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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 .."

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INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOKAEY NATIONAL ECONOMIC COMMITTEE 
CONGEESS OF THE UNITED STATES 

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 INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 27 



IRON AND STEEL INDUSTRY 

DISTRIBUTION AND PRICING OF SELECTED STEEL PRODUCTS 
THE BASING POINT SYSTEM 



JANUARY 26, 27, 29, AND 30, 1940 



Printed ^or the use of the Temporary National Economic Committee 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
124491 WASHINGTON : 1940 

NORTHEASTERN A" ^ 



•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 BERGE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 
•LEON HENDERSON, Commissioner 
Representing the Securities and Exchange Commission .. i 

GARLAND S. FERGUSON, Commissioner ^31 

•EWIN L. DAVIS, Commissioner VH 

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 .^^ 

•CHARLES L. KADES, Special Assistant to the General Counsel QM 

Representing the Department of the Treasury j™»J 

CLARENCE C. AVILDSEN, Special Adviser to the Secretary XStS 

Representing the Department of Commerce "^ 

JAMES R. BRACKETT, Executive Secretary 



REPRINTED 
BY 

WILLIAM S. HEIN & CO , INC 

BUFFALO N. Y. 

1968 



CONTENTS 



Testimony of — Page 

Adams, Avery C, vice president, United States Steel Corporation, 

Pittsburgh, Pa 14157-14230, 14234-14261 

Custer, A. B., administrative officer, Purchase Division, Bureau of 

Supplies and Accounts, Navy Department, Washington, D. C. 14307-14312 

de Chazeau, Melvin G., professor of economics, University of Virginia, 

Charlottesville, Va 14130-14149 

Dorenbusch, A. A., general sales manager, Newport Rolling Mill Co., 

Newport, Ky 14279-14288 

Ezekiel, Mordecai, economic adviser to the Secretary, Department of 

Agriculture, Washington, D. C--, 14154-14156 

Fairless, Benjamin F., president, United States Steel Corporation, 

New York City 14157-14230, 14232-14278 

White, Hugh E., examiner. Federal Trade Commission, Washington, 

D. C 14231, 14293-14307 

Widmann, Edward T., attorney. Federal Tradt Commission, Wash- 
ington, D. C-. 14289-14293 

Wooden, Walter B., assistant chief counsel, Fedcal Trade Com- 
mission, Washington, D. C 14313-14329 

Yntema, Theodore Otte, professor of economics, Univer^ty of Chicago, 

Chicago, 111 14150-14153 

Form A questionnaire. 14130 

Form B questionnaire 14133 

Analysis of distribution of selected steel products 14134 

Fabrication-in-transit rates and price cutting 14142 

Relationship between steel prices and production and general activity 14150 

Federal Trade Commission's analysis of United States SteeL Corporation's 

report on the basing point system ' 14lt'>6 

The basing point system in the steel industryand deviations from it Hlb' 

Effectiveness of commercial resolutions since N. R. A -.. 14211 

Policy of price announcement since spring of 1 936 142 15 

Freight rate book of the Iron and Steel Institute 14222 

N. R. A. code provisions continued after N. R. A. invahdation 14232 

Freight rate compilations by the Iron and Steel Institute 14246 

Comparison of Pacific coast and Birmingham prices 14255 

Prices in the Detroit area 14259 

Development of the Pittsburgh-plus system 14261 

Price discussions among competitors 14280 

Identical bids in the steel industry 14289 

Excess capacity in production of sheets and hot-rolled strip 14301 

Comparison of costs and prices at Pittsburgh, Chicago, and Birmingham. 14304 

Identical bids received by the Navy Department 14308 

Federal Trade Commission's summation of the monopolistic characteristics 

of the basing point system . 14312 

Schedule of exhibits iv 

Friday, January 26, 1940 14129 

Saturday, January 27, 1940 , 14187 

Monday, January 29, 1940.-.' 14229 

Tuesday, January 30, 1940 ^ 14279 

Appendix . 14331 

Supplemental data 140 ly 

Index ^ 



IV 



CONTENTS 
SCHEDULE OF EXHIBITS 



Number and summary of exhibits 



2189. Form A, data on the distnoution of selected carbon 

steel products, and letter of instruction from 
Thurman Arnold 

2190. Form B, data on the distribution and pricing of 

selected steel products, and letter of instruction 
from Thurman Arnold 

2191. Companies reporting. Forms A and B 

2192. Affidavit and verification 

2193. Form A or B, consuming districts of the United 

States 

2194. Supplement to Form B tables 

2195. Table: Form B summary — February 1939 

2196. Table: Published base prices, February 1939 

2197. Tables: Heavy Structural Shapes; Plates; Hot 

Rolled Sheets; Hot Rolled Strip 

2198. Tables: Summary of analysis of Form B distribu- 

tion of selected steel products, February 1939 

2199. Chart: Dispelling the Fog, 1938, compilation of 

basing points classified by products issued by 
Republic Steel 

2200. Letter from Carnegie-Illinois Steel Corporation to 

its sales managers announcing price program 

2201. Letter from Carnegie-Illinois Steel Corporation to 

its sales managers re : price announcement 

2202. Article from Iron Age, "Steel Buyers Overwhelm- 

ingly Opposed to F. T. C. Plan of Steel Pricing"... 

2203. Circular letter of Walter S. Tower, executive secre- 

tary of the American Iron and Steel Institute 

2204. Copy of draft of preamble and resolutions adopted 

by the board of directors of the American Iron 
and Steel Institute . 

2205. Resolution adopted by members of the iron and 

steel industry assembled, at American Iron and 
Steel Institute, June 6, 1935... 

2206. Commercial resolution adopted by the board of 

directors of the American Iron and Steel Insti-- 
tute as amended June 14, 1934 

2207. Commercial resolution adopted by the board of 

directors of the American Iron and Steel Insti- 
tute, June 14, 1934-. 

2208. Iron and Steel Industry Code of Fair Competition 

regulations as amended Oct. 11, 1934 

2209. Table: Freight tariff, American Iron and Steel 

Institute 

2210. Table: Government tonnage record, 1939 

2211. Table: Government tonnage record, 1938 

2212. Excerpt from a price announcement of the Carnegie- 

Illinois Steel Corporation on June 4, 1936 

2213. No exhibit. 

2214. Letter from A. A. Dorenbusch to A. K. Andrews, 

president, Newport Rolling Mill Co 

2215. N. R. A. code of fair competition for the iron and 

steel industry as approved by President Roose- 
velt on Aug. 19, 1933 

2216. Supplemental commercial resolutions adopted by 

the board of directors of the American Iron and 
Steel Institute 



Intro- 
duced at 
page 



14129 

14129 
14129 
14129 

14130 
14130 
14130 
14130 

14130 

14130 

14192 
14219 
14219 
14229 
14231 

14231 

14231 

14233 

14236 

14246 

14247 
14275 
14275 

14257 
14280 
14288 
14288 



Appears on page 



14331-14335 

14336-14339 

14339-14341 

14341 

14341-14343 

14343-14347 

14347 

14348 

14348-14423 

14423-14428 

Facing 

14428 

14428 
14429-14430 
14430-14434 

14434 

14434 

14435 

14435 

14436 

14437-14441 

14442-14443 
14444-14457 
14458-14505 

14506 
14506 
14506-14530 
(0 



' On file with committee. 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and summary of exhibits 



2217. Letter from American Iron and Steel Institute to 

Lukens Steel Co., July 12, 1935 

2218. No exhibit. 

2219. No exhibit. 

2220. Letter from Lukens Steel Co. to American Iron and 

Steel Institute, Oct. 15, 1935 

222i. Letter from American Iron and Steel Institute to 
St. Louis-Southwestern Railway Lines, Oct. 15, 
1935 

2222. Letter from American Iron and Steel Institute to 

Boston and Maine Pailroad, July 18, 1935 

2223. Letter from American Iron and Steel Institute to 

Lockhart Iron and Steel Co., Sept. 9, 1935 

2224. No exhibit. 

2225. Letter from Lockhart Iron and Steel Co. to Amer- 

ican Iron and Steel Co.,- Sept. 4, 1935 

2226. Letter from American Iron and Steel Institute 

Traffic Committee, to chairman of Commercial 
Committee, Jan. 29, 1934 

2227. No exhibit. 

2228. Letter from Reading Iron Co. to American Iron & 

Steel Institute, Nov. 27, 1935 

2229. Letter from Bethlehem Steel Co. to American Iron 

& Steel Institute, Dec. 2, 1935 

2230. Letter from the Youngstown Sheet and Tube Co. to 

the Bethlehem Steel Co., April 11, 1935 

2231. Table: Analysis of "Government Tonnage, 1938" 

and "Government Tonnage, First Quarter 1939". 

2232. Table: Numerical measurement of awards for 

rolling mill products and all other steel products _ 

2233. Chart: Total steel ingot capacity. United States; 

ingot capacity, United States Steel Corporation; 
total ingot production, United States 

2234. Table : United States capacity for the production of 

hot rolled sheet and hot rolled strip steel; indi- 
vidual and total capacities of the 16 principal 
producers of sheet and strip steel and ratio of 
production to total capacity 

2235. Chart: Total capacity United States for produc- 

tion of hot rolled sheet and liot rolled strip steel; 
annual capacity of the 16 principal producers of 
hot rolled sheets and hot rolled strip; produc- 
tion, United States, hot rolled sheets and hot 
rolled strip 

2236. Excerpts from "Financial Analysis of the Steel 

Industry," purporting to show certain facts re- 
specting certain producers of rolled steel having 
a rated annual ingot capacity in excess of one 
million tons 

2237. Tables: Relative mill cost of manufacturing struc- 

tural shapes, plates, merchant bars and black 
sheets in the Pittsburgh, Chicago, Duluth, and 
Birmingham districts, for the 2 months' period 
of January and Februarv 1921, and the year 
1920 

2238. Table: Statement of relative mill costs of finished 

steel and the sales prices thereof at various pro- 
ducing points 

2239. Chart: Showing comparative margins between cost 

of producing steel and the selling prices thereof at 
Pittsburgh, Chicago, Birmingham, and Duluth. _ 



Intro- 

duced at 

page 



14290 

14290 

14290 
14290 
14291 

14291 

14291 

14292 
14292 
14293 
14295 
14296 

14299 
14302 

1430S 
14304 

14305 
14305 
14305 I 



Appears on page 
14530-14532 

14532 

14532-14533 
14533 
14534 

14535 

14535 

14536 
14536 
14536-14537 
14538 
14539 

14539 
14540 



14541 



14542-14543 



14544-14545 



14546 

Facing 
14546 



VI 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and summary of exhibits 



Intro- 
duced at 
page 



Appears on page 



2240. Invitation for bids issued by Navy Department, 

Bureau of Supplies and Accounts, opened Nov. 
19, 1935 

2241. Invitation for bids issued by Navy Department, 

Bureau of Supplies and Accounts, opened May 
26, 1936 

2242. An arialysis of the basing point system of delivered 

prices 



14307 

14307 
14329 



SUPPLEMENTAL DATA 

Exhibit introduced in Hearings, Part 20 

1418. The basing point method of quoting delivered prices 
in the steel industry 



14547 

14548 
14548-14618 



14619-14694 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



FRIDAY, JANUARY 26, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Thursday, January 25, 1940, in the Caucus Room, Senate OflSce 
Building, Senator William H. King, Utah, presiding. 

Present: Senator King (acting chairman); Representative Williams; 
Messrs. O'Connell and Davis. 

Present also: Walter B. Wooden, Assistant Chief Counsel, and 
Willis Ballinger, Director of Studies for the Federal Trade Commis- 
sion, representing the Federal Trade Commission; Frank P. Smith, 
representing the Securities and Exchange Commission; A. H. Feller, 
special assistant to the Attorney General, Department of Justice; 
W. A. Janssen and John V. W. Reynders, representing the Depart- 
ment of Commerce. 

Acting Chairman King. The committee will be in order. 

Mr. Feller. Dr. deChazeau, please. 

Acting Chairman King. I suppose Dr. Yntema ought to be aroujid? ' 

Mr. Feller. He will be called later. 

Mr. Chairman, I offer for the record a series of tables and docu- 
ments prepared by the Departmient of Justice. I shall read the list 
of documents. 

Acting Chairman King. Are they all to be placed in the record? 

Mr. Feller. Yes, sir. 

Acting Chairman King. All right, but I am not sure as to the 
materiality of this. 

Mr. Feller. Letters of instruction sent to various steel companies, 
covering Form A and a copy of Form A. 

(The documents referred to were marked "Exhibit No. 2189" 
and are included in the appendix on pp. 14331-14335.) 

Mr. Feller. Letters of instruction covering Form B and a copy 
of Form B. 

(The documents referred to were marked "Exhibit No. 2190" and 
are included in the appendix on pp. 14336-14339.) 

Mr. Feller. A list of companies on Form A and Form B. 

(The list referred to was marked "Exhibit No. 2191" and is mcluded 
in the appendix on pp. 14339-14341.) 

Mr. Feller. Copy of the affidavits executed by each of the com- 
panies for Form A and for Form B. 

(The document referred to was marked "Exhibit No. 2192 ' and is 
included in the appendix on p. 14341.) 

1 Dr.Theodore Otte Yntema, whose tesCfmony for the U. S. Steel Corporation appears In hearings, Part 28. 

14129 



14i30 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. An outline of consuming districts for Form A and 
Form B. 

(The document referred to was marked "Exhibit No. 2193" and is 
included in the appendix on pp. 14341-14343.) 

Mr. Feller. Supplement to the Form B tables. 

(The document referred to was marked "Exhibit No. 2194" and is 
included in the appendix on pp. 14343-14347.) 

Mr. Feller. A summary of the results obtained from the answers 
on Form B. 

(The document referred to was marked "Exhibit No. 2195" and is 
included in the appendix on p. 14347.) 

Mr. Feller. A list of the published base prices for reported prod- 
ucts Form B for February 1939. 

(The dDcument referred to was marked "Exhibit No. 2196" and is 
included in the appendix on p. 14348.) 

Mr. Feller. Eighteen Form B tables, on each of the following 
products: Heavy shapes, plates, hot rolled sheets, and hot rolled 
strip. 

(The documents referred to were marked "Exhibit No. 2197" and 
are included in the appendix on pp. 14348-14423.) 

Mr. Feller. Lastly, summary of analysis of Form B, distribution 
of selected products, February 1939. 

(The document referred to was marked "Exhibit No. 2198" and is 
included in the appendix on pp. 14423-14428.) 

TESTIMONY OF MELVIN G. deCHAZEAU, UNIVERSITY OF VIRGINIA, 
CHARL0TTE3VILLE, VA.— Resumed 

Dr. deChazeau. As part of its investigation of the iron and steel 
industry for this committee, the Department of Justice with the 
cooperation of the Federal Trade Commission undertook a study 
of the distribution of shipments of certain selected steel products 
and a more detailed examination of certain pricing characteristics 
for some of them. I need not point out that this project was under- 
taken because there were no data available for any recent period 
showing the geographical distribution of steel products nor the magni- 
tude of such pricing phenomena under a basing-point system as freight 
absorption, phantom freight, mill-net prices received, the extent to 
which the basing-point formula of pricing was observed, or the relative 
importance of extras in the price of steel. To obtain these data two 
questionnaire forms were devised, known as Form A and Form B. 

THE FORM A QUESTIONNAIRE" 

Dr. deChazeau. Form A was restricted to tonnage of shipments 
only, on 18 products in each of the years 1936, 1937, and 1938. To 
preclude the burden of an invoice analysis, it was first ascertained 
from most companies of any size in the industr}^, some 57 in all, how 
these shipments were recorded, if at all. Twelve of the large 
companies, which maintained machine tabulating systems using 
punch cards on which both State and county of destination were 
punched, reported shipments by States and also by the 64 consuming 
districts used for Form B analysis. These districts are defined in 



CONCENTRATION OP ECONOMIC POWER 



14131 



the mimeographed sheets before you entitled "Form A or B : Consum- 
ing districts of the United States." 

I should say that these districts were not devised by us, but were 
taken from a report of the National Recovery Administration on the 
operation of the basing-point system in the iron and steel industry, 
November 30, 1934, in which they had been developed for purposes 
of that study in cooperation with the Code Authority of the American 
Iron and Steel Institute. 

Acting Chairman King. Had there been any departures from the 
situation revealed in the documents to which you refer? 

Dr. deChazeau. The document at that time did not break down 
the analysis by products, but covered all products, and, secondly, 
it did not break it down by producing areas but covered only ship- 
ments from the Pittsburgh area, plants within 50 miles of Pittsburgh. 
It covered the second quarter of 1934. 

Acting Chairman King. Do you tliink a document of the vintage 
of 1933 ^ 

Dr. deChazeau (interposing). 1934, second quarter. 

Acting Chairman King. Of 1934 would be a fair standard for now? 

Dr. deChazeau. If the analysis in 1934 had enabled one to compare 
producing areas, and if it had broken down individual products, then 
I should agree with you that there would be no point in getting a 
more recent record, except of course, that there has been a change in 
the basing-point structure of considerable magnitude, namely, in June 
1938. 

Mr. O'Connell. With reference to 1934 you referred only to the 
breaking down of the districts? 

Dr. deChazeau. That's right. 

Mr. O'Connell. You are not introducing anything that has to do 
with that? 

Dr. deChazeau. Nothing of that sort. I understood the Senator 
to question why we should make another analysis in view of the fact 
that that study had been made. My answer was responsive to such a 
question. All we took from that study was the delineation of consum- 
ing districts. These were defined in terms of counties. 

Actmg Chairman King. Are the consuming districts the same now? 

Dr. deChazeau'. The consuming districts which we have used in 
this analysis are identical with those consuming districts; yes, sir. 

Through the courtesy of the United States Steel Corporation, I call 
your attention to this map, prepared by its staff, in which the consum- 
ing districts which transgress State lines are blocked in colors. "With 
the exception of those that are blocked in colors, the consuming 
districts are states, or, in cases where the consuming districts overlap a 
State line, the remainder of such States. In the western part of the 
United States, only California is shown on this map. In the western 
area separate States were used as consuming districts with the excep- 
tion of California, which was divided into two areas, northern and 
southern. 

It is of particular interest in connection with this map to note the 
size of the consuming districts with relation to the location of mills. 
For example, in the so-called Pittsburgh area, which you will note 
overlaps certain counties in West Virginia, Ohio, and Maryland, Alle- 
gheny County, here, is of course the primary location of steel mills. 



14132 CONCENTRATION OF ECONOMIC POWER 

But the consuming district is rather broad with relation to such mill 
location. Confusion, therefore, is likely to occur in analyzing ship- 
ments in this area in which you have high concentration of mills. 

Mr. Wooden. Mr. deChazeau, does that map purport to sho\v that 
no shipments are made outside of the districts that are shown in the 
respective colors by the mills within those districts? 

Dr. deChazeau. No, sir. This map implies nothing about ship- 
ments; otherwise I would not use it. It merely indicates visually the 
various districts which were in fact used in this analj^sis. In all cases 
in which color is not blocked in, the consuming districts are bounded, 
by State lines, such as Massachusetts, Rhode Island, Vermont, New 
Hampshire. 

Acting Chairman King. Well, of course that color map represents 
consuming districts as well as producing districts, as I understand you, 
at least some of the consuming districts — — 

Dr. deChazeau. (interposing). For purposes of this analysis we 
considered consuming districts or combinations of consuming districts 
as producing areas, since it was not practical to take individual mills. 

Mr. Reynders. I don't think we understand the significance of the 
particular areas. Perlbaps you will '"^'n that a little bit so we will 
understand what it is all about. 

Dr. deChazeau. I am not sure that I get the import of the question. 
The basis of the division of the various consuming districts was, of 
course, their relative importance as consuming areas for steel. This 
leads, for example, to setting off a district here called Metropolitan 
New York as contrasted, say, with this district here called Phila- 
delphia. You will find no New Jersey area. These two metropolitan 
areas absorb the state. 

Mr. Reynders. Tak« the area around Chicago. Why do you 
limit it to that extent, or why don't you go beyond the area that is 
indicated? 

Dr. deChazeau. With the details which were considered by the 
National Recovery Administration and by the Code Authority in 
delimiting these districts, I am not familiar. There were two reasons 
for adopting their district break-down: first, I have faith in those who 
worked on it, particularly Prof. J. M. Clark of Columbia University; 
and second, some companies have used these areas for the break-down 
of their own shipment records. Therefore, if we were to use any 
definition of areas less than States, these seemed appropriate. 

Now one other thing. It is obvious, of course, that markets for 
steel do not conform necessarily with State lines. Hence areas which 
extend beyond State lines often give a far better picture of distribution 
with relation to a given mill or group of mills. On the other hand it 
is quite clear that, no matter how one breaks down distribution with a 
single group of districts one cannot delimit the most important market 
areas for every group of mills and for each product. Selection of 
districts must be made on an average basis. It must be arbitrary; but 
it permits a more significant study than state areas alone would 
provide. 

Sixteen companies, the records of which would permit a report by 
States only — I am still talking about Form A — reported on that basis, 
and 1 1 other companies reported by sales districts. All reports were 
made separately for each plant in each year — 1936, 1937, 1938. 
Minor adjustments made to facilitate reporting need not be discussed 
at this time. 



CONCENTRATION OF ECONOMIC POWER 14133 

FORM B QUESTIONNAIRE 

Dr. deChazeau. Form B, on the other hand, required an invoice 
analysis. In addition to tonnage shipped into each consuming dis- 
trict, each reporting company recorded— for shipments into each 
district— total delivered value, total freight from basing point to 
destination, total freight paid or allowed from point of shipment to 
destination, and total extras included in the delivered value. 

I should note in passing that such data enable one to compute 
"phantom freight" as opposed to '-freight absorption," that is the 
freight from the basing point to destination, minus the freight allowed 
from the mill to destination. It likewise enables one to determine a 
computed base price— i. e., the deHvered value less the freight added 
from the basing point, less the extras — which, per ton, should be 
comparable to the pubhshed base price. There are other relations 
that may be worked out. 

Separate, reports were required for each plant and for each of 10 
products as well as for each basing point on which price was computed. 
To minimize the burden of the work, reporting plants were selected 
independently for each product on the basis of their location and 
their importance in terms of capacity. That is, each plant did not 
report on every one of the 10 selected products for which it had capac- 
ity, but only on a selected number for which it was judged especially 
important. For all 10 products, there were roughly 175 "plant 
product" reports made by 55 companies in all. 

Most of these companies reported on a single product for a single 
plant. Again, to render the project feasible, a single current month. 
February 1939, was selected as the period for which reports were 
required. 

Acting Chairman King. Was there any significance in the selection 
of those 2 months? 

Dr. deChazeau. In the selection of February 1939? 

Acting Chairman King. Yes. 

Dr. deChazeau. We wanted a month for which we could expect, 
returns as soon as possible; but the reason for choosing February 
rather than January was that it is a middle of the quarter month. 

These two questionnaires were sent to the industry on December 
23, 1938 (Form B), and January 19, 1939 (Form A). The last repHes 
were received by the department during the latter part of August 
1939. 

February was preferable to January because the probability of 
shipments at past-quarter prices is reduced. It is not eliminated, 
but to the extent that it is reduced, the middle of the quarter month 
would permit less ambiguous conclusions. 

Of course, we took a risk that prices might be altered during the 
month. Fortunately, this did not occur so far as pubhshed prices 
were concerned, or so far as we have been able to check the actual 
prices published by the companies during that period. 

Mr. Wooden. What proportion of all shipments during the month 
of February do you think this covers? 

Dr. deChazeau. I am going to take that up, Mr. Wooden. 

The burden of the task shouldered by reporting companies was 
great, especially for the large integrated companies, and I want 
publicly to acknowledge the splendid cooperation evidenced by them. 



14134 CONCENTRATION ol' StJONOMIC POWER 

ANALYSIS OF DISTRIBUTION OF SELECTED STEEL PRODUCTS 

Dr. deChazeau. The analysis of these data is not complete. A 
machine tabulation of both Form A (with the exception of reports by 
sales districts) and Form B was made to permit an analysis of the 
data by a series of classifications for each product; for example, by 
grouped plants in each consuming area, by grouped plants within 25 
miles of basing point and within 50 miles of basing point; by grouped 
plants according to degree of plant integration and company integra- 
tion; by basing points on which products were priced, and by various 
other combinations. Because of a grave limitation of staff, it has 
been possible to complete the analysis for selected classifications of 
only 6 out of the 10 products reported on Form B. Two of these, 
sheet and tin-plate bars and cold-rolled sheets, have not been finally 
checked and therefore are not presented this mornmg. The distri- 
bution of products under Form A (i. e., tonnage distribution in the 
3 years 1936-38) has been analyzed only to the extent of providing 
a check on the representative character of the distribution during the 
month of February 1939 for the Form B products studied. The 
presentation this morning therefore is in the nature of an interim 
report. 

The primary object of the Form B study of distribution was to 
provide a factual answer to many questions which have been raised 
with regard to the effects of the basing-point system of pricing in the 
steel industry. From this point of view, it was considered both un- 
necessary and unwise that the Department of Justice should encroach 
on that part of the investigation reserved to the Federal Trade Com- 
mission, namely, the social or economic desirability of a basing-point 
system of pricing as contrasted with any other pricing system. 

In the construction of tables for summary presentation of results 
before this committee, therefore, no attempt has been made to delimit 
the economic market of any mill or group of mills either under a 
basing-point system of prices or any other pricing system, nor is any 
judgment implied as to the desirability of any given pricing system. 
Rather, we have tried to present these data in as many alternative 
ways as time and staff would permit to the end that they might be 
most useful for tliis committee and the various parties in interest in 
this investigation. Finally, although this study provides a more 
accurate statistical measure of the relative importance of certain con- 
tentions with respect to pricing practices of the steel industry under 
the basmg-point system, the underlying conditions in the industry are 
so complex that it cannot be considered definitive. In fact, I doubt 
whether one could ever arrive at a definitive conclusion in the statisti- 
cal sense. 

Acting Chairman King. Permit an inquiry: In your study for the 
presentation data, did you have before you the investigations which 
were made and the conclusions reached and the action taken by the 
government during the N. R. A. period? 

Dr. deChazeau. I have made an extended study of those, Senator. 

The analysis which I present to you this morning covers four hot- 
rolled steel products: heavy structural shapes, plates, sheets, and 
strip. Two heavy steel products, both of primary importance in 
construction (including shipbuilding) and two light steel products, 
for which the automobile industry is the most important user, al- 



CONCENTRATION OF ECONOMIC POWER 14135 

though there are many otlier uses. This study is incorporated in 18 
tables for each product wiiich, I hasten to add, I do not intend to 
discuss in detail.' 

I call your attention, first, to the table before you entitled "Form B 
Summary." In this table is shown for each of the 10 products re- 
ported on Form B the total tonnage of shipments analyzed. This 
figure of tonnage shipped is substantially lower than the actual total 
of each product sliipped by reporting companies in the period. F. o. b. 
mill sales, shipments to plants or warehouses of the same or affiliated 
companies (includmg fabricators of the same or affiliated companies), 
shipments to jobbers' warehouses, and exports were excluded from the 
detailed analysis of shipments to consuming districts. Some of these, 
obviously, were not shipped to consuming districts as we have defined 
them, while others presented complications in the compilation and 
also in the evaluation of price information which would have confused 
the other shipments. Shipments in these categories excluded from 
the distribution analysis are shown separately in table 4a. ^ In addi- 
tion to tonnage in this summary table are shown various over-all 
averages per ton including delivered value, calculated base price, mill 
net, extras, and freight absorption. 

For comparison with computed base prices the published base 
prices during February 1939 are shown in an accompanying table. 
Neglecting plates, cold-rolled strip and tin plate for the moment, the 
over-all computed base price for cold-rolled sheets was slightly over $5 
per ton less than published base price, those for sheet and tin bars and 
hot-rolled sheets were $4.62 and $4.22 below published base price; 
wire rods and hot-rolled strip were $3.63 and $3.76 below. All prices 
are for net tons. Heavy shapes and wire averaged lower by $1.68 
and $1.46. 

The reduction below base of 70 cents for plates is undoubtedly an 
understatement. From the detail tables, it is clear that some com- 
panies must have included floor plates in their reported shipments of 
plates. Floor plates take a much higher price, $67 as contrasted with 
$42 for regular plates. With cold-rolled strip, a similar error has 
occurred. That is, commodity strip, a higher priced product ($62 as 
contrasted with $59 for a cold-rolled strip) has been included by some 
companies. These can be eliminated by going back to individual 
records, but they have not been eliminated in this over-all presentation. 
The effect, in cold-rolled strip, is an average computed base price of 
$1.18 in excess of published price. V/ith tin plate, the anomaly is only 
apparent. This product is priced per base box of a given number and 
dimension of plates. Pu^blished base prices are per 100-pound base 
box while the 95-pound box (a lighter gage product), for which data 
were requested, takes a negative extra of 10 cents. Thus the equiva- 
lent base price of a 95-pound box for comparative purposes would be 
$4.90 per box, or $103.16 per net ton. An apparent excess of 36 
..mts per ton in the computed over the published base price becomes m 
fact a reduction of $2.80 below equivalent base price per ton. 

I call attention, especially, to average freight absorption as a percent 
of delivered value. 

Mr. Feller. May I just see- if I get that point made clear to the 
committee? What you have just been pomting out is the calculation 

' "Exhibit No. 2197," appendix, pp. 14348-14421. 
> Of "Exhibit No. 2197"; appendix, pp. 14421-14423. 



14136 CONCENTRATION OF ECONOMIC POWER 

which has been made on the basis of the questionnaire by the com- 
panies, to indicate the extent to which these products were sold on price 
which deviated from the published base price. 

Dr. deChazeau. That is right. 

Mr. Feller. You have shown that in each of the products listed 
here the product was sold by the industry generally at less than the 
published base price. In some places the deviation was large, in some 
places it was relatively small. 

Dr. deChazeau. Yes, with the exception of cold-rolled strip, in 
which commodity strip is undoubtedly included, and with the ap- 
parent exception of tin plate, which is not a true exception because 
we have taken a 95-pound box rather than a 100-pound box. I should 
point out that tin plate is sold on the base box, which is defined in 
terms of a given number of sheets of given dimension. Therefore 
with changes in the weight you get differentials above or below the 
published price per 100-pound box. 

Acting Chairman King. There is no uniformity, then, in the size of 
all the tin plates. 

Dr. deChazeau. There is no uniformity in gage (weight per unit 
of area) and for that reason we took a single category, a 95-pound box 
after discussion of the matter with the officials of the United States 
Steel Corporation and Carnegie Illinois Steel Corporation. 

Acting Chairman King. As I understand your testimony with re- 
spect to the point that you are now discussing in reply to the question 
propounded by Mr. Feller, there were deviations from the posted 
price by the vendors of steel products above and below the posted price. 

Dr. deChazeau. The only average deviation above published 
price which we found in these 10 products is in cold-rolled strip, 
and in that product we know it to be a fact that, in some cases, com- 
modity strip was unfortunately included. Commodity strip takes a 
higher base price. That would affect the height of the average 
computed base price. 

Acting Chairman King. Those departures from the reported price 
were made by various reporting companies? 

Dr. deChazeau. That is right. 

Acting Chairman King. And their prices were not exactly uniform, 
not uniform? 

Dr. deChazeau. That is right. This, Senator, is the over-all 
average on all shipments priced on basing points between wliich 
there was no price differential. One couldn't make an over-all 
statement of this kind where a differential was involved; rather, one 
could only after corrections which have not been made here. These 
averages apply to shipments priced on basing points at which there 
was no price differential. The computed base price is derived from 
the delivered value less the freight from basing point to destination 
less the extras divided by tonnage shipped. One has to deduct the 
extras, of course, to get a figure comparable to published base price. 

Mr. Wooden. Does not the amount above base price and below 
base price reflect the range, so to speak, of the mill-net? 

Dr. deChazeau. Not directly, Mr. Wooden. Obviously with a 
range you would get variation in the mill-net. We have shown the 
mill-net less extras per ton. 

Mr. Feller. Is your question this: le this figure which we have 
just been discussing the equivalent of mill-net? 



OONCENTRATION OF ECONOMIC POWER 14137 

Mr. Wooden. Does it reflect the range of mill-net above the base 
price and below? 

Dr. deChazeau. No. 

Mr. Wooden. What does it reflect in that regard? 

Dr. deChazeau. The computed base price will have no direct 
relation to the mill-net. To get at the computed base price one 
deducts from the delivered value the freight from the basing point, 
whereas to get at the mill-net one deducts from the delivered value 
the freight allowed or paid from the mill to the destination. They are 
two quite different figures. 

Mr. Wooden. If more freight is allowed than actually incurred, 
then the mill-net falls below the base price. Is that right? 

Dr. deChazeau. If more freight is allowed? 

Mr. Wooden. Than is actually paid. 

Dr. deChazeau. I'm sorry. That would depend upon whether 
or not there was a differential. 

Mr. Wooden. Yes. 

Dr. deChazeau. If there were no differential among basing points, 
then with freight allowed in excess of freight from basing point you 
would have a reduction -in the mill-net. 

Mr. Wooden. If the freight charged is less than the actual freight, 
then the mill-net is less than the base price. 

Dr. deChazeau. If I get your question now, you are suggesting 
that the freight allowed to the customer is less than the actual freight? 

Mr. Wooden. Yes. That decreases the mill-net by that much, 
doesn't it? 

Dr. deChazeau. If such a situation existed that would be true. 
Generally speaking, the freight allowed is the actual freight from mill 
to destination, since the freight allowed is in fact paid in that case by 
the customer to the railroad company. 

Mr. Wooden. I am talking about where the freight figured on the 
invoice is less than the freight from the basing point, then the mill-net 
is increased by that much. 

Dr. deChazeau. Oh, than the freight from the basing point. That 
depends upon whether there is a differential or not. 

Mr. Wooden. Assuming there is no differential. 

Dr. deChazeau. Assuming there is no differential, then to the ex- 
tent that the freight allowed from mill to destination is greater than 
freight from basing point, there is freight absorption. To the extent 
that it is less there is 

Mr. Wooden (interposing). I think we understand each other. We 
may be talking at cross-purposes by using slightly different language, 
but one is a converse of the other, and that is why I asked my question 
as to whether the range of mill-net was not reflected by the amount 
above base price that you speak of here and the arnbunt below. 

Dr. deChazeau. No ; because you are dealing with more than one 
phenomenon. For example, if you have a price cut at a given destina- 
tion, Mr. Wooden, it itself will affect the delivered value and will have 
nothing to do with the freight from basing point or the freight allowed 
to destination. Therefore, your mill-net will be reduced in that area 
when you have phantom freight as well as when you have freight 
absorption. Now those two are just two different things entirely. 

Mr. Wooden. But you do have phantom freight and freight absorp- 
tion even though the delivered price is identical, don't, you? 



14138 CONCENTRATION OF ECONOMIC POWER 

Dr. deChazeau. Even though the delivered price is identical from 
v^arious points? 

Mr. Wooden. Yes. 

Dr. deChazeau. Quite right. 

Acting Chairman King. You use the word "differential." That 
word was employed frequently when we were discussing the situation 
in Birmingham. Do you use it in the same sense? 

Dr. deChazeau. In the same sense; that is, it is a published price 
at a given basing point which is other than that at the lowest basing 
point. Todaj, it would apply primarily to Gulf ports and Pacific 
ports, since most of the differentials have been eliminated. That 
isn't entirely true; there are still some differentials in certain products. 

I call attention especially to average freight absorption as a percent 
of delivered value, in this case adjusted for interrbasing-point price 
differentials. This percentage is, roughly, 1 percent or less for sheet 
and tin bars, cold-rolled strip, and tin plate. It is approximately 
2 to 3 percent for all other products shown ; that is, it varies within 
that range. I have noted percentages on the adjusted basis. When 
sales are made into areas in which there is a price differential, from 
the point of view of the mill, the adjusted basis as contrasted with 
the unadjusted indicates whether the "freight absorption" is real or 
whether it is nominal (i .e., its effect on the mill net.). 

Already submitted for the record is an illustration of the method of 
adjustment presented by the Steel Corporation, which I refer to merely 
as an illustration. If, for example, we deal with 

Acting Chairman King (interposing). You had better identify it 
if it is in the record. * 

Dr. deChazeau. It is entitled "Explanation of Unadjusted and 
Adjusted Freight Absorption." ' I understand it is in the record. 
I wish to call your attention merely to the way in which the adjust- 
ment is made. If we assume, for example, that the actual freight paid 
on a shipment to destination — ^from Chicago, say, into Texas' — is 
$17.60 and that the freight from the nearest basing point, which is 
Houston, to this particular destination is $8.40, that would show on 
the unadjusted basis, a freight absorption of $9.20, that is, the "differ- 
ence between these two items. 

The basing-point price at Houston, however, is $49 whereas that at 
Chicago is $42, providing a differential of $7. 

Now, from the point of view of the mill, that freight absorption of 
$9.20 is a purely nominal matter. The actual adjusted freight 
absorption is that amount less the basing-point price differential, or 
$2.20 per ton. This is what is meant by the adjusted basis. 

I want to add that so long as one is dealing with a basing point 
at which there is no capacity and a price differential exists, or so long 
as the price differential is purely nominal (i. e., it does not measure a 
difference in cost), then the comparative advantage of various mills 
shipping into that area will be indicated correctly either by the adjusted 
figures or by the unadjusted figures. But from the point of view of a 
given mill, and particularly if you are relating freight absorption to 
delivered value, the adjusted figure is the real and the unadjusted is the 
nominal figure. 

Now, this summary, of course 

Mr. Feller (interposing). Have you concluded the discussion on 
freight absorption? 

1 "Exhibit No. 1418." 



. CONCENTRATION OF ECONOMIC POWER 14139 

Dr. deChazeau. I have concluded the explanation of the adjusted 
basis for freight absorption used in this summary. 

Air. Feller. Well, I just again wanted to summarize. . You have 
been explaining the results which have been obtained to show the 
importance of. freight absorption and the result which you have 
obtained is that it varies from product to product from about 1 per- 
cent of the delivered value to about 3 percent of the delivered value? 

Dr. deChazeau. That is right. 

Mr. Wooden. Doctor, what is the reason for comparing the per- 
centage of freight absorption to the delivered value? 

Dr. deChazeau. I consider that the significant basis for comparison 
because the delivered value represents what the buyer pays. 

Mr. Wooden. What is the reason for comparing the extras to the 
delivered value? Are they not expressed in terms of base price plus 
or minus? 

Dr. deChazeau. Yes. You can compare them in any way you 
like, but again my reason for comparing them to the delivered value is 
because that is the price which is paid. You could compare them to 
the mill net yield if you liked; you could compare them to the pub- 
lished price)^ although there are some difficulties in that; or you could 
compare them to delivered value. You can change the percentage 
depending on what basis you use. 

Mr. Wooden. Ordinarily your percentage would be higher figured 
on the mill net? 

Dr. deChazeau. It would be higher on the published base and it 
would be still higher on the mill net. That is right. 

This summary, of course, is an inadequate basis for the evaluation 
of the effects of the basing-point system under consideration. The 
figures in the table do provide an approximation to the order of 
magnitude of the items considered. As an over-all average, however, 
they may conceal important disparities among consuming regions and 
producing areas which are of crucial significance from certain points 
of view. It is to supply a basis for evaluation of these more detailed 
questions that the 18 tables on each product have been constructed. 
May I interpolate at this point that many of these tables are in a 
fundamental sense not final but working tables. By that I mean that 
they do not at the moment make a part of a finished memorandum on 
distribution from which final conclusions have been drawn and policy 
recommendations made. This work of evaluation in which tables 
may be derived from these data but not necessarily identical with the 
tables here used, is a function, undoubtedly, of a final report. Not 
only staff limitations but also considerations of fairness to the industry 
hp,ve dictated the procedure used here. Obviously, in summarizing 
these data, unless we present the basic material, the industry would 
have no way of checking up on the conclusions that we have drawn. 

The data presented in the 18 tables submitted on each product ' 
give the following information. (I propose merely just to characterize 
the kind of information.) The first two tables describe the basing- 
point structure, the changes in price and in number of basing points 
that took place in June 1938, and the location of plant capacity, 
according to the 1938 Iron and Steel Works Directory of the United 
States and Canada, with respect to such basing points. 

I "Exhibit No. 2197." ■ 

124491— 41 ^pt 27 2 



14140 CONCENTRATION OF ECONOMIC POWER 

The second group of tables (3 through 7, inclusive) is concerned 
primarily with the stability of geographic distribution of products 
and the representative character of the actual distribution analyzed 
in February 1939. 

The third group (tables 8 through 11 and table 13) analyzes in 
detail the shipments made to all areas receiving 2 percent or more 
of the total shipments in the period. Shipments from grouped plants 
in producing areas are analyzed in terms of the extent to which they 
supplied the receipts of consuming areas into which they shipped at 
the lowest average freight absorption for any producing area. In 
other words, the ability to reach a consuming area with a lower 
freight absorption per ton than any other producing area has been 
employed as a criterion of the so-called natural market of that pro- 
ducing area. Computed base prices on shipments of each producing 
area into each consuming area according to the basing point on which 
they were priced are also compared with the published base price in 
order to give a very rough measure of the extent to which the basing- 
point formula of pricing was observed. This measure was likewise 
applied to total shipments, irrespective of source, priced on each 
basing point. Finally, the extent to which each producing area sup- 
plied the requirements of its own immediate consuming district (iden- 
tical with the producing area in most cases), was analyzed. 

Four possible ways of delimiting the "natural" market of each 
producing area were analyzed in tables 12 and 14 through 16. The 
four measures applied to all sales of each producing area — shipped 
into all consuming districts in this case; not merely the most im- 
portant, but all consuming districts — were respectively: 1, ship- 
ments priced on the nearest basing point; 2, shipments into areas 
in which average freight absorption per ton was equal to or less than 
that on all shipments by that producing area priced on the nearest 
basingpoint; 3 is identical with 2 except that we have used as the cri- 
terion the average mill net On such shipments and finally, 4, ship- 
ments to areas in which the average freight paid or allowed from a 
given producing area was lower than that from all other producing 
areas. 

Tables 17 and 18 merely list all instances in which shipments re- 
ported as priced on a given basing point were shipped into areas 
which could not have been "governed" by the basing point reported 
(in terms of published freight schedules and basing-point prices). 
These tables list all out-of-line results for which there may be many 
possible explanations, some of which I have indicated on the sup- 
plement to those tables. All instances in which computed base 
prices were in excess of published base prices are likewise listed. 

To permit a ready comparison of results obtained for these four 
products, a table has been prepared which contrasts in parallel col- 
umns the data and computations from the data for each. This is 
the large table which you have before you. 

Acting Chairman King. That is the summary of analysis of Form 
B, distribution of selected steel products, February 1939? 

Dr. deChazeau. That is right, sir. 

Acting Chairman King. That is the document to which you are 
now referring? 

Dr. deChazeau. Yes, sir. 

Acting Chairman King. Has it been identified? 

Mr. Fellep ^' !:as been admitted. 



CONCENTRATION OF ECONOMIC POWER 14141 

Dr. i>eChazeau. It is meant to be no more than an aid for the 
study of the more detailed tables and is entitled, as the Senator just 
noted, "Summary of Analysis of Form B Distribution of Selected 
Steel Products, February 1939." The comparisons are segregated in 
eight groups, identified A to H, inclusive, in conformity with the 
classification just discussed. 

To discuss the preliminary conclusions reached, together with 
supporting evidence and limitations would be an imposition on the 
courtesy of the members of tliis committee, since it would take a very 
extended period of time. To indicate no conclusions would be unfair 
to ourselves and to others who are interested in this analysis. Subject, 
therefore, to limitations with the detail of which I shall not burden the 
committee at this time, I will venture nine generalizations. 

1. With the change in the basing-point structure in June 1938, it 
may be said that, for these four products, basing points, generally 
speaking, are well adapted to the location of capacity in the industry, 
especially so for shapes and plates, less so for sheets and strips. Lo- 
cated at base or within 25 miles of base is capacity varjdng from 58 
percent for sheets to 85 percent for shapes; within 50 miles, from 78 
percent for sheets to 96 percent for shapes. 

2. The geographical distribution of the products in February 1939, 
may be considered fairly typical for the industry as indicated by similar 
distribution during the calendar years 1936, 1937, and 1938. Total 
shipments of reporting plants in that month varied in general con- 
formity with their relative capacities for the product in question. 

3. Out of the 64 consuming districts, those receiving 2 percent or 
more of total shipments varied from 12 for strip to 18 for plates but 
accounted for from 66 percent of all shipments in the case of shapes 
to 89 percent in strip. This shows not only a concentration of ship- 
ments but justified the use of such selected areas for more detailed 
analysis. 

4. Producing areas for which shipments to selected consuming dis- 
tricts averaged the lowest freight absorption per ton accounted for a 
substantial proportion of the total receipts of those consuming dis- 
tricts, 62 and 50 percent for shapes and plates, but Only 34 and 41 
percent for sheets and strips at an adjusted freight absorption varying 
from 14 cents per ton for plates to a "phantom" freight of 92 cents 
for strip. "Phantom" freight appears when the freight from basing 
point to destination is greater than the freight allowed from mill to 
destination. The percentage of the market thus served is probably 
understated, because of the large size of consuming districts with 
reference to the location of mills and the small volume of shipments 
by some of the producing areas showing lowest freight absorption. 
What I have in mind is this : A given plant or plant group, over a part 
of the consuming area may have an apparent advantage in freight 
absorption which would disappear if it tried to serve the entire area. 
Therefore, the 62 to 34 percent estimated percentage participation of 
"governing" mills in such markets is on the low side. 

5. A comparison of computed base prices with published base prices 
indicates that, notwithstanding possible error in the averages, the 
basing-point formula of pricing was honored more in the breach than 
in the observance during the,period. 

(a) Price cutting, thus revealed, appeared to be more prevalent and 
more drastic in sheets and strips than in plates and shapes, perhaps 



14142 CONCENTRATION OF ECONOMIC POWER 

partly because of uncompleted contracts for the former made when 
prices were slashed for a short time during the fall of^938. 

Acting Chairman King. When yoii say "price cutting" you mean 
departures from the posted prices? 

Dr. deChazeau. Departures from the posted prices; yes, sir. 

Mr. Wooden. That completion of unfinished orders, you wouldn't 
call thatvprice cutting, would you? That would be simply carrying 
out of contracts made at another level of prices? 

Dr. deChazeau. That is quite right. That is why I inserted the 
qualification. To the extent that there were shipments on contracts 
wJiich overlapped the previous quarter and which were made at a 
price quoted during the price cut, such shipments would tend to 
reduce the computed base price during the sample period. 

(b) Especially noteworthy for shapes and plates was a tendency 
for the home plants in important producing areas to be responsible 
for the lowest computed base'prices in their own areas, even when they 
did not cut prices drastically in each other's areas. Again I wish to 
state that by "cut prices" I mean computed base prices lower than 
published base price. Examples are Chicago, Pittsburgh, eastern 
rennsylvania for shapes. 

fabrication-in-transit rates and price cutting 

Dr. deChazeau. The explanation of this phenomenon, I believe 
is probably to be found in part in- the fabrication-in-transit rate 
structure applicable to these structural materials. Thefee so-called 
f-i-t rates on structural products permit steel to move out of line, from 
the steel plant to the fabricator's shop and, as fabricated material, 
to final destination, at the through rate from the steel mill to final 
destination, plus a slight charge for stop-over which varies among 
freight areas and railroads but is about 3 cents per hundredweight. 
That is on the order of 60 cents per net ton. 

Acting Chairman King. If yoii will pardon me for interrupting 

Dr. deChazeua. Yes, sir. 

Acting Chairman King. The rise and fall in our business barometer, 
if I may use that expression, is not uniform. That is to say, there 
may be great activity in certain manufacturing lines and domestic 
undertakings in certain sections of the United States, whereas in 
other sections of the United States there may be but little activity 
In other words, business is spotted. 

Now with those variations resulting from causes which it isn't 
necessary to inquire about now, it would seem to me— and I am asking 
your opinion — that that would necessitate or, at any rate, result in 
considerable variations in prices, whether posted or not — variations 
much to the disadvantage of the company, sometimes to its advantage, 
much to the advantage of the consumer, and at other times of dis- 
advantage to the consumer. In other words, you can't apply a rule, 
can you, or a formula which determines exactly the price of a com- 
modity at all times in all parts of the United States? 

Dr. deChazeau. I should agree with you, Senator. Perhaps you 
misunderstand the implication of the presentation here. 

Acting Chairman King. Oh, no; perhaps what I inquired about 
was not germane to your presentation, which I am listening to with 



CONCENTRATION OF ECONOMIC POWER 14143 

a good deal of interest. But as a sort of practical matter it occurred 
to me to ask that question now. 

Dr. deChazeau. It did not surprise me 

Acting Chairman King. I beg your pardon. 

Dr. deChazeau. It did not surpise me to find this variation in 
computed base prices with relation tq published base prices. It was 
somewhat surprising for me, and it might be for others, to find that 
the computed base price for a mill, say, in Chicago, on sales in its own 
(i. e., Chicago) area was lower than that for any other producing area 
selling in the Chicago area. Again, for example in eastern Pennsyl- 
vania, the computed base price for shipments into that area was 
lowest for the home'plants, the plants located in that area and quoting 
on their nearest basing point. The computed base price was lower for 
those home plants quoting on their nearest basing point than for their 
quotations on any other base and it was also lower than those for 
any other plants shipping into the Eastern Pennsylvania market. 
It is that phenomenon which I think requires some additional ex- 
planation. The fabrication-in-transit rate structure is a possible, or 
partial source of price cutting in one's own immediate market. In 
shapes, for example, it was particularly interesting that Chicago was 
responsible for the low quotation in the Chicago area, Pittsburgh was 
second lowest in the Pittsburgh area. North Ohio being lowest. But 
these two latter areas are, as you can see, contiguous. 

Despite that fact, on all shipments made by Pittsburgh into Chicago, 
the computed base price was considerably higher than that of other 
mills in the market, and vice versa for Chicago shipments into Pitts- 
burgh. It is that phenomenon which calls for some explanation. 

Mr. Wooden. There were shipments by Chicago mills into Pitts- 
burgh of the same products and shipments by Pittsburgh mills of the 
same products into Chicago? 

Dr. deChazeau. Yes, sir. 

Mr. Wooden. To what extent did that occur? 

Dr. deChazeau. Of course it varies with products. It was not very 
important, but the interesting thing to me was that the computed 
base price in those instances was not lower than the computed base 
price on shipments from other areas or even on shipments from the 
home producing area. 

Incoming waybills (i. e., waybills on the shipment from mill to 
fabricating plant) may be accumulated by the fabricating plant and 
used on outgoing shipments of equal tonnage which permit the greatest 
saving to the fabricator. So long as foreign mills are willing to quote 
him, therefore, it is profitable for the fabricator to purchase his steel 
from the foreign rather than from the home mill. For example, 
through the application of incoming way-bills on shipments to par- 
ticular areas, the fabricator may save up to five or six dollars a ton. 
Obviously the saving depends entirely on the destination, on the 
freight rate structure, and on the source of supply; but the advantage 
(for purposes of f-i-t) in buying from a contiguous mill is very small. 

The price to the fabricator at his plant is the same from both mills. 
But if he is at Neville Island, say (within the switching limits of Pitts- 
burgh), and he bm^s from a Pittsburgh plant, there is no advantage in 
f-i-t. The maximum difference between the through rate from the 
Pittsburgh mill to destination *of the fabricated material and the sum 



14144 CONCENTRATION OF ECONOMIC POWER 

of the two local rates is not more than a few cents. However, if he 
can get his steel from Chicago in shipments to certain destinations the 
difference will be substantial and effects a reduction in the cost of 
steel to him at ultimate destination. The saving varies up to about 
five or six dollars a ton. I don't assume that is the average; the 
average is likely to be considerably less. Thus, if the home mill is 
to retain its business, it must cut the price to compensate the fabri- 
cator for foregoing his f-i-t privilege. 

This explanation is consistent with the small proportion of the total 
receipts of the home consuming district supplied by the local plants 
in plates and shapes (roughly 49 percent for each) as contrasted with 
the high proportion supplied in sheets and strip (82 and 78 percent). 
On the latter there are no fabrication-in-transit rates. 

6. Using shipments priced on the nearest basing point as a criterion 
of natural market, then for strips, sheets, and plates slightly more 
than 50 percent of receipts in those markets were supplied by the 
"governing" producing area. Over two-thirds of this market was 
supplied by "governing" producing areas in the case of shapes. The 
advantage in mill-net yield for producing areas on sales within this 
market as contrasted with outside sales averaged $1.57 per ton for 
strip and around $2.00 for the other three products. The advantage in 
average freight absorption on shipments to the former areas was sub- 
stantially higher than that in mill-nets for every product. This fact 
indicates relatively greater price cutting in the home market by home 
miUs than in outside markets. 

7. Using average freight absorption on shipments priced on the 
nearest basing point by each producing area as a criterion of its market, 
then roughly 27 percent of shipments of shapes and plates by producing 
areas were made into their markets so defined; 34 percent of sheet 
and only 14 percent of strip shipments. But it is interesting to observe 
that many of the most important producing areas are excluded en- 
tirely from their home consuming areas on such a criterion. That is, 
freight absorption on shipments by such producing areas into their 
home consuming areas W8s greater than the average on all sales. 

One reason for that is, of course, shipping across the basing point 
within one's own area. If the area is large, one may expect a fairly 
high proportion of such sales. 

8. Using average mill-nets received on sales priced on the nearest 
basing point as a criterion, the percentage of total shipments by pro- 
ducing areas shipped into their markets, so defined, is increased sub- 
stantially for all products except sheets. That is, for shapes it be- 
comes 33 percent, plates 49 percent, sheets 36 percent, and strip 34 
percent. Average advantage in mill-net to producing areas selling 
within rather than outside this market ranges from roughly $2.50 for 
strip to $3.66 for sheets. 

9. Using the lowest average freight paid or allowed from steel plant 
to destination as the criterion of the natural market, producing areas 
sold 58 percent of their total shipments of shapes into such markets, 
67 percent of their plates, 43 percent of their sheets, and 44 percent 
of their strip. This measure of market area conforms most closely, 
although very crudely, to that defined in terms of an f. o. b. mill price, 
if such mill prices were equal for all mills. 

_ It is interesting to note that if all shipments received by consuming 
^stri(^s in each^ such market, irrespective of source, were in fact sup- 



CONCENTRATION OF ECONOMIC POWER 14145 

plied by the governing producing area (i. e., that producing area 
closest freight-wise), some of the most important producing areas 
could not have confined themselves to that market without dras- 
tically curtailing, their total shipments. For example, such markets 
would have provided an outlet in shapes for only 23 percent of ship- 
ments made by Buffalo; 41 percent of those by Colorado; 62 percent 
for Pittsburgh-North Ohio River Plants; 94 percent for Chicago. In 
plates, a larger producing area had to be employed (e. g., Pittsburgh, 
Youngstown, North Ohio River plants were grouped). For the 
group, the percentage was 61 percent; for Birmingham 63 percent. 
Producing areas not mentioned were areas for which the total require- 
ments of consuming districts "governed" were equal to or greater 
than total shipments actually made by such producing areas. In 
sheets, Pittsburgh- Youngstown-North Ohio River plants could have 
shipped only 14 percent of their actual shipments; Middletown- 
Newport- Ashland, 77 percent; Chicago, 79 percent; Buffalo, 85 
percent. In strip, Pittsburgh- Youngstown-North Ohio River, 30 
percent; St. Louis, 68 percent; Chicago, 82 percent. 

In presenting these percentages I emphasize that the ability or the 
inability of mills in a given producing area to market their output in 
areas most cheaply reached in terms of freight costs constitutes, by 
itself, an argument neither for nor against a basing point system of 
pricing or any other pricing system. What I have presented here, 
within the limits of the type of data available, is a market fact. As 
such, it must be reckoned with. Given the actual location of mills 
with respect to areas of important consumption, some mills and 
groups of mills must seek business farther afield than lowest trans- 
portation costs permit. This situation may be consistent with maxi- 
mum efficiency and lowest over-all cost, or it may represent a funda- 
mental maladjustment of capacity. The judgment must rest on 
other evidence, and that is, as I see it, a problem for the Federal 
Trade Commission hearings. 

Mr. Wooden. Do I understand. Dr. deChazeau, that you think 
your presentation on the facts outlined by you does not tend either 
to establish or to disestablish the degirability of the so-called basing 
point system? 

(Mr. O'Connell assumed the Chair.) 

Dr. deChazeau. That is my statement. I have attempted to give 
in terms of relative magnitudes some answer to questions with regard 
to freight absorption, to mill nets and to price cutting. I have indi- 
cated the extent to which producing areas do or may supply — and still 
maintain their shipments — the requirements of certain areas or certain 
markets defined in different ways. 

I do not say, and I certainly am not to be understood to imply, 
that these data are irrelevant to the issue. I consider them very 
vital to the question. My contention is that they constitute market 
facts, and before reaching a final judgment as to the economic or 
social desirability of the basing point system, other considerations 
must be taken into account. 

Mr. Wooden. Do you mean that this freight absorption and 
phantorn freight, so-called, are market facts just like the basing-point 
system itself may be a market fact? 
Dr. deChazeau. They are facts in the actual market; yes, sir. 



14146 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. And assuming the existence and continuance of the 
basing point system, these market facts that you referred to should 
be taken into account? 

Dr. deChazeau. Most certainly. 

Mr. Wooden. Would you say that the amount of freight absorbed 
represents the amount that the shipper is willing to take less than the 
base price? 

Dr. deChazeau. Under the conditions which exist at that particu- 
lar moment for that pai"ticular shipment. 

Mr. Wooden. That's right; that is what I mean. 

Dr. deChazeau. Yes, quite right; otherwise, he would not do it. 

Mr. Wooden. And on the other hand, would you also say 

Dr. deChazeau (interposing). Pardon me, but may I make just 
one qualification to that? Business is not usually conducted one 
little job at a time. One has customers and those customers take a 
variety of products. For that reason, a mill might at a given time 
take a loss on a particular shipment which it would not take if that 
were a new customer, but being a good customer and a continuing 
customer, certain losses are taken in that way. 

Mr. Wooden. Would you also say that the amount of phantom 
freight, so-called, would represent how much more than the base 
price the shipper can get in a particular 

Dr. deChazeau (interposing). 'Given a particular pricing situation, 
it does not represent how much more he can get because it does not 
determine his mill net. It represents the extent to which the actual 
transportation costs are lower than the transportation costs from the 
basing point to destination. 

Mr. Wooden. He gets an increase 

Dr. deChazeau (interposing). My reason for saying that — may I 
add, if you will pardon me? — is-,that, as I pointed out before, what he 
gets (his mill net), is primarily determined by the delivered price 
if there is price cutting. Now, if you ask your question on the 
assumption that the basing-point formula is always followed by all 
mUls, I could give you a definite answer, and it would be "Yes." 

Mr. Wooden. Well, assume that -it is followed in some particular 
case, the answer would be "Yes"? 

Dr. deChazeau. My answer would be "Yes." 

Mr. Wooden. I see. If freight absorption, then, represents how 
much less than the base price the shipper is willing to take in his 
mill net, and the phantom freight, so-called, represents how much 
more than the base price, which, in other cases, he can get, why isn't 
the logical thing to do to figure the percentage on both "those items 
against the base price rather than against the delivered price? 

Dr. deChazeau. It depends entirely on what you want to do. In 
the first place, I should say that you have set up a situation which is 
significant only so long as the basing, point formula is in fact followed. 
The result of our analysis is, that it is honored in the breach. I 
should say, for that reason, that that sort of computation would be 
of academic interest only. 

Mr. Wooden. Well, every system is departed from at times, I 
take It? 

Dr. deChazeau. I beg you pardon? 



CONCENTRATION OF ECONOMIC POWEIl 14147 

Mr. Wooden. Are we considering a system as a system' or the 
extent and nature of departures from it? 

Dr. deChazeau. We were concerned not with the system as a 
theoretical system, but with the system as an operating system. 

Mr. Wooden. As for the month of February, 1939? 

Dr. deChazeau. That is right. Of course, you reahze yourself 
that our first objective was to have not a single month, on which I 
recognize limitations, but a month in a quarter of very high produc- 
tion in the industry, prior to the basing-point change, namely, May, 

1937, and a month during a period in wliich there was very low utiliza- 
tion, and therefore possibly much greater price-cutting, namely. May, 

1938. It was only the large amount of work involved that 

Mr. Wooden (interposing). I may have overlooked it in your 
statement, but I still do not have any idea of what percentage of all 
shipments made during February, 1939, is represented by your 
tabulations. 

Dr. deChazeau. You mean made by all mills? 

Mr. Wooden. Made even by the mills that are excluded in your 
survey. What percentage of all shipments during that month? 

Mr. Feller. All shipments of all steel products? 

Mr. Wooden. Yes; and what percentage of all shipments for these 
particular products? 

Dr. deChazeau. Well, that would have to be answered for each 
product separately. In tables 4 and 4-A for each product,' you will 
find figures wliich provide an answer to your question. For example, 
I am looking at tables 4 for shapes. The total toimage shipped 
(i. e., analyzed by us), which represents, with the exception of f. o. b. 
mill sales, exports, shipments to plants of the same or affiliated com- 
panies (which are often merely changes in inventories), and shipments 
to jobbers' warehouses, all of the shipments distributed by the sample 
group of companies, was 79,921 tons, as contrasted with aggregate 
shipments of 144,184 tons. 

Mr. Wooden. And do those represent shipments into all territories 
or shipments only into these districts that you have outlined? 

Dr. deChazeau. The 144,184 tons is the total shipment of heavy 
shapes by all reporting plants to any place in the world. 

Mr. Wooden. And your 79,000 is into these districts only, is that 
right? 

Mr. Feller. No; I think there may be some misunderstanding here. 

Mr. Wooden. Well, I just want to clear it up. 

Mr. Feller. The districts include the entire continental United 
States. Those colored districts on that chart are merely those 
districts which are smaller than a State. All other points of the 
United States were included within a State. Now the reason for the 
difference between the 79,000 tons, which is the amount of shipments 
included in this analysis, and the 140,000 tons, which was .the total 
shipment, was this, that there was excluded from this analysis exports, 
f. o. b. sales, their f. o. b. mill sales, of which there may be some, and 
shipments to jobbers' warehouses. 

Now, all those types of sales, like exports, shipments to jobbers' 
warehouses, are sales which are not made on any bosing 

Dr. deChazeau (interposmg). T think I can give you that. 

1 Appendix, pp. 14c(49, 14365, 14380, 14406, 14421-M423. 



14148 CONCENTRATION OF ECONOMIC POWER 

Mr. Feller. They are out of the basing-pomt system. There- 
fore, in shapes, all those 

Dr. deChazeau (interposing). No; that isn't entirely so. I give 
you actual totals for shapes in table 4-A.^ Our domestic shipments to 
consuming districts which were analyzed, is 79,921, about 80,000. 
F. o. b. mill sales were 3,702. Clearly, those may be distributed but 
they are sold f. o. b. mills. Shipments to plants or warehouses of the 
same or affiliated companies are 49,346. That is the largest item. 
Shipments to jobbers' warehouses are 5,030 — giving total domestic 
shipments of 137,999, plus exports of 6,185, which gives you your total 
figure. 

Now, you understand, I am sure, that in excluding shipments to 
plants or warehouses of the same or affiliated companies, we were 
primarily interested in making our results meaningful. Those 
shipments, if included, would so increase our tonnage — often they are 
mere inventory transfers — that they would be meaningless from a 
price basis. Therefore our computations as to computed base price 
would be completely thrown out, and utterly valueless. 

The same considerations or similar considerations led us to exclude 
sliipments to jobbers' warehouses, since often there are special jobber 
discounts which, if excluded, would again make our figures less 
significant when reduced to a tonnage basis. 

Mr. Wooden. Do you understand that shipments to jobbers' 
warehouses are not figured on a basing point? 

Dr. deChazeau. They are figured on a basing point so far as I 
know, but in addition to the regular extras, there are special jobbers' 
discounts. 

The jobber item is a relatively small item in all these products. 
It would be especially small in shapes, as contrasted with other 
products. I believe that the real answer to the point which you have 
raised, Mr. Wooden, is provided by comparison 6f total ship- 
ments by area on our Form A analysis for these products, in 
which many of these items were included, with our Form B distri- 
bution. Making that comparison, we find that we can use the 
February '39 figures as quite typical; that is, with very few exceptions 
the percentage distribution in February '39 falls witnin the range of 
the distribution over the 3 years on the Form A sample. Since there 
is great stability in the relative distribution on Form A, we can 
conclude that the February distribution is not atypical. 

Mr. Wooden. What inferences would you draw from the fact that 
on some shipments there are certain amounts of so-called phantom 
freight and on other shipments there are certain amounts of so-called 
freight absorption, by the same shipper? 

Dr. deChazeau. What inference would I draw? 

Mr. Wooden. Yes. In other words, what is the significance of 
there being phantom freight consisting of a difference above the base 
price and freight absorption consisting of a difference below the base 
price? What is the significance of it? 

Dr. deChazeau. For one thing, it represents the direction in which 
the shipment moves with relation to the location of the mill and the 
basing point. I take it that isn't the answer that you want. What 
you want me to discuss is what conditions lead a mill to make a vari- 
able price on its products. 

2 Appendix, p. 14421. 



CONCENTRATION OF ECONOMIC POWER 14149 

Mr. Wooden. You mean a variable mill-net. 

Dr. deChazeau. A variable mill-net. 

Mr. Wooden. Yes; that is what I meant to ask. 

Dr. deChazeau. In a general way I think I can answer that without 
getting too far into the subject matter, as I understand it, of your own 
hearing; and I have tried to avoid that. In the production of steel, 
unlike the production of certain agricultural products, one produces to 
order, and, therefore, the additional cost involved for an additional 
shipment of a particular specification imder a given set of conditions 
will differ, depending upon the level of output at that time. Hence, 
the variations in the mill-net with relation to that variable cost may 
make profitable a given shipment — by profitable, I don't mean a 
return on total investment, but a, return in excess of the variable 
cost — which would not be profitable for the entire business. I have 
already indicated another source of such variation in miU-net ; namely , 
that business is not carried on from moment to moment but from year 
to year and over a period of years. Therefore, one meets, the require- 
ments of a given customer for a particular product, even at a disad- 
vantage to oneself, rather than to incur ill will and lose business. 

Mr. Wooden. Assuming that the basing point system is in opera- 
tion, wouldn't you expect to find these phenomena of so-called phan- 
tom freight and so-called freight absorption? 

Dr. deChazeau. Now you are asking a question whicli I can answer 
very briefly. To the extent that the basing-point system exists, some 
"phantom" freight, (that is variation of the mill-net) is a necessary 
condition of the operation of that system as a formula. 

Mr. Wooden. Both freight absorption and phantom freight. 

Dr. deChazeau. That is right. Mill-net will vary and one may 
have freight absorption. 

Mr. Wooden. Was the participation of the Federal Trade Com- 
mission in this study anything more than cooperation with regard to 
the form of the questionnaires to be sent out? 

Dr. deChazeau. Well, in that I hope I have not given the Federal 
Trade Conunission too little credit. The whole project was discussed- 
with the Federal Trade Commission. I may say that the Federal 
Trade Commission was primarily interested in the Form A distribu- 
tion and the Department of Justice was primarily interested in the 
Form B distribution. 

Mr. Wooden. Did the Commission do anything more than coop- 
erate with the preparation of forms of the questionnaire? 

Dr. deChazeau. That is right. The analysis has been entirely by 
the Department, which has handled all phases. 

Acting Chairman O'Connell. Are there other questions? 

Thank you very much. Dr. deChazeau. I think your presentation 
has been very, very interesting. 

The committee will recess untU 2 o'clock. 

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

after recess 

The committee resumed at 2:05 p. m. on the expiration of the 
recess. 

Acting Chairman McConnell. Dr. Yntema, are you ready? 
The conmiittee will please be in order. 



14150 CONCENTPvATTON OF ECONOIMIC TOWER 

Mr. Feller. Mr. Chairman, may I just say that the program is for 
Dr. Yntema to make a brief statement with relation to Dr. Ezekiel's 
testimony of the other day, and Dr. Ezekiel may desire to reply 
briefly to that. 

Subsequent to that, I shall turn the counsel's chair over to Mr. 
Ballinger, who shall proceed with the basing point inquiry. 

Acting Chairman O'Connell. Will you proceed, please? 

TESTIMONY BY DR. THEODORE OTTE YNTEMA, UNIVERSITY OF 
CHICAGO, CHICAGO, ILL.— Resumed 

RELATIONSHIP BETWEEN STEEL PRICES AND PRODUCTION AND 
GENERAL INDUSTRIAL ACTIVITY 

Dr. Yntema. In his testimony before this committee on January 
24, Dr. Ezekiel undertook to evaluate the effects of a reduction in 
steel prices upon the general level of business activity and also upon 
the cost of producing steel. He then attempted to show the possi- 
bilities of concerted price reductions by many industries. 

In an effort to estimate the effect of a reduction in the price of 
steel upon general industrial activity, Dr. Ezekiel argued that any 
increase in the production of steel resulting from such price reduc- 
tion must be paralleled by a general rise in business activity. 

To make liis point, he presented this chart, "Exhibit No. 2183,"^ 
showing that there has in the past been a very close relation between 
fluctuations in steel production, industrial steel sliipments, and iii- 
dus trial production excluding iron and steel. In fact he said that this 
chart "shows how absurd it is to assume that steel output could 
change without a corresponding change in the level of industrial 
activities as a whole." From this, if I understood liim correctly, he 
inferred that the effect of steel prices on steel consumption would 
spread out to cause a corresponding increase in other industrial ac- 
tivity, and argued that this general increase in business activity would 
in turn further increase the demand for steel. I submit that this is 
erroneous reasoning. In homely but adequate terms I believe it may 
be described as a case of the tail wagging the dog. 

Now there is no question at all that in the past steel production 
has been very closely related to other industrial activity. That's the 
relation exhibited in this chart. There have, however, been from 
year to year small deviations in this average relationship, and in one 
or two years large deviations. The general relation shown in this 
chart affords no basis whatsoever for assuming that an increase in 
domestic steel shipments causes an increase in general industrial 
activity. Wlien questioned specifically on the point, Dr. Ezekiel 
recognized that either might be cause and either might be effect. 

In liis testimony, if I understood him, I think he did make use of an 
assumed causal relationship of domestic steel shipments upon other 
business activity. 

I submit, however, that there is good reason ^o suppose that the dog 
can wag the tail, and that general business activity does determine 
the amount of steel produced. Furthermore, the effects of changes 
in the price of steel are reflected in small deviations of steel production 

' Included in Hearings, Part 20. 



CONCENTRATION OF ECONOMIC P0^^ EU 14151 

from the levels which would normally be associated with given levels 
of general business activity. 

Dr. Ezekiel has failed completely to establish the magnitude of the 
secondary effects on general business activity, due to reductions in the 
price of steel. By his confusion of cause and effect he has reached the 
implausible inference that sales would increase so rapidly that the 
gross income of steel producers would rise as the price of steel fell 
or was reduced. 

There would, of course, be some secondary effects on general business 
activity resulting from a reduction in the price of steel. The magni- 
tude 01 these, however, cannot be estimated from the evidence which 
Dr. Ezekiel has introduced, and I repeat that I should still be grateful 
to Dr. Ezekiel or to anyone else who would show me how we might 
make a reasonable approximation of these secondary effects. We 
know, however, that in comparison with the direct effect of a reduction 
in the price of steel on steel production, which is itself not large, that 
the secondary effects must be still smaller because the steel industry 
proper constitutes only a small fraction of all business. The total 
value of its products is only about 4 or 5 percent of the total value of 
all goods and services produced in boom times and considerably less 
than that in time of depression. 

To establish his second point, that reductions in the price of steel 
would decrease the cost of producing steel, Dr. Ezekiel attempted to 
demonstrate that a reduction in the price of steel would cause scrap 
prices to go down. Observing that in the past scrap prices and steel 
prices tended to move in the same direction, Dr. Ezekiel concluded 
therefrom that cheaper steel would mean probably less expensive 
scrap. Had he considered the matter more carefully I am inclined to 
think that he would have recognized his mistake. 

The significant relationship is that between steel production and 
scrap prices. Wlien steel production has been high, scrap prices 
have been high; when steel production has been low, scrap prices have 
been low. As steel operations rise the demand for scrap rises, but 
without a corresponding increase in supply the price naturally goes 
up. Therefore, insofar as a reduction in the price of steel would 
cause steel operations to rise, it would also cause the price of scrap to 
rise. Tliis would increase, not reduce, the costs of producing steel. 
For the short-run period in which we are interested the effects of a 
reduction in steel prices upon the prices of other commodities in the 
economic system and ultimately, then, upon the prices of goods and 
services which the steel industry buys are too small to affect substan- 
tially the results of our cost analysis. In fact, they may not even 
be sufficient to offset the increased cost of scrap. I use, as Dr. Ezekiel 
has, the words "may" and "might" in this connection, because neither 
he nor I can predict with accuracy what would happen. 

Dr. Ezekiel has, I fear, created a fictitious dilemma by reading into 
our statements ideas which are not there. While it is true that in 
the short run the steel industry would sustain a reduction in profits 
or an increase in losses by reducing its prices and would obtain an 
increase in profits and a reduction of losses by increasing its prices, 
within moderate limits, we did not suggest tnat all industries could 
make more money by producing less product and selling it at a 
higher price. If this dilemma has existed in the mind of anyone 



14152 CONCENTRATION OF ECONOMIC POWER 

besides Dr. Ezekiel, because of preconceptions in approaching the 
problf-m or because of our mifortunate terminology, I hope that this 
statement may dissipate the misapprehension which has existed. 

Dr. Ezekiel fails entirely to recogniz"fe that individual companies 
in the steel industry are not able to charge any price which they 
choose, but are limited by competitive forces in the market. Without 
recognition of this fact, the low profits in the industry and the evidence 
submitted in our studies do indeed constitute a real dilemma. With 
recognition of the facts, the dilemma evaporates. 

Finally, Dr. Ezekiel points out that we did not consider in the 
documents submitted to the committee, the effects of general reduc- 
tions in the prices of a large range of commodities. As I said in my 
first statement to the committee, we undertook seriously to study 
this problem but we were unable to reach conclusions of sufficient 
scientific value to warrant a presentation of them before this com- 
mittee. I might say that we abandoned our plans to submit a 
statement on this subject only after consultation with economists 
whom we considered to be" among those best qualified to deal ade- 
quately with the subject. 

At the conclusion of his statement. Dr. Ezekiel presented his plan 
for concerted action to reduce prices in a large number of industries. 
I have already said that I do not feel competent, and I have not been 
able to find anyone else whom I regard as competent, to evaluate 
with reasonable certainty the economic consequences of such a 
program. That, of course, is a personal opinion and I offer it as such. 

I doubt that we possess, much less would use the collective wisdom 
necessary to decide when, where, -and how to reduce prices. The com- 
plexities of the administrative problems which would be involved in 
such a plan are almost beyond comprehension. Nor is it realistic to 
assume that a great number of business enterprises would voluntarily 
engage upon a concerted program of price reduction. Even though 
such a plan might have desirable economic effects, if it would work, I 
am inclined to think that it is not only administratively unworklable, 
but fraught with grave social and political consequences, to our demo- 
cratic way of life. 

Before I leave the stand, I want to express my thanks for the court- 
esy whicK has been extended to me by Dr. Kreps and by the commit- 
tee. 

(Senator King assumed the Chair.) 

Acting Chairman King. Do I imderstand your statement which 
you made just a moment ago, that you are rather apprehensive, and 
I know I am, of trying to repeal the law of supply and demanti, and to 
set up a sort of super-government in industry to fix prices and to regu- 
late jDroduction? I don't want a totalitarian state, I don't want to 
superimpose upon industry and upon the American people any form of 
Federal control which would interfere with private initiative and with 
those fine qualities which have made this the greatest country in the 
world. 

Proceed. 

Mr. Feller. I should like to ask you just one question. Assuming 
that it were found that in a number of important industries, there were 
artificial restraints on competition which, while not entirely eliminat- 
ing competition, had the effect of diminishing its area, and thereby 
sustaining the price above the level that it would reach in the event 



CONCENTRATION OF ECONOMIC POWER 14153 

that competition could be restored to the fullest extent consistent 
with the structure of the industry, do you think that the removal 
by action under the antitrust laws, simultaneous removal, of such 
artificial restraint, would have the effect of increasing production 
through a decrease in price? 

Dr. Yntema. Well, Mr. Feller, that is a very general question and a 
very large question. I am no lawyer; I have not had experience with 
the antitrust laws. I should, after some study, be willing to comment 
on some particular situation, but I am very hesitant to generalize on 
subjects as diverse as those to which you refer, 

Mr. Feller. I should just like to make the purport of my question 
clear, although perhaps your answer is sufficient. Dr. Ezekiel advo- 
3ated the plan which is chiefly associated with the name of Dr. Owen 
W. Sprague, of concerted action by industries to reduce prices. You 
are apprehensive, as a good many people are, of the effects that that 
sort of concert might have on the democratic system. 

Now, assuming that the same effect could be achieved, not through 
this concerted action by industry, but through enforcement of the anti- 
trust laws, you would have presented squarely the problem which both 
Dr. Ezekiel and Dr. Sprague raise, namely, whether simultaneous re- 
duction in price, assuming it could be brought about by the enforce- 
ment of the antitrust laws, would have such an effect on volume that 
it would result in greater profits for industry. 

Dr. Yntema. I don't believe economists are able to give a con- 
clusive answer to that question. 

Mr. Feller. Again, my question was somewliat narrowing. I 
take it there are two parts to the problem. The first part is, can we 
bring about simultaneous reductions in price? The second is, assun- 
ing that you did have a simultaneous reduction in price, would it 
have this important economic effect that both Dr. Ezekiel and Dr. 
Sprague claim for it? 

Dr. Yntema. That's correct; there are these two aspects to the 
problem. 

Mr. Feller. It seemed to me that you had answered by casting 
doubt on the feasibility of the first part. 

Dr. Yntema. No; I don't think that you got the full import of 
the statement I made earlier and the statement I have just made. I 
said that we recognized that problem and that we have attempted 
seriously to study it. There is in this problem a sufficient area of 
difference of opinion so that we at least hi.av6 not been able to reach 
conclusions which we think can be established with satisfactory 
validity. As a matter of fact, if you want my personal opinion I am 
quite willing to offer it. I don't think that we can eliminate busi- 
ness cycles through flexibility in prices. Now there are situations, I • 
have no doubt, in which we should improve our economic situation 
through price reductions. I don't think anyone would deny that. 

Finally, may I say that I greatly appreciate the criticisms and the 
suggestions we have received, and particularly the opportunity for 
open discussion of these studies which has been afforded us by the 
committee. 

Acting Chairman King. I think the committee is indebted to you 
for a very clear exposition of the views that you entertain and the 
views of the organization for whom you have testified. 

Mr. Feller, Dr. Ezekiel would like to make a brief comment. 



14154 (lONCENTT'vATTON OF ECONOMIC POWER 

TESTIMONY OF DR. MORDECAI EZEKIEL, ECONOMIC ADVISER 
TO THE SECRETARY, DEPARTMENT OF AGRICULTURE, WASH- 
INGTON, D. C— Resumed 

Dr. EzEKiEL. If the committee is willing, I woiild like to refer 
just very briefly to two or three of the points Dr. Yntema has just 
discussed. 

First, in presenting the statistical evidence which I did in the chart 
that Dr. Yntema has already called your attention to, "Exhibit No. 
2183," I made no attempt to measure bow much mcrease in general 
industrial production could be expected to follow a given increase in 
steel production. I merely pointed out that if a reduction in steel 
prices did materially increase the output of steel, it was inconceivable 
that that would take place in view of the past experience without 
some corresponding increase in activity through other associated 
industries, and that if you did have the increase in activity in other 
associated industries, that would produce a secondary increase in 
the demand for steel in addition to that for which Dr. Yntema made 
measurement. I made no attempt to measure how much that in- 
crease might be, but simply pointed out that the failure to allow for 
it left one factor which the analysis presented by Dr. Yntema had 
failed to take into account. 

Likewise, in referring to the relation of steel prices to scrap prices, 
Dr. Yntema is correct in his criticism in one sense. I used the phrase 
"steel prices" in my testimony when I should have used the 
phrase "products of the iron and steel industry." I assumed that a 
reduction in steel price and a reduction in pig-iron price would occm' 
as part of a general reduction in prices of the products of the industry, 
both semifinished and finished, and that a reduction in pig-iron 
price in general was associated with a reduction in scrap prices. Dr. 
Yntema questioned some of my conclusions at that point, but neither 
he nor I have made any effort to introduce testimony as to how far 
changes in steel or in iron prices are associated with scrap prices; 
without such material we are both rather conjecturing as to the 
exact relationship. 

Acting Chairman King. In the realm of speculation or conjecture? 

Dr. EzEKiEL. Conjecture based on examination of data in both 
cases, but without an attempt, I believe, to measure the exact nature 
of the relationship. As far as Dr. Yntema's comments on the general 
proposal for concerted expansion in production, I take it that he is 
criticizing more the possibility of bringing such operations intb action 
rather than the economist's view as to whether, if taken, they would 
work or not. I believe he as an economist would agree that assum- 
ing the administrativ ^^ problems could be solved, a general increase 
in production and increase in employment secured through reductions 
in prices, if properly brought about, would aid very greatly in solving 
the problem of unemployment. 

He, several times, has referred to the possibility of eliminating 
business cycles; My testimony was directed on that point not so 
much to business cycles but to the fact that we have had heavy un- 
employment ranging around a quarter of the entire city potential 
working population, over most of the last decade, and that continuous 
heavy unemployment is a chronic problem far beyqnd business cycles, 
so-called. The price policy of city industry, where organized in large 



CONCENTRATION OF ECONOMIC POWER 14155 

units, is believed by most economists who have studied that problem 
to have a great deal to do with the problem of continuing heavy un- 
employment. 

