Part 6 (1/2)

With much respect and admiration to John D. Rockefeller I remain,

Yours truly,

H.M. BACKUS.

It appears from the affidavits that the negotiations were conducted on behalf of Mrs. Backus and her company by Charles H. Marr, who had been in the employ of the Backus Company for some time, and by Mr. Maloney, who was the superintendent of the company from the time of its organization and was also a stockholder; and on behalf of the Standard Oil Company by Mr. Peter S. Jennings.

There has been an impression that the Standard Oil Company purchased for $79,000 property which was reasonably worth much more, and that this sacrifice was occasioned by threats and compulsion. Mr. Jennings requested Mr. Marr to submit a written proposition giving the price put by the Backus Company upon the several items of property and a.s.sets which it desired to sell. This statement was furnished and was annexed to Mr. Jennings's affidavit. The Standard Oil Company finally decided not to purchase all of the a.s.sets of the company, but only the oil on hand, for which it paid the full market price, amounting to about $19,000, and the item ”works, good-will, and successors.h.i.+p,”

which were offered by Mr. Marr at $71,000, and for which the Standard offered $60,000, which was promptly accepted. Mr. Marr made affidavit as follows:

”Charles H. Marr, being duly sworn, says that, in behalf of the Backus Oil Company, he conducted the negotiations which led to the sale of its works, good-will, and stock of oils and during same when said company had offered to sell its entire stock for a gross sum, to wit, the sum of one hundred and fifty thousand dollars ($150,000), which was to include cash on hand, accrued dividends, accounts, etc., said Jennings requested said company to submit an itemized proposition fixing values upon different articles proposed to be sold, and that he, after full consideration with Mrs. Backus and with her knowledge and consent, submitted the written proposition attached to said Jennings's affidavit; that the same is in his handwriting, and was copied at the office of the American Lubricating Oil Company from the original by himself at the request of said Jennings, and said original was submitted by affiant to Mrs. Backus.

”That she was fully cognizant of all the details of said negotiations and the items and values attached thereto in said proposition, consulted with at every step thereof, none of which were taken without her advice, as she was by far the largest stockholder in said Backus Oil Company, owning about seven-tenths (7/10) of said company's stock, and she fully approved of said proposition, and accepted the offer of said Jennings to pay sixty thousand dollars ($60,000) for the item works, good-will, and successors.h.i.+p without any opposition, so far as affiant knows. And affiant says that the amount realized from the a.s.sets of the Backus Oil Company, including purchase price, has been about one hundred and thirty-three thousand dollars ($133,000), and a part of its a.s.sets have not yet been converted into money as affiant is informed.”

Mr. Marr, who was, it will be remembered, the widow's representative, refers to the negotiations leading up to the purchase and says:

”But affiant says that nothing that was said by Mr. Jennings or anybody else during their progress could be construed into a threat, nor did anything that was said or done by said Jennings hasten or push forward said trade.”

He also says:

”Affiant says that the negotiations extended over a period of from two to three weeks ... and during their pendency that Mrs. Backus frequently urged affiant to bring the same to a conclusion as she was anxious to dispose of said business and relieve herself from further care and responsibility therewith. And when the said offer of purchase by said Jennings upon the terms aforesaid was conveyed to her by affiant, she expressed herself as entirely satisfied therewith.”

Mr. Maloney made an affidavit that he was superintendent of the Backus Oil Company from the time of its organization, and also a stockholder in the company, and had been a.s.sociated in business with Mr. Backus for many years previous to his death; that he took part in the negotiations for the sale, representing Mrs. Backus in the matter.

After speaking of the negotiations, he says:

”Finally, after consultation, the proposition was made by her to dispose of the works, good-will, and successors.h.i.+p for $71,000. A few days after the proposal was made to her to pay the sum of $60,000 for works and good-will, and to take the oil on hand at its market price, which proposition she accepted, and the sale was concluded.

”During these negotiations Mrs. Backus was anxious to sell, and was entirely satisfied with the sale after it was concluded. I know of the fact that about a year and a half previous she had offered to sell out the stock of the Backus Oil Company at from 30 to 33 per cent. less than she received in the sale referred to, and the value of the works and property sold had not increased in the meantime. I was well acquainted with the works of the Backus Oil Company and their value. I could at the time of the sale have built the works new for $25,000. There were no threats nor intimidations, nor anything of the kind used to force the sale. The negotiations were pleasant and fair, and the price paid in excess of the value, and satisfactory to Mrs. Backus and all concerned for her.”

So far as I can see, after more than 30 years have elapsed, there was nothing but the most kindly and considerate treatment of Mrs. Backus on the part of the Standard Oil Company. I regret that Mrs. Backus did not take at least part of her pay in Standard certificates, as we suggested she should do.

THE QUESTION OF REBATES

Of all the subjects which seem to have attracted the attention of the public to the affairs of the Standard Oil Company, the matter of rebates from railroads has perhaps been uppermost. The Standard Oil Company of Ohio, of which I was president, did receive rebates from the railroads prior to 1880, but received no advantages for which it did not give full compensation. The reason for rebates was that such was the railroads' method of business. A public rate was made and collected by the railroad companies, but, so far as my knowledge extends, was seldom retained in full; a portion of it was repaid to the s.h.i.+ppers as a rebate. By this method the real rate of freight which any s.h.i.+pper paid was not known by his compet.i.tors nor by other railroad companies, the amount being a matter of bargain with the carrying company. Each s.h.i.+pper made the best bargain that he could, but whether he was doing better than his compet.i.tor was only a matter of conjecture. Much depended upon whether the s.h.i.+pper had the advantage of compet.i.tion of carriers.

The Standard Oil Company of Ohio, being situated at Cleveland, had the advantage of different carrying lines, as well as of water transportation in the summer; taking advantage of those facilities, it made the best bargains possible for its freights. Other companies sought to do the same. The Standard gave advantages to the railroads for the purpose of reducing the cost of transportation of freight. It offered freights in large quant.i.ty, car-loads and train-loads. It furnished loading facilities and discharging facilities at great cost.

It provided regular traffic, so that a railroad could conduct its transportation to the best advantage and use its equipment to the full extent of its hauling capacity without waiting for the refiner's convenience. It exempted railroads from liability for fire and carried its own insurance. It provided at its own expense terminal facilities which permitted economies in handling. For these services it obtained contracts for special allowances on freights.

But notwithstanding these special allowances, this traffic from the Standard Oil Company was far more profitable to the railroad companies than the smaller and irregular traffic, which might have paid a higher rate.

To understand the situation which affected the giving and taking of rebates it must be remembered that the railroads were all eager to enlarge their freight traffic. They were competing with the facilities and rates offered by the boats on lake and ca.n.a.l and by the pipe-lines. All these means of transporting oil cut into the business of the railroads, and they were desperately anxious to successfully meet this compet.i.tion. As I have stated we provided means for loading and unloading cars expeditiously, agreed to furnish a regular fixed number of car-loads to transport each day, and arranged with them for all the other things that I have mentioned, the final result being to reduce the cost of transportation for both the railroads and ourselves. All this was following in the natural laws of trade.

PIPE-LINES VS. RAILROADS

The building of the pipe-lines introduced another formidable compet.i.tor to the railroads, but as oil could be transported by pumping through pipes at a much less cost than by hauling in tank-cars in a railroad train the development of the pipe-line was inevitable.