The Standard Oil Company thus paid out in dividends during 1882 to 1906 the sum of $548,436,446, an average of 24 per cent per year. For the ten years ending in 1906, the dividends ranged from 30 per cent to 48 per cent, and averaged 39.7 per cent. Furthermore, a large part of the profits was not distributed to stockholders, but was put back into the business. The total net earnings from 1882-1906 amounted to $838,783,783, exceeding the dividends by $290,347,337. During the ten years ending in 1906, the ratio of net earnings to capital ranged from 48.8 per cent to 84.5 per cent, the average for the ten year period being over 61 per cent.

The rate of dividends and of net earnings becomes even larger, moreover, if applied, not to the capital stock, but to the actual investment in the business, exclusive of the reinvestment of surplus earnings. This investment, determined by adding to the appraised value of the properties in 1882 ($55,710,698) the sums invested since 1882, amounted in 1906 to $69,024,480.1 Of course, the value of the property held by the Standard in 1906 much exceeded this figure, but this excess value came from the building up of the property through the reinvestment of the surplus earnings. Tested by the investment basis, the Standard Oil Company, with a capitalization in 1906 of $98,338,382, was overcapitalized by about $30,000,000; that is, its stock was watered to that extent.

The objection may be made that the rate of profit on the actual investment is not a fair basis of analysis; that a fairer basis is the ratio of dividends and net earnings to the value of the company's property, i. e., to its net assets. There has, therefore, been included in the table a column showing the per cent of the net earnings to the mean net assets. Naturally these figures are more favorable to the Standard, yet even these figures show how profitable the prices charged by the Standard have been. The net earnings of the Standard for the ten years ending in 1906 averaged over 25 per cent on the company's net assets. It is not necessary to discuss the argument that prices are reasonable when they return only a fair profit on the value of the

1 Brief for the United States (no. 725), vol. II, pp. 4-5.

property, even including in that value the property which was acquired out of surplus earnings. It is not necessary because viewed from any standpoint it is manifest that the Bureau of Corporations spoke truly when it said that "the domestic consumer has been compelled to pay an exorbitant tribute to the oil monopoly. "1

It is apparent that the profits of the Standard Oil Company have been enormous. For the ten years ending in 1906 these profits averaged almost $60,000,000 per year, while the dividends averaged nearly $40,000,000 per year. The $20,000,000 of undivided profits were ample to provide for any extension of plant. Much of the $40,000,000 in dividends therefore went into other industries-naturally into those allied with the oil industry. Inasmuch as all industries depend on transportation and as the railroads are large buyers of oil products, intimate affiliations with the railroad companies were well worth cultivating. We find, therefore, that the Standard Oil capitalists became large shareholders in railroad companies. We find also that the Standard Oil interests went into the gas and the electric lighting businesses. The Consolidated Gas Company of New York City, for example, was once, if not still, a Standard Oil affair. We find these same interests in the steel business, notably as large stockholders in the United States Steel Corporation. We find them interested in copper, the Amalgamated Copper Company being a notable example. We find them in the glucose business, particularly in the Corn Products Refining Company. We find that they have even invaded the banking field. In this field they could probably say, with Æneas, quorum pars magna fui, a great part of which I-not was-but am. They could even, with Pistol, exclaim

Why, then the world's mine oyster,
Which I with sword will open.

Also in other realms is their influence felt-in the educational world, in religious, humanitarian, and other activities-with the Congress of the United States of America unwilling to

1 Report on the Petroleum Industry, part II, p. 42.

46

give a charter to a $100,000,000 of this money, to be devoted in perpetuity to the good of mankind.

Truly, there are various grave and far-reaching problems connected with the question as to whether a monopoly in oil is to be permitted to continue as being on the whole a blessing to mankind, whether a few cents per gallon added to the price of the oil that lights the humbler worker's home or to the price of the gasoline that drives Ford and Packard and business truck is or is not to be hereafter the stable foundation for world-wide business activities and for humanitarian succors as well.

