Here is evidence of how the Standard Oil Com pany's secret agreements with the railroads made it the interest of the latter to decrease the shipments of independent oil by refusing to furnish adequate cars and by delaying delivery. In 1878 Mr. W. H. Nicholson, the representative of Mr. Ohlen, a New York shipper of petroleum, appeared before an investigation ordered by the Secretary of Internal Affairs of the State of Pennsylvania and gave evidence upon oath that he began to have a difficulty in getting cars in May of that year. One day, he stated, Mr. Ohlen telegraphed to the officials of the Erie road to know if he could get 100 cars to run east. The reply came back, " Yes." About noon Mr. Nicholson saw Mr. O'Day, the manager of the United Pipe Lines (Standard Oil property), in which his oil was stored, and told him he was waiting to have his cars loaded. Mr. O'Day at once said he could not load the cars. " But I have an order from the Erie officials giving me the cars," Mr. Nicholson objected. " That makes no difference," O'Day replied ; " I cannot load cars except upon an order from Pratt." Nor would he do it. The cars were not loaded for Mr. Nicholson, though at the time he had 10,000 barrels of oil in the United Pipe Lines and an order for 100 cars from the officials of the Erie in his hand. " Pratt," of course, was the late Mr. Charles Pratt, whose refinery was at this time merged in the Standard combine, and whose name is memorialised in this country by the well-known " Pratt's motor spirit." High-handed proceedings of this sort by the Pennsylvania Railroad gradually created such a hubbub that the State of Pennsylvania instituted a suit against it. This is the evidence given by Mr. B. B. Campbell, President of the Producers' Union, on the occasion :— I never heard of a scarcity of cars until the early part of June, 1878. I came to Parker (a town in Pennsylvania) about five o'clock in the evening, and found the citizens in a state of terrible excitement. The Pipe Lines would not run oil unless it was sold ; the only shippers we had in Parker of any account, viz., the agents of the Standard Oil Company, would not buy oil, stating that they could not get cars ; hundreds of wells were stopped to their great injury ; thousands more, whose owners were afraid to stop them for fear of damage by salt water, were pumping the oil on the ground. . . . On Saturday morning I spoke very plainly to Mr. Shinn (Vice-President of the Allegheny Valley Railroad Company, controlled by the Pennsylvania), telling him that the idea of a scarcity of cars on daily shipments of less than 80,000 barrels a day was such an absurd, barefaced pretence that he could not expect men of ordinary intelligence to accept it, as the preceding fall (aniglice, autumn), when business required, the railroads could carry day after day from 50,000 to 60,000 barrels of oil. . . . I requested him to be the vehicle of communicating to the Pennsylvania Railroad officials my views on the subject, telling him that I was convinced that, unless immediate relief was furnished and cars afforded, there would be an outbreak in the Oil Regions. . . . On the next Monday I returned to Parker. After passing Redbank, where the low-grade road, the connecting-link between the Valley Road and the Philadelphia and Erie Road, meets the Valley Road—between that point and Parker—the express train was delayed for over half an hour in passing through hundreds of empty oil care I " In August, 1872, Mr. Rockefeller, as the result of much plotting and planning, succeeded in persuading about four-fifths of the refining interest in the United States to go into a National Refiners' Association, with himself as president, the object being to checkmate the Petroleum Producers' Union, which had just exposed the South Improvement Company. This refiners' association was to operate on what was known as the " Pittsburg Plan "—so called from the place where the scheme was first organised—according to which all the refineries were subject to a central board. They were to refine only such an amount as the board allowed, not to undersell prices fixed by the board, and to leave their buying of crude oil and the arrangements for transportation entirely in the hands of the board. In the aggregate they would thus form a company, presided over by one central board ; their parti cipation in this company would be expressed in terms of stock, and each stockholder would receive dividends whether his plant operated or not. It was, in short, the germ of a " Trust," with Mr. Rockefeller as trustee. The refiners had put their heads into the lion's mouth with a vengeance.
The Petroleum Producers' Union was up in arms at once to protect the price of crude, and made an heroic effort to do so by restricting output. They also set up a producers' selling agency to cut out the Refiners' Association by refusing to sell it oil except at their own price.
They were no match in generalship, however, for Mr. Rockefeller, especially when aided, as he was, by the hand of Nature. Nature was unkind enough to send the producers " gushers " with floods of oil when they wanted it least, and they found restriction of output practically impossible. At the same time most of the producers were badly in want of ready cash, and the Refiners' Association had the longer purse.
