5 :: WHY CONSOLIDATION
CHAPTER 1 of this volume listed the various explanations that have been offered for the Corporate Revolution. The following chapter will examine how well those explanations fit the case of sugar refining.
One of the explanations for the Corporate Revolution given in Chapter 1 cited the completion of the national railroad network in the period just prior to the Great Merger movement. According to one version of the argument, the railroads increased the market area of the typical firm, enabling it to take advantage of potential economies of scale. This meant that fewer firms were required to supply any given market, and thus that fewer firms could in the long run survive. According to the alternative version, the completion of the national railroad network led to increased competition by drawing various local markets, previously separated by high transport costs, together into one large market. The Great Merger movement followed as an attempt to mitigate this increased competition. These variations on the same theme, while pointing to quite different effects, are not necessarily incompatible.
As has already been pointed out,1 the coming of the railroads did, indeed, increase the typical sugar refinery’s market area. But the result was to strengthen, not destroy, the competitive nature of the industry. Because of lower transportation costs new markets opened up, and thus the railroads made it possible for many more refineries, given the then efficient scale of operations,2 to survive than had previously been the case. It was, in fact, the decade immediately following the railroad boom of the late 1840’s that saw the number of sugar refineries throughout the country increase from less than half a dozen to more than thirty. For the first time in the industry’s history there was effective price competition. Quality was standardized, and a whole new class of retail brokers arose to keep a close watch over the market. Even as late as the Depression of 1873, when the main outlines of the rail network east of the Missouri River had been completed, sugar refining still displayed all the characteristics of a competitive industry.
The second version of the argument—that the railroads obliterated previous market boundaries, thus creating intensified competition on a national scale—does not seem to fit the case of sugar refining any better. For this explanation implies that the coming of the railroads transformed a previously fragmented market, each fragment being supplied by a separate group of firms, into a single national market supplied by all firms together. Such a fragmentation of the market in sugar refining simply was not the case. It is true that before the coming of the railroads there were separate and distinct markets for refined sugar—the East Coast market, the Louisiana market, and, somewhat later, the West Coast market. But these remained separate and distinct, even after the completion of the national railroad network.
By its very nature, the business of refining sugar was necessarily confined to a few major seaports. Only such cities as New York, Boston, Philadelphia, New Orleans, and San Francisco had the necessary combination of direct ocean access to raw materials, ample credit facilities, and sufficient skilled labor; as a result, these cities controlled the sugar trade in their respective market areas. Thus, even before the coming of the railroads, sugar refining was geographically concentrated. The principal effect the new form of transportation had was to extend the market areas of these major refining centers. (In this respect, New York, Boston, and Philadelphia should be considered a single refining center, since transportation costs to the hinterlands were substantially the same for all three cities.) While the expansion of market areas did lead to some increased competition between the major refining centers, particularly in those regions where their market areas bordered (as in the southeastern states and the upper Mississippi valley), the increase was of only minor significance. It was the competition within these market areas—not between them—that inspired the efforts, even before the trust was formed, to bring about some sort of combination.
Another explanation that has been offered for the Great Merger movement cites the high American tariffs in effect at that time. It has been argued that without the protection which these import duties provided, the consolidation of American industry would not have been possible. Ironically, Henry Havemeyer himself offered this explanation. The tariff, he told the U.S. Industrial Commission in 1899, was the mother of trusts, though not, he hastened to add, the sugar trust specifically. “Economic advantages incident to the consolidation of large interests in the same line of business are a great incentive to their formation,” Havemeyer testified, “but these bear a very insignificant proportion to the advantages granted in the way of protection under the customs tariff.”3
At first glance this explanation seems to have relevance—despite Havemeyer’s protestations—even to the sugar refining industry. The tariff on refined sugar was considerable, amounting to 89 per cent ad valorem in 1887.4 Even when allowance was made for the fact that American refiners had to pay substantial duties on the raw sugar they imported, it nonetheless remained true that they were well insulated against foreign competition. This protection was equal to approximately 1.25 cents a pound, or 0.5 of a cent a pound more than the average direct cost of refining sugar in the United States.5 And at least some of those familiar with the American industry were convinced that sugar could be refined as cheaply in this country as anywhere in the world.6
Yet, while it is possible to show that American refiners had the benefit of considerable tariff protection, it is difficult to link this protection to the formation of the sugar trust. After all, the American sugar refining industry had been protected against foreign competition long before 1887. The nation’s first tariff, enacted almost a hundred years earlier, had levied a duty on refined sugar that was two cents a pound greater than the duty on raw sugar, and the differential, as a result of later tariff legislation, had grown even larger. By 1816 it amounted to thirteen cents a pound. While the degree of protection given American refiners was never again quite so large, and in fact declined steadily over the years, it nonetheless remained substantial.7
The tariff on refined sugar, like that on many other manufactured items, had been justified by the infant industry argument, though not always in exactly those words. And to the extent that the sugar refining industry did establish a foothold in this country, gradually growing stronger and more efficient until it was capable of holding its own against all foreign competition, this argument was eventually borne out. But it must be said that the tariff led to the formation of the sugar trust only in the sense that it enabled the sugar refining industry to survive. The fact that the industry was eventually consolidated was incidental.
This is not to say that the tariff was unimportant once the sugar trust was formed. Previously, when the industry was highly competitive, Congress did not have to worry about how high the duties on refined sugar were—except to allay political opposition to tariffs in general—as long as American firms were effectively protected against foreign competition. The impersonal workings of the domestic market set an upper limit on the price of refined sugar. After the trust was formed, however, this situation changed dramatically. Since the impersonal workings of the market could no longer be relied upon, Congress, in drawing up the schedule of sugar tariffs, had to recognize that it was also setting the upward limit on sugar prices.
