On May 29, 1911, the Supreme Court of the United States ordered the dissolution of the American Tobacco Company, the same day it broke up Standard Oil. The trust that controlled ninety percent of all tobacco produced in America—cigarettes, plug tobacco, snuff, pipe tobacco, and cigars—was declared an illegal monopoly under the Sherman Antitrust Act. The enterprise had absorbed roughly 250 competitor firms since its incorporation in 1890, some purchased outright, others destroyed by predatory pricing, and still others acquired only to have their plants closed. Its capitalization stood at over 235 million dollars by 1904 and exceeded 300 million by 1911, a scale matched in American industry only by Standard Oil and U.
S. Steel. At the head of this institution sat James Buchanan Duke, born on December 23, 1856, in a farmhouse outside Durham, North Carolina. He had no university education and only fragmentary formal schooling, but by the age of 43 he was president of one of the largest industrial monopolies in the world.
He had begun working full-time in his father’s tobacco operation at fifteen. In 1884, he installed two Bonsack cigarette machines in the Durham factory under a private royalty arrangement competitors did not know existed. By 1889, he had captured 38 percent of the American cigarette market through an advertising spend of 800,000 dollars in a single year. On January 31, 1890, he merged his five largest rivals into the American Tobacco Company and spent the next fifteen years methodically acquiring or eliminating everything else.
The foundation of the family fortune had been laid by his father, Washington Duke. Born in 1820 on a small farm in Orange County, North Carolina, Washington learned to read at home and never spent a full year in school. After the death of his first wife, he married Artelia Roney in 1852 and built a two-story frame house on 300 acres north of what would become Durham. In 1858, typhoid took both his eldest son and his wife within ten days.
When the Confederacy expanded conscription in 1864, the 43-year-old Washington was pulled into the Confederate Navy. Before reporting, he sold his farm belongings, converted the proceeds into cured tobacco leaf, and arranged for it to be stored on the homestead. He was captured by Union forces near Petersburg, Virginia, and held at Libby Prison in Richmond until the war ended in April 1865. Released in New Bern on the North Carolina coast, roughly 135 miles from his homestead, he walked home with no money, no horse, and no transportation of any kind.
Federal soldiers had ransacked the farm during his absence. The legend that he returned with 50 cents and a blind mule has been repeated for over a century, but the archival record shows the blind mule of legend was in fact two blind mules, appearing several months later on the family’s first sales trip. Washington and his children cured, beaten, sifted, and packed tobacco by hand, producing a brand called Pro Bono Publico, Latin for “for the public good,” from a 16-by-18-foot log structure the family called the first factory. By 1866, the operation produced approximately 15,000 pounds of smoking tobacco annually, and the proceeds of that first sales trip paid for lard, bacon, and a bucket of sugar.
By 1873, production reached 125,000 pounds a year, and in April 1874, Washington moved the family and business into the railroad town of Durham. In 1878, George W. Watts of Baltimore bought a one-fifth interest in the firm for 14,000 dollars, and the partnership was renamed W. Duke Sons and Company.
Washington stepped back from active management around 1880 and devoted the rest of his life to the Methodist Church, the Republican Party, and philanthropy. He helped persuade Trinity College to relocate to Durham in 1892 and funded construction of Lincoln Hospital, the first hospital for African Americans in Durham, in 1901. He died in 1905 at age 84, having begun life on a dirt-floored farm and ended it as the patriarch of a tobacco trust. The documentary record complicates the family’s founding myth.
In 1855, Washington purchased an enslaved girl named Caroline, then approximately 11 or 12 years old, from an estate sale. In 1863, he leased the labor of an enslaved man named Jim from a Lenoir County planter. The wealth that built the dynasty began on land partly worked by people who were never paid, a fact the official narrative would quietly omit for decades. Washington had three sons who lived to adulthood.
Brodie Leonidas, born 1846, was the eldest and the family casualty. He established the first Duke tobacco operation in downtown Durham in 1869, but developed a serious alcohol addiction that became unmanageable by the early 1890s. He underwent the era’s famed Keeley cure, returned apparently sober, declared bankruptcy within three years, and relapsed. When he acquired three adjacent parcels in downtown Durham, he named the streets running through them Washington, Hated, and Watts, spelling out “Washington Duke Hated Watts” for anyone reading a city map.
