Hell's Cartel

by Diarmuid Jeffreys

  Duisberg was fortunate. After several weeks of playing with variants of the Congo red recipe and getting absolutely nowhere, he came in one day and noticed that the muddy brown residue of one of his early experiments (contained in a test tube that he had meticulously labeled and set aside in a cupboard) had turned bright scarlet. Working back through his notes, he realized that he had found something that was both chemically identical to Congo red and arrived at in a way that was sufficiently unique to let Bayer’s lawyers fight off any claim of infringement. As it happened, the original manufacturers went ahead and sued anyway, but before the matter was settled Duisberg cleverly managed to persuade them that an expensive legal battle was in no one’s interest and that the two companies would be best served by getting together to share the patent and jointly monopolize the dye’s production. They were, in effect, agreeing to the creation of a minicartel, the first of many such deals that Duisberg was able to pull off and a foreshadowing of much bigger things to come.

  He repeated this trick with two other colors over the next three years and gradually made Bayer enough money to solve its short-term financial problems. Rumpff and his fellow directors quickly understood that they had found a chemist with a rare blend of scientific flair and business skills. In recognition of his achievements and desperate to prevent him from taking his talents elsewhere, they made him head of all the company’s research and patenting programs and even hired several new employees to work under his supervision. Duisberg now had a brief to think creatively, to look around for new business prospects. It was a heady responsibility for a young man who only a few years before had been writing letters begging for a job, and he wasn’t quite sure what to do with it. But his short experience in the industry, with all its crucifying competition, had already taught him one thing: the field was too crowded; it was time to get involved in something other than making dyes.

  The most promising opportunities seemed to lie in pharmaceuticals. For some years, German scientists, building on the work of August von Hofmann, had been investigating the medical potential of coal tar derivatives, with chemical similarity to naturally derived medicines such as quinine. Most of these experiments had ended in failure, but in 1884 the Hoechst dye firm, owned by Eugen Lucius and Adolf Bruning, used a graduate student’s research to produce an aniline-based fever-reducing tonic known as antipyrine. Although the tonic’s deeply unpleasant gastric side effects soon forced its withdrawal from the market, antipyrine enjoyed a brief commercial success and inspired a number of imitators. Two years later, for example, the Biebrich dye firm of Kalle and Company started selling a similar medicine drawn from the coal tar derivative acetanilide. Before its launch, however, Kalle had to overcome a significant commercial problem. Acetanilide was widely available and impossible to patent. Every synthetic dye business in the country already used it as an intermediate in the manufacturing process. If Kalle launched acetanilide as a promising new drug, many of its competitors would, too, and the benefits of sole ownership would be lost. So the company came up with a novel solution. It coined a catchy new brand name for the product, Antifebrine, and then, ingeniously, registered the name as a protected trademark.

  At the time drugs sold by licensed pharmacists (as opposed to the quack remedies peddled on the street by patent medicine salesmen) were known by their generic chemical names and were similarly described in the medical journals that doctors read to inform themselves about new treatments. Naturally, doctors used these same generic names when filling out their prescriptions and left it up to the pharmacists to decide which chemical supplier they obtained the substances from. This practice allowed pharmacists to shop around for the best deals, which helped keep drug prices affordable for the patient. But Antifebrine upset this happy state of affairs. As its manufacturers had hoped, physicians found the new brand name, which was widely advertised, easier to remember than acetanilide, the drug’s generic name, and began putting it on their prescriptions instead. Because a doctor’s instructions were legally sacrosanct and had to be followed to the letter, pharmacists soon found, to their considerable fury, that they were having to order Antifebrine from Kalle and Company, the sole owners of the trade name, and were prevented from substituting acetanilide from other suppliers—even though the generic drug was identical, widely available, and much cheaper. Of course, once it was clear that it had established an effective monopoly, Kalle hiked its prices and sat back to enjoy the benefits.

  To Carl Duisberg, tasked by his employers with finding new areas of business, Kalle’s well-publicized success acted like a goad. He sat down with his small research team and brainstormed. Surely Bayer could be equally inventive. It was then he remembered that lying around at the back of the Elberfeld plant were thirty thousand kilos of a waste chemical called paranitrophenol. This was another incidental by-product of synthetic dye manufacture, similar in composition to acetanilide, and he began to wonder if it might have some of the same antipyretic properties. He asked Oskar Hinsberg, one of the other sponsored graduates hired by Rumpff, to see if he could make anything of it. A few weeks later Hinsberg came back with remarkable results. He had produced a substance called acetophenetidine. It promised to be an even more effective fever reducer than acetanilide and, better still, it didn’t seem to have as many harmful side effects.* Duisberg leapt at the opportunity. After a few simple trials on volunteers around the factory he persuaded Rumpff and the Bayer board (by now falling more and more under his spell) to market the compound as a medicine. With Kalle and Company’s clever prescription trick firmly in mind, he gave the drug a catchy brand name, Phenacetin, and registered it as a trademark.

