delivered this stock to himself and to Mr. L. M. Palmer, both of them directors in the American Sugar Refining Company, as trustees under a voting trust for five years, the beneficiaries being Mr. Havemeyer, Mr. Palmer, Mr. W. B. Thomas, Mr. J. E. Parsons, and Mr. J. H. Post, all of them, with one exception possibly, officers in the American Sugar Refining Company.1 As part of this same set of transactions, the American Sugar Refining Company on its own account acquired $5,128,000 of the preferred stock of the National Sugar Refining Company of New Jersey. (This included the $900,000 of preferred stock in this company received by the American Sugar Refining Company in exchange for the Mollenhauer stock acquired by it in 1893.) The American Sugar Refining Company therefore, either directly or through its officers, held three-fourths of the stock of the newly organized holding company; and as a natural result competition between these concerns was eliminated, except such competition as resulted from Mr. Havemeyer's general policy of promoting competition for business among the several plants. A suit to invalidate the issue of the common stock on the ground that it was made without any consideration and contrary to the laws of New Jersey, was filed in 1911. Mr. Horace Havemeyer, a son of the former head of the American Sugar Refining Company, in testimony before an investigating committee implied that this suit was brought because he (the son) had resigned from the directorate of the American Sugar Refining Company, and proposed to make the National Sugar Refining Company a real competitor.2 As the result of this proceeding the common stock was cancelled, and the American Sugar Refining Company, owning the majority of the preferred stock, came into direct control of the company. Subsequently it offered to its own shareholders the right to subscribe at par for $5,000,000 of its $5,128,200 stock in the National Company. Many of them refused to make the exchange; and the American Company thus continued to hold nearly one-fourth of the stock in its own treasury.

1 Original Petition, p. 76.

Hearings on the American Sugar Refining Company, 1911-1912, pp. 569-570,

By 1900, competition, though not eliminated, was clearly held within bounds. The natural consequence was an advance in the price of refined sugar.1 This, in turn, soon led to the building of competing refineries. Among the new enterprises established were the Federal Sugar Refining Company, the Warner Sugar Refining Company, the Colonial Sugars Company, and the Cunningham Sugar Refining Company.

The American Sugar Refining Company, for its part, continued active in the attempt to eliminate competition. In 1903 the Western Sugar Refining Company, in order to drive out of business the California and Hawaiian Sugar Refining Company (its only rival for the Pacific Coast trade), swamped the markets of the latter with refined sugar sold below the cost of production, with consequent financial loss for the smaller concern.2 Confronted with bankruptcy, the California and Hawaiian Sugar Refining Company agreed in 1903 that for a period of three years it would not manufacture or sell any refined cane sugar, and that it would permit its beet sugar output to be marketed by the Western Sugar Refining Company. During the life of the agreement, the California and Hawaiian concern refined no sugar of any kind, either from cane sugar or from sugar beets; but it was paid the sum of $200,000 a year, this payment being clearly for the purpose of restraining its competition.

4

3

In 1904, also, the American Sugar Refining Company put an end to the proposed competition of the Pennsylvania Sugar Refining Company. This concern had been organized in 1883, with a capital of $100,000. In 1903 its authorized capital was increased to $5,000,000, and the company was nearly ready to begin operating a newly erected refinery. A majority of the stock of the Pennsylvania Sugar Refining Company (26,000 shares out of 50,000) was held by the Champion Construction Company, which, in turn, was controlled by Mr. Adolph Segal. The Construction Company, under contract, was building and equip

1 See p. 117.

2 Original Petition, p. 81.

3 Ibid.

4 On this episode see Original Petition, pp. 82-88.

ping the Pennsylvania Sugar Refinery, and it was also building a large apartment house in Philadelphia. It was thus in need of funds. Aware of these facts, Mr. Gustav E. Kissel, an officer and director of the American Sugar Refining Company, acting for the company, lent Mr. Segal the sum of $1,250,000 on a oneyear note dated January 4, 1904. As security for the payment of the note when due, Mr. Segal transferred to Mr. Kissel 26,000 shares and $500,000 in bonds of the Pennsylvania Sugar Refining Company, together with written authority to vote the stock, the Champion Construction Company having given its consent to this transaction. The petition of the government charged that Mr. Segal was not aware that the American Sugar Refining Company was the real lender of the money, and that he had no reason to believe that the lender had any ulterior purpose. But Mr. Kissel, controlling, as he did, the Pennsylvania Sugar Refining Company, caused four of the seven directors to resign, and himself and three others to be elected in their stead. Thereupon they had spread upon the minutes a resolution that the refinery be closed. Having prevented the operation of the refinery, which would probably have put Mr. Segal in funds with which to meet the note, Mr. Kissel and the officials of the American Sugar Refining Company succeeded during the years 1904, 1905, and 1906-the petition relates-in so involving Mr. Segal in business complications, and in so embarrassing him, that he found himself unable to pay even the interest on his note; and until 1909 the note remained unpaid and the refinery idle.

