiderstood you. Are you asking whether they can get information from the corporation? Q. I am asking whether the taxing power of Ibe jectionable corporation; can you reach that by any process of law? — .\. And ships it to Missouri, you mean? (J. I may say ships it to himself in ^Missovni. — .\. Under the existing law I do not think that can l)e done, sir; but I sliould be disjiosed to say, frame a law by which it could l>e done. y. Your ^Iiss(.uri buyer bought his goods in Pennsylvania. Hasn't he a constitu- tional right to carry his own projierty into Missouri? — A. Yes; and as you state the proposition, I think 1 want to modify what I saiil. You can not reach it unless upon a basis of intent under some statute, and you can not, to my mind, supply the Intent; liut if that element be added, you could reach it. Q. (By Mr. Piiillii-s.) If such were the habit in Mis-ouri, to buy in Pennsylvania, or other Statis, from all or a \ery large nmnber of these trusts, and ship there, would it come under th(.' ^Missouri statute by intent to evade the law? — A. There you get what I mean as to intent; the rustom would hardly coyer it. Each case nuist stand upon its own pnxif; custom might possilily tend to show wdiat they intended to do, Init I think it would be evidential only. As I said, the custom alone would not be a sutficient basis to make a case. Q. (By Mr. F.^rquhak.) You speak of State legislation in respect to the remedies. State legislation could not give an effectual remedy unless it \vas similar in form all over the country, could it? — .V. If by that you ]nean to say that its effects would lie uniform, undouiitedl.\'. The State law has no force outside of its own domain. It might, ho^yever, under certain conditions, help ^lissouri, considered liy itself, to have a statute — even though Illinois, across the riyer, ilid not have it; it might effect a partial benefit, although that might not reach the loot of the evil. • j. At any time since the organization of tlie ( iovernnient, has uniformity of State legislation ever been secured? — \. Absolutely not; but I undertake to say there never will be, notwithstamling the very admirable efforts made by the commission and the conunittees of the American Bar Assoeiation to produce it as near as possible, the difficulty being that, if you had the legislatures of the -Irt States adopt the same law- to-day, the following legislature is not bound by the act of its jiredecessor, and would be very prone to change it according to its own fancies. If by that I seem to dis- courage the idea of trying to get uniformity, I want to say I am far from that attitiKle. <^n the contrary, I think a partial nr approximate uniformity may be created. Eyery word that has luen uttered along these lines is yaluable for that pur- pose, liecause it is all educational. It tends to form better, more thoughtful, and well-considered legislation, so that peo]>le will be salislied, not UK'rely because it is uniform— for they will not care for that in several States — but because it is the be.sf. y. Is it not somewhat of an anomaly that only a forty-fifth ]iart of the State sovereignty of the ITnited States can create a cor|)oration that can command, and IHi.ssibly control, a national market as well as an international'.' — .\. It is not only an anomaly, but it is a very serious danger. ple and the legislators ■were intelligent en(]Ugh to sec that uniformity was a greater thing than a slight local i.ibjection, and they have defeated every projxisition to amend any uniform law that we have had passed, except one, and that was in Massachusetts on the )> days of grace, which they did n the constitutional prohibitions against impairing the obligation of contracts and depriving it of its prop- erty without due process of law. It becomes subject to the laws of any other State into which it goes, and that State may regulate its operations even t( ) the extent of prohibiting it from doing any business there whatever. \Vhat a State may do with corporations of its c)\\-n creation it may do A\-ith such foreign corjiorations admitted within its territorv. (Hoper r. California, lory U. S.,64.S; New York State r. Eoberts, 171 U. S., 65.S; Orient Ins. Co. r. Daggs, 172 U. S., 557.) If, on the other hand, it be engaged in interstate commerce, then the third factor — the United States — must be introduced, for since the Federal Constitution gives to Congress the jiower to regulate interstate commerce' no State may usurp that power either l)y denyingto the corpora- tion the right to conduct business in the State (Pensacola telegraph Co. i: AVestern Union Telegraph Co., illi U. S., 1; Crutcher /■. Kentucky, 141 I". S., 47) or by regu- lating or taxing such interstate trade (Bro\Mi ,•. Maryland, 12 Wheat., 419; State Freight Tax,15 Wall., 282; Gloucester Ferry Co. r. Pennsylvania, 114 U. S., 196). If the corporation be one employed by the National Government for some end of its own, still less may the State denv to it necessary privileges or regulate its l)usiness. (St(]ckton /■. Baltimore and N. Y'. li. Co., 32 Fed. Kep., 9; Horn Silver Mining Co. (. New York State, 143 I'. S., 305.) The result of this distribution of powers under the Federal Constitution has been to leave the States largelv helpless ti.> remedy evils which are thought by the |)e(jple of the States, or of some of them, to be a menace to their welfare. In yielding c(.>u- trol of hiterstate commerce to the Federal Gcjvernment there has been naturally some serious loss to the States in general governmental i)ower, quite distinct from the mere inability to regulate commerce. In the desire to av(jid the evils of scjiarato 1212 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. and antagonistic control of trade and comnierre the States, have deprived themselves of the p(j\ver to control their own internal affairs whenever those affairs are connected in any direct way with conuiiercc between the States or with foreign nations. In this situation of affairs the question naturally arises, What is the appropriate remedy? Laying aside all suggestions of change in the organic law, it would seem that there are three po.^silde solutions: First. The ]iresent s\'stem of dual control may be maintained with an increased harmony of acti(jn among the States and lietween the States and the National Gov- ernment, such harmony of action being directed toward the stricter control of moiKjpolistic combinatii )ns. Secvjnd. The National Government may, by Congressional action, give to the States a larger, perhaps an exclusive, control of corporations engaged in interstate commerce. Third. The National (T(jvernment ma.\' take to itself a largei', perhaps an exclusive, control of corporations engaged in interstate commerce. The tirst pnjpositioM demands an examination of the constitutional provisions by which the relati\'e powers of the State and Federal ( rovernments are determined and of the effect given to these provisions Ijy judicial decisions. Three provisions of the Federal Constitvition confer upon Congress the extensive powers "to regulate commerce with foreign nations, and auiong the several States and with the Indian tribes;" ' "to lay and collect taxes, duties, imposts, and excises;"' "to establish post-oihces and post-roads."' The exercise of these comprehensive pon'ers may be said to be subject to these limitations: " Direct taxes shall be apportioned among the several States * * * according to their respective numbers;" *"no capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to betaken;"* "no tax or duty shall be laid on articles exported from any State;"* "no preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another, nor shall vessels bound tci or from one State be obliged to enter, clear, or pay duties in another;"' " no person shall be * * * deprived of life, liberty, or property without due process of law;"^ "the citizens of each State shall be entitled to all privileges and immunities of citizens in the several States." s The above powers and limitations have been the subject of a very large number of decisions by the Supreme Court. As thus interpreted the provisions maj' be said to measure the power of Congress over interstate commerce and the extent to which sui'h control has 1)een taken from the States. The conclusions nray be stated first in general terms and afterwards in the form of s]iecific applications. In general terms these conclusions are warranted: In the matter of interstate commerce the United States are but one country, (Bobbins r. Shelby Taxing District, 120 U.S., 489, 494.) fl'hat is commerce is to be determined liy the usages of the commercial world and not by the declaration of a particular State. (Bowman v. Chicago & N. W. Ey., 125 U. S., 46o; Leisy?'. Hardin, 135 U. S., 100.) The reasons which may have caused the framers of the Constitution to repose the power to regulate commerce in Congress do not affect or limit the extent of the power. (Leisy v. Hardin, 135 U. S., 100; Addy- ston Pipe & Steel Co. v. United States, 20 S. C. R., 96.) When Congress has not acted its inaction is to be taken as an indication of its will that commerce shall be free from any restrictions. (Robbins v. Shelby Taxing District, 120 U. S., 493.) State laws passed to regulate interstate commerce are invalid. (Gibbons r. Ogden, 9 Wheat., 1.) State laws passed with another intent or in the reasonable exercise of the police power, but which incidentally affsct interstate commerce, are valid if local in operation and reasonalale in their incidental effect upon such commerce. (Wilson /'. Blackbird Creek IMarsh Co., 2 Pet., 245; Mavor r. Milns, 11 Pet., 102; Coolev i. Board of Wardens, 12 Hf>w., 2>«); Comity of Mobile ?■. Kimball, 102 U. S., 691; Morgan Steam- ship Co. K. Louisiana, 118 U. S., 455; Plumley v. Massachusetts, 155 U. S.,461; Hen- nington r. Georsjia, l(i:! U. S., 299; Patapsco Guano Co. r. North Carolina, 171 U. S., 345;' Lake Shore & :\lich. So. Ry. ,-. Ohio, 178 U. S., 285.) But State laws which unreasoiialily affect interstate comnK'rce, although ])assed for local purposes or in the exercise of the police powi'r, are invalid. (Passenger Cases, 7 How., 283; Welton r. Missouri, 91 U. S., 275; Walling /■. .Michigan, 116 U. S., 446; Wabash, etc., R. p. Illi- nois, 118 U. S., 557; Robbins i: Shelb\' Taxing District, 120 U. S., 489; Leisy r, Plardin, 135 U. S., 100; Schollenbergcr r. Penns.vlvania, 171 U. S., 1.) The application of these general conclusions to specific cases enables us to appreci- ate tlic comi>arative hnjiotence of the Slates in the matter of controlling interstate commerce or the persons or cor|ioratioiis engaged in it. .V State can not exclude n foreign corporation engaged in interstate commerce. (Pensacola Telegraph Co. i' 'Art, I, S, 3. -Art. I,S, 1. -lArt. I, R, 7. 4Art. I. 2, 3. 6Art. I, 9, 4. ".Art. I, I.I. 5. "Art. I, 9. 0. SAmend. V. OArt. IV, 2, 1. LEGISLATION PUBLIC CONTROL: — HUFFCUT. 1213 Western Union Telegraph Co., 96 U. S., 1; Crutcher v. Kentucky, 141 U. 8., 47.) A State can not tax a corporation upon itis interstate cojnnierce (Bniwn p. :\IarvUind 12 Wheat. ,419; State Freight Tax, 15 Wall., 232; Gloucester Ferry <;'.>. v. Pennsyhauia^ 114 U. S., 196) , not even though created under its own la\\-s (Philadelphia, etc.". Steam- ship Co. I'. Pennsylvania, 122 U. 8., 326). Nor can it tax the agents ot such a cor- poration or of a natural person for the privilege of doing business in the State (Availing v. Michigan, 116 U. S., 446; Robbins r. Shelbv Taxing District, 120U. S., 4M9.) A State can not fix the toll on a bridge connecting it' with a sister State and owned l)y one of its own corporations. (Covington, etc., Bridge Vo. v. Kentucky, Ifii U. S., 204.) A State can not fix a rate for carrying interstate commerce. (Wabash, etc., Ruy. r. Illinois, 118 U. S.,557.) A State can not absoluteh- fix the rates for the carriage of domestic (intrastate) commerce, for if its rate l)e held unreasonably low the Icirisla- ture deprives the carrier of property without due process of law. (Fourteenth Aniend- ment; Smyth i: Ames, 169 U. S., 466.) A State can not require carriers to sell 1,000- mile tickets at less than the usual rate fixed for other tickets. (Lake Sliore and Mich. S. Rwy. (■. Smith, 173 W S., 684.) A State cannot exclude oleomargarine (SchoUen- berger r. Pennsylvania, 171 U. S., 1; Collins r. Xew Hampshire, 171 U. S., 30); nor intoxicating liquors (Bowman c. Chicago and N. W. Kwv., 12.1 U. S., 46.5; Leisy ,.. Hardin, 135 U. S., 100; Scott !'. Donald, 165 U. S., 58) ; lior immigrants (Henderson V. New York, 92 U. S., 259) ; nor even "lewd and debauched women" (Chy Lung r. Freeman, 92 U. S., 275). In the exercise of its police power a State is permitted to legislate for local pur- poses affecting the health, morals, safety, or C(Jn^•enience of its people, provided the legislation does not directly or unreasonably affect interstate commerce. A State may pass local pilotage laws (Cooley r. Board' of Wardens, 12 How., 299); harbor improvement laws (County of ]\I(jbi'le r. Kimball, 102 U. S., 691); quarantine laws (Morgan Steamship Co. v. Louisiana, 118 U. S., 455) ; laws forbidding the heating of cars w-ith stoves (New York, etc., R. v. New York, 165 U. S., 628) ; laws foi-ljidding the running of Sunday freight trains (Hennington r. Georgia, 163 U. S., 299) ; la^^s requiring a reasonable number of through trains to stop at ]>opulous centers (Lake Shore and jlich. S. Rwy. r. Ohio, 173 U. S., 285) ; but not laws requiring a through train to go out of its direct route to land passengers (Illinois Central R. v. Illinois, 163 U. S., 142); laws requiring the prompt delivery of telegrams (Western Union Tel. I'o. (>. James, 162 U. S., 650) ; laws to prevent fraud in the sale of oleomargarine (Plumlej' r. ;\Iassachusetts, 155 U. S., 461); reasonable inspection laws (Potapsco Guano Co. c. North Carolina, 171 U. S., 345) ; but not if unreasonable or a cover for the regulation of commerce (Jlinnesota r. Barber, 136 U. S., 313; Brimmer c. Kel)- man, 138 U. S., 78; Scott t: Donald, 165 U. S., 58). While the States are thus restricted and limited in their control ( if interstate com- merce and of persons and corporations engaged in it, the United States are equally circumscribed in their control of non trading enterprises and of corporations not engaged in interstate commerce or in some business o\er which the Constitution gives Congress authority. As was held in the Knight case (156 U. S., 1), the anti- trust law does not extend to a combination for the manufacture of sugar, l^ei'ause manufacture is not trade or c'ommerce. Congress, therefore, could not sujiprcss a monopoly for the manufacture of sugar, while the States could not sujipress a mon- opoly for the interstate sale of sugar. The States could exclude the manufactur- ing corporations, for since a corporation is not a citizen within the meaning of Article IV, section 2, subsection 1, of the Constitution, it is not entitled to the privi- leges and immunities of citizens in the several States. (Blake r. ilcClung, 172 U. S., 239; Orient Ins. Co. /'. Daggs, 172 U. S., 557.) But the States could not exclude the trading corporations, for the States can not regulate interstate C(.immerce. If, then, the corporations are both manufacturing and trading corporations, how arc they to be dealt with? It is obvious that the product of the sugar combination is to go largely into interstate commerce and will pass beyond the control of the States. If one State offers a refuge to the manufacturing corporatii ms, the other States are pow- erless. Forty-four States may pass uniform laws to control such comliinations; the forty-fifth may render this combined action in large part nugatory by chartering aneop]e of the United States from combinations formed to control the prices of raw material and the output and price of the finished products. lender its i)ower to regulate commerce Congress has thus far passeil but two acts calculated to aid the States in the control of monopolistic enterprises, namel.y, the interstate-commerce act of 1887 and the antitrust act of 1890. 1214 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. The interstate-commerce act was passed to regulate interstate transportation rates after it had been decided (Wabash, etc., E. r. Illinois, 118 V. 8., 557) that the States could not ret;ulate such rates within their own territory. This act, as inter- preted by the court,-, places upon interstate carriers a prohibition against unjust or unreasonaVile rates and against unjust discrimination, but otherwise leaves them as free as they were at connncin law to make special contracts looking to the increase of business, to classify traffic, to adjust and apportion rates so as to meet the neces- sities of Cdiinnerce, and generally to manage their own business in their own way. (Interstate Commerce Cdiiimissiun /■. Railway Co., 167 U. S., 479.) The commission appointed under the act is cliarged njainly with the duty of investigating questions as to the reasonaljleness of the rates established (ir questions as to unjust discrimina- tions, and is not authorized to fix rates. (Interstate Commerce Commission v. Alabama Midland Rwy., 168 U. S., 144.) To this end it may require the attendance of wit- nesses and the pi-oduction of liooks and papers. (Interstate Commerce Commission v. Brimson, 154 U. S., 447; 155 U. S., 3.) But its powers as thus defined are not extensive, and perhaps the criticism of Jlr. Justice Harlan (168 U. S., 176) is justified that "it has lieen shorn by judicial interpretation of authority to do anything of an effective cliaiacter. ' ' The antitrust act (i.'(i !Stat. L. , L'09) was passed to prohibit monopolistic combina- tions in restraint of interstate or international commerce. It has been the subject of several adjudications by the Supreme Court, and fmni these it is possible to deduce the following conclusions as to the effect of the legislation: (1) A restraint of busi- ness not included in the I'ategor^- of interstate commerce is not within the prohibi- tions of the act (United States /. E. C. Knight Co., 156 U. S., 1); (2) a com- bination which, although affecting interstate commerce, does not restrain it — that is, does not exclude the "jjcration of competition — is not within the act (Anderson v. United States, 171 I'. S., 604); {'A) any combination which restrains interstate com- merce, whether sucii lestraint ln' illegal at common law or not, is illegal under the act and may l>e enjoined at the suit of the United States, although the rates fixed by the com))ination nuiN' lie reasonable and lair (United States v. Trans-Missouri Freight Ass'n, 166 V. S., liili); I'nited States r. Joint Traffic Ass'n, 171 U. 8., 505; Addyston Pipe and Steel Co. .■. United States, L'O S. C. R., 96). The importance of the last decision rendered by the Supreme Court under this act, acronipanied as it is by the rare spectacle of a unanimous court, justifies more than a jiassing reference. In ,\ddystiin Pipe and Steel Co. r. United States a combina- tirin of iron-pipe uianufactiu'ers was enjoined ti-om carrying out a contract the pur- pose of which v.as to exclude competition among the parties to the contract. From the (ij)inion of ^Ii'. Justice Peckham, concurred in l)y the whole court, we gather these instructive conclusions as to the powers of Congress under the commerce clause of the Federal Constitution and the extent to which it is . rioH) , pointed it out very distinctly in these words: "It is true that tlie present decision strikes only at the power by create banks, but no person can fail to see that the prin- ciple involved affects the power to create any other description of corporation, such as railroads, turnpikes, manufacturing companies, and others. ' ' The legislation in question, supplemented by the dei'ision that it is a valid exercise of the Federal power, suggests the method of securing a uniform Federal control of corporations engaged in interstate commerce. A national act which should provide for the incorporation of trading companies and the reorganization of State trading corporations under the Federal act, supplemented by a tax upon the interstate busi- ness of the State corporations, would lead t(.i a uniformity similar to that attained in the case of banks of issue, and would place all such interstate business, so far as it is carried on by corporations, strictly within the control of the Federal jiower. But would such legislation be constitutional? I believe that it would, and for the following reasons: First. The power to regulate interstate commerce is unquestionably confided exclu- sively to Congress, and is restricted, if at all, liy Congressional acquiescence in the exercise of a concurrent power by the States so far as that oiierates for merely local purposes and is not designed to regulate, and does not directly regulate, such com- merce. (Gibbons r. Otjden, 9 Wheat., 1; Brown r ilarvland, 12 AVheat., 419; Cooley V. Port Wardens, 12 How., 299; The License Cases, 5 How., 504; ('ounty of Mobile V. Kimball, 102 U. S., 691; Bo\vman v. Chicago & N. W. Ry., 125 U. S., 465; Leisy r. Hardin, 135 U. S., 100; In re Rahrer, 140 U. S., 545; Addyston Pipe & Steel Co. c. United States, 20 S. C. R., 96.) Second. Where Congress is given a power it is given the supplementary power "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers" (Const. Art. I, sec. 8, subs. 18), and this includes the power to create such corporations or agencies of the Government as ma.\- be deemed necessary (McCulloch /'. Maryland, 4 Wheat, 316; Luxton (. North River Bridge C:(i., 153 U. S. , 525) . In the exercise of this power Congress has created bankmg corp( irations J 218 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. (I Stat. L., 191; V2 lb., 666; 13 lb., 99; 21 lb., 66; '22 lb., 162; Eev. Stat., p. 992); railroad and tele.avaph companies (12 Stat. L., 489; 13 Hi., 365; 14 lb., 292; 161b., 57:'.; 17 lb., 59) ; l)ri(lge nmipanien (26 Stat. L., 268) ; tlie Nicaragua Canal Company (25 Stat. L., (i73) ; .«a\ings and trust (.■ompany (13 Stat. L., 510) ; insurance company, though perha|)M tliis was while acting as a legislature for the District of Columbia (13 Stat. L., 428; 27 lb., 29) , and jjcrhaps other coriwrations. Tt has been held that tl\e States can not tax such corporations without the consent (if Congress (California r. Pacific R. R. Co., 127 U. S., 1), and that under the act of r\i;n'ch 3, 1875, they are entitled tii remove tlreir causes into the Federal coiu'ts (T'acitic Railroad Removal Cases, lb5 U. S., 2) , though diiul)tless Congress could deny them this right if it thought fit. Such corporations might, and probably would, do a domestic business within the States, but if so they \\oul(l be subject to the rule that where t^ongress creates a cor- poration and remains silent as to its merely domestic Imsiness, its silence is equiva- lent to a declaration of intention that the corporation shoulme a part of interstate conmrerce, and so the transaction one subject t(i the jjrivilege tax; but tliis difficulty is no greater than that now experienced in \'ednesday of April, A. D. 188.3. (5) Elections for trustees to succeed those herein appointed shall be held annually, at which election a sufficient number of trustees shall be elected to fill all vacancies occurring either from expiration of the term of ottice of trustee or from any other cause. All trustees shall he elected to hold their office for three years, except those elected to fill a vacancv arising from any cause except expiration of term, who shall be elected for the balance of the term of the trustee whose place they are elected to fill. Every trustee shall hold his office until his successor is elected. (6) Trustees shall be elected by ballot by the owners of trust certificates or their proxies. At all meetings the owners of trust certificates who may be registered as such on the books of the trustees may \-ote in i)erson or 1 ly proxy, and shall have one vote for each and ever\- share of trust certificates standing in their names; but no such owner shall be entitled to vote upon any sliare which has not stood in his name thirty days prior to the day appointed for the election. The transfer books may be closed for thirty days immediately preceding the annual election. A majority of the shares represented at such election shall elect. (7) The annual meeting of the owners of said trust certificates for the election of trustees and for other business shall be held at the office of the trustees in the city of New York on the first Wednesday of April of each year, unless the place of meet- ing he changed by the trustees, and said meeting may l)e adjourned from day to day until its business is completed. S]>ecial meetings of the owners of said trust t'ertifi- cates may be called bv the majoritv of the trustees at such times and places as they may appoint. It shall also be the dutv of the trustees to call a special meeting of holders of trust certificates whenever requested t(.> do so by a petition signed by the holders of 10 per cent in value of such certificates. The business of such special meet- ings shall be confined to the object specified in the notice given therefor Notice f.t the time and place of all meetings of the owners of trust certificates shall be given by personal notice as far as possil)le and by public notice m one of the principal news- papers in each State in \vhich a Standard Oil Co. exists at least ten days before such meetmg. At any meeting, a majorit\- in the value of the holders ot trust («rtih- cates represented consenting thereto, l)v-laws may be made, amended, or repealecl relative to the mode of election of trastees and other busmessof the holders of trust certificates; provided, however, that said l.>--laws shall be in conformity with this agreement. By-laws may also be made, amended, and repealed at any meeting by and with the consent of a majority in value of the holders ot trust certificates, which alter this agreement relative to the number, powers, and duties of the trust,ees and to other matters tending to the more efficient accomplishment of the objects for which the trust is created, provided only that the essential intents and purposes ot this agreement be not thereby changed. 1224 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. (8) Whenever a vacancy occurs in the board of trustees more than sixty days prior to the annual meeting for the election of trustees, it shall be the duty of the reniaininfj trustees to call a meeting of the owners of the Standard Oil Trust certifi- cates for the purpose of electing a trustee or trustees to fill the vacancy or vacancies. If an\- vacancy occurs in the board of trustees, from any cause, \yithin sixty days of the d'ate of the annual meeting for the election of trustees, the vacancy may be filled by a majority of the remaining trustees, or, at their option, may remain vacant until the annual election. (9) If, for unv I'eason, at any time, a trustee or trustees shall be appointed by any court to fill any vacancy or vacancies in said board of trustees, the trustee or trustees so appointed shall hold his or the respective office or offices only until a suece.9Sor or succi'ssors shall be elected in the manner above provided for, (10) Whenever any (.'hange shall occur in the board of trustees, the legal title to the stock and other property held in trust shall pass to and vest in the successors of said trustees without any formal transfer thereof; but if at any time such formal transfer shall be deemed necessary or advisable it shall be the duty of the board of tru>tees to obtain the same, and it shall be the duty of any retiring trustee, or the administrator or executor of any deceased trustee, to make said transfer. (11) The trustees shall prepare certificates, which shall show the interest of each ))eneHciary in said trust, and deliver them to the persons properly entitled thereto. They shall be divided into shai-es of the par value of $100 each, and shall be known ■ as "Standard Oil Trust certificates," and shall be issued subject to all the terms and conditions of this agreement. Tlie trustees shall have power to agree upon and direct the form and contents of saiil certificates, and the mode in which they shall l)e signed, attested, and transferred. The ci'rtificates shall contain an express stipu- lation that the h(3lders thereof shall be bound by the terms of this agreement, and by the by-laws herein provided for. (12) No certificates shall be issued except for stocks and bonds held in trust, as herein provided for, and the par value of certificates issued by said trustees shall be equal to the par value of the stocks of said Stam.lard Oil Companies, and the appraised value of other bfmds and stocks held in trust. The various bonds, stocks, and mon- eys held under said trust shall 1 )e held for all parties in interest jointly, and the trust certificates so issueil shall be the evidence of the interest held by the several parties in this trust. No duplicate certificates shall be issued by the trustees except upon surrender of the original certificate or certificates for cancellation, or upon satisfactory pr(jof of the loss thereof, and in the latter case they shall require a sufficient bond of indemnity. (l:!) The stocks of the various Standard Oil Companies held in trust by said trus- tees shall not be sold, assigned, or transferred by said trustees, or by the beneficiaries, or liy both combined, so long as the trust endures. The stocks and bonds of other corporations held by said trustees may be by them exchanged or sold and the pro- ceeds thereof distributed pro rata to the holders of trust certificates, or said proceeds may be held and reinvested by said trustees for the purposes and uses of the trust; provided, however, tliat said trustees may from time to time assign such shares of stock of said Standard Oil Companies as may be necessary to qualify any person or persons chosen or to be (diosen as directors and officers of any of said Standard Oil Companies. (14) It shall be the duty of said trustees to receive and safely to keep all interest and diviilends declared and paid upon any of the said bonds, stocks, and moneys held liy them in trust, and to distribute all moneys received from such sources or from sales of trust property or otherwise by declaring and paying dividends upon the Standard Trust certificates as funds accumulate, whicdi in their judgment are not needed for the uses and expenses of said trust. The trustees shall, however, keep separate accounts and receipts from interest and dividends, and of receipts from sales or transfers of trust propeity, and in making any distribution of trust funds, in which moneys derived from sales or transfers shall be included, shall render the holders of trusi certificates a statement showing what amount of the fund distributed has been derived from such sales or transfers. The said trustees may be also authorized and empowered by a vote of a majority in value of holders of trust certificates, whenever stocks or bonds have accunuilated in their hands from money purchases thereof, or the stocks or bonds held by them have increas^Ml in value, or stock dividends shall have been ' may elect themselves to such positions when they see lit so to do, and shall endeavor to have the affairs of said companies managed and directed in tlie manner they ma\' deem most conduci\e to the Ijest interests of the holders of said trust certiticates. (16) All the powers of the trustees may 1 le exercised by a majority- of their num])er. They may appoint from their o^n immber an exet-utive and other committees. A majority of each committee shall exercise all the powers which the trustees may con- fer upon such committee. (17) The trustees may employ and pay all such agents and attorneys as they may deem necessary in the management of said trust. (18) Each trustee shall be entitled t( i a salary for his services not exceeding twenty- five thousand dollars per annum, except the jiresident of the b( )ard, who may be voted a salary not exceeding thirty thousand dollars per annum, which salaries shall be fixed by said board of tru,stees. All salaries and expenses connected with or grow- ing out of the trust shall be ]>aid ))y the trustees from the trust fund. (19) The board of trustees shall have its principal office in tlie I'ity of Nt'w York, unless changed by vote of the trustees, at which office, or in some place of safe deposit in said city, the Isonds and stocks shall lie kept. The trastees shall have po^er to ailopt rules and regulations pertaining to the meetings of the board, the election of officers, and tlie management of the trust. (20) The trustees shall render at eai'h annual meeting a statement of the affairs of the trust. If a termination of the trust )ie agreed upon, as hereinafter pro\ided, or within a reas(3nable time prior to its termination by lajise of time, the trustees shall furnish to the holders of the trust certificates a true and perfect inventory and appraisement of all stot'ks and other property held in trust, and a statement of the financial affairs of the various companies whose sti^cks are held in trust. (21) The trust shall continue during the lives of the survivors and survivor of the trustees in this agreement named, and for twent>'-one years thereafter; provided, however, that if at any time after the expiration of ten years twd-thirds of all the holders in value, or if after the expiration of one j'ear 90 iier cent of all the hold- ers in value of trust certificates shall, at a meeting of holdirs nf trust certificates called for that purpose, vote to terminate this trust at some time to be by them then and there fixed, the said trust shall terminate at the date sn fixed. If the liolders of trust certificates shall vote to terminate the trust as aforesaid, tliey may, at the same meeting, or at a subsequent meeting called for that purjiose, decide liy vote of two-thirds in value of their number the mode in which the affairs of the trust shall be wound up, and whether tlie trust property shall be distributed or whether part, and if so, what part shall be divided and what part sold, and whether such sales shall be public or private. The trustees, who shall continue to hold their offices for that purpose, shall make the distribution in the mode directed, or, if no mode be agreed upon, by two-thirds in value as aforesaid, the tiustees shall make distribution of the trust projierty acc(jrding to law. But said distributi(jn, however made, and whether it be of property, or values, or nf both, shall lie just and eijuitable, and such as to insure to each owner of a trust certificate his due prnportion of the trust property or the value thereof. (22) If the trust shall be terminated by the expiration of tlie time for which it is created, the distribution of the trust pr<"iperty shall be directed and made in the mode above provided. (23) This agreement, together ^\-ith the registry of certificates, books of accounts, and other books and papers connected with the business of said trust, shall be safeh- kept at the principal office of said trustees. (Signatures.) SUPPLEJI ENTAL .iOREEMENT. Whereas in and by an agreement dated January 2, 1882, and known as tlie Stand- ard Trust agreement, the parties thereto did mutually covenant and agiee, inter re; during a prolonged absence or inability of the president or any other officer, the board may appoint substitutes pro tempore, and on the death or res- ignation of the president or other officers, it shall fill the vacancy. A majority of the trustees shall be recjuired to constitute a quorum for the transac- tion of business, but less than a quorum may adjourn from time to time and from place to place. Regular meetings of the board of trustees shall be held on the first "Wednesday of January, April, July, and October of each year, unless the same shall lie a legal holi- day, in which event the meeting shall be held on the day following. Article III. — The pn'sidciit. The president shall preside at all meetings of the ow ners of trust certificates or trustees if present; appoint or remove all officers and agents other than those electeil by the owners of trust certificates or the board of trustees; call meetings of the board of trustees, when requested l)y a majority of the trustees in writing; sign all certificates of shares, and have a general care, supervision, and direction of the affairs of the trust. He shall have power to call meetings of the board from time to time when he shall think proper; to sign I'ertificates of sliares in blank and leave them with the treasurer in sufficient numbers to provide for the promjjt transfer of shares. In the event of the death, al iseni'e, or inability of the president to perform the duties imp(.)sed upon him by these by-laws and the orders of the board of trustees, the vice-president may exercise his jiowers and perform liis duties, subject to the control of the board of trustees or executive committee. Article IV. — Hie xeeretitry. It shall be the duty of the secretary to notify the members thereof of all meetings of the board of trustees, when required by tlie president or by a majority of the trustees in writing; to attend such meetings when jiracticable; keep true recnrds of the proceedings; attest such records after meeting by his signature; safely keep all documents and papers which shall come into his possession, and truly keep the b(.