(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEAEY NATIONAL ECONOMIC COMMITTEE 
CONGEESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

SECOND SESSION 
PURSUANT TO 

Public Resolution No. 113 

(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION" OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 20 
IRON AND STEEL INDUSTRY 

PRICE POLICIES ON SPECIFIC PRODUCTS 

PACIFIC COAST PROBLEMS 

STEEL EXPORT ASSOCIATION 



NOVEMBER 8, 13, 14, AND 15, 1939 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1940 



'Alternates. 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Cong.) 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KINO, Senator from Utah 

WILLIAM E. BORAH, Senator from Idaho 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE. Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

•WENDELL BERQE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•LEON HENDERSON, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

•EWIN L. DAVIS, Commissioner 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

•A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

Representing the Department of the Treasury 

CLARENCE C. AVILDSEN, Special Adviser to the Secretary 

Representing the Department of Commerce 

JAMES R. BRACKETT, Executive Secretary 



CONTENTS 



Testimony of — J*aBe 

Baker, H. A., president, American Can Co., New York Citv... 10753-10778, 

10782-J0788, 10795 

Bash, S. M., member of the board of managers. The Steel Export Asso- 
ciation of America, New York City 10922-10983 

Fairless, Benjamin F., president. United States Sleel Corp., New York 

City 10743-10761, 10786, 10792-10804 

Gibson, Francis H., district sales manager, South Chester Tube Co., 

Chester, Pa 10830-10880 

Goble, John E., vice president in charge of sales, National Tube Co., 

Pittsburgh, Pa -".. 10880-10897 

Hook, Charles, president, American Rolling Mill Co., Middletown, 

Ohio 10805-10830 

Hughes, H. L., vice president, United States Steel Corp., New York 

City 10778-10788, 10799 

Loretz, T. A. L., general manager. Pacific Coast Steel Fabricators' 

Association. Los Angeles, Calif 10897-10920 

Pfeltz, A. R., vice president, American Can Co., New York City 10753, 

1076?, 10770-10771, 10775-10801 

Ritchin, Hyman B., Department of Justice, Washington, D. C. 10788-10789 

Roberts, Charles H., general sales manager. South Chester Tube Co., 

Chester, Pa 10830-10880 

Schaefer, Henry E., assistant manager of the Tubular Products Divi- 
sion, Wheeling Ste^l Corp., Wheeling, W. Va 10830-10880 

Schroeder, H. W., district sales manager, New York office, Wheeling 

Steel Corp 10922-10983 

Stapleton, John H., assistant to the vice president in charge of sales, 

Carnegie-Illinois Steel Corp., Pittsburgh, Pa 10747-10749 

Strickland, Oscar I., manager. Tubular Products Division, Wheeling 

Steel Corp., Wheefing, W. Va 10830-10880 

Statement of — 

Miller, Nathan L., general counsel. United States Steel Corp., New 

York City 10801-10802 

Witney, George W., counsel. South Chester Tube Co 10833, 10855, 

10874-10875 

Price relationship between finished and semi-finished steel 10743 

Tin plate prices 10754 

Contracts for the sale of tin plate 10757 

Contracts for the sale of cans 10762 

Tin plate prices 10788 

Employer cooperation in the British Isles and in the United States 10806 

Tubular products 1083 1 

Question of selling pipe f. o. b. the mill 10835 

Competition between lap-weld and seamless pipe 10845 

Lap-weld price discussions in August 1938 10854 

Pricing of seamless pipe 10880 

Pacific Coast steel fabricators' problems 10898 

Fabrication in transit 10914 

The Steel Export Association of America 10922 

The problem of non-members' shipments 10932 

Possible effect of cartel control on home markets 10951 

Question of eliniinating the American non-member .10957 

Schedule and summarv of exhibits ' v 

Wednesday, November 8, 1939 10743 

Monday, November 13, 1939 1O805 

Tuesday, November 14, 1939 _._ 10863 

Wednesday, November 15, 1939 10921 

Appendix __. 10^85 

Index . .-,,, I 

in 



SCHEDULE OF EXHIBITS 



Number and summary of exhibits 



Intro- 
duced at 
page 



1398. Memorandum, dated February 25, 1938, from John H. 

Stapleton, assistant to the vice president in charge of 
sales, to D. F. Austin, vice president in charge of sales. 
Carnegie-Illinois Steel Corp., containing expressions Jf 
opinion with respect to steel products 

1399. Chart: Base price of tin plate at Pittsburgh, by years, 

1925-1939 

1400. Chart: Market price of pig tin (New York), by months, 

1929-1939 

1401. Chart: Contract sales price of No. 2 plain sanitary tin 

cans (coke), by years, 1929-1939 

1402. Table: Relationship of cost of tin can to selling price of 

canned products — No. 2 can 

1403. Memorandum, dated October 15,' 1935, from H. L. 

Hughes, vice president, to^W. A. Irvin, president, 
United States Steel Corp., regarding the price of tin 
plate to the American Can Co 

1404. Memorandum, dated June 5, 1936, from H. L. Hughes, 

vice president, to W, A. Irvin, president, United States 
Steel Corp., regarding the price of tin plate 

1405. Letter, dated April 27, 1937, from A, R. Pfeltz, vice pres- 

ident, American Can Co., to B. F. Fairless, president, 
Carnegie-Illinois Steel Corp., outlining points of a con- 
versation between those gentlemen on the subject of 
tin plate 

1406. Announcement, dated April 14, 1938, by H. A. Baker, 

president, American Can Co., of a price adjustment 
due to the difference between the officials and the actual 
market prices of tin plate 

1407. Letter, dated March 24, 1938, from A. F. Pfeltz, vice 

president, to H. A. Baker, president, American Can 
Co., regarding the price of tin plate 

1408. Memoranda, dated June 7, 1932, by Nathan L. Miller, 

general counsel, United States Steel Corp., outlining 
his opinions as to the definiteness of, and actions per- 
missible and outlawed by, the anti-trust laws of the 

United States 

1409-1417. Appear in Hearings, Part 26 

1418. Appears in Hearings, Part 27 

1419-1421. Appear in Hearings, Part 19 

1422. Appears in Hearings, Part 16 

1423. Chart: Base price of hot rolled sheets, Pittsburgh, by 

months, 1921-1939, inclusive 

1424. Chart: Base price of black plate for tinning, Pittsburgh, 

1926-1939 -, 

1425. Letter, dated September 8, 1938, from Charles Hook, 

president, American Rolling Mill Co., to A. A. Berle, 
Columbia University, in reply to Dr. Berle's memo- 
randum of suggestions to this Committee 

1426. Table: Estimated steel companies' earnings on common 

stock, 1929 through 1938 



10747 
10754 
10754 
10765 
10772 

10773 
10781 

10784 

10787 
10790 

10802 



10806 
10806 

10806 
10823 



YI 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and snniinary of exhibits 



1427. Letter, dated February 3, 1939, from Francis H. Gibson, 

district sales manager, to C. H. Roberts, general sales 
manager. South Chester Tuber Co., regarding an order 
from Gulf Oil Corp. for seamless pipe 

1428. Letter, dated December 30, 1937, from J. D. Swartz, 

South Chester Tube Co., Tulsa, Oklahoma, to J. P. 
Steele, Southwestern District sales manager of the 
same company, regarding the price of lap-weld oil 
country products 

1429. Letter, dated June 24, 1938, from Francis H. Gibson, 

district sales manager, to C. H. Roberts, general sales 
manager, South Chester Tube Co., regarding a reduc- 
tion by the National Tube Co. in the price of seamless 
tubular products . 

1430. Letter dated February 3, 1930, from Francis H. Gibson, 

district sales manager, to C. H. Roberts, general sales 
manager, South Chester Tube Co., regarding increased 
competition between lap-weld and seamless oil country 
tubular products 

1431. Teletype, dated July 15, 1938, reproducing a conversa- 

tion between J. P. Steele and C. H. Roberts, South 
Chester Tube Co., regarding a reduction on the part 
of Wheeling Steel Corp. in the price of lap-weld tubular 
products 

1432. Letter, dated August 9, 1938, from C. H, Roberts, general 

sales manager, to Francis H. Gibson, district sales 
manager. South Chester Tube Co., regarding a con- 
ference with Henry E. Schaefer, assistant manager. 
Tubular Products Division, Wheeling Steel Corp. about 
the price of tubular products. _1 

1433. Letter, .ated August 12, 1938, from Francis H. Gibson, 

district sales manager, to C. H. Roberts, general sales 
manager. South Chester Tube Co., regarding conversa- 
tions with respect to the price of oil country tubular 
products : --'- -- 

1434. Letter, dated August 15, 1938, from Francis H. Gibson, 

district sales manager, to C. H. Roberts, general sales 
manager, South Chester Tube Co., regarding the un- 
settled price situation with respect to tubular products. 

1435. Memorandum, dated October 1, 1938, from H. E. 

Schaefer, assistant manager. Tubular Sales Division, 
Wheeling Steel Corp., to A. J. Powers of the same com- 
pany, regarding a reduction by the National Tube Co. 
in the price of seamless tubular products. ., 

1436. Memorandum^ dated October 24, 1938, from H. E. 

Schaefer, assistant manager. Tubular Sales Division, 
to I. G. Thompon, Wheeling Steel Corp., regarding 
the lack of business in lap>-weld tubular products due 
to a reduction in the price of seamless products 

1437. Memorandum, dated September 29, 1938, from Francis 

• H. Gibson, to C. H. Roberts, South Chester Tube Co., 
regarding the price of oil country tubular products and 
the discontinuance of manufacture of lap-weld products 
by some companies . 

1438. Memorandum, dated October 1, 1938, from H. E. Schae- 

fer, assistant manager, Tubular Sales Division, to I. G. 
Thompson, Wheeling Steel Corp., regarding the dis- 
continuance of sales of seamless tubular products at 
lap- weld prices 



Intro- 
duced at 
page 



10836 



10846 



10847 



10850 



10853 



10854 



10856 



10861 



10865 



10866 



10868 



10878 



Appears 
on page 



11005 



0) 



(0 



0) 



C) 



11006 



11007 



11008 



(0 



0) 



11009 



0) 



i On file with the Committee. 



CONTENTS 

SCHEDULE OF EXHIBITS— Continued 



VII 



Number and summary of exhibits 



Intro- 
duced at 
page 



Appears 
on page 



1439. Table: Fabricated structural steel awards on jobs of 100 

tons or more covering fabricated structural tonnage 
placed for delivery at points in the 3 Pacific Coast 
states (California, Oregon, and Washington) during 
the 18 months' period of January 1, 1938 to June 30, 
1939 

1440. Table: Fabricated structural steel awards on jobs of 100 

tons or more covering fabricated structural tonnage 
placed for delivery at points in the states of Arizona, 
New Mexico, Nevada, Utah, Idaho and Montana 
during the 18 months' period of January 1, 1938 to 
June 30, 1939 

1441. Table: (A) Current published basing point prices on 

steel bars, shapes, plates and sheets, taken from the 
Iron Age of August 24, 1939, revised to November 9, 
1939 
Table: (B) Comparison of Eastern basing point prices 
plus actual transportation cost versus "On Cars, Dock, 
Pacific Ports" base prices 

1442. Statement showing typical examples of competitive situ- 

ations faced by Pacific Coast fabricators in attempting 
to secure tonnage in territories immediately adjacent 
to Pacific Coast shops by reason of (A) existing price 
structure and (B) fabrication in transit freight prac- 
tices employed by intermediate fabricating shops situ- 
ated in the Middle West and South 

1443. Table: Typical examples of effect of application of Gov- 

ernment land grant rates in evaluating bids to the 
U. S. Government on fabricated structural and plate 
steel for projects in far Western states 

1444. Articles of association of the Steel Export Association of 

America 

1445. Letter, dated February 7, 1938, from H. W. Schroeder, 

district sales manager, to Jl L. Neudoerfer, vice presi- 
dent and general manager of sales. Wheeling Steel 
Corp., outlining the details of a meeting between for- 
eign and domestic steel producers 

1446. Letter, dated April 12, 1938, from H. W. Schroeder, 

manager. Export Department, Wheeling Steel Corp., 
to the secretary. Steel Export Association of America, 
enclosing a draft of "Exhibit No. 1447" 

1447. Report from the Board of Managers of the Steel Export 

Association to the presidents of the member companies 

1448. Letter, dated November 14, 1938, from C. E. Masters, 

assistant to the vice president, Bethlehem Steel Export 
Corp., to John Outwater, the Steel Export Association, 
asking Mr. Outwater to write the FJuropean representa- 
tive of the Steel Export Association regarding Conti- 
nental prices and sales of steel products 

1449. Corrected tables to the pamphlet "Major Characteristics 

of the Iron and Steel Industry", admitted to the record 
as "Exhibit No. 1349" 



10900 



10902 



11010 



11011 



10906 



11012 



10915 

10918 
10923 

10948 

10950 
10950 

10957 
10983 



11013 
11016 

0) 

11017 
11018 

11020 

(') 



' On file with the Committea 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



WEDNESDAY, NOVEMBER 8, 1939 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. 0. 

The committee met at 10:15 a. m., pursuant to adjournment on Tues- 
day, November 7, 1939, .in the Caucus Room, Senate Office Building, 
Senator WiUiam H. King presiding. 

Present: Senator King (actmg chairman); Representatives Reece 
and Williams; Messrs. O'Connell, Avildsen, Henderson, and Brackett. 

Present also: Willis Ballinger, Frank A. Fetter and Hugh White, 
representing the Federal Trade Commission; John V. W. Reynders, 
representing the Department of Commerce; A. H. Feller, Special 
Assistant to the Attorney General; John W. Porter, Irving B. Glick- 
feld, Hyman B. Ritchin, Monroe Karasik and Ward S. Bowman, 
Department of Justice. 

Acting Chairman King. Are you ready to proceed, Mr. Feller? 

Mr. Feller. Yes, sir. 

Acting Chairman King. The committee will be in order. 

PRICE relationship BETWEEN FINISHED AND SEMI-FINISHED STEEL 

Mr. Feller. Mr. Fairless, earlier in your testunony we had touched 
somewhat briefly on the question of the price policy on the sale of 
semifinished steel. ^ 1 should like to revert to that just for a few 
minutes. As I understand it, and I hope you will correct me on this, 
a rather important question of price policy is presented by the price 
relationship between semi-manufactured steel and the finished steel. 

Now, the semifinished steel, as I believe we discussed earlier, is sold 
either to nonintegrated steel concerns which manufacture finished 
products and sell them in competition with you or other steel pro- 
ducers, or to certain customers of yours who may, on occasion, manu- 
facture a finished product for their own use and not for sale. 

Now, could you tell us the considerations pro and con in connection 
with the problem as to whether the price of semi-finished steel should 
be increased or decreased in relation to the price of the finished steel? 

TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED 
STATES STEEL CORPORATION, NEW YORK, N. Y.— Resumed 

Mr. Fairless. In the event of a price change? 
Mr. Feller. Yes. 

Mr. Fairless. Mr. Chairman, in my previous testimony I referred 
to the merchandising policy of our subsidiary companies who are 

' Mr. Fairles5'8 previous testimony appears In Hearings, Part 19. 

10743 



10744 CONCENTRATION OF ECONOMIC POWER 

manufacturers of semifinished steel, and I am wondering at tliis time, 
before 1 completely answer this question, if it would be helpful if we 
displayed pictures of semifinished steel. Would that be helpful to 
the committee? 

Mr. Feller. Well, the committee has already seen the movie, 
which showed a good many of these products. 

Mr. Fairless. I am only offering it in the event the committee is 
interested. They are available. They were prepared for the com- 
mittee to show what the product looks like, when 1 talk about a slab 
or a sheet bar or a rod. 

Mr. Feller. It is up to the committee. 

Acting Chairman King. I would not want to divert Mr. Feller 
from his line of procedure. If it would not be too much of a detour, 
it would be all right. 

Mr. Feller. I don't want to take too much lime on this. I 
understand these pictures are to show the committee what a slab is or 
a bloom or a billet. 

Mr. Fairless. The motion picture didn't particularly point out 
that this is a semi-finished product, I believe. 

Acting Chairman King. I think perhaps we had better omit the 
introduction of that. 

Mr. Fairless. They are available if the committee is interested. 
Adding just one more point to Mr. Feller's presentation of the semi- 
finished steel picture, we also have sold at times, and probably will 
again sell, semifinished steel to integrated, so-called integrated, steel 
companies, which is another outlet for this product. 

Our pricing policy in respect to semifinished steel is as follows: 
W^e attempt at all times to sell users of semifinished steel those products 
at such prices that they can convert that steel into finished products 
and compete in the finished steel markets. As a result of that policy, 
and that has been particularly true during the last 9 years, the price 
of semifinished steel had got to a point so low that many times we 
didn't get back a new doUar for an old one. Nevertheless, we at- 
tempted to, and did, keep our semifinished customers in business, and 
that is our policy. You appreciate, of course, that while we announce 
the prices of our finished products and we announce the prices of our 
semifinished steel, we always attempt to keep them in proper relation, 
and by that I mean so that there will be sufficient spread in the cost of 
conversion as between the semifinished and the finished product 
to permit a reasonable profit. However, competitive conditions 
within the industry sometimes, and many times, are so great that 
our published prices in respect to the finished products cannot be 
realized, either by us or by the customers we serve in respect to semi- 
finished steel. We are in constant contact with those customers; 
they come to us with their problems, and it is our policy to make ad- 
justments in respect to the semifinished price to them, even although 
that does at times result in price dollars per ton below our officially 
announced prices of semifinished steel"; still we pursue that policy and 
try to keep our customers in business. 

I might cite that it is a matter of record and this committee could 
refer to the earnings of so-called nonintegrated companies versus the 
integrated complies. I am sure that the record will show that the 
results eaming-wise of nonintegrated companies during the last 9 
ve^is have been brighter than the integrated companies. 



CONCENTRATION OF ECONOMIC POWER 10745 

Acting Chairman King. Have you discovered that there is com- 
petition among your customers to whom you furnish or sell semi- 
finished steel? 

Mr. Fairless. Oh, my yes. Oh, yes; of course. 

Acting Chairman King. Whether those customers are your sub- 
sidiaries or whether they are independents, so to speak. 

Mr. Fairless. Oh, yes. 

Acting Chairman King. In the trade generally. 

Mr. Fairless. Oh, yes. We must keep our position and be com- 
petitive with every product we make, and we cannot be influenced in 
our competitive relationship in respect to finished products by any 
relationship that exists with our semifinished customers. 

Acting Chairman King. Is there competition between some of your 
customers who obtain semifinished steel from your company and 
persons or corporations or individuals who obtain semifinished steel 
from other steel companies? 

Mr. Fairless. Oh, yes; definitely. 

Acting Chairman King. So there is competition among your own 
customers who deal perhaps exclusively with you, as well as your 
customers and the customers of other vendors of semifinished steel. 

Mr. Fairless. That is right. 

Representative Williams. Is it because of that competition that 
the income of the integrated companies, in your opinion, is less than 
the nonintegrated companies? 

Mr. Fairless. No; the major reason for the nonintegrated compa- 
nies making a better showing eaming-wise is because of their small 
investment as compared with the integrated companies. In other 
words, they begin with the slab or sheet bar or rod. That is their raw 
material. Their only investment, then, is in the finishing facilities: 
sheet mill, strip mill, tin mills, or wire mills. Our investment, and by 
far the greater part of our investment, lies back of the semifinished 
products. In other words, we have our ore reserves, our transporta- 
tion facilities, our sources of raw materials, coal, coke, blast furnaces, 
open hearths, blooming mills, slabbing mills, which represent by far the 
gr'^atest part of our investment in the steel business, and we have all 
that before we can make semifinished steel. 

Representative Williams. And that is where there is a smaller 
income, in these original primary processes? 

Mr. Fairless. In times of stress such as we have had in the last 

9 years. 

Representative Williams. Wliat is your definition of an integrated 
company? We have had some confusion here as to what the meaning 
of the term is. 

Mr. Fairless. Integration is a relative term and for any company 
to be completely integrated would mean to me self-contained, and I 
don't know of any company that is in that position. We are not 
completely integrated, we are large purchasers of certain raw materials 
such as manganese ore and all of the alloys that we use in the manu- 
facture of steel. We manufacture none except ferromanganese and 
there we are purchasers of manganese ore for refractories. We are 
very small manufacturers of refractories, to the extent normally of 

10 or possible 15 percent of our requirements, so we are far from 
being completely integrated. 



10746 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller, As the term is used in the industry you are integrated. 
We have referred from time to time to an integrated producer. You 
are integrated as that term is used. 

Mr. Fairless, In respect to iron ore and fuel, if that is what we 
are discussing as integration, we are. 

Mr. Feller. This is just to clear up the matter. 

As the term is used in the industry a nonintegrated company is a 
company which doesn't produce iron ore or pig iron or steel, that is 
raw steel. It buys its steel from somebody else and makes a product. 

Mr. Fairless. That is the general term as applied to integration. 

Representative Williams. I think I understand in general terms 
what an integrated company is, but I was just wondering how we 
were using the term here. You say it is a relative term. What 
percentage of your raw material do you purchase, in money, not 
in volume. 

Mr. Fairless. I haven't that figure, it would be relatively small 
as compared to the whole if we include iron ore, coal, and limestone. 

Representative Williams. What about your transportation facili- 
ties of your raw materials? Do you own them? 

Mr. Fairless. Yes, some. The United States Steel Corporation 
has an investment in various railroads. They are conmion carriers, 
however. They do not deal exclusively with the business of the 
subsidiary companies of the United States Steel Corporation. 

Representative Williams. You have your fleets, too, have you? 

Mr. Fairless. On the Great Lakes for transportation of iron ore; 
yes, sir. 

Mr. Feller. You also have an ocean-going fleet? 

Mr. Fairless. Yes. 

Mr. Feller. Operating now? 

Mr. Fairless. Yes; it is a common carrier. 

Mr. Feller. That is the Isthmian Steamship Company, the Isth- 
mian Line, is it not? 

Mr. Fairless. That is right. Its business is possibly not more 
than 30 percent United States Steel Corporation business. It is a 
common carrier. It does a general shipping business. 
: Mr. Feller. Mr. Fairless, you stated the problem with respect to 
the pricing of semifinished material in a very clear and concise manner. 
It is correct to say that the Corporation has been advised from time 
to time that the price of semifinished material should be increased so 
that the return on the semifinished material should approximate more 
nearly the return on the finished? 

Mr. Fairless. Yes ; naturally. 

Mr. Feller. And the Corporation to date has refused to do that? 

Mr. Fairless. That is right. 

Mr. Feller. Or has not done that. 

Mr. Fairless. That is right. 

Mr. Feller. Mr. Stapleton is now called as a witness. May I ask 
th£|rt he be sworn? 

Acting Chairman King. May I ask first, further elaborating the 
answer you gave, what is the reason that is assigned by the company 
for the position taken as your answer indicated? 

. Mr. Fairless. Why have we taken that position? 

Acting Chairman King. Yes. 



CONCENTRATION OF ECONOMIC POWER 10747 

Mr. Fairless. This has always been the policy of the United States 
Steel Corporation. If you take many of the integrated companies 
that exist today, they had their beginnmgs as nonintegrated companies, 
and many of them bought most of their semifinished steel from the 
United States Steel Corporation. The Carnegie Steel Co., which is 
now one of the important units of the Carnegie-Illinois Steel Corpo- 
ration, was a semifinished producer at one time to the extent of about 
40 percent of its capacity, and sold 40 percent of its capacity in the 
form of semifinished material to nonintegrated companies. Many of 
"those nonintegrated companies later put in steel-making facilities and 
they became integrated companies, and stUl there are some remaining 
nonintegrated companies and our policy in respect to those that remain 
hasn't changed. It is still in eifect. 

Mr. Feller. May I ask that Mr. Stapleton be sworn? 

Acting Chairman King. Do you solemnly swear that the testimony 
you shall give in this hearing shall be the truth, the whole truth, and 
nothing but the truth, so help you God? 

Mr. Stapleton. I do. 

TESTIMONY OF. JOHN H. STAPLETON, ASSISTANT TO THE VICE 
PRESIDENT IN CHARGE OF SALES, CARNEGIE-ILLINOIS STEEL 
CORPORATION, PITTSBURGH, PA. 

Mr. Feller. Please give your name to the reporter. 

Mr. Stapleton. My name is John H. Stapleton. I am assistant 
to the vice president in charge of sales, Carnegie-Illinois Steel Corpo- 
ration, Pittsburgh, Pa. My functions are primarily those of personnel 
and organization, 

Mr. Feller. Mr. Stapleton, I show you a memorandum dated 
February 25, 1938, ^n the letterhead of the Carnegie-Illinois Steel 
Corporation. It was taken from the files of that corporation, and I 
ask you if you will look at that. 

Mr. Stapleton. I have. 

Mr. Feller. I offer this. 

Acting Chairman King. It is offered for the record, do you mean? 

Mr. Feller. Yes, Mr. Chairman. 

Acting Chairman King. It may be received. 

(The communication referred to was marked "Exhibit No. 1398" 
and is included in the appendix on p..iI0985.) 

Mr. Feller. Mr. Stapleton, in this memorandum there occurs the 
following paragraph: 

This policy is too specific. We obtain greater sales representation through 
furnishing semi-finished material to nonintegrated units who have selling organi- 
zations for the distribution of the finished product. While it is true they are 
competitive with us, they nevertheless to a large degree are under our control, 
and were we to discard these accounts, the tonnage would be furnished by other 
steel producing competitors and our competition on the finished product would 
simply be increased without our obtaining any portion of the profit by selling to 
nonintegrated units. We believe we obtain 60 per cent or more of the possible 
profit, and we are of the opinion that a great deal of this tonnage represents 
items which otherwise would be lost to us. 

I take it, Mr. Stapleton, that this is a comment by you on a sug- 
gestion that the price of semifinished materials be increased, and I 
take it that you were opposed to that policy. That is correct, is it not? 



10748 CONCENTRATION OF ECONOMIC POWER 

Mr. Stapleton. I would like to state there that I know practically 
nothing about semifinished steel. My duties deal with personnel 
matters. This memorandum was written 4 days after I was employed 
is my new capacity. As a matter of fact, I did not have a title at 
that time, nor office space nor anything else, and I was asked to give 
some off-hand comments on certain points, which I did, and they are 
just purely personal opinions. 

Mr. Feller. May I ask you what you meant by the statement — 

While it is true they are competitive with us, they nevertheless to a large 
degree are under our control. 

Mr. Stapleton. I meant by that that through them we reached 
the finished markets. We had entree to those markets, and thereby 
reached markets which we otherwise would not have reached. 

Mr. Feller. I don't quite understand how that sort of relationship 
could be explained by the use of the word "control" — "under our 
control." 

Mr. Stapleton. I don't think it is a very good word, except that 
this was an inter-office memo and the man that received it knew 
what I had reference to. 

Mr. Feller. What do you think he would have Known? How 
would he have imderstood it? 

Mr. Stapleton. He would have understood that I had reference 
to the fact that we were gaining entree to a market which we would 
otherwise not have been in. These people were selling customers we 
probably did not serve, and thereby we controlled more busiaess by 
entering those markets. 

Mr. Feller. Did you mean by the word "control" then that the 
final finished product would be under your control? 

Mr. Stapleton. I meant by the word "control" that we secured or 
obtained the business. 

Mr. Feller. You secured the business because you sold the semi- 
finished material to the nonintegrated producer? 

Mr. Stapleton. That's right. We indirectly obtained steel busi- 
ness. 

Mr. O'CoNNELL. Mr. Stapleton, as I understood the sentence the 
word "control" was used with reference to your clients, as persons to 
whom you sold semifinished goods with whom you were in competi- 
tion. Is that correct? 

Mr. Stapleton. No, that is not. It had reference to the ultimate 
markets. 

Mr. O'Connell. Would you read that sentence again, please? 

Mr. Feller. The sentence r^ads as follows: 

While it is true they are competitive with us, they nevertheless to a large degree 
are under our control, and were we to discard these accounts, the tonnage would 
be furnished by other steel producing competitors, and our competition on the 
finished product would simply be increased without our obtaining any portion of 
the profit by selling to nonintegrated units. 

Mr. O'Connell. When you speak of "they are somewhat under our 
control," as I understand that sentence, you were referring to the 
persons to whom you were selling semifinished goods. 

Mr. Stapleton. It is ambiguous, but it refers to the finished 
product. 



CONCENTRATION OF ECONOMIC POWER 10749 

Mr. O'CoNNELL. It certainly doesn't sound ambiguous to me. Do 
you mean by "they" that you do not mean the persons with whom 
you are competitive? 

Mr. Stapleton. That's right. 

Acting Chairman King. Were they under your control? 

Mr. Stapleton. I don't see how they coufd be; no. 

Acting Chairman King. Did you intend to convey the meaning 
that they were under your control? 

Mr. Stapleton, No; I did not. 

Mr. O'Connell. It was an unfortunate choice of grammar? 

Mr. Stapleton. That's it. 

Mr. Feller. May I ask you this: We previously had some testi- 
mony with reference to the spread between the semifinished material 
and the finished material. Is that spread under your control? 

Mr. Stapleton. I don't know that. 

Mr. Feller. How about that, Mr. Fairless.? 

Mr. Fairless. The spread itself is under my control. 

Mr. Feller. I mean the Corporation's. 

Mr. Fairless. Of course the selling price at which we sell any of 
our products is under our control. But answering your question 
directly now, you asked me if we can control the spread that exists 
between semifinished and the finished product. Of course not. How 
could we? 

Mr. Feller. Well, if you raise the price of the semifinished and do 
not raise the price of the finished, isn't the result in the market that 
the spread between the two is narrowed? 

Mr. Fairless. Shall I repeat or refer to the record my statement of 
our policy in respect to the sale of semifinished steel? 

Mr. Feller. This isn't a question of what your policy actually is. 
At that point I am not raising any question as to whether or not you 
have in fact narrowed the spread as a matter of policy. I am merely 
asking you whether as a matter of fact that spread isn't under your 
control, that if the Corporation desired, it could narrow it. 

Mr. Fairless. In our announced prices? 

Mr. Feller. Yes. 

Mr. Fairless. In announcing the price of semifinished steel on the 
one hand and the resultant finished product on the other, if we so 
desire that we could narrow the spread in respect to those announce- 
ments? 

Mr. Feller. Yes. 

Mr. Fairless. Certainly, of course, but that is an entirely different 
question than I referred to in respect to our policies. Being able to 
do it and doing it are two different things, aren't they? 

Mr. Feller. Oh, yes. 

Mr. Avildsen. May I suggest for the benefit of some of the coin- 
mittee members who were not present when Mr. Fairless stated his 
policies with regard to semifinished steel, that he repeat that? 

Mr. Feller. I think the reporter can read that back. 

Mr. Avildsen. I think the notes have gone downstairs. 

Mr. Fairless. I can make it very short. Our policy, gentlemen, 
in respect to the sale of semifinished steel is as follows: We are the 
largest sellers of semifinished steel. Semifinished steel is sold to so- 



10750 CONCENTRATION OF ECONOMIC POWER 

called nonintegrated companies on one hand. It is also sold in some 
instances to integrated companies, companies whose steel making 
facilities are less than their finishing facilities, and on the other hand, 
a third outlet is to customers who convert some form of semifinished 
steel into the finished product in which they are interested. 

The policy of the United States Steel Corporation and its subsidiaries 
has always been, and still is, to keep our customers competitive in 
respect to the price that we charge them for semifinished steel in 
relationship to the market conditions that exist in the finished prod- 
ucts that they make. 

Now we begin for a quarter, using it for an example, we publish 
the price for semifinished steel, and also a price, published by some 
subsidiary, for the resultant finished product. You will always find 
that the so-called spread between the prices of these products is 
sufficient for a profit, a satisfactory profit, based on satisfactory 
business conditions. We can't be elastic to the point of providing 
such a spread that if operations are at 20 percent of capacity, for 
example, in respect to that particular product, that we can guarantee 
the customer a profit. We can't do that. We don't have a profit 
ourselves. But the spread is always sufficient for a satisfactory 
profit with satisfactory operating conditions. 

Now we have no control over that finished market, so when we get 
into a condition market-wise where the announced price in respect to 
the finished product is not the realized price, then we sit down with 
our semifinished customer and we make some adjustment in the price 
of his semifinished steel and I refer you to our semifinished customers 
for verification of that statement. 

Mr. Feller. Mr. Fairless, I understand from your statement that 
the possibility exists that the Corporation, might so arrange its pricing 
policy that the profit margin of the nonintegrated producer could be 
diminished. I also understand you to say that the Corporation has 
not done that, and as I have said before, we are not going into the 
question at all as to whether or not you have done that. The Siole 
problem that we are directing our attention to here is the existence 
of this economic problem on the one hand, a large producer which 
sells a semifinished product to a smaller producer who in the end is the 
competitor of the large producer, and I think perhaps you will agree 
that there we have an economic problem which the committee should 
have before it. 

Now whether or not the power which you have has been exercised 
in any improper way, that we do not suggest nor even imply, but is it 
not true that the power does exist and that it is a problem of some 
consequence for the nonintegrated producer? 

Mr. Fairless. I do not agree it is a problem of any consequence. 
I admit, of course, that theoretically it could happen, just what you 
have stated, but keep in mind that we don't control the semifinished 
steel market. 

Mr. Feller. Will you explain just what you mean by that? 

Mr. Fairless. I am going to. Serrii-fiiiished steel is a steel prod- 
uct and it is just as competitive, and at some periods in oiu" business 
cycle it becomes possibly more highly competitive, if possible, than 
some of our finished lines, for this reason, that whenever this steel 



CONCENTRATION OF ECONOMIC POWER 10751 

industry operates, say, at anything less than 60 percent of capacity — 
and the records show that this industry operates many times at less 
than 60 percent of capacity, then every producer of steel in this in^ 
dustry is actually or potentially a seller of semi-finished steel. So 
obviously we couldn't just name some price, as you presented it, 
Mr. Feller. Theoretically we could name a price, but the customer 
would simply go to some other steel company and buy semi- 
finished steel, because it is a highly competitive product. 

Mr. Feller. But in times of high demand, such as the present, 
the problem does become something more than theoretical. 

Mr. Fairless. No, it does not, because the policy of the United 
States Steel Corporation in respect to merchandising products doesn't 
change with the rate of operation. 

Mr. Feller. At such a time, however, if you were to increase the 
price of semi-finished materials at a time like today, when the opera- 
tions were above 90 percent, you would have an effect which is different 
from the effect which would occur in times of very low demand when 
there was an intense scramble for business. 

Mr. Fairless. You are familiar with our price announcements for 
the present quarter? 

Mr. Feller. Oh, yes, sir. 

Mr. Fairless. Has that occurred? 

Mr. Feller. No, sir. As I have stated before, we have not in any 
wny implied that you have exercised this power. 

Acting Chairman King. Mr. Feller, doesn't every manufacturer, 
whether it is steel — I am asking for information and to get your point 
of view — or woolen goods, or a producer of oU, doesn't his attitude or 
don't his prices change by reason of demands or lack of demands, 
increased cost, change in the economic situation? 

Mr. Feller. To answer your question, may I say, Senator, that 
the closest parallel here that I can see is in the case of the oil. industry, 
where a large refiner of oil may sell oil to retailers who are independent 
and who have no refining facility, and at the same time distribute 
his own oil through competing outlets. That is the economic problem 
which we are placing before the committee. I don't think it is neces- 
sary to go into it any further except to indicate that such a problem 
exists. 

Mr. Fairless. I might, if I may, Mr. Chairman, just give you an 
example of how impractical it would be for us to exercise this power, if 
it exists — I do not admit that it exists — by this example: We are 
selling X Company 5,000 tons per month of semifinished steel and he, 
in turn, produces some finished product which is in turn in compe- 
tition with us. 

Assume that we make it impossible for this customer to exist by doing 
just what Mr. Feller says theoretically we can do. What happens is, 
we lose 5,000-tons-a-month busmess. It may go to someone else. 
On the other hand, let's take an impossible example that this man 
is driven out of business, and in my 25 years of experience I have yet 
to know of a so-called nonintegrated unit that has been driven out 
of business for this reason, but that doesn't diminish the requirements 
of that particular product Nation-wise to the extent of 5,000 tons 
every month; it just means that that 5,000 tons per month goes to 



124491 — 40— pt 2C 



10752 CONCENTRATION OF ECONOMIC POWER 

the steel industry as a whole. Now we may get a part of it, but 
certainly we wouldn't get the 5,000 tons. So it is absolutely against 
our own best interests to exercise any power that we might theoret- 
ically have in respect to this problem. I think it is entirely a practical 
businessman's decision. 

Mr. Reynders. Isn't it also a fact that the facilities of these non- 
integrated units differ to this extent, that they fill an order book which 
it is possible to fill economically on their type of equipment? 

Mr, Fairless. Many times. 

Mr. Reynders. Whereas your mills are tonnage mills and you are 
not in good position to fill an order book of a thousand tons of each 
size. 

Mr. Fairless. That is true. 

Mr. Reynders. To that extent, Mr. Feller, there would be a differ- 
ence in the competition in the ultimate product. 

Mr. Fairless. Many times these nonintegiated people deal entirely 
in specialties, entirely in specialties. 

Mr, O'CoNNELL. Mr. Fairless, while we are being so highly theoret- 
ical, and taking the example you gave about a purchaser of your semi- 
finished goods in an amount of say 5,000 tons and the undesirability 
from your standpoint of narrowing the spread to such an extent that 
it would put him out of business, I can see that that might very well 
be not to your advantage, but theoretically also might it not be to 
your advantage to so narrow the spread as to give you a competitive 
advantage and put your supplier, let us say, on starvation wages? I 
take it the narrower the spread the better it is for you people in com- 
petition with him, 

Mr. Fairless. Theoretically that is true, but in the early part of 
my testimony I referred you to the earnings over the past 9 years of 
these nonintegrated units as compared with the integrated units. The 
records speak for themselves. And their showing earning-wise has 
been definitely better than the United Statos Steel Corporation, 

Mr. O'Connell. I was merely attempting to follow the path that 
Mr. Feller tried to follow in distinguishing what the Steel Corpora- 
tion has done or what its policy has been, and as you say will be, with 
what power the Steel Corporation has or a company in the position of 
the United States Steel Corporation has, the economic power that it 
has and the extent to which it might be possible and desirable from 
its own standpoint to use it. 

Mr, Fairless. Potentially we are all capable of committing criipe. 

Mr, O'Connell. That is true. 

Mr. AviLDSEN. Isn't it a fact, too, Mr, Fairless, that if you took 
advantage of these nonintegrated companies in a time of great demand 
and shut off their source of supply of semifinished steel, there would - 
be nothing to stop them merging and building their own semifinished 
steel mill, and that you would then later be forced to meet that 
competition, and that for a matter of pure self-preservation you would 
supply them with semifinished steel at a time of high demand to keep 
them from becoming an integrated producer? 

Mr. Fairless, In spite of this broad policy 

Mr. AviLDSEN (interposing). There are no patents involved, 

Mr. Fairless. In spite of this broad policy that I have outlined 
that very thing has happened. 



CONCENTRATION OF ECONOMIC POWER 10753 

Mr. Feller. Mr. Chairman, I have no further questions along 
these general price policy considerations. I shall call, as soon as the 
committee has had an opportunity to ask questions, witnesses in- 
cluding Mr. Fairless and some others from the United States Steel 
Corporation, in respect to the pricing of tin plate, one of the important 
products of the industry. 

Acting Chairman King. Are there any other questions that you 
desire to ask? 

Mr. Reynders. Mr. Fairless will be back on the stand later on? 

Acting Chairman King. If we desire to call him, he will be 

Mr. Reynders. I want to open up a subject but I don't want to 
do it now. 

Acting Chairman King. You will be available, Mr. Fairless. 

Mr. Fairless. I understood I was to remain. 

Mr. Feller. Yes; you are to remain. 

I should like to call Mr. Fairless and Mr. Hughes who testified 
yesterday, also Dr. Baker and Mr. Pfeltz. 

Acting Chairman King. Come forward, gentlemen. Will those 
witnesses who have not been sworn, stand and raise your right hand? 
Dr. Baker and Mr. Pfeltz, do you and each of you solemnly swear 
that the testimony you will give in this hearing shall be the truth, 
the whole truth and nothing but the truth, so help you God? 

Mr. Pfeltz. I do. 

Dr. Baker. I do. 

TESTIMONY OF H. A. BAKER, PRESIDENT, AND A. R. PFELTZ, 
VICE PRESIDENT, AMERICAN CAN CO., NEW YORK CITY 

Mr. Feller. Please give your names to the reporter. 

Mr. Pfeltz. A. R. Pfeltz, American Can Co., New York. 

Dr. Baker. H. A. Baker, American Can Co., New York. 

Mr. Feller. Dr. Baker, tell us your connection with the American 
Can Co. 

Dr. Baker. President of the company. 

Mr. Feller. Mr. Pfeltz? 

Mr. Pfeltz. Vice president. 

Mr. Feller. Mr. Fairless, just for the information of the commit- 
tee, would you give us a definition of tin plate? 

Mr. Fairless. It is a very high gage steel product that is coated 
with tin. 

Mr. Feller. Very thin steel sheet coated with tin. 

Acting Chairman King. Built up largely after the McKinley Tariff 
Act. 

Mr. Fairless. That is right. 

Mr. Feller. And tin plate is customarily sold in a standard unit 
called the base box, is it not? 

Mr. Fairless. Yes. 

Mr. Feller. Which contains 100 pounds of tin plate haying 112 
sheets 14 inches wide and 20 inches long; that is the standard, is it not? 

Mr. Fairless. That is the standard. 

Mr. Feller. From time to time, Mr. Chairman, reference will be 
made to the price of tin plate as so much per base box. 



10754 CONCENTRATION OF ECONOMIC POWER 

Acting Chairman King. Do you want these two graphs identified 
or will they be identified for the record later? 

Mr. Feller. In a moment, Mr. Chairman. 

The principal use of tin plate, Mr. Fairless, is what? 

Mr. Fairless. For the canning industry. 

Mr. Feller. The making of containers for food and for paints and 
various other products, oil and so on? 

Mr. Fairless. Yes. 

Mr. Chairman, I offer for the record two charts, one entitled "Base 
Price of Tm Plate at Pittsburgh By Years, 1925-39," and the other 
entitled "Market Price of Pig Tin (New York) By Months, 1929 and 
1939." Both of these charts were prepared by the Department of 
Justice. 

Acting Chairman King. They may be received. 

(The charts referred to were marked "Exhibits Nos. 1399 and 
1400," respectively, and are included in the appendix on pp. 10987 and 
10988.) 

TIN PLA^E PRICES 

Mr. Feller. I should like to explain for a moment the chart on 
tin plate. 

Acting Chairman King. Base price? , 

Mr. Feller. Yes, sir, base price of tin plate at Pittsburgh. The 
committee will notice that the price of tin plate during that period 
has been in the range between the $4 line and the $6 line. On the 
righthand side of the price line, the committee will see a dotted 
rectangle marked in for the year 1938. It will later appear in the 
testimony that late in the year 1938 a price reduction was annoimced 
which was made retroactive to the first of the year, and in order to 
indicate the retroactive price reduction we have put in this dotted 
line. 

Acting Chairman King. That would mean a reduction in the price 
approximately at the beginning of 1938. 

Mr. Feller. That is right, in actual effect the price at the beginning 
of 1938 had gone down to $5, although the price reduction itself was 
announced very late in the year. The committee will notice on the 
chart entitled "Market Price of Pig Tin (New York)" a somewhat 
fluctuating line which might be compared with the line on the chart 
representing the base price of tin plate. We will later point out just 
what the relationship is with specific reference to the amount of tin 
which goes into the tin plate. I think it might be a good point to 
do that right now. 

Mr. Fairless, about how much tin is used in a base box of tin plate? 

Mr. Fairless. About a pound and a half. 

Mr. Feller. In value how does that relate to the base price of the 
whole box? 

Mr. Fairless. It fluctuates. It might mean 25, 30 percent. 

Mr. Feller. Somewhere in that neighborhood? 

Mr. Fairless. Yes. It has, of course, been higher percentage-wise 
and it has been lower. The price of pig tin, as you know, is something 
we have no control over. 

Mr. Feller. I understand. 



CONCENTRATION OF ECONOMIC POWER 10755 

Acting Chairman King. Where do you get your pig tin from? 
Where do the manufacturers of tin plate obtain their raw tin from? 

Mr, Fairless. From the Straits, largely. 

Mr, Feller. There is also some tin which is recovered domesti- 
cally, from tin plate scrap, is there not? 

Mr. Fairless, Yes. 

Mr. O'Connell. Did I understand you to say about a pound and 
a half of tin would be used in a base box? 

Mr. Fairless. Yes. 

Mr, O'Connell, And j^ou suggested the value of the tin would 
fluctuate but it might be around 25 or 30 cents? 

Mr. Fairless. Twenty-five or thirty percent of the selling price of 
the tin plate. It fluctuates. It all depends on what the price is. 

Mr. Pfeltz. More generally it is between 15 and 20. 

Mr. O'Connell. At the present time the market price of pig tin 
is indicated to be slightly less than 50 cents. A pound and a half of 
tin would be in the neighborhood of 70 cents. The base box price of 
tin is $5. 

Mr. Pfeltz. Or approximately 15 percent of the present cost. 

Mr. Fairless. But there are deductions, though, from that $5 
price, you see. 

Mr, O'Connell. That would tend to increase the percentage. 

Mr. Fairless. That is right. 

Mr. Feller. I am informed that the market price of tin today is 
somewhere in the neighborhood of 60 cents. 

Acting Chairman King. Tin or tin plate? 

Mr. Feller. Tin. 

Mr. Henderson. Tin is a commodity which is imder control of an 
international cartel. 

Mr. Feller. Well, it has been from time to time under the control 
of an international cartel. I wouldn't be able to tell you what the war 
has done to that cartel. I don't know. 

Mr. Chairman, to understand the pricing of tin plate it is necessary 
to go to some extent into the contractual system or contracts on the 
basis of which tin plate is sold. Some of the contracts under consider- 
ation will not be within Mr. Fairless' knowledge, either because they 
were with other companies or because they were concluded with sub- 
sidiaries of the United States Steel Corporation before Mr. Fairless' 
connection with it, I should like to address my remarks to Dr. Baker 
at this point with reference to the contracts which he had for the 
purchase of tin plate. 

Acting Chairman King. Will there be any evidence tending to show 
the companies which manufacture tin plate and have manufactured 
and disposed of it in the United States during the past 10 or 15 years? 

Mr. Feller. I think we might deal with that right now. Dr. Baker, 
from which companies do you buy tin plate? 

Dr. Baker. Practically all companies that manufacture tin plat*^ 
in varying amounts, 

Mr. Feller. Could you tell us otfhand about how many such 
companies there are? 

Dr. Baker. There would be 8 jr 9, would there not, Mr. Pf(>lt/.? 
I should have said 10 companies. 



10756 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. From which company do you buy the largest quantity? 

Dr. Baker, The Carnegie-Illinois Steel. 

Mr. Feller. A subsidiary of the United States Steel Corporation. 
Gould you tell us in connection with the manufacture of cans whether 
your compan;^ is the largest manufacturer? 

Dr. Baker. I believe it is. 

Mr. Feller. And which is the second largest manufacturer? 

Dr. Baker. The Continental Can Co. 

Mr. Feller. Do you happen to know which is the third largest? 

Dr. Baker. No; I don't know their size. 

Mr. Feller. Would the Crown Cork & Seal Co. be in the third 
place, Crown Can Co.? 

Dr. Baker. Either they or the National Can Co., I would say. 

Mr. Feller. Could you estimate 

Acting Chairman King (interposing). How many companies 
manufacture cans? 

Dr. Baker. Food can manufacturers: The American Can Co., 
Continental Can Co., National Can Co., Owens-Illinois C.an Co., 
Crown Can Co., Phillips Can Co., Heekin Can Co., Pacific Can Co., 
and Heinz Co. In the milk-packing field practically all of the large- 
canners of milk make their own cans, such as Borden, Pet, Carnation, 
and so on. In the general line of manufacture of tin containers, 
I believe there are something over 50 small companies in that field. 

Mr. Feller. For the information of the cormnittee. Dr. Baker, 
you mentioned some terms that the committee might want to have 
explained a bit, A sanitary can is a can in which food is packed, is 
that correct? 

Dr. Baker. A sanitary can is a round, full opened, double-seamed 
closure container for the packaging of food to be sterilized after 
closure. 

Mr. Feller, And the general line can? 

Dr. Baker. They practically include all other cans, such as coffee 
cans, oil cans, tobacco boxes, aspirin boxes, and so forth. 

Hr. Feller. Dr. Baker, do you happen to know about what per- 
CtP.nta.ge of the sanitary cans produced in the United States are pro- 
duced by your company? 

D V. Baker. No ; I do not. 

^T-- fller. Is it a large percentage? 

Dr.B kKER. I would say it was a pretty good percentage, yes. 

Actmg Chairman King. Could you give any idea — 10, 20, 30, 40 
percent? 

Dr. Baker. I couldn't give a very definite idea. That can easily 
be obtained by the Government people, who get the facts from each 
company, but no one company does get the facts of the others. You 
can easily figure that out, Mr. Feller. 

Mr. Feller. We have not been able to find any source which gave 
us that fact. 

Dr. Baker. We will give you our figures and you can get the 
others and make your calculations. 

Acting Chairman King. Is there active competition in the market 
for cans? 

Dr. Baker. Very active. 



CONCENTRATION OF ECONOMIC POWER 10757 

Mr. Feller. Dr. Baker, could you tell us the total production of 
cans of your company, let us say, in 1937, by numbers? 

Dr. Baker. By numbers in cans? I couldn't give yOu the number 
of cans. I believe the published net figures of the total sales were 
$187,000,000, of which about one-half were packers' cans, in dollars. 

Mr. Feller. Would you know, Mr. Pfeltz, approximately how 
many cans your company produced in 1937? 

Mr. Pfeltz. I should say, without definite knowledge, approxi- 
mately 10,000,000,000, of all types. 

Dr. Baker. But that is not packers' cans. The packers' caii 
figure would not be, I think, any more than 60 percent of that, a 
little less than 60 percent of that. 

Mr. Feller. Dr. Baker, you have used a new term now, packers' 
cans. Will you explain for the committee what the packers' can is? 

Dr. Baker. All food cans in which the product is sterilized for 
safekeeping, a sterilized food product in a hermetically closed con- 
tainer. 

Representative Williams. What is the difference between that and 
the sanitary can which you just described? 

Dr. Baker. They are indistinguishable except that there are other 
types of cans that have a soldered type of closure, like milk cans, 
which are not sanitary cans because they don't come within the 
definition of being a double-seamed can. They are a soldered can. 

Mr. Feller. Then the packers' can includes both the sanitary 
can and the milk can? 

Dr. Baker. Yes. 

Acting Chairman King. What are the small cans in which beans 
and tomatoes and various agricultural and fruit products are 
contained? 

Dr. Baker. We call those sanitary packers' cans. 

CONTRACTS FOR THE SALE OF TIN PLATE 

Mr. Feller. Turning to the question of a contract for the purchase 
and sale of tin plate, Dr. Baker, in 1927 your company entered into a 
contract for the purchase of tin plate with the American Sheet & Tin 
Plate Co., did it not? Do you recall? 

Dr. Baker. I believe so. 

Mr. Feller. And the American Sheet & Tin Plate Co. was at that 
time a subsidiary of the United States Steel Corporation? 

Dr. Baker. Yes. 

Mr. Feller. Mr. Fairless, the American Sheet & Tin Plate Co. 
has since become merged with the Carnegie-Illinois Steel Corporation? 

Mr. Fairless. In 1936 it became a part of the Carnegie-IUinois 
Steel Corporation. 

Mr. Feller. Dr. Baker, considering for a moment the clause in the 
1927 contract between your company and the Am^irican Sheet & Tin 
Plate Co., that clause provided more or less as follows, that — 

Contracts or orders under this agreement shall call for seller's ruling current 
prices at the time the tonnage covered by such contracts or orders is placed which 
shall be subject to the terms hereof. 



10758 CONCENTRATION OF ECONOMIC POWER 

In the event of a decline in seller's selling schedule, buyer — 
That is the American Can Company — 

is to receive the benefit of such revision on any unspecified portion of a contract or 
unshipped portion of an order, and in the event of the reestablishment of prices 
after a decline, the unspecified portion of a contract and the unshipped portion of 
an order shall command prices equal to the increase, but in no case shall prices be 
higher than those caUed for at the time of entry of any such contract or order — 

And the contract then went on to provide a certain scale of discounts 
which were in consideration of the very large quantities of products 
which you would purchase. Is that generally correct? 

Dr. Bajker. Yes. 

Mr. Feller. In other words, the contract, which I understand was 
a requirement contract 

Dr. Baker (interposing). A partial requirement contract. 

Mr. Feller. A partial requirement contract, did not specify a 
specific, definite price. It did not say so many dollars through the 
Ufe of the conrract, but provided that the price, generally speaking, 
would be the seller's ruling current price at the time the product, the 
order for the product, was placed, with certain discounts. 

Dr. Baker. Yes. 

Mr. Feller. That is correct? 

Dr. Baker. Yes. 

Mr. Feller. Merely to develop your system of contractual rela- 
tions with the subsidiaries of the United States Steel Corporation, in 
1931 you entered into a further contract wdth the American Sheet & 
Tin Plate Co. Do you recall that? 

Dr. Baker. I believe so. 

Mr. Feller. And this contract provided in part [reading]: 

When the net domestic current selling price on cokes, charcoals and ternes — 

Those are various kinds of coated products, tm plate and terne — 

as provided in said contract — 

That is the previous contract of 1927 — 

is four dollars and higher, the discount of 7.5 percent of the price per base box 
shall be allowed buyer by seller during each year beginning January 1, 1932, of 
the term of this contract as extended. 

That is the clause in that contract? 

Dr. Baker. Yes. 

Mr. Feller. Passing on to the next contract, on September 22, 
1936, you entered into a contract with the Carnegie-IUinois Steel 
Corporation, a subsidiary of the United States Steel Corporation 
which had in the interim been consolidated with the American Sheet 
& Tin Plate Co. Is that correct? 

Dr. Baker. Yes. 

Mr. Feller. And that contract provided, with respect of price, 
as follows: 

Delivered prices for each kind of material and each point of delivery as specified 
by buyer shall be as follows: 

"For coated products, from the seller's officially announced domestic base 
price at Pittsburgh, Pa., or Gary, Ind., or elsewhere, in effect at the time of entry 
of buyer's definite order, depending upon which of said base prices shall result 
in the lower delivered price, there shall be deducted 7.5 percent." 



CONCENTRATION OF ECONOMIC POWER 10759 

Then there are further provisions made witli respect to certain 
transportation charges and certain extras or deductions. Would you 
care to have the rest of that clause in the record? 

Dr. Baker. I don't think so. 

Mr. Feller. Essentially the price clause was that the price should 
be Carnegie-Illinois' officially announced domestic base price at 
various points, less 7.5 percent? 

Dr. Baker. That is correct. 

Mr. Feller. Since the date of that contract, Dr. Baker, you have 
modified the contract by ehminating the 7.5 percent discount, is that 
correct? 

Dr. Baker. That is correct. 

Mr. Feller. And at the present time, then, generally speaking, 
the price clause of your contract with Carnegie-Illinois Steel Corpora- 
tion is to the effect that the price shall be Carnegie^IUinois' officially 
announced domestic price on tin plate at various points? 

Dr. Baker. That is correct. 

Mr. Feller. Is that correct, Mr. Fairless? 

Mr. Fairless. Yes. 

Mr. Feller. The Camegie-IUinois Steel Corporation is your 
largest supplier of tin plate? 

Dr. Baker. It is. 

Mr. Feller. And you have contracts, do you not, with other steel 
companies for the purchase of tin plate, as you have already stated? 
Those companies, I understand, include Bethlehem Steel Co., Re- 
public Steel Corporation, Youngs town Sheet & Tube Co., Granite 
City Steel Co., Jones & Laughlin Steel Co., and also — do you have a 
contract with Yomlgstown? 

Dr. Baker. Yes. 

Mr. Feller. And with Inland? 

Dr. Baker. Yes. 

Mr. Pfeltz. What was that last — with Inland? We have no con- 
tract with Inland. 

Mr. Feller. Dr. Baker, I should like to read the price clause from 
your contract with Youngstown, with the Youngstown Sheet & Tube 
Co., a contract entered into between American Can Co. and Youngs- 
town Sheet & Tube Co., October 14, 1936: 

Delivered prices for each kind of material and each point of delivery as specified 
b' buyer shall be as follows: 

For coated products, from the officially announced domestic base price of 
Carnegie Illinois Steel Corporation, or its successors, at Pittsburgh, Pa., or Gary, 
Ind., or elsewhere, in effect at the time of entry of buyer's definite order, depend- 
ing upon which of said base prices shall result in the lower delivered price, there 
shall be deducted 7.5 per cent — 

And then the clause goes on to deal with transportation charges and 
extras and deductions. 

I should Like to ask you this, Dr. Baker: In the various contracts 
which you had with steel companies selling you tin plate, did you 
have a clause similar to this; that is to say, a clause providing that 
the price should be on the basis of the officially announced price of 
Carnegie-Illinois Steel Corporation, less a certain discount? 

Dr. Baker. Yes. 



10760 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. Of 7]^ percent. And at the present time those con- 
tracts still contain the provision that the price shall be the oflBcially 
announced price of Carnegie-Illinois Steel Corporation, but you have, 
since the conclusion of those contracts, eliminated this kind of dis- 
count clause. 

Dr. Baker. That is correct. 

Mr. Feller. It appears, then, that in all your steel contracts the 
price is made dependent upon the officially announced price of your 
largest supplier; that is the Carnegie-Illinois Steel Corporation. 
Then, on the basis of these contracts, whenever Carnegie-Illinois 
Steel Corporation announces ofl&cially a different price — if it announces 
for example, a price deduction, then all the other steel companies 
which supply you on the basis of contract are required to give you a 
lower price. Is that correct — a price equivalent to the officially 
announced price of the Carnegie-Illinois Steel Corporation. 

Dr. Baker. They agreed to sell tin plate on the same basis which 
we buy from the Carnegie-Illinois Steel Corporation. 

Mr. Feller. At least, the official price of the tin plate, of all the 
tin plate which your company buys under contract, is under the 
control of the Carnegie-Illinois Steel Corporation. 

Dr. Baker. I wouldn't say — while theoretically that might have 
been the case, our contracts have now all been changed so that we 
base our price of cans on our own announced price of tin plate. 

Mr. Feller, I was going to come to that almost in a moment, 
Dr. Baker, the question of the can contract. 

Now, Mr. Fairless, in your contracts with other purchasers of tin 
plate — that is, purchasers other than American Can Co. — do you 
have a provision similar to the provision in the contract of the Ameri- 
can Can Co. — that is to say, a provision that the price shall be the 
ojB5cially announced price of Carnegie-IHinois Steel Corporation? 

Mr. Fairless. I don't know that we have any contracts that read 
just as you have stated, in that language. In effect, yes. 

Mr. Feller. Similar, in effect? 

Mr. Fairless. Yes. In other words, we sell tin plate to others, 
some contractually and others otherwise, at the same price that we 
sell to the American Can Co. 

Mr. Feller. Mr. Fairless, is it customary in the sale of other steel 
products to provide that the price shall vary in accordance with the 
oflBcial announcement of price of one of the producers? 

Mr. Fairless. I do not understand your question. 

Mr. Feller. Well, we have just seen that the various contracts 
which the American Can Co. has for the purchase of tin plate provide 
that the price under the contract shall be the oJBBcially announced 
price of the Carnegie-Illinois Steel Corporation. Are you familiar 
with similar clauses in contracts for the purchase of steel products 
other than tin plate? 

Mr. Fairless. Oh, yes. It has been the custom in this industry as 
long as I have been in it for contracts to be based on the Iron Age 

? notation of steel products. In my early days in the steel business 
was a large buyer of semifinished steel, and we bought for years our 
semifinished requirements on a contract that had as its base the 
Iron Age — the average Ircn Age — quotations of semifinished for a 
period of time. Contracts are written in the steel business, have 



CONCENTRATION OF ECONOMIC POWER 10761 

been in the past, and might very well still be, based on pig-iron 
quotations. It isn't an uncommon 

Mr. Feller (interposing). Taken from the Iron Age. 

Mr. Fairless. Or some trade paper. 

Mr. Feller. Or some trade paper. Are you familiar with any 
contract which provides specifically for a price announced by some 
other steel producer by name? 

Mr. Fairless. No; only I thinlc — and this is your investigation, 
not mine — it would be very well to have the background of what the 
tin-plate business is, and how it is conducted by comparison with 
other steel business. 

Mr. Feller. I think this might be a good point to have that. Go 
ahead, Mr. Fairless. 

Mr. Fairless. I think mavbe Dr. Baker is better equipped. 

Mr. Feller. Go ahead; tell us about it. 

Mr. Fairless. The background of tin plate is more different from a 
merchandising standpoint than any other steel product. In effect, 
we have to name a price on tin plate that is good for 12 months. 
Theoretically, and as per the contracts, it covers a period of 9 months, 
but practically it usually works out that it covers 12 months. So to 
that extent it is an entirely different method of merchandising than 
practically any other steel product, where we announce our prices for 
90-day periods. 

Also, in tin plate we are dealing with an uncertainty opstwise that 
we do not have to contend with in practically any other steel product, 
at last in respect to volume, and that is pig tin, so when we name a 
price, which usually comes around about the first of December or 
sometimes earlier, we amiounce a price for tin plate, and that price is 
good for next year. It can't be any higher. It might be lower but it 
can't be higher, and we have to gamble with the factors of cost, such as 
pig tin, labor, or any other item. So it is a different product, and it is 
sold on a different basis. 

Now you might say, "Why?" Dr. Baker can explain why much 
more clearly than I can because of the nature of his business and the 
necessity of price protection. 

Mr. Filler. Mr. Fairless, your statement is with reference to the 
method of pricing by Garnegie-Illinois — that is, the United States 
Steel Corporation? 

Mr. Fairless. That is all I am talking about at any time. 

Mr. Feller. Now, Dr. Baker, could you explain to us why, in your 
opinion, other producers of tin plate should, in their contracts, specifi- 
cally provide that the price would be the price announced by Camegie- 
lUinois Steel Corporation? 

Dr. Baker. We make our can contracts naming the price on Janu- 
ary 1 each year. That is good throughout the whole year. In other 
words, it is a ceiling price. In order to be able to do that you have to 
know that y;ou, yourself, are covered, and that is what we did in our 
contracts with Camegie-IUinois and other tin-plate manufacturers, 
so that we were protected and our customers were protected by a 
uniform price throughout the year, which has been the method 
necessary to process agricultural products in as varying a climate as 
from Utah to Florida for tomatoes, for instance. They wanted a 
uniform price throughout the year. They wanted to be able to sell 



10762 CONCENTRATION OF ECONOMIC POWER 

futures; they wanted an important element of their canned-foods cost, 
the container, to be at a stable price throughout the year, and that 
system was devised to enable that, to be done by the use of a so-called 
official price of tin plate. 

Mr. Feller. The official price being the price announced by 
Camegie-IlUnois Steel Corporation? 

Dr. Baker. Yes. 

Mr. Feller. Did any of your other suppliers of tin plate object to 
taking as the standard the price announced by somebody else? 

Dr.. Baker. Not that I knowof. Do you know of any, Mr. Pfeltz? 

Mr. Pfelt?. No. 

Mr. Feller. Can you tell us how long this system has been in 
effect, the system by which various steel producers provide in their 
contracts with you that the price shall be the officially announced 
price of a subsidiary of the Steel Corporation? 

Dr. Baker. I don't know the exact date it began but it was a very 
long time ago. It was practically the beginning of the real advance- 
ment of the canning industry. It must be practically 30 years. 

CONTRACTS FOR THE SALE OF CANS 

Mr. Feller. Dr. Baker, we will come back to the question of the 
contracts for sales of tin plate, but I think since you have mentioned 
the contracts for the sale of the cans which are made from the tin 
plate, that perhaps we might go into that to some extent. 

Dr. Baker, I understand that the contracts for the sale of cans are, 
generally speaking, uniform with respect to all or most of the pur- 
chases of cans from you, uniform with respect to terms. 

Dr. Baker. Yes; we use the one form of contract. 

Mr. Feller. You use one form of contract with respect to all your 
sales of packer's cans, which include both the sanitary cans for packing 
food and the milk cans for packing milk. Now, I understand that 
very recently you have made a change in the form of those contracts, 
have you not? 

Dr. Baker. Yes; we have. 

Mr. Feller. Dr. Baker, I should like to have you state to the 
committee, first the provision in your contracts for the sale of cans 
prior to the change, and then the provisions of the new contracts; I 
mean specifically the provisions relating to price. 

Dr. Baker. The provisions in the old contract, adjusted on January 
1 prices for tin to the tin plate basis as named by the Carnegie-Illinois 
Steel Corporation, effective January 1 of each year. 

Mr. Feller. In other words, to get this clear, the price at which you 
sold cans to your customers was dependent upon, or was related to, the 
officially announced price of tin plate as announced by Carnegie- 
Illinois Steel Corporation. 

Dr. Baker. It was related to that and cans were invoiced on that 
basis. 

Mr. Feller. Will you go ahead. Dr. Baker? That in effect was 
the contract prior to the recent change? 

Dr. Baker. Yes. 

Mr. Feller. Now when did you change your contract? 

Dr. Baker. We have just changed it this faU, early this faU. We 
have made this change in our contract, that we protect ourselves on 



CONCENTRATION OF ECONOMIC POWER 10763 

tin plate purchases, that is we cover the price at which we can buy- 
tin plate, and we make our own announced price which is for invoic- 
ing purposes, and we say that at the end of each year we will compute 
the actual average price paid for ordered production sizes of tin 
plate, and to the extent that that price may be less than the January 
1 price, we refund to our customers everything except 10 cents per 
base box. In other words, it has a provision, a contractual pro- 
vision, for adjusting it to the market, if the market should go down- 
ward. They are at all times protected if the price should go up, but 
we never had before a contractual relationship for doing this. It has 
been done on a voluntary basis before, but that was uncertain and 
it was voluntary, and to that extent was not quite satisfactory. 

Mr. Feller. Mr. Chairman, for the purposes of the record, I 
should like to read the respective provisions relating to price of the 
old can contracts, and then of the new can contracts, if the committee 
will bear with me. 

In the old contracts for sanitary cans, the following provisions 
occur: 

Basis for fixing prices: The following prices shall be the prices of Sanitary 
cans under this contract until December 31, 19—, and thereafter shall be used 
as the basis for fixing all prices for said cans: 

The contract then proceeds to set out the differentials depending 
on the size of cans, and for the purpose of the record I shall read 
these: 

„, J J . , Differentials 

standard sizes of cans per M 

No. 1 18 cents. 

No. 2 26 " 

No. 2>^ 33 " 

No. 3-4% inches 38 " 

No. 10 - 74 " 

The contract then goes on to provide: 

The oflScial price of the Carnegie-Illinois Steel Corporation for tin plate, per 
base box 100 lb. Coke Plate, 14" x 20", 112 sheets per box, F. 0. B. MiU, Pitts- 
burgh, Pa., shall be the standard by which all readjustments of prices of cans 

covered hereby shall be determined. On said oflBclal price was 

$ per base box. Prices of cans shall advance or decline from the above 

named basis prices in accord with said oflScial price for said tin plate in the follow- 
ing manner; that is to say, there shall be no change made in the above named 
prices for cans except in case of a difference of at least ten cents (100) per base 
box between said official price for tin plate on any adjustment date and the 

above named officials price of $ per base box. For each said difference 

of ten cents (100) on any and all adjustment dates there shall be added to or 
deducted from the above named prices for cans the corresponding differential 
set over against each size of can and a proportionate addition or deduction for 
each fractional difference beyond ten cents (100) or a multiple thereof. Prices 
so determined shall take effect on the dates of readjustment and shall cover all 
deliveries made during the period until the next adjustment date. 

Dr. Baker, if I understand your old contract provision correctly, 
the price of cans which you manufactured and sold under this contract 
would go up or down in certain stated waj^s, depending upon changes 
in the officially announced price of Carnegie-Illmois for tin plate. 

Dr. Baker. That is correct, sir. Of course we might on our own 
account do something else besides that, voluntarily, although it was 
not in the contract. 

Mr. Feller. We shaU go into that, Dr. Baker, at some length. 
Now, ho V long was this contract in effect? 



10764 CONCENTRATION OF ECONOMIC POWER 

Dr. Baker. This old form of contract? 

Mr. Feller. Yes. 

Dr. Baker. It has been changed in minor degrees about every 
issue, but something over 25 years I believe that type of form has 
been used, perhaps 30. I haven't looked that up. 

Mr. Feller. Now for the purposes of the record, Mr. Chairman 
I should like to crave the patience of the committee whUe I read in the 
price provisions of the new contracts. 

Method of announcing tin plate prices: The officially announced price on 
January 1st of each year (described in Seller's previous can contracts as the official 
price of Carnegie-Illinois Steel Corporation) for tin plate, per base box, 100 lb. 
standard coke plate, 14" x 20", 112 sheets per base box, F. O. B. Mill, Pittsburgh, 
Pa., has been for years the standard adjustment basis by which prices of cans 
covered by American Can Company Packers' Can contracts have been reaffirmed 
or adjusted for the ensuing calendar year. Said officially announced price was 
subject to the regular allowances for cash and multiple packaging on all ordered 
production sizes of prime plate with seconds arising, with regular allowance for 
seconds, and with differentials for lighter and heavier gauge plate. On January 
1st, 1939, said official price as above described was $5.00 per base box. 

Prior to and effective January 1st of each year and of the term of this contract, 
American Can Company will announce the base box price for tin plate, which 
shall be used as the adjustment basis for all cans covered by this contract for that 
calendar year. The base box forming a basis for such announced price shall be 
the same as set forth in the preceding paragraph describing the official base box 
price of the Carnegie-Illinois Steel Corporation. Said announced price of the 
American Can Company shall not be higher than the January 1st officially 
announced or published price per base box for tin plate of the Carnegie-Illinois 
Steel Corporation covering deliveries of tin plate for the first three quarters of the 
ensuing calendar year, and said announced price of American Can Company shall 
be subject to a j'^ear end readjustment for each calendar year under the provisions 
of this contract as hereinafter set forth. 

ContiQuing: 

Method for adjusting invoice prices of cans at the beginning of each 
YEAR OF THIS CONTRACT: The announced price of the American Can Company for 
tin plate per base box, 100 lb. standard coke plate, 14" x 20", 112 sheets per base 
box, F. O. B. Mill, Pittsburgh, Pa. as herein described in paragraph No. 3 — 

Which is the paragraph I just finished reading — 

shall be the standard by which all adjustments or readjustments of prices of cans 
covered hereby shall be determined. Such tin plate price on January 1st, 1939 
is hereby recognized as the announced price of $5.00 per base box and the above 
named basis prices for cans are computed with reference to said tin plate price. 
Prices of cans shall advance or decline from the above named basis prices for cans 
in accord with said announced price for said tin plate in the following manner, 
that is to say, for each calendar year during the term of this contract the tentative 
prices of cans sold hereunder, which shall be the invoice prices, shall be determined 
by adding to or subtracting from the basis prices of cans covered by this contract 
an amount equal to the differential set over against each size of can named herein 
for each variation of ten cents (10^) from said price of $5.00 per base box, in the 
announced price of tin plate for such year, and an amount equal to the fractional 
part of such differential for each such variation of less than ten cents (10^) in the 
announced price. Prices so determined shall take effect on the dates of readjust- 
ment and shall cover all deliveries made during the period until the next adjust- 
ment date. The first adjustment date shall be January 1st, 1940, and other 
adjustment dates thereafter shall be January 1st of each year of the term hereof. 

Paragraph 6, and I need read only one portion of that paragraph: 

Method for readjusting can prices at the end of each year of this 
contract: After the end of each calendar year the invoice price of cans sold 
hereunder during such year shall be subject to readjustment in the following 
Planner; Seller shall compute the average price actually paid by it for all ordered 
production sizes of tin plate bought by Seller during said year for use in the 



CONCENTRATION OF ECONOMIC POWER 10765 

manufacture of all tin cans, upon the basis of a base box as above described in the 
definition of the officially announced price of the Carnegie-Illinois Steel Corpora- 
tion. If such average price shall be less than the announced price for the year 
by an amount less than ten cents (lOji) per base box, no readjustment shall be 
made in the invoice prices of cans. If such average price shall be less than the 
announced price for the year by an amount more than ten cents (lOji) per base 
box, Seller will refund to Buyer an amount equal to one differential for each ten 
cents (10^) of such diflFerence. in excess of the first ten cents (10(4), for which no 
readjustment shall be made, and a proportionate share of one differential for any 
fractional amount of such difference beyond ten cents (10(4) or a multiple thereof. 
Said refund to be paid to Buyer, or at Seller's option credited to any indebtedness 
of Buyer to Seller within sixty (60) days after December 31st of each calendar 
year of said contract in which said refund shall apply. 

That is the end of that. So that the committee should get clear 
the difference, is this a correct statement, Dr. Baker? Under your 
old contracts the price for cans varied in certain fixed relationships 
with the ofl&cially annoimced price of Carnegie-IUinois. I am talking 
now merely on the basis of what the contracts provided. Under your 
new contracts the prices in the first instance will vary with the offi- 
cially announced price of Carnegie-Illinois, but you will make an 
adjustment with each of your customers on the price of cans periodi- 
cally, which will reflect the actual prices which you have paid for tin 
plate as distinguished from the officially announced prices of Carnegie- 
Illinois. Is that a correct statement? 

Dr. Baker. That is substantially correct. You said the officially 
announced price of Carnegie-Illinois Steel Corporation. It would be 
the American Can Co. announced price, we say which shall not be 
higher than the officially announced price of Carnegie-Illinois Steel 
Corporation. We don't say it will not be lower. 

Mr. Feller. I see. 

Dr. Baker. Outside of that I think your statement is correct. 

Mr. Feller. The net effect of it to the purchaser of cans is this, 
is it not? Under the old contract your contractual obUgation was 
limited to a variation of the price of cans only insofar as the officially 
announced price of Carnegie-Illinois varied. 

Dr. Baker. That is correct. 

Mr. Feller. Under the new contract you have a contractual 
obligation to vary the price of cans in accordance with the actual 
price which you have paid for tin plate. 

Dr. Baker. Yes. 

Mr. Feller. Mr. Chairman, at this point I should like to offer for 
the record a chart entitled "Contract Sales Price of No. 2 Plain 
Sanitary Tin Cans (Coke) by Years, 1929-39." The source is Poor's, 
from the American Can Co. 

Acting Chairman King. It may be admitted. 

(The chart referred to was marked "Exhibit No. 1401," and is 
iticluded in the appendix on p. 10988.) 

Acting Chairman King. Dr. Baker, I assume as to the source. 
Poor's from the American Can Co., that you concede the accuracj 
or the authenticity; you concede that that organization, whatever it 
is, its reports are accurate? 

Dr. Baker. Which are you referring to. Senator? 

Acting Chairman King. I am referring now to the last chart to 
which Mr. Feller referred and to the statement at the bottom: "Source: 
Poor's, From the American Can Co." 



10766 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. Mr. Chairman, Poor's is a large organization making 
mrveys of business, just like Moody's. 

Acting Chairman King. That is what I understand. 

Mr. Feller. This chart was printed by Poor's in a study made of 
the American Can Co. 

Acting Chairman King. What I am trying to ascertain is whether 
Dr. Baker questions the accuracy of this chart, or the findings or 
surveys of Poor's or whether he accepts that study. 

Mr. Feller. No, sir; not that study, merely the chart indicating 
the can prices. He certainly couldn't be bound by anything said in 
a study with respect to business, and so on, other than that. 

Acting Chairman King. Wliat I mean is whether he accepts the 
chart as being substantially accurate. 

Dr. Baker. I would say this. Senator: that the sources for infor- 
mation are available and I would have no grounds for doubting the 
chart is proper. 

Mr. Pfeltz. The only possible error that may have been made is 
for 1938 when we did adjust prices. 

Mr. Feller. Yes, sir; we will go into that. As you will notice at 
the top, from the heading there, it deals with contract sales prices, 
and adjustm.ents made out of the contract we will come to before the 
conclusion of this testimony. 

Dr. Baker, could you tell the committee why this change was made 
in the uniform contract for the sale of cans by your company? 

Dr. Baker. It seemod to us to be fair and desirable for the reason 
that the market price of tin plate showed instability due to fluctua- 
tions in economic conaitions and price of pig tin, labor elements, and 
there was such a large amount of high speed manufacturing rapacity 
for tin plate, all of which would tend to make an mistable market, 
and our experience had been in 1938 that the January 1 price as 
announced did not properly reflect the actual market price for tin 
plate throughout the year 1938, and we voluntarily made an adjust- 
ment to the market price which we were able to secure on a lower 
basis than the January 1 price, and we thought that the time had come 
when we should put that in definite contractual form. 

Mr. Feller. I am not sure that the committee quite understands 
why you felt it necessary to make that change, You made the change 
because of the effect of tin-plate prices on cans, or vice versa? I wish 
you would explain that just a little further. 

Dr. Baker. The conditions surrounding manufacture of tin plate, 
the excess capacity in the country to manufacture tin plate, and the 
wide fluctuations in the economic conditions, tended to produce an 
unstable market in the price of tin plate, and as we said, in 1938 we 
had that experience. We took care of it on a voluntary basis, but we 
then thought that we should put it on a definite contractual basis, 
and that is what we did, mak' \g the additional change that we would 
make our own announced price for tin plate instead of using the ofii- 
cially announced price of Carnegie-Illinois Steel Corporation. 

Mr. Feller. Why should it be of conceiu to your customers that 
the market for tin plate is unstable? Your customers buy cans, not 
tin plate. 

Dr. Baxer. Yes; but the price of cans was adjusted each year to 
the price of tin plate as announced on January 1, and naturally they 



CONCENTRATION OF ECONOMIC POWER 10767 

wanted to buy tin cans on a proper basis which could only be done if 
tin plate was purchased on as close a basis as possible. We wanted 
to set ourselves up as an adequately equipped piu-chasing agency for 
our customers. 

Mr. Feller, By this unstable market for tin plate do you mean 
an unstable price? 

Dr. Baker. Oh, yes. 

Mr. Feller. You mean that actually the officially announced 
prices. were not being charged? 

Dr. Baker. Tin plate was being soM for less than the January 1 
price. 

Mr. Feller. Were there years previous to 1938 when the market 
for tin plate was unstable? 

Dr. Baker. I think that there were. 1 know there were particu- 
ularly after the last war, in 1919 and '20. We made a great many 
voluntary adjustments at that time and then there were questions 
about the stability of the price after 1930, and '31, '32, '33, with rather 
confused conditions. 

Mr. Feller. Did you issue this new form of contract because 
you wanted to stabilize tin plate? 

Dr. Baker. No. We entered into it because we wanted to do the 
best job that we could for our canner customers, and buy tin plate 
on the best basis possible and let our customers know exactly what 
th^t basis was. In order to write 3-year contracts we have to ha-^e 
an adjustable feature for tin plate, and the only way that we could 
figure it out was to name a price, announce a price, which was good 
for the year, a ceiling price than which it can go no higher, and if 
the market proves that that price was too high and we are able to 
improve on it, then we return to the customers all of the improvement 
which we have received less the 10-cents on base box. 

Mr. Feller. Under your old form of contract in which you had a 
contractual obligation to vary the price of cans only if the officially 
announced price were varied, was it your experience that your custo- 
mers would complain that the officially announced price was too 
high? 

Dr. Baker. They sometimes thought it was too high because they 
thought the price of cans was too high dependent on their market 
conditions. What they mostly complained of was that the situation 
was not clear, they didn't know exactly what was being done and 
they thought that they were being compelled to trust us too much. 

Mr. Feller. You say the situation was not clear. The contract 
was perfectly clear. You had an obUgation with respect to changing 
the price of cans only when the officially announced price changed. 

Dr. Baker. Yes. 

Mr. Feller. What was there vmclear about the situation in the 
minds of your customers? 

Dr. Baker. Whether that price proved to be a proper market 
price for the year each year. 

Mr. Feller. They entered into contracts in which their rights 
were tied to the officially announced price. Of what interest was it 
to them what the actual price was? 

Dr. Baker. Well, if the actual price was lower than the January 1 
price and we were benefiting by that, then they would think they 
would be paying too much for their cans. 

124491 — 40— pt. 20 3 



10768 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. In other words, your customers were occasionally 
bothered by the fact that you might be getting a concession from the 
officially announced price which was not being passed on to them. 

Dr. Baker. Yes, they had those thoughts in mind at times. 

Mr. Henderson. May I ask a question? I am not quite clear 
myself on this 7% percent. The American Can Co. got that, did 
they not? 

Dr. Baker. They did. 

Mr. Henderson. The customer did not. 

Dr. Baker. No. 

Mr. Henderson. Did many of your customers know of that ar- 
rangement you had? 

Dr. Baker. They all knew that there was some arrangement but 
the customers did not know it generally. It wasn't a generally known 
fact until the N. R. A. Code days when a contract became public 
property for everybody. 

Mr. Henderson. They didn't know it until then? 

Dr. Baker. Not exactly. 

Mr. Henderson. They knew that you did get a concession, that 
your cost was not the officially pubhshed Carnegie price. 

Dr. Baker. Oh, yes. 

Mr. Henderson. As I understand they thought, at times perhaps 
in addition to a fixed concession you might have gotten a reduction 
from the official base price also. 

Dr. Baker. Yes. 

Air. Henderson. And so they thought they ought to have a lower 
price in adjustment of their contracts? 

Dr. Baker. Yes. 

Mr. Henderson. But in your opinion is the new contract clearer 
than the old one? 

Dr. Baker. Oh, absolutely. 

Mr. Henderson. Doesn't it involve more computations? 

Dr. Baker. It involves more computations but in the end it is 
perfectly clear and definite. There is quite a lot of work in keeping 
those figures and preparing them, but the answer is simple. 

Mr. Henderson. Somebody buying your cans under the old con- 
tract could tell by reference to Iron Age or any pubhshed information 
pretty much whether he was going to get an adjustment and what 
the amount of the adjustment would be, could he not? 

Dr. Baker. No. The adjustment only was to be made by the 
January 1 pubhshed price and there was no obligation to make any 
further adjustments if the price should change, if the market should 
soften or weaken. 

Mr. Henderson. If Carnegie-Illinois posted a lower official price 
in the second quarter or the third quarter, your customer was bound 
by the January 1 price? 

Dr. Baker. Technically so, although whenever that occurred we 
gave them what the lower price was. 

Mr. Henderson. Can a customer as he goes along now make a 
computation as to what his refund is likely to be? 

Dr. Baker. Yes; if he knows what the market price of tin plate is 
turning out to be as the year goes on. It is very simple for him, 
because for each 10 cents of change from that January 1 price aU he 



CONCENTRATION OF ECONOMIC POWER 10769 

has to do is look at his scale of differentials and if it is a No. 2 can he 
sees it means 26 cents to him if there is a 10-cent weakening in the price. 

Mr. Feller. Is the customer apt to know what the market price 
actually is? 

Dr. Baker. In some cases, yes. 

Mr. Feller. How would he know that? 

Dr. Baker. There are numbers of them who buy tin plate them- 
selves and do some manufacturing. 

Mr. Feller. Yes; but let us take a small canner on the Eastern 
Shore of Maryland who doesn't buy any tin plate. Is there any way 
that he has of knowing what the actual market price for tin plate is 
at any particular time? 

Dr. Baker. No; not unless he gets something from the trade papers. 

Mr. Feller. Not unless the trade papers carried some stateiiient 
to the effect that it is understood that the market price is such and 
such. 

Dr. Baker. Yes; that is the only way he would have of knowing it. 

Mr. Feller, Can you tell us, Dr. Baker, just when you decided 
to make the change from the old contract to the new contract? 

Dr. Baker. We had been working on it since 1938. 

Mr. Feller. When did you issue the first of these new contracts? 

Dr. Baker. In early October, I would say. 

Mr. Feller. In early October. 

Dr. Baker. Yes. 

Acting Chairman King. Of this year? 

Dr. Baker. Yes, sir. 

Mr. Feller. Could you tell us whether there was any customer 
pressure which was responsible for these new contracts? Did your 
customers come around and say, "Why don't you change your 
contract?" 

Dr. Baker. They didn't know how to change them but we thought 
that this type of contract would be perfectly clear and definite, would 
be pleasing to them, and it has so proven. 

Mr. Feller. Well, you had no specific complaints with reference 
to your old contract? 

Dr. Baker. Oh, yes. 

Mr. Feller. And specifically those complaints were that the 
customer felt that you might be getting a concession which was not 
being passed on to him? 

Dr. Baker. Oh, yes; several of them brought up that possibiUty 
and said that it was not covered in the contract, and it was not. 

Mr. Henderson. If you don't care to comment on this, that is 
your right, but did the general discussions of price policy going on 
in the current year have anything to do with your decision? I have 
heard rumor to the effect that the deliberations of this committee 
and general considerations of price did affect it, and I wondered 
whether you wanted to comment on that. If you don't it is perfectly 
all right. 

Dr. Baker. I don't think that I should make any general state- 
ment on that. I have explained our position to Mr. Feller personally 
on that. 

Mr. Henderson. You mean privately you have explained to Mr. 
Feller in connection with this examination? 



10770 CONCENTRATION OF ECONOMIC POWER 

Dr. Baker. In connection with this examination. 

Mr. O'CoNNELL. Do I understand that your contracts with sup- 
pHers of tin plate, in these contracts, the price that you pay for tin 
plate is tied to or determined by the announced price of the Carnegie- 
Illinois? 

Dr. Baker. Yes, sir; that is the way they have been. 

Mr. O'CoNNELL. I also understood you to say that under those 
contracts the market price for tin was off or you were able to get con- 
cessions from the announced price of Carnegie-Illinois which as a 
voluntary proposition you passed on in some cases at least to your 
customers. 

Dr. Baker. Yes, sir; in an unusual year like 1938. 
Mr. O'CoNNELL. In an unusual year such as 1938 you were, although 
obligated to pay your suppliers the announced price of Carnegie- 
Illinois, in fact able to obtain concessions from those prices? 

Dr. Baker. Yes; they adjusted to the market basis, whether they 
had a contract or not. 

Mr. O'CoNNELL. You mean the actual market as distinguished 
from the announced price? 

Dr. Baker. Yes; actual selling prices that would be made. 

Mr. O'CoNNELL. That was something not covered by your contract 
with your suppliers? 

Dr. Baker. No ; it was not covered contractually because we don't 
know how to put it in words except that we do expect our suppliers 
to keep us in a competitive condition with respect to the purchase of 
our raw material. 

Mr. O'CoNNELL. But your contract provided that you would pay 
an announced price of Camegie-IUinois, so that the concessions you 
were able to obtain were mutually agreed upon and contrary to the 
provisions of the contract, as I would understand it. 

Dr. Baker They were not included in the contract. 

Mr. O'CoNNELL. The contract provided for another basis of price? 

Dr. Baker. Yes. 

Mr. Feller. Dr. Baker, I wasn't quite clear from your answer to 
Mr. Henderson's question, would you prefer that I preserve confidence 
with respect to the statement that you made to me? It is quite all 
right with me. 

Dr. Baker. I am only guessing a little bit about what Mr. Hen- 
derson actually meant. 

Mr. Feller. I will take it, then, that you don't want me to say 
anything about it, and I shan't. 

Dr. Baker. I covered it with you. The records are clear. 

Mr. Feller. I shan't say anything further about it, then. 

Mr. Pfeltz. You have a copy of that transcript, haven't you? 

Mr. Feller. Yes, sir. My question was whether you cared to havp 
me say anything about that or whether you preferred not to. 

Dr. Baker. Oh, no; you can use anything that you want to as far 
as I am concerned. 

Mr. Feller. The conversation between Dr. Baker and myself took 
place on October 16, 1939, at the Department of Justice. The state- 
ment of Dr. Baker to me was as follows: 

We want to be perfectly free to take advantage of any price that is of benefit 
to our customers. We don't want to have anything that is fixed or rigid. We 



CONCENTRATION OF ECONOMIC POWER 10771 

have got to have an invoicing price. We have to have a ceiling price. Then we 
have to have means of adjusting it to the market basis. Theoretically this seems 
to take care of all of the things that our customers might expect us to take care 
of, and all the things which we have thought it probable that you gentlemen 
would also like to have taken care of. Maybe some of j'our inspiration is back 
of this. I would like to have your reaction. 

My answer to that was : 

Purely as a personal reaction I would say that I think it is a better contract — 

and Dr. Baker went on to say : 

That is the way our customers seem to feel because they accept it very readily 
and exchange it and sign new ones. 

That is more or less what you had in mind at that time? 

Dr. Baker. Yes. 

Mr. Henderson. May I ask another question independent of that? 
In a normal year how much would the 7)^ percent amount to on your 
total volume of business with all your suppliers? 

Mr. Pfeltz. We don't have 7}{ percent. 

Mr. Henderson. When you had it. 

Mr. Ppeltz. When we had it? 

Mr. Henderson. Yes. 

Mr. Pfeltz. It would probably have amounted to four or five 
million dollars. 

Mr. Henderson. So in effect what you are doing under the present 
circumstances is making what amounts to a concession on your part 
of something Uke $4,000,000? 

Dr. Baker. That was discontinued back in 1936. 

Mr. Henderson. That is what I am getting at. I wanted to get 
clear it was a relinquishment on your part. 

Mr. Pfeltz. And that is shown on this chart of contract sales price 
of No. 2 sanitary cans, where we dropped the price from $2.30 or 
$2.40 per hundred down to below $2 at the beginning of 1937. That 
wss passed on to our customers. 

^^. HENnERSON. I understand the answer is yes, that it was a re- 
linquishment on your part. 

Mr. Pfeltz. Yes. 

Dr. Baker. I should bring out the point, however, that at that 
time all other buyers of tin plate were getting the self -same 7% percent 
as far as we know. 

Mr. Pfeltz. Or more. 

Mr, Henderson. As far as you know. 

Mr. Feller. I might add as far as we know the same is true. 

May I suggest, if there are no further questions, the meeting 
adjourn at this point because we are going into an elaboration later. 

Acting Chairman King. We will adjourn until half past two. 

(Whereupon, at 12:15 p. m., the committee recessed until 2:30 p. m. 
of the same day.) 

afternoon session 

The hearing was resumed at 2:30 p. m. upon the expiration of the 
recess, Representative Williams presiding. 

Acting Chairman Williams. The committee will please be in order. 
Mr. Feller, are you ready to proceed? 

Mr. Feller. Yes, sir. 



10772 CONCENTRATION OF ECONOMIC POWER 

Mr. Chairman, I should first like to introduce for the record a table 
entitled "Relationship of Cost of Tin Can to Selling Price of Canned 
Products, No. 2 Can." The source of the figures is from a pubUcation 
called the Almanac of the Canning Industry, published annually by 
the Canning Trade Pubhdiing Co., Baltimore, Md. 

Acting Chairman Williams. It may be admitted. 

(The table referred to was marked "Exhibit No. 1402," and is 
included in the appendix on p. 10989.) 

Mr. Feller. The committee inight be interested in studying these 
figures, which give the relationship of the cost of the can to the selling 
price of the can plus the contents. In the case of three major vege- 
tables, tomatoes, corn, and peas, it is given by years. I may say if 
Dr. Baker would care at some later date to put in some other figures, 
we should be very happy to have him do so. I don't know of any 
other figures on this subject. 

Acting Chairman Williams. Have you examined this before, 
Doctor? 

Dr. Baker. No, sir. 

Acting Chairman Williams. If you care to do so at this time, 
perhaps you haven't had any time to do so in detail, if you have any 
comments to make on it 

Mr. AviLDSEN (interposing). Do you know, Mr. FeUer, if this is 
the retail selling price or the wholesale selling price? 

Mr. Feller. I beheve it is the wholesale selling price. 

Dr. Baker. Of course, it is impossible to check up a matter of 
this kind in any quick way. Undoubtedly it has been compiled 
from trade paper references and should be fairly correct, although it 
is probably impossible to have it ever exactly correct. 

Mr. Feller. Yes; I think that would be true. 

Dr. Baker, I beheve you wanted to elaborate just a bit with respect 
to the price clause in your contract for the purchase of tin plate. 
Would you care to make a further statement with respect to that? 

Dr. Baker. In answer to your questioii about the tin-plate con- 
tracts and their bearing on can contracts, I neglected to say that in 
all of our tin-plate contracts except one, the Bethlehem Steel Co., 
there is a provision that if those companies sell tin plate at a lower 
price, they will lower their price to us to that extent, and that was 
not included in a general statement. That was incomplete without 
that further statement. 

Mr. Feller. Yes, sir. 

Mr. Fairless, reference has been made from time to time to the 
officially annoimced price of Camegie-IUinois, officially annovmced 
price of tin plate, and reference has also been made to the fact that 
at times tin plate has actually been sold in the market at a price 
below the officially annoimced price of Camegie-IUinois. Do you 
recall any occasions on which Camegie-Illnois took the initiative in 
selling below the officially announced price? 

Mr. Fairless. No; it would be contrary to our poHcy to take the 
initiative in selling below our announced prices of any product, tin 
plate or otherwise. 

Mr. SLLER. Your policy, then, is to attempt to adhere in your 
sale, as closely as possible to your officially announced price. 

Mr, Fairless. That is the reason for announcing the price. 



CONCENTRATION OF ECONOMIC POWER 10773 

Mr. Feller. Dr. Baker, may I ask whether the American Can Co. 
has also felt it to its interest to see to it that the oflficially announced 
price was maintained insofar as it was possible for you .to do that? 

Dr. Baker. It is always advantageous for the proper price to be 
named and for it not to be subject to any criticism or necessity of 
revision. 

Mr. Feller. Mr. Hughes, may I ask you to identify this document 
which appears to be a memorandum signed by you addressed to 
Mr. W. A. Irvin, dated October 15, 1935, taken from the files of your 
company. 

Mr. Hughes. It seems to be. 

Mr. Feller. I offer this for the record. 

(The document referred to was marked "Exhibit No. 1403" and is 
included in the appendix on p. 10989.) 

Mr. Feller. This document reads as follows: 

In connection with the American Can Company claim I think an important 
point which is perhaps not fully realized by Mr. Wheeler and other members of the 
Executive Committee, is that before we assented to the Steel Code containing thia 
provision we submitted the actual wording to Mr. Phelps for his comment. 

Mr. Phelps was connected with the American Can Co.? 

Mr. Hughes. He was president at that time. 

Mr. Feller, (reading further from ^Ixhibit No. 1403) : 

Unfortunately for us this was done verbally and not in writing. Mr. Phelps 
had no comment to make, the reason being that it — 

I take it that is the provision in the Steel Code — 

accomplished the very purpose that he has been seeking for several years, namely 
no cutting of the American Can price. 

May I ask you, Mr. Hughes, to explain what you had in mind when 
you stated that Mr. Phelps had a purpose which was to be no cutting 
of the American Can price? 

Mr. Hughes. Does that so state, "a pm-pose"? 

Mr. Feller (reading further from Exhibit No. 1403) : 

The reason being that it accomplished the very purpose that he has been seeking 
for several years, namely, no cutting of the American Can price. 

Would you Hke to look at it? 

Mr. Hughes. The question is, What was the purpose? 

Mr. Feller. No; the question is — let me take it in stages. The 
American Can price that you are referring to there, is that the price 
at which American Can purchased tin plate, or the price at which it 
sold cans? 

Mr. Hughes. It was the price annoimced by Carnegie-IUinois 
Steel Corporation, the purchase price from us. 

Mr. Feller. Could you teU us why, in your view, at that time Mr. 
Phelps should have wanted the American Can price not to be cut? 

Mr. Hughes. The price of tin plate that we had announced? 

Mr. Feller. That is right. 

Mr. Hughes. Presumably he thought his competitors might be 
buying at a lower price. 

Mr. Feller. And you felt at that time that it was to his interest 
to see to it that the officially announced price was maintained? 

Mr. Hughes. Yes. 



10774 CONCENTRATION OF EC^ONOMIC POWER 

Mr. Feller. Dr. Baker, would you care to comment on that, 
whether that was in fact the piu-pose of the officials of the American 
Can Co. at that time, or several years before that time? 

Dr. Baker. That was before I was in charge of affairs and I 
wouldn't have any other opinion than what the record itself, and the 
explanation as given, would call for. 

Mr. O'CoNNELL. May I ask a question here? Dr. Baker, yould 
you have any view as to whether your company would want the price, 
the posted price .or the published price of Carnegie-Illinois maintained 
as to your company, as well as to other companies, or were you inter- 
ested in seeing that whatever price was obtained for tin plate was 
available to you as well as to your competitors? In other words, 
were you interested in maintaining the posted price or were you 
interested in getting the same price that your competitors would get? 

Dr. Baker. We were interested in having as good a price as our 
competitors would get. 

Mr. O'CoNNELL. As good a price as your competitors, and you were 
not interested in keeping the posted price of Carnegie-Illinois at its 
posted level. 

Dr. Baker. We wanted the Carnegie-Illinois price to be as good for 
us as the price to other people. We wanted it good enough for us and 
good enough for our competitors, too. Otherwise, there might b(? 
confusion, chaos, misunderstanding. 

Mr. O'Connell. And of course the most practical way of seeing to 
it that your c^'-ipetitors would get no better price than you 

Dr. Baker (interposing). Would be to get a good price. 

Mr. O'Connell. Encourage the adherence to the posted price as 
far as possible. 

Dr. Baker. To get a good price, because if it weren't a good price, 
it would be commercially unsound to try to expect it to be held. 

Mr. O'Connell. It would be to the advantage of your company, 
I take it, to attempt to get concessions from the posted price to the 
extent you possibly could, or to force the posted price down? 

Dr. Baker. The posted price, if it went down, would always be 
passed on to our customers; if there is a new, official price named, we 
adjust our contracts, although we did not have a definite contractual 
relationship obligating ourselves to do it. 

Mr. O'Connell. Do you mean it didn't make any difference how 
high the posted price was, so long as your competitor paid the same 
price? 

Dr. Baker. Oh, yes; of course it would. 

Mr. O'Conneli^. I understood you to say whatever reduction was 
made would be passed on to your customers. 

Dr. Baker. That is now. This is at that time when there was 
no provision for final adjustment. 

Mr. O'Connell. Yes. At that time, it was more to your advan- 
tage, to the advantage of your company, to get a reduction, not in 
the posted price but in the actual price as distinguished from the 
present time. 

Dr. Baker. It would have been that way; yes. 

Mr. Avildsen. But actually you were passing the savings on 
voluntarily, is that it? 

Dr. Baker. We did whenever there was a new official price posted. 



CONCENTRATION OF ECONOMIC POWER 10775 

Mr. O'CoNNELL. ^Mienever there was a new official price posted? 

Dr. Baker. Yes. 

Mr. O'CoNNELL. But I also understood you to say during this 
period it was possible on occasion to get a price concession without 
change in the posted price. 

Dr. Baker. Yes, it was. 

Mr. O'CoNNELL. Would that price concession obtained by you be 
passed on to your customers? 

Dr. Baker. We did do that in '38. 

Mr. O'CoNNELL. I am speaking of this period prior to 1936. 

Dr. Baker. I don't recall anything. I was in the sales department 
at that time in Chicago and I do recall several adjustments being made, 
but officially I know nothing about this. This was another set of 
officials that were involved. 

Mr. O'CoNNELL. I want to be sure I understand this. Prior to 
1936, as I understand it, your contracts with your customers provided 
for a price based on the posted price of Carnegie-Blinois. 

Dr. Baker. Yes. 

Mr. O'CoNNELL. Your contract with Carnegie-Ilhnois and with 
the other suppUers of tin plate provided for the posted price less 
7K percent. 

Dr. Baker. Yes. 

Mr. O'CoNNELL. And on occasion it was possible to obtain addi- 
tional price concessions from the suppliers of tin plate. I think you 
testified to that general effect this mornmg. 

Dr. Baker. Yes, I think that was so. 

Mr. O'CoNNELL. The savings so obtained either through the 7% 
percent or through the concessions made without change of the 
posted price were not as a general rule, in tliis early period, passed 
on to your customers in contrast to the situation as it exists under 
your present form of contract. Is that a fair way to contrast those 
two situations? 

