CHAPTER XV

SYMPATHETICAL CO-OPERATION

Some day, perhaps, when more of our story-readers have learned that there are things in the world quite as important as the frets, follies, and loves of boys and girls half-grown, more of our story-tellers will hold their magic mirror up to the full-pulsed life with which mankind throbs through the laboring years that stretch along after the short fever of mating is over. George Rice, coming from the Green Mountains of Vermont, entered the oil business twenty-nine years ago, when he and it were young. He was one of the first comers. Beginning as a producer in the Pithole region, in the days of its evanescent glory, in 1865, he prospered. Escaping the ruin which overtook those who stayed too long in that too quick sand, he was one of the first to develop the new field at Macksburg, Ohio, and to see the advantages of Marietta, on the Ohio River, as a point for refining. Crude oil could easily be brought from Ohio and Pennsylvania by barge down the Ohio River. The field he entered was unoccupied. He drove no one out, but built a new industry in a new place. In 1876 he had risen to the dignity of manufacturer, and had a refinery of a capacity of 500 barrels a week, and later of 2000 barrels. Owning wells, he produced, himself, a part of the crude which he refined. His position gave him access to all the markets by river and rail. Everything promised him fortune. His family took hold with him in the work of bread-winning. "The executive part of the business is done altogether by my family," he says. "One daughter keeps the books, another daughter does nine-tenths of the correspondence, and my son-in-law is the general manager."[358] One of the daughters was a witness in one of her father's cases before the Interstate Commerce Commission. "She discussed with counsel," said the New York _World_, "the knotty points involving tank-car rates, mileage, rebates, and the long and short haul as familiarly as any general freight agent present."

Several other refiners, seeing the advantages of Marietta, had settled there. They who elected themselves to be trustees of the light of the world, thus having the advantages of the place pointed out to them by practical men, determined that Marietta must be theirs. They bought up some of the refiners. Then they stopped buying. Their representative there, afterwards a member of the trust, "told me distinctly that he had bought certain refineries in Marietta, but that he would not buy any more.... He had another way," he said, "of getting rid of them."[359] Of these "other ways" the independents were now to have a full exposition. In January, 1879, freight rates on oil were suddenly and without previous notice raised by the railroads leading out of Marietta, and by their connections. Some of the rates were doubled. The increase was only on oil. It was--in Ohio--only on oil shipped from Marietta; it was exacted only from the few refiners who had not been bought, because there were "other ways of getting rid of them."[360]

This freight-tariff attack on the independent refiners was arranged by their powerful rival and the railroad managers at a secret conference, as the latter admitted.

"Did you have any consultation or invite consultation with other manufacturers of oil at Marietta?"

"No, sir."[361]

When the representatives of the combination in this market were taxed by a dealer with getting the benefit of this manipulation of freight, "they laughed." All the railroads took part in the surprise. Curiously enough, the minds of the managers of a dozen roads acted simultaneously and identically, over thousands of miles of country--some, as they admitted, with suggestion, and some, as they testified, without suggestion--upon so precise a detail of their business as the rates on oil at one little point. "I did it at my own instance," said the freight agent of the Baltimore and Ohio. Freight officials of railways as far apart east, west, and south, and in interest, as the Baltimore and Ohio, and the Pennsylvania, and the Lake Shore, which had no direct connection with Marietta, and reached it only over other lines, stopped their "wars" to play their part in the move by raising the rate on oil only, and, most remarkable of all, to a figure at which neither they, nor the railroad connecting them with Marietta, nor (and this was the game they were gunning for) the independent refiners could do any business. From other points than Marietta, as Cleveland, Parkersburg, Pittsburg, and Wheeling, where the combination had refineries, but the Marietta independents had none, the railroads left the former rates unchanged.[362]

Rice was "got rid of" at Columbus just as effectually as if Ruskin's "Money-bag Baron," successor of "the Crag Baron," stood across the road with a blunderbuss. His successful rival had but to let its Marietta refineries lie idle, and transfer to its refineries at Wheeling its Marietta business--and Rice's too. By the pooling of the earnings and of the control of all its refineries--the essential features of the combination--its business could be transferred from one point to another without loss. One locality or another could be subjected to ruinous conditions for the extermination of competitors, and the combination, no matter how large its works there, would prosper without check. It gets the same profit as before, but the competitor by its side is ruined. All its refineries along a given railroad can be closed by high rates made to "overcome competition," but profits do not cease. Their business is done elsewhere by its other refineries, and all the profits go into a pool for the common benefit.