Henry O. Havemeyer, in his subsequent testimony before various congressional committees, was quite candid on this point. To the House Committee on Manufactures in 1888 he conceded that the trust set its price by taking the London price of refined sugar and adding to it the amount of tariff protection.8 Six years later, appearing before a special Senate committee investigating charges of bribery in connection with the tariff bill enacted that year, Havemeyer was asked, “Is not this … a fact, that the trust, being able to fix the price in America, [sets] it just low enough to keep out refined sugar made in other countries?” “That is the business, practically [speaking]…,” he replied. “And you have so fixed it as to practically exclude all foreign competition?” he was then asked. “Yes, sir; as protection to our own business.”9
Of course, foreign competition was not the only consideration in setting the price of refined sugar. When asked what guarantee the consumer had that the price of refined sugar would not continue to be the London price plus import duties, Havemeyer replied, “There are a number of guarantees.… First, as I said before, the cheaper we can furnish sugar to the consumer the more he will eat and the more we will refine. [Second,] if we attempted to advance the rate of sugar [too much], we would increase the competition, by encouraging new firms to enter the sugar refining business.”10 But while these other considerations were important, it was still the amount of tariff protection which set the upward limit on sugar prices, especially in the short run. The key members of the congressional tax-writing committee were well aware of this fact, and they responded by seeing to it that the degree of protection embodied in the tariff bills of 1890 and 1894 was gradually reduced until it amounted to no more than 0.125 cents a pound.11
One could argue that the degree of tariff protection should have been lower, perhaps even eliminated altogether, but this would not have destroyed the trust; it would merely have made it less profitable. This conclusion, in fact, points to the true significance of the tariff. It had very little to do with the actual formation of the trust. But once the trust was established it was one of the major factors in determining how secure the market position of the consolidated industry would be.
Still another explanation for the Great Merger movement cites the growth of U.S. capital markets at that time. This development, it has been argued, made it possible not only for previously fixed assets to be converted into liquid capital but also for promoters such as J. P. Morgan to float industrial combinations on the basis of expected monopoly earnings. Some have even suggested that the merger movement was part of a gigantic stockjobbing scheme designed to enrich these same promoters.
In the case of the sugar refining industry, this explanation has several weaknesses. For one thing, the impetus for combination came, not from outside promoters, but from persons long and intimately associated with the industry. John Searles and the branch of the Havemeyer family with which he was closely associated, although heavily involved in many outside interests, nonetheless were substantially involved in sugar refining. Their Havemeyer Sugar Refining Company could trace its origins back as far as 1870, and Searles himself had taken an active part in the tariff controversies of the late 1870’s. Of the men actually responsible for organizing the trust, only John R. Dos Passos could be classified as an outsider. But his role was a relatively minor one, it being limited to advising what form the combination should take.12
For another thing, the organizers of the sugar trust—they and the others who had formerly comprised the industry—did not become rich from the sale of trust certificates. They became rich because the value of the certificates they received for their properties and then held on to gradually appreciated. The amount of these certificates was determined, not by any calculation as to how many the public would buy, but by an estimate of what the refining properties were worth as individual enterprises plus what they were worth when merged together into a single business entity. It was to take several years for these capitalized expectations to be realized. In the meantime, the value of the trust certificates fluctuated greatly, depending in part upon the economic fortunes of the sugar trust, but even more directly upon its current legal status.13
In other words, if the trust’s organizers were to realize what they considered the certificates to be worth intrinsically, they would have to wait until the market confirmed their judgment. Of course, this still left considerable leeway for speculating on the rise and fall in the value of the certificates, an activity in which the trust’s organizers undoubtedly engaged, although to what extent it is impossible to tell. Still, this speculation was incidental to the organizer’s main task, that of making the trust a going concern. For it was on this last consideration that the profits from consolidating the sugar refining industry ultimately depended.
Perhaps the most serious weakness of the stockjobbing explanation is the fact that before 1885 not much of a market for industrial securities existed. Although there were well-organized exchanges already in existence both in New York and Boston, these dealt almost exclusively in railroad, banking, public utility, and government securities. Except for a few mining shares and the stocks of companies closely connected with the railroads, such as the Pullman Company, the only industrial securities traded were those of the large New England textile firms, and they were traded for the most part on the Boston exchange. There was not an extensive market for industrial securities, because many companies at that time, especially those outside of New England, were unable to meet the requirements for listing on one of the regular exchanges: large capitalization, widespread ownership, and a willingness to disclose pertinent information.14
In fact, it was the growing flood of trust certificates which led to the development of an industrial securities market of significant proportions. The Standard Oil trust, even though its certificate-holders tended at first to sell their shares only among themselves, had already prepared the way for public acceptance of this new type of security. Then came the formation of the cottonseed oil, lead-smelting, whiskey, and other trusts, not to mention the Sugar Refineries Company. All issued their own certificates.
At first the regular exchanges refused to have anything to do with this new type of security, largely because the trusts refused to provide information on their structures or operations. But the certificates were popular with the investing public, and in 1885 when the bottom dropped out of the market for most other types of securities, the New York Stock Exchange agreed to establish an unlisted department where the various trust certificates could be traded. This department functioned in much the same manner as the present over-the-counter market.15 Despite the lack of protection which this unofficial arrangement afforded investors, the trading in trust certificates was brisk and soon exceeded the sales of the more conventional, regularly listed industrial securities. “The trade in sugar refining certificates alone by the last half of 1889,” Navin and Sears have noted, “averaged 150,000 shares a week—in contrast to a volume of 2,000 in Pullman shares.…”16
It seems clear, then, that the consolidation of the sugar refining industry—and this was true of other industries as well—was due to factors far more fundamental than the existence of an industrial-securities market. For this early phase of the consolidation effort, the trust movement, proceeded without a market of significant proportions. In fact, it was the trust movement that was largely responsible for the market’s growth and development.
This is not to say that the nascent industrial-securities market did not greatly facilitate the consolidation of the American sugar refining industry. Searles, in trying to persuade Spreckels to join forces with the other refiners, already was able to point to the greater liquidity Spreckels would have if his properties were part of a trust whose certificates were widely traded on one of the exchanges. And later, when other industries were consolidated—industries that did not lend themselves to consolidation as readily as sugar refining—this factor grew in importance. Businessmen who might otherwise have been unwilling to surrender their independence were persuaded to exchange their properties for trust certificates, and later for corporate stock, because such a move not only enabled them to shift their capital in and out of the industry more easily but also increased the value of their holdings. As Navin and Sears have pointed out, securities widely traded on one of the exchanges experienced a more than threefold increase in market value simply as a result of being listed.17 Even today this is a significant factor in persuading a small firm to merge with a larger corporation.18
But what were those more fundamental factors responsible for the consolidation of American industries? They were perhaps best described in an article published in the Commercial and Financial Chronicle at the height of the trust movement. “The effect of competition in regulating the prices of manufactured articles is not, at best, wholly satisfactory,” explained the editors of the Chronicle, who largely mirrored the views of businessmen.