Dr. Baker. No; there was no definite contractual obligation for 
us to do so in the past. The difference now is that we have put it in 
a definite contractual form. 

Mr. O'CoNNELL. I understand the difference in the contractual 
relationship. I wondered if 3'ou had any very clear understanding 
of the actual situation under the earlier form of contract. We 
understand what the contractual relationship was. I also under- 
stand that the 7K-percent differential was definitely not passed on. 

Dr. Baker. No, 

Mr. O'CoNNELL. "\Miat about price concessions made to your com- 
pany by your suppliers without a change in the posted price? 

Dr. Baker. I Imow of none. I was not in charge of company 
business at this time. Mr. Pfeltz has had continuous charge of the 
tin plate matter. 

Mr. O'CoNNELL. May I put the same question to you? 

Mr. -Pfeltz. So far as I recall prior to 1936 we got no concessions 
other than those stipulated in the contracts with the difl^erent com- 
panies and that called for 7% percent. 

Mr. O'Connell. Right there, as I understand it, then, tbe con- 
tracts all provided for the posted price witli the 7K percent discount. 



10776 CONCENTRATION OF ECONOMIC POWER 

Mr. Pfeltz. Yes; and from companies with whom we had no con- 
tracts we got 7K perceni; the same as those with whom we had con- 
tracts. 

Mr. O'CoNNELL. In 1936 the 7K percent differential or discoimt 
was eliminated? 

Mr. Pfeltz. It was eliminated. 

Mr. O'Connell. Between 1936 and the present time prior to the 
enactment of the new contract, your contracts with your suppliers 
were based on the posted price of Carnegie-Illinois without any 7% 
percent? 

Mr. Pfeltz. That is correct. 

Mr. O'Connell, But I understand that during that period, sub- 
sequent to 1936, there were price concessions on occasion obtained 
from your suppliers without change in the posted price. 

Mr. Pfeltz. No doubt that statement was made but I recall of no 
concessions having been made to the American Can other than the 
7% percent. 

Mr. O'Connell. That is clear up to 1936. Are you also saying 
there were no price concessions made between 1936 and the present 
time? 

Mr, Pfeltz. That was in 1938, and that we in turn passed back to 
our customers. 

Mr. O'Connell. That is what I wasn't entirely clear on. Between 
1936 and the present form of contract that you are now using 

Mr. Pfeltz (interposing). That is right. 

Mr. O'Connell. October of this year, there were some price con- 
cessions obtained from your suppliers. 

Mr. Pfeltz. In the 1 year. 

Mr. O'Connell. In 1938, without change in the posted price 
which you are now telling me were in fact passed on to your customers 
although you were under no legal obligation so to do. 

Mr. Pfeltz. That is correct. 

Mr. O'Connell. From your understanding that is what happened 
in every case where you had a price concession? 

Mr. Pfeltz. That is right. 

Mr. AviLDSEN. Mr. Pfeltz, this contract that you adopted last 
month, is that a contract in which you do agree to do jbhe things you 
voluntarily did in 1938? 

Mr. Pfeltz. That is correct. 

Mr. AviLDSEN. It doesn't contain any greater concessions or any- 
thing of that sort? It is just what you had been doing voluntarily? 

Mr. Pfeltz. No; in 1938 we gave back all that we got. Our new 
contract contemplates the American Can Co. having an edge, we 
might call it, of 10 cents on any purchases that we make if we get it. 
In other words, if the price is $5 and it proved to be not the right price, 
and the price goes to $4.75, instead of passing back to our customers 
the 25 cents, we give them 15 cents for each base box that is repre- 
sented in the various sizes of cans. That, in the case of a No. 2, 
would amount to 39 cents. 

Mi*. O'Connell. Take the contract that you now have with your 
suppliers of tin plate. Are those contracts based upon the posted 
pricB of Carnegie-Illinois for tin plate at certain given periods? 

Mr. Pfeltz. I ask for that again, please. 



CONGENTRATION OF ECONOMIC POWER 10777 

Mr. O'CoNNELL. In the contracts that are now in effect between 
American Can Co. and its suppliers of tin plate, the price which you 
pay for your tin plate is based on the posted price of Carnegie-Illinois, 
is that correct? 

Mr. Pfeltz. That is correct. 

Mr. O'CoNNELL. As of what period? 

Mr. Pfeltz, As of any period that Camegie-Illinois may change 
their base price and published price. 

Mr. O'CoNNELL. Does your contract with your customers provide 
for an adjustment purely based upon changes in the posted price of 
Camegie-Illinois ? 

Mr. Pfeltz. No; on whatever our purchase actually may be. 

Mr. O'CoNNELL. Do I understand, then, that that is in contempla- 
tion of the possibility that although you have a contract with your 
suppliers to pay them the posted price of Camegie-IUinois, you antici- 
pate the possibility that you will be able to obtain price concessions 
apart from changes in the posted price? 

Mr. Pfeltz. If conditions warrant, such as in 1938. 

Mr. O'CoNNELL. Isn't it a possibility? Your present contract 
with your customers contemplates that possibility, does it not? 

Mr. Pfeltz. Yes. 

Mr. AviLDSEN. Mr. Pfeltz, do I understand that the 7K-percent 
concession was eliminated in the N. R. A. days, 1932? 

Mr. Pfeltz. No. 
, Mr. AviLDSEN. What year was that? 

Mr. Pfeltz. '36. 

Mr. AviLDSEN. Was that in connection with the change in the 
general price structure? 

Mr, Pfeltz. No. 

Mr. AviLDSEN. Do you know why it was eliminated? Is there any 
particular reason why it was ehminated? Was it because of the 
Robinson-Patman Act? 

Dr. Baker. Everybody was getting the 7^2 percent at that time, 
and the official price 

Mr. Pfeltz (interposing). Was no longer an official price. 

Dr. Ba'Iker. Well, it was an absurd condition, because the price was 
$5.25 less 7K percent, so they aU said, "Well, that isn't any good. 
Let's make it a $4.85 price and have no discount whatever," and that 
is what was done. 

Mr. O'CoNNELL, You mean it was absurd from the point of view 
of your customers? 

Dr. Baker. Generally it came out in the N. R. A. days, when the 
contract was made public, that it was 7% percent; then under the code 
provisions that was made the price by all steel people. It went on in 
that way even after the N, R, A., so it was just a change from a gross 
price which no longer meant anything to a net price. 

Mr. O'CoNNELL. Something you said this morning gave me the 
impression that it was largely, or at least to some extent, pressure 
froni your customers that resulted in the elimination of 7^ percent. 
Their contract, as I understand it, with you, was based upon a posted 
price which they might in all probability have thought was your price, 
arfd when it became apparent to them that your price was, in fact, 



10778 CONCENTRATION OF ECONOMIC POWER 

7K percent less, it seemed to them reasonable that they should get the 
benefit of that. 

Dr. Baker. No; as a matter of fact they seemed to be very- 
much surprised that it was as low as that. We had gone to great 
pains to tell them that we did not pay the official price, that we had a 
discount and that others had discounts, too. 

Mr. Feller. Dr. Baker, I should like to just see if we can't clarify 
this matter somewhat for the committee. You had, for a number of 
years up until 1936, a contract with a subsidiary of the Steel Corpora- 
tion providing for a 7}{-percent discount from the seller's announced 
price. It is true, is it not, that in 1936, perhaps somewhat earlier, a 
controversy arose between you and the United States Steel Corpora- 
tion over the interpretation of that clause in the contract? 

Dr. Baker. That is correct. 

Mr. Feller. Am I correct in saying that the American Can Co. 
took the position that under the contract it was entitled both to 7% 
percent off the officially announced price plus a further 7% percent? 

Dr. Baker. I believe the contract read 7}i percent from the lowest 
net billing price. 

Mr. Pfeltz. Or selling schedule. 

Dr. Baker. Or selling schedule. 

Mr. Feller. Yes; and the United States Steel Corporation took 
the position at that time that you were entitled to 7}^ percent off the 
officially announced price, and your position was that you were en- 
titled to 7)^ percent in addition. 

Dr. Baker. I believe that is the way the contract read. 

Mr. Feller. Is that correct, Mr. Hughes? 

TESTIMONY OF H. L. HUGHES, VICE PRESIDENT, UNITED STATES 
STEEL CORPORATION, NEW YORK, N. Y.— Resumed 

Mr. Hughes. We did iiot so interpret it. We interpreted it that 
the 7}^ percent was off the announced price, the published price. 

Mr. Feller. And the American Can Co. took the position that 
there was an additional 7K percent? 

Mr. Hughes. That is correct. It was 7}^ percent off the lowest 
domestic selling price, and we were selling other customers at the 
published price less 7% percent. 

Mr. Feller. The contention of the American Can Co. was that 
since other customers were getting 7K percent, under the wording, 
under their interpretation of the contract, they were entitled to 7% 
percent off the price at which you were selling to others? 

Mr. Hughes. That is correct. 

Mr. Feller. Mr. Hughes, could you tell us what the result of this 
controversy was? 

Mr. Hughes. We discussed the matter over a period of, I would 
think, perhaps 18 months, and finally the American Can Co. filed 
suit against the Carnegie-Illinois Steel Corporation. 

Mr. Feller. Did that suit ever come to trial? 

Mr. Hughes. No ; it was settled out of court. 

Mr. Feller. Do you remember what the payment — was any sum 
oT money paid to the American Can Co.? 

Mr. Hughes. Yes, sir. 



CONCENTRATION OF ECONOMIC POWER 10779 

Mr. Feller. Do you remember what the sum was? 

Mr. Hughes. Two and a quarter million dollars. 

Mr. Feller. Dr. Baker, you also were engaged in conversations 
with your other suppliers of tin plate, such as Bethlehem and Youngs- 
towu, with respect to an interpretation of similar clauses in their 
contracts? 

Dr. Baker. Personally I had nothing to do with that. Mr. 
Pfeltz was in charge of our tin plate buying, and I think he can 
answer those questions probably better than I can. 

Mr. Feller. Mr. Pfeltz, you also had some question with your 
other tin plate suppliers as to the interpretation of their clauses in 
the contract? 

Mr. Pfeltz. We had written new contracts with our suppUers 
which, in addition to giving us the 7}i percent when we had taken a 
certain amount of tin plate, entitled us to an additional allowance 
per base box; after we had taken, we will say a contract called for a 
million boxes, after we had taken 600,000 we got 25 cents a box on 
each box over the 600,000, and when we had taken in excess of 
1,000,000 boxes we got the 25 cents on the entire amount taken. 

Mr. Feller. Am I correct in understanding that those contracts- 
were cancelled and new contracts negotiated in consideration of the 
cash payment by your tin plate suppliers to you? 

Mr. Pfeltz. The contracts were drawn for 10 years. Under the 
contract, we wUl say we would take from a certain tin plate producer 
a million boxes per year, and receive 25 cents per box. During the 
10 years we would have earned two and a half million dollars. The 
contract was embarrassing to those companies in that it gave us 25 
cents no matter what price they named. If they allowed others 25 
cents, we got an additional 25. The contracts therefore became em- 
barrassing and they wished to have cancelation. We agreed to 
cancelation for a consideration. 

Mr. Feller. In consideration then of your cancellation of the 
obligation to allow you this additional 25 cents per base box, you 
received a cash sum from each of these tin plate suppliers. 

Mr. Pfeltz. That is correct. 

Mr. Feller. Was that sum equivalent to the differential over the 
whole of the contract period? 

Mr. Pfeltz. No; about 30 percent. In other words, we settled for 
about 30 cents on the dollar. 

Mr. Feller. That is right, instead of getting 25 cents on each 
base box over the period of the contract you got in a lump sum 30 
percent of what you would have gotten. 

Mr. Pfeltz. About 7% cents a box. 

Mr. Feller. May I ask, you received such payments from Beth- 
lehem, Republic, Youngstown, Jones and Laughlin Granite City, did 
you not? 

Mr. Pfeltz. Republic as well. 

Mr. Feller. Yes; Republic. Did you conceive that the sums 
which you received from Carnegie-Illinois, from Republic, Bethlehem 
and your other 

Mr. Pfeltz (interposing). Let's dissociate the Carnegie-Illinois 
from the others, that is an entirely different picture. 



10780 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. Let's take them separately, then. Taldng the two 
and a quarter million dollars which you received from the Carnegie- 
Illinois Steel Corporation, would you have construed that to be a 
saving which you had made below the officially announced price 
which your customers might have asked you to pass on to them, if 
you had such a contract as you have now? 

Mr. Pfeltz. I couldn't answer that. I don't know. 

Mr. Feller. In net effect you had received a lump sum settlement 
m consideration for, rather in place of a perhaps larger sum which 
you would have received piecemeal on each base box over the period 
of the contract. 

Mr. Pfeltz. Well, we are dealing now with a past transaction. 
We had already filed suit, and the amount of the suit, as I recall it — 
I may be wrong at this date — was that it was approximately $6,000,000 
that we felt Carnegie owed us at that time, nearly $7,000,000. 

Mr. Feller. That sum which you received represented a saving 
to you in the cost of the tin plate wliich you purchased. 

Mr. Pfeltz. Quite naturally. 

Mr. Feller. And you did not conceive at that time that it was 
necessary to pass that on to your customers, 

Mr. Pfeltz. That is right. 

Mr. O'CoNNELL. Mr. Pfeltz, you mentioned a moioaent ago the 
fact that the contract that you had with your various suppliers at 
that time was proving embarrassing to them. Do I understand that 
that was because under the terms of the contract regardless of what 
price they sold tin plate at to other persons, you automatically 
obtained a price differential? 

Mr. Pfeltz. If we purchased the quantity. 

Mr. O'CoNNELL. If you purchased the quantity you would in effect 
get a 25 percent cheaper price than they could sell to anyone else. 

Mr. Pfeltz. Unless others bought a 1 ke quantity. 

Mr. O'CoNNELL. I imderstood that the differential applied re- 
gardless of how much quantity someone else bought. 

Mr. Pfeltz. I probably didn't make that clear. If John Brown 
bought a miUion boxes of plate he could have the same deal as the 
American Can Co. had; but if he didn't buy it, he wasn't entitled to it. 
If we bought a million boxes from some producer, a miUion and fiye 
we'll say, we got 25 cents; if someone else bought 750,000 boxes, they 
would get 25 cents per box on the equivalent of 150,000 boxes. If 
they could work that up to a milhon boxes or in excess of a miUion 
they would then get the same deal that we had. 

Mr. O'CoNNELL. You mean then it must have been embarrassing 
because the difference in price could not be justified on the basis of a 
quantity discount? 

Mr. Pfeltz. That is right. 

Mr. O'CoNNELL. Although quantity had something to do with 
the discount? 

Mr. Pfeltz. Yes. 

Kepresentative Reece. Mr. Chairman, I notice the committee 
has with it today Senator Guffey, of Pennsylvania, who is very much 
interested in this subject, and I am sure the committee is pleased to 
have him with them, and I thought would like to have Kis presence 
noted in the record. 



CONCENTRATION OF ECONOMIC POWER 10781 

Mr, Feller. Mr. Hughes, in further elucidation of the problem 
contained in the controversy with American Can Co., I should like to 
have you identify this memorandum dated June 5, 1936, signed by 
you and addressed to Mr. W. A. Irvin, taken from your files. By the 
way, it is correct to say Mr. Irvin was then President of the United 
States Steel Corporation? 

Mr. Hughes. That is correct. 

Mr. Feller. I offer this for the record. 

Acting Chairman Williams. It may be received. 

(The Tetter referred to was marked "Exhibit No. 1404" and is in- 
cluded in the appendix on p. 10989.) 

Mr. Feller. This is a rather lengthy memorandum. Beginning at 
the bottom of the first page, you state [reading}: 

It would seem to leave us with but two courses of action — 

1 — to stand on our present contract and fight the case in the courts if they — 

I assume that means the American Can Co. — 

dare to go there. 

And you elucidate that further: 

2 — to revise immediately our contract with them giving them an additional 25(4 
per box beyond the 7H% discount on all the plate they take. This would cost us 
about two and one-half million dollars per year. It would meet the contracts 
already concluded with Bethlehem, J & L, Republic and Youngstown. 

You go on to discuss the disadvantages of the second course, that is 
to revise your contract by giving an additional 25 cents per box beyond 
the 7}i percent discoimt, and you state [reading further from "Exhibit 
No. 1404"]: 

If we should follow the second course, we are further confronted with the pos- 
sibility that we may be charged with collusion by the F. T. C. or other govern- 
mental agency. This is a very serious aspect of the case. 

And then you go on and say: 

At present we publish a price on tin plate of $5.25 per base box but actually sell 
that plate at $4.76 per base box, a spread of 49ji per box, made up of the 7]4% con- 
tract differential and 10^ for 10 Pkg. containers. 

At present therefore there is 49^ fiction in our published price and it is to our 
published price that the can companies generaUy tie their selling price of cans. 
This spread is already too much. The addition of another 25^ discount would 
increase the fiction in our published price from 49^ to 74^ per box. A situation 
which must inevitably be aired by the can user or somebody else. 

It is to be noted that the Corporation is the only tin plate producer on the spot 
in this connection. The others do not publish tin plate prices in the first instance 
and their names are not uspd in contracts for the sale of cans, as is ours. 

Mr. Hughes, there are two things in this statement of yours that 
I should like to have you elucidate a bit. There is, first, your state- 
ment that if you did revise your contracts, you might be charged with 
collusion by the Federal Trade Commission or other governmental 
agency. May I ask what you meant by that? 

Mr. Hughes. Well, we published a price at that time, say $5, and 
we gave a discount under the then existing contract of 7}^ percent. 
That was generally known, I imagine, to every can user. What I had 
in mind there ^'«s that if we made an additional 25 cent discount, 
presumably it would be kept secret and I didn't think that was good 
business. 

Mr. Feller. The other part of your statement which I should Hke 
to ask you about occurs in the succeeding paragraph, in which you talk 



10782 CONCENTliATION OF ECONOMIC POWER 

about the 49 cent fiction in the pubUshed price, which would be 
increased to 74 "cents if the additional 25 cent discount were granted. 
Did you at that time think that it would be advisable to eUminate the 
7% percent discount altogether, and thereby eliminate this fiction? 

Mr. Hughes. I did. 

Mr. Feller. And you were in favor, then, of the new contracts 
negotiated after 1936, eliminating that discount? 

Mr. Hughes. That is correct. 

Mr. O'CoNNELL. May I ask a question there? T am not entirely 
clear the answer you gave to Mr. Feller's first question was responsive 
to the question. I understood the question to be as to what you meant 
by your reference to the possibility that an additional 25 cent reduction 
in the price of tin plate to the American Can Co. might cause you some 
difficulties with the Federal agencies, as being possibly a violation of 
law. As I understood your answer, it was to the effect that an 
additional 25 cent reduction in the price to American Can Co., which 
would presumably be kept secret, would not be good business. Now 
maybe it wouldn't be good business, but I don't understand that that 
is responsive to the question which related to the Federal Trade 
Commission. 

Mr. Hughes. I don't think I gave that answer to that particular 
question. I thought it was a second question. 

Mr. Feller. No, I believe you said it in answer to the first question. 

Mr. Hughes. May I ask the date of that memorandum? 

Mr. Feller. Yes; it was June 5, 1936. 

Mr. Hughes. As I recall it, the Robinson-Patman bill about that 
time was before Congress and we could not of course stand up under 
that bill with a 25 cent deduction to certain Customers and not to 
others. 

Mr. O'CoNNELL. That is what I thought your answer should be 
but I didn't think that was the answer you gave. 

Mr. Hughes. I think perhaps 1 had that in my mind at that time. 

Mr. O'Connell. The question of the secrec;^ of any price you made — 
I think that there is no thought about anything Ulegal about making 
secret prices as distinguished from secret discounts. 

Mr. Hughes. No, sir. 

Mr. Feller. Mr. Hughes, from the testimony up to this point, it 
would appear that prior to 1936, the practice was to sell tin plate to 
the American Can Co. and other makers of cans, at a price which was 
in fact less than the oflScially published price. At that time it was also 
the practice of the American Can Co. to sell cans at a price which was 
on the basis of contract, tied to the officially published price. 

Now, the fiction which you refer to was the fact that the officially 
published price was used in the selling of cans, and yet it had no real 
significance in connection with the selling of tin plate, is that correct? 

Mr. Hughes. I imagine the American Can Co. at that time, in 
making their contracts with can buyers, took into account the fact 
that the published price of the Carnegie-Illinois Steel Corporation was 
not the actual price of the tin plate that was sold. Moreover, that 
fact was generally known to any purchaser of tin plate. 

Mr. Feller. That fact I believe on Dr. Baker's testimony became 
known during the N, R. A. days and was not generally Imown pre- 
viously. 



CONCENTRATION OF ECONOMIC POWER 10783 

Dr. Baker. Oh, yes; it was known previously — not the exact figure, 
but the facts. 

Mr, Feller. Was the fact of the request for an additional 25 cents 
made by you from various of the steel companies generally known? 

Dr. Baker. I don't know about that. 

Mr. Feller. Do you know whether it was generally known that in 
1936 you received a cash settlement which was related to this matter 
of getting an additional 25 cents? 

Dr. Baker. Yes; I understand that is a fact. I had nothing to do 
with it. I would like to correct this point. With respect to the term 
fixing the difference between the official price and the net price, it is 
hardly susceptible of being a term of fixing the difference, because in 
the first place we took into account in our actual selling prices our net 
cost of plate. We set up in our contracts that prices were so much for 
certain sizes of cans, when the official price was so and so, and the 
official price thereafter was used only to adjust in accordance "with 
differences in that price from year to year, so it wasn't tied in as com- 
plete a way as I understood your remark to cover. 

Mr, Feller. I also understood you to say earlier that the 7% 
percent was not passed on to the customer directly. Is that correct? 

Dr. Baker. No; it was not passed on, other than what portion of it 
may have been in the actual prices as paid. 

Mr. Feller. And the sums received as cash settlements in 1936 in 
the various steel companies were also not passed on. 

Dr. Baker. Well,. at that time we reduced our prices straight across 
the board a flat 8 percent, and you can't divorce receipts and reductions 
in prices and say that because it wasn't specifically tied to it it 
wasn't taken into consideration, Mr. Feller. 

Mr. Feller. Do you recall. Dr. Baker, the occasion for the re- 
duction of your prices a flat 8 percent? That was in 1936, 1 believe, 
was it not? 

Dr. Baker, Yes; June 18, 1936; upon the passage of the Robinson- 
Patman Act. 

Mr. Feller, The reduction, then, was to comply with the Robin- 
son-Patman Act, 

Dr. Baker, Yes. 

Mr. Feller. Just to make it clear on the record, is this a correct 
statement? Previous to the Robinson-Patman Act you had had 
contracts with various purchasers of cans which provided for varying 
discounts, and on the passage of the Robinson-Patman Act you can- 
celed all those contracts and entered into a uniform contract with all 
your purchasers providing for a flat discount, or uniform discounts? 

Dr. Baker. We reduced the base price a flat eight percent to all 
customers in our contracts. 

Mr. Feller. Was that reduction, that flat 8 percent reduction, 
intended to compensate your customers for the elimination of the 
quantity discounts which had previously existed? 

Mr. Baker. No; it was to shorten them up. We deemed that a 
complete compliance with the requirements of the Robinson-Patman 
Act which restricted the basis upon which you could give quantity 
discounts. 

Mr. Feller. Dr. Baker, this morning you stated in answer to a 
question as to how a purchaser of cans would know what the actual 



124491— 40— pt. 20- 



10784 CONCENTRATION OF ECONOMIC POWER 

market price of tin plate was, that a particular purchaser might have 
no way of knowing unless he gets something from the trade papers, 
and my question then was: "Not unless the trade papers carried 
some statement to the effect that it is understood that the market 
price is such and such," and Dr. Baker said, "Yes, that is the only 
way we would have of knowing it." 

Mr. Pfeltz, I have here a copy of a letter written on the letterhead 
of the American Can Co., A. R. Pfeltz, Vice-President, dated April 
27, 1937, signed "Al," addressed to Mr. Fairless. Did you write that 
letter? 

Mr. Pfeltz. I recall the letter. 

Mr. Fellee. I offer this, Mr. Chairman. 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit No. 1405," and is in- 
cluded in the appendix on p. 10991.) 

Mr. Feller. Mr. Pfeltz, this letter reads as follows: 

Dear Ben: 

I am sure that you will not forget nor overlook any of the several matters 
that I talked with you about last evening, but I thought I would drop you a 
little note specifically referring to each item, and for good and sufficient reasons 
refer to them very briefly indeed. 

1. Was the delivery of plate to our Island factories. 

2. Stopping delivery of tin plate on $4.85 basis as of October 1st. 

3. Full weight plates because of panelling and denting troubles which we are 
having with so many cans. 

4. Someone who will coordinate sales of tin plate for the several units of the 
Steel Corporation. 

5. Progress made by other companies producing cold rolled strip tin plate 
thereby enabling them to sell their products for special purposes for which there 
would otherwise be no sale. 

6. Control over Metal Trade Journals in the publication of prices on tin plate, 
and the elimination of such comments as are foreign to the subject (from our 
standpoint). 

Mr. Pfeltz, will you explaia what you meant by the words in para- 
graph No. 6? 

Mr. Pfeltz. It is pretty hard to remember exactly what that con- 
versation was because I didn't attach a great deal of importance to 
it at the time other than the fact that the trade journals would be 
inclined to call someone, we'll say in Carnegie's office in Pittsburgh, 
who was Dot qualified to pass on the subjects and they would give 
information and it would be published which was wrong, which did 
did not reflect facts and which would cause a lot of our customers 
becoming rather concerned as to what was what. All we asked for 
there was definite concrete facts regarding the price structure. 

Mr. Feller. Do you mean that after the trade journals had pub- 
lished some erroneous information you would then give them the 
correct information? 

Mr. Pfeltz. Substantially that; yes. 

Mr. Feller. Do you think the words, "Control over Metal Trade 
Journals m the publication of prices 

Mr. Pfeltz (interposing). I think that was very badly worded. 

Mr. Feller. It is your word, Mr. Pfeltz. 

Mr, Pfeltz. I admitted it was badly worded. 

Mr. Feller. You then go on to speak about the "Elimination of 
such comments as are foreign to the subject (from our standpoint)." 

Mr. Pfeltz. Well, for instance, some comment about the price 



CONCENTRATION OF ECONOMIC POWER 10785 

being extremely weak at a time of the year when our customers were 
taking a great many cans in certain parts of the country and in other 
parts they would not have reached the point where they were packing, 
and that would disturb them, and they would not give us the outlet 
for cans, thinking that there would be a lower price, we would be 
congested in our warehouses, both with cans and probably would have 
difficulty in taking care of the trade when the time came. 

Mr. Feller. Would such a comment as you have just mentioned 
be foreign from the standpoint of the purchaser of cans? 

Mr. Pfeltz. What was that? 

Mr. Feller. Would such a comment as you have just referred to 
be one that you would consider to be foreign to the subject from the 
customer's standpoint? You spoke about "the elimination of com- 
ments as are foreign to the subject (from our standpoint)." 

Mr. Pfeltz. Yes. 

Mr. Feller. That the customer might be very well interested in 
such ney s? 

Mr. Ffei. Not if he were unable to get cans when he wanted 
them. If we can't supply our customers with cans ahead of tune we 
are not equipped to take care of the peak when the peak is on. We 
must fill his warehouses, we must fill our own and operate our own 
lines day and night. If you disturb them at the wrong time of the 
year it certainly doesn't induce them to take cans. 

Mr. Feller. Don't you think that such a conveying of correct 
information to your customer could be sufficiently accomplished by 
telling the trade journals what the real facts were after the publication? 

Mr. Pfeltz. I wouldn't know that. 

Mr. Feller. You have spoken of elimination of such comments. 
Just what did you have in mind by eliminating a comment such as 
you just described to us? 

Mr. Pfeltz. If the trade papers don't get this information and it 
doesn't come from, as a rule, people in authority who know wha.t the 
general situation is, if you have had any occasion to deal with the 
trade papers you know how they pick a thing off and make a big 
story out of nothing, and that is exactly what they had been doing 
time and again. 

Mr. Feller. And what did you think should be done about that? 

Mr. Pfeltz. I know what I should have done about it. 

Mr. Feller. What did you suggest to Mr. Fairless in this conversa- 
tion should be done about it? 

Mr. Pfeltz. To simply instruct these boys to be a little careful as 
to how; they handed out mformation. 

Mr. Feller. You speak about the "elimination of such comments 
as are foreign to the subject (from our standpoint)." What sort of 
comment would be foreign from your standpoint and not from some- 
body else's? 

Mr. Pfeltz. I can't answer that. 

Mr. Feller. Specifically in drafting or writing this letter you 
pointed out that you were interested in comments foreign from your 
standpoint. 

Mr. Pfeltz. Yes; but I do not recall what I had in mind at this 
particular time. 

Mr. Feller. Do you recall this conversation, Mr, Fairiess? 



10786 CONCENTRATION OF ECONOMIC POWER 

Mr. Fa.irless. I recall the conversation and I think Mr. Pfeltz has 
explained it as I recall it. The trade papers unfortunately are looking 
for news, and I say unfortunately advisedly, and aren't always too 
careful as to the source of that news, and many times print statements 
that are not facts. In all fairness to the trade papers, after they 
do make a mistake or print a misstatement they are always ready to 
correct it, but many times the injury has already happened before 
the correction could be made effective, and as I recall our conversation 
that evening, it had to do with the subject Mr. Pfeltz has discussed. 
The trade papers getting in touch with some of our boys down the 
Hne and asking their opinion of some particular condition, either in 
the tin-plate industry or in the steel industry and then writing an 
article, is disturbing and isn't many times based on facts. That is 
my recollection of the conversation with respect to this particular 
item. I recall very distinctly that there was much more time spent 
in discussion of some of these other items than there was of this 
particular one. 

Mr. Henderson. Mr. Feller, may I ask a question? 

Mr. Fairless, the language used in this paragraph 6 is pretty 
specific and seems to suggest that you people have some control over 
the metal trade journals. Do you want to comment on that? 

Mr. Fairless. We have no control, Mr. Henderson, at all. Th6 
trade papers cooperate with us and it is their policy normally to — 
I would say it is their poHcy to print facts and to come to us to get 
facts and it is our desire to cooperate with them, because many of 
our customers depend upon the trade papers for definite information 
in respect to their particular commodities or the steel business in 
general. 

Mr. Henderson. You have no financial interest in any of the metal 
trade journals? 

Mr. Fairless. No, sir; no, sir. 

Mr. Feller. Mr. Pfeltz, as Dr. Baker has told us earlier, it is 
true, is it not, that a purchaser of cans would be very much interested 
in finding out whether or not the price of tin plate was weak, to 
use your words. 

Mr. Pfeltz. Yes. 

Mr. Feller. And the only source on which he could depend 
would be the trade journal. 

Mr. Pfeltz. Yes. 

Mr. Feller. You would say then it is of great importance to 
the can purchaser that he have access to whatever facts there are. 

Mr. Pfeltz. If they are facts. 

Mr. Feller. Do you think he is not entitled to have access to 
rumors, to rumors that are current? 

Mr. Pfeltz, I don't know that I would care to answer that. 

Mr. Feller. We were discussing earlier the question of the extent 
to which the American Can Co. received concessions which were or 
were not passed on to the customers. Reference has been made from 
time to time to the 1938 period in which concessions which had been 
received were passed on. I should like to have the record speak 
clearly on that subject, and I shall offer for the record the announce- 
ment which was sent out by the American Can Co. on April 14, 1938 
to its various customers. Will you identify that, Dr. Baker? 



CONOENTIiATION OF ECONOMIC I'OWER 10787 

Dr. Baker. Yes. 

Mr. Feller. I offer that for the record. 

Acting Chairman Williams. It has been identified, has it? 

Dr. Baker. It has been. 

Acting Chairman Williams. It may be received. 

(The accouncement referred to was marked "Exhibit No. 1406" and 
is included in the appendix on p. 10991.) 

Mr. Feller. As I understand it, Dr. Baker, the mechanics by 
which the transaction took place in 1938 were something of this kind : 
In April you issued an announcement that the actual market price of 
tin plate was not the same as the official price and you stated to youi 
customers that at the end of the year you would make an adjustment 
to the actual market price. Is that correct? 

Dr. Baker. That is correct. 

Mr. Feller. And when did you make that adjustment? 

Dr. Baker. As soon as we got our figures ready after the end of the 
year, about 30 days after, I would estimate after the end of the year. 

Mr. Feller. And then you sent each of your customers a check 
which represented the amounts of the differences between the actual 
price paid and the officially announced price? 

Dr. Baker. Either a check or credited their account. 

Mr. Feller. Now, just to complete the record on this point, Mr. 
Fairless, your company also, toward the end of the year, announced a 
reduction in the official price, did it not, at the end of the year 1938? 

Mr. Fairless. The equivalent of that; yes. 

Mr. Feller. And that was made retroactive to the first of the year. 

Mr. Fairless. Yes ; all shipments during the year. 

Mr. O'CoNNELL. Dr. Baker, as a practical matter could that reduc- 
tion which you made available at the end of the year to your customers 
have been passed on to the ultimate consumers of the products which 
ultimately found their way into the cans? 

Dr. Baker. Only through our canner customers. 

Mr. O'CoNNELL. As a practical matter, I take it, the cans that you 
sold during 1938 were probably resold and distributed to the ultimate 
consumers before your customers had any idea as to what its ultimate 
cost was going to be. 

Dr. Baker. We gave them an estimate as soon as we could. 

Mr. O'CoNNELL. I am not attempting to indicate that there would 
have been any practical way of doing it. I was just attempting to 
illustrate the fact that, as a practical matter 

Mr. Pfeltz (interposing). You mean if they wished to reduce their 
l)rice of canned goods they could, in view of this reduction which they 
were going to get from the American Can. 

Mr. O'CoNNELL. But they didn't know how much reduction they 
were going to get. 

Mr. Pfeltz. They didn't know exactly what it would amount to, 
but the canning industry is in general in such bad shape that they 
would be very glad to pocket that money for Christmas. 

Mr. O'CoNNELL. I have no doubt of that. 

Mr. Feller. Mr. Pfeltz, on the books of the American Can Co. 
yon maintain, do you not, various accounts with your sellers of tin 
plate. Is that correct? Do you, among those accounts, have some 
accounts which do not reveal the names of the steel companies? 



10788 CONCENTRATION OP ECONOMIC POWER 

Mr. Pfeltz. I am not an accountant, Mr. Feller, and I don't know 
what our books show. Maybe Dr. Baker does, but I can assure you 
I do not. 

Dr. Baker. I don't know how there would be any basis for such a 
question. It would be news to me. I am not an accountant, either. 

Mr. Pfeltz. Just what do you mean? What are you driving at? 

Mr. Feller. Am I correct in saying that you have two accounts 
on your books with steel companies which are called, on your books, 
respectively, secretary's account No. 1 and secretary's account No. 2? 

Mr. Pfeltz. Your Mr. Ritchin located those accounts when he was 
in New York a couple of months ago, and told me about them, and 
that was the first time I had heard of them, and I don't think Dr. 
Baker has heard of them even now. They mean nothing today. 
They did mean something 25 years ago. 

Mr. Feller. What did they mean then? 

Mr. Pfeltz. I don't loiow, but both parties who knew all about 
them have since died. 

Mr, Feller. Mr. Ritchin, for the record, is one of the members of 
the staff of the Department of Justice. 

Mr. Pfeltz. Mr. Ritchin got the story from the comptroller's 
assistant, Mr. Madge, and I think he could tell you better than I 
could just what they mean, 

Mr. Feller, Perhaps we ought to have Mr, Ritchin sworn, and 
he might, while sitting here at the table, tell us what Mr. Madge 
told him. 

Acting Chairman Williams, Do you solemnly swear the testimony 
you are about to give in this proceeding shall be the truth, the whole 
truth, and nothing but the truth, so help you God? 

Mr, Ritchin. I do. 

TESTIMONY OF HYMAN B. RITCHIN, DEPARTMENT OF JUSTICE, 

WASHINGTON, D. C. 

TIN PLATE PRICES 

Mr. Feller. State your name for the reporter, please. 

Mr, Ritchin. Hyman B. Ritchin. 

Mr. Feller. You are connected with the Department of Justice? 

Mr. Ritchin. Yes, a member of the staff of the Department of 
Justice. 

Mr. Feller. You visited, some months ago, the offices of the 
American Can Co.? 

Mr. Ritchin. I did. I visited the office of the American Can Co. 
on two occasions. The first occasion was the latter part of August, 
and the other occasion was at the beginning of September. 

Mr. Feller. And did you examine the books of account of the 
American Can Co.? 

Mr, Ritchin. Yes; with the assistance of Mr. Madge, who is the 
assistant comptroller of the American Can Co., I examined the books 
of the company relative to the payments made by the Carnegie- 
Illinois Steel Co. to the American Can Co. On the books of the 
American Can Co. in the general ledger are set up various accounts. 
These accounts are with the steel companies with which the Amer- 
ican Can Co. has business connections. The names were listed — 
Republic Steel Corporation and other steel companies were listed by 



CONCENTRATION OF ECONOMIC POWER 10789 

their correct names, with the exception of the Carnegie-Illinois Steel 
Co. and the Bethlehem Steel Corporation. The Carnegie-Illinois 
Steel Corporation was listed as secretary No. 1; the Bethlehem Steel 
Corporation was listed as secretary No. 2. 

I asked Mr. Madge for an explanation of these two terms, and he 
said secretary No. 1 started in the earlv part of 1900 when, I think, 
a Mr. Wheeler, who was then comptroller, set it up in that fashion. 
It has continued to date. He explained it as a matter of custom; 
that he just didn't get around to changing the name. 

Mr. Feller. Mr. Chairman, in 1912, a proceeding was brought 
by the Department of Justice against the American Can Co. under 
the antitrust laws. The suit was in the District Court of Maryland 
and was decided by the District Court hi 1916. In the citation of the 
case, entitled "United States v. American Can Company, 230 Federal 
Reporter 659," occurs the following statement at pages 884 and 885 
of the Reporter: 

The preferential rebates received by the Defendant, i. e. American Can Com- 
pany, from the Tin Plate Company, i. e. American Sheet and Tin Plate Company, 
a subsidiary of the Steel Corporation, in the period from 1902 to 1913, amounted 
to the large sum of nine million dollars. The answers of both the Defendant 
and the Tin Plate Company claim that these transactions were normal, and the 
allowances were those which would naturally be made to an exceedingly large 
consumer. The facts seem to show that the parties themselves did not so regard 
it. Tin plate was billed to the Defendant at the fixed list price and the rebate 
was subsequently paid. Great precautions were taken by the Defendant to 
conceal the facts from most of its bookkeepers and even from some of its officers. 
The rebates, when obtained, were entered upon the books of the Defendant in 
such a way as to conceal their origin. 

In the record of the trial of that case, a Mr. Williams, an accountant, 
testified as follows: 

Q. Mr. Williams, you know of rebates being received from the American Tin 
Plate and the American Sheet and Tin Plate Companies? 

A. I knew of a concession being made by the American Tin Plate Company. 

Q. In what form? 

A. In the form of a monthly remittance, monthly settlement. 

Q. Who originated the method of keeping that account? 

A. If I remember correctly, I did. 

Q. Where did you put it? 

A. I think I put it in an account called "Secretary's Account." 

Q. As far as you knew, who knew of the existence of that special concession 
and itg receipt by the Can Company? 

A. I only knew of one other person in the company who had knowledge of it 
besides myself. 

Q. That was who? 

A. Mr. F. S. Wheeler. 

Now Mr. Pfeltz, in view of your statement that you were not aware 
of this practice untU it was called to your attention by Mr. Ritchin, 
I don't know if you can enlighten us further with respect to the reason 
for its continuance. Would you say 

Mr. Pfeltz (interposing). I have no knowledge of it, Mr. Feller. 
I didn't know it was there, that it was handled that way, so I "can't 
tell you why it was handled that way. 

Mr. Feller. Can you tell us, if you recall, when you began pur- 
chasing tin plate from the Bethlehem Steel Co.? 

Mr. Pfeltz. I should say approximately 20 years ago. 

Mr. Feller. Approximately 20 years ago. 

Mr. Pfeltz. About 18, I should think. 



10790 CONCENTRATION OF ECONOMIC POWER 

Mr, Feller. 1918? 

Mr. Pfeltz. No, about 1921, about 18 years ago. 

Mr. Feller. Oh, about 1921. Now as Mr. Ritchin has testified, 
on the books of your company the account with the Bethlehem Steel 
Corporation is entitled "secretary No. 2" and you began purchasing 
tin plate from the Bethlehem Steel Co. some 5 years after the decision 
of the case from the report of which I have just read, and you don't, I 
presume, have any knowedge as to why it is that the Bethlehem Steel 
account is kept in that way. 

Mr. Pfeltz. I have no knowledge as to why we didn't have seven 
or eight more "secretaries." There is no difference so far as I recallat. 

(Senator King assumed the Chair.)' 

Mr. Feller. Mr. Pfeltz, I hand you a letter dated March 24, 
1938, signed by you, written to Dr. Baker, taken from your files. 
Will you identify it, please? 

Mr. Pfelt2 . I recognize it. 

Mr. Feller. I offer the letter for the record. 

Acting Chairman King. It may be received. 

(The letter referred to was marked "Exhibit No. 1407"" and is 
included in the appendix on p. 10992.) 

Mr. Feller. Mr. Chairman, the first two pages of this letter relate 
to a matter involved between the American Can Co. and the Inland 
Steel Co, Toward the end of the second page occurs the following 
paragraph: 

The same situation which confronted them in 1937 

Acting Chairman ■ King (interposing). What is the date of that, 
please? 

Mr. Feller. It is dated March 24, 1938. I take it that the 
"them," from the context, refers to the Inland Steel Co, [Reading 
further from "Exhibit No. 1407":] 

The same situation which confronted them in 1937 again- confronted them. in 
1938, and regardless as to the promise made by Mr. Grace at the time the con- 
ference was held by leading Officials of all the Steel Companies regarding the 
price for tin plate for 1938, Bethlehem again named a price below the official, 
and as Inland was, like others, badly in need of tonnage, they found it necessary 
to meet the situation. 

Mr, Pfeltz, referring to the statement which you make in this 
letter — 

at the time the conference was held by leading Officials of all the Steel Companies 
regarding the price for tin plate for 1938 — 

do you recall on the basis of what information you made that state- 
ment? 

Mr. Pfeltz. It was simply information which I would naturally 
gather in my official position with the American Can Co. It may 
come from any source. Whenever there is a meeting of steel people, 
the Iron and Steel Institute, it is common knowledge, everyone 
knows that;die steel fellows are in town. Now where I got that 
information,^ I couldn't tell you. It may have come from someone 
on the outside. 

Acting Chairman King, Did you participate in any meeting? 

Mr. Pfeltz. No. We participate in no steel meetings. 

Acting Chairman King. Do you know that one was held? 



concp:ntration of economic power 10791 

Mr. Pfeltz. Only hearsay. 

Mr. Feller. Have you at other times been informed by your 
assistants or by others that there were meetings of the steel pro- 
ducers regarding the price of tin plate in other years? 

Mr. Pfeltz. I have known of meetings, but I have not known of 
any meetings regarding the price of tin plate. 

Mr. Feller. How did you know that Mr. Grace had at that time 
made a promise? 

Mr. Pfeltz. I heard it. 

Mr. Feller. I take it that what you heard was that Mr. Grace 
had made a promise that Bethlehem would not name a price below 
the official price. 

Mr. Pfeltz. That is what I heard. 

Acting Chairman King. From whom? 

Mr. Pfeltz. I couldn't say that. I don't recall. 

Acting Chairman King. Any official of the Bethlehem Co.? 

Mr. Pfeltz. No. 

Acting Chaii-man King. Any official of your own company? 

Mr. Pfeltz. No. 

Mr. Henderson. Mr. Pfeltz, this was a matter which affected the 
price which you were going to pay for a tremendous amount of 
tonnage, was it not? 

Mr. Pfeltz. No. 

Mr. Henderson. You mean if such a meeting took place at which 
they were going to determine the price that you would pay, wouldn't 
you question whether they were really determining something as to 
your profit and loss and the operation of your business? 

Mr. Pfeltz. I wouldn't know that, Mr. Henderson. 

Mr. Henderson. Wouldn't you be interested as to whether it was 
liigh or low? 

Mr. Pfeltz. Naturally, we have to protect our customers, and if 
we can ascertain that the price which is being named generally does 
not reflect the market, then we are very foolish in not trying to get 
that same price for our customers. In other words, we felt that the 
large steel companies should protect the largest buyer of tin plate 
and give them as good a price as any tin plate is being sold for. 

Mr. Henderson. Let me ask you this: Do I understand that if 
there was such a meeting and the price they fixed was what you con- 
sidered fair, you would have no further interest in the matter? 

Mr. Pfeltz. Say that again, Mr. Henderson. 

Mr. Henderson. I gather from your response's that if the producers 
of tin plate did meet and fix the price, if it was fair you would have no 
further interest in the matter. 

Mr. Pfeltz. Well, we would have no further interest if the price 
was fair and reflected the market — that is, reflected the price at 
which tin plate was being sold. If tin plate was being sold at a 
lower price we certainly wanted that lower price. 

Mr. Henderson. And you want the committee to understand that 
on something that was as important as this, you can't remember 
who told you that particular piece of information? 

Mr. Pfeltz. No; because there was nothing fixed at the time re- 
garding the price for the year. 

Mr. Feller. Mr. Fairless, do you recall this occasion? 



10792 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. What occasion? 

Mr. Feller. The occasion of a conference held by leading officials 
of all the steel companies regarding the price of tin plate ;for 1938? 

Mr. Fairless. No, sir. 

Mr. Feller, Mr. Chairman, I have no further questions with regard 
to tin plate. 

Mr. Fairless. I would like to interject something here so as not to 
leave this situation in this shape in respect to this committee, with 
your permission. 

Acting Chairman King. Proceed. 

Mr. Fairless. I became president of the United States Steel 
Corporation January 1, 1938. My appointment had been made just 
prior to that. The first negotiation that I entered into in respect 
to the price of tin plate was for the current year, and I wish to give 
this committee the facts in connection with that transaction. 

After several meetings, I don't know just how many but certainly 
three or more, with Dr. Baker and Mr. Pfeltz, in respect to what the 
price of tin plate should be for the current year 1939 

Mr. Pfeltz (interposing). For '38. You were still with Carnegie. 

Mr. Fairless. No, I am talking about negotiations in 1938. I 
could go back to 1937 when I was with Carnegie, but I am talking 
about my first participation as president of the United States Steel 
Corporation. 

Acting Chairman King. That would be in 1938? 

Mr. Fairless. That is right. 

Now keep in mind what happened to the price of tin plate. The 
price announced around December of the previous year, in 1937, the 
price for 1938 was officially announced by Carnegie-Illinois as $5.35. 
Competitive conditions during the year developed the fact that tin 
plate was selling at lower than that price, and after careful investiga- 
tion, it was developed that tin plate had been sold as much as 25 cents 
lower than that price, and that became the official price for the year 
1938. Even though the announced price was $5.35, the adjustment 
brought it back to $5.10. 

So we came into the negotiations for the 1939 price with a $5.10 
price for tin plate as against the announced price of $5.35. After 
several conferences, as I have stated, at least three or inore, in respect 
to what the price might be, with Dr. Baker, Mr. Hughes, Mr. Pfeltz, 
and myself present I believe in each of them, discussing all of the 
factors having to do with the price of tin plate, market conditions, 
costs, our best thoughts in respect to what the price of pig tin might 
be for this year and the possibilities of labor costs, the possibilities 
of infringements in respect to other types of containers, which always 
comes into our discussions, we finally reached the last day of the 
negotiations — aad I am only bringing this up to disabuse the mind of 
anyone on this committee as to any group meetings setting the price 
of tin plate. 

Now this is the last meeting. Mr. Hughes and I went to Dr. 
Baker's office and Dr. Baker said, "Well, what conclusion have you 
come to?" 

I said^ "Well, Doctor, with all the factors at our command, and 
considermg our previous discussions, it is my opinion that we should 
continue for 1939 the present price, which is $5.10." 



CONCENTRATION OF ECONOMIC POWER 10793 

Dr. Baker said, "I don't agree with that," and he gave me many 
reasons — many reasons — and we had a long discussion there, and I 
said, finally, "Well, Doctor, what is your idea of the price?" 

And as I remember, Doctor, your price was $4.90, that wOiS what you 
had in mind at that time, or perhaps $4.95; $4.90. And, finally, after 
a long discussion lasting several hours, we decided and set the price 
right there for the year 1939 at $5. So the price of tin plate was set 
then, and not by any meeting of the tin-plate industry. 

Mr. Henderson. To make the matter clear, did you have any 
negotiations when you were with Carnegie having to do with what the 
price of tin would be? 

Mr. Fairless. No; Mr. Henderson. Naturally an important 
announcement of price affecting such an important product as tin 
plate, and because it covers such a period of time contractually, 9 
months, which really, as I stated earlier in our hearing here today, is 
12 months — everybody in the tin plate business is interested in our 
announced price of tin plate. The investigation has brought out here 
that contracts are made between buyers and sellers, and I am sure that 
those contractual arrangements are not only between the American 
Can Co. and other producers of tin plate, but between other can 
conipanies and other producers of tin plate. Obviously, everybody is 
very vitally interested in our ofiicially announced price of tin plate. 

Mr. Henderson. But my question was, did you participate when 
you were with Carnegie? 

Mr. Fairless. I answered it by saying no, but I did want to enlarge 
upon it because I think it is due this committee to have this informa- 
tion ; have the background of it, rather. 

Naturally, with this announcement carrying so much weight and so 
important in dealing with millions of dollars of sales, along about 
November, or thereabouts, I don't believe I ever meet a manufacturer 
of tin plate but what he will say, "Ben, have you reached a decision 
yet in your negotiations with the Can Company with respect to the 
price of tin plate?" 

And if we haven't, my answer is "No." If we have, of course it is 
announced. 

So I don't want to be in the position of attempting to leave the 
impression that no manufacturer of tin plate ever asked me or dis- 
cusses with me what the price of tin plate is. 

Mr. Henderson. But you do want the codimittee to imderstand, 
as far as you are personally concerned, that you never had a group 
meeting with other manufacturers of tin plate. 

Mr. Fairless. To set the price of tin plate? 

Mr. Henderson. Yes. 

Mr. Fairless. Definitely. * 

Mr. Henderson. I wanted to make the opportunity for you to 
have the record clear on that. 

May I then ask you this: How do you suppose that kind of 
impression got abroad to such a positive extent it would come to 
Mr. Pfeltz's attention? 

Mr. Fairless. I can't answer that. I know of lots of rumors. I 
have heard plenty. 

Mr. Henderson. Mr. Pfeltz, have you any idea as to how 
such a rumor would get to such a positive state that you could embody 



10794 CONCENTRATION OF ECONOMIC POWER 

it in a letter to Dr. Baker? Is it your impression that the people with 
whom you deal do get together and fix the price of tin plate? 

Mr. Fairless. What is that again? 

Mr. Henderson. Is it your impression that the people from whom 
you buy tin plate get together as a group and fix the price at which 
you will buy tin plate? 

Mr. Pfeltz. No. So far as I know, Mr. Fairless fixes the price of 
tin plate, and has fixed it as long as he has been connected with Car- 
negie-Illinois. 

Mr. Henderson. And before Mr. Fairless? 

Mr. Pfeltz. Before that Mr. Irvin or Mr. Farrell fixed it, because 
our price has been based on the official price of Carnegie or American 
Sheet. We weren't interested in what other companies did about 
that price. They didn't publish any price. Carnegie or American 
Sheet published the price. They were the ones to whom we looked. 

In 1937 we were not sold on the price that was going to be made. 
We have got something to do for our customers every year. We must 
buj'' our tin plate as cheaply as we think it should be bought. Mr. Fair- 
less and I differed, in fact Mr. Fairless and Mr. Hughes differed with 
Dr. Baker and with me both as to what that price should be. I admit 
that at the time we had a rising tin market. I thought it was coming 
down and they thought possibly it would go up, and they had to 
name the price for the entii'e year and therefore named a price which 
later proved to be unsound and had to be reduced. 

Mr. O'CoNNELL. Mr. Fairless, from my standpoint I am not at all 
sure that you can enlighten me at all, but there is one hiatus m this 
situation which isn't entirely satisfactory from my standpoint and it 
may be that you have no information about it. As I understand it we 
have a situation in which all of the manufacturers of tin plate in their 
contracts with the people to whom they sell tin plate agree over a 
period of years to in effect abdicate their price-making function to the 
Carnegie-Illinois Steel Corporation. 

Mr. Fairless. No, I didn't say that. 

Mr. O'CoNNELL. No, I say that is what I understand the situation 
to be, I don't think you expressed it just that way. 

M^. Fairless. You understand it wrongly because that isn't the 
case. 

Mr. O'CoNNELL. It is the fact, is it not, that in the long-term con-- 
tracts or in the contracts that are made between the other steel 
suppliers and the can companies the agreement is to the effect that 
they will sell tin plate at a price which is either the same as or based 
on the posted price of the Camegie-IUinois Steel Corporation. 

Mr. Fairless. I can't pass judgment or tell you the details of other 
producers' contracts. 

Mr. O'Connell. You just finished saying 5 minutes ago that that 
was what you understood it to be. 

Mr. Fairless. That is what I understood. 

Mr. O'Connell. That is what I understand it to be — — 

Mr. Fairless (interposing). Also I understand there is much tin 
plate sold that is not covered by long-term contracts. 

Mr. O'Connell. That may be so. 

Mr. Fairless. It is so. 



CONCENTRATION OF ECONOMIC TOWER 10795 

Mr. O'CoNNELL, But to the extent that the other suppliers of tin 
plate agree to sell tin plate to their people at the price which is fixed 
by the Carnegie-Illinois Steel Corporation 

Mr. Fairless (interposing). I don't like the word "fixed." 

Mr. O'CoNNELL. Determined or posted. 

Dr. Baker. As low as. 

Mr. Fairless. Announced. We don't fix price. We announce it. 

Mr. O'CoNNELL. I take it the word "fixed" has a certain connota- 
tion and I shouldn't have used it. To the extent that the other 
suppliers of tin plate contracted to use the price posted by the Carnegie- 
Illinois Steel Corporation they have in effect so far as that portion of 
their business is concerned, given over their function of pnce to the 
Carnegie-Illinois Steel. Isn't that so? 

Mr. Fairless. I don't know. It all depends on the basis. They 
might write a contract based on the officially announced price of 
Carnegie-Illinois less something? 

Mr. O'CoNNELL. We are agreed as I understand it that there are 
a substantial number of contracts. Limiting it to the contracts of 
the American Can Co., I understand the testimony to be that in 
general your contracts with all suppliers of tin plate provide for a 
price wmch is the price posted by Carnegie-Illinois Steel Corporation. 
Isn't that correct? 

Mr. Pfeltz. Yes, that is substantially correct. 

Mr. O'CoNNELL. In that area, at least, your suppliers are content 
to tak,e whatever price is fixed by the Carnegie-Illinois Steel Corpora- 
tion. Is that a fair statement as regards those particular contracts? 

Mr. Pfeltz. They may make a lower price, they could make a 
lower price. 

Mr. O'Connell. But the point I mention is that they did not. 
You were testifying that they have not and that those contracts 
provide for a price which is the same as that fixed 

Mr. Pfeltz (interposing). They have not made a lower price to us. 

Mr. O'Connell. 'That is all I am talking about, the contracts they 
have A^dth your company. 

Mr. Pfeltz. They have not made a lower price than Carnegie- 
Illinois have made to us. 

Mr. O'Connell. They have made no price at the time they make 
the contract. They agree to take the price fixed by Camegie-IUinois. 

Mr. Pfeltz. That is right, the oflioially named or published price. 

Mr. O'Connell. Within that area I take it that we may assmne 
these companies are content to take whatever price Camegie-Hlinois 
posts. Is that correct? 

Mr. Fairless. Yes. 

Mr. O'Connell. The difficulty I have is m understanding why in 
that situation these suppliers of steel or tin plate are not more inter- 
ested in influencing or in getting Camegie-IUinois to fix or to post . a 
price satisfactory to them than would be indicated by your explanation 
of the way it actually works. As I say you may not be able to en- 
lighten me at all. 

Mr. Fairless. I am sorry I can't. It might be that they would 
be very much interested. 

Mr. O'Connell. I should think they would be. 



10796 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. But I am only telling this committee how the price 
is actually arrived at, and I don't think there is any particular mystery 
about it when you stop to consider that the American Can Co. is the 
largest purchaser of tin plate and the Carnegie-Illinois Steel Corpor- 
ation is the largest producer of tin plate, with tin-plate facilities 
located where they can serve the various plants of the American Can 
Co. very satisfactorily. I don't believe that a more fair price for 
tin plate could be hoped to be arrived at than through the process of 
negotiations bfetween the largest purchaser of a product and the 
largest producer of a product; in other words, to arrive at a fair price, 
and I know, I can speak from— I can't speak officially now because I 
haven't always been associated with the United States Steel Corpor- 
ation, I have been associated with smaller companies, and in one of 
my earUer associations I was in the tin-plate business, and I was 
always very happy to have the price of tin plate negotiated for by the 
United States Steel Corporation with the American Can Co. That 
seemed to me, my reaction to that was, it was a perfectly logical turn 
of business. 

Mr. O'CoNNELL. You think that it would be entirely reasonable 
for the other suppliers of tin plate to take the view that Carnegie- 
niinois being the largest producer in its field and the American Can 
Co. the largest manufacturer of cans, they can get as good a price as 
they could if they did it themselves. 

Mr. Fairless. I think the largest purchaser of any product cer- 
tainly is entitled to the lowest possible price that that product can 
be bought for. I start with that. 

Mr. O'CoNNELL. True. 

Mr. Fairless. And I think that the largest producer of any product 
is in the position to make certainly as low costs as anybody who 
manufactures that product. So it seems to me. 

Mr. O'CoNNELL. As low a cost? 

Mr. Fairless. Cost as low, at least as low, so it seems to me that 
the result of negotiations between buyer and seller of that kind should 
result in a very fair price for a product. And that is my impression of 
the tin-plate price. Now, we do, of course, as Dr. Baker and Mr. 
Pfeltz have stated, run into some unusual conditions during the year, 
and '37 is a good example. When that five thirty-five price was nego- 
tiated I will admit that Dr. Baker and Mr. Pfeltz weren't happy. 
They thought that price was too high, but as we projected our costs 
and as we saw the trend, the then trend, of the price of pig tin, which 
is 9, very important factor, with the unsettled conditions labor was in, 
and with the steady advancement in the prices of raw materials, we 
felt that we couldn't in safety and in protection to ourselves name a 
lower price. What actually happened was that the price of pig tin 
went off during the year, and, of course, business receded too, as has 
been already brought out here, so I will admit that Dr. Baker's ideas 
and Mr. Pfeltz 's in respect to tin-plate price at that particular time 
were better than mine. The facts, however, are that when the year 
was over the price was five ten, it wasn't five thirty-five. 

Mr. Reynders. May I ask whether or not in the other producers' 
adoption of price that you happened to have negotiated with the 
American Can Co. was that a voluntary act on their part that you 
had nothing to do with? It is up to them either to accept that as 
their price or not as they see fit. 



CONCENTRATION OF ECONOMIC POWER 10797 

Mr. Fairless. That is up to them. 

Mr. Henderson. Does it frequently happen that in effect what you 
are doing is holding an umbrella over the rest of the producers? 

Mr. Pfeltz. Well^ Mr. Henderson, there are many occasions 

Mr. Henderson (interposing). I addressed that to Mr. Fairless. 
I will be glad to have you speak also. 

Mr. Fairless. What is the question? 

Mr. Henderson. Does it sometimes happen that you find by your 
posting of a price and adhering to it you are in effect holdmg an 
umbrella over other manufacturers of tin plate? 

Mr. Fairless. Well, you would hold the umbrella until you reached 
the point where you know you are holding it, and then you do some- 
thing about it. 

Mr. Henderson. I gather from that, that it does sometimes 
happen. 

Mr. Fairless. It has happened. 

Mr. Henderson. Do you want to respond to that? 

Acting Chairman King. Let me ask a question there. Does that 
mean that the producer of tin plate may not charge a lower or higher 
price than that which you charge? 

Mr. Fairless. I believe, Mr. Chairman, that our officially an- 
noimced price certainly fixes the ceiling, unless you would run into 
some imusual conditions. I can't conceive of that, except just citing 
the export price of tin plate today, it is higher than the domestic 
price, not because we set it there but because we are offered, we have 
offers for tin plate, at substantially higher prices than our domestic 
prices today. But that is because of a very unusual situation, of 
course. 

Acting Chairman King. By and large, the prices which you fix, or 
which you stated for tin plate, are they remunerative — ^were they 
remunerative to the company? Did they bring excess profits, 
reasonable profits, or were there losses? 

Mr. Fairless. No; not losses. There have been periods, I assume, 
that tin plate has been certainly not profitable, but it isn't an un- 
profitable product today. Neither is it an unreasonably high profit 
product. We have a terrific investment in the tin-plate business — 
terrific! 

Acting Chairman King. Which would be independent of the in- 
vestment in your other activities? 

Mr. Fairless. I mention that at this time because of the changes 
in the method of manufacturing tin plate which have come into our 
industry in the last, well, say 5 years, where we have gone from the 
old method of the hot — what we called the hot pack plate, made on 
the old-fashioned mills, to a cold reduced product which is superior 
in quality and lower in cost from a manufacturing standpoint, but 
the investment to make this product is many times more than by the 
old, and tliis industry has just gone through the spending of — I 
don't recall the figure; certainly several hundred million dollars. 

Acting Chairman King. Just for tin plate? 

Mr. Fairless. For cold reduced tin plate, yes; and that in the 
last 5 or 6 years. 

Acting Chairman King. I assume there is considerable obsolescence 
in your machinery and a great deal of machinery which is rendered 
obsolete by technological and other developments. 



10798 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. Yes, sir; yes, sir. 

Acting Chairman King. Have you any figures indicating the value 
of the property, plants, and so forth, which have been rendered 
obsolete during the past few years by reason of changes in markets, 
changes in conditions, technological developments, et cetera? 

Mr. Fairless. I can give you, not the figures of investment; 
I can give a figure that has been given to me, of a write-off in '35 of 
$270,000,000. I am not giving that as a definite figure, but I do 
want to cite this, that when we built our new plant in the Pittsburgh 
district called the Irvin Works, which is dedicated to the manufacture 
of sheets and tin plate, we contemplated the closing down, and actually 
did close down, six individual plants about when that plant went into 
operation. Now some of those plants were temporarily closed because 
of business conditions, but our picture, when completed — by our 
picture I mean the completion of the Irvin Works — contemplated the 
permanent closing down of those six plants for the reasons that you 
have just indicated, because of technological development within the 
industry. 

It so happens, however, that due to this great demand at present 
for tin plate, and because of the fact that export tin plate can be fur- 
nished by the hot roll method, because that generally is the type of 
tin plate they had been receiving abroad, and because the price is 
better, we have put back into operation four of those six plants that 
we contemplated closing. But there again, that is of a temporary 
nature. 

Here is the figure that you asked for [reading] : 

The reserve for obsolescence and depreciation was increased to the pxtent of 
$270,000,000 in 1935, principally because of improvements in manulfacturing 
methods which made existing facilities of older design less valuable. 

Mr. O'CoNNELL. That is for the corporation generally ; that wouldn't 
apply only to tin plate? It is the whole? 

Mr. Fairless. No; but it so happens that tin plate was the biggest 
factor product-wise.' 

Mr. O'CoNNELL. Along that same line, would you know whether 
your operations generally in the tin plate field in recent years have 
been more or less profitable than other lines to your company? 
Would they be more or would they be less? 

Mr. Fairless. They would certainly be more profitable than some 
Unes, because some lines would show no profit. 

Mr. O'CoNNELL. In recent years has it been one of the most profit- 
able, take it over the period of the past 5 or 6 years? 

Mr. Fairless. I will say this in answer to that question, that tin 
plate has been one of the most profitable lines during the depression, 
and if you follow the rate of operations of the steel industry you will 
find that tin plate has been one of the most consistent performers 
during the depression. 

Mr. O'CoNNELL. Yes; I imderstood that. 

Mr. Fairless. In other words, the demand for tin plate has not 
fallen off to the extent of other products, and to that extent it has 
been more profitable. 

Acting Chairman King. Mr. Pfeltz, did you desire to coijtinue your 
comment? 

Mr. Pfeltz. I simply want to reply to Mr. Henderson about the 
price of Carnegie. There are many times— in fact there is hardly a 



CONCENTRATION OF ECONOMIC POWER 10799 

year but that various steel people come to me and say that they hope 
the price is gomg to be so and so, and not the price that is eventually 
named by Carnegie. They are hoping for a higher price. 

Mr, Henderson. It often happens, does it not, that after the price 
has been announced, other producers do suggest that they can 
deliver plate to you cheaper than the published price. Isn't that 
correct? 

Mr. Pfeltz. I think you will have to repeat that again. I didn't 
understand it. 

Mr. Henderson. Doesn't it happen- from time to time that after 
Carnegie has posted the price, other producers suggest to you that 
they can deliver plate at less than the posted price? 

Mr. Pfeltz. No; that is not a fact. 

Mr. Henderson. Not to your company? 
vir. Pfeltz. Not to our company. 

Mr. Henderson. Mr. Chairman, I want to ask Mr. Hughes along 
t-he line of the sentence quoted in the letter from Mr. Pfeltz to Dr. 
Baker.^ Did you participate in the negotiation of the contracts 
between your company and American Can? 

Mr. Hughes. You mean the underlying contracts? 

Mr. Henderson. Yes. 

Mr. Hughes. The long-period contracts? 

Mr. Henderson. Or the contracts which were imder discussion as 
to what the price should be. 

Mr. Hughes. I participated in the negotiation of the present con- 
tract, dated September 22, 1936. I did not on the prior contracts, 
as I recaU. 

Mr. Henderson. Do you want to make the record clear whether 
or not you participated m any group of tin-plate producers concern- 
ing what the posted price would be? 

Mr. Hughes. I did not. 

Mr. O'CoNNELL. Mr. Pfeltz, I was interested in the statement you 
just made to the effect, as I understood it, that at various times other 
producers of tin plate would come to you, during a period prior to or 
during your negotiations with Carnegie-Illinois Steel, and suggest that 
they would prefer, and would like to have, a higher price for tin plate 
than the existing price, or possibly than the price that they were afraid 
Carnegie-Illinois would arrive at. Was it possible that they hoped 
that you, as a prospective purchaser of the tin plate, would fight for 
a higher price for tia plate? 

Mr. Pfeltz. We never fight for a higher price. We always fight 
for a lower price. 

Mr. O'Connell. What would be the motive in a steel man coming 
to you? 

Mr. Pfeltz. Here, we wUl say that before the price comes out 
someone may come in and say, "Well now, what do you think this 
price is going to be?" 

I would say "I don't know; what do you think is justified?" 

They will say, "We are having higher labor costs; all of our other 
materials, including pig tin and scrap iron, are going up. We think 
it should be 35 cents above today's price." 

Well then, Carnegie comes along and names a price that is 25 cents 
instead of 35. 

■ "Ezbibit No. 1407," appenUK, P. 10002. 
124431— 40— pt. 8C 



10800 CONCENTRATION OF ECONOMIC POWER 

Mr. O'CoNNELL. Well, you see my point. According to the general 
testimony, it sounds to me as though the other suppliers of tin plate 
approached you with a view to getting a higher price for tin plate. 

Mr. Pfeltz. They are only hoping, Mr. O'Connell, that it will be 
higher. 

Mr. O'Connell. But during the same period apparently they were 
not sufficiently hopeful or desirous to take the same steps as regards 
the party on the other side of the bargaining table. I don't see any 
reason why a steel man would expect the American Can Co. to help 
him to get Carnegie-Illiuois to set a higher price for tin plate. It 
doesn't make sense, does it? 

Mr. Pfeltz. No; it is only conversation. 

Mr, O'Connell. But we don't even have the conversation on the 
other side, where I should think there would be conversation. 

Mr. Pfeltz. What do you mean, we don't have conversation on 
the other side? 

Mr. O'Connell. I take it we don't have the conversations between 
the steel people and Mr. Fairless that you have indicated. 

Mr. Henderson. I think Mr. Fairless did say that every time 
beforea new price is posted the other producers do say something as 
to what their hopes are. 

Mr. Fairless. What I did say, Mr. Henderson, was that prior to 
the time when the official price of tin plate, Carnegie-Illinois' official 
price, is announced, or is usually announced — there is no set date; 
it is on or about December 1 of the previous year — why naturally 
there are questions asked me, if I meet a steel man, "Have you com- 
pleted your negotiations with the American Can Co. with respect to the 
price of tin plate?" That is a natural question to ask, isn't it? 

And my answer, if we haven't, is "No, we haven't." 

Mr. O'Connell. Now you see my point. I am merely contrasting 
that situation with the situation Mr. Pfeltz has explained, in which 
steel men come to him and do not ask him whether negotiations have 
been completed, but give him reasons why the price should be higher, 
and I am merely suggesting that they are talking with the wrong man. 

Mr. Fairless. I think it is perfectly natural conversation, however. 

Mr. O'Connell. I should think it would be perfectly natural to 
have the same conversation with you. 

Mr, Fairless. I don't buy tin plate; I sell tin plate. Mr. Pfeltz 
buys tin plate. I think it is a perfectly natural conversation for a 
seller of tin plate to have with Mr. Pfeltz,, as he just recited. 

Mr. O'Connell. But the seller is talking to Mr. Pfeltz about a 
price you and Mr. Pfeltz are to agree upon, and he is giving Mr. 
Pfeltz reasons why you shoidd want a higher price. That is what 
Mr. Pfeltz said. 

Mr. Fairless. He is going to get the price I get, isn't he? 

Mr. O'Connell. That's right. 

Mr. Fairless. I should think he has an interest. 

Mr. O'Connell. Of course he has an interest. 

Mr. Pfeltz. We will probably put it this way: If they give us a 
story like that, they maj^ think we won't fight quite as hard for a low 
price. That is about it. 

Mr. Fairless. But it has no effect. 

Mr." O'Connell. That is my point. They talk to you and give 
you reasons why the price should be high. 



CONCENTRATION OF ECONOMIC POWER 10801 

Mr. Pfeltz. They try to sell me this idea that the price should be 
high, and it doesn't work. It hasn't yet. 

Acting Chairman King. Are there any other questions? 

Mr. O'CoNNELL. But they don't give Air. Fairless the same 
argument. 

Mr. Pfeltz. I don't know what they give Mr. Fairless. 

Acting Chainnan King. We will take a formal recess for 5 minutes. 

(A brief recess was taken.) 

Acting Chairman King. The committee will be in order. 

Mr. Henderson. Mr. Chairman 

Mr. Feller (interposing). May I just finish up this point? I 
should like to make two slight additions to the record; first, the Mr. 
Grace referred to in the letter of March 24, 1938, from Mr. Pfeltz 
to Dr. Baker, ^ is the Mr. Grace who is president of the Bethlehem 
Steel Corporation. I believe that was not previously in the record. 

Secondly, I have been informed by the Contmental Can Corpora- 
tion, which Dr. Baker testified was the second largest producer of 
cans, that with one exception their contracts with the producers of 
tin plate contain price clauses similar to the price clauses in the con- 
tracts of the American Can Co. 

I have just one other thing. 

Acting Chairman King. That is assented to by Dr. Baker? 

Mt. Feller. Dr. Baker w^ould not know. 

I should like to offer for the record, Mr. Chairman, two memoranda 
which deal with questions of law prepared by Nathan L. Miller, 
Governor Miller, who is General Counsel of the United States Steel 
Corporation. They bear no date and I believe Governor Miller 
would desire to say a few words with respect to them. 

Acting Chairman King. Do you want him sworn? 

Mr. Feller. I am making no use of them. 

STATEMENT OF NATHAN L. MILIER, GENERAL COUNSEL, U. S. 
STEEL CORP., NEW YORK CITY 

Mr. Miller. Just to explain the occasion of the times when these 
memoranda were written. When Mr. Irvin became president of the 
United States Steel Corporation in April 1932, he consulted me on 
a number of occasions on the subject of what our antitrust laws per- 
mitted to be done, and what they said could not be done, and after a 
number of such discussions he asked me to prepare for his guidance 
and for the guidance of the officials of the manufacturing and selling 
subsidiaries of the Corporation as precisely as I could state them, 
because I had told him that there wasn't as much confusion about these 
laws as people popularly, commonly, supposed — he asked me to pre- 
pare memoranda statmg as definitely as I could, with particular 
reference of course to the business of the steel industry, precisely what 
could and what could not be done under those laws. 

I prepared two memoranda, on^ on the subject of "Relations with 
Competitors," one on the subject of "Sales Methods." Your memo- 
randa, Mr. Feller, are not dated. Apparently they were obtained by 
the Department of Justice from the files of one of the subsidiary com- 
panies and apparently they were copies of these memoranda which 
were dated but the copies left off the date. 

I have here, taken from our files, the copies of the original memo- 
randa as dated, together with Mr. Irvin's letter of transmittal to the 
heads of the various subsidiary companies. The names of the persons 



10802 CONCENTRATION OF ECONOMIC POWER 

to whom these copies were sent are on the letter of transmittal. They 
were the then presidents of the manufacturing and selling subsidiaries 
The memoranda were dated June 7, 1932, and Mr. Irvin's letter of 
transmittal is dated June 10, 1932, and I suggest that you take this 
for the record instead of the copies that you have. 

Mr. Feller. Yes, sir; and may I say at this point that I hope very 
much that when the committee comes to consider in its final delibera- 
tions the question of what the antitrust laws mean, that they will 
take these very excellent, succinct memoranda into account. 

Mr, Miller. I ought to say that these opinions were written prior 
to the passage of the Robinson-Patman Act. I can't say as much for 
the definiteness of that act as I can for those that I have here discussed. 
[Laughter.] 

Acting Chairman King. There will be no controversy over that. 

Mr. Feller. I offer in substitution for what I have offered the 
copies which Governor Miller has given. 

Acting Chairman King. It may be accepted and you may with- 
draw the copies you have submitted. Have both of them offered. 

(The memoranda referred to were marked "Exhibit No. 1408," and 
are included in the appendix on p. 10993.) 

Acting Chairman King. Is that all? 

Mr. Miller. That is all I have to say unless counsel wants to 
examine me on these opinions. I am prepared to defend them and I 
am prepared to defend the proposition, Senator, that our present anti- 
trust laws are not indefinite and uncertain, and that there is no 
diflficulty in understanding what they mean and that there should be 
no difficulty in enforcing them. 

Mr. Henderson. Mr. Chairman, in connection with Mr. Fairless' 
testimony he several times referred to studies which had been made 
by the Corporation and by a special staff under the direction of Dr. 
Theodore Yntema of the University of Chicago. The staff has con- 
sulted with Mr. Olds and other members of the Corporation and they 
have submitted a number of copies which have been distributed to the 
members of this committee. I have made a short examination of 
the material and have consulted with the various departments and 
agencies as well as the committee staff as to the best procedure for the 
introduction of this material. I may say that based on what examina- 
tion I could give the material last night there is material presented 
about one of the country's leading companies such as^ I believe was 
never available before, and it ought to be of extreme mterest to this, 
committee. 

However, there are a number of inquiries and studies by the staff 
which need to be made before the committee would be in a position 
to make a fair examination of either the material or of Dr. Yntema, 
who is in large part responsible for it. The material falls into two 
parts, one part relating to the basing point which this committee 
assigned, as you ^vill recall, to ther Federal Trade Commission; the 
other relates to costs, demand for certain products, returns, and a 
volume of information which is particularly pertinent not only to 
questions of the steel industry but of the general operations of the 
committee. 

I suggest, and this meets with the approval of our chairman, Senator 
O'Mahoney, and with the representatives of the Corporation, that we 



CONCENTRATION OF ECONOMIC POWER 10803 

set for the first opportune time after the first of the year a 
hearing at which these materials will be officially presented to the 
committee and that we attempt to arrange for Dr. Yntema to appear 
with other members the Corporation might select for discussion 
of this topic. ^ We would ask the Federal Trade Commission to take 
over the consideration of the basing point report and the staff of the 
committee to be responsible for the examination of everything else. 

Mr. Miller. Would you like us to have these identified for the 
record? 

Mr. Henderson. I believe all members of the committee have 
them. We can officially receive them now and put them in our files. 

Acting Chairman King. I think that had better be done and have 
them identified. 

Mr. Miller. Read the titles? 

Acting Chairman King. I don't think that is necessary. 

Mr, Henderson. The titles can be recorded in today's verbatim 
proceedings. 

Acting Chairman King. Will one of you confer with the clerk and 
the stenographers to see that the appropriate titles are incorporated 
in the record? 

(The documents are as follows:) 

1. "Index to Book of Charts and Book of Charts." 

2. "Some Factors in the Pricing of Steel." 

3. "A Statistical Analysis of the Demand for Steel, 1919-1938." 

4. "An Analysis of Changes in the Demand for Steel and in Steel Prices, 
1936-1939." 

5. "An Analysis of the Demand for Steel in the. Automobile Industry." 

6. "An Analysis of the Demand for Steel in the Railroad Industry." 

7. "An Analysis of the Demand for Steel in the Container Industry." 

8. "An Analysis of Steel Prices, Volume and Costs-Controlling Limitations on 
Price Reductions." 

9. "An Analysis of Steel Prices, Volume and Costs-Controlling Limitations 
on Price Reductions — Summary." 

10. "The Basing Point Method of Quoting DeUvered Prices in the Steel 
Industry." 

Acting Chairman King. They will be a part of the files of the 
committee. 

(The documents referred to were marked "Exhibits Nos. 1409 to 
1418," respectively, and are on file with the committee.) ^ 

Acting Chairman King. Is there anything else? 

Mr. Fairless. If Mr. FeUer is through with me I have a very short 
statement I would like to make. 

Acting Chairman King. Proceed. 

Mr. Fairless. Mr. Chairman, before leaving the stand I would like 
to say, we feel the responsibilities of 235,000 workers whose daily 
bread depends upon our decisions. You must remember some 40,0C0 
of our workers have invested their savings in shares of stock of our 
corporation. Close behind these are the thousands of supply dealers 
and shopkeepers, large and small, in the cities, to^vns, and villages 
where our plants are located. Then there are 220,000 stockholders, 
most of whom have had a lean time of it since 1931, the common-stock 
holders having received only one dividend of $1 per share paid in 1937, 
and finally — I do not put them last — there are our customers and the 

1 Hearings on the steel Industry were resumed January 23, 1940. See Hearings, Parts 26 and 27 for test 
mony. 

' Tlie exhibits were later ordered to be printed. "Exhibits Nos. 1409-1417" are included in Hearings, 
Part 26; "Exhibit No. 1418" is included in Hearings, Part 27. 



10804 CONCENTRATION OF ECONOMIC POWER 

general public whom we serve. We feel it is our duty to work with 
and protect each of these groups to the best of our ability. The mere 
fact that our losses have been quite consistent as well as substantial 
since 1930, except in 3 years, should indicate that the price of steel 
has been so low that with the volume we have had only a meager 
profit has been made during the 9-year period. We have spread the 
work in poor years and by this means have been able to keep an 
approximate average of 60,000 men employed beyond the strict needs 
of the business available. At every point we have done our best to 
cooperate with the Government in the efforts to improve the dis- 
tressing conditions which have prevailed. These are the facts of the 
great prolonged depression through which we have been passing. 
While we sincerely desire to provide constant and regular employment 
for our employees I cannot recommend following any untried theory 
in this important and complex business in attempting to accompHsh 
this result. I have to move cautiously, taking into consideration all 
of the basic factors of the steel industry and seeking all the help and 
advice I can get from the experienced men around me. We have 
spent our business lives in the industry and I think we are fully quali- 
fied to deal with the problems of the United States Steel Corporation. 

In addition, I wish to thank this committee for your patience and 
your very fair treatment, not only of myself but of the other witnesses 
of the United States Steel Corporation, and I also extend the same 
thanks to Mr. Feller and his group. 

Acting Chairman King. Speaking for the committee, I think we 
may express our appreciation of the frankness with which you and 
your associates have discussed the matters presented. Ts there 
anything else, Mr. Feller? 

Mr. Feller. No, sir, 

Mr. Henderson. I presume, Mr. Fairless, you will be present when 
we discuss this material. 

Mr. Fairless. Yes. 

Mr. Henderson. Because it relates to a number of topics which 
I should like to have interrogated you on as we went along. I am 
reserving a number of questions until that time. 

Mr. Fairless. I will be here if I am well. 

Acting Chairman King. You heard the statement of the Commis- 
sioner a few moments ago as to the proposition to discuss this presenta- 
tion early in January, at a date which will be mutually agreed upon. 
Is that satisfactory with you and your associates? 

Mr. Fairless. It is. 

Acting Chairman King. Is there anything further? 

Mr. Feller. I should just like to state the witnesses who will be 
called tomorrow. Mr. Eugene Grace, president of the Bethlehem 
Steel Corporation, Mr. Paid MackaU, vice president, and possibly we 
shall get to Mr. Ernest T. Weir, president of the National Steel 
Corporation. ^ 

Acting Chairman King. The committee will stand adjourned 
until tomorrow morning at 10:15.. > 

(Whereupon at 4:50 p. m. the committee recessed until 10:15 a. m., 
Thursday, November 9.)^ 

> Testimony of these witnesses appears in Hearings, Fart 19. 

> Hearings held November 9 and 10, 1939, are included in Hearings, Fart 19. 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



MONDAY, NOVEMBER 13, 1939 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. O. 

The committee met at 10:30 a. m., pursuant to adjournment on Fri- 
day, November 10, 1939, in the Caucus Koom, Senate Office Building, 
Senator William H. King, presiding. 

Present: Senator King (acting chairman); Representative Williams, 
Messrs. Frank, O'Connell, Avildsen and Brackett. 

Present also: Hugh White, representing the Federal Trade Commis- 
sion; John V. W. Reynders, representing the Department of Com- 
merce; A. H. Feller, Special Assistant to the Attorney General; 
John W. Porter, Irving B. Glickfeld,'Hyman Ritchin, Monroe Karasik 
and Ward S. Bowman, Department of Justice. 

Acting Chairman King. The committee will be now in order. 

(Representative Williams took the Chair.) 

Mr. Feller. Mr. Hook, please. 

TESTIMONY OF CHARLES HOOK, PRESIDENT, AMERICAN ROILING 
MILL CO., MIDDLETOWN, OHIO— Resumed ^ 

Acting Chairman Williams. Before you proceed, Mr. Feller, I 
have here a letter from Mr. H. H. Anderson, Shell Oil Co., Inc., Shell 
Building, St. Louis, Mo. who appeared as a witness on October 
11, 1939. He agreed to furnish Dr. Isador Lubin, Commissioner of 
the Bureau of Labor Statistics of the Department of Labor, with certain 
data on the cost of workmen's compensation insurance, and he has 
now furnised that in the attached letter from Mr. Anderson, and he 
asks that it be inserted in the record. That has been approved 
by Dr. Lubin, and we ask that that be incorporated in the record. 

(The letter referred to w^as marked "Exhibit No. 1422" and is 
included in Hearings, Part 16.) 

Mr. Feller. Last week, Mr. Chairman, various figures were intro- 
duced into the record with reference to the price of cold rolled sheets 
which are rolled on the continuous roUing mill. These figures were 
introduced during the testimony of Mr. Hook. 

Mr. Hook. They weren't introduced in mine. 

Mr. Feller. I beg your pardon — you made reference to the prices 
of certain products. In order to complete the record I should like 
to introduce a chart entitled "Base Price of Hot Rolled Sheets, 
Pittsburgh, by Months, 1921-1939, inclusive," the source being the 
Iron Age, and another chart entitled "Base Price of Black Plate for 

' Mr. Hook's previousltestimony appearejin Hearings, Part!l9. 

10805 



10806 CONCENTRATION OF ECONOMIC POWER 

Tinning, Pittsburgh, 1926-1939," the source being the Iron Age, 
both of these charts being prepared by the Department of Justice. 

Acting Chairman Williams. They may be admitted. 

(The charts referred to were marked "Exhibits Nos. 1423 and 
1424," respectively, and are included in the appendix on pp. 10997 
and 10998.) 

Mr. Feller. I point out that both of these products are rolled on 
the continuous miU. 

Mr. Hook, on Friday we had been discussiug the patent licenses 
which your company has issued on the continuous rolling mill,^ and 
I should like to revert just for a moment to that subject. You pointed 
out to us that on certain products the price had declined substan- 
tially since the introduction of the continuous rolling mill. You also 
pointed out to us the various price clauses contained in your licenses 
which, under certain conditions, or if certain conditions were fulfilled, 
would give you the right to determine the minimum price at which 
certain of the products rolled on the continuous mill should be sold. 

Merely by way of summary, is it not correct to say that if the 
validity of those price clauses were determined, you would then have 
power to reverse the price trend which these products have shown, 
that is to say, you could prevent the products from declining in priced 
and you could then determine that the price curve should go the other 
way, which would bring the price up. 

Mr. Hook. We would have the power to set a minimum price 
below which the products or the royalty products, as referred to in 
the license contracts, would not be sold. 

Mr. Feller. And that power you could exercise, not on the basis 
of actual market condition, but on the basis of what, in your dis- 
cretion, you assume to be best for your business. 

Mr. Hook. And protecting the interests of the company. Correct. 

Mr. Feller. With that slight reference to the testimony of last 
week, Mr. Chairman, I should like to go on to another topic. 

A year ago, to be exact on September 8, 1938, Mr. Hook wrote a 
letter to Dr. A. A. Berle, in connection with a memorandum of sug- 
gestions which Dr. Berle had made to this committee, With Mr. 
Hook's permission, I should like to insert this letter, offer this letter 
for the record, and mimeographed copies have been prepared for 
the members of the committee. 

Acting Chairman Williams. I assume you have no objection to it, 
Mr. Hook? 

Mr. Hook. I have no objection at all, Mr. Williams. In fact, 
I would like very much to see it put in the record, provided the revision 
up to date is included . 

employer cooperation in the BRITISH ISLES AND IN THE UNITED 

STATES 

Mr. Feller. I should point out that the. figures which were at- 
tached to the mimeographed copy have since been revised since the 
mimeographed copy was prepared, and I have the revised figures for 
the reporter. Unfortunately we don't have them mimeographed. 

Acting Chairman Williams. The letter may be received. 

CThe letter reierred to was marked "Exhibit No. 1425" and is 
included iii the appendix on p. 10998.) 

I See Hearings, Part 19, p. 10690 et seq. 



CONCENTRATION OF ECONOMIC POWER 10807 

Mr. Feller. A number of matters mentioned in this letter have 
been under discussion in Mr. Hook's testimony. There is one subject 
which I think the Committee could appropriately consider now. On 
page 3 of this letter, the following occurs [reading]' 

Early in this letter I mentioned our business interests in England and our 
association with English manufacturers. This experience and my recent studies 
as a member of the Commission appointed by the President to investigate Indus- 
trial Relations in England, has impressed me with the difference in the way we 
have generally attempted to make changes affecting our industrial system. 

As you know, over there when an important change or study is contemplated, a 
royal commission is generally appointed with an outstanding, able and impartial 
chairman, together with equal numbers of parties in interest. Plenty of time is 
taken to make a thorough study and investigation before conclusions are drawn 
by either the commission or the Government. 

No sensible industrialist would contend that there must not be certain proper 
regulation of corporate activities; however, we cannot peg wages or continue to 
increase wages if management is denied the right of group cooperation with 
respect to prices. 

In England the right of employers to cooperate with respect to price and 
allocation of business is not denied and, therefore, there is greater opportunity for 
employers to cooperate with employee organizations with respect to wages, and 
the public is protected against the combination of employer and employee organi- 
zations through the operation of the Import Advisory Committee. 

Please do not misunderstand me. I am not advocating the British system 
for the United States. I have simply brought these several matters to your 
attention to indicate the many factors that must be taken into consideration and 
how carefully the whole field must be studied if Senator O'Mahoney's Committee 
is to make a report that will be of real value in helping to create a situation that 
will encourage and not destroy individual and corporate initiative and that will 
raise and not lower the standard of living of the average citizen. 

Mr. Hook, are you still of the mind that you were when you wrote 
this letter, with respect to this portion of the letter? 

Mr. Hook. I haven't changed my opinion. 

Mr. Feller. Do I take it that your opinion is tbat to some degree, 
in some manner, management should be granted the right of group 
cooperation with respect to prices? 

Mr. Hook. Well now, in talking about prices, Mr. Feller, I don't 
mean by that the right to agree on prices. But I think that it is 
perfectly proper and I think in the public interest, certainly in in- 
dustry's i^jiterest, for corporate management t» discuss the relationship 
between cost and price. And as a res^ilt of discussion, which I have 
always been in favor of, whether i# be employer and employee or 
whether it be units of an industry, I think a-feal understanding of 
the economic problems involved results, and always out of it comes, 
a constructive conclusion. 

I think, so that you won't misunderstand me, I made it perfectly 
clear that I was not recommending the English system, because to 
recommend the English system you would have to have the English 
laws. As you know, in England an employers' association is a trade- 
union, just exactly as an employees' organization is a trade-union. 
Therefore, the responsibilities and obligations and opportunities of 
the two are identical and the same. Now, of course, England is a 
great exporting country, and therefore the operation of the import 
advisory committee would operate very much more quickly and pos- 
sibly more eflPectively, because we are not a great exporting nation. 
I don't know, possibly about 10 percent; I haven't the figure in my 
mind, I don't know. The Department of Commerce would probably 
answer that question. 



10808 CONCENTRATION OF ECONOMIC POWER 

Mr. AviLDSEN. Can you tell us a little bit about this import ad- 
v^isory committee? It is sometMng I am not at all familiar with. 

Mr. Hook. It may interest you to know that in '37, for instance — ; 
lere is an illustration — when I was over in the summer of 1937 a 
discussion was going on between the automobile manufacturers and 
the manufacturers of steel who made steel for automobile production, 
the automobile manufacturers contending that prices were too high, 
the steel manufacturers contending that the prices were fair and 
proper, and as a result there was an investigation by the import ad- 
visory committee to determine whether or not prices were fair and 
proper and in the public interest. It resulted in the advisory com- 
mittee, as I remember, coming, to the conclusion that for the period 
that prices had been set, which was up to the end of December 1937, 
taking into consideration the obligation of the steel manufacturers as 
to wages, as to raw material prices and the other things entering into 
cost, that it was a fair price, so that they did not rule adversely or 
make an adverse report. However, the steel manufacturers agreed 
that as of January 1, 1938, there would be a revision and there was 
a revision. 

Now, I talked to the managing director of one of the very large 
motor interests with respect to this subject while I was over there, 
because he knew that our foreign subsidiary was sitting in on these 
discussions, and he appealed to me and pointed out what he thought 
w^as their side of the story, and I think I was able to present to him 
what few facts I had, few because I was too far away from it to have all 
the details. 

Mr. AviLDSEN. Have you any idea how long that investigation 
took? 

Mr. Hook. No; I haven't the slightest idea. 

Mr. AviLDSEN. Did it go on for weeks or months? 

Mr. Hook. Undoubtedly for several weeks, maybe it was months, 
I don't Itnow. 

Mr. AviLDSEN. Who appoints tliis committee? What is it a 
committee of? 

Mr. Hook. It is an appointed Government body, permanent, and 
it reports to the proper division of the Government which has the 
power to reduce quotas or tariffs, and that is the way they would con- 
trol it; in other words, assuming that the import advisory committee 
had determined that these particular prices of these particular prod- 
ucts in the steel industry were too high, and not in the public interest, 
they would so advise the steel industry, and if the industry didn't vol- 
untarily revise prices, then the import advisory committee would 
recommend to the proper division of the Government a reduction in the 
toriff protection which the steel industry enjoyed against the low-cost 
producers of thr Continent— for instance Belgium, Germany, and 
other countries, so by reducing or taking off the quota, or reducing the 
tfiriff^ it had the effect of, well, "Either reduce your prices or in wiU 
come competitive material." 

That is, as I understand, the way it operates. The point that I 
V, jis trying to make hc^re, Mr. Chairman, is that in England the several 
ili visions of government do cooperate with business very closely, 
riu'io is a very friendly, cooperative attitude, irrespective of what the 
!i\ ision of govornnient may be. That we noticed was the case with 



CONCENTRATION OF ECONOMIC POWER 10809 

the Ministry of Labor. They are not prejudiced, not partial, but 
attempt to present the facts as to both sides of the picture and to help 
in the proper solution of the problem, in other words business is 
encouraged by real cooperation on the part of the Government. 

Mr. AviLDSEN. Mr. Hook, did you find that the steel industry in 
England by reason of this cooperation and consultation was able to 
avoid the peaks and valleys that we have had in the steel industry in 
this country? 

Mr. Hook. Well, Mr. Avildsen, I am afraid that I am not competent 
to answer that question. I can only tell you, what our own experience 
has been with respect to one part of the steel industry; in that par- 
ticular division of the steel industry during the period that we have 
been associated with steel companies in England there have not been 
the peaks and valleys, certainly not as much as we have had. The 
part of the industry with which we have been associated has to do 
with the manufacture of specialty sheets. We were not interested in 
the manufacture of what we called commodities or the common grades 
of sheets. 

Mr. Avildsen. Do you think that stabilization of production is 
due to the consultation between the large producers and the large 
consumers? 

Mr. Hook. I think, personally it is my opinion, that it has had 
much to do with it. 

Mr. Avildsen. Do they fix prices for a year in advance, 3 months, 
or what is their practice? 

Mr. Hook. It depends upon the product, Mr. Avildsen. In the 
industry that we are associated with, high-finished sheets, I think that 
generally it is set for 6 months, as they have been able to contract for 
raw materials on the same basis, and so forth. Whether they go 
further than that I don't know, and at times if a change in conditions 
with respect to raw material purchases were indicated, I imagine that 
they would reduce the period for which the price was set. 

Mr. Reynders. Mr. Hook, in the course of your patent negotia- 
tions you have come m contact also with the steel industry of France 
and Germany, to some extent? 

Mr. Hook. Well, with the United Steel Co. (Vereinigte Stahl- 
werke) m Germany and with two of the very large units in England; 

yes. 

Mr. Reynders. Disregarding the present situation and gomg to 
perhaps the situation that has obtained for the last 3 or 4 years, are 
you able to say whether there was a cooperative attitude on the part 
of the Govemmeni in Germany and France? 

Mr. Hook. Yes; I thmk that that is true; at least our experience 
is that it is true in Germany as well as in England. 

Mr. Reynders. In other words, they regard the steel industry- 
there I suppose more from the point of view of international competi- 
cion than we do in this country. 

Mr. Hook. Well, I presume so, Mr. Reynders, because of course 
England being such a large export nation they would have to take into 
consideration their international situation. 

Acting Chairman Williams. Do you have your owti mills there? 

Mr. Hook. No; we don't own the mills. We work with the 
English manufacturer and assist him in the operation of his mill. 



10810 CONCENTRATION OF ECONOMIC POWER 

Acting Chairman Williams. To what extent do you export your 
products? 

Mr. Hook. From this country? 

Acting Chairman Williams. Yes. 

Mr. Hook. Of course, that differs in different periods, but I have 
the record here. 

Acting Chairman Williams. What was it during '37 and '38? 

Mr. Hook. Well, I think it was about 8 percent. 

Acting Chairman Williams. And that was a specialized product? 

Mr. Hook. Yes; largely specialized. 

Acting Chairman Williams. Was that product that you exported 
made in England? 

Mr. Hook. Oh, no; do you mean what we 

Acting Chairman Williams (interposing). I mean the same kind of 
product. I don't mean the one you export, of course. Were you in 
competition, in other words, with that particular product in England? 

Mr. Hook. No; the majority of things which our own company 
export are specialties which we have produced here and developed in 
this country, and with respect to which there is not severe competition 
on the other side, although at times, it may interest you to know, in 
the mill that we are associated with in England, which we gave tech- 
nical advice and help,' due to the difference in methods between our 
American system of management and theirs, at times even under our 
instruction we weren't able to get the quality in the very highest grades 
produced. It took us several years before we were able to help them 
train their organization to do the job so that they could make a com- 
parable grade over there to what we made over here. So during that 
period we exported those top grades from here and made the lower 
grades in the English mill. That is still true in certain products. 

Mr. O'Connell. Mr. Hook, that situation which you have just 
described as existing in England in the steel industry requires, does 
it not, not only a different type of industrial organization; that is, an 
industry sitting down or in position to act as an industry, as well 
as a different type of law, legislation, than we have in iliis country? 

Mr. Hook. Oh, yes. 

Mr. O'Connell. You couldn't d<> it here. 

Mr. Hook. Oh, of course, you couldn't. 

Mr. O'Connell. Do you think we ought to try it here? 

Mr. Hook. I think that would ^'equire very careful investigation. 

Mr. O'Connell. That ^- q^^ite a revolutionary step for tl is country, 
it is quite foreign to anything we have in either industry or govern- 
ment that is considered desirable in this country. 

Mr. Hook. Oh, absolutely. As I said, ycu couldn't operate it here 
under our method of operation; the whole scheme of operation would 
have to be similar to the English scheme. The attitude — I press on 
that point — of the various departments of government would have to 
be the same. You can have the best plan in the world, as you know, 
and Tidess that plan is operated by eflficient people and wcrkitg 
together, the plan won't work. 

Mr. O'Connell. What you refer to as attitude, at least insofar as 
antitrust laws are concerned, is to a large extent, I should think, a 
result of the laws that we have. We have a Sherman Act and other 

' Richard Thomas & Co., Ltd., Ebbw Vale, Monmouthshire, Wales, British Isies. 



CONCENTRATION OF ECONOMIC POWER 10811 

laws which have been in effect for 40 or 50 years. You can't do 
much about attitude in that field without changing the laws. 

Mr. Hook. I am not recommending the change of the antitrust 
laws. As a layman it seems to me that the laws are adequate to 
control industry. It seems to me — maybe the legal profession 
wouldn't agree with me at all, we have a very distinguished member 
of the bar here whose judgment I value very highly and he might not 
agree with this — as a layman, because I believe so much in consulta- 
tion and cooperation,, the only suggestion I would have would be a 
change which would permit industry to go, whether it be the Depart- 
ment of Justice or other body, or the Federal Trade Commission, 
which would be empowered to tell us, when we wanted to cooperate 
in a certain way, "Yes, that is legal; and you have the right to do it.'* 
The trouble as I understand it today when we have a borderline case 
or a plan is, " Well, we can't tell you. The courts will have to decide." 
So we have to determine whether it is something that we can properly 
do or take a businessman's chance, as it were, and wait for the courts 
to decide. I don't know whether I make myself clear. 

Mr. O'CoNNELL. It seems to me that you are advocating or sug- 
gesting that we consider something that has been talked about for a 
number of years and in legal parlance it is what is known as adminis- 
trative declaratory rulings, the right for people to come and present 
a program or plan of something that they propose to do and be 
advised in advance as to whether or not it is considered legal by those 
who would be clothed with that function. 

Mr. Hook. Right. 

Mr.O'CoNNELL. Specifically, and getting down to cases and talking 
a little bit about price, what would you think in the price field an 
industry should be able to propose as an industry and have any gov- 
ernmental agency approve it? I was trying to get down to price. 
It seems to me price is the heart of the problem. There may be other 
things but I would like to talk about that one. 

Mr. Hook. I am not advocating, I am very much opposed to, 
industry setting a price. I am very much in favor of open competition. 
I am very much in favor of published prices so that the world and 
everybody else knows what your price is. I think that is very 
essential. Personally, I think, and maybe many of my associates 
in the industry wouldn't agree with me, that it would be very advan- 
tageous and in the pubHc interest for industry to be permitted to file 
its prices with its trade association so that those prices are known to 
everybody ; in other words, they are maximum prices. 

Mr. O'CoNNELL. Of course you would also expect the people in the 
industry would adhere to those prices, wouldn't you, as they filed 
them? 

Mr. Hook. Yes; if I made a price, if I filed a price, then i ought to 
be held accountable and expected to maintain that price until I filed 
a new price. 

Mr. AviLDSEN. That is substantially what you did under the N. 
R. A. Code, isn't it? 

Mr. Hook. Substantially. 

Mr. AviLDSEN. That part of the N. R. A. procedure you stiU agree 
wdth. 