Acting Chairman King. Thank you very much, Doctor. 

Dr. EzEKiEL. Might I make one other comment, sir? 

Acting Chairman King. Certainly. 

Dr. EzEKiEL. As a professional student of price statistics and pro- 
duction and price behavior, I would like to express a word of appre- 
ciation both to Dr, Yntema and to the Steel Corporation for the 
material they have made available in these studies. So far as I 
am aware, it is the most thorough study' ever made of the facts 
pertaining to industrial behavior in a single great industry and will 
lead, I believe, to a great deal of new information and new light on 
these problems of industrial price behavior. 

Acting Chairman King. May I ask one question. Doctor? Do you 
not think that economists, as well, as businessmen and all American 
citizens, in their formulation of plans for development and for industry 
and for employment, ought to take into account the fact, or recognize 
the fact, that we have a dual form of government? We are a democ- 
racy; we are not in Germany; we are not in Russia; we are, as I have 
stated, a dual form of government, and there are limitations upon the 
power of the Federal Government. The Federal Government may not 
superimpose its power in violation of the written Constitution and of 
the rights which belong under our written Constitution to individuals 
as well as to States. 

Dr. EzEKiEL. Yes, Senator, I certainly agree that any economic 
plans should be so constituted as to preserve democracy. In my 
statement I believe I pointed out how coordination of production 
could use democratic procedures, and evidenced some illustrations 
from AAA experience. Might I also sdy that I also am very much 
worried- about the abUity of democratic forms to be maintained if we 
are to continue to have one-quai-ter of all our people unable to find 
means of providing for themselves. I beUeve that the continuing 
unsolved problem of work for our people in the cities is also a threat to 
democracy, and we need very intensive studies as to how that may be 
solved through democratic procedures. 

Acting Chairman King. Thank you very much. Are you through, 
Mr. Feller? 

Mr. Feller. I am through with Dr. Ezekiel. I just wanted to 
make one statement to clarify the record a bit. I made a rather 
flippant comment yesterday concluding the hearing. I hope no one 
takes it too seriously. I do want to point out this, that the testimony 
which the committee has heard the last 3 days constitutes the most 
important effort to state in measurable terms some of the most 
difficult problems of industry, the relation between price and volume, 
concepts of cost; and while it may be that the results at this timd seem 
inconclusive, I am confident that the material here presented will 
become of increasing importance as time goes on and as more and 
more students have access to it. 

I should like also to state that the area ot agreement among the 
gentlemen who have testified is perhaps larger than the committee has 
appreciated, and I understand that Dr. Kreps and Dr. Yntema are 
attempting to work out a statement that they would like to present 

124491—41 — pt. 27 3 



14156 CONCENTRATION OF ECONOMIC POWER 

for the record at some other time, which will indicate just exactly how 
far they do disagree and how far they agree. Thanli you. 

Acting Chairman King. When they present it we may want to 
interrogate them. 

FEDERAL TRADE COMMISSION'S ANALYSIS OF UNITED STATES STEEL 
corporation's REPORT ON THE BASING POINT SYSTEM 

Mr. Ballinger. Mr. Chairman, on March 6, 7, and 8 of 1939, the 
Federal Trade Commission introduced expert testimony before the 
Temporary National Economic Committee to show that producers of 
steel in the United States were operatmg under a pricing system which 
we. observed eliminates price competition in the steel industry.^ It 
was the opmion of the experts who appeared on the Federal Trade 
Commission program that the steel industry was therefore monopo- 
listic. At the conclusion of- the Commission's testimony there was 
offered for the record a document entitled "Monopoly and Compe- 
tition in Steel," which described how the basing point system in the 
steel industry operated to-suppress price competition in this industry. 
Subsequently the United States Steel Corporation asked and obtained 
leave of the Temporary National Economic Committee to reply to 
the expert testimony offered by the Federal Trade Commission in 
March of last year. The Corporation has prepared a document 
entitled "The Basing Point Method of Quoting Delivered Prices in 
the Steel Industry, Exhibit No. 1418." ^ This document has been 
analyzed by the staff of the Federal Trade Commission.' It is now 
my desire, Mr. Chairman, to have Mr. Walter B. Wooden, Assistant 
Chief Counsel of the Commission, question some of the parties respon- 
sible for the Corporation's document on the conclusions reached 
therein. Mr. Wooden is one of the veteran experts of the Com- 
mission on the basing point system. 

Inquiry by the Commissioli as^ to the authorship of this document 
elicited the information from the Corporation that it had been pre- 
pared by a great many people, including officials of the Corporation, 
lawyers, and economists. 

For the purpose, therefore, of questioning those responsible for the 
document, I request that Mr. Wooden be permitted to examine 
Mr. Fairless, President of the Corporation, and Mr. Adams, Vice 
President of the United States Steel Corporation of Delaware. 

Acting Chairman King. Proceed. Mr. Adams, you were sworn, 
weren't you ? 

Mr. Adams. Yes. 

Acting Chairman King. Mr. Fairless was sworn. 

1 See Hearings, Part 5, pp. 1657-1680, 1861-1894, 1903-1946, 1951-1982; "Exhibit No. 358," a Federal Trade 
Commission report on Monopoly and Competition in Steel, appendix, p. 2192. 
' Appendix, p. 14619ff. 



CONCENTRATION OF ECONOMIC POWER 14157 

TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT UNITED 
STATES STEEL CORPORATION, NEW YORK CITY— Resumed ' 
AND AVERY C. ADAMS, VICE PRESIDENT UNITED STATES 
STEEL CORPORATION OF DELAWARE, PITTSBURGH, PA.— 
Resumed 

Mr. Wooden. Mr. Chairman and members of the committee, in 
taking up this subject of the basing point system in the steel industry 
I want the committee to understand that every effort will be made to 
confine the presentation -to tangible, concrete matters of fact, and to 
avoid, so far as possible, abstruse or abstract criteria and abstruse 
theoretical considerations. After having gone into the subject from 
a factual standpoint, however, it will be necessary to pay some atten- 
tion to the theoretical considerations because the Corporation in sub- 
mittiiig its documents on the basing pomt system has made use of a 
great many of these theoretical abstractions which we have beard for 
the last few days. 

There are only two fundamental factual issues involved: First, 
whether the basing point system in the steel industry is the embodiment 
of some form of collusive methods of price control, and if so what 
forms and methods; and, secondly, whether the objections to the 
basing point system are based, as the Corporation contends, upon 
abstract criteria or whether they are based upon tangible, concrete 
evidence. Only after that factual exposition has been made will 
any attempt be made to go into the theoretical side of the subject. 
The theoretical aspect of the basing point system in the steel 
industry is likewise two-fold: First, whether the use of that system 
is consistent with the economic concepts of a competitive economy 
or conforms to the economic concepts of a monopolistic situation; the 
second theoretical question is simply whether or not the basing- point 
system in the steel industry should be permitted to continue as a 
matter of pubUc interest. 

Now, I should like to approach this subject further from a common 
groimd, which the Corporation itself states in one of the exhibits 
presented, namely, "Exhibit No. 1410," entitled "Some Factors in 
the Pricing of Steel," ^ in which it states: "Price competition is neces- 
sary in any industry operating in a capitalistic system. Is the steel 
industry competitive? Efforts at such determination too easily 
lead into the realms of economic sophistry. Criticism and defense 
of competition in the industry should not be based on abstract criteria 
which fail to take into account the fundamental phenomena involved ; 
it should be based on tangible evidence." 

As I say, that is a common ground on which the Corporation and 
we can approach the subject. 

And now I should like to ask some questions of Mr. Fairless. 

Mr. Fairless, will you state for the information of the committee, 
in as few words as possible, just what are the mefchanical or physical 
features of the basing-point system in the steel industry? 

Mr. Fairless. Mr. Chairman, I should like all questions that have 
to do with basing-point matters, particularly as they pertain to the 

1 For Mr. Fairless' previous testimony see Hearings, Parts, 19 and 20. 
'Included in Hearings, Part 26, appendix, p. 13893. 



14158 CONCENTRATION OF ECONOMIC POWER 

studj which we have presented to this committee, to be directed to 
Mr. Adams. In respect to policies and poUcy questions and matters 
pertaining to the United States Steel Corporation, I should prefer 
that those questions be directed to me. At the same time, I offer 
myself at any time for any question and will attempt, to the best of 
my limijbed ability, to answer it. 

Mr. Wooden, Before we go ahead then on that basis, which is at 
least partially acceptable to me, I should like to ask a few questions 
about the preparation of the Corporation's pamphlets which are in 
the record as "Exhibits Nos. 1418 and 1410." ' 

You have already stated, I believe, Mr. Fairless, that quite a group 
of persons worked together on the preparation of those pamphlets? 

Mr. Fairless. You are referring nov^ to the basing-point pamphlet, 
are you, or all the pamphlets? 

Mr. Wooden. No. I am talking only about these two, one, "Exhibit 
No. 1418", "The Basing-Point Method of Quoting Dehvered Prices 
in the Steel Industry," and, two, "Exhibit No. 1410", "Some Factors 
in the Pricing of Steel." 

Mr. Fairless. You are correct in your statement. 

Mr. Wooden. And this latter pamphlet, "Some Factors in the 
Pricing of Steel," contains a section on the basing-point system, does 
it not? 

Mr. Fairless. I believe that it does. 

Mr. Wooden. Will you state just how those two pamphlets that 
I have referred to were prepared? 

Mr. Fairless. On the basing-point pamphlet, a man by the name 
of Becht, Amo C. Becht, was the leader in the preparation of this 
particular study. Mr. Becht at the present time is an instructor at 
the University of Georgia, and is no longer connected with this 
particular activity. 

In addition to Mr. Becht, various members of the U. S. Steel 
Corporation's official family and subsidiary companies, together with 
members of the firm of Governor Miller, and Irving S. Olds, 
together with outside economists, all participated to some extent in 
the preparation of the pamphlets that you have referred to. ■ 

I might, for further clarification, make the statement that Mr. 
Becht worked approximately 1 year iu the preparation of the data and 
information that is contained in the basing-point study which has 
been presented to this committee. 

Mr. Wooden. You mean "Exhibit No. 1418"? 

Mr. Fairless. Well, yes, if that is the proper number. It is the 
basmg-point study. There isn't any mystery about it. 

Mr. Wooden. Yes, and what about "Exhibit No. 1410"? How 
was that prepared? 

Mr. Fairless. It was prepared largely in the same manner by the 
same group, supplemented by Corporation people, of the subsidiaries 
and the Corporation itself, and was headed, I believe, by Mr. Edward 
T. Dickinson, Jr. 

Mr. Wooden. Were there any other economists beside this Dr. 
Becht who participated in the preparation of these two pamphlets? 

Mr. Fairless. I said yes. 

Mr. Wooden. Can you name any other? 

' "Exhibit No. 1410" is included in Hearings, Part 26, appendix, p. 13893; "Exhibit No. 1418" is 
included in this Part, appendix, p. 14619 S. 



OONCBNTRATION OF ECQNiOMIC POWER 14159 

Mr. Fairless. Well, Dr. Yntema had a place in these studies. 
When they referred to economic problems, he was consulted. 

Mr. Wooden. Did he review or participate in the final preparation 
of the pamplilets as they were submitted? 

Mr. Fairless. I can't answer that. Dr. Yntema is here and he 
can answer that for himself. 

Mr. Wooden. Any other economist besides the two that you have 
named? 

Mr. Fairless. Bradford Smith, who happens to be an economist, 
and is directly associated with the United States Steel Corporation at 
71 Broadway. He participated in these studies and conclusions. 
Mr. Wooden. Did you have any other outside economist? 
Mr. Fairless. I don't believe so. 

Mr, Wooden. Do I understand that after the first draft of the 
pamphlets was prepared, it was then reviewed by various officials 
of the Steel Corporation? 

Mr. Fairless. Well, I wouldn't put it in just those words. Various 
officials of the United States Steel Corporation and subsidiary com- 
panies were consulted all through the preparation of this particular 
study or studies. 

Mr. Wooden. And who made the final review and approval of 
the pamphlets? 

Mr. Fairless. You mean as an individual? 

Mr. Wooden. Individuals, if there were more than one. 

Mr. Fairless. Why, the T. N. E. C. group who have been working 
now for [a year and a half, in conjunction, of course, with the official 
family of the United States Steel Corporation. 

Mr. Wooden. Well, the pamphlets are submitted as the statements 
of the Steel Corporation? 

Mr. Fairless. Definitely so, yes. 

Mr. Wooden. And you would assume responsibility for any of the 
statements contained therein? 

Mr. Fairless. Any of the statements? 

Mr. Wooden. Yes. 

Mr. Fairless. Yes; certainly. Otherwise, we would not have 
presented them to the committee. 

Mr. Wooden. Mr. Fairless, can you tell me whether or not these 
pamphlets on the basing-point system were submitted to any other 
companies or representatives of companies in the steel industry? 

Mr. Fairless. To the best of my knowledge; no. 

Mr. Wooden. They do not then represent the statements even 
inferentially or indirectly of any part of the steel industry, other than 
the United States Steel Corporation and its subsidiaries, is that correct? 

Mr. Fairless. This is tllie statement of the United States Steel 
Corporation. 

Mr. Wooden. I beheve you are the president of the Corporation? 

Mr. Fairless. That is correct. 

Mr. Wooden. How long since? 

Mr. Fairless. Since January 1, 1938. 

Mr. Wooden. And prior to that time, you were? 

Mr. FA.IRLESS. President of the Carnegie Illinois Steel Corporation. 

Mr. Wooden. And how long had you been with the Carnegie 
Illinois? 

Mr. Fairless. Since 1935; October 1st. 



14160 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. And prior to that time you were in the steel industry? 

Mr. Fairless. Twenty-five years, all together. 

Mr. Wooden. In what connection? 

Mr. Fairless. I was executive vice president of the Republic Steel 
Corporation at the time I came up to the United States Steel Corpora- 
tion. 

Mr. Wooden. Have you held any ofl&cial place in the American 
Iron and Steel Institute? 

Mr, Fairless. Yes, sir. 

Mr. Wooden. What? 

Mr. Fairless. Vice president. 

Mr. Wooden. When? 

Mr. Fairless. Now. 

Mr. Wooden. And were you at one time, chairman of the Institute's , 
committee on commercial matters? 

Mr. Fairless. No; not the Institute's. I was chairman of the 
commercial committee under the Code Authority during the N. R. A 

Mr. Wooden. Now during your experience in the industry, have 
you been in the sales end of the business? 

Mr. Fairless. In an official capacity? 

Mr. Wooden. Yes. 

Mr. Fairless. Never; I never held a sales position. 

Mr. Wooden. Mr. Adams, may I ask you how long have you been 
connected with the Corporation and in what capacity? 

Mr. Adams. October 1, 1939; vice president of sales of the United 
States Steel Corporation of Delaware. 

Mr. Wooden. And before that time you were? 

Mr. Adams. With the Inland Steel Co., as vice president and 
assistant general manager of sales. 

Mr. Wooden. And how long have you been in the industry in a 
sales capacity? 

Mr. Adams. Since 1923, with the exception of 8 years during which 
I was vice president in charge of sales of the General Fire-proofing 
Co., at Youngstown, Ohio. 

Mr. Wooden. You had occasion during your sales experience in 
the steel industry to become familiar w ith what sometimes is referred 
to as the basing-point system? 

Mr. Adams. From a practical standpoint, yes, sir. 

Mr. Wooden. Will you tell the CommitlBC, in as few words as you 
can, what are the main features — physical and mechanical features — 
of the basing-point system? 

Mr. Adams. It is a method which we use in calculating our deUvered 
prices which we quote to our customers. We have found that in 
dealing with perhaps some 500,000 customers, who are users of steel, 
they prefer to have us quote delivered prices. 

Mr. WoodejJ. Will you — I don't mind your enlarging upon the 
point, but I want the physical aspects, and mechanics, of the system, 
rather than the reasons for it. Just a skeleton outline of what the 
system" is. 

Mr. Adams. If I understand your question cor ectly, we follow a 
method of arriving at delivered prices wliich is '^Jiown as the basing- 
point system. We publish base delivered prices at our points of 
production. 



OONGBNTRATION OF ECONOMIC POWER 14161 

Mr. Wooden. That means delivered at the point of production, 
doesn't it? 

Mr. Adams. Yes, sir. 

Acting Chairnian King. May I ask a question there? Is that 
system one which has been approved by your customers and by the 
consumers of steel throughout the United States, if you know? 

Mr. Adams. I would say very definitely, Senator, that our customers 
favor this method of quoting prices, the delivered-price method — and 
as evidence of that I would like to offer for the record an article from 
Iron Age of April 1939, which is the result of a survey made by Iron 
Age and conclusions reached by Iron Age. 

Acting Chairman King. It will be exhibited to counsel and we will 
take the views of counsel before it is admitted. Personally, I see no 
objection to it but I think counsel ought to have a chance to examine 
it, if he cares to. 

Mr. Wooden. Well, of course, we are familiar with the general 
situation that in the basing-point system customers who are in com- 
petition with each other naturally do not want their competing 
rivals to buy any more cheaply than they do, and that may account 
for such desire or such favoritism as there is on the part of customers 
toward the system, because it does put them on an equality as to the 
delivered price. 

Acting Chairman King. Well, Judge, do you object to it? If 
you do 

Mr. Wooden (interposing). I haven't any objection but it is sub- 
ject to 

Acting Chairman King (interposing). Perhaps it can be put in 
at the conclusion of the testimony. 

Mr. Wooden. I think that would be better; yes.^ 

Mr. Davis. Mr. Chairman, I would like to ask a question in this 
connection. With respect to your assertion that it is definitely de- 
sired by the customers, I want to ask you if it isn't a fact that your 
organization has on numerous occasions refused to grant a miU price 
when it was requested? 

Mr. Adams. I wouldn't say that we had done that on numerous 
occasions, because we have not had numerous requests for mill prices 
in that sense of the word. 

Mr. Davis. You have invariably refused to give such a price when 
it was requested, have you not? 

Mr. Adams. I would say that we have not refused in every case. 
There may be exceptions to every policy, but the policy of the United 
States Steel Corporation is to quote delivered prices. 

Mr. Davis. Only? That is true, is it not? 

Mr. Adams. No, sir. I won't say that because there have been 
exceptions to our policy, in connection with instances where condi- 
tions justified making that exception. 

Mr. Davis. Will you state one of the recent exceptions? 

Mr. Adams. I think one of the recent exceptions was where a cer- 
tain oil company asked for an f. o. b. mill price and we refused to 
devi 'te from our policy and quote on that basis. Our policy, how- 
ever, is to quote delivered prices at the point of consumption where we 
believe competition exists; in other words, we think that that is the 
market for our product. 

' Introduced Infra, p. 14229, as "Exhibit No. 2202"; appears In appendix, p. 14430. 



14162 CONCENTRATION OF ECONOMIC POWER 

Now if you want to go into exceptions at this time, that would 
invoke our pohcy regarding various products and methods of trans- 
portation, but I didn't realize that that was what you 

Mr. Davis (interposing). Well, I will refrain from developing it 
further, with this additional question: Is it not a fact that you have 
expressly refused to grant mill prices to the Federal Government, 
when requested to do so? 

Mr. Adams. Is that the exception you have reference to, in con- 
nection with our negotiations with the Government? Is that it? 
Mr. Davis. Yes; where they have asked for bids or prices. 
Mr. Adams. On the contrary, we do grant mill prices to the Gov- 
ernment, and have in a great many cases. The Government does, 
however, in appraising their bids, appraise them on the basis of the 
delivered" price value, , because the United States Government, like 
all the rest of our customers, is interested in the cost of the material 
delivered at the point where it will be used. 
Acting Chairman King. Proceed, Judge. 

Mr. Wooden. I understand that your general practice and poUcy, 
however, is to quote only in terms of delivered prices? 
Mr. Adams. That is correct. 

Mr. Wooden. Now you spoke of quoting base prices at your points 
of production. Are all your points of production known or recognized 
as basing points? 

Mr. Adams. No, sir; there are a few exceptions. We have a few 
small mills located at what might be called nonbasing points, insofar 
as the operation of the Steel Corporation is concerned, but the total 
tonnage produced at those nonbasing points is very small. 

Mr. Wooden. Now, there are a number of other producing points 
in the industry, are there ijiot, that are not basing points? 

Mr. Adams. There are a few. According to my information, 
there are 52 published basing-point prices in the United States today 
and when you multiply that number by the number of products 
involved, that list of 52 may be expanded up to 125 or 150. 

Mr. Wooden. Isn't it true that for some products, there are a 
comparatively small number of basing points compared with the 
total number of producing points? 

Mr. Adams. Will you repeat that question? 
(The question was read.) 
Mr. F airless. For example? 

Mr. Wooden. Well, how about structural shapes? How many 
basing points are- there for structural shapes and how many producing 
points? 

Mr. Adams. We have no nonbasing points for structural shapes, 
Mr. Wooden. I am not referring only to the Steel Corporation's 
points but to the industry's. 

Mr. Fairless. Well, this is the U. S. Steel Corporation hearing, 
not the steel industry hearing. 

Mr. Wooden. I understood it was to be about the basing-point 
system in the industry. 

Mr. Fairless. As applied to the United States Steel Corporation. 

Mr. Wooden. Well, I don't understand it that 

Mr. Fairless (interposing). We certainly didn't have any idea 
that we were here representing the steel industry at any time or point 
during these hearings. 



CON€.BNTRATION OF ECONOMIC POWEK 14163 

Mr. Wooden. You brought out that you do not represent the steel 
industry in presenting these statements, but the title of your "Exhibit 
No. 1418" is, "The Basing Point Method of Quoting Delivered Prices in 
the Steel Industry." 

Mr. Fairless. That's right. 

Mr. Wooden. And you describe it from the industry standpoint 
as well as the Corporation standpoint. 

Mr. Fairless. Well, from the standpoint that we must brmg out, 
in presenting our evidence, the basing points which we are confronted 
with in transaction of our daily business. 

Mr. Adams. Mr. Wooden, we would be glad to present a map at 
this time, if you care to have us do so, to show the basing points for 
structural shapes and the nonbasing points, so that we can determine 
here and now just how many nonbasing points thsre are on structural 
shapes. 

Mr. Wooden. Well, it is already in evidence before the Committee, 
I think — the number of basing points and the location ojf the basing 
points and the products to which each applies. Now from the 
general knowledge that you have of the system in the industry don't 
you know that as to some products there may be only five or six 
basing points, as to a given product? 

Mr. Adams. Well, we have scattered through the steel industry a 
range of products and a range of mills. There are some products 
that are made by 4 or 5 mills, there are other products that are made 
by 30 mills; so that with that as a premise, you would naturally find 
a varying number of basing points published in this industry. 

Actmg Chairman King. May I ask a question there? Are there 
basing points — and I assume there are, as far as the steel industry as 
a whole is concerned^that are not the basing points of your company? 

Mr. Adams. Yes, sir. 

Acting Chairman King. I am asking this for my own information. 
Judge, I don't want to interfere with you; but for my own informa- 
tion, are you testifying with respect to basing points alone or ex- 
clusively, which are used or employed by your company or by all of' 
the steel industry? 

Mr. Adams. When the question is asked as to the number of non- 
basing-point mills' there are m the country, we answer in terms of 
United States Steel Corporation and we make the statement that 
practically all of our tonnage is sold at producing points where prices 
are published, delivered prices are published, at our points of pro- 
duction. 

Mr. Wooden. And which are basing points. 

Mr. Adams. And which are basing points. 

Acting Chairman King. Are there basing points that other com- 
panies use which j^ou do not recognize or employ in determining 
prices? 

Mr. Adams. We do not publish delivered prices at competitors' 
basing points, but, because of the prices that exist at those points, 
we find it necessary to compete with the mills located at those points, 
and when we have to reduce our delivered price at the point of delivery 
by an amount necessary to meet that competition, then our mill net 
return is reduced and the amount that it is reduced is so-called 
freight absorption. We don't recognize that as a term; it is an evi- 
dence of competition that exists in this industry. 



14164 CJONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. In your pricing you sometimes base your delivered 
price, do you not, upon the basing point prices of competitors? 

Mr. Adams. We try to guess as to what the delivered price will be 
at the point of consumption. If a competitor is quoting in accordance 
with his published price we will try to ascertain what that price is by 
guesswork and beat that particular price at the point of consumption. 
In many cases that means that we have to reduce our price. 

Mr. Wooden. But after you ascertain the competitor's base price 
and that base price happens to control the destination price where 
you happen to be figuring, then you figure on that competitor's base 
price plus the freight from that basing point, do you not? 

Mr. Adams. No, sir; we do not. 

Mr. Wooden. How do you do it? 

Mr. Adams. The price that we quote is a delivered price and that is 
dependent upon the competition that exists at that particular point. 

Mr. Wooden. Well, do you not know what the competitor's base 
price is? 

Mr. Adams. No, sir. 

Mr. Wooden. You have no knowledge of 

Mr. Adams (interposing). What his base price or his delivered 
price is? 

Mr. Wooden. His base price. 

Mr. Adams. We think in terms of delivered price. 

Mr. Wooden. But don't you know what his base price is? 

Mr. Adams. We might know what his published base price is. 

Mr. Wooden. You publish your base prices and competitors 
publish theirs? 

Mr. Adams. We publish base delivered prices at our points of 
production. 

Mr. Wooden. And competitors publish theirs? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Your principal competitors publish theirs? 

Mr. Adams. They notify their trade; I don't know whether they 
publish their prices each quarter on all products. 

Mr. Wooden. There are some territories, are there not, where your 
base prices govern or control the delivered prices? 

Mr. Adams. If our problem is predicated entirely upon the question 
of published base prices and transportation costs involved, we might 
arrive at that assumption, but that presupposes the absence of com- 
petition. 

Mr. Wooden. Yes, but it is a fact that your base price plus the 
freight from your basing point controls the delivered price in some 
territories? 

Mr. Adams. I wouldn't say that it controls the delivered price, no, 
sir, because we have competition in the territories located close to our 
mills just as we have competition in territories located closer to a 
competitor's mill. 

Mr. Wooden. Of course you have competitors coming in there, 
but if they follow the basing point system they come in there at your 
base price plus freight from your basing point, do they not? 

Mr. Adams. They might assume, and the assumption would be 
predicated upon the fact that we publish a base delivered price, that 
the price that we might quote at a point near our mill would be the 
sum total of our published base price plus the actual freight to destina- 



CONCENTRATION OF ECONOMIC POWER 14165 

tion, but they would assume then that we never deviated from our 
published delivered prices, and that, of course, is not the fact in the 
picture, because we do deviate. 

Mr. Wooden. Have you deviated from your base prices as a con- 
sistent policy, or has it been an exception for you to deviate from 
your base prices? 

Mr. Adams. Our policy is to be competitive naturally. Now the 
records will show that our average price over a long period of time, 
with the exception of the code period, was lower than our published 
price. 

Mr. Wooden. Well, that includes the item of freight absorption, 
does it not? 

Mr. Adams. Again I must say that the term "freight absorption" 
is a term that has been coined by the critics of the basing-point method. 
Freight absorption from a steelman's standpoint is a transportation 
cost that is included in our delivered prices. Someone has to pay 
that freight. The railroads publish tariffs and rates of freight. Now 
someone has to pay that freight, so there is no technical absorption of 
freight. If we reduce our delivered price in competing for a piece of 
business at a point closer to a competitor's mill than ours, then we 
have to meet that competition by reducing our mill net return. 

Mr. Wooden. That's what I meant. 

Mr. Adams. And that in itself is an evidence of the competition 
that exists in the steel industry today. 

Mr. Wooden. Do you reduce yom* mill net by the amount neces- 
sary to make your delivered price the same as that of the competitor? 
Is that right? 

Mr. Adams. We do that and in a great many cases reduce it still 
further in order to meet what is known as price absorption, or price 
rediiction, in order to be competitive beyond the competition that 
develops from difference in transportation costs. 

Now I would like to make this point in connection with transporta- 
tion costs. When we build a steel mill and select a location for that 
mill, we have to bring in 4 tons of raw materials for every ton of steel' 
produced. The transportation costs in assembling those raw materi- 
als is a figure that exceeds the average transportation cost on finished 
products, so that transportation cost can be compared with the trans- 
portation cost involved in transporting our finished steel products to 
the points of consumption. 

Mr. Wooden. Do you make it a practice to cut your base prices, 
published prices, without making a public announcement of your 
change? 

Mr. Adams. We find it necessary to reduce our base prices in order 
to meet competition. 

Mr. Wooden. Without publishing the change? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Do you attempt, however, to meet such things at 
times by republishing the base prices to meet the situation that you 
refer to? 

Mr. Adams. Certainly. If competition breaks out at a certain 
point where one instance or two instances or a limited number of 
cases are involved, we will deviate from our published price in order 
to meet that competition. If it becomes general — we make a study 
of the use of that word "general" — then we do reduce our published 
prices. 



14166 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Will you tell me in what respects, if any, the state- 
ment or description that I give now of the basing-point system in 
steel is maccurate or inadequate? 

There are a number, let us assume, of producing points and some 
points not of production known as basing points, and at those points 
so-called base prices apply. There are a number of other producing 
points that are not basing points for the particular products that are 
produced at other basing points. In figuring prices, ordinarily de- 
livered prices are quoted. The delivered price quotation is made up 
of the base price on the particular product, plus the all-rail freight 
ordinarily to destination, and which base price controls the delivered 
price depends upon wliich one makes the lowest delivered price when 
the freight is added. Is that correct so far? 

Mr. Adams. That is generally correct, assuming the absence of com- 
petition from the standpoint of price reductions in the base price. 

Mr. Wooden. Well, I'm not going into that; I am trying to get at 
these physical, mechanical aspects of the system. 

Further, when one basing-point mill goes into a territory where 
another basing-point price plus freight from that basing point to the 
destination makes a lower delivered price, then the first basing-point 
mill meets that delivered price, does it not? 

Mr. Adams. Yes, sir. 

Mr. Wooden. And in doing that it adopts, for the purpose of that 
transaction, the basing-point price of the other mill plus the freight, 
all-rail freight, from that basing point to destination. Is that correct? 

Mr. Adams. We don't look at it from that viewpoint, Mr. Wooden. 
We consider that in a case like that we reduce our mill net return in 
order to meet competition at that point of delivery. 

Mr. Wooden. But in essence your delivered price is made up of the 
other basing-point price plus freight from that other basing point, is 
it not? 

Mr. Adams. I don't see how you can arrive at that conclusion, 
because as I said before, the freight in your delivered price is a trans- 
portation cost wliich has to be assumed by the successful bidder, so 
that the actual freight in that particular case from the standpoint of 
the Corporation is the freight from our producing mill to the point of 
consumption. 

Mr. Wooden. Yes; but that is deducted from the delivered price, 
leaving you a smaller mill net. Isn't that correct? 

Mr. Adams. That is correct. It reduces our mill net return. 

Mr. Wooden. And the delivered price in that instance is the 
equivalent mathematically of the other basing-point mill's base price 
plus freight from it to destination, isn't it? 

Mr. Adams. That is correct, providing our competitor doesn't 
reduce his published base price in order to meet some other competitor. 

Mr. Reynders. Is it correct to say that that constitutes a ceiling at 
that point? 

Mr. Adams. That is correct, Mr. Reynders. 

Acting Chairman King. May I ask a question? Assume that a 
producer finds a market within a radius, say, of 100 miles, and another 
producer who is perhaps four or five hundred miles away but desires 
to ship into that area where the area is small, and the freight rate, of 
course, would be a great deal higher from the four- or five-hundred- 



CONCENTRATION OF ECONOMIC POWER 141j67 

mile producer than that of the producer that was within the small area, 
what would be the basing point there? 

Mr. Adams. Well, there would be two basing points involved as 
such. The man located farthest away from the point of consumption 
would receive a lower mill net return. 

Acting Chairman King. He would have to pay more freight? 

Mr. Adams. His transportation costs would be higher; yes, sir. 

Acting Chairman King. That would necessitate, if he competed 
with the producer witliin the small area, a reduction in his profits if 
profits are made, at least a reduction in the price? 

Mr. Adams. Yes, sir, in the mill net return. 

Mr. Wooden. If each mill should calculate its delivered price in 
terms of a basirg-point price on the particular product from the 
basing point to any particular destination on an all-rail freight basis, 
the result would be that the mills would get into that particular 
destination at an identical delivered price, would it not? 

Mr. Adams. That would depend entirely upon the, relation of their 
published base prices and the relation of the transportation costs. If 
two mills published identical prices and were quoting to a consumer 
who was exactly 200 miles from each mill and neither mill deviated 
from their published base prices, the delivered prices would be 
identical. 

Mr. Wooden. But even if the consumer were 50 miles from one 
mill and 150 miles from the other, the delivered price would be 
identical if the same base price was used by both and both added 
the same freight element from the base price to the destination, would 
it not? 

Mr. Adams. Well, I think you are assuming something, Mr. 
Wooden, that is a little different from our practical analysis in the 
situation that exists. We still think in terms of delivered prices 
because our customers prefer to have us quote the delivered price. 
Now when we reduce our delivered price so as to be competitive in 
that market, the result is a reduction in our mill-net return. We 
don't take a competitor's basing-point price and add his freight. 
That isn't the freight that interests us. The freight that interests us 
is our actual transportation cost, and we analyze our actual trans- 
portation cost just like we analyze our costs of labor and materials 
and other things that go into the build-up of our delivered prices to 
determine whether or not we want to be competitive at the point of 
delivery. We may have a level of prices, in the steel industry such 
that we would not want to compete in that market. 

Mr. Wooden. By beiiig competitive do you mean making your 
delivered price at a given df^stination the same as that of your, com- 
petitors? 

Mr. Adams. We believe that delivered prices are an indication of 
fair competition in a great many cases. 

Mr. Wooden. Can you answer my question? 

(The question was read.) 

Mr. Adams. In our negotiations with our customers, if the customer 
should say to us, "We have a delivered price which is $2 a ton below 
the price that you have quoted, we will place that business with you 
if you reduce your price $2 a ton and be competitive," then we 
normally, under a normal set of conditions, would reduce our price 



14168 CONCENTRATION OP ECONOMIC POWER 

to a price equal to his. We would assume that after we had made 
that reduction we were then competitive from a price standpoint. 
Other things enter into the consideration, quality, service, factors of 
that kind. 

Mr. Wooden. Do you consider that unless your delivered price is 
the same as that of your competitors there is a noncompetitive 
situation there? 

Mr. Adams. That question has to be broken down into two parts. 
If our price is higher we are noncompetitive from the price stand- 
point; if our price is 

Mr. Wooden (interposing). The others are noncompetitive? You 
are noncompetitive; yes, that is right. 

Mr. Adams. If our price is higher at the point of delivery than our 
competitors we would be noncompetitive from a price standpoint. 
If we went through a series of negotiations which resulted m our 
reducing our delivered price to a competitor's level we would assume 
that we were competitive. If our reduction exceeded the price 
quoted by competition we would assume, too, that we were highly 
competitive. 

Mr. Wooden. What if you went below the delivered price of your 
competitors? Would that be competitive? 

Mr. Adams. Well, I would say that in that case we would be in a 
very competitive position from a price standpoint. 

Mr. Wooden. In other words, you are in a competitive position 
when your delivered price is the same as that of competitors and also 
competitive when it is below that of competitors. Is that right? 

Mr. Adams. Yes, sir. 

Mr. Wooden. As to other physical aspects of the basing point 
system, does it not result that frequently when you are selling in the 
territory of another basing point mill and meeting the delivered price 
at destination there, that you are absorbing substantial amounts of 
freight, so-called, meaning by that that you realize a mill-net return 
that is less than your own base price? 

Mr. Adams. We still don't talk or think in terms of absorbing 
freight, because the freight is constant. If we do meet competition 
at a point of delivery and the result is to reduce our mUl-net return, 
then we njight have a mill-net return which is lower than the mill -net 
return reflected by quoting in a nearby territory where that type of 
competition did not exist. 

Mr. Wooden. And that is a very frequent and day-to-day occur- 
rence, isn't it. Your realizing smaller mill-nets when you go into 
territory of other basing point mills? 

Mr. Adams. That is true ; yes, sir. 

Mr. Wooden. And assuming that your delivered price in such a 
case is the same as that of your competitors, the reduction in your, 
null-net return is just the amount needed to meet that delivered price 
of the competitor, isn't it? 

Mr. Adams. Unless our delivered price should be below that of our 
competitor, unless we have the other factor in the pictm-e, which is 
price absorption, price reduction. 

Mr. Wooden. Then it would be reversed, if your base price was 
the controlling base and a competitor came in he would absorb freight 
in the same way and to the same extent, wouldn't he? 

Mr. Adams. Yes, sir. 



dONCENTRATION 01' ECONOMIC POWER 14169 

Mr. Wooden. Then another point. Even as a base mill, figuring 
your delivered price, as you do, in terms of all-rail freight, ordinarily, 
if you make an actual delivery by some cheaper mode of transportation 
such as water or truck, you have there, do you not, an increment in 
your base price represented by the amount of the difference between 
the transportation element that you figure and the transportation 
element that you actually use for the shipment. 

Mr. Adams. You mean that our mill-net return might be increased? 

Mr. WooDEisr. Yes. 

Mr. Adams. That, of course, as you know, Mr. Wooden, breaks 
itself down into several different cases. 

Mr. Wooden. All right. 

Mr. O'CoNNELL. If you use a means of transportation which is less 
expensive than rail transportation and your delivered price is on a 
basis of all-rail freight, I take it then that it would invariably result 
in higher mill-net, would it not? 

Mr. Fairless. If you did. 

Mr. O'CoNNELL. That is what I understood his question to be. 

Mr. Adams. The answer is yes, but again we are talking In terms of 
an occasional exception,, because that question raises the question of 
our over-all policy regarding water shipments, truck shipments, and 
methods of transportation which in some instances might be less than 
the aU-rail freight. It also raises the question as to whether or not we 
charge the rail rate or charge the water rate. 

Mr. Wooden. But assuming you charge the rail rate in the quo- 
tation of the delivered price and ship by a cheaper mode of transpor- 
tation, you thereby increase your miU-net return above the base 
price, do you not? 

Mr. Adams. That is correct, but I want to make the poLcrt in passing 
that the few cases that we have been able to find on our books cover 
a very, very limited amount of tonnage. When we reach the ques- 
tion of water transportation I would like to have the opportunity of 
going into that further so that we can get down to facts. 

Mr. Wooden. I want to go into it further also. 

Referring to section C in "Exhibit No. 1409" ' which is the Cor- 
poration's exhibit of charts, I note that in a number of instances the 
mUl-net yield, for instance for bars at Chicago, exceeded the base 
price by a substantial amount. For instance, take the month of 
June, 1935. Do you have that? 

Mr. Adams. I have it now, Mr. Wooden. - It is Chart C-6 in "Exhibit 
No. 1409." 2 

Mr. Wooden. Does that show that for the month of June, 1935, 
your mill-net on bars at Chicago exceeded your base price by 18 
cents per hundredweight? 

Mr. Adams. We believe that these figures are accurate. The 
period that you have pointed out in the first place is the code period. 
In the second place, these charts are predicated upon a comparison 
between the mill-net yield, which includes extras, and the reported 
base price, so that when the mill-net yield is below the reported 
base price in periods other than duricg the code period, we have 
made reductions in our base prices which exceed the amount of the 
extras involved. 

' Included in Hearings, Part 26, appendix, p. 13743. 
» Ibid, p. 13805. 



14170 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Is it your explanation, then, that that 18 cents per 
hundredweight excess over the base price, or $3.60 a ton excess over 
base price, is the result of extras being- included? 

Mr. Adams. That would be my explanation of it now without 
going into the detailed data which we're used in connection with the 
preparation of the charts. 

Mr. Wooden. Are you sure that none of such excess of mill-net 
over base price could be the result of shipments by water? 

Mr. Adams. When you use the word "none", Mr. Wooden, of 
course that means that there might be a few cents involved, or more 
likely fractions of cents involved, that can be traced to that. 

Mr. Wooden. I should add also by truck or any cheaper mode of 
transportation than all rail. 

Mr. Adams. Yes, sir; my reply would be the same. 

Mr. Wooden. Isn't it possible, also, that such excesses of mill-net 
yield over the base price at a place like Chicago would be the result 
of your use of an arbitrary switching charge there, which would be 
in excess of the actual switfchihg charge? 

Mr. Adams. That is perfectly possible. 

Mr. Wooden. As a matter of fact, you do have these arbitrary 
switching charges at certain basing points, do you not? 

Mr. Adams. We include in our published base delivered price at 
Chicago a charge of 3 cents per hundred pounds. Now you mentioned 
trucks a ninute ago. The actual trucking charge in the Chicago area 
is 12}^ cjnts, and we charge 3 cents, so our mill-net return in that 
particular case would be reduced rather than increased. 

I think that with your permission, inasmuch as we are talking about 
the possibilities that exist in the steel industry of raising mill-net 
returns by methods of transportation wliich cost less than the rail 
rate and charging the rail rate, I would like to say that we made a 
study for the benefit of this Committee of our shipments in 1937, and 
we found that we shipped 12,700,000 tons of finished products by all 
means of transportation. We actually shipped 1,200,000 tons by 
water and charged the water rates. There were 18,000 tons out of a 
total of 12,700,000 tons that we shipped by water and charged the 
rail rate. Now when you break that down you find that the subject 
we are taljdng about amounts to a very, very infinitesimal amount. 

Mr. Wooden. These figures that were put in this morning by Dr. 
deChazeau showed amounts of several dollars per ton representing so- 
called phantom freight and several dollars per ton representing so-called 
freight absorption, did they not? 

Mr. Adams. I don't know what figure he might have mentioned. 
I would like to take any particular figure that you have in mind, any 
particular case, and break it down. 

Mr, Wooden. Well, are there not frequent instances where you do 
reduce your mill-net return by the amount of the difference between 
the actual freight from your shipping point and the freight calculated 
from another basing point to destination? 

Mr. Adams. It is the approach that you follow to that subject that 
draws the distinction. We still quote delivered prices, and whien we 
find it necessary to reduce those delivered prices in order to meet 
competition at point of delivery our mill-net return goes down. 

Mr. Wooden. By the amount necessary to make your price com- 
petitive at destination. 



CONCENTRATION OF ECONOMIC POWER 14171 

Mr. Adams. To make our price competitive at destination ; yes, sir, 

Mr. Wooden. We will come later on to some of those subjects in 
more detail. I just wanted to get the general picture. 

Mr. Fairless, it is the stated opinion of the Corporation in "Exhibit 
No. 1418" ^ that the purpose of the pamphlet is to establish that the 
basing-pouit method is the natural result of basic economic conditions 
in the steel industry and does not result in the absence of price com- 
petition.^ Is that correct substantially? 

Mr. Fairless. That is right. 

Mr. Wooden. And it is also the position taken, I believe, that the 
delivered price competition natm^ally takes" the form of meeting the 
delivered prices of competitors, is that correct? 

Mr. Fairless. That is in the only definition of being competitive 
that I know. There may be others. 

Mr. Wooden. Mr. Gregg, I believe, is the vice president of U. S. 
Steel Corporation? 

Mr. Fairless. He is president of one of our leading subsidiaries, 
the Tennessee Coal, Iron, Railroad Co., and was at one time, vice 
president of the Corporation. 

Mr. Wooden. Mr. Chairman, I have here a printed transcript of 
testimony given by Mr. Gregg in hearings before the Senate Com- 
mittee on Interstate Commerce in 1936, and I should like to read a 
portion of it, if I may? 

Acting Chairman King. Proceed. 

Mr. Wooden. This was in hearings before the Senate Committee 
on Interstate Commerce in March of 1936, on Senate bill 4055. - Mr. 
Gregg was being questioned about the basing-point system. He 
testified : 

That has been the general merchandising plan in the industry. 

The Chairman. So that if the plan is followed, there is no competition so far 
as price is concerned? 

Mr. Gregg. On the contrary, there is competition. To answer your questio^n 
specifically, if that plan were universally followed, there would be no competition 
in so far as one element of competition is concerned, namely, price. 

That is on page 207 of the record that I referred to. 

Now, Mr. Fairless, do you think Mr. Gregg was right in saying 
that if the basing-point system were followed, there would be no 
competition in price? 

Mr. Fairless. It seems to me that it would be perfectly obvious 
that if every steel producing company in this great industry posted 
their prices applying to their particular basing points, and that they 
and all their competition in quoting prices to consumers of steel used 
the nearest basing point and quoted the base price which had been 
published by the producer for that particular basing point, and added 
to that price the extras that applied to the products involved, and 
added to that the transportation cost to the point of consumption, 
obviously there would be a one-price set-up in the steel industry. 

Now, the results that we have previously prodilced, I would think 
and I hope, are suJB&cierit, of course, to prove that that is a theory and 
in practice it does not result, and never has resulted, to the best of 
my knowledge, except at one time, and I think you all know tjie 
period, and that happens to be the period when the realized price of 
bars at Chicago was higher than the announced vprice. 

' Appendix, p. 14619fl. 

' Further testimony on this subject appears infra, p. 14174 et seq. 

124491— 41— pt. 27 4 



14172 CJONCENTRATION OF EC50N0MIC POWER 

Acting Chairman King. Was that under the N. R. A.? 
Mr. Fairless. That is right. 

Mr. Wooden. Well, is it your position, Mr. Fairless, that the 
result of an identical delivered price at a given destination, arrived 
at by using a base price plus extras, plus freight from the base to the 
destination, is price competition or is not? 

Mr. Fairless. The basing-point system of arriving at delivered 
prices is only a method by which the U. S. Steel Corporation, and to 
a great extent the steel industry, merchandises its products. Now, 
so far as the actual operation of the multiple basing-point system is 
concerned, it is purel;^, highly competitive. Why? Because any 
producer can name at his particular basing point any price he chooses, 
and even after naming his price, he still reserves the right to use it or 
not use it as he sees fit. 

It seems to me that for all practical purposes and for the conserva- 
tion of time, which I believe is important to all of us, we will concede, 
if that is the point that you are trying to make, that if base prices as 
announced were followed in every transaction, and that the nearest 
basing point to the consumer governed, and that the rail freight was 
added from that point, and the delivered price arrived at in that 
manner, there wouldn't be any competition in the steel industry. It 
would be a one-price industry, pure and simple. 

Mr. Wooden. Well, then, do you mean to say 

Mr. Fairless (Interposing). What I do mean to say is that prac- 
tically speaking, and this is after spending 25 years in this industry, 
that does not exist except in theory. 

Mr. Wooden. You mean to say 

Mr. Fairless (Interposing). Practically every company is out 
fighting for business and it is attempting to get business on a com- 
petitive basis. 

Mr. ^ Wooden. Do you mean to say that competition in price 
exists when the system is departed from and when the system is 
adhered to there is no competition in price? 

Mr. Fairless. Well, I only know one way to state the things and 
that is in the simple and direct manner. 

Mr. Wooden. That isn't answering my question. 

Mr. Fairless. I know that if my price of bars is $40 and I get 
only $38 for them, I know that my price has been reduced $2. I also 
know, and the exhibits that we have presented here conclusively 
show, not from any theory standpoint, but actual developments of 
our business, that we do not realize, and this industry, I am sure, 
does not realize its announced prices. I say, "Why?" or somebody 
says "Why?" It is due to conapetition. 

Now, when we quote our prices, Mr. Wooden, in the newspapr^rs, 
the trade papers, those are the prices we want to get. We think they 
are fair, and my previous testimony has shown how our prices were 
arrived at. They are not picked out of the air on the basis of how 
much profit we can exact from an unsuspecting public; they are 
based on our costs and a reasonable profit that we think we sifiould 
get for those goods. 

Mr. Wooden. I wanted to ask you- 

Mr. Fairless (Interposing). But when we find — pardon me, but 
when we find that we cannot get those prices, even as fair as they are, 
due to competition, we reduce them. We reduce them how far? It 



CONCENTRATION OF ECONOMIC POWEH 14173 

is dependent upon the conditions involved in the particular trans- 
action. 

Mr. WooDE^r. I take it, Mr. Fairless, that you are in agreement 
with Mr. Gre^g to the effect that if the system is followed, and to the 
extent that it is followed, there is no competition in price ; is that right? 

Mr. Fairless. Well, I thought I had made myself clear. 

Mr. O'CoNNELL. Well, the answer is "Yes," but you say that as a 
practical matter, the system is not followed? 

Mr. Fairless. I have answered it that way. All the things you 
said, Mr. Wooden, if they were true, then your conclusion or the 
conclusion I assume that you are striking for, would be true. 

Mr. O'CoNNELL. May I interrupt? So that as one who looks with 
favor on price competition, I can be thankful that the system which 
the steel industry has set up does not work, is that right? 

Mr. Fairless. Well, although I wasn't present at the time the 
basing-point system was devised, I still think it is a good method for 
merchandising steel products, but I say that the United States Steel 
Corporation would welcome a better method for merchandising its 
products. It would welcome it. 

Now, the fact is that we have this plan. When you stop to con- 
sider that here is an industry, and you are talking about sixty or sixty- 
five millions of tons of steel capacity, how in the world could these 
products — and there is a multipUcity of them — how could they be 
merchandised without a plan? How could the architect who was 
trying to arrive at the possible cost of a business buUdmg, structure 
or bridge, do it if he didn't have any basis for knowing how steel was 
sold? When it comes to the actual transaction, that becomes a 
matter between buyer and seller, and if there ia any man seated at 
these tables who ever bought steel in any ciuantitj, and who isn't 
convinced that there is definite competition in this mdustry, I would 
be very much surprised. Likewise, if there is anyone who doubts that 
there is competition in the industry, I would suggest that he put 
himself in a position to buy, either for himself or someone else, a 
reasonable quantity of steel. 

Mr. O'CoNNELL. Well, my comment was merely that, as it appears 
to be the fact, we can be a little bit encouraged about price com- 
petition because the basing-point system doesn't work to perfection. 

Mr. Wooden. Mr. Fairless, as a matter of fact^ haven't there been 
periods of time when the basing-point system did work exactly to 
bring about the identical deUvered prices which it is normally cal- 
culated to produce? 

Mr. Fairless. It didn't work, you say? 

Mr. Wooden. Haven't there been periods when it did work? 

Mr. Fairless. Did work? 

Mr. Wooden. Yes. 

Mr. Fairless. It worked beautifully imder the N. R. A. Steel Code. 

Mr. Wooden. And as a matter of fact, the basiiig-point system was 
incorporated in the N. R. A. code, was it not? 

Mr. Fairless. The Code Authority accepted it, yes; definitely. 

Mr. Ballinger. Mr. Fairless, if the system does not work and the 
system of pricing in steel is therefore competitive, because ot depar- 
tures from the system, would you be willing to endorse legislation to 
outlaw the basing-point system? 

Mr. Fairless. Well, why? 



14174 CONCENTRATION OP ECONOMIC POWER 

Mr. Ballinger. Well, it doesn't work; why have it around? 
Some day you might make it work. 

Mr. Fairless. It does work. The basing-point system was never 
designed to prevent competition, Mr. Ballinger. It was not so 
designed and it isn't so used today. 

Mr. Wooden. It was designed, however, to 

Mr. Fairless. It is only a method of merchandising our products. 

Mr. Wooden. It was designed, was it not, Mr. Fairless, ^according 
to your own testimony, to produce an identical delivered price when 
followed? 

Mr. Fairless. My testimony? 

Mr. Wooden. Yes. In other words, I thought you agreed with 
Mr. Gregg that if it were followed you would not have any competition 
in price. 

Mr. Fairless. On the one hand you are asking me how the system 
is designed ; then you go from that to how the system works. I would 
like to answer either question. 

Mr. Wooden. I don't mean originally intended by design, but I 
mean calculated to produce certain results. 

Mr. Fairless. Well, it is definitely my opinion that the multiple 
basing point system for the distribution of steel products was not 
designed to prevent or preclude competition. 

Acting Chairman King. Sort of a merchandising formula? 

Mr. Fairless. That's right. 

Mr. Wooden. And yet it produced the effect, as Mr. Gregg said, 
that if it works, in other words an identical delivered ptice and no 
competition in price. 

Mr. Fairless. I should like to clear up Mr. Gregg's testimony — 
which, of course, I am not responsible for. 

Acting Chairman King. He was testifying under the N. R. A., was 
he not? 

Mr. Wooden. No ; subsequent to that. 

Mr. Fairless. As I read from'the record, Mr. Gregg said substan- 
tially what I have just said. 

Mr. Wooden. That's what I thought. As a matter of fact, do you 
not, in your pamphlet, "Exhibit No. 1418,"' quote from the N. R. A. 
report with approval, to. the effect, that '"The outstanding characteris- 
tic of the basing point system is the fact that it puts rival producers on 
a footing of price equality with each other in all the consuming points 
over a wide area"? 

Mr. Fairless. That's a true statement, but it still doesn't preclude 
competition in those areas. 

Mr. Wooden. Are you intending to defend the system itself by show 
ing that there are departures from it? 

Mr. Fairless. Well, I didn't know that I was here particularly to 
defend the system at all. I am here to answer any questions about it. 
My greatest defense for the multiple basing-point system in this in- 
dustry would be that I have yet to see any substitute for it that is 
equal to it, let alone better. 

Mr. Wooden. As a means of doing what? 

Mr. Fairless. Of transacting our business in an orderly manner. 

Acting Chairman King. What are the widest fluctuations in prices 
of steel during the past 10 or 15 years? 

• Appendix, p. 14619ff. 



CONCENTRATION OF ECONOMIC POWER 14175 

Mr. Fairless. You mean as between the prices of a certain 
product? 

Acting Chairman King. Yes. Have there been very wide 
fluctuations? 

Mr. Fairless. Oh, yes. In a 10-year period? Yes. 
Acting Chairman King. Have there been fluctuations within a year 
among the producers of steel? 

Mr. Fairless. There have been some, but substantially the prices 
that are in effect today, Senator, are those announced June 24, 1938, 
substantially. So far as announced prices are concerned, that is. 
Now the realized prices fluctuate. Obviously with the industry 
operating at almost capacity, as it did in the fourth quarter of 1939, 
the more nearly were those announced prices realized insofar as the 
United States Steel Corporation was concerned, but even in that 
period our records will show that the announced prices were not 
realized. 

Mr. Wooden. Mr. Fairless, in that connection, even when the 
basing point system is working 100 percent and producing an identical 
delivered price, your mill net realizations fluctuate even then, do 
they not? 

Mr. Fairless. The basing point system works 100 percent every 
day, 24 hours of every day, but it doesn't result in uniform prices, 
because that isn't the reason that the system is in vogue or practice. 

Mr. Wooden. Would you say that the present purposes of it are 
different from what they were when it was originated? 

Mr. Fairless. I haven^t any idea when it was originated — I 
wasn't in the picture at that time. But I do know, from 25 years 
experience, how it works. 

Acting Chairman King. During your connection with the steel 
industry, have the prices in various parts of the United States at the 
same time, same day, same month, same week, same year, varied 
with respect to steel commodities? 

Mr. Fairless. Yes. 

Acting Chairman King. So that the costs for instance in San Fran- 
cisco for steel would be different fr6m the costs for steel, say, in 
Pittsburgh or New York? 

Mr. Fairless. Yes. 

Mr. Wooden. The delivered price, of course, varies according to 
the delivery charge, does it not? 

Mr. Fairless. We announce 

Mr. Wooden (interposing). You have different delivered prices at 
an innumerable number of destinations? 

Mr. Fairless. Certainly. 

Mr. Wooden. Depending on differences in freight? 

Mr. Fairless. Well, freight and other considerations. Not en- 
tirely freight. 

Mr. Wooden. But freight alone would produce innumerable 
variations? 

Mr. Fairless. Certainly. 

Acting Chairman King. And the cost of production, aside from the 
freight, would be different, would it not, in the various parts of the 
United States? 

Mr. Fairless. Yes. 



14176 CJONCENTRATION OF BOONOMIO POWER 

Acting Chairman King. A steel mill in Provo, Utah, the cost of 
producing steel there might be very much different from the cost of 
producing steel in some other parts of the United States? 

Mr. Fairless. Certainly. 

Acting Chairman King. And, of course, the transportation costs 
from Provo to San Francisco or Sacramento or Los Angeles, where 
probably the greater part of the steel is consumed, would be greater 
than the transportation costs from Pittsburgh to some of the consum- 
ing areas nearby Pittsburgh? 

Mr. Fairless. Steel could be — can be produced in Provo, Utah. 
It is one of the lowest-cost spots in the United States. 

Acting Chairman King. That's because of the proximity of coal? 

Mr. Fairless. And ore. 

Acting 'Chairman Kjng. And what? 

Mr. Fairless. And iron ore. 

Acting Chairman King. The iron ore being a little more than 150 
miles away, with fine railroad communications? 

Mr. Fairless. That's right. 

Acting Chairman King. So that that's an element then? 

Mr. Fairless. That's right. 

Acting Chairman King. The cost of ore, then, is quite an impor- 
tant factor in determining the price of the finished product? 

Mr. Fairless. Definitely. 

Mr. Davis. Mr. Fairless, what percentage of total tonnage is sold 
at quoted prices and what percentage at lower than quoted prices? 

Mr. Fairless. What percentage? 

Mr. Davis. Yes, sir. 

Mr. Fairless. Do you have some particular period in mind? 

Mr. Davis. You can take any period you want to. 

Mr. Fairless. I wouldn't have that information available. Do 
you have it, Mr. Adams? 

Mr. Adams. We don't have those statistics available. It depends 
upon your approach to the subject. Mr. Wooden raised the question 
as to whether there is competition under the basing-point system, if 
it works perfectly. From a sales standpoint I would like to say that 
under Mr. Wooden's definition of the perfect functioning of the 
basing-point method of calculating delivered prices, that we have 
competition. 

Mr. Wooden. You mean that the delivered price is different even 
under the perfect functioning of the basing-point system? 

Mr. Adams. I would say that even if we had identical delivered 
prices at the point of consumption, that there is still competition in 
the picture by the amount that we would have to' reduce our mill-net 
return in order to compete in a territory farther removed from our 
market. 

Mr. Wooden. But so far as the buyers are concerned at that 
particular point, the delivered price is the same? 

Mr. Adams. It might be, but by the same token, under any method 
of calculating prices you are apt to have identical prices, or uniform 
prices at the point of consumption, because in your negotiations with 
a buyer, if he tells you that a competitor has reduced his price and 
gives you an opportunity to meet that price and take the business, 
then you have two identical prices. 



CONCENTRATION OF ECONOMIC POWER 14177 

Mr. Davis. There is no competition in price so far as the buyer is 
concerned, is there, in your industry? 

Mr. Adams. Our industry is full of competition from the buyer's 
standpoint. We^are constantly calling upon the larger buyers of steel 
and we are constantly being told that our prices are not low enough. 
We have breaks in the market, had one a short time ago where the 
price went off $8 a ton. 

Mr. Wooden. A good deal depends upon the general conditions of 

demand and supply in that connection, I suppose, whether business is 

active and plenty of it, whether the prices are well maintained or not? 

Mr. Adams. Well, of course the elements of supply and demand 

enter into any competitive situation from a practical standpoint. 

Mr. Wooden. Have there not been instances even during such per- 
iods as you refer to, where the basing point system wasn't working and 
prices were being cut, where some buyers continued to pay the full 
basing point price plus freight from the basing point? 

Mr. Fairless. Mr. Chairman, can I answer that question? 
Acting Chairman King. Yes. 

Mr. Fairless. I would like most emphatically, if I have that ability, 
once and for all to state our position insofar as the basing point system 
is concerned. Our contention is that breaks in prices are not a break- 
down to any degree of the so-called basing point system. We contend 
that the basing point system was in effect and worked just as well 
when sheets and other flat rglled products sold for $8 a ton under the 
market as it did when they sold definitely on the market. There is 
no relationship, and constantly to be asking us the question about the 
break-down of the basing point system we don't believe is a fair presen- 
tation. Everybody, of course, is entitled to his own opinion of the 
basing point system, but we contend that the basing point system is 
only a vehicle which we use to merchandise our products. We have 
told you we use it because we know of no better method to merchan- 
dise our products. There might be, and if out of these hearings could 
come that, we would be the first to welcome it. 

Now so far as competition is concerned, the fact that you have bas- 
ing points and that prices are quoted as applying to those basing points 
for various products, and the fact that those prices are not maintained 
or are maintained or are reduced, so many dollars one time and more 
or less dollars at another time, are in no way in relationship to the 
basing point system. That is our contention, and I would like to make 
that clear if I can, 

Mr. Wooden. But is it not true, Mr. Fairless, that if price reduc- 
tions are made that are made, say, secretly, that they constitute a 
reduction from the delivered price that would be effective if the basing 
point system were followed? 

Mr. Fairless. Well, in the first place there are no secrets in the 
steel industry. 

Mr. Wooden. No secret price cutting? 

Mr. Fairless. No, no secrets. When we talk about the prices of 
flat rolled products being reduced $6 or $8, whatever they were last 
year, that apphes to the United States of America. 

Mr. Ballinger. In other words, there is no chance for somebody 
to slip one over on you in the steel industry? There is no chance for 
someone to slip one over and cut the price without your knowing it? 



14178 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. I didn't say that. I didn't say that. Of course a 
seller of steel could go to you today, if you happen to be in the market 
to buy steel, and reduce his price. I don't claim that I would know 
anything about that. But I do claim that if prices are being reduced 
on that particular product or products which might be involved for 
any period of time, I think our people in the field, I think they would 
know about it. That's what they are engaged for. 

Mr. Ballinger. Well, at any point where you are selling steel there 
do the prices differ? I mean have they differed, one producer got a 
lower price than another one? 

Mr. Fairless. Certainly. 

Mr. Ballinger. Many times? 

Mr. Fairless. Yes; daily. 

Mr. Ballinger. Tl^ey aren't the same price at destination generally? 

Mr. Fairless. Generally? WTiat is generally? 

Mr. Ballinger. I mean all producers are offering at the same price 
at destination, practically, in general. 

Mr. Fairless. I don't like to answer that question generally. I 
don't know; I couldn't answer that. I wouldn't know. Obviously, 
if markets are not reasonably maintained, then we have new markets, 
don't we? 

Mr. Wooden. Is it your position, Mr. Fairless, that unless the 
delivered prices at given destinations are the same from various com- 
petitors, that there is not a competitive situation? 

Mr. Fairless. Well — repeat the question, please. 

(The question was read by the stenographer.) 

Mr. Fairless. Well, I really do not know what you mean by that 
question. What is your poijit? 

Mr. Wooden. It's simply whether prices at destination have to be 
the same in order to be competitive from your point of view. 

Mr. Fairless. No; they don't have to be the same. I have jio 
control over whether they are the same. 

Mr. Wooden. Are they competitive at given destinations when they 
are not the same? 

Mr. Fairless. What is your question? 

Mr. Wooden. Are they competitive at given destinations when the 
prices are not the same? 

Mr. Fairless. Why certainly. 

Mr. Wooden. And competitive also when they are the same? 

Mr. Fairless. They could be. 

Mr. Wooden. .Yes; all right. Haven't you advanced the theory 
in your pamphlets that they should be the same at destination in 
order to be competitive? 

Mr. Fairless. I don't think so. 

Mr. Wooden. You quoted from N. R. A. to the effect that that was 
the outstanding characteristic of the basing point system, didn't you? 

Mr. Fairless. Generally speaking, the general policy was that if 
we are selling a group of steel consumers an identical product that we 
should charge each of those consumers the same delivered price in that 
particular locality. As a matter of fact, the law also says we should. 

Mr. Wooden. Do you mean by the same delivered price the same 
as the delivered price of competitors? 

Mr. Fairless. Well, it may or may not be. I tried to make that 
point. I will be very glad to repeat it if you choose. 



CONCENTRATION OF ECONOMIC POWER 14179 

Mr. Wooden. That is all right. 

Acting Chairman King. If you fix the price at which you would 
sell, for instance, in Pennsylvania, in Philadelphia, that wouldn't 
preclude a competitor from selling at a higher or lower price. 

Mr. Fairless. No, sir; not at all. However, at no point and at 
no time do we ever attempt to get higher than our announced price. 

Mr. Davis. Mr. Fairless, was there any variation in delivered 
prices quoted by the different steel companies under the operation of 
the N. R. A. code? 

Mr. Fairless. I couldn't answer that. I couldn't answer that. 
Obviously I couldn't myself know. 

Mr. Davis. Can you answer that, Mr. Adams? 

Mr. Adams. No, I can't answer that. I wasn't in the steel in- 
dustry then. 

Mr. Wooden. Mr. Fairless, in that connection I believe you 
testified here in November, referring to the Birmingham differential, 
that it was a rare instance when you got the full Birmingham differ- 
ential in a period of the last 7 years. Do you recall that? 

Mr. Fairless. I don't think I made that statement in my testi- 
mony. Seven years? I said that generally speaking the differential 
had been eliminated prior to the abolition by our announcement of 
June 24, 1938. 

Mr. Wooden. If you did make such a statement did you intend to 
include in it the N. R. A. Code period? 

Mr. Fairless. No, I did not. 

Mr. Wooden. Seven years would have included it. 

Mr. Fairless. Did I make a definite 7-year statement? 

Mr. Wooden. I so read it myself. 

Mr. Fairless. Myself? 

Mr.. Wooden. Yes, that's the way I read it. I believe you said 
the basing point system was incorporated in the N. R. A. Code. 
That code, did it not, specified the basing points for various products 
and provided that the delivered prices should be fixed according to 
basing points plus all rail freight to destination. 

Mr. Fairless. Correct. 

Mr. Wooden. And were you chairman of the Committee on 
Commercial Matters that functioned during that period? 

Mr. Fairless. Part of tbe time. 

Mr. Wooden. Did that committee have to do with implementing 
the code by promulgating or preparing a series of rules and regulations 
or recommending such a series of rules and regulations? 

Mr. Fairless. Well, that committee which was appointed by the 
Code Authority and was responsible to the Code Authority dealt 
with all commercial matters pertaining to the steel industry during 
the duration of the steel code. 

Mr. Wooden. Didn't that Code Authority you refer to cpnsist of 
the Board of Directors of the American Iron and Steel Institute? 

Mr. Fairless. And others. 

Mr. Wooden. What others? 

Mr. Fairless. Government officials. 

Mr. Wooden. Didn't the code itself provide that the Institute 
Board of Directors should be the Code Authority? 

Mr. Fairless. Yes, but the Board of Directors was augmented in 
order to provide a place for certain Government representation. 



14180 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. When the code passed out under the Supreme 
Court decision in the Schechter case in May 1935, the industry, did it 
not, passed a resolution to continue the commercial provisions of the 
code in effect as well as some other provisions? 

Mr. Fairless. I can't answer that. I was not a director of the 
institute at that time. 

Mr. Wooden. Were you not in a position in the industry to know 
whether or not the industry did adopt such a formal resolution to con- 
tinue the code after June 1935? 

Mr. Fairless. Continue the code? 

Mr. Wooden. Continue the Standards of Fair Competition which 
are described in the Steel Code? 

Mr. Fairless. As I say, I was not a director of the institute and 
I am not familiar with what happened at that time. I became a 
director in 1937. 

Mr. Wooden. Are you without knowledge on that subject? 

Mr. Fairless. Well, I'm certainly not without practical knowledge. 
I know, and the performance of the industry will certainly show, that 
immediately upon the abolition of the Steel Code and the N. I. R. A. 
that steel prices became highly competitive almost overnight, and the 
results as shown in our charts will prove iust that assertion. 

Mr. Wooden. Do you recall working as chairman of the Committee 
on Commercial Matters on various resolutions or regulations to sup- 
plement and implement and make more effective the working of the 
code? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. One of those resolutions related, did it not, to the 
charging of certain arbitrary switching charges at certain basing 
points? 

Mr. Fairless. Arbitrary? 

Mr. Wooden. Yes. 

Mr. Fairless. Well, I recall, that a switching charge of 50 cents 
was established for Pittsburgh and 60 cents for CI '^ago. 

Mr. Wooden. Those arbitrary switching charges "^^e promulgated 
in the form of a commercial resolution, were they not.'' 

Mr. Fairless. I believe they were. 

Mr. Wooden. And was that a matter that you handled as chairman 
of this Committee on Commercial Matters? 

Mr. Fairless. I don't remember whether that came up at the 
time I was chairman or not. I was a member of the committee and 
later, in the latter days of the code, became its chairman. 

Mr. Wooden. Those arbitrary switching charges that were included 
in that resolution have continued in effect, have they not? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. You state that, I believe, in your Exhibit 1418, 
page 64, footnote. You state that that practice has generally been 
followed dince the code. 

Mr. Fairless. That is right. 

Mr. Wooden. That, I take it, means that not only you but ypur 
competitors follow that practice? 

Mr. Fairless. Generally speaking. 

Mr. Wooden. And those arbitrary switching charges are in some 
cases more and in some cases less than the actual switching charges, 
are they not? 



C50NCENTRATI0N OF ECONOMIC POWER 14181 

Mr. Fairless. In most cases less. 

Mr, Wooden, Yes; but they run both ways to some extent. 

Mr. Fairless. In most cases the actual switching charge is higher 
than the rate charged. 

Mr, Wooden. But there are some cases where it is lower. 

Mr. Fairless. There might be, undoubtedly are. 

Mr. Wooden. What is the purpose of having a switching charge 
added to the base price which is not the actual switching charge? 

Mr. Fairless, In our case it is the desire to treat all of our cus- 
tomers in a given territory on the same basis and reflect in their 
deUvered prices a constant charge for transportation within the basing 
zone. Many times those customers are competing one against the 
other. 

Mr. Wooden. And isn't it true that the producers at some of these 
basing points where the arbitrary switching charges apply have vary- 
ing actual switching charges? 

Mr. Fairless. Have actual? 

Mr. Wooden. Yes. 

Mr. Fairless. I would assume so. 

Mr. Wooden, And does not this arbitrary switching charge unify 
the switching charge which the various producers in' that area may use, 
rather than using their own actual and varying switching charge? 

Mr. Fairless. Well, there isn't any mystery about ii, it is simply a 
standard charge that is made for switching in these big switching 
areas as represented in Chicago and Pittsburgh. It was designed to be 
fair to the consumers of steel in those particular territories. It was 
designed so that on the average it would actually cost the steel pro- 
ducers in their territories more than they received for transportation 
in order to make it 100-percent fair. 

Mr. Reynders. If there were different switching charges in that 
area, wouldn't automatically all the producers assume the low one, 
whatever it might be? There would be uniformity as a matter of 
automatic conditions. 

Mr. Fairless. That is right. 

Mr. Wooden. But under this rule or regulation or resolution 
whatever one calls it, the switching charge was standardized on this 
arbitrarv basis, was it not? 

Mr. Fairless. I have answered that, yes. 

Mr. Wooden. Do you recall the resolution which set up that 
arbitrary switching charge and the reasons given in the preamble to it? 

Mr, Fairless. No, I can't remember that. 

Mr. Wooden. It is Resolution No. 20. Do you recall that it was 
cited that there was a great diversity in the switching charges at 
various basing points? 

Mr. Fairless. I don't recall. I am wilhng to accept it if you have 
the resolution; we can save a lot of time, 

Mr. Wooden. Do you recall that the resolution stated that the 
reason for making an arbitrary switching charge was to insure uniform 
practice? 

Mr. Fairless. Well, that would be a very good reason, if given. 
We have all these customers in the same territory, buying the same 
steel, using it for the same purposes in many cases. It certainly would 
be a proper reason for bringing about uniformity in their ^osts. 



14182 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Unless you had a standardized switching charge you 
would not be able to have an identical deHvered price in that switching 
area, would you, with the actual switching charges varying? 

Mr. Fairless. Obviously, obviously. 

Mr. Wooden. There was another of those commercial resolutions 
under the code which I understand your pamphlet to state represents 
the general practice, and that is with reference to the figuring of 
delivered prices when dehvery is taken by truck.' Under the code the 
resolution provided that where the buyer took delivery by truck, in his 
own truck, that he should be allowed 65 percent off of the rail trans- 
portation, did it not? 

Mr. Fairless. He would be quoted a delivered price and then he 
would be credited with 65 percent of the all-rail transportation charge 
involved in the transaction. 

Mr. Wooden. Meaning that he would be quoted a delivered price 
on all-rail delivery and then when he brought his own truck to take 
delivery he would be allowed 65 percent off the all-rail delivery, mean- 
ing that he paid a premium or an excess of 35 percent in order to take 
delivery in his own truck? Is that correct? 

Mr. Fairless. Do you want me now to explain all about this? 

Mr. Wooden. I want you to tell me if that is correct. 

Mr. Fairless. Again there isn't any mystery about handling our 
truck deliveries. 

Mr. Wooden. Is my statement of it correct? 

Mr. Fairless. No; it wasn't correct. The inference behind your 
statement isn't correct. 

Mr. Wooden. Will you tell me what the factual situation is? 

Mr. Fairless. That is what we would like to do. Mr. Adams can 
do that very hurriedly .- 

Mr. Adams. On truck deliveries where we contract with a common 
carrier, the truck company, to deliver our products to destination, 
we charge the all-rail rate of freight. We do that because in our 
analysis of rail rates versus truck rates we find that there is practically 
no difference. There may be a difference of a few cents here or there, 
but generally speaking they are approximately the same. 

If we sell our material on a delivered-price basis, as we always do, 
and a buyer wants to send his truck to our mill to pick up that mate- 
rial, we quote the delivered price predicated upon a transportation 
cost which is equal to the rail rate and we deduct from that 65 percent 
of that rate. Our object in doing that is something that we do not 
attempt to conceal. We are attempting to discourage the use of 
trucks in the transportation of our products for many reasons. In 
the first place, our production facilities are not laid out to haul all 
of our products by truck, small truck loads. We couldn't possibly 
ship 12 to 15 million tons of finished products throughout this coun- 
try each year and use trucks. There is not enough space in our plants 
to handle trucks on that basis, so it is an attempt on our part to dis- 
courage the use of trucks in the handling of steel products. Also 
there is the question of the material being damaged in transit, and 
other items of that character. 

Mr. Wooden. If a buyer takes delivery in his own truck, why 
should you worry about damage in transit? 

' Further testimony on this subject appears infra, p. 14184 et seq. 



CONCENTRATION OF ECONOMIC POWER 14183 

Mr. Adams. Well, we don't worry about that, Mr. Wooden, to 
much of an extent. Our main objective is to discourage the use of 
trucks because our investment in production facilities is an invest- 
ment which does not provide for the use of trucking facilities in and 
out of our plants. Our costs of loading into trucks exceed the cost 
of loading into freight cars, not only the actual cost but the indirect 
cost. We can call upon a railroad to deliver a car to our siding and 
we can be sure that that car will be there at a certain time, but if a 
buyer sends his own truck to our plant, that truck might arrive at 
10 o'clock one morning or at 10 o'clock the next morning, and we have 
to change our loading programs all around to accommodate that 
situation. 

Now, we do it in certain instances as a convenience to our customers, 
but again, going back to our records for the year 1937, we actually 
did ship 313,000 tons of steel by trucks in 1937. 

Mr. Wooden. Charging the 35 percent additional or the 65 percent 
allowance, depending on how you look at it? 

Mr. Adams. We haven't that, statistical data available, Mr. 
Wooden. 

Mr. Wooden. Well, this practice of adding 35 percent or deducting 
65 percent from the all-rail, just according to how you look at it, is a 
practice that originated by rule under the code, is it not? 

Mr. Adams. Well, I can't answer that. 

Mr. Faieless. I can answer, that. It wasn't so much by rule as 
it was by a study that was made by various producing companies of 
the actual differences in cost to the steel companies in handling truck 
shipments versus rail shipments. Also, as I remember, the results of 
the study established the 65 percent figure, and also it established a 
saving within, I believe, 200-mile limits, which the steel industry lelt 
were about the economical limits for trucking. 

Mr. Davis. Are you talking about your own companies or about 
your own companies and competing companies? Are you talking 
about your cost of production? 

Mr. Fairless. At the moment, we are talking about a matter that 
came up in the industry during the application of the Steel Code; 
therefore, it was an industry matter and it was an industry study 
at that time. 

Mr. Adams. The fact is, gentlemen, that there are very few of our 
customers who own their own trucks and want to send those trucks 
to our mills to pick up steel. On the other, hand, we try to discourage 
that practice. 

Mr. Wooden. You would do the same, would you not, in case he 
hired a truck to come and get his own purchase? 

Mr. Adams. That is true, but here again, we are dealing with a 
relatively small portion of our business. The man who owns his 
truck and sends it to our mills to pick up steel is competing against 
his competitor at the point of delivery. One man is charged the all- 
rail freight; the other man who owns his own truck, if he doesn't 
own it, he hires one and sends it in, whichever the case may be, is 
charged the all-rail freight, less 65 percent of that delivered transporta- 
tion cost. In that way, insofar as our own company is concerned, 
there is apparently no discrimination as between customers, because 
we are seUmg our products on a delivered price basis, and we try to 



14184 CONCENTRATION OF ECONOMIC POWER 

avoid discrimination in dealing with our diflFerent customers at the 
point of delivery, who are competing in their markets. 

Mr. Wooden. Didn't the use of trucks by some buyers who were in 
competition with buyers who bought all-rail, tend to unsettle the price 
between those buyers; in other words, didn't the truck buyer own his 
purchase at destination cheaper than the one who bought all-rail? 

Mr. Adams. There might be that tendency, of course, but we have a 
Robinson-Patman bill in this coimtry. 

Mr. Wooden. Isn't the disturbing effect upon that delivered price 
figured on the all-rail basis, one of the reasons that you adopted this 
truck rule — this 35-65 percent? 

Mr. Adams. I would say the first reason was the few requests 
that we have had from our customers who come to our mill and pick 
up material with their own trucks. Now, naturally, it follows that 
we are interested in the delivered price level at the point of delivery. 

Mr. Wooden. And the truck delivery tended to disturb or upset 
that deUvered price, didn't it? 

Mr. Adams. I would say that it might tend to do that. I wouldn't 
say that it does, because when you avoid discrimination at the point 
of consumption by allowing 65 percent of the rail rate, then our deliv- 
ered prices to the two customers involved, one taking his merchandise 
by all-rail and the other taking it by his own truck, are approximately 
the same, taking into consideration the costs involved in the picture. 

Acting Chairman O'Connell. You used the word "discrimina- 
tion." There is an element of discrimination- as against trucks in 
comparison with railroads, isn't that a fact? In other words, in 
order to compete with the railroads in trucking steel, the truck has to 
operate on 35 percent less, is that right? 

Mr. Adams. It would be infinitesimal. It would be very small. 
We tried to avoid — when I used the word "discrimination," I used it in 
connection with two customers competing against each other at point 
of delivery so that we would 

Acting Chairman O'Connell (interposing). I understand. I was 
raising a httle different question, because as I understand it, for a 
truck to compete with a raihoad in trucking steel, it has to be able to 
operate on 35 percent less revenues for any given job; isn't that right? 

Mr. Ad.ams. Well, we would allow the buyer who owns his own 
truck, and there are relatively few of those, 65 percent of the rail rate 
if he used his own truck. 

Acting Chairman O'Connell. And that same 65 percent would be 
all that would be available to him if he were to hire a truck? 

Mr. Adams. That is right. 

Mr. Reynders. And as a practical matter, I will ask, your shipping 
yards are rarely equipped with roads on which a truck could get 
admission under traveling cranes and so forth, and moreover, in loadr 
ing a truck, you would be dealing with 5- to 10- ton quantities, whereas 
with a railroad car, you are deahng with 50- or 100-ton quantities, 
which must affect the situation in your shipping yard very materially, 
I should think. 

Mr. Adams. That is absolutely correct. Our direct and indirect 
costs involved in loading trucks versus cars 

Mr. Reynders (interposing). For instance, dropping a 5- or 10-ton 
load on a truck might injure that truck very seriously, but in the case 
of a railroad car, that wouldn't be the same situation. 



OONCENTRATION OF ECONOMIC POWER 14185 

Mr. Adams. That is correct, Mr. Reynders. 

Mr. Wooden. As a matter of fact, though, Mr. Adams, there are 
some products that are shipped rather heavily by truck, are there not? 

Mr. Adams. Well, I can only answer that by saying 

Mr. Wooden (interposing). Your pamphlets say so. 

Mr. Adams. That in the boom year of 1937, we shipped 313,000 tons 
by truck, out of a total of roughly 12,700,000 tons of finished products. 
Now, that is a relatively small percentage of the total. You might say 
that a large volume of one single product was shipped, when you com- 
pare that volume to any one customer's total requirements, but from 
an over-all picture, the percentage /actor is low. 

Acting Chairman O'Connell. Would this be a convenient place to 
recess? 

Mr. Wooden. Any time would be all right. 

Acting Chairman O'Connell. Several members of the committee 
want to leave, and as Senator King said, we have only one session 
tomorrow. We will try to start it at 10 o'clock and continue until we 
are all in a mood to stop for the week end. 

We will recess now until 10 o'clock tomorrow morning. 

(Whereupon, at 4:30- p. m., a recess was taken until Saturday, 
January 27, 1940, at 10 a. m.) 



INVESTIGATION OF CONCENTKATIONOE ECONOMIC POWER 



SATURDAY, JANUARY 27, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. G. 
The committee met at 10:05 a. m., pursuant to .adjomnment on 
Friday, January 26, 1940, in the Caucus Room, Senate Office Building, 
Mr. Joseph J. O'Connell presiding. 

Present: Mr. O'Connell (acting chairman), Senator King, Mr. 
Davis. 

Present also: John V. W. Reynders, representing the Department of 
Commerce ; WiUis Balhnger, Director of Studies for the Federal Trade 
Commission, and Walter B. Wooden, assistant chief counsel, repre- 
senting the Federal Trade Commission. 

Acting Chairman O'Connell. The committee will be in order. 
Mr. Wooden. 

TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED 
STATES STEEL, CORPORATION, NEW YORK CITY— Resumed 
AND OF AVERY C. ADAMS, VICE PRESIDENT, UNITED 
STATES STEEL CORPORATION OF DELAWARE, PITTSBURGH, 
PA. — Resumed 

the basing point system in the steel industry and deviations 

FROM IT 

Mr. Wooden. Mr. Fairless, you testified yesterday afternoon that 
when one competitor made a lower dehvered price than another com- 
petitor, that that was a competitive situation. Is that correct ? 

Mr. Fairless. It certainly indicates that price competition exists. 

Mr: Wooden. Then why, in your pamphlet ["Exhibit No. 1418"'] 
did you quote from the N. R. A. to the effect that if a competitor with 
lower freight costs gives his customer any benefit "he is giving a lower 
price than competition forces him to give. In other words, he is 
following some sort of a noncompetitive principle rather than a 
competitive one"? 

Mr. Fairless. That isn't my quotation. 

Mr. Wooden. But the Corporation quoted it from the N. R. A. 
report, didn't it? 

Mr. Fairless. If it is in the report I assume we did. 

Mr. Wooden. Well, how do you reconcile your putting forward that 
quotation in your pamphlet with the statement that you have just 
made, that for one competitor to make a lower dehvered price than 
another is a competitive condition? 

> Appendix, pp. 14619 fl. 

14187 

124491—41 — pt. 27 5 



14188 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. Mr. Chairman, I believe that this particular 
quotation is clothed in the language of the economists, and I think I 
have testified before this committee previously that I am not an 
economist and I don't at any time pose as one, and therefore I have no 
comments to make on this particular quotation. 

Mr. Wooden. But that's the statement of the Corporation, isn't 
it, by quotiug the N. R. A. report to that effect? 

Mr. Fairless. I am not questioning the statement if it is in our 
exhibit — and I assume it is. I haven't read it completely. 

Mr. WoornN. Now I also recall that you testified yesterday after- 
noon that you agreed with Mr. Gregg, vice president of your company, 
when he testified that L' the basing point system were fully operative 
there would be no competition in price. Is that correct? 

Mi". Fairless. That is not correct. 

Mr. Wooden. What is your position with reference to that? 

Mr. Fairless. My position in respect to Mr. Gregg's testimony, is 
first, that I am not responsible for his testimony. I haven't it before 
me, and I don't believe it's fair, and I think the committee will agree 
that it is decidedly unfair to take from any witness' testimony just a 
part or a paragraph or a phrase that you care to use in anjr way that 
you choose, and it seems to me that if this committee is going to pass 
any opinion in respect to Mr. Gregg's testimony, it should have Mr. 
Gregg's entire testimony. 

In respect to my agreeing, agreeing to what? 

Mr. Wooden. Here is what I read from the Gregg testimony before 
the Senate Committee on Interstate Commerce in 1936. The chair- 
man asked the question: "So that if the plan is followed," referring 
to the basing pomt system, "there is no competition so far as price is 
concerned." 

"Mr. Gregg. On the contrary there is competition. To answer 
your question specifically, if that plan were universally followed there 
would be no competition insofar as one element of competition is 
concerned, namely, price." 

Mr. Fairless. My contention is that competition exists even 
although two or more companies arrive at the same price or have 
identical bids, providing, of course, that the conclusion is arrived at 
legallj^. It seems to me that when two or more companies are inter- 
ested in getting a piece of business, tonnage, a contract, that has to 
do with steel, you immediately have competitioji. The fact that each 
of those companies has announced prices to the public certainly 
prevents them from charging any price that they might choose to 
charge. 

Mr. Wooden. Didn't you 

Mr. Fairless. Pardon me while I answer. Therefore, the ceiling 
has been established. Now competition begins. 

Competition is a very broad term, gentlemen, as you know. We 
steel people, probably wrongly, but simply because it has been the 
practice, generally refer to competition as meaning price and refer to 
it in that manner. Competition, of course, has many factors other 
than price. To begin with, these various companies are in competi- 
tion when they name their base prices. United vStates Steel Corpora- 
tion can't name as a base price for steel products in Chicago or Pitts- 
burgh or Birmingham any price 

Mr. Wooden. Pardon me- 

Mr. Fairless. I am trying to answer your question. 



(X)N<JENTKATION OF ECONOMIC POWER 14189 

Mr. Wooden. I don't think you have; either you have or you 
haven't. 

Mr. Fairless. Mr. Chairman. 

Mr. Wooden. Mr. Chairman. 

Acting Chairman O'Connell. What was the question? 

Mr. Wooden. I will have to read it; but since we have the inter- 
ruption, I think there ought to be, even in this informal forum, some 
degree of control over what a witness may say and when he may say it. 
I haven't any objection to anything being said at any time, but for 
the witness to start making a long speech in justification of the system 
as a whole rather than answering a particular question seems to me 
out of place. 

Acting Chairman O'Connell. The committee have at all times 
given witnesses a reasonable degree of latitude and I don't believe 
that this witness has intentionally or unintentionally taken advantage 
of the latitude we have given. 

Specifically, the question as I recall it was a rather broad one and I 
think Mr. Fairless under the circumstances was answering it at 
that length. On the other hand, I think Mr. Fairless would agree 
that it is necessary so far as is possible to limit his answers to the 
question asked so that the examiner may have an opportunity to 
develop whatever he wants to develop along the lines he has thereto- 
fore laid out. 

Mr. Fairless. Yes; I agree, Mr. Chairman, except I do not intend 
to submit myself to answer questions in just the way that the examiner 
would like to have them answered. 

Mr. Wooden. I think we had better read the r^uestion and see 
where we are. 

Acting Chairman O'Connell. I think you can repeat it and see 
if he understands the question. 

Mr. Wooden. It was with reference to his testimony yesterday 
afternoon. I asked him if he hadn't testified he agreed with Mr. 
Gregg in saying that if the system were universally followed, that there 
would be no price competition. I think the record will speak for itself 
on that. 

Mr. Fairless. I am trying to answer the question, Mr. Chairman. 

Acting Chairman O'Connell. Maybe I can shorten this a bit. 
My understanding of what you said yesterday was that if the system 
operated to perfection and all companies charged their own base 
prices or the base prices of others where others had established the 
base price, that in that theoretical situation — you call it theoretical 
because you don't believe it works — in that situation there would 
hp as you put it a one-price situation and no price competition. 

Mr. Fairless. No; I didn't say it like that, and I at no time 
meant to say that. To begin with, I have said not once but several 
times during my testimony — and the record speaks for itself-t— that 
the multiple-basing-point system was simply a vehicle designed for 
the purpose of merchandising the various steel products of the steel 
industry. It was never designed, and it certainly isn't used, for the 
purpose of arriving at base prices or delivered prices or anything 
having to do with prices. 

Acting Chairman O'Connell. If I may interrupt, the design isn't 
what I am talkingjabout. I would be perfectly willing to concede 
it might have been designed as a method of merchandising steel, but 



14190 CONCENTRATION OF ECONOMIC POWER 

it is also possible that a thing designed for one purpose may result 
in something else. 

Mr. Fairless. What I did say, Mr. Chairman, was this, that if 
all steel companies — if all steel companies — had basing points and 
posted their base prices, whicl: to begin with is a competitive situation, 
but if they did post their prices and they did quote in respect to 
steel tonnage in a particular territory, or any territory, and they 
used the nearest basing point and applied the base price that had been 
published by the company that governed or controlled that basing 
point, and added all the charges, extras and all the transportation 
charges, obviously there would be a uniform price arrived at, but that 
doesn't mean that that would not still be a competitive price so far 
as competition is concerned, because the basis to begin with, the 
base price, was competitive, bound to be competitive. 

Mr. Reynders. Would you explain that, because it seems to me 
the base price necessarily is the lowest base price that any com- 
petitor submits; that is, automatically when a steel maker publishes 
a price that is lower than has existed, all competitors must come down 
to that level or they may be overloaded, but whatever happens it 
will be a uniform one because it will be the lowest price which any 
competitor is willing to post. 

Mr. Fairless. Eventually ; yes. 

Mr. Reynders. Now that is the one situation. Now with that 
forming a ceiling, then I think the question whether there may result 
uniform prices may legitimately occur on a rising market, that is 
where the demand exceeds the supply, then you are limit;ed by your 
ceiling which had formerly been established automatically on the 
same level. 

Mr. Wooden. Well, the basing-point system, Mr. Fairless, has 
been the system used in the steel industry, has it not, as a method 
of quoting — making — prices? 

Mr. Fairless. The basing-point system has been in vogue in the 
steel industry since — I don't know how long; many years. 

Mr. Wooden. Before your day? 

Mr. Fairless. That is right. 

Mr. Wooden. Now referring to the matter of the base price, 
how does the Corporation determine what base prices it will pubUsh 
and adopt? 

Mr. Fairless. It is all a matter of record in my testimony here, 
my previous testimony. Do you want that all repeated? 

Mr. Wooden. No; I will ask you a little more specifically: To 
what extent does the Corporation figm-e its base prices based on its 
cost of production at various mills? 

Mr. Fairless. To begin with, the United States Steel Corporation 
doesn't announce base prices at all. 

Mr. Wooden. I mean its subsidiaries. 

Mr. Fairless. The base prices are announced by the subsidiary 
companies and those prices are arrived at by very careful study by 
the subsidiary involved. The cost of manufacture of the product or 
products is one factor which is given very careful consideration. 
Competition in respect to the particular product or products involved 
is also given very careful consideration. Now that competition comes 
from within and also from without this industry. The subsidiary 
before announcing prices not only considers the competition that it 



CONCENTRATION OF ECONOMIC POWER 14191 

has from the industry, but it also considers competing products and 
competing terms. 

Another factor that is given very careful consideration is the 
market itself, supply, demand, at the time of the posting of those 
base prices. 

Mr. Wooden. Do the Corporation subsidiaries or their representa- 
tives exchange views with competitors with regard to base prices? 

Mr. Fairless. Exchange views? 

Mr. Wooden. Yes. Consult with competitors with regard to base 
prices. 

Mr. Fairless. Not consult; no. 

Mr. Wooden. Have you informed competitors of what base prices 
you were considering announcing? 

Mr. Fairless. Inform them? 

Mr. Wooden. Yes. 

Mr. Fairless. Officially inform them? 

Mr. Wooden, Any way, unofficially or otherwise. 

Mr. Fairless. Not to my knowledge. 

Mr. Wooden. Mr. Adams, have you known of instances where 
subsidiaries of the United States Steel Corporation have exchanged 
information with representatives of other companies concerning base 
prices? 

Mr. Adams. No, sir. 

Mr. Wooden. Not even during the code period? 

Mr. Adams. I wasn't in the steel industry during the code period. 
I can't speak for that particular time. 

Mr. Wooden. Mr. Adams, do you know a man by the name of 
A. A. Dorenbusch? 

Mr. Adams. I don't recall that man at this particular moment. 

Mr. Wooden. Do you know pretty widely the personnel of the 
sales officials of various companies in the steel industry? 

Mr. Adams. I know quite a few of them; yes. As I stated yester- 
day, I was out of the industry from 1928 to 1936. From July 1, 
1936, to December 1, 1938, I was manager of sheet sales for Carnegie- 
Illinois, a subsidiary of the United St'ates Steel Corporation. 

Mr. Wooden. Have there been any meetings attended by repre- 
sentatives of various steel companies that you are aware of at which 
base prices were discussed? 

Acting Chairman O'Connell. During what period do you refer to? 

Mr. Wooden. Since he has been in the industry; since 1936. 

Mr. Adams. As manager of sales of the sheet division of Carnegie- 
Illinois I would have no authority at all to discuss base prices except 
with my o\vn superior officers. 

Mr. Wooden. Well, have you done so? Have you attended any 
meetings or discussed matters of base price with competitors? 

Mr. Adams. I think, Mr. Wooden, that that subject was covered 
at our hearing here in November, that it was exhausted at that time, 
that question was asked and was answered at that time. 

Mr. Wooden. And the answer is in the negative, is it? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Mr. Fairless, you testified here in November * 
to the effect that you didn't hestitate to exchange opinions with a 
competitor about the base price of sheets, for instance, if some com- 

' Mr. Fairless' testimony in November appears in Hearings, Parts 19 and 20. 



14192 CONCENTRATION OF ECONOMIC POWER 

petitor asked you what the base price was, that you didn't hesitate 
to tell him. 

Mr. Fairless. I gave no such testimony. In my testimony there' 
was no discussion of that. Did you read that in my testimony? 

Mr. Wooden. I did. 

Mr. Fairless. I would like to have it produced. 

Mr. Wooden. We wiU come back to that in a moment. Mr. 
Chairman, I have here a copy of a letter dated August 17, 1935, 
written by one A. A. Dorenbusch, general manager of sales of the 
Newport Rolling Mill Co. and the Andrews Steel Co., which are 
affiliated concerns. The letter was written by Mr. Dorenbusch to 
Mr. A. K. Andrews, temporarily in Ontario, Canada, and I should 
like to offer it for the record at this time. 

Acting Chairman O'Connell. According to the procedure of this 
Committee, Mr. Wooden, it would be necessary that that letter be 
identified by the author or someone in a position to so identify it, 
unless it has already been produced as a public record. Has it been a 
public record somewhere else? 

Mr. Wooden. It hasn't been produced, Mr. Chairman, as a public 
record. I understood that unless a document was challenged as to its 
authenticity that the procedure here would permit the reception of it. 

Acting Chairman O'Connell. That is not true, as I understand it. 
We had the same difficulty during the hearing within the past month, 
and the chairman ruled that until some means was found of identifying 
the exhibits of that nature, we would not permit them in the record. 

Mr. Wooden. I might say in further support of the authenticity of 
the document that it was obtained by a representative of the Depart- 
ment of Justice, from the files of the Andrews Steel Co., and that 
representative interviewed the author of the document about it. 

Acting Chairman O'Connell. I don't want to be too technical, 
but if it is sufficiently important that you want that introduced into 
the record, I think that as a minimum the man from the Department 
of Justice who obtained the letter should be brought and put on the 
stand to identify the letter. I think that is entirely in accordance 
with the ruling Senator O'Mahoney made during the investment 
banking hearing, and I have no desire to deviate from that policy. 

Mr. Wooden. I have here a photograph of a pubUc advertisement 
put out by the Republic Steel Corporation which gives a map showing 
the location of basing points for various products, and a key list 
showing the basing points for each particular product as announced 
up to August 1, 1-938. I assume that there will be no objection from 
the witnesses to accepting that as what it purports to be, and 

Acting Chairman O'Connell (interposing). I "think 

Mr. Fairless (interposing). Mr. Chairman, we have all the infor- 
mation in respect to basing points, where they exist, and so forth, 
and this is, after all, the United States Steel Corporation hearing, 
isn't it? 

Mr. Wooden. No; it is a hearing on basing-point systems. 

Acting Chairman O'Connell. If you want that put in the record 
it will be admitted. 

Mr. Wooden. That's what I wigh to do, your honor. I would like 
to have it admitted as an exhibit. 

(The map referred to was marked "Exhibit No. 2199" and is 
included in the appendix facing p. 14428.) 



CONCENTRATION OF ECONOMIC POWER 14193 

Mr. Wooden. According to this, "Exhibit No. 2199," showing the 
basing points up to August 1, 1938, there were only three basing 
poLQts on pipe, one at Pittsburgh, one at Gary, Ind., and the third at 
Lorain, Ohio. Is that correct? 

Mr. Fairless. Mr. Adams, is that correct? 
Mr. Adams. I think that's correct. 

Mr. Wooden. Now there are important producers of pipe, are there 
not, at other points than those three? 

Mr. Adams. What kind of pipe was referred to? 
Mr. Wooden. It simply says steel pipe. 
Mr. Adams. What was your next question, Mr. Wooden? 
Mr. Wooden. There are other important producers of pipe, are 
there not, besides those located at those three basing points? 

Acting Chairman O'Connell. What are the three basing poijits? 
I wasn't following. 

Mr. Wooden. Pittsburgh, Gary, Ind., and Lorain, Ohio. 
Mr. Fairless. There are very few. 

Mr. Wooden. There is an important producer at SparroWs Point, 
is there not? 

Mr. Fairless. No, sir. 

Mr. Wooden. Don't they have the capacity to produce that? 
Mr. Fairless. It aU depends on what you are talking about. 
Are you talking about seamless pipe, butt-weld pipe, or standard 
pipe? 

Mr. Wooden. What is the character of pipe that is based on Pitts- 
burgh, Gary, and Lorain? 

Mr. Fairless. Largely seamless, which is not made at Sparrows 
Point. 

Mr. Wooden. And what is this Toncan iron pipe, with only one 
basing point? 

Mr. Fairless. Only one company makes it, only one producer. 

Mr. Wooden. This diagram shows that, for instance, on nails, 

staples, wire, and barbed wire, the basing points are at Pittsburgh, 

Chicago, Duluth, Minn., and the other poiuts are all Gulf ports or 

Pacific Coast points. Is that correct? 

Mr. Fajrless. Well, I am assuming that the — that's the only rea- 
son I objected to the introduction of another corporation's data. 
I assume that it is correct. 

Mr. Adams. Well, that isn't correct, because Birmingham is a 
basing point. 

Mr. Davis. Mr. Fairless, you said that you had full information 
about basing points. That being true, why can't you answer the 
question as to whether these are correct or not correct? 

Mr. Fairless. There are a multiplicity of basing points, and I 
didn't say that I had all that information. 

Mr. Davis. That's the point — we want to get the facts with respect 
to the basing points. They are not all identical as to products, of 
course. There is a large number of basing points for a large number of 
products, but they are not all identical, of course, as the general 
public sometimes believes. 

Mr. Fairless. Well, Judge Davis, we have presented to this 
Committee, and it accepted, fuU and complete information in respect 
to all basing points, for all principal products. It is a matter of record 
of this Committee. 



14194 CONCENTRATION OF ECONOMIC POWER 

Mr. Davis. The Committee has received them, yes — not accepted 
necessarily, but received them for the record. 

Mr. Fairless. They have, I think, the information. 

Mr. Davis. Mr. Wooden lias a right to examine. 

Mr. Wooden. Yesterday afternoon you sought to give the impres- 
sion that basing points existed at almost every point of production for 
each product, and I want to show, if you will permit me, that there are 
some important products that the basing points are rather limited in 
number. Isn't that true? 

Mr. Fairless. I ask for examples. 

Mr. Wooden. I have given you examples. What about naUs, 
staples, woven-wire fence, bale ties, and barbed wire? Aren't the 
only basing points recognized in the industry, namely, at Pittsburgh, 
Chicago, Birmingham— no ; not Birmingham. 

Mr. Adams. Yes; Birmingham is. 

Mr. Wooden. It isn't listed here. 

Mr. Fairless. That is an example. 

Mr. Adams. Birmingham is a basing point and so is Worcester, 
so those are two omitted basing points.' 

Mr. Wooden. Since when? 

Acting Chairman O'Connell. What is the date of that, Mr. 
Wooden? 

Mr. Wooden. It is supposed to bring the basing points down to 
date, up to August 1, 1938. The date of publication of the adver- 
tisement I don't think shows on here. 

Acting Chairman O'Connell. Haven't there been some additional 
basing points established since 1938? 

Mr. Fairless. Mr. Chairman, I am not trying to be technical and 
I am at all times trying to be helpful to move along as rapidly as we 
can, but doesn't it seem ridiculous to take an advertisement as the 
basis for developing the basing points of the steel industry and the 
varous products involved when our group here have spent the greater 
part of a year and a half in getting the up-to-date, accurate data and 
information and are here ready to present it to you? 

Mr. Davis. Mr. Fairless, will you please state for the record upon 
your own responsibility all of the basing points for the products men- 
tioned?. 

Mr. Fairless. You mean for me to give them verbally? 

Mr. Davis. Yes. 

Mr. Fairless. No, I can't do that. 

Mr, Davis. Haven't you any of your numerous assistants around 
you who are familiar with that information? 

Mr. Fairless. I can't name 

Mr. Adams (interposing). Judge Davis, yesterday I testified that 
there are 52 basing points. 

Mr. Davis. Yes, but you know full well, Mr. Adams, and we do, 
that those are not 52 basing points for all of the steel products. 

Mr. Adams. I so testified yesterday, and I also testified that if 
those 52 basing points were multiplied by the various products you 
would have considerably over 100 different basing point prices. 

Mr. Davis. Just 

Mr. Adams (interposing). Just a second, please. In the steel 
industry we have 24 different classifications of steel products, that is, 
the United States Steel Corporation makes 24 different lines of steel 



CX>NCENTRATION OF ECONOMIC POWER 14195 

products. Now those lines are broken down again by various items. 
When you say pipe you are speaking about innumerable different types 
of pipe. Now this advertisement was dated August 1, 1938. We 
have found two mistakes in it, Birmingham and Worcester, and since 
that date unquestionably there have been some basing points added. 
We can testify that— — 

Mr. Davis (interposing). When? 

Mr. Adams. — that we have basing point prices at all of our pro- 
duction points with the exception of a few, and we can name those 
exceptions. 

Mr. Davis. When was Birmingham made a basing point, when you 
eliminated that $3 differential? 

Mr. Adams. The differential itself was eliminated June 24, 1938. 

Mr. Davis. And that was when Birmingham was made a basing 
pouit? 

Mr. Adams. On what? 

Mr. Davis. On what you are talking about. You. raised the 
question. 

Mr. Wooden. Nails and barbed wire. When did Birmingham 
become a basing point on nails and barbed wire? 

Mr. Fairless. I believe it became a basing point on those products 
at the time they began to manufacture them. 

Mr. Wooden. When was that? 

Mr. Fairless. I haven't the definite date. 

Mr. Wooden. Has it been since July 1938? 

Mr. Fairless. I haven't the definite date. 

Mr. Wooden. Can't you say whether it has been since then? 

Mr. Fairless. I can't say unless I know. 

Mr. Wooden. What are the basing points on tin plate? Either 
of you. 

Mr. Adams. Pittsburgh and Gary where we produce tin plate. 

Mr. Wooden. What about Granite City? There is one there? 

Mr. Adams. In the spring of 1937 Granite City announced or noti- 
fied their trade that on their products there would be a differential' 
of 10 cents above the published base prices of Carnegie-Illinois at 
Gary and at Pittsburgh. 

Mr. Wooden. Then becoming a basing point? 

Mr. Adams. Sir? 

Mr. Wooden. And by that becoming a basing point? 

Mr. Adams. If you want to look at it in that way, yes; there is a 
differential above the Pittsburgh and Chicago base prices of our com- 
pany. That is an example of a company announcing a lower base 
price. 

Mr. Wooden. Now there are only three basing points on tin plate. 
Is that right? 

Mr. Adams. If you consider Granite City a basing point on tin 
plate 

Mr. Wooden (interposing). And only two otherwise. 

Mr. Adams. The answer is yes. 

Mr. Wooden. There are oth^- points of production of tin plate 
that are not basing points, are there not? 

Mr. Adams. Yes. 

Mr. Wooden. What companies, and where? 



14196 CONCENTRATION OP ECONOMIC POWER 

Mr. Adams. One of our subsidiaries, the Tennessee Coal, Iron & 
Railroad Co., produces tin plate at Birmingham. 

Mr. Wooden. What competitive companies produce tin plate and 
where? 

Mr. Adams. Well, there are a number of companies that produce 
tin plate. We are testifying for our own company. 

Mr. Wooden. You know the industry well enough to know what 
companies produce tin plate besides yourself, don't you? 

Mr. Adams. Well, we know that Bethlehem produces tin plate. 
Also Republic. 

Mr. Wooden. Tell us where? 

Mr. Adams. Bethlehem and Republic. 

Acting Chairman O 'Conn ell. W^here do those two companies 
produce tin plate, do you happen to know? 

Mr. Fairless. Republic at Warren, Ohio, and Bethlehem at 
Sparrows Point. 

Mr. Wooden. Pittsburgh is the only basmg point for tin plate, 
then, in the eastern section of the country, isn't it? 

Mr. Adams. That is correct. 

Mr. Wooden., The prices for tin plate in the eastern part of the 
country are all based on Pittsburgh as a basing point, are they not? 

Mr. Adams. Well, we quote delivered prices. 

Mr. Wooden. Based on Pittsburgh. 

Mr. Adams. We announce a price at Pittsburgh, base delivered 
price at Pittsburgh. 

Mr. Wooden. And the delivered prices in the eastern part of the 
country are the equivalent of Pittsburgh plus freight, all rail freight, 
to destination, are they not? 

Mr. Adams. Our price is composed of our published base delivered 
price plus our transportation cost to destination, providing we don't 
have to deviate from that price level. 

Mr. Wooden. And the Bethlehem Co. producing tin plate at 
Sparrows Point, if and when it follows the basing point system, adds 
the freight from Pittsburgh right to Sparrows Point or Baltimore 
when it is selling in that locality, does it not? 

Mr. Adams. I can't testify for the Bethlehem Steel Co. as to what 
prices they would quote on tin plate. 

Mr. Wooden. Don't you know that the basing point system con- 
templates that it v.'ill do so? 

Mr. Adams. We have testified that the basing point system is a 
vehicle for merchandising our products, that it works every hour of 
the day, and that it does not promote uniform prices. 

Mr. Davis. Mr. Adams, regardless of how you acquire them, as a 
matter of fact does your company not acquire the price quotations 
of your competitors and have them on hand all the time? 

Mr. Adams. We would not be doing our job if we were not famihar 
with the published prices of our competitors.' 

Mr. Davis. Well, in fact you are familiar with them, are you not? 
You know what their published prices are. 

Mr. Adams. Why, certainly. 

Mr. Davis. And don't you know when they deviate from them 
unless they are secret rebates? Don't you keep up with that? 

' Further testimony on this subject appears infra, p. 14197 et seq. 



CONCENTRATION OF ECONOMIC POWER 14197 

Mr. Adams. We don't believe that there are any secret rebates in 
the steel industry, but it is certainly the responsibility of our salesmen 
to keep us informed regarding variations in price in the field, at the 
points of consumption. 

Mr. Davis. In other words, as a matter of fact in actual practice 
you have on hand and keep up with the quoted prices of your com- 
petitors and whether or not they are deviating from those quoted 
prices, as I understand it. 

Mr. Adams. As nearly as we can keep up to date, with reference 
to the prices which our competitors quote at points of delivery, we 
do that, and certainly make every eflPort to do it every day of the week. 

Mr. Wooden. Then you know whether or not Bethlehem Corpo- 
ration, for instance, is maintaining the price in the eastern part of the 
country, don't you? 

Mr. Adams. Within our ability to ascertain that fact we do. 

Mr. Wooden. And don't you find that the price is ordinarily main- 
tained on the basis oi Pittsburgh base price plus freight to destination? 

Mr. Adams. Are you talking tin plate now? 

Mr. Wooden. Yes, yes. 

Mr, Adams. I don't know that one can answer that in terms of 
"ordinarily." We know that the prices of tin plate have fluctuated over 
a period of time. We have alreadv testified as to the^ deviations or 
the fluctuations in the price of tin plate over the last 3 years. 

Mr. Wooden. Didn't you hear Mr. Grace's testimony here before 
this committee that he followed the prices of the Steel Corporation 
subsidiaries on tin plate? 

Mr. Adams. I didn't hear Mr. Grace's testimony. I wasn't in the 
room that particular day. I would say that when the subsidiary 
companies of the United States Steel Coropration puhlish a price that 
that is t'je ceiling price and that the BetJilehem Steel Co. couldn't 
expect to make a serious attempt to get that business at any higher 
price. Now I can't testify as to. the extent that the Bethlehem Steel 
Co. would reduce their prices below our published prices. 

Mr. Wooden. Did you read Mr. Grace's testimony? 

Mr. Fairless. I did, Mr Wooden. 

Mr. Wooden. Didn't he testify that he followed the prices, the base 
prices of the Steel Corporation subsidiaries as announced? 

Mr. Fatrless. We are discussing tin-plate, I believe. Mr. Grace 
made the statement — it so reads in his testimony — that his company 
did vary from their announced prices in respect to tin plate. It is a 
matter of record. 

Mr. Wooden. Didn't he also testify, and didn't the American Can 
Co. officials testify, that the other companies followed the announced 
prices of the Steel Corporation's subsidiaries on tin plate? 

Mr. Fairless. In about 2 minutes I believe I could unfold the 
entire method of selling tin plate. 

Mr. Wooden. I am directing your attention to what you heard and 
what you read. 

Mr. Fairless. If the committee is interested. You have it, of 
course; it is all a matter of record. 

Mr. Wooden. I am asking your recollection of the testimony. 

Mr. Fairless. Well, I am not going to attempt to recall the testi- 
mony. I am here to give testimony and answer any questions you ask 
me if I can. 



14198 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. What is the difference between the way tin plate 
delivered prices are calculated on Pittsburgh for the eastern part of 
the United States and the way various steel products were calculated 
on a Pittsburgh plus basis back some years ago? 

Mr. Fairless. Well, I can't answer that except to tell you and tell 
the committee, rather, how our tin plate sales are handled. We 
produce tin plate at three points, at four points in the United States, 
Pittsburgh, Chicago, Birmingham, and Pittsburg, Calif. Our pro- 
duction at Pittsburg, Calif, is very small. It is largely at the other 
three points.- We have basing points in Chicago and Pittsburgh. 
We have not as yet established a basing point in Birmingham, for this 
reason: We began the operation of that plant just a year ago, there is 
very little tin plate business in the Birmingham district except that 
which is controlled by the two large can companies. The Carnegie- 
Illinois Steel Corporation had contracts and has contracts with both 
of those companies, so in order to get Birmingham under production 
and under way and give it an opportunity to prove its quality and the 
many other things that are involved in the manufacture of this very 
sensitive product, the Carnegie-Illinois Steel Corporation with the 
consent of these two companies with which it had contracts, allocated 
to Birmingham a certain amount of that business for production, and 
that is the only business that has been produced at Birmingham since 
the mill went into operation. Therefore, no basing point has been 
established and our policy in respect to that has not definitely been 
established as yet. 

Mr. Wooden. Is the price of tin plate in Birmingham based on 
Pittsburgh plus freight from Pittsburgh? 

(Senator King assumed the Chair.) 

Mr. Fairless. Well,- 1 don't believe there is any tin plate sold in 
Birmingham, or used in Birmingham. If there is, it is just a very 
few base boxes. 

Mr. Wooden. Is there any tin plate sold or used in the southeastern 
part of the United States? 

Mr. Fairless. Yes. 

Mr. Wooden. Are the prices on tin plate delivered to those places 
in the southeastern part of the country the equivalent of Pittsburgh 
base price plus freight from Pittsburgh? 

Mr. Fairless. All-rail freight? 

Mr. Wooden, Yes. 

Mr. Fairless. No, sir ; not in all cases. 

Mr. Wooden. Are they the equivalent of Pittsburgh base price plus 
rail and water freight in some cases? 

Mr. Fairless. And water in others. 

Mr. Wooden. Yes. Is that right? 

Mr. Fairless. That is right. 

Mr. Wooden. Pittsburgh is the single basing point for tin plate in 
the eastern part of the United States. Isn't that correct? 

Mr. Fairless, It is the only point at which we make tin plate in 
the eastern part of the United States. 

Mr. Wooden. And isn't it the only basing point for the whole 
industry in the eastern part of the United States? 

Mr. Fairless. I can't answer that. 

Mr. Wooden. Can you answer it, Mr, Adams? 



CONCENTRATION OF ECONOMIC POWER 14199 

Mr. Adams. I can only testify for our company. 

Mr. Wooden. And do you mean to say that you don't know whether 
Pittsburgh is the only basing point for the quotation of tin plate in the 
eastern part of the United States? 

Mr. Fairless. Well, I can answer that, Mr. Adams, So far as any 
other public announcement of any basing point for tin plate in the 
eastern United States, Pittsburgh is the only one. But that does not 
mean, Mr. Chairman, that mills producing tin plate do not sell tin 
plate on the basis of their own production point, and we wouldn't 
know, we have no way of knowing that. Most of our tin plate is sold 
to two customers, except for export plate, and sales to those two are 
made on a contractual basis, and the conditions and terms of those 
contracts are known to this Committee. 

Mr. Davis. Didn't you gentlemen say that you received and kept 
up with and observed the price quotations of your competitors and 
did your best to keep up with whether or not they deviated from 
them? Isn't that correct? ^ 

Mr. Fairless. No; it is not correct. 

Mr. Davis. Didn't you say that, Mr, Adams? 

Mr. Adams. I made the statement 

Mr. Davis. Didn't you make that statement in substance? 

Mr. Adams. I made the statement that it is our job to ascertain 
what the published base prices are of our competitors, and further 
than that I said that it was our job to ascertain to what extent the 
delivered prices fluctuated from time to time. That is a measure- 
ment of competition. That's part of a salesman's job. Now when 
Mr. Wooden asks a question as to whether or not there are any other 
base prices in the eastern part of the United States on tin plate, we 
have. to say that we don't know, to make an honest statement covering 
all situations. Now if he asks a question as to whether there are any 
published base prices in the eastern part of the United States other 
than Pittsburgh, we have to reply that we publish a base delivered 
price on tin plate in Pittsburgh. We don't know of any other pub- 
lished base prices on tin plate in the eastern part of the United States, 
but as Mr. Fairless testified, we don't know accurately. We can't 
speak for the Bethlehem Steel Corporation, or any other corporation 
here, right down to the last transaction, as to whether or not they are 
quotiug prices on their own producing points or prices that approxi- 
mate that. 

Mr. Wooden. Well, you know 

Mr. Davis (interposing). Do you have in your files the Bethlehem 
quotations on prices on tin plate? 

Mr. Adams. We wouldn't have in our file the Bethlehem quotations 
on tin plate. No. 

Mr. Fairless Certainly not. 

Mr, Adams. How would we secure such quotations? 

Mr. Davis. Their price list? 

Mr. Fairless. We might wish we had, Judge Davis. 

Mr. Wooden. You know their published prices, do you not? 

Mr. Davis. Their pubhshed prices, if you want to quibble over 
terms. 

Mr. Adams. Judge Davis, we don't want to quibble over terms. 

1 See p. 14196, supra. 



14200 CONCENTRATION OF ECONOMIC POWEB 

Mr. Davis. I think that you are- 



Acting Chairman King (interposing). Let's ask the question and 
proceed. 

Mr. Davis. I will refrain from saying-what I think. 

Acting Chairman King. Proceed. 

Mr. Davis. Haven't you already admitted that you did obtain, 
we'll say, the published price quotations of your competitors? 

Mr. Adams. Certainly, 

Mr. Davis. And kept them and observed them? 

Mr. Fairless. No, we didn't say that. 

Mr. Adams. Let us get this straiglit. We try to secure it. Let us 
say that we do secure a list, if you please, by some method, of all of the 
published prices of our competitors. Now we secure that from trade 
journals if they are published in trade journals. 

Mr. Davis. Are they not always published in trade journals? Do 
not the companies? always publish — are there not published in the trade 
journals in the industry the prices? 

Mr. Adams. If there ar6 3^0 companies manufacturing sheets, I 
would say that their prices are certainly not all published in trade 
journals. There are a few of the larger companies that do publish 
their prices and those publications get in the trade journals, but there 
is a vast distinction between a published base price and a quotation, 
Judge Davis, and when you ask me if we have a record of the Bethle- 
hem Steel Co.'s quotations, I certainly must answer in the negative. 

Mr. Davis Do you ever see any of their quot-ations? 

Mr. Adam j. Certainly we see some of their quotations. 

Mr. Davis. You s6e those and you see their prices pubhshed in the 
trade journals, do you not? 

Mr. Adams. We see their published prices in the trade journals. 

Mr. Davis. Now 

Mr. Adams (interposing). Let me answer your question so that it 
won't be misinterpreted. WTien I say we receive quotations of the 
Bethlehem Steel Co., I have to restrict that to a very, very few cases 
where we become so friendly with the buyer that he says, "Here is 
the quotation that the Bethlehem Steel Corporation has made. " Now 
are you seriously interested in securing our business, and if so, will 
you reduce your price level to a point where you would take that 
business?" — if the quotation is below our quotation. 

Now we have no large list of any quotations of the Bethlehem Steel 
Corporation. We probably secure one every 3 months or something 
like it to that e.xtent, but we do know what their published prices are. 

Mr. Davis. All of that is preliminary to an effort to get an answer 
to Mr. Wooden's question. Now have you ever observed in any of 
these trade journal publication of prices or any of the trade quotations 
that have come to your notice from the public, where they have not 
made a quotation on Pittsburgh plus freight from Pittsburgh to the 
point of delivery in the eastern United States? 

Mr. Fairless. Still talking tin plate. Judge Davis? 

Mr. Davis. Yes. 

Mr. Adams. We have testified for the record that the price 

Mr. Davis (interposing). I would like for you to first answer my 
question and then you can make your explanation. 

Mr. Adams. Well, I can't very well answer it without stating our 
position. We have testified that the prices of tin plate have deviated 



CONCENTRATION OF ECONOMIC POWEK 14201 

or fluctuated over the period of the last few years. There have been 
reductions in the price of tin plate. 

Mr. Wooden. Take some particular quarter when an announced 
price is out. Haven't you found, haven't you made it a business to 
find out whether the delivered prices in the eastern part of the United 
States are the equivalent of Pittsburgh plus freight to destination? 

Mr. Adams' We have made it a part of our job to ascertain, yes, 
what the delivered prices were, 

Mr. Wooden. And aren't the delivered prices of tin plate in the 
eastern United States the equivalent of Pittsburgh base price plus 
freight to destination? 

Mr. Adams. Not in all cases; no, sir. 

Mr. Wooden. In most cases? 

Mr. Fairless. Absolutely not. 

Mr. Adams. No, sir; we can't make a statement to that effect. 

Mr. Wooden. Is it true in some cases? 

Mr. Adams. Why, I assume that it would be true in some cases that 
the price on tin plate in the eastern part of the United States would be 
equal to our published price at Pittsburgh plus our transportation 
costs but by the same, token I want to make the point that that 
covers a few cases or some cases 

Mr. Wooden (interposing). And you don't know what proportion 
of the business it applies to? 

Mr. Adams. No, sir; I do not know what proportion of the business 
it applies to. 

Mr. Davis. Will you prepare and present for the record a detailed 
explanation of any deviations within the past 12 months by your 
company or any other company from the Pittsburgh plus prices in the 
eastern United States?- 

Acting Chairman Ktng. Just for my own information, how would he 
ascertain from other companies 

Mr. Davis (interposing). Any of which he has knowledge, his own 
company or subsidiaries, or any of his competitors of which he has 
knowledge. 

Mr. Wooden. He says he makes a business of finding out what com- 
petitors do. 

Mr. Fairless. Mr. Chairman, we are given credit for knowing 
entirely too much about what goes on in the steel business. 

Mr. Ballinger. You said there are no secrets in the steel business. 

Mr. Fairless. Mr. Chairman, I wish that we did know exactly the 
basis upon which every base box of tin plate was sold in the eastern 
part of the United Stateis 

Mr. Wooden (mterposing). Or any other part of the United 
States. 

Mr. Davis. Mr. Fairless, I said of which you had knowledge. I 
restricted it to your own company and its subsidiaries, and affiliates. 

Mr. Fairless. Well, I can answer 

Mr. Davis (interposing). And of your competitors which has come 
to your knowledge, and the reason I put that in was because Mr. 
Adams suggested that there had been deviations. 

Mr. Fairless. Well, Judge Davis, I would have to answer that 
question for our Corporation in this way. We know exactly how we 
sell our tin plate in the eastern part of the United States — we know 
exactly. We have no definite information in respect to how any other 



14202 CONCENTRATION OF ECONOMIC POWER 

company sells its tin plate. Our salesmen hear that a customer is 
buying tin plate for such and such a price, and it may or may not be 
true. To make a statement as defimte-as you are asking for in respect 
to the prices at which competitors of the-United States Steel Corpora- 
tion sell their products is just asking for something we can't give you. 

Mr. Davis. Will you prepare and file that information with respect 
to your own company and its own subsidiaries? 

Mr. Fairless. File it? File what? 

Acting Chairman King. The statement, as I understand it, of 
deviations 

Mr. Davis (interposing). Showing any deviations within the past 
12 months from the Pittsburgh price 

Mr. Fairless (interposing). Plus all rail freight to destination. 
Is that your question? 

Mr. Davis. All rail or rail and water, transportation to point of 
delivery in the eastern United States. 

Mr. Fairless. Can we furnish that information? 

Mr. Davis. Yes, and will you? I know you can do it. Will you? 

Mr. Fairless. What is the point? Does the committee want this 
information? 

Mr. Reynders. Isn't that giving out a lot of trade information 
in regard to their own company without corresponding information 
from competitors? It seems to me that is going far afield when you 
ask them to give out all their quotations. 

Mr. Davis. These gentlemen are insisting -that there are many 
deviations from the application of the basing point system, and I 
think that this comiiiittee is entitled to know to what extent there 
are exceptions. They are the ones that persist in stating the ex- 
ceptions, and I think the committee has a right to know the^extent 
of those exceptions, and I don't think that prices made upon goods 
that have been sold is any trade secret, and that they are entitled 
to keep it from this committee or the public generally. 

Mr. Fairless. Mr. Chairman, in respect to tin plate the United 
States Steel Corporation sells, exclusive of export, a very high per- 
centage, a very high percentage of its plate to two people, to 
two customers, the American Can Co. and the Continental Can Co. 
Our transactions with both of those companies are governed by 
contracts. All the terms and conditions having to do with price, 
delivery, cash discount and all the features of sale, are parts of those 
contracts, and Government representatives in getting information 
relative to these hearings saw those contracts and read them. 

Now, I don't know what further information we can give. You 
talk about delivery of tin plate by the United States Steel Corporation 
in the eastern part of the United States. It is largely to those two 
customers. 

Mr. Wooden. How many other customers do you have? 
* Mr. Fairless. Very few. 

Mr. Wooden. How many? 

Mr. Fairl^ess. I don't know. 

Mr. Wooden. How many, approximately. As against two, do you 
"have as many as ten others? 

Mr. Fairless. My answer is, I don't know the number of custo- 
mers. The tonnage that we sell to customers other than these two 
is a very, very small percentage of our total. 



CfONCBNTRATION OF ECONOMIC POWEiR 14203 

Mr, Wooden. Do you sell tin plate to jobbers? 

Mr. Fairless. Some. 

Mr. Wooden. You have a good many jobber customers en tin 
plate in the eas*-em part of the United States, don't you? 

Mr. Fairless. No; we do not. 

Mr. Adams. Very few. 

Mr; Wooden. What do you mean by very few. Do you have 100? 

Mr. Adams. No, sir. 

Mr. Wooden. Fifty? 

Mr. Adams. No, sir. 

Mr. Wooden. Twenty? 

Mr. Adams. We might have sold a few boxes of tin plate. 

Mr. Wooden. Do you have many tin plate jobbers in the eastern 
part of the United States? 

Mr. Adams. I don't think so. 

Mr. Wooden. Do you have as ipiany as 10? 

Mr. Adams. I don't think we have 10. 

Mr. Wooden. How many do you have? 

Mr. Adams. I would say offhand perhaps four or five jobbers of 
tin plate in the eastern part of the country. 

Mr. Wooden. Do you deviate from Pittsburgh plus on sales to 
those customers? 

Mr. Adams. We don't sell on Pittsburgh plus, we sell on a delivered 
price basis. 

Mp. Wooden. Which is the equivalent, plus freight to the desti- 
nation, isn't it? 

Mr. Adams. It is our publfehed delivered price 

Mr. Wooden. At Pittsburgh, plus the freight to destination. 

Mr. Adams. Plus our transportation cost to destination, providing 
we don't change that price on account t)f a competitive situation. I 
have testified here that there have been deviations in tin plate, and 
Judge Davis said, "Will you file the list of deviations over a period 
of twelve months?" My testimony was that we have had deviations, 
and then Judge Davis said, "Then to that extent the basing-point 
system hasn't worked. In other words, will you file a record pointing 
out where the basing-point system has not worked?" 

We still contend that the basing-point system is working every 
day, that it is simply a vehicle for merchandising our products, and 
that deviations in price or fluctuations in price, or a raising and lower- 
ing of the price level at the point of delivery, does not constitute a 
change in the basing-point system insofar as whether it works or 
whether it does not. The basing-point system is still a vehicle for 
nierchandising our products, and it is working all the time. 

Mr. Wooden. Even when the delivered prices are not identical 
under it, do you say it is still working? 

Mr. Adams. Certainly. 

Mr. Wooden. Does that mean that the base price is being cut or 
that some element in the delivery price is being cut? 

Mr. Adams. We tried to explain that yesterday. Now, we have 
a chart here which we would be glad to introduce to show how we 
arrive at our delivered prices, to show to what extent we change those 
delivered prices due to the necessity to reduce them to get a piece 
of business in a territory closer to a competing mill than our production 
point. We also have on that chart figures which show that our 

124491 — 41— pt. 27 6 



14204 CONCENTRATION OF ECONOMIC POWER 

reductions in price on certain products exceed the reductions necessary 
to reduce our price to the level of the price quoted. 

Mr. Wooden. You are talking about mill net yields now, are 
you not? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Mill net yields are continually varying, are they not? 

Mr. Adams. I am talking about a reduction in our delivered price. 

Mr. Wooden. Yes. 

Mr. Adams. Brought about by two factors, and those factors in 
eflFect make it necessary for us to reduce our mill net returns. 

Mr. Wooden. You have to reduce your mill net return when you 
go into the territory of another basing point, do you not? You have 
to absorb freight and reduce your mill net return, is that correct? 

Mr. Adams. In a great many cases that is true. 

Mr. Wooden. And you absorb the freight just to the exact amount 
necessary to equalize your delivered price, do you not? 

Mr. Adams. We do not- absorb freight. Freight, as I testified 
yesterday, has to be paid, nobody absorbs it. 

Mr. Wooden. That is a quibble, if I ^^ay say so. I agree that 
freight is not absorbed, but isn't that i\.^ expression that is used in 
the industry? 

Mr. Adams. I think you are so familiar with this subject, Mr. 
Wooden, that you know that nobody absorbs any freight. 

Mr. Wooden. The freight has to be paid and it is paid by the 
purchaser, is it not, and deducted from the face of the invoice? 

Mr. Adams. It depends upon the procedure followed, yts. 

Mr. Wooden. Ordinarily isn't that the case, that freight is not 
prepaid ordinarily by the shipper of plate? 

Mr. Adams. That is correct. 

Acting Chairman King. And is added to the price the customer 
pays? 

iVIr. Adams. Yes; it is a transportation cost like the transportation 
cost involved in assembling our "raw materials, except that this last 
transportation cost exceeds the transportation cost on the finished 
product. 

Mr. Wooden. The customer deducts the freight from the invoice 
and pays the railroad the full freight and remits to you the balance, 
does he not? 

Mr. Adams. The customer pays the freight that is added in the 
transaction. 

Mr. Wooden. He pays it to the railroad. 

Mr. Adams. We are interested — our company is interested — in the 
actual transportation cost. 

Mr. Wooden. The customer pays the freight to the railroad and 
deducts it from the face of the invoice and remits the balance to you. 
That is your mill net, isn't it? 

Mr. Adams. No; our mill net is the — well, you have got adjusted 
freight absorption and unadjusted freight absorption which were 
explained yesterday. 

Mr. Wooden. Your mill net is what you get for your commodity 
after the freight is taken off and paid by the purchaser. 

Mr. Adams. After the freight is taken off and after any reduction 
in price. 

Mr. Fairless. Cash discount allowance. 



CONCEN^'RATION OF ECONOMIC POWER 14205 

Mr. Adams. After cash discount allowance, that is the mill net. 

Mr. Wooden. The mill net represents the actual price received for 
the commodity. 

Mr. Adams. Yes, sir. 

Mr. Fairless. That is correct. 

Mr. Wooden. I still don't understand whether we are going to 
have the statement of deviations from Pittsburgh plus freight to 
destination on tin plate for a 12-month period. 

Acting Chairman King. I understood, Mr. Fairless, that the con- 
tracts with those two large patrons would show the exact transactions 
between them, and you have shown those contracts. Would that 
answer the question or the requirement which was made by Judge 
Davis? Would those contracts show the deviation? 

Mr. Fairless. I have already stated here, Senator, that we do not 
in the distribution of our tin plate charge our — keep in mind that we 
do not make tin plate except in Pittsburgh in the East, so we begin 
with our producing point and our basing point in Pittsburgh. 

Now, one of the questions asked, I believe, was, Do we charge our 
posted price for tin plate plus the all-rail charge, transportation 
charge, to destination in every case? My answer is "No, we do not." 

Mr. Davis. Yes; but I modified it by saying all-rail or rail and 
water. 

Mr. Fairless. Eventually you did. 

Acting Chairman King. Make your statement, and then let him 
answer you. 

Mr. Fairless. Another question was, Do we sell any tin plate on 
our Pittsburgh price plus our all-rail? Certainly. Certainly we do. 
Then the question was asked. What percentage? I would have to go 
through, or cause someone to go through, all our records to develop 
that. In other words, we do not have that information available. 

I will say that a very great percentage of our eastern tin-plate sales 
are sold on the basis of our announced price on tin plate. 

Mr. Wooden. Now then 

Mr. Fairless (interposing). Pardon me. Now another question 
was asked, and much time spent on it: How do your competitors 
sell? I don't know. That is my answer. 

Mr. Wooden. You do know, do you not, Mr. Fairless, that Mr. 
Grace testified,^ and Mr. Pfeltz, of the American Can Co., testified ^ 
that the tin-plate price announced by the Carnegie Steel Co. and the 
Carnegie-Illinois Steel Corp., was followed and adopted by the other 
tin-plate manufacturers, and that the tin-plate contract of the Ameri- 
can Can Co. provided that it would be so accepted; isn't that a fact? 

Mr. Fairless. I don't believe I should be asked to review the 
testimony of other witnesses who appeared before this committee 
last November. As far as I am concerned, my own testimony is a 
matter of record, and I assume theirs is also. 

Mr. Wooden. Don't you know the facts to be as I stated, not what 
the testimony is, but aren't those the facts in the industry? 

Mr. Fairless. I shall relate again, if you want me to repeat, the 
facts pertaining to how the United States Steel Corporation subsidiary 
companies merchandise their tin plate. 

1 Mr. drace's testimony appears in Hearings, Part 19. 
• Mr. Pfeltz' testimony appears in Hearings, Part 20. 



14206 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. I don't want that as far as I am concerned. I do 
want to ask whether what I say is a fact. 

Acting Chairman King. What is the question you ask? If you 
can answer it categorically, do so ; if you can't, say so. 

Mr. Wooden. Whether it isn't a fact that the other producers of 
tin plate competitive with the Corporation subsidiaries for years made 
contracts with the American Can Co. or other can companies pro- 
viding that their price to the can companies would be the price 
announced by the subsidiaries of the United States Steel Corporation. 

Mr. Fairless. My answer to that question is, I do not know. 

Mr. Wooden. Do you know, Mr. Adams? 

Mr. Adams. No. 

Mr. O'Connell. Mr. Wooden, may I interrupt for a moment? 
It seems to me the committee being fairly familiar with the testimony 
of Mr. Grace and some of the other people who testified here in 
November, does recall that Mr. Grace did say that in general his com- 
pany felt that the price announced by Carnegie-Illinois after nego- 
tiating a price with the various can companies was acceptable to his 
company and was what as a matter of general practice they followed. 
I think the committee knows that and I don't see any real reason for 
pressing Mr. Fairless on it. I think it is general custom in the 
industry with which we are familiar. 

Mr. Davis. I wish to observe in that connection that the United 
States Steel Corporation has filed a large volume of material with this 
committee, which they asked to be received by the committee, and 
regardless of what Mr. Grace or any other member of the industry 
may have testified, that Mr. Wooden has a right to question him, the 
president of the largest unit in the steel industry, as to what the facts 
are as he knows them. 

Acting Chairman King. There is no one denying that, and I think 
the witness has answered, but the question as Mr. Wooden just stated 
it was to ask him to state his recollection of the testimony of other 
witnesses. He may or may noi have been here. If Mr. Wooden 
wants to ask any other question/ he may proceed. 

Mr. Wooden. The witness said he didn't know. 

Mr. Davis. He asked him whether he agreed with the correctness 
of the statement. That was simply a basic question which is certainly 
absolutely legitimate, I submit, especially when we are having as much 
difficulty as we are. 

Mr. O'Connell. As I understood Mr. Fairless, his answer was that 
he didn't know. I was merely indicating that the committee does know 
what Mr. Grace testified an4 Mr. Grace did indicate that was the 
custom in the industry. 

Mr. Wooden. I asked Mr. Fairless if that wasn't a fact in the 
industry. 

Mr. O'Connell. And he said he didn't know. 

Mr. Wooden. That is correct. 

Actmg Chairman King. Proceed. 

Mr. Wooden. Mr. Adams, how many basing points in the industry 
are there on rivets? 

Mr. Adams. I can't answer that, Mr. Wooden. I wouldn't have 
the slightest idea. 



CONCENTRATION OF ECONOMIC POWER 14207 

Mr. Wooden. This exhibit, the adverti. 3ment of Repubhc Steel,' 
shows only four. 

Mr. Fairless. It might interest you to know we don't manufacture 
them. 

Mr. Wooden. All right, I am asking about the basing points in the 
industry, not merely what the Steel Corporation manufactures. 

Mr. Adams. I can't answer that because there are too many prod- 
ucts and too many basing points involved to be able to answer that. 
We can supply that information. 

Mr. Wooden. About how many are there on washers? 

Mr. Adams. I couldn't answer that. 

Mr. Wooden. Don't you know tliere are only three basing points 
on washers? 

Mr. Adams. I don't know whether there are three or thirty. 

Mr. Fairless. Mr. Wooden, I believe that you are getting into the 
fabricator's field rather than the steel man's field. We feel that our 
particular function in respect to rivets, bolts and nuts and washers, 
etc., is to sell steel to those who manufacture these products, and that 
is the extent of our participation. Now when you get into the basing 
points of those more or less finished products, you would have to call 
in the industry that manufactures them, and it doesn't happen to be 
the steel industry. 

Mr. Wooden. Are they rolling mill products? 

Mr. Fairless, The raw material is, but not the finished product. 

Mr. Wooden. Not the finished product. Do you have such 
products in mind, Mr. Adams, when you talk about the number of 
basing points there are in the country? 

Mr. Adams. No, sir; I only had in mind the number of basing 
points on products that the United States Steel Corporation manu- 
factures, really tonnage products from that standpoint. 

Mr. Wooden. Now I would like to come back to the matter we 
touched on yesterday afternoon regarding the continuation of the 
resolution adopted during the Code period which related to the 
charging of 35 percent of the all-rail rate on truck deliveries, deUvered 
in the purchaser's own truck. 

Mr. Adams, you testified that you imposed that 35 percent addition 
to the base price on truck deliveries. 

Mr. Adams. Mr. Wooden, I don't believe I testified in that way. 

Mr. Wooden. I know you put it as a 65 percent deduction but 
isn't that equivalent to a 35 percent addition? 

Mr. Adams. I set forth yesterday the fact that the Steel Corpora- 
tion shipped 12,700,000 tons of finished products in 1937, that we 
shipped 313,000 tons by truck, that in those truck shipments we 
contracted with common carriers to deliver certain products and cer- 
tain tonnages to customers, and that in connection with that trans- 
action we added transportation equal to the railroad rate of freight to 
destination from our producing point. 

Now that covered one part of the shipment of 313,000 tons. I 
further testified that there were very few of our customers who owned 
their own trucks and wanted to deliver steel to their plants by their 
trucks. When they did ask us to deliver steel by way of their own 

' "Exhibit No. 2199," appendix, facing p. 14428. 



14208 CONCENTRATION OF ECONOMIC POWER 

trucks, we charged the all-rail rate of freight and allowed 65 percent, 
feeling that the customer was entitled to some credit for the use of his 
own truck in that connection, and that we had two objectives in 
mind in following that policy, the first being that in the market at 
the point of delivery we would have two or maybe a dozen customers in 
the same line of business competing one against the other. One would 
own his own trucks and maybe the balance of a dozen would have 
shipments come in by rail. We felt that it was a fair policy, because 
it placed our customers who were competing against each other in the 
market at the point of delivery on a comparable footing insofar as 
their cost of raw material was concerned. 

The second point I made in connection with our policy was the 
added cost that accrued to our company at our producing points in 
loading oiir steel into trucks when the plants were laid out to load 
steel into railroad cars. 

Now that is our policy, we think it is a fair policy. 

Mr. Wooden. And it is the industrjr policy too, isn't it? 

Mr. Adams. I can't speak for the industry, Mr. Wooden. I can 
only speak for the Steel Corporation, and I say that with all sincerity 
because we believe — I have reason to believe from reports that I 
receive from salesmen — that there have been a good many deviations 
from that policy. 

Mr. Wooden. I refer you to ^age 71 of your pamphlet, "Exhibit 
No. 1418," where you say that the practice generally exists in the in- 
dustry of doing what you say you have been doing here. 

Mr. Adams. I will accept that. 

Mr^ Wooden. You state that in your own pamphlet, that that is 
the general practice. 

Mr. Adams. I will accept that. I would like to have the members 
of the committee remember that, in compiling these pamphlets, there 
were a number of people employed to secure as much information as 
we possibly could secure for the benefit of this committee. Now if 
there are a few statements which are not entirely accurate, there might 
have been an error in the preparation of the pamphlet, and when we 
use the word "general," there are always exceptions. There have 
been exceptions to this policy. To what extent, I don't know. I 
am only setting forth the fact that it is our policy when a customer 
owns his own truck, and sends it to our plant, that we add to our px^o- 
ducing-point price the railroad transportation cost and allow him 65 
percent. 

Acting Chairman King. You have read the paragraph to which 
Mr. Wooden refers, have you not, Mr. Adams? I will read it: 

A practice generally eiists in the steel industry of including in the delivered 
price to a buyer, who accepts delivery by sending his own truck to the mill, the 
rail freight from applicable basing point to destination, and allowing ^^m a 
credit equal to 65% of the rail freight from mill to destination. This might be 
construed to mean that the buyer always pays one-third of the rail freight used in 
calculating the delivered price for the privilege of taking delivery by his own truck. 
This is true, however, only when the mill is at the basing point freightwise nearest 
to the buyers' destination. If the mill is not at any basing point, the effect of this 
practice will be either to increase the amount realized by such mill in excess of the 
base price at the basing point as a result of its geographical location, or merely to 
decrease the freight absorption which would result from a rail shipment. 



CONCENTRATION OF ECONOMIC POWEOR 14209 

And then examples are given. 

Do you wish to modify that statement or do you accept that 
generally? 

Mr. Adams. I think if we accept the word "general" to mean what 
it was meant to imply, that we should accept that; yes, sir. 

Acting Chairman King. You accept that statement, do you, with 
the explanation you have made? 

Mr. Adams. With the proper explanation of the word "general"; 
yes, sir. 

Mr. Fairless. Mr. Chairman, I would like to clarify one phase 
that I don't beheve has been cleared in respect to trucking. Here is a 
customer and here is a steel i)lant. For the product that the cus- 
tomer uses, the governing basing point is this producer's. Here is 
our steel plant, 150 miles away. This customer sends trucks into 
our plant. Keep in mind that we are governed pricewise by this 
basing point here, not by our basing point, but the allowance freight- 
wise is the allowance from our plant to the consumer, not from the 
basing point. 

Mr. Wooden. Mr. Adams, thiii 35-percent addition to the base 
price, which you say is equivalent to 65 percent reduction from the 
all-rail freight, that has no relation to the cost of loading on trucks, 
has it? 

Mr. Adams. I think we are talking about approximately the same 
thing, Mr. Wooden, but we look at it from the standpoint of allowing 
65 percent. Now that is 65 percent of the 

Mr. Wooden (interposing). Didn't the Chairman just get through 
reading the Corporation's own statement that that might be construed 
to mean that the buyer pays one-tliird, but that it wasn't always 
true he did, and giving the qualifications? 

Mr. Adams. Yes; and the example was cited and carried on through 
the rest of the paragraph. 

Mr. Wooden. Now the 35-percent is applied to the all-rail freight, 
isn't it? 

Mr. Adams. The 65 percent. 

Mr. Wooden. All right, the 65 percent is applied to the all-rail 
freight. 

Mr. Adams. Is allowed. 

Mr. Wooden. The cost, or the amount added there, would be 
varying according to the amount of the freight, being in a percentage. 

Mr. Adams. Yes, sir. 

Mr. Wooden. That varying percentage could have no relation to 
the cost, could it, the cost of loading or things of that sort? It would 
be the same all the time? 

Mr. Adams. We think that it strikes an average, although you 
can't say that it is predicated exactly on costs any more than you 
can say that extras are constantly predicated on costs because of 
changing cost conditions. 

Mr. Wooden. You said yesterday afternoon that you used this 
method in part to discourage truck delivery, is that correct? 

Mr. Adams. That is correct; yes, sir. 

Mr. Wooden. Now you state on page 70 of Exhibit No. 1418 that 
manjT^ types of wire products also can be carried economically by 



14210 ^ CONCENTRATION OF ECONOMIC POWER 

truck. 1$id you want to discourage tlie economical delivery of wire 
products by truck? 

Acting Chairman King. Answer it if you can and make any explana- 
tion you care to make. 

Mr. Adams. We don't try to discourage any economic procedure if 
it is found to be economical when all factors are analyzed. 

Mr. Wooden. Do you charge the 35 percent on deliveries by truck 
of wire products? 

Mr. Adams. I think we allow 65 percent of the delivery cost on 
wire products, Mr. Wooden. 

Mr. Wooden. Which can be carried economically by truck accord- 
ing to your own statement on page 70 of your Exhibit No. 1418. 

Mr. Adams. We have already testified that we have shipped 313,000 
tons by truck. Now the assumption is that that would not have 
taken place if it was not an economical procedure. 

Mr. Wooden. Did you two gentlemen, or either of you, ever read 
the report of the Federal Trade Commission to the Senate on the 
operation of the Steel Code with reference .to this truck-delivery 
matter? 

Acting Chairman King. Under the N. R. A.? 

Mr. Wooden. Yes; but the practice is still in effect. 

Acting Chairman King. Did either of you witnesses read that 
report? 

Mr. Fairless. No; I haven't. 

Mr. Adams. I haven't read it. 

Mr. Wooden. That report, on pages 32 to 35, describes this truck 
matter and quotes the written complaints and objections of various 
concerns who were adversely affected by it. The names of the con- 
cerns were given, the addresses were given, quotations from their 
complaiuts to the N. R. A. were given. They included shippers of 
steel, they included purchasers of steel, they included trucking 
companies, all complaining of the adverse effect, the damaging effect 
of that 65 percent or 35 percent matter, on their business. 

(Mr. O'Connell assumed the Chair.) 

Mr. Fairless. Shippers of steel complained? 

Mr. Wooden. Some. 

Mr. Fairless. Why didn't they change it? 

Mr. Wooden. It was under the code. 

Mr. Fairless. Under the code? 

Mr. Wooden. Yes. 

Mr. Fairless. . There aren't any complaints now, are there, Mr. 
Wooden? 

Mr. Wooden. I am just going iuto this matter that there were. 
And I would just like to ask you whether you think, in view of the 
complaint from concerns like that, that the objection or criticism of 
this aspect of the pricing methods of the industry are in the field of 
mere abstract criteria and abstruse theory? 

Mr. Fairless. I should like to attempt to reply to that question, 
broad as it is. It seems to me, Mr. Chairman, that it would be 
impossible to have any merchandising plan in any industry approach- 
ing the size of the steel industry without having some complaints, 
justified and unjustified. 

Now this trucking problem that is up for discussion — I really 
shouldn't have referred to it as a problem because it isn't a problem 



CONCENTRATION OF ECONOMIC POWER 14211 

between the United States Steel Corporation and its customers. It 
is impossible for the United States Steel Corporation to establish a 
principle for handling this particular phase of our business and have 
it apply 100 percent in all cases. On the other hand, it would be 
impossible for us to conduct our business day by day without having 
some general over-all policy that dealt with this important subject. 

Now when we say that we charge the customer the all-rail freight 
from our producing plant to his consuming plant, and then allow 
him 65 percent of the all-rail freight involved, that is our general 
overall poHcy. And in administering that policy we have found 
cases— a very small percentage of the total — where it works an in- 
justice to certain peoi)le, due to their peculiar location, due to the 
peculiarity of their business; and in each and every one of those cases, 
to the best of my laiowledge, we have made adjustments in this over- 
all policy to satisfy the customer completely. 

Now I cite you an outstanding example. In the southwestern part 
of the United States there is a great market for so-called oil-country 
goods. The United States Steel Corporation's leading subsidiary in 
respect to the manufacture of tubular products, the National Tube 
Co., maintains a stock in Houston, Tex. That is our own stock. 
We sell that to our various customers in that district, and in many 
cases — as a matter of fact most cases — they send their trucks, be- 
cause trucking lends itself satisfactorily to that particular part of the 
country, and to that particular business, because an oil well is not 
located adjacent to a railroad siding. In that case we charge those 
customers simply a handling charge for placing the material out of 
our stock into their trucks, so there is a big deviation from this so- 
called principle. 

But m defense of it in respect to this particular part of the country, 
in the East and the Middlewest, this particular policy of ours appUes, 
generally speaking, very satisfactorily, and while we still have some 
cases that cjme up that we have to deal with on a special basis, they 
are very small; and we do deal with them on a special basis. 

Mr. Wooden. Are you now trying to say that it is not the genera 
practice in the industry, as the pamphlet said it was? 

Mr. Fairless. I am perfectly willing to have the reporter read 
what I have just said. 

Mr. Wooden. Well, what you mean by it is what I am getting »l. 

Mr. Fairless. Just what I said. 

EFFECTIVENESS OF COMMERCIAL RESOLUTIONS SINCE N. R. A. 

Mr. Wooden. Well, Mr. Fairless, there are a number of other com- 
mercial resolutions that were adopted during the code period, were 
there not, besides these two that are discussed in your pamphlet? 

Mr. Fairless. I assume so; yes, sir. 

Mr. Wooden. I understand that a number of those resolutions are 
still in effect in the industry. Is that correct? 

Mr. Fairless. I would have to answer "no" to that question, to 
give a "yes" or "no "answer. 

Mr. .Wooden. Do you mean to say that none of the others, none 
except these two that we have been discussing, are still in effect? 

Mr. Fairless. Well, I should hke to deal with specific matters. 
Now what is it you want me to answer? 



14212 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Tell us whether or not any other of the commercial 
resolutions adopted under the code besides these two that we have 
been discussing, such as the allowance on truck deUveries and the 
matter of arbitrary switching charges, whether any others are still in 
effect. 

Mr. Fairless. Mr. Chairman, it seems to me that before I answer 
any question that Has to do with the steel Code under N. I, R. A. days, 
that I should know what we are talking about. I am only asking for 
the particular resolution, if there is such a thing in evidence. What 
is it? 

Mr. WooE»-.N. Well, you said yesterday you did not know that 
there was a resolution of the industry continuing the standards of 
fair competition provided for in the Code. 

Mr. Faipless. I did, sir, and I gave my reasons. I was not a 
Director of the Institute and how would I know? 

Mr. WcoDEN. The trade press gave it out that ninety percent of the 
industry joined in those resolutions, and you weren't aware of it. Is 
that right? 

Mr. Fairless. I have answered the question. 

Mr. Wooden. I have here a letter, dated December 18, 1939, from 
Mr. Irving S. Olds to James R. Brackett, Executive Secretary of the 
Committee, in which he states in reply to a question as to the matter 
of these commercial resolutions- 

I am informed that the officials oi Jnited States Steel Corporation know of no 
amendments or modifications since June 1935 of commercial resolutions and regu- 
lations adopted during the NRA Code period, or similar statements or announce- 
ments of commercial practice made since June 1935. 

Was that matter taken up with either of you gentlemen before that 
answer was made? 

Mr. Olds. Don't you think I had better answer that question, Mr, 
Wooden? I discussed that matter with Mr. Fairless before I wrote 
that letter. 

Mr. Wooden. Yes. Well then, Mr. Fairless, with that to aid you, 
can you tell us whether some of these other commercial resolutions of 
the code period are still in effect? 

Mr. Fairless. There are no resolutions of the code period or any- 
thing having to do with the code officially in effect in the United 
States Steel Corporation. 

Mr. Wooden. Are they in practical effect in the industry? 

Mr. Fairless. Well, Mr. Chairman, I again appeal to you. I 
want to be just as helpful as I can, but I can't answer these questions 
that are put here for the obvious purpose of confusing the issue. 
Now I am perfectly willing to answer Mr. Wooden, but I cannot 
answer — he asked me a question about something that I don't know 
what he is talking about. He has some particular thing in mind. 
Now what is it? 

Mr. Wooden. You were chairman of the committee that handled 
those matters during the code period? 

Mr. Fairless. Part of it; yes. 

Mr. Wooden. And you can't tell me whether any particular ones 
other than these two are still in effect? 

Acting Chairman C'Connell. Mr. "Wooden, I think that Mr. 
Fairless' point is fairly well taken. He apparently is not cognizant 
in detail of the situation to which you are referring. I think that if 



CONCENTRATION OP ECONOMIC POWER 14213 

there are particular commercial practices which were put into eflFeot 
in that period that you have reason to believe are still in effect, that 
we might address ourselves more precisely to them. 

Mr. Wooden. Can you tell us, Mr. Fairless, whether the resolution, 
number ten, which fixed the maximum deduction of 38 cents per ton 
from the base price that could be made on Southern foundry pig iron 
of a certain quality is still in effect? 

Mr. Fairless. I can't answer it. 

Mr Wooden. Can you tell us, Mr. Adams? 

Ml. Adams. I never heard of it, Mr. Wooden. I don't think it is 
in effect. 

Mr. Wooden. As a matter of fact, isn't the differential 38 cents a 
ton between Southern pig iron of certain quality for shipment to 
Northern points? Isn't it 38 cents stUl? 

Mr. Adams. I can't answer that. 

Mr. Wooden. I direct your attention to the Iron Age for January 
13, 1938, which carried a note to the effect that that is the differ- 
ential between Southern foundry pig iron for shipment to Northern 
points. 

Mr. Fairless. It might be helpful, Mr. Wooden, and also to the 
committee, to clarify our position in respect to shipments of Southern 
pig iron to so-called Northern points. 

Acting Chairman King. Can you answer that question yes or no? 

Mr. Fairless. I don't know. I wanted to ^ive a reason why I 
wouldn't know. We do not ship Southern pig iron to Northern 
points; we serve our Northern customers from Northern production 
and our Southern customers from Southiern production. 

Mr. Wooden. You don't know enough about the industry to know 
whether a differential of 38 cents per ton is recognized still between 
Southern foundry pig iron of certain quality and Northern pig iron? 

Mr. Fairless. I do not. 

Acting Chairman King. Mr. Fairless, do you know whether there 
is any difference between the prices in the Northern field and in the 
Soutliern field? 

Mr. Fairless. Oh, yes; definitely. 

Acting Chairman King. Do you know what the differentials are? 

Mr. Fairless. You mean the schedule of prices, Northern pig 
iron versus Southern pig iron? 

Acting Chairman King. Yes. 

Mr. Fairless. Mr. Adams has them or can get them. I don't 
know what it is exactly but there is a differential, there is a difference 
of quality, of course. 

Acting Chairman King. Judge Wooden, is it material — I express 
no opinion — to show what was done under the N. R. A. with a view 
to determining what is being done or what ought to be done now? 
It may be relevant. 

Mr. Wooden. I am inquiring to find out if it isn't being done now. 
That is the purpose. 

Acting Chairman King. Would that be for the purpose of ratifying 
the conduct of the N. R. A. or approving it or disapproving it? 

Mr. Wooden. I wouldn't attempt to state any purpose in it, but 
simply to show what the facts are, whether or not the N. R. A. 
arrangements have continued since the N. R. A., and the resolutions 



14214 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. Well, the answer to that, just what you have ex- 
pressed, is definitely no. 

Mr. Wooden. I am asking you about particular resolutions. 

Mr. Fairless. My answer covers any or all resolutions. Every 
one of the resolutions that you are referring to went out with the code. 

Mr. O'CoNNELL. Then the point is that subsequent to the invali- 
dation of the N. R. A. there was a voluntary move on the part of the 
industry to continue 

Mr. Fairless (interposing). That was the question that Mr. 
Wooden put up to me and my answer was that I was not a director 
at that time and I therefore am not qualified to say. 

Mr. Wooden. Can you tell me whether or not the regulation or 
resolution that was specified under the code with regard to shipments 
for structural use in an identified structure is stUl the practice? 

Mr. Fairless. No, sir; it is not now the practice. 

Mr. Wooden. Didn't it continue to be the practice after the code 
for some time? 

Mr. Fairless. Well, to be very specific in my answer, the provision 
of that particular resolution didn't exist during the code. 

Mr. Wooden. Weren't you aware of complaints being made by 
fabricators of the deleterious and damaging effect of that upon their 
business? 

Mr. Fairless. I have answered with the statement that the resolu- 
lution was never effective, even during the code. 

Mr. Wooden. Haven't you seen announcements of companies in 
the industry as late as 1936 specifying that condition with regard to 
shipments for an identified structure? 

Mr. Fairless. What condition? 

Mr. Wooden. That the place of erection or the nearest place to it 
should be considered the destination point, rather than the place of 
fabrication. 

Mr. Fairless. You are talking about f. i. t. privileges now, aren't 
you? 

Mr. Wooden. Yes. 

Mr. Fairless. That is a big subject. 

Mr. Wooden. I don't want to go into the whole subject. 1 was 
asking about that particular phase of it. 

Mr. Fairless. I should Hke to clear up that phase. 

Acting Chairman King. Answer it as compactly as you can. 

Mr. Fairless. I should like to clear up the phase I think Mr. 
Wooden is trying to develop, whether or not the steel industrj^ is 
carrying on in effect the resolution having to do with the f. i. t. privi- 
leges during the code, and my answer to that question is short and 
very definite, and the answer is no, they are not. 

Acting Chairman King. Generally speaking — I use the word "gen- 
erally" because it is so frequently used — were any of the activities or 
proceedings under the code continued after its abrogation, after it 
ceased to be effective as a legal organization, if it ever was? Can you 
answer that, were the practices under the code continued after its 
invalidation? 

Mr. Fairless. I can answer that question probably better, Senator, 
by telling you that many of the practices that were made compulsory 
und er the code were practices that were already in existence for a long 
time in the industry before there was a code or an N. I. R. A., and 



CONCENTRATION OF ECONOMIC POWER 14215 

they existed because they were fair, they were reasonable, and they 
were accepted by both producer and seller. For example, we spent 
much time yesterday afternoon in discussion of the freight rate within 
various switching districts such as Chicago and Pittsburgh. I think 
I have developed the information in respect to that. Now the mini- 
mum freight rate in the Pittsburgh district to any plant^ anybody that 
we do business with, is 55 cents. The raaximum freight rate is 99 
cents. Our charge is 50 cents. In Chicago the minimum is 65 
cents — these are actual figures taken from our records — and the 
maximum is 90 cents. Our charge is 60 cents. In Birmingham, the 
minimum charge is 70 cents, the maximum is $1.80. Our charge is 
50 cents. In Cleveland the minimum is 42 cents, the maximum is 
84 cents. Our charge is 50 cents. That had to do with a provision of 
fair practices, trade practices, during the steel code and it has con- 
tinued. Here is a very good reason why it has continued, because in 
each case, with the exception of Cleveland, and to what extent there 
I am not familiar enough with to give you the exact percentage, but in 
every other case our charge is less than the minimum freight rate to 
any customer in the district. 

POLICY OF PRICE ANNOUNCEMENT SINCE SPRING OF 1936 

Mr. Wooden. In the spring of 1936, Mr. Adams^ did the Cori)ora- 
tion begin some new policy with regard to publication of base prices? 

Mr. Adams. I didn't come with the Corporation until June 1936. 

Mr. Fairless. I was there. 

Mr. Wooden. Will you answer, then? 

Mr. Fairless. What is the question? 

Mr. Wooden. Whetiber or not the Corporation or its subsidiaries 
began a new policy of price announcement in the spring of 1936. 

Mr. Fairless. To the best of my knowledge; no. 

Mr. Wooden. Did they at that time put out announcements saying 
that the price for the particular quarter would be certain amounts at 
particular basing points or points of production of the Corporation? 

Mr. Fairless. I think that had been the practice in vogue for a 
long time. Your question was a departure or change. 

Mr. Wooden. Yes. 

Mr. Fairless. No change so far as I know. 

Mr. Wooden. Are you aware of any change in the policy or practice 
of other companies about that same time, on the same subject? 

Mr. Fairless. No, sir. 

Mr. Wooden. I ask you whether or not there wasn't some dis- 
cussion among leaders of the industry during the early part of 1936 
with regard to instituting a poUcy, a practice, of published announce- 
ments of base prices. 

Mr. Fairless. No, sir. 

Mr. Wooden. Didn't the subsidiaries of the Corporation put out 
announcements in the spring of 1936 stating that only deliv.ered prices 
would be quoted? 

Mr. Fairless. It has been the practice, and still is, quarterly for 
the subsidiary companies to announce their prices for the ensuing 
quarter. There was no change in respect to that. 

Mr. Wooden. Hasn't the practice been to quote only delivered 
prices? 



14216 CONOENTRATION OF ECONOMIC POWER 

Mr. Faikless. That is our method of selling our products. 

Mr. Wooden. And that is also the method of selling that is followed 
by the industry generally, isn't it, only- delivered prices? 

Mr. Fairless. I can't answer that, I^on't know. 

Mr. Wooden. WeU, aren't these pamphlets that you offer here, 
"Exhibit No. 1418",' based on the admission that that is the practice 
in the industry to quote only delivered prices? 

Mr. Fairless. I don't know, I can't tell you what this industry 
does, how they conduct their business in individual companies. 

Mr. Wooden. Doesn't this pamphlet, 1418, undertake to describe 
how the industry conducts its business with regard to making dehvered 
prices? 

Mr. Fairless. I think it does in a general way, yes. 

Mr. Wooden. WeU, then, you do know that that is the practice, 
the general practice of the industry, to quote dehvered prices only? 

Mr. Fairless. Generally speaking I believe the industry quotes 
dehvered prices, but I have no way of knowing that that method is 
covered completely, or is uSed completely. 

Mr. Wooden. You have reviewed this pamphlet, have you not, 
before it was submitted? 

Mr. Fairless. In a general way, yeS, sir. 

Mr. Wooden. Do you understand it to be an explanation or an 
analysis of the delivered price system with the use of basing points 
to calculate dehvered prices? 

Mr. Fairless. Certainly with respect to the United States Steel 
Corporation and its subsidiaries. 

Mr. Wooden. And also for the, industry? 

Mr. Fairi sss. Mr. Wooden, it seems to me that we could save a 
lot of time, x know you are busy and I certainly am; I would like to 
put aside, once and for all, the question of what our competitors do 
in all cases. I don't know. 

Mr. Adams. I think Mr. Wooden has the answer to his own question 
if he accepts the Form B returns. The industry went to a great deal 
of trouble and expense in attempting to give the committee through 
the Form B returns a cross-section of just what takes place. All the 
dehvered prices are in there, the question of transportation costs, and 
all of those factors, so you can determine fron those returns just what 
our competitors are doing, and we can't testify to that. 

Mr. Wooden. I call your attention to a publication in the Iron Age 
of January 7, 1937, summarizing the conditions in the industry for 
the year 1936 and characterizing a certain program of open-price 
announcement as being the most successfid price stabilizing move- 
ment the steel industry had experienced other than the steel code. 
Can you teU me what that has reference to? 

Mr. Fairless. I cannot. I don't recall the article. I would 
assume it would be an opinion of some writer for Iron Age. 

Mr. Wooden. It is further stated in that article that Mr. Girdler, 
president of Republic, initiated the movement at the beginning of 
the second quarter, making his announcements for the second quarter 
Does that recall anything to your mind? 

Mr. Fairless. Not a thing. 

1 Appendix, pp. 14619 ff. 



CONCENTRATION OF ECONOMIC POWER 14217 

Mr. Wooden. The Iron Age article also says that other steel com- 
panies followed the RepubUc's example and announced openly their 
seUing prices. 

Mr. Fairless. When? 

Mr. Wooden. 1936. 

Mr. Fairless. My dear sir, we have been announcing openly our 
selling prices for years. We didn't begin in 1936. 

Mr. Wooden. That is why I am asking about it. 

Mr. Fairless. The answer is, as far as United States Steel Cor- 
poration is concerned, we have not adopted any new selling policies 
as rumored by Iron Age or anybody. 

Mr. Wooden. The Iron Age also says that other companies followed 
the Republic's example. Do you know anything about that? 

Mr. Fairless. I know one that didn't. 

Mr. Wooden. You continued the policy you had before? 

Mr. Fairless. That is right. 

Mr. Wooden. As a matter of fact, didn't your company send out 
announcements to its sales managers that some price announcement 
program was going to be begun in May 1936? 

Mr. Fairless. I haven't any idea what you are driviijg at. Why 
don't you give me just exactly what you have in your mind and we 
could save a lot of time? 

Acting Chairman King. I think the question is proper. Answer if 
if you can. 

Mr. Wooden. I might say in this general connection that I have 
certain extracts and portions of documents on which my questions 
are based and I understand that without formal identification of them, 
which I am not prepared to make at this time, I cannot oflFer them, 
so I am somewhat handicapped and I am asking the questions as I 
do for that reason. 

Will you produce the letters to sales managers dated May 21 and 
May 23, 1936? Do you have them? 

Mr. Fairless. Mr. Chairman, representatives of this committee 
visited many of our subsidiary companies and have gone through our 
files, everything that they asked for has been presented, and if this 
committee has any letters written by any of our people of which some 
explanation is necessary or deemed advisable, we will be very happy 
to give it. 

Acting Chairman King. The judge asked if you had those letters. 

