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United States of America vs. Standard oi 



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PBINTED IN U.S.*. 




Cornell University 
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Circuit Court of the United States 

For the Bastern Division of the Eastern 
District of Missouri. 



UNITED STATES OF AMERICA 



STANDARD OIL COMPANY and others. 



Brief on Behalf of Defendants Standard Oil 
Company and others. 



JOHN G. JOHNSON, 
JOHN G. MILBURN, 

Of Counsel. 



14b 



A 



2. 3 G" o~P 3 



V 



CircQit Court of the United States 

FOR THE EASTERN DIVISION OF THE 
EASTERN DISTRICT OF MISSOURI. 



United States of America 

vs. 

Standard Oil Company and 
others. 



BRIEF FOR STANDARD OIL. COM- 
PANY AND OTHERS. 

The Theory of the Bill. 

The gravamen of the bill is an alleged con- 
spiracy to restrain and monopolize the trade and 
commerce in petroleum and its products among 
the States and Territories of the United States, 
the District of Columbia, and foreign nations, in 
which Mr. John D. Rockefeller, Mr. William 
Rockefeller, Mr. Henry M. Flagler and others 



2 

have been engaged since the year 1870. The 
operations of the conspiracy are divided into 
three periods : one extending from 1870 to 
1882 ; another from 1882 to 1899 ; and the last 
from 1899 to the present time. The character- 
istic ascribed to the first period is the purchase 
and acquisition of interests in concerns engaged 
in different branches of the oil business for the 
purpose of fixing the price of crude and refined 
oil, limiting their production, and controlling 
their transportation. The characteristic ascribed 
to the second period is the formation of what is 
known as " The Standard Oil Trust ", by which 
various independent firms, corporations, limited 
partnerships and individuals engaged in the oil 
business turned over the management of their 
businesses to nine trustees. The characteristic 
ascribed to the third period is the vesting of this 
control and management in the Standard Oil 
Company (of New Jersey) as a holding company. 
The bill then proceeds to treat each of these 
periods in detail. 

First Period, 1870 to 1882. 

This period begins with the organization of 
the Standard Oil Company of Ohio in the year 



1870 with a capital stock of $1,000,000, to take 
over the businesses of Rockefeller & Andrews, 
William Rockefeller & Company and Rocke- 
feller & Company, located at Cleveland, Ohio, 
and New York City. This company, so it is 
alleged, acquired during the years 1871, 1872 
and 1873 all the competing refineries in Cleve- 
land, Ohio, excepting three or four, the owners 
of which were forced to sell by their inability to 
compete with it owing to the rebates and prefer- 
ential rates which it obtained from the railroad 
companies, (p. 13). 

The names of a large number of companies, 
partnerships and individuals engaged in the oil 
business at various times during this period are 
given, and it is alleged that they and others 
formed associations and entered into agree- 
ments, combinations and conspiracies between 
themselves, to fix the price of crude oil, 
and limit its production, to fix the price 
of the products of crude oil and limit their 
production, and to suppress competition 
and monopolize the trade. The only specific 
instance mentioned is an agreement of Decem- 
ber 19th, 1872, between two associations, one 
known as the Petroleum Producers Association 



and the other the Petroleum Refiners Associa- 
tion (p. i8). This agreement is Exhibit i. (pp. 

195-197)- 

It is alleged that the individuals engaged in 

the conspiracy acquired during this period by 
the sale of stock interests in the Standard Oil 
Company of Ohio interests in the stocks and 
businesses of many of the concerns previously 
mentioned, and through these interests and 
agreements with other refiners controlled in the 
latter part of the period more than 90 per cent, 
of the oil business, and were enabled to do so 
and crush and limit competition by means of re- 
bates and preferential rates obtained from rail- 
roads, particularly the Pennsylvania Railroad, 
the New York Central and Hudson River Rail- 
road, with its connection the Lake Shore and 
Michigan Southern Railroad, the Erie Railway, 
with its connection the Atlantic and Great 
Western Railway, the Jersey Central Railroad, 
the Reading, and the Baltimore and Ohio. (pp. 19, 
20, 21). 

Then follows a specification of various con- 
tracts with railroad companies which are alleged 
to have had this effect, as follows : 

{a) The organization of the South Improve- 



ment Company in January, 1872, and the con- 
tract between it and various railroad companies, 
(pp. 21-25. Contract Exhibit 2, pp. 198-207). 

{b) Leases or agreements between 1874 and 
1877 for the control of the terminal facilities of 
the various railroad companies for unloading, 
storing and handling oil at Jersey City, New 
York, Baltimore and Philadelphia, (pp. 25-28 ; 
contracts with the Krie Railway, Exhibits 3 and 
4, pp. 208-216 ; contract with the N. Y. C. & H. 
R. R. Co. and the Lake Shore Company, pp. 
217-219). 

{c) A pooling contract between the railway 
companies of October i, 1874, with its provision 
for drawbacks to refiners of crude oil and ship- 
pers of crude oil to the seaboard, (pp. 28-30 ; 
agreement Exhibit 6, pp. 220-226). 

{d) A contract of October 17, 1877, between the 
Pennsylvania Companies and the Standard Oil 
Company whereby the Standard Oil Company 
agreed to arrange its shipments by the various 
railroads to maintain their proportions of the 
trafl&c as fixed by an agreement between the 
railroad companies, and to guarantee a mini- 
mum of oil traffic, for which it was to receive a 
commission of ten per cent, of the rates on its 



own shipments. It is alleged that there was a 
similar contract with the New York Central and 
Erie Companies, (pp. 31, 32 ; Exhibit 7, pp. 
227-229). 

(e) Contracts between the American Transfer 
Company, a pipe line company, and the New 
York Central, Erie and Pennsylvania Companies, 
whereby the railroad companies agreed to pay 
to the Transfer Company twenty cents a barrel 
on all crude oil carried by the railroads, (pp. 33, 
34 ; contract with Pennsylvania Company, Ex- 
hibit 8, pp. 231-233 ; contract with the Erie 
Railway Company, Exhibit 9, pp. 234, 235). 

(/) An allowance by the railroad companies 
during the years 1877 and 1878 of an additional 
fifteen cents per barrel on shipments of crude oil 
by the Standard Oil Company and its allied 
interests, (p. 35). 

It is further alleged that in 1879 separate suits 
were brought by the State of Pennsylvania 
against the Pennsylvania Railroad Company 
and other railroad companies, and against the 
United Pipe Lines Company, to oust them from 
their franchises in Pennsylvania because of 
these contracts or some of them; which suits 
were adjusted by a contract between the Standard 



Oil Companies and the Independent Petroleum 
Producers' Union, and a contract between the 
Union and the Pennsylvania Railroad Com- 
pany, (pp. 36-38 ; Exhibit 10, pp. 236-241). 

It is further alleged that the parties to the 
conspiracy acquired during this period in the 
name of the Standard Oil Company the owner- 
ship and control of the principal pipe lines ex- 
tending from the oil regions of Pennsylvania 
to the various railroads over which oil was 
transported to the refineries at Philadelphia, 
New York, Cleveland and other points, and con- 
solidated them first into the American Transfer 
Company and the United Pipe Lines, and later, 
in the year 1881, into the National Transit Com- 
pany ; and that they were thereby enabled to fix 
the price of crude oil and the price for its trans- 
portation by pipe lines and railways, resulting 
in rate discriminations against their competitors. 

(PP- 38, 39)- 

Period, 1882 to 1899. 

The formation of the so-called Standard Oil 
trust is alleged, including the trust agreement 
of January 2d, 1882, and the supplemental 
agreement of January 4th, 1882. (p. 39). 



Referring to the corporations and limited part- 
nerships named in the trust agreement it is 
charged as follows (pp. 54, 55) : 

" And that each and all of said corpora- 
tions and limited partnerships were at the 
time of the signing of said agreement, and 
for a long time prior thereto, so engaged 
separately in said business as such corpora- 
tions and limited partnerships ; and that by 
the said trust agreement and the placing of 
said stock interests in the hands of said trus- 
tees, as by the said agreement provided, all 
competition among the said corporations, 
limited partnerships and individuals was 
suppressed and destroyed, and the aforesaid 
trade and commerce among the several 
states and territories of the United States, 
the District of Columbia, and both foreign 
nations, as above described, was restrained 
and monopolized." 

The trustees organized as a body ; adopted 
by-laws ; and proceeded pursuant to the trust 
agreement to organize the Standard Oil Com- 
pany of New Jersey and the Standard Oil Com- 
pany of New York. (pp. 55, 56). 

It is further alleged as follows (pp. 56, 57) : 

" Your petitioner further alleges that pur- 
suant to said trust agreement the said trus- 
tees caused to be transferred to themselves 



tlie stocks of all corporations and limited 
partnerships named in said trust agreement, 
and caused various of tlie individuals and 
co-partnerships who owned independent re- 
fineries and other properties employed in the 
business of refining and transporting and 
selling oil in and among the said various 
states and territories of the United States as 
aforesaid, to transfer their property situated 
in said several states to the respective 
Standard Oil Companies of said States of 
New York, New Jersey, Pennsylvania and 
Ohio, and other corporations organized or 
acquired by said trustees from time to time." 

The trust certificates were in the following 
form (p. 57) : 

" No. Shares $100 each. Shares 

Standard Oil Trust. 

" This is to certify that 
is entitled to shares in the equity to 

the property held by the trustees of the 
Standard Oil trust, transferable only on the 
books of said trustees on surrender of this 
certificate. This certificate is issued upon 
condition that the holder or any transferee 
thereof shall be subject to all the provisions of 
the agreement creating said trust and of the 
by-laws adopted in pursuance of said trust 
agreement as fully as if he had signed the 
said trust agreement." 



10 

The individuals to whom these certificates 
were issued at the time of the formation of the 
trust are given on pages 58 and 59. 

It is alleged that from time to time during 
this period other properties belonging to concerns 
engaged in various branches of the oil business 
in competition with the trust were acquired, and 
their property or stocks transferred to corpora- 
tions owned or controlled by the trustees or to 
the trustees, (p. 59). 

A list of the corporations whose stocks were 
in whole or in part held by the trustees in the 
year 1888 is given (pp. 60, 61). Between that 
time and 1892 these various interests by trans- 
fers of properties and stocks were vested in 
twenty companies, which are named on page 62. 

It is alleged that (p. 63) : 

" the individual defendants herein, being at 
all times a majority of and in control of 
said board of trustees, . . . controlled 
all of said separate corporations through 
said stock ownership, and elected boards of 
directors and officers in the said various 
corporations from time to time, and man- 
aged them all in harmony." 

As a result of the judgment in a suit in the 
Supreme Court of the State of Ohio, entitled 



11 

State of Ohio, ex rel. Attorney General vs. 
Standard Oil Company (of Ohio) (49 Ohio St., 
137), a meeting of the trust certificate holders 
was held on March 21, 1892, and a resolution 
adopted terminating the trust agreement of Janu- 
ary 2d, 1882, and providing for the winding up 
of the trust, (pp. 63, 64 ; resolution, pp. 64, 65). 

The trust certificates issued at the time of the 
formation of the trust amounted to $70,000,000. 
At the time of the dissolution they amounted to 
$97,250,000 ; the additional certificates having 
been issued for stock dividends and in payment 
of properties acquired. The plan of dissolution 
provided for issuing to each certificate holder on 
the surrender of his certificates an assignment of 
an interest in the stocks held by the trustees in 
the proportion of the number of his certificates 
to the total outstanding certificates, (p. 66 ; 
Assignment, p. 67). 

Holders of more than a majority of the out- 
standing certificates surrendered their certifi- 
cates, obtained their assignments of legal interest, 
and converted them into shares of the twenty 
companies. It is alleged that the individual de- 
fendants so surrendered their certificates ; that 
the mass of certificate holders retained their 



12 

certificates down to the acquisition of the shares 
of the twenty companies by the Standard Oil 
Company (of New Jersey) in 1899; and that 
thereby the " individual defendants in this action, 
who were the liquidating trustees, did continue to 
manage the affairs of all said separate corpora- 
tions so engaged in said business in the same 
manner as they had theretofore under and by 
virtue of the terms of said trust agreement ". 
(p. 69). 

Period, 1899 to the present time. 

In January, 1899, ^^^ charter of the Standard 
Oil Company (of New Jersey) was amended, and 
its capital stock increased from ten million dol- 
lars to one hundred and ten millions, of which 
the outstanding ten millions were declared to be 
preferred stock and the remaining one hundred 
millions common stock. Of the shares of com- 
mon stock $97,250,000 were then issued in ex- 
change for the shares of the companies and lim- 
ited partnerships which had been held by the 
trustees of the trust (including the preferred 
stock of the Standard Oil Company of New 
Jersey), and represented by the $97,250,000 of 
trust certificates outstanding at the time 
of the dissolution in 1892. This, it is 



13 

charged, was done by the individual defendants 
for the purpose of further carrying out the con- 
spiracy and effecting a monopoly of the oil busi- 
ness, (pp. 70-74). 

The names of sixty-nine companies are given 
as the companies now controlled by the de- 
fendants (pp. 75, 76). Some of these com- 
panies are described as engaged in refining ; 
others in transporting crude oil through pipe 
lines ; others as owners of tank cars and steam- 
ships for the transportation of oil ; and others as 
engaged in the marketing of oil throughout the 
United States, (pp. 79-84). Then follows a gen- 
eral allegation that from 1882 to 1899 the Stand- 
ard Oil Trust, and since 1899, the Standard 
Oil Company and its subsidiary corpora- 
tions, have refined and sold more than 
ninety per cent, of the petroleum products 
manufactured and consumed in the United States 
and shipped to foreign countries, and have 
monopolized the commerce, traffic, transporta- 
tion, refining and sale of oil, in the United States 
and foreign countries, thereby restraining such 
commerce, regulating the production and supply 
of the products, and fixing the price thereof, (pp. 
84-86). 



14 

The remainder of the bill is devoted to a 
statement of the various means by which this 
monopolization has been effected. The head- 
ings of the various subdivisions sufficiently in- 
dicate for our present purpose what those means 
as so set forth are, and we give them in their 
order as follows : (i) agreements with Tidewater 
Companies (pp. 86-89 ; Exhibit 13, pp. 251- 
260) ; (2) contract with Pennsylvania Railroad 
Company of August 22, 1884 (pp. 89-92 ; Ex- 
hibit 14, pp. 262-268) ; (3) restraint and 
monopolization by control of pipe lines (pp. 
92-95; Exhibit 15, pp. 269-271); (4) unfair 
practices against competing pipe lines (pp. 97- 
loi) ; (5) certain contracts in restraint of trade 
(pp. 101-108 ; Exhibit 16, pp. 272, 273 ; Ex- 
hibit 17, pp. 274-276) ; (6) railroad discrimina- 
tions, instances of which are given as fol- 
lows : (a) in southern states (pp. 1 10-124) ; i^) 
in southwestern territory (pp. 124-129) ; 
(c) rates from Kansas points (pp. 130-133); {d) 
failure to pro-rate on shipments to Pacific Coast 
(pp. 133-134) ; {e) failure to pro-rate on ship- 
ments to North-West (pp. 125-137) ; (/) dis- 
criminations in New York and New England 
(PP- 134-147) ; (i^) discriminations between 



15 

Parkersburg and Marietta (pp. 147-149) ; (k) dis- 
criminations in California (pp. 149-153) ; and (?) 
discriminations in Central States (pp. 153-161) ; 
(7) general system of discrimination ; control of 
railroads (pp. 162-167) ; (8) monopoly of sale of 
lubricating oil to railroads (pp. 167-172); (9) 
unfair methods of competition consisting of (a) 
local price cutting (pp. 173-176); {d) reports 
of competitors' shipments (pp. 176-178); (c) 
operation of bogus independent companies (pp. 
178-181), and (d) payment of rebates on oil 
prices (pp. 181-182) ; and (10) division of terri- 
tory (p. 185). 

The bill closes with the allegation that by 
reason of the control of the oil business by the 
Standard Oil Trust and the Standard Oil Com- 
pany (of New Jersey) the profits since January 
ist, 1882, have been exorbitant (pp. 182-184). 

This is the case made by the bill. Its essen- 
tial features are : 

(i) A conspiracy entered into by certain 
individuals to restrain and monopolize the 
oil business, dating back to 1870 ; 

(2) A combination of competitive plants 
and properties in execution of the con- 
spiracy ; 



16 

(3) The employment of certain means and 
agencies after the acquisition of the 
properties to effect the monopoly ; and 

(4) The actual present monopolization of 
the business by those means and agencies. 

Snmiuary of facts bearing on the alleged 
combination or conspiracy in restraint of 
trade. 

(i) In 1865 Mr. John D. Rockefeller became 
the owner of a refinery in Cleveland, with which 
he had been connected for three or four years, 
and organized the firm of Rockefeller & Andrews 
to continue its business. Rockefeller & Andrews 
in 1866 associated themselves with Mr. William 
Rockefeller in the formation of the firm of Will- 
iam Rockefeller & Company, which built another 
refinery on property adjacent to the refinery of 
Rockefeller & Andrews. In the same year Mr. 
John D. Rockefeller, Mr. Andrews and Mr. Will- 
iam Rockefeller organized the firm of Rockefeller 
& Company, with headquarters at New York 
City, " to develop the sale of oil from that point 
and to save for our business the expenses of com- 
mission men ; and by doing our own warehouse 
business to reduce, if possible, to the minimum 



17 

of cost the handling of the oil which we ex- 
ported " (Vol. i6, p. 3054). The properties of 
these firms were in 1867 taken over by the new 
firm of Rockefeller, Andrews & Flagler. Addi- 
tional capital was brought in by Mr. Flagler 
who at that time became a member of the firm. 
This firm had two refineries at Cleveland where 
the manufacturing was done; a domestic trade 
from Cleveland ; and an export trade from New 
York. 

The Standard Oil Company of Ohio was or- 
ganized in 1870 by the members of this firm to 
take over its property and business. Its capital 
was $1,000,000, represented mainly by the prop- 
erty and business thus acquired. The balance 
was new capital contributed by capitalists in 
Cleveland and New York City. 

Mr. John D. Rockefeller, Mr. Andrews, Mr. Wil- 
liam Rockefeller and Mr. Flagler were young, 
vigorous and able men. Mr. Andrews was a prac- 
tical refiner and devoted himself particularly to 
the manufacturing branch of the business. The 
Messrs. Rockefeller and Mr. Flagler devoted them- 
selves particularly to its commercial and financial 
interests. The firm of Rockefeller, Andrews & 
Flagler had by its enterprise, methods, zeal 



18 

and business capacity won for itself position, 
standing and credit. The organization of the 
Standard Oil Company of Ohio, with its in those 
days large capital of one million dollars, enabled 
it with the credit and confidence it commanded 
to provide itself with the means of conducting its 
business on the most advanced, effective and 
economical lines. It was no doubt at that time 
one of the concerns in the business best equipped 
to cope with the widespread demoralization which 
prevailed. 

(2) The result of the discovery of petroleum 
in the northwestern part of Pennsylvania, of a suc- 
cessful method of mining it, of the application of 
methods of refining it into kerosene, and of the 
usefulness of the product for illuminating, heat- 
ing and lubricating purposes was, during the 
'6o's, the multiplication of refineries of all sorts 
and kinds, and a vast excess of refining capacity 
both with respect to the production of the crude 
oil and the demand for its products. Chaotic 
conditions prevailed in every branch of the in- 
dustry; — production, manufacturing and trans- 
portation. There was a continual war of con- 
flicting interests and a maximum of instability. 



19 

(a) The period of substantial production be- 
gan in i860 with a volume of 500,000 barrels, 
which had increased in 1865 to 2,500,000, and in 
1870 to over 5,000,000 barrels. A vast number 
of people were drawn to the oil fields, the 
earliest of which were in Venango County, 
Pa., extending from the south-east corner of 
Warren County to Franklin. Wells were sunk 
in great numbers and a wild spirit of adventure 
prevailed. At the close of the war there was a 
rush from the disbanding armies to the oil 
fields. Many of the wells that were sunk turned 
out dry, others would produce large quantities 
for a short time, and others had a longer life. 
Many who sank wells had but little capital and 
were compelled by their necessities to sell their 
production at whatever they could get for it. 
The facilities for storage and transportation 
were to the last degree meagre. These condi- 
tions, intensified by the spirit of speculation 
which they inevitably engendered, produced 
during those years wild fluctuations in the prices 
of crude oil, — prices which ranged from $20 to 
10 cents a barrel. The following table shows 
the average price of crude oil during the years 



20 



from i860 to 1869 compiled from Government 
documents : 

i860 $9.59 per barrel 

1861 49 

1862 1.05 

1863 3-15 

1864 8.06 

1865 6.59 

1866 3.74 

1867 2.41 

1868 3.62>^ 

1869 5.63^ 

These are yearly averages showing only the 
differences year by year, and not the much 
wider fluctuations from month to month, and 
even from day to day. In i860, for example, 
the range was from $20.00 to $2.00 ; in 1862 
from $2.50 to loc; and in 1864 from $14.00 to 

f3-75- 

A manufacturing business cannot be estab- 
lished on a sound basis when its raw material is 
subject to such abnormal fluctuations. 

{b) The crude oil had at first to be trans- 
ported to the railroads by wagon. Later short 
pipe lines were laid to gather the oil at the wells, 



21 

which were connected by other lines with the 
branch extensions of the various railroads as 
they were built. There was the same disregard 
of practical conditions in laying these pipe lines 
that characterized the sinking of wells. There 
was an unnecessary multiplication of lines to 
every locality where oil was being found, and a 
struggle to get the business at any price. Lines 
were laid with insuflicient capital behind them ; 
many of them became useless soon after they 
were built through the exhaustion of the wells ; 
and under such conditions there could be neither 
remunerative nor uniform rates. 

(c) The same conditions prevailed in the re- 
fining branch of the industry. At first there 
was a mushroom development of insignificant 
refineries at Oil City, Titusville, other points 
along the Allegheny River, Erie, Pittsburgh, 
Cleveland, and the Atlantic seaboard. War 
taxation crushed out many of these. The con- 
ditions in other branches of the industry which 
have been described were fatal to others. Im- 
provements in methods were beyond the means 
of those who had little or no capital. Those 
who could find capital enlarged and improved 
their refineries and established themselves on a 



22 

firmer basis. The removal of war taxation in 
1868 again stimulated construction, as did the 
continually increasing volume of the crude pro- 
duction. The result was a great excess of refining 
capacity. In " Derricks Hand-Book of Petro- 
leum," Vol. I, page 780, the daily refining ca- 
pacity in 1873 of all the refineries is stated to be 
47,000 barrels, which was more than twice the 
amount of crude produced. The testimony shows 
that the excess of refining capacity was much 
greater before that time. Moreover the crude 
production was greater than the demand for the 
manufactured products. This is shown by the 
fact that the stocks of crude oil increased be- 
tween 1871 and 1873 at the rate of 500,000 bar- 
rels a year, and in 1874 the increase was two 
millions of barrels. Obviously, as the same 
authority observes, " Many of the refineries had 
to shut down part of the time, or else not oper- 
ated to their full capacity." 

{d) The railway situation was equally compli- 
cated. The three trunk lines which competed 
for oil trafl&c were the Pennsylvania to the south 
of the oil fields ; the Erie, with its connection 
the Atlantic and Great Western, and the New 
York Central with its connection the Lake 



23 

Shore and Micliigan Southern Railroad, to the 
north. The Pennsylvania Railroad had the most 
advantageous position. Its haul to the seaboard 
from the points where it received the crude and 
refined oil was shorter than that of the other 
lines, and as the oil fields extended southerly 
into Clarion and Butler Counties from 1869 on it 
became shorter and shorter. This is apparent 
from the fact that the distance from Pittsburgh 
to Philadelphia is about 400 miles, whilst the 
haul on the Erie and its connection from Oil 
City to New York was 550 miles, and the haul 
on the Lake Shore and New York Central Rail- 
roads from Cleveland to New York was 740 
miles. In the later 6o's and the early 70's the 
struggle of these railway systems for traffic as 
they were extended westward is a matter of 
history. It affected every kind of traffic. 
Agreements were made from time to time 
to maintain rates, but were short-lived. 
Every railroad company protected the 
industries on its own line with special rates, and 
special efforts were made for particular kinds of 
traffic of growing importance. It was an era of 
each road getting all the business it could by 
offering the rates that would get it. The oil 



24 

traffic was no exception. The Pennsylvania 
Railroad naturally felt itself entitled to the 
major part of the trafl&c because of its proximity 
to most of the refining points and its shorter 
line to the seaboard. The New York Central 
and Erie were bound to get all they could 
and took whatever measures were necessary 
to that end. The effort of the Pennsylvania 
was to control the transportation of crude oil 
from the oil regions, and the refined oil from the 
refineries in that locality and Pittsburg. In the 
language of the day, " Cleveland was to be wiped 
out as a refining centre." The effort of the 
New York Central was to protect and develop 
Cleveland as a refining center. The effort of the 
Erie was to get a fair share of the business from 
the oil fields and the refineries in the oil regions.. 
The situation was further complicated by the 
fact of water transportation to New York via 
Lake Erie and the Erie Canal. 

