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that underselling to drive a rival from a market was one of the evils he was called to cure, he did not hesitate to employ it himself. Indeed, he had long used his freedom to sell at any price he wished for the sake of driving a competitor out of the market with calculation and infinite patience. Other refiners burst into the market and undersold for a day; but when Mr. Rockefeller began to undersell, he kept it up day in and day out, week in and week out, month in and month out, until there was literally nothing left of his competitor. A former official of the Empire Transportation Company, who in 1877 took an active part in the war his company was waging against the Standard, once told the writer that in every town, north or south, east or west, in which they already had a market for their refined oil, or attempted to make one, they found a Standard agent on hand ready to undersell. The Empire was not slow in underselling. It is very probable that in many cases they began it, for, as Mr. Cassatt says, "They endeavored to injure us and our shippers all they could in that fight, and we did the same thing."

In spite of the growing bitterness and cost of the contest, the Empire had no thought of yielding. Mr. Potts's hope was in a firm alliance with the independent oil men, many of the strongest of whom were rallying to his side. At the beginning of the fight he had very shrewdly enlisted in his plan one of the largest independent producers of the day, Mr. B. B. Campbell, of Butler. "Being a pleasure and a duty to me," says Mr. Campbell, "I entered into the service with all the zeal and power that I have. I made a contract with the Empire Line wherein I bound myself to give all my business to this line." At the same time Mr. Potts sought the help of the man who was generally accepted as the coolest, most intelligent, and trustworthy adviser in matters of transportation the Oil Regions had, Mr. E. G. Patterson, of Titusville. Mr. Patterson was a practical railroad man, and an able and logical opponent of the rebate and "one shipper" systems. He had been prominent in the fight against the South Improvement Company, and since that time he had persistently urged the independents to wage war only on the practice of rebates

to refuse them themselves and to hold the railroads strictly to their duty in the matter.

Several conferences were held, and finally, in the early summer, Mr. Potts read the two gentlemen a paper he had drawn up as a contract between the producers and the Empire. It speaks well for the fair-mindedness of Mr. Potts that when he read this document to Mr. Campbell and Mr. Patterson, both of whom were skilled in the ways of the transporter, they "accepted it in a moment." The Pennsylvania Passes a Dividend

"It was made the duty of Mr. Patterson and myself to get signatures of producers to this agreement," says Mr. Campbell, "in a sufficient amount to warrant the Pennsylvania road entering into a permanent agreement. The contract, I think, was for three years." The attempt to enlist a solid body of oil men in the scheme was at once set on foot, but hardly was it under way before troubles of most serious import came upon the Pennsylvania road. A great and general strike on all its branches tied up its traffic for weeks. In Pittsburg hundreds of thousands of dollars' worth of property were destroyed by a mob of railroad employees. It is not too much to say that in these troubles the Pennsylvania lost millions of dollars; it is certain that as a result of them the company that fall and the coming spring had to pass its dividends for the first time since it commenced paying them, and that its stock fell to twenty-seven dollars a share (par being fifty dollars). Overwhelmed by the disasters, Mr. Scott and Mr. Cassatt felt that they could not afford any longer to sustain the Empire in its fight for the right to refine as well as transport oil.

The Standard Pays Fifty Per Cent.

While the coffers of the Pennsylvania were empty, those of the Standard were literally bursting with profits; for the Standard, the winter before this fight came on, had carried to completion for the first time the work which it had been organized to accomplish, that is, it had put up the price of refined oil, in defiance of all laws of supply and demand, and held it up for nearly six months. The story of this dramatic commercial hold-up

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portation Company. 'The Standard wanted us to do so," says Mr. Cassatt.

and cars; we objected to buying the pipe lines, and it resulted in their buying them and the refining plant.