Mr. Fairless. To ask us just for a letter written May 21, 1936, I 
imagine there were many letters written May 21 having to do with 
sales matters and sales poHcies. 

Mr. Wooden. Announcing the beginning of your price announce- 
ment program. 

Acting Chairman King. If you have the letters here will you ex- 
hibit them? If you haven't, say so. 

Mr. Fairless. We have a letter of that date. Of course, I don't 
know whether that is the letter. 

Mr. Adams. If you have a letter, Mr. Wooden^ 

Mr, Wooden. I have a portion of such a letter purporting to have 
been written to all managers of sales by J. H. McKown, assistant 
vice president and assistant general manager of sales, Carnegie- 



14218 CONCENTRATION OF ECONOMIC POWER 

Illinois Steel Corporation, dated May 21, 1936, and it contains these 
statements (reading from "Exhibit No. 2200"): 

We will begin our price announcement program by announcing prices on bars 
and small shapes, later strip, then sheets, and oTir other commodities will be given 
consideration as promptly as possible. 

Do you recall such an annoimcement being sent out to your man- 
agers of sales? 

Mr. Adams. Again I will have to say, Mr. Wooden, I wasn't with 
the company at that time. 

Mr. Fairless. I really don't know anything about it. 

Mr. Wooden. You don't have anything in mind as to what the 
beginning of your price announcement program was at that time? 

Mr. Fairless. I do not, sir. The only change that I can think of 
in respect to price announcements that has been made by our Cor- 
poration since my connection with it had to do with deHveries during 
a quarter. Now the poHcy in vogue in our Corporation for a long 
time was to announce prices for a quarter, which meant that business 
could be taken during that 3 months at the prices announced. Now 
we have varied from that in respect to one feature, and that is that 
we announce our prices for deUvery within that quarter. If that is 
what you are referring to, Mr. Wooden, I can clarify it, otherwise I 
can't. That was to clarify our deUveries, otherwise we would be 
shipping into second and third and maybe fourth quarters, material 
at the first quarter price. 

Mr. Adams. I think, Mr. Wooden, that perhaps I can answer your 
question. 

, Mr. Wooden. My question was whether that meant anything to 
you and you said you weren't with the company. 

Mr. Adams. I said I wasn't with the company, but since you asked 
me that question I have located the letter involved and it brings 
back 

Mr. Wooden. May 21? 

Mr. Adams. May 21, 1936, signed by Mr. J. H. McKown, assist- 
ant vice president and assistant general manager of sales, Carnegie- 
Illinois Steel Corporation. 

Mr. Wooden. Might we have a copy of it? 

Mr. Ad^ams. Certainly, sir. Do you want me to read it? 

Mr. Wooden. I would Uke to offer it for the record. 

Acting Chairman King. You give us a copy. 

Mr. Adams. Certainly; I will be glad to d6 that. 

Mr. Wooden. You have also a circular letter to the sales nlanagers 
by the same writer dated May 23, 1936? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Will you supply a copj of that also? 

Mr. Adams. Certainly. I think this is the letter you have reference 
to, Mr. Wooden. Let me explain the change that took place, if I 
can. 

Mr. Wooden. WeU, what do you know about it if you weren't with 
the company then? 

Mr. Adams. It simply indicates a change in the formal method that 
was followed. Prior to that time, as I understand it, the writers for 
the trade journals would ask us what our price was going to be for a 
quarter. We would tell them and our prices would be published in 
the trade journals. About this time in 1936 we decided to not only tell 



CONCENTRATION OF ECONOMIC POWER 14219 

the trade journals but to advise our district sales offices in the way 
of a formal letter and a ^ormal announcement, so that each of our 
customers at the various points of delivery would have a definite 
written formal notice from us regarding the delivered prices that we 
were amiouncing for the quarter. It is just a technical change of 
procedure, as I understand it. Now beyond that I can't go, Mr. 
Wooden. 

Mr. Fairless. You will also find that representatives of the 
T. N. E. C. already have copies of this letter. 

Mr. Wooden. Is it in evidence? 

Mr. Fairless. You have copies. Whether it was offered in evi- 
dence I can't answer. 

Mr. Adams. All of these letters are in your file. 

Mr. Wooden. I would like to offer them in evidence. 

Mr. O'Connell. They are not in the record so far as I know, so 
we might as well get them in. 

Mr. Wooden. I offer them for the record. 

Acting Chairman King. If on examination it i& found that they 
have been introduced there will be no necessity of reproducing them. 

(The letters referred to were marked "Exhibits Nos. 2200 and 
2201," respectively, and are included in the appendix on pp. 14428 
and 14429-14430.) 

Mr. Adams. I understand these letters were given to the Depart- 
ment of Justice. They are not in the record of the proceedings. 

Acting Chairman King. The Department of Justice has copies of 
these letters, has it? 

Mr. Adams. Yes, sir. 

Mr. W^ooden. Referring to the letter of May 21, 1936, which is in 
the record as "Exhibit No. 2200," ^ what does it mean, Mr. Fairless, 
about the statement that "We will begin our price announcement 
program"? 

Mr. Fairless. I believe Mr. Adams can answer the question more 
fully than I can. 

Mr. Wooden. He wasn't with you then. 

Mr. Fairless. He is with us now, he knows our practices, obviously. 

Mr. Adams. As I miderstand it, that language was simply used to 
describe a change in our procedure. As I have said, the prior pro- 
cedure was to notify the trade journals or if they came to us and asked 
us on or about 30 or 45 days prior to the beginning of the calendar 
quarter what our price would be for the quarter, we would tell them 
and they would publish it. That was one method of notifying our 
customers in general. Then we decided to change that procedure to 
the extent of actually having printed, having sheets of paper printed, 
which we sent out to our district sales offices and they in turn dis- 
tributed them to the buyers of steel in their territory. In other 
words surrounding Detroit you would have Lansing and Flint and so 
on, and we would want to be sure that there was a formal notice from 
Carnegie-Illinois Steel Co. setting forth just what our published 
prices were, and that was considered, as I understand it, a change in 
our published announcement program. We all know that in that way 
we could accurately inform our customers what our delivered prices 
would be, and they would be sure of knowing what their costs of steel 
were going to be. 

> Appendix, t5. 14428. 

124491— 41— pt. 27 7 



14220 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. What was the difference between what you did 
then and what you had done previously? 

Mr. Adams. I think I have explained that. As far as I know, one 
method was to notify the trade journals; the second method was to 
notify each customer individually on a written form exactly what his 
delivered price would be on each of the products that he used or 
purchased and which we manufactured. 

Mr. Wooden. So you began a price announcement at that time, 
May 1936, of announcing base prices on products at the base point, 
didn't you? 

Mr. Adams. Well, those were base delivered prices. 

Mr. Wooden. Did you distribute those? 

Mr. Adams. Just a minute, Mr. Wooden. In the change in the 
announcement program we not only announced our base deUvered 
prices at the point of production, but we carried that through to a 
point where each customer would have a record from us as to what our 
base deUvered prices in his town were on each of the products that he 
was interested in. 

Mr. Wooden. How did you pubUsh the base prices? Did you 
publish them in trade journals? 

Mr. Adams. They still appeared in the trade journals; yes, sir. 
This was just an extra step taken to make sure that we had made it as 
convenient as possible for our customers to know during each quarter 
what our delivered prices would be. 

Acting Chairman King. Would the letters sent to the customers 
be in harmony with the prices appearing in the trade jourhals? 

Mr. Adams. Yes, sir. 

Mr. Wooden. Did you send these price announcements to any of 
your competitors? 

Mr. Adams. Not to my knowledge ; no, sir. 

Mr. Wooden. Do you know, Mr. Fairless? 

Mr. Fairless. No, I don't. 

Mr. Wooden. Wasn't it understood they would receive them? 

Mr. Adams. There would be no 

Mr. Fairless (interposing). Understood by whom? 

Mr. Wooden. By you. 

Mr. Fairless. No, sir. 

Mr. Wooden. Did you receive price announcements of a similar 
character from other companies? 

Mr. Adams. No, sir; not to my knowledge. 

Mr. Wooden. You saw them printed in the trade journals? 

Mr. Adams. We saw them printed in the trade journals if they 
published them in that maimer. 

Mr. Wooden. And how many companies did publish them? 

Mr. Adams. Again I can't answer. As I have said, there are 30 
of them and some of them publish their prices and others don't. 

Mr. Fairless. A few. 

Mr. Wooden. Now the Iron Age to which I referred, January 7, 
1937, describing this movement in the steel industry, for a program 
of price announcement, stated that after the Republic took this lead 
and others followed, the last three-quarters of the year 1936 were re- 
markably free from price cutting. Does that register in your mind 
as to what the conditions were? 



CONCENTRATION OF ECONOMIC POWER 14221 

Mr. Fairless. It doesn't register in my mind and it doesn't register 
on the charts of information which we have turned over to this 
committee. 

Mr. Wooden. Did you have an understanding with any of your 
competitors that any change in pubUshed prices that were put out in 
May 1936 would be similarly pubhshed? 

Mr. Fairless. No, sir.- 

Mr. Wooden. Had they been published as comprehensively prior 
to that time by other companies as they were after the spring of 1936? 

Mr. Fairless. I can't answer that; I don't know. 

Mr. Wooden. Do you know, Mr. Adams? 

Mr. Adams. No, sir. 

Mr. Wooden. Where were you at that time? 

Mr. Adams. In the spring of 

Mr. Wooden (interposing). 1936. 

Mr. Adams. What date? 

Mr. Wooden. May 1936. 

Mr. Adams. In May 1936 I was vice-president of the General Fire- 
proofing Company at Youngstown, Ohio. 

Mr. Wooden. Is Mr. Walter Tower here? 

Acting Chairman King. Is the gentleman present? 

Mr. Wooden. He was here yesterday. Mr. Chairman, I have 
copies of letters, portions of letters, that only Mr. Tower could 
identify, or some other witness — certainly not the gentlemen present. 

Acting Chairman King. Were they letters taken from the files 
of the 

Mr. Wooden (interposing) . Not of the Steel Corporation, but from 
either the files of the institute or concerns corresponding with the 
institute. I will not try to offer any of them in the absence of more 
formal identification. 

Acting Chairman King. I am interested in one question, if either 
of you gentlemen cares to answer it or can answer it. During the 
years which you have been identified with the steel business, and 
particularly with the United States Steel Corporation, has there been 
active competition, genuine competition among aU of the steel 
companies? 

Mr. Fairless. Definite and severe competition most of that time. 

Acting Chairman King. Have their annual sheets which were filed 
for publication, or their returns to the Government, as far as you are 
familiar witu their returns if you are familiar with any, indicated 
deficits or losses or lack of profits during those years? 

Mr. Fairless. Yes, sir. 

Acting Chairman King. Was that general or 

Mr. Fairless (interposing). Very general. 

Acting Chairman King. Or just spasmodic? 

Mr. Fairless. Very general. 

Acting Chairman King. Have there been years, when United States 
Steel Corporation has had losses rather than profits? 

Mr. Fairless. Yes, sir. 

Acting Chairman King. My recollection is that you or some wit- 
ness has testified here to information of the large deficits during a 
given period, and if that went into the record, those figures, I don't 
care to recur to them now. 



14222 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. Do you want these figures? 

Acting Chairman King. Were they put in the record? 

Mr. Fairless. Yes, sir. 

Acting Chairman King. That is my recollection. You need not 
reproduce them. 

Mr. Adams. They are in the record, Senator, and during the last 
decade we have had something like 4 years of losses and 6 years of 
profits, reasonable or otherwise. Over the last decade I think they 
will show that we have made less than 2 percent return on our invest- 
ment,^ 

Acting Chairman King. Those figures are in the record ; there is 
no need 

Mr. Adams (interposing). Of course when we talk about price 
changes upwards and downwards, we wonder how anyone could 
conceive that there isn't severe price competition in our industry 
from the practical man's standpoint, because you can't operate on a 
narrower margin than that -and exist. 

Acting Chairman King. Proceed, Judge. 

freight rate book of the iron and steel institute 

Mr. Wooden. Now when it comes to a question or a matter of 
calculating the delivery or transportation element in the dehvered 
price, the American Iron and Steel Institute has put out for some 
time, has it not, compilations of freight rates? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. Those compilations were instituted during the code 
period, were they? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. And the iustitute still puts out compilations of 
freight rates, both by rail and by water and rail? 

Mr. Fairless. I believe I can save time by giving 

Acting Chairman King (interposing). Answer yes or no, if you can, 
and then make your explanation. 

Mr. Fairless. Yes; but I can give the complete history of this 
rate book 

Mr. Wooden (interposing). The answer is yes. I don't care for 
any more than that. I would like to pursue my line of questioning, 
if I may. I have no objection to a statement being made at some later 
time or when I am through with the subject, but just to throw the 
thing open for anything he may care to say about the subject 

Mr. Fairless (interposing). It is only a history, Mr. Wooden, of 
just exactly what happens in respect to this rate book to which you 
are referring; that's all. It is not my opinion or — 

Mr. Wooden (interposing). All right. 

Mr. Fairless. The American Iron and Steel Institute has a trafiic 
committee composed of traffic managers of 10 different steel com- 
panies. This committee supervises the institute's Freight Rate 
Book. There are 4 sections to the Institute's Rate Book, and the 
responsibility of keeping these sections up to date is assigned to 
different members of the committee. When corrections are necessary 
— and b}'- necessary I mean when rate changes take place — these 
committee members have the changes made on supplementary sections 
or pages, sending these section? or pages to the institute for distribu- 



CONCENTRATION OF ECONOMIC POWER 14223 

tion to holders of the rate book. The rate book, is available to 
anyone interested in the steel business, but, peculiarly, it is not used 
by all of the steel companies and is used by some manufacturing 
concerns not classed as steel companies. There is a nominal charge 
made for this service and thcindividual holders of the book pay these 
charges to the institute. 

Mr. Wooden. The freight rates are figured from the various basing 

points to the various destinations, are they not, in the institute book? 

Mr. Fairless. You are talking about the construction of the book? 

Mr. Wooden. I am talking about the Institute's Freight Rate Book, 

whether they do not show the freight rates from the basing points to 

various destinations. 

Mr. Adams. The freight rates in the book, Mr. Wooden, are all 
rates which are secured from the railroads governing transportation 
costs from various places to various destinations. 

Mr. Wooden. Do they not show the freight rates from the various 
basing points to various destinations? 

Mr. Adams. Why, certainly, they would have to. And they also 
show rates from nonbasing points to other destinations, and numerous 
freight rates that are involved and are required by people not actually 
producing steel. 

Mr. Wooden. You say they show the freight rates from nonbasing 
points as well? 

Mr. Adams. I would say so; yes. It is a convenience — and that's 
all — for the steel industry and for people who fabricate steel. The 
rates are published by the railroads, and we are constantly checking 
with our large traflBc department to determine just what those rates 
are. 

Mr. Wooden. Isn't it a fact that the determination of the correct 
rate between one point and another is a matter on which even freight 
or traffic experts will differ? 

Mr. Adams. Well, I am not a traffic expert, Mr. Wooden. 
Mr. Wooden. Don't you know that to be a fact? 
Mr. Adams. No; I don't know that to be a fact. As a salesman I 
have always secured freight rates froni our traffic department. Now, 
the rate that they give me may be published in that freight-rate book 
or it may not be published in that freight-rate book. It takes time 
for any organization — and when I say organization I mean this com- 
mittee that Mr. Fairless has talked about, composed of certain traffic 
managers in the steel industry — to accumiilate that information. 

Acting Chairman King. Where does this committee get its infor- 
niation? 

Mr. Adams. Direct from the railroads. Senator, and 

Acting Chairman King (interposing). From basing points to the 
consumers? 

Mr. Adams. They collect all their rates from all points between 
cities where the shipment of steel, or alhed products made from steel, 
might be involved. 

Acting Chairman King. They don't attempt to project rates or to 
speculate as to what the rates are? 

Mr. Adams. There is no speculation as to rates. It is public in- 
formation and as Mr. Fairless just said, pecuhariy enough, all of the 
steel companies do not use that freight-rate book, and also peculiarly, 
other companies use it. 



14224 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Mr. Chairman, I have documents which show that 
the calculation of freight rates does likely produce errors, that it is 
important to have uniformity in the calculation of freight rates in 
order to have the delivered prices equalized. I have documents which 
will show that it was understood that the published freight rates of the 
institute would be recognized and used until after a correction sheet 
was published. 

Mr. Fairless. I object to that statement. 

Mr. Wooden. And it is simply because of my inability under the 
program of this committee regarding formal identification of these 
documents that I am not able to use them right now. 

Mr. Fairless. I object to the statement. 

Acting Chairman King. Your objection doesn't determine our 
course. 

Mr. Wooden. I don't know just how I am going to go about the 
matter of formalizing the identification of such documents. 

Mr. Fairless. My objection is that it is not a true statement. 

Acting Chairman King. I think before the hearing concludes, if 
you deem that testimony relevant, it would seem that ample oppor- 
tunity will be afforded for presenting the same to the committee. 

Mr. Fairless. For further clarification I should like to make this 
statement to the committee. It is of no importance whatsoever to 
the United States Steel Corporation whether we use this book- or not, 
and as a matter of fact any time that a rate change is made — and most 
rate changes, as we know from our experience, are downward, not 
upward — whether they be downward or upward they are immediately 
put into effect through the offices and functions of the various traflSc 
departments of the United States Steel Corporation. Many times 
these supplements to this book are distributed 2 or 3 months after 
a rate change has happened. • 

Acting Chairman King. I presume that freight rates change fre- 
quently, do they not? 

Mr. Fairless. Yes. 

Acting Chairman King. I know in the pe -ding bill which is in 
Congress now, the railroad bill, there is a provision for the filing of 
tariffs, that is for rates, changes from time to time, various applications 
were made. 

Mr. Fairless. Yes. And I should like to point out that this book 
does serve a very useful purpose to small steel companies, particularly 
nonintegrated companies, companies that do not and cannot afford 
trafl&c departments such as those of the larger companies. As far as 
we are concerned, this cannot be any issue with us because it doesn't 
make any difference whether we have it or not. 

Acting Chairman King. Proceed, Judge. 

Mr. Wooden. I have to decide whether or not it will be necessary 
to provide the formal identification of the documents to which I refer. 
Acting Chairman King. The committee is not going to be very 
exacting. Judge. 

Mr. Wooden. I had supposed that unless the authenticity of the 
documents were challenged that they might be received subject to such 
challenge. 

Mr. O'CoNNELL. Senator, you weren't here when the question 
came up this morning as to whether certain documents Mr. Wooden 
had could be introduced and I took the position which I believe is coti- 



CONCENTRATION OF ECONOMIC POWER 14225 

sisteiit with tlie position the committee has heretofore taken— I know- 
it is in line with the decision the chairman marie in connection with 
the investment banking hearing — that in the absejice of the witness 
who could testify^to the authenticity of the document that we would 
not permit it in evidence unless it was obtained from some published 
source. That is the situation with which Mr. Wooden is confronted. 
It seems to me it is one he can meet but I didn't feel it would be con- 
sistent with what we have done before to permit the introduction of 
those things at that time. 

Acting Chairman King. The Senator will not overrule a member 
of the committee who comes from a great department of the Govern- 
ment, so we will adhere to it for the time being. 

Proceed. 

Mr. Wooden. Under the code, during the code rather, it was 
provided that the freight rates compilations put out by the American 
Iron and Steel Institute should be used, was it not? 

Mr. Fairless. I can't answer thatdefinitely. You probably have 
the complete and full information. 1 don't have. Your question is 
whether it was compulsory? 

Mr. Wooden. Yes. 

Mr. Fairless. My answer is: I don't know. 

Mr. Wooden. Now with, regard to the all-rail basis of calculation 
of delivered prices, you and your companies use in actual shipments a 
cheaper method at times consisting of truck delivery and of water 
transportation. 

Mr. Adams. Yes, sir. 

Mr. Wooden. Under the code it was compulsory to use the aU-rail 
basis, was it not? 

Mr. Adams. I don't know,^Mr. Wooden. I don't think so. 

Mr. Wooden. With certain exceptions which the board of directors 
took care of by special regulation. 

Mr. Fairless. Tliat's correct, but those certain exceptions covered 
the very large bulk of steel that moved by water. I want to emphasise 
rather than minimize the exceptions. 

Mr, Wooden. And the institute put out compilations of freight 
rates which showed those rail and watep rates as well as the rail rates, 
did it not? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. And it has continued ' to put out rail and water 
compilations of freight? 

Mr, Fairless. I can't answer that. You mean as a part of the 
traffic book? 

Mr, Wooden. Yes. 

Mr, Fairless. I can't answer that. 

Mr, Wooden. Or part of the traffic service, rather. Now during 
the code period, efforts were made to get the industry to change from 
the all-rail basis of freight computation, were there not? 

Mr. Fairless. Made by whom? 

Mr. Wooden. Various persons and concerns who said they were 
adversely affected by the maintenance of the all-rail basis of com- 
putation. 

Mr. Fairless. Do you meaa officially? Are you talking about 
officials, or what is your point? 



14226 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Isn't it a fact that there were many commercial 
interests 

Acting Chairman King (interposing). Did you say "commercial," 
pardon me? 

Mr. Wooden. Commercial interests consisting of shippers, pur- 
chasers located on waterways and chambers of commerce, and many 
similar groups that urged the abandonment of the all-rail basis of 
computation of steel prices. 

Mr. Fairless. I don't Icnow of such. 

Mr. Adams. Mr. Wooden, if you want to 

Acting Chairman King (interposing). I think you ought to wait 
until Mr. Wooden asks you a question. If he asks you that, I have no 
objection to your answering. 

Mr. Fairless. I have stated before that almost any merchandising 
policy of an over-all nature would create some dissatisfaction and some 
compla-ints. 

(Further discussion of this point was off the record.) 

Mr. Wooden. The point is that the all-rail basis of computing 
deUvered prices from basing points still 'continues in the industry. 

Mr. Adams. That is not a fair statement. 

Mr. Wooden. I appreciate very well that there are other compila- 
tions of rail and water rates and even of water rates that make excep- 
tions to that. 

Acting Chairman King. Would you care to make a statement now, 
or will you wait until the Judge offers proof of that? 

Mr. Fairless. Well, he has said that it still exists and it doesn't 
exist. 

Mr. Wood EN. I didn't say it existed to the exclusion of everything 
else. 

Isn't it a fact that at a meeting of the members of the industry that 
the protests of commercial interests that wanted the all-rail freight 
basis of computation discontinued, that their requests, were rejected 
by a vote of the members of the industry present? 

Mr. Fairless. I attended no such meeting. 

Mr. Wooden. Do you know anything about such a meeting? 

Mr. Fairless. No; I do not. I take it you are going back to the 
code now. 

Mr. Wooden. That is right, yes, during 1934. 

Did you read the report, either of you gentlemen, of the Federal 
Trade Commission on the practices of the steel industry under the code 
made to the United States Senate with reference to the subject of the 
all raU base method of calculation? 

Mr. Fairless. I am just thinking, trying to recall; I am not certain 
whether I did or not. Thechancesareldid. I followed it pretty closely. 

V-:. 'Vooden. Did you note there the quoted objections made by 
various o. mmercial interests such as local chambers of commerce and 
individual industries located on the rivers and water transportation 
agencies protesting against the use of the aU-rail basis of freight 
computation? 

Mr. Fairless. I don't recall. We do have, we believe, a very satis- 
factory record in respect to our dealings with the so-called water 
movements of steel. 

Mr. Wooden. Those statements appear on pages 27-35 of the Com- 
mission's report to the Senate and on page 23 of its report to the 



CONCENTRATION OF ECONOMIC POWER 14227 

President in November 1934. Summarizing them, there were 72 
protestants. Twenty-eight of them were industrial concerns, 8 were 
water transportation agencies, 4 were associations devoted to improve- 
ment of rivers and canals, 4 were local chambers of commerce, and 
12 were United States Senators and 14 were Members of the House of 
Representatives. Would you say in view of those facts that the 
objections to that phase of the basing point system are based on 
abstract criteria? 

Mr. Fairless. I can only repeat, Mr. Chairman, that the United 
States Steel Corporation's subsidiary companies have various plants 
located on the inland waterways or adjacent thereto, and we believe 
that we have a very clear understanding of the method of dealing with 
water deliveries, and we do not charge, as has been inferred, the full 
rail freight. We do give the customer the benefit of water shipments' 
where it is justified in our opinion, and where it isn't justified we think 
we have very definite reasons for not allowing it. Where it is, we 
give due allowance for water dehveries or rail and water deliveries, 
and do not charge the all rail freight, and we have the record here to 
prove that statement. This is just our own record. This hasn't 
anything to do with the industry; this is just the United States Steel 
Corporation's record. It is important, I believe. 

Total water shipments in 1937, 1,129,884 tons. Actual water 
rate charged, 344,622 tons. Rail rate from nearest' basing point 
less-than-water rate from mill, 725,584 tons. That is an important 
point. Many people, who are not familiar with the steel business, are 
of the opinion that any time steel moves by steamers and barges from 
Pittsburgh down the Ohio River that it represents a savmg in trans- 
portation costs, but that isn't true because of the workings of the 
multiple basing point system. For example, for sheets, strip and 
ot^er produ^:,s delivered to Cincinnati, which is an important con- 
sammg poin from the base point of the American Rolling Mill at 
Middletown, vrhich is the nearest basing pomt to Cincinnati, the rail 
freight rate is less than the published water rate from Pittsburgh. 
While we deliver, while we avail ourselves of the water transportation 
facilities which we own and avaU ourselves of the saving, yet it is 
just a matter of that much less freight absorption, and that tonnage 
amounts to 725,584 tons. Price concessions made equal to water 
transportation saving, 41,513 tons. By that we mean even where 
we are in competition with a competitor who cannot serve a customer 
by water and we can, we may make price concessions in our 
base prices to cause ourselves to be competitive. 

The tonnage out of that total where we actually charged the all 
rail freight and delivered by water, for that year was 18,165 tons, or 
1.6 percent of a total tonnage moved by water of 1,129,884 tons. 
You might say, "Why?" The reasons, we believe, are very obvious 
and very understandable. There are some people, some customers, 
who can talce water shipments. They are located on the water, but they 
have competitors whom we also serve who are located 50 miles inland , 
or X miles inland. We feel that we would not be fair to the inland 
customer if we put his competitor in an advantageous position by 
furnishing the same products in the same locality at a lower price. 
Therefore, we charged the rail freight in those cases, out of that total 
tonnage which I have given you for that year, covering 18,165 tons 
for the whole United States Steel Corporation. 



14228 CONCENTRATION OP ECONOMIC POWER 

Mr. Wooden. You state in your pamphlet, do you not, "Exhibit 
No. 1418," ' that there are occasions when by using a lower or cheaper 
mode of transportation than all-rail you get an increment above your 
base price? 

Mr. Fairless. That would be true in these 18,165 tons to the extent 
represented by transportation. It doesn't necessarily mean, however, 
that we received in excess of our announced price including the trans- 
portation charges. 

Mr. Wooden. But doesn't your pamphlet describe how so-called 
phantom freight arises out of a situation where the mode of transporta- 
tion actually used is cheaper than the all-rail basis? 

Mr. Fairless. Well, again I believe that you are dealing with 
theories and I am dealing with facts. Now I have given you the facts. 

Mr. Wooden. Is your pamphlet dealing with theories also or is it 
dealing with facts? Doesn't your pamphlet show that you get what 
is called phantom freight by using a mode of transportation that is 
cheaper than the all-rail basis? 

Mr. Fairless. It doesn't. We have issued no pamphlet showing 
how we secure phantom freight. 

Mr. Wooden. I am referring to Exhibit 1418 which is in evidence 
here. Don't you show that very thing in that pamphlet? 

Mr. Fairless. Well, anything that is in that pamphlet I will stand 
back of. 

Mr. Wooden. Don't you laiow whether that is in it or not? 

Mr. Fairless. Not as you put it I wouldn't know. 

Mr. Wooden. Do you know if there is anything in there discussing 
phantom freight arising out of the use of cheaper .'^' odes of tranpn*- -• 
tion than all-rail? 

Mr. Fairless. Well," discussing it, I imagine, yes, of course. It 
discusses every phase of the so-called multiple-basing-point system. 

Mr. Wooden. And that is one phase of it. 

Mr. Fairless. That is one of your phrases. It is not one of oiu* 
phrases. We did not coin the name ''phantom freight." 

Acting Chairman King. The committee wiU recess until Monday 
morning at 10:30. 

(Whereupon, at 12:50 p. m., an adjournment was taken until Mon- 
day, January 29, 1940, at 10:30 a. m.) 

I Appendix, pp. 14619 S. 



INYESTIGATION OF CONCENTEATION OF ECONOMIC POWER 



MONDAY, JANUARY 29, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 
The committee met at 10:35 a. m., pursuant to adjournment on 
Saturday, January 27, 1940, in the Caucus Room, Senate Office 
Building, Mr. Joseph J. O'ConneU presiding. 

Present: Mr. O'ConneU (acting chairman), Senator King, Messrs. 
Davis and Ferguson. 

Present also: Sumner T. Pike and John V. W. Reynders, repre- 
senting the Department of Commerce; Walter B. Wooden, Assistant 
Chief Counsel, Willis J. Ballinger, Director of Studies for the Federal 
Trade Commission; and Hugh E. White^ economist, representing the 
Federal Trade Commission. 

TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED 
STATES STEEL CORPORATION, NEW YORK CITY, AND AVERY 
C. ADAMS, VICE PRESIDENT, UNITED STATES STEEL COR- 
PORATION, PITTSBURGH, PA.— Resumed 

Mr. Fairless. Mr. Chairman, I have a matter I would like to call 
to the attention of the committee. You will recall on Friday afternoon 
we offered for the record an article from the April issue, 1939, of Iron 
Age.^ The clerk now has this article, but so far it has not been received 
into the record. You will recall that Acting Chairman King then 
suggested that this article might be put in later. If agreeable to the 
committee, I suggest at this time that the Iron Age article be now 
received into the record. 

Acting Chairman O'Connell. It will be received in the record and 
inserted at the close of your testimony toda;v. That was the under- 
standing that I had with Senator King. I think Mr. Wooden has 
the article. 

Mr. Wooden. There is no objection to receiving it in that way 
Mr. Chairman, except I might make this observation, that it seems to 
me those who are responsible for the making of the statements that 
are referred to in the article should make the statement here rather 
than in this indirect way through the channels of a trade magazine. 

Acting Chairman O'Connell. We discussed this when Senator 
King was here last week and I believe it was his judgment that it 
should be included in the record, and it will be. 

(The article referred to was marked "Exhibit No. 2202" and is 
included in the appendix on p. 14430.) 

p. 14161, supra. 

14229 



14230 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Mr. Fairless, I am showing you what purports to be 
a mimeographed circular letter issued by the Executive Secretary of 
the American Iron and Steel Institute under date of June 3, 1935, and 
enclosing a copy of a draft of preamble and resolutions adopted by the 
Board of Directors at a meeting held on June 3, 1935. You said the 
other day that you didn't know anything about such a resolution. 
Are you willing to accept the documents that I show you as containing 
the text of such resolution? 

Mr. Fairless. Judge, the only point that I was making was that 
I was not a director of the Institute at that particular time and there- 
fore I couldn't personally be acquainted with the transactions of the 
board of directors. 

Mr. Wooden. But you knew such a resolution had been adopted, I 
presume, at the time. 

Mr. Fairless. No; I did not, sir. If I did, at the moment I don't 
recall it. 

Mr. Wooden. I believe you said you didn't know anything about a 
resolution of the industry ratifying the resolution of the board of 
directors. 

Mr. Fairless. That is correct; I did not. 

Mr. Wooden. And I called your attention to the fact that the 
trade press said 90 percent of the industry joined in those resolutions. 
Didn't the Republic Co., with which you were then connected, join 
in them? 

Mr. Fairless. I can't answer, I wasn't President of the Republic 
Steel Corporation. 

Mr. Wooden. What were you in June 1935? 

Mr. Fairless. Executive vice president of RepubUc. 

Mr. Wooden. Yet you don't know of any resolutions extending the 
code by voluntary resolutions? 

Mr. Fairless. I have answered your question, Judg6. 

Mr. Wooden. Mr. Chairman, I am ready to establish the source 
of those resolutions by another witness unless the present witness is 
willing to accept them as being authentic. 

Mr. Fairless. I am perfectly willing to accept them; I don't 
question them. I just simply answered the question. 

Acting Chairman O'Connell. I take it that I am responsible for 
the difficulty that you are having because it was my view that docu- 
ments like that would, in accordance with the procedure of the Com- 
mittee, have to be identified by someone in position to do so. It isn't 
a question of whether Mr. Fairless will accept them or not. I think 
that if you have a witness who can be called to testify to the authen- 
ticity that is the way to do it and it shouldn't take more than a 
minute. 

Mr. Wooden. I will then call Mr. White. 

Acting Chairman O'Connell. Do you solemnly swear that the tes- 
timony 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 White. I do. 



CONCENTRATION OF ECONOMIC POWER 14231 

TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, 
WASHINGTON, D. C. 

Mr, Wooden. Mr. White, you are an employee of the Federal Trade 
Commission? 

Mr. White. I am. 

Mr. Wooden. How long have you been such employee? 

Mr. White. Since April 1922. 

Mr. Wooden. Will you state whether you had occasion during 
1934, '35, or '36 to visit the offices of the American Iron and Steel 
Institute? 

Mr. White. I did. 

Mr. Wooden. Did you examine files there and obtain documents 
from their files? 

Mr. White. Yes. 

Mr. WoodbSn. I am showing you two papers, one purporting to be a 
circular letter of Walter S. Tower, Executive Secretary of the American 
Iron and Steel Institute, June 3, 1935, and attached copy of draft of 
preamble and resolutions adopted by the Board of Directors of the 
American Iron and Steel Institute, marked "Exhibits Nos. 2203 and 
2204" for identification. Have you examined those papers? 

Mr. White. Yes, sir. 

Mr. Wooden. Will you teU us what you know about them? 

Mr. White. These papers were secured during the progress of an 
investigation into the practices of the steel industry in respect to 
merchandising steel sheet piling and was made in response to the 
direction of the President. Whether they were given to me by Mr. 
Tower personally or by his office manager I don't recall. They were 
taken from the file of the Federal Trade Commission, File 1-9268, 
which is the investigation file covering the subject. They were 
marked by me shortly thereafter. 

Mr. Wooden. Mr. Chairman, I offer them in evidence for the 
record. 

Acting Chairman O'Connell. They may be received. 

(The documents referred to were marked "Exhibits Nos. 2203 and 
2204," respectively, and are included in the appendix on p. 14434. 

Mr. Wooden. Mr. White, I show you a paper entitled, "Resolution 
adopted by members of Iron and Steel industry assembled at American 
Iron and Steel Institute, June 6, 1935," and ask you to state what you 
know about it. 

Mr. White. This exhibit was received under similar circumstances 
and purports to be a resolution adopted by members of the iron and 
steel industry assembled at the American Iron and Steel Institute, 
June 6, 1935. 

Mr. Wooden. What do you know about the paper itself? Where 
did it come from? 

Mr. White. It was received under similar circumstances, whether 
from Mr. Tower personally or from h.s office manager I do not recall. 
It was marked by me at that time. 

Mr. Wooden. I ofTer that document in evidence. 

Acting Chairman O'Connell. It may be received. 

(The document referred to was marked "Exhibit No. 2205" and is 
included in the appendix on p. 14435.) 



14232 CONCENTRATION OF ECONOMIC POWER 

N. R. A. CODE PROVISIONS CONTINUED AFTER N. R. A, INVALIDATION 

Mr. Wooden. Those resolutions ("Exhibits Nos. 2204 and 2205") 
show action of the industry by the Board of Directors of the Iron and 
Steel Institute continuing in effect the provisions of the Code of Fair 
Competition after the code itself had been declared invahd as a result 
of the Schechter decision, and I call the committee's attention to the 
fact that in so continuing the code it included the so-called Standards 
of Fair Competition of the code and in turn that included the opera- 
tion of the basing point system of delivered prices, and we have already 
in evidence the fact that some of these so-called commercial resolu- 
tions implementing the code and the basing point system under the 
code have been continued in effect to the present time. I refer to 
the resolutions relating to the use of arbitrary switching charges at 
certain basing points and I should like to. offer the resolution which is 
in question about the use of arbitrary switching charges. 

(Senator King assumed the Chair.) 

Acting Chairman King. Where does that appear? 

Mr. Wooden. It is in a volume composed of all the so-caUed com- 
mercial resolutions which the board of directors of the Institute 
adopted during the code period. May the reporter number this 
resolution? 

Acting Chairman King. Have you a separate copy? 

Mr. Wooden. No. 

Mr. Fairless. Mr. Chairman, I should like simply to inention, ahd 
I am sure the judge will agree, that rather than refer to the American 
Iron and Steel Institute board of directors during the operation of the 
code, it really should be the Code Authority. It so happened that the 
Code Authority was comprised of the Directors of the American Iron 
and Steel Institute augmented by certain Government people, but it 
functioned as a Code Authority rather than the American Iron and 
Steel Institute. 

Acting Chairman King. Is there any controversy as to the per- 
sonnel? 

Mr. Wooden. I brought this out the other day, that the board of 
directors was the Code Authority and so constituted by the code 
itself. 

Mr. ReVnders. With the addition of several Government officials. 

Mr. Wooden. They sat in on some of the operations and meetings 
of the Code Authority, but at no time that I am aware was the code 
amended to make them members of the Code Authority. 

Acting Chairman King. Wlio were the members of the Code Au- 
thority, Mr. Fairless? 

Mr. Fairless. As I understand the operation, the American Iron 
and Steel Institute board of directors, augmented by a certain number 
of Government officials, the exact number of whom I don't remember, 
functioned as the Code Authority. Now independent of the Code 
Authority, the Board of Directors of the American Iron and Steel 
Institute continued to function as such in respect to any matters per- 
taining to the Institute that were not a part of the functions of the 
Code Authority. I think I am correct in that. 

Mr. Wooden. Mr. Fairless, are you willing to accept the document 
under discussion as being a copy of the resolution of the board of 



CONCENTRATION OF ECONOMIC POWER 14233 

directors regarding the use of arbitrary switching charges at certain 
basing points? 

Mr. Fairless. During the code? 

Mr. Wooden. Yes. 

Mr. Fairless. I will accept any of the commercial resolutions that 
were adopted by the Code Authority. 

Mr. Wooden. You accept this one? 

Mr. Fairless. I do. 

Mr. Wooden; Then, Mr. Chairman, I will offer it as it stands. 

Acting Chairman King. It may be received. 

Proceed. 

(The document referred to was marked "Exliibit No. 2206" and is 
included in the appendix on p. 14435.) 

Mr. Wooden. I should like to read for the committee's information 
the text of this resolution which we have ascertained is still in effect, 
and the pamphlet of the Corporation so states. 

This is Commercial Resolution A-4 as amended June 14, 1934, 
effective June 31, 1934, preamble and resolution duly adopted by the 
Board of Directors as amended on June 14, 1934, with respect to 
switching charges to be- added to base prices for products delivered 
at basing points. 

You see, this is an implement of the basing-point system. 

Whereas it is provided in Section 4, Schedule E of the Code that when switching 
charges for the delivery of the product at a basing point are required to be added 
in determining the delivered price of such product pursuant to the provisions of 
said Section 4 the Board cf Directors may by resolution fix such an arbitrary 
switching charge or such arbitrary switching charges for the delivery of such 
product as the Board shall deem proper with a view to preventing unequal com- 
petitive conditions in respect of the sale of such product for delivery at such 
basing point; and 

Whereas a great diversity in the switching charges exists at the various basing 
points and on that account it is practically impossible in most cases for members 
of the code to ascertain in advance of the sale of any product for delivery at any 
basing point, the correct published tariff switching charges chargeable thereon 
pursuant to the provisions of said Section 4 ; and 

Whereas the Board has been advised that the arbitrary rates prescribed in the 
following resolution are fair averages of the actual switching rates now in effect in 
the switching areas of the respective basing points at which such rates are to be 
applied; 

Resolved that the Board of Directors hereby fixes, for the purposes of the pro- 
visions of Section 4 of Schedule E of the code, arbitrary switching charges for the 
delivery of any product at any basing point for such product named in Schedule 
F of the code, except pig iron sold for delivery in Jefferson County, Alabama, 
from any furnace located in that county, as follows: 

(a) for deliveries in carload lots (minimum thirty tons) at Chicago, Illinois, 
and Gary, Indiana, and for deliveries in such carload lots from either of such 
places to the other, sixty cents per net ton, or, if the published base price for such 
product at such basing point is stated per gross ton, then sixty cents per gross ton; 

(b) for deliveries in carload lots (minimum twenty-five tons) at all other 
basing points named in Schedule F of the Code, fifty cents per net ton, or if the 
published base price for such product at such basing point is stated per gross ton, 
then fifty cents per gross ton; and 

(c) for deliveries in less-than-carload lots at all basing points named in 
Schedule F of the Code, and for deliveries in less-than-carload lots from either 
Chicago, Illinois, or Gary, Indiana, to the other of such places, ten cents per 
hundred pounds, but not in any case exceeding on any one shipment the charge 
per carload at the carload rate hereinabove specified for the basing point in 
question. 

What is the switching area, Mr. Adams, of the Chicago basing 
point? 



14234 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. You mean in respect to areas, Judge? 

Mr. Wooden. Yes; I mean what area is covered by the Chicago 
switching district. 

Mr. Fairless. We can't answer that. It is defined by the railroads, 
not by the steel industry. I can give you the rates that apply. 

Mr. Wooden. No; I want to know what the area covered by the 
switching district is. Can you tell us, Mr. Adams? 

Mr. Adams. I can't tell you exactly. 

Mr. Wooden. Approximately. Does it go around to Gary on the 
south of Chicago? 

Mr. Adams. No; it doesn't extend down to Gary. 

Mr. Wooden. Can't you tell us what area it does cover? 

Mr. Adams. I can't tell you specifically ; no ; because it is established 
by the railroads. 

Mr. Wooden. You know what it is, don't you? 

Mr. Adams. I know approximately. 

Mr. Wooden. Tell us approximately. 

Mr. Adams. Well, I would say an area of within 15 miles of Chicago, 
the center of Chicago, would be my approximate guess, Mr. Wooden. 

Mr. Wooden. Are you guessing? 

Mr. Adams. I am guessing; yes, sir. I don't know exactly. 

Mr. Wooden. Do you know what the switching area of the Pitts- 
burgh distr'ct is? 

Mr. Ad/ ms. I can't tell you exactly. 

Mr, Wooden. What is your approximate answer on that? 

Mr. Adams. It is slightly smaller than the Chicago area. 

Mr. Wooden. But they cover the area of a number of producing 
plants, do they not? 

Mr. Adams. Yes; they will take in a number of producing plants. 

Mr. Wooden. They take in a number of competitive producing 
plants, competitive with your own mills, do they not? 

Mr. Adams. I would say "Yes." 

Mr. Wooden. Mr. Chairman, I just want the committee to under- 
stand that here is an instance where the basing point system of 
delivered prices in the switching areas of the various members have 
been fixed by the action of the Board of Directors of the Institute, and 
those particular switching charges are still in effect. As the resolu- 
tion cites ("Exhibit No. 2206") the actual switching charges of the 
different mills in those areas differ, and this resolution, standardizes 
by an arbitrary imposition of what the arbitrary charge shall be in 
being added to the basing point price to get the delivered prices in 
those switching areas, and if the basing point price is the same for 
the various mills in that area, the delivered price within those switching 
areas must become identical, because here is a prescription of the 
amount that must be charged, regardless of the actual switching charges . 

Mr. O'CoNNELL. Mr. Wooden, if I understand your point, the, 
discussion had on Saturday relative to whether or not the arbitrary 
prices were below or above the actual on the average, makes no 
difference. In other words, whether the arbitrary switching charge 
be lower or higher than the actual, your point is that it is for the pur- 
pose of establishiiig one of the elements of the selling price. 

Mr. Wooden. Right, but it is higher than some actual and lower 
than other actual. It is an arbitrary standardization of the switching 
charge, regardless of what the actuaUty is. 



CONCENTRATION OF ECONOMIC POWER 14235 

Mr. O'CoNNELL. But you would think your point was well taken 
if the switching charge were lower than average. It doesn't make 
any difference. The point is, to stabilize one of the elements of cost. 
That is your point. 

Mr. Wooden. Except this: Where the arbitrary charge is higher 
than the actual, as Corporation statement admits, that results in 
so-called phantom freight by the amount of that difference and an 
increment above the base price. 

Mr. Wooden. Mr. Fairless, will you accept the document I show 
you for identification as an authentic document of the Board of 
Directors of the Institute, known as Commercial A-18, effective 
June 1, 1934? 

Mr. Fairless. I am perfectly wUling to accept any resolution that 
you have to offer that has to do with the steel code. However, I wish 
to state in respect to all these resolutions, and anything that has to do 
with the operaton of the steel code, that they are now not in effect as 
such in the United States Steel Corporation. 

Mr. Wooden. But they are in effect in the industry, as your pam- 
phlet states, and as you have testified — the one I have showed you. 

Mr. Fairless. Our pamphlet does not state that anything haying 
to do with the steel code is in effect. 

Mr. Wooden. But the practice involved in this resolution is still 
carried on, is it not? 

Mr. Fairless. I should like simply to make a very simple statement 
to the committee. When the steel code was formed, and built, irre- 
spective of what any of us might think of the situation then existing, 
past practices of the industry were very carefully considered and those 
that were felt to be in harmony with the best interests of the pubUc in 
general were adopted as principles of "the code. Also during the 
building of the code and its functioning, from time to time certain 
weaknesses developed and those weaknesses were covered, or cor- 
rected rather, by certain resolutions, and these are the resolutions, 
some of them commercial and some of them with respect to other 
features. 

Mr. Ferguson. Mr. Fairless, coimsel asked you whether this par- 
ticular practice was stUl, in "effect, being carried out. 

Mr, Fairless. Mr. Ferguson, I am just coming to explaining 
exactly how it operates. Now these new resolutions covered various 
weaknesses, or apparent weaknesses, and they came up for adoption 
and were adopted, and they were put into effect. Now some of the 
practices have been continued and I have no argument with the judge 
in^ respect to this so-called arbitrary switching charge, I have no 
argument about it at all, but I do say that the reason it has been 
continued, and any features that have been continued — they have 
been continued because they have been proven to be fair and adcept- 
able to the buyers ai;d the sellers of steel, and they are not continued 
in any respect on the basis of a continuation of the steel code or any 
resolutions pertaining thereto. 

Mr. Wooden. Not even the resolution continuing the code in 
effect which you were shown a while ago? ^ You say the thing that 
has been done, and continues to be done, has not been done pursuant 
to the resolution that was to continue the code in effect. 

> "Exhibit No. 2204," appendix, p. 14434. 
124491— 41— pt. 27 8 



14236 CONCENTRATION OF ECONOMIC POWER 

Mr. Fairless. Is that your statement? My answer is that the 
steel code is not in effect. 

Mr. Wooden. But these particular outgrowths and developments 
of the steel code are still in effect. 

Mr. Fairless. I believe I have made my position clear, 

Mr. Wooden. Mr, Chairman, I would like to offer for the record, 
this exhibit, which is commercial resolution A-18, effective June 21, 
1934. We have been over the subject matter but I want to bring 
out the text of this resolution for the committee's information. 

Acting Chairman King. It may be admitted. 

(The document referred to was marked "Exhibit No. 2207" and is 
included in the appendix on p. 14436.) 

Mr. Wooden. Preamble and resolution duly adopted by the board 
of directors on June 14, 1934, authorizing reductions in the delivered 
prices for products delivered by truck provided by the purchaser: 

Whereas it is provided in Section 4 of Schedule E of the Code that in any case 
in which a product shall be delivered by other than all-rail transportation the 
member of the Code selling si^ch product may allow to the purchaser a reduction 
in the delivered price otherwise chargeable under the provisions of said Section 
at: such rate previously approved by the Board of Directors and filed with the 
Secretary as the Board of Directors shall deem equitable and necessary, in order 
that competitive opportunity to producers and consumers of products shall be 
maintained; and 

Whereas on recommendations heretofore made to the Board of Directors it 
approved rates of such reductions by members of the Code to purchasers of 
products delivered by truck provided directly or indirectly by such purchasers 
and for their account which the iSoard deemed and now deems to be equitable 
and necessary, in order that competitive opportunity to producers and consumers 
of products shall be maintained; 

Resolved that in any case in which any purchaser shall require that any product 
purchased by him from a member of the Code be delivered by truck and such 
truck is provided, directly or indirectly, by such purchaser and for his account, 
such member of the Code may allow a reduction in the delivered price for such 
product otherwise chargeable under Section 4 of Schedule E of the Code and the 
regulations .prescribed by, and the resolutions adopted by, the Board of Directors 
thereunder and then in effect (a) at rate equal to 65% of the carload all-rail 
published tariff freight rate on such product from the point at which transporta- 
tion of such product by truck began to the place of delivery of such product by 
truck to such purchaser (if such freight rate be published on a per car basis, the 
ja'te per ton shall be determined by dividing such charge per car by 2.^), or (b), if 
the transportation by such truck be at a basing point for such product, then at a 
rate equal to 65% of the rate 'of the applicable arbitrary carload switching charges, 
if any, at such basing point theretofore approved by the Board of Directors, or, if 
such Board shall not have approved a rate of arbitrary carload switching charges 
for such basing point, 65% of the rate per ton of the actual switching charges 
(computed on the basis of the minimum carload quantity to which such charges 
apply) applicable on the delivery of such product at such basing point under the 
provisions of said Section 4, from the point at which transportation of such product 
by truck began to the place of delivery of such product by truck to such purchaser. 

There is a further proviso that I will not read, but it further requires 
that the truck must be loaded within 24 hours after it has begun to 
be loaded, and so on. 

Acting Chairman King. Do you desire that incorporated in the 
record, I mean the last? 

Mr. Wooden. I offered the entire document but I don't think I 
need read the balance of it. 

Mr. Wooden. I would just like to have the committee understand 
that here is a practice admittedly still in effect by the Corpora- 
tion's own pamphlet and by the testimony that we have had. There 
is an arbitrary addition of 35 percent of the all-rail freight to a destina- 



CONCENTRATION OF ECONOMIC POWER 14237 

tion, even when the buyer provides his own truck or hires a truck to 
take it away. I have brought out for the committee's information 
hitherto that shippers of steel, buyers of steel and trucking companies, 
have gone on record in written protests to the effect of such a provision 
upon their business, and I would like to call the committee's attention 
to the fact that the amount involved in that 35 percent addition to 
the basing point price, when it is figured as 35 percent in terms of the 
all-rail freight, amounted in some instances to $2.50, $3.50, $3.90 per 
ton. The amount of it is substantial, and important. 

Mr. Fairless. Mr. Chairman, could I say a word in respect to 
that? 

Acting Chairman King. Proceed. 

Mr. Fairless. I have no differences with the Judge in respect to 
this particular resolution, but again I wish to state to the Committee 
that this practice referred to in this resolution was a compulsory one 
under the code. Any member of the code who did not conform in 
every transaction to that resolution was subject to fine as provided 
by the code. 

Now the difference in today's practice in the United States Steel 
Corporation and that provided by the resolution which Judge Wooden 
has just read, and I have no quarrel with it at all, is simply this: To 
begin with, during the code that so-called arbitrary allowance given 
to the customer when he sent a truck provided by himself or others, 
was one that was arrived at after very careful study, very careful 
study, not by just one company, but by several companies reviewing 
their own experiences having to do with truck dehveries over a reason- 
able period of time. 

Naturally, to take that situation and apply it to every condition 
all over the United States of America brought protests, and many of 
them were justified. There is no question about it. But when you 
were dealihg, as we were under the code — where you had to have a 
definite set-up and comply with it — naturally the big percentage, the 
majority, had to be taken into consideration, and that was the basis 
for arriving at this set-up. The code went out, and with it went this 
resolution. The thing that continued was the practice where it prop- 
erly applied, and it continues today with respect to our particular 
business where it is proper. I cited to this Committee, I gave you 
an example Saturday, of Houston, Tex. This particular practice 
does not apply there, it doesn't lend itself, it would be decidedly un- 
fair, so we do not practice it. Down there we deUver oil country 
goods from our Pittsburgh and our Lorain plants. We carry them 
in stock, and the customers, and they are many, come with iheir 
own trucks or send trucking companies to get the goods and we charge 
them only the handling charge, and it is a nominal handling charge, 
covering the cost. 

Many of our wire and sheet products in various parts of the country 
are handled on that same basis, but as a general policy— and we say 
"general" because it does apply fairly to a very large percentage of 
our products — this 65 percent credit as appHed to. the all-rail freight 
rate is fair and is practiced by the United States Steel Corporation, 
and we have no apologies for it because it is accepted by our customers. 
Any time that any customer or group of customers feels that an injus- 
tice has been done or is being done, he can come to the proper oj£cials 



14238 CONCENTRATION OF ECONOMIC POWER 

of the subsidiary company of the United States Steel Corporation and 
I ana sure he will go away a happy man. 

Acting Chairman King. Were there inequalities among the con- 
sumers, purchasers, under the code with respect to the switching charge 
to which the Judge has just referred? 

Mr. Fairless. The switching charge? No, I don't think so with 
respect to the switching charge, for this reason. As I read here 
Saturday, in the Pittsburgh district the minimum switching charge is 
55 cents, and the maximum is 99 cents. The charge that we make for 
switching in that Pittsburgh district is 50 cents, so therefore it is under 
even the minimum charge. 

In Chicago the minimum charge is 65 cents and the maximum is 90 
cents. Our charge is 60 cents. 

Acting Chairman King. I recall those figures. 

Mr. Fairless. In one district — and as I stated in my earUer testi- 
mony, I do not have the facts to know to what extent — our charge 
is greater than the minimum. In other words, in Cleveland it is 42 
cents versus our charge of 50, but the maximum, however, is 84 cents. 
Where the average would fall I don't know. 

Acting Chairman King. To what extent has there been a departure 
by your company, and so far as you know by other producing com- 
panies of steel, from the provisions of the code * to which the Judge 
has just called our attention? 

Mr. Fairless. The trucking provisions? 

Acting Chairman King. Yes. 

Mr. Fairless. Tremendous departures. 

Mr. Wooden. Why then 

Acting Chairman King (interposing). One moment, Juage. 

Mr. Fairless. I have cited the Houston situation and it applies 
to the Columbia Steel Co. on the Pacific coast. There are exceptions 
all over this country. 

Acting Chairman King. Then. you would say that the letter and 
the spirit of that resolution is not adhered to now by your company? 

Mr. Fairless. It is only adhered to now where it is a fair situation 
in respect to the consumers of our products. 

Acting Chairman King. Where it is practical — and of course we 
have to accept your view as to what is practical, I suppose, that is, 
you have given your view, you determine whether it is practical or 
not — does that work any injustice to the pubhc or to the consumer? 

Mr. Fairless. In our opinion it does not. 

Acting Chairman King. Is it a fair rate to be charged, is it com- 
mensurate with the responsibihties and the duties performed by the 
company? 

Mr. Fairless. We think so. 

Acting Chairman King. You do not believe it to be an unjust 
charge? 

Mr. Fairless. No, in other words, we are not trying to make 
any profits through trucking or nontrucking of our products by cus- 
tomers. 

Mr. Wooden. Senator, I would like to point out with regard to 
the arbitrary switching rates, it isn't a question of their fairness but 
the effect is to make the delivered prices within the switching areas 
identical to all buyers within those switching areas. 

• "Exhibit No. 2207," appendix, p. 14436. 



CONCENTRATION OP ECONOMIC POWER 14239 

Mr. Fairless. And we are proud of that. 

Mr. Wooden. Not only for you but for the industry. Now you 
make yours identical with the delivered prices of your competitors 
in that industry by use of that resolution, or the principle involved 
in that resolution. 

Mr. Fairless. We do not admit that. 

Mr. Wooden. That is the effect. Why do you say, Mr. Fairless, 
that you make exceptions and departures from this when you say in 
"Exhibit No. 1418"^ your pamphlet, that this practice has been 
generally followed since the code, in referring to these arbitrary 
switching rates? 

Mr. Fairless. In referring to the arbitrary switching rates? 

Mr. Wooden. Yes, you say the practice has been generally fol- 
lowed. Now you say it isn't generally followed. 

Mr. Fairless. No, I didn't say that with respect to the switching 
rates. I admit they are followed. 

Mr. Wooden. All right, you say the Corporation doesn't follow 
them. 

Mr. Fairless. We are talking about trucking. 

Mr. Wooden. I am talking about switching now. 

Mr. Fairless. My answer here has been on trucking. Did I 
make it clear? 

Mr. Pike. It was very clear to me. 

Mr. Wooden. The Senator was talking about switching charges. 

Mr. Fairless. No. 

Mr. Wooden. Yes; he did at first. 

Acting Chairman King. I was about to call attention, if the judge 
will permit me, to "Exhibit No. 1418," and I read: 

Undoubtedly the additional cost and inconvenience of loading trucks justifies 
an extra charge, particuarly at older mills which were planned exclusively for car- 
loading, and offer little possibility for installation of truckloading facilities. 

In summary, the answers to the criticism of "phantom freight" supposedly 
realized by steel mills on truck deliveries may be summarized in the following 
points: first, only an extremely small proportion of steel tonnage is delivered by 
trucks, partly because many products cannot be economically hauled by truck, 
and partly because large consumers prefer rail delivery. Secondly, truck move- 
ments frequently result in freight absorptions, sometimes because of the 65% 
allowance for shipments in buyers' own trucks, and also, because of deliveries 
within the switching limits of basing points, where only the "switching arbi- 
traries" 

Mr. Fairless (interposing). We admit they are arbitrary. 
Acting Chairman King. [Reading further from "Exhibit No. 
1418":] 

are included in the delivered price. Third, the rates of common carrier trucks, 
regulated by governmental agencies, are seldom much lower than rail freight rates, 
and sometimes are higher. Fourth, at the majority of mills it costs more to load 
steel into trucks than to load into railroad cars, and furthermore delivery to trucks 
involves inccnvenience, loss of time, and other similar considerations which cannot 
easily be translated into dollars and cents. It seems clear that the mills are not 
profiting as a result of truck deliveries. The criticisms on this score are more 
cheoretical than real. 

Does that substantially reveal the situation now with respect to 
the matter indicated in the sentences which I have just read? 
Mr. Fairless. Yes, sir. 

1 Appendix, p. 14619. 



14240 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Senator, I. would like to point out the fact that if 
some mill made an allowance of 66 percent instead of 65 percent, it 
would throw off the delivered price to that 'extent, and this resolution, 
still in effect, and according to the corporation's own statement in 
"Exhibit No. 1418," says that generally exists in the industry. 

As to the matter of cost, Mr. Adams has testified that it had 
some relation to cost, but the obvious fact is that the costs of various 
mills differ and this is at least a 35 percent standardization; and 
furthermore the 35 percent applies to the all-rail freight rate, which 
means if you apply a fixed percentage to a varying base figure, you 
get all sorts of variations in actuality. It can, therefore, have no 
real relation to the actual costs of any particular mill. 

Mr. Reynders. Was it not brought out on Saturday, where you 
arrived at a disproportionate charge, that an adjustment was made 
in that allowance in case of falling prices? 

Mr. Wooden. I don't know just what you mean. Do you refer to 
freight absorption? 

Mr. Reynders. I refer to the fact, as I remember it, that the steel 
corporation, where the charge — this remnant of 35 percent, became 
unreasonable, that then the corporation made an adjustment. 

Mr. Wooden. I don't know about that, but the statement in the 
pamphlet is that that practice of using the 35 or 65 percent, as you 
view it, is generally practiced in the industry. 

This resolution ^ regarding thcf arbitrary switching charges recites 
that it was impossible to ascertain in advance of the sale the correct 
published tariff switching charges. Why was it important to ascer- 
tain that in advance of the sale unless you wanted to make the sale 
at a delivered price and make it according to a stated figure for the 
switching charge? 

Mr. Fairless. I don't believe I understand your question. Judge. 

Mr. Wooden. Read it, please. 

(The reporter read the question.) 

Mr. Pike. That is not the question. I think you have "important" 
where the Judge said "impossible." 

Mr. Wooden. Important is right. 

Mr. Pike. I thought you said impossible. 

Mr. Fairless. The answer, I believe, to your question is that we 
sell our steel products on a delivered-price basis; we quote on that 
basis. Naturally we must know the transportation costs involved or 
we could not quote the delivered price. 

Mr. Wooden. You don't have to know an arbitrary charge. Why 
don't you use your actual charge and be done with it? 

Mr. Fairless. I have given our reason. The record is complete so 
far as I am concerned; 

Mr. Wooden. If you used your actual switching charge, you would 
have different delivered prices, would you not, from competitors using 
a different switching charge rate? 

Mr. Fairless. More important than that, we would have 

Mr. Wooden (interposing). Is not that a fact? 

Mr. Fairless. As you stated it, it is absolutely a fact, but more 
important than the way you put the question is that also we would 
have customers, actual customers competing with each other in the 
same switching area, that we would be (^harging various prices for steel. 

« "Exhibit No. 2206". appendix, p. 14435. 



CONCENTRATION OF ECONOMIC POWER 14241 

Our only difference, as I see it, is the basis for uniformity. Your con- 
tention is that it is from a competitive standpoint, and my contention 
is that it is to treat all our customers within a single area on the same 
basis. 

Mr. Wooden. Did not the resolution itself ("Exhibit No. 2206") 
recite that it was from a competitive standpoint that this arbitrary 
switching charge was to be imposed? 

Mr. Fairless. During the code, when it was compulsory to arrive 
at uniform prices; you must liaye some basis. 

Mr. Wooden. But this practice, you state in your pamphlet, is 
still generally in effect. 

Mr. Ballinger. Mr. Fairless, why should j^ou be very anxious to 
put the buyers of steel on the plane of eguality if for instance they have 
unequal costs in transportation. For instance, I am a buyer of steel, 
and I enjoy a natural advantage in transportation, namely it is 
cheaper to ship to me than to ship to my competitor; why should 
you be anxious to penalize me for my advantage? 

Mr. Fairless. We are not, Mr. Ballinger, but the thing we attempt 
to do is to treat all customers alike price-wise in their respective terri- 
tories. There may be every reason, and there are, why a manufac- 
turer located in Boston might not expect to realize the same delivered 
price as one located in Chicago, but our policy is that all of our 
customers in Boston and particularly those that are in competition 
in Boston, should receive the same delivered price from us, and all 
those in Chicago should receive the same delivered price from us. 

Mr. Ballinger. Even if they enjoy an advantage, one buyer, 
namely, that his switching charge in actuality should iie less; that is 
one of the advantages he enjoys in business? 

Mr. Fairless. When you get into a switching area, the advantage 
is not very big, and the practical workings of this industry would bring 
about a uniform charge. In other words, to make my point clear, 
if we did not have this so-called arbitrary switching charge in Pitts- 
burgh, my opinion and judgment — knowing the workings of this 
industry — are that the charge would be 55 cents, because that happens 
to be the minimum charge in the district. 

That is where competition would finally finish. The minimum 
charge in a particular district would be the practical charge. 

Mr. Ballinger. But the maximum charge might throw you off; 
wouldn't it? 

Mr. Fairless. You wouldn't charge, in a practical way, that 
maximum charge. 

Mr. Ballinger. I thought switching charges varied with the 
actual transaction, an actual switching charge for a transaction. 

Mr. Fairless. Not within the switching limits. You see, this 
Pittsburgh c-istrict is defined by the railroads. Your question is, if 
you happen to be a buyer there, as I understand it, you have this 
minimum, and a competitor of yours has ine 99, the maximum; why 
should you not enjoy that advantage? Well, my answer to that is 
competition. You might be my customer, at least I hope you would 
be if you wore there, and the 99-cent fellow might be X company's 
customer; the 99-cent fellow would ^o to his source of supply, >and I 
am sure, knowing the workings of this industry, that he would finish 
at the 55-ceijt charge, so your so-called advantage would vanish. 



14242 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Why is it jiecessary to have a resolution defining 
this with such great exactitude in that event? 

Mr. Fairless. Well, Judge Wooden, I don't know why I should 
keep explaining the code. You know the code, you knew the 
N. I. R. A. 

Mr. Ballinger. Why wouldn't competition work it out? Why 
have a resolution about it? 

Mr. Fairless. Every transaction, every commercial transaction, in 
the steel industry during the code was handled in that manner. 

Mr. Ballinger. You give a beautiful point that competition would 
work this out, but then you give an arbitrary resolution about it. This 
would be a beautiful chance for the industry to prove it is competitive, 
let it alone, let competition settle it. Why have an arbitrary 
resolution? 

Mr. Fairless. It isn't a resolution. We could name, or any sub- 
sidiary of the United States Steel Corporation could name, any de- 
livery charge in any of these districts they choose; we are not bound 
by any resolution. 

Mr. Wooden. But the practice continues according to the principles 
stated in the resolution. 

Mr. Fairless. It does, and it does so because it is fair and because 
it is practical, because it is reasonable and because it is accepted by the 
buyers of steel. 

Mr. Ballinger. Switching to Another point, this question of truck- 
ing, if trucking is more economical, after you make allowance for all 
cost and the fellow owns his own trucks, you say you don't want to 
let him take his material away in trucks because it wouldn't put all 
buyers on an equal plane. This raises the point a little more force- 
fully because there might be genuine economies in this illustration of 
considerably greater magnitude than switching charges. I ask you why 
is it that you want to put a man who buys for delivery by truck and a 
man who buys for delivery by rail on a parity, when there may be an 
economy from trucking. You don't get the transportation charge 
anyway, and if he wants to elect a cheaper method of transportation, 
isn't he exhibiting what we call capitalistic initiative, and you are sort 
of penalizing him at that point and saying he can't do it. 

Mr. Fairless. We are not penaliziag him at all and we are not 
trying to dictate to him the type of transportation that he might 
select. We are only pointing out to this committee that our mills 
were built and laid out, designed, to transport steel through the rail- 
road method. That was the only method in existence at that time. 
We are also pointing out to this committee that in respect to our 
delivered prices in any particular locality, if it is cheaper for the 
delivery to be made by truck it is perfectly, of course, perfectly all 
right with us that delivery be made in that manner, but we do want a 
method of handling that transaction that will insure imiformity to aU 
buyers of our product in that locality, and if he chooses not to use 
trucks it is all right. 

Acting Chairman King. That is to say, if I understand you, if you 
circumscribe an area, say 100 miles in diameter, and if you sell to half a 
dozen plants in that field of operation, some of the purchasers would 
prefer to haul from your plant by truck, others would utilize the rails, 
and your view is that you should see that all of your purchasers would 
have the same price for steel within that area. 



CONCENTRATION OF ECONOMIC POWER 14243 

Mr. Fairless. Yes. 

Acting Chairman King. And that one who hauled b^r truck might 
not have advantage over the man who obtained his by rail. 

Mr. Fairless. Yes; and also that we would be compensated for 
the extra costs that we have in handling truck shipments versus rail- 
road shipments. There is an invoice for every truckload of steel just 
the same as there is for every carload of steel; in one case you are 
dealing with 5 tons, 3 tons, 10 tons, versus 50 or 70 tons. We would 
have trucks coming in at all hours of the night disturbing our schedules 
of loading. It would entail keeping billing clerks and loading forces 
out waiting for a truck to arrive that had been scheduled. The 
customer wants the material, and there are many additional costs. 
I wouldn't testify before this committee and say that in each and 
every single transaction the 65 percent allowance was perfectly 
adequate and we didn't gain or we didn't lose, or that it was a break- 
even in every case; it isn't, but to the best of our judgment and to the 
extent to which our studies have provided the information, it is the 
best reasonable average where it can be applied. There are points, and 
many of them, where it can't be applied at all, and there we negotiated 
with the user of steel and we arrive at a satisfactory basis. 

Acting Chairman King. I assume from your statement just made 
that in some cases it costs more to the company, to the mill, to take 
care of the trucking exports, and so on, than it would if you shipped 
by rail. 

Mr. Fairless. Oh, yes. 

Acting Chairman King. It is a disadvantage to the company to 
ship by trucks? 

Mr. Fairless. It is a disadvantage, yes, cost-wise. Then there is a 
safety factor. Keep in mind if you take a plant like Gary, of course 
we are all reas )nable men and we know that we are not talking about 
all of Gary's production shipped by truck, no one is, but imagine if 
you had to handle through the Gary works of the Carnegie-Illinois 
Steel Corporation, say, 10,000 tons of steel in 24 hours and handle it 
by truck. You just have a physical impossibility to deal with, it 
just couldn't be done. 

Mr. Reynders. Mr. Chairman, I think that they will usually have 
to load the material first on a flat car in many instances and then 
in another part of the plant they wiU handle that material with the 
locomotive freight. 

Mr. Fairless. Well, our mills are laid out in line and the steel is 
finished on the finishing end and there is space provided there for 
bundling and the various preparations for shipment, such as oiling, 
wrapping, whatever the case might be. 

Mr. Wooden. Some mills 

Acting Chairman King. Let him finish his statement. 

Mr. Fairless. Pardon me, and here is your railroad track, your 
car is provided, it is a continuous operation. You interpose trucks 
and you have quite a different problem, unless it is limited to a reason- 
ably small percentage of your production. If we took our bar mills 
and had to ship the complete production of the Gary bar mills — they 
are all laid out, as any of you who have seen them Imow, in a row, all 
feeding into a common finishing department and likewise a common 
loading department; if the production of those mills running as they 
happen to be running now had to be handled by truck we would 
nr.PT.Qff> T would sav ohr^■•^^■ 9 r^o-r-" r. ^-op]^ That would be rav s'uess. 



14244 CONCENTRATION OF ECONOMIC POWER 

Mr. O'CoNNELL. Eefcrring again to the IN. R. A. period, as 1 
understood the testimony, the purpose, at least one of the purposes, 
of having an arbitrary switching charge and a fixed percentage reduc- 
tion or addition, as the case may be, for truck transportation, and so 
forth, was to arrive at uniformity in price during that period. That 
was the i)ohcy with the N. R. A. philosophy, as I would understand it, 
and you indicated that at that time it was a compulsory arrangement. 

Mr. Fairless. It was compulsory. 

Mr. O'CoNNELL. But these particular elements that we have been 
discussing were for the purpose of arriving at uniformity in price. 
It is no longer compulsory, but is it not fair to say that to the extent 
that these practices exist in the industry today they result in the same 
uniformity in price that you tried to get under N. R. A.? 

Mr. Fairless. Well, in respect to that one factor in price. 

Mr. O'CoNNELL. That is right. 

Mr. Fairless. But keep in mind that under the N. I. R. A. it 
wasn't just uniformity in respect to the switching charge or the 
allowance for trucking, it also went back to the base price. 

Mr. O'CoNNELL. So as of today you have a base price, you have a 
uniform freight rate book, you have an arbitrary switching charge, 
which is generally used in the industry, and you have a 35 percent 
addition for truckage, which is ordinarily generally used in the in- 
dustry, and those are about all the elements that go to make up the 
price, plus the extras which are also uniform in the industry. Is that 
not true? All the elements that I have mentioned 

Mr. Fairless (interposing). That isn't all, there are many others, 
but that is 

Mr. O'CoNNELL (interposing). To the extent that the practices 
are generally used it would result in the same kind of uniformity of 
price that you had in the N. R. A., wouldn't it? 

Mr. Fairless. I don't want to be technical, but I am not going to 
admit that there is uniformity of the base price — start there, there is 
no uniformity of base price in this industry today as compared with 
the code. 

Mr. O'CoNNELL. As compared with N. R. A.? 

Mr. Fairless. Yes; so we have our competition beginning in the 
first transaction that you mentioned, base price. 

Mr. Ballinger. All these uniformities plus a uniform base price 
would bring you out exactly where the N. R. A. was. 

Mr. Fairless. Mr. Ballinger, it is my opinion — this is just a steel 
man's opinion — that it would be impossible to set up rules and regula- 
tions that this industry wouldn't find some way to change and be 
highly competitive. 

Mr. Wooden. In other words, there would be no danger, in your 
opinion, in permitting the industry to get together and make any kind 
of regulation and resolution it wanted to because you feel they wouldn't 
follow it. Is that right? 

Mr. Fairless. Certainly not. I certainly didn't say that and I 
certainly don't expect to let that statement stand as coming from me. 
That would be illegal. Now if we are operating this industry illegally, 
why, prosecute us and put us in jail where we would belong. 

Mr. Wooden. As a matter of fact, Mr. Fairless, some mills are 
much better located than others or much better equipped for handhng 
truck deliveries than others, are they not? 



CONCENTRATION OF ECONOMIC POWER 14245 

Mr. Fairless. Yes; in respect to markets. 

Mr. Wooden. Some of them more or less cater to truck delivery, 
do they not? 

Mr. Fairless. Cater to it? 

Mr. Wooden. Yes. 

Mr. Fairless. They might, they might. 

Mr. Wooden. When you charge 35 percent of the all-raU rate on 
delivery by truck, you have there an addition, have you not, of that 
amount to your base price in the form of your mill-net on that trans- 
action? 

Mr. Fairless. In answer to your question, Judge, the first part of 
your question — I would like to answer the entire question — if I were 
the owner of a mill where delivery of my product by truck was more 
advantageous to me than by rail, I would certainly cater to trucking 
delivery and I would sell my goods on a basis that would produce all 
the sales for deUvery by truck that I could get. 

Mr, Wooden. But my question is, when you charge 35 percent of 
the all-rail freight for delivery by truck, that 35 percent goes to 
increase or swell your base price by that much, doesn't it? 

Mr. Fairless. Less the costs involved. 

Mr. Wooden. Yes; but costs are involved in your base price as 
well. 

Mr. Fairless. Certainly. We can't run our business on the basis 
of giving emphasis to everything except the cost. We must consider 
costs in running this business. 

Mr. Wooden. The purchaser by truck who is charged this 35 per- 
cent of the all-rail freight pays you more by that amount than the 
rail purchaser who takes rail delivery, doesn't he? 

Mr. Fairless. Well, the delivered price is the same. 

Mr. Wooden. Yes; but I am talking about what you get. You 
get that 35 percent in your mill-net yield, don't you, that you don't 
get from the rail purchaser? 

Mr. Fairless. No, we don't get it in our mill-net yield because to 
the extent that higher costs are involved it is absorbed to that extent. 
That is the constant consideration. 

Mr. Wooden. Outside of that factor of costs in the loading for 
truck delivery. Less your cost of loading for truck delivery that 35 
percent goes as an increment to your base price, doesn't it? 

Mr. Fairless. Do you want me to say yes? I'll say yes. 

Mr. Wooden. Do you have available here price announcements, I 
think, of the Carnegie-Illinois Co. in the early summer of 1936 regard- 
ing the terms on which products sold for identified structures and 
fabricated-in-transit may be sold? Will you produce them? 

Mr, Fairless, I believe that is one of the exhibits the Federal 
Trade Commission asked for and was sent to you. 

Mr. Wooden. Well, I would like to use it here. I will ask you to 
produce a copy. 

Acting Chairman King. Haven't you a copy? 

Mr. Wooden. I have an excerpt from it. I don't have the original. 

Acting Chairman King. Do you desu*e to put the excerpt in the 
record? I assume there is no dispute as to the text. Put the excerpt 
in subject to correction when you get the original copy, if that is 
agreeable. 

Mr. Wooden. I will pass on. 



14246 CONCENTRATION OF ECONOMIC POWER 

I submit this document for the record. 

Acting Chairman King. It may be received. 

(The document referred to was marked "Exhibit No. 2208" and is 
included in the appendix on pp. 14437-14441.) 

Mr. Wooden. Mr. Fairless, I am showing you a document marked 
for identification Exhibit No. 2208. Do you recognize it and accept 
it as a copy of the resolution adopted by the Board of Directors with 
regard to the use of Freight Tariff No. 1 and known as Regulation 
No. 4 of the code? 

(Mr. O'Connell assumed the Chair.) 

Mr. Fairless. Yes, I accept all these code resolutions on the basis 
that I have outlined. 

Acting Chairman O'Connell. If you have any more of those you 
may just identify them as resolutions of the code and they may be 
identOied by Mr. Fairless subject to check if there are errors in them. 

FREIGHT RATE COMPILATIONS BY THE IRt)N AND STEEL INSTITUTE 

Mr. Wooden. All right. The Institute has continued to keep up 
to date, has it not, the freight tariffs which were compiled pursuant 
to and referred to in this resolution that I have just called your atten- 
tion to? 

Mr. Fairless. Well, not pursuant to that resolution. They do 
keep up as I have already testified, this so-called freight book. 

Mr. Wooden. It does continue to put out freight rates, freight-rate 
compilations, showing all-rail freights from various basing points to 
destinations, and not only all-rail rates but rail and water rates to 
certain portions of the country? 

Mr. Fairless. To the best of my knowledge it is an up-to-date 
pamphlet, or kept up to date as near as it is reasonably possible to do 
so, of all transportation charges and changes, all on the basis of actual, 
factual information. 

Mr. Wooden. Is that the work of the traffic committee of the 
Institute? 

Mr. Fairless. I so testified Saturday morning. 

Mr. Wooden. Mr. Adams, you said that the Institute freight books 
include freight from points that are not basing points for particular 
products. Are you sure of that? 

Mr. Adams. That was my recollection, Mr. Wooden. I can't say, 
I am not positive. 

Mr. Wooden. You are not real sure? 

Mr. Adams. No. 

Mr. Wooden. As a matter of fact, don't the Institute compilations 
show the rates only from basing points on particular products? 

Mr. Adams. I said I am not quite sure of that point. I know that 
the freight rate book does show the freight rates from basing points to 
innumerable destinations. 

Mr. Wooden. Why did you testify the other day so readily and 
volunteer that it includes freight rates from nonbasing points? 

Mr. Adams. That was my opinion, Mr. Wooden. 

Mr. Wooden. Do you want to stand on it now? 

Mr. Adams. I will say I don't know definitely regarding that one 
point. 



CONCENTRATION OF ECONOMIC POWER 14247 

Mr. Wooden. Don't you know as a matter of fact that the Institute 
freight books show freight rates only from basing points? 

Mr. Adams. No, I don't know that definitely either. The Institute 
freight rate book is the record, as we have testified, of the freight 
rates which are public property and obtained from railroads. We 
don't always use that freight rate book because you might say that 
is not up to date, it takes time to get the rates back from the Institute. 

Mr. Wooden. As a matter of fact, are there not a lot of producing 
points that are not shown in the Institute freight books? 

Mr. Adams. Well, again you are asking me a question, Mr. Wooden, 
that I thought I answered. I can't say specifically just how many 
basing points are shown in the freight rate book. 

Mr. Fairless. Obviously Mr. Adams and myself wouldn't be as 
familiar with the details of that book as our traffic people. 

Acting Chairman O'Connell. You were trying to develop from 
Mr. Adams if he knew whether the freight hook as compiled included 
freight from points other than basing points and apparently neither 
of you people are in position to say dogmatically whether that is so 
or not. 

Mr. Adams. I don't think we as individuals ever refer to the 
freight rate book because our traffic department always supplies 
us with that information as to a specific rate on a specific transaction. 

Acting Chairman O'Connell. I think the question is one you 
might very well have known the answer to inasmuch as it is a com- 
pilation by the Institute, you are familiar with the operations of the 
Institute generally, and I think the question is one you might have 
known the answer to, but proceed, Mr. Wooden. 

Mr. Fairless. Mr. Chairman, I don't imagine that I. have seen 
the freight book more than two or three times in its existence. I 
don't use it. 

Acting Chairman O'Connell. But the general question as to what 
would be mcluded in the rate book might very well come to your 
attention as a member of the Institute, I take it. 

Mr. Fairless. Not necessarily. When the book came into being 
I was not a director of the Institute. Our traffic department would 
be able to answer any question pertaining to it. 

Mr. Wooden. I submit these tables for the record. 

Acting Chairman O'Connell. They may be admitted. 

(The data referred to were marked "Exhibit No. 2209" and are 
included in the appendix on pp. 14442-14443.) 

Mr. Wooden. Mr. Adams, wiU you look at the sheets marked 
"Exhibit 2209" and which are sample sheets or some sheets taken 
from the freight rate book of the Institute? Do you recognize them 
as being in the form and substance of what the Institute puts out? 

Mr. Adams. I think that is correct, Mr. Wooden. 

Mr. Wooden. Will you look at those sheets and tell us whether 
there are not a .number of producing points in the shipping area of 
the destinations shown there that are not shown as the place from 
which the rates are calculated? 

Mr. Adams. Well, in glancing quickly through this list of towns 
it is apparent that most of them are producing points and basing 
points. 

Mr. Wooden. I beg your pardon? 



14248 CONCENTRATION OF ECONOMIC POWER 

Mr. Adams. Iu glancing quickly through this list of towns I woula 
say that most of them are basing points and producing points, Mr. 
Wooden. That is the list across the top of this page citing Chicago, 
Gary, Cleveland, Detroit, Lorain. 

Mr. Wooden. Are there not a number of shipping points in the 
shipping area, so to speak, of Connecticut, to which these sheets relate 
that are not shown on those sheets, a number of places of production 
and shipment? 

Mr. Adams. Do you mean a number of points where steel is not 
produced? 

Mr. Wooden. Wliere it is produced and yet not shown on those 
sheets. 

Mr. Adams. Well, I don't know that I can answer that question 
specifically because I couldn't tell you just how many locations there 
are in Connecticut where various grades of products 

Mr. Wooden (interposing). I am not speaking about shipments 
in Connecticut but to Connecticut which those sheets give the rates 
for. I am talking about places of production between Chicago and 
running easward that are not shown on those sheets and yet which 
produce steel for shipment into Connecticut. 

Mr. Adams. Yes, there would be some such cases. 

Mr. Wooden. There are quite a number of them in fact, are there 
not? 

Mr. Adams. I don't know honestly how many there are. 

Mr. Wooden. You know the location of plants and the physical 
set-up and distribution of the steel plants in the country, don't you? 