(e) These were the conditions which existed 
during the period mentioned. There was demor- 
alization in every branch of the business ; in 
production, in refining, in local pipe line trans- 
portation, and in railroad transportation. Every 
branch of the business was in an abnormal state 



25 

There was no certainty or stability in any part 
of it. There was a deadly struggle at every 
point, and the oil business was threatened with 
ruin. 

(3) Farseeing and conservative men sought for 
a cure for this disastrous condition of affairs. 
Those who would naturally lead the way were 
the railroad companies and the larger refiners. 
The plan of the South Improvement Company 
was evolved for this purpose late in 1871 and the 
beginning of 1872. Its object was to co-ordinate 
the various branches of the industry ; to bring 
together the producer, the refiner and the rail- 
road ; to adjust their relations so as to secure for 
the producer a fair and adequate remuneration 
for his product, to assure the refiner his sup- 
ply at a reasonable and normal price and equal 
railroad rates, and to secure for the railroads 
fair and remunerative rates for the trans- 
portation of the oil. It originated with the 
railroads and some of the leading refiners in 
Pittsburgh and Philadelphia. The Standard 
Oil Company had no faith in its practicability, 
but gave its passive support that it might not 
be charged with blocking an effort to ameliorate 



26 

the conditions of tlie business. The plan failed 
and never went into operation. It is not neces- 
sary here to discuss it more in detail. Its his- 
tory has been written from different points of 
view, as will be seen by a reference to Miss 
Tarbell's book and " The History of the 
South Improvement Company," by Dr. Leonard 
Woolsey Bacon. The version of the parties 
who promoted it is found in the circular 
which was issued at the time (Vol. 6, p. 2619). 
Mr. John D. Rockefeller's version of it and of the 
relations to it of the Standard Oil Company is 
found in Vol. 16, pp. 3068-3071. That the rela- 
tion of the Standard Oil Company to it was a 
passive one is also shown by the testimony of 
Mr. Flagler before a Committee of the House of 
Representatives in the year 1888. (Report of 
Committee on Manufactures of the House of Rep- 
resentatives, 1888, p. 289). 

(4) It is apparent that in the early seventies 
the position of the Standard Oil Company of 
Ohio and the other refiners at Cleveland was a 
serious one. There was not only the general 
demoralization of the business and the excess of 
refining capacity at that and every other refining 



27 

point, but the adverse attitude of the Penn- 
sylvania Railroad to Cleveland as a refining 
centre and its relative disadvantage with ref- 
erence to the crude oil production as the 
oil fields extended south into Marion and 
Butler counties, and to the export business 
because of its distance from the Atlantic sea- 
board. Moreover in the excitement aroused 
by the South Improvement Company a boycott 
was maintained against the Standard Oil Com- 
pany to deprive it of its supply of crude oil. 
The facts in its favor were that it was then a 
large and important concern of the most modern 
type, equipped with the best appliances, and 
owned and managed by able men in good credit, 
who had faith in the business and the courage of 
their faith. They felt that to maintain their 
ground it was necessary to increase and ex- 
pand their business, as their strength and 
power of self preservation would grow with its 
volume. Therefore in the latter part of 1871 
negotiations took place between them and va. 
rious refiners in Cleveland, which were then 
and during the year 1872 consummated by the 
purchase of their refineries. The capital 
stock of the Standard Oil Company of Ohio 



28 

was increased from one to two millions and 
a half of dollars. Tlie purchases were made 
for cash or with the stock of the Company as 
the vendors might elect. The transactions were 
entirely voluntary, and the charge that the sale 
of these refineries was coerced in any way, or 
that their owners were driven out of the busi- 
ness, is unsupported by any evidence. On the 
contrary many of them were glad to convert their 
investments into cash because of the prevailing 
conditions. Others who took stock in pay- 
ment lost their confidence and sold it. On the 
other hand so far from being a conspiracy to 
monopolize the oil trade it was actually and ob- 
viously a measure of self-preservation. The ob- 
ject of the Standard Oil Company was to fortify 
itself by an increase of its business. Had it not 
done so it is very questionable whether Cleve- 
land could have continued a refining centre, as 
it was generally recognized that the entire in- 
vestment in the oil business there was at stake. 

Having by these acquisitions increased its re- 
fining capacity the next step was to increase its 
markets and marketing facilities. This it did 
with respect to the export business by the pur- 
chase in 1873 of the plant of the Long Island 



29 

Refining Company in New York harbor, which 
furnished it with extensive dock and warehouse- 
ing facilities, and the purchase of the business 
of the DeVoe Manufacturing Company, which 
had a large trade in Europe and the Orient 
in the sale of refined oils in cans, besides 
being a manufacturer of the cans. To extend 
its domestic trade it purchased at the same time 
an interest in the firm of Chess, Carley & Co. 
of Louisville, Kentucky, which had a large 
marketing business in the south and southwest. 

{5) Even at this distance of time it is not diffi- 
cult to reconstruct what was bound to be the 
normal development of the oil business in view 
of the existing conditions. First and foremost 
the development of the use of petroleum products 
in this and foreign countries was necessary. That 
involved a continuous extension and multiplica- 
tion of marketing facilities. Refining was a pro- 
gressive art, having as its end and aim the perfec- 
tion of the products, economy in methods and 
processes, and the utilization of the waste material 
in by-products. The multiplication of refining 
points was necessary to reach the different parts 
of the country with a minimum of unnecessary 



30 

transportation. The seaboard was the natural 
locality to refine for export purposes, and differ- 
ent regions of the country could be supplied from 
particular interior refining points with the mini- 
mum of transportation. It was necessary for a 
regular and adequate supply of crude oil at nor- 
mal prices that there should be adequate systems 
of pipe lines to gather it at the wells and carry 
it to the various railroad points, and tankage 
systems for the storage of the oil whenever the 
production exceeded the demands of the trade. 
And it was only a matter of time when the rail- 
road and ocean transportation of oil in barrels 
would be superseded by a special kind of car and 
a special kind of vessel, such as the tank car and 
tank steamer of later times. 

The development of the industry along these 
lines would inevitably substitute organization for 
chaos in each of its branches, and favor the sur- 
vival of the fittest. The tendency would be from 
instability to stability. That was the natural 
order of things and there was no escape from it. 
Without concentration there was only the 
promise of destruction. The progressive refiner 
must enlarge his sphere of operations ; reduce 
the costs of his business to the lowest point ; 



31 

extend his markets in every direction ; and co- 
operate with other interests to establish normal 
conditions. This would require intelligence, 
enterprise, courage and capital. It meant, too, 
that the man or men incapable of such an effort 
for whatever reason must fall behind, or out of 
the race altogether. Organization is the basis of 
all success in the struggle for existence in the 
industrial world, and particularly when there are 
inter-dependent branches of an industry which 
are only fruitful in co-operation. If to 
organize, extend and develop an industry 
is a criminal conspiracy then all great 
enterprises are conspiracies in their conception 
and origin. Such a view of the matter is 
purely artificial, and unworthy of serious con- 
sideration. We may therefore assume that the 
men who constituted the Standard Oil Co. of 
Ohio early saw that organization, expansion and 
development were essential to the existence and 
progress of the Company and its business ; that 
they moved in that direction as their means 
permitted and the opportunity offered ; and that 
to do so was a natural course and not a con- 
spiracy. 



32 

(6) In 1872, as we have seen, the Company 
was established on a large scale as a refiner in 
Cleveland and had extended its marketing fa- 
cilities in various directions. The next step for 
its owners was to establish themselves as refiners 
in the oil regions for the obvious advantages of 
that situation. It was the vicinity of the crude 
oil production, and if, in the turn of events, it 
excelled as a refining locality to the point of 
supremacy they would be there for the protection 
of their interests and business. Early in 1874 
they acquired the Imperial Oil Refinery, at Oil 
City, a large modern refinery situated on the 
Allegheny River. In the latter part of 1874 
or the beginning of 1875, to establish them- 
selves at other points which had special advant- 
ages, they acquired refineries at Philadelphia, 
including the refinery of the Atlantic Refining 
Company, and refineries at Pittsburgh, includ- 
ing the refinery of the Standard Oil Company 
of Pittsburgh, a separate and distinct concern. 
About the same time they purchased the re- 
finery and business of Charles Pratt & Company 
on the Brooklyn side of the East River, and 
thereby acquired additional refining facilities at 
the seaboard, increased dock properties and ware- 



33 

housing facilities, and a large domestic and Ori- 
ental trade. It was at this time, and no doubt to 
enable them to make the purchase of the Charles 
Pratt & Company, Philadelphia and Pittsburgh 
properties, that the capital stock of the Standard 
Oil Company of Ohio was increased from two 
millions and a half to three millions and a half 
of dollars — its last increase. The value of the 
property obtained through these acquisitions 
was three millions of dollars (Vol. i6, p. 3082). 

In 1875 the refineries of Porter, Moreland & 
Co. and Bennett, Warner & Co. at Titusville 
were acquired to strengthen their position as 
refiners in the oil regions. In 1876 and 
1877 they acquired a majority interest in the 
refinery and business of J. N. Camden & Co. 
at Parkersburg, West Virginia, which were 
vested in the Camden Consolidated Oil Co., or- 
ganized by them for that purpose ; a number of 
refineries in Baltimore, which were vested in the 
Baltimore United Oil Co., organized by them for 
that purpose ; and a refinery on a small scale in Bos- 
ton, Mass., with a New England trade which they 
organized as the Maverick Oil Co. In 1877, they 
acquired from the Producers Consolidated Land 
and Petroleum Co. a small refinery at Bayonne, 



34 

New Jersey, and some land at Communipaw on 
wHcli they shortly after constructed the refinery 
known as the Eagle Works. 

(7) Between 1870, when the Standard Oil Co. 
of Ohio was organized, and 1877 the production 
of crude oil had increased from 5,000,000 bar- 
rels to 13,000,000, the yearly product being as 
follows, in round figures : in 1870, 5,200,000 ; 

1871, 5,200,000; 1872, 6,300,000; 1873,9,900,- 
000 ; 1874, 10,000,000 ; 1875, 8,800,000 ; 1876, 
9,000,000; and 1877, 13,000,000. (Deft.'s Ex. 
265, Vol. 19, p. 624.) During the same years 
the stocks of crude oil in storage had in- 
creased from 537,000 barrels to 3,127,000 
barrels, as follows, in round figures : 
^870, 537,000 barrels ; 1871, 532,000 ; 

1872, 1,084,000 ; 1873, 1,625,000 ; 1874, 3,705,- 
000 ; 1875, 3,550,000 ; 1876, 2,551,000 ; 1877, 
3,127,000 barrels. It is clear, therefore, com- 
paring the yearly production during these years 
with the yearly stocks, that though there was a 
great increase in the manufactured products it 
was not equal to the supply of crude oil, and that 
the great need was an increase of the consumption 
and more markets. This was theparticular direc- 



35 

tion tbat the efforts of the Standard Oil Co. took 
during these years. It extended its own mar- 
keting stations through various States, among 
them Indiana, Illinois, Michigan, Wisconsin 
and Minnesota. The men interested in it 
organized The Consolidated Tank Line which 
took over and extended the marketing business 
of Alexander-McDonald & Co. in the southern 
part of Ohio, Indiana and Illinois, and west of 
the Mississippi, with headquarters at Cincinnati, 
their interest in the Company being a half. 
They also acquired an interest in the Waters- 
Pierce Oil Co. which had a marketing business 
in Missouri and the southwest. They organized 
the Beacon Oil Company, which took over the 
marketing business of Kidder, Vaughan & Co. 
in New England, and acquired a large interest in 
the marketing business of the Portland Kerosene 
Oil Company, located at Portland, Maine. 

They extended their operations to the manu- 
facture and sale of lubricating oils in 1877 and 
1878 by acquiring the lubricating plants of 
the American Lubricating Oil Co. in Cleveland, 
of the Mica Axle Grease Co. in Pittsburgh, of 
the Payne, Ablett Co. near Pittsburgh, of the 
Eclipse Lubricating Oil Co. at Franklin, and an 



36 

interest in the Galena Oil Works and Signal 
Oil Works, which were associated enterprises 
engaged in the manufacture of lubricating oils 
at Franklin, Pa. This extension of their busi- 
ness enabled them not only to extend the market 
for lubricating oils, but to utilize the residuum 
at their various refineries remaining after the 
production of refined oil for illuminating pur- 
poses, as it is that residuum which is used in 
the manufacture of lubricating oil. By these 
various acquisitions they increased not only 
their refining capacity to meet the increase in 
the production of crude oil, but also the markets 
for the various manufactured products. 

(8) These, with the exception of the purchase 
from the Empire Transportation Co. to be men- 
tioned later, are the principal refinery and mar- 
keting acquisitions in the years from 1872 to 
1879. They were all separate, distinct and in- 
dependent transactions occurring at different 
times over this period of years. Each purchase 
was the result of a voluntary negotiation between 
the particular vendor and vendee. There was 
no combination between the several vendors, or 
any relation of any kind between the different 



37 

transactions. Every feature is lacking of a com- 
bined mass of transfers, in whicli tlie consumma- 
tion of each would have been dependent upon the 
consummation of all. There was no scheme for 
these acquisitions as a whole, and no coercion. 

It is probable that the purchase price of the 
Charles Pratt & Co. business and the Pittsburgh 
and Philadelphia refineries acquired at the be- 
ginning of 1875, was paid in shares of the 
Standard Oil Co. of Ohio, because at that 
time occurred the last increase of its capital 
stock from two millions and a half to three 
millions and a half of dollars. In the other in- 
stances the purchase price was largely paid in cash. 
The usual course was either to pay in cash or to 
organize a corporation to take over the property 
purchased, such of the vendors as wished to be 
paid in stock of the purchasing company taking 
its stock, and such of them as wished to be paid in 
cash receiving it from the proceeds of the shares of 
the new company subscribed and paid for by per- 
sons interested in the Standard Oil Co. of Ohio, 
and acting for the stockholders of that Company, 
for that purpose and to provide the necessary ad- 
ditional capital. It may be mentioned here that 
there is no evidence that any of the vendors 



38 

were in any way restricted from engaging or em- 
ploying their capital in the business in the future, 
or of any restrictions of any kind being placed 
upon them in that or any other regard. 

(9) Pipe line acquisitions. 

The conditions which prevailed in the earliest 
years have already been mentioned in a general 
way. The first stage was the building of gather- 
ing lines by many different people without re- 
gard to whether there were already sufficient 
pipe line facilities or not. Wherever oil was 
discovered and wells sunk more lines were laid 
than were necessary. This was followed by rate- 
cutting, loss, general demoralization and, in 
many instances, insolvency. But a prompt, 
adequate and orderly service was indispensable 
both to producers and refiners. It was also 
essential that the business should be remunera- 
tive to attract capital to provide adequate service 
and facilities for new oil territories as they were 
discovered, and to provide tankage for the storage 
of the surplus when the production exceeded 
the demand. The pipe line situation must ob- 
viously have been a matter of deep concern to 
a large refiner as it affected the supply of the 
raw material of his business. This was brought 



39 

liome to the Standard Oil Company in 1872 by 
the embargo placed on its supply as an incident 
of the excitement over the South Improvement 
Company. It could not remain subject to similar 
movements that might be inaugurated at any 
time. The producers numbered many thousands, 
and they were an unwieldy, excitable mass, who 
never could nor did maintain steady measures for 
the conservation of their business. There was 
no reason why they should not have organized 
an adequate pipe line and storage service, but 
they never did so. It was absolutely neces- 
sary that the Company should establish such 
a relation with pipe lines that its supply 
would be assured. There was therefore acquired 
in the year 1873 a third interest in the firm of 
Vandergrift & Forman, which then owned cer- 
tain lines known as the United Pipe Lines, and 
the capital stock of the American Transfer Com- 
pany, which owned another system of lines. 
Referring to Petitioner's Exhibit 770 (Vol. 10, 
p. 1817) it appears that on September 4th, 1874, 
there were at any rate nine of those pipe line 
systems. The recital in that exhibit clearly 
reveals the conditions which had existed. It is 
as follows : 



40 

" Whereas the jjipe lines owned and 
controlled by tlie parties hereto have a joint 
capacity for transportation more than twice 
as great as the total volume of petroleum 
produced in the district traversed by said 
lines ; and whereas the separate and dis- 
cordant relations now prevailing among the 
parties hereto lead to a needless multiplica- 
tion of extensions, branches and other 
matters involving a heavy cost, which ulti- 
mately becomes in some shape a charge upon 
the business transported, and also leads to 
the offering of open or secret inducements 
of an illegitimate nature, such as rebates, 
special rates, selling oil for less than it costs 
and full pipeage rates, and in other ways 
thereby to attract an under (? " undue ") 
share of traffic to the respective lines repre- 
sented herein ; and whereas it is believed to 
be desirable both for the interests of the 
parties hereto and those of the public whom 
they serve that all needless expenditure and 
all illegitimate inducements should cease ; 
now therefore for those purposes and for 
other valuable considerations mutually mov- 
ing the parties hereto they do each respect- 
ively agree with each other as follows : " 

This exhibit is a pooling agreement, common 
at that time with transportation companies, fix- 
ing a uniform rate of pipeage, providing for the 
payment of the earnings of the various systems 



41 

into a common fund, and fixing the proportion 
of the fund to which each system should be 
entitled. It appears from the loth article that 
the United Pipe Lines above mentioned were to 
be entitled to 29>^ per cent, of the common 
fund, and the American Transfer Company 7 
per cent., which shows the extent of the Stand- 
ard's pipe line interests at that time. 

In 1877 the United Pipe Lines and some of the 
other systems mentioned in Exhibit 770 were or- 
ganized into a corporation, named the United Pipe 
Lines, and a part of the lines of the American 
Transfer Company were transfered to it, to vest 
the gathering systems in the new company, and 
the longer lines, more in the nature of trunk lines, 
connecting the gathering systems with the rail- 
roads, in the American Transfer Company. In that 
year the pipe lines of the Empire Transportation 
Company were acquired in the interest of the own- 
ers of the Standard Oil Company through the 
transaction to be mentioned later, and became a 
part of the United Pipe Line system, thereby in- 
creasing their interest in that company. In 1881, 
the National Transit Company was organized by 
the men interested in the Standard and others to 
take over all the lines of the United Pipe Lines 



42 

and tlie American Transfer Company, including 
the trunk lines from tlie oil regions to Cleve- 
land, to Buffalo and to the seaboard, whicli were 
in process of construction. In 1882 the gather- 
ing lines of the National Transit Company 
amounted to 2,468 miles and the trunk lines to 
1,062 miles, a total of 3,530 miles. In 1908 the 
total mileage of the Standard's gathering lines 
was 45,227 miles and its trunk lines 9,388 
miles, a total of 54,615 miles, the difference, 
with the exception of less than a thousand miles 
representing construction by the company, or its 
subsidiary companies at its instance and with 
the capital it provided. (Archbold, Vol. 17, p. 
3232; Defts. Bx. 261, Vol. 19, p. 621). 

A glance at Defendant's Exhibit 265 (Vol. 19, 
P. 624) shows what the demand for capital out- 
lay in the construction of pipe lines and storage 
facilities must have been between 1874 and 1882. 
The production increased from 10,000,000 bar- 
rels in 1874 to 30,000,000 in 1882, or to treble 
the amount ; and during that time it extended 
into Vest Virginia. The volume of Industrial 
Statistics for 1892 issued by the Secretary of 
Internal Affairs of the State of Pennsylvania, 
shows that the stocks of crude oil increased from 



43 

3,700,000 barrels in 1874 to 34,596,000 in 1882. 
The tankage to store this vast increase was 
enormous in its quantity and had to be pro- 
vided. It was the ability to provide by the 
outla}^ of many millions of dollars all this 
necessary new construction of pipe lines and 
tankage which accounts for the expansion of the 
Standard's pipe line interests during those years, 
as no other interest cared to run the risks of such 
an investment. 

It is scarcely necessary at this day to elab- 
orate the fact that the ownership of an 
adequate pipe line system, with its necessary 
storage facilities, is an indispensable adjunct to 
refining on a large scale. It is the pipes 
that are in contact with the wells, and by their 
means only is the refiner enabled to provide 
his supply at the wells and regulate its storage 
and transportation according to the needs of 
his refineries. To be dependent upon others 
for that storage and transportation would 
introduce an element of uncertainty entirely 
incompatible with the successful prosecution 
of the business. This was demonstrated by 
the early conditions in the history of the business, 
and all subsequent experience has confirmed it. It 



44 

is established beyond dispute by the fact tbat all 
the present large and important refining interests, 
wbich have no connection with the Standard Oil 
Company, such as the Pure Oil Company, the 
Gulf Refining Company, the Texas Company, the 
National Refining Company of Cleveland and 
the Union Oil Company of California have found 
it necessary to have their pipe line systems (Re- 
port of Commissioner of Corporations on Petrol- 
eum Industry, August 5, 1907, Part 2, p. 637). 
This is also true of Crew, Levick & Co. (Rec, 
vol. 20, p. 107.) For the same reasons the owners 
of the Standard Oil Co. acquired their pipe line 
interests between 1873 and 1881. Since that 
time, as has already been stated, the expansion 
of the system with the exception of less than a 
thousand miles, has been due to new construc- 
tion to reach the new oil fields in Ohio, Indiana, 
Illinois, Kansas, Missouri, Indian Territory and 
Oklahoma as they were discovered and provide 
the necessary storage facilities. 

(9) Reference has been made to the Empire 
Transportation Company in connection with the 
acquisition of refineries and pipe lines, and we 
will now take up that transaction. The Penn- 



45 

sylvania Railroad always felt that it had a prior 
claim on the transportation of oil because of its 
proximity to the oil fields. It was the first com- 
pany to give special attention to it by organizing 
the Empire Transportation Company to furnish 
with its tank cars a service exclusively devoted 
to the transportation of oil. At an early day the 
Empire Company, to further control the traffic, 
acquired and established pipe line systems of its 
own. Its next step was to acquire and operate 
refineries and engage in the business of refining 
oil. It acquired the ownership or control of the 
Sone & Fleming Refinery at Brooklyn ; built a 
refinery at Philadelphia ; and through a subsidi- 
ary company, the National Storage Company, 
acquired property for the same purpose at Com- 
munipaw, New Jersey. This connection of the 
Pennsylvania Railroad with the business of 
refining oil aroused great antagonism in the 
latter part of 1876 and the beginning of 1877, 
particularly on the part of its rivals, the New 
York Central and Erie companies, though the 
Standard Oil Company joined in it. It was 
charged that through this alliance of the Rail- 
road Company with the pipe line systems and 
refining interests of the Empire Transportation 



46 

Company it could control not only the trans- 
portation of oil as against rival railroads, but also 
the refining of oil as against rival refiners, by 
merging its transportation charges in the re- 
fining profits. This led to a bitter war between 
the railroads, in which the Standard Oil Com- 
pany participated. It withdrew its oil traffic 
from the Pennsylvania Railroad ; both pipe line 
and railroad rates were cut ; and every incident of 
such a war was in full play for some time. This 
state of affairs continued during most of the 
year 1877. Finally the demoralization became 
so extreme that an adjustment was reached 
whereby the Empire Transportation Company 
sold its refineries and pipe lines to the Standard 
interests and its tank cars to the Pennsylvania 
Railroad. This war is fully described both by 
Mr. Rockefeller in his testimony and by Mr. 
Cassatt in testimony which he gave in a case in 
1879, and which the Petitioner has made a part of 
the record. It was in this way that the Standard 
interests came to acquire in October, 1877, the 
Sone & Fleming refinery at Brooklyn and the 
Philadelphia refinery of the Empire Transporta- 
tion Company, and its pipe line system which was 
transferred either to the United Pipe Lines or 



47 

the American Transfer Company. It was a 
separate transaction with its own features and 
conditions, and followed as a consequence of the 
Pennsylvania Railroad Company participating 
in the business of refining oil to the detriment 
of the other railroads and the refining interests. 