… It may prevent them from being too high or too low, but it does not prevent wide fluctuations from year to year which involve loss to both the producers and to the public. In fact, in the present workings it makes them inevitable. A man will not go into business unless prices are so high as to give him what he thinks a good prospect of interest on his investment after paying all other charges. But when he has once invested his money, he will not be able to withdraw it without loss. This plant, once established, must be kept in operation, even though the returns do not pay interest or fully cover maintenance charges. It then becomes a life and death struggle with him to maintain his position in the trade. He will compete all the more actively while prices are below cost, as long as his financial resources will stand the strain.
Instead of establishing one natural or normal standard of prices, competition then furnishes two distinct ones. One, which includes all elements of cost, determines when new capital will come in; another, which only includes operating expenses in the very narrowest sense, determines when old capital will be driven out. One of these points may be very much higher than the other. The standard of prices of pig iron in a time of inflation is two or three times as high as in the period of depression which follows. For the concerns which have lived through the depression have a temporary monopoly in the “boom” which enables them to command the highest returns, while those which have afterwards been tempted to come in by these specially high prices throw their stock on the market just when it is not needed, and intensify the downward reaction.
Now it is obviously for the advantage of the public as well as the manufacturers that these extremes should be avoided if possible. It is not desirable that the low prices should last so long as to drive concerns out of business if their work is needed in the long run. The temporary cheapness is dearly paid for on such terms. To a certain extent, then, the efforts to prevent this result are justifiable in the interests of the public.…19
In other words, the coexistence of a large-scale enterprise requiring substantial fixed investment and a regime of perfect competition led to results that businessmen found intolerable. The ensuing instability, they argued, was even detrimental to the public interest. The formation of trusts, then, like the formation of price agreements and pools at an earlier stage, was an attempt by businessmen themselves to deal with this problem by establishing some degree of control over prices and output. Realizing that technologically advanced methods of production and perfect competition were incompatible, businessmen were quite willing to discard the latter. Although not revolutionaries by nature, they were—at least some of them—prepared to overthrow the existing structure of markets when they could see no other alternative to their own eventual extinction. They knew that the rule “survival of the fittest” implied that every firm, no matter how strong at present, might eventually be forced to give way to an even stronger one. In this sense they could see the truth of the Marxist prophecy, even though they were not prepared to accept Marx’s ultimate conclusions. The subsequent testimony by members of the industry before various investigative bodies clearly reveals the force of this motivation in bringing about the consolidation of the various refineries.20
For some students of this period, the principal explanation for the Great Merger movement was the desire not so much to gain control of prices and output as to take advantage of certain economies of scale. The resulting savings justified these consolidations, at least from society’s point of view, even if an attendant consequence was the elimination of competition. Searles, in his testimony before the Senate committee, tried as best he could to bring out this point. The sugar trust, he stressed, was established “in order to save the waste of independent administration.…”
Economies of scale are of several types.21 Most basic, perhaps, are the direct or “technical” economies of scale. These occur only at the plant level, and they determine how large a plant must be in order to produce goods efficiently, that is, with the least possible input of labor, capital, and raw materials. This type of scale economy is closely related to the state of the industrial arts, although changes in the relative price of inputs will affect it. There are also what might be called overhead economies of scale. These occur only at the firm level, and they arise from the fact that by expanding the scale of its operations a firm can economize on certain of its overhead costs—most important, the cost of management and sales promotion. This type of scale economy often reflects the “lumpiness” or indivisibility of such overhead costs. Finally, there are the “pecuniary” economies of scale. Once a firm reaches a certain size, it is able, simply by the dominant role it plays in the market, to force down the price of the inputs it must buy. This type of scale economy is always associated with some degree of monopsony power, and economists tend to dismiss it as a true social savings, since it can come about only at the expense of some other group in society.
Insofar as the consolidation of the sugar refining industry was concerned, there apparently were not any significant direct or technical economies of scale.22 Since this form of savings is to closely related to the state of the industrial arts, one would not expect it to have been otherwise. Put another way, the mere existence of twenty-two independent refineries would not have prevented the realization of direct economies of scale, were such economies possible. While some of the existing refineries undoubtedly were too small to operate efficiently, this shortcoming could have been corrected, had this been the real objective, simply by merging one refinery with another. It certainly did not require the consolidation of virtually the entire industry.
More important, however, was the fact that, at the time the sugar trust was organized, nearly all the technical economies of scale could be realized at a point below the plant level. The principal source of indivisibility in a sugar refinery, at least insofar as the equipment was concerned, was the vacuum pan. It, together with two defecating tanks, six bone-black filter tanks, two sugar coolers, and two centrifugal machines, comprised a single refining unit, and this single refining unit embodied virtually all technical economies of scale.23 Typically, a refinery consisted of several such refining units, but this was in order to save on certain overhead costs, principally the expense of maintenance and management, not to save on any direct costs of manufacture. Since most technical economies of scale could already be realized at a point below the level of the existing firms, there would appear to be no reason for consolidation on those grounds.
What about the prospect of achieving further economies in overhead costs? The fact that it was possible to realize certain savings in this category by combining several refining units in a single firm suggests that an increase in the size of the firm itself might have led to even greater savings.
The historical evidence seems to indicate that there were no significant overhead economies of scale, at least not as that term is understood. John Jurgensen later testified that the formation of the trust did result in some savings, for it placed in two or three hands the buying of all raw sugar and the selling of all refined products,24 but Henry Havemeyer called these, as well as all savings in management costs, “inappreciable.”25 In other words, whatever savings were achieved, they did not amount to much when spread over the millions of pounds of refined sugar produced each day. Since there was no source of sales expense other than these management costs—not even advertising—it was impossible to achieve any economies in that area.
Searles, in his subsequent testimony, laid particular stress on one type of overhead economy. “… Perhaps the greatest of all benefits” from consolidating the sugar refining industry, he said, was “the concentration of technical knowledge and ability of the people connected with the business. At the time the original sugar trust was organized each one of the refineries had some method or plans which it kept secret, which were supposed to be of value and which had value. When the trust was organized, these gentlemen were brought together and this technical knowledge and skill was concentrated and utilized for the common good.”26 Henry Havemeyer, however, minimized the importance of this overhead economy. The prospect of being able to pool the technical knowledge of everyone in the industry, he told the U.S. Industrial Commission, was realized only “in a measure.”27
There was an important reason why the benefit from forming the trust which Searles cited should have turned out in practice to be insignificant. It was not the larger refineries, such as Havemeyer & Elder and Matthiessen & Wiechers, that were most likely to benefit from the pool of technical knowledge; they were already at a high level of technical efficiency. Rather, it was the smaller refineries that stood to gain. In most cases, however, these smaller refineries were subsequently shut down so that whatever economies were achieved in this area were not of lasting significance. That is probably the reason why Henry Havemeyer later minimized their importance.