CHAPTER VI

THE AMERICAN SUGAR REFINING COMPANY

1

The early history of the sugar trust, touched on in chapter III, may be briefly reviewed. The Sugar Refineries Company-a trustee device had been organized in 1887. In 1890 this arrangement was declared illegal by the New York courts, and as a result a reorganization was determined upon. In January, 1891, the American Sugar Refining Company was chartered in the state of New Jersey,-then a place of refuge for combinations and trusts. The new company had an authorized capitalization of $50,000,000, half preferred stock and half common.2 The American Sugar Refining Company exchanged its capital stock for the trust certificates of the Sugar Refineries Company, and thus obtained control over the various corporations previously controlled by the trustees. The American Sugar Refining Company next caused the several corporations, seventeen in number, to convey to it their entire property, real and personal; and

1 On the American Sugar Refining Company see: Original petition in United States v. American Sugar Refining Company et al.; Hearings before the Special Committee of the House on the Investigation of the American Sugar Refining Company, 1911-1912; House Report no. 3112, 50th Cong., 1st Sess., 1887-1888; Report of Committee on General Laws relative to "Trusts" and "Sugar Trusts," transmitted to the New York Legislature, April 30, 1891; Report of Joint Committee of the Senate and Assembly appointed to investigate trusts, transmitted to the New York State Legislature, March 9, 1897 (Lexow Report); Industrial Commission, vol. I, pp. 43-166, 801-812; 121 New York Reports 582-626; 156 U. S. 1–46; Report of the Federal Trade Commission on the Beet Sugar Industry in the United States, May 24, 1917; Annual Reports of the Attorney General of the United States, 1909 ff.; Willett and Gray's Weekly Statistical Sugar Trade Journal; Taussig, Some Aspects of the Tariff Question, Part II (Sugar); Vogt, The Sugar Refining Industry in the United States.

2 Original Petition in United States v. American Sugar Refining Company, p. 47. Referred to hereafter as Original Petition.

thereupon dissolved them. Upon the completion of this series of transactions, the American Sugar Refining Company became a property owning trust, as distinct from a holding company trust.

The American Sugar Refining Company operated only four refineries, the Standard Sugar refinery at Boston, the Matthiessen and Weichers refinery at Jersey City, the Havemeyers and Elder refinery at Brooklyn, and the Louisiana Sugar refinery at New Orleans. These four refineries among them had a daily melting capacity of about 70 per cent of that of the whole country. There were only six other cane sugar refineries in the country, and one of these the Havemeyers and Elder plant in San Francisco was for all practical purposes a part of the trust. The owners of the San Francisco plant had gone into the "trust" in 1888, the year after its organization, but because of the opposition of the state of California, the plant had been transferred to Messrs. H. O. Havemeyer, T. A. Havemeyer, and C. H. Senff, members of the board of trustees of the Sugar Refineries Company. These three men had thenceforth carried on the business under the name of Havemeyers and Elder, but always in coöperation with the Sugar Refineries Company, and its successor, the American Sugar Refining Company. Including the output of this San Francisco refinery, as is only proper, the American Sugar Refining Company controlled at its organization about 75 per cent of the country's melting capacity.2

The only cane sugar refining companies outside of the trust in January, 1891, were the California Sugar Refinery at San Francisco; the Franklin Sugar Refining Company, the E. C. Knight Company, and the Delaware Sugar House, all located at Philadelphia; and the Nash, Spaulding and Company at Boston (later known as the Revere Sugar Refining Company). During the course of the year 1891 the Spreckels Sugar Refining Company began the operation of a large new refinery at Philadelphia; and the Baltimore Sugar Refining Company had under construction a refinery in Baltimore. The sugar trust set out to overcome all these competitors, and by 1892 had acquired all of them but one. The first to succumb was the California Sugar Refinery at 1 Original Petition, p. 51. 2 Ibid., pp. 51-52.