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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

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INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEAKY NATIONAL ECONOMIC COMMITTEE 
CONGEESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

SECOND SESSION 
PURSUANT TO 

Public Resolution No. 113 

(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 15-A 



PETROLEUM INDUSTRY 

REPORT ON MARKETING PRACTICES IN THE 

RETAIL DISTRIBUTION OF MOTOR FUEL 

AND MOTOR LUBRICANT PRODUCTS 



SATURDAY, OCTOBER 7, 1939 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1940 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Cong.) 

JOSEPH C. O'MAHONET, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KING, Senator from Utah 

WILLIAM E. BORAH, Senator from Idaho 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD. Assistant Attorney General 

♦WENDELL BERGE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•LEON HENDERSON, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

♦EWIN L. DAVIS, Commissioner 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

»A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 
Representing the Department of the Treasury 



•Alternates. 

n 



Representing the Department of Commerce 
JAMES R. BRACKETT. Executive Secretary 



CONTENTS 



Page 
Letter, dated May 13, 1939, from Arthur W. Ramsdell, Sales,. Marketing 
and Management Consultant, New York City, to Kendall Refining Com- 
pany, The Pennzoil Company, Quaker State Oil Refining Corporation, 
and Wolverine-Empire Refining Company outlining and submitting 

this report v 

Summary and Conclusions 8731 

The Market 

OutHne of Procedure 8736 

The Retail Outlet .- : 8736 

Analysis of Findings from the Questionnaire 8738 

Tables 1-5. Showing Loss of Business ' — 8738 

Tables 6-11. Types of Methods of Gaining & Forcing Control-- 8741 

Table 12. Field Survey of 4 Cities 8745 

Distributors' Complaints 8746 

Statistical Analysis of Retail Market . 8752 

Legal Steps Taken by Independents 8754 

Importance of Industry of Independents 8766 

ni 



ARTHXm W. RAMSDEa^L 
SALES, MARKETING AND MANAGEMENT CONStJLTANT 

8 East 46th Street, New York, N. Y. Murray Hill 2-1176 

JMay 13, 1939. 
Kendall Refining Company, 
The Pennzoil Company, 
Quaker State Oil Refining Corporation, 
Wolverin&Empire Refining Company. 

Gentlemen : On April 16, you retained our organization to investigate con- 
ditions in the field of gasoline and motor lubricant marketing with particular 
reference to conditions which exist in the marketing of independent brands of 
motor oils and/or greases. 

You stipulated that the investigation of marketing practices in the retail 
distribution of motor fuel and motor lubricant products report on the questions 
as contained in the statement of Senator Joseph C. O'Mahoney, Chairman of 
the National Economic Committee, to-wit : 

"What is the exact relationship between the independent producer and 
independent distributor on the one hand, and the major units of produc- 
tion and distribution upon the other? 

"What restraints, if any, exist upon free enterprise?" 

You stated that our report must be in your hands by May 15, 1939. The 
time element, it must be recognized, would naturally limit the returns from 
the distributors and operators of service stations. 

You ask us to independently investigate and determine : 

1. The extent to which a free and open market exists for the independent 
producer and refiner (as distinguished from the major integrated producer 
and refiner) in brands of gasoline, motor oil and other motor lubricants. 

2. To what extent is this field still open for free enterprise, such as 
is contemplated under American laws for business conduct. 

Your outline of the scope of work to be covered requests that in the event 
our investigation determines tliat a free and open market does not exist for 
independent gasoline and motor lubricants, that we determine factually : 

a. How the present situation developed. 

b. How its operation is maintained by those benefitting therefrom. 

c. Whether the buying public is permitted through point-of-sale advertising 

and merchandise display to normally find and purchase independent 
brands of motor lubricants in the normal channels of trade for such 
products. 

d. That we investigate historically the growth of the development and estab- 

lish what, if any, legal steps have been taken for the protection of the 
independent interests. 

e. That we supply and make as part of our report what we believe to be 

sufficient evidence of the importance of the independent branch of the 
Pennsylvania grade petroleum industry. 

With these questions in mind, we took the following steps: 
We sent questionnaires, reproductions of which appear in the appendix, to 
SOS independent distributors and jobbers. Accompanying these questionnaires 
was a letter outlining the purpose of the survey and supplying a definition of 
the terms used in the questionnaire. 

We selected four typical American cities — Washington, D. C, Columbus, Ohio, 
New Orleans, Louisiana and Portland, Oregon and canvassed every retail outlet 
for gasoline and motor lubricants. Each canvasser was equipped with a ques- 
tionnaire which he was instructed to fill in from facts gleaned by observation 
of the premises, as well as conversations with the operators. He was instructed 



VI LETTER OF TRANSMITTAL 

(o state what he saw regardless of the answers given him by the retail dealer 
whom he interviewed. 

We gathered (ngelher such pertinent data as are available in the Public 
Record and from sources in the oil industry as we had time to digest and 
tabulate. 

An examination of the facts which we were able to gather establishes beyond 
a question of doubt that a free and open market for independent brands of 
motor oils, motor lubricants and gasolines no longer exists in the normal chan- 
nels of trade for such products in the United States. The facts indicate that 
approximately 85% of the total volume of gasoline is marketed and controlled by 
a few large integrated oil companies and that the sale of independent brands of 
motor oils and other lubricants is excluded from those key outlets, the Service 
Station and Garage, which mainly control the retail sale of the products. 

We are submitting herewith the report of our findings. 
Very truly yours, 

AjtTHUE W. RAMSDELL. 



INVESTIGATION OF CONCENTKATION OF ECONOMIC 

POWER 



SATURDAY, OCTOBER 7, 1939 

United States Senate, 
Temporary National Economic Committee,^ 

Washington, D. C. 

EXHIBIT NO. 1210 ' 

REPORT ON MARKETING PRACTICES IN THE RETAIL DISTRIBUTION 
OF MOTOR FUEL AND MOTOR LUBRICANT PRODUCTS BY ARTHUR 
W. RAMSDELL 

SUMJVIARY AND CONCLUSIONS 

The investigation of marketing practices in the retail distribution of Motor 
Fuel and Motor Lubricant Products was undertaken with the object of supplying 
current data to answer questions appearing in the text of the statement of Senator 
Joseph C. O'Mahoney, Chairman of the Temporary National Economic Committe*' 

"What is the exact relationship between the Independent Producer anw 
Independent Distributor on the one hand, and the major units of production 
and distribution upon the other? 

"What restraints, if any, exist upon free enterprise?" 

Our investigation developed the following important points in relation to these 
and other similar questions : 

1. The Service Stations and Garages render a specialized service to automobile 
owners. As a result of the operation of Building Codes and Underwriters' Rules, 
the distribution of motor fuel is restricted to Ser^'ice Stations and Garages. 
Therefore, they are the main retail nutlets for the sale to the consumer of motor 
fuel and motor lubricants. 

2. Through somecform of control, the Major Oil Companies have effected various . 
types of exclusive dealing arrangements with the owner of the Service Station 
or Garage which forces the retail outlet so controlled to exclude for sale the 
brands of the Independent Producer and Refiner. 

3. Our investigation revealed that the policies and sales tactics which appear 
to be common to all Major Oil Company gasoline suppliers are intendwi to and 
do eliminate Independent brands of competitive products from owned and/or 
controlled retail outlets. 

4. The usual marketing practice is to effect with the owner of the retail outlet 
an agreement of some type of exclusive dealing arrangement whereby the Major 
Oil Company agrees to install gasoline handling equipment and guarantees to 
supply uninterrupted deliveries of gasoline to the Service Station, the owner of 
the retail outlet being required by the agreement to sell only the motor fuel and 
motor lubricants of the Major Oil Company gasoline supplier. 

5. The investigation of the market definitely establishes that there is a 
consumer demand for the brands of motor oil being produced by the Inde- 
pendent Producei' and Refiner.; that the ovoier of the retail outlet is constantly 
faced with the problem of satilsfying consumer demand but is prohibited by the 
Major Oil Company controlling the station from carrying motor oil products 
to satisfy this consumer demand. 

'This exhiMt was not siibmittpd for the record- by Uio staff .of tlm Commlttoo. 
» Entered in the record Saturday. October 7, 1!)39. See Hearings, Tart 15. p. 8488. 

8731 



8732 CONCENTRATION OF ECONOMIC POWER 

6. The ultimate consumer, the car owner, is denied the facilities of the 
retail dealer in purchasing the motor lubricant products of the Independents 
and is. consequently forced by the Major Oil Companies to accept the motor 
lubricant products of the Major Oil Companies. 

7. The owners of the retail outlets, in order to supply the insistent demand of 
the consumer, procures the products of the Independent Producer and Refiner 
and engages in bootlegging practices in order to, first, satisfy the customer 
and, second, to avert summary action by the Major Oil Company of cancella- 
tion of his source of gasoline supply, and/or extra margin on gasoline sales, 
nnd/or courtes.y card privileges, and/or credit extensions. 

8. The practices above set forth are restraints upon free enterprise. 

They restrain the owner of the Service Station or Garage from carrying 
a diversified line of motor lubricant products. 

They restrain the Independent Distributor and Jobber from distributing 
his products through the retail outlets, which are the normal channels of 
trade. 

They restrain the Independent Producer and Refiner from producing the 
supply of motor fuel and lubricants that would be required if the consumer 
could obtain the products of his choice. 

n. A free and open market, it is found, does not exist in the distribution of 
motor fuels and motor lubricants. 

10. The retailing of motor fuels and motor lubricants Is controlled by the 
group of Major Oil Companies who act in concert as competitors and who, 
through 100% exclusive dealing an-angements, now control approximately 85% 
of the retail outlets in the United States. By controlling the retail outlets 
specializing in motor fuel and motor lubricant products, the Major Oil Com- 
panies have obtained a monopoly of the retail distribution of motor fuel and 
motor lubricants. 

11. The restraints upon free enterprise, it has been found, exist to such an 
extent that the small Independent Distributor of motor fuel and motor lubri- 
cants is rapidly being forced out of business through the marketing practices 
of the Major Oil Company gasoline suppliers. 

12. An analysis of the selling methods of the Major Oil Companies discloses 
that the following tactics are employed to enforce exclusive dealing arrange- 
ments. 

(a) Major Oil Company gasoline suppliers employ the hold they have on 

the owner of the outlet through equipment installation and source 
of gasoline supply to force the exclusive sale of Major Oil Com- 
panies' motor lubricant products. 

(b) Intimidation and/or threats are used to force the owner or operator of 

the retail outh^t to oxclude the products of the Independent Pro- 
ducer and Refiner. The principal type of threats employed are : 

1. Will erect a competitive service station. 

2. Will cut off the extra margin and so give the retail outlets' com- 

petitors an advantage in price quotations. 

3. That the courtesy card privilege will be cancelled. 

4. That the supply of gasoline will be cancelled. 

5. That the contract or agreement will be cancelled and the equip- 

ment installed removed from the premises of the outlet. 

13. The marketing practices employed in the distribution of motor fuel and 
motor lubricants substitute for free competition in selling, an agreement of 
a tying type which limits selling and marketing methods and practices to 
operating within the terms of the tying agreement, or some sort of 100% exclu- 
sive control agreement. 

14. In the strict marketing and selling sense, the retail outlets controlled 
by the Major Oil Company group of competitors are not permitted to function 
as other types of retail outlets in according the consumer the liberty of obtain- 
ing the kind and type of motor oil product of his choice. 

15. Steps taken by the Independent Producers and Refiners of motor oils 
and motor lubricants have followed the law abiding procedure of seeking 
relief through Departments of the Goverimient charged with Administration 
and Enforcement of existing laws. 

Investigations have been carried through by Governmental Departments and 
they produced sufficient evidence for opinions by the Chief counsel of the 



CONCENTRATION OF ECONOMIC POWER 8733 

Federal Trade Commission that the practices were either infringemeuts or 
violations of existing laws. 

Just as the i)oint was reached where relief might be granted the Independent 
Producer and Refiner another governmental body was assigned jurisdiction 
of the matter complained of. The assuming of this jurisdiction abrogated the 
investigations and opinions of the department of prior jurisdiction. 

As the second governmental body undertook to act upon its decisions of 
infringement and violations of the Code, this Department's jurisdiction was 
invalidated by the Supreme Court decision which declared that the National 
Industrial Recovery Act was unconstitutional. 

16. During the period of years taken for the filing of complaints, the as- 
sembling of data and the rendering of opinions, the Independent Producer.s 
and Refiners could employ no methods to thwart the concerted action on the 
part of groups of competitors of the Major Oil Companies, but saw themselves 
barred from the retail market and now view in prospect the ending of business 
enterprises whoses beginning dates to the discovery of oil in the United States 
in 1859. 

17. Because no relief was forthcoming from the several former investigations 
of the same practices, Independent Distributors and Jobbers feel that investiga- 
tion by governmental bodies produce little other than a recanvassing of condi- 
tions, facts about which have been established and exist in such form as to be 
acted upon. 

They believe that a recanvassing should be of existent facts and data on 
file in the various government departments. It is their opinion, re-enforced 
by twelve years of exi)erience, that a delay of an additional year or two for 
further investigation by governmental departments holds no prospect other than 
that the few remaining Independent outlets will be forced to go over to the 
monopolistic control of the Major Oil Company gasoline suppliers. 

18. Definite restraints exist upon free enterprises in the retail distribution 
of motor fuels and motor lubricants to such an extent that there is no doubt 
that a free and open market does not exist for the products of the Independent 
Producer and Refiner, and the Independent Distributor and Jobber. 

Restraints are also found to exist upon the retail outlet owner in that he is 
prohibited from carrying a full line of motor oil products adequate to meet the 
various types of consumer demand. 

19. Purely incidental to this investigation, it was found that similar restraints 
exist in respect to competition in the sale of accessories, tires and other auto- 
motive supplies. 

CONCLUSIONS 

The details upon which our conclusions are based form the body of this 
report. Our findings indicate that competition is confined mainly to the group 
of Major Oil Companies whose operations in the production, refining and dis- 
tribution of petroleum products is quite thoroughly integrated. 

The concerted action on the part of this group of competitors may be re- 
garded with the ideology that the practice insures orderly marketing condi- 
tions. However, our observation is that the concerted action of the group 
Is so thoroughly applied that it is having the result of putting the Independ- 
ent Producer and Refiner, the Independent Distributor and Jobber and the 
Independent Retail Outlet Operator out of business. 

Competition exists, but mainly among the group of Major Oil Companies, 
and the policy that has been observed as being generally adopted by all mem- 
bers of the group is a policy to eliminate the products of the Independent 
Producer and Refiner from distribution through the retail outlets. The con- 
sumer market for motor fuel and motor lubricants is so large that there is 
ample room for the competitive effort of the independents. 

Generally, the retail outlet, that is, the outlet that distributes products to 
the ultimate consumer, must undertake duties of a public service nature. The 
retail outlet in general marketing procedure offers products to the consumer 
and is the final step in the distribution process from prodiicer to consumer. 
Producers compete with one another for the money the consumer will spend 
for products of consumer demand. 

The producer is interest'ed mainly in supplying the demand of the consumer. 
The retail outlet operator is generally guided as to the kind and type of prod- 
ucts that he will sell by the demand of his customers. As has been stated, 
this is the general practice in the retail distribution of products. Freedom 
exists for the' retail operator to handle such products as he has demand for. 



8734 CONCENTRATION OF ECONOMIC POWER 

TLe producer, when this freedom of distribution to retail outlets exists, then 
can employ his efforts in stimulating (Consumer demand for his product. 

Our tindings from the survey indicate that this free market in the retail 
distribution of motor fuel and motor lubricant products does not exist because 
the retail outlet owner or operator has his freedom of function limited by 
tying, or 100%, exclusive arrangement dealings for the products of one Major 
Oil Company. 

It is a singular condition that the product handled by the retail outlets is 
so essential to the retail outlet operator as to move him to enter into an 
agreement by which, in order to guarantee his source of supply of the principal 
l)roduct. gasoline, he will acquiesce in demands to eliminate all other motor 
fuel and motor lubricant products from distribution through his outlet. That 
this condition exists is supported by ample evidence in the roport. 

However, viewing the practice from a strictly marketing point of view, 
the functions of selling competitive products through the retail outlet, the 
Service Station .and Garage, are practically eliminated. The functions of the 
Independent Distributors and Jobbers have been absorbed and the functions 
performed by the salesmen of the Major Oil Companies are more those of 
"order-takers" and enforcement agents rather than freedom of competition of 
salesman with salesman for the dealer's order. 

Of more importance, however, is the disregard of the consumer's demand and 
the employment of methods that force consumer acceptance of the products 
of the Major Oil Company who holds control of the station. 

A free and open market implies freedom to buy what is wanted and to 
sell the product in demand. It seems essential that for a free and open market 
to exist in the retail distribution of motor fuel and motor lubricant prod- 
ucts that the 100% agreement, or other types of exclusive dealing agreements, 
through which the Major Oil Companies control the retail outlets must be 
interpreted in the light of the public service function rendered by the Service 
Station and Garage. 

The retail outlet serving the ultimate consumer, the car owner, should offer 
a line of products of suflBciently diversified brands that will permit the consumer 
to purchase the products of his choice. The retail outlet would then be an 
open market free for the selling activities of all producers of motor fuel and 
motor lubricant products. The distribution of the product to the retail outlet 
would then depend upon the owner of the retail outlet, who, as a practical 
business man, would be guided by the demand of his customers as to the 
number of different kinds and types of motor oils that he would carry as his 
line. 

The principal deterrent to the owner of the service station and garage to 
carry a diversified line of products is the type of agreement, or contract, that 
he has concluded with a Major Oil Company for his supply of gasoline. 

It seems, therefore, that some action is necessary that will guarantee to the 
owner of the retail outlet a source of supply of gasoline and also guarantee 
to him the exercise of his liberty to buy and sell whatever other products 
are in demand. TTie retail owner and operator should have the freedom and 
right to purchase supplies from all competitive Producers and Refiners, and be 
relieved of the hazard of being forced out of businessi by being denied the 
supply of his principal product, gasoline. 

The coercive threats that force the retail outlet operator to handle only the 
Major Oil Companies' motor fuel and motor lubricant products should be sup- 
planted with the selling methods of free competition. The application of sales- 
manship and selling methods should be open to all Producers and Refiners of 
Motor oils. 

The tying, or 100%, exclusive dealing arrangement could well be discontinued, 
and in its place a contract substituted whereby the owner of the retail outlet 
contracts for a quantity of gasoline. This contract .should not have associated 
with it any tying clauses that require the retail outlet owner to handle only 
the products of the company with whom he contracts for his supply of gasoline. 
During our investigation of the marketing practices, the different types of 
agreements took such a position of importance that we found it necessary to 
examine the history of the 100%, or exclusive dealing arrangement, practices. 
Consequently, we have included in this report copies of the report of the Federal 
Trade Commission and copies of the decisions of the Petroleum Administrative 
Board covering thel findings of governmental investigations made during the 
past twelve years. 

An examination of the material included in the Exhibits contained in Report 
II will Indicate that previous investigations have accumulated sufficient data 



OONrRNTRATION OF KCONO.MK' I'OWKR 8735 

regarding tlio marketing practices of the Major Oil Company group so that tlie 
step of crystallizing the resnlts of these investigations into a program, conld 
he effected that would create a free and open market for the distrihution of 
motor oil and motor fuel products. 

It seems that the delay incident to crystallizing the findings of past investiga- 
tions has cost the Independents much in the way of reducing their business. 
The Independent Jobber and Distributor has been greatly affected, and to 
continue his business it is urgent and essential that he be provided with a 
free and open market within which he can operate without restraint upon 
free enterprise. 

Orderly marketing conditions can exist in the retail distribution of motor 
fuel and motor lubricant products when individual enterprise and initiative are 
unencumbered and when the rewards to be had from a free and open market 
are insured to individual enterprise. 

There is comprehended in the definition of the term "free and open market,' 
the following: 

"A Market in which the Retailer is permitted the freedom to purchase 
the products that he chooses to sell, liberty to display, advertise and resell 
products without any penalty whatsoever being imposed by the Producer 
of the principal line of products carried by the Retailer. 

"That the Dealer has made no "tying" agreement, either written, oral or 
implied to confine his purchases of petroleum products to those offered for 
sale by his gasoline supplier to the exclusion of similar products offered 
by other suppliers. 

"That the Retailer has not been given valuable considerations, conditioned 
upon his confining his retail efforts to petroleum products purchased from 
his gasoline supplier, in the form of cash payments, loans of money or equip- 
ment, special rental or lease arrangements for the property he operates, credit 
card agreement, special discounts or margin agreement, advertising allow- 
ance, special credit extension, guarantee of un-interrupted supply of gasoline, 
free painting of building, signs, etc., free paving of driveways or partial 
reimbursement for same, special prices, discounts or allowances. 

"That there exists no performance guarantee which are conditioned on the 
Retailer handling the petroleum products of the gasoline supplier exclusively, 
in the form of special remuneration to the retailer or his employees such as 
"capping" or bonuses for pushing the petroleum products of the gasoline 
supplier. 

"Where for any reason whatsoever the general public is denied the oppor- 
tunity to locate or find through directional advertising, examine, and pur- 
chase other petroleum products than those of the gasoline supplier.'' 

That urgent action is essential to arrest the practices of the Major group is 
emphasized by the analysis of our findings presented in the statistical section, for 
during the years 1936 to date the findings Indicate that the Major Oil Company 
group have intensified their drive to obtain 100%, or other type of exclusive deal- 
ing, control, of the retail outlets. 

The statistical data indicates that practically 8.5% of the retail outlets are con- 
trolled by the Major group and that the practices of more recent date are to 
concentrate upon enforcing control for exclusive sale of all Major Oil Company 
products. 

The investigation indicates that coercive tactics are now rigidly applied to force 
dealers to go "exclusive" for Major Oil Company products. Letters of the type 
reproduced in the following pages deliver a most threatening ultimatum. With 
the power to follow through in the hands of the Major group, a more restricted 
market is in the oflSng. 



G. L. Week 

The Atlantic Re:finino Company 

petrolehim peodttcts 

Wilkes-Barre, Pa., November 8, 19S8. 
Economy Gas & Oil Co., 

No. Penna. Ave. d Scott St., Wilkes-Barre, Pa. 
(Att: Mr. Isaah Troy.) 
Gentlemen :• We have checked your service station several times recently and 
find you are pushing motor oils other than Atlantic to your customers. 



8736 CONCENTRATION OF ECONOMIC POWER 

This is to give you notice that the next time we checlc your station and find 
you are still pushing Wolfeshead, Canfield and other brands of motor oil, we will 
discontinue the credit card privilege that you are now enjoying. 

I believe that you, yourself, feel you are not fair in continuing the credit card 
privilege and at the same time pushing other oils from which you are not making 
any more money than you are on Atlantic. 
Very truly yours, 

The Atlantic Refining Company, 
G. L. Week, District Manager. 
GLW SMB 

OUTLINE OF PROCEDXJRE 

In carrying forward our analysis of marketing jjraclices in the rotnil dis- 
tribution of motor fuel and motor lubricant products, we sent questionnaires to 
808 distributors located throughout the United States. 

The questionnaire, marked "A," see Appendix this report, was accompanied 
by a letter, marked "B," see Appendix, and a letter, Definition of Terms used in 
the Questionnaire, marked "C." The mailing of the questionnaires was com- 
pleted by noon of April 27th. Request was made that they be returned by 
May 5th. 

Additionally, a field survey was undertaken in Washington, D. C. ; Portland, 
Oregon ; Columbus, Ohio ; and New Orleans, La. Field canvassers were em- 
ployed to call upon every retail outlet within the city limits, see Instructions 
to Inspectors, marked "D," and to fill out the form, marked "E" in the Appendix. 
Returns were received as follows : 

85 Distributors filled out questionnaires supplying d:it:i on 1.512 dealers. 

61 Distributors substituted a letter describing marketing practices in their 
territory in lieu of returning the questionnaire, stating that they did not 
have lime in which to compile tlie data called for in the questioiniaire. 

Returns were received from the canvas.sers calling upon filling stations, as 
follows : 

Washington, D. C. — Number of filling stations and garages 531 

Portland, Oregon — Number of filling stations and garages . 864 

Columbus, Ohio — Number of filling stations and garages _„ 510 

New Orleans, La. — Number of filling stations and garages 534 

An analysis of the returns finds a definite pattern of conditions existing in 
practically all parts of the United States. The pattern of conditions is such 
as to indicate that a larger number of returns would supply little, if any, addi- 
tional data and would but add a preponderance of figures that would merely 
indicate a greater number of instances of the practices found as being employed, 
without changing the pattern as to the kind and type of marketing pi'aclici<s 
employed in the distribution of motor fuel and motor lubricant products. 

THE RETAIL OUTLET 

The starting point in the analysis of mnrketing practices in the retail dis- 
tribution of motor fuel and motor lubricant products, is the retail outlet, the 
Service Station and Garage. The investigation indicates that the restraints upon 
free enterprise Starrs with the Service Station and Garage and works back 
through the distribution functions of Distributor and Jobber, to the Independent 
Producer and Refiner. 

The Service Station and Garage are the most highly specialized. of all types 
of retail outlets. In fact, the principal product, gasoline, cannot be distributed 
by any other retail outlet. 

Other types of retail outlets are prohibited through city ordinances, rulings 
of the fire underwriters, and through rulings of the Fire Department from 
handling flammable or inflammable products. 

Building codes in every state throughout the United States specify the type 
of construction of the building and the precautions that must be taken against 
fire hazard. 

The resulting effect of the building codes and the regulations of the National 
Board of Fire Underwriters has produced a type of outlet to distribute motor 
fuel and motor lubricating products. Consequently, the retail distribution of 
motor fuel and motor lubricant products must be mainly through the Service 
Station. 



CONCENTRATION OF ECONOMIC POWER 8737 

Control of the retail outlets by Major Oil Companies, therefore, produce a 
monopoly of petroleum products distribution. 

The manner in which control has been obtained by a group of Major Oil 
Companies is generally through some type of Exclusive Dealing Arrange- 
ment, i. e., 

100 per cent Agreement 

Tying Contract 

Leasing Arrangement 

Lease and Re-Lease. 

Lease and Equipment Agreement 

Sales Contract type of Control 

Lease — Re-lease and Equipment 

(See Report II, Exhibit A, Section 12 — Detail of Contracts Employed; 
and Exhibit C, Pages 6-7-8 and Section VII. Page 15-16-17, Exhibit K). 

Control of Service Stations by a Major Oil Company is not so thorough in 
any one territory as to dominate all the retail outlets. For the most part, each 
Major Oil Company has obtained control of a small percentage of the service 
stations and garages in any one territory and, consequently, competition exists 
through competitive efforts among various ^Major Oil Companies in each 
territory. 

One practice has been observed — that all of the Major Oil Companies pro- 
hibit distribution by the retail dealer that they control of motor fuel and motor 
lubricant products of the Independent Producer and Refiner. 

From a practical marketing point of view, control of a retail outlet might be 
considered from the angle of a company owned store or outlet, as for instance, 
company owned stores of manufacturers of shoes, clothing, building materials 
and building accessories. However, in each of these cases, other retail outlets 
exist, the operators of which can be interested in selling the products of manu- 
facturers who, due to limited financial resources, are not in a position to 
operate wholly owned company stores. Additionally, other types of consumer 
products have many types of retail outlets to employ in distributing to the 
ultimate consumer. 

The distribution of petroleum products is in no way analogous. Retail dis- 
tribution of motor fuel cannot be engaged in except by those retail outlets 
which in the matter of building construction, the location of tanks and handling 
equipment are equipped in such a manner as to eliminate fire hazard. 

Motor fuel is the principal product distributed by the service station and 
garage. However, the services required for the maintenance and upkeep of 
the automobile are so closely tied in with gasoline that all motor fuel and 
motor lubricant products are logically concentrated in the Service Station and 
Garage as the outlet for distribution to the retail trade. 

These considerations must be taken into account in determining the potential 
number of outlets that are available for the distribution of motor fuel and 
motor lubricant products. Any investigation of marketing practices to deter- 
mine what restraints, if any, exist upon free enterprise must recognize that in 
the retail distribution of motor fuel there is but one type of outlet, the Service 
Station or Garage, that Producers, Refiners or Marketers of petroleum prod- 
ucts have at their disposal for the distribution of their product to the ultimate 
consumer. 

The marketing of motor fuel through other retail outlets is prohibited by 
local law and Underwriters' regulations. 

The diversity, of products, therefore, that the owner of the Service Station 
can distribute is practically limited to products for the operation and main- 
tenance of the automobile together with a line of a limited number of acces- 
sories in demand by the ultimate consumer, the car owner. 

The business man investing his money in a Service Station cannot transform 
the Service Station into another type of outlet. Store rooms, by way of com- 
parison, can be used as a drug store, grocery store, beauty shop, etc. 

Money invested in the building of a Service Station is lost if the building 
cannot be used as a Service Station. This fact, no doubt, accounts for the 
manqer in which the owner of the Service Station accepts the inducements 
and submits to the threats or coercion of the Major Oil Companies to sell only 
their products regardless of whether or not they are iti demand by the 
consumer. 



3738 CONCKN'THATION OV ECONOMIC POWER 

ANALYSIS OF FINDINGS KKOM THK QUKSTIONN AIKK 

Tables 1 lo 11 inclusive, present the statistical analysis from the question- 
naires. 

Tables 1, li, 3, 4, 5: The year Ihe control of the Service Station and 
Garage was gained by the Major Oil Company and the resulting effect in 
the loss of business to the Independent Producer and Refiner and the 
I>ocal Distributor and Jobber. 

Table 6: How Control of the Service Station and Garage was obtained. 

Table 7: The owner of the Service Station and Garage's reason for 
entering into a type of Exclusive Dealing Arrangement with the Major Oil 
Company. 

Table 8: The type of concessions made by the Major Oil Company in 
gaining control of retail outlets. 

Table 9: The practices employed by the Major Oil Company in forcing 
the owner of the Service Station and Garage to retail exclusively the 
products of the Major Oil Company. 

Table 10 : Data indicating that a free and open market existed prior to 
Major Oil Company obtaining control of the Service Station and Garage. 

Table 11 : Data indicating that a free and open market no longer exists 
after the Major Oil Company obtains control of the Service Station and 
Garage. 

Table 12 : The findings of the Field Survey of four (4) typical cities. 

An analysis of the questionnaires returned by 82 distributors indicates that 
beginning about 1936, the Major Oil Companies intensified their efforts to ob- 
tain control of the Service Station. 

The restraint that had been exercised by the Code being removed, the 
Major Oil Companies were left free to employ tactics to eliminate the Inde- 
pendent Producer's nd Refiner's products from distribution through the 
Service Station and C arage. 

The data accumulated by the Federal Trade Commission in its investigation 
during 1932, was not used to crystallize governmental action on behalf of the 
Independent Producer and Refiner. Consequently, the Major Oil Companies 
have obtained greater dominance over a larger number of retail outlets ; and 
by the degree of Major Oil Companies' domination of retail outlets, the busi- 
ness of the Independent Producer and Refiner and the business of the Local 
Distributor and Jobber has been reduced. 

Tables 1 to 5 present an Analysis of the statistical data contained in the 
Questionnaire. 

The 82 distributors reporting cover 1,512 Service Stations that sold formerly 
the Independents' products and which are now closed as outlets for all products 
other than those of the Major Oil Companies. 

The intensity of the drive by the Major Oil Companies to obtairi control of 
a greater number of retail outlets is indicated by Table 1. 

In the territory of 82 Distributors, 
During 1935— 

Major Oil Companies gained control of 49 Service Stations 
During 1936— 

Major Oil Companies gained control of 98 Service Stations 
During 1937— 

Major Oil Companies gained control of 311 Service Stations 
During 1938— 

Major Oil Companies gained control of 397 Service Stations 
During 1939 to May 6, 1939— 

Major Oil Companies gained control of 119 Service Stations 
During 1935 to May 6, 1939— 

Major Oil Companies gained control of 538 Service Stations 

in addition to the above 

1, 512 Service Stations 

The Questionnaire did not indicate the year that control was gained of 538 
Service Stations. 



CONCENTRATION OF ECONOMIC POWER 8739 

The effect of this control is retlected in the following figures of Table 4 : 

Oallona of 
Motor Oil 
Group Control Gained 193G: SoW 

During 1936—66 Distributors' sales to 96 Retail Outlets that 

were handling their products amounted to 94, 613 

During 1937 — these 66 distributors' sales to the same 96 Retail 

Outlets amounted to . 2,364 

During 1938 — these 66 distributors' sales to the samje 96 Retail 

Outlets amounted to 1, 703 

During the first quarter of 1939 — these 66 distributors' sales to 

the same 96 Retail Outlets amounted to 202 

(J roup Control Gained 1937: 

During 1936—73 Distributors' sales to 307 Retail Outlets that 

were handling their products amounted to 118, 542 

During 1937— the Major Oil Companies gained control of these 

307 Retail Outlets and the 73 Distributors' sales amounted to_ 54, 390 
During 1938 — these 73 Distributors' sales to the same 307 Retail 

Outlets amounted to 19, 268 

During the first quarter of 1939, these 73 Distributors' sales to 

the same 307 Retail Outlets amounted to 2, 570 

Group Control Gained 1938 : 

During 1938 — the Major Oil Companies gained control of 387 

Retail Outlets who were buying from 77 Distributors report- 
ing. 
During 1936— these 77 Distributors' sales to the 387 Retail Out- 
lets amounted to 114,586 

During 1937 — these 77 Distributors' sales to the same 387 Retail 

Outlets amounted to 127, 867 

During 1938 — the Major Oil Companies gained control of these 

387 Retail Outlets and the 77 Distributors' sales amounted to_ 68, 816 
During the first quarter of 1939 — these 77 Distributors' sales to 

the same Retail Outlets amounted to 5,451 

Group Control Gained 1939: 

During the first quarter of 1939 — the Major Oil Companies 

gained control of 113 Retail Outlets who were buying from 

65 Distributors. 

The gradual increase of gallons of motor oil sold from 1936 to 1939 through 
these 113 Retail Outlets indicates the amount of effort and enterprise that the 
Individual Distributor put forth to develop his motor oil business, and it also 
indicates the increasing demand for the motor oils of the Independent Producer 
and Refiner. 

Oallons of 
motor oil 
sold 
During 1936 — 65 Distributors' sales to 113 Retail Outlets that were 

handling their products amounted to 26, 780 

During 1937 — these 65 Distributors"' sales to the same 113 Retail 

Outlets amounted to 37, 473 

During 1938 — these 65 Distributors' sales to the same 113 Retail 

Outlets amounted to 43, 776 

During the first quarter of 1939 — these 65 Distributors' sales to the 

same 113 Retail Outlets amounted to 3, 534 

An examination of the methods employed by the Major Oil Companies in 
obtaining this additional business but forces the conclusion that the methods 
are those of monopolistic control and that they can hardly be regarded as 
selling methods. 

Selling methods, in the final analysis, are competition of one salesman with 
another salesman for the order of the owner of the Retail Outlet, and followed 
through to the source of consumption, the supplying of the demand of the 
consumer. If the consumer demands the product, the retailer normally will 
see to it that he satisfies the demand of his customer. If the favored product 
of the, customer is not readily available, the customer, will buy elsewhere, or 
may be "high pressured" (in selling parlance) into buying a substitute. 



8740 CONCENTRATION OF ECONOMIC POWER 

The methods of the Major Oil Companies are definitely calculated only to 
supply their own products and to see to it that the product the consumer 
wants is not available in the Retail Outlets. 

First hand contact with the practices employed in the marketing of motor 
fuel and motor lubricant products develops the impressive factor that some 
owners of the Retail Outlet will attempt to satisfy the insistent demands of 
consumers by bootlegging and selling products the consumer demands which 
the Major Oil Company controlling the station prohibits the owner to sell. 

The comparison of figures presented above indicates that even after control 
has been gained by the Major Oil Company, the Independent Producer and 
Refiner, and the Independent Distributor and Jobber, manage to sell their 
products through some controlled Retail Outlets, and reference to the letters 
from the Distributors (See Section LB-25, Pages LB-38-3&-40) indicate the 
hazard under which they operate in daring to defy the arbitrary orders of the 
Major Oil Company controlling the station. 

In such cases, the owner of the Retail Outlet knows that his best business 
comes from satisfying the demand of his customer. To satisfy the demand 
of those customers insisting upon Independent Brands, he must procure high 
grade nationally advertised brands of motor oil in such manner as to evade 
the agreement for exclusive dealing, the conditions upon which the Major Oil 
Company will sell him gasoline. (See Exhibit — L-19c.25, Page LB-39, which 
states that Delivery Trucks stop a block away to make sure "no Major spotters 
are about." Also see Exhibit— Li-21.25, Page LB-40, relating that dealers have 
some clientele that "want our products and they keep them in the basement 
* • * out of sight of the Company man who calls.") 

Table 3 assembles the statistical data taken from the questionnaires by states. 
In New York State, 20 distributors sent in questionnaire covering the 
business done with those service stations and garages whom the Major Oil 
Company gained control of during 1935 to 1939. 

Oallons of 

■VT XT t ct. t^ motor oil 

New York State : sold 

During 1936—20 Distributors' sales to 31 Retail Outlets 

amounted to 79, 057 

During 1937 — after Major Oil Company control these 20 Dis- 
tributors' sales to the same 31 Retail Outlets amounted to — 938 

During 1938 — these 20 Distributors' sales to the same 31 

Retail Outlets amounted to 1, 101 

During the first quarter of 1939 — these 20 Distributors' sales to 

the same 31 Retail Outlets amounted to 51 

Pennsylvania : 

In Pennsylvania, 13 distributors sent in questionnaires covering 
the business done with those Retail Outlets whom the Major 
Oil Companies gained control of during 1935 to 1939. 