>oks and accounts of the trust appertaining to his office, so as at all times to show the real condition of the trust affair.s, and shall present statements thi'rei if when required b\- the board. He shall keep books in which transfers of shares may be made liy any owner of trust certificates or his attorney duly I'on.stitufed in writuig; also a sliai'c ledger and certificate book; prepare new certificates upon the transfer of shares and sur- render of the old certificates, and keep a register (if all the certificates issued. On the dav of the annual election the secretary shall furnish for the use of tlie inspectors an alphabetical list of the naiiu's of all the owners of trust certificates wlio shall have been registered as such for thirty days prior to said clecti(jii. The assistant secretary shall perform such of the duties of the scci-etary as may lie required of him by the board of trustees. Article V. — Tmixurer. It shall be the dut}- of the treasurer to keep and aci-dunt for all inone\-s, funds, and property of the trust which shall come into his hands, and he shall render such 1228 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. accounts and present such statements to the trustees and executive committee as may be required of him. Disbursements shall only be made l)y him under resolutions of the board of trus- teep, or by the executive committee, or upon vouchers approved by the proper officers. He shall sign certificates of shares when presented to him after they shall have been sitrned by the president. The assistant treas>u-er shall perform such of the duties of treasurer as may be required of him by the l)oard of trustees. Article VI. — Exci'iitivr, ciimmilti'f. The executive committee shall possess and exercise by a majority of all its members all the powers and duties uf the board of trustees, but only when the board shall not be in session. They shall keep a record of all their proceedings, which shall be cer- tified by the secretary under his hand, which record shall be read at the next ensu- ing meeting of the l)oard of trustees. The secretary shall call meetings of this committee on the requisition of the president of the l)oard or of any of its members. Article VII. The fiscal year of this trust shall be the calendar year. Article VIII. These by-laA\s may be altered, amended, or repealed at any meeting of the owners of trust certificates ])y a vote of majority in value of all the owners represented, pro- vided, h(i\vever, that all by-laws relative to formal meetings and formal duties of the trustees and officers may be altered by the board of trustees. REVISED CHARTER OF THE STANDARD OIL COMPANY OF XP:W JERSEY. Rcxdh-ci], That it is advisable to alter- tlie charter of this company to read as below stated, and that a meeting of the stockholders be called to meet at the principal office of the comjiany in Bayonne, New Jersey, on the 14th day of June, 1899, at 11 a. m., to take action thereon, notice of such meeting to be signed by the president and secretary and given to each stockholder in person, or mailed to his proper post-office address, at least ten da}s previous to the time of meeting, as provided by the by-law. First. The name of the corporation is Standard Oil Company. Second. The locati( m of the principal office in the State of New Jersey is at the company's refinery in the city of Bayonne and county of Hudson. The name of the agent therein and in charge thereof, and upon whom process against this company may l)e served, is J. H. Alexander. Third. The objects Sov «-liich this company is formed are: To do all kinds of min- ing, manufacturing, and trading l;)usiiicss; transporting goods and merchandise by land or water in any manner; to l>uy, sell, lease, and improve lands; build houses, stnictures, vessels, cars, wharves, drs shall have power to hold its meetings, to have one or more offices, and to keep tlie books of the corporation (except the stock and transfer books) outside of the State, at such places as may be from time to time designated by them. I certify that the above resolution was adopted Ijy the board of directors of the Standard Oil Company at a meeting held on the 26th day of 31ay, .\. D. 1899, a majority of directors being present and voting in favor therey agent, or by proxy, and shall have one vote for each and e\ery share of stock standing in their nanies, but no shareholder shall be entitled to vote upon any stock \^'hich has not stood in his name ten days prior to the day appointed for the election. The transfer books may he clused for ten (la)-s previous to the annual election. At all elections the directors shall be tlie judgesof the qualilications of voters, shall prescril le rules and regulations for vesting, apjjoint inspectors to c(jllect and count the votes, and cause the result of the election t(_i be entered in full on their minutes. The board may connnit its powers in this matter to a committee of its own members. The election shall be held on the day designated for that purpose unless prevented l)y accident, in which case the board shall designate another day for the election. A majority of the stockholders present at any meeting shall constitute a quorum. Article II. — Boanl of (Uredui-x. The board of directors shall consist of thirteen persons, who shall hold their office one year and until their success(3rs are elected. The board of directors at their first meeting after e'S'ery annual election shall elect a president, four vice-presidents, a treasurer, and secretary, and such officers shall hold their offices during the pleasure (jf the board. One person may be both secretary and treasurer. In case of any vacancy in the board of directors by death, resignation, or other- wise, the board shall have the power to fill for the unexpired term such vacancy by ballot. The board may also appoint one assistant treasurer, one assistant secretary, and such ay these by-laws and the order of the board of directors, the vice-president may exercise his pn\vers and jierform bis duties, subject to the control of tlie board of directors. Article IV. — Sfrrfhirii. It shall be the duty of the secretary to notify the members thereof of all meetings of the board of directors when r(^i]uire(l by the president, or when required by a niajiirity of the directors in writing; to attend such meetings when practicable; keep true records of the votes at elec'tions and all other proceedings; attest such records after every meeting )iy his signature; safely keep all documents and papers which shall Clime into his possession, and truly keep the books and accounts of the com- pany uiijiertaining to his office; and shall iiresenl statements thcre^of when required by the board. He shall keep books upon which transfer of stock may be made by any stfickholdei', or his attorney duly constituted in writing. He shall prepare new ci'rtificates upon the transfer of shai'es and surrender of the old (•ertificates and keep a register of all certificates issued. The assistant secretary shall perform such of these duties as the directors may re(]uire. CHARTERS AND BY-LAWS. 1231 Article Y. — Trcdsui'er. It shall be the duty of the treasurer to keep and account for all monies, funds, and property of the company which shall come into his hands, and he shall render such accounts and present such statements to the directors as may be required of him. He shall deposit all funds of the company which may come into his hands in such bank or banks as the directors may designate; he shall keep his bank account in the name of the company, and shall exliibit his books and accounts to any director upon application at the office during ordinary business hours; he shall indorse for collec- tion the bills, notes, checks, and other negotiable instruments received bj' the com- pany; he shall sign all bills, notes, checks, and other negotiable instruments of the company; and shall pay out money on the business as the corporation may require, taking proper vouchers therefor, provided, however, that the diiectors shall have power by resolution to delegate any of the duties of the treasurer to other officers, and to provide by what officers all bills, notes, checks, vouchers, orders, or other instruments shall be signed. The assistant secretary shall perform such of these duties as the directors may require. Article YI. — Corporate smi. A corporate seal shall be prepared and shall be kept by the secretary in the office of the company. The impression of the seal ma}' be made and attested by either the secretary or an assistant secretary for the authentication of contracts and other papers requiring the seal and bearing the signature of the president or one of the vice-presidents. Article YII. — Fixral i/eitr. The fiscal year of this corporation shall be the calendar year. Article YIII, — Amendments, These by-laws may be altered or amended by a vote of the directors at any meeting. CERTIFICATE OF INCORPORATION OF FEDERAL STEEL COMPANY. [Internal-revenue stamp, 10 cents, canceled.] [Registered office with the Corporation Trust Company oi' New Jersey, 60 Grand street, Jersey City, N. J.] First. The name of the corporation is Federal Steel Company. Second. The location of its principal office in the State of New Jersey is at No. 60, Grand street, in the citv of Jersey City, county of Hudson. Said office is to be reg- istered with the Corporation Trust Company of New Jersey. The name of the agent therein and in charge thereof, and upon whom process against this corporation may be served, is the Corporation Trust Company of New Jersey. Third. The objects for which, and for any of which, the corporation is formed, are to do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world, viz: Mining of all kinds; manufacturing of all kinds; transportation of goods, merchan- dise, or passengers, upon land or water; building houses, structures, vessels, ships, boats, railroads, engines, cars or other equipment, wharves or docks; constructing, maintaining, and operating railroads (other than railroads within the State of New Jersey), steamship lines, vessel lines, or other lines for transportation; the purchase, improvement, or sale of lands; To manufacture, purchase, or otherwise acquire, to hold, own, mortgage, pledge, sell, assign and transfer, or otherwise dispose of, to in\-est, trade, deal in and deal with goods, wares, and merchandise, and property of e\-ery class and .lescniition; To acquire and undertake all or any part of the liusiness, assets, and liabilities of any person, firm, association, or corporation ; To apply for, purchase, or otherwise acquire, and to hold, own, use, operate, and to sell, assign, or to otherwise dispose of, to grant licenses in respect of or otherwise turn to account any and all inventi.jns, imp'rovements, and processes used m con- nection with, or secured under letters patent of the United States or elsewhere, or otherwise; and, with a view to the working and development of the same, to carry 8?A 79 1232 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. on any liusini'ss, whether mannfacturing or otherwise, which the corporation may think calcnlati'd divertly or indirectly to elt'ectuate these objects; To enter into, malce, perfoini, and carry imt contracts of every kind \\'itli any per- son, firm, association, or corporation; To liave one or more otiiccs; to carry on all or any of its operations and business; and unliniitedh- and without restriction to hold, purchase, mortgage, lease, and con- vey real and personal projierty in any State or Territory of the United States, and in any foreign t'omitry or place. in general to carry on any other business in connection therewith, whether manu- facturing or otherwise, ■with all the powers (.'onferreil liy the laws of New Jersey upon corporations under the act hereinafter referred to. Fourth. The total authorized capital stock of the corporation is two hmidred milhon dollars (s;AX),O0O,0O0) , divided into two million (2,000,000) shares of the par value of one hundred dollars (8100) each. Of such total authorized capital stock, one million shares, amounting to $100,000,000, shall be preferred stock, and one million shares, amounting to $100,000,000, shall be common stock. From time to time the preferred stock and the connnon stock shall be issued in such amomits and proportion as shall be determined l)y the board of directors, and as may be permitted liy law. The preferi-ed stock sliall be entitled, out of any and all surplus net profits, when- ever lus funds of the corporation before anytliing shall be paid therefrom to the hohk'rs of the common stock. The connnon stock shall be suliject to the prior rights of the holders of the pre- ferred stock, as herein declared. If, after pro\'iding for the payment of full divideuds for any fiscal year on the [ireferreil stoi-k, there siuill remain any surplus net profits of such year, any and all such surplus net profits of such year, and of any other fiscal year lor which full ilividends shall have been paid on the preferred stock, shall be applicable to dividends upon the common stock, when and as from time to time the same shall be det'lared by the board of directors and out of an\- such surplus net profits, after the close of any fiscal year, the l>oard of directors may pay dividends upon the common st(jck of the corporation for such fiscal year, but not until aftei' the dividends ujion the preferred stock for such fiscal year shall have l>een actually paid or provided and set apart. Fifth. The names of the incorporators (the ]iost-olticc address of each is No. 60 Grand street, Jersey City, N. J.) anmes or is vacant by reason of death, resignation, disqualification, increase in number, or otherwise, the remaining directors, by a majority vote, may elect a successor, who shall hold office for the unexpired term or until his successor is elected. III. .MEETINGS OP STOCKHOLDERS. 5. The annual meeting of stockholders shall be held on the first Monday of April in each year if not a legal holiday, and, if a legal holiday, then on the day following, at the registered office of the company in the State of New Jersey, commencing at 11 o'clock a. m., when they shall elect by a plurality vote by ballot the full, board of directors to serve for one year, and until their successors are elected or chosen and qualified, each stockholder being entitled to one vote in person or by proxy for each share of stock standing registered in his name on the 10th day of the month preceding the election; provided, no stock shall be voted which has been transferred within twenty ilays of the time of the election. A majority in amount of the stock outstanding shall be requisite to constitute a quorum for an election of directors or the transaction of other business. The polls for such election shall be open at twelve o'clock noon and closed at one o'clock in the afternoon. Notice of the annual meeting may be published in a newspaper in the city of New York once each week during the calendar month next preceding the meeting; but a failure to publish such notice or any irregularity in the publication or notice shall not affect the validity of the said meeting or the proceedings therein. Special meetings of stockholders shall be called by the secretary by mailing a notice at least five days prior to the date of meeting to each stockholder of record at his last-known post-office address, on the request in writing, or by vote, of a majority of the board of directors or executive committee, or on demand In writing by stock- holders of record owning a majority in amount of the entire issued capital stock of the company. IV. .MEETINGS OF DIRECTORS, 6. The board of directors shall meet at the office of the company in New York immediately after the adjournment of the annual meeting of stockholders and elect the officers of the corporation for the ensuing year. Regular meetings of the directors shall be held at the office of the company in New York, or Ijy order of the directors elsewhere, on a day and at an hour to be fixed by resolution of the board. Notice of regular meetings shall be mailed to each director at his last-known post offit'c address by the secretai'v at least three days jirevious to the time fixed for the liiceting. A\'hile the number of directors remains at three, a majority shall be necessary to constitute a (luorum for the transaction of business; but if the number of directors shall be increased to fifteen, then six shall constitute a quorum for the transaction of linsiness. Special meetings of tlie board may be called l)y the presideijt on one day's notice to each director, deliwred to him jiersonally or left at his residence or usual place of business; or such sjiecial meetings may be called in like manner on the written request of three members. CHARTERS AXD BY-LAWS. 1235 V. tOJIPENKATION OF DIRECTORS .VXD EXECUTIVE COMMITTEE. 7. Directors and meiuliers of the executive committee as sucli shall not receive any stated salary for their services, but may be allowed $10 each for attendance at each regular or special meeting if present at roll call, and until adjournment, unless excused. VI. INSPECTORS OP ELECTION. 9. The board of directors, at a meeting held prior to the annual meeting of the stockholders, shall appoint two stockholders to act as inspectors and conduct the election of directors at the ensuing annual meeting of stockholders. Inspectors of election shall not be eligible to the office of director. If any inspector of election fails to attend the election, a successor may be appointed by the stockholders in attendance. VII. ORDER OF BUSINESS. 10. The order of business at the meetings of the board of directors shall be as fol- lows: (1) A quorum being present, the chairman shall call the board to order. (2) The minutes of the last meeting shall be read and considered as approved if there be no amendments. (3) Reports of officers of the company. (4) Reports of committees. (5) Unfinished business. (6) iliscellaneous business. (7) New business. VIII. OFFICERS OF THE COMPANY. 11. The officers of the company shall consist of a chairman of the boanl, presi- dent, first vice-president, second 'vice-president, secretary, general counsel, treasurer, auditor, and such other officers as may from time to time be elected or appointed l)y the board of directors. One person may hold more than one office. Ix. 12. The directors shall elect from among their own number a chairman of the board, a president, a first vice-president, and a second vice-president; and shall also appoint a secretary, treasurer, auditor, and general counsel. DUTIES OF THE CH.VIRMAN. 13. It shall be the dutv of the chairman to preside at all meetings of the board of directors and to give such counsel and advice as from time to time may l>y hini be deemed essential to the 1 >est interests of the corporation to the executive committee, or to the president. XI. DUTIES or' THE PRESIDENT. 14. It shall be the dutv of the president, in the absence of the chairman of the board, to preside at all n'leetings of the board of directors; to have general and active management of the business of tlie c(impan\-; to see that all .jrders and resolutions of the board are carried into effect; to execute all contracts and agreements author- ized by the board; to keep in safe custodv the seal of the company, and when 1236 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. authorizeil l>y the board m- executive committee, to affix the seal to any instrument leijuirinn; the same, which seal shall always be attested by the signature of the pres- ident and of the secretary or the treasurer. He may sign certificates of stock. He shall have the general sujierintendence and direction of all the other officers of the comjiany, except the chairman of the board, and shall see that their duties are properly performed. He sliall submit a complete report of the operations of the company for the year and the state of its affairs ontlic .'!lst day of December to the directors at their regular meeting in April andtdthe stockholders at their annual meeting in April of each year, and from time to time shall report to the directors all matters within his knowledge which the interests of the company may require terform such other duties as may be prescribed by the board of directors. XIII. 16. The second vice-president shall be vested with all the powers and required to perform all the duties of the president in the absence of both the president and the first vice-piesident ; he may sign certificates of stock, and he shall perform such other duties as may be prescribed by the board of directors. XIY. PRESIDENT PRO TEM, 17. In the absence of the president and first vice-president and second vice- president, the board may appoint a pjresident jji-o tein. XV. SECRETARY. 18. The secretary shall be e.r officio secretary of the l>oard of directors and of the standing comndttees; he shall attend all sessions of the board; shall act as clerk thereof, and record all ^'otes and the minutes of all proceedings in a book to be kept for that pur]>ose. He shall perform like duties for the standing committees when required. He shall give notice of all culls for instalhnents tobc paid by the stockholders, and shall see that proper notice is given of all meetings of the stockholders of the com- jiany and of the board of diicclors, and shall perform such other duties as may be jirescrilicd liy the lioai'd of directors or ]iresident. He sliall 1)e sworn to the faithful ilischurge of his duty, and shall give such bond as may l)e requii-eil by the boanl of direc tors. The assistant secretary, if one is ajipointed, shall l)e vested with all the powers and required to pci-form all the duties of the secrctai-y in his absence, inability, refusal, or neglect to act. XVI. THEASl'HER. 19. The treasurer shall keep full and accurate accounts of receipts and disburae- nicnts in books Ijelonging to the conqiany, and shall de]iosit all moneys and other valuable effects in the name and to tlie credit of tlic company in such depositories aff may be designated by the lioaid of directors or executive committee. CHARTERS AND BY-LAWS. 1237 He shall disburse the ftinds of the comimnv as maybe ordered bv the board, taking proper vouchers for such dislxirsements, and shall render to the president and directors at the regular meetings of the board, or whene\er they may require it, an account of all his transactions as treasurer and of the financial c(5ndition of the com- pany, and at the regular meeting of the board in April annually a like report for the preceding year. He shall give the company a bond in form and in a sum and ^vith security satis- factory tci the board of directors or the executive committee for the faithful perform- ance of the duties of his office and the restoration to the company, in case of hia death, resignation, or removal from office, of all books, papers, vouchers, money, (jr other property of whatever kind in his possession belonging to the corporation, and containing such other provisions as the board of directors or executive committee may require. Certificates of stock, when signed by the president or first vice-president or sec(3nd vice-president, shall be countersigned 1 ly the treasurer. He shall keep the accounts of stock registered and transferred in such form and manner and under such regula- tions as the board of directors may prescribe. The assistant treasurer, if one is appointed, shall be vested with all the powers and required to perform all the duties of the treasurer in his alisence, inability, refusal, or neglect to act. XYII. 20. The auditor shall have supervision over all the accounts and account books of the company and see that the system of keeping the same is enforced and main- tained. He shall direct as to forms and blanks relating to books and accounts in all depart- ments, and no change shall be made without his consent or the consent of the president or executive committee. He shall see that there is kept in the bookkeeping department a set of books con- taining a complete record of all business transactions of the company pertaining to accounts. He shall, when requested, furnish the executive committee or president a state- ment of the earnings and expenses of the corporation or any other company in which this corporation may be interested for any given time, and shall keep books and records for the purpose of furnishing such statistics. He shall verify the assets reported by the treasurer or his assistant at least twice a year and make report of the same to the executive committee. He shall cause the books and accounts of all officers and agents charged with the receipt or disljursement of money to be examined as often as practicable, or when requested liy the president or executive committee, and shall ascertain whether or not the cash and vouchers covering the balance are actually on hand. He shall render such assistance and advice as the president or executive committee may desire concerning the books and accounts and system of financial transactions of all other corporations in which this corporation is interested and furnish to the president or executive committee such statements concerning the same as may be requested by them. In case of a default within his information at any time he shall at once notify the president and chairman. XYIII. GENERAL COUNSEL. 21. The general counsel shall be the legal adviser of the company and shall per- form such services and receive such compensation as may l-ie determined by the board of directors or the executive committee. XIX. DUTIES OF OFFICERS -MAY BE DELECJATED. 22 In case of the absence of any oflicer of the company, the board of directors or the executive committee mav delegate his powers or duties to any other oflicer or to any director for the time being. 1238 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. XX. ST.INDING CO.MMITTEE. 23. There shall be an executive committee of five directors, selected by the board, who shall meet at regular periods, or on notice to all by any of their own number. They shall advise with and aid the officers of the company in all matters concerning its interests and the management of its business; and when the board of directors is not in session the executive committee shall have and may exercise all the powers of the 1 )( lard of directoi's. The executive committee, unless otherwise provided by the board of directors, shall fix the salaries or compensation of all officers. The executive committee shall keep regular minutes, and cause them to be recorded in a 1 look kept in the office of the company for that purpose, aird report the same to the board of directors whene\'er lequired by them. XXI. TERM OF OEPICE. 24. Each officer shall hold his office only during the pleasure of the board of directors, unless otherwise provided by special agreement in writing signed by a majority of the executive committee. XXII. TR,\XSFEB OF STOCK. 25. All transfers of the stock of the corporation shall be made upon the books of the company by the holder of the shares in person or by his legal representative; but no transfer of stock shall be made within 10 days next preceding the day appointed for paying a dividend. XXIII. CERTIFICATES TO BE C.VNCELED. 2fi. Certificates of stock sui'i'endered shall be canceled by the transfer agent at the time of transfer. XXIV. LOSS OF CEETIFIC.VTE. 27. Any persr^n claiming a certificate or evidence of stock to be issued in place of one lust iir destroyed shall make an affidavit or affirmation of that fact and advertise the same in such newspa]ier and for sucli space of time as the board of directors may require, describing the certificate, and shall furnish the company with proof of pub- lication by tlie affidavit of the publisher of the news])aper, and shall give the board a bond of imlemnity in form approved Ijy the l)oard, with one or more sureties, if re(|uired, in il(juble the ]>ar value of such certificate, whereupon the president and treasurer may, one month after the termination of the advertisement, issue a new certilicate of the same tenor with the one alleged to be lost or destroyed, but always subject to the approval of the board of directors. XXV. CONTR.VCTS AND .VCiREEMEXTK. 2K. nient be mai No agreement, contract, or obligation (otlierthan a cheque) involving the pay- of money or the credit or lialnlity of the <'ompany, for more than 15,000, shall ide without the approval of the board of lii rectors or of the executive committee. CHARTERS AND BY-LAWS. 1239 XXYI. CIIECjUES FOR MOSEY. 29. All cheques, drafts, or on.lers for the payment of iiione^' nhall he signed by the treasurer and countersigned hy the chairman of the board 'or president or first or second vice-president. No cheque shall be signed Ijy both the treasurer and chairman or president or a vice-president in blank. XXVII. 30. The books, accounts, and records of the company shall be open to inspection by any member of the board of rporation, and to pay for the same in cash, stock of this corporation, bonds, or otherwise. (d) To apply for, obtain, register, purchase, lease, or otherwise acquire, and to hold, o«n, use, operate, introdtice and sell, assign, or otherwise dispose of, any and all trade-marks, trade names, ami distinctive marks, and all inventions, improvements, and ]irocesscs used in connection with or secured under letters patent of the United States or elsewhere, or other^^•isc, and to use, exercise, develop, grant licenses in respi'i't of, or othciwise turn to account any such trade-marks, patents, licenses, con- cessions, processes, and the like, or any such iiroperty, rights, and information so acquired, and \^ ith a view to the working and ilcvelopmcnt of the same; to carry on any business, whether mining, manufacturing, or otherwise, which the cor]joration may think calculated directly or indirectly to effectuate these objects. ((') To make and cnler into contracts of every sort and kind with any individtial, firm, association, corporation, private, public, or municipal, liody politic, and with the <_iov('rnment of the Uniteil States, or any iState, Territory, or C(5lony thereof. (/) To do all and e\'ci-ything nei'cssary, suitalile, or proper for the accomplish- ment of any of the luirjioses or attainment of any one or more of the objects herein CHARTBES AND BY-LAWS. 1241 enumerated, or which shall at any time ai.pear conducixe or expedient for the pro- tection or benefit of the corporati(3n, either as hoklers of (ji- interested in any pr(jp- erty, and in general to carry on any business, whether njanufaeturing, mining, or otherwise. (g) To do any or all of the things herein set forth to the same extent as natural i)er- sons might or could do, and in any part of world, as principals, agents, i-on tractors, trustees, or otherwise. It is the intention that the olijects specified and causes contained in this third paragraph shall, except where otherwise expressed in sai.l paragraph, be nowise lim- ited or restricted by reference t(.i or inference from the terms of any other clause of this or any other paragraph in this charter, Ijut that the objects specified in each of the clauses of this paragraph shall be regarded as independent objects. Fourth. The total amount of the capital stock of said corporation is to be fifty mil- lion dollars ($50,000,000), divided into five hundred thousand (500,000) shares of one hundred dollars ($100) each. Of the said stock tw(.i hundred thousand (200,000) shares, amounting at par to tweut)- million dollars (S20,000,000) , are to be preferred stock, and three hundred thousand (:!00,000) shares, amounting to thirty million dollars (§30,000,000) , are to be common stock. The rights, privileges, and conditions following shall attach to the shares aforesaid, that is to say : (1) The common stock shall be subordinate to the rights of the preferred stock, except that both preferred and common stock shall ha^-e eipal voting powers. (2) The corporation shall not be at liberty — ((() To create or issue any other or further shares ranking in any respect jmri jkisru with or in priority to the aforesaid issue of U\(i hundred thousand (200,000) prefer- ence shares ; (i) Xor to create any charge, except as herein provided, upon the net profits of the corporation which shall not be sul » irdinate to the rights of the preference shares ; (c) Nor to reserve a surplus fund which shall not be chargeable with the payment of the accrued dividends on the preference shares. (3) The said preference shares shall carry a fixed cumulative preferential dividend at the rate of, but never exceeding, seven per cent. (7)^) per annum on the par value thereof, and such dividends shall be declared quarterly on the second days of Janu- ary, April, July, and October in each year, or at sucli other time as the board of directors or the executive connnittee shall see fit and determine. If in any year dividends amounting tfi seven per cent. (T/r) per annum shall not be paid on such preferred stock, the deficiency shall be a charge on the net profits and be payable, but without interest, before any dividends shall be paid upon or set apart for the common stock. (4) The balance of the net profits of the corporation, after the payment of said cumulative dividend at the rate of seven per cent. (7%) per annum to the holders of the preferred stock, may be distributed as few Jersey. Fifth. The directors of the corporation shall be divided into five classes, equal in number, in respect to the time for which they shall severally hold oflJce. The first class shall be electeost-(3ffice address of the mcorporators, and the number of shares of common stock sul)scribed for by each, the aggregate of which (S10,000) 1242 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. is the amount of capital stock with whicli this corporation shall commence business, are as follows: Name. Post-office address. Number of shares of common stock. James B.Dill Howard K. Wood . . . Duncan T. McLaren. 27 Pine street, New York 525 Main street, East Orange, N. J. . 525 Main street, East Orange, N. J. . 90 6 '5 Seventh. The duration of the corporation is to be perpetual. Eighth, ] . The board of directors shall have power without the assent or vote of the stocliholders to make, alter, amend, and rescind the by-laws of this corporation, and, subject alwaj's to the payment of the dividends on the preferred stock, to fix the amount to be reserved as working capital. 