Pennsylvania, the New York Central, and the Erie, made exclusive contracts for shipping oil. Under these contracts rates to the seaboard were to be generally raised, though the members of the South Improvement Company were to receive liberal rebates. The refiners of Cleveland and Pittsburgh were to get lower rates than the refiners located in the oil regions. But the clause in these contracts that caused the greatest amazement and indignation was one which gave the inside group rebates on every barrel of oil shipped by its competitors.

It would be difficult to imagine any transaction more wicked than these contracts. Carried into execution they inevitably meant the extinction of every refiner who had not been admitted into the inside ring. Of the two thousand shares of the South Improvement Company, the gentlemen who were at that time most conspicuously identified with the Standard Oil Company subscribed to five hundred and forty. Mr. Rockefeller has always protested that he did not favor the scheme and that he became a party to it simply because he could not afford to antagonize the powerful Pennsylvania Railroad, which had originated it. When the details became public property, a wave of indignation swept from the Atlantic to the Pacific; the oil regions, which would have been the heaviest sufferers, shut down their wells and so cut off the supply of crude oil; the New York newspapers started a "crusade" against the South Improvement group and Congress ordered an investigation. So fiercely was the public wrath aroused that the railroads ran to cover, abrogated the contracts, signed an agreement promising never more to grant rebates to any one, while the Pennsylvania Legislature repealed the charter of the South Improvement Company. This particular scheme, therefore, never came to maturity. Before the South Improvement Company ended its corporate existence, however, a great change had taken place in the oil situation. Practically all the refineries in Cleveland had passed into the control of the Standard Oil Company. The Standard has always denied that there was any connection between the purchase of these great refineries and the organization of the South Improvement Company. But there is much evidence sustaining a contrary view, for many of these refiners afterward went on the witness stand and told circumstantial stories, all of which made precisely the same point. This was that the Standard men had come to them, shown the contracts which had been made by the South Improvement Company, and argued that, under these new conditions, the refineries left outside the combination could not long survive. The Standard's rivals were therefore urged to "come in," to take Standard stock in return for their refineries, or, if they preferred, to sell outright. Practically all saw the force in this argument and sold—in most cases taking cash.

The acquisition of these Cleveland refineries made inevitable the Rockefeller conquest of the oil industry. Up to that time the Standard had refined about fifteen hundred barrels a day, and now suddenly its capacity jumped to more than twelve thousand barrels. This one strategic move had made Rockefeller master of about one-third of all the oil business in the United States, and this fact explains the rapidity with which the other citadels fell. There is no evidence that the Standard exercised any pressure upon the great refineries in New York, Pittsburgh, and Philadelphia. Indeed these concerns manifested an eagerness to join. The fact that, unlike the Cleveland refiners, many of the firms in these other cities took Standard stock, and so became parts of the new organization, is in itself significant. They evidently realized that they were casting their fortunes with the winning side. The huge shipments which the Standard now controlled explain this change in front. Every day Mr. Rockefeller could send from Cleveland to the seaboard a train, sixty cars long, loaded with the blue barrels containing his celebrated liquid. That was a consideration for which any railroad would at that time sell its soul. And the New York Central road promptly made this sacrifice. Hardly had the ink dried on its written promise not to grant any rebates when it began granting them to the Standard Oil Company.

In those days the railroad rate was not the sacred, immutable thing which it subsequently became, although the argument for equal treatment of shippers existed theoretically just as strongly forty years ago as it does today. The rebate was just as illegal then as it is at present; there was no precise statute, it is true, which made it unlawful until the Interstate Commerce Act was passed in 1887; but the common law had always prohibited such discriminations. In the seventies and eighties, however, railroad men like Cornelius Vanderbilt and Thomas A. Scott were less interested in legal formalities than in getting freight. They regarded transportation as a commodity to be bought and sold, like so much sugar or wheat or coal, and they believed that the ordinary principles which regulated private bargaining should also regulate the sale of the article in which they dealt. According to this reasoning, which was utterly false and iniquitous, but generally prevalent at the time, the man who shipped the largest quantities of oil should get the lowest rate.

The purchase of the Cleveland refineries made the Standard Oil group the largest shippers and therefore they obtained the most advantageous terms for transporting their product. Under these conditions they naturally obtained the monopoly, the extent of which has been already described. Their competitors could rage, hold public meetings, start riots, threaten to lynch Mr. Rockefeller and all his associates, but they could not long survive in face of these advantages. The only way in which the smaller shippers could overcome this handicap was by acquiring new methods of transportation. It was this necessity that inspired the construction of pipe lines; but the Standard, as already described, succeeded in absorbing these just about as rapidly as they were constructed.

Not only did the Standard obtain railroad rebates but it developed the most death-dealing methods in its system of marketing its oil. In these campaigns it certainly overstepped the boundaries of legitimate business, even according to the prevailing morals of its own or of any other time. While it probably did not set fire to rival refineries, as it has sometimes been accused of doing, it undoubtedly did resort to somewhat Prussian methods of destroying the foe. This great corporation divided the United States into several sections, over each of which it appointed an agent, who in turn subdivided his territory into smaller divisions, each one of which likewise had its captain. The order imperatively issued to each agent was, "Sell all the oil that is sold in your district." To these instructions he was rigidly held; success in accomplishing his task meant advancement and an increased salary, with a liberal pension in his old age, whereas failure meant a pitiless dismissal. He was expected to supervise not only his own business, but that of his rivals as well, to obtain access to their accounts, their shipments, and their customers. It has been asserted, and the assertion has been supported by considerable evidence, that these agents did not hesitate to bribe railroad employees and in this way get access to their competitors' bills of lading and records of their shipments, and that they would even bribe dealers to cancel such orders and take the oil from them at a lower price. This information laid the foundation for those price-cutting campaigns that have brought the name of the Standard Oil into such disfavor. And when the Standard cut, it cut to kill; the only purpose was to drive the competitor from the field, and, when this had been accomplished, the price of oil would promptly go up again. The organization of "bogus companies," started purely for the purpose of eliminating competitors, seems to have been a not infrequent practice. This latter method emphasizes another quality