During 1930 — 3 Retail Accounts' purchases amounted to 35,489 

During 1937 — after Major Oil Company enforced control the 

same 3 Retail Accounts' purchases amounted to IS 

During 1938 — the same 3 Retail Accounts' purchases amounted 
to 18 

During the first quarter of 1939 — the same 3 Retail Accounts' 
purchases amounted to . 18 

These three outlets illustrate what happens to independent brand volume 
when major oil companies enforce their control as thoy did in these outlets 

in 1037. 

Gnllons of 
motor oil 
Ohio : sold 

In Ohio, 7 distributors sent in questionnaires covering the busi- 
ness done with those Retail Outlets whom the Major Oil Com- 
panies gained control of during 1935 to 1939. 

During 1936 — 28 Retail Outlets' purchases amounted to 20,236 

During 1937 — ^the same 28 Retail Outlets' purchases amounted 

to 23, 598 

During 1938 — after Major Oil Company Control the same 28 

Retnil Outlets' purchases amounted to 9,216 

During the first quarter of 1939 — the same 28 Retail Outlets' 
purchases amounted to 946 



CONCENTRATION OF ECONOMIC POWER 8741 

Gallons of 
motor oil 
Utab : xold 

In Utah, 1 distributor sent in questionnaires covering the busi- 
ness (lone with those Retail Outlets whom the Major Oil 
Companies gained control of during 1935 to 1939. 
During 1936 — this distributor's sales to 9 Retail Outlets 

amounted to 4,190 

During 1937 — after Major Oil Company control this distributor's 

sales to the same 9 Retail Outlets amounted to 100 

During 1938 None. 

During the first quarter of 1939 None. 

An analysis of Tables 3 and 5 indicate similar trends of the lo8s of business to 
the Individual Business Man and the Independent Producer and Refiner. The 
extent of the loss could only be determined by a return from each Distributor. 

The analysis of Table 3 of the conditions in each state from which reports were 
received, indicates a definite pattern of the trend. Formulas' could be employed 
to estimate the total loss incurred by the Indei^endent Producer and Refiner and 
the Independent Distributor and Jobber, and though such theoretical formulas of 
statistics are highly interesting, the plain, cold facts are that no free and open 
market exists for the distribution of motor oil and that the Major Oil Companies 
have closed the market for the distribution of motor oils othei than their own 
products. Consequently, the Independents are gradually being forced out of 
business. 

Tables 20 to 28, inclusive, present the statistics assembled by the Bureau of 
Census on the number of filling stations and garages in each state. (See Statisti- 
cal Section.) These statistics when compared with the data contained in Tables 
3 and 5 will, for all practical purposes, indicate what a closed market effects in 
loss of business to the Independents due to restraints upon free enterprise. 

TYPES OF METHODS OP GAINING AND FORCING CONTROL 

Tables 6 to 11 : Table 6 presents a statistical analysis of the answers to the 
question "How Control was Obtained" broken down into five sub-classiflcatiotis. 
The Distributor in filling out the questionnaire has supplied the name of the 
Major Oil Company obtaining control and has identified the type of practice 
employed to obtain an Exclusive Dealing Arrangement for all of the products of 
that Major Oil Company, 

85 Distributors reported information on "How Control was Obtained" of 1,512 
Retail Outlets and also supplied in their reports the name and address of each 

Retail Outlet. 

Wumier of 

controlled retail 

outlets 

Of the different types of Exclusive Dealing Arrangements with th^ Re- 
tail Outlet, control was effected through a lease with 696 

Control was obtained through other 100% types of Exclusive Dealing 

Arrangements of 280 

Control was obtained through purchase of __ 97 

The distributor did not know how control was effected with 186 

All other types of 100% or exclusive control 25 

Did not cover this question in reporting on 228 

1,512 

However, this Table compared with the data in Tables 8 and 9 reporting on 
conditions before and after monopolistic practices, indicates that the type of. 
Exclusive Dealing Arrangement did proliibit the sale of the products of the 
Independent Producer and Refiner from distribution through the 1,512 Retail 
Outlets reported upon. 

Table 7 presents the statistical data in answer to the question 'The Dealer's 
Reason for Signing Up,' this question being broken down into ten sub-classifica- 
tions, in reporting on 1,512 Retail Outlets, an analysis of the questionnaires 
indicates that in many instances there were combinations of deals made to effect 
100 per cent or other Exclusive Dealing Arrangements. 
124491 — 40— pt. 15a ' 



8742 CONCENTRATION UK ECONOMIC POWER 

The questions may be assembled into two groups : 

Group I. Price concessions under the heading of additional margin on gaso- 
line, additional margin on other lines. 
Group II. Money spent by the Major Oil Company to obtain an agreement 
with the dealer in the form of investments in improvement of 
the dealer's property which, in reality, is some sort of financial 
or credit control of the pressure type, i. e., money was spent to 
create an obligation which until satisfied requires of the recipient 
his submission to control. 
The distributors filling out this portion of the questionnaire reported a total 
of 1,992 reasons given by the owner of the Retail Outlet for his signing an 
Exclusive Dealing Type of Agreement. 

The threat of the Major Oil Company that they would build a com- 
petitive station effected an agreement with 41 

In Group I, an additional margin on gasoline was given to 446 

An additional margin on other lines was given to 125 

Some form x)f price concession was given to 571 

in Group II, the number of owners of the Retail outlets receiving 

Free equipment-- 528 

and/or Free Paint Job 463 

and/or Free Building Construction 154 

and/or Free Paving 141 

and/or Parking Lot Space 14 

1,300 

Distributors reported as "all other types of reason" 50 

No information was obtained as to the details of the a,greement with 30 



1,992 

Table 8 presents a statistical analysis of the question 'Concessions' broken 
down into seven sub-classifications. 

85 Distributors supplied 667 answers. 

The answers to this question when compared with the answers of Table 6 
regarding additional margins on gasoline and other products, indicates that 
money considerations enter into and play an important part in obtaining 
control. 

Concessions in the form of cretlit extension is a type of financing supplied 
the owner of the Retail Outlet. 

Special discount, bonus plan and cash payment afford the owner of the 
Retail Outlet a means of increasing his profits in direct relationship to the 
initiative and effort he puts forth in promoting the sales of the products of 
the Major Oil Company controlling the Retail Outlet. 

Special discount and Bonus payments are made for extra effort in the pro- 
moting of sales of the products of the Major Oil Company controlling the 
Retail Outlet. 

Special discount and the bonus plan are especially employed by the Major 
Oil Company to establish a differential in favor of their own products to 
encourage and enlist the owner's effort to push those products upon which 
he receives extra earnings for increased quantities sold. 

These differentials operate in favor of the Major Oil Company's motor 
oil products, the purpose being to sell the ultimate consumer products "just 
as good" as the product that he has asked for. 

Regardless of what might be said as to the payment of bonuses for extra . 
effort in promoting one type of product over anotlier, it cannot be overlooked 
that the Service Station and Garage are to function as a retail outlet to supply 
the consumer demand and that the products in demand by the consumer should 
be available for him at that retail outlet where he purchases motor fuel nnd 
nrotor oil. 

Credit Extensions were granted to 201 owners of retail outlets. Ad- 
vertising allowances were granted to 32 owners of retail outlets — that is, 
a total of 233 received concessions in the form of financing. 

Special discounts were granted to 171, bonus plan payments to 147, 
outright cash payments to 37, all other types of concessions to 21; total, 
376. 



CONrENTRATION OF ECONOIMIC; TOWER 3743 

Distributors reported tlint considerations were given but the type could 
not be detcrmineil and consequently reported as "Don't know," 58; total, 
067. 

Table 8 presents the statistical data on the question "How Control is En- 
forced" broken down into five-sub-classittcations. 

The statistical data presents in round figures that control was enforced 
through the character of contract ; through threats to cancel the extra margin 
allowed the owner on a sale of the Major Oil Company's product ; and threats 
of courtesy card withdrawal. 

Control of exclusive dealing in Major Oil Company's products was en- 
forced through character of contract with 500 retail outlets. 

By threats to cancel the extra margin granted on Major Oil Company 
products to 205 retail outlets. 

By threats to withdraw the privilege of selling to consumers on credit 
via the courtesy card privilege, 262 ; by all other types of threats and 
coercive intimidations, 19 ; by threats that were not disclosed as to type 
and reported as "Don't know," 9; total, 995. 

The statistical analysis of this Table presents the report of 85 Distributors 
that the Major Oil Company employs the rights of cancellation of the agree- 
ment and with the cancellation, cutting off of the source of supply of gasoline 
to the owner of the Retail Outlet, as Control through Character of Contract. 

A more vivid picture is supplied in that section of the report under tlie 
heading of "Distributors Complaints." The Distributors' Complaints data re- 
ports the actual experience of Dealers with the agents of the Major Oil Com- 
panies. 

Apparently from the returns of the questionnaries, the threat inherent in 
the character of the contracts, of cancellation of the agreement with the 
Major Oil Company is the most effective in bringing compliance to exclusive 
dealing, than threats of cancelling the extra margin on gasoline, or of with- 
drawal of courtesy card privileges. 

The most effective leverage applied by the Major Oil Company upon the 
owner of the Retail Outlet is the threat that involves the loss of business to 
the owner. 

Tills opinion seems to be warranted when an attempt is made to account 
for the owner of the Retail Outlet's ready acquiescence In the threats of the 
Major Oil Company. 

So long as his source of supply of gasoline Is guaranteed, he can keep In 
business and operate his Retail Outlet. The small business man can exercise 
enough business judgment and ingenuity to meet competitive prices. Bu{ when 
the threat is made that his contract will be cancelled and that he must look 
to other sources for his supply of gasoline, the owner of the Retail Outlet well 
knows that the supply and distribution of gasoline is controlled by the Major 
Gioup and that he must cope with the concerted action on the part of groups 
of competitors. He Immediately recognizes that to keep in business he must 
submit to the dictates of the Major Oil Company as to what products he may 
sell through his Service Station and/or Garage. 

Next in importance Is threat of withdrawal of the Courtesy Card. 

Courtesy Cards -are given to consumers and grant the holder the privilege of 
purchasing automotive supplies and equipment on credit. The terms are set 
forth in the photostat of a Courtesy Card following. 

The Major Oil Company assumes the risk involved In late or non-payment for 
the purchases made. 

The Dealer who is granted the privilege of honoring Courtesy Card purchases 
extends credit and his credit sales are allowed as payments against his pur- 
chases from the Major Oil Company. 

The products the consumer can purchase on credit are the products produced 
or supplied by the IMajor Oil Company. Consequently, the Courtesy Card 
privilege is an inducement for the dealer to go "exclusive." 

Loss of the privilege of extending credit means to the dealer loss of the vol- 
ume of business done on a credit basis at no risk to himself 

The concerted action on the part of Major Oil Company gasoline suppliers in 
the use of Credit Cards affords one of the best illustrations of group action for 
the exclusion of Independent Products. 



8744 



CONCENTRATION OF ECONOMIC POWER 



Tables 9 and 10 can be analyzed together. One presents conditions existing 
in the territory before monopolistic practices obtained control of the 1,512 retail 
outlets reported upon, and the conditions existing after monopolistic practices 
had given control of the station to the Major Oil Company. 

85 Distribotors' reported on before and after the 1,512 retail outlets were 
controlled by the Ma.iors. 





Tables 


Before 


Table { 


: After 




No 


Yes 


No 


Yes 


Was your merchandise on display'at the'retail outlet? 


122 


1,149 






Is your merchandise now on display at the retail outlet? 


1,126 


95 


Did the dealer display your curb and other point-of-sale advertising 
signs and advertising material?-- 


156 


1,058 




Are your curb and other point-of-sale signs displayed at the outlet? 


1,143 


69 


Was there a free and open market for your motor oil in the account?. .. 


114 


883 




Is there novr a free and open market for your motor oil in this account/ 


1,136 


117 











Table 9, reporting conditions before monopolistic practices, indicates that in 
so far as the great majority of the Individual Retail Outlets of the 1,512 re- 
ported upon is concerned, a free and- open market existed, and that the owner 
of the Retail Outlet operated the business with the ohject of supplying the 
products in demand by the consumer. 

Table 10, indicates that the majority of the outlets no longer afford a free 
and open market in which the consumer can obtain the products of his choice. 

A free and open market would embrace the following : 

A Market in which the retailer is permitted the freedom to purchase the 
products that he chooses to sell. 

Liberty to display, advertise and resell products without any penalty what- 
soever being imposed by the Producer of the principal line of products 
carried by the Retailer. 

Where for any reason whatsoever the general public is denied the oppor- 
tunity to locate or find through directional advertising, examine and pur- 
chase other motor fuel and motor lubricant products than those of the 
gasoline supplier. 

Note the excerpts from Distributors' letters reporting conditions throughout 
the nation : 

Page LB-7 — Exhibit L-14.5 — "Display of merchandise is not permitted." — 

New York. 
Page LB-8 — Exhibit L-40.5 — "The supervisor visited the station and 

ordered the sign and rack removed." — Massachusetts. 
Page LB-10 — Exhibit L-5c.6 — "Dealers say plainly that they would handle 

our products if they dared to risk what the leasing company might do." — 

Virginia. 
Page LB-22 — Exhibit L^1.13 — "The majority of these operators would like 

to carry a premium brand of oil, but state they are not allowed to or are 

afraid to." — North Carolina. 
Page LB-23 — Exhibit Li-21.13 — "We have a few accounts that one company 

controlled that do have our oils in, but they are kept hid." — Colorado. 
Page LB-35— Exhibit Lr-10.21— "Our distribution of Kendall Oil in this ter- 
ritory simmers down to a few faithful." — Oregon. 

These few of the many ^milar reports contained in the Exhibits of Letters 
from Distributors indicate that restricted practices are employed that force 
the dealer to bootlegging practices. 

The Dealer has and f^els the responsibility of serving his ^ustomers. Being 
a practical business man, he knows he loses money when he loses sales. 



CONCENTRATION OF ECONOMIC POWER 



8745 



FIELD SURVEY OF FOUR CITIES 

Table 12 presents the finding of the Field Survey of Four Cities. Inspectors 
called on service stations and Garages as classified by the following types of 

outlets : 



Total 

Parking lot. 

Garnge 

Service station 

Filling station. 

Parking lot and filling station 

Car dealer. 

Tiro company 

Filling station and motor company 

Garage and filling station 

Motor oil _ 

Auto service and garage i 

Parking and garage... 

Parking lot and service station 

Garage, station and parking 

Filling and service station 

All others 

No answer 





New 
Or- 
leans, 
La. 


Wash- 


Colum- 


Port- 


Total 


ington, 


bus, 


land, 




D. C. 


Ohio 


Oreg. 


2,439 


534 


531 


510 


864 


44 


4 


1 


17 


22 


189 


42 


7 


21 


119 


458 


10 


2 


105 


341 


1,551 


437 


472 


344 


298 


30 


10 


11 


7 


2 


38 


10 


20 


1 


7 


9 


9 








4 


4 
9 






21 


6 


6 


1 




1 
1 






50 


1 


48 


3 






3 

1 
1 




4 






3 


1 








3 






3 


19 


4 


1 


1 


13 


14 


8 


2 


2 


2 



Table 12: This table presents a tabulation of the reports filled out by 
in.spectors who called on every service station and garage in four typical cities. 

The purpose of listing the questions in the order that they appear in the 
questionnaire (see Exhibits marked '"D" and "E" in Appendix), was to" test 
the answers of the different questions in making comparisons. 

Question "e" — "Individually owned and Operated" was checked by the 
answers to Questions "6" — "Does Station display more than one company's 
motor oil?" and "7" — "Does Station display any other company's sign or other 
merchandising material?" 

When an outlet is not controlled, more than one brand of motor oil Is 
generally sold and display signs of one type or other are employed to advertise 
the brands that the outlet offers for sale.- 

A comparison of the answers to Question "e" and Questions "6" and "7*' 
indicates that the observations made by the inspectors show that there are 
fewer independently operated stations than does the information obtained as 
a result of the interviews with the operators of the stations. 

The Inspector's conversation with the owner or operator of the Retail Outlet 
was to determine whether the outlet was "Controlled" or Independent. 

The Inspector was to make observations and also report on what he saw. 

The inspectors in Washington, D. C, called on 531 retail outlets. They 
were told that the outlets were individually owned and operated by 230. 
They noted that only one company's gasoline was sold by 429. They 
noted that more than one company's motor oil was sold by but 152, and 
<^hat more than one company's .advertising signs and materials were 
displayed by but 114. 

The spread between 114 and 152 is small for survey work and indicates 
that between 22%" and 2Q% of tlie Retail Outlets are Independents, and that 
between 78% and 71% of the Retail Outlets are controlled by the group of 
ilajor Oil Companies. 

A map of Washington is included facing p. 8835, infra. Maps coded as 
follows : 

Controlled O 
Independent O 

and present graphically the picture of a Controlled Market. 

"The locations of the Independent Retail Outlets are submerged by the 
dominance of the controlled outlets. 



8746 CONCENTRATION OF ECONOMIC TOWER 

Tho inspectors in Columbus, Oliio, called on 508 retail outlets. They were 
told that the outlets were individually owned and operated by 156. They 
noted that only one company's gasoline was sold by 503. They noted that 
more than one company's motor oil was sold by but 137, and that more 
than one company's advertising signs and materials were displayed by 
but 83. 

The spread between 83 and 137 is small for survey work and indicates that 
between 16% and 27% of the Retail Outlets are Independents, and that between 
74% and 73%) of the Retail Outlets are controlled by the group of Major Oil 
Companies. 

A map of Coiiinilins i.v; included on p. 8835, infra. Maps coded as follows: 

Controlled O 
Independent O 

and presents graphically the picture of a Controlled Market. 

The locations of the Independent Retail Outlets are submerged by the 
dominance of the controlled outlets. 

The inspectors in New Orlean, Louisiana called on 532 retail outlets. 
They were told that the outlets were individually owned and operated by 
ISO. They noted that only one companys' gasoline was sold by 513. They 
noted that more than one company's motor oil was sold by but 94, and 
that more than one company's advertising signs and material were dis- 
played by but 82. 

The spread between 82 and 94 is small for survey work and indicates that 
between 15% and 17% of the Retail Outlets are Independents, and that be- 
tween 85% and 83% of the Retail Outlets are controlled by the group of Major 
Oil Companies. 

A map of New Orleans is included on p. 8835, infra. Maps coded as 
follows : 

Controlled 
Independent O 

and presents graphically the picture of a Controlled Market. 

The locations of the Independent Retail Outlets are submerged by the domi- 
nance of the controlled outlets. 

The inspectors in Portland, Oregon, called on 863 retail outlets. They 
were told that the outlets were individually owned and operated by 519. 
They noted that only one company's gasoline was sold by 851. They noted 
that more than one company's motor oil was sold by but 43, and that more 
than one company's advertising signs and material were displayed by but 
172. 

The spread between 43 and 172 is small for survey work and indicates that 
between 5% and 20% of the Retail Outlets are Independents, and that between 
84% and 73%) of the Retail Outlets are controlled by the group of Major Oil 
Companies. 

A map of Portland is included on p. 8835, infra. Maps coded as follows : 

Controlled O 
Independent O 

and presents graphically the picture of a Controlled Market. 

The locations of the Independent Retail Outlets are submerged by the domi- 
nance oi the controlled outlets. 

DISTRIBUIXJRS' COMPLAINTS 

Many distributors receiving the questionnaire wrote advising that they did 
not have suflBcient time in which to complete the data called for their terri- 
tory, and .substituted for the questionnaire a letter reporting the practices em- 
ployed in the retail distribution of motor oil in their territory. 

The careful reading of the letters substituted for the questionnaire conveys 
the definite impression that the distributors are possessed with a feeling of 
defeatism of the "what's the use" type. 



CONCENTRATION OF ECONOMIC POWER 8747 

In tracing the history of the efforts employed by the Independent Producers 
and Refiners in getting their case before the proper governmental bodies, this 
observation, that the distributors are more possessed of defeatism than laissez, 
we feel is reinforced. 

The analysis of the letters presents data of a -ifkost convincing type of the 
effect of the practices of the Major Oil Company on the business of the Inde- 
pendent Distributors and Jobbers. 

Photostat reproductions of the letters are presented in Exhibits, p. 8825, infra. 

In order to determine whether the complaints in the different letters develop 
a definite pattern throughout the United States, the letters were broken down 
for analytical purposes. Paragraphs were assembled under 43 different classi- 
fications of complaints. These paragraphs are presented under the heading of 
the type of complaint, in Section LB — indexed "Distributors' Complaints" and 
careful reading will establish that the same marketing practices are employed 
in all parts of the United States. 

The general use of threats, coercion and intimidation indicates that the em- 
ployment of aggressive acts is a characteristic of the marketing practices of the 
Major Oil Companies. 

The companies using methods of force have been identified. The Distributors 
have listed the following organizations as depending upon aggressive acts to sell, 
I'ather than the fair competitive methods of snlesmuiiship: 

The Atlantic Refining Company 
Sinclair Refining Company 
Standard Oil Company of New York 
Standard Oil Company of New Jersey 
Standard Oil Company of Ohio 
Standard Oil Company of Indiana 
The Texas Corporation 
Shell Union Oil Corporation 
Richfield Oil Corporation 
Cities Service Company 
Tide Water Associated Oil Company 
The Pure Oil Company 
Gulf Oil Corporation 
Sun Oil Company 
Phillips Petroleum Company 
Union Oil Company of California 
Barnsdall Refining Corporation 
Continental Oil Company 
Humble Oil & Refining Company 
Magnolia Petroleum Company 
Standard Oil Company of California 
Consolidated Oil Corporation 
Standard Oil Company of Louisiana 
Signal Oil & Gas Company 
Skelly Oil Company 

Paragraphs of the letters are assembled under, the following general 
classifications : 

1. 83% of the Retail Outlets controlled. 

2. Force Retail Outlet owner to sell only Major Oil Company's products 

3. Coercive methods employed to exclude competitive products. 

4. Abuse of power of concentrated money. 

5. Consumer demand denied. 

6. Nationally advertised brands in demand by consumer. 

7. Methods of obtaining agreements for exclusive dealing arrangement. 

8. Threats employed to force an agreement. 

9. Free and open market conditions prior to agreement. 

10. Consumer can no longer freely buy his favorite product. 

11. Control of additional products retailed at service station after owner 

proves the added lines are profitable. 

12. Independents forced to abandon selling efforts. 

13. Threats that force compliance. 

14. Equipment installations. 

15. Price fixing. 



8748 CONCENTRATION OF ECONOMIC POWER 

16. Concerted group action to exclude nationally advertised brands. 

17. Type of equipment grants and veiled domination behind them. 

18. Credit exten.sions excessive. 

21. Prevent and restrain competition. 

25. Bootlegging nationally advertised brands. 

26. Service station owner must defend his own business. 

27. Seizure of distributor's function by Major Oil Company. 

28. Obstructions to commerce of competitors. 

29. Elimination of all independent business men. 

30. Sell at a loss to defeat a profitable iujiependent. 

31. Majors build their own retail outlets. 

32. The Social Security Act and contract changes ensuing. 

33. Absorbing wholesalers function. 

34. Unemployment increased by centralizing distribution function, 

35. Courtesy card cancellation threats. 

36. Small business man waging a handicapped fight. 

37. Technicality of legal terms employed as a license to persist in practices. 

38. Power extends to control over sources of public information. 

39. Accessory sales dominated by Major Oil Companies. 

40. Forcing consumer acceptance of Major Oil Companies' products. 

42. Reciprocal business practices. 

43. Social Security benefits denied employees. 

The break-down of the letters segregates by classification the practices com- 
plained ot. The letters from which these paragraphs were taken were received 
ffom distributors throughouti the United States. 

The.letters present a plain story of the Individual Distributor regarding prac- 
tices that are forcing him out of. business. 

The statistical analysis of Table 3 indicates the degree to which these prac- 
tices have curtailed business, but these letters set forth mure plainly than 
a statistical analysis could the manner in which the practices of the Major 
Oil Companies affect the Independent Producer and Refiner, the Independent 
Distribator and the ultimate consumer of motor fuel and motor lubricant 
products. 

The following excerpts are selected from Section LB, Pages 1 to 72, as 
typical -examples of distribution by Aggressive Acts versus Distribution by 
fair competition of salesmanship: 

Page LB-6-Exhibit L-32.3: "When they found our gear lubes in his 
station, either by persuasion or threat, they forced him to return the 
grease. Of course this means no further outlet for our grease at his 
station.^ This iB a desirable location and should be good for at least 300 
gallons of oil and as m.any pounds of grease each year. It was a new 
account this spring so we had had no precedent for his gallonage." — Maine. 

LB-13a-Exhibit Lr-G8.7: "Their policy now seems to be that the major 
oil company leases the station from the owner, which station they in 
turn lease to an operator for 10 per gallon on the sale of gasoline. When 
we approach the operator and try to sell him our product, we are told 
in every instance that the major oil company will not permit them to 
handle our product or display any sign advertising any other merchandise 
than that sold by that particular major oil company. 

We have not seen a recent cont,ract which the major companies use, 
but whatever it is, works just as conclusively in closing the outlets to 
independent oil companies as the old lease and agency contract." — 
Virginia. 

LB-14-Exhibit L-34.8 : "In September 1938 the Gulf Refining Co. repre- 
sentative objected to me selling Kendall Oil for which I have a very good 
demand and many regular customers. They threatened to build a station 
next to mine if I did not discontinue the sale of Kendall and sell their 
products exclusiveiy. I felt that it would hurt my business if I discon- 
tinued the sale of Kendall and I do not feel as though I could stand their 
competition as there are now so many Company stations that our gallonage 
has been greatly reduced." — Maine. 

LB-16a— Exhibit L-66.8 : "These individuals are financially responsible 
(not the major oil companies) for the conducting of their business. They 



CONCENTR'ATION OF ECONOMIC POWER §749 

must buy and sell at their own risk, pay the city privilege tax., etc., and 
in general relieve the major gasoline company of any and all financial 
resiwnsibility, yet they are given to understand by salesmen and others 
in authority, that they must buy and sell only the products of tlie major 
company with whom they are conected." — Arkansas. 

LB-16a-Exhibit L-GG.S : "Next call dealer tells me that the Major Com- 
pany representative have told him if they can't get the cooperation from 
him they feel they should have, they will build a Station next to him 
and put him out of business." 

It is dithcult, perhaps even impossible to get a written statement or 
testimony from these dealers regarding this situation. The reasons for 
this are obviously because they realize that to do so would probably mean 
that they would be ousted by the major company. — Arkansas. 

LB-22— Exhibit Lr-30.13 : "In soliciting oil business from so-called 100% 

gasoline service stations leased from major oil companies or handling one 

brand only of gasoline, our salesmen report a m. rket closed to them on 

■ account of fear of the dealer of reprisals fi-om the major companies should 

they handle a competing brand of oil." — New York. 

LB-40 — Exhibit L^9.25 : "This has resulted in the dealer being forced to 
remove all Quaker State advertising, and in those cases where he sells 
Quaker State at all, he does it by keeping it hidden so that the major 
company representative will not see it." — Vermont. 

LB-42a— Exhibit L-70.26: "Our salesmen all bring in the same story— it 
is fear of losing their lease if they handle our merchandise." — District of 
Columbia. 

LB-44b — Exhibit L-65.27 : "The whole thing resolves itself into this — 
instead of a free open market we have one where the major operators, 
through fear and deception control the business in a large percentage of 
the cases." — Kansas. 

LB-51— Exhibit 1^37.33: "A major oil company salesman (Standard Oil 
Company of N. J.) recently boasted to the writer that you cannot and will 
not see any other motor oil in our (Standard) customers service stations. 
And he is absolutely right. There isn't any." — New Jersey. 

LB-G5a — Exhibit Lr-62.38 : "Mr. Reed was recently put off the radio here 
on account of his vicious attacks on the methods they employ in merchan- 
dizing their products."— Tennesseee. 

LB-66 — Exhibit Lr-17c.39 : "The restraint on these controlled outlets 
extend even to such items as tires, tubes, batteries, accessories and even 
to as small an item as anti-freeze." — Virginia. 

LB-71a — Exhibit L-80-80C.42 : "During the past year the expanding use 
of major company credit cards has served to make inroads into the small 
portion of independent business remaining to me. Lately, the reciprocal 
interchange of credit card facilities between groups of major oil companies 
has increased this tendency. A consumer may prefer independent mer- 
chandise, but he is pressured into buying the products of monopoly thru 
methods available only to monopoly." — Arizona. 

The use of threats, coercion and intimidation as a means of controlling the 
distribution of products to the ultimate consumer have little place in sound 
.celling methods. The distribution function is to supply the ultimate consumer 
with the product that he demands. The sole object and purpose of manufactiir- 
ing a product is to make available to the market the products that the con- 
sumer wants. 

That there is a definite demand for motor oil other than those of the Major 
Oil Companies, is indicated by the following reports from four separate field 
surveys. These surveys were made by three separate organizations and no 
doubt the field work sampled different localities throughout the country. The 
reports indicate that froni 19% to 23% of the automobile owners i)refer and 
demand the products of those Independent Producers and Refiners whose brands 
are denied distribution throngli over 83% of the Service Stations by Major Oil 
Company groups of competitors who dominate non-company owned retail outlets. 



8750 



CONCENTRATION OF ECONOMIC POWER 

What Brand of Oil do You Usually But? 
Meredith Publishing Co., Des Moines, Iowa 

November 15, 1937. 



Own cars 

Did not answer..- 

Replied to the question _ 

Percentages are based on the 
1,609 who own cars. 

Quaker State (Independent) 

Pennsylvania (Both) 

Mobiloil (Major) 

Standard (Major) 

Shell (Major) 

Oulf (Major) 

Texaco (Major) 

Pennzoil (Independent) 

Kendall (independent) 

Iso-VLs (Major) _. 

Sunoco (Major) 



Num- 


Per- 


ber- 


cent 


1,609 




297 


18.46 


1,312 


81.54 


115 


8.77 


105 


8.00 


96 


7.32 


84 


6.40 


65 


4.95 


62 


4.73 


62- 


4.73 


56 


4.27 


54 


4.12 


40 


3.05 


38 


2.90 



Other brands were mentioned 
less frequently. 

Percentages are based on the 
1,312 who replied to the ques- 
tion. 



Per- 
cent 



Percentages are based on the 
1,609 who own cars: — Contd. 

Sinclair (Major) 

Conoco (Major) 

Veedol (Major) 

Socony (Major) 

PhUlips (Major) 

Cross Country (Major) 

Havoline (Major) 

Any, all kinds 




What Brand of Motor Lubricating Oil Do You Use? 
American Weeldy Survey (1938) 



Quaker State (Independent) 

Mobiloil (Major)..- 

Pennsylvania ' (Both) 

Texac« (Major) 

Oulf (Major)-.. 

Pacific Coast Brands 

Standard (Major) 

Pennzoil (Independent) 

Shell (Major) 

Epso Essolube (Major). 

Sunoco (Major) 

Sinclair (Major) ., 

Veedol (Major).. 

Kendall (Independent) 

Standard Iso-Vis (Major) 

Havoline (Major). 



Total 




replies 


Per- 
cent 


from all 
States 


in U. S. 




8, 986 


8.23 


8,966 


8.21 


7,993 


7.32 


7,054 


6.46 


5,962 


5.46 


5,377 


4.94 


6, 376 


4.93 


5,037 


4.61 


4,897 


4.49 


4,132 


3.79 


3,730 


3.42 


3,719 


3.41 


3,218 


2.95 


3,094 


2.83 


2,983 


2.73 


1,835 


1.68 



Brand 



Socony (Major) 

Atlantic (Major) 

Conoco (Major) 1 

Sears Roebuck (Major) 

Richfield (Major) 

Phillips (Major) 

American (Major) 

Cities Service (Major). 

Standard Polarine (Major). 
Penn State (Independent).. 
Wolfs Head (Independent). 

Hy vis (Independent) 

Valvoline (Independent)... 
All others 



U.S. Total 109,153 100.00 



Total 
replies 
from all 

States 
in U. S. 



1,759 

1,662 

1,654 

1,609 

1,591 

1,178 

1,158 

1,093 

916 

823 

744 

527 

475 

1,605 



Per- 
cent 



1.61 
1.52 
1.52 
1.47 
1.46 
l.OS 
1.06 
1.00 
.84 
.75 
.68 
.48 
.44 
10.63 



' It must be remembered that where "Pennsylvania" is mentioned, if this number were broken down 
into brands, by far the largest percentage would be Quakeb State users. 

ScRipps-HovvTARD Newspapers, Survey — Fall of 1937 



Brand 



Standard (all companies) (Major).. 

Oulf (Major) 

Quaker State (Independent) 

Mobiloil (Major). 

Sunoco (Major).. 

Pennzoil (Independent) 

Shell (Major) 

Texaco ( M ajor) 

Kendall (Independent) 

Hav-olinr (Major) 

Sinclair (Major) 



Replies 



5,120 
3,084 
2,087 
2,052 
1,530 
1,347 
1,262 
1,237 
1,205 
1,143 
911 



Per- 
cent 



14.9 
9.0 
(5.1 
5.9 
4.5 
3.9 
3.7 
3.6 
3.6 
3.3 
2.7 



Brand 



Cross Country 

Purol (Major) 

American (Major) 

Atlantic (Major) 

Cities Service (Major) 

Union 76... 

Richlube (Major) 

Others 



Replies 



822 
798 
554 
509 
384 
362 
331 
6,799 



31, 5.37 



Per- 
cent 



2.4 
2.3 
1.6 
L5 
1.1 
LI 
LO 
26.1 



CONCENTnATlON OF ECONOMIC POWER 8751 

The Meredilli Publishing Company's survey hidicates a total of 1,012 
answers. Eliminating from the 1,012, the 51, classified as "any and all kinds" 
leaves 961 consumers who definitely expressed their preference for the products 
of Independent Producers and Refiners of motor oil. 

The American Weekly Survey indicates a total of 109,153. Eliminating "all 
others," 11,605, and Pennsylvania, 7,993, since the identity is not disclosed as 
either independent or major, 89,555 consumers expressed their preference for 
motor oil. Of the 89,555,-16,686, or 22%, expressed their preference for the 
products of Independent Producers and Refiners of motor oil. 

Scripps-Howard Newspapers Survey, Fall of 1937, indicates a total of 31.537. 
Eliminating "others" 6,799-24,738 consumers definitely expressed their prefer- 
ence for motor oil. Of the 24,738, 4,639, or 19%, expressed their preference 
for the products of Independent Producers and Refiners of motor oil. 

The demand exists for products of these Independent Producers and Re- 
finers. The outlets through which consumer demand is supplied are the Service 
Stations and Garages. 

The control of the retail outlet of distribution controls the sale of products 
to the consumer. The exclusion of the brand of products in demand from the 
retail outlets forces consumer acceptance of products other than those of his 
own choice. 

The Independent Producer, Refiner and Marketer has suffered the loss of 
business. His products have been forcibly ejected from the Automobile Service 
Station and Garage, yet he must attempt to satisfy consumer demand. He 
must endeavor to realize upon the expenditure in national advertising. He 
must fight to survive in spite of the arbitrary restraints of the Major Oil 
Company Group of competitors. 

To supply consumer demand, the Independent Producer and Refiner has pack- 
aged his product to enable retail outlets, such as grocery stores, hardware 
stores, mail order houses and department stores, to sell cans and buckets of 
motor oil to the consumer. 

Other Retail Outlets carry a diversified line of various types of products in 
order to meet the consumers' demand and choice of product. 

Practical Retailing experience would recommend that the Service Station 
and Garage retailer have and enjoy the same liberties of making money as 
other Retail Operators. 

Through the exclusive dealing arrangement, the Service Station and Garage 
dealer is not permitted to compete for motor oil biisiness. The agreement with 
the Major Oil Company forces him to carry and sell but one line of motor oil 
products. He is thus forced to "high pressure" the consumer into buying the 
one motor oil product he sells. 

High pressure selling has proved to be effective. The analysis of Tables 1 to 
5, inclusive, indicate the results in loss of business to the Independent Producer 
and Refiner. 

However, the surveys analyzed above indicate that during the years of the 
intensified drive of the Major Oil Company Group of competitors, a persistent 
group of consumers demanded the Independent Brands of Motor Oil. Should 
the Service Station and Garage Operators be restrained from competing for 
the business represented by this group of consumers? A free and open market 
will permit them to compete for the business of the insistent consumer who 
wants Independent Brands of motor oil. 

The closing of a free and open market restrains the Independent Producer 
and Refiner from distributing his products and participating in the profitable 
business of supplying the consumer demand. 

Consumer demand for motor fuel and. motor lubricant products has increased 
greatly so that today the products distributed by the Retail Outlet occupy, in 
the estimate of the consumer, the rank of first importance among the necessities 
of life. 

The study appearing in the Cleveland Trust Company Business Bulletin, 
February 15, 1935, graphically presents the relative importance of various 
consumption products generally classified as necessities by the consumer. 

An examination of the analysis of the Distributors' complaints brings to the 
fore the manner in which .the size of an organization and the supposedly unlim- 
ited amounts of money that are available for use in the execution of its prac- 
tices can be effectively used to intimidate the small business man who has his 
life savings invested in his business. 



8752 CONCENTRATIOxX OF ECONOMIC POWEH 

To the small business man the loss of his small business means the loss of his 
total investment. 

An analysis of the statistical data presented in the questionnaires and an 
analysis of the paragraphs in the "LB" section indicate that the small business 
man feels that he is made to submit or else lose his business. 

STATISTICAL ANALYSIS OF THE REH-AtL MARKET 

The sources of figures available for a study of the trend of growth in numbers 
of the service station and garage are the following: 

Fifteenth Census of the United States, 1930. Retail Distribution. 