From Rice's point of view, Marietta was the storm-centre; but the evidence before the Ohio Legislative Investigation of 1879, before the Legislative Committee of New York of 1879, before Master in Chancery Sweitzer in Pennsylvania, and in the suit against the Lake Shore Railroad, showed that the low barometer there was part of a disturbance covering a wide area. The demonstration against the independent refiners of Marietta was only part of a wider web-spinning, in which those at all points--New York, Boston, Philadelphia, Pittsburg, Oil City, Titusville, Buffalo, Rochester,[363] and Cleveland--were to be forced to "come in" as dependents, or sell out, as most of them did.

That rates were not raised from points controlled by the combination is only part of the truth. At such places rates were lowered. This, like the increase of rates, was done at a secret conference with the oil combination and at its instance.[364] Where it had refineries the rates were to be low; the high rates were for points where it had competitors to be got rid of without the expense of buying them up. The independents knew nothing of the increase of freights prepared for them by the railroad managers and their great competitor until after, some time after, it had gone into effect.

The railroad company gave notice to their rivals what the rates were to be, but withheld that information from them.[365] That was not all. Before the new rates were given all the old rates were cancelled. "For a few days," said an independent, "we could not obtain any rates at all. We had orders from our customers, but could not obtain any rates of freight."

As to many places, the withholding of rates continued. "There's many places we can't obtain any rates to. They just say we sha'n't ship to these other places at any price."[366]

When the Ohio Legislature undertook to investigate, it found that the railroad men professed a higher allegiance to their corporations than to the State. They refused to answer the questions of the committee, or evaded them. "I am working under orders from the general freight agent," said one of them, "and I don't feel authorized to answer that." The arguments of the committee that the orders of an employer could not supersede the duty of a citizen to his government, or the obligations of his oath as a witness, were wasted. "I will tell you just how I feel," said the witness to these representatives of an inferior power. "I am connected with the railroad company, and get my instructions from the general agent, and I am very careful about telling anybody else anything." The Legislature accepted the rank of "anybody else" to which it was assigned, and did not compel the witness to answer.

To a question about the increase in freight: "I object," said another railroad officer, "to going into details about my own private business."[367]

One peculiar thing about the action of the railroads was that it was an injury to themselves. The Baltimore and Ohio, for instance, by raising its rate, cut off its oil business with Marietta entirely. "What advantage is it, then?" the freight agent of the road over which the Baltimore and Ohio reached Marietta was asked.

"There is no advantage.... We had revenue before this increase in rates, and none since."

"What would be the inducement for her (the Baltimore and Ohio) to do it, then?"

"That is a matter I am not competent to answer."[368]

The railroad men testified positively that the increase affected all alike at Marietta. It was supposed even by those who thought they saw to the bottom of the manoeuvre that the combination would close its Marietta works temporarily, in order to seem to be equally affected with all the rest. It could do this with no loss whatever, since, as explained, no raise in rates had been made from Wheeling, Parkersburg, Pittsburg, Cleveland, where it was practically alone, and it could reach all its customers from those places as well as from Marietta. But the combination kept on filling orders from its refineries at Marietta at the old freight rates, while by its side the men it was hunting down sat idle because the discriminating rates of freight made it impossible for them to use the highways. It was so careless of appearances that oil ordered of its works at Parkersburg would be sent from the Marietta branch,[369] and at the old rate of 40 cents, while the other refineries could not ship because the rate to them was 65 cents; the increase at Marietta was not enforced against it, but only against the three independents--just as planned in the South Improvement scheme.

The move was far-reaching--as far as Chicago, the rate to which was made $1.20 a barrel, instead of 90 cents a barrel.

"Then they cut you off from the Western trade as well as this State?"

"Yes, sir; almost entirely.... I was selling in Chicago, and it cut trade entirely off."[370]

"Before the rates were changed did you run to your full capacity?"

"Yes, sir; about that."[371]

At one stroke the independents lost the business which it had cost them years of work to get. As the testimony of witness after witness showed, the merchants who had been their customers in Chicago, Columbus, and other places, now had to send their orders to those for whose benefit the railroad men had raised the rates. This sweeping change was not due to any change in their desire to sell, or of their old customers to buy. They could still make oil which was still wanted. But they were the victims of a competitor who had learned the secret of a more royal road to business supremacy than making a better thing, or selling it at a better price. Their better way was not to excel but to exclude. When their "secretary" was called before the Ohio Legislature, after this freight ambuscade had transferred the bulk of the business of the independent refineries at Marietta to him and his associates, he declared that the sole cause of their success was the "large mechanical contrivances" of the combination, its "economy," and its production of the "very best oil." "With an aggregation of capital, and a business experience, and a hold upon the channels of trade such as we have, it is idle to say that the small manufacturer can compete with us; and although that is an offensive term, 'squeezing out,' yet it has never been done by the conjunction of any railroads with us."[372]

The small manufacturer did compete and flourish until these railroad men literally switched him out of the market. He competed and got his share of the business, until the men who wanted monopoly, finding that they had no monopoly of quality or price or business ability, resorted to the "large mechanical contrivance" of inducing the managers of the railroads to derail the independent, throwing him off the track by piling impassable freight tariffs in his way. The successful men secured their supremacy by preventing their competitors from entering the market at all. Instead of winning by "better" and "cheaper," they won by preventing any competitor from coming forward to test the questions of "better" and "cheaper." Their method of demonstrating superiority has been to prevent comparisons.