Mr. Adams. Yes; generally speaking. 

Mr. Wooden. Then tell us some plants between Chicago and the 
east that are not shown as shipping points on those sheets. 

Mr. Adams. Well, speaking for the Steel Corporation I don't see 
Allentown listed there. That is a plant where we produce plain wire. 
It is not a basing point plant. 

Mr. Wooden. It bases on Pittsbm-gh, doesn't it? 

Mr. Adams. The nearest basing point on plain wire for shipment 
to certain points in the metropolitan area is 

Mr. Wooden (interposing) . It bases on Pittsburgh? 

Mr. Adams. The nearest basing point is Pittsburgh there. Now 
let me explain that, please, Mr. Wooden. That plant is a small 
plant, it manufactures plain wire only. The Form B returns for 
February showed that that plant produced roughly 700 tons, only 
700 tons during the month of February 1939. 

Mr. Wooden. Doesn't it produce naUs also? 

Mr. Adams, I have it listed here as wire products only. Of that 
700 tons, 650 tons were shipped abroad for export, 54 tons went into 
the metropolitan area. That is not a basing point mill. 

Mr. Wooden. I want to know some of the competitive mills east 
of Chicago that ship into Connecticut and whose locations are not 
shown as shipping points on these Institute freight sheets. 

Mr. Adams. Have you any in mind, Mr. Wooden? 

Mr. Wooden. You know the industry. You have only about 12 
or 15 shipping points there; there are many more places of production 
east of Chicago for shipment into Connecticut, are there not? 

Mr. Adams. Yes. 



CONCENTRATION OF ECONOMIC POWER 14249 

Mr. Wooden. Can't you give us the names of some of them and 
the location of their plants? 

Mr. Adams. Well, you might say Niles, Ohio, Niles Rolling Mills. 
I don't see Niles listed here. That is a point of production, Niles 
Rolling Mill Co. manufacturing sheets. 

Mr. Wooden. How about Middletown? Is that there? 

Mr. Adams. That is a basing point, I don't see it listed here. 

Mr. Wooden. For some products? 

Mr. Adams, On sheets. 

Mr. Wooden. What about Indianapolis? Is Indianapolis on 
there? Indianapolis is a producing point, isn't it? 

Mr. Adams. Not a producing point for any of our mills. 

Mr. Wooden. Isn't it a producing point for Continental Steel Cor- 
poration? 

Mr. Adams. Yes. 

Mr. Wooden. The Continental Steel Corporation couldn't use 
that sheet for getting the freight rate from its own plant at Kokomo. 
could it? Of course, it also has an IndianapoUs plant. 

Mr. Adams. No; it couldn't use this sheet for that purpose, 

Mr. Wooden. It couldn't use that sheet for any purpose except to 
figure the delivered price according to the basing points that are shown 
on that sheet, could it? 

Mr. Adams. Well, it could use this sheet to ascertain the published 
tariff from one point to a destination. 

Mr. Wooden. From points at which it has no shipments to make. 

Mr. Adams. That is correct. Of course, we have testified that we 
don't use the freight book exclusively ourselves. 

Actmg Chairman O'Connell. Are there freight rates, shown for 
other than basing points in that freight-rate book, assuming that the 
industry uses the basing-point system? 

Mr. Fairless. Not for the general use of the steel industry. Of 
course, there isn't any mystery about the actual freight rates from 
any 'producing point. It is available, I would imagine; I know it is 
in our traffic departments, various traffic departments; I assume it is 
in the offices of other companies. 

Acting Chairman O'Connell. But this book to be useful in con- 
nection with a basing-point system would need no rates other than 
rates for basing points? 

Mr. Fairless. It is an instrument that is very useful in our present 
method of merchandising steel products. Now it is particularly use- 
ful to smaller companies, as I testified before. 

Mr. Wooden. Providing they want to quote on the basis of basing 
point plus freight. We just had some cases here where the shipping 
points of some companies were not included and could serve no other 
purpose. 

Acting Chairman O'Connell. You were trjdng to develop whether 
or not there were freight rates for points other than basing points 
and if, as I understand it, this freight-rate book is intended to im- 
plement the basing-point system for prices it seemed to me reasonable 
to conclude that there were no freight rates shown in the book other 
than freight rates from basing points. 

Mr. Wooden. I wouldn't want to say necessarily that there is 
nothing l)ut basing-point places of shipment shown. That is pos- 



14250 CONCENTRATION OF ECONOMIC POWER 

sibly too wide and sweeping an assertion, but there are many places 
of production and shipment that are not shown. 

Mr. Chairman, I would like to read Jor the record at this time a 
portion of the testimony of W. A. Il-vin, president of the United 
States Steel Corporation, in 1936, from his testimony before the Sen- 
ate Committee on Interstate Commerce, page 596 of the printed 
record of those hearings on Senate Bill 4055. This question was 
asked: 

The Chairman. Do not representatives of your companies participate in 
meetings with other steel companies at which market conditions and prices are 
discussed? 

Mr. Irvin. We talk of market conditions. That is one of the functions of the 
Institute when we get together. We talk of market conditions, what the possibil- 
ities are, and the prices in various localities, foreign competition, how much is coming 
in at this port or that port, and at what price it is coming in; at which price foreign 
materials are being sold at the various seaports, and anything that would naturally 
arise in connection with the steel industry, and other industries as well. 

I also would like to read from a portion of his testimony on the same 
occasion from page 595 of that same document; being questioned as 
to how the base prices were determined : 

Mr. Irvin. I would say we generally make the prices. 

The Chairman. You generally make the prices? 

Mr. Irvin. Yes, sir. We generally make the prices, unless some of the other 
members of the industry think that that price may be too high, and they make 
the price. 

The Chairman. You lead off, then, with a price charg'ed, either up or down, at 
Gary. Is that correct? 

Mr. Irvin Yes. 

The Chai tMAN. I notice the price on March 19 at Chicago for soft steel bars 
was $1.90, ^ hile at Pittsburgh the price was $1.85. 

Mr. Irvin. Yes. 

The Chairman. When the Iron Age printed that announcement, did they ask 
Bethlehem or did they ask you, or from what company did they receive that 
information? 

Mr. Irvin. I do not think I can answer that. 

The Chairman. At any rate, you were the one that fixed it? 

Mr. Irvin. We fixed our own price at $1.90 and $1.85'; we always notify the 
trade papers; I think our commercial people always notify the trade papers and 
others interested as to what our prices are. 

The Chairman. Then the rest of them follow that? 

Mr. Irvin. I think they do. That is, I say they do generally. They may 
quote the same prices, but maybe they need some business and make a better 
price. We do not always know that until it is over. 

The Chairman. Those are the exceptions, are they not? 

Mr. Irvin. Yes. 

The Chairman. Those are looked upon as the price-cutters in the industry? 

Mr. Irvin. Yes; and we have them with us always. 

The Chairman. They represent a comparativley small percentage, do they not? 

Mr. Irvin. It depends. Senator, on business conditions. I would say that 
when we are going at 30 or 40 per cent, we have more of them with us than when 
we are going at 60 or 70 per cent. 

And also from page 607 of that same document. 

Acting Chairman O'Connell. Do you intend to examine Mr. 
Fairless about this? 

Mr. Wooden. No; I am putting it in at this time, Mr. Chairman, 
because of Mr. Fairless' testimony that representatives of his company 
and subsidiaries did not discuss prices with competitors. 

Acting Chairman O'Connell. When was that testimony given? 

Mr. Wooden. Saturday morning, I believe. 

Acting Chairman O'Connell. I mean that which you are reading. 

Mr. Wooden. 1936. 



CONCIlNTtlATlON OF ECONOMIC POWER 14251 

Acting Chairman O'Connell. What was your position at that 
time, Mr. Fairless? 

Mr. Wooden. He wasn't with the Corporation. 

Mr, Fairless. In 1936? Oh yes; I was with the Corporation. 

Mr. Wooden. What was your position? 

Mr. Fairless. In respect to what? 

Mr. Wooden. In the company, your ofl&cial position. 

Mr. Fairless. President of Carnegie-Illinois Steel Corporation. 

Mr. Wooden. That is the most important subsidiary of the United 
States Steel Corporation, isn't it? 

Mr. Fairless. Yes; it is the largest. 

Mr. Wooden. The testimony of Mr. Irvin was given in March or 
April 1936. 

Mr. Fairless. Are you asking me a question? I haven't the 
question. 

Acting Chairman O'CoNNEtL. I don't believe he has asked a 
question. 

Mr. Wooden. On page 607 of that same document, Mr, Irvin 
testified with regard to concessions: 

I think by and large that a very large percentage of the steel or other commodi- 
ties that are sold in that way are sold on a fair price basis to most of the users. 
The customers who are apt to get concessions are those having larger orders to 
place, and the ones who utilize steel in their own production. 

On page 592 of the same document: 

The Chairman. You spoke of these prices. Let me ask you this: If they 
followed the system or the method of using the base price plus the all-rail freight, 
then they would all sell at the same, price, would they not? 

Mr. Irvin. If everyone would use that, without deviation, it would be the 
same. They would all be the same. 

The Chairman. When they do not use that system, and there is a lowering, 
the man that does it is looked upon as a price cutter, is he not? 

Mr. Irvin. Yes, sir. 

Mr. Wooden. Will dne of you gentlemen representing the Corpo- 
ration here identify these documents? 

Mr. Fairless. We identify them. 

Mr. Wooden. As being the tabulations underlying the statement 
made in "Exhibit No. 1418" regarding the result of an examination 
of records on bids to the Federal Government? 

Mr. Fairless. That is correct. 

Mr. Wooden. Mr. Chairman, I offer for the record these two 
volumes of tabulations on Government Tonnage Records, just identi- 
fied by the witness. 

Acting Chairman O'Connell. They may be admitted. 

Mr. Wooden. Mr. Chairman, it will be necessary through another 
witness to go into these documents, but I don't know that it is nec- 
essary while the present witnessess are here. We have analyzed the 
showing rilade in those exhibits and we propose to show that the 
statement made in "Exhibit No. 1418" is quite wide of the facts, 
based upon their own underlying data which they have produced. 

Acting Chairman O'Connell. I don't think it is necessary to mcke 
any comment on that at this time. You intend to produce a witness 
later who will analyze the material underlying this material? 

Mr. Wooden. That is right. 

Acting Chairman O'Connell. I am a little at a loss. 

124491 -41 — |.f. 27 — n 



14252 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. The statement in "Exhibit No. 1418," to which I 
refer, reads: 

Identical quotations probably occur more frequently in sealed bids to govern- 
mental bodies than in private sales of steel products. There are two reasons for 
this: (1) The sealed bid practice required by statute prevents public agencies 
from bargaining individually with producers as is usually done by private buyers; 
(2) Sealed bids are eventually pubhshed and although a producer may be willing 
to quote a lower price on a private sale he is reluctant to do so when he knows 
that such lower price will soon be published and possibly may have to be made 
applicable to every similar ton of steel sold by him in the future. Nevertheless, 
in spite of this tendency, identical bids on governmental contracts are by no means 
the general rule. An examination of records covering Federal Government awards 
for steel products made at Washington, D. C, during 1938 and the first quarter 
of 1939, indicates that such awards aggregated approximately $10,500,000, of 
which about 80 per cent in value went to the lowest bidder and only about l6.5 
per cent in value by lot on account of identical bids. The balance of 3.5 per 
cent was awarded on a basis other than of price. 

Acting Chauman O'Connell. As I understand, it is yoitr desire to 
have this testimony that you have just referred to at a later time so 
that we may complete our examination of Mr. Fairless as soon as 
possible?' 

Mr. Wooden. Yes; that is right. I want to get through. 

Mr. Fairless. This is our record and we let it stand. 

Acting Chairman O'Connell. These are the documents just identi- 
fied which are the underlying data also from your records, are they not? 

Mr. Fairless. We identified these records. 

Acting Chairman O'Connell. As I understand it, Mr. ^Wooden is 
going to have another witness make an analysis of that data. 

Mr. Fairless. These were prepared by us and submitted to Judge 
Wooden at his request. 

Mr. Wooden. The Corporation takes the position, does it not, Mr. 
Fairless, in "Exhibit No. 1418," that the basing-point system was a 
natural- result of basic economic conditions and that it evolved over a 
long period of time to meet th6 peculiar characteristics of the industry? 

Mr. Fairless. I don't recall just the exact wording but I assume 
that you are quoting from the pamphlet. 

Mr. Wooden. In substance, yes. I refer to the foreword of "Ex- 
«hibit No. 1418" and page 26 of "Exhibit No. 1410."' I believe you 
said the other day that as far as you were concerned you didn't know 
how the system originated. Is that correct? 

Mr. Fairless. Yes, or when. I understand it has been in effect 
about 50 years. 

Mr. Wooden. Do you agree that the same principle in effect, or the 
basing-point system in principle has been in effect that length of time? 

Mr. Fairless. It is a simple statement that the basing-point system 
or rather the multiple-basing-point system is in effect, it began and 
grew with the industry, it developed with the industry, I believe. 

Mr. Wooden. Have you gone into the history of it? Have you 
made any study of the history of it? 

Mr. Fairless. With respect to what? 

Mr. Wooden. As to how the basing-point system originated? 

Mr. Fairless. Well, I have read a lot about the basing point, 
naturally. 

Mr. Wooden. Did you ever read the testimony in the Pittsburgh 
Plus Case before the Federal Trade Commission? 

' Both exhibits arc included in Hearings, Part 2G. 



CONCENTRATION OF ECONOMIC POWER 14253 

Mr. Fairless. Not in its complete form. 

Mr. Wooden. In what form did you read it? 

Mr. Fairless. I don't know. If you want to discuss the Pitts- 
burgh Plus Case — I am not a lawyer, it seems to me we are getting on 
legal groimds when you start discussing the Pittsburgh Plus Case. 

Mr. Wooden. No; I merely want to know whether the Corporation 
in making the statements that it did about the natural economic origin 
of the basing point system took into account the evidence in the 
Pittsburgh Plus Case or the findings of fact made by the Federal Trade 
Commission in that case. 

Mr. Fairless. Here is a footnote on page 15, section B, entitled 
"Historical Material." The footnote reads 

Mr. Wooden. My question was not that. 

Mr. Fairless. I believe it is. 

Material in this section was largely drawn from the Trial Examiner's report 
on the facts in the Pittsburgh Plus Case before the Federal Trade Commission 
of 1924. 

Mr. Wooden. Did you take into account the findings of fact of 
the Federal Trade Commission itself as distinguished from the trial 
examiner's findings? 

Mr. Fairless. Judge Wooden, I did not prepare this pamphlet. 
As I explained to you, in your original question, the man who was 
largely responsible for its preparation is not here. I couldn't under- 
take to discuss intelligently before this committee every statemeijt 
made in this pamphlet. 

Mr. Ballinger. Well, before the pamphlet was pubHshed you 
undoubtedly went over it with the expert who prepared it and he 
rather convinced you that it was all .right, didn't he; that is, he 
showed you all of his evidence in making those statements. 

Mr. Fairless. I went over it not with the man himself but with 
Mr. Olds and other members of our special group. This is fully 
documented here. 

Mr. Wooden. Did it come to your attention that the Federal 
Trade Commission found in its findings of fact in the Pittsburgh Plus 
Case that the system originated in an early form among the beam 
producers away back about 1880 and that it was for the purpose of 
fixing identical delivered prices? 

Mr. Fairless. No, sir. 

Mr. Wooden. Was it brought to your attention that the findings 
of fact of the Commission were to the effect that until after 1900 the 
basing-point system was not in effect except sporadically and on a 
very limited number of products? 

Mr. Fairless. I can't discuss that. 

Mr. Wooden. WeU, the Corporation says this is a natural economic 
evolution. I am directing your attention and asking you if you' have 
considered some of these other things that don't quite square with that 
contention. 

Mr. Fairless. WeU, to make our position perfectly clear, we have 
submitted for the record this pamphlet having to do with this impor- 
tant subject and that is our testimony. This particular Pittsburgh 
Plus Case you refer to I understand is under appeal at the moment; 
in other words, it is ill the counts, so I am not a lawyer and I couldn't 
go into the legal phases. 



14254 CONOEN'I'RATION OF ECONOMIC POWER 

Mr. Wooden. I am merely discussing matters of fact. Isn't it a 
fact that until the N. R. A. code put it into effect that there was no 
basing-point system on pig iron? 

Mr. Fairless. Pig iron, Judge, has in my experience 

Mr. Wooden (interposing). Can't you answer my question? 

Mr. Fairless. I am going to answer it, but some of these questions 
can't be answered by "yes" or "no." 

Mr. Wooden. That can. 

Mr. Fairless. By me it can't, so I have to answer the question as 
I know it and understand it. It has been my experience in the steel 
industry that generally speaking pig iron has been sold f. o. b, pro- 
ducing furnace, generally speaking. 

Mr. Wooden. Until when? 

Mr. Fairless. I said generally speaking, that is forever as far as I 
am concerned. 

Mr. Wooden. Isn't it a fact that pig iron was put under the basing- 
point system at the time the N. R. A. code went into effect? 

Mr. Fairless. Well, the merchandising of pig iron was put under 
the Steel Code it was a product under the Steel Code. 

Mr. WooDEiN. Weren't the various producing points for pig iron 
specified as basing points under the code? 

Mr. Fairless. They were for iron and steel. 

Mr. Wooden. And prior to that time pig iron had been priced and 
sold f. o. b. furnace, hadn't it? 

Mr. Fairless. Not entirely, but generally speaking; not entirely, 
I bought a lot of pig iron that wasn't purchased on the basis o' the 
producing furnace, but rather the producing area. 

Mr. Wooden. You have a basing point on pig iron at Provo, you 
say? 

Mr. Fairless. Do we have? 

Mr. Wooden. Yes. 

Mr. Fairless. I believe we haye. We sell very little iron, as you 
know. 

Mr. Wooden. But you do sell some? 

Mr. Fairless. We sell some. We consume most of our iron. 

Mr, Wooden. You sell some from Provo? 

Mr. Fairless. Some; a small percentage of the production. 

Mr. Wooden. And some other points from which you sell pig 
iron? 

Mr. Fairless. We sell pig iron in Cleveland, Pittsburgh, and 
Birmingham. 

Mr. Wooden. I thought you testified Saturday that you did not 
sell any pig iron. 

Mr. Fairless. I don't think I gave any such testimony. 

Mr. Wooden. All right, the record will show. 

Acting Chairman O'Connell. He diti not testify to that? Did hel 

Mr. Wooden. It was my understanding. 

Acting Chairman O'Connell. My recollection was 

Mr. Wooden. I asked about pig iron differential and he said, "I 
can't tell because we don't sell it." 

Mr. Fairless. I said the reason I could not answer your question 
was because any pig iron we sold in the South was from our Southern 
production, and in the North from our Northern production; there- 



CONCENTRATION OF ECONOMIC POWER 14255 

fore, if there was a differential for Southern iron deHvery in the North 
it didn't register with me; that was my testimony. 
Mr. Wooden. The record will show. 

COMPARISON OF PACIFIC COAST AND BIRMINGHAM PRICES 

Mr. Wooden. Is it not a fact that the price of bars on the Pacific 
coast at the Pacific coast ports is equivalent to the Birmingham base 
price on bars, plus the freight out there? 

Mr. Adams. I cannot say exactly; I don't think, it is. 

A^r. Wooden, I said the freight; I did not say all-rail freight, but 
I said the freight from Birmingham by water. 

Mr. Fairless. Yes; by water. It is an arbitrary delivered price on 
the Pacific coast ports; whether it represents the all-water, published 
rate from Birmingham or not, I cannot answer. 

Mr. Adams. Here appears the actual freight. 

Acting Chairman O'Connell. Did not we have testimony about 
that in November? My recollection was that the freight on these 
items delivered on the West coast was in amomit the Birmingham 
price plus the amount which was slightly less than that. 

Mr. Wooden. On different products. In some cases it was less and 
others it was slightly more. 

Actmg Chairman O'Connell. But it varied from the Birmingham 
price; that is in .he record. 

Mr. Adams. Here are the actual figures. The rail and ocean rate 
from Birmingham to San Francisco is 69 cents per hundred pounds. 
Our San Francisco basing point price is 50 cents higher than our an- 
nounced published Birmingham price. 

Mr. Wooden. Fifty cents higher? 

Mr. Adams. Yes, sir. So the actual rail and ocean rate from Bir- 
mmgham is 19 cents per hundred pounds higher than the rate or the 
transportation cost that we use in arriving at our delivered prices on 
the Pacific coast. 

Mr. Wooden. Is not the Pacific port price on bars based on Bir- 
mingham, plus, rather than on Pittsburgh? 

Mr. Adams. It is not based on either, from that standpoint. We 
announce a price on the Pacific coast covering several ports. It has, 
you might say, a relationship to our Birmingham prices or Pittsburgh 
prices, but it is a relationship which I define here insofar as Birming- 
ham is concerned as being 19 cents lower than the actual rail and ocean 
rate from Birmingham to the Pacific coast. 

Now we have done that, of course, because of foreign competition. 
We have the same problem at the Gulf coast ports. 

Mr. Wooden. You add a considerable amount of freight, do you 
not, from Birmingham in order to arrive at your Pacific coast port 
base price? 

Mr. Adams. No, sir; I don't think I can say that, because we an- 
nounce delivered prices at certain points on the Pacific coast and de- 
livered prices at cer.tam points on the Gulf coast. Now the prices 
that we announce are less than the base prices plus the actual trans- 
portation costs, and the reason they are less is l)ecause of this fereign 
competition. 

Mr. Wooden. Are they not built up witli reference to the eastern 
base prices, plus transportation? 



14256 CONCENTRATION OF ECONOMIC POWER 

Mr. Adams. I have just cited an example, Judge Wooden, and I 
don't know how you can say that you arrive at 50 cents as a transpor- 
tation cost when it is actually part of a published base price and the 
actual transportation cost is 69 cents. 

Mr. Wooden. On some products it is more than the actual trans- 
portation cost from the East, is it not? 

Mr. Adams. I don't know of any. If that is so I would like to 
know about it. 

Mr. Fairless. It could not be, Judge. 

Mr. Wooden. Well, you produce bars on the Pacific coast, do you 
not? 

Mr. Fairless. Yes, sir. 

Mr. Wooden. And you have in your Pacific coast base price an 
element that is pretty close to the freight or transportation cost from 
the eastern producmg points, do you not? 

Mr. Fairless. It is less than the actual transportation cost, Judge 
Wooden, but our assembly costs of course, on the West coast, that is 
the actual transportation cost involved in assembling our raw materials 
on the West coast, is higher than it is on the East coast, and of course 
the demand on the West coast is less than it is in the East. 

So you can't develop economies from the standpoint of having a 
large, completely integrated plant on the West coast, and when I say 
integrated I moan a plant which would produce all of the products 
that are produced in some of the large integrated plants in the eastern 
part of the country. 

Mr. Wooden. Did there come to your attention in connection with 
your statement that the basing point system evolved out of the natural 
economic conditions — did there come to your attention the findings 
of the Federal Trade Commission to the effect that the basing pomt 
system was not applied to the sale of tin plate until 1903? 

Mr. Fairless. I am not familiar with it. 

Mr. Wooden. That did not come to your attention? Did it come 
to your attention 

Mr. Fairless (interposhig). I would imagine there were very few 
producers of tin plate in the United States in 1903. 

Mr. Wooden. Did it come to your attention that prior to 1903 the 
corporation subsidiaries sold tin plate f. o. b. mill and not on a basing 
point system? 

Mr. Fairless. The corporation was formed in 1901, so you are 
speakhig about a 2-year period there that I am not familiar with. 

Mr. Wooden. Did it come to your attention that the Conxmis- 
sion's findings of .fact showed that the Pittsburgh plus system was 
adopted in 1900 by the National Tube Co. and that its competitors 
also adopted it about that time? 

Mr. Fairless. I am not familiar with that historic review. 

Mr. Wooden. Did it come to your attention that the Commission 
found that plate and structural shape producers met and agreed upon 
the Pittsburgh plus system in September 1903 and 1904; that the 
large wire producers, including one of your corporation subsidiaries, 
agreed on the Pittsburgh plus system as a method of maintaining 
uniform prices? 

Mr. Fairless. One answer, I think, would cover all of these (|ues- 
tions. I am not familiar with this particular historical review that 
you are giving. 



CONCENTIIATION OF ECONOMIC TOWER 14257 

Mr. Wooden. As a matter of fact, so far as you are concerned, you 
don't know whether the basing point system originated as a natural 
result of economic conditions or just how it originated, do you? 

Mr. Fairless. I am very confident that its development was due 
to the economic development of the United States. 

Acting Chairman O'Connell. We will recess now until 2 o'clock. 

(Whereupon at 12:35 o'clock the committee recessed until 2 p. m.) 

AFTERNOON SESSION 

The hearing was resumed at 2:20 p. m. upon expiration of the recess. 
Acting Chairman O'Connell. The committee will be in order. All 
right, Mr. Wooden. 

TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED 
STATES STEEL CORPORATION, NEW YORK CITY, AND AVERY 
C. ADAMS, VICE PRESIDENT, UNITED STATES STEEL CORPO- 
RATION OF DELAWARE, PITTSBURGH— Resumed 

Mr. Wooden. I was asking this morning for a copy of the Carnegie- 
Illinois Steel Corporation price announcement of June 4, 1936, cover- 
ing concrete reinforcing bars, and I believe it was suggested that if the 
excerpt which I have here were presented, it might be received and 
conceded to be an authentic statement of a price announcement of 
that corporation. 

Acting Chairman O'Connell. I think it can be received on that 
basis. 

Mr. Olds.^ I will be glad to send Mr. Wooden one tomorrow when 
I get back to New York. 

Acting Chairman O'Connell. Let's introduce the excerpt now, and 
if it is inaccurate we can correct it. I assume it is accurate." 

Mr. Wooden. I have a copy of the excerpt. 

Do you recognize that statement as one that appeared in your 
price announcement of Carnegie-Illinois? 

Mr. Adams. I don't recognize it; no. 

Mr. Fairless. I don't recognize it as such, but I am willing to 
assume that it was a part of the announcement. 

Acting Chairman O'Connell. Is it satisfactory to you that we 
proceed on that assumption, and we will have a complete copy of the 
price announcement put in the record tomorrow? I don't know what 
line of questions Mr. Wooden means to pursue. 

Mr. Olds. I don't know whether I can get it here tomorrow. I w ill 
mail it tomorrow when I get back to New York. 

Mr. Fairless. On that assumption, I am willing to proceed. 

Mr. Wooden. Now this relates to the method of making dehvered 
prices on products sold for fabrication for an identified structure, does 
it not, Mr. Fairless? 

Mr. Fairless. Apparently ; yes. 

Mr. Wooden. And provides that the place of delivery shall be con- 
sidered to be the railroad station nearest to the place where the struc- 
ture is to be assembled or erected; that is correct, isn't it? 

Mr. Fairless. It so states. 



•Irving S. Gids, counsel, U. S. Steel Corpoialion. 

2 Admitted infra, p. 14259, as "Exhit)it No. 22)2"; included in the appendix on p. Hr^rtfi. 



14258 CONCENTRATION OF ECONOMIC I'OWEll 

Mr. Wooden. The alteriiq.tive to that would be to make the price 
effective at the point of fabrication, not at the point of the erection 
of the structure, or to make the price f. o. b. mill? 

Mr. Fairless. The reason for the announcementfis that many times 
these structures are not located on any railroad siding, and also that 
the fabricatioQ takes place at that point. I really have to explain 
what is involved. 

Mr. Wooden. Can't you answer my question before you proceed 
to give the reasons for the practice? 

Mr. Fairless. I can^t answer just as you put it; there may be other 
alternatives; you have named two possible alternatives; there might be 
others. 

Mr. Wooden. Can you name any others? 

Mr, Fairless. Offhand, no- 1 cannot. 

Mr. Wooden. This practice originated under the N. R. A. Code, 
did it not? 

Mr. Fairless. I can't answer that specifically. In our method of 
selling our products, which is at a delivered price, we have to have 
some basis for calculating that delivered price, and we are simply 
stating our method in respect to concre<te bars for fabrication. 

Mr. Wooden. What was it before the code? Wliat was the prac- 
tice in quoting delivered prices for use in identified structures? 

Mr. Fairless. In the United States Steel Corporation? 

Mr. Wooden. As you knew it in the industry. 

Mr. Fairless. Well, prior to — of course I was not with U. S. Steel 
Corporation prior to the code, or during the code. I believe that 
generally speaking the company that I was with, Republic Steel Cor- 
poration, while we were not. large factors at that time in concrete 
bars, I believe as I recall our policy that it wns to the best of 'our 
ability to quote delivered prices. 

Mr. Wooden. But what was its policy with regard to quoting de- 
livered prices for products sold for fabrication in an identified struc- 
ture? Was it the place of the erection or the place of the fabrication? 

Mr. Fairless. Well, the Republic Steel Corporation was not a factor 
in the so-called identified structures business because it was not 
engaged in fabricated structural business. That company sold its 
concrete bars largely tlu-ough jobbers. 

Mr. Wooden. Well, you were chairman of the committee on com- 
mercial matters that formulated many of these resolutions during the 
code period, were you not? 

Mr. Fairless. I have so testified. 

Mr. Wooden. And can't you tell us then whether or not, or what 
the practice was prior to the code with reference to quoting prices 
on an identified structure? 

Mr. Fairless. No, I cannot. I would say that there was no single 
method. 

Mr. Wooden. Some companies did one way and some another? 

Mr. Fairless. That would be my judgment; yes, sir. 

Mr. Wooden. And this proviso to which we are referring in exhibit 
2212 standardized that practice, did it not? 

Mr. Fairless. Under the code? 

Mr. Wooden. Yes. 

Mr. Fairless. Yes, sir. 



CONCENTEATriON OF ECONOMIC POWEJl 14259 

Mr. Wooden. Now here in 1936 Camegie-Illinois was still carrying 
on that method of quoting prices on products sold for fabrication for 
an identified structure; that is correct, is it not? 

Mr. Fairless. It so states there. 

Mr. Wooden. Don't you know that is correct, of your own knowl- 
edge? 

Mr. Fairless. In 1936? 

Mr. Wooden. Yes. 

Mr. Fairless. Well, it may or may not be; I don't believe it was 
true in all cases. 

Mr. Wooden. Wliat about it, Mr. Adams? Wliat do you know 
about it? 

Mr. Adams. I don't know that it was true in all cases. I presume 
it was done in certain cases. I know the practice today is to quote 
on the basis of the delivered price at the point of fabrication. 

Mr. Wooden. How long has that been the practice? 

Mr. Adajms. I can't answer that as to the exact date. 

Mr. Wooden. Can't you tell us approximately? 

Mr. Adams. No, I can't tell you approximately. 

Mr. Wooden. Has it been 6 months or how long? A year or what? 

Mr, Adams. You are asking me to guess now and I don't want to 
make a guess because I don't know the exact date of the change in 
that practice. 

Mr. Wooden. Well, wUl you ascertain the date and report? 

Mr. Adams. Certainly. 

Mr. Wooden. I don't believe, Mr. Chairman, that I offered this 
exhibit. I will do so now. 

Acting Chairman O'Connell. It will be admitted. 

(The excerpt from the price announcement referred to was marked 
"Exhibit No. 2212" and is included in the appendix on p. 14506.) 

Acting Chairman O'Connell. Let me see if I understand this. 
As I understand it, in 1936 the practice was adopted or continued by 
your company of quoting delivered prices on steel for identified struc- 
tures on a basis of the location of the structure itself, but at the present 
time you quote on that type of material f. o. b. point of fabrication? 

Mr. Adams. Delivered price at the point of fabrication, yes, sir. 

Acting Chairman O'Connell. But you don't know when after 
1936 the practice was changed? 

Mr. Adams. No, sir, and I don't know because I was manager of 
sales in the sheet division and we didn't have that problem in the 
sheet end of our business at that time. 

Mr. Fairless. We will develop the definite date. 

Mr. Wooden. Can you tell us what the practice is with regard to 
Detroit delivery for hot rolled strip, as to how the basing point value 
is determined? 

PRICES IN THE DETROIT AREA 

Mr. Adams. There is a company located in Detroit, Great Lakes 
Steel Corporation, which is part of National Steel, and they publish a 
price at Detroit which at the present time happens to be $2 a ton 
above our published price at our points of production, where we make 
strip, which ,'iTe at Pittsburgh and Gary. 



14260 CONCENTKATION OF ECONOMIC POWER 

Mr. Wooden. Isn't the basing point value for Detroit delivery on 
hot rolled strip deterniLned by deducting 20 cents a hundred pounds, 
which is $2 a ton from the delivered price? 

Mr. Fairless. Twenty cents a hundred pounds is $4 a ton. 

Mr. Adams. To get at that particular question, the actual freight 
rate from Pittsburgh to Detroit is 29 cents. From Gary to Detroit is 
28 cents, and the price of Great Lakes, published, is 10 cents higher 
tha;n our Pittsburgh and Gary prices, so if we were making that ship- 
ment, making a shipment into the Detroit area from our Gary mill, 
we would have to reduce our delivered price to an extent equal to that 
published in Detroit, which in that case would be $3.60 a ton. 

Mr. Wooden. You mean you would have to do that in order to 
make your Detroit delivered price the same as the Great Lakes? 

Mr. Adams. We would have to reduce our price at least to that 
extent if we were seriously interested in securing business in the 
Detroit area. It doesn't follow that that delivered price has not been 
reduced further in a great many cases. 

Mr. W^ooden. But in doing that you would be seeking to make 
your delivered price the same as the delivered price at Detroit of the 
Great Lakes company? 

Mr. Adams. No; that would not be our primary objective. Our 
primary objective would be to 

Mr. Wooden (interposing). That would do it, wouldn't it? 

Mr. Adams. Would be to get the business. If we reduced it just 
to that extent our prices would be equal to those of Great Lakes? 

Mr. Wooden. That is what you do, isn't it? 

Mr. Adams. We do that and we do other things, Judge Wooden; 
as you know, we have already submitted for the record figures showing 
that our average reaUzed prices are at a level below our published base 
prices. 

Mr. Wooden. But your average realized prices have, no relation to 
the delivered prices, that is are not the same as 5'Our delivered prices 
at all, are they? 

Mr. Adams. No, sir; because we have transportation cost involved. 

Mr. Wooden. You get a different transportation cost from each 
delivered price, do you not, each destination? 

Mr. Adams. Yes 

Mr. Wooden. So you get a varying mill-net dependmg on the 
destination to which you quote and ship. 

Mr. Adams. Our delivered prices iaclude, of course, our transporta- 
tion costs. We have to change our delivered prices to various levels 
in order to maintain our position from the standpoint of competition. 

Mr. Wooden. You mean by that, do you not, making your de- 
livered price the same as the delivered price of your competitors? 

Mr. Adams. No; I don't mean that. Judge Wooden. I have tried 
lo explam that 

Mr. Wooden (interposing). Well, you mean that by being com- 
petitive, do you not? 

Mr. Adams, if we are seriously interested in a piece of business at 
the point of delivery we have to quote prices or a price level which is 
equal to or better than that of our competitors. Now when you 
break it right down mto that broad question you have to take a 
specific case because a good many times our prices will be lower at the 
point of delivery than those quoted by our competitors. 



CONCENTRATION OF ECONOMIC POWEll 14261 

Mr. Wooden, Do you make secret cuts in your published prices? 
Mr. Adams. May I ask what you mean by secret? 
Mr. Wooden. Without publishing. Do you make cuts in your 
base prices without publishing the cuts? 

Mr. Adams. We have testified to that effect. 

DEVELOPMENT OF THE PITTSBURGH PLUS SYSTEM 

iVIr. Wooden. I would Uke to ask whether or not with reference to 
the statement in the pamphlet ^ that the basing point system is the 
outgrowth of natural economic conditions, you took into account the 
findings of fact of the Federal Trade Commission to this effect:^ 

No systematic Pittsburgh Plus system had been adopted by the steel producers 
at the time of Pittsburgh's greatest predominance in the steel industry or until 
after 1900. From 1873 or earlier to 1903 steel producers attempted generally 
with some success to fix prices for steel products through pools, price fixing trade 
meetings, and later on through what are known as the Gary Dinners. From 
1903 to 1909 the Pittsburgh Plus- system of quoting and selling steel products 
was used in connection with and as a basis for the price fixing activities of the 
steel producers. From 1909 to the present time, with minor interruptions, the 
Pittsburgh Plus system has been used by the steel producers independently of 
such pools, price fixing trade meetings and Gary Dinners for the purpose and 
with the effect of reaching uniform delivered prices. In 1921, with the advent 
of price competition on plates, shapes and bars, the Pittsburgh Plus system was 
discontinued by the Chicago district mills in their sales of those products, but 
not in their sales of sheets and tin plate and wire and wire prdducts, in which 
articles in that district and everywhere else Pittsburgh Plus prices still prevail. 

Did you take into account any such statement in the Commis- 
sion's findings when you made your statement that the basing point 
system was a natural economic evolution? 

Mr. Fairless. I can't answer that. 

Mr. Wooden. Did you take into account the findings of fact of 
the Federal Trade Commission to this effect freading further from 
''Exhibit No. 343"! : 

The wire nail producers, including the Respondent American Steel and Wire 
Company, agreed on zone prices in May, 1898. In 1904 the large wire producers 
agreed to maintam uniform prices by means of the Pittsburgh Plus system. 

Did you take any such evidence as that into account? 
Mr. Fairless. I know no tiling about it. 

Mr. Wooden. Did you take this into account as further shown by 
the findings of fact of the Federal Trade Commission: 

Prior to the year 1900 sheet steel was not sold on the Pittsburgh Plus system, 
and even after the absorption of a large number of sheet mills by the American 
Sheet Steel Company, which was later taken over by Respondent American Sheet 
and Tin Plate Company, that company sold its sheets in the Chicago district 
f. o. b. its mills in that district. In the fall of 1900, however, that company 
inaugurated the Pittsburgh Plus system in selling its sheets,^and the respondent, 
American Sheet & Tin Plate Co. has followed the system erer since, practically 
without exception. 

Did you take anything like that into consideration? 

Mr. Fairless. May I ask, Judge Wooden, what do you mean by 
taking into account? 

Mr. Wooden. Wlien you made your statement in this pamphlet 
that the basing-point system originated as a matter of natural eco- 

' "Exhibit No. 1418," included in Uearings, Part 26. 

- Reading from the Federal Trade Commission's Cease and Desist Order in the I'tUsfjuryh Ptits Case, 
introduced in Hearings, Part 5 as "Exhibit No. MV and placed on file with the Committee. 



,14262 CONCKNTKAllON <JK ECONOMIC FOWEK 

nomics in the steel industry, did you take those things into account 
when you made that statement? 

Mr. Fairless. I can't answer that question. You are going back 
to a period earlier than the date of the formation of the United States 
Steel Corporation. 

Mr. Wooden. To some extent, not altogether. 

Did you take into account the Commission's findings that 

Prior to 1900 to 1903 tin mills sold their products generally f. o. b. mill, but 
after absorption of many tin mills by the American Tin Plate Company, which 
was shortly after taken over by Respondent American Sheet and Tin Plate 
Company, that company inaugurated tlie Pittsburgh Plus system in selling its 
tin plate from its various mills. In -1903, it announced as to its Indiana mills 
that tin plate would no longer be sold f. o. b. the Indiana mills but would be sold 
thereafter on the Pittsburgh Plus system because of the higher cost of production at 
the Indiana mills. The Respondent American Sheet and Tin Plate Company 
has continued the Pittsburgh Plus system ever since on tin plate. 

Did you take any such evidence into account? 

Mr. Fairless. What was the latter statement? 

Mr. Wooden. This was in 1924, these findings, and to the effect 
that the American Sheet & Tin Plate Co. had continued the Pitts- 
burgh Plus system ever since on tin plate. 

Mr. Fairless. As I understand it, these findings that you are 
referring to are under review, are still in litigation. 

Mr. Wooden. Yes, but as a matter of fact the Corporation did not 
take those findings up for review from 1924 until 1938, 

Mr. Fairless. I would refer that to our General Counsel. 

Mr.- Wooden. Don't you know that is a fact? Isn't it a fact that 
it was 1938 before steps were taken to have those findings and the 
Commission's order reviewed in the courts? 

Mr. Fairless. Are you asking me? 

Mr. Wooden. Yes. 

Mr. Fairless. I submit all legal questions to a lawyer. 

Mr. Wooden. That is a matter of fact as to time I am asking you, 
whether that didn't occur in 1938, 14 years after the findings and 
order were made. 

Acting Chairman O'Connell. I think it is in the record before 
this committee that it was in 1938 that the Steel Corporation appealed 
from the order in the Pittsburgh plus case. There is no reason why 
you should know that. I happen to know that, I think it is in the 
record. 

Mr. Fairless. It keeps me quite busy, lyTr. Chairman, to keep up 
with the practical problems of making and attempting to sell steel 
without getting into the legal or economic fields. 

Mr. Wooden. But the Corporation undertook to state in these 
pamphlets which you present that the basing point system originated 
in the natural economics of the industry. I am calling these matters 
to your attention to see whether you considered them when you made 
those statements. 

Did you ever read or have called to your attention any of the 
testimony in the Pittsburgh plus case before the Federal Trade 
Commission? 

Mr. Fairless. Not recently. 

Mr. Wooden. Did you ever read the testimony of Col. Henry 
Bope in that case? 

Mr. Fairless. Not to my knowledge. 



CONCENTRATION OF ECONOMIC POWER 14263 

Mr. Wooden. Did you know who Colonel Bope was? 

Mr. Fairless. In a general way. 

Mr. Wooden. He was one of the early pioneers in the industry, was 
he not? 

Mr. Fairless. I believe he was. 

Mr. Wooden. And prominently identified with the Carnegie 
interests and until the Carnegie Corporation was taken over by the 
Steel Corporation? I understand that he was vice president of the 
Carnegie Co. before it was taken over by the United States Steel 
Corporation. 

(Senator King assumed the Chair.) 

Mr. Wooden. Wasn't Colonel Bope vice president of the Carnegie 
Corporation after it was taken over by the United States Steel 
Corporation for many years? 

Mr. Fairless. I haven't any idea. 

Mr. Wooden. Did you ever read or have called to your attention 
the testimony of Colonel Bope in the Pittsburgh plus case as follows: 

Q. Going back to the original organization, what connection did the Pittsburgh 
base system have with that? 

That has to do with pool meetings. 

A. The price was made, based upon Pittsburgh, because the Carnegie Brothers 
and Company were the largest manufacturers, and it was felt they should have 
the say as to what the price should be, and how it should be established at the 
main point, so as to give stability of prices, which had been fluctuating all over the 
lot. 

Q. By that do you mean to get uniform prices? 

A. To get uniform prices. 

Q. Before that time what was the practice? 

A. The practice was generally to quote F. O. B. mills. Every mill was a law 
unto itself. 

Q. And the difference In prices between the mills, did that amount to the 
freight rate, or was it entirely independent? 

A. Each mill made whatever price seemed necessary to take the business. 

Mr. Fairless, What is the date of that? 

Mr. Wooden. The testimony was given in the Pittsburgh plus case 
on November 7, 1922, the transcript of the testimony pages 10857- 
10870. 

Did you ever read or have called to your attention Colonel Bope's 
testimony to this effect in the same case: 

Q. Would you mind giving the dates when you became associated with each 
association? 

A. Do you mean as to what I knew about them from actual association with 
them? 

Q. Yes, that is what I mean. 

A. I sat in what was known as the Bar Association from 1897 on. That was 
what was called a gentlemen's agreement. It was not a popl. It was nothing 
more or less than an association to help stabilize prices, but more particularly 
to stabilize extras, which had been very unscientific in their manner, and we 
went to a cost basis in order to establish scientific extras, which were almost 
more important than the base price, and many of the associations dealt with 
matters of that kind quite as much or more than they dealt with prices; but 
the structural association existed in one form or another from 1880, excepting 
in 1893, when the panic produced such a chaotic condition of affairs that practi- 
cally all the associations were dissolved; but they came together again after 
things began to get a little bit more stabilized. 

Q. What was the necessity for a basing point? Could they maintain prices 
without a basing point? 

A. No. They tried it once in 1909 and got into such chaos in a short time 
that the mills were glad to get back to the old base. Ever}'- system has to have 



14264 CONCENTRATION OF ECONOMIC POWER 

some stabilizing point, and Pittsburgh from its natural location, its natural 
advantages, and everything of that sort seemed to be the natural basing point. 

And further: 

Why, I do not see how it would have been possible to have maintained stability 
in the steel market under the conditions of its growth without having some 
point on which they could base their method of operation. 

Q. And by stability do you mean uniform prices? 

A. That did give a stability to the general market. 

Q. Is that what you meant by stability? 

A. Yes." 

You never took into account any of that sworn testimony in 
making the statement that the basing point system originated in the 
natural economics of the industry, is that correct? 

Mr. Fairless. I have read very httle, if any, of that testimony, 
and I fail to see its significance. There may be a great significance 
which I am overlooking. 

Mr. Wooden. Then wh}^, if it is not significant to you, did you 
make the statement in your pamphlet that the basing point system 
originated in the natural economics of the industry and not in the 
cooperative, concerted activity such as I have referred you'to? 

Mr. Fairless. Well, it seems to me that the steel industry, to 
begin with, grew with the United States of America. Now when 
you go back to 1890, which happens to be the year I was bom, I 
wouldn't know very much about the basing point system at that 
time, and I lon't think I was very much concerned about it, or even 
in 1900, or e ^en in 1901, the year the United States Steel Corporation 
was formed, but it does seem reasonable to me that as this industry 
grew — it grew like a mushroom as we all know because of the demands 
of this great country — there had to be some method for merchandising 
its products. 

Now, there were many changes, there have been many changes 
in the make-up of the steel industry. I believe the records will show 
that in 1901, the year of the formation of the United States Steel 
Corporation, that it produced somewhere around 60 or 65 percent 
of all the steel that was produced in the United States in that year, 
so that was the United States Steel Corporation of 1901. 

Mr. WaoDEN. It wasn't that liigh, really, Mr. Fairless, on the total 
production but merely on some products it ran that high. 

Mr. Fairless. That may be, but now we come to 1.939 and the 
United • States Steel Corporation is a much larger company today 
than it was in 1901, but its percentage participation in the steel 
business in 1939 was in the thirties, in the low thirties, so we have 
had many changes, competition has grown, and so has our country. 

So far as the multiple basing point system is concerned, again review- 
ing my previous testimony, it grew; it grew with this industry, and 
many changes have been made. At one time there was a single 
basing point, and then there became a basing point in Chicago. 
Why? Because of the tremendous producing facilities that were 
built in Chicago about 1906, I believe, or '07. And the next phase 
of the basing-point system — this is just a general observation — were 
the differentials that were established. Why were they estabhshed? 
They were established probably because of two things: First, the 
market would permit it; and secondly, the consumption of steel in 
that particular territory was greater than the producing facilities. 



CONClONTIlA'riON OF KCONOMICI TOWKll 14265 

Now those are general statements. They changed because facilities, 
producing facilities, were augmented. Then we come to more com- 
panies and more basing points, more basing points on all products. 
Our next step, and I think a very important one, which we took on 
June 24. 1938, was the elimination of the differentials, practically — 
practically the elimination of the differentials insofar as basing points 
applied to the United States Steel Corporation subsidiary companies. 
So the statement that you refer to in our pamphlet expresses the opin- 
ion of those that had to do in a general way with the preparation of 
this statement, that the multiple basing-point sj^stem was a natural 
development as a merchandising vehicle for the steel industry. 

Mr. Wooden. Do you want to stand on that statement in the 
pamphlet, notwithstanding this evidence of its origin to wliich I have 
called your attention? 

Mr. Fairless. We have submitted this pamplet for the record and 
that is my stand, of course. 

Mr. Wooden. I would like to know whether you took into account 
or had called to your attention in the preparation of this pamphlet 
the testimony of one Edward Worcester, formerly vice president of 
National Tube Co., appearing on pages 11270-278 of the testimony 
in that case, where Mr. Worcester says 

x^cting Chairman King (interposing). He was former vice president 
of the National Tube Co., which as I understand it was a Corporation 
subsidiary. 

Mr. Fairless. And still is. 

Mr. Wooden. Mr. Worcester testified: 

By the manipulation of freight rates we were often obliged to ship pipe from 
Pittsburgh to Richmond ox M'Qmphis as a destination. We delivered at Rich- 
mond^ and they had a lower rate from Richmond than they had from the nearest 
crossing to that, which would be Cincinnati or Louisville. So pipe used to travel 
in that roundabout way. That was the condition when we took hold of it in 
September, 1899. 

Q. At that time you got together and considered plans for the future? 

A.' Not with anybody except ourselves. 

Q. I mean those eighteen companies that then organized — was that the idea, 
that they met together? 

A. Oh, no, those companies were already the National Tube Company in 
September, 1899, and the only ones who had anything to do with it were our 
executive officers and myself. I was General Sales Agent at that time. 
■ Q. What changes did they make, if any, at that time? 

A. There were several plans proposed, and I proposed that in order to have a 
price perfectly definite to everybody any where, . that we should sell delivered, 
freight prepaid, so that there could be no interference with our freedom of action 
as to shipments, and no doubt in the mind of the customer what he was going to 
pay for his pipe, and in order to do that we had to select a leasing point to work 
from. So we established what was known as the Pittsburgh basing discount. 
That was under discussion from September, 1899, until February, 1900, and was 
finally agreed to among ourselves and put out on March 1,' I think, 1900;. but 
theretofore the list price of pipe — pipe is all sold on the basis of list and dis- 
counts—the list price of pipe took care of the various costs of the various sizes, so 
that pipe could be sold at one discount practically. That would have been a 
very cumbersome thing for us to handle. There was nothing to base your freight 
on. So we changed that and made our list ten cents a pound. 

Q. Made your list ten cents a pound? 

A. Made our list ten cents a pound, so that if three inch pipe weighed ten 
pounds the list was $1. If four inch pipe weighed ten pounds, it was $1. If it 
weighed twelve pounds it was $1.20. So that every ten cents a hundred weight, 
which would be $2 a ton, would be one per cent of discount. As you'- list was 
$200 a ton, one per cent of discount would be $2 a ton; so that when we published 
a Pittsburgh basing discoimt, we published it with these lists, and with a tariff 



14266 (;«)N(JKN'L'KA":'OJM of economic POWEli 

book giving the rate of freight from Pittsburgh to every point iii the United 
States, which was all distributed freely, and anyone anywhere wishing to know 
what pipe would cost him where he was had simply to take the Pittsburgh basing 
discount and the freight rate. Supposing thff basing discount was 50 per cent 
and the freight to where he was was 50 cents, that 50 cent rate meant five per 
cent of discount, so that he knew that his price, if it cost him fifty at Pittsburgh 
would cost him forty-five there. 

^''hat plan has been in operation without any trouble from that time to this 
time. 

Q. Have the competitors of the National Tube been using Pittsbu.-gh as a 
basing practice since? 

A. They have followed our practice in quoting, I believe. 

That method of quoting pipe in terms of discount and length 
rather than weight still obtains, does it not? 

Mr. Fairless. It d(-pends on what kind of pipe you are talking 
about, Judge. Standard pipe 

Mr. Wooden (interposing). Some kinds of pipe. You tell us what 
kinds. 

Mr. Fairless. I am willing to admit that some grades of pipe are 
sold as you outline and others are sold on the ton basis, the weight 
basis. 

Mr. Wooden. Which lands are sold on the discount basis that I 
have outlined? 

Mr. Fairless. The discount basis? 

Mr. Wooden. Yes. 

Mr. Fairless. All pipe is sold on a discount basis, "if it is cash 
discoimt you are talking about. 

Mr. Wooden. I m^ant a discount from a high list such as the $200 
that was mentioned. 

Mr. Fairless. Standard pipe is sold on the discount basis. That 
is because of its distribution largely through jobbers. Standard pipe 
is very seldom sold directly from any producing mill. It is distributed 
through jobbers because of the necessity of the wide distribution of 
standard pipe. 

Mr. Wooden. That is the reason the pipe lists are based on the 
high list of discount, because it is sold through jobbers? 

Mr. Fairless. Largely, that is standard pipe. Seamless pipe is 
n jt sold that way. Line pipe is sold direct to the customer at a definite 
price, the s'ame as plates or any other product. 

Mr. Wooden, Large oil compar es, for pipe lines and natural gas 
companies? 

Mr. Fairless. Right. 

Mr. Wooden. Will you look on page 50 of "Exhibit No. 1418?" » 
Do you see there the statement to the effect that the location of mills 
in the industry cannot be attributed to any pricing method? 

Mr, Fairless. Yes, I have it. 

Mr. Wooden. How do you reconcile that statement with the state- 
ment appearing on page 47 of the same document which says: ^ 

However, it can be pointed out that in many respeci„ the existence of the 
Pittsburgh plus method would have a natural tendency to encourage location of 
mills outside of rather than at Pittsburgh? 

Mr. Fairless. Let me get through with this first one first. I should 
like, Mr. Chairman, to reply to the statement made on page 50. 
which reads as follows: 

Thus a location — 

' Appendix p. 14619. 
» Ibid, p. 14648. 



CONCIONTUATION OF KCONOAllC I'OVVlOlt 14207 

of the steel mill — 

cannot justly be called "uneconomic" unless some other location can be shown to 
be better. The benefits of proximity to a large consuming market may be offset 
by high assembly costs. A large steel mill cannot limit its operations to the few 
products for which there might be a local demand, and the small scale operations of 
the smaller mill would undoubtedly result in high operating costs with no saving 
to its customers. The location of n ills upon the sole basis of nearness to a market 
would always subject them to local and seasonal variations in demand, and might 
well be disastrous if the market should subsequently move away because of labor 
difficulties or other causes. Concentration of facilities necessarily results from 
the nature of the steel industry, and present locations of mills are based upon a 
proper consideration of the economic factors involved. They cannot be attributed 
to any pricing metliod. 

Mr. Wooden. It is that last sentence that I want you to consider 
in connection with the sentence on page 47 and ask you to reconcile 
them. 

Mr. Fairless. What is the next one? 

Mr. Wooden. Page 47, where you say, "It can be pointed out that 
in many respects the existence of the Pittsburgh plus method would 
have a natural tendency to encourage location of mhls outside of 
rather than at Pittsburgh." 

Mr. Fairless. The Pittsburgh plus method, of course, is not in 
existence. 

Mr. Wooden. But the mills were located, many of which were in 
existence during the Pittsburgh plus period. 

Mr. Fairless. Let's read it and see what it says. 

Acting Chairman King. Proceed. 

Mr. Fairless. "Under the Pittsburgh plus method delivered 
prices all over the country were higher' 

Mr. Wooden. Just before that, the sentence before that. 

Mr. F.-viRLEss. The paragraph before. 

Mr. Wooden. The sentence before it. 

Mr. Fairless. I don't want to read just a sentence. Can't I read 
the entire paragraph? 

Mr. Wooden. All right; simply amplify what I have called your 
attention to. 

Mr. Fairless. "An accurate appraisal of this criticism—" what 
is the criticism? The heading — probably better read the entire article. 

Mr. Wooden. I don't think that is' necessary in order to call 
attention to these two apparent contradictions. 

Mr. Fairless. I have found it quite convenient to read an entire 
article, Judge, oftentimes, rather than just a sentence that one might 
pick up. 

Acting Chairman King. If the entire article is not necessary to 
answer ttie question, don't read it, but if you consider that it is quite 
necessary because of tlie language which would show upon the question 
involved, I think perhaps it would be relevant. I will let you be the 
judge for the moment, but if I think you are going far afield I will 
check you. 

Mr. Fairless. I don't care to read it at all, but just tiying to 
clarify it. 

Acting Chairman King. We will try to clarify it. 

Mr. Wooden. Let me ask another question that you can clarify 
at the same time. 

Mr. Fairless. Let's see if I can do anything with the one you have 
already asked me.. 

124491— 41— pt. 27 10 



' 14268 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. It is the same thing in another form; maybe you can 
answer them both at once. On page 47, amplifying about the Pitts- 
burgh plus method, it says — 

This encouraged the location of mills at Chicago, Buffalo, Bethelhem, Sparrows 
Point, Cleveland, Birmingham, and so forth, and made possible the constant 
expansion of their facilities. 

Mr. F AIRLESS. That is right. 

Mr. Wooden. How do you reconcile that with the statement on 
page 50, that the location of mills cannot be attributed to any pricing 
method? 

Mr. Fairless. Well, I should like to cover both, if I may. 

Acting Chairman King. You may, as briefly as you can. 

Mr. Fairless. Yes; I will. In my early testimony in November 
you recall that I presented to the committee the reasons for locating 
a steel plant. It isn't market, except to a limited extent; it is raw 
materials and their cost of assembling, fuel, iron ore, flux. That is 
why Pittsburgh, with its wonderful fuel and its transportation fa- 
cilities, became a steel center. 

Now in respect to markets, markets are ever changing, so therefore 
you cannot buUd a steel plant in respect to a market. Detroit today 
is the center of automobile production, but 20 years from now Detroit 
may not be the center of automobile production, and so it goes with 
rubber, and so forth. Now in respect to pricing, the location of the 
steel industry at Pittsburgh certainly had no relationship with prices. 
Now you asked me why Chicago grew and why we make this state- 
ment. 

Mr. Wooden. No; I didn't ask you that; I asked you how you 
reconciled the statement on page 50, that the location of mills had 
no relation — couldn't be attributed — to any pricing method, with the 
statement on page 47 that the Pittsburgh plus system did encourage 
the location of mills at Chicago and other points named. 

Mr. Fairless. Well, if the Pittsburgh plus were in effect — in other 
words, if we only had one basing point and that was Pittsburgh — that 
is what we are talking about — obviously it would encourage locations 
such as Chicago and Birmingham and other locations to develop steel 
plants. 

Mr. Wooden. Then the statement on page 50 that the location of 
mills cannot be attributed to any pricing method is not correct, is it? 

Mr. Fairless. I think it is correct. 

Mr. Wooden. You just got through saying that Pittsburgh plus 
encouraged location of mills at Chicago and elsewhere. 

Mr. Fairless. Well, you are turning it around the other way and 
looking at it — I am simply stating that you don't build a steel plant 
and locate a steel plant with respect to price of the pr6duct that you 
are going to make; it is to put the idea in mind of the costs to produce 
those products. 

Mr. Wooden. All right. 

Acting Chairman King. Then the basing point is not the mother 
and father of any particular steel plant at a given place? 

Mr. Fairless. No, certainly it is not. 

Acting Chairman King. The raw material is essential to the devel- 
opment, to the production of steel, then, as an important factor in 
determining where the mill shall be located? 



CONCENTRATION OF ECONOMIC POWER 14269 

Mr. Fairless. Market is a factor, but not the predominating 
factor. 

Mr. Davis. Isn't it a fact, though, that one of the effects of the 
basing point system is to maintain plants at locations which are no 
longer economically situated? 

Mr. Fairless. I don't believe so, Judge. 

Mr. Davis. And haven't some of the members of the industry from 
time to time given that reason and stated that if the system was 
abolished it would eliminate plants located at some of these uneconomic 
points because the materials supplying the mills originally have been 
exhausted, and so forth? 

Mr. Fairless. Would you care to give an example of an uneconomic 
point where a steel plant is located? 

Mr. Davis. Well, I am no technician ; J. think we can do that. 

Mr. Fairless. I only ask the question to clarify. 

Mr. Davis. I am speaking generally on that subject. 

Mr. Fairless. Do you agree we have producing plants in Pitts- 
burgh, Chicago, Birmingham — speaking of districts now, and the 
Pacific coast? Are q.ny of those uneconomic? 

Mr. Davis. I am not on the stand. 

Mr. Fairless. I was just asking the question, 

Mr. Davis. If Mr. Wooden or members of the committee ask you a 
question they are entitled to an answer and then if you want to make 
any pertinent explanation, why of course you are at liberty to do so, 
but I don't care to argue the matter with you. If you are not prepared 
to answer the question, it is all right. 

Acting Chairman King. I think perhaps the question would imply 
that you are the judge of whether it is economic or uneconomic, and 
if Judge Wooden or any of the memberS of the committee think that 
your determination of a given point is economic or uneconomic, then 
we might ask for further explanation. 

Mr. Fairless. We feel every one of our producing plants is located 
economically. Now there are comparisons, of course. Some are more 
economic than others in respect to assembly costs of raw materials. 
Obviously it costs us more money to assemble raw materials on the 
Pacific coast than it does in Birmingham, and in some instances in 
respect to some raw materials it costs us more money to assemble 
raw materials in Pittsburgh than it does in Chicago. Chicagp has a 
decided advantage in respect to ore, but that is offset to a great extent 
by its disadvantage in respect to coal. 

Pittsburgh has a great advantage in coal and has a disadvantage in 
respect to ore comparable to the transportation costs from lower lake 
ports to Pittsburgh. 

Acting Chairman J^ing. Have some of the plants of your company, 
by reason of changes in the market or changes in the facilities of 
obtaining ore or for other reasons which are material iii the production 
of the finished commodity, become uneconomic to maintain so that 
you are compelled to abandon them, or if you haven't ab«i-ndoned 
them that the costs of production are so great as that those costs 
impinge upon those plants where tbi costs are much less and where 
the returns, are much greater? 

Mr. F-AiRLESS. Exactly as you have put' il, we have abandoned 
two steel producing plants wimin tjie last year or 18 months for that 
very reason. 



'14270 ' CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Mr. Fairless, will you agree that the natural and 
logidal effect of an interference with or suppression of price competi- 
tion is to encourage, to tend to encourage, the location of plants that 
are relatively uneconomically located? 

Mr. Fairless. I believe that question could be simplified? I 
would like to have it repeated. 

Mr. Wooden. I will try it again. Would you agree that the natural 
and logical tendency of any long-continued interference with price 
competition is to cause mills to be located in relatively uneconomic 
locations? 

Mr. Fairless. I believe that if there was no competition in the steel 
industry and prices could be named at any level and maintained that 
there would be a so-called umbrella held over uneconomic operations 
in various parts of the country. 

Mr. Wooden. And the effect of the umbrella would be, would it not, 
to encourage the location of mills that are relatively uneconomically 
located? 

Mr. Fairless. If it existed it would. 

Mr. Reynders. On the other hand, you would not locate a new 
plant in such a location. 

Mr. Wooden. Not all plants can be equally well located. 

Mr. Reynders. There may be an existing plant which gradually 
had become uneconomic which is being maintained in operation. I 
don't believe that it is an economical thing, as far as natural economy 
is concerned, because of the community which has been built around 
that plant, to scrap a plant like that; it not only scraps the facilities, 
but it also scraps the whole community which has grown up around 
that plant. 

Mr. Fairless. Steel plants when built in many cases were eco- 
nomically sound. It might have been that the assembling cost of the 
raw material at that particular point was higher than the lowest or 
lower cost competitors, but it probably had a market, it probably 
had a labor condition or many other factors that have to do with costs 
other than just the assembly cost of raw materials, important as it is, 
and as time went on they lost those factors, they lost their markets, 
or the methods employed in making their particular products were 
changed, technological developmeiits came. I cite you the many tin 
mills, tin-plate plants, that have been forced to close down because 
of the technological development over the last 10 years approximately 
in the manufacture of tin plate. 

Acting Chairman King. Do many plants in the steel industry, not 
only in your company but the industry generally from your knowledge 
of that industry, become obsolete because of technological develop- 
ments or because of the exhaustion of raw materials or higher freight 
rates which have resulted from modification of railroad activities, 
and for other reasons? 

Mr. Fairless. Many plants of individual companies and in some 
cases entire companies have gone out of business. 

Acting Chairman King. If I may put a personal statement in the 
record, I loiow of a number of smelters in the West that have been 
compelled to close down that cost large sums of money because of the 
exhaustion of mines or because of different freight rates, because of 
technological development. I was wondering if there would be any 
analogy between that situation and the steel industry. 



CONCIKN'J'KATION OF KCONOMIC PpWKK 14271 

Mr. Fairless. There is, definitely. 

Mr. Wooden. Mr. Fairless, didn't some representatives of the 
steel industry testify before the Senate Committee on Interstate Com- 
merce in connection with the so-called antibasing point bill that the 
abandonment of the basing point system would result in abandon- 
ment of some plants, some resultant injury to communities where 
those plants were located? 
Mr. Fairless. I am not going to testify in respect to someone else's 

testimony. I will, however 

Mr. Wooden (interposing). You were present, were you not, at 
those hearings? 

Mr. Fairless. I would like, however, to make this observation, 
which I believe answers the question, that in respect to the basing 
point system it has grown with this industry, it is about 50 years 
old, I believe. The United States Steel Corporation does not take 
the position that there aren't any criticisms, justified criticisms, of 
the basing point system. Our position is that it is the best mer- 
chandising medium for our steel products that has been called to our 
attention, and also that if a better method is called to our attention 
we would be the first to adopt it, but I would like to call to the at- 
tention of this committee at this time — and I think it is appropriate 
to our discussion — that very careful consideration must be given not 
only by the steel industry but by Government to the effects of a 
change in the present multiple basing point system. It isn't some- 
thing that can be discarded and some untried method to replace it 
made without very, very careful consideration. Now we have com- 
munities, and someone just referred to plants, in what Judge Wooden 
read, that would be dislocated, but I don't know what that partic- 
ular witness meant by plants; it might have been a steel plant, it 
might have been a fabricating plant, but we do know in the many 
locations where we have steel plants located, we also have many 
fabricators of steel that are located adjacent to those particular plants. 
Now if some change were made, were forced upon this industry b}'' 
legislation, that caused a complete change in the merchandising of the 
products that tliis industry produces, there would undoubtedly be 
some very severe repercussions. 

Acting Chairman King. To what extent? 

Mr. Fairless. To what extent I am not able to answer because I 
haven't had any definite replacement of the multiple basing-point 
system put before me, and if there were a proposed system put before 
me I couldn't say yes or no to it without very careful study. 

Acting Chairman King. I want to ask you, Mr. Fairless, if the 
steel company maintains many fabricating plants, or is it engaged 
rather in the production of the raw materials? 

Mr. Fairless. Largely our policy is to stick to the steel business 
as closely as we can. We do have a very large fabricating unit, the 
American Bridge Co., and that is necessary in order to carry on our 
heavy line steel business. 

Acting Chairman King. There is a relation, then, an economic 
relation, as well as a practical relation, between fabricating plants 
and the manufacturing plant. 

Mr. Fairless. Very definitely. 

Acting Chairman King. A plant might become obsolete and war- 
rant being scrapped, but in so doing it might seriously injure a fab- 



14272 CONCENTRATION OF ECONOMIC POWER 

ricating plant which furmsh,ed employment for a large number of 
people. 

Mr. Fairless. That is right. 

Acting Chairman King. And vice versa. 

Mr. Fairless. Right. 

Acting Chairman King. And a plant may become obsolete and 
thus call for the obtaining of ingot steel from a more remote distance, 
so that the plants may become obsolete, thus injuring the fabricating 
plants, the fabricating plants may become obsolete because of tech- 
nological developments, and thus reduce materially the market for 
the steel of the-plant. 

Mr. Fairless. It is very possible, 

Mr. Wooden. Are those changes in location and continued opera- 
tion of mills going on as a result of technological changes? 

Mr. Fairless. In some lines of this industry. That is particularly 
true in the light rolled products. 

Mr. Wooden. Do you see any reason why changes should not be 
allowed or forced to take place because of pressure of competition? 

Mr. Fairless. There is no technological development being held 
back because of price competition. 

Mr. Wooden. I didn't say that, but if dislocation of plants takes 
place because of technological developments, why are you afraid of 
any possible dislocation because of pressure of competition? 

Mr. Fairless. I didn't say thftt I was. 

Mr. Wooden. You are not, then? 

Mr. Fairless. I am not. 

Mr. Wooden. But doesn't your pamphlet take the position that the 
abandonment of the basing point system would cause a great deal of 
dislocation of mills and disruption of industry? 

Mr. Fairless. It would. It does and it would, In our opinion. 
It isn't just miUs we are talking about. It is industry. We are talk- 
about the users and the fabricators of steel rather than the producer^ 
of steel, 

Mr. Wooden. It follows from that, then, does it not, that there is 
some connection between the location of industry and the plants with 
the pricing method used by the industry? 

Mr. Fairless. No, sir, no; not at all, Judge Wooden, because 
you locate" your steel plant for one reason and then your fabricator 
locates his factory because of the steel plant location. 

Mr. Wooden. Didn't you say on page 47 of your pamphlet that the 
Pittsburgh Plus method encouraged the location of miUs at Chicago, 
BuflFalo, Bethlehem, Spiarrows Point, and other spots? 

Mr. Fairless. Yes; but there is no Pittsburgh plus today. 

Mr. Wooden. The mills are there, aren't they? 

Mr. Fairless. Where? 

Mr. Wooden. At those various points. 

Mr. Fairless. Yes; and they grew during that period. 

Mr. Ballinger. Mr. Fairless, you admit in the pamphlet here 
that if you cjianged the pricing system in the steel industry to an 
f. o. b. system that it would cause tremendous changes in the steel 
industry with respect to plants, didn't you, so there must be some 
relation between a pricing system in the steel industry and the 
location of the plants. 



CUNCENTKATION OF ECONOMIC POWER 14273 

Mr. Fairless. I don't believe so, Mr. Ballinger — well, some 
relation. 

Mr. Ballinger. You say considerable relationship, on page 97: 

The above criticisms of the uniform f. o. b. mill price system have shown that 
it involves definite economic losses, it would destroy the investment in many 
, plants, it would also act injuriously on many local communities whose welfare is 
dependent on the steel mills at that point. 

There would be a big shift in the steel industry? 

Mr. Fairless. If you went to a uniform f. o. b. mill system, that 
is something else. 

Mr. Ballinger. It is a different pricing system than the one you 
have now. 

Mr. Fairless. It is a different method of merchandising, yes. 

Mr. Ballinger. Then the pricing system does have some effect. 

Mr. Fairless. We don't know what anyone really means by 
uniform f. o. b. mill pricing system. 

Mr. Ballinger. You don't know what it means and yet you say 
this is going to be the result of it. 

Mr. Wooden. Beginning on page 86 ' of your pamplilet, "Exhibit 
No. 1418," and running over for quite a number of pages, you devote 
a great deal of attention to showing the disruptive effect upon business 
of a change from a basing point system of pricing to a mill system of 
pricing. 

Mr. Fairless. Well, I should say any new system, any new system, 
whether it would be a uniform f. o. b. piiU or not, should at least be 
given very careful consideration. Before you could give your answer 
you would naturally have to have the details that had to do with the 
new system. There isn't any mystery about the multiple basing 
point system. We all know, and I think this committee knows, 
pretty well how it operates. Something that would replace it I would 
like to know equally as much about as I do about the present multiple 
basing point system before I expressed an opinion. 

Mr. Ballinger. Mr. Fairless, if it could be shown that this 
system of merchandising steel did repress price competition, then 
would you be willing that the system should be changed so it would 
restore competition even though it resulted In dislocations in the 
steel industry? 

Mr. Fairless. That is a very broad question. I am not concerned 
chiefly about the steel industry. I am concerned about the effect 
of this problem on the economics of the United States of America. 

Mr. Ballinger. But suppose the effect of the economics is repres- 
sion of price competition. 

Mr. Fairless. I am not going to suppose anything unless I know 
what we are talking about. I am firmly convinced, and I think I 
know something about the steel business — ^not too much, not enough, 
but I know something about it — I am firmly convinced that the present 
multiple basing point system does not control prices. I make that 
as a definite statement for this record. 

Mr. Wooden. Mr. Fairless, in that connection, isn't it a fact that 
even when some buyers, large buyers like the automotive interests, 
were getting concessions from the base price, that other buyers con- 
tinued to pay the full base price? 

' Of the original. 



14274 CONCENTRATION OF ECONOMIC POWEli 

Mr. Fairless. Not generally speaking, 

Mr. Wooden. Now, it is true to a great extent, isn't it, as to smaller 
buyers? 

Mr. Fairless. Are you going to answer your own question? 

Mr. Wooden. No, I am asking you. 

Mr. Fairless. Then I shall answer it. You asked me the question 
and I think you refer to the sale of sheets, strip, flat rolled products 
at six and eight dollars a ton off. 

Mr. Wooden. No; I am not referring to that particularly, or 
exclusively at any rate," 

Mr. Fairless. Tell me what you want me to answer. 

Mr. Wooden. I am asking you the general question whether or 
not some buyers, particularly smaller buyers, have not continued to 
pay full base price plus freight on some steel products while other 
buyers, large buyers, were getting concessions. 

Mr. Fairless. Well, I would have to go through or cause someone 
to go through all the records of all the subsidiary companies. 

Mr. Wooden. Then you don't know. 

Mr. Fairless. I know my business, I believe, pretty well. I would 
say this, that when we have a general price decline in any of our prod- 
ucts it doesn't take very long until that becomes country-wide. Now 
I wouldn't make the statement that if a price were reduced in Detroit 
on Monday that on Monday simultaneously that reduced price was 
effective throughout all the United States. It can't operate, this 
industry can't operate, that rapidly. 

Mr. Wooden. If it were published it would become operative? 

Mr. Fairless. If it were published? 

Mr, Wooden. Widely known. Aren't some of these concessions 
made without publication? 

Mr, Fairless. Wliat do you mean— not concessions, no. 

Mr. Wooden. Well, reductions below the full base price figure — 
aren't they made without knowledge of competitors? 

Mr, Fairless. Well, I'll be very happy, if you want to take the 
time, to go over our pricing policy. 

Acting Chairman King. Answer the question "yes" or "no." 

Mr, Fairless. I would have to have an example. 

Mr. Ballinger. Mr. Ford changed frorn model T to model A. Did 
he come to you and tell you you would have to knock down the price 
of steel to him? 

Mr. Fairless. Model T to model A? 

Mr. Ballinger. Well, he changed models in 1928 and put on a new 
model. 

Mr. Fairless. No. 

Mr. Ballinger. He didn't come to you and tell you you would 
have to give him a concession on steel? 

Mr. Fairless. No ; I think I told you this myself 

Mr. Ballinger (interposing). I wasn't going to reveal the source. 

Mr. Fairless. There is. no secret about it. What I told you in 
respect to Mr. Ford was that Mr. Fo^d got into more or less difficul- 
ties in '21, I believe. He came to all of his suppliers, whether it was 
steel, rubber, leather, wool, or whatever the product might be, and 
asked for a reduction in price. Now, the question you are asking 
me is, did every user of steel get that price? 

Mr. Ballinger. Yes; a similar rfeduction. 



(X>N<'KN rilATlON OF lOCONOMK.' I'OWlOIl 14275 

Mr. Fairless. All I can say is that at that tune — and the product 
I was confronted with happened to be chrome vanadium steel, because 
Ford used chrome vanadium steel and we were large manufacturers— 
that automatically became the price of chrome vanadium steel to 
anyone who cared to use it. 

Mr. Ballinger. So he didn't get a special concession? 

Mr. Fairless. No; he secured a lower price and at the same time 
the price for the product moved down to that level, because obviously 
we couldn't sell another automobile company at some higher price, 
and it was largely the automobile companies that used that product. 

Mr. Wooden. Is it not a fact, Mr. Fairless, that Government pur- 
chases on sealed bids have continued to reflect quite largely the full 
base price, plus the freight; in other words, to be based on the basing- 
point system? 

Mr. Fairless. We have the figures. Do you want them? They 
are presented here. 

Mr. Wooden. We are going into those, too, but is it not a fact 
that your policy has been to quote the full base price on Government 
bids? 

Mr. Fairless. Our policy is to secure our published prices every- 
where we can, and any time we do not secure those prices it is because 
of competitive conditions that prevent us from doing so. 

Mr. Wooden. You found the competitive conditions such that they 
permitted you to quote and get your full base price on Government 
bids? 

Mr. Fairless. In some instances; in many instances, no. 

Mr. Wooden. Those instances you refer to are covered by these 
compilations which you referred to a moment ago? ' 

Mr. Fairless. They are. 

Well, we may have been successful in some of those. We only 
refer to the transactions for that period. In Washington, too. We 
are not talking about Federal purchases otherwise. 

Mr. Wooden. Do you know how that compilation was made up? 

Mr. Fairless. Yes; it is an accurate record, so I am told, that w j 
made by our Waslungton office, which follows all the lettings and all 
the biddings in Federal work. 

Mr. Wooden. It is based on page 34 of your statement on a basis 
of value, is it not? 

Mr. Fairless. That is right. 

Mr. Wooden. Not upon the number of cases of bidding? 

Mr. Fairless. Well, obviously many of these items are for a very 
small amount, as you know. 

Mr. Wooden. But you based it upon value? 

Mr. Fairless. We state how we value it, and I might add it does 
not include, because we thought it would be unfair to include, big 
tonnage items such as armor plate and protective deck plates. 

Mr. Wooden. As a matter of fact, do you not ha-ve in there many 
items that are not rolling-mill products? 

^ Mr. Fairless. Well, I can't answer as to the detail. The informa- 
tion was furnished to our special T. N. E. C. group by our Washington 
office. 

Mr. Wooden. Don't you have in there many items involving quota- 
tions by jobbers as distinguished from producers? 

' "Exhibits Nos. 2210 and 2211," appendix, pp. 14444-14457 and 14458-H.'>n5. 



14276 CONOENTRATION OF ECONOMIC POWER 

Mr. Fairless. I can't answer that. 

Mr. Wooden. Now, beginning on page 86 and running for a number 
of pages, you devote a great deal of attention to the claim that the 
ending of the basing-point system and the substitution of a mill-pricing 
system would dislocate and disrupt the industiy and result in creation 
of a lot of local monopolies. Is that not correct? 

Mr. Fairless. That is right. 

Mr. Wooden. How do you reconcile that statement made on those 
pages with your statement in "Exhibit No. 1418," reading as follows: 

It is' impossible to measure quantitatively the amount of transportation costs 
which might be considered unnecessary from any point of view, and it is equally 
impossible to measure the economic costs which would result from any interference 
with present practices, or more specifically, from any direct or indirect limitation 
of selling territories. 

Mr. Fairless. I don't believe we could accurately measure it, but 
we think it would be tremendous. 

Mr. Wooden. Do you think it is impossible to measure? 

Mr. Fairless. I think it is impossible accurately to measure the 
results of any untried theories. 

Mr. Wooden. You went ahead to attempt to measure the impos- 
sible, is that right? 

Mr. Fairless. All we are tiying to do, and if I am correct, all we 
tried to do was to make a very careful study of these various problems 
and present our findings and our opinions to this committee. We take 
the position that they are not perfect; we don't take the position, and 
never have, that everything we have said in every one of these pamph- 
lets is 100-percent correct, that there are no errors. Undoubtedly 
there are many errors, but this is the best that we could do ; we did it 
honestly; we spent much time, and I might add much money, in pre- 
paring it and it is submitted to this committee for whatever it is worth. 

Mr. Wooden. You also stated on page 47 of "Exhibit 1418," 
"There is no way by which the present steel-producing facilities can 
be compared scientifically with those which would have existed under 
other conditions." Yet you attempt to demonstrate that a change in 
the system wUl produce a lot of local monopolies and cause an economic 
disaster, is that correct? 

Mr. Fairless. Yes, sir; definitely. That is what we contend, and 
that, of course, is based upon the facts as we present them, and without 
any definite system, with its details all developed to replace our present 
system. 

Mr. Wooden. You make the statement in' your pamphlet that the 
Federal Trade Commission has proposed to impose by law or mandate 
an f. o. b. mill price that is uniform to all customers of a given mill. 
Do you mean to say that the Federal Trade Commission proposes to 
ignore the exceptions and provisos of the statute, the -Robinson- 
Patman Act, that provides exceptions where the price to various 
customers need not be uniform? 

Mr. Fairless. Well, I would assume that the Federal Trade 
Commission would at all times attempt to obey all the statutes the 
same as the United States Steel Corporation. 

Mr. Wooden. Then you don't mean to say that the Federal Trade 
Commission proposes to impose by law or mandate a price at the mill - 
that is uniform to every customer? 

Mr. Fairless. To be perfectly frank, Judge, and not with any 
attempt at being flippant, I really don't know what you do propose. 



CONCENTRATION OF ECONOMIC POWER 14277 

Mr. Wooden. Well, you state in here at quite some length what the 
Commission proposes. 

Mr. Fairless. There have been statements that that was your 
answer to the present multiple basing point problems as you found 
them. Now you may be incorrectly quoted. 

Mr. Wooden. You don't know as to that? 

Mr. Fairless. You have never told me personally. 

Mr. Wooden. Would you think that to impose by law or mandate 
a mill price absolutely uniform to every customer would be without 
regard to the provisos of the law which permit differences in price to 
different customers under certain conditions? 

Acting Chairman King. Are you asking whether he believes in a 
law of that character? 

Mr. Wooden. I am asking whether he is charging in this pamphlet 
the Federal Trade Commission with seeking to impose by law or man- 
date the imposition of a mill price that is uniform to all customers, 
when the law itself does not so provide. 

Mr. Fairless. I have not suggested any such thing and have no 
intention of doing so. 

Mr. Wooden. Well, your pamphlet suggests it, does it not? 

Mr. Fairless. Not my interpretation of it. 

Mr, Wooden. Does it not say that the Federal Trade Commission 
proposes by law or mandate to establish a price at thiS mill that is 
uniform to all customers? 

Acting Chairman King. You can't answer that question? 

Mr. Fairless. I don't know. I really don't know. I beg your 
pardon. 

Mr. Wooden. Look at page 37 of "Exhibit No. 1418." Do you 
find there the statement that the "Federal Trade Commission pro- 
poses to impose by law or mandate"? 

Mr. Fairless. I shall read it if you will give me time. 

Mr. Wooden. Right at the top of the page. 

Mr. Fairless. What is your question? 

Mr. Wooden. I am asking you why you say on that page that the 
Federal Trade Commission proposes to impose a uniform f. o. b. mill 
price system with, the elimination of freight absorption by law or 
mandate? You have said, I understood, that you did not know what 
the Commission proposes. 

