SYMPATHETICAL CO-OPERATION
Some day, perhaps, when more of our story-readers have learned that
there are things in the world quite as important as the frets, follies,
and loves of boys and girls half-grown, more of our story-tellers will
hold their magic mirror up to the full-pulsed life with which mankind
throbs through the laboring years that stretch along after the short
fever of mating is over. George Rice, coming from the Green Mountains
of Vermont, entered the oil business twenty-nine years ago, when he and
it were young. He was one of the first comers. Beginning as a producer
in the Pithole region, in the days of its evanescent glory, in 1865,
he prospered. Escaping the ruin which overtook those who stayed too
long in that too quick sand, he was one of the first to develop the new
field at Macksburg, Ohio, and to see the advantages of Marietta, on the
Ohio River, as a point for refining. Crude oil could easily be brought
from Ohio and Pennsylvania by barge down the Ohio River. The field he
entered was unoccupied. He drove no one out, but built a new industry
in a new place. In 1876 he had risen to the dignity of manufacturer,
and had a refinery of a capacity of 500 barrels a week, and later of
2000 barrels. Owning wells, he produced, himself, a part of the crude
which he refined. His position gave him access to all the markets by
river and rail. Everything promised him fortune. His family took hold
with him in the work of bread-winning. "The executive part of the
business is done altogether by my family," he says. "One daughter keeps
the books, another daughter does nine-tenths of the correspondence, and
my son-in-law is the general manager."[358] One of the daughters was
a witness in one of her father's cases before the Interstate Commerce
Commission. "She discussed with counsel," said the New York _World_,
"the knotty points involving tank-car rates, mileage, rebates, and the
long and short haul as familiarly as any general freight agent present."
Several other refiners, seeing the advantages of Marietta, had settled
there. They who elected themselves to be trustees of the light of the
world, thus having the advantages of the place pointed out to them by
practical men, determined that Marietta must be theirs. They bought up
some of the refiners. Then they stopped buying. Their representative
there, afterwards a member of the trust, "told me distinctly that
he had bought certain refineries in Marietta, but that he would not
buy any more.... He had another way," he said, "of getting rid of
them."[359] Of these "other ways" the independents were now to have a
full exposition. In January, 1879, freight rates on oil were suddenly
and without previous notice raised by the railroads leading out of
Marietta, and by their connections. Some of the rates were doubled. The
increase was only on oil. It was--in Ohio--only on oil shipped from
Marietta; it was exacted only from the few refiners who had not been
bought, because there were "other ways of getting rid of them."[360]
This freight-tariff attack on the independent refiners was arranged by
their powerful rival and the railroad managers at a secret conference,
as the latter admitted.
"Did you have any consultation or invite consultation with other
manufacturers of oil at Marietta?"
"No, sir."[361]
When the representatives of the combination in this market were taxed
by a dealer with getting the benefit of this manipulation of freight,
"they laughed." All the railroads took part in the surprise. Curiously
enough, the minds of the managers of a dozen roads acted simultaneously
and identically, over thousands of miles of country--some, as they
admitted, with suggestion, and some, as they testified, without
suggestion--upon so precise a detail of their business as the rates
on oil at one little point. "I did it at my own instance," said the
freight agent of the Baltimore and Ohio. Freight officials of railways
as far apart east, west, and south, and in interest, as the Baltimore
and Ohio, and the Pennsylvania, and the Lake Shore, which had no direct
connection with Marietta, and reached it only over other lines, stopped
their "wars" to play their part in the move by raising the rate on oil
only, and, most remarkable of all, to a figure at which neither they,
nor the railroad connecting them with Marietta, nor (and this was the
game they were gunning for) the independent refiners could do any
business. From other points than Marietta, as Cleveland, Parkersburg,
Pittsburg, and Wheeling, where the combination had refineries, but the
Marietta independents had none, the railroads left the former rates
unchanged.[362]
Rice was "got rid of" at Columbus just as effectually as if Ruskin's
"Money-bag Baron," successor of "the Crag Baron," stood across the road
with a blunderbuss. His successful rival had but to let its Marietta
refineries lie idle, and transfer to its refineries at Wheeling its
Marietta business--and Rice's too. By the pooling of the earnings
and of the control of all its refineries--the essential features of
the combination--its business could be transferred from one point
to another without loss. One locality or another could be subjected
to ruinous conditions for the extermination of competitors, and the
combination, no matter how large its works there, would prosper without
check. It gets the same profit as before, but the competitor by its
side is ruined. All its refineries along a given railroad can be closed
by high rates made to "overcome competition," but profits do not cease.