2. With the assent in writing or pursuant to the vote of the holders of two-thirds of all the stock, irrespective of class, issued and outstanding, the directors shall have power and authority to sell, assign, transfer, convey, or otherwise dispose of the property and assets of this corporation as an entirety on such terms and conditions as the directors shall deem fit, right, and just. 3. The board of directors, and, when the board is not in session, the executive com- mittee, in addition to the powers and authorities by statute and by the by-laws expressly conferred upon them, are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation, but subject, nevertheless, to the provisions of the statute, of the charter, and to any reg- ulations that may from time to time be made by the stockholders: Provided, That no regulations so made shall invalidate any provisions of this charter, or any prior acta of the directors or executive committee which would have been valid if such regula- tions had not been made. 4. There shall be an executive committee of five members, who shall be elected by the stockholders from the directors and hold ofBce as hereinafter provided. The said committee sball have and exercise all the powers expressly conferred upon it by this certificate of incorporation, and also all the powers of the board of directors whenever a quorum shall fail to be present at any stated or other meeting of tlie board, and as well at all times whenever the board shall not be in session, and shall have power to affix the seal of the corporation to all papers which they may deem to require it. The committee shall have power to make rules and regulations for the conduct of its business, and to determine how many members thereof shall constitute a quorum. The officers of the committee shall be a chairman, a vice-chairman, and a secretary, who shall h(jld office during the term of their office as members of the committee, and shall be elected by the stockholders. At all meetings of the committee all questions shall be decided bj' a majority of votes, and in case of an equality of votes the chairman, and, in his absence, the vice- chairman, and, in the absence of both, the secretary, shall have a second and deciding vote. The stockhi ilders shall, at their first meeting, elect by ballot the said committee of five members from the directors elected at such meeting, and the said officers thereof. The stockholders shall determine and fix the compensation to be paid to the njem- bers of the committee and to any of the officers thereof as such. At every annual meeting after the first meeting, whenever the term of office of any member or officer of the committee shall expire, the st'ear and until their successors are elected and qualified. The bdiird of (lire(t(irs shall also annually choose a secretary and a treasurer, and may ch(^i(ise an assistant secretary and an assistant treasur(:'r, who need not be mem- bers of the lioard, or one person t(i act in more than one capacity, and an auditor, who shall hold office for (ine year and until their successors are elected, unless sooner lenidved by the boaid, which the board shall have the power at anytime to do with (ir without cause. MEETIX(*S OF DIHECTORS, j;!. stated meetings of the direi'tdrs shall be held quarterly, without notice, on the 2d (lay (if .lanuaiy, April, July, and Octolier in each year, at the office of the corpo- CHARTERS AND BY-LAWS. 1245 ration in the city of Cliicago, at ten o'clock in the forenoon, or liy order of the board elsewhere, at a tiuie and place to be fixed lj\- the board, and of wliicli time and place thus changed notice of at least ten da\-s shall lie gi\-en td each rtirect(jr. A majority of the directors in office shall be neccssaiv to c'onntitntea quorum, and a majority vote of the entire board shall be neccssar\- to transact any business (.r to effectuate any resolution or order, except to adjourn, and except where otherwise expressly prdvided in these by-laws. 14. Special meetings of the b(jard inu\- be called 1 )v the executive committee on three days' notice to each director. 15. The directors may hold their meetings and have an office and keep the books of the corporation (except the stock and transfer books) outside of the State of New Jersey, at the cities of ^^ew York, Chicago, Pittsburg, or such other place or places as they may fix upon. POWERS OF THE DIRECTORS. 16. The board of directors shall have management of the business of the corpora- tion, and in addition to the powers and authorities, by these by-laws expressly con- ferred upon them, may exercise all such powers and do all such acts and things, as may be exercised or done by the corporati( m, but sul)ject, nevertheless, ti i the' pro- visions of the statute of the charter and of these by-laws, and to any regulations from time to time made l)y the stockholders, pr()\ided that no regulati<.)ns so made shall invalidate any prior act of the directors which would have been valid if such regula- tion had not been made. 17. Without prejudice to the general powers n inferred Ijy the last preceding clause and the other powers c< inferred by these by-laws, it is hereby expressly declared that the board of directors shall have the follo«'ing powers, that is to say: To purchase or otherwise acquire, for the corporation, any property, rights, or pri\'ileges which the corporation is authorized to acquire, at such prices, and on such terms and conditions and for such consideration as they think fit. 'At their discretion to pay for an}- property or rights acquired by the corporation, either wholly or partially in money or in stock or in other securities of the corporation. To appoint any person or persons to accept and hold in trust for the corporation any property belonging to the corjioration or in which it is interested, or for any other purpose, and to execute and to do all such duties and things as may be requisite in relation to any such trusts. From time to time to provide for the management i if the affairs of the corporation at home or abroad in such manner as they think fit, and in particular from time to time to delegate any of the powers (jf the board of directors to any committee, officer, or agent, and to appoint any persons to be the agents of the corporation, with such powers (including the power to subdelegate ) and upon such terms as may 1 le thought fit. STANDING COMMITTEES. 18. There shall be an executive committee of five directnrs elected liy the stock- holders as provided in the certificate of incorporation, who shall meet at regular periods or on notice to all, by any of their own number; they shall advise with and aid the officers of the company in all matters concerning its interests and the manage- ment of its business, and generally exercise the powers conferred by the certificate of incorporation. The committee shall also have the power: To appoint and at their discretion remove or suspend such managers, officers, subordinates, assistants, or otherwise, and clerks, agents, and servants, i)ermanently or temporarily, as they ma>' from time to time thhik fit; and to determine their duties and fix, and from time to time change, their salaries or emoluments, and to require securitv in such instances and in such amounts as they think fit. To confer, by resolution, upon an>- officer of the corporation the right to choose, remove, or susjiend such subordinate officer, agents, or factors. To determine who shall be authorized to sign, on the corporation's behalf, bills, notes, receipts, acceptances, indorsements, checks, i-eleases, contracts, and ilocuments. Power is hereby given to the executive committee to act liy the >\Titteu consent of a quorum thereof, although not formallv convened. In case of a vacancy in the executi\e'ccimmittee, or in the office of the chairman, vice-chairman, or secretary thereof, the vacaiicj- shall be filled by the remaining members of the committee. The chairman, vice-chairman, and secretary of the executive committee shall lie elected as provided in the certificate of incorporation, and shall ])erforni such duties as shall be prescribed b\- the committee. 1246" HEARINGS BEFORE THE INDUSTRIAL COMMISSION. There may lie a finance committee of three directors appointed by the board, who shall, under" the direction of the executive committee, examine and audit all accounts of the corporation at the chjwe of each fiscal year, and at such other times as they may deem necessary. The standing ci anmittee shall keep regular minutes of their transactions, and to cause them to be recorded in a book kept in the office of the corporation for that purpose, and to report the same to the Ijoard of directors whenever required. OEDEE OF BUSINESS, DIKECTOES' .MEETING. 19. The order of business at the meetings of the board shall be as follows: (1) A quorum l)eing present, the president shall call the board to order. (2) The minutes of the last meeting shall be read and considered as approved if there be no amendments. (3) Eeixirts of officers of the company. (4) Reports of committees. (5) Unfinished liusiness. (6) ^Miscellaneous business. (7) New business. PRESIDENT. 20. The president shall preside at all meetings of tlie board of directors, and he, cir one of the vice-presidents, shall, with the treasurer or assistant treasurer, in the company's behalf, sign all certificates of stock. He shall make annual reports show- ing the condition of the affairs of the corporation, and make such recommendations as he thinks pro]ier, and submit the same to the board of directors at the meeting next preceding the annual meeting of stockholders, and he shall from time to time bring liefore the ilirectors and the executive committee such information as may he required touching the business and jirfiperty of the corporation. THE VICE-PRESIDENTS. 21. The vice-jiresidents shall, in the order of their rank, be vested with all the powers and be required to perform all the duties of the president in his absence. THE SECRET.iEY. 22. The secretary shall be ex officio secretary of the board of directors and of such I'ommittees as shall request him so to act, and shall attend all sessions of the board, and shall record all votes and the minutes of all proceedings of the stock- holders and of the directors in a book to be kept for that purpose. THE TEE.iSlIEER. 2.3. The treasurer shall cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects, in the name and to the credit of the corporation, in such deposit(.iries as may be designated by the executive committee. He shall disburse the funds of the corporation as may be ordered by the board of directors or executive committee, taking proper vouchers for such disbursements, and shall render to the president and directors, at the stated meetings of the board or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the corporation. He shall give tbe corporation a liond in a sum, and with one or more sureties, sat- isfactory to the board, for the faithful performance of the duties of his office and the restoration to the company, in case of his death, resignation, or removal from office, of all bfioks, papers, vouchers, money, or other proiierty at whatsoever time in his possession belonging to the corporation. 24. The auditor sliall have supervision over all the accounts and account books of the corporation, and see that the system of keeping the same is enforced and main- tained, lie shall direct as to forms and blanks relating to books and accounts in all departments, and no change shall be made without his consent or the consent of the president or executive committee. He shall see that there is kept in the bookkeep- ing deiiartnient a st-t of books containing a complete record of all business transac- tions of the corporation pertaining to accounts. He shall, when reiiuesteil, furnish the executive committee or president a statement CHARTERS AND BY-LAWS. 1247 of earnings and expenses of the corporation or any other corporation in which this corporation may be interested for any given time, and shall keep books and records for the purpose of furnishing such statistics. He shall verify the assets reported by the treasurer or his assistant at least twice a year and make reports of the same to the executive committee. He shall cause the books and accounts of all officers and agents charged with the receipt or disbursement of money to be examined as often as practicable, or when requested by the president or executive committee, and shall ascertain whether or not the cash and vouchers covering the balances are actually on hand. He shall render such assistance and advice as the president or executive committee may desire concerning the books and accounts and system of financial transactions of all other corporations in which this corporation is interested, and furnish to the presi- dent or executive committee such statements concerning the same as may be requested by them. In case of a default within his information at any time he shall at once notify the president and the chairman. DUTIES OF OFFICERS JfAY BE DELEGATED, 25. In case of the absence of the president, vice-presidents, secretary, treasurer, assistant secretary, assistant treasurer, or auditor of the corporation, or for any other reason that may seem sufficient to the board, the board of directors may delegate his powers and duties to any other officer or to any director for the time being. CERTIFICATES OF STOCK. 26. All certificates of stock shall be signed by the president or one of the vice- presidents and by the treasurer or assistant treasurer, and shall have affixed thereto the corporate seal. THA^'SFEES OF STOCK. 27. Shares of the stock of the corporation shall be transferable only on the books of the corporation by the holder thereof in person, or by his or her attorney duly authorized thereto in ^^■ritiIlg, and upon the surrender and cancellation of the certifi- cate therefor duly indorsed. The corporation shall have the right to require the endorsement of the stockholder to be proved or acknowledged in the same manner as required by the statutes of New Jersey for deeds of real estate as a condition precedent to transfer. Whenever any transfer shall be made for collateral security, and not absolutely, the fact shall be so expressed in the entry of said transfer. The corporation shall not be bound by or recognize any equitaljle or partial inter- ests in a share or shares, or any interests except the absolute right of the person reg- istered as the owner thereof. The corporation shall not be bound to recognize trusts. In case of the alleged loss or destruction of a certificate of stock, a new certificate may be issued in its jilace upon proof of such l(.)ss or destruction and the giving of a bond by the owner of such lost or destroyed certificate or his legal representatives in such sum, and with one or more surety or sureties, as the directors shall direct or require, as indemnity against any claim that may be made against the corporation; a new certificate may be given without requiring any bond when in the judgment of the directors it is proper to do, but in no (.'ase shall such new certificate be issued except pursuant to resolution or order of the board of directors. FISCAL YEAR. 28. The fiscal year of the corporation shall begin the first day of January and ter- mmate on the 31st day of December in each year, beginning in 1899. DIVIDENDS. 29. Dividends upon the capital stock of the corporation, when earned, shall be declared quarterly on the 2nd days of January, April, July, and October of each year, beginning in 1899, or at such other times as the board of directors or the execu- tive committee shall see fit and determine. directors' annual statement. 30. The board of directors shall present at each annual meeting, and when called for by the stockholders at any special meeting of the stockholders, a full and clear statement of the business and condition of the corporation. 83a 80 1248 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. CONTRACTS AND AGEEEMEXTS. 31. No agreement, contract, or obligation, other than a check, involving the pay- ment of money or the credit of the company for more than one thousand dollara, shall be made -without the order of the board of directors or of the executive com- mittee, duly entered in the minutes. 32. Any stockholder, officer, or director may waive any notice required to be given under thei^e by-laws. 33. Wherever under the provisions of these by-laws notice is required to be given to any direct(jr, officer, or stockholder, it shall not be construed to mean personal notice, but such notice shall, except where provision is made in these by-laws for the giving of such notice by publication in a newspaper or newspapers, be given in writing liy depositing the same in the post-office or letter box in a post-paid sealed wrapper, addressed to such director, officer, or stockholder at his or her address as the same appears on the books of the corporation, and the time of the giving of such notices shall be deemed to be the time when the same shall be thus mailed. ALTEEATION OF BY-LAWS. 34. Tht' stockholders, by vote of a majority of the stock issued and outstanding, irrespective of class, may, at any stated meeting of the stockholders, amend these by-laws, provided notice in writing of the. proposed amendment shall be sent at least thirty days in advance of the aforesaid stated meeting to every stockholder of record. The board of directors by a vote of eleven of the members may alter or amend these by-laws, but no alteration shall be made unless proposed at a stated meeting of the board and considered at a subsequent stated meeting. [Internal-revenue 10-cent stamp— canceled.] THE AMEEICAN STEEL AND WIRE COMPANY OF NEW JERSEY. certificate of incorporation. State op New Jersey, ss: This certifies that we, Joseph R. Ellicott, Robert S. Green, and Theodore S. Beecher, do hereby associate ourselves into a corporation under and by virtue of the provisions of an act of the legislature of the State of New Jersey, entitled "An act concerning corporations," approved April 21st, 1896, and the acts supplementary thereto and amendatory thereof, for the purposes hereinafter mentioned, and to that end we do by this our certificate set forth: First. The name of such corporation is "The American Steel and Wire Company of New Jersey." Second. The location of its principal office in the State of New Jersey is at No. 60 Grand street, in Jersey City, county of Hudson, and the company is to be registered with the Corporation Trust Company of New Jersey. The said trust company will be the agent in said principal office and in charge thereof, upon whom process against the corporation may be served. Third. The objects for which the corporation is formed are to manufacture and trade in steel, iron, and other metals; to make, purchase, and sell manufactured articles made partly or wholly from metals of any kind and all like or kindred prod- ucts; to acquire and dispose of rights to make and use the same; to make, purchase, and sell such other products or merchandise as may be conveniently or advantageously used or sold in connection with said metals and business; and to apply for^ purchase, or otherwise acquire, and hold, own, use, operate, sell, assign, or otherwise dispose of any and all inventions, improvements, and processes used in connection with or secured under letters patent of the United States, or other countries, or otherwise, and grant licenses and rights in respect thereof, or otherwise. The corporation shall have power to purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose (if the .shares of the capital stock of, or any bonds, securities, or evidences of CHARTERS AND BY-LAWS. 1249 indebtedness created by any other corporation or corporations of this or any other State, and while owner of such stocli: mav exercise all the rights, powers and priv- ileges of ownership, including the right to vote thereon. The corporation shall also have power to have one or more offices outside of this State, and to carry on any part of its operations and business, and hold, purchase, mortgage, lease, or convey real or personal property m any State or Territory of the United States and in anv foreign country or place. " ° Fourth . The total authorized capital stock of the corporation is ninet v million dollars (190,000,000), divided into nine hundred thousand (900,000) shares of the par value of one hundred dollars (SlOO) each. The amount of capital stock with which it \\ill com- mence business IS two hundred and fifty thousand dollars (1250,000) . Of such total authorized capital stock, four hundred thousand (400,000) shai-es, amounting to forty million dollars ($40,000,000) , par value, shall be preferred capital stock, and five hun- dred thousand (500,000) shares, amounting to fifty million dollars (S50,000,000), par value, shall be common stock. The holders of preferred stock shall be entitled to receive in eacii year out of the surplus net profits of the corporation a fixed yearly dividend of seven per centum, payable quarterlv, before any dividend shall be set apart or paid on the common stock, but sliall not be entitled "to anv furthei- dividend or share of profits. The dividends upon the preferred stock shall' be cumulative, so that, if in any year dividends amounting to seven per centum are not paid on the pre- ferred stock, the deficiency is payal )le subsequently, before anv dividends are set apart or paid upon the common stock. In case of liquidation or diss(jlution of the corpora- tion, the holders of preferred stock will be entitled t(j be paid in full both the princi- pal of their shares and the accrued dividend charge before any amount is paid to the holders of common stock; but after the payment on any such' liquidation or dissolu- tion to the holders of the common stock of its par value, the remaining assets and funds shall be diviiied pro rata among the holders of both classes of said capital stock. Fifth. The names and post-office addresses of the incorporators and the number of shares subscribed for by each, the aggregate of such subscriptions being the amount of capital stock with which the corporation will commence business, are as follows: Name. Post-office address. No. shares. Joseph R. EUicott Xyack N Y 1 000 Elizabeth, N. J Theodore S. Beecher Irvington, N. Y 500 Sixth. The existence of the corporation shall begin on the fourteenth day of Jan- uary, 1899, and shall be perpetual. Seventh. The business of the corporation shall be managed by its directors, who shall respectively be shareholders therein and one of whom shall be an actual resi- dent of this State. Directors of the corporation shall be divided into three classes, equal in number, in respect to the time for which they shall severally hold office. The first class shall be elected for a term ( if three years, the second class for a term of two years, the third class for a term of one year; and at each annual election after 1899 the successors to the class of directors whose terms expire in such year shall be elected to hold office for three years, so that the term of office of at least one class shall expire in each year. The power to make and alter Ijy-laws shall be in the directors, but any by-law may be altered or repealed by the stockholders. The by- laws shall prescribe the number of directors necessary to constitute a quorum of the board of directors, which may be less than a majority. In case of an increase in the number of directors between the annual elections by the stockholders, the board of directors may elect the additional directors, who shall hold office until the next meeting of stockholders or until their successors shall be elected. The iirectors shall have power to hold their meetings, to have one or more oflices and to keep the books of the corporation (except tlie stock and transfer books) outside of iis State at such places as may from time to time be designated by them. ■With the assent in writing or pursuant to the vote of the holders of two-thirds of •he capital stock issued and outstanding, the directors shall have power and author- ty to sell, assign, transfer, convey, or otherwise dispose of the property and assets )f this corporation as an entirety on such terms and conditions as the directors shall leem fit, right, and just. i, i ^ ^ , The directors shall, from time to time, determine whether, and to what extent, and it what times and places, and under what conditions and regulations, the accounts md books of the corporation, or any of them, shall be open to the inspection of the 1250 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. stockholders, and no stockholder shall have any right to inspect any account or book or document of the corporation, except as conferred by statute of New Jeraey or authorized by the directors. In witness whereof we have hereunto set our hands and seals the twelfth day of January, 1899. Signed and sealed in the presence of- Albekt C. Wall. Jos. R. Ellicott. ROBT. S. Gkeen. Theodore S. Bebcher. L.a. L. s. L. S.' State of New Jersey, cuunly of Hudson, ss: Be it remembered that on this twelfth day of January, 1899, before me, the sub- scriber, a master in chancery of New Jersey, personally appeared Joseph R. Ellicott, Robert S. Green, and Theodore S. Beecher, who, I am satisfied, are the persons named in and who executed the foregoing certificate of incorporation; and I having first made known to them the contents thereof, they did each acknowledge that they signed, sealed, and delivered the same as their voluntary act and deed for the uses and purposes therein expressed . Albert C. Wall, MaMer in Chancery of New Jersey. [Internal-revenue 10-cent stamp— canceled,] By-laws of the American Steel and Wire Company op New Jersey. [Incorporated under the laws of the State of New Jersey.] Article I. meetings of stockholders. Section 1. A regular annual meeting of the stockholders shall be held at the princi- pal office of the company at Jersey City, Hudson County, State of New Jersey, at 11 o'clock a. m. on the third Tuesday of February in each year, beginning with the year 1900, for the election of directors and the transaction of such other business as may come before the stockholders for action. Sec. 2. Special meetings of the stockholders may be called by the chairman or •president or by order of the executive committee or board of directors whenever they deem it necessary, and it shall be their duty to order and call such meetings whenever persons holding one-fourth of the capital stock of the company outstand- ing shall in writing request the .same. Such special meetings shall be held at the principal office of the company in the same manner as the annual meeting. Sec 3. At all meetings of the stockholders, each stockholder shall be entitled to one vote for each share held by him, which vote may be given personally or by proxy authorized in writing. Tlie instrument authorizing a proxy to act shall be exhibited to the secretary and inspectors of election at the meeting, and shall be lodged with the secretary if he shall so request. No share or shares of stock which have been transferred on the books of the company within twenty days next pre- ceding any election shall be voted on at any such election. Sec. 4. The holders for the time being of a majority of the stock issued and out- standing, represented in person or by proxy, shall constitute a quorum for the trans- action of business; and, in the absence of a quorum, the stockholders attending or represented at the time and place for which a meeting shall have been called may adjourn the meeting for a period not exceeding twenty days. Sec. .5. Notice of the annual and of any special meeting of the stockholders shall be given to each stockholder by jiosting the same in a postage-prepaid letter addressed to each stockholder at the address left with the secretary of the company, or by delivering the same personally at least ten days before such meeting, in addition to any publication or notice that may be required by law. The notice of a special meeting shall state briefly the object of the meeting, and no other business shall be transacted at such meeting. A failure to give the notice for the regular annual mee^ ing shall not invalidate the iiroceedings of the meeting. Sec. 6. The stockholders may at each annual meeting choose by ballot two persons (who need not be stockholders) to act as inspectors of election at all meetings of the stockholders until the close of the next annual meeting. In case of a failure to elect CHARTERS AND BY-LAWS. 1251 inspectora, or in case an inspector shall fail to attend or refuse to serve, the stock- holders at any meeting may choose an inspector or inspectors to act at such meeting. Sec. 7. The order of business at all meetings of the stockholders shall be as follows: 1. Proof of notice of meeting and report as to stockholders present in person or by proxy. 2. Reading of minutes of previous meeting and action thereon. 3. Appointment of inspectors of election, if the inspectors elected at the preceding annual meeting be not present and ready to serve. 4. Reports of oflficers. 5. Election of directors. 6. Election of inspectors of election to serve until the close of the next annual meeting. 7. Unfinished business. 8. New business. The election of inspectors of election to serve until the close of the next annual meeting may be held at the same time as the election of directors and by the same ballot. The order of business to be followed at any meeting may be changed 1 )y vote of the majority in interest of those present at the meeting. Article II. BOARD OP DIRECTORS. 8ec. 1. Tlie property and business of the company shall be managed and con- trolled by a board of directors, who must at all times be stockholders. The board shall consist of fifteen members and shall be divided into three classes of five mem- bers each. The first class shall hold office for three years, the second class for two years, and the third for one year. At all regular annual elections the directors, except when chosen to fill a vacancy, shall be chosen for a term of three years. In case of vacancy in the board resulting from death, resignation, disqualification, or other cause the board shall have power to appoint the members necessary to make up the full number of fifteen, but «uch appointment shall continue only until the next regular meeting of the stockholders. All directr>rs shall hold their offices until their successors are elected and qualified. Sec. 2. The directors shall act only as a board, and the indi^ddual directors shall have no power as such. Eight directors at a meeting duly called shall constitute a quorum for the transaction of business; but any less number may adjourn any meet- ing from time to time until a quorum shall be present. Sec. 3. Regular meetings of the directors may be held at the office of the company in the city of New York, in the State of New York, or elsewhere in that or any other State, as the board of directors may from time to time determine. N(jtice of regular meetings shall be mailed by the secretary to each director at his last known post- office address at least three days previous to the time fixeil for the meeting. Special meetings of the board may be called by the chairman, president, or executive com- mittee, or by request of any three members, made in writing on at least one day's notice to each director, delivered to him personally, or mailed to him or sent by telegraph, or left at his residence or usual place of business. Sec 4. The directors may without notice meet at the office of the company in Jersey City at 1 o'clock p. in., or at the office in the city of New York at 2 o'clock p. m., of the day of the regular annual meeting of the stockholders or the next day, and elect the officers of the company for the ensuing year. They shall also at such meeting appoint the executive committee. Sec 5. Directors as such shall not receive any stated salary for their ser\ices, but shall be allowed ten dollars for attendance at each regular or special meeting of the board, if present at roll call. Article III. executive committee. Sec. 1 The board of directors shall appoint an executive committee of three directors, who shall serve during the pleasure of the board. Vacancies m such executive committee shall be filled by the board of directors. . , t Sec 2 The executive committee shall have and exercise, subject to the control of the board of directors, all the powers of the board requisite for the conduct, manage- ment, and development of the company's business; and when the board is not in session the executive committee shall have and may exercise all the powers of the 1252 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. board. The executive committee shall fix the salaries or compensation of all the officers of the company drawing $2,500 per year or more. It may fill vacancies among the officers of the company, but any officer appointed by the executive committee may be removed by a vote of the board of directors. A majority of the executive committee shall l>e a quorum for the transaction of business, and the committee shall at all times act by the \-ote of a majority. If a member of the committee be absent from any meeting, the remaining members of the committee shall have the power to appoint any director to act as a member of the committee for that meeting. The exet'utive committee may hold its meetings at any office of the company or at any place which they may deem proper, and may prescribe and regulate what, if any, notice shall be given of nieetings of the committee. The executive committee shall keep minutes of its proceedings, and report the same to the board of directors at each ensuing meeting of the board. Article IV. Sec. 1. The board of directors shall annually elect or appoint the following perma- nent officers : A chairman of the company, a president, four vice-presidents, a general manager, a treasurer, an assistant treasurer in New York, an assistant treasurer m Chicago, a secretary, an assistant secretary in New York, an assistant secretary in Chicago, an auditor, an assistant auditor, and general counsel. The board or execu- tive committee may also from time to time appoint such other officers, committees, agents, or employees as it may deem proper. Sec. 2. If any vacancy shall occur among the officers of the company, such vacancy shall be filled by the board of directors or the executive committee, except as to the chairman or president, vacancies in which offices shall be filled by the board. Sec. 3. The board of directors, the executive committee, the chairman, or the pres- ident may from time to time prescribe the duties of the other officers, agents, and employees of the company. THE CHAIRMAN, Sec. 4. It shall be the duty of the chairman to preside at all meetings of the board of directors and stockholders. He shall have general supervision of the entire bus- iness of the company and of its several officers, subject to the control of the board of directors or executive committee. He shall see that all orders and resolutions of the board and executive committee are carried into effect, and he shall execute all con- tracts and agreements authorized by the board or executive committee. The chair- man shall submit a complete report of the operations of the company for the year, and of the state of its affairs on the 31st day of December, to the directors at their regular meeting in February of each year, and to the stockholders at their annual meetings, and from time to time shall report to the directors all matters within his knowledge which the interests of the company may require to be brought to their notice. THE PRESIDENT. Sec. 5. It shall be the duty of the president, in the absence of the chairman, to preside at all meetings of the board of directors and stockholders, and, subject to the powers of the chairman and executive committee, the president shall have general and active management of the business of the company. The president may sign and seal certificates of stock. He shall, sul>ject to the above powers of the chairman and executive committee, ha\e the general superintendence and direction of all the other officers of the company and shall see that their duties are properly performed. He shall, subject to the powers of the chairman and executive committee, have the general powers and duties usually \ested in the office of the president of a corpora- tion. He shall freely consult and' advise with the chairman and also with the execu- tive committee in relation to the business and interests of the company, and act under their instructions. THE \IOE-PKESIDENTS, Sec. 6. The vice-presidents shall, in their order, be vested with all the powers and required to perform all the duties of the president in his absence. Each may sign certificates of stock, and shall perform such duties as may be prescribed from time to time by the board of directors or the executive committee. CHARTERS AND BY-LAWS. 1253 PRESIDENT PKO TEM. Sec. 7. In the absence of the president and the vice-presidents the board may appoint a president pro tern. THE GENERAL MANAGER. Sec. 8. The general manager shall have general superintendence of the onduct of the business of the company, other than its financial affairs, under the direction and control of the chairman, president, executive committee, and board of direct (jrs. THE TREASl'EER. Sec. 9. The treasurer shall have charge of the funds, receipts, and disbursements of the company. He shall deposit all moneys and other valuable effects in the name and to the credit of the company in such banks and with such depositaries as may be designated by the board of directors or executive committee. He shall disburse the funds of the company as may be ordered by the board or executive committee, taking proper vouchers for such disbursements, and shall render to the chairman, president, or executive committee, and to the directors at the