V

COMBINATION IN THE STEEL INDUSTRY1

THIS

HIS case-a proceeding under the Sherman Anti-Trust Law is largely one of business facts. The construction of that statute has been settled by the Supreme Court. Standard Oil Co. v. United States; United States v. American Tobacco Co. That construction has been applied in this circuit in the Keystone Watch Case 2 and the Powder Trust Case. It follows, therefore, that our duty is largely one of finding the facts and to those facts applying settled law.

The tests of the violation of this statute having then, as we have seen, been adjudged by the Supreme Court, namely, whether the acts in question "prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade," it would appear the questions of fact for us to determine from the evidence are these:

First. Was the Steel Corporation, when this bill was filed in 1911, prejudicing the public interests by unduly restricting competition, or unduly obstructing the course of the steel and iron trade, between the states, or with foreign nations? If this question be answered "Yes," the law was then being violated, and an injunction should issue to restrain present and future violations.

Second. Did the Steel Corporation, when it was formed in 1901, either by the intent of those forming it, or by the inherent nature of that company's contemplated acts, prejudice the public interests by unduly restricting competition or unduly obstructing the course of the steel and iron trade, interstate or foreign?

1 U. S. v. U. S. Steel Corporation, U. S. Dist. Court, N. J. decided June 3, 1915; 223 Federal Reporter, 55. Elaborate details are also given in the U. S. Bureau of Corporations, Report on the Steel Industry, July 1, 1911. Stevens, op. cit., chapter VI, reprints testimony of Gates, Gary, Schwab, and Carnegie before the Stanley Committee. 2 These cases are reported in Chapter XVII, infra.

If this question be answered "Yes," then the law was violated, and the Steel Corporation must be adjudged originally illegal. If illegal, it must be dissolved, because only thus can its inherent nature be prevented from continuing to work further violations of the statute. On the other hand, if these questions are negatived, then the Steel Corporation should not be dissolved, but permitted to pursue that usual course of trade, which it was the purpose, as we have seen, of this statute to protect. It will thus be seen that, as stated at the outset, this case is practically one of business facts.

Turning, then, to the first question, let us address ourselves, first, to the iron and steel trade here in the United States, and inquire whether the evidence satisfies us that the Steel Corporation, when this bill was filed in 1911, was then prejudicing the public interests by unduly restricting or unduly obstructing the steel and iron business of the United States. In considering that question, a number of fields of inquiry naturally suggest themselves. Had this company in 1911 a monopoly of the steel and iron trade of the country? What had been and was then its business conduct towards its competitors? Was it fair or unfair? Had it forced or was it forcing others out of the steel trade by unfair conduct? Had it prevented others from entering it? Was it then exacting or had it exacted from the public undue prices for its products? Had it lowered the character of its product? Had it cut down or was it cutting down, its output so as to restrict proper supply? Had it taken advantage of its power to unduly reduce wages? All these, as we have seen from the Standard Oil, the Tobacco, the Powder, and Keystone Watch cases, were inquiries by which the question could be determined whether the Steel Corporation was acting, as the Supreme Court said in the Standard Oil case, with "the legitimate purpose of reasonably forwarding personal interest and developing trade," or, on the other hand, "with the intent to do wrong to the general public and to limit the right of individuals."

Now as trade is a contest for it between different persons, and the gain of that trade by one means the loss of it to another, it follows that the person who best knows whether the man who

gained it, gained it fairly, is the man who lost it. If there is monopoly, if unfair business methods exist, if the course of trade and fair trading is throttled, we can find proof of it from business competitors. Trade competitors are the first to feel the pinch of unequal, unfair, and undue restraint of the natural and normal course of trade. Being the first to suffer, they are the keenest to condemn. Turning, then, to this Steel Corporation's competitors, let us decide from the proofs whether the Steel Corporation had, when this bill was filed, a monopoly of the iron and steel business of the United States.

We turn, first, to finished rolled products, because they are the basic supply to the vast number of varied industries throughout the country dependent thereon. If all these minor industries are dependent on a monopolized source of an indispensable base, we can say, without going further, that not only such industries, but the general public, are prejudiced; for, as said and held by the Supreme Court in the Tobacco case, wrongful purpose and illegal combination are established "by the gradual absorption of control over all the elements essential to the successful manufacture of tobacco (steel) products."

