The History of the Standard Oil Company/Volume 1/Appendix/Number 19
NUMBER 19 (See page 133)
TESTIMONY OF W. T. SCHEIDE
[Report of the Special Committee on Railroads, New York Assembly, 1879. Volume III, pages 2774-2777.]
Q. Why were you shipping over the Pennsylvania road and not over the Erie?
A. For the reason that the Pennsylvania was most eligibly situated for our purposes.
Q. How did you come, then, to ship over the Erie at all?
A . We came to ship over the Erie because of what we considered very bad treatment on the part of the Pennsylvania Railroad.
Q. What was that bad treatment that you received at the hands of the Pennsylvania road?
A. It consisted, principally, in a discrimination against us in furnishing us with cars.
Q. They refused you transportation?
A. Yes, sir.
Q. Were they refusing you transportation in the interest of the combination?
A. In the interest of a peculiar idea that they had, that all shippers should be placed upon the same basis.
Q. And in consequence of that peculiar idea, they gave to other shippers transportation and did not give it to you
A. Yes, sir.
Q. And that was the practical way in which that corporation carried out that idea?
A. Yes, sir; you will allow me to explain, please?
Q. Yes; go on.
A. The oil business differs from other business in this, that it is a daily crop; there is a certain amount of oil produced that has to be shipped every day; the consumption, however, is not equal to the daily production of our trade; the consumption varies and the demand varies; the consequence is that there are seasons of the year when a man engaged in shipping oil ships oil really at a loss because there is no demand for it, and there are other seasons when there is a large profit; now the Pennsylvania Railroad always insisted upon having a large number of shippers; this large number of shippers would ship only when there was profit, and when there was no profit somebody else had to ship; we had been their shipper for a number of years.
Q. When you speak of their shipper—their leading shipper, do you mean?
A. Yes, sir; we did their business between Philadelphia and Baltimore and New York.
Q. Were you their evener, so to speak?
A. We did not have any eveners in those days.
Q. Did you practically stand in the position of an evener?
A. No, sir; we were simply their shipper of crude oil.
Q. When you speak of their "shipper," in the singular, do you mean that you were their sole shipper, as you subsequently became on the Erie?
A. I mean we had better rates of freight than anybody else could have obtained over the Pennsylvania Railroad at that time.
Q. And therefore monopolised the business; go on?
A. And the consequence is that in consequence of this change in the demand that when there comes a season that there is a little money in it, the Pennsylvania Railroad would encourage these numerous small shippers who would come in and they would pro-rate cars with them; they would only allow us to put in a requisition for a certain number of cars and they would allow anybody else, an entire stranger, a man who never shipped any before, to put in an equal requisition, and they would pro-rate with him, and the consequence was in the paying business we were out and in the unpaying business we were in.
Q. And you left it?
A. Yes, sir.
Q. Because you could not get rates better than other people?
A. No, sir; because we could not stand it; because we were losing money.
Q. On the same basis that other people were?
A. No, sir; other people were not shipping except when there was a profit.
Q. Why did you ship when there was not a profit?
A. Because that was our business; we were shippers of petroleum.
By the Chairman.
Q. I don't understand why you were obliged to ship at a loss?
A. That is the reason why we left the Pennsylvania Railroad.
Q. I don't understand why you were obliged to ship at a loss?
A. We were in the petroleum business and shippers of petroleum, and we had contracts; in order to keep the cars running it was necessary for us to make a contract for one, two, three, five, or six months ahead.
By Mr. Sterne.
Q. Isn't it true that upon the basis of your having better rates than anybody else, you proceeded to make contracts to extend your business?
A. Yes, sir.
Q. With the Pennsylvania road?
A. Yes, sir.
Q. And that the moment that you were placed in the position of having
A. No transportation.
Q. No transportation equal to your expectations, with your special rates?
A. I had to buy oil in New York.
Q. That was the real fact?
A. Yes, sir.
Q. The business was based upon the rate of transportation?
By the Chairman.
Q. Why did you have to buy oil in New York?
A. To fill my contract.
Mr. Sterne.—He had made his contract upon the basis of his special rate.
The Witness.—And there was a certain supply of transportation which was given to me.
By Mr. Sterne.
Q. Practically an exclusive supply of transportation you had at one time over the Pennsylvania road, hadn't you?
A. Yes, sir.
Q. And when they changed their policy in that respect and gave other people transportation, you could not fill the orders upon the basis of which you had made your contracts?
A. You will excuse me; this would seem as though this was a sudden arrangement; it was not; it lasted three or four years.
Q. You had reason to suppose that it would last, had you not?
A. This policy of theirs?
Q. This policy.
A. Yes, sir.
Q. That drove you on the Erie?
A. Yes, sir.