Because of this transaction the receiver of the Pennsylvania Sugar Refining Company brought suit against the American. Sugar Refining Company under the Sherman law for treble damages. The American Company finally settled by paying $750,000 in cash, and returning the securities.1 The American Company never got back the principal of the loan, hence the transaction cost it $2,000,000. Counsel for the American Company testified that the settlement was made because the suit was instituted at about the time of the underweighing cases, 1 Hearings on the American Sugar Refining Company, 1911-1912,

p. 220.

and the feeling against the American Company was so strong that the trial would have proven a farce.

In 1908, another independent concern, the Colonial Sugars Company, operating a small refinery in Louisiana, was acquired by the Cuban-American Sugar Company. The latter concern was a combination of several raw sugar producing companies in Cuba, and according to the government petition was operated in harmony with the American Sugar Refining Company, the latter having, in fact, lent it large sums of money, and having in other ways dominated its affairs.1

This left as independent cane sugar refineries only Arbuckle Brothers, the Federal Sugar Refining Company, the Warner Sugar Refining Company,2 the Revere Sugar Refining Company, the Cunningham Sugar Refining Company, and two individual plants, one of which in 1909 was not in operation.

We turn now to the beet sugar industry, and to the attempt of the American Sugar Refining Company to duplicate here the considerable degree of success attained in the cane sugar branch.

The beet sugar industry in this country is comparatively new. Prior to 1898 the production of refined sugar from domestic beets hardly exceeded in any year 2 per cent of the country's output of refined sugar. Under the protection afforded by the Dingley tariff of 1897, however, the industry developed rapidly. In 1901, 7 per cent of the sugar consumed was beet sugar; in 1909,

14 per cent.3

Up to 1901 the American Sugar Refining Company had had little to do with the beet sugar industry. In 1897 it had purchased from the Spreckels family a one-half interest in the Western Beet Sugar Company,-a company incorporated in 1887, and possessing a factory in California. In the same year (1897) the two interests had incorporated the Spreckels Sugar Refining

1 Original Petition, pp. 88-89.

2 These three companies refined in 1909 some 8.70, 6.30 and 2.50 per cent, respectively, of the country's output. Hearings on the American Sugar Refining Company, 1911-1912, p. 43.

3 Original Petition, p. 93.

Company, which was to build a new factory in the same state. The following year this newly organized company acquired all of the stock of the Western Beet Sugar Company, and permanently closed the factory. The Spreckels Sugar Company after its organization sold all its product through the Western Sugar Refining Company, one-half of the stock in which, as we have seen, was owned by the American Sugar Refining Company. A half-interest in one concern represented, therefore, the American Sugar Refining Company's total investment in the beet sugar business up to 1901.

The beet sugar industry, however, was steadily growing in importance, and in some localities was becoming a serious competitor of cane sugar. By 1901 there were thirty-one separate concerns manufacturing beet sugar, and eight others were planning to enter the business.1 The American Sugar Refining Company apparently came to the conclusion that it must eliminate this growing competition. Having obtained the necessary funds by an increase in its capital stock from $75,000,000 to $90,000,ooo, the company in the summer of 1901 manufactured an unusually large quantity of refined sugar for the purpose, so the government petition alleged, of selling it in the markets of its rivals. About the same time Mr. H. O. Havemeyer and Mr. L. M. Palmer entered into unlawful agreements with various railroads leading out of Boston, New York, Jersey City, Philadelphia, and New Orleans, for the transportation at rates much below the published tariffs of large quantities of refined sugar, and for the free storage of this sugar in warehouses belonging to the railroads. The amount of rebates paid to the American Sugar Refining Company during the years 1901-1904 totalled $500,000.* The next step was the sale of this sugar in the markets of the beet sugar companies at prices below the cost of production.5 This move forced the beet sugar refineries to sell out to the American Sugar Refining Company or face the prospect of ruin; and many of them decided to sell.

1 Original Petition, p. 96.

2 Ibid., pp. 97-98.

Ibid., pp. 98-99. 4 Ibid., p. 99.

5 Ibid.