Mr. Fairless. Well, it is generally understood that that is your 
theory. Now if it is not we stand corrected, and I would like you to 
tell me what your theory is 

Mr. Wooden. I cannot speak for the Commission. 

Mr. Fairless. Since we are looking for facts. 

Mr. Wooden. I am' not speaking for the Commission; I can only 
say, and I do say, that the Commission has never taken that position 
that you say they have taken . 

Mr. Fairless. If we are wrong it is one of the many mistakes that 
we expected to make when we prepared all these articles. 

Mr. Wooden. I am making that statement on the basis of his- 
torical fact only, without any regard to what the Commission's posi- 
tion is or may be in the future, but only as to what it has been in the 
past, and 1 should like to go into that in another comiection a little 
bit more fully. I am not able to locate it just now — but I want to 
offer for the record another of the commercial resolutions which orig- 



' 14278 CONCENTRATION OF ECONOMIC POWER 

inated under the code with reference to this quoting of prices regarding 
an identified structure. 

Acting Chairman King. The witness having stated that those reso- 
lutions are not of his Icnowledge, there would be no objection to offer- 
ing it, and if Mr. Fairless wishes to make comment on it later, he will 
have the opportunity. 

Mr. Wooden. I can't locate it right now. 

Mr. Ballinger. From the testimony read here into the record per- 
taining to the Pittsbm-gh plus case, there have been periods in the 
steel industry with respect to certain products when they did have an 
f. o. b. mill system, did they not, on certain products? Have you not 
sold products at the mill? 

Mr. Fairless. That is right. 

Mr. Ballinger. Well, the industry did not go to pieces, did it, 
under that system? I mean there was no great catastrophe and 
calamity? 

Mr. Fairless. Well, Mr. Ballinger, my reply to that would be that 
you can't judge the entire steel industry by one or more of its products. 

Mr. Ballinger. Well, I am taking a product Uke pig iron. It 
took you from 1870 to 1934 to decide you needed a basing point in 
that product, did it not? 

Mr. Fairless. Distribution of pig iron, of course, is not nearly as 
widely spread as steel products. Pig iron normally is produced for 
use by the producer. 

Mr. Ballinger. That is all. 

Acting Chairman King. Judge, have you any other questions of 
the witness? 

Mr. Wooden. I think not. 

Acting Chairman King. Have you any observations to make, Mr. 
Fairless, or Mr. Adams?" Judge Miller, have you any questions to ask? 

Mr. Miller. No ; I have no questions. 

Mr. Fairless. In respect to the letter that will be submitted sub- 
ject to identification tomorrow, the letter does not refer to U. S. Steel 
Corporation ; it was not written or received by anyone connected with 
our company, and I wish to leave the observation with the committee 
that we know nothing about it and are not prepared to comment upon 
it or discuss it. 

Mr. O'CoNNELL. It is intended that it will be offered for the record 
tomorrow so it can be identified^ and that is all you care to say in 
connection with it? 

Mr. Miller. I don't think I can add anything, except to express 
the appreciation of aU of us of the very great courtesy that has been 
extended to us by the chairman and by every member of the commit- 
tee and by counsel. 

Acting Chairman King. All the committee desires is to have the 
representatives of the Government or the others present such facts 
as they deem relevant and material and we are very patient, and I 
hope intelligent, listeners. Is that all for today? 

Mr. Wooden. I want to identify some papers, but could do it 
tomorrow morning. 

Acting Chairman King. The committee will stand adjourned until 
10:30 tomorrow "morning. 

(Whereupon at 3:45 p. m. the committee stood in lecess until 10:30 
Tuesday morning.) 



[NYESTIGATION OF CONCENTEATION OF ECONOMIC POWER 



TUESDAY, JANUARY 30, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 

The committee met at 11 a. m., pursuant to adjournment on 
Monday. January 29, 1940, in the Caucus Room, Senate Office Build- 
ing, Senator Joseph C. O'Mahoney, Wyoming, the chairman, presiding. 

Present: Senators O'Mahoney (chairman) and King; Representa- 
tive WilHams; Messrs. O'Connell and Hinrichs. 

Present also: Willis J. Ballmger, Director of Studies for the Fed- 
eral Trade Commission, Walter B. Wooden, Assistant Chief Counsel, 
and Hugh E. White, economist, representmg the Federal Trade 
Commission. 

The Chairman. The committee will come to order. You may 
proceed. Judge Wooden. 

Mr, Wooden. Mr. Chairman, I should like to call to the witness 
stand Mr. A. A. Dorenbusch. 

The Chairman. 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. Dorenbusch. I do. 

TESTIMONY OF A. A. DORENBUSCH, GENERAL SALES MANAGER, 
NEWPORT ROLLING MILL CO., NEWPORT, KY. 

Mr. Wooden. Your name, I believe, is A. A. Dorenbusch. 

Mr. Dorenbusch. That is right. 

Mr. Wooden. And where do you live? 

Mr. Dorenbusch. I live in Newport, Ky. 

Mr. Wooden. What is your business? 

Mr. Dorenbusch. Steel business, rolling of sheets. 

Mr. Wooden, With what company are you connected? 

Mr. Dorenbusch. The Newport Rolling Mill Co. 

Mr. Wooden, Is there some affiliated company also? 

Mr, Dorenbusch, We have the Andrews Steel Ca:, which is really 
the parent company of our business, which produces the raw steel. 
We in turn roll the sheets, but it is all one company, 

Mr. Wooden. What are the products produced by the Newport 
Rollmg Mill Co.? 

Mr, Dorenbusch. They are principally sheets. In fact, the 
Newport RoUmg Mill Co, produces nothing but sheet steel. 

Mr, Wooden. Is there any particular kind of sheets or various 
kinds? 

14279 



14280 OONOENTRATION OF ECONOMIC POWER 

Mr. DoRENBUscH. Well, of course we start with what is known as 
ordinary hot rolled sheets and any subsequent treatment that they 
get produces different grades, pickled sheets, galvanized sheets; we 
make electrical sheets, sheets that are known to the trade as gal- 
vannealed ; long ternes. 

Mr. Wooden. What is your position with the company? 

Mr. DoRENBuscH. General sales manager. 

Mr. Wooden. How long have you held that position? 

Mr. DoRENBuscH. I have held that position about 12 years, 
although I have been with the company for 25 years. 

Mr. Wooden. Do you have a Mr. A. K. Andrews who is connected 
with the company? And if so, what is his connection? 

Mr. Dorenbusch. Mr. A. K. Andrews is the president of the 
Newport Rolling Mill Co. 

Mr. Wooden. Who are the principal competitors of the Newport 
RoUing MiU Co.? 

Mr. Dorenbusch. Well, 'I would say that everyone in the steel 
sheet busiuess was a competitor of the Newport RoUing Mill Co., 
because of the diversified line of our products, 

Mr. Wooden. Who are your competitors on galvanized sheets? 

Mr. Dorenbusch. Well, there would be Carnegie Illinois, Conti- 
nental, Wheeling, Inland, Great Lakes, Jones & Laughlin. 

Mr, Wooden, Weirton? 

Mr, Dorenbusch. Weirton. All galvanized, sheet producers. I 
don't know whether I have named all of them or not, but those are 
the princij al ones. 

Mr. Wc ODEN. Does your Newport Rolling Mill Co. sell galvanized 
sheets over a wide territory, and if so, what? 

Mr. Dorenbusch. Yes, we sell galvanized sheets most anjrwhere 
in the United States. 

Mr. Wooden. You mean you actually carry on business throughout 
the country on galvanized sheets? 

Mr. Dorenbusch. We do. That's right, sir. 

Mr. Wooden. Referring to a copy of a letter dated August 17, 
1935, addressed to Mr. A. K. Andrews, Footes Bay, Ontario, Canada, 
and bearing the initials at the lower left-hand corner of A. A. D., did 
you write the letter of which that is a copy? 

Mr. Dorenbusch. Yes, I did write the letter. 

Mr. Wooden, And Mr. Andrews, I believe you said, was president 
of the company, your company? 

Mr. Dorenbusch. He is president of our company; yes, sir, 

Mr. Wooden. At the time the letter was written was he on vacation? 

Mr. Dorenbusch. Apparently he was on vacation at his home in 
Canada, his summer home. 

Mr. Wooden. Mr. Chairman, I would like to offer the letter in 
evidence. 
. The Chairman. The letter may be received. 

(The letter referred to was marked "Exhibit No. 2214" and is 
included in the appendix on p. 14506.) 

price discussions among competitors 

Mr. Wooden. I should like to read it for the information of the 
committee. The letter was written by the witness under date of 



CONCENTRATION OF ECONOMIC POWER 14281 

Mr. A. K. Andrews, 

Fooles Bay, Ontario, Canada. 

Dear Mr. A. K.: It was not definitely decided until late last evening to put 
into effect for fourth quarter a one-price policy allowing the galvanized sheet 
price to remain at $3.10 per 100 lb. for No. 24 gauge base f. o. b. Pittsburgh. A 
few of the larger interests such as Weirton and Inland were in favor of reducing 
the price to $3 base for No. 24 gauge f. o. b. Pittsburgh but this was finally 
defeated and it was agreed to allow all prices to remain the same as now in effect. 

The announcement of no further jobber allowance after October 1 will be made 
by Continental on Tuesday of next week after which all mills can announce 
likewise. We, of course, in the meantime will notify our people which no doubt 
will be conducive of causing an influx of jobber business for shipment prior to 
October 1st. 

"It is my intention to discuss this with Mr. Little this morning so that we wiU be 
prepared to take care of the rush that we like others will no doubt have during 
the month of September. 

"I discussed the automotive situation with Neil Flora last evening and he 
informed me that while some little tonnage was placed several weeks ago, nothing 
more has been done and that all the mills are holding firmly to their prices and 
are expecting that additional tonnages will have to be placed soon." 

May I digress there and ask you, Mr. Dorenbusch, who was Neil 
Flora? 

Mr. Dorenbusch. Mr. Flora is the secretary of the National 
Association of Flat Rolled Steel Manufacturers. 

Mr. Wooden. Including galvanized sheets? 

Mr. Dorenbusch, Yes, that would include galvanized sheets. 

Mr. Wooden. And where was he located? 

Mr. Dorenbusch. In Pittsburgh. 

Mr. Wooden. I continue with the letter: 

I find that our tonnage booked up to last night (Friday) amounted to 2812 
tons and this morning's mail brought several additional cars so we are hoping at 
least to have 3000 tons for this week. 

Do hope that your stay in Canada will be pleasant and that you will be greatly 
benefitted by your vacation. 

Sincerely yours, 
AAD:GRK. 

Tliat is all I wish to ask this witness. 

Mr. O'Connell. I should like to ask a question or two. Mr. 
Dorenbusch, you say in the letter that "it was not definitely decided 
until late last night to put into effect for fourth quarter a one price 
policy." By whom was it not decided? 

Mr. Dorenbusch. By whom was it not decided? 

Mr. O'Connell. By whom was it decided the night before? 

Mr. Dorenbusch. Well, naturally, of course, when there is a 
contemplated change in price which had been talked of in all our 
trade papers, and so forth, and we were naturally interested in the 
announcement of whatever quarter prices that was, we were in confid- 
ence among ourselves at the office trying to [determine from various 
sources around through our different offices what information they 
might be able to gather on the streets, and so forth, as to when the 
price would be put into efffect and what it would be. 

Mr. O'Connell. That doesn't really answer my question, does it? 

Mr. Dorenbusch. I am sorry. 

Mr. O'Connell. By whom was it decided? 

Mr. Dorenbusch. It was decided by our people, our meeting at 
Lome. 

Mr. O'Connell. You mean a meeting at which your company 
only was represented? 



14282 CONCENTltATION OF ECONOMIC POWER 

Mr. DoRENBuscH. Yes, our inner company. 

Mr. O'CoNNELL. The next sentence says, "A few of the larger 
interests such as Weirton and Inland were in favor of reducing the 
price to $3 base but this was finally defeated and it was agreed to 
allow all prices to remain the same as now in effect." 

Could you elaborate a little on what you meant by that? 

Mr. DoRENBUscH. We may get information, of course. For 
instance, our Chicago representative may be in touch with the various 
offices of the various other companies and get their viewpoint and 
get information like this which flows very freely at a time when we 
are looking for this sort of information. So that is where that may 
have come from. 

Mr. O'CoNNELL. But the letter says "this was finally defeated and 
it was agreed to allow all prices to remain, the same." 

Mr. DoRENBuscH. That word "defeated" may of course be rather 
ambiguous. 

Mr. O'CoNNELL. Would you say the word "agreed" was also a 
little ambiguous? You said it was agreed to let the fourth quarter 
prices remain the same. 

Mr. DoRENBuscH. Yes, that may be, also, putting it in that light. 

Mr. O'CoNNELL. How did you loiow that Inland and Weirton 
wanted to have lower prices? 

Mr. DoRENBUSCH. Well, that may be common talk on the street. 
Our district managers in Chicago of course are in touch with these 
offices and they exchange information as to what they each know. 

Mr. O'CoNNELL. The next paragraph starts — 

The announcement of no further jobber allowance after October 1 will be 
made by Continental on Tuesday of next week after which all mills can announce 
likewise. 

WTiat did you mean by that? 

Mr. DoRENBUscH. We may have picked up that same information, 
that they were going to announce such a thing and we naturally 
would follows. 

Mr. O'CoNNELL. You naturally would follow? 

Mr. DoRENBUscH. Well, yes, that is about the only system we 
have, being located as we are down in Kentucky. We are t<5o small 
to lead. 

Mr. O'CoNNELL. But at this time you knew that the following 
Tuesday Continental was going to announce no further jobber dis- 
counts, and that aU other mills, including your own, would adopt a 
similar practice at the same time. 

Mr. DoRENBUSCH. Yes; we may have picked that information up. 

Mr. O'CoNNELL. How would you pick that information up? 

Mr. DoRENBUscH. Well, if our men in the field would hear that 
that was the case, that they were going to discontinue it, and others 
would also, they would convey it to us, of course, and then also the 
trade papers usually carry information to that effect. 

The Chairman. May I suggest that that is a conditional answer. 
The question has to do with the facts as they existed. 

Mr. DoRENBUscH. Well, the facts would be the same, as I see it. 
That is, the means we have of getting that information, of course, is 
just through contact and asking questions. 

The Chairman. Of course your letter is very definite, there is 
nothing conditional about it at all. "The announcement of no further 



CONCENTKATION OF ECONOMIC POWER 14283 

jobber allowance after October 1 will be made by Continental on 
Tuesday of next week after which all mills can announce likewise." 
Now that sentence indicates specific knowledge, not only as to what 
Continental is to do, but as to the date, the precise day on wliich is 
is going to do, it. Now do you want the committee to understand 
that you just picked this up out of the air in some vague manner, 
but then when you wrote your letter conveyed it to the person to 
whom you were writing as a clear and definite statement? 

Mr, DoRENBUSCH. Well, we may have determined that at the time 
by getting some information. 

The Chairman. You say you may have. Did you or did you not? 

Mr. DoRENBUscH. Of course I don't just remember the exact 
details. That has been so long ago that I just don't know. 

Mr. Wooden. You say, Mr. Dorenbusch, that after Continental 
announced withdrawal of jobber allowances the following Tuesday, 
that other mills, all mills can amiounce likewise. Couldn't they do 
it before? 

Mr. Dorenbusch. Oh, they probably could, yes, but of course 
they all try to be competitive. 

Mr. Wooden. What do you mean by being competitive, having 
the same policy at the same time and changing it at the same time? 

Mr. Dorenbusch. Not necessarily the same time, I think. 

We never Icnow the detail of these things until we see them pub- 
lished and then we do follow them. 

Mr. Wooden. Where was it you discussed the automotive situation 
with Mr. Neil Flora? 

Mr. Dorenbusch. I discussed that over the telephone, no doubt. 

Mr. Wooden. Didn't you get the information over the telephone 
from Mr. Flora that you put into this IStter? 

Mr. Dorenbusch. You mean about the automotive situation? 

Mr. Wooden. No, about the first paragraph, about leaving prices 
unchanged. 

Mr. Dorenbusch. No; I don't suppose I got that from him. 

Mr. Wooden. You don't suppose? 

Mr. Dorenbusch. Well, I never discussed prices with Mr. Flora. 

Mr. Wooden. You say in your letter that you discussed prices 
with him about the automotive situation and he advised you that 
the mills were all holding firmly to prices. 

Mr. Dorenbusch. I don't believe that letter says that I duscussed 
the prices in the automotive industry; I discussed the automotive 
industry with him and that may be with regard to tonnages that had 
b^en placed. 

Mr. Wooden. You say that Mr. Flora told you that all the mills 
are holding firmly to their prices. 

Mr. Dorenbusch. Well, he may have. There may have been a 
specific instance that I would have had at that time where one of the 
automobile buyers would have said to either our salesman or to me 
that they had placed a certain piece of business at a certain price, and 
in that event I may have asked Mr. Flora if he knew anything about 
it. Naturally we seek that information, and he is closer to the heart 
of the industry than we are down our way. I may have asked him 
that. 



124401 — 41 — pt •?.~- 



14284 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Do you mean that when you get a report of a cut 
price that you take it up with Mr. Flora to find out whether he can ver- 
ify it of not? 

Mr. DoRENBUscH. No; I don't mean that. I mean that in seeking 
or casting about for information of that kind, if there had been a 
definite sale made I may ask Mr. Flora if he had heard anything about 
it and as he did in this instance, according to that letter, he told me 
that he hadn't heard anything about it, that everything was all right. 

Senator King. Was the N. R. A. in force at that time? 

Mr. Wooden. No; N. R. A. went out with the Schechter decision 
on May 27, 1935. This was nearly 3 months later. 

Mr. O'CoNNELL. A few moments ago yoii indicated in discussing 
this question of the withdrawal of jobber allowances, that of course 
your company had to be competitive. I take it that a withdrawal of 
jobber allowances is in effect a price increase, isn't it? 

Mr. DoRENBUscH. Well, it may mean a greater return to the mill, 
that is right. 

Mr. O'CoNNELL. That would mean a price increase. Is it your 
conception of competition that whatever one of your competitors in- 
creases prices that you, in order to be competitive, have likewise to 
increase your prices? 

Mr. DoRENBUscH. Yes; we do, because we are so small down there 
that we certainly couldn't get a higher 

Mr. O'CoNNELL (interposing). You are so small that you can't be 
competitive. 

Mr. DoRENBUSCH. Well, no; we wouldn't get a higher price. 

Mr. O'CoNNELL. In this case you followed on a price increase. 
Had you not followed Continental you would have been selling at a 
lower price. 

Mr. DoRENBUscH. That is right. 

Mr. O'CoNNELL. Would that not have been competitive? 

Mr. DoRENBUSCH. I don't get the question. 

Mr. O'CoNNELL. Wouldn't that have been competitive to sell at a 
lower price? You indicated that it was competition that required 
you to some extent at least to follow Continental on the way up on 
'the price increase. Would you not have been competitive had you 
either reduced your prices or kept them lower than Continental prices 
after this increase? 

Mr. DoRENBUscH. I don't think so. 

Mr. O'CoNNELL. You don't? 

Mr. DoRENBUscH. No. 

Mr. O'CoNNELL. Then competition to your mind is following some- 
one else's prices. 

Mr. DoRENBUSCH. Well, that is the system that is in effect. 

Mr. O'CoNNELL. I know, I understand that is the system that is in 
effect, I have no doubt of that, but you used that system as being 
synonymous with competition and I was curious to get your idea of 
what competition involved. 

Mr. DoRENBUscH. Well, I just don't quite get you, I guess. 

Mr. O'CoNNELL. No ; T think we are pretty far apart on competition. 

The Chairman. It might be a very practical question so far as you 
are concerned. Let me ask you, do you believe that competitors 
should be permitted to consult with one another with respect to the 



OONCENTKATlON OF ECONOMIC POWER 14285 

price to be charged the pubUc for the goods the competitors both 
produce? 

Mr. DoRENBUscH. No; I don't think so. 

The Chairman. You don't think that they should be permitted to 
confer with one another and find out what prices are hkely to be, for 
example? 

Mr. DoRENBTTSCH. Well, it may be my own personal opinion that 
it would be all right to confer on it, but not to agree on a price. 

The Chairman. Well, has it been the practice, so far as your exper- 
ience goes, for competitors to confer? 

Mr. DoRENBUscH. No; it never has. I never have conferred with 
any of our competitors. 

The Chairman. But you have attempted to find out what your 
competitors are going to do? 

Mr. Dorenbusch. Very definitely; yes, sir. 

The Chairman. And how do you do that? 

Mr. Dorenbusch. Well, by contacts on the street. We have cer- 
tain customers, of course, that have been loyal to us for years, that 
'when they are approached by another company and led .to believe 
there is going to be a change in price this way or the other, they will 
pass the information on to us quite readily. We also get it through 
contacts of our salesmen on the street. 

The Chairman. Well, do you ever get it by conferences with the 
heads of other firms and companies? 

Mr. Dorenbusch. No, sir. 

The Chairman. Who was this Mr. Flora that you mentioned? 

Mr. Dorenbusch. Mr. Flora, as I mentioned a while ago, is the 
Secretary of the National Association of Flat Rolled Steel Manufac- 
turers, which takes in sheets, of course*; that is a flat-rolled product. 

The Chairman. Well, you wouldn't object to conferring with a man 
holding such a position with respect to prices? 

Mr. Dorenbusch. Well, I never have. I've never conferred with 
him on prices, only that I may ask him if he had heard of anything 
of any lower — any business being placed at lower prices, where I had 
information of a specific order having been placed at a price. 

The Chairman. Now do I understand that you want the committee 
to get the impression, from your testimony, that the conference to 
which your first paragraph in this letter refers, was a conference solely 
of your own officials and employees? 

Mr. Dorenbusch. That's right. 

Senator King. Let me ask the judge a question: Judge, didn't the 
Sypreme Court of the United States, in the Sugar Institute case, say 
that there was no objection to meeting and conferring if they didn't 
fix prices? They could exchange their views. 

Mr. Wooden. I think that's been the opinion of the Supreme Court 
in other cases, particularly the Cement and Michigan Hardwood cases, 
going back prior to the Sugar Institute case. In the Sugar Institute case 
a basing-point system was involved, and the Supreme Court allowed 
the injunction of the lower court to stand against it. 

Senator King. The case to which I have just invited attention has 
not been overruled by the Supreme Court. That is the law now, 
isn't it, so far as the Suprenie Court of the United States may announce 
what the law is? 



14286 c;(>.\("i:N'in{A'j'JON of kco.nomjc rowEU 

Mr. Wooden. So far as I laiow, the mere conference in itself may 
not constitute an agreement. It may be evidence, however, from 
which an agreement may be inferred with other circumstances. 

Senator King. The point I am trying to get at, the Supreme Court 
of the United States — persons engaged in the manufacture of shoes or 
hnens or tobacco or anytJiing else may confer, exchange views, biii, 
they may not fix prices. , 

Mr. Wooden. I think that's 

Senator King (interposing). May not enter into an agreement for 
the fixing of prices, but may exchange views with respect to the in- 
dustry and its condition, and probably the denjand in the industry. 

Mr. Wooden. I think that was . announced by the Court in the 
Cement case and Michigan Hardwood case,' back in 1925, both decided 
on the same day. ^ 

The Chairman. In these particular questions which I am directing 
to the witness now, I am not trying to imply that there was any 
violation of the law or that the witness or his company jWas doing 
anything which has been condemned by the law, or whether as a 
matter of fact there was any violation at all. 1 am just curious to 
know how the price fixing— and I am using that now merely in the 
sense of determining — the price-determining arrangement actually 
works. Now you tell us that you were referring solely to a meeting 
of your own employees and associates. It is difficult for me, therefore, 
to interpret this first paragraph which I will read for you again: 

It was not definitely decided until late last evening to put into effect for fourth 
quarter a one price policy allowing the galvanized sheet price to remain at $3.10 
per 100 lb. for No. 24 gauge base f. o. b. Pittsburgh. A few of the larger interests 
such as Weirton and Inland were in favor of reducing the price to $3 base for 
No. 24 gauge f. o. b. Pittsburgh but this was finally defeated and it was agreed to 
allow all prices to remain the same as now in effect. ■ • ' - 

Now would a person reading that paragraph not be justified in in- 
ferring that a few of the larger interests were represented at the 
meeting where the decision was re'ached? 

Mr. DoRENBuscH. Well, it may give you the inference, of course, 
but just where we got that information, as I say, gathered here, there, 
.and other places, why 

The Chairman (interposing). But you are telling us that they were 
not represented at that meeting? 

Mr. DoRENBUscH. Not at our meeting; no, definitely not. 

The Chairman. And you are telling us that it was not your in- 
tention at that meeting to decide upon a price which had already been 
discussed and agreed upon by other competing companies? 

Mr. DoRENBUscH. W^ill you repeat that? I didn't get that. 

The Chairman. Well, at the time you wrote this letter, did you 
know what the other companies were going to do with respect to 
price? 

Mr. DoRENBuscH.,i_Well, we evidently did from the tone of things 
there. 

The Chairman. And did you luiow that merely because you picked 
it up on the street corner, or because you had pretty good official 
information from the executives of your competitors? 

Mr. DoRENBtrscH. No; we didn't have that sort of information 
from the executives of our coir peti tors. 



CONCENTRATION OF ECONOMIC POWER 14287. 

The Chairman. Well now, what sort of information did you have 
actually? You see, what I am trying to do is find out how you came 
to this conclusion. There is no question of law violation involved, 
and I am not trying to trap you. I am just trying to find out how 
this system worked, in order to make clear in my own mind how it 
ought to work. 

Mr. DoRENBUscH. WcU, I don't know exactly how I got the in- 
formation. I recall the letter and I get your inference there all right, 
but just how we got it, through our various offices or men, through 
theu* contacts, where it may have been let out here, there, and the 
other place. Whenever a price is ready to be aimounced, really before 
it is announced, usually some of the men on the street or in these 
various offices arc out with it ahead of time and they pass it on to 
customers and in that way our men pick it up, and naturally they 
convey it to us immediately. 

Mr. Wooden. Mr. Dorenbusch 

The Chairman (interposing). Mr. Wooden, would you ])crmit me? 

Mr, Wooden. I beg your pardon. 

The Chairman. Let me read the whole of that last sentence: 

A few of the larger interests such as Weirton and Inland were in favor of reducing 
the price to $3 base for #24 gauge f. o. b. Pittsburgh but this was finally defeated 
and it was agreed to allow all prices to remain the same as now in effect. 

Now don't you think that a person reading that sentence would be 
justified in the inference that there was a debate? Why did you use 
the word "finally"? 

Mr. Dorenbusch. Well, I don't know. 

The Chairman. Now you are telling me that there was no debate, 
there was no discussion, and there was no final defeat for anybod}^? 

Mr. Dorenbusch. Only as we gathered that. 

The Chairman. Where were they defeated and how? 

Mr. Dorenbusch. Well, I don't know that. 

The Chairman. You wrote it. 

Mr. Dorenbusch. I know I wrote it. 

The Chairman. All right. 

Mr. Wooden. Mr. Dorenbusch, can you tell us whether your own 
rtien picked this information up on the street late at nigJit? You 
said that it was not definitely decided until late in the evening. Were 
they out on the street picking up information late in the evening? 

Mr. Dorenbusch. Our people, they may have heard it tlie next 
morning. 

Mr. Wooden. Well, but you said it wan't decided until "late last 
evening." 

Mr. Dorenbusch. Yes; I said that. 

Mr. Wooden. Well, now, you wrote the letter the next morning, 
didn't you? 

Mr. Dorenbusch. That's right. 

Mr. Wooden. Do you now say that you got the iufornuitiou tlio 
next morning? 

Mr. Dorenbusch. Yes; probably got it the next morning. 

Mr. Wooden. But you talked to Mr. Neil Flora the evening 
before? 

Mr. Dorenbusch. No; not necessarily. I nuiy liavo talked to 
him that morning. 



14288 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Well, you paid in the letter that you discussed it 
with Neil Flora last evening. 

Mr. DoREKBuscH. Well, that was on another subject. 

Mr. Wooden. But you said in the same paragraph that Mr. Flora 
told you that aU the mills were holding firmly to their prices. 

Mr. DoRENBuscH. WeU, of course that is a different subject en- 
tirely than involved in the first paragraph. 

Mr. Wooden. Were holding firmly to the prices? 

Mr. DoRENBUscH. Prices that were in effect at that time. 

Mr. Wooden. And that's what the paragraph says, that they were 
going to continue to be held at the same prices instead of being re- 
duced. That's correct, isn't it? 

The Chairman. Any other questions? 

Mr. Wooden. Nothing further. 

The Chairman. You may stand aside. Any other witness? 

Mr. Wooden. It was established yesterday, Mr. Chairman, by 
testimony, that certain resolutions establishing certain commercial 
practices with reference to the method of figuring delivered prices 
had been continued in operation since the code, and that they con- 
tinued in operation, so far as now shown, down to the present time. 
Since the code itself, as has been testified, and as is apparent on the 
face of the code, provided for the incorporation of the basing point 
system in the code, and since it was shown yesterday that the industry 
adopted resolutions continuing the fair competition provisions of the 
code in effect after the Schechter case, I think it would be in order to 
have a copy of the code itself in the record, and I submit one of the 
publicly printed and distributed copies for that purpose. 

The Chairman. Without objection the code may be received for 
printing in the record. 

(Tlie document referred to was marked "Exhibit No. 2215" and 
is included in the appendix on pp. 14506-14530.) 

The Chairman. Anything else, Mr. Wooden? 

Mr. Wooden. I should like to caU attention to section 4, schedule E 
of the code which has just gone in evidence, for the provision regarding 
the method of quoting prices for delivery on an identified structure, 
where the material was being fabricated m transit. Yesterday I had 
the impression that it was a separate resolution, but I find it is a part 
of the code itself and it was shown yesterday that that particular 
provision continued in effect for quite some time after the code 
itself was held invalid bythe Supreme Court. 

I offered yesterday also certain of the commercial resolutions 
adopted by the Board of Directors ' which were continued m effect, 
specifically, according to the testimony, and I should like to offer 
in supplementaton of those particular resolutions the remaining 
commercial resolutions that were adopted by the Board of Directors 
of the American Iron and Steel lastitute during the code period. 

I make that offer of the other resolutions on the basis of the letter 
of the United States Steel Corporation vice president, Mr. Olds, 
which I read into the record, I think on Saturday, to the effect that 
the Corporation officials knew of no amendments or modifications 
of those commercial resolutions since June 1935. The volumfe which 
I have contains several of the resolutions to which reference was 



1 "Exhibits Nos. 2206, 2207, and 2208," appendix, pp. 1443.'i, 14436 and 14437-14441. 



CONCENTKATION OF ECONOMIC POWER 14289 

made ou the record yesterday aud which -were received yesterday. T 
am offering the remainder of the resolutions. 

The CHA-tRMAN. You are offonTie; tbeni to be filed with the com- 
mittee? 

Mr. Wooden. To be filed. I should like to make some arrange- 
ment by which at least a duplicate may be provided and the original 
copy retained in the files of the Federal Trade Commission. 

The Chairman. The committee will be very glad to accept that 
to file with the records. 

Mr. Wooden. I may say the volume contains some so-called 
commercial regulations which are of the same general nature as the 
commercial resolutions and adopted under the same auspices. 

The Chairman. Very well. 

(The resolutions referred to were marked "Exhibit No. 2216" and 
are on file with the coromittee,) 

Mr. Wooden. I should also like to add a small additional portion 
of the testimony given by W. A. Irvin, president of the United 
States Steel Corporation, before the Senate Committee on Interstate 
Commerce in March 1936, just a few lines. It appears on page 607 
of the printed record of the hearings before that committee on S. 4055. 

The Chairman. Now you were here yesterday when Mr. Grace was testifying. 

Mr. Irvin. Yes. 

The Chairman. He stated there were occasions when you came into his terri- 
tory and underbid his base price. Have you anj' specific examples of that? 

Mr. Irvin. I think I stated this morning that I thought he made that in a 
rather facetious way. If I thought he intended it I would have resented it very 
much. 

I would like to call Mr. Widmann to the stand. 

The Chairman. 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. Widmann. I do. 

TESTIMONY OF EDWARD T. WIDMANN, ATTORNEY, FEDERAL 
TRADE COMMISSION, WASHINGTON, D. C. 

Mr. Wooden. Mr. Widmann, wUl you state your full name and 
business? 

Mr. Widmann. Edward T. Widmann. I am an attorney with the 
Federal Trade Commission. 

Mr. Wooden. How long have you been there? 

Mr. Widmann. Since 1934. 

Mr. Wooden. Will you state whether or not you had occasion as 
part of your oflBcial duties of the Commission to make any investiga- 
tion of conditions m the steel industry? 

Mr. Widmann. I did. 

Mr. Wooden. When, on what occasion, and under what circum- 
stances? 

IDENTICAL BIDS IN THE STEEL INDUSTRY 

Mr. Widmann. In 1936, the Federal Trade Commission undertook 
an investigation of identical bids submitted by the steel producers^op, 
steel sheet piling, wliich bids were submitted on piling to be used in 
certain P. W. A. projects. 



14290 CON( !]ONT11ATION OF ECONOMIC 1•0\^•K1^ 

Mr. Wooden. In that connection will you state whether or not 
yon made any examination of the files and records of the American 
Iron and Steel Institute? 

Mr. WiDMANN. I did. 

Mr. Wooden. Did you select and obtain copies of documents from 
their files? 

Mr. WiDMANN. I did. 

Mr. Wooden. I show you certain documents. Will you state what 
they are? 

Mr. WiDMANN. These are copies of certain letters and documents 
which we obtained from the American Iron and Steel Institute, 

The Chairman. Which who obtained? 

Mr. WiDMANN. Which I obtained from the American Iron and Steel 
Institute. 

The Chairman. In what manner? 

Mr. WiDMANN. Pursuant to the investigation which I was making 
of alleged collusive bidding on steel sheet piling by steel producers. 

The Chairman. Did you get them from their files? 

Mr. WiDMANN. Yes. 

Mr. Wooden. Were the copies provided for you there or how were 
the copies made? 

Mr. WiDMANN. Some of the exhibits which we obtained were in the 
nature of duplicate copies of letters of which they had extra copies. 
They, the American Iron and Steel Institute, prepared copies of certain 
other letters concerning which they did not have extra copies in the 
files. Those copies which they made and submitted to us were, 
however, compared with the original exhibits. 

Mr. Wooden. Do you vouch for the correctness of the copies that 
you have identified here? 

Mr. WiDMANN. I do. 

Mr. Wooden. I would like to offer them for the record, Mr. 
Chairman. 

The Chairman. The letters may be received. 

Mr. WiDMANN. Letter, dated July 12, 1935, from the American 
Iron and Steel Institute to the Lukens Steel Co. 

(The letter referred to was marked "Exhibit No. 2217" and is in- 
cluded in the appendix on pp. 14530-14532.) 

Mr. WiDMANN. A letter, dated July 6, 1935, from J. Frederic Wiese, 
assistant to vice president of the Lukens Steel Co., to R. K. Keas, 
Secretary, Traffic Committee, American Iron and Steel Institute. 

(The "letter referred to was marked "Exhibit No. 2220" and is 
included in the appendix on p. 14532.) 

Mr. WiDMANN. A letter, dated October 15, 1935, from the American 
Iron and Steel Institute to H. C. Devine, purchasing agent of the St. 
Louis-Southwestern Railway Lines. 

(The letter referred to was marked "Exliibit No. 2221" and is 
included in the appendix on pp. 14532-14533.) 

Mr. WiDMANN. A letter, dated July, 18, 1935, from the American 
Iron and Steel Institute to J. W. Rimmer, vice president of the Boston 
and Maine Railroad. 

(The letter referred to was marked "Exhibit No. 2222" and is 
included in the appendix on p. 14533.) 

Mr. WiDMANN. A letter, dated September 9, 1935, from the Ameri- 
can Iron and Steel Institute to the Lockhart Iron and Steel Co. 



CONCENTRATION OP ECONOMIC POWER 14291 

(The letter referred to was marked "Exhibit No. 2223" and is 
included in the appendix on p. 14534.) 

Mr. WiDMANN. A letter, dated September 4, 1935, from the Lock- 
hart Iron and Steel Co. to R. K. Keas, secretary, Traffic Committee, 
the American Iron and Steel Institute. 

(The letter referred to was marked "Exhibit No. 2225" and is 
included in the appendix on p. 14535.) 

Mr. WiDMANN. A letter, dated January 29, 1934, from the chairman 
of the traffic committee. Iron and Steel Institute, to S. E. Hackett, 
chairman. Commercial Committee of the American Iron and Steel 
Institute. 

Mr. Wooden. I would like to call attention to several pertinent 
matters in them. I would like to call attention to "Exhibit No. 
2226," which is a letter from the chairman of the traffic committee of 
the Institute, one H. C. Crawford. Is that correct? 

Mr. WiDMANN. That is right. 

Mr. Wooden. H. C. C. are the initials — to S. E. Hackett, chairman 
of the commercial committee of the Institute, written on January 29, 
1934, while the code was still in operation. Mr. Crawford states: 

The Traffic Committee recommends the passing of a resolution making the use 
of Tariff No. 2 mandatory in the figuring of prices under the Code. While every 
effort has been made to figure minimum rates, it is not humanly possible to obtain 
accuracy in each and every instance, bearing in mind that the half million rates 
published have been compiled by some hundred and fifty men'. As errors are 
discovered the incorrect rate will be changed, but until the change appears in a 
supplement to the tariff it is our opinion it should not be used for sales purposes. 
Certain branches of the industry have for years followed such a practice. We 
urge that, if possible, it be generally adopted. 

The pomt there I think is clear, that the Institute publication of the 
freight rates was to remain in effect until a supplement to it was 
issued making any necessary corrections. In other words, even if a 
rate were found to be incorrect the incorrect rate as published by the 
Institute should be used until there was opportunity to change it by 
a supplement to the tariff of the Institute. 

Mr. O'CoNNELL. In that connection I take it it is your point that 
the purpose of doing that was to insure imiformity in that element of 
price by all steel producer's. 

Mr. Wooden. Yes. As a matter of fact, the recitation of the 
resolution ' putting into effect these freight tarifis compiled by the 
Institute so recited, that it was to implement and make effective the 
calculation of delivered prices which were fixed under the code in the 
basing-point system, plus all-rail freight to destination. I think it was 
the testimony of Mr. Fairless that they used the freight book of the 
Institute during that period. I mean by that period the period of the 
code, although I believe that they haven't found it necessary to use it, 
according to his testimony, since. 

Mr. O'Connell. i\.ccording to his testimony they did not always 
use it. 

Mr. Wooden. The record will show; I am not perfectly clear on it 
myself. 

1 would hke to call attention also to "Exhibit No. 2220," dated 
July 6, 1935, which is after the code wns invalidated, a letter by the 

1 "KNliibit No. 1!208," ap|ipii(.li\, r'. I44:i7-!U1I. 



14292 CONCENTRATION OF ECONOMIC POWER 

Lukens Steel Co, to R. K. Keas, secretary of the traffic committee 
of the Institute, July 6, 1935. It says: 

As you know, we sell Locomotive Firebox and Boiler Steel to most of the 
railroads in the country. From time to time the Institute has sent us figures 
representing divisions and mileages incident to quoting the railroads under the 
provisions of A-8. 

A-8 was one of the commercial resolutions. 

However, of the total railroads purchasing Lukens' steel a very few have sub- 
mitted the necessary figures. Can't you possibly furnish us with the figures 
pertaining to the balance of the railroads? Certainly these figures must be 
available by this time as the practice of quoting under the stipulations of A-8 
has been followed for a good many months. 

It is most difficult to figure the proper prices and freight allowances now since 
the emergency rate became eS'ective. 

This is after the code. 

So many individual problems come up; for instance, you have furnished us with 
figures relative to the CJiicago & P^astern Illinois Railroad. That tabulation of 
figures shows a 20 switching charge for Dalton, 111. This means that the balance 
of the through rate from Coatesville to Dalton was considered as prorate. Has 
the emergency charge increased this switching charge by 10% or has that rate 
remained constant, thereby increasing the prorate by 20? Anything you can do 
for us in this connection will certainly be appreciated. 

I merely say that there are other letters among these exhibits re- 
lating to the method of figuring freight in the Institute freight-rate 
book, and which call attention to errors in them and make reference 
to the necessity or the practice of getting the Institute fre^ight-rate 
books corrected before the correct rates themselves were used. 

Mr. Wooden. Do you identify these as obtained by you from the 
same source under similar circumstances? 

Mr. WiDMANN. I do. 

Mr. Wooden. I offer them in evidence. 

The Chairman. They may be received. 

Mr. Wooden. The first is a latter, dated November 27, 1935, from 
Arthur C. Garvey, general traffic manager of the Readmg Iron Co., 
to E. T. Butler, secretary of the Traffic Committee of the American 
Iron and Steel Institute. 

(The letter referred to was marked "Exhibit No. 2228" and is in- 
cluded in the appendix on p. 14536.) 

Mr. Wooden. The next letter, dated December 2, 1935, is from 
W. H. Gantt, assistant traffic manager of the Bethlehem Steel Co., 
to E. T. Butler, American Iron and Steel Institute. 

(The letter referred to was marked "Exhibit No. 2229" and is in- 
cluded in the appendix on p. 14536.) 

Mr. Wooden. Now- "Exhibit No. 2228" is a copy of a letter from 
the General Traffic Manager of the Reading Iron Co. to E. T. Butler, 
the secretary of the traffic committee of the Institute, dated Novem- 
ber 27, 1935, which is 6 months or more after the code was invalidated. 
The writer says; 

Tariff No. 3 shows LCL rate, Coatesville, Pa. to Albemarle, N. C, 680. 

In Eastern Points-Carolina Tariff I. C. C. 646, the LCL rate from Coatesville 
to Albemarle, N. C. is 57..50. 

You doubtless will desire to have the lower rate pnljlished in lieu of the 680 
I'ate. 

"Exhibit No. 2229" is a letter from W. H. Gantt, assistant traffic 
manager of the Bethlehem Steel Company, to E. T. Butler, American 
Iron and Steel Institute, dated December 2, 1935, and saying: 



COJSrKNTlJATlON OF EOONOMIC rowEu 14293 

In reply io your letter o[ November 29th, in connection witli which you sub- 
joined a letterfrom a subscriber with reference to the proper rate on less carload 
shipments from Coatesville, Pa., to Albemarle, N. C. 

The less carload freight rate of 68 cents per 100 pounds, as shown in Institute 
Freight Tariff No. 3, is in error. The correct basis is 57^2 cents. We are taking 
the necessary steps to have this erroneous rate rectified in next supplement to 
tariff in question. 

In that general connection, I should like to call the committee's 
attention to one of the findings of fact made by the Federal Trade 
Commission in the Pittsburgh Plus Case, regarding freight tariflFs in 
use at that time. It is in paragraph 14 (n) of the findings: 

The freight tariffs are complicated and oft times there are two or more different 
freight rates between two points given in the different tariffs. The freight traffic 
expert's duty under the Pittsburgh plus system is to find the lowest rate existing 
from Pittsburgh to every consuming point. Different traffic experts might not 
arrive at the same results, and therefore a uniform freight rate book is absolutely 
necessary in order that the steel producers may reach absolutely uniform Pitts- 
burgh plus prices. 

I have nothing further to ask Mr. Widmann. 
The Chairman. You may stand aside. 
Mr. Wooden. Mr. White. 

The Chairman. Mr. "WTiite, you have already been sworn, haven't 
you? 

Mr. White. Yes, Mr. Chairman. 

TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, 
WASHINGTON, D. C— Resumed 

Mr. Wooden. Mr. White, in the course of your duties with the 
Federal Trade Commission did you also have occasion to examine the 
files of the American Iron and Steel Institute in connection with the 
same investigation that Mr. Widmann has just testified about? 

Mr. White. Yes; I was designated by the Commission as the exam- 
iner in charge of that investigation. Together we made the investiga- 
tion to which Mr. Widmann referred. 

Mr. Wooden. Mr. White, I show you a letter addressed to H. C. 
Crawford, chairman of the traffic committee of the Bethlehem Steel 
Co. and ask you to tell us what it is. 

Mr. White. It is a copy of a letter, or rather a copy of a copy of a 
letter which appeared in Investigation File 1-9268, which was secured 
from the files of the American Iron and Steel Institute on or about 
April 6, 1936. 

Mr. Wooden. I should like to offer it for the record now. 

The Chairman. It may be received. 

(The letter referred to was marked ''Exhibit No. 2230" and is 
included in the appendix on pp. 14536-14537.) 

Mr. Wooden. I should like to direct the committee's attention to 
the nature of this letter, the substance of it. It is dated April 11, 
1935, which was just about a month before the invalidation of the 
N. R. A. It is a letter from the Youngstown Sheet and Tube Com- 
pany to H. C. Crawford, chairman of the traffic committee, care of 
Bethlehem Steel Company. • 

On February 22 we replied to your letter of February 12 relating to the disposi- 
tion of fractions in the quoting of delivered prices. This proposal, as we under- 
stand it, is concerned only with delivered prices, but in view of the recent develop- 
ment at Canton, Mississippi, we believe that there should be included in this 



14294 CONClONTJtATION OF ECONOMIC POWEU 

proposal a ruling to the effect that where it is necessary to name a basing point 
price for discount purposes, the same rule regarding fractions should apply. 

We are sure that your Pipe Department is familiar with the Canton, Mississippi, 
job, to which we refer. There was involved on a PWA project approximately 
$60,000.00 of pipe, on which all bidders named a uniform delivered price, decimals 
being carried in two places, in accordance with usual practice. 

It was necessary to name a basing point price for discount purposes, and two 
concerns carried the basing point price to three places, one concern, however, 
making a mistake in figuring the price, but the successful bidder, which was 
Republic, has been awarded the business because carrying the basing point price 
to three places resulted in their bid being 12 cents low — 

12 cents low on $60,000 by using three decimal places instead of two. 

Unless you include a ruling on basing point i)rice, as well as delivered price, 
this will no doubt happen again. 

Now, Mr. White, I call your attention to a statement that appears 
in "Exhibit No. 1418" on page 34. The statement on page 34 to 
which I refer is as follows. It is a statement made by the United 
States Steel Corporation in its pamphlet. It says in brief that in 
spite of the tendency toward uniformity or identity of bids on Govern- 
ment business, identical bids on governmental contracts are by no 
means the general rule. 

An examination of records covering Federal Government awards for steel prod- 
ucts made at Washington, D. C, during 1938 and the first quarter of 1939, indi- 
cates that such awards aggregated approximately $10,550,000, of which about 
80 per cent in value went to the lowest bidder and only about 16.5 per cent in 
value by lot on account of identical bids. The balance of 3.5 per cent was awarded 
on a basis other than price. 

Air. "White, have you analyzed the underlying data which the Cor- 
poration provided and submitted as the basis for that statement which 
I have just read? 

Air. White. I have, and I think by way of explanation it should 
be said that those data were submitted in two volumes, one for the 
year 1938, which appears in the record as "Exhibit No. 2211," and 
those contained in another volume, captioned "Government Tonnage 
Record, First Quarter, 1939," and appearing in the record under 
"Exhibit No. 2210." 

We have examined these data and in order to make absolutely cer- 
tain that no errors occurred in the amounts, we balanced the pages 
of each of the exhibits, treated the years separately, and then treated 
them in their entirety. 

Air. Wooden. Will you state the results of your analysis? 

Air. White. Let me say first it was observed that there were a 
number of commodities here which were recognized as being other 
than steel products. I believe the statement to which you referred 
in "Exhibit No. 1418," page 34, referred to or mentioned only steel 
and products of steel. 

Air. Wooden. The statement on page 34 is as to steel products. 

Air. White. First it was noticed that there were a considerable 
number of other than steel products, among them being such com- 
modities as cement and various others which were clearly distin- 
guishable from steel. 

Next it was observed that there were a considerable number of 
bidders who were not listed in the Iron and Steel Works Directory of 
the I"^nited States and Canada, published by the Iron and Steel 
Institute as steel producers. We first indicated by symbols, in order 
to bring these diflPerent categories together, those that were producers 



CONCENTRATION OF ECONOMIC POWEIl 14295 

of rolled steel and those that were not, then we segregated the com- 
modities" that were recognized as rolled-steel products and those that 
were not, and again segregated commodities that were products of 
these rolled forms. All of that has been expressed in tabular fonn on 
the sheets which you have before you. 

Mr. Wooden. I would suggest, Mr. Chairman, that the tabulation 
made by Mr. White, to which he refers, be admitted to the record, 
and that the Steel Corporation have an opportunity to examine it. 

The Chairman. It may be admitted. 

(The tabulation referred to was marked "Exhibit No. 2231" and 
is included in the appendix on p. 14538.) 

Mr. Wooden. Will you proceed, Mr. White, with your statement 
of the results of your analysis? 

Air. White. The tabulation which has just been received is made 
by using the same measurements that the Corporation used, that is 
tlie volume of business in dollars and cents. I have a memorandum 
here which for brevity might be ofFej'.d foj- the record, showing the 
number — or rather the percentage — of the total rolled products on 
which bids were made by producers of those forms which were alike 
and on which award was'made by lot, and the percentage ^v^hich were 
unlike.-. 

Mr. Wooden. Mr. White, the figures given in the Corporation 
pamphlet, "Exhibit No. 1418," show the total of $10,550,000 for 
steel products. What was the total amount of rolling mill steel prod- 
ucts that you were able to find in the underlying material that the 
Corporation submitted? 

Mr. White. The total value of the rolling mill products, both 
years, was $4,193,926.55. 

Mr. Wooden. Were you able to account for the remainder of 
$6,000,000 in the $10,550,000 figure? 

Mr. White. No; I didn't recognize any additional items as being 
in the form of rolling mill products. 

Mr. Wooden. Do the underlying data contain, however, a number 
of other steel products than rolling mill products? 

Mr. White. Yes; the aggregate amount of which is shown as 
$16,080,635.26. 

Mr. Wooden. What kind f^i products are included other than 
rolling mill products that you found in this tabulation? 

Mr. White. Well, there are large quantities of armor plate, which 
to the best of my information is rather a forged product than a rolled 
product. Then there are -car wheels, or truck wheels — I have forgot- 
ten just exactly' how they are expressed — which may be rolled by a 
different process than the rolling mill. Then there are, I believe, 
listed cranes and cable; cable especially is made in a large variety, of 
forms, and where the cable was not distinctly recognized as copper 
cable, of which there is a considerable quantity, that was put into the 
category of steel products, without any definite knowledge whether 
they were entirety steel or cable with a steel center. 

Mr. Wooden. You mean you put them m your analysis? 

Mr. White. Yes. 

Mr. Wooden. In other words, you gave the Corporation the benefit 
of the doubt on th.^t point? 

Mr. White. Yes. I might say hi that respect, too, that the symbols 
here have been carried throughout the tabulation so if it is desireH to 
check them it may be done. 



14296 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. Do I understand, then, that you can Jfind m this 
underlying data only some four million dollars' worth of rolling mill 
products as against the $10,550,000 siated on page 34 of "Exhibit 
No. 1418"? 

Mr. White. Yes; something less than four and a quarter millions. 

Mr. Wooden. Now did your analysis go to the point of ascertaining 
the percentage of identical bids on the rolling mill products, considered 
separately? 

Mr. White. Yes, sir. They are not shown on the tabulation, but 
in a separate memorandum here which is somewhat detailed. 

Mr. Wooden. I would suggest, Mr. Chairman, that this separate 
tabidation, to which Mr. White refers, be admitted to the record. 

The Chairman. It may be admitted. 

(The tabulation referred to was marked "Exhibit No. 2232" and is 
included in the appendix on p. 14539.) 

Mr. Wooden. Will you proceed to state, Mr. White, what your 
analysis showed or shows as to the percentage of identical bids on 
rolling mill products in the underlying data which the Corporation 
submitted? 

Mr. White. Referring first to the rolling mill products and the 
awards made to producers of those products, the tabulation shows 
that there were 514 bids, of which 138 were tie bids, or a percentage 
of 26.85. 

Mr. Wooden. You mean by tie bids that they were identical in 
every respect? 

Mr. Wh^ te. I am using the language that was used in the tabula- 
tion. I assume that's what is meant. 

Mr. Wooden. All right. 

Mr. O'Connell. You say 514 bids. Do you mean 514 bid openings 
or that many bids? 

Mr. White. There were that many awards. 

Mr. O'Connell. So that the number of bidders would be many 
more than that? 

Mr. White. Yes, sir. 

Mr. Wooden. You gave the percentage. 

Mr. White. Yes, the balance of course were 376, or a percentage of 
73.15. 

Mr. Wooden. That fs for the producers of rolling mill products? 

Mr. White. Yes. 

Mr. Wooden. Now did you analyze separately the underlying data 
with reference to bids by nonproducers? 

Mr. White. Yes. Now these nonproducers, it will be understood, 
of course, are those that are not specifically listed as producers of 
rolled steel shown in the Iron & Steel Works Directory of the 
United States and Canada. The number of awards to nonproducers 
was 182, of which 16 were tie bids, a percentage of 8.79. The unlike 
bids were 166, which is a percentage of 91.21. Now taking the total 
of bids on rolling mill products, we find there were 696, of which 154 
or 22.13 percent were tie bids. 

Mr. Wooden. Now what did you find with reference to your 
analysis of the bids contained in this underlying data for steel products 
other thau rolling mill products? 

Mr. White. For all other steel products, number of awards to 
pro(hicers of rolling mill products wns 421, of which 55 were tie bids, 



CONCENTRATION OF ECONOMIC POWER 14297 

or a percentage of 13.06. The number of awards to uonproducers of 
those products was 784, of which 104 were tie bids, or a percentage of 
13.27. 

The Chairman. As I understand this testimony, Mr. Wooden, 
Mr. White is testifying that he has examined the underlying data 
prepared by the United States Steel Corporation.' 

Mr. Wooden. Yes, sir. 

The Chairman. From which whoever prepared this memorandum 
on the basing point system for the United States Steel Corporation 
drew the conclusion that [reading]: 

an examination of records covering Federal Government awards for steel 
products made at Washington, D. C, during 1938 and the first quarter of 1939, 
indicates that such awards aggregated approximately $10,550,000, of which 
eighty percent in value went to the lowest bidder and only about 16.5% 
in value by lot on account of identical bids. The balance of 3.5% was 
awarded on a basis other than of price. 

Mr. Wooden. That's right.2 

The Chairman. Mr. White's testimony, then, is that this data 
which he has examined does not appear to support this statement. 

Mr. Wooden. That's -correct. 

The Chairman. May I ask whether the Federal Trade Commission 
has had any of its representatives examine the original data of 
Governmental awards? 

Mr. Wooden. Not with reference to these particular transactions. 
The entire data on which Mr. White bases his analysis are the data 
furnished by the Corporation as the underlying data for its general 
statement. 

The Chairman. Well, of course, the facts, I suppose, could be 
easily ascertained by examining the actual awards by the Federal 
Government. 

Mr. Wooden. It could be, yes. 

The Chairman. That would determine from those awards whether 
or not there were identical prices in only the proportion indicated 
in this memorandum. 

Mr. Wooden. Yes. 

The Chairman. It is conceivable to the Chairman that there 
might be an error in the compilation of this data. There might also 
be an error in the examination of it, unless Mr. White and the person 
who prepared the data were in agreement with respect to the meaning 
of particular figures. 

Mr. Wooden. That's true. Did you make your analysis, ]Mr. 
White, on the basis of dollar volume or upon the number of biddings, 
separate bids and lettings? 

Mr. White. The analysis which has been referred to is on the 
basis of volume entirely. 

Mr. Wooden. In other wofds, the same basis that the Corporation 
used? 

Mr. White. Yes. 

Mr. Wooden. Dollars and cents? 

Mr. White. That's right. 

M'-. Wooden. Is it entirely possible or even probable that a differ- 
ent ] —rcentage would be shown if based upon the number of bid 

1 "Exh. lits Nos. 2210 and 22n", appendix, pp. 14444-14457 and 14458-14505. 

2 Aftei necessary corrections were made in Mr. White's testimony upon his recheck of tho un 'erlyinn 
data it appears that the Corporation's statement just quoted was subsfsntially rorrcet. 



1429S C().Nt;ENTUATlON OF ECONOMK" I'OWKK 

invitations rather than upon the value involved in the particular 
invitations? 

Mr. White. A quite different showing on percent, Mr. Wooden. 
I am a httle embarrassed by not having before me the facts in that 
respect. I thought they had been prepared and were included with 
these which came up since we arrived here, but they have not 
apparently. 

Mr. Wooden. Well, can you state from recollection approximately 
what the difference was? 

Mr. White. No; I don't thmk I should do that, Mr. Wooden. 
There should be a strictly accurate reply made to that question. 

Mr. Wooden. Can you say whether it was less or more than the 
percentages shown on the basis of volume? 

Mr. White. No; I don't think I should say they are f^ more 

or less. 

Mr. Wooden. You will have that material soon, will you? 

Mr. White. Gladly. It will be ready for submittal this afternoon 
if it is desired to have it. 

Mr. Wooden, Have you finished with your statement regarding 
the percentage of awards for these steel products other than rolling 
mill products? 

Mr. White. 1 think so. I don't think anything can be added to 
what is already said. 

Mr. Wooden. Can you say whether or not. these steel products 
other than rolling mill products are sold on a basing point system or 
whether they are sold at delivered prices, or do you know anything 
about that? 

Mr. White. Well, I distinctly recognize one, perhaps more, as 
being sold on that basis, and I think there are one or two more which 
I am a little hesitant about specifying. ^ 

Mr. Wooden. Will you state, if you can, how you can account for 
the fact that the corporation says the value involved in these biddings 
on steel products is $10,550,000 approximately, while you were unable 
to find more than $4,193,000 of rolling mill products? Where would 
the difference come in? 

Mr. White. Well, their designation, you will notice, their category 
consists 

Mr. Wooden (interposing). Page 34 ^ refers to steel products only. 

Mr. White. Steel products. Well, I undertook to segregate what 
I recognized as rolling mill products from other steel products, and 
since there is a total of only a little over four millions of rolling mill 
products, they must have been referring to fabricated products as well. 

Mr. Wooden. Do you know whether any of these products other 
than rolling mill products are priced on a basing point system? 

Mr. White. No; I don't think I should say that I know that defi- 
nitely, Mr. Wooden. I suspect some '^f them are. 

Mr. Wooden. Mr. White, I direcu your attention to a statement 
that appears on page 99 of "Exhibit No. 1418," the corporation's 
pamphlet on the basing point system, reading as follows: 

The capacity of the industry, inchiding reserve capacity, is not more than suflB- 
cient to supplv tlie needs of the country during periods of high demand such as 
1929, 1937 and the present time. 

1 Of "Exhibit No. 1418." 



CONrKNTKATION OF ECONOMIC PO^^•EIl 14299 

RELATION OF PRODUCTION TO CAPACITY, 1901-38 

Mr. WooBEN. I will ask you if you have made any compilation or 
showing of the relation of capacity to production, based upon the data 
supplied by the Corporation itself in "Exhibit No. 1409." 

Mr. White. I have. 

Mr. Wooden. TeU us what you did, please. 

Mr. White. I plotted the figures with respect to total ingot capac- 
ity shown 

Mr. Wooden. Pardon me, before you do that I would like to direct 
your attention at the same time to the statement on page 45 of 
"Exhibit No. 1418," that the total capacity of the industry "includes 
reserve capacity barely sufficient to supply peak demands." 

Mr. White. Well, the best answer to that, Mr. Wooden 

Mr. Wooden (interposing). Just go ahead with your statement 
regarding what you did. 

Mr. White. 1 would say that we have plotted total capacity shown 
in Exhibit 1409, ingot capacity, for the years 

Mr. Wooden (interposing). Is that for the entire industry? 

Mr. White. For the entire industry. It shows both the entire in- 
dustry, total United States as expressed here, and also United States 
Steel separately. What I have done is merely to repeat what I notice 
to be substantially the graph shown in that same exhibit, page 191. 

Mr. Wooden. By same exibit you mean "Exhibit No. 1409"? 

Mr. White. That is correct, and added thereto a production line 
which is plotted from total ingot production appearing on page 198 of 
that exhibit. 

Mr. Wooden. I offer for the record this chart entitled "Total ingot 
capacity. United States (gross tons), years 1901-38." 

The Chairman. It may be admitted. 

(The chart referred to was marked "Exhibit No. 2233" and is in- 
cluded in the appendix. on facing p. 14539.) 

Mr. Wooden. Now, Mr. White, on the basis of this exhibit can you 
find any support for the statements in the corporation's pamphlet * to 
which I directed your attention, to the effect that the capacity is not 
more than sufficient to supply the needs of the country during periods 
of high demand and that it includes reserve capacity barely sufficient 
to supply peak demands? 

Mr. White. Assuming the needs of the country to be the produc- 
tion, or the amount produced, I can't find a basis for the statement 

Mr. W^ooDEN. Take the year 1929, to wliich the corporation refers, 
what was the approximate percentage relation of production to capac- 
ity in that year? 

Mr. White. I haven't the result expressed in percentages, Mr. 
Wooden. 

Mr. Wooden. Well, the chart shows that it was a fairly substantial 
amount below the capacity, does it not? 

Mr. White. Yes; somewhat. 

Mr. Wooden. The percentage could be worked out from the under- 
lying figures, could they not? 

Mr., White. Somewhat less. 

• "Exhibit No. 1418." 



12'149i— 41— pt. 27 



-14300 CONCENTRATION OF ECONOMIC POWER 

Mr. Wooden. What about 1937, to which the corporation also 
refers as saying that the capacity is not more than sufficient to supply 
the needs of the country during 1937? 

Mr. White. That shows there was a considerable excess. 

Mr. Wooden. Much more than 1929? 

Mr. White. A production of approximately 52,000,000 tons whereas 
the capacity was in excess of 70,000,000. 

Mr. Wooden. Does this chart show any periods when the capacity 
of the United States Steel Corporation alone was equal to supplying the 
entire demand or production at certain periods? 

Mr. White. Yes ; it shows five occasions in which that might be so. 

Mr. Wooden. What were those years? 

Mr. White. 1908, 1921, 1932, '33, and '34. 

The Chairman. In other words, during the entire period from 
1901-38 the capacity of the United States Steel Corporation by this 
exhibit is shown with the exception of these years which you have just 
mentioned to have been considerably less than the actual total pro- 
duction of the United States during those periods. 

Mr. White. That is true. 

The Chairman. It is also to be observed from this exhibit that in 
1901, the United States Steel capacity was slightly under 10 and the 
total capacity of the United States was sHghtly over 20, so that at that 
time in 1901, United States Steel's capacity was approximately 50 
percent of the total capacity of the United States, and that that pro- 
portion remained somewhat stable until about 1907 or 1908 and that 
since that time the total capacity of the United States has grown 
much more rapidly than the capacity of the steel corporation. That 
is correct, is it not? 

Mr. White. Yes, sir. 

The Chairman. So that today the United States Steel Corporation 
has the power to produce a considerably smaller proportion of the 
output than the United States as a whole can produce. 

Mr. White. That is true, there has been a declining percentage. 

The Chairman. And in these years of 1927, '28 and '29, and in 
1936 and '37, the total production of the United States was apJDarently 
approximately twice as great as the capacity of the United States 
Steel Corporation. 

Mr. White. Yes; more than that. It wiU probably be noticed in 
this graph that there has been a continuous increase from 1901 to 
1938 in the total capacity of the country with the exception of the year 
1926. Now it may be worth noting that there is an explanation con- 
tained on page 191 of "Exhibit No. 1409" which says that that was 
due to a readjustment of capacity data by the American Iron and Steel 
Institute rather than an abandonment of facilities to produce steel. 
That statement was corroborated by the press and it is pretty well 
known what happened at that time. There was a committee of the 
American Iron and Steel Institute appointed to survey or resurvey 
the total ingot capacity, with the result that there was a temporary 
reduction shown here in 1926. 

Mr. Wooden. That showing is for the total ingot capacity. Would 
there be a different showing if you took it by various products? 

Mr. White. This showing is only as to ingots of which the rolled 
products are made. 



CONCENTRATION OF ECONOMIC POWER 14301 

Mr, Wooden. Have you made any study of the situation regarding 
excess capacity as to any particular product, rolling mill product? 

Mr. White. Yes. 

Mr. Wooden. What? 

Mr. White. On hot rolled sheets and hot rolled strip. 

Mr. Wooden. Will you state what you did in that connection? 

Mr. White. I have listed the capacities of the p oducers of hot- 
rolled sheets and hot-rolled strip, 16 of them individually, showing 
each capacity for sheets and strip and the total as given in the Ameri- 
can Iron & Steel Works Directory for the United States and Canada 
published by the American Iron & Steel Institute for the year 1938. 

Mr. Wooden. Did you plot the results of that study in chart form, 
in graph form? 

Mr. White. I first compiled the capacities of these 16 producers 
and 

Mr. Wooden (interposing). What 16 producers? 

Mr. White. Sixteen producers of hot-rolled strip and hot-rolled 
sheets showing that their capacity for both forms was 12,862,500 
gross tons. 

The Chairman. The committee will stand in recess now until 
2 o'clock. 

(Whereupon, at 12:40 p. m., the committee recessed until 2 p. m. of 
the same day.) 

afternoon session 

The hearing was resumed at 2:20 p. m., upon the expiration of the 
recess. 

The Chairman. Are you ready to proceed, Mr. Wooden? 

Mr. Wooden. Yes, sir. 

The Chairman. The committee will be in order, 

TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, 
WASHINGTON, D. C— Resumed 

EXCESS CAPACITY IN PRODUCTION OF SHEETS AND HOT-ROLLED STRIP 

Mr. Wooden. Mr. White, when we recessed at noon you were just 
on the point of making a statement with regard to your study of the 
conditions as to excess capacity in the production of sheets and hot 
rolled strip, I believe, is that right? 

Mr. White. Yes, sir. 

Mr. Wooden. Will you proceed with your description of what you 
did and what you found in the course of that study? 

Mr. White. I prepared a tabulation showing the total capacities 
for hot-rolled sheets and hot-rolled strip as shown by the Iron and, Steel 
Works Directory of the United States and Canada, published by the 
American Iron and Steel Institute for the year 1938. I have also shown 
the capacities of 16 of those principal producers. 

Mr. Wooden. How many producers in all did you find listed in the 
directory for the industry? 

Mr., White. Fifty-two. 

Mr. Wooden. And what did the figures show for the 16 that you 
listed? 



14302 CONCENTRATION OF ECONOMIC POWER 

Mr. White. They showed a combined capacity of 12,862,500 tons 
for 16 companies and a total capacity of the United States for 52 
companies of 14,949,950 tons. 

Mr. Wooden. Do you mean to say that 16 out of 52 companies had 
a combined capacity that was six-sevenths, approximately, of that 
of the entire sheet production, sheet and hot-rolled strip production? 

Mr. W^HiTE. That is correct. 

Mr. Wooden. Did you put your figures in the form of a chart or 
graph? 

Mr. White. I did. 

Mr. Wooden. Will you let me have that, please? 

Mr. Chairman, I offer for the record a table entitled "Total United 
States Capacity for the Production of Hot-Rolled Sheet and Hot- 
Rolled Strip Steel, 1938" and a graph entitled "Total Capacity, United 
States, for Production of Hot-Rolled Sheet and Hot-Rolled Strip 
Steel; Annual Capacity of the 16 principal Producers; and Production, 
United States." 

The Chairman. They may be admitted. 

(The table and graph referred to were marked "Exhibits Nos. 2234 
and 2235," respectively, and are included in the appendix on pp. 
14540 and 14541.) 

(Mr. O'Connell assumed the chair.) 

Mr. Wooden. Mr. White, referring to "Exhibits Nos. 2234 and 
2235," can you tell me whether those figures show that the 16 principal 
producers of sheets and hot-rolled strip have a capacity ,to produce 
more than twice what was needed during 1938? 

Mr. White. That is correct. The tabulation shows production 
ratio to capacity to have been 45.3 percent. That is of the 16 com- 
panies. Total production to total capacity was 39 percent. 

Mr. Wooden. In other words, there was about two and a half times 
as much capacity to produce sheets and hot-rolled strip ais there was 
need for during 1938. Is that cgrrect? 

Mr. White. That is what the figures contained in the Iron and 
Steel Works Directory and the production figures contained in the 
annual statistical reports of the American Iron and Steel Institute 
'for 1938 showed. 

Acting Chairman O'Connell. You refer to need as synonymous 
with production? 

Mr. Wooden. Yes; I intended to say that, need as shown by the 
amount of production. 

Mr. Wooden. Now Mr. White, you were unable to state before 
noon what the results of your analysis of "Exhibits Nos. 2210 and 
were 2211" were when figured on the basis of number of invitations 
rather than on the basis of value — total value. 

Mr. White. Mr. Wooden, the figures given just before the luncheon 
adjournment were, I find, for the number of bids received, and not 
for 

Mr. Wooden (interposing). You now have it for value, then? 

Mr. White. Yes. The percentage of identical bids by the pro- 
ducers of rolled products received on the rolled products was 12.67; 
that is, column 6 divided by colurmi 2 of the tabulation shows that 
ratio. 

Mr. Wooden. Do I understand that 12 — what was the decimal 
point figure? 



CONCENTRATION OF lOOONOMlC POWKIt 14303 

Mr. White. 12.67. 

Mr. Wooden. 12.67 percent of the rolled steel products on » value 
basis were identical. Is that right? 

Mr. White. That is of tltose bids made by the rolled steel pro- 
ducers. 

Acting Chairman O'Connell. I am not clear. The 12.67 is that 
on a basis of value of the commodity or on the basis of number of bids?. 

Mr. White. That is on the basis of value. 

Acting Chairman O'Connell. And the figure this morning of 26 
poipt something was based on the number of bid openings. Is that 
conect? 

Mr. White. That's correct. 

Acting Chairman O'Connell. And that in turn is based upon a 
break-down of the $10,500,000 figure shown in "Exhibit No. 1418" 
submitted by the Steel Corporation as showing 

Mr. White (interposing). No, its 

Acting Chairman O'Connell. (interposing). Percentage of Gov- 
ernment purchases of steel during a given period with purchases- 



Mr. White (interposing). That is not quite correct, Mr. Chairman. 
It was the break-down of data furnished in response to request for 
data which underlies that statement to which vou refer. 

Mr. Wooden. Now Mr. White, I want to bring your attention to a 
statement made by the corporation in "Exliibit No. 1418" on page 95, 
to the effect that "the capital investment per ton of steel is high and 
the annual turnover is relatively low compared with many other 
industries." Have you made any compilation with reference to the 
subject of capital investment per ton of steel? 

Mr. White. I have made only a limited and rather hurried examina- 
tion in response to the question asked by Senator King the other day, 
and from 

Mr. Wooden (interposing). Will you state what you did and what 
results you have? 

Mr. White. I took the financial analysis of the steel industry for 
the past 11 years as published in the magazine Steel, various annual 
issues of the magazine Steel for those years, 1928 to 1938 inclusive, 
and I selected nine of the companies, or all of those companies having 
ingot capacity in excess of 1,000,000 tons. This tabulation purports 
to show the rated ingot capacity of those companies for the respective 
years, the capitalization per ton of ingot capacity, total earnings per 
ton of ingot capacity, and percent of total earnings on capitalization. 
Of course I don't vouch for these figures; they are merely indications 
and submitted just in response to that quesion by Senator King. 

Acting Chairman O'Connell. Can you tell me in a general way 
what this indicates? The Senator's question was rather general. 

Mr. White. The Senator asked, I believe, something about the 
returns upon 

Acting Chairman O'Connell (interposing). About the what? 

Mr. White. The percentage of return on invested capital, or upon 
capitalization rather, and this table purports to show that. 

Mr. Wooden. It shows, does it not, Mr. YvHute, a rather wide 
variation among the nine principal producers of their capitalization 
on the basis of per ton ingot capacity? 

Mr. White. Yes. 



14304 CONC^ENTRATION OF ECONOMIC l^OVVER 

Mr. Wooden. It shows quite a wide variation on their earnings per 
ton of ingot capacity, does it not? 

Mr. White. It does, with a noticeable difference in rate of return 
to the rather smaller companies. 

Acting Chairman O'Connell. Do you wish this offered for the 
record? 

Mr. Wooden. Yes. 

Acting Chairman O'Connell. Let it be admitted. 

(The tabulation referred to was marked "Exhibit No. 2236" and is 
included in the appendix on pp. 14542-14543.) 

Mr. Wooden. Now Mr. White, I believe you were connected with 
the trial of the Pittsburgh Plus case before the Federal Trade Com- 
mission. Is that correct? 

Mr. White. That is correct. 

Mr. Wooden. Did you make compilations and submit tabulations 
and graphs in that case? 

Mr. White. I did. 

Mr. Wooden. Did you mfike any study of the manner in which the 
price load and the cost load, cost of production load in the industry, 
was distributed in various sections of the country? 

Mr. White. I made a limited study to the extent that data, reliable 
data, were available. 

Mr. Wooden. WiU you state what the data were and what you did 
with them? 

COMPARISON OF COSTS AND PRICES AT PITTSBURGH, CHICAGO, AND 

BIRMINGHAM 

Mr. White. The United States Steel Corporation, in response to a 
request, submitted what purported to be a statement of the relative 
mill cost figures of certain of the principal forms of rolled steel, that 
is plates, shapes, bars, and black sheets, for the year 1920, and I think 
for two months of 1921. Nineteen twenty was a year of rather high 
production, part of which time the mills were running at practical 
capacity, some of them at least. 

At that time the prices of steel in every part of the country, at least 
of these forms, except in the Birmingham district, were based upon 
the Pittsburgh price plus the then current freight rate from Pittsburgh 
to destiiiation. That was the general situation. The complaint in this 
Pittsburgh plus case, so-called, grew out of the fact that there was a 
feeling on the part of some of the western consumers of these products 
that they were being saddled with an undue proportion of the total 
burden of steel prices. They based that largely upon the fact that they 
had some competition, in the Chicago district in the shape of a sub- 
sidiary company of the International Harvester Co., who as I recall 
produced about 340,000 tons a year, a proportion of which was used 
in their own producti'^n — about 50 percent it was estimated — and the 
balance of it was sold to the trade or to their competitors on a Pitts- 
burgh plus basis. That is, the Pittsburgh price plus the equivalent of 
the freight rate to destination. That, it was thought, gave Interna- 
tional Harvester a rather clean-cut advantage over its competitors in 
that district. 

After these figures were received from the United States Steel Cor- 
poration, these cost figures, they were put in evidence and I computed 



CONCENTRATION OF ECONOMIC POWER 14305 

from those figures a table put in as exhibit No. 6852 in that case, a 
copy of which you have before you, Mr. Wooden, which resolved the 
production costs of the corporation at the various points on various 
forms, PittsburghjT. Chicago, and Birmingham, into a net ton price, and 
resolved that again into a hundredweight base price, the unit basis 
on which those rolled forms were sold. 

From the Pittsburgh base price was subtracted the mill costs of 
producing bars, and that was found to be $2 per net ton. , From the 
Pittsburgh plus price on those same forms at Chicago was deducted 
the production cost at Chicago as shown by the statement furnished 
by the corporation, and we found there a margin of $13.80 per ton. 
The same thing was done with respect to the other forms. Specifically 
on plates, the margin between production costs and sales prices at 
Pittsburgh was found to be $9.60 per net ton, and the spread between 
the same elements at Chicago was $17.80 per ton. 

(Senator O'Mahoney, resumed the Chair.) 

Mr. Wooden. Is that summed up in the statement that the prices 
are higher at Chicago although the cost of production at Chicago was 
lower than at Pittsburgh? 

Mr. White. Yes, that is what it means. I have referred to the cost 
statement which was put in as Commission's Exhibit 6851, which 
you may want. 

Mr. Wooden. Did you make a chart for use in that case represent- 
ing graphically the statement that you have just made? 

Mr. White. I did. 

Mr. Wooden. Mr. Chairman, I would like to have these three 
charts in the record. 

(The charts referred to were marked "Exhibits Nos. 2237, 2238, 
and 2239" and are included in the appendix on pp. 14544-14546.) 

Mr. Wooden. You were telling us, Mr. White, about the dispro- 
portion between cost and price compared between Pittsburgh and 
Chicago on what products? 

Mr. White. Shapes, plates, bars, and black sheets. 

Mr. Wooden, What about the disproportion between prices and 
costs at Birmingham compared to Pittsburgh? 

Mr. White. The spread between production costs at Birmingham 
and the Birmingham price was $8 per ton, on bars. 

Mr. Wooden. Does that mean that the cost at Birmingham was 
lower but the price higher? 

Mr. White. Yes. The net ton mill cost of bars at Birmingham 
resolved into $44 per net ton, whereas the cost of the same product 
at Pittsburgh was $45. I think it should be noted here that Birming- 
ham at that time had a price that was not the full Pittsburgh price 
plus the rate to Birmingham on any of these products. 

Mr. Wooden. It was known as the Birmingham differential? 

Mr. White. Known as the Birmingham differential. 

Mr. Wooden. That was what, $3? 

Mr. White. Five dollars, as I recall it. 

Mr. Wooden. Mr. Chairman, I would like to state that we have 
no present information as to the cost of production of any particular 
product in any particular, plant. It is information that is rather 
jealously guarded by the industry, but I would like to ask Mr. White 
whether assuming that there are differences in cost of production per 



14306 CONCENTRATION OP ECONOMIC POWER 

ton on given products today, would the same showing in principle 
result that you have shown in these exhibits? 

Mr. White. Assuming the same differences of cost exist. 

Mr. Wooden. Assuming some differences in cost exist — I am not 
trying to get you to measure what the situation would be today because 
you don't have the factors, but if there were some differences in cost 
today, would this disproportion exist as between the cost and price 
burden in different sections of the country? 

Mr. White. Some difference would exist, but not to this extent 
because since that time equal base prices have been announced at 
all of these producing points. 

Mr. Wooden. Was a considerable part of tliat disproportionate 
showing referred to in those exhibits the result of so-called phantom 
freight, in other words adding freight from the basing point when in 
fact there'was no actuail freight to be paid? 

Mr. White. Yes; of course that was true. 

Mr. Wooden. Would you say that wherever and to whatever extent 
there is phantom freight added today under the basing point system, 
consisting of a freight charge where there is no freight or a freight 
charge that is greater than the actual* freight, then you have that 
same disproportionate distribution of the price and cost burden? 

Mr. White. Yes; of course. What I have here is merely illustrating 
this opportunity under this method of merchandising for somebody 
arbitrarily to decide as a substitute for competitive processes how 
much of this burden of total steel prices is to be assessed on any 
particular part of the country at any point. That is an outstanding 
fact. 

Mr. HiNRiCHS. Mr. White, I take it that you are indicating that 
this lack of relationship between cost and price is a possible indication 
of a lack of competitive price fixing. 

Mr. White. That together with some other facts which of course 
are not shown. 

Mr. HiNRiCHS. Well, have you indicated in the record whether or 
not Chicago, for example, is a steel export or a steel import market? 

Mr. White. That was developed very exhaustively in the Pitts- 
burgh basing case. I might say the defense in that case was that the 
cost of steel to the Chicago consumer would be the cost of material 
at Pittsburgh plus the cost of shipping into Chicago. All of that 
assumption would be nullified by what they did. Numerous ship- 
ments were shown out of Chicago to a point halfway between Pitts- 
burgh and Chicago, specifically Cincinnati. It was shown that a 
certain number of large concerns purchased 95 percent of their re- 
quirements from the Corporation and the Corporation put in ex- 
hibits showdng that in some cases 100 percent of that supply came from 
Chicago rather than Pittsburgh. 

Mr. HiNRiCHS. Well, that evidence with reference to where goods 
originate needs to be tied in as you have just done to your discussion 
of cost and price; does it not? 

Mr. White. Yes. AU I was attempting to show by these exhibits 
was the fact as to production cost, relative production cost, and how 
it illustrates that one who has the power can arbitarily substitute for 
the competitive processes his judgment as to how much different sec- 
tions of the country should pay of the total burden of steel prices. 



CONCKNTItATlON OF K<H>N().MIC i-OVVKR 14307 

Mr. Wooden. I might say that Dr. deChazeau in testifying the 
other day pointed out tliat a recent study by the Department of 
Justice showed tluit sliipmonts of the same pi-ochict were being made 
between Pittsl)urgli and Chicago, in other words shipments from 
Pittsburgh to Chicago and shipments by Chicago mills to Pittsburgh 
of the same product. 

I liave nothing further to ask Mr. "Wliite. 

The Chairman. Do the members of tlie conmiittee desire to ask 
Mr. Wliite any additional questions? 

(The witness, Mr. White, was excused.) 

Mr. Wooden. I would like to call Mr. Custer for a very short 
examination. 

The Chairman. Do you solemnly swear that the testimony you are 
about to give in this proceedhig shall be the truth, the whole truth, 
and nothing but the truth so help you God? 

Mr. Custer. I do. 

TESTIMONY OF A. B. CUSTER, ADMINISTRATIVE OFFICER, 
PURCHASE DIVISION, BUREAU OF SUPPLIES AND ACCOUNTS, 
NAVY DEPARTMENT, WASHINGTON, D. C. 

Mr. Wooden. Will you state your occupation, Mr. Custer? 

Mr. Custer. Administrative officer in the Purchase Division of the 
Bureau of Supplies and Accounts, Navy Department. 

Mr. Wooden. How long have you held that position? 

Mr. Custer. About 20 years. 

Mr. Wooden. In the course of your duties have you had to do 
with the buying and obtaining of bids on rolled steel products? 

Mr. Custer. Yes, sir. 

Mr. Wooden. Do you obtain sealed bids on such products? 

Mr. Custer. All bids are sealed bids. 

Mr. Wooden. Is that required by statute? 

Mr. Custer. It is required by law. 