(lo) Stress is laid on the relations between 
the Standard Oil Company and the rail- 
roads between 1872 and 1880 ; and to the 
alleged special rates and favors it received 
from them is attributed its power to destroy the 
business of its competitors and acquire their 
properties. This is charged even with respect 
to the acquisition of the Cleveland refineries in 
1871 and 1872, but, as we have already said, 
without any foundation. But certain later con- 
tracts between it and the railroads are annexed 
to the bill, and this operation and effect is 
claimed for them. There is no basis for this claim. 

Whatever was done is to be judged by the 
standards, conditions and law of those days and 
not by the standards, conditions and law of the 
present time. It was a time of intense struggle 
between the trunk lines for every kind of traffic, 
with alternating short periods of agreed rates or 
pooling. Schedule rates were merely nominal. 



48 

Special contracts with shippers who could 
command even a small volume of any par- 
ticular kind of traffic were the custom. Shippers 
went from railroad to railroad for the best terms 
they could get, and railroads offered the induce- 
ments of special rates or rebates to get the busi- 
ness. The shipper who commanded a large and 
steady volume of traffic insisted that he 
was entitled to lower rates because of that 
fact. There was legal authority justifying him 
in making that claim. (See Nicholson vs. Great 
Western Ry. Co., 4 C. B. (N. S.) 366 ; Cleveland 
&c. R. R. Co. vs. Closser, 126 Ind., 348 ; Oxlade 
vs. N. E. Ry. Co., I Ry. & Can. Traf . Cases, 72 ; 
Root vs. L. I. R. R. Co., 114 N. Y., 300.) In other 
words, it was recognized that a wholesale shipper 
was entitled to a lower rate than a retail shipper ; 
that a refiner who could deliver to the railroad a 
train-load of oil every day or every other day 
was justified in insisting upon a lower rate than 
a refiner who delivered smaller quantities at 
irregular times which had to be transported in 
trains made up of different species of traffic. 
Indeed the contrary rule which prevails now 
is an arbitrary protection of the smaller shipper, 
and not founded on any principle of reason 
or business. 



49 

Whether the Standard Oil Company in the 
earliest period obtained better rates than its 
competitors there is no evidence to show. 
There could be none because every ship- 
per was making his own contracts for 
rates and keeping them to himself. 
It is fair to assume that in the main it got as 
low rates as anybody, and lower than some be- 
cause of the volume of its business ; but that was 
an incident of the business and not an advantage 
forged as a weapon of assault. 

We turn now to the specific contracts during 
this period which are annexed to the bill. 

(a) Exhibits 3, 4 and 5 are contracts made 
with the Erie and New York Central roads 
in 1874 and 1875, relating in the main 
to the operation of oil terminals, in the 
one case at Weehawken, New Jersey, and 
in the other, at Hunters Point, Long Island, 
and on the Hudson River at or about Sixty- 
fifth Street, and they were necessary and justifi- 
able. The oil traffic was a special traffic which re- 
quired special handling and facilities in ware- 
houses on its arrival at destination. The 
damage to the barrels in course of trans- 
portation required cooperage or refilling in 



60 

new barrels before being reloaded on lighters 
to be taken to the various docks where they 
were again unloaded for shipment by vessel. 
The entire service was a distinctly special 
service and the Standard Oil Company was 
most interested in its proper performance be- 
cause of the volume of its trafiSc. That was 
the reason for these contracts whereby it as- 
sumed to operate the terminals, consisting of 
warehouses, and to make uniform charges to all 
parties who used them or for whom services 
were performed as low as any other oil yard 
affording facilities " for the transfer, storage, 
preparation and shipment of the oil at the 
terminus of any railway, or other line competing 
with the Krie Railway, at or adjacent to the port 
of New York, and generally so to manage the 
premises as to give all patrons of the road fair 
and equal facilities for their oil business at uni- 
form cost " (Bill, p. 210). 

In the case of the New York Central the Oil 
Company agreed to provide at Hunters Point 
and on the Hudson River (Bill, p. 217) 

"large and commodious warehouses, wharves 
and piers, amply provided with tankage and 
all the necessary appliances for the receipt 
from the boats, barges and cars of the party 



51 

of the second part (the railroad company) 
of crude petroleum or the products of crude 
petroleum ; the cooperage, warehousing and 
delivery of the same to consignees in a 
prompt and efl&cient manner, and to receive 
upon the side tracks adjacent to its said 
property at the foot of 65th Street all 
crude petroleum which may be consigned to 
that point and unload the same and deliver 
the same to consignees on demand, doing 
and performing in respect thereto all such 
other things as the party of the second part 
may be bound to do ; also to receive upon 
the wharves of the party of the first part at 
Hunters Point aforesaid all the products of 
crude petroleum in packages, which may be 
consigned to that point, and deliver the 
same to consignees upon demand, doing 
and performing in respect thereto all such 
other things as the party of the second part 
may be bound to do." 

The terminals at Hunter's Point and at 65th 
street on the Hudson River were owned by the 
Standard Oil Company, and the Railroad Com- 
pany was relieved by this arrangement from pro- 
viding at its own expense other terminals for 
shippers other than the Standard. 

These contracts originated in a practical neces- 
sity which justified them, and there is no evidence 
that they operated injuriously to other shippers 
or refiners. 



52 

It is to be observed that the contract of April 
17, 1874, is an instance of a special contract for 
rates. (Bill, p. 208). The Railroad company was 
to furnish the cars and haul them to its Wee- 
hawken yards in full trains whenever practica- 
ble. The rates of freight were to be made by 
the President of the Atlantic and Great Western 
Railroad Company, the Erie's western connec- 
tion, and the Oil Company, to the satisfaction of 
the former, and were not to be higher than the 
rates paid by competitors of the Oil Company 
from competiting western refineries to New York. 
The Oil Company was not to ship more than 50 
per cent, of the product of its refineries by any 
other lines eastward ; it assumed all risks of 
losses by fire, natural leakage or breakage ; and ' 
it was itself to load the trains at the place of ship- 
ment and unload them at the place of destina- 
tion. Thus it did its own loading and unloading, 
assumed unusual risks, and its trafi&c moved in 
trainloads, 

{b) Exhibit 6, dated October ist, 1874, is an 
agreement between the Pennsylvania, New York 
Central and Erie Companies pooling the oil 
traffic from the oil regions to New York via the 
three trunk lines, and to Philadelphia and Balti- 



58 

more via tlie Pennsylvania Railroad. The New 
York proportion was fixed at 62.46 per cent, of 
the total, in which each of the companies was to 
share equally. The Philadelphia and Baltimore 
proportion was fixed at 37.54 per cent., to all of 
which the Pennsylvania Railroad was entitled. 
The rates on refined oil from Cleveland, Pitts- 
burg and the oil regions to New York, Phila- 
delphia, Baltimore and Boston, and the rates on 
crude oil to the same points were prescribed. 
Particular exception is taken to the following 
provision (Bill, p. 222) : 

" The roads transporting the refined oil 
shall refund to the refiners as a drawback 
the charges paid b}' them upon the crude 
oil reaching their refineries by rail ; and the 
roads transporting through crude oil to the 
eastern seaboard shall refund to the shippers 
22 cents per barrel; both of said drawbacks 
to be paid only on oil reaching the initial 
points of rail shipment through pipes the 
owners of which maintain agreed rates of 
pipeage, it being understood that the said 
rates of pipeage shall be equitably adjusted 
as between the several railroads, and that 
they shall set forth in a contract to be en- 
tered into between each pipe line and the 
trunk lines parties hereto ; said agreed rates 



54 

of pipeage being of importance to the parties 
hereto and constituting a valuable considera- 
tion to them." 

Upon wbich we observe : 

(i) That the provision to refund to the refiner 
the freight on the crude oil was to make " a 
group rate " for refined oil from Cleveland, 
Pittsburg and the oil regions to the seaboard, 
placing them all on an equality, which was a 
usual and established practice with respect to 
many similar kinds of traffic. The objection 
made to this provision could be made to every 
" group rate " that has ever been established. 

(2) The provision for the refund of 22 cents a 
barrel on the crude oil transported to the sea- 
board was to place the seaboard refineries on an 
equality with the inland refineries. Thus the 
rate on refined oil from Cleveland to New York 
was, according to the contract, $1.90 per barrel, 
less the crude rate of 35 cents per barrel from the 
oil regions to Cleveland. As a barrel of refined 
was the equivalent of one and one-third barrels 
of crude the amount to be deducted would be 35 
cents plus one-third of 35 cents, or 11.666 cents, 
making a total of 46.666 or 47 cents. De- 
ducting that sum from the rate on refined oil 



56 

would make the rate to New York I1.43. 
Refunding to tke seaboard refiner 22 cents a 
barrel his rate of $1.65 for crude oil would 
be reduced to $1.43. Thus the rate on a 
barrel of refined oil from Cleveland to the sea- 
board was made the same as the rate on a barrel 
of crude oil from the oil regions to the seaboard, 
and thereby the refiners at Cleveland and the 
refiners at New York were put on an equal 
basis. 

(3) The last clause of the provision respecting 
the drawbacks being paid only on oil reaching 
the initial points of rail shipment through pipes 
the owners of which maintained agreed rates of 
pipeage was necessary for two reasons ; first, 
to maintain uniform pipeage rates, and second, 
to guard against the drawbacks being used as a 
fund for rebates between the pipe line companies 
and the shippers at the expense of the railroad 
companies. Petitioner's Exhibit 770 (Vol. 10, 
p. 1817) shows that the sum of 22 cents men- 
tioned in this agreement was the charge for 
pipe line transportation, and it was manifestly 
absorbed in the railroad rates prescribed by the 
agreement. Necessarily it should only be re- 



66 

funded when it had been paid, and it would only 
be paid if the agreed pipeage rates were main- 
tained. 

(c) The agreement between the Standard Oil 
Company and the Pennsylvania Railroad of 
October 17, 1877 (Bill, p 227) ; in connection 
with which it is averred that there were similar 
contracts with the New York Central and Erie 
Companies (Bill, pp. 31 and 32). These contracts 
were what is known as " evener " contracts and 
were common in the railroad practice of that time. 
One of the methods then in vogue to avoid the 
enormous losses from rate wars among the rail- 
roads was an agreement apportioning the heaviest 
kinds of trafl&c, such as grain, cattle and oil, be- 
tween them in fixed proportions ; and to make 
such an agreement effective one or more of the 
heaviest shippers were selected to so arrange 
their business and apportion their shipments as 
to maintain the proportions fixed. For that 
service they were paid a commission. The 
Standard Oil Company as the heaviest shipper 
of oil was made the " evener " in connection with 
the pooling agreement between the railroads of 
October, 1877, and that was the purpose of this 
agreement. Exhibit 7, and the agreements of 



57 

similar tenor with the other trunk lines. Dr. 
Leonard Bacon has said of this method : 

" The delegating of this task of evener to 
the largest of the concerns engaged in ship- 
ping by the competing lines seemed by com- 
mon consent, at that stage in the evolution 
of the railroad system, to be a necessary ex- 
pedient for the operating of a " pool " for 
the ending of destructive railroad wars. In 
the livestock pool between the trunk lines 
from Chicago to New York in 1875, the 
allowance to the heavy Chicago house that 
undertook the task of evener was to be $15 
for each carload by whomsoever shipped. It 
was a crude method liable to serious ob- 
jections, and yet, to the railroad men of that 
day it had this in its favor, that no better 
way had then been devised for avoiding the 
evils and abuses far more damaging to all 
the interests concerned, including the public 
interest, than this method of the pool and 
the evener?'' 

{d) The contracts between the American Trans- 
fer Company and the Pennsylvania Company 
and other trunk lines respecting the payment of 
first, 20 cents, and then 22^ cents, a barrel on 
all crude oil transported by the railroads (Bill, 
PP- 33, 34 ; Exhibit 8, p. 231 ; Exhibit 9, p. 234). 

It is to be observed that this is a contract be- 
tween transportation companies. The American 



58 

Transfer Company had pipe lines of its own and 
represented the lines of the United Pipe Lines. It 
gathered and bought oil at the wells, transported 
it to the railroad junction points, and largely con- 
trolled the line of its railroad transportation. It 
built lines and provided facilities at the instance, 
and for the benefit, of the various railroads. 
(See statements in both contracts.) The trans- 
portation of crude oil from the wells to the point 
of destination was thus a joint service of the 
Railroad companies and the American Transfer 
Company and the pipe lines it controlled, and 
the burden of providing the facilities to make 
the necessary railroad connections fell upon the 
Transfer Company. The Transfer Company 
evidently deemed that it was entitled to the com- 
pensation provided by these contracts for its 
share in the joint service, in obtaining and 
furnishing the traffic, and in providing the facili- 
ties, and there is nothing in the record to im- 
peach at this distance of time the fairness of its 
claim or the measuring of the compensation by 
the total crude shipments, all, or practically all, 
of which it would seem were received by the rail- 
roads through the lines of the Transfer Com- 
pany. 



59 

{e) It is charged that at this time an additional 
15 cents per barrel on shipments of crude oil was 
allowed to the Standard Oil Company as a further 
rebate. (Bill, p. 35). Mr. Cassatt in his testi- 
mony given in March, 1879, explains that this 
reduction of the rate was made at a conference 
of railroad presidents in July, 1878, to meet a 
rate that had been made via Buffalo and the Erie 
Canal; that it was only in force until the closing 
of the canal in December of that year ; and that 
it was not made exclusively to the Standard Oil 
Company but to any shippers who were not 
shipping over the line via Buffalo and the canal. 
(Vol. 20, pp. 12, 13, 19, 30, 31). 

( /) There is no substantial evidence that these 
contracts, rates, reductions and allowances which 
we have reviewed had any relation to the ac- 
quisitions of refining and pipe line properties by 
the Standard Oil interests during these years. 
They certainly did not induce the sale of the 
Cleveland refineries, of the Charles Pratt & 
Company refinery, of the Atlantic Refining 
Company's refinery, and the other refineries at 
Pittsburg and Philadelphia represented by 
Warden, Frew & Company, the Imperial Re- 
finery at Oil City, the refineries of Porter, More- 



60 

land & Company and Bennett, Warner & Com- 
pany, at Titusville, the refineries and pipe lines 
of the Empire Transportation Company, the 
refinery of the American Lubricating Oil Com- 
pany, the refineries at Parkersburg and Balti- 
more, or the interest in the Galena and Signal 
Companies ; and these constitute the great bulk 
of the acquisitions during those years. The 
owners of those establishments were not forced 
to sell because the Standard obtained better rail- 
road rates than they could get, or under compul- 
sion of any kind. Doubtless various small re- 
fineries at different points, particularly in the 
oil regions, that were not equipped to compete 
successfully, and the owners of which could not 
find the capital to make the improvements ne- 
cessitated by the progress of the business, or for 
other reasons of that kind, were desirous 
of selling, and did sell, were purchased not 
for their refining capacity but because they 
had a certain amount of trade, and the physical 
property could be utilized in connection with 
other refineries. This was all the dismantling 
there has ever been of independent refineries. 
These have been called purchases " to put them 
out of business," and it is deemed to be evi- 



61 

dence enougla of that motive that some of them 
were dismantled ; but the fact is just as we have 
stated it. 

Excepting some very general and vague state- 
ments there is no evidence in the record 
showing or tending to show any causal con- 
nection between the railroad rates which the 
Standard obtained between 1870 and 1882 and 
its acquisitions during that period. 

(11) The period of these acquisitions extended 
from 1871 to 1879. The Cleveland refineries 
were acquired by, and conveyed to, the Standard 
Oil Company of Ohio. All the other properties 
were acquired for the stockholders of that com- 
pany. The earnings of the Company over and 
above a moderate annual dividend, represent- 
ing the margin between a legitimate manufact- 
uring profit in a business of that hazardous 
character and such a dividend, instead of 
being paid out in dividends to the stock- 
holders were used to acquire these prop- 
erties for their benefit. When physical 
properties were acquired they were conveyed to 
individuals in their behalf. When stocks of cor- 
porations were acquired, or stocks of new com- 



62 

panics organized to take over properties were 
subscribed and paid for, tbey were taken in 
the names of individuals for the same purpose. 
In 1879 the title to these properties and stocks, 
all held in such undivided common ownership, 
was vested in three trustees by an instrument 
which is found in the record (Deft.'s Ex. 257, 
Vol. 19, pp. 618-620). It is known as the Vilas, 
Keith and Chester agreement. It was an ex- 
ecuted transfer of all these properties and stocks 
by the individuals who held them on behalf of 
the stockholders of the Standard Oil Company 
of Ohio to Vilas, Keith and Chester as trustees 
in trust, to hold, control and manage them for 
the exclusive use and benefit of the persons 
named in the agreement, and in the pro- 
portions therein stated, and to divide and 
distribute them as soon as it could con- 
veniently be done between the beneficiaries 
in the proportions stated. The beneficiaries 
were the stockholders of the Standard Oil 
Company of Ohio, and their respective pro- 
portions were the proportions in which 
they owned the stock of that company. It 
thus appears that the individuals who were 
the stockholders of the Standard Oil 



63 

Company of Ohio owned these properties and 
stocks from the time of the several acquisitions 
in an undivided common ownership. Hence 
the concerns and businesses acquired were not 
after their acquisition independent or competitive 
concerns. 

(12) In January, 1882, the so-called Standard 
Oil trust was constituted (Bill, pp. 40-51). The 
parties to that agreement are embraced in three 
classes. The second class is made up of certain 
named individuals, who were the stockholders 
of the Standard Oil Company of Ohio and 
the owners of the corporations named in the first 
class in their entirety, and of a part of the shares 
of the corporations named in the third class, 
and, with a few exceptions, of the major part. It 
was not an agreement bringing together independ- 
ent competing concerns separately owned, but an 
agreement between common owners of various 
properties for the purposes therein expressed. It 
did not affect the relations of the properties to 
each other or unite them in any different owner- 
ship than had existed before. After the agree- 
ment was executed the same ownership interests 
in all the properties were represented by trustees' 



64 

certificates as they had previously been repre- 
sented by shares of the Standard Oil Company 
of Ohio and the Vilas, Keith and Chester trust. 
It was purely an arrangement between the com- 
mon owners of various properties and stocks 
concerning the form in which the legal title to 
the properties and stocks should be held and the 
interest of the real owners be evidenced, as dis- 
tinguished from a combination of different com- 
peting properties and businesses separately and 
independently owned. 

(13) At this time these properties in common 
ownership consisted of refineries at Cleveland, 
Oil City, Titusville, Buffalo (acquired in 1882), 
Pittsburg, Philadelphia, Parkersburg, Baltimore 
and the Atlantic seaboard in and abotit New York 
harbor ; of the pipe line system which has been 
described, and of marketing organizations in 
various parts of the country. Naturally after 
the acquisition of these properties the main 
process was one of their unification and in- 
tegration into a single business to secure 
efficiency and economy. The acquisitions 
after this time were of minor importance and 
have no material bearing on the questions in- 



65 

volved in this case. The structure of the organ- 
ization was not affected by them one way or the 
other, and its history would have been the same 
without them as with them. But there was con- 
stant internal expansion and development as 
markets were established all over the world 
and the use of the products increased. Existing 
refineries were enlarged and new refineries were 
built at places best adapted for the economical 
distribution of the products. As new oil fields 
were discovered the pipe line systems were 
extended to supply their needs ; and mar- 
keting stations, consisting of tanks for 
the storage of oil and tank wagons for 
its distribution, were established all over the 
country. Tank steamers were provided for 
the transportation of the products to countries 
in every quarter of the globe, and marketing 
stations were established there for its stor- 
age and distribution. The development along 
all these lines has been the result of growth 
and expansion, and not of combination or ac- 
quisition. The period of acquisition substan- 
tially stopped as early as 1879, — thirty years 
ago. 



66 

The most marked feature of this development 
during the past fifteen years has been the 
marketing of the oil all over this country by 
the Company itself. Previous to that time it 
had relatively few marketing stations and sold 
principally to jobbers who dealt with the re- 
tailers. The jobber made his own prices and 
the retailer was at his mercy. After the new 
system was inaugurated, and the Company dealt 
directly with the retailer by multiplying its 
marketing stations and expanding its system of 
tank wagon deliveries, the jobber was neces- 
sarily eliminated from the trade as a mid- 
dleman whereever the system reached. These 
jobbers had plants consisting of storage 
tanks and delivery wagons, and cus- 
tomers along the routes which were traversed 
by their wagons. They retired from the busi- 
ness to a very large extent as the Company 
established its own marketing stations and 
the middleman's profit disappeared, and their 
plants and the good-will of their routes were 
for sale, and the Company bought them. Such 
acquisitions were numerous all over the country, 
but they were a natural incident in the in- 
evitable development of the business and not 



67 

the result of an unnecessary movement simply 
to displace the jobber as a competitor. 

How complete the structure of the Standard 
Oil organization was in 1882 is apparent from 
its structure at the present time. The Bayonne 
works and the Eagle works at Cummunipaw, the 
two principal refineries of the Standard Oil Co. 
of New Jersey, date back to 1877. ^^s works 
at Parkersburg and its Baltimore works date back 
to the same time, and its Atlas works at BufEalo 
to 1882. The chief works of the Standard Oil 
Co. of New York are the Pratt works in 
Brooklyn, the Queens County works, the Sone 
& Fleming refinery, and the Long Island works, 
which all date back to the period between 1872 and 
1877. The refineries of the Standard Oil Co. 
of Ohio at Cleveland date back to 1870 and the 
period between that year and 1877. The 
refineries of the Atlantic Refining Co. at 
Philadelphia and at Pittsburgh and its Eclipse 
works at Franklin date back to the same years. 
The Vacuum Oil Works at Rochester and Olean 
date back to 1879 or thereabouts. The interest 
in the Galena Signal Oil Works dates back to 
1879. 



68 

The remaining refineries, being those at 
Whiting, Ind., at Sugar Creek in Missouri, and 
Wood River in Illinois, of the Standard Oil Co. 
of Indiana; the refinery at Neodesha, Kan. of 
the Standard Oil Co. of Kansas ; the refinery at 
Lima, O. of the Solar Refining Co., and the re- 
finery at Richmond Cal. of the Standard Oil 
Co. of California, are all creations of the Stand- 
ard organization since 1882. 

The pipe line system so far as any of it was 
acquired, with the exception of less than a thou- 
sand miles, dates back to the period between 
1873 and 1881 ; and the foundations of the mar- 
keting system in the various regions of this 
country were laid during the same period. 

The organization is in all the main features 
of its structure a creation of the period between 
1870 and 1881; and, in the main, prior to 1879. 

(14) In 1892 the so-called Standard Oil Trust 
was dissolved as a result of the decision of the 
Supreme Court in the State of Ohio vs. The 
Standard Oil Company (49 Ohio St., 137). No 
change of ownership followed from this step. 
The real owners of the properties before the dis- 
solution were the certificate holders, who were 



69 

originally the stockholders of the Standard Oil 
Company of Ohio. The plan of dissolution 
was for the trustees to assign to the cer- 
tificate holders their proportionate shares of 
all the property and stocks held by the trustees. 
A part of the certificate holders at once 
surrendered their certificates and received as- 
signments of their respective proportionate 
shares, and on their surrender to the various 
companies of these assignments received the 
shares of stock of each to which they were en- 
titled. The shares of those who did not sur- 
render their certificates continued to be held for 
them by the trustees. There was no change 
of the common ownership except as one person 
might be substituted for another on a transfer 
of certificates. There was no separation of the 
ownership of the shares of the different com- 
panies either by those who surrendered their 
certificates or those who continued to hold 
them. As separate shares they were un- 
marketable, because each company was simply a 
part or member of an organism though a 
distinct legal entity with its own ofl&cers to 
manage its affairs. Those who had exchanged 
their assignments from the trustees for shares 



70 

continued to hold their shares in a mass, just as 
the shares of those who did not surrender their 
certificates continued to be held by the trustees 
for them in a mass. There was no change in the 
conduct of the business as a unit. The function 
in the business as a whole, say of the Stand- 
ard Oil Company of New York, continued just 
the same after the dissolution as before, 
and the same is true of all the other companies. 
Every owner, whether in possession of shares 
of the respective companies or in possession of 
trustees' certificates, was after as before the dis- 
solution the owner of a fixed proportionate part 
of all the companies and properties. 

