The United States Since the Civil WarLingley, Charles Ramsdell
History
The United States Since the Civil War
Lingley, Charles Ramsdell
United States -- History -- 1865-1921
promised the entire freight business of the Company, each to have an
assured proportion of the traffic, with freedom from rate-cutting
competition. All this was the common railroad practice of the times.
But another portion of the contract was not so common. It provided that
the roads should give the South Improvement Company rebates on all oil
shipped by its competitors and furnish it with full way-bills of all
such shipments each day. In other words, the Company was to know exactly
the amount of the business of its competitors and with whom it was being
done. The contract allowed the roads to make similar rebates with
anybody offering an equal amount of traffic, but the likelihood of such
an outcome was slender in the extreme. Armed with this powerful weapon,
Rockefeller entered upon a campaign to eliminate competition by offering
to buy out independent refiners either with cash or with Standard Oil
stock, at his estimate of the value of their property. Those who
objected to selling were shown that the alliance between the South
Improvement Company and the railroads was so strong that they faced the
alternative of giving way or being crushed. Of the twenty-six refineries
in Cleveland, at least twenty-one yielded. The capacity of the Standard
leaped from 1,500 to 10,000 barrels a day and it controlled a fifth of
the refining business of the country. When these facts came to be known
in the oil country, the bitter Oil War of 1872 began. Independent
producers joined to fight for existence, and at length the railroads
gave way and agreed to abandon the contract with the South Improvement
Company, and the legislature of Pennsylvania annulled its charter,
although in one way or another rebates continued and the absorption of
rivals went on. In 1882 the entire combination--thirty-nine refiners,
controlling ninety to ninety-five per cent. of the product--was
organized as the Standard Oil Trust. All stock-holders in the combining
companies surrendered their certificates and received in return receipts
or "trust-certificates," which showed the amount of the owner's interest
in the trust. In order to secure unity of purpose and management, the
affairs of the combination were put into the hands of nine trustees,
with Rockefeller at the head.
Public-domain text, read in full here on John Shaqi.
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