Their business is done elsewhere by its other refineries, and all the
profits go into a pool for the common benefit.
From Rice's point of view, Marietta was the storm-centre; but the
evidence before the Ohio Legislative Investigation of 1879, before the
Legislative Committee of New York of 1879, before Master in Chancery
Sweitzer in Pennsylvania, and in the suit against the Lake Shore
Railroad, showed that the low barometer there was part of a disturbance
covering a wide area. The demonstration against the independent
refiners of Marietta was only part of a wider web-spinning, in which
those at all points--New York, Boston, Philadelphia, Pittsburg, Oil
City, Titusville, Buffalo, Rochester,[363] and Cleveland--were to be
forced to "come in" as dependents, or sell out, as most of them did.
That rates were not raised from points controlled by the combination
is only part of the truth. At such places rates were lowered. This,
like the increase of rates, was done at a secret conference with the
oil combination and at its instance.[364] Where it had refineries the
rates were to be low; the high rates were for points where it had
competitors to be got rid of without the expense of buying them up. The
independents knew nothing of the increase of freights prepared for them
by the railroad managers and their great competitor until after, some
time after, it had gone into effect.
The railroad company gave notice to their rivals what the rates were
to be, but withheld that information from them.[365] That was not all.
Before the new rates were given all the old rates were cancelled. "For
a few days," said an independent, "we could not obtain any rates at
all. We had orders from our customers, but could not obtain any rates
of freight."
As to many places, the withholding of rates continued. "There's many
places we can't obtain any rates to. They just say we sha'n't ship to
these other places at any price."[366]
When the Ohio Legislature undertook to investigate, it found that the
railroad men professed a higher allegiance to their corporations than
to the State. They refused to answer the questions of the committee,
or evaded them. "I am working under orders from the general freight
agent," said one of them, "and I don't feel authorized to answer that."
The arguments of the committee that the orders of an employer could not
supersede the duty of a citizen to his government, or the obligations
of his oath as a witness, were wasted. "I will tell you just how I
feel," said the witness to these representatives of an inferior power.
"I am connected with the railroad company, and get my instructions from
the general agent, and I am very careful about telling anybody else
anything." The Legislature accepted the rank of "anybody else" to which
it was assigned, and did not compel the witness to answer.
To a question about the increase in freight: "I object," said another
railroad officer, "to going into details about my own private
business."[367]
One peculiar thing about the action of the railroads was that it was an
injury to themselves. The Baltimore and Ohio, for instance, by raising
its rate, cut off its oil business with Marietta entirely. "What
advantage is it, then?" the freight agent of the road over which the
Baltimore and Ohio reached Marietta was asked.
"There is no advantage.... We had revenue before this increase in
rates, and none since."
"What would be the inducement for her (the Baltimore and Ohio) to do
it, then?"