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cannot be told in this chapter; it is enough for present purposes to say that in the winter of 1876-77 millions of gal-"They wanted us to buy the pipe lines lons of oil were sold by Mr. Rockefeller and his partners at a profit of from fifteen to twenty-five cents a gallon. The curious can compute the profits; it certainly ran into the multi-millions. dividend of fifty per cent. was paid for the year following the scoop, and "there was plenty of money made to throw that dividend out twice over and make a profit," Samuel Andrews, one of the Standard's stockholders, told an Ohio investigating committee in 1879. The Standard then had a war budget big enough for any opposition, and it is not to be wondered at that the Pennsylvania, knowing this and finding its own treasury depleted, was ready to quit.

The Pennsylvania Surrenders

It was August when Mr. Scott and Mr. Cassatt decided to give up the fight. Peace negotiations were at once instituted, Mr. Cassatt going to Cleveland to see Messrs. Rockefeller, Flagler, and Warden, who was visiting them there. Later, the same gentlemen met Mr. Scott and Mr. Cassatt at the St. George Hotel, in Philadelphia. "The subject of discussion at these meetings," said Mr. Cassatt in 1879, when under examination, "was whether we could not make some contract or agreement with the Standard Oil Company by which this contest would cease. They insisted that the first condition of their coming back on our line to ship over our road must be that the Empire Transportation Company, which company represented us in the oil business, must cease the refining of oil in competition with them. The Empire Transportation Company objected to going out of the refining business. The result of this objection Colonel Potts stated in 1888. "Our contract with the Pennsylvania Road gave to them the option, at any time they saw proper, upon reasonable notice, of buying our entire plant; they exercised that option." Was that at your request or desire ?" the chairman asked the colonel. "No, sir. It was at the request of the Pennsylvania Road through their officials."

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The question then came up as to who should buy the plant of the Empire Trans

The negotiations were carried on in Philadelphia, Mr. Rockefeller and Mr. Flagler mainly representing the Standard. A substantial agreement was reached about the 1st of October. The agreement would have been probably perfected about that time except that the counsel for the Empire line thought it was necessary that they should advertise the fact that they were going to sell their property, and have a meeting of their stockholders and get their assent to the sale before the papers were finally signed."

This meeting of which Mr. Cassatt speaks was held on October 17th.

Funeral Oration of the Empire

Colonel Potts made a statement to the stockholders which he began by a brief review of the growth of the company from the point when twelve years before it had started as a new route charged with the duty of meeting formidable competitors. He pointed out that at the close of the twelfth year the company was the owner of a large fleet of lake vessels, of elevators and docks at the city of Erie, of improved piers in New York, of nearly five thousand cars, of over five hundred miles of pipe lines, of valuable interests in refineries, of all the appliances of a great business. In these twelve years, Colonel Potts told his stockholders, the organization had collected more than one hundred million dollars, and in the last year their cars had moved over thirty thousand miles of railway. He explained to the stockholders the condition of the oil business, which had made it necessary, in his judgment, for the Empire Transportation Company to go into the refining business. It was done with the greatest reluctance, Colonel Potts declared, but it was done because he and his colleagues believed that there was no other way for them to save to the Pennsylvania Road permanently the proportion of the oil traffic which they had acquired in the twelve years in which they had been in business. He reviewed, dispassionately, the circumstances which had led the

Pennsylvania Road to ask the company to give up its refineries. He stated his reasons for deciding that it was wiser for the Empire to resign its contracts with the Pennsylvania and go into liquidation than to submit to the demands of the Standard interests.

Colonel Potts followed his statement by an abstract of the agreements which had been made between the Standard people and the Empire. By these agreements the Standard Oil Company bought of the Empire Transportation Company their pipe line interest for the sum of $1,094,805.56, their refining interests in New York and Philadelphia for the sum of

$501,652.78, $900,000 worth of Oil Tank

Car Trust, and they also settled with outside refiners and paid for personal property to the extent of $900,000 more, making a total cash payment of $3,400,000. Two millions and a half of this money, Colonel Potts told the stockholders, would be paid that evening by certified checks if the agreements were ratified.

