Chapter XII: The Trust’s “tied Houses” in England

I have reserved until the end of my survey the examination of the Standard Oil Trust’s operations in Great Britain, because, as they have not been investigated so closely here as they have been by various Legislative Committees in the United States, there is less official testimony to proceed upon. Many of the Trust’s intrigues and agitations here can only be understood by remembering what has been proved by direct testimony to have taken place in similar circumstances in the United States. In this way our preceding examination of the secret rebate, the bribery, the underselling, and all the other machinery of the Trust in its native home, will help us to understand a few things which are still obscure here.

During the time when the Trust was growing up in America, the British consumer and the British oil-dealer were alike blissfully unconscious of what was in store for them. For the first English news of the Trust we must turn to the evidence provided by Mr. (now Sir) Boverton Redwood, the distinguished chemist, whose subsequent appearances at so many public inquiries as a Standard Oil witness have been fitly rewarded by his selection as Petroleum Adviser to the Home Office!

This takes us back to the years 1877–8, when Mr. Boverton Redwood was the Secretary of the Petroleum Association, and visited America at their request to induce the American refiners to adopt the Abel (closed) tester in standardising their oil, and also to complain of certain impurities which were appearing in their consignments. With regard to the first, Mr. Redwood’s report to his association shows that he conducted experiments with the Petroleum Committee of the New York Produce Exchange which satisfied them with the Abel tester, and we read that Mr. Paul Babcock took great interest in these experiments. Mr. Babcock was then a director of the Devoe Manufacturing Company, about this time bought by the Trust, and twenty years later he and Mr. Boverton Redwood met in London, both giving evidence before the Commons’ Petroleum Committee against raising the flash-point of kerosene. Mr. Redwood met in 1877 a number of other persons whose names will be familiar to readers of my narrative. He, for example, visited the refinery of Messrs. Charles Pratt & Co., through the kindness of Mr. H. H. Rogers, and when he left New York he carried letters of introduction from Mr. Wm. Rockefeller, Vice-President of the Standard Oil Company, to Colonel Payne, its Treasurer, in Cleveland, Ohio. Indeed, Mr. Redwood’s tour seems to have been in the main a Standard Oil excursion, for in Philadelphia he visited Messrs. Warden and Frew (who were in the Trust), at Pittsburg he saw Mr. Charles Lockhart, of Lockhart and Frew (another Trust firm), and then at Cleveland he was taken over the Standard Oil works by Mr. Samuel Andrews (John D. Rockefeller’s first partner). When he returned Mr. Redwood was the bearer of a letter from Mr. Wm. Rockefeller, dated December 19, 1877, couched in the best Standard Oil vein:--

It is our desire to furnish at all times refined oil that will
be acceptable to the trade of all countries. It is our wish and
intention that our products shall always reach the highest excellence.

Whatever their wish might be, the prospect of making more money proved too strong for these philanthropists, and complaints continued from the English traders as to the bad quality of the oil sent here. In 1879 and again in 1884 Mr. F. W. Lockwood, a saponaceous Standard Oil expert, was sent here to gammon the Petroleum Association with some cock-and-bull story. The second visit is referred to by Mr. Boverton Redwood in a report to the Petroleum Association, published in the _Grocer_ of May 3, 1884. In it he explained that Mr. Lockwood attributed the complaints about the oil to the use of damp-clogged or hard lamp-wicks. This great discovery was too much even for Mr. Redwood, who has never been a harsh critic of the Standard Oil Trust methods. He thus reported:--

In conclusion, I desire to record as strongly as possible my
individual opinion that in their own interest the American refiners
should forthwith institute such arrangements as will ensure
the future maintenance of a satisfactory standard of quality.
Considerable injury to the petroleum trade results from the
distribution of such oil as is the subject of this report, consumers
in many cases relinquishing the use of petroleum oil in favour of
some other sort of light. Moreover, the American refiners should
bear in mind that even now they have not a monopoly of the supply of
mineral burning oil in this country, and they will find it necessary
to pay much greater attention than heretofore to the quality of the
oil they manufacture.

As an impartial testimony to the then quality of the Standard’s illuminating oils and the wonderful processes of manufacture which their Press Bureau now tells us they invented, I should give that document a high place. But to do them justice, the American refiners were not above taking a hint from other manufacturers. A gentleman with long experience in the oil trade once told me how Mr. H. H. Rogers about this time came to England. Up in the North there was a manufacturer of lubricating oils who had by his own ingenuity and skill developed some excellent ideas. He used to blend American oils, and Mr. Rogers asked one of the importers who dealt in their goods to introduce him. They went over the works together, and the proud owner showed them all his special processes and his little inventions and blends. Rogers was a practical refiner, he kept his eyes open, and after he returned to America the Standard’s first lubricating oil branch, the Thompson and Bedford Company, of New York, began to export here some of the specialities which the North countryman had made. As brain-pickers the Standard men have no equal.