  Phenacetin was a groundbreaking product, the first really big hit of the nascent pharmaceutical business and the true forerunner of the drugs made and sold by today’s multibillion-dollar industry. Altruistic scientists and academics driven by curiosity had played no part in its development. It was the result of a purely industrial process, invented and marketed by a commercial manufacturer with the sole aim of making money. And it was hugely profitable. A few months after its launch in 1888, Europe and North America were swept by a major flu epidemic and fever-reducing treatments were in great demand. Phenacetin was one of the few effective therapies available and Bayer cashed in. Indeed, it struggled to meet the incoming orders. Transforming a dye-making business into a pharmaceutical manufacturer was no easy task and the first batches of the drug were brewed in hundreds of discarded beer bottles found in a shed on the company premises. But Duisberg had become a man with a mission, and he shrugged off the problems. Later that year Bayer scientists came up with another profitable drug, a sedative dubbed Sulfonal, which led in turn to a more advanced version called Trional. Each one made the company handsome profits and cemented Duisberg’s reputation and position.

  When Carl Rumpff died in 1890, the board gave in to the inevitable and handed effective control of the business to his protégé. Bayer was still making dyes, of course, and by now was also branching out into other chemical products such as paints and detergents, but henceforth a large part of its focus was to be on medicines. Duisberg set up a separate pharmaceutical division and spent 1.5 million marks (a huge sum for the time) on building a state-of-the-art laboratory for his growing team of researchers. Previously condemned to working in any spare space they could find at Elberfeld—corridors, bathrooms, even an old wood shed—the scientists now moved into a modern three-story block lavishly furnished with all the latest equipment, gas and water supplies, and efficient ventilation to get rid of toxic fumes. To many of the company’s older chemists, who remembered the times they had been found slumped unconscious by their benches, few things could have been more symptomatic of their new chief’s understanding of the demanding complexities of their trade.

  In less than six years, Duisberg had transformed his company’s ailing fortunes, lifting it out from its position amid the struggling also-rans of the German chemical industry and setting it on the road to the top. He celebrated this
burgeoning success by marrying Carl Rumpff’s niece, Joanna, and moving into a sumptuous new home in Elberfeld full of expensive furniture and objets d’art. He indulged his four children in a manner that his father had so singularly denied him, and he began to put on weight, showing the first signs of the portliness that would characterize him in later years. With his full moustache and well-cut clothes, he would have appeared to a casual observer like any other successful, complacent member of the new German bourgeoisie.

  In fact, though, Duisberg put in punishingly long hours at work, plowing through an exhausting daily agenda of memoranda, reports, and meetings and demanding the same total commitment from all his subordinates. His ambition and his energy were boundless. Even as he packed more scientists into the laboratory at Elberfeld, urging them on to greater and greater achievements, he was drawing up the master plans for a massive new Bayer factory at Leverkusen, north of Cologne. He knew that the company’s continued survival in one of the most competitive industries in the world could be ensured only by developing a range of compelling new products, each of which would have to be efficiently manufactured, marketed with imagination, and sold at the greatest possible profit. From now on, from the shop floor to the boardroom, no one would be allowed to forget that simple formula.

  In the meantime, of course, he wasn’t the only one with plans for the future. Germany’s dyestuffs world was full of aggressively ambitious men and each of them was energized by the same desire to mitigate or evade its crippling competition. While some followed Bayer into pharmaceuticals, with varying degrees of success, others found different solutions to the problem; the basic coal tar science that had underpinned all the industry’s early achievements was proving to be adaptable to an extraordinary range of commercial applications, from paints and printing inks to photographic materials and cleaning products. It would be a mistake, however, to assume that all this activity signified a collective rush out of the core business of manufacturing and selling dyes. Profit margins had been tightly squeezed but there was always money to be made by anyone able to come up with an attractive new shade, and, in any case, the chemicals produced in the dye-making process were the foundation of everything else. Moreover, as scientists at one of the most powerful of Bayer’s future allies were even then finding out, the old color trade hadn’t yet lost its capacity to surprise. They were on the verge of solving a problem that had been baffling chemists for a generation. At long last, somebody had pierced the mystery of indigo.

  * * *

  NATURAL INDIGO was derived from a plant, Indigofera tinctoria, first brought to Europe from India in the thirteenth century. Initially, it was a rare and extremely expensive color, more likely to be found on artists’ palettes than in clothes. But after the Dutch and British opened up the Far East to large-scale commerce in the 1600s, it became hugely popular as a textile dye. By the early nineteenth century, the indigo trade was one of the world’s richest commodity businesses—particularly for Britain, which dominated supply and pricing through thousands of small plantations in and around the Bengali territories of its Indian colony.