"That is a matter I am not competent to answer."[368]
The railroad men testified positively that the increase affected all
alike at Marietta. It was supposed even by those who thought they saw
to the bottom of the manoeuvre that the combination would close its
Marietta works temporarily, in order to seem to be equally affected
with all the rest. It could do this with no loss whatever, since, as
explained, no raise in rates had been made from Wheeling, Parkersburg,
Pittsburg, Cleveland, where it was practically alone, and it could
reach all its customers from those places as well as from Marietta. But
the combination kept on filling orders from its refineries at Marietta
at the old freight rates, while by its side the men it was hunting down
sat idle because the discriminating rates of freight made it impossible
for them to use the highways. It was so careless of appearances
that oil ordered of its works at Parkersburg would be sent from the
Marietta branch,[369] and at the old rate of 40 cents, while the other
refineries could not ship because the rate to them was 65 cents; the
increase at Marietta was not enforced against it, but only against the
three independents--just as planned in the South Improvement scheme.
The move was far-reaching--as far as Chicago, the rate to which was
made $1.20 a barrel, instead of 90 cents a barrel.
"Then they cut you off from the Western trade as well as this State?"
"Yes, sir; almost entirely.... I was selling in Chicago, and it cut
trade entirely off."[370]
"Before the rates were changed did you run to your full capacity?"
"Yes, sir; about that."[371]
At one stroke the independents lost the business which it had cost them
years of work to get. As the testimony of witness after witness showed,
the merchants who had been their customers in Chicago, Columbus, and
other places, now had to send their orders to those for whose benefit
the railroad men had raised the rates. This sweeping change was not due
to any change in their desire to sell, or of their old customers to
buy. They could still make oil which was still wanted. But they were
the victims of a competitor who had learned the secret of a more royal
road to business supremacy than making a better thing, or selling it
at a better price. Their better way was not to excel but to exclude.
When their "secretary" was called before the Ohio Legislature, after
this freight ambuscade had transferred the bulk of the business of
the independent refineries at Marietta to him and his associates, he
declared that the sole cause of their success was the "large mechanical
contrivances" of the combination, its "economy," and its production of
the "very best oil." "With an aggregation of capital, and a business
experience, and a hold upon the channels of trade such as we have, it
is idle to say that the small manufacturer can compete with us; and
although that is an offensive term, 'squeezing out,' yet it has never
been done by the conjunction of any railroads with us."[372]
The small manufacturer did compete and flourish until these railroad
men literally switched him out of the market. He competed and got his
share of the business, until the men who wanted monopoly, finding that
they had no monopoly of quality or price or business ability, resorted
to the "large mechanical contrivance" of inducing the managers of
the railroads to derail the independent, throwing him off the track
by piling impassable freight tariffs in his way. The successful men
secured their supremacy by preventing their competitors from entering
the market at all. Instead of winning by "better" and "cheaper," they
won by preventing any competitor from coming forward to test the
questions of "better" and "cheaper." Their method of demonstrating
superiority has been to prevent comparisons.
All the independent refiners at Marietta, except Rice, died. "Most of
those we received from have gone out of the business," a Cincinnati
dealer told the Legislature. Some had fled; some had sold out.[373]
Rice set himself to do two things: the first, to drag into the light
of day and the public view the secrets of these "better methods"; and
the second, to get new business in the place of what he had lost. He
succeeded in both. It was in January that he had notice served upon him
that he could no longer go to market. In two months he had the Ohio
Legislature at work investigating this extraordinary administration of
the highways. This was a great public service. It did not yield the
fruit of immediate reform, but it did work which is the indispensable
preliminary. It roused the people who were still asleep on these new
issues, and were dreaming pleasant dreams that in George III. they had
escaped from all tyrants forever, and that in the emancipation of the
blacks they had freed all slaves forever.