The first appearance of the Standard in this country was rather sudden. There came here an American gentleman named Frank E. Bliss, who had been connected with the business of Charles Pratt & Co. Nobody knew what his London business was, but one day there appeared in the _Financial News_ the brief record of the registration at Somerset House on April 27, 1888, of the Anglo-American Oil Company, Limited. It had a capital of £500,000 in £20 shares. The first list of signatories contained several clerks and agents, but it also bore the name of Frank E. Bliss, and that told those who were in the trade what was coming. The first list of directors subsequently filed at Somerset House included such sound, reliable Standard Oil names as H. H. Rogers, J. D. Archbold, W. H. Libby, J. G. Gregory, and Wesley H. Tilford, all of 26, Broadway, New York, and Frank E. Bliss, of London. The precise significance of the word “Anglo” in its title becomes clearer when it is stated that the articles of association provided that the directors’ meetings should be held in London, but that if a majority of the directors so decided they might be held in New York or any other part of the United States of America. As there was only one director resident in England, it is not hard to guess where most of the directors’ meetings took place. This also helps us to appreciate the amount of truth in Mr. J. D. Archbold’s Missouri evidence that he did not know why the Anglo-American Oil Company made loans amounting to £500,000 to its managing director, Mr. James A. Macdonald. Mr. Archbold was a director of the “Anglo” from the outset until somewhere between July, 1907, and July, 1908. In 1893 its capital was increased to £520,000, and at this time Mr. John D. Rockefeller’s name first appears on the share list as the owner of 6,867 shares out of a total of 26,000. In July, 1899, the share list of the Anglo-American Oil Company contained the names set out below. As will be seen, many of them have appeared in the course of my story, and the list contains a great deal of “American” and very little “Anglo.” Where no address is given below, the return at Somerset House has “26, Broadway, New York,” which is the central address of the Standard:--

AMERICAN SHAREHOLDERS.

Shares.
H. M. Flagler and J. D. Archbold 10,239
John D. Rockefeller 6,867
C. W. Harkness, 611, Fifth Avenue, N.Y. 1,542
Mrs. Mary Pratt, Chas. M. Pratt, and Fred B. Pratt 1,336
Oliver H. Payne, 2, West Fifty-seventh Street, N.Y. 1,068
H. M. Flagler (separately) 748
H. H. Rogers 503
Laman V. Harkness, Greenwich, Conn. 349
W. L. Harkness, 10, West Forty-third Street, N.Y. 347
Wm. Rockefeller 347
Chas. Lockhart, Pittsburg 320
John D. Archbold 213
W. Everitt Macy 199
Mrs. Esther Jennings, 48, Park Avenue, N.Y. 146
Miss A. B. Jennings, 48, Park Avenue, N.Y. 63
Oliver Jennings 63
Walter Jennings 64
Mrs. Mary B. Jennings, Fairfield, Conn. 53
Mrs. Elmira D. Brewster 53
George S. Brewster 53
F. F. Brewster, Newhaven, Conn. 53
R. Stanton Brewster 53
J. M. Constable, draper 82
H. Melville Hanna, Cleveland, Ohio 80
Wesley H. Tilford 80
C. F. Heye 98
J. S. Kennedy 80
Ed. T. Bedford 66
Ambrose M. McGregor 53
Louis H. Severance 142
C. M. Chapin 26
H. C. Folger, jun. 26
W. H. Macy, jun. 13
W. T. Wardwell (treasurer of the Standard Oil Trust) 21
Daniel O’Day, banker, N.Y. 47
Hugh J. Jewett, Morristown, New Jersey 32
J. H. Alexander, Elizabeth, New Jersey 18
Mrs. Emma B. Auchinloss, 17, West Forty-ninth Street, N.Y. 63
L. S. Thompson, Redbank, New Jersey 29
W. P. Thompson, Redbank, New Jersey 34
Mrs. Mary E. Thompson 37
Mrs. Eliz. T. Preston, 1,228, Wood Avenue, Colorado Springs 26
Mrs. Helen James 63
Mrs. Salome Jones, Boston, Mass. 29
Joseph Seep, banker, Oil City, Penn. 26
C. F. Akerman 1
A. J. Pouch 1
T. C. Bushnell 1
Livingston Roe 1

LONDON SHAREHOLDERS.