regular meetings of the board or when- ever they may require it, an account of all his transactions as treasurer and of the financial condition of the company, and at the regular meeting of the boarcl in February annually he shall make a like report for the preceding year. He shall keep full and ac- curate books of account. He shall give to the company a bond in the sum of $100,000 for the faithful performance of the duties of his office and the restoration to the com- pany, in case of his death, resignation, or removal from office, of all books, papers, vouchers, money, or other property of whatever kind in his possession belonging to the company, which bond shall be an undertaking of a surety company in such form and contaming such provisions as the board of directors or executive committee may require. The fees of the surety company for furnishing the said bond shall be paid by the company. Certificates of stock, when signed by the president or a vice- president, shall be countersigned by the treasurer. He shall keep the accounts of stock registered and transferred in such form and manner and under such regulations as the board of directors or executive committee may prescribe. THE .VSSISTANT TREASURERS, Sec. 10. The assistant treasurers in New York and Chicago shall have power to sign checks and drafts upon the banks and depositaries of the company, and to endorse checks and drafts for deposit with such banks or depositaries to the credit of the company. The assistant treasurer in New York shall also have power to act as a vice-treasurer, and as such to sign certificates of stock in the place and stead of the treasurer in his absence. The assistant treasurers shall perform such other duties as may be from time to time prescribed by the chairman, president, executive commit- tee, or board of directors. They shall each furnish to the company a bond of a surety company in all respects similar in form and amount to that required of the treasurer, and the fees of the surety company for furnishing the said bonds shall be paid by the company. THE AUDITOR. Sec. 11. The auditor shall have supervision o\-er all the act'ounts and account Ijooks of the company, and see that the system of keeping the same is enforced and main- tained. He shall direct as to forms and blanks relating to books and accounts in all departments, and no change shall be made without his consent or the consent of the chairman, president, or executive committee. He shall see that there is kept in the bookkeeping department a set of books containing a complete reconl of all business transactions of the company pertaining to accounts, and shall, when requested, fur- nish to the board, executive committee, chairman, or president, a statement of the earnings and expenses of the companv or of any other corjioration in which this company may be interested, for any given time, and shall keep books and records for the purpose of furnishing such statistics. He shall verify the assets reported by the treasurer or his assistants at least twice a year, and make report of the same to the board or executive committee. He shall cause the l>ooks and accounts of all officers and agents charged with the receipt of or disbursement of money to be exammed as often as practicable, or when requested by the chairman, president, or executive committee, and shall ascertain whether or not the cash and vouchers covering the balances are actually on hand. He shall render such assistance and 1254 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. advice as the chairman, president, executive committee, or board may desire concern- ing the books, accounts, and system of financial transactions of all other corporations in which this company is interested, and furnish to the chairman, president, execu- tive committee, or board such statements concerning the same as may be requested by them. In case of a default coming to his knowledge at any time, he shall at once notify the chairman and president, as well as the executive committee. THE ASSISTANT AUDITOK. Sec. 12. The assistant auditor shall perform all the duties of the auditor in hia absence, as directed from time to time by the chairman, president, executive com- mittee, or board of directors, and such other duties as they may prescribe. THE SECRETARY. Sec. 13. The secretary shall record all the votes and proceedings of the stockholders and of the directors in a book kept for that purpose. He shall keep in safe custody the seal of the company, and, when authorized by the board or executive committee, atBx it to any instrument requiring the same, which seal shall always be attested by the signa- tures of the chairman, president, or a vice-president, or of the secretary or an assist- ant secretary. He shall perform such other duties as pertain to his office, or as the chairman, the president, the board of directors, or the executive committee may require. In the absence of the secretary from any meeting of the stockholders or directors the record of the proceedings shall be kept and authenticated by an assist- ant secretary, or Ijy such other person as may be appointed for that purpose at the meetmg, [Amendment to section 13, Article IV. Adopted at directors' meeting of June 21, 1899.] Sec 13. The secretary shall record all the votes and proceedings of the stockholders and of the directors in a book kept for that purpose. He shall keep in safe custody the seal of the company, and may affix it to any instrument requiring the same when authorized or directed so to do by the board of directors, the executive committee, the chairman, the president, or any vice-president discharging the duties of the pres- ident, pursuant to the by-laws. Said seal shall always be attested by the signature of the chairman, president, or a vice-president, or of the secretary, or an assistant secretary. He shall perform such other duties as pertain to his office, or as the chair- man, the president, the board of directors, or the executive committee may require. In the aljsence of the secretary from any meeting of the stockholders or directors a record of the proceedings shall be kept and authenticated by an assistant secretary, or by such other person as may be appointed for that purpose at the meeting. THE ASSISTANT SECRETARIES, Sec. 14. The assistant secretaries shall be vested with all the powers and required to perform all the duties of the secretary in his absence. They shall perform such other duties as may be prescribed by the chairman, president, executive committee, or board of directors. THE GENERAL COUXSEL. Sec. 1.5. The general counsel shall advise the board of directors, executive commit- tee, and otlicers of the company upon all points of law arising in the conduct of the company's business, and it shall be the duty of such counsel to advise the board from time to time as to all reports required by law. TEXl'RE OF OFFICE. Sec. 16. Each officer shall liold his office during the pleasure of the board of direc- tors; provided that with respect to all officers, except the chairman, president, and vice-presidents, an agreement in writing may be entered into with authority of the board or the unanimous approval of the executive committee fixing a definite term. Article X, contracts and aurekments. Sec. 1. N(j agreement, contract, or obligation (other than a check) involving the liayment of money, or the credit or liability of the company, shall be made without CHARTERS AND BY-LAWS. 1255 the approval of the board of directors or of the executive committee, except that the chairman or the president may in the ordinary course of the business of the company make contracts not involving an obligation or liability in excess of $50,000. BANKS, DEPOSITAEIES, CHECKS, AND DKAFTS, Sec 2. All checks and drafts and all funds of the company shall be deposited from time to time in such banks, trust companies, and with such bankers or otheV depositaries, as the board of directors or executive committee may designate. All checks shall be drawn out of the regular check books of the company, and upon the stubs of such checks the purpose for which they are drawn shall be specified. All checks, drafts, or orders for the payment of money shall be signed by the treasurer or one of the assistant treasurers, and shall be countersigned by the chairman, or the president, or a vice-president. No checks shall be drawn or funds used for any pur- pose other than for the corporate objects of the company. [Amendment to section 2, Article V. Adopted at directors' meeting of June 24, 1899.] Sec 2. All checks and drafts and all funds of the company shall be deposited from time to time in such banks, trust companies, and with such bankers or other depos- itaries as the board of directors or executive committee may designate. All checks shall be drawn out of the regular check books of the company, and upon the stubs of such checks the purpose for which they are drawn shall be speciiied. All checks, drafts, or orders for the payment of money shall be signed by the treasurer or one of the assistant treasurers, and shall be countersigned by the chairman or tlie president or a vice-president, or by such other officer or officers as the executive committee may designate. No checks shall be drawn or funds used for any purpose other than for the corporate objects of the company. Article VI, .SHAKES AND THEIR THANSFEH. Sec 1. Each holder of stock shall be entitled to a stock certificate signed by the president or one of tlie vice-presidents and the treasurer or vice-treasurer of the company and countersigned by the transfer agent of the company, certifying the number of shares owned by him. All such certificates shall be issued in consecutive order from certificate books, and shall be numbered and registered in the order in which they are issued, and on the stub of each certificate issued shall be entered the name of the person owning the shares represented 1 ly such certificate, with the num- ber of shares and of which class and the date of such certificate, and in'case of can- cellation, the date of cancellation. The jierson receiving any such certificate shall personally or by agent sign on such stub a receipt for the certificate issued to him. Every certificate returned to the company for the exchange or transfer of shares shall be canceled, and pasted in its original place in the stock cei'tificate book, and no new certificate shall be issued until the old certificate has been thus canceled and returned to its original place in such book, except in the case proviiled for in section 5 of this article. Sec 2. The board of directors or executive committee may appoint a registrar of transfers of stock in the city of New York or elsewhere, and after the appointment of such registrar of transfers no certificate for stock shall l3e binding ujion tlie company or have any validity unless countersigned by such irgistrar of transfers. Sec. .3. Transfers of shares shall be made only upon f lie ) lOoks of the company by the holder in person or by power of attorney duly exei'uted and filed with tlic secretary of the company, and on the surrender of the certificate or certificates for such shares; but the board of directors or executive committee may appoint some suitable bank or trust company or agent in the city of New York or elsewhere to facilitate trans- fers by stockholders under such regulations as the board may from time to time pre- scribe. Such transfer books shall be closed for such a period as the board shall direct previous to and on the day of the annual or any special meeting of the stockholders. The transfer books may also l)e closed Ijv the board for such ]ienod as may be deemed advisable for dividend purposes. Sec. 4. Every stockholder shall fuinish the secretar>' with an address at which notices of meetings and all other notices may be serveil upon or mailed to him, and in default thereof notices may ))e addressed to him at the office of the company in Jersey City, New Jersev. Sec. 5. The board of "directors mav direct a new certificate or certificates of stock to be issued in the place of any certificate or certificates theretofore issued by the 1256 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. company alleged to have been lost or destroyed, and the board, when authorizing such issue of a new certificate or certificates, may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the company a bond, in such sum as they may direct, as indemnity against any claim that may be made against the company; but a new certificate may be issued without requiring any such bond when, in the judgment of the directors, it is proper so to do. The directors, however, may refuse to issue any new certificate except upon the institution of legal proceedings, as provided in the statute in such case made and provided. Article VII. DIVIDENDS. Dividends may be declared by the board of directors, from time to time, out of the surplus or net profits of the company, and paj'able at such times as the board shall determine. The dividend on the preferred stock shall be payable quarterly, if from time to time so declared by the board, and the dividends on the preferred stock shall be payable before any dividends shall be set apart or paid on the common stock, aa provided in the company's certificate of incorporation. Any surplus remaining after providing the quarterly dividend on the preferred Stock maj' be set apart and paid on the common stock. [Amendment to Article VII, adopted at directors' meeting oJ December 11, 1899.] Dividends may be declared by the -board of directors, from time to time, out of the surplus or net profits of the company, as hereinafter stated, or at such other times as the board shall determine. The dividends on the preferred stock shall be payable quarterly, viz: On the sec- ond days of January, April, July, and October, in each year, if, from time to time, or otherwise, so declared by the board, and the dividend on the preferred stock shall be payable before any dividend shall be set apart or paid on the common stock, aa provided in the certificate of incorporation of this company. After all dividends on the preferred stock for the current dividend year have been paid, or after sufficient of the surplus or net profits of the company shall have been provided or set apart for the payment of all dividends on the preferred stock for the current dividend year, the directors may, in their discretion, from time to time, apply any further surplus or net profits of the company towards the payment of dividends on the common stock. All dividends on the capital stock of this company may be declared and payable as above set forth, and as the board may, from time to time, direct; provided, however, that no dividend shall be declared except as permitted by law and by the certificate of incorporation of this company. Article VIII. The common corporate seal is, and, until otherwise ordered by the board of direc- tors, shall be, an impression upon paper or wax bearing the words, ' ' The American Steel & Wire Company of New Jersey, Incorporated 1899." Article IX. AMENDMENT OF BY-L.4-WS, The board, by a vote of a majority of the directors of the company, may alter or amend these by-laws, but no alteration shall be made unless first proposed at a previous meeting of the board. The stockholders may amend the by-laws at any general or special meeting. [Article X of by-laws, adopted at directors' meeting ot December 11, 1899.] Sec. 1. The board of directors shall have power, at any regular or special meeting, to fix the sum or amount to be reserved as a working capital of the company, over and above the capital stock paid in. Sec. 2. The board may fix the amount of such working capital quarterly, viz: For each ensuing quarter beginning, respectively, with the months of January, April, July, and October, cir ptherwise, as the board may hereafter determine. Sec. 3, The board may, at its discretion, at any regular or special meeting, either increase or reduce the amount of working capital previously fixed and reserved. CHARTERS AND BY-LAWS. 1257 AMERICAN !^UGAR REFINING CO.'\IPANY- RATION.i -CERTIFICATE OF INCORPO- This IS to certify that we, F. O. Matthiessen, Jno. E. Searles, jr., H. O. Ha^■ellu■yer Wm. Dick, and Theo. A. Haveiiieyer, do heri'ljy associate ourselves into a e<_)mp'any under and by virtue of the provisions of an act of the legislature of New Jersey entitled "An act concerning corporations," approved April 7, 1875, and the several supplements thereto and acts amendati >rv thereof, for the purposes hereinafter men- tioned, and to that end we do by this our certiticate set forth : First. That the name we have assumed to designate such company and to be used in its business and dealings is "The American Sugar Refining Company." Second. That the place in this State where the business of such company is to be conducted is Jersey City, in the countv of Hudson, in which the principal part of the business of such company within this State is to be transacted ; that the principal place of busmess out of this State is to be situated in the city of Brookh-n, in the county of Kings, in the State of New York; that the States of Maine, Massachusetts, Connecticut, New York, Pennsylvania, Louisiana, Missouri, California, and Maryland are the other States of the United States in which it proposes to carry on operations, and that the objects for which said company is formed are the purchase, manufac- ture, refining, and sale of sugar, molasses, and melads, and all la^\ful business incidental thereto. That the business which is to be carried on out of this State is a part of the pur- chase, manufacture, refining, and sale of sugar, molasses, and melads, and all lawful business incidental thereto. Third. That the total amount of the capital stock of said company is fifty million dollars; the number of shares into which the same is divided is five hundred thousand, and the par value of each share is one hundred dollars. That of this amount one-half will be general stock and one-half preferred stock, and that the holders of such preferred stock shall 1ie entitled to receive from the sur- plus or net profits arising from the business of the corporation a fixed yearly dividend of seven per centum, payable semiannually on the 2nd days of January and July in each year before any dividend shall be set apart or paid on the said general stock. Should the surplus or net profits arising from the business of the corporation prior to any dividend day be insutficient to pay the dividend upon preferred stock, such dividends shall be payable from future profits, and no dividends shall at any time he paid upon general stock until the full amount of seven per centum per annum up to that time upon all the preferred stock shall have been paid or set apart. The holders of preferred stock shall be entitled to no dividends beyond the seven per centum aforesaid. The amount with which said company will commence business is eleven thousand dollars, all of which shall be general stock and which is divided into shares of the par value of one hundred dollars each. Fourth. The names and residences of the stockholders and the amount of shares held by each are as follows, viz: Names. Residences. Number of shares. Theo. A. Havemeyer William Dick Jos. B. Thomas F. 0. Matthiessen Jno. E. Searles, jr ... H. 0. Havemeyer Geo. C. Magoun Mahwah, N. J . . . Brooklyn, N. Y. . Boston, Mass New York, N. Y . Brooklyn, N. Y .. Greenwich, Conn New York, N. Y . (Twenty) 20. (Twenty) 20. (Twenty) 20. (Twenty) 20. (Ten) 10. Ten) 10. Ten) 10. Fifth. The period at which said company shall commence is the tenth day of January, 1891, and the period at which it shall terminate is the tenth day of Janu- ary, 1941. Sixth. The directors of said company shall be classified in respect to the time for which they shall severally hold office in three classes. Each class shall contain as near as mav be one-third "of the whole number of directors. At the first election of directors the first class shall be elected for a term of one year, the second class for a term of two years, and the third class for a term of three years, and at each annual election after the first the successors to the class of directors whose term expires in I A letter accompanying the copy of the certificate of incorporation states that the by-laws can not be sent on request without special vote of the board of directors. 1258 HEARINGS BEPOEE THE INDUSTRIAL COMMISSION. that year shall be elected to hold office for the term of three years, so that the term of office of at least one class shall expire in each year. In witness whereof we have hereunto set our hands and seals the ninth day of January, 1891. F. O. Matthiessen. Jno. E. Seakles, Je. H. O. Havemeyee. Wm. Dick. Theo. a. Havemeyer. State of New Yokk, City and County of Neto York, ss : Be it remembered that on this ninth day of January, A. D. 1891, before me, Frank K. Runyon, personally appeared Francis O. Matthiesson, John E. Searles, jr., Henry O. Havemeyer, Theodore A. Havemeyer, and AVilliam Dick, who I am satisfied are the persons named in, and who acknowledged, the foregoing certificate, and I having first made known to them- the contents thereof they did each acknowledge that they signed, sealed, and delivered the same as their voluntary act and deed. In witness whereof I have hereunto set mv hand and affixed my official seal this 9th day of January, A. D. 1891. Frank K. Runyon, Master in Chancery of New Jersey. [Endorsed:] "Recorded in Hudson Co., N. J., clerk's office, Jany. 9th, 1891, in Book 11 of clerk's record. "Dennis McLaughlin, Clerk." [Endorsed:] " Filed January 10, 1891. "Henry C. Kelsey, ' ' Secretary of State. ' ' State of New Jersey, department of state, I, George Wurts, secretary of state of the State of New Jersey, do hereby certify that the foregoing is a true copy of the certificate of incorporation of "The American Sugar Refining Company," and the endorsements thereon, as the same is taken from and compared with the original filed in my office on the 10th day of January, A. D. 1891, and now remaining on file therein. In testimony whereof I have hereunto set mv hand and affixed my official seal, at Trenton, this 19th day of August, A. D. 1899. [seal.] George "Wurts, Secretary of State. UNITED STATES DYE-WOOD AND EXTRACT COMPANY. [lO-cent internal revenue stamp, cancelled.] certificate op incorporation. [Registered office with the New Jersey Corporation Guarantee and Trust Company, Camden, N. J.] First. The name of the corporation is the "United States Dy"e-AVood and Extract Company." Second. The principal office in New Jersey is at No. 419 Market street, Camden, New Jersey. The New Jersey Corporation Guarantee and Trust Company is the agent therein and in charge thereof, and upon whom process against this corporation may be served. Third. That the ol )jects for which and for each of which this corporation is formed are: To manufacture, buy, sell, deal in and deal with dyewood, extracts, chemicals, and all like or kindred products; to manufacture, prepare for market, market and sell the same and any articles or product in the manufacture or composition of which tliey, or either of them, are a factor; To buy, sell, manufacture, refine, manipulate, import, export, and deal in all such .'substances, chemical or otherwise, apparatus, products and things capable of being CHARTERS AND BY-LAWS. 1259 used in any such business as aforesaid or required by any customers of or persons having dealings with the company. In furtherance, and not in limitation, of the general powers conferred by the laws of the State of New Jersey, and of the objects and purposes as herein above stated, it is hereby expressly provided that the company shall have also the following powers; that is to say: (a) To do any or all of the things herein set forth as objects, purposes, powers or otherwise, to the same extent and as fully as natural persons might, or could do, and in any part of the world, as principals, agents, contractors, trustees or otherwise. (&) To conduct its business in all its branches and have one or more offices, and unlimitedly to hold, purchase, and convey real and personal property, both within and without the State of New Jersey, and m all other States, Territories, and colonies of the United States, and in all foreign countries and places, subject always, however, to the laws of the respective States, Territories, colonies, and foreign countries. (c) To manufacture, purchase, or otherwise acquire, hold, own, sell, assign, and transfer, invest, trade, deal in and deal with goods, wares, and merchandise and prop- erty of every class and description, and to do manufacturing of any kind. (d) To purchase, or otherwise acquire, to hold, own, maintain, work, mine, develop, to sell, or otherwise dispose of, without limit as to amount, within or without the State of New Jersey, and in any part of the world, real estate and real property and any interest and rights therein. (e) To acquire the good will, rights, and property of all kinds, and to undertake the whole or any part of the assets and liabilities of any person, firm, association, or corporation, and to pay for the same in cash, stock of this corporation, bonds, or otherwise. (/) To hold, purchase, or otherwise acquire, to sell, assign, transfer, mortgage, pledge and otherwise dispose of shares of the capital stock, bonds, or other evidences of indebtedness created by other corporation or corporations, and while the holder of such stock to exercise all "the rights and privileges of ownership, including the right to vote thereon, to the same extent as a natural person might or could do. ig) To guarantee the payment of dividends or interest on any shares, stocks, deben- tures or other securities issued by, or any other contract or ol)ligation of, any corpo- ration. {h) To make and enter into contracts of every sort and kind with any individual, firm, association, corporation, private, public or municipal, body politic, and with the Government of the United States, or any State, territory, or colony thereof. It is the intenticjn that the objects, purposes, and powers specified and clauses con- tained in this third paragraph shall, except where otherwise expressed in said para- graph, be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes, and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purptises, and powers. Fourth. The total amount of' the capital stock of said corporation is to be ten mil- lion dollars (.S10,000,000) , divideil into one hundred thousand (100,000) shares of one hundred dollars (?ilOO) each. Of the said stock sixty thousand (60,000) shares, amounting at par to six million dollars (Sti, 000,000) , are tti be preferred stock, and forty thousand (40,000) shaves, amounting at par to four million dollars ($4,000,000), are to be common stock. Upon the vote of a majority of the preferred and connnon sto"ck issued and out- standing, irrespective of class, the directors shall have the power to create deferred- stock debentures which shall he subordinate to the common and preferred stock, both as to dividends and the principal, so that the said deferred-stock delientures shall not he entitled to any dividend or interest whatever until after both preferred and common stock shall have in any one year received, or had set apart for payment, a dividend at the rate of six per cent per annum, and after the payment of a dividend of six per cent in any year to the stock, preferred and common, a dividend at the rate oi, -but not exceeding, six per cent shall be jjaid to the holders of the said deferred- stock debentures, but it shall not be entitled in any one year to any further dividend or interest. In the event of liquidation or dissolution of the company, the common and preferred stock shall be paid in full before any payment shall be made upon the said deferred-stock debentures. Said deferred-stock debentures shall have no voting power. The deferred-stock debentures shall always be subordinate also to the claims of general creditors of the company. The rights, privileges, and conditions following shall attach to the shares aforesaid; that is to say: , . , , , . , ^ , (1) The common stock shall be subordinate to the rights of the preferred stock, except that both preferred and common stock shall have equal voting powers. 1260 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. (2) The corporation shall not be at liberty, without the consent in writing firat obtained of the holders of two-thirds in amount of the preferred stock issued and outstanding — (a) To create or issue any other or further shares ranking in any respect pari passu with or in priority to the aforesaid issue of $6,000,000 of preference shares; (i) Nor to create any charge, except as herein provided, upon the net profits of the corporation which shall not be subordinate to the dividend rights of the preference shares; ((■) Nor to reserve a surplus fund \Ahich shall not be chargeable with the payment of the accrued dividends on the preference shares. (.3) The said preference shari's shall carry a fixed cumulative preferential dividend at the rate of, but not exceeding, six per cent (Gfo) per annum on the par value thereof, and such dividends shall be declared quarterly on the second days of Jan- uary, April, July, and October in each year, or at such other times as the board of directors or the executive committee shall see fit and determine. If in any ypar dividends amounting to six per cent (6%) per annum shall not be paid fin such preferred stock, the deficiency shall be a charge on the net pi'ofits, and he ] layable, but without inteiest, before any dividends shall be paid upon or set apart for tlie common stock. (4) The balance of the net profits of the corporation, after the payment of said cumulative dividend at the rate of six per cent (6%) per annum to the holders of the preferred stock, may be distributed as dividends among the holders of the general or common stock as and when the board of directovs.or executive committee shall in their discretion determine. (.5) In the event of the liquiiUition or dissolution of the corporation the surplus assets and funds thereof shall be applied in the first place in repaying to the holders of the aforesaid cumulated preference shares the full amount of the principal thereof, and the accrued dividends, if any, charged, but without interest, before any amount shall be paid upon the common stock, and after such payment in full to the holders of saiil cumulative preference shares the surplus assets and funds shall be devoted to the payment of the principal in full of the common stock, and thereafter to the pay- ment of the principal of any deferred-stock debentures issued and outstanding. Thereafter the surplus funds and assets shall belong to and be divided among the holders of the common shares. From time to time the preferred and common stock may be issued in such amount and proportion as shall be determined by the board of directors, in accordance with the laws of the State of New Jersey. Fifth. The directors of the corporation shall be divided in respect to the time for whi(th they shall severally hold office into five classes, equal in number. The first class shall be elected for a period of five years; the second class for a period of four years; the third class for a periodof three years; the fourth class for a period of two years, and the fifth class for a period of one year; and at each annual election after 1899 the successors to the class of directors whose terms expire in such year shall be elected to hold office for five years, so that the term of office of at least one class shall expire in each year. In case of an increase in the board of directors between the annual election by the stockholders, the newly created directorships shall be and be construed as vacancies until the next annual election, to be filled forthwith by the board. Sixth. The names and post-office address of the incorporators and the number of shares of common stock subscribed for by each, the aggregate of which $1,000 is the amount of capital stock with which this corporation will commence business, are as follows: Name- P. 0. address. Number of shares of common stock. 3 Henry T.Wills . Boston Mass 4 3 Seventh. The duration ai the corporation is to be perpetual. Eighth. 1. The corporation shall have no power to mortgage its real property, excc))t upon the assent in writing first obtained of tlie holders of two-thirds of the issued preferred stock hereinbefore described, or upon the affirmative vote of the holders of a majority of the said preferred stock at a meeting of the preferred stock- holdciH duly called for that purpose, and upon such assent so obtained, or upon such CHARTERS AND BY-LAWS. 1261 affirmative vote so had, and not otherwise, the corporation shall have power to mort- gage its real property to secure an issue of bonds or otherwise: Provided, lioireeer, This limitation shall apply only to mortgages other than purchase-money mortgages on the acquisition of property, which purchase-monev mortgages shall cover only the property acquired. 2. The board of directors shall have power without the assent or vote of the stock- holders to make, alter, amend, and rescind the by-laws of this corporation, and, sub- ject always to the payment of the dividends on the preferred stock, to fix the amount to be reserved as working capital. 3. With the assent in writing or pursuant to the vote of the holders of two-thirds of all the stock, irrespective of class, issued and outstanding, the directcjrs shall have power and authority to sell, assign, transfer, convey, or otherwise (lispcsc of the prop- erty and assets of this corporation as an entirety on such terms and conditions and for such consideration as the directors shall deem fit, right, and just. 4. The board of directors, and when the biiard is not in session the executive com- mittee, in addition to the powers and authorities by statute and by the Ijy-laws expressly conferred upon them, are hereby empowered to exercise all such j'lowers and to do all such acts and things as may be exercised or done by the cor])oration, but subject, nevertheless, to the provisions of the statute, of the charter, and ti > any regula- tions that may from time t(j time be made Ijy the stockholders: Pi-ori(_l<'d,Thsit no regulations so made shall invalidate any provisions of this charter, or any prior acts of the directors or the executive committee which would have been valid if such regulations had not been made. 5. There shall be an executive committee of five members, who shall be elected by the stockholders from the directors, and hold office as hereinafter provided. The said committee shall have and exercise all the powers expressly c<.inferred upon it by this certificate of incorporation, and also all the powers of the board of directors whenever a quorum shall fail to be present at any stated or other meeting of the board, and as well at all times whenever the board shall not be in session, and shall have power to affix the seal of the corporation to all papers which they may deem to require it. The committee shall have power to make rules and regulations for the conduct of its business and to determine how many members thereof shall constitute a quorum. The officers of the committee shall be a chairman, a vice-chairman, and a secretary, who shall hold office during the term of their office as members of the committee, and shall be elected by the stockholders. At all meetings of the committee all questions shall be decided by a majority of votes, and in case of an equality of votes the chairman, and in his absence the vice- chairman, and in the absence of both the secretary, shall have a second and deciding vote. The stockholders shall, at their first meeting, elect by ballot the said committee of five members from the directors elected at such meeting, and the said officers thereof. The stockholders shall determine and fix the compensation to be paid to the mem- bers of the committee and to any of the officers thereof as such, and the compensa- tion of any member or officer of the committee so fixed shall not be diminished during his tenure. At every annual meeting after the first meeting, whenever the term of office of any member or officer of the committee shall expire, the stockholders shall elect a suc- cessor. Any member of the committee may be elected to succeed himself. Any director, irrespective of class, is eligible to election as a member of the exec- utive committee. The term of office of each member of the committee shall be coextensive with the term of his office as director, unless the stockholders, at the time of his election, shall fix a shorter period or term of office, which they shall have power to do. Any mem- ber of the committee who shall cease to be a director of the company shall ipso facto cease to be a member of the committee. Neither the directors nor the members of the executive committee nor the presi- dent nor the vice-president shall be subject to removal during their respective terms of office, nor shall their terms of office be diminished during their tenure. All vacancies in the executive committee shall be filled for the unexpired term from the directors by the remaining members of the committee. 