Mr. Hook. Yes, sir. That is my personal opinion, I am speaking 
for nobody but myself. 



10812 CONCENTRATION OF ECONOMIC POWER 

Mr. O'CoNNELL. But what you have described as being the situa- 
tion exists in England you wouldn't advocate in this country, in other 
words, a set-up which would permit of price fixing by industry under 
or with governmental sanction or aproval? 

Mr. Hook. I certainly wouldn't under our conditions. 

Mr. O'CoNNELL. I mean the main condition, though, is one of law, 
it seems to me. 

Mr. Hook. Yes. 

Mr. O'ConNell. You wouldn't advocate changing the law. 

Mr. Hook. No; I wouldn't advocate changing the law in that 
respect. I would advocate a wider permission with respect to con- 
sultation and dissipate the fear that when businessmen get together 
to discuss what I tliink is perfectly legitimate, costs, the relation of 
cost to price, and so forth, they wouldn't be under the fear of prosecu- 
tion or criminal offense. 

Mr. O'CoNNELL. You don't subscribe to Adam Smith's old dictum 
to the effect that businessmen seldom get together for any purpose but 
what the result is conspiracy to fix prices. 

Mr. Hook. No, sir; I don't. I have had too much experience with 
businessmen and I am convinced that the great vast majority of 
businessmen in tliis country are trying to do a constructive, helpful 
job in the public interest and not to act against public interest. 

Acting Chairman Williams. As a matter of fact, don't you have 
these consultations that you talk about? 

Mr. Hook. Yes; we do. We talk costs and conditions of the 
industry, but we are scared to death to discuss price. 

Acting Chairman Williams. There ought to be a very definite 
relation between cost and price, oughtn't there? 

Mr. Hook. Naturally, you are supposed to use your judgment if 
you find that the relationship between cost discussion — and Mr. 
Williams, that is generally on detailed parts of the operation, not on 
the over-all cost. I have never heard a discussion in any group of 
the total cost. Generally, it is with respect to an operations cost. 

You know, for instance, that in the steel industry we pickle sheets. 
I am just using that as an illustration; or we open-anneal sheets. 
Well, what kind of a furnace do we use and what is the operation cost 
of that particular operation? 

Acting Chau-man Williams. Do these English mills manufacture 
a comparable product to yours? 

Mr. Hook. Well, they didn't. They are getting nearer to it now 
as a result of experience. 

Acting Chairman Williams. How does the cost of production 
there compare with yours? 

Mr. Hook. I am not competent to answer that question, Mr. 
Williams, because our job over there is to assist them in managing 
the mill with respect to their operation and not go into the details of 
cost. I suppose our men in our subsidiary in England do discuss 
must at times discuss, with the English manager their costs, but I 
have no figures; it would be a mere guess. I think the answer to 
that, Mr. Williams, must be this, that the very fact that they have 
to set up the tariffs which they do against the special products of the 
United States indicates that their cost has not yet got in line with 
ours on those special products. 



CONCENTRATION OF ECONOMIC POWER 10813 

Mr. Reynders. May that fact not be due to the competition which 
they experience ffom Germany and Belgium? 

Mr. Hook. Germany and Belgium are not competitive in these 
high-grade sheet products that I am talking about, although Germany 
is naw making a very much better hisfh-finished sheet than they did 
3 years ago. 

Mr. Reynders. They have installed a number of units. 

Mr. Hook. They have put in one of our mills and their product 
has improved. 

Acting Chairman Williams. How does this base price of sheets 
get established? 

Mr. Hook. How does the base price of sheets get establif hed? 

Acting Chairman Williams. Yes. 

Mr. Hook. Well, that has been over a period of years. 

Acting Chairman Williams. From year to year? 

Mr. Hook. For instance, we decide on the specialty products which 
we make. We may be the leaders in a particular grade. You remem- 
ber I mentioned a pure iron, ingot iron. 

Acting Chairman Williams. Let's just take the ordinary sheets. 

Mr. Hook. The units that are the biggest producers of that grade 
would establish their price, dependent of course upon their costs and 
the economic conditions that exist at the time. 

Acting Chairman Williams. That price is published and becomes 
the base price for the industry. 

Mr. Hook. No — well, it becomes 

Acting Chairman Williams (interposing) . The base price. _ 

Mr. Hook. The base price — I am glad you brought that point up — 
what it is, is a statement to the buyer in effect that for the period 
which those prices have been established that they will not go any 
higher. 

Acting Chairman Williams. \Miat is that period? 

Mr. Hook. Generally a quarter, three months. There have been 
cases in our industry when the competition was so severe, in automo- 
bile sheets early in this year, for instance, that the automobile industry 
was able to get some of the units and we ail followed, to agree to sell 
at the same price for shipment up to December 31 of this year. Now 
that doesn't happen very often. It is generally a quarter because we 
can't anticipate, we can't take a chance. 

Acting Chairman Williams. To what extent has the realized price 
followed the base price? 

Mr. Hook. In that particular — do you mean the quoted price? 

Acting Chairman Williams. The price that is realized by the 
industry, the actual price. 

Mr. Hook. The announced price. Well, it hasn't followed it un- 
fortunately, Mr. Williams. For instance, durmg this quarter in some 
weeks on certain grades that are sold to the automobile industry they 
have sold $8 under the announced price. That came about by some- 
body trying to get a good-sized order, I suppose, and they made a 
lower price than tb^ announced price. Somebody found out — and 
you do find those things out by contact with the buyer — and in order 
to get his share he may have^ gone a little bit lower. Finally there 
was that seesawing back and forth until they finally got down to a 
point where it was so low that nobody wanted to go any further and 
it just stopped. 



10814 CONCENTRATION OF ECONOMIC POWER 

Acting Chairman Williams. Then what did you do — establish a 
new base price? 

Mr. Hook. No; not for that period, because it was on contract. 

Acting Chairman Williams. For the future? 

Mr. Hook. Nobody has announced for the next quarter yet. 

Acting Chairman Williams. I am talking about the policy that 
was followed. You got down to the low point below which nobody 
wanted to go. Then what did the industry do? 

Mr. Hook. Then somebody feels that the base has been estab- 
lished and they will announce a price probably on that base unless 
they feel they can get it up and announce somewhere between the 
low that it reached and the announced prices that were supposed to 
be in existence. 

Acting Chairman Williams. Do you feel in that competition there 
have been considerable sales below cost? 

Mr. Hook. Yes; I do. 

Acting Chairman Williams. What do you think about that policy? 

Mr. Hook. I don't like it. I don't think it is a good policy. 

Mr. O'CoNNELL. Do you think it is a good policy to deviate from 
the posted price? 

Mr. Hook. Well, I don't think it is a good policy. 

Mr. O'CoNNELL. You wouldn't be the first one to deviate, would 
you? 

Mr. Hook. None of us think we are the first, and sometimes I think 
we are misled, unquestionably. We think that we have the infor- 
mation, possibly we think that "X" company has made a reduction 
of $2 a ton and the man in the field confers with the management at 
home and says, "Here, we are going to lose out with XYZ company 
if we don't meet this competition," and management authorizes that 
it be met and in some instances they may decide to go a little lower. 

Mr. O'CoNNELL. I take it the ideal of this posted-price system 
would be one in which there would be no deviation by any of the 
industry from the posted price. 

Mr. Hook. Of course that would be ideal for the individual com- 
panies — I am talking now about its being up to the individual com- 
pany to maintain its price. That doesn't mean that somebody else 
can't post a price which is lower, but if we want to get the business 
we know that for an identical product we can't get any-thing better 
than the other fellow. For instance, let, me illustrate. Suppose you 
were selling Ford cars on the east side of the street and I was selling 
Ford cars on the west side of the street and your price for Ford cars 
was $500; well I couldn't get $510 for my car on the other side of the 
street. The same thing happens when you are selling identical prod- 
ucts in the steel industry. 

Mr. O'CoNNELL. It has occurred to me from time to time as we 
have listened to this testimony that any posted-price system which is 
operated to perfection is one in which you have a minimum competi- 
tion. We have heard from time to time in this steel hearing about 
the extent of underselling or price concessions being obtained off the 
base price and at one point it was indicated that that was the extent 
to which price competition really existed in the industry. 

Mr. Hook. I can't agree with that. I think you may have mis- 
interpreted what some of us in the industry have said. What in 



CONCENTRATION OF ECONOMIC POWER 10815 

effect is posted price is a guaranty, or it is announced to the buyer, 
that he won't be charged any more than that during that period, and 
below it he can, if he can work it, get lower prices, and you know that 
that is why realizing price and posted price are not the same; and there 
has been very severe, and I call it severe, not lively but severe com- 
petition in the steel industry because we have through technological 
development over a period of time developed our mills to produce 
very large tonnages. Of course we are all anxious to run those mills 
as near full as we can and as a result of that desire to get business 
units will quote below what is known as- the established price. I want 
particularly to call your attention to the fact that — excuse me for 
impressing it or trying to impress it upon you — this announced price 
is really a guaranty for that period of time that they won't be sold 
any higher than that, so that the buyer knows that at least for that 
period he won't have to pay any more than that. 

Mr. O'CoNNELL. Surely; but if the system works to perfection that 
is al^o the realized price. 

Mr. Hook. Yes; if it works to perfection. 

Acting Chairman Williams. To what extent has the base price 
through the years been reaUzed? How does it run? What percentage 
of the business is conducted on the basis of base price as compared 
with the price below, cut prices? 

Mr. Hook. Mr. Williams, I would be guessing at that. 

Acting Chairman Williams. Of course you all try to realize the 
base price. 

Mr. Hook. We try to get the base price if we can. 

Acting Chairman Williams. What I was trying to find out was to 
what extent you reaUze whether it is a substantial part of your 
business or whether it is only a very minor part of it that is sold on the 
base price. 

Mr. Hook. That depends upon the period, the conditions, the 
general business conditions at the time. You realize that. 

Acting Chairman Williams. I am trying to find out whether or 
not the business is conducted generally on the base price or whether 
that is the exception. 

Mr. Hook. No; I would say that generally the company that 
annoimces a base price — I am not talking of these very unusual com- 
petitive periods, for instance, like the one we have been experiencing 
since last May when there was a terrifically competitive situation. 
The disturbance the year before and just the year before when changes 
in conditions created a competitive situation make it hard for me to 
say what percientage was sold on the announced price. Take the 
period we are going through right now, the fourth quarter of 1939. 
The volume of business is such that I judge that the mills which have 
open spaces on their schedules which would permit them to roll in the 
fourth quarter for delivery by^ say, December 31, will get the full 
announced price for practically all of the tonnage, I imagine, that they 
sold ; that is so simply because you are dealing with supply and demand. 

Mr. AviLDSEN. Mr Hook, isn't it also a fact that at the present 
time some small producers, nonintegrated producers, are selling their 
product above the posted price of the United States Steel Corporation, 
for example? 

Mr. Hook. Yes. 



124401 — 40— pt. 20 e 



10816 CONCENTRATION OF ECONOMIC POWER 

Mr. AviLDSEN. In other words, your statement that you can never 
get more than the posted price isn't exactly true. You can get more 
than the posted price at times when there is an unusually heavy de- 
mand and deliveries can't be made at the posted price. 

Mr. Hook. I am glad you asked me that question. I realize I might 
be misunderstood. Take that situation you are talking about. 
When those companies announced their price for the fourth quarter, 
that meant that they could contract for that period, their buyers 
could contract for that period. Now as to any buyer who did not 
contract for that period, during the time that such price was in effect, 
then the mill might change the price and this new price would become 
a new posted price, don't you see? So that thereafter a buyer could 
buy only at the new posted price. Increased cost of raw materials 
and other things might be such that even after making an advance 
above the quoted price of, say, September 1, the mill might make 
another one as of October 1 ; the buyers then who wanted to buy their 
product would cover the balance of the quarter and if they didn't, 
then the miU might raise on October 27, another dollar; that isn't 
inconsistent with what I said. Do I make it clear? 

Mr.' AviLDSEN. Yes, sir. 

Mr. Feller. I should like to ask this question. I am not sure that 
the record indicates clearly the extent of group cooperation that you 
suggest as proper to the industry. You have talked about costs and 
about relation of costs to price. In your letter to Mr. Berle you speak 
about the right of group cooperation with respect to prices.^ I under- 
stood from your testimony that you do not suggest that there be any 
agreement with respect to price. I take it what you mean there is 
that you do not suggest that each company agree to be bound legally 
by prices which are arrived at, but am I correct in saying that what 
you do suggest is that industry be permitted to get together in con- 
fidence and discuss what the price ought to be? 

Mr. Hook. No. 

Mr. Feller. On the basis of cost. 

Mr. Hook. No ; what they ought to be, but what would be indicated 
as a fair price under the circumstances, because when you say what 
they ought to do, that indicates that I mean agreement, and I am not 
in favor of that. I think in America we have built up our industrial 
system on freedom of action, freedom of competition. 

Mr. Feller. To be precise, you feel that industry should be per- 
mitted to get together and discuss what a fair price would be on the 
basis of cost. 

Mr. Hook. That is right. There would be differences of opinion, 
no doubt. 

Mr. O'CoNNELL. What do you think the result would be as a 
practical matter? You would have wide differences of opinion and 
certain differences in cost. Where would the consumer come out in 
terms of business? 

What kind of price would you have as a result of that form of 
cooperation? 

Mr, Hook. I think we would have a fair price, sir. 

Mr. O'CoNNELL. A fair price from whose standpoint? 

> "Exhibit No. 1425" appendix, p. 10998. 



CONCENTRATION OF ECONOMIC POWER 10817 

Mr. Hook. To the consumer, because it is in the interest of the 
industry to see that prices are fair as related to cost, and if you were 
unwise enough to set prices which would stop the sale of the product 
upon which your business is dependent for profits, why, you would 
kill the goose that laid the golden egg. 

Mr. O'CoNNELL. When industries get together and discuss prices 
and consider the cost factor, and you would idtimately arrive at a 
f airpric e, it would be a fair price as related to someone's cost. Whose 
cost? 

Mr. Hook. You get the general average. 

Mr. O'CoNNELL. Would a fair price be a price that would continue 
in business all the units that would be sitting together at a particul^ar 
time? 

Mr. Hook. I couldn't answer that. We have put out of com- 
mission in the steel industry a tremendous amount of capital assets. 
You know, for instance, that in our end of business — I mentioned in 
the memorandum which I read at the beginning of my testimony 
that certainly at least $200,000,000 of old equipment was made 
obsolete by the introduction of this new system. Well, the industry 
is taking its medicine, and we smile because we know that that is the 
American way of doing things. That is why we have better products 
and lower costs, and why more people have been able to buy the things 
that enter into raising their standard of living. 

Mr. Reynders. In such a discussion of costs is it your feeling that 
the general information as to what real cost is would be increased? 
There might be some producers overlooldng some items of cost, and 
would not be taking account of them, but in a discussion of cost, they 
would have the benefit of the discussion of the industry as to what a 
real cost is. 

Mr. Hook. I will express myself on that. I have been one of those 
who have advocated that when you are talking about cost, it means 
all your obligations as to cost, and in talking in our own organization 
we always refer to the preferred dividends as interest, not as dividends, 
because you know that there are mighty, mighty few issues — I don't 
know of any principal issues today— of preferred stock that are not 
cumulative, and you have got to pay the dividend sooner or later. It 
is just as much a part of your cost as the interest on your bonds, 
although you may be privileged to defer it for awhile. But before the 
common-stock holder, who takes the enormous risks in industry, gets 
a penny, all those back payments on preferred interest must be made 
up. Therefore, we must take that into account in figuring our cost, 
and I am afraid many times those things are forgotten. 
' Mr. Reynders. Would the same thing apply to such items as 
obsolescence, for instance? 

Mr. Hook. Yes. 

Mr. O'CoNNELL. I don't want to labor the point, but I still don't 
quite understand exactly the sort of fair price you would get. I would 
assume that in an industry such as steel there would be varying costs 
as between different producers. 

Mr. Hook. Yes. 

Mr. O'CoNNELL. And if the industry were in a position to sit down 
and discuss what a fair price would be, based upon costs, I would like 
to know whose costs. 



10818 CONCENTRATION OP ECONOMIC POWER 

Mr. Hook. Well, that comes as a result of discussion. You know 
who are the economic units in the industry and you know darn well 
that, taking it as a whole, the economic unit can get a better price for 
your product in relation to cost than the other fellow, and if the ma- 
jority in the industry, by location and by efficient methods, have costs 
that are lower than yours, have very materially lower cost — I am 
talkmg of materially lower — you realize you have got to get to work 
and change your equipment and get on the bandwagon, or eventually 
you will be out of it. 

Acting Chairman Williams. That would be cost based on the most 
efficient and economical administration. 

Mr. Hook. Several units, not only one; the more efficient units. 

Mr. O'CoNNELL. I rather queried that, in practical operation, 
because, as I would understand it, the situation would be one in which 
the efficient, the less efficient, and the least efficient would be all sitting 
down together to determine what a fair price was, and I am wondering 
whether it would be possible that a fair price so arrived at would be a 
price which would be one which would be based, as a practical matter, 
on not the most efficient producer, but on the least efficient producer, 
one which would keep all the units in business. 

Mr. Hook. That wouldn't happen, not in this country. 

Mr. O'CoNNELL. You mean the system might break down? 

Mr. Hook. I think to some extent that has happened abroad. I 
think they were late in taking advantage of technological develop- 
ment which was brought out over here simply because they didn't 
have the nerve to throw their capital assets in the wastebasket and 
make the necessary capital expenditures to go ahead, and it is only 
for that reason that we were able to get in. It is a difference in attitude 
of management. It is very different. My experience over there and 
my experience with American management is that American manage- 
ment is continually and everlastingly looking for ways and means of 
making a better product, in order, of course, to have their product 
favored, and for better means of producing at lower costs so that the 
product could be sold at a lower price and more people would be able 
to buy. 

Mr. AviLDSEN. Let's take the case of your own company. You 
are responsible for some great technological improvements in the 
manufacture of sheets. 

Mr. Hook. Yes. 

Mr. AviLDSEN. Do you think that you would have been inspired 
to risk all that money and to do all that work to bring about those 
improvements if you were sitting in with a group, consulting on cost, 
and you were pretty sure that everybody in that group was going to 
get a fair price for his product? Wouldn't that have the effect of 
removing the incentive for you to do the very things you did in your 
industry? Didn't you make those improvements to get a greater 
volume of business? 

Mr. Hook. Oh 

Mr. AviLDSEN (interposing). I think those are the things Mr. O'Con- 
nel has in mind. 

Mr. Hook. Maybe I can make that clear. I am glad you asked me 
that question. 

Now, let's go back to — weU, let's take a recent development. It 
happens that this is a patented process. I think I mentioned it here 



CONCENTRATION OF ECONOMIC POWER 10819 

last Friday. We call this new sheet Zinc-grip. By this new process, 
which was originally developed by a Polish engineer — and we sent men 
over to Poland several years ago to see his little unit, really more or 
less of an experimental unit — he hadn't been able to develop it to make 
wide sheets and long sheets — so we sent over and investigated it and 
saw the merit of it, that it could be developed, so we purchased the 
rights for the United States and an interest in the European rights. 

Now, we spent probably, as I said, about $300,000 before we ever 
made a commercial sheet. But we did that because we believed that 
in that special product — that isn't a commodity product, that isn't 
anything that I would feel that I had to sit down with my competitors 
and discuss, unless we licensed them. But if we were operating that 
process ourselves — and during the development period, we certainly 
would want to retain the right to ourselves until we had developed it 
and developed our costs. But in that particular sheet — for instance, 
we can take a galvanized sheet. Here is an object. Now, formerly 
it was necessary, for certnm products, to make it out of a black sheet, 
pickle it, take the oxide off, and stamp it, and then dip it in a galvaniz- 
ing process, which took a great deal more zinc and was much more 
expensive. If we could make a galvanized sheet, the coating of which 
would stick when you stamped it, and do that all in one operation, you 
can see what that was going to save the producer of the finished article. 
He would then be able to take a coated sheet and stamp it right out, 
instead of taking a black sheet, pickling it, then stamping it, and then 
dipping it, largely by hand. 

Now, in that case, it was up to us to determine what is a fair price, 
and that is what we are trying to do, to sell the product and still secure 
for ourselves a fair return on that sale. What we have been discussing 
here is the general run-of-mill, run-of-mine product. 

Mr. O'CoNNELL. What I have in mind is — there is nothing very 
mysterious about it — I was always under the impression that ■ the 
only fair price is one determined by the forces of competition between 
sellers on the one hand, and possibly between buyers on the other, and 
it occurs to me that what you are suggesting is at least a variation of 
that, and when I suggest to you that it might result in a fair price 
based upon what some producer other than the most efficient producer 
might get, you say it can't happen here. It is the fact that it has 
happened in other places, and I am not entirely convinced that it 
might not happen here. That is my only point. I am suspicious of 
consultations for the purpose of fixing' a fair price — I am sorry I used 
the word "fixing," but even to ascertain what a fair price would be, 
whether it be by industry, of whether Government takes a hand or not. 
I just think it is a variation from what we hope to have under a com- 
petitive system, because competition is supposed to be regulative of 
price, and I am wondering whether, under what you think would be 
desirable, you would have the same sort of competitive situation we 
hope to have here, or whether we would have something entirely 
different. 

Mr. Hook. My experience with American manufacturers is that 
they realize definitely that lower prices, as far as they_ can get lower 
prices consistent with fair-profit, and that such discussion would only 
encourage further technological advance, because you could not get 
the American manufacturers, those who have the efficient units, to 
agree to a price which would be high and stop competition. It just 



10820 CONCENTRATION OF ECONOMIC POWER 

operates that way. We have to be reahsts about these things, and 
Imow just how it happens, and that is the way it does happen. 

Mr. O'CoNNELL. I can conceive that some manufacturer or manu- 
facturers who didn't take as long run a view of the situation as you do 
would be, in a given moment, very happy to accept a price based 
upon the costs of the less efl&cient producer. It merely, temporarily 
at least, increases the margin of profit for the more efficient one. But 
you don't think it would work that way. 

Mr. Hook. I think the man who has advantages by location is 
certainly entitled, through efficient management and operation, to a 
greater profit in his unit if he can get it. 

Mr. O'CoNisTELL. Then he would get that by accepting, as a fair 
price, the price based on someone else's cost. 

Mr. Hook. I am talking now about the exceptional producer. I 
am not talking about the group of the most efficient producers. 
There might be some one producer who would have a considerable 
advantage over the others. 1 don't think that is fair to take his cost 
as indicating what a fair price should be. 

Mr. Reynders. Another way to look at it, Mr. Hook, is "that the 
most efficient producer, ia respect of equipment and geography, would 
wish to receive a reasonable profit. 
Mr. Hook. That is right, 

Mr. Reynders. And the less efficient would receive less than a 
reasonable profit. That is another way to look at it. 

Mr. Hook. Then you get back to what is a reasonable profit. 
Mr. Reynders. You can put it down as five, six, or seven dollars 
a ton. 

Mr. Hook. I am perfectly williag to express my personal opinion 
on it. 

Mr. Reynders. I mean, it doesn't follow that because you have 
sat down to discuss costs, that you arrive at a figure which would give 
the less efficient a reasonable profit. 
Mr. Hook. No, indeed. 

Mr. Reynders. That is what I am trying to bring out. 
Mr. Hook. No, sir. 

Mr. Reynders. The most efficient may get a reasonable profit, 
but the less efficient would be apt to get what would be generally 
considered as less than a reasonable profit on their investment. 
Mr. Hook. That is right. 

Mr. O'CoNNELL. Well, I still don't know whose costs this fair pnce 
would be determined by. You say it won't be determined by the 
most efficient producer, you don't think it would be reasonable to 
expect the industry to determine it on the least efficient. Do you 
suppose it would be a norm, something along the middle? 
Mr. Hook. I think it would be above the middle, sir. 
Mi*. O'CoNNELL. Above the middle? 

Mi". Hook. Above the middle. I think it would be an average of 
the most efficient producers, of the group of most efficient producers. 
This is all theory, you know. What I am trying to sayv to you is this, 
particularly, that from my own experience and my knowledge of 
business men in America, a proper consultation without agreement, 
in which no obUgation rests to agree — in feet, with a prohibition as to 
agreement, but a fair discussion of all the factors that enter into costs, 
is, in effect, a thing to be desired, and is not against the public interest. 



CONCENTRATION OF ECONOMIC POWER 10821 

Mr. O'CoNNELL. Of course, I realize that, under the existing laws 
that we have here, the devices in agreements which have the effect- of 
restraining trade, and so forth. Broadly spealdng, it seems to me 
from the point of view of the public interest, anything short of agree- 
ment which has the same economic results is just as much to be 
discom'aged. 

Mr. Hook. Let me see if I can clear up in your mind what you 
don't quite get clear with respect to what I am trying to say. I 
hadn't brought this into it yet. This was the point. We talk about 
purchasing power in this coimtry a great deal. Now, we are apt to 
forget that management has an obUgation, a verj, very definite 
obligation, to the investors who have put money in its hands — they 
reaUy have loaned management this money, expecting them to use 
it properly and effectively to return them, that is to the investors, 
wages, call it income or dividends, or call it what you like. 

Certainly, the purchasing power of the investor — just think of the 
millions of them that we have who invested their savings in industry — 
has been seriously affected in the past few years due to the fact that 
they have had no income with which to buy things and carry on the 
circle, and sometimes I think that has been due to the lack of under- 
standing on the part of certain parts in management with respect to 
these items of cost which they have ign,ored. I think to some extent 
that has happened, but I think management has an obligation to 
secure for its product in the more efficient units certainly sufficient 
to give a reasonable return. 

We are always talking about that reasonable return. What is it? 
It is an indefinite sum that I think certainly if we are properly financed, 
and we have no overcapitalization — I am assuming all those things — 
that we ought to earn 10 percent on our common stock and surplus, 
that is the common-stock holders' equity, and if you reserve 5 percent 
of it for reinvestment in the plant and you distribute 5 percent of 
those earnings to the investors, that certainly is not an unreasonable 
amount. That seems to me a minimum that we ought to aim at 
because in periods such as we have gone through in which we have 
these very heavy losses as we have had in the steel industry, working 
capital has been depleted, we have got some way or other at some 
time to have a chance to make that up and get some of it back. 
You have taken it out of your savings and you want to build those 
savings up again. Industry has savings, its surplus is savings just 
as we individuals have to buUd up a bank of savings if we want to 
get any place. 

Mr. O'CoNNELL. I have no difficulty on the question of what the 
obligation of management might be and we possibly are not out of 
accord at all, but I don't understand that under our system capital 
as such has any right to a particular return. 

Mr. Hook. No 

Mr. O'CoNNELL (interposing). I mean it depends upon the man- 
agement to some extent. I think it would be nice, I think it would 
be fine if we could all get 10 percent. 

Mr. Hook. I say we ought to aim at that. 

Mr. O'CoNNELL. Whether or not you get it depends upon, or 
should depend upon, the ability of the managers of that money to 
compete with other managers, other capital, for return. 



10822 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. Right there, would you mind if I just took a figure 
here which I would like to present to you to illustrate what concerns 
me and why I think at times due to lack of understanding — I don't say 
misunderstanding, a lack of understanding — we reach prices which 
are too low. I have here the earnings of each of the 10 larger com- 
panies in the steel industiy, starting with '29 through '38, and I 
was interested to see what during that period they earned on the 
stockholders', the common-stock holders' investment, that is, on 
the common stock and surplus. Now it varied with companies 
of course, but none of them earned, even the most efficient here, 
those two companies that have had the highest earnings during 
that period earned for the period from 1929 to and including '38, 
the one, 8.63 percent and the other 7.29 percent. We earned 2.33 
during that same period. Another very large unit earned 0.62 
percent. Another lost 0.233 percent. Another lost 0.381 per- 
cent. Another one, a large unit, lost 0.308 percent. The largest 
unit, 0.49 percent; another lost 0.153 percent; another made 0.115. 
The average of 8 of those 10 companies from whom we could get 
accurate figures so there would be no question of these figiires was 
an earning of 0.66 percent during that 10-year period. Drop out 
1929 because it was in that other 10-year period, just drop it out for 
the moment, and take the 9-year period, 1930 to 1938, and the 
average of the 9 companies was a loss of 0.23 percent on the stock- 
holders' investment. With a big industry such as the steel industry, 
with its enormous investment per ton of product and per man em- 
ployed — as you know, for mstaiice in our branch of the industry we 
have got to invest $11,000 per man before we can go into the busmess. 
It may be lower in some of the divisions of the industry, but the 
average itivestment would certainly be somewhere around $9,000 or 
$9,500 per man employed. Where are you going to get this money? 
Well, unless you make an earning record, unless the industry can 
earn enough to encourage people to put their savmgs into it, you 
are going to stop the advance of the industry. 

Mr. O'CoNNELL. We are all in accord that it is desirable for in- 
dustry to make money. I was merely querying what you suggested 
^ regards price would be calculated on the one hand to produce the 
result that you want and on the other hand to protect the system that 
I understand we all want to keep and to protect the interests of the 
general public. You think it is calculated to do both. I am sure it 
is calculated to do one, I am not so sure it is calculated to do the 
other. 

Mr. Hook. Well, I base my opinion, which is a personal opinion, 
simply on my experience and the operation of the American economic 
system. 

Mr. O'CoNNELL. You have the advantage of me there. 

Acting Chairman Williams. What do you think that very small 
return there, perhaps loss in the last 9 years, is due to in the steel 
industry? That is a rather unusual thing, isn't it, to have a loss over 
the entire industry for a period of 9 years? 

Mr. Hook. I am afraid maybe you wouldn't agree with some of 
the reasons that I might put forth. 

Mr. O'CoNNELL. Would you have any objection to having that 
tabulation from which you just read put in the record? 



CONCENTRATION OF ECONOMIC POWER 10823 

Mr. Hook. No; not at all; in fact, I would be very glad to have it 
in the record. 

Mr. O'CoNNELL. Have you any objection for that to go in? 

Mr. Feller. No. 

Acting Chairman Williams. It may be received. 

(The tabulation referred to was marked "Exhibit No. 1426," and 
is included in the appendix on p. 11001.) 

Mr. Hook. Of course you had a low volume of general business. 

Acting Chairman Williams. I understand that, but independent 
of that. I don't believe you find over the general field a loss, or 
would you generally, in the industry field? 

Mr. Hook. We are in the capital-goods industry. 

Acting Chairman Williams. I didn't intend to get into a full 
general discussion of that entire field. I was just wondering if you 
had something specific as a reason for that rather Unusual situation. 

Mr. Hook. Making a general statement, I say there has not been 
the encouragement to the private and corporate investor to expand 
in the capital-goods field for a number of reasons. I think one of 
them is that there are certain provisions of the Securities andExchange 
Act which I think have made industry hesitate to go ahead, that is 
directors and officers.^ I think very definitely that the manner in 
which the National Labor Relations Act, for instance, has been ad- 
ministered has had a very definite deterrent effect. I think that the 
fear of Government competition as a result of the attitude, for in- 
stance in one field, public utilities, has had an effect; we don't know 
how far that might be expanded, and ther^ has been the fear there, 
so that there are any number of things which I feel have affected the 
flow of capital into production and trade. I have here, for instance, 
a chart showing industrial production starting in '26. We often use 
that as a base. If you will notice, the line of consumer goods produc-- 
tion and the line of capital goods production parallel each other up 
there to 1930. Then we had this big drop in '31. 

This is the line of capital goods, and here is your line of consumer 
goods, so there is a great vacuum in here as between the relationship; 
there is a big difference in the relationship between capital goods 
and consumer goods during this period. I was interested to find 
out what happened to capital financing. If you will take the curve 
showing capital financing during that same period you will see that 
there is a big vacuum, as I like to call it, or still that wide divergence 
between industrial production and new capital financing, in other 
words your new capital financing and your capital goods production 
followed along; if you put one on top of the other, they pretty nearly 
match. To me that shows that the private and corporate inves- 
tor did not have the confidence that was essential to the production 
of capital goods. He didn't want to take the chance, the risk, as he 
wasn't getting any return. 

Mr, O'CoNNELL. Mr. Hook, when Mr. Weir was on the stand ^ he 
testified as regards the steel industry in two particulars that rather 
surprise me in connection with what you have had to say, and one 
was that something over a billion doUars of new capital had been 

' In an explanatory note subsequent to his testimony Mr. Hook stated: "I had reference to the Securities 
Act of 1933, not to the Securities Exchange Act of 1934. The latter does not affect new financing as does 
the former.— C. R. H. 

' Mr. Weir's testimony appears In Hearings, Part 10. 



10824 CONCENTRATION OF ECONOMIC POWER 

put into the steel industry within this period to which you are re- 
ferring on the one hand. 

Mr. Hook. Eight. 

Mr. O'CoNNELL, And he also testified that the industry in terms 
of its capital equipment and ability to produce and all that sort of 
thing was better than it ever was before. 

Mr. Hook. Correct. 

Mr. O'CoNNELL. That wouldn't indicate there was any real shortage 
in available capital. 

Mr. Hook. There is a very definite explanation and I am glad 
you asked me that question because during the period of 1920 to 1929, 
inclusive, we will say, when the manufacturing industry was making 
a reasonable profit, the investor felt he had a chance for a return on 
his investment. Well, we had a record in the steel industry of earnings 
which wasn't large by any means. That is shown by the records we 
have here of earnings in the industry, for 1920 to 1928; it was only 
5.1 percent on the total investment in the industry, but yet there was 
an earning record there. Therefore, in the early part of the depres- 
sion the industry still had borrowing power. As you go along and 
if we don't get to the point where this industry can make better 
earnings than it has shown in the last several years, then we will have 
our hands full trying to get anybody to put their savings into our 
industry for technological development. Furthermore, a large part, 
and I said in my opening statement approximately $500,000,000 dur- 
ing this last 10 years, has been put into these new continuous mill 
plants. Well, if a process is developed with one or two units going 
into it they simply force out the inefficient units, therefore $200,000,000 
of capital went into the wastebasket in the form of those old steel 
mills, and to build one mill Mr. Weir testified to the fact that their 
one mill at Detroit cost $25,000,000. Am I correct in that? He 
testified to that effect, so you see one of these units costs a lot of money. 

Acting Chairman Williams. Have you any idea what the capital 
structure of the steel industry is? 

Mr. Hook. What do you mean "the capital structure"? 

Acting Chairman Williams. The capital invested in it. 

Mr. Hook. It is here in the report, Mr. Williams. 

Mr. AviLDSEN. I think it is about $4,000,000,000. 

Mr. Hook. That is about right. 

Acting Chairman Williams. Is there any feeling anywhere that 
that capital structure is too heavy, in other words that the invest- 
ment is so large that it is very difficult to obtain a reasonable return 
on that investment? 

Mr. Hook. No ; not if we have reasonable operating conditions we 
ought to be able to handle it. 

Acting Chairman Williams. The fact remains that you have hot 
done it in the last 10 years. 

Mr. Hook. The investment per ton of capacity is not high. 

Mr. Feller. Mr. Hook, I think perhaps I might point this out, 
that in connection with your answer to the chairman as to the reason 
for the profit showing of the industry over the 10-year period, '30 to 
'39, that some of the forces to which you refer have not been in 
operation over the whole of that period. The Securities and Exchange 
Act, for example, began to operate in 1934, about midway of the 



• CONCENTRATION OF ECONOMIC POWER 10825 

period. The National Labor Relations Act began to operate about 
1936, really in 1937 after the decision of the Supreme Court. So 
the forces that you are referring to have operated over about half 
of the period. Taking that half of the period, say 4 Oj 5 years, 
the industry did make a profit in 1937, one of those years, and ap- 
parently is going to make a profit in another one of those years, 
1939. I merely make that observation and point out that perhaps 
the explanation must also be sought in some other factors'. 

Mr. Hook. Well, I want to call your attention to the fact, too, sir, 
that the spring of 1937 was when we had the greatest upset in indus- 
trial relations in this country that I have ever seen in the history 
of the country and I think it had a very serious effect in stopping that 
increase in general production which had started. Going back to 
the earlier period it is my very definite opinion that the depression 
which began in, say, '30, the late fall of '29, would have come to an 
end far sooner if some of these restrictions on management had not 
been instituted. 

Mr. Feller. Of course that is a matter which I think none of us 
are perhaps fully competent tO' decide upon. A question ot what 
woirfd have happened is something else. 

Mr. Hook. As long as you have asked me that question I just 
want to call your attention to a chart here. I made a statement in 
the beginning of this year which I am perfectly willing to restate. 
Right along that line, on the first of this year, several papers asked 
me to make a statement with respect to what I thought of 1939. I 
made this statement [reading]: 

There is a great accumulated need for the things that sustain and will improve 
our standard of living. This statement is verified when we chart the ftatistics 
showing industrial production and separate consumer goods and capital goods, 
using 1926 as a base — or 100. It is remarkable how closely the production of 
consumer goods and capital goods parallel each other in the years 1926 to 1929, 
inclusive. But from the middle of 1930 to the present time the lines have drawn 
widely apart. This shows conclusively that the great deficit in employment is 
the result of the deficit in capital-goods production. 

And if we plot upon the same chart the statistics showing new capital financing 
for the years 1921 to 1929, inclusive, an amazing deficit in new capital financing 
for the period 1931-1938, inclusive, is clearly portrayed. 

It is obvious from such an analysis that unemployment will continue to be 
severe until there is a flow of savings into capital goods through new capital 
financing. 

Mr. Walter Lippmann in his article of December 22nd says: "We have so 
much unused capital that the Government has just borrowed $100,000,000 for 
three months at practically no interest whatever." 

It is my firm conviction that the accumulated need will be converted into de- 
mand, and corporate and private savings will flow into production and trade with 
the resulting transfer of employable men and women from Government relief 
rolls, supported by taxation, to the payrolls of private industry, when confidence 
is restored — by assuring corporate management and private investors that the 
following things will be done: 

1 — Action by Congress to establish a sound and fair labor relations policy. 
The disturbed labor relations which have existed during the past few years have 
been a major obstacle to recovery. 

2 — Assurance that there will be a halt to the growing tendency to employ the 
taxing power for regulatory rather than for revenue purposes. Because the fed- 
eral income tax law has been made so complicated that it is almost unworkable, 
a commission of qualified legislators and informed laymen should be appointed 
to study the entire field of taxation. In my opinion, broadening the base is one 
of the most helpful things that could be done at this time. 



10826 CONCENTRATION OF ECONOMIC POWER 

May I say there, Mr. Chairman, that it is very encouraging, I am 
sure, to industry as a whole and certainly has been to me to see the 
very constructive manner in which Mr. Hanes, acting for the Treasury 
Department, has invited industrial management and others to confer 
informally with respect to what might be done to help our whole 
tax structure. That is the kind of cooperation that I have tried to 
indicate that I thought was very desirable and very helpful. [Con- 
tinues reading:] 

3. Elimination of government competition with private enterprise, and where 
such competition exists that the government be compelled to conduct its business 
by making the same charges to the cost sheet which private enterprise is required 
to make. There is nothing more unfair than to tax private enterprise and use 
these funds to put private enterprise out of business. 

Mr. O'CoNNELL. I take it you are referring at least to some extent 
to T. V. A., and it might be proper — you might not know this — that 
T. V. A. at least has, as I understand it, recommended to Congress 
that it be required to pay taxes to the areas in which it is operating, 
along the same basis that privately owned public utility companies 
would be doing. That is just as an interpolation. 

Mr. Hook. I think they ought to be charged interest if it is neces- 
sary to borrow from the public to make the capital investment, just 
the same as private industry would have to do, otherwise you have a 
fallacious cost. [Continuing to read:] 

4. Indicate to the public that the same efficiency, ethics and expenditure control 
expected and demanded of private enterprise will be the policy of government in 
its operations. 

I am encouraged to believe that the leaders in government are desirous of in- 
augurating such a program. Therefore, I am optimistic with respect to a con- 
tinuing increase during the year 1939 in the payrolls of private enterprise. 

I read that because I have in front of me a chart showing indus- 
trial production. I go back to May 1 and I find, using the Standard 
Statistics Co.'s cornposite index of industrial production, that it stood 
at 83 and that there is a constant rise, as you will see, from May 1 at 
which time it is my opinion that corporate and private investors' con- 
fidence began to build up as a result of certain things which I enumer- 
ated way back the first of the year would be done. Several of them 
have been done. We have, for mstance, a committee that has been 
appointed to investigate the operation of and the administration of the 
National Labor Relations Act. We have the Treasury Department 
taking a very constructive attitude and giving us an opportunity to 
present to them their viewpoint. Private and corporate investors 
were very much encouraged by congressional action with respect to 
the spend-lend program. I could go through several other things 
which I personally think were responsible for a changed attitude on 
the part of corporate and private investors in building the confidence 
which is essential to encourage the flow of savings into production and 
trade, and war or no war, we would have had an excellent general 
business volume, certainly up to the first of the year, because it shows 
from May 1, it rose from 83 to, on September 1, almost 100 — 98. 

Acting Chairman Williams. Do you think there ought to be an in- 
creased expansion of industrial production capacity? 

Mr. Hook. I think in certain fields, Mr. Williams. 

Acting Chairman Williams. Isn't it a fact that that capacity 
hasn't been used that they have, 25 percent maybe, 50 percent at the 
outside? 



CONCENTRATION OF ECONOMIC POWER 10827 

Mr. Hook. Some of it needs going over, just as in our own industry 
we chucked into the wastebasket some two hundred milhons in old 
mills and built more efficient products which have meant a lower price 
to the public, a better product and increased earnings. 

Acting Chairman Williams. You have done that largely out of 
internal fmancing, haven't you? 

Mr. Hook. We had to borrow a good deal of money to do that 
ourselves. 

Acting Chairman Williams. The evidence, I believe, during the 
last few years is that the amoimt furnished from internal sources is 
about half of the new capital invested. 

Mr. Hook. Yes, I think that is a very excellent program if we can 
follow it. 

Acting Chairman Williams. Don't you think it is a rather danger- 
ous policy to enter upon an overproduction capacity during a period of 
boom, and we will have just what we had following the other boom 
when it is over with, if it is created? We can't hope, can we, to have a 
production capacity running full, 100 percent? 

Mr. Hook. All the time; no. 

Acting Chairman Williams. That never has been true, has it? 

Mr. Hook. No, but what I am talking about 

Acting Chairman Williams (interposing). There is a question in 
my mind whether it won't create that very thing, whether or not we 
are not already expanding industrially sufficient in view of the fact 
that the capacity is not being and has not been used. 

Mr. Hook. Maybe I can explain what I mean by saying this to you, 
Mr. Williams. When we just had these old mills, for iastance — this is 
something that I know something about — there were periods of time 
when they said, "Well, you have got too much capacity." We weren't 
selling it then, but we did go ahead and find a method whereby we 
could make a better product at a lower price which encouraged the use 
of the product for purposes for which it could not have been used prior 
to that time. In other words, it increased volume, because not 
only was there a reduction in price, but the quality of the product 
was improved, making it possible to use it for things that it could not 
be used for before, and that is what has made America what it is. In 
other words, although we have equipment which may apparently not 
be running to capacity, the reason that it isn't running to capacity 
possibly is that it is not as efficient as it ought to be, and a lot of the 
capital which has been invested in equipment over the years today 
needs revamping, a lot of it ought to go out the window and would go 
out the window and more efficient methods of production which would 
bring about better products at lower cost would result from this new 
capital investment and investors would be perfectly willing to take a 
chance on that if they thought they were going to get a return on their 
investment. 

Acting Chairman Williams. Any further questions? If not, we 
thank you very much. 

Mr. AviLDSEN. Excuse me. 1 wanted to ask a question. 

Mr. Feller. I understand some of the members of the Committee 
wanted to ask some questions after recess. 

Mr. AviLDSEN. I had only one question. 

Acting Chairman Williams. Have you any, Mr. Feller? 



10828 CONCENTRATION OF ECONOMIC POWER 

Mr. AviLDSEN. I had only one question, Mr. Hook, and that was re- 
garding the subject you were talking about Friday afternoon when we 
adjourned, namely, the matter of how much labor was required to 
produce these sheets by the continuous process as compared with the 
hand process, and I don't think it was entirely clear to all the members 
of the committee just how you could bring about so great a reduction 
in the cost in those sheets with no substantial reduction in the number 
of men employed in making them. Do you think you could clear that 
up for us? 

Mr. Hook. I was thinking of that over the weekend and I can read 
this statement in a couple of minutes. Maybe it will be clearer to 
do so rather than attempt a long explanation. [Reading:] 

With regard to the figures given as to number of men emplQyed per 100 tons of 
product, the increased rates of wages and the reduced selling prices for sheets 
made by the continuous process, there seemed to be some confusion in the minds of 
some of the members of the committee, and if I may I would like to elucidate 
further and hope to make it perfectly clear. 

The old hand sheet-rolling process produced sheets from seven to ten feet long, 
slightly irregular in length necessarily from the process, and allowances made in 
the width for irregularities of the rolls. In the new process, the sheets are made in 
coils thousands of feet in length, coils weighing 10,000 to 12,000 pounds, and very 
close to required size in width. Obviously to everyone there is a great saving in 
the waste that was the previous practice from the two ends of the sheets alone. 

Then, in the old process, the material was heated at least four times and now 
but once. Heating steel always causes an oxide to form, which is a direct loss, and 
further, the oxide is frequently rolled into the sheet, spoiling it, another source 
of waste. 

To still further increase the previous expense this oxide must be removed by 
sulphuric acid, which is not easy to handle, not easy on the men, and expensive — 
so there is another saving there. Further, in rolling these long strips the temper- 
ature is kept more uniform and high pressure, 1,000 to 1,500 pounds, water sprays 
are used to keep the surface clean, so that there results an internal structure 
much improved and very much more uniform, requiring fewer sheets to be thrown 
out by the inspectors, both for this reason and that of a better surface secured by 
this new technological method. 

Uniformity of internal structure permits annealing to be done much more 
accurately, for the internal structure of a sheet is very delicate at the red hot or 
annealing temperature,' and in the old hand-finished sheets a variation of several 
hundred degrees was frequent, so that some sheets would be properly annealed or 
heat treated and some would not, and this results in much less waste. 

So it is all of these factors that enter into the simple array of figures that I read 
to you Friday, and I trust this matter is now thoroughly explained. 

There was one point that I think you had in mind with respect 
to the number of men per hundred tons of shipment. I am just 
thinking now of one of several places, for instance, where you will 
have, we will say, two furnaces, or one furnace doing open annealing. 
This was a long furnace with a chain in it and it has to be loaded on 
one end and has to be unloaded on the other. You have a certain 
number of men to handle that particular part of the process. Now 
that furnace is capable of maybe handling your capacity up to 65 
percent or 75 percent. Whether you run at 50 percent or whether 
you run at 75 percent you have got to have that crew there, so when 
you are running at 75 percent your number of men used per him- 
dred tons of output of course is reduced considerably and that 
shows on the report. I gave Mr. Williams a copy of it and 
Mr. Feller has a copy of it, and I think you have a copy of it, Mr. 
Avildsen. That accounts for the variation in the number of men 
ppT hundred tons of shipment in those several years. When you get 



CONCENTRATION OF ECONOMIC POWER 10829 

to the top of production and you are making a million tons, then 
you are usiag your labor most effectively and the capacity of the 
lumace is used with the same number of men. 

Mr. AviLDSEN. That clears up the matter so far as I am concerned. 
I have no other questions. 

Mr. Feller. I should like to ask just one question in connection 
with your answer to the chairman as to where the responsibility for 
the poor showing of the industry lies. You recall Mr. Weir's state- 
ment when he appeared before this committee and in the speech to 
which reference has been made and which is in the record, that the 
trouble with the industry was that management had not been profit- 
minded. Do you agree with Mr. Weir on that? 

Mr. Hook. I think Mr. Weir was justified in criticizing management 
to the extent he did, absolutely. He was justified in criticizing 
management for permitting prices to get so low with respect to cost 
that it encouraged losses, which of course the industry shows. 

Mr. Feller. Do you think if management had 'seen profit-minded 
the result would have been different? 

Mr. Hook. Well, I think it would have been better if management 
had probably had a little more courage to withstand the pressure 
on the part of the buyer for prices which are out of line with respect 
to cost. Right there, in talking about the steel industry I am very 
glad to note that in the statement which you prepared, Mr. Feller. 
I want to compliment you because you made this statement: ^ 

In an economic analysis of price and distribution characteristics, however, 
this definition is inadequate for it comprehends a wide range of products which 
differ fundamentally from each other in value per unit and therefore in economic 
mobility, in scale and technic of production in the geographical dispersion of 
consuming areas with relation to centers of production, in size and geographic 
concentration of customers, in the availability of potential substitutes for a 
given use and in methods of distribution employed, although most steel is tailor- 
made to exact specifications within narrow limits of tolerance, and therefore it is 
almost completely homogeneous forj anyj "given J specification, irrespective of 
source. Multiplicity of product characteristics requires a break-down of the 
iron and steel industry into almost as many industries as there are products. 

And in Mr. Thurman Arnold's statement at the opening of the 
hearings of this committee he says: ^ 

It was therefore with considerable gratification that the Department noted 
some weeks ago the decision of the major units of the industry to confirm existing 
published prices to the end of the current year. I do not pass judgment at this 
time on the problems which will beset the industry in the coming difficult months 
but I confidently trust that the patriotic spirit which prompted that decision will 
continue to rule the industry decisions in the future. 

I want to say t ,- you that I agree with that completely, but you 
have got to differentiate between products in the industry. For 
instance, in the industry with which I happen to be connected we have 
had very low prices, and reference was made some place during the 
discussion, I think by one of your experts, to the fact, for instance, 
that two companies in the industry in the third quarter had earnings 
relatively low; one was the Otis Steel Co. Now the Otis Steel Co.'s 
production is mostly sheets and the American Rolling Mill Co.'s 
production is mostly sheets, and it is in that line where there has been 
a very severe competition and very low prices. Therefore, the in- 

> See "Exhibit No. 1349", included in Hearings, Part 18, appendix, p. 10391. 

> See Hearings, Part 18. 



10830 CONCENTRATION OF ECONOMIC POWER 

dustry must not be considered unpatriotic if, because of the increase 
in cost of raw materials, for instance in scrap, on our coated sheets in 
zinc and the other items that go into our cost, we find it necessary, 
and I think it is necessary in the interest of everybody, that prices in 
that particular branch of the industry be advanced to some extent in 
order to get a reasonable return, at least get your costs. Many of the 
products in that industry have not only been sold in some instances 
below total cost but below material and labor. That certainly is 
unsound econoniicaUy. 

Mr. Feller. Mr. Chairman, I have nothing further. 

Acting Chairman Williams. I wonder if you would be available 
immediately after recess, Mr. Hook. 

Mr. Hook. Yes, sir. 

Acting Chairman Williams. It may be some of the members of the 
committee who have not been able to be here this morning may want 
to interrogate you somewhat. 

Mr. Hook. I will be very glad to be here, sir. 

Acting Chairman Williams. If you will come back at that time 
the committee will stand in recess until 2:15. 

(Whereupon, at 12:25 o'clock, a recess was taken until 2:15 p. m. 
of the same day."* 

AFTERNOON SESSION 

Whereupon after the noon recess the committee resumed at 2:25 p. m 

Acting Chairman Williams. The committee will be in order, please. 

Mr. Feller. I should like to call Mr. Koberts, Mr. Gibson, Mr. 
Schaefer, Mr. Strickland. 

Acting Chairman Williams. Will you be sworn? Do you solemnly 
swear that the testimony you are about to give in this proceeding shall 
be the truth, the whole truth, and nothing but the truth, so help 
you God? 

(The four witnesses said, "I do.") 

TESTIMONY OF CHARLES H. ROBERTS, GENERAL SALES MANAGER, 
AND FRANCIS H. GIBSON, DISTRICT SALES MANAGER, SOUTH 
CHESTER TUBE CO., CHESTER, PA.; OSCAR I. STRICKLAND, 
MANAGER, TUBULAR PRODUCTS DIVISION, AND HENRY E. 
SCHAEFER, ASSISTANT MANAGER, TUBULAR PRODUCTS DIVI- 
SION, WHEELING STEEL CORPORATION, WHEELING, W. VA. 

Mr. Feller. Mr. Gibson, will you state for the committee your 
ull name and the company with which you are connected? 

Mr. Gibson. Francis H. Gibson. 

Mr, Feller. And you are connected with the South Chester Tube 
Co.? 

Mr. Gibson. That is correct. 

Mr. Roberts. Charles H. Roberts, South Chester Tube Co. 

Mr. Schaefer. Henry E. Schaefer, Wheeling Steel Corporation. 

Mr. Strickland. Oscar I. Strickland, Wheeling Steel Corporation. 

Mr. Feller. Mr. Chairman, I would first like to make a general 
statement with respect to the testimony which will follow. The 
committee wiU recall the general course of the hearings ; you will note 



CONCENTRATION OF ECONOMIC POWER 10831 

that after testimony had been taken with respect to iron ore, various 
officials of major steel comi>anies have been called to testify with 
respect to general price policy of steel pricing as a whole. During 
that testimony we also elucidated the facts with respect to the pricing 
of one particular product group, tin plate. 

We will now bring out various facts relating to the pricing and the 
competitive situation in another group of products, namely, tubular 
products, and particularly as related to those classes of tubular 
products which are sold in what is known as the oil country. Oil- 
country goods are those tubular products which are used for casing 
and the drilling of wells, line pipe, and various other forms of tubes 
which are used for conveying oil products. I am going to ask my 
associate, Mr. John W. Porter, to conduct most of the questioning 
along this line. 

Before the testimony commences I should like to make two state- 
ments for the record. First, a number of documents will be produced 
here which were taken from the files of the South Chester Tube Co. 
Each of these documents bears stamped on its face the following 
legend: 

Possession and use of this photostat by U. S. Government subject to conditions 
named by imprint on reverse side. 

This stamp was placed upon it by the South Chester Tube Co. On 
the reverse side of each document appears this legend: 

This photostat has been furnished by the South Chester Tube Company to 
the Temporary National Economic Committee under a subpoena duces tecum, 
issued under the authority contained in Section 5 of Public Resolution No. 114, 
75th Congress. The South Chester Tube Company reserves the right to question 
the validity of the issue of said subpoena, the validity of the law under which 
the committee is working, and issuing such subpoenas, and reserves all of its 
rights under the Constitution and laws of the United States. The company, its 
officers, directors, stockholders, and emplo.vees claim immunity under Section 
79R and E15, U. S. C. 59, Stat. 301, or any other law which grants same. 

That is the end of the legend as it appears on these documents. 

I have also been asked by counsel for the South Chester Tube Co. 
to state that the witnesses and the company formally claim such 
immimity as they are entitled to under existing law. Mr. Porter will 
now examine. 

Mr. Porter. Mr. Roberts, what is your position with the South 
Chester Tube Co.? 

Mr. Roberts. General sales manager. 

Mr. Porter. And what is the business of your company, generally 
speaking? 

TUBULAR PRODUCTS 

Mr. Roberts. We manufacture lap-welded tubular goods, about 
80 percent of which is made for the oil country, for drilling and pro- 
duction of oil. The balance is miscellaneous material made up of 
so-called merchant pipe and line pipe. 

Mr. Porter. Does the South Chester Tube Co. make any steel? 

Mr. Roberts. Manufacture the steel? 

Mr. Porter. Yes. 

Mr. Roberts. No. 

Mr. Porter. What is the material from which the South Chester 
Tube Co. manufactures its tubular products? 

124491 — iO— pt. 20 7 



10832 CONCENTRATION OF ECONOMIC POWER 

Mr. Roberts. It is known in the trade as skelp. 

Mr. Porter. Would you describe briefly for the information of the 
committee what sort of a product skelp is? 

Mr. Roberts. It looks like a plate, usually manufactured in fairly 
large tonnages of a given thickness and width and of uniform length. 
It is given the name skelp, as I understand it, because it is classified as 
a semifinished product. 

Mr. Porter. In other words, then, skelp is in all superficial respects 
similar to steel plate, but it is cue raw material from which certain 
types at least of tubular products are manufactured. Is that correct? 

Mr. Roberts. That is right. 

Mr. Porter. JSow as I understand it, you yourself manufacture 
none of this skelp? 

Mr. Roberts. That is right. We purchase aU of it. 

Mr. Porter. You purchase all of that? 

Mr. Roberts. Yes. 

Mr. Porter. From what types of companies does the South Chester 
Tube Co. purchase its skelp? 

Mr. Roberts. WeU, we purchase it from so-called integrated mills 
in our- neighborhood, large companies, the Bethlehem Steel, Lukens 
Steel, and mills of that type. 

Mr. Porter. Will you state, Mr. Roberts, whether or not most or 
all of the companies from whom your company purchases skelp them- 
selves manufacture tubular products of some kind or another? 

Mr. Roberts. Two of them do not. 

Mr. Porter. Two of them do not, and the rest, I take it then, do? 

Mr. Roberts. Yes. 

Mr. Porter. In view of the fact, Mr. Chairman, that at various 
points during the testimony reference has been made to the question 
of the relationship between the price of semifinished steel products 
and the prices of a finished product made from those semifinished 
articles, I would like to direct one or two more questions along this 
line to Mr. Roberts. 

Acting Chairman Williams. In order that we might have this ques- 
tion of immunity thoroughly understood here, the question has been 
asked as to what this immunity applies. It is not understood that 
it is to aU the testimony, is it? Should these individuals' objections 
and immunities be made as we proceed, or is it appHed only to the 
documentary evidence to be introduced? 

Mr. Feller. I take it, Mr. Chairman, that the immunity which is 
claimed can only be whatever immunity is provided by the statute 
under which this committee is operating. 

Acting Chairman Williams. Whether or not they have to claim 
that immunity and it is applied to each individual question that they 
want to apply it to. 

Mr. O'CoNNELL. Mr. Feller, as I understand the law under which 
we operate, it is generally to the effect that any witness may refuse 
to answer a question propounded to him on the grounds that to 
answer the question would tend to incriminate him. At that point, 
as I understand it, the committee would then have the option of 
either requiring him to answer the question, in which event he would 
be immune from prosecution, or deciding that they would prefer not 
to haVe the question answered. Now is it your thought that that is 
the way we would operate? That is, when a particular question 
which in the mind of the witness or their coimsel might tend to in- 



CONCENTRATION OF ECONOMIC POWER 10833 

crimiiiate them was asked, that they would decline to answer unless 
granted unmunity, or is it your thought that they have now been 
given blanket immunity from anything they may hereafter say? 

Mr. Feller. Well, I merely made this statement at the request of 
the counsel; as to whether or not counsel desires that the matter be 
put beyond whatever question may appear in his mind by making a 
specific claim on specific questions, I think is up to witnesses and 
their counsel. 

Mr. O'CoNNELL. So far the committee has not granted any im- 
munity to anyone as reg'ards these witnesses. 

Mr. Feller. So far no one has made a claim of immunity as to 
any legal consequence which foUows from that. I think it would be 
beyond the bounds of my function at this time to make any statement 
in respect to that. 

STATEMENT OF GEORGE W. WITNEY, COUNSEL, SOUTH 
CHESTER TUBE CO. 

Mr. Witney. The question that we raise here is as to the method 
that was used in securing the information which will probably be dis- 
closed this afternoon. 

As you probably realize, representatives of your committee were 
sent to the offices of the South Chester Tube Co. They made a 
general examination of all the files of the company and extracted 
therefrom some perhaps 200 letters. They desired to take the orig- 
inal letters and copies. We gave them photostats. It is question- 
able in my mind as to whether or not the committee have a right to 
disclose the information in detail that was acquired in that manner. 

Acting Chairman Williams. Then you are claiming immunity only 
as to the documentary evidence that may be offered? 

Mr. Witney. As the witnesses disclose that documentary evi- 
dence, and I should think they should be allowed immunity as to 
any questions that are raised by the documents. 

Acting Chairman Williams. As we proceed, it will be their privi- 
lege to claim immunity. 

Mr. Witney. I should like to claim immunity as to any of the 
documents that are raised in that particular manner. 

Mr. Frank. Would that be a basis for immunity? I had assumed 
a claim for immunity to arise as a result of the witness raising an 
objection that if he were forced to answer, he would be incriminating 
himself. I hadn't supposed it would arise on an alleged claim that 
documentary evidence was procured improperly. 

Mr, Witney. My understanding of the situation is that it may not 
be necessary at aU, but what I am trying to prevent is something 
being developed in this questioning which may lead people to think 
that either of these companies were doing something that was illegal. 
The information that you acquired and the manner that you did, I 
think, are open to question. All I am trying to do is to establish 
immunity for the material that may be produced here on the questions 
that may be raised and the answers given by the men here. 

Acting Chairman Williams. As I understand it, you already have 
claimed immunity for the introduction of any of these documentary 
papers that may be introduced, and it seems to me the only regular 
procedure will be to claim that immimity so far as the oral testimony 
IS produced when the questions are raised. 



10834 CONCENTRATION OF ECONOMIC POWER 

Mr. Witney. If you would rather have me do it specifically, I 
shall be glad to do it that way. 

Mr. O'CoNNELL. I think it would be more proper to claim it as the 
question arises, which seems to you or to your witness the sort that 
might incriminate them. 

Acting Chairman Williams. Proceed. 

Mr. Porter. Mr. Roberts, we were talking in a general way about 
the nature of the business of the South Chester Tube Co., and have 
brought out that it is a manufacturer of a finished product which it 
manufactures from a seniifinished product known as skelp. You had 
also testified that that semifinished product, skelp, is purchased by 
your company from integrated producers, among others, who not only 
manufacture the skelp but also produce tubular products which they 
sell in the same markets which your own products enter. That is a 
fair statement, is it not? 

Mr. Roberts. That is true. 

Mr. Porter. As a purchaser of a semifinished product, skelp, 
I assume that it would be fair to say that the South Chester Tube Co., 
has no part other than that of a new buyer in the estabUshment of a 
price of that semifinished product. Is that correct? 

Mr. Roberts. That is correct. 

Mr. Porter. Suppose, then, that the integrated producers of 
skelp from whom your company buys, should in a given case increase 
the price of skelp without at the same time making any advance in the 
price of the finished tubular product. What would be the effect of 
such an action upon your business? 

Mr. Roberts. Well, there would be a reduction of the margin 
between the cost of the raw material and the finished product which 
would naturally either reduce our profits or increase our losses 
as the case might be. 

Mr. Porter. And the extent to which that margin was reduced 
would be reflected directly'in the operating conditions of your business? 

Mr. Roberts. Positively. 

Mr. Porter. Now let us take another case, again purely hypo- 
thetical. Suppose that the larger producers of tubular products 
should increase the price of those products, rather should reduce the 
price of those products without making a comparable reduction in the 
price of skelp. What would the effect of that be on your business? 

Mr. Roberts. That would be the same effect as your first question. 

Mr. Porter. In other words, your margin would be reduced? 

Mr. Roberts. Our margin would be reduced. 

Mr. Porter. So it would be fair to say, then, I take it, that the 
South Chester Tube Co. as a finishing company operates within the 
margin which exists at all times between the price of the semifinished 
product, which is its raw material, and the price of the finished product 
which it manufactures. Is that correct? 

Mr. Roberts. That is correct. 

Mr. Porter. Does the South Chester Tube Co. have any control 
over the price of the tubular products which it manufactures? 

Mr. Roberts. No; we have no control. We have to be governed 
entirely by competition; we try to meet that competition if it is 
possible. 



CONCENTKATION OF ECONOMIC POWER 10835 

Mr. Porter. What is the policy of your company with respect to 
meeting that competition? 

Mr. Roberts. We have to analyze all the factors in the case and 
decide whether it is possible to meet the competition and maintain 
our normal profit or at least mamtain an average price that will permit 
us to continue operation. 

Mr. Porter. Will you state, Mr. Roberts, whether or not it is the 
policy of your company to sell its finished products at a price lower 
than what you believe to be the competitive price? 

Mr. Roberts. You say is it possible? 

Mr. Porter. Is it your policy? 

Mr. Roberts. No; it is not. 

Mr. Porter. Your policy, then, is to adapt your prices to what we 
may call the going prices in the market for your products? 

Mr. Roberts. We of course publish base prices from time to time 
as market changes occur, and we attempt to adhere to those base 
prices as religiously as possible. 

Mr. Porter. Mr. Roberts, I shoiild like to ask you whether the 
products which you manufacture, that is steel pipe and other tubular 
products, which go largely into the oil field for one purpose or another, 
are sold in the same manner as other steel products, that is, my ques- 
tion is: Are they sold on a delivered price basis'? 

Mr. Roberts. They usually are. 

Mr, Porter. You say ''usually are." There are exceptions? 

Mr. Roberts. There might be an occasion where a truck would 
come to our plant and perhaps pick up a few lengths of pipe or some- 
thing of that kind. In that case they would be sold F. O. B. mill. 

Mr. Porter. Would it be fair to say that those cases normally 
involve small orders placed by consumers who are located nearby 
to your plant? 

Mr. Roberts. Yes; that is true. It would always be small orders. 

Mr. Porter. So that in the normal course of events your products 
are sold on a delivered price basis? 

Mr. Roberts. That is correct. The major part of our tonnage 
goes to markets that are considerably distant from the plant and we 
seU on the delivered prices in those cases. 

Mr. Porter. I might at this point inquire where your principal 
markets lie geographically speaking. 

Mr. Roberts. In the so called midcontinent and California. 

Mr. Porter. Mr. Gibson, I thmk that you did not state for the 
record what your position with the South Chester Tube Co. is. 

Mr. Gibson. District sales manager at Pittsburgh. 

Mr. Porter. Pittsburgh, Pa.? 

Mr. Gibson. Yes, sir. 

question of selling pipe f. o. b. the mill 

Mr. Porter. Mr. Gibson, I should like to show you a letter dated 
February 3, 1939, bearing your signature arid your title, district 
sales manager, and addressed to Mr. C. H. Roberts, general sales 
manager, a letter on the letterhead of the South Chester Tube Co. 
Will you identify that? 



10836 CONOENTBATION OF ECONOMIC POWER 

Mr. Gibson. That is my letter. 

Mr. Porter. I should like to offer this letter, Mr. Chairman, to 
be printed. 

Acting Chairman Williams. Any objection? It will be received. 

(The letter referred to was marked "Exhibit No. 1427" and is 
included in the appendix on p. 11005.) 

Mr. Porter. I should like to read a few paragraphs from it. The 
letter bears a heading which reads: 

Subject: Gulf River Shipments. 

The devil has broken loose in the pipe district here yesterday and today due 
to the action of our good friend Mr. Weiss. 

May I interject at that point a question, Mr. Gibson, as to the 
identity of Mr. Weiss? 

Mr. Gibson. Purchasing department of the Gulf Oil Corporation 
who handles nominally tubular goods purchases. 

Mr. Porter (reading further from "Exhibit No. 1427"): 

As you know, he is a pretty smart boy even though he finds it suitable for his 
purpose to appear very dumb at times. When the barge rates went into eflfect 
for pipe at Memphis and Houston he started to work on a proposition which came 
to a climax here yesterday and certainly will have wide ramifications. The Gulf, 
as we understand it — 

and parenthetically I assume that means the Gulf Oil Co. 

Mr, Gibson. I would say. 

Mr. Porter (reading from "Exhibit No. 1427"): 

The Gulf, as we understand it, have purchased two barges and a small river, 
boat. Weiss ofifered an order for a bargeload of seamless to Jones & Laughlin, 
the barge to be loaded alongside their loading docks on the Ohio River here, and 
also a bargeload order to Spang Chalfant under the same conditions, the pips to 
be billed f . o. b. barge siding, which, as you know, takes only 2% cents per hundred- 
weight switching charge in freight. When the National Tube Co. heard of this 
they just raised cain, and in some way or other stopped J. & L. from accepting 
this order and likewise Spang Chalfant. The National Tube Co. stood hard and 
fast by their pohcy that no pipe would be quoted other than f. o. b. destination 
or f. o. b. Houston or Memphis stock. 

I should like to interrupt the reading of the letter at that point 
for a question or two. Mr. Gibson, the National Tube Co. is, I take 
it, a subsidiary of United States Steel Corporation. 

Mr. Gibson. Correct. 

Mr. Porter. I think it might be helpful if I summarized my 
understanding of the facts which this letter relates so far as I have 
read it. Is it correct to say that in this report you are stating that 
the Gulf Oil Co., through its pipe-purchasing agent, Mr. Weiss, 
offered to two pipe producers an order for a bargeload each of seam- 
less steel pipe, to be delivered at the Ohio River docks, presumably 
near Pittsburgh, of the Gulf Oil Co., to be billed as so delivered 
rather than to be billed f. o. b. destination which was presumably 
somewhere on the lower Mississippi River? Is that correct? 

Ml. Gibson, That is substantially correct; yes. 

Mr. Porter. So that when you say in the last paragraph which I 
read that the National Tube Co. stood hard and fast by their policy 
that no pipe would be quoted other than f. o. b. destination, you are 
stating that the National Tube Co. was in effect insisting that the 
custom in the trade be observed. Is that correct? 

Mr. Gibson. That is correct. 



CONCENTRATION OF ECONOMIC POWER 10837 

Mr. Porter. I should like to resume the reading of the letter: 

We mentioned this matter to you on the telephone, but since then we have 
had about an hour and a half's session with Mr. Weiss, in which he did all the 
talking and we said little or nothing. He wanted to know why he could not get 
pipe quoted f. o. b. barge siding, provided it was their own barge. We naturally 
said nothing of an incriminating nature and simply stated that we could take no 
part in this matter whatever, as we were not on the river and therefore totally 
disinterested. Our reply to his question as to why no pipe mill was permitted 
to quote on the basis above mentioned, was that we simply stated as long as we 
had been in this business, we had never known of any manufacturer quoting 
f. o. b. mill. 

Mr. Gibson, do you recall the circumstances which led you to wl-ite 
this letter? 

Mr. Gibson. WeU, in the first place we were approached to meet the 
same situation that the purchasing department of the Gulf were 
getting for the moment. We were located at tidewater, Chester, Pa. , 
and had some $6.20 approximately per ton to get our material to the 
river (Pittsburgh), and I thought it very wise to report that situation 
to my principals at Chester. 

Mr. Porter. Are there any facts which you can add to the state- 
ment in your letter in elaboration of it? 

Mr. Gibson. Which particular fact? 

Mr. Porter. I mean the story which you are telling in the para- 
graphs that I have read. 

Mr. Gibson. Not of a general nature. If there are specific state- 
ments you wish elaborated upon I will be glad to do so. 

Mr. Porter. What would you say has been the general pohcy of 
the industry with respect to billing on an F. O. B. mill or barge siding 
basis? 

Mr. Gibson. It has never been the pohcy of the manufacturers of 
oil equipment goods to bill on any other, generally speaking, than an 
f. o. b. destination price. 

Mr. Porter. Can you explain the basis of that pohcy? 

Mr. Gibson. Yes; very easily. We have in the manufacture and 
sale of oil company tubular goods a particular situation which perhaps 
does not cover any of the other steel commodities, finished steel 
commodities. I can explain that in more detail by saying that the 
pipe manufacturer is actually responsible for the condition,- so far as 
workmanship, quaUty, any imperfections, and rights to threading at 
the place of ultimate use of that produce which is either in the hole 
in the ground or laid along the ground as a pipe Une. We are held to 
those things most drastically by the ultimate user or the purchaser of 
the pipe. If this were changed and purchasers were permitted to take 
finished pipe to their own operations by their own means of convey- 
ance, whatever they might be, we would stiU by virtue of the long 
estabhshed pohcy in the industry, be held absolutely responsible for 
the condition of that material at destination. Therefore, by shipping 
in our own conveyances, whetheT they be steamship, barge, or by com- 
mon carrier, rail, or recognized steamship hues, we have some recourse 
to damage in transit, I beheve it is fair to say, and possibly quite 
logical, that if we turn the material over to the ultimate user of the 
material in his own conveyance, and it got to destination and was 
damaged, knowing the attitude of purchasers in general of almost any 
product, they would immediately claim that they handled that 



10838 CONCENTRATION OF ECONOMIC POWER 

material with excess care and so forth and while we give it every 
possible inspection at the mill we always find damaged pipe in transit. 

If we had shipped it in our own conveyances, or by conmion carrier 
of any nature, we have a recourse to the common carrier, or if it is our 
own conveyance we know how it has been handled. That, I beheve, 
is the background of the practice which has been established for a long 
period of time in the pipe industry as it particularly affects the oil 
country for keeping as much manufacturers' control over the product 
to its ultimate destination and use as we possibly can. It might be 
interesting or of value to the record to state here that on the thread 
elements in oil country tubular goods today we are held to a gross 
tolerance of six-thousandths of an inch in the most important element 
in the make-up of threads. You see how a very sHght jar, bumping, 
distortion, could very readily throw those out, and it is the policy of 
all of the major oil companies to inspect this material at its destination, 
usually at well side, on the pipe skids beside the rigging, and reject it 
there at our expense. You not only have to accept the rejection and 
give credit for the material rejected, but you have to go to the field 
and get it back to your nearest stockyard or back to the plant in many 
instances, and I believe that that is rather a peculiar situation in the 
steel industry, as I don't know of any other product which works to 
such close tolerances, in which the manufacturer is responsible for its 
condition clear to the point of actual use. 

Mr, Porter. As I understand it, then, what you are saying in effect 
is that, since by the custom of the trade you, the manufacturer, are 
held accountable for any damage or failure in the product up to the 
very point of use, you have felt that you should, yourselves, have 
access to whatever means of recourse there may be for damage occur- 
ring outside your own control. 

Mr. Gibson, I am very happy that you brought in the word 
I 'failure," which is a word that is peculiarly adaptable to the oil 
industry. We are held to task for failures which are beyond the 
threaded or machined elements of the material itself, even to the body 
of the pipe, where on occasion it fails, and I am glad you said "failure" 
in there, because the mills are held to task for almost everjrthing which 
results in added expense or difficulty to the oil operator m setting his 
string of pipe, or many other circumstances which are too numerous 
to go into at this time. 

Mr, Porter. Now, from what you have said I would take it that 
you are stating cardinal reasons, from the point of view of the manu- 
facturer's self-interest, why he himself should not sell his product on 
any other basis than f. o. b. destination. Can you explain for the 
committee why any individual manufacturer should have any interest 
in the method according to which any of his competitors might sell 
their products? 

Mr. Gibson. The American way of doing business, as I have found 
it in the short time I have been engaged in it, is that if one manufac- 
turer of an article — and there are very few manufacturers of "oil 
country steel tubular goods — has made an arrangement of any kind 
which deviates from the accepted policy of the industry, it isn't very 
long until that deviation will, per se, spread to the rest of the industry. 

Mr. Porter. Well, I wonder if that is true. I would assume that 
the purchasers would not themselves be anxious to take over a liability 
for damage in transit. 



CONCENTRATION OF ECONOMIC POWER 10839 

Mr. Gibson, If they would, I see no reason for any mill granting 
them that privilege. 

Mr. Porter. So your position is exactly what on this question? 

Mr. Gibson. I believe if you can write a contract for Qil country 
tubular goods that the manufacturer's responsibility in its entirety 
ceases with the physical acceptance of the material at the mill or any 
other point of shipment, I don't know that there would be anyone 
who would have any objection. I can see no basis for it. 

Mr. Porter. What is your understanding, based on your knowledge 
of the transactions described in this letter, Mr. Gibson, as to the reason 
for the Gulf Co.'s desire to purchase this pipe f. o. b. barge siding, 
rather than f. o. b. destination? 

Mr. Gibson. I have no reason which I could give for this record. 

Mr. Feller. Don't you think they wanted to save money? 

Mr. Gibson. That is probably the essential reason for most every- 
thing which is done in business, I would say. 

Mr. Feller. Specifically in this transaction, wouldn't it be cheaper 
for them to buy f. o. b. barge "side? 

Mr. Gibson. Mr. FeUer, I can't answer that question because I 
have no knowledge of how much it would cost the Gulf Co. or any 
other company to transport their own material to any given point. 

Mr. Porter. Assuming that they themselves own transportation 
facilities which might otherwise go unused, it would seem probable, 
would it not, that the net cost to them in the end would be less if 
their own facilities were used for the delivery? 

Mr. Gibson. If they had their own facOities and they were going 
unused, I would believe it would be logical to assume that they wouldn't 
need the facilities, possibly. 

Mr. Porter. You will recall that the letter states at one point 
that the Gulf Co. have purchased two barges and a small river boat. 
I don't know that it Is fair to infer from that statement that that 
purchase was made with a view to the use of these barges in the 
transportation of pipe from Pittsburgh to the lower Mississippi 
ports, but at least these barges might have been used in this instance, 
isn't that so? 

Mr. Gibson. They might have been used in this instance, and 
they might not have been purchased. I don't have anything to sub- 
stantiate that statement. 

Mr. Porter. I should like to call your attention specifically to a 
paragraph which I read before. It reads in part: 

We mentioned this matter to you on the telphone — 

That is, these transactions which we have been talking about — 

but since then we have had about an hour and a half's session with Mr. Weiss, 
in which he did all the talking and we said little or nothing. He wanted t^ kn w 
why he could not get pipe quoted f. o. b. barge siding, provided it was their own 
barge. We naturally said nothing of an incriminating nature, and simply stated 
that we could take no part in this matter whatever, as we were not on the river 
and therefore totally disinterested. 

Would you tell us, Mr, Gibson, what you had in mind in making 
the statement, "We naturally said nothing of an incriminating 
nature." 

Mr. Gibson. I would say that "incriminating" was a very poor 
choice of words, of a word, perhaps. If I would be writing that 
letter, after thought, I would say "of a committing nature." 



10840 CONCENTRATION OF ECONOMIC POWER 

Mr. Porter. Of a what? 

Mr. Gibson. Of a committing nature. 

Mr. Porter. Would you elaborate on that? 

Mr. Gibson. Yes ; to the extent that I would not have said anything 
in that instance which would have committed us to any definite policy. 

Mr. Porter. And by that you mean, I take it, any policy other 
than that which you believe to be customary in the trade. 

Mr. Gibson. That is right. 

Mr. Feller. Did you tell Mr. Weiss how much to his advantage 
it was to continue to sell on this basis? You have just told us what 
the custom was for the purpose of insuring that the product got to 
the point of delivery in a good condition. Wouldn't it be greatly to 
his advantage to have this practice continued, since he would continue 
to have recourse against you for any damage? 

Mr. Gibson. Will you repeat the first part of your question, the 
very first sentence, please? 

Mr. Feller. Did you point out to Mr. Weiss during this conversa- 
tion that this practice was greatly to his advantage in purchasing? 

Mr. Gibson. I did not point out any such facts. The letter said 
I remained quite silent during the entire conversation. 

Mr. Feller. Can you explain to us why Mr. Weiss was so very 
much exercised over the fact that he couldn't buy f . o. b. barge siding? 

Mr. Gibson. No; I can't explain any of Mr. Weiss' actions or 
reactions. 

Mr. Feller. Apparently you had a talk with him for an hour and 
a half in which he apparently complained about the fact that he 
couldn't buy f. o. b. 

Mr. Gibson. Yes. 

Mr. Feller. Why should he complain if it was just this technical 
matter about protecting the shipment while it was in transit? 

Mr. Gibson. I don't know why he should complain to me because 
we were totally out of the entire transaction by virtue of the fact that 
we could not compete or could not have put material on the river by 
virtue of the position of our plant. 

Mr. Porter. Would this perhaps be an explanation, Mr. Gibson? 
I shall read now a paragraph toward the end of the letter which I have 
not read before. [Keading further from ''Exhibit No. 1427":] 

Weiss advised us that yesterday they had a meeting called in Mr. Bothwell's 
office and, present at that meeting were: Mr. Weiss of the Traffic Department of 
the Gulf, Mr. McConnor, Sales Manager of the National Tube Company, and 
the Gulf's legal staff. Dave tells us today — 

Dave is Mr. Weiss? 

Mr. Gibson. That is correct. 

Mr. Porter (reading): 

that upon the opinion of their legal department they may enter suit against every 
mill on the river which refused to quote them f. o. b. barge siding. The Gulf's 
legal staff contending that the river is not controlled by the Interstate Commerce 
Commission, that the material is to move in their own equipment subject to their 
responsibility and, therefore, the action of the pipe mills was in restraint of trade. 

Does that paragraph in your judgment throw any light on the reason 
for Mr. Weiss' concern in this matter? 

Mr. Gibson. It probably throws all of the light necessary on it from 
his point of view. If jou note that paragraph says, "Mr. Weiss said," 
and has no elaboration on my part, I don't believe, does it? 



CONCENTRATION OF ECONOMIC POWER 10841 

Mr. Porter. I call your attention to the statement at the end of 
that paragraph to the effect that the Gulf had expressed wilhngness 
to assume responsibility for the transportation of the pipe. Would 
the customer's willingness to assume that responsibility haye any 
bearing on your readiness to meet the customer's request as to the 
basis of pricing? 

Air. Gibson. I believe it would have a very definite effect. From 
our point of view we would be very happy if they would accept the 
material as their entire responsibility at shipside, for instance, where 
we ship on the Delaware River. 

Mr. Porter. But you felt that you were not called upon to take 
a position in this matter because of the fact that you were not on the 
river side. Is that correct? 

Mr. Gibson. That is quite right. 

Mr. Porter. I have one other question with respect to the letter 
in particular, and it relates to this sentence: 

Our reply to this question — 

That is Mr. Weiss' question — 

as to why no pipe mill was permitted to quote on the basis above mentioned was 
that we simply stated that as long as we have been in this business we have never 
known of any manufacturer quoting f. o. b. mill. 

Would you say that the word "permitted" as you used it there was 
also an unfortunate choice of language? 

Mr. Gibson. No, I would not. Bear in mind, pfease, that I am 
not an official of the South Chester Tube Co. Permission for doing 
it and permission for most of the sales people in pipe organizations or 
any organization that you choose who are salesmen, sales managers, 
anyone whom you elect, comes beyond their jurisdiction in the final 
analysis. 

Mr. Porter. I should like you to notice, however, that the language 
you used suggests not so much that you were not permitted, but to 
quote, "that no pipe mill was permitted to quote on the basis above 
mentioned." What did ^p-ou have in mind? 

Mr. Gibson. In that mstance that no pipe mill was permitted, 
probably it is used that we never had quoted on this basis. I don't 
think it was meant to cover any othef organization than my own. 
Kjiowing my limitations as district sales manager I certainly wouldn't 
presume to take it on myself to say what the responsibilities or omis- 
sions of other district sales managers for other manufacturers were. 

Mr. Porter. Mr. Schaefer and Mr. Strickland, I should like to 
address this question to you both and you may answer it jointly or 
severally. Was the Wheeling Steel Corporation approached by the 
Gulf Oil Co. with this order for seamless pipe to be sold f. o. b. barge 
siding Ohio River? 

Mr. Strickland. Mr. Schaefer will answer. 

Mr. Schaefer. No; no inquiry from the Gulf people for price 
f. o. b. river. 

Mr. Porter. Did you know anything of this transaction at the 
time? 

Mr. Schaefer. No, sir. 

Mr. Porter. Is this the first you have heard of it? 

Mr. Schaefer. This is the first I have heard of it. 



10842 CONCENTRATION OF ECONOMIC POWER 

Mr. Porter. Mr. Chairman, I have no further questions on this 
particular section of these gentlemen's testimony. Do any of the 
committee have any question? 

Mr. Frank. I would like to ask Mr. Gibson a question. You 
stated that the reason that manufacturers were unwilling to quote 
f. o. b. mill was that the manufacturers would be liable for the con- 
dition of the goods up to the point of delivery at the point of use. Is 
that correct? 

Mr. Gibson. That is correct. 

Mr. Frank. This letter states, however, that Mr. Weiss had said — 
the letter that you have been testifying about — that he wanted to buy 
on the basis of the buyer's responsibility at the point of shipment, and 
you said under those circumstances you would have found no objection 
to such a transaction. Did I understand you correctly? 

Mr. Gibson. I said that our mill probably would not have had any 
objections. 

Mr. Frank. Then I would like to know why you began this letter 
by saying: 

The devil has broken loose in the pipe district here yesterday and today, due 
to the action of our good friend Mr. Weiss — 

Why you said: 

He is a pretty smart boy, even though he finds it suitable for his purpose to 
appear very dumb at times — 

And why you said that — 

Mr. Weiss started to work on a proposition which came to a climax here yester- 
day and will certainly have wide ramifications. 

If he was proposing to do something which to you appeared to be 
innocuous from the point of view of your business, as you stated, 
namely, to buy f. o. b. mill with responsibility in the buyer at that 
point, why did you consider that his action was causing the devil to 
break loose, why did you consider he was very smart, and why did 
you think that his action would have wide ramifications? 

Mr. Gibson. May I ask that Mr. Roberts reply to that question 
in view of the fact that he has" more first-hand knowledge about a 
shipment and the commitment which we were asked to take at our 
mill by one of the major oil companies on their oil tankers plying 
between Philadelphia and the Gulf coast. 

Mr. Frank. I would rather like to have you answer it first and then he 
can supplement it, because you were asked the previous questions and 
gave replies indicating that the suggestion made by Mr. Weiss was of 
innocuous character if the buyer was willing to take the responsibility 
at the point of shipment. I can't understand in view of that why you 
said the devil would have broken loose as a result of that innocuous 
suggestion. 

Mr. Gibson. I will answer that question, Mr. Frank, with per- 
mission for supplementary additions to be made by Mr. Roberts as 
to detail. Several years ago we were asked by one of the major oil- 
producing companies operating in production in the Southwest, the 
Gulf coast area, and who plied tankers between Philadelphia and 
the Southwest, Gulf ports, bringing back crude oil for refining. The 
same proposition was given to us. In that instance it apj)lied to 
coastwise tankers rather than river barges. After very careful investi- 



CONCENTRATION OF ECONOMIC POWER 10843 

gation of the facilities for their handling the pipe, their racking it, 
which in the case of a tanker would be on deck space, and their facil- 
ities for unloading and so forth, and knowing, as every man in the 
pipe industry knows, that he is held responsible for his product right 
to the ultimate point of use, we had quite a bit of controversy with 
this particular company in withdrawing from that inquiry and from 
their proposition that we handle pipe and convey same to them to be 
conveyed by their own boats, and I turned it over to Mr. Roberts. 

Mr. Frank. That doesn't seem to be quite the answer to my 
question, because as your letter states, Mr. Weiss was proposing a 
proposition which did not involve the difficulty to which you have 
just referred. He was proposing that the buyer should take the risk 
of the shipment and if that was so then that difficulty to which you 
have just referred and to which you referred previously would have 
been absent. 

Mr. Gibson. May I soj might have been absent. 

Mr. Frank. How could it not have been absent? 

Mr. Gibson. In the point of view of one who sells maybe, and I 
would say it usually is in drawing up a contract for the sale of material. 
You find in the preliminary discussion of a contract a lot of things 
where you have a very mutual meeting of minds but where the man 
is paying you after buying from you, and your sole reason for existing 
financially is by virtue of what you can sell, usually when you come 
aroimd to pick up the finished contract as the purchaser has drawn 
it up, you find that lots of times there are lots of things in there or 
hidden in there which were not in the preliminary discussion, and I 
am afraid that you would find that in such contracts drawn by major 
oil companies for handling in their own equipment, that some way or 
other they would incorporate in there that the pipe was subject to 
inspection or something or other. 

That is not factual, but that is the result of my experience over 
quite a few years in selling tubular goods. 

Mr. Frank. Well, you have indicated a full knowledge of the diffi- 
culty and I must say that I am impressed by the character of your 
answers with the fact that you are not, to use your own language in 
this letter, very dumb, and I would not think that you would be in 
much danger even if you are not a lawyer, even without the advice 
of a lawyer, of finding any such hidden clause in a contract which 
would involve the difficulties for you of which you were then, as you 
are now, very well aware. 

Now you say in this letter that you made no reply to Mr. Weiss, 
merely saying that no pipe mill was permitted to quote on that basis. 
Why didn't you tell Mr. Weiss your reasons for being unwilling, the 
industry bemg lmw^lling, to make this kind of a contract? It must 
have been evident to him or if it was not, you could have easily made 
it evident to him, that the reason was that you feared that despite 
what you might put into a contract, there would be some hidden 
clause that would leave the seller liable for the goods at destination, 
rather than at mill. 

Mr. Gibson. The answer to tho. first part of your question, Mr. 
Frank, as to why I didn't speak for the industry, I didn't feel com- 
petent to speak for the pipe manufacturing industry. However, ] 
did feel competent to speak for my own company and the very un- 



10844 CONCENTRATION OF ECONOMIC POWER 

pleasant situation which we had had a few years before which very 
frankly led me to believe that in the course of possibly a short time 
we might be approached "v^^th the same situation in being "asked to 
ship on the gulf tankers to the gulf coast, because as a matter of 
record they do ply their own boats into Philadelphia. 

Mr. Reynders. I would like to ask you one question, from the 
standpoint of the South Chester Tube Co., which is your immediate 
interest, would your markets be restricted or extended if you were 
quoting entirely on an f. o. b. mill basis? In other words, could you 
reach the gulf coast and river points or the Pacific coast with the 
same degree of comfort in competition with plants located in Pitts- 
burgh, we will say? 

Mr. Gibson. We could not reach the river points with any degree 
of comfort. In fact, the discomfort is actually $6.40 per ton differ- 
ential. 

Mr. Reynders. Well, speaking from the interest of your company, 
which is more advantageous and which would enable you to exist 
with fair comfort, on tn f. o. b. basis or destination basis? 

Mr. Gibson. Will you repeat that question, please, sir? 

Mr. Reynders. In other words, from the standpoint of your own 
company, located on the Delaware River, would you be more able to 
maintain your position if you had the opportunity to bid upon a 
dehvered basis at destination, than if you were bidding entirely f. o. b. 
your mill? 

Mr. Gibson. With reference to the barge shipments? 

Mr. Reynders. Any shipment. 

Mr. Gibson. Well, that is a rather diflBcult question. They do 
not equalize themselves. That is in comparison to delivery f. o. b. 
destination. The mills at Pittsburgh enjoy quite a distinct freight 
advantage to the midcontinent, and we will define the midcontinent 
for the purpose of mentioning it only as Tulsa. Pittsburgh miUs 
enjoy quite a distinct advantage in rail shipments there. 

Mr. Porter. Mr. Strickland, did you state for the record your 
position with the Wheehng Steel Corporation? I think you didn't. 

Mr. Strickland. I am the manager of the tubular products division, 

Mr. Porter. Manager of the tubular products division? 

Mr. Strickland. Sales manager. 

Mr. Porter. And Mr. Schaefer? 

Mr. Schaefer. Assistant manager of the tubular products division. 

Mr. Porter. Mr. Strickland, is the Wheeling Corporation an 
integrated steel producer, as the term is customarily used? 

Mr. Strickland. I would think so. 

Mr. Porter. To be more specific, does the Wheeling Steel Cor- 
poration produce pig iron? 

Mr. Strickland. Correct. 

Mr. Porter. And steel? 

Mr. Strickland. Correct. 

Mr. Porter. And semifinished and finished steel products, is that 
correct? 

Mr. Strickland. Yes, sir. 

Mr. Porter. In the field of tubular products, what does the 
Wheehng Steel Corporation manufacture? 



CONCENTRATION OF ECONOMIC POWER 10845 

Mr. Strickland. We manufacture Lapweld oil country goods and 
line pipe. 

Mr. Porter. What was the latter? 

Mr. Strickland. Line pipe. Standard pipe, both butt weld and 
lap weld. 

Mr. Porter. The Wheehng Steel Corporation is not a producer of 
seamless pipe, is that correct? 

Mr. Strickland. No, sir; they are not. 

Mr. Porter. Mr. Chairman, at this point I should like to read a 
veiy brief statement in the nature of a definition which has been 
prepared by the Department for the convenience of the committee. 

Mr. Strickland. May I correct myself? You asked if we pro- 
duced seamless; we finish seamless and sell it as seamless pipe. 

Mr. Porter. And by that I take it you mean you buy seamless 
round? 

Mr. Strickland. Seamless shells and finish it. 

Mr. Porter. And what is the nature of the jfinishing process? 

Mr. Strickland. The threading, coupling and testing. 

competition between lap-weld and seamless pipe 

Mr. Porter. I was saying, Mr. Chairman, that the Department 
has prepared a very brief statement which is in the nature of a glossary, 
as it were, of the oil country tubular goods trade, which I think may be 
convenient for the committee, and I should like to read it. 

Of the numerous uses of steel pipe, one of the most important is in the produc- 
tion and transportation of oil. Both of the two principal classes of steel pipe, 
welded pipe, and seamless pipe, are widely used in this field. 

I might interject there a reminder to the committee of the fact that 
in the motion picture which was displayed at the opening of these 
hearings, one of the products, the manufacture of which was de- 
scribed, was seamless steel pipe. Welded pipe was not included. 

There are three types of welded pipe; of them lapweld is the principal competitor 

of seamless in the oil industry. 

That is correct, is it not, gentlemen? 

Mr. Strickland. I think we could safely assume that. 

Mr. Porter (reading further): 

The competition between these two classQs of products has serious economic 
implications. While the National Tube Cornpany, a subsidiary of the U, S. Steel 
Corporation, and a few of the other largest integrated steel producers, manufacture 
both welded and seamless pipe, the two products are normally not produced by 
the same mills. 

Because of its superior strength, seamless has tended to displace lapweld for 
casing in the drilling of oil wells. Since the two are sold at comparable prices, 
with only a relatively small differential in favor of lapweld, seamless has tended to 
some extent to replace lapweld in the general oil country market. 

During years of depression this inter-product competition inevitably took 
sharper form. Amid the widespread secret price-cutting which followed the un- 
precedented fall in steel activity late in 1937 and in the first half of 1938, this 
competition reached its most intense stage. This background may be kept in 
mind for convenience in understanding the case study of oil country tubular 
products and their prices. , 

Mr. Roberts, is it fair to say that during the last half of 1937 a rather 
chaotic price situation developed in the market for lapweld oil country 
products? 



10846 CONCENTRATION OP ECONOMIC POWER 

^ Mr. Roberts. I don't recall any unusual chaotic condition at that 
time; no. 

Mr. Porter. I should like to show you, Mr. Roberts, a letter on 
the letterhead of South Chester Tube Co., dated at Tulsa, Okla., 
December 30, 1937, and addressed by J. D. Swartz to J. P. Steele, 
designated as Southwest district sales manager. I would like you to 
identify that, if you would. 

Mr. Roberts. Yes, I identify that. 

Mr. Porter. I should have said that at the bottom the letter 
bears the notation to the effect that a copy was sent to Mr. Roberts. 
Mr. Chairman, I should like to offer this letter to be placed on file 
with the committee. It need not be printed in its entirety. 

Acting Chairman Williams. It may be accepted. 

(The letter referred to was marked "Exhibit No. 1428" and is on 
file with the Committee.) 

Mr. Porter. I should like to read just a paragraph or two from 
the letter. 

We have definite and atithentic information from a nunaber of confidential 
sources establishing the fact that the National Tube Company has called on a 
number of their jobbers, trying to get them to give them orders for lapweld 
casing at a price of which their cost would figure approximately 12}^ percent 
below regular lapweld prices, and which would figure from 5 to 7 percent lower 
than the jobbers cost on our lapweld casing. 

Then I shall omit a number of paragraphs. 

One story is that the National Tube Company wants the above mentioned 
tonnage to enable them to establish their cost on lapweld casing, as they have 
not had suflSciont amount of lapweld tonnage in the past several years to know 
what their present cost would be. 

Further, it has been developed that when they have established their cost on 
lapweld casing they wiU use this as a basis to establish a selling price on a lower 
grade seamless. It would perhaps be grade A or grade B, and this selling price 
would be comparable to present lapweld prices. 

I might say, Mr. Chairman, that I from time to time during my 
quotations have omitted the names of particular customers and 
particular prices which seem to me not material in the context. Does 
that letter, Mr. Roberts, refresh your recollection as to the market 
for lapweld products at that time? 

Mr. Roberts. Yes; it appears to me that this was, from what 
finally developed, just gossip and rumor because I have no recollection 
and no actual knowledge that what was intimated in here actually 
took place. 

Mr. Porter. Would it be fair to say that the circulation of, shall 
we say, rumors of this kind was to some extent symptomatic of the 
uncertain character of the markets at the time? 

Mr. Roberts. Well, it is my experience, over a number of years, 
that there have been many occasions where rumors have started and 
they don't really gain much by repetition. They usually become 
more confusing as they are repeated. 

Mr. Porter. In the course of testimony before the committee in 
the last several days we have heard that in the case of a number of 
steel products, the going prices during this period and the latter half 
of 1937 and also in the early part of 1938 were substantially in many 
instances, below the quoted or the posted prices. Was that true of 
oil country tubular goods also, Mr. Roberts? 



CONCENTRATION OF ECONOMIC POWER 10847 

Mr. Roberts. Not to my recollection, no, sir. Up to that time, 
as I recall it, the oil-country market bad been fairly stable. 

Mr. Porter. Up to what time was that, Mr. Roberts? 

Mr. Roberts. Through the latter part of 1937 and perhaps in the 
early part of 1938. 

Mr. Porter. I see. Let us suppose for just a moment that the 
report which this letter contains had been true, and that the National 
Tube Co. had in fact run off a large quantity of lapweld oil country 
tubular goods, which it disposed of at reduced prices through its job- 
bers, what would have been the effect of such an action on the then 
current market? 

Mr. Roberts. Well, I don't know that I could answer that ques- 
tion, because a good bit would depend on the price at which the 
material was sold. 

Mr. Porter. Naturally, but it would have had an effect, would it 
not? 

Mr. Roberts. WeU, I think it would have had an effect, because 
it would be bringing back in the market some tonnage which we had 
not before, or at least for a number of years, we had not been worried 
about. 

Mr. Porter. Did the prices of oil country goods continue firm 
through the first half of 1938? 

Mr. Roberts. To the best of my knowledge. 

Mr. Porter. Was there a weakening in them at any time during 
1938? 

Mr. Roberts. Not unless there were some specific cases that I per- 
haps wouldn't know about, or wouldn't hear about. That is, I can't 
recall any. 

Mr. Porter. You will recall, and I think the committee will recall 
as well, that in June 1938 on the 24th of the month there was a general 
downward revision of steel prices. Did that reduction apply to oU 
country goods, Mr. Roberts? 

Mr. Roberts. I think that applied specifically to oil country goods. 

Mr. Porjer. As well as to other products? I have here a letter 
addressed to you, Mr. Roberts, by Mr. Gibson, dated June 24, 1938, 
which I would Uke to have you identify. 

Mr. Roberts. Yes; I recall that letter. 

Mr. Porter. I should like to offer this letter, Mr. Chairman, to be 
placed on fUe with the committee and it need not be printed. 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit No. 1429" and is on 
file with the Committee.) 

Mr. Porter. The letter begins at the time this is written: 

Nothing further of a definite nature has been learned about any prices for oil 
country goods. The whole oil country purchases and sales fraternity here — 

and the letter is dated at Pittsburgh — 

is in more or less of an uproar. Purchasers of other steel commodities such as 
drilling lines, steel derricks, etc., are now clamoring for a reduction and adjusted 
basing point to follow the mess which the Steel Corporation has made of the whole 
business. Mr. Schaefer — 

and I take it that is the Mr. Schaefer who is present, Mr. Gibson? 
Mr, Gibson. That is correct. 



124491 — 40 — pt. 2C 



10848 CONCENTRATION OF ECONOMIC POWER 

Mr. Porter (reading): 

Mr. Schaefer visited us here yesterday and advised that Wheeling would do 
nothing about any price situation until they learn what the National Tube Com- 
pany's reaction toward lapweld will be. Mr. Schaefer stated that they were 
accepting business, what little they had in the last few days, under conditions of 
price in effect at the time of shipment. 

Schaefer also said confidentially and frankly that if there was any revised lap- 
weld price made by the National Tube Compan}?^ and we did anything beyond 
that, they would not make any announcement and doubtless would meet our 
prices in competition and publish no list. 

I think that is enough of the letter for our present purposes. Do 
you recall the situation which that letter describes, Mr, Roberts? 

Mr. Roberts. No, I don't; other than I think at that time the 
National Tube Co. announced a reduction in the price of seamless of, 
as I recall, either 5 percent or Yji percent. I wouldn't be sure. 

Mr. Porter, And was a similar reduction made in the prices of 
lapweld products at the same time? 

Mr. Roberts. I don't think so. At least as far as our lists are 
concerned I don't think we made any change at that time. 