All the independent refiners at Marietta, except Rice, died. "Most of those we received from have gone out of the business," a Cincinnati dealer told the Legislature. Some had fled; some had sold out.[373] Rice set himself to do two things: the first, to drag into the light of day and the public view the secrets of these "better methods"; and the second, to get new business in the place of what he had lost. He succeeded in both. It was in January that he had notice served upon him that he could no longer go to market. In two months he had the Ohio Legislature at work investigating this extraordinary administration of the highways. This was a great public service. It did not yield the fruit of immediate reform, but it did work which is the indispensable preliminary. It roused the people who were still asleep on these new issues, and were dreaming pleasant dreams that in George III. they had escaped from all tyrants forever, and that in the emancipation of the blacks they had freed all slaves forever.

Rice knew that the Legislature were planting trees for posterity, and did not wait for help from them. He set about looking up markets where the public were free to choose and buy. He could not go West or East or North. He went South. The little family kept the refinery at Marietta running, and the father travelled about establishing new agencies in the South, and studying freight tariffs, railroad routes, and terminal facilities for loading and unloading and storing. In 1880, through all the storm and stress of these days, he was able to double the capacity of his refinery. Again he succeeded in building up a livelihood, and again his success was treated as trespass and invasion. His bitter experience in Ohio in 1879 proved to be but an apprenticeship for a still sterner struggle. Rice was getting most of his crude oil from Pennsylvania, through a little pipe line which brought it to the Alleghany. The pipe line was taken up by the oil trust.[374]

This compelled him to turn to the Macksburg, Ohio, field for most of his petroleum. He had one tank-car, and he ran this back and forth faster than ever. Then came the next blow. The railroad over which he ran his tank-car doubled his freight to 35 cents a barrel, from 17-1/2. That was not all. The same railroad brought oil to the combination's Marietta refineries at 10 cents a barrel, while they charged him 35. That was not all. The railroad paid over to the combination 25 cents out of every 35 cents he paid for freight. If he had done all the oil business at Marietta, and his rival had put out all its fires and let its works stand empty, it would still have made 25 cents a barrel on the whole output. Rice found a just judge when he took this thing into court. "Abhorrent," "dangerous," "gross," "illegal and inexcusable abuse by a public trust," "an unparalleled wrong," are the terms in which Judge Baxter gave voice to his indignation as he ordered the removal of the receiver of the railroad who had made this arrangement with the combination, to enable it, as the judge said, "to crush Rice and his business."[375]

In an interview, filling four columns of the New York _World_ of March 29, 1890, the head of the trust which would receive this rebate is reported to have made this attempt to reverse the facts of this and similar occurrences: "The railroad company proposed to our agent," he said. But the judge who heard all the evidence and rendered the decision, which has never been reversed or impaired, declared that it "compelled" the railroad to make the arrangement, "under a threat of building a pipe line for the conveyance of its oils and withdrawing its patronage." This arrangement was negotiated by the same agent of the oil combination who engineered the similar "transfer" scheme by which the trunk-line railroads gave it, in 1878, 20 to 35 cents a barrel out of the freights paid by its competitors in Pennsylvania, as already told.[376]

"I reluctantly acquiesced," the receiver said, writing in confidence to his lawyer, anxious lest so acquiescing he had made himself legally liable. The interview describes the arrangement as an innocent thing: "A joint agreement for the transportation of oil." It was an agreement to prevent the transportation of oil by anybody else. Judge Baxter shows that it was a joint agreement, procured by threats, for the transportation of "$25 per day, clear money," from Rice's pockets into the pockets of the members of the trust for no service rendered, and without his knowledge or consent, and with the transparent purpose of transporting his business to their own refineries. Judge Baxter called it "discrimination so wanton and oppressive it could hardly have been accepted by an honest man, and a judge who would tolerate such a wrong or retain a receiver capable of perpetrating it, ought to be impeached and degraded from his position."[377]

This matter was also passed upon by the Select Committee of the United States Senate on Interstate Commerce. "No comment," the committee say, "is needed upon this most impudent and outrageous proposition"--by the oil company to the railroad.[378]

"Are you going to deny that story?" a great American statesman of the latter-day type was asked by one of his friends.