(15) l^liis was the situation in 1899 when the 
capital stock of the Standard Oil Company (of 
New Jersey) was increased. All the owners 
then owned precisely the same proportion of the 
shares of the Standard Oil Company (of New 
Jersey) that they did of the shares of each 
of the other companies. In 1899 they trans- 
ferred all their shares in the various com- 
panies to the Standard Oil Company of New 
Jersey, and received for the proportion of the 
shares which had been represented by a trust 



71 

certificate a share of the common stock of the 
Standard Oil Company (of New Jersey). In 
other words, the owners of the shares of these 
various companies, all of which were owned by 
the same owners in the same proportions, trans- 
ferred their shares to one of the com- 
panies in the common ownership, and received 
for them its shares in precisely the same 
proportion. No other change was effected 
than that, and that was not a change 
in the real ownership of the companies, but 
merely in the form of its evidence. Each 
share of the Standard Oil Company's stock 
represented what a trustee's certificate had 
represented, and after the transfer was made 
the individual instead of holding a trustee's 
certificate held a share of the Company. After 
the transfer the stockholders of the Standard 
Oil Company (of New Jersey) owned all these 
properties which before that they had owned as 
holders of trustee's certificates, and, before the 
formation of the trust, as stockholders of the 
Standard Oil Company of Ohio. The business 
of the companies and their relations to each 
other were absolutely unchanged. There was 



72 



therefore in this step no combination of pre- 
viously independent competing companies. There 
has been the same common ownership since the 
acquisition of the separate concerns in the seven- 
ties ; the changes have only been in the form of 
the evidence of that ownership. 



Sniniuary of Facts Bearing on Monopoly^ 

(i) There has not been at any time, with 
possibly one or two trivial exceptions, any ex- 
clusion of the capital or energies of others from 
participation in the business by restrictive agree- 
ments in connection with the acquisition of 
plants and properties, or otherwise. The whole 
domain of the business, from the production of 
the crude oil to the marketing of the manufac- 
tured products, has always been open to every- 
body. 

(2) The Standard has never owned or con- 
trolled more than a small part of the production 
of crude oil in the various oil fields. It was not- 
engaged in production at all until the year 1889. 
Since and including that year the following 



73 

figures show its percentage of the whole produc- 
tion year by year : 

Year. Per Cent. Year. Per Cent. 

1889 15-90 1898 33.50 

1890 24.05 1899 31.68 

1891 26.22 1900, 31-27 

1892 24.12 1901 27.13 

1893 28.84 1902 20.10 

1894 28.17 1903 17.24 

1895 30-12 1904 1444 

1896 28.76 1905 11.24 

1897 28.71 1906 1 1. 1 1 

Deft.'s Ex. 266, Vol. 19. 

In 1907, out of a total of 170,717,593 barrels, 
its production was 17,896,141, or JO}4 per cent; 
These figures show that for years there has been 
a steady decrease in its proportion. 

(3) The wide distribution of the oil fields has 
furnished the amplest opportunity for participa- 
tion in the business, both with respect to the 
location of refineries and pipe line construc- 
tion. Oil is produced in considerable quanti- 
ties in fourteen or fifteen States. Defendant's 
Exhibit 265 (Vol. 19, p. 624), compiled from a 
Government publication, shows the locations of 



74 

tlie oil fields. Down to 1876 production was 
confined to Pennsylvania and New York. The 
Lima-Indiana, Mid-Continent, Texas, California 
and Illinois fields have been discovered from 
time to time in subsequent years. The produc- 
tion of Pennsylvania, New York, West Vir- 
ginia, Kentucky, Tennessee, Kansas, Indian 
Territory, Oklahoma and Illinois, though 
varying in quality, is refinable by the ordi- 
nary processes, while a considerable propor- 
tion of the production of California, Ohio, 
Indiana, Texas and Louisiana is only re- 
finable by special processes. This is a very 
different situation from a limited and confined area 
of production favoring concentration of refining 
points and pipe line facilities. Actual experi- 
ence has demonstrated that there has been no 
obstacle to the establishment of refineries with 
access to the various oil fields, with or without 
their own pipe line facilities, or to the employ- 
ment of capital in the construction of pipe lines 
by any one who cared to engage in the business. 
(4) The increase in the production of crude 
oil is a marvelous record and one quite fatal to 
the allegations of monopoly. At the time of the 
organization of the Standard Oil Co. of Ohio in 



75 

1870 the total production had for the first time 
reached 5,000,000 barrels in one year. The 
10,000,000 barrel mark was reached in the year 
1874 ; the 20,000,000 in 1880 ; the 30,000,000 
(permanently) in 1889 ; the 40,000,000 in 1890 ; 
the 50,000,000 in 1891 ; the 60,000,000 in 1896 ; 
the 70,000,000 in 1901 ; the 80,000,000 in 1902; 
the 100,000,000 in 1903 ; the 120,000,000 in 
1904; the 130,000,000 in 1905; the 170,000,000 
in 1907, and the 180,000,000 in 1908. 

The increase is further emphasized by the 
table No. 266, entitled " Statistical Record of the 
Progress of the United States, 1800 to 1907," 
found in the Statistical Abstract of the United 
States for the year 1907, issued by the Depart- 
ment of Commerce and Labor, under the heading 
" Production of Principal Commodities." In that 
table petroleum is given year by year, and the 
following figures are taken from it : — 

Year Gallons 

1870 220,951,290 

1873 4i5,539>oi2 

1882 1,281,454,860 

1899 2,396,975,700 

1906 5,312,745-312 



76 

The figures for 1908 also show the wide dis- 
tribution of the oil producing fields. They are : — 

Field. Barrels (42 Gallons) 

Pennsylvania (including New York 

and part of Ohio) 25,053,810 

Lima (part of Ohio, Indiana) 10,005,547 

Mid-continent (Kansas, Oklahoma). . . 48,488,432 

Illinois = 34,019,708 

Gulf Coast (Texas and Louisiana)... 16,906,850 

California 48,306,737 

Other production 400,000 

Total 183,181,084 

With such an increasing and widely dis- 
tributed output of the raw material the coercive 
monopolization of its products is almost incon- 
ceivable. 

(5) The enormous internal growth and expan- 
sion of the Standard since 1882 through the 
building of new works, the enlargement of exist- 
ing ones, the new construction of pipe lines, and 
the expansion of its markets and marketing 
facilities, account for the size and extent of its 
business, and not the acquisition of competitive 
plants. 



77 

It was not until the year 1872 that the pro- 
duction of crude oil reached 5,000,000 barrels. 
Between that time and 1882 it increased to about 
25,000,000 barrels, and all of its principal acqui- 
sitions of refineries and pipe lines were before 
1882. It is true that the production in 1882 was 
30,000,000 barrels, but it fell again in the suc- 
ceeding years to less than 25,000,000. Even 
this production exceeded the consumption as it 
appears by the volume of Industrial Statistics 
for 1892 issued by the Secretary of Internal 
Affairs of the State of Pennsylvania that the 
stocks of crude oil increased from 1,084,423 in 
1872 to 34,596,612 in 1882, largely because of 
the enormous production in the years 1880, 
1881 and 1882. In 1882 the Standard, in 
addition to its refineries at Cleveland, had 
established itself as a refiner at Philadelphia, 
Pittsburgh, Titusville, Oil City, Franklin, 
Parkersburg, Buffalo, Olean, and on the At- 
lantic Seaboard around New York harbor and 
at Baltimore. At that time the value of its re- 
fineries and manufacturing properties was $17,- 
000,000, and its consumption was, as appears 
by Defendant's Exhibit 268, 16,592,593 barrels. 
From time to time after 1882 it enlarged its ex- 



78 

isting works, and built new refineries at Marcus 
Hook, Lima, Ohio, San Francisco, Whiting, 
Ind., Sugar Creek, Mo., and Neodesha, Kan., 
and in 1906 the total value of its refining 
plants had increased to $57,689,560 (Deft.'s 
Ex. 269, Vol. 19, page 627), and its consump- 
tion to 65,000,000 barrels (Deft.'s Ex. 268). 

The situation in California may be cited as a 
striking illustration of this internal expansion. 
In 1900 the Pacific Coast Oil Co. had about fifty- 
six acres of land which were supposed to be 
good for producing purposes ; a small refinery 
at Alameda ; a small pipe line about forty miles 
long ; and a small bulk steamer. The capacity 
of the refinery was about 260 barrels of crude 
oil a day. The pipe line ran from the oil pro- 
ducing field to the coast at Ventura, about two 
or three hundred miles from the refinery at Ala- 
meda. The Company's stock and property were 
purchased by the Standard in that year for 
$760,000. It then constructed a refinery at 
Richmond, Cal., utilizing as much of the ma- 
terial of the Alameda refinery as it could, which 
has a capacity of 28,000 to 30,000 barrels of 
crude oil a day. A pipe line 350 to 400 miles 
in length was built in the years 1902 and 1903 



79 

to tlie refinery from tlie oil fields whicli had been 
recently discovered in an entirely different region 
of California from that tapped by the short pipe 
line of the Pacific Coast Oil Co. In 1900 the 
total production of crude oil in California was 
4,329,950 barrels, and in 1907 it was over 
40,000,000 barrels. California crude could not 
in 1900 be refined into a marketable article, 
and its product was only saleable by mixing it 
with eastern refined oil in the proportion of 30 
per cent, of California refined to 70 per cent, of 
eastern oil. The Standard, through its chemists, 
invented a process for the successful refining 
of the native oil into a merchantable article, and 
now, through its efforts, all the Pacific Coast 
trade and a large Oriental trade are supplied 
with oil manufactured from California crude. 
The domestic trade amounted in 1902 to 40,259 
barrels ; in 1903 to 161,889 ; in 1904 to 243,471 ; in 
1905 to 359,337; in 1906 to 346,390 ; and in 1907 
to 440,856 barrels. The export trade was in the 
year 1904, when it began, 61,342 barrels; in 
1905, 271,900 barrels; in 1906, 878,874 barrels, 
and in 1907, 1,161,162 barrels. 

The Pacific Coast Oil Co., as we have said, 
was purchased in 1900 for $761,000.00 After- 



80 

wards its name was changed to the Standard Oil 
Company of California. Its net assets on De- 
cember 31st, 1906, were 521,329,952.00. The 
authorized capital of the Company is now $25,- 
000,000.00, of which 517,000,000.00 have been 
issued, the whole of which was paid for in cash 
at par by the Standard Oil Co. (of New Jersey). 
In other words, the Standard Oil Company (of 
New Jersey), has contributed the original pur- 
chase price and 517,000,000.00 of additional 
money in the development of the business in 
California. (Tilford, A^ol. 17, pp. 3488, 3496, 
3522 and 3523). The California Company has 
onl}- paid dividends in the years 1906, 1907 and 
1908 ; in 1906 and 1097 ^^ ^^^ ^^^^ of ^ P^^ 
cent., and in 1908, at the rate of 10 per cent. 

Defendant's Exhibit 284, Vol. 19, page 683, 
shows that in 1902 the Standard Oil purchased 
in California 3,000,000 barrels out of a total 
production of 14,000,000; in 1903, 6,000,000 
out of a total of 24,000,000 ; in 1904, 
9,500,000 out of a total of 29,700,000 ; in 1905, 
9,500,000 out of a total of 34,000,000 ; in 1906, 
9,500,000 out of a total of 32,500,000, and in 1907, 
9,000,000 out of a total of 40,000,000 ; and that 
its own production was in 1902 113,778 barrels; 



81 

in 1903, 91,133; in 1904, 121,994; in 1905, 
97,205 ; in 1906, 59,556, and in 1907, 624,000 
barrels. 

What it has accomplislied there by the size of 
its own undertaking could have been accom- 
plished by any one with the same energy and 
enterprise and willing to take the risks of such 
an investment ; and others are now actually fol- 
lowing in its wake, notably the California 
Petroleum Refineries, Ltd., with its refinery with 
a capacity of 2,500,000 barrels of crude per 
vear. 

In 1882 the total Standard pipe line mileage 
was 3,531 miles, divided between gathering lines 
2,468, and trunk lines 1,062.95. ^^ i899itsJtotal 
mileage had increased to 14,653, of which 
10,749 miles were gathering lines and 3,904 
trunk lines. In 1908 the total mileage was 
54,616, of which 45,227 were gathering lines and 
9,388 were trunk lines. Less than a thousand 
miles of this increase were acquired by pur- 
chase from others. The balance was all new 
construction of its own. After 1882 the trunk 
lines were completed to the seaboard at Bayonne, 
New York, Philadelphia aud Baltimore ; gather- 



82 

ing lines were built for the Lima-Indiana and 
Illinois fields, with a trunk line to Chicago ; 
for the great Mid-continent field, with a trunk 
line to Whiting, and for the California field. 
(Deft's Exhibit 262, Volume 19, following page 
621, graphically illustrates the increase of the 
pipe line mileage during the period stated). 

The increase in the marketing stations is 
shown by Defendant's Exhibits 263 and 264 
(Vol. 19). A marketing station consists of tanks 
for the storage of oil, with tank wagons for the 
distribution of the oil to retailers. Exhibits 263 
shows that in 1888 there were 313 such stations 
and their location. Exhibit 264 shows that in 
1906 there were 3,573, and their location. 

The efforts of the company have been 
unceasing in the development of the markets 
of the world. As Mr. Archbold testified (Vol. 19, 
p. 3290)— 

" Our trade is pretty nearly world-wide. 
There is scarcely a civilized part of the 
globe that the Standard Oil Co. does not 
reach in one way or another with American 
oil. Q. And has it been a slow building-up 
process? A. It has been a process since 
the organization began. The effort began 
at once with the expansion of trade. The 



83 

effort of the Standard Oil Co. from its very 
iBception has been the development of the 
resources of this country and the extension 
of its commerce throughout the world. Q. 
In the Orient and in Europe is it your en- 
deavor to reach the consumer direct in the 
same way you do here ? A. It is. We are 
as rapidly as possible putting the same plan 
of distribution into operation in all those 
countries that we have here, so as to, with 
the greatest possible economy, reach the 
consumer." 

Defendant's Exhibit 276, Vol. 19, p. 660, 
shows the relative volumes of the Standard's 
export and domestic trade in illuminating oil, as 
follows : 



84 



Year. 


Exports. 


Domestic. 


1891.... 


57.10 Percent. 42.90 


Per Cent 


1892.... 


.... 57-28 ' 


42.72 




1893... 


61.72 ' 


38.28 




1894... 


62.44 


37-56 




i895--- 


60.15 


39.85 




1896.... 


63.61 ' 


36.39 




1897.... 


64.25 


35-75 




1898.... 


62.17 ' 


37-83 




1899..-. 


60.21 ' 


39-79 




1900.... 


.....61.84 ' 


38.16 




1901 ... 


63.39 


' 36.61 




1903.... 


59-92 


' 40.08 




1903.... 


55-37 


' 44.63 




1904.... 


60.14 ' 


39-56 




1905.... 


62.86 ' 


37-14 




1906.... 


63.00 ' 


37.00 





Tlie development of the business is remark- 
ably illustrated by the table on page 525, 
Volume III, of the Brief on the Facts, 
which shows the attention that has been con- 
tinuously given to the utilization of the 
by-products of the Standard refineries, their 
manufacture into useful articles, and the creation 



85 

and expansion of tlie demand for them. The 
table is as follows : 

Crude Oil Consumed — Crude Oil Yield, 
AND THE Divisions as Between Re- 
fined Oil and all Other Products 
BY S. O. Co. Refineries. 



Year 



1895 
1900 

1904 

1906 



Total 
Crude Oil 
Consumed 
(Gallons) 



1,712,431,056 
1,872,159,702 
2,345,797,146 
2,728,248,642 



Total Yield 

all products 

(Gallons) 



1,630,234,365 
1,774,807,397 
2,207,629,694 

2,571,919,995 



Total 

Refined Oil 

(Gallons) 



990,084,070 
1,098,236,795.5 
1,112,495,658 
1,209,441,341 



Year 


Percentage 

Refined Oil 

Of Total 


Total By- 
products 
(Gallons) 


Percentage 

By-Products 

of Total 


1895 
1900 

1904 

1906 


60.73 
61.88 

50-39 
47.02 


640,150,295 
676,570,601.5 
1,095,134,036 
1,362,478,654 


39-27 
38.12 
49.61 
52.98 



86 



Year 



Refined Oil. 
Inc. over 1895 
Per 
Gallons Cent. 



1900 108,152,725.5 10.92 
1904 122,411,588 12.36 
1906 219,357,271 22.14 



By-Products. 
Inc. over 1895 

Per 
Gallons Cent. 



36,420,306.5 5.69 

454,983,741 71-07 

722,328,359 112.84 



Thus the total amount of illuminating oil for 
foreign and domestic trade had come to be in the 
year 1906 less than one-half of the total product 
of the Standard refineries, the remainder con- 
sisting of the by-products enumerated by Mr. 
Archbold (Vol. 17, p. 3255). 

In the same brief it is shown that in the 
year 1906 bulk for bulk the illuminating oil 
sold in the United States by the Standard 
concerns formed only 17.39%, or about one- 
sixth, of the total products of the refineries, and 
yet the brunt of the charge against it is that it 
is a monopoly by virtue of its control of the 
illuminating oil trade (Brief on the Facts, Vol. 
in, p. 528). 

The same brief (pp. 530, 531), shows that the 
largest estimate of the profits earned on the de- 



87 

fendants' domestic trade in illuminating oil in 
1906 was from $14,000,000 to about $18,000,000. 
If it should be objected that it does not appear 
that the profits on the foreign and domestic trade 
were on an equality attention is called to the 
following figures which show that the average 
export prices have been uniformly higher than 
the average domestic refinery prices for the same 
kind of oil. 





Pet. Ex. 1041 


Def. Ex. 293-B, Aver- 


Year. 


Export W. W. 


age Refinery Prices 




Prices. 


W. W. Oil. 


1895 


5-84 


5-24 


1896 


577 


4-93 


1897 


4.68 


4.02 


1898 


4-97 


4.26 


1899 


6.29 


5-25 


1900 


6.96 


5-44 


I9OI 


5.60 


4.96 


1902 


571 


5-45 


1903 


7-39 


6.85 


1904 


6.81 


6.76 


1905 


5.68 


542 


1906 


6.14 


5-38 



The foreign companies, to whose profits refer- 
ence was made on the oral argument, are mar- 



keting companies only ; so that the fact that they 
have apparently made a lower percentage of 
profits than the domestic companies has no sig- 
nificance. Most of the domestic companies, espe- 
cially those whose profits have been largest, are 
both refining and marketing companies. Natur- 
ally their profits would be very much larger 
than those of mere marketing companies. The 
comparison between export prices, which include 
the refining profit, and the average domestic re- 
finery prices, is the proper test, and it establishes 
an approximate equality between the export and 
domestic trade in refined oil as to profits. 

(6) There have always been numerous refineries 
in this country, owned by other parties, engaged 
in the production and sale of oil here and in for- 
eign countries. In the report of the Commissioner 
of Corporations concerning the oil industry, dated 
May 2nd, 1906, there is given (on page 59) a list 
of 65 so-called independent refineries which is 
headed " Principal Independent Refineries in 
the United States by States, 1904." That 
list shows refineries at various points in Pennsyl- 
vania, New York, New Jersey, Ohio, Kansas, 
Texas and California. In a foot note on page 
58 the Commissioner adds six others, which 



89 

" began operations in 1905 and 1906 in the 
Kansas territory." Referring to the oil regions 
in Pennsylvania he states (R., p, 84) that 
" there are two independent refineries at Brad- 
ford, ten at Warren, Struthers and Clarendon, 
three at Titusville, three at Coraopolis, six at 

Oil City, and others at scattered locations, * "aking 

^.egrau 
altogether more than thirty such establis Wes*"^ 

in this vicinity." "-ed 

Mr. Emery, in his testimony in this case, 
named 52 independent refineries as active works, 
and among them such important concerns as 
the Pure Oil Co. with its refinery at Marcus 
Hook, Pa., the National Refining Co. with re- 
fineries at Cleveland and other points, the Gulf 
Refining Co., and the Texas Co. His list with 
two or three exceptions is confined to Ohio and 
east of Ohio. 

The witnesses Westgate and Boltz in their 
testimony named 36 refineries which have formed 
an association known as the National Petroleum 
Association for the advancement of their interests 
(Vol. 6, p. 2926 ; Vol. 5, p. 2054). 

Defendants' Exhibit 277 (Vol. 19, pp. 662 and 
663) gives a list of 123 competitive refineries. 



90 

This subject is exhaustively treated in the 
Brief on the Facts, Vol. I., p. 231. 

In the report of the Commissioner of Corpora- 
tions on the oil industry of August 5th, 1907, 
it is said at page 651 : 

" The largest independent concern in 
'" ( scarcely produced more than 200,000 
^^ t^^rrels of illuminating oil. Since that time, 
cor- however, two or three independent concerns 
have enlarged their refineries or built new 
ones which approach more nearly to the 
size of the Standard plants. Thus, the 
plant of the Pure Oil Co. at Philadelphia 
has a capacity of about 700,000 barrels (of 
42 gallons) of crude per year, and can pro- 
duce on the basis of the prevailing yield 
from Pennsylvania crude between 300,000 
and 400,000 barrels (of 50 gallons) of illumi- 
nating oil per year. The Gulf Refining 
Co.'s plant at Port Arthur, Tex. has a crude 
capacity of more than 4,000,000 barrels per 
year. This is by far the largest independ- 
ent refinery now in operation, but on account 
of the small proportion of illuminating oil 
obtained from Texas crude its output of that 
product is much less than that of many of 
the Standard plants, probably in the neigh- 
borhood of 500,000 barrels per year. A 
new independent concern in California, the 
California Petroleum Refineries, Ltd., has a 
plant nearing completion which will have 



91 

a capacity of about 2,500,000 barrels of 
crude per year, which is not very mucli less 
than the capacity of the Standatd's Cali- 
fornia plant, which in 1904 handled about 
3,017,000 barrels." 

And on pages 636 and 637 : 

" Many independent concerns have gone 
a good way in the direction of integration. 
Thus many of the small refiners of West- 
ern Pennsylvania and Ohio are interested 
in crude-oil production, and supply part of 
the oil which they refine. A considerable 
number of them have small pipe lines or 
are part owners of pipe lines for supplying 
their refineries with crude. A large pro- 
portion of them have facilities for selling 
their products directly to retail deal- 
ers or are interested in market- 
ing concerns which have such facilities. 
The great majority of the refiners, it is 
true, have not carried integration nearly so 
so far as the Standard. But some of them, 
such as the Pure Oil Co., the Gulf Refining 
Co. (in conjunction with the J. M. Guffey 
Petroleum Co., which is owned by the 
same interests), the National Refining Co. 
of Cleveland, and the Union Oil Co. of 
California, have developed the system of 
integration to a degree approaching that of 
the Standard itself. All of these concerns 
have pipe lines, refineries and local market- 
ing facilities. All of them carry the 



92 

elaboration of by-products to substantially 
the most complete point permitted by the 
character of the crude which they use. All 
except the National Refining Co. are large 
producers of crude oil. All of them own 
tank cars and all, except the National 
Refining Co., own tank vessels. Probably 
none of these concerns manufactures the 
accessory materials of refining, packages, 
etc., to any such extent as the Standard does, 
but otherwise their system of integration 
is nearly as complete as that of the 
Standard. The difference between them 
and the Standard is rather in the volume 
of business than in its comprehensiveness." 

The testimony shows that these concerns are 
as a rule prosperous and growing. As an illus- 
tration of that fact, Petitioner's Exhibit 371, Vol. 
8, Page 899, shows that the crude oil receipts of 
the Producers' and Refiners' Oil Co., associated 
with the Pure Oil Co., increased from 1,321,572 
barrels in 1900 to 2,771,384 barrels in 1906 ; that 
the crude oil delivered by the United States Pipe 
Line Co., associated with the Pure Oil Co., to the 
refinery of the latter Company at Marcus Hook 
which began operations in 1904 increased from 
223,000 barrels in that year to 733,000 barrels 
in 1906 ; and that the refined oil delivered by 
the United States Pipe Line Co. from interior 



93 

refineries to Marcus Hook increased from 400,- 
000 barrels in 1901 to 800,000 barrels in 1906. 
Mr. Tarbell, who is connected with those Com- 
panies, testified that their business had been 
" a growing, developing and expanding busi- 
ness " (Vol. 3, p. 145 1), and further as follows 
{Idem, p. 1460) : 

" Q. Mr. Tarbell, for a number of years you 
have lived alongside of the Standard Oil Co., 
have you not, in many different localities in 
the transaction of your business ? A. We 
are in a number of points where they are 
doing business; yes, sir. Q. At many 
points? A. Yes, sir. Q. In Europe and 
in this country ? A. Yes, sir. Q. And your 
business is growing? A. Yes, sir. Q. And 
you have made money ? A. Yes, sir. Q. 
And you are a prosperous concern? A. 
Well, I think we are. Q. And you are ex- 
panding and developing the whole time? 
A, It is necessary to do so if we stay in the 
oil business. 