Mr. Porter. I take it that that is the sense of the third paragraph 
which I read, which speaks of Wheeling at least doing nothing about 
any price situation untU they learn what the National Tube Co.'s 
reaction toward lapweld wUl be. That would seem to suggest that 
the National Tube Co. had not taken any action at that point, Mr. 
Gibson. What is your recollection of the circumstances which 
attended the writing of this letter? 

Mr. Gibson. The letter is my letter. Might I preface the remarks 
I am about to make by saying that, as is weU known, the very accepted 
fact that Pittsburgh being the capital, so to speak, of the steel industry, 
part of my work with the South Chester Tube Co. as its representative 
there is to keep abreast of trends and markets and anything which 
might be of benefit to the interests of our company. 

Naturally, all of those facts, rumors, whatever you choose to call 
them, do not materialize, the facts naturally materialize but the 
rumors and gossip which you encounter in Pittsburgh as the center 
of the steel market are not always true ; nor do they later develop into 
the things which they pretend to be when you hear them. To return 
to this particular letter, there had been considerable talk, conjecture, 
among the sellers, as well as the buyers, of pipe that there was to be 
some sort of a revision in prices and we didn't know exactly what that 
revision was to be; nor what was to come on, and how it affected us in 
particular as manufacturers .of lapweld pipe exclusively, and Mr. 
Schaefer being as vitally interested as I in the lapweld markets, since 
that is their only manufactured product of a tubular nature, which 
they manufacture themselves in its entirety, discussed this with me, 
whether I had heard anything. I wrote this to Mr. Roberts as part 
of my obligation to the company, to keep abreast of these rumors and 
facts, if they materialized as facts. 

Mr. Porter, My question was directed rather to the price situation 
at that time, as you recall it. Mr. Roberts has testified to his recollec- 
tion that the National Tube Co. had announced a reduction in the 
prices of seamless oil country products. Does your recollection 
confirm that? 



CONCENTRATION OF ECONOMIC POWER 10849 

Mr. Gibson. I believe that the National Tube Co. had made some 
general announcement as concerned a revision and an addition of a 
class of seamless tubular oil country goods on this date, but I did not 
have a copy of those published prices which I believe bore a date of 
July 1. At the time this was written the rumor which I had was to 
the effect that the National Tube Co. published price lists did not 
contain any prices for lapweld material whatever, and that the gossip 
and rumor about the streets was to the effect that they had dis- 
continued manufacture of lapweld oil country tubular goods as 
effective the date of the issue of that list which I believe bears a date 
of July 1 . 

Mr. Porter. Would you, Mr. Gibson, as the representative of a 
concern manufacturing only lapweld products have any interest in a 
revision of prices on seamless steel products? 

Mr. Gibson. I would say we would ha\ e a very vital interest in a 
downward revision. 

Mr. Porter. Would you explain that interest? 

Mr. Gibson. Briefly, seamless tubular goods are made from a solid 
piece of steel and, not to be unduly teclmical, a process of elongation 
in which the tube is formed without any welds of any nature. It is 
simply a drawing out of a solid piece of steel. Lapweld tubular goods 
made by the folding, so to speak, of a sheet or plate bear, a weld 
down the entire length of the actual tube part of the pipe, and because 
it has a weld throughout the whole length it is generally accepted and 
in technical tests it has been defuiitely proven to be of a less efficient 
nature to collapse under tension and tension of joint to seamless 
tubular goods. That is a statement as to general classification. 
Naturally, the only hope we have of selling lapweld tube, as a general 
thing, as refers to oil company usage is by virtue of the fact that we 
have a price differential which allows us to sell it in competition to a 
recognized, a technically recognized superior product. If that spread 
of selling price is not sufficient we can't ever hope to interest the user in 
purchasing an acknowledged inferior product, and the spread between 
the purchase price on those two types of tubular goods is what allows 
us, very frankly, to do the business volume which we do. It is 
recognized, of course, that even with that price spread there are 
drilling depths and surface line conditions which lapweld tubular goods 
cannot hope to meet imder the present existing operating practices. 

Mr. Porter. So that I take it It is fair to say on the basis of the 
testimony thus far this afternoon that the manufacturer of lapweld 
oil country products is interested in price in two outstanding re- 
spects: First, in the degree of the spread between his raw material, 
skelp, and the price of the finished lapweld product, and, second, in 
the price of competitive finished pipe products of other types, notably 
searnless product. 

Mr. Gibson. That is a comprehensive statement; yes, sir. 

Mr. Porter. And I take it that that interest is true of your com- 
pany, Mr. Strickland, as weU as the South Chester Tube Co. 

Mr. Strickland. Yes, sir; that is the last statement, between the 
seamless and the lapweld. 

Mr. Porter. Exactly. 

Returning for a moment, Mr. Gibson, to the action of the National 
Tube Co. at this period about the 1st of July 1938, I should like to 



10850 CONCENTRATION OF ECONOMIC POWER 

have you identify a letter bearing your signature, dated at Pittsburgh 
on February 3, 1939, addressed to Mr. Roberts, which I think sum- 
marizes rather briefly the events of this particular period. 

Mr. Gibson. That is my letter, Mr. Porter. 

Mr. Porter. Mr. Chairman, I should like to offer this letter to be 
placed on file with the committee. 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit No. 1430" and is on 
file with the Committee.) 

Mr. Porter. I may explain, in order to give the setting of the letter 
which as I have said is dated February 3, 1939, several months after 
the events which were concerned, that it would appear that Mr. 
Gibson was analyzing in this letter to Mr. Roberts some of the con- 
siderations which explained a falling-off in the sales of lapweld pipe 
during the middle part of 1938. I am reading now from the letter: 

However, these first two considerations as mentioned above I believe were very 
much smaller factors in determining the proportion of wells drilled to pipe pro- 
duction, than was the situation created on July 1st, when the National Tube 
Company without notice or warning created a new class of seamless, a reduction 
of price on all old grades and the establishment of new physical properties for oil 
country pipe of future manufacture from that date. You will recall as vividly 
as the writer, the mad rush which ensued immediately after this action of July 
1st, whereby all mills immediately recognized the fact that pipe in stock, par- 
ticularly seamless of course, was made obsolete in the face of the new grades. 
The natural reaction of the mills could only be that they must dispose of their 
stocks of seamless on hand at that time and J. & L., because of their precarious 
financial condition, immediately made all old Grade "C" new Grade "B" in so 
far as price was concerned. 

I might interject a question there. I take it the significance of that 
action by Jones & Laughlin, Mr. Gibson, was that a new grade of 
seamless pipe having been introduced by a competitor, the National 
Tube Co., the Jones & Laughlin Steel Corporation felt it necessary to 
dispose of the old grade which had been replaced at lower prices than 
the old grade had hitherto commanded. Is that correct? 

Mr. Gibson. I would like to change your wording to this extent, 
that to the best of my knowledge the introduction of the new grade of 
seamless material was not made by J. & L. 

Mr. Porter. National Tube. 

Mr. Gibson. You said J. & L. 

Mr. Porter. I didn't intend to. Thank you. My statement is 
otherwise accurate, is it? 

Mr. Gibson, Will you repeat it now? 

(The reporter read Mr. Porter's statement.) 

Mr. Gibson. To answer that question, let's go back to the fact that 
on the 1st of July a new grade of oil country casing was placed upon 
the market as I repeat to the best of my knowledge for the first time 
by the National Tube Co. 

Mr. Porter. That is the seamless product? 

Mr. Gibson. That is the seamless product and seamless products 
prior to that time had all borne symbols of grade of letters, A, B, C, 
and D until that time, the symbols significant of the physical properties 
of the steel and therefore of the pipe. I don't think that it is of interest 
to this committee to get into a technical discussion of the variants of 
those properties except to say that they were graded from the point 
of yield strength, the higher the yield strength, of course, the lower 



CONCENTRATION OF ECONOMIC POWER 10851 

the setting depth in the hole or feasibihty of running them to deeper 
depths in the well. 

We had prior to the introduction of grade B as a casing, only C and 
D as casing classifications. When the new B was introduced the old 
C was marked up in its physical properties, or in other words any new 
C made from that date on would be carried at a higher yield strength, 
which I can give to you but I don't believe that is of any particular 
interest. And coupled with yield strengths in tubular goods casing 
there are other specifications which must be carried out in the manu- 
facture and test procedure to meet the standard of the American 
Petroleum Institute to which we all work as a standard of manufacture. 
A large amount of the old C would not meet one of the specifications 
for the record, namely elongation, and since the new C was going to 
be a better product, the other manufacturers' old C then in present 
stock became a more or less obsolete product, but I have no method 
of knowing how much of this there was. We do not manufacture 
seamless. This is all, you might say, hearsay testimony which I am 
giving at this time, but it was disposed of at the new grade B prices 
and sold as the old grade C physical standard. Does that answer 
your question? 

Mr. Porter. Yes; I think that covers the matter. 

I will go back a moment later to summarize, but at the moment I 
should like to read one other portion of this letter. 

Mr. Gibson. May I interrupt, Mr. Porter, to say that this matter 
of this letter and perhaps others which you might have, were reported 
by me to Chester only as a matter of general information. We do not 
manufacture seamless and I repeat the statement I made prior to this 
time, to the effect that I feel it part of my obligation to the company 
to report all of the things which happen in Pittsburgh as regards pip , 
the market, the manufacture, and so forth, not particularly because it 
affects our company but as a matter of general interest. I would like 
to get that into the record. We are not particularly interested in 
seamless as we do not manufacture it. 

Mr. Porter. But as has been developed earlier, the prices of those 
grades of seamless steel pipe which carry lower physical specifications 
are of interest to you as a lapweld manufacturer. 

Mr. Gibson. Very vitally. 

Mr. Porter. By virtue of the fact that there is competition be- 
tween the two products. 

Mr. Gibson. And I might add to that that the lapweld competition 
immediately became competition between the new then called 
grade B. 

Mr. Porter. I am reading again from the letter of February 3, 1939, 
which reviewed the facts that we are discussing at the moment: 

We also cannot fail to take into consideration the fact that the July reduction is 
in the price of seamless material and the advent of grade "B" together with the 
National Tube Company's annouflicement that they were discontinuing the 
manufacture and sale of lapweld oil country goods, all had quite a bearing on the 
production of the palls. This naturally prompted the purchase of considerable 
material which was actually old grade "C" seamless by operators who normally 
would have purchased lapweld, and we certainly cannot overlook the fact that the 
spread in price between the "B" grade of seamless and lapweld so reduced the 
savings in the use of lapweld to cut down the lapweld production of all the mills. 



10852 CONCENTRATION OF ECONOMIC POWER 

So if I may summarize at this point, the significance of the introduc- 
tion of the new grade of seamless was really twofold, was it not, Mr. 
Gibson, that is, under the annoimcement of the National Tube Co. 
the new grade B seamless pipe was priced at a level which might be, 
whether in fact it was or was not, competitive with lapweld oU country 
products, and iu addition the old grade C which was replaced, being 
obsolescent, was offered to the trade at the same price as the new 
grade B, and therefore also was competitive with the lapweld product? 

Mr. Gibson. Insofar as existing stocks of the old grade B were 
concerned, the old grade C, I mean. 

Mr. Porter. Just what, iu fact, Mr. Roberts, was the effect of 
these changes on the price of lap-weld lq the market? 

Mr. Roberts. Well, as Mr. Gibson has stated, the price of the 
grade B seamless was so low compared to what seamless had been 
sold at in the past that it became even more difficult to interest 
customers in the purchase of lap-weld materials. 

Mr. Porter. I take it that I may say for the record, and I think 
these gentlemen will bear me out, that soon after July 1, 1938, and 
during the course of that month, most of the producers of oil country 
goods announced prices on the old grade C seamless product equiva- 
lent to the prices of the new grade B. That is a fact, is it not, 
gentlemen? 

Mr. Roberts, I think it is. 

Mr. Schaefer. During the latter part, I believe. 

;Mr. Porter. Yes. So that I should like to revert for just a 
moment to the letter already in the record dated June 24, 1938, 
which was written by Mr. Gibson to Mr. Roberts,^ in which he said 
in part: 

Mr. Schaefer also said confidentially and frankly that if there was any revised 
lapweld price made by the National Tube Company and we did anything beyond 
that, they would not make any announcement, and doubtless would meet our 
prices in competition and publish no list. 

I take it from that that it is fair to say, then, that during this 
period the lap-weld producers were waiting in a sense to see where the 
prices would establish themselves after this period of transition, is 
that correct? 

Mr. Roberts. That .i correct; yes, sir. 

Mr. Schaefer. The lirst reduction to which you first referred on 
June 24, on or about that time, as I recall, that that only apphed — 
that was a 5-percent reduction — only appUed to certain items; it 
wasn't a reduction that applied to all kinds of seamless material. 
A little later on, I think the latter part of July, when a general re- 
duction came out on all seamless of 2}^ percent, which made certain 
items of grade C 5 and 2% percent, and that I think was the time 
when the new grade B was announced, new grade B seamless 

Mr. Porter. Excuse me, Mr. Schaefer. I think the record shows 
that the new grade B was announced on July 1. 

Mr. Schaefer. That is when the price went into effect, on July 1. 
Wf )ok no action as far as lap-weld was concerned. We announced 
a reduction of 2)^ percent on all grades of lap-weld. 

Mr. Porter. When was that? 

Mr. Schaefer. On about July 1. 

> "Exhibjtt No. 1429," on file with the committee. 



i 



CONCENTRATION OF ECONOMIC POWER 10853 

Mr. Porter. Was that reduction followed by j'-our company, Mr. 
Roberts? 

Mr. Roberts. I don't recall. I know we didn't publish a list. It 
is just possible that if we had any inquiries in that period we would 
have quoted the 2}^ percent lower price. 

Mr. Porter. Now, Mr. Schaefer, will you state whether or not 
your company, the Wheeling Steel Corporation, after that 2^ percent 
reduction on July 1, contemplated further reductions in the prices of 
lap-weld products? 

Mr. Schaefer. We took, considerable time to consider the whole 
tubular situation, Mr. Porter. We had to make quite a few surveys, 
which we did, and in the meantime there wasn't any business to 
speak of; there wasn't anything to hurry about prices, so we na- 
turally took our time to get our feet on the ground and see about 
where we would land. We did later on, as you know, make some 
reductions on lap weld. 

Mr. Porter. That was considerably later, sometime in the latter 
part of August, was it not? 

Mr. Schaefer. I think we made one on August 1 and August 24. 

Mr. Porter. And August 24? 

Mr. Schaefer. Yes. 

Mr. Porter. Mr. Roberts, I should like to show you a teletype 
dated July 15, 1938, reproducing a conversation I think between you 
and your Fort Worth representative, Mr. Steele. I would like to 
have you identify that. 

Mr. Roberts. Yes; I recall this. 

Mr. Porter. I should like to offer this to be placed on file, Mr. 
Chairman. 

Acting Chairman Williams. It will be received. 

(The letter referred to was marked "Exhibit No. 1431" and is on 
file with the Committee.) 

Mr. Porter. The paragraph in which I am interested is one which 
reads as follows: 

^ Did you know Wheeling intends to announce their prices today on popular 
sizes? We understand they intend to use National Tube old list prices of lap- 
weld and reduce them 2% and 5 percent and $7.50 per ton. 

I take it, then, Mr. Roberts, that at that time it was reported to 
you that the WheeHng Steel Corporation intended to make a further 
reduction in its prices on lap-weld oil country products? 

Mr. Roberts. That would appear from that teletype; yes, sir. 
^ Mr. Porter. And as I understand it, Mr. Schaefer, your company 
did actually announce a reduction of price on August 1, 1938, is that 
correct? 

Mr. Schaefer. Well, we announced a relative reduction on lap- 
weld pipe, appHcable to lap-weld oil country goods, which rather 
paralleled the seamless at that time. That was just a general an- 
nouncement. We didn't put out any list. 

Mr. Porter. I see. That was August 1, 1938? 

Mr. Schaefer. That was leading up to the August 1 price. 

Mr. Porter. I see; and then on August 1 you issued your list? 

Mr. Schaefer. That is right. 

Mr. Porter. Now followmg that, by your company on the 1st 
of August 1938, Mr. Schaefer, did your company give consideration 



10854 CONCENTRATION OF ECONOMIC POWER 

to the possibility of a further reduction iu the prices of lap-weld 
products? 

Mr. ScHAEFEK. After August 1 our company — we were doing 
considerable figuring; we were not satisfied. The August 1 list might 
bring us — some of them were in the red; some of them were in the 
black, yiou might say. But we weren't satisfied that was the list 
we would eventually consider as our standard list. 

Mr. Porter. Mr. Roberts, were you at that time — that is, in the 
first week or two of August 1938 — aware that the Wheeling Steel 
Corporation was giving consideration to the possibility of further 
reductions in its lap-weld lists? 

Mr. Roberts. Not that I recall. 

Mr. Porter. I should hke to hand you, Mr. Roberts, a letter 
dated August 9, 1938, addressed to Mr. Gibson at the Daniel Boone 
Hotel, Charleston, W. Va., which I should like to have you identify. 
I might point out that a reply to this letter is reproduced on the same 
sheets — a reply by Mr. Gibson dated August 15, 1938 — but at the 
moment my interest is only in your letter of August 9. 

Mr. Roberts. Yes; I remember that. 

Mr. Porter. Mr. Chairman, in view of the fact that these two 
letters are printed on the same sheets, I think that my offdr should be 
of both letters to be printed, unless it is possible to print just the letter 
of August 15, which I shall come to in a few moments, separately. 

Acting Chairman Williams. Have you identified the second one 
yet? 

Mr. Porter. No; the witness has not identified the second letter 
yet. I should like to offer just the first, if that is practicable. 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit 1432" and is included 
in the appendix on p. 11006.) 

Acting Chairman Williams. I take it you will offer the second one 
later? 

lap-weld price discussions in august 1938 

Mr. Porter. Yes; I should like to read brief portions of this letter 
of August 9, written by Mr. Roberts to Mr. Gibson. "I talked to 
Henry on Friday." Who is Henry, Mr. Roberts? 

Mr. Roberts. I presume Mr. Schaef^r. 

Mr. Porter (reading): 

I talked to Henry on Friday, but evidently did not get very far with my argu- 
ment when I told him it was my impression from past conversations which 
you will bear out, that he was terribly afraid to make prices too low for fear of 
bringing down the house on his head, and I told him that apparently he had 
thrown discretion to the winds as there does not seem to be any good reason for 
making the South Penn list as low as he has done. 

Skipping to the fourth paragraph: 

I do not know what route you will take in returning from Charleston, but 
I am wondering whether it would be convenient to stop off at TV heeling on the way 
back to go into this matter further with Henry, provided I am unable to get 
anywhere with him. He admits that the prices quoted do not permit of any 
profit, and I can't understand why they deliberately quote prices so low when it 
apparently is possible to get higher prices in West Virginia. 

I think that is all otthc letter that I need to read. I take it, then, 
from this portion of the letter that I have read, Mr. Roberts, that at 



CONCENTRATION OF ECONOMIC POWER 10855 

that time you were in commimication with Mr. Schaefer, of Wheeling, 
with respect to certain prices on Wheeling's lap-weld list. Is that 
correct? 

Mr. Roberts. Well, as it has been stated previously, tjiere was a 
great deal of confusion at that time due to the drastic changes in the 
prices of tubular goods. We have nothing else in our line to operate 
the plant on, and we naturally are vitally interested in the prices at 
which tubular goods will be sold. 

The reports that came to me as to the possible prices which would be 
quoted on lap weld seemed to me to be so far out of proportion to the 
prices that were being quoted on seamless or that we understood would 
be quoted on seamless, and they were so far below our costs, that I 
was really very much alarmed if they would be published, and we 
would be forced to meet such competition. Otherwise, I couldn't see, 
unless we met the competition, there would be anything else to do but 
close the plant. Any discussion that I might have had with Mr. 
Schaefer had entirely to do with the actual costs of producing mater- 
ial, which, after all, is the basis on which we have to start to compute 
prices. 

Mr. Porter. Is it your custom, Mr. Roberts, or the custom of the 
officers of your company, to consult or confer with the Wheeling Steel 
Corporation either with respect to the prices which you are to announce 
or with respect to the prices that they announce? 

Mr. Witney. Mr. Chairman, I thmk that is one of the questions 
imder which we would like to have immunity. 

Acting Chairman Williams. Well, what is your claim? 

Mr. Witney. I don't loiow the answer, but I am afraid the answer 
might incriminate one company, at least the South Chester Tube Co. 

Acting Chairman Williams. Very well. You may answer. 

Mr. Roberts. No; positively. We don't consult Wheeling or any 
other company as to what prices they are going to publish. It has 
never been our policy as far back as I have had anything to do with the 
sale of tubular goods in connection with the South Chester Tube Co. 

Mr. Porter. But you do consult, I take it. What is the subject of 
those consultations, normally? 

Mr. Roberts. It isn't usual to consult. That so happened this 
time that the situation was so demoraUzed, as I stated, that we were 
very much alarmed that we were wondering how we were going to con- 
tinue business, and our only consultation with any of the Wheeling 
people was to inquire into the possibihty of their having incorrectly 
checked their costs or whether they could perhaps justify the prices 
from their costs. 

Mr. O'CoNNELL. As I understand this letter, you felt that the list 
pubhshed by the Wheeling Co. was too low and you discussed with 
Mr. Schaefer the fact that you thought this price was too low and 
should be higher. 

Mr. Roberts. As I recall, I asked him only why he felt that it was 
necessary to go so far, to make such a drastic reduction. 

Mr. O'Connell. You say, "You talked to Henry on Friday but 
evidently did not get very far with your argument," so I take it that 
argument was addressed to the question of prices that they were 
charging. 



10856 CONCENTRATION OF ECONOMIC POWER 

Mr. Egberts. That again is a rather poor choice of words. We 
didn't have any argument. 

Mr. O'CoNNELL. All I have to go by, of course, is what you say 
here. 

Mr. Roberts. I reaUze that. Some of these letters were written 
rather hurriedly and without sufficient thought and the choice of 
words is not the best in all cases. 

Mr. Reynders. May I ask if that would involve the possible 
closing down of your plant? 

Mr. Roberts. I was very much afraid of that. 

Mr. O'CoNNELL. One more question. Further in the letter you 
suggest to Mr. Gibson that he stop in to see Mr. Schaefer on his way 
back from Charleston. What did you expect him to discuss? 

Mr. Roberts. I thought in the meantime that possibly Mr. 
Schaefer would have the chance to check into these costs and find 
out whether he still thought it was necessary to go that low. 

Mr. O'CoNNELL. You thought he might then have been impressed 
with what you had had to say to him before? 

Mr, Roberts. I naturally wanted to know whether he felt they 
could consistently do that, 

Mr. Porter. Mr. Gibson, in order to continue these events of 
August 1938, I should hke to show you a letter bearing your signature 
dated August 12, 1938, at Pittsburgh, and addressed to Mr. Roberts. 

Mr. Gibson. I identify the letter, sir. 

Mr. Porter. Mr. Chairman, I should like to offer this letter to be 
printed. 

Acting Chairman WilltariS. It miay be received. 

(The letter referred to was marked "Exhibit No. 1433," and is 
mcluded in the appendix on p, 11007.) 

Mr. Porter. The letter reads as follows, and I might just point 
out that this letter follows by 3 days the letter of Mr. Roberts, date 
of August 9, 1938, which we have been discussing.^ [Reading from 
"Exhibit No. 1433"]: 

Regarding previous correspondence concerning l^pweld prices of the various 
mills, we wish to advise that we stopped in Wheeling last week on our way west 
and spent some time with both Mr. Schaefer and Mr. Strickland. 

At that time, they gave me copies of their new lists and, while I did not have a 
great deal of opportunity while with them to analyze these, I remonstrated quite 
vigorously about the reduction in orices on the items other than the tonnage 
group. 

Mr. Schaefer said he did not see they could do anything else and exist. 

Mr. Schaefer is out of town at the present time, but since returning to Pitts- 
burgh, I find that most of the other mills are after us, in an eflfort to get our co- 
operation in insisting that Wheeling bring the prices on the items other than the 
tonnage group up to the previously announced 2}^ percent. 

Mr. E. N. Smith of the National Supply Co. discussed this with me by telephone 
today and wants me to meet with Mr. Brundred, their vice president, to go over 
this matter. 

Trom Mr. Smith, we learned that Mr. Goble, vice president of the National 
Tube Company, was hunting- Mr. Schaefer to secure an interview and demand 
that they revise these prices. 

lu West Virginia, we found a terriffic confusion existed and, yesterday, the 
first Lapweld List from Spang Chalfant reached the National Supply Company 
and the customers there. 



« "Exhibit No. 1432," appendix, p. 11006. 



CONCENTRATION OF ECONOMIC POWER 10857 

Then I should like to read a postscript to this letter: 

Since dictating the above, I have reached Mr. Strickland of Wheeling by tele- 
phone, who advised that he had already talked with you today. 

From Mr. Strickland's conversation, I learned that they had already been 
with Goble and that Wheeling is now going to revise their previously announced 
prices. 

Mr. Strickland stated you could come to Pittsburgh early next week to go 
into this matter, and I assured him that I would also do anything I could to 
help them out of this jam. 

Mr. Gibson, do you recall the circumstances under which you 
wrote this letter? 

Mr. Gibson. Yes, Mr. Porter. 

Mr. Porter. Would you like to tell in your own words what those 
circumstances were? 

Mr. Gibson. To go back to the letter written at some date men- 
tioned, I don't have it here, which you previously read into the 
record, there was a terrific confusion concerning lap weld pipe prices 
at that time, since no list had been published by any mill. That, 
of course, as can readily be seen, left a very confusing attitude on 
the part of the customers as weU as the manufacturers, and from what 
information we had had concerning the list which we proposed to 
publish, it looked to me like there were sizes included in that on which 
the prices were below cost and I didn't believe that that was a very 
good practice. 

Are there some particular points yOu want to question me about? 

Mr. Porter. You did talk to Mr. Schaefer on this matter, I take it. 

Mr. Gibson. I talked to Mr. Schaefer at Wheeling; yes. 

Mr. Porter. What was the tenor of that conversation so far as 
you recall it? 

Mr. Gibson. The tenor of that conversation was to the effect that 
we at that time, as you know, had not published a list price on lap- 
weld tubular goods. No one else had published a list price. I saw 
at that time a tentative list which Wheeling was contemplating 
publishing. The figures thereon were, to my way of thinking, very 
much out of line with costs, and I so stated to Mr. Schaefer at that 
time. 

Mr. Porter. Mr. Schaefer, do you recall what your reaction to 
Mr. Gibson's position was? 

Mr. Schaefer. My recollection is, Mr. Porter, that Mr. Gibson 
came in as I recall and started to talk about the oil country list. That 
oil country list previously menti.'>iied in the letter there, the visit was 
some time about August 12 or 13, was it not? 

Mr. Porter. The visit, it states, was August 12. 

Mr. Schaefer. Our list of August 1 was already out. As far as 
that goes it was public property. 

Mr. PoT^TER. Was it that list which was the subject of the conver- 
sation or was it some tentative list for the future which you gentlemen 
discussed? 

Mr. Schaefer. At that time it could only have been that list, as I 
recall it, because that was the only list we had out. 

Mr. Porter. As I recall your testimony of a few moments ago, 
you stated that at that time the officials of the Wheeling Steel Cor- 
poration were giving some consideration to a possible further revision 
of the lapweld lists. 



10858 CONCENTRATION OF ECONOMIC POWER 

Mr. ScHAEFER. We were going over our costs, reviewing the set-up, 
to see exactly what we might and might not be able to do. We were 
constantly working on lapweld prices. 

Mr. Porter. "V^at was the nature of your reply to Mr. Gibson? 

Mr. Schaefer. The only thing was that that was our present list 
and that was all we had"to offer at that' time, August 12. 

Mr. Porter. Mr. Gibson, you speak in your letter of discussing 
the matter with Mr. E. N. Smith, of the National Supply Co. What 
is the National Supply Co. 

Mr. Gibson. The National Supply Co. is a manufacturer and 
distributor of oil country products. 

Mr. Porter. Do you recall the nature of your discussion with 
Mr. Smith? 

Mr. Gibson. Yes ; to the extent that at the time there had been no 
officially re\dsed list of any lapweld casings received by the Spang 
Chalfant Supply Co. or the National Supply Co. in particular, and Mr, 
Smith wanted to know if I had one or if we had published one. 

Mr. Porter. As I read this letter, the paragraph immediately 
preceding the one in which you mention your conversation with Mr. 
Smith, is talking about the fact that — 
most of the other companies are after us — 

Meaning, I take it, South Chester Tube Co. — 

in an effort to get our co-operation in insisting that Wheehng bring th6 prices 
on the items other than the tonnage group up to the previously announced 2}i%. 

The next paragraph reads: 

Mr. E. N. Smith, of the National Supply Company discussed this with me by 
telephone today— 

and I take it "this" can only mean the effort to get South Chester 
Tube Co. to insist that Wheeling bring prices up. Would you say 
that is a fair reading of those two paragraphs? 

Mr. Gibson. Not in its entirety. With the discontinuance . of the 
manufacture of lapweld casing by the National Tube Co., that left 
Wheeling and the South Chester Tube Co. as the two remaining 
manufacturers who made only lapweld oil company products, and 

Mr. Porter (interposing). A correction there, Mr. Gibson. I take 
it that even before their discontinuance of the manufacture of lapweld 
products, the National Tube Co. had produced also seamless and other 
types of pipe, so that even before that time Wheeling and South 
Chester were the only manufacturers exclusively of lapweld. 

Mr. Gibson. That is correct, but after the National Tube Co. dis- 
continued the r lanufacture of that we remained the only two exclusive 
lapweld manufacturers who had no possibility of making anything 
else. I am sorry I didn't make that clear. They were interested 
from the point of view of the National Supply Co. to find out what 
the lapweld prices were going to be, and they found or got possession, 
I believe, as this letter refers to, this price list, they wanted to know 
if we were going to meet that and if we thought it was fair from the 
basis of cost and naturally we would have to follow the first published 
list or reject it and establish another, and naturally you couldn't 
hope to sell lapweld products at that price. 

Mr. Porter. That list which you speak of was the Wheeling list, 
was it? 



CONCENTRATION OF ECONOMIC POWER 10859 

Mr. Gibson. That is correct. 

Mr. O'CoNNELL. Is the National Supply Co. a purchaser of the 
tubular products? 

Mr. Gibson. The National Supply Co., to my understanding of it, 
owns Spang Chalfant, who is a manufacturer and they purchase their 
tubing goods from Spang Chalfant Co. 

Mr. O'CoNNELL. The company to which you just referred do man- 
ufacture this kind of 

Mr. Gibson (interposing). Both kinds. 

Mr. O'CoNNELL. Then there is another company other than your 
company and the Wheeling Co. that manufactures lap weld, but you 
are .the only 

Mr. Gibson (interposing). Oh, I am afraid I have stated that very 
poorly. What I meant to say is that Wheeling and ourselves are the 
only two companies who manufacture only lapweld tubular goods for 
the oil industry. 

Mr. Porter. I take it that the National Supply Co. is the distribut- 
ing outlet for the Spang Chalfant Co. Is that correct? 

Mr. Gibson. In part. 

^Ir. Porter. And that the Spang Chalfant Co. manufactures both 
lapweld and seamless oil country products. 

Mr. Gibson. That is correct. 

Mr. Porter. From this letter I gather that during your conversa- 
tion with Mr. Smith of the National Supply Co. it was stated by Mr. 
Smith that Mr. Goble of the National Tube Co. "was hunting Mr. 
Schaefer to secure an interview and demand that they revise these 
prices." 

Mr. Gibson. That is hearsay from Mr. Smith. I would like to 
say for the record that "demand" is not a very good choice of word 
there. I don't think that Mr. Smith would be in position to say 
that anyone demanded anything. That was my wording and I 
don't think it is particularly good. 

Mr. Porter. In the postscript to this letter you state that you 
have reached Mr. Strickland of Wheeling by telephone and that from 
your conversation with him you learned th-^t day, meaning, I take it, 
Wheeling, "had already been with Goble and that Wheeling is now 
going to revise their previously announced prices." 

Mr. Gibson. Oh, no; Mr. Porter. It says, "Since dictating the 
above I have reached Mr. Strickland of Wheeling by telephone, who 
advised that he had already talked with you today," you meaning 
Mr. Roberts. 

Mr. Porter. I was referring to the second paragraph: 

From Mr. Strickland's conversation I learned that they had already been 
with Goble and that Wheeling is now going to revise their previously announced 
prices. 

Mr. Gibson. That is what the letter reads; yes, sir. 

Mr. Porter. Is that a fair statement? 

Mr. Gibson. From the content of the letter, yes. 

Mr. Porter. Is the statement in the letter a fair statement of your 
conversation with 'Mr. Strickland? 

Mr. Gibson. Yes. 

Mr. Porter. Is that your recollection of the conversation with 
Mr. Gibson, Mr. Strickland? 



10860 CONCENTRATION OF ECONOMIC POWER 

Mr. Strickland. What is the date of the letter? 

Mr. Porter. August 12, 1938. 

Mr. Strickland. Do you have the letter there? In the first 
place, I did not talk to Mr. Goble regarding this matter whatsoever. 
In the second place, at that time, on August 12, we had not made up 
our minds whether we were going to revise or not. In fact, it must 
have been around the 18th or 19th before we definitely decided what 
we were going to do regarding an issue on the new list on lap-weld 
pipe. Please understand, people may have contacted me to know 
what we were going to do. We were in no position to tell them whether 
we were going to revise up or down or whether we were even going to 
revise the list. We didn't know ourselves. 

Mr. Porter. Mr. Strickland, isn't the Wheeling Steel Corporation 
customarily the leader in establishing prices on lap-weld oil country 
products? 

Mr. Strickland. We are not. 

Mr. Porter. So that this, in a sense, was an unusual situation. 

Mr. Strickland. Very unusual. 

Mr. Porter. Did Mr. Goble ever approach you with respect to 
this list? 

Mr. Strickland. He did not. 

Mr. Porter. At no time? 

Mr. Strickland. At no time, sir. 

Mr. Porter. You did have, however, a conversation with Mr. 
Gibson and Mr. Roberts. 

Mr. Strickland. With Mr. Roberts and I believe with Mr. Gibson. 
I had a conversation with Mr. Roberts regarding this. My memory 
goes that far. 

Mr. Porter. Do you recall the substance of your conversation with 
Mr. Roberts referred to in this "postscript of the letter of August 12, 
1938? 

Mr. Strickland. August 12? I believe it would be, if my memory 
serves me — I have no record of it — probably the same thing that we 
had discussed — that was, that it was a question of their seeming to 
believe that some of the items that we had on our lap-weld hst were 
too low in price — that is the only thing I can think of. 

Mr. Porter. Do you recall what your reaction to that suggestion 
was? 

Mr. Strickland. Well, as I told you awhUe ago, we could not make 
up our minds what we were going to do. I couldn't give anybody an 
answer at that time because I didn't know. 

Mr. Porter. I take it you did not share Mr. Roberts' view with 
respect to the level of these prices. 

Mr. Strickland. To be perfectly frank, we hadn't gotten that far 
along in our costs to know where we stood; we had not got far enough 
along in the investigation of costs to make a decision at that moment. 

Mr. Porter. Mr. Chairman, in order to bring this portion of the 
testimony to an early close I should like to offer for identification by 
Mr. Gibson a letter bearing his signature on August 15, 1938, which 
is the one attached to the letter of August 9, already in the record. 

Mr. Gibson. That is my letter, Mr. Porter. 

Mr. Porter. In view of the fact that this letter is available in 
mimeographed form, I think it unnecessary to read any substantial 
portion of it, and I therefore offer it to be printed. 



CONCENTRATION OF ECONOMIC POWER 10861 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit No. 1434" and is m- 
cluded in the appendix on p. 11008.) , ,. i 

Air. Porter. Mr. Gibson, in the third paragraph of this letter you 
state: 

As we mentioned to you — 

That is, Mr. Roberts — 
by telephone, on our way west we spent some at Wheeling and remonstrated 
with these people very vigorously. 

I take it that remonstrance was with respect to the list which has 
been under discussion here. Is that correct? 

Mr. Gibson. That is correct. 

Mr. Porter. At the bottom of page 2 you say: 

Incidentally, Mr. Czarniecki of the Byers Company was in our office this niorn- 
ing and we have enlisted his support in trying to have Wheelmg see the light m 
this matter, and frankly we believe that our efforts here with Mr Smith of the 
NationarSupply Company have had a great deal to do with getting Wheeling 
started on the right track again. 

Did you present this problem to Mr. Czarniecki, of the Byers Co., 
as one in which he would be interested? 

Mr. Gibson. Just the reverse. He presented it to me as one m 
which they were very interested. j. , ^ >>r 

Mr. Porter. The Byers Co. is a manufacturer of what, Mr. 

Mr. Gibson. Primarily iron pipe. They do manufacture some 
steel pipe, of what range I can't say. _ .-,■,. 

Mr Porter. So that when Mr. Czarmecki raised this question you, 
as you state, enUsted his support in trying to get WheeUng to see the 
light in this matter. 

Mr. Gibson. Yes. .,, ^^ ■ 1 1 

Mr. Porter. Did Mr. Czarniecki approach you with this problem, 

Mr. Strickland? 

Mr. Strickland. No; he did not. 

Mt. Porter. Mr. Schaefer? 

Mr. Schaefer. I don't recall that he ever did. 

Mr. Porter. Did anyone from the National Supply Co. or the 
Spang-Chalfant Co. approach either of you gentlemen? 

Mr. Strickland. No, sir. 

Mr. Schaefer. To raise prices? . 

Mr Porter. With respect to the list which we are discussmg here. 

Mr. Schaefer. They may have said the hst wasn't a uniform hst. 
I don't recall anyone of them directing the question to me. 

Mr Strickland. I want it a matter of record here that while some 
people protested these prices, at no time did we make any agreement 
to raise the price, decrease the price, or use any but our own best 

^^Mr^^PoRTER. I should hke to have the record show your answer 
to this question, Mr. Strickland. Did you in fact durmg this period 
make any upward provision in your lap-weld hsts? 

Mr. Strickland. Do you mean as to the August 24 hst.' 

Mr. Porter. That is right. 



10862 CONCENTRATION OF ECONOMIC POWER 

Mr. Strickland. It is pretty hard to say, unless you take all your 
tonnage, whether it is a decrease or an increase. Mr. Porter, I would 
like to read a little note I wrote on the train of the real reason wh^ 
we made the change of August 24 over our price of August 1. This 
is just a rough note that I wrote. [Reading:] 

On August 1st when we brought out our August 1st sheet, we did not know the 
reason for the introduction of tonnage itema of casing and tubing into the industry. 
At the time we had only two courses to pursue, one was to simply parallel the 
reduction of seamless by our additional spread between lapweld and seamless 
that had been in effect on our previous list; second was to consider all lapweld 
items as tonnage items, as we only had one kind of lapweld pipe to sell, while the 
seamless manufacturers had three different grades of casing in the tonnage items. 
We adopted the second method and brought out our sheet of August first. Several 
days after bringing out our sheet of August first people in the industry contacted 
us and explained that the reason for putting out a tonnage list was due that after 
a number of conferences with the larger buyers in the oil industry there had been 
arrived at a tonnage list of popular sizes on the basis of the buyers in the oil 
business concentrating on these sizes and weights and would buy the greater 
part of their tonnage in these sizes and weights, thereby giving the manufacturers 
a lower cost, and it was thought that the manufacturers might be able to pass 
on some of that saving to them. The consumers did not want this tonnage list 
increased. With this explanation of what the consumers wanted and a realiza- 
tion that we might undo considerable work that had been done by the buyers 
and the manufacturers in standardizing on items in the oil country field, we 
started to work out a new list, keeping in mind that we expected to sell lapweld 
oil country goods, that we had to keep in our list at least the same dollar and ton 
spread that we had on previous lists between lapweld and seamless. As we 
worked this out, a number of people contacted us as to what we were going to 
do so we were unable to tell them definitely until we had announced our prices 
to the trade. On August 24th this price list reduced the prices to the consumer 
on the tonnage items or the important items and increased the non-tonnage items 
on the less important items. 

Mr. ScHAEFER. May I make a change there? Mr. Strickland 
said three different steel-tonnage items. There were two tonnage 
items. 

Mr. Strickland. I will accept that. 

Mr. Porter. Mr. Roberts, would you state whether it was the 
popular sizes, as the phrase is used in the trade, or the less frequently 
pm-chased sizes of lap-weld pipe as to whose prices you were concerned 
during this period? 

Mr. Roberts. My recollection is that it was the so-called non- 
tonnage group. 

Mr. Porter. That is the nonpopular group, if I may use the phrase. 

Mr. Roberts. Yes; that is right, the nonpopular group. 

Mr, Porter. Mr. Chairman, in view of the hour, I think that 
this might be a convenient point at which to break this testimony, 
which will take a somewhat different line from here on. Perhaps the 
Committee has some questions which it would like to put to the 
witnesses. 

Acting Chairman Williams. Has the Committee any questions? 
You are ready to resume your testimony in the morning then? 

Mr. Porter. Yes, sir. 

Acting Chairman Williams. The Committee will be in recess until 
10:15 tomorrow. 

(Whereupon, at 4:45, the Committee recessed until 10:15 a. m., 
Tuesday, November 14, 1939.) 



INVESTIGATION OF CONCENTEATION OF ECONOMIC POWER 



TUESDAY, NOVEMBER 14, 1939 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 

The cominittee met at 10:30 a. m., pursuant to adjournment on 
Monday, November 13, 1939, in the Caucus Koom, Senate Office 
Building. Representative Clyde C. Williams presiding. 

Present: Representative WiUiams (acting chairman); Messrs. 
Henderson, Avildsen, O'Connell, and Brackett. 

Present also: Hugh White, representing the Federal Trade Com- 
mission; John V. W. Reynders, representing the Department of 
Commerce; A. H. FeUer, special assistant to the Attorney General; 
John W. Porter, Irving Glickfeld, Hyman Ritchin, Monroe Karasik, 
and Ward S. Bowman, Department of Justice. 

Acting Chairman Williams. The cominittee wiU be in order, please. 
The witnesses will come forward, please. 

TESTIMONY OF CHARLES H. ROBERTS, GENERAL SALES MANAGER, 
AND FRANCIS H. GIBSON, DISTRICT SALES MANAGER, SOUTH 
CHESTER TUBE CO., CHESTER, PA,; OSCAR I. STRICKLAND, 
MANAGER, TUBULAR PRODUCTS DIVISION, AND HENRY E. 
SCHAEFER, ASSISTANT MANAGER, TUBULAR PRODUCTS DIVI- 
SION, WHEELING STEEL CORPORATION, WHEELING, W. VA.— 
Resumed 

Mr. Porter. Mr. Chairman, yesterday afternoon through these 
witnesses testimony was brought out with respect to the behavior of 
certain prices of steel tubular products during 1938; specifically the 
story which was told related to the price competition between two 
types of oil country tubular products, seamless steel pipe and lap-weld 
steel pipe, and the witnesses who are now on the stand, representing 
the only two exclusive manufacturers of lap-weld pipe, described the 
events following upon certain changes in the price structure of seamless 
tubular products on the 1st of July 1938. 

It will be recalled that on that day the National Tube Co., a sub- 
sidiary of the United States Steel Corporation, announced a new 
class or grade of seamless tubular product at a price differential of a 
relatively small extent above the comparable lap-weld product, and 
at the same time annoimced its own withdrawal from the manufacture 
of lap-weld pipe. The result of this action was considerable pressure 
by seamless products upon the price structure of lap-weld tubular 
products in the oil coimtry field. 

10863 

124491 — 40— pt. 20 9 



10864 CONCENTRATION OF ECONOMIC POWER 

We heard from the witnesses testimony as to the actions taken by 
their companies^ that is the Wheeling Steel Corporation and the South 
Chester lube Co., as a result of these events. The Wheeling Steel 
Corporation announced a reduction in prices on August 1, 1938 and 
some 3 weeks later a further reduction in many lines of lao-weld 
products. ^ 

This morning I should like to continue and complete the story of 
these events m the market for oil country tubular products durina- 
the latter half of 1938. ^ 

Mr. Schaefer, following the events which we were discussing yester- 
day was the price situation A\dth respect to lap-weld products clarified 
and stabihzed, that is in the last week or two of August 1938 and the 
first 2 weeks of September? ' 

Mr. Schaefer. As far as we were concerned, I would say it was 
Mr. Porter. The confusion which had theretofore existed was 
pretty much eliminated, was it? 
Mr. Schaefer. Apparently so. 

Mr. Porter. Is that your reaction also, Mr. Koberts? 
Mr. Roberts. Yes, it was in very much better shape the latter 
part oi August than it had been a month or so prior to that time 

Mr. Porter. Gettmg into September, did this stability continue 
through the middle and latter part of September 1938, Mr. Schaefer? 
Mr. Schaefer. It did. 
Mr. Porter. Without exception? 

Mr. Schaefer. Without exception. You mean all the way through 
September? ^ 

Mr. Porter. Yes. 
• ^r, Schaefer. No ; I wouldn't say that. There was an occurrence 
in the latter part of September which did upset that. 

Mr. Porter. Will you tell us what that event was, and as lar as 
you can recall, when it occurred? 

Mr. Schaefer. That event, as far as I can recall, occurred during 
the last week of September. That mcident meant that the price of 
grade B seamless toimage items was practically put down to the price 
of lap-weld, so-called, tonnage items. 

Mr. Porter. Let me see if I understand you. I take it that what 
you are saymg is that the price of grade B seamless, which we will 
recall was the new grade announced by the National Tube Company 
on July 1, 1938, was reduced at some time during this period in 
September of which you are speaking to a level substantially equiva- 
lent to that of lap-weld products. 
Mr. Schaefer. That is right. 
Mr. Porter. Is that correct? 
Mr. Schaefer. Yes. 

Mr. Porter. As far as your knowledge goes, Mr. Schaefer, can you 
state what company made this reduction in the price of grade B 
seamless tubes? 

Mr. Schaefer. The reduction, as I recall it, was not a general 
announcement. We heard during the latter part of September that 
seamless B was being offered to the trade, as I recall it. That was 
being offered by the Oil Well Supplv Co. 

Mr. Porter. And what is the Oil WeU Supply Co., Mr. Schaefer? 
Mr.' Schaefer. The Oil Well Supply Co. is the principal distribu- 



CONCENTRATION OF ECONOMIC POWER 10865 

tor, I believe, of the National Tube Corporation, which in turn is a 
subsidiary of the United States Steel Corporation. 

Mr. Porter. Mr. Schaefer, I show you a memorandum dated 
October 1, 1938, signed bjr you, and addressed to Mr. A. J. Powers, 
Fort Worth, Tex. I take it Mr. Powers is a member of your staff. 

Mr. Schaefer. Powers is our field man. 

Mr. Porter. Will you identify that, please? 

Mr. Schaefer. Yes. 

Mr. Porter. Mr. Chairman, I offer this memorandum to be placed 
on file with the committee. It need not be printed in its entirety. 

Acting Chairman Williams. It may be accepted. 

(The letter referred to was marked ''Exhibit No. 1435" and is on 
file with the committee.) 

Mr. Porter. I should hke to read just one paragraph from this 
memorandum. This memorandum, I might repeat, is dated October 
1, 1938. [Reading:] 

Just recently we were threatened with another upset. We have said nothing 
to you but you probably did hear that National was out for a few days offering 
to accept orders for Seamless "B" Casing and meeting the Lapweld price. 

Is it fair to understand that "National" there means the National 
Tube Company? 

This was rather disturbing news but we understand that this privilege has 
been withdrawn and no "B" Seamless will be offered, or orders accepted, at the 
Lapweld figure. 

Is that substantially your reaction of what occurred? 

Mr. Schaefer. I would say it is. 

Mr. Porter. Mr. Roberts, does your recollection concur with that 
of Mr. Schaefer with respect to these few days during which the price 
of grade B seamless casing was reduced to meet the lap-weld prices? 

Mr. Roberts. Yes; our information is substantially the same as 
that given by Mr. Schaefer to our Tulsa, Okla., office and the informa- 
tion that we got was exactly the same as the testimony by Mr. 
Schaefer. . . . 

Mr. Porter. What was your reaction to this mformation when you 
received it, Mr. Roberts? 

Mr. Roberts. Well, we were completely dumfoimded. Looking 
at the situation in dollars and cents we couldn't see how we could 
exist if that condition went on, because the price of pipe had gotten 
§0 low at that time that there was no spread between the cost of the 
raw materials, the skelp, and other materials which we used and the 
finished products to enable us to continue in existence. 

Mr. Porter. In other words, these circumstances constituted sub- 
stantially a situation analogous to the hypothetical case which I sug- 
gested to you early in your testimony yesterday, a case in which the 
price of the finished article which you produce is reduced without a 
comparable reduction in the price of the raw material which you buy, 
namely skelp. Is that correct? 

Mr. Roberts. That is correct. 

Mr. Porter. So that the margin under which you operate was 
substantially curtailed. 

Mr. Roberts. That is correct. 

Mr. Porter. Mr. Schaefer, are the same comments generally 
applicable to the position of your company with respect to this event? 



10866 CONCENTRATION OF ECONOMIC POWER 

Mr. ScHAEFER. Mr. Porter, I might say that our company was of 
course surprised at that action, but it had to meet the price of lap-weld. 
We had discussed this and we have been thinking about it a long time, 
on account of the small amount of lap-weld oil-country goods that we 
sell that possibly our machinery and method of making pipe was out- 
moded, and probably we would have, if we wanted to stay in the 
casing business, the oil-country business, to revert to some other 
method of making pipe. 

Mr. Porter. By that you mean change to the manufacture of some 
other type of pipe. 

Mr. Schaefer. Seamless or electric welding. If seamless was the 
article that the consumer wanted and he could set it at greater depth 
than we could offer, wells were going deeper and deeper, the consumer 
wouldn't consider putting lap-weld in the deep well, so if we wanted 
to stay in the oil-country business we were not ready at that time to 
make a decision, we were thinking very seriously of what our next 
move would be. 

Mr. Porter. Just parenthetically let me ask you this: At that 
time did the Wheeling Steel Corporation have facihties for the manu- 
facture of any other type of tubular product? 

Mr. Schaefer. Yes, sir. 

Mr. Porter. What type? 

Mr. ScHAEFEK. Standard pipe of butt-weld and lap-weld and 
line pipe. 

Mr. Porter. But not seamless? 

Mr. Schaefer. Not seamless, no. 

Mr. Porter. Reverting for a moment to the question of the Wheel- 
ing Steel Corporation's reaction to this reduction in the price of 
grade B seamless, I show you a memorandum dated October 24, 1938, 
addressed by you to Mr. I. G. Thompson at the Dallas office of your 
company. 

Mr. Schaefer. That is my letter. 

(Senator King assumed the Chair.) 

Mr, Porter. Mr. Chairman, I offer this memorandum of October 
24, 1938, from Mr. Schaefer to Mr. Thompson, both of the Wheeling 
Steel Corporation, to be placed on file with the committee. 

Acting Chairman King. It may be received. 

(The letter referred to was marked "Exhibit No. 1436" and is on 
file with the Committee.) 

Mr. Porter. I should like to read just one paragraph of this 
memorandum. 

The past week has been more than quiet and, no doubt, this condition was 
brought about on account of the reductions made in Crude prices and the holding 
of pro-ration to previous figures, and there is no question in the writer's mind that 
when our chief competitor for a few days only put down Seamless "B" to Lapweld 
prices they did considerable damage; probably more than any of us can figure out 
for there is no question but what they took in a lot of tonnage. Of course, they 
were not able to get all the Pipe going but the chances are that they were able to 
pick up the "cream" and until this is disposed of things may be a little slow. 

In the latter part of that passage which I read, Mr. Schaefer, were 
you referring to the events of the last week or so of September which 
we mentioned before? 

Mr., Schaefer. Yes; might I say right here, you notice that I use 
in about the fifth line of our letter the words "our chief competitor." 
That is a mistake. They were not our chief competitor in lap-weld. 



CONCENTRATION OF ECONOMIC POWER 10867 

Mr. Porter. That is, they had withdrawn from the majaufacture 
of lap-weld. 

Mr. ScHAEFER. Yes. 

Mr. Porter. Can you state whether or not the National Tube Co. 
was still marketing lap-weld products? 

Mr. ScHAEFER. I couldn't state. They probably had some lap- 
weld materials that they had to get rid of. 

Acting Chairman King. You modify that statement then that you 
nominate them chief competitor. 

Mr. ScHAEFER. Well, chief competitor going out of the lap-weld 
business, they were not a chief competitor. 

Acting Chairman King. You said so. 

Mr. ScHAEFER. I know in that letter. That is the wrong use of 
the word. 

Mr. O'CoNNELL. They were stUl making seamless? 

Mr. ScHAEFER. Oh, yes. 

Mr. O'CoNNELL. That is in competition with lap-weld. 

Mr. ScHAEFER. Yes, surely, on account of the setting depths. 

Mr. O'CoNNELL. Do you intend that National is a competitor of 
yours but not necessarily the chief competitor? 

Mr. ScHAEFER. I had reference there to the lap-weld putting the 
price of seamless down to lap-weld It would be a competitor in the 
lap-weld in that case. 

Of course they were competition. The seamless was in com- 
petition against lap-weld. It surely was. 

Mr. Porter. .Just to clarify this point, you were, in this passage 
under discussion, referring again to the events of the latter part of 
September 1938 when the National Tube Co. reduced for a short 
period the prices of grade B seamless to a level directly competitive 
with lap-weld oil country products. Is that correct? 

Mr. Schaefer. That is right, because any consumer who is using 
lap-weld casing, whether service casing or what-not, and could get it 
at the lap-weld price would have been foolish not to have purchased it. 

Mr. Porter. And you were saying the obvious in this letter, that 
is that that action, to use your phrase, "did considerable damage," 
and again to quote you, "that they took in a lot of tonnage inevitably." 

Mr. Schaefer. That was a guess on my part that they would. 

Mr. Porter. That was your reaction to that move? 

Mr. Schaefer. Yes; that they took in a lot of tonnage; they took 
in some tonnage. As I say, where seamless is used, especially in the 
Mid-Continent, field, and so forth, they would jump at the chance. 

Acting Chairman King. You expected competition, didn't you? 

Mr. Schaefer. We expected competition; yes. We had been 
thinking about this for a long time. 

Acting Chairman King. There was competition in the production 
of the commodities manufactured by your organization? 

Mr. Schaefer. There was competition; yes. 

Mr. Porter. Is it fair to say, Mr. Schaefer, that this is the first 
occasion on which the customary price differential in favor of lap- 
weld as against seamless had been substantially eHminated? 

Mr. Schaefer. Substantially eliminated on the tonnage item. 

Mr. Porter. This was the first occasion in which that had been 
true? 



10868 CONCENTRATION OF ECONOMIC POWEJR 

Mr. ScHAEFER. I believe that is so. 

Mr. Porter. Mr. Roberts, I show you now a docuiiient bearing a 
heading, "Memo," dated September 29, 1938, addressed to you, which 
bears no signature. In pencU in the upper right-hand corner there 
appears the legend: "Brought by G. W. S. from Pittsburgh trip," 
with the initials below "J. W. C." I ask you to identify tins letter. 

Mr. Roberts. Yes; I recall that letter. 

Mr. Porter. Mr. Chairman, I offer this letter to be printed. 

Acting Chairman King. The one addressed to Mr. C. H. Roberts? 

Mr. Porter. That is correct. 
' Acting Chairman King. It may be received. 

(The letter referred to was marked "Exhibit No. 1437," and is 
included in the appendix on p. 11009.) 

Mr, Porter. 1 should like to read portions of the letter. 

The matter outlined below is in strict confidence and has been received by the 
writer since return of the gentleman from New York whom we mentioned by 
telephone. Naturally, to gain the end which the other mills wanted, that is not to 
have, the National Tube Company quote prices on seamless material which would 
meet with lapweld competition, it was very necessary for these other mills to give 
up something in return. Through the same and another source we have today 
checked a second meeting of manufacturers other than the National Tube Com- 
pany to be held in a few days. As it stands at the moment, the thing resolves 
itself as follows. 

I think that it is unnecessary to read any more of the letter at 
this point. Mr. Roberts, what can you teU us of the facts which the 
first two paragraphs of this letter that I have just read describe? 

Mr. Roberts. The memorandum at the top has reference to Mr. 
G. W. Sweet, our general superintendent, who happened to be in 
Pittsburgh the day that this memorandum was written. He was 
there on a business trip and he has nothing whatever to do with sales 
or anything of that nature. He was there on a business trip, on some 
machinery, and he also had some business at Beaver Falls, Pa. 

Mr. Porter. In other words, he was merely the messenger who 
brought this letter from Pittsburgh. 

Mr. Roberts. That is right. It isn't the custom of our company 
to write memos, and I have been given to understand by Mr. Gibson, 
who wrote this, that his reason for writing a memo was that Mr. 
Sweet was in a hurry to catch a train back to Chester and he hurriedly 
dictated a memorandum which he didn't even have time to sign. 

Mr. Porter. My question was whether you could describe the 
events to which the first two paragrai)hs of this letter relate. Would 
you rather have me direct that question to Mr. Gibson? 

Mr. Roberts. As he wrote the letter perhaps he would be better 
able to explain. 

Mr. Porter. Very well, Mr. Gibson. 

Mr. Gibson. You directed your question concerning the firsi two 
paragraphs? 

Mr. Porter. That is right. 

Mr. Gi'json: The first paragraph, of course, relating to the fact 
that this message was to be held in strict confidence, was mainly due 
to respective persons from whom I had secured the information, and 
naturally we didn't want to inake that common property. Second, 
may I refer to this to refresh my memory on it? I would like to say 
Here, at this point, that ampUfication of this and other subjects, I 



CONCENTRATION OP ECONOMIC POWER 10869 

think I touched upon this yesterday very briefly, that we as the 
smallest manufacturer of oil country tubular goods in this country, 
having roughly only seven men to dispose of all of the product, and 
my being located in Pittsburgh, makes it part of my duty to gather 
all of the information pertinent to anything which concerns the in- 
dustry, and relay it immediately to the bome office. In many 
instances that information is valueless, it is in most instances rumor, 
gossip, as I mentioned yesterday, Pittsburgh being the capital of the 
steel industry, so called, and a great many of us know each other quite 
well, we of course exchange information of a general nature, and of as 
a specific nature as we possibly can, and this was the result of the 
exchange of such information. 

The second paragraph states specificall.y, "checked second meeting 
of manufacturers, other than the National Tube Co., to be held in a 
few days." That meetmg, to the best of my loiowledge was never 
held. I do not know of any meeting which was ever held, and have 
never been invited to attend any meeting which was ever held. 

Mr, Porter. I take it, however, that you knew of a first meeting 
of manufacturers, since you speak of a second meeting. 

Mr. Gibson. I knew of a discussion of manufacturers prior to that 
time. We must go back, I think there, !Mr. Porter, to the fact that 
the National Tube Co. bavin"; discontinued the manufacture of oil 
country Lapweld products, left, as has been stated repeatedly, the 
rest of the industry who had such equipment and had been manufac- 
turing that in various quantities, considerably in an uproar. Every 
one wanted to laiow what their policy was to be insofar as the con- 
tinuance of manufacture of that type of product. And naturally it 
was the subject of, I might say, very general discussion. It was on 
every one's mind who liad anything to do with the manufacture of 
steel pipe, and as far as meetings are concerned, I would like to 
amplify that to state that I do not believe that they were formal 
meetings to discuss these particular problems, but certainly everyone 
contacted each other to find out what their position should be, and 
what attitude they should take insofar as the production of this type 
of material should be. 

Acting Chairman King. Should or would? 

Mr. Gibson. Should, sir. 

Mr. Porter. In addition to the problem raised by the withdrawal 
of the National Tube Co. from the manufacture of lapweld oil country- 
products, there was also, was there not, the problem which you state 
in the second paragraph of this letter, in the following words: 

Not to have the National Tube Company quote prices on Seamless material 
which would meet Lapweld competition. 

Mr. Gibson. That was a decided problem; yes; and a very vital 
one to ourselves. I believe in some degree it was vital to other manu- 
facturers who had stUl continued to have quite a large capital invest- 
ment in equipment to manufacture Lapweld products. 

Mr. Porter. Is it a fair inference from this paragraph and from 
what you have just said, that among the topics discussed by the other 
manufacturers of Lapweld products in these conversations of which 
you have spoken, was the step or steps, to quote you, necessary for 
these other mills to give up something in return for the readiness, 



10870 CONCENTRATION OF ECONOMIC POWER 

we'll say, of the National Tube Co. to cease quoting prices on Seamless 
materials which would be in direct competition with Lapweld? 

Mr. Gibson, That was mentioned as a matter of street gossip, I 
felt quite disposed, from the reasons stated a few moments ago — the 
report got to my home oflSce, but the very validity of the statement 
is explainable in the fact that that never occurred. 

Mr. Porter. You will recall, Mr. Gibson, as you look at this letter, 
that in the third, fourth, fifth, sixth, and seventh paragraphs, you 
outline with some particularity, the steps to be taken by various 
producers of Lapweld, steps which it would seem were in the nature of 
an execution of the arrangement which you suggest in the second 
paragraph, that is the steps necessary to get the National Tube 
Company to cease quoting on Seamless prices in direct competition 
with Lapweld. 

Mr. Gibson. I would prefer the interpretation of that in this 
respect, that that would be the logical tning for them to do or be 
forced to do by virtue of competition. 

Mr. Porter. I call your attention, however, to the fact that you 
use the future tense. 

Mr. Gibson. That is quite correct, 

Mr. Porter. In several cases. You say, for example, 

the National Tube Company will leave as they are at the moment the prices for 
grade B Seamless. 

Youngstown, Spang Chalfant, Jones & Laughlin. and Republic Steel will 
discontinue the manufacture of lapweld pipe. 

Was that a prediction which you were making on your own recog- 
nizance, or was that a statement of something which you knew to be 
a fact? 

Mr. Gibson. I did not know that to be a fact at all. It may 
possibly have been a wish before the thought, but the fact that many 
of those things transpired as factual. 

Mr. Porter. To what extent, Mr. Gibson, did the South Chester 
Tube Co., either through you or -someone else, participate hx thespi 
discussions? 

Mr, Gibson. In which discussions, please, Mr. Porter? 

Mr. Porter. The ones you mentioned in your testimony. 

Mr. Gibson. The only participation were those I mentioned a 
moment ago, to the effect that they were quite common points of 
gossip and discussion among aU representatives of pipe manufacturers 
on the street or wherever we chanced to meet. 

Mr. Porter. I should like to call your attention 

Acting Chairman King (interposing). May I ask a question there. 
WeU, these discussions, which you have rather cavalierly passed over — 
I don't say that by way of criticism — did they eventuate in the fixing 
of prices imder an agreement under the terms of which some com- 
panies would abandon the manufacture in which they were engaged, 
and others take up the slack, so to speak, or receive the benefits that 
might be obtained by the abandonment of one? 

Mr, Gibson. They most certainly did not, Mr. Senator. 

Acting Chairman King. What was the purpose of those discussions? 

Mr, Gibson. The purpose of those discussions, from iny point of 
view, which is the only one I can speak authoritatively for, is basically, 
we were in -a very, very confused state. It was chaotic. Here we 



CONCENTRATION OF ECONOMIC POWER 10871 

had manufactured a product for upwards of 40 years with a price 
difi'erentiiil between that of the seamless oil country goods, which of 
course was not in existence for 50 years but since its entry in the 
industry, and here we were, faced with a condition in which, a seamless 
product, an admittedly superior product, to which I testified yester- 
day, was being offered at the same price as the old lapweld oil country 
tubular goods. I can amplify my statement that these were prob- 
ably more wishes, in regard to some portions of this letter, than possi- 
bly anything else. None of the: facts contained therein — that is none 
of the statements set forth therein, have become an actuality at all. 

Acting Chairman King. Well, does this sentence or phrase mean 
anything, or is it absolutely innocuous, "It was very necessary for 
these other mills to give up sometliing in return." What did you mean 
by that. Did they give up anytliing in return, if so, what, and what 
was the benefit to be derived by the renunciation of the rights which 
they enjoyed? 

Mr. Gibson. They did not give up anything in return whatever, 
and the very fact that you state it is innocuous, I would say, not 
contradictorily, but it was probably a very blind guess upon my part. 

Acting Chairman King. It seems to me it is better to have em- 
ployees or officials that don't make blind guesses. That is just an 
observation. 

Mr. Gibson. I amplified that at the start of this testimony, in 
answer to Mr. Porter's question, Mr. Senator, that I am very well 
aware of the fact that communications which go between me and my 
home office are not even a smajl percentage actualities. 

Acting Chairman King. Don't you think the home office would 
profit more by receiving information that was not guesses and that 
were actualities, rather than prophecies, perhaps, not based upon 
any facts? 

klr. Gibson. They doubtless would, sir, if you could secure them 
all as actualities. But perhaps as general statement, things which are 
being talked of and tilings which are being discussed, and I riepeat the 
statement I made a few moments ago, that Pittsburgh being the 
center of the manufacture of steel in the large majority, we aU know 
each other and we discuss these problems in the main. 

Acting Chairman King. Just one other question. Did any organi- 
zation give up something in return for an abandonment of the pro- 
duction of certain commodities in wliich they were engaged? 

Mr. Gibson. No, sir; to the b' st of my knowledge no. 

Acting Chairman King. Proceed. 

Mr. Porter. One more question with respect to the meeting or 
meetings which you mentioned in your letter, Mr. Gibson. I would 
like to direct your attention for a moment to the next to the last 
paragraph on the first page of this letter, which reads as follows: 
[reading further from "Exhibit No. 1437']: 

In so far as the South Chester Tube Company is concerned, as has been stated 
this afternoon, neither the National Tube nor a meeting of the other mills feel 
they should take the responsibility of determining or suggesting any policy for us 
to follow, as they would not want to be confronted at Washington, since we make 
no other product in the way of pipe, and not even any other products manufactured 
of steel. 

Did you know that to be the view, both of the National Tube Co. 
a^id of a meeting of the other mills? 



10872 CONCENTRATION OF ECONOMIC POWER 

Mr. Gibson. Answering the last question first, I did not know of a 
meeting of the other mills, nor did I know that any had ever been 
held, if any such have ever been held, never having attended them or 
never having been invited to attend them. 

Mr. Porter. How did you happen to use that language? 

Mr. Gibson. That probably is not a very good choice of words. 
This was dictated in quite a hurry, as Mr. Roberts testified, and I 
would say that I did, however, make a canvass of opinion of the other 
mills by telephone, by meeting representatives on the street, and may 
I go back to the basic factor of this, which was established in Mr. 
Schacfer's testimony, I believe, that with the National Tube Co. not 
participating in the market for lap-weld oil-country goods, it was felt 
perhaps the mills which exclusively made lap-weld material should 
perhaps take the lead in announcing the price. Does that answer your 
question, Mr. Porter? 

Mr. Porter. I don't think it answers my question, and I don't 
think you make yourself clear as to the significance of this point. 

Mr. Gibson. In what respect? 

Mr. Henderson. I think you might ask the witness concerning "as 
has been stated this afternoon." Who stated it to you that afternoon? 

Mr. Gibson. May I refer to this again? 

In what paragraph? 

Mr. Henderson. The last paragraph: 

In so far as the South Chester Tube Company is concerned, as has been stated 
this afternoon — 

Who stated that to whom that afternoon? 

Mr. Gibson. Mr. Henderson, I can't recall that. I don't recall 
who stated what to whom in that instance. That is a telephone call 
by me to Mr. Roberts. 

Mr. Henderson. Now, where did you get the information that you 
telephoned Mr. Roberts? 

Mr. Gibson. The information was gathered from personal con- 
tacts 

Mr. Henderson (interposing). We have been through that. I 
didn't ask you what class or variety of people, or whether you got it on 
the street or got it out of the air. Whom did you talk to, specifically? 

Mr. Gibson. I am afraid I couldn't answer that specifically as to 
whom I talked to. 

Mr. Henderson. Can you tell me one you talked to? 

Mr. Gibson. I can tell you a number of people I talked to during 
this transition period or very chaotic period in the pipe industry, 
which I believe lasted 4 or 5 days. As I have stated before, we in 
Pittsburgh know each other rather well. It is a matter of record that 
I have talked to Mr. Schaefer, I have talked to representatives of the 
Youngstown Sheet and Tube Co.,. representatives of Jones & Laughlin 
Co. 

Mr. Henderson. Let's get off the generality, it isn't even glittering. 
With respect to this specific item ahout which you telephoned Mr. 
Roberts, whom did you talk to? 

Mr. Gibson. I can't answer that specifically as to this particular 
conversation. 

Mr. Henderson. You can't answer as to anyone? 



CONCENTRATION OF ECONOMIC POWER 10873 

Mr. Gibson. Not as refers to this particulpr paragraph in this 
letter; sir, no. 

Mr. Henderson. Now, which do you want me to beheve, that you 
can't remember, or that it is inconvenient for you to tes:tify on it? 
If it is embarrassing for you, and the like, I would much prefer, and I 
think the committee would, that you say, "It is embarrassing for me 
on account of the position I have in my company, and the position 
my company has in this trade, and on account of the nature of the 
information discussed here, to say it," because I find it difficult to 
believe that you can't remember where you got the information. 

Mr. Gibson. I don't believe it is the position of my company or my 
counsel to want me to be nonspecific in the mentioning of any par- 
ticular names. If you will bear in mind, please, sir, Mr. Henderson, 
that during tliis period we were running around very chaotically 
trying to find out what the future of our product and our sole existence 
was, and I might go even a step further, sir, and say that I was 
deliberately trying to stir everybody up that I could to find out what 
their attitude was going to be on the future of a product which is our 
sole source of revenue. 

Mr. Henderson. We have here a letter to which great importance 
was attached by the writer on its confidential nature. It specifically 
recites engagements, undertakings, mentions specific companies, and 
all you can tell me is that "I was running aroimd Pittsburgh, the center 
of the industry, and talked to people oh the street, and this is what I 
got and only a small part of it will assay as the truth." Is that the 
impression you want to leave with the committee about the 
memorandum? 

Mr. Gibson. As factual, yes, sir. 

Mr. Henderson. And do you want the committee to understand 
that you can't remember who told you what? 

Mr. Gibson. Not in that particular palragraph of that letter, which 
is about 14 months ago, and as I previously stated, I was trying to 
contact everyone. Naturally, however, in my position as district 
sales manager of the smallest oil country lap-weld tubular manufacturer 
in the United States, I wasn't contacting officials. I was contacting 
sales personnel, who are my most intimate connections in those 
organizations. 

Mr. G. W. Witney (general counsel, South Chester Tube Co.). I 
would like to tell you as general counsel for the company that the 
answers Mr. Gibson is giving to you are the same answers he has 
.a:iven to me after very close cross-examination. He does not remem- 
ber, as far as I can find out. 

Mr. Henderson. In response to that, I say, Mr. Chairman, perhaps 
a little more specifically than you intimated, I find it difficult to 
believe that. 

Mr. Witney. You mean my statement. 

Mr. Henderson. No; not your statement. I find it difficult to 
believe that concerning aU this information, detailed here with great 
specificity, the memory process has so completely failed. I find it 
impossible to believe that American business could be carried on if 
there were so much evidence of fallen arches in the medulla oblongata. 

Mr. Witney. I think I would like to make a statement to the point. 



10874 CONCENTRATION OF ECONOMIC POWER 

Acting Chairman King. Are you testifying now? 

Mr. Witney. I am general counsel for the company. 

Acting Chairman King. If you are general counsel, that wouldn't 
absolve you from being sworn if you expect to testify to some facts 
in the matter. 

Mr. Henderson. I would rather not stand on any technicality. 

Acting Chairman King. Make your statement. 

Mr. Witney. I think the committee should take into consideration 
the fact that this is a one-product company in a small community. 
This company has been in existence since around 1884 in making 
pipe, tubular products for the oil industry primarily. It manufactures 
in one process only, the process of taking a piece of skelp and folding 
it and making it into a tube, a lap-weld product, so-called. They 
have just the one furnace and the one product, one mill. They are 
in this small community with perhaps from 500 to 800 employees, 
many of whom are a third generation of people who are working for 
the company. They have a pier on the Delaware River. If it 
were not for this they would not be able to compete in the Texas field. 
They are able to ship by water at low rates. They could not ship by 
rail and compete with the Pittsburgh mills. These people have had 
a very close interest in the development of the pipe business in the 
oil fields. Everything they know about that business is learned 
through six or seven district offices that are operated by individual 
salesmen, of which Mr. Gibson is one. Mr. Gibson is in the Pitts- 
burgh office. His father was there before him, and his grandfather. 
These people have to keep in touch with current conditions. They 
cannot do it by telephone. They do it by an exchange of letters. 
Unfortunately the letters have been kept— possibly it is unfortunate 
for the company — and your committee have unearthed those letters. 

I think in, reviewing, the committee in considering these letters — 
they should take into consideration the size of the company, the fact 
that the men handling those letters were salesmen reporting to their 
sales manager in a very small company. A lot of the information, 
of course, is gossip, a lot of it suspicion, a lot is wish, a lot is rumor. 
Some of it, of course, is factual. The sales manager has to take the 
information that he gets from the various district offices and sift it 
and make his decisions in cooperation with the officials of the company. 
There are only three officials of the company. The president of the 
company is a very fine gentleman who has been sick for nearly 4 years. 
These men have had to make their decisions possibly without his help 
and cooperation. The only way they can make their decisions is by 
reviewing the information which they gather through their salesmen 
in the field. It is unfortunate that this small company, which depends 
entirely upon production of one product in the industry, should be 
brought here and made such a common thing of, and that their indi- 
vidual correspondence with their salesmen should be brought out to 
be subject to cross-examination. None of these letters was ever 
written for any purpose of that kind. I have objected very strongly 
to the use of these letters by this committee, by the men from it. 
I have done everything I could to protect the company. I do think 
these things should be taken into consideration by the committee in 
reviewing the testimony. 



CONCENTRATION OF ECONOMIC POWER 10875 

Acting Chairman King. I am sure the Committee will give due 
consideration to the evidence that is adduced, and I am sure they will 
not overlook your statement. 

Mr. Henderson. May I respond just a moment to that? 

Mr. Witney. Mr. Henderson has lived in South Chester 

Mr. Henderson (interposing). I have known the South Chester 
Tube Co. for a long while myself. If you will recall, I told the 
witness what my preferences were in the thing. I Icnow what the 
difficulties are, and one thing this committee would be interested in 
IS, What are the difficulties of a small company as against a large 
company? And if I had to guess at this minute about this matter, 
I would say that one of the things which bulks very largely is what 
the effect on your company is likely to be in competition 'as a result 
of this discussion going on here. 

Mr. Witney. Would you like me to make a statement to that 
effect regarding that matter? 

Mr. Henderson. No ; I would rather finish what I have to say. 

Mr. Witney. Excuse me. 

Mr. Henderson. I say we are confronted here with deciding whether 
we take at face value specific statements that are made, or what we are 
led to. guess on things. I said I find it difficult to take the other. 
Now I will stand on that. 

Mr. Witney. Not to my knowledge. 

Acting Chairman King. If I may indulge in a conclusion which 
probably isn't warranted, as I haven't, heard all the evidence, it would 
seem from the statement of counsel as well as the fragmentary part 
of the testimony which I have heard by the witness, Mr. Gibson, that 
this is a very small company. Doubtless it is subjected to very great 
competition, and I assume from what Mr. Gibson said that he is sort 
of hanging around on the outskirts looking into the activities of the 
big companies to see whether he is to be permitted to survive. 

I agree with Mr. Henderson. Perhaps it would be more illumina- 
ting to the committee if we could ascertain just what some of the fears 
and apprehensions were, and just what some of the contests were, 
that Mr. Gibson and his company had to pass through in order to 
survive. 

Mr. Porter. Mr. Chairman, may I just say at this point what 
should not be necessary for us to say, namely, that it was certainly 
not the desire of counsel in any way to embarrass the South Chester 
Tube Co. It happened quite fortuitously that this information came 
to us via that company, and our interest in the business situation 
which these letters of this company revealed is of the precise character 
which you, Mr. Chairman, and Commissioner Henderson have 
summarized as the character of the problem. 

We regret that so much attention has to be given to the specific 
language of any particular letter, but what we are interested in is the 
larger problem which all of this material hinges upon. 

Acting Chairman King. Will you proceed? Are there any other 
questions? Are you through, Mr. Porter? 
Mr. Porter. Not quite, sir. 

Mr. Gibson, let me ask you this. Will you state whether or not 
on or before the date of this last letter, September 29, 1938, the National 



10876 CONCENTRATION OF ECONOMIC POWER 

Tube Co. did, in fact, cease selling grade B seamless at the lap-weld 
oil-country price level? 

Mr. Gibson. That is my understanding; yes, sir. 

Mr. Porter. So far as you recall, when did the National Tube Co. 
cease to do that? Was it before or after you wrote this letter? 

Mr. Gibson. I believe it was prior to that letter. We can refer, 
if we are permitted, to the first information which we received on the 
subject, as Mr. Roberts testified, from our Tulsa, Okla., office. May 
we have an opportunity to ascertain that date? 

Mr. Henderson. As I gather, Mr. Counsel, the answer was that 
this is precisely one of the things that did happen. 

Mr. Porter. Yes, sir. 

Mr. Henderson. And it is a very important matter of policy. 

Mr. Porter. The central fact. 

Mr. Gibson. I beg your indulgence just a moment while we ascer- 
tain whether we can find this particular piece of correspondence. 

Mr. Porter. What was your understanding at the time, Mr. 
Gibson, as to the reasons why the National Tube Co. ceased or rather 
withdrew the reduced prices on grade B seamless which had been 
directly competitive with the lap-weld price? 

Mr. Gibson. I can state no knowledge of the National Tube Co.'s 
reasons for doing any particular thing. Certainly I am not consulted 
about their actions, but any testimony that I might give to that 
effect would be pure conjecture. 

Mr. Porter. In view, however, of the wide contacts in the trade in 
Pittsburgh, of which you have spoken repeatedly, I think the com- 
mittee would be interested to know your understanding based on 
whatever information or thoughts you may have had at the time as to 
the reasons why the National Tube Co. withdrew these lower prices. 

Mr. Gibson. I will testify as to my own personal thoughts in the 
matter, which is the only thing wiiich would be authentic and they 
are only my own conjecture in the matter, that they had decided, very 
possibly, that the tonnage sold in the lap-weld oil-country trade had 
gotten to such a low percentage that in the total operations that 
they felt perhaps it was an obsolete method of making pipe which 
served only a small percentage of the' oil industry, and that they were 
very probably from the point of view of operation, manufacturing 
and selling what little they did of this particular commodity at per- 
haps a loss, therefore that there was no need of it in their manufactur- 
ing set-up from that date hence. That I repeat is only my own con- 
jecture and I don't believe I would be qualified to give reasons why 
the National Tube Co. would take any action whatever. 

Mr. Porter. If I understand you, what you are testifying to is 
your conjecture as to the reasons why National Tube Co. decided 
to withdraw from the manufacture of lap-weld products. My ques- 
tion to you, however, was your understanding or conjecture as to 
the reasons why the National Tube Co. decided to withdraw the 
lower prices on grade B seamless which had been in effect for a period 
of a few days in the last week of September 1938. 

Mr. Gibson. I repeat that I can't give any answer which would 
be their reasons, and reasons that I could give would be only suppo- 
sition upon my part. 

Mr. Porter. As I have said, I think the committee would be 
interested to hear you on that. 



CONCENTRATION OF ECONOMIC POWER 10877 

Mr. Gibson. On my personal supposition as to why that would 
be undertaken? Well, possibly this would be one reason. As I 
say, I am not trying to speak for the attitude or the action of the 
National Tube Co. Undoubtedly they had some lap-weld material 
in stock which they wanted to dispose of. Naturally, in the economic 
follow-up of that thought, they wanted to dispose of it at the best 
possible price they could get, and possibly they thought that their 
announcement of the discontinuance of further manufacture of lap- 
weld oil-country goods would lead those in the industry to follow 
suit. That would of course make a cumulative total of quite a 
considerable tonnage of stocks in various parts of this country which 
as a follow-up to the National Tube Co.'s discontinuance of that 
product might have the reaction on the other manufacturers to dis- 
pose of their stocks at quite concessionary prices. That is purel}' 
my own conjecture. 

Mr. Porter. Again, as I understand it, you are addressing yourself 
to possible reasons for the National Tube Co.'s disposal of its lap-weld 
production. I am asking you, however, for your imderstanding or 
conjecture as to the reasons why the National Tube Co. withdrew 
the reduced prices on grade B seamless which it had put into effect 
for a few days in the last week of September 1938, and which during 
those few days had been directly competitive price-wise with the 
lap-weld lists. 

Mr. Gibson. You say directly competitive price-wise; there was 
a spread. Now I can't testify as an econoniist. In my own conjec- 
ture perhaps this action might stop the action or the supposed or 
presumed actions of other manufacturers in disposing of existing 
stocks of lap-weld material at ruinous prices. Certainly there would 
be no incentive for a producer of oil, "operator" as we commonly 
term them, to purchase any lap-weld pipe when he could secure seam- 
less at the same price, and following that up to what I hope is a logical 
conclusion, the lap-weld stocks in the hands of other operators probably 
lie dormant. 

Mr. Henderson. Your conjecture is that National Tube didn't 
find this out until the}^ had put through grade B at the lap-weld price 
and then they reversed their action. 

Mr. Gibson. Will you state that again please, Mr. Henderson? 

Mr. Henderson. National Tube had taken an action in putting 
grade B in competition with the lap-weld. Isn't that correct? 

Mr. Gibson. They had taken an action in placing grade B as a 
competitive item to lap-weld? 

Mr. Henderson. Yes. 

Mr. Gibson. When they announced the 

Mr. Henderson (interposing). Yes; they had already announced 
that? 

Mr. Gibson. Yes. 

Mr. Henderson. This would suggest that they were going to 
reverse that by discontinuance and bring back the spread, and your 
conjecture is that they didn't realize before what the effect of bringing 
down the seamless would have on their own stocks of lap-weld. 

Mr. Gibson. And other stocks, too, perhaps; yes; I will answer 
that question; yes; generally, yes. 



10^78 CONCENTRATION OF ECONOMIC POWER 

Mr. Henderson. They realized that after they had taken the action 
it was probably disadvantageous to their own lap-weld and other 
stocks. 

Mr. Gibson. I would answer that question generally yes, sir, as a 
presumption of the action of the National Tube Company. 

Mr. Porter. Mr. Schaefer, I should like to show you a memorandum 
signed by you dated October 1, 1938, and addressed to Mr. I. G. 
Thompson, Dallas office of the Wheeling Steel Corporation. Would 
you identify that, please? 

Mr. Schaefer. Yes, sir. 

Acting Chairman King. Wheeling Steel is a Texas Corporation? 

Mr. Porter. A producer of steel and steel products, including in 
the field of pipe and tubular products, lap weld oil country goods of 
the same character as the products of the South Chester Tube Co. 

Acting Chairman King. You stated Dallas, Tex. 

Mr. Porter. The Dallas Office of the Wheeling Steel Corporation. 
I should like to offer this to be placed on file with the committee. 

Acting Chairman King. It may be received. 

(The memorandum referred to was marked "Exhibit No. 1438" and 
is on file with the Committee.) 

Mr. Porter. I will read just a paragraph or two, and I may repeat 
that this memorandum is dated October 1, 1938. [Reading:] 

As you know, for the past four months we have had unheard of conditions 
surrounding the distribution of Oil Country Goods and one that loomed up very 
seriously was the threat that "B" Seamless would be permanently on a Lapweld 
basis. You probably know that no official announcement was made of this fact 
but that in a few instances National did quote on and accept some "B" Seamless 
at Lapweld prices. 

From developments the past day or two, you now probably know that this 
situation has cleared up and we understand that it will not be possible to secure 
"B" Seamless at the same price as Lapweld material and, of course, we are very 
thankful that this decision has come about. 

Mr. Schaefer, what specifically did you have in niind when you 
used this language:. 

From developments the past day or two you now probably know that this 
situation has cleared up. 

Mr. Schaefer. Well, the fact is that the Dallas office knew of the 
withdrawal of the "B" seamless, that they were making the "B" 
seamless at the lap-weld price. He knew that. They heard that in 
Texas. 

Mr. Porter. You say he knew that from developments the past 
day or two. What were the developments that you had in mind 
there? 

Mr. Schaefer. The developments were withdrawing the latter part 
of September the selHng of "B" seamless at the lap- weld price. 

Mr. Porter. I don't want to labor the point, but as I understand 
it you are saying he knew of that withdrawal from developments of 
the past day or two, and I am asking what the developments were. 

Mr. Schaefer. He knew of the developments because his own job- 
bers down there told him that the price had been withdrawn. 

Mr. Porter. So the developments were the withdrawal of the price. 

Mr. Schaefer. Yes. 

Mr. Porter. That is the only thing you had in mind. 

Mr. Schaefer. That is the only thing. 



CONCENTRATION OF ECONOMIC POWER 10879 

Mr Porter. What was your understanding at the time, Mr. 
Schaefer, as to the reasons for National Tube Co.'s withdrawal of 
those reduced prices? 

Mr. Schaefer. I do not know the reason why they put it m or 
why they withdrew it, Mr. Porter. . 

Mr. Porter. You probably had views, however, at that time. 1 
wonder if you wouldn't state them for the committee. 

Mr Schaefer. I didn't go into the reviewing of this matter to any 
extent. We had "B" seamless in stock and we had lap-weld m stock. 
The matter of concern to me was that if the "B" seamless was to be 
placed at the lap-weld price, while we were not possibly as seriously 
affected as Mr. Gibson is testifying, it remained that we probably, 
"the Wheeling Steel Corporation, would have to go out of the lap-weld 
business. As much as we would regret to discard the machinery for 
making lap-weld, if it was an item that was passe, let us say, an item 
that there was not much use for (as our records would mdicate the 
amount of lap-weld oil country we sold was a very small portion of 
our business), we would have either to find some other use for that 
particular steel that we put in lap-weld oil-country goods or possibly 
decide to go into the manufacture, to hold our position in the mdustry, 
of a seamless or just as good a material. 

Acting Chairman King. There was competition between the two 
products, the seamless and lap weld. 

Mr. Schaefer. There was competition, you might say, yes; that 
is if we wanted to stay in the lap-weld business we couldn't sell it at 
the price of seamless. 
Acting Chairman King. Was that your primary product? 
Mr. Schaefer. That was one of them. 
Actmg Chairman King. Was it secondary? 

Mr. Schaefer. We manufacture the lap weld from the ore for 
the finished product. 

Acting Chairman King. What I am trymg to get at is this: was 
the lap weld a very important factor in your production? 

Mr. Schaefer. No; I don't think it amoimted to 2}i percent. 
Acting Chairman King. Did you contemplate if prices became so 
low that you would have to abandon your production of lap weld 
and continue your activities in other directions? 

Mr. Schaefer. That is right. , . 

Acting Chairman King. Is that what you had m mmd? 
Mr. Schaefer. That is right. If we were m, you .might say, 
the horse and buggy stage so far as lap weld was concerned and the 
march of progress showed seamless was the item, we might as well 
get out of it. - . 

Acting Chairman King. The evidence was that seamless was m 

the dynamic period and lap-weld was in the horse and buggy period. 

Mr. Schaefer. Absolutely. You couldn't take some lap weld 

and set it at the depths the boys wanted to go because they were 

always going deeper and deeper and they wouldn't take a chance on 

lap-weld. , . . 

Mr. Porter. Just to make it clear, however, Mr. bchaeter, it is 
true, is it not, that m the field of oil country tubular products your 
production of lap-weld was a primary phase of your busmess. 

Mr. Schaefer. You mean the total of our lap-weld to the total of 
the lap- weld in the industry? 

J 2-1401 — 40 pt,20 1.0 



10880 CONCENTRATION OF ECONOMIC POWER 

Mr. Porter. I mean the total of your lap-weld oil-country pro- 
duction to the total of all your oil country tubular production. 

Mr, ScHAEFER. The total of ours? 

Mr. Porter. Yes. In other words, I think the record shows that 
so far as yom- own manufacture is concerned you were exclusively a 
manufacturer of lap-weld oil-country products. 

Mr. ScHAEFER. That is right. 

Mr. Porter. You manufactured no other oil country tubular 
product. 

Mr. ScHAEFER. No; only in lap-weld. 

Mr. Porter. Mr. Chairman, I would like to call Mr. Goble of the 
National Tube Co. 

Acting Chairman King. Do you excuse Mr. Schaefer? 

Mr. Porter. Yes; and Mr. Strickland, Mr. Gibson, and Mr. 
Roberts. 

Acting Chairman King. Thank you, gentlemen. 

Mr. Goble, do you solemnly swear that the testimony you are about 
to give in this proceeding shall be the truth, the whole truth, and 
nothing but the truth, so help you God? 

Mr. GoELE. I do. 

TESTIMONY OF JOHN E. GOBLE, VICE PRESIDENT IN CHARGE OF 
SALES, NATIONAL TUBE CO., PITTSBURGH, PA. 

Acting Chairman King. WiU you give. your name and address to 
the reporter? 

Mr. GoBLE. John E. Goble, Pittsburgh, Pa. 

Mr. Porter. And your position, Mr. Goble? 

Mr. Goble. Vice president in charge of sales. 

Mr, Porter. Of what company? 

Mr. Goble, National Tube Co. 

Mr. Porter. National Tube Co., as has been testified to before, 
is a subsidiary of United States Steel Corporation? 

Mr. Goble. Yes, sir. 

Mr. Porter. Will you state very briefly the products of the 
National Tube Co.? 

Mr. Goble. The products of the National Tube Co. may be divided 
into four general classes: standard pipe, oil-country goods, line pipe, 
and miscellaneous. 

Mr. Porter. And in the field of oil-country goods what are the 
principal products of the company? 

Mr. Goble. ^-eamless, principally; seamless oil-country goods. 

Mr. Port." The National Tube Co. was until sometime in 1938, 
however, a d anufacturer also of lap-weld oil-country goods. Is that 
right? 

xrl. '^ aLE. That is true. 

PRICING OF seamless PIPE 

Mr. Porter. As you know — I think you have been present during 
much of the recent testimony both yesterday afternoon and this 
morning — the National Tube Co. has been mentioned a number of 
times/ I think your name has also occurred in the course of the 



CONCENTRATION OF ECONOMIC POWER 10881 

testimony. I should like to ask you first, Mr. Goble, to state the 
reasons, so far as you know them, for the reduction in price during 
the last week of September 1938, of the grade B seamless oil country 
products by the National Tube Co. to a level substantially competitive 
price-wise with lap-weld oil-country products. 

Mr. Goble. It is a rather long story, Mr. Porter. If you will 
permit me to give the complete story I will be glad to, if you will be 
just a Uttle bit patient so that I may state all the reasons and reactions 
we were havmg during the period. 

Mr. Porter. All right. Let me ask you this for my own informa- 
tion. Are you going back to some time previous to this period in the 
last week of September? 

Mr. Goble. I intend to ; yes, sir. 

Mr. Porter. How far back? 

Mr. Goble. To 1936, at the time I became employed by the 
National Tube Co. 

Mr. Porter. All right. 

Mr. Goble. During 1936 we, for competitive reasons, reduced the 
price of certain of our products the first of January and again in April, 
I believe those were the dates. In 1937, as I believe you have the 
evidence, we increased the prices of all of our products. Then in 1938 
came the reductions. 

Mr. Porter. That was June 24. 

Mr. Goble. I believe that we announced it sometime around the 
22d or 24th of June. The prices were effective as of July 1. 

Acting Chairman King. Were those reductions the result of compe- 
tition or decline in business? 

Mr. Goble. Will you repeat that, please? 

Actmg Chairman King. Were those reductions to which you have 
just referred the result of a decline in business or extreme competition? 

Mr. Goble. The reductions which we made in 1936 were due to 
extreme competition; we had to meet competitive prices in certain 
lines. 

Mr. Henderson. In 1938 it was part of the general posting of new 
prices by the Corporation? 

Mr. Goble. Yes, sir. 

Mr. Feller. Just to clarify, Mr. Goble, you may perhaps know 
that Mr. Fairless testified with respect to the price changes in 1936 and 
he spoke, if I recall correctly, about correcting a distortion or imbal- 
ance which had occurred during the depression between the various 
products which the Corporation manufactured. Was this reduction 
in some of these products that you are talking about part of the at- 
tempt to bring the, shall I say, margins of differentials between various 
products into line? 

Mr. Goble. It was in some cases. For instance, the differentials 
which were estabUshed with respect to line pipe and standard pipe, 
their being related items; there were certain reasons for correlating 
those prices, but the price reductions in 1936 were made purely for 
competitive reasons. 

Acting Chairman King. You will discuss that generally, will you? 

Mr. Goble. Yes, sir. 

Acting Chairman King. Then I think those things will be brought 
out with your paper and you may proceed. 



10882 CONCENTRATION OF ECONOMIC POWER 

Mr. Gqble. For a number of years we have been perfecting the 
technique of making seamless pipe, through technological development 
and through improvement in our- practices. During these years the 
requirements of the trade, referring to oil country goods, have changed 
tremendously. In the old days a majority of the wells were shallow 
depth. Times have changed, and the majority of the wells became 
deeper. 

Prior to 1938, July 1938, we were manufacturing three grades of 
what we call oil-country goods. I don't want to be too technical, but 
I think it is important that you understand the relationship between 
those grades. The lowest grade of goods which we made was a lap- 
weld casing. The next grade was a seamless grade C, and the highest 
grade which we manufactured was a seamless grade D. The relation- 
ship of those grades — incidentally, I believe it has already been stated 
but I would like to clarify it — it is generally conceded in the industry 
that the gage of a product is its yield point strength. 

Those grades that we manufactured prior to 1938 were lap- weld with 
a minimum yield of approximately 30,000 pounds; grade C, with a 
minimum yield of approximately 45,000 pounds; and grade D, with a 
minimtim yield of 55,000 pounds. 

As the years have gone by it became evident to us that these grades 
were not ample to serve the requirements due to the changing drilling 
conditions. We thought it was advisable to completely reconstruct 
our schedules and bring out new grades. 

I might say that we had been continually losing our position in 
the sale of the low-grade item, although we made, e.s I have stated, a 
lap-weld low-grade material. But we had been losing our position 
because our production had been going down in lap-weld for a number 
of years. We were not able to compete. I think probably Mr. 
Feller has records sufficient to show that during this period prior to 
1938 the prices of otherlap-weld materials, so far as the public prices were 
concerned, of which we became advised from time to time through 
our customers, were considerably below our lap-weld prices. There- 
fore our sales of lap-weld pipe had been continually decreasing for a 
considerable period of time. 

We thought, therefore, that in view of the necessity for these 
changes in physical properties, and in view of the fact that our sales 
of lap-weld pipe had gone down to practically nothing, we should 
bring out a grade which would put us back in the market in this shallow- 
well field. 

Mr. Porter. That is a seamless product which would be directly 
competitive with the former lap-weld low-grade product, is that 
correct? 

Mr. GoBLE, That is right ; correct. 

During tliis period there had been certain very important develop- 
ments in the oil industry where relatively shallow wells were being 
drilled in large numbers. I refer first to the East Texas field, which 
was very important to us, and we lost a tremendous amount of 
tonnage in that field because in many cases lap-weld casing was satis- 
factory. Our prices on lap-weld casing was not competitive. The 
result was that we lost our position very rapidly. 

Mr. Porter. Pardon me just a moment. Would you' care to state 
why your lap-weld price at that time was not competitive? 



CONCENTRATION OF ECONOMIC POWER 10883 

Mr. GoBLE. It was probably due to the fact that we had rather large 
investments in lap-weld equipment, our production was too small, arud 
possibly due to those things it was unprofitable for us to attempt to 
meet the lap-weld competition. 

Mr. Henderson. You were selling at the base price, and com- 
petitors were selling under it? 

Mr. GoBLE. Mr. Henderson, while I don't have any pubhshed 
price sheets of competitors, it is my impression, I beUeve this is true, 
and I believe probably Mr. Feller can confirm this, that published 
prices of other lap-weld manufacturers were considerably below our 
published prices on lap weld, which we did not attempt to meet. 

Mr. Feller. I'm sorry; I just don't have that information, but 
I would be very glad to furnish it for the record. 

Mr. Henderson. It isn't important. 

Mr. GoBLE. On the other hand, it is our belief that other lap weld 
was being manufactured with superior physical properties to ours, 
and selling at a price below ours. 

Acting Chairman King. Do you mean by that that the steel product 
or the tube manufactured by your successful competitors had better 
physical properties than did your product? 

Mr. GoBLE. That was the report to us by our engineering depart- 
ment who would, I assume, calculate these physical properties from 
published setting depths. 

Acting Chairman King. Proceed. 

Mr, GoBLE. As of 1938, due to our continual loss of business in this 
low-grade field, a new field's having come into development in lUinois 
which was a shallow field, we were very much concerned, because many 
of our customers told us that they were perfectly willing to take lap- 
weld pipe, that it was entirely satisfactory for their requirements. In 
view of our noncompetitive position in lap-weld pipe we were not in 
a position to participate. Therefore, we were concerned. 

We put out the new grade B seamless in exchange for these previous 
three grades. We established the new grade B with 40,000 pounds 
minimum yield; put the C up to 55,000 pounds minimum yield; and D 
up to 80,000 pounds minimum yield, thinking that we had a proper 
range in low-grade pipes to take care of shallow wells and the highest 
grade pipes to take care of any deep-well requirements. 

This thing went on for a whUe, and we found that we were not 
participating in sales of low-grade material because, I believe, after 
July 1, some time during August — and I believe this has been testified 
here — twice in August, lap-weld prices were again reduced. 

Our customers came to us and told us that we were still not competi- 
tive with our grade B material. Now that is the story as I have it 
in mind at the present time with respect to the price reductions in 1938. 

Mr. Porter. May I restate that just to see if I understand it 
correctly? As I understand your testimony it is to the effect that at 
this time in the middle of 1938 ahd especially at the time of the opening 
of the Illinois field, a shallow field, the National Tube Co. faced a 
dilemma, the alternatives being the return to production in lap weld 
to meet the requirements of customers or the introduction and pro- 
motion of a new low-grade seamless to replace lap weld in the needs 
of those customers. Is that correct? 

Mr. Goble. Yes, sir. 



10884 CONCENTRATION OF ECONOMIC POWER 

Mr. Porter. And the second alternative was the one which was 
chosen. Now there has been testimony, both yesterday and today, 
to the effect that the introduction of the new grade of seamless grade 
B by virtue of the fact that it automatically made obsolescent to a 
degree the old grade C seamless, resulted in pressure upon the price 
structure of lap-weld oil coimtry products by virtue of the fact that 
the old-grade seamless was made available to the trade at the same 
price as the new grade B seamless, which in turn was competitive 
with lap-weld. 

Mr. GoBLE. Mr. Porter, I don't think you have that picture exactly 
clear in your mind, if I may clear it up. For a long time our engineer- 
ing friends among the producers had been devising new calculations 
and specifications for odd sizes and weights and odd phj^sicals which 
created a very difficult situation for us in our production. In our 
equipment we require long runs of specific items to get the lowest 
costs, and when our customers were ordering special items, it created 
considerable difficulty in om* manufacture and cut down our produc- 
tion and raised our costs, so for a considerable period of time we had 
been trying to devise, in discussion with our consumers, means of 
inducing them to specify fewer sizes and weights. Over this period 
of time the oil companies were very much interested in this program. 
They themselves felt that possibly if we could eliminate a few of the 
hundreds of sizes and weights of oil country goods and confine our 
producing to a lesser number, we could get greater runs and possibly 
effect savings which might eventually be passed on to the consumer. 
So, as I recall, for probably a year and a half we had been discussing 
what we called a simplified list of sizes and weights for oU coimtry goods. 
We devised this list after the oil industry had been unable to ar- 
range a list to suit itself, because the people in Cahf omia wanted 
certain sizes and weights and the people in the Midwest, or what is 
commonly known as the midcontinent area, wanted something else. 
We finally took the matter in our own hands and brought out what we 
called a simplified list, taking total items of our production and 
selecting therefrom those items which represented a majority per- 
centage of the total. 

Acting Chairman King. Then you have the same problem to deal 
with that the manufacturers of ladies' hats do, they change every day 
arid have various sizes and shapes. 

Mr. GoBLE. That is somewhat analogous. 