Mr. Wooden. I show you two documents. Will you state what 
they are? 

Mr. Custer. Those are abstracts of records of bids received in the 
Bureau of SuppUes and Accounts. 

Mr. Wooden. And were they handled under your supervision and 
in your office? 

Mr, Custer. They were. 

Mr. Wooden. WiU you vouch for the correctness of these papers 
as representing the bid figures actually received on sealed bids on 
those two occasions? 

Mr. Custer. I can. 

Mr, Wooden. I would like to offer the tables for the record. 

(Mr. O'Connell assumed the Chair.) 

Acting Chairman O'Connell. They may be admitted. 

(The documents referred to were marked "Exhibits Nos. 2240 and 
2241" and are included in the appendix on pp. 14547-14548.) 

Mr. Wooden. Referring to the bid opening of November 19 and 
which is represented by "Exhibit No. 2240," can you state, Mr. 
Custer, just so that we get an over-all picture of it, how many bidders 
participated there and what their bids were? I don't think you have 
to give many figures. 



14308 CONCENTRATION OF ECONOMIC POWER 

IDENTICAL BIDS RECEIVED BY THE NAVY DEPARTMENT 

Mr. Custer. Fifty bidders put in a uniform price of $45,683.48. 

Mr. Wooden. Were tliere some bidders who didn't quote exactly 
that figure? 

Mr. Custer. There are several exceptions. 

Mr. Wooden. How many? 

Mr. Custer. Seven, 1 find. 

Mr. Wooden. Seven out of the number you gave or seven in 
addition? 

Mr. Custer. Seven out of the number. 

Mr. Wooden. Now referring to the abstract covering the bids 
opened May 26, 1936, "Exhibit No. 2241," I believe, how many bidders 
were there, and what were their bids? 

Mr. Custer. Thirty-one bidders quoted a uniform price. of $20,- 
727.26. 

Mr. Wooden. Were there any exceptions to the quoting of that 
figure? 

Mr. Custer. There are no exceptions in this list. 

Mr. Wooden. Are these two cases that you have testiiied about 
typical? Have you received many bids of a similar nature so far 
as the degree of identity in the bid price is concerned? 

Mr. CusTEP. We have received a number of identical bids. This 
is comparatively a large list. It is a long list of bidders, longer than 
the average. 

Acting Chairman O'Connell. To what use is the type of steel 
.covered in those invitations put, is it armor plate or what is it? 

Mr. Custer. It is not armor plate, it is for general purposes. Not 
being a technician, I am not prepared to give you the details. 

Acting Chairman O'Connell. You say you oftentimes receive 
identical bids though often not with as many bidders as there indi- 
cated. Do you have any general understanding as to how often you 
receive that t,ype of bids in connection with steel products? We were 
discussmg steel products primarily. 

Mr. Custer. Including within that group those classes or lots 
where there are some tie bids and some that are not tie bids, approxi- 
mately 60 to 70 percent fall in that group. 

Acting Chairman O'Connell. Sixty to seventy percent of bid 
openings involving steel? 

Mr. Custer. Yes. 

Acting Chairman O'Connell. And I take, it that where you get 
not all tie bids but where the low bids are tied, you have to resort to 
that matter of drawing lots, is that the way you make the award? 

Mr. Custer. That is correct. 

Acting Chairman O'Connell. In a situation such as appeared in 
that later bid opening where you had 31 bidders, in that particular 
case would you merely put the 31 names in a hat and draw out the 
successful bidder? 

Mr. Custer. In substance that^we have a system of putting names 
or numbers in uniform capsules to guard against the possibility of a 
selection, and then draw from the group. 

Mr. HiNRiCHS. Don't you think it would be more appropriate to 
use loaded dice against the Treasury? 



CONCENTRATION OF ECONOMIC POWER 14309 

Mr. Custer. We have used other methods of drawing which give 
exactly the same results as the system of enclosing the names in 
capsules. 

Mr. Wooden. Mr. Custer, can you tell us whether or not these 
seven exceptions in "Exhibit No. 2240," seven exceptions from the 
identity of bids put in by others, includes any producers or whether 
some of them were jobbers? 

Mr. Custer. I recognize all, with the possible exception of one as 
jobbers or dealers. 

Mr. Wooden. Each of the seven, you mean. You recognize each 
of the seven except possibly one? 

Mr. Custer. Yes. 

Mr. Wooden. And that one is what? 

Mr. Custer. The Wheatland Tube Co. is a manufacturer, but I am 
under the impression that they also handle some materials in the 
capacity of a dealer. 

Representative Williams. What variation was there in the price 
of those seven that were exceptions? 

Mr. Custer. These variations are slightly under the uniform prices 
bid by the larger group, except in the case of Wheatland Tube. 

Acting Chairman O'Connell. In that case, then, you did not have 
to resort to drawing lots, or did you? 

Mr. Custer. We would not in that case, assuming that the bids 
were unmodified. If they were responsive to the advertisement, that 
is, offering material according to specifications it would not be nec- 
essary to resort to drawing lots. 

Mr. Wooden. Did you ever have any experience with jobbers who 
were awarded a contract on the basis of a low bid being imable to 
furnish you with the goods after you had awarded the contract? 

Mr. Custer. We have had some experience, but as a general rule 
the jobbers are able to fulfill the contracts. 

Mr. Wooden. I call your attention to the bid of the Pahner Supply 
Co., $45,682.38. How much off is that from the identical bid put in 
by most of the others? 

Mr. Custer. $45,682.38 agamst $45,683.48— $1.10. 

Mr. Wooden. I think there is nothing further I have for Mr. 
Custer. 

Representative Williams. That was the point I had in mmd. 
Wliat was the range in those prices, what was the difference, whether 
they were all just practically the same thing or whether there was 
any material difference in any of them. 

Mr. Custer. The lowest bid under the group is $43,188.46 as 
agamst $45,683.48. 

Representative Williams. Well, there would be a right substantial 
difference. 

Mr. Custer. That is a substantial difference. This bid of $45,- 
682.38 is very probably accounted for by adding or dropping fractions. 
One bidder will add on the half cent, another may drop it off. The 
unit prices are probably identical. But the other bids, I think, the 
differences are accounted for otherwise, other than by the adding or 
dropping of fractions. 

Mr. HiNRicHS. Mr. Custer, do you handle the bids on commodities 
other than steel? 



14310 (:;oNO>Iil^:'^UATroN of econoimic poweh 

Mr. Custer. All materials, 

Mr. HiNRiCHS. All materials? 

Mr. Custer. Yes. 

Mr. HiNRicHS. Does that include the apparel purchases that are 
made as well, purchases of apparel? 

Mr. Custer. Power? 

Mr. Hjnrichs. Apparel, clothing of one sort or another. 

Mr. Custer. Yes, sir, it does. 

Mr. HiNuiCHS. Now it's an old economic maxim, of course, that 
under con.petitive conditions only a single price can prevail in market 
at any one tiine, and that maxim is very frequently misquoted as 
justifying this kind of identical sealed bid. That is, the single price 
does in fact prevail, therefore by reference to all autliority it becomes 
apparently competitive. Now in the purchase of clothing, is it your 
experience that you receive identical bids if you advertise for articles 
of clothing? Is it common to receive identical bids? 

Mr. Custer. When you say clothing, there are not a great many 
articles of clothing purchased. The materials are purchased and 
made into clothing. 

Mr. HiNRiCHS. Well, let'^ take the materials. Do you buy cotton 
textiles? 

Mr. Custer. Yes. 

Mr. HiNRiCHS. Do you frequently receive an identical bid for 
rotton textiles? 

Mr. Custer. That I would answer only from general observation. 
Over a period of time wo do receive identical bids in almost every line 
of material, which would include textiles. 

Mr. HiNRicHS. In almost all lines where bids are advertised for? 

Mr. Custer. At some time or other. 

Mr. HiNRiCHS. Well, now, are those identical bids in a case of that 
sort apparently the result of chance or the result of — is it customary to 
have identical bids in cotton, cotton textiles? 

Mr. Custer. That would be largely a matter of opinion. I would 
have no way to determing that as a fact. It does appear rather 
strange that identical bids would appear frequently by chance. 
That I have no way of verifying or determining. 

Mr. HiNRiCHS. What lines do you expect to find different bids in if 
you advertise, or do you expect as a matter of course to have the 
differences only a matter of typographical error? 

Mr. Custer. Well, from the standpoint of expectation we would 
expect competitive bids in all lines. 

Mr. HiNRiCHS. Well, but obviously that expectation you have to 
entertain because it would be a violation of the law; but just as a 
human being you must have gotten rather used to seeing bids come in 
in identical form in the case of steel. You say 60 or 70 percent of your 
cases come in with identical bids. There you would hardly open up 
an envelope in the normal expectation of seeing different bids. 

Mr. Custer. We would expect some tie bids generally in steel. 

Mr. HiNRicHS. And you would expect tie bids in almost every 
instance where bidding occurs, or are there any lines in which yOu 
expect when you look at an envelope, you open the thing with a 
certain curiosity not to see just what level is being bid but what the 
differences in bids are. 



CONClON'rilATlON OF ECONUMKJ l*OVVKll 14311 

Mr. Custer. That expectation would be present in most any class 
of steel. 

Mr. HiNuicHS. Even steel? 

Mr. Custer. In steel. 

Acting Chairman O'Connell. Wiiat ^xpeptation do you mean? 

Mr. Custer. That there would be tie bids. 

Mr. HiNRiCHS. And in almost any line you would expect to find 
tie bids, that the majority of the bids would be tie? 

Mr. Custer. I wouldn't want to say just that. Steel, of course, is 
an item which is bought for Navy purposes in large quantities and 
frequently, and it is an item which is more often before the eye. The 
occasional purchase would not attract much attention. Well, I 
might mention plumbing fixtures, merely as it comes to mind. I am 
not in a position to say whether plumbing fixtures would come within 
the tie bid group or not. 

(Senator O'Mahoney resumed the Chair.) 

Mr. HiNRiCHS. They very well might. Do you ever buy socks? 

Mr. Custer. Yes. 

Mr. HiNRiCHS. Do those ordinarily come to you as tie bidfe? 

Mr. Custer. I think they are more often competitive. 

Mr. HiNRicHS. Well, are there other items of that sort that 
ordinarily come to you with differentiated bids? 

Mr. Custer. I would hesitate to answer that without making a 
survey or a review of some examples, and I haven't had occasion to 
check outside of the larger and more frequent purchases for some 
time. 

Representative Williams. Is there an}'' reason that you can think 
of why there should be identical bids on one article an}'-, more than 
on another that your department buys? 

Mr. Custer. I would answer that as it has been answered generally 
to me, that the items of materials which have published prices, 
prices of common knowledge to the industry and the trade, are more 
likely to be tie bids, such as steel. Any trade paper will give you the 
market quotation of steel; there are any number of trade papers. 

Representative Williams. Did you ever get a bid from the steel 
companies or on any article of steel that was below the published 
price? 

Mr. Custer. That's rather difficult to answer. The pubhshed 
prices are based on Pittsburgh or some other basing rate. Our 
prices are all quoted on a delivered price at our navy yards, and 
the only way to determin.e that would be to deduct freight to arrive 
at the base price. 

Our prices generally are very close to the published prices, allowing 
for the differentials in the quoted market prices. 

Mr. Wooden. Published prices? 

Mr. Custer. On the published prices. They are more often under 
than over. 

Representative Williams. It seems to me we had some evidence 
here that there were a great deal of sales in the steel industry that 
were decidedly below the i^ublished price to everybody except the 
Government, is that true? 

Mr. Custer. Well, only to tlie extent that I just answered. Our 
prices when reduced to the same basis are more often lower than the 
published prices, market prices, than higher. 



14312 OONCKNTRATION OF ECONOMIC POWER 

Mr. Wooden. Are you aware, Mr. Custer, that the mill net return 
at various mills, even though figured on the base price, the full base 
price, frequently comes out less than the base price because of the 
fact that their actual freight is greater than the freight rate on which 
the delivered price is figured? 

Mr. Custer. I would not be in a position to give the reason for it. 

Mr. Wooden. How do you account for the fact that these various 
concerns located at various widely scattered points of production and 
shipment get such a close identity of delivered price when their actual 
freight rates must differ substantially ^ 

Mr. Custer. I am not in a position to give that answer. 

Mr. Wooden. Does that factor in the situation have any bearing 
upon your conclusion as to whether or not the tie bids in such a situa- 
tion are competitive? 

Mr. Custer. From our standpoint, we are concerned with a de- 
termination only of what is a fair and reasonable price, not so much 
the cause for that price, and we do not go beyond the reasonableness 
of the price. 

Mr. Wooden. The only basis upon which you have to consider the 
reasonableness is whether it is competitive or not, isn't it? 

Mr. Custer. Competitive, or in the range of published market 
prices. 

Mr. Wooden, You assume the pubUshed market quotations are 
competitive, is that it? How do you know that-? 

Mr. Custer. I would say that we do not know. We assume it. 

Mr. Woo )EN. You have to assume it, don't you? 

Mr. CusiER. We have to assume it. 

Mr. Wooden. In order to get your steel. 

Mr. Custer. That is right. 

The Chairman. Are there any other questions? If not, you may 
stand aside. Thank you so much. 

(The witness, Mr. Custer, was excused.) 

FEDERAL TRADE COMMISSION'S SUMMATION OF THE MONOPOLISTIC 
CHARACTERISTICS OF THE BASING POINT SYSTEM 

Mr. Ballinger. Mr. Chairman, at this point I want to offer for 
the record a document which has been prepared by Mr. Wooden and 
Mr. Hugh White of the Federal Trade Commission who have been 
associated with the Commission's activities for many years with 
respect to the basing-point system in the steel industry. This docu- 
ment is addressed to a detailed consideration of the documents pre- 
pared by the Corporation, including some additional factual matter 
relating to the basing-point system. 

In my opinion, Mr. Chairman, this document, prepared by Mr. 
Wooden and his associates, is perhaps the most complete and compre- 
hensive document that has been prepared by the Governinent on the 
monopolistic nature of the basing-point system in the steel industry. 

Mr. Wooden is going to take the stand very briefly, Senator, just 
to point out some of the high lights in this pamphlet, but before Mr. 
Wooden starts in ^o tell you about that I want, if possible, to sum- 
marize very briefly what we think this hearing has shown from the 
standpoint of the Federal Trade Commission, where this hearing has 
taken us, because we made the charge that the basing-point system 



CONCENTRATION OF ECONOMIC 1'<:)WER 14313 

was monopolistic, and we would like to point out to the conmiittee 
that we don't think that conclusion has been upset. 

I will start in this way. Back in 1924 the trial staff of the Federal 
Trade Commission contended in the Pittsburgh plus case that the 
basing-point system was a monopolistic device in that it repressed 
price competition in the steel industry. The steel industry stoutly 
denied this, and, of course, the Commission made a decision and issued 
a cease and desist order against the system. There was no appeal 
from that order for 15 years. Then the industry went into the 
multiple basing-pomt system. 

The Chairman. There was no appeal for 15 years. What hap- 
pened during that 15 years? 

Mr. Ballinger. The industry went over into what is known as the 
multiple basing-point system. 

The Chairman. Then the industry abandoned the basing-point 
system? 

Mr. Ballinger. No; multiple basing-point systems are many Pitts- 
burgh plus systems, I mean operating in certain territories, the way 
we see it. 

Mr. O'CoNNELL. Do I understand that the cease and desist order 
of the Federal Trade Commission merely prohibited a Pittsburgh 
plus system based on destination prices? Do you know the answer 
to that? 

Mr. Wooden. The answer is that the order ran against the making 
of prices or quoting of prices on any other base than the point of 
production and shipment. 

The Chairman. Pardon me, Mr. Wooden, I suppose you ought to 
be sworn, according to pur proceeding. 

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

Mr. Wooden. I do. ^ 

TESTIMONY OF WALTER B. WOODEN, ASSISTANT CHIEF COUNSEL, 
FEDERAL TRADE COMMISSION, WASHINGTON, D. C. 

Mr. O'Connell. To pursue that just a little further — — 

M£. White (interposing). It is understood that order was against 
the United States Steel Corporation. 

Mr. O'Connell. It was against the United States Steel Corporation 
and its subsidiaries, is that all? 

Mr. Wooden. That is correct. 

Mr. O'Connell. Under the tenns of the cease and desist order, 
the multiple basing point system was prohibited by the order of 1924, 
so long as the basing prints included points other than points of 
production. 

Mr. Wooden. Yes. Of course the more multiple basing points 
there are, the more points of production there are included. 

Mr. O'Connell. Do you understand that the United States Steel 
Corporation and its subsidiaries obeyed or complied with the cease 
and desist order from 1924 until they appealed from the order? 

Mr. Wooden, Their report of compliance was to the effect that 
they would obey the order so far as practicable. How far that was 
practicable and how far it was obeyed, I am not able to state. 



14314 CONCENTRATION OF ECONOMIC POWER 

Mr. O'CoNNELL. The Commission took no action pursuant to 1924? 

Mr. Wooden. Meantime the N. R. A. came along and incorporated 
the basing point system as it then existed into the code. 

The Chairman. What was the date of the original order to which 
Mr. Ballinger referred? 

Mr. Wooden. I think it was July 1924. 

The Chairman. From 1924 to 1933, when the N. R. A. was passed, 
what did the Federal Trade Commission do to supervise the enforce- 
ment of its cease and desist order? 

Mr. Wooden. 1 am not able to answer that. I wasn't handling 
that phase of the business, in fact I was not connected with the 
Pittsburgh plus case. 

The Chairman. How about you, Mr. White, were you familiar 
with it? 

Mr. White. In a general way. 

The Chairman. What did the Trade Commission do to supervise 
the enforcement of its cease^ and desist order? 

Mr. White. Mr. Chairman, I don't think it is appropriate for me 
to make any statement as to what they did. I am just an employee 
of the Commission and I am not familiar in all respects with what 
they did. 

The Chairman. I think it is perfectly appropriate if you know. 

Mr. White. Well, it had under investigation the merger of the 
Betlileham, Lackawanna, and Midvaie properties, and the question 
was somewhat involved in that case. That case was never decided, 
and whUe the Commission made some supplemental investigations 
and ascertained what was being done generally in the trade, there 
were no complaints about the multiple basing-point system. 

The Chairman. Perhaps these questions are a little premature. 
Mr. Ballinger was making a statement. 

Mr. White. In other words, Senator, the system was somewhat 
modified. They had abandoned the so-called Pittsburgh basing sys- 
tem by which the single origin at Pittsburgh as a basing point was 
used. 

The Chairman. As I understood the statement of Mr. Ballinger, 
it was that the Pittsburgh basing plan was abandoned after the issu- 
ance of this order in 1924, and that a multiple basing system, which 
is from the point of view of the Trade Commission equally objection- 
able, wos adopted. 

Mr. White. It made no comprehensive investigation along that line. 
There were people connected with the Federal Trade Commission 
who toolv that view but the Commission made no comprehensive 
investigation and didn't find out what the effects of that practice were. 

Mr. Wooden. I might add this, that the Pittsburgh plus case arose 
out of complaints of a certain group of Western rolled steel-consumers 
who were being injured, they felt, by the Pittsburgh plus practice. 
The adoption of the multiple basing point system served to allay and 
satisfy in large part those injured Western rolled steel-consumers. 

The Chairman. Those particular complaints were satisfied and the 
Federal Trade Commission was not acting as a complainant. 

Mr. Wooden. The Pittsburgh plus case was a formal case and in 
all formal cases tlie Commission does appear as the formal complainant. 

The Chairman. Yes; technically; but I am referring now to the 
initiation of complaints. 



CONCENTRATION OF ECONOMIC POWER 14315 

Mr. Wooden. In other words, that complaint did not originate out 
of any abstract theories and criteria, but out of the cry of complaint 
from definitely injured business mterests, very strongly organized 
business interests. 

Mr. O'CoNNELL. I don't want to pursue this too far, maybe we are 
far afield, but I would hke to get clear in my own mind what the 
Pittsburgh plus order did and what it was supposed to do. As I 
understood you just then, it was my understanding of the order that 
it prohibited a pricing system based upon any other than points of 
production or shipment. Now I understand also that in 1938, the 
United States Steel Corporation appealed from the cease and desist 
order of the Federal Trade Commission issued in 1924. Between 
1924 and 1938, as I understand it, another system, although with 
some characteristics somewhat similar, grew up in the industry and 
it is now what we call a multiple basing point system, so there are 
various systems rather than the one that existed in the Pittsburgh 
plus case. 

Now at the present time I understand the Steel Corporation is 
challenging the order of the Federal Trade Commission in the Pitts- 
burgh plus case, is that correct? 

Mr. Wooden. That is right. 

Mr. O'CoNNELL. And now it is before the circuit court of appeals? 

Mr. Wooden. That is right. 

Mr. O'CoNNELL. I had an opportunity to glance at a brief, and you 
may correct me in this if I am wrong, but I was under the impression 
one of the grounds advanced by the Steel Corporation in their pro- 
ceeding before the circuit court of appeals for requesting that the 
order be set aside was that the order had never been complied with 
anyway. 

Mr. Wooden. I believe such a contention is made. 

Mr. O'Connell. If the steel company takes that position, wouldn't 
it be fair for us to assume that the order was not complied with in fact 
after 1924? 

Mr. Wooden. Well, speaking personally I think that is a fair 
inference. It is my own inference anyway. 

Representative Williams. After all, is there any difference in the 
principle of the system? 

Mr. Wooden. I think the multiple basing point system is in 
principle the same thing as a single basing point system, as illustrated 
by the fact, as brought out by testimony of Mr. Fairless and Mr. 
Adams within the last few days, that on tin plate there are only three 
basing points at present in the country. Pittsburgh is one of them, 
and for the entire eastern United States there is a single basing point 
system in effect with Pittsburgh as the only basing point for that whole 
area. Formerly the Pittsburgh plus system applied to the #hole 
country. 

Mr. White. Mr. Wooden, might I ask if the Corporation or the 
industry hasn't itself said that they were the same in principle? 

Mr. Wooden. The American Iron & Steel Institute in a published 
statement made in March 1935 stated that the multiple basing point 
system was the same m principle as the pricing system used by the 
industry for the past 40 years. 

Mr. Ballinger. When the industry went over, Mr. Chairman, to 
the multiple basing point system, it wasn't long before the Federal 

124491 — 41— pt. 27 13 



14316 CONCENTRATION OF ECONOMIC POWER 

Trade Commission said that this system, too, repressed price com- 
petition m the steel industry. Last March when we put on our hear- 
mg before this committee we charged that the multiple basing point 
system repressed price competition in the steel industry. Then in 
the interim the Corporation prepared two documents in which it said 
that the basing point system did not repress price competition. Then 
when Mr. Fairless came before this committee he made some very 
astonishing admissions, at least they seem very happy to us because 
they seem to clear up the controversy that has existed between the 
Federal Trade Commission and some of the experts in the steel 
industry. 

Mr. Fairless admitted that when the basing point system was 
followed, that it eliminated price competition in the steel industry. 
That was a very significant admission. Now with that admission, 
I want to show just how that was brought about. Mr. Wooden 
brought into the record a statement of Mr. Gregg, vice president of the 
United States Steel Corporation, m which Mr. Gregg admitted when 
the basing point system worked, it did repress price competition in the 
steel industry. 

Mr. Gregg. To answer your question specifically, if that plan were univer- 
sally followed there would be no competition in so far as one element of com- 
petition is concerned, namely, price. 

Then Mr. Wooden asked Mr. Fairless: 

I take it, Mr. Fairless, that you are in agreement with Mr. Gregg to the effect 
that if the system is followed, and to the extent that it is followed, there is no 
competition in price; is that right? 

Mr. Fairless. Well, I thought I had made myself clear. 

Mr. O'CoNNELL. Well, the answer is "Yes," but you say that, as a practical 
matter, the system is not followed? 

Mr. Fairless. I have answered it that way. All the things you said, Mr. 
Wooden, if they were true, then your conclusion, or the conclusion I assume that 
you are Striking for, would be true. 

So he conceded the point, and. we think that is a very significant 
admission. 

Now it becomes a question of how much the basing point system is 

followed in the steel industry, as Mr. Fairless' whole defense was that 

'the basing point system is sort of a shadowy thing that stands there 

and nobody takes advantage of it, they are always departing from it, 

and naturally that suggests, why have it in the first place? 

The Chairman. The committee is aware that I was necessarily 
away all last week while the presentation was being made by the 
steel industry. Am I to understand from what you say now that the 
steel industry defended the basing point system but said at the 
same time that it was not followed? 

Mr. Ballinger. Apparently, as I get it, they did not defend the 
basing point system. They said competition existed in the industry 
because of departures from it. 

Mr. Wooden. They defended, of course, the basing point system. 
They put in these two pamphlets 

Mr. Ballinger (interposing). I say Mr. Fairless' testimony. 

The Chairman. I am talking about the industry. This pamphlet 
which was offered for the record by the industry was a defense of the 
basing point system, was it? 

Mr. BALLif>fGER. Yes, of the basing point system. 



CX)NCENTRATION OF ECONOMIC POWER 14317 

Mr. Wooden. It was not offered by the industry, Mr. Fairless was 
careful to emphasize, but by the Corporation; but it is a defense of 
the system from the industry standpoint, not from the Corporation 
standpoint. 

The Chairman. But at the same time, the testimony was that the 
basing point system thus- defended is not followed, is that right? 

Mr. Wooden. That is true. 

Mr. Ballinger. It is this way. They said in the pamphlet 
which they prepared ^ when the basing point system worked that a 
system of identical delivered prices was still a competitive price 
situation in the steel industry. Th^n Mr. Fairless testified that if 
the basing point system were fol tved, it eliminated price com- 
petition. In other words, Mr. Fairless' testimony was in direct 
opposition to what the document had said. He had taken an entirely 
new position in defense of the basing point system, maintaining it 
did not repress price competition because it was departed from, not 
because it was adhered to, conceding if it was adhered to it was 
monopolistic in that it eliminated price competition. 

If we had known Mr. Fairless was going to say that, we wouldn't 
have taken all the trouble we did to prepare Mr. Wooden's document 
and Mr. White's document, trying to prove when the basing point 
system operates, it represses price competition. We got that con- 
cession from Mr. Fairless. We think that is significant because it 
brings the Steel Corporation and the Federal Trade Commission into 
agreement on the theory of the system. 

Now the question is how far the system is departed from in actuality. 
I think some significant things have been introduced here. First 
Mr. Fairless admitted during the N. R. A. period the basing point 
system worked beautifully, so we may 'assume from that that, price 
competition was eliminated in the steel industry during the N. R. A. 
days. Then Mr. Wooden read a statement into the record by Mr, 
Irvin where he said as late as 1936 that Mr. GracCj president of the 
Bethlehem Steel Corporation, must have been speaking facetiously 
when he said that U. S. Steel would cut below the base prices of 
Bjthlehem Steel Corporation. I think that is rather significant, be- 
cause it shows it would be rather a joke in the steel industry if anybody 
did that. 

Then Mr. Wooden showed that many of the provisions of the N. R. 
A. code which are absolutely necessary if you are going to make the 
basing point system work, that there are certain things that you have 
to have standardized if you are going to get identical delivered prices, 
ar^e still in existence. You have to have standard switching charges 
and you have to prevent trucks from breaking up the price structure, 
and you have to implement it various other ways. Mr. Wooden 
showed many of those provisions were carried on after the expii-ation 
of the code and many of them are still in force today. 

Finally, we come down to identical bids on Government business and 
I think Mr. Wooden showed this morning in the case of the figures 
used by the United States Steel Corporation, that about 90 percent'^ 
of the bids were identical delivered prices, showing I think that the 
basing -point system was working very well on those bids. 

The question remaining, therefore, is, how serious and how numer- 
ous are the departures in private business? We can't answer that 

' "Exhibit No. 1418", appendix, p. 14619. 

' Mr. Ballinger subsequently submitted a letter and memorandum for inclusion in the record in con- 
nection with his statement, see p. 14330. 



14318 CONCENTRATION OF ECONOMIC POWER 

question, but if the basing point system works as well in private busi- 
ness as it does when the steel industry does business with the Govern- 
ment, you might say the steel industry is 90 percent monopohstic and 
10 percent competitive. 

I will let Mr. Wooden go on and explain the high lights of this 
pamphlet. 

Mr. Wooden. Mr. Chairman and members of the committee: 
I think really the fundamental issue is not so much what the actual 
results at any given time of the system are, but what its potentiaUties 
are, what its intentions are, and what it normally works out to if 
permitted to function and if favored by conditions of general trade and 
business that are conducive to the proper working out of the system. 

On the question of how far the basing point system is adhered to 
and how far it is departed from, I would say that there is no method of 
determining that question short of an examination of sales records of 
the members of the industry, with the particular idea in mind of 
ascertaining the answer to that question. 

To take mere general assertions and opinions of members of the 
industry, who when the system is called in question merely say, "Why, 
it is more honored in the breach than in the observance," the inevitable 
psychological tendency is to exaggerate the degree and extent of 
departures from the system, and there is no check on it unless you go 
to the sales records. 

Each competitor has to base his opinion as to others departing or 
adhering to the system largely on rumor and hearsay and suspicion. 
He IS inclined probably to minimize the extent of his own departures 
and to exaggerate the extent of the departures of his competitors, and 
so I think it is an onerous task to undertake to answer that particular 
question. It seems to me the question really has to be decided upon 
the potentialities and natural tendencies and natural results, and to 
a large' extent the actual results, which have worked out over the 
years, and not as of any particular limited period of time, such as the 
depression years. 

Any kind of a system, no matter how well organized, no matter how 
powerful the forces back of it, may have to yield at times to the pres- 
"sure of adverse business conditions. If the demand totally fails, even 
a strong monopoly will have to yield to it in its prices at times. In 
this industry we have, as the corporation shows itself, about 81 percent 
of the total production controlled by nine companies, and the steel 
corporation itself is the largest among them with probably a control 
of 35 percent or mpre of the total possible output. 

I would like to say that the subject of the basing point system in 
steel has been debated for years and to my mind, my personal mind, 
it has been debated long enough. If debate on the subject can be pro- 
longed indefinitely we can expect the system itself to be prolonged 
just as long as those who employ it find it profitable to employ it. 
I should hope that the last word on the subject might be said before 
this committee and that the only thing remaining to decide is whether 
the Government will continue to tolerate the basing point system in 
steel or take some steps to substitute a better condition for it. 

I would like to say in just a very few woids what the basing point 
system is like — in my own words. It is a formula method of pricing 
which when appropriately observed and implemented by certain 
methods, which have been brought out here, automatically produces 



CONCENTRATION OF ECONOMIC POWER 14319 

identical delivered prices for all sellers at any given destination. The 
success of the system depends in the first place upon a common require- 
ment that each seller sell only at delivered prices and a common refusal 
to quote or sell f.-.o. b. mill and allow the purchaser to take his pur- 
chased anywhere he likes and in -any mode of conveyance he likes. 
Ordinarily, except as otherwise provided by arrangement in the in- 
dustry, the all-rail freight basis is the basis of calculating the delivered 
price. The delivered price is not calculated from the actual shipping 
point as such, but from a number of basing points. Some of these 
basing points m^y not even be producing points; most of them are. 
For each product there is a basing point. The numbier of basing points 
in total may be considerable, but it does not follow that the basing 
points for any particular product are considerable in number. As to 
many of them they are quite limited, as I cited in the case of tin plate 
in which there are only three I believe; on pipe there are only a few, 
and on other products there are only a few. Of course on pig iron 
there are a great number because they went directly under the code 
from the f. o. b. furnace system to a basing point system with almost 
every point of production a basing point. But that makes no differ- 
ence in the ultimate result. It sunply means that if every producing 
point were a basing point there would be no so-called phantom freight 
but there would be the so-called freight absorption. When each pro- 
ducing point went into the sales territory of another producing point 
they could still match their deUvered prices by absorbing the freight 
necessary to put them in there at the identical delivered price. 

The actual cost of transportation of course may be greater or less 
than the cost of transportation figured from the basing point. For a 
number of non-basing-point mills their actual shipping charges for 
transportation might be either greater or less. If they charged more 
in the delivered price than the basing point rate of freight, they have 
what is called phantom freight. It is an increment and increase in 
their actual mill-net realization. If their actual freight from the 
particular shipping point at a non-basing mill is more than the 
imputed rate, then there is freight absorption — they net less than the 
base price by the amount of the difference between the actual and the 
imputed rate of freight. 

Mr. O'CoNNELL. You don't think there is anything necessarily 
wrong with freight absorption or phantom freight in all situations, do 
you? 

Mr. Wooden. No; the question here immediately before the com- 
mittee in the basing-point system is one of a systematic pattern of 
freight absorption and phantom freight with the end and result of 
matching the delivered price and making it identical. In that process 
freight absorption arises and phantom freight arises. 

Mr. O'CoNNELL. Let us suppose I were in a highly competitive 
industry and it happened to be steel, there would be nothing wrong 
with my using a formula for arriving at a deUvered price which would 
in effect cause stoie of my customers to pay less than the actual 
freight and some c^f them to pay more. In an industry, it seems to 
rate, that sells its commodities on a dehvered price basis it necessarily 
giv V jome of its customers the benefit of freight allowance and some 
customers it charges more. 

Mr. Wooden. That gets into a field of economics that I would 
prefer not to get into, but I would say that the basing point system is- ' 



14320 CONCENTRATION OF ECONOMIC POWER 

not that kind of a situation, ]t>ecause it represents a systematic pattern 
of freight absorption and phantom freight with the result and intent 
of making the deUvered price identical. 

Mr. O'CoNNELL. Well, it is a formula adopted by an industry 
which results in identical prices rather than some customers having a 
freight advantage and some a disadvantage. 

Mr. Wooden. I think that is true. 

On this phantom freight matter, the corporation freely admits in 
its phamphlets that there is phantom freight and takes great pains 
to point out the types of phantom freight and how it may arise. 
They freely admit the existence of freight absorption and point out 
how it arises, but they do not give very much space or attention to 
the importance of those two complementary phases of the de- 
Uvered price. They are just the alter ego of the delivered prices 
themselves, the freight absorption on the one hand and the phantom 
freight on the other. The corporation does not give much idea of the 
extent or importance of those items, but this report which I am 
presenting here shows many cases where it is extremely important as 
to the quantity or the amomit in dollars and cents that is added to 
or deducted from the base price by those two things, phantom freight 
and freight absorption. 

The corporation makes it plain in their pamphlets, if it hadn't 
been made plain by Mr. Fairless, and it quotes N. R. A. reports to the 
effect, that the outstanding characteristic of the basing-point system 
is the fact that it does put rival producers on a footing of price equality 
with each other in all the consuming points over a wide area. That is 
openly defended as a means of putting competition on a basis that 
would yield higher prices than would result without it. You will 
find those statements quoted on pages 30 and 37 of the corporation 
pamphlet "Exhibit No. 1418." 

These pamphlets, "Exhibits Nos. 1410-1418," take the position 
throughout that the critics of the basing-point system in the steel 
industry are basmg their criticisms largely if not wholly upon abstruse 
and abstract criteria and theoretical considerations rather than 
tangible evidence. To meet that contention, which is repeated over 
and over again and is impHcit throughout the pamphlets of the cor- 
poration, I would suggest that the committee take into account the 
facts developed here in the last few days showing that the basing- 
point system was made a matter of formal agreement under the 
N. R. A. code. It was incorporated in the code itself, the basing 
pomts were named, and very detailed and elaborate provisions were 
set up for implementing that basing-point system, so that the delivered 
prices would be identical to the nth degree. It has been fehown here 
in the last 2 days that, the basing point system has .continued since the 
code, that the industry after the code was invalidated adopted resolu- 
tions to the effect that they would continue the provisions of the code 
including the basing-point system as a voluntary agreement ("Ex- 
hibits Nos. 2204 and 2205"), and the evidence is that they have con- 
tinued to do that and the basing-point system still exists. 

It has been shown here in the last few days that some of the detailed 
methods of implementing and making more effective the basing- 
point system of the code period have been continued in effect. I 
refer, for illustration, to the matter of an arbitrary switching charge 
at basing points which was put in under the code by resolution of the 



CONCENTKATION OF ECONOMIC POWER 14321 

board of directors of the institute ("Exhibit No. 2206"), and which the 
corporation itself says in its pamphlet is the general practice in the 
industry, yet. I refer also to the resolution relating to the charging 
of 35 percent of the all-rail freight rate upon shipments or sales made 
for truck delivery ("Exhibit No. 2207"). 

A man bringing his own truck or hiring a truck to go to the mill to 
buy steel — they will figure the carload freight rate to the place of his 
destination and then although his own truck is at the mill, charge him 
35 percent of that all-rail freight rate to the destination and load it on 
his truck. But he gets it. And it was testified, too, that that was for 
the purpose, or at least that one of the things they meant to correct 
by it was the use of truck delivery that interferred with the identity 
of price figured on the all-rail basis. It is admitted in the corpora- 
tion pamphlet that for many products the delivery by truck is most 
economical and yet Mr. Adams testified that they put this into 
effect, so far as his company was concerned, in order to discourage 
truck transportation of steel. 

There are any number of these commercial resolutions. Another 
one has to do with the method of figuring the freight. The board of 
directors approved definitely under the code a compilation of freight 
rates which the traffic committee of the institute has compiled and 
formulated ("Exhibit No. 2208"), and under the code the industry was 
definitely required, compelled, to obey it. Well, that compilation of 
freight rates is still being put out by the Institute, and we have put in 
evidence here today showing that after the code was invalidated they 
carried on the same understanding that that compilation was to be 
used in figuring the delivered prices. That's very important, because 
the matter of interpretation of freight tariffs is a matter on which 
even freight experts will differ, and when you have some standardized 
compilation that puts down the figure to be used — whether correct 
or not doesn't matter, just so it's uniform — then you get your identical 
delivered price. The evidence put in here today shows that they 
were to use this institute compilation, even though a particular rate 
might be in error, until they could correct it through the institute book. 
Sometimes if the correct rate were lower than the published rate in 
the institute book anyone who used the correct rate would get a lower 
delivered price than his competitors. But to prevent that they made 
this rule or understanding that until the corrections were put out 
through the compilation itself, the Institute compilation, they should 
foUow that Institute compilation and not the correct freight rate. 

The effect of this 35 percent addition — you may call it a 65 percent 
reduction, but it's the same thing, just using different words for it — 
the obvious effect of that is that if some mill added only 34 percent of 
the all-rail freight to the base price it would be giving the purchaser 
the advantage of a lower delivered price. So 35 percent is the rule 
for all members of the Institute. The Corporation says in its pam- 
phlet that that practice is still being generally followed. 

We had this morning an example of how base prices themselves 
can be and are arrived at, in the letter from Mr. Dorenbusch to the 
president of his own company ("Exhibit No. 2214"), describing how 
it was decided to continue the base price on a certain product in effect 
for the next quarter, and stating definitely in that respect that some 
of the interests in the industry wanted a lower price, but that that was 
finally defeated and it was agreed to let the base price continue. 



14322 CONCENTRATION OF ECONOMIC POWER 

Representative Williams^ Does the evidence show how many- 
were in on that conference mentioned in that letter? That was the 
most remarkable letter I have seen yet, I think. 

Mr. Wooden. The witness' memory was rather meager on that 
subject. As a matter of fact, he testified that the conference referred 
to was one among the members of his own organization. 

The Chairman. The witness denied the implication of the letter. 

Representative Williams. I was not here. That was the reason 
I was asking. I wondered if the evidence showed the men of the 
organizations that were" in on. that conference.. 

Mr. Wooden. Now there was another provision adopted imder the 
code requiring that on sales made for use in the erection of an identified 
structure and on which work was to be done on the products in transit, 
known as fabrication in transit, that you had to figure the delivered 
price according to the nearest place to the structure rather than the 
place of the fabrication. The commission pointed out the effect of 
that rule in its report to the Senate in 1934. It pointed out that the 
effect was to give information to the integrated producers who also 
operated fabricating plants, as to where a particular structure was 
going to be erected and enable them to <have an advantage in having 
that information for use in competition against fabricators who didn't 
have the affiliations with the integrated producers. That rule was 
shown here in the last day or two to have continued at least as late as 
1936, a year or more after the code, and to some as yet undetermined 
later time. We were unable to ascertain how much later. 

I would call the committee's attention also to the testimony here 
in November which showed considerable interesting and significant 
evidence concerning the discussions that take place among producers 
in connection with determining the base price of tin plate and of pipe. 
There is considerable evidence from which the inference can be drawn 
that there is an exchange of opinion among the competitors before 
they decide what prices shall be published. 

Then in the same connection there was evidence put in here in 
November by Mr. Adams, a vice president of the Corporation, and 
Mr. Fairless, showing how competitors work together and consult with 
each other with regard to what the proper extra charge shall be, extras 
being placed on products which are somewhat variant from the base- 
price quality, either above or below. Many of them are above. 
The importance of extras may be gained from the fact that the Com- 
mission's report to the Senate, I think, showed increases under the 
code in extras, in quantity extras, I believe, of — oh, three or four 
hundred percent. . And the obvious fact is that a change in the price 
of extras may be as important as a change infthe base price itself. 
It is possible by changing the price of the extras to greatly affect the 
real net prices returned or received by the industry, as distinguished 
from these published base prices. 

Mr. O'CoNNELL. Mr. Wooden, I take it that a standard book of 
extras is important or necessary in arriving at uniform prices in the 
same way that the standardization of other elements of cost or freight 
or the base price itself are important. 

Mr. Wooden. That's right. 

Mr. O'Connell. In other words, in order to arrive at identical 
prices you must have uniformity in each of the elements that go to 
-xn.ake up the final price to the purchaser? 



CONCENTRATION OF ECONOMIC POWER 14323 

Mr. Wooden. That's right. 

Mr. O'CoNNELL. And the standard-freight-rate book is one way, 
the standard book of extras is another, arbitrary switching charge is 
another, and the base price itself is the one with which you start. 

Mr. Wooden. That's true, and under the code the Institute, the 
American Iron and Steel Institute, put out a standard book of extras. 
I understand that since the code the extras are still standard, but 
each company puts out its own book. But it was brought out here 
before the committee, I tliink in November, that these competitors' 
representatives worked out' cooperatively and collaboratively the 
type and extent and amount of extras to be imposed, and that in fact 
the extra charges made by each company in the steel industry are 
identical with those made by the others. 

(Mr. O'Connell assumed the Chair.) 

Acting Chairman O'Connell. As I recall it, you testified that as to 
that particular element of cost the producers in the steel industry 
thought it proper to consult with each other for the purpose of arriving 
at a standard rate for all extras, and I think one of the witnesses 
indicated that in that connection they relied upon an opinion of counsel 
that insofar as that particular element of cost, it was perfectly proper 
for them to agree. Do you recall that? 

Mr. Wooden. Yes; I do. I should like to point out that the effect 
of this all-rail basis of figuring the transportation cosjb was frankly 
defended by the industry on the ground that it put inland producers 
on an equality with producers located on the waterways. It was 
thought to be unfair competition for the producers located on water- 
ways to be allowed to give the benefit of waterway transportation, 
cheaper waterway transportation, to their customers to the detriment 
of the inland producers. That is what accounted for the all-rail 
base. Despite the protests ot concerns that were located on the 
waterways, both sellers and buyers, transportation companies, 
chambers of commerce, Senators and I^epresentatives, the industry in 
1934 took a vote and overwhelmingly defeated the proposition of 
shifting from the all-rail base to meet those protests. That all-rail 
base still continues with the exception that the Institute publishes* 
some compilations, of freight rates that show rail and water and rail- 
ocean-rail so as to figure rates out to the Gulf ports and to the Pacific 
Coast ports. 

Representative Williams. If that were carried out, shouldn't 
there be differential freight? 

Mr. Wooden. I can't see any escape from the logic of the proposi- 
tion that a purchaser, or a seller either, that is located on water, for 
instance, should be allowed to have the benefit of his location even 
though it may be a little bit hard upon someone who doesn't have a 
similar location or as good a location. Otherwise, it seems to me, that 
is a perfect example of deprivation of natural advantages which are 
one of the outstanding features in any competitive system. If 
people are not allowed to exercise their natural advantages of location 
on water or otherwise, the implication is very clear that it is an inter- 
ference and an arbitrary interference with competitive advantages. 

I won't do more than mention the fact that the Corporation con- 
tends in these pamplilets that the basing-point system was the natural 
economic outgrowth of natural conditions in the industry. Mr. 
Fairless could not give any support for that statement, and on the 



14324 CONCENTRATION OF ECONOMIC POWER 

contrary he had not even considered the detailed specific findings of 
fact made by the Federal Trade Commission in the Pittsburgh Plus 
case based upon evidence taken in that case that showed the origin 
of the system was clearly one in which competitors united to fix 
prices and prevent competition by using the basing-point system plus 
freight from the basing-point and thereby getting an identical delivered 
price. 

I should like to advert for a moment to this matter of phantom 
freight, and I should like to make the point that it is not merely the 
existence of the phantom freight itself but the conditions out of which 
it arises. Under the basing-point system it is all merely the natural 
expression of the sj^stem itself, and it is necessary to the system that 
it be maintained fully or the system itself breaks down. Some of this 
phantom freight is very important. The Corporation itself has a mill 
at Allentown, Pa., that makes, 1 think, nails and something else, with 
prices based on Pittsburgh. The freight from Pittsburgh to Allen- 
town is about $6 a ton. Under the system it must add that freight 
from Pittsburgh to Allentown. If it adds less than the full amount of 
that freight then there is a monkey-wrench in the machinery and some 
competitors are not going to know just what the delivered price at 
Allentown ought to be. They won't have an identical delivered price 
unless the Allentown mill adds the full freight from Pittsburgh to its 
destination. It is the systematic pattern, as I said before — this 
phantom freight — that is characteristic of the system. 

It has been infeiTed, I think, in a good many quarters that the 
changes in base prices in 1938 and the abolition of some of the dilTer- 
entials that existed before that time between basing points had done 
away with phantom freight, but I think that is entirely a misconcep- 
tion. Phantom freight will always exist under the basing point system 
as long as the actual freight from a shipping point is less than the 
imputed freight which is added in for purposes of quoting prices and 
making prices. The Corporation admits that phantom freight arises 
out of the use of truck transportation and out of the use of water 
transportation, because the delivered price is figured on the all-rail 
basis. Therefore there is a difference between the actual and the 
imputed freight which goes to swell the base price. 

There is a mill out in Colorado, the Colorado Fuel and Iron Co. 
It is the only one in a wide area there, but it produces large quan- 
tities of heavy structural shapes, light structural shapes, universal 
plates, hot rolled strip, merchant bars, concrete reinforcing bar , 
billets, blooms, blooms for forging, plain wire, nails and staples, 
barbed wire, wire fencing, and bale ties. It bases prices for all those 
products on Chicago and Gary. That means that for the local pur- 
chasers in Colorado, the addition of phantom freight from those basing 
points is required by the basing-point system and it amounts to $19.60 
a ton. You may say that being the only producer in that territory 
it is entitled to do that, but I point out that unless it takes advantage 
of the full amount of that all-rail freight advantage it is not playing 
fair with the basing-point system. With that freight advantage of 
$19.60 on those products out to Colorado, if it charges only $19,50, 
ten cents less than the full freight advantage, it is going to have the 
low price out there and other shippers can't get in and sell in the face 
of that ten-cent discount. 



CONCEJMTRATION OF ECONOMIC POWER 14325 

On the Pacific Coast some products are produced which are priced 
on an eastern base plus water freight out there to Los Angeles and 
San Francisco and other Pacific ports. On one or two products, and 
not on one or two others — but on one or two products the base price 
out there as testified to by the Pacific Coast Fabricators' Association 
Secretary is the equivalent of those eastern prices, such as Birmingham 
plus, or Sparrows Point plus. On one or two products, as I started 
to say, it is rounded off so as to be a little bit higher than the eastern 
prices plus freight out there, and yet those products, or some of those 
products, are produced right on the Pacific Coast. The same point 
appliesy You may say that there is a shortage of production out there 
and they are entitled to charge what it would cost to bring the product 
from the East, but as I said before unless they take advantage of it 
to the last cent they are imdercutting what the basing point system 
calls for. 

There are some important aspects of this phantom freight on other 
industries. It was that phantom freight element that caused the 
outcry of the western rolled steel consumers against tha Pittsburgh 
plus system, because located at Chicago or in territories in the Middle 
West, although the goods were produced right there the price was 
made by adding the freight from Pittsburgh and it was called phantom 
freight. The result of it was that fabricators and remanufacturers 
in the Pittsburgh district who could buy at Pittsburgl^ without any 
plus came out there into the Middle West territory around Chicago 
and competed with those middle western fabricators and remanufac- 
turers who had to pay that Pittsburgh plus phantom freight and the 
western people simply couldn't compete with them. 

The same thing was true on the Pacific coast according to the 
testimony of the Secretary of the Pacific Coast Fabricators Association, 
He testified that even now the fabricators out there when they come 
toward the East are stopped at a very short distance by the competi- 
tion of the eastern fabricators who can buy in the East at the eastern 
prices and have the advantage against them while the western fabri- 
cators can't come East. The amount of their disadvantage in terms 
of dollars and cents, even at the present time, is greater than it was ' 
in the case of the Pittsburgh plus system in the Middle West. 

Not only does that phantom freight have an effect upon existing 
fabricators and reinanufacturers in their ability to compete, but an 
important point is that the amount of the phantom freight may be so 
great as to preclude the development and growth of new industries in 
such localities. With the advantage that the eastern fabricators and 
remanufacturers located at or near eastern basing points have in 
owning their goods, in buying their goods at the base prices without 
freight, it is simply impossible to compete with them and new indus- 
tries don't spring up as they would normally in such territories. 

Mr. HiNRicHs. Do you mean by that new industries using steel as 
a raw material? 

Mr. Wooden. Oh yes, surely, that is what I mean. 
Another factor in that connection is the factor of waste. There are 
many remanufacturing industries, fabricating industries, that buy 
their steel as raw material and in making their finished product they 
just necessarily have to waste a large percentage of it. It may be a 
waste of 30 or 40 percent in the manufacture, and they can only sell 
that waste product as scrap. 



14326 CONCENTRATION OF ECONOMIC POWER 

Now, that tends to increase the effect of the phantom freight far 
beyond what the superficial amount seems to be, because of that waste 
practice. They pay phantom freight on that unavoidable waste. > 

Well, I should like to say that the freight absorption likewise is just 
the natural, automatic reflection of the identical delivered price, and 
that both of them together, freight, absorption and phantom freight, 
reflect the range of the mill nets which the mills receive under the 
basing point system. I should like to point out, as I do in the pre- 
pared statement, that the Corporation throughout its pamphlets and 
in its testimony of its ofiicials here, recognized that these mill net 
yields are the actual prices obtained; that the base price is not the 
real price and that the delivered price is not the real price, but that the 
real price is what the mill net yield returns to the seller. And it 
admits expressly in the pamphlets that this mill net yield is a system- 
atic pattern of variation that is the reflection of the identical delivered 
price under the basing point system. 

It might be thought that it is not in keeping to discuss the econ- 
omic aspects of the basing point system in this statement, but the 
Corporation brought into these pamphlets defending the basing point 
system a great many economic theories, drawing upon the conclusions 
and facts set up by their expert economists such as Dr. Yntema and 
others, which were put in as separate exhibits. They claim, for 
instance, that identical delivered prices result from perfect competition 
in a free market, and they cite the classical economic concept of a free 
market to sustain that position. At the same time they contend that 
perfect competition is an abstraction and exists nowhere, and yet they 
seek to take advantage of that theory of perfect competition and its 
effect upon uniformity of price by saying, "That's what we have in the 
steel industry." To do that they postulate the market as being at 
destination, and of course under the basing point system they won't 
permit it to be anywhere else. The fact of the matter is, the im- 
portant issue is whether in requiring sales to be made only at destina- 
tion they do not thereby close all the markets at the mill and even 
close the market entirely in the sense that economists use the word 
market. 

The Corporation in its pamphlet makes its argument that there is 
such a contrast between the physical conditions of the steel industry 
and the concepts of the economists of perfect competition that the 
rules regarding competition should not be applied, citing in that 
connection such matters as the limited number of producers and the 
limited number, relatively, of large buyers of steel. My only com- 
ment in that connection would be that the fewer the number of pro- 
ducers the greater care ought to be exercised in seeing that a competi- 
tive condition among them is maintained, rather than relaxing any., 
rules because of that small number of producers. 

The Corporation makes claims that the demand for steel is inelastic 
and that the price has no relation to demand. I would say in that 
connection that if it be trtie that price and demand for steel are unre- 
lated, it simply means that one-half of the law of supply and demand 
has thereby been repealed. If there is no relation between demand 
and price, and that half of the law of supply and demand has been re- 
pealed, then it indicates the existence of some form of artificial control. 
Yet the Corporation expressly says and goes to great length to prove ^ 
through its economists and studies of prices and costs and everything 



cx)Ncentration op economic power 14327 

of that, sort, that it is not feasible to reduce the price of steel because 
to do so would not increase the demand. The record is against them 
on that, and I think the Government economists disposed of that 
issue very nicely in the last week. 

The Corporation also makes quite an argument to the effect that 
prices and profits are reasonable in the industry. There is a section 
of this statement which is devoted to that contention. Since my 
. time is so limited, I will not stop to analyze that contention of the 
Corporation, but I would like to make this particular point, that a 
great deal depends on whether you consider the prices and profits 
off the industry as a whole, as a collective entity, or whether you take 
the profits of particular members of the industry. If you take them 
collectively, you thereby forget that it is supposed to be a competitive 
industry. If you take them separately you will find that some ojf 
the more eflacient concerns have been able, even through the depres- 
sion, to make satisfactory profits. 

The whole question of prices and profits can't be determined, as a 
matter of fact, imless you adhere to the principle that only competi- 
tion can determine what price is fair and reasonable. If you depart 
from that standard somebody has to determine it, and then it simply 
becomes a question of 'determination by interested members of the 
industry through the use of such a thing as the basing-point system. 
The Corporation also defends some of the uneconomic results of 
the system, such as excess capacity. It takes various positions re- 
garding excess capacity. It argues in the first place that it doesn't 
exist; in the second place that if it does exist there is no way of meas- 
uring it; third, that there is no feasible way of eliminating it; and 
fourth, that it has certain economic advantages which justify it. 
You will find all those positions taken in its pamphlet. I put in here 
today a chart showing the relation between production and capacity 
of the industry for a number of years past ("Exhibit No. 2233"), 
and which contradicts these statements of the Corporation to the 
effect that the capacity of the industry was not more than suflficient 
to supply the needs of the country during periods of high demand, 
such as 1929, 1937, and the present time. As a matter of fact, by 
decades you can carry the industry back to 1901, when the Steel 
Corporation was formed, and if you take it by decades you will find 
that from 1901 to 1910 the percentage of production to capacity was 
68.26 percent; 1910 to 1920, 77.65 percent; 1920 to 1930, 70.54 per- 
cent; 1930 to 1939, 44.55 percent. So instead of there being no 
excess capacity, it has existed in the industry ever since the Steel 
Corporation was formed. 

There is nothing novel about the thought of excess capacity of the 
industry. The magazine "Steel" had an editorial in July 1938, which 
I cite in this statement, concerning excess capacity and discussing 
the relation of it to capitalization. It pointed out that for the period 
between 1926 and 1937 the production was only 60 percent of the 
capacity, and that the entire capacity earned during that period, 3.49 
percent on the capital invested in the entire capacity, after absorbing 
depreciation and overhead on the idle 40 percent; and they suggested 
that steel, instead of being a $4,281,000,000 mdustry actually would 
be capitalized at considerably less if much excess capacity whose 
future usefulness is problematical were scrapped. 



14328 CONCENTRATION OF ECONOMIC POWER 

The Corporation also defends the existing location of mills. It 
was brought out here yesterday that- the pamphlet shows — and I 
quoted the page, quoted the language — that the location of mills 
cannot be attributed to any pricing system. Then they switch around 
and they go over to the point that if you bother the system or disturb 
it in any way it just puts all these plants out of business. It says 
that it would be an exception if any mill could satisfactorily survive 
under a change in the system to an f. o. b, mill system. 

The Corporation goes into the argument that the overhead and 
capital costs justify the basing point system, and I put in here today 
a statement which showed how much variation there was between 
the capital costs of the different companies ("Exhibit 2236")- 

Nowhere, however, does the Corporation do a better job at what 
they sometimes refer to as economic sophistry than in the argument 
that if you substitute another system, a mill price system, for the 
basing price system, you will disrupt and dislocate industry and 
cause economic disaster. They take about, I think, 12 pages and 
present maps with aji elaborate showing as to how mills would be 
restricted to a very limited territory and simply could not do business 
under any mill system. But in doing that they employ a technique 
which they elsewhere say in the pamphlet is simply impossible. 
They say it can't be done, you can't measure what would happen — 
and then they go ahead and try to measure it. Even in trying to 
measure it, though, they make a lot of assumptions which are gratui- 
tous and unfounded. They assume so many things about it that 
there is no ground for assuming. 

In the last place I would like to mention tnat in making its argu- 
ment in these pamphlets, the Corporation has misstated the position 
of the Federal Trade Commission regarding alternatives to the basing 
point system. They contend — and devote a large part of their 
pamphlet to the argument based upon the contention — that the 
Federal Trade Commission proposes to impose by law or mandate 
a mill system of pricing that would prevent any seller making any 
different price to one customer than to another. 

The Commission has not taken that position, and there is no evi- 
dence to support the claim that it has. As a matter of fact, if it had 
taken that position it would have taken the position that it was above 
the law, because the law itself specifies the conditions under which 
different prices may be made to different customers. 

Acting Chairman O'Connell. You are speaking of the Robinson- 
Patman Act? 

Mr. Wooden. And its predecessor, the Clayton Act. 

Acting Chairman O'Connell. Of course, the Commission might 
propose to change those laws. 

Mr. Wooden. Yes; but the Corporation says what the Commission 
has done, and it has done no such thing. What it might do in the 
future, I can't say. 

Acting Chairman O'Connell. But I am merely pointing out that 
the Federal Trade Commission might propose legislation which would 
be inconsistent with some provisions of any existing statute such as 
the Robinson-Patman or the Clayton Act. 

Mr. Wooden. Surely. I wouldn't attempt to say what the Com- 
mission would do in the future, but I direct attention to the fpct that 
the Corporation has misstated what it has done and said in the past. 



CONCENTRATION OF ECONOMIC POWER 14329 

In the last analysis, the question is whether this system should be 
allowed to continue. The Corporation itself agrees that price com- 
petition is necessary in an industry operating in a capitalistic system. 
So, if the conclusion be that this is not a competitive system and that 
price competition is suppressed by the system, then the Corporation 
would have to follow the logic of its own position and say, "You have 
got to get rid of it or else the capitalistic system itself is menaced." 

In closing, I would merely like to say that it seems to me the 
peculiar province of this committee is to consider whether legislation 
outlawing the basing-point system should' not be recommended. As 
the situation is now, with the outcome of any basing-point case depend- 
ing upon the interpretation of the law and the facts under theories of 
conspiracy and concerted action which, I think, are necessary to make 
the law applicable, it requires an enormous expenditure of time and 
effort and labor in establishing that condition in an adversary proceed- 
ing for each particular industry and what the facts are in that industry 
regarding the basing-point system. I would say that no more vitally 
needed legislation within the scope of this committee can be suggested 
than that of directly prohibiting tli^ basing-point system by congres- 
sional mandate. The constitutional power of Congress to regulate 
interstate commerce could find no more appropriate exercise, assum- 
ing that our long-established public policy of preserving competition 
and free enterprise is to be something more than an abstraction. 

Thank you. 

Acting Chairman O'Connell. Do you wish to ofler this document 
for the record? 

Mr. Wooden. Yes. 

Acting Chairman O'Connell. It may be admitted. 

(The document referred to was marked "Exhibit No. 2242" and is 
included iii the appendix on p. 14548.) 

Acting Chairman O'Connell. Thankyou very much, Mr. Wooden. 
If there is nothing more to come before the committee we will stand in 
recess subject to the call of the chairman. 

(Whereupon, at 4:25 p. m., the committee adjourned subject to the 
call of the chairman.) 



14330 CONCENTUATION OF ECONOMIC POWER 

The following letter is included at this point in connection with Mr. 
Ballinger's statement on p. 14317, supra. (See footnote reference 2 
on that page.) 

Federal Trade Commission, 
Washington, December 11, 1940. 
Mr. William Heflin, 

Temporary National Economic Committee, 

The Capitol, Washington, D. C. 
Dear Mb. Heflin: Enclosed herewith is a memorandum to be inserted in 
the record in connection with my statement relative to identical bids on govern- 
ment business, during the Commission's steel hearings on January 30, 1940. 
Sincerely yours, 

Willis J. Ballinger, 
Executive Assistant to the Commission, T. N. E. C. Inquiry. 
WJB:FG 
End. 

The percentages in this and the following paragraphs were materially changed, 
the percentages above stated being found to be in error. The fact appears to be 
that during the particular limited period of time involved, there waj, according 
to the data submitted by the Corporation, no notable uniformity in bids to the 
Government such as characterizes the system when it is adhered to. As shown by 
the Department of Justice in their "Exhibit No. 1349," ' part of the period cov- 
ered by Corporation's a:.'ta was one of "price confusion," "exceptional weaknesses 
in the prices of many steel products", and marked by "many companies" begin- 
ning the "quotation of base prices, especially for flat rolled products like strip, 
sheet, or plates at their own mills'." 

The situation during more typical periods is shown in bids to the Navy Depart- 
ment during 1935 and 1936. (See "Exhibits Nos. 2240, 2241",2 and testimony 
of A. B. Custer of the Navy Department.) In one case there were 43 bids, iden- 
tical to the oenn}^ in the amount of $45,683.48, and in another there were 31 bids, 
identical tc the penny, in the amount of $20,727.20. The whole matter of the 
significance of the percentage errors referred to is covered by the letter of Mr. 
Irving S. Olds, Chairman of the Board of the Corporation, tc Chairman O' Ma- 
honey, dated October 4, 1940, and the letter of Walter B. Wooden in comment 
thereon dated November 29, 1940, both of which are in the record.^ In any event, 
it should be obvious that the merits and demerits of any system cannot be deter- 
mined by the extent of temporary departures from it. 

The argument advanced in the paragraphs covered by this memorandum is 
that the high percentage of identical bids on Government orders from the steel 
industry is a refutation of the contention of the representatives of the Steel Cor- 
poration before the Temporary National Economic Committee that the "basing 
point system is a "shadowy thing," which is practically disregarded in the deter- 
mination of steel prices. The staff of the Commission feels that this argument is 
not invalidated, because the United States Steel Corporation submitted data to 
the Committee whichapplied to a very limited period, and a period during which 
the basing point system in the steel industry was temporarily abandoned because 
of price-cutting. The staff of the Commission is of the opinion that there is ample 
evidence in a number of previous studies conducted both by the Federal Trade 
Commission and other governmental agencies, such as the National Recovery 
Administration, to show convincingly that observance of the basing point system 
in the steel industry is the general rule rather than the exception, with the result 
that a very high percentage of bids on Government purchases have been identical 
to the penny. 

' Included in Hearings, Part 18, appendix, p. 10391. 

» Pp. 14547 and 14548, supra. 

s Supra, pp. 14691 and 14693, respectively. 



APPENDIX 



Exhibit 2189 



Address reply to 

"The Attorney General" 

and refer to 

initials and number 

60-138-M 

Re Form A 

Department of Justice, 
Washington, D. C, January 19, 1939. 
Gentlemen: As part of the investigation of the iron and steel industry for the 
Temporary National Economic Committee, the Department of Justice and the 
Federal Trade Commission have prepared a questionnaire on the distribution of 
certain selected steel products. You will find enclosed (a) instructions for the 
compilation of the data requested; (b) copies of the form (Form A) on which 
spaces are provided for the recording of the figures reported; and (c) a form of 
affidavit and verification. 

Form A and the instructions accompanying Form A have been designed in 
conformity with reported company methods of recording tonnage shipment data 
from manufacturing plant to destination. It is contemplated that the data re- 
quested will be a matter of record with your company or that they may be readily 
derived from existing records without resort to original invoices. Inquiries with 
respect to any part of the questionnaire or any problem raised by it should be 
addressed to this, Department, with the file reference as indicated. 

There is also enclosed an affidavit to be executed by that oflScer of the reporting 
company ultimately responsible for the preparation of the questionnaire. Execu- 
tion of Form A will not be deemed complete unless the verified afl^davit is properly 
made and returned. 

It will assist the Committee if each reporting company as soon as possible will 
advise the Department of the ai»proximate date when final reports on Form A 
for the periods selected can be submitted. 
Very truly yours, 

Thurman Arnold, 
Thurman Arnold 
Assistant Attorney General. 

Form a 60-138-M 

Data Reqihred for the Temi-orary National Economic Committee on the 
Distribution of Selected Carbon Steel Products 

instructions 

1. AU tonnage data required are indicated on the accompanying sheets, labeled 
Form A. Spaces are provided at the head of each sheet for the insertion ,of the 
following information: (a) the names of the company; (b) the name and location 
of each works or group of works from which shipments are reported; and (c) the 
year during which shipments reported were made. 

2. Separate sheets should be used for each works and for each of the three 
calendar years (1936, 1937 and 1938) for which data are required. For example, 
if the company operated two separate works during each of the three calendar 
years, its final report will be made on six sheets ; if only one works, on three. Addi- 
tional copies of Form A will be supplied on request. 

(a) If the company operates more than one works and if it is impracticable 
to derive these data from its records for each works separately, give the name 

124491— 41— pt. 27 14 14331 



14332 CONCENTRATION OF ECONOMIC POWER 

and location of each works for which these data are aggregated and indicate 
tlie distance between works and the ways in which integrated operations are 
effected. 

(b) Under no circumstances must the data combine the operations of 
works if different basing-point areas. 

3. In reporting tonnage shipped, indicate for each product whether the weights 
are gross or net tons. 

4. All data requested are for carbon steel. Special products such as alloy steels 
and high carbon wire are excluded. 

5. Your company is understood to record tonnage shipments of steel products 
from works to destination by States and by counties on punch cards for machine 
tabulation. You are requested, therefore, to report tonnage shipments for the 
products listed on Form A both by States and by certain important sub-division 
of States and metropolitan consuming areas, listed in the first column of Form A 
under "By other consuming districts" and defined in the schedule of consuming 
districts enclosed. 

6. In addition to the information requested on Form A, please give, on a separate 
sheet, the name and, if available, the most important destination-plant location 
of each of the company's four largest customers for each of the selected products 
for which shipment data are required. 

7. There is enclosed an affidavit to be executed by that officer of the reporting 
company ultimately responsible for the preparation of this questionnaire. Exe- 
cution of Form A will not be deemed complete unless the verified affidavit is 
properly made and returned. 



CONCENTRATION OF ECONOMIC POWER 



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CX)NCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



14335 




14336 C50NCENTRATI0N OF ECONOMIC POWER 

Exhibit No. 2190 

Address reply to 

"The Attorney General" 

and refer to 

initials and number 

60-138-M 

Department op Justice, 
Washington, D. C, December 2S, 1938. 
Re Form B 

Gentlemen: As part of the investigation of the iron and steel industry for the 
Temporary National Economic Committee, the Department of Justice and the 
Federal Trade Commission have prepared a questionnaire on the distribution and 
pricing of certain selected steel products. You will find enclosed (a) instructions 
for the compilation of the data requested; (b) copies of the form (Form B) on 
which spaces are provided for the recording of the figures reported; (c) a list of 
the works and the products selected for report; (d) a detailed definicion of the con- 
suming districts listed on Form B; and (e) a form of affidavit and verification. It 
is contemplated that these reports be filled out from records currently prepared 
by companies during the month of February, 1939. The forms are selt-explan- 
atory. 

These data are requested at this time only for the month of February, 1939. 
At a later date, when seasonal pressure upon clerical personnel of reporting com- 
panies has lifted, similar information will be required for a single month in each 
of the years 1937 and 1938. The reports call for records of shipments only of 
selected products from certain specified works, of each company. In the case of 
each reporting company the works and products included are listed on the enclosed 
sheet. Inquiries with respect to any part of the questionnaire should be addressed 
to this Department, with the file reference as indicated. 

There is also enclosed an affidavit to be executed by that officer of the reporting 
company ultimately responsible for the preparation of the questionnaire. Execu- 
tion of Form B will not be deemed complete unless the verified affidavit is properly 
made and returned. 

It will assist the Committee if each reporting company as soon as possible will 
advise the Department of the approximate date when reports for the month of 
February, 1939 can be submitted. 
Very truly yours, 

(Signed) Thurman Arnold, 

Assistant Attorney General. 

Form B 60-1 38-M 

Data Required for the Temporary National Economic Committee on the 
Distribution and Pricing of Selected Steel Products 

instructions 

1. AU data required are indicated on the accompanjfing sheets, labeled Form B. 
Spaces are provided at the head of each sheet for the- insertion of the following 
information: (a) the name of the company; (b) the name and location of each 
works or group of works, listed on the enclosed sheet, from which shipments are 
reported; (c) the name of each product, listed on the enclosed sheet, shipped from 
such works during the period covered; (d) the month and year during which ship- 
ments reported were made (i. e., for purposes of this questionnaire, February, 
1939); (e) the basing point on which delivered price was computed. 

2. Separate sheets should be used for each works, each product, and each basing 
point on which delivered price was computed. For example, if the company 
operates two separate works, produces and ships from eacK of those works three 
of the selected products, and prices each of those products on three basing points, 
its final report will be made on eighteen separate sheets of Form B. With one 
works, nine sheets would be required; with one works and one product, three 
sheets. Additional copies of Form B will be supplied on request. 

(a) If it is impracticable to provide the information requested separately 
for each of the works indicated, give the name and location of each of the 
works for which these data are aggregated, and indicate the distance between 
works and the ways in which integrated operations are effected. 

(b) Under no circumstances must the dita combine the operations of works 
in different basing-point areas. 



CONCENTRATION OF ECONOMIC POWER 14337 

3. Data are requested for the period February 1-28, inclusive, 1939. 

4. In the case of products which are quoted Gulf Ports or Pacific Coast Ports 
without price differentials among ports, Gulf Ports or Pacific Coast Ports will be 
considered a single basing point in each case respectively. 

5. Special attention is called to the detailed definition (in terms of counties) of 
the consuming districts listed on Form P. 

6. The data requested in this questionnaire are for carbon steel only. Special 
products such as alloy steels and high-carbon wire are omitted. 

7. There is also enclosed an affidavit to be executed by that officer of the 
reporting company ultimately responsible for the preparation of the questionnaire. 
Execution of Form B will not be deemed complete unless the verified affidavit is 
properly made and returned. 

Address reply to 

"The Attorney General" 

and refer to 

initials and number 

60-138-M 

DEPARTMENT OF JuSTICE, 

Washington, D. C, January 27, 1939. 
Re Form B. 

Gentlemen: You are referred to the questionnaire (i. e., Form B) which was 
sent to you by this Department under date of December 23, 1938. Several 
questions of interpretation have been raised by representatives of the industry 
and, to insure uniformity in reporting, you are requested to consider the follow- 
ing determinations an integral part of the instructions which accon^panied Form 
B. 

1. Column (4) which is now headed "Freight charges added to base prices to 
arrive at invoiced value per column (3)" should be interpreted to mean "Freight 
charges from nearest basing point, freightwise, to point of delivery" in all in- 
stances in which the delivered price is not computed directly from a base price 
plus freight. 

2. In the case of shipments to third parties, including fabrication-in-transit 
shipments, consuming district means district of ultimate destination. 

3. All direct shipments, including shipments for the account of affiliated com- 
panies and shipments for the account of jobbers or other distributors, are to be 
tabulated by consuming districts. Such shipments are not to be included under 
"Other shipments." 

4. In the case of "Exports", it will be sufficient to report total tonnage snipped 
and the aggregate value at the mill of such shipments leaving columns ("3) to 
(6) inclusive blank. 

5. In the case of "F. O. B. mill sales", columns (4) and (5) should be blanked 
out, since no freight is involved. 

6. In the case of "Shipments to plants or warehouses of the same or afiSliated 
companies", please observe the following: 

(a) Shipments to warehouses (i. e., for resale) of the same or aflSliated 
companies may be reported in tonnage only, columns (3) to (6) inclusive 
being left blank. 

(b) Shipments to fabricating plants of the same or affiliated companies, 
however, should be reported in all six columns. A fabricating plant means 
a plant engaged in the further processing of steel into such products as 
ships, all forms of structures, fence, posts, and other wire products, oipe 
and tubes, etc. 

If shipments to warehouses are reported in tonnage only, they shoula be re- 
ported separately and not aggregated with shipments to fabricating plants. 

7. "Shipments to jobbers' warehouses" means shipments which are outright 
sales but which are made for resale, whether the buyer be classified as a jobber, 
retailer, or distributor. For these shipments, column (4) may be blanked out 
but the data in the other columns (2) to (6) inclusive are required. 

8. Companies requested to report data on Form B for "Plain wire, drawn" 
will please observe the following definition of this product: Plain wire, drawn, 
means wire which is sold in the bright state only, excluding all wire receiving 
special treatment after drawing. 

Very truly yours, 

(Signed) Thurman Arnold, 

Assistant Attorney General. 



14338 



CONCENTRATION OF ECONOMIC POWER 



Products Selected for Form B Analysis: 

1. Sheet and Tin Plate Bars 

2. Wire Rods 

3. Plates 

4. Heavy Structural Shapes 

5. Hot Rolled Sheets 

6. Hot Rolled Strip 

7. Cold Rolled Sheets 

8. Cold Rolled Strip 

9. Tin Plate (95 lb. base boxes) 
10. Plain Drawn Wire 



Temporary National Economic Committee 

Form B 

Distribution and pricing of selected steel products 



Company.... p^^.^] 



'Month 

[Year 

Name and location of works Basing point on which delivered 

Product price was computed 



Domestic shipments to consuming 
districts ' 

(1) 


Tonnage 
shipped, 

net or 

gross tons 

(state 

which) 

(2) 


Total 
invoiced 
delivered 

value 

^3) 


Freight charges 

^ded to base 

prices to arrive 

at invoiced 

value per 

column (3) 

(4) 


Actual freight 

paid or allowed 

on shipments 

from mill to 

destination 

(5) 


Total extras 
included in 
Invoice de- 
livered value 
per col- 
umn (S) 

(6) 


District 
Maine _ _. 


Tons 


Amount in 
dollars 


Amount in 
dollars 


Amount in 
dollars 


Amount in 
dollars 


New Hampshire 












Vermont 
























Rhode Island 












Connecticut (except Fairfield 
























Eastern and Central New York,.. 












Buffalo 












Philadelphia 
























Pittsburgh.-. 




































North Ohio River. 




















































































Detroit ... .. -... 












Michigan — all other 




































Iowa 












St. Louis 












Kansas City 
























North Dakota 












South Dakota- 












Nebraska 












Kansas 












Delaware . 












Baltimore.. 












Maryland— all other except 2 coun- 
ties 




























































South Carolina 













' Distribution of selected steel product's by consuming districts is requested for all shipments direct to 
consumers excluding exports, f. o. h. mill sales, shipments to other plants or warehouses of the same or 
affiliated companies, and shipments to jobbers' warehouses. Consuming districts are defined in schedule 
enclosed with this form. 



CONCENTRATION OF ECONOMIC POWER 14339 

Distribution and pricing of selected steel products — Continued 



Domestic shipments to consuming 
districts ' 

(1) 


Tonnage 
shipped, 

net or 

gross tons 

1 (state 

which) 

(2) 


Total 
invoiced 
delivered 

value 

(3) 


Freight charges 

added to base 

prices to arrive 

at 'nvoiced 

value per 

column (S) 

(4) 


Actual freight 

paid or allowed 

on shipments 

from mill to 

destination 

(5) 


Total extras 
included in 
invoice de- 
livered value 
per col- 
umn (S) 

(6) 


District 


Tons 


Amount in 
dollars 


Amount in 
dollars 


Amount in 
dollars 


Amount in 
dollars 


Florida 












































































































Texas 




















































































Utah 
















































California — southern 












California— northern 
















































Other shipments: ' 
Exports 












F. 0. b. mill sales' 












Shipments to plants or ware- 
houses of same or affiliated 












Shipments to jobbers' ware- 

























> These items need not be repeated on reports for each basing point. It is understood that they are not 
to be included in the distribution of shipments by consuming districts within the United States. " 

' "F. o. b. mill sale" means a sale priced at the mill and delivered to the customer at the mill without 
freight allowance. 

* "Affiliated company" means any company described as a parent, subsidiary, or affiliated company in 
the reporting company's annual reports or in any registration statement filed by it with the Securities and 
Exchange Commission. 



Exhibit No. 2191 
Companies Reporting, Fo«m A 

1. By states and consuming districts: 

Colorado Fuel and Iron Corporation 
Keystone Steel and Wire Company 
Youngstown Sheet and Tube Company 
Bethlehem Steel Company 
American Rolling Mill Company 
Granite City Steel Company 
Jones and Laughlin Steel Corporation 
Carnegie-Illinois Steel Corporation 
National Tube Company 
American Steel and Wire Company 
Tennessee Coal Iron and Railroad Company 
Columbia Steel Company 

2. By states only: 

Andrews Steel Company 
Wheeling Steel Corporation 
Continental Steel Corporation 
Allegheny-Ludlum Steel Corporation 



14340 CONCENTRATION OF ECONOMIC POWER 

Pittsburgh Steel Company 
Weirton Steel Company 
Republic Steel Corporation 
Sharon Steel Corporation 
Great Lakes Steel Corporation 
Follansbee Bros. Company 
Worth Steel Company 
Cohoes Rolling Mill Company 
Detroit Steel Corporation 
McKeesport Tin Plate Corporation 
Empire Sheet and Tin Plate Company 
Lukens Steel Company 
3. By sales districts only: 
Otis Steel Company 
Mid-States Steel and Wire Company 
Superior Steel Corporation 
Greer Steel Company 
Acme Steel Company 
The Eastern Rolling Mill Company 
J. A. Roebling's Sons Company 
Alan Wood Steel Company 
Inland Steel Company 
McLouth Steel Corporation 
Phoenix Iron Company 

Companies Reporting, Form B 

Acme Steel Company 

Alan Wood Steel Company 

Allegheny-Ludlum Steel Corporation 

American Chain & Cable Company, Inc. 

American Rolling Mill Company 

American Steel & Wire Company 

Andrews Steel Company 

Apollo Steel Company 

Atlantic Steel Company 

.\tlantic Wire Company 

Bethlehem Steel Company 

Carnegie-Illinois Steel Corporation 

Central Iron & Steel Company 

Cold Metal Prodes Company 

Colorado Fuel & Iron Corporation 

Continental Steel Corporation 

W. H. Davey Steel Company 

Detroit Steel Corporation 

Empire Sheet & Tin Plate Company 

Follansbee Bros. Company 

Greer Steel Company 

Granite City Steel Company 

Great Lakes Steel Corporation 

Inland Steel Company 

Jones & Laughlin Steel Corporation 

Keystone Steel & Wire Company 

Laclede Steel Company 

Lukens Steel Company 

McKeesport Tin Plate Corporation 

McLouth Steel Corporation 

Mid-States Steel & Wire Company 

Niles RolUng Mill Company 

Northwestern Steel & Wire Company 

Otis Steel Company 

Phoenix Iron Company 

Pittsburgh Steel Company 

Reeves Steel & Manufacturing Company 

Republic Steel Corporation 

J. A. Roeblings Sons Company 

Seneca Wire and Manufacturing Company 

Sharon Steel Corporetion 



CONCENTRATION OF ECONOMIC POWER 14341 



Sheffield Steel Corporation 
Stanley Works, The 
Superior Steel Corporation 
Tenn. Coal Iron & R. R. Company 
Thomas Steel Company 
Washburn Wire Company 
Washington Tin Plate Company 
Weirton Steel Company 
Wheeling Steel Corporation 
Wickwire Bros., The 
Wickwire-Spencer Steel Company 
Wilson Steel & Wire Company 
Worth Steel Company 
Youngstown Sheet & Tube Company 



Exhibit No. 2192 

Form A or B 60-138-M 

Affidavit 

State of \„„ . 

County of T*" 

On this day of , 1939, personally appeared before 

me ,to me known and known to me to be the 

of the gZ^Sy?" -d who by me be- 

ing duly sworn deposed and acknowledged that he is of the said 

corporation ^j^^^^ ^-^q accompanying form sheets issued under the authority of 

the Temporary National Economic Committee, each of which is designated 
"Form A," were executed under his authority and by his direction, that to the 
best of his knowledge and belief the statements and figures contained therein, and 
each of them, are true and accurate and that they were prepared from the records 

of the said pomnanv " regularly made and kept by it in good faith in the conduct 
of its affaiis. and for its own use. 

[seal] 

Notary Public. 
verification 

State of \ . 

County oj J " 

, being duly sworn, deposes and says that he is 

an officer, to wit th6 of the Company°° 

and that he is authorized to execute and has this day executed the foregoing 
affidavit and that the averments contained therein, and each of them, are in all 
respects true. 



Corporation! Company . 

Signed and sworn to before me this day of , 1939. 

[seal] 

Notary Public. 

Exhibit No. 2193 

Form A or B. Consuming Districts of the United States 

A. Consuming districts coincident with State boundaries: Maine, New Hamp- 
shire, Vermont, Massachusetts, Rhode Island, Minnesota, Iowa, North Dakota, 
South Dakota, Nebraska, Delaware, District of Columbia, Virginia, West Vir- 
ginia, North Carolina, South Carolina, Georgia, Florida, Kentucky, Tennessee, 
Mississippi, Arkansas, Louisiana, Oklahoma, Texas, Montana, Idaho, Wyoming,? 
Colorado, New Mexico, Arizona, Utah, Nevada, Washington, Oregon. 