U. S. Department of Commerce, Bureau of Census, Retail Distribution 

Volume No. 1, U. S. Summary 1933. 
Retail Trade Survey Census of Business 1935, U. S. Department of Com- 
merce, Bureau of Census. 
Tables 20-28, Statistical Section, presents the figures of the three census 
enumerations for comparison by states. 

Percentage of Increase and Decrease in the number of Retail Outlets i.s 
indicated for each state. 

The sales in dollars for each state indicate the volume of business of the 
Filling Station. 

The column headed "Average Business per Station" indicates the average 
dollar sales of each Filling Station. 

The study of these tables in connection with the findings presented in Tables 
1 to 5 indicate the dollar business that is involved in exclusive control of 
product distribution by each Major Oil Company. 

Nationally the dollar sales of Filling Stations is reported as $1,967,714,000.00 
for the year 1935. This total broken down bv states ranges from a figure of 
$2,464,000.00 in Nevada to a figure of $157,211,000.00 in New York. 

The average dollar business per Filling Station ranges from a figure of 
$1,171.00 per Filling Station in Oklahoma to $33,336.00 per Filling Station in 
Washington, D. C, with an average for the United States of $9,960.00 per 
Filling Station. 

In 2 States the average dollar business is $6,000.00 and over. 

" 7,000.00 " 

" 8,000.00 " 

" 9,000.00 " 

" 7 " " " " " " 10,000.00 " " 

" 9 " " " " " " 11,000.00 " 

" 4 " " " " " " 12,000.00 " 

" 2 " " " " •' " 13,000.00 " 

" 1 " " " " " " 14,000.00 " 

Referring to Tables 1--"), inclusive, 85 Distributors in 20 states account for, 
by name and address, 1,512 Retail Outlets that the Major Oil Company group 
of competitors have gained control of since the above census report. 

Table 1 indicates that an intensified drive was made for control of Retail 
Outlets during 1936 to and including the first quarter of 1939. 

It appears from the following analysis that over 85%, conservatively, of 
the Retail Outlets are now controlled by the Major Oil Company group of 
competitors. 

The other source of statistical data is contained in a report on marketing 
facilities to Congressman Wm. P. Cole, Jr., Chairman of the Sub-committee 
of the Committee on Interstate and Foreign Commerce, House Resolution 441, 
dated March 20, 1935. Tables 30-31. 

Tables 20-28, Statistical Section, present the figures of the Bureau of Census 
on Filling Stations and Garages for the years 1929, 1933 and 1935. Figures 
are furnished by the companies reporting for each of the calendar years 1930 
to 1934 (Tables 30-31). The comparison of the Bureau of Census's figni-es 
and the report of the Sub-committee of the Committee on Interstate and 
Foreign Commerce of the companies reporting on Filling Stations and Garages 
for those years covered by the three census's taken, indicate the following: 



CONCENTRATION OF ECONOMIC POWER 8753 

P.iirojin of Census: 

Filling Stations, 1930 121,513 

Garages, 1930 66,973 

Total 188, 306 

Reported by Companies, 1930 163,628 

Percentage controlled by the companies reporting 86. 9 



Bureau of Census : 

Filling Stations, 1933 170,404 

Garages, 1933 86,454 

Total 256, 858 

.Reported by Companies, 1933 214,815 

Percentage Controlled by the Companies reporting 83.6 



Pnreau of Census : 

Filling Stations, lO:!." 197,568 

Garages, 1935 66, 243 

Total 263, 811 

Reported by Companies, 1934 219,382 

Percentage Controlled by the companies reporting 83.2 

The letters from Distributors contain varying estimates of the percentage 
of control in their territory, viz (See LB-1) : 

New York 75% 

Pennsylvania 85% 

Maine 81% 

Wisconsin 85% 

Virginia 75% 

Theoretical formulas might be developed to indicate the percentage of con- 
trol of the Retail Outlets. However, the formulas would remain an estimate. 
An accurate census of the Filling Stations would produce factual data but aside 
from perfecting numerical data, the situation would not be affected. 

The statistical data presented above is supplied for the purpose of indicating 
the business from which the Independent Distributor and Jobber is barred from 
in competing for a share of the money the consumer will spend annually for 
motor fuel and motor lubricants. 

A market represented by a consumer expenditure during 1935 of $1,767,714,- 
000.00 is monopolized by the marketing practices of the Major Group of Oil 
Company competitors. 

A market in each locality of from $6,000,000 to $11,000,000, in statistical terms 
of "median" per Retail Outlet is closed to free competition for the local Dis- 
tributor and Jobber, the small business man. 

In the light of this presentation of the findings of this survey, an explanation 
of the movement of the creation of State Barriers seems to be supplied. 

The following reproductions of letters from individuals and organizations 
close to the problem of state barriers lend force to this observation. 

Further, the comments contained in Exhibit "N", Report II — Confidential 
Bulletin No. 30 lends further support to the observation. 

Orderly market conditions require that governmental action be employed to 
maintain a free and equal opportunity for free competition in the relationship 
of the Independent Producer and Distributor and the Major Oil Company group 
of competitors. 

The market for free competition exists as a market of competition of con- 
certed action on the part of groups of competitors. The observations indicate 
that this restricted competition is not producing orderly market conditions. 

Action by Governmental Departments seems essential. The data accumu- 
lated and presented In this report indicates that control of Retail Outlets is 
approaching a complete absorption of the remaining Independent Service Sta- 
tions and Garages. The methods now being applied employ acts of force to 
thoroughly eliminate the. Independent from the market. 



8754 CIONCENTHA'I'ION OF ECONOMIC POWER 

office of tub executive directok 
Feperation of Tax Administrators 
1313 east sixtieth street 

Chicago, Illinois, May 2.'i, 1939. 
Mr. Adam Donald, 

8 East 46th Street, New York, New York. 
Dear Mr. Donald: The best answer I can give to the inquiry contained ii 
your letter of May 20 is : both. To what extent each factor is operating ana 
which came first varies from place to place and would be difficult to answer in 
any case. I did not quite get the full implication of your quotation from the 
American Petroleum Industries letter, as I do not understand precisely what 
kind of bill was involved and how it was regarded as a state trade barrier. 

The Council of State Governments, which was responsible for a very excellent 
conference on Interstate Trade Barriers held in Chicago on April 5, 6, and 7, 
might be interested in your inquiry and I am therefore forwarding a copy of 
your letter and my answer to Frank Pane, Executive Director of that 
organization. 

Sincerely yours, 

Albert Lepawsky, 
Executive Director. 

LEGAL STEPS TAKEN Uf THE INDEPENDENTS 

The analysis presented in this report indicates the loss of business suffered 
by Independent Producers and Refiners as year by year the Major Oil Com- 
panies increased their control over a larger and larger number of service 
stations. 

The monopolistic t' ctics of the Major Oil Companies have been complained 
of and in observing f ae history of the legal steps taken as outlined in the sec- 
tion of this report — "History of Legal Steps and Complaints" — the impression 
is definitely gained that the loss of business has been due not to any laissez 
of the Independent Producers and Refiners, but rather to the delays incident 
to hearings and rulings on fine points of law. 

The History of Legal Steps may be briefed as follows : 

1926: Federal Trade Commission considering the legal aspects of the ex- 
clusive dealing arrangements. 

The Lease and Agency type of contract was first under question of govern- 
mental authorities during 1926. An investigation and report was submitted by 
tho Federal Trade Commission, Senate Document 61, 70th Congress, First Ses- 
sion, in response to a senate Resolution 31, 69th Congress, First Session, June 3, 
1926. No enacting legislation followed this investigation. 

1931: Pennsylvania Grade Crude Oil Association files complaints before the 
Federal Trade Commission. 

Pennsylvania Grade Crude Oil Association during 1931 applied for the issuance 
of a complaint against the Major Oil Companies attacking the practices of 
making the so-called lease and Agency contracts before the Federal Trade 
Commission. During 1932, the Federal Trade Commission began investigation 
of the Lease and Agency methods of marketing petroleum products. 

October 1933 : Federal Trade Commission's Chief Counsel reports his opinion 
of violations of existing legislation. 

Though a memorandum has been issued for the Federal Trade Commission 
on the subject of Lease and Agency, Lease and License methods of marketing 
petroleum products by Chief Counsel, Robert E. Healy, yet no action in the 
form of relief issued from this investigation due principally to the ehaotment 
during 1933 of the National Industrial Recovery Act. 

The practices engaged in by the Major Oil Companies were considered as a 
violation of existing law in this opinion. No action was taken in the form of 
orders of cease and desist or of rulings of cause for complaint. The findings 
of the investigation were not acted upon, and the entire situation was left to 
the Code of Fair Competition to be developed by the National Industrial Re- 
covery Administration. Members of associations and of the industry applied 
themselves to the formulation of a Code of Fair Competition for the Petroleum 
Industry. The Lease and Agency contracts were the point of greatest contro- 
versy in reaching a final agreement on a Code. 



CONCENTRATION OF ECONOMIC POWER 8755 

Finally, in order to get the code adopted, a compromise rule was agreed 
upon, which empowered the President or the administrator to call upon the 
Federal Trade Commission to report its findings as to whether either the Lease 
and Agency or Lease and License methods of marketing petroleum products 
constitute an unfair trade practice. The Code was signed by the President, 
August 19, 1933. 

Under date of November 1, 1933, the Honorable Charles H. March, Chair- 
man of the Federal Trade Commission, directed a letter to General Hugh S. 
Johnson, Administrator, National Recovery Administration, and attached to 
the letter a memorandum for the Commission submitted by Robert E. Healy, 
Chief Counsel. 

The Honorable Harold L. Ickes, Administrator of a Code of Fair Competition 
for the Petroleum Industry, under date of March 4, 1935, rendered a decision 
on certain provisions in the Lease and Agency and Lease and License forms 
of exclusive dealing arrangements. (LS — page 19, 1) On the same date 
the Honorable Harold L. Ickes directed a letter to the Honorable Bwin L. 
Davis, Chairman of the Federal Trade Commission, requesting advice concern- 
ing any findings made or action taken pursuant to the subject of his com- 
munication. 

Under date of April 9, 1935, the Honorable Ewin L. Davis, Chairman of the 
Federal Trade Commission, directed a letter to the Honorable Harold L. Ickes in 
regard to exclusive dealing contracts and distribution of motor fuels in which 
the Honorable Ewin L. Davis points out to the Administrator of the Petroleum 
Administration : 

"The Administrator operates under a statute which specifically and in con- 
trast with anti-trust laws negatives a design to 'eliminate or oppress small 
enterprises' or 'to discriminate against them' and which confers broad discre- 
tionary authority. He is not constrained by the above considerations of law 
and has already, in order of March 5, banned the methods in question as to 
the marketing of petroleum products other than gasoline and motor fuels. We 
assume that his fourth question relates to the use of these methods as employed 
in the distribution of gasoline and motor fuel only." 

"The Commission concurs with the Administrator as to the importance of a 
further investigation in order to ascertain the effect of these practices on 
the Independent Oil Companies' trade in the latter products." 

March 20, 1935 : Report on Marketing facilities to the Sub-Committee of the 
Committee of Interstate and Foreign Commerce, showing, 184,338 non-company 
owned service stations supplied on 100 per cent basis by the Major Oil Com- 
panies. 

May 28, 1935: The National Industrial Recovery Act was ruled unconstitu- 
tional on May 28, 1935, and therewith ended the Code of Fair Competition for 
the Petroleum Industry. It will be noted that from 1926 to 1935 practices 
were engaged in and were permitted to persist regardless of the results that 
tliey were producing upon the business of the Independent Producers and 
Refiners of Pennsylvania Grade Petroleum products. 

By not being interfered with in their practices, the Major Oil Companies 
have exerted greater coercive pressure upon the Independent business man 
operating the retail service station outlet. Today retail outlets — service sta- 
tions, originated and started by the enterprise of an individual business man 
in 1907, an outlet which grew in numbers to 197,568 service stations in 1935, 
and for the most part under the monopolistic control of a group of oil pro- 
ducers and refiners generally termed "the Major producers and refiners." 

June 1936: Final Report of the Marketing Division of the Petroleum Ad- 
ministrative Board. 

Planning and Coordination Committee had submitted its recommendation on 
May 25th. This recommendation was never acted upon by the Administrator. 
June 1936 to date: Twelve years after the first investigation, the Independ- 
ents find no legislation enacted or enforcement measures of existing legislation 
employed to arrest the marketing practices of the Major Oil Companies. Their 
business has been reduced as a result of the closing of the majority of the 
Service Stations as retail outlets for the distribution of their products. 

In the case of the Independent Producers and Refiners of motor fuel and 
motor lubricant products, lack of enforcement has been due to an accumulated 
series of circumstances. 

The section in this report, History of Legal Steps, is included as a part 
of our analysis in order to emphasize that though the conditions existing today 
have been created by a lack of enforcement in the past, the lack of enforcement 



8756 CONCENTRATION OF ECONOMIC POWER 

is not due to laissez on the part of the Independent Producers and Refiners of 
motor fuel and motor lubricant products and particularly of the producers and 
refiners of Pennsylvania Grade Crude Petroleum. 

The History of Legal Steps traces the series of accumulated circumstances that 
have contributed to deferring action to maintain a free and open market. 

Report II, Exhibits A to P, supply excerpts from Documentary Publications 
and copies of briefs, memorandums, decisions and opinions. 

The History of Legal Steps in this report and the Exhibits A to P, Report 
II, has assembled the material produced l)y investigations during a period of 
twelve years. The data represents the accumulated result of many undertakings 
and investigations. 

The time, effort and work has produced data that shows that the marketing 
practices Uncovered are considered as either infringements or violations of 
existing legislation. 

Without presuming to discuss the legal aspects of the matters involved, a 
practical procedure, from a marketing point of view, would be to remove the 
conditions imposed upon the Retail Distribution of motor fuel and motor 
lubricant products and permit the marketing practices generally existing in 
retailing other products to the consumer to function. 

The establishment of general retailing practices as the method for distribu- 
tion of motor fuel and motor oil products N.ould remove the restraints now 
imposed upon free enterprise. 

THE IMPORTANCE OF THE INDUSTRY OF INDEPENDENT PRODUCERS AND KEFINEES OF 
PENN8TLVANIA GRADE CRTTDE OIL 

Pennsylvania Grade Crude Oil is generally recognized as containing the most 
valuable lubricating oil content of any of the crude oils produced in the IJnited 
States. 

This grade of oil is produced in western Pennsylvania, western New York, 
West Virginia and southeastern Ohio, and constitutes one of the most valuable 
natural resources which the country has. 

In the state of Pennsylvania this grade of oil is produced in 18 counties ; 
in Ohio, in 20 counties ; New York, in 3 counties ; and West Virginia, in 26 
counties. 

In the region mentioned there are approximately 140,000 producing wells, hav- 
ing an average daily production of about one-half barrel per well per day. 

The Pennsylvania lubricating oils are sold throughout the United States and 
in many foreign countries, and are regarded generally as being of the highest 
quality. 

The number of men engaged in drilling, production and the manufacture of 
Pennsvlvania Grade Crude oil and its products exceeds 20,000; the annual 
payroll is estimated at $25,000,000.00. 

In a normal year some 5,000 new wells are drilled in the Pennsylvania region. 
Purchases of new equipment and replacement of equipment by Producers amount 
to more than $1,000,000.00 annually. Carload shipments of petroleum products 
originating in the Pennsylvania oil region amount to 100,000 to 110,000 annually. 

Substantially all of the Pennsylvania Grade Crude Oil production is in the 
hands of the Independent Producer. 

The industry dates from the original discovery of oil in the United States 
which was in Pennsylvania in 1859. 

The industry is an important and valuable asset to national economy and the 
contribution it makes to industrial production requirements is that of producing 
an oil with a most valuable lubricating content. 

The Pennsylvania prade Crude Oil is so designated because the principal 
fields of paraflSn base oils are located in the Appalachian region. Oils with a 
paraffin base as distinguished from oils with an asphalt base are generally 
required and demanded when the best lubricant available is essential for lubri- 
cating performance. 

Authoritative opinions as to underground reserves of Pennsylvania Crude Oil 
indicate that production from the field will continue long after many of the 
flush fields are exhausted. 

It is important therefore that what is known as the Pennsylvania Industry be 
kept in active operation. 

The assembled data presented in this report provides the basis for the con- 
clusions appearing in the section "Summary and Conclusions." 



CONCENTRATION OF ECONOMIC POWER §757 

The approach to the inquiry of marketing practices was strictly that of deter- 
mining factual conditions. The data presented is the material gathered and the 
presentation is of actual findings. 

More extensive data might have been accumulated had time permitted ; how- 
ever, the questionnaires and letters present, in our opinion, a very fair cross- 
section of the marketing practices in the Retail Distribution of Motor Fuel and 
Motor Lubricant products. 

We feel it necessary to say that the treatment of the legal complications is far 
afield of the marketing consultant's normal functions, and add that our presen- 
tation of the material contained in the Section of "History of Legal Stops and 
Complaints" should be regarded as entirely from the viewpoint of practical 
marketing experience. 

Further, we felt it advisable to include the comments regarding State Barriers 
since our first hand contact with the conditions reported noted a temper among 
the Independent Distributors inclined to resort to the organization of state 
groups for the enactment of state laws which will, first, protect their own stand- 
ard of living, second, the homes and standards of living of the people in their 
community; third, guarantee the circulation of the money turnover in localities 
that makes for prosperous times in their own locality. 

Supplementing the questionnaires and letters forwarded to our office, Dis- 
tributors have supplied copies of letters to : 

Senators, Representatives, The Department of Justice, Tlie Federal Trade 
Commission and to Senator Joseph C. O'Mahoney, Chairman of the Temporary 
National Economic Committee. 

Photostat reproductions of the copies of these letters are included in Report 
II Exhibits. 

DISTRIBUTORS' COMPLAINTS 

By "exclusive dealing arrangements" the Major Oil Companies control, on a 
fair estimate, in excess of 83% of all service stations, outlets for motor fuel 
and motor lubricant products. 

We find it is impossible for us to answer the questions intelligently. 

The situation complained of in the questionnaire occurred as far as our 
territory is concerned, back in 1929 thru 1932 or about that period. At 
that time the major oil companies signed up as many independent stations 
as possible to handle their products exclusively. — Texas, Exhibit L-3.1. 

There are in the city of San Antonio approximately 175 lease agreement 
stations that are controlled by the above mentioned major companies and 
these stations for the most part represent the best locations in the city and 
positively prevent the independent distributors from selling any one of such 
stations and, of course, the few independent retailers that are left offer 
a very small field for the smaller independent distributors. — Texas, Exhibit 
L-48C.1. 

We have checked over our territory and find in the city of Watertown 
approximately 75% of the retail outlets for gasoline and oil are owned or 
controlled by major oil companies. — New York, Exhibit L-39.1. 

In 1936 we would say there were approximately 75% of these accounts in 
our territory operating independently. Today. 85% of all accounts are 
controlled by major companies. — Pennsylvania, Exhibit L-36.1. 

For a number of years the major companies concentrated heavily on 
selling the independent gasoline retailers. They were so successful that 
today very little motor oil other than that sold by the major companies 
is dispensed by these dealers. — New Jersey, Exhibit L-37.1. 

According to the latest figures we have, about 81% of the gasoline sold 
In this state is supplied by the major companies. Of the remaining 19% 
very nearly all is sold by so-called independent large buyers who are so 
closely tied up with one or other of the major companies as to make 
ga.soline sales in this state nearly 100% major company deliveries. — Maine, 
Exhibit L-32C.1. 

It is our experience that 85% of the service statiou outlets are closed 
to us and consequently are not worked by this company at all. I might 
cite one or two main arteries iri Milwaukee pi>oper. — Wisconsin, Exhibit 
1^29.1. 

124491 — 10— pt. 15a 3 



8758 CONCENTRATION OF ECONOMIC POWER 

As the numher of these accounts was never great it required only a 
short time for the majors to practically clean up all of the outlets we 
had. 

We have remaining approximately 35 gas station accounts in 43 coiinties 
which we cover on eastern and central Illinois and western Indiana. 

These accounts have given us about 7% of our total volume. The largest 
one purchased exactly 700 gallons last year and only two were above 500 
gallons. Thirty of these accounts purchased l^s than 200 gallons. — Illinois, 
Exhibit Lr-25.1. 

* * * major oil company tactics which were started by them June 1st 
of 1936 in this territory to restrain the sale of independent oils and at 

■ which time I predicted their eventual monopoly of service station outlets 
for their products.' They have continued this procedure since that time 
and their plan has been a complete success to eliminate the sale of inde- 
pendent oils thru service station. — Oregon, Exhibit Lr-19.1. 

Ten or fifteen years ago, the percentage of independent filling stations 
in this territdry was about 75%. Today it is reversed. The producing 
fompabies have about 75% of this business. — Virginia, Exhibit L-lS.l. 

It is practically impossible on this short notice to give you the informa- 
tion of the entire territory- as you desire. 

We wish to state that the grease and oil marketing outlets in the terri- 
tory which we cover are owned and controlled by the major gasoline mar- 
keters to the extent of 75% of the total gallonage on motor oil and 90% 
on gasoline. — Virginia, Exhibit Lf-17c.l. 

It is very evident that major oil companies are more active today In 
controlling or monopolizing gasoline and oil outlets than ever before. I 
notice that in the area in which I work they have gone so far as to put 
pressure on the so-called storage garage to whom the gasoline and oil 
business is a small factor. It seems that the major having almost com- 
pletely gained control of the independent service station (with whom they 
have a contract for gasoline and oil, and of course 100% control of their 
so-called company owned stations which in the majority of cases are 
leased) their next step has been to take over garage outlets. 

In many suburban towns, we do not have a single gasoline station out- 
let. They are all controlled by the majors. — Massachusetts, Exhibit L4-1.1. 

This leaves about 90% of the stations and garages in this territory con- 
trolled by the major oil companies. — Washington, Exhibit L-63.1. 

As you alr^eady well know we are- continually losing accounts to the 
Majors thru titieir leases and other methods in inducing the Dealers to han- 
dle their products exclusively^ but. I would not care for that if there were 
other outlets tfH:ake their plac6 which there are not. — Exhibit L-60.1. 

The latest information available shows that approximately 80% of the 
gas stations in the District of Columbia are either company owned or oper- 
ated, or operated uiider a 100% lease. The largest single group is controlled 
by Standard Oil of N. J., and of the one hundred and forty 100% Standard 
Stations, they operate but one. — District of Columbia, Exhibit L/-70.1. 

The five cases as outlined are examples of how the majority of the 499 
100% outlets have been acquired in the District of Columbia. — District of 
Columbia, Exhibit Lr-73.1. 

It is possible that we of the StanfiU Company could list at least one hun- 
dred motor oil outlets that are anxious to buy and sell our products if their 

■ gasoline suppliers would allow them to do so. However, it would take a 
week-or two to get the necessary information together. — Kentucky, Exhibit 
Iv-77.1. 

This makes three stations in the immediate territory I have lost in the 
last year from the same tactics. — Georgia, Exhibit L-79.1. 

Due to this practice there are thousands of gallons of potential business 
that we could and would get if this were not the case. — Virginia, Exhibit 
;• .( L-81.1. 

•; t^lth regard to Total % Gasoline business in Territory would say that 
when viewing the fact that 80% of the gasoline dealers whom we sell are 



CONCEN'." RATION OF ECONOMIC POWEK §759 

100% controlled this in i. lelf establishes the fact that the larger % of the 
business of our territory is being done by the controlled stations. From 
observation and information while making contacts it is our belief that 
approximately 35% of the dealers in the area which we serve are doing by 
far the larger % of the business. Of the 35% doing this volume, according 
to our records, about 87% to 90% are 100% controlled.— Pennsylvania, 
Exhibit L-82C.1. 

• * * by the Washington Post. "Washington, D. C, 16th in the num- 
ber of gasoline retail outlets, totaling 619, of which 499 are 100% controlled 
outlets, 41 controlled co-ops, leaving 79 open to competitive business, or 
approximately 13%." — District of Columbia, Exhibit L-73c2.1. 

That the Major Oil Companies so control the Service Stations that the motor 
(uel and motor lubricant products of the particular Major Oil Company in 
ontrol are sold exclusively. 

Capitol Drive, U. S. Highway #16: On this street are 32 outlets for ga.so- 
line and oils. Only 4 of them are open to independent solicitation, th(> 
others are either owned or controlled by major oil companies. 

Oakland Avenue is a north and south street running from mid-town lo 
the north limits, a distance of 6 miles. It is a service businessi street am! 
has 15 outlets, 3 of which are available for solicitation, and those tlirec 
being garages. 

U. S. Highway 41 : On this highway within the Milwaukee limits are 45 
drive-in service stations and only 4 of these can be classed as free iude- 
jjpndents, open to solicitation by marketers like ourselves. — Wisconsin, 
Exhibit L-29.2. 

I haA'e operated a wholesale lubricating oil business in Kansas and pnrt 
of Missouri for the past fifteen years and have seen the trade change from 
a free open proposition to about a 50% closed deal, due to trick leases and 
fear, of the gasoline supplier. — Kansas, Exhibit L-65.2. 

A considerable number of Standard Oil (Indiana) Station operators were 
handling Pennzoil prior to the consumatiou of the Standard-Quaker State 
alliance, but were informed that they would have to discontinue handling 
Pennzoil and take on Quaker State. — Iowa, Exhibit L-64.2. 

At Wenatchee the North Central Chevrolet Co. recently changed locations 
and the Stand. Oil Co. spent better than $700.00 in decorating their building 
for 100% contract over a period of time. — Washington, Exhibit L-72.2. 

I find it much harder to sell stations now than I did in 1937 as at thai 
time there were more independent stations as so many have been taken 
over by the major oil companies due to indebtedn.ss to the gasoline sup- 
plier and a number of other methods used by the Majors to compel a dealei" 
to sell only their products. — Minnesota, Exhibit Lf-74.2. 

Atlantic Refining Company leased them one of their company owned 
stations on S. 3rd St., Easton, providing they would go 100% Atlantic at 
their own location on N. 3rd St. — Pennsylvania, Exhibit L-S2.2. 

This station is now operated by Mr. HoUohorn, who informed me tha 
I was too late, that he would have bouglit Quaker State Motor Oil from 
me the day before but could 'lot do so at that time, for he had been uj 
to the Wofford Oil Company's ofllce to sign up the paper for the station and 
they told him he would have to .continue selling Quaker State and ta 
have the curb sign removed. — Georgia, Exhibit L-79.2. 

Jensen Auto Service, Inc., West Hartford, Conn. Gallons of Motor 1 
purchased from us: 1936, 398; 1037, 445; 1938, 92; 1939, None. 

This account signed up with Socony Feb. 1938 and received an addition} 1 
margin on oil for signing up. — Connecticut, Exhibit L-83.2. 

The Major Oil Companies coercively force controlled Service Station operatoi 3 
exclude from sale the products of Indei)endeut Producers and Refiners. 

I enclose herewith skeleton report for the territory which I cover. 

To date we have not lost accounts to Major Oil Companies because thej 
have had them tied up and would not let us get in on an initial basis. For 
this reason our records would not^ive you a true picture of this particular 
area. — Colorado, Exhibit L-21.3. 



87G() COX(^ENTPtATI()N OF ECONOMIC POWEll 

When they found our gear lubes in his station, either by persuasion or 
threat, they foicod him to return the grease. Of course this means no 
further outlet I'nr our grease at his station. Tliis is a desirable location 
and should be good for ii( h'ast 300 gallons of oil and as many poitiuis of 
grease each year. It was a new account this spring so we had had^ no 
precedent for his gallonage. — Maine, Exhibit L-32.3. 

There is not a free and open market on petroleum products in this area, 
but so much reciprocity and pressure that is brought to l^ear on dealers 
and consumers alike cannot be put down in writing. One reason is that 
many statements which are made to us verbally could not be substantiated 
if the party who made them was asked to make the accusations in writing 
or as a witness at a hearing. There is a vast amount of intimidation that 
is verbal and without witne.sses. — California. Exhibit L-51.3. 

In fact, we know many dealers who would like to handle our products, 
and whopi we would like to sell, but are prevented from doing so because 
those dealers r(>ali7:e that to do so would penalize their position with the 
m.ajor gasoline company with which they are connected.— Arkansas, Ex- 
hibit L-r)9.3. 

To all intents and purposes these Operators are independent, yet they are 
definitely and specifically told that they expect them to handle only such 
products as can be purchased from the Company. — Iowa, Exhibit Lr-64.3. 

Mr. Thompson, who is Texas Jobber in and around Brainerd, saw the 
Kendall at Lewis' Station and immediately wrote me that I would have 
to pick up at once the Kendall at his station and cancel the order I took 
from his staticm at Brainerd that he was not building stations for me 
to sell my oil through. — Minnesota, Exhibit L-74.3. 

Then there is the case where leased stations are held by contracts to 
handle no other products than merchandise of the major company making 
the lease. — Nebraska, Exhibit L-71.3. 

This account changed proprietorship and changed over to Sinclair. We 
lost the entire grease business and a good portion of the oil business. In 
19S6 they used 3413 lbs. of our grease and continued to use it in 1937 until 
the change. — Pennsylvania, Exhibit L-82c.3. 

Of the independently owned outlets operating on 100% contracts with 
major companies none are allowed to purchase competitive products, and 
a very few who have not signed over their lease or are accepting monthly 
rentals, are so restricted that the gallonage from these few stations is 
insignificant. — District of Columbia, Exhibit L-73-C.3.3. 

That all service stations, all car dealers, all garages are more or less 
signed by major oil companies ; they either permit or prohibit independent 
oils to be sold in these places, as they choose according to the amount of 
business being done. — Virginia, Exhibit Lr-81.3. 

The financial strength of the Major Oil Companies is employed to threaten 
the small business man who has all of his money invested in his business 
enterprise. 

We do know that since the so-called "Iowa Plan of Marketing" has gone 
into operation that major competition has been much more troublesome 
than formerly. — Iowa, Exhibit L-75.4. 

As time went on and various laws were passed to restrict such activi- 
ties I thought I might still win back the business I had lost thru no 
fault of my own. — Arizona, Exhibit L-80.4. 

H. H. (}uilmart, 822 Maple Ave., Hartford. Conn.: Gallons of Motor 
Oil purchased from us : 193G, 817 ; 1937, 417 ; 1938, 242 ; 1939, 60. 

This account signed up with Tidewater and received a cash payment for 
signing up. — Connecticut, Exhibit Ij-83.4. 

The motor fuel and motor lubricant products of the Independent Refiners of 
Motor Oil, are forced off the market or the outlets therefore have been eliminated 
to such an extent that the consumer, the automobile owner, cannot obtain the 
product he demands. 



CON'CENTRATION OF ECONOMIC POWER gygl 

So far as the question of merchandise display, we merely wish to state 
that in the accounts which we are reporting to you our merchandise was on 
display before their conversion to a competitive company. After the con- 
version we are not aware that our merchandise is sold or displayed in 
these accounts. Most assuredly where leases are involved a display of 
competitive merchandise is not permitted. — New York, Exhibit L-14.5. 

While it is true that the major oil companies have testified under oath 
that these lease and agency stations are open for the solicitation of other 
oil companies, nevertheless it is impossible for not only ourselves but any 
other brand product to break in. — Wisconsin, Exhibit Lr-29.5, 

Replying to your letter of 'April 26. * * * the "close door" policy 
prevails with a dealer from his gas "and oil supplier. 

This "close door" policy has prevailed over a period of several years where 
oil companies control the lease, but there are instances where the lessee still 
has had permission to handle one premium oil. — Ohio, Exhibit L-9.5. 

The following is an illustration of what happens to new accounts: 
Comeau, Watertown, Massachusetts, is a Tidewater station. They dis- 
played a Kendall Rack and Sign for two weeks. When pumps needed 
repairing, the Major Company sent a repair man to put them in order. 
A few days later, a supervisor who obviously had a report from the repair 
man visited the station and ordered the sign and rack to be I'emoved. We 
had to pick them up and return them to our stock, also the inventory that 
remained unsold. — Massachusetts, Exhibit- L-40.5. 

More recently the Tidewater Co. assisted with the purcliase of the J. C. 
Thomas Motor Co. of Damariscotta. This account formerly yielded us 240 
gallons of oil and 3S0 pounds of grease annually. The Tidewater Co. wants 
the new owners to discontinue Kendall Oils and Greases. 

The manager of the Puritan Chevrolet Co. of Batli say.s he is well ac- 
quainted with the quality of Kendall products and would like to buy but 
is so tied up that he can handle only Standard Oil Co.'s. — Maine, Exhibit 
1^32.5. 

This practice of the major companies is having the effect of forcing the 
public to buy their merchandise, by reason of the fact -that more and more , 
outlets are being closed to tlie indei^endents by the methods employed by 
those major companies. — Arkansas, Exhibit L-66c.5. 

The Independent Refiner, and particularly the Independent Refiner of Penn- 
sylvania Grade Motor Oil, has over a long period of years advertised the excel- 
lence of -Pennsylvania Grade Motor Oil. Consumer demand therefor has been 
Iniilt up throughout the United States for a Nationally Advertised Brand. The 
metliods employed by the Major Oil Companies force the products of the Inde- 
pendent Producer and Refiner out of the outlet and, consequently, no free and 
open niarkt^^ exists for products of the Independent Refiner. 

Tills iVmaining 50% eventually becomes "converted" to the major com- 
panies' products because he finds it increasingly harder to locate a neigh- 
borhood dealer that handles the products he wants. Moreover in our terri- 
tory ifls the customary practice for the major company to pick up the 
custodier's car and deliver it at no extra charge. The small independent 
dealem:annot compete with this type of business.— Massachusetts, Exhibit 
I^1.6> ^ 

The resti^iint that is existing upon free competitinu is terrific. Quite a 
few of the controlled stations do buy our merchandise in small quantities 
lint are not alH>wed under any condition to display merchandise or use curb 
signs or any advNJtisement of any description. It is definite that a free 
and open market is Ijeiiig denied the distributor, the i-etailer and the con- 
sumer. — Virginia, Exh>bi4 Lr-17c.G. 

We saw our business, whiun tvuS, running about 120,000 gallons jjcr year, 
drop to aiiproximately 24,000 gallon:?> Since that time by adding other 
types of oil we have been able to build oitF^business back to approximately 
45,000 gallons per year.— Texas, Exhibit Lr-'6:Q, 

If there was not the ijublic demand for Kend.-tU^ Oils, we wouldn't stand 
a chance of selling the average service station^ because of company 
restrictions. 



8762 CONCENTRATION OF ECONOMIC POWER 

As it is, both locally, and throughout the territory, we have qu'te a 
number of both toinpany owned, and leased stations selling our products. 
Of course they are not displayed, and we have no sign or advertising privi- 
leges. OtluT dealers say plainly tliat they would handle our product if 
they dared to risk what the leasing company might do. — Virginia, Exhibit 
L-5C.6. 

A free and open market is denied the distributor and retailer in many 
instances and the lease and agency contract is definitely a detriment for the 
free distribution of merchandise. — Ohio, Exhibit L-9c.6. 

On a previous visit I noticed that two 1x6 Quaker State vertical signs, 
which we had shipped to Mr: Hobsgood and which he had placed on each 
end of his station, were missing, and when making inquiry as to why they 
had been removed, I was informed by Mr. Hobsgood that the Standard Oil 
Company's representative had taken them down. I then asked Mr. Hobsgood 
if this was pursuant to his wishes, and was informed that they were taken 
down while he was away from the station. 

I then a.sked Mr. Hobsgood if it was a truck driver or a sales represents 
tive who had removed these signs, and Mr. Hobsgood answered- that it was 
"Buford." I then asked if "Buford" was his first name or last name, and 
I thought he answered that it was Tom Buford. — Louisiana, Exhibit Lr-48.6. 

If these dealers merchandise or even display competitive brands of motor 
oil, they are threatened by the majors in the form of reducing rent, building 
competitive stations, etc. — Maryland, Exhibit L-54.6. 

* * * while these accounts carry competitive brands of oils, the Major 
company keeps them from displaying Curb Signs or other advertising mate- 
rial on competitive brands. A common practice in this type of account is 
for the controlling company to loan or give the Oil Display racks. — Califor- 
nia, Exhibit L-61C.6. 

Special prices, paint jobs, advertising concessions have been prevalent. I 
have in mind the Carter Super Service, Lawrence, Kansas. This firm was 
buying considerable oil from me and advertising my oil, in fact I recently 
sold them a complete lubrication set-up. The Socony-Vacuum Co. came 
along and by special promises and concessions were able to place this cus- 
tomer in a position where he is afraid to buy from me. In this particular 
case the Socony-Vacuum Co. went so far as to nail and paste their advertis- 
ing over my signs. I could recite you any number of these cases. — Kansas, 
Exhibit L-65.6. 

The prevailing method employed by the Major Oil Companies in acquiring 
control of Service Stations is by two agreements executed simultaneously and 
as one transaction whereby the Major Oil Company purports to lease the station 
site from the operator under one agreement and by another agreement designates 
the former operator as the person to conduct the station and sell thereat the 
petroleum products of that Major Oil Company exclusively. 

All of the stations are operated by one man in the station, who is sup- 
posed to have leased the station from the major company and thereby has 
become an independent dealer, but this is only a subterfuge, as the lessee 
knows full well, if he should buy any merchandise other than the major 
company's for which he operates, the lease will not be renewed. The effect 
of this is that we are estopped from the sale of our merchandise thru these 
stations. — Texas, Exhibit L-3.7. 

We find it extremely difiicult to obtain outlets for our products through 
service stations, inasmuch as the service stations in this area are practi- 
cally all controlled through underlying leases by the major oil companies. — 
Pennsylvania, Exhibit L-20.7. 