Actually, the sugar trust was little more than a paper organization. It had no office and kept no records—except a list of certificate-holders.28 It was really only a board of trustees that met two or three times a week, usually in the Wall Street chambers of Havemeyer & Elder. Although the board retained ultimate authority, the actual work of the trust was carried out by two committees, a mercantile group that included Searles, Jurgensen, Julius Stursberg, William Dick, Henry O. Havemeyer, and Joseph B. Thomas, and a manufacturing panel that included Theodore A. Havemeyer, Charles Senff, F. O. Matthiessen, and Charles Foster.29 The functions of the mercantile committee were divided, with Jurgensen and Stursberg handling the purchase of raw sugars; the others, the sale of refined products. The manufacturing committee, meanwhile, decided how much sugar each refinery should melt.30
No attempt was made to control prices directly—either the price of raw cane or the price of refined sugar. Henry Havemeyer and others connected with the trust made quite a point of this in their testimony before the House Committee on Manufactures in 1888.31 But the board of trustees very definitely did attempt to control physical quantities—the amount of raw cane purchased, the amount of raw cane melted, and the amount of refined sugar sold. And that, of course, was the equivalent of controlling prices.32
Each refinery had to file a daily report showing its purchases of raw sugar, its meltings, its sales of refined products, and the prices paid or charged.33 To assure that the reports were accurate, an auditor was sent around to the various refineries periodically to check their books.34 On the basis of these reports, the trustees then set general policy. Havemeyer and his colleagues tried to give the impression that these decisions of the trustees were merely recommendations and that the companies themselves did not have to follow them.35 But as Parsons pointed out, “The board possess[es] this control, that if at the end of the current year they are dissatisfied … they can remove the officers of the particular corporation and put in others.”36
Subject only to this over-all direction, each company was left free—in fact was instructed37—to manage its own business. “As I remember,” Stursberg later testified, “every company continued to control its own affairs under the guidance of its officers who reported … to the respective committees of the Sugar Refineries Company.”38 The trust, then, was little more than a pool, but a pool with greatly expanded powers and more certain authority over its constituent members.
Having competed vigorously against one another for so long, the various refineries at first found it difficult to adjust to the new regime, especially since it still left them with a large measure of freedom. It sometimes happened, for example, that a member of the trust paid more for raw sugar or charged less for refined sugar than the price set by the board of trustees. Havemeyer, in fact, cited several such incidents in his efforts to prove that the Sugar Refineries Company did not actually control prices.39 Stursberg later made the same point. Upon being asked if it were not correct that the trust sought to regulate prices he replied, “More or less.” “Well,” he was then asked, “in what respect is it not correct?” “Some of the corporations, especially [those] out of town…, did not live up to these suggestions at all times.… I refer especially to the Boston Houses,” Stursberg explained.40
In fact, one of the few pieces of correspondence to survive from the sugar-trust era is a letter from Henry Havemeyer to Joseph B. Thomas complaining that someone in Boston was purchasing raw sugar at 1/16 of a cent above the New York price. Havemeyer asked Thomas to get together with Charles Foster, the other member of the board of trustees from Boston, to prevent anything like that from happening again.41
Although as time went on, these independent acts became less and less frequent, they nonetheless illustrate the extent to which the various companies that comprised the sugar trust continued to operate as separate entities even after the trust was established. In so doing they precluded the possibility of achieving any significant direct or overhead economies of scale. This is not to say that some of the refineries were not later shut down while others increased in size. This happened, as circumstances and the state of the industrial arts permitted, but, generally, economies of scale were a later development. At the time the trust was organized there was little expectation of achieving them.
Thus, when one looks at the savings that mere size gave the sugar trust, they do not appear to have been important—at least not important enough to have led to the consolidation of the sugar refining industry. However, when one looks at the savings which a size sufficient to control price and output gave the trust, the picture is quite different. First of all, as a result of its monopsonistic power, the trust achieved certain pecuniary economies of scale, the most significant of which was a lower price for raw sugar.
Before the trust was established the market for raw sugar had been highly competitive, with many buyers (the twenty-two independent refineries) and many sellers (the various raw-sugar brokers). Upon the formation of the trust the number of buyers was suddenly reduced to five, with one of those five accounting for more than three-quarters of all purchases. In New York, Boston, and New Orleans the one buyer, the sugar trust, represented virtually the only potential customer. Moreover, it could command far greater resources than all the sellers combined. For the raw-sugar brokers to perform their economic function of maintaining an orderly market, it was necessary that they be able to buy and store raw sugar in their warehouses when the price was below normal, waiting for a rise in the price to release the extra stocks on the market. Yet, taking all the brokers together, the most raw sugar they could store was 25,000 tons. By the same token, it was not uncommon in the years that followed for the sugar trust to carry an inventory of from 150,000 to 200,000 tons of raw sugar.42
Faced with this great inequality in bargaining strength, the raw-sugar brokers could not hope to survive. The coup de grâce came with a sudden fall in raw-sugar prices, the world market’s reaction to the news of the trust’s formation. This fall in prices led to a heavy loss in the inventories that the raw-sugar brokers held, a blow from which they never recovered. The trust soon began to buy its supplies directly from overseas agents, while the raw-sugar brokers drifted into other fields, some of them, in fact, becoming dealers in sugar trust certificates.43
Once the competitive market in raw sugar had been destroyed, the trust was able to bring its monopsonistic power to bear in forcing down the price of its most important input. The representatives of Cuban sugar growers found that they either had to deal with the trust or forgo selling their product in America.44 The few remaining independent refineries were not able to provide a sufficient market, even though they generally paid 1/8 of a cent more per pound for raw sugar than did the trust.45 One ship’s captain, rather than accept the trust’s price, sailed to London,46 but others had no choice; they sold on the trust’s terms. A person close to the industry estimated that the consolidation succeeded in knocking 3/8 of a cent a pound off the price of raw sugar,47 and Havemeyer and Searles, in their testimony before the various investigative bodies, openly boasted of this fact. Since it was mainly foreign growers who suffered, no one in Congress seemed to mind. In fact, the nation’s representatives seemed to agree that the 3/8 of a cent represented a gain for the American people.
In the same manner, the trust was able to secure a reduction in the cost of its other inputs. These were primarily labor, bone black, anthracite coal, barrels, and rail transportation.