The city renamed Hated Street to Gregson Street in 1902. Brodie cycled through more bankruptcies and died in 1919. Benjamin Newton Duke, born 1855, was the family’s steward. He served as vice president of American Tobacco from its founding through its dissolution and managed relationships with banks, railroads, textiles, and utilities.
He gave quietly to Trinity College for forty years, co-founded the Southern Power Company with James in 1905, and supported black institutions in the Jim Crow South. His Manhattan residence at 1009 Fifth Avenue would become the social hub of the family in New York. James Buchanan Duke, the youngest, was named after the sitting Democratic president, an irony given that the Dukes became reliable Republicans. He was called Buck from childhood.
His formal education was fragmentary, and by fifteen he was working full-time in the family operation. Contemporaries noticed the absence of ordinary social signals. He did not flirt, did not drink to excess, did not collect art, and did not cultivate views on subjects other than tobacco. He smoked continuously and wore the same suits until they were threadbare.
His instruction to new employees was a single sentence: “Don’t ask me to raise your salary. I always know what my people are worth to me, and I pay them what they are worth without being asked. ”
The dominant smoking tobacco brand in Durham was Bull Durham, made by W. T.
Blackwell and Company, which had locked up the loose-leaf market through advertising and brand recognition the Dukes could not match. James’s response was characteristic: “My company is up against a stone wall. It can’t compete with Bull Durham. Something has to be done, and that quick.
I’m going into the cigarette business. ”
The cigarette industry in 1881 employed armies of immigrant women rolling cigarettes by hand at a pace of approximately four per minute. The economics were indefensible, with labor costs of roughly 96 cents per thousand cigarettes. Allen and Ginter of Richmond, the largest cigarette manufacturer, posted a 75,000-dollar prize for a functional cigarette-rolling machine.
James Albert Bonsack, born in 1859 in Roanoke County, Virginia, solved the problem. With fifty dollars borrowed from his grandmother, he designed a machine that could produce approximately 200 cigarettes per minute, a fifty-fold improvement over the best human roller. Allen and Ginter, having sponsored the prize, declined to adopt the technology, concluding that smokers would not accept machine-made cigarettes. It would become one of the costliest decisions in 19th-century American industry.
James B. Duke made the opposite calculation. The first Bonsack machine was installed in the Durham factory on April 30, 1884. The standard royalty charged to other licensees was 30 cents per thousand cigarettes.
Duke negotiated a private rate of 20 cents, a discount of one-third, in exchange for an exclusive commitment to use only Bonsack machines. He also hired one of Bonsack’s own mechanics to live in Durham and service the machines. The contract was secret. The labor cost of producing a thousand cigarettes fell from 96 cents in 1876 to roughly 8 cents by 1895.
The royalty advantage compounded the labor advantage. Duke could cut prices below his competitors’ floor and still earn a profit, and could simultaneously outspend them on advertising. In 1889 alone, W. Duke Sons and Company spent 800,000 dollars on cigarette advertising, the equivalent of roughly 25 million dollars today.
Duke printed collectible cards in cigarette packages, sponsored a touring polo team played on roller skates, and purchased entire newspaper advertising sections in cities his competitors had dominated. By 1889, his company produced 834 million cigarettes a year and controlled 38 percent of the American market, more than any single competitor. On January 31, 1890, after eighteen months of negotiation and mutually exhausting price competition, the five largest cigarette manufacturers in the United States executed articles of incorporation in New Jersey under the name American Tobacco Company. Initial capitalization was 25 million dollars.
James B. Duke, age 33, became president. The trust at formation controlled approximately 40 percent of the American cigarette market, and that figure would not remain stable. Beginning in 1895, American Tobacco launched a systematic campaign to absorb companies in plug tobacco, snuff, pipe tobacco, and cigars.