■" * * an independent leasing a station, then leasing to the major 
company and they in turn leasing back to the independent for $1.00 or 
some other kjnd of a proposition. — New York, Exhibit L-38.7. 

I have personal knowledge of one lease agreement in this city which is 
similar to about 25 other agreements made by The Texas Company in San 
Antonio. This par<^icular lease concerns the station operated by a party 
named Paul Scheffler at 1201 N. St. Mary's Street. The Texas Company 
leases this station from the ovsTiers of the property — Mr. Negley and Mr. 
Johnson Grifiith. The rent schedule on this property is based on an in- 



CONCENTRATION OF ECONOMIC POWER 8763 

creased amount each year over a five year period. And the lease is made 
direct between Mr. Negley and Mr. Griffith to The Texas Company. The 
Texas Company in turn has a lease agreement with the operator Mr. Paul 
Scheffler which calls for a rental paid by Mr. Scheffler of less than the 
amount paid by The Texas Company to Messrs. Johnson Griffith and Mr. 
Negley. Mr. Scheffler's lease contract with The Texas Company is on an 
annual basis and the rent is paid monthly by him. Mr. SchefQer is not 
permitted to handle any other petroleum products than those made by The 
Texas Company. — Texas, Exhibit Lr-4S.7. 

The policy formed by the majors over a period of years has had a 
very undesirable effect on free competition through their outlets. The 
various inducements which they use are leasing the property from the 
owner, release to the operator for a nominal rental, or purchasing the 
property outright, then leasing to an operator and offering different con- 
cessions and equipment, then appointment of the operator as a commission 
employee on a guarantee spread. In this territory the commission is 
usually 30 per gallon regardless of the rental paid for the property. — 
Virginia, Exhibit L-17.7. 

Since September 1937, I have been an oil distributor for Kendall products. 
Since that time the available market has been shrinking due to the 
activities of the big oil companies. 

These activities are the leasing of service stations on various types of 
agreements, whereby the operator or leasor is prohibited from selling my 
products or displaying the oil or signs. — Florida, Exhibit L-50.7. 

The methods employed by these major companies to get control of the 
business and shut out the independents, are to lease or buy the most 
desirable locations, and th«n to sublet them to individuals who operate 
them under their own names. — Arkansas, Exhibit L-66.7. 

At Ardenvoir, Wash, they spent something like $2,400.00, so the operator 
of the company store told the writer, for new buildings and equipment 
for 100% contract, which was not to be paid back at nil, or over a long 
period of time on a gallonage basis. — Washington, Exhibit Ij-72.7. 

Their policy now seems to be that the major oil company leases the 
station from the owner, which station they in turn lease to an operator 
for Id per gallon on the sale of gasoline. When we approach tlie operator 
and try to sell him our product, we are told in every instance that the 
mnjor oil company will not permit them to handle our product or display 
any -sign advertising any other merchandise than that sold by that par- 
ticular major oil company. 

We have not seen a recent contract which the major oil companies use, 
but whatever it is, works just as conclusively in closing the outlets to inde- 
pendent oil companies as the old lease and agency contract which we under- 
stand was declared illegal a few years ago. — Virginia, Exhibit Ij-68.7. 

Practically all of the Major Oil Companies operating in Iowa have 
leased their stations to supposedly independent Operators, although some 
have rot.ii'ied, and still operate as a Company unit. — Iowa, Exhibit L- 
64.7 

Ta.fcc ^jj average days work and analyze the results, call on four ac- 
counts in one town, every dealer tells' you they know that you are offering 
tlu'm a quality product for which they have some demand, and would like 
to hwidle, BUT the — Company owns the building and I am just leiising 
with 4he agreement that I handle their products and no other.— Exhibit 
L-60.7. 

The major comf^a'iics here in Iowa do rent a number of individually 
owned station^ and in most cases thoy lease these stations back to the 
owner to operate. In many cases the I'ent the owner pays for tlio station 
when he ro-leascs it is much less then he receives from the major com 
pany. Likewise many times the rent paid by the lease on company-ownco 
stations is lower than it should be if based on the value of the property.- 
lowa, Exhibit L-75.7. 

These companies then leased the same premises back to my customers, 
the lease being drawn in such a way that thoy could buy or .sell only tliosc 
products supplied by the oil company. — Arizona, Exhibit 1^-80.7. 



8764 CONCENTRATION OF ECONOMIC POWER 

Threats of price wars, threats of price cutting, threats of erection of stations 
in the immediate vicinity as added competition against the particular operator, 
and threats to discontinue supplying him with gasoline to carry on his business 
are resorted to by the Major Oil Companies to force the individual business 
man operating the station to surrender his individuality and submit to the 
they are connected. — Arkansas, Exhibit L-66.8. 

In September 1938 the Gulf Refining Co. representative objected to me 
selling Kendall Oil for which I have a very good demand xind many regular 
customers. They threatened to build a station next to mine if I did not 
discontinue the sale of Kendall and sell their products exclusively. 

I felt that it would hurt my business if I discontinued the sale of 
Kendall audi I do not feel as though I could stand their competition as 
there are now go many Company stations that our gallonage has been 
greatly reduced. — Maine, Exhibit 1-^34.8. 

We are not answering your extensive questionnaire in detail. 

Our chief resistance in selling oil is the 100% contract insisted upon by 
the companies selling gasoline, who at the same time wish to sell their 
oils. In order to enforce this contract, they give the dealer less margin 
on the gasoline if he does not handle branded oils. — Missouri, Exhibit 
L-28.8. 

Some companies are more severe than others in the carrying out of their 
pojlicy, but all of them are more or less offenders against the free dis- 
tribution of merchandise by independents. — Ohio, Exhibit L-9c.8. 

The major oil companies operating in my territory state to a lessee that 
he can put in other oils, but while this has been their statement if the 
operator does put in other brands they find reasons under the terms of 
their lease to get rid of him. — Colorado, Exhibit L-21.8. 

They threaten to cancel courtesy cards, they delay gasoline deliveries 
when these dealers require special deliveries on holidays and Sundays, 
they refuse to paint buildings, threaten to cancel any number of otlier 
small but important concessions that are necessary in service station opera- 
tion. All these concessions are allowed when the service stations sell the 
motor oil of the major gasoline company exclusively. 

Many large as well as small users will tell you that they are acquainted 
with your product and would like to use it but reciprocity requires that 
they buy elsewhere even though it is not as economical. Believe investi- 
gation would bring to light that in many instances employees of major 
oil corppanies are required to buy their automobiles through their em- 
employers so that they can use the purchase order as a "club" to get busi- 
ness. We have customers who are forced to buy a certain quantity each 
month in order to retain the business of some major oil company. They, 
in turn, sell this at a loss in order to purchase something from us which 
has proven more satisfactory to them. We cannot get you proof because 
the customer would not be willing to place himself in jeopardy to do .-o. 
Free painting and loaning of equipment is done openly and on such a 
generous scale that the small independent cannot hope to compete with 
it.— California, Exhibit L-51c.8. 

Operator's father owns this property and leases to Standard Oil Co. 
of La. They in turn, sublease to present operator. He, at one time pur- 
chased several cases of Kendall oil and displayed same in the window on 
the day of delivery. Severay days later I called on this account to find 
that our sign had been removed and oil hidden, at which time he informed 
me that the Standard Oil Company's salesman had threatened to have 
him removed from the station, and that said lease specified that at the 
privilege of doing so under these conditions with a three day written 
notice. Up to this writing, we have never been able to further sell this 
customer Kendall Products. — Louisiana, Exhibit L-53.8. 

Next call 4ealer tells me that the Major Company representative have 
told him if they can't get the cooperation from him they feel they should 
liave. they will build a Station next to him and put him out of business. — 
Exhibit L-60.8. 

These individuals icte financially responsible (not the major oil com- 
panies) for .the conductlBg of their business. They njust buy and sell 
at their own risk, pay the city privilege tax., etc., and in general relieve 



CONCENTRATION OF ECONOMIC POWER 8765 

the major gasoline company of any and all financial responsibility, yet 
they are given to understand by salesmen and others in authority, that 
they must buy and sell only the products of the major company with whom 
they are connected. — Arkansas, Exhibit Lr-66.8. 

I refer to the 100% leasing practices of the major oil companies. Many 
of my customers, being as hard hit by the depression as I was, were 
coerced in one manner or another into leasing their stations to some major 
oil company. — Arizona, Exhibit L-80.8. 

Prior to the inception of the intensified campaign of the Major Oil Com- 
panies for acquisition of stations through "exclusive dealing arrangements" 
many Service Stations carried several kinds of gasoline and several kinds of 
motor oil, the products carried being governed by the demand of the consumer 
as to kind and type of product. 

In 1930, the approximate year the retail gasoline outlets and garages 
started leasing and selling their stations to the Majors, we sold 125,000 
gallons of oil in this territory. In 1928 we sold 58,000 gallons in the same 
territory. And any unbiased person familiar with tlie conditions under 
which we have had to reach the market during this 8 year period would 
surely agree that this decline in our volume can be traced to the barrier 
which the majors erected between our company and the market. — Florida, 
Exhibit Lr-31.9. 

We cannot blame the dealer for making this request since all the major 
oil companies offer these inducements to the dealer so that he will switch 
from one product to another. — Pennsylvania, Exhibit L-20.9. 

After obtaining "an exclusive dealing arrangement" the Major Oil Company 
forces the operator to comply with the management policies of the Major Oil 
Company to eliminate all kinds and types of petroleum products sold by Inde- 
pendent Producers and Refiners from distribution through the retail outlet, 
forcing the Independent Producers and Refiners to entirely eliminate or aban- 
don the distribution of their products through Non-Company owned but supplied 
on 100 per cent basis Service Stations. 

From a survey we made approximately four years ago, covering test 
areas in New England, we are positive that not over 30% of the outlets 
are strictly independent, and that approximately 70% are either owned 
or controlled by the major gasoline companies. — Massachusetts, Exhibit 
1^27.12. 

Over a term of years I have lost many thousands of gallons of oil due 
to lease and other forms of coercion used by the majors. At present there 
are pending several very fine independent accounts which doubtless will 
shortly become controlled accounts. — Maine, Exhibit L-4.12. 

The campaign by the majors has been so successful we, the independent 
oil jobbers, have been compelled to look elsewhere for our oil gallonage 
and we concentrated upon the car dealers. — Pennsylvania, Exhibit L.-37.12. 

We have attempted in the past few years to market gasoline through 
service station outlets, but we find that the cost is almost prohibitive in- 
asmuch as the dealers have been trained by the major oil companies to 
ask for new computer pumps, lifts, air compressors and similar equipment 
from the svipplying company.— Pennsylvania, Exhibit Lr-20.12. 

I am enclosing a copy of a letter written to your company under date 
of September 17, 1936 and compariad our gallonage for the three months 
prior to June 1st, 1936 and the three months following; June 1st, 1936 
bc'ng the date set by the major companies for their ultimatum to the 
service stations to be 100% major oil company products. The figures at 
that time showed as follows : 
March, April, May 1936: 

Oil gallons _ 11,196 

Lube pounds— 11, 037 

June, July, August 1936: 

Oil , gallons— 5, 596 

Lube pounds.- 6,416 

—Oregon, Exhibit 1^19.12. 



8766 UUNCENTRATION OF ECONOMIC POWER 

Siuce 1936 I would say that I had lost at least 2,000 gallons per year 
caused from -dealers signing up 100% or leased. — New York, Exhibit 

Lr-13.12. 

As near as we can estimate collectively, these combined practices have 
cost us about thirty-eight accounts and approximately thirty thousand 
gallons of motor oil. This, of course, refers only to those accounts whom 
we formerly had and have lost, and has nothing to do with those accounts 
who would like to buy from us but who have never been our dealers 
because of the restrictions imposed on them by the major companies. — 
Vermont, Exhibit Lr-49.12. 

" jOut of fifty calls made last week, forty-two were 100% which prevented 
any sales at these locations. They were all desirable prospects good for 
approximately 1,000 to 1,200 gallons per year and as many pounds of grease. 
But estimating 300 gallons and considering we could sell but twenty of 
them, we are prevented from selling at least 6,000 gallons of oil in that 
section. — Maine, Exhibit L-32c.l2. 

The information attached hereto discloses that 92 accounts -were lost in 
1938 in our New Jersey territory and 88 were lost in our New York terri- 
tory. All of these accounts were sold by ns during the year 1937 nud only 
a few were sold in 1938, but to the activity of the major oil companies in 
acquiring the service stations through one method or another as Indicated 
on the- attached reports. — New Jersey, Exhibit L-iJ6.12. 

As the result, these accounts have been unprofitable and we ceased our 
efforts to interest gas station accounts several years ago. — Illinois, Exhibit 
L-25.12. 

We are distributors for tires, accessories and oil. Our tire and accessory 
business has been going ahead year after year whfle our oil business in 
the past four or five years has reduced itseif to less than one-half. — Penn- 
sylvania, Exhibit Lr-36.12. 

This condition prevails generally throughout our territory and has reached 
a point where it is a waste of time to even call on this class of business. — 
Wisconsin, Exhibit Lr-29.12. 

We are in receipt of your questionnaire which you request by May 5th. 

It is impossible for us to get this data up in this length of time. 

The major oil companies operating in North Carolina control or monopo- 
lize the most desirable outlets. This, of course, has caused a serious loss 
of business. — North Carolina, Exhibit L-1.12. 

One important situation that does not sliow up in a survey is the time and 
expense involved in contacting dealers we would like to sell but cannot 
because of some deal or price situation offered or forced by the major. 
Major's coercion causes life of account to be materially shortened and 
necessitates tremendous turnover of accounts which is very expensive to 
independent and he is not set up to switch equipment around Like the 
major. — Massachusetts, Exhibit 1-40.12. 

The only remaining avenue now for the independent oil distributor seems 
to be the automobile dealer. As regards this type of outlet, I would esti- 
mate th"at in this metropolitan area of Boston the majors have tied up about 
50% already, having gained control via free equipment or modernization of 
the lubritorium. — Massachusetts, Exhibit Lr^.l2. 

Since 1936 our gallonage has continued to drop off each year until it has 
become a very serious problem. The major companies are just squeezing 
the independents out, and it seems more prevalent than ever this Spring. 
There are also different price concessions to 100% stations that a split 
account cannot get. — New Hampshire, Exhibit Lr-67.12. 

The Texas Company who had leased the property from the former Owner 
also leased it from the new Owner giving him a monthly rental of $50.00, 
and then leased it back to him at $25.00, providing he would not handle any 
other brands of oil. He would like very much to handle PeDnzoil, but hesi- 
tates to do so, fearing that The Texas Company will penalize him by with- 
drawing the $25.00 monthly gift.— Iowa, Exhibit Lr-64c.l2. 

It is difficult, perhaps even impossible to get a written statement or testi- 
mony from tBfese dealers regarding this situation. The reasons for this are 



CONCENTRATION OF ECONOMIC POWER gygy 

obviously because they realize that to do so would probably mean that they 
would be ousted by the major company. — Arkansas, Exhibit L-66.12. 

Has been Atlantic since opening up. Our display sign has been removed 
several times because of pressure by Atlantic representatives. — Pennsyl- 
rania, Exhibit I/-82.12. 

I asked him what would happen if he were to put Quaker State in again 
and he replied that they would lose the distributor prices. — Georgia, Exhibit 
L-78.12. 

The individual operator, operating under an "exclusive dealing arrangement", 
upon asserting his rights and initiative to distribute such products as his pur- 
chaser demand, is brought under control and forced to eliminate such products 
from distribution by threats of cancellation of the lease, discontinuance of the 
supply of gasoline, and threats of cancellation of extra margin on each gallon 
of gasoline sold. 

Most all service stations which are owned by Standard, Gulf, Texaco, 
Pure Oil and Shell are 100% for their products. We do not call on them as 
there is practically no chance of selling them, because the major companies 
own or lease stations and the operators are afraid the stations will be taken 
away if other motor oils are sold by them. — North Carolina, Exhibit L-^4.13. 

In soliciting oil business from so-called 100% gasoline service stations 
leased from major oil companies or handling one brand only of gasoline, 
our salesmen report a market closed to them on account of fear of the 
dealer of reprisals from the major companies should they handle a competing 
brand of oil.— New York, Exhibit Lr-30.13. 

The majority of these operators would like to carry a premium brand of 
oil, but state that they are not allowed to or are afraid to. — North Carolina. 
Exhibit Lr-1.13. 

* ♦ * effectively keep us out of most independently owned stations 
that handle the major's lines. We call on our trade every week or two and 
the man on the gasoline truck contacts these accounts every other day. 
Continual pressure is applied and such concessions as are found necessary 
to eliminate us from the picture are granted. — Illinois, Exhibit Iy-25.13. 

Harold Small of Bath, owned his garage with large parking lot attached. 
Besides regular garage equipment, he had a lx)dy repairing department in 
the rear. There is also a rent above. By ^threats and spending consider- 
able money on the service station at the front, they induced him to sign 
a lease, thinking it covered only the front of the garage and filling station 
outside. When he "came to," he found he had leased his entire property to 
the Shell Corporation. He is now worried continually by the fear that 
they will put him out of his own property. Needless to say he now deals 
in Shell products only. — Maine, Exhibit Lr-32c.l3. 

* * * of how they "dried up accounts" refusing to deliver them gaso- 
line if they did not whip into line and their so-called "gentlemen's agree- 
ment" by which a "dried up" account could not secure gasoline from any 
other major company. — Oregon, Exhibit Lf-19c.l3. 

Coercive tactics are used from time to time. On the other hand we have 
noticed where a station is operated by a good dealer, that if he makes up 
his mind not to be coerced, the restrictions are not so severe. — Ohio, Exhibit 
L,-9c.l3. 

We have ja few accounts that are company controlled that do have our 
oils in but they are kept hid and no indication is evident from the stand- 
point of the motorist that they are servicing Kendall Products.— <3olorado, 
Exhibit L-21.13. 

In projecting the results which have followed the major gasoline market- 
ers control over the retail outlets it seems to this writer that many of 
the hardships have been borne by the operators of retail service stations. 
Usually the moment an operator leases his stat4on to a major his status be- 
comes that of a peon. — Florida, Exhibit L-^1.13. 

If we are successful in selling our motor oil to a gas dealer, immediately 
the major* oil company goes to work on the dealer. He threatens cancella- 
tion of his contract, or uses other mpans until the dealer discontinues h's 



8768 CONCENTRATION OF ECONOMIC POWER 

purchases of outside lubricating oils and greases.— Michigan, Exhibit 
Lr-57.13. 

We started doing business with Cluxlon ycrvice Station, Jacksonville, 
Fla., in September 1937. They were buying up to 300 gallons) per year. 
The Sun Oil Company, from whom he leased this station under threat of 
lease cancellation, stopped Claxton Service Station from selling any more 
Kendall. We lost the account in March 11)39 and lost 300 gallons of oil 
per year. 

A similar case is the Alexander Battle Service Station, Jacksonville, 
Florida. American Oil Company leased this station to Alexander and 
Battle, who purchased Kendall from me for 10 months. TTien under threat 
of cancellation they were no longer permitted to sell my oil. — Florida, 
Exhibit 1^50.13. 

Many dealers operating with split pumps consisting of one major and 
one or more independent brands of gasoline have had pressure brought on 
them recently to the effect that if they wished to continue the major gaso- 
line and enjoy the courtesy card privileges, they would be required to use 
the major gasoline brand of' greases, otherwise the pump would be removed. 

Once again these threats are verbal and made in a subtle way so that 
proof is not available, but you will admit that after hearing this so many 
times fi'om reliable people that there must be some truth to the statement.^ 
California, Exhibit Lr-51c.l3. 

Mr. Parker's first purchase of Quaker State Motor Oil from us was made 
on February 15th, 1939, and was delivered from our warehouse stock at 
Baton Rouge, La. At the time of placing order Mr. Parker requested a 
Quaker State Curb sign and display rack. 

When I called on Mr. Parker on the above date I noticed that the 
Quaker State Curb sign and display rack had been removed. * * * was 
reluctantly informed by Mr. Parker that i\Ir. Tom Buford of the Standard 
Oil Company approached him and requested that he not display the Quaker 
State signs or oil. From the manner in which Mr. Buford put this request 
* * * Mr. Buford promised not to open competitivie Standard Oil Station 
across road. — Louisiana, Exhibit L-46.13. 

The difficulty of securing specific information in any of these cases is 
caused by the fact that the Major Oil Company controlling the outlet does 
not issue written instructions or write into their contract any restrictions, 
but their employees or their agents give word-of-mouth instructions to the 
operators of the outlets whether they be on a commission, lease and license, 
or rental basis. Their contracts carry, as a rule, a 30-day cancellation 
clause and if the operator of the outlet does not conduct the business in 
accordance with the Company's wishes, it is always an easy matter to find 
what appears to be on the face of it a valid reason for exercising the cancel- 
lation clause. — Virginia, Exhibit L-16.13. 

One of the principal weapons used by the Majors in forcing the sup- 
posedly independents to comply with their demands is that they would, 
and would, refuse to renew their lease upon its expiration, or cancel the 
same upon so many days notice. — Iowa, Exhibit L-64.13. 

If the dealer should persist (as they sometimes do) in handling another 
brand, then the major company will usually find some excuse to oust this 
•dealer.— Arkansas, Exhibit L-66.13. 

Can take you to an account who have sold our products for over ten 
years and who has built up a fine business, recently two Major Companys 
have built large Super Service Stations right next to him'and his business 
has suffered to such an extent that he recently told me that he has been 
approached by two IMajors who has offered to lease his Station for a 
ten year period and he feels that he will be forced to do so as he can not 
compete with these two large Major built stations. — Exhibit L-60.13. 

We have any number of accounts that are 100% Major Gasoline of one 
kind and in each case the Major having the account has done everything 
to retard the sale of any competitive oils and in the majority of cases 
keeps them from using competitive greases. The most effective weapon they 
empldy. being the reduction of the Gasoline Margin allowed to the Customer 
for goiiig,100% on their brand. — California, Exhibit L-61.13. 



CONCENTRATION OF ECONO.MIC POWER 8769 

We find that we are somewhat handicapped in tlie sale of a branded 
oil for the reason that major gasoline marketers go in to dealers with 
their gasoline and make contracts with them saying they are to handle 
their prodncts only; should the dealer want to handle any otlier products, 
they will cut down the margin of protit on gasoline. — Nebraska, Exhibit 
L-71.13. 

* * * my business is affected by these practices which consist of such 
companies as Sun Oil Co. and Tidewater Oil Co., not permitting independent 
dealers to carry independent oils in their stations. These major oil com- 
panies flatly tell these dealers that if they carry independent oils they wih 
not permit them to have company charge accounts and penalize tliem on 
price. — Connecticut, Exhibit L-58c2.13. 

* * * our past customers are either afraid to buy oil from us for 
fear of losing their gas and oil franchise with the major companies, or are 
definitely told that they will be penalized if they do purchase any other 
brand of oil other than tliat which is distributed by the company from 
whom they are purchasing gas. — Connecticut, Exhibit Lr-5Sc3.13. 

Under the agreements, the Major Oil Company installs equipment for handling 
of gasoline and the Service Station is otherwise improved. The individual 
operator does business under the threat that the Major Oil Company will 
remove all equipment and cancel the contract specifying the quantity of gasoline 
to be delivered to the operator. The Supreme Court of the United States in 
the case of the Federal Trade Commission v. Sinclair Refining Company, 67 L. 
ed 746, approved the lease or loan of pumps as lawful on the ground that the 
loan of pumps by one company did not under the specific agreement then under 
consideration and then in use operate to thereafter make the station premises 
an outlet for the exclusive sale of the products of the loanor. 

Major companies owned and controlled stations. 

Major companies furnishing equipment free to independent dealers, special 
prices and concessions, to secure the New Car Dealer accounts, which is 
very desirable as a recpmjnendation by such dealers of a certain lubricant 
has a lasting effect on the buyers. — New York, Exhibit L-15.14. 

There have been various inducements offered by oil companies to get 
attractive leases by furnishing equipment at the oil company's price ; 
painting of buildings and permitting the dealer to buy equipment and pay 
for it on a gallonage basis. — Ohio, Exhibit L-9c.l4. 

Most of the companies in this territory thru furnishing paints, better 
price to 100% accounts and various other methods they have of keeping us 
out, are controlling the sale of only their products thru these outlets, even 
tho they have them leased to supposedly independent operators. — Colorado. 
Exhibit Lr-21.14. 

Each year more and more of the independent dealers are enticed or 
coerced into some form of agreement to handle but one particular brand of 
gasoline and oil. In the case of Sam Hartt, Belfast, Maine whose letter Is 
attached, the Tidewater Oil Co. supplied him with a lift and two or three 
grease servers. — Maine, Exhibit L--32.14. 

Dechambeault Garage, Biddeford, Maine, on first call said he would take 
on Kendall products and would order next time we called. When we made 
the second call, he said he could not buy as the Standard Oil Co. had 
supplied him with a lift and other equipment at a cost of about $400.00 on 
condition that he handle only Socony products. This account was estimated 
to be good for 500 gallons oil annually. — Maine, Exhibit Lr-32c.l4. 

During the past five years, our outlets have been shut off, one by one, 
through various methods such as lease, re-lease, credit courtesy cards, free 
equipment, free paint jobs, free building construction and additional margin 
on gasoline, usually %<f per gallon. — Pennsylvania, Exhibit Lr-22.14. 

Major companies leased stations. Lessee is not allowed to handle other 
than company products. While lease does not actually show this, dealer 
cannot expect any concessions whatsoever if he even attempts to sell com- 
petitive products. By concessions is meant — loaning of equipment, painting 
of stations, etc. — Virginia, Exhibit L-5.14. 



8770 CONCENTRATION OF ECONOMIC POWER 

We do, however, wish td register our complaint against some of the tactics 
of the above named companies, such as the selling of greasing equipment 
which at times runs into sums from $500 to $700, with the privilege of 
paying for same upon a basis of 14 per pound overcharge on purchases,, and 
in many cases this overcharge will not amount to any more than the pay- 
ment of interest on the installation. This, as you can see, works a hardship 
upon an independent dealer whose capital is limited, making it impossible 
to secure any further business from this source of outlet. — Virginia, Exhibit 
L-6.14. 

It is impossible to fill in this questionnaire. We can cite some recent 
incidents which are becoming more common each day with regard to unfair 
trade .practices of the majors to wean away accounts from the smaller 
independent manufacturers and distributors. We consider three practices 
as very unfair and name them in order : 

1. 100% contracts with dealers to eliminate independent distributors 
merchandise. 

2. Supplying unlimited lubricating equipment on lease to dealers for 
their oil and grease business. 

3. Reciprocity business to the large fleet truck operators — which is 
large volume freight hauling in return for their oil and grease business. 

The other day one of our dealers in Dayton, Ohio wrote us a letter in 
which they told us a major oil company approached them with the intention 
of weaning the oil and grease business from us by offering to install $700.00 
in equipment on consignment. Our dealer favored us by advising they would 
rather go along with us if we could meet this deal. A small concern such 
as ours cannot afford to invest in thousands of dollars in equipment to 
retain such accounts.— Ohio, Exhibit Lf-35.14. 

To say that our ci 5tomers (the independents) are forced to purchase is 
putting it mildly. "^ 'hat one company does not offer the other one will. 
Prices may be kept equal, but paint jobs, paving and furnishing of equip- 
ment vary to the extent that one cannot but advise the recipient that he 
would be foolish not to accept. — Oregon, Exhibit L-10.14. 

Other practices of giving free equipment, such as new automatic and self- 
computing pumps, etc., also restricts the dealer. — New • Jersey, Exhibit 
Lr-26.14. 

Like all independent oil distributors, we have been blocked out of station 
after station. In many instances this has been accomplished by the gift to 
the dealer by the major company of equipment, such as pumps, lifts, dis- 
pensing equipment, etc. In other instances, the companies have financed for 
the dealer on a gallonage deduction basis the installation of a complete new 
lubritorium. In this territory these are two of the many different forms 
used to place the dealer on a 100% basis. — Vermont, Exhibit L-49.14. 

In a few cases where they do not control the lease they have been offering 
to resurface the driveway or repaint the building, forcing the dealer to buy 
their grease and oil exclusively. — Pennsylvania, Exhibit L-20.14. 

Standard Oil Co. has just recently installed for him, free of charge, one 
hydraulic grease rack, along with enough paint to touch up building. They 
also own the pumps and tanks in this station, and on several occasions I 
have approached this account with the prospect of selling some oil, hut 
each time have been told that the Standard Oil Co. would not permit him 
to handle any other oil. — Louisiana, Exhibit L-53c.l4, 

* * * would cancel us out at the earliest possible moment, were it 
not for the fact that their lease with the property owner plainly states that 
my company is to operate the station during the term of this lease, or any 
renewal thereof. Continental has not hesitated to tell us plainly that if we 
sold more of their motor oils, they would do anything within reason that 
we asked for. Furthermore, if we dropped Kendall altogether, they would 
do anything that we asked for. All of this is thrown at us and we sell more 
gasoline gallonage than any outlet they control in this territory. (213,366 
gal. for 1938).— Virginia, Exhibit L-5.20. 

Next town two accounts, one a Company owned and leased Station the 
other can not handle your product because they are fixing his garage. 



CONCENTRATION OF ECONOMIC POWER §77 J 

putting In new pumps in return for a five year lease, and he does not dare 
to carry any competing lines as they would not fix him up. — Exhibit Lr-60.14. 

Greystone Service Station, 1101 Rhode Island Ave., N. W. For the past 
19 years this station has been operated independently by Johnson Zimmer- 
man. It was time for a complete installation of new pumps, station equip- 
ment and remodeling. The entire problem was solved by the Standard Oil 
Co. who took over the lease, put in all new equipment, made all necessary 
repairs and modernized the station. It was estimated the cost was over 
$3,500.00. The rental paid by the Standard Oil Co. to the owners was re- 
ported to be $250.00 a month. The re-lease to Mr. Zimmerman I under- 
stand is Ic per gallon, with an estimated potential monthly gallonage of 
approximately 15,000. This is another example of a brilliant deal made by 
a major oil company to frepze an account. — District of Columbia, Exhibit 
Lr-73.14. 

The major companies offer the dealer everything from computing pumps, 
painting buildings, grading, cement or crushed stone front — to lifts installed 
at no cost to them. The car dealer account has been solicited on all sorts 
of schemes to get them tied up with miajor produ -New Hampshire, Ex- 
hibit Lr-67.14. 

The Major Oil Company holding control of the service station requires the 
operator to sell the product of the Major Oil Company at the prices fixed by 
it and the agreement provides that the Major Oil Company can terminate the 
agreement at any time. 

I'm in one H of a pickle. The "big boss" (Tydol) was in this A. M. 

and raised particular "Hail Columbia" about the two hundred lbs. of Ken- 
dall grease. Doesn't seem to mind the motor oil, but feels where they sup- 
plied the lift I should buy all the grease from them. Is there any way to 
get around it to keep peace in the family? — Maine, Exhibit Lr-33.15. 

We do Quaker State oils and greases, but our principal business is auto- 
motive accessories, supplies and equipment, as well as tires and batteries. 

We are very much interested in your investigation because being inde- 
pendent distributors of nationally known products we find it very difficult 
at times, in fact many times impossible, to sell goods to certain types of 
outlets.— Ohio, Exhibit Lr^.l5. 

It is true that the major oil companies have leased their company owned 
stations to individuals, but these indiTiduals are given to understand ver- 
bally that if theyt)uy a competitive product the lease will not be renewed. — 
North Carolina, Exhibit Lr-1.15. 

The immediate situation this area shows the majority of outlets controlled 
by lease and release arrangements from which all material outside the 
supplying company is practically excluded. — Ohio, Exhibit L-7.15. 

In our estimation most of the ills of the marketing end of the oil busi- 
ness would be eliminated if the marketing end of the major companies' 
business had to stand on its own feet as does the' independent. — Massa- 
s chusetts. Exhibit Lr-40.15. 

\ At the time the Iowa plan went into effect, the majors discontinued setting 
a retail price, but did set a "dealer's Price." "the dealer is supposed to set 
his own reselling price. — Iowa, Exhibit Ir-75.15. 

(B) Much discrepancy on prices is found (no adherence to policy — ap- 
parently is no policy) one dealer pays one price and another will be dif- 
ferent on same amount and same product. Many cases yearly bonus is 
given 6n each purchase if they contract on so much oil Instead of on 
exactly what customer sells. (Contract Is therefore a blind only). — 
New Hampshire, Exhibit L-7ai5. 

Control of outlets was obtained thru a concession of 1^ per gallon when 
a station signed up 100%. Or a station was painted free of charge to insure 
100% control.— Arizona, Exhibit 1^80.15. 

The "exclusive dealing arrangements" enables a group of Major Oil Com- 
panies competing with one another to effect ''concerted action on the part of 
groups of competitors In order to insure orderly market conditions" and by 
concert of control of the retail outlet, the service station, to exclude the Na- 
tionally Advertised Brands of all Independent -Producers and Refiners. 



§772 COXCENTUATION OF E( 'ONOlNIin POWER 

* * * where other products than those furnished by the oil companj 
are definitely prohibited to be stocked by the lessee. — Ohio, Exhibit Lr-9.16. 

Our sales on both motor oils and greases of a nationally advertised 
brand has been seriously affected by the methods of obtaining service 
stations now used by the major oil companies.- — New Jersey, Exhibit Lr-26.16. 

Company owned stations such as Shell, Socony, Sunoco, Esso, Gulf and 
Texaco are all 100% of their respective products and do not want Wolf's 
Head.— New York, Exhibit Lr-11.16. 

I wi.sh to state that during 1938 we lost Ave accounts due to 100% sta- 
tions.— New York, Exhibit 1^39.16. 

Recently, however, the Gulf Oil Company has started a drive on this 
type of account. The Gulf Oil Company is at present literally buying the 
car dealer oil gallonage. They are offering lifts, air compressors, grease 
guns, back boards, plus anything the car dealer might want. To sight 
a few cases: one car dealer's service manager (Studebaker) informed us 
that he was given an air compressor, a lift, a floor painting job, a set of 
grease guns and a back board. These items totaling in the neighborhood 
of $2,000. Another car dealer (Buick) informs us that he was given 
equipment, tiling and many other things valued at $l,200.^New Jersey. 
Exhibit Lr-37.16. 

The second account was the Folmer Service Stations in Mansfield, Ohio. 
These two stations were doing a fine independent business and giving us 
about 2,000 gallons of Kendall Oil per year. Mansfield, a city of some 40,000 
population, has today approximately 78 major outlets with only six inde 
pendent dealers left. So much pressure was placed on Folmer that he 
finally fell by the wayside in 1938 and sold his stations to Hi-Speed, giving 
us another loss of 2,000 gallons a year. — Ohio, Jlxhibit L-52.16. 

After making twenty or more new calls a 7eek and finding conditions 
as they now exist you wonder what is to be the fate of the independent 
dealer.— Exhibit 1^60.16. 

Further, the operators hesitate to stock non-competitive merchandise 
for Which they have calls, fearing that their efforts to expand their stocks 
will not meet with the appi'oval of the major oil company. — District of 
Columbia, Exhibit L-70.16. 

The last deal I have run onto is the major gasoline supplier threatening 
to cut off credit if they found competitive merchandise in stock. This 
threat is used to good advantage, for the reason that the small operator 
guards his small credit rating pretty close and being cut off by any major 
oil CO., they feel would greatly impair their credit and no doubt it would. — 
Kansas, Exhibit L-65.16. 

There are many and varied methods used and inducements made by Major 
Oil Companies to induce the station operator to discontinue handling any 
independent brands. For Instance, at Clinton, la. we formerly had a very- 
fine Pennzoil Account in the McEleney Auto Co. until they switched from 
Skelly to Socony-Vacuum products, the latter informing Mr. McEleney that 
they would (and did) place one of their large illuminated signs on the 
roof of his building provided he would eliminate practically all other brands 
of oils. Our sales of Pennzoil dropped from around 50 gallons per month 
to less thar 15. — Iowa, Exhibit Lh64c.16. 

The reason for Mr. Thompson writing me was because I sold Mr. Basil 
Lewis of Crosby, Minn. 5 cases of Kendall in March for immediate delivery 
and another Texaco Super-Station in Brainerd for April 1st delivery 8 
cases of Kendall. — Minnesota, Exhibit L-74.16. 

All of the remaining jobbers have either signed up with one of the major 
oil companies or have been actually purchased by one of the major oil 
companies. Those jobbing companies operating under major company 
hook-up in most cases are very reluctant to take on a brand such as our 
Wolf's Head in addition to possibly their own brand and a brand spon- 
sored by the major oil company. — Minnesota, Exhibit L-69.16. 

We have been told by this company that the Socony Vacuum Company 
spent approximately $1100.00 in this place to get them 100%. — Pennsylvania, 
Exhibit Lr-82.16. 



(X)NCENTRATION OF ECONOMIC POWER 8773 

Mr. Hutson said that the Standard Oil Company gave Uiem distributor 
prices on tires, gasoline, greases and oils if they would throw out Quaker 
State SLiid Firestone. — Georgia, Exhibit L-78.16. 

Equipment grants are given the service station, and after installation threats 
of removal are employed to coerce the owner of the service station to follow 
Major Oil Companies' policies. 

Major companies act as bankers where they can on lifts-bldgs. etc. and 
in most cases get money back at 10 per gal. gas (some places 1%^ per 
gal.) but in some instances they do not ask for it back as lease or tie up 
is long enough and customer sits tight. — New Hampshire, Exhibit L-76.17. 

Gulf had control for quite some time. Dealer displayed our sign until 
the Gnlf Ketining Company installed a lift and dispensing equipment and 
g;iv(> free paint job recently. 

