The Standard Oil

Mr. Herbert L. Pratt has been chosen to be the head of the Standard Oil Company of New York, to replace Mr. Henry C. Folger, who resigned shortly after the Board of Directors failed to secure the stockholders' consent to an increase of capitalization from $225,000.000 to $300,000,000. This shift in the oil line-up has drawn public attention to the personalities, policy, present condition and past history of this oldest of American trusts.

Herbert L. Pratt was born in Brooklyn in 1871, and took a degree of Bachelor of Arts at Amherst in 1895. He is director of several companies, including the Asia Banking Corporation and the Bankers' Trust Company, Manhattan.

Harry C. Folger, his predecessor, was connected with the Standard Oil Co. of New Jersey until 1911, when he became President of the New York Company. He is the author of several monographs on Shakespeare and is reputed to own the finest Shakespeare library in America. He is 66 years old.

More prominent than either Pratt or Folger in Standard Oil circles is Alfred C. Bedford, Chairman of the Board of Directors of the Standard Oil Company of New Jersey. Like; Pratt, the moving spirit of the oil industry is a Brooklynite. He is 59 years old, and was educated in Brooklyn and Europe. He has been in the employ of the Standard Oil since 1882. In 1907 he became a director of the dominant New Jersey Company, of which he has been President since 1916. During the war he was Chairman of the National Petroleum War Service Committee, and in 1919 Chairman of the International Trade Conference in America, organized under the U. S. Department of Commerce. At the Genoa Conference he was an informal observer, and is generally associated with the foreign activities of the mammoth oil company.

Superficially it would appear that the Standard Oil, which was dissolved into 38 separate companies in 1911 by order of the U. S. Supreme Court, was an incoherent concern. Among the disjuncta membra of 1911 are the Anglo-American Oil Co., the Atlantic Refining Co., Borne, Serymser Co., Buckeye Pipe Line Co., Crescent Pipe Line Co., Cumberland Pipe Line Co., Eureka Pipe Line Co., Galena-Signal Oil Co., Illinois Pipe Line Co., Indiana Pipe Line Co., National Transit Co., National Transit Pump and Machinery Co., New York Transit Co., Northern Pipe Line Co., Ohio Oil Co., Mid-Kansas Oil & Gas Co., Pierce Oil Co., Pierce Pipe Line Co., Prairie Oil and Gas Co., Prairie Pipe Line Co., Solar Refining Co., South Penn. Oil Co., Penn-Mex Fuel Co., South West Pennsylvania Pipe Line Co., Southern Pipe Line Co., the Standard Oil Companies of California, Indiana, Kansas,. Kentucky, Nebraska, New Jersey, Louisiana, New York and Ohio, Swan & Finch Co., Union Tank Car Co., Vacuum Oil Co; and the Washington Oil Co. The combined capitalization of these companies is $957,843,750, but as it has until very recently been the policy of Standard Oil to undercapitalize, its actual resources are considerably in excess of this sum. Within the last few months there has been a tendency to increase capital stock by capitalizing the large surpluses that have accumulated, probably with a view to avoiding new corporate taxes and to secure wide stock distribution. An idea of the size of the surpluses is given by the fact that, after deduction of taxes, the net earnings of Standard Oil in the years 1912-18 were $378,000,000, while dividends were approximately $176,000,000.

Past History. The origin of the Standard Oil monopoly, for practical monopoly it still is, was the foundation of a refinery in Cleveland by an Englishman named Samuel Andrews in 1862. John D. Rockefeller invested $4,000 in the venture. In 1867 the concern was organized under the name of Rockefeller, Andrews and Flagler. In 1870 it was incorporated as the Standard Oil Com-pany of Ohio, with a capitalization of $1,000,000. The parties interested were John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Steven V. Harkness and William Rockefeller.

In 1871-2 a scheme was worked out whereby the railroads gave the Standard Oil secret rebates. This was done through the notorious South Improvement Co., a concern organ-ized by Rockefeller, which bought a charter with the right to carry on any kind of business in any country and in any way. The rebates were secured by arrangements with Vanderbilt and Clark of the New York Central, Jay Gould and General McClellan of the Erie, and Thompson and Scott of the Pennsylvania. In

1872 there was a Congressional investigation and the rebates were revoked, but continued in secret to the extent of 25%, and with this advantage the Standard Oil controlled 95% of production by 1877.

In 1882 the Standard Oil was organized as a Trust. Ten years later the trust feature was dropped in favor of a " community of interest " in which John D. was one of 99 stockholders, under a holding company known as the Standard Oil Co. of New Jersey. This reorganization followed the Sherman Anti-Trust Law of 1890, a feature of the Standard's duel with the Government, which had begun with the investigation of 1872. In 1876 Standard influence had caused the pigeonholing of the first Interstate Commerce Bill. In 1879 Rockefeller and his associates were indicted for conspiracy, but all suits were withdrawn in 1880 in return for agreements by the Standard and the Pennsylvania to abandon practice against producers. In 1907 Judge Landis found the com-pany guilty on 1,462 rebating counts and imposed a record fine of $29,240,000. This decree was set aside on a technicality by a higher court, and the suit was dismissed on retrial.

In 1907 the Federal Government, at the instance of Roosevelt, to whose campaign fund it is alleged that the Standard contributed in 1904, brought suit against the Standard " as a combination in restraint of trade " under the Sherman Anti-Trust Law. The case lasted four years, and dissolution was ordered in 1911. In consequence the New Jersey Co. gave up the ownership of the stock of its constituent companies, thus ceasing to be a " combination," and capitalized for $100,000,000. At that time the New Jersey Co., as holding company, owned practically all the capital stock of 38 other companies, with par value of $145,000,000, and a majority of New Jersey stock was controlled by twelve men. The Supreme Court decision came in May and the dissolution was effected on October 1, 1911. The legal offense was the holding of the stock of 19 specified companies in combination. The 38 companies that constitute the Standard group are not legally combined, but practically they act as one corporation.

Theodore Roosevelt felt this defect in the wording of the Anti-Trust Law, and on June 3, 1911, wrote in The Outlook: "What is urgently needed is the enactment of drastic and far-reaching legislation which shall put the great Inter-State business corporations of the type of the Standard

Oil Co. . . . at least as completely under the control and regulation of the Government in each and every respect as the Inter-State railways are now put. . . . Our prime object must be to have the regulation accomplished by continuous administrative action and not by necessarily intermittent law suits."

Needless to say, no such legislation has been enacted, and the Standard Oil Companies since the " dissolution " of 1911, continue to operate in effect as a monopoly, if not a combination.