These conditions are utterly inconsistent with 
the theory of a monopoly. They demonstrate 
that the field is not only open to competitors, 
but is occupied by them. The extent to which 
they participate in it is measured only by their 
efforts and capital. It is true that the Standard 



94 

has done a large percentage of the business, but 
that is because of its long life, its comprehensive 
efforts, its energy, and the capital it has 
employed and risked. That percentage has 
been, however, continually decreasing in later 
years as others have engaged in the business 
on a larger and more comprehensive scale. What 
is true of to-day was equally applicable to past 
times if the same efforts and capital had been 
employed, and the same intelligence shown in 
adapting those efforts to modern conditions. 
The percentage of the total business done by the 
Standard will doubtless continue to decrease, and 
the causes of that decrease had just the same 
opportunity of operation in the past as in the 
present. The volume of the business which 
any concern obtains for itself is de- 
pendent upon its activities and means. 
That is true now, and always has been 
true. It is true of the volume of busi- 
ness that has been done by the Standard and 
by its competitors. It was the most intelli- 
gent, the most active, the best equipped, and in 
the highest credit, and the greatest share of the 
business fell to it. But that is not monopoly, 
and that it is not so is demonstrated by the fact 



95 

that as others have approached it in efi&ciency, 
capacity and means they have shared in the 
business correspondingly, and are constantly 
sharing in it to a greater and greater extent. 

(7) To show the volume of the Standard's 
business is the object of Petitioner's Exhibits 
376, 377 and 378 (Vol. 8, Page 904). Exhibit 
376 shows that the runs from the Standard, 
Tide- Water and Manhattan pipe lines, compared 
with the total production of crude oil in the 
Pennsylvania field, were in the year 1900, 92.9 
per cent.; in 1901, 92.9 per cent.; in 1902, 90.7 
per cent.; in 1903, 89.5 per cent.; in 1904, 88.7 
per cent; in 1905, 87.3 per cent., and in 1906, 
83.2 per cent., which is a decrease of nearly 10 
per cent, in seven years ; and that the percentages 
with respect to the Lima-Indiana field were in 1900, 
92.9 per cent.; in 1901, 93.0 per cent.; in 1902, 
92.5 per cent.; in 1903, 92.4 per cent.; in 1904, 
93.5 per cent. ; in 1905, 92.9 per cent., and in 
1906, 89.6 per cent. It is to be observed as to 
the Lima-Indiana field that it has been largely 
left to the Standard for the reason that its pro- 
duction, excepting to a small extent, is not refin- 
able by the ordinary processes ; and that the 
Standard at great expense developed and patented 
a successful process for its utilization. 



96 

Exhibit 378 shows that the proportions of the 
total pipe line deliveries to the Atlantic sea-board 
of the Standard and Tide- Water Pipe Lines from 
1900 to the year 1906, were as follows : 
Year. Per cent. Year. Per cent. 
1900 97.1 1904 95.7 

1901 97-5 1905 95-5 

1902 96.6 1906 ... 95.1 

1903 96.0 

These figures simply show that during the 
years they cover the Standard and Tide-Water 
Companies refined 95 per cent, of the crude oil 
refined at the Atlantic sea-board if the amount 
of crude exported and the amount reaching the 
seaboard by railroad be disregarded. There was 
no reason why others should not have refined at 
the sea-board as the Pure Oil Company does. 

Bxhibit 377 shows during the same years the 
proportion of the exports of illuminating oil by the 
Standard compared with the total exports, as 
follows : 

Year. Per cent. Year. Per cent. 
1900 90.8 1904 86.9 

1901 90-5 1905 87.9 

1902 89.3 1906 86.3 

1903 86.2 



97 

Here again we have a decreasing proportion. 

The use of naphtha or gasoline has greatly 
increased during the last ten years, so that, as 
appears from the statistics of 1904, it was a little 
over one-half of the quantity of illuminating oil 
that was marketed. It is a more valuable pro- 
duct than illuminating oil as it brings a much 
higher price. This trade is another instance of 
the increase in the volume of the business of 
competitors during recent years as it has grown 
from eight per cent, of the whole in 1897 to 13 
per cent, in 1906. (Brief on Facts, Vol. III., p. 

535)- 

Another instance of the same kind is furnished 
by Defendant's Exhibit 108 (Vol. 18, p. 274), 
which shows the number of tank cars in use in 
this country in the transportation of petroleum 
and its products on the first day of January of 
each year of the years 1899, 1905 and 1908, by 
the Union Tank I/ine Company and the Waters- 
Pierce Oil Co. (Standard Companies), and by 
other companies and railroads. It appears that 
in 1899 the Standard's cars were 62 per cent, of 
the whole; in 1905 they had decreased to 52 per 
cent. ; and in 1908 they had further decreased to 
51 per cent. ; whilst during the same period the 



98 

tank cars of other companies, including those 
owned by the railroads which are used by them, 
had increased from 38 per cent, of the whole to 
49 per cent. To express the matter in another 
way the Standard's tank cars between 1899 and 
1908 had increased 171 per cent., whilst those in 
use by others had increased 263 per cent. ; or 
the tank cars used by the Standard Companies 
in 1899 were 60 per cent, more than those in use 
by others while in 1908 they were only four per 
cent. (Brief on Facts, Vol. II., p. 251). 

But whatever may be the volume of the 
Standard's business it is due to the size 
and capacity of its refineries, their geo- 
graphical distribution, and the marketing 
facilities that it has provided in every sec- 
tion of this country and throughout the world. 
It is not due to any restriction of the employ- 
ment of the energies and capital of others in 
the business, or to any system of exclusive 
selling to the trade. There is no evidence that 
the dealers in oil have ever been required to buy 
exclusively from the Standard, or been placed 
under any restrictive contracts or arrange- 
ments respecting the source of their supply. 
There has been no effort at any time to control 



99 

the market by any such means. That formid- 
able weapon has never been used to secure an 
advantage over competitors, and had the Stand- 
ard men ever been engaged in a conspiracy to 
" crush " competition by excluding competitors 
from the trade it would have been used because 
of its potency. 

It is claimed that the extent of the Standard's 
pipe line system has conduced to a monopolistic 
control of the business. That charge we have al- 
ready answered. Its pipe line systems have been 
extended from time to time as new oil fields were 
discovered to meet its own needs and provide its 
refineries with a regular and adequate supply of 
crude oil. It was a necessary step, and as legi- 
timate as it was necessary. Wherever these lines 
could be private lines that was and is their char- 
acter, because they were built for its own pur- 
poses. For instance, when the mid-continent 
field showed promise of great development the 
Prairie Oil and Gas Co., organized by the 
Standard, by an expenditure of many mil- 
lions of dollars built its own private line 
to reach those fields and acquire the oil for 
the Standard's refineries. The production of 
those fields has far exceeded the consumption, but 



100 

tankage lias been provided at a cost of many 
more millions tliat the producers might have an 
immediate cash market for their oil. But the 
United States Pipe Line Company, controlled by 
the Pure Oil Co. , also has its pipe line to the 
Atlantic sea-board, and has extended its trunk 
line and its gathering systems into Ohio, and 
West Virginia to reach the oil in those fields. 
The Texas and Gulf Co.s have their pipe lines 
running from the mid-continent field to the Gulf. 
What those Companies did, and have done, 
others could equally well have done wherever 
oil is produced by finding capital and putting it 
to that use. 

In the States where it was necessary by local 
laws or for other reasons that the pipe lines 
should be common carriers the relation of any one 
desiring transportation has been the same as the 
relation of shippers to any other common carrier. 
They could demand reasonable rates and enjoin 
unreasonable rates. Since July, 1906, they have 
been able, under the Interstate Commerce Act, 
to apply to the Interstate Commerce Commission 
to fix the rates of any of the common carrier lines 
engaged in interstate transportation, but no one 
has done so. 



101 

The claim that the ownership of the pipe 
line systems has been used coercively with a 
monopolistic effect is without any foundation. 
The fact is that from an early day pipe lines 
have been, as they now are, an absolutely neces- 
sary adjunct to the refining business on a large 
scale, and they have been provided by the Stand- 
ard to meet its own needs for a sure, regular 
and adequate supply of oil for its refineries, and 
not as a weapon of coercion or control. 

(8) It is further charged that the volume of 
the Standard's business has been due to rail- 
road rebates, particular contracts in restraint of 
trade, and unfair competitive practices. Those 
subjects are dealt with at length in the Brief on 
the Facts. 

(9) It is also charged that the course of 
prices furnishes evidence tending to show a 
monopoly. That charge is effectively answered 
in the Brief on the Facts (Vol. 3, pp. 539 et seq.) 
where it is shown that during the period under 
examination the Standard's prices rose less than 
the average rise in general comodities, and that, 
measured by the purchasing value of money, 
they did not practically rise at all. Moreover 
the constant fluctuation in the prices from year 



102 

to year is the strongest evidence that they were 
governed by economic conditions and not fixed by 
arbitrary will. It is to be borne in mind that 
there may be a natural and legitimate influence 
or power over prices due to the magnitude 
of a business, and that inferences may not 
be drawn from prices in favor of monopoly 
when the other evidence shows that the magni- 
tude of the business is due to legitimate acquisi- 
tion, growth and development, and not to the 
exclusion of others from the business by re- 
strictive contracts or unlawful or coercive methods. 
Obviously the controlling and fundamental mat- 
ter is whether that magnitude is a growth and 
development along lawful and legitimate lines : 
because if it is so the course of prices is quite 
immaterial. 

(lo) What has been said about the course of 
prices covers the charge that the profits of the 
Company have been excessive. In the first place 
the profits have not been excessive considering 
the nature and hazards of the business ; and in 
the next place if the evidence, apart from profits, 
fails to show that the magnitude of the business 
is monopolistic the fact of unusual profits, if it 
existed, does not convert it into a monopoly. 



103 



These summaries are not exhaustive, and do 
not pretend to be more than a fair statement of 
the more material facts bearing on the subjects 
they cover. 



POINTS. 

(1) The common ownership of the Stand- 
ard properties was not an illegal combina- 
tion or conspiracy at the time the Act of 
1890 went into effect. 

(2) The Act of 1890 did not by its terms 
or reasonable construction convert that 
common ownership into an illegal and 
criminal combination in restraint of trade. 

(3) Congress could not constitutionally 
convert the ow^nership of the properties 
and the use to 'which they were put into an 
illegal and criminal combination or con- 
spiracy. 

(4) £ven if the acquisitions of the Stand- 
ard properties and their common ow^ner- 
ship had occurred since the Act of 1890 
went into effect they would not constitute 
an illegal and criminal combination or 
conspiracy ^vithin the Act. 



104 

(5) The acquisition by the Standard Oil 
Co. (of New Jersey) from the common 
owners of their shares in the so-called sub- 
sidiary companies was not an illegal and 
criminal contract, combination or con- 
spiracy within the Act of 1890. 

(6) There is no monopolization or at- 
tempt to monopolize. 

(7) The only relief, if any, that can be 
granted is to enjoin specific acts, contracts, 
or methods in restraint of interstate trade 
or tending to its monopolization if any 
such are found to exist. 

(8) There is no basis in the proofs for a 
degree affecting the international trade of 
the Defendants. 

(9) There is no basis in the proofs for a 
decree severing the ownership of the stocks 
of the pipe line companies. 

(10) There is no basis in the proofs for a 
decree afPecting the Defendants engaged 
in the natural gas business, or the oiirner- 
ship of their stocks by the Standard Oil Co. 
(of If cw Jersey). 



105 



POINT I. 

The common ownership of the Standard 
properties was not an illegal combination 
or conspiracy at the time the Act of 1890 
went into effect. 

(i) The right freely to buy and sell property 
is a fandamental civil right and a part of the 
liberty of the individual guarded and protected 
by the constitutional guaranties, both national 
and state. It is indispensable to the existence 
and progress of civilization. The utmost free- 
dom in its exercise as an element of the 
broader principle of liberty of contract is inher- 
ent in our social and industrial system. It has 
never been limited by any policy of encouraging 
or protecting competition. There has never been 
one rule with respect to its exercise for competi- 
tors in business and another for non-competitors. 
No such classification is recognized by the com- 
mon law. The right to buy from or sell to a 
competitor is no different from the right to buy 
from or sell to a non-competitor. The common 
law furnishes no precedent placing any restric- 
tion upon the right of competitors to buy from 
and sell to each other their businesses and plants. 



106 

As recently as Cincinnati Packet Co. vs. Bay 
(200 U. S., 179) the validity of a sale was recog- 
nized though, as the Court said, " All there was 
to sell besides certain instruments of competition 
was the competition itself." 

In Trenton Potteries Co. vs. Oliphant, 58 N. 
J. Eq. 507,524, combinations by independent and 
unconnected traders to regulate prices or pro- 
duction are distinguished from purchases of the 
businesses of competitors, and in regard to the 
latter the Court said : — 

" A person engaged in any manufacture 
or trade, having the right to acquire and 
possess property, and to do with it what 
he chooses, may lawfully buy the business 
of any of his competitors. His first pur- 
chase would at once diminish competition. If 
he continued to purchase, each succeeding 
transaction would remove another competi- 
tor. If his capital was large enough to en- 
able him to buy the business of all compet- 
itors, the last purchase would completely 
exclude competition, at least for a time. 
But in the absence of legislative restrictions 
(if such could be imposed) upon the acqui- 
sition of such property and its use when so 
acquired, courts could impose no limitation. 
They would be obliged to enforce such con- 
tracts, notwithstanding the effect was to 
diminish or even to exclude competition. 



107 

But appellant is a corporation and not an 
individual. Corporations, however, may 
lawfully do any acts within the corporate 
powers conferred on them by legislative 
grant. Under our liberal corporation laws, 
corporate authority may be acquired by ag- 
gregations of individuals organized as pre- 
scribed to engage in and carry on almost 
every conceivable manufacture or trade. 
Such corporations are empowered to pur- 
chase, hold, and use property appropriate 
to their business. They may also pur- 
chase and hold the stock of other corpora- 
tions. Under such powers it is obvious 
that a corporation may purchase the plant 
and business of competing individuals and 
concerns. The legislature might have with- 
held such powers or imposed limitations 
upon their use. In the absence of prohi- 
bition or limitation on their powers in this 
respect, it is impossible for the courts to 
pronounce acts done under legislative grant 
to be inimical to public policy. The grant 
of the legislature authorizing and permitting 
such acts must fix for the courts the char- 
acter and limit of public policy in this re- 
gard. It follows that a corporation em- 
powered to carry on a particular business 
may lawfully purchase the plant and busi- 
ness of competitors, although such purchases 
may diminish or, for a time at least, destroy 
competition. Contracts for such purchases 
cannot be refused enforcement." 



108 

In Diamond Matcli Co. vs. Roeber, io6 N. Y., 
483, it was said: 

" We are not aware of any rule of law 
which makes the motive of the covenantee 
the test of the validity of such a contract. 
On the contrary, we suppose a party may 
legally purchase the trade and business of 
another for the very purpose of preventing 
competition, and the validity of the contract, 
if supported by a consideration, will depend 
upon its reasonableness as between the par- 
ties. Combinations between producers to 
limit production and to enhance prices, are 
or may be unlawful, but they stand on a 
different footing." 

See, also. 

In re Greene, 52 Fed., 104. 

In re Corning, 51 Fed., 210, 211. 

(2) The common law doctrine respecting con- 
tracts and combinations in restraint of trade does 
not circumscribe the right to buy and sell ; it 
concerns only executory contracts or arrange- 
ments restricting the liberty of individuals in 
the pursuit or conduct of their businesses. 
Its underlying conception was that such re- 
strictions could be carried to the point of 
contravening a sound publie policy with respect 
to the freedom of the individual to employ 



109 

his energy and capital in trade, and the freedom 
of trade. It has no concern with compulsory 
competition or the right of the individual to re- 
tire from a trade in which he is engaged and 
sell the business and the property employed in 
it to a competitor. It leaves competitors free 
to form partnerships and thereby combine their 
energies, resources and capital. It leaves them 
free to form corporations and unite their 
energies, resources and capital in that mode of 
organization. It does not deny to the competitor 
who wishes to retire from business, or who from 
lack of ability, ingenuity or enterprise, is fall- 
ing behind in the competitive race, or who for 
any other reason wishes to sell, the only market 
for his business by prohibiting him from selling 
it to those engaged in the same business. It has 
never sought to place a limit on the expansion 
of the business of the individual or the corpora- 
tion either by employing additional capital in 
enlarging existing plants, or building new ones, 
or by acquiring existing plants from others. In 
leaving free the right to buy and sell the common 
law merely expresses the faith and belief 
of men and society in the free play of individual 



no 

efiFort and the supreme necessity of the right to 
industrial progress. 

" The truth is," said Lord Justice BowEN 
in the Mogul Steamship Case, L. R., 23 
Q. B., 617, " that the combination of capital 
for purposes of trade and competition, is a 
very different thing from such a combina- 
tion of several persons against one, with a 
view to harm him, as falls under the head of 
an indictable conspiracy. There is no just 
cause or excuse in the latter class of cases. 
There is such a just cause or excuse in the 
former. There are cases in which the very 
fact of a combination is evidence of a design 
to do that which is hurtful, without just 
cause, — is evidence — to use a technical ex- 
pression — of malice. But it is perfectly 
legitimate, as it seems to me, to 
combine capital for all the mere purposes 
of trade for which capital may, apart from 
combination, be legitimately used in trade. 
To limit combinations of capital, when used 
for purposes of competition, in the manner 
proposed by the argument of the plaintiffs, 
would, in the present day, be impossible — 
would be only another method of attempting 
to set boundaries to the tides." 

(3) The scope and limits of the common 
law doctrine are clearly shown and fixed by 
the cases habitually cited. These cases 
have been frequently analyzed by the courts, 



Ill 

particularly in the opinions of Harlan, J., in 
U. S. vs. E. C. Knight Co. (156 U. S., p. 25 
et seq.) and in Northern Securities Co. vs. U. S. 
(193 U. S., pp. 339-342) ; and in the opinion of 
Taft, J., in U. S. vs. Addystone Pipe and Steel 
Co. (84 Fed., pp. 288-292). 

The leading cases are Hilton vs. Eckersley (6 
El. & Bl., 47) in England ; and in this country 
Morris Run Coal Co. vs. Barclay Coal Co. (68 
Pa. St., 173) ; Salt Co. vs. Guthrie (35 Ohio St., 
666) ; Amot vs. Pittston & Elmira Coal Co. (68 
N. Y., 558); Craft vs. McConoughy (79 111., 346) ; 
India Bagging Association vs. Kock (14 La. 
Ann., 168) ; Vulcan Powder Co. vs. Hercules 
Powder Co. (96 Cal., 510) ; Oil Co. vs. Adoue (83 
Tex., 650) ; and Chapin vs. Brown (83 Iowa, 156). 
Many other cases might be cited, but these are 
typical of them all, and a reference to them will 
sufi&ciently indicate the nature of the combina- 
tions which have been held to be in restraint of 
trade or contrary to public policy and show that 
they do not include purchases of competitive 
properties. 

Hilton vs. Eckersley (6 El. & BL, 47) was 
brought upon a bond signed by eighteen Lanca- 
shire cotton spinners binding them severally to 



112 

carry on their businesses with respect to the 
wages they would pay, hours of labor and other 
matters, according to the regulations of the 
majority. The Court of Exchequer Chamber 
held that the bond was void, because in restraint 
of trade, for the reason that " each man's power 
of carrying on his trade according to his discre- 
tion for his own best advantage " was restrained. 
(See Stephens' History of the Criminal Law of 
England, pp. 219, 220). 

Morris Run Coal Co. vs. Barclay Coal Co. (68 
Pa. St., 173), was an agreement between five in- 
dependent coal companies, controlling the pro- 
duction of the Blossburg and Barclay mining 
regions in Pennsylvania, empowering a com- 
mittee to fix prices and each company's propor- 
tion of sales. 

Arnot vs. Pittston and Elmira Coal Co. (68 
N. Y., 558), was an agreement between two in- 
dependent coal companies whereby one of them, 
which had a coal depot at Elmira which was the 
chief market for coal in western New York, pur- 
chased a portion of the product of the other and 
bound it not to sell coal to any other party to 
come north of the state line between New York 
State and Pennsylvania. It also appeared that 



113 

the purchasing company had similar contracts 
with all the other mining proprietors in the same 
coal region. 

Salt Co. vs. Guthrie (35 Ohio St., 666), in- 
volved an agreement between independent manu- 
facturers in a salt producing territory in Ohio 
providing for a committee to fix the prices at 
which all of them should sell their product. 

Craft vs. McConoughy (79 111., 346), in- 
volved an agreement between five independent 
grain dealers in Rochelle, Illinois, to conduct 
their business as if independent of each other, 
but fixing the prices at which they would sell 
and dividing the profits of the business as a 
whole between them in fixed proportions. 

India Bagging Association vs. Kock (14 La. 
Ann., 168) was based on an agreement between 
eight independent commercial firms in New 
Orleans which held a large quantity of cotton 
bagging providing that no member should sell 
for three months excepting by vote of the 
majority. 

Vulcan Powder Co. vs. Hercules Powder 
Co. (96 Cal., 510) involved an agreement 
between four independent powder companies 
of California providing that each should sell at 



114 

prices to be fixed by a committee of their repre- 
sentatives, and pay over to the others the profits 
on any excess of sales over a fixed proportion of 
the total sales. 

Oil Co. vs. Adoue (83 Tex., 650) was based on 
an agreement between five independent owners 
of cottonseed oil mills in Texas that they 
would not sell at less than certain agreed prices, 
and whereby one of them guaranteed to the other 
four profits to a stated amount. 

Chapin vs. Brown {83 la., 156) involved an 
agreement between the grocery men in a town 
not to buy or sell any butter so as to throw the 
business into the hands of one man who dealt 
exclusively in butter. 

There are other cases concerning agreements 
between independent companies or parties en- 
gaged in a quasi-public employment fixing prices 
and dividing or pooling the business. (Gibbs vs. 
Gas Co., 130 U. S., 396; Hooker vs. Vande- 
water, 4 Denio, 349 ; Stanton vs. Allen, 5 Denio, 
434; West Va. Transportation Co. vs. Ohio 
River Pipe Line Co., 22 W. Va., 600.) 

These cases suflBciently illustrate the doctrine 
of the common law although in some of them 
there was a local statute denouncing con- 



115 

spiracles " to commit any act injurious to trade 
or commerce." In each case there was a com- 
bination of independent competitive manufac- 
turers or dealers in the form of an executory 
agreement regulating prices, production, or the 
conduct of the business of each in other particu- 
lars. The essence of such combinations is that 
the parties to it are independent competitive 
manufacturers or dealers, and that restraint 
is placed upon the freedom of each to conduct 
his own business with respect only to his own 
interests and judgment. Unless these essential 
elements appear the doctrine of these cases 
has no application. Purchases of property, 
though afifecting competition in uniting prop- 
erties employed in the same business which 
had been previously separately owned, were not 
involved, and are neither within the letter or the 
spirit of the principle of these cases. 