6 The directors shall, from time to time, determine whether, and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the corporation, or any of them, shall be 9pen to the inspec- tion of the stockholders; and no stockholder shall have any right to inspect any account, or book, or document of the corporation, except as conferred by statute of New Jersey or authorized by the directors. 1262 HEARINGS BEFORE THE INDUSTRIAL COMMISSION. 7. The directors shall have power to hold their meetings, to have one or more offices, and to keep the books of the corporation (except the stock and transfer books) outside of this State, at such places as may from time to time be designated by them. The undersigned, for the purpose of forming a corporation in pursuance of an act of the legislature of New Jersey entitled "An act concerning corporations" (Revi- sion of 1896) and the various acts amendatory thereof and supplemental thereto, do make, record, and file this certificate, and do respectively agree to take the number of shares of stock hereinbefore set forth, and accordingly hereunto set our hands and seals. Dated Camden, N. J., March 3, 1899. James B. Dill. Henhy T. Wills. Frederick W. Garvin, l. s. L. s. L. s. In the presence of — Geo. W. Mark. James B. Dill, Solicitor, S7 Pine St. , New York City. State of New York, County of New York, ss: Be it remembered that on this third day of March, A. D. eighteen hundred and ninety-nine, before me, a commissioner of deeds for the State of New Jersey, resid- ing in New York, personally appeared James B. Dill, Henry T. Wills, and Frederick W. Garvin, who I am satisfied are the persons named in and who executed the fore- going certificate, and I having first made known to them, and each of them, the contents thereof, they did each acknowledge that they signed, sealed, and delivered the same as their voluntary act and deed. Geo. W. Mark, A Commissioner of Deeds for the State, of Neiv Jersey, residing in Nev) York. [lO-cent I, E stamp, canceled.] LIST OF WITI^ESSES. General aspects of combinations: Page. Thurber, F. B. , president Tnited States Export Association :', Dowe, P.E., pret'ident Commercial Travelers' National League 25 Sugar combinations: Buynitsky, Stephen X., assistant chief customs division of the Treasury Department _ ' 43 Smith, G. Waldu, president Wholesale Grocers' Association of New York wty - 55 Mas, Ernest, former chemical engineer Glucose Sugar Refining Company. . 72 Doscher, Clans, independent sugar refiner a7 Haveineyer, Henry O.; president American Sugar Eefining Company 101 Jarvie, James N., member firm of Arbuckle Brothers 138 Post, James H., commission merchant in sugar _ 147 Whisky combinations: Clarke, Charles C. , independent distiller, Peoria, 111 167 JIcNulta, John, receiver DistilHng and Cattle Feeding Company 192 Cook, Martin R. , wholesale liquor dealer and distiller 240 Luyties, Henry E. G. , wholesale liquor dealer and distiller 250 Standard Oil Company: Lee, J. W. , president of three independent pipe-line organizations 261 Jlonnett, F. S. , attorney-general of Ohio 297 Clark, AV. H. , former agent of Standard Oil Companj' 330 Da\ds, T. F. , independent producer and refiner. Marietta, Ohio 351 Westgate, T. B., independent refiner and officer in independent oil organi- zations 365 Lockwood, M. L. , independent producer of oil 383 Boyle, P. C. , editor and proprietor. Oil City Derrick 404 Mathews, B. A., selling agent of Standard Oil Company 491 Archbold, John D. , vice-president Standard Oil Company of New York . . 506 Phillips, 'Thomas AV., independent producer and officer in independent nil organizations 589 Emery, Lewis, independent refiner and officer in independent oil organ- izations . - - 602 Gall, Andrew D., manager Gall-Schneider Oil Company, Montreal 672 Rice, George, independent producer and refiner ('iS(;, 793 Page, Howard, vice-president Union Tank Line Company 755 Rockefeller, John D. , president Standard Oil Company 794 Dodd, S. C. T. , solicitor Standard Oil Company 798 Sugar combinations (resumed) : Atkins, Edwin F. , manufacturer and importer of sugar 801 Whisky combinations (resumed) : Bradley, Edson, vice-president Distilling Company of America 813 Rice, Samuel M., president Distilling Company of America S31 Tin-plate combination : Graham, W. T., second vice-president .Imerican Tin Plate Company 849 AVheeler, F. S. , treasurer American Tin Plate Cum pany 863 Reid, Daniel G. , president American Tin Plate Company 865 Griffiths, William, manufacturer of tin plate 887 Going, H. F., retired canner and manufacturer of tin cans 915 Greer, George, district manager American Tin Plate Company 922 Tuylor, Nathan A., independent tin-plate manufacturer 931 National Steel Company : Reis, Wilham E., president National Steel Company 943 m\ 81 1263 1264 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. American Steel Hoop Company : Page. Cfuthrie, Charles S., president Amerieaii Steel Hoop Company 953 Tin-plate and steel companies : Moore, William H., promoter of American Tin Plate Company, etc 959 Federal Steel Company: Stetson, Francis L., counselor at law 969 Gary, Elbert H., president Federal Steel Company 982 American Steel and Wire Company: Gates, John W., chairman American Steel and Wire Company 1005 Pam, Max, attorney at law 1034 National Shear Company: Pearson, James C, private banker 1041 Wiss, F. C. J. , vice-president National Shear Company 1043 International Silver Company: Dodd, Samuel, president International Silver Company 1049 Watrous, William H., director International Silver C'ompany 1062 Rogers, N. Burton, vice-president of C. Rogers & Brc is 1066 State corporation laws and transfer companies: Dill, James B. , attorney at law 1077 Wood, Howard K. , assistant secretary Corporation Trust Company of New Jersey .' 1089 Hansell, Frank R., secretary New Jei-sey fiuarantee and Trust Company. 1094 Marwick, James, auditor Corporation Trnst Company of New Jersey 1096 Garvin, James S. , assistant secretary Ne's\' Jersey Registration and Trust Company 1098 Rj'an, Dennis B. , attorney at law - 1099 King, Charles N. , secretary New Jersey Corporations Agency 1106 Nevins, Andrew P. , attorney at law 1111 Smith, J. Ernest, attorney at law 1119 Edgerton, Charles E., Ithaca, N.Y 1123 Sawyer, W. L. , secretary Corporation Trust Company of Delaware 1125 Myers, James J. , member of the legislature of Massachusetts 1127 Legislation — Public control: Dos Passos, John B., attorney at law 1139 Allen, Charles C, attorney at law 1177 Huff cut, Ernest W. , professor at Cornell University Law School 1211 Appendix — Charters and By-Laws 1221 GEXEBAL INDEX OF TESTIMOI^Y (SeL^ also, special index for Standard Oil Company). Addyston Pipe Company: Page Decision I'oncerning, discussed. ])os Passos, 1175; Allen, 1186, 1196; Huffcut, 1214 Adulteration: ' Corn flour, mixture with wheat 5j;;s 73 77 79 Corn oil, mixture with various other oils ■_ ". _'."". ' ilaV 73' 74 Government regulation, advocated _ " Havem'eyer 'l28 Whiskies, no injurious articles used. . . Clarke, 171, isO, 1X5; McNulta, 230' 231 Advantages of combinations. (See ICffVrh, Erunomiex.) ' Advertising: Economy in, by combination Bradley, 829; Rogers, 1070 3l(jnopoly due tcj, legitimate Smith, 70 71 Agents of corporations: ' ' Provisions concerning maintenance in State, New Jersev. Dill, 1077 1076 West Virginia Xevins, 1112-1115, HIS, 1119 Number of corporations represented by. New Jersey King, 1106 Jlethods of appointment, business, etc.. New Jersev Ryan, 1100-1105; ,, ^ , ,, . ' King, 1106, 1107, 1111 .Methods of busniess, Delaware Sawyer, 1125-1 127 Trust companies. New Jersev, description of business \Vood,'l089-1094; Hansen, 1094-1096; .Alarwick, 1096, 1097; Garvin, 1098, 1099 Aggregation of capital. (See Cojiilal.) Agricultural products: Prices fixed by foreign markets Thurber, 11 Alcohol: ilanufacturiug and art-;, desirability of increased use McNulta, 227, 234; Rice, S46 Taxation JIcNulta, 225-227 ; Bradlej-, 829 ; Rice, S46 American Spirits Manufacturing Company. (See Whislij roinfiinolions.) American Steel and Wire Company, of New Jersey (sole ■iritni'.ss, G.VTEs) : American Steamship Company, relation to 1007 American Steel and Wire Company of Illinois, relation to 1019-1021 Plants and output controlled by 1005, 1028 Barbed wire — Practical monopoly of output thiough patents 1009, 1010, 1033 Prices 1009, 1033 Capitalization — Amount and classes of stock 1020,1021 Bonded debt of constituent companies 922, 923 C(ist of plants, working capital, etc 1020, 1021, 1032 Trademarks, good will, etc. , value of 1021, 1022 Carnegie Steel Company, no direct relation to 1023 Cause of combination not excessive cojnpetition 1033 Coal mines, ownershij) of 1005, 1023 Competition and competing establishments — Advantage of combination in securing large buyers 1024 Excessive, not cause of combination 1033 N< ) attempt to prevent 1022, 1023 Strength of. 1015, 1016, 1022 Independent plants, offer to sell out to ci >mbinati( m 1 024 Purchase of matejial from combination 1024 No agreement with 1010,1011,1022 "Wire fencing, no agreement as to ) iriccs 1022, 1031 1265 1266 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. American Steel and Wire Company, of New Jersey — Continued. Page. Cost of production, reduction during past twenty years 1008, 1033 Waste in rolling, amount of 1008 Debts, bad, reduction in, by combination 1030 Dividends, common stm-k, reasons for not paying on.. 1034 Economies of combination — Closing of plants, reasons for 1028, 1029 C( jmbination of (liff erent branches of indiistry 1030 Debts, bad, reduction in 1030 Freights, saving by shipments from nearest plants .' 1030 Officers and salaries, savings in 1029 Superintendence, best former ability retained 1034 Traveling men dispensed with 1018, 1030 Exportation of product — Advantages of building up foreign market 1015 ('(inditions of competition with foreign producers 1013-1018 Combination, tendency of, to increase 1016- China and Japan, amount of trade with 1030 England, large exportation to 1015 Advantages of United States in manufacture 1014 Prices lower than domestic ; reasons 1015 Federal Steel Company, no direct relation to 1023 Freights, no special rates or rebates 1031 itail rates, Lake Erie to Pittsburg i . . 1007 Savings by shipments from nearest plant, 1030 Germany, conditions of production and exportation 1014, 1016, 1018 Syndicates in iron and steel industry 1 017, 1018 International combination, attempt to form 1017, 1018, 1024 Iron and steel industries — Combinations, c( >ntrol Ijy 1023 Ci imbinations, relations 1 letween 1023, 1027 Export trade, conditions of 1014-1018 Iron ore, output, increase 1025 Prices, recent increase in 1006, 1025 Iron, pig, increase of output 1006 Labor (see also Wnr/ex) — Amalgamated Associatiijn nc )t recognized 1011, 1012 Employees, number of 1012 Lake freights, cost ( if transportation, estimated 1007 Rates, increase of 1006, 1007 Mines, < )wnership of 1000, 1005, 1006, 1023 National Steel Company, no direct relation to 1023 Nails, wire — Independent manufacturers, no agreement with 1010, 1011, 1022 Output, proportion controlled by combination 1005, 1010 Prices, increase of 1010 Patents, few in manufacture of 1 009, 1010 New .Tersey, reasons tor incorporating in (Pani) 1035 Organization, history and description — Certificate of incorporation and by daws 1248-1256 American Steel and Wire Companv of Illinois, relation to 1019-1021 1 1 ist( .rv of movement .' 1019-1021 :\Iethoii of acquiring plants 1028, 1032 J 'lunts entering combination, list of 1028 Plants afterwards closed, reasons for buying 1028,1029 Dissi ilution of independent companies 1028 Promoters' profits 1031 Stock, exchange of 1019-1021 Output of p]'iiducts — Ch ising of plants, reasons for 1027-1028 Increase during jiast twenty years 1008 Increase shice combination 1028, 1029 Projiortion controlled liy (t(md)ination 1005,1009,1010 I'aibcd wire, jnuctical monopoly through ]ialents 1009,1010,1033 Patents, control of 1009, 1010, 1033 Saving of law suits, concerning 1030 GENERAL INDEX OF TESTIMONY. 12y Reid, 886 Cost of plants. (See ('iipilalization, Orf/aii/iznlioii.) Cost of production — Elements entering into Greer, 928 Excessive when industry first estal^lished Reid, 878 Early statistics, discussed Griffiths, 902; (-ireer, 923, 924 Increase in cost of materials and labor Graham, 853; Reid, 885; Griffiths, 902 Estimated at different prices of steel _ t.iriffiths, 902 Prices of raw material, statistics of Reid, 868, 869 Relative of combination and competitors Graham, 857; Reid, 885; Griffiths, 899, 900 Wages, increase < jf Graham , 853 ; Reid, 869-874 Waste in rolling steel Reid, 867 Descripti(jn of business Graham, 849; Griffiths, 890 Boxes, contents, amountof steel, etc ..- Graham, 849; Reid, 867; Greer, 930 Dipping establishments — Methods of business • Graham, 849 Number of independent plants < {raham, 852 Reasons for establishing dipping plant only Taylor, 931 Relation to American Tin Plate Company' Taylor, 933, 937, 940 GENERAL INDEX OF TESTIMONY. 1269 American Tin Plate Company— Continued. Dipping estal.)lishments — Continued. Page. Attempt to suppress competition of, refusal to sell plates ( hittiths, 89.5 896, 899 Denied Graham, 8.50; Greer, 924, 928 Large sales recently made to, by combination Greer, 924, 928 Irresponsible, desirability of discouraging Greer, 924 Unable to obtain supply except from combination. .Griffiths, 894; Taylor, 933 Contracts, existing, for supply of material Taylor, 933 Unable to sell as cheaply as combination Greer, 928 Prosperity of business, N. & G. Taylor Company Taylor, 935 Dismantling of plants '.... Graham, 853; Eeid, 876 Dividends, number paid, and future prospects Graham, 856 Economies — General discussion Graham, 855; Eeid, 886; Greer,929; Griffiths, 913 Consumer does not profit by Griffiths, 910 Buying of supplies in large quantities Reid, 877 ; Griffiths, 913, 914 Freights, shipment from nearest plant Graham, 855, 856; Eeid, 877, 886; Griffiths, 913; Taylor, 942 Labor, no reductioii in amount per unit Graham, 860; Eeid, 876; Griffiths, 899 Large and improved plants Graham, 855 Six mills limit of economy Griffiths, 915 Patents, slight importance of Graham, 861 Processes, few new methods of manufacture Graham, 860 Selling of goods, agents, etc., saving Graham, 855; Eeid, 877 Specialization of manufacture in particular plants Reid, 877 Superintendence, personal, by owner, superiority of Griffiths, 899, 900; Taylor, 941 Previous managers chiefly retained Eeid, 877; Greer, 929 Exportation, not likely in immediate future Eeid, 882 Freights, shipment from nearest plant, economv of Graham, 855, 856; Eeid, 877, 886; Taylor, 942 Special rates, denied Graham, 856 Good will. (See Cupiicdhntion.) Griffiths, AVilliam — Sale of plant and erection of new plant Griffiths, 887, 893, 896 Position as tin-plate manufacturer, discusseil Greer, 923 Importation. (See Tririff.) Jobbers — Brands, manufacture under special -- Graham, 852; Eeid, 875 ilust be assigned to the combination Griffiths, 891-893 Form of contract concerning assignment and manufacture -.. Griffiths, 891, 892 Exclusive purchase of goods from combination required Griffiths, 890-893 Denied Graham, 8ri2; Eeid, 875 Eefusal to sell plates, and discriminations, denied Graham, 850, 851, 854; Eeid, 874,875, 878 Unable to obtain supply except from combination - Griffiths, 894 Labor (see also ir'/ffcs) — Number of employees - Graham, 8&8 Unionizing of plants under (•onibination - Greer, 928 Organization of tinners - - - -,-- Griffiths, 908 IMore idleness than ever before . . - Cjriffiths, 904, 905 Discontent and apprehension of employees Griffiths, 904-906 No reduction in amount per unit Graham, 860; Eeid, 876; Griffiths, 899 ilf .nessen plant, conditions in Griffiths, 905, 907 New Castle plant, outj.ut in excess of stipulation Griffiths, 904 Denied '- - - - Greer, 924 Ownership of sti ick by employees Graham, 8o4; Moore, 961 Dipping plants, union labor not employed Taylor, 936 Wages and conditions of labor Taylor, 932 Strikes referred to Eeid, 876; Griffiths, 907, 908 Women, employment and wages Eeid, 880 Contracts by combination for exclusive ccmtrol, discussed (Traham, 852; Reid, 875; Griffiths, 888-890; Taylor, 939 1270 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. American Tin Plate Company — Cuiitinueil. Machinery — Continued. Page. No monopoly of tinning machinery Taylor, 935 Recent patents on tinning machinery Taylor, 936 ^Ii )ore, William H. , promotion by, described Moore, 960-963 Companies promoted by Moore, 959, 963 Xational Steel Company, relations with Tin Plate Company. . Graham, 854, 863- Reid, 875; Griffiths, 894; Reis,956 Xevv Jersey, laws complied with Graham, 857; Wheeler, 864; Reid, 865 Organization of combination (see also CupiUdiznlimi, Promotion) — Certificate of incorporation and by-laws 1240-1248 Description of process Reid, 866; Moore, 959-962 Earl}' movements toward combination Griffiths, 903 Plants bought outright for cash or stock Graham, 850; Reid, 866; (Iriffiths, 887; Moore, 960 Each concern made its own bargain Graham, 851, 860; Moore, 961 Prices paid increased by anticipated profits Reid, 884 Plants sold for 25 per cent above cost Griffiths, 909 Standard price, $40,000 per mill Griffiths, 909 Working capital, amount furnished l)y organizer Reid, 885; Moore, 960 Stock, methods of allotment Moore, 961 Mortgaging of property, restriction on Moore, 961 Plants all free of debt Moore, 961 Officers selected by promoter _ Moore, 962 Output — Proportion controlled by combination Reid, 882, 883 Number of independent plants Graham, 858, 861 Dismantling of plants and reasons Graham, 853; Reid, 876 Shortage of supply for cans, 1899 Going, 917 Large consumption of tin plate in l' nited States Reid, 882 Patents, relatively unimportant _ . . Reid, 875 Prices — Statistics and general statements — Statistics, by months, American plate, 1888-1899 Reid, 868, 869 Movements since formation of combination . . _ Reid, 867 Early high prices Griffiths, 898 Brands, special, higher prices for Griffiths, 898; Greer, 930 Reduction bv estabhshing industry in United States Graham, 858; Going, 916; Taylor, 935 Decline, former, cause i if Griffiths, 901 Changes, according to changes in tariff, etc Greer, 927 Sources of statistics (iraham, 859, 862; ( frilfiths, 908 Variations according to cjuality C-iriffiths, 908; Greer, 930 Foreign product, increase in price Reid, 869; Griffiths, 915; Taylor, 934, 938 Effect iif combination — American Tin Plate G.mpany |.rartically fixes .. Reid, 886; Taylor, 938 Increase due to increaseil cost Graham, 853; Kei.l. S(;7, .S74, RS5; Taylor, 933, 984, 938 Increased demand, effect Reid, SSI : Griffiths, 914 Increase less than in other iiDu [jvoducts Greer, 930 ('ontracts for deliverv at less than quofi^d prices Reid, 867; Going, 917; Greer, 924 1 iiciease greater than increase of ci ists (.Trilfiths, 902, 911 Profits under different prices Griflitlis, 8!l7, S98, 903, 904; Greer, 923 Policy of American Tin Plate Company Reid, 886; Greer, 930 Reduction not likely in immediate future Reid, 881; Grifliths, 915 Inciease can scarcely afferl ccjiisumption of canned goods Going, 918 Profits, reduction through increased cost of iiroilucti(m (iraham,859 Prices, rates under different ( iriifiths, Si)7, S98, 903, 904; Greer, 923 Promoter's profits, amount of. Reid, S()li; Griffiths, '.Ml; Moore, 960-963 "Working capital furnished by organi/.ei' Reid, 885 Quality — Tui]iortance of good plate to can manufacturers Croing, 917, 921 Comparative of American and W'l'lsh iiroduct (jrahani, 861; Going, 91(); Greer, 926; Taylor, 932 Decrease in amount of tin used, recent Going, 916 Denied Greer, 926 Combination, effect on ■ < ioing, 916; CTreer, 925,929 GENERAL INDEX OF TESTIMONY. 1271 American Tin Plate Company — Ccmtinued. Page. Selling of goods, agents, etc., saving in Graham, 8.55; Reid, 877 Steel- Prices by months, 1888-1899 Eeid, 868 Contracts with steel companies Griffiths, 894; Graham, 8.54; Reid, 875; Eeis,947; Guthrie, 956 Stock. (See Capitalization.) Stockholders, right to examine books properly guaranteed Graham, 857; Reid, 865 Strikes referred to Reid, 876; Griffiths, 907, 908 Superintendence, personal, bv nwner, superiority of Griffiths, 899, 900; Taylor, 941 Previous managers chiefly retained Reid, 877; Greer, 929 Tariff- Amalgamated Association, influence in securing passage Taylor, 937 Rates," changes in ". Reid, 878 Effects of— Beneficial in establishing industry Reid, 880; Taylor, 934, 935, 937 Reduction of price bv American industry Graham, 858; Reid, 878 Early effect of McKiiiley Act Reid, 878; Taytor, 935 Large proportion of tin plate used in United States Reid, 882 Quality, comparative, American and Welsh Graham, 861; Going, 916; Greer, 926; Taylor, 932 Combination not due to Reid, 881 ; Grifliths, 912 Xeed of protection — Sufficiency of present rate Reid, 879, 880 Importation, small amount of.. Graham, 855; Griffiths, 915; Going, 921 Exportation, small amount of - - Graham, 855 Protection still necessary Reid, 878, 879, 882; Grifliths, 909, 910; Taylor, 9.34 Margin })etwecn foreign and domestic prit'es Reid, 878 Removal would destroy tin-plate industrv Graham, 854 Removal of protection, effects of Taylor, 939 Wages, Wales, compared with United States. . . Graham, 860; Reid, 880 Combinations in British tin trade Taylor, 940 Taylor, N. A., relation to American Tin Plate Company Taylor, 931, 933, 940 Prices, variations, 18SH-1899 Reid, 868 Increase in price and causes Graham, 859; Taylor, 941 Sources of supply Graham, 859 ; Taylor, 940 Wages — , . T3 ■ 1 Fixed by annual agreement with Amalgamate 869 Amalgamated 'Association scales, 1897-1900 Reid, W^O-Si^ Output of workmen, limit of - - Reid, °' l-8(;^ Increase since formation of combination Graham, 85i>; Reid, 869-874; Griffiths, 903 Earnings . .f different classes of labor geid, 879 Tinners, little skill required - - Reid, 879 Dipping establishment, conditions in ----,---, ao,^^ I' oqa Wales, compared with United States Graham, 860; Reid, 880 Antitrust laws (see also i('f/;.v/«/(r'ii) : ,. ,,, nno i.in^ Desirability of definite apphcation to conditions \lJen, iiy,,, i-U4 Existing statutes — ^^ ,, ^ . , . _,. Sufficient - - ^'^^ ^'^^'^' '^' ^^^'^' ^^°^ General character and effects., llavenieyer, 1(15, 106, 114, 122; Monnett, 329 Ineffectiveness and evasion ------ Dowe, 2b , Clarke 187 Illinois, interpretation and effect of a.'t McNulta, 21^ ; Pam, 1038 Mis,soiin, act and its interpretation , Allen, 1186 1201, 1204 Not likely to interfere with business of corporations ^ ^oore 966 r^x.- i„ , ,.„fo,.,.,jri tr, Monnett, .329 Ohio law s, referred to Cmith fiQ Interference by, deprecated ""'Pu;; inqs ^S^S^ ^^^iS^^':;::::;::;;:: ■^^^:<^^^- Sos passos; n^^ ^"' Courtlmerpretations, discussed...... .\llen, 1185, 1188; Huffeut, 1214, 1215 Railways, application to. - - Dos Passos, 1158 Working beneficial to some extent ^ee, zao 1272 THE INDUSTRIAL COMMISSION I INDUSTRIAL COMBINATIONS, Antitrust laws — Continued. United States act — Continued. Page. Sufficient protection when properly enforced Rice, 728-730 Failure of Attorney-dreneral to enforce Rice, 728, 730 Arbuckle Brothers (see also Sugar eoiiiliiiiiilkma) : Competition with American Sugar Refining Company Jarvie, 138-147 Attorney-General: Failure to enforce Sherman antitrust act Eice, 728, 730 Baking-powder combination: Commercial travelers, displacement by Do we, 29, 32 Monopoly of, due to advertisuig Smith, 70 Rebate system Smith, 59, 66 Barbed wire : Control of output, prices, etc (.iates, 1009, 1033 Beef combination: Railway discriminations in favor of Lockwood, 399, 400 Beer: Tax, increase advocated McNulta, 225, 226 Beet sugar: (See Sugar combinafioit.) Bicycles: Commercial travelers, displacement by combination Do we, 29 Bonds: Advantages of corporate bond system Dos Passes, 1148, 1149 Brands: Importance and value of, silver Dodd, 1054, 1055, 1057, 1059 Sugar Havemeyer, 111, 116 Whisky Bradley, 829, 845 Brass w^are: Prices increased through combination Do we, 28 Brewery trust: Cleveland and Sandusky Brewing Company Monnett, 328 Ohio, suit brought against ^lonnett, 314 By-products : Whisky Clarke, 168; Luyties, 258 Oils. (See Stanilard Oil combination. ) Canada (see also Stamhtrd Oil comhinalion) : Combinati ons, few and strongly opposed by people Gall, 685, 686 Reciprocity treaty, lobbying by lumber interests Thurber, 15 Tariff, proposal to remove on all monopolistic articles Gall, 686 Cans and canned goods : Conditions of manufacture and labor Going, 918-922 Effect of tin-plate combination Going, 917, 918, 921 Relation of tin-plate industry to (joing, 917, 921 Capital, aggregation of (see also Coiiibiiiatiiiiix, (JurponiHonXj ^fdiiopoly) : Effects discussed generally Dos Passes, 1142-1144 iSfot injurious in itself Allen, 1179 Historical development of modern methods Dos Passes, 1146, 1147 Individual compared with coi-porate ownership Dos Passes, 1143 Limit ijf safe aggregation, impossibility of fixing Dos Passos, 1143 Pernicious only when accompanied by monopoly Dos Passos, 1144 Purposes of, impossibility of discriminating between , Dos Passos, 1143 Corporate stocks, held l>y small investors Dos Passos, 1164, 1165 Wealth, importance of incentive to accumulate Dos Passos, 1165 Capitalization : ^\ mount and value of plants — American Steel and Wire Company ( rates, 1020-1022, 1032 American Steel Hoop Company Guthrie, 953 American Tin Plate Company Graham, 850, 851, 860, 861; Keid,866, 884; Griffiths, 911; Moore, 960-963 Federal Steel Company . . . _ Gary, 986, 992, 993 < jlucose Sugar Refining Coi apany Mas, 81 National Sfeel Company Reis, 943-945, 949 National Shear C(jmpany Wiss, 1041-1044, 1047 Standard Oil Company. (See Shimliird Oil cDmbinalioii.) Sugar combination Doscher, 94, 100, 101; Havemeyer, 110, 111, 117, 123; Post, 152, 160 Whisky. (See ]Yliiskii i-i>iiibiii(ttiu'iix.) GENERAL INDEX OF TESTIMONY. 1273 Capitalization — Continued. Page. Classes of stock DjU ]^()84 Preferred stock not allowed in Mussachuse'tts .'.".".'.'."."."... Myers! 1129 Common and preferred stock, relative quantities of iMonnett, 328 Delaware, laws rc^nlating _ _ . Smith, 1121, 1122 Earnmgs, should l)e based i.n Thurber, 6, I'l; Havemeyer, US; Gates, 1021 Good will, nnportance and justiticationof capitalizing. Havemeyer, 110, 111, 118; Rogers, 586; Moore, 962; Gates, 1021, 1022; Dill, 1084; Dos Passos, 1170 Good will, significance of term discussed Dodd, 1054, 1055, 1059 ^Mortgages, advantages of corporate bond system Dos Passos, 1148, 1149 Massachusetts, laws concerning ' Jlyers, 1127-1138 New Jersey, pro\-isions c(inceming pu>-ment, etc 'Dill' 1080, 1082 t)vercapitalization (see also Amounl) — Instances of Dill, 1080; Ryan, 1 101 Common stock does not represent actual cost Thurber, 17 Few large corporations overcapitalized Dos Passos, 1166 Bonus of («mmon stock, significance of Dos Passos, 1170 DifKculty of estimating Thurber, 6, 21; Dos Passos, 1149 Large capital intended to secure wide distribution of stock Stetson, 976 No intention to make nominal capital represent value Stetson, 976 Fairness of earning dividends on Havemeyer, 118 Reasons for surplus value of stock Moore, 967 Evils generally condemned Dowe, 25, 31 Fraudulent purposes McNulta, 237; Dill, 1080; Myers, 1133 Chief incentive to combination Myers, 1133 Concealment of earnings by ._ Thurber, 7 Charges, excessive, fostered by Lee, 295 ; Myers, 1 135 Increase in view of anticipated profits Dos Passos, 1170 Investors, injury to Thurber, 19; Smith, 69 Massachusetts, agitation concerning j\Jyers, 1 12l-i, 1129 Paying in of stock — Limit and provision for paying, Delaware Smith, 1121, 1122 New Jersey Dill, 1080, 1082 West Virginia . _ _ Nevins, 1114-1116 ilisrepresentatii 111 and concealment as to Dill, U).sO, 1082 Stock must be paid in in full, Massachusetts Myers, 112(S, 1129 Property and services — Law as to taking for stock, New Jersey Stets(jn, 975 West Virginia Nevins, 1116 Delaware Smith, 1121 Public statement of stock issued for King, 1110; Dos Passos, 1166, 1167 Stockholders liable for fraud in taking Dill, 1081 Provisions concerning taking, etc., England Dill, lOSL', 1083 Evil of issuing stock for Dill, lOsO, 1081 Remedies and regulation — Advantages ti i the people ( if strit't regulation Myers, 11 34 Regulation advocated - Clarke, 191 Restriction in propos Passi )s, 1157 Issue of stock without nominal value advocated Stetsi^n, 976 Issue of stock controlled by State officers, Massachusetts :\Iycrs, 1130 Issue of ne\'\- stock at market value, Massachusetts. Myers, 1132 Limitation t- . si, 000, 000 advocated - Lee, 294, 295 3Iassachusetts, laws for preventing oycrcapitalizatioii Myers, 1129-1133 Companies overcapitalized as much as others.. Moure, 966 Trusts, eyasion of law by - Myers, 1121 Prospectuses, liability for statements in, England Dill, 1082 Tax on organization, pro rata, tendency ti i check . _ Thurber, 21 West Virginia, laws regulating. Nevins, 1114-1116 Carnegie Steel Company : Referred to (iriffiths, 894; Gates, 1023,1027 1274 THE INDUSTRIAL COMMISSION". INDUSTRIAL COMBINATIONS. Causes of combination : Com petition, excessive — Page. (xeneral statement - Smith, 71 American Steel and Wire Oonipanv Gates, 1033 American Tin Plate Company ". 854, 866, 867, 897-905, 925, 929, 941 International Silver Company Dodd, 1051 ; Rogers, 1067 National Shear Company ... 1 AViss, 1044-1046 Sugar combination . . Smith, 71; Havemeyer, 109, 123; Post, 165; Atkins, 811 Weak competitors, effect on industry Griffiths, 901 'Wliisky combination Luyties, 255; Bradley, 828 Evolution, natural and necessar\- Thurber, 3, 10; Archbold, 565; Dos Passos, 1144-1148, 1152 Overcapitalization as incentive to combination Myers, 1133 Railwav discrimination the chief cause Lockwood, 390; Emery, 643; Rice, 688; Allen, 1190, 1191 Survival of the fittest Havemeyer, 135 Tariff, excessive protection by Havemeyer, 101, 102, 116, 118, 133, 137 American Tin Plate Company, not caused by Reid, 881 ; Griffiths, 912 Federal Steel Company Gary, 999 National Shear Company Wiss, 1046 Chair trust : Prices, increase through combination Dowe, 28 Charters : ^lonopolies granted by special Dos Passos, 1145 Withholding from trusts, advocated Dowe, 35; Monnett, 310; Rice, 730 Chicag-o trust conference: Conclusions referred to _ Dos Passos, 1157, 1158 Clocks: Prices, increase through combination Dowe, 28 Coal: Combinations, tendency to depress price Lee, 278 C'ombinations of railways controlling Allen, 1191 Railways, special rates to certain companies ■ Lockwood, 396 Coffee: American Sugar Refining (lompanv, competition, prices, etc Thurber, 6, 22; Havemeyer, 113, 1 14, 126; .larvie, 140 Varying qualities, profits due to Smith, 67 Closing of plants: American Tin Plate Companv Graham, 853; Reid, S7G; Griffiths, 899, 904-907 ; Greer, 924-927 Sugar combination Thurber, 5; Doscher, 99; Havemeyer, 110, 124 W hisky combination Clarke, 170, 191 ; McNulta, 203 Combinations (seeaAso Anli-tnist Imrs, Ei-nnoiiiies, Effeds, Muiiopoliex, etc.): Acciuisition of stocks more coiiunon than of properties Stetson, 970 Laws against, ineffective, early English Dos Passos, 1152, 1153 Monopolistic intent must be slhown to render illegal Allen, 1200-1202, 1205 Number and importance of recent Allen, 1189 I'ower to extend into other fields. _ Allen, 1191-1193 Rail ways, interest in '. Rice, 743; Allen, 1191 Standard Oil Company, influence in forming other trvists Rice, 688 Syndicates in Germany _ Gates, 1017, 1018 Uni viTsality of tendency Thurber, 8-10 Com.bs: Prices, increase through c( mil li nation Dowe, 28 Commercial travelers (see also Si-Uiinj) : Associations, nature and membersliip Dowe, 31,40,41 I lisplacement by coml)inations Dowe, 26-33 Losses through Dowe, 27, 28 Often works ] jcrmanent injury Dowe, 33 ( »p|)Osition to trusts by Dowe, 25, 33 Savhig to combinations 1 )y displacement Dowe, 33, 37 Travelers' Protective Association, resolutions concerning trusts Dowe, 26, 39 T^nnccessary under corrdMnation Dowe, 36 Commercial Travelers' League: ( )rganization, membership, purposes Dowe, 31, 40, 41 Common la'w: Liability of promoters and othcers for false statements. -Dos Passos,1163, 1176, 1177 GENERAL INDEX OF TESTIMONY. 1275 Common law— Continued. Monopoly- I.,g, Attords suflieient remedies for Dos Passos 1155 1156 Matutes desirable to supplement Allen, 1193, 1204 lijarly decisions against _ Allen 1183 Decisions of courts under. United States Allen 1 18-1^1187 Attitude toward. _ . . McNulta, 217; Monn('tt, 313, 314 I'artial restraint of trade against Dos Pass(3s 1173 Illegality of restraint of trade Gary' 1000 Publicity, sufficient protection under i)os Passos 11(13 1166' 1176 Com.petitioii: ' ' ' Methods and policy of combinations — Advantages of great aggregations in competing. . Smith, 71 ; Havemeyer, 109 American Steel and Wire Company. . Gates, iOlO-1015, 1022-1024, 1031, 1033 Business principles only should govern Haveme\-er, 120 Competing manufacturers and dealers driven out Thu'rber, 13 Can crush competitors by cutting prices Rice, 730 Destruction of, sought by trusts Dowe, 35 Local markets, underselling in Dowej 37 Purpose of combination to reduce Dodd, i'o'5'5; Rogers, 1067" Sugar combination Doscher, 88, 89 ; Havemeyer, 107-109, 120 Tin plate combination S52, 875, 888-896, 924, 928, 936, 939 Possibility of, against combinations — Where ccjnditions are equal Dowe, 37, 38 ; Lockwood, 392 Small traders have certain advantages Clarke, 189 Remedy for combinations — Al )uses restrained or prevented bv Thurber, 6, 14; Smith, 68, 70; Clarke, 187; McNulta, 217, 237; Mon- nett, 329; Stetson, 980; Gary, 1001; Dos Passos, 1151 Impossibility of establishing where large capital required. McNulta, 237, 238 Increase of large scale competition likely. Clarke, 189 Cost of production must be made low to prevent McNulta, 217, 237 Prices,necessity of low, to check Havemeyer, 105 Unfair — Should be prohibited Lee, 294; Westgate, 383; Lockwood, 394; Emery, 671 Germanv, prohibition in Lee, 273, 276; Archbold,532; Emery, 616, 617, 623 Congress (see, also, Xatlonal laws) : Corporations, power to regulate, discussed Stetson, 981 ; Dill, 1087, 1088; Gary, 1000, 1003; Allen, 1209; Huffcut, 1211-1219 Absence of power except as to interstate business Huffcut, 1213 Charters, power to issue special Pam, 1037 Interstate commerce — Powers concerning, discussed (jarv, 1000, 1002, 1003; Myers, 1138; Dos Passos, 1160, 1173, 1174; Allen, 1195-1197, 1202, 1203, 1210; Huffcut, 1211-1219 Power limited to Gary, 1000, 1002 Power to prohibit State corporations from engaging in. . Huffcut, 1218, 1219 Legislation by, deprecated Dos Passos, 1159-1161 Mails, prohibition of use to combinations Huffcut, 1217 Powers of, discussed Stetson, 981; Dill, 1087, 1088; Dos Passos, 1159-1161, 1173, 1174; Huffcut, 1211-1219 Constitutional amendment to increase, discussed * ^'"^'i' ^'^^'^ Taxation, power to control corporations by Huffcut, 1217,1218 Corn: Price, effect of whisky combination on - . Thurber, 12; McNulta, 239 Relation to distilling business.. --- McNulta, 225-229; Rice, 846 Glucose and other products from, discusscil - - - ^las, 73-83 Corn flour: Character and value, mixture with wheat flour ."^las, 73, 77, 79, 83 Corn oil: Adulteration and decejition in sale - ^fas, 73, 74, 79, 80 Price, increase through combination ]\Ias, 79, 80 Refining, discovery of process - ^las, 74, 75 Substitutes for rubber made from - 3Ias, 74 77, 78, 80 127(i THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Corporation laws (sec also l,iyi«liili(iii, NatlaiKd lairx, Reports, Stock, li-c): Page. Classification and limitation of p(.i\vern, advi ii-ateil Allen, 1193 Delaware, described Smith, 1119-1123 England, liberality and advantages of Moore, 964, 966 Fraudulent incorporations, impi issibilitj' of preventing Stetsdii, 975 Liberalitx-, probable increase in various States '. . Mcmrc, 964, 966 Net'essity of Pam, 1036 A))S(.lute freedom iif agreement, advucated Stetson, 972, 973 i\l;issachusetts, described Myers, 1128 C'l irporations driven out of State 1 ly strict Myers, 1133 New Jersey. (See Xcir Jrisri/.) West Virginia, described .. .'