Acting Chairman King. You had various sizes and shapes as a 
result of your engineers' efforts, having hundreds and hundreds of 
different sizes and shapes. 

Mr. GoBLE. Each one seemed to calculate that he required some- 
thing a little bit special in the way of size or weight or length for hi? 
requirements. 

Possibly! omitted to say that as of July 1 we had definitely, because 
of our loss position, decided to abandon lap-weld pipe even though it 
meant the sacrifice of a considerable investment of the National 
Tube Co. 

Acting Chairman King. July of what year? 

Mr. GoBLE. Nineteen thirty-eight. Now this simplified list, 
when devised by us from- our actual producticto figures over a period 
of the previous year or two, was brought out. As I recalFthere were 



CONCENTRATION OF ECONOMIC POWER 10885 

12 sizes, or 12 weights and 5 sizes, or 6 sizes — I don't have the list here 
with me, but a very simplified Ust of sizes and weights. In this new 
price program of July 1938 we put the prices of those simplified sizes 
and weights below the prices of all other items as an inducement to the 
trade to confine its requirements to those special items. 

Mr. Porter. Let me see if I can make this a little bit clearer, Mr. 
Goble. Is it fair to say, in view of your last statement, that with the 
introduction of the grade B seamless the customary preexisting differen- 
tial in price between lap-weld and the lowest grade seamless was 
reduced? 

Mr. Goble. Between lap-weld and the lowest grade seamless? 
May I get that question clear? 

Mr. Porter. Let me put it this way. Is it true that the differential 
between the lap-weld price and the price of the new grade B seamless 
was smaller than the differential between the lap-weld price and the 
old grade C seamless as that price had been prior to July 1 and the 
introduction of grade B? 

Mr. Goble. There are two factors there, Mr. Porter. Do you 
refer to our old lap-weld price or to a competitive lap-weld price? 

Mr. Porter. Well, both. I would like to have you comment on 
both. 

Mr. Goble. Let's have the actual distinction between prices. 
Possibly that is the best way to answer it. The old grade D seamless 
was priced at approximately 12}^ percent above grade C seamless, 
which was the lowest grade seamless we sold at that time. Our lap- 
weld was sold at approximately $7.75 per ton below grade C seamless. 
Now there were competitive prices. I can't give you any specific 
figures, but it was our understanding that they were down as much 
as $6 and $7 below our lap-weld, so that that would have created a 
spread between the competitive level of prices in some cases as much 
as $12 or $13 below our old grade C seamless. 

Mr. Porter. Now what was the differential 

Mr. Goble (interposing). The differential between the new grades 
was this. 

Mr. Porter. Just grade B for the moment. 

Mr. Goble. Grade B was $7.50 below grade C, which would not 
have been down — which was approximately equal to our level, but 
not down to the competitive level of prices, that is if I understand the 
arrangement at the time. 

Mr. Porter. After July 1? 

Mr. Goble. Yes. 

Mr. Henderson. You were selling grade B; what was your old 
posted price? 

Mr. Goble. For lap-weld, although it did not have the same 
method of discount, Mr. Henderson, we established it at an ap- 
proximate. We put it $7.50 exactly below grade C, whereas the old 
had been established on a little bit different basis and was approxi- 
mately $7.75. 

Mr. Porter. So that, taking your statement of a moment ago that 
a total differential of, we will say, $13, existed between the competitive 
lap-weld price prior to July 1, 1938, and the old grade C 

Mr. Goble (interposing). The lowest grade of seamless. 



10886 CONCENTRATION OF ECONOMIC POWER 

Mr. PoRTEE. Which was the lowest grade of seamless, with the 
introduction of the new grade B, the differential between the going 
lap-weld price, assuming no change, and the lowest grade of seamless 
would be reduced to some six or seven dollars. 

Mr. GoBLE. I would like to point out that there apparently, to 
our knowledge, was no relationship between certain other published 
lap-weld prices and our prices of seamless. Therefore, one item might 
have been very slightly below and another item a substantial amount 
below, so in using a figure of $5 or $6 or $7, I am using what I assume 
to be an approximation of the average. 

Mr. Porter. Subject to those qualifications you would agree with 
my statement? 

Mr. GrOBLE. Yes, sir. 

Mr. Porter. And you would also agree, I take it, that some 
differential price-wise was necessary for the lap-weld producers ill 
order for them to be able to sell their product in competition with 
the new low grade of seamless. 

Mr. GoBLE. I don't think I could testify to that, Mr. Porter, 
because we were t6o busy running our own business to try to analyze 
what someone else was doing. 

Mr. Porter. In view of the testimony we have had to the effect 
that generally speaking seamless is a superior product in terms of 
strength, setting depth, and so on, that would be necessarily the case, 
I take it. 

Mr. Goble. I think if you will analyze the figures and examine the 
setting depths of our grade B seamless as published by us, and com- 
pare it with the published setting depths of certain other lap-weld 
manufacturers, you will see that they are comparable. We claim of 
course that searoless is more desirable because it hasn't seams, other- 
wise we would not have abandoned lap-weld and gone into seamless. 

Mr. Porter. Exactly, and as I understand it from the testimony of 
other witnesses recently, they would agree with you on that. 

Mr. GoBLE. I think I heard that testimony. 

Mr. Porter. That is all I was getting at. 

Now, Mr. GoBLE, that brings us up into July of 1938, and from pre- 
vious testimony we have heard that during that month and also 
during the month of August 1938 there were reductions in the prices of 
lap-weld products, the specific cases of such reductions being those 
instituted by the Wheeling Steel Corporation. In connection with 
that testimony letters were introduced into the record dated August 
12 and 15, 1938, and written by representatives of the South Chester 
Tube Co., which mentioned your name, and which at one point read 
as foUows: I am quoting now from the record, page 349: 

From Mr. Smith — 

Parenthetically of the National Supply Company — 

we leamedthat Mr. Goble, Vice-President of the National Tube Company, was 
hunting Mr. Schaefer — ^ 

Parenthetically of the Wheeling Steel Corporation — 

to secure an interview and demand that they revise these prices — 

That is the lower prices which they had announced early in August. 
Do you have any recollection of the event which that paragraph 
describes, Mr. Goble? 



CONCENTRATION OF ECONOMIC POWER 10887 

Mr. GoBLE. I did not at any time seek to see Mr. Schaefer nor did I 
see him with respect to this matter at any time. 

Mr. Porter. Have you ever discussed the price hst on lap-weld 
products with Mr. Schaefer or anyone else from the Wheeling Steel 
Corporation? 

Mr. GoBLE. No, sir; I have not. 

Mr. Porter. Now going into September 1938 as you know we have 
had testimony to the effect that for a period of 4 or 5 days toward the 
end of the month, perhaps in the last week of September, the National 
Tube Co. without making any formal announcemenfin some cases sold 
its grade B seamless oil country tubular product at prices substan- 
tially equal if not exactly equal to the then going prices of lap-weld 
products of a comparable character. Is that the case, Mr. Goble? 

Mr. Goble. That is, I believe what you refer to is, the fact that 
we instructed our district offices that they might accept orders for 
lap-weld pipe at the going level of prices, on which we would supply, 
with their consent and knowledge, seamless grade B material. 

Mr. Porter. How long were those instructions in effect? 

Mr. Goble. I think probably about 6 days. 

Mr. Porter. About 6 days, toward the end of vSeptember 1938. 
Is that correct? 

Mr. Goble. Yes, sir. 

Mr. Porter. How did you happen to take that action at that time? 

Mr. Goble. Because after the initiation of this new program of 
ours of July 1, which had been designed by us to regain for us- a market 
in the shallow-weU field which we had lost through what we considered 
our not being competitive, we decided that something must be done 
BO far as we were concerned, because here was one of the most im- 
portant developments in the United States at the particular time, 
the shallow field in Illinois in which we were hardly participating. 
We felt that it was necessary for us to go and get a reasonable share 
of that business. 

Acting Chairman King. You mean the shallow field was developed 
which would furnish a market for steel which you were not then pro- 
ducing. = 

Mr. Goble. WeU, we had abandoned lap-weld, Mr. Chairman. 
The only thing we had to offer to the trade was our grade B seamless. 
Lap-weld prices had again been lowered and we were still not getting 
the business. 

Mr. Henderson. You gave these instructions however, not only, 
to your dealers in the Illinois district but universally? 

Mr. Goble. To our district office managers, Mr. Henderson, and 
they in turn conveyed them to their customers. 

Mr. Henderson. So your new grade B price was effective to the 
extent that you could get business in Texas? 

Mr. Goble. Yes, sir. 

Mr. Henderson. In the shallow wells there? 

Mr. Goble. Yes, sir. 

Mr. Porter. As I understand it, Mr. Goble, these instructions 
were withdrawn after approximately 6 days? 

Mr. Goble. That is correct; these instructions to the district 
offices. 

Mr. Porter. Why was that action taken? 



10888 CONCENTRATION OF ECONOMIC POWER 

Mr. GoBLE. From the previous testimony here it would indicate 
that there is a misunderstanding about it, because we at no time, nor 
have we now, discontiuued that practice. We never discontinued it. 
What we did when we put that into practice was to instruct our district 
offices that they had permission to accept, without conference with us, 
orders for lap-weld pipe at the going level of price on which we would 
supply grade B searoless. Now when those instructions to our district 
offices were withdrawn, they were withdrawn in this way. Our district 
offices were told that they henceforth would not have that privilege, 
that all inquiries from customers for that product must be referred to 
us in the Pittsburgh central office who would decide whether or not 
we would carry out that transaction by supplying seamless for old lap- 
weld orders. The reason we did that was that during those few days 
we had this in force, that is the authority vested in our district man- 
agers, we were constantly in touch with our district managers and 
our customers and there were some developments which occurred 
that we had not foreseen. Possibly we should have foreseen them 
but we hadn't, and the developments were to the effect that customers' 
engineers were delving seriously into this new program of ours because 
at that time we were selling our grade B seamless some $12 or $13 
below our grade C seamless. The spread was sufficient so that there 
was considerable activity on the part of our customers and their 
engineers, in revamping their programs. And it became evident to 
us that what was going to happen, and what was already happening 
was that, instead of our recapturing the shallow field market, engineers, 
had devised a scheme whereby an engineer who had formerly used 22- 
pound 7-inch grade C material, we will say, for his requirements 
to a given depth, due to this considerable differential in price, very 
promptly discovered that what he could do would be to use 24-pound, 
a slightly heavier wall, and order lap-weld knowing that he would get 
seamless and that 24-pound grade B would do his job whereas he had 
formerly used 22-pound grade C and he would have a considerable 
saving in his purchase. Now when we put this program into effect 
we had not planned that this was going to change the customers' 
programs, that they were going to start using heavier weights for 
deeper wells, thereby taking away the tonnage which we have always 
looked on as our backbone, that was grade C tonnage. Our grade B 
tonnage had not been developed from an engineering viewpoint to 
meet deep well requirements, and it was obvious to us that if we 
permitted this to be put into effect and started using our grade B 
where it was never designed to be used, due to the leniency in inspec- 
tions, leniency in threads, and leniency in physical and chemical 
analysis, we did not want the grade B to become abused in deeper 
wells. We recognized that if we permitted it to do that we would be 
faced sooner or later with an avalanche of claims and for bur own pro- 
tection we saw that we were getting ourselves in very hot water, and 
we decided that the best thing for us to do was regardless of what 
we had previously determined, to withdraw from the position so far 
as onr district offices were concerned. What we did do, and what we 
have ('(intinuod to do ever since, was to supply grade B material at the 
lap-weld price, but we oblige our district officers to take the customers' 
requirements at destination, and submit them to the Pittsburgh 
office where we know what the customer's requirements are, the 



CONCENTRATION OP ECONOMIC POWER 10889 

depths to which he proposes to go, and so forth, and we decide whether 
or not we will accept the order on that basis. We have never 
discontinued the practice. 

Mr. Porter. Is it your testimony then, that all these", things in- 
cluding the analysis of the customer's reaction in terms of the speci- 
fications which they designated took place within the period of 6 days? 

Mr. GoBLE. They were taking place hourly, Mr. Porter. There 
was considerable excitement throughout the country from reports of 
our district managers as to the reaction of our customers. 

Acting Chairman King. You probably made a mistake. 

Mr. GoBLE. I am afraid we did, Mr. Chairman. 

Mr. Porter, I would like to emphasize the fact that grade B seamless 
had not been designed and in our opinion, the reasons which I 
stated, was not suitable for deep well drilling. 

Mr. Porter. Just one other question, Mr. Goble. During the 
early part of yesterday afternoon's testimony there was introduced 
into the record a letter written by Mr. Gibson, of the South Chester 
Tube Co., with respect to an order placed by the Gulf Oil Co. with a 
number of seamless producers early in 1939. I believe that you were 
in the room at that time and probably heard that testimony, did you 
not? 

Mr. GoBLE. Yes, sir. 

Mr. Porter. To refresh j^our recollection I will read the material 
paragraphs. This is Mr. Gibson's letter:^ 

The Gulf, as we understand it, have purchased two barges and a small river 
boat. Weiss — 

who was identified yesterday as a purchasing agent of the Gulf Oil 
Co.— 

oflFered an order for a barge load of seamless to Jones & Laughlin, the barge to be 
loaded alongside their loading racks on the Ohio River here, and also a barge 
order to Spang Chalfant, under the same conditions, the pipe to be billed f. o. b. 
barge siding, which as you know takes only 2^ cents per cwt. switching charge in 
freight. 

When the National Tube Company heard of this they just "Raised Cain" and, 
in some way or other, stopped J. & L. from accepting this order, and hkewise 
Spang Chalfant. The National Tub-- Company stood hard and fast by their 
policy, that no pipe would be quoted other than f. o. b. destination, or f. o. b. 
Houston or Memphis stock. 

Do you have any recollection, Mr. Goble, of the events which that 
letter describes? 

Mr. Goble. Well, Mr. Porter, you understand I can't testify as to 
the meaning of that letter, but I will be glad to relate to you the facts 
as far as the National Tube Co. is concerned. 

Mr. Porter. I would like to have you do that. 

Mr. Goble. We were offered an order for a barge load of pipe by 
the Gulf Corporation for deliver}^ f. o. b. our McKeesport mill. We 
rejected that order because it has always been our practice and the 
practice of the Steel Corporation subsidiaries to sell merchandise on a 
delivered basis in general, I believe. That is the practice of the 
National Tube Co. We were not in a position to discriminate in 
favor of one customer or one method of transportation. We felt that 
if we permitted the Gulf Oil Corporation to purchase that barge load 

< "Exhibit No. 1427," appendix 11005. 



10890 CONCENTRATION OF ECONOMIC POWER 

of pipe f. o. b. McKeesport we would have no reason to reject similar 
orders from all other customers by all other means of transportation, 
recognized means of transportation. 

I believe the impUcation is there that trouble was raised by us 
with respect to the attitude of Jones & Laughlin. I testify that we 
had no relationship whatever with Jones & Laughlin or anyone else, 
except ourselves and customers, with respect to this barge require- 
ment, and I would like also to point out for the benefit of the record, 
if I may, that the National Tube Co. has not found it necessary in 
conducting its business to confer with its competitors with respect 
to its pohcies, and this was a pohcy of the National Tube Co. 

Mr. Porter. I would just like to ask you this, to make the matter 
perfectly clear. Did you at that time know that the Gulf Oil Cor- 
poration had made a similar offer to other producers of seamless pipe? 

Mr. GoBLE. I had no knowledge of that unless the purchasing 
agent of the Gulf Oil Corporation might have told our general manager 
of sales and he might have told me. I have no recollection that he did. 

Mr. Porter. Let me put a brief hypothetical question. Suppose 
in a situation such as this that it did come to your knowledge that 
an offer of a sale f. o. b. null or f. o. b. customer's docks had been 
made generally to the trade and it came to your knowledge further 
that one or more of your competitors were giving serious consideration 
to acceptance of that order, what would be the attitude of your 
company? 

Mr. GoBLE. Mr. Porter, we can do nothing about that. It isn't 
within our rights to try to deter our competitors from any course that 
they wish to pursue. All we attempt to do is to run our business 
according to the instructions given by Governor Miller in the memo- 
randum, which I believe was submitted here the other day, and let 
other people run theirs. 

Mr. Porter. Would it be fair to infer, however, that the National 
Tube Co. would regret such action by its competitors? 

Mr. GoBLE. We would regret it in this way ; we would regret it the 
same way as we would regret a competitor's going and taking one of 
our valued customers in business. 

Mr. Porter. Would the National Tube Co. have any feeling as to 
the establishment by a competitor of a different policy with respect 
to selling on a delivered-price basis? 

Mr. GoBLE. Are you asking me if we would regret that? 

Mr. Porter. Yes. 

Mr. GoBLE. Well, as I have stated, we would regret it on the same 
basis as if a competitor took an order which w^e were trying to get. 
We would feel he had taken something from us by underselling us or 
giving a consideration which it was not our custom or practice to give. 

Mr. Feller. May I ask you this, Mr. Goble: Wouldn't it be some- 
thing which would affect you somewhat more than the mere loss of a 
customer? Might it not exercise pressure on the whole price structure 
and entire policy of the selling? 

Mr. Goble. Well, I would be concerned in this way. We have a 
policy which in general is devised by not only our own company officials 
but by the United States Ste(^l Corporation, and as far as I personally 
am concerned, when the officials of the United States Steel Corpora- 
tion decide to make that policy I don't know that it makes much 
difference to me. 



CONCENTRATION OF ECONOMIC POWER 10891 

Mr. Feller. You mean it doesn't make much difference to the 
National Tube Co.? 

Mr. GoBLE. To me as an individual. I shall pursue such course 
as is laid down with respect to general policy. The practice of selling 
on a deUvered basis is a matter of the general policy of the Steel 
Corporation and its subsidiaries. As long as that is in effect I shall 
abide by that, and if it is decided to eliminate that practice, I shall 
be glad to go along on that basis or any other basis. 

Mr. Henderson. Do you buy any oil from Gulf? 

Mr. GoBLE. Yes, sir. 

Mr. Henderson. Do you buy it f. o. b.? 

Mr. GoBLE. Mr. Henderson, I am sorry I can't tell you. I don't 
buy it myself. 

Mr. Henderson. I was wondering why someone didn't ask a 
question related to some of the testimony in the oil hearings as to 
what the basis of selling oil companies was.' 

Let me ask you this. One of the letters introduced yesterday 
indicated that there was a meeting in the Gulf office, called iq Mr. 
Bothwell's office, and Weiss, of the traffic department of Gulf, 
McConnor, sales manager of National Tube, and Gulf's legal staff 
were there. Was that meeting held? 

Mr. Goble. Yes, sir. My story from Mr. McConnor with respect 
to that meeting was to the effect that he had been telephoned by 
Mr. Weiss, who was in the purchasing department of Gulf and upon 
arriving there they had assembled somewhere, whether it was in 
Mr. Bothwell's office or elsewhere I don't recall, but they had as- 
sembled with Mr. Bothwell and I believe a representative of the 
traffic department and possibly a legal representative, and the 
purpose of the meeting, as explained to me by Mr. McConnor, was 
that the Gulf Corporation was trying to induce Mr. McConnor to 
accept that order for the barge load, which he had refused to do on 
that basis. 

Mr. Henderson. Did Mr. McConnor say also that they threatened 
to report that action as being in restraint of trade? 

Mr. Goble. He never reported that portion of it to me, if such a 
thing was said. I do not recall hearing that before until the testimony 
was given yesterday. 

Mr. Henderson. Do you think that would have been a matter of 
importance? 

Mr. Goble. I think so. I think if a customer were threatening us 
with legal action that would be important. Therefore I am inclined 
to doubt that such a matter was presented in that way. 

Mr. Henderson. Just in passing, do you mean that it seems when 
they get into some of these competitive diflBculties they do think of 
some of the laws relating to competition? You remember the other 
day a memorandum by Mr. Pfeltz raised the question whether one 
of his sources of supply had not -violated the Robinson-Patman Act. 
You don't think that was a predominant subject in that particular 
meeting? 

Mr. Goble. I don't think so, Mr. Henderson, because, knowing the 
type of men that manage the Gulf Oil Corporation, I can hardly 
picture their threatening to that extent in order to try to force some- 

' Hearings on the petroleum industry are included in Hearings, Parts 14, 14-A, 15, 15-A, 16, 17 and 17-A. 



10892 CONCENTRATION OF ECONOMIC POWEB 

body to accept an order on a basis whicb they thought was desirable 
for them. 

Mr. Henderson. Those things don't take place very often, do 
they? When a purchasing agent runs up against a situation where he 
feels there is a restraint of trade he tries to beat it if he can. 

Mr, GoBLE. That is right. But I can't picture the officials of the 
Gulf Oil Corporation taking that position. 

Acting Chairman King. Are you through, Mr. Porter? 

Mr. Porter. I have no further questions, Mr. Chairman. 

Acting Chairman King. We will adjourn until 2:15. 

(Whereupon the committee recessed at 12:30 o'clock until 2:15 
p. m. of the same day.) 

AFTERNOON SESSION 

(The hearing was resumed at 2:20 upon the expiration of the recess, 
Commissioner Leon Henderson presiding.) 

Acting Chairman Henderson. The meeting will be in order. Mr. 
Goble, I have a few questions to ask you. I am particularly interested 
in the reference you have made to your position in the industry. I 
don't know whether you recall, but I asked an official of the Corpora- 
tion about that before. Would you mind saying what you mean 
when you speak of your position in the industry? 

Mr. GoBLE. WTiat I meant by that, Mr. Henderson, was the 
business which we were getting compared with what we approximated 
the total national tonnage to be, as compared with the relationship 
between our capacity to produce and the total national capacity. 

Acting Chairman Henderson. And you have the feeling that over 
a period of time you ought to get something around that percentage 
of business? 

Mr. GoBLE. Somewhere near that percentage; yes, sir. 

Acting Chairman Henderson. And if you don't there is something 
wrong with your marketing policies or your sales 

Mr. GoBLE. (interposing). Or our product. 

Acting Chairman Henderson. Or your what? 

Mr. GoBLE. Or our product. 

Acting Chairman Henderson. And in this case I assume that you 
had in mind it was your price. 

Mr. GoBLE. Yes, we were unwilling to meet the competition in 
a particular field. We thought it was unwise from the profit viewpoint 
for us to do so, because of the small volume of business which we were 
getting. 

Acting Chairman Henderson. You weren't willing, in other words, 
to go out in lap-weld at a lower price? 

Mr. GoBLE. Yes, sir. 

Acting Chairman Henderson. And you preferred to meet it with 
something of a higher grade at about that price? 

Mr. GoBLE. We preferred over a period, as I stated, of several 
years to try to effect through technological development another 
product by which we could redeem that market. 

Acting Chairman Henderson. Kather than try to get that market 
through price competition? 

Mr. GoBLE. Yes, sir. 



CONCENTRATION OF ECONOMIC POWER 10893 

Acting Chairman Henderson. There wasn't any doubt in your 
mind that the level at which you were offering lap-weld, as differen- 
tiated from your competitors, did have something to do with your 
losing ground? 

Mr. GoBLE. Unquestionably that is true. 

Acting Chairman Henderson. That is, lap-weld was being sold 
and you people were holding it at your posted price and the rest of 
the industry was selling either below your official price or using a 
different and lower posted price. 

Mr. GoBLE. I wouldn't assume, Mr. Henderson, that all of the rest 
of the industry was doing that. I would assume that a majority of 
that tonnage was selling below our posted price. 

Acting Chairman Henderson. What do you have in mind as the 
percentage which you ought to get of the going business? Thirty-five 
percent? 

Mr. GoBLE. Well, we haven't aspired to that much, Mr. Henderson, 
in a number of years. Of course we would hke to. 

Acting Chairman Henderson. Well? 

Mr. GoBLE. We haven't been able to. 

Acting Chairman Henderson. What is the ratio of your capacity 
to the total in the industry? 

Mr. GoBLE. I would say approximately 35 percent. 

Acting Chairman Henderson. For lap-weld and electric? 

Mr. GoBLE. I am speaking of the total tubular goods and tonnage. 

Acting Chairman Henderson. Of aU kinds? 

Mr. GoBLE. Yes, sir. 

Acting Chairman Henderson. Then was this move of yours — 
when you substituted the low-grade B seamless — a matter within the 
determination of National Tube, or was it something that had to be 
referred to the parent corporation? 

Mr. GoBLE. That would normally be referred to the parent corpo- 
ration so far as policy was concerned, and I assume that it was done 
in that case. I have no contact, personally, myself, with the Corpo- 
ration. Those contacts are handled, I believe, by our President. 

Acting Chairman Henderson. So you don't know whether that 
was 

Mr. Goble (interposing). I don't know, except I understand from 
our President that he did. 

Acting Chairman Henderson. Did you know at the time what a 
move hke this was likely to do to South Chester Tube and Wheeling? 

Mr. Goble. Well, I just don't know the import, if you don't mind. 

Acting Chairman Henderson. I mean, did you know that it was 
likely to be very upsetting to them on account of this formerly main- 
tained differential? 

Mr. Goble. Yes; we assumed that it would probably be disturbing 
because it was a distinct and new departure from past practices; it 
was a new product and probably came somewhat as a shock to them. 
Our developments possibly were not know theretofore to anyone else 
except ourselves, although undoubtedly some of our customers must 
have given an inkUng here and there about what we proposed to do 
because from time to time we would, in a confidential way, discuss it. 

Acting Chairman Henderson. You mean with your customers? 



10894 CONCENTRATION OF ECONOMIC POWER 

Mr. GoBLE. fes, sir. 

Acting Chairman Henderson. Had you ever discussed it at all 
with the other members of the iadustry making tubing? 

Mr. GoBLE. No, sir. 

Acting Chairman Henderson. Did you have any discussions 
among yourselves as to the exact place it would be necessary to put 
the price in order to get a fair share of the market? 

Mr. GoBLE. Well, as of July 1, at that time w^e thought that the 
proper level would bie at our published lap-weld price, or an approxi- 
mation of that price. I explained this morning the bases of calcula- 
tions were slightly different, but the result was meant to be the same. 
In other words, we felt that if we could put grade B seamless on our 
lap-weld basis, that would make it possible for us to participate in 
this low-grade tonnage. 

Acting Chairman Henderson. And that would/mean that some- 
body else would lose some share they had been gathering in during 
the period your prices were too high for the general level of the 
industry? 

Mr. GoBLE. Yes, Mr. Henderson, we were under the impression 
at that time, and I suppose that can be confirmed from records, 
that other manufacturers were operating at a greater rate in compari- 
son with their rated capacity than we were. 

Acting Chairman Henderson. And if you had recovered a reason- 
able amoimt of lost tonnage by virtue of the July 1 changes, you 
wouldn't have been confronted with the additional situation you had 
for those 6 days in September? 

Mr. GoBLE. That is correct. 

Acting Chairman Henderson. Did you discuss, during the con- 
siderations that led you to set those lap-weld prices, going below 
the published prices that formerly obtained for lap weld? 

Mr. Goble. Did we discuss putting our grade B below? 

Acting Chairman Henderson. Yes. 

Mr. Goble. No, -sir; it is not my belief that we ever put grade B 
seamless below lap-weld prices. 

Acting Chairman Hendehson. I asked you whether you considered 
what the effect of that would be. 

Mr. Goble. Well, no; because we had no thought of ever doing 
that. We didn't think it was necessary. 

Acting Chairman Henderson. You thought you would get a 
reasonable amount of tonnage by offering this admittedly better-grade 
product at the same price? 

Mr. Goble. Yes, sir. 

(Representative Williams assumed the Chair.) 

Mr. Henderson. But you did know that it was likely to divert 
business from some of the others. Did you know how much excite- 
ment it actually caused in the trade when you made this annoimce- 
ment, particularly of the September reduction? 

Mr. Goble. No; except the reverberations, if I may call them that, 
which we received through our district offices, and from the customers 
whom we contacted. That was the only information which we 
received. 

Mr. Henderson. Did you yourself run into any of your competitors 
during this neriod? 



CONCENTRATION OF ECONOMIC POWER 10895 

Mr. GoBLE. I do not think, and I am quite sure of this, Mr. Hender- 
son, during that particular period I didn't see or talk in any manner to 
any competitor. 

Mr. Henderson. But you do talk with your competitors once in a 
while at trade meetings? 

Mr. GoBLE. During my tenure with the company there have been 
only two or three times when I ever discussed any matter with my 
competitors. 

Mr. Henderson. In this you are a little different from the other 
branches of the industry. 

Mr. Goble. This was a case where we had gone out on our own and 
we had nothing to discuss. We had abandoned lap-weld pipe. 

Mr. Henderson. Did you get back, by your September move, a 
reasonable amount of tonnage? 

Mr. Goble. WeU, now, you mean during this period of 5 or 6 
days? 

Mr. Henderson. Yes. 

Mr. Goble. No, sir; the tonnage actually placed on our books was 
not very important. It was the developments that were taking place 
that frightened us, developments as to the trend, the direction in 
which this was traveling, which we had not anticipated. There was 
a relatively small amount of tonnage put on our books during that 
period. 

Mr. O'CoNNELL. What about the period between July 1 and 
that 6-day period? 

Mr. Goble. That had been disappointing, very disappointing. 

Mr. O'CoNNELL. Specifically, what effect had it, do you know? 

Mr. Goble. It had undoubtedly increased our participation 
shghtly, but our customers still said, continued to say, that — 

for our particular purpose on this particular project, lap weld is good enough, and 
we still can't pay you a differential to get seamless. 

Mr. O'CoNNELL. What about your participation at the present 
time? Is it better? 

Mr. Goble. I think we have regained it to some degree. We 
won't know that imtil we finally get the statistics of the iron and steel 
industry because we can only assume these things. They are the 
result of our best judgment until we finally get statistical data. 

Mr. Henderson. But you think you have gained back some? 

Mr. Goble. 1 think we have gained back some portion of it. 

Mr. Henderson. What do you think would have happened if you 
had kept in effect that policy of letting the manager take over the 
lap-weld at that price with the idea of substituting seamless? 

Mr. Goble. What imdoubtedly would have happened was that 
the use of our grade B would have expanded into fields which we did 
not wish it to serve. We would have been faced with trouble. 

Mr. Henderson. It would have reached up to grade C but it 
certainly would have done something to the lap-weld being produced 
by other producers, would it not? 

Mr, Goble. It possibly would have taken considerably more of 
their business. 

Mr. Henderson. So really you were sitting in the driver's seat, to 
use a common expression, so far as price-making goes. 



124491 — 40-|ipt. 2C 



10896 CONCENTRATION OF ECONOMIC POWER 

Mr. GoBLE. I would say that we were sitting ia a very dangerous 
position in respect to our own busiaess. 

Mr. Henderson. Well, as the testimony shows in the last 2 days, 
South Chester Tube and the rest of them thought you were sitting 
in a dangerous place so far as they were concerned. You were sitting 
in the driver's seat. That is what you had intended to do, wasn't it? 

Mr. GoBLE. We intended to regain a portion of our business, our 
position. 

Mr. Henderson. And as your testimony shows, you took one 
action, which wasn't enough and you took another action. Then I 
suppose you could have decided to take a third action. You were 
out to get that market back at that particular time. 

Mr. GoBLE. I can't say that we were ever prepared to go any further 
than that, because that was a very drastic action within itself. I think, 
Mr. Henderson, that you might consider this particular angle. If we 
sold seamless grade "B" casing at a lap weld price, we would never 
get all of the lapweld business. I have many customers, there are 
hundreds of people throughout these United States, that state: 

So far as we are concerned for our particular purpose, we don't care whether you 
ship lapweld or seamless. 

Mr. Henderson. On account of the prices. 

Mr. Goble. Yes, sir. 

Mr. Henderson. The 30,000 of lap-weld will take care of it pretty 
adequately. 

Mr. GoBLE. And that is a substantial market. 

Mr. Henderson. But if you sold it at a price lower than lap-weld 
you would get the lap-weld business, would you not? 

Mr. GoBLE. Yes, sir; because then they would buy the cheapest 
material. 

Mr. Henderson. Would you be likely to increase the uses for 
whieh this particular type of goods is used? Would it displace the 
use of any other materials or would it just, in your opinion, get a 
bigger percentage of the oil country business? 

Mr. GoBLE. Unquestionably our bringing out of grade B has, to 
some degree, taken the place of or detracted from our sales of grade C. 

Mr. Henderson. But it didn't reduce the volume of seamless sold? 

Mr. GoBLE. No, sir. 

Mr. Henderson. It increased the amount of seamless you were 
seUing? 

Mr. GoBLE. I think that is true. 

Mr. Henderson. Somewhere along the line there you were trying 
to find the proper price for that quality which would move some 
tonnage. 

Mr. GoBLE. That is true. 

Mr. Henderson. And having 35 percent of the capacity in the 
industry was a tremendous factor, wasn't it? 

Mr. GoBLE. It was very important that we maintain our position 
and try to keep our mills operating at a level comparable with other 
mills. 

Mr. Henderson. You were here yesterday, I guess, and read the 
testimony and heard this morning's testimony. 

Mr.. GoBLE. I heard the testimony. I don't think 1 have read it. 



CONCENTRATION OF ECONOMIC POWER 10897 

Mr. Henderson. Have you any explanation as to how the writers 
of these memos and letters got what you consider misapprehensions 
about your place and the position you were taking? 

Mr. GoBLE. I haven't the slightest information, Mr, Henderson, 
and could only assume, and it would be an assumption, that it was 
gossip. 

Mr. Henderson. That it was gossip passing in the trade? 

Mr. GoBLE. Yes, sir. 

Mr. Henderson. Did you know whether Youngstown, Spang, 
J. & L., were going to discontinue lap-weld? 

Mr. GoBLE. I had no information. I don't think they ever did. 
To my knowledge they never have. 

Mr. Henderson. That is all the questions I have. 

Mr. O'CoNNELL. I would like to ask a question. Do you happen 
to know how much of an investment would be required to set up a 
imit which would make seamless pipe? I was thinking of a concern 
which is now engaged solely in the production of the lap-weld, which 
there has been some evidence is in the process of becoming obsolete. 
I was curious to know. You people discontinued making the lap- 
weld, and went into the business of making seamless. Is there a very 
substantial investment that is required to make that change? 

Mr. GoBLE. Mr. O'Connell, you see I am in charge of sales 

Mr. O'Connell (interposing). I realize that, and thought you 
might have some general information. 

Mr. GoBLE. I could only get that from my auditor. It would be 
purely conjecture, and might be 50 percent wrong. I don't know the 
value of those investments, except in a general way. 

Mr. Henderson. Are they covered by patents? 

Mr. GoBLE. No, sir; there may possibly be some few little gadget 
patents, but to my knowledge I don't know of those. 

Mr. Henderson. How about electric welding? 

Mr. Goble. Yes; there are some patents on electric weld, I under- 
stand. 

(The witness, Mr. Goble, was excused.) 

Mr. Feller. I should like to call Mr. T. A. L. Loretz. 

Acting Chairman Williams. Do you solemnly swear the evidence 
you are about to give in the matter now pending shall be the truth, the 
whole truth, and nothing but the truth, so help you God? 

TESTIMONY OF T. A. I. LORETZ, GENERA! MANAGER, PACinC 
COAST STEEX FABRICATORS' ASSOCIATION, LOS ANGELES, 
CAUF. 

Mr. LoRETZ. I do. 

Mr. Feller. Mr. Loretz, will you state your name for the reporter? 

Mr. LoRETZ. My name is T. A. L. Loretz. 

Mr. Feller. And the organization with which you are connected? 

Mr. LoRETZ. I am the general manager of the Pacific Coast Steel 
Fabricators' Association, with headquarters in Los Angeles, Calif . 

Mr. Feller. The Pacific Coast Steel Fabricators' Association is 
an association of various fabricators of steel located in the three 
Western States on the Pacific coast, the far Western States? 



10898 CONCENTRATION OP ECONOMIC POWER 

Mr. LoRETZ. That is correct. Its membership includes the 25 or 26 
of the principal structm*al- and plate-steel fabricators in California, 
Oregon, and Washington. 

Mr. Feller. Are any of your members connected or afiiliated with 
any company manufacturing steel? 

Mr. LoRETz. Not to my knowledge, Mr. Feller. The membership 
as far as I know, consists entirely of the so-called independent fabri- 
cators, that is, fabricators having no known connection with any 
rolling-mill or steel producer. 

Mr. Feller. What products are fabricated by members of your 
association? 

Mr. LoRETZ Structural-steel buildings, bridges, and all products 
fabricated from structural-steel sheets, plates, and bars, the plate 
fabricators manufacture steel tanks, silos, pen stock, welded-steel 
pipe and other plate products. 

(Senator King assmned the Chair.) 

Mr. Feller. And some of the members of your association also 
construct vessels, do they not, ships? 

Mr. LoRETz. That is correct, three of the companies are ship- 
buildet-s as well as being engaged in the general fabrication of steel. 

Mr. Feller. Is it correct to say that generally speaking your 
members can be classified into two groups, those concerns engaged 
principally in the fabricating of structural steels and those engaged 
principally in the fabricating of plates? 

Mr. LoRETZ. That is correct except that some of the larger ones 
are engaged in both types of operation and of course those two opera- 
tions overlap to some extent. 

Mr. Feller. In what cities are the plants of your principal members 
located? 

Mr. LoRETZ. In the southern section of California, in Los Angeles 
and Vernon and Alhambra, which are cities adjacent to Los Angeles; 
in the San Francisco Bay area, in San Francisco, South San Francisco, 
Oakland, Alameda, and Berkeley; in Oregon in the Portland area, and 
in Washington, in Seattle and Renton, Wash. 

Mr. Feller. Sometime ago you testified before the United States 
Maritime Coromission, and you stated at that time, as I recall, the 
purposes for which the Pacific Coast Steel Fabricators' Association 
had been estabhshed. I wonder if for the benefit of this committee 
you can repeat what you said on that occasion as to the purposes of 
the estabUshment of your association. 

PACIFIC COAST STEEL FABRICATORS* PROBLEMS 

Mr. LoRETz. With the permission of the chairman I will read from 
the record of that proceeding in order to save time. Quoting from 
United States Maritime Docket, No. 514, page 579, of the reporter's 
transcript: 

The Pacific Coast Steel Fabricators' Association was organized ifi 1935, during 
NRA code days, and its purposes were to bring about a greater measure of coop- 
eration among members of the industry located in the three far western states, 
to foster the development of the independent steel fabricating industry in these 
states by all legitimate means, and so forth. 

Among other things which the Association has been called upon to do, one of 
the most important has been an effort to resist the dumping of fabricated iron 
and steel products in this territory ; by dumping I refer to the practice of f abrica- 



CONCENTRATION OF ECONOMIC POWER 10899 

tors outside this territory shipping tonnage in here at prices lower than their 
normal cost of production plus transportation, on the theory of bolstering up 
total volume without any attempt to add normal overhead or any profit at' all 
on such business outside their own normal sphere of operation. 

Steel fabricators on the West Coast operate under the extreme disadvantage 
of being at the end of the line, \n so far as this business of shipping into other 
fabricators' territories is concerned. Fabricators located in the interior indus- 
trial sections of the United Srates, namely. Chicago, Minneapolis, Kansas City, 
Des Moines, and so forth, utilize the all-rail routes to fabrication in transit to 
advantage in shipping into this territory. Fabricators located at or adjacent to 
the Atlantic or Gulf Seaboards are located near the mill source of supply of most 
of the raw materials, namely, unfabricated structural shapes and plates, and pay 
little or no differential, by that I mean freight differential, on their fabricated 
products over the plain unfabricated material rates borne by West Coast 
fabricators on the same raw materials obtained from the same eastern or southern 
mill sources of supply. 

Mr. Feller. Do you have something further? 

Mr. LoRETz. There is one further section that might be interesting 
to the committee, Mr. Feller. I will try to stay out of the portion of 
the testimony that related entirely to transportation. Quoting again: 

The West Coast fabricators ask no favors or advantages from the coastal 
steamship operators nor from any other transportation agency. There has, 
however, got to be a stop somewhere in the continued cutting of rates into this 
territory as it affects the iron and steel interests or the plant investment of 
upwards of twenty-one million dollars of fabricators represented in this Associa- 
tion will be confiscated. The Pacific Coast fabricators can only ask and do only 
ask that the ocean freight rates of their competitors having numerous other 
natural advantages, be treated with exactly the same yardstick as the Pacific 
Coast fabricators. Every steel mill and every steel fabricator has its natural 
marketing area which presumably it was created to serve. Seldom, however, 
does any steel milbor steel fabricator confine its sales activities to this natural 
marketing area. Either because of, (1) limited available tonnage within its 
natural area, or (2), a policy of taking business outside of that area at less than 
normal returns to build up volume, and, (3) finally because its competitors have 
retaliated and come into its territory, a complicated system of cross-shipping and 
backhauling of steel and steel products has developed throughout the United 
States. The Federal Trade Commission, as a matter of fact in its report of 
May 7, 1939, entitled "Monopoly and Competition in Steel," took cognizance 
of this situation and condemned it as economically wasteful. The Pacific Coast 
and its back country have been a relatively good field on construction, reclama- 
tion and building projects and oil-field development in recent years, consequently 
it has been the natural target for outside competitors of practically all sections 
of the country. Unfortunately, the Pacific Coast Iron and Steel Fabricating 
interests have no beyond or outside territory in which they can indulge in any 
retaliatory tactics. They are, as mentioned before, at the end of the line. They 
are located farthest in terms of distance and transportation rates from their main 
sources of supply. 

Mr. Feller. Mr. Loretz, I think perhaps we could develop, step 
by step, some of the matters you have touched on here. First I 
should like to ask if you can explain the position of what you have 
called the independent Pacific coast fabricators with respect to other 
fabricators, and particularly as reflected in the amount of business 
that these various types of fabricators have done in the Pacific Coast 
States, 

Mr. Loretz. In order to develop that picture factually for our 
own information and to place it in the proper factual form before the 
committee, I have prepared two exhibits which I believe have been 
distributed and which are identified as exhibit 1 and exhibit 2, each 
a mimeographed exhibit consisting of two pages. Commenting 
briefly 

Mr. Feller (interposuig). May I offer this for the record? 



10900 CONCENTRATION OF ECONOMIC POWER 

(The exhibit referred to was marked "Exhibit No. 1439" and is 
included in the appendix on p. 11010.) 

Mr. LoRETz. Exhibit No. 1, as its title shows, is a statement show- 
ing fabricated structural steel awards on jobs of 100 tons or more 
covering fabricated structural tonnage placed for delivery at points 
in the three Pacific Coast States (California, Oregon, and Washing- 
ton). The 18-month period of January 1, 1938, to June 30, 1939, 
was used, that being the most complete representative period that 
figures were available for at the time these exhibits were compiled. 

May I state for the record at this time that these exhibits were 
prepared in August and September pursuant to a request from Mr. 
Feller and a subpoena duces tecum issued by the committee. 

Page one of exhibit number one will show that for these three 
Pacific Coast States, during the period analyzed, Pacific coast fabri- 
cators were awarded a total of 41,597 tons of structural steel, which 
represented 27 percent of the total tonnage of that class let for delivery 
or erection in the three Pacific Coast States. Five percent, or 7,685 
tons, went to Midwest and Southern States independent fabricators; 
2.4 percent, or 3,688 tons, went to so-called Atlantic States independ- 
ent fabricators; while 101,277 tons, or 65.6 percent of the total tonnage 
in the territory went to so-called mill afiiliate fabricators. 

Mr. Feller. Who are the mill affiliate fabricators? 

Mr. LoRETZ. The mill affiliate fabricators are the fabricators known 
to be aflBliated with the United States Steel Corporation and the 
Bethlehem Steel Co., namelj^, the American Bridge Co., in the case of 
the Steel Corporation, and there were some awards that were made to 
the Columbia Steel Co., which is the Pacific coast sales subsidiary of 
United States Steel, which were included in that tonnage. As I 
recall it, all of the awards to Bethlehem were under the name of 
Bethlehem. 

Acting Chairman King. May I ask a question for my own infor- 
mation so I may have a proper approach to the question involved? 

It is a fact, is it not, Mr. Loretz, that for a good many years com- 
plaints have been made by people on the western coast and back into 
the Rocky Mountain section, as well as some interior points, that rail 
freight rates were very high. In many instances these were almost 
prohibitive. For that reason demands were made for the building up 
of a coastwise trade as a result of which, and in order to meet such 
demands, ships were constructed, sailing from the Atlantic ports 
through the Canal, California, the Pacific Coast, back to the Atlantic 
coast. By reason of the construction of these water means of trans- 
portation the rates for transporting commodities to the Pacific coast 
were reduced, which was the desire. They were reduced to such a 
degree that demands were made by interior points that the ocean 
traffic, coastwise trade, be put under the control of the Interstate 
Conmierce Commission, and responding to the petitions which I 
received, atnd there were many of them, 8 or 9 years ago, I offered 
another plan which, with some modifications, Was adopted, under the 
terms of which the coastwise trade was brought under the control 
of the Interstate Commerce Commission and that Commission fixed 
its rates. 

TSIdw are you complaining because rates were cheapened so that 
-fabricated steel can be, shipped from the East and compete in price 



CONCENTRATION OF ECONOMIC POWER 10901 

with that fabricated on the west coast? Are you complaining about 
that? 

Mr. LoRETz. I can't make the imqualified answer, Mr. Senator, 
that we are complaining of that. The development of the intercoastal 
Atlantic-Pacific trade has occurred just about as I have outlined. 
These intercoastal steamship lines have a heavy east-bound lumber 
haul. In fact, I would say over 50 percent of the lines are direct 
affiliates of lumber companies, with the result that they are out after 
west-bound freight and the tendency is to cut the west-bound rates 
from the Atlantic ports to the Pacific ports down pretty low, except 
in peak times when ships generally have quite a lot of emphasis going 
on west-bound. Well, that is not true, generally speaking, east- 
bound. : The complaint that I would have with respect to the inter- 
coastal steamship rate structure is that the rates are not properly 
constructed in that they don't recognize the main thing that steam- 
ship lines have to sell; namely, space. 

You take a steel plate, for example, and make a base rate on that. 
Then they take that and roll that and make a tank out of it, increase 
its bulk, its cubic by several thousand percent, hterally, and charge 
very little, if any, differential in the rate. As a matter of fact, my 
testimony in the Maritime Commission docket No, 514 was directed 
to that very thing. 

Acting Chairman King. Isn't your complaint rather that the 
Interstate Commission has failed to charge suflficient rates as would 
be fair and just to activities upon the Pacific coast, that it hasn't 
approached the ^subject of measuring t^e space upon the ships, and 
so on, as to do justice to the Pacific coast shippers? 

May I add further, are you asking that Congress shall legislate 
and fix rates? We did not do it with respect to interstate commerce 
rail rates. It seems to me, then, that Congress would be entering 
upon a very broad field which would have no beginning and no end 
if it attempted to fix rail rates or ocean freight rates, and that is the 
reason we set up the Interstate Commerce Commission. They have 
authority* to investigate to determine that justice has been done, to 
fix rates that would be fair and just, and that is all you people on the 
Pacific coast should be interested in. 

May I say I am interested in those rates because Utah furnishes 
some of the steel that you fabricate. We have a mill there at Provo 
and we are interested, of course, in the development of the steel 
business on the Pacific coast — the fabricating business— because we 
ship ingots and some finished products from Utah. It seems we are 
going too far afield if we expect this committee or Congress to enact 
legislation or recommend legislation fixing rates. 

Mr. LoRETZ. That is not being advocated by our association at all, 
Mr. Senator. My comments on freight rates were merely to answer 
your questions. 

Mr. Feller. May I point dut that the reference to ocean trans- 
portation was merely as an explanation of one of the purposes for the 
creation of this association as I understand it, and Mr. Loretz' purpose 
here is to discuss other problems which the members of his association 
face in the steerindustry, as such. 

Mr. Reynders. May I ask a question? Would you say the date 
of completion of the Golden Gate Bridge, if you remember it? 



10902 CONCENTRATION OF ECONOMIC POWER 

Mr. LoRETZ. 1937, as I remember it. 

Mr. Reynders. And the Oakland Bay Bridge? 

Mr. LoRETZ. I believe that was also in 1937. I haven't those 
exact dates. 

Mr. Reynders. Would any of those tonnages in Division 4 relate to 
structures of that character in which the weight of individual members 
is an important factor? 

Mr. LoRETZ. No. You will notice the period covered here is 
January 1, 1938, to June 30, 1939, so I am sure none of those two 
major bridge jobs were included in that. 

Mr. Reynders. Were there any other structures of large dimen- 
sions that came in at this period? 

Mr. LoRETz. Nothing by any means as large as that. There may 
have been some rather heavy jobs of three or four thousand tons 
included in there. I have my work sheets on that here and I could 
check that, though I am quite sure there were no 

Mr. Reynders (interposing) , It might be interesting to see some of 
those figures, because some of this tonnage must be constructed in 
shops of special facihties to handle heavy individual parts, which 
perhaps the smaller companies could not very well handle. 

Mr. LoRETZ. I would say with respect to all, or practically all of 
this tonnage, the larger shops on the Pacific coast are equipped to 
fabricate it. 

Mr. Feller. Just to clarify the matter a bit further, you referred 
here to mill aflBliate fabricators. 

Would you say it included the United States Steel Corporation 
subsidiaries and also the fabricating division of Bethlehem Steel? 
Do you happen to know whether the United States Steel Corporation 
subsidiaries have fabricating shops in these three far Western States? 

Mr., LoRETZ. The United States Steel Corporation, to the best of 
•my knowledge, does not have any fabrication facihties of its own in 
the three Western States. The tonnage taken by the United States 
Steel Corporation and its subsidiaries included in here was undoubtedly 
fabricated at eastern or middle western shops and transported in 
fabricated form to the Pacific coast. And further, with reference to 
that, the Bethlehem Steel Co. has acquired and does maintain fabri- 
cating shops in all three Western States. 

Acting Chairman King. Where does it get the raw material from, 
the ingots or unfinished steel? 

Mr. LoRETZ. It gets its steel from its own mills located in Los An- 
geles, San Francisco, and Seattle, and from eastern mills at Bethlehem, 
Pottsville, and Sparrows Point in the East. 

Mr. Feller. You don't know how much of the tonnage which was 
awarded to Bethlehem was fabricated in the west-coast shop? 

Mr. LoRETz. That information would not be available to me; no. 

ShaU I proceed with the explanation of exhibit No. 2, Mr. Feller? 

Mr. Feller. I would like to submit it. 

Acting Chairman King. It will be received. 

(The exhibit referred to was marked "Exhibit No. 1440," and is 
included in the appendix on p. 11011.) 

Mr. LoRETZ. In the case of both exhibit 1 and exhibit 2, I have 
defined the terms used on the first page of the exhibit. It is shown 
precisely what is meant by the term "Midwest States and Southern 
States independent fabricators," and so on. 



CONCENTRATION OF ECONOMIC POWER 10903 

The only further comment on exhibit No. 1 Ms to show that only 
2.4 percent of the tomiage during that period in those three Western 
States was taken by independent Atlantic States fabricators. I make 
that comment because of Senator King's inquiiy with respect to freight 
rates intercoastal. Exhibit No. 2^ is made up in tlie same form and 
shows fabricated structural steel awards, the same class and for the 
same period for delivery or erection at points in what may be termed 
the Intermountain or States adjacent to the Pacific coast, territory 
which might normally be considered to be a national marketing terri- 
tory of Pacific-coast fabricators, namely, the States of Arizona, New 
Mexico, Nevada, Utah, Idaho, and Montana.. 

Tliis exhibit will show that during that period the Pacific-coast 
fabricators in the three far Western States were able to secure only 2.4 
percent of available structural tonnage in these Intermountain States; 
local fabricators, that is, shops located in those several States, took 
3.7 percent of the tonnage, or a total between them of only 6.1 per- 
cent. The Atlantic States fabricators took but a fraction, 0.8 per- 
cent, whereas the balance, 93.1 percent of the structural tonnage 
available in those States, went to Middle Western and Southern 
States, so-called independent fabricators and the miU-aflEiliated fabri- 
cators. In the case, of course, of mill-affliated fabricators, I have no 
information as to where the fabrication work was done, or from what 
point shipment was made. 

Acting Chairman King. How do you account for the very small 
awards to the Atlantic States indepei^dent fabricators, namely, eight- 
tenths of 1 percent? 

Mr. LoRETZ. Well, they would have to fabricate at their eastern 
shops and either ship around via the Atlantic seaboard and through 
the Panama Canal and bear tiie transportation cost from a Pacific 
port back into Arizona or Utah as the case might be or they would 
have to ship transcontinentall}' by rail and pay a substantially higher 
freight rate than the middle-western fabricator would pay. 

Acting Chairman King. How was that 42 percent shipped; by rail 
or water? 

Mr. LoRETZ. Of course I haven't exact knowledge there, but I 
would say 

Acting Chairman King (interposing). Midwest States and Southern 
States independent fabricating. 

Mr. LoRETZ. I would say that was undoubtedly shipped 100 percent 
or close to 100 percent by raO; all rail. 

Acting Chairman King. Would no part of that come from the steel 
industry in Alabama? 

Mr. LoRETZ. Yes, some undoubtedly did originate in Alabama. 
Alabama, Illinois, Indiana, Kansas are the principal fabrication points 
in the Middle West. I have included the Southern States with the 
Middle Western States in these tabulations. 

Acting Chairman King. Are you complaining about the prices at 
which they disposed of their products on the Pacific coast, shipping 
them as they did, by water or by rail or both? 

Mr. LoRETz. We are not complaining before this committee, Mr. 
Senator, as to transportation rates. We realize that this committee 

• "Exhlljlt No. 1439, appendix, p. nOlO." 
t "Exhibit No. 1440, appendix, p. 11011." 



10904 CONCENTRATION OF ECONOMIC POWER 

is not delving into transportation rates. This is merely a result of a 
factual study to show where the tonnage, where the structural tonnage, 
in the Western States went. As will be shown later on it is by a 
combination of factors, one of which is transportation. 

Mr. Reynders. Could I ask you, is the transportation item, item 4, 
the same as on item 2? 

Mr. LoRETZ. You are referring to orders shipped by so-called mill- 
affiliate fabricators? As I said, we have no information as to where 
that business may have been fabricated. It might have been fab- 
ricated in the Pacific-coast shops, in the case of the Bethlehem Steel 
Co., or it might have been fabricated in the Middle West or farther 
eastern fabrication points. 

Mr, Reynders. To the extent it was manufactured in the East or 
Middle West, the transportation would no doubt be by rail also? 

Mr. Loretz. I would say it would no doubt be by rail. It isn't in 
the cards to have an inland rail haul at the eastern end and a further 
rail haul at the western end. 

Dr. LuBiN. Does the Columbia Co. do any fabricating, or are they 
just a sales organization? 

Mr. Loretz. I don't understand that the Columbia Steel Co. does 
any fabrication work. I believe it takes orders for fabricated steel 
under that name which are probably assigned, then, to the fabricating 
unit of the Steel Corporation. 

Dr. LuBiN. So other than these independents who are members of 
your organization, Bethlehem is the only large organization on the 
coast that actually fabricates bteel products? 

Mr. Loretz. That is correct. 

Dr. LuBiN. Would their capacity be sufficiently large to cover this 
101,000 tons that you have m that 18-month period, or would it 
necessarily follow they would have to bring some in, assuming they 
did it all, which of course they didn't? 

Mr. Loretz. They have about four, either four or five shops on 
the west coast, and I haven't information as to what their capacity 
might be. 

Dr. LuBiN. In other words, these figures do not necessarily prove 
that these materials that are put out, sold by the mill affiiliate fabrica- 
tors, necessarily have been brought in from outside of the Pacific 
coast. It is theoretically possible that they might have been manu- 
factured on the coast itself. 

Mr. Loretz. In the case of the Bethlehem Steel Co. I would say 
that is so. 

Dr. LuBiN. So that the freight question wouldn't come into the 
picture so far as they are concerned. They would be in the same 
situation you are in? 

Mr. Loretz. That is correct. 

Acting Chairman King. Would that entire 51 percent plus come 
in the category just referred to, that is, produced upon the Pacffic 
coast? 

Mr. Loretz. Theoretically, yes. Actually I doubt if, because of 
the transportation and other disadvantages, such of that tonnage as 
the Bethlehem Steel Co. might have secured would have been shipped 
from their Pacific coast plants. 

Mr. Henderson. In making up item ]No.4, there were other com- 
panies which had awards besides Bethlehem, were there not? 



CONCENTRATION OF ECONOMIC POWER 10905 

Mr. LoRETz. Yes. No. 4 includes Bethlehem and the United 
States Steel and its affiliates. 

Acting Chairman King. Do you know what percentage of that 51 
percent consisted of steel fabricated on the Pacific coast? 

Mr. LoRETZ. No, as I stated, I wouldn't have any information as 
to where those companies chose to do their fabricating. 

Acting Chairman King. Is it your view that substantially all of 
that 51 percent was fabricated on the Pacific coast because of freight 
rates which would preclude them from perhaps shipping from the 
interior part of the United States, or in fact from the Atlantic seaboard? 

Mr. LoRETZ. Quite to the contrary, Mr. Senator. I would venture 
the opinion that most of the 51.1 percent was shipped from middle 
western points of origin. 

Acting Chairman King. What territory would you call Middle 
West? 

Mr. LoRETZ. From Illinois, Indiana, Minnesota, Kansas, Alabama. 

Acting Chairman King. And if it were shipped from that territory, 
would it be by rail? 

Mr. LoRETZ. It would be by rail. 

Acting Chairman King. And the rate would be very much higher, 
then, than water rates, and the Pacific coast fabricators would have 
the advantage of the short haul? 

Mr. LoRETz. This 51 percent, you notice, appears on exhibit No. 2, 
which is material destined to the interior Western States, Arizona, 
New Mexico, Nevada, Utah, Idaho, and Montana, so that under the 
present price and transportatiou set-up, the logical shipping points 
for material destined to that territory would be points in the Middle 
Western States. 

Acting Chairman King. I suppose the Federal Government wou.ld 
use some of this steel that is comprised in these shipments? 

Mr. LoRETz. That includes Government projects; yes. 

Acting Chairman King. Would any considerable part of the entire 
am.ount be Government purchase? 

Mr. LoRETz. A substantial amount would. I didn't make any 
check to determine just how much. 

Acting Chairman King. And the awards which were made were 
competitive in character? The Government didn't buy except under 
competitive procedure? 

Mr. LoRETZ. That is correct. 

Acting Chairman King. So that whoever got the award got it by 
reason of lower prices, presumably? 

Mr. LoRETZ. That is correct; and one factor in that would be the 
matter of land grant freight rates, which I had planned to touch upon 
briefly later in my testimony. 

Acting Chairman King. All right. 

Mr. Feller. One of the factors that, I take it, comes into this 
question is the matter of the steel price structure itself, the "^ ice on 
steel, and perhaps you can tell us about the attitude of the independent 
Pacific coast fabricators with respect to that steel price structure. 

Mr. LoRETZ. Along that line, Mr. Feller, I have prepared an exhibit 
identified as my exhibit No. 3 consisting of two pages. That was 
prepared around the 1st of September. The source for the prices 
was the Iron Age of August 24, 1939, so it will be necessary, in offering 



10906 CONCENTRATION OF ECONOMIC POWER 

this exhibit, to make some corrections in it. With your permission, 
I will read those. 

Mr. Feller, I offer this. 

Acting Chairman King. It may be received. 

(This exhibit referred to v/as marked with "Exhibit No, 1441," and 
is included in the appendix on p, 11012.) 

Mr, LoRETZ. To bring exhibit 3 up to date, it should be shown in 
the title that the source is the Iron Age of November 9, 1939, instead 
of — I am referring now to the third line of the title — August 24, 1939, 
and' these corrections should be noted in connection with the column 
headed "Plates," the next to the righthand column, 

Down under "Philadelphia delivered" the 2.05 should be crossed 
out, in other words that should read 2.15 and in connection with the 
2.15 there should appear an asterisk. In the case of "New York 
delivered" the reference to $2.19 should be eliminated and in con- 
nection with $2.29 an asterisk should be shown. There should also 
be an asterisk in connection with the two last items, $2.45 for Gulf 
ports and $2.60 for Pacific ports, and the explanation of that asterisk 
should be changed as follows: The words "Subject to concessions 
particularly in the East of $2 per ton, 10 cents per pound," should be 
crossed out and this explanation should be shown instead: "Twenty- 
five cents premium by certain independent plate mills for early 
deliveries." In other words the current Iron Age in the case of 
Pittsburgh, Pa., for example, will show $2.10 to $2.35. It is my 
understanding that the $2.35 represents a 25 cent premium or extra 
which certain mills are charging for early deliveries. 

Mr. Reynders. Doesn't that really apply to the local steel com- 
pany? 

jVir. LoRETZ. You possibly have better information than I have. 
I understood it applied to Lukens and to one or two other companies 

Mr. Reynders. They raised their price $5 a ton and the scrap 
prices went up $6 to $7. I don't know of any otuer mill charging 
that and guaranteeing prompt deliveries. 

Mr. LoRETz. None of them were guaranteeing prompt deliveries. 

That will also change on page 2 of the same exhibit, on No. 3, after 
"Plates f. o. b. Sparrows Point, Md.," the parenthetical notation, 
2.10 less .10 should be crossed out and in place of the $2, $2.-10 should 
be shown. That will change the total of price plus transportation to 
$2.59 instead of $2.49. With those exceptions the exhibit is correct, 
there having been no other changes in published prices or any changes 
in transportation rates. 

Explaining this exhibit No. 3, there is shown under "A" the 
various basing points which are recognized basing points for which 
prices are published in the trade publications, together with the price 
per pound currently shown for those several basmg points. While 
there are steel bars, certain size shapes and sheets rolled on the 
Pacific coast by mills which are afiiliated with the two major steel 
companies, the prices that are shown as on cars, dock. Pacific ports, 
apply for material delivered by the coast mills as well as on material 
that is actually rolled in the East and transported to the Pacific 
doast. In other words, t}iere is no differentiation in price as between 
materials actually rolled on the Pacific coast and material transported 
to the Pacific coast from eastern rolling mills. 



CONCENTRATION OF ECONOMIC POWER 10907 

Mr. Reynders. These prices are base prices, so-called? 

Mr. LoRETz. They are base prices, so-called. 

Mr. Reynders. We have had some testimony here in other lines 
of products where the base prices were not the realized prices. I am 
wondering whether all these companies on the coast paid the full price 
or whether there were some concessions. 

Mr. Loretz. I wouldn't be in a position to say that every one had 
paid the base price on every purchase, in fact I think it is generally 
knowTi that that is not the case. However, it is reasonable to assume 
that concessions made on the Pacific coast if such concessions are made 
be substantial^ the same from the base prices as concessions that 
would be made from other basing points through the East and Middle 
West. However, I think as of the present time the base prices are 
generally recognized to be actual going prices, whereas 2 or 3 months 
ago that might not have been the case. 

Mr. Reynders. In view of the increased present demand? 

Mr. Loretz. In view of the increased present demand. 

Section B of exhibit No. 3, which starts down toward the bottom 
of page 1, is designed to compare the Pacific coast prices, the so-called 
on cars Pacific ports prices, with certain eastern base prices plus 
transportation costs. For example, No. 1 is on bars which are 
quoted and are sold at Birmingham at a base price of $2.15. The 
transportation cost from Birmingham to Los Angeles Harbor, for 
example, is as shown, made up of several factors, 65 cents per 100 
pounds, making a total of $2.80. The base price on cars Los Angeles 
Harbor, which is also the base price on cars at other Pacific-coast 
terminal ports, is $2.75, a difference of 5 cents, and I might state 
again that that $2.75 price which is quoted on cars Pacific ports 
applies whether the material has actually been transported in through 
a Pacific port or produced at a Pacific Coast rolling mill. 

Mr. Reynders. Would the governing base price be Sparrows Point? 

Mr. Loretz. Bars are not produced at Sparrows Point, sir. I have 
used Sparrows Point for the purpose of comparison on plates which 
are produced at Sparrows Point. That is example No. 3 on the next 
page. 

In the case of shapes, wliich is example No. 2 of this comparison, 
it will be noted that the Philadelphia delivered price on shapes is 
$2.31)^, which with transportation costs, all transportation costs 
added, total $2.70^ as against the on-cars Pacific coast or Los Angeles 
Harbor price of $2.70. That also would apply whether the material 
is rolled at a mill adjacent to Philadelphia or actually rolled at Tor- 
rance or Los Angeles or Seattle or other Pacific coast rolling mills. 
Just a half a cent difference, it will be noted, there. On plates, 
example No. 3, as corrected, the Sparrows Point price plus transporta- 
tion is $2.59, whereas the base price on cars Los Angeles Harbor or 
other Pacific coast ports is $2.60. In other words, the base price at 
Los Angeles Harbor is more than the eastern price plus actual trans- 
portation costs. 

On sheets, Example No. 4, the situation is the same. The Sparrows 
Point price plus actual transportation costs, total $2.49, as against a 
quoted price Los Angeles Harbor or other Pacific coast port, of $2.50, 
one cent over the eastern price plus transportation regardless of 
whether the material is rolled in a Pacific coast mill or is actually 



10908 CONCENTRATION OF ECONOMIC POWER 

shipped out of the East. I beheve in other respects that exhibit is 
self-explanatory. 

Acting Chairman King. Do I understand that exhibit indicates 
that the cost of these various commodities referred to in the chart 
are substantially the same on the Pacific coast as they are on the 
Atlantic coast, or at Pittsburgh? 

Mr. LoRETZ. No, sir; the purpose of this exhibit is to show that 
the price on the Pacific coast is substantially the same or in some 
cases actually higher than the eastern price plus the full transporta- 
tion cost. 

Acting Chairman King. Take shapes, Philadelphia delivered, 
$2.21 K, and then the freight, Los Angeles, 49 cents, and the car at 
Los Angeles, $2.70. What is your contention there? 

Mr. LoRETZ. It is not the purpose to make any contention. It is 
just to illustrate that the Pacific coast prices are substantially the 
eastern prices plus actual transportation. It is not our purpose to 
argue either for or against the delivered price system. This exhibit 
is purely factual and designed to show that actually the existing 
prices on the Pacific coast are the eastern prices plus transportation, 
and the same as has been testified to with respect to tubular products, 
bars and plates, shapes and sheets are sold by mills on a delivered 
basis — to the best of my knowledge entirely a delivered basis. 
In other words, a steel user, a steel fabircator, in Los Angeles, 
pays $2.60 for steel plates even though he could go back to Sparrows 
Point and buy it for $2.10 and pay his own transportation cost and 
save a cent a hundred pounds. 

Mr. Feller. The point that you are making, I take it, is this, 
Mr. Loretz. Taking shapes, for example, a purchaser of steel shapes 
at Philadelphia, near an eastern mill, would pay $2.21 K per hundred 
pounds. A purchaser at Los Angeles, who is also adjacent to a mill 
in Los Angeles maldng the same product, would pay $2.70, although 
the product is actually delivered from a mill right hear his plant. 

Mr. Loretz. That is correct. 

Mr. Feller. And the price which he pays, $2.70, is substantially 
equivalent to the price at the eastern mill or near the eastern mill 
plus the transportation to the west coast, although the steel. may 
never actually bo transported. 

Mr. Loretz. That is correct. 

Mr. Reynders. May I call attention to this fact, however, the 
rolling mills on the coast are all small-capacity mills and generally 
speaking hand mills and the cost of production there, would you not 
say, is substantially higher than in the mechanical mills of the East 
where large tonnage is rolled? 

Mr. Loretz. I couldn't definitely answer that, sir. I know that 
I have made certain checks as to the costs of some of the basic materials 
going into steel production out there as compared with steel production 
at eastern and southern points, also labor and power costs and other 
factors, and that does not reflect a higher cost on the Pacific coaSt. I 
am not a cost expert nor am I a middleman so I am not in position to 
weight all those factors and tell you what the final result would be. 

Mr. Reynders. You would know, for instance, whether the so- 
called mill cost is higher or lower on the coast as compared with the 
Eastern mills? 



CONCENTRATION OF ECONOMIC POWER 10909 

Mr. LoRETZ. I haven't access of course to the costs of the Steel 
Corporation or the Bethlehem Steel Co. and that would be the only 
sure way of knowing what those costs are. 

Mr. Reynders. But you know those mills are hand-operated mills, 
on the coast? 

Mr. LoRETZ.. That is my understanding, yes, although I couldn't 
qualify to testify with respect to that. 

Mr. Feller. Would you tell us whatever figures you have at hand? 

Mr. LoRETZ. Some of the factors, of course some of the more 
important factors, are the costs of scrap steel, pig iron, the labor 
costs and the power costs. I have some figures with respect to that 
if you care to have me read them into the record. 

On No. 1 heavy melting scrap, scrap being used I believe 50 percent 
toabout 70 or 80 percent in the production of steel. on the West coast, 
the Pacific coast quoted price is only $14.35 per gross ton. 

Mr. Reynders. What date was that? 

Mr. LoRETz. As of November 9, 1939. The source for that is the 
latest Iron Age. 

Acting Chairman King. Where would that scrap come from? 

Mr. LoRETZ. That would be scrap available On the Pacific coast. 

Acting Chairman King. What would be the principal source of 
supply? What part of the United States would it come from? 

Mr. LoRETz. It would originate right around the Pacific coast in 
the immediate interior such as Arizona, Nevada, and so on. 

Acting Chairman King. And then would be shipped to the East 
by boat? 

Mr. LoRETZ. No; it is my understanding that there is none so 
shipped. I might say that price of $14.35 apparently exists in spite of 
the heavy demand for scrap for shipment across the Pacific in recent 
months. That $14.35 may be compared with quoted prices at 
Pittsburgh, Pa., $21 to $22; Philadelphia, $21.50 to $22; at Chi- 
cago, $18.50 to $18.75; Youngstown,_ $20.50 to $21; Cleveland, $19 
to $19.50; and Birmingham, which is the next lowest point to Los 
Angeles or to the Pacific coast, pardon me, $18. 

Pig iron, while the class of pig iron that I understand is used m 
rolling mills is not publicly quoted in the trade papers, the price of 
that is, I believe, closely related to other classes of pig iron and a 
comparison as to No. 2 foundry pig iron may be interesting. The 
price delivered at San Francisco, Los Angeles, and Seattle on that is 
$26.50 as against $24.84, at Philadelphia for example; $23 for Chicago, 
Cleveland, and Youngstown; $24 at Bethlehem and Sparrows Point. 

Mr. Reynders. In that connection do you understand those are 
prices at which the companies make their own pig iron and there is a 
great difference there from the user of molten steel and j^ou couldn't 
make a comparison on that basis and get a correct result. Your scrap 
price moreover, I think reflects the very recent extraordinary condi- 
tions. Under conditions which would obtain normally the S3rap 
would be comparable to that on the Pacific Coast, or very close to it. 

Mr. LoRETZ. The figures that I am submitting are as conditions 
are at the present time. 

. I made a check of the labor costs from the Bureau of Census, 
United States Department of Commerce, report dated March 7, 1939, 
on wage averages for the year 1937, which I imderstood are the last 



10910 CONCENTRATION OF ECONOMIC POWER 

year available. Under the classification of steel works, rolling mills, 
an average wage for San Francisco of $1,610 for roll workers is shown. 
Seattle happens to be exactly the same figure, $1,610; Los Angeles, 
$1,530 as against certain Eastern points; Youngstown, $1,715; Pitts- 
burgh, Pa., $1,890; and Chicago, $1,730. 

One other factor which I took occasion to check was power costs 
from the Federal Power Commission reports dated January 1, 1938. 
A comparison of Los Angeles and San Francisco, Calif., as against 
Detroit, Birmingham, Pittsburgh, Pa., Betlilehem, and Chicago, 
shows those two California cities to have lower costs on industrial 
power than any of the other cities cited. 

Mr. Reynders. Do you have the figures? 

Mr. LoRETZ. I have them, sir, but frankly I am not familiar with 
these units and just how to interpret them. I would be glad to give 
them to you during the recess. 

Mr. Reynders. Mr. Loretz, the electrical power used in steel 
plants in the East is a byproduct and would be substantially only a 
fraction of the charge for electrical power where the power is purchased 
from the outside. It is merely a byproduct of the operation of their 
blast furnaces, so that it really doesn't compare with the prices paid 
otherwise. 

Mr. LoRETZ. I am aware that is the case. However, I thought the 
figures might be valuable for comparative purposes only. 

Mr. Reynders. For purposes of the committee we want the picture 
to stand out for the record according to the facts. 

Mr. LuBiN. Would that be true of the small independent fabri- 
cators? 

Mr. Reynders. No; integrated companies. 

Mr. LuBiN. So that if you were comparing plants in the East of 
size equal to those in the West, those figures the witness gave wouldn't 
be comparable. 

Mr. Reynders. Except that Mr. Loretz is comparing the United 
States Steel and Bethlehem situation with plants on the coast. 

Mr. Loretz. I think it is fair to say where any company found it 
to its advantage to maintain its own power facilities it naturally 
would do so in lieu of paying the commercial power rate. 

Mr. Reynders. Having been connected in the early stage with 
the Columbia Steel Corporation I happen to know that and I didn't 
want an incorrect impression. 

Mr. Loretz. I am very glad to have you clarify the record and it 
it not my purpose to state that any steel company is charging too 
much for its products. I don't claim to be a cost expert. I am 
merely presenting this factual data in line with the request of the 
Department for what it may be worth. I will say, however, that it 
is the contention of the Pacific coast steel fabricators that steel sold 
on the Pacific coast, steel produced on the Pacific coast, I should say, 
should be sold based upon its cost of production plus a reasonable 
profit, whatever that may be, and not based upon eastern prices 
plus transportation costs. 

Acting Chairman King. Your contention is, is it not, that steel 
on the Pacific coast by reason of the competition of eastern producers 
is too cheap, and the producers of fabricated steel on the Pacific 
coast ought to get a higher price. Is that what you mean? 



CONCENTRATION OF ECONOMIC POWER 10911 

Mr. LoRETz. I am afraid if tl^at is what I did mean I wouldn't 
say it. However, that doesn't happen to be the case. Steel out 
there is apparently piiced as shown by this exhibit, substantially 
the eastern price plus transportation and is not priced based upon 
the cost of production at the mills out there. Of course we recog- 
nize that all steel is not produced on the Pacific coast but as to such 
shapes, sheets, and bars as are produced there it is our contention 
that they should be priced with relation to the cost of production 
there and that the user on the Pacific coast, the people whom I 
represent, should not be burdened with an eastern price plus a theo- 
retical transportation charge. 

Acting Chairman King. After all it comes down to the proposition 
I have made, does it not, namely, that you think you ought to get 
a higher price for the products fabricated on the Pacific coast than 
you are getting now and you don't get a higher price because of the 
competition from fabricated steel producers in the interior of the 
United States. 

Mr. Feller. I think that is a misunderstanding. As I understand 
Mr. Loretz's point it was this. The members of his association are 
requu'ed in erecting the structure and fabricating the various products 
wluch they make, to buy steel which is manufactured by others, 
chiefly by Bethlehem and United States Steel Corporation, and those 
two manufacturers maintain a plant on the Pacific coast. Speaking 
as a steel consumer in this case, Mr. Loretz is saying that the price 
which my people pay for steel should be related to the cost of pro- 
duction at those plants which are located near us in the Western 
States, and his contention is that they are not so related but that they 
are based upon an eastern price plus transportation, which may be 
purely theoretical because the steel is made right out there on the 
Pacific coast, and his argument, therefore, would be that if the costs 
of making steel on the Pacific coast are either lower or substantially 
the same as the eastern costs, then the western consumer of steel is 
being penalized by the amount of theoretical freight, and in any event 
if the cost of making steel plus a reasonable profit is below the eastern 
price plus the transportation, theoretical transportation, then they 
are also being penalized to that extent. That as I take it is your 
contention. 

Mr. Loretz. That is correct; yes. 

Mr. Reynders. But I think in that connection you must compare 
like products. Isn't it correct that as far as shapes are concerned only 
the light shapes are rolled on the coast, no substantial amount of 
what you call heavy shapes is rolled? 

Mr. Loretz. Not heavy shapes. 

Mr. Reynders. How about plates? Bethlehem doesn't roll plates 
on the coast. 

Mr. Loretz. The sheet gages only. 

Mr. Reynders. Very light, so the comparison isn't exactly of the 
same kind. 

Mr. Loretz. I have shown in exhibit 3 by an asterisk note which 
products are produced on the Pacific coast and which are not, although 
I haven't attempted to difterentiate by sizes. 

Mr. Feller. I think, Mr. Loretz, I am correct in saying that with 
respect to pipes which are not rolled on the Pacffic coast, you will 

124491 — 40— pt 20 12 



10912 CONCENTRATION OF ECONOMIC POWER 

make the further point that it costs even more on the Pacific coast 
than it does if you were permitted by the steel companies to buy 
your steel in the East and transport it by common carrier. 

Mr. LoRETz. That is correct. 

Mr. Feller. In other words, with respect to those products which 
are manufactured on the west coast, the point I think Mr. Loretz has 
made is that the western steel consumer must pay his theoretical 
freight charge with respect to those products which are not manu- 
factured on the Pacific coast. He must pay the actual freight charge, 
plus a little more. 

Mr. Reynders. The difference between 259 and 280. 

Mr. Feller. Yes; when this exhibit was originally made up in 
August, a difference of 11 cents. 

Mr. Loretz. I might state further in that connection that the two 
major steel companies own and operate their own intercoastal steam- 
ship services, and that the great bulk of the tonnage transported for 
their account from the east coast to the west coast is transported in 
their own bottoms. 

Mr. Reynders. I want to say I am thoroughly sympathetic to the 
intere&ts of the fabricators on the coast. I don't want to have it mis- 
understood, but I would like to have the facts stand out as they are. 

Mr. Feller. May I also say, Mr. Chairman, for the record, at this 
point, that one of- the problems to be brought up is in connection with 
the relative costs of manufacturmg steel at the west-coast plant — two 
of the largest units in the industry — as compared with manufactur- 
ing steel at the eastern plant. At the hearing which will be held in 
January, I think it would be most instructive to the committee if 
both the United States Steel Corporation and Bethlehem were to pre- 
pare comparative statements of costs for submission to the committee. 
We have not had an opportunity to procure them and this somewhat 
fragmentary data which Mr. Loretz has been able to secure is not 
particularly conclusive. 

I would also like to ask another question along those lines in con- 
nection with something which Mr. Reynders brought up. Mr. 
Reynders, if I remember correctly, pointed out that the mills which 
produce in California are hand mills. May I ask you whether it is 
a fact that hand mills in the East do not also sell steel products in 
California — eastern companies which still operate hand mills? 

_Mr. Loretz. I am not familiar with which mills are so-called hand 
mills and which are not, so I would prefer to have that information 
supplied by a mill representative. 

Mr. Feller. Are you familiar with which eastern companies, in 
addition to United States Steel and Bethlehem Steel, sell on the 
Pacific coast? Do you know whether Lukens does, for example? 

Mr. Loretz. Yes. 

Mr. Feller. Central Iron, Steel? 

Mr. Loretz. They have. 

Mr. Feller. Phoenix Iron Co.? 

Mr. Loretz. They have. Jones & Laughlin Co. does regularly. 

Mr. Feller. Worth? 

Mr. Loretz ; Worth, and Allan Wood. The Republic Steel Co. 

Mr. Reynders. I would like to say, for the record that Worth and 
Central operate hand mills. 



CONCENTRATION OF ECONOMIC POWER 10913 

Mr. Feller. And they are enabled to sell on the Pacific Coast. 

Mr. Reynders. On the basis outlined here; yes. 

Mr. Feller. I believe you have stated, Mr. Loretz, that the Bethle- 
hem and United States Steel Corporations are the only two companies 
manufacturing steel which also have affiliated fabricating units. May 
I ask whether the members of your association, as independent 
fabricators of steel, have found themselves placed at a competitive 
disadvantage with respect to the fabricating units of these two large 
steel companies? 

Mr. Loretz. I can give you no specific case of such a disadvantage. 
I would say that it is only natural that there should be a disadvantage 
where one company engages in the entire picture from the ingots right 
on through the rolling mill, the transportation and fabrication proces- 
ses, that that company would have, by the very nature of things, an 
advantage over a so-called independent fabricator who entered the 
picture onl}'' at the time of material companies into the fabrication 
stage. 

Acting Chairman King. The large producer, starting in with the 
raw material and turning out finally the finished product — the inte- 
grated companies would have an advantage over the separate and 
independent small producers. 

Mr. Loretz. I would say it is obvious that he has that advantage. 
Now whether he has abused the natural advantage that he has, I 
would not be able to say. 

Mr. Reynders. On the other hand, the integrated company also 
has the investment of the ore, up to the stage of making the road 
material. 

Mr. Loretz. That is absolutely correct. 

Mr. Feller. I take it that in connection with this problem of 
competition with the fabrication affiliates of the steel mills them- 
selves, you believe that this matter of prices of steel has some signifi- 
cance, your position being that the American Bridge Co., for example, 
could purchase steel from affiliates of the United States Steel Cor- 
portation at the eastern price fabricating structure partially in the 
east, and then bring it out west; whereas the people whom you repre- 
sent must buy it at the western price and consequently may, in some 
cases, suffer, 

Mr. Loretz. That is correct, and again speaking theoretically, I 
think it is obvious that what the company you mentioned might pay 
its mill affiliate, for example, for its steel, would be really a book- 
keeping transaction anyway. Whether they paid a lower or higher 
price would be merely a bookkeeping transaction. Likewise what 
they paid their subsidiary transportation company for the transporta- 
tion of that steel would be a bookkeeping proposition, regardless of 
what the bookkeeping entry might be. 

Acting Chairman King. WeU after all, in the final adjustment of 
the accounts of an integrated company they have got to take into 
account the losses and gains; take into account the advantages and 
disadvantages of being an integrated company. 

Mr. Loretz. That is absolutely right. 

Acting Chairman King. So you are complaining, if you make any 
complaint at all, because there are some companies that are integrated 
and produce steel and fabricated steel upon the Atlantic coast and 



10914 CONCENTRATION OF ECONOMIC POWER 

ship it around to the Pacific coast, because of those advantages which 
follow a large corporation, an integrated corporation, have a cost 
advantage over fabricators on the Pacific coast. 

Mr. LoRETZ. I want to make it clear, sir; we are not complaining; 
we certainly are not asking this Committee for any rehef from a situa- 
tion of that kind. We are merely saying that the major steel com- 
panies have that advantage, we are not contending that they are 
abusing any advantage that they may have. 

Acting Chairman King. Do you think in view of that advantage, 
conceded that it is, I am not expressing an opinion, do you think they 
ought to increase the prices in order to sort of equalize the disadvan- 
tage, if any, to which those whom you represent are subjected? 

Mr. LoRETZ. I am not advocating increase in prices at all. The 
only thing I may have advocated here was that the price of steel pro- 
duced on the Pacific coast* should reflect the cost of production there 
as long as they choose to produce steel there must be come saving 
in it. Let the man who is their custom6r there have some part of the 
advantage of their producing it there, and in that way it will tend to 
more nearly equalize conditions as between the independent fabri- 
cators -and those who are mill aflfiliates. 

Mr. Feller. Do the companies which you represent conceive that 
they receive any advantage, price-wise, from the fact that steel is 
manufactured on- the Pacific Coast? 

Mr. Loretz. To my knowledge they receive no advantage by reason 
of the fact that steel is produced on the Pacific coast. They of course 
do receive some advantage in that material is probably more readily 
available there by reason of its being rolled there but they receive no 
advantage in price. 

Mr. Reynders. May I ask what is the present situation in regard 
to foreign steel on the Pacific coast? When I was still familiar with 
the situation some years back, there was a definite competition with 
Lelgian and perhaps German mills shipping to the coast, at a sub- 
stantially lower figm-e. 

Mr. Loretz. Yes; up untU the recent disturbance in Europe, that 
was a factor, but a very small factor in that the domestic steel fabri- 
cators chose not to take advantage of that foreign material that was 
available there. Of course, that situation has changed in the last 2 
or 3 months, there is no foreign steel being imported there to my 
knowledge. 

FABRICATION IN TRANSIT 

Mr. Feller. Mr. Loretz, I should now like to ask you about the 
mystic letters F. I. T. which are used so frequently in the steel indus- 
try. For the information of the committee, they refer to an insti- 
tutional practice known as fabrication in transit. It is a subject of 
great complexity and we hope to be able to furnish the committee at a 
later date with a report which would deal in some detail with these 
perplexities, but at the present time I think it would be useful to the 
committee if some, shall I say, introduction to the subject were given 
from the standpoint of this particular group of steel consumers. 
Would you tell the committee what this fabrication in transit is? 

Mr. IjORetz. I think the best way I can define fabrication in transit 
is that it is a process by which a steel company or a couple of steel com- 



CONCENTRATION OF ECONOMIC POWER 10915 

panies ship steel across the country and back again, and after all that 
has taken place the railroad owes them about 2 cents a hundred 
pounds. [Laughter,] Pardon that slight exaggeration, Mr. Feller. 

As that is a rather complex subject I have endeavored in an exhibit, 
my exhibit 4, which has been distributed to members of the Com- 
mittee, to give a specific example of what can occur under the existing 
price structure and the existing rail transportation rate structure with 
its fabrication in transit privilege. 

Mr. Feller. Just before you go into that, let's see if the Com- 
mittee understand what the fabrication lq transit privilege is. It is a — 
well, let me see if I can attempt a definition, perhaps you will correct 
me on it. 

Mr. LoRETZ, Fabrication in transit legitimately used is a privilege 
accorded by rail transportation companies almost generally whereby 
steel can originate at a mill and go to an intermediate point for fabri- 
cation and after fabrication can be reshipp'ed to a more distant point. 
Initially the shipper or the fabricator will pay to the transportation 
company the rate applying from the miU to the intermediate fabrica- 
tion point, then upon reshipping that to the more distant final destina- 
tion, instead of paying the freight rate and charge appUcable from the 
intermediate fabrication point to the final destination, he will pay the 
through rate from the null origin point to the final destination, less the 
transportation he has already paid from the mill up to the intermediate 
fabrication point, plus a charge which varies from 2}^ cents to 3}^ cents 
per 100 pounds, depending upon territory, for that stop-off privilege. 

Mr. Feller. Let's take a very simple example. A fabricator is 
locatedj let us say, at St. Louis, and he receives a contract to award a 
structure at, well, say, Kansas City. 

He may buy the steel from a Chicago mill, take the steel off the cars 
at St. Louis, fabricate the parts there and ship it out to Kansas City 
and pay in the last analysis the freight rate which is applicable on a 
through haul from Chicago to Kansas City instead of the two separate 
hpuls, Chicago to St. Louis, St. Louis to Kansas City. Is that 
schematically about right? 

Mr. LoRETz. That is correct — plus the small stop-off charge. 

Mr. Feller. I take it this exhibit which you have offered is in- 
tended to indicate the situation of the Pacific coast independent 
fabricator on particular hypothetical jobs, taking into consideration 
the pricing structure which has just been discussed and the existing 
fabrication in transit privilege. 

Acting Chairman King. It may be received for the record. 

(The chart referred to was marked "Exhibit No. 1442," and is 
included in the appendix on p. 11013.) 

Mr. Loretz. That is correct. 

Mr. Feller. TeU us about your exhibit 2} 

Mr. Loretz. In exhibit 2 it was brought out that the Pacific coast 
fabricator in the period treated^was able to get only 2.4 percent of the 
business available during that period in the States of Arizona, New 
Mexico, and Nevada, Utah, Idaho, and Montana, which is quite a 
bit less than the Pacific coast fabricator feels that he should be able 
to obtain under normal circumstances and conditions. There are 
probably two main explanations for the Pacific coast fabricator to do 

1 "Exhibit No. 1440," appendix, p. 11011. 



10916 CONCENTRATION OF ECONOMIC POWER 

any business, first is the price structure, whereby the Pacific coast 
fabricator doesn't get any benefit, if there should be any, from the fact 
that steel, steel shapes, sheets and bars are produced on the Pacific 
coast. Secondly, it is shown by this exhibit that even under the exist- 
ing price structure the Pacific co.ast fabricator would be able to do some 
business at Phoenix, Ariz., is the example shown, if the intermediate 
fabricator, and we use Birmingham as an example of an intermediate 
fabricator, paid the full, lawful transportation rates applicable in 
accordance with the tariffs on file with the Interstate Corumerce 
Commission. 

For example, number 1 on page 1 shows the material plus the trans- 

Eortation cost of the Los Angeles fabricator, based upon, his present 
ase price on bteel shapes, wfich is $2.70. When he buys material 
for fabrication at the plant in Los Angeles he pays $2.72}^, 2}i cents 
being an arbitrary charge for switching, which is added. The out- 
bound freight rate on fabricated material from Los Angeles to Phoenix, 
Ariz., according to the rail tariff on file with the Interstate Commerce 
Commission, is 36 cents, which would give the Los Angdes fabricator a 
total material plus transportation cost of $3.80K- We have of course 
disregarded all other costs entering into fabrication and erection here. 

Example No. 2, take a Birmingham, Ala., fabricator who wiU buy 
material at $2.12)^ total at his plant at Birmingham and if he pays the 
normal freight rate applicable from Birmingham to Phoenix will pay 
$1.10, making the total landed cost, material plus freight, of $3.22^. 

On page 2, example 3 shows what the fabricator in Birmingham can 
do under the existing price structure, under the existing transportation 
rate structure. I have only chosen Birmingham here as a point of 
example. That can be done and is being done by so called inter- 
mediate fabricators throughout the Middle West and South. The 
Birmingham fabricator can by applying — this is getting rather com- 
plicated again — by registering, certain tonnage that he buys from a 
mill in Chicago at the identical Birmingham price, registering that 
tonnage as so-called transit tonnage, can then reshij) an entirely differ- 
ent tonnage of fabricated structural steel from Binningham to Phoenix 
and instead of paying the Birmiagharri to Phoenix lawful published 
railroad tariff rate he wiU, by taking advantage of that 58 cents per 
100 pounds that he or the mill has already pp,id from Chicago to 
Birmingham, coupled with the fact that the rate from Chicago to 
Phoenix through Birmingham is the same as the Binningham to 
Phoenix rate, he can fix it so he will only pay transportation 52 cents 
per 100 pounds plus an F. I. T. charge of 3K cents, or total transporta- 
tion cost of 55)4 cents, thereby reducing his total landed material plus 
freight cost at Phoenix down to $2.67?^. 

Mr. Feller. The result of that I take it is that the Los Angeles 
fabricator, who is 395 miles away from Phoenix, cannot put that 
material into Phoenix at less than $3.08}^, whereas the Bir m i n gham 
fabricator who is 2,200 miles away from Phoenix, can put it there at 
$2.67%. 

Mr. LoRETz. That is the final result. The final result I should say 
is to eliminate the man in Los Angeles or any fabricator in California 
from any chance to do business even at a point as close to Los Angeles 
as Phoenix, Ariz. 

Acting Chairman King. Does the railroad get any benefit of that? 



CONCENTRATION OF ECONOMIC POWER 10917 

Mr. LoRETZ. The railroad loses about 55 cents per 100 pounds under 
its normal transportation charge, but I want to point out in all fair- 
ness that the man at Birmingham is not technically violating the law 
or violating the tariflf in doing that. Many years ago the railroads 
put a provision in their tariffs that permitted substitution of materials 
of substantially the same class at the transit point, on the theory 
that it was not impossible but was impractical to attempt to continue 
the identity of steel through the fabrication process. As a matter of 
fact it is neither impossible nor unpractical to continue the identity 
of steel through the fabrication process, but it is a custom of the trade, 
so to speak, that substitution be permitted in railroad tariffs and it 
has continued on to the present time. That is another matter that 
we recognize as not in the scope of this committee's investigation, but 
it is something that influences the trend of commerce away from nor- 
mal channels and which we feel is deserving of this committee's atten- 
tion, or should be called to this committer's attention in any factual 
presentation. 

Acting Chairman King. Do you know whether this exact question 
which you have presented was submitted or has been submitted to 
the Interstate Commerce Commission either by shippers or by some 
railroads contending that the policy which you have outlined worked 
harm to the ultimate consumer or to the railroads or to the fabricator? 

Mr. LoRETz. It has been before the Interstate Commerce Com- 
mision a good many years ago and the Commission has never made 
any ruling ordering the carriers to refrain from this practice or finding 
that it was discriminatory. . I state that it is planned by our associa- 
tion to bring that matter before the Interstate Commerce Commission 
in a formal proceeding in the near future and we recognize that that 
is the proper remedy. I might state further in that connection that 
it is my understanding that the pending general transportation bill, 
S. 2009, amends or proposes to amend the Interstate Commerce Act 
to specifically insert reference to transit points in connection with 
either section 2 or 3 relating to discrimination, preference and prejudice 

Acting Chairman King. So that I may get the illustration clearly 
in my mind, suppose that at Birmingham, Ala., a shipment of steel 
was made, for instance, to El Paso and at El Paso there was a fabricat- 
ing plant, and the shipment from Birmingham to El Paso was fabri- 
cated at El Paso in plates or commodities for use upon the Pacific 
coast and thence shipped to Los Angeles. Would there be more than 
one charge, namely, the entire cost from Birmingham to El Paso 
plus from El Paso to Los Angeles? 

Mr. LoRETz. In the final analysis, there again the shipper or the 
receiver would pay the raih-oad company only the through rate from 
Chicago to Los Angeles plus his transit charge. 

Acting Chairman King. What do you mean by present transit 
charge? 

Mr. LoRETz. The 23^ or 2% cfents. 

Acting Chairman King. In other words, treat it as a one-way 
transportation without a stop-over. 

Mr. LoRETz. That is correct. 

Acting Chairman King. Pay freight only one way, there would be 
no double charge there. 

Mr. LoRETZ. That is right. 



10918 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. The hour being rather late, just one other little point. 
Mr. Loretz mentioned early in his testimony a matter in connection 
with the land grant freight rate which he also stated at that time was 
a matter that his company, his association, is interested in, That 
matter is before another committee of Congress but I should like to 
ask Mr. Loretz to have an opportunity to file his exhibit on that land 
grant freight rate with this committee. 

Acting Chairman King. It may be received. 

(The exhibit referred to was marked "Exhibit No. 1443" and is' 
included in the appendix on j). 11016.) 

Mr. Loretz. This is a mimeographed exhibit consisting of two 
pages with full explanation. The purpose of the exhibit really is to 
show how business on Government projects located right in California, 
Oregon, and Washington, is diverted away from California shops 
and therefore from California labor by the operation of the land-grant 
statutes. I believe it is unnecessary to go into any great detail 
here because as Mr. Feller has said the repeal of the land-grant statutes 
is before another committee of Congress, in fact is included in the 
general transportation bill S. 2009 as amended. 

Mr. Feller. I have no further question aloiag this line. 

Dr. LuBiN, I would like to ask Mr. Loretz a question. Mr. 
Loretz, do you think there is any solution to this problem through 
private capital or new capital going onto the Pacific coast, erecting 
steel plants, and fixing their own selling prices based upon cost of 
production and reasonable profit, assuming you could get them to use 
that process and not take advantage of the umbrella of the basing 
point? 

Mr. Loretz. I wouldn't say that our members would like to see 
additional capital out there because their relations with the Bethle- 
hem and United States Steel are generally speaking very pleasant, 
their only quarrel, you might say, with those people being that steel 
is not priced at the present time based upon its cost of production 
plus profit. 

Dr. LuBiN. I take it that your members are anxious that a price 
be set in California which will have some relationship to the cost of 
producing such steel as is made in California. 

Mr. Loretz. Yes, sir. 

Dr. LuBiN. Do you have any suggestion as to how to bring that 
about? Is there any way of bringing it about other than new 
capital coming iri and refusing to adopt that method of price determi- 
nation? 

Mr. Loretz. In about May of 1938, you will recall, the various 
steel companies led I believe by the United States Steel Corporation, 
recognized a number of producing points throughout the countrjr as 
basing points in and of themselves which had not up until that time 
been, recognized as such. I believe the only points that are not 
recognized at the present time anywhere in the country are the 
rolling mills in the Western States. If the major steel companies 
see fit now or in the future to recognize their plants out there as basing 
points, pricing their products based upon cost of production there plus a 
reasonable profit, the same as they have their plants everywhere else 
throughout the country, our situation would be considerably alleviated, 
in fact I would say that we would have no logical complaint. 



CONCENTRATION OF ECONOMIC POWER 10919 

Dr. LuBiN. But in these other instances I note from your exhibit 3/ 
irrespective of where that basing ^oint happens to be, the price happens 
to be the same, whether it be Pittsburgh or Chicago or Gary or 
Buffalo or Betlilehem or Cleveland. In other words, in case of plates, 
even Birmingham, Ala. What is the advantage of having Los 
Angeles and San Francisco made basing points if the price they are 
going to fix at those points is going to have no relationship necessarily 
to the cost of production at that particular point? 

Mr. LoRETz. Oh, I say it should have a definite relation to the cost 
of production at those points, and I have assumed that in their 
adjustments of 1938 which are reflected in the present prices and-in 
exhibit No. 3, that the costs of production at those points have been 
taken into consideration. 

Mr, Feller. The record shows only that the cost of production at 
Birmingham is probably lower than it is at other points. 

Dr. LuBiN. I still ani trying to see-^perhaps it is an unfair ques- 
tion, Mr. Loretz, but I was Vondering whether you would have any 
suggestion as to how to bring this situation about, namely, a price on 
the Pacific coast which has some relationship to the cost of production 
out there. 

Mr. Loretz. Yes; I think that should be accomplished. You are 
asking me if I know how that can be accomplished, how the steel com- 
panies can be prevailed upon to give such r^N^'-ognition to the coast? 

Dr. LuBiN. Yes. ^ 

Mr. Loretz. No; I have no suggestion to ofiFer along that line*. 
I think that lies with them. 

Acting Chairman King. You are famUiar with the steel plants 
throughout the United States in the steel industry. There is a vast 
amount of capital, is there not, invested in the steel industry? 

Mr. Loretz. Indeed there is. • 

Acting Chairman King. And the steel industry in its present 
stature, whether it is big or little, is more than adequate to supply 
all of the demands, consumptive demands of the people for many years 
to come, is it not? 

Mr. Loretz. In normal times; yes. 

Acting Chairman King. In abnormal times, any time that we have 
had since 1929, the steel plants are adequate, more than adequate, 
to supply aU of the demands of the people. Is that true? 

Mr. LoREitz. Of course at the present time as you possibly know, 
deliveries of steel are hard to get, I believe, in most sections of the 
country. Certainly that is true on the Pacific coast. 

Acting Chairman King. They are not manufacturing, are they, 
at full capacity? 

Mr. Loretz. They are pretty close to it. 

Acting Chairman King. There is much evidence here to show that 
for years they were as low as 15 percent, but they were 50 percent plus 
in some years. 

Mr. Feller. At the present time they are a little over 93 percent. 

Acting Chairman King. That is quite recent. Do you believe that 
the best economy would justify large expenditures of capital to ex- 
pand capacity larger than the demands, the domestic demands, or 
the possible or probable market might require? 

I "Exhibit No. 1441," appendix, p. 11012. 



10920 CONCENTRATION OF ECONOMIC POWER 

Mr. LoRETz. I don't feel that investment should be made or that 
new capital should be invested in new plants beyond normal con- 
sumption. 

Acting Chairman King. If you had cotton mills in California that 
manufactured raw cotton into finished products they would furnish 
employment for a large number of people but unfortunately the cotton 
is grown in the South and it wouldn't be regard as wise and economic 
that they transport the cotton by rail or by water to California or to 
Utah in order to develop the cotton manufacturing industry there. 

Mr. LoRETz. We have cotton in California and Arizona, sir. 

Acting Chairman King. Well, a very small amount. 

I think that is all. Shall we take a recess? We will recess until 
10:15 tomorrow morning. 

(Whereupon, at 4:25 p." m. the committee stood in recess untU 
10:15 a. m., Wednesday, November 15, 1939.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



WEDNESDAY, NOVEMBER 15, 1939 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 

The committee met at 10:13 a. m., pursuant to adjournment on 
Tuesday, November 14, 1939, in the Caucus Room, Senate Office 
Building, Senator William H. King, Utah, presiding. 

Present: Senator King (acting chairman) ; Representative Williams; 
Messrs. Henderson, O'Connell, Avildsen and Brackett. 