(4) It is not necessary to analyze the rule of 
public policy on which these cases are 
based. " Public policy," said Lord Brougham, 
in Kgerton vs. Brownlow (4 H. L. Cas., 196) " is 
that principle of the law which holds that no 
subject can lawfully do that which has a tend- 
ency to be injurious to the public or against the 



116 

public good." "If," said Sir George JESSEI., in 
Printing Co. vs. Sampson (19 L. R. Eq. Cas., 462) 
" there is one thing more than any other which 
public policy requires, it is that men of full 
age and competent understanding shall have 
the utmost liberty of contracting, and that con- 
tracts, when entered into freely and voluntarily, 
shall be held good and shall be enforced by 
Courts of Justice ". Whenever contracts or 
transactions are questioned as injurious to the 
public there is a balancing of the considerations 
bearing on liberty of contract on the one hand 
and on the public good on the other, out of which 
have grown certain fixed and definite rules or 
determinations. Amongst them is this rule that 
combinations or contracts between independent 
manufacturers or dealers regulating their busi- 
nesses and restricting each in the conduct of 
his own separately owned business may es- 
tablish such a control of the market as to be in- 
jurious to the public and, therefore, the courts 
will not enforce them. But when purchases 
are made of competing concerns there is no 
continuance of the previous separate owner- 
ship and no restriction upon the conduct of 
businesses separately owned. The purchaser 



117 

has increased his productive capacity to the 
extent of his acquisitions, but neither he 
nor anyone else is thereby under the ban of 
any restrictions. The distinction between the 
two situations is obvious and fundamental, and 
it is the reason why the rule with respect to 
combinations does not apply to the ownership of 
various properties through their acquisition and 
purchase though they were previously employed 
in competition. The title to property thus ac- 
quired passes, and with it the complex mass of 
rights called ownership, among which is the 
right to use it for the purposes for which it is 
adapted. There is no authority at common law 
for invalidating, limiting or impairing rights of 
ownership in property so acquired. 

(5) But it will no doubt be argued that if 
acquisitions originate in a scheme to acquire 
practically all the properties or plants used 
in a business with a view to restraining trade 
or controlling the market it is an illegal com- 
bination at common law. The proposition, 
which it will be insisted is sustained by certain 
cases, has been thus formulated : " An agreement 
between competitors to surrender control over 
their properties, and transfer them to one and 



118 

the same corporation or organization, where each 
transfer is conditional upon a similar transfer 
by each of the other competitors and parties 
to the arrangement, and where the considera- 
tion for each transfer is the acquirement of 
an interest by the seller in the new organization 
which will have control of all the former com- 
petitors, is an illegal combination." Whether 
this is a sound common law doctrine we need not 
stop to discuss, because the facts of this case do 
not bring it within its range. But a reference to 
the cases will be useful in accentuating the pre- 
cise facts which were involved and the scope of 
the rule they apply. 

These cases are, Richardson vs. Buhl, 77 
Mich., 632 ; People vs. North River Sugar Re- 
fining Co., 54 Hun, 354 ; State vs. Standard Oil 
Co., 49 Ohio St., 137 ; State vs. Distillery Co., 
29 Neb., 700 ; Distilling Co. vs. People, 156 111., 
448. 

In Richardson vs. Buhl {'j'] Mich., 632), it was 
held that the Diamond Match Company which 
had been incorporated for the purpose of manu- 
facturing and dealing in friction matches, and 
acquiring as far as possible all the plants in the 
United States, was an unlawful body. The only 



119 

authorities cited are cases involving contracts 
between, or combinations of, independent pro- 
ducers regulating prices or production. It is 
not a reasoned determination of the matter, 
and, the question was imported into the case 
by the Court on its own motion, in connec- 
tion with the determination of a collateral 
matter between individuals, and without its 
being raised or discussed by counsel, or the pres- 
ence of the company itself. The case stands by 
itself and is in direct conflict with Trenton Pot- 
teries Co. vs. Oliphant, 58 N. J. Eq., 507 ; Oak- 
dale Co. vs. Garst, 18 R. I., 484 ; State vs. Con- 
tinental Tobacco Co., 177 Mo., i ; In re Greene, 
52 Fed., 104; In re Corning, 51 Fed., 210, 211. 
The People vs. North River Sugar Refining 
Co., 54 Hun, 354, was a case of a combination 
of separately owned and competing manufactur- 
ing concerns in the form of a trust. It was held 
that the transfer of the shares of the company 
by the stockholders to the trustees of the 
trust was an ultra vires and unlawful act on 
the part of the corporation warranting its 
dissolution, and that the trust in tending to 
monopoly was an illegal combination. This was 
not a case of sale, but a pure combination be- 



120 

tween independent concerns for the manage- 
ment and control of their separate businesses 
as a whole by a body of trustees. The Court 
of Appeals sustained the judgment on the former 
ground and did not pass on the question of the 
combination as a monopoly. (121 N. Y., 582). 

State vs. Standard Oil Co. (49 Ohio State, 137), 
was determined on the pleadings consisting of the 
amended petition, the answer thereto, and the 
demurrer of the State to the answer. These 
pleadings are given in the report of the case. 
There is no averment or claim in the amended 
petition that the trust agreement was a combina- 
tion in restraint of trade or tending to a mon- 
opoly, or in any way raising such an issue. 
What was claimed is shown by the final aver- 
ment, which is that " by reason of defendant's 
stockholders, directors and ofi&cers signing 
and entering into such trust agreements and 
carrying out their provisions and surrendering 
their stock in defendant and accepting in lieu 
thereof certificates issued by the nine trustees 
aforesaid and permitting the corporate powers, 
business and property of the defendant to be 
exercised, conducted and controlled by said 
trustees in manner aforesaid, and by reason of 



121 

the acts and omissions of the defendant herein 
before recited, said defendant has forfeited 
its corporate rights, privileges powers and 
franchises." It is, however, significant that 
the issue of a combination in restraint of trade 
and tending to a monopoly was tendered by the 
original petition filed, but that petition was, after 
the denials of the original answer, superseded 
by the amended petition, which withdrew such 
issue from the case, and there was no such issue 
in the case as it was presented to the Court. 
The case is only authority for the proposition 
that the execution of the trust agreement by all 
of the stockholders and oflEcers of the Standard 
Oil Co. of Ohio was a corporate act on its part, 
and as such ultra vires and an abuse of its cor- 
porate powers. The case did not at all involve 
the legality of purchases or acquisitions of prop- 
erty on the theory that they constituted a com- 
bination. 

In The State vs. Nebraska Distillery Com- 
pany (29 Neb., 700), there was under considera- 
tion the combination of independent distillers 
known as the Whiskey Trust. 

In The Distilling and Cattle Feeding Co. vs. 
The People (156 111., 448), it was held that this 



122 

combination of independent distillers known as 
the Whiskey Trust was a combination in 
restraint of trade and tending to create a mo- 
nopoly, and that the organization of the defend- 
ant corporation to acquire the plants of the 
parties to the trust in exchange for its stock as 
the result of an agreement among them that the 
corporation should be organized for that pur- 
pose did not purge the combination of its 
illegality. 

Eliminating People vs. North River Sugar 
Refinery (54 Hun, 354), and State vs. Dis- 
tilling Company (29 Neb., 700), because they 
involved combinations of separate and inde- 
pendent concerns for the management of their 
businesses as a whole by an outside body of 
trustees, and State vs. Standard Oil Co. (49 
Ohio St., 137), for the reasons above stated, only 
Richardson vs. Buhl (77 Mich., 632), and Dis- 
tilling Company vs. People (156 111., 448), re- 
main, and of these it is the doctrine and au- 
thority of the latter case with which we have to 
deal. 

(6j The ruling of that case precisely stated is, 
that if a number of independent manufacturers, 
representing the major part of an industry. 



123 

combine to form a trust which is held to 
be an illegal combination in restraint of 
trade, and thereupon acting together they 
organize a corporation to take over their 
respective properties in exchange for its stock as 
part of one and the same scheme, the combina- 
tion is continued in the corporation, there having 
been merely a change of form. It is not neces- 
sary for us to question this doctrine as it has no 
application to the facts presented by the record 
in this case. We are content to say that it 
will bear a good deal of examination before it is 
finally accepted. It is a new departure as there 
is a real distinction between a combination of in- 
dependent concerns, each continuing its separate 
ownership, restricting the freedom of each in the 
conduct of its business, and the obliteration of that 
ownership in the transfer of the separate concerns 
to a new corporation with its own stockholders and 
their common ownership of the whole enterprise, 
considering that in the one case there is a restraint 
upon the separately owned concerns and their 
management and operation, whilst in the other 
there is a single ownership and no restraint of 
any kind. The rule of public policy respecting 
combinations was never intended to restrict the 



124 

right of sale or compel the continued ownership 
of property by an individual or a corporation. 

There are one or two cases of the same char- 
acter as the Illinois case, but it is not necessary 
to treat them separately. 

The Northern Securities case (U. S. vs. North- 
ern Securities Co., 193 U. S., 197) is also urged 
in support of the broad proposition that the ac- 
quisition of competitive plants is a combination 
in restraint of trade at common law. 

The Northern Pacific and Great Northern Rail- 
road Companies were competitive trans-conti- 
nental railroads, each with its own stock holders 
and board of directors. Neither had the legal 
power or authority to acquire the other ; in fact, 
such an acquisition was prohibited. Each was 
bound, so far as the other and the public were 
concerned, to maintain its separate competi- 
tive existence. To bring them under what 
would be practically a common control and man- 
agement certain leading stockholders of each 
company combined together to organize the 
Northern Securities Company under the laws 
of the State of New Jersey and to exchange 
its shares at fixed ratios for the shares of the two 
companies. This was held to be a combination in 



125 

restraint of trade ; the organization of the com- 
pany being treated as a mere device for the har- 
monious operation of both roads and the elimina- 
tion of competition between them. Mr. Justice 
Harlan said (p. 346). "The Securities Company 
is itself a part of the present combination, its 
head and front ; its trustee." Mr. Justice 
Brewer said (p. 362) : 

" The transfer of stock to the Securities 
Companies was a mere incident of the man- 
ner in which the combination to destroy 
competition and thus unlawfully restrain 
trade was carried out." 

There is a fundamental difference between 
such a combination for the purpose of bring- 
ing these competing railroad companies under 
the same control and management through 
the medium of a holding company, and a 
purchase of competing manufacturing con- 
cerns. There is perhaps some analogy between 
such a combination and the facts involved in 
the Illinois case, if the vital difference between a 
manufacturing or trading company and a public 
service corporation is disregarded. There was in 
each case an agreement to bring independent 
concerns under the same management through 



126 

the medium of a corporation organized for that ex- 
press purpose ; but that is radically different from 
the acquisition by an existing concern through 
separate transactions of other concerns in the 
same business to extend the sphere of its opera- 
tions or to secure a greater degree of necessary 
independence in vital relations of the industry, 
such as a regular and adequate supply of the 
raw material. On this difference we stand. 

The same distinction applies to U. S. vs. Ameri- 
can Tobacco Co. (164 Fed., 700), as it involved 
numerous mergers and consolidations of separate 
and independent companies, of an entirely differ- 
ent character and nature from the transactions in- 
volved in this case. 

(7) The result of this examination and review 
of the authorities is to establish the proposition 
which we have formulated as our first point. 
The preceding summary of facts conclusively 
shows that there was no common-law com- 
bination or conspiracy, but a separate pur- 
chase and acquisition of plants and busi- 
nesses, for a consideration fixed in each 
case by the parties to the transaction in the 
main paid in cash, but, in some instances, in 
whole or in part, in shares of stock, either of the 



127 

Standard Oil Co. of Ohio or of the company 
organized to take over the business acquired. In 
some instances the physical property was bought 
and transferred; in others it was acquired 
through the transfer of the stock of the company 
which owned it. The transaction was substan- 
tially the same whichever course was taken, 
because what was being acquired was the prop- 
erty and business of the selling concern. The 
transactions extended over a period of years. 
They had their specific objects or purposes ; some 
to refine at points most favorable for par- 
ticular territories ; others to acquire ware- 
house and dock facilities ; others to diver- 
sify products ; others to reach new markets ; 
others to assure an adequate supply of 
raw material, and so on. It was a development 
step by step of a successful institution as the 
means at its command enabled it to extend its 
operations ; and not a scheme or plot to absorb 
a growing and boundless industry. It is a pure 
figment of the imagination that three or four 
young men as far back as 1870, in the origins of 
the industry, when all of its conditions were in 
a state of demoralization, conceived the idea of 
appropriating it as their own domain, and saw 



128 

in their dreams what has come to pass in the 
vast increase in space and quantity of the oil 
production and the world-wide use of the in- 
numerable products of petroleum. The antiquity 
of the alleged conspiracy is alone fatal to its 
serious consideration. The sensible view is 
that these men were able, alert, intelligent, 
courageous and prudent ; that by unremitting in- 
dustry and thorough organization they made the 
most of every situation, forecast the opportunities 
of the industry, and rapidly adapted their efforts 
to changing conditions ; and that the growth and 
expansion of the Standard were the inevitable 
results of their genius and enterprise. No doubt, 
in some instances, men who were also successful 
in the business, to advance their own interests, 
sold to them and united with them. There was 
no law preventing them from doing so, as once a 
competitor always a competitor has never been, 
and is not now, a maxim of legal compulsion. 
In man}' instances, no doubt, men were desirous 
of selling because they saw that to conduct the 
business successfully, with the changes in con- 
ditions from time to time, required much more 
capital than they could command, and that it was 
in their best interest to sell. It would, too, be 



129 



folly to ignore tlie fact tliat in a business char- 
acterized by its peculiar conditions and Hazards 
concentration is the law of its development. It is 
along these lines that the growth and expansion 
of the Standard Oil Co. finds its explanation, and 
not in the theory of a combination or conspiracy 
that is iterated and reiterated on almost every 
page of the bill in this case. 



POINT II. 

Tlie Act of 1890 did not by its termg 
or reasonable construction convert that 
common o'cmersliip into an illegal and 
criminal combination in restraint of trade 
nnder Secrtion 1 of the Act. 

(i) In July, 1890, when the Act went into 
effect, the situation was that the Standard Oil 
properties were held in an undivided common 
ownership. The owners had previously trans- 
ferred the legal title to their respective interests 
to nine trustees, who then held it in trust for 
them ; but they were the real owners. It 
is true that later that particular trust was held 



130 

to be illegal, partly on a point of corporation 
law and partly, though the question was not in 
the case, on the ground that the trust was an 
illegal combination because composed of separate 
concerns and, therefore, but for the trust, com- 
petitive, which was not the fact. The dissolu- 
tion of the trust would simply eliminate it 
without disturbing the common ownership. 
The common ownership in 1882 and 1890 
is not disputable. In 1890 the properties 
consisted of refineries employed in the manu- 
facture of a great many different products, 
but principally illuminating oil ; of private 
pipe lines to gather the necessary sup- 
ply of crude oil at the various oil 
fields and carry it to the refineries ; of 
certain public pipe lines open to the use of pro- 
ducers and refiners generally, but not, for the 
reasons which have been stated, used by them ; 
and marketing facilities in various parts of this 
and foreign countries. The properties were 
operated as a single, unified business and an 
organic whole. Their product was sold partly 
in intrastate and partly in interstate and foreign 
trade. 



131 

The ownership of the refining properties and 
the manufacturing of the products were not sub- 
ject to the jurisdiction of Congress (U.S. vs. E.G. 
Knight Co., 156 U. S., i). The intrastate trade 
was not subject to its jurisdiction (Addy stone 
Pipe Co. vs. U. S., 21 1). The same is true of the 
private pipe lines. Only the interstate and 
foreign trade and the interstate transportation of 
the common carrier pipe lines, to the extent that 
there was any, were subject to its jurisdiction, 
and the parts of the business on which the 
Act of 1890 bore. There was no existing 
combination with respect to those parts as they 
were merely an incident of the ownership of the 
manufacturing properties and a part of the pipe 
line properties. If there were then any out- 
standing contracts with other parties restraining 
interstate or foreign trade the operation of the 
Act would be to denounce them and make their 
further performance illegal. But the common 
ownership of the properties and their operation 
for the purposes to which they were adapted as 
a unit was a legal situation which was not 
affected by the Act. 

(2) Even if Congress had the power, it did 
not seek or attempt by the first section of the 



132 

Act to denounce as illegal previous acquisitions 
of competitive properties or disturb existing 
titles or rights of ownership. Had it sought to 
do so appropriate and explicit language would 
have been used. There is no such language. 
The phrases " contract, combination or con- 
spiracy in restraint of trade " are not appro- 
priate for that purpose. Those phrases were 
well known and had a settled legal significance. 
They were contracts or combinations of an 
executory nature restricting the liberty of the 
parties or others in the conduct of their busi- 
nesses to the injury of the public. They did 
not, in any way, involve executed transfers of 
property or their incidental rights of ownership. 
It was against such executory contracts, com- 
binations and conspiracies that the Act of 1890 
was directed. This is borne out by the conditions 
out of which the legislation grew. The period of 
ten years or so prior to the passage of the Act 
had been marked by combinations of independent 
competitive concerns ; some of them on a very 
large scale. These combinations took different 
forms. There were agreements creating a sell- 
ing agency or a central committee to regulate 
production and fix prices. There were associations 



133 

of independent and competing manufacturers 
and merchants to maintain prices by means of the 
commercial boycott. Boards of trustees were 
created to bold the legal title of the stocks 
of independent and competing corporations 
to secure co-operation as to production and prices. 
Speaking generally it may be said that every 
method for combining competitive concerns for the 
regulation of production and prices was adopted 
that human ingenuity could devise. These com- 
binations were deemed to be injurious to the pub- 
lic, and the purpose of the first section of the 
Act was to denounce and prohibit them. That 
purpose was accomplished without any interfer- 
ence with executed transfers of property or ex- 
isting rights of ownership. 

(3) The case nearest in its facts to this case 
arose in 1892 and was the occasion of a profound 
consideration of the Act of 1890 by the late Mr. 
Justice Jackson, then a Circuit Judge. We refer 
to In Re Greene (52 Fed., 104). It grew out of 
an indictment in Massachusetts of a number of 
individuals who were the principal persons con- 
nected with the Distilling &l Cattle Feeding Co., 
organized in the year February 11, 1890, under 
the laws of Illinois. It was averred that the Com- 



134 

pany had as it appears prior to the passage of 
the Act obtained control by purchase, renting 
and leasing of 70 distilleries within the United 
States used for the manufacture of distillery prod- 
ucts ; that each of the distilleries was when ac- 
quired a separate and competing concern ; and 
that by means of this ownership and control the 
Company manufactured 75% of the distillery pro- 
ducts and monopolized the interstate trade and 
commerce therein. It was further averred that the 
Company, to maintain its monopoly, had agreed 
with various dealers in Massachusetts to pay re- 
bates on condition that they bought exclusively 
from the Company. The Defendant, who was held 
under a warrant awaiting an order for his removal 
to the district of Massachusetts to answer 
the indictment, applied for a writ of habeas corpus, 
which application Judge Jackson granted, hold- 
ing that the Act of 1890 did not intend to de- 
clare that the acquisition and ownership of these 
properties with the control of the trade that it 
gave was an offence under the Act. The pertinent 
portions of the opinion are quoted under a later 
head of this brief. This case has been frequently 
cited, and we are not aware that its doctrine has 
been authoritatively disapproved or its author- 



135 

ity impaired. It is claimed that the decision in 
the Northern Securities case has that effect, but 
the fundamental diiTerences which distinguish 
them rebut that contention as we have already 
shown. 

(4) An analysis of the decisions of the Su- 
preme Court of the United States under the 
Act of 1890 confirms our position under this 
point. 

(a) United States vs. E. C. Knight Co. (156 
U. S., i) held that an acquisition of sugar re- 
fineries in the State of Pennsylvania by the 
American Sugar Refining Co., which owned a 
large majority of the sugar refineries in the 
United States giving it a practical control of 
the business, was not within the Act of 1890 ; 
that it bore no direct relation to commerce be- 
tween the States though the intention was to 
sell the product throughout the States ; that 
manufacturing is not commerce ; and that it did 
not follow that an " attempt to monopolize, or 
the actual monopoly of the manufacture, was an 
attempt, whether executory or consummated, to 
monopolize commerce, even though, in order to 
dispose of the product the instrumentality of 
commerce was necessarily invoked." 



136 

{b) United States vs. Trans-lMissouri Asso- 
ciation (i66 U. S., 290) and United States vs. 
Joint Trafl&c Association (171 U. S., 505) held 
that a combination between a large number of 
railroad companies creating a body or committee 
to fix rates was a combination in restraint of 
trade within the meaning of the Act. The 
agreement between the companies restricted 
their power of fixing their own rates by its 
delegation in a measurable degree to an outside 
body, and it was a restriction vitally affecting 
the interests of the public. 

{c) Hopkins vs. United States (171 U. S., 578) 
and Anderson vs. United States (171 U. S., 604) 
held that the restrictive rules of certain live 
stock exchanges related to a business that only 
incidentally affected interstate commerce; and 
that the Act only applies to agreements and 
combinations directly restraining such com- 
merce. 

{d) Addystone Pipe & Steel Co. vs. United 
States (175 U. S., 211) was a combination be- 
tween independent competing manufacturers 
providing machinery and methods for fixing 
prices in such a way as to enhance them in a 
very aggravated form. 



137 

(e) Montague vs. Lowry (193 U. S., 38) was a 
combination of manufacturers and dealers in 
tiles, mantels and grates for tlie purpose of regu- 
lating tlie trade in those articles in California 
in various particulars, including prices, and 
establishing a commercial boycott on manufac- 
turers and dealers who did not become members 
of the association and submit to its regulations. 

{/) Northern Securities vs. United States (193 
U. S., 197) was a combination of the principal 
stockholders of two parallel and competing trans- 
continental railway systems to establish a com- 
mon control and eliminate competition b}' means 
of a holding company. 

{£■) Swift vs. United States (196 U. S., 375) 
involved a combination of independent concerns 
for the conduct of the business of each in 
certain specified particulars calculated and in- 
tended to monopolize the trade. The injunction 
which issued was based on the bill, as the defend- 
ants stood on their demurrer which was over- 
ruled. 

(A) Cincinnati Packet Co. vs. Bay (200 U. S., 
179) held that a covenant not to engage in the 
shipping business between certain points for a 
period of five years, and to maintain rates be- 



138 

yond one of the points, in connection with a sale 
of vessels, was not a violation of the Act. 

(/) Loewe vs. Lawler (208 U. S., 274) held 
that a combination of labor organizations to boy- 
cott the interstate trade of a manufacturer was 
a conspiracy in restraint of trade within the 
Act. 

To these cases may be added /;/ Re Debs (158 
U. S., 564), which practically held that the 
physical obstruction of interstate transportation 
by labor associations was a conspiracy in re- 
straint of trade within the Act. 

All these cases, in which the Act was held 
to be applicable, involved combinations in 
the common law sense affecting interstate 
commerce ; some by restrictions imposed 
on the members of the combination ; others 
by restrictions or acts limiting or destroying 
the activities of parties outside of the com- 
bination ; and they declare no doctrine which 
denounces such an acquisition and ownership of 
previously competing properties as appears in 
this case. If that acquisition and ownership are 
to be brought within the Act it will be only by 
a radically new interpretation and application. 



139 



POINT III. 



Congress conld not constitutionally con^ 
vert the ownership of the properties and 
the nse to which they were put into an 
illegal and criminal combination or con- 
spiracy. 

The acquisitions of the properties vio- 
lated no law when they occurred, and the 
title of the common owners was a valid, 
legal title. No principle of the common law 
invalidated titles or ownership even if acquired 
in connection with contracts or combinations 
in restraint of trade. The right to own the 
properties involved the right to use and en- 
joy them. " Congress has not the power or 
authority under the commerce clause, or any 
other provision of the Constitution, to limit and 
restrict the right of corporations created by the 
States or the citizens of the States in the acquisi- 
tion, control and disposition of property " {In re 
Greene, 52 Fed., 104). The Chief Justice said 
in United States vs. E. C. Knight Co. (156 
U. S., I, p. 16) that " Congress did not at- 
tempt to make criminal the acts of persons 
in the acquisition and control of property 



140 

whicli the States of their residence or creation 
sanctioned or permitted," because " it was in the 
light of well settled principles that the Act of 
July 2d, 1890, was framed," plainly implying 
that it was beyond the power of Congress to 
make such acts criminal or declare them illegal. 
Judge Jackson also said in the Greene case that 
" in construing and applying the provions of the 
Act to the specific offenses charged it must be 
assumed that Congress did not intend to make 
the enactment either retroactive or give it an ex 
post facto operation or effect," and the basis of 
such an assumption was the lack of power to do 
so as applied to the previous acquisition and 
ownership of distilleries in such number as to 
control the trade and commerce in their products 
which appeared in that case. It is really too 
plain for argument that Congress was without 
the power to declare the acquisition and owner- 
ship of the properties in question unlawful or a 
criminal offense, and compel directly or indi- 
rectly the disintegration of that ownership. 
So, also, it is not within the power of Con- 
gress to disturb the ownership or prevent 
the use of manufacturing property simply be- 
cause the product becomes the subject of 



141 

interstate or commerce. If, however, when the 
product becomes the subject of interstate trade 
or commerce acts are done, or agreements are 
made, with respect to it in that relation that are 
in restraint of trade, it is within the power of 
Congress to denounce those acts and agreements 
and empower the Courts to retrain them. That, 
we submit, is the power which it exercised in the 
passage of this Act. 



