[The Standard Oil Company was one of the first corporations to organize in the form of a "trust" in the legal sense. The great wealth of its chief stockholders and its large measure of monopolistic control have made it, in the popular mind, the typical "trust." May 2, 1906, the Commissioner of Corporations issued a report on the Transportation of Petroleum, and May 20, 1907, a report of nearly 1400 pages on the Petroleum Industry, most of it relating to the Standard Oil Company. A few comparatively brief extracts from the later report are here given to illustrate the evidence as to the sources of this company's monopoly power. A number of uncomplimentary adjectives have been omitted in order that they may not distract the student's attention from the statements of facts. The first part of the selection is from Part I, pp. xv-xx of the Report.]

Its dominant position. In 1904 the Standard Oil Company and affiliated concerns refined over 84 per cent of the crude oil run through refineries; produced more than 86 per cent of the country's total output of illuminating oil; maintained a similar proportion of the export trade in illuminating oil; transported through pipe lines nearly nine-tenths of the crude oil of the older fields and 98 per cent of the crude of the mid-continent, or Kansas-Territory field; secured over 88 per cent of the sales of illuminating oil to retail dealers throughout the country, and obtained in certain large sections as high as 99 per cent of such sales. It also controlled practically similar proportions of the production and marketing of gasoline and lubricating oil. While handling a much smaller proportion of the oil, both crude and refined, in the Gulf and California fields, this fact has little significance as to its control of illuminating oil, gasoline, and lubricating oil, for the reason that the crude of those particular fields produces a comparatively small per cent of these products and is used mostly for fuel.

The Standard has as its only competitors in the refining business about seventy-five small refineries, whose total consumption of crude oil is less than that of a single one of the Standard, to wit, the Bayonne refinery, and less than one-fifth of the Standard's total consumption. Over fifteen of these competitors are dependent for their supply of crude oil upon the Standard's pipe lines, and are so restricted by this dependence as to be capable of little effective competition or growth. In the pipe-line business of the eastern and mid-continent fields it has up to the present but one competitor of any significance - the Pure Oil Company - and that competitor's pipe-line business is not more than one-twentieth of that of the Standard. . . .

History of form of organization. Starting with the partnership of Rockefeller, Andrews & Flagler, formed in 1867, in 1870 these interests took the corporate form of the Standard Oil Company of Ohio, with a capitalization of $1,-000,000. At that time they controlled not over 10 per cent of the refining business of the country. Within ten years from that date the process of combination under these interests had been so rapid that they admittedly controlled from 90 to 95 per cent of this branch of the oil industry, and their control of the pipe-line business had increased with equal rapidity. This commanding position having been gained, in 1882 they concentrated their holdings under the Standard Oil Trust, which included the entire stock of fourteen companies and a majority interest in twenty-six additional concerns. The capitalization of the trust was $70,000,000 and the appraised valuation of its property over $55,000,000. Nine individuals, acting as trustees of the trust, owned together on that date more than $46,000,000 out of the $70,-000,000 of the trust certificates issued. . . .

In 1892, as a result of a legal attack on this form of organization, the trustees announced that the trust would be dissolved, and a process of so-called dissolution took place. This in no way, however, affected the original control of the aforesaid individuals over the entire concern, because the stocks of each of the various subsidiary corporations were not returned to their original holders, but were allotted to the holders of trust certificates on a pro rata basis, with the result that the trustees, who had previously held the majority of the trust certificates, now held a majority interest in each one of the constituent companies.

In 1898 contempt proceedings were started against the Standard Oil Company of Ohio on the ground that it had not withdrawn from the trust. Thereupon, pending the decision, these interests selected the Standard Oil Company of New Jersey as a holding corporation for the constituent Standard companies, and increased its common stock to $100,000,000 for that purpose. This company then gave its own stock in exchange for the stocks of such companies. This change, like the previous one of 1892, as was its obvious purpose, left the monopoly power of the Standard capitalists undisturbed. The same group of men who had been holders of a majority of the trust certificates, then of a majority of the stocks in the subsidiary companies, now became holders of a majority of the stock of the controlling New Jersey company.

The outstanding stock of this company is about $98,000,-000. It controls at least 10 refining companies, 4 lubricating-oil companies, 3 crude-oil producing companies, 13 pipe-line and other transportation companies, 6 marketing companies, 16 natural-gas companies, and 15 foreign concerns, besides having close affiliations with a considerable number of other concerns. . . .

Relations to railways. It is of the utmost importance to indicate clearly those fundamental facts that form the basis of the Standard's power. The monopoly of this concern has never rested on ownership of the source of supply of crude oil. Not over one-sixth of the total production of crude in the country in 1905 came from wells owned by the Standard interests. It cannot be too strongly emphasized that its growth and present power rests primarily on the control of transportation facilities in one form or another. Additional means of domination have been found in local price discrimination and other unfair competitive methods in the sale of products, as well as in the elimination of the jobber; but throughout its entire history the factor of transportation has been the keystone of its success.

The . . . railway discriminations obtained by the Standard in its earlier years as against its competitors did more than all other causes together to establish it in its controlling position. Later, when the rebate, per se (that is, the actual, physical repayment of part of the freight rate), was substantially abandoned, the Standard was able, by compelling the cooperation of the railroads, to establish in place thereof a system of secret or open discriminations in rates in its own favor, covering almost the entire country and of such a nature that throughout large sections it could sell and make a profit on oil at prices which left no profit for competitors. The existence of many such important railway discriminations was set forth in full in the report of the Commissioner on the Transportation of Petroleum, in May, 1906; and as a result of that report all the secret rates which had been discovered were discontinued, and the discriminations in open rates have largely been abandoned.