ence is further shown by a comparison of the number of factories, with their output, owned at different periods by the trust with the number owned by the independents. The years 1897, 1900, and 1906 are significant years. From a table given in the report of the Bureau of Corporations it appears that in 1897 the trust owned five plants producing chewing and smoking tobacco and snuff with an output of five million pounds each, while the independent concerns had seven plants of this size.1 In 1900 the independents had only one such plant, all of the remaining six having been acquired by the trust, which in that year was operating ten plants producing as much as five million pounds each. By 1906 the seventh independent plant had been acquired by the trust, and the trust had increased the output of some of its smaller plants, so that it had twenty-one factories all told of the size mentioned. There were only two independent concerns producing over five million pounds in 1906, two new concerns having arisen with an output of this amount. To quote from the report of the Bureau, "despite enormous expenditures for advertising and in 'schemes' and despite frequent price cutting by means of its so-called 'fighting brands' and its bogus independent concerns, there has been, in several branches of the industry, a constant tendency for competitors to gain business more rapidly than the Combination and thus to reduce its proportion of the output. This tendency has been overcome only by continued buying up of competitive concerns. Many weaker concerns have been virtually driven out of business or forced to sell out to the Combination, either by reason of the direct competition of the latter, or as an indirect result of the vigorous competition between the Combination and larger independent concerns. In the case of the larger and more powerful concerns which it acquired, however, the Combination has usually secured control only by paying a high price. The immense profits of the Combination have enabled it to keep up this policy." 2

What effect has the trust had upon the prices of tobacco products? We may take up first the cigarette branch. The American Tobacco Company (the cigarette trust) was organized in 1 Report on the Tobacco Industry, part I, p. 39. 2 Ibid., p. 41.

1890. In what way the establishment of this trust affected prices can not be said; the detailed data with respect to the years immediately following the formation of the company are not obtainable. The really significant figures, therefore, are lacking. The prices from 1893 to 1910, however, are available, and these are shown in the following table. The prices are wholesale, since the trust sold largely to jobbers.

WHOLESALE PRICES OF CIGARETTES RECEIVED BY THE TRUST ON ITS DOMESTIC BUSINESS, 1893-1910 1

The net price less tax on all the cigarette business of the trust, exclusive of exports and foreign output, averaged $3.02 per thousand in 1893. From then until 1899 it steadily declined, reaching $2.01 in 1899. This proved to be the low point. Thereafter until 1910 the price increased almost continuously, and in that year reached $3.51. But the increase in prices since 1893 or 1 Report on the Tobacco Industry, part III, p. 155.

* Includes manufacturing, selling, advertising, and freight.

even since 1899 (the low point) has not been commensurate with the increase in the cost of production; and the profit in 1910 was less, therefore, than in either 1893 or 1899. It is difficult to say just what significance attaches to these figures. The important thing, clearly, would be a comparison of the range of prices for cigarettes after the trust was established in 1890 with the range prior to that time. Data on this point being lacking, a comparison might be made of the prices charged for tobacco before and after the dissolution of 1911. Yet for reasons given on page 472 such a comparison would not lead to any definite conclusions.

No conclusions of especial value can be drawn from a study of the prices of little cigars. Until 1898 cigarettes and little cigars were grouped together in reports made to the Bureau of Internal Revenue, and therefore it is not possible to say what proportion of the little cigar business was controlled up to that time by the trust. In 1898 (when the statistics were first separated) the trust produced 48.7 per cent of the little cigars, and its control gradually increased until in 1910 it was as high as 91.4 per cent. The net price less tax, as the table on page 182 of the report of the Commissioner of Corporations on Prices shows, was distinctly less in 1910 than in 1895 (the first year for which these statistics are available 1), and was no higher than in 1898 when the Combination controlled only half the little cigar industry. But the cost meanwhile had declined greatly. The cost in 1910 was 64 cents less per thousand than in 1898, and the price about the same as in 1898. It follows that the profit was very much larger, in fact, it was more than double. It appears, therefore, that the trust was able to maintain prices; that it prevented the reduction in prices which under competitive conditions might be expected to follow a considerable decline in the cost of production. To arrive at any definite conclusions, however, we should know what prices and costs would have been had there never been a little cigar trust, and that of course can not be ascertained. The statistics for plug tobacco are perhaps more significant.

1 The American Tobacco Company kept the statistics for its little cigar business separately as early as 1895. Report on the Tobacco Industry, part III, p. 182.

One reason is that they are obtainable since 1893, or several years before the formation of the plug trust. This renders it possible, therefore, to make a comparison which could not be made for the cigarette and little cigar branches,-a comparison of the prices immediately before and after the organization of the trust. The plug trust (the Continental Tobacco Company) controlled 56.3 per cent of the business in 1899, and gradually increased this control to 81.8 per cent in 1906. The relation between steadily increasing monopolistic control and prices can thus also be pointed out.

The essential figures are shown in the following table:

WHOLESALE PRICES OF PLUG TOBACCO RECEIVED BY THE TRUST,

1

Report on the Tobacco Industry, part III, p. 51.

2 Includes manufacturing, selling, advertising, and freight.

a Loss.

In 1894, when there was no important concentration of the plug business in the hands of any one concern, the net price less tax averaged 29.1 cents per pound. The inauguration by the American Tobacco Company of its campaign for the plug business led to severe cuts in prices. The existence and severity of this competition is shown by the figures for 1895 to 1898. The average price per pound fell from 29.1 cents in 1894 to 15.5 cents in 1895, to 12.9 cents in 1896, and to 12.2 cents in 1897. In the spring of 1898 an agreement looking toward consolidation was reached, and largely as a result the average price for 1898 rose to 16.7 cents per pound, quite a bit higher than in 1897. In 1899, the year of the acquisition of the Liggett and Myers concern, the price rose to 21.0 cents, and in 1900 to 22.8 cents. As the trust increased its control year by year the price rose, and with it the profit. By 1901 the price had advanced to 25.1 cents, or more than double the price of 1897; and the profit was 6.5 cents per pound as compared with a loss of 2.4 cents in 1897. By 1908 the high-water mark in prices was reached at 30.3 cents, the profit in that year being 8.0 cents per pound. The Continental Tobacco Company at this time controlled 81.9 per cent of the business. The year 1908 was not the year of maximum profit, however, because the cost was higher than in 1903, when a profit of 9.8 cents per pound was attained.

The power and influence of the trust is indicated, though not proven, by the course of prices during the years 1901 to 1903. The internal revenue tax on plug tobacco had been 12.0 cents per pound in 1900. In 1901 it was reduced to 10.9 cents, in 1902 to 7.8 cents, and in 1903 to 6.0 cents. In spite of these marked tax reductions, the net price (including tax) rose from 34.8 cents in 1900 to 36.0 cents in 1901, and by 1903 had declined to only 35.4 cents. In other words, during a period when the tax was reduced by 6 cents, presumably in the interests of the consumer, the price actually increased six-tenths of one cent. The cost of production during these years increased by exactly the same amount as the price. It is evident, therefore, that the consumer got no benefit from the reduction in the tax; and that he was forced to pay six-tenths of a cent more to compensate the trust