. Nevins, 1111-1119 Unifonnity, lack of, evils. Arcldiold, ri(i,5; Allen, 1209; Muffcut, 1215 Corporation Trust Company of Delaware: Metliiids (if business, descrilied Sawyer, 1125-1127 Corporation Trust Company of New Jersey: Methods of business, described Wood, 1089, 1094; IMarwick, 1096, 1097 Corporation Trust Company of West Virginia: Metlioils of business, descril led Xcvins, 1114 Corporations : Advantages of corj» irate form (if organization Havemeyer, 105; Stets(in,980,982; Dos I'a.swis, 1148, 1149 Advantages to States in which located Havemeyer, 103 Broad extent t>i modern c(>rp(jrate functions Pam, 1036 Competition, advantages in Dos Passos, 1172; Allen, 1189 Corporate form may ilself constitute danger Allen, 1189 Fi ireign — Powos of States concerning !\!oimett, 330; Pam.KKJo, l():!(i; Dill, lOS.'S; Allen, 1187, IISS; Huffcut, 121K1214 Kxclusioii unless conforming to State laws, discussed- Dos Passos, 1 I7ii, 1174; Allen, no:!, 1UI5, 1207 Prohibition of interstate connnerce to mouojiolistic Allen, 1194, 1196 Historical development of form of organization Dos l'assos,1147 plostility to, illogical and harmful Havemeyer, 105 Monojiolistii', prohibition of incorporation of, advocated Allen, 1194 Monopolies granted by spedal charter Dos Passos, 1145 tjnasi-public charact(.'r, how far applicable Allen, 1200, 1201 l.'ights of— Not entitled to privileges of individuals Allen, 11H7 Right of State to control as its creatures . Dos Passos, 1171, 1 172; Allen, 1189 Right ( if State t( i in \est igate corporate affairs . Dos Passi is, 1 1 02-1 164, 1 1 (iS, 1 1 74; Allen, 1194 State lines disregarded liv econonuc conditions Pam, 1036 Tramji, definition and cniI I )ill, 1077 Taxation. (See Tuxiilinn.) Cost of production. (/Sic lirouniHicx of ( 'iniiliiiuiliiiii.) Cotton spinning-: Clombination in ( Jrcat Britain Thurber, 9 Courts (see also iS'<( ((((/( o-(/ Oil ('nuiiiiinii, iniili'i- lirmJUig Sitilx): Tendency to favor combinations Lock wood, )!S0; Kice, 728, 736 (•hargcsof favoritism unjustifiable Arcliliold, 5.53 ■ Decisions relating to monopolies summarized Ulen, 1 IS4-1187 Leading decisions referred to — Addyslon Pijic case Dos Passos, 1175; Allen, 1188, 1 1 !Hi; Iluffcnt, 1214 Distilling and Cattle Feeding Compan\- case McNulta, 216 In re Rahrer ' ' Allen, 1195 Knight, tlnited States /• Allen, 1185; nuffcut,1214 Ll■is^■ r. Hardin \llcn, 1195 .M imn r. Illinois A lien, 1 184, 1200 McCulloch r. .Maryland Allcn,]196 National Lead < 'om|ianv c (Irole Allen, 1186 Original Packa'ge cases.' \llen, 1195, 1190; Huffcut, 1212,1215 State /". Standard Oil Trust \ lien, 1185 Cracker trust: lieferivd hi Monneit, 328, 329 Delaware: Agents of corporations, met Ik ids of d(jing business Sawyer, 1125-1127 GENERAL INDEX OF TESTIMONY. I'iTT Delaware — Continued. Annual reports — Page. Requirements concerning Smitti, 1121, 1122 Compliance with law Sawyer, 1126 Capital, limit and provisions as to paying Smith, 1121,' 1122 Corporation law, described Smith, 1119-1123 Reasons for passage of Smith, 1120, 1123 Stock and transfer books, provisions concerning Dill, 1(179; Smith, 1120 Methods of keeping _ _ Saw ver, 112,5-1 127 Taxation of corporations .', Smith, 1122 Delaware Corporation Trust Company: Methods of business described Sawyer, ]12.'i-1127 Department stores: <_Treat Britain, extensive development Thurber, 9 Depressions, industrial: Producti\e capacity, excess of, chief cause Thurber, 20 1893, railway losses, chief cause. Smith, 68 Diamond Match Company: Organization, referreil to Moovc, 9.59 Reduction of prices by ]\loore, 9(i5 Directors : Duty toward stockholders limited by terms of trust Stetson, 973 Number, increase by directors, justification . - Stetson, 972 Powers, whatever agreed by stockholdei-s, just _ . Stetson, 971, 972 Usually hold majority of stock c if corpi iratii m Stetson, 973 Usually faithful to interests of corijoration Stetson, 973, 974 Distilling Company of America. (See Wliiski/ miiihliKition'i.) Distilling- and Cattle Feeding Company. (See Wliixhi/ cDiiihiiintli/iif.) Distillers and Cattle Feeders' Trust. (See WJiIkI;/ fiDnhination-t.) Economies of combinations: (xeneral statement Buynitsky , .50 ; Smith, 68, 71, 72; Havemeyer, 105; Archbold,570; Rockefeller, 796; Gary, 1001; Dos I'assos, 1151, 1152 American Steel Hfiop Company < luthrie, 953, 954 American Steel and Wire Company Gates, 1028, 1030, 1034 National Sheai- Company Wiss, 1045 National Steel Company Keis, 947 Sugar combination . . . ." 5, 91, 99, 109, 110, 124, 151, 158, 811, 812 Tin-plate comliination (Traham, 855; Reid,886; Greer, 929 AVhisky combination Clarke, 183, 184, 186; iMcNulta, 238; Luyties, 255; Bradlev, 827 Administration, saving in .salaries, etc 37, 203, 953, 983, 991, 1029, 1049," 1069 Advertising, reductii m in cost of 829, 1070 Buying sawig in . 12, 23, 107, 153, 184, 201 , 829, S77, 913, 914, 984, 994, 1063, 1073 Closini^ of plants 5, 99, 109, lid, 1 24, 169, 170, 203, 216, 1050 Continuous working at full capacity 99, 109, 110, 151, 1(>2, 170, 191, 203, 2.54 Debts, bad, reduction in 1030 Freights, shipment from nearest plant 201 , 2.54,770,855,8.56,877,886,942,947,953,1030 Labor, saving in -- 110,190,191,860,876,899 Large capital, economy of generally ^ - - 570, 1049 Large plants, advantage of 91, 109, 110, 151, 184, 203, 2.54, 294, 295, 855, 915 Location of plants (see also Triiii.spoi-tatlnu) 170, 191, 291-20.3, 238 Management, superior abihty in 110, 255, 957, 98.i Personal, by owner, superiority of ^^- 899, 900,941 Previous managers chiefly retained •'^"'i", f'29, 9;i4, 1034 Reduction of amount of superintendem-e. - - 203 Patents 861,1030 Processed", 'improvement in 186, 187, 202-205, 826, 855, 860, 9S4, 985 Raw materials, purchase of. - - 12' 1.3 107, 153, 184, 201, 829, 913, 947, 984, 994, 1063, 1073 Selline of goods, tra^■el^ng men, etc. ■'•^. 37, ^ 829,8.55,877, 895,953, 1018, ]0:',0, 10.50, 1063, 1068 Specialization of manufacture at particular plants 877, 953 Trade-marks, common use of 1050, 1063, 1065 Transportation, saving in 201, 254, 770, S55, 856, 886, 942, 947 9.53 1030 Union of different branches of industry - 94^,983,984,994 1278 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Effects of com'binatioii (see also Erunoinii's, Labor, Prices, etc.): Page' Banking business, transfer to large cities - Olarlie, 190 Beneficial, generally Thurber, 18; Smith, 68; Havemeyer, 134; Clarke, 186; Archbold, 565; Gary, 1001; Dos Bassos, 1152^ Chicago trust conference, conclusions concerning Dos Passos, 1157 Government, form of, influence of trusts discussed Monnett, 326, 327 Danger of revolution Rice, 746- Slenace to democratic McNulta, 240 Individuals injured, public benefited Dos Passos, 1156 Individual character and enterprise 7, 8, 18, 25, 34, 135, 181, 190, 295, 911, 967 Injurious effects, purely incidental Dos Passos, 1156 Injurious and demoralizing, generally Dowe, 25, 34-38; GriiRths, 910' Injury, possibility of, to general public Smith, 49, 50 Injurious and dangerous where prices are controlled McNulta, 237 Legislative and judicial corruption by combinations Lockwood, 893; Emery, 671; Dos Passos, 1159 Privileged classes created Rice, 741, 746 Small t< iwns, transfer of business from Clarke, 190 Socialism, tendency to foster Dowe, 34, 36 Wealth, immense aggregation by Rice, 742, 746 Subdivision of capital among stockholders Thurber, 7, 18, 24; Dos Passos, 1164 Elections: Corporations shoulil not influence. Gary, 997 Elevator combination: Combination of farmers, advocated Havemeyer, 122 Railway discriminations in favor of Havemeyer, 121 ; Lockwood, 400' Employment. (See Labor.) England: Combinations, tendenc}- toward Thurber, 9 Corporation laws, liberality and advantages Moore, 964, 966 Provisions as to publicity, capital, etc Dill, 1082, 1083 Monopoly, early decisions against Allen, 1183 Trade unions, agreements with trust employers Thurber, 9 Export trade: Agricultural products; prices, fixed by Thurber, 11 f\)iid:>inations, extension bv means of Clarke, 184; Archbold, 562; Guthrie, 956; Gates, 1016 Education of wants for American products Thurber, 11, 12 Extension necessary Thurber, 10, 11 Manufactures, gi-eater profits than on agricultural products Thurber, 11 Merchant marine, necessity of development Thurber, 10, 11 Silverware Rogers, 1074 Steel imiducts, conditions in Guthrie, 956; Gary, 998, 1001 ; Gates, 1014-1018 Subsidies to American vessels, advocated (iatcs, 1016 S\ibsidics granted to foreign sliipping Gates, 1017 Tin plate. - Ciraham, 855; Taylor, 934 \Vhisky, obstruction by (Tovernment regulation McNulta, 227-235; Bradley, 824, 82H; Rice, 846, 848 Farmers: Effect i)f trusts oa, as producers of raw materials Thurber, 22 Federal Steel Company {diicf »'?7»(',v.s, Gary) : Administration, advantages and economy in. 983, 985, 991 Bonded debt of I'onstitueut companies 992, 993 Busini'ns, description of 982 Capitalization — Stdi'k, authorized and issued. : Stetson, 969; Gary, 986 Value of plants, estunated 986, 987 Mining lands, increase in value 987 Slock, additional issues nuist be at par 993 Bonded debt of constil uent companies 992, 993 Coke, amount and jiroportion purchased by combination 985 Com[)etition, no atteni]it to i)revent 985, 986, 989 Diri'ctois — Autliorized to increase their own number Stetson, 972 Xuiiibcr, and ownership of stock by . 9M Purchase of stocks by, discussed 997 Relation U> constituent companies 99^ GENERAL INDEX OF TESTIMONY. 1279 Federal Steel Company — Continued. Page. Dividends, payment on common stock enjoined 993, 994 Payment on preferred stock 993, 994 Sources of profit 994, 995 Economies — Diffusion of knowledge of different managers 985 Harmony between different branches of industry 983, 984, 994 Officers, reduction of number and salaries 983, 991 Processes, employment of best from different plants 984, 985 Export trade, amount and character of 998, 1001 Reasons for keeping up 1001 Elgin, Joliet and Eastern Eailroad Company, exchange of stocks, etc. - . 986, 992 Illmois Steel Company, exchange of stocks, etc 986, 988, 992 Properties owned by 982, 987 Iron, pig, production, amount and proportion by combination 982, 985 Ore, increased cost 990 Labor — Amalgamated Association, relations to 983 No political influence exercised upon 997 Number and wages of laborers increased 983, 991 Mines, ownership and value of 982,987 Minnesota Iron Company, description of properties 982, 987 Purchase of stock, arrangements for 986, 988, 992 Monopoly, not sought by Federal Steel Company 983, 985, 989 Organization — History and methods Stetson, 969,970 Morgan, J. P. & Co., contract with Stetson, 970; Gary, 986-989 Ownership of stocks of constituent companies 1003 Profits from promotion — 986 Promotion, publicity of - 987 Exchange of stocks, arrangements for 986-989 Certificate of incorporation and by-laws 1231-1239 Constituent companies, reasons for not merging 995 Control by election of directors 988 Relation between 984,988 New Jersey, reasons for incorporating in Stetson, 970; Gary, 996 Output, no attempt to monopolize --- 985 Proportion of different classes controlled 985 Politics, no influence exercised in 997 Prices — Increase in, of different products of combination 990 Ore, increase in 990 Profits, sources of 994, 995 Properties, description of 982, 987 Rails, steel, increase in price not greater than in raw materials 990 Proportion produced by Federal Steel Company 985 Railways, ownership of 982, 987 Speculation, directors not interested in. 997 Suit to restrain payment of dividends intended for 997 Stock, corporation authorized to purchase its own Stetson, 971 , 972 Amount authorized and i&sued Stetson, 969; Gary, ,986 Additional issues must be at par 993 Protection needed despite exportu 997, 998 Germany, methods and labor in 998 Trust, Federal Steel Company is not a qqo qo^ Vessels, ownership by Federal Steel Company noo' n^i Wages, average daily, 1898, 1899 - 983,991 Savings, production on large scale - Smith, 72 For eigrn corporations: Powers of States to regulate J.^'^'-.f^-rWf^ As regards interstate commerce - ;^ii™' '-^?'' \^°°' Huffcut, 1211-1214; Pam,1035; Monnett,330; Nevms, 1117 Exclusion unless conforming to State laws, advocated ... - Allen, 1193, 1195, 1207 Discussed Dos Passos, 1173, 1174 Overcapitalization,'prevention of evasion of law, Massachusetts. . Myers, 1131 Prohibition of interstate commerce to monopolistic, advocated. . Allen, 1194, 1196 Retaliatory laws, justification of Dill,1085 83a 82 1280 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Freiglits. (See also Railways) : Saving in by combination — Page. American Steel Hoop Company Guthrie, 953 American Steel and Wire Company Gates, 1030 American Tin Plate Company Graham, 855- Reid, 877, 886; Griffiths, 913; Taylor, 942 National Steel Company Reis, 947 Sugar combination Havemeyer, 110 AVhisky combination McNulta, 201 ; Luyties, 254 Gas: New York, bills for reduction of price Thurber, 16 New York City, combinations in Allen, 1191-1193 Germany: Combinations, supervision of government Gates, 1018 Tendency toward Thurber, 8; Gates, 1017, 1018 Iron and steel production, conditions of Gates, 1014-1018 Competition, excessive, prohibited Lee, 273, 276; Emery, 616, 617, 623; Archbold, 532 Protection of investors and taxpayers Luyties, 257 Sugar, bounty on Smith, 52 Glass: Prices, increase by combination Dowe, 28 Glasg'O'w: Combination, tendency toward Thurber, 8 Glucose sugar: Beer, use of, in manufacture Mas, 83 Corn, products derived from, described Mas, 73-81 Extensive use in sirups Havemeyer, 114 Inferior quality Mas, 82 Processes secret but not patented Mas, 83 Prices of glucose and by-products Mas, 78-80 Glucose Sugar Refining Company: American Sugar Refining Company, relation to .-. Mas, 81, 82; Havemeyer, 114 Monopoly, extent of Mas, 78, 84 Prices, effect on Mas, 79, 80 Capitalization, excessive Mas, 81 Contract with Ernest Mas as engine,er Mas, 75-78, 86 Formation of trust, referred to Mas, 75,86 Good will: Value and capitalization of 110, 118, 586, 851, 864, 884, 962, 1021, 1022, 1054, 1055, 1059, 1084, 1170 Government ownership (see also Railways) : Local monopolies, advocated Monnett, 327; Myers, 1136 Civil service, injurious effect on Monnett, 327 Great Britain. (See England. ) Grocers, wholesale (see also Rebate System) : Competition, reduction of prices to unprofitable basis Smith, 59-61, 65 Sugar Refining Company, relation to Thurber, 13, 14 Grocers' "Wholesale Association: Organization and purposes Smith, 55 Rebate system, movement to secure generally Smith, 59-65 Hawaiian Islands: Sugar, production, tariff, etc Buynitsky, 54; Havemeyer, 102, 136; Atkins," 801, 802, 810 Hotels: Loss from displacement of commercial travelers by combination. . . Dowe, 27, 32 Illinois: Antitrust law and its interpretation McNulta, 217; Pam, 1038 Taxation of corporation Pam, 1036 Illinois Steel Company: Property, relation to Federal Steel Company, etc Gary, 982,986-988,992 Individual enterprise, effect of combinations: Discouragement of Lee, 295; Griffiths, 911 Efficient managers of plants retained Guthrie, 954; Moore, 967; Reid, 877; Greer, 929; Gates, 1034 "Individualism," lessening of Dowe, 34 Opportunity tor advancement in official positions Thurber, 7, 8, 18 Middlemen and small manufacturers, displacement Dowe, 25, 34, 36 GENERAL INDEX OF TESTIMONY. 1281 Individual enterprise, effect of combinations— Continued. Page. Older men, desire to retire Guthrie, 9.54; ]\Iuore, 967 I roprietors, displacement or reduction to salaried employees. . Clarke, 1 81 190 Production by individuals is sure to cease " Havemever 13.5 Insurance companies: ' Ohio, suits against (.'ombinations Monnett 297 International Paper Company: ' Organization, referred to Stetson, 970 International Silver Company: Brands, Rogers, hist.jry of Rogers, 1069, 1070 Importance and value of Dodd, 1054, 1055, 1057, 1059 Capitalization — Bonds, ami5unt issued Dodd 1053 Plants, cash value of, estimated .' ." "codd, 1055,' 1057 Plants, method of paying for Dodd, 1058, 1061 Stock, authorized and issued Dodd, 1053 ; Watrous, 1063 Common, as bonus Rogers, 1073 Common, decrease in value Dodd, 1061 Common, pool of, described Dodd, 1058, 1060, ioei; Rogers! 1070 Value of, anticipated Rogers, 1068, 1073 Trade-marks and brands, value of IJodd, 1054, 1055, 1057, 1059 Causes of combination, excessive competition Dodd, 1051; Rogers, 1067 Competition — Number and importance of competitors Dodd, 1054 Purpose of combination to reduce Dodd, 1055; Rogers, i067 Strength of, by International Silver Company Rogers, 1072 Reduction of, through combination Dodd, 1059; ^^'atrous, 1063 Labor, interest of, in suppressing price cutting Dodd, 1056 Speculative influence, danger of Rogers, 1074, 1075 Profits of competitors, increased by increased demand Rogers, 1071 C. Rogers & Bros., relation to combination Rogers, 1067, 1069, 1070, 1072 Cost of production, increase since combination, causes Dodd, 1052 Dividends, none paid, reasons Dodd, 1061 ; Rogers, 1065 Economies — Capital required for advantageous production Dodd, 1049 Combination of plants under single roof Dodd, 1050 Advertising, reduction in cost of Rogers, 1070 Administration, saving in cost of Dodd, 1049; Rogers, 1069 Buying, saving in Dodd, 1050; AVatrous, 1063; Rogers, 1073 Selling, saving in Dodd, 1050; Watrous, 1063; Rogers, 1068 Trade-marks, common use of Watrous, 1063, 1065 Export trade, amount and character of Rogers, 1074 Labor — Character and skill of Watrous, 1064 Number of men employed Dodd, 1051, 1056 Employees not organized Dodd, 1052 Relations of employers and employees, satisfactory Dodd, 1053; Watrous, 1064; Rogers, 1072 Wages Dodd, 1052, 1053, 1056; Watrous, 1064, 1065; Rogers, 1072, 1074 Women, employment of Watrous, 1064, 1066 Interest in suppressing price cutting Dodd, 1056 Managers, method of assigning, etc Watrous, 1062 Officers, salary, amount and relation to dividend Dodd, 1062; A\'atrous, 1066; Rogers, 1075 Organization — Description of process Dodd, 1051, 1053, 1054 Negotiations preceding present organization Rogers, 1067, 1068 Options given to irresponsible individuals Rogers, 1067 Plants, part of, left out Rogers, 1066 Plants, purchase outright - - Dodd, 1053, 1054 Promotion, payment for, amount of - Rogers, 1068 C. Rogers & Bros., terms of sale Rogers, 1068 Output — Description of products Dodd, 1049 Proportion controlled by combination Dodd, 1049 Increase since combination Dodd, 1051 Pool of common stock, described Dodd, 1058, 1060, 1061; Rogers, 1070 1282 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. International Silver Company — Continued. Prices — Page. Decrease prior to combination Dodd, 1051 ; Rogers, 1071 Increase since combination, amount and reason Dodd, 1052, 1056; Rogers, 1071 Cutting by International Silver Company Rogers, 1071, 1072 Promotion, payment for, amount of Rogers, 1068 Quality, improvement in, since combination Dodd, 1060 Rogers Bros., history of brands Rogers, 1069, 1070 Relation to combination, busines.s, etc Rogers, 1067-1075 Speculation, danger of influence on competition Rogers, 1074, 1075 Stocks, amount and classes Dodd, 1053 Pool of, described Dodd, 1058, 1060, 1061; Rogers, 1070 Strikes, no difficulty from Rogers, 1072 Trade-marks, importance and value of Dodd, 1054, 1055, 1057, 1059 Rogers, history of Rogers, 1069, 1070 Wages — Increase since combination. Dodd, 1052 C. Rogers & Bros., increase by Rogers, 1071-1073 Method of determining.. Dodd, 1052; Watrous, 1064, 1065; Rogers, 1072,1074 Rates of Watrous, 1064 Wilcox Silver Plate Cempany, terms of sale to combination Dodd, 1058, 1061 Women, employment of ... " Watrous, 1064, 1066 Interstate commerce: Corporations, power of Congress to prohibit from Huffcut, 1218, 1219 States, power as to Huffcut, 1211-1213 Definition — Meaning of constitutional clause Dos Passes, 1160; Allen, 1202, 1203 Difficulty of defining Thurber, 16, 17; Gary, 1002, 1003 Desirability of definition by Congress Allen, 1203 Foreign corporations, exclusion of, discussed Dos Passes, 1174; Huffcut, 1211-1213 Prohibition to trusts violating law, deprecated Thurber, 20 States, delegation of powers regarding to, by Congress Huffcut, 1215, 1216 Police power, extent of Huffcut, 1212, 1215, 1216 Interstate Commerce Act: Ineffectiveness to prevent discriminations Rice, 729, 733 Supported and approved bj' Standard Oil Company Archbold, 516, 517, 527 Working of, discussed Huffcut, 1214 Interstate Commerce Commission: Disadvantage of giving ultimate power as now organized Stetson, 979 Failure to enforce law '. Rice, 729, 746 Judicial character and life tenure, advocated Stetson, 980 Powers, increase, discussed Stetson, 979, 980 Railway discriminations, admitted to exist by Allen, 1190 Regulation of combinations by Lee, 296 Unreasonable rates should be summarily abolished Stetson, 979 Investors, protection of (see also Capitalizatioti, Promotion) : Combinations largely intended to fieece McNulta, 237; Rogers, 586; Stetson, 975, 976 Common law, liability of promoters and officers Dos Passos, 1163, 1176 Existing laws sufficient for protection : Dos Passos, 11 76, 1177 False statements to secure Luyties, 257 Government protection, deprecated Havemeyer, 123 Impossibility of complete protection Myers, 1135-1137 Regulation of capitalization, discussed Stetson, 976; Myers, 1138; Dos Passos, 1157 Iron and steel industries: Advantages of United States in manufacture Guthrie, 955; Gates, 1011 Combinations, relations between existing Gates, 1023, 1027 Germany, conditions and competition of Gates, 1014-1018 Syndicates in Gates, 1017, 1018 Proportion controlled by great combinations (xates, 1023 Tariff, protection, necessity of Reis, 947; Guthrie, 955; Gary, 997,998; Gates, 1014-1018 Iron mines: Failures in Lake Superior region Reis, 950 Ownership of, by combinations Reis, 944, 949; Gary, 982, 987; Gates, 1003, 1005, 1006, 1023 I'ri (portion controlled by great combinatiojis Gates, 1023 GENERAL INDEX OF TESTIMONY. 1283 Iron ore: Page. Output and prices Gates, 1025 Iron, pig-: Control by combinations Gary, 982, 985 ; Gates, 1023 Furnaces all in operation at present Reis 951 Output, increase Gates, 1006 Prices, average annual Reis, 945 Iron pipe: Prices, increase through combination Do we, 28 Kentucky Distilleries and Warehouse Company. (See Whixki/ rouibmaiions.) Labor (see also Wages) : Capital, relations with, constantly improving Archbold, 543 Interests identical with Thurber, 12; Smith, 69 Effects of combination — Generally, referred to Mas, 85 American Steel and Wire Company Gates, 1011, 1012 American Tin Plate Company ." Graham, 853, 858, 860; Reid, 869-876, 879; Griffiths, 903-907; Greer, 924 Commercial travelers, displacement and consequent losses. . Dowe, 26-33, 36; Bradley, 829; Gates, 1030; Dodd, 1050 Dependence upon single employer, disadvantages Dowe, 35; Havemeyer, 121 ; Lee, 288 Displacement by.. Thurber, 24; Havemeyer, 110; Clarke, 190, 191; Lee, 290 Expert chemists and investigators, displaced Mas, 85, 86 Foremen, number not greatly reduced Clarke, 190 Idleness, increase of Griffiths, 904, 905 Improvement of conditions Smith, 69 Increased employment through combination Smith, 68 National Steel Company Reis, 946 Office force, effect on Guthrie, 953; Clarke, 190; Gary, 983 Smelters' trust, dispute as to hours Havemeyer, 121 Stability of employment, effect on Lee, 289, 290; Griffiths, 904, 905 Strikes, possibility of closing establishments during Dowe, 35; Havemeyer, 121; Lee, 288 Standard Oil Company. (See Standard Oil Company.) Sugar combination Havemeyer, 110, 122, 128, 129; Post, 158, 161 Superintendents and foremen, high salaries Lee, 290 Whisky combinations Clarke, 185, 190, 191; McNulta,203; Cook, 249 Interest in combinations and legislation Dos Passos, 1171 Organizations — Advocated Archbold, 542 Agreements with trust employers, Great Britain Thurber, 9 American Steel and Wire Company, does not recognize Gates, 1011 American Tin Plate Company, relations to Graham, 853; Reid, 869; Griffiths, 904-907; Greer, 928 Employers prefer to have men belong to '. . . ^ Going, 920 Federal Steel Company, relations to Gary, 983 International Silver Company, nonunion Dodd, 1052; Watrous, 1064 Monopolistic character of Thurber, 6; Allen, 1198-1200 Necessary to meet combinations of capital Lee, 289; Allen, 1199 Rapid progress and effects Thurber, 5, 6 Legislation (see also Antitrust laws; Oipltalization; Corporation laics; Natiomd laws; New Jersey; Publicity; Railways; Stockltolders) : Recommendations and discussion, general Monnett, 329; Davis, 361; Archbold, 543; Allen, 1193-1197 Capitalization, limitation of, advocated Lee, 294, 295 Charges, regulation of, quasi-public companies Lee, 294; Myers, 11.35 Charters, withholding or forfeiture of Dowe, 35; Monnett, 310; Rice, 730 Chicago Trust Conference, conclusions concerning Dos Passos, 1156, 1157 Common law, sufficiencv as remedy, discussed Monnett, 313, 314; Gary, 1000; DosPassos, 1155, 1156, 1163, 1164, 1176; Allen, 1183-1187, 1193, 1204 Competition, destructive, prohibition of Lee, 294; Westgate, 383; Lockwwood, 394 Conspiracies, treatment of trusts as Dowe, 28, 36 Suppression of combinations, advocated McNulta, 237, 240 Coroorations, right of State to control Dos Passos, 1171 , 1172; ^ Allen, 1189, 1194 Quasi-public character, how far applicable Allen, 1200, 1201 1284 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Legislation — Continued. Page. Desirability of study by commissioners Dos Passes, 1139, 1140 Desirability of definite application to conditions Allen, 1193, 1204 Existing statutes and their working — Sufficiency of - of con>peting with untaxed -sugar Atkins, 802, 808 Little capital being invested in sugar : Atkins, 807 Responsibility of Tnited States for commercial prosperity Atkins, 811 Dividends — Amount of Thurber, lo; Havemeyer, 136 bource of present, referred to Havemever, 132; Post, laS Doscher, Glaus — Former sale of refinery to trust Doscher, 98, 100 Capacity and cost of refinerv Doscher, 91, 92 Competition of refinery Smith, 57; Doscher, 90 Attempts of American ('ompanv to purchase refinerv Doscher, 89, 90, 98 Drawbacks. (See Tariff.) Economies of combination — Ability of different refiners combined Havemeyer, 1 1© Large plants, advantages of Doscher, 91: Havemeyer, 109, 110; Post, 151 Closing of refineries Thurber, 5; Doscher, 99; Havemeyer, 124 Continuous working at full capacity Havemever, 109, 110; Post, 151, 162 Employees, reduction of number. .". '. Havemeyer, 110 Raw sugar, purchase when prices lowest Post, 158 Reduction of cost by combination Atkins, 811, 812 England, refineries destroyed by competition of beet sugar Havemeyer, 133 Europe, reasons for greater cheapness of refining Havemeyer, 106, 107, 133; Jarvie, 142, 146; Post, 153 Glucose (see also CJliicosf ,Sti(/ar Ki'Jiuing ('ompany) — American Sugar Refining Company, relation to Ma,s, 81, 82; Havemeyer, 114 Extensive use in sirups Havemeyer, 1 14 (Irocers, wholesale (see also Rebntex) — Agreement as to prices and rebates Thurber, 13, 14; Smith, 55-59; Doscher, 95 Excessive cutting of prices by -, Smith, 55, 66, 67; Jarvie, 142 Profits destroyed by recent competition of refineries Havemeyer, 126 Exclusive handling of trust sugar not required . . . Smith, 57, 67; Jarvie, 142 Havemeyer & Elder, capacity of plant and eionomy Post, 151 Value of brand Havemeyer, 111 Hawaii, refining of sugar in Atkins, 810 Conditions of sugar production, duty, etc Atkins, 801, 802, 810 Labor — Conditions of work in refineries Havemeyer, 128, 129; Post, 161 Cuba, conditions in Post, 162 Emplovment, effect of combination Thurber, 5, 23; Havemeyer, 122; Post, 158, 161 Organization of workmen Post, 163 Unskilled labor chiefly employed Havemever, 128, 129 Wages - - ."- Thurber, 5, 23; Havemever, 128, 129 Lexow Committee, New York,, testimony before, quoted . . Havemeyer, 125, 126 Louisiana, production of sugar, protectirm and conditions Buynitsky, 49; Havemeyer, 130, 131 ; Atkins, 805, 80fi Mollenhauer Refinerv — Capacity and cost Post, 148, 151, 152 Not now running at full ('apacity Smith, 57; Post, 154 Relation to American Company - Smith, 57; Doscher, 99; Flaveiiieyer, 126; Post, 1.50 Monopoly. (See Output, PriceH.) Nash Refinery, relation of American CemipanN' to Havemeyer, 126 National Refining Company - - Post, 148, 150, 151 , 154 New York Sugar Reflning Company, (i^vi' DoKcliei; Clav».) Output, refined — Amount and proportion controlled by combination. Havemeyer, 107, 117,124,126; Jarvie, 141 Control of, as purpose of combination, discussed Havemeyer, 125,126; Jarvie, 146; Post, 154, 160 Closing, of refineries by combination Doscher, 99; Havemeyer, 124 83a 83 1296i THE INDUSTRIAL COMMISSION". INDUSTRIAL COMBINATIONS. Sugar combinations — Continued. Organization of combination — Page. History of - Havemeyer, 109 Refineries entering Doscher, 99 Change to corporation Havemeyer, 109, 124 Articles of incorporation -- ' 1257 Packages, sale in small, by Arbuckle Brothers Jarvie, 141, 146 Relative cost of different kinds Havemeyer, 106 ; Post, 153 Prices — Statistics, variations — Raw and refined, 1879-1898 Thurber, 5; Havemeyer, 103 History and reasons of variations in margin Havemeyer, 108; Post, 147, 148, 165 Western markets, changes in Post, 165 Competition and cutting — Methods of cutting Doscher, 95, 96 Special cuts to dispose of surplus stock Post, 149 Policy of American Company Havemeyer, 118, 120, 135; Post, 158 Influence of competing refineries in keeping down Post, 158, 159 Louisiana and Hawaii, competition of Havemeyer, 130, 131 Arbuckle Brothers, cutting by Thurber, 14, 22; Dowe, 28, 29; Smith, 57; Jarvie, 138, 142, 146 Control by combination — Degree of, discussed Thurber, 14; Doscher, 95, 96; Havemeyer, 125, 126; Atkins, 811 Method of fixing Post, 149 Principles of trust in fixing Post, 158;' Havemeyer, 118, 120, 185, 136 Reduction, recent, intended to crush competing refineries Doscher, 88,89 Increase, intention after crushing competition Havemeyer, 115 Danger of complete control by one combination Post, 159 Effect of combination — Discussed generally Havemeyer, 126; Post, 148, 165 Reduced by Thurber, 2, 22; Smith, 70; Havemeyer, 103; Post, 156, 165, 166 Policy of combination Havemeyer, liO, 120, 1 35, 136 Margin, amount necessary for profits Doscher, 97; Havemeyer, 136; Jarvie, 139, 140; Post, 160, 161 Tariff, change of, effect , Post, 148 Profits of refining — Losses and failures before trust organized Havemeyer, 109 Fair rate, discussed Doscher, 97; Havemeyer, 136; Posti 160, 161 Raw sugar, profits from changes in price Post, 158, 161 High profits due to economies Havemeyer, 103 Protection. (See Tar If.) Railways— Apportionment of freights among Havemeyer, 113 Rebates and privileges not received from. . Havemeyer, 118, 112; Jarvie, 142 Free storage at terminal points Doscher, 90; Havemeyer, 112 Raw sugar (see also Beet sugar) — Polariscope test, best degree for refining Buynitsky, 44 Profits by change in price Post, 158, 161 Stocks carried on hand Post, 152 Wholesale grocers do not handle Smith, 69 Amount of consumption and sources of supply Atkins, 803 Cuba, effect of war Atkins, 802, 807, 808 Puerto Rico, Hawaii, and Philippines, sugar from, free of duty. Atkins, 801, 810 Louisiana, productiouin. Buynitsky,49; Havenieyer,130,]31; Atkins, 805, 806 Production — Amount of, different countries, table Havemeyer j 104 Reduction of, causes Post, 159,160 Sources of supply Havemeyer, 128; Post, 152; Doscher, 96 Louisiana sugars, superiority Buynitsky, 49 Refiners, interest in production Post, 160 Prices — Influences affecting Havemeyer, 107; Post, 153 Effects of combination Thurber, 12, 23; Post, 153; Havemeyer, 107 Amounts obtainable by producers of different countries Atkins, 802, 807, 808 GENEEAL INDEX OE TESTIMONY. 1297 Sugar combinations— Continued Raw sugar— Continued. ' Pa„ Tariff rates R > t li Excessive protection to local" p"rod"uc'erV.";.V.V. V.V.V.V.V.V Havemeylr7l02; Rebates to dealers- ^^^' ^^°' ^'^^ ' ■^*'^i"'^' ^0^-809 MeS^'"''"-^ ^''^°'"y S^""!^' 56; Havemeyer, 126-128 ¥S,thod described . Post, 154 ; Haveme ver 126-128 Athdavit abandoned reasons Smith, 57-59, 67; Havemever, 128 Hn -fn ?^^*f '*^*l'^ S^iith, 56, 58. 66; Doscher, 95 Uniform to all purchasers J Smith 58 Freight rates, adjustment of prices for equalizing! \. ...... Smith' 58 Cutting of pric'es still continues Smith, 58; Havemeyer, 128; Post, 154 Competition of new refineries, effect of Smith, 57, 58, 67 Arbuckle and Doscher refineries have established system. . . . Smith, 57, 67; Illinois and Ohio, special system adopted Post 155-157 Kenneries (see also Compeimg refineries) — Cost of plants estimated Doscher 91 92- o , •., , ., Havemeyer, iii; Jarvie, 139; Post, isi,' 152 benate committee on bribery, testimony before Havemever 125 .Sirup — ■' ' Quantity obtained and value Doscher, 94; Post, 150, 151 Tariff on.- Buynitsky, 44 Drawbacks on exportation Buynitsky 46 51 Spanish war — ' Effect on conditions of sugar business Atkins, 801, 802, 807, 808 Spreckels refinery, capacity and economy of operation Post 151 Competition of Havemeyer! 108 Tariff — Rates existing Buynitsky, 44 Countervailing duties — Schedule of rates Buynitsky, 52, 53 Rates satisfactory Post 157 Differential duty, refined — Amount of, estimated Buynitsky, 46^9; Post, 161, 162 Consumers not injured by Buynitsky, 49; Atkins, 808 Protection has built up refining industry Havemeyer, 133 Foreign competition at present excluded, reasons Havemeyer, 130; Jarvie, 141, 144; Post, 157 Importation of foreign sugars, conditions favoring Post, 157 Insufl!iciency of present Havemeyer, 102, 106, 115, 118, 132; Jarvie, 143, 144; Atkins, 806 Increase detrimental to refiners Post, 162 Reduction of, effect discussed Havemeyer, 115, 132; !larvie, 145 Foreign competition, cheapness of production Havemeyer, 106, 107,133; Jarvie, 142, 146; Post, 153 Drawbacks — Rates and methods of fixing Buynitsky, 44-46, 51 Hawaii, reciprocity treaty with Buynitsky, 54 Raw sugar — Rates Buynitsky, 44 Excessive protection and local competition Atkins, 803-809; Havemejer, 102, 113, 130, 131 Present duty chiefly intended to protect beet sugar Atkins, 801 Farmer receives little advantage in price of beets Atkins, 804 High protection makes improvements in proiluction unneces- sary Atkins, 805, 806 Removal would not affect refiners Atkins, 807 Reduction by treaty as to British colonies Atkins, 801, 802 Effect of Spanish war on rates from different countries Atkins, 801, 802, 807, 808 Internal revenue tax to offset, advocated Havemeyer, 102 Stocks on hand, influence of changes Post, 158 Western sugar refinery, ownership Havemeyer, 113 Tariff: Competition, effect in increasing Havemeyer, 137 Combination, cause of. . Havemeyer, 101, 116, 118, 133, 137; Gary, 999; Wiss, 1046 Not cause of tin-plate combination Reid, 881 ; Griffiths, 912 1298 THE INDUSTRIAL COMMiyWION : INDUSTRIAL COMBINATIONS. Tariflf— Continued. I'age. Cost of living and wages in America and Europe Gary, 1014 Germany, government assistance to exportation Crates, 1016 Monopolized articles, reduction or removal of, discussed Buynitsky, 50; Rice, 730; Gary, 998-1000 Monopoly, protection should not permit creation of Gary, 999 Protection needed in certain industries Cary, 998, 999 Shears, protection necessary - Wies, 1046 Steel, nece^sity of protection, discussed Havemeyer, 118; Reis, 947; Guthrie, 955; Gary, 997, 998; Gates, 1013-1016 Sugar, raw, effect of Havemeyer, 102, 113, 130, 131; Post, 148, 158; Atkins, 801-808 Rates Buynitsky, 44 Sugar, refined — Countervailing duties Buynitsky, 52, 53; Post, 157 Effect and sufficiency discussed Buynitsky, 46, 49; Havemeyer, 102, 106, 115, 118, 132; Jarvie, 142, 146; Post, 157, 161, 162 Rates - - - Buynitsky, 44 Ten per cent uniform duty, sufficient for protection Havemeyer, 102, 106 Tin plate, effect and need of Graham, 854, 855, 861 ; Reid, 878-881 ; Griffiths, 909, 910, 915, 921; Greer, 926; Taylor, 934, 940 Trusts, lobbying bv, to influence •. Thurber, 15 Chief cause of" Havemeyer, 101, 102, 116, 118, 133, 137 Taxation: Inheritance tax as renied)- for combinations Lee, 296 Taxation of corporations: Assessment, evils of arbitrary Dill, 1081, 1082 Congress, powers regarding Allen, 1207, 1208; Huffcut, 1217, 1218 Constitutionality of special taxes on trusts Havemeyer, 122 Delaware, rates and advantage Smith, 1122 Enforcement, difficulty of Lee, 296 Federal Government, control by means of Allen, 1 194; Huffcut, 1217, 1218 Graduated tax, legality of ' Allen, 1207, 1208 Illinois, inequality in Pain, 1036 Internal, on products of trusts, advocated Mas, 84 Interstate commerce, State can not tax corporations as regards... Huffcut, 1213 Justification of special, discussed Thurber, 17; Dos Passos, 1172 N'ew York, franchise tax, referred to Monnett, 327 New Jersey, rates of tax King, 1108; Dill, 1086 Reasonableness, cause of organization of corporations in Thurber, 21; (Tary,996; Stetson, 975; Dill, 1081 Ohio, franchise tax described Monnett, 327 Organization tax, pro rata, check on overcapitalization Thurber, 21 Profits, confiscation above certain rate, deprecated Thurber, 17 Taxation of spirits — Alcohol, remission of tax when used in arts or exported McNulta, 227 Beer and wine, increase advocated _ McNulta, 225, 226 Capacity tax, injustice of McNulta, 233 Discriminating taxes against other countries, advocated McNulta, 228, 229 Exportation, hampered bv i-egulations McNulta, 227, 235; Cook, 245, 248; Bradley, 824, 828; Rice, 846, 849 Illicit manufacture, encouraged bv high rates McNulta, 231; Cook, 243; Bradley, 824-826; Rice, 841-848 Rates, reduction of, advocated ." McNulta, 229-234; Luyties, 252, 256; Bradley, 824; Rice, 841-844 Should be proportioned to auiomit of alcohol McNulta, 225, 226 Storage and transportation, changes in method advocated McNulta, 228-230; Bradley, 828; Rice, 848 Tin: Prices (Jraham, 859; Reid, 868; Taylor, 941 Tin plate. (See American Tin Mate (.'mnptmy.) Tobacco: Comnieicial travelers, displacement by combination Dowe, 29 Dealers, rel)ates for exclusive handling of product Thurber, 14 GENERAL INDEX OV TESTIMONY. 