The work of persuasion went on swiftly. By the 18th of January the president of the Pennsylvania road, J. Edgar Thompson, had put his signature to the contract, and soon after Mr. Vanderbilt and Mr. Clark signed for the Central system, and Jay Gould and General McClellan for the Erie. The contracts to which these gentlemen put their names fixed gross rates of freight from all common points, as the leading shipping points within the Oil Regions were called, to all the great refining and shipping centres—New York, Phila delphia, Baltimore, Pittsburg and Cleveland. For example, the open rate on crude to New York was put at $2.56. On this price the South Improvement Company was allowed a rebate of $1.06 for its shipments; but it got not only this rebate, it was given in cash a like amount on each barrel of crude shipped by parties outside the combination.
The open rate from Cleveland to New York was two dollars, and fifty cents of this was turned over to the South Improve ment Company, which at the same time received a rebate enabling it to ship for $1.50. Again, an independent refiner in Cleveland paid eighty cents a barrel to get his crude from the Oil Regions to his works, and the railroad sent forty cents of this money to the South Improvement Company. At the same time it cost the Cleveland refiner in the combination but forty cents to get his crude oil. Like drawbacks and rebates were given for all points—Pittsburg, Philadelphia, Boston and Baltimore.
An interesting provision in the contracts was that full way bills of all petroleum shipped over the roads should each day be sent to the South Improvement Company. This, of course, gave them knowledge of just who was doing business outside of their company—of how much business he was doing, and with whom.he was doing it. Not only were they to have full knowledge of the business of all shippers—they were to have to all books the railroads.
The parties to the contracts agreed that if anybody appeared in the business offering an equal amount of transportation, and having equal facilities for doing business with the South Improvement Company, the railroads might give them equal advantages in drawbacks and rebates, but to make such a miscarriage of the scheme doubly improbable each railroad was bound to co-operate as "far as it legally might to main tain the business of the South Improvement Company against injury by competition, and lower or raise the gross rates of transportation for such times and to such extent as might be necessary to overcome the competition. The rebates and draw backs to be varied pari passu with the gross rates." * The reason given by the railroads in the contract for grant ing these extraordinary privileges was that the "magnitude and extent of the business and operations" purposed to be car ried on by the South Improvement Company would greatly promote the interest of the railroads and make it desirable for them to encourage their undertaking. The evident advantages
received by the railroad were a regular amount of f reight,— the Pennsylvania was to have forty-five per cent. of the East bound shipments, the Erie and Central each per cent., while West-bound freight was to be divided equally between them—fixed rates, and freedom from the system of cutting which they had all found so harassing and disastrous. That is, the South Improvement Company, which was to include the entire refining capacity of the company, was to act as the evener of the oil business.± It was on the second of January, 1872, that the organisation of the South Improvement Company was completed. The day before the Standard Oil Company of Cleveland in creased its capital from $i,000,000 to $2,500,000, "all the stockholders of the company being present and voting there for." * These stockholders were greater by five than in 1870, the names of 0. B. Jennings, Benjamin Brewster, Truman P. Handy, Amasa Stone, and Stillman Witt having been added. The last three were officers and stockholders in one or more of the railroads centring in Cleveland. Three weeks after this increase of capital Mr. Rockefeller had the charter and contracts of the South Improvement Company in hand, and was ready to see what they would do in helping him carry out his idea of wholesale combination in Cleveland. There were at that time some twenty-six refineries in the town—some of them very large plants. All of them were feeling more or less the discouraging effects of the last three or four years of rail road discriminations in favour of the Standard Oil Company. To the owners of these refineries Mr. Rockefeller now went one by one, and explained the South Improvement Company. "You see," he told them, "this scheme is bound to work. It means an absolute control by us of the oil business. There is no chance for anyone outside. But we are going to give every body a chance to come in. You are to turn over your refinery to my appraisers, and I will give you Standard Oil Company stock or cash, as you prefer, for the value we put upon it. I advise_ you to take _the stock. It will be for your good." Cer tain refiners objected. They to_sell. They_did and manage their business. Mr. Rockefeller was regretful, but firm. It was useless to resist, he told the hesitat ing; they would certainly be crushed if they did not accept is offer, and he pointed out in detail, and ow beneficent the scheme really was—preventing the creek refiners from destroying Cleveland, ending competition, keeping up the price of refined oil, and eliminating specu lation. Really a wonderful contrivance for the good of the oil business.