Rice knew that the Legislature were planting trees for posterity, and
did not wait for help from them. He set about looking up markets where
the public were free to choose and buy. He could not go West or East or
North. He went South. The little family kept the refinery at Marietta
running, and the father travelled about establishing new agencies in
the South, and studying freight tariffs, railroad routes, and terminal
facilities for loading and unloading and storing. In 1880, through all
the storm and stress of these days, he was able to double the capacity
of his refinery. Again he succeeded in building up a livelihood, and
again his success was treated as trespass and invasion. His bitter
experience in Ohio in 1879 proved to be but an apprenticeship for a
still sterner struggle. Rice was getting most of his crude oil from
Pennsylvania, through a little pipe line which brought it to the
Alleghany. The pipe line was taken up by the oil trust.[374]
This compelled him to turn to the Macksburg, Ohio, field for most of
his petroleum. He had one tank-car, and he ran this back and forth
faster than ever. Then came the next blow. The railroad over which he
ran his tank-car doubled his freight to 35 cents a barrel, from 17-1/2.
That was not all. The same railroad brought oil to the combination's
Marietta refineries at 10 cents a barrel, while they charged him 35.
That was not all. The railroad paid over to the combination 25 cents
out of every 35 cents he paid for freight. If he had done all the oil
business at Marietta, and his rival had put out all its fires and let
its works stand empty, it would still have made 25 cents a barrel on
the whole output. Rice found a just judge when he took this thing into
court. "Abhorrent," "dangerous," "gross," "illegal and inexcusable
abuse by a public trust," "an unparalleled wrong," are the terms in
which Judge Baxter gave voice to his indignation as he ordered the
removal of the receiver of the railroad who had made this arrangement
with the combination, to enable it, as the judge said, "to crush Rice
and his business."[375]
In an interview, filling four columns of the New York _World_ of March
29, 1890, the head of the trust which would receive this rebate is
reported to have made this attempt to reverse the facts of this and
similar occurrences: "The railroad company proposed to our agent,"
he said. But the judge who heard all the evidence and rendered the
decision, which has never been reversed or impaired, declared that it
"compelled" the railroad to make the arrangement, "under a threat of
building a pipe line for the conveyance of its oils and withdrawing its
patronage." This arrangement was negotiated by the same agent of the
oil combination who engineered the similar "transfer" scheme by which
the trunk-line railroads gave it, in 1878, 20 to 35 cents a barrel out
of the freights paid by its competitors in Pennsylvania, as already
told.[376]
"I reluctantly acquiesced," the receiver said, writing in confidence
to his lawyer, anxious lest so acquiescing he had made himself legally
liable. The interview describes the arrangement as an innocent thing:
"A joint agreement for the transportation of oil." It was an agreement
to prevent the transportation of oil by anybody else. Judge Baxter
shows that it was a joint agreement, procured by threats, for the
transportation of "$25 per day, clear money," from Rice's pockets into
the pockets of the members of the trust for no service rendered, and
without his knowledge or consent, and with the transparent purpose of
transporting his business to their own refineries. Judge Baxter called
it "discrimination so wanton and oppressive it could hardly have been
accepted by an honest man, and a judge who would tolerate such a wrong
or retain a receiver capable of perpetrating it, ought to be impeached
and degraded from his position."[377]
This matter was also passed upon by the Select Committee of the United
States Senate on Interstate Commerce. "No comment," the committee say,
"is needed upon this most impudent and outrageous proposition"--by the
oil company to the railroad.[378]
"Are you going to deny that story?" a great American statesman of the
latter-day type was asked by one of his friends.
"Not I," was the reply. "The story's false. When you find me taking the
trouble to deny a thing, you can bet it's true!"
This "agreement for the transportation of oil" had its calculated
effect. It put a stop to the transportation of oil from the Ohio field
by Rice over the railroad, just as the destruction by the same hands
of the pipe line to the Alleghany had cut him off from access to the
Pennsylvania oil-fields. He then built his own pipe line to the Ohio
field. To lay this pipe it was necessary to cross the pipe line of his
great rival. Rice had the pluck to do this without asking for a consent
which would never have been given. His intrepidity carried its point,
for, as he foresaw, they dared not cut his pipe for fear of reprisals.