At the psychological moment Mr. Rockefeller struck the judicious blow of offering to throw in his lot with the producers and buy crude only from the Producers' Selling Agency (and that at $4.75 a barrel, a clear dollar over the then current market price), if the producers on their part would undertake to maintain the price and sell to no one outside the Refiners' Association. The coup succeeded, and, half tempted, half constrained by cash necessities, the producers were ill-advised enough to trust their enemy and sign what was known as " The Treaty of Titusville " on the lines proposed. They at once
received an order from Mr. Rockefeller for 200,000 barrels of crude at $3.25, not quite as good a price as that first mentioned, but which, under the circumstances, they were glad to accept. The " treaty " was signed on December 19, 1872. The producers had shipped about 50,000 of the barrels ordered by Mr. Rockefeller, when, on January 14, 1873, they were suddenly electrified to hear that that gentleman refused to take any more of the contract oil ! When taken to task Mr. Rockefeller urged in his defence the pitiful plea that the producers had not kept their part of the contract by limiting the supply of oil. It was true that the Producers' Union was pledged by its own internal organisa tion to limit the supply of crude, but no such stipulation appeared in the contract signed by it with the Refiners' Association. It was its own domestic arrangement. Had the matter been taken to court it is difficult to see how an alleged verbal understanding could have prevailed against a written contract. But no such step was taken. The Producers' Union collapsed in utter demoralisation and never made another united effort for the next five years. The Refiners' Association also found itself unable to keep up the internal discipline it had imposed upon itself. It dissolved in June, 1873, and Mr. Rockefeller was left sole master of the situation. He had outgeneralled everybody.
In 1874 the Erie, Central, and Pennsylvania Railroads entered into a combination with certain of the pipe lines, to the effect that equal rates should be charged by both the railroads and the pipe lines in the combination. The railroads were to starve out the indepen dent pipe lines by refusing them the advantages given to the United Pipe Lines. Both railway freights and pipage rates were to be raised simultaneously, and on such a schedule that henceforth the cost of transport would be equal to all refiners, on crude and refined, from all points ! This combination was an nounced curtly by a private circular sent out by James H. Rutter, freight agent of the New York Central, containing the paragraph : You will observe that under this system the rate is even and fair to all parties, preventing one locality taking advantage of its neighbour 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 satis fied. This scheme does it, and we trust will work satisfactorily to all.
The refiners and shippers referred to as com placently as if they formed the bulk of the refining and shipping interest were, of course, Mr. Rockefeller and his friends, assumed for the nonce, as in the case of the South Im provement Company, to be " the trade." This astounding circular, commonly referred to in American Trust history as the Rutter circular, introduces us to the second species of unjust discrimination enjoyed by Mr. Rocke feller, and perhaps—of late years, at any rate— with an even more disastrous effect than that of the secret rebate—namely, the " discriminatory rate." In some cases the discriminatory rate was secret, in others published. The Rutter circular projected the idea into a sort of quasi publicity as an ostensibly fair one. The brief for the Government in the pending appeal by the Standard Oil Company of New Jersey against the Missouri judgment characterises these discriminatory rates as follows :— The testimony in this case will show that in the open pub lished rates, as well as in secret and unfiled rates, there was radical discrimination against the independent shipping points and in favour of the Standard shipping points. . . . It is impossible that without connivance with the Standard Oil Company the railroads of this country should have uniformly made a system of rates whereby with scarcely an exception the independent shipping points were discriminated against in favour of the Standard shipping points. . . . It is a well-known fact that this group of defendants is the most influential in financial circles in the United States. This influence has un doubtedly been used to obtain these preferential rates,:because it could not be possible that it merely happened in the ordinary course of business that practically every Standard shipping point would be favoured with advantageous rates as against competitors.
This contention has, of course, been already sustained by the finding of the Missouri Circuit Court, as it is sustained by the common sense of any one who takes the trouble to go through the schedules of rate charges made by the railroads recently brought to light. The Stan dard Oil Company's main refinery is at Whiting, in Indiana, a trifle to the south-east of Chicago. To take a few instances, the rate from Whiting to Chattanooga, a distance of 849 miles, by the route on the road, was fixed by the railroad at 25.9 cents per hundred gallons, while the rate from Pittsburg—an independent refin ing centre—to Chattanooga, a distance of only 651 miles, was as much as 47 cents per hundred. In other words, the Standard Oil Company paid 21 cents a hundred less for shipping 200 miles further. This difference amounts to over 1i cents per gallon, which is in itself a large profit on oil. The discrimination against Cleveland and Toledo—two other independent shipping centres — on shipments to Chattanooga was equally great. Again, take the destination of Birmingham, in the State of Alabama. The open rate from Pittsburg, a distance of 794 miles, was 51.5 cents ; from Whiting, a distance of 820 miles, it was 29.5 cents, a difference of 22 cents. Similarly there was an equal dis crimination against Cleveland and Toledo on shipments to Birmingham. And so on to the end of the chapter of conspiracy all over the States.