1299 Trade unions: Page. Advantag&s and disadvantages to workmen, discussed Havemeyer, 104, 119; ,, ,. ,. , Lee, 289; Arohbold, 5,42 Monopolistic character, discussed Thurber, 6 ; Allen, 1198-1200 Kapid development and effects Thurber, 5, 6 Recognition by combinations '. Post,'l63; Graham, 853; Reid, 869; Griffiths, 904-907; Greer', 928; (lary, 983; Gates, 1011; Dodd, 1052; Watrous, 1064 Tramp corporations: Definition and evil Dill 1077 Transportation. (See Freightu, Raihrnys, Watn- fransporlatioit.) Trust conference, Chicago: Conclusions, referred to Dos Passos, 1157, 115S Trusts: Advantage of form of organization Dos I'assos, 1141, 1142 Combination, element of, necessary to constitute Allen, 1180 Definition of term as at present applicable Mien, 1180-1182 Pearly English religious and similar trusts Allen, 1178 Existence denied Smith, 68; Dos Passos, 1142 Financial interests, combination must include Allen, 1181 Illegality, held by courts Uos Passos, 1142 Legal significance of form Dos Passos, 1141 Monojiolistic purpose of early English trusts Allen, 1179 Monopoly, purpose of creating must exist Allen, 1181, 1182 Origin of the trust form ■ Allen, 1178 Overcapitalization, evasion of laws through flyers, 1131, 1 134, 1135 Secrecv of form of organization Dos Passos, 1141 ; Allen, 1179 Trust agreement. Distillers' and Cattle Feeders' Trust JIcNulta, 198-200 Standard Oil Company 1221 Type founders: Commercial travelers, displacement by combination Dowe, 29 Voting trusts : Purpose and character Dos Passos, 1174, 1175; Myers, 1131,1134 Pure Oil Company. (See under Standard Oil Company.) Wages, effect of combinations on: Advances made for purpose of disarming opposition Dowe, 33; Lee, 289 American Tin Plate Company Graham, 853, 860; Reid, 869-874, 879; Griffiths, 903 American Steel and Wire Companv (xates, 1011, 1012 Federal Steel Company - - .' - Gary, 983, 991 Effects generally Clarke, 185 Increase through combination Thurber, 5, 24; Moore, 965 International Silver Compaiu- Dodd, 1052, 1056; Watrous, 1064-1066; Rogers, 1072, 1074 National Shear Company Wiss, 1045 National Steel Company - Reis, 946 Officials, salaries of, saving by Dowe, 37; (iary, 983,991; <;ates,1029 Rates paid by combination not higher Lee, 289 Rates, fair, due topolicv -- Lee, 289 Sugar combination '. Thurber, 5, 23; Ha\ c nieyer, 128, 129 Whisky combinations - - Clarke, 1 85 Wealth : Concentration, advantages to public Thurber, 18; Clarke, 186 Distribution, equality impossible - - - Thurber 18 Distribution, increase by combination Dos 1 assos, 1165 Importance of incentive to accumulate I^os Passos, 1165 West Virginia: . ,„„„,. Agents of corporations in State, requirements concerning Acvins, \l\l, lllo Capital, limit and provisions as to payment Xevins, 1114-1116 Corporation laws, described - .^ evms, 1111-1118 Advantages of ^^"^yf"'' Ui niii? Liberality of I^ing, 1110, 1111 Corporations, roving character of - - ^iH. J?jQ'l?iQ Taxation, provisions concerning - .>evins, 1113, 1118 West Virginia Corporation Trust Company: Methods of business Nevms,1114 1300 THE INDUSTRIAL COMMISSION: INDUSTEIAL COMBINATIONS. Whisky combinations: Page. Historical summary of trust and corporations 167 Advantages of combination. (See Econmnus of combination.) Adulteration, freedom of cheap whisky from unhealthful Clarke, 179, 180: McNulta, 205, 230, 231 Aging of whisky, losses by evaporation Clarke, 182, 183 American Spirits IManufacturing Company — Organization and purchase of property of Distilling Company . . McNulta, 235; Eice, 831, 832 Capitalization and value of plants Clarke, 1 75, 176; McNulta, 235; Rice, 832, 833 Stocks, value of Rice, 833 No undue secrecy in business Rice, 840 Business never flourishing Rice, 840 Stockholdera nearly unanimous for further consolidation Rice, 840 Barrels, waste and injury by storage in McNulta, 228-230; Rice, 848 Brands, each distillery continues its own McNulta, 204 Importance as regards beverage whiskies Bradley, 829; Rice, 845 By-products, relation of cattle feeding to distilling Clarke, 168 Drying of residue for feed Luyties, 258 Capitalization — Amount of capital of different companies Bradley, 818; Rice, 834, 835 American Spirits Manufacturing Company Clarke, 175, 176; McNulta, 235; Rice, 832, 833 Distillers and Cattle Feeders' Trust Clarke, 169, 170; McNulta, 193-197, 201 Distilling and Cattle Feeding Company Clarke, 173; McNulta, 195, 238 Distilling Company of America '. Bradley, 819, 820, 822; Rice, 838 Kentucky Distilleries and Warehouse Comjiany Bradley, 818 Standard Distilling and Distributing Company Clarke, 177; Cook, 249; Rice, 834, 835 Cattle feeding, relation to distilling business Clarke, 168 Drying of residue, advantages Luyties, 258 Causes of combination (see also Economies of ajinhhialiou) — Excessi\e competition Luyties, 255; Bradley, 828 Competing distilleries — Number and firoportion of output — Number of independent spirits distilleries Bradley, 816, 817 Erection by distillers formerly joining trust McNulta, 197, 218 Construction due to excessive prices McNulta, 207; Luyties, 251 Output, present proportion controlled by Clarke, 178, 189; Cook, 248; Bradley, 814, KI5; Rice, 835,836 Merchants' Distilling Cumpanv •. Cook, 244; Luyties, 255; Bradley, 815; Rice, 835 Purchase by combination described Clarke, 183, 185; McNulta, 197,216 Managers, payment of salary to pre\'ent competition. . McNulta, 203, 218, 238 Competition and effects of — Prices and profits cut by . CUarke, 176, 178; McNulta, 208, 209 ; Luyties, 254 Advantages of moderate capital Luyties, 255 Preference of purchasers for independents Clarke, 184; Cook, 245; Luyties, 253 Competition — Purpose of early combinations to control McNulta, 238, 240; Cook, 246; Rice, 836 Polic3' of present combinations as to Bradley, 814, 815, 827; Rice, 847 Cost of production must be reduced to prevent McNulta, 217, 240; Clarke, 189 Prices, cutting by combination Clarke, 170, 181-183 Sijccial cuts to customers of competitors Clarke, 170, 181-183; McNulta, 208; Luyties, 253; Bradley, 815; Rice, 847 Special cuts abandoned at present _ Bradley, 815; Rice, 847 Ad\antages of trust in underselling Luyties, 253 Compounding of whisky, (See Uciiifiral'mn.) Consumption of spirits, increase in prosperous times Rice, 845 Corn, effect of combination on price Thurber, 12; McNulta, 239 Plan to increase price by developing distilling. . McNulta, 226, 229; Rice, 846 GENERAL INDEX OF TESTIMONY. 1301 ■Whisky comtinations— Continued. Cost of production — Page. Average for distilleries in combination, 1891-1895 McNulta, 211-213 Coal, cost of Clarke, 185 Aim ot present combmations to reduce McNulta, 240; „ , ,. , Bradley, 814, 815, 827; Rice, 847 Keduction only means of controlling market McNulta, 217, 240 Reduction, Kentucky whiskies . Bradley 827 Cost of distilleries, estimated Cook 249 Distillers and C'attle Feeders' Trust — ' Capitalization and value of plants- . . Clarke, 169, 170; McNulta, 193-199, 201 Capitalization of constituent distilleries McNulta, 193, 194 Conduct of business — Closing of plants by Clarke, 170, 175; McNulta, 203, 216, 218, 238 Distilleries, additional, purchase of McNulta, 197 Effect oi distillers who entered McNulta, 236, 237 Records and papers, destruction McNulta, 195, 196 Dividends, rates and proportion to actual cost Clarke, 187 Organization and history — Method and form of organization t^larke, 169, 170 Distilleries entering trust, list, etc McNulta, 193-197 Trust agreement, synopsis McNulta, 198-200 Illegality of trust form Clarke, 174 Change to corporation Clarke, 171, 173; McNulta, 218-224 Bill of sale to Distilling Company :iIcNulta, 221 Trust certificates, method of issue McNulta, 193-199 Fluctuations in value Clarke, 174 Trustees, names of McNulta, 198 Legal position and powers . . Clarke, 169, 173, 174; McNulta, 189, 199 High prices received for distilleries belonging to McNulta, 200, 201 Distilling and Cattle Feeding Company — Capitalization and value of plants, discussed. . Clarke, 173; McNulta, 195, 238 Bonds, amount issued and purposes , McNulta, 195 Conduct of business — Products manufactured by McNulta, 195, 204 ]\Iethods of controlling constituent distilleries McNulta, 206 Records and papers, difficulty of securing McNulta, 195, 196 Salary, monthly account. McNulta, 224 Directors, election of first McNulta, 220 Dividends and profits McNulta, 216 Organization, history and method Clarke, 171 , 173 ; McNulta, 195, 218-224; Rice, 831, 832 Bill of sale of Distillers' Trust to McNulta, 221 Receivership, history Clark, 175; McNulta, 192; Rice, 831,832 Policy 7 egarding prices McNulta, 208-210 Reorganization, difficulty in accomplishing McNulta, 210 Sale to American Spirits Manufacturing Company McNulta, 235 Stocks, subscriptions for - McNulta, 219, 220 Variations in value McNulta, 207; Rice, 833 Speculation and manipulation Clarke, 174, 175 ; McNulta, 198, 209, 210; Rice, 832 Distilling and Cattle Feeding Company r. People, case referred to. . McNulta, 216 Distilling Company of America — Incorporation and purposes - Bradley, 819; Rice, 837 Capital, amount issued, and disposition Bradley, 819, 820; Rice, 838 Exchange of stock for stock of constituent companies Bradley, 819-821; Rice, 838 Annual interest charged, effect of combination Bradley, 822; Rice, 838 New Jersey, reasons for incorporation in. Bradley, 823 Promoters'" profit from organization Bradle>', 820-822; Rice, 838, 839 Holds stock of other companies, does not operate. . . Bradley, 819; Rice, 837 Advantage of consolidating different branches of trade Bradley, 819 Distributers of spirits (see also -R'-rri/iorfion) — List of leading -McNulta, 206 Rectification and compounding by Clarke, 180 Relation to combination. McNulta, 206, 210; Cook, 244; Clarke, 188; Rice, 835 1302 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Whisky combinations — Continued. Distributers of spirits — Continued. Page. Association aiid incorporation of Clarke, 188 Erection of distilleries by Cook, 244 Dividends, payment by different distilling combinations Bradley, 822 Economies of combination — Generally — Advantages of combination, generally, discussed. . Clarke, 183, 184, 186; Luyties, 255 Efficiency of management, relative Luyties, 255 No advantage from merely combining scattered distilleries. McNulta, 238 Kentucky whiskies, reduction of cost of manufacture Bradley, 827 Continuous operation, closing of plants - Clarke, 170, 191; McNulta, 203; Luyties, 254 Foreign markets, advantage in securing — Clarke, 184 Large plants Clarke, 184; McNulta, 203; Luyties, 254 Location of plants — Favorable places sought bv combination McNulta, 201, 202 Closing of badly located distilleries Clarke, 170, 191 ; McNulta, 203 Relation to raw material McNulta, 238 Processes, increased production by improved McNulta, 202-204; Bradley, 826 Experiments, improvements in veast making, etc Clarke, 186, 187; McNulta, 202 Purification of spirits by improved - . McNulta, 204, 205 Haw materials, saving in purchase Clarke, 184; McNulta, 201 Salesmen, advertising, etc., saving in Bradley, 829 Superintendence, reduction of amount required McNulta, 203 Transportation, advantage in, discussed McNulta, 201; Luyties, 254 Exportation — Surplus output exported at lose Clarke, 169; McNulta, 200 Reasons for small amount Cook, 245, 246; McNulta, 235 Beneficial effects on the price of corn Rice, 846 Large foreign consumption of alcohol _ Bradley, 828; Rice, 847 No tax levied on spirits exported Cook, 246 Remission of tax in case of, advocated McNulta, 227, 229 Hindered by obstructive tax regulations McNulta, 235; Cook, 245,248; Bradley, 824, 828; Rice, 846, 848 Bonded-warehouse system, description of working Clarke, 182, 183 Beverage whisky exported temporarily to evade tax Rice, 848 (iermany, control of whisky output by Government Luyties, 257 Gin, proce.-^s of manufacture described McNulta, 204 Great Western Distillery, capacity and advantages ilcNulta, 217 Green r. United States, case referred to Clarke, 188 Greenhut, J. B. , charges against Clarke, 175 Illicit distilling. (See Tajiilion.) Individual owners, reduced to mere agents by trust ('larke, 181 Kentucky, Distillers' and Warehouse Association, referred to Clark, 188 Kentuck)- Distilleries and Warehouse Company — History of organization, capitalization, etc Bradley, 818 Purchase of distilleries, prices, etc Bradley, 818 Proportion of Kentucky output controlled l)y Bradley, 818; Rice, 836 Kentucky whiskies — Necessity of aging Rice, 836 Importance of brands Bradley, 829; Rice, 845 Cheap grade, manufacture by combination _ Bradley, 826 Prices, possibility of maintaining high Bradley, 829; Rice, 845 Reduction by combination Bradley, 827 Quality improved l)y comljination Bradley, 830 Labor — Displacement by combination Clarke, 185; McNulta, 203; Cook, 249 Organization of workmen Clarke, 189 Wages, increase in certain cases Clarke, 185 Ix)bbying, use of funds by trusts McNulta, 235 McNulta, John, actions as receiver of Distilling Company Clarke, 175; McNulta, 192-196, 208 GENERAL INDEX OF TESTIMONY. " 1303 Wliisky combinations— Continued. Page. New Jersey, advantages of incorporation iu Bradley, 823 Distilling companies have complied with law Bradley, 823, 824 Output — production — Amount and relation to consumption- Total for United States and for combination, 1890-1894. . . McNulta, 215 Spirits compared with "straight" whisky Luyties, 258 Stocks of spirits on hand .' Cook, 247 Capacity excessive _ Cook, 245^ 246 Consumption per capita Luyties, 252 ; Rice, 845 Increase, possibility by changes in taxation McNulta, 225-230; Cook, 243; Rice, 846 Average yield per bushel of corn.... McNulta, 215; Bradley, 826; Rice, 844 (_^ontrol by combinations. {See also Bebate si/xtem.) Purpose of combination as to control McNulta, 238, 240; Cook, 246; Rice, 836 Rebate system intended to control McNulta, 207 Limitation under pi >ols Clarke, 168, 169 American Spirits JIanufacturing Companv, control by Clarke, 176 Distillers' trust, control by ! '. ' Clarke, 176 Control by leasing ground of distilleries McNulta, 216, 218, 238 Sales by trust, -monthly, 1889-1895 McNulta, 214 Distilling and Cattle Feeding ("lompanv, control bv McNulta, 212, 213, 215 Distilling Company of America — Proportion controlled by Clarke, 178, 189; Cook, 248; Bradley, 814, 815; Rice, 835, 836 Kentucky whiskies, proportion controlled bv Bradley, 818; Rice, 836 Number of present competing plants Bradlev, 816, 817 Policy of " Rice, 836 Cost of production, cheapening, proper means to control. . McNulta, 207 Pools of distilleries, historv and working Clarke, 168, 169; .McNulta, 200; Cook, 241 Prices — Average monthly, 1884-1899 Bradlev, 816 Average quarterly, 1891-1895 McNulta, 211 Variation according to price of corn McNulta, 209, 239 Brands, special, influence on Clarke, 189; Bradley, 829; Rice, 845 Control by combinations. (See also Rebate si/slem. ) Degree and effect, earlier combinations Clarke, 189; McNulta, 207; Cook, 249 Present policy regarding Bradley, 814, 815, 827; Ri(«, 847 Purpose of trust to control Cook, 246 Distributers, fixing of prices Clarke, 180, 188; McNulta, 210; Cook, 242, 246, 250 Stock speculation, influence in breaking down McNulta, 209, 210 Joint agreement of receiver and competing distilleries . McNulta, 208, 21 Standard Distilling Company, attempt to secure excessive, ('ook, 248, 249 No discrimination in favor of compounders Bradley, 828 Cutting of — Competing distillers, cutting bv Clarke, 170, 176, 178, 181-183; ^ ' Bradley, 815; Rice, 847 Special cuts to customers of competing distillers.. Clarke, 170, 181-183; McNulta, 208; Luyties, 253; Bradley, 815; Rice, 847 .\bandoned at present Bradley, 815; Rice, 847 Effect of changes — On dealers and consumers, discussed - Clarke, 178, 179; McNulta, 236; Cook, 242-245; Luyties, 256; Bradley, 830; Rice, 846 Special brands, effect of changes in price Cook, 243, 245 Effect of combination — Distillers' trust Cook, 241; Clarke,, 171, 186 Variation in proportion to price of corn Bradley, 827; Rice, 847 Reduction, recent, due to competition Luyties, 254 Present policy to reduce Bradley, 814, 815, 827; Rice, 847 Kentucky whiskies, possibility of maintaining high Bradley, 829; Rice, 845 1304 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Whisky coin'binations — Continued. Prices — Continued. Page. Margin of profit, proper amount discussed McNulta, 238- Cook, 246, 248, 249 Processes of manufacture, described Clarke, 168 Improvements by combination McNulta, 202-205: Clarke, 186, 187; Bradley, 826 Profits- Great fluctuations in Bradley, 828 Possibility of securing higli Cook, 246 Proper amount per gallon McNulta, 238; Cook, 248, 249 Distillers' trust Clarke, 171, 181 Distilling and Cattle Feeding Company McNulta, 211, 212, 213 Individual distillers have mostly lost by combination McNulta, 236, 237 Promotion, .profits from, Distilling Company of America Bradley, 820-822; Rice, 838-840 Quality, improved by combination Bradley, 830 Railways, rebates and special rates Clarke, 184; McNulta, 201 Rebate system — History and description Clarke, 171, 172; McNulta, 210,211; Cook, 241,242; Bradley, 813 Form of vouchers McNulta, 206 Rates allowed Clarke, 171, 172, 181; McNulta, 207, 210,211; Luyties, 2.50; Rice, 834 Total amount by years McNulta, 210, 211 Standard Distilling Company, system under Clarke, 181 ; Cook, 244 American Spirits Manufacturing Company, discontinued bv. . McNulta, 207; Bradley, 814; Rice, 844 Abandoned by present combination Bradley, 814; Rice, 847 (_!ontrol of dealers bv means of Clarke, 172; McNulta, 207; Luyties,251; Bradley, 813 Objection of rectifiers and wholesale dealers to System Clarke, 180, 181; McNulty, 207 Advantages to distributers belonging to trust Cook, 244 Use of rebate fund for buying distilleries Clarke, 172 Failure of trust to pay rebates Cook, 242; Luyties, 251 Bonds issued to protect holders of rebates Clarke, 173 Rectification and compounding — Processes and profits Clarke, 179, 180; Bradley, 827; Rice, 835 C'haracter of whisky made by McNulta, 205; Luyties, 256 Importance of control of business to distilleries Rice, 835 Proportion of business controlled by combination Rice, 835 Rectifiers (see sdaa I>isirihiiii'rt<) — Objection to dealing with combination Clarke, 180 Distilling Company makes no discriminations in sale Bradley, 828 Retail dealers — Prices, effect of changes upon Clarke, 178, 179; McNulta, 236; Cook, 242-245; Luyties, 256; Bradley, 830; Rice, 846 Profits, amount estimated Clarke, 179 Rye whisky — Nource of raw product McNulta, 202 1 mportance and number of brands Rice, 837 Purchase of distilleries by combination Bradley, 822; Rice, 837, 839 Output, proportion controlled by combination Bradley, 818; Rice, 837 Shuf eldt Distillery, sj lecial prod ucts and reason for purchase by trust . . McNulta, 204 Speculation — Trust certificates, extensive speculation in Clarke, 174 Offices of Distillers' Trust, manipulation by Clarke, 174, 175; McXulta, 198; Rice, 832 Influence on prices of si)irits McNulta, 209, 210 Spirits — High wines and proof spirits, significance of terms Bradley, 827 Quantity produced compared with "straight" whisky Luyties, 258 Marketable immediately, uses Clarke, 168 Importance of rectification and distribution Rice, 835 GENERAL INDEX OF TESTIMONY. 1305 TK^iisky combinations— Continued. Spirits— Continued. Page. Character of whisky made from McNulta, 205 Qr^i^if n-^. "??■'■ ™oEX-STA?sDARD OIL COMBINATION Adulteration: Page, Linseed oil, adulteration bv Standard Olarke, 338 Denied ' Mathew;*, 495 Lubricating oil?, frauds in Clarke, 388, 884; Davis, 356 Denied Mathews, 495 Barrels: Early history of use Boyle, 407^09 Decrease in cost of West'^ate, 371 By-products of refining'; Increasing importance and value Dowe. 29; Davis, 355, .860; Westgate, 368, 371 ; Aivhbold, 570; Emery, 627, 628 Profits, relation to Boyle, 441 Advantage bi Standard in use of Phillips, 602; Emery, 627, 628 Large capital necessary to utilize properly Archbold, 570; Davis, 855 Disposal by small refineries Davis, 355 Sale by Standard Oil Company to other concerns Boyle, 441 Campaign contributions: By Standard Monnett, 318 OampbeU, B. B. — Rebates from pipe lines Boyle, 476 Relation to Petroleum Producers' Association Boyle, 459 Contract with Pennsylvania Railroad _ Emery, 662, 668 Carter, Colonel — Relation to Standard and independent organizations Lee, 270 ; Boyle, 442; Archbold, 529, 531, 577, 578; Rogers, 584; Phillips, 590 Canada : Crude oil — Aniount produced and proportion controlled by Standard trail, 672, 673 Inferior quality - (thII, 672, 681 Importation of oil Gall , 678 Purchase of oil from American independent refineries Gall, 680-682 Tariff, anK.iunt and effects (rail, 680-682 Lubricating oil Gall, 688 Prices of refined oil, effect . >f Standard (rail, 674, 679 Railway discriminations — Appeal to railway committee Ctall, 676, 677, 685 Difference in rates between Aiuerican and Canadian oil Gall, 675-677 Higher charge for shorter haul Gall, 6(6-678 Increase of rates from United States VV^estgate, 378, 379; Archbold, 573; Rogers, 582; Gall, 675-678, 683-685 Rebates believed to be paid to Standard Oil Company Gall, 676, 677 Water transportation employed by Standard Oil Company- (rail, 68"> Standard Oil Company — Control i-)f ri'fining by Gall, 673 Risks of starting independent refinery - - - Gall, 678 Sells only to exclusive agents Gall, 677. 678 Commercial travelers: Displacement of - - - - Dowe, L'9 Competing or independent refineries (see also t'uinpHilwn, iiielhads: l-oi- eiftn inafkets; Pipe linen, independent; Pure Oil. Cuinpant/) : ' Xumber, business, relations, etc. — Number, names, importance - Boyle, 488; Archbold, 540-542 Ohio, competition in Monnett, 318; Archbold, 544-546 Output of refined, proportion controlled by Lee, 286; Westgate,381; Lock wood, 402; Boyle, 484; Arch- bold, .560, 567, 572, 578; Emery, 646; Rice, 689 1.307 1308 THE INDUSTRIAL COMMIS8IOK: INDUSTRIAL COMBINATIONS. Competing or independent refineries — Continued. Number, business, relations, etc. — Continued. Page. Relation to one another Lee, 270; Westgate, 380; Emery, 656, 657 Pipe-line companies, relation to Lee, 270, 271, 290 Oil City Derrick, attitude toward '. Boyle, 404 Conditions of production and competition (see also Ecovomies of Combi- nation) — Advantages in economical production , . Westgate, 372 ; Lockwood, 384 Cost of refining cheaper in interior Lee, 268; Emery, 649, 650 Preference of dealers for independent oil Clark, 345, 346 Railway rates, competition possible where fair. Lockwood, 38.5; Emery, 633 Piping of oil to seaboard, advantage of Lockwood, 397 Fair competition, regardless of size of capital, sufficient. . Westgate, 382,383 Driven out of business bv railway discriminations, 1870-1879 Emery, 616, 644, 646 Profits of business Davis, 362; Phillips, 591, 592, 602; Rice, 689 Present prosperity of business Emery, 669, Crude producers — Erection of refineries by Boyle, 441, 442 Reasons for inability to refine oil Boyle, 452, 453. Advantages of competing refineries to Lee, 291 ; Phillips, 598 Effect on prices and producers Clark, 345, 346; Boyle, 444; Lee, 293; Phillips, 598 Markets, disposal of product — Methods of selling product Lee, 291 Difficulty of disposing of product Davis, 351 By-products, disposal of Davis, 355 Canada, purchase from American independent refineries Gall, 680-682 Quality of oil, superior to Standard Lee, 291; Clark, .346; Gall, 680-682 Relations to Standard — Attempt of Standard to siH'ure support Phillips, 594 Division of business with Standard, propositions for . . Archbold, 530, 531, 548; Phillips, 593 Colorado, no compulsion to sell products to Standard Boyle, 584; Archbold, 579 Texas oil field, relation of Standard to Page, 792 Threats against by Standard Oil Company Rice, 692 Destruction during seventies by rail way discriminations . Emery, 616, 644, 646 Recent purchase or absorption by Standard Oil Company — History Lee, 270, 272; Monnett, 309; Davis, 362; Westgate, 370, 371 ; Phillips, 593; Emery, 657 Reasons for refusal to sell Lee, 271 Reasons of Standard for purchasing.. Lee, 270; Westgate, 370; Archbold, 572 Proposition of Theodore F. Davis to sell to Archbold, 549 Propositions of George Rice to sell to Archbold, 559; Rice, 749-754, 793; Page, 786 Lease and closing of refineries Lee, 272 Destruction or dismantling of plants. . . Lee, 275, 288, 296; Archbold, 544, 572 Canada, purchase of refineries by Standard Gall, 673 Risks of establishing Gall, 678 Special refineries and refiners — Argan Refinery, competition with Standard Davis, 361 Purchase by Standard Monnett, 309 ; Davis, 361 Baltimore and Ohio Railroad officials interested in Davis, 351, 359 Lubricating oil, quality and prices Davis, 356 Emerj', Lewis, twice driven out of business Emery, 616, 648 Matthews, alleged attempt to blow up refinery of Lockwood, 389; Archbold, 553-556 Rice, George, experience in competition Rice, 704, 709-711 Scofield, Shurmer, and Teagle referred to Monnett, 318; Davis, 362; Rice, 729 Westgate, T. F. , experience in competition Westgate, 365-383 Competitive points: Number and names of leading Lee, 266, 269 Railway rates discriminate against Lee, 266, 269 Relative prices, competitive and noncompetitive points Lee, 265, 266; Monnett, 302, 317; Clark, 350 INDEX STANDARD OIL COMBINATION. 1309 Competition, methods of Standard: General— p^^^, , General description by local agent Clark, 330-345 Keply to above evidence Matthews, 491-505 proportion ot trade allowed to independents, limited Westgate, 367 Methods not different from other businesses or manufactures Davis, 364 Reasons for superiority of Standard Havenieyer 116 Pacihc coast.. _ Westgate, 369 Excessive cutting ot prices — General statement Lee, 265, 266, 273 (cutting below cost of production charged Westgate, 365, 370 bometinies necessary, but deprecated Archbold, 568, 569 _ Should be prohibited Westgate,383 Special cuts-m particular localities- Existence of practice and instances Lee, 277- IVIonnett, 313; Clark, 337; Westgate," 367; Lockwoodi 402; ^.„ Boyle, 433, 485, 486; Emery, 629-632; Rice, 704; Page, 792 Differences m prices Clark, 350; Monnett, 302, 317 New York City, special cuts against Pure Oil Company Lee, 265, 266; Westgate, 365; Lockwood, 402; Archbold, 528 Philadelphia, special cuts in Lee, 266; Emery, 629, 631, 632 Foreign markets, excessive cuts in Lee, 273; Westgate, 381; Lockwood, 398; Boyle, 433; Archbold, 531, 570; Phillips, 593 Governmental regulation, foreign markets Lee, 276, 277; Archbold, 532; Emery, 616, 617, 623 Threats of special cuts. . Clark, 337; Westgate, 369, 370; Archbold, 550, 552 Cuts usually made by Standard first Emery, 629, 630, 632 Cuts made first by competitors Mathews, 506 Discussion of facts Mathews, 491, 492, 496, 499, 505 Sometimes necessary, justification Archbold, 569; Boyle, 433, 443 Increase after competition is crushed ." Clark, 350 Denied Archbold, 572 Special cuts to customers of competitors — Practice, existence, and instances Clark, 331-345; Monnett, 313; Davis, 357; Westgate, 366, 368-370; Rice, 704, 735 Agents not allowed to make Mathews, 494, 499 Reasons for and amounts of differences Mathews, 499, 500, 505 Contracts with customers for sale at fixed prices Mathews, 499, 505 Impossibility of long maintenance Archbold, 528, 529 Purchase of empty barrels to secure trade Clark, 336 Denied Mathews, 496 Information as to competitors' business — Secured by Standard Oil Company, methods and instances Monnett, 316; Clark, 335, 336; Davis, 356, 357 ; West- gate, 366; Emery, 614, 615; Gall, 684 Competitors' oil sampled, Canada Gall, 684 Agents employed to watch competitors' business Clark, 335, 341 Railways, information as to shipments given by Westgate, 366; Emery, 614, 615 Practice, extent and justification discussed . . . Mathews, 505; Archbold, 573 Employees of competitors, secured from Monnett, 316; Davis, 356 Denied Mathews, 505; Archbold, 573 Attacks on dealers in independent oil — Establishment of competing peddlers by Standard Clark, 331, 335; Mathews, 491; Westgate, 368,369; Archbold, 550 Helmick, William, manner of driving to poorhouse Clark, 337 Denied Mathews, 496-499 Purchase of building occupied by competitor. Clark, 340; Mathews, 502, 503 Theats to establish competing dealers Lockwod, 401, 402 Grocery store established. Chess, Carley & Co Rice, 709, 710; Page 764 Threats to destroy business of dealer Archbold, 550, 552 ; Westgate, 370; Clark, 337; Mathews, 469-499 Contracts with dealers for exclusive handling of Standard oil Rice, 711 EYaudulent methods — Adulteration of oil of competitors Davis, 358 Brands of competitors copied by Standard Davis, 357 ; Westgate, 366 Denied Archbold, 549, 550 1310 THE INDUSTRIAL rOMMIHSK)N: INDUSTRIAL COMBINATIONS. Competition, metliods of Standard — ('ontinued. Fraudulent methods — Continued. Page. Copying of Standard brands by independents Archbold, 549, 550 ( )il manufactured by competitors sold by Standard Westgate, 369 Lamp tests, frauds in Clark, 346 Denied Mathews, 500-502 Different grades sold from same tank. Monnett, 313; Clark, 331, 333, 338, 341 Denied Mathews, 492-495 Matthews ease, attempt to blow up refinery. Lockwuod, 389; Archbold, 553, 556 Cost of refining (see also By-productn; Projiin) : Estimated Lee, 276; Monnett, 315, 316; Westgate, 368, 371 ; Eice, 734 Reduction and causes Lee, 276; Davis, 358; Westgate, .371; Boyle, 456 Plant, cost of Davis, 362 Inde] lendents produce as economicallv as Standard Lee, 268; Westgate, 372; Lockwood,384 Profits of refining per barrel. Lee, 273; Archbold, 532; Phillips, 591, 592 Crude oil: Canadian (jil, amount produced and proportion controlled by Stand- ard Gall, 672, 673 Inferior quality Gall, 672 Colorado field, relation of Standard to Boyle, 484; Archbold, 579 Cost of production — Average Lee, 282, 283 Discussed _ Boyle, 434, 435; Westgate, 372 Decrease and causes Lee, 280; Davis, 360 Influences affecting Davis, 363 Speculative uncertainty Lee, 282 Relative, large and small wells Lee, 293 Drilling wells, c( ist of Emery, 661 ; Boyle, 420, 434 Fuel, comparative prices, 1867 and 1899 Boyle, 418 Early figures Boyle, 411,415-417 Foreign countries — Production in, statistics, etc , , Archbold, 563-567 Standard Oil C'ompany not engaged in producing Archbold, 566 Russian oil, producers and amount of production Archbold, 563-567 Inferior quality of Lee, 278; Emery, 626, 632; Page, 791 Histor\' of discovery and earlv progress — General statement. . .' Lee, 262; Boyle, 404-428; Emery, 603 Coal oil, early refining of Boyle, 405 Salt wells, relation to oil discoveries Boyle, 405, 406 Lease of oil lands, first, described Boyle, 406, 407 Drake well, discovery Boyle, 407 Flowing wells, discovery and effect Boyle, 408, 409 Drilling, invention of methods Boyle, 405-412 Cost of drilling, early Boyle, 411^15 Barrels, relation to oil industry Boyle, 407-109 Transportation, early methods and cost of Boyle, 407, 410, 413 influence of, on prices Boyle, 419 T(.';unsters, burning of oil by Boyle, 414 Speculation, early Boyle, 411, 413 Capital, amount invested, 1864 Boyle, 411, 412 Stock companies, introduction of Boyle, 411 Tax on oil Boyle, 412, 417 Bank failures, 1866 ." Boyle, 414 t'ost of production, 1867, estimated Boyle, 415-417 Deepening of wells, effect Boyle, 427 West Virginia and Ohio, early dis<'overies in Boyle, 414, 415 Butler and ( 'larion fields, development Boyle, 421 Bradford field, first discovery Boyle, 421 Markets, early character of (dealing in oil Boyle, 450, 451 Oil exchanges, history of establishment Boyle, 420, 448-451 Leasing of land — Methods and royalties Davis, 364; Archbold, 539, 540 < )hio oil — Output (see also above, biatislics) Davis, 35S Number of competing jjroducera Archbold, 545 Purchase of land in Ohio field by Standard Lockwood, 403; Archbold, 560, 561 INDEX STANDARD OIL COMBINATION. 1311 Crude oil— Continued. Ohio oil— Continued. i^age. Opposition of independents to recognition on exchanges Archbold 532 ±-ronts ot Standard from, discussed Monnett, Mil ; Archb. .Id' 544 -Uaeksburg oil, quality of Davis '^^l ' '^r,-^ ^ Corning field, quality of product Tiavis' ck-> Pipelines (see also P/j.cX-'j/fs l.elo^v)- """ i^^vih, ..r,^ Interestof producers.)! crude in independent.. Lee, 281', 293- Bovle 44'' 444 Meet of independent on prices.. Lee, 286; Boyle, 444, 445 ; Phillips' 598 599 Purchase of oil by u^e, 285, 353, 354 ; Davis; 362 Premiums on oil — > > i , , ^"^ Paid to drive out competing pij.e lines. Lockwood, 395 Paid tor quality and tn meet comy.etition Boyle, 475; „ . Archbold, 576; Rogers, 582 Prices — > ' o I Statistics, etc. — Average ]>y years, 1860-1898 Bo\le, 434; Archbold, 547 Highest and l.nvest, 1869-1887 '. Lee 279 Variations liy months and days, 1891-1899 Boyle, 437^39 Relative prices and cost of production, 1867 and 1899 B'oyle, 418 Early history, variations and causes _ Bovle 409, 4ii,4i2,4i4,' 415,519, 426 h luctuations, causes explained Lee, 281, 283 Relation to price of refined Archbold' 571 Present prices satisfactory Boyle, 484^ 489 Effect of variations on profits of refineries Boyle', 45 2^ 456 Production, relation to .'