Its Two Dissolutions—Roosevelt's Fight against the Standard Oil
Twice over, in 1892 and 1911, its constitution was judged illegal, but in vain.
In 1892 the system of nine trustees was declared illegal by the Supreme Court of Ohio. The trustees voted the dissolution of the Trust, but continued to administer all the corporations in the same way until 1899. The Trust was apparently divided into twenty distinct companies; the nine old trustees distributed the shares in such a way as to possess the majority in each one. Thus they made sure, as before, of unity of direction. Rockefeller had reversed the judgment of the court.
Here is the legal formula, which is dignified in its simplicity: "John Rockefeller has placed in the hands of the said attorney 256,854/292,500 of the total shares held by the said trustees on July 1, 1892, in each of the companies whose shares were deposited."
Still better, after receiving the shares which were granted them in each company, the old trustees took them and sold them to the Standard Oil Company of New Jersey, which has a capital of 100 million dollars of common stock, and only ten million dollars of preferred stock. For the Standard has a monarchical constitution. All power to the holders of preferred stock! The holders of common stock have none but that of drawing dividends. Though they may be in an enormous majority, they count for nothing in the direction of the enterprise.
About 1900 Rockefeller went still further. He increased the number of ordinary shares, and reduced that of the privileged shares. A memorandum of the Industrial Commission drew attention to this. "During the year 1900, the common stock has been increased by 38,550,700 dollars and the preferred stock has been reduced by 3,968,400 dollars."
In short, Rockefeller makes the concern more and more autocratic. The Standard forms a veritable State within a State, which nothing can bend. The Trust was reconstituted, with a holding company, the Standard Oil Company of New Jersey, holding the title-deeds of all the other companies.
It was then that Roosevelt undertook to destroy a power before which everything bowed down. The Federal Government brought an action before the Court of St. Louis, under the Sherman Anti-Trust Law. The Standard Oil and the seventy companies dependent on it were accused of "conspiracy, coercion, intimidation, rebating and other illegal acts in restraint of trade." The Federal Court of St. Louis ordered the dissolution of the Trust in 1909. The Standard entered an appeal before the Supreme Court of the United States, which confirmed the dissolution in 1911, after five years of inquiries, prosecutions, judgments and appeals. The struggle had been going on since 1906. Many judgments had to be reversed. Thus, the Standard Oil Company of Indiana, with a capital of only a million dollars, was ordered to pay a fine of 29 million dollars for an illicit understanding with the Chicago and Alton Railway. It was paying only six cents a hundredweight for transport, while its competitors paid eighteen. This judgment was reversed in July 1908 by the Court of Appeal of Chicago. "It is strange," ran the decision "that a company with a capital of a million dollars should be fined a sum representing twenty-nine times this capital." The first tribunal had found 1,462 infringements proved, and had zealously applied the maximum for each case; that is how it had arrived at the incredible figure of 29 million dollars.
The Standard Oil was given six months to dissolve. The result was the same as in 1892. There were simply thirty-four companies apparently independent. In the midst of this new constellation, the Standard Oil Company of New Jersey, whose capital has risen to 600 million dollars, merely shines with a greater brilliance than its satellites. And the Standard has no longer to fear attack from the Government of the United States, which bows obediently to its will. Even better, the late President Harding energetically supported its claims throughout the world. Whoever attacks the Standard attacks the Federal Government itself.
To think of Rockefeller's modest company in 1870, with its 600 barrels a day and its small capital of a million dollars, and to see what it has become to-day, is to be lost in amazement. In 1920, the Great Council of the Standard controlled a capital of a thousand million dollars; representing almost equal profits, and a daily consumption of two hundred million barrels, which it even hopes to see presently increased to three hundred million. Here are the original and the present positions; they are widely different:—