This account did display our signs and oil until recently. Standard put 
in a pit and promised to relocate the pumps, which seems to account for 
our signs and oil being removed from display. — Pennsylvania, Exhibit 
1^82.17. 

Excessive credit extensions are given the owner of the service station, credit 
ext(>nsion*being used as a means of financing the service station operator. 

Credit is extended promiscuously especially in the spring and fall change- 
overs. Always going just a step farther on credit or price if it will let 
them in. — New Hampshire, Exhibit L-76.18. 

Behrens & Bnshnell, Ivorytoii. Conn. ; Gallons of Motor Oil purchased 
from us— 1936, 373 ; 1937, 168 ; 1938, none ; 1939, none. 

This account signed up with Socony Sept. 1937 and received the following 
for signing' up : Free equipment, free paint job. Credit extension. — Con- 
necticut, Exhibit L-83.18. 

The "exclusive dealing arrangements" are intended to restrain or prevent 
competition in the supplies or prices of an article or commodity, (gasoline, 
motor oils and greases) in general use. 

In reply to your questionnaire * * * 

Our distribution of Kendall oil in this locality simmers down to a few 
faithful who believe, either so strongly in the quality of the oil, or because 
of the combined efforts of our organization and the advertising which the 
Kendall Oil Company puts out, that they do not allow any of the majors 
to interfere with their buying. — Oregon, Exhibit L-10.21. 

We understand that when the producing companies sell gasoline to the 
independent stations the prices are to some extent governed by the amount 
of oil sold for this account.^Virginia, Exhibit L-18.21. 

The major oil companies sign a sales contract which specify a minimum 
and maximum gallonage that the operator must use. The company claims 
that after the operator has used the maximum he can then buy from any- 
body he wishes, and therefore th^y do not monopolize or control the account 
100%. The negro in the wood pile is that the figure they use for the 
maximum is twice as much as the account can possibly sell, which gives 
them the account 100%. — North Carolina, Exhibit Li-1.21. 

I might add that there also remains the fleet owned type of outlet, but 
I find that the more desirable and larger fleet accounts (especially if 
their consumption of gas is large) are being tied up on all grease and oil 
requirements by an additional margin of discount on gas.-^Massachusetts, 
Exhibit 1^41.21. 

There is no free and open market for the products of the Independent 
Distributor in any of the major company controlled lease agreement sta- 
tions. The dealers in such stations are given reduced rental, free jobs at 
intervals and book credits which are paid back to the major companies by 
the- lessees on a cent per gallon charge on their monthly gallonage. This 
control by the majors is enforced by threats to cancel lessee's contract, 
withdrawal of hook credit plan and the withdrawal of the courtesy card 
privilege. — Texas, Exhibit L— i3c.21. 

The continuation of the above, cited monopolistic practice is foirdng us 
out of the market. We feel that we have the rigtit to carry on a legitimate 
124491 — 40— pt. 15a 4 



8774 CONCENTRATION OF ECONOMIC POWEB 

business and we are asking you for your immediate help in stopping these 
monopolistic practices in the oil indtxstry. — Florida, Exhibit Lr-50c.21. 

* * * impossible to give you any specific information * * * jn this 
territory wherever a retail station is controlled by one of the major oil 
companies and in this we incUidi! Standard Oil Company of New Jersey, 
The Texas Oil Company, Pure Oil Company, Atlantic Refining Company, 
American Oil Company, and the local distributor or agent for Gulf Refining 
Co., it is practically impossible to sell any of the controller outlets any 
petroleum products. — Virginia, Exhibit L-16.21. 

Sullivan & Helen Gas Station, 3008 Rhode Island Avenue, N.E. This 
account was taken over by the Tidewater Oil Co. in November 1932. Oper- 
ated as an independent station it averaged monthly 45,000 gallons. It is 
believed a flat figure of several thousand dollars was paid the owner for this 
business in addition to a long term rental lease said to be $450.00 per month. 
The gallonage has dropped to less than half. Had this station, continued to 
operate as an independent, we believe they would have purchased up to date 
better than 10,000 gallons of Kendall oil. This case is to illustrate how a 
major company can pay $450.00 a month rent for a station and sublet it for 
$180.00 for the privDoge of selling their product exclusively at a loss for the 
past six years. — District of Columbia, Exhibit Lr-73.21. 

This means that for service station distribution through jobbers we would 
have to go largely to the trackage station or cut price seller and it is hardly 
reasonable to expect that a marketer devoting all of his efforts toward sell- 
ing gasoline at a cut price, would be a good logical outlet for premium oil 
at a premium price. — Minnesota, Exhibit L(-69.21. 

This account states that he could sell a representative amount of our 
oil if he were allowed to display our sign and merchandise. — Pennsylvania, 
Exhibit 1^82.21. 

The Independent Operator of a Service Station, being a practical business 
man, knows that he must keep his. customers satisfied and as repeat buyers by 
selling the products they demand. In order to do this he is forced to bootleg 
high quality Nationally Advertised products of the Independent Producer and 
Refiner in order to supply his customers demand and hold his business and 
protect his investment in his service station. 

This letter is in reply to your letter of April 16th. 

I have a number of dealers who used to use and sell Kendall in fairly 
good quantities when they were at liberty to display our signs and adver- 
tising. Since they have signed up with the major company, for one reason 
or another, and have to keep our oil out of sight, in most cases their sales 
on Kendall have dropped off more than 85%. — New York, Exhibit Lr-12.25. 

Many dealers have branded Pennsylvania oils in their stockroom, but are 
afraid to advertise them or use any of the advertising matter supplied by 
the Pennsylvania oil distributor.— Pennsylvania, Exhibit Lr-20.25. 

I am not allowed to display either signs or oil. In these places I lose 
about % the gallonage before. — New York, Exhibit Lr-13.25. 

The Sinclair Refining Company control their stations in this territory to 
the extent that of all of their outlets we sell approximately four in the 
entire territory that we cover. — Virginia, Exhibit Lf-17.25. 

Summing up the whole situation, it appears that the sale of any inde- 
pendent oil or lubricant in an area such as greater Boston is becoming 
more and more a bootleg proposition. By that I mean that dealers who 
have carried an independent popular brand of motor oil, like Kendall, and 
built up a demand for it are finding that if they continue to serve their 
customers with this particular merchandise, they must remove all evidence 
of the product from public view if they are to continue to receive any 
co-operation from the major oil company. — Massachusetts, Exhibit Lr-41.25. 

Of the 580 accounts which we are selling approximately 20% of this 
number are boot-legging our brands of motor oil — Louisiana, Exhibit L-45.25. 

* * * Mr. Frieler said he did not think that he needed any Quaker 
State Oil. 

* * * We can check it. 



CONCENTRATION OF ECONOMIC POWER 8775 

Mr. Frieler asked the friends to move so that he could open the doors 
as the Quaker State Oil was stored within. The customer-friends asked 
Mr. Frieler why he did not have it out on the open shelves and display 
racks like the Texaco brands, and why was he hiding it? Mr. Frieler 
replied that they wouldn't let him put it out or display it. 

Q. Mr. Frieler, who are they? 

A. Mr. Barret and other salesmen of The Texas Oil Co. 

Q. Mr. Frieler, do you own or rent this property? 

A. I own it. 

Q. Who pays the licenses and taxes for the station? 

A. I do. 

Q. Who pays the other miscellaneous expense, such as light, power and 
heat, water bill, and wages of hired help? 

A. I do. 

Q. I notice that you are selling Coca Cola, and that you have a nice 
attractive display right outside the door. Do they object to you handling 
and selling that? 

A. No. 

Q. If you make a dollar you can buy from me and others, and likewise 
if I can make a dollar, I can buy from you and others, and this is what 
makes the wheels of trade function towards good business and prosperity. 

A. Yes, but still they said I can't put out a sign or display Quaker 
State Oil so we will just have to let it go at that. 

Q. Maybe there will come a time when you can put out a Quaker State 
sign and Quaker State Display rack to display the Quaker State Oil. If 
so, will you do it? 

A. Yes, I will be only too glad to do so because I know it will help my 
business, but for the time being let's let it wait a little while. — Louisiana, 
Exhibit L-46C.25. 

In some cases where the dealer was particularly anxious to handle our 
product, he has been forced to bootleg it without any sort of display what- 
ever, so that we were without having a free and open market for our 
motor oil. — Pennsylvania, Exhibit L-22.25. 

We do not look, with fa- "-r, on the account that wants our product on 
a bootleg basis. These situations are frequently based on what might be 
termed deception and the results are not usually healthy. Given sufficient 
time these accounts are usually able to convert their customers to tht 
major brands. — Illinois, Exhibit L-25.25. 

* * * of how we had to bootleg our product with the dealers in order 
that they could still hold some of their Kendall customers ; stopping the 
delivery truck a block away from the dealer's place of business to make 
sure no major spotters were about ; the dealer having to hide the Kendall 
in hiding places; the major companies buying up the Kendall which the 
dea er had left so that there would be no sign of a competitive oil and 
then reselling the Kendall to one of our accounts at a discount. — Oregon, 
Exhibit L-19C.25. 

There is a considerable amount of boot-legging of our oil by those who 
formerly sold" it and who wish to continue doing so openly, but are not 
permitted doing so. When deliveries are made our truck is not allowed on 
the premises. The truck is parked some distance from the station and 
the driver is either required to carry the cases some distance or else one 
of the attendants will drive to the truck and transfer the cases to his car. 
—California, Exhibit I^51c.25. 

However, in these cases it is because the lessee has some clientele that 
wants our products and he keeps them in the basement or some place el.se 
out of sight of both the company man that calls on him as well as the 
motoring public. They have them to service a few of their friends and 
customers that demand them. — Colorado, Exhibit L-21.2.'i. 

This has resulted in the dealer being forced to remove all Quaker State 
advertising, and in those cases where he sells Quaker State at all, he does 
it by keeping it hidden so that the major company representative will not 
see it. — Vermont, Exhibit 1^-49.25. 

This station is owned by Pan-AmiM-Jean Petroloum Co. and leased out. 
They forbid any sales of any other products with threats of i-liangiiig 



8776 ('<).\('i:.\'ri;Aii(>.\ oi' lOfoxoMic i-owi-jn 

operator, altliougli they luivo liiddcii in (ho biu-k of their station sevonil 
oases of Kendall oil which they sell only to customers requesting same. 
— Louisiana. Exhibit 1^-58.25. 

In a few iirstances, because of demand, operators arc bootlegging oiir 
product as they are afraid for the n>ajor oil company to linow they are 
handling our product and are not permitted to display either the goods 
or the signs. — Virginia, Exhibit L-6S.25. 

We have some dealers who handle Pennzoil, but are uot permitted to 
display it; in fact they keep it ditched in other parts of the building 
and when thoy get a call for it they service the car, but pushing their 
displayed merchandise mostly.— Nebraska, Exhibit I/-71.2i). 

Some of the stations carry a small supply of independent oils, but if 
a customer calls for them it is very difficult to get, and we have I'oinid it 
buried in bales of straw, down cellar, up over offices, and in some instances 
in another building. None of these stations have any display signs of these 
oils ; and customers who are looking for them usually are watching for a 
display sign. — New Hampshire, Exhibit I>-()7.2.5. 

If some of these dealers sometimes buy another brand of oil so they 
can sell some of their retail customers who demand it, they dare not 
display It as they do the merchandise of the major company, but nuist keep 
it hidden from view, usually in a back room or behind other merchandise 
where it cannot be soon by representatives of the major company. — Ar- 
kansas, Exhibit Lr-6G.25. 

The attached letter to Senator O'Mahoney will give a little more infor- 
mation, covering our territory and will show that we have been forced to 
bootleg our oils in order to get them into some of the controlled accounts. — 
California, Exhibit L-61c.25. 

The Independent Operator of a Service Station accepting the terms and 
conditions forced upon him by the Major Oil Company in order to obtain his 
supply of gasoline, must direct his individual initiative aiid enterprise to defend 
his own business. 

The time element does not permit our going into the detail you request 
with respect to the coercive tactics in common use to discourage and pro- 
hibit the sale of any material through controlled service stations except 
that of the supplying company. As a cross section of several hundred 
accoimts with whom we used to do business we submit herewith the record 
of eight of these accounts whose average yearly consumption was about 
16,000 gallons of oil which was taken away from us for the reasons Indi- 
cated and represented a competitive situation with which we could not 
cope.— Ohio, Exhibit L-7.26. 

We felt it our duty to give our vi^nv-point and we hope somehow or 
other our industry may be maintained as one of free enterprise wherein 
those who rightfully earn the busiiness may secure that business rather 
than it should go to someone who leases a piece of property and thereby, 
withQut ownership or responsibility, control the variety and brands of 
goods sold.— Ohio, Exhibit Lr-8.26. 

The President of the United States made a statement in his fir.st inau- 
gural address that made us feel that -'possibly a way would be found 
to relieve us independent operators from this unlawful competition. He said, 
"I am for the forgotten man." If anybody has been forgotten it is the 
man who in early life saved a part of his income and then sought to enter 
any legitimate field of selling. — Texas, Exhibit L-3c.26. 

I do not want to appear to be a mal-content but if some form of divorce- 
ment of major oil 'company units that was fair and equitable could be 
worked out it is my opinion and belief that everyone in the industry from 
the marketing standpoint would get a more even break at the business on 
a margin of profit that would enable each of them to make a living. — 
Colorado, Exhibit L-21c.2G. 

Our salesmen all bring in the same story — it is fear of losing their lease 
if they handle our merchandise. — District of Columbia, Exhibit Lr-70.26. 

The Major Oil Companies by obtaining control of the retail outlet for motor 
fuel and motor oil, aggressively seizes the business of those individual busi- 



COXCKNTKATIOX (»l" KCONO.MIC I'OWKR 8777 

iioss men in csich locality who linv*' for years opiMatcd as dislribiitors or jobbers 
lor llie producls of llie Independent Prodncer and Refiner, and is cdnsf^qnently 
absorbing the wholesaler's function. 

The other bad practice the majors ■■n<' dniuij is scllin.:; tlieir oil direct 
to tlie consumers at wliolesale iirices, and cudiii};; llie retailer out of the 
picture. — Texas, E.thil)it L 2.27. 

Out of a total gasoline gallona.ge in Colorado of 229 million gallons major 
refiners sold eitJier directly or thru some of their jobbers, whom most of 
them have set up in this territory to get the business on a long margin 
basis because' they did not want (o appear to lower the dignity of their 
companies, approximately 192 million gallons for tlie year 19H8. In many, 
many instances major oil companies here in the past have asked their 
jobbers to take this business on a cut price basis whidi in my opinion has 
been one of the reasons that in this area there has been and continues 
to he much discount ing at the pumps. — rennsylvania. Exhibit L-21c.27. 

Attached you will tind your questionnaire completely filled out regarding 
the distribution of gasoline and oil by the major oil companies. We don't 
have a complete list of all the accounts that have been lost, but this partial 
list will give you some idea of the volume of business that we will lose 
due to the pressure being placed on the small independ<'nt business man 
by the major gasoline companies. 

Take for instance my own business. During the eleven years I have been 
in business I have gradually added new employees to take care of the 
increase in business, but if these monopolies are allowed to grow and 
gradually force out the independent business, who has alw\ays been a good 
citizen and tax payer and definitely interested in the welfare of his com- 
munity, the loss in business will force me to reduce my organization.— 
Ohio, Exhibit L-52c.27. 

If the major companies continue their luonopolistic practices the inde- 
pendent distributor will soon be definitely forced out of business. — Maryland, 
Exhibit L-54.27. 

I am attaching questionnaire relating to four specific accoinits two of 
which. Cutbertson & Henderson and L. B. Holton, have been taken over 
absolutely 100% and the other two contracted 100% but permitted tem- 
porary exception to sell a small amount of Kendall oil because of public 
demand. My loss of gallonage in these four accounts will amount to not 
less than 4,500 gallons for 1939.— Ohio, Exhibit L-55.27. 

Prior to June 1st, 1936 we had in our territory 136 Kendall service 
station accounts. Today we have 27 service staticm accounts. Our sales 
for the month past, April, were 2.760 gallons of which 320 gallons were 
sales to service stations. Our service station outlets have been practically 
•all absorbed by the majors thru their various forms of control, principally 
the threat of cancellation of additional margin on gasoline and rental 
allowances. — Oregon, Exhibit L-19.20. 

* * * enclosing questionnaire. 

While our gallonage has been greatly reduced through the continual 
curtailing of competition by various methods of the major companies, this 
does not begin to amount to that lost by our being shut out of many of 
the most desirable outlets by these 100% contracts leases and other 
practices. — Maine, Exhibit L(-32.27. 

These are only a few of the many cases I could cite, and it appears to me 
and also to many other salesmen with whom I have talked that there is a 
well organized plan to eliminate all independent competition, and if they 
are allowed to continue it will be but a short time before all independent 
business will be a thing of the past. — Exhibit r.r-60.27. 

As an independent oil distributor and jobber we wish to state that it is 
getting more impossible right along to get business from any service station 
either so called independent or otherwise because of the practice of the 
major oil companies in making concessions or donations to service stations 
that they cannot contrnl by leasing, in return for 100% contracts. — Wash- 
ington, Exhibit L-72.27. 



8778 CONCENTRATION OF ECONOMIC POWER 

The whole thing resolves itself into this — instead of a free open market 
we have one where the major operators, through fear and deception control 
the business in a large percentage of the cases. — Kansas, Exhibit L-65.27. 

Barry-Pate Motor Co., 1130 Conn. Ave. * * * at that time they had a 
100% Texas contract on gasoline, but were allowed to handle one other 
oil. After servicing the account for four months they signed up with the 
American Oil Co., and it is my understanding, additional margin on gasoline 
and parking lot concession froze this account, as they advised me they could 
not buy any other oil, although I had a verbal agreement with them to take 
several hundred gallons. — District of Columbia, Exhibit Lf-73.27. 

* * * service stations has been brought about by reason of the fact 
that major oil company competition has gradually thinned the ranks of 
jobbers operating under their own brands and trade names to the point 
where few if any independent jobbers are left operating in the market. — 
Minnesota, Exhibit L-29.27. 

Within twelve months after the institution of the oil lease and agency 
plan, we had outlets closed to us which were giving us approximately 
75,000 gallons of oil per year, and forced us to close our warehouse in 
Danville, "Virginia, from which point we were distributing in the nearby 
counties of "Virginia and North Carolina. — "Virginia, Exhibit L-68.27. 

The above practices have worked a tremendous hardship on distributors ; 
and if they continue it will be impossible for an independent distributor to 
make a living. Where we used to run large trucks, now we are delivering 
with half-ton trucks, and a lot of the time they are not loaded to capacity. — 
New Hampshire, Exhibit Lr-67.27. 

As this practice progresses, opportunities become more limited, in fact 
almost extinct for the individual who would try to make a living as an 
independent retail gasoline and oil dealer. — Arkansas, Exhibit Lr-66.27. 

No contract other than the ordinary five year Standard contract was 
entered into by the Palmetto Service Station and the Standard Oil Com- 
pany. — Georgia, Exhibit Lr-78.27. 

If the major companies are allowed to continue unrestricted their method 
of controlling and freezing the retail outlets it can be plainly seen that in a 
very short time the remaining 13% left us under the present setup will be 
taken over, thereby forcing us out of business. — District of Columbia, 
Exhibit I^73c3.27. 

The Major Oil Companies not only select those with whom they may choose to 
deal as they may do, but by the agreement fixes the price at which the goods are 
to be resold and also obstructs the free flow of commerce in the products of 
competitors. The agreement fixes resale prices and obstructs the commerce in 
the jiroducts of competitors. 

Each year it becomes more difficult to hold in line the bigger and better 
dealers, as every day new concessions are being offered by the majors to 
attract this type of. accounts. — Maine, Exhibit Lr^.28. 

This competitive condition has not been condusive to good business prac- 
tice in this area and has been in keeping with the program of many majors 
of liquidating their crude at a profit to themselves even tho their particular 
marketing division did not make money. This in turn has been the control- 
ling factor, in my opinion, in the inability of many independent jobbers to 
stay on an even keel. — Colorado, Exhibit L-21c.28. 

They also employ a bonus contract. The dealer signs this oil contract at 
the time he signs the gasoline contract. The more oil he sells the larger 
the bonus. Accordingly he is urged to shoot for the larger bonus and is 
advised to eliminate completely all competitive motor oils. He constantly 
impresses the dealer with his bigness and endeavors to advise the dealer how 
unwise it is -to buy from a small company who has no production, no tank 
cars, steamships, etc. — Michigan, Exhibit L~57.28. 

Harry O'Neil refuses to divulge inducements in his "attractive" contract 
but recently took an operation lease from Standard Oil Co. of Ohio on one of 
their important super service stations owned in fee at Mount & High Sts, 



CONCENTRATION OF ECONOMIC POWER 8779 

Apparently this was in consideration of faithful performance in his pri- 
vately owned station at Town & Front Sts. where he had previously sold 
large quantities of Kendall. — Ohio, Exhibit L-55.28. 

Since this plan has been in effect, the supplying companies have at no 
time urged a price which would be profitable to the dealer but have under 
cover prevailed upon these dealers, both lessees and actual dealers to cut 
their prices in order to move a greater volume, all of which is done at the 
expense of the dealer and to the detrimeiit of other competition. — Iowa, 
Exhibit Lr-75.28. 

We are constantly reminded by the 100% controlled operators that they 
are constantly bedeviled by the controlling company's representatives about 
handling our products and requested time and time again to remove our 
signs from display because of some official from the main office making a 
tour of inspection witliin ten days or two weeks. — Pennsylvania, Exhibit 
Lr-82.28. 

The Major Oil Companies are using methods of competition and trade prac- 
tices that are ruinous and calculated to eliminate the independent producer and 
refiner, the independent distributor and jobber, and the independent service sta- 
tion operator. 

I am unable to give you accurate information regarding 100% stations, but 
this is as accurate as I am able to give you : 350 stations — 75 independents. 
—New York, Exhibit L-13.29. 

The salesmen of the Gulf Oil Company are virtually on the loose. It is 
"We'll do this and that, and all we ask is, 'Give us the oil business,' " and 
the car dealers love it. We are now faced with this question and we enter 
our customers place of business, "How much are you going to give us for 
nothing and when do we start." — New Jersey, Exhibit Lr-37c.29. 

From the best information we can get at least one half the oil being 
consumed is being sold direct from the major oil company agents ware- 
house to the consumer in case lots. This practice will eventually ruin our 
business. — Texas, Exhibit Li-2.29. 

There are many more cases where it has meant the loss of from 100 to 
800 gallons per year lost for each account. — Florida, Exhibit L-50.29. 

In the Portland district alone there are 438 service stations. I am unable 
to advise the exact number which are major controlled as their rarious 
complex forms of control make it difficult to ascertain this fact and the 
operator is sometimes I'eluctant to admit that he has gone ''100%." — Oregon, 
Exhibit L,-19.29. 

L. B. Holton sold his station known as Fourth Oak Oil Co. to a Mr. Scho- 
dorfer, the money being supplied by Pure Oil Co. as a loan. Again it is 
impossible to get him to state his reason for immediately disposing of all 
items except those supplied by Pure Oil Co., but immediately the entire 
building was repainted and new pumps put in by Pure Oil Co.— Ohio, Ex- 
hibit 1^55.29. 

Due to the fact that the enclosed data covers only the period from 1936 
to date, it is not possible for us to show clearly how drastically this policy 
has curtailed our volume of business since retail gasoline outlets first began 
to be controlled. For several years prior to 1936 the majors began tying 
up retailers and therefore Independent Oil Wholesalers like ourselves have 
not had free access to the market for five or six years prior to 1936. — 
Florida, Exhibit L-31.29. 

Selling to gasoline service stations is practically impossible. Fir-e years 
ago 90% of our business was secured from this type of outlet, but due to 
unfair practices of the major oil companies, we wore forced to find other 
sources of busioess. — Michigan, Exhibit L-25.29. 

If this situation is not corrected, it will be only a matter of time until 
the individual or independent company will be forced to quit the field 
because their outlets will have been unfairly seized by these major com- 
panies. We hope that some means will be found to stop this unfair ;irKl 
un-American practice. — Arkansas, Exhibit L-66.29. 



8780 CONCENTRATION OF ECONOMIC POWER 

At Douglas, Washington, the Standard Oil Co. put in new pumps, re- 
graded the approaches and fixed up the service station of an independent 
far 100% contract, to be paid back on a five year basis on a gallonage 
basis, without interest, and the pumps cost him less than market price. 

At Grand Coulee, Wash., they sold John Ford two pumps the same make 
we sell, for less than market price, with five years to pay without interest, 
if necessary, payments to be made on a gallonage basis. — Washington, 
Exhibit L-72C.29. 

The American Oil Co. acquired the lease and a check on this station 
shows they have never reached the average gallonage that this station was 
doing when operated as an independent. We contend this case proves 
that if the major companies would only pay a rental based on the actual 
number of gallons a station could produce under favorable conditions, 
thousands of independents would not have been forced out of business. 
—District of Columbia, Exhibit Lr-73.29. 

The volume of lubricating oil which we are moving through service 
stations handling major companies' gasolines is very, very small, and 
will continue to be small so long as the major companies continue the 
present method of control of these outlets. — Iowa, Exhibit L-75.29. 

With a total yearly gasoline gallonage iii D. C. of 132,103,743, exclusive 
of Government account totalling 1,739,216, there should be a potential oil 
gallonage of approximately 2,500,000 gallons. Of ihis potential we are now 
getting less than 3%.— District of Columbia, Exhibit L-73c2.29. 

Whatever the subterfuge, I was shut out and altho my former customer 
wanted my merchandise and could have sold it to willing consumers, they 
were forced to buy and sell other products merely because they were 
manufacturt^d or handled by the controlling major company. — Arizona, 
Exhibit L-S0.29. 

The financial resources of the Major Oil Companies are employed to acquire 
service stations and operate them at a loss to defeat an Independent who is 
doing a profitable business. 

Obviously these policies are merely the man with the money forces the 
little fellow out as he cannot buy or finance everybody's business as well 
as his own. — New Hampshire, Exhibit L-7G.30. 

* * * at prices beyond all reasonable expectations of a profitable return, 
thereby freezing 87% of the total potential retail outlets. — District of 
Columbia, Exhibit Lr-73c2.30. 

The Major Oil Companies in addition to obtaining control of a service station, 
build, equip and operate service stations of their own. The fact is that the 
number of such outlets is insignificant in comparison with the acquisition of 
outlets by "exclusive dealing arrangements." 

Morrill Garage, Portland, was on leased land. Tidewater bid more for 
the lease than he could afford to pay and put him out of business. We 
lost 1500 gallons per year by this move. — Maine, Ex^hibit Lr-32c.31. 

* * * as most of our accounts were ruined by methods you ask for, 
before 1936. Since 1936 the major oil companies have been building new 
stations and operating them direct, or if they are leased out they are tied 
up to where we have never done any business with them. This is the 
policy that is hurting our business, the major oil companies building their 
fine stations on every corner and freezing the independents out. — Texas, 
Exhibit L-2.31. 

Major oil company competition in the city of San Antonio, Texas, de- 
signed to choke off competition from the independents consists largely of 
their building and operating their own stations and their despicable leasing 
of outlets to operators who are not permitted to stoci-- or sell any other 
merchandise. — Texas, Exhibit Lr-43.31. 

It is no secret that the common procedure today for a major oil company 
is to lease a location, erect a building, and then re-lea.se the building and 
equipment to an individual whom they control as to the type and variety 
of goods that this individual will offer for sale. — Ohio, Exhibit L-8c.31. 



CONCENTRATION OF ECONOMIC POWER 8781 

The major companies build their own stations and wliorc ever they decide 
to do so, lease stations, but largely they are owned. This has gone on to 
such an extent, that it very largely monopolizes the oil business in our 
territory. There are many towns in our territory that are absolutely tied 
up either by their own stations or their leased stations. — Texas, Exhibit 

Lr-3.31. 

With the numerous large super service stations constructed during the 
past two years by Standard Oil of Ohio, Pure Oil Co., Texas Co., Gulf Re- 
fining and Sun Oil Co., independent gasoline retailers have rapidly disap- 
peared, and the campaigns by Standard Oil of Ohio and Pure Oil Co. 
for garage and car dealer accounts have further limited the sale of inde- 
pendent oils. — Ohio, Exhibit L-55c.31. 

The Major Oil Company by absorbing the wholesaler's function is gradually 
putting the individual enterprising business man, the distributor and jobber of 
petroleum products out of business. 

The attached report is a condition that exists in hundreds of Service 
Stations and Garages in the territory I represent as an independent oil 
jobber. If something isn't done to curb such practices, I as one independent 
jobber will cease to exist. — North Carolina, Exhibit Lf-28.33. 

Examine any jobbers' books and see how in the last three years his cost 
of doing business has risen and his average selling price has dropped due 
to chaotic marketing conditions over which he has no Control but which 
oftentimes compel him to adopt unsound business policies. — Massachusetts, 
Exhibit L-40.33. 

These restraints have had a material effect on business obtainable by us 
but very fortunately, up to the present time we have not suffered in gallon- 
age to the extent that some of the other independent distributors for the 
reason that we have different other outlets other than the service stations 
such as consumer outlets, commercial accounts and independent garages. 
If this restraint continues it is going to materially affect each independent 
distributor to the extent that it will be impossible for them to continue 
operating on a profitable basis which, of course, will mean that they will 
finally have to retire from that business and leave it to the major com- 
panies. — Virginia. Exhibit L(-17c.33. 

A major oil company salesman (Standard Oil Company of N. J.) re- 
cently boasted to the writer that you cannot and will not see any other 
motor oil in our (Standard) customers service stations. And he is ab.so- 
lutely right. There isn't any. — New Jersey, Exhibit L-37.33. 

The continually increasing number of company built, leased or purchased 
service stations, the gain in 100% contracts which during the past few years 
has been extended to garages and car dealers, unless there is immediate 
definite and permanent relief, will within a very few years eliminate every 
independent dealer from the oil business. — Maine, Exhibit Lr-32c.33. 

We have listed 20 accounts whose average yearly purchases from us 
have ranged from 300 to 1500 gallons, and whose sales activities have been 
hampered by major company pressure which comes under the scope of your 
questionnaire, and which forms a true cross-section of the general condition 
which now exists. — Louisiana, Exhibit L^5c.33. 

For quite a few years this station .sold Quaker State Motor Oil and dis- 
played a Quaker State curb sign. 

During the latter part of last year this station was remodeled, and since 
then Mr. Flashner cannot sell anything but Texaco products, Mr. Kensing- 
ton is the Texaco agent. 

The Quaker State business from this, outlet has dwindled away to prac- 
tically nothing. — Louisiana, Exhibit L-^7.33. 

Just as a matter of information the volume of Quaker State Oil sold 
thru this station has been steadily decreasing. — Louisiana, Exhibit L-48.33. 

Much could be said along this line, but it is unnecessary imder present 
conditions. The small jobber is on his way out. — Texas, Exhibit Iv-3c.33. 

We emphatically state that the independent operator is being slowly but 
surely choked out of the field by major company competition. — Texas, 
Exhibit 1-43.33. 



g782 CONCENTRATION OF ECONOMIC POWER 

We have been distributing motor oils and greases for about ten yeara 
and we believe if the large companies are not restrained in their marketing 
practices, there will not be any independent distributors of petroleum 
products left. — Michigan, Exhibit L-57.33. 

The small group of major gasoline marketers have, by their control of 
retaU outlets, erected an economic toll bridge which enables them to impose 
charges on independent wholesalers who have to pass these bridges in order 
to sell goods to the car-owning public. — Florida, Exhibit Lr-31c.33. 

We devoted our efforts to commercial and automobile dealer accounts 
as there is nothing left for us in the service station accounts. It was a 
bitter pill to swallow as it cost us considerable time and money to develop 
service station accounts and then to lose them because of every possible 
uijethical practice of the majors who instead of selling their merchandise 
on a competitive basis, adopted every practice of monopoly and restraint 
of trade.— Oregon, Exhibit L^19c.33. 

Naturally their greater effort is centered against the Pennsylvania 
refiners. — Virginia, Exhibit L<-5c.33. 

* * * I managed to weather the storm, and when general business 
improved I anticipated a corresponding improvement in my ovra business. 
But I was sadly mistaken. I found that a new factor had entered into 
the picture which shut me out from making sales to a large portion of 
my former customers. — Arizona, Exhibit L-80.33. 

The Major Oil Companies by eliminating the distributor and jobber are 
increasing unemployment, and creating lower wage standard for the salesman 
of petroleum products in the different localities throughout the United States. 

Our salesmen, of course, work on salary and commission and their com- 
missions have been reduced to a very small fraction of What they were 
in former years. — Pennsylvania, Exhibit Lr-36.34. 

Number of Employees — I have filled in the number who are in my employ 
here in Onondaga County although for the past year I could have gotten 
along with one but retained them both with a decrease in salary. — New 
York, Exhibit L-38.34. 

During the year 1936 our company employed twenty persons and today 
we have just eight employees. — Ohio, Exhibit Lr-35c.34. 

The sad part of this entire picture is that when the majors take over 
these stations they sell their own products 100% and on top of that they 
usually lower the wages of the employees to such a basis that it is nearly 
impossible for them to go out and buy the many articles of every type of 
merchandise that they need. These low wages react on sales because 
these employees make so little that the chain organizations can be blamed 
for lowering the purchasing power of the country. These majors, by 
forcing out the independent dealers all over the country, who in the past 
have paid good wages and employed extra employees, are adding to the 
increasing unemployment condition. — Ohio, Exhibit L-52.34. 

Our salesmen have had their income reduced considerably. Some were 
forced out of the oil business, because of the low earnings caused by major 
oil companies closing the channels of securing business. Some of our men 
are now working on various government projects at small salaries. 

If there was a free and open market, we would not be forced to pay 
starvation wages. — Michigan, Exhibit L-57c.34. 

Also it is not hard to visualize the fate of their own salesmen when they 
have control of all retail outlets as they will no longer be needed. — 
Exhibit L-60.34. 

* * * we are operating with three employees * * * 

* * * us to regain half of the outlets that have been taken over by 
the major oil companies, it would be necessary for us to employ at least 
five more people. — District of Columbia, Exhibit L-73c2.34. 

The Major Oil Companies threaten the Individual Service Station Operator 
with cancellation of the arrangement of credit extension on motor fuel and 
motor oil purchases by the consumer holding courtesy cards. 



CONCENTRATION OF ECONOMIC POWER §733 

In compliance with your request of April 26, we are enclosing this infor- 
mation which we have made up to the best of our knowledge. We are 
also sending you a copy of a letter which was written to us by the manager 
of the local Atlantic Refining Co. 

The letter speaks for itself. It shows a threat that we are to lose the 
privilege of honoring credit cards, if we sell any other oil but the Atlantic 
products. — Pennsylvania, Exhibit L-42.35. 

We have checked your service station several times recehtly and find 
you are pushing motor oils other than Atlantic to your customers. 

This is to give you notice that the next time we check your station and 
find you are still pushing Wolfshead, Canfield and other brands of motor 
oil, we will discontinue the credit card privilege that you are now enjoying. 

I believe that you, yourself, feel you are not fair in continuing the 
credit card privilege and at the same time pushing other oils from which 
you are not making any more money than you are on Atlantic. — Pennsyl- 
vania, Exhibit tr-42c.35. 

The most prevalent reason for losing the leased station business is the 
threat of the major oil company of withdrawing the courtesy card privilege, 
which prevents dealers from purchasing the various brands of Pennsylvania 
oils requested by their trade. — New Jersey, Exhibit Lr-26.35. 

The major companies such as the Atlantic Refining Co. and the Sun Oil 
Co. have enforced control by threat of cancellation of the extra margin 
or threat of courtesy card withdrawal. — Pennsylvania, Exhibit L-22.35. 

One evil that has caused a considerable loss of business to the independent 
marketer and which cannot be determined in any accurate or tangible 
manner is the practice recently adopted by the major oil companies of 
extending credit to holders of courtesy cards on a nation-wide basis. This 
is evidence of collusion to restrict the independent market as the cards of 
practically every large company in this area will be accepted as a basis 
for credit by major companies in other sections of the country who have 
no facilities in this area, and vice versa. — California, Exhibit Lr-51.35. 

* * * never kept an actual record of cost in gallonage * * * 
Major companies positively refuse to allow their own stations to buy 

our product. 

Major companies positive threat to take away their courtesy card service 

if dealer persists in handling any outside products. — Virginia, Exhibit 

L,-5.35. 

We wish also to report many instances where the branch managers of 
major companies have threatened to withdraw the privilege of honoring 
credit cards unless the dealers refrain from selling competitive merchan- 
dise. — Virginia, Exhibit L-35. 

I have called on a number of the boys lately that have been customers for 
some time, that have told me they' would have to discontinue buying from 
me for the reason that Sinclair, Cities Service or Standard have told them 
they would have to discontinue their credit if they found any more com- 
petitive goods in stock. — Kansas, Exhibit Li-65.35. 

They are also using their credit cards as an inducement to sign inde- 
pendent dealers. This gives one dealer a decided advantage over the other 
and certainly is not fair. — Washington, Exhibit L-63.35. 

The general practice of these major companies is to threaten the operator 
with the loss of charge account signs, refusing to make repairs to their 
stations such as painting, etc. — Connecticut, Exhibit Li-58.35. 

The various penalties threatened are many and varied, some of them 
being the taking away of the privilege of honoring credit cards, or that the 
gas company will not keep the station in good repair, and repainting, etc. 
will have to be paid for by the station operator instead of by the major 
company. Further, -a threat is often used that they will definitely lose 
their franchise if they handle any other product than that of the major 
company. — Connecticut, Exhibit Lr-58c3.35. 

