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Oil and Antitrust: The Oil Cartel Case and the Cold War*

Published online by Cambridge University Press:  11 June 2012

Burton I. Kaufman
Burton I. Kaufman
Affiliation:
Associate Professor of History, Kansas State University
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Abstract

Nowhere was the postwar growth of multinational corporations more dramatic than in the petroleum industry. The major oil companies of the western nations were soon banded together in a complex of joint exploration, producing, refining, and marketing organizations. But efforts to advance criminal prosecution of the American companies under the antitrust laws soon ran head-on into overriding considerations of national security. The hardening of the Cold War, complicated by internal political weaknesses in Iran, persuaded both President Truman and President Eisenhower to soft-pedal litigation. In the end, criminal prosecution of joint production enterprises became civil suits against marketing and pricing agreements, which were settled by consent decree. This, according to Professor Kaufman, amounted to attacking “the tail but not the head or body of the energy tiger.”

Type
Research Article
Information
Business History Review , Volume 51 , Issue 1 , Spring 1977 , pp. 35 - 56
Copyright
Copyright © The President and Fellows of Harvard College 1977

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References

1 On the Webb-Pomerene Act, see Kaufman, Burton I., Efficiency and Expansion: Foreign Trade Organization in the Wilson Administration, 1913-1921 (Westport, Conn., 1974), 214–216Google Scholar. See also Fugate, Wilbur L., Foreign Commerce and the Antitrust Laws (Boston, 1973) 223–254.Google Scholar

2 Fugate, Foreign Commerce and the Antitrust Laws, passim. Brewster, Kingman Jr., Antitrust and American Business Abroad (New York, 1958), passim.Google Scholar

3 Wilkins, Mira, The Maturing of Multinational Enterprise; American Business Abroad (Cambridge, Mass., 1974), passim.CrossRefGoogle Scholar

4 Federal Trade Commission, Report on the Copper Industry (Washington, D. C., 1947)Google Scholar; Federal Trade Commission, Report on the Sulphur Industry and International Cartels (Washington, D. C., 1947)Google Scholar; Federal Trade Commission, Report on International Electrical Equipment Cartels (Washington, D. C., 1948)Google Scholar; Federal Trade Commission, Report on International Steel Cartels (Washington, D. C., 1948)Google Scholar; Federal Trade Commission, Report on Fertilizer Industry (Washington, D. C., 1950)Google Scholar; Federal Trade Commission, Report on International Cartels in the Alkali Industry (Washington, D. C., 1950)Google Scholar.

5 Wilkins, The Maturing of Multinational Enterprise, 292-300; Fugate, Foreign Commerce and the Antitrust Laws, esp. 444-447.

6 Public Papers of the Presidents of the United States: Harry S. Truman, 1949 (Washington, D. C., 1964), 233–235Google Scholar. On Eisenhower's views, see especially, Public Papers of the Presidents of the United States; Dwight D. Eisenhower, 1954 (Washington, D. C., n.d.) 352–364.Google Scholar

7 Frank W. Gaines to Robert Nitschke, October 4, 1946; Nitschke to Graham Morrison, January 31, 1947, DOJ, 60-57-140.

8 Nitschke to John F. Sonnett, June 4, 1947, ibid. Morrison's response to Nitschke is in long hand at the end of Nitschke's memorandum.

9 One reason why Truman encouraged the expansion of American oil interests was his fear that without an American presence in the Middle East, especially in Iran, the region might fall to the communists. According to one of his advisers, George Elsey, Truman went to the globe in his office during a meeting to discuss the Korean situation in late June, 1950. Putting his finger on Iran, Elsey noted, the president said “Here is where they [the communists] will start trouble if we aren't careful… if we just stand by, they'll move into Iran and they'll take over the whole Middle East.” Papers of George Elsey (Harry S. Truman Library, Independence, Missouri).

10 Nitschke to John F. Sonnett, June 4, 1947, DOJ 60-57-140.

11 Brewster to Clark, November 14, 1947, ibid. See also George P. Comer to John Ford Beecher, June 7, 1948, and Comer and Haldon R. Mohar to Herbert Borkland, September 1, 1948, ibid.