"Not I," was the reply. "The story's false. When you find me taking the trouble to deny a thing, you can bet it's true!"

This "agreement for the transportation of oil" had its calculated effect. It put a stop to the transportation of oil from the Ohio field by Rice over the railroad, just as the destruction by the same hands of the pipe line to the Alleghany had cut him off from access to the Pennsylvania oil-fields. He then built his own pipe line to the Ohio field. To lay this pipe it was necessary to cross the pipe line of his great rival. Rice had the pluck to do this without asking for a consent which would never have been given. His intrepidity carried its point, for, as he foresaw, they dared not cut his pipe for fear of reprisals.

In turning to the South, after his expulsion from the Ohio and Western markets, the Marietta independent did but get out of one hornet's nest to sit down in another. His opponent was selling its oil there through a representative who, as he afterwards told Congress, "was very fortunate in competing." He thought it was "cheaper in the long-run to make the price cheap and be done with it, than to fritter away the time with a competitor in a little competition. I put the price down to the bone."[379] Rice, in the South, ran into the embrace of this gentleman who had the "exclusive control" of that territory, and whose method of calling the attention of trespassers to his right was to cut them "to the bone." The people and the dealers everywhere in the South were glad to see Rice. He found a deep discontent among consumers and merchants alike. They perhaps felt more clearly than they knew that business feudalism was not better, but worse, because newer, than military feudalism. This representative of the combination assured Congress that "99.9 of all the first-class merchants of the South were in close sympathetical co-operation with us in our whole history"--that is, out of every hundred "first-class merchants" only one-tenth of one merchant was not with them. This is a picturesque percentage.

Rice's welcome among the people would not verify his opponent's estimate that his vassalage included all but one-tenth of one dealer in every hundred. From all parts came word of the anxiety of the merchants to escape from the power that held them fast. From Texas: "Most of our people are anxious to get clear." From Arkansas: "The merchants here would like to buy from some other." From Tennessee: "Can we make any permanent arrangement with you by which we can baffle such monopoly?" From Kentucky: "I dislike to submit to the unreasonable and arbitrary commands." From Mississippi: "It has gouged the people to such an extent that we wish to break it down and introduce some other oils." From Georgia, from different dealers: "They have the oil-dealers in this State so completely cooped in that they cannot move." "We are afraid."[380] As Rice went about the South selling oil the agents of the cutter "to the bone" would follow, and by threats, like those revealed in the correspondence described below, would coerce the dealers to repudiate their purchases. Telegrams would pour into the discouraged office at Marietta: "Don't ship oil ordered from your agent." "We hereby countermand orders given your agent yesterday." One telegram would often be signed by all the dealers in a town, though competitors, sometimes nearly a dozen of them, showing that they were united by some outside influence they had to obey.[381]

Where the dealers were found too independent to accept dictation, belligerent and tactical cuts in price were proclaimed, not to make oil cheap, but to prevent its becoming permanently cheaper through free competition and an open market. Rice submitted to Congress letters covering pages of the Trust Report,[382] showing how he had been tracked through Tennessee, Missouri, Nebraska, Georgia, Kansas, Kentucky, Iowa, Mississippi, Louisiana, Texas, Arkansas, Alabama. The railroads had been got to side-track and delay his cars, and the dealers terrorized into refusing to buy his oils, although they were cheaper. If the merchants in any place persisted in buying his oil they were undersold until they surrendered. When Rice was driven out prices were put back. So close was the watch kept of the battle by the generals of "co-operation" that when one of his agents got out of oil for a day or two, prices would be run up to bleed the public during the temporary opportunity. "On the strength of my not having any oil to-day," wrote one of Rice's dealers, "I am told they have popped up the price 3-1/2 cents."[383]

The railroad officials did their best to make it true that "the poor ye have with you always." By mistake some oil meant for the combination was delivered to Rice's agent, and he discovered that it was paying only 88 cents a barrel, while he was charged $1.68, a difference of 80 cents a barrel for a distance of sixty-eight miles.

"Could you stand such competition as that?"

"No, sir. Before that I went up there and sold to every man in the place nearly. They were glad to see me in opposition.... I lost them, except one man who was so prejudiced that he would not buy from them."

"Your business had been on the increase up to that time?"

"Increasing rapidly.... I haul it in wagons now forty miles south of Manito."

"The rates against you on that railroad are so high that you can for a distance of forty miles transport your oil by wagon and meet the competition better than you can by using their own road?"

"Infinitely better."[384]