Displayed merchandise and advertising sign until notified by the repre- 
sentative of the Sun Company that they must remove our sign and oil from 



8784 CONCKNTRATIOX OF ECONOMIC POWER 

display or would lose their courtesy card privilege. They complied with 
this request. — Pennsylvania, Exhibit L-82.35. 

Short Service Station, Southport, Conn. : Gallons of Motor Oil purchased 
from us— 1837, 117; 1938, 66; 1939, 24. 

For signing up with Sun Oil Company this account received : Free equip- 
ment, free paint job and was threatened with withdrawal of courtesy 
cards. — Connecticut, Exhibit Lr-83c.35. 

The individual distributor and jobber, or the independent Service Station 
operator, having witnessed for a period of 12 years the gradual reduction of his 
business and the in&ction of governmental bodies in interfering with practice 
in violation of existing legislation, feels, at present, that efforts for relief from 
these government bodies is hopeless. 

JHowever, is it not possible that an equal amount of energy directed in the 
form of public education might not be more productive? Just what. medium 
could be used is admittedly a question in doubt. Certain facts could be 
presented that any monopolistic organization could not deny but might still 
effect the opinions of certain. classes of purchasers. — Illinois, Exhibit Lr-24.36. 

Unless some national movement is made immediately to curb the vicious 
practices of the majors the outlook for the independent is indeed very dis- 
mal. — Maine, Exhibit Lr4.36. 

We are sorry that we have not time to give you the detailed analysis of 
the situation here, but believe you will receive from others the exact situa- 
tion that prevails here. Anything that can be done to help this situation 
will be greatly appreciated, but feel your efforts are hopeless as long as the 
major oil companies are given the power to set prices and maintain them 
exactly equal. — Oregon, Exhibit L-10.36. 

We appreciate the tremendous task being undertaken to right such wrongs 
and pledge ourselves to help correct such practices in-so-far as we can. — 
Ohio, Exhibit L-35c.36. 

The writer has been in this business for 20 years and has never been 
as apprehensive of the future of the independent fair dealer as at the 
present time. Many dealers who are very friendly to us have stated that 
they were afraid of being put out of business unless they agreed to 100% 
control and in many instances were given a verbal promise that they could 
continue selling Kendall products, but were ordered to discontinue doing 
so after lease was signed. — California, Exhibit L-51c.36. 

The writer is somewhat skeptical as to the value of legislation as a 
correction for practices referred to above. Somewhat different methods 
have to be used but both the objective and the effect undergo little change. 
Control over these matters is usually by agencies that are largely political 
and the result is usually that the remedy is worse than the disease. — Illi- 
nois, Exhibit L,-25c.36. 

If these conditions continue for another year it will be difficult if not 
impossible for an independent oil jobber to remain in business. — Ohio, 
.' Exhibit L-55C.36. 

Why the government and the state allow this evasion to continue is hard 
to understand. For instance, the chain store tax in Texas applies if any- 
thing other than gasoline oil or grease is sold thru the station. By their 
meth'od the man who leases the station under their contract may sell any- 
thing he sees fit. — Texas, Exhibit L-43c.36. 

This particular case is just one of at least 25 others that are on the 
same basis and which could be very easily verified by anyone with the 
proper government authority. — Texas, Exhibit L»-43c.36. 

Since there has been no referee with power to decide the fairness of the 
toll charges to be made for passing over these bridges, companies like our- 
selves have had to pay dearly in the form of a reduced volume of business. 
Surely some laws could be enacted which would penalize rough play in 
this type of competition between companies in order that less strategically 
situated companies like ourselves might continue to exist. — Florida, Exhibit 
L^31c.36. 



CONCEiXTUATIOX OF KCONOMIC TOWER 8785 

As three years have elapsed since the majors started their program to 
restrict sales to their products only and there has been no evidence of 
relief from their tactics, we have had to reconcile ourselves to the fact that 
we must relin(iuish this business to them as they are too big for us to 
combiit. And yet we are selling a product that the car owner wants and 
yet which we are prevented to enable him to purchase. 

Some time nfter these practices were started an investigator for the 
Federal Trade Commission spent considerable time in Portland making 
an investigation of these practices. I consulted with him and know that 
he secured a good deal of first-hand information by direct contact with the 
dealers. I presume this information is in their hands. 

As previously stated such a period of time has elapsed since the majors 
froze us out of the service station business that we had practically recon- 
ciled ourselves to the fact that nothing would be done.— Oregon, Exhibit 
I^19c.36. 

If the representatives at Washington want to be really sincere in the 
eflicient operation of their position they can easily, by enforcing the laws 
that are now in effect, do a great service to the big majority that are 
only interested in equal distribution of wealth and power and in the con- 
tinued success of the American government. 

The attitude that most business men take is — Why should we pay men 
to go to Washington and make laws if they ax'e not enforced? Without 
a question the Sherman Anti-trust law and the Robinsou-Patman law 
are two laws that are being constantly abused by big business today. 
—Ohio, Exhibit 1^52.36. 

These and similar restraining policies have grown on this industry for 
a good many years and a very complete file of complaints on a national 
scale was created and was made a part of an appeal to the Federal Trade 
Commission about six years ago. 

The unemployment law, if it were effectively administered, would un- 
doubtedly throw so much additional expense on the part of major industry 
oil companies operating under this program that they would automatically 
have to release their vicious control. 

It seems to me that in this existing legislation lies the opportunity to 
keep on killing this control racket and remove this restraint of trade which 
has seriously hampered the employment and investment of thousaiids of 
small independent oil jobbers. — Ohio, Exhibit Lr-7.36. 

We certainly hope that this investigation will open the situation up, 
because it is growing worse all the time instead of better, and if it con- 
tinues it will only be a question of time before the independent oil dis- 
tributor will be a very minor factor in any of the better waiting stations. 
Naturally, it is the best outlets on whom the major companies concentrate. 
—Vermont, Exhibit D-49.36. 

If our elected representatives believe in a square deal to all and if 
they can not be Influenced by large interests then I believe that they will 
remedy this un-American situation, otherwise God help America. — Exhibit 
1^60,36. 

In the first place, our operation is confined almost exclusively within 
the State of Iowa, where a Chain-Store Tax Law was passed by the 
Assembly two years ago, a portion of which, as you no doubt are aware, 
was invalidated by the Iowa Supreme Court. Another attempt was made 
at the last session, just closed, to enact legislation along those lines, but 
without success. — Iowa, Exhibit Li-64.36. 

What is going to happen to independent jobbers like ourselves unless 
something can be done to stop such unethical transactions? — Washington, 
Exhibit L-72C.36. 

I have been a distributor of independent petroleum products in this 
section of Arizona for the past fourteen years and may be classed as a 
small business man, that is, I employ only two persons and do all of the 
outside selling myself. 

I do not know what means may be employed to give small independent 
business relief. I know that the measures taken in the past have only 
served to call forth more clever evasions. 



8786 CONCENTRATION OF ECONOMIC POWER 

I am sure that if the power of the United States Government is not 
soon invoked to open the channels of trade to free competition, many 
small business men such as myself will be on relief after many years 
of hard and productive work. — ^Arizona, Exhibit L-80-80c.36. 

The Major Oil Companies employ fine legal technicalities in order to evade 
taxation and particularly to eliminate the employees of company owned service 
stations from the benefits entitled them under the provisions of the Social 
Security Act. 

At the same time this station is operated as though it were independently 
owned, the oil company having no responsibility under the Social Security 
Act and thereby sidestepping the various chain store taxes. — Ohio, Exhibit 
D-8.37: 

The purpose of this type of operation is to evade the Social Security 
Act, the chain store tax and the Unemployment Compensation tax. — Texas, 
Exihibit Lr-3.37. 

Congress, elected mostly by the great masses of working people and small 
business men — should protect these people against the large monopolies 
that take money out of a community adding to the government's great 
burden of relief and unemployment. Low wages paid by monopolies will 
eventually reduce the possibility of the masses owning their own homes 
and paying the different types of taxes, necessary for the successful func- 
tion of our government. — Ohio, Exhibit L-52.37. 

The majority of these lessees are practically starving because of de- 
pressed prices and margins and while their working conditions are dictated 
by the supplying company they hold no responsibility for their income 
or hours of work. Why not approach from the angle of major company 
responsibility of the employee for these type outlets?— Ohio, Exhibit Lr-7.37. 

[Western Union Telegram] 

ZA 641 74 NL 3 Extra Detroit Mich. 29 1939 Apr. 29 PM 8.03 

Adam Donald — Care Arthub W. Ramsdell, 

8 East 46 Street, NYK.: 
Re Petroleum survey Michigan social security and chain store tax caused 
majors to transfer control from company owned to leased stations. Majoi^ 
companies always had control of stations and present 30 day cancellation clause 
lease mere subterfuge. Former managers usually knew lessqr necessary to 
continue employment. Inventory sold to lessor and strict enforcement implied 
but not written into lease. Advise us if this information desired in ques- 
tionnaire and under what heading. 

C. J. Fleming, 

Care Versnlclc Bros. Co., 2531 East Division. 
[\0 2531 —Michigan, Exhibit L-56.37. 

Under this plan, as you know, the majors lease all of their stations to 
so-called "lessees." While the major companies are not supposed to exer- 
cise any control under these leases, yet we do know that all of the majors 
still control their stations, and that actually the Iowa plan is only a com- 
mission form of payment. The real object of the plan is to evade both the 
Iowa Chain Store Tax and all Social Security obligations. — Iowa, Exhibit 
Iv-75.37. 

But again I was sadly mistaken. New methods of evasion sprang up as 
fast as restrictions were put into effect. Major company agents took leases 
and shut me out. — Arizona, Exhibit Lr-80.37. 

The Major Oil Companies hold through their expenditure for advertising, 
quipment, etc., etc., a concentrated influence that makes itself felt with all 
hannels affecting public opinion. 

If this fails, the major companies usually have the sales efforts of one 
of their subsidiaries directed to these accounts. Sterling is commonly 
merchandised in this manner. — Illinois, Exhibit Lf-25. 

We should also like you to investigate the exclusive privilege enjoyed by 
one of the major oil companies in selling their product on the Virginia 
Skyline Drive, which was a government project being built by C. C. C. 
Camps, and a project that we would think that there certainly would bo no 



CONCENTRATION OF ECONOMIC POWER §787 

partiality shown. Before the year 1938 it was our privilege to sell a large 
quantity of our nationally known brand of oil upon this drive, but we were 
informed last year that there would be no more competitive brands sold by 
this corporation, and we were told that the company that now has this 
business exclusively gained same by a loan that was made, for which they 
too, took preferred stock. We feel sure that the present Administration in 
Washington is not in favor of such monopolistic deals, and also feel that 
if you will investigate as outlined to you, you will get the proper coopera- 
tion from the Washington authorities. — Virginia, Exhibit Li-6.38. 

Possibly the best evidence of how drastic the measures taken by the 
majors were in 1936, can be realized by referring to the series of newspaper 
ads mentioned in my letter of Sept. 17, 1936, which ads were run by the 
Independent gasoline dealers of Portland. In these ads they appealed to 
the motoring public and advised them of the dictatorial attitude taken by 
the majors and the fact that on account of these practices by the majors 
they were restrained from selling the purchasing public the merchandise 
or oil they preferred. However, as stated in my letter the majors quickly 
crushed this advertising as it was having an adverse effect on them. — 
Oregon, Exhibit L-19c.38. 

Mr. Reed was recently put off the radio here on account of his vicious 
attacks on the methods they employ in merchandizing their products. — 
Tennessee, Exhibit L-62.38 

The Major Oil Companies exert their control over the individual operator to 
the extent of designating or supplying, what and which automotive accessories 
are to be sold at the service station. 

The restraint on these controlled outlets extend even to such items as 
tires, tubes, batteries, accessories and even to as small an item as anti- 
freeze. — Virginia, Exhibit Lr-17c.39. 

* * * it is also practically impossible to sell the outlet any other com- 
modities such as tires or batteries. This was also formerly true of the 
Texas Company, but their attitude with respect to these sundry items 
changed sometime back when they filed a consent decree with the Federal 
Trade Commission agreeing that they would cease such discrimination 
practices. — Virginia, Exhibit L-16.39. 

We have no definite proof, but we only know that these things exist. For 
example, the Shell Oil Corporation have effected an arrangement with cer- 
tain selected jobbers similar to ourselves to supply the goods we term ac- 
cessory products, including tires, batteries and other so-called products to 
their controlled stations on an exclusive arrangement. 

The Pure Oil Company is another' organization which controls their out- 
lets on tires, batteries and accessories. In fact, the majority of the larger 
oil companies have some sort of a connection with the major tire companies, 
making it impossible for us to do business on the brand of tires that we 
have to offer the dealer.— Ohio, Exhibit L-8c.39. 

However, the writer has had twelve years experience in the retail 
with the service station and the tire business. Large tire companies and 
major oil companies have, generally speaking, connived in much the 
same manner to obtain control of as many retail outlets as possible and 
the establishment of their own individually operated and controlled outlets 
has been the business death of many indejjendent operators. — Texas, 
Exhibit L-43.39. 

There can be little doubt that manufacturers and wholesalers of tires, 
spark plugs, batteries, auto accessories, seat covers, etc. have been simi- 
larly affected.— Florida, Exhibit Lr-31.39. 

At Chelan, Wash, the Texaco Oil Co. subleased a station to an operator, 
with all the equipment necessary, except greasing equipment which the 
operator had to buy and he had arranged to buy it from us, but the- 
company representative came along in the meantime and told him that he 
had to biiy it from Sunset Electric Co., Seattle, presumably bepause the 
oil company gets a commission from them. 

Oil companies specify to their controlled stations where they shall buy 
all accessories and supplies, probably for the same reason. — Washington, 
Exhibit L^72c.39. 



8788 CONCENTRATION OF ECONOMIC POWER 

Not only are we unable to sell Pennzoil to these 100% stations, hut 
we are also unahle to sell any competitive merchandise where the major 
oil company distributes similar automotive merchandise. 

All of the major oil companies do not distribute automotive products, 
so it is difficult to estimate the proportion of the market in the gasoline 
stations that are closed to us. 

We believe that it amounts to 50% of the volume of the total six- 
hundred and nineteen stations in the District.— District of Columbia, Ex- 
hibit L-70-70C.39. 

They are not only eliminating competition in their petroleum products 
but are now selling all sort of automotive products, even putting their 
own accessory trucks out to supply the trade. This will be forced on theii 
accounts in the same way their own products are which will within a shorl 
time put the automotive jobbers out of business.— Exhibit L-60.39. 

The Major Oil Companies dominate the distribution function of the retail 
outlet as to the kind and type of products that it will supply the consumer, 
in order to force consumer acceptance of major oil company's approved line of 
l)roducts, with an autocratic dominance best expressed in the terms "the public 
demands be damned." 

To my knowledge the oil industry is the only type of business in the 
country in which the small retailer cannot exercise his own judgment 
in giving his customer the brand he prefers or asks for. Can you imagine 
a cigar store carrying only one brand of cigarette exclusively, or a drug 
store with only one brand of tooth paste, or a food store with only one 
brand of coffee? — Massachusetts, Exhibit, L-41c.40. 

It seems to this writer that there can be no doubt that consumers have 
been adversely affected by this control, also. For several years a large 
number of car owners have found it impossible to purchase many of the 
products and some of the brands of merchandise which they would nor- 
mally choose. — Florida, Exhibit L-31c.40. 

I want to especially call your attention to two of these accounts. First, 
Russell, Harp, Incl, of Akron, Ohio, who in 1937 gave us 5,000 gallons of oil 
business. During the entire time of my business experience with this 
concern they were being granted extra credit extensions by the Pure 0^1 
Company. After Mr. Harp's financial condition was in such shape that 
he couldn't make all his payments on demand, the Pure Oil Company took 
over his lease, throwing out all products except those made by the Pure 
Oil Company. This was a loss of 5,000 gallons of Kendall Oil to us from 
one account only. — Ohio, Exhibit L-52.40. 

This, of course, means that in every case where this has happened, the 
retailer has changed as far as we are concerned from a desirable account to 
one who sells Quaker State onlv where the public insists on it. — Vermont, 
Exhibit L^9.40. 

This station under a lease to Standard Oil Co. Of La., they having recently 
furnished all new and modern equipment. Apparently they have no great 
objection to the sale of competitive oils only, but will not allow any oils to 
be displayed whereby the customer sitting in his car can identify same as 
being sold here. Am of the opinion this is somewhat of a personal set-up 
of friendship between the Standard Oil salesman and the operator, more 
than through the Standard Oil Co. — Louisiana, Exhibit L-53.40. 

A controlled operator generally is denied the benefits of buying competi- 
tively most of the products he sells. He is denied the privilege of offering 
for sale many products which he could sell profitably, and is forbidden to 
handle many brands of merchandise which his customers could and would 
buy from him if given a required opportunity to do so. These factors have 
greatly reduced the earnings of nearly every gasoline retailer whose station 
is leased or otherwise controlled by a major. — Florida, Exhibit L-31c.40. 

Here in Cedar Rapids a former Pennzoil Booster took over the operation 
of a Texas Station, which had in the past been unprofitable to all Operators. 
By his personal efforts he has made this a paying outlet, and although they 
made no objections to his handling Peiuizoil when he f rst took it over, they 
have since forced him to discontinue our product thrai^li threats of can- 



CONCENTRATION OF ECONOMIC POWER gygg 

celling his lease, raising the rent, or refusal to renew upon expiration. He 
don't want to take a chance of losing the business which he has worked 
hard to build.— Iowa, Exhibit L-64-64c.40. 

Alexander Service Sta., Glastonbury, Conn. : Gallons of Motor Oil pur- 
chased from us— 1936, 198 ; 1937, 543 ; 1938, 325 : 1939, 54. 

This account received an additional margin on motor oil from Tidev^ater 
Oil Co. distributor as an inducement to stop pushing the sale of our prod- 
uct.— Connecticut, Exhibit Lr-83.40. 

The Major Oil Companies employ their enormous buying power as a means of 
forcing independent owners and operators of garages, car dealers and repair 
shops, into signing "an exclusive dealing arrangement" under the guise of 
reciprocity in business. 

The next big thing we have to overcome is the infinite variety of reci- 
procity deals. — Missouri, Exhibit L-23.42. 

We not only have had discouraging experiences with service stations but 
also with car dealers. We have two cases on hand now where the Atlantic 
Refining Co., whenever it appears that we are going to be able to sell the 
dealer, purchase one or two automobiles which prevents us from getting 
tlie order. — Pennsylvania, Exhibit L-22C.42. 

* * * concentrate our efforts solely on the independent garage and car 
dealer. Offsetting this, the major company has their repair work done not 
from where he gets his business but with our accounts. Purchases of new 
equipment are usually handled in the same manner. — Illinois, Exhibit 
I^25c.42. 

Many of the major oil companies maintain a star staff of "reciprocity 
Agents" whose duties are to check up the balance between purchases and 
sales with commercial accounts and in order to ferret ou*t information of 
this kind it would be necessary for you to have some investigator in the 
role of salesman to obtain first hand information. — California, Exhbiit 
1^51.42. 

The large oil companies are exercising another type of control which is 
freezing out the small business man. Due to the millions of dollars in pur- 
chasing power, they frequently go to a local car dealer and purchase motor 
equipment if the dealer will carry their products 100% and drop out other 
hands of products. Such a case is Henry A. McClellan, 901 Mine Street, 
Jacksonville, Florida. We were selling this account about 700 gallons per 
year and because of the purchase of motor equipment by Sinclair, all prod- 
ucts except Sinclair were dropped. — Florida, Exhibit L-50c.42. 

Sometime ago a fleet truck operator who was a customer of ours was lost 
to us because a major company offered them a volume of trucking business 
in I'eturn for their oil and grease business. This is something we could not 
offer. We sold our goods on the basis of quality and service and the major 
sold theirs on the basis of reciprocity. The trucking concern went so far 
as to say they preferred our merchandise, but could not turn down the offer 
for business. — Ohio, Exhibit Lr-35.42. 

Another method of getting a car dealers Inisiness is to start sending 
a considerable portion of their repair business on trucks and cars to a 
dealer who had never handled any of their products, and then later offer 
to purchase a certain number of units either or both of trucks and cars. 
—Iowa, Exhibit L^64c.42. 

During the past year the expanding use of major company credit cards has 
served to make inroads into the small portion of independent business re- 
maining to me. Lately, the reciprocal interchange of credit card facilities 
between groups of major oil companies has increased this tendency. A con- 
sumer may prefer independent merchandise, but he is pressured into buying 
the products of monopoly thru methods available only to monopoly. — Ari- 
zona, Exhibit D-80-80C.42. 

The Major Oil Companies re-write their contracts to employ such legal tech- 
nicalities as will enable them to evade Social Security Taxes which the Inde- 
pendent must pay. 

124491— 40— pt. 15a 5 



8790 CONCENTRATION OF ECONOMIC POWER 

There are also some cases where the company originally owned the 
station and since sold it to an operator, but made the same sale on a 
contract which permits him to sell only those items which the company 
approves. — Vermont, Exhibit L-49.43. 

Altho stations were absolutely controlled, the operator by subterfuge 
became an independent business man legally and was not subject to various 
unemployment and other taxes designed to aid social security. I have to 
pay such taxes on the wages of my employees. — Arizona, Exhibit L-80.43. 

HISTORY OF LEGAL STEPS AND COMPLAINTS 

The purpose of this section of the report is to point out that Independent 
Producers, Refiners, Marketers and Jobbers of petroleum products instituted 
from time to time legal steps to obtain relief from practices interfering with 
the distribution of their products. Due to the specialized type of retail outlet 
generally termed throughout the oil industry as "Service Station," it is neces- 
sary that background be developed showing the origin and growth of this 
new and highly specialized outlet, and therefore, this history will be divided 
Into the following sections : — 

Beginning of the Service Station Outlets. 

Growth and Expansion of this Type of Outlet through the Promotional 
Efforts and Individual Initiative of the Small Business Man. 

Entering of the Major Oil Companies in the Retail Field in Competition 
with the Small Ilndividual Business Man and Originator of the New 
Type of Outlet. 

Investigation undertaken by the Federal Trade Commission in response to 
Senate Resolution directing that a report be submitted on the Petroleum 
Industry— June 1926. 

The methods employed by the Major Oil Companies to obtain control of 
Service Stations and to monopolize Petroleum Product Distribution 
through control of Retail Outlets. 

Action taken by Pennsylvania Grade Crude Oil Association for issuance of 
a Complaint against the Major Oil Companies attacking the practice of 
making so-called Exclusive Dealing Arrangements. 

Report of the Federal Trade Commission covering the Investigation under- 
taken prior to the enactment of the National Industrial Recovery Act. 

The Code of Fair Competition of the Petroleum Industry — Rule covering 
the subject of Lease and Agency and Lease and License Agreements. 

Memorandum on behalf of Pennsylvania Grade Crude Oil Association filed 
by attorneys representing Trade Associations, Producers, Refiners, Whole- 
salers and Retailers opposing Exclusive Dealing Arrangements, signed by 
Newton D. Baker, A. Mitchell Palmer, Howard F. Burns, J. Villard 
Frampton, E. C. Breene and E. J. Jones. 

Decision of the Administrator for the Petroleum Industry on the Provisions 
of Article 5, Rule 19, of the Code of Fair Competition. 

Xetter from the Federal Trade Commission concerning the questions sub- 
mitted to the Commission on March 4, 1935 with reference to Lease 
and Agency, Lease and License and other forms of exclusive dealing 
arrangement. 

Invalidation of the N. R. A. Code in May, 1935. 

Filing of brief by the Attorneys for Group of Oil Refining Companies with 
the Chairman of the Subcommittee of the Committee on Interstate and 
Foreign Commerce. 

Report on Marketing Facilities to Chairman William P. Cole, Jr., Chairman 
of the Sub-committee of the Committee of Interstate and Foreign Com- 
merce, House Resolution 441, March, 1935. 

Confidential Bulletin #30 to all Contributing Companies from F. S. Packard, 
Chairman of thg' American Petroleum Industries Committee, Central 
Division. 

Final Report of the Marketing Division of the Petroleum Administrative 
Board, June 1936. 

The increased distribution of motor fuel and motor lubricant products to the 
ultimate consumer during the period from 1907 to date, has been through 
a retail outlet generally designated throughout the oil industry as a service 
station. 



CONCENTRATION OF ECONOMIC POWER 8791 

The growth of this type of outlet has been phenomenal and up until about 
1926, all Producers and Refiners enjoyed a free and open market for their 
products in supplying the independent operator of the service station. 
. From 1926 forward, concerted action on the part of groups of competitors 
within the general classification of the Major Oil Companies, introduced prac- 
tices aimed at controlling the sole retail outlet for petroleum products. The 
Independent Producers and Refiners upon finding that the concerted efforts 
employed by the oil companies of the Major groups effected the closing of a 
free and open market for their products, undertook the necessary legal 
steps to bring to the attention of the appropriate administrative bodies of the 
government, practices of a monopolistic nature. 

The setting forth in chronological order of the steps taken is to supply evi- 
dence that the Independents exerted every effort on their part to protect their 
business, their industries and their investment. 

In reciting in chronological order the development of the service station as 
an outlet and the growth and expansion of the business of the oil producing 
and refining companies, such comments as may be made should be regarded 
as emanating from the sales marketing point of view and not as assuming or 
presuming to give opinions on matters of law and legal proceedings. 

The sales and marketing point of view is concerned with the consumer's 
point of view, and with methods, operations and mechanism incidcn. to bring- 
ing to the market the products that the con.sumer demands. In fact, the sole 
object of producing products is that of supplying the demand of the ultimate 
consumer. 

BEGINNING OF THE SERVICE STATION OUTLETS 

The automobile industry from 1907 on expanded greatly due to the general 
adoption by the ultimate consumer of this new mode of transportation. With 
the increasing and widespread use of the automobile, motor fuel and motor 
lubricants became more and more in demand, and as a consequence, awaiting 
for discovery by an enterprising business man was the Service Station, i. e., 
facilities to serve increasing numbers of automobile owners. 

In truly typical American fashion, an individual, an enterprising business 
man, saw the opportunity of starting a business, the sole object of which was 
to supply automobile owners with motor fuel and motor lubricating products. 
He opened what he termed "an oil and gasoline station" consisting of barrels 
of motor oil, a tin measure or two, a wrench, and some large tanks of gaso- 
line. Automobile owners thus were provided with the facilities to conveniently 
obtain petroleum products required for the operation of their automobiles. 
Gradually, other individuals opened similar stations in different part of the 
country. This type of retail outlet increased in number in the succeeding 
ten years. 

During this period of development, individual enterprising business men in- 
vested their savings in gas and oil stations, and as the number of automobiles 
in use increased, their business likewise increased, so that from a very small 
beginning and with little money, an individual, undertaking the full risk incident 
to the investment and development of an enterprise, started a new business. 

GBOWTH AND EXPANSION OF THIS TYPE OF OUTLET THROUGH THE PROMOTIONAL 
EFFORTS AND INDIVIDUAL INITIATIVE OP THE SMALL BUSINESS MAN 

In time, gasoline and oil stations became known as service stations. Opera- 
tion of this type of outlet is best reflected in the following figures from National 
Petroleum News, February 5, 1936 : 

1907 — Beginning of a service station 

1920 — 15,000 service stations throughout the United States 

The following figures are from the Bureau of Census, Retail Distribution 
1930, Census of American Business 1933 — Census of Business 19.35 : 

1930 — 121,513 service stations throughout the United States 
1933 — 170,404 service stations throughout the United States 
1935 — 197,568 service stations throughout the United States 

From 1907 to about 1914, service stations were operated principally by the 
individual business man. About the beginning of 1914, the larger oil companies 
built and operated service stations of their own. A few large and very expensive 
structures were built in different parts of the country. 



8792 CONCENTRATIOIN OF ECONOMIC POWER 

The undertakings of these large oil companies were not hampered with the 
limitations experienced by the individual business man operating a service 
station. Money was spent in large amounts in the construction of very elaborate 
buildings to be used as service stations. The Major Oil Companies by build- 
ing their own service stations thus created outlets to compete with the small 
individual business man. 

ENTERING OF THE MAJOR OIL COMPANIES INTO THE RETAIL FIELD IN COMPE^'ITION 
WITH THE SMALL INDIVIDUAL BUSINESS MAN AND ORIGINATOR OF THE NEW TYPF 
OF OUTLET 

During the period of 1920 to 1929, service stations were opened by individual 
business men in increasing numbers throughout the country. The Major Oil 
Companies competed with one another for the business of the service station. 
Competition was not limited to price differentials, but was expanded to include 
loaning of gasoline pumps and equipment to the operators of the stations and, 
gradually competition became so keen that the Major Oil Companies vied with 
one another to obtain the business of the service station. Gasoline pumps and 
tank equipment were loaned to any responsible individual who wished to open 
a service station. This practice accounted in large part for the phenomenal 
increase of service stations from 1920 to 1929. 

With the loaning of equipment, a type of contract came into existence the 
purpose of which being to establish ownership of the equipment and to guarantee 
to the oil company supplying the equipment the business of the operator of the 
service station. Coincident to the loaning of equipment. The Major Oil Com- 
panies undertook to build their own service stations throughout the country, 
and integration of operation by the different oil companies was extended to 
include the retailing functions. 

At first, the Major Oil Companies constructed their own service stations ; 
however, about 1926, Major Oil Companies gave more attention to gaining con- 
trol of the individual service station and at about this time "lease and agency" 
stations became very common. This agreement or contract device enabled the 
Major Oil Companies to obtain control of the senace station to assure an out- 
let for their petroleum products and at the- same time reducing the expenditures 
incident to building service stations, company owned and operated. 

INVESTIGATION UNDERTAKEN BY THE FEDERAL TRADE COMMISSION IN RESPONSE TO 
SENATE RESOLUTION DIRECTING THAT A EEffORT BE SUBMITTED ON THE PETROLBHJM 
INDUSTRY — JUNE 1926 

During the period of 1914 to 1926, practices of the Major Oil Companies had 
become of such character as to prompt a Senate Resolution as follows ; 

Senate Resolution 31, 69th Congress, First Session, adopted June 3, 1926. 

Resolved, That the Federal Trade Commission, be, and is hereby directed 
to investigate and report to the Senate in the nest session of Congress : 

First — The very material advances recently made in the price of ciiide 
oil, gasoline, kerosene and other petroleum products, and whether or not 
such price increases were arbitrarily made and unwarranted. 

Second — Whether or not there has been any understanding or agreement 
by the various oil companies or manipulations thereby to raise or depress 
prices, or any conditions of ownership or control of oil properties or of 
refining and marketing facilities in the industry which prevent effective 
competition. 

Third — The profits of the principal companies engaged in the producing, 
refining and marketing of crude oil, gasoline, kerosene and other petroleum 
products during the years 1922, 1923, 1924 and 1925, and also such other 
matters as may have been bearing upon the subject covered by the provi- 
sions of this resolution. 

Excerpts from the report on petroleum industry made by the Federal Trade 
Commission in response to Senate Resolution 31, are included herein as 
(Exhibit A). 
Page 9 — Reports on the phenomenal growth of the gasoline service station 
in the United States. 

Pages 255, 256, 257, 258, 259 containing a description of the exclusive dealing 
arrangements, concluding with the statement, Page 259, 



CONCENTRATION OF ECONOMIC POWER 8793 

In view of the fact that the Commission is considering tlie legal aspects 
of these exclusive dealing arrangements, no opinion is expressed in this 
connection. 

The report was transmitted to the Senate, December 12, 1927, Senate Docu- 
ment 61, 70th Congress. Thi* type of contract became known as a "lease and 
agency' type of contract 

THE3 METHODS EMPLOYED BY THE MAJOE OIL COMPANIES TO OBTAIN CONTROL OF 
SERVICE STATIONS AND TO MONOPOLIZE PETROLEUM PRODUCT DISTRIBUTION THROUGH 
CONTROL OF RETAIL OUTLETS 

Lease and Agency contracts effected complete control of the service stations 
by the Major Oil Companies with whom the owner and operator of the service 
station entered into contractual relationship. Major Oil Companies vied with 
one another in signing up the business man operating his own station. The 
business man had made the investment in the property and the contract assured 
him of a dependable source of supply of the principal petroleum product in 
demand by automobile owners, i. e., gasoline. The Major Oil Companies on 
their part undertook to improve the properties of the owner and operator 
which included the installation of more modern service station equipment. 
As a consequence, the "lea.se and agency" type of contract placed in the hands 
of the Major Oil Companies complete control of the service station, clauses of 
ownership being avoided. This control being extended to the extent of specify- 
ing that the agent is not to store or sell in the premises any petroleum products 
other than those furnished by the company. The Major Oil Company, therefore, 
obtained an exclusive outlet for its motor fuel product, gasoline, and its motor 
lubricant product, motor oil. 

Gradually, the full provisions of the contract were enforced and various ways 
and means were found to force the operator of the service station to elinjinate 
all motor oil products other than those produced by the Major Oil Company 
holding the contract. The effects of the enforcement of the various clauses of 
the "lease and agency" contract were soon felt by the Independent Producers 
and Refiners, as year after year the distribution of their products was denied 
distribution through the service station. 

Service station operators prior to signing the contract carried a line of motor 
oil products such as would meet the demand of automobile owners, i. e., the 
ultimate consumer. A free and open market existed. Each Independent Pro- 
ducer and Refiner enjoyed a free and open market in which to dispose of his 
products. The business of the Independents continued to expand in proportion 
to the demand of satisfied customers for their product. 

The service station operator had that freedom inherent to the individual ini- 
tiative of the business man, to buy products offered l)y Independent Producers 
and Refiners seeking his outlet as a means of distributing products to the 
ultimate consumer. 

After the signing of the contract, Major Oil Companies employed coercive 
methods, such as, threats of cancellation of the contract, carrying with it, of 
course, the termination of the source of supply of gasoline. As the individual 
operator of the .service station acquiesced to the demands of the Major Oil 
Companies, the products of the Independent Producers and Refiners of motor 
oil were denied distribution through the service station outlet and consumers 
were denied the opportunity of obtaining the kind and type of motor oil that 
they demanded. 

This type of contract was employed by all of the large integrated producers 
and refiners of petroleum products. Competition was reduced to competition 
between the groups of competitors who employed this type of concerted action 
in obtaining control of service stations, and by an equal degree of concerted 
action on the part of the various Major Oil Companies, the motor oil products 
of the Independent Producers and Refiners were denied distribution through 
all service stations regardless of which Major Oil Company controlled the 
station through the "lease and agency" type of contract. 



8794 CONCENTRATION OF ECONOMIC POWER 

ACTION TAKEN BY PENNSTLVANIA GRADE CRUDE OIL ASSOCIATION FOR ISSUANCE OF A 
COMPLAINT AGAINST THE MAJOR OIL COMPANIES ATTACKING THE PRACTICE OF 
MAKING SO-CALLED EXCLUSIVE DBIAUNG ARRANGEMENTS WITH DISTRIBUTORS 

(Exhibit B) 

Independent Producers and Refiners of motor oil who are members of the 
Pennsylvania Grade Crude Oil Association, undertook the appropriate procedure 
of the filing of a complaint before the Federal Trade Commission during 
December, 1931. 

REPORT OF THE FEDERAL TRADE COMMISSION COVERING THE INVESTIGATION UNDER- 
TAKEN PRIOR TO THE ENACTMENT OF THE NATIONAI, INDUSTRIAL RECOVERY ACT 

(Exhibit C) ' , ' 

Prior to the completion of the report of the Federal Trade Commission, the 
National Industrial Recovery Act became a law. As a consequence, the final 
report and decision by the Federal Trade Commission was not rendered ; how- 
ever. Chief Counsel, Robt. E. Healy, prepared a memorandum for the Commis- 
sion — re : "lease and agency," "lease and license," methods of marketing of 
petroleum products. 

(Pages 1 to 8 inclusive) contain the detailed analysis of the principal terms 
of the "lease and agency" agreements. After the analysis of the different types 
of agreements, this statement is made : 

(Page 8— Paragraph 1) 

"I assume, and there is considerable support for the assumption, that 
one of the reasons why the Major Oil Companies adopted the "lease and 
agency" method was to evade the law relating to resale price maintenance, 
price discrimination and tying contracts but as the Supreme Court in 
Superior Oil Company vs. Mississippi, 280 U. S. 395, speaking through 
Justice Holmes, said : 

"the fact that it is desired to evade the law, as it is called, is im- 
material, because the very meaning of a line in the law is that you 
intentionally may go as close to it as you can if you do not pass it." 

(Page 8 — Paragraph 2) 

"The problem I am wrestling with has not been decided by the Courts 
so far as I can learn. Good lawyers differ about it. The question is a 
close one ; so close that a conclusive answer cannot be found except through 
a test case in the Courts. However, I suhmit my views as directed by the 
Commission." 

(Pages 8 (bottom) and 9 (top)) Discuss at some length the legal point of 
view on the question as to whether or not the "lease and agency" contracts 
are genuine lease contracts with agents. 

(Page 9 — Paragraph 1) Statement is made: 

"My conclusion ig * * * the lease and agency contracts are actual 
genuine leases and actual genuine contracts of agency * * * However, 
in my opinion, there is reason to believe that through this successful evasion 
of the law, the major oil companies have accomplished certain results which 
the law as it was administered prior to ihe enactment of the 'National 
Industrial Recovery Act, and the approval of the Codes thereunder, re- 
garded as evil * * * Likewise, the companies could not contract with 
the owner of a service station to handle their products and none others 
without taking the serious risk of violating Section S of the Clayton Act, 
but by the lease and agency device, they could and did accomplish the same 
result." 