12 Senate Select Committee on Small Business, Commission Print No. 6, The International Petroleum Cartel: Staff Report to the Federal Trade Commission (Washington, D.C.)Google Scholar.

13 Senate Select Committee on Small Business, Commission Print No. 6, The International Petroleum Cartel, 1.

14 John Edgar Hoover to the Acting Attorney General, May 7, 1952, DOJ, 60-57-140.

15 W. B. Watson Snyder to H. G. Morison, January 23, 1952; “Memorandum for the Attorney General”, January 24, 1952; W. B. Watson Snyder to Mr. Hodges, September 11, 1950, ibid.

16 More work needs to be done on Truman's policy toward trusts, but see, for example, Hamby, Alonzo L., Beyond the New Deal: Harry S. Truman and American Liberalism (New York 1973), 46–47.Google Scholar

17 Senate Foreign Relations Commitlee, Subcommittee on Multinational corporations, Committee Print, Multinational Oil Corporations and U. S. Foreign Policy, 57-58. See also statement of Leonard J. Emmerglick, Senate Foreign Relations Committee, Subcommittee on Multinational Corporations, Hearings, Multinational Corporations and United States Foreign Policy, Part VII (Washington, D. C., 1974), 103–107Google Scholar.

18 This incident is covered in numerous works on Mideast oil interests. One of the most recent is Rand, Christopher T., Making Democracy Safe for Oil: Oilmen and the Islamic East (Boston, 1975), 135–136Google Scholar. See also Engler, Robert, The Politics of Oil: A Study of Private Power and Democratic Directions (New York, 1961), 203–204Google Scholar.

19 See, for example, “Conference with representatives of the Department of State,” prepared by George H. Schueller, August 13, 1952. According to Schueller, during this conference Robert Eakins, chief of the Department of State's Petroleum Policy Staff, thus suggested the Middle East situation as one problem on which there should be close consultation. He emphasized the delicate nature of this problem, the presence of national security interests, and the importance of keeping oil interests in the Middle East in the hands of United States nationals. DOJ, 60-57-140. See also “Memorandum re Pending Criminal Proceedings Against Oil Companies,” January 21, 1953, Ibid. For the oil company's campaign against the FTC report, see “Editorials, News Stories, Articles, and Other References Indicating Attacks on FTCs Oil Cartel Report,” October 17 and December 16, 1952, Stephen J. Springam Papers, Box 47 (Harry S. Truman Library, Independence, Missouri). See also Engler, The Politics of Oil, 209-212.

20 “Memorandum for the Secretary,” November 26, 1952, DOJ, 60-57-140. See also W. B. Watson Snyder to H. G. Morison, January 23, 1952 and George B. Haddock to Newell A. Clapp, August 22, 1952, ibid; Emanuel Celler to Harry S. Truman, OF 134-138, Harry S. Truman Papers (Harry S. Truman Library, Independence, Missouri).

21 Truman to McGranery, January 12, 1953, DOJ, 60-57-140.

22 Engler, The Politics of Oil, 216-217.

23 See, for example, Oscar John Dorwin to Assistant Attorney General, May 23, 1957 and Dorwin, “Memorandum for the Department of State of the Views of the Texas Company,” June 25, 1958; Herman J. Schmidt to Secretary of State, June 5, 1958; Oscar J. Dorwin to Lee Loevinger, November 15, 1961; David Haberman for files, January 24, 1962, DOJ, 60-57-140.

24 “Report of the Attorney General to the National Security Council Relative to the Grand Jury Investigation of the International Oil Cartel — January 1, 1953” and “Memorandum for the Attorney General” by Robert S. Cutler, DOJ, 60-57-140. See also W. B. Watson Snyder to H. G. Morison, January 23, 1952, ibid. The Justice Department had quite early taken the position that it would not use private interests for public policy purposes. See, for example, Johnston Avery to John C. Stedman, May 31, 1949, ibid.

25 The Department of Interior had been uncooperative and defensive of the oil companies even before the civil suit was filed. See Secretary of Interior Oscar L. Chapman to Attorney General James P. McGranery, January 17, 1953, ibid. See also Clarence A. Davis (Acting Secretary of Interior) to Attorney General Herbert Brownell, Jr., May 1, 1956, ibid. See also Robert Engler, Politics of Oil, esp. 92-94, 126-128, 245-246, and 358-359.