  It was inevitable that Germany’s synthetic dye industry would challenge this lucrative monopoly just as soon as scientists found a way to replicate indigo’s deep blue luster. In 1880 a Berlin chemist called Adolf von Baeyer came very close (by using the chemical toluene as a base material) to producing the dye in tiny, test-tube-sized doses. He patented the idea amid much excitement, and for a while it seemed as though a breakthrough had been made. As Baeyer began looking around for a partner to develop his discovery, his close friendship with Heinrich Caro at BASF—the most technically proficient of the dye producers—gave the company an edge over its rivals. For a onetime payment of 100,000 marks and a promise of 20 percent of all future profits, Baeyer was persuaded to join the firm.

  A formula that worked in a test tube proved impossible to reproduce on an industrial scale. “Little indigo,” as Baeyer’s substance became known, could just about be made to fix onto cotton but couldn’t be used for anything else, and even for cotton it was extraordinarily expensive. More problematically, it stank. The odor the dye gave off was so unpleasant that people coming near it found themselves gagging repeatedly. After three years, Baeyer managed to decode the complete structure of natural indigo, which promised for a while to make an affordable process easier to find, but all further efforts ended in the same blind alleys. The starting chemicals were too costly and the yield was depressingly small.

  With further developments held up by a power struggle on BASF’s board—during which Engelhorn was replaced as head of the business by Heinrich Brunck, a professional industrial chemist—the search for indigo wasn’t fully resumed until 1891. That year a fresh team of company scientists finally found a cheap way to make antranalic acid, one of synthetic indigo’s most essential ingredients. The first modest production runs began in 1894 and then, after an expensive new plant was installed at Ludwigshafen, the dye went into full-scale mass production in 1897. It had taken forty-one years from William Perkin’s groundbreaking discovery of mauve in 1856 to unpick the grandest of the old natural colors and to get an artificial version onto the market.

  But if the effort it took to get there had been exhausting and expensive (the additional production facilities had cost in excess of 18 million marks, almost equivalent to the firm’s total stock value at the time), the commercial benefits reinforced BASF’s belief in the merits of investing heavily in research and development. Indigo was a license to print money, at least in the short term, and within three years was responsible for a quarter of the company’s total sales. There was competition, of course, but less than might have been expected. German patent laws had recently been tightened and it was getting harder for the smaller dye manufacturers to re-create the complicated science of the industry’s leaders. Hoechst, one of the few other companies with the necessary technical competence, did manage to find its own route to indigo synthesis, but the two rivals soon agreed to jointly fix production and price levels and effectively closed the door on any new entrants—an increasingly common practice. After a few years, other new blue dyes began appearing, but indigo reigned supreme well into the next century. Indeed, the only real losers were the producers of the natural version of the color. The success of synthetic indigo devastated the British-dominated organic industry; the number of plantations in India shrank by two-thirds in less than five years, creating widespread local unemployment and unrest and leading to calls for retaliatory tariffs. The resulting souring in relations between Britain and Germany, although temporary, would have long-term political and economic consequences.

  None of this mattered much to BASF at the time. It was too busy celebrating its success. In 1900 the imperial German government, keen on trumpeting the achievements of the German chemical industry, asked it to take part in a collective exhibit at that year’s World Exposition in Paris. Precluded from bragging openly about itself—the official catalog had no index linking individual products on display to the firms that made them—BASF nonetheless made sure, by handing out glossy promotional brochures to all and sundry, that everyone knew the company was responsible for many of the most important items. And, of course, it did have much to boast about. As well as being the world’s single largest producer of artificial dyes (a vast crystal bowl full of its indigo was one of the show’s prize exhibits), it also produced a host of heavy and intermediate chemicals—hydrochloric and sulphuric acid, caustic soda, liquid chlorine, and a great many more—almost all of which had been developed using new methods devised by its scientists.

  To anyone from the smaller, struggling British, French, and American dye and chemical industries, flicking through those brochures would have been a disquieting experience. The company’s vital statistics were horribly impressive. The competitors would have read, for example, that BASF’s Ludwigshafen plant comprised 421 buildings spread over an area of 206 hectares, each connected to a forty-two-kilometer-long company rail network
with 223 turntables and loading points; that the company employed a core workforce of 6,300, with 146 chemists, 75 engineers and technicians, and a commercial sales force of 433; and even that it annually consumed 243,000 tons of coal, 20 million cubic meters of fresh water, 12 million kilos of ice, almost 13 million cubic meters of gas (for heat and light), and another 132 million kilos of assorted raw materials. But chilling though this barrage of numbers must have been, it would have been nothing compared with the realization that it actually applied to only one company, that this giant business was just a small part of a much wider industrial infrastructure. Because BASF wasn’t the only German chemical company with exhibits at Paris; Hoechst was there, too, as were Bayer, Cassella, Agfa (the Berlin dyestuffs business established by Carl Martius), and a half dozen others, each of which had access to impressive resources and could boast of its scientific and manufacturing achievements. Indeed, one of those companies had just launched a product that would eventually be found in almost every household in the world.