In large part, the power that the sugar trust was able to bring to bear in reducing the cost of these other inputs was merely a reflection of its ability, on the product side, to limit output. For example, as refineries were closed down, large numbers of workers were discharged. One witness later estimated that altogether 5,000–6,000 employees lost their jobs as a result of the sugar refining industry’s consolidation.48 When several of the Boston refineries were shut down in the fall of 1888, officials of the trust took advantage of the opportunity to enforce a 10 per cent cut in wages among those refinery workers still holding jobs. In reporting this event the New York Times noted: “… the only reason that could be advanced for [the wage cut] was that the Bay State employees [those whose refinery had been closed down] would probably be willing to accept employment at lower wages at the Boston Refinery [one of the refineries that remained in operation]. At all events, it would prevent a strike at the latter place.”49
For political reasons, the trust subsequently reversed this policy of enforcing wage cuts, for it vitiated the trust’s argument that it needed tariff protection because labor costs were higher in the United States than in Europe. In fact, the trust and its successor company began pursuing a policy of paying their workers wages that were slightly higher than the prevailing rates for similarly skilled laborers.50 It was this sharing with their workers of part of the monopoly returns from consolidation which probably accounts for the divided opinion among labor leaders with regard to these industrial combinations. While many trade-union officials complained that the combinations led to reduced employment opportunities and higher prices, thereby injuring the workingman, others pointed out that the combinations often paid higher wages and provided steadier work.51 Havemeyer himself cited this last factor, the steadier work, when replying to charges that the consolidation of the sugar refining industry had resulted in considerable unemployment.52
As for the trust’s other inputs—in particular, anthracite coal and rail transportation—they were all supplied either by fellow monopolists or by firms with some independent pricing power and/or large overhead costs. This led to a situation best described as bilateral monopoly whereby the actual price reflected the respective economic strength and bargaining skill of the two parties.53 While the amount of savings to the trust cannot thus be known, the cost of these inputs was certainly less than it would have been had the consolidation been without countervailing market power.
Pecuniary economies of scale, important as they might have been, were nevertheless of secondary importance compared to another source of savings from consolidation—the control over price and output which the consolidation made possible. As Searles explained it:
Under the old regime, when the consumption was decreased, every refiner, in trying to keep his refinery in operation rather than close it up, was obliged to cut down his production 25 per cent, 40 per cent, sometimes 50 per cent at an enhanced cost of frequently one-eighth of a cent a pound on the entire product.… Under the existing arrangement, when the market will not take, that is, when the people will not buy the sugar, we reduce the production of sugar to the actual consumption of the country, not by trying to run all the houses at the increased cost … of one-eighth of a cent a pound, which means millions of dollars, but we close up the factories which cost the most per pound to operate, and only run those which can be run with the greatest economy, and run those to their fullest capacity.54
In other words, before the trust was organized the typical sugar refinery had a cost curve similar to the one shown in Figure 1. Because of the industry’s seasonal nature the firm found itself operating to the left of point A a good part of the year. “The sugar consumption of the country,” Searles pointed out, “is, during … [the winter], only about 60 per cent of what it is in the summer time. The consequence is that we have a surplus refining capacity, or sufficient refining capacity, to supply the whole country during the months of August and September, and carry as idle plant 40 per cent of that capacity during these other months of the year.”55 Ordinarily, the profits during the summer would have been sufficient to compensate for the losses during the winter, but as the nation’s refining capacity proceeded to grow more rapidly than the demand, this became less and less the case.
With the sugar trust’s formation the cost situation changed radically. As a multiplant firm, the Sugar Refineries Company had a cost curve similar to the one shown in Figure 2. Each refinery was now able to operate at its point of maximum efficiency, which corresponds to point A in Figure 1. When necessary, production was curtailed by closing down a refinery completely rather than by having it continue producing at less than full capacity. In this way no refinery was forced to operate to the left of point A, in the area of increasing cost. (Actually, the curve shown in Figure 2 represents the locus of these low-cost points.)
At first glance, since output could be altered only by somewhat large, discrete amounts, this would appear to be a somewhat clumsy way of regulating the supply. As a matter of fact, however, by judiciously juggling inventories, the process of adjusting supply to demand could be carried out quite smoothly. When production was greater than what the market could absorb at current prices, inventories of refined sugar were allowed to accumulate. On the other hand, when production was less than what the market could absorb at current prices, inventories were allowed to fall.
Searles later gave an illustration of how this regulating process worked, and of how, at the same time, it served to stabilize prices and output. Testifying before a Senate committee in the summer of 1894, he said:
Now it happened last year in September … that there was in this country a sugar famine. The country had been afraid by reason of the panic (i.e., the panic of 1893) to buy anything; the grocers and all the wholesale dealers were unable to raise the money to carry the stocks of sugar they had been able to carry previous to the month of August. The question came with us whether we should stop our refineries, and some of our people felt as though we ought not to accumulate large quantities of sugar.
But we did run our refineries until we had a stock of nearly 400,000 barrels of sugar, and in one week we had a call from the country for that entire 400,000 barrels. Under the old system of refineries, with sixteen [independent firms], the refiners could not have been found who would have dared to have accumulated any such stock of sugar with the possibility of a decline in raw sugars which we faced, and the result would have been that there would not have been in this country 100,000 barrels of sugar under any circumstances.
Under this organization [i.e., the consolidated industry] we were able to accumulate and did have these 400,000 barrels of sugar, and when the demand came we had a call for 7,000,000 barrels of sugar in three weeks. We ran our refineries day and night in order to meet the demand of the people. We were bid from Chicago and all the larger cities of this country a premium of 1 cent a pound on our price if we would only send the sugar. The company turned out 1,000,000 barrels, and they sent every man 100 barrels where they could not otherwise have sent him 1 and kept the country going, and they did it without a farthing’s increase in the cost to the consumer. That is a thing that would have been absolutely impossible under other conditions where there would have been active competition. It was only made possible by the fact that the American Sugar Refining Company [successor to the sugar trust], knowing it had the field, was able to accumulate this sugar with safety and carry it until the people wanted it.56
Searles contended that this was not an isolated incident. The trust and its successor, the American Sugar Refining Company, intend, he declared, “to provide all the sugar the consumers of this country will take. In order to economize [on] the cost of producing that sugar they [will] frequently … run their factories at a time when there is no sale of sugar, comparatively, for the sake of keeping their operatives employed and their refineries open.…”57 In other words, the basis for regulating output was the expected long-run demand, not the short-run demand. This was also the basis for setting prices.