26 Senate Committee on the Judiciary and Senate Committee on Interior and Insular Affairs, Joint Hearings, Emergency Oil Lift Program and Related Problems (Washington, D. C., 1957)Google Scholar. See also Engler, Politics of Oil, 78-79, 143-146, 231-237 and 355-371.

27 Senate Foreign Relations Committee, Subcommittee on Multinational Corporations, Committee Print, Multinational Corporations and U. S. Foreign Policy, 65-66. See also Walter Bedell Smith to Attorney General Herbert Brownell, Jr., April 27, 1953 and Wilbur L. Fugate to Stanley L. Barnes, January 24, 1956, DOJ, 60-57-140.

28 See various memoranda in Senate Foreign Relations Committee, Subcommittee on Multinational Corporations, Committee Print, The International Petroleum Cartel, the Iranian Consortium and V. S. National Security (Washington, D. C., 1974), 33–95Google Scholar.

29 Leach to Smith, February 16, 1954. DOJ, 60-57-140. See also Smith to Leach, January 28, 1954, ibid. According to the Department of Justice, following the Iranian embargo, a group of oil company representatives, known only by the initials, “G.A.C.,” began operating in New York City as a private purchasing agency to fill the orders of alleged cartel members for shipment to Europe. Spot shortages of oil in the United States were alleged to be due to the purchasing activities of G.A.C., “Memorandum for the Attorney General,” June 24, 1952, ibid.

30 W. B. Watson Snyder to Assistant Attorney General Stanley N. Barnes, September 16, 1954, DOJ, 60-57-140.

31 Ibid.

32 Wilbur Fugate to Victor R. Hansen, June 3, 1957, DOJ, 60-57-140. See also Max Freeman to Leonard Emmerglick, October 16, 1953; Barbara J. Svedberg for files, June 27, 1956; Oscar John Dorwin, “Memorandum for the Department of State of the Views of the Texas Company,” June 25, 1958; Wilbur Fugate to Lee Loevinger, April 13, 1961, ibid.

33 Senate Committee on the Judiciary and Senate Committee on Interior and Insular Affairs, Joint Hearings, Emergency Oil Lift Program and Related Problems, esp. 1-9, 762-869 and 1003-1336; Senate Committee on the Judiciary, Petroleum, the Antitrust Laws and Government Policy (Washington, 1957), 19–22, 25-26, and 51-55Google Scholar. See also Engler, The Politics of Oil, 305-307.

34 Wilbur Fugate for files, April 12, 1957; Oscar John Dorwin to Victor R. Hansen, May 23, 1957; “Memorandum for the Attorney General,” June 20, 1957; Wilbur Fugate for files, December 3, 1957, DOJ, 60-57-140.

35 Wilbur Fugate to Stanley L. Barnes, November 3, 1955, ibid.

36 Wilbur Fugate to Robert A. Bicks, November 15, 1957; Wilbur Fugate for Files, November 6, 1957; Wilbur L. Fugate to Robert A. Bicks, October 30, 1957; Wilbur Fugate for Files, November 25, 1957; Wilbur Fugate to Victor R. Hansen; December 5, 1957, ibid.

37 Wilbur Fugate for Files, April 4, 1957; “Memorandum for the Attorney General,” June 20, 1957, ibid.

38 “Memorandum for the Attorney General,” June 20, 1957.

39 Wilbur Fugate for Files, December 3, 1957; Oscar John Dorwin to Assistant Attorney General, May 23, 1957, ibid. See also Robert A. Bicks for Files, December 6, 1957 and Barbara J. Svedberg for Files, June 27, 1956. The latter memorandum concerns a discussion that Svedberg had with Texaco's chief counsel, Oscar John Dorwin. According to Svedberg, Dorwin remarked, with reference to breaking up Caltex that “they [Texaco] would carry the case to the Supreme Court on this issue alone, that they would ‘go on like this for ten or fifteen years before breaking up Caltex.’”

40 Wilbur Fugate for Files, December 4, 1957 and Robert Bicks for Files, December 6, 1957 ibid.

41 O'Mahoney to Rogers, November 20, 1957, ibid. See also Kefauver to Assistant Attorney General, December 27, 1957; Victor Hansen to O'Mahoney and to Kefauver, January 7, 1958, ibid.

