Cutting to Kill

oil, standard, cents, competition, price, independent, business, sold, prices and rival

Page: 1 2 3 4 5 6 7

The denouement of this case is tragic enough. The concern was finally driven out of business by these and similar tactics, so Mr. Emery and his partner both affirm. The negro was never taken into the Atlantic Refinery, and Buckley soon after lost his position, as he of course richly deserved to. A man who shows himself traitorous, lying, thieving, even for the of the oil business," is never kept long in the em ployment of the Standard Oil Company. It is notorious in the Oil Regions that the people who "sell" to the Standard are never given responsible positions. They may be shifted around to do "dirty work," as the Oil Regions phrase goes, but they are pariahs in the concern. Mr. Rockefeller knows as well as any man ever did the vital necessity of honesty in an organisation, and the Buckleys and negroes who bring him secret intelligence never get anything but money and contempt for their pains.

For the general public, absorbed chiefly in the question, "How does all this affect what we are paying for oil?" the chief point of interest in the marketing contests is that, after they were over, the price of oil has always gone back with a jerk to the point where it was when the cutting began, and not infrequently it has gone higher—the public pays. Sev eral of the letters already quoted in this chapter show the immediate recoil of the market to higher prices with the removal of competition. A table was prepared in 1892 to show the effect of competition on the price of oil in various states of the Union. The results were startling. In California, oil which sold at non-competitive points at 26% cents a gallon, at competitive points brought cents. In Denver, Colo rado, there was an "Oil War" on in the spring of 1892, and the same oil which was selling at Montrose and Garrison at twenty-five cents a gallon, in Denver sold at seven cents. This competition finally killed opposition and Denver thereafter paid twenty-five cents. The profits on this price were cer tainly great enough to call for competition. The same oil which was sold in Colorado in the spring of 1892 at twenty five cents, sold in New York for exportation at 6.10 cents. Of course the freight rates to Colorado were high, the open rate was said to be nine cents a gallon, but that it cost the Standard Oil Company nine cents a gallon to get its oil there, one would have to have documentary proof to believe, and, even if it did, there was still some ten cents profit on a gallon— five dollars on a barrel. In Kansas, at this time, the difference between the price at competitive and non-competitive points was seven cents ; in Indiana six cents ; in South Carolina four and one-half cents.* In 1897 Scofield, Shurmer and Teagle, of Cleveland, pre pared a circular showing the difference between prices at com petitive and non-competitive points in Ohio, and sent it out to the trade. According to this circular the public paid from 25 to 331 per cent. more where there was no competition. The fact that oil is cheaper where there is competition, and also that the public has to pay the 'cost of the expensive "Oil Wars" which have been carried on so constantly for the last twenty-five years all over the country, is coming to be rec ognised, especially in the Middle West of this country, by both dealers and communities. There is no question that the attempts of Standard agents to persuade or bully dealers into countermanding orders, or giving up an independent with whose oil they are satisfied, meet with much less general suc cess than they once did. It even happens now and then that communities who have had experience with "Oil Wars" will stand by an independent dealer for months at a time, resisting even the temptation to have their lamps cleaned and filled at next to nothing.

Briefly put, then, the conclusion, from a careful examina tion of the testimony on Standard competitive methods, is this : The marketing department of the Standard Oil Company is organised to cover the entire country, and aims to sell all the oil sold in each of its divisions. To forestall or meet com petition it has organised an elaborate secret service for locating the quantity, quality, and selling price of independent ship ments. Having located an order for independent oil with a dealer, it persuades him, if possible, to countermand the order.

If this is impossible, it threatens "predatory competition," that is, to sell at cost or less, until the rival is worn out. If the dealer still is obstinate, it institutes an "Oil War." In late years the cutting and the "Oil Wars" are often intrusted to so-called "bogus" companies, who retire when the real inde pendent is put out of the way. In later years the Standard has been more cautious about beginning underselling than for merly, though if a rival offered oil at a less price than it had been getting—and generally even small refineries can contrive to sell below the non-competitive prices of the Standard—it does not hesitate to consider the lower price a declaration of war and to drop its prices and keep them down until the rival is out of the way. The price then goes back to the former figure or higher. John D. Archbold's testimony before the Industrial Commission in 1898 practically confirms the above conclusion. Mr. Archbold said that the Standard was in the habit of fighting vigorously to hold and advance its trade—even to the extent of holding prices down to cost until the rival gives way—though he declared it to be his opinion that the history of the company's transactions would show that the competitor forces the fight. Mr. Archbold told the com mission that he personally believed it was not advisable to sell below cost for the sake of freezing out a smaller rival, save in "greatly aggravated cases," though he admitted the Standard sometimes did it. The trouble is that, accepting Mr. Rockefeller's foundation principle that the oil business be longs to him, any competition is "an aggravated case." All that is reassuring in the situation has come from the obstinate stand of individuals—the refiners who insisted on doing an independent business, on the theory that "this is a free coun try"; the grocers who resented the prying and bullying of Standard agents, and asserted their right to buy of whom they would; the rare, very rare, community that grasped the fact that oil sold below cost temporarily, meant later paying for the fight. These features of the business belong to the last decade and a half. At the period we have reached in this his tory—that is, the completion of the monopoly of the pipe lines in 1884. and the end of competition in transporting oil there seemed to the independents no escape from Mr. Rocke feller in the market.

The sureness and promptness with which he located their shipments seemed uncanny to them. The ruthlessness and persistency with which he cut and continued to cut their prices drove them to despair. The character of the competition Mr. Rockefeller carried on in the markets, particularly of the South and Middle West of this country, at this time, aggravated daily the feeble refining element, and bred con tempt far and wide among people who saw the cutting, and perhaps profited temporarily by it, but who had neither the power nor the courage to interfere. The knowledge of it fed greatly the bitterness in the Oil Regions. Part of the stock in conversation of every dissatisfied oil producer or ruined refiner became tales of disastrous conflicts in markets. They told of crippled men selling independent oil from a hand cart, whose trade had been wiped out by a Standard cart which followed him day by day, practically giving away oil. They told of grocers driven out of business by an attempt to stand by a refiner. They told endless tales, probably all exaggerated, perhaps some of them false, yet all of them believed, because of such facts as have been rehearsed above. There came to be a popular conviction that the "Standard would do anything." It was a condition which promised endless annoyance to Mr. Rockefeller and his colleagues. It meant popular mistrust, petty hostilities, misinterpretations, contempt, abuse. There were plenty of people even willing to deny Mr. Rockefeller ability. That the Standard was in a venture was enough in those people's minds to damn it. the Standard wanted was wrong, anything they contested was right. A verdict for them demonstrated the corruption of the judge and jury; against them their righteousness. Mr. Rockefeller, indeed, was each year having more reason to realise monopoly build ing had its trials as wells as its profits.

Page: 1 2 3 4 5 6 7