Present also: Hugh White and Miss Ellen Love, representing ttie 
Federal Trade Commission; John V. W. Reynders, representing the 
Department of Commerce; A. H. Feller, Special Assistant to the 
Attorney General; John W. Porter, Hyman Ritchin, Irving Glickfeld, 
Monroe Karasik, and Ward S. Bowman, Department of Justice. 

Acting Chairman King. The committee will be in order. Call your 
witnesses. 

Mr. Feller. I should like to make an announcement or two, Mr. 
Chairman. 

T'he staff of the Department of Justice have been preparing for some 
time a series of statistical exhibits having to do with the distribution 
and pricing of steel products. These exhibits are being prepared on 
the basis of questionnaires which were sent out to some 50 steel com- 
panies and the steel companies have very generously cooperated in 
furnishing us with this information which has involved a great deal 
of work on their part. Unfortunately, these statistics and exhibits 
are not yet ready, due to the immense task of getting up the figures. 
In the near future the Department wiU submit these analyses in the 
form of a report to the committee with an accompanying statement. 
We hope to be able to send copies of these analyses to all the companies 
in the industry insofar as that is possible, and we hope to have them 
before the industry and before the committee in such time as wiU 
enable the consideration of these analyses at the hearing in January.^ 

Acting Chairman King. It seems to me, in the hght of the state- 
ment, that the reports which may be transmitted to the various com- 
panies who have answered the queries, that the transmission should be 
at an early date, so that they wiU have an opportunity to make such 
reply as they care to. 

Mr. Feller. That is precisely what I meant, namely, that we will 
try to transmit them as soon as possible, so as to permit adequate 
opportunity for the companies to present in January such reply or 
amplification as they may think necessary. 

I should like to call, now, Mr. Bash and Mr. Schroeder. 

1 The analyses were sabsequently introdaoed as "Exhibits Nos. 2194, 2196, 2196, and 2197." See Hearings 
Part 27. 

16921 



10922 CONCENTRATION OF ECONOMIC POWER 

Acting Cliairman King. Do you solemnly swear that the testimony 
you shall give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

TESTIMONY OF S. M. BASH, MEMBER OF THE BOARD OF MANAGERS, 
THE STEEL EXPORT ASSOCIATION OF AMERICA, NEW YORK CITY, 
AND H. W. SCHROEDER, DISTRICT SALES MANAGER, NEW YORK 
OFFICE, WHEELING STEEL CORPORATION 

Mr. Bash. I do. 

Mr. ScHROEDER. I do. 

Mr. Feller. Mr. Chairman, in this hearing we have seen some- 
thing of the iron ore industry, of the general pricing policy of the 
steel industry, of the pricing policy and the competitive situation in 
relation to two product categories, tin plate, and tubes. We have 
seen something of the problems and attitude of a group of steel 
consumers. 

We now turn to another set of problems, a problem which can be 
described as the relation between the United States steel industry 
and the steel industry of the rest of the world. And the problem 
revolves about the Steel Export Association of America. 

Acting Chairman King. Mr. Bash, is that a separate organization? 

Mr. Feller. I am about to have that explained. Mr. Bash, you 
are a manager of the Steel Export Association of America, are you 
not? 

Mr. Bash. That is correct. 

Mr. Feller. And you are also vice president of the Bethlehem 
Steel Export Association? 

Mr. Bash. It is a corporation. 

Mr. Feller. Yes, I'm sorry; and the Bethlehem Steel Export Cor- 
poration is a subsidiary of the Bethlehem Steel Corporation? 

Mr. Bash. Yes, 

the steel export association of AMERICA 

Mr. Feller. Can you tell us briefly what the Steel Export Asso- 
ciation of America is? 

Mr. Bash. Yes, it is a combination of certain steel manufacturers 
of the United States who have gotten together under the auspices of 
the Webb-Pomerene Act, which was enacted, I believe, in 1918. 

Mr. Feller. Can you tell us who the members are? 

Mr. Bash. Yes. 

Mr. Feller. Which companies are members of the Steel Export 
Association? 

Mr. Bash. Armco International Corporation; Inland Steel Co. 
Jones & Laughlin Steel Corporation; The Newport Rolling Mill Co. 
Pittsburgh Steel Co., successor to the Pittsburgh Steel Products Co. 
Bepublic Steel Corporation, formerly the Republic Iron & Steel Co. 
Spang, Chalfant & Co.; Weirton Steel Co.; Wheeling Steel Corpora- 
tion; The Youngstown Sheet & Tube Co.; The United States Steel 
ExDort Co.; and the Bethlehem Steel Export Corporation. 

Mr. Feller. When was the Steel Export Association formed? 

Mr. Bash. I think around April or May of 1928. 



CONCENTRATION OF ECONOMIC POWER 10923 

Mr. Feller. And who were the original members at the time of 
the formation? 

Mr. Bash. United States Steel Products Company. The name has 
subsequently been changed to the United States Steel Export Com- 
pany and the Bethlehem Steel Export Corporation. 

Mr. Feller. The United States Steel Products Company is a 
subsidiary of the United States Steel Corporation? 

Mr. Bash. Correct. 

Mr. Feller. In other words, the Association then, was originally 
formed un'der the auspices of the United States Steel Corporation 
and the Bethlehem Steel Corporation? 

Mr. Bash. Correct. 

Mr. Feller. Mr. Chairman, in order that the Cormnittee may 
properly understand the organization of the Steel Export Association 
I think it might be well if I recalled to the Committee the terms of 
the act under which this organization was formed and is functioning. 

The act is the Webb Export Trade Act, usually known as the 
Webb-Pomerene Act. (Act of April 10, 1918, ch. 50, 40 U. S. Stats. 
516.) The pertment provisions of the^ Webb-Pomerene Act are con- 
tained in section 2 of that act and they read as follows: 

Nothing contained in the act entitled "An Act to Protect Trade and Commerce 
Against Unlawful Restraints and Monopolies" approved July 2, 1890, (that is the 
Sherman Anti-trust Act, in other words, nothing contained in the Sherman Anti- 
trust Act) shall be construed as declaring to be illegal an association entered into 
for the sole purpose of engaging in export trade and actually engaged solely in 
such export trade or an agreement made for acts done in the course of export 
trade' by such association; 

Provided such association agreement or- act is not in restraint of trade within 
the United States and is not- in restraint of the export trade of any domestic 
competitor of such association; and 

Provided further, that such association does not, either in the United States 
or elsewhere, enter into any agreement, understanding, or conspiracy or do any 
act which artificially or intentionally enhances or depresses prices within the 
United States of the class exported by such association or which substantially 
lessens competition within the United States or otherwise restrains trade therein. 

To summarize, an association formed solely for the purpose of 
engaging in export trade, or an agreement or act in the course of such 
export trade by the association is exempt from the antitrust laws, 
provided that the association agreement or act is not in restraint of 
trade within the United States, is not in restraint of the export trade 
of any domestic competitor of the association, and provides further 
that the association does not enter into any agreement, conspiracy or 
understanding, or do any act which artificially enhances or depresses 
prices within the United States, or substantially lessens competition 
within the United States. 

I should like to offer for the record, Mr. Chairman, to be placed on 
file but not to be printed, the articles of association of the Steel Export 
Association of America. 

Acting Chairman King. It may be admitted. 

(The document referred to was marked "Exhibit No. 1444" and is 
on file with the committee.) 

Acting Chairman King. Formed in 1920? 

Mr. Feller. Formed in 1928, sir. 

Acting Chairman King. May I inquire of the witness, was there not 
a preliminary organization, or a corporation perhaps cf a different 
character, formed prior to 1928 under the Webb-Pomerenu A<^t? 



10924 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. Yes ; but not with the United States Steel and Bethlehem 
as members. There was a combination known as the Consolidated 
Steel Co., which was formed, I think, during 1918, which was made up 
of, I think, 11 individual steel companies in this country, and that 
organization carried through until the latter part of 1922. 

Acting Chairman King. 'Twenty-two? Then what became of that 
organization? 

Mr. Bash. They went out of business. 

Acting Chairman King. It was not merged with the 1928 organi- 
zation? 

Mr. Bash. Not in any way. 

Acting Chairman King. Then there was a hiatus between '22 and 
'28. 

Mr. Bash. I might add that the Bethlehem Steel Co. was one of the 
members of ConsoHdated Steel Co., and when that disbanded Beth- 
lehem formed the Bethelehem Steel Export Corporation to handle 
their foreign business. 

Mr. Feller. I should like to go very briefly into the history of 
the Steel Export Association. Could you teU us what its general 
purpose is? 

Mr. Bash. Yes, sir; its general purpose was to allow 

Acting Chairman King (interposing). Pardon me. Have you a 
copy of their charter? 

Mr. Feller. The Articles of Association would state that. 

Acting Chairman King. They would state the purpose. 

Mr. Feller. Yes. 

Mr. Bash. I think I might go back a Uttle before the orga':.ization 
of the Steel Export Association of America, to at least give the 
committee some idea of the conditions^ that were prevailing, -ir.der 
which we had to operate, so that you might be able to form a picture 
and I am sure you will draw the conclusion it was advantageous 
under the enactment of the Webb-Pomerene Act. Prior to the forma- 
tion of the Steel Export Association of America, we were not allowed 
to agree to prices with the various steel manufacturers in this country 
insofar as export trade was concerned, likewise with Europe, in view 
of the fact that it was contrary to the Sherman Act. Consequently, 
every steel company operated separately and independently. Our 
competitors were, in this country, our competitors in Europe. 

We naturally, from our viewpoint, were at a considerable disad- 
vantage, one point being that Europe was operated as a unit. They 
had, we will say, 12 competitors in the United States to contend with; 
we had those 12 competitors plus all of the rest of the world msofar as 
they w^re manufacturing steel. Therefore, when the Webb-Pomerene 
Act was enacted, it was the natural consequence, in view of the very 
severe competitioD that we had to contend with 

Acting Chairman King (interposing). You mean foreign competi- 
tion? 

Mr. Bash. Foreign competition, from the standpoint of lower labor 
costs, likewise the standpoint that the various governments of Europe 
were granting subsidies, help from the standpoint of finaiice, and 
giving all the possible help that they could to build up their export 
business. 

I don't know whether it is appreciated, but some of the countries 
in Europe are dependent upon, must have, export trade, or die. We 



CONCENTRATION OF ECONOMIC POWER 10925 

will take, for instance, in England — take a commodity like tin plate, 
and take sucb a commodity as tubes. I think that you will find that 
their export business would run anywhere between 35 and 55 percent 
of their production in those items. 

Then we will go over to Belgium, to Luxemburg, whose production 
is much in excess of their home requirements, so necessarily that 
builds up the most severe competition that can be imagined. 

When the Webb-Pomerene Act was enacted we formed, that is the 
Steel Export Association formed, an association which would allow 
us to get together and establish prices, to divide the world's business 
amongst ourselves and if possible if we could arrange it, with Europe. 

Acting Chairman King. When you say the world's business you 
exclude the United States. 

Mr. Bash. I am talking foreign, entirely, throughout. Naturally 
we took advantage of that. It eliminated a lot of useless, wasteless 
competition, as we view it, and in addition to that it allowed us to 
talk to Europe or to talk with the European manufacturers as a unit 
rather than to attempt to do it as separate units or rather separate 
individual companies. 

Mr. Feller. Mr. Bash, I am going to 

Mr. Bash. I didn't quite finish. 

Mr. Feller. Go ahead. 

Mr. Bash. I am glad to say that since the enactment of the Webb- 
Pomerene Act we have been successful in forming various arrange- 
ments with Europe which enabled us to secure what we thought was 
a fair price and a fair — I won't say fair, an excellent percentage of the 
world's business based on our performance in previous years and which 
after all must be the yardstick foi: determination of course. 

Mr. Henderson. When you say arrangement with Europe, did 
you make that arrangement through the cartel? 

Mr. Bash. Absolutely. I am only speaking of the Steel Export 
Association of America. 

Mr. Henderson. You say this excellent percentage of foreign 
business you have must of course be based upon performance in the 
past. Do you mean as to what the volume of American business 

Mr. Bash (interposing). In open competition. 

Mr. Henderson. Has been in the past? 

Mr, Bash. Yes, sir. 

Mr. Henderson. That runs, may I point out, directly different 
from the policy so far as competition for business in this country is 
concerned. Testimony by witnesses yesterday and by Mr. Fairless 
is to the effect that the proper ratio is a ratio of capacity. 

Mr. Bash. Well, that might apply to domestic business but insofar 
as export business is concerned, we may have a tremendous capacity 
in a certain commodity, but if we don't use it, naturally we can't 
expect the other fellow to give us something just because we have 
got the capacity. 

Mr. Henderson. No ; vou can't expect him to 

Mr. Bash (interposing). And I don't know any sound argument as 
to why vou should have it. 

Mr. Henderson. How about the sound argument about gomg 
out and getting it? . i • i j-j 

Mr. Bash. We had our turn. We had our time m which we did 
that to the best of our ability. 



10926 CONCENTRATION OF ECONOMIC POWER 

Mr. Henderson. You mean you think we are past that time? 

Mr. Bash. Well, I won't say that we are past that time. In free 
competition no one can tell what the result will be, and I certainly 
don't think that we have any advantage over Europeans. In open 
competition I think it is just to the contrary. 

Acting Chairman King. Mr. Feller will develop it. 

Mr. Feller. I am coming back to the matter of purposes of the 
Association. I should like to develop at this point the agreements 
with the foreign concern to which you had reference at the end of your 
exposition a moment ago. Could you tell us which were the principal 
agreements between the Steel Export Association and the foreign 
cartel? 

Mr. Bash. Yes; we had an agreement which is no longer existent 
on pipe. 

Mr. Feller. By the, way, I wonder if you could tell us in a rough 
chronological order. 

Mr. Bash. I don't know as I could remember that. I believe that 
the first one was tinplate. 

Mr. Feller. Do you remember what that was? 

]^r. Bash. Yes; here they are, the whole list of them. There was 
the oil agreement. 

Mr. Feller. What agreement? 

Mr. Bash. Oil agreement. 

Mr. Feller. Oil country goods? 

Mr. Bash. Yes; it was in effect from July 6, 1928, to March 31, 1933. 
It was superseded by another agreement as of December 17, 1928, 
which carried on to March 31, 1935, and we also had running along 
that same period of time an agreement known as the General Export 
Agreement which covered merchant tubular products. A part of that 
agreement was a subagreement or supplemental agreement; the 
duration for South Africa was apphed to pipe, which apparently ran 
from April 13, 1929, possibly December 17, 1928 (I haven't the exact 
date) to March 31, 1935. In other words, the three of them tied in to- 
gether. Along with that was an agreement which tied in with the 
pipe agreements known as the Swedish tube agreement, and the dura- 
tion of that was frofn December 13, 1928, to March 1, 1930, and 
there was a British domestic market agreement applicable to pipe hke- 
wise, which was supplemental to the oil-country agreement and the 
general-export agreement, the duration of which was from May 1, 
1929, to March 31, 1935. 

Mr. Henderson. Is that the British- American agreement? 

Mr. Bash. That was the British domestic market. 

Acting Chairman King. Mr. Feller, I assume that there were 
intercorporate (if I may view all these organizations as one cor- 
poration) agreements, that is to say two or three of the exporters 
might have an agreement with South Africa, but not all of them. 

Mr. Feller. I am going to develop that. 

Acting Chairman King. I didn't want to interfere with the witness. 

Mr. Bash. May I answer that? In that respect all agreements 
were consummated by the Steel Export Association of America. Now 
the Steel Association of America consisted of various members who 
were in various groups. If they manufactured one product it would 
be in that group but not necessarily in another group. 



CONCENTRATION OF ECONOMIC POWER 10927 

Acting Chairman King. Any member of the group might avail 
itself oi the terms of any agreements negotiated by the parent 
organization. 

Mr. Bash. Yes, sir; he could apply. 

Mr. Feller. Senator, there are also, of course, accompanying these 
agreements with the foreigners — there would necessarily have to be-^ 
some arrangements witliin the members of the Association as to the 
division of the quota. 

Mr. Bash. Yes, sir. 

Mr. Feller. I wonder if you would go on with the agreements. 
I think it would be useful for the record to have a hst of them 

Mr. Bash. These various agreements which I mentioned here ex- 
pired in 1935, much to our sorrow. It was at the end or the expiration 
of these agreements that the Europeans gave notice that they did not 
wish to continue, due, I think, primarily to the fact that they weren't 
getting along too weU with their agreements in their domestic markets. 
We prevailed upon- them to the best of our ability to continue. 
Notwithstanding that, at the expiration of the agreements they were 
not renewed. 

Mr. Henderson. Mr. Bash, may I ask there which countries prin- 
cipally denounced the agreements? 

Mr. Bash. The fight, if you term it such, was primarily between 
Germany and France. 

Mr. Henderson. And that revolved around the ownership of the 
Saar properties? 

Mr. Bash. I think that had quite a bit to do with it, to what extent 
I don't know. 

Acting Chairman King. The Americans didn't denounce it? 

Mr. Bash. Absolutely not. We did all we could to retain it. Since 
that time we have been endeavoring to reformulate the pipe agreement. 
We have had, with Europe, sort of an informal oral understanding — 
what I mean by informal is that it wasn't subject to quotas and penal- 
ties. We were both maintaining prices with the hope and endeavor 
that by doing so we could convince them that the other side of the 
agreement should be reformed. 

Following on that was the Welsh tin-plate agreement, which ran 
from October 1, 1928, to September 30, 1931. 

Mr. Henderson. Did the Welsh denounce that? 

Mr. Bash. Yes; they did, at its expiration, I think principally, and 
the only reason that I know of, because England had gone off gold, 
and I don't think I have to add anything to that. 

Acting Chairman King. That upset their economy. 

Mr. Bash. It upset ours likewise, to the extent that our tin-plate 
export trade shrunk very, very drastically. 

The first international tin-plate agreement, which by its terms was 
in effect from July 1, 1934, to June 30, 1937, was superseded by a 
second international tin-plate agreement, the duration of which was 
for the same period, July 1, 1934, to June 30, 1937. 

Acting Chairman King. I beg pardon for interrupting, but were 
all of those agreements of short duration? 

Mr. Bash. Yes. 

Acting Chairman King. They didn't extend over, say. 10 or 15 
years? 

124491 — 40— pt. 20 13 



10928 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. Oh, nothing like that. I think the maximum was 
probably 2 or 3 years. 

Acting Chairman King. Was the objection to a longer period from 
abroad or from home? 

Mr. Bash. Well, I think it was both. 

Mr. Fellee. You mentioned the international tin plate. 

Mr. Bash. Yes; this agreement was supplemental to the first inter- 
national tin plate. I thmk I have read that. It was superseded by 
the second supplemental tin-plate agreement with the British, the dura- 
tion of which was for the same period, July 1, 1934, to June 30, 1937. 
Then there was a supplemental tin-plate agreement with the Nor- 
wegians. This agreement was supplemental to the first iuternational 
tin-plate agreement. Its duration was for the period October 17, 

1934, to Jime 30, 1937. The time during which it was to be in effect 
was subsequently extended to June 30, 1938. The second iuterna- 
tional tiu-plate agreement, by its term the duration of this agreement 
was July 1, 1934, to June 30, 1937, which likewise was amended or 
was extended to June 30, 1938. 

The second international tiu-plate agreement with the British is 
supplemental to the second iuternational tiu plate. By its terms its 
duration likewise was from July 1, 1934, to June 30, 1937. The time 
during which it was to be in effect was extended to June 30, 1938. 

Then there was a proposed international tin-plate agreement which 
was to run from June 26, 1938, to June 30, 1941, which had never 
been signed as some of the details were stUl to be worked out, and of 
course with the war it never has been signed. 

Then there was the first interiiational rail agreement, the duration 
of which was from April 1, 1929 to March 31, 1935, which was sub- 
sequently extended to August 1, 1935. Then follows the second 
international agreement, the duration of which was from August 1, 

1935, to July 31, 1940, which was superseded by a third international 
raU agreement, the duration of which was the same period, August 1, 
1935, to July 31, 1940. 

Tentative agreements, however, were in negotiation with regard 
to heavy products and sheet products. "Heavy products" was -the 
term used to cover a number of products, namely, bars, plates, shapes, 
wire rods, semifinished material — I think that was all; and the sheet 
agreement covered hoops and strips, black and galvanized sheets. 

Mr. Feller. When were these tentative agreements? 

Mr. Bash. Proposed, originally started? 

Mr. Feller. Yes. 

Mr. Bash. During the early part, in fact February, of 1937 the 
Steel Export Association sent representatives to London, of which I 
was one, to endeavor to negotiate agreements on the products I had 
mentioned, if possible, providing of course the quotas and conditions 
were satisfactory. 

The representatives of the association came to agreement insofar as 
a proposed agreement was concerned on behalf of the American steel 
producers, with the distinct, definite understanding that it was not 
to go into effect until groups were formed insofar as the products were 
concerned. 

Acting Chairman King. Groups in the United States? 

Mr.* Bash. Yes. 



CONCENTRATION OF ECONOMIC POWER 10929 

Mr. Feller. When was that proposed agreement reached? 

Mr. Bash. February 1937. 

Mr. Feller. Does that conclude the agreements? 

Mr. Bash. Yes, su-; up to date, insofar as agreements and proposed 
agreements are concerned. 

Mr. Henderson. May I have again the products that were in the 
February 1937 agreement? 

Mr. Bash. Yes. From memory, thej were bars, plates, structural 
shapes, wire rods; semifinished matenal, which consists of billets, 
blooms, sheet bars and so forth. I think that is all. And that came 
under the heading of the group known as the heavies. I missed one 
commodity there — skelp. 

The sheet agreement covered hoops, strip, cold-roUed, black sheets, 
and galvanized sheets. 

Mr. Feller. Did it cover. hot-rolled? 

Mr. Bash. Oh, yes; hot-rolled and cold-rolled. 

Mr. Feller. Mr. Bash, I should like to have just a general sketch 
of a typical agreement so that the committee can understand what an 
agreement consists of. 

The agreements, Mr. Bash — is this correct? — dealt primarily with 
the system for fixing quotas and the system for fixing prices. Is that 
correct? 

Mr. Bash. Yes, sir. 

Mr. Feller. Did the agreements contain in them the quotas them- 
selves, or were the quotas to be determined later? 

Mr. Bash. No; the agreements included either the agreement or 
proposed agreement. The first determination was the quotas, and 
those agreements stated what the quotas were, insofar as America 
was concerned, and all of the other participants. 

Mr. Feller. And those quotas would be in percentage of total 
world business? 

Mr. Bash. Yes; and possibly in some instances in tonnage, gen- 
erally percentage. 

Mr. Feller. How about price? How was that determined? 

Mr. Bash. Price was determined based on general conditions, cir- 
cumstances, and some competition.. 

Mr. Feller. And by whom was that price determined? 

Mr. Bash. It was determined by the committees — I am speaking 
now insofar as the Steel Export Association is concerned — which were 
formed in various groups in the Steel Export Association. They made 
their recommendations to the board of managers, who subsequently 
came to agreement with the European members of the agreement. 

Mr. Feller. The general system, then, is, the agreement sets forth 
the percentage of the world business that each group, each national 
group, is entitled to, and then sets up an organ, a committee, which 
makes recommendations with respect to the price at which those 
exported commodities are to be sold. 

Mr. Bash. Yes. 

Acting Chairman King. Were the foreign prices' based upon the 
same level as the prices to be charged by the American producer? 

Mr. Bash. Yes, sir; the prices were identical, or supposed to be 
identical. 

Acting Chairman King. And the various forms of money of the 
respective coim tries would be adjusted with respect to that price. 



10930 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. That was all taken into consideration. We will take 
a commoditjr, for instance, as tin plate. On tin plate the prices were 
named in this manner: We divided up the world and said that this 
part of the world is American influence, based on past business, where 
we received most of our business in the past in open competition.. 
The rest of the worid came under European influence. We tried 
not to disturb the manner of doing business in the various markets 
in the past, and if we went into, for instance, the European sphere of 
influence, with the old practice of quoting sterling, we quote our prices 
in steriing. 

In South America, for instance, which we thought presented our 
sphere of influence, the Europeans were supposed to quote their 
prices in dollars. 

Acting Chairman King. Gold and sterling, then, were interchange- 
ably used as the base of computation and if there was a difference in 
price between gold and sterling — that is, as a base — the prices were 
arranged with reference to those differentials? 

Mr. Bash. The idea was that we should both start out on equal 
prices until a position had been established, excess or deficit. 

Mr. -Feller. The agreements required, did they not, that each 
party to the agreement, each national group and members of those 
groups, comply with the prices determined by the committee? 

Mr. Bash. You say why they did not? 

Mr. Feller. No; I say the agreements did so provide. 

Mr. Bash. That the price was to be determined. 

Mr. Feller. And each party was bound to sell at that price? 

Mr. Bash. That is right. Oh, wait — you were allowed to sell 
below that price if you were in deficit. 

Mr. Feller. Yes? 

Mr. Bash. So that you could establish — well, if I was in deficit 
I naturally would ask for some preferences if I couldn't sell it at the 
price, so as to make up mydeficit position. 

Mr. Feller. Yes; I think perhaps it would be helpful to the 
committee if you could just very briefly sketch out this system of 
deficits and penalties — I believe that is one of the words you use. 

Acting Chairman King. You called it "deficit" instead of "in the 
red." 

Mr. Bash. No; it was deficit in tonnage. 

Acting Chairman King. You would be "in the red" then in meas- 
uring up your allotments. 

Mr. Bash. That is right. We, as well as the European members 
of these agreements, reported in to a central organization our 
figures of 

Mr. Feller (interposing). That was in London? 

Mr. Bash. Yes; ours, as well as their fibres of sales and shipments 
for a given period. They were put together and naturally from that, 
by the application of the percentages, it was easily determined as to 
whether Or not a member country was in excess or deficit. If there 
was a slight excess or a slight deficit, nobody was concerned particu- 
larly about it; we let it run for a reasonable length of time with the 
idea and effort of adjusting without disturbing market conditions. 

Mr. Feller. If there were a substantial deficit what happened? 
Just t'o make it clear to the committee, the deficit would mean if the 



CONCENTRATION OF ECONOMIC POWER 10931 

American group, for example, had a quota of 100,000 tons and sold 
80,000 tons, they would be 20,000 tons in deficit. What would 
happen then? 

Mr. Bash, i tJimk probably the best illustration would be to cite 
an instance. In the first tin plate agreement we became in very 
serious deficit. We complained; the Europeans did their utmost to 
assist us. In fact, the British went so far as to place a tonnage with 
us to rectify our deficit position. 

Acting Cnairman King. The deficit wasn't caused by the Europeans* 
overselling m markets which ought to have gone to the American 
producers? 

Mr. Bash. No, Mr. Senator; we had no division as to participations 
in particular markets. We could roam the world and so could the 
other fellow, but naturally our idea would be to seU in markets which 
would mean the most to us in return and for future relations. 

Mr. Feller. May I ask you this question at this point: You use 
the expression "roam the world." There were some markets in which 
you couldn't sell? 

Mr. Bash. The only markets in which we had agreed not to sell 
were the home markets of the Europeans. 

Mr. Feller. In other words, you could not sell at all in Germany, 
France, Great Britain. 

Mr. Bash. Not unless we had a prior agreement. 

Mr. Feller. Yes, Belgium and some of the others. 

Mr. Bash. Yes; some of them provided for certain shipments into 
member countries who were participants of the agreement. 

Mr. Feller. And some provided, in the word of the agreement, 
that some markets were sacrosanct. No other party to the agree- 
ments could import. 

Mr. Bash. Except into the United States. 

Acting Chairman King. Do those agreements contemplate or pro- 
vide that where tarifl's interfere with exports and imports there would 
be an adjustment of the tariffs? 

Mr. Bash. It didn't touch or make any reference to tariffs in any 
shape or form. 

Mr. Feller. What happens when a party to one of these agree- 
ments is in excess of the quota? 

Mr. Bash. He paid a penalty. He had accounting periods which 
ran for say a year or maybe 2 years, and if at the end of that 
period when the books were closed he was in excess, he piaid a penalty 
to us, or we paid a penalty to him of an amount which had been 
predetermined. 

Acting Chairman King. Based on profits? 

Mr. Bash. No, sir; based on our getting too much or too little of 
the business in an effort to see that there wasn't any inducement for 
a man to exceed his quota. 

Acting Chairman King. Suppose an allocation to A company was 
50,000 tons in Argentina, and 

Mr. Bash (interposing). That couldn't be. We had no specific 
countries in which there was a quota for that country. 

Acting Chairman King. Suppose there was a quota for A company 
and none of the companies exceeded or came up to their quota, would 
A company, which was competent to supply the demands of the 



10932 CONCENTRATION OF ECONOMIC POWER 

market, b e permitted to sell, without being penalized, in excess of the 
quota? 

Mr. Bash. No, sir, any member country who sold in excess of the 
quota, no matter what the cost, was subject to penalty. 

Acting Chairman King. Even though he was importuned to make 
such sale and to fill the requisition by those who were in the group? 

Mr. Bash. That is right. 

Mr. AviLDSEN. Are you talking about a steel company or a group? 

Mr. Bash. I understood he was talking about it as a member. 

Acting Chairman King. No: a group. 

Mr. Hendeeson. He is talking about the members of the Export 
Association here, not about the members of the agreement. Do they 
sell trade quotas one against another? 

Mr. Bash. If any member sold in excess of his quota he would be 
responsible to the Association for exceeding his quota and, necessarily, 
if the Association had to pay a penalty brought about by his excess 
sale, he would be expected to pay that international penalty through 
the Association. 

THE PROBLEM OF NON-MEMBERS' SHIPMENTS 

Mr. Feller. Now, Mr. Bash, to clarify this further, let us take the 
case of the United States. 

As I understand it, while a number of producers of steel are members 
of your association, affiliated in some of these groups, there are other 
producers of steel who have no connection with the association. Now 
suppose there were a tonnage of 100,000 tons allocated to the American 
group and the member of the group exported that amount but steel 
producers in the United States who were not members of the group — 
I believe the term is "outsiders." 

Mr. Bash. I think the proper expression would be "nonmembers." 
Although the term "outsiders" has been used. 

Mr. Fellee. Yes. Now suppose these American nonmembers also 
exported steel so that the total exports from the United States were 
substantially in excess of 100,000 tons. What happens then? 

Mr. Bash. Well unfortunately, or fortunately, when we agreed to 
international quotas, our quota was arrived at by the utilization of all 
of the exports from the United States, irrespective of who made the 
shipment. Now coming back to your specific question, as I say, we 
have based on that, naturally, by the utilization of those figures we had 
to assume responsibility for the exports of all steel from the United 
States, regardless of who made it. liikewise the Europeans assumed 
the same responsibility. 

Probably the question you are asking now is, why did you assume 
that responsibility? 

Mr. Feller. No. At the moment I am just trying to elaborate 
the mechanics. I take it, then, that in a situation that I have outlined 
the members of the Steel Export Association of America would be 
required to pay a penalty on overshipments, the excess shipments 
which were made by the nonmembers. 

Mr. Bash. Exactly. 

Mr. Fellee. You were about to state why. 

Mr. Bash. With regard to why we assumed the responsibility, I 
think it was a reasonable responsibility assumed since our quotas 



CONCENTRATION OF ECONOMIC POWER 10933 

were based on that performance, wdth the distinct understanding that 
the members of the agreement would be, at all times, competitive. 

Mr. Henderson. May I ask a question there? But the other 
participants in the agreement didn't have as many outsiders in their 
respective countries as the Export Association, did they? 

Mr. Bash. I don't think they did. 

Mr. Henderson. There are compulsory cartels in some of the 
participating countries and consequently a smaller percentage of 
outsiders. When you entered into the last ones the British had 
already come together into confederation. 

• Mr. Bash. That is right, and in assuming that responsibility, I 
think we made a natural assumption that being competitive it would 
be possible for us — that is, the people who had built up the business — 
to retain comparatively the same amount of business as we had had 
before. 

Mr. Henderson. In these other countries, an outsider couldn't 
get a license to export unless the Government sanctioned it. 

Mr. Bash. I don't think that is correct. 

Mr. Henderson. In Germany it was. I know the British ap- 
proached it certainly. 

Mr. Bash. But it certainly isn't true so far as France is concerned. 

Mr. Henderson. But it was injBelgium and in Luxemburg. 

Mr. Bash. Possibly, I don't know, but I do know that insofar as 
France is concerned, there were exporters other than those in the car- 
tel, to a small degree. 

Acting Chairman King. They had a good deal of independence 
there and competition in Jugoslavia and Rumania. 

Mr. Bash. We were never disturbed by Rumania. 

Mr. Henderson. Poland was a big question, was it not? 

Mr. Bash. Poland created no disturbance. 

Mr. Feller. Now to complete the general outline of the form of 
these agreements I should like to read for the record what I might 
refer to as the United States clause, which I take it was incorporated 
in each agreement, special reference to the American market. 

Mr. Bash. I think I would be very pleased to put that in: 

Mr. Feller. I am reading here from the Rail Agreement, August 
1, 1937; clause 1-D reads as follows: 

It IS understood that the Steel Export Association of America (hereinafter re- 
ferred to as the American Group) is an association constituted under an Act of 
Congress of the United States of America approved April 10, 1918, and entitled 
"An Act to Promote Export Trade and For Other Purposes" commonly known as 
the Export Trade Act. As used in this paragraph the term "United States" shall 
have the meaning given in the Export Trade Act. Materials sold in the United 
States other than for export and sold for export to the United States shall not be 
covered by this agreement, and this agreement shall not be construed as in any 
way referring to trade in materials so sold and shall not be allowed directly or in- 
directly to restrain trade within the United States or the export trade of any domes- 
tic competitor of the American group or to enhance or depress prices of such ma- 
terial or to lessen competition therein .within the United States. 

In other words, in each of your agreements there is incorporated 
expressly what, in effect, is a paraphrase of section 2 of the Webb Fy- 
port Act? 

Mr. Bash. Yes, sir. 

Mr. Feller. I should like to go back now to the questions which 
we started in this discussion, namely, the purposes of the Association, 
the purposes of these agreements which the Association had entered 



i0934 CONCENTRATION OF ECONOMIC POWER 

into with the foreign cartel. I would like to put you this situation 
and I would like to take a specific situation. In 1937 the United 
States was a large exporter of steel, was it not? 

Mr. Bash. Yes; that was an exceptional year. A lot of business 
was diverted to this country due to the particularly heavy activity 
in Europe when they were unable to supply their requirements. 

Acting Chairman King. All commodities or steel? 

Mr. Bash. Steel. 

Mr. Feller. And 1937 was also generally speaking quite a good 
year for domestic steel production in the Umted States. 

Mr. Bash. I think it was, part of the year. 

Mr. Feller. Yes, Now in 1938, early in 1938, these various 
agreements that you had with respect to heavy steel and sheets came 
into force, did they? 

Mr. Bash. Yes; the latter part of the year. 

Mr. Feller. And in the year 1938 the steel exports from the 
United States were substantially below what they were in 1937. 

Mr. Bash. Very considerably below. 

Mr. Feller. The problem I want to put to you is this. Here we 
had 1937, a year which, generally speakmg, was one of good business 
for the United States domestic producers. At the same time the 
United States domestic producers exported a good deal of material. 
In' 1938, business was generally speaking pretty bad m the United 
States. Wouldn't one way to have smoothed out this curve of high 
production in 1937, generally speaking, and low production, generally 
speaking, in 1938, have been for the American producer to have m- 
tensified his efforts to export m 1938? In other words, shouldn't the 
export pohcy of the American producers be to attempt to use exports 
as a compensating mechanism wherever possible to take up the slack 
which domestic business condition may bring about? 

Mr. Bash. Possibly; provided you are able to stand the gaff. 

Mr. Feller. Well, you were able to stand the gaff in 1937. 

Mr. Bash. We were. There wasn't any competition. 

Mr. Feller. Was the foreign situation in 1938 very different from 
1937? 

Mr. Bash. Very materially. Europe back in the market were 
operating in the early part, other than England, I think possibly on 
the basis of 40 to 50 percent of capacity. 

Acting Chairman King. You mean '38? 

Mr. Bash. Yes. 

Acting Chairman King. You said '37. 

Mr. Bash. I am sorry; '38. 

Mr. Feller. Part of the reason of the high demand for steel in 
1937 were the rearmament efforts. 

Mr. Bash. That -is what it has been attributed to. I am not sure 
that in major portion it was attributable to that. 

Mi*. Feller. In 1938 the rearmament efforts were continued, 
weren't they? 

Mr. Bash. Yes. That is why I say i am not so sure the increase 
in armaments contributed in major portion to increasing productivity 
of Europe. 

Mr. Feller. I am coming to this point. This is reaUy my question: 
Taking the end of 1937, during a period when you were negotiating 



CONCENTRATION OF ECONOMIC POWER 10935 

these heavy steel and sheet agreements, weren't the American pro- 
ducers deliberately by virtue of these agreements placing themselves 
in the position where they could not follow this desirable policy of 
expanding exports in order to take up the slack which was inevitable 
in 1938? 

Mr. Bash. Mr. Feller, I don't think you can look at it and single 
out any one year as an over-all policy. As I have mentioned before, 
the competition, open competition, prior to the time that we had 
agreements with Europe, was in a number of products ruinous and 
m the rest of them they certainly weren't anything to boast about 
insofar as our participation is concerned, looking at it over a period of 
years. What we were trying to do when we formed these agreements 
was at least to preserve and with the hope that by operating as a 
unit similar to Europe we would be able to increase our participation 
in the world's market, certainly at least to maintain what we had had. 
Our agreements were predicated, insofar as we were concerned, on 
the year 1936 as the reference period, whereas in agreements amongst 
the Europeans they used the year 1934 as the reference period and 
insisted that we use that year, which we absolutely refused, in view 
of the fact that it would give us quite a bit of tonnage less than 1936 
would give us. 

Acting Chairman King. Well, in 1938 did your group relax its 
efforts to find foreign markets and to obtain sale for the commodities 
which, under the quotas, members of the group were authorized to do? 

Mr. Bash. No, we did not. We endeavored at all times to maintain 
our quotas, and I think that the records will show that we not only 
maintain them in 1938, but far exceeded them. 

Acting Chairman King. Did you sell more steel in the aggregate in 
1938 than in '37? 

Mr. Bash. No, sir; nowhere near as much. 

Acting Chairman King. Was it your own fault? 

Mr. Bash. No, sir; we had an entirely different situation. In 1937 
it was a seller's market. 

Mr. Feller. Well, coming back to something which you have just 
said, and something you have referred to on several occasions, the 
fact that Europe acts as a unit. You referred to the fact that the 
European producers could sell in the market at a lower price. 1 take 
it, the theor\" also is if the American producers come together as a 
unit, they can receive a better bargain from the Europeans, or just 
what is the theory? 

Mr. Bash. Absolutely. There is no question about as a imit we 
can bargain a lot better than individual companies. 

Mr. Feller. Why should the European producers bargain? If 
they are in a poFition where they are hungry for exports. As you 
yourself ?aid, they must export or die. They have, generally speak- 
ing, lower labor costs. Why should they be willing to enter into an 
agreement with you under which they permit you to participate in 
the market? 

Mr. Bash. I assume for the same reason we entered into it, and 
that is to get a fair return, a reasonable return, and not have to sell at 
ridiculous prices brought about by competition. 

Mr. Feller. In other words, the essential philosophy behind this is 
price stabihzation through agreement, because if you don't have that, 
competition will drive price to ruinously low levels. 



10936 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. Yes, and has driven us out of the markets, for periods. 

Mr. Feller. One of the things I have difficulty in understanding in 
connection with the operation of such a system is just where the differ- 
ence hes between the foreign market and the domestic American 
market. I mean, would you say, from your experience, in the opera- 
tion of this system, that it is one which we ought to adopt in the 
United States as among our own domestic producers? 

Mr. Bash. No, sir, I can't answer that at all. I know nothing about 
the domestic business. Aly efforts and entire business career have 
been in the export field, and I wouldn't attempt to conmient insofar as 
the domestic situation is concerned. 

Acting Chairman King. Does the question of exchange cut any 
figure in these transactions? That is to say, it is evident that some 
companies want exchange so that they may pay obligations in foreign 
countries, or obtain commodities wliich they greatly need in foreign 
countries. And they haven't the gold with w^hich to make payments, 
and therefore they have got to get exchange, and they get that 
exchange by selling and by receiving. 

Mr. Bash. To the only extent that I can recall that that has en- 
tered into it, that has been, as I say, in a smali portion, the barter 
system in Germany. 

Mr. AviLDSEN. Mr. Bash, I understand that at the time the Webb- 
Pomerene Act was passed the Congress made quite an extensive in- 
vestigation into the export situation, that the Interstate Commerce 
Committee of the Senate held hearings on it, and so forth. Are you 
familiar with their report to the Congress? 

Mr. Bash. Well, I have an extract from the report of the Com- 
mittee on Interstate Commerce of the Senate dated August 15, 1917, 
relating to the Export Trade Act, which I would hke to read. It 
says: 

The Federal Trade Commission, in a summary of a report made May 2, 1916,* 
points out the liberality, with which foreign and particularly European nations 
permit organizations or combinations with respect to their foreign trade. This 
is the common practice in Germany, England, France, Italy, Austria-Hungary, 
Switzerland, Holland, Sweden, and Belgium, as well as in Japan. In Germany 
alone prior to the beginning of the European War there were 600 important 
cartels or combinations embracing nearly every manufacturing and commercial 
industry in the Empire. Many of these organizations devoted themselves largely 
to the export trade, and they "carried on vigorous campaigns to extend their 
foreign business, to prevent competition" — 

I think this is worth noting — 

"among German producerB in foreign markets and to secure profitable prices." 

Acting Chairman King. May I say that there was a very exhaus- 
tive investigation made by the Senate Committee on Interetate Com- 
rnerce of the Senate, and Senator Pomerene, who as I recall was 
chairman---I happened to be in the Senate at that time — made a 
number of very comprehensive addresses in the Senate explaining it, 
and giving the reasons why he and his committee recommended the 
enactment of the law. 

Mr. Henderson. I might say, Senator, too, that Dr. Francis 
Walker, new Chief Economist of the Federal Trade Commission, has 
made himself especially familiar with the European cartel arrange- 
ments upon which this was based, 

' Federal Trade Commission report on cooperation in export trade. 



CONCENTRATION OP ECONOMIC POWER 10937 

Mr. Bash. I didn't quite finish. I wanted to add: 

Since the beginning of the European war the Allies have even organized buy- 
ing agencies for the benefit of their governments and their people. Our naer- 
chants and manufacturers must meet this situation. Very few of them can 
compete singlehanded with these great combinations. Our belief 'is that it is 
necessarj' to permit our businessmen to form similar organizations or associa- 
tions so as to enable them to meet foreign competitors on a more equal footing. 
In this way they will be able to reduce the selling cost and keep in closer touch 
with the demands of thfe foreign markets. 

Acting Chairman King. Mr. Feller, there is one phase that you 
interrogated the witness concerning which I am not quite clear on, if I 
may be pennitted. 

Mr. Feller. Please do. 

Acting Chairman King. I do not quite understand the deductions 
to be drawn from your statement as to the reason why, in 1938, you 
did not sell as many products as in 1937. 

Mr. Bash, First of all there wasn't the demand in foreign trade. 

Acting Chairman King. Was the competition fiercer? 

Mr. Bash. No, sir; we had arrangements, agreements, but there 
wasn't the demand, and the total world exports, in 1938, were not as 
great as they were in 1937. 

Acting Chairman King. Then as I understand you, the demands 
for steel in the markets which we had secured entrance into, were very 
much less in 1938 than in 1937. 

Mr. Bash. Very considerably less. 

Acting Chairman King. Is that the only reason why you did not 
sell more in 1938? 

Mr. Bash. Yes; that is the only reason. If there had been more 
we would have sold more. Our quota would have given us more 
tonnage. 

Acting Chairman King. By reason of the reduced demands or the 
aimin'shed demands in '38, was that brought about by reason of the 
intense competition, or simply because the market didn't require it? 

Mr. Bash. I think it was primarily because the market didn't 
require it, it had been filled up, they had bought a lot of tonnage in 
anticipation during 1937. 

Mr. O'CoNNELL. I understand that under the quota arrangement 
your organization was entitled to as large a portion of the world busi- 
ness as it received and was entitled to receive in 1937? 

Mr. Bash. No, sir; the reference year on which our quota was 
based was the year 1936. 

Mr. Feller. In 1936 the exports were substantially below 1937? 

Mr. Bash. Quite so ; but that was the highest year for quite a few 
years. 

Representative Williams, Did you have & deficit in 1938 below 
your quota? 

Mr. Bash. No, sir; just to the contrary. We were in excess. 

Representative Williams. Was that true of the other nations? 

Mr. Bash. No; if we were in excess they were in deficit, of course 

Representative Williams. And you had to pay 

Mr. Bash (interposing). No, sir; we didn't pay them. One 6f the 
reasons that we exceeded our quota was for the fact that the Europeans 
were not taking business which they should have taken, and which 
was diverted to this coimtry. Additionally, I think possibly the major 



10938 CONCENTRATION OF ECONOMIC POWER 

factor was that considerable business had been taken by nonmembers 
for which we assumed responsibility, and their tonnage materially 
increased our excess position. 

Acting Chairman King. Is that '38 or '37, or both? 

Mr. Bash. That is '38. In 1937, on some commodities we received 
our quota, and I think possible as a whole we got what we were 
entitled to. 

Acting Chairman King. May the committee assume as a fact in 
this discussion that in 1938 you were ready to export larger quantities 
than you did, and the only reason why you did not do so was because 
the European demand or the world demand did not call for it? 

Mr. Bash. We were prepared to do that providing we kept within 
our obligations to the other side. 

Acting Chairman King. Well, were you under obhgations which 
precluded you from shipping more steel products in 1938 than you 
formerly had shipped? 

Mr. Bash. Yes, sir; we had taken on some new agreements since 
1937. This heavy group proposed agreement did not apply in 1937. 
For accounting purposes it began on some products on December 1, 
1937, and on other products on January 1, 1938. 

Acting Chairman King. Then you had voluntarily — not volun- 
tarily, because with two parties to a contract you can't say that one 
can act independently in a unitary way, and it is involuntary — but 
did you voluntarily relinquish any position you had theretofore had 
in the foreign market? 

Mr. Bash. No, sir; I don't think we did. I think by those agree- 
ments we enhanced our position. 

Mr. Feller. May I just, for the information of the committee, 
give the figures on semifinished and finished iron and steel exports in 
the United States as reported by the Bureau of Foreign and Domestic 
Commerce of the Department of Commerce. In 1936, total exports 
of the United States were 1,221,209 tons; in 1937 they were 3,475,257 
tons; in 1938 they were 2,149,334 tons. 

Now, to simplify it, it was of the order of 1,000,000 in 1936, 
3,000,000 in 1937, and oi the order of 2,000,000 in 1938. Your 
agreements, of course, did not cover the whole field of semifinished 
and finished products, but since you base your quotas on 1936, on 
the 1936 performance, which was generally speaking of the" order of 
one-third of our exportation in 1937, it is true, is it not, that you 
voluntarily assumed a position which was less than your performance 
of 1937? 

Mr. Bash. I don't think that is a fair comparison, Mr. Feller. 
Here you are, taking a most abnormal year and trying to compare 
it with a more normal year. 

Mr. Feller. Of course I am not — I don^t know just what the 
criterion of normality is. In 1937, which was the time when you 
were entering into these negotiations, you didn't know whether 1938 
and 1939 would be substantially poorer. 

Mr. Bash. Well, we had an indication, because we didn't really 
seriouslv enter into these negotiations until — I'm sorry 

Mr. Feller (interposing). They began in February 1937. 

Mr. Bash. No; I'm sorry. It didn't really start, we assumed no 
obhgations, until late in 1937. We had a proposed agreement which 



CONCENTRATION OF ECONOMIC POWER 10939 

was made in February 1937. We endeavored, after we came home, 
to form groups. Business was so good that we didn't have time to 
put our efforts on the formation. In fact, I don't know as we were too 
keen on formmg it at that moment, and we didn't really start to func- 
tion even in a slight degree until late in 1937, at which time business 
had started to slip off. 

Mr. Feller. Let's just put our attention for a moment on this 
particular period. From whom did the initiative come for the forma- 
tion of this heavy steel and sheet agreement? Who made the first 
proposal that there be an agreement along those lines, you or the 
foreigners? 

Mr. Bash. The foreigners. 

Mr. Feller. Why did they do that, do you Ivnow? 

Mr. Bash. Yes; I think I do; because they had recently made 
arrangements amongst themselves — when I say "themselves" I mean 
the Continent and the British — embracing those products covering 
exports to the world, and naturally they would like to have as many 
people in there and as many countries in there to make it operate. 

Mr. Feller. Did the fact that American exports in 1937 had 
increased some 300 percent over the preceding year, 1936, have 
anything to do with their attitude? 

Mr. Bash. No, sir; because they approached us before 1937; as I 
recall it it was about in April, May, or June, in 1936. 

^'Ir. Feller. Did they become more anxious about this problem 
of American exports during the course of negotiations which anpar- 
ently lasted the better part of the year 1937? 

Mr. Bash. No; the negotiations didn't last, because they started 
in February and ceased, and toward the latter part of '37, when 
business slipped off very materially, naturally they wanted the 
agreements implemented. 

Mr. Henderson. And you folks went over to the quarterly meeting 
of the cartel at Dusseldorf about November I think? 

Mr. Bash. No, sir; I don't think we had anyone; 1 don't recall 
anyone being at Dusseldorf on these commodities. 

Mr. Henderson. Did you have them on other commoaities? 

Mr. Bash. Yes; possibly on tin plate. 

Mr. Feller. I just want to get your answer clear on this point. 

Negotiations began in February of 1937. During the year 1937 

Mr. Bash (interposing). They were suggested in the middle of 
1936. It lay dormant until we had — I won't say it lay dormant, 
but during that period we endeavored to form groups here and see 
if the whole subject was worth while from the standpoint of the 
various steel companies, whether they were interested to become 
members, and naturally we couldn't. go over there and talk unless 
we wont over anfi talked as a unit, 

Mr. Feller. Now, you had such a talk in February of 1937? 

Mr. Bash. Yes. 

Mr. Feller. And then matters more or less became dormant again 
until the latter part of 1937? 

Mr. Bash. Right. 
, Mr. Feller. Now, during the year. 1937 the United States became 
a very substantial factor in the world market, and American exports 
of steel products increased by 300 percent. Weren't the foreigners at 
all worried about that? 



10940 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. They might have been worried about it, but certainly- 
they couldn't do anything about it when they were working to full 
capacity. There was a lot of business in 1937 that was directed to 
this country, and from countries that hadn't purchased from here for 
10 or 15 years, and were only coming here purely and simply as a 
necessity. 

Mr. Feller. Didn't foreigners say in these meetings in the latter 
part of 1937 that American exports were ruining the price, Americans 
were exporting at cut prices? 

Mr. Bash. Yes. 

Mr. FILLER. And did they urge that as a reason why they wanted 
to go into this agreement? 

Mr. Bash. We had a proposed agreement, and they wanted it to 
be implemented to preserve a semblance of order and stability. 

Mr. Feller. And in the latter part of 1937 they wanted the imple- 
mentation partly because they felt that the American exports were 
disrupting the market? 

Mr. Bash. I won't say exports, you mean price, don't you? I think 
that is a fair assumption. 

Mr. Feller. How about the tonnage itself. Did they feel the 
Americans were getting more of the world business than they ought 
to have? 

Mr. Bash. I don't Ivnow. I assumed, since we had determined on 
quotas, in February, that they naturally would like to keep us on 
that basis. 

Mr. Feller. It seems to me that at the moment you are giving 
considerable emphasis to these determinations, these proposed agree- 
ments which were made in February. Did the American group feel 
that the determination which had been made in February was still 
valid at the end of the year, when they were faced with the fact that 
the United States had performed substantially better in 1937 than it 
had at the time this February conference was held? 

Mr. Bash. Of course, when those agreements were talked about 
we were looking at the whole situation from the standpoint of the more 
normal, or of a normal, year. No one can anticipate or expect that 
business was going to continue on that basis; that is, the basis of 1937. 

Mr. Avildsen. Excuse me, Mr. Feller. I notice that you speak of 
1937 as being 300 percent better than 1936. As I read these figures 
that were quoted, the increase in 1937 over 1936 was 190 percent 
increase, and 1938 shows an increase of 75 percent over 1936. In other 
words, our exports in 1938 were 75 percent over 1936, and our exports 
in 1937 were 190 percent 

Mr. Feller (interposing). I think the term I used was "the exports 
in 1937 were 300 percent of." 

Mr. Avildsen. As I understood you, you said "over." 

Mr. Feller. They were three times the exports of 1936. It was a 
substantial gain. 

Mr. Avildsen. It was a 190 percent gain in 1937 and a 75 percent 
gain in 1938, despite a lowered degree of buying in the world markets 
in 1938. 

Mr. Bash. May I raise a question? Of that tonnage you mention 
in those three years, is that inclusive of scrap? 



CONCENTRATION OF ECONOMIC POWER 10941 

Mr. Feller. Does that include scrap? The heading is "Finished 
and Semifinished Iron and Steel Products." We will have the record 
speak clearly on that point. 

What I am coming to is this. In 1937 — I am now not talking about 
what happened in 1938, what happened at the end of 1937 when the 
conversation began to implement these agreements — in 1937 at that 
point the United States producers performed rather rem,arkably in 
the export market, substantially more than they had in 1936. The 
agreement which you were discussing would have done this, would it 
not, for the foreigners: It would have reduced the participation of 
Americans in the foreign market below what it had been in 1937. 
That was No, 1. And No. 2, it would have kept the home markets 
of the foreign participants to the agreement sacrosanct, would it not? 

Mr. Bash. Looking at i^t purely and simply for that year, but "what 
we were endeavoring to do, and what we did do, we were living and 
operating from day to day. We couldn't anticipate what 1938 was 
going to do or 1939 or any other year. All we had to look at was what 
had happened previously in years gone by. 

Mr. Henderson. I gather from what you said a little earlier, Mr. 
Bash, that what you were seeking in this agreement was stability of a 
certain kind over a period of years. 

Mr. Bash. Stability and the maintenance and possibly an increase 
in American participation of the world's markets. 

Mr. Henderson. That could only come, could it not, by a change in 
your quotas? 

Mr. Bash. Yes, but — — 

Mr. Henderson (interposing). Or an increase in the total volume 
of business. 

Mr. Bash. Quite so, Mr. Henderson, but I think it is a fair assump- 
tion that after a period of years probably due to the expiration of one 
agreement, if we had shown that we were able to sell our goods and 
something in addition to that, it seems to me that we would have 
every reason and right to go to the Europeans if they wanted to 
extend those agreements and say: "Here, we have performed, we 
have more than performed, we think we are entitled to an increase 
in our quota." 

Mr. Henderson. To that extent then selling by the outsiders would 
be very helpful, would it not, in negotiating for a larger quota? 

Mr. Bash. It would be helpful from that standpoint but it wouldn't 
be helpful from the standpoint of the responsibility that we had 
assumed. 

Mr. Feller. I hadn't quite completed what I was asking before. 
First, let me see if I can clear up this point. In 1937 the American 
producers had sold quite a good deal in the world market. Would 
they not have liked to sell as much as that in 1938? 

Mr. Bash. Yes; they would. 

Mr. Feller. And more, and nevertheless you went into an agree- 
ment under which you obligated yourself not to sell as much. 

Mr. Bash. That is right; based on past performance. 

Mr. Feller. What I am coming to is this: I can see what the 
European producers got out of this. They got protection, complete 
protection for their home markets and they got smaller American 



10942 CONCENTRATION OF ECONOMIC POWER 

participation in the world market — smaller, that is, than 1937. What 
did the American producers get out of this? 

Mr. Bash. They got out of it for that particular period which 
no one could anticipate as to what was going to happen. We were 
looking at it from the broad viewpouit, which I still believe is one 
that on the basis of those allotments over a period of years is well 
worth wliile, and I think we have gotten somethmg that means 
something. 

Mr. Feller. You couldn't get as much as the Europeans, could 
you, because you couldn't make the American market sacrosanct be- 
cause the law doesn't permit it? 

Mr. Bash. Naturally not. As a condition there is no alternative. 
We must accept it as it is. 

Mr. Henderson. In terms of your explanation of the value of this 
agreement, and considering the specific year of 1938, I gathered 
from the responses you gave Senator King and others that probably 
with an extraordinary amount of effort in that period you could have 
gone beyond what you did sell, but that you chose to be pretty much 
bound by the quota arrangements. 

Mr. Bash. Well, if the other fellow holds the umbrella over us, yes; 
but if he meets us in open competition, I don't know what would have 
been accomplished. 

Mr. Henderson. I will put it the other way. You didn't choose 
to try to find out whether the umbrella was going to be held up or 
lowered in 1938. 

Mr. Bash. Well, it certainly is reasonable to assume, I think, Mr. 
Henderson, that it wouldn't be held over us an indefinite period of 
time if we were, you might say, running hog-wild and paying no atten- 
tion to our quotas. 

Mr. Henderson. I think that is a responsive answer and I will 
take it. 

Acting Chariman King. Perhaps I have a lack of understanding 
of your former answers, but I would like to ask again why in 1938 
there was such a marked reduction over your exports in '37. I under- 
stand from a statement which was made by Mr. Avildsen that 
notwithstanding the reduction in 1938 you sold 75 percent more than 
in 1936. 

Mr. Bash. The demand in 1938 had increased materially from what 
it was in 1937. Insofar as America is concerned a lot of business was 
placed in this country because they couldn't get the material in 
Europe for the shipments that were required. 

Acting Chairman King. Are you speaking of '37? 

Mr. Bash. Yes; I say in '37. 

Mr. Avildsen. You said '38 but you meant '37. 

Mr. Bash. I am sorry. A lot of business came to this country 
which we hadn't seen for, as I said, 10 or 15 years, and it came here 
purely and simply out of necessity. 

Acting Chairman King. That explains the large exports in '37. 

Mr. Bash. In 1938 the demand materially decreased, that is, the 
world demand of steel for export. 

Acting Chairman King. Did you volimtarily reduce your exports 
in '38, or was it the result of a lack of market? 

Mr. Bash. We endeavored to live within the obligation which we 
had assumed which carried penalties, heavy penalties. We had given 



CONCENTRATION OF ECONOMIC POWER 10943 

an obligation, we had made an undertaking, we intended to and did 
our best to live within it. 

Act'mg Chairman King. If you had exceeded tnat you would have 
had to pay penalties. 

Mr. Bash. Yes, sir. 

Representative Williams. What did you do in '37 about the 
penalty? 

Mr. Bash. The agreement insofar as these heavy products are 
concerned wasn't applicable. 

Representative Williams. The fact that you had this agreement, 
your quota was established, was a kind of deterrent on your export 
activity. 

Mr. Bash. If you look at it from that angle; yes. 

Mr. Henderson. In a single year. 

Mr. Bash. Yes. 

Representative Williams. For any year in which you have quotas. 

Mr. Bash. It is the question of whether that isn't a better thing for 
America than to have open, wide competition of the severest nature, 
and I am frank to admit that America can't stand up under that 
sort of competition as well as Europe. 

Mr. Feller. Would you agree with me in this, that in the" year 
1938 in view of the very marked contraction of the American domestic 
market there was the greatest need for the fullest utilization of the 
foreign market to the extent that American producers were able to 
roach it? 

Mr. Bash. Naturally we need as much business in this country as 
we can possibly get, but we must not single out a year when business 
is poor and base our export policy on that. I think we have got to 
look at it over a period of years. 

Acting Chairman King. You might have retaliations. 

Mr. Bash. Undoubtedly you would. 

Acting Chairman King. And precipitate an international competi- 
tive system which would practically destroy the foreign market. 

Mr. Bash. For us. 

Acting Chairman King. For American manufacturers. 

Mr. Avildsen. Have you any idea, Mr. Bash, as to what rate of 
capacity the foreign, continental mills, were operating at in 1938? 

Mr. Bash. Yes, in the early part it was my understanding that the 
continental mills were operating between 40 and 60 percent. 

Mr. Avildsen. In other words, they needed more business and if 
they hadn't been members of the cartel they would have gone out and 
bid against you, bid lower prices, in order to get more volume. 

Mr. Bash. There is not the slightest doubt of it in my mind. 

Mr. Feller. Would they also have invaded the domestic American 
market to a great extent? 

Mr. Bash. I can't answer that, of course. 

Representative Williams. What unusual situation which you de- 
scribed was there which caused that unusual demand in '37 which 
didn't exist in '38? 

Mr. Bash. I think a good part of it has been attributed to the man- 
ufacture of arms, but personally I don't believe that the major part 
was contributed by that. I think it was just — I don't know how it 
occurred — but an increased demand. 



124491 — 40— pt 2C 



10944 CONCENTRATION OF ECONOMIC POWER 

Mr. AyiLDSEN. It is true, Mr. Bash, that in this country there was 
a great deal of speculative buying in steel in 1937, wasn't there? 

Mr. Bash. Yes. 

Mr. AyiLDSEN. I know in Chicago we bought in anticipation of 
rising prices. I assume that importers of steel in South America 
would have done the same thing, they would have anticipated the 
p rice and bought more than their normal requirements with the result 
that they couldn't buy so much in 1938. 

Mr. Bash. In certain commodities. For instance, tin plate, I 
think purchases of tin plate were anticipated probably 6 months. 
Subsequently the tin plate business of the world dropped off very, 
very materially. 

Representative Williams. There wasn't any let-up in the rearma- 
ment program in Europe during '38, was there? 

Mr. Bash. Not to m}'- knowledge, rather to the contrary. 

Representative Williams. The thing that rather troubles me is why 
that unusual situation existed in '37 over there and didn't continue 
through '38. 

Mr. Bash. I think possibly some of it, in fact I know some of it, 
was undoubtedly created by speculation, some of it was attributed to 
increase in armaments, and undoubtedly stocks were at their bare 
minimum. 

Mr. Henderson. Then in '37 the total volume was made up of a 
combination of the demand for armaments and the demand arising 
from the general increasing tide of business. In '38, while the arma- 
ment demand might have persisted, the general level of business may 
have declined and brought down the level of operations. 

Mr. Bash. Exactly; in fact I think in 1938 probably armaments 
were increased, therefore it would seem to me as good reason that you 
can't attribute a good measure of the 1937 increase to armament. 

Mr. Henderson. You mentioned that the American total in '38 
represented some business you felt the European producers should 
have taken. Why didn't they take it? 

Mr. Bash. That has been somewhat of a puzzle to me. I assumed 
that the reason that they didn't want to take it was this: That they 
were probably willing to let a certain amount of business escape them 
beyond the tonnage which was allocated to us rather than bring down 
their general price situation all over the world. 

Mr. Henderson. Don't some of these companies also want to keep 
in reserve as much steel making capacity as possible? 

Mr. Bash. That might have been the case, Mr. Henderson, but 
we are talking of '38 and 

Mr. Henderson (interposing). That was the year of Munich. 

Mr. Bash. Quite so, but you had the mills operating in Europe 
somewhere between 40 and 60 percent. They stUl had room for quite 
a bit more business. 

Mr. Henderson. Then you think that they allowed the Americans 
to do a more liberal amount than in 1936 in order to avoid price 
cutting. 

Mr. Bash. That is one of the things, and now since you have men- 
tioned it, undoubtedly another one is that they have certain trade 
preferences in some of the countries. For instance in Denmark the 
British have a trade agreement. Whatever we do, generally speaking. 



CONCENTRATION OF ECONOMIC POWER 10945 

the British wdll have an opportunity to take the business. We are not 
disturbed particularly about that because Denmark has never been a 
permanent American market. We would seek our business some- 
where else. 

Mr. Henderson. Where would that somewhere else probably be? 

Mr. Bash. In the Far East, some other Scandinavian country, 
South America, any part of the world except the countries who are 
members, their countries are sacrosanct. 

Acting Chairman King. Let me ask you a question. Do you know 
what the exports in 1938 were by the outside American producers of 
steel? 

Mr. Bash. No, sir; there is no way for us to determine that. We 
can imagine what they were, or we can arrive at some idea of what 
they were. 

Acting Chairman King. They were free, then, not having any cartel 
arrangement, to export as much as they possibly could find a market 
for in foreign countries in 1937 or '38. 

Mr. Bash. Yes, sir. 

Acting Chairman King. In 1938 did they export more than they 
did in '36 or '37? 

Mr. Bash. I don't know, but I will say this, that they exported more 
in 1938 than any other year comparable to 1938. 

Acting Chairman King. What would be the basis for comparison? 

Mr. Bash. Suppose that 2,000,000 tons were exported in 1938 and 
2,000,000 tons were exported m, say, 1936, '35 or '34. Their partici- 
pation in the exports from this country in 1938 were very, very 
considerably larger than they had been in any previous year, other 
than '37 possibly. 

Acting Chairman King. Would not that argue that except for your 
cartel you could have exported more? 

Mr. Bash. No, sir; I seriously doubt that they would have done it 
or we would have done it in open competition, or anywhere near the 
tonnage. In fact, I am satisfied that we wouldn't have. 

Acting Chairman King. Do you believe that the cartel was ad- 
vantageous to the steel interests of the United States? I am speak- 
ing of its foreign interests, its foreign markets, in 1937 and 1938. 

Mr. Bash. 1937 I think we can rule out, we didn't need any agree- 
ments in that year, it was a seller's market. In 1938 I think it was a 
decided advantage because undoubtedly we would have had the most 
severe competition. 

Acting Chairman King. Do you think you would have had any 
particular competition from the Outsiders, using the term Mr. Feller 
has used, in 1937? 

Mr. Bash. Undoubtedly, but we wouldn't have paia any attention 
to it; we had all the business we wanted. 

Acting Chairman King. Did outsiders do a considerable business? 

Mr. Bash. They did a very nice business. 

Acting Chairman King. Did you feel in 1937 any pressure upon 
your markets from the outsiders? 

Mr. Bash. We lost a very considerable amount of business. 

Acting Chairman King. In '38? 

Mr. Bash. Yes, sir. 

Acting Chairman King. From the outsiders? 



10946 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. Yes. 

Acting Chairman King. By lowering, cutting, prices? 

Mr, Bash. That is the answer to it. We don't have any definite 
figures. All the figures that we can present on that would be the 
exports of the members of the association as compared with the figures 
issued by the Department of Commerce and subtract one from the 
other. 

Acting Chairman King. If your group had cut prices to meet com- 
petition from the outsiders, would you have been violating any under- 
standing you had under the cartel? 

Mr. Bash. Decidedly so. 

Acting Chairman King. So that if you restrained yourselves it was 
because of your understanding or agreement with the foreign producers. 

Mr. Bash. And the only reason. 

Acting Chairman King.' But in the long run you believed that was 
advantageous because it would preserve for the future a situation that 
tvould be favorable to your group in finding foreign markets. 

Mr. Bash. Without question I believe firmly and definitely that 
it would be advantageous to America to continue to operate on the 
basis of the cartels. 

Acting Chairman King. The plants of your group were in a position 
in 1938, of course, to have produced more than they did produce. 

Mr. Bash. Yes, sir. 

Acting Chairman King. And there is no reason in the world, is 
there, why if you can find the markets, except if you are restrained 
by a cartel, that you should not seek those markets for the purpose 
of increasing your production and furnishing greater employment to 
the American people. 

Mr. Bash. None whatsoever. In fact, that is what we are doing 
and have always done, to try to increase the exports from America. 

Acting Chairman King. By and large, and perhaps this is outside 
of the field of inquiry by the committee, would you say that the Webb- 
Pomerene Act has justified its enactment? 

Mr. Bash. Absolutely. 

Acting Chairman King. Would its repeal be advantageous or 
disadvantageous? 

Mr. Bash. Most disadvantageous. 

Acting Chairman King. Do cartels of the character you indicated 
under that bill abridge the rights of American citizens or interfere 
with American business or interfere with the small producer in any of 
the activities which might come within the periphery of the cartel 
agreements? 

Mr. Bash. No, sir; I don't think so in the slightest degree. 

Acting Chairman King. Do you think you have increased the 
foreign markets for American steel production under the Webb- 
Pomerene Act? 

Mr. Bash. WeU, we have maintained them and possibly on a sound 
basis. 

Mr. AviLDSEN. Mr. Bash, getting back to 1938, were you prompted 
in making those new agreements by any consideration of additional 
plant capacity of foreign countries in steel making? Were they build- 
ing more steelmaking plants in other countries? Did that affect the 
situation? 



CONCENTRATION OF ECONOMIC POWER 10947 

Mr. Bash. No; I don't think so. 

Mr. AviLDSEN. Mr. Hook testified here, the other day, about build- 
ing some mills in Wales with the American process.^ Did the Japanese 
add to their capacity? 

Mr. Bash. Yes; the Japanese are not a member of our cartel. 

Mr. Henderson. Nor Russia. 

Mr. Bash. No. 

Mr. AviLDSEN. Where did Japan buy that steel before? 

Mr. Bash. In 1937 they bought a very large amount of steel here 
which normally was secured in Europe. Europe has supplied many, 
many more times of the Japanese requirements than we have. 

Mr. Henderson. Along the line of Senator King's inquiry I take it 
from your testimony that most of your experience has been in this 
foreign field. Have you not observed that the trade, both import and 
export in various countries, is passing pretty largcJy into what might 
be termed cartel organizations; not only on the soiling end are there 
closer-knit groups, but also on the buying end? Doesn't a producer 
from an individual coimtry, say America, if he wants to sell into Japan 
or sell into some of the other markets, have to deal with an import 
group also, deal with a bloc? 

Mr. Bash. In varied forms; yes. 

Mr. Henderson. In other wordsj it gets to a place where both on 
the selling end, that is your competitors, and on the buying end, you 
are almost driven to the necessity of dealing with a group as a group. 

Mr. Bash. Absolutely, and there are more combinations being 
formed every day both in selling and buying with regard to export 
trade, and of necessity, to be able to defend yourself. 

Acting Chairman King. So you meet sales resistance not only from 
the groups formed in foreign countries but by the governments assist- 
ing them or being parties to them. 

Mr. Bash. Exactly. You must have some unit to be able to meet 
the other unit on the same ground. 

Mr. Feller. I should like to consider a bit more in detail the 
events which led up to your agreement in the early part of 1936, and 
I should like to turn for a moment to Mr. Schroeder. 

In the latter part of 1937 and the early part of 1938 you were a 
manager of the Steel Export Association, were you not, one of the 
board of managers? 

Mr. Schroeder. I was selected to serve with the board until reor- 
ganization. 

Mr. Feller. You were selected by the Wheeling Steel Corpora- 
tion 

Mr. Schroeder (interposing). No; selected by the board to serve 
with them. 

^ Mr. Feller. But you were then with the Wheeling Steel Corpora- 
tion and still are today? 

Mr. Schroeder. Yes. 

Mr. Feller. You no longer serve with the Steel Export Associa- 
tion? 

Mr. Schroeder. I am still the representative of our company to 
the Association. 

Mr. Feller. You, however, do not sit with the board? 

> See Hearings, Fart 19, p. 10694 et seq. 



10948 CONCENTRATION OF ECONOMIC POWER 

Mr. SCHEOEDER. No. 

Mr. AviLDSEN. Will you tell us the witness' name? 

Mr. Feller. Mr. Harold Schroeder. 

Mr. AviLDSEN. His position. 

Mr. Schroeder. District sales manager, New York oflBce, Wheel- 
ing Steel Corporation. 

Mr. Feller. Mr. Schroeder, I should like to have you identify 
this letter, which is signed by you, dated February 7, 1938, addressed 
to the attention of Mr. J. L. Neudoerfer, vice president and general 
manager of sales. Wheeling Steel Corporation. 

Mr. Schroeder. That is my letter. 

Mr. Feller. I offer this for the record. 

Acting Chairman King. It may be received. 

Mr. Feller. I don't think it is necessary to have it printed. It 
may be placed on file with the committee. I shall read the perti- 
nent parts. 

Acting Chairman King. It may be received and placed on file. 

(The letter referred to was marked "Exhibit No. 1445" and is on 
file with the Committee.) 

Mr. Feller. The letter begins in this fashion: 

Supplementing my letter of January 27th and our conversation during your 
visit here on February 2nd, subsequent developments have been as follows. 

The foreign delegation, consisting of the Earl of Dudley, I. F. L. Elliott, Gerard 
Spencer Summers, and Hector Dieudonn6, arrived on the Normandie Friday 
morning, and we met in the board room of the Guaranty Tru^t Company, 14th. 
floor, 35 Nassau Street, at eleven o'clock. 

Lord Dudley spoke for the foreign group, reminded the Corporation and 
Bethlehem that they had made an agreement last February conditional upon 
the later formation of a sheet group, that the International Cartel felt that the 
American agreement had not been hved up to, and that the formation of a sheet 
group was a necessary part of the American agreement; they had come over here 
to find out for themselves the reason forthe delay, and if matters were not buttoned 
up by Wednesday next, when they intended to return on the Queen Mary, the 
International Cartel would take drastic steps toward lower prices and throw the 
world markets open. The inference was plain that such a low level of export 
prices would probably result in foreign makers attempting to share in the large 
and relatively high priced American domestic market. Discussion of this point 
was discouraged by members of the American group on the plea that they had 
only come prepared to discuss export matters. 

The letter goes on to say: 

Mr. Bash of Bethlehem, acting as chairman of the meeting- and spokesrnan 
for the American group, explained to the foreign visitors that the Corporation 
and Bethlehem had lived up to their engagements, but that the difficulty lay in 
their inability to control the outsiders, and to date, their inabiUty to bring the 
outsiders together into a sheet group. 

The rest of the letter deals with the matter of arriving at an agree- 
ment among the American producers as to their participation in the 
quotas. Mr. Schroeder, I take it that this letter correctly reports 
what went on in the meeting that Friday morning? 

Mr. Schroeder. As far as I was able to report it, sir. 

Mr. Feller. And I take it that this letter in effect states that the 
foreign delegation, headed by the Earl of Dudley, left the inference 
or made the inference with the American group that if an agreement 
were not reached with the foreign cartel, that the cartel producers 
would cut prices in the export market and would probably attempt 
to share in the American domestic market. Was that inference 



CONCENTRATION OF ECONOMIC POWER 10949 

something which disturbed the American producers who were present 
at that meeting? 

Mr. ScHROEDER. That was not discussed. 

Mr. Feller. That was not discussed at all? 

Mr. ScHROEDER. It was mentioned by them and if I remember 
personally we advised them that we were not prepared to discuss that. 
I explained to them that it was not in accordance with our laws to 
discuss a thing of that kind and we declined to discuss it. 

Mr. Feller. Would you say, even though the matter was not 
discussed, that this inference that if an agreement were not reached 
the foreign producers would probably, attempt to share in the Ameri- 
can domestic market, that is to say, to import steel into the United 
States — would you say that influence .operated as an inducement to 
the American producers to 'conclude this agreement? 

Mr. ScHROEDER. No, sir. 

Mr. Feller. What would you say to that, Mr. Bash? 

Mr. Bash. Absolutely of no part. 

Mr. Feller. You recall the statement being made? 

Mr. Bash. No; I don't recall the statement being made. 

Mr. Feller. You don't recall the statement being made? 

Mr. Bash. I won't say it wasn't made, possibly it was made, but 
I know what the answer would be as is indicated by this letter. We 
have never, under any circumstances, discussed the domestic trade 
of this country in relation or rather in exchange for, any quotas that 
have been granted. 

Mr. Feller. There are really two questions. One: whether or 
not you have discussed them, and you have answered that in the 
negative. The second question is, to put it bluntly, whether or not 
the foreign delegation made a threat or inferred a threat of compe- 
tition in the American market and whether or not such an inference 
or threat resulted in your being more ready to enter into an agree- 
ment. 

Mr. Bash. To answer them separately, if they had made a threat 
I wouldn't have taken it seriously because they have been shipping 
into this rnarket for years and in an appreciable tonnage, and I think, 
possibly, if you look at the figures— I don't know what the result is 
but I don't think they have discontinued shipping here. 
: Mr. Feller. No; but the problem is one really which was raised 
by a question which Mr. Avildsen asked you. As he pointed out, 
Mr. Hook told us about the increasing capacity in foreign countries. 
-Now if we were to attempt to put ourselves back in the situation of 
1937 — ^let us assume at that time a hope that the dizzy pace of rearm- 
ament in Europe would slacken — wouldn't that have released so 
much capacity in Europe that it would have put the foreign producers 
in a position to export a great deal more steel to the United States? 

Mr. Bash. I think they have been in that position except possibly 
for a year there when business "^was particularly active. 

Mr. Feller. Mr. Schroeder, T hand you a letter signed by you, 
addressed to the Secretary of the Steel Export Association of America, 
on the letterhead of the Wheeling Steel Corporation, dated April 12, 
1938. This letter was received by us from the files of the Steel Export 
Association, and attached to it was an vmsigned document headed: 
"Report from the board of managers of the Steel Export Association 



10950 CONCENTRATION OF ECONOMIC POWER 

to the presidents of the member companies." The letter to which it 
was attached stated [reading from "Exhibit No. 1446"]: 

Please refer to the meeting of the Board of Managers on April 5 summarizing 
the present status of the S. E. A. 

The next step is to formulate the recommendations of the Board as to what 
should be done about it. To crystallize our discussion, I am taking the liberty 
of sending to you a draft of the proposed letter setting forth the recommendations 
of the Board that should be submitted to the presidents of the member companies, 
in compliance with the request from our company. 

Will you identify these please, Mr. Schroeder? 

Acting Chairman King. That to which you refer, the report from 
the board of ignanagers. 

Mr. Feller. That is what I am inquiring about. 

Mr. Schroeder. Yes. 

Mr. Feller. I offer this to be printed. 

Aoting Chairman King. It will be received. 

(I'ne documents referred to were marked "Exhibits Nos. 1446 and 
1447, respectively, and are included in the appendix on pp. 11017 and 
11018.) 

Acting Chairman King. Mr. Bash, have you seen the letter and 
accompanying report of the Board? 

Mr. Bash. Yes; I have a copy. 

Acting Chairman King. You are famihar with the contents? 

Mr. Bash. Yes. 

Mr. Feller. I shall read the first five or six paragi-aphs of this 
letter at this time — I beg your pardon, the paragraphs of the report 
[reading from "Exhibit No. 1447"]: 

At the request of one of our members, we are addressing each of you, first, to 
give an authentic description of the present status of the Steel Export Association; 
second, to report the definite steps which we are agreed should be taken to com- 
plete the reorganization and enlargement of the Association. We have been 
working for several months to accomplish this — much has been done, but there 
still remain many loose ends to be tied up before the Association can function 
properly. We believe that this matter is of importance to all member companies 
and solicit your aid in effecting a settlement of these outstanding points. 

First, please study carefully the attached report of things as they are. When 
the Association was formed in 1928, quota participations were based upon per- 
formance during open competition of the three years preceding, and the principle 
of quotas in proportion to capacity was denied in its entirety. Since then, because 
of the operation of the Association, and its various international agreements, and 
more recently because of an international shortage of steel, prices for export rose 
from the point at which only a few companies were interested, to levels at which 
all were desirous of participating, particularly in view of present low operating 
rates and dearth of domestic business. 

In view of the fact that the letter was mimeographed for Members 
of the committee, I shall skip to the bottom of the first page.^ 

At this point in the development of general bad feeling, it became necessary 
to consider the forming of a Heavy Steel Group in the S. E. A., (I take it that is 
the Steel Export Association) followed by a Sheet Group. Recognizing the 
primary importance of agreement on quotas, all of the early discussions centered 
on this point, and there remain only a few percent to be reconciled before attaining 
100 percent quotas in each product. 

These cases are set forth in detail in the statement attached, and will not be 
considered separately here, beyond the warning that close as we are to 100 
percent, no product group can function with a true regard for the rights of all 
its members un<il those rights are clearly agreed upon. Until quotas come out 
even at 100 percent, there has been no agreement, and groups which now are nearly 
completed are in serious danger of falling apart again unless an early settlement 
can be reached. Also, and more imminent, is the danger that the British and 

1 "Exhibit No. 1446," appendix, p. H017. 



CONCENTRATION OF ECONOMIC POWER 10951 

Continental parties will renounce the present tentative agreenaents unless they 
are made more satisfactorily effective. Such renunciation would inevitably be 
followed by an influx of low-priced foreign steel in domestic markets. 

Mr. Schroeder, what were these tentative agreements?- 
Mr. Schroeder. Beginning with heavy steel, memorandum of 
February 1937 — Mr. Bash spoke about it; continuing with the visit 
of the foreign members reported in the letter just put in the record, 

February 7, 1938. 

POSSIBLE EFFECT OF CARTEL CONTROL ON HOME MARKETS 

Mr. Feller. Mr. Schroeder, why should the renunciation of these 
tentative agreements inevitably be followed by an influx of low- 
priced foreign steel in domestic markets? 

Mr. Schroeder. That was my opinion at the time, sir. 

Mr. Feller. And what was that opinion based upon? 

Mr. Schroeder. Experience in knowing what happens in export 
markets when there is no cartel control. 

Mr. Feller. In other words, your experience at that time had been 
that when there is cartel control the American domestic market is to 
some extent saved from invasion by foreigners.? 

Mr. Henderson. "Sacrosanct" I believe is the word. 

Mr. Feller. No. 

Mr. Schroeder. I have no application to the word "sacrosanct" 
in this case. 

Mr. Feller. No; I don't think that word would necessarily apply. 

Mr. Schroeder. I was speaking of my own experience. 

Mr. Feller. Your own experience, then, was that when a cartel 
arrangement was in effect, the American market was, to some extent, 
protected from an influx' of foreign steel? 

Mr. Schroeder. Not in the manner that you infer. I am speaking 
of a case more of simple arithmetic. 

Let us suppose that something has sold for $5 in this country; it 
sold for $5 in England or on the Continent, and is also being sold for 
$5 in South America. We both ship in our export markets and we 
get the $5-price in South America and that is a stabilized market — 
that condition is a stabilized market. Now suppose there were no 
stabilized market and the price in South America were driven down 
to $3, the man making this commodity in England or the Continent 
would not be as much interested in selling in South America at $3 
as he would be in shipping to this country, paying our duty, and selling 
in a $5-market. That is what I had in min^. 

Mr. Feller. Then may I ask you whether, in your experience, 
the conclusion of a cartel agreement of this character is in part in- 
duced by the fact that if it were concluded, this condition of probable 
invasion of the domestic market would be obviated. 

Mr. Schroeder. No, sir. All of these export international agree- 
ments are based upon getting a higher price for the product which we 
export. 

Mr. Feller. May I ask you then this. This is a question I have 
asked once or twice before: Would you say that the anticipation of 
probable increased imports into this country, in the absence of an 
agreement with the cartel, was in some degree an inducement to the 
American producers to enter into such an agreement? 



10952 CONCENTRATION OF ECONOMIC POWER 

Mr. ScHROEDER. No, sir. 

Mr. Fuller. Well, in this proposed report you. were about to 
tell your mercibers that such would be the case. 

Mr. ScHROEDER. That report was written by myself, sent to the 
Association for their consideration; it was not sent out. A report 
from the Association I think was sent out on the 19 th, which went 
to aU members. 

Mr. Feller. That, I believe, would also be clear from the fact 
that the letter speaks of the only satisfactory proposal. But laying 
aside the fact that the report wasn't sent out, did not you, as the 
draftsman of that report, think at the time of this statement which 
you made, that the renunciation of the tentative agreement "would 
mevitably be followed by an influx of low-priced foreign steel in 
domestic markets?" Did you not think personally at that time 
that that would be a reason why the members to whom this report 
was destined would be wiUing to enter into the agreement? 

Mr. ScHROEDER. JNo; I think I painted as complete a picture as I 
could. 

Mr. Feller. You were doing propaganda work, is that it? 
. Mr. ScHROEDER, No; it was my duty to re^^-ort to all my prin- 
cipals fully. Perhaps I should go back. The meetings of our execu- 
tives in February resulted in an assurance to the foreigners that in 
principle we would execute and implement these agreements. This 
letter was written several months, later. Our executives asked me 
what had happened, why hadn't we reached a conclusion. I said we 
had been blocked at this point and it was in an attempt to report 
back to our executives whete we stood that I asked the Association 
to make such a report and submitted to them a tentative draft of 
what might be said, and I said [reading from "Exhibit No. 1446"]: 

There are doubtless other points which should be included in such a letter, and 
of course there will be differing vieWs on many of the issues discussed. 

I believe that wherever a real difference of opinion exists it will be desirable to 
include both the majority and the dissenting opinions in our report to the 
presidents. 

Acting Chairman King. Was it your view that if the American 
cartel, that is probably not the proper term, but this group, which 
you and Mr. Bash represent, abandoned or renounced the agreements 
which had been made with the various European nations, that by way 
of retahation — probably that is too strong a term — they might 
reduce prices, flood the market, and sustain losses themselves in order 
to penalize the American producers for their renunciation of the 
agreement? 

Mr. ScHROEDER. I think it would be too expensive for them to try 
to do that because those countries export from^SO to 80 percent of 
their entire production. This country I don't believe has exported 10 
percent in any year. 

Acting Chairman King. I understand from one of the witnesses, 
from Mr. Bash, that up to 60 percent of the capacity in 1938 

Mr. ScHROEDER (intcrposing) . Were operating, but not for export 
business. They were operating at 40 to 60 percent of their capacity 
to total business. Of that a good deal was going to export, but 
Belgijini and Luxemburg, depending on their export business, can't 
afford to ship 85 percent of their production into export markets to 
retaliate with us at a low price. They have to get a price to live. 



CONCENTRATION OF ECONOMIC POWER 10953 

Acting Chairman King. Does not the cartel permit them to get a 
higher price? 

Mr. ScHROEDER. That is the purpose. 

Acting Chairman King. Then if the cartel were departed from 
by the American group it would jeopardize to some degree their 
market? 

Mr. ScHROEDER. Ycs, 

Acting Chairman King. Lower their prices? 

Mr. ScHROEDER. Right. 

Mr. Bash. Let me interrupt; in that respect I would like Mr. 
Feller, if he will, to read the third and fourth paragraphs of Mr. 
Schroeder's letter, which I think will bear out somewhat what I have 
been talking about this morning. 

Acting Chairman King. Will you do that? 

Mr. Bash. The mejoaorandum-^the first page. 

Mr. Feller (reading from "Exhibit No. 1447"): 

Without the Association and its agreements abroad, this would have the old, 
familiar and inevitable result of driving export prices down again to unprofitable 
levels. The companies who are permanently engaged in the export trade and 
who have enjoyed the larger shares of this business, are the ones most interested 
in maintaining prices, because they stand to lose most by their decline. On the 
other hand, most of the newcomers, the "have nots", are interested in raiding the 
export market until the price becomes unattractive and then withdrawing. Some 
of these newcomers have resolved to fight their way into the company of the 
"haves", and remain in the export business permanently. 

The result has been repeated demands by the "have nots" for increases in 
quota, at the expense of the "haves". Naturally the "haves" have resisted this 
encroachment, in some cases leaving no alternative but an open violation of the 
Association rules when the contenders persist in obtaining satisfaction of their 
demands. 

The question that arises in my mind, on the basis of this, is whether 
or not, Mr. Schroeder, you weren't setting forth two reasons for com- 
ing to this agreement. One is the reason which Mr. Bash has stated 
several times, and which is referred to in these two paragraphs, namely, 
the fact that by this struggle for markets the export prices would be 
driven down to unprofitable If-vels; and whether, in the next para- 
graph, the first paragraph on the second page, you were not telling, or 
were not intending to tell, the members of the association that unless 
they reached such an agreement, the result would be an influx of 
low-priced foreign steel in the United States. 

Were you, in effect, saying that? 

Mr. Schroeder. That is what I said, sir; that was my opinion 
at the time. 

Acting Chairman King. We will take a recess until 2:30. 

(Whereupon, at 12:35 p. m., a recess was taken until 2:30 o'clock 
of the same day.) 

AFTERNOON SESSION 

(The hearing was resumed at 2:40 p. m., upon the expiration of the 
recess, Representative Clyde C. Williams presiding.) 

Acting Chairman Williams. The committee may be in order. 
Proceed, Mr. Feller. 

Mr. Bash. Mr. Chainnan, may I try to clear up sornething that 
I said this morning which I am not sure that the committee under- 
stood, and that was the question raised by Mr. Feller, that if we did 



10954 CONCENTRATION OF ECONOMIC POWER 

not have an association during the year 1938, if the exports from the 
United btates wouldn't have been larger than they were. 

It IS my feeling that had we not had an association, our shipments 
would not have been as large as they were, because we would have had 
unrestricted competition from Europe. I wanted to make sure that 
that was hilly appreciated. 

Mr. Feller. Mr. Chairman, at the moment of adjournment this 
mornmg we had been considering part of the draft report which Mr 
Schroeder had drawn up in April of 1938, and in particular that 
portion of the draft report ^ which said that: 

More imminent is the danger that the British and Continental parties will 
renounce the present tentative agreements unless they are made more satis- 
factorily effective. Such renunciation would inevitably be followed by an influx 
of low priced foreign steel in domestic markets. 

• ^{l ^^S^!^ correctly, at the very conclusion of the hearings this morn- 
ing Mr. bchroeder stated that that was his opinion at that time That 
is correct, is it not? 

(Mr. Schroeder nodded in the affirmative.) 
_ Mr. Feller. Mr. Bash, sometime ago a responsible business analy- 
sis group. Poor's, published a survey called "Poor's Industry and In- 
vestment Survey on the Iron and Steel Industry." That was pub- 
lished April 12, 1939, and in that survey occurs the following: 

A J nmox^Jf* ^cj^^i^i?^^ created under the authorization of the Webb-Pomerene 
Act (1918) the Steel Exporters' Association of America, including 80 per cent to 
90 per cent of domestic industry, has arrived at an understanding with European 
producers respecting shipments and prices. Following a series of conferences 
between the International Steel Cartel and the Association, it was announced late 
m May 1938, that agreements had been reached. Whereas "dumping" of Ameri- 
can steel products m Europe at prices as much as $10 a ton below prevailing mar- 
kets was the alleged reason for the cartel's negotiations with the American pro- 
ducers the latter in turn were apprehensive lest there be a recurrence of excessive 
imports mto the United States such as those which hurt profits and employment 
here ]ust prior to the pick-up in demand during 1935 and 1936. Thus the agree- 
ment, by putting botii imports from and exports to Europe upon a quota basis, 
aids in the stabilization of prices in both markets. 

I take it from what you have previously said, Mr. Bash, that is a mis- 
apprehension. 

Mr. Bash. I presume so. 

Mr. Feller. Will you give us some idea as to how a responsible 
business analysis organization of this kind would get such a misappre- 
hension? 

Mr. Bash. Frankly, I don't know. 
: Mr. Feller. Are you aware that others have had the same appre- 
hension or misapprehension? 

Mr. Bash. No; I am not. 

Mr. Feller. Mr. Schroeder, you had an apprehension when you 
wrote this report m April 1938, that the possibiUty of an influx of for- 
eip steel had something to do with this question. Were you aware 
whether others had any such apprehension? 

Mr. Schroeder. None at all. 

Mr. Feller. You said you had formed this opinion on the basis of 
your experience. 

Mr. Schroeder. Yes. 
ift^^' ^^^^^^; ^^- Schroeder, contmuing on your report of April 
1938, your draft of report, on the last page, page 3, the third para- 

> "Exhibit No. 1447," appendix, p. 11018. 



CONCENTRATION OF ECONOMIC POWER 10955 

graph from the last begins as follows [reading from "Exhibit No. 
1447"]: 

Beyond this the American party must negotiate for freedom from responsibility 
to the heavy steel group for shipments by American outsiders during whatever 
period of time may be required to negotiate w^ith these outsiders, and to 'obtain 
their participation in the agreement either as active or as associate members. 
With present outsider activity we cannot be responsible for them. When all 
outsiders have joined up there will be no problem. In the meantime it is suggested, 
that much the same clause be employed as at present under the tin plate agree- 
ment mentioned in the attached report. Furthermore, with a view to diminishing 
the opportunities offered to outsiders, it is recommended that responsible brokers, 
jobbers or export merchants be licensed by commission agreements with the asso- 
ciation to deal exclusively with its members. License would be offered upon 
nomination by any member. At present the brokers seek connection with out- 
siders and contrive to defeat the purposes of the Association. It is hoped that the 
licensing plan will ensure the cooperation of the worth while merchants. 

Had you discussed this proposal previous to writing this report 
with other of the managers of the association, this proposal about 
licensing? 

Mr. ScHROEDER. Which paragraph? 

Mr. Feller. Next to the last paragraph — proposal about licensing 
by commission agreements. 

Mr. SCHROEDER. No. 

Mr. Feller. Had any such proposal been discussed? 

Mr. Schroeder. Not in connection with any of this that I know of. 
It is a practice, I believe, followed quite extensively abroad, particu- 
larly in England. It occurred to me as a good plan in our country. 

Mr. Henderson. That is the way the English did take control 
over the export situation. 

Mr. Schroeder. Yes. 

Mr. Feller. Mr. Bash, has the Association contemplated such 
proposal? 

Mr. Bash. It was discussed after receipt of Mr. Schroeder's mem- 
orandum and we decided, or rather came to the conclusion, that we 
were not in agreement with the suggestion. 

Mr. Feller. Was any suggestion made that the law might inter- 
fere with this? 

Mr. Bash. I don't remember whether any was or not, but from our 
method of doing business this was something entirely foreign, and 
insofar as brokers and merchants are concerned, insofar as the sale of 
steel products manufactured in America, they do not enter into the 
picture anywhere near the extent that they enter into the picture in 
European countries. I won't say all, but a great portion. The 
major portion of the steel exported in this country is sold directly 
by the mills interested. 

I would Uke to add one thing to try to give you a picture as to why 
the Europeans employ brokers and merchants. Aside froifi a few large 
steel interests there are a number, particularly in England, of very 
small producers who may make one product or they may make two 
products. Naturally they can't afford to open an office or appoint 
agents to represent them all over the world ; it would be too expensive. 
Therefore they utilize the merchant to do their business for them. 

Mr. Feller. The point of interest here was a suggestion that 
exclusive licenses be put into effect with a view to diminishing the 
opportunities offered to outsiders. Has your association discussed 



10956 CONCENTRATION OF ECONOMIC POWER 

any means with a view to diminishing opportunities offered to out- 
siders? 

"Mr. Bash. Well, I can't answer that; I think, probably the way you 
want me to answer it, but very briefly, you must remember that first 
of all the members of the S. E. A., Steel Export Association, assumed 
a responsibility. 

Mr. Feller. Yes. 

Mr. Bash. For the entire exports from the United States. In fact, 
the quotas granted to United States manufacturers were based on that. 
We assumed that responsibility, purely and simply — I wiU use an 
example: Let's assume that our percentage, whatever it was, was 
equivalent to 50,000 tons in a particular product. Under the aegis 
of the association and the international agreement, if there" was a 
nonmember theref was nothing to prevent hini from selUng that entire 
allotment which the members of the association were responsible for, 
in addition to whatever they sold. We weren't anxious to assume that 
responsibility, naturally, but the foreigners would not make an agree- 
ment with us unless we assumed the responsibihty the same as they 
did. 

Now under those circimistances, what it amounted to was that the 
nonmembers, as I see it, were Uving under the umbrella of the asso- 
ciation, trying to have their cake and eat it at the same time. 

Mr. Feller. Consequently, there was a — shall I say temptation — 
on the part of the members of the association to attempt in some way 
to influence the action of the nonmembers. I don't say they yielded 
to that temptation but such a temptation did exist, did it not? 

Mr. Bash. What we did, I don't see anything wrong with it at all, 
and that was to ask the foreigner, our partner in this association, 
to take the share of business which his quota warranted him to take, 
so as to reheve us of any penalty that might be created by a non- 
member, to any appreciable extent. If it was a snaall amount we 
weren't going to worry particularly about it. 

Mr. Feller. How did you ask the foreigner to take that? 

Mr. Bash. I think we told him, requested him 

Mr. Feller (interposing). You mean you said to him, "You can go 
above your quota." 

Mr. Bash. No, no, no; you misinterpret it. We said to the 
foreigner: 

Now, here, we are up to our quota based on our shipments as well as the non- 
members's shipments. You are not taking your share of the business, otherwise 
we wouldn't be in excess. We want you to take your share of the business, other- 
wise we want to be relieved of the responsibility. 

Mr. Feller. I don't quite know what you mean by "take." Do 
you mean price-wise? 

Mr. Bash. Go out in the market and get the tonnage and get 
the orders. 

Mr. Feller. In other words, you would say to the foreigner, 
"We relieve you from the obhgatioh of quoting those prices that are 
provided for in the agreement." 

Mr. Bash. Oh, he has a perfect right when he is in deficit to name 
a price lower than our price. We conversely have the same right. 
There may be times when there is a deficit and excess position. If it 
amounts to anything ajjpreciable we will protect the policy, or if 
we are in deficit the foreigner will protect us if we are in deficit. 



CONCENTRATION OF ECONOMIC POWER 10957 

Mr. Henderson. You mean by going out and getting tonnage? 

Mr. Bash. Yes; and even more than that, Mr. Henderson; we 
would quote a higher price in order to divert tonnage to him. 

Mr. Henderson. You would quote a price higher than the agreed 
price in order to divert that tonnage? 

Mr. Bash. Either that or he would quote a lower price. 

In t)ther words, we had made an obligation, they had made an 
obligation, we were trying at all times to see to it that each one of us 
got what we were supposed to get. 

Mr. Henderson. That appUed to outsiders also. 

Mr. Bash. No; the nonmember was no part of our association. 
We lad 

Mr. Henderson (interposing). I mean as far as handling out- 
siders was concerned, those who were Uving under your umbreUa. 

Mr. Bash. Yes. 

Mr. Feller. Mr. Bash, I hand you a letter dated November 14, 
1938, on the letterhead of Bethlehem Steel Export Corporation, 
S. M. Bash, vice president, addressed to Mr. John- Outwater, Steel 
Export Association of America, and signed C. E. Masters, assistant 
to the vice president. Will you identify that, please? 

Mr. Bash. Yes; that is the letter. 

Mr. Feller. I offer this for the record. 

Acting Chairman Williams. It may be received. 

(The letter referred to was marked "Exhibit No. 1448," and is 
included in the appendix on p. 11020.), 

Mr. Feller. Who is Mr. John Outwater? 

Mr. Bash. He was iii charge of the Steel Export Association at 
that time in New York. 

Mr. Feller. I shall go on reading the letter: 

After consultation with U. S. Steel Products Company, we would like you to 
send the following letter over your signature to Mr. Todd in tomorrow's mail. 

Who is Mr. Todd? 

Mr. Bash. Mr. Todd was the European representative of the Steel 
Export Association of America, located in London. 

Mr. Feller (reading further from "Exhibit No. 1448"): 

Ship Steel and Ordinary Plates and Shapes for Scandinavia and Holland 

You will recall the conservation after dinner on the night you sailed which 
resolved itself into the fact that we are in the Cartel until 1940 with definite 
quotas and that it is up to us to live within these quotas. We are satisfied to do 
this but, frankly, the situation as regards the products for the territories mentioned 
in the caption of this letter has us baflBed. Today, one of our larger members has 
received word from their London ofl5ce that a large British merchant firm informs 
them they have been attempting to secure firm offers for ship plates for Holland 
on the basis of $1.96 c. i. f. but without success, they being informed that lower 
prices are being named by other merchants for plates from Worth and Central. 

Worth and Central are American firms who are npn'-members? 
Mr. Bash. Yes. 

Mr. Feller. They were non-members of the Association? 
Mr. Bash. They were non-members. 

QUESTION OF ELIMINATING THE AMERICAN NON-MEMBER 

Mr. Feller (reading further from "Exhibit No. 1448"): 

As you know we are presently asked to rn^intain £11.0.0, which at $4.78 ex- 
change is about $2.32 per 100 c. i. f., and the Continentals claim they have the 



10958 CONCENTRATION OF ECONOMIC POWER 

situation under control by taking not lower than £9.15.0, which at the same ex- 
change rate equals $2.06, and they claim to have taken considerable tonnage at 
higher prices. 