POINT IV. 

£ven if the acquisitions of the Standard 
properties and their common ownership 
had occurred since the Act of 1890 went 
into effect they Mroald not constitute an 
illegal and criminal combination or con- 
spiracy within the Act. 

The tendency of the cases is to sustain the 
position that the first section of the Act of 
1890 is directed at combinations of independent 
concerns for the regulation of production and 
prices whatever their form, and no more sought 
to affect or restrict the right of purchase or 
acquisition than did the common law. This 
appears not only from what has been judicially 



142 

declared to be the object and purposes of the 
Act, but in what has been said as to transactions 
which are not within its scope. 

In one of the earliest cases (1892), In re Com- 
ing (51 Fed., 205), Ricks, J., said (pp. 211-212) : 

" From those debates (in Congress) it is 
evident that the Congress did not intend to 
limit the amount of capital a citizen should 
invest in any line of business or restrain 
his energy or enterprise in acquiring for 
himself all the trade possible in such busi- 
ness, provided in doing so he did not by 
illegal contracts or devices restrain others 
from pursuing the same business, or de- 
prive the public from enjoying the advan- 
tages of a free use of capital, skill and ex- 
perience of competitors." 

In the exhaustive examination of the act by 
Mr. Justice Jackson, not long after its passage, 
in Re Greene (52 Fed., 104), he said: 

" The enactment was manifestly aimed at 
the trust combinations and associations 
formed by individuals and corporations 
which the State Courts have in most in- 
stances declared illegal." 

And further (pp. 66, 67) : 

" Congress may place restrictions and 
limitations upon the right of corporations 



143 

created and organized under its authority to 
acquire, use and dispose of property. It may 
also impose such restrictions and limitations 
upon the citizen in respect to the exercise of 
a public privilege or franchise conferred by 
the United States. But Congress certainly 
has not the power or authority under the 
Commerce Clause or any other provision of 
the Constitution to limit and restrict the 
right of corporations created by the states 
or the citizens of the states in the acquisi- 
tion, control and disposition of property. 
. . . It is equally clear that Congress 
has no jurisdiction over and cannot make 
criminal the aims, purposes and intentions 
of persons in the acquisition and control of 
property which the states of their residence 
or creation sanction and permit." 

In U. S. vs. E. C. Knight Co. (156 U. S., i) 
it was said (p. 16) : 

" It was in the light of well settled prin- 
ciples that the act of July 2, 1890, was 
framed. Congress did not attempt to assert 
the power to deal with monopoly directly as 
such ; or to limit and restrict the rights of 
corporations created by the States or the 
citizens of the States in the acquisition, 
control, or disposition of property ; or to 
regulate or prescribe the price or prices at 
which such property or the products thereof 
should be sold ; or to make criminal the 



144 

acts of persons in the acquisition and con- 
trol of property which the State of their 
residence or creation sanctioned or per- 
mitted. Aside from the provisions ap- 
plicable where Congress might exercise 
municipal power, what the law struck at 
was combination, contracts, and conspiracies 
to monopolize trade and commerce among 
the several States or with foreign nations. 
. . . The subject matter of the sale 
was shares of manufacturing stock, and the 
relief sought was the surrender of property 
which had already passed and the sup- 
pression of the alleged monopoly in manu- 
facture by the restoration of the status quo 
before the transfers ; yet the act of Con- 
gress only authorized the Circuit Courts to 
proceed by way of preventing and restrain- 
ing violations of the act in respect of con- 
tracts, combinations, or conspiracies in re- 
straint of interstate or international trade 
or commerce." 

In U. S. vs. Trans-Missouri Freight Associa- 
tion (i66 U- S., 290) it was said, in the opinion 
of the Court with reference to contracts speci- 
fically designated at common law, " contracts in 
restraint of trade " (p. 329) : 

" A contract which is the mere accom- 
paniment of the sale of property and thus 
entered into for the purpose of enhancing 



145 

the price at which the vendor sells it, which 
in effect is collateral to such sale and where 
the main purpose of the whole contract is 
accomplished by such sale, might not be 
included within the letter or spirit of the 
statute in question." 

There is no intimation in this saving clause 
of the opinion that sales themselves of property 
employed in a business from one competitor to 
another are or may be in restraint of trade. 

In U. S. vs. The Joint Traffic Association (171 
U. S., 505), it was said (pp. 567-568) : 

" As examples of the kinds of contracts 
which are rendered illegal by this construc- 
tion of the act, the learned counsel suggests 
all organizations of mechanics engaged in 
the same business for the purpose of limit- 
ing the number of persons employed in the 
business, or of maintaining wages ; the for- 
mation of a corporation to carry on any par- 
ticular line of business by those already en- 
gaged therein ; a contract of partnership or 
of employment between two persons previ- 
ously engaged in the same line of business ; 
the appointment by two producers of the 
same person to sell their goods on commis- 
sion ; the purchase by one wholesale mer- 
chant of the product of two producers ; the 
lease or purchase by a farmer, manufacturer 
or merchant of an additional farm, manufac- 



146 

tory or shop ; the withdrawal from business 
of any farmer, merchant or manufacturer ; 
a sale of the goodwill of a business with an 
agreement not to destroy its value by en- 
gaging in similar business ; and a covenant 
in a deed restricting the use of real estate. 
It is added that the effect of most business 
contracts or combinations is to restrain 
trade in some degree. This makes quite a 
formidable list. It will be observed, how- 
ever, that no contract of the nature 
above described is now before the court, and 
and there is some embarrassment in assum- 
ing to decide herein just how far the Act 
goes in the direction claimed. Neverthe- 
less, we might say that the formation of 
corporations for business or manufacturing 
purposes has never, to our knowledge, been 
regarded in the nature of a contract in re- 
straint of trade or commerce. The same 
may be said of the contract of partnership. 
It might also be difficult to show that the 
appointment by two or more producers of 
the same person to sell their goods on com- 
mission was a matter in any degree in re- 
straint of trade. We are not aware that it 
has ever been claimed that a lease or pur- 
chase by a farmer, manufacturer or mer- 
chant of an additional farm, manufactory or 
shop, or the withdrawal from business of 
any farmer, merchant or manufacturer, re- 
strained commerce or trade within any legal 
definition of that term ; and the sale of a 



147 

good-will of a business with an accompany- 
ing agreement not to engage in a similar 
business was instanced in tbe Trans- 
Missouri case as a contract not within the 
meaning of the act ; and it was said that 
such a contract was collateral to the main 
contract of sale and was entered into for the 
purpose of enhancing the price at which the 
vendor sells his business." 

The view thus expressed excludes from the 
operation of the Act a vast mass of transactions 
which interfere with competition. " Interference 
with competition " and " restraint of trade " can- 
not therefore be convertible terms though they 
are too often assumed to be so. If a part- 
nership is formed which combines the energies 
and resources of two or three or more 
competitors in the same business there is an 
interference with competition, but not, as the 
Court says, a restraint of trade. So, if a 
corporation is formed which acquires property 
and plants employed in a business which have 
been competitive there is an interference with 
competition, but again, not a restraint of trade. 
It would seem to be a necessary conclusion that 
confusion results from identifying too closely 
acts interfering with competition with acts re- 



148 

Straining trade. This has led to all the cur- 
rent motions about competition being the one 
vital matter determining whether acts are in 
restraint of trade or not. What the phrase 
" combination in restraint of trade " really in- 
volves is a restriction of the freedom of action 
of the parties to the contract or combination or 
others in the control, management or conduct 
of their respective businesses. Combinations 
and agreements which do not involve such re- 
strictions are not combinations or agreements 
in restraint of trade, although they may incident- 
ally interfere with competition. This is borne 
out by the exclusion of transactions of the kind 
mentioned by Mr. Justice Peckham from the 
operation of the Act although they unques- 
tionably interfere with competition. 

In Robinson vs. Suburban Brick Co. (127 
Fed., 804), and A. Booth & Co. vs. Davis (127 
Fed., 875), a covenant in a contract for the sale 
of the property of a competitor restricting the 
vendor from engaging in the business was held 
to be valid. 

In the case last cited it is said (p. 878) : 

" The transaction by which the com- 
plainant acquired the title and interest for 



149 

which it seeks protection in this cause was 
an out and out purchase of the vendor cor- 
poration's property and good will, and of the 
ancillary agreement of its stockholders, the 
breach of which agreement is the gravamen 
of the complainant's case. That such a 
transaction is lawful seems clear. In U. S. 
V. Addyston Pipe & Steel Co. (85 Fed., 271- 
281) Judge Taft considers the question 
here involved, and in a forcible opinion 
demonstrates that agreements by the seller 
of property or business not to compete with 
the buyer in such a way as to impair the 
business sold are perfectly valid." 

In Cincinnati Packet Co. vs. Bay (200 U. S., 
179 it was said : 

" Presumably all there was to sell besides 
certain instruments of competition was the 
competition itself, and the purchasers did 
not want the vendors name." 

In Smiley vs. Kansas (196 U. S., 447) it was 
said (p. 356) : 

" Undoubtedly there is a certain freedom 
of contract which cannot be destroyed by 
legislative enactment. In pursuance of that 
freedom parties may seek to further their 
business interests, and it may not be always 
easy to draw the line between those con- 
tracts which are beyond the reach of the 
police power and those which are subject to 



150 

prohibition or restraint. But a secret ar- 
rangement by whicb, under penalties, an 
apparently existing competition among all 
the dealers in a community is one of the 
necessaries of life is substantially destroyed, 
without any merging of interests through 
partnership or incorporation^ is one to which 
the police power extends." 



POINT V. 

The acquisition by the Standard Oil Co. 
(of Ifew Jersey) fvova. the common oixaiers 
of their shares in the so-called subsidiary 
companies ivas not an illegal and criminal 
contract, combination or conspiracy iirithin 
the Act of 1890. 

(i) There is no combination under the Act 
unless one is formed which restrains trade, that 
is, which restricts the freedom of competitors 
in carrying on their respective businesses. 
In 1899 all the Standard Oil properties 
were held in a common ownership, and that 
common ownership had existed from the time 
of the acquisition of every property acquired, and 
in all subsequent extensions, developments and 



15] 

expansions as they occurred. All the properties 
were acquired for the individuals who were 
stockholders of the Standard Oil Company of 
Ohio. The stockholders of that company be- 
came the holders of the trustees' certificates, 
and the certificate holders, through the conver- 
sion of their certificates into the shares of the 
twenty companies and the exchange of those 
shares for the shares of the Standard Oil Com- 
pany of New Jersey, one of their own corpora- 
tions, became the stockholders of the Standard 
Oil Company of New Jersey, and as such, the 
owners in precisely the same proportion of all 
the properties as they had been as certificate 
holders and as stockholders of the Standard Oil 
Company of Ohio. There has never been any 
separate ownership of any of the properties since 
their acquisition. Every owner has all along been 
the owner of his same proportionate share in all 
the properties and companies corresponding 
first to his stock ownership in the Standard Oil 
Company of Ohio, then to his certificate owner- 
ship, and now to his stock ownership in the 
Standard Oil Company of New Jersey. When 
these properties and companies were owned by or 
held for the stockholders of the Standard Oil 



152 

Company of Ohio there was no competitive rela- 
tion between them in the sense in which that 
term is used when there is under consideration 
whether a certain transaction or combination is 
in restraint of trade. Properties, plants and 
companies owned by the same persons in a com- 
mon ownership are not independent or com- 
petitive from the point of view of the Act of 
1890. 

(2) When the so-called trust of 1882 was 
formed there was no union or fusion of competi- 
tive properties and companies. The trust was 
not formed for any reason or purpose hav- 
ing any relation to competition or the suppres- 
sion of competition. Prior to its formation the 
managers of every separate concern were the 
appointees of the common owners, and the 
concerns were operated and managed in the 
interest of the common ownership. The 
owners, through the medium of the trust, 
selected nine of their number to act for them in 
selecting these ofl&cers and managers, which did 
not in any way change their ownership or affiect 
the relations of the concerns to each other. The 
motive for the creation of the trust was that each 
owner might have in the trust certificates a con- 
venient and usable evidence of his interest. 



153 

(3) When the trust was dissolved there was no 
change of ownership, and no change in the rela- 
tion of the separate concerns to each other. The 
same owners selected the officers and managers 
of the concerns. When the shares were ex- 
changed for shares of the Standard Oil Company 
(of New Jersey) there was again no change of 
ownership. If twenty men own a twentieth 
interest in each of twenty corporations represented 
by a twentieth of the shares in each corporation, 
no real change of ownership is worked by the 
transfer of all of their shares to one of the cor- 
porations in exchange for an equivalent number 
of its shares. As owners each of one-twentieth 
of the shares of the one company their ownership 
is just the same as when they each owned one- 
twentieth of the shares of each of the companies. 
The indisputable and controlling fact is that 
there was no competitive relation between the 
concerns after their original acquisition thirty 
years ago and more. 

(4) Under these circumstances we submit that 
the transfer of the shares of the various com- 
panies for their equivalent in shares of the 
Standard Oil Company (of New Jersey), which 
represented precisely the pre-existing propor- 



154: 



tionate interests in the common property, was 
not a combination in restraint of trade within 
the meaning of the Act of 1890. 



POINT VI. 

There is no monopolization or attempt 
to monopolize. 

(i) On pages 84, 85, and 86 of the Bill it is 
alleged that the Standard Oil trust during the 
period from 1882 to 1899 and the Standard Oil 
Company since 1889, and their various subsidiary 
corporations and the individual defendants 
named, acting through both the trust and 
said corporations, have monopolized the oil 
business by means not only of the various al 
leged combinations constituting the acquisition 
of the properties, but by certain additional 
means, the allegations respecting which are set 
forth in the sub-divisions of the Bill from and 
including sub-division 6 to and including sub- 
division 28. We have so far dealt with the ac- 
quisition and ownership of the Standard prop- 
erties and have shown that they did not con- 



165 

stitute a combination in restraint of trade. The 
common ownership itself, therefore, does not 
constitute a monopoly. We now proceed to con- 
sider the remaining allegations respecting the 
monopolization of the trade. 

This proceeding was begun in December, 
1906. It was instituted under Section 4 of 
the Act of 1890 which authorizes proceed- 
ings in equity " to prevent and restrain viola- 
tions of this Act." There would be no existing 
violation of the Act to restrain unless the de- 
fendants, when the proceeding was begun, 
monopolized or were attempting to monopolize 
the oil business. Whether that condition ex- 
isted is the subject matter of this point ; and 
first we have to ascertain what is a monopoly or 
monopolization within the Act. 

(2) There has as yet been no authoritative defi- 
nition by the Supreme Court of what constitutes 
a monopoly within the meaning of the Act of 
1890. There have been references to the term, 
but they do not furnish an authoritative defini- 
tion. Though it has been prominent in public dis- 
cussion in recent years it has generally seemed 
sufl&cient to use it without attaching any specific 
meaning to it, and more as a term of reproach 



156 

than as a specific legal or economic conception. 
It is not uncommon to hear size in and of itself 
treated as monopoly. According to that view 
there is a point at which growth and expansion, 
however legitimate, become illegal and criminal. 
However convenient that use of the term may- 
be for popular purposes it is not its legal mean- 
ing or signification. At common law a monop- 
oly had a precise definition ; it was " a license 
or privilege allowed by the King for the sole 
buying and selling, making, working or using 
of anything whatsoever whereby the subject in 
general is restrained from that liberty of manu- 
facturing or trading which he had before " 
(Blackstone, Vol. 4, p. 160). It is said that in 
modem legislation and judicial usage it has a 
broader application than that of an exclusive 
right based on a grant. Just what it means in 
that broader use of the term is the point to be 
determined. A governmental grant, as in the 
case of a patent monopoly, it is said, is no longer 
necessary, and that may be assumed to be true. 
But monopoly still imports the idea of exclusive- 
ness, and an exclusiveness existing by virtue 
of a restraint of the liberty of others. 
It may be a practical as distinguished from 



157 

a theoretical or complete exclusiveness, but 
that does not eliminate the restraint of others 
as the essential element. With the common law 
monopoly that restraint resulted from the grant 
of the exclusive right or privilege. There 
must be some substitute for the grant as a 
source of the restraint essential to the condition 
of exclusiveness which constitutes monopoly. 
Conceivable sources are contracts, combinations 
and conspiracies excluding individuals and capital 
on a comprehensive scale and in an effective degree 
from participation in a particular business. What- 
ever the magnitude of a single concern may be 
and whatever the volume of the business there 
may be in its hands, it is not, we submit, a 
monopoly unless " the subject in general is re- 
strained from that liberty of manufacturing or 
trading which he had before ", by definite and 
assignable restrictive contractual obligations, well 
known as contracts in restraint of trade, combina- 
tions aflfecting the liberty of their members or 
constraining that of outsiders, or conspiracies to 
injure, curtail or destroy the business of others 
of a criminal or tortious character at common 
law, or other unlawful or tortious acts having 
that effect. These very general observations are 



158 

offered as an introduction to what has been said 
on the subject in cases which have arisen under 
the Act of 1890. 

(3) In American Biscuit & Manf g Co. vs. 
Klotz, 44 Fed., p. 724, it was said per Curiam: 

" In construing the federal and state 
statutes, we exclude from consideration all 
monopolies which exist by legislative grant ; 
for we think the word ' monopolize ' cannot 
be intended to be used with reference to the 
acquisition of exclusive rights under gevern- 
ment concession, but that the lawmaker has 
used the word to mean ' to aggregate ' or ' con- 
centrate ' in the hands of few, practically, 
and, as a matter of fact, and according to the 
known results of human actions, to the ex- 
clusion of others ; to accomplish this end by 
what, in popular language, is expressed in 
the word 'pooling', which may be defined 
to be an aggregation of property or capital 
belonging to different persons, with a view 
to common liabilities and profits. The ex- 
pression in each law 'combination in the 
form of trusts' would seem to point to just 
what, in popular language, is meant by 
pooling. . . . 

In re Corning (51 Fed., 205), Ricks, J., said : 

" It is not averred that, when defendants 
purchased their 70 distilleries, they ob- 



159 

ligated the vendors not to build other dis- 
tilleries, or not to continue in the distillery 
business in the future. It is not averred 
that defendants attempted in any way to 
bind the vendors to withhold their capital 
or skill or experience in the business from 
the public in the future. There is no aver- 
ment that the defendants in any manner, or 
at any time, attempted to control the busi- 
ness of the remaining one-fourth of the dis- 
tilleries in the United States, or in any way 
attempted to limit their output, or by agree- 
ment with them control the price at which 
their product should be sold, or in any de- 
gree restrained their trade, or limit the ter- 
ritory over which their trade should extend. 
The full scope of the averments in this re- 
spect is that before this law was passed by 
Congress the defendants legally purchased 
with their own capital three-fourths of the 
distilleries in the United States, and that 
they produced 77,000,000 gallons of dis- 
tillery products, and sold these products in 
the markets of the several states at the best 
possible prices ; and that they continued so 
to own and operate said distilleries, and so 
to sell their products, after the passage of 
this Act. This they did without any at- 
tempt at any time, by contract, to control 
the production of the other distilleries, or 
the prices at which they should sell, or 
without any contract with such distillers in 
any way restraining trade. The indict- 



160 

ment, therefore, in my judgment, wholly 
fails to charge a crime, so far as the pur- 
chase of said distilleries or their manu- 
facture of distilled products before the 
passage of the Act is concerned, or 
so far as they are charged with continuity 
to own and operate them with unlawful in- 
tent after the passage of the Act. * * * 
From these debates (in Congress) it is evi- 
dent that the Congress did not intend to 
limit the amount of capital a citizen should 
invest in any line of business, or restrain 
his energy or enterprise in acquiring for 
himself all the trade possible in such busi- 
ness, provided in doing so he did not, by 
illegal contracts or devices, restrain others 
from pursuing the same business, or de- 
prive the public from enjoying the advan- 
tages of the free use of capital, skill and 
experience of competitors." 

In re Greene (53 Fed., 104) (1892), Jackson, 
Circuit Judge, said (p. 115) : 

"It is not very clear what Congress 
meant by the second section of the Act of 
July 2, 1890, in declaring it a misdemeanor 
to ' monopolize,' or ' attempt to monopo- 
lize,' any part of the trade or commerce 
among the states or with foreign nations. 
It is very certain that Congress 
could not, and did not, by this enact- 
ment, attempt to prescribe limits to the 



161 

acquisition, either by the private citizen or 
state corporation, of property which might 
become the subject of interstate commerce, 
or declare that, when the accumulation or 
control of property by legitimate means 
and lawful methods reached such magni- 
tude or proportions as enabled the owner or 
owners to control the trafiEc therein, or any 
part thereof, among the states, a criminal 
offense was committed by such owner or 
owners. All persons, individually or in 
corporate organizations, carrying on busi- 
ness avocations and enterprises involving 
the purchase, sale, or exchange of articles, 
or the production and manufacture of com- 
modities, which form the subjects of com- 
merce, will, in a popular sense, monopolize 
both state and interstate trafiEc in such ar- 
ticles or commodities just in proportion as 
the owner's business is increased, enlarged, 
and developed. But the magnitude of a 
party's business, production, or manufac- 
ture, with the incidental and indirect powers 
thereby acquired, and with the purpose of 
regulating prices and controlling interstate 
trafi&c in the articles or commodities form- 
ing the subject of such business, produc- 
tion, or manufacture, is not the monopoly, 
or attempt to monopolize, which the statute 
condemns. 

" A ' monopoly,' in the prohibited sense, 
involves the element of an exclusive privi- 
lege or grant which restrained others from 



162 

the exercise of a right or liberty which they 
had before the monopoly was secured. In 
commercial law, it is the abuse of free com- 
merce, by which one or more individuals 
have procured the advantage of selling alone 
or exclusively all of a particular kind of 
merchandise or commodity to the detriment 
of the public. As defined by Blackstone (4 
Bl. Comm., 159), and by Lord Coke (3 Co. 
Inst., 181), it is a grant from the sovereign 
power of the state by commission, letters 
patent or otherwise, to any person or corpo- 
ration, by which the exclusive right of 
buying, selling, making, working or using 
anything is given. When this section of 
the Act was under consideration in the 
Senate, distinguished members of the judi- 
ciary committee and lawyers of great ability 
explained what they understood the term 
' monopoly ' to mean ; one of them say- 
ing : 'It is the sole engrossing to 
a man's self by means which prevent 
other men from engaging in fair com- 
petition with him.' Another senator defined 
the term in the language of Webster's dic- 
tionary : ' To engross or obtain, by any 
means, the exclusive right of, especially the 
right of trading, to any place or with any 
country, or district ; as to monopolize the 
India or Levant trade.' It will be noticed 
that, in all the foregoing definitions of 
' monopoly ', there is embraced two leading 
elements, viz., an exclusive right or privi- 



163 

lege, on the one side, and a restriction 
or restraint on the other, which will operate 
to prevent the exercise of a right or liberty 
open to the public before the monopoly was 
secured. This being, as we think, the 
general meaning of the term, as employed 
in the second section of the statute, an 
' attempt to monopolize ' any part of the 
trade or commerce among the states must 
be an attempt to secure or acquire an exclu- 
sive right in such trade or commerce by 
means which prevent or restrain others 
from engaging therein. It was certainly 
not a ' monopoly ', in the legal sense of 
the term, for the accused or the Distilling 
& Cattle Feeding Company to own 70 dis- 
tilleries, and the products thereof, whether 
such products amounted to the whole or a 
large part of what was produced in the 
country. Their ownership and control of 
such products, as subjects of trade and com- 
merce, is not what the statute condemns, but 
the monopoly or attempt to monopolize the 
interstate trade or commerce therein. In 
this acquisition and operation of the 70 dis- 
tilleries, which enabled the accused or said 
Distilling & Cattle Feeding Company to 
manufacture and control the sale of 75 per 
cent, of the distillery products of the coun- 
try, it does not appear, nor is it alleged, that 
the persons from whom said distilleries were 
acquired were placed under any restraint, by 
contract or otherwise, which prevented them 



164 

from continuing or re-engaging in such 
business. All other persons who chose to 
engage therein were at liberty to do so. The 
effort to control the production and manu- 
facture of distillery products, by the enlarge- 
mont and extension of business, was not an 
attempt to monopolize trade and commerce 
in such products within the meaning of the 
statute, and may therefore be left out of fur- 
ther consideration." 

