r from the State of
Pennsylvania. This corporation, which was in fact though not in legal
form the "Standard Oil Companies," then entered into contracts with
the New York Central and Hudson River Railroad Company, the Erie
Railway Company, and several other lines which traversed the
oil-producing country, for the shipment of petroleum. The South
Improvement Company agreed to ship over these railways all the
petroleum products. In return the railway companies agreed to carry
their goods, not upon the terms open to other customers, but with a
system of rebates, paid not only upon the oil shipped by the company,
but upon that shipped by any other competing companies. "In one
locality the railroad companies were to charge oil shippers as freight
not exceeding $1.50 per barrel, and pay a rebate to the South
Improvement Company of $1.06 per barrel, whether it was the shipper of
the oil or not, so that under these contracts the Standard Oil Company
members would pay no more than 44 cents per barrel as freight to the
carrier, while their competitors would pay $1.50, and of this last sum
the railways were to pay back to the combination $1.06 per
barrel."[131]

Though this monstrous conspiracy was quickly unmasked, and the South
Improvement Company lost its charter, secret negotiations with the
railway companies enabled the Standard Oil Companies to strengthen
themselves by this system of rebates paid out of the pockets of their
business rivals. Chiefly by means of these and other discriminating
contracts they were enabled to enlarge their sphere of activity, and
making full use of their growing capital, succeeded in destroying or
absorbing their competitors, until, as early as 1875, they held a
practical monopoly of the refineries of the interior. No fewer than
seventy-four refineries are stated to have been bought up, leased, or
bankrupted by the Standard Oil Company in Pennsylvania alone in the
course of its career.

Until about 1878 the chief source of power of the company seems to
have been the alliance with the railroads and the local monopolies
obtained by buying up or crushing rival businesses. But the president,
Mr. Rockefeller, and his associates were men of keen business ability,
who understood how to make use of the inventive genius of the abler
employees who passed into their service, and of the improvements in
method of production and distribution of oil which were suggested. In
the next few years the company wer