THE SECRET REBATE There are those who will tell you that it has been accomplished because John D. Rockefeller was thrifty ; there are others who are persuaded by the Standard's Press Bureau to believe that it is due to the Standard's economies in production and improvements in transport. Neither of these agreeable theories can explain the mystery, because most of these improvements were invented and first adopted by others, and Mr. Rockefeller's savings would not have enabled him to get control of 80 per cent. of the American oil refining business in ten years. The truth is that the secret rebate trick is the foundation of this great monopoly, and this it is now proposed to prove from official sources.
The introduction of the secret railway rebate or discrimination may or may not have been due to Mr. John D. Rockefeller's inventive genius — it is not absolutely proved to have been so—but the Report of the United States Government Commissioner of Corporations (Mr. J. R. Garfield) on the Transport of Petroleum, dated May 2, 1906, shows that at any rate the Standard Oil Company made the practice so much its own that it may fairly be regarded as its special system. On page 1 of the report this is made perfectly clear :— The general result of the investigation has been to disclose the existence of numerous and flagrant discriminations by the railroads in behalf of the Standard Oil Company and its affiliated corporations. With comparatively few exceptions, mainly of other large concerns in California, the Standard has been the sole beneficiary of such discriminations. In almost every section of the country that Company has been found to enjoy some unfair advantages over its competitors, and some of these discriminations affect enormous areas.
Not only has this resulted in great direct pecuniary advantage in transportation cost to the Standard, but it has had the far more important effect of giving that Company practically unassailable monopolistic control of the oil market throughout large sections of the country.
Of course, it was just as iniquitous for an American railroad company, with its Govern ment charter, to discriminate in favour of a large customer as it would be for an English one, or for a Government Department, say the Post Office, to sell stamps to a favoured few under their face value. The very secrecy with which the discrimination was invariably sur rounded both by the railroads that granted it and the consignors who received it proves clearly that its illegality and injustice were recognised on both sides. It was only gradually
that the matter of these secret rebates leaked out, about a couple of years before Mr. Rocke feller consolidated all his refining interests into the Standard Oil Company, of Cleveland, Ohio, where much of the oil-refining business was then carried on. This was in June, 1870. The capital of the new concern was $1,000,000, the parties interested in it at that date being John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, and William Rockefeller. Before this time Rocke feller's striking success, which was at first attributed mainly to his extraordinary capacity for bargaining and borrowing, had not only attracted the attention of other Cleveland refiners, but raised their suspicion. They argued that they bought crude oil pretty nearly as cheaply as he, refined it as economically, and sold it at the same price. Yet they could not make money at anything like the same rate. There was only one explanation of it ; he must be getting cheaper rates of transport from the railroads.
The matter was tested, and found to be so. Mr. Alexander, of the well-known refining firm of Alexander, Scofield & Co., Cleveland, stated on oath before the Committee of Commerce of the United States House of Representatives in April, 1872, that in 1868 or 1869 he went to the Erie Railroad management and said : " You are giving others better rates than you are us. We cannot compete if you do that." The railroad agent, Mr. Alexander further testi fied, did not attempt to deny the allegation, but simply agreed to give Mr. Alexander a rebate also. This was 15 cents (7id.) a barrel on the regular published rate of 40 cents (1s. 8d.) on all oil brought to Cleveland from the wells. A crude oil shipper, W. H. Doane, made a similar complaint, without mentioning names ; and the complaint was stopped by a 10 cents (5d.) reduc tion per barrel. The method of granting these rebates was significant. The full published rate was paid as usual by the shipper, then at the end of each month, on forwarding vouchers for the amount of oil shipped, he received in cash from the railroad company his 15 cents or 10 cents rebate per barrel, as the case might be. This, I take it, was a precaution to conceal the granting of the rebate by keeping documentary evidence on hand that each shipper had duly paid the same fixed rate.