14342 CONCENTRATION OF ECONOMIC POWER 

B. Other consuming districts (Counties included in each district are listed 
below) : 

Connecticut: all counties except Fairfield County. 
Metropolitan New York: 

New York State: Bronx, Kings, Nassau, New York, Queens, 

Richmond, Rockland, Suffolk, Westchester. 
New Jersey: Bergen, Essex, Hudson, Middlesex, Monmouth, 

Morris, Passaic, Somerset, Union. 
Connecticut: Fairfield. 
Eastern and central New York: 

New York State: Orange, Putnam, Sullivan, Ulster, Dutchess, 
Columbia, Renssalaer, Broome, Washmgton, Saratoga, Warren, 
Essex, Clinton, Cortland, Onondaga, Tompkins, Cayuga, Tioga, 
Chemung, Schuyler, Yates, Seneca, Albany, Schnectady, Scho- 
harie, Delaware, Otsego, Madison, Chenango, Green, Franklin, 
Hamilton, Fulton, Montgomery, Oswego, Ontario, Wayne, 
Steuben, Herkimer, St. Lawrence, Oneida, Lewis, Jefferson. 
Buffalo: 

New York State: Niagara, Erie, Catteraugus, Chautauqua, 

Genesee, Monroe, Orleans, Livingston, Wyoming, Allegany. 
Pennsylvania: Erie. 
Philadelphia: 

Pennsylvania: Bucks, Philadelphia, Montgomery, Chester, Dela- 
ware. 
New Jersey: Mercer, Hunterdon, Burlington, Camden, Atlantic, 
Gloucester, Salem, Cumberland, Cape May, Ocean. 
Eastern Pennsylvania: 

Pennsylvania: Northampton, Monroe, Pike, Wayne, Susque- 
hanna, Lackawanna, Wyoming, Luzerne, Carbon, Columbia, 
Perry, Dauphin, Northumberland, Snyder, Montour, Union, 
Lycoming, Sullivan, Bradford, Tioga, Schuylkill, Lehigh, Berks, 
Lebanon, Lancaster, York, Adams, Potter, Cumberland, 
Clinton, Center, Mifflin, Juniata, Huntington, Fulton, Franklin, 
New Jersey: Sussex, Warren. 
Pittsburgh: 

Pennsylvania: McKean, Elk, Cameron, Clearfield, Jefferson, 
Clarion, Bxitler, Armstrong, Bedford, Blair, Venango, Indiana, 
Cambria, Beaver, Allegheny, Westmoreland, Somerset, Wash- 
ington, Green, Fayette, Forest, Warren. 
Maryland: Allegany, Garrett. 

West Virginia: Preston, Monongalia, Marion, Wetzel. 
Cleveland: 

Ohio: Lorain, Cuyahoga, Lake, Erie, Geauga, Ashtabula, Portage, 
Summit, Medina, Huron. 
Youngstown: 

Ohio: Trumbull, Mahoning, Columbiana. 
Pennsylvania: Crawford, Mercer, Lawrence. 
North Ohio River: 

Ohio: Jefferson, Belmont, Monroe, Washington, Noble, Morgan. 
West Virginia: Hancock, Brooke, Ohio, Marshall, Tyler, Pleasants, 
Wood. 
Canton-Massillon-Mansfield: 

Ohio: Guernsey, Muskingum, Stark, Carroll, Wayne, Ashland, 
Richland, Harrison, Tuscarawas, Coshocton, Holmes. 
South Ohio River: 

Ohio: Meigs, Gallia, Lawrence, Athens. 
West Virginia: Jackson, Mason, Cabell. 
Ohio: All counties in Ohio other than those listed under Cleveland, 
Youngstown, North Ohio River, Canton-Massillon-Mansfield, and 
South Ohio River districts. 
Indiana: All counties except Lake County. 
Chicago: 

Illinois: Cook, Du Page, Lake, Kane, Will. 
Wisconsin: Kenosha, Racine, Milwaukee. 
Indiana: Lake. 
Illinois: All counties except Madison and St. Clair Counties and those 
included under Chicago district. 



CONCENTRATION OF ECONOMIC POWER 14343 

Detroit: 

Michigan: Saint Clair, Macomb, Oakland, Livingston, Lapeer, 
Ingham, Jackson, Washtenaw, Wayne, Genesee, Hillsdale, 
Lenawee, Monroe, Shiawassee. 
Michigan: All counties except those listed under Detroit district. 
Wisconsin: All counties except Kenosha, Racine, and Milwaukee Coun- 
ties. 
St. Louis: 

Missouri: St. Louis, St. Louis City> St. Charles. 
Illinois: St. Clair, Madison. 
Kansas City: 

Missouri: Jackson. 
Kansas: Wyandotte. 
Missouri: All counties except St. Louis, St. Louis City, St. Charles, 

and Jackson Counties. 
Kansas: All counties except Wyandotte County. 
Baltimore: 

Maryland: Calvert, Anne Arundel, Howard, Carroll, Baltimore, 
Baltimore City, Harford, Cecile, Kent, Queen Anne, Caroline, 
Talbot, Dorchester, Wicomico, Somerset, Worcester. 
Maryland: All counties except Allegany and Garrett Counties and 

those listed under Baltimore district. 
Birmingham: 

Alabama: Jefferson, Etowah, Bibb, Calhoun, St. Clair, Shelby, 
Tuscaloosa, Blount, Walker. 
Alabama: All counties except those listed under Birmingham district. 
California, southern: 

California: Inyo, San Luis Obispo, Orange, Santa Barbara, Kern, 
San Bernardino, Ventura, Los Angeles, Riverside, San Diego, 
Imperial. 
California, northern: All counties in California except those listed 
under California, southern district. 



Exhibit No. 2194 
Supplement to Form B Tables 

Caution. — For Convenience of the Press Only. Not to be Released Until 
Introduced in the Record. 



This table is presented to indicate the broad outlines of the formal pricing 
structure for each product analyzed and to indicate how that pricing pattern 
was altered by the changes in June, 1938. 

In general, the elimination of most inter-basing-point price differentials, the 
reduction of others and the establishment of new basing points may be expected 
to increase the amount of freight absorption and reduce the amount of so-called 
phantom freight in the distribution of products thus affected as contrasted with 
what these items would have been prior to June, 1938. 



This table is presented to indicate the extent to which the present basing-point 
system corresponds with the distribution of capacity. 



This table indicates the distribution by producing areas and by degree of 
company intergration of the total capacity for each product analyzed, together 
with the corresponding capacities of plants for which distribution of shipments 
was reported on Form B. It shows the representativeness of the sample taken. 

tables 4 AND 4a 

On the assumption -hat shipments will tend to conform to capacity overtime, 
this table indicates the extent to which relative shipments, by producing areas 
in February, 1939, may be considered characteristic. The "norm", probably 



14344 CONCENTRATION OF ECONOMIC POWER 

never attained in a dynamic situation, would be indicated by identical percentages 
of capacity and of shipments for each producing area. It ia not implied that such 
a norm would be ideal in any economic sense! 

TABLES 6 AND 6A 

In addition to the more detailed information requested for shipments during 
February, 1939 on Form B, tonnage distribution of selected products in each of 
the three years 1936-38 were requested from companies which maintained usable 
records of such shipments. These tables indicate the relative coverage of the 
sample of companies reporting (a) by defined districts and (b) by States in terms 
of~1938 capacity. 

TABLES 6 AND 7 

The purpose of these tables is to indicate the extent to which the geographic 
distribution of the product analyzed (i. e., the Form B distribution) in February, 
1939 may be considered typical of its usual distribution. The sample of companies 
and plants reporting on Form A by states differs- from that reporting on Form A 
by districts and both differ from that reporting on Form B. It should also be 
noted that by reason of the definition of consuming districts, the regions defined 
by States in Table 6 are not completely identical with those same regions defined 
by consuming districts (Form A and Form B). Greater stability in geographic 
distribution might be expected were it possible to remove these sources of vari- 
ation. 

The range of variation is indicated in Table 7. The difference between the 
maximum percentage of total shipments received by a given consuming ai'aft 
(state or district) in any one of the four periods (1936, 1937, 1938, and February, 
1939) and the minimum percentage received in any such period constitutes the 
range of distribution for the purposes of this table. 



Because of ' mited staff, it has not been possible to make all the computations 
necessary for a, complete analysis of Form B in each of the 64 consuming districts 
defined therein. For some purposes, therefore, it has been necessary to sample 
consuming districts for detailed analysis. This was done on the basis of their 
importance as measured by tonnage received. 

This table shows the percentage of total shipments accounted for by this 
selection of consuming districts on the following bases: (a) all shipments reported, 
(b) all shipments reported by plants in producing areas, (c) shipments made by 
plants in producing areas priced on the various basing points reported by them, 
(d) all shipments priced on each basing point irrespective of location 'of source. 



This, table indicates the extent to which the shipments received in each of the 
most important consuming areas were derived from those producing areas which 
could best serve them as measured by average freight absorption. In areas in 
which the lowest delivered price was computed from a basing-point at which the 
quoted lirice was at a differential above other basing points, freight absorption 
has been indicated in two ways; (a) unadjusted (that is, the difference between 
"freight added" and freight allowed), and (b) adjusted (that is, the unadjusted 
figure minus the diflFerential) . If the quoted base price be considered the true 
market price of a steel product and the criterion of a fair price for steel for both 
buyer and seller, it is obvious that so-called "freight absorption" or "phantom 
freight" (i. e., nagative freight absorption) are concepts of nominal importance 
only. Where an inter-basing-point price diflFerential exists, the unadjusted freight 
absorption is nominal whatever one's attitude toward the significance of the base 
price. 

Since each plant reported aggregates only for shipments priced on a given basing 
point into a given consuming district, it is not possible to show what proportion 
of such shipments involved an equality between freight added and freight paid, 
what proportion a freight absorption, and what proportion a phantom freight. 
The net figure, even for a given reporting plant, is an average. 



This table indicates roughly the extent to which the basing-point formula of 
pricing was observed on shipments made by each producing area into selected 



CONCENTRATION OF ECONOMIC POWER 14345 

consuming areas during the month of February, 1939. As such it is a measure 
of price competition during that period. In interpreting this table, Iiowever, 
several imponderables which may account for the results without questioning 
the dominance of the formula should be borne in mind: (1) Although February is 
a middle-of-the-quarter month and there were no announced price changes during 
the period, some shipments may have been made under long-term contracts at 
other than current prices; (2) some companies rounded off the tonnage of ship- 
ments made to given districts thereby distorting per ton computations where 
total tonnage shipped was small; (3) errors made in reporting the extras included 
in the delivered value would throw the computed base price out of line (as, of 
course, would an error in reporting freight added or delivered value). On the 
other hand, it should be remembered that these figures are averages and therefore 
conceal much wider variations in the reports of individual companies. 

Since each plant reported its total shipments priced on a given basing point 
into a given consuming district, together with aggregates for that tonnage of 
delivered value, extras, etc., it is not possible to show what percentage of the 
total shipments into a given area were priced in accordance with the formula. 

TABLE 11 

This table presents the same comparison as that made in Table 10 but on a 
more general basis. It averages all shipments irrespective of source in accordance 
with the basing point from which delivered price was computed. It is, of course, 
subject to the same limitations as Table 10. 



Sales priced on the basing point nearest the location of the mill provide a rough 
approximation to one concept of the economic market of that mill or group of 
mills. This conclusion is qualified by the following limitations. (1) It does not 
apply to mills located away from a basing point although so long as mills are 
relatively close to a basing point, it may be used as a rough approximation. (See 
Table 2 above.) (2) It does not strictly define the market for a mill with access 
to transportation facilities which are cheaper than the all-rail or arbitrary rates 
employed in computing destination prices. (3) It does not allocate areas which 
are governed by non-producing basing points or by basing points at which price 
differentials are maintained over other bases. 

With these reservations in mind, Table 12 may be considered a rough indication 
of the extent to which mills in each producing area sold in their home markets. 
Average mill nets and average freight absorption (on both an adjusted and an 
unadjusted basis) are likewise contrasted for sales on the nearest base and sales 
on ail other basing points. 

TABLE 13 

This table indicates the extent to which plants in a given area supplied the 
•requirements of customers within that same area together with the extent to 
which those customer requirements could have been supplied by such plants, 
total shipments remaining unchanged. This table has only limited significance. 
The more important reservations are the following: (1) Because of the location 
of plants within any given consuming area, its best market (in terms of distance, 
freight or mill net) will often be partially in another consuming area in preference 
to some portions of its own area. Only an adjustment of areas to suit each plant 
could eliminate this ambiguity. (2) Although a product may be properly classi- 
fied in a given category, some plants produce special sizes, sections or qualities 
which are not in direct competition with those of other mills. The natural market 
for these products is in no sense defined by the districts established in Form B. 
(3) By reason of peculiarities in the freight-rate structure and the possibilities 
of cheaper than all-rail transportation, a plant sometimes finds its most advan- 
tageous market, in terms of mill net under a delivered price system, at a distance 
from the mill. 

It is not implied that the economic market of a producing area is defined by 
the consuming area with which it is made to coincide in this table. 

TABLES 14 AND 14A 

Using the average freight absorption per ton on saleh\priced on the nearest 
basing point as a criterion of market areas governed by a given producing area, 
this table represents the allocation of market areas that would result and the 
relative participation of each producing area in those market areas. Table 14 



14346 CONCENTRATION OF ECONOMIC POWER 

is constructed on unadjusted freight absorption, Table 14a on freight absorption 
adjusted to take into account inter-basing-point price differentials. Aggregate 
shipments received from all sources by these" "governed" areas are indicated in 
the notes. 

The criterion applied in this table is admittedly arbitrary and suffers from 
defects already noted in connection with Tables 13 and 9. Since average freight 
absorption on sales priced on the nearest basing point constitutes the minimum 
freight absorption for the purpose of defining the market area of each producing 
area, many consuming districts are eliminated entirely from the category of 
markets for existing producing areas. Most notable is the exclusion of important 
consuming areas from the markets of the mills located within those areas respec- 
tively. In each instance, average freight absorption within these home areas 
was greater than the average for all sales priced on the nearest basing point. 

On the other hand there is duplication of certain consuming districts in the 
market areas of certain producing areas. This phenomenon results from the 
following circumstances. (1) Consuming districts are in some instances quite 
large as measured in freight rates from any given outside point to destinations 
within that area. (2) Reported shipments to each area are averages of each 
plant's total shipments to that area priced on a given basing point. (3) Special 
sizes, sections or qualities produced by a single mill may be priced only on the 
basing point nearest to that mill irrespective of destination. Thus shipments 
may be made from Pittsburgh or Bethlehem into Chicago or Birmingham without 
any freight absorption. 

TABLE 15 

This table is similar to Table 14 except that the criterion of market area for 
each producing area is the average mill net per ton received on all shipments 
priced on the nearest basing point. Aside from defects peculiar to the concept 
of freight absorption, it is subject to the same reservations as those noted for the 
former table; notably, duplication of consuming districts in the market areas of 
some producing areas; and elimination of important cortsuming areas as marketing 
areas for plants located in these districts respectively. 

TABLES 16 AND 16A 

As a measure of one concept of the economic market areas of given producing 
areas, this table is less subject to ambiguities than those already described. The 
criterion here applied is the lowest actual freight allowed on shipments from any 
producing area into a given consuming area. In this sense it is an approximation 
to a market delineation in terms of actual freight rates from each producing area. 
It fails to achieve this ideal to the extent that the boundaries of consuming dis- 
tricts do not coincide with the lowest freight rates from any given producing 
area. Parts of a consuming district, therefore, may be served more economically 
from a given producing area although the greater portion of that district is more 
economically supplied from a second producing area even though at an average 
freight allowance higher than that reported on actual shipments from the former 
producing area. Nevertheless, in this table, the entire consuming district would 
have .to be allocated to the first area. This criterion has been followed strictly 
although flagrant instances of probably erroneous allocations have been noted. 
The actual allocation of consuming districts on this basis is shown in Table 16a. 

Percentages indicate the participation of each producing area in the total 
business of its economic market so defined, the extent to which each producing 
area concentrated its business within that market, and the extent to which it 
could have done so, other things equal. The latter percentage assumes that the 
shipments actually received within the "governed" consuming district were of a 
type and specification which the producing area was capable of rolling and in a 
position to roll economically to consumer's requirements with regard to delivery 
dates. 

TABLE 17 

This ti We lists all instances in which shipments into consuming districts were 
reported i is priced on a basing point which could not have governed any portion 
of that diVitrict on the basis of relative freight rates available to the Department 
of Justice. There are several possible explanations of these exceptional instances: 

1. Errors in reporting might arise in several ways: 

(a) Although the data shown may be accurate for the shipments involved, 
they may have been erroneously reported under the wrong basing point. 



CONCENTRATION OF ECONOMIC POWER 



14347 



(b) Actual shipments may have been made out of mill warehouses and freight 
items computed from that source although the basing point indicated was that 
governing the original shipment to warehouse. 

(c) For products subject to fabrication-in-transit, shipment may have been 
classified by ultimate destination although all other data were reported as if it 
were a shipment to fabricator's shop. 

(d) Delivered value may have been accepted as the going price and, without 
checking the freight rate fromi the governing base, freight from the basing point 
nearest the mill may have been reported as freight added to arrive at delivered 
price. 

2. Without error in reporting, the shipment may have represented special 
specifications manufactured only by a given mill and priced by that mill on its 
own nearest basing point, irrespective of destination. Were this the explanation, 
the delivered value would be lil<ely to exceed that on shipments from the govern- 
ing base while freight absorption would be small or absent. Since such special 
■products are not immune from price competition, however, this would not neces- 
sarily be true for all such shipments. 



This table lists all instances in which the average computed base price less 
extras exceeded the quoted base price at the governing basing point. Since any 
premiums included in the delivered value should have been reported as extras, 
this result would be expected only in case (1) extras actually included in the 
delivered value, were not all reported, (2) tonnages shipped were small and were 
erroneously reported in rounded figures, or (3) errors were made in reporting the 
freight added or the delivered value. 



Exhibit No. 2195 
Form B Summary — February 1939 



Tons shipped ' 

Delivered value per ton 

Tons priced on ba.sing 
points without pub- 
lished price differen- 
tial. _ __ 

Calculated base price on 
sales on basing points 
without differentials. . 

Mill net less extras per 
ton 

Kxtras per ton 

Extras as percent of de- 
livered value 

Freight absorption per 
ton (unadjusted) 

Freight absorption per 
ton (adjusted)' 

Freight absorption as 
percent of delivered 
value (unadjusted) 

Freight absorption as 
percent of delivered 
value (adjasted)' 

Freight paid or allowed 
per ton 

Freight added per ton.. 



Sheet 
and 
Tin 
Plate 
Bars" 



8,198 
$30. 36 



8,198 



$29.38 



$29.06 
$0.05 

0.2% 

$0.32 

$0.32 

1.1% 

1.1% 

$1.25 
$.93 



Wire 
Rodsi 



27, 141 
$44. 96 



21,276 

$39. 37 

$38. 48 
$2.56 

5.7% 

$1.82 

$1. 31 

4.0% 

2.9% 

$3.92 
$2.10 



Plates 



96, 443 
$49.25 



85, 897 

$41. 30 

$39. 58 
$4.02 

8.2% 

^2.57 

$1.54 

5.2% 

3.1% 

$5.64 
$3.07 



Heavv 
Struc- 
tural 
Shapes 



79, 921 

$47. 57 



73, 672 

$40. 32 

$39. 26 
$1.89 

4.0% 

$1.83 

$1.12 

3.8% 

2.4% 

$6.43 
$4.59 



Hot 
RoHed 
Sheets 



190,910 

.$51.68 



148,410 

$38. 78 

$37. 82 
$9.70 

18. 8% 

$1.69 

$1.21 

3.3% 

2.3% 

$4.16 
$2.47 



Hot 
Rolled 
Strip 



67, 896 

$48. 58 



$39. 2i 



$38 55 
.$6.04 



12.4% 
$1.34 



1.9% 



$3.98 
$2.65 



Cold 
Rolled 
Sheets 



82, 919 
$62. 42 



50, 766 

$58. 97 

$57. 47 
$0. 45 

0.7% 

$2.59 

$1.80 

4.2% 

2.9% 

$4. .SO 
$1.91 



Cold 
Rolled 
Strip 



17,728 
$93, 64 



9,301 

$60. 18 

$60. 44 
$27. 79 

29. 7% 

$1.34 

$0.20 

1.4% 

0.3% 

$5.42 
$4.08 



Tin 
Plate 

(95# 
box) 



Plain 

Wire 

•Drawn 



29,036 
$102.46 



28,552 

$100. 36 

$101.37 
<-$4. 02 

-3.9% 

-$1.06 

-$1.09 

-1.0% 

-1.1% 

$.5. 11 
.$6. 17 



17, 166 

$57. 98 



(') 

I $50. 54 

$49. 08 
$3.96 

6.8% 

$1.47 

(') 

2.5% 

(}) 

$4.95 
$3, 48 



' Sheet and Tin Plate Bars and Wire Rods are shown in gross tons; all others are in net tons. 

' Adjustments for basing point price differentials were not made for this product. Prices are not quoted 
in the Iron Age for Pacific Ports, Duluth and Detroit. (146 tons were priced on Duluth, 86 tons on Pacific 
Ports and i to** on Detroit.) 

» Adjusted for basing point price differentials over Pittsburgh price. 

' Negative extras on tin plate are in part accounted for by the fact that only 95 Id. base boxes were re- 
ported. Such sales carry a deduction from the standard 100 lb. base box, as tin plate extras are quoted 
by the base box and not by a unit of weight. 

Source: Compiled from the Temporary National Economic Committee questionnaire Form B, February 



124491-41— pt. 27- 



-15 



14348 



CONCENTRATION OP ECONOMIC POWER 
Exhibit No. 2196 

Published Base Prices, February 1939 
[Prices per net ton except Sheet Bars and Wire Rods] 





Product 


Basing point 


Sheet 
Bars 
(Per 
gross 
ton) 


Wire 
Rods' 
(Per 
gross 
ton) 


Plates 


Heavy 
Struc- 
tural 
Shapes 


Hot 
Rolled 
Sheets 


Hot 
Rolled 
Strips 


Cold 
Rolled 
Sheets 


Cold 
Rolled 
Strip 


Tin 
Plates 


Plain 
Drawn 
Wire* 


Pittsburgh, Pennsylvania. -- 
Chicago, Illinois 


34.00 
34.00 


43.00 
43.00 


42.00 
42.00 
42.00 
42.00 
42.00 
42.00 


42.00 
42.00 
42.00 

""42.00 
42.00 


43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
43.00 


43.00 
43.00 
43.00 
43.00 
43.00 
43.00 


64.00 
64.00 
64.00 
64.00 
64.00 


59.00 
61.00 

"59.' 66 
59.00 


100.00 
100.00 
100.00 


52.00 
52.00 


Cleveland, Ohio 


34.00 
34.00 


43.00 
"43." 56 


52.00 






52.00 


Buffalo, New York 


34.00 
34.00 


64.00 








Snarrows Point, Maryland 




42.00 








Middletown, Ohio 


43.00 


64.00 














42.00 
42.00 




































42.00 


















45.00 










63.00 








34.00 
















San Francisco, California - 


52.00 


















Granite City, Illinois 








45.00 




66.00 




102.00 




Gulf Ports 






49.00 
52.00 


49.00 
54.00 




Pacific Ports 






53.00 
45.00 


"'45.' 65 


76.00 
66.00 








Detroit, Michigan' - 






61.00 





















' Rods over 9/32 In. or 47/64 in., inclusive, $5.00 a ton over base. 
' A ^delivered price (not a basing point). 
' Sold in base boxes (100 lb. base box used as the standard). 
< Bright Wire to the manufacturing trade in carload lots. 

Source: The Iron Age. 



Exhibit No. 2197 

Table 1. — Heavy Structural Shapes: Basing Points and Basing Point Prices, 
May 19S8 and February 1939 

[Prices per net ton] 





May 1938 


February 1939 


Basing point 


Base price 


Differential 
over Pitts- 
burgh 


Base price 


Differential 
over Pitts- 
burgh 


Pittsburgh 


$45. 00 
46.00 
47.00 
47.00 
48.00 
53.00 
56.00 
49.00 


$0.00 
1.00 
2.00 
2.00 
3.00 
8.00 

11.00 
4.00 


$42.00 
42.00 
42.00 
42.00 
42.00 
49.00 
54.00 
(») 


$0.00 


Chicago-Gary i. _.. 


0.00 


Buffalo- 


COO 


Bethlehem ... 


0.00 


Birmingham . . 


0.00 


Gulf Ports 


7.00 


Pacific Ports 


12.00 


Cleveland 









' Gary not listed as a basing point in May 1938 issues of the Iron Age. 
' Not listed as a basing point by February 1939 issues of the Iron Age. 

Source: The Iron Age (all issues in the months listed). 



CONCENTRATION OF ECONOMIC POWER 



14349 



Table 2. — Heavy Strvctural Shapes: Distribution of Capacity by Distance from the 

Nearest Basing Point 



Distance from Nearest Basing Point (air miles)' 



Capacity (1,000 
gross tons) 2 



Percent of Total 
Capacity 



Total United States 

0-25 — 

26-50 

Sl-100 

Over 100 



3, 667. 4 



100.0 




' Includes all basing points listed ia the Iron Age after the change in basing points in June 1938. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the Iron 
Age. (The directory did not list Carnegie-Illinois Steel Corporation capacity separately by product for each 
plant. Thus an estimate was required for capacity at Pencoyd, Pennsylvania. This capacity was esti- 
.mated at 140,000 gross tons.) 

' Includes 68,700 gross tons on the Pacific Coast. 

Table 3. — Heavy Structural Shapes: Distribution of Total Capacity in the United 
States and Form B Sampled Capacity by Producing Areas 



Producing area ' 



Total United States 

Integrated* 

Semi-integrated 

Non-integrated 

Eastern Pennsylvania and Philadelphia. 

Pittsburgh 

Chicago 

Buflalo. 

North Ohio River 

St. Louis 

Birmingham 

Colorado,. 

Areas not in the sample: 

YoungstowD 

California (northern and southern)... 
Washington -. 



Total U. S. Capacity » 



(1,000 gross 
tons) 



3667.4 



3517. 4 
150.0 



» 1, 090. 
1,018.7 
927.6 
215.0 
113.0 
110.0 
-91.0 
20.0 

13.5 
46.7 
22.0 



Percent of 
total 



95.9 
4.1 



29.7 
27.8 
25.3 
5.8 
3.1 
3.0 
2.5 
0.5 

0.4 
1.3 
0.6 



Estimated Capacity 
Sampled 



(1,000 gross 
tons) 



2782. 
150. 



950.0 
550. 
783.0 
215.0 
113.0 

no. 

91.0 
20.0 



Percent of 
total capac- 
ity sampled 



79.9 



79.1 
100.0 



87.2 
63.8 
84.4 
100.0 
100.0 
100.0 
100.0 
100.0 



' Producing areas conform to Form B consuming areas. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 
' Of the capacity sarqpled 94.9 percent represented integrated companies and 5.1 percent semi-integrated 
companies. 

* Degree of integration here used is company integration (not plant). 

• Includes 140,000 gross tons estimated capacity at Pencoyd, Pennsylvania, (not listed separately in 
the directory) 

« Estimated capacity at Munhall, Pennsylvania, (not listed separately in the Directory) 

Table 4. — Heavy Structural Shapes: Estimated Sampled Capacity by Producing 
Area and Shipments by Producing Area 





Capacity Sampled ' 


February 1939 Shipments ' 


Producing area » 


Tonnage 

(1 ,000 gross 

tons) 


Percent of 
sampled 
capacity 


Tonnage 
(Net tons) 


Percent of 

total 
shipments 


Total 


2, 932. n 


100.0 


79, 921 


100.0 






Eastern Pennsylvania and Philadelphia. ! 

Chicago . 


950.0 
783.0 
650.0 
215.0 
113.0 
110.0 
91.0 


32.4 
26.7 
22.2 
7.3 
3.8 
3.8 
SI 


22,957 
20,355 
45, 437 
10,260 
2,550 
1,151 
4,240 
2,971 


28.3 
25.5 


Pittsburgh 


19.3 


Bufialo.. . 


12.8 


North Ohio River 


3.2 


St. Louis . 


1.4 


Birmingham 


5.3 


Colorado 


20 n. 7 


3.7 











' Producing areas conform to Form B consuming areas. 

' Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. 

• Compiled from the Temporary National Economic Committee qdcstionnairc Form B, Feb. 1939. 

♦ Estimated capacity at Munhall, Pa. (not listed separately in the Directory). 



14350 



CONCENTRATION OF ECONOMIC POWER 



Table 5. — Heavy Structural Shapes: Distribution of Total Capacity and Form A 
Sampled Capacity by Producing Area (District Sample) 1938 



Producing Area ' 



Total United States 

Eastern Pennsylvania and Philadelphia 

Pittsburgh 

Chicago - — 

Buffalo - 

North Ohio River - -- 

St. Louis... 

Birmingham 

California' 

Washington -.. 

Colorado -- 

Youngstown ---. 



Total U. S. 
Capacity ' 



Tonnage 
(1,000 a. T.) 



3, 667. 4 



* 1,090.0 

1,018.7 

927.5 

215.0 

113.0 

110.0 

91.0 

46.7 

22.0 

20.0 

13.5 



Capacity Sampled 



Tonnage 
(1,000 a. T.) 



2, 969. 4 



800.0 

1,018.7 

742.5 

215.0 



91.0 
46.7 
22.0 
20.0 
•13.5 



Percent 

Sampled by 

Producing 

Area 



81.0 



73.4 
100.0 

80.1 
100.0 



100.0 
100.0 
100.0 
100.0 
100.0 



' Producing areas conform to Form B Consuming Areas. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. 

' Includes Northern and Southern California. 

< Includes 140,000 Q. T. estimated capacity at Pencoyd, Pennsylvania. 

' Company sampled but no shipments were reported for this product. 



Table 5A. — Heavy Structural Shapes: Distribution of Total Capacity and Form A 
Sampled Capacity by States (State Sample) 19SS 





Total U. S. 

Capacity 

(1,000 gross 

tons) ' 


Capacity Sampled 


state 


(1,000 gross 
tons) 


Percent Sam- 
pied by state 


Total United States 


3, 667. 4 


3, 082. 4 


84.0 






Pennsylvania ... .... 


2, 018. 7 
628.0 
299.5 
215.0 
113.0 
110.0 
91.0 
46.7 
22.0 
20.0 
13.5 


1, 818. 7 
613.0 
129.5 
215.0 

> 113. 


86.2 




97.6 




43.2 




100.0 


West Virginia 


100.0 






Alabama . . 


91.0 
46.7 
22.0 
20.0 
13.5 


100.0 


California - . . . . ... ..-.. 


100.0 


Washington 


100.0 


Colorado 


100.0 


Ohio '... 


100.0 







' Iron and Steel Works Directory of the United States and Canada, 1938r 

• Report is not included in calculations for tables 6 & 7. 

' Company was sampled but no shipments were reported for this product. 



CONCENTRATION OF ECONOMIC POWER 



14351 



Table 6.- 



-Heavy Structural Shapes: Relative Stability of Tonnage Distribution 
by Consuming Region, 1936, 1937, 1938 and February 1939 



Regiop 


Form A distribution by states 


Form A distribution by con- 
suming district 


Form B 
distribu- 
tion 




1936 


1937 


1938 


1936 


1937 


1938 


Feb. 1939 


All regions (net tons) 


1,661,615 


1, 853, 461 


956, 214 


1,727,984 


1, 941, 706 


984, 428 


79, 921 


Percent 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 






North Eastern' 


35.7 
34.2 
6.0 
6.2 
10.7 
7.2 


35.3 
35.3 
6.3 
6.3 
11.4 
6.4 


37.4 
27.0 

5.9 
10.1 
13.3 

6.3 


34,0 
36.7 
6.3 
5.9 
10.3 
6.8 


32.5 
38.9 
5.6 
6.1 
10.9 
6.0 


34.9 
30.0 
6.3 
9.9 
12.8 
6.1 


35.0 


North Central ' 


30.8 


West Centrals... 


8.5 


South Eastern * _ 


7.4 


South & Southwestern '.. 
Mountain & Western '... 


12.9 
6.4 



' Includes following states and consuming districts: Maine, N. H., Vt., Mass., R. I., Conn., N. Y., N. J., 
Pa., Metropolitan N. Y., Eastern & Central N. Y., Buffalo, Phila., Eastern Pa., Pittsburgh. 

' Includes following states and consuming districts: Ohio, Ind., III., Mich., Wis., Minn., Cleve., Youngs- 
town, N. Ohio River, Cant. -Mans., S. Ohio River, Ohio — other, Chicago, Ill.-other, Detroit, Mich, other. 

' Includes following states and consuming districts: Iowa, Mo., N. Dak., S. Dak., Nebr., Kans., St. Louis, 
Kans. City, Mo.-other. 

< Includes following states and consuming districts: Md., D. C, Va., W. Va., N. C, S. C, Ga., Fla., 
Baltimore, Md. -other, Delaware. 

» Includes following states and consuming districts: Ky., Tenn., Ala., Miss., Ark., La., Okla., Tex., 
Birmingham, Ala.-other. 

•Includes following states and consuming districts: Mont., Idaho, Wyo., Col., N. Mex., Ariz., Utah, 
Nev., Wash., Ore., California, Northern California, Southern California. 



Note: Each region is defined by the areas listed, eliminating duplications, 
and consuming districts have been italicized. 



The most important states 



Table 7. — Heavy Structural Shapes: Range of Variation of Tonnage Distribution 
in Consuming States and Consuming Districts, 1936, 1937, 1938 and February 
1939 

[Range of distribution of percentages by areas] 



Range 


Form A: 1936-1938 inclusive 


Forms A &' B: 
1936-1938 Inclu- 
sive and Feb- 
ruary 1939 


By 49 states: ' 

Number of 

states 


By 64 districts: 

Number of 

districts 


By 64 districts: 

Number of 

districts 


Over 5.0 






2 
6 
9 
10 
36 


2.1-5.0 . 


2 
5 
6 
36 


6 

2 

5 

51 


1.1-2.0 _ 


0.6-1.0 


0.5 or under. 


Total 


49 


64 


64 



' Includes the District of Columbia. 

Source: Compiled from Temporary National Economic Committee Forms A and B. 



14352 CONCENTRATION OF ECONOMIC POWER 

Table 8.— Heavy Structural Shapes: Selected Consuming Areas for Detailed 

Analysis, February 1939 



Producing Area ' 


Basing Point 2 


All Con- 
suming 
Areas (net 
tons re- 
ceived) 


Selected 
Consum- 
ing Areas 
(net tons 
received ') 


Percent 

of all 
Consum- 
ing Areas 
Receipts 




All basing points 

All basing points. 

Pittsburgh. 

Chicago-Gary. 

Birmingham 

Buffalo.. 

Gulf Ports 

All basing points 

Chicago-Gary 

Birmingham 

All basing points 

Pittsburgh 


79,921 


52, 467 


65.6 








20,355 


12, 683 


62.2 








472 

18, 157 

83 

207 

1,173 


439 

12, 209 

15 

207 

979 


93.0 
67.2 
18.1 
100.0 
83.5 




1,151 


823 


71.5 








1,083 
68 


801 
22 


74.0 
32.4 


Pittsburgh 


15, 437 


9.832 


63.7 








5,499 

2,524 

51 

959 
4,738 

414 


3,531 

2,270 

9 

889 
2,730 

403 


64.2 




Chicago-Gary 

Birmingham 

Buffalo- < 


89.9 
17.3 
92.7 




Bethlehem 


57.6 




Gulf Ports 


97.3 




All basing points... 

Pfittsburgh.. . 




Buffalo . . - . — - 


10, 260 


6,555 


63.0 








2,693 

4,764 

^,084 

171 

282 


1,195 

3,084 

1,852 

142 

282 


44.4 




Chicago-Gary 

Buffalo . 


64.7 
88.9 




Bethlehem . . 


83.0 




Gulf Ports 


100.0 




All basing points 

Pittsburgh. 




Eastern Pennsylvania and Philadelphia 


22,957 


17, 081 


74.4 




675 
400 
299 
449 
20,244 
427 


212 
194 
1 
349 
15, 765 
427 


31.4 




Chicago-Gary 

Birmingham 

Buffalo. 


48.5 
0.3 
77.7 




Bethlehem 


77.9 




Gulf Ports 


100.0 




All basing points... 

Chicago-Gary. 

Birmingham 

Gulf Ports. 






4,240 


1,515 


35.7 








96 

3,337 

424 


35 

1,056 

424 


36.5 
31.6 
100.0 




All basing points 

Birmingham 

Gulf Ports 




Colorado 


2,971 


1,175 


39.5 








199 
976 


199 
976 


100.0 
100.0 




All basing points 

Pittsburgh. -.. 




North Ohio River 


2,550 


1,770 


69.4 








2,072 
93 
211 
125 


1,405 
56 
199 
110 


67.8 




Chicago-Gary 

Buffalo. 


60.2 
94.3 




Bethlehem 


88.0 




Pittsburgh 




All producing areas 


11,411 


6,782 


59.4 




Chicago-Gary.. 

Birmingham 

Buffalo 

Bethlehem... _. 

Gulf Ports... 






28, 753 
4,213 
3,910 

25, 385 
3,696 
2,553 


18,649 
1,302 
3,496 

18, 747 

3,491 




64.9 
30.9 
89.4 
73.9 
94.5 




Pacific Points 


0.0 



' Producing areas conform to Form B consuming areas. 

' Lists only those basing points reported as governing the selected consuming areas. 

' Consuming areas receiving 2% or more of total shipments. Areas selected were: Metropolitan New 
York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, Ohio— other, Indiana — other, Chicago, 
Illinois — other, Detroit, Iowa, St. Louis, Birmingham, Texas. 

Source: Compiled from Temporary National Economic Committee questionnaire Form B for February 
1939. 



CONCENTRATION OF ECONOMIC POWER 



14353 



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S^£S-°-'3cae3«M(a9'd'?9 
S 3 ce cs.tioxixixi aj3 ^.h-^ 



Freight 
absorp- 
tion on 
all ship- 
ments to 
area 


COCOCO»0(NCO-^— 'irt— <»oasc<)(Nr^ 
COTf-<l^co»0»0-^^COtOMC^^-*0> 


cmS 

CO -I 


o-H<=o-io-HMod-<odo>2J. 


"-^ 


Total 
net tons 
shipped 
to con- 
suming 

area 


r^c^oor-^r^^cocccor-fC^icoooQO 

C^00Si)"C^>00JC0t-.f-^O(N«0C 
C-)COCO^00COi?lcOCO(NC<t^cCt^t~ 


II 


^ TjJ"-^jr-^ci"co 00 ^ ciof^^ CO CO 


S3g 






«5 

.Q-O 
C3 CO 

"3 "3 



2, 



|S.2;2g§£«KjaS| 

5p4WPH050wQ5comh^ 



a a 

O <B 

cj-O 

j3 a 
o o 



BS 



^■§:: -9 


2S| b 

bis s 




J2tj CO 


«J3 — .^ ft 


^.£f2 » W3 








£3 -ij> CI to CO 
St?S3J3 


pm 

owe 

th 

otj 

ya 


otal sh 
gthel 
ere less 
ted is r 
rned b 


^1 ^ § > 


sSg°a 


£-c££^ 


2co « CO b 


S£."jMa 


ntor 
hat a 
in th 
umin 
is in 




o~a § a 


ftgiSa,^ 


fJ'^S-o 


receivin 
oducing 
made b 
Id serve 
er select 


en b ,„ = J3 


§ 0.^ o"S 


£Ma'S° 


trgiMi 


.as.S'SaS 


a>^.2='& 



o.d 0.2 05 CO 

- " " a" .M ■ 



14354 



CONCENTRATION OF ECONOMIC POWER 



Table 10. — Heavy Structural Shqpes: Comparison of Computed Base Prices with 
Published Base Price in Selected Areas, February 1939 





Reported bas- 
ing points 


Pub- 
lished 

base 
price ' 


Computed base prices on shipments from producing areas • 


Selected Consum- 
ing Areas ' 


Eastern 
Penn- 
sylva- 
nia and 
Phila- 
delphia 


Chi- 
cago 


Pitts- 
burgh 


Buf- 
falo 


Bir- 
ming- 
ham 


Colo- 
rado 


North 

Ohio 

River 


St. 
Louis 


Metropolitan New 
York. 


Bethlehem 

Chicago-Gary. 

Pittsburgh 

Pittsburgh 

Buffalo. 

Bethlehem 

Bethlehem 

Bethlehem..^. 

Buffalo 

Pittsburgh 

Gulf Ports 

Chicago-Gary. 
Birmingham.. 

Bethlehem 

Chicago-Gary. 

Pittsburgh 

Pittsburgh 

Chicago-Gary. 
Chicago-Gary. 

Buflalo 

Chicago-Gary. 

Pittsburgh 

Chicago-Gary. 

Pittsburgh 

Buffalo 

Bethlehem 

Chicago-Gary. 
Birmingham. - 

Pittsburgh 

Chicago-Gary. 


42.0 

42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
49.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 


40.30 

43.45 
•43. 50 
42.02 


39.86 


41.53 
42.09 


40.73 
40.89 






40.22 






















43.25 


39.08 


40.19 
42.07 






46.20 
42.18 














41.25 
41. 30 
39.84 
•37. 50 

""'48.03' 
41.40 












Philadelphia.. 

Eastern Pennsyl- 




40.82 
41.92 


40.62 
41.35 






40.48 




















48.'94' 
41.40 
41.73 


44.16 

48.98 












Texas 


49.26 


46.70 
•40. 50 
45.26 


43.88 














42.11 




40.85 




38.41 




•42. 75 
43.43 
41.14 

•50. 50 
40.20 
40.17 
41.45 
42.56 
43.08 
43.15 






41.09 


42 72 


39.63 








36.08 
















40.69 I 41.97 
40.89 41.06 
33. 95 36. 05 


41.54 
41.72 
40.27 
40.80 
41.04 






40.63 
37.82 






















39.96 
39. SO 

46.62" 


39.80 
40.35 
40.68 
42.91 
42.57 
41.29 






41.82 




Iowa 




















38.94 


41.71 




37.66 


39.00 


Rnffnln 






41.32 
42.21 




41.05 






40.30 












Illinois, all other 


40.64 


42.04 


42.31 








42.30 


Birmingham. 


•65.00 


38.13 












35.04 












40.20 


33.38 



























I Consuming areas receiving 2 percent or more of the total shipment''. 
' As listed by all February 1939 issues of the Iron Age. 
' Producing areas conform to Form B Consuming Areas, February 1939. 
•Represents shipments of less than 5 net tons. 

Source: Compiled from Temporary National Ecconomic Committee Form B Questionnaire, February 
1939. 



Table 11.- 



-Heavy Structural Shapes: Published Base Prices and Calculated Form, 
B Base Prices By Basing Points, February 1939 



Basing. Point 


I'ublished 
base 
price' 


Calculated 
ba.se 
price' 


Basing Point 


Published 
base 
price' 


Calculated 
base 
price' 


Pittsburgh 


Per net ton 
$42.00 
42.00 
42.00 
42.00 


Per net ton 

$39. 50 

40.09 

40.92 

40.78 


Birmingham 


Per net '■m 

$42. 00 

49,00 

^••.00 


Per net ton 
$40.47 


Chicago-Gary... 


Gulf Ports 


47.30 


Buffalo.. 


Pacific Pi^'ts 


54.38 


Bethlehem 











' Source: AU February '939 issues of the Iron Age. 

' Computed from Temporary National Economic ComUiiitee Form B questionnaire, February 1939. 



CONCENTRATION OF ECONOMIC POWER 



14355 



05 






!i) 



CO 



(i:- 



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o 



«J t^ - to 6«~ 

a oii <u 5 e 
o 0-° n 



q5 tH M 

nil 



"rtffl.S-g 

a 9 S-a 



OX] <a 2 ( 



»0 CO 
lOOO 



CD -H COCO t^i 



Sb-C^C^'-'OiCOOOC 
"OeDOlCOCCoOCJC 



ONOOCOiOCC^COOC 



w ^ CO 






J W)^ 



H S U — « «"*:» 
*-S*j.jQ 03 J2 o 



a) o » a a 



5 3" He 



'I' 2 
n g 



■a'o 



«.5H 



«o 



pC0C0C0CS»CJi0O»OC0^M'i-t.-- 



oo^ocoMcoc*co^c^ocic^ 



S S 3 ;2 

0C5 00 00 1^ 

CO eo CO CO 



OS rf 



Ol 00 ^H 



C^ 00 »o 



oo 00 r-- Ci CO o 

CO CO CO CO CO ^ 



OO 00 Oi 






t^ <-( .~4 



00 Oi C^J 



•-• Ol ^ 



CO CO lO 



O 00 «o 



S S K 



53 S ^ 2 ■* 



a o 



E? & 



PQ O Oh CQ pq O O 



O 2 






■o 


e 


!i< 


o 






. c. 








S£ 


e 

o 




a 


!«',S 





O 3 



aa 



o -a .-ri a .i: o ^ 
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14356 



CONCENTRATION OF ECONOMIC POWER 



Table 13. 



-Heavy Structural Shapes: Shipments Received Compared to Shipments 
Made by Producing Areas, February 1939 



Producing area ' 



All producing areas 

Pittsburgh, North Ohio River, Youngs- 
town. 

Chicago 

St. Louis 

Eastern Pennsylvania, Philadelphia, Met- 
ropolitan New York 

Birmingham, Alabama — other 

Buffalo. 

Colorado 



Total ship- 
ments made 
by plants 
in produc- 
ing area 



17,987 

20, 355 

1,157 

23,337 
3,860 

10,260 
2.971 



Shipments received in producing areas 



Total re- 
ceived in 
producing 
areas 



39, 335 



8,333 
1,702 

18, 702 

2,247 

1,682 

578 



Received 

from plants 

in identical 

area 



29, 497 



5,038 

5,660 

434 

15, 714 

1,345 

1,014 

292 



Percent re- 
ceived from 
plants in 
identical 
Ilea 



75.0 



75.5 
67.9 
25.5 

84.0 
59.9 
60.3 
50.6 



Total re- 
ceived in 
area as per- 
cent of total 
shipments 
from the 
area 

49.2 



37.1 
40.9 
147.9 

80.1 
58.2 



1 Producing areas conform to Form B consuming artas. When major consuming areas are contiguous to 
producing areas they also have been included as indicated in the stub. 

Source: CompUed from Temporary National Economic Committee questionnaire Form B for February 
1939. 

Table 14:.— Heavy Structural Shapes: Analysis of the Market Areas of Grouped 
Plants as Measured by the Freight Absorption on Shipments Priced on the Nearest 
Basing Point February 1939 





Nearest 
basing 
point 


Total ship- 
ments 


Shipments 
priced on 
nearest bas- 


Shipments to all areas in which 
freight absorption is: 






ing point 


Equal to or 
less than 
standard ' 


Greater than 
standard ' 


Producing areas ' 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 




Net 
tons 


Freight 
absorp- 
tion 
per 
net 
ton 


Net 
tons 


Per- 
cent 

of 
total 
ship- 
ments 


Freight 
absorp- 
tion 
per 
net 
ton 


Eastern Penn- 
sylvania, Phil- 
adelphia. 

Chicago 


Bethlehem 

Chicago-Gary 
Pittsburgh... 

Buffalo 

Birmingham _ 
Chicago- Oary 
Chicago-Qary- 


22,957 

20, 355 
17,987 

10,260 
4,240 
2.971 
1,151 


0.70 

1.06 
3.22 

3.25 

3.05 

2.41 

-2.31 


20,244 

18, 157 
7,571 

2,084 
3,337 
1,636 
1,083 


-0.01 

0.19 
0.40 

0.01 

.91 

-2.48 

-2.37 


5,718 

8,472 
2,873 

1,014 

1,543 

523 

446 


2-0.33 

3 0.01 

<0. 11 

J-0.04 

«0. 20 

'-10.74 

8-4.38 


17,239 

11,883 
15, 114 

9,246 

2,697 

2,448 

705 


75.1 

58.4 
84.0 

90.1 
63.6 
82.4 
61.3 


1.05 
1.82 


Pittsburgh, 
Youngstown, 
North Ohio 
River. 

Buffalo 


3.81 
3.61 


Birmingham 

Colorado 


4.67 
5.22 


St. Louis, 


-0.10 






Total . 


79,921 


1.83 


54,112 


0.05 


20,589 


-0.43 


59,332 


74.2 


2.63 













' Standard freight absorption for each producing area is the freight absorption on sales on the nearest 
basing point. 

> Comprises shipments to: Philadlephia, Delaware, Baltimore, District of Columbia, Virginia, (aggregate 
tons received in areas listed — 7,185) 

3 Comprises shipments to: South Ohio River, Illinois-other, Detroit, Michigan-other, Wisconsin, Iowa, 
St. Louis, Kansas City, North Dakota, South Dakota, Nebraska, Kansas, Kentucky, Birmingham, 
Alabama-other, Oklahoma, Montana, Idaho, Colorado, Utah, Nevada, (aggregate tons received in areas 
listed— 17,080) 

< Comprises shipments to: Cleveland, North Ohio River, Canton-Mansfield, Ohio-other, West Virginia, 
Kentucky, Birmingham, Youngstown, Detroit, (aggregate tons received in areas listed — 10,419) 

' Comprises shipments to: Buffalo only, (aggregate tons received in area listed — 1,682) 

« Comprises shipments to: Kentucky, Tennessee, Birmingham, (aggregate tons received in areas listed— 
2,987) 

' Comprises shipments to: Montana, Wyoming, Colorado, New Mexico, Utah, (aggregate tons received 
in areas hsted— 913) 

' Comprises shipments to: St. Louis, Missouri-other, (aggregate tons received in areas listed — 2,210) 

» Producing areas indicated are the same as Form B consuming areas. 

Source: Compiled from the Temporary National Economic Committee questionnaire Form B for Feb- 
ruary 1939. 



CHDNCENTRATION OF ECONOMIC POWER 



14357 



Table 14 A. — Heavy Structural Shapes: Analysis of the Market Areas of Grouped 
Plants as Measured by the Freight Absorption on Shipments Priced on the Nearest 
Basing Point {Adjusted for Basing Point Price Differentials) February 1989 





Nearest 
basing 
point 


Total ship- . 
ments 


Shipments 

priced on 

nearest bas- 


Shipments to all areas in which 
freight absorption is: 






ing point 


Equal to or 
less than 
standard i 


Greater than 
standard • 


Producing areas » 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 




Net 
tons 


Freight 
absorp- 
tion 


Net 
tons 


Per- 
cent 
of 
total 
ship- 
ments 


Freight 
absorp- 
tion 


Eastern Penn- 
sylvania, Phil- 
adelphia. 

Chicago 

P ittsburgh, 
Youngstown, 
N. Ohio River. 

Buffalo 


Bethlehem 

Chicago-Gary 
Pittsburgh.... 

Buffalo 

Birmingham.. 
Chieago-Qary 
Chicago-Gary- 


22, 957 

20, 355 
17, 987 

10,260 
4,240 
2,971 
1,151 

79, 921 


0.33 

0.63 
2.22 

2.90 

1.43 

-0.54 

-2.31 

1.12 


20,244 

18, 157 
7,571 

2,084 
3,337 
1,636 
1,083 
54,112 


-0.01 

0.19 
0.40 

0.01 

.91 

-2.48 

-2.37 

0.05 


5,925 

9,061 
2,873 

1,014 

1,543 

638 

446 


J-.32 

3 0.01 

<0. 11 

s-0. 04 

8 0.20 

7-10.21 

8 -4.38 


17, 032 

11,294 
15, 114 

9,246 

2,697 

2,333 

705 


74.2 

55.5 
84.0 

90.1 
63.6 
78.5 


.56 

.96 
2.62 

3 22 


Birmingham 

Colorado 


2.13 
■> 11 


St. Louis..- 


61.31 -0.10 


All producing 


21,500' —0.4.') 


58, 421i 73. l! 1 71 


areas. 















> standard freight absorption for each producing area is the freight absorption on sales on the nearest 
basing point. 

J Comprises shipments to:— Philadelphia, Delaware, Baltimore, D. C, Virginia, Southern California, 
(aggregate tons received in areas listed — 8201) 

3 Comprises shipments to:— South Ohio River, Illinois, other, Detroit, Michigan, other, Wisconsin, 
Iowa, St. Louis, Kansas City, North Daliota, South Dakota, Nebraska, Kansas, Kentucky, Birmingham, 
Alabama, other, Oklahoma, Montana, Idaho, Colorado, Utah, Nevada, Washington, Mississippi, (aggre- 
gate tons received in areas listed — 18,103) 

< Comprises shipments to: — Cleveland, North Ohio Rivej, Canton-Mansfield, Ohio, other. West Vir- 
ginia, Kentucky, Birmingham, Youngstown, Detroit, (aggregate tons received in areas listed— 10,419) 

• Comprises shipments to:— Buffalo only, (aggregate tons received in areas listed— 1,682) 

« Comprises shipments to: — Kentucky, Tennessee, Birmingham, (aggregate tons received in areas listed — 
2,987) 

' Comprises shipments to: — Montana, Wyoming, Colorado, New Mexico, Utah, (aggregate tons received 
in areas listed— 913) 

' Comprises shipments to: — St. Louis, Missouri, other, Arizona, (aggregate tons received in areas listed — 
2,345) 

» Producing areas indicated are the same as Form B consuming areas. 

Source: Compiled from the Temporary National Economic Committee questionnaire Form B for Feb- 
ruary 1939. 



14358 



CONCENTRATION OF ECONOMIC POWER 



Table 15. — Heavy Structural Shapes: Analysis of the Market Areas of Grouped 
Plants as Measured by the Mill Net on Shipments Priced on the nearest Basing 
Point* February 1939 





Nearest 
basing 
point 


Total 
shipments 


Shipments 

priced 
on nearest 


Shipments to all areas In which 
mill net is: 




Net 
tons 


MUl 
net 
per 
ton 


basing 
point 


Less than 
standard i 


Equal to or 
greater than 


Producing area • 


Net 
tons 


Mill 
net 
per 
ton 


standard ' 




Net 
tons 


Per- 
cent 
of 
total 
ship- 
ments 


MiU 
net 
per 
ton 


Net 
tons 


MiU 
net 
per 
ton 


Eastern Pennsylvania, 
Philadelphia. 


Bethlehem — 

Chicago-Gary 
Pittsburgh,... 

Buffalo 

Birmingham . 
Chicago-Gary 
Chicago-Gary 


22,967 

20, 355 
17,987 

10,260 
4,240 
2,971 
1,151 


$40.36 

39.62 
38.17 

37.92 
39.48 
38. 85 
40.25 


20,244 

J 8, 157 
7,571 

2,08^ 
3,337 
1,636 
1,083 


$40. 60 

39.75 
39.07 

40.95 
39.49 
41.08 
40.31 


14,687 

11,566 
13,450 

9,246 

1,785 

2,333 

669 


64.0 

56.8 
74.8 

90.1 
42.1 
78.5 
58.1 


$39. 74 

38.91 
37.29 

37.57 
38.32 
36.09 
37.99 


»8,270 

3 8, 789 
M,537 

« 1, 014 

« 2, 455 

'638 

8 482 


$41. 45 
40.55 


Pittsburgh, Youngs- 
town, North Ohio 
River. 

Buffalo 


40.75 
4L09 




40.33 


Colorado 


48.94 


St Louis -- 


43.38 






Total 


79, 921 


39.26 


64,112 


40.05 


53, 736 


67.2 


38.35 


26,185 


41.13 









1 standard mill net for each producing area is the mill net received on sales on nearest basing point. 

' Comprises shipments to: Maine, New Hampshire, Massachusetts, Connecticut, Eastern & Central 
New York, Philadelphia, Missouri-other, Delaware, Baltimore, Maryland-other, District of Columbia, 
Virginia, North Carolina, Southern California, (aggregate tons received in areas named, 12,826) 

3 Comprises shipments to: North Ohio River, South Ohio River, Ohio-other, Indiana-other, Illinois- 
other, Michigan-other, Minnesota, St. Louis, Kansas City, Missouri-other, North Dakota, South Dakota, 
Nebraska, Kansas, Georgia, Florida, Kentucky, Tennessee, Alabama-other, Arkansas, Montana, Idaho, 
Colorado, Arizona, Utah, Nevada, Washington, Northern California, (aggregate tons received in areas 
listed, 20,798) 

< Comprises shipments to: New Hampshire, Massachusetts, Eastern & Central New York, Cleveland, 
North Ohio River, Canton-Mansfieljl, etc.. South Ohio River, Ohio, Baltimore, Maryland-other. District 
of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Kentucky, Tennessee, 
Alabama-other, OklaJioma, Colorado, (aggregate tons received in areas listed — 19,402) 

» Comprises shipments to: Buffalo, (aggregate tons received in area — 1,682) 

' Comprises shipments to: Missouri-other, North Carolina, South Carolina, Georgia, Florida, Kentucky, 
Tennessee, Birmingham, Alavama-other, Arkansas, Louisiana, Oregon, Northern CaJifornia. (aggregate 
tons received in area— 9,380) 

' Comprises shipments to; Montana. Colorado, Wyoming, Arizona, New Mexico, Utah, (aggregate tons 
received in areas listed — 1,049) 

* Comprises shipments to: Indiana, Illtnois, other, Kansas City, Nebraska, Kansas, Arkansas, Texas, 
(aggregate tons received in areas listed — 11,029) 

' Producing areas listed are the same as Form B consuming areas. 

•Mill net as used here is mill net less extras. 

Source: Compiled from the Temporarv National Economic Committee questionnaire Form B for Feb- 
ruary 1939. 



CONCENTRATION OF ECONOMIC POWER 



14359 






TS 


OS 


g* 


OS 






s 


Si 


fc. 




^ 

« 





gfe. 



- ^ 



Si 
if 

0,0 



CO 



CQ 







,921 
00.0 

,921 
00.0 
,078 

67.7 
57.7 

00.0 




_ 




01 


OS •-! Oi ,-t «0 »-* 




o 
E-i 


t~ t~ •* 








a 


^•T co>nt^ o — o 




O . CJ . CO 




g 


-- oco « g g 




S 


r-l t- -H <0 




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CO 




o 


rth- 00U500 lO 00 M 




t^ . c< .to . . 




a! 


»« <N-t~ g gS 5! 




U) 


(N rt 




_o 












"o 






O 






O CO M O »C t^ ,-1 o> 




b£> 


■* . ITS .O . . 




■5 a 

el 


eM«ooi>oo> NM -H 


1 


^- ^"„' « » g 


<; 


m 




be 






a 






'S 

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o 




t3 


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.r-l . . lO rt O 


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W 


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Pm 


3 

n 




€.2 


t^ lO <00><D OJ Oi 00 




KS^ 


00 . rt .c» . . 




*?5 t2°l S ?S S 




30 *> 




J3 t» 


^ ^ ""^ 




|:^iS 






E«3 




O 








"-S °?5". S S § 




S 


S S 2 




,a 






O 






JjOO JJWgJ to CO 00 

OiookOcooo -^'td »o 




l^«A-| 




.C» - -co - t~ 00 —i 




East 
Penn 
van 
Phi 
delpl 


?3 S 2 










i i-s 




■'■§" 


a i§" i 






i is 

! 1 >> 




o am 
«3« 


total shi 
ine 1)... 
ming are 
it) (Line 






1 ifrt 




o m o 






E 




a o 3 


: to 
by 1 
nsu 
rcer 






1 1 (» 




Six 


2 Q OJ 1 






• 1 o 






£«•.>-'■ 






1 . U) 

i is 
; ;£ 

, r 03 




0SC8 3 
bc~ 5 


" > 0) 0) 1 








lis 


g CO t» to ; 






: 1 bn 






o> d) a 1 






• 1 a 




> p t^'S ' 






i is 

1 . 3 




8£S 
" o ,9 


to go 
) (Li 
es in 
rodu 










^ w 






iii 




s C33 
» * 


.Ha 2°- ; 

.. 3 ho 










> £ 


areas 
(perc 
all so 
emini 






1 < 3 


n 


5si 


ucmg 
areas 
from 
B gov 






ed 

total shipmcn 
iived from all 
ea, (net tons), 
total shipmen 
producing are 
lents by prod 
uch governed 


lents by prod 
ch producing 
ents received 
ments by thi 
nel) 










et tons shipp 
Percent of 
lipments rec< 
producing ari 
Percent of 
lipments by 
atio of shipm 
received by s 
by line 2) .. 


atio of shipm 
ments by sui 
atio of shipm 
to total ship 
divided by li 






Z ai oitf tf Ph 1 


. 




-H ei 




CC**!** 


•d 1 



o a 

5m 






S^ p 
a^ 8 

fQ.9S "3 



5a« 


;>. 


•0 a ^ 







aS "> 




^8g 


y 


H 


a 


•T3Ja a 


.a 2=3 


2 


— OS ffl 





§62 .. 
- - S? ra 



14360 



CONCENTRATION OF ECONOMIC POWER 



«2^ 



2"o 






^ 



^ 



a ° 
•OS — - 






ri^M 



OQ 2 ® I 



Sl'^isSz^ 



ea 2 

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rS-soo, 



^ 2a.&nO os-M 
■2^B.2g^T^H S§ 

'E-iOPn-<JiJgralZO<lW 



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wis 



r, <S fe !a . « O.S 



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.■SJ3 0^0^ 



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■• 1 


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o<;ph 



CONCENTRATION OF ECONOMIC POWER 



14361 



OQ, 03 O 






coo 



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©•" o" S 



og-JE 



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co»-« 

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t^ooeo^o t^ 

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8Jh 

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weoc^Ncoos 

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CO -|H^ lOC^ooQcoN-^m 



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tig O bfo bf 

Cn, 6/)C bcO 

Es: " B " S 

PQO OBom 






IS ;53S 

6*0 SJo o 6 
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.ts 3.55 sic £i 
fQOWOOO 



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14362 



CONCENTRATION OF ECONOMIC POWER 



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9Iro 






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for by 
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• a"- 





CONCENTRATION OF ECONOMIC POWER 

Part 2 
Table 1. — Plates: Basing Points and Basing Point Prices 
[Prices per net ton] 



14363 





May 1938 


February 1939 


Basing Point 


Base price 


Differential 

over Pitts- 

biu-gh 


Base price 


Differential 
over Pitts- 
burgh 


Pittsburgh .-.-.... . . 


$46.00 
46.00 
48.00 
49.00 
47.00 
47.00 

(') 

(') 
63.00 
66.00 




$42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
49.00 
62.00 




Chlcago-Qary --- 


$1.00 
3.00 
4.00 
2.00 
2.00 


$0.00 


Birmingham 


0.00 


Cleveland .. .. 


0.00 


Coatesville 


0.00 


Sparrows Point- • .- 


0.00 


Claymont 


0.00 


Yonnf^town 




0.00 


Onlf Ports 


8.00 
11.00 


7.00 


Pacific Ports 


10.00 







' Not listed as a basing point in May 1938. 
Source: Iron Age (all issues for months listed). 



Table 2.— Plates: 



Distribution of Capacity by Distance from the Nearest Baling 
Point 



Distance from nearest basing point (Air miles) > 


Capacity (1.000 
gross tons)' 


Percent 
of total 
capacity 


Total United States.. - 


5,604.8 


100.0 






0-26.- 


• 4,224.06 

100.0 

1,070.0 

110. 76 


76.7 


26-50-. 


1.8 


51-100- -. - ' - 


19.6 


Over 100 I 


2.0 







' Includes all basing points listed in the Iron Age, after the change in basing points in June 1938. 
' Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and tjbe 
Iron Age. 
» Includes 14,500 gross tons on the Pacific Coast. 



124491 — 41— pt. 27- 



IG 



14364 CONCENTRATION OF ECONOMIC POWER 

[Adding machine tabulation] 



S88.0 



10.00 
12.86 

4.2(1 

6.25 

3. 5U 
14.00 
22.00 
I.'-). .% 

4.00 
. 10 
15.50 
10.50 
20.00 
18.00 
26.50 
.60 
16.55 

2.50 

5.36 
10.00 

5.40 

.13 

13.00 

10.50 

.30 

l.fiO 
12.50 
14.40 

7.50 
16.50 

2.80 
29.40 
29.00 
.20 
St 00 
10.80 



4358. 5 



[Italic Indicates pencil notations. Asterisk indicates red figures.] 



CONCENTRATION OF ECONOMIC POWER 



14365 



Table 3. 



-Plates: Distribution of Total Capacity in the United States and Form B 
Sampled Capacity by Producing Areas 



Producing Area i 



Total U. S. Capacity « 



1,000 O. T. 



Percent 
of total 



Estimated Capacity 
Sampled 



1,000 0. T. 



Percent 
of total 
capacity 
sampled 



Total United States 

Integrated * 

Semi-integrated 

Non-integrated 

Pittsburgh. 

Eastern Pennsylvania, Philadelphia, Delaware 

Chicago 

Detroit 

Baltimore 

Youngstown 

Birmingham 

Cleveland 

North Ohio River 

St. Louis 

Areas outside the sample: 

Colorado 

Kansas City 

Buffalo 

Washington... 

Tennessee 



5, 504. 8 



100.0 



' 4, 693. 3 



(4, 453. 5) 

(1, 028. 4) 

(22. 9) 



(80.9) 
(18.7) 
(0.4) 



(3, 755. 3) 
(938. 0) 



(84.3) 
(91.2) 



626. 45 
035.0 
995.3 
500.0 
440.0 
311.0 
251.8 
120.0 
100.0 
60.0 

8.0 
11.5 
30.35 
14.5 

0.9 



(•) 



29.5 
18.8 
18.1 
9.1 
8.0 
5.7 
4.6 
2.2 
1.8 
1.1 

0.1 
0.2 
0.5 
0.3 



1, 524. 5 
1,008.0 
617.0 
500.0 
440.0 
72.0 
251.8 
120.0 
100.0 
60.0 



93.7 
97.4 
62.0 
100.0 
100.0 
23.2 
100.0 
100.0 
100.0 
100.0 



' Producing areas conform to Form B Consuming Areas. 

' Compiled from the Iron and Steel Works Directory of the United States and Canada 1938. 
' Of the capacity sampled 80.0 percent represented integrated companies, 20.0 percent semi-integrated 
companies. ^ 

* Degree of integration here used is company integration (not plant). 
•Less than 0.05 percent. 

Table 4. — Plates: Estimated Sampled Capacity ty Producing Areas and Distribution 
of Shipments by Producing Areas 



Producing Area ' 



Sampled Capacity « 



1,000 gross 
tons 



Percent of 
sampled 
capacity 



February 1939 ship- 
ments ' 



Net tons 



Percent of 

total ship- , 

ments 



Total U. S. 

Pittsburgh. ._ 

Eastern Pennsylvania, Philadelphia & Delaware 

Chicago ^ 

Detroit _ 

Baltimore 

Birmingham 

Cleveland 

North Ohio River 

Youngstown 

St. Louis 



4, 693. 3 



100.0 



96,443 



100.0 



1,524.5 
1, 008. 
617.0 
500.0 
440.0 
251.8 
120.0 
100.0 
72.0 
60.0 



32.5 
21.5 
13.1 
10.7 
9.4 
5.3 
2.6 
2.1 
1.5 
1.3 



24, 381 

27,885 

15,088 

941 

10, 821 

12,836 

967 

482 

1,783 

1,259 



25.3 
28.9 
15.6 

1.0 
11.2 
13.3 

1.0 
.5 

1.9 

1.3 



' Producing areas conform to Form B consuming areas. 

» Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. 

' Compiled from the Temporary National Economic Committee Questionnaire Form B, February 1939. 



14366 



CONCENTRATION OF ECONOMIC POWER 



Table 5. — Plates: Distribution of Total Capacity and Form A Sampled Capacity 
by Producing Area {District Sample), 1938 



Producing Area • 



Total United States. 



Pittsbureh — 

Eastern Pennsylvania, Philadelphia, Delaware. 

Chicago , 

Detroit - - 

Baltimore.- i.-- 

Youngstown.,.' 

Birmingham 

Cleveland 

North Ohio River ; - - 

St. Louis. 

Buffalo .-..: 

Washington.- - — - 

Kansas City , 

Colorado 

Tennessee 



Total V. 8. 
Capacity 
Tonnage 

(1,000 gross 
tons)' 



6,604.8 



626.45 

036.00 

995.3 

600.0 

440.0 

311.0 

251.8 

120.0 

100.0 

60. e 

30.36 

14.5 

11.5 

8.0 

0.9 



Capacity Sampled 



Tonnage 
(1,000 
gross 
tons) 



3, 216. 1 



Percent 
sampled 
by pro- 
ducing 
area 



58.4 



1, 524. 6 


93.7 


705.3 


70.9 


440.0 
261.0 
171.8 


100.0 
83.9 
68.2 






60.0 

- 30.0 

14.5 


100.0 
98.8 
100.0 


8.0 


100.0 



' Producing areas conform to Form B consuming areas. 

« Compiled from the Iron and Steel Works Directory of the United States and Canada. 1938. 

Table 5A. — Plates: Distribution of Total Capacity and Form A Sampled Capacity 
by States (State Sample), 1938 





Total U. S. 
Capacity 
Tonnage 

(1,000 gross 
tons)' 


Capacity Sampled 


State 


Tonnage 
(1,000 
gross 
tons) 


Percent 
sampled 
by state 


Total United States 


6,504.8 


4,248.7 


77.2 








2, 608. 46 

688.3 

500.0 

467.0 

440.0 

356.0 

251.8 

228.0 

100.0 

30.36 

14.6 

11.5 

8.0 

0.9 


1,676.1 
338.3 
800. a 
427.0 
440.0 
236.0 
251.8 
228.0 

» 100.0 
30.0 
14.5 


66.8 




67.6 




100.0 


Illinois - ... -. 


91.4 




100.0 


'Ohio 






100. 


Delaware . 


100.0 


West Virginia 


100.0 




98.8 




100.0 








8.0 


100. e 








1 



' Source: The Iron and Steel Works Directory of the United States and Canada, 1938. 
t Company was sampled but no shipments were reported for this product. 



CONCENTRATION OF ECONOMIC POWER 



14367 



Table 6. — Plates: Relative Stability of Tonnage Distribution by Consuming Region 
19S6, 19S7, 19S8 and February 1939 



Region 


Form A Distribution by States 


Form A Distribution by Con- 
consuming District 


FormB 
Distri- 
bution 




1936 


1937 


1938 


1936 


1937 


1938 


Feb. 1939 


Ail regions (net tons) 


1,691,356 


2,154,866 


834,200 


1,447,092 


1,839,877 


779, 571 


96,443 




Percent 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 




North Esstern ' 


42.7 
31.1 
3.0 
4.8 


42.6 
31.8 
3.8 
6.1 
9.7 
7.1 


36.8 
27.7 
4.2 
8.4 
14.8 
8.1 


30.1 
40.3 
3.8 
4.9 
10.6 
10.3 


29.4 
41.6 
4.9 
6.3 
11.2 
7.6 


29.6 
34.8 
4.3 
8.6 
14.7 
8.1 


35.1 
29.7 
2.8 
9.2 
13.6 
9.7 


North Central « 


West Central * 


South Eastern < . . 


Southern & South Western '. 
Mountain and Western • 


9.2 
9.2 



« Includes following states and consuming districts: Maine, N. H., Vt., Mass., R. I., Conn N Y N J 
Pa., Metropolitan N. Y., Eastern & Central N. Y., Buflfalo, Phila., Eastern Pa., Pittsburgh. ' 

• Includes following states and consuminK districts: Ohio, Ind., III., Mich., Wis., Minn., Cleveland 
Youngstown, North Ohio River, Canton-Mansfield, South Ohio River, Ohio-other, Chicago, 111 -other' 
Detroit, Michigan-other. ' 

> Includes following states and CQnoUming districts: Iowa, Mo., N. Dak., S. Dak., Nebr., Kans St Louis 
Kans. City, Mo.-other. 

< Includes following states and consuming districts: Delaware, Md., D. C, Va., W. Va., N. C , S 
Oa., Fla., Baltimore, Md.-other. ' ' '' 

' Includes following states and consuming districts: Ky., Tenn., Ala., Mi.ss., Ark., La., Okla., Tex 
Birmingham, Ala.-other. '' 

• Includes following states and consuming districts: Mont., Idaho, Wyo., Colo., N. Mex. Ariz., Utah, 
Nev., Wash., Ore., California, So. California, No. California. 

Note: Each region is defined by the areas listed, eliminating duplications. The most important states 
and consuming districts have been italicized. 



Table 7. — Plates: Range of Variation of Tonnage Distribution in Consuming States 
and Consuming Districts, 1936, 1937, 1938 and February 1939 {Range of dis- 
tribution of percentages by areas) 



Range 


Form A: 1936-1938 inclusive 


Form A & B: 
1936-1938 inclu- 
sive and Feb. 1939 


By 49 states: 

Number of 

states ' 


By 64 dis- 
tricts: Num- 
ber of districts 


By 64 districts: 
Number of dis- 
tricts 


Over 5.0 L 


1 
4 
6 
6 
32 


1 

5 

6 

13 

40 


3 
7 
8 
13 
33 


2.1-5.0 

1.1-2.0 1. 


.6-1.0. -■- 


0.5 or under 


Total. . 


49 


64 


64 



' Includes the District of Columbia. 



14S68 CONCENTRATION OF ECONOMIC POWER 

Table 8. — Plates: Selected Consuming Areas for Detailed Analysis, February 1939 



Producing area ' 


Basing point » 


Vll consum- 
ing areas 
(net tons 
received) 


Selected 
consuming 
areas (net 
tons re- 
ceived ») 


Per cent of 
all consum- 
ing areas 
receipts 


All producing areas 


All basing points 


96,443 ■ 


76, 447 


79.3 


Chicago - 


All basing points 


15. 088 


10 634 


70.6 




Pittsburgh 


387 

13,909 

• 146 

300 

204 

74 

68 


240 
9,818 

80 
213 
204 
' 68 

21 


62.0 




Chicago-Gary 


" 70.6 




Birmingham 


54.8 






71.0 




Coatesville . - 


100.0 




Gulf Ports 


78.3 




Pacific Ports 


30.8 




All basing points --- - 






. 1.259 

1,062 

175 

22 


572 
419 
13] 
%22 


45.4 






39.5 






74.3 




Gulf Ports 


100.0 




All basing points-- 




Detroit - 


941 


941 


100.0 




Sparrows Point . - 


2g 

73 

6 

834 


28 

73 

6 

834 


100.0 
100.0 




Buffalo*--- --- 

Cleveland -.. 


100.0 
100.0 




All basing ■ wintS- 


967 


743 


76.8 




Chicag )-Gary . . 


89 
702 

12 
162 


89 
480 

12 
162 


100.0 




Cleve); nd . . 


68.3 






100.0 




Coates ?ille..- - 


100.0 




All basing . joints. 




Youngstown 


1,783 


1,409 


79.0 




Pittsburgh 


205 

80 
522 

67 

422 

298 

4 

12 
156 

13 


203 

74 
442 

51 

201 

253 

4 

12 
1.56- 

13 


99.0 




Sparro\vs Point 

Chicago-Gary 


92.5 
84.7 






'76.1 




Cleveland 

Youngstown 


47.6 
84.8 




Middle own *.. 


100.0 




Coatesville 


100.0 




Claymont 

Gulf Ports 


100.0 
100.0 




All basing points - 






24,381 


20, 701 


84.9 




Pittsburgh 

Sparrows Point 

Chicago-Gary 






8,349 

760 

3,784 

1,101 

2,848 

2,818 

973 

1,888 

46 

1.814 


7,232 
6fi0 

3,183 
833 

1.993 

2,672 
872 

1.615 
46 

1,595 


86.6 
86.8 
84.0 




Birmingham 

Cleveland . . 


75.6 
69.9 




Youngstown . 


94.8 




Coatesville - 

Claymont 

Gulf Ports 


89.6 
85.5 
100.0 




Pacific Ports 


87.9 




All basing points 




Eastern Pennsylvania, Philadelphia, 


27, 885 


22,382 


80.2 


Delaware. 


Pittsburgh 




509 
3,813 
1,603 
1,190 
1,813 
1,414 
4,446 
10,.263 
1,045 
1,789 


•322 
2.552 

689 
77 
1,024 
1,402 
4,250 
9,400 
1,044 
1,632 


63.2 




Sparrows Point 

Chicago-Gary 


66.9 
43.0 




Birmingham 


6.5 




Cleveland 


56.5 




Youngstipwn 


99.1 




CoatesviUi! 


95.6 






91.6 




Gulf Pori:, 


99.9 




Pacific P..i-ts.-. 


91.2 











' Producing ari as conform to Form B Pon<!U..iing arci. i. 

> Includes onlv oasing points govc^rr.'.ng sele« led consi ming areas. 

' Con.sumingai i as receiving two pel coiit ortnoreof toi .1 shipments. Area-; selected -vere: Mass., Metrop. 
N. Y.. Bu«., Phila., Ka. Pa., Pgh., Yst., Ohi)— other -Ind., Chi., IB. o^her, DecroH, Va., Ky., Birm., 
Tex.So. Cal., N. Cnl. / 

, < Shown in the icports but not listed us a ba ing poin by tbe Iron Agr. 



CONCENTRATION OF ECONOMIC POWER 



14369 



Table 8. — Plates: 



Selected Consulting Areas for Detailed Analysis, February 
19S9 — Continued 



Producing area 


Basing point 


All consum- 
ing areas 
(net tons 
received) 


Selected 
consuming 
areas (net 
tons re- 
ceived) 


Per cent of 
all consum- 
ing areaf" 
receipt; 




All basing points. 


10, 821 


9,176 


84.8 




Pittsburgh 






43 

2,2S4 

292 

271 

130 

1,292 

3. 975 

16fi 

2,342 


43 

2,140 

140 

198 

128 

1,292 

3.188 

166 

1,881 


100 




Sparrows Point--. .. 
Chicago-Gary. 


93.7 
47.9 




'^'flveland . . 


73 1 




.ngstown.. - 


98.5 




atesville . ■ 


100 




Claymont 


80 2 




Gulf Ports 


100 




Pacific Ports 


80.3 




All basing pijints 




BirmiDgham 


12,836 


8,964 


69.8 




Sparrows Point _ - 

Chicago-Gary 






288 
371 

7,973 

18 

612 

466 

627 

2,481 


26 

135 

4,970 

18 

280 

466 

627 

2,442 


9.0 

36.4 






62.3 




Cleveland 


100.0 




Coatesville 


46.8 




Claymont - 


100. 




Gulf Ports 


100.0 




Pacific Ports 


98.4 




All basing points . ... 




North Ohio River 


482 


456 


94.0 




Pittsburgh 






55 
214 
69 
46 
25 
28 
55 


50 
214 
59 
26 
25 
28 
55 


90.9 




Chicago- Gary. 


100.0 




Birmingham - 


100 




Cleveland.- 


54.3 




Youngstown 


100.0 






100.0 




Detroit* .-. 


100.0 




Pittsburgh 






9,550 

7,253 

21,919 

10, 737 

6 

7,254 

4,697 

4 

7.70! 

16,776 

55 

1,993 

8,498 


8,090 

5,480 

15.202 

6,201 

6 

4,986 

4,492 

4 

7,072 

!4, 853 

56 


84.7 






75.6 




Chicago-Gary 


69.4 






57.8 




Buffalo* 


100.0 




Cleveland 


68.7 




Youngstown - . . 


95.6 




Middletown *. 


100.0 




Coatesville . . 


91.8 




Claymont . . . 


88.5 




Detroit * 


100 n 




Gulf Ports .... 


1,976 99.1 




Pacific Ports . 


7, 671 88. 4 











* Shown in the reports but not listed as a basing point by the Iron Age. 

Source: Compiled from the Temporary National Economic Committee, Form B questionnaire, Febru- 
arjr 1939. 



14370 



CONCENTRATION OF ECONOMIC POWER 



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14372 



CONCENTRATION OF ECONOMIC POWER 



< 
a 

3 

1 
1 

4) 

a 
ft 

3 

03 

a 
o 

£ 

a 
a 
PQ 

1 
3 

ft 

s 

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$39.60 
41.46 
44.80 
42.67 
40.6a 
44.75 
41.77 
41.90 
41.96 


35T)<00 




COOOl 
Oh-'-J 


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CO I^ COO 

•^ ■* TJH -TJ* 


Eastern 
Pennsyl- 
vania, 
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delphia, 
Delaware 






?5g 

COO 


46.23 
•23.00 
43.54 
41.76 
60.77 
59.00 


J5S?S 




85! 


1 c»t^o 
. uiiooo 

»0 ■'T CO 


Published 
base 
price 


$42. 00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 
42.00 


Reported basing points 


J3 

S 
B 

0^ 


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a 

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6 

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CONCENTRATION OF ECONOMIC POWER 



14373 



Table' 11. — Plates: Published Base Prices and Calculated Form B Base Prices 
By Basing Points, February 1939 



Basing Point 


Published 

Base Price 

(Per net 

ton) ' 


Calculated 

Base Price 

(Per net 

ton) » 


Basing Point 


Published 

Base Price 

(Per net 

ton) ' 


Calculated 

Base Price 

(Per net 

ton) a 


Pittsburgh.. 


$42.00 
42.00 
42.00 
42.00 
42.00 


$39. 25 
41.02 
38.94 
43,03 
41.78 


Coatesvillc 

Sparrows Point 

Youngstown 

Gulf Ports.. 


$42. 00 
42.00 
42.00 
49. C!) 
52.00 


$42. 41 


Chicago Gary 


41.78 
42.79 




45.78 




Pacific Ports 


49.92 









I As listed in all February 1939 issues of the IronAge. 

» Computed from Temporary National Economic Committee Form B Questionnaire, February 1939. 

Table 12. — Plates: Total Sales by Grouped Mills in Each Producing Area on 
Nearest Basing Point and on All Other Basing Points, February 1939 





Nearest basing point 


Net tons sold 