In turning to the South, after his expulsion from the Ohio and Western
markets, the Marietta independent did but get out of one hornet's
nest to sit down in another. His opponent was selling its oil there
through a representative who, as he afterwards told Congress, "was very
fortunate in competing." He thought it was "cheaper in the long-run to
make the price cheap and be done with it, than to fritter away the time
with a competitor in a little competition. I put the price down to the
bone."[379] Rice, in the South, ran into the embrace of this gentleman
who had the "exclusive control" of that territory, and whose method of
calling the attention of trespassers to his right was to cut them "to
the bone." The people and the dealers everywhere in the South were glad
to see Rice. He found a deep discontent among consumers and merchants
alike. They perhaps felt more clearly than they knew that business
feudalism was not better, but worse, because newer, than military
feudalism. This representative of the combination assured Congress
that "99.9 of all the first-class merchants of the South were in close
sympathetical co-operation with us in our whole history"--that is, out
of every hundred "first-class merchants" only one-tenth of one merchant
was not with them. This is a picturesque percentage.
Rice's welcome among the people would not verify his opponent's
estimate that his vassalage included all but one-tenth of one dealer
in every hundred. From all parts came word of the anxiety of the
merchants to escape from the power that held them fast. From Texas:
"Most of our people are anxious to get clear." From Arkansas: "The
merchants here would like to buy from some other." From Tennessee: "Can
we make any permanent arrangement with you by which we can baffle such
monopoly?" From Kentucky: "I dislike to submit to the unreasonable
and arbitrary commands." From Mississippi: "It has gouged the people
to such an extent that we wish to break it down and introduce some
other oils." From Georgia, from different dealers: "They have the
oil-dealers in this State so completely cooped in that they cannot
move." "We are afraid."[380] As Rice went about the South selling oil
the agents of the cutter "to the bone" would follow, and by threats,
like those revealed in the correspondence described below, would coerce
the dealers to repudiate their purchases. Telegrams would pour into
the discouraged office at Marietta: "Don't ship oil ordered from your
agent." "We hereby countermand orders given your agent yesterday." One
telegram would often be signed by all the dealers in a town, though
competitors, sometimes nearly a dozen of them, showing that they were
united by some outside influence they had to obey.[381]
Where the dealers were found too independent to accept dictation,
belligerent and tactical cuts in price were proclaimed, not to make
oil cheap, but to prevent its becoming permanently cheaper through
free competition and an open market. Rice submitted to Congress
letters covering pages of the Trust Report,[382] showing how he had
been tracked through Tennessee, Missouri, Nebraska, Georgia, Kansas,
Kentucky, Iowa, Mississippi, Louisiana, Texas, Arkansas, Alabama.
The railroads had been got to side-track and delay his cars, and the
dealers terrorized into refusing to buy his oils, although they were
cheaper. If the merchants in any place persisted in buying his oil
they were undersold until they surrendered. When Rice was driven out
prices were put back. So close was the watch kept of the battle by the
generals of "co-operation" that when one of his agents got out of oil
for a day or two, prices would be run up to bleed the public during
the temporary opportunity. "On the strength of my not having any oil
to-day," wrote one of Rice's dealers, "I am told they have popped up
the price 3-1/2 cents."[383]
The railroad officials did their best to make it true that "the poor ye
have with you always." By mistake some oil meant for the combination
was delivered to Rice's agent, and he discovered that it was paying
only 88 cents a barrel, while he was charged $1.68, a difference of 80
cents a barrel for a distance of sixty-eight miles.
"Could you stand such competition as that?"
"No, sir. Before that I went up there and sold to every man in the
place nearly. They were glad to see me in opposition.... I lost them,
except one man who was so prejudiced that he would not buy from them."
"Your business had been on the increase up to that time?"
"Increasing rapidly.... I haul it in wagons now forty miles south of
Manito."
"The rates against you on that railroad are so high that you can for
a distance of forty miles transport your oil by wagon and meet the
competition better than you can by using their own road?"
"Infinitely better."[384]