"Not knowing what your action might be at this meeting," he concluded, "we are still in active business. We could not venture to do anything that would check our trade, that would repel customers, that would drive any of them away from us. We must be prepared if you said no to go right along with our full machinery under our contract, or under such modification of that as we could fight through. We could not stop moving a barrel of oil. We must be ready to take any offered to us; we must supply parties taking oil. There was nothing we could do but what was done; nothing was stopped, nothing is stopped, everything is going on just as vigorously at this moment through as wide an extent of country as ever it did, and it will continue to do so until after you take action, until after we get these securities or the money. That, we suppose, will be about six o'clock to-day, if you act favorably, and at that time we shall, if everything goes through, telegraph to every man in our service, and to the heads of depart

ments what has been done, and at twelve o'clock to-night we shall cease to operate anything in the Empire Transportation Company."

The stockholders accepted the proposition, and that night at Colonel Potts's

office on Girard Street, Philadelphia, Mr. Scott and Mr. Cassatt, of the Pennsylvania Railroad, Colonel Potts and two of his colleagues in the Empire, and two of the refiners with whom he was affiliated, met Mr. Wm. Rockefeller, Mr. Flagler, Mr. Warden, Mr. Lockhart, Mr. Charles Pratt, Mr. J. A. Bostwick, Mr. Daniel O'Day, and Mr. J. J. Vandergrift, and their counsel, and the papers and hecks were signed and passed which wiped cut of existence a great business to which a body of the best transportation men the State of Pennsylvania has produced had given twelve years of their lives.

Absorption of the Pipe Lines Complete

The pipe lines thus acquired were at once consolidated with the other Standard lines. Only a few independent lines, and only one of these of importance-the Columbia Conduit-now remained in the Oil Regions. The downfall of the Empire was quickly followed by their collapse, and early in 1878 they were all consolidated with the United Pipe Lines and the American Transfer Company. Mr. Rockefeller was now master of the entire pipe line business.

The Pennsylvania Railroad, in return for its subjection to the Standard's demands in regard to the Empire, was insured forty-seven per cent. of all the oil shipped eastward. From the Standard alone it was to receive not less than two million barrels a year. The Pennsylvania was to allow the Standard such rates as might be fixed from time to time by the four trunk lines,* care being taken to provide that these rates should be dropped to meet lower rates which might be offered by the opening of competing lines. On these fixed rates Mr. Rockefeller was to have a rebate of ten per cent. agreement with the Pennsylvania stipulated also that no other shipper should be allowed any rebate unless he guaranteed the Pennsylvania the same profit it realized from the Standard trade. Meek Obedience of the Pennsylvania

The

The Pennsylvania fulfilled its new agreements meekly and faithfully. In February, 1878, the American Transfer Company, a part of the Standard Oil

* The Baltimore and Ohio came into the railroad pool in 1877, after resisting the Standard's overtures for some five years.

Company, it will be remembered, asked for a rebate of at least twenty cents on each barrel of crude oil received and shipped over the road. The Central and Erie were granting it, Mr. O'Day told Mr. Cassatt.

The rebate was promptly

granted In the summer an advance of the ten per cent. rebate was asked, on the ground that the independents were opening a new route which might injure Mr. Rockefeller's supremacy. The rebates were increased until oil on which the open rate to seaboard was $1.90 was shipped In for the Standard at eighty cents. November, 1879, the Acme Oil Company shipped oil from Titusville to New York for 663 cents, that company alone receiving a rebate of sixty-three cents.

