The South Improvement Company can own, contract, or operate any work, business, or traffic (save only banking); may hold and transfer any kind of property, real or personal; hold and operate on any leased property (oil territory, for instance); make any kind of contract; deal in stock, securities, and funds; loan its credit, guarantee any one's paper; manipulate any industry; may seize upon the lands of other parties for railroading or any other purpose; may absorb the improvements, property or franchises of any other company, ad infinitum; may fix the fares, tolls, or freights to be charged on lines of transit operated by it, or on any business it gives to any other company or line, without limit.
Its capital stock can be expanded or "watered" at liberty; it can change its name and location at pleasure; can go anywhere and do almost anything. It is not a Pennsylvania corporation only; it can, so far as these enactments are valid, or are confirmed by other Legislatures, operate in any state or territory; its directors must be only citizens of the United States — not necessarily of Pennsylvania. It is responsible to no one; its stockholders are only liable to the amount of their stock in it; its directors, when wielding all the princely powers of the corporation, are also responsible only to the amount of their stock in it; it may control the business of the continent and hold and transfer millions of property, and yet be rotten to the core. It is responsible to no one; makes no reports of its acts or financial condition; its records and deliberations are secret; its capital illimitable; its object unknown. It can be here to-day, to-morrow away. Its domain is the whole country; its business everything. Now it is petroleum it grasps and monopolises; next year it may be iron, coal, cotton, or breadstuffs. They are landsmen granted perpetual letters of marque to prey upon all commerce everywhere.
When the course of this charter through the Pennsylvania Legislature came to be traced, it was found to be deviousand uncertain. The company had been incorporated in 1871, and vested with all the "powers, privileges, duties and obligations" of an earlier company — incorporated in April, 1870 — the Pennsylvania Company; both of them were children of that interesting body known as the "Tom Scott Legislature." The act incorporating the company was not published until after the oil war; its sponsor was never known, and no votes on it are recorded. The origin of the South Improvement Company has always remained in darkness. It was one of several "improvement" companies chartered in Pennsylvania at about the same time, and enjoying the same commercial carte blanche.
Bad as the charter was in appearance, the oil men found that the contracts which the new company had made with the railroads were worse. These contracts advanced the rates of freight from the Oil Regions over 100 per cent. — an advance which more than covered the margin of profit on their business — but it was not the railroad that got the greater part of this advance; it was the South Improvement Company. Not only did it ship its own oil at fully a dollar a barrel cheaper on an average than anybody else could, but it received fully a dollar a barrel "rake-off" on every barrel its competitors shipped. It was computed and admitted by the members of the company who appeared before the investigating committee of Congress that this discrimination would have turned over to them fully $6,000,000 annually on the carrying trade. The railroads expected to receive about one and a half millions more than from the existing rates. That is, an additional cost of about $1.25 a barrel was added to crude oil, and it was computed that this would enable the refiners to advance their wholesale price at least four cents a gallon. It is hardly to be wondered at that when the oil men had before them the full text of these contracts they refused absolutely to accept the repeated assertions of the members of the South Improvement Company that their scheme was intended only for "the good of the oil business." The committee of Congress could not be persuaded to believe it either. "Your success meant the destruction of every refiner who refused for any reason to join your company, or whom you did not care to have in, and it put the producers entirely in your power. It would make a monopoly such as no set of men are fit to handle," the chairman of the committee declared. Of course Mr. Warden, the secretary of the company, protested again and again that they meant to take in all the refiners, but when he had to admit that the contracts with the railroads were not made on this condition, his protestations met with little credence. Besides, there was the damning fact that no refiners had come in except those in Cleveland, and that they with one accord testified that they had yielded to force. Not a single factory in either New York or the Oil Regions was in the combination. The fact that the producers had never been approached in any way looked very bad for the company, too. Mr. Watson affirmed and reaffirmed before the committee that it was the intention of the company to take care of the producers. "It was an essential part of this contract that the producers should join it," he declared. But no such condition was embodied in the contract. It was verbal only, and, besides, it had never been submitted to the producers themselves in any form until after the trouble in the Oil Regions began. The committee, like the oil men, insisted that under the circumstances no such verbal understanding was to be trusted. 21
No part of the testimony before the committee made a worse impression than that showing that the chief object of the combination was to put up the price of refined oil to the consumer, though nobody had denied from the first that this was the purpose. In a circular, intended for private circulation, which appeared in the newspapers about this time explaining the objects of the South Improvement Company, this was made clear:
"The object of this combination of interests," ran the circular, "is understood to be twofold: firstly, to do away, at least in a great measure, with the excessive and undue competition now existing between the refining interest, by reason of there being a far greater refining capacity than is called for or justified by the existing petroleum-consuming requirements of the world; secondly, to avoid the heretofore undue competition between the various railroad companies transporting oil to the seaboard, by fixing a uniform rate of freight, which it is thought can be adhered to by some such arrangement as guaranteeing to each road some such percentages of the profit of the aggregate amount of oil transported, whether the particular line carries it or not. It is also asserted that a prominent feature of the combination will be to limit the production of refined petroleum to such amounts as may serve, in a great measure, to do away with the serious periodical depressions in the article. Is it also to be expected that, desiring to curtail the production of refined petroleum in this country, the railroads will not offer any additional facilities for exportation of the crude article."
A writer in the Oil City Derrick, quoted in the Cleveland Herald, March 2, 1872, said: "The ring pretend that they will make their margin out of the consumers. That is, that they will put refined up to a figure that will enable them to pay well for crude. . . . The consumers are the avowed victims, since they must pay a price which will warrant the ring in going on with their operations. And the producers' security for the price is a mere matter of discretion."
Wherever the members of the company discussed the subject they put forward this object as one sufficient to justify the combination. If refined oil was put up everybody in the trade would make more money. To this end the public ought to be willing to pay more.
When Mr. Warden was under examination by the committee the chairman said to him: "Under your arrangement, the public would have been put to an additional expense of $7,500,000 a year." "What public?" said Mr. Warden. "They would have had to pay it in Europe." "But to keep up the price abroad you would have to keep up the price