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A commercial condition has grown up in Oklahoma by which a combination of people can destroy half the wealth of that State by a stroke of the pen. They can put the price of oil to 20 cents a barrel as well as to 50 cents a barrel, if they desire; if they thought the public would stand for it. It is public opinion they are afraid of now more than anything else.
Under the theory of that law, which our courts have sustained so far, we regulate any combination. To give an example, the laundries combined in Oklahoma City some time ago. Their combination was illegal, but we paid no attention to that. The fact that they were combining and had a monopoly on a business gave our commission jurisdiction over their practices and prices. They planned to increase their prices. They were called before the commission which established the prices they charged before they went into the combination. We advised the stockholders that we would recommend the attorney general dissolve the corporation unless the prices were put back to what they ought to be. They paid salaries of as high as $300 a month for running a laundry. We said the officers should not be permitted to rob the stockholders in this way; that if you
think you can run your business more cheaply by this combination we will permit it to be done, as long as the public is not injured thereby.
The ice manufacturers down there have a virtual monopoly on the business, because one ice plant will not ship ice to where there is another one located without the consent of the other plant. We regulate their prices. We have issued probably 50 orders covering deliveries at certain points, as outlying districts of the city. We require them to deliver within certain prescribed territory, as the evidence may justify.
We had one case where the distributors were selling 300 pounds of ice for 400. We made an order requiring permission or license from the commission for distribution. It was purely a police regulation.
We had another peculiar case before us, that of the Daily Oklahoman, which refused to publish the advertisements of big mercantile dry-goods houses. They had the only morning paper in the city, so this newspaper had a virtual monopoly on the morning advertising. We gathered all the testimony possible and wrote quite a lengthy opinion, and found it was necessary for the Oklahoman to publish advertisements for these people at the rate established for other concerns of the same kind.
The CHAIRMAN. You made the newspaper a public utility there?
Mr. HENSHAW. That had to advertise for that dry-goods firm as long as they advertised for its competitor. That was the proposition. We also held, of course, that the paper could not be required to publish an advertisement against its principles; that is, a religious paper could not be required to carry an advertisement for a whisky firm, but if they carried it for one they must carry it for the other. Of course, I do not see any necessity of a Democratic paper carrying Republican advertisements.
Senator ROBINSON. Of course, that does not go to the question as to whether or not your commission can fix prices or regulate interstate commerce. I do not think you can do that, because that is not within
the police power of the State to fix the price of any article entering into interstate commerce.
Mr. HENSHAW. We have not undertaken to do that. This case is up before us now about fixing the price of oil. Of course, the question arises when it becomes interstate commerce.
Senator Robinson. But as to oil that is produced, sold, and transported in interstate commerce, if you have the power to fix the price you would have just as much power to fix the price wrong, as far as legal right is concerned, as you would to fix it right, and the chances are that you would make a mistake. I do not believe any State functionary or any State laws should fix the price of articles of interstate commerce.
Mr. HENSHAW. I was giving you this illustration of
Senator Robinson. If you could, we would absolutely destroy commerce.
Mr. HENSHAW. I was giving you this illustration how we were operating in a small way, wholly within the State, where we can ascertain all the facts.
The CHAIRMAN. Do you think the United States could exercise similar powers over articles of interstate commerce ?
Mr. HENSHAW. Of course, it may be impracticable. What I was trying to illustrate was the proposition that when a business of any character becomes of such public consequence, that the public must use the commodity, and it has a monopoly, something may be done under that theory of law. When a new condition arises, the courts must meet that situation. Sometimes it takes years to do it, but when a thing is absolutely right, and you can see it is right, and you know it is right, and a court can see it is right and knows it is right, there is going to be found some way to do right. There is no question about it. You will find some way to do it right.
Senator ROBINSON. I do not think that is germane to this discussion. I have a great deal of confidence in and respect for the courts, but I am not willing, by any means, to admit that all the decisions of all of the courts have been right.
Mr. Henshaw. Not the first time they have met the problem? Senator Robinson. No; nor the last time. I do not think that kind of discussion throws very much light on this legislation or what is to be accomplished.
Mr. HENSHAW. I want to suggest as to the divorcement of pipe lines from the common-carrier feature. If a pipe line is made a common carrier, at least it should have a scale of rates. If it carries oil for itself, it should be credited with that amount of revenue, the same as we do the railroads. They must pay the same rate over their own pipe line as other people do.
Senator Robinson. In this bill?
Senator Robinson. I am talking about this. That had occurred to me in our discussion a while ago, but that does not appear to me to be contemplated by this bill at all. There is nothing in this bill, as I read it, about rates.
Mr. Henshaw. No; the rates would be fixed by the Interstate Commerce Commission.
Senator ROBINSON. My proposition is this, under that bill you have not gone halfway far enough, if I read the signs aright. If you pass that bill and permit the pipe lines to buy their own oil and ship it, you give them, in practice at least, the same power to monopolize the industry and control the prices, and you have accomplished very little.
Mr. HENSHAW It must apply to all; they must not have a preference.
Senator ROBINSON. I am talking about the legislation that you have before us. The point is this, if the pipe line can ship its own commodity, it has even then an advantage over the private shipper, because it is making money both ways.
Mr. HENSHAW. Oh, yes.
Senator ROBINSON. It is making money as a carrier; and it can therefore monopolize the field, and can dominate the industry, because in effect it carries its own goods for nothing. The only point I make is this: Under the bill which you have proposed here, I very much fear that the result which you desire will not be accomplished.
Mr. HENSHAW. There is some danger, unless that other condition
Senator ROBINSON. Just concede—I do not really concede it-but just concede for the sake of argument that this bill does require the Interstate Commerce Commission to compel the pipe line to pay itself the same rate for carrying its own oil that it receives from an independent shipper of oil; the mere fact that it is carrying its own oil, and receiving pay for doing it, is enabling it to make a profit, and therefore it can pay more for the oil in a given field than the man who has to ship over their line; and thus they will monopolize the field in the end. I do not see how you are going to get away from monopoly unless you divorce the transportation business from the marketing business.
Mr. HENSHAW. I am sure the divorce of the transportation business would not be objectionable. Your suggestion would not be objectionable.
Senator ROBINSON. Mr. West says it is.
Senator ROBINSON. He went further than that, he said they did not want it.
Mr. HENSHAW. He is in closer touch with the producers than I am.
Senator ROBINSON. He said he had been all over that question recently in a political way, and knew what he was talking about, and that they did not want to be deprived of the privilege of selling their oil to the pipe line companies, or that the pipe-line companies should be deprived of the privilege of buying.
STATEMENT OF J. H. REBOLD, OKMULGEE, OKLA.
Mr. REBOLD. Here is what we think will be a remedy, but which I think has been overlooked in this hearing, that the reason there are no markets at the end of these lines now is that the present price for transporting is prohibitive. In the pipe line it costs about onesixth to transport the oil that it costs to transport the same oil over railroad. But if an independent refiner built a plant at the end of or along the line of the Standard Oil Co.'s lines, and he asked the Standard to sell him oil, the Standard says, we have no oil to sell, we are refining our own oil. We think by the common-carrier feature that the producer and the refiner will be brought together again. The refiner will go out into the field and say, “I want to buy so much oil from you,” knowing the rates that it will cost him to get it to his refinery, and knowing what it costs for the crude, he knows what the cost will be at the refinery. Then we think the refiners will spring up along these lines at various places, and we will gradually develop a market. But it will take some time to build these refineries and establish these markets. Mr. West is endeavoring to avoid throwing present customs out of adjustment in the meantime.