ROCKEFELLER, JOHN DAVISON (1839-1937), American capitalist, born at Richford, N.Y., July 8, 1839. When he was 14 years old the family moved to Cleveland, Ohio, where he attended the public school and then became an assistant book keeper (1855) in a commission house, earning $50.00 the first three months. Soon he was advanced to $25.00 per month and by 1858 he had saved enough to become a partner in a produce commission firm. In 1862 he and his partner had $4,000 to invest together with Samuel Andrews, inventor of a more economical process for cleaning crude oil, in an infant business which was beginning to be spoken of as "oil refining." In 1867 the firm of Rockefeller and Andrews became Rockefeller, Andrews and Flagler, and by Jan., 1870, the partners did about one-fifth the refining business of Cleveland, then the chief oil refining city in America. In that month, together with his brother William, Stephen V. Harkness and other associates, he organized and be came president of the Standard Oil Company. The capitalization was $1,000,000 in io,000 shares of which John D. Rockefeller held 2,667 and the firm of Rockefeller, Andrews and Flagler 1,000 shares. This corporation under Rockefeller's leadership was within ten years to establish itself as the most important factor in the petroleum industry in America.
When Rockefeller entered the oil industry it was in a highly chaotic state, subject to ruthless competition between local com panies of small means, subject to disastrous fires, the uncertainties of drilling, wildcat financing, and, finally, to a totally unsystematic control of production and distribution. To group all units of the industry under one leadership and to use their combined strength and control to bring about economies and improvements, to control supply and stabilize prices, was Rockefeller's dream. His success was to have far-reaching results, for the Standard Oil Company was the first great American combination to be con spicuously successful, and served by its example to further the trend toward consolidation and monopoly.
The spectacular advance of Standard Oil to supremacy was initiated with the aid of the South Improvement Company, an association of leading refiners, formed in 1872. These associates prevailed upon the Pennsylvania, Erie, and New York Central railways to grant 25-5o% rebates on all oil shipped for members of the association, and, in addition, to give "drawbacks" on all oil transported for competitors. With this effective mechanism for
suppressing competition the other refiners in Cleveland were approached and urged to sell, being offered in payment their choice of either cash or Standard Oil stock. Of the 26 companies in the city 21 accepted the offer. Although public opinion forced the railways to repudiate their agreement within three months, the important object was already obtained with the Standard in possession of the Cleveland refineries, and Rockefeller now master of about one-third of the refining business of the country. By 1875 fhe large refineries in New York, Philadelphia and Pitts burgh had likewise merged their identity with Standard Oil and by 1878 Rockefeller had control of over 90% of the refineries in the United States. He next concentrated on the marketing machinery, acquiring control of companies which were marketing oil, acquiring oil terminals in the chief cities, and gathering up, one after another, the pipe lines which were being laid down by competitors in the hope of defeating his hold on the railways.
The dissolution of the South Improvement Company in 1872, incident to a Congressional investigation and popular protest, necessitated a new form of organization to achieve unified con trol. The Central Association of Refiners was organized in 1875, but Rockefeller wanted a tighter form of organization for the sake of greater security. His form of organization was a mystery until revealed by an investigation of the New York State senate in 1888. The inquiry revealed that 39 corporations, with property in many different States, which had varying laws to curb corpora tions, had turned over their stock and the right to control it to an organization having no legal existence, a "trust," consisting of nine "trustees," who had united to do things no incorporated com pany could do. "This," wrote the committee, "is the original `trust.' " The word had become common in 1882, about three years after the device had been adopted by the Standard Oil Company. When formed, the Standard Oil Trust was capitalized at $70,000,000, which was subsequently increased to $102,233,700. In 1892 the Ohio Supreme Court declared the Standard Oil Trust illegal, but it was not dissolved until 1899. The Standard interests were then reorganized as the Standard Oil Company of New Jersey, but in 1911 the U.S. Supreme Court declared this com bination a violation of the Sherman Anti-trust Act and ordered its dissolution.