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"(26) That on the total cost of investment, assuming that the cost of investment of the successor companies at the date of dissolution was the same as that of the Combination in the corresponding branches of the business, the earnings of the successor companies averaged 14.6 in 1913. The earnings of the Combination for the corresponding business in 1908 were 17.9 per cent. and in 1910 about 17 per cent.
"(27) That there have been no material changes in prices to the jobbers since the dissolution of the Combination.
"(28) That for all principal brands of the successor companies there have been practically no changes in prices to the consumer since the dissolution of the Combination.
“(29) That the high profits taken in conjunction with the practically unchanged wholesale and retail prices of tobacco indicate that there has been but little competition in price, but this is explained in large part by the customary retail prices and other peculiar price-making conditions of the tobacco trade, including statutory provisions, which make it impracticable in most cases to increase the quantity sold at the customary price.
“(30) That for the principal brands of plug tobacco, the manufacturer's cost in 1913 was approximately 50 per cent. of the consumer's price, the internal-revenue tax 15 per cent., the manufacturer's profit 10 per cent., and the jobber's and retailer's margin 25 per cent.; that for the principal smoking and cigarette brands the manufacturer's cost in 1913 was approximately 45 per cent. of the consumer's price, the internal-revenue tax 20 per cent., the manufacturer's profits 10 per cent., and the jobber's and retailer's margin 25 per cent.; and that for a number of the snuff brands the manufacturer's cost in 1913 was approximately 35 per cent. of the consumer's price, the internal-revenue tax 15 per cent., the manufacturer's profit 20 per cent., and the jobber's and retailer's margin 30 per cent.
"(31) That for companies other than the Combination and successor companies there were marked decreases in the proportions of their collective output in the plug, smoking, snuff, cigarette, and little-cigar branches, from 1905 to 1913.
"(32) That compared with both the Combination and successor companies the manufacturing costs of the other companies covered by the investigation were extremely high in practically all branches.
"(33) That compared with either the Combination or the successor companies the selling costs per unit of product of other companies investigated were extremely high in all branches.
"(34) That the larger margins above manufacturing and selling costs of the Combination and successor companies enabled them in most branches to spend from three to five times as much per unit of product for advertising or competitive purposes as the other companies investigated and at the same time to obtain practically the same or even greater rates of profit.
"(35) That compared with the Combination and successor companies the other companies investigated made an exceedingly poor showing of profits and that there was a marked decrease in profits of these companies in navy plug and Turkish cigarettes since the dissolution of the Combination.
"(36) That among companies investigated other than the Combination and successor companies the operations of the larger ones were, as a rule, the most profitable; and, in the manufactured tobacco business, those doing a general tobacco manufacturing business usually were more prosperous than those manufacturing exclusively one class of product. The operations of certain small companies, however, having especially popular brands were also profitable.
"(37) That the companies other than the Combination and successor companies which were the most successful in
increasing their output were the ones that adopted the coupon advertising system, i. e., the method of giving coupons, which are redeemable in either cash or articles of merchandise, as an inducement for trade.
"(38) That the independent companies, like the Combination, did not generally reduce prices in 1901 and 1902, during which time the revenue tax was materially reduced.
'(39) That the independent companies, like the Combination, generally increased prices on smoking tobacco in 1910 to meet the increase in tax rate, and that the increase in price in most cases exceeded the increase in tax, but, like the Combination, they did not increase prices on plug, cigarettes, or cigars."
4. UNITED STATES STEEL CORPORATION*
THIS is by far the largest and in many ways the most important industrial combination yet formed.
It was organized February 23, 1901, in the first place with the nominal capital of $3,100, which was shortly thereafter increased to $1,100,000,000, of which authorized capital stock $550,000,000 was preferred and $550,000,000 common stock. The charter is drawn in the broad terms of the New Jersey charters, the special purpose named being the manufacture of iron, steel, and other materials, with the right to do practically everything else which can be brought into connection with that work.
To avoid some of the difficulties met with by earlier large corporations, it is provided that whenever all quarterly dividends accrued upon the preferred stock for previous quarters shall have been paid, the board of directors may declare dividends on the common stock out of any remaining surplus of net profits.
An act of the legislature of the State of New Jersey passed
*See pp. 157 to 180 for detailed treatment of prices under the United States Steel Corporation. See Chapter X, especially pp. 182 to 186, for treatment of employees by this Corporation.
March 22, 1901, was, it was supposed, passed at the instance of the promoters of this corporation, in order to enable them to manage the affairs of so great a body without being hampered by the possible difficulties of getting a large meeting of stockholders. The new provision of the law provides that "any action which theretofore required the consent of the holders of two-thirds of the stock, at any meeting after notice to them given, or required their consent in writing, to be filed, may be taken upon the consent of, and the consent given and filed by, the holders of two-thirds of the stock of each class represented at such meeting in person or by proxy." Whether such a liberalizing provision would be safe in case of all corporations may perhaps be questioned.
In form this corporation resembles that of the Federal Steel Company already explained in Chapter VII. The United States Steel Corporation has bought the stock of its
NAME OF COMPANY AND CLASS OF STOCK
Federal Steel Co., Pfd. stock
Amer. Steel & Wire Co., N. J., Pfd. stock
National Steel Co., Pfd. stock
U. 8. STEEL STOCK RE-
4.00 $107.50 125.00
20.00 14,000,000 100.00
PFD. STOCK COM. STOCK
For $64,000,000 of stock
For $96,000,000 of stock there was issued $144,000,000 of United States Steel collateral trust bonds.
different constituent companies, and controls these companies by virtue of being practically the single stockholder in each case. The rates at which the stock of the various constituent companies was exchanged for that of the United States Steel Corporation, together with the amounts of both kinds, appear in the accompanying table, p. 364.
In addition to the stocks named above, the corporation acquired a smaller interest in many other companies, parts of which had been owned by other companies, usually one of the steel corporation subsidiaries. Later, the corporation purchased a number of other companies of importance, such as the Clairton Steel Company, purchased in 1904, the Risdon Iron and Locomotive Works, San Francisco, purchased in 1911, and particularly the Tennessee Coal, Iron and Railroad Company, in which it secured a controlling interest in November, 1907.
In order that it may be certain of securing a proper supply of coal and coke, the corporation has likewise acquired large properties of this nature, especially the H. C. Frick Coke Company, and other large coal companies.
Aside from this, the company is the owner, either directly or through its subsidiaries, of very important iron ore mines in the Lake Superior ore region, as well as elsewhere.
As an illustration of the way in which it has been found desirable to extend its work into other fields, it may be mentioned that in 1906 the Universal Portland Cement Company was organized with a $1,000,000 authorized stock to develop the cement business of the corporation. The productive capacity of these plants at the present time amounts to between thirteen and fourteen million barrels per year.
It likewise owns or controls some thirty railroads, those which mostly contribute directly to its own work by carrying ore, coal, or other material between the different plants, or from the plants to the ship companies.