What, then, are the facts in reference to finished rolled products? In that regard, the evidence is that in 1911 the finished rolled product which excludes pig iron, steel castings, and ingots of the United States (using in this opinion, when quoting figures, round numbers, and by the term "Steel Company," or "Steel Corporation," meaning the United States Steel Corporation) was 19,000,000 tons. Of this tonnage the competitors of the Steel Corporation produced 54 per cent, or 10,300,000 tons, while the Steel Corporation made 8,700,000 tons; but not only did its competitors produce in 1911 the major part of the country's finished rolled product, as above, but judging from the past, the present proportionate lead of the competitors bids fair to increase. In 1901, when the Steel Company was formed, the total finished roll product of the United States was 13,000,000 tons. This was substantially divided between 49.9 per cent made by its competitors, and 50.1 per cent by the Steel Company. While both together have since increased the nation's product from 13,000,000 to 19,000,000 tons, yet of this 6,000,000

increase its competitors produced 3,400,000 tons to the Steel Company's 2,600,000 tons.

Taking steel ingots, another basic supply on which great numbers of finishing industries are ultimately dependent, we find that while in 1901, of the 13,000,000 tons of the total American ingot production, the competitors of the Steel Company only made 4,500,000 tons, as against the Steel Company's 8,500,000, yet by 1911, in the country's vast increase from 13,000,000 to 24,000,000 tons, the competitors had increased their production by 6,500,000 tons, while the Steel Company had only increased 4,500,000. In other words, while the Steel Company produced in 1901, 66 per cent of the country's ingot production, it was producing but 54 per cent in 1911.

In pig iron, the basic supply of foundries, finishing mills, and other dependent industries, the relations were slightly the other way. In 1911, out of a total cast of 22,000,000 tons of pig iron, only 12,000,000, or 54.8 per cent, were made by competitors of the Steel Company, as against 9,000,000, or 56.8 per cent, made by such competitors in 1901, out of a total of 16,000,000-a decrease of 2 per cent.

These facts and figures bearing on basic supplies of the country's dependent iron and steel industries satisfy us that there is no monopolistic control anywhere of such basic factors as ingots, pig iron, and finished rolled products, and the testimony hereafter referred to satisfies us that any substantial producer of such basic articles can, by selling such products at such lower price as he sees fit, compel all producers of such supplies, including the Steel Corporation, to also lower their prices. So, also, monopolistic control of finished steel articles in wide use would be a matter of grave public prejudice. Taking for example, wire production, in which, through fencing, nails, and the great range of articles made from wire products, so many people are interested. When the Steel Corporation was formed in 1901, of the 9,000,000 kegs of wire nails then made in the United States, the competitors of the Steel Corporation made 3,000,000 kegs, and the Steel Corporation 6,000,000. By 1011, the country's production had grown to 13,000,000, but of the 3,500,000 of increase the Steel Corporation made 1,000,000 as

against its competitors making 2,500,000. The net result was that, when this bill was filed, the Steel Corporation's competitors had 6,500,000 and the Steel Corporation 7,000,000 of the country's total production of 13,500,000 kegs. So of wire netting, fencing, and other wire products in general use. The general average of the nation's total production made by competitors when this bill was filed was 78 per cent. It will be seen that in this particular respect, due, no doubt, as we shall see, to the growth of its foreign trade in wire products, the Steel Corporation had slightly increased its proportion from 20 per cent of the total product in 1901 to 22 per cent in 1911. But at the same time it will be noted that, as the very large part of the Steel Corporation's increase in wire products was made in foreign trade the proofs (volume 10, p. 3902) show that only 42 per cent of the Steel Corporation's wire product of 1911 was sold in the United States-it was in 1911 making relatively much less of the wire products consumed in the United States. than it was in 1901.

In the important item of structural steel, used in bridges, steel framed buildings, steel car frames, etc., the steel corporation's competitors produced about 67 per cent, and the Steel Corporation 33 per cent. And for the same reason as shown above, in the growth of the foreign trade, it will be seen by an analysis of Defendant's Exhibit (Vol. 3, p. 317, and Vol. 2, p. 204) that in structural shapes, as in wire products, the Steel Company was in 1911 making relatively less structural articles of this country's consumption than it was in 1901.

So, also, in steel rails. In 1901, the competitors of the Steel Company made 1,100,000 tons of steel rails, and the Steel Company 1,700,000. In 1911, its competitors made 1,200,000 tons, an increase of 100,000 tons, while the Steel Company made 1,600,000 tons, a decrease of 100,000 tons.

Summarizing our study of the proofs of this general subject, of the relative part of the Steel Company and its competitors in the total iron and steel production of the country, and their relative part in the home market, we find that, taking the ten years from 1901, when the Steel Company was formed, until 1911, when the Attorney-General filed this bill to dissolve it, its com