In sum, then, the consolidation of the sugar refining industry meant that fluctuations in demand, instead of being equilibrated primarily through changes in price as they had been before the trust was organized, were now equilibrated primarily through changes in output. But insofar as these changes in output were based on a longer time horizon, production and employment were greatly stabilized.
This new equilibrating mechanism was evident in the first winter after the trust’s formation. Noting that the output of sugar was greatly below that of the previous year, Willett & Gray’s Weekly Statistical Sugar Trade Journal reported on December 15, 1887, that “production [was] being kept down to consumption, by the closing of several refineries in New York and Boston.… Prices of refined are thereby kept steady.…” Three months later, when the full impact of the seasonal slump in demand would normally have been felt, that same journal recorded that the demand for “refined has remained firm at unchanged prices. All the elements which formerly caused frequent fluctuation are absent, and the whole sugar business has settled into a state of dullness and stupidity, which is a feature of the absence of all competition.”58
As the cost curve in Figure 2 indicates, a reduction in output was apt to result in lower average total costs (excluding any return on capital), the opposite of what had been true before the trust was organized. This lowering of costs reflected the fact that as output was reduced, the least efficient plants were shut down first. However, as time went on, these least efficient plants were gradually replaced by improved facilities. As Searles explained, “Some of the plants, by reason of location and their character, [could] not be worked as economically as others, and the better refineries have been doubled in capacity and improved rather than … operate refineries which, through bad location or poor machinery, could not be operated as economically.”59
In the New York area the Oxnard and North River refineries were shut down almost at once, just as soon as the stocks of raw sugar they had on hand could be worked off. The Moller & Sierck refinery met a similar fate soon thereafter. All three were subsequently dismantled, and their machinery was distributed to other members of the trust. The North River property, in fact, became a public park.60
The Havemeyer Sugar Refining Company’s Greenpoint refinery was rebuilt as had been agreed, but following its completion in 1891 it was used only during peak periods of the year. The same was true of the DeCastro & Donner refinery. The Dick & Meyer plant burned down only a few months before the new Greenpoint refinery was finished, but in this case the board of trustees decided not to replace the destroyed facility.61 Meanwhile, the Brooklyn Sugar Refining Company’s plant had been connected by pipes to the adjoining Havemeyer & Elder refinery so that for all practical purposes they had become one and the same plant.62 Similarly, the Havemeyer Sugar Refining Company’s Jersey City refinery was connected to the adjoining Matthiessen & Wiechers refinery.
In Boston a similar winnowing-out process took place. The Bay State refinery was the first to close. Eight months after it joined the trust, its doors were shut permanently and its machinery was transferred to the Standard refinery. Not long after that the Continental refinery was connected by pipes to the Standard, which was located next door, and the operations of the two plants were completely integrated in much the same manner as those of the Havemeyer & Elder and Brooklyn refineries in New York and the Matthiessen & Wiechers and Havemeyer refineries in Jersey City. The Boston refinery, meanwhile, had been turned into a storage warehouse. Although its machinery was not dismantled, the plant itself was used thereafter only when the Standard-Continental was temporarily closed for repairs.63
In New Orleans the Planters refinery had closed down even before the trust was organized, and the entire output of the city had been concentrated in the Louisiana company’s plant. Eventually, however, as the Planters’ capacity was needed to meet the growing demand for refined sugar in the South, the two refineries were connected by pipes so that they, too, could be operated as a single plant. The New Orleans Sugar Bowl, in reporting this development in 1889, noted that “several of the ‘Trust’ refineries in New York and Boston have been similarly connected to work together, to the great advantage of the ‘Trust’ in the cost of manufacturing…,”64 The savings, of course, were in overhead costs, since, as has already been pointed out, most technical economies of scale could be realized at a point below the plant level.
In St. Louis the trust made a sincere effort to keep the Belcher refinery in operation. William Havemeyer was even sent from New York to see if he could make it pay, but after eight months of steady losses the plant was finally shut down.65 “In the first place, it was 1200 miles from a seaport town…,” Havemeyer later explained. “Every pound of sugar that I used had to come up from New Orleans.… Then, we had to compete with the eastern refineries on one side and the California refineries on the other side. We were between two firms all the time.”66 In the case of the Forest City refinery, in Portland, Maine, the trust did not even make an effort to keep it going. The competitive position was so hopeless that the refinery was shut down as soon as the trust took control.67
At the same time that these less efficient plants were being scrapped, the remaining refineries—Havemeyer & Elder in Brooklyn, Matthiessen & Wiechers in Jersey City, the Standard in Boston, and the Louisiana in New Orleans—were being expanded to meet the rising demand for refined-sugar products. This could be accomplished, without any increase in average variable costs, simply by adding entire refining units: vacuum pan and all. As this process continued, the tendency was for the cost curve shown in Figure 2 to level off until it was horizontal—or nearly so. Insofar as this process was typical of what happened in other industries that were later consolidated, it explains why the empirical study of cost curves has shown constant average variable costs and constant marginal costs over those ranges of output at which the modern corporation, or mega-corp, customarily operates.68
This change in the shape of the sugar refining industry’s cost curve represented a real saving—enough, argued Searles, “to pay a profit on the business.”69 More important was the fact that it represented a social as well as a private gain. Seager and Gulick made somewhat the same point in discussing the consolidation movement as a whole. “It is one of our conclusions,” they wrote in their valuable study of the “trust” problem in 1929, “that after all of the economies of large-scale production have been realized, there remain wastes and losses that can be avoided only through the exercise of sufficient control over prices to maintain them at profitable levels and over outputs to secure the highest attainable regularity in the operation of plants. The combination movement is thus a natural and indeed inevitable business development, which is not in and of itself opposed to the public interest.”70 Even without following Seager and Gulick in all the conclusions they reach, one can still accept the basic point—that the consolidation of an industry may result in social savings other than the commonly recognized economies of scale, savings which reflect a more rational utilization of resources.
But these savings, it must be remembered, cannot be separated from the control over price and output which made them possible, because in order to achieve the former, it was first necessary to establish the latter. For that reason these savings should be regarded not as economies of scale but rather as economies of monopoly power. “Wasn’t it a fact,” Stursberg later was asked during the antitrust suit brought by the government against the American Sugar Refining Company, “that this consolidation was taking in a great number of refineries which you knew were not going to be operated, [and it was this] that put this doubt in your mind as to the earning of the trust certificates?” “Not in my mind,” Stursberg answered, “because I felt that the advantages of working the modern and better refineries at their lowest cost and continuously instead of reducing with the variations of the market would more than make up what the cost would be for the amount spent on this property.” “That is, you could afford to pay for the plants that were shut down in order to eliminate their competition?” the government’s counsel continued.