The Pennsylvania lived up as faithfully to its agreement in regard to rival shippers as it did to those concerning rebates. The independents, who in the summer of 1877 were preparing to ally themselves permanently with the road, were dropped immediately when peace negotiations were begun, and a letter of remonstrance they sent Mr. Scott at the time was never answered. The experiences of several of these independents have been recorded in court testimony. One or two will suffice here. For instance, among the Eastern refiners was the firm of Denslow & Bush; their works were located in South Brooklyn. They had begun in a very small way in 1870, and by 1879 were doing a business of nearly a thousand barrels of crude a day. They had transported nearly all their oil by the After that line went out Empire line.

of business in October, 1877, the contract with Denslow & Bush was transferred to the Pennsylvania Railroad Company. This contract terminated on the first day of May, 1878. Some time in March they received formal notice of its expiration, and solicited an interview with the officers of the Pennsylvania Railroad in order to make some arrangements for the further transportation of their oil. Mr. Cassatt named New York. The meeting was held at Mr. Denslow's office, 123 Pearl Street. Besides Mr. Bush, there were present to meet Mr. Cassatt, Messrs. Lombard, Gregory, King, H. C. Ohlen, and C. C. Burke, all independents. When Mr. Bush was under examination in the suit against the Pennsylvania he gave

an account of what happened at this interview:

Mr. Cassatt's Frank Language to Independents

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We asked Mr. Cassatt what rate of freight we should have after the expiration of these contracts, whether we should have as low a rate of freight as the Standard Oil Company or any other shipper? He said, "No." We asked why. "Well, in the first place, you can't ship as much oil as the Standard Oil Company." "Well, if we could ship as much oil ”— I think Mr. Lombard put this question-" would we then have the same rate?" He said, "No." Why?" "Why you could not keep the road satisfied; it would make trouble.' And he remarked in connection with that, that the Standard Oil Company was the only party that could keep the roads harmonized or satisfied. He intimated, I believe, that each road had a certain percentage of the oil business, and they could divide that up and give each roads its proportion, and in that way keep harmony, which we could not do. Right after that he made the remark that he thought that we ought to fix it up with the Standard; we ought to do something so as to all go on and make some money, and I think we gave him very distinctly to understand that we didn't propose to enter into any "fix up" where we would lose our identity, or sell out, or be under anybody else's thumb. I believe that he went so far as to say that he would see the Standard, and do everything he could to bring that thing about. We told him very clearly that we didn't want any interference in that direction, and if there was anything to be done, we thought we were quite capable of doing it. The interview perhaps lasted an hour. There was a great deal of talk of one kind and another, but this is, I think, the substance. This interview was in March, 1878, I think.

Another interview at which I was present was either in June or July. Mr. Scott was present. Mr. Scott Corroborates Mr. Cassatt

This interview was brought about because we had been deprived, as we believed, of getting a sufficient number of cars we were entitled to. We had telegraphed or written to Mr. Cassatt-at least Mr. Ohlen, our agent, had, on several occasions, and tried to get an interview, and finally this one was appointed, at which Mr. Scott would be present When we arrived there we found Mr. Brundred, from Oil City, and Mr. Scott went on to state that he thought that we were receiving our fair proportion of cars. They tried to make us believe and feel, I suppose, that we were getting our due proportion, when for some considerable time previous to this we had not been able to do any business in advance; we could only do business from hand to mouth. We could not sell any refined oil unless we absolutely had the crude oil in our possession in New York, and Mr. Lombard, one of our number, had sold a cargo of crude oil, I think, of 9,000 barrels, and Denslow & Bush absolutely stopped their refinery for three weeks consequently, in order to let their oil go to Lombard & Ayers to finish their vessel, because they would only get three or four cars a day; and we stopped our place for three weeks to give them our crude oil, all we could give-our proportion-in order to