(Page 10 — Paragraph 1) 

"I shall next discuss a fourth charge against the major oil companies. 
It may be stated as follows : * * * by obtaining leases of a large num- 
ber of established service stations have closed the channels of distribution 
or trade outlets to other refiners and distributors, have unreasonably re- 
strained trade and violated the Sherman Act and the Federal Trade 
Commission Act." 

CPnno 11 — Paranrn'Tth M 



CONCENTRATION OF ECONOMIC POWER 8795 

* * * "They estimate that the members of the Pennsylvania Grade 
Crude Oil Association have lost more than fifty percent of their distribu- 
tors in Virginia, North Carolina, South Carolina, Georgia, and Kentucky, 
and the Conmiission files contain communications from numerous com- 
plainants who claim that in the states just named the lease and agency 
method has resulted in closing numerous retail outlets for their products." 

(Page 11 — Paragraph 2) Contains comparisons of the sales of gasoline of a 
number of the Major Oil Companies during 1929 when the "lease and agency" 
contracts were not much used, and the Sales of the same companies during 
1930, a year in which the "lease and agency" plan was in full force for the 
four companies mentioned. The analysis, however, confines itself to com- 
parison of sales of gallons of gasolme and does not present any figures what- 
soever on the increased sales of gallons of motor oil products of the four com- 
panies reported upon. 

{Page IS — Paragraph 1) 

* * ♦ "It has, however, been frequently held by the courts that there 
are many acts which one may perform without violating the law if one 
acts independently but which violate the law when adopted in concert." 

{Page IS — Paragraph S) 

"The lease and agency contracts are not precisely uniform. They are 
much alike in substance. In my opinion, there is reason to believe that 
certain major oil compi»nies have cooperatively and in concert perfected, 
adopted and furthered the use of, lease and agency contracts, quite alike 
in substance, and have thereby violated Section 5 of the Federal Trade 
Commission Act." 

{Page 14 — Paragraph 1) 

"In my opinion there is reason to believe that certain of the major oil 
companies have used oppressive and coercive methods to bring about the 
execution of lease and agency contracts by service station operators and in 
one section more lately to force a revision downward of commissions and 
rentals payable to said agents." 

{Page 15 — Paragraph 2) 

"I will next discuss the lease and license method of marketing petroleum 
products. The lease and license method may be briefly described as that 
method whereby a company producing petroleum products obtains from 
the proprietor of an established filling station a lease of said station and 
then gives him a license to sell the company's products therein although 
there are numerous instances where the license is issued to some person 
other than the original proprietor from whom the lease was taken." 

{Page 16 — Paragraph 1) Reports findings of Investigation Committee showing 
that certain of the major oil companies are abandoning the agency method and 
adopting a policy of a.sking persons who made contracts under the "lease and 
agency" plan to accept license in lieu of agency contracts. After reporting the 
findings of the investigators, the following is set forth: 

* * * "It is believed that the lease and agency stations are still in the 
majority but there seems to be a tendency away from that method to the 
lease and license method. This is believe to be due principally to the 
fact that chain store tax laws are increasjng in number and in amount 
of tax per unit. In keeping with the theory that persons in charge of 
stations are company agent.s, various states have claimed that the oil 
companies are conducting chain stores with as many units as there are 
lease and agency instances, and one of the companies st^ates that the appoint- 
ment of an agent exposes the company to the danger of liability for injuries 
caused by the negligence of the agent and to the possibility of liability to 
the agent and his employees for injuries sustained while engaged in the 
company's service." 

{Page 17 — Paragraph 2) 

"The most difficult legal question arising from the lease and agency 
method is not present in the case of lease and license because it is perfectly 
plain that the licensee is a purchaser from the* company and is not the 
company's agent." 



8796 CONCENTRATION OF ECONOMIC POWER 

' {Page 17 — Paragraph 3) 

"Evidence has come to my attention which gives reason to believe that 
certain oil companies have violated Section 2 of the Clayton Act in selling 
to licensees at discriminatory prices. Commission examiners report evi- 
dence tending to show that station operators who sign up for lease and 
license are by some companies given better prices than those who refuse 
to sign." 

{Page It — Paragraph 4) 

"The charge has also been made that in carrying out this lease and 
license method of marketing certain oil companies have made tying contracts 
in violation of Section 3 of the Clayton Act. * * * j f^gj^ jfj^^ there is 
reasonable ground for believing that the effects described in Section 3 of 
the Clayton Act flow from this arrangement. The more diflicult legal 
question is whether the contract is a tying contract. It is claimed on one 
side that the tying provision relates only to the use of the licensor's premises, 
and that the licensor having obtained legal possession of the premises has 
the right to specify that the products of his rival shall not be sold there. 
The claim on the other hand is that the tying provision is appurtenant to 
the sale of the products and is therefore within the prohibition of Section 3 
of the Clayton Act. Viewed in either light the practical effect is to exclude 
all petroleum products except those of the licensor from premises formerly 
operated independently and open for the sale of all such products as the 
proprietor was willing to sell. * * * Here again good lawyers differ as 
to the correct answer to this difficult legal problem. * * * i think the 
lease and license and fuel sales agreements should all be construed together. 
(See Texas Co. vs. Northrup. Sup. Ct. of Appeals, Virginia. 153 S. E. 659), 
and that so construed the whole arrangement is one for the marketing of 
the licensor's products and is a tying contract within Section 3 of the 
Clayton Act, and that there is reason to helicvc that said Section has heen 
violated through the lease and license contracts and that thereby Sectioti 5 
of the Federal Trade Commission Act has been violated also. 

{Page 19 — Paragraph 1) 

* * * "It is appropriate for me to observe that the lease and license 
method closes ivhat xcere formerly normal retail outlets to refiners of gaso- 
line and to brands of lubricating oil not controlled by the licensors, and 
that the arrangement is to the disadvantage and detriment of said refiners 
and producers of said oil." 

It will be noted that Chief Counsel Robt. E. Healy gave opinion of viola- 
tion- -(Page 9 — Paragraph 1) — (Page 13 — Paragraph 3) — (Page 14 — Paragraph 
1) — (Page 17 — Paragraph 3) — (Page 17 — Paragraph 4). 

THE CODE OF FAIR COMPETITION FOR THE PETROLEUM INDT'STRY RITLE CO\'ERING 

THE SUBJECT OF LEASE AND AGENCY AND LEASE AND LICENSE AGREEMENTS 

(Exhibit CO 

The preamble to the National Industrial Recovery Act, Section 1, states 
that it is declared to be the policy of Congress to : 

(1) Provide for the general welfare by promoting the work of the Industry 

for the purpose of cooperative action among trade groups; 

(2) Eliminate unfair competitive practices; 

(3) Reduce and relieve unemployment; and, 

(4) Rehabilitate Industry. 

To accomplish these ends. Section 3 (a) of the Act, provides for the sub- 
mission of codes of fair competition by Representative Trade Associations or 
groups and for their approval by the President. 

Tlfty-nine trade associations, each representative of some division of the 
marketing branch of the oil industry, met in Chicago, June 22-24, 1933, 
for the purpose of arriving at an agreement on a Code to be submitted to 
the National Recovery Administration. The result of this conference was 
thp submission of a code containing alternate proposals on the exclusive 
dealing question. The proposals made follow: 



CONCENTRATION OF ECONOMIC POWER 8797 

Alternate Proposal # 1 

"It is hereby declared an unfair trade practice for any refiner, dis- 
tributor, wholesaler, or jobber to contract or in any way, orally or in 
writing, directly or indirectly whether by Lease and Agency, Lease and 
License, or any other manner enter into any agreement with any dealer, 
service station operator, or vendor of petroleum products, which agree- 
ment provides for or purports to provide for the exclusive sale or dis- 
tribution of the products of said refiner, distributor, wholesaler, or jobber: 

"Provided this provision shall not apply 

(a) where the dealer, service station operator or vendor of petroleum 

products occupies a station or place of business which is owned 
in fee by such refiner, distributor, wholesaler or jobber. 

(b) or where held by such refiner, distributor, wholesaler or jobber 

under a valid and binding lease, and where the premises at 
the time the lease was executed were not improved with any 
building or other facilities or equipment for the sale or storage 
of petroleum products, or, 

(c) held by such refiner, distributor, wholesaler, or jobber under a 

valid and binding lease for a period of at least five years where 
the lease provides for a substantial rental not determined by 
the volume of petroleum products sold at the premises and 
where the lease does not contain any provision permitting either 
party thereto to cancel or terminate it or the term thereby 
granted before the expiration of five years from the beginning 
of such term. 

"Nothing in this rule shall be construed as preventing any refiner, 
distributor, wholesaler, or jobber from making a bona fide lease as above 
set forth and subleasing said site and improvement to anyone at the 
same rent paid by the sublessor plus a fair return of the investment 
put thereon by the sublessor and provided further that the compensation 
allowed the sublessee and/or operator shall not exceed the compensation, 
if on a gallonage basis, allowed generally to retailers not operating 
under contractual obligations. 

"All such leases and subleases shiiU be recorded I)efore becoming valid. 

"All existing contracts or sales agreement which constitute unfair trade 
practices, as herein defined, should be terminated as promptly as prac 
ticable in keeping with the spirit of the rule." 

Alternate Proposal # 2 

"Refiners, distributors, jobbers, or wholesalers may acquire for any 
period by lease, sublease, or by assignments thereof service or filling 
stations, or sites for same ; and any service or filling station or site 
therefor so acquired may be leased, subleased or licensed by such refiner, 
distributor, jobber, or wholesaler to the owner or lessor thereof, or to 
any other person to be operated as a filling station for the distrilmtion of 
the products manufactured or .sold by such refiner, distributor, jobber or 
wholesaler, or such refiner, distributor, jobber, or wholesaler may em- 
ploy the owner or lessor thereof or any other person as the agent of 
^uch refiner, distributor, jobber, or wholesaler for the sale of petroleum 
products thereat. Nothing herein contained shall require anyone acquir- 
ing such lease, sublease or assignment of lease to record or file it in 
any public record. Nothing herein contained shall modify or limit the 
provisions or effect of Rule 2 hereof or permit the installation at any 
place leased, as herein provided, of any equipment prohibited by Rules 
1 or 2 hereof." 

The Administrator for the Industrial Recovery engaged a committee con-' 
sisting of representatives from each of the conflicting groups, and this committee 
proposed Article V, Rule 19, as a compromise. Rule reads as follows : 

Rule 19. Pending decision by the Federal Trade Commission as to 
whether the lease and agency, lease and license methods of marketing 
petroleum products constitute an unfair trade practice : 

(a) No new contract shall be written under either method, 



8798 CONCENTRATION OF ECONOMIC POWER 

(b) Any such contracts now in effect shall not be renewed for a period 

exceeding one year, and the cancellation privilege shall be on 
notice not exceeding thirty days, 

(c) Provisions of Rules 7 and 8 shall apply in all instances to existing 

lease and agency and lease and license contracts and to renewals, 
as above defined, 

(d) In so far as lease and agency and lease and license agreements are 

concerned, the provisions of Rule 15 shall not apply to soliciting 
the sale and purchase of petroleum products, and 

(e) Should the Federal Trade Commission fail to render a final decision 

on the. validity of lease and agency and lease and license agree- 
ments within 60 days of the effective date of this Code, the 
President, or agency designated by him, may make a final deci- 
sion prohibiting such marketing methods, or, authorizing them 
without condition or upon such conditions as he or it may pre- 
scribe ; or the President or agency designated by him may in his 
or its discretion temporarily prohibit the use of such marketing 
methods pending the decision of the Federal courts, or he or it 
may temporarily authorize such methods pending decision of the 
Commission and of the courts, either without condition or upon 
such conditions as he or it may prescribe." 
The code was signed by the President, August 19, 1933. 

MEMORANDUM ON BEHALF OF PENNSYLVANIA GRADE CRUDE OIL ASSOCIATION FILED BY 
ATTORNEYS REPRESENTING TliADE ASSOCIATIONS, PRODUCERS, REFINERS, WHOLESALERS, 
AND RETAILERS OPPOSING EXCLUSIVE DEALING ARRANGEMENTS 

(Exhibit D) 

A memorandum on behnlf of Pennsylvania Grade Crude Oil Association was 
submitted to the Federal Trade Commission. 

(Exhibit E) 

Under date of November 1st, 1933, The Hon. Charles A. March, Chairman of 
the Federal Trade Commission, addressed a letter to Geiieral Hugh S. Johnson, 
Administrator of the National Industrial Recovery Administration, by direction 
of the Commission. 

(Page 1 — Paragraph S) 

"This action the Commission has declined to take for reasons hereinafter 
stated." 
(Page 2 — Paragraph 3) 

* * * "Because of active concert tetiveen various oil companies in the 
employment of these agreements, and because there is some indication of 
the elimination of competition as to rentals and commissions, and because 
of the use of oppressive and coercive methods in securing the execution of 
these agreements, the oil companies have engaged in unfair methods of 
competition in violation of Section 5 of the Federal Trade Commission Act." 

(Page 2 — Paragraph 4) 

"The Commission has reason to believe that the lease and license agree- 
ment, as distinguished from the lease and agency agreement, has been em- 
ployed to bring about price discrimination and has been accompanied by 
tying contracts^ and that its employment to effectuate these ends constitutes 
a violation of law, especially insofar as tying contracts are involved inas- 
much as no provision of the Petroleum Code seeks to legalize such a prac- 
tice." 

(Page 2 — Paragraph 5) 

* * * "Though the Commission is, of course, aware that Section S (b) 
of the National Industrial Recovery Act preserves intact its powers under 
the Federal Trade Commission Act. it has deemed it in the public interest 
to hold in abeyance action as to the issuance of a complaint inasmuch as 
action by "The President", or agency designated by him", may make the 
issuance of such a complaint wholly unnecessary either by prohibiting such 
niarhcling, methods, or authorizing them." 



CONCENTRATION OF ECONOMIC POWER 8799 

X. Decision of the Administrator for the Petroleum Industry on the Provisions 
of Article 5, Rule 19, of the Code of Fair Competition 

(Exhibit F) 

At a later date, the President designated Secretary of the Interior, Hon. 
Harold L. Iclies as administrator for the petroleum industry. 

Under date of March 4, 1935, a decision was made by the administrator. 
(Page 11 — Paragraph 1) of the decision the following appears: 

* * * "If, therefore, it is found that under existing standards a prac- 
tice is unfair, or if it is found that a practice operates to create a restraint 
of trade which will discriminate against or oppress small enterprises, there 
is adequate ground for a Code prohibition." 

{Page 16 — Paragraph 1) 

"I find, regardless of the possible application of prior legislation, that the 
small independent marketers of petroleum products other than gasoline have 
been placed at a distinct and unfair disadvantage through lease and other 
arrangements compelling exclusive handling of products." 

There follows then a discourse of the results of the practices upon the 
business of independent companies, etc. 

{Pages 20, 21, 22, 2S) 

♦ * * "I feel, therefore, that it is inadvisable in the present state of 
the record to prohibit finally the practice of giving price advantages to 
operators of leased stations through the payment of rent or otherwise. /, 
therefore, have chosen to prohibit differentials in favor of exclusive accounts 
only where the statidards of prior legislation are clearhi violated. That is 
to say, the practice of discriminating in price in favor of operators who are 
neither lessors nor iona fide agents must cease. 

Another feature of exclusive contracts that is objected to is that thoy 
are not mutual as between the operator and the supplying company. This 
does not prima facie make the writing of the contract unfair. Here again, 
however, the operation of the practice is significant. Retail dealers have 
had no option bttt to accept contracts cancellable only by the supplying 
because no company supplying products that have universal sales acceptance 
has been willing to make contracts proxnding for mutual cancellation except 
under the most desirable circumstances. Such an arrangement practically 
binds the dealer to the supplying company to an extent which makes his 
profits a matter only determinable by it, since the margin of profit permitted 
could be reduced at will upon the penalty of eviction, where a lease arrange- 
ment exists. This feature of the agreement has unquestionably led to a 
great sacrifice of investment, and has deprived many dealers of any real 
independence. The Marketing Committee of the oil industry has recom- 
mended that action be taken along these lines in order that dealers may be 
free to choose their supplier and in order that free and open competition 
in the retail market for gasoline may be aided. I concur in this 
recommendation. 

I do not rule upon the contention that the institution of the exclusive 
system of contracts was a concerted move by the major supplying companies 
to stifle independent competition. / believe that the Federal Trade Com- 
mission should promptly investigate this phase of the situation in order that 
remedial action may be taken if found justified. 

This decision is not to be construed as authorizing the writing of any 
new exclusive contracts for the sale of petroleum products at retail outlets. 
The validity of any such contracts is in considerable doubt. Article V. 
Rule 19, as interpreted, shall remain in full force and effect, subject to the 
terms and effect of this decision. 

It is, therefore, ordered, pursuant to the authority of the Act of June 16, 
1933, known as the National Industrial Recovery Act (48 Stat. 195), to 
Executive Order 6260-A. authorized by Section 2 (b) of said Act, to Article 
V, Rule 19, and to Article 1, Section 2 of the Code of Fair Competition for 
the Petroleum Industry, approved by the President August 19, 1933, in 
conformance with the provisions of Section 2 (a) of the said act, that: 



8800 CONCENTRATION OF ECONOMIC POWER 

1. Any provisions in lease and agency, lease and license or other form 

of exclusive dealing arrangements requiring the exclusive sale at a 
retail outlet of any petroleum product other than gasoline or motor 
fuel are unfair competitive practices and in violation of this Code, 
and no refiner, distributor, wholesaler, jobber or retailer shall at- 
tempt to enforce any provisions in existing contracts requiring such 
exclusive sale or otherwise attempt to exclude such products ; 

2. Any provisions in any exclusive dealing arrangements whereby the 

operator of a retail outlet or outlets receives any price advantage 
in return for the exclusion of the products of competitors from 
such outlet or outlets, are unfair competitive practices and in 
violation of this Code. Provided that, pending decision by the 
Federal Trade Commission, this shall not apply to rent paid to 
operators of retail facilities leased by such operators to the supply- 
ing refiner, distributor, jobber, wholesaler or retailer or to price 
advantages allowed to bona fide agents; 

3. Any operator of a retail outlet for petroleum products under a lease 

and agency, lease and license or other form of exclusive dealing 
arrangement may cancel the same upon giving thirty days notice 
in such form as may be required by law. Any failure on the part 
of a refiner, distributor, jobber, wholesaler or retailer to accept 
such notice as an effective termination of the entire arrangement 
shall be an unfair competitive practice and in violation of this 
Code; 

4. Article V, Rule 19 shall remain in full force and effect, subject to 

the terms and effect of this decision ; 

5. This decision shall not be constnied to affect exclusive dealing ar- 

rangements of the character described in Article V, Rule 20, Pro- 
vided that Rule 20 shall be construed to apply only to cases 
where the supplier owns the facility in fee*." 

It will be noted that the Administrator rendered decision prohibiting prac- 
tices (Pages 20, 21, 22, 23) of — requiring the exclusive sale at a retail outlet 
of any petroleum products other than gasoline or motor fuel, price advantages, 
contract cancellations, and that Article V, Rule 19, shall remain in full force 
and effect. 

LETTER FROM THE FEDERAL TRADE COMMISSION CONCERNING THE QUESTIONS SUB- 
MITTED TO THE COMMISSION ON MARCH 4, 1935 WITH REFERENiCE TO LEASE AND 
AGENCY, LEASE AND LICENSE, AND OTHER FORMS OF EXCLUSIVE DEALING AR- 
RANGEMENTS 

(Exhibit G) 

Under date of March 4, 19.3."), the Administrator for the Petroleum Industry 
the Hon. Harold L. Ickes, directed a letter to the Hon. Ewin L. Davis, Chairman 
of the Federal Trade Commission, requesting advice concerning any findings 
made or action taken on the subjects listed in the letter. 

Under date of April 9, lOS.'j, Hon. Ewin L. Davis, Chairman of the Federal 
Trade Commission, Washington, D. C, directed a letter to Hon. Harold L. Ickes, 
Administrator of the Petroleum Industry in re : exclusive dealing contracts in 
the distribution of motor fuel. 

(Page 3 — Paragraph 5) 

"The question of legality turns, we believe, upon whether these contracts 
for lease and for agency actually create the legal relationships of principal 
and agency and of lessor and lessee. If they are drawn in the form of 
agency and lease instruments as a subterfuge without bona fide intention 
to lease the premises or to assume the status of principal and agent the 
exclusive dealing feature, tve have reason to helieve, would render this 
method unlawful." 

(Page J/ — Paragraph 1) 

"This does not mean that the Commission is oblivious of the fact that 
tlie lease and agency contracts tend directly to concentrate trade in the 
hands of such company as thus becomes the principal and the sole sup- 
plier of formerly independent retailers ; and that these contracts tend to 
eliminate small distributors and to prevent new distributors from breaking 



CONCENTRATION OF ECONOMIC POWER 8801 

into the field where contracts of this kind are numerous. tVe think that 
it tends towards each of these things. 

(Page 5— Top) 

* * * "To have used coercive or oppressive means to secure leasehold 
and exclusive agency or license arrangements for retail outlets, quite dif- 
ferent aspects, under the anti-trust laws, may then be presented." 

(Page 5 — Paragraph 5) 

* * * "The Commission has reason to believe that this method of 
distribution is in contravention of the Federal Trade Commission and the 
Clayt07i Acts, provided that the effect is to substantially lessen or seriously 
menace the competition of independent distributors." 

(Page 5 — Paragraph 6) 

"The Commission believes that before it can give an opinion upon whether 
the lease and license urethod has the effects necessary to constitute it 
violative of the P'ederal Trade Commission act or Clayton act, a further 
investigation which can now be restricted to that method in its effect upon 
gasoline and motor fuels, should be made. While it is deemed necessary 
to inquire whether the effects of such methods may be to substantially lessen 
competition or tend toward monopoly, the answer should not be deemed to 
turn solely upon such question of act. The size of the corporations using 
the method and the general monopolistic intent are also important quesr 
tions to consider." 

(Page 6 — Paragraph i) 

"What has been said above about the lease and agency and lease and 
license methods of marketing is expressly confined in their status under 
the anti-trust laws. The Administrator operates under a statute wlUfh 
specifically and in contrast with anti-trust laws negatives a design, "to 
eliminate or oppress small enterprises" or to "disoriminate against them" 
and which confers bro»d discretionary authority. He is not constrained by 
the above considerations of late and has already, in the order of March \, 
banned the metliods in question as to thd marketing of petroleum products 
other than gasoline and motor fuels. We assume that his fourth question 
relates to the use of these methods as employed in the distribution of 
gasoline and motor fuel only." 

(Page 7 — Paragraph 1) 

"The Commission concurs with the Administrator as to the importance 
of a further investigation in order to ascertain the effect of these prac- 
tices of the independent oil companies' trade in the latter products." 

(Page 7 — Paragraph 2) 

"The Commission will undertake such investigation as the Administrator 
may request and will present such facts and conclusions of law as, result- 
ing from such investigation, it may have reason to believe to be justified. 
The Commission must add that in view of its limited funds, the cost of 
any investigation so conducted at the Administrator's request will neces- 
sarily be subject to reimbursement to the Commission's funds." 

It will be noted that the Chairman expressed opinion that contract tends to 
concentrate itrade in the handf* of the company — (Page 4 — Paragraph 1) 
action in contravention to existing law — (Page 5 — Paragraph 5) — and declines 
to rule due to provisions of National Industrial Recovery Act— (Page 6— 
Paragraph 4). 

It will be noted that the letter from Hon. Ewin L. Davis, Chairman of the 
Federal Trade Commission, is dated April 9, 1935. 

XII. Invnlidation of the N. R. A. Code in May, 19Sr> 

In May, 19.35. the National Industrial Recovery Act was declared unconstitu- 
tional and all industry code organizations were gradually disbanded. 



8802 CONCENTRATION OF ECONOMIC POWER 

XIII. Filing of brief by the Attorneys for Oroup of Oil Refining Companies with 
the Chairman of the Sub-committee of the Committee on Interstate and 
Foreign Commerce 

(Exhibit H) 

December, 1934, a group of Independent Oil Producers and Refiners sub- 
mitted a brief to the Sub-committee of the Committee on Interstate and Foreign 
Commerce, describing an unfair method of competition in connection with 
marketing of gasoline, motor oil, and greases, giving a quite complete resume 
of the efforts that had been made to obtain a decision and/or rule that would 
compel the Major Oil Companies to desist from using the "lease and agency" 
and "lease and license" type of contract. 

(Exhibit J) 

The brief contains a copy of a letter from Charles Fahy, Chairman of the 
Petroleum Administrative Board, to the Planning and Coordination Committee, 
Washington, D. C. 

(Paragraph 1) of the letter states: 

"The Board has, at the request of the Administrator, considered over 
a long period of time the advisability of recommending to the Administra- 
tor that a decision be made regarding lease and agency, lease and license, 
and other types of exclusive dealing arrangements." 

{Paragraph 2) 

"This decision has been frequently postponed due to formal or informal 
requests made by either your Committee or the Marketing Sub-Committee. 
It is our present un-lerstanding that the representatives of the industry field 
cannot agree upon my mutually satisfactory action that might be taken." 

{Paragraph S) 

"We are, therefore, recommending to the Administrator, certain definite 
actions to take in covering any or all exclusive dealing arrangements. Our 
recommendations involve the follotcing features: 

(2) Exclusive dealing arrangements would be permitted for gasoline only. 
No company would be allowed to tie up a service station so as to exclude 
lubricating oils, greases and other petroleum products. Any threats of 
termination of the gasoline agreement if lubricating oils of other suppliers 
were handled would be made an unfair means of competition." 

(Exhibit K) 

Attached to the brief is a report of discussions of a group of attorneys repre- 
senting oil companies on the subject of marketing of petroleum products. 

Letter from C. F. Fox, Regional Sales Manager of the Sun Oil Company, 
to R. D. Leonard, Chairman, Penna. — Del. State Sub-Committee, describing the 
modus operandi of obtaining a "lease and agency" agreement. 

BEPORT ON MARKETING FACILITIES TO CHAIRMAN WILLI.AM P. COLE, JR., CHAIRMAN 
OF THE SUB-COMMirrEE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, 
HOUSE RESOLUTION 441, MARCH, 1935 

(Exhibit M) 

The report has been summarized by the Petroleum Administrative Board. 
Pages 1 to 13, inclusive, presenting an analysis of the tables appearing in the 
report. Table 7 is of particular value in that it reports on the number of 
service stations and distribution outlets — motor fuel sales (quantity) — and 
book value of company owned stations and non-company oivned stations sup- 
plied on 100 i)er cent basis. The figures contained in these tables indicate the 
rapid growth and expansion of the Major Oil Company's policy of acquiring 
100 per cent control of the service stations throughout the United States; 100 
per cent control of the service stations which through the provisions of the 
"lease and agency" or "lease and license" type of contract are excluded as 
outlets for the distribution of all products other than the products of the 
Major Oil Company controlling the station. 



CONCENTRATION OF ECONOMIC POWER 



8803 





Non-Company 
owned but sup- 
plied on 100% 
basis 


Company owned 




Closed 
Down 


Operated by 
Others 


Company 
Owned and Op- 
erated by Com- 
pany 


1930 - 


139, 604 
159, 957 
175,556 
181, 377 
183. 039 
184, 338 


365 
982 
438 
561 
810 
881 


6,616 
8,245 
8,110 
8,008 
9,743 
10, 574 


17, 408 


1931 


21, 577 


1932 . . 


23,310 


1933 


25,429 


1934 


25,066 


July 1, 193*. 


24,470 







CONFIDENTIAI- BULLETIN #30 TO ALL CONTRIBUTING COMPANIES FKOM F. E. PACKARD 
CHAIRMAN OF THE AMERICAN PETROLEUM INDUSTRIES' COMMITTEE, CENTRAL 
DIVISION 

(Exhibit N) 

This bulletin is significant for it indicates the reaction of the individual enter- 
prising business man to conditions that he had been forced into by larger and 
more powerful organizations 

{Paragraph 2) 

"While the passage of this bill is regrettable, the attitude of the iieople 
toward large oil distributors is more alarming. For the first time in oppos- 
ing legislation of this kind we lost the support of a considerable body of oil 
jobbers. They joined with the retailers and wholesalers associations .to 
put the measure through without exempting filling stations. A very consid- 
erable group of jobbers, including the President and some of the Directors 
of the Iowa Association, were on the ground fighting against the amendment 
excluding service stations from the provisions of the measure." 

{Paragraph 5) 

"This sentiment is not alone discernible in Iowa, but it is becoming general 
throughout the Central Division. The small jobber is determinedly and 
aggressively after the big operators and tcill join with any group which advo- 
cates any sort of legislation which tvill hamper the activities of their large 
competitors, such as investigations of price structures, state control of market- 
ing, state control of the industry, one price laws, chain store laws, and last 
but not least, legislation directly prohibiting the operation of multiple service 
stations." 



FINAL BEPOBT OF THE MARKETING DIVISION OF THE PETROLEUM ADMINISTRATIVE BOARD, 

JUNE, 1936 

(Exhibit P) 

{Page 102— Group VIII— Rule 19) 

Reports the various actions entered upon in response to the question as to 
whether the "lease and agency" and "lease and license" contracts constitutes an 
unfair trade practice, since as pointed out on Page 110 — Paragraph 2 — 

{Page 110 — Paragraph 2) 

* * * "From the date of the decision to the time that the code was 
suspended, no accord was reached as between divergent views within the 
industry, and although the PU.nning and Coordination Committee had sub- 
mitted its recommendation of May 25, as above set forth, this recMnmendation 
was never acted upon by the Administrator." 

The Bureau of Census report for its figures for 1933, shows a total of 256.858 
stations and garages; 1935 — 263,811. The companies reporting to the Sub- 
committee of the Committee for Interstate and Foreign Commerce, reported as 
of July 1, 1934, a total of 219,382 service stations. The figures indicate the ex- 
tent to which the Major Oil Company through the use of 100 per cent Exclusive 
Dealing Arrangements tj-pe of contract have obtained a monopolistic control of 
the retail outlet for distribution of petroleum products. 



8804 



CONCENTRATION OF EC;ONOMIC POWER 



Table 1.- 



-Totals all teiTitories combined numher of distributors- 
outlets taken over by majors during year indicated 



-Report of 





Number of 
Distribu- 
tors report- 
ing 


Year Con- 
trol was 
gained not 
given 


Number of outlets Majors gained Control 
of during — 


Total 
Out- 




1935 


1936 


1937 


1938 


1939 > 


lets 




2 
2 
5 
1 
3 
20 
13 
3 
1 
6 


7 
6 
51 






10 
8 
8 
4 

53 
86 
38 


21 

17 

33 
2 

54 
101 

70 
6 
5 
6 

28 
1 
8 

20 
6 
1 


3 

22' 

2 
13 
27 
21 

1 

3 

3 

5 

2" 

7 
1 

1 


47 


Maine 


3' 


3 

5 


34 


Massachusetts _ 


122 




8 


^few Jersey 


106 
53 
110 

7 

1 

45 

19 


21 
4 
3 


4 
31 
18 


251 


New York __ 


302 


Pennsylvania 

Illinois 


200 
14 


Indiana 


3 


' 6 

6 


14 
C 

28 

5 
2 


9 


Michigan 


71 


Ohio 


72 


Wisconsin 








6 
4 
4 
1 


2 
8 
2 


18 


Florida 

Georgia., 


31 
37 


98 
55 


North Carolina 


5 




21 

5 


21 








13 


5 


2 


23 


Alabama 






2 


Kentucky 


7 










7 






3 


9 


7 
3 

1 
2 


1 
2 

3 


20 




1 




6 


Montana 








1 


Utah _ _... 

California 


8 
23 





9 
1 


8 
5 


27 
32 








84 


538 


49 


9* 


311 


397 


119 


1.512 



' First Quarter 1939. 

Table 2. — Totals all territories combined, gallons purchased by dealers from 
distributors, and year of control gained by majors 



Control Gained 


Gallons 

Purchased 

1936 


Gallons 

Purchased 

1937 


Gallons 

Purchased 

1938 


Gallons 
Purchased 
1939 ' > 


No Data -.. 


101,164 
39,864 
94, 613 
118,542 
114,586 
26, 780 


102, 440 
3,749 
2,364 
54,390 
127, 867 
37,473 


B5, 797 
2,523 
1,703 
19,268 
68,816 
43, 776 . 


8,587 


1935 


348 


1936 . -- . 


202 


1937 - --- 


2,570 


1938 


5,451 


1939 


3,534 








495, 549 


328, 283 


201,883 


20,692 



1 First (JiiartiT 1939. 



CONCENTRATION OF ECOJNoMIC POWER 8805 

Table 3 





No. of 
Distrib 
utors 
who 
Re- 
ported 


No. of 
Dealers 
that Ma 
jors gained 
Control of 
and whom 
Distribu- 
tors were 
supplyins 
Prior to 
Control 


Gallons Purchased by 
Dealers from Distrib- 
utors durinp Years 
Indicated Before Ma- 
jor Company Control 
of Outlets 


Year 
Control 

was 
gained 

by 
Major 

Oil 
Com 
pany 


Oallons Purchased by Dealers 
from Distributors during Years 
Indicated After Major Com- 
pany Control pf Outlets 




1936 


1937 


1938 


1936 


1937 


1938 


1939 

1st 

Quar. 




2 

2 

2 

2 

2 

2 

5 

5 

5 

5 

5 

3 

3 

3 

3 

3 

20 

20 

20 

20 

20 

13 

13 

13 

13 

13 

3 

1 
1 
6 
6 
6 

2 
2 
2 
2 
2 
1 
1 
1 
1 
3 
3 
1 
1 
1 

1 
1 
1 
1 
1 
1 
2 
2 


16 
21 
3 
3 

8 
17 
3 
6 
8 
33 
22 
21 
4 
53 
54 
13 
4 
31 
86 
101 
27 
3 
18 
38 
70 
21 
6 
1 
5 
3 
6 
8 
6 
3 
6 
14 
28 
5 
6 
1 
4 
8 

28 
20 
7 
4 
2 
5 
6 
1 
1 
2 
1 
1 
13 
5 
3 
9 
7 
1 
3 
2 
1 
9 
8 
2 
1 
5 


Oallons 

motor 

oil 

5,043 
6,001 


Gallons 

motor 

oil 


Gallons 

motor 

oil 


1937 
1938 
1939 
1936 
1937 
1938 
1935 
1936 
1937 
1938 
1939 
1935 
1936 
1937 
1938 
1939 
1935 
1936 
1937 
1938 
1939 
1935 
1936 
1937 
1938 
1939 
1938 
1939 
1938 
1939 
1936 
1937 
1938 
1939 
1936 
1937 
1938 
1939 
1937 
1938 
1935 
1936 
1937 
1938 
1939 
1935 
1936 
1937 
1938 
1939 
1935 
1937 
1938 
1939 
1937 
1938 
1936 
1937 
1938 
1939 
1938 
1939 
1938 
1936 
1937 
1938 
1936 
1937 
1938 
1939 


Gallons 

motor 

oil 


Gallons 

motor 

oil 

2,189 


Oallons 

motor 

oil 

884 
5,290 


Gallon* 
motor 
oil 
126 




9,521 
110 


'""m 


300 










Maine 


350 


^ 








3,003 
4,936 






916 


142 
2,406 
60 
33 
588 
8,442 






5,074 




123 


Massachusetts . - 


475 
823 


35 
'"i,"263" 


60 










39 




1,820 

4,879 

254 






12 




9,465 
4,345 


""7," 826' 


214 








400 


New Jersey 


2,329 
145 


2,963 

268 

4,577 


1,890 

225 

1,988 

3,602 
















7,188 
4,902 
2,604 


. . . 




60 




6.083 
3,262 


""2," 895" 


223 








170 


New York 


197 
79, 057 


143 

938 

23, 434 


156 
1,101 
7,256 
18, 759 


12 










61 




51,407 
39,511 
14,444 






277 




37.946 
15,464 


'i5,"646' 


1, 145 








623 


Pennsylvania 


35,489 
3,395 


18 

453 

6,521 


is 

229 
1,776 
7,496 


18 










61 




11,281 

17, 876 

3,409 

1,927 

385 

412 

249 






332 




16,026 

5,181 

2,505 

487 

560 

340 


"4," 865' 
""346 
'""'577' 


670 








325 








2,778 


264 








18 


Indiana 




---i- 


396 


64 




46 


Michigan.. 


2,990 










6,220 

3,709 

960 




" 


2,305 


60 
2,510 






4,416 
812 


"i,"226" 










230 


Ohio 


i 868 










4,418 
20,236 

'"i,"49i' 
640 






2,699 


288 
9,216 


289 




23, 598 
300 


"""850' 


946 






, 




Wisconsin 




315 








590 




154 

339 

115 

3,324 

4,831 




Florida 


474 
825 


530 

105 

4,385 


iifl 










61 




9,660 

3,965 

156 






763 




6,101 
734 


"2," 496 


060 








232 


Georgia 








80 










60 










513 

389 

12 






145 


Jt 






871 
135 


80 


264 


38 








18 


North Carolina. 


900 


60 
1,136 


60 
978 
385 


42 




2,696 
1,025 
2,574 
5,150 
1,450 






163 




340 
3,614 


"4," 366' 


102 








1,000 


Virginia 




2,300 


650 
620 


200 




1,450 




128 


Louisiana. 