“In a way,” Stursberg replied.71 In other words, it would have been impossible to keep some plants operating at full capacity and others idle without a considerable degree of monopoly power. Of course, the very act of becoming a multiplant firm in an industry the size of sugar refining resulted in a certain amount of control over price and output. But still, the organizers of the trust had to be sure there would not be so many other independent firms throwing refined sugar on the market that their efforts to manage supply would be disrupted.
The sugar refining industry’s problem at the time of the trust’s formation was excess capacity relative to demand. To solve this problem it was necessary, of course, to eliminate some of the excess capacity. It so happened that the best way to do this was to close down entire refineries, especially the older, more obsolescent ones. The advantage the trust form of organization had was that it provided a convenient way of compensating those whose refineries would have to be closed. They would simply be given their appropriate share of trust certificates. For this plan to be successful, however, those refineries which continued to operate had to earn sufficient profits to pay a dividend on the refineries that closed.
Henry Havemeyer and the others connected with the sugar trust later argued that the savings from stabilizing production were alone sufficient to justify the consolidation. “The output of the different refineries,” Havemeyer told a congressional committee in 1888, “does not differ under the … [trust from what it was before]. It is [merely] concentrated in a few. By working these few to their fullest capacity, the economy is so great that it more than pays the expenses of the closed refineries.…”72 Even if what Havemeyer said were true, the members of the trust would have had no way of knowing for certain before the trust was organized that such would be the case. They would have required some additional assurance, specifically the assurance of monopoly power, before agreeing to gamble their fortunes on the success of the consolidation. Looking at the record, it is clear that the savings the trust realized from operating its plants at full capacity were not the only source of its profits.
There was, first of all, the trust’s monopsony position, which enabled it to achieve certain pecuniary economies. Far more important, however, was its monopoly power. In the five years before the trust was formed, the average margin between raw and refined sugar had been 0.853 of a cent a pound. In the five years that followed the formation of the trust, the average margin was 1.01 cents a pound, an increase of 18 per cent.73 This improved margin was the result almost entirely of the trust’s ability to regulate price and output. But insofar as this ability led to certain economies, pecuniary or otherwise, the increase in profits was even greater than the increase in margin.
These profits were considerable. The trust declared its first dividend of 2.5 per cent in April, 1888,74 and from that time on, until it was superseded by the American Sugar Refining Company in 1891, the trust continued to pay 2.5 per cent each quarter on the par value of its certificates. This constituted a return of 10 per cent per annum on the trust’s capitalization—a capitalization which included not only the refineries that had been shut down but also the “water” in the trust certificates that represented expected monopoly earnings. Moreover, in 1889 the trust declared a special dividend of 8 per cent, payable in trust certificates.75 But this still was not the whole profit picture. After paying out the above dividends, the trust had a surplus which in 1891 amounted to $7 million, or the equivalent of another 14 per cent dividend.76
It is difficult to say whether these were “monopoly” or “reasonable” profits. In testifying before various investigative bodies, Searles and Henry Havemeyer insisted that the profits were no greater than those earned by various independent firms before the trust was organized; they were simply more concentrated. In other words, they argued, the consolidation of the sugar refining industry had not led to any increase in the cost of refined sugar for the consumer. If the profits of sugar refining were greater, it was only because of the savings that the trust was able to realize. “We maintain,” Havemeyer told the U.S. Industrial Commission, “that when we reduced the cost we were entitled to the profit, and that it was none of the public’s business; we took it and paid it out to our stockholders; it may be business policy to share that with the public sometimes; we did not do that then; we have done it since.”77
In making this claim, Searles and Havemeyer, aside from contradicting their own statements that the sugar refining industry had been forced to operate at a loss before the trust was organized, were not being completely honest. The price of refined sugar did fall after 1890, but only because the tariff on raw sugars was temporarily eliminated. Previously, in the period immediately after the trust was organized, not only the margin between raw and refined sugar, but also the price of refined sugar itself, had risen.78 These facts had led many people to make their own judgments as to the causes of the sugar refining industry’s increased profitability; and in some measure, that judgment accounted for the political and legal attack under which the sugar trust promptly found itself. Before turning to that reaction, however, it may be stated, briefly and in conclusion, that the sugar refining industry was consolidated for one reason alone: so that those who had survived the Golden Age of Competition would no longer be completely at the mercy of impersonal market forces. All other considerations, including possible economies of scale and windfall profits, were secondary.
1 See pp. 36–38 above.
2 The more specific role played by economies of scale will be discussed below.
3 U.S. Industrial Commission, Reports, 1, pt. 2: 101.
4 U.S. House Committee on Manufactures, Report on Trusts, p. 84.
5 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 195.
6 As Hugh N. Camp, a former refiner, told a congressional committee in 1888: “I am satisfied that the sugar refineries of the United States can make sugar as cheap[ly] as any sugar refineries in the world. I do not suppose any house in the world can make sugar cheaper than the Havemeyers” (U.S. House Committee on Manufactures, Report on Trusts, p. 77).
7 Wells, The Sugar Industry and the Trust, pp. 22–23; 1 U.S. Stat. 24 (1789); 2 U.S. Stat. 768 (1812); 5 U.S. Stat. 558 (1842); 9 U.S. Stat. 46 (1846); 11 U.S. Stat. 192 (1857).
8 U.S. House Committee on Manufactures, Report on Trusts, p. 108.
9 U.S., Congress, Senate, Special Committee to Investigate Attempts at Bribery, Report, p. 360.
10 U.S. House Committee on Manufactures, Report on Trusts, p. 109.
11 26 U.S. Stat. 567 (1890); 28 U.S. Stat. 509 (1894); United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 195.
12 Navin and Sears, pointing to the role Dos Passos later played in the formation of the American Thread Company, have described him as one of the major promoters responsible for the Great Merger movement. Insofar as the sugar trust was concerned, this is misleading. He was a technical adviser rather than an active promoter of that combination. See T. R. Navin and M. V. Sears, “The Rise of a Market for Industrial Securities, 1887–1902,” pp. 129–30.