Frankly, several of our members have received reports from many sources to 
the effect that the Continental prices at which business is reported to have been 
closed are subject to rebates of varying amounts. We have no quarrel with the 
Continentals or the British in quoting lower than £9.15.0 by means of the rebate 
system (as this is what we have been asking them to do for some time to eliminate 
the American outsider) if they have some real reason for not wanting a price 
lower than £9.15.0 to become officially known but, as partners, we consider that 
we are entitled to know what they are actually doing, because if what they are 
actually doing is sufficiently low actually to eliminate the American outsider, then 
we can properly judge the reports our members are constantly receiving as to 
prices being quoted by the American outsiders and whether or not they are secur- 
ing any real volume of business. We would be inclined to stay off the ship steel 
business for the Scandinavian and Holland markets (except possibly at such times 
as we are in deficit — and then only to the extent of making up our deficit) so long 
as we know that we are not being denied the opportunity of taking business which 
is being lost by the Cartel to the Philadelphia district mills. Furthermore, as 
you well know, the sooner these mills are eliminated from taking business the 
better our chances will be of bringing them under control in our own group. 

There is also the thought that after the trial period some of our members are 
not going to be content to remain in the American Party if it ultimately develops 
that mills outside the party can secure more tonnage than group members. 

This is one of our most aggravating and pressing problems and we are wondering 
if you cannot discuss it frankly with Sir Andrew Duncan toward the end of clarify- 
ing the situation once and for all. 

Mr. Bash, had your company been asking the continentals or the 
British to quote lower prices by means of the rebate system? 

Mr. Bash. No; by the rebate system? — we didn't care how they 
accomplished it. 

Mr. Feller. You didn't care how they accomplished what? 

Mr. Bash. -A lower price, as long as we know what they are doing. 

Mr. Feller. And you wanted them to quote the lower price so 
that they should eliminate the American outsider. 

Mr. Bash. I don't know as though I would put it that way. 
I would put it in tliis manner, Mr. Feller. We had assumed a re- 
sponsibility for the -entire export shipments of the products covered 
by these agreements. That responsibility carried with it quite heavy 
penalties. To give you an example, it was entirely possible that the 
nonmembers could ship, could sell and sliip, the entire amount which 
had been allocated to America purely and simply under the umbrella 
which was actually held for them, and based on that, all we were 
asking, and what we were asking, was that the foreigners carry through 
their part of the obligation or release us from the responsibility of 
penalties. 

I might say that the foreigners did not comply with our requests 
to the extent that we asked them, which brought about very large 
sales on the part of nonmembers and created a very large penalty in 
the way of money, as I recall it, and this is not singling out any 
particular product as a base, but I think after the end of the first 6 
months, due to the foreigners not maintaining a price suflBcient to 
maintain their quota position, the Steel Export Association owed in 
the way of penalties somewhere in the neighborhood of a miUion 
dollars. 

Mr. Henderson, As I take it, you felt you couldn't keep your 
part of the obhgation unless they helped you out with the outsider. 



CONCENTRATION OF ECONOMIC POWER 10959 

Mr. Bash. Absolutely, Mr. Henderson. If that condition per- 
sisted, what is meant was the break-down of the association at least 
in those products. 

Mr. Henderson. How do you reconcile that with the language in 
the Webb-Pomerene Act that no part of your action shall be taken 
in restraint of the export trade of a competitor, because it is very 
clear that this action is definitely aimed at the export business of a 
competitor, an outsider? 

Mr. Bash. No; I don't think so. He had perfect liberty to do 
just as he liked insofar as competition was concerned. If he was 
outside of the association we would have still been just as hot after 
him as we were in the association. 

Mr. Henderson. That's it; you were hot after him. 

Mr. Bash. We were trying to maintain our position. Now, this 
got to a point where the outsiders or the nonmembers, on some 
products, based on Government figures and the reports to the Asso- 
ciation, were shipping more than the members. 

Mr. Henderson. That may be true. It may be true, but your 
testimony here certainly indicates that you wanted some help from 
the cartel members on restraining the export trade of competitors, and 
that is specifically prohibited by the language of the Webb-Pomerene 
Act. I can understand very definitely on the mechanics of running 
it under these difficulties that you can't handle a situation if the out- 
siders get the market. Every cartel, every arrangement that has 
broken down has usually broken down, barring war and other things, 
because of outsiders, but I don't know how you can reconcile it with 
that specific language in the act. 

Mr. Bash. The net result of it was, we far from restrained them. 
It was just the opposite. They grew up and grew up like a mush- 
room. 

Mr. Feller. Aside from the question of what the foreigners 
actually did, I understand from this letter that your company was 
asking foreigners to cut prices so as to drive small American concerns 
out of the European market. Isn't that the net effect of what you 
were asking? 

Mr. Bash. No. 

Mr. Feller. Well, what does the word "elimination" mean? 
Your answer was that the Europeans didn't want to do that, and I 
say, "Good for them." 

Mr. Bash. I don't say that the Europeans 

Mr. AviLDSEN (interposing). I understand Mr. Bash said that 
they offered to the foreign cartel to let these American firms sell that 
way if they would reUeve them of the penalties. 

Mr. Bash. I will go further than that and say that that was an ac- 
tual happening. We were relieved of responsibOity. 

Mr. AviLDSEN. In other words, instead of dropping their prices, 
they relieved you of responsibifity? 

Mr. Bash. We were relieved of entire responsibility as far as non- 
members were concerned. The net result was that the prices dropped. 

Mr. O'CoNNELL. There is nothing about that in this letter. 

Mr. Bash. No. 

Mr. O'CoNNELL. So far as this letter is concerned, and even admit- 
ting you were unsuccessful in what you hoped to accompUsh, is it 

124491 — 40 — pt. 20 15 



10960 CONCENTRATION OF ECONOMIC POWER 

not a fair statement that what you are proposing is that your Euro- 
pean partners take such actions as would be necessary to eUminate 
American producers who were not members of your organization? 

Mr. Bash. I don't beUeve under any circumstances any time we 
can eliminate anybody. 

Mr. O'CoNNELL. You can try. I address myself rather to what 
you hoped to accomplish, rather than to the results. 

Mr. Bash. We were asking the Europeans to either take their share, 
of the busLQess, and I don't think you can divorce a letter from all of 
the other circumstances and conditions that surround it; this is just 
one cold part of the whole situation, and finally the situation got so 
unbearable that we were relieved of' the entire responsibility for the 
American nonmembers. 

Mr. AviLDSEN. In other words, isn't it true that you didn't care 
how much the small companies sold in th& small markets or at what 
price, as long as you didn't have to pay penalties to the cartel? 

Mr. Bash. If we didn't have to pay penalties to the cartel, then we 
could defend ourselves in open competition, and that is what we asked 
for. 

Mr.'O'CoNNELL. It seems to me you are complicating the situation. 
At the time the letter was written you were obligated to pay penalties 
to the extent that you exceeded the quota to the American markets'. 

Mr. Bash. Quite so, and this situation became even more aggra- 
vated. 

Mr. O'CoNNELL. You knew this situation: the outsiders entered 
into the arrangement and you agreed to pay penalties if the American 
producers exceeded their quota. At the time this letter was written 
you attempted to get cooperation from the European partners to 
eliminate American producers from the trade who were not members 
of your association. Isn't that a fair situation? 

Mr. Bash. Somewhat, but isn't it reasonable — I will put it another 
way. Should we break up an association which, as far as I am 
concerned, was most beneficial to American steel production because 
we have some people who won't come in and, instead, want to hang 
on to our coattaUs and live under the aegis of it? 

Mr. O'CoNNELL. It is qmte obvious, of course, that X will not answer 
that question, but I do suggest you read the provisions of the Webb- 
Pomerene Act which, as I understand it, is to prevent the thing hap- 
pening which you were trying to accomplish in this case. It isn't a 
question of what would be reasonable for you to do, but what you are 
permitted to do undef- the law. 

MJK Bash. Absolutely, and we had no intention of eliminating them 
100 percent, you can't. 

Mr. O'CoNNELL. That is the effect, it has nothing to do with what 
you hoped to do. 

Mr. Bash. If we had said "compete" we would have come to the 
same result. 

Mr. O'CoNNELL. Change what, word? 

Mr, Bash. Instead of using the word "eliminate" be allowed jto be 
competitive. In essence that would be what it amounted to. 

Mr. O'CoNNELL. You say "we have been asking them to do this for 
sometime, to eliminate the American outsider." It seeihs to me those 
words* mean what they say and I don't see how you can make it 



CONCENTRATION OF ECONOMIC POWER 10961 

different by substituting the word "competition." The purpose, as 
I understand it, was to either force the so-called outsiders into your 
association, or to eliminate them from the foreign business. 

Mr. Bash. There is no way of forcing them. We did all the 
talking we possibly knew how to do to try to convince them that it 
was not only to their benefit, but to the country as a whole for them 
to come along. 

Mr. O'CoNNELL. Having talked to them and been unsuccessful, 
this is another method of attempting to bring them into the associa- 
tion, is it not, or to eliminate them from the trade? It has nothing to 
do at this point with how effective you were, looking at it today. I 
am interested in what you hoped to accomplish and what you actually 
did then. 

Mr. Bash. I would say this, that there was no intention or any 
expectation that at any time we could eliminate anybody from 
competing in the steel industry or the export trade. 

Mr, Henderson. Mr. Bash, I would like to read you an item from 
the New York Times of December 11, 1937. It is a wireless to the 
New York Times and the date line is Berlin: 

The net result of the session of the European Iron and Steel Cartel with repre-: 
sentatives of the United States Iron and Steel Industry at Dusseldorf this week 
appears to have been reduction of the European price of some highly specialized 
plate and sheet iron products in order to meet American competition and dis- 
courage additional American concerns from entering the export market. 

Does that adequately express what did take place? 

Mr. Bash. I wasn't there, sir. 

Mr. Henderson. Were representatives of the S. E. A.^? 

Mr. Bash. I don't know whether they were or not. I don't' 
believe they were. You say in December? 

Mr. Henderson. This was in December 1937. 

Mr. Bash. I question that because at that time we were in London — 
not we, I was in London at which time we were arranging or agreeing 
to report shipments in the case of some products from December 1, 
1937, and the others January 31. 

Mr. Henderson. Do you want me to understand that no member 
of the Export Association was there at that particular time? 

Mr. Bash, I don't want you to understand it because I don't 
know whether they were or not. 

Mr. Henderson. Were you representing the Export Association? 

Mr. Bash. No ; at that tune I went to London on company business; 
I did not go over on steel. 

Mr. Henderson. On Bethlehem business? 

Mr. Bash. Yes. 

Mr. Henderson. Who was representing the Association? 

Mr. Bash. There was no one there at the time representing, other 
than the man of the local office. 

Mr. Henderson. You mean you had two people at the London 
office? 

Mr. Bash. There was a permanent London office of the Steel 
Export Association. 

Mr. Henderson. Do you know whether their members were 
present? 



Steel Export Assodatlon. 



10962 CONCENTRATION OF ECONOMIC POWER 

Mr. Bash. I can't tell you yes or no. 

Mr. Henderson. Do you know, Mr. Sckroeder? 

Mr, ScHROEDER. I don't know. 

Mr. Henderson. ThB whole reporting of the cartel meeting con- 
stantly iterated' that the American concerns were there negotiating at 
the French meeting— at the Paris meeting this was— and it indicated 
that United States and Bethlehem were both in attendance at that 
time. 

Mr. Bash. I can answer for myself that I was not in Dusseldorf 
m December 1937. 

Mr. Henderson. All right. Now in February 1937 when the 
negotiations first started, were you at the meetmg with the cartel 
people? 

Mr Bash. Yes; in London in February, I and another representa- 
tive of the association. 

Mr. Hendersen. And you were negotiating on the basis of renre- 
sentating the S. E. A.? 

Mr. Bash. That is right. 

Mr. Henderson. But as far as you know at this period nobody was 
representing 

Mr. Bash (mterposmg). They might have been, I can't tell you 
one way or the other whether they were or weren't. 

Mr. Avildsen. Mr. Bash, can you tell us somethmg about the 
amount of export business which was done by these companies prior 
to the time when the_ price of these commodities got very high? 
Did they substantially increase their proportionate amount? 

Mr. Bash. Many hundreds percent. 

Mr. Avildsen. They were not in the export market to any extent 
when the price was low, but when the price rose they came in. 

Ivlr. Bash. They were "inners" and "outers", as we called them. 
When the domestic business was poor they were in the export trade 

Mr. Avildsen. Regardless of the export price? 

Mr. Bash. No; if the price was worthwhile. When the domestic 
business was good they practically disappeared. 

Mr. Avildsen. So it couldn't be said they depended on export busi- 
ness for their existence. 

Mr. Bash. On the contrary. Their participation in the export 
business, m companson with some other companies who estabHshed 
the exports from the United States, the basis on which our quotas 
were given to us 

Mr. Avildsen (interposing). As long as the cartel's price was 
rather low they did not come in and disturb the situation or cause you 
to pay any penalties; it was only when the cartel price rose. 

Mr. Bash. That is right, and of course under the cartels the prices 
were good, otherwise there wouldn't be any good reason to have a 
cartel. I think Mr. Schroeder said something in his memorandum 
this mornmg about raidmg the export markets when prices were 
attractive. 

Mr. Feller. Mr. Bash, as I understand it, you had, of your own 
free ^vill, assumed this responsibihty in your negotiations with the 
foreign cartel. 
Mr. Bash. I wouldn't say of our own free will, we tried to avoid it. 



CONCENTRATION OF ECONOMIC POWER 10963 

Mr. Feller. The American outsiders bore no responsibility for 
the one you undertook under that obUgation, they weren't parties 
under the agreement. 

Mr. Bash. Not the sUghtest responsibility did they assume or 
bear. 

Mr. Feller. After undertaking this obligation on the basis of your 
negotiation with the foreign cartel, you found the American outsiders 
were a disturbing influence and in order to relieve you/self of that 
obligation you asked the foreigners to go ahead and eUminate them 
from the export market. Isn't that what you did? 

Mr. Bash. Mr. Feller, you must bear in mind that when you enter 
into a cartel arrangement, unless there is a definite, positive under- 
standing that the cartel is going to be competitive, all you are doing is 
holding an umbrella for the people who won't come in for some reason 
or other. 

Mr. Feller. Exactly, and therefore the question really arises — 
and I think the fundamental question here is if the provision of the 
Webb-Pomerene Act, to the effect that the export business of out- 
siders should not be restricted, is to be adhered to, whether it is 
possible to have an export association at all in this situation. Don't 
you think that is a fundamental question? 

Mr. Bash. We think it is an excellent thing for the country to be 
allowed to make arrangements for export, as they have been made, and 
should a few companies who, under competitive conditions, are not 
seriously interested in export business, should they be allowed to 
disrupt the steel export trade of this country? 

Mr. Feller. The Congress has said that you can't stop them; 
the Congress has said you can't interfere with the export trade of any 
outsiders. 

Mr. Bash. Well that is just about the result that happened. We 
couldn't interfere and I guess we were the losers. 

Mr. Feller. Didn't you try to interfere here? 

Mr. Bash. We tried to get the foreigners to take their share of the 
business, definitely. 

Mr. Feller. You tried to get them to cut prices and eliminate 
American outsiders. 

Mr. Bash. Wait a minute; no, sir; I object — to eliminate our 
responsibility. We were not allowed to defend ourselves. And 
finally, we did get relief of that responsibility because we couldn't 
continue under that situation. 

Mr. Feller. And furthermore, as you said, the sooner these mills 
are eliminated from taking business, the better our chances will be of 
bringing them under control in our own group. That was another 
purpose? 

Mr. Bash. I didn't say that. 

Mr. AviLDSEN. There wouldn't be any purpose in joining your 
cartel if they could shoot under your umbrella. 

Mr. Bash. Right; and the net result would have been that if this 
thing had continued, if we weren't allowed to be relieved of the respon- 
sibihty and we went abroad and said to the people on the other side, 
"Unless you reUeve us from this responsibility we are withdrawing from 
the association because we cannot live under those conditions and. 



10964 CONCENTRATION OF ECONOMIC POWER 

assume responsibility to the extent that a man who has been a very- 
small participant will grow under it," to the extent that he is getting 
more than the members that are in the association. 

Mr. AviLDBSEN. Your other American members would have with- 
drawn from the American association? 

Mr. Bash. Absolutely. 

Mr. AviLDSEN. And the whole cartel Tvould have gone down? 

Mr. Bash. Yes. 

Mr. Henderson. That was a significant item in the N. R. A. 
Code as far as it concened allocaions and quotas in the price arrange- 
ment. That was the difficulty with the 10 percent. 

Mr. Bash, let me ask you this: The foreign participants in these 
arraneeTnents had many more sanctions by which they could treat 
with outsiders, did they not? 

ivlr. Bash. I bGlicve their Government allows them to do many, 
many things which we wouldn't think of doing. They allow them to 
coerce and to do — weU, I won't say almost anything — a great number 
of things. 

Mr. Henderson. That has been the trend in tne heavy industry 
cartels abroad. 

Mr. Bash. In a lot of industries too. 

Mr. Henderson. The English, for example, have gone into this 
import hcensing scheme. It makes no difference what price is 
quoted by the Belgian-Luxembourg group, under the existing arrange- 
nients, even with the existing tariff, they couldn't get in if the im- 
porter didn't have a license, could they? 

Mr. Bash. Yes; and I will give you an example of how far it went 
in England. We will take the tin-plate manufacturers. A great 
number of them, as you undoubtedly loiow, are small units, two mills, 
four mills, six mills, or maybe eight mills, located in various parts of 
Wales. The town pretty nearly exists on them. They are anti- 
quated; they have been there for generations; generally run by a 
family, and naturally they must resort tc the use of merchants for the 
sale of their products. A number of those merchants were licensed 
and at any time that they broke the price or violated an agreement 
they were taken off the list and were not allowed to sell for those mills. 

That is the extent that they went to in order to control their 
industry in an effort to maintain a reasonable price. 

Mr. Henderson. Naturally in these other coimtries, too, the gov- 
ernment is a substantial factor, is it not? 

Mr. Bash. Absolutely. 

Mr. Henderson. Sometimes they are partners, are they not? 

Mr. Bash. They can go to the government for help in any number 
of lines from the standpoint of — well, you know what a lot of them do 
insofar as subsidies are concerned. 

Mr. Henderson. In some of these countries the government is in 
the cartel, is it not? 

Mr. Bash. Yes; in the case of Britain they have the British Iron 
and Steel Federation, which is Government sponsored. 

Mr. Henderson. But in some part the German industry is owned 
by the German Government. 

^ Mr. Bash. That is right. In fact, they are erecting at the prescDt 
time a new steel works which is owned, I beheve, whoUy by the 
Government. 



CONCENTRATION OF ECONOMIC POWER 10965 

Mr. Henderson. And in that sense the Government does get a 
chance to review the considerations as to whether they will or will 
not apply sanctions to outsiders and as to whether the price is suited 
to its OAVTi economic policy at the moment. 

Mr. Bash. The steel industries of various countries can go to the 
Government for assistance, lay their case before them, and look at it 
not from the individual companies, but from the country as a whole. 

Mr. Henderson. That as true certainly in what the British did in 
arranging the tariff for the Imports Advisory Committee. 

Mr. Bash. Exactly. 

Mr. Henderson. They worked it up to 33 percent and then back 
to 20 percent after they had negotiated a satisfactory agreement with 
the cartel. 

Mr. Bash. Yes ; and of course you know, notwithstanding the tariffs, 
they have an agreement with the continentals in which a certain 
amount of tonnage is allowed to England each year. As I recall it, 
I think it is a half million tons, which is part of the over-all picture of 
the cartel system. 

Mr. Henderson. You have decided difficulty, so far as the Amer- 
ican structure of laws is concerned, in trying to work out an arrange- 
ment with the international cartel, do you not? 

Mr. Bash. Yes. 

Mr. Henderson. It gets down pretty much to the standards of 
operation and regulation of these cartels, does it not, Mr. Bash? 

Mr. Bash. Well, personally I thought that the Webb-Pomerene 
Act covered it for us. 

Mr. Avildsen. Do you think that act should be modified or 
changed? 

Mr. Bash. We are perfectly satisfied the way it operates now. 

Mr. Henderson. I think the substance of today's testimony would 
indicate that there is only a minimum of public protection in this 
difficult undertaking. You are likely to get either short-run or long- 
tun considerations. They are likely to be unsuited, as Mr. Feller 
points out, to the particular economic trend in the country. In other 
words, in 1938 so far as the use of our facilities in this country toward 
giviQg employment was concerned, regardless of other considerations, 
the outsiders were acting more in the national interest than the 
members of the S. E. A. 

Mr. Bash. I tldnk I mentioned before you came in, Mr. Henderson, 
one point that I wanted to clear if it wasn't fuUy understood, and that 
was Mr. FeUer's question as to whether or not we, that is the American 
steel industry, would have secured more business if there had not been 
a cartel in 1938. My answer to that is that I tliink we would have had 
less for the simple reason that we would have European competition, 
as I have mentioned quite a number of times, of the severest form, so 
instead of having more without a cartel I tliink we would have had less 
without a cartel. 

Mr. Henderson. WeU, that is what I am indicating. Under this 
arrangement you are the determinators, you are the judges, of the 
long-run and short-run consequences and you are undoubtedly in- 
fluenced by what is good for the dominant corporations in that associa- 
tion. The law as it is set up today says it just can't happen here. 
It just can't happen that this kind of an arrangement should inter- 
fere with the freedom of action of those who do not voluntarily go 



10966 CONCENTRATION OF ECONOMIC POWER 

into the cartel, and the law was certainly designed to prevent com- 
pulsion. It was certainly intended to give the outsiders the same 
measure of protection as the Sherman Act gives competitors in the 
domestic trade. 

Mr. Bash. Would you say that it interferes any more with them 
under this situation in the cartel than it would in open competition? 
It is stiU competition. 

Mr. Henderson. A different brand and variety, and it runs entirely 
contra to the commonly accepted ideas of competition upon which 
our laws are based. 

Mr. Bash. Isn't competition the right to name any price you so 
desire? 

Mr. Henderson. That is one element of it, yes; but if this action 
you suggested were followed you would have prevented an individual 
from getting that business, by utilizing the superpower of the organi- 
zation of all the important steel companies acting in a unitary capacity. 
There would be a small producer against the whole world of steel 
producers; that is what he would be up against. 

In other words, if you follow the line down, that outsider would 
never get any business, no matter what price he quoted. 

Mr. AviLDSEN. He would get his permitted amount. He is offered 
to come into the cartel. He is given a chance to come in. 

Mr. Henderson. But the essence of the Webb-Pomerene Act is 
voluntary association. 

Mr. AviLDSEN. That is right ; but you say he couldn't get any export 
business. He could; he could get his pro rata amount. 

Mr. Henderson. Not if he stayed out. If you follow the logic 
implicit in this attempt to ehminate the American outsider, he 
wouldn't have freedom to quote a price that seems to him reasonable, 

Mr. AviLDSEN. Oh, a reasonable price; now you are talking about 
another thing. He continued to quote but he didn't get into this 
fancy price that the cartel was trying to get. 

Mr. Henderson. What Mr. Bash says is that it didn't work out 
that way; they didn't go that far. What they did was take the 
alternative of relieving the S. E. A. of responsibility for that quota. 

Mr. Bash. And then we became competitive with him. 

Mr. AviLDSEN. They didn't keep him out of the market. 

Mr. O'CoNNELL. They weren't successful in keeping him out of 
the market. 

Mr. AviLDSEN. They didn't try to keep him out of the market. 

Mr. Henderson. I think they did. 

Mr. Bash. No, sir. 

Mr. Henderson. I think the record running over a period of years, 
according to all the reports I have ever heard, is that there was a 
very definite attempt on the part of the cartel to cut prices to keep 
out the American outsider. 

Mr. AviLDSEN. To keep him from getting more than his share of the 
business but not to keep him out. 

Mr. Henderson. Well, a share of business presumably is deter- 
mined in America by what you can get by price competition and 
managerial efforts. 

Mr. Reynders. Wasn't the price actually made by these outsiders? 

Mr. Bash. All we did was endeavor to follow them down but they 
were always a few jumps ahead of us. 



CONCENTRATION OF ECONOMIC POWER 10967 

Mr. Reynders. They were making the price? 

Mr. Bash. Exactly. Of course, Mr. Henderson, I would like to 
point out that wheil we went across we made the best bargain we knew 
how to make, with every expectation and hope that we wo^ild have in 
this group, based on prior conversation, the people who were interested 
in any particular commodity. We did what we thought was worth 
while and in the benefit of the country as a whole. Now does it 
come to the point that we should renounce the deal or the agreements 
which we made? 

Mr. Henderson. I think it doesn't fall in that particular way. 
I think there has been presented today, with the assistance of your 
comment and the material which has been introduced, a very im- 
portant question, and that is not whether an organized American 
industry should participate in trying to get the best advantage it 
can in the export business, but what protections are needed to insure 
a fair deal. I think that is the most important question. 

I would agree, as I think my remarks this morning would indicate, 
that there just isn't any hope for individual companies in export 
business to try to get a substantial tonnage when they are moving 
into a form of world business and particularly export business, that 
is under group control. But in order to get reconciliation I am sug- 
gesting that perhaps something more in the way of standards is needed 
so that you won't be driven to a temptation of trying to ^hminate 
the outsiders. 

Mr. Bash. In the first place, it is an impossibility to eliminate them. 

Mr. Henderson. I am not so sure about that. 

Mr. Avildsen. Were all these firms invited to come into the 
cartel? 

Mr.'BASH. Yes, sir; we consulted every one of them and invited 
them to come in. We even went to the extent of offering them quotas 
which we understood were considerably in excess of their proportionate 
business in free open competition. 

Mr. Feller. Why do you think they stayed out? 

Mr. Bash. I can only imagine one thing — to get as much business 
as long as they could under the umbrella. 

Mr. Feller. Did any of them give you any other reason? Do you 
recall whether any company suggested that they were staying out on 
advice of counsel i* 

Mr. Bash. No; I don't. 

Mr. Henderson. I gather from the essence of the letter covering 
the Earl of Dudley's visit, that the outsiders were invited to that 
meeting, were they not? 

Mr. Bash. Well, at that time, yes; a portion of it, in the sheet 
agreement, the proposed sheet agreement all of the members, or rather 
all of the various concerns which we consulted were nonmembers; 
they were brought there with the hopes that they would be convinced 
of the desirability of coming in. 

Mr. Henderson. All of the low-cost producers were there, I under- 
stand. Inland was there; Weirton was there. 

Mr. Bash. I don't think there was anyone that we missed. 

Mr. Henderson. You invited them to hear what the Earl of Dudley 
and the rest of them had to tell you? 

Mr. Bash. Exactly. 



10968 CONCENTRATION OP ECONOMIC POWER 

Mr. Henderson. As to what they would Hke to have so far as a 
cartel arrangement is concerned. 

Mr. Bash. And I think that that helped us somewhat in finally 
arriving at quotas. 

Mr. Henderson. Of course, this letter and the visit of the Earl 
of Dudley came after the important meeting of the cartel to which 
I was referring. That was in November and December of 1937 and 
the Earl of Dudley and the other representatives were here in Feb- 
ruary of 1938. 

Mr. Bash. 'Thirty-eight. 

Mr. Henderson. So it was a very acute problem as to what these 
outsiders were doing so far as prices were concerned. 

Mr. Bash. Of course if you will recall, they said at that meetmg 
that they didn't think that U. S. Steel Products Co. and ourselves 
had carried along with our obligation. 

Mr. Henderson. That is right. They were holding you to the 
obligation of getting in these fellows. 

Mr. Bash. Exactly, and I think we convinced them at that time 
that we had made serious effort to do it. 

Mr. Henderson. They evidently indicated that if vou weren't 
able to do it they would take a part in it and, not only'^that, would 
probably invade the U. S. market. 

Mr. B-ash. No, sir. 

Mr. Henderson. Well I prefer to think, Mr. Bash, that this 
statement — 

The inference was p'ain that such a low level of export prices would probablv 
result in foreign makers attempting to share in the large and relatively high 
priced American domestic market — 

meant something to the writer. He was a fairly well qualified ob- 
server at that time. 

Mr. Bash. Let's analyze that. We'll take the Earl of Dudley, 
who is in the British industry. Certainly the Earl of Dudley couldn't 
possibly have been talking about the British industry because they 
had never had, as I understand it, any worth-while participation in 
this market. 

Mr. Henderson. No; but that is just the point. It was the in- 
dustry acting as a whole. I can recall about the middle of 1936, I 
think it was when the Queen Mary made its first trip, some of the 
steel fellows were coming over here and they said — they gave out a 
broadcast: 

We are coming over here and tell the American industry they ought to get nto 
the cartel. We are in the water and the water is fine, they ought to get into it also; 

Mr. Bash. Yes, sir; that was the first visit. 

Mr. Henderson. I think there was some very definite suggestion 
that if you people, you, Bethlehem and U. S., didn't take care of the 
situation, they would so far as the American market was concerned. 

Mr. Bash. No; Mr. Henderson. We have and always have re- 
fused even to discuss anythmg with regard to the domestic market in 
any shape or form. 

Mr. Henderson. I am not suggesting that you discussed it. I 
am saying what the representatives of the cartel told you and Weir 
and all the rest of the producers who were present at the meeting. 



CON/ENTRATION OF ECONOMIC POWER 10969 

Mr. Bash. Nq^ I don't think so. I think the reason for that 
meeting was th/ fact that they did not feel that the export people 
were putting ^loiigh energy in forming the agreement, which pro- 
posed agreem^t we had signed in February. In fact, they asked to 
meet the preslxients of our various companies with the idea of trying 
to coax them — I won't say coax them, but with the idea of having 
them get behind us and push this thing through. 

Mr. Henderson I don't see any reason why you shouldn't use the 
the word "coax." When you want to influence a desirable action, 
one desirable to you, you are at liberty to use all yoiu* power and 
persuasion. A lot of business is done that- way. 

Mr. Bash. I didn't avoid it for any particular reason except that 
the other was more expressive. 

Mr. Henderson. Wliat I think you are saying to me is that they 
were raising questions about U. S. and Betidehem, they didn't feel 
they had shown enough energy. 

Mr. Bash. Exactly. 

Mr. Henderson. Do I take it from that they felt you could have 
gone into some agreement in order to get a participation in the ex- 
port business and had become indifferent as to what the American 
producers would do? 

Mr. Bash. No; it was to our interest to get them in because we 
had assumed responsibilities for them, so naturally if we had a quota 
of "X" amount and the people other than U. S. Steel and Bethlehem 
shipped all that tonnage, necessarily there wouldn't be any reason 
for us to continue an agreement. All we were doing was assuming 
responsibility and getting nothing out of it. 

Mr., Henderson. As a matter of fact, if you went out in competi- 
tion on costs, that is United States and Bethlehem as against the rest 
of the people named there, you probably would be at a decided 
disadvantage, particularly on hot- and cold-rolled sheet, wouldn't you? 

Mr. Bash. Are you talking about as compared with the other 
American companies? 

Mr. Henderson. I am talking as to United States and Bethlehem — 
the competition pricewise would be at a disadvantage. 

Mr. Bash. I mean competition with whom? 

Mr. Henderson. With Republic, Armco, Youngstown, Wheeling, 
Weirton, Great Lakes, J. & L. 

Mr. Bash. I don't know why we should be at a disadvantage. 

Mr. Henderson. On the matter of costs? Isn't it pretty generally 
understood they are lower-cost producers than the two large organi- 
zations? 

Mr. Bash. I can't answer that, but I can only answer you in 
respect to the amount of business that has been done in the export 
trade, and I think without question that the major portion of it in 
years gone by has been done by U. S. and Bethlehem, in all prod- 
ucts. There may be a few exceptions. 

Mr. Henderson. Until recently, that was the reason for the threat, 
one of the reasons for trying to get them into line. That was one of 
the reasons for getting away from competition based on ignorance, 
the phrase you used this morning. 

Mr. Bash. Right, but there was no question in my mind but what 
we would still have retained our position in the trade because we are 
in the business day in and day out. 



10970 CONCENTRATION OF ECONOMIC POWER 

Mr. Henderson. I said you would have been at a disadvantage 
costwise. 

Mr, Bash. I can't answer you as far as costs are concerned. 

Mr. AviLDSEN. Mr. Bash, are you familiar with any other export 
associations formed under this Webb-Pomerene Act in other com- 
modities, as to whether they are operating successfully? 

Mr. Bash. I can't answer. I know that there are a number of 
them. I am not familiar with them. I don't know how they 
operate. 

Mr. AviLDSEN. You don't know whether there are others with 100- 
percent membership? 

Mr. Bash. No; I don't. 

Mr. Feller. I should just like to ask one question, Mr. Bash. Mr. 
Bash, supposing in the domestic business the United States Steel 
Corporation and Bethlehem should publish a price on plates and shapes 
and these mills that are referred to here, Worth and Central, the 
Philadlephia district mills, should sell their, plates and shapes in 
California at a price below your quoted price, do you think it would 
be proper for Bethlehem to ask United States Steel Corporation to 
cuts its price in California so as to eliminate Worth and Central from 
California business? 

Mr. Bash. Mr. Feller, I don't know the first thing about the 
domestic trade. As I have said earlier this morning, my entire ex- 
perience has been in export. 

Mr. Henderson. Have you been representing Bethlehem very long? 

Mr. Bash. I think since — do you mean in the Association? 

Mr. Henderson. Well, in the foreign business. 

Mr. Bash. Well, I have been with Bethlehem in the foreign end 
since 1922. 

Mr. Henderson. Have you represented them in connection with 
the Eail Cartel? 

Mr. Bash. No, sir; I did not. 

Mr. Henderson. Who did? Did Mr. Schwab usually attend to 
those things himself? 

Mr.' Bash. Mr. who? 
-Mr. Henderson. Mr. Schwab. 

Mr. Bash. No; I think possibly if there was representation it was 
by my predecessor, Mr. Stewart. I don't know whether he repre- 
sented them or not, 

Mr, Henderson. You people weren't in the tube market, then? 

Mr, Bash, Yes. 

Mr. Henderson.* Your predecessor probably represented you. 

Mr. Bash. Yes, Originally when the tube cartel was formed, We 
had' just about begun the manufacture of pipe. We entered into the 
tube cartel with a quota which was to become effective if and when 
we entered the export trade on tubular products. We didn't enter it, 
as I recall it, for possibly a year after we began to manufacture tube, 

Mr. Henderson. In that connection 

Mr. Bash (interposing). You of course imderstand that was after 
the Association was formed in '28. 

Mr. Henderson. Yes; that is as far as tubular goods were con- 
cerned. 

Mr. Bash. Yes, 



CONCENTRATION OF ECONOMIC POWER 10971 

Mr. Henderson. You people were participating to some extent in 
the rail cartel before that. 

Mr. Bash. Not to my knowledge. 

Mr. Henderson. It was longer ago than that. I see someone m 
the back row shaking his head. 

Mr. Bash. I can't answer you insoiar as that is concerned. I don't 
know when that was started. 

(Senator Eling assumed the Chair.) 

Mr. Henderson. I am not tr3dng to do any pinning down, but I 
am trying to get at the fact that your experience has been in markets 
where conditions of trade are entirely different from the domestic 
steel business, 

Mr. Bash. My entire history. 

Mr. Henderson. And over a period of years, as we agreed before, 
European trade has been going toward cartel arrangements with 
the fixing of prices, allocation of quotas, reservation of markets, and 
the Uke. 

Mr. Bash. I think it is growing more all the time. 

Mr. Henderson. My observation is that the steel testimony has 
indicated possibly we are tending a bit toward that in our efforts. 
There seems to be an inevitability of trend that way. 

Mr. Bash. I think if we expect even to maintain our position we 
must do that. 

Mr. Henderson. In the foreign trade? 

Mr. Bash. In the foreign trade. 

Mr. Henderson. I was speaking of the domestic. 

Acting Chairman King. I want to apologize to the members of the 
committee for not being here. I am a member of the District Com- 
mittee, and we had to lay a foundation for the Jefferson Memorial. 

Mr. Feller. Mr. Chairman, I myself have no further questions, 
but if I recall, I just interrupted one of the members of the com- 
mittee in a question. 

Mr. O'Connell. Mr. Bash, would it be fair to say that the long 
run success of a cartel organization such as the one you represent 
depends upon participation in it by substantially all producers in a 
particular field? 

Mr. Bash. To get the utmost out of it; yes. 

Mr. O'Connell. In other words, to be most effective your organi- 
zation would have to be composed of all producers. 

Mr. Bash. I wouldn't say all producers. 

Mr. O'Connell. All substantial producers. 

Mr.' Bash. All those substantial producers that are interested in 
export trade. There are some substantial producers that are not in- 
terested in export trade, I assume, evidenced by the fact^ that we 
never encounter or haven't encountered their competition very 
seriously. 

Mr. O'Connell. But the success of the efforts of your organiza- 
tion particularly as related to dealing with international organizations 
has a direct relationship to the extent to which you can have 100-per- 
cent participation at home. 

Mr. Bash. The nearer we get to 100 percent the more we are going 
to get out of it. 



10972 CONCENTRATION OF ECONOxMIC POWER 

Mr. O'CoNNELL. As I understand it the Webb-Pomerene Act 
would prevent that 100-percent participation except on a purely 
voluntary basis on the part of the home people. 

Mr. Bash. That is correct. 

Mr. O'CoNNELL. In view of that fact and since you are so con- 
vinced that it is essential that we meet the foreign situation as we 
find it, would you be in favor of legislation which would require par- 
ticipation in a cartel orgaDization such as the one you represent? 

Mr. Bash. No, sir; I hardly know how to answer that. 

Mr. O'CoNNELL. It seems to me that would almost follow. 

Mr. Bash. Well, I don't think you can force anyone. 

Mr. O'CoNNELL. You mean that your attempts to force them 
have tended to make you believe that you can't do it? 

Mr. Bash. Well, shall we use the word "force" or "coerce"? 

Mr. O'CoNNELL. "Coerce" is all right with me. "Coerce" would 
suit me all right. 

Mr. Bash. We have done our utmost to get them to come in. As 
I said before we went to the extent of offering them appreciably more 
than they had done in open competition. We not only asked them 
to come in, we pleaded with them to come in. 

Mr. AviLDSEN. You tried to coax them in. 

Mr. O'CoNNELL. I am addressing myself to whether or not you 
think it advisable to offer some outside help to get them in. You 
admit that it would be very desirable from the standpoint of your 
organization to have 100-percent participation. You haven't been 
able to get that. 

Mr. Bash. To be perfectly frank with you, I have never given it 
any serious thought. 

Acting Chairman King. Do you think the Federal Government 
has the authority to coerce, intimidate, or force domestic manufac- 
turers of steel in its various forms to join a cartel? 

Mr. Bash. I don't know, but I doubt it. 

Acting Chairman King. Speaking only for myself, on my own 
views of individual hberty, I should deny that it had. 

Mr. O'CoNNELL. I wasn't attempting to indicate that I thought 
it was within the power or not within the power or that I thought it 
was desirable or not. I merely said it seemed to me the witness' 
position would lead necessarily to the conclusion that whatever would 
be reasonably necessary to get 100-percent cooperation, that .you 
think is not essential but desirable, would be worth giving consider- 
ation. 

Mr. Bash. I don't think that the Government should in any way 
interfere with the liberties of either individuals or corporations when 
it comes to the question of trying to force them. 

Mr. O'CoNNELL. What about the cartel organization? Would vou 
say that that same statement would apply as regards the activities 
of your group? 

Mr. Bash. Yes; I don't think that we would v/ant anything that 
would be used to force them rnto the cartel system. 

Mr. O'CoNNELL. As I have interpreted the letter that we have 
had so much discussion of, it would come in the category of attempts 
on the part of your organization to force outsiders either into your 
organization or out of the market, the export market. 






CONCENTRATION OF ECONOMIC POWER 10973 

Mr. Bash, Well, we would much prefer to have them in, but if we 
are assuming responsibility, I can't help but keep coming back to it 
all the time, we have assumed responsibility for the entire shipment of 
America 

Mr. O'CoNNELL (interposing). You voluntarily assumed it? 

Mr. Bash. It would seem to me that we should be allowed to defend 
ourselves 

Acting Chairman King. Excuse me, you assumed the responsibility 
for the entire shipments of the United States? 

Mr. Bash. Yes, sir. 

Acting Chairman King. What business had you or your group to 
assume that responsibility? The Webb-Pomerene Act doesn't give 
you or your group the authority to assume that responsibility, if I 
properly interpret it. 

Mr. Bash. We didn't willingly assume the responsibility. We had 
to be responsible for their shipments. 

Acting Chairman King. For what shipments? 

Mr. Bash. For the shipments of the nonmembers, and in exchange 
for the quotas which were granted us which were based on total ship- 
ments from the United States. 

Acting Chairman King. And in order to avail yourself of the provi- 
sions of the Webb-Pomerene Act you construed it to authorize you to 
assume that responsibility even though it meant that you by intimi- 
dation or coercion or by cutting of prices could crowd out of the market 
those who didn't join your organization or force them into joining it. 

Mr. Bash. Well, we never used any intimidation. We endeavored 
to the best of our abilitj to have them join, trying to point out to them 
the advantages of commg into the association. 

Acting Chairman King. Do you think that you went any further 
than labor unions in trying to get employees to join their unions? 
They have used a good deal of force, I am told, in some activities. 

Mr. Bash. I don't think we went as far. From what I under- 
stand I don't think we went as far. 

Acting Chairman King. I voted for the Webb-Pomerene Act and 
made what contribution I could to see it passed. I never dreamed 
that it could be utilized as a cliib or bludgeon to force producers into 
the cartel, that is domestic producers, or to force them at all, or to 
use coercion in order to bring them within the periphery of its influence 
and power. 

Mr. Bash. I don't think we have used it as a club. 

Acting Chairman KrNG. Well if you have, you have done wrong, in 
my opinion. 

Mr. Bash. So do I, because then it enters into the question of 
restraint of trade. 

Acting Chairman King. I think the purpose of that act was to 
emphasize the fact, in a way, that the United States was not self 
contained, that it was to the advantage of manufacturers and agricul- 
turalists to find markets for their surplus commodities, to recogiuze 
the fact that we were not isolationists, as some Americans would like to 
have us, and that trade and commerce were essential to the prosperity 
of the individual as tvell as groups, and our industry generally, and 
that if we could take an important part in the commerce of the world, 
find markets for our surplus commodities, we would be helping not 



10974 CONCENTRATION OF ECONOMIC POWER 

only the producers of those commodities in the United States, but 
generally the whole economy of oar country, and to that extent, aid 
the rest of the world. 

Mr. Bash. I think the "Webb-Pomerene Act has certainly aided 
the completion of that. Without the Webb-Pomerene Act, as I 
mentioned, we would have the most severe competition to contend 
with from Europe, and I seriously doubt that we would have been 
able to have maintained the position that we have attained in the 
export trade year in and year out. 

Acting Chairman King. Suppose that any considerable number of 
companies producing steel in the United States refuse to come into 
the cartel, accept the cartel system, what would be the result? 

Mr. Bash. I am afraid if they were major interests there wouldn't 
be any cartel, we would be back in the old cat and dog days, fighting 
each other tooth and nail. 

Acting Chairman King. Don't you think that would be better 
than by any compulsory process to bring people into a cartel system? 

Mr. Bash. Yes. 

Acting Chairman King. You do recognize, however, that the cartel 
system will be menaced, or at any rate its benefits will be greatly 
minimized if there is a considerable number of American producers 
who not only refuse to join but try to displace the national markets 
of the world? 

Mr. Bash. Yes. 

Acting Chairman King. What recommendation do you and your 
group make in order to preserve the cartel system in the spirit in 
which it was contemplated by the Webb-Pomerene Act when it was 
passed, and at the same time allow freedom of action on the part 
of those who do not wish to join the cartel? Have you anything to 
suggest? 

Mr. Bash. No. There are a lot of aspects which have been brought 
up today from that angle which I have not personally thought out or 
attempted to. 

Acting Chairman King. I can see there are some problems there 
and if the nonmembers of the cartel group were bent upon smashing 
it or seriously injuring it by cutting prices far beyond what would be 
reasonable so that even they lost money on their operations, it would 
present a situation that might call for at least further consideration. 

Mr. Bash. The inevitable result would be if we had an umbrella 
over some one and they persisted in taking — I won't say the major 
share, but a good share of the business — the net result would be that 
the cartel would collapse. 

Acting Chairman King. Would you regard that as unfortunate? 

Mr. Bash. Yes. 

Acting Chairman King. Would it result in cheaper prices of domes- 
tic steel to consumers of domestic steel? 

Mr. Bash. I don't think it would have any effect on the domestic 
situation, I don't know, I don't know the situation as it exists in 
the domestic trade, but I don't see why one should be related to the 
other. 

Acting Chairman King. If the cartel system were voided by any 
reason or any cause it would, if I understand your philosophy, super- 
impose upon the domestic market a larger quantity of domestically 
produced steel, and thus increase competition here. 



CONCENTRATION OF ECONOMIC POWER 10975 

Mr. Bash. There would be more steel to be sold in the domestic 
market. As to whether it would create more competition, I don't 
know, but it would certainly be more steel to the extent of the differ- 
ence between what we are able to do imder a cartel and what we might 
be able to do if there weren't a cartel. 

Acting Chairman King. Is it your opinion that if there were no 
cartel our foreign markets would be greatly restricted? 

Mr. Bash. Absolutely. I think they would be reduced very 
considerably. 

Acting Chairman King. And you would have to reduce production 
in many steel mills of the United States? 

Mr. Bash. Yes. 

Acting Chairman King. And to that extent it would injuriously 
affect labor? 

Mr. Bash. Exactly, and I think it would come to the point that 
we just couldn't stand the gaff of continued foreign competition with 
the assistance granted in some measure or other by the governments 
of those various nations who were fostering foreign trade at all times. 

Acting Chairman King. You could, of course, exclude all steel 
commodities if you had no cartel, through the power of Congress. 
Under tlie interstate commerce power which it has, it could impose 
tariff duties which could keep out competition. 

Mr. O'CoNNELL. Is there a tariff now? 

Mr. Bash. I understand there is. 

Mr. O'CoNNELL. How substantial is it, do you know? 

Mr. Bash, I have no idea. 

Mr. Henderson. I would like to register a slight disagreement with 
the witness on whether or not it would affect the domestic market if 
the United States were in. 

I think it is the history of the big cartels in recent years — and I 
think at the forthcoming cartel hearing before this committee ^ it will 
be shown that it is the custom, and considered a justifiable one — to 
move into markets of those who are not participants in the cartel, 
either with the purpose of urging them to come in or of meeting their 
competition elsewise. 

During the N. R. A. many instances came to my attention in which 
members of a cartel would be assigned different countries outside the 
cartel and asked to keep up with competition in those countries — in 
other words, even to the extent of selling at a loss for the purpose of 
gaining that market and retaining a certain amount of tonnage for 
the cartel. I have no doubt that what Mr. Schroeder fears is exactly 
what would take place, particularly if the world ever is restored to a 
peaceful basis and a large amount of tonnage which is now employed 
for armament and other purposes is turned toward peaceful pursuits. 
That would be particularly true with the rise of the capacity of two 
producers who are not members — Soviet Russia and Japan. Added 
to the new German capacity and to the agitation for English capac- 
ity, which has been making great strides in the last few years, I don't 
believe that anything short of a definitive solution could be main- 
tained against that competition. 

I think that is one of the things which very definitely faces us in 
the world organization of heavy industries, and some of the light ones, 
wherever there is a very close integrated control extending to super- 

I Hearings on cartels are included in Hearings, Part 25. 
124491 — 40— pt. 20 16 



10976 CONCENTRATION OF ECONOMIC POWER 

national organizations. I think the evidence heard, Mr. Chairman, 
is going to be very helpful to this committee when it takes up the 
consideration of cartel principles, perhaps sometime in January or 
February. 

Mr. ScHROEDER. Mr. Chairman. 

Acting Chairman King. Just one moment, please. As I have indi- 
cated, I have been very much in favor of the Webb-Pomerene Act 
and I foresaw when it was under consideration in the Senate, when I 
voted for it, that it afforded a wider market for our commodities and 
I would not favor any measure that would imperil the benefits that 
are to be derived from the cartel system, 

The point I had in mind was that I would be averse to the utihzation 
of the cartel system by those who are in the American group to force 
American producers into the cartel system. I can realize the benefits 
that might result generally and persuasion, you Imow, is a very proper 
method of bringing about results which will be conducive to the 
interests of all. 

Mr. Bash. The experience today has been that rather than hurt, 
they have profited considerably by it, very considerably. 

Mr. ScHROEDER. I Wanted to make sure that Mr. Hendefson 
understood the remarks I made this morning about the possible effect. 

This morning we were talking about the difference between a con- 
sideration and an effect. I said that we had no consideration of 
imported steel but there might be an effect of it. I wanted to clear 
up any possible misunderstanding. If we were to go further with the 
thought that we had no cartels and foreign prices were very low and 
we were then forced to sell in export markets at very low prices, then 
suppose further that steel came into this country and crept under the 
tariff barrier, it would come in first at distant points from our own 
mills because our own costs would be highest at those p'oints. If it 
should go further and come in all around the seaboard points and take 
a substantial proportion of our business away from us, that would 
mean lowered employment of our men in our mills. It might con- 
ceivably affect the whole economic set-up, it might reduce our prices 
and it would have the effect of either making us work for nothing or 
at a loss, or bring our wages down. It just upsets everything. 

That is the thmg that I spoke of, the thing that I meant when 
I wrote my draft report, and some of my associates in the Export 
Association don't see it that way. They thought that was less im- 
portant than I did without a doubt. 

Mr. Henderson. Let me ask you, in the making of any cartel 
arrangement, isn't one 'of the most important functions to be served 
the preservation of the local market? 

Mr. ScHROEDER. The local market meaning the domestic market? 

Mr. Henderson. Yes. 

Mr. Schroeder. It is no consideration at all. 

Mr. Henderson. You mean in the making of a cartel? 

Mr. Schroeder. Yes. 

Mr. Henderson. I mean in the minds of those who come into a 
cartel arrangement, isn't that one of the things that is most essential, 
holding the home market sacrosanct? 

Mr. Schroeder. Not in our minds. 



CO^'CENTRATION OF ECONOMIC POWER 10977 

Mr. AviLDSEN. Couldn't they do that by tariff without providing 
a cartel? Couldn't the same thing be accomplished by tariff with a 
given country? 

Mr. Henderson. It hasn't been accomplished. In fact one of the 
arguments for organization of international cartels was the ability 
to transcend that. 

It is an essential of every important cartel agreement. 

Mr. Reynders. But we can't do it in our case. 

Mr. Henderson. No; we can't do it. 

Acting Chairman King. I may have misinterpreted your position. 
Do you mean to say that in the operation of a cartel you haven't in 
mind the domestic market, the protection of it so far as possible, that 
you are interested in finding a market for exports rather than in 
protecting the domestic market who are producing more than you 
ship abroad? 

Mr. ScHROEDER. We have not considered the Export Association 
or its cartel affiliations as having anything to do with domestic 
business. 

Acting Chairman King. Did you plan with a view to ignoring the 
domestic demands? 

Mr. ScHROEDER. It is just a totally different business in our minds. 

Acting Chairman King. It would seem to me that in the operation 
of your cartel system you would not want to destroy or injure or 
impair in any way the domestic market and the domestic producer. 

Mr. ScHROEDER. We don't want to take any conscious act at all 
that would affect domestic business. We specifically except it from 
our agreements. 

Mr. Henderson. I take it what you are saying is that in the making 
of these agreements, as was evidenced by the letter when the Earl of 
Dudley was here and as I think Mr. Bash said, the American group 
can only discuss export matters, I gather from what you said here 
recently that independent of the cartel arrangement you can't be 
totally unmindful of what effect the existence of a cartel has on selling 
in this market. That is, if you are not in it. 

Mr. ScHROEDER. That is what I wanted to point out as the thing 
that was in my own mind but which was no part of our association 
membership. In other words, our association membership was 
directly 

Mr. Henderson (interposing). You don't mean to imply that those 
boys in that meeting who were sitting imder the umbrella weren't 
being told that their position locally, domestically, was in jeopardy, 
if they kept on with these selling arrangements. 

Mr. ScHROEDER. I was one of those there. 

Mr. Henderson. You were one of them there. There were others 
there. You weren't selling below the fixed price, were you? 

Mr, ScHROEDER. At that time there was no agreement so far as we 
were concerned. We were a nonmember of that group, 

Mr, Henderson, You were a nonmember? 

Mr. ScHROEDER. We were at that time a nonmember, invited to 
attend and to join. 

Mr. Henderson. You weren't unmindful of what the effect might 
be on the domestic market of an organized world cartel selling in this 
market, were you? 



10978 CONCENTRATION OF ECONOMIC POWER 

Mr. ScHROEDER. We declined to discuss it. I kept it in my mind 
as a reservation. 

Mr. Henderson. Yes; and I think it was in the mind of every man 
there. 

Mr. Schroeder. I don't think so. 

Mr. Henderson. Then we have a difference of opinion. 

Mr. Schroeder. I wanted to bring that point out more clearly, 
so it wouldn't be left as a misunderstanding. 

Mr. Avildsen. Mr. Schroeder, is it a fact that we- were importing a 
lot of steel from Europe before this cartel was entered into and such 
importations ceased afterwards? 

Mr. Schroeder. We are continuously importing steel, I should say 
in all principal products, in varying amounts, with cartels, without 
cartels. 

Mr. Avildsen. I remeniber Mr. Gregg testified the other day that 
down in Alabama they have to compete with imported cotton baling 
wires brought in here under the American price. 

Mr. O'Connell. I don't want to labor the point, Mr. Schroeder, 
but if I understand you correctly, you stated that the effect of the 
existence or absence of a cartel organization in this country would be 
apparent insofar as the domestic market was concerned, that is that 
effect was in the picture, but that in your consideration of the agree- 
ment with the foreign cartel, you gave no thought particularly to what 
that effect was. Is that correct? 

Mr. Schroeder. That is correct. 

Mr. O'Connell. Do I understand also that the reason that you did 
not consider the obvious effect that the presence or absence of such 
an agreement would have was because you are prohibited by law from 
using that as one of your considerations? 

Mr. Schroeder. We were prohibited by law from making that a 
part of any of our agreements. We reminded our foreign visitors that 
we were not prepared to discuss such a thing. 

Mr. O'Connell. It seems to me a httle bit naive, though, to expect 
us to imderstand that it was apparent that the presence or absence of 
the agreement would liave a very important effect upon the domestic 
market and also to expect us to beheve that all the participants in the 
discussions were able to put that very important consideration out of 
their minds, and it had no effect on the negotiations. 

Mr. Schroeder. I have in mind other times when cartels have 
broken down, there have been interruptions in both the tin plate and 
tube cartel, there has been no substantial change in the amount of 
steel, either tin plate or tubes, imported into this country, before or 
after the break-down. There may have been some change, but a very 
small one. 

Mr. O'Connell. I don't think we understand each other very weU. 
I will try it once more. As I understand it, it is your behef , or it was 
your beuef at the time you wrote this memorandum, that the existence 
of an agreement between your organization and the international 
cartel would have a definite effect upon the domestic market for steel. 

Mr. Schroeder. It would have some 

Mr. O'Connell (interposing). And the absence of such an agree- 
ment would have a different effect, but also a substantial effect. 

Mr.* Schroeder. It would have a possible effect. 



CONCENTRATION OF ECONOMIC POWER 10979 

Mr. O'CoNNELL. If I get your words correctly you say "Such 
renunciation," meaning of the agreement, "would inevitably .be 
followed b}'^ an influx of low-priced foreign steel in domestic markets." 
Now at that time at least you were speaking of something more than 
possible effect. 

Mr. ScHROEDER. I was. 

Mr. O'CoNNELL. Now you are also expecting us to believe, with 
that condition present in your mind, that it was also possible to exclude 
it from your mind when you were making negotiations with a foreign 
cartel. Does that seem reasonable? 

Mr. ScHROEDER. I Can keep it, let's say, hidden in my mind. It 
can exist in my mind and not in the mind of our associates who are 
making this contract. 

Mr. O'CoNNELL. As a reasonable man, can it exist in your mind, 
can you so departmentalize your mind so that that situation will not 
have effect upon your negotiations, what you want to do in the way 
of such an agreement? 

Mr. ScHROEDER. I waut to make clear the difference of doing any- 
thing because of something and realizing that something might be an 
inferential result. 

Mr. O'CoNNELL. You didn't have much doubt about it at the time 
your wrote this memorandum. 

Mr. ScHROEDER. I Said an inferential result. 

Representative Williams. As a matter of fact, what has been the 
result of the cartel on the domestic market? 

Mr. ScHROEDER. Noue that I know of. 

Representative Williams. It hasn't had any effect on it? 

Mr. ScHROEDER. No. 

Representative Williams. What has been the effect of the cartel 
on our export trade? 

Mr. ScHROEDER. Generally averaging over all products it has 
maintained a higher market price in the foreign markets. 

Representative Williams. Has our export trade increased under 
the system? 

Mr. ScHROEDER. Ycs. 

Representative Williams. Then it has been beneficial from the 
standpoint of the exporter but it hasn't affected the domestic market. 

Mr. ScHROEDER. Corrcct. 

Representative Williams. That is the purpose of it. 

Mr. ScHROEDER. That is the purpose of it. That is why we are 
in it. We are a very much smaller exporter than, I would say, 
Bethlehem or U. S. Steel. We were a small nonmember. We were 
asked to come in, we came in. Our quotas are a few percent or none 
at all, but we believe in this thing. 

Representative Williams. It is a rather difficult matter for me to 
disassociate the two elements in my mind. It seems to me that 
whatever would increase the 'export and the export price would 
necessarily affect the domestic market. In other words, if we didn't 
have the export market, it seems to me that we would have a log jam 
on the domestic market with depressed prices. 

Mr. ScHROEDER. The type of products that we make, sir, we only 
make on order, we don't make them and try to sell them afterward. 
If we didn't get our export orders we would be idle for that length of 
time. 



10980 CONCENTRATION OF ECONOMIC POWER 

Mr. Henderson. But that idleness, it has been testified here, does 
result in a breaking of posted prices, does it not? 

Mr. ScHROEDER. I think there is usually some part of every mill 
capacity idle. 

Mr. Henderson. Let me make it then as a statement. It has 
been testiJSed here by witnesses that cutting below the base price does 
take place when the industry is running at low levels of operation. 
So if you didn't get that tonnage it would have an effect on realizations 
in the domestic market. I want to read one more thing from this 
New York Times report of the Dusseldorf meeting. It says: 

European Cartel hopes first, that the American interests soon may reach an 
agreement among themselves despite the anti-trust laws, and, second, that next 
spring may bring such an increase in American domestic consumption as to elimi- 
nate American underselling entirely. Should these hopes prove illusory, however, 
the European Cartel spokesmen left no doubt that they would resort to fighting 
prices in order to meet American competition, especially in the Far East. 

1 see no reason for supposing that if they would do that in the 
export trade, it would not also go for the domestic trade if they were 
confronted with an excess of capacity. 

Acting Chairman King. Mr. Schroeder, let's get out of the realm of 
metaphysics and get down to realism. I don't understand you, 
I will say veiy frankly. Supposing that you were the president of a 
corporation producing steel, some of which was consumed and some 
of which you found an export market for, and your corporation was 
invited to join this group under the cartel system, under Webb- 
Pomerene Act, would you not, before you joined, want to know 
whether or not it would affect injuriously or otherwise your corpora- 
tion that was producing steel? 

Mr. Schroeder. Yes, sir. 

Acting Chairman King. Before you joined the cartel, you would 
want to know whether it was going to destroy or impair the domestic 
market, wouldn't you? 

Mr. Schroeder. We would look over 

Acting Chairman King (interposing). I am speaking of you, your- 
self, your company. 

Mr. Schroeder. We would look it over very carefully. 

Acting Chairman King. And if you believed it would injure the 
domestic market, you wouldn't join it? 

Mr. Schroeder. No, sir. 

Acting Chairman King. Then you would join to find a wider 
market for your product and not for the purpose of injuring the 
domestic market? 

Mr. Schroeder. Correct. 

Acting Chairman King. In other words you would expect perhaps 
to improve the condition of the domestic market by removing from 
American consumption the surplus commodities and shipping them 
abroad and finding a market for them there? 

^ Mr. Schroeder. That is the point — we wouldn't quite go that far, 
sir; we just wouldn't make the materiafc- We have been in the export 
market for a great many years in a small way. 

Acting Chairman King. Supposing that you had a capacity in 
your mill for the production of more than what you had been selling 
in the domestic market, and you found that by joining the cartel 
you might be able to compete in foreign markets and sell some of 



CONCENTRATION OP ECONOMIC POWER 10981 

your surplus products here and increase your capacity. Did you 
have that in mind? 

Mr. ScHROEDER. No) the tiling we had in mind was selling the same 
amount of material at a higher price, because the quotas in this 
association are based upon past performance. 

Acting Chairman King. Do you mean to say that those who joined 
the cartel, the manufacturers of steel in the United States who 
became members of the cartel, had no intention of expanding their 
market; they were going to be satisfied with just the production which 
had characterized their operation in the past? 

Mr. ScHROEDER. They tried to expand their markets as a whole, 
but they agreed with each other to take their own proportion of that. 

Acting Chairman King. But the purpose was, was it not, to find 
foreign markets and thus increase production at home, so that they 
would have a surplus to ship abroad? 

Mr. ScHROEDER. Ycs. 

Acting Chairman King. So then, in joining the cartel, obviously, 
members of the cartel would be interested in the effects of the cartel 
upon the domestic market? 

Mr. ScHROEDER. Well, if we were to consider that the^^e might be 
a cartel, but we would not be a member, then we could reap the 
advantages of a cartel price without restriction in tonnage. We know 
enough about this business to know that couldn't be. We have to 
take our choice of a restricted output for export 

Acting Chairman King. I give it up. Don't put that in the record'. 

Mr. Henderson. I think that ought to be in the record. If you 
don't, I give up. 

Mr. Avildsen. I would like to ask a couple of questions. You 
testified this morning that your American associations divided into 
several groups, that is, the plate group and the heavy-shape group 
and the sheet group, the tin-plate group, and so forth. Now, I under- 
stand that so far as plate is concerned, that did not work out veiy well, 
due to the lower prices which were quoted by tliis Philadelphia group. 

Mr. Bash. That is it. That was applicable to that group and did 
not spread to the other groups in view of the fact they they don't 
make the other products and if they do they haven't shown any 
particular interest in export. 

Mr. Avildsen. How many groups are working on what you call a 
satisfactory basis now? How many commodities? Could you name 
the commodities? 

Mr. Bash. Yes; well of course none of these agreements are now 
in effect of course, since they have been suspended since the beginning 
of the war. Prior to that time the ones that were working success- 
fully were the rail group, the tin plate group, and pipe, although we 
didn't have an international agreement on pipe. The heavy group 
and the sheet group were never consummated. 

Mr. Avildsen. As far as tin plate, pipe, and rail were concerned, 
those groups were working statisfactorily. 

Mr. Bash. That is right, with a certain amount of normal difficul- 
ties, which, naturally, they would al\^ays have, but as a whole they 
were working satisfactorily. 

Mr. Avildsen. And yel you were not in any way violating any of 
the provisions of the Webb-Pomerene Act as far as those commodities 



10982 CONCENTRATION OF ECONOMIC POWER 

were concerned, in other words, there was no pressure put on any 
competitors in this country who were not members of the cartel. 

Mr. Bash. That is right, correct. 

Mr. Feller. May I ask what you meant by saying the heavy steel 
group was never consummated? 

Mr. Bash. In February 1937 there was a proposed agreement. 
We worked along in an effort to consummate it but the agreement 
was never signed, and the war came along and all negotiations ceased 
and any international agreements that we had were suspended. 

Mr. Feller. Well, this letter about which we have had so much 
discussion, the letter of November 14, 1938, deals with plates, ship 
steel, ordinary plates and shapes, do I miderstand there never was 
any agreement in effect at all with relation to those? 

Mr. Bash. There was never any international agreement. We 
were negotiating and had not cleared up all the details. 

Mr. Feller. Then you undertook this action of asking the foreign- 
ers to sell at lower prices even though there was no agreement in effect 
at all? 

Mr. Bash. There was an understanding between us. It was a 
question of getting all the details straightened out. 

Mr, Feller. Did you have a responsibihty under an agreement 
which had never been consummated? 

Mr, Bash. We felt that we had a responsibihty. We felt that 
the agreement had been consunmiated and it was a question of 
putting it in form. 

Mr. Feller. Were you hable for penalty? 

Mr. Bash. We were, to my mind. 

_Mr. Feller. I would just hke in order to have the record clear on 
this point, what was the date or the approximate date at which the 
agreement was in such shape that you felt that the obhgations of 
an agreement had become incumbent? 

Mr. Bash. I ^link it was June of 1938. 

Mr. Feller. I have no further questions. 

Acting Chairman King. Any further questions? 
. Mr. O'Connell. Mr. Bash, are you sufficiently famihar with the 
Webb-Pomerene Act to tell us whether the act imposes any obliga- 
tions on your organization as regards making available your contracts 
or certificate of charter and other things to some Government agency? 

Mr. Bash. I don't know. 

Mr. O'Connell. Is there any continuing supervision or check-up 
as regards what you do by any governmental agency? 

Mr. Bash. I think there is but what there is, I don't know at the 
first. 

Mr. O'Connell. Does the act require you to file copies of any 
international agreements? 

Mr. Bash. I don't know. 

Mr. Henderson. There is no requirement that you disclose to the 
Federal Trade Commission the details leading up to negotiations for 
agreements and the like? 

Mr. Bash. There is no requirement that I Imow of. 

Mr. Henderson, And there is no requirement to furnish to any 
other Government agency those details? 

Mr. Bash, Not to my knowledge. 



CONCENTRATION OF ECONOMIC POWER 10983 

Mr. Feller. In order that the record may be straight on this 
point, section 5 of the Export Trade Act requires the filing of the 
certificates or articles of incorporation and the bylaws. It goes on 
to say that — 

The Association shall also furnish to the Federal Trade Commission such 
information as the Commission may require as to its organization, business, con- 
duct, practices, management, and relation to other associations, corporations, 
partnerships and individuals. 

Mr. Bash. It is my understanding that -vVe filed the original 
information v/ith some department of the Government, I don't 
know which. 

■ Mr. Feller. Federal Trade Commission. 

Mr. Bash. Federal Trade Commission and I think subsequently 
that we have made a report to them once a year. 

Acting Chairman King. Anything else, Mr. Feller? 

Mr. Feller. I would like first to state that I and the members of 
my staff appreciate very much the patience of the committee. We 
regret the fact that illness has kept Senator "Ma honey from pre- 
siding here, but I also must say that we have the highest regard indeed 
fdr the unfailing courtesy, tact, and patience of Senator King in pre- 
siding. Before you close the hearing, Mr. Chairman, I should also 
like to introduce to be placed in the record, a number of corrected 
table's to the pamphlet "Major Characteristics of the Iron and Steel 
Industry," * which was prepared by the Department of Justice for the 
Temporary National Economic Committee. 

Acting Chairman King. They may be received. 

(The tables referred to were marked "Exhibit No. 1449" and are 
on file with the committee.) 

Acting Chairman King. If there is nothing further, the committee 
wUl stand aajoiimed subject to the call of th^ Chairman. 

(Whereupon at 4:30 p. m., the committee adjourned subject to the 
call of the Chairman.) 



(Further testimony on the Steel Indugtrj'- is resumed in Hearings, 
Parts 26 and 27.) 



> "Exhibit No. 1349", included in Hearings, Part 18. 



APPENDIX 



Exhibit No. 1398 

[Copy of letter] 

Carnegie Illinois Steel Corporation 

UNITED states STEEL [SEAL] CORPORATION SUBSIDIARY 

(In ink:) Miss Reynolds. 

February 25, 1938. 
D. F. Austin, Vice President in charge of Sales 
J. H. Stapleton 

#2 History of Earnings 

We believe an attempt to continue increasing the price of semi-finished products 
is not a proper move without a thorough study of the amount of business available 
from non-integrated producers of finished products. If we accept the theory that 
we are and wish to continue to be the supply source for non-integrated steel 
processors, we must leave sufficient conversion margin to make the business 
interesting to them. 

#2 Sales Department 

We have consolidated our New York District Office at 71 Broadway, and it 
will be necessary for you to state why this move was made rather than changing 
to an up-town location. 

#112 Sales Department 

We believe the General Sales Office in Chicago should be demobilized, and 
base this on the thought of centralizing responsibility. The Assistant should be 
adjacent to the Manager, and as you know, our Chicago contacts were more of a 
nuisance than a benefit. 

#114 Sales Department 

To handle small orders through our warehouses at the mill price would result 
in a definite demoralization of the warehouse market. We presume the thought 
is to handle these small orders through the warehouse at a warehouse price, but 
we do not believe we can influence the buyers to pay us a higher price when mill 
shipments can be obtained elsewhere. If from a cost standpoint, we find it 
preferable to obtain small items from the warehouse rather than mill, we should 
do so, but the mill purchasing such steel from the warehouse. We are of the 
opinion that a great many of our small items come from large buyers of steel. 

#115 Sales Department 

It is stated that our sales policy is to discourage executive selling and encourage 
solicitation by the sales organization in the field. We do not see how this has 
any particular bearing on the subject that the pension system should not be 
considered a part of the salesmen's remuneration. We agree with the thought 
but do not understand the reason. 

#117 Sales Department 

We presume this has reference to giving the Carnegie-Illinois Steel Corporation 
authority to approve all salaries, providing they are within the proper calssifica- 
tions to be established. 

#98 Sales Department 

This policy is too specific. We obtain greater sales representation through 
furnishing semi-finished material to nonintegrated units who have selling organiza- 

10985 



10986 CONCENTRATION OF ECONOMIC POWER 

tions for the distribution of the finished products. While it is true the}'^ are com- 
petitive with us, they, nevertheless, to a large degree, are under our control, 
and were we to discard these accounts, the tonnage would be furnished by 
other steel producing competitors, and our competition on the finished products 
would simply be increased without our obtaining any portion of the profit by 
selling the non-integrated units. We believe we obtain 60% or more of the 
possible profit, and we are of the opinion that a great deal of this tonnage represents 
items which otherwise would be lost to us. 

#101 Sales Department 

We do not believe this is feasible for the reasons outlined under #114. 

#103 Sales Department 

We do not believe we can accept this recommendation in its present form. 
There are certain high-cost products on which too great a loss would be entailed 
if competitive conditions resulted in low prices. 

#4 Market Participation 

The association between iron castings, fabricated castings, and stamped prod- 
ucts made from sheets is rather remote. With heavy products we were successful 
in a campaign to promote the use of rolled steel sections instead of castings, but 
with light stamped, which are generally made in large volumes of an item, we 
question whether it would be practical to promote a campaign to promote the 
use of flat rolled products instead of pig iron. There appears to be no statement 
to the effect that pig iron products are an unprofitable item, and it certainly is a 
readily sellable product. The large number of foundries existing in this country, 
none of which would be satisfactory for manufacturing other products, indicates 
considerable resistance would be encountered, and the available scrap-market 
always leaves an opening for lower costs if the foundries decide to change from 
east iron to cast steel. We do not believe the furnaces being used today in the 
manufacture of foundry iron could be used to produce liquid metal for conversion 
into steel; therefore we would suffer a substantial loss in equipment. 

#5 Market Participation 

The statement is incorrect that semi-finished products yield little or no profit. 
When little profit is obtained, it is because the tonnage is placed at high-cost 
mills, which otherwise would be used in the production of high-cost items for 
conversion by our own company. Our net return on semi-finished materials 
may be lower than on finished products, but we feel we are reachin^ a market 
which otherwise would not be reached by us, and we are dealing with competition 
which is more friendly than it would be were these competitors purchasing from 
competitors. Briefly, we obtain the major portion of the profit. 

#104 Sales Department 

We understand that you and Mr. Perry are both opposed to the cooperation 
suggested. 

#108 Sales Department 

While the Indianapolis District has been established, it would appear far more 
preferable to have this as a sub-office of the Chicago District Office. We believe 
our cost has been increased without any corresponding gain in tonnage. 

#109 Sales Department 

The intent of this paragraph is evidently to meet Bethlehem's competition in 
New York State. There is no question but that this competition exists, but it 
appears dangerous to our warehouse company to pursue the practice of shipping 
all structural shapes from Waverly. As a matter of fact, this is not being done, 
and Waverly is being used the same as other Scully Warehouses, that is, where 
delivery requires, a few items will be purchased from Scully to complete shipment 
of large orders, particularly when delivery promises have been broken. This 
policy should be continued. 



CONCENTRATION OF ECONOMIC POWER 

#58 Market Participation 



10987 



Our continuance in the axle business in the Pittsburgh area should be predicated 
on the costs with present equipment and the rate that could be expected by the 
purchase of new equipment. The amount of tonnage available per annum is a 
known factor, but we should determine from what friendly axle manufacturer we 
would obtain the axle billets to replace the axle tonnage lost to us. Here again, 
we would be entering the semi-finished field, to a large degree, when it seems to be 
our policy to reduce our participation. 

#118 Sales Department 

We can agree with this in theory, provided a suitable plan is developed. 



Exhibit No. 1399 

[Prepared by Department of Justice] 

BASE PRICE OF TIN PLATE AT PITTSBURGH 

BY YEARS, 1925-1939 









































































































' 1 








1 • J 














1 




r 








u 








1 






























































































..,..l,.l.. 


..i,.l 


:..!.. 


I..I.. 


.....l..,., 


..I..I..1.. 


..1..1..I.. 


..I..I..I.. 


..i..i..r.. 


..I..I..,.. 


.,i.,l,.i.. 


..,..1..,.. 


..I..I 


..,..1..,.. 


..,,.1,.,., 


I9ZS 


1926 


1927 


1926 


1929 ' 


1930 


1931 


1932 


1933 


1934 


1935 


1936 


1937 


I938* 


1939 



109^88 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1400 
[Prepared by Department of Justice] 

MARKET PRICE OF PIG TIN (NEW YORK) 

BY MONTHS, 1929-1939 






1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 



Exhibit No. 1401 
[Prepared by Department of Justice] 

CONTRACT SALES PRICE OF NUMBER 2 PLAIN SANITARY 
TIN CANS (COKE) 



CENTS 
PER CAN 
iOOf — 



BY YEARS. 1929-1939 



CENTS 
PER CAN 
— 1300 



1929 1930 1931 1932 1953 I9S4 I93S 1936 1937 1938 1939 



CONCENTRATION OF ECONOMIC POWER 10989 

Exhibit No. 1402 
Relationship of cost of tin can to selling price of canned products {No. 2 Can) 





Tomatoes 


Corn 


Peas 


Year 


Selling 

Price per 

Can 


Cost Of 
Can 


Ratio of 

Can Cost 

to Selling 

Price 


Selling 

Price per 

Can 


Cost of 
Can 


Ratio of 

Can Cost 

to Selling 

Price 


Selling 

Price per 

Can 


Cost of 
Can 


Ratio of 

Can Cost 

to Selling 

Price 


1934-Jan.. 


$0. 00458 
.06875 
.06875 
. 07083 
.05416 
. 05208 
. 05625 
.05625 
.05416 
.05208 
.04916 


$0.02067 
.02067 
.02007 
.02067 
. 02007 
.02067 
.01902 
.01902 
. 02032 
. C2032 
. 01941 


32% 
30% 
30% 
29. 1% 
38. 1% 
39. 6% 
33. 8% 
33. 8% 
37. 5% 
39% 
39.4% 


$0. 06458 
. 00666 
.08333 
.08333 
.05833 
.05416 
.07083 
.06458 
.05416 
.05000 
.04791 


$0.02067 
.02067 
. 02067 
.02067 
. 02067 
. 02067 
. 01902 
.01902 
.02032 
. 02032 
. 01941 


32% 
31% 
24. 8% 
24.8% 
35. 4% 
38. 1% 
26. 8% 
29.4% 
37. 5% 
40. 6% 
30.5% 


$0.0875 
.0875 
.09166 
.05833 
.05416 
.0625 
. 07708 
.0625 
.0,')8.33 
.05833 
.05000 


$0. 02067 
.02067 
.02067 
.02067 
.02067 
. 02067 
. 01902 
. 01902 
. 02032 
. 02032 
.01941 


23. 6% 
23.6% 


July 


1935-Jan 


22.5% 
35. 4% 
38. 1% 
33% 


July . 


1936-Jan 


July 


1937-Jaa 


24.6% 


July 


30. 4% 


1938-Jan 


34.8% 


July 


34.8% 


1939-Jan 


38.8% 





Source of figures on Can Costs and Selling Prices: "The Almanac of the Canning Industry" Published 
annually by the Canning Trade Publishing Co., Baltimore, Maryland. 



Exhibit No. 1403 

October 15th, 1935. 
Mr. W. A. Irvin: 

In connection with the American Can Company claim, I think an important 
point, which is perhaps not fully realized by Mr. Wheeler and other members of the 
Executive Committee, is that before we assented to the Steel Code containing this 
provision we submitted the actual wording to Mr. Phelps for his comment. 
Unfortunately for us this was done verbaUy and not in writing. Mr. Phelps had 
no comment to make, the reason being that it accomplished the very purpose that 
he has been seeking for several years, namelj', no cutting of the American Can 
price. 

It seems strange to me that a company of the standing of the American Can 
Company would seriously press such a claim, after having given its consent, at 
least its tacit consent, to this provision of the Steel Code. It was only after we 
had thus committed ourselves did they make any protest. 

H. L. Hughes. 

(Penned notation:) W A I saw Mr. Wheeler 10/15/35. 



Exhibit No. 1404 



June 5th, 1936. 



American Can Company. 
Mr. W. A. Irvin: 

As a result of the meeting on April 2l8t, 1936, between Messrs. Taylor, Irvin 
and Phelps, you instructed me to make up a schedule of additional discounts for 
tin plate taken by the American Can Company provided they would increase the 
proportion of their business placed with us from 75% to over 90%. Your instruc- 
tions further were to provide liberal discounts for the larger quantities. 

I made up such a schedule starting with an additional discount of 15(i per box 
for the 9th and 10th million boxes and ranging up to an additional discount of 
50^ per box for the 17th and 18th million boxes. This latter figure would bring 
the price down very close to cost and it would show a saving to the American 
Can Company over the present contract of about three million dollars annually. 

On May 6th, 1936, you called on Messrs. Phelps and Pfeltz and gave them this 
suggested schedule under the pledge of secrecy, at which time they stated they 
would like to think it over. 



10990 CONCENTRATION OF ECONOMIC POWER 

Without further conference with us, on May 21st, they served their Summons 
and Complaint. 

Sometime in the interim and without further conference with us'they made use 
of our proposal of additional discounts as a club to conclude contracts with 
Bethlehem, J & L, Republic and Youngstown. We understand that these con- 
tracts cover a five year period and obligate the American Can Company to take 
from each of these four companies 400,000 boxes annually at our published price 
less 7/i%. However, these same contracts further obligate these four companies 
to supply up to a million boxes each, if required by the American Can Company, at 
a reduction of 250 per box beyond the 7}^% discount. This additional discount 
of 250 a box appUes also to the 400,000 boxes minimum provided the American 
Can Company takes the full million boxes. There is no doubt in our mind that 
they intend to do so as it means an additional million dollars a year to the 
American Can Company. 

These contracts completely change the situation. It would seem to leave us 
with but two courses of action — 

1 — to stand on our present contract and fight the case in the courts if they 
dare to go there. The danger to us in this course lies not so much in 
the possible result of the case in the courts as in the damage that the 
American Can Company would be able to do us during'' the period of 
probably two years before the case could get into court. They c )uld 
offer us cold reduced plate far beyond our capacity to supply and thus 
reduce substantially the corresponding amount of tonnage due us 
under the contract. They could be unreasonable in their rejections of 
plates and claims for damages. They could refuse to cooperate in the 
scheduling of tonnage at our various plants and could hurt our miU 
people and make it costly for them in a number of ways. 

2 — to revise immediately our contract with them giving them an additional 
250 per box beyond the 7)4% discount on all the plate they take. 
This would cost us about two and one-half million dollars per year. 
It would meet the contracts already concluded with Bethlehem, 
J & L, Republic and Youngstown. 

In following the second course the seriousness of the situation pricewise in 
the tin plate market is pronounced. All four companies who have made contracts 
with American would have to give Continental the same price— in fact one at 
least has already done so. The news' would spread within 24 hours, concessions 
would be made by all not only to Continental and American but to all other can 
makers. Wheeling, McKeesport and Weirton would not stand on present prices 
for a minute. They could not do so and keep their can producing customers in 
business. The practical result would be that the net price of tin plate to every- 
body Would be reduced from $4.66 per base box to $4.41 per base box. While 
there might be a temporary gain by the can makers in profit equivalent to approxi- 
mately 250 per box it is my opinion that eventually nothing would be gained by 
the can makers either. The price of cans would decline in the same proportion as 
250 per box on tin plate. 

The trouble does not stop there — the price of sheet bars of course cannot be 
maintained at $30. with a $5. reduction in tin plate. ■ A similar reduction would 
have to be made on the 100,000 tons of black plate that we annually supply to 
Continental Can Co. These particular price reductions inevitably follow. But 
it is conceivable that the reduction also will extend to flat rolled products generally. 

If we should follow the second course, we are further confronted with the 
possibility that we may be charged with collusion by the F. T. C. or other govern- 
mental agency. This is a very serious aspect of the case. 

At present we publish a price on tin plate of $5.25 per base box but 'ft.ctually 
sell that plate at $4.76 per base box, a spread of 490 per box, made up of the 
7/4% contract differential and 100 for 10 Pkg. containers. 

At present therefore there is 490 fiction in our published price and it is to our 
published price that the can companies generally tie their selling price of cans. 
This spread is already too much. The addition of another 250 discount would 
increase the fiction in our published price from 490 to 740 per box. A situation 
which must inevitably be aired by the can user or somebody else. 

It is to be noted that the Corporation is the only tin plate producer on the spot 
in this connection. The others do not publish tin plate prices in the first instance 
and their names are not used in contracts for the sale of cans, as is ours. 

H. L. Hughes. 



CONCENTRATION OF ECONOMIC POWEF 10991 

Exhibit No. 1405 

American Can Company 
New York Central Building, 230 Park Avenue, New York 

A. R. Pfeltz, Vice President 

April 27, 1937. 
Mr. B. F. Fairless, 

President, Carnegie-Illinois Steel Corporation, 

Pittsburgh, Pa. 
Dear Ben: I am sure that you will not forget nor overlook any of the several 
matters that I talked with j'ou about last evening, but I thought I would drop 
you a little note specifically referring to each item, and for good and sufficient 
reasons refer to them very briefly indeed. 

1. Was the delivery of plate to our Island factories. 

2. Stopping delivery of tin plate on $4.85 basis as of October 1st. 

3. Full weight plates because of panelling and denting troubles which we are 
having with so many cans. 

4. Someone who will coordinate sales of tin plate for the several units of the 
Steel Corporation. 

5. Progress made by other companies producing cold rolled strip tin plate 
thereby enabling them to sell their products for special purposes for which there 
would otherwise be no sale. 

6. Control over Metal Trade Journals in the publication of prices on tin plate, 
and the elimination of such comments as are foreign to the subject (from our 
standpoint) . 

I enjoyed very much seeing you last evening and I am looking forward to 
another visit with you next Wednesday. 
Sincerely yours, 

(Signed) Al., Vice President. 
ARP/U. 

Exhibit No. 1406 

American Can Company 
New York Central Building, 230 Park Avenue, New York 

H. a. Baker, President 

April 14, 1938. 
Contract No. Dated . 

Gentlemen: Uncertain and disturbed business conditions have caused a 
situation in which the official price of tin plate applicable on January 2. 1938 
does not now reflect the actual market price of tin plate. 

Up to the present date, the American Can Company has paid the regular 
official price for its tin plate, less the regular allowances for cash and multiple 
packaging on all ordered production sizes of prime plate with seconds arising. 
Regular allowances for seconds and standard differentials for lighter and heavier 
gauge plate have, of course, applied to our purchases. 

Under present conditions price adjustments on past deliveries and lower 
prices for future deliveries should be obtainable and our Company is taking steps 
to achieve this result. 

As soon as practicable after the end of 1938, our Company will average its 
actual 1938 purchase prices per base box of prime plate on the Pittsburgh Mill 
basis for 100# prime coke plate, less the regular allowances for cash and multiple 
packaging, and will voluntarily refund to all contract customers, on the cans 
shipped in 1938, the difference between the cost of tin plate thus determined and 
the cost of tin plate similarly determined under the official price as named on 
January 2, 1938. 

This action is taken with helpful intent to clarify the existing situation but 
without establishing a precedent or prejudicing any of our rights under our 
contracts as written. 

Very truly yours 

American Can Company, 
(In ink:) H. A. Baker, President. 



124491— 40— pt. 20 17 



10992 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1407 

(Stamped:) Received Mar. 24, 1938. H. A. Baker. 
(Notation:) Keep. 

American Can Company 

New York Central Building, 230 Park Avenue, New York 
A. R. Pfeltz, Vice Preaident 

March 24, 1938. 
Dr. H. A. Baker, 

President, American Can Company, New York Office. 

Dear Dr. Baker: I recited to you and Mr. Phelps last Monday the situation 

which confronted the Inland Steel Company representatives when they called at 

Camden the latter part of 1936 to see Mr. Willetts of the Campbell Soup Company 

regarding Campbell tin plate tonnage. This recitation was in effect as follows: 

For 1937 Inland needed tonnage as th«y had not been able to break in and sell 
suflBcient tin plate to enable them to operate their mills at the same rate of opera- 
tions as some of the other mills were operating. They named Mr. Willetts the 
official price, i. e., $4.85 Pittsburgh, $4.95 Gary and Mr. Willetts was not inter- 
ested. They went back to Chicago and discussed the matter further with Mr. 
L. E. Block, Chairman and Mr. Joe Block, Executive Vice President, and returned 
to Camden and again named the same price to Mr. Willetts who was very much 
provoked, according to Mr. Block's statement, and practically threw the' Inland 
representatives out of the office. They then returned to Chicago for further dis- 
cussion. in the matter and for further instructions the result being the Blocks 
authorized them to meet competition, which I am given to understand was from 
Bethlehem. This competition was met in 1937. I am not sure (Mr. Block not 
having informed me) as to what differential they had to allow per base box from' 
the official price. 

I was quite certain throughout 1937 that Campbell had bought under the mar- 
ket, as Carnegie-Illinois had been promised an opportunity to quote and they did 
not have this opportunity. I therefore on several visits paid me by the Vice 
President in Charge of Sales of the Inland Steel Company asked him as to whether 
or not they had sold Campbell and on each occasion he informed me that they 
had sold Campbell "on the hne". I did not believe this statement and on one 
of Mr. Joe Block's visits here I so informed him, it was late in the day and Mr. 
Block was anxious to catch the Century for Chicago — he told me that he would 
like to have some time with me on his next visit. I recently saw Mr. Block; he 
seemed very anxious to get squared away with the American Can Company and 
to make a clean breast of the whole matter. He claimed that he did no't know 
that such a statement had been made to me and further Informed me that the 
Campbell instance was the only instance where a price lower than the official price 
had been named to any buyer of tin plate from them. I asked what Continental 
was paying and he definitely stated that they were paying the official price. 

Mr. Block, in order to square away 1937, now wants to seAd us a check repre- 
senting the difference between what we paid and what Campbell paid. I did not 
accept his proposal but told him I would let him know. I then asked how he 
was able to name a price lower than named the American Can Company and still 
conform with the Robinson-Patman Act and he stated their lawyers informed them 
they could meet competition. I then asked if he gave us a check or credit, if the 
same would be done for Continental and he definitely said "no". 

The same situation which confronted them in 1937 again confronted them in 
1938, and regardless as to the promise made by Mr. Grace at the time the con- 
ference was held by leading Officials of all the Steel Companies regarding the price 
for tin plate for 1938, Bethlehem again named a price below the official, and as 
Inland was, like others, badly in need of tonnage, they found it necessary to meet 
the situation. This they have done. Regarding this Mr. Block wants to see me, 
but I prefer not to see him until after the matter has been discussed with our legal 
advisers. 

All of the above brings up the question of the validity of our Bethlehem con- 
tract. It is true they do not guarantee our price to be as low as may be named to 
o-thers, but are they not liable under the Robinson-Patman Act for damages if 
Buch lower prices are named to others? 

There is no doubt in my mind but that Crown and Continental are both buying 
from Bethlehem at prices lower than we are paying, and the same is undoubtedly 
true with respect to their purchases from Weirton. I do know of one instance 
where a lower than official price was named by Weirton. i. e.. Carnation, and the 
Sales Manager for Carnegie-Illinois Steel Corporation was told by Mr. Cross of 
Carnation that they would have to name a lower price for their Wisconsin tonnage 
or they would lose the business, which they have had for 25 years or more. Mr. 



CONCENTRATION OF ECONOMIC POWER 10993 

Totten, Sales Manager, for Carnegie-Illinois asked the question as to how much it 
would have to be reduced and if they met the reduction would they get all of the 
business. They were told the reduction would have to be 25^ but that they would 
get but a 15% increase over what they are at present getting in tonnage; and 
Carnation further stated they would not take the business away from Weirton. 
Mr. Totten is of the opinion that they are possibly getting an allowance greater 
than 25^ on their Maysville business, which is shipped down the river on Weirton's 
barges from Weirton, West Virginia at a very low cost. I also understand Pet 
and Nestle are buying at a price below the official, and the same is also true of 
Borden. 

Carnegie-Illinois has but one milk can account, they do not participate in the 
business of other milk companies, and, personally, I do not think that Carnegie 
should lose this business and that we should grant them permission to meet the 
situation without the same conflicting with our contract. A reduction in the 
official price at this time would be expensive to us and I do not believe it would 
solve the problem — there is so little business to be had and the mills are operating 
on such an extremely low basis that there is bound to be a scramble for tonnage. 

Mr. Hughes informs me that Continental so far this year has not bought a 
single package of tin plate here. Weirton is shipping nothing to either Crown 
Can or Crown Cap; nor is Bethlehem, in fact, Bethlehem has a quantity of plate 
produced for Crown account which is on hand at Sparrows Point and which they 
are trying to dispose of to us and other buyers, and as I previously advised you. 
Crown is endeavoring to sell some of the stock, amounting to approximately 
150,000 boxes, through New York Jobbers from their Philadelphia stock. Mr. 
Milsop, President of the Weirton Steel, had one of his representatives at the Crown 
plant at Baltimore last Monday and he reports that they have an enormous 
stock of plate on hand, and as you may have heard, Mr. McMannus who is badly 
in need of money, arranged to have the 1937 price on Crown Caps good through 
January and February, this resulted in a majority of the cap buyers loading up; — 
he afterwards reduced the price on caps so that most of his customers are very 
much dissatisfied, and his competitors very much pleased at the outcome. Mr. 
Whetzel of the Steel Corporation visited the Crown Philadelphia Plant the early 
part of February and informed me that they have an enormous stock of plate, and 
apparently have a whole warehouse filled with uncrated equipment. 

The above is for your consideration, and I hope that we can have an early 
discussion of this problem with our legal advisers as Mr. Fairless expects to be in 
New York next week and I should like very much to lay the cards on the table with 
him at that time. 

Yours very truly, 

ARP/U. (Signed) A. R. Pfeltz. 



Exhibit No. 1408 

[Copy] 

June 10, 1932. 
Mr. I. Lamont Hughes, 

President, Carnegie Steel Company, 

Pittsburgh, Pa. 
Dear Sir: We are enclosing herewith, for your information, copies of inter- 
pretation of Laws by Governor Miller. 
Yours very truly, 

(Signed) W. A. Irvin, President. 



Sent to: 



I. L. Hughes L. A. Paddock E. F. Affleck 

E. J. Buffington H. C. Ryding J. S. Keefe 

E. W. Pargny A. N. Diehl Chas. Heggie 

F. W. Waterman Carroll Burton B. F. Harris 



Memorandum. 



United States Steel Corporation, 

GEiifERAL Counsel's Office, 

June 7, 1932. 
re relations with competitors 



No understanding, arrangement or agreement, "gentlemen's" or otherwise, in 
respect of prices, production, division of territory or tonnage can lawfully be 



10994 CONCENTRATION OF ECONOMIC POWER 

entered into between competitors. It is immaterial whether the obligations or 
restraints imposed are legal or only moral. In either case they are forbidden by 
law. 

However, it is permissible for competitors freely to exchange information on 
past sales, prices, capacities, costs and the like, to discuss the conditions and 
needs of the industr}^ to provide appropriate means for standardization of 
product and of cost accounting systems, to establish standards of business ethics 
and even, I think, to agree not to engage in unfair methods of competition. 

The gathering and dissemination of statistics, the standardization of product 
and of cost accounting systems, the establishment of proper standards of business 
ethics and conduct and the definition of unfair and unlawful methods of competi- 
tion are legitimate subjects for the activities of trade associations or of direct 
discussion between competitors without the intervention of trade associations. 
But neither trade associations nor discussions between competitors may be em- 
ployed either to cloak or as a means to eflfect or enforce, directly or indirectly 
unlawful agreements to fix prices or to divide territory or business, or the like. 

In other words, each individual competitor must be free to act as he pleases 
without any contractual or moral restraint or coercion whatever. Each has 
a perfect right to be guided by self-interest, to refrain from acts provocative of 
retaliation and to do what he can free from any moral or legal restraints to prevent 
demoralization and to stabilize the industry. To that end the fullest discussion 
and the fullest exchange of information are permissible. The harmful effects of 
cut-throat competition, of unfair trade methods, of selling below cost or even a fair 
margin of profit, and the like, are legitimate subject, of discussion; but the line 
must be drawn at anything, no matter what, involving coercion or restraint, 
whether contractual or only moral, which interferes with the free and independent 
action of each. In other words, reliance must be placed upon enlightened self-, 
interest, not upon any form of concerted action or understanding, express or 
implied. 

To illustrate: It is permissible to inform competitors of one's prices in the past. 
It is not permissible to state what the future prices are going to be, because that 
necessarily involves the obligation, either moral or otherwise, to charge the prices 
named. It is permissible to call attention to the demoralization resulting from 
price-cutting. It is not permissible by any sort of concerted action to use coercive 
measures, promises or threats to influence a competitor not to cut prices. The 
periodic exchange of information on capacity, sales, prices and the like will 
naturally tend to stabilization, but that is permissible since it is the result solely of 
enlightened self-interest. It ceases to be permissible only when there is introduced 
some element of agreement, "gentlemen's" or otherwise, or of concert of action 
designed to coerce or restrain free and independent action. 

There is less uncertainty as to the meaning of our anti-trust laws than seems to 
be popularly supposed. The terms "unreasonable restraint of trade" and "public 
interest" are supposed to introduce elements of uncertainty, but they have no ap- 
plication to direct restraints such as price-fixing agreements and the like. They 
apply only to those indirect restraints which are incidental to an arrangement in 
and of itself lawful, e. g., an agreement for a limited time and within a limited area 
not to reengage in a particular business incident to a contract for the sale of such 
business, or to those incidental restraints resulting from mergers or consolidations 
of two or more companies. The merger or consolidation being in itself lawful, 
the question arises under the anti-trust laws where competition is involved whether 
the resulting incidental restraint of trade is unreasonable and therefore against 
the public interest. In the case of agreements directly to restrain trade, such as 
price-fixing agreements, the law deems them unreasonable and contrary to the 
public interest. 

Nathan L. Miller, 

General Counsel. 



United States Steel Corporation, 

General Counsel's Office, 

June 7, 193S. 
Memorandum. 

re sales methods 

I. Discounts, Drawbacks or Rebates 

Sectfon 2 of the Clayton Act forbids discrimination in price "where the effect 
of such discrimination may be to substantially lessen competition or tend to create 



CONCENTRATION OF ECONOMIC POWER 10995 

a monopoly in any line of commerce." However, that does not prevent discrimi- 
nation in price "on account of differences in the grade, quality, or quantity of the 
commodity sold" or differences in selling or transportation costs or when made in 
good faith to meet competition. 

It is to be observed that the statute does not apply merely to discriminations 
which do substantially lessen competition or do create a monopoly, bijt to those 
which may have that effect or tendency, and it is only safe to assume that any 
discrimination except for differences in grade, quality or quantity or selling or 
transportation costs or to meet competition is within the statute. 

Where discounts are allowed to meet competition, the requirement is that it be 
done in good faith. In other words, that must be the bona fide reason and all of 
the surrounding circumstances should be considered in determining the question 
of bona fides. Where quantity discounts are made, they should have relation to 
the quantity sold. In other words, they, should be comoarative and all buyers of 
like quantities should be treated alike. 

In the case of requirement contracts there ought to be a specified minimum 
sufficiently large to justify the discount allowed. However, in the case of a 
customer of long standing whose requirements are pretty definitely known, this 
is not absolutely indispensable, although it is much to be preferred. 

Since good faith is an important and sometimes a controlling element, it is 
indispensable that there be no effort at concealment. That does not mean that 
one must proclaim his private business contracts to the world. It does mean, 
however, that methods of accounting and of payment on their face designed to 
conceal the true nature of the transaction will almost inevitably give rise to the 
inference that the discount was given for an improper and an unlawful purpose. 

II. Control of Resale Prices 

Any arrangement between seller and buyer of anything but patented articles, 
under which the seller retains any control whatever over the buyer's resale price, 
is unlawful. This applies only to cases of sales. When the title has once passed 
to the buyer he must be free to dispose of the article as he pleases. 

III. Agreements Limiting Buyers from dealing with Others 

Section 3 of the Clayton Act forbids the lease or sale of articles "whether 
patented or unpatented" or the fixing of a price discount or rebate thereon "on 
the condition, agreement or understanding that the lessee or purchaser thereof 
shall not use or deal in the goods, wares, merchandise, machinery, supplies or 
other commodities of a competitor or competitors of the lessor or seller, where the 
effect of such lease, sale or contract * * * 77^0^ be to substantially lessen 
competition or tend to create a monopoly in any line of commerce." 

Direct agreements with buyers that they shall not buy from competitors are 
manifestly unlawful. Such agreements necessarily tend to lessen competition 
or create a monopoly; but manifestly the statute cannot apply to every arrange- 
ment the indirect etfect of which is to limit purchases by the buyer from others 
for such is the effect of every sale. 

It may be stated as a safe generalization that every direct agreement with 
buyers that they shall not purchase from others is unlawful. 

However, contracts which merely have that effect are not ipso facto unlawful; 
otherwise every sale would be unlawful. The ordinary and customary contracts 
entered into in good faith for a legitimate purpose will not be declared unlawful 
merely because of a possible tendency unless in fact they do substantially lessen 
competition or create monopolies. 

IV. Requirement Contracts 

The necessary effect of a requirement contract is to prevent the buyer from 
purchasing from others, and it may"-be urged with some plausibility that that is 
the same as a sale on the express condition that the buyer will not purchase from 
others. The point has not been adjudicated, but the better reason supports the 
view that such contracts are not inherently unlawful. The test of each will, 
therefore, depend upon its particular circumstances. If made for the purpose 
and with the effect of lessening competition or creating a monopoly they are 
unlawful. If made for the purpose of promoting the legitimate interests of buyer 
and seller in the normal and customary manner, they will not be unlawful mere'y 
because a buyer who has supplied his requirements will not normally purchase 
from others. 



10996 CONCENTRATION OF ECONOMIC POWER 

As hereinbefore stated, where special discounts are allowed on requirement 
contracts, a definite minimum sufficiently large to support the discount ought, 
if possible, to be stated. 

Requirement contracts may be unenforcible for various reasons, such as lack 
of definiteness, mutuality and the like. This memorandum deals only with the 
question of legality under the anti-trust laws. The conclusion is that they may 
be entered into. 

The shorter the term of such contracts, the safer they are from legal attack. 
In other words, there is competition on the expiration of the contract just as on 
the individual sale. A single contract might be unobjectionable, whereas a 
sufficient number of them, especially for long terms, to tie up a major or even a 
considefable part of the market, might be held to be evidence of an attempt to 
monopolize. 

Each case will be judged by its own facts. Wherefore no such contract should 
be made except after the careful scrutiny and approval of counsel. 

V. Agencies, Dealers and Distributors 

(a) Agencies. — The agent stands in the shoes of his principal and it is permis- 
sible for the principal to do through an agent whatever he can do directly. No 
one is obliged tp sell to another unless he chooses to do so. No one is obliged to 
sell for any price that does not suit him. No one is obliged to handle the products 
of his competitor. It is therefore lawful for the principal to agree with a bona 
fide agent that he shall sell only at prices fixed by the principal or to purchasers 
designated by the principal and that he will not handle the products of others. 