In U. S. vs. Trans-Missouri Freight Associa- 
tion (58 Fed., 58), Sanborn, Circuit Judge, said 
(p. 82) ? 

" A monopoly of trade embraces two es- 
sential elements : (i) The acquisition of an 
exclusive right to, or the exclusive control 
of, that trade ; and (2) The exclusion of all 
others from that right and control." 

In Northern Securities Co. vs. The United 
States (193 U. S., 197), Mr. Justice Holmes in 
his opinion said (p. 409) : 

" I repeat, that in my opinion, there is no 
attempt to monopolize, and what, as I have 
said, in my judgment amounts to the same 
thing, that there is no combination in re- 
straint of trade, until something is done 
with the intent to exclude strangers to the 
combination from competing with it in some 
part of the business which it carries on." 



166 

In Whitwell vs. Continental Tobacco Co. 
(125 Fed., 454), it was said, by Sanborn, Circuit 
Judge (p. 462) : 

" The Supreme Court has declared that 
the true construction of the first section is 
that no contract, combination, or conspiracy 
is denounced by it unless its necessary effect 
is to directly and substantially restrict com- 
petition in commerce among the states. By 
a parity of reasoning, the correct interpreta- 
tion of the second section must be that no 
attempt to monopolize a part of commerce 
among the states is made illegal or punish- 
able by the provisions of that section unless 
the necessary effect of that attempt is to 
directly and substantially restrict commerce 
among the states. The acts of the defend- 
ants had no such effect. They evidenced 
nothing but the legitimate efforts of traders 
to secure for themselves as large a part of 
interstate trade as possible, while they left 
their competitors free to do the same. It was 
not — it could not have been — the purpose 
or the effect of the second section of this 
law to prohibit or to punish the customary 
and universal attempts of all manufacturers, 
merchants and traders engaged in interstate 
commerce to monopolize a fair share of it in 
the necessary conduct and desired enlarge- 
ment of their trade, while their attempts 
leave their competitors free to make success- 
ful endeavors of the same kind." 



166 

In National Cotton Oil Co. v. Texas (197 U. S., 
115), the constitutionality of certain anti- 
trust acts of the State of Texas was involved. 
In the course of his opinion, Mr. Justice Mc- 
Kenna said (p. 129) : 

" It is enough to say that the idea of 
monopoly is not now confined to a grant of 
privileges. It is understood to include a 
' condition produced by the acts of mere in- 
dividuals.' Its dominant thought now is, 
to quote another, ' the notion of exclusive- 
ness or unity ' ; in other words, the supres- 
sion of competition by the unification of in- 
terest or management, or it may be through 
agreement and concert of action. And the 
purpose is so definitely the control of prices 
that monopoly has been defined to be, ' uni- 
fied tactics with regard to prices.' It is the 
power to control prices which makes the in- 
ducement of combinations and their profit. 
It is such power that makes it the concern 
of the law to prohibit or limit them." 

(4) We will not attempt by a minute com- 
parison of these various definitions to reconcile 
them. Some of them are obscured by the use 
of general phrases which are only pertinent 
when they are related to particular conditions. 
A concern may by legitimate growth and expan- 
sion and by entirely legitimate means acquire 



167 

such a preponderance of a particular trade as to 
be a dominating factor in that trade, but it can- 
not be said to be a monopoly in a legal sense. 
Therefore, " dominating a trade " as a phrase is 
only applicable in connection with other condi- 
tions. The same is true of the phrase "the con- 
trol of the market." There may be a perfectly 
legitimate control of the market for the time 
being, and it is, therefore, not in and of itself 
controlling. This is true of the power to 
fix prices, as it is a power which inheres in 
every producer to the extent of his trade 
limited only by economic considerations. 
"" Unification of interest or management " may 
result from entirely legal transactions as well 
as illegal, and it is valueless for the purposes 
■of definition without the necessary qualifica- 
tion. It follows that these various conditions 
are not in and of themselves controlling. There 
must be some element or condition out of which 
they spring, or associated with them, which im- 
parts to them the quality of a monoply in a legal 
sense. The clew to that element is found in the 
statement of Judge Jackson that it is an exclu- 
sive control resulting from restrictions and re- 
straints which " operate to prevent the exercise 



168 

of a right or liberty open to the public before the 
monopoly was secured," and the statement of 
Judge Sanborn that it is " an exclusive right ta 
or the exclusive control of that trade " embracing 
" the exclusion of all others from that right and 
control." But the question still arises what con- 
stitutes " the exclusion of all others " or " a re- 
striction or restraint " which operates " to prevent 
the exercise of a right or liberty open to the 
public before the monopoly was secured." The 
solution in part at least is found in the first section 
of the Act ; that is an exclusion resulting from 
contracts, combinations or conspiracies in re- 
straint of trade such as are therein mentioned, in 
such volume and to such a degree as to constitute 
practically an exclusive control, is .monopol- 
ization or an attempt to monopolize. There are 
specific contracts, combinations or conspiracies 
which do not reach the point of monopolization.. 
There may be such contracts, combinations and 
conspiracies which in their effect reach that 
point. Apart from such contracts, combinations 
and conspiracies there may be other acts con- 
templated by the Act as constituting the act of 
monopolization, but we cannot conceive of any 
such acts being so contemplated unless they are 



169 

in themselves unlawful or tortious. Hence we 
submit that monopolization within the Act is the 
exclusive control of a trade which is the natural 
effect and result of a comprehensive system of 
such contracts, combinations or conspiracies, 
or other unlawful or tortious acts. In other 
words, to monopolize or attempt to monopolize a 
trade means the control of it, or the attempt to 
control it, through the exclusion of others 
generally from it by the means and agencies 
which are prohibited and declared to be illegal 
by Section i of the Act or by other means and 
acts which are in and of themselves unlawful or 
tortious. It is the presence of such means or 
agencies of exclusion that constitutes a 
monopolistic domination or control of a trade, 
and in their absence, size, domination, and con- 
trol of the market or prices, are not a monopoly 
in a legal sense. It is not, therefore, a final 
test what properties and plants a concern owns, 
or how extensive their capacity and product are, 
or how great the volume of its business is 
in relation to the whole of the business or the 
business of anybody else. 

It is to be borne in mind that as this is a 
criminal statute it is to be assumed in its con- 



170 

struction that the Legislature was not creating 
an oflFense without indicating with a fair degree 
of definiteness what acts should constitute it. 
To make monopolizing a criminal offense with- 
out any standard for judging the means by 
which the exclusion of others is effected, which 
is essential to monopolizing, would be an in- 
tolerable situation. The conduct of a trade 
consists of a multitude of acts varying in 
their ethical quality. Competition is a state 
of war. One man may push it to the extreme 
limits, whilst another may draw the boundary 
line clear inside of them. Price cutting and re- 
bating, collecting information of the trade of 
competitors, the operation of companies under 
other names to obviate prejudice or secure an 
advantage, or for whatever reason, are all 
methods of competition. Who knows where the 
line is that separates "fairness" in these 
methods from " unfairness ? " What legal 
standard determines what is " fair " and what is 
"unfair?" Lord Morris said in the Mogul 
case ([1892] App. Cas., p. 51) that the question 
of " fairness " is one that would be determined 
by the "idiosyncrasies of individual judges," 
and that he could see no limit to competition ex- 



171 

cept the invasion of the legal rights of another. 
Yet competition is one of the principal means 
whereby one man gets the better of his fellows 
in the struggle for trade, and appropriates to 
himself an ever increasing share of it, even ex- 
tending to such a dominating share of it as to 
constitute what is called control. What legal 
rules or standards has a man to guide him in 
determining when his methods cross an imagin- 
ary line between fair and unfair, so that his suc- 
cess thereby becomes a criminal offense ? Those 
who stand upon an Act which encourages com- 
petition cannot complain of the extermination 
which competition involves. 

It is unnecessary to multiply instances. We 
say that it could not have been the intention of 
the legislature to constitute such matters ele- 
ments in the criminal offense of monopolizing a 
trade. Contracts in restraint of trade are governed 
and defined by fixed legal standards, as are com- 
binations and conspiracies in restraint of trade. 
There is no uncertainty in denouncing the con- 
trol of a business which results from such con- 
tracts, combinations and conspiracies as a criminal 
offense, because a man would then know whether 
his acts and transactions constituted the offense 



172 

prescribed by the Act. The same is true of any- 
other unlawful or tortious acts of exclusion. But 
unfair methods of competition such as have been 
indicated, and other similar methods of business, 
present moral rather than legal problems in the 
solution of which judges and juries would differ, 
and no man could know whether his methods of 
business were threatening him with criminal 
consequences or not. This is what we mean by- 
saying that the Act should be construed to con- 
stitute an offense consisting of elements gov- 
erned by legal standards, which is the case if the 
monopolization which is denounced is the con- 
trol of business accomplished by the means de- 
clared to be illegal by the first section of the 
Act or by means otherwise unlawful, and 
that it should not be construed to constitute 
the offense of elements that are outside of 
the domain of legal standards, and so vague, in- 
definite and uncertain that whether a crime had 
been committed or not would depend upon the 
idiosyncrasies of judges and juries. 

The case of Swift vs. U. S. (196 U. S., 375) 
is pertinent in connection with this phase of 
the case. The defendants named in the bill 
were a number of corporations, firms and indi- 



173 

viduals engaged in the business of buying live 
stock, slaugbtering it, and converting it into 
fresh meats, and selling the fresh meats through- 
the United States, controlling nearly the whole 
trade. It was alleged that they had combined 
to monopolize the business. It was not charged 
or contended that the extent of the business 
of the defendants was in and of itself a monopoly. 
It was charged that monopolization or an attempt 
to monopolize resulted from certain specific acts 
or courses of conduct of the combination, such 
as refraining from bidding against each other in 
purchasing cattle except perfunctorily ; bidding 
up prices for a few days higher than the state of 
the trade would warrant to induce stock owners 
in other States to make large shipments ; the ar- 
bitrary raising and lowering of prices from time 
to time ; the collusive restriction of the shipments 
of meat ; the imposition of penalties upon their 
customers for deviations from certain rules ; the 
keeping of a black list of customers who de- 
parted from those rules ; and obtaining rebates 
from railroad companies. The case in its mon- 
opoly aspect turned on the combination for those 
purposes, and it was the use of the specific means 
alleged which was enjoined, and not the com- 
bination for any other purposes. 



174 

We therefore insist that to monopolize, or at- 
tempt to monopolize, under the Act of 1890, is 
not established by showing that a concern con- 
trols the manufacture and sale of the bulk of 
any particular article, or that it dominates the 
trade in that article, or controls the price thereof 
in so far as it deals in the article, in the absence 
of an exclusive control of the character indicated. 

(4) Having attempted to define a monopoly it 
is now to be remarked that monopolization 
within the Act is confined to the monopolization 
of interstate and foreign commerce by its ex- 
press terms, and by the fact that production and 
manufacture are not interstate commerce or 
within the jurisdiction of congress. Interstate 
commerce does not begin until there is some 
interstate transaction of sale or interstate 
movement for purposes of sale. In the Swift 
case (196 U. S., p. 397) it was said : 

" Therefore the case is not like United 
States V. E. C. Knight Co., 156 U. S., i, 
where the subject matter of the combina- 
tion was manufacture and the direct object 
monopoly of manufacture within a State. 
However likely monopoly of commerce 
among the states in the article manu- 
factured was to follow from the agreement 



175 

it was not a necessary consequence nor a 
primary end. Here the subject matter is 
sales and the very point of the combination 
is to restrain and monopolize commerce 
among the states in respect of such sales. 
The two cases are near to each other, as 
sooner or later always must happen where 
lines are to be drawn, but the line between 
them is distinct." 

The distinction is between a monopoly in the 
manufacture of an article and a monopoly in its 
sale. The extent to which a corporation or com- 
bination is engaged in the production and manu- 
facture of an article is one thing ; its interstate 
commerce is an entirely different thing. It may 
be a producing and manufacturing monopoly 
and yet not be a monopoly with respect to inter- 
state commerce within the meaning of the Act of 
1890. It is its conduct with respect to interstate 
commerce that determines whether it is monop- 
olizing within the Act. It is only when it markets 
its product throughout the states that it comes 
within the province of that Act, and therefore 
the question must always be, in determining 
whether there is monopolizing within the Act, 
not the extent of its manufacturing capacity 
and production, but whether in marketing its 



176 

products througliout the states it is monopolizing 
or attempting to monopolize that trade. If 
competitors generally are not excluded from the 
trade by contracts, combinations or conspiracies 
in restraint of trade or other unlawful 
acts having that as their purpose and 
effective in its accomplishment there is no 
monopolization. The question here is therefore 
whether by such means refiners and dealers gen- 
erally are now being excluded from the markets 
of the various states or foreign countries. 

(5) We have specified the means which 
are charged as the means by which the 
alleged monopolization is effected. They may 
be condensed as follows : 

(i) Agreement with Tide-Water Company, 
dated October 9th, 1883 ; (3) contracts with 
Pennsylvania Railroad Co. of August 22nd, 
1884 ; (3) control of pipe lines and unfair prac- 
tices against competing lines ; (4) particular 
contracts in restraint of trade ; (5) combination 
with railroads to obtain discriminations ; (6) 
methods of selling lubricating oils to railroads ; 
(7) unfair methods of competition ; (8) and di- 
vision of territory. 



177 

All of these matters are covered by the Brief 
on the Facts and the Summary of Facts con- 
tained in this brief, to which we refer to avoid 
repetition, simply insisting here that it is estab- 
lished that there is no monopolization or attempt 
to monopolize. 



VII. 

The only relief, if any, that can he 
granted is to enjoin specific acts or 
methods in restraint of interstate trade, 
or tending to its monopolization if any 
snch are found to exist. 

(i) We have already shown that it is not the 
intent of the Act, or within the power of Con- 
gress, to limit the manufacturing properties or 
plants that a corporation or individual may ac- 
quire or create ; and that therefore, the common 
ownership and use of the Standard properties 
may not be directly or indirectly disturbed. We 
have also shown that the intrastate sale and 
marketing of the products is not within the Act 
or the jurisdiction of Congress. The only sub- 
ject within the Act is interstate and foreign com- 



178 

merce ; that is, tlie interstate and international 
marketing and sale of the products. If it should 
be found by the Court that the Defendants, 
by the employment of any particular means, 
are monopolizing or attempting to monop- 
olize that particular trade then, following 
the precedent of Swift vs. the United States 
(196 U. S., 375), the proper relief is to enjoin 
those means. There were alleged in that case 
certain acts or courses of conduct intended to 
monopolize the trade. The injunction granted 
by the Circuit Court restrained the defend- 
ants from combining to restrain interstate trade 
by doing any of the acts or pursuing any 
of the courses of conduct specifically alleged^ 
''''or by any other method or device ", and also 
from combining together to monopolize or at- 
tempting to monopolize the interstate trade 
by means of rebates from railroad companies. 
The Court said as to the nature of the action 
(P- 394) : 

" To sum up the bill more shortly, the 
charge is, a combination of a dominant pro- 
portion of the dealers in fresh meat through- 
out the United States not to bid against 
each other in the live stock markets of the 
different States ; to bid up prices for a few 



179 

days in order to induce the cattlemen to 
send their stock to the stock yards ; to fix 
prices at which they will sell, and to that 
end to restrict shipments of meat when 
necessary ; to establish a uniform rule of 
credit to dealers, and to keep a black-list ; 
to make uniform and improper charges for 
cartage, and finally, to get less than lawful 
rates from the railroads to the exclusion of 
competitors." 

After considering the reasons for holding the 
scheme as a whole to be within the reach of the 
Act of 1890 the Court said (p. 398) ; 

" For the foregoing reasons, we are of 
opinion that the carrying out of the scheme 
alleged, by the means set forth ^ properly may 
be enjoined, and that the bill cannot be dis- 
missed." 

The Court then reviewed those means separ- 
ately and held that each of them as a part of a 
connected scheme was suflSciently brought by 
the allegations within the provisions of the Act 
of 1890 to be specifically enjoined ; but the 
general words of the injunction " or by any other 
method or device the purpose and effect of which 
is to restrain com,merce as aforesaid'''' were 
stricken out, the Court saying (P. 401) : 



180 

" The defendants ought to be informed as 
accurately as the case permits what they 
are forbidden to do. Specific devices are 
mentioned in the bill, and they stand pro- 
hibited. The words quoted are a sweeping 
injunction to obey the law, and are open to 
the objection which we stated at the be- 
ginning, that it was our duty to avoid, to 
the same end of definiteness so far as ob- 
tainable, the words " as charged in the bill" 
should be inserted between " dealers in such 
meats '' and " the effect of which rules," and 
two lines lower, as to charges for cartage, 
the same words should be inserted between 
" dealers and consumers " and " the effect 
of which." 

Further, the Court said (p. 402) : 

" It only remains to add that the foregoing 
question does not apply to the earlier sec- 
tions which charge direct restraints of trade 
within the decisions of the Court, and that 
criticism of the decree, as if it ran generally 
against combinations in restraint of trade, 
or to monopolize trade, ceases to have any 
force when the clause against " any other 
method or device " is stricken out. So 
modified^ it restrains such combinations only 
to the extent of certain specified devices^ 
which the defendants are alleged to have 
used and intend to continue to useP 

In Addytone Pipe & Steel Co. vs. U. S. (175 
U. S., 211), the Court said (p. 247) : 



181 

" The views above expressed lead gener- 
ally to an aflSrmance of tlie judgment of 
tte Court of Appeals. In one aspect, how- 
ever, that judgment is too broad in its terms 
— the injunction is too absolute in its direc- 
tions . . , as it may be construed as 
applying equally to commerce wholly within 
a State as well as to that which is interstate 
or international only. This was probably 
an inadvertence merely. Although the 
jurisdiction of Congress over commerce 
among the States is full and complete, it is 
not questioned that it has none over that 
which is wholly within a State, and, there- 
fore, none over combinations or agreements 
so far as they relate to a restraint of such 
trade or commerce. It does not acquire any 
jurisdiction over that part of a combination 
or agreement which relates to commerce 
wholly within a State, by reason of the fact 
that the combination also covers and regu- 
lates commerce which is interstate. The 
latter it can regulate, while the former is 
subject alone to the jurisdiction of the 
State. ... To the extent that the 
present decree includes in its scope the en- 
joining of defendants thus situated from 
combining in regard to contracts for selling 
pipe in their own State, it is modified and 
limited to that portion of the combination or 
agreement which is interstate in its charac- 
ter." 



182 

The paragraph, of the opinion immediately 
preceding the quotation we have just given is as 
follows (p. 246) : 

" It is almost needless to add that we do 
not hold that every private enterprise which 
may be carried on chiefly or in part by 
means of interstate shipments is, therefore, 
to be regarded as so related to interstate 
commerce as to come within the regulating 
power of Congress. Such enterprises may 
be of the same nature as the manufacturing 
of refined sugar in the Knight case, — that 
is, the parties may be engaged as manufac- 
turers of a commodity which they thereafter 
intend at some time to sell, and possibly to 
sell in another State ; but such sale we have 
already held is an incident to and not the 
direct result of the manufacture, and so is 
not a regulation of, or an illegal interfer- 
ence with, interstate commerce. That prin- 
ciple is not affected by anything herein 
decided." 

(2) These cases clearly furnish the principle 
which should govern in the disposition of this 
case. A combination is alleged, followed by 
the allegation of specific acts and courses of 
conduct which it is alleged restrain and monop- 
olize interstate commerce in oil. The only 
questions that can be raised are therefore (i) 
Is there a scheme to monopolize interstate trade 



183 

in oil by the specific means alleged ; (2) 
are tlie means adequate ; and (3) if the scheme 
exists, which of the particular means alleged 
are now being employed? If any of those 
means are found in use the relief to be 
given is to enjoin the monopolization or 
attempt to monopolize the interstate commerce 
in oil by those specific means. The jurisdiction 
of the Court extends that far and no further. It 
does not extend to the ownership of the refiner- 
ies because under the Knight case production 
is not within the Act or subject to the 
jurisdiction of Congress. It does not extend to 
the intra-state disposition of the product because 
that is domestic commerce not within the Act 
or subject to the jurisdiction of Congress. 
And under the Swift case, even if a combina- 
tion exists which is a monopolization of or an 
attempt to monopolize a particular trade, it can- 
not be generally enjoined, but only the acts and 
devices to effect the monopolization which are 
specifically alleged, as they are in the bill before 
the Court, can be enjoined. The case is precisely 
within and governed by the principle of the 
Swift case as to the relief that can be adminis- 
tered. 



184 

In this regard tlie case is entirely different 
from the Northern Securities case. That was a 
combination for the control of two interstate rail- 
way systems engaged in interstate transporta- 
tion. Their business was exclusively transpor- 
tation, and was therefore exclusively commerce as 
distinguished from production. The dominating 
element of their business was interstate transpor- 
tation, therefore interstate commerce. The 
control of the combination was reached by 
the prohibition of the voting power of the 
holding company. The control was the only 
device alleged as the means whereby in- 
terstate transportation was restrained, and the 
decree necessarily was directed at that control. 



POINT VIII. 

There is no basis in the proofs for any 
decree affecting the international trade of 
the Defendants. 

It appears from the proofs that the Standard 
Oil Co. (of New Jersey) owns the shares in 
whole or in part of many different foreign com- 



185 

panies operating exclusively in foreign countries, 
none of wtich, with a single exception, is 
a party to this proceeding. The only exception 
is the Anglo-American Oil Co., Ltd., and nothing 
is shown as to its business or as to the busi- 
ness of the other foreign companies. All that 
does appear is that about 60% of the refined 
oil is marketed in foreign countries. The 
markets in foreign countries are free and open 
to everyone. No refiner in this country is 
restricted in any way, or by any means, from 
selling all the oil in those countries which he 
can manufacture, and intercourse with those 
countries is just as open to them as to the 
Standard. There is no evidence that they are 
by any devices or acts of the Standard pre- 
vented or restricted from access to those markets. 
The competition there is with all the foreign 
production, and the conditions which exist there 
govern the business which is done. We fail to 
see any ground for disturbing the marketing 
facilities which have been established through- 
out the world by means of the foreign companies. 
It has been a work of enormous labor and ex- 
pense to establish those facilities and they secure 



186 

for this country a vast trade it would not other- 
wise liave to its great advantage and that of the 
people. 



POINT IX. 

There is no basis in the proofs for any 
decree severing the oivnership of the pipe 
line companies. 

As we have already said, these companies fall 
into two classes. There are the companies which 
were organized by the owners of the Standard 
properties to provide purely private pipe lines 
for the purposes of their own business. They 
were built to reach the oil fields and provide a 
regular and adequate supply of crude for the 
refineries. There is no principle upon which 
their ownership should be severed, particu- 
larly as they are an indispensable adjunct of the 
refineries. No one would dream now of building 
a refinery on a large scale without a pipe line 
system to reach the oil fields for the crude 
supply. To separate them in any such case 
would be to amputate an essential part of the re- 
fining plants. 



187 

The other class consists of the common carrier 
pipe lines. There is no evidence or principle jus- 
tifying their severance. They are, in fact, by the 
nature of the business only nominally common 
carrier lines. The development of the business 
has been along the line of every refinery 
having its own associated pipe line system, 
and that has become an unalterable condition of 
the business. That is why the Standard's pipe 
lines are not in fact common carrier lines, why 
they are not used as such. In the absence of 
any demand or need for their use by others 
there is absolutely no basis for a severance of 
their ownership from that of the refineries. 

No question is or can be raised as to the cor- 
porate power of the Standard Oil Company (of 
New Jersey) to own and hold the stocks of these 
companies. 



188 



X. 



There is no basis in the proofs for any 
decree respecting the defendants engaged 
in the natural gas business or the o^trner- 
ship of the stocks or any of them by the 
Standard Oil Co. (of New Jersey). 

There is no evidence affecting these compa- 
nies whatsoever. They are not engaged in the 
oil business, and it is only the oil business 
which is involved in this proceeding either by 
the allegations of the bill or the proofs. They 
are engaged in a separate and distinct business, 
which is the supply of natural gas to particular 
communities. The Standard Oil Co. (of New 
Jersey), in so far as it owns the stocks of any of 
them, is authorized by its charter to do so, and 
its right to hold them is not challenged by any 
evidence in the case. 

John G. Johnson, 
John G. Milburn, 
Of Counsel for the Defendant Standard 
Oil Company and others. 

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