Frank E. Bliss 1
James Macdonald 1
J. H. Usmar 1
W. A. Hawkins 1

There have been various changes in the share list, and on June 30, 1910, the following were the principal shareholders:--

Shares.
Standard Oil Company of New Jersey 49,993
Trustees Standard Oil Trust 1
Frederick D. Asche 1
J. H. Usmar, 22, Billiter Street, E.C., merchant 1
Francis Edward Powell, 22, Billiter Street, merchant 1
Thomas H. Hawkins, secretary, 22, Billiter Street 1
James Hamilton, 22, Billiter Street, merchant 1
William E. Bemis, 26, Broadway, New York 1
------
50,000

The capital of the Company was at that date £1,000,000 in £20 shares. It is worthy of notice that in 1907–8, at a period when Mr. Roosevelt and his party were out after the Trusts, Mr. Archbold, Mr. Rogers, and nearly all the American directors of the Anglo-American resigned. In June last the directors were Mr. J. H. Usmar, Mr. Thomas H. Hawkins, Mr. F. E. Powell, Mr. William P. McKendrick, of 22, Billiter Street, E.C. (the London address of the Anglo-American Oil Company, until it moved last autumn to St. James’s Park), and Mr. F. D. Asche, of 26, Broadway, New York. Mr. Fred D. Asche is a clerk in the export department of the Standard in New York. Thus, while in 1889 there were five directors resident in New York and one in London, in 1910 there were four directors resident in London and one in New York--a somewhat significant reversal of the ratio. Mr. Jas. A. Macdonald, the gentleman already mentioned, ceased to be managing director in 1906, when his one share was transferred to the Standard Oil Company of New Jersey.

The advent of the Anglo-American Oil Company was the beginning of troubled times in the English petroleum trade. Mr. Rockefeller’s motto, “Pay nobody a profit,” was put into force, and the Trust began to buy out or to starve out the various groups of middlemen who had hitherto been vending their oils to the English consumer. Some evidence on that point was given to the Select Committee on Petroleum in 1897 by Mr. W. J. Leonard, of Carless, Capel and Leonard, Pharos Oil Works, Hackney Wick. Mr. Leonard stated that London was then the only “free market” for other oil than Standard, since, although there were independent dealers in Liverpool, they had for several years a “selling agreement” with the Anglo-American Oil Company. Then came these answers:--

The Chairman: I want to know what there is to prevent you importing
oil into Liverpool in competition with the Anglo-American Oil Company?

_A._ If we did this of course the Anglo-American Oil Company would
at once put down their price, _so that we should have to sell
at a ruinous loss, and we cannot afford to compete with them; I
mean, we are all afraid of them_. If we sent oil to Liverpool the
Anglo-American price, instead of being nearly ¾d. a gallon more
than the price in London, would probably be something like ¾d. a
gallon less than the price in London. That would be the immediate
effect.

_Q._ Yes, but is there not a regular importation, and an increasing
importation, of Russian oil?

_A._ No, it is not an increasing importation; it is not, certainly.
Of course the Anglo-American Company are getting the whole business
practically (Report and Evidence, 1897, Q. 4,834).

This is how an “independent” oil merchant talked of the colossal power of the Standard Oil Trust at that date, and their influence extended even to the smallest transactions. When a great proportion of oil was still imported in barrels, at least one London firm did a very good business buying up the empty oil barrels from the hawkers and small dealers, who used to collect them at the consumer’s premises. The barrels were well made, and the Standard gladly bought the empties to use again. But it found somebody else was making a living. This would never do. At once the Standard began to offer small inducements to the hawkers, and the barrels went to them direct, so that the small factor’s business was killed.

Very interesting evidence was given by Mr. W. T. Rigby, Secretary of the Liverpool Oil Dealers’ Association, who was called in support of the Standard’s opposition to the raising of the flash-point. He said the members of his association objected to the Anglo-American Company supplying so small a quantity as five gallons to small shops which had formerly been supplied by the small wholesaler. He went on:--

In the first instance, when the Anglo-American put their tanks on the
ground they gave us their word that no less a quantity than twenty
gallons would be delivered, but when they found that the retail
dealers of Liverpool would not embrace the new system of tank-wagon
delivery, but preferred to take it in the old style of barrels, they,
in the words of their Liverpool manager, were forced to administer
a stab in our backs--this is, go really behind us and secure that
trade which legitimately belonged to the Liverpool chandler doing a
small wholesale business, and that is why they [his association] are
objecting to the delivery of anything less than ten gallons of oil
(Report and Evidence, 1897, Q. 6,052).

But some of the wholesalers, especially where in the provinces they had built up a good business which it would be difficult for the Standard to capture, were allowed to remain as “tied houses” in the trade. Some evidence was with difficulty extracted by the Lord Advocate and Mr. M‘Killop, M.P., at the same committee from Mr. Geo. Base, a large “independent” oil dealer of Norwich, who had come up to give evidence in support of the Standard’s views against raising the flash-point:--

Mr. M‘Killop, M.P.: Have you any freedom to use any class of oil you
like?--We prefer American oil. In fact, we have dealt in nothing else.