The methods were consistent: identify a profitable independent, introduce a fighting brand priced below cost, sustain losses until the independent was bankrupt, then acquire it at distressed prices and often close its plants. The Supreme Court would later describe this practice as purchasing plants not for the purpose of utilizing them, but in order to close them up and render them useless for the purposes of trade. The plug war of the mid-1890s absorbed deliberate losses estimated at 3. 5 to 4.
1 million dollars to destroy independent chewing tobacco manufacturers. Drummond Tobacco was acquired in 1898 for 3,457,500 dollars. Liggett and Myers entered the trust in 1899. The maker of Bull Durham was eventually absorbed as well.
The list of companies consumed during the consolidation runs to roughly 250 firms. In 1901, Duke went to England with 30 million dollars to acquire British tobacco firms. Thirteen British companies banded together to form the Imperial Tobacco Company of Great Britain and Ireland, a defensive merger directly mirroring what Duke had done in 1890. After two years of transatlantic commercial warfare, the two giants reached a truce in 1902 and formed the British American Tobacco Company as a joint venture to manage trade outside both their home territories.
Duke became its first chairman, and the company would grow into the first global tobacco multinational. In tobacco country itself, farmers in Kentucky and Tennessee who grew the dark-fired leaf that fed the trust’s plug and snuff operations saw their prices systematically depressed by the monopoly’s position as a single buyer. In 1906, growers organized in the Planters Protective Association responded by burning American Tobacco’s warehouses to the ground. The Black Patch Tobacco Wars made further federal delay impossible.
On July 19, 1907, the Department of Justice filed a petition under sections 1 and 2 of the Sherman Act against the entire combination. Sixty-five companies and 29 individuals were named, including James Buchanan Duke, Benjamin Newton Duke, and George W. Watts. The trial began in early 1908.
Duke, then 51 and reportedly suffering from pernicious anemia, testified from his bedroom at his Fifth Avenue residence. On November 7, 1908, the Circuit Court found American Tobacco guilty. The majority opinion acknowledged that the record did not show the trust had raised prices, restricted supply, or inflicted measurable harm on consumers, yet still found guilt because the act of combining had itself terminated competition between formerly independent firms. The Supreme Court heard the case in 1910, and on May 29, 1911, Chief Justice Edward D.
White delivered the decision in United States v. American Tobacco Company, applying the rule of reason and finding the trust’s history as a whole in restraint of trade. In November 1911, the dissolution plan divided American Tobacco into 16 successor companies, the four largest being a greatly reduced American Tobacco Company, Liggett and Myers, P. Lorillard, and R.
J. Reynolds. The dissolution was, in the immediate financial sense, a success for James B. Duke.
His personal equity was reshuffled into shares across all 16 successor companies, which then began to compete with one another. The collective market value of the 16 entities exceeded the value of the original trust within a few years, and Duke’s personal fortune, estimated at approximately 150 million dollars by 1916, was greater after the dissolution than before. The legal verdict had broken the monopoly. The economic verdict had made him richer.
By 1911, Duke was 54 years old and had worked in tobacco continuously since age fifteen. Within a year of the Supreme Court’s ruling, he had committed serious capital to the hydroelectric venture his brother Benjamin had begun, a company that would become Duke Power, the largest electric utility in the Southeast. In 1924, the parent company was renamed Duke Power Company, recognizing the family’s central role. On December 11, 1924, in the office of his attorney in New York, Duke executed the indenture of trust creating the Duke Endowment with an initial principal of 40 million dollars.
The beneficiaries included Duke University, named for his father, non-profit hospitals in the Carolinas, orphan care organizations, rural Methodist churches, Davidson College, Furman University, and Johnson C. Smith University, the historically black institution in Charlotte. The condition was explicit: Trinity College was required to rename itself Duke University in honor of Washington Duke. On December 29, 1924, the trustees voted unanimously to accept.
James B. Duke died of pneumonia at his Fifth Avenue mansion on October 10, 1925, at age 68. The fortune left in trust for his 12-year-old daughter, Doris, was reported in headlines around the world at 100 million dollars. The dynasty that bore his name would attach itself to a chapel, a university, an electric utility, and one of the longest antitrust opinions ever issued by an American court.
It had begun in 1865 with a man walking home from a Union prison through a state that had just lost a war, carrying nothing he could legally call his own.