1,500 


500 
1,905 






3,448 
1,635 






1.334 
1,108 


348 




1,748 




810 








80 


Texas 


105 

1,560 

435 


1,100 

1,699 

378 


""i,'368" 






544 


78 








220 


Montana 










Utah 


4,190 


100 
72 








2,628 
553 












95 




15 




California 


500 








2,576 






228 


















2 


3 


173 


990 


1,128 








217 













124491— 40— pt. 15a- 



8806 



CONCENTRATION OF ECONOMIC POWER 



Table 4. — Oallons motor oil purchased by dealers from distrihutors — By year of 
control (fained hy major oil company 





No. of 

Dlstrlb- 

ntors 




Gallons of 


Oallons of 


Gallons of 


Oallons of 




No. Of 


Motor Oil 


Motor Oil 


Motor Oil 


Motor Oil 




Dealers 


Purchased 


Purchased 


Purchased 


Purchased 






1936 


1937 


1938 


1939' 


Control Gained, 1935 


6 


3 


475 


35 


60 


60 




3 
20 


21 
4 


2,329 
197 


2,963 
143 


1,890 
156 






n 




13 


3 


35, 489 


18 


18 


18 




4 


4 


474 


530 


339 


186 




2 
1 


4 
1 








30 




900" 


""'eo' 


"'eo' 


42 


Total ^ 


48 


40 


39,864 


3,749 


2,523 


348 


Control Gained, 1936 


2 


3 


350 


00 


00 


00 




6 


5 


823 


00 


33 


39 




3 


4 


145 


268 


225 


00 




20 


31 


79, 057 


938 


1,101 


61 




13 


18 


3.395 


453 


229 


61 




6 


6 


2.900 


00 


00 


00 




7 


6 


868 













4 


8 


825 


105 


116 


61 




2 


2 


60 


00 


00 


00 




1 


3 


1.500 


500 


00 


00 




1 


9 


4.190 


100 


00 


00 




2 


1 


500 


00 


00 


00 


Total 


66 


96 


04.613 


2,364 


1,703 


202 


Control Gained, 1937 


2 


16 


5.043 


2,189 


884 


126 




2 


8 


3.003 


916 


142 


00 




6 


8 


1,820 


1,263 


588 


12 




3 


53 


7,188 


4,577 


1,988 


60 




20 


86 


51, 407 


23.434 


7. 256 


277 




13 


38 


11.281 


6.521 


1,776 


332 




6 


8 


6.220 


2,305 


60 


00 




7 


14 


4,418 


2,699 


288 


299 




1 


6 


1.491 


315 


00 


00 




4 


28 


9,660 


4,385 


3,324 


753 




2 


6 


513 


145 


00 


00 




1 


2 


2,696 


1.136 


978 


163 




3 


13 


6,150 


2.300 


6.50 


200 




1 


9 


3.448 


1,905 


1,334 


348 




1 


8 


2.628 


72 


00 


00 




2 


6 


2,576 


228 


00 


00 


Total 


73 


307 


118,542 


54.390 


19,268 


2,570 


Control Gained, 1938. 


2 


21 


6,001 


9,621 


6,290 


300 




2 


17 


4,936 


5,074 


2,406 


123 




6 


33 


4,879 


9.465 


8,442 


214 




3 


54 


4,902 


6,083 


3,602 


223 




20 


101 


39, 611 


37,946 


18,759 


1,145 




13 


70 


17,876 


16,026 


7,496 


670 




3 


6 


1,927 


2,505 


2,778 


254 




1 


5 


412 


560 


396 


64 




6 


6 


3,709 


4,416 


2,510 


00 




7 


28 


20,236 


23,598 


9,216 


946 




1 


1 


640 


590 


154 


00 




4 


20 


3,965 


6,101 


4,831 


969 




2 


6 


389 


871 


264 


38 




1 


1 


1,025 


340 


385 


102 




3 


5 


1,450 


1,450 


620 


125 




1 


7 


1,635 


1,748 


1,108 


310 




1 


3 


105 


1,100 


644 


78 




1 


1 


435 


378 


00 


00 




1 


2 


553 


95 


15 


00 


Total 


77 


387 


114,586 


127,867 


68,816 


6,451 


Control Gained, 1939 


2 


3 


00 


110 


179 


00 




6 


22 


254 


4,345 


7,826 


400 




3 


13 


2.604 


3,262 


2,895 


170 




20 


27 


14.444 


15.464 


15,646 


623 




13 


21 


3.409 


6,181 


4,865 


325 




3 


1 


385 


487 


346 


18 




1 


3 


249 


340 


577 


46 




00 


3 


960 


812 


1,220 


230 




7 


6 


00 


300 


850 


00 




4 


7 


156 


734 


2,496 


232 




2 


1 


12 


135 


80 


18 




1 


1 


2,674 


3.614 


4,300 


1,000 




1 


1 


00 


00 


00 


30 




1 


2 


1.560 


1.699 


1.368 


225 




2 


3 


173 


990 


1.128 


217 




65 


113 


26,780 


37,473 


43. 776 


3,534 



1 First Qnaitei 1939. 



CONCENTRATION OF ECONOMIC POWER 



8807 



Table 5. — Gallons motor oil purchased by dealers from distributors during years 
indicated. Year control gained by margin not given 



Connecticut 

Maine 

Massachusetts 

New Hampshire. 

New Jersey 

New York 

Pennsylvania 

Illinois 

Indiana 

Michigan. 

Ohio 

Minnesota 

Florida 

Georgia -. 

Vireinia... 

Alabama 

Kentucky 

South Carolina 

Texas 

Utah - 

California 



Total. 



Total of table 4 by year of control: 

Control Gained, 1935 

Control Gained, 1936 

Control Gained. 1937 

Control Gained, 1938 

Control Gained. 1939 



Total. 

Grand Total. 



No. of 
Distrib- 
utors 
who Re- 
ported 



No. of Dealers 
that Majors 
gained Con- 
trol of and 
whom Dis- 
tributors 
were supply- 
ing Prior to 
Control 



7 
6 

51 

8 

106 

53 

no 

7 

1 

48 

19 

18 

31 

37 

23 

2 

7 

21 

1 



Gallons 
Motor 
Oil 1936 



00 

755 

19, 212 

00 

9,334 

9.948 

46, 6S1 

450 

238 

810 

2,000 

00 

3, 353 

3,592 

250 

00 

00 

00 

106 

515 

3,720 



101, 164 



39, 864 
94, 613 
118,542 
114,586 
26,780 



394,385 



495, 549 



Gallons 
Motor 
Oil 1937 



117 

718 

17, 436 

705 

12, 106 

10. 474 

41,974 

1,850 

246 

590 

1,500 

6,010 

2,702 

2,663 

250 

00 

00 

00 

120 

410 

3,509 



102, 440 



3,749 
2,364 

54,390 
127, 867 

37. 473 



225,843 



328,283 



Gallonx 
Motor 
OU1938 



138 

308 

8,989 

2,193 

3.732 

9.356 

25, 834 

2,000 

146 

295 

1,000 

5,800 

2,069 

1,461 

220 

00 

00 

00 

96 

60 

2,100 



65, 797 



2,523 

1,703 

19,268 

68,816 

43, 776 



136, 086 
201,883 



Gallons 

Motor 

Oil 1939 ' 



24 
40 

1,806 
299 
00 

1,399 

2,557 
50 
66 
130 
00 
00 

1,525 
299 
60 
00 
00 
00 
00 
30 
302 



8,587 



348 

202 

2,570 

5,451 

3,534 

12, 105 

20,692 



' First Quarter 1939. 



8808 



CONCENTRATION OF ECONOMIC POWER 



Table 6.- 



-Hoio was control of outlet obtained? Type of control gained by major 
companies — All territories combined 



Major companies 


All 
other 
•types of 
excliisive 
dealing 
arrange- 
ments 


Outlet pur- 
chased by 
major oil 
company 
and oper- 
ated as a 
wholly 
owned 
station 


Control 
obtained 
by lease 

to the 
major oil 
company 
and then 
released to 

owner 


All types 
of 100% 

exclusive 
dealing 

arrange- 
ments 


Don't know 

type of 

control 

but outlet 

is 100% 
controlled 
by major 


Not 
stated 
question- 
naire 
did not 
report on 
question 
of control 


Atlantic Refining Company 




5 
5 
13 
1 


40 
29 
65 
46 
4 
2 
63 
46 
U 
U 
28 
27 
59 
70 


23 

7 
34 
11 

1 


3 

4 
28 

17 
2 


6 


Sinclair Oil Company." 


3 


3 


Standard Oil Co., New York 


26 


Standard Oil Co., New Jersey 

Standard Oil Co., Ohio 


3 


15 


Standard Oil Co., Indiana., 








Texas Company 


2 

1 


7 
12 


19 
15 
5 
2 
18 
3 

45 
29 


13 
20 

1 

1 
19 

3 
25 

9 


13 


Shell Corporation. 


18 


Richfield Oil Corporation-.... 


2 


Cities Service 


1 
2 


1 

1, 
3 
11 
3 


3 


Tidewater Oil Company . . 


25 


Pure Oil Company 


2 


dulf Refining Company <. 


2 

4 


15 


Sun Oil Company 


8 






Phillips Petroleum Company 






4 


1 
2 






Union Oil Company 










Barnsdall Corporation 


















5 

1 
2 






1 














Magnolia Petroleum Company 












Transcontinental Oil Company 






















































Signal Oil Company 














Skelly Oil Company 




12 
12 
18 

1 










All Others 


3 
4 


52 
87 
33 


22 
33 
6 


3 

32 
3 


20 


Standard 

oco-American ... 


30 
4 








Total 


25 


97 


696 


280 


186 


/ 228 
I 1,512 



CONCENTRATION OF ECONOMIC POWER 



8809 



Number of 
outlets 
majors 
gained con- 
trol of in 
territory of 
85 distribu- 
tors 1935-391 


r»»0(OOJ ^ 1-" .-«.-• OS cQ »c c^ 


lOPI 


(O-iW 










Tf t~cn 




"l 


c^ 

g 


Don't 
know the 
details of 
the agree- 
ment 


^CCt~-" 




Meo 








•"•••r 






















-HtC-H 




c 


©"5 w 




'««"* 


r-ma> 






05.-1 




















^ tT »-i 







Granting 
of addi- 
ti«nal park- 
ing lot 
facilities 




























e^ 1 






Won't 
build 
competi- 
tive sta- 
tion 


CSCJ<N>0 




'tc in 




10 


r-c^ 






















<N«:r-< 




'tj' 


a 
"3 





a 

Si 

»-« 
§• 






S.S 
p. 


mm^t~ 


rt t^r--* 


■^ lOt- 






















i/;0CT)< 




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Sinclair Oil Company... 

Standard Oil Co. of New York 

Standard Oil Co. of New Jersey 

Standard Oil Co. of Ohio 


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8810 



CONCENTRATION OF ECONOMIC POWER 



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J4 5) 







CONCENTRATION OF ECONOMIC POWER 
Table 9. — How control is enforced — all territories combined 



8811 





Character 
of contract 


Threats to 
cancel 


Threats of 

caJicel 
courtesy 
card with- 
drawal 
which 
cancels 
dealers 
right to 
grant 
credit to 
consumers 


All other 


Don't 
know 


Number of 
outlets 


Major companies 


Contract 
spiecifles 
certain 
conditions 
now com- 
pliance of 
n hich pro- 
vides 
threat of 
cancellation 


Extra 
margin 
allowed 
dealer on 
major oil 
company 
supplies 


Threats 
that are 
not gen- 
erally 
identified 


Threats 
have been 
employed 
but type 

not dis- 
closed by 

dealer 


Majors 
gained 
control of 
in territory 
of 86 dls- 
tributors 
1935-39' 


Atlantic Refining Company 


37 
13 
76 
18 

4 

2 
40 
29 

1 

9 
14 
15 
66 
41. 


20 
4 

16 
9 


24 
2 
18 
52 


1 




76 




61 


Standard Oil Co. of New York 

Standard Oil Co. of New Jersey... 


1 
4 


2 

1 


160 
93 

7 












2 




15 
15 
7 
1 

12 
10 
18 
17 


16 
14 
4 
2 
9 
5 
22 
43 


1 


_......... 


117 




112 


Richfield Oil Corpcration_ 




1» 






19 








93 






3 


38 




1 
5 


167 


Sun Oil Company - 




123 






Phillips Petroleum Company 


1 


2 








5 


1 






2 














Continental Oil Company 

Humble Oil & Reflninp Company. 


2 


1 








6 








1 












2 












































































1 
8 

35 
9 
5 








1 


All Others - - - 


36 
66 
19 
11 


5 
33 
10 

2 


4 
1 

1 


1 
1 


112 




204 




47 






60 










Total 


498 


205 


262 


19 


9 


/ 1- 512 
\ 993 





• First quarter 1939. 



8812 CONCENTRATION OF ECONOMIC POWER 

Table 10. — Conditions iefore monopoly practices — Bj/ territory 



Territory 


Was your merchan- 
dise on display? 


Did the dealer dis- 
play your curb 
and other point 
of sale signs and 
advertising ma- 
terial? 


Was there a free 
and open market 
for your motor 
oil in the ac- 
count? 


Number of 
outlets ma- 
jors gained 
control of in 
territory of 
85 distribu- 




No 


Yes 


No 


Yes 


No 


Yes 


tors 1935-39 1 


Connecticut 




46 
27 
95 

2 

200 

239 

155 

12 

9 
40 
64 

7 
18 
73 
38 

5 
12 
21 

2 

1 
20 

6 

1 
25 
31 


2 


44 

28 

71 

2 

195 

230 

148 

8 

9 

45 

48 

7 

2 

68 

36 

5 

12 
21 


1 


40 
29 
36 
6 
154 
213 
145 
7 


47 


Maine 


1 
8 
2 

31 
7 

14 


34 


Massachusetts 

New Hampshire 


12 
4 

36 
11 
13 


2 


122 
8 


New Jersey 


19 
15 
15 


25) 


New York 


302 


Pennsylvania. 

Illinois -■ 


260 
14 


Indiana . 






9 


Michigan 

Ohio 

Wisconsin __ 


23 

5 


25 
12 


43 

1 


7 
46 


71 

72 

7 


Minnesota 








18 

69 

35 

5 

12 
3 
2 


18 


Florida. 


21 


26 
2 


19 


98 
55 


North Carolina . 






5 


South Carolina - 

Virelnia 


8 


8 
1 


8 
17 


21 
23 


Alabama.- 




2 


Kentucky. 






1 
20 
5 
1 
24 
29 




7 


Louisiana •- 








20 
4 

1 
3 
28 


20 


Texas 




1 




6 


Montana 






1 


Utah.... 


1 
1 


3 




27 


California.. 


4 


32 


All Territories 


122 


1,149 


156 


1,058 


144 


883 


1,512 



' First Quarter 1939. 

Table 11. — Conditions after monopoly practices — By major company 



Major Company 



Is your mer- 
chandise now 
displayed by the 
outlet? 



No 



Yes 



Is your curb and 
other point of 
sale signs dis- 
played at the 
outlet? 



Is there a free 

and open market 

for your motor 

oil in this 

account? 



No 



Yes 



Number of 
outlets majors 
gained control 
of in territory 
of 85 distribu- 
tors 1935-39 1 



Atlantic Refining Company 

Sinclair Oil Company 

Standard Oil Co., New York 

Standard Oil Co., New Jersey 

Standard Oil Co., Ohio... 

Standard Oil Co., Indiana 

Texas Company 

Shell Corporat ion 

Richfield Oil Corporation 

Cities Service 

Tidewater Oil Company 

Pure Oil Company.. 

Qulf Refining Company 

Sun Oil Company 

Phillips Petroleum Company 

Union Oil Company... 

Continental Oil Company 

Humble Oil & Refining Company 

Magnolia Petroleum Company 

Skelly Oil Company 

All others 

Standard 

Amoco 

Total 



60 
38 
122 
80 
3 



16 

17 

61 

34 

129 

94 

4 

2 

5 

1 

2 

1 

61 

162 

39 

21 



1,126 



67 

39 

122 

79 

3 

2 

85 

84 

15 

16 

65 

34 

135 

98 

1 

2 

4 

1 

2 



67 
161 
41 
20 



38 

122 

66 

7 

2 

91 

93 

15 

16 

56 

26 

126 

90 

5 

2 

5 

1 

2 

1 

72 

166 

42 

24 



1,143 



1,136 



76 

51 

166 

93 

7 

2 

117 

112 

19 

19 

93 

38 

157 

123 

5 

2 

6 

1 

2 

1 

112 

204 

47 

59 



) First quarter 1939. 



CONCENTRATION OF ECONOMIC POWER 
Table 12. — Field survey, April 28 to May 5, 1939 



8813 



Canvasser's Report of Interview of 
what he was told 


Canvasser's Report on what he noted 
from checking Stations' practices 




No. 
of 
retail 
out- 
lets 


Sell only one 

company's 

gasoline 


Display more 

than one 
company's mo- 
tor oil #6 


Display more 

than one 

company's 

signs #7 




Yes 


No 


Yes 


No 


Yes 


No 


Washington, D. C: 

a. Company owned and operated 


93 

199 

9 


80 

198 

9 


13 
1 


22 

8 


71 

191 

9 


19 
6 


74 
193 


c. Leased by company and released 


9 








e. Individually owned and operated 


230 


142 


88 


122 


108 


89 


140 




531 


429 


102 


152 


379 


114 


416 


Columbus, Ohio: 

a. Company owned and operated 

b. Company owned and leased 


73 

222 

56 

1 

156 


73 
220 

56 

1 

153 


.. 


19 
15 
10 


54 
206 
46 

1 
63 


10 
4 
6 

73" 


63 
217 


c. Leased by company and released 

d. Leased and company operated 

e. Individually owned and operated 


50 

1 


3 


93 


82 




508 


503 


4 


137 


370 


83 


413 


New Orleans, Louisiana: 

a. Company owned and operated 

b. Company owned and leased 


47 
78 

213 
4 

190 


46 
77 

209 
4 

177 


1 

1 
3 

5" 


12 
4 
22 

1 
55 


35 
74 

190 
3 

135 


10 
3 
19 

1 
49 


37 

75 


c. Leased by company and released 

d. Leased and company operated- 

e. Individually owned and operated 


193 

3 

141 




532 


513 


10 


94 


437 


82 


349 


Portland, Oregon: 

a. Company owned and operated 


91 
170 
72 
11 
519 


90 

169 

72 

11 

509 


1 

1 


6 
15 
11 
3 
8 


85 
155 

61 

8 

344 


1 
9 
6 
2 
154 


90 
161 


c. Leased by company and released 

d. Leased and company operated 

e. Individually owned and operated 


66 

9 

364 




863 


851 


11 


43 


653 


172 


690 



8814 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OP ECONOMIC POWER 



8815 





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8816 



CONCENTRATION OF ECONOMIC POWER 



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1 



CONCENTRATION OF ECONOMIC POWER 



8817 





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8818 



CONCENTRATION OF ECONOMIC POWER 



O 





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CONCENTRATION OF ECONOMIC POWER 



8819 



^s 



060 






St: 






f:l 



sss 






352 






II 



Mg "3 Mg, 






8820 



CONCENTRATION OF ECONOMIC POWER 





S5 


oq 


w 




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1 


pa 


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3 



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CONCENTRATION OF ECONOMIC POWER 



8821 



cc 




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124491— 40— pr. 15a 7 



8822 



CONCENTRATION OF ECONOMIC I'OWEK 









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00 

•is 

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COCCCCCIMCI 



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CO — ' -^ »Q»0 

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CO h-T cc' »n w r 



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cooi-^ ooooo 



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lA lO >C IC *C 



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■^ t^ O O O <3> 



■<** '^ tt W3* 00 

w ,-H M cocir* 

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coooc^i Tf a> ^ 

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t^ O CO -^r c^ 

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CO CD CO CD *0 



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cotjTio lo^-^ 



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coos oo-^o 
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O^MCO'^P^ 

0> 0> OS OS o> 3 



CONCENTRATION OF ECONOMIC POWER 



8823 



■^cocococ 



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^^ O O Ob 00 o> 



eoeocociOiCi 



03 cc o^ ^o> to 

■^(N O »0 -^ O 



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<-i OCC -- OS 
^ OOOi OOO 



occoco ecco 

coo — OOM 



*-^MC^N 






CO CO CD O ^ >0 



00 CO *C 00 <N •-< 
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t- »o Oi ooo r- 



r* ■-< CO »o uD ■« 



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lO Cfl 00 ^ o »-< 

cDoo cccD ^ go 

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CO OS tO CO occ 
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CO ^ r* 00 00 00 



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c< C4 c5 c^^ c^ c4 



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CO CO u^ O cO O 



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8824 CONCENTRATION OF ECONOMIC POWER 

Table 8. Service stations supplied on 100 per cent basis 





Service Stations 


Per cent of total 


As of January 
1— 


Company owned— 


Noncompany 

owned but 

supplied on 

100 per cent 

basis ' 


Total 


Company owned— 


Noncompany 
owned but 




And 
operated 


Operated 
by others 


And 
^operated 


Operated 
by others 


supplied on 

100 per cent 

basis 




Integrated companies 


1930 


16, 976 
20,780 
22,501 
24,627 
24,248 
23,761 


6,509 
8,125 
7,930 
7,770 
9,480 
10, 16C 


138, 242 
158, 471 
173,388 
177, 929 
179, 024 
180.047 


161, 727 
187, 376 
203,819 
210, 326 
212, 752 
213, 974 


10.50 
11.09 
11.04 
11.71 
11.40 
11.10 


4.02 
4.34 
3.89 
3.69 
4.46 
4.75 


85.4a 


1831 


84.57 


1632 


85.07 


1933 


84.60- 


1934 


84. 14 


July 1,1934 


84.15 




Nonintegrated companies 


1930 


432 
797 
809 
802 
818 
709 


107 
120 
180 
239 
263 
408 


1,362 
1,486 
2,168 
3,448 
4,015 
4,291 


1,901 
2,403 
3,157 
4.489 
5,096 
5,408 


22.72 
33.17 
25.62 
17.86 
16.05 
13.11 


5.63 
4.99 
5.70 
5.32 
5.16 
7.54 


71.65 


1931 


61.84 


1932 


68.68 


1933 


76.82 


1934 


78. 79 


July 1, 1934.... 


79.35 




Integrated and nonintegrated companies— Combined 


1930 


17,408 
21, 577 
23,310 
26,429 
25,066 
24,470 


6,616 
8,245 
8,110 
8,009 
9,743 
10, 574 


139.604 
159, 957 
175, 556 
181, 377 
183, 039 
184, 338 


163, 628 
189, 779 
206,976 
214,815 
217, 848 
219, 382 


10.64 
11.37 
11.26 
11.84 
11.51 
11. 15 


4.04 
4.34 
3.92 
3.73 
4.47 
4.82 


85.32 


1931 


84.29 


1932 


84.82 


1933 


84.43 


1934... 


84.02 


Julyl, 1934 


84.03 



> See note on Table No. 7. 



CONCENTRATION OF ECONOMIC POWER 8825 



EXHIBITS 

HYGRADE OIL & FUEL CORP. 

l070.io»e NIAGARA ST. ^JH[|^^ BUFFALO, NEW YORK 



March 18th, 1939. 



To all Managers and Tenants 
on Hygrade-Gulf Stations: 



It has been dravm to ny attention 
that a man, who was previously enployed by us, 
is offering to various station managers and 
operators Oil for resale on their stations. 
He has been using the argument "Others are 
doing it; why not you?" 

Hay I call your attention to the 
unfairness of such a suggestion, and. point out 
to you that wherever such oil is found on a 
station, inoediate cancellation of our arrange-! 
ment with the tenant or manager will obtain. 



HYGRADE OIL & FUEL CORPORATION 
By rxA/hAaA^l^.^yt^ 
AGU:S 



riA/hAnAJA^A 

fj Presidtot. 



I^jj^ GULF PETROLEUM PRODUCTS mllA 



8826 CONCENTRATION OF ECONOMIC POWER 









s^ 



V=t^ >^^yt,.g^ j:^i^£t—^ ■^^:^,«< _- >^-*«-<, ^^i^t-?-'- i^-»«_t-' (^-^7 

<Za^^ a/' >6:W^gg^.>^:t:r .i;?-.^ ^-,^->a>^ "*>g^ ^i^:<-«*^-«^ .^^aUk.^ 

^-»^ ^t/ -<- »^ 'P^t^/- g^^«!g<-<-«»' -<=^iglg^ i:^<-y .«»-.-t-g^ pi^^g-^ y^Jt-fc^ ^^g^-g^. 













<0. >J^CL,:^,.T^,i^^x-^L.,..c_J'^f>At^ 



CONCENTRATION OF ECONOMIC POWER 



8827 



PHILLIPS PFJKOLELIM COMPANY 



ATlONAL CREDIT ID£Mr!fiC»MON CARD 



VOID ARER 
M«r. 31, 1939 



R. V. Rxd«r 

3453 Colfax AT«. S. 

mnnaapolla, Kinn. 



NOT VALID UNLUS SI6NE0IT CUSTCMII 



<^Vj^^:^^^Ll.^i^ 



RM 50086 



PHILLIPS PETROLEUM COMPANY 

NATIONAL CREDIT IDENTIFICATION CARD 



VOID AFTER 
Mar. 31. 1939 



• 



R. V. Ryder 

3453 Colfax Ave, s. 

MinneapoliSt Minna 



NOT VALID UNLESS SIGNED BY CUSTOMER 



8828 



CONCENTRATION OF ECONOMIC POWER 



THC TttMS OF ISIM 



I AMD DlAifat I 



ACCOUNTS AM CUE ANO PArABLf Br THt lOJH Of THE UONIH 
SU»S«JUtNT 10 DEUVtRT. ANO THIS CAHO MAT IE CANCHIEO AI ANT 
TIME WITHOUT NOTICE UfON NONPAYMENT OF ACCOUNT Hf DUE DATE. 
MOlMt A6lfC3 TO rtOMPTlr NOdfT ISll 



IIS HAMt. ANO TXI AUTHOimO HOlOCt _ 

MCH niSON HIRHjriOlt. 

CREDIT EXTENDED HEDEUMOU SHALL W AT THE OPTION OF THE OCALEK. 



THE TERMS OF ISSUE 



THIS CARD IS ACCEPTED BY THE INDIVIDUAL uR FIRM WHOSE NAME AND SIGNATURE 
APPEARS HEREON FOR HIS OR THEIR EXCLUSIVE USE IN PURCHASING PETROLEUM 
PROOCCTS. TIRES. BAHERY. ACCESSORY AND LUBRICATING SERVICE REGULARLY 
SOLO FOR CREDIT BY THE AUTHORIZED DEALERS OF PHILLIPS PETROLEUM COMPANY 
AND SERVICE STATIONS ANO DEALERS OF ANY OF THE UNDERNAMED COMPANIES: 



COLONIAL BEACON OIL CO.. INC. 
STANDARD OIL CO. OF NEW JERSEY 
STANDARD OIL CO. OF PENNSYLVANIA 
THE STANDARD OIL CO. (OHIO) 
STANDARD OIL CO. (KENTUCKY) 
STANDARD OIL CO. OF LOUISIANA 
KESBEC. INC.. NEW YORK CITY 
HUMBLE OIL & REFINING CO. 



THE CALIFORNIA COMPANY 

:IN MONTANA ^ WYOMING ONLY 
STANDARD OIL CO. OF CALIFORNIA 
STANDARD OIL CO. OF B. C. LTD. 
UNION OIL COMPANY OF CALIFORNIA 
UTAH OIL REFINING COMPANY 
UNION OIL CO. OF CANADA. LTD. 
IMPERIAL OIL. LIMITED— CANADA 



STANDARD OIL CO. OF. TEXAS (NOT GOOD IN NEW MEXICO) 

ACCOUNTS ARE DUE AND PAYABLE BY THE lOTH OF THE MONTH 
SUBSEQUENT TO DELIVERY. AND THIS CARD MAY BE CANCELLED AT ANY- 
TIME WITHOUT NOTICE UPON NON-PAYMENT OF ACCOUNT BY DUE DATE. 

HOLDER AGREES TO PROMPTLY NOTIFY ISSUING COMPANY IN WRITING SHOULD THIS 
CARD BE LOST OR STOLEN. IF NOTICE IS NOT GIVEN. IT SHALL BE PRESUMED THAT PARTY 
PRESENTING THIS CARD FOR CREDIT IS AUTHORIZED TO MAKE PURCHASES IN THE HOLD- 
ER'S NAME. AND THE AUTHORIZED HOLDER WILL PAY FOR ALL PURCHASES FURNISHED 
SUCH PERSON HEREUNDER. 

CREDIT EXTENDED HEREUNDER SHALL BE AT THE OPTION OF THE DEALER. 



CONCENTRATION OP ECONOMIC POWER 



8829 




National Credit Cards 

ARE ISSUED BY 

PHILLIPS PETROLEUM COMPANY 

and the following: 

, Beacon Oil Company, Inc. 

(New England) 

Standaud Oil Co. of New Jersey 

Standard Oil Co. of Pennsylvanit 

The Stanoa«d Oil Co. (Ohio) 

Stanoaao Ou Co. (Kentucky) 

Standard Oil Co. of Louisi 

Kc»EC Inc., New York City 

HuMtLc Oil and RtriNiNC Co. (Teui) 

Standard Oil Co. of Teiu 

(Not good in New Mciico) 

The California Co. 

(In Montani ind Wyoming only) 

Standard Oil Co. of Ctlifornia 

Standard Oil Co., B.C. Limited 

Union Oil Co. ofCilifomia 

Utah Oil Rcpininc Co. 

Union Oil Co. of Canada, Ltd. 

Imperial Oil, Ltd. Canada 



REDIT CONVENIENCE 

from 
COAST-TO-COAST 



8830 



CONCENTRATION OF ECONOMIC POWER 




A Nation-wide Service to Motorists Only One Monthly Statement 



With the New York WorWs Fair and the Golden Gate 
International Exposition already looming large on 
the travel horizon, Phillips Petroleum Company and 
a group of well known oil companies have arranged a 
reciprocal credit plan for the convenience of touring 
motorists. Wherever you go, from coast-to-coast, and 
in Canada, your Phillips 66 National Credit Card wili 
be recognized at all stations of the companies shown 
above. We are happy to be able to offer this conven- 
ience to Phillips credit customers' and we will be glad 
to have vou mention this service to vour friends. 



The advantages of the plan are obvious. No matter 
where in the United States or Canada the purchases 
are made, whether gasoline . . . oil . . . lubricating 
service . . . tires . . . accessories . . . they will all be in- 
cluded in your regular monthly Phillips statement. 
We trust your Phillips 66. National Credit Card will 
be of use to you this year and we hope it will add to 
your motoring pleasure. 

All Phillips 66 distnbutors carry a supply of new 
up-to-date road maps of nearby states which should 
be of value in planning week-end trips or vacations. 
You may have as many as you want. 



CONCENTRATION OF ECONOMIC POWER 



8831 



THE CLEVELAND TRUST COMPANY BUSINESS BULLETIN 



Volume 16, No. 2 
February 15, 1935 



the same sort of preference is operative. The 
production of grasoline has held up daring 
this depression far better than that of doth- 
insr, or shoes, or of processed foods, and has 
made durinsr 1934 a new high record. More- 
over gasoline consumption did not show any 
depression reduction until 1932 and 1933, 
and it has already recovered all the lost 
ground and something more. 





CONSUMPTION OF NECESSITIES 

I92S3I00 


























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Even during hard times 
CoBsnmption Americans give to gasoline a 

foremost rank among the 
necessities of life. This may seem to be an 
amusing fact rather than an impressive one, 
but it is in reality one of the important Eco- 
nomic developments of the depression. It 
has already become clear that the vigorous 
expansion of production by the automobile in- 
dustry has been the most important single 
factor in the recovery that has so far taken 
place. The development which we need most 
is a large increase in the volume of residen- 
tial construction, but the one that we are 
getting is a strong advance in the output of 
automobiles. 

If we turn from the consideration of such 
important purchases as those of new auto- 
mobiles and new hom^s to the smaller ones 
of individual consumption goods, we And that 



In the diagram the four lines are arranged 
to show the changes in the consumption of 
gasoline, shoes, processed foods, and cloth- 
ing during the past seven years on the basis 
of the records for 1928 being taken as equal 
to 100. The data for gasoline represents con- 
sumption, those for shoes and processed 
foods show production, and the line for 
clothing represents the changing numbers of 
people engaged in producing clothes. 

The volume of food produced declined from 
1928 to 1932, and has recovered in 19S4 al- 
most to the 1928 level. The output of shoe? 
dropped abruptly at the beginning of the 
depression, and reached its lowest point in 
1930. Apparently economies in shoe pur- 
chases were among the first to be generally 
adopted. By 1934 all the loss had been re- 
covered. Gasoline consumption has been but 
little, and only temporarily, affected by the 
depression. Apparently it ranks in popular 
esteem ahead of other things that we have 
become accustomed to think of as being the 
foremost necessities of life. 



-8832 



CONCENTRATION OF ECONOMIC POWER 



»OAR0 OF MANACen 

HON GCOflCC AIKEN 

HON AUXANOCft ARMSTftONC 



HON (lOeCftT L COCHRAN 

Ce*«Ne> o* Nvbroika and Cholri — w «f 



THE COUNCIL OF STATE GOVERNMENTS 

1313 EAST 60TH STREET, CHICAGO, ILLINOIS 

NCW TOW OfnCL Jtt FlfTH AVtNUC 



GOVCiINO* nOtOT I. COCHtAN 
MCNUT W. ICXA 
niAMCIANC 



• 



HON. HAtOCO C OSTCtTAG 

(>«*•*«• el BooH 

HOM. C H MOOItSSnT 

HON. CLLWOOO ). TVRNU 



HOK SMCON E lEi.AND 

M«y 25, 1979 



"r. Adam Donfild 
8 East 46th Street 
New York, N, I. 

Dcnr V.r. Donald: 



HON. MASK GAAVCS 
(N wl^ w t, Nm Yofi Swt Toi 



HON. HCNRY HOfiNER 



N HCNIIY f LONG 
v tf iwwlwloww el C e i uo ill u el «Mrf 



HON. JAMfJ O MOMIOC 



HON HA>OU> C. OSTCRTAG 
».>■ lib. el Ne. YeA legKlMte 

tCNAIO* HENKY FAUXMAN. Jt. 
Pwi<le<H. , 

AwKterten 



HON ELLWOOO ) riMNU 



Mr. Albert Lepawsky, Executive Director of the 
Federation of Tea Administrators, bee forwarded to u? a copy 
of your Inquiry of 'lay 20 concerning the sources of pressure 
for state trade barrier legislation. 

You, of course, realite th^t it 1? almost Impossible 
It Tiake any general statement In this regard since con'Utlons 
vary so much from state to state and they vary also enormously 
depending upon the type of trade barrier legislation consl^'ered. 

For Instance, preference for home purchases has nst- 
urelly come from retailers In the smaller states an'^ from 
large manufacturers In the manufacturlnR stntes. On the 
.other hand, preferences for home labor In the construction 
of oubllc works has come from labor organisation?. 

Discriminatory beer legislation hfs largely D en 
the result of pressure from the Iprge interstate brewers and 
the local brewers, depending upon the type of barrier which 
has been set up. Both types have been adopted by states. 
Again, most barrier laws on wines or discriminatory taxation 
of out-of-state wines have been the result of pressure by 
organised grape gro/ers. 

In the Instance of motor vehicle barrier lepisletlon, 
local trucking concerns hfve plnyed a part and the reilroada 
have also been responsible. 

In very few Inrtences could it be said that these 
laws have been adopted by the state leglslntures merely for 
the purpose of raising revenue. In most cases 11* tie or 
no revenue Is reall-ed,; a'l an instance, the revenue from 
the high taxes and license feec for the sele of oleomargarine 
in Wisconsin amounted, I em inforaed. to but flf.S over on^ 



HON KXN •. WLSON 
SecMsUe el aae 



AKWMe d Aileeea 
: SDUTM CCOIGC WOOOWAW 

><|l>llrf>»» H |tlWl|0»««^ 



three-year period. In a state like Wisconsin, the pressure for 
barrier againet the use of oleomargarine rvnturally cones froa 
both dairy farmers and the manufacturers of dairy productSe 

In the south, cotton farmers and cottonsead manufacturers 
have urged the adoption of legislation penalizing oleomargarine 
only if it is mtide from oils im;iorted from outslr'e the United 
States. 

Therefore I feel it is almost impossible to make definite 
statements concerninK those pressures which have caused the adaption 
of trade barrier laws. 



Very sincerely. 



SGHiEC 




yXuf-yc^ 



CONCENTRATION OF ECONOMIC POWER 883S 



CLARK UNIVERSITY 

WeaCOm. MAfSACHUWTT* 

■c««o»c« AMD aecwiAaT 



<yim^lUMJ. . ^ ^V^^c^f~L yC^y^a^ yCiZAt*^ ^^t^.-^-^!e^lM^f' 'i-t^ ff^u^^^^ 

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8834 CONCENTUA'JHON OF ECONOMIC POWER 



ly/ (l£.eU*^ /9-^^ Za^iU^ cuXZc/y^^^i^.^JL^ ''^W^x^ Qit<rvttuM4T 
/^ ,i^5,,<^<jA.J*^uwu<^i^>-t*^ cJCeCu^ /<l^^^ Za^jU^ 'tvBfc^ ^».<i5x«^ ,aZ»^^ 



St^e. /fyC-^^ /^U*<t; ^>--^^<r-»4.t.4t^ ffl-ct-«-*H*-i '/LtaL^ A.c<^ /IntayLc^tA^ 
^rVv^ ^tfV-t<. Ayi,A^ lyut^o^ul. &-«-x^%.<,Ji^6eJcc 



au^U^ 



Exhibit No 12ia-A 




IFactp. 8S39-NO I) 



88i 



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MAP OF 

GREATER 

NEW ORLE/NS 

L OL ISIAN A 

COMP L£D t DRAWN NOC^eNOE 



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Exhibit No. 1210-D 




CONCENTRATION OF ECONOMIC POWER §835 






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