Have you a general freedom to use Russian oil, for example, if you
choose?--We don’t like Russian oil.

Are you bound to any particular dealer? Are you bound to use American
oil?--_Yes, that is so._ That is largely because of choice.

You are under contract?--Yes.

You are not allowed to sell any other?--Yes, that is so.

Mr. Ure, M.P.: What do you mean by contract?--I mean I have an
arrangement at present in distributing American oil.

Do you mean that you have a binding agreement with the Standard Oil
Company to sell nothing but their oil for a specified period?--No,
not for a specified period.

For an indefinite period?--There is no period specified whatever.

Do you mean that you have a signed agreement to this effect, “signed,
sealed, and delivered”?--If it is a binding agreement, it does not
matter whether it is signed or not.

Is that a common type of agreement with the American Company and its
customers?--I don’t know.

Does it specify any price?--No.

Does it preclude you from dealing in the oil of any other
company?--_Well, yes, it does to a certain extent._

What happens supposing you have oil from any other company?--That
I can hardly say, but I am perfectly at liberty to determine the
agreement at any time I choose.

Do you mean that breach of the agreement would not entail a claim for
damages?--No.

Then what “consideration” do you get for entering into such
agreement?--The consideration is the larger volume of business.

But you can without an agreement deal in it?--Yes.

Why? You go into this agreement, and can give me no reasons for it.
Is it in writing?--In print.

So that a great number of people enter into the same kind of
agreement, apparently?--No, I think not. Of course, I have no
personal knowledge (Report and Evidence, 1897, Q. 3,475 _et seq._).

We have only to read the evidence of Mr. Leonard and Mr. Rigby, and the American evidence already given, to understand why these “tied houses” exist.

In one portion of the United Kingdom the Standard has never been able to obtain complete control. Scotland is the earliest home of the mineral oil industry, and patriotism and caution alike induced the Scottish users of burning oils to prefer the high-flash oil which the Scottish oil companies refine to the dangerous low-flash petroleum imported by the Standard. Although the cheapness of the latter’s product has made considerable inroads on the former’s trade in kerosene the Standard has never been able to kill it, and it has of late made various proposals to the Scottish companies to take over their whole output of kerosene and to distribute it by the tank system. The Scottish oil companies (who do a barrel-oil trade) are unwilling to supply the Standard with all their output, for they know that the Standard would by the tank distribution system kill the middlemen. Then when it had made itself the sole channel by which kerosene could reach the scattered Scotch consumers, it might decline to buy any more Scotch oil and simply force its own oil on the purchaser. The Standard people are now attempting to push their own oils by the tank distribution system on Scotland, but are meeting with strong opposition.

But the strength of the Scottish companies is not patriotic so much as economic. They refine their oil from the shale, a soft, greasy, slate-like stone. Now so long as kerosene was the only thing the refiner troubled about, the Americans had the advantage because Nature had done half the work of distillation for them in her own laboratory, and instead of mining a stone, they got petroleum as a liquid. But the bottom is falling out of the kerosene trade, as I have already explained, and the Scottish companies are recouping themselves on their by-products. At the time of writing burning oils (kerosene) and lubricants are lower than they have ever been, and it is certain that no profit is being made out of them in Scotland. But the Scotch shale in distillation yields sulphate of ammonia, which is in good demand as a fertiliser, and is not obtainable from either American or Russian crude. Naphtha is also selling at a fairly good price owing to the development of the motor industry--in fact, the Standard has been buying large quantities of it from certain Scotch companies. In the past the Scotch refiners have been greatly assisted by the considerable percentage of paraffin wax which their crude yields, but in the last three or four years they have lost some of this advantage owing to the increased output of paraffin wax in Galicia. The Boryslav and Tustanovitch fields in that country produce an oil which yields from 1 to 7 per cent. of paraffin wax, and the production of paraffin wax has shot up very suddenly--which is no doubt one reason why the Standard has been fighting so hard in Galicia. The net result is that the Scotch companies have a hard struggle to maintain themselves against the Standard monopolist tactics, but that on the whole they hold their own.

THE FLASH-POINT SCANDAL

“The flash-point of 73 deg. was badly founded, because it is the
flash-point of a substance which is being burned at temperatures
commonly above 73 deg., and, therefore, you are dealing in every lamp
so used with an oil beneath your flame which is in a condition of
danger.”

PROFESSOR ATTFIELD, F.R.S.,
_Select Committee on Petroleum, 1896 Report_.