42 See, for example, Wilbur Fugate to W. Wallace Kirkpatrick, November 10, 1960 and Oscar J. Dorwin to Assistant Attorney General Lee Loevinger, November 15, 1960, ibid.

43 Wilbur Fugate to Robert A. Bicks, December 10, 1959, ibid. See also Fugate to Bicks, June 26, 1959; Fugate to Victor Hansen, January 19, 1959; Fugate to Lee Loevinger, April 13, 1961; Herman J. Schmidt to Secretary of State, June 5, 1958; “Draft Memorandum of the Department of State Regarding the Plaintiff's Motion for Production of Documents,” July 11, 1958; Robert Murphy to Victor R. Hansen, September 16, 1958; “Memorandum for Attorney General,” September 19, 1958, ibid.

44 Wilbur Fugate for Files, November 13, 1959, ibid.

45 ibid.

46 Wilbur Fugate to Robert A. Bicks, November 17, 1960; Fugate to Lee Loevinger, April 13, 1961, ibid. See also Fugate to Bicks, October 3 and 10, 1960; Fugate to William D. Kilgore Jr., June 19, 1962, ibid. For the Department of Defense's agreement to the consent proposal, see Vice Admiral Burton B. Biggs to Robert A. Bicks, November 3, 1960, ibid.

47 Wilbur Fugate to Robert A. Bicks, October 3 and 10, 1960; Fugate to Lee Loevinger, April 13, 1961, ibid.

48 Fugate to Kirkpatrick, November 10, 1960, ibid. According to Fugate, in accepting the consent settlements, Judge Cashin himself “commented on the critical situation existing in the Middle East and in foreign countries generally, and stated again to counsel for the other defendants that he thought that from the point of view of national defense and preserving American interests abroad, it was very important that the case be settled as to the other defendants.” Fugate to Robert L. Bicks, November 17, 1960, ibid.

49 Wilbur Fugate to W. Wallace Kirkpatrick, November 8, 1960, ibid.

50 David I. Haberman for Files, December 7, 1961 and December 14, 1962, ibid. See also Oscar John Dorwin to Lee Loevinger, November 15, 1961 and Loevinger to Dorwin, December 4, 1961; Wilbur Fugate to Loevinger, December 12, 1961, ibid.

51 David I.Haberman to William D. Kilgore, Jr., March 1, 1963, ibid. Fugate, Foreign Commerce and the Antitrust Laws, 209.

52 David I. Haberman to Alan Dobey, May 9, 1966, DOJ, 60-57-140. See also unpublished manuscript prepared for Socal by Neil H. Jacoby, “Post-War Changes in the Foreign Oil Industry” (1963) and Wilbur Fugate to Lee Loevinger, December 12, 1961, DOJ, 60-57-140.

53 David I. Haberman to Alan A. Dobey, May 9, 1966, ibid. See also Wilbur Fugate to Donald F. Turner, February 14, 1967; press release of January 24, 1968, ibid.

54 Department of Justice press release, January 24, 1968; David I. Haberman to Allan A. Dobey, May 9, 1966, ibid.

55 David I. Haberman to Alan A. Dobey, May 9, 1966, ibid. It is perhaps significant in this respect that in 1968 counsel for Jersey made it clear to the Justice Department that Jersey did not desire dismissal of its consent settlement since “Jersey's overseas operations [were] presently guided by the provisions of the Jersey decree.” David I. Haberman for Files, March 1, 1968, ibid.

56 As David I. Haberman of the Public Counsel and Legislative Section of the Justice Department pointed out in 1966, “the real key to the economic power wielded overseas by the Cartel case defendants together with British petroleum and Shell at least since World War II, has resided in the complex of closely interlocked joint ventures which they control at some of the very industrial levels we have been foreclosed from challenging, viz., crude production and refining.” Haberman to Alan A. Dobey, May 9, 1966, ibid.

57 Nash, Gerald D., United States Oil Policy 1890-1964; (Pittsburgh, 1968), 238.Google Scholar

58 Kaufman, Efficiency and Expansion, 213-216.