The Richmond Virginian. (Richmond, Va.) 1910-1920, 1911-09-25
Powerful Inside Group Of
Financiers Able to Take
Great Profits
GOOD WILL IS RATED
AT ENORMOUS VALUEi
Commissioner of Corpora-
ton, Herbert Knox Smith,
Gives Out His Report
on Industry

WASHINGTON. Sept. 24.-How n
small but powerful inside" group Of
fnanciers has appropriated the enor-
nous profits of the American Tobacco
Company through the manipulation or
stock Of thc trust. and how these
enormous profits were made possible
by the imitation Of the good VIII OF
the various competitors absorbed by
the combination. are portrayed in q
report made public to-day by HERBERT
Knox Smith. United States Commis-F
sioner OF Corporations. "a
This is the second part of the res
port on the great tobacco concern
which is branded as Il monopoly by
the commissioner. The report deaxS
with the earnings. capitalization and
investment Of the combination.
Earnings Grow Large. 1.
The commissioner shows how thu
combination in 1890 started with
capital of $25.000,o00. operating only
IN cigarettes, and hoy by 1908 1t had
grown 10 a control of about four-fiftha
Of tho whole domestic tobacco in
dustry. except cigars, and had nee
| capitalization of more than $3I6,000,-
| o0o. From Is per cent, on the actual
/ investment in 1880 tho coubinaxlona
earnings rose in 1891 to more than II
per cent. the commissioner states. and
| by 1908 the average yearly earnings
j had reached - per cent. or about $3l.-
100000
1t is pointed out by the commissioners
that the combination found the good
VIII a good field for imitation of Capt.
talization, and he reports that in 1904
| the combination placed the value OF
| Its good will" on domestic business
alone at sl48.o0o,o0o, whereas the bu-
reau. after careful analysis, has com.
puted its actual cost at s64, 900 or
| SO per cent. of the whole Investment.
| accompanying Commissioner Smiths
report. which Is very lengthy and
complete, Is tho following letter sub
United to the President. in which the
commissioner condenses the subject
matter Of the report.
department OF Commero and Labor
Bureau of Corporations,
Washington, Sept. rs, 1911.
Sill have the honor to submit
herewith Part II OF a Report on the
Tobacco Industry. 1t deals with earn-
ings, capitalization and investment
1t shows the vas learning power
that arises from substantial control
OF a large industry. The great to-
| bacco combination, which centoro
round the American Tobacco Coxa-
| pany. started In 1890 with $25, 0oO,-
| 600 capitalization. operating only In
| cigarettes By 1908 it controlled
about four-nfths Of the whole do
mestic tobacco industry. except O.
ceeded SS16, 900, 900. This concentra>
ton is the basis Of the combination's
great earning power. High rates Of
| earnings have gone with monopolAn~
ito control Of the industry. and the
| less the degree OF control the leam
the rate. The proof OF this follows
here. Crates of earnings arc herein
computed In all cases on the actual
investment including borrowed fundzk
as established by the bureAu. Earn
ings" are the net before deductinn
| interest chargea)
Earnings as D Whole.
| In 1890 the combtnauon's earn
ings were over Is per cent on the
actual Investment. They rose IN 1851
TO moro than FL per cent. II waa
then operating principally. and with
a practical monopoly. in cigarettes.
In 1895 came expansion. into other
branches q keen competitive strux-
gle. and a sharp drop in earnings.
But by 1900 the combinations broad
domino ton OF the whole industry took
effective shape. Its earnings from
that date cover the great bulk Of tn:
industry. In 1901 they were 10 p0xs
cent; In 1908 over 1e per cent. and
from 1904 to 1903 the average wao
10 per cent. or $1,000. 600 yearly.
| This was the earning power %
substantial monopoly. the result %
the concentration above stated.
| Earnings In Particular branches TN
/ Here appears, even more stftkinlfs
| ~, the earning power Of concentrato6
control. In the snuff business thu
combination has an almost complies
monographs per cent. OF the whole
business From u rate of Less thar
per cent In the f,rst year i1sO1y@
tha earnings rose tn 1903 to Is par
cent, and in 1905 to over % pop
cent The common stock OF tho mu1e
company, or1ginally all water" paid
80 per cent dividends In 1903 and
81 per cent In 1910,
In tina highly controlled "suaok1n0
tobacco" business the average eaFa~
ngs OF It's important wubeddAz1eo
Increased from III per cent In 110G
to 90 per cent. In 1903.
! Conversely. the subsidiaries cnga&14
! In the nat-plug business. with more
active composition. IN no year eAx1s
ed 10 per cent. In 1905 leaS than IL
percent
Finally. IN the cigar business, 90
which tho combination controls -
over Is per cent. Its rate Of eaxzs:
and from 1904 to 1909 averaged -
than Q per cent. This business. moe1js
over. showed exoaedingiy heavy loa
in 1904 and 1904 Herc wore soveD
campetition and low earntn9n.
| Earninan 0f independents
| The ccnhinatinn's rate OF eayninNa
has Tar exceeded that az tts compSH
to-A Its ratio In 1Soa. q ropre1ent4&
| tive year, was about two ana 0ne-1laaa
tunes the average rete for ~ a. ~
most important independGnt AA1
factuTers Of smoking and chewing t
bacco and snuff. The earnin1q
those Independents. moreover. 61oQ&
| represent the average rate In me ~
baccc business before the fosmQ1
OF the roughly QDG
~. .kcontannsA - 1ne0n1 1N6S !3