It is to be understood, of course, that a mere form of agency contract cannot be 
used as a subterfuge to conceal an actual sale with unlawful restrictions imposed 
upon the buyer. 

(b) Dealers and Distributors. — It is permissible to sell to a single dealer or dis- 
tributor in a given territory and to protect distributors by classifying customers 
as jobbers, retailers, consumers, with different prices to each. 

From what has already been said, it is manifest that it is not permissible to 
fix the re-sale prices of the distributor or dealer or to prevent them by agreement 
from handling the goods of others. That can only be done by establishing agen- 
cies. 

Profits on direct sales in the territory of an exclusive distributor or dealer may 
be allowed such dealer or distributor for legitimate reasons to promote trade, 
but all such arrangements should have the scrutiny of counsel. 

Wherever agencies are created there should be authority of the State to do 
business. 

VI. Consignment Contracts 

Consignment contracts may be employed (1) to retain title in the goods as a 
protection against the possible creditors of the consignee, (2) to establish agencies. 

Whether such contracts are agency or sales contracts will depend upon their 
terms. Though in terms an agency contract, if they contain many provisions 
usual in sales contracts and unusual in agency contracts, the courts may look 
through the form to the substance and hold them to be sales contracts, especially 
if they contain resale price provisions or provisions restricting the consignee from 
dealing with others. 

It is to be understood tnat any plan or arrangement to monopolize is unlawful. 
Tying up all or substantially all of the agencies of distribution in a given territory, 
whether through agency arrangements, requirement or consignment contracts 
or otherwise, may be unlawful for monopolizing. 

All such contracts should receive the careful scrutiny of counsel. 

Nathan L. Miller, 

General Counsel. 



"Exhibits Nos. 1409-1417" are included in Hearings, Part 26. 



"Exhibit No. 1418" is included in Hearings, Part 27. 



'Exhibits No. 1419-1421 are included in Hearings, Part 19. 



"Exhibit No. 1422" is incluOed in Hearings, Part 16. 



CONCENTRATION OF ECONOMIC POWER 



10997 



X 

q: 

m 
en 

Q. 

(Tf 

H 
LU 
Ld 
X 
C/) 

o 

UJ 



o 
a: 

\- 
o 

X 



UJ 

o 
q: 

Q. 

UJ 
CO 

< 



S' 


e 


















m 


















M 


















^ 






























































1<I3S 


lO 

CO 

lO 


2^ 
































































































r- 


"^ 




















030 
Xcl3S 

3Nnr 








































f 




























































L 


»■ 


























































1 
























































■"^ 






















































































H«n 






























































..".'°^ 












- 


















































BNOr 

uvin 


lO 

(0 
lO 

o> 

lO 
lO 

* 

lO 

ro 
0> 

<J> 
O 

lO 

at 

o> 
o> 

CO 
N 
0> 

f- 

CO 

<0 

0> 

in 

CVJ 

eg 
2 

ro 

CM 

2 

CSJ 
C«J 
0> 

M 
0> 














































































f-- 


1 






" 




T 






























































■* 


-| 


















ld3S 
3Nnr 
H«n 

030 
ld3S 

3Nnr 
nvn 

330 
i<J3S 
3Nnr 

■((YK 
■D30 
id3S 

3Nnr' 
»»« 

090 
U3S 

3Nfir 
■«»« 

■030 
i<i3S 

3Nnr 

«»H 
030 
U3S 

3Hnr 

DVH 
030 
U3S 

3Nnr 

WW 
■030 
U3S 
3Nnr 
uvn 
030 
id3S 
wnf 

H»1«l 
030 
U3S 

3N(ir 

030 
U3S 

3Nnr 
■a»ni 

030 
ld3S 

3Nnr 
tnn 
030 

ld3E 

3Nnr 
H«n 

030 
ld3S 

3nnr 

VIM 
■030 
UX 

3Nnf 
vm 












































L 
















































































































































































































































, 


































































































































































































































^ 














____ J 




























































— .- 


_ 
















» 












































1 




























































L 






























































\. 














lU 


















































> 










> 
















































r 












0) 


























































3 

u 

z 
































































































































































/ 










































































0> 




























































lO 




























































0> 




























































*r 




























































^ 










































^ 


















M 








































^ 




















0> 
























































































































(A 






































■X 






















X 






































•>s. 






















1- 




















































































































































































z 








































r*" 




















^ 




























































OD 
































































































1 
























































































































^ 
















































































































































































r' 


"* 






















































































































"~ 


— 






















































































































— • 
















































































































































































> 






















































^ 








































































































































































































































^ 




































































" 




■^" 




























































































































V 






























































>^ 
















































> 














1 




























































J 
























VM 



































■— 














































■r 








































3^3 











- 














































1 



10998 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1424 
[Prepared by Department of Jiistice] 
BASE PRICE OF BLACK PLATE FOR TINNING. PITTSBURGH 



























r 














































" 














^ 




^' 






~ 




~ 






— 








(.00 












































































































































































































































































































































































































































































































































































































































































































































































































4.00 


+ 


^ 


"~ 


"" 


" 


~ 




M 


























































































>.uu 






















































"1 








M 




A\ 


























■ 
















^ 


^ 




























































































_ 






















L> 




\ 


r 


_ 






















































































V 


-\ 


^ 































>. 


— 


-/ 








, 


^ 




N 


























■ 




r 


V 


















f 






















J.UU 












































V 


-, 


•/ 




s 
















r^ 








































































































V> 






' 






































































































































































UJU 
















































































































t.uu 






































































































































































































































"" 






























































































































































































































I.DO 




























































































































































































































































































































































1* 


M 






Itl 


n 






I« 


M 






l» 


29 






19 


9( 


> 




19 


31 






19 


9S 






19 


5! 






19 


34 


t 




19 


3£ 






9SC 




1937 




1938 




939 


0.00 



Exhibit No. 1425 

[The letter below from Charles R. Hook, President, The American Rolling Mill Company, to A. A. 
Berle, Jr., was referred by Mr. Berle to Senator O'Mahoney] 

The American Rolling Mill Co. 
Middletown, Ohio 

Charles R. Hook, President 

September 8, 1938. 
Dr. A. A. Berle, Jr. 

c/o Columbia University, 

New York, N. Y. 

My Dear Dr. Berle: I have read with a great deal of interest your memo- 
randum of suggestions to the Temporary National Economic Committee. It is 
very gratifying to note that you are urging a careful and thorough study upon the 
part of the Temporary National Economic Committee before drawing any con- 
clusions. 

Since 1922 I have made a number of trips to England, as we have maintained 
there an organization of some size in connection with our business interests in that 
country. Since 1927 we have assisted in the management of one of the very im- 
portant British steel companies, aside and apart from our activities in selling our 
own products in that country. 

As you probably know, the American Rolling Mill Company developed and in- 
troduced the continuous sheet rolling process in this country. A large plant oper- 
ating under our patent license is just being put into operation at Ebbw Vale in 
South Wales. 

In section three, part three of your memorandum under the heading "The 
Necessity of Protecting Capital Investment," the following statement appears: 

"The C. I. O. did not resist the introduction of the rolling machine in 
the steel district, though inevitably the effect must be to throw out of 
work a great many steel employees, who will not be replaced through 
employment in the manufacture of rolling miU machinery." 

It may interest you to know that a study which we made last year shows that 
since the introduction of the continuous sheet and strip roUing process, the num- 
ber "of men employed in rolling and processing steel sheets and strips has actually 



CONCENTRATION OF ECONOMIC POWER 10999 

been largely increased. The reason for this I think is obvious if we study what 
has taken place since the introduction of this process. 

The average price which we received for all of the sheets and strips which we 
sold in the year 1923 was $100.15 per ton. The first continuous mill, which was 
built at our Ashland, Kentucky, plant began operations in the early part of 1924. 
The average price which we received for our goods in that year was $95.51 per 
ton, and, while as you know, manufactured goods in general increased in price 
between 1923 and 1929, the price of sheets and strips made by the continuous 
process continued downward each year, and in 1929 we received an average of 
$73.87 per ton for our product. 

The price continued to decline until in 1933 the average price we received was 
$45.98 per ton. Heavy increases in cost, due largely to the general heavy wage 
increases throughout all industry, necessitated increases in price, and our average 
price for the year 1937 was $66.69. 

To illustrate more clearly how the reduction in cost was passed on to the public, 
I am attaching hereto an exhibit marked "A" showing the price per 100 pounds 
we received for an automobile fender sheet .0375 in thickness, 39" in width and 
80)4" in length in 1923; what we received for that same sheet in 1929; andVhat 
we received for the same sheet at the end of 1937. The quoted price at the present 
time is $3.10 per hundred weight, which is $73.00 per ton below the 1923 price 
and $34.00 per ton below the 1929 price. 

You will note that between 1923 and the end of 1937 there was a reduction of 
$57.00 a ton in the price of automobile fender steel. 

Due to the continuous hot and cold reduction process, we have been able to 
produce a quality of steel sheet that could not and cannot today be produced 
by any method or combination of methods outside of the continuous process 
which we developed. 

As a result of the lower price and greatly improved quality of sheet steel, brought 
about by the continuous process, the market for sheet steel products has been 
greatly widened, creating a greatly increased demand and thereby necessitating 
increased production of steel sheets under the same general manufacturing business 
conditions. 

While the number of men required per ton of output was greatly reduced in 
the actual rolling process, the increase in demand and thereby in production, re- 
quired a large increase in the number of men required to process the rolled mate- 
rial, with the result that the total number of men employed is in excess of the 
number which would be employed under the old conditions and after allowing 
for the normal growth of the industry. 

I am attaching hereto another interesting exhibit marked "B", which shows 
the minimum hourly wage rate which was in existence in our plants in each of 
the years 1923 to 1938, inclusive. There is also shown on this exhibit the average 
earnings, both hourly and annual, in our plants and in the industry as a whole 
beginning with 1929 and including 1937. I do not have our 1938 figures to date. 

Please note that while there was an average reduction in the selling price of all 
of our products of $7.18 per ton between 1929 and 1937, the average hourly rate 
paid our employees rose from 65/-^^ per hour in 1929 to 97.5fi per hour in 1937, 
and that the actual annual averasco earnings of all our employees rose from 
$1601 in 1929 to $1937 in 1937. If allowance were made for the diflference in 
cost of living between 1929 and 1937, the real earnings for 1937 would have 
averaged over $2000 per annum. 

Earlier in this letter I mentioned our business interests in England and our 
association with English manufacturers. This experience and my recent studies 
as a member of the Commission appointed by the President to investigate In- 
dustrial Relations in England, has impressed me with the diflference in the way 
' we have generally attempted to make changes affecting our industrial system. 

As you know, over there when an important change or study is contemplated, 
a royal commission is generally appointed with an outstanding, able and impar- 
tial chairman, together with equal numbers of parties in interest. Plenty of time 
is taken to make a thorough study and investigation before conclusions are drawn 
by either the commission or the government. 

No sensible industrialist would contend that there must not be certain proper 
regulation of corporate activities; however, we cannot peg wages or continue to 
increase wages if management is denied the right of group cooperation with 
respect to prices. 

In England the right of employers to cooperate with respect to price and allo- 
cation of business is not denied and, therefore, there is greater opportunity for 
employers to cooperate with employee organizations with respect to wages, and 



11000 CONCENTRATION OF ECONOMIC POWER 

tHe ptiblic is protected against the combination of employer and employee 
organizations through the operation of the Import Advisory Committee. 

Please do not misunderstand me. I am not advocating the British system for 
the United States. I have simply brought these several matters to your attention 
to indicate the many factors that must be taken into consideration and how 
carefully the whole field must be studied if Senator O'Mahoney's Committee is 
to make a report that will be of real value in helping to create a situation that 
will encourage and not destroy individual and corporate initiative and that will 
raise and not lower the standard of living of the average citizen. 

I think you have made a valuable contribution by setting up a stop, look and 
listen warning. 

We have produced better goods at lower costs, which in turn has raised the 
purchasing power of the average worker's time in this country far above that of 
any other country in the world. 

My observations and close association with workers and supervisors ovef a 
period of 40 years in business, leave no doubt in my mind that these conditions 
are the result of our system of rewarding individual ability, initiative, hard work 
and thrift, through the private enterprise system operated for profit. 

I always have been and am today interested in any plan that will permanently 
raise the standard of living of our people. I am convinced that if we take away 
the hope of reward for ability, initiative, hard work and thrift we will lower instead 
of raise our standard of living. It is my firm belief that higher standards of living 
and continuity of prosperous industrial conditions go hand in hand, 

Please pardon the length of this letter. I started out to comment only on the 
particular sentence in section three of your memorandum; however, all of the 
factors I have mentioned in this letter relate to that sentence. 
Very sincerely yours, 

(Signed) Charles R. Hook 

CRH H. 

P. S. — By the way, there was no C. I. O. in existence when .the continuous 
method was introduced. The C. I. O. was not organized until about 1935. 

C. R. H. 



"A" 
.0375-39"X80>^" 

AUTOMOBILE FENDERS 

1923 

$5. 35 22 Ga. base Auto Body 
. 15 Ga. Deduction 



5. 20 20 Ga. 

75 Extra Deep Drawing Fender Quality 

20 Width 

10 Oil 



$6. 25 
1929 

$4. 00 20 Ga. base Auto Body 

. 50 Deep Drawing 

. 20 Width 

. 10 Oil 



$4. 80 
1937 (4th quar) 

$3. 45 20 Ga. base Cold Finish Mill Run 
. 10 Oil 



3. 55 

. 15 Deduction for quantity when 150 tons are ordered for shipment 
at one time 

a40 



CONCENTRATION OF ECONOMIC POWER 



11001 



1923— 

1929— 

1937— 

Sept. 1938— 

Sept. 1939— 



56. 25 per 100#=$135. 00 per ton 
4. 80 " " = 96. 00 " " 
3 40 " " = 78. 00 " " 
3. 10 " " = 62. 00 " " 
2. 95 " " = 59. 00 " " 

"B" 

Average Earnings 





Minimum Wage 
Rate 


Armoo 


Nat. Ind. 

Con. Bd. 
Cost of 
Living 


Real 
Annual 
Earnings 


Armco 

Sheet Selling 

Price 




Armeo 


Hour 


Actual 
Annual 


Net Ton 


1923 . 


33.0^ 

37.0 4-29-23 

37.0 

37.0 

37.0 

37.0 

37.0 

37.0 

37.0 

37.0 

34. 3 10-4-31 

33. 1-1-32 

30. 6-5-32 

45. 7-16-33 

47. 5 4-1-34 

47.5 

62. 5 11-15-36 

62. 5 3-16-37 

62.5 

62.5 










$100. 16 


1924 










96.61 


1925... 










83.34 


1926 










83.18 


1927 _ 










79.17 


1928 










70.24 


1929 


65.6 
64.1 
62.6 

63.9 

62.6 
76.1 
78.8 
80.5 
96.1 
98.6 
99.1 


1601 
1410 
1162 

790 

1134 
1231 
1636 
1708 
1774 
1398 
1850 


100.0 
96.7 
87.2 

77.9 

74.9 
79.4 
82.6 
84.8 
88.6 
86.4 
86.0 


1601 
1468 
1321 

1014 

1514 
1550 
1860 
2014 
2005 
1618 
2176 


73.87 


1930 


68.74 


1931 


68.89 


1932 


61.83 


1933 


46.98 


1934 


63.66 


1936 


64.11 


1936 


66.29 


1937 - 


66.99 


1938 ,. 

1939. 


64.35 
61.06— 9 mo8 







Exhibit No. 1426 
[Submitted by Chas. R. Hook, pre?., Amer. Rolling Mill Co.] 

Estimated steel companies' earnings on common stock, 10-year period — 1939 

thru 19SS 

[Italic figures denote loss] 



Company 


Year 


Est. Earn- 
ings on 
Common 
Stock 


Estimated 
Ave. Com- 
mon Stock- 
holders' 
Invest- 
ment > 


Earned 

on 
Stock- 
holders' 
Invest- 
ment 


Est. 
Earn- 
ings Per 
Share of 
Common 
Stock 


Estimated 

Averace 

No. of 

Com. 

Shares 


Armco 


/1929 
1930 
1931 
1932 
1933 
1934 
1936 
1936 
1937 

U938 


$6,059,250 

53,125 

3, B17. 70S 

i.na.m 

789, 669 
849, 986 
4, 193, 635 
6. 325, 748 
7,314.381 
S,SSt,90S 


$59,014,326 
65, 652, 201 
63,111.464 
69, 305, 402 
57,002,180 
65,999,917 
68, 245, 903 
71,150,157 
82,989,763 
82, 875, 419 


'Ml 

S.10% 
S. 6B% 

l!62% 

8! 89% 
8.81% 
i.Ot% 


$4.36 

.03 

1.88 

i.te 
.ie 

.60 
2.41 
2.73 
2.66 
1.16 


1,389,909 
1, 618, 718 
1, 709, 124 
1, 709, 226 
1,709,296 
1, 709, 380 
1,743,176 
2.319,866 
2,868,617 
2,868,666 




Total Earnings — 10 Years 


$16, 307, 629 
$1, 530, 763 










Average Per Year 




$66, 657, 466 


2. 33% 


$.78 


1,964,677 









Average Stockholders' In vestoient Is average of investment at beginning and end of each year. 



11002 



CONCENTRATION OF ECONOMIC POWER 



Estitnated steel companies' earnings on common stock, 10-year period — 1929 
thru 1938 — Continued 

[Italic figures denote loss] 



Company 


Year 


Est. Earn- 
ings on 
Common 
Stock 


Estimated 
Ave. Com- 
mon Stock- 
holders' 
Invest- 
ment 


Earned 

on 
Stock- 
holders' 
Invest- 
ment 


Est, 
Earn- 
ings Per 
Share of 
Common 
Stock 


Estimated 

Average 

No. of 

Com. 

Shares 


Bethlehem 


/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 


$35,242,980 

16, 843, 406 

6,779,S5B 

S5,98i,4Sl 

16,S7S,7gS 

5.986,638 

Z,U5,956 

6, 663, 382 

24, 348, 500 

2, «20, 857 


$380, 948, 244 
456, 858, 924 
446, 916, 798 
425, 470, 205 
403, 135, 843 
390, 707. 957 
383, 455, 352 
373.394,120 
369. 737, 408 
372, 737, 842 


9. 25% 
3. 69% 
1.52% 
6.11% 

5. ",9% 

■:f& 

1. 78% 

6. 59% 
.60% 


$15. 50 
5.26 
2.12 
8.12 
4.77 
1.87 

.70 
2.09 
7.63 

.70 


2, 273. 740 
3. 200. 000 
3.200,000 
3, 200, 000 
3,200,000 




3, 194. 858 
3, 194. 314 
3,189.989 
3, 185, 114 


Total Earnings— 10 Years 


$24, 607, 408 
%2, 460, 741 










Average Per Year . . - 




$394, 575, 868 


.62% 


$.79 


3, 103, 802 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 




Inland 


$11, 712. 374 
6, 498, 967 
1. 263, 599 
S, 320,968 
166, 693 
3, 729, 890 
9, 417, 818 
12, 800, 545 
12, 665, 317 
4,916,203 


$62,991,697 
67, W9, 604 
66, 713, 960 

61, 714, 450 
55, 726, 537 
53,011,104 

62. 413, 286 
76, 471, 852 
86, 724, 229 
92, 808, 391 


18. 59% 
9. 59% 
1. 89% 
5.38% 
.30% 
7.04% 
15.09% 
16.74% 
14. 60% 
5. 30% 


$9.76 
5.42 
1.05 
2.77 
.14 
3.11 
7.47 
8.71 
8.14 
3.12 


1, 200, 000 
1.200,000 
1, 200. 000 
1,200,000 
1, 200, 000 




1. 200, 000 
1, 260. 000 
1.469.600 
1. 565. 213 
1.673,950 


Total Earnings— 10 Years 


$59, 850, 448 
$5,985,045 










Average Per Year 




$69, 331, 526 


8. 63% 


$4.58 


1,305,866 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 




Jones tS: Laugblin.- 


$16. 738, 733 
4,983,314 
6,393, iSS 
ll,OiO,lSl 
8,581,020 
6, 861, 345 
1 508, 689 
19,627 
678, 826 
9, 989, 931 


$131,594,218 
138, 269, 277 
134, 357, 721 
123, 435. 173 
112,001,665 
103, 805, 906 
98, 846, 522 
94, 734, 712 
92, 618, 525 
88,003,809 


12. 72% 
3.60% 
i.76% 
9.74%, 
7. 66% 
6. 61%, 
4- 56%o 
.02% 
.73% 

11. 35% 


$29. 04 

8.65 

11.09 

20.86 

14.89 

11.91 

7.82 

.03 

1.18 

17.33 


576. 320 
576. 320 
676. 320 
576. 320 
676, 320 
676, 320 
576, 320 
576, 320 
576, 320 
576,320 


Total Earnings— 10 Years 


m, 934,038 
$t, 593, m 










Average Per Year 




$111. 118. 348 


2.33% 


$4.6u 


676. 320 




n929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

V1938 




National... .■ ... 


Incorporated 
8, 415, 822 
4, 443, 324 

1, 662. 920 

2, 812, 407 
6,050,720 

11, 136, 452 
12, 541, 842 
17, 801. 893 
6, 661, 652 


November?, l 
$100, 240, 646 
104, 161, 827 
103, 001, 331 
103, 232, 134 
105,763,592 
110, 134, 246 
111, 474, 550 
115,946,749 
124, 527, 910 


929 

8.40% 

4. 27% 

1. 61% 

2. 72% 

5. 72% 
10. 11% 
11. 25% 
15. 35% 

5. 35% 


$3.91 
2.06 
.77 
1.30 
2.81 
5.17 
5.80 
8.22 
3.07 


2, 149. 735 
2. 1.56. 832 
2. 156, 832 
2. 156, 832 




2. 166, 832 
2. 165. 777 
2,166.977 
2, 166, 477 
2,167,877 


Total Earnings— 9 Years.. •.... 


$71,527,032 
$7. 947. 448 










Average Per Year ■- 




$109,001,606 


7.29% 


$3.68 


2, 168, 241 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938, 


Otis — 


$2,868,977 
63, 492 
2,376,580 
3,636,393 
2,311768 
241349 
1,423,391 
1,347.299 
1. 538, 327 
1,985,660 


$14,279,070 
14, 728, 357 
12. 522, 428 
8.258.356 
4. 400. 171 
3. 215. 621 
3,893,760 
5, 390, 074 
8, 288, 925 
9,644.144 


20.09% 
.43% 
18.99% 
i4.02% 
62.61% 
7.60% 
38. 56% 
25.00% 
18. 56% 
20.69% 


$3.41 
.08 
2.83 
132 
2.76 
.29 
1.69 
1.58 
1.72 
2.20 


841,002 
841.002 
841.002 
841,002 
841,002 




841, 002 
841,002 
863, 534 
896,389 
901.320 


Total Earrmgs— 10 Years 


$3,315,254 
$331, 626 










Average Per Year 




$8. 692, 889 


S.81% 


$.39 


853,826 







CONCENTRATION OF ECONOMIC POWER 



11003 



Estimated steel companies' earnings on common stock, 10-year period — 19S9 
thru 1938 — Continued 

[Italic figures denote loss] 



Oompany 


Year 


Est. Earn- 
ings on 
Common 
Stock 


Estimated 
Ave. Com- 
mon Stock- 
holders' 
Invest- 
ment 


% 
Earned 

on 
Stock- 
holders' 
Invest- 
ment 


Est. 
Earn- 
ings Per 
Share of 
Common 
Stock 


Estimated 

Average 

No. of 

Com. 

Shares 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 












Republic 


Consolidatioi 

$n. 607, 800 

11 831 843 

7. ese, 900 

7, 033, 076 
1. 978. 350 
7, 175, 519 
6, 632, 745 

10, jfi9, ns 


1 consumated j 
$148, 222, 881 
133, 841, 841 
122,995.839 
116, 559, 531 
130, 974, 768 
150, 943, 316 
175, 376, 506 
191, 735, 594 


Vpril 8, 193 
8.61% 
11.08% 
6.20% 
6. 03% 
1. 51% 
4. 75% 
3. 78% 
6.43% 


0. 

$6.45 
7.68 
S.89 
S.BS 
.71 
1.76 
1.24 
1.86 


1, 953, 920 
1, 956, 981 
1,956,981 
1,992,064 
2,800.000 
4, 083, 389 
5, 363, 343 
6, 593, 179 




Total Earnings^S Years 


$36, 721, ess 
$1 690, IBi 










Average Per Year 




$149, 045, 260 


8.08% 


$1.4S 


3, 212. 482 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 




U. S. Steel 


$172, 372, 383 
79, 201, 894 
19,181,536 
96, S95, 381 
61, 710, 799 
i6,887,i56 
ei07g.969 
25, 363, 679 
69, 724, 681 
.32, 937, ISl 


$1,573,406,764 
1,726,316,317 
1,762,447,592 
1,680,367,748 
1,590,297,435 
1,530,060,600 
1,362,480,428 
1,232,378,645 
1,281,097,868 
1,166,826,666 


10. 96% 

4. 59% 
■ 69% 

5.74% 

5. 88%i 
3.06% 

1. 77% 

2. 06% 
5.44% 
2. 82% 


$21. 19 
9.12 
1.S9 
11.08 
7.09 
6,39 
2.77 
2.91 
8.01 
S.78 


8, 132, 840 
8, 687. 435 
8, 703. 252 
8, 703, 252 
8, 703. 252 




8, 703, 252 
8, 703, 252 
8. 703. 252 
8, 703, 252 


Total Earnings — 10 Years 


$72, 467, 365 
$7, 246, 737 










Average Per Year - . .. . 




$1,468,935,754 


.49% 


$.84 


8, 644. 629 




/1929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 




Wheeling - 


5, 352, 384 
2, S9g 
5, m, 17 i 
5, 559, 392 
2. 569. 212 
1, 755. 680 
1. 214, 806 
1, 826, 279 
2, 299, 863 
1, HI, 686 


$55, 299, 180 
65.646,015 
44,981,597 
33,217,971 
29, 148, 432 

27, 663, 759 

28. 345, 398 
29,239,916 
34, 067, 367 
38, 213, 264 


9. 68% 

.01% 

11.64% 

16.74%, 

8.81%, 

6.36%, 

4. 29% 

6. 25% 

6. 75% 

3.77% 


$13, 30 

.01 

13.51 

14-38 

6.65 

4.62 

3.13 

4.71 

4.84 

S.56 


402. 301 
402, 301 
387, 691 
386, 614 
386, 514 




387. 767 
388, 070 
475, 343 
563, 212 


Total Earnings— 10 Years 


$B. 872, 104 
$687,210 










Average Per Year 




$38, 292, 426 


/. 63%, 


$1.41 


416, 735 




/1 929 
1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 

U938 




Youngs town i. . 


$20, 739, 174 
6,211,133 
7.865,900 
U, 097, 783 
9, 167, 901 
S, 490, 119 
772, 521 
9, 739, 501 
11, 365, 649 
/, m, 934. 


$123, 506, 193 
129, 840, 831 
122, 907, 367 
108, 411, 651 
96, 247, 864 
89, 871, 172 
• 89,055.847 
96, 890, 408 
114, 465, 352 
123, 442. 682 


16. 79% 
4.78% 
6. 40%, 

IS.00% 

9. 63%, 

S. 88%, 

.87% 

10.05% 
9.93% 
1.20% 


$17. 28 
5.17 
6.66 
11.75 
7.64 
2.91 

.64 
7.82 
7.02 

.89 


1, 200, 000 
1, 200, 000 
1,200,000 
1, 200, 000 
1, 200, 000 




1, 200, 000 
1, 200, 000 
1, 246, 188 
1.618.896 
1,675.008 


Total Earnings— 10 Years 


$12, 722, 341 
$1. 272, 234 










Average Per Year -. 




$110, 377, 341 


1. 15% 


$.98 


1, 294, 009 









Common Stockholders' Investment includes following: 

Common stock less stock held m Treasury. 

Contingent and insurance reserves (as nearly as could be ascertained). 

Surplus, less deferred charges. 

Deduction of estimated preferred dividends in arrears. 
[In lnk:l 

10 Year Period— 8 Co. Earnings on Com. Stock 

9 Year Period— 9 Co. Loss on Com. Stock 

QEH/AB. 
10/30/39. 



$149,833,795 
$49,726.4X8 



11004 



CONCENTRATION OF ECONOMIC POWER 



Summary of Estimated % Return on Ave. Common Stockholders^ Investment and 
Estimated Earnings Per Share of Common Stock 10 Year Period — 1929 Thru 19S8 

ESTIMATED EARNINGS PER SHARE OF COMMON STOCK 
[Italic figures denote loss] 



Year 


Armco 


Beth- 
lehem 


In- 
land 


Jones & 

Laugh- 

lin 


Na- 
tional 


Otis 


Re- 
public 


U.S. 
Steel 


Wheel- 
ing 


Youngs- 
town 


1929 


$4.36 

.03 

1.88 

1.16 

U6 

.50 

2.41 

2.73 

2.55 

1.16 


$15.50 
5.26 
2. ;« 

8. IS 

i.77 

■ 1.87 

.70 
2.09 
7.63 

.70 


$9.76 
5.42 
1.05 
S 77 
.14 
3.11 
7.47 
8.71 
8.14 
3.12 


$29.04 

8.65 

11.09 

SO. 86 

14.89 

11.91 

7.8S 

.03 

1.18 

17. SS 


"$3."9i' 
2.06 
.77 
1.30 
2.81 
5.17 
5.80 
8.22 
3.07 


$3.41 

.08 
S.88 
4.Sg 
S.76 

.S9 
1.69 
1.68 
1.72 
i.iO 


"'$M5" 
7. 58 
S.89 
S.5S, 
.71 
1.76 
1.24 
1.86 


$21. 19 
9.12 
1.S9 
11.08 
7.09 
5. 39 
S.77 
2.91 
8.01 
S.78 


$13.30 
.01 

13.51 
H.38 
6.65 

3.13 
4.71 
4.84 
S.66 


$17. 28 


1930 


6.17 


1931 - 


6.65 


1932 


11.75 


1933 


7.64 


1934 


e.9i 


1935 


.64 


1936 


7.82 


1937 


7.02 


1938 


.89 






Ave. Per Year.. 


$ .78 


$ .79 


$4.58 


$i.60 


$3.68 


9 .39 


$l.iS 


$ .84 


$1.41 


$ .98 



ESTIMATED % RETURN ON AVE. COMMON STOCKHOLDERS' INVESTMENT 



1929 

1930 

1931 

1932 

1933 

1934 

1935 

1936 

1937 

1938 

Ave. Per Year. 



10. 27% 
.08% 
5. 10% 
3. 6S% 
1.39% 
1.52% 
7.20% 
8. 89% 
8. 81% 
4.02% 



2. 33% 



9. 25% 
3. 69% 
1. 52% 
6. 11% 
3. 79% 
1. 53% 

.69% 
1. 78% 
6. 59% 

.60% 



18. 59% 

9. 59% 

1. 89% 

5.38% 

.30% 

7. 04% 

15. 09% 

16. 74% 

14. 60% 

5. 30% 



.62% 



8.63% 



12. 72% 
3.60% 
^76% 
9. 74% 
7. 66% 
6.61% 
4-66% 
.02% 
.73% 

11.35% 



2.33%, 



8.40% 
4.27% 

1. 61% 

2. 72% 
5. 72% 

10. 11% 
11. 25% 
15. 35% 
5. 35% 



7.29% 



20.09% 
.43% 
18. 99% 
44-02%, 
62.61%, 
7. 80% 
36. 56% 
25. 00% 
18. 56% 
SO. 59% 



3.81% 



8.61%, 
11.08%, 
6. 20% 
6.03%, 
1. 51% 
4. 7.^% 
3. 78% 
6. 43%, 



3. 08%, 



10.96% 

4. 69% 
.69% 

6. 74%, 
3. 88% 
3. 06%, 
1. 77% 
2.06% 

5. 44% 
8. 82%, 



.49% 



9.68% 
.01%, 
11.64%, 
18.74%, 
8.81%, 
6. 36%, 
4. 29% 
6. 25% 
6. 75% 
5. 77% 



;. 63%, 



16. 79% 
4. 78% 
6. 40%> 

13.00%, 

9. 63%, 

3.88%, 

.87% 

10. 05% 
9. 93% 
1. 20% 



1. 15% 







10 YEAR PERIOD-1929-1938 




10 Year-Ave. Per 
Year 


2. 33% 


.62% 


8.63% 


2.33%, 




3.81% 




.49% 


1. 63% 


> 1. 15% 










9 YEAR PERIOD— 1930-1938 




9 Year-Ave. Per 
Year 


1.53% 


.«9% 


7.60% 


4.32% 


7.29% 


8. 33% 


- - 


.76%, 


S.39%, 


K81%, 







10 Year Period 

8 Co.— 10 Yr. Ave. Com. Stock Invest. $2,266,981,617 

8Co.— lOYr. " Earn, on Com. Stock $14,983,381 

8Co.-10Yr. " % Return .68% 

(In ink:) Total 10 year earnings on common stock for the 8 companies (which exclude 

National and Republic) — $149,833,796 

9 Year Period 

9 Co.— 9 Yr. Ave. Com. Stock Invest - $2,381,743,728 

9Co.— 9Yr. " Earn, on Com. Stock - 96,526,047 

9Co.— 9Yr. " % Return -- .«% 

(In ink:) Total 9 year loss on common stock for the 9 companies (which exclude Re- 
public) $49,7t6.4iS 

• Ave. 8 Companies =.66%. 
»Ave. 9 Companies =.iS%. 
QEH/AB. 
10/30/39. 



CONCENTRATION OF ECONOMIC POWER 11005 

Exhibit No. 1427 i 

(Penned notation:) CHR Noted PJC 2/6/39. 

South Chester Tube Co., 
Pittsburgh, Pa., February 3, 1939. 
Subject: Gulf River Shipments. 

Mr, C. H. Roberts, 
Gen. Sales Manager. 

De.\r Harry: The "Devil" has broken loose in the pipe district here yesterday 
and today, due to the action of our good friend Mr._ Weiss. As you know he is a 
pretty smart boy, even though he finds it suitable for his purpose to appear 
very dumb at times. 

When the barge rates went into effect for pipe at Memphis and Houston, he 
started to vork on a proposition which came to a climax here yesterday and 
certainly will have wide ramifications. 

The Gulf, as we understand it, have purchased two barges and a smaU river 
boat. Weiss offered an order for a barge load of Seamless to Jones & Laughlin, 
the barge to be loaded alongside their loading racks on the Ohio River here, and 
also a barge load order to Spang Chalfant, under the same conditions, the pipe to 
be billed f. o. b. barge siding, which as you know takes only a 2%ji per cwt. 
switching charge in freight. 

When the National Tube Company heard of this, they just "Raised Cain" and, 
in some way or other, stopped J. & L. from accepting this order, and likewise 
Spang Chalfant. The National Tube Company stood hard and fast by their 
policy, that no pipe would be quoted other than f. o. b. destination, or f. o. b. 
Houston or Memphis stock. 

We mentioned this matter to you on the telephone, but since then we have had 
about an hour and a half's session with Mr. Weiss, in which he did all the talking 
and we said little or nothing. He wanted to know why he could not get pipe 
quoted f. o. b. barge siding, provided it was their own barge. We naturally said 
nothing of an incriminating nature and simply stated that we could take no part 
in this matter whatever, as we were not on the river and therefore totally dis- 
interested. Our reply to his question as to why no pipe mill was permitted to 
quote on the basis above mentioned, was that we simply stated that as long as we 
had been in this business, we had never known of any manufacturer quoting 
f. o. b. miU. 

Weiss advised us that yesterday they had a meeting called in Mr. Bothwell's 
office and, present at that meeting were: Mr. Weiss, the Traffic Department of the 
Gulf, Mr. McConnor, Sales Manager of the National Tube Company and the 
Gulf's legal staff. Dave tells us today that upon the opinion of their Legal 
Department, they may enter suit against every mill on the river which refused to 
quote them f. o. b. barge siding, the Gulf's legal stafiF contending that the river is 
"not controlled by the Interstate Commerce Commission, that the material is to 
move in their own equipment subject to their responsibility and, therefore, the 
action of the pipe mills was in restraint of trade. 

Dave also advised that our name was brought up in this meeting yesterday, 
but he said we could not figure in this whatever, as we were not on the Pitts- 
burgh rivers. 

It is our understanding that he wants this barging done only because of the deep 
wells Gulf has in contemplation in the Delta area, mainly Louisiana. 

We touched upon this in a conversation with John Anderson yesterday and he 
was very cagey about the whole thing. He stated "he did not believe any of the 
mills would go along with it. 

However, J. & L. did accept one barge order, and we have not heard the last 
of this by any means. 

We have nothing to fear in this National business, but feel you should be posted 
on everything that we learn. 
Very truly yours, 

(In ink:) Francis H. Gibson, 

District Sales Manager. 

FHG/G. 

) See p. 10831, supra, for statement by Mr. Feller as to documents taken from the flies of tbe South 
Chester Tube Co. 



11006 CONCENTRATION OF ECONOMIC POWER 

Mr. F. H. Gibson: Feb. 7, 1939. 

Thanks very much for this interesting information, and we are just wondering 
what will happen next. 
Very truly yours, 

R'mm. G. S. M. 



"Exhibit No. 1428", introduced on p. 10846, is on file with the Committee. 



"Exhibit No. 1429", introduced on p. 10847, is on file with the Committee. 



"Exhibit No. 1430", introduced on p. 10850, is on file with the Committee. 



"Exhibit No. 1431", introduced on p. 10853, is on file with the Committee. 



Exhibit No. 1432 

(Crossed-out matter in linetype; new matter in brackets:) Special [Reg] 
Delivery [to Pgh.] 
Enc. South Chester Tube Co., 

Chester Pa., August 9, 1938. 
Mr. Francis H. Gibson, 

Daniel Boone Hotel, Charleston, W. Va. 

Dear Francis: Received your wire rrom Centralia and am enclosing several 
copies of our Standard and South Penn Casing list. In reply to your question 
as to which list we will make effective in West Virginia, I hope it will be possible 
to eventually establish our prices. 

I talked to Henry on Friday, but evidently did not get very far with my argu- 
ment, but I told him that it was my impression from past conversations which 
you will bear out, that he was terribly afraid to make prices too low for fear of 
bringing dowm the house on his head, and I told him that apparently he had 
thrown discretion to the winds as there does not seem to be any good reason 
for making the South Penn list as low as he has done. He intended to be away 
over the week-end and said he might call today and discuss the matter further 
with me, and if anything develops after this letter is mailed, I will wire you. 

Steele states that Spang, has adopted Wheeling's list for the popular sizes 
which, of course, will make our field stock prices higher than our competitors, 
and we may have to do something about that, but Spang is using our list on the 
unpopular sizes shown on page 2 which leads me to believe that these prices are 
more in line with general ideas of the industry, and I intend to point this out to 
Henry, hoping that h^ will consider revising his Ust. 

I do not know what route you would take in returning from Charleston, but 
am wondering whether it would be convenient to stop off at Wheeling on the way 
back to go into this matter further with Henry provided I am unable to get any- 
where with him. He admits that the prices quoted do not permit of any profit 
and I can't understand why they deliberately quote prices so low when it appar- 
ently is possible to get higher prices in West Virginia. If you feel it necessary, 
I shall be glad to have you telephone me before going to Wheeling. 

We received this morning United's order #9985 for 3385 feet 8-^"0. D. 20# 
IIH thread Casing which is a new weight for that district. Our list is $89.90, 
and Wheeling's list is $77.90, and due to this wide difference in price, we hesitate 
to enter the order and prepare for shipment by September 1st until we have 
the price question straightened out. Our list on full operation would allow us 
to just exactly break even, but on present operation, our loss is at least $5.00 
per ton. Our list would net us $82.30 and Wheeling's list would net us $71.00, and 
to my way of thinking, there is entirely too much difference between the two lists, 
but due to our high costs, we do not feel that we can consistently reduce them. 



CONCENTRATION OF ECONOMIC POWER 11007 

If Columbian Carbon Co. is willing to pay our price for the high tensile steel 
as against the lower price published by Wheeling, that would be fine, but if we 
are unable to eflfect a change in Wheeling's list and Columbian is unwflling to 
pay a higher price, then I will have to discuss it with Mr. Cook for his approval, 
and I hope that you can get this definitely straightened out while you are in 
West Virginia so that we can proceed with preparation of the material. 
Very yours truly, 

(In ink:) C. H. Roberts. 
R'mm. G. S. M. 



Exhibit No. 1433 

(Pencil notation:) JWL X file. 

(Pencil notation:) CHR Looks like good news. 

Enc. 

South Chester Tube Co., 

Pittsburgh, Pa., August 12, 19S8. 
Mr. C. H. Roberts, 

Gen. Sales Manager: 

Regarding previous correspondence concerning lapweld prices of the various 
mills, we wish to advise that we stopped in Wheeling last week on our way west 
and spent some time with both Mr. Schaefer and Mr. Strickland. 

At that time, they gave me copies of their new lists and, while I did not have 
a great deal of opportunity while with them to analyze these, I remonstrated 
quite vigorously about the reduction in prices on the items other than the tonnage 
group. 

Mr. Schaefer said he did not see they could do anything else and exist. 

Mr. Schaefer is out of town at the present time, but since returning to Pitts- 
burgh, I find that most of the other mills are after us, in an effort to get our coop- 
eration in insisting that Wheeling bring the prices on the items other than the 
tonnage group up to the previously announced 2-J4%. 

Mr. E. N. Smith of the National Supply Company discussed this with me by 
telephone today and wants me to meet with Mr. Brundred, their Vice President, 
to go over this matter. 

From Mr. Smith, we learned that Mr. Goebel, Vice President of the National 
Tube Company, was hunting Mr. Schaefer to secure an interview and demand 
that they revise these prices. 

In West Virginia, we found a terrific confusion existed and, yesterday, the first 
Lapweld List from Spang Chalfant reached the National Supply Company and 
the customers there. We borrowed one of these and had it photostated and are 
enclosing a copy. 

We left Charleston, unable to quote any definite prices, for while we could not 
find anyone who had as yet received a copy of Wheeling's list in the Charleston 
District, all of the miD representatives who have been there since the price reduc- 
tion, have informed various customers |.hey would meet any lapweld competitive 
price. We simply had to say we could not definitely quote as yet, nor furnish 
lists. It is our hope that the other miUs wiU be able to have Wheeling recall 
these prices. 

Very truly yours, 

(In ink:) C C to Mr. Cook 8/13. 

(In ink:) Francis H. Gibson, 

District Sales Manager. 

FHG/G. 

P. S. — Since dictating the above, I have reached Mr. Strickland of Wheeling 
by telephone, who advised that he had already talked with you today. 

From Mr. Strickland's conversation, I learned that they had already been with 
Goebel and that Wheeling is now going to revise their previously announced 
prices. 

Mr. Strickland stated you could come to Pittsburgh early next week to go into 
this matter, and I assured him that I would also do anything I eould to help 
them out of this jam. 

FHG/G. 



124491 — 40— pt 2C 



11008 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1434 
(Stamped:) Received Aug. 10, 1938—9:45, Pittsburgh. 

Pittsburgh, Pa., August 16, 1938. 
Mr. C. H, Roberts, 

Gen. Sales Manager: 

Replying to yours as above, we left Charleston with the price situation as much 
in the air as it was when we arrived there. 

After having had ample time to analyze Wheeling's lists, we decided to state 
that we were not prepared to make prices down there at the present time. We 
found all over the country that no one had received Wheeling's list, but everyone 
had heard rumors that such a list had been issued, with widely reduced prices. 

As we mentioned to you by telephone, on our way west, we spent some time at 
Wheeling and remonstrated with these people very vigorously. We tried to 
reach Mr. Schaefer by telephone to see if he would be in Wheeling on our return, 
but found he was not available and therefore did not stop. As we wrote you 
Saturday, we learned where he was and that the National Tube Co., Spang, 
Chalfant, etc. were right after them, and Mr. Strickland advised their prices 
would be revised upward immediately. 

As yet we have no further information on this todaj', but hope to have a definite 
story by tomorrow, at which time we will communicate with you at once. 

While we know that all of the West Virginia customers much prefer our material 
to Wheeling's, we must admit with such a wide variation in prices, we could not 
expect to receive any business. It seems imperative that Wheeling must make an 
increase, or we will either have to meet their prices or turn down business. In so 
far as the carload of 8-5/8" O. D. 20# is concerned, we hope you can hold this up 
for another two or three days, until we find out definitely what Wheeling is going 
to do. 

Incidentally, Mr. Czarniecki of the Byers Company was in our office this 
morning and we have enlisted his support in trying to have Wheeling see the light 
in this matter, and frankly, we believe that our efforts here with Mr. Smith of the 
National Supply Company, have had a great deal to do with getting Wheeling 
started on the right track again. 

We believe by Wednesday, at the latest. Wheeling wiU have revised their lists 
and, in the meantime, you may be hearing from them directly. 
Very truly yours. 



FHG/G. 



(In ink:) Francis H. Gibson, 

District Sales Manager. 



'Exhibit No. 1435," introduced on p. 10865, is on file with the Committee. 



"Exhibit No. 1436," introduced on p. 10866, is on file with the Committee. 



CONCENTRATION OF ECONOMIC POWER 11009 

Exhibit No. 1437 
(Penned notations:) 
CHR then X file. 
R saw FJT. 
Think brot by GWS from Pgh trip JWL 10/10. 

Septembbr 29, 1938. 
Memo. 

Mr. C. H. Roberts. 

Dear Harry: The matter outlined below is in strict confidence and has been 
received by the writer, since return of the gentlemen frdm New York, whom we 
mentioned by telephone. 

Naturally, to gain the end which the other mills wanted, that is: Not to have 
the National Tube Company quote prices on Seamless material which would meet 
Lapweld competition, it was very necessary for these other mills to give up some- 
thing in return. Through the same and another source, we have today checked 
a second meeting of manufacturers other than the National Tube Company to be 
held in a few days. As it stands at the moment, the thing resolves itself as 
follows: 

The National Tube Company will leave as they are at the moment the prices 
for Grade "B" Seamless, which have already been announced. The National 
Tube Company and all other seamless mills will [dis]continue the manufacture of 
new Grade "C" and bring the physicals of new Grade "B" considerably higher. 
, This with the new Grade "D" will bring the status back to where it was prior to 
July 1st, when the whole mess was started. 

Youngstown, Spang Cbalfant, Jones & Laughlin and Republic Steel will dis- 
continue the manufacture of Lapweld Pipe in Oil Country sizes 10-3/4" O. D and 
under. 

Wheeling Steel, who has already been contacted today, advised that with the 
present spread between Grade "B" and Lapweld, they were slowly being forced 
out of business and would only ask that they be allowed to dispose of present stocks 
of Lapweld on hand. 

Bethlehem, who was contacted today, stated they had not made any Lapweld 
Oil Country material since July 1st. This I doubt, but they have also signified 
their intentions, to discontinue the manufacture of this product. 

In so far as the South Chester Tube Company is concerned, as has been stated 
this afternoon, neither the National Tube nor a meeting of the other mills feel 

they should take the responsibility of determining [or suggesting] 

any policy for us to follow, as they would not want to be confronted at Washing- 
ton, since we make no other product in the way of pipe, and not even any other 
products manufactured of steel. 

We are handing this to Mr. Sweet, and we need not advise that this information 
is of the most confidential nature. 

Prior to the meeting of the miUs, other than the National Tube, we are going 
over this matter with our source of confidential information. This meeting will 
be held probably Monday or Tuesday of next week and, within an hour after it 
adjourns, we hope to have exactly what transpired. 

Note.— Changes and new matter enclosed In brackets. 



"Exhibit No. 1438," introduced on p. 10878, is on file with the Committee. 



11010 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1439 
(Exhibit No. 1) 

Statement Showing Fabricated Structural Steel Awards on Jobs of 100 Tons or More 
covering Fabricated Structural Tonnage Placed for Delivery at Points in the Three 
Pacific Coast States {California, Oregon and Washington) During the Eighteen 
Months' Period of January 1, 1938 to June SO, 1939 (See Note "A") 

[Tonnages shown are tons of 2000 pounds] 





1st quar- 
ter 1938 
tonnage 


2nd quar- 
ter 1938 
tonnage 


3rd quar- 
ter 1938 
tonnage 


4th quar- 
ter 1938 
tonnage 


1st quar- 
ter 1939 
tonnage 


2nd quar- 
ter 1939 
tonnage 


Full pe- 
riod 1/1/38- 
6/30/39 
totals 


1. Awards to "Pacific Coast 

Independent Fabricators" 
(as defined in Note "B").. 

2. Awards to "Midwest States 

and Southern States Inde- 
pendent Fabricators" (as 
defined in Note "C") 

3. Awards to "Atlantic States 

independent Fabricators" 
(as defined in Note "D").. 


2,764 
(27. 1%) 

1,988 
(19. 5%) 

2,040 
(20.0%) 

3,416 
(33.4%) 


3,013 
(22.5%) 

450 
(3. 4%) 

Nil 


6,918 
(25. 5%) 

3,690 
(13.6%) 

348 
(1.3%) 

16, 163 
(59.6%) 


8,895 
(18.3%) 

435 
(0.9%) 

NU 


14, 302 
(35. 4%) 

610 
(1.5%) 

1,300 
(3.2%) 

24, 167 
(59.9%) 


5,705 
(39.6%) 

512 
(3. 5%) 

NU 


41, 597 
(27.0%) 

7,685 
(5.0%) 

3,688 
(2. 4%) 


4. Awards to "Mill Affiliate 
Fabricators— Fabrication 
Point Unknown"— (as de- 
fined in Note "E") 


9,944 
(74. 1%) 


39,368 
(80.8%) 


8,219 
(56.9%) 


101, 277 
(65. 6%) 


Totals 


10, 108 


13,407 


27,119 


48,698 


40, 379 


14, 436 


154,247 




(100.0%) 



Note "A".— Source of data: "Awards— Structural Steel" as reported currently each week by "The 
Iron Age." 

Note "B".— The terra "Pacific Coast Independent Fabricators" as used herein means Structural Steel 
fabricators with plants located in California, Oregon or "Washington and not known to be owned or con- 
trolled by any Steel Rolling MUl interest. 

Note "C".— The term "Midwest States and Southern States Independent Fabricatort" as used herein means 
structural steel fabricators with plants located in the states Of Nebraska, Kans6 , Oklahoma, Minnesota, 
Wisconsin, Iowa, Missouri, Arkansas, Louisiana, Illinois, Michigan, Indiana, Ohio, Kentucky, Tennessee, 
and Alabama, and not known to be owned or controlled by any steel rolling mill Interest. 

Note "D".— The term "Atlantic States Independent Fabricators" as used herein means structural steel 
fabricators with plants located in the states of New York, Pennsylvania, New Jersey, Delaware, "Maryland 
and "Virginia and not known to be owned or controlled by any steel rolling mill interest. 

Note "E".— The term "Mill Affiliate Fabricators" as used herein means structural steel fabricators and 
sales units understood to be affiliated with major steel producers. 

(Compiled by Pacific Coast Steel Fabricators' Association pursuant to diretction of and under subpoena 
from Temporary National Economic Committee). 



CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1440 

(Exhibit No. 2) 



11011 



Stalemenl Showing Fabricated Structural Steel Awards on Jobs of 100 Tons or More 
Covering Fabricated Structural Tonnage Placed for Delivery at Points in the States 
of Arizona, Neiv Mexico, Nevada, Utah, Idaho and Montana During the Eighteen 
Months' Period of January 1, 1938 to June SO, 1939 {See Note ''A") 

[Tonnages shown are tons of 2000 pounds] 





1st quar- 


2nd quar- 


3rd quar- 


4th quar- 


1st quar- 


2nd quar- 


Pull pe- 
riod 1/1/38- 
6/30/39 
totals 




ter 1938 


ter 1938 


ter 1938 


ter 1938 


ter 1939 


ter 1939 




tonnage 


tonnage 


tonnage 


tonnage 


tonnage 


tonnage 


1. Awards to "Pacific Coast 
















Independent Fabricators" 
















(as defined in Note B-1) . 


Nil 


Nil 


Nil 


Nil 


Nil 


286 
(17.3%) 


285 
(2.4%) 


1-A. Awards to "Intermoun- 
















tain States Independent 
















Fabricators" (as defined 
















in Note B-2) 


Nil 


Nil 


NO 


Nil 


316 

(5. 5%) 


125 
(7.6%) 


435 




(3.7%) 


2. Awards to "Midwest States 
















and Southern States Inde- 
















pendent Fabricators" (as 
















defined in Note "C") 


300 


200 


535 


855 


1,968 


1,115 


4,973 




(22.2%) 


(22. 7%) 


(70. 9%) 


(52.9%) 


(35. 2%) 


(67.8%) 


(42.0%) 


3. Awards to "Atlantic States 
















Independent Fabricators" 
















(as defined in Note "D").. 


Nil 


Nil 


100 
(13. 2%) 


Nil 


Nil 


Nil 


100 
(0.8%) 


4. Awards to "Mill AflBIiate 
















Fabricators— Fabrication 
















Point Unknown"— (as de- 
















fined in Note"E") 


1,050 


680 


120 


761 


3,325 


120 


6,056 




(77.8%) 


(77.3%) 


(IS. 9%) 


(47. 1%) 


(59.3%) 


(7. 3%) 


(51. 1%) 


Totals 


1,350 


880 


755 


1,616 


5,603 


1,645 


11,849 




(100.0%) 



Note "A".— Source of data: "Awards— Structural Steel" as reported currently each week by "The 
Iron Age". 

Note "B-l".— The term "Pacific Coast Independent Fabricators" as used herein means Structural Steel 
fabricators with plants located in California, Oregon or Washington and not known to be owned or controled 
by any Steel Rolling Mill interest. 

Note "B-2".— The term " Intermountain States Independent Fabricators"as used herein means structural 
steel fabricators with plantslocatedin the states covered by this exhibit, i. e. Arizona, New Mexico, Nev«da, 
Utah, Idaho and Montana, and not known to be owned or controlled by any steel rolling mill interest. 

Note "C". — The term "Midwest States and Southern States Independent Fabricators" as used herein means 
structural steel fabricators with plants located in the states of Nebraska, Kansas, Oklahoma, Minnessta, 
Wisconsin, Iowa, Missouri, Arkansas, Louisiana, Illinois, Michigan, Indiana, Ohio, Kentucky, Tennessee, 
and .Alabama, and not known to be owned or controlled by any steel rolling mill interest. 

Note "D".— Tae term "Atlantic States Independent Fabricators" as used herein means structural steel 
fabricators with plants located in the states of New York, Pennsylvania, New Jersey, Delaware, Maryland 
and Virginia and not known to be owned or controlled by any steel rolling mill interest. 

Note "E".— The term "Mill Affiliate Fabricators" as used herein means structural steel fabricators and 
sales units understood to be afliliated with major steel producers. 

(Compiled by Pacific Coast Steel Fabricators' Association pursuant to direction of and under subpoena 
from Temporary National Economic Committee). 



11012 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1441 
Exhibit No. 3 

Statement Showing (A) Current Published Basing Point Prices on Steel Bars, 
Shapes, Plates and Sheets {Taken From "The Iron Age" of August 24, 1939) 
[Revised to 11/9/39) Together With (B) Comparison of Eastern Basing Point 
Prices Plus Actual' Transportation Cost Versus "On Cars, Dock, Pacific Ports" 
Base Prices 



(A) 





Base per pound (cents) 


Base point 


Bars 


Shapes 


Plates 


H. R. 
Sheet 


F. O. B. Pittsburgh, Pa 


2.15 
2.16 
2.16 
2.16 


2.10 
2.10 
2.10 
2.10 
2,10 
2.10 


«2.10 
•2.10 
>2.10 


2.00 


F. 0. B. Chicago, lU 


2.00 


F. 0. B. Gary, Ind .- 


2.00 


F. 0. B. Buffalo, N. Y... 


2.00 


F. 0. B. Bethlfiliem, Pa 






F. 0. B. Birmingham, Ala. 


2.16 


>2.10 
«2.10 
1 2. 10 


2.00 


F. 0. B. Sparrows Pomt, Md 


2.00 


F. 0. B. Cleveland, Ohio 


2.16 




2.00 


F. 0. B. Middletown, Ohio . .. 


2.00 


F. 0. B. Youngstown, Ohio. 






«2.10 
»2.10 


2.00 


F. 0. B. Coatesville, Pa- 








F. 0. B. Granite City, 111 






ZIO 


F. 0. B. Claymont, Del 






«2.10 




F. 0. B. Duluth, Minn 


2.25 
2.47 
2.49 
2.25 
2.60 
2.76 






''Philadelphia, delivered" 


2.215 
2.27 


[2.08 toj « 2. 15 
£2.19 toj I 2. 29 


2.17 


"New York, delivered" 




"Detroit, delivered" 


2.10 


"On cars, dock, Gulf Ports" 


2.45 
2.70 


«2.45 
12.60 




"On cars, dock. Pacific Ports" (See Note) 


2.60 







["Subject to concessions, particularly in the East, of $2.00 per ton" (.10 per lb.)] 
> [25c premium by certain "Independent" Plate Mills for early deliveries). 

Note.— Crossed-out matter in llnetype; new matter enclosed in brackets. 

Note.— These "Pacific Port*' Prices apply on Bars and Shapes rolled at California and Washington 
mills, no specific F. O. B. Mill Prices being established on Pacific Coast rolled steel. 

(All Rates and Prices per 100 pounds] 

(B) 1. Bars » F. O. B. Birmingham, Ala $2.15 

Freight 

Birmingham to Mobile $.16 

Mobile to Los Angeles Harbor . 45 

Wharfage, Los Angeles Harbor . 01^ 

Carloading, Los Angeles Harbor .01% 

Marine Insurance — Approx . 01 

.65 

$2. 80 

Versus price "On Cars, Los Angeles Harbor" $2. 75 

(Including on Bars rolled at Pacific Coast 
Mills). 

2. Shapes ">■ "Philadelphia Delivered" $2. 2lH 

Freight 

Philadelphia to Los Angeles Harbor $. 45 

Wharfage, Los Angeles Harbor . 01^ 

Cadoatiing, Los Angeles Harbor. . 01% 

Marine Insurance — Approx .01 

.49 

$2. 70>^ 
Versus price "On cars, Los Angeles Harbor".. $2. 70 

(Including on Shapes rolled at Pacific 
Coast Mills). 

» Bars, Shapes (within rolling limits) and Sheets are produced at Pacific Coast Mills. (Plates ai« not 
rolled on the Pacific Coast). 



CONCENTRATION OP ECONOMIC POWER 11013 

3. Plates F. O. B. Sparrows Point, Md {QAQ lees WJ ^ftrOO [2. 10] 

Freight 

Sparrows Point to Los Angeles Harbor. . $. 45 

Wharfage, Los Angeles Harbor .01J4 

Carloading, Los Angeles Harbor . 01 Ji 

Marine Insurance — Approjt: .01 

.49 

«3t49 [2.59] 
Versus price "On cars, Los Angeles Harbor" $2. 60 

4. Sheets » (Hot Rolled) F. O. B. Sparrows Point, Md $2. 00 

Freight 

Sparrows Point to Los Angeles Harbor * $. 45 

Wharfage, Los Angeles Harbor 01>4 

Carloading, Los Angeles Harbor 01% 

Marine Insurance — Approx 01 

49 

$2.49 
Versus price "Oh cars, Los Angeles Harbor" $2. 50 

(Including on Sheets rolled at Pacific 
Coast Mills). 

' Freight rate shown applies on Sheets #16 gauge and heavier; Rate on Sheets #17 gauge and lighter (when 
in packages) is $.03 per 100 pounds higher. 

(Compiled by Pacific Coast Steel Fabricators' Association pursuant to direction of and under subpoena 
irom Temporary National Economic Committee). 



Exhibit No. 1442 

Exhibit No. 4 

Statement Showing Typical Examples of Competitive Situations Faced hy Pacific 
Coast Steel Fabricators in Attempting to Secure Tonnage in Territories Immed- 
iately Adjacent to Pacific Coast Shops by Reason of (A) Existing Price Structure, 
and (B) Fabrication in Transit" Freight Practices Employed by ''Intermediate" 
Fabricating Shops Situated in the Middlewest and South 

(See Exhibit No. 2 for 1938-39 Tonnage Record for States of Arizona, New Mexico, Nevada, Utah, Idaho and 
Montana. Pacific Coast "Independent" shops secured 2.4% of available tonnage in these adjacent states 
during that period while Middlewestern "Independent" fabricators were taking 42% and "mill aflBliate" 
fabricators — presumably shipping from the East and Middlewest— took 61.1)%. 

Assume a 500-ton industrial type building consisting primarily of steel 
trusses to be constructed at Phoenix, Arizona (approximately 395 miles 
from Los Angeles; approximately 2200 miles from Birmingham, Ala- 
bama). Fabricating plants at Los Angeles and Birmingham bid the 
job. The unfabricated steel for such a structure can be obtained 
almost entirely from mills at Torrance or Huntington Park (Los Angeles 
County) California, or from Birmingham, or from Chicago, or from 
Pittsburgh, Pa. 

(1) Material plus Transportation Cost of Los Angeles frabricator, under current 
base price on Steel Shapes (See Exhibit 3) and published railroad tariffs, 
is: 

Material (irrespective of whether shipped from Eastern rolling mill 
through Los Angeles Harbor, or locally from Los Angeles vicinity mill): 

{Per 100 lbs.) 

F. O. B. cars, "Pacific Port" $2. 70 

Plus Arbitrary "Switching" added (regardless 

actual shipping point) . 02)^ 

$2. 72)4 

Plus Outbound Freight, Fabricated Material, Los Angeles 

to Phoenix, Arizona- . 36 

Loa ANGELES FABRICATOR'S MATERIAL PLUS FREIGHT 

(Shop fabrication costs, miU "extras", and other cost 

factors are disregarded for the purpose thoB comparison) 3. 0SJ4 



11014 CONCENTRATION OF ECONOMIC POWER 

(2) Normal Material plus Transportatton cost of Birmingham fabricator, under 
current base, price on Steel Shapes (See Exhibit 3) and published railroad 
tariff rates, is: 

Material (F. O. B. Birmingham) $2. 10 

Plus arbitrary "Switching" added . 02^ 

$2. 12/2 

Plus Outbound Freight, Fabricated Material, Birmingham 

to Phoenix, Arizona 1. 10 

Birmingham fabricator's NORMAii materiai, plus freight 
(Shop fabrication costs, miU "extras" and other cost fac- 
tors disregarded same as above for purpose of this com- 
parison) $3. 22>^ 



(3) Possible — and Probable Actual — Material plus Transportation cost of Birm- 
ingham fabricator, under current base price on Steel Shapes (See Exhibit 
No. 3) and published railroad tariff freight rates and transit provisions, is: 
Material — purchased by Birmingham fabricator at "F. O. B. Birming- 
ham" price but purchased on condition that Mill deliver from Chicago 
and not locally out of Birmingham mill: 

(F.O.B. Birmingham) $2. 10 

Plus Arbitrary "Switching" added 02/2 

$2. 12^2 
Less Chicago to Birmingham invoice freight 
allowance . 58 

$1. 54>4 
Plus "collect" freight paid carrier (Chicago to 

Birmingham) . 58 

$2. 12/2 

Plus Outboimd Freight Birmingham to Phoenix, 

as follows: Through Freight Rate, Chicago 

(via Birmingham) to Phoenix $1. 10 

Less Inbound Freight, Chicago to Birmingham 
(deductible upon presentation of evidence of 
inbound freight payment) .58 

.52 
Plus "Fabrication-in-Transit" charge. _ . OSYi 

. 55/4 

Birmingham fabricator is thus able to land 
fabricated steel at Phoenix, Arizona as 
TO "material plus transportation" cost $2. 67% 

(Shop fabrication costs, mill "extras" and other cost factors disregarded 
for purpose of this comparison). 



CONCENTRATION OF ECONOMIC POWER 11015 

(4) Exactly the same result — as to "Material plus Transportation" delivered 
cost at Phoenix, Arizona, as shown in "(3)" above, may be accomplished 
through another device — that of substitution of tonnage at transit point 
in connection with rail carriers' "Fabrication-in-Transit" provisions, viz: 

(a) Birmingham Fabricator purchases the unfabricated steel 

tonnage from a Birmingham mill for $2. 12}^ 

(b) He also (within a year prior) has purchased an equivalent 

tonnage from a Chicago mill (@$2.12}4 delivered, Birm- 
ingham) for use on a Birmingham local project — but has 
registered that tonnage with rail carrier as "transit 
tonnage" (which is common practice). 

(c) In shipping to Phoenix the steel fabricated from Birming- 

ham rollings mentioned in "(a)" above, the fabricator 
shows reference to Chicago-Birminghanoi movement 
mentioned in "(b)" ("substitution" being permitted 
under present tariffs of rail carriers) and instead of paying 
full tariff rate (Birmingham to Phoenix @$1.10) pays: 

Chicago to Phoenix $1. 10 

Less Chicago to Birmingham credit (actually 
paid to carrier in connection with an entirely 
unrelated tonnage) .58 

$. 52 
Plus "F. I. T." charge ! 03)4 

■ $. 55>^ 

Result — Same as "(3)" above $2. 67% 



Under both "(3)" and "(4)" which are hypothetical cases, but in line with com- 
mon prnlices, business is diverted from normal channels by fabricators who are 
situated at any "intermediate" or other advantageous locations where they may 
purchase from various mill sources of supply at an identical delivered price, and 
switch tonnage and "cross-ship" to best advantage. Compare "material plus 
transportation" of "(2)" above with "(3)" and "(4)" above. Note competitive 
position at Phoenix of Los Angeles fabricator per "(1)" with normal or published 
"material plus freight" cost of Birmingham fabricator per "(2)". Note then that 
by devices illustrated in "(3)" and "(4)", Los Angeles fabricator is forced out of 
the competitive picture. Then refer to Exhibit 2 proving how effectively the Cali- 
fornia fabricator is, under present conditions, excluded from the Arizona field, in 
competition with ea.stern fabricators. (Pacific Coast "Independent" fabricators 
secured approximately 2.4% of the available tonnage in the states of Arizona, 
New Mexico, Nevada, Utah, Idaho and Montana in the IJ^-year period of Janu- 
ary 1, 1938-June 30. 1939). 

The above illustration of the Birmingham vs. Los Angeles situation at Phoenix 
is only typical. Substantially the same situation exists as to competition between 
Pacific Coast fabricators and Midwestern or Southern states fabricators at such 
points as: 

Las Vegas — Boulder City, Nevada 
Reno, Nevada 
Boise, Idaho 
Butte, Montana 

Spokane and Grand Coulee, Wash, 
etc. 

For further data on the "cross-shipping" evil and its effects, reference is made 
to the Federal Trade Commission report of March 7, 1939 — "Monopoly and Com- 
petition in Steel". 

(Compiled by Pacific Coast Steel Fabricators' Association pursuant to direction of and under subpoen 
from Temporary National Economic Committee). 



11016 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1443 

(Exhibit No. 5) 

Statement Showing Typical Examples of Effect of Application of Government Land 
Grant Rates in Evaluating Bids to the U. S. Government on Fabricated Structural 
and Plate Steel for Projects in Far Western States 





Typical Origin Point 


Comparative Material Plus Transportation Costs 
(In Cents Per 100 Pounds) 




Movement Under Pub- 
lished Tariff Rate 


Movement Under "Land 
Grant" Rates' 




Est'd. 
Mat'l. 
Cost 


Freight 


Total 


Est'd. 
Mat'l. 
Cost 


Appr. 
Freight 


Total 


Example "^"—Structural 
Steel delivered Shasta Dam 


Oakland, Calif 

Gary, Ind 


272J^ 
2121^ 
212H 
272H 
272>-^ 
212,1-^ 
212V2 
212>^ 
272>^ 
272 Vi 
212)^ 
2121^ 
212^ 
212H 


33 
110 
110 

23 

im 

116K 
115}^ 
132 

33 

20 
110 
110 
143 
119 


305}^ 
322K 
322H 

290 

328 

328 

3443^ 

305!^ 

2921.^ 

322H 

322 'i 

355H 

ZSVA 


272H 
2WA 
2123^ 
272H 
272}^ 
212J4 
2121.^ 
212>i 
272;ii 
2724 
212V^ 
212,4 
212K' 
2123^ 


21H 

644 

71H 

14 

173^ 

67 

63 

84 

19 

IIH 

59 

634 

97 

74 


294 
277 


(Calif.). 

Example "B"— Structural 
Steel delivered Friant 


Birmingham, Ala 

Los Angeles, Calif 

San Francisco, Calif. - 
Chicago, 111 


284 
2863^ 
2804 
279yi 


(Calif.). 


Birmingham, Ala 

Pittsburgh, Pa 

Portland, Ore 


275>4 
290H 
2913^ 




Seattle, Wash 


284 


Example "C— Structural 


Chicago, 111... -. 


27VA 


Steel delivered Crownover 


Gary, Ind 


276 


(Wash.). 


Bethlehem, Pa 

Birmingham, Ala 


3093^ 
286M 



• Land Grant Rates shown are necessarily approximate, divisions as between carriers, alternate routes, 
and other factors not available to this organization entering into the calculation of exact land grant rates. 
The rates shown however are believed to be substantially correct and sufficiently accurate for the purpose of 
comparisons for which they are intended. 



COMMENT 

It will be noted that Pacific Coast fabricators situated close to Government 
project sites shown above (Shasta Dam and Friant, Calif., and Crownover, Wash.) 
'.ave a slight advantage on "material plus freight" costs — even under existing 
steel base prices — over Middlewestern, Eas^tern and Southern shops provided 
lawfully published tariff freight charges apply. However, when "Land Grant" 
rates are applied — as they are by the various branches of the U. S. Government 
today in the evaluation of bids and settlement of charges the picture changes and 
the Pacific Coast fabricator is forced to forego business right at his own back- 
door — or make heavy absorptions in order to retain the tonnage (which tonnage 
represents monies allocated by the Federal Government to Western States presum- 
ably for the benefit of Western labor and Western industry). Regular railroad 
tariff freight rates are on file with the Interstate Commerce Commission and in 
most instances have been presented by, or approved by the I. C. C, and are pre- 
sumed to be properly related as between competing shipping points, distance and 
other transportation rate factors considered. 

Deductions from these established commercial rates on basis of 50% for the 
land grant mileage over the route having the greatest land grant mileage, obviously 
result in the substitution of drastrically reduced, wholly unrelated and discrimina- 
tory rates for use on government jobs for the non-discriminatory, reasonable and 
properly related rates on 'file with the Interstate Commerce Commission. 

In addition, the application of "Land Grant" rates penalizes those railroads 
which were not built under land grants. 

Congress in appropriating public monies for public works endeavors to spread 
V.3 allocations over the country as a whole for the benefit of the people as a whole, 
and to provide employment during construction to the workers in industry in all 
parts of the country. "Land Grant" rates, as long as they remain in effect 
defeat the intent of Congress in this respect in this way: — the steel fabricators 
or other vendors in the Midwest for example are enabled, by application of 
unnatural, improperly related, less than reasonable land grant rates, to partici- 
riste ()) piose to 100% in the fabricated steel and other manufactured materials 



CONCENTRATION OF ECONOMIC POWER 11017 

for public projects in their own territory — plus (2) the lion's share of the same 
materials going into Western States' projects. Similar unnatural diversion of 
business, and uneconomic cross-shipping between territories, results from the 
application of land grant deductions in other sections of the country. The Pacific 
Coast is more adversely affected than any other general territory however, because 
it is "at the end of the line" and not in a position to indulge in relatiatory tactics. 

To fully appreciate the discriminations that result from "Land Grant" rates 
and the extent to which normal competitive relationships are disrupted on trans- 
portation of government materials, it is only necessary to refer to "Map of Land- 
Grant and Bond-Aided Railroads of the United States" as prepared by the 
Quartermaster General of the War Department. The Middle-west is completely 
interlaced with land-grant roads. The East has none. One road (the Northern 
Pacific) is completely "Land Grant" from Minneapolis to Seattle and Portland, 
resulting in the cutting of normal transportation charges 50% on movements 
under "government bills of lading" from a number of points in the Middlewest 
to points served by the Northern Pacific in Montana, Idaho, Washington, and 
Oregon, with cuts of close to 50% on shipments originating at or destined to 
points on other railroads. Between Atchison, Kansas and Barstow, Calif., the 
Santa Fe Railroad is about 75% "land-grant" creating almost as acute a conditoin 
between the Middlewest and California as applies between the Middlewest and 
Pacific Northwest. 

Legislation is before Congress (S. 2009, as amended. Sect. 321* passed subject- 
to conference between the Senate and House of Representatives; to accomplish 
repeal of the "Land Grant" provisions of the Interstate Commerce Act. This 
constructive legislation should be enacted with as little further delay as possible. 

(Compiled by Pacific Coast Steel Fabricators' Association pursuant to direction of and under sub- 
poena from Temporary National Economic Committee.) 



"Exhibit No. 1444", introduced on p. 10923, is on file with the Committee. 



"Exhibit No. 1445", introduced on p. 10948, is on file with the Committee. 



Exhibit No. 1446 

Wheeling Steei, Corpobation 

General Offices: Wheeling, West Virginia 

Cable Address Western Union 

Wheelsteel BentleysABC 

New York Private 

Acme 
Export Department: Equitable Building, 120 Broadway, N. Y. 

New York, N. Y., April 12, 1938. 

The Secretary, Steel Export Association op America, 

75 West Street, New York, N. Y. 
Dear Sir: Please refer to the meeting of the Board of Managers on April 5 
summarizing the present status of the S. E. A. 

The next step is to formulate the recommendations of the Board as to what 
should be done about it. To crystallize our discussion, I am taking the liberty 
of sending to you a draft of the proposed letter setting forth the recommendations 
of the Board that should be submitted to the presidents of the member companies, 
in compliance with the request from our company. 

There are doubtless other points that should be included in such a letter, and 
of course, there will be differing views on many of the issues discussed, I believe 
that wherever a real difference of opinion exists, it would be desirable to include 
both the majority and the dissenting opinions in our report to the presidents. 
I await your notice of the second meeting. 
Yours very truly. 

Wheeling Steel Corporation, 
(In ink:) H. W. Schrobder, 

Manager, Export Department 
HWSiJMM. 

"n'B WHXXUNO STEEL" 



11018 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1447 

report from thb3 board of managers op the steel export association to 
the presidents of the member companies 

Dear Sir; At the request of one of our members, we are addressing each of 
you, first, to give an authentic description of the present status of the Steel 
Export Association; second, to report the definite steps which we are agreed should 
be taken to complete the reorganization and enlargement of the Association. We 
have been working for several months to accomplish this — much has been done, 
but there still remain many loose ends to be tied up before the Association can 
function properly. We believe that this matter is of importance to all member 
companies and solicit your aid in effecting a settlement of these outstanding 
points. 

First, please study carefully the attached report of things as they are. When 
the Association was formed in 1928, quota participations were based upon per- 
formance during open competition of the three years preceding, and the -principle 
of quotas in proportion to capacity was denied in its entirety. Since then, 
because of the operation of the Association, and its various international agree- 
ments, and more recently because of an international shortage of steel, prices 
for export rose from the point at which only a few companies were interested, to 
levels at which aU were desirous of participating, particularly in view of present 
low operatmg rates and dearth of domestic business. 

Without the Association and its agreements abroad, this would have the old, 
familiar and inevitable result of driving export prices down again to unprofitable 
levels. The companies who are permanently engaged in the export trade and 
who have enjoyed the larger shares of this business, are the ones most interested in 
maintaining prices, because they stand to lose most by their decline. On the 
other hand, most of the newcomers, the "have nots", are interested in raiding the 
export market until the price becomes unattractive and then withdrawing. Some 
of these newcomers have resolved to fight their way into the company of the 
"haves", and remain in the export business permanently. 

The result has been repeated demands by the "have nots" for increases in 
quota, at the expense of the "haves". Naturally the "haves" have resisted this 
encroachment, in some cases leaving no alternative but an open violation of the 
Association rules when the contenders persist in obtaining satisfaction of their 
demands. 

At this point in the development of general bad feeling, it became necessary to 
consider the forming of a Heavy Steel Group in the S. E. A., followed by a Sheet 
Group. Recognizuig the primary importance of agreement on quotas, all of the 
early discussions centered on this point, and there remain only a few percent 
to be reconciled before attaining 100% quotas in each product. 

These cases are set forth in detail in the statement attached, and wiU not be 
considered separately here, l)eyond the warning that close as we are to 100%, no 
product group can function with a true regard for the rights of all its members 
until those rights are clearly agreed upon. Until quotas come out even at 100%, 
there has been no agreement, and groups which now are nearly completed are in 
serious danger of falling apart again unless an early settlement can be reached. 
Also, and more imminent, is the danger that the British and Continental parties 
will renounce the present tentative agreements unless they are made more satis- 
factoril}'^ effective. Such renunciation would inevitably be followed by an influx 
of low priced foreign steel in domestic markets. 

Obtaining quota agreement in the beginning is absolutely necessary to the 
working of the international cartel argreements, yet our experience of the last 
few months reminds us of the old adage that while one man may bring a horse to 
water, ten men cannot make him drink. Persuasion remains the only course; 
meanwhile, a declining price level is the only method available to influence the 
quota that each member will desire. The problem is to arrange for quotas, yet 
at the same time maintain a price that would be satisfactory to all. 

We recommend the abandonment of the principle of "no cutting across", 
which has met with strong opposition from numerous mills, and instead we propose 
the establishment of two classes of membership, active and associate, both classes 
contributing to the expenses of the Association at the same pro rata cost per ton, 
on tonnage shipped. Active members would have a definite quota, and when in 
deficit would be entitled to price protection from members in excess. Associate 



CONCENTRATION OF ECONOMIC POWER 11019 

members, consisting of companies not regvilarly engaged in export business, would 
not have any fixed quota, but would be given the same price to quote as active 
deficit members, in return for their engager) u-nt to submit all inquiries to the 
Association, maintain the prices given to them to quote, report all sales and 
shipment?!, pay their pro rata share of the cost of the Association per ton shipped, 
be responsible for their tonnage share of auj' international penalty for excess 
shipment bj' the American party, and enjoy their share of any bonus due to an 
American deficit. Such associate members would be expected to become active 
members with fixed quota, if at any time their attitude should change with regard 
to export business, or if their participation should exceed 3% equivalent quota. 

While it is fundamental that cartels must be predicated upoji a freezing of 
previously attained position, nevertheless some flexibility is necessary if a desirably 
long term of agreement is to be made. We recommend rescinding the previous 
rules against sale of American quotas, and further provide that any member in 
deficit must agree to sell for cash up to 50% of his deficit position if desired by 
another member. With this provision, members able to sell up to their quotas 
may purchase the opportunity for further sales within the rules, and not be forced 
to operate illegally by the pressure of economic cii'cujristance, as at present. The 
price to be paid for such quotas shall be fixed from time to time by each products 
group in proper relation to the excess and deficit penalty then applying. 

With provision for associate memberships, and with some flexibility in the 
quota system amongst active members, it is believed that quota agreement should 
be accomplished readily. This should be for a national agreement having the 
same term as the corresponding international agreement, and all active or asso- 
ciate memberships held by each company should be clearly defined by being set 
forth in a separate contract between the S. E. A. and each such company. The 
present articles of association, and the hundreds of resolutions passed during the 
last ten years, are being codified, and will be attached to each membership contract 
as a set of by-laws. In this way, all members will know just where they stand, 
and what their privileges and obligations are. At present no one knows them all. 

When the Association has assumed definite shape, upon completion of the work 
outlined above, it will be necessary for it to undertake further negotiations with 
the British and Continental parties of the Heavy Steel Group. Preliminary figures 
now available to us show that the American Party must ask to be excused from 
applying its heavy over shipments by members against its international quota 
up to June 30, 1938, or endeavor to obtain more favorable quotas for the American 
Party on products where previous percentages are entirely inadequate under 
present conditions. 

Beyond this, the American Party must negotiate for freedom from responsibility 
to the Heavy Steel Group for shipments by American outsiders, during whatever 
period of time may be required to negotiate with these outsiders and to obtain 
their participation in the agreement, either as active or as associate members. 
With present outsider activity, we cannot be responsible for them. When all 
outsiders have joined up, there will be no problem. In the meantime, it is sug- 
gested that much the same clause be employed as at present under the Tin Plate 
agreement, mentioned in the attached report. 

Furthermore, with a view to diminishing the opportunities oflFered to outsiders, 
it is recommended that responsible brokers, jobbers, or export merchants be 
licensed by commission agreements with the Association to deal exclusively with 
its members. License would be offered upon nomination by any member. At 
present, the brokers seek connection with outsiders, and contrive to defeat the 
purposes of the Association. It is hoped that the licensing plan will ensure the 
cooperation of the worthwhile merchants. 

In the past, each company in this association has be*n wiUing to defer to the 
common good when convinced that a fair compromise was reached. This letter 
and accompanying report is addressed to you in that spirit, and we solicit your 
cooperation toward making this association completely effective. 



11020 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 1448 

Bethlehem Steel Export Corporation 

exporters of the products of bethlehem steel company 

25 Broadway, New York, U. S. A. 

Acme, Western Union 
Cable address Bentley and other 

'Bethdehem" New York S. M. Ba^h, Vice President standard codes 

November 14th, 1938. 
Mr. John Cutwater, 

The Steel Export Association of America, 

75 West Street, New York, N. Y. 
Dear Sir: After consultation with U. S. Steel Products Company, we would 
like you to send the following letter over your signature to Mr. Todd in tomorrow's 
Tuail: 

*'JShip Steel and Ordinary Plates and Shapes for Scandinavia and Holland. 

"You will recall the conversation after dinner on the night you sailed which 
resolved itself into the fact that we are in the Cartel until 1940 with definite 
quotas and that it is up to us to live within these quotas. We are satisfied to do 
this but, frankly, the situation as regards the products for the territories mentioned 
in the caption of this letter has us baffled. Today, one of our larger members has 
received word from their London office that a large British merchant firm informs 
them they have been attempting to secure firm offers for ship plates for Holland 
on the basis of $1.96 c. i. f. but without success, they being informed that lower 
prices are being named by other merchants for plates from Worth and Central. 
As you know we are presently asked to maintain £11.0.0, which at $4.73 exchange 
is about $2.32 per 100#, c. i. f., and the Continentals claim they have the situation 
under control by taking not lower than £9.15.0, which at the same exchange rate 
equals $2.06, and they claim to have taken considerable tonnage at higher prices. 

"Frankly, several of our members have received reports from many sources to 
the effect that the Continental prices at which business is reported to have been 
closed are subject to rebates of varying amounts. We have no quarrel with the 
Continentals or the British in quoting lower than £9.15.0 by means of the rebate 
system (as this is what we have been asking them to do for some time to eliminate 
tiie American outsider) if they have some real reason for not wanting a price 
lower than £9.15.0 to become officially known but, as partners, we consider that 
we are entitled to know what they are actually doing, because if what they are 
actually doing is sufficiently low actually to eliminate the American outsider, then 
we can properly judge the reports our members are constantly receiving as to 
prices being quoted by the American outsiders and whether or not they are se- 
curing any real volume of business. We would be inclined to s^.ay off the ship 
steel business for the Scandinavian and Holland markets (except possibly at such 
times as we are in deficit — and then only to the extent of making up our deficit) 
so long as we know that we are not being denied the opportunity of taking business 
which is being lost by the Cartel to the Philadelphia district mills. Furthermore, 
as you well know,, the sooner these mills are eliminated from taking business the 
better our chances will be of bringing them under control in our own group. ' 

"There is also the thought that after the trial period some of our members are 
not going to be content to remain in the American party if it ultimately develops 
that mills outside the party can secure more tonnage than group members. 

"This is one o . our most aggravating and pressing problems and we are won- 
dering if you cannot discuss it frankly with Sir Andrew Duncan toward the end 
of clarifying the situation once and for all." 
"iours very truly, 

Bethlehem Steel Export Corporation, 
(In ink:) C. E. Masters, 

Assistant to Vice President. 



"Exhibit No. 1449", introduced on p. 10983, is on file with the Committee. 



INDEX 

Page. 

Affleck, E. F 10993 

Almanac of the Canning Industry, The 10772 

American Bridge Co 10900, 10913 

American Can Co ]0753, 

10756, 10758-10760, 10765-10706, 10768, 10773-10774, 10776- 
10778, 10780-10782, 10784, 10786-10790, 10793, 10795-10796, 
10799-10801, 10989-10992. 

American Petroleum Institute 10851 

American Rollino; Mill Co 10805, 10829, 10998, 11001 

American Sheet & Tin Plate Co 10757, 10758, 10789, 10794 

American Tin Plate Co 10789 

Anderson, H. H 10805 

Anderson, John.- 11005 

Anti-trust laws, memoranda interpreting, by Nathan L. Miller 10801-10802 

Armco International Corp . 10922, 10969, 11004 

Austin, D. F 10985 

Austria-Hungary 10936 

Baker, H. A 10753, 10991, 10992 

Bash, S. M 10922, 11020 

Belgium 10808, 10813, 10925, 1 0933, 1 0936, 10952 

Berle, Dr. A. A 10i:06, 10S16, 10998 

Bethlehem Steel Co 10759, 10772, 10779, 10781, 10789-10791, 10832. 10900, 

10902, 10904-10906, 10924, 10992, 10993, 11002, 11004, 11020 

Bethlehem Steel Corp... 10790, 10801, 10804, 10910-10913, 10918, 10922-10923, 

10948, 10961, 10962, 10968-10970, 10979, 10986, 10990, 11009 

Bethlehem Steel Export Association 10922 

Bethlehem Steel Export Corp 10922-10924, 10957, 11020 

Block, J. L 10992 

Block, L. E 10992 

Borden Co., The 10756, 10993 

Bothwell, E. C .- 10840, 10891, 11005 

British Government, cooperation of, with business , 10808-1081 1 

British Isles 10806, 10810 

Brundred, 10856, 11007 

Buffington, E. J 10993 

Burton, Carroll 10993 

Byers Co - 10861, 11008 

Campbell Soup Co 10992 

Canning Trade Publishing Co 10772, 10989 

Cans: 

Contracts for the sale of.; 10762-10785 

Manufacturers of 10756-10757 

Carnation MUk Products Co 10756, 10992 

Carnegie-Illinois Steel Co_ 10747, 10756-10766, 10768, 10770, 10772-10780, 10782. 
10784, 10788-10789, 10795-10796, 10800, 10985, 10991-10993 

Carnegie Steel Co 10747, 10792-10794, 10798-10799, 10993 

Cartel: 

Control, effect of: 

On exports 10979-10980 

On home markets 10951-10957, 10976-10979 

European, agreements with American producers. 10925-10932, 10948-10949 

Census, United States Bureau of 10909 

Central Iron & Steel Co 10912, 10972, 11020 

C. I. O 10998,11000 

Clayton Act 10994-10995 



II INDEX 

Page 

Columbia Steel Co 10900, 10904 

Cplumbia Steel Corp 10910 

Columbia University 10998 

Columbian Carbon Co 11007 

Commerce, U. S. Bureau of Foreign and Domestic 10938 

Commerce, U. R. Dept. of 10807, 10909, 10946 

Competition in business advocated 10811-10812 

Congress of the United States 10825-10826, 10933, 10975, 11016-11017 

Consolidated Steel Co 10924 

Constitution of the United States 10831 

Continental Can Co., Inc 10756, 10801, 10990, 10992, 10993 

Continental Steel Corp l 11020 

Continuous rolling mill process, labor used in as compared with hand 

process 10828-10829 

Cook, Gustavus Wynne 11007 

Cross, N. C 10992 

Crown Can Co .- 10756, 10992, 10993 

Crown Cork & Seal Co 10756, 10993 

Czarniecki M. J 10861, 11008 

Daniel Boone Hotel 10854, 11006 

Denmark 109^4-10945 

Diehl A. W ' 10993 

Dieudonne Hector 10948 

Discussions, price, among businessmen advocated 10807-10820 

District Committee, United States Senate 10971 

District Court of Maryland 1 0789 

Dudley, Earl of 10948, 10967-10968, 10976 

Duncan. Sir Andrew 10958, 11020 

Elliott, I. F. L 10948 

England.-. 1 10807-10810, 10812, 10936, 10951, 10955, 10964, 10998-10999 

Exports, steel, finished and semi-finished, 1936-1938, by years 10938 

Fabrication in transit..... . 10914-10920 

Definition of 10914-10915 

Fairless, Benjamin 10743, 10784-10785, 10881, 10991, 10993 

Farrell, James A 10794 

Federal Government: 

See Government of the United States. 

Federal Power Commission 10910 

Federal Reporter 10789 

Federal Trade Commission 10781-10782, 

110802, 10803, 10811, 10899, 10936, 10982-10983, 10990 
Finished and semi-finished steel, price relationship between. 

See Price. 

Gibson, Francis H 10830, 10863, 10889, 1 1005-1 1008 

Goble, John E 10857, 10859, 10860, 10880, 11007 

Golden Gate Bridge . 10901 

Government of the United States 10831, 10905, 10972, 11016 

Grace, Eugene 10790-10791, 10801, 10804, 10992 

Granite Citv Steel Co 10759 

Great Britain 10931, 10965 

Great Lakes Steel Corp . 10969 

Gregg, Robert 10978 

Guarantv Trust Co 10948 

Gufi"ev, Senator Joseph F 10780 

Gulf Oil Corp 10836, 10839, 10841, 10889, 10890-10892, 1 1005 

Hanes, Hon. John W . 10826 

Harris, B. F 10993 

Heekin Can Co.: 10756 

Heggie, Chas 10993 

Heinz, H. J., Co 10756 

Holland . 10936,10958,11020 

Hook, Charles 10805, 10947, 10998, 11000-11001 

Management cooperation, with respect to price, recommended by.. 10807- 

10820 

House of Representatives, United States 11017 

Hughes, H. L . - 10753, 10773, 10778, 10989-10990, 10993 



INDEX HI 

Page 

Hughes, I. Lamont 10993 

Import Advisory Committee, operation of in England 10807-10808, 

10965, 11000 

Inland Steel Co 10759, 10790, 10922, 10967, 10992, 11002, 11004 

Integration, definition of : 10745-10746 

International Steel Cartel 10948, 10954, 10967-10958 

Interstate Commerce Act 10917. 11017 

Interstate Commerce Commission 10840, 

10900-10901, 10916-10917, 11005, 11016 

Interstate Commerce, United States Senate Committee on 10936 

Iron Age 10760, 10768, 10805-10806, 10905, 10906, 10909, 11010-11011 

Iron and Steel Institute, American 10790 

Irvin, W. A 10773, 10781, 10794, 10801-10802, 10989, 10993 

Irvin Works 1 0798 

Isthmian Steamship Co 10746 

Italy 10936 

Japan 10936, 10947, 10975 

Jefferson Memorial 10971 

Jones & Laughhn Steel Co 10759, 

10779, 10781, 10836, 10850, 10870, 10S72, 10889-10890, 10897, 

10912, 10922, 10969, 10990, 11002, 11004-11005, 11009. 

Jugoslavia 10933 

Justice, United States Dept. of 10754, 

10770, 10788-10789, 10801, 10806, 10811, 10829, 10845, 10910, 

10921, 10983. 

Keefe, J. S 10993 

Labor Statistics, United States Bureau of 10805 

Labor, United States Dept. of 10805 

Labor used to produce sheets by continuous mill as compared with hand 

process 10828-10829 

Lap-weld and seamless pipe, competition between . 10845-10862 

Lippmann, Walter 10825 

Loretz, A. L ^ . 10897 

Lukens Steel Co 10832, 10906, 10912 

Luxemburg 10925, 10933, 10952 

Mackall, Paul 10804 

Madge, 10788 

Management cooperation, with respect to prices, recommended 10807-10820 

Maritime Commission, United States 10898 

Maritime Docket No. 514, U. S 10898 

Masters, C. E 10957, 11020 

McConnor, W. F 10840, 10891, 1 1005 

McKinley Tariff Act . 10753 

McManus, C. E 10993 

Miller, Nathan L 10801, 10890, 10993-10994, 10996 

Memoranda by, interpreting antitrust laws 10801-10802 

Milsop, T. E . 10993 

Ministry of Labor, EngUsh 10809 

"Monopoly and Competition in Steel" 10899 

Moody's 10766 

Munich : 10944 

National Can Co 10756 

National Labor Relations Act j 10823, 10825-10826 

National Steel Corp 10804, 11002, 11004 

National Supply Co 10856, 10858-10859, 10861, 10886, 11007 

National Tube Co 10836, 

10840, 10846, 10852, 10856, 10859, 10863-10865, 10867-10868, 
10870-10872, 10876-10880, 10881, 10883, 10887, 10889-10891, 
10893, 11005, 11007-11009. 

Nestle brand 10993 

Neudoerfer, J. L .__.__. ._. 10948 

Newport Rolling Mill Co., The .. . 10922 

New York Times ■ 10961, 10980 

Normandie, S. S _._.._. .__ _. _ - 10948 

N. R. A . 10768, 10777, 10782, 10811 

N. R. A. Code 1 10964, 10975 

Oakland Bay Bridge . 10902 

124491 — 40 — pt. 20 19 



IV INDEX 

Page 

Oil Well Supply Co 10864 

Olds, Irving^ 1 10802 

Otis Steel Co 10829, 11002, 11004 

Outwater, John 10957, 11020 

Owens-Illinois Can Co 10756 

Pacific Can Co 10756 

Pacific Coast Steel Fabricators Association 10897- 

10898, 11010-11011, 11013, 11015, 11017 

Pacific Coast steel fabricators' problems 10898-10914 

Paddock, L. A 10993 

Pargnv, E. W 10993 

Perrv,J. L 10986 

Pet Milk Co 10756, 10993 

Pfeltz, A. R 1.- 10753, 10989, 10991-10992-10993 

Phelps, H. W 10773, 10989, 10992 

PhiUips Can Co 10756 

Phoenix Iron Co • 10912 

Pipe: 

Competition between lap-weld and seamless 10845-10862 

Question of selling f. o. b. mill 10835-10844 

Seamless, pricing of 10863-10897 

Pittsburgh Steel Co 10922 

Pittsburgh Steel Products Co 10922 

Poland:- 10819, 10933 

Pomerene, Senator 1 0936 

"Poor's Industry and Investment Survey on the Iron and Steel Industrv"- _ 10954- 

Poor's Register of Directors 10765-10766, 10954 

Powers, A. J '. 10865 

Price: 

Discussion, lap-weld pipe 10854-10862 

Policy of U. S. Steel Corp 10744, 10749-10752 

Relationship between finished and semi-finished steel 10743-10752 

Tubular products 10845-10896 

Public Resolution No. 114 10831 

Quartermaster General, United States War Department 1 1017 

Queen Mary, S. S 10948, 10968 

Repubhc Iron & Steel Co 10922 

Repubhc Steel Corp 10759, 

10779, 10781, 10788, 10870, 10912, 10922, 10969, 10990, 11003 
11004, 11009 

Ritchin, Hyman B 10788-10790 

Roberts, Charles H 10830, 10835, 10859-10860, 10863, 11005, 11008, 11009 

Robinson-Patman Act 10777, 10782, 10783, 10802, 10992 

Rumania 10933 

Russia . 10947, 10975 

Ryding, H. C 10993 

Scha-efer, Henrv E 10830, 10863, 10886, 10887, 11006, 11008 

Schroeder, H. W 10922, 10947-10948, 11017 

Schwab, Charles M 10970 

Seamless and lap-weld pipe, competition between. 
See Lap-weld and seamless pipe. 

Seamless pipe, pricing of 10863-10897 

Securities and Exchange Act 10823, 10824 

^emi-finished and finished steel, price relationship between. 
S€€ PricG 

Senate, United States 10976, 11017 

Shell Oil Co., Inc 10805 

Sherman Act 10810, 10923-10924, 10966 

Skelp, definition of 10832 

Smith, Adam 10812 

Smith, E. N 10856, 10858-10859, 10861, 11007, 11008 

South Africa . 10926 

South America . 10930 

South Chester Tube Co 10830-10835, 

10841, 10844, 10846, 10846, 10848, 10849, 10855, 10858, 10863, 
10864, 10870, 10873, 10875, 10878, 10886, 10889, 10893, 10896, 
11005, 11006, 11009. 



INDEX V 

Page 

South Wales 10998 

Spang, Chalfaut, & Co 10836, 

10856, 10858, 10859, 10861, 10870, 10889, 10897, 10922, 11005, 11009 

Standard Statistics Co 10826 

Stapleton, John H 10747, 10985 

Steel: 

Exports, finished and semi-finished, 1936-1938, by years 10938 

Finished and semi-finished, price relationship between. 
See Price. 

Industry, return on capital investment 10821-10824 

Steel Code 10989 

Steel Export Association of America 10922- 

10927, 10929, 10932-10933, 10947, 10949, 10950, 10952, 10959, 10961, 
10965, 10966, 10976-10977, 11017-11020 

Articles of association of 10923 

Agreements of, with European cartel 10925-10932, 10948-10949 

Competition prevailing before formation of 10924-10926 

Efforts of, to induce non-members to join 10972-10975 

Meeting of, with European cartel in 1938 10948-10951 

Membership of 10923-10925 

Non-members: 

Problem of shipments of 10932-10936, 10945-10947 

Question of eliminating 10957-10968 

Steele, J. P 10846 

Stewart, 10970 

Strickland, Oscar I 10830, 10856, 10857, 10863, 11007, 11008 

Summers, Gerard Spencer 10948 

Supreme Court, United States 10825 

Swartz, J. D 10846 

Sweden - 10936 

Sweet, G. W 10868, 11009 

Switzerland 10936 

Taylor, Myron 10989 

Temporary National Economic Committee. ._ 10831, 

10983, 10998, 11010, 11011, 11013, 11015, 11017 

Thomas, Richard, & Co 10810 

Thompson, I. G 10866, 10878 

Tin plate: 

Definition and uses of 10753-10/54 

Prices of and contracts for 10754-10801, 10813-10816 

Todd, - 10957, 11020 

Totte'n, George E 10993 

Treasury, United States Dept. of 10826 

Tubular products. 

See Pipe. 

T. V. A..: 10826 

United States v. American Can Co 10789 

United States Steel Corp 10743, 

10746-10747, 10749-10753, 10755-10758, 10762, 10778, 10781, 
10792, 10796, 10801-10804, 10809, 10815, 10836, 10845, 10863, 
10865, 10880-10881, 10889-10891, 10893, 10900, 10902, 10904- 
10905, 10909-10913, 10918, 10923-10924, 10948, 10962, 10968- 
10969-10970, 10979, 10985, 10991, 10994, 11003-11004, 11006. 

Price policy of 10744,10740-10752 

Studies made bv 10802-10803 

United States SteelExport Co 10922-10923 

United States Steel Products Co 10923, 10957, 10968, 11020 

University of Chicago ^nono 

Vereinigte Stahlwerke 10809 

Wales.: 10810,10964 

Walker, Dr. Francis 10936 

Waterman, F. W 10993 

Webb-Pomerene Act . 10922-10923, 

10925, 10933, 10936, 10946, 10954, 10959-10960, 10963, 10965- 

10966, 10970, 10972-10974, 10976, 10980-10983. _^^ 

Weir, Ernest T 10804, 10823-10824, 10829, 10868 

Weirton Steel Co 10922, 10967, 10969, 10990. 10992-10993 



VI INDEX 

Weiss, Dave 10S36-10837, 10840, 10842-10843, 10891, 11005 

Western Union _. 11017, 11020 

Wheeler, F. S 10773, 10789, 10989 

Wheeling Steel Corp 10830, 

10841, 10844, 10845, .10853-10855, 10858, 10860, 10861, 10863, 
10864, 10866, 10878-10879, 10886-10887, 10893, 10922, 10947- 
10949, 10969, 10990, 11003-11004, 11006-11009, 11017. 

Whetzel, J. C 10993 

Willetts, H. M 10992 

Williams, 10789 

Witney, George W 10833 

Wood, Allen 10912 

World War I 10936 

Worth Mills 10912, 10970, 11020 

Ynterna, Theodore Otte 10802, 10803 

Youngstown Sheet & Tube Co., The 10759, 10779, 10781, 10870, 10872, 

10897, 10922, 10969, 10990, 11003^11004, 11009 



BOSTON PUBLIC LIBRARY 



3 9999 06351 942 3