Episode 13

Not only did the Standard obtain railroad rebates but it developed the most death-dealing methods in its system of marketing its oil.In these campaigns it certainly overstepped the boundaries of legitimate business, even according to the prevailing morals of its own or of any other time.While it probably did not set fire to rival refineries, as it has sometimes been accused of doing, it undoubtedly did resort to somewhat Prussian methods of destroying the foe.This great corporation divided the United States into several sections, over each of which it appointed an agent, who in turn subdivided his territory into smaller divisions, each one of which likewise had its captain.The order imperatively issued to each agent was, "Sell all the oil that is sold in your district." To these instructions he was rigidly held; success in accomplishing his task meant advancement and an increased salary, with a liberal pension in his old age, whereas failure meant a pitiless dismissal.He was expected to supervise not only his own business, but that of his rivals as well, to obtain access to their accounts, their shipments, and their customers.It has been asserted, and the assertion has been supported by considerable evidence, that these agents did not hesitate to bribe railroad employees and in this way get access to their competitors' bills of lading and records of their shipments, and that they would even bribe dealers to cancel such orders and take the oil from them at a lower price.This information laid the foundation for those price-cutting campaigns that have brought the name of the Standard Oil into such disfavor.And when the Standard cut, it cut to kill; the only purpose was to drive the competitor from the field, and, when this had been accomplished, the price of oil would promptly go up again.The organization of "bogus companies," started purely for the purpose of eliminating competitors, seems to have been a not infrequent practice.This latter method emphasizes another quality that accompanied the Standard's operations and so largely explains its unpopularity--the secrecy with which it so commonly worked.

Though the independent oil refiners were combating the most powerful financial power of the time, they were frequently fighting in the dark, never knowing where to deliver their blows.

This same characteristic was manifested in the form of corporate existence which the Standard adopted.The first great "trust" was a trust not only in name but in fact.The Standard introduced not only a new economic development into our national organization;it introduced a new word into our language and an issue into American politics that provided sustenance for the presidential campaigns of twenty-five years.From the beginning the Standard Oil had always been a close corporation.Originally it had had only ten stockholders, and this number had gradually grown until, in 1881, there were forty-one.These men had adopted a new and secretive method of combining their increasing possessions into a single ownership.In 1873 the Standard Company had increased its capital stock (originally $1,000,000) to $3,500,000, the new certificates being exchanged for interests in the great New York and Philadelphia refineries The Standard Oil Company of Ohio never had a larger capital stock than that.As additional properties were acquired, the interests were placed in the hands of trustees, who held them for the joint benefit of the stockholders in the original company.In 1882 this idea was carried further, for then the Standard Oil Trust was organized.

The fact that the properties lay in so many different States, many of which had laws intended to curb corporations, was evidently what led to this form of consolidation.A trust was formed, consisting of nine trustees, who held, for the benefit of the Standard Oil stockholders, all the stock in the Standard and in the subsidiary companies.Instead of certificates of stock the trustees issued certificates of trust amounting to $70,000,000.

Each Standard stockholder received twenty of these certificates for each share which he held of Standard stock.These certificates could be bought and sold and passed on by inheritance precisely the same as stocks.

Ingenious as was this legal device, it did not stand the test of the courts.In 1892 the Ohio Supreme Court declared the Standard Oil Trust a violation of the law and demanded its dissolution.