Shade of Sherman

Last week from Madison, Wis. the shadow of Ohio's late Senator John Sherman spread darkly across 18 major U. S. oil companies, five of their subsidiaries, 58 oilmen and three oil trade journals. Under the Sherman Anti-Trust Act they were all criminally indicted by a Federal grand jury for having "combined and conspired, beginning in February 1935, and continuing to date, to raise and fix prices of gasoline sold in interstate commerce, mainly in ten States of the Middle West."

Named in the indictment was practically every prince and potentate in U. S. oildom. The list included President Edward G. Seubeit of Standard Oil Co. of Indiana, President John A. Brown of Socony-Vacuum Oil Co., President Dan Moran of Continental Oil Co., President R. G. A: Van de Woude of Shell Union Corp., President Alexander Eraser of Wolverine Petroleum Corp., President J. F. Drake of Gulf Oil Corp., President Henry May Dawes of Pure Oil Co., President William Starling Sullivant Rogers of Texas Corp., President Earle Westwood Sinclair of Sinclair Refining Co., President Edward L. Shea of Tide Water Oil Co., President Jacob France of Mid-Continent Petroleum Corp., President Frank Phillips of Phillips Petroleum Co., President Edwin B. Reeser of Barnsdall Corp., President William G. Skelly of Skelly Oil Co. Also indicted were Keith Fanshier, petroleum editor of the Chicago Journal of Commerce, and Warren C. Platt, publisher of Platt's Oilgram and National Petroleum News.* To oilmen the sole surprise was that the Government had decided to use for the first time in a big case its power to conduct a criminal rather than civil prosecution under the Sherman Act. Late last spring Attorney General Homer Stille Cummings announced that complaints of oil price-fixing had been received, that at President Roosevelt's express request the Department of Justice would investigate. Three months ago a Federal grand jury began sitting in Madison, has since examined more than 100 witnesses.

Last week's indictments charged the defendants with fixing prices by: 1) operating two buying pools, one in East Texas, the other in Oklahoma and the nearby mid-continent fields, through which they "concertedly purchased large quantities of gasoline in spot transactions from independent refiners at artificial prices which they sought to and did establish and maintain as the going market prices"; 2) selling gasoline to some 4.000 jobbers under long-term contracts in which the price would be determined by the average of the spot market prices published in the Chicago Journal of Commerce and Platt's Oilgram.

The result, according to the indictment, was that large sums of money were arbitrarily extracted from jobbers. Furthermore it was specifically charged that the defendants were still attempting to stabilize prices by taking ''distress" (i. e., excess) gasoline off the market, particularly in the East Texas fields.

From the New Deal, such accusations sounded strange to oilmen's ears. Said one oilman: "The oil industry feels like a small boy spanked by mama for doing something papa told him to do. . . ."

The idea of forming pools to buy up surplus gasoline reached oilmen from Washington in 1933 when East Texas skimming plants were playing hob with the market. First pool buying was done in 1934 under the direct supervision of Secretary of the Interior Ickes acting as administrator of the petroleum industry. That year he said: "I feel that this plan is a real move toward stabilization of the oil industry." The program, however, did little good, largely because the East Texas refiners and some major companies could not be persuaded to join the pool. Month after his announcement, Secretary .Ickes made use of powers delegated to him by President Roosevelt, wrote Socony-Vacuum's Vice President Charles E. Arnott, then chairman of the Marketing Committee of the Planning and Coordination Committee of the petroleum industry:

"It has been brought to my attention that the market for gasoline and other petroleum products has recently been disturbed by numerous price wars. . . . This has resulted in petroleum products being sold below cost in some areas in order to meet unrestrained competition. . . . Price wars necessarily injure small independent marketers. . . . Therefore, I am requesting and authorizing you, as Chairman of the Marketing Committee, to designate committees for each locality when and as price wars develop, with authority to confer . . . and in a co-operative manner to stabilize the price level to conform to that normally prevailing in contiguous areas where marketing conditions are similar."

Chairman Arnott went to work, but before the second price stabilization program got under way, it was pigeonholed by the Government. Oilmen went ahead with operations of their own, on which the present indictment is based. When they got under way almost the only howl came from the jobbers.

Legally, the Madison case seemed to turn on whether or not the price stabilizing was continued after NRA lapsed. Defense's opinion of the case was headlined by the Tulsa World: OIL MEN CHARGE DOUBLE-CROSS BY GOVERNMENT DEPARTMENTS.

*In last week's news was an oil name more famed than any of those indicted by the Government--Doheny. Up from the presidency of Petroleum Securities Corp. to the chairman's seat, which has been vacant since her husband died last year, moved the relict of Edward Laurence Doheny. As all oil men know, dark-haired, 6-year-old Mrs. Carrie Estelle Betzold Doheny can do business with the best of them. Her company was her husband's personal basket, founded long before the top blew off the Naval oil lease of Elk Hills. Today it is a hodgepodge of the remaining Doheny oil lands in Bakersfield, Long Beach, Ventura, Kettleman Hills, a big interest in Tide Water Associated Oil, a number of California corner lots, an eleven-story building in Los Angeles, four ranches which raise cattle, grain, fruits.

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