lift them out and get their vessel cleared. After trying to impress upon us that we were getting our proportion of cars, we asked Mr Scott substantially the same question we asked Mr. Cassatt in New York, whether we could have, if there was any means by which we could have, the same rate of freight as other shippers got, and he said flatly, "No"; and we asked him then if we shipped the same amount of oil as the Standard, and he said, "No," and gave the same reasons Mr. Cassatt had in New York, that the Standard Oil Company were the only parties that could keep peace among the roads. We stated to Mr. Scott that we would like to know to what extent we would be discriminated against, because we wanted to know what disadvantage we would have to work under. And we went away very much dissatisfied. All the information we got on that point was from Mr. Cassatt in New York, when he stated that the discrimination would be larger on a high rate of freight than on a low rate of freight, which led us to infer that it was a percentage discrimination. That is all the point that I recollect we ever got as to the amount of the commission. We told Mr. Scott that if they hadn't sufficient cars on their road we would like to put some on, and he told us flatly that they had just bought out one line and they would not allow another one to be put on; that if they hadn't cars enough they would build them. He seemed to show considerable feeling that afternoon, and he said: "Well, you have cost us in fighting for you now a million dollars" (or a million and a half, something like that a very large sum), "and we don't propose to go into another fight."

An Independent Who Tried Again Not only were there men in the refining business who were willing to fight under these conditions, there were men among the very ones who had succumbed at the opening of the Standard's onslaught who were ready to try the business again. Among these was Mr. William Harkness, whose experience up to 1876 was related in the preceding chapter of this history. Mr. Harkness's next experience in the oil business was related to the same committee as that already quoted:

"When I was compelled to succumb," he said, "I thought it was only temporarily; that the time would come when I could go into the business I was devoted to. We systematized all our accounts and knew where the weak points were. I was in love with the business. I selected a site near three railroads and the river. I took a run across the water-I was tired and discouraged and used up in 1876, and was gone three or four months. I came back refreshed and ready for work, and had the plans and specifications and estimates made for a refinery that would handle 10,000 barrels of oil a day, right on this hundred acres of land. I believed the time had arrived when the Pennsylvania Railroad would see their true interest as common carriers, and the interest of their stockholders and the * Commonwealth of Pennsylvania vs. Pennsylvania R.R., United Pipe Lines, Etc.

business interest of the city of Philadelphia, and I took those plans, specifications and estimates and I called on Mr. Roberts, president of the Pennsylvania Railroad Company. I had consulted one or two other gentlemen, whose advice was worth having, whether it would be worth my while to go to see President Roberts. I went there and laid the plans before him, and told him I wanted to build a refinery of 10,000 barrels capacity a day. I was almost on my knees begging him to allow me to do that. He said, 'What is it you want?' I said, ‘I simply ask to be put upon an equality with every body else, and especially the Standard Oil Company.' I said, 'I want you to agree with me that you will give me transportation of crude oil as low as you give it to the Standard Oil Company or anybody else for ten years, and then I will give you a written assurance that I will do this refining of 10,000 barrels of oil a day for ten years.' I asked him if that was not an honest position for us to be in; I, as a manufacturer, and he, the president of a railroad. Mr. Roberts said there was a great deal of force in what I said, but he could not go into any written assurance. He said he would not go into any such agreement, and I saw Mr. Cassatt. He said in his frank way, 'That is not practicable, and you know the reason why.'

"The Good of the Oil Business"

Controlling fully ninety per cent. of the refining interests of the country, controlling the entire pipe line, or oilgathering system, recognized by the four great trunk lines as the autocrat of the business, and able to bring them to his wishes by merely expressing them, able to raise the oil market to an unnatural figure and hold it there for six months, Mr. John D. Rockefeller, by the end of 1878, certainly had reason to be proud of his four-years' work. The "good of the oil business" was in his judgment worked out. There were people, however, who claimed that it was the good of Mr. Rockefeller, not that of the oil business, that had been achieved, and these people "people with a private grievance," "mossbanks naturally left in the lurch by the progress of this rapidly developing trade," the Standard officials described them-at the news of the collapse of the Empire Transportation Company began an onslaught on his creation through the press, through commercial combinations, through the courts and legislatures, which in its vigor and bitterness rivalled the Oil War of 1872. It was now to be seen whether Mr. Rockefeller was as great in defensive as he was in offensive operations.

(To be continued)

+ Hepburn Commission of 1859.

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