going concerns in the tobacco business in the States of Kentucky, Louisiana, Maryland, Michigan, Missouri, New York, North Carolina, and Virginia. For ten of these plants the consideration was all cash, totalling $6,410,235.26. For the remaining five, payments totalled $1,115,100.95 in cash and $4,123,000 in stock.

The last of these firms purchased was the Drummond Tobacco Company of Missouri, dealers in plug tobacco principally. This purchase, for a cash consideration of $3,457,000 fairly completed the campaign of the American Company for control of the plug tobacco business of the United States. Purchases of plug tobacco firms began in 1891. In 1893 the American Tobacco Company tried to bring about a combination of the leading manufacturers of plug tobacco. When this plan failed cutthroat competition followed in the plug tobacco field, lowering the price below cost of production. This ugly warfare was won by the trust through its superior financial strength and the wider range of its business although by the end of the war, in 1898, the losses entailed on the American Company totalled more than $4,000,000. Through this warfare the American Company gained control of important plug tobacco companies and brought the others to terms.

As a conclusion of this war the American Tobacco Company organized in connection with several leading plug manufacturers a New Jersey corporation, the Continental Tobacco Company, with a capital of $75,000,000, afterward raised to $100,000,000. Five large and successful plug tobacco manufacturers, P. J. Sorg and Co., John Finger and Bros., Daniel Scotten and Co., P. H. Mayo and Bros., and John Wright Co. turned over their plants and assets to the Continental Company in exchange for cash and stock. The American Tobacco Company also turned over to this new corporation, at large valuations, all of its plug tobacco business,

including the National Tobacco Works, the James G. Butler Tobacco Co., the Drummond Tobacco Co., and the Brown Tobacco Co. As a consideration it received more than $1,100,000 in cash and $30,274,200 of stock in the Continental Company. Mr. Duke, president of the American Company, became president of the Continental Company.

As an example of method in this consolidation, the P. 'Lorillard Company was acquired by the Continental Company by payment of $6,000,000 stock for the $3,000,000 common stock of the Lorillard Company and by taking over $1,581,300 of the $2,000,000 preferred stock of the Lorillard Company in return for notes to a larger amount. Though the Lorillard Company thus passed virtually under control of the American Tobacco Company, through the latter's ownership of stock in the Continental Company, the Lorillard Company continued to do business under its own name and with its own old brands, just as if it were an independent concern.

As a further step in piling the capitalizations, the American Tobacco Company, after the organization of the Continental Company, increased its own capital from $35,000,000 to $70,000,000.

As a result of all these purchases and consolidations, the American Company in 1898 was manufacturing 86 per cent. of all the domestic cigarettes, 26 per cent. of all the smoking tobacco, 22 per cent. of all the plug tobacco, 51 per cent. of all the little cigars, 6 per cent. of all snuff and fine cut tobacco, and more than 2 per cent. of all cigars and cheroots.

In the third period from 1898 to 1904 either the American Company or the Continental Company bought and closed up some thirty competing corporations and partnerships engaged in the tobacco business, requiring in each case that the firm members bind themselves not again to compete for years. Control of many more going tobacco concerns with plants

scattered over the United States and Porto Rico was purchased under conditions similar to those used in the earlier acquisitions. Many of the concerns acquired had control, through stock ownership, of subsidiaries, and in many instances the acquired corporations and their subsidiaries were carried on as apparently independent competitors of the American Company although they were controlled or owned by it. Large sums of money, too, were paid in many instances for plants which were immediately closed.

During this period the American Tobacco Company still further widened its control by purchasing concerns auxiliary to the tobacco business, for examples, concerns engaged in the manufacture of packing boxes, of tin foil, and of licorice.

During this period the machinery of control was perfected by organizing five important corporations, later known in the Federal suit as "accessory defendants," viz., The American Snuff Company, the Conley Foil Company, the American Cigar Company, the MacAndrews and Forbes Company, and the American Stogie Company.

The American Snuff Company, a New Jersey corporation of 1900 with a capital of $25,000,000, united important snuff plants and gave the American Company dominance in this line in which it had only slight share even in 1898.

The Conley Foil Company produced for the American Company all of its foil which constituted the majority product of the United States.

The MacAndrews and Forbes Company consolidated the licorice business so thoroughly that they came to use more than 95 per cent. of the licorice root used in the United States.

The American Cigar and the American Stogie companies centralized these branches of manufacture so far as they were under control of the American Company.

The retail field was entered through control by the American Company of the United Cigar Stores Company.

Another of the important developments of this third period was the division of the Tobacco trade of the world by agreements with the great English combination, the Imperial Tobacco Company of Great Britain and Ireland. This great British consolidation had been formed in attempt to meet the competition of the American Company which had entered the British territory and was prosecuting its business there in its usual aggressive way. In September, 1902, the Imperial and American companies contracted that the Imperial Company should limit its business to the United Kingdom, except purchasing leaf tobacco in the United States, that the American Company should limit its business to the United States, its dependencies and Cuba, and that the British-American Company with a capital of 6,000,000 pounds sterling should be organized to take over the export business of both of these companies. The Imperial Company held one-third and the American Company two-thirds of the stock of the British-American Tobacco Company.

In June, 1901, the Consolidated Tobacco Company was organized as a holding company. Largely in exchange for bonds of this company substantially all the shares of common stock of the American and the Continental companies was secured.

After the Northern Securities case decision had endangered all holding companies, the tobacco interests in October, 1904, organized in New Jersey the new American Tobacco Company, with perpetual existence, capitalized at $180,000,000. Of this capital, $80,000,000 was in preferred stock, mainly without voting rights. The new company merged all the preceding constituents. By the method of stock distribution in effecting this merger, the same six men who had controlled the Consolidated holding company remained in control of the new solidifying corporation. The assets of all of the old companies passed to the American Tobacco Company

which continued to carry on the business until its dissolution was effected in conformity to the decree of the Supreme Court in 1911.

In this fourth period, after the formation of the merger company, the same methods were continued in furthering the monopolization of the tobacco business. Plants were bought only to be dismantled, their former operators covenanting not to enter the field again as competitors, and control of other plants was secured although they were afterward operated ostensibly as competitors.

That the combination held a monopolistic position in every branch of the tobacco manufacturing industry except that of cigars in 1904, and that it still further extended its monopolistic control after the formation of the merger corporation in 1904 is in clear evidence from the following table:

AMERICAN TOBACCO COMPANY'S PROPORTIONATE HOLDINGS IN THE UNITED STATES*

Company follow:

From 1905 to date regular 1 per cent. quarterly on preferred stock.

From 1905 to June, 1911, regular 2 per cent. quarterly on common stock. Owing to the decree of disintegration no dividends on common stock September and December, 1911,

*Report of Commission of Corporations on the Tobacco Industry, part III, p. 2.