. . Lee' 279 Depression by overproduction and excessive stocks. . Boyle, 451 , 455^ 456 Overproduction not chief cause of fall. Lee, 280; Lockwood, 396 Restriction of 1887, effect upon Lee, 288; Boyle, 429 Influences affecting — Determined by demand and supply Boyle, 479, 480 Determined by prices of refined Boyle, 446, 447 Must be sufficient to pay small producers Lee, 293 Illegitimate methods used _ Boyle, 449-451 Speculation, influenced by Davis, 362; Boyle, 436, 449 Standard Oil Comj)an}', influence of — Controlled by Standard Dowe, 38; Lee, 299; Davis, 362; Lockwood, 403; Rice, 689 Denied Boyle, 446, 490 Method of fixing by Standard, effects Bovle, 436^40, 449, 451 ; Archbold, 571 Depressed 1 ly combination Lee, 279-284 ; Monnett, 311 Denied Archbold, 540 Dejiressed to enable Standard to buy lands Lockwood, 403; Phillips, 592 Raised to injure competing refiners Lee, 276 Arbitrary increase and reduction by Standard Lockwood, 395 Independent pipe lines often pay more than Standard. Lee, 286; Boyle, 444, 445 Effect in raising Phillips, 598, 599 Oil Exchanges, established Boyle, 420, 448-451 Producers — Profit discussed Lee, 281-284; Bovle, 434, 435, 456, 485; Phillips, 599; Archbold, 538-540, 553 Present prosperity 'of Boyle, 484; Archbold, 538-540, 583; Emery, 669 Standard Oil Company, effect on producers injurious Lee, 281-284; Phillips, 599 Denied Boyle, 433-435, 485; Archbold, 538-540, 553 Refining of oil by, reasons for failure Boyle, 452, 453 Pipe lines, interest in maintaining independent Lee, 282, 293; Boyle, 442, 444; Phillips, 598, 599 Independent, attempt of Standard to secure support of Phillips, 593 Production, output — Statistics — Average daily, 1870-1898 Boyle, 435; Archbold, 547 Annual output and value of oil Boyle, 435; Archbold, 539 83a 84 1312 THE INDUSTBIAL COMMISSION: INDITSTEIAL COMBINATIONS. Crude oil — Continued. Production, output — Continued. Statistics— Continued. Page. Production and proportion by countries, 1897 Archbold, 567 Production and proportion by States, 1896, 1897 Archbold, 568 Total amount of production, importance Rice, 687 Production chiefly from small wells Lee, 294 Sources of statistics Boyle, 485 Variations in production, causes, etc Lee, 283; Boyle, 409-428,473 Overproduction and effect Lee, 280; Lockwood, 396; Boyle, 445, 451, 452, 456 Restrictions of production, early Boyle, 426-428, 454-458 Restriction of 1887— History and effect Lee, 284; Boyle, 428-432, 460, 461 Established at instance of producers only Archbold, 540 Relation of Standard Oil Company to Boyle, 429, 430 Boundary line drilling contract, text Boyle, 459 Interior drilling contract, text Boyle, 460 Effect on prices Lee, 288; Boyle, 429 Oil set aside for benefit of drillers Lee, 284; Boyle, 482, 483 Effect on drillers Boyle, 431,483 Speculation in — Methods used to influence prices Davis, 362; Boyle, 436, 450 Losses to producers through Boyle, 451 Depression of prices to producers by Boyle, 449 Suppression by Standard Oil Company Boyle, 449, 451 Standard Oil Company (see also Priced — Proportion of output controlled by Lee, 263, 281, 282; Monnett,318, 319; Lockwood, 402; Boyle, 489; Archbold, 560, 561, 571 Purchase of lands by, methods Davis, 354; Lockwood, 403; Phillips, 592 Lease of oil lands by Lee, 285 Effect of production by Lee, 285 Effect on producers injurious Lee, 281-284; Phillips, 599 Denied Boyle, 433-435, 485; Archbold, 538-540, 553 Texas oil field — Relation of Standard to Page, 792 Derrick's Handbook of Petroleum: Character of statistics in Boyle, 485 Economies of combination in production: Superior methods of Standard, generally Smith, 71; Havemeyer, 116; Cook, 248; Archbold, 563, 570; Dodd, 799; Rockefeller, 796; Monnett,318; Boyle, 486-490; Westgate,372 Denied Lockwood, 392 Large capital , economy of, generally Archbold, 570 Capital of 1500,000 sufficient for best production Lee, 269 Ability, command of superior Archbold, 563; Westgate, 372 Superintendents, high salaries Lee, 286 Directors have had little practical experience Lee, 271 Superintendents, less skillful than independent refiners 'Lee, 269 Improvements and inventions in refining Westgate, 372; Boyle, 486, 488; Emery, 624 Closing of plants less favorably situated Monnett, 309 By-products, utilization by Standard Emery, 627, 628; Phillips, 602; Archbold, 570; Davis, 355 Sale and marketing of products, superior skill in Boyle, 488-490; Archbold, 562, 570 Denied Phillips, 600 Foreign markets, need of aggregation of capital to secure Archbold, 562, 563 Coal, economy in purchase Lee, 278 Denied Archbold, 533 Pipe lines, consolidation of system Boyle, 489; Rockefeller, 796 Standard can not transport more cheaply Lee, 269 Transportation, improved methods introduced by Standard Archbold, 563 Advantages by favorable location of refineries Page, 770, 776-778 Ad-\?antages of many distributing points Page, 788 Tank ships and schooners owned by Standard Page, 791 <,iuality of oil. (See below, (Jualiti/.) IKDEX STANDARD OIL COMBINATION. 1313 Emerjr, Lewis: Page. Driven out of business by Standard EmBry, 648 United States Pipe Line, relations to, etc Emery, 650-653 Foreign markets— Exportation: Export trade— statistics- Amount of oil exported Lee, 277, 278; Arohbold, 535-537, 568; Emery, 622, 623 Relative value of exported oil for different years Boyle, 435, 436 Benefit of export trade to country ". [ Davis, 363 Domestic prices maintained by Lee, 282 Quality of export oil Lee, 274, 277, 278; Emery, 623, 626 Competition in — Excessive cuts and prices to drive out independents Lee, 273; Westgate,381; Archbold,531; Phillips, 593 Special cuts to extend trade justifiable Boyle, 433 Cutting below cost in far East Archbold, 570 Slethods of Standard Oil Company in controlling Monnett, 319 Government control of competition Lee, 276, 277; Archbold, 532; Emery, 616, 617, 623 France, trade chiefly controlled by Standard Lee, 277 Germany — Conditions of business and competition Lee, 273, 278; Phillips, 601 Pm-chase of Poth Agency by Standard Boyle, 443 Pur(?haae of independent tankage by Standard Emery, 617 New tankage, etc., established by independents Emery, 617 Emery, Lewis, experience in Emery, 616, 617, 623 Prevention of unfair competition by Government Lee, 273, 276, 277; Emery, 616, 617, 623; Archbold, 532 Attitude of Government toward Standard Bice, 742 Profits in, due to fair railway rates Lockwood, 393 Independent refiners — Extent of operations in foreign markets Lee, 273-276, 285 ; , Archbold, 535-538, 568 Importance of foreign shipments to Westgate, 380; Emery, 631 Methods of shipment Lockwood, 397, 398 Prices, compared with domestic Archbold, 559, 560 Necessity of moderation Boyle, 439 Russian oil — Crude and refined output Archbold, 567 Relative amount exported Archbold, 533, 534 Amount of business Emery, 623, 626, 632 Strength of competition Archbold, 546, 553, 566; Page, 791 Suffers from Standard competition Emery, 623 Standard Oil Company — Amount of export business Archbold, 533-537, 568 Extension of foreign markets by Archbold, 562-568, 579; Emery, 626, 628; Page, 792 Not pioneer in securing Phillips, 600 Tin cans, exportation and manufacture abroad. . Lee, 282; Archbold, 533, 534 Export oil refined at seaboard Lockwood, 398 Grades. (See Qualiiy.) . Independent refineries and organizations. (See Competing Kejinenes; Pipe Lines, Independent; Pure Oil Company.) Interstate Commerce Act. (See Railway discrimitmtions.) Labor: Effect of Standard combination— Satisfactory relations Archbold, 542, 543, 565 Employees of Standard competent and well paid - . - . Lee, 289 Displacement by dismantling plants t """oII'q' oon Dependence on a single employer, evil effects Lee, 288, 289 Wages paid by .:..... Lee, 285,286; Clark, 348; Gall, 680 Superintendents and foremen, high wages paid Lee, 286 Hours, at distributing stations Clark, 349 ; Mathews, 494 Oil well drillers— .0,^00 Combinations of .. Boyle, 431, 483 Wages paid Davis, 364; Boyle, 483 Restriction of 1887, effect on Boyle, 431, 482, 483 1314 THE INDUSTRIAL COMMISSION: INDtJSTEIAL COMBINATIONS. Linseed oil: Page. Alleged adulteration by Standard Company Clark, 333, 334; Mathews, 495 IiOgau, Emery & Weaver: Suit for discriminations Lee, 287; Emery, 633-635, 639 Lubricating' oils : Character, value Emery, 627 Compounding, processes, qualities. Clark, 333, 334; Davis, 356 Different prices for same quality Clark, 333, 334; Davis, 356 Denied - Mathews, 502, 505 Frauds in branding Clark, 333, 334 Denied _ Mathews, 495, 502 ]Mon(3poly, practical, of Standard Oil Company Davis, 355 Prices and discriminations between customers, discussed Mathews, 502, 505 Railways, disci-iminations in purchase from Standard Company Lee, 268; Davis, 355; Rice, 699, 700 Denied _ Archbold, 516; Page, 757-759 Superior quality of Galena oils Page, 757, 758 Contracts of Galena Oil Company, as to cost of lubrication Page, 757, 758 Standard' s prices uniform to all purchasers Page, 757, 758 Canada, amount produced and imported Gall, 683 Matthews — Buffalo Refinery : Alleged attempt to blow up Lockwood, 389; Archbold, 553 Methods of business of Standard Oil Company : Suits by stockholders to ascertain condition of business '. . Boyle, 444 Amount of oil sold at certain stations Mathews, 499 Inspection of accounts, etc., by local agents Clark, 342, 343; Mathews, 504 Deiluctions from salaries of agents for errors Clark, 345 Letters answered by indorsement Clark, 348 Oral instructions in place of writing Clark, 346, 347 Amount of daily deliveries from tanks, etc Clark, 342; Mathews, 496 Miners' oil: Compounding, adulteration in Clark, 334 ; Mathews, 495 Monopoly of Standard, degree of: Monopolistic character of Standard Oil Company Phillips, 600 Standard has no legal advantages Phillips, 596 Growth of Standard Oil Company, 1870-1879 Emery, 646; Rice, 689 Proportion controlled by Standard, 1870-1879 Rice, 689 Proportion controlled by Standard, 1879 Emery, 646 Proportion controlled by Standard, 1894-1898 Archbold, 560 Proportion of refining controlled by Standard Lee, 286; Lockwood, 402; Emery, 605 Canada, proportion of oil refined by Standard Archbold, 572, 573 National Transit Company. (See Pipe lines.) Ohio Oil Company : Purposes of organization Monnett, 299 Petroleum Producers' Association: Organization and purposes Boyle, 419,454,455 Petroleum Producers' Agency: Attempt to maintain prices, 1870 Boyle, 455-458 Pipe lines: Buckeye Pipe Line Company — nature and working Monnett, 298, 299, 311 Business, customs, and methods — Described Lee, 285 Deductions and assessments for losses by tii-e Davis, 354 Gauging and deductions for evaporations Davis, 354 Charges and cost of piping — Relative charges of Standard and independent lines . . Lee, 271 ; Westgate, 381 Charges excessive Rice, 734 Reasonableness of charges Thurber, 23; Rogers, 581, 588, 589 Not reduced by combination Lee, 280, 284 Ohio, rates in _. Monnett, 311 Cost of transi lorting oil, estimated Lee, 284; Archbold, 553; Rogers, 588; Phillips, 594; Emery, 666; Rice, 734 Consolidation by Standard Oil Company — liistory — C(.>iidDinations, early, descril.ied Boyle, 424; Emery, 604 Absorption by Standard, described Lee, 262, 293; Boyle, 424-426; Emery, 630 INDEX STANDARD OIL COMBINATION. 1315 Pipe lines— Continued. Consolidation by Standard Oil Company— Continued. History — Continued. Page. Competition, excessive, cause of Boyle, 424-426 Purchase of independent lines Ijv Standard Lockwood, 395; Archbold, 561 Purchase made up by reduced oil prices Phillips, 592 Western and Atlantic Pipe Lines, purchase by Standard . . Lockwood, 395 Standard's methods in — Described Lee, 254; Monnett,321; Lockwood, 394; Emery, 605 Discriminations and rebates by railwa-\'s Lockwood, 386, 388; Boyle, 424; Emery, 641; Rice, 695, 696 Premivims on oil _ Lockwood, 394; Boyle, 475; Archbold, 576; Rogers, 582 Degree and effects of monopoly — Proportion and effects of control Lee, 264, 265; Rice, 689 Control of different lines by Standard Davis, 361 Difficulty of establishing competing lines i\lonnett, 310, 311 Control of competition by means of Monnett, 299, 312, 315 Railway rates increased to prevent competition with Monnett, 317 Crude oil, price controlled by Monnett, 325; Davis, 362; Lee, 285 Advantages of consolidation Boyle, 471-474, 489, 490; Archbold, 553 Necessity of large capital Rockefeller, 797 Distances to which lines are laid to reach wells Rogers, 581, 588 Eminent domain for — Opposition of Standard and railways to Lee, 262; Boyle, 474; Archbold, 513; Emery 605, 659, 660 New York and New Jersey, law's lacking Lee, 267; Emery, 653, 654 Law granting, advocated Emery, 662 History, early Lee, 262; Boyle, 409, 413,423-126, 480-482; Emery, 603-605 Immediate shipments, significance of practice Boyle, 482 Independent organizations, existing (see also Producers' Oil Cuiiipani/, Pure Oil Company, United Stales Pipe Line) — Organization and relations — Names and history Lee, 261; Lockwood, 297; Rogers, 581 History, organization and effects Boyle, 442-445 Relations to one another Lee, 261; Boyle, 462-471; Rogers, 584 Capital and profits Phillips, 591, 592, 600 Effects on oil industry — Raising of prices to producers by Lee, 293; Boyle, 444, 445; Phillips, 592, 598, 599 Advantages to refiners Phillips, 598, 599 Katesof pipage. Standard and independent lines. Lee, 271; Westgate, 381 Seaboard lines, advantages of - - - Lee, 265 Wastefulness and inabilitv to meet demands Boyle, 404, 442,443,445,475; Rogers, 589 Attempts of Standard to control- Purchase of stock bv Standard Lee, 270; Westgate, 370, 382; Boyle, 442; Archbold, 529, 531, 577, 578; Rogers, 584; Phillips, 590. Control sought through buying refineries Westgate, 370, 371 Combination with Standard, propositions Archbold, 530, 531; Phillips, 383; Emery, 659 Opposition of Standard— ODDOsition to free pipe-line law - i^ee, ^Dz, zo^, uppos o PI g^y^jy^. Archbold, 513; Emery, 605,659,660 Opposition to laying pipes. - ------ J^'^^' 264, 267; ^^ Lockwood, 397; Boyle, 445,474,475; Emery, 651 Opposition of Rice to National Transit Company's lines Boyle, 486 Purchase of wells readied by independent hues Westgate, 380 Railways, opposition to crossing of pipe lines— Described Lee, 264, 267; Lockwood, 397; Emery, 650-655 ; Rice, 739 Opposition due to Standard Company Phillips, 593 Reasons for Archbold, 529 Attempt to secure permission of Standard toeross railways. Emery, 659 1316 THE INDUSTRIAL COMMISSION: INDUSTRIAL COMBINATIONS. Pipe lines — Continued. Independent organizations, existing — Continued. Refined oil — Page. Transportation by independent pipe lines Lee, 267; Lockwood, .398; Boyle, 445; Emery, 651 Early transportation of Boyle, 413 Monopoly. (See above. Consolidation.) National Transit Company — Charter, manner of securing Rogers, 585, 588; Emery, 607, 619-622 Charter, character and powers Emery, 608, 609, 621, 622 Capitalization Rogers, 587 Agreement with Tidewater Pipe Company for division of traffic. Rice, 738 Contracts with railways for division of traffic Emery, 663-667; Rice, 701, 702; Page, 759-763 Efficiency in meeting demands of McDonald field Boyle, 471, 473 Capacity'of lines Boyle, 481; Rogers, 583, 584 Credit balances, outstanding, 1889-1899 Rogers, 583 Residurmi, statement of, published monthly Rogers, 583 Premiums on oil — Paid to injure competing lines Lockwood, 394 Sometimes paid to meet competition. . Boyle, 475; Archbold, 576; Rogers, 582 Paid for superior quality Boyle, 475; Archbold, 576; Rogers, 582 Purchases of oil by pipe lines — effects Lee, 285; Davis, 352, 354, 362; Boyle, 420, 424 Rebates and discriminations by — Early Boyle, 423, 476-479 Attempt to recover by suits Boyle, 427, 428, 476-479 Relation to premiums on oil Boyle, 479 Corning fields, discrimination against Davis, 352 Refined oil, transportation by United States pipe line Lee, 267, 268; Lockwood, 398; Boyle, 413, 445; Emery, 651 Press : Attitude toward Standard generally Rogers, 587 Unfairness of certain papers toward Standard Boyle, 487 Oil City Derrick, relation to Standard Boyle, 404 Suits for libel against Boyle, 487 Opposition to independent interests Rice, 754 Subsidizing by Standard Monnett, 312, 321 ; Lockwood, 398 Material furnished by Standard Monnett, 321 Prices: Statistics — Export prices, average by years, 1870-1898 Thurber, 4; Boyle, 435; Archbold, 547 Variations by months and days, 1891-1899 Boyle, 437-439 Exported oil, relative value for different years Boyle, 436 Average, New York, Chicago, and Cincinnati, 1885-1899. . Archbold, 547, 548 Cincinnati prices of refined oil Boyle, 447, 448 Statistics based on export oil misleading Westgate, 371, 372 Foreign prices compared with domestic Archbold, 546, 559, 560; Emery, 631, 633; Rice, 734; Page, 791 Domestic, difficulty of securing Boyle, 446-448 Sources of Boyle, 485 Transportation, early fluctuations due to Boyle, 419 Causes of recent fluctuations Lockwood, 395, 403 Restriction of crude output, effect upon Boyle, 430 Influences affecting — Crude prices, relation to refined Boyle, 446, 447; Archbold, 571; Gall, 674, 689 Relation to price of crude and to competition Lockwood, 395 Margin made more uniform by Standard Boyle, 437-439 Domestic prices, influences affecting Boyle, 448 By-products, influent'e of Davis, 355, 360; "We.'^tgate, 368, 371; Archbold, 570 Barrels, influence of Boyle, 437 ; Westgate, 371 Railway discriminations, reduction bv reason of Archbold, 526, 528; Rockefeller, 795 INDEX STANDARD OIL COMBINATION. 1317 Prices— Continued. Effect of combination — Page. Possibility of raising above competitive rates, discussed Lee, 292; ^ , . , „ , Archbold, 569, 570 Oontrot by standard Company, degree and effects of Lee, 276, 286; „ , ^ . Lockwood,403; Archbold, 531, 568-570 Kates sufhcient for profit, stated Lee, 266 ; Rice, 735 Kelative prices of mdependents and Standard Clark, 345, 346 Increase by Lee, 296, 292; Monnett,323; Lockwood, 403; Rice, 734-736 t auada, mcrease through Standard Gall, 674 Extra profits from Ohio oil Rice, 735^ 736 California, excessi\'e prices in Emery' 633 Reduction not due to Standard Lee, 275, 276; ^ , , Monnett, 317; Lockwood, 394; Rice, 734 Keduceti ve methods Clark, 346 Denied Matliews, 500-502 Railways: Oil regions, first construction in Boyle, 410, 411 Ownership (if railwajs 1 )y Standaid Monnett, 318; Rice, 688, 703 Oil well^ supplies, excessive rate on Lockwood, 391 , 396 Report of shipments of oil by competitors Westgate, 367; Emery, 614, 615 Standard agents, local, have no direct deahngs with Clark, 347 INDEX STANDARD OIL COMBINATION. 1319 Railway discriminations and rebates (see also South himrooeinml Comiximj) : Early history, generally— Page. Described Lee, 263, 264, 287; Lockwood, 384, 385,387,399; Boyle, 453 btandard originator of system Rice 741 Rate of rebates referred to, 1872-1879 Emery, 647| 660 Violation by railways of contract of 1872 Emery, 641 , 642 Raising of rates, 1874, letter regarding Emery, 641 Rebate on refined to offset crude transportation Emery, 641 Amounts during 1877-1879 _ _ Lee, 287; Lockwood, 386, 387; Boyle, 453; Kicu, 696, 697 Method of calculating Archbold, 514, 515; Emery, 660, 661 Avowed purpose of railways to maintain Rice, 698, 699 Universality of practice before interstate commerce act. . Archbold, 517, 526; Page, 756; Rockefeller, 795; Offers originated with railway companies Archbold, 527 Standard has never fixed rates for other shippers Page, 789 Standard did not receive rebates on competitors' shipments Page, 790; Rockefeller, 795 Rebates received by competitors of Standard Page, 790; Rockefeller, 795 Existing conditions — Discussed Lockwood, 396 ; Boyle, 487 Discriminations believed to exist Lee, 292; Davis, 352; Phillips, 601 Standard Oil Trust dictates tariffs Rice, 717 Denied _ Page, 768 Pennsylvania Railroad, rebates paid by, up to 1893 Emery, 634, 645, 646 Despeaux t). Pennsylvania R. R., testimony referred to Rice, 700-703; Page, 759-763 Baltimore and Ohio Railroad, letter shcjwing existence Emery, 637, 638; Page, 770 Baltimore and Ohio Southwestern, discriminations by Davis, 351, 352 Damages assessed by Interstate Commerce Commission up to 1893. . Lee, 287; Westgate, 380; Emery, 645, 646 Standard Oil officials, interest ui railways Monnett, 318; Rice, 688, 703; Page, 768 Corning field, high rates on crude oil from ." Davis, 353 Illegality under common law Rice, 708 Discrimination since interstate commerce act denied. .^ . Amdibold, 516-528; Page, 778; Rockefeller, 795 Letters from railway officials denying existence Archbold, 517-526; Rice, 747;vPage, 787 Difficulty of securing evidence Emery, 634, 635 Possibility of ignorance of discriminations by high officials. . Emery, 642, 643 No difference in rates per hundred AVestgate, 372 Commission on freight received by Standard Rice, 727 Denied Page, 769 Proportion of oil tonnage to the total railway tonnage Page, 787 Barrel shipments. (See Timk cars.) Campbell, B. B.— Discriminations in favor of Emery, 635, 636 Contract with Pennsylvania Railroad, 1879 Emery, 662 Canada — Increase in rates to, and causes Lee, 297; Westgate, 378, 379; Archbold, 573; Rogers, 582; Gall, 675-678, 683-685; Page, 788 Higher charge for shorter haul Gall, 676-678 Difference in rates between American and Canadian oil Gall, 675-677 Rebates believed to be paid to Standard Gall, 676, 677 Appeal to railway committee - Gall, 676, 677, 686 Carload lots. (See Tank cars.) •Competitors, rebates on oil shipped by — South Improvement Company, contract Emery, 612-614 Rice case Archbold, 556-559; Rice, 706-709 Payment, denied Archbold, 579; Page, 790; Rockefeller, 795 Effects of discriminations — Chief cause of Standard Oil monopoly Lockwood, 384, 394, 400; Phillips, 593; Emery, 609, 644, 645; Rice, 688, 741 Profits of Standard secured from, estimated Lockwood, 386 1320 THE INDUSTRIAL COMMISSION: INBUSTRIAL COMBINATIONS. Railway discriminations and rebates — Continued. Effects of discriminations — Continued. Page. Practice, former, injurious to Standard Company Archbold, 526, 528 Prices to customers reduced by reason of - Archbold, 526, 528; Rockefeller, 795 Competing refineries driven out of business by Emery, 616, 644, 646 Chief obstacle to competition Westgate, 382, 383 Fear to establish independent refineries on account of Lockwood, 400 Differences in rates, effect on profits Westgate, 378 Crude oil, price diminished by Monnett, 325 Division of petroleum business — South Improvement Company, division among railways Emery, 610, 611 National Transit Companv, division between pipe lines and rail- ways Emery, 663-667; Rice, 701, 702, 738, 739; Page, 759-763 Emery, Lewis — Twice driven out of business by Emery, 616, 648 Rebates received by, in 1870 Emery, 670 Empire Transportation Company — Driven out by discriminations Lee, 263; Rice, 696 Reasons for purchase by Standard Oil Company Archbold, 513, 514 Discriminations by, in favor of certain refineries Archbold, 514 Exclusive transportation of Standard's oil — Special arrangements made with railway managers for Emery, 630, 631 Independent refineries and pipe lines — Discriminations in favor of competitors of Standard suspected . . Archbold, 578 Denied Phillips, 601 United States Pipe Line, freight rates to New York Archbold, 529, 530 Phillips, 601; Emery, 655 Interstate commerce act — Secured by refiners Lockwood, 389 Suits and decisions of commission, concerning rebates Lee, 287; Westgate, 379, 380; Emery, 636; Rice, 714-716, 729 Relation of commission to Standard Lockwood, 398 Disregard by railways and trusts Lockwood, 389 Refusal to obey orders of commission Westgate, 380 Baltimore and Ohio Railroad, letter regarding maintenance of rates, Emery, 637 Evidence as to New Haven and Hartford underbilling case Page, 771-774 Strictly obeyed by Standard Archbold, 516, 527, 579; Page, 756, 778, 787 Logan, Emery & Weaver — Suit against Pennsylvania Railroad Lee, 287 ; Emery, 633-635 Reasons for settling suit Emery, 669 Lubric'ating oil — Preference in purchase from Standard. . . Lee, 292; Davis, 355, 364; Rice, 699 Effect on other buyers Davis, 359 Excessive prices paid Standard for Lee, 268, 291 ; Rice, 699, 700 Denied Archbold, 516; Page, 757-759 Pipe lines — Rebates by railwavs on oil from certain Boyle, 424 Emery, 641; Rice, 695, 696 Railway rates increased to prevent competition with Monnett, 317; Rice, 739 Absorbed by means of discriminations Lockwood, 386, 388 National Transit Company, contract of 1881 with railways Rice, 701, 702 True character discussed Page, 759-763 Contract of 1884 Emery, 663-667; Rice, 702; Page, 759-763 Still in force Emery, 667 Reasons for Rice, 738, 739; Page,' 761 Amounts of rebates paid under contracts of 1881 and 1884 . . Rice, 701, 702 Purchase of oil (see also Luhrlcitling oil) — I'reference in purchase of refined oil by railways Davis, 359 Prices fixed by central railway officers Clark, 347 Rates — Tariff rates changed by numerous circulars, etc - Rice, 732 Changes made without warning to injure Standard's competitors, Rice, 719-727; Page, 769 Changes made for convenience of stocking up Rice, 719-727; Page, 769 INDEX STANDARD OIL COMBINATION. 1321 Railway discriminations and rebates— Continued. Rates — Continued. Page. Transcontinental Association, correspondence with Standard con- cerning Rice, 719-727; Page, 769 Excessive — Contract of pipe lines and railways for maintenance . . . Emery, 663-667 Existing from oil regions to seaboard Emery, 667 Risk of shipment of oil, estimated _ ^^'estgate, 378, 379; Rice, 716; Page, 769 Discrimination between places of shipment — Competitive points, disadvantage in rates from. Lee, 266; Monnett, 309, 316 Difference in rates for places at same distances Westgate, 374-377; Rice, 710 Rates from Standard shipping points lower Westgate, 375, 376 Rates not ranged to favor Standard shipping points Page, 768 Advantage of Standard from, nearer location Page, 770 Arbitrary rates discussed regardless of classifications and tariffs, Westgate, 374-377 Increase of rates to competitors' points, instances of Monnett, 322 New York and New England points, excessive rates. Westgate, 374—379 ; Page, 775-777 Through rates to New England points discontinued.. AVestgate, 374r-377 Reasons for, discussed Page, 776 Not due to influence of William Rockefeller Page, 777 Advantage of seaboard refineries in distributing to Eastern points. Page, 776, 777 New York, rates per ton per mile in Westgate, 375 Whiting, Ind. , lower rates on shipments from, referred to . . Monnett, 309 ; Rice, 731 Reasons for Page, 777, 778 Pacific coast, increase of rates to Westgate, 376 Long and short haul — Instances of discrimination in favor of terminal points .. Rice, 718, 719, 736-738 Stop-over privileges on ta,nks billed to terminal points Rice, 718 Refusal to give rates — Independent shippers refused rates Westgate, 374 ; Lock wood, 401 Independent shipments not solicited by railways .Westgate, 378 Fast freight lines refuse to handle independent oil Westgate, 374 Refusal of cars for carrying independent oil Emery, 648, 649 Receivers — „ „ Discriminations by, case of George Rice Rice, /06-^09 Remedies (See also Railvxiy discriminaiions in general index) — Competition possible under fair rates Lock wood, 385 ; Emery, 633 Fixed classification for oil advocated Westgate, 379 Courts afford no remedy Lockwood, 388, 389 Courts, charges against, unjustifiable Archbold, 553 Diflaculty of compelling testimony concerning Emery, 635 Books, compulsory production, demanded Westgate, 383 ; Emery, 643 Discriminations against Lockwood, 390, 401 ; Rice, 687-719 Discriminations by Southern railways up to 1888 Rice, 704, '10-716 Only between tank and barrel shipments ... Page, 765 "Please turn another screw" letter Rice, 705, 747, 748; Page, 763, 764 Manner of securing letter - -.- "^S^, 785 Cleveland and Marietta Railway case - - - Rice, 706-709 Discussed -- Archbold, 556-559 Referred to - r&ge, 793 Discriminations by Louisville and Nashville Railroad Rice, 704, 705 Discussed ^''^''d^^' III Forced to discontinue refining Rice, 7^9 Rates compared with barrel shipments— Oil in barrels formerly carried at same rate Rjce, 7Ib Rates per barrel lower than for barrel shipments Monnett, 229; ^ Lockwood, 388; Rice, 712, 734, 735 1322 THE INDUSTRIAL COMMISSION". INDUSTRIAL COMBINATIONS. Railway discriminations and rebates — Continued. Tank cars — Continued. Rates compared with barrel shipments — Continued. Page. Comparative rates stated Eice, 714, 715 Not specially in favor of Standard Page, 765 Order requiring same rates for barrels Page, 765, 789 Refusal of railways to obey Page, 789 .Justice of charghig for weight of barrels Page, 767 Standard ships largely in barrels Page, 765, 789 Difficulty of purchase by independent refiners Eice, 712 Eailways should be required to furnish to shippers Eice, 713 Injustice of requiring Page, 765 Comparative advantages to railways — Discussed Eice, 716, 717; Page, 765-767, 769 Relative quantity carried, as compared with box cars Page, 767 Risk of shipping oil by, relative Rice, 716, 717; Page, 769 Loading and unloading, comparative advantages. . . Rice, 717; Page, 767 Charge made for full capacity of car Page, 766 Miscellaneous discriminations — Discriminations in favor of Union Tank Line Company. . . Monnett, 299 Denied _ Archbold, 543 Reasons for returning free Page, 767 Weight of oil shipped by Standard underbilled Westgate, 873; Eice, 731 Denied Archbold, 550, 552; Page, 770-773 Weight of oil per gallon underestimated Eice, 732 IMethod of arriving at average weight Page, 766 Contents officially stated in handbook . . . Archbold, 551; Page, 766 Profits from mileage rate paid by railways Rice, 732 ; Page, 778-784 Deduction of 62 gallons in estimating freights Rice, 716 Reasons for Page, 766 Charge for weight of car where used for storage Eice, 718 Reasons for Page, 769 Accepted only where consignees have facilities for unloading Rice, 618, 719 Justification of _ Page, 769 Discriminations in favor of Standard's patent car Rice, 719 Justification of _ Page, 769 Stop-over privileges on oil billed to terminal points Rice, 718 Charges on cotton-seed oil lower than on petroleum Rice, 715, 716 Number owned by Standard and other owners Page, 779-781 * Union Tank Line Company, low profits Page, 779-781 Terminal facilities — Controlled by Standard Lockwood, 388 ; Rice, 698 Facilities and advantages given to Standard Monnett, 323 Allowances for loading and unloading oil Monnett, 299 Tidewater Pipe Line Company — Discriminations against Rice, 696, 697 Underbilling of tank cars — A\' eight of oil shipped by Standard underbilled AVestgate, 373; Eice, 731 Denied Archbold, 550, 552; Page, 770-773 Correct weight furnished by Standard Page, 774, 775 Underbilling by New Haven and Hartford Rice, 731 Explained as due to errors Page, 770-775 Shipments within the St.ite Page, 772-775 Kefineries and refining (see, also, Conipetivg Ti'jhici-iiv, Cost of refining, Eroiiomies) : Early establishment and numbers Boyle, 407; Emery, 603 Fuel, early high prices Boyle, 415, 418 Associations of refiners, early _ Boyle, 420 Processes, early discovei-y Boyle, 407 ; Emery, 624, 625 Methods of distillation and production, descrilicd Emery, 624, 625 Amount of refined oil from crude Emery, 626 Pennsylvania, superior advantages for loeatiou of Lee, 268; Emery, 649, 650 Production of refined oil and proportion by countries, 1897 Archbold, 567 Rice, George (see, also, under Iluilway discriiiiinntioiin) : Neg(iliatiiins Avith Standard for sale of property Archbold, 559; Rice, 749-754, 793; Page, 789 llxperiences in competition .• Rice, 704, 709, 711 INDEX STANDARD OIL COMBINATION. 1323 Rockefeller, Andrews & Flagler: Page. History of firm.. Wnio,.,, mft Seep Purchasing Agency : limery, 606 Methods and relation to Standard Bovle 436 446 South. Improvement Company: .' > . Organization — Early history Boyle, 421-42:-) Charter in Ml _ Emery, 607, 608 Repeal of charter Emery; 639 Extensive powers EmerV, 608 liailways, originated by Boyle 421 422 Officers interested in " _'_ _ Rice' 691 Relations to .standard Lockwood, 400; Emery, eOOrsVo"; Rice, 690^ 691 List of shareholders and holdings Emery, 61!); Rice, 690, 691 Discriminations and rebates — Described Lee, 283; Lockwood, 385, 400; Rice, 689-695 Contract with Pennsylvania Railroad in full Emery, 610-615 Signature of contrai't Eiiier-s' 618 Contract never operative An ■iibold, 54b; 560 Amoimt of rebates on shipments of competitors Rice, 694, 695 Agreement of railways to protect from competition Lockwood, 385; Emerv, 616; Rice, 691 Impossible for others to obtain equal advantages Emery, 61(i Result--— ^ Protest of producers against Emery, 639 Petroleum Produeers' Unii m, report concerning Emery, 639 Crude oil, prices depressed ) )y Lee, 283 Contract of railways with producers n(jt to discriminate Lockwixjd, 401; Emery, 640; Rice, 693 Violation of this agreement _ Emery, 641 , 642 Standard did not continue methods of Archbold, 540, 553, 560 Speculation. (See Crude oil, xjieculallon.) Standard Oil Company., history, organization, etc. : Standard Oil Company of Ohio — Organization, capital jMonnett, 299 Incorporation and early history Emery, 606; Rockefeller, 795 Railway officers interested in Emery, 606 Dividends, accumulations and depreciation of property. . . jMonnett, 302, 303 Stock certificate, form of Monnett, 320 Tank cars, sale of _ _ Monnett, 302 Entrance into Standard Oil Trust Monnett, 300 Standard Oil Company of Pennsylvania — Original shareholders of _ . Emery, 619 Standard Oil Trust- Corporations and firms entering Monnett, 300 Capitalization — Actual value basis of trust certificates Monnett, 300 Excessive prices paid for refineries purchased Emery, 630 Valuation of plants entering, method Monnett, 300 Organization described Dodd, 799 Trust agreement in full 1220-1228 Trust certificates — Amount issued, referred to Archbold, 543; Dodd, 799 Large proportion still outstanding Monnett, 303, 307 Amount outstanding and value Archbold, 574, 575 'V'alue, present, according to income Monnett, 309 Trustees — Stock assigned to Monnett, 300 Names of original - Monnett, 301 Term of office Monnett, 301 Trust certificates, more than half owned by Monnett, 307 Constituent companies, controlled by INIonnett, 307 Rockefeller, controlled by Monnett, 307 Existing organization — Description — Present form described Archbold, 574,575 Constituent companies and their relation to trust Monnett, 301, 307, 308, 322 1324 THE INDUSTRIAL COMMISSION: INDUSTRTAT, COMBINATIONS. Standard Oil Company, history, organization, etc. — Cc^iicmued. Existing organization — Continued . Description — Continued. Page. Harmony preserved despite dissolution of trust Archbold, 574 Ohio organizations belonging to combination Monnett, 298, 299 Transfer of trust certificates for stock in companies, form . Monnett, 320 Conversion into stock chiefly by large holders Monnett, 307 Fractional shares receive no dividends, reasons Monnett, 307; Rogers, 583, 587 New Jersey corporation, new, character of Archbold, 574, 575 Articles of incorporation 1228 Rockefeller, J. D., control of trust and constituent companies by. - Monnett, 307 Capitalization — Amount and value of stocks Archbold, 575, 576: Boyle, 480; Monnett, 301; Dodd,,799 Dividends — Amount paid since 1882 Rice, 688, 689, 754; Dodd, 799 Standard Oil Company of Ohio, amount of Monnett, 302 Amount of each since 1892 Monnett, 308 Constituent companies, statement of dividends, 1897 Monnett, 302 Form of resolution declaring on trust certificates Monnett, 308 Stocks — Holdings of Archbold, 538, 575 Value of Monnett, 301; Boyle, 480; Archbold, 575, 579; Rice, 754 Not subject to speculation Archbold, 575 Managers have not speculated in A rchbold, 575 Suits and prosecutions against combination: Books and records — Burning of, Ohio suits Monnett, 303-306 Denied Archbold, 543 Refusal to produce, Ohio suits Monnett, 306, 307 Pennsylvania Railroad, production in Logan, Emery & Weaver case Emery, 635, 669 Bribery of court officers — Alleged Monnett, 313, 316 Denied Archbold, 544 Testimony — Difficulty of securing Clark, 345 Difficulty of proving railway discriminations -.. Emery, 634, 635; Rice, 705 Refusal to answer questions Monnett, 298, 314, 315; Lock wood, 385 Witnesses should not be held to incriminate themselves Monnett, 315 Specific suits — Commonwealth v. Pennsylvania Railroad, referred to Emery, 660 Despeaux r. Pennsylvania Railroad, testimony referred to... Rice, 700-703; Page, 759-763 Commonwealth v. John D. Rockefeller, referred to Emery, 662 Logan, Emery & Weaver, case of, summarized Emery, 633-635, 669 Ohio V. Standard Oil Company, of Ohio, suit described Monnett, 297, 298, 303-307 Present status Monnett, 314, 315 Injurious to interests of State Archbold, 543 Producers' Protective Union, suits against Standard Boyle, 428 Rice, George — Payment of counsel against the Standard Company, by. . Archbold, 561 Suits regarding discriminationsm Archbold, 556-558;, Rice, 707-710, 715 Tariff: Canada, amount and effects _ _ Gall, 680, 682 Proposal to remove on monopolistic articles Gall, 686 No oil imported into United States Lee, 295 Taxation: Internal-revenue tax on oil — History Boyle, 412, 417 Deprecated Boyle, 417 Tests of oil. (See Qiia/iti/.) INDEX STANDARD OIL COMBINATION. 1325 Tidewater Pipe Company: Page. Railway discriminations against Rice 696 697 Value of stock Boyle' 480 Turpentine : Gasoline mixed with Clark 331 TT ■ nP^'j'^i': Mathews Union Tank Line Company (see also Railway discriminnlions) : Nature and working Monnett, 299 Tank cars referred to Monnett, 302, 303 Discrimmations in favor of Monnett 299 Denied Archbold, 550,"552;" Page, 778' 786 Excessive profits from mileage Rice, 732 Low rate of profits .■■■.'." 'page, 779^ 784 Mileage from railways sole source of income Page, 784 Belation to Standard Page, 781-784 TJnited States Pipe Line Company: Purpose of organization Archbold, 507 Advantages to refiners and producers Lee, 265 Failure to pay_ dividends Boyle, 443 Relation to Producers and Refiners' Oil Company Boyle, 462, 463, 471 Standard Oil Company, relation to ". Archbold, 529 Purchase of stock by Lee, 270; Westgate, 370, 382; Archbold, 529, 577; Phillips, 590; Emery, 656 Representation of Standard on board Emery, 656 Voting trust, reasons for forming Emery, 656 Contract in full Archbold, 507, 508 Opposition of Standard and railways to laying of pipes Lee, 264, 267 ; Lockwood,397; Boyle, 445, 474, 475; Archbold, 529 ; Phillips, 593; Emery, 650-655, 659 Philadelphia, necessity of building to Emery, 662 Freight rates from terminus to New York Archbold, 529, 530; Emery, 655 Vacuum Oil Company: Matthews case, suits against, described Archbold, 554, 556 Vandergrift & Porman Company: Relation to early pipe lines Boyle, 426 Wages. (See Labor!) Water transportation: Early methods Boyle, 410 Competition possible because of Lee, 269 Canada, Standard employees for shipment to Gall, 683 Relation of Standard and independents to Monnett, 319 Competition lowers rates Monnett, 316 o