13 Sales of sugar-trust certificates were, at first, infrequent. One of the first transactions noted was for 100 shares @80, and was reported by the New York Times on January 26, 1888. It was not until six months later that the Commercial and Financial Chronicle began reporting the trading in sugar-trust certificates on a regular basis. The initial listing showed 77 asked, 73 bid. In June, 1889, the certificates rose above par for the first time, but they began to decline soon thereafter, reaching 59 ¼ asked, 59 bid, in December when the news broke that the New York Court of Appeals had upheld the voiding of the North River Sugar Refining Company’s charter.
14 Navin and Sears, “Market for Industrial Securities,” pp. 106–12.
15 Francis A. Eames, The New York Stock Exchange, p. 65; see also the Commercial and Financial Chronicle, July 13, 1889, p. 52.
16 Navin and Sears, “Market for Industrial Securities,” p. 115.
17 Ibid., p. 108. This is based on the finding that unlisted companies generally could be sold for three times current earnings, while listed securities generally could be sold for between seven and ten times current earnings.
18 Jesse W. Markham, “Survey of the Evidence and Findings on Mergers,” p. 181.
19 Commercial and Financial Chronicle, July 28, 1888, p. 94.
20 U.S. Senate Committee to Investigate Attempts at Bribery, Report, pp. 337, 383, 387; U.S. House Committee on Manufactures, Report on Trusts, pp. 102, 126; U.S. Industrial Commission, Reports, 1, pt. 2: 97.
21 See Joe S. Bain, Barriers to New Competition.
22 See Henry O. Havemeyer’s testimony before the U.S. Industrial Commission, Reports, 1, pt. 2: 109–11.
23 R. R. Bowker, “A Lump of Sugar,” p. 84.
24 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 4457–58.
25 U.S. Industrial Commission, Reports, 1, pt. 2: 110.
26 Lexow committee investigation, 1897, p. 439.
27 U.S. House Committee on Manufactures, Report on Trusts, pp. 101–2.
28 Ibid., p. 39.
29 Ibid., pp. 97–98.
30 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 4446–48.
31 See Henry Havemeyer’s and John Parsons’ testimony, U.S. House Committee on Manufactures, Report on Trusts, pp. 27–29, 54; see also Foster’s testimony, United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 4769–70.
32 While the market for raw sugar was essentially a world market, the Atlantic seaboard refining cities imported most of their cane from Cuba. The United States was Cuba’s most important customer, and a consolidation of buyers in this country was certain to have an effect on raw-sugar prices in Cuba, at least until the patterns of trade could be altered. Given the close commercial ties between Cuban sugar growers and American importers, however, this last possibility was not easily realized.
33 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 4769–70.
34 Ibid., p. 523.
35 U.S. House Committee on Manufactures, Report on Trusts, pp. 128–29.
36 Ibid., p. 34.
37 Henry O. Havemeyer to William Agar, January 9, 1888, reprinted in United States v. American Sugar Refining Co., et al., pretrial testimony, 1912, p. 4740.
38 Ibid., p. 519.
39 U.S. House Committee on Manufactures, Report on Trusts, pp. 128–29.
40 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 519.
41 Ibid., pp. 4744–45.
42 Ibid., pp. 184–85.
43 Ibid., p. 219; Willett & Gray’s Weekly Statistical Sugar Trade Journal, June 13, 1889.
44 John Dodsworth, a reporter for the Commercial Bulletin, told the House Committee on Manufactures in 1888, “The common understanding is that the trust is the only buyer of raw sugar, and importers frequently hold themselves more or less at the mercy of the trust buyers” (U. S. House Committee on Manufactures, Report on Trusts, pp. 57–60).
45 New York Times, November 11, 1888.
46 Ibid., February 1, 1888.
47 Hugh N. Camp, testimony before the U.S. House Committee on Manufactures, Report on Trusts, p. 76.
48 John Bergin, Lexow committee investigation, 1897, pp. 189–91.
49 New York Times, October 3, 1888. It is interesting to note that one of the purposes of the sugar refining industry’s consolidation, as stated in the trust deed, was “To furnish protection against unlawful combinations of labor” (U.S. House Committee on Manufactures, Report on Trusts, p. 7). This was probably no more than a residue of the bad feelings from the strike of 1886; see Chapter 3, p. 66 above. Still, the fact remains that the trust, and even its successor, the American Sugar Refining Company, was untouched by strikes during the period covered by this study.
50 U.S. Industrial Commission, Reports, 1, pt. 1: 69. The policy was subsequently found to assure the sugar trust and similar consolidations of a more reliable and closely attached labor force.
51 See the summary of trade-union testimony with regard to industrial combinations in U.S. Industrial Commission, Reports, 14: viii.
52 U.S. House Committee on Manufactures, Report on Trusts, p. 103.
53 For more on this point, see pp. 196ff.
54 U.S. Senate Committee to Investigate Attempts at Bribery, Report, p. 383.
55 Ibid., p. 382.
56 Ibid., p. 389.
58 Willett & Gray’s Weekly Statistical Sugar Trade Journal, March 3, 1888.
59 U.S. Senate Committee to Investigate Attempts at Bribery, Report, p. 382.
60 United States v. E. C. Knight et al.: Transcript of Record, pp. 164–68; New York Times, January 1, 1888.
61 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 321–23.
62 Ibid., p. 515.
63 United States v. E. C. Knight et al.: Transcript of Record, pp. 164–68; United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 4585–88, 4603–5; New York Times, October 2, 1888.
64 The New Orleans Sugar Bowl article was reprinted in Willett & Gray’s Weekly Statistical Sugar Trade Journal, August 8, 1889.
65 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 4539.
66 Ibid., pp. 4549–50.
67 Ibid., p. 548.
68 J. Johnston, Statistical Cost Analysis, chaps. 4–5.
69 U.S. Senate Committee to Investigate Attempts at Bribery, Report, p. 383.
70 Henry R. Seager and Charles A. Gulick, Jr., Trust and Corporation Problems, p. ix.
71 United States v. American Sugar Refining Co. et al., pretrial testimony 1912, pp. 550–51.
72 U.S. House Committee on Manufactures, Report on Trusts, p. 60.
73 Lexow committee investigation, 1897, p. 274.
74 People v. North River Sugar Refining Co.: Record, p. 51.
75 U.S., Congress, Senate, Committee on Finance, Replies to Tariff Inquiries on Schedule E, Sugar, pp. 92–94.
76 Paul L. Vogt, The Sugar Refining Industry in the United States, pp. 120–21; Willett & Gray’s Weekly Statistical Sugar Trade Journal, January 18, 1891.
77 U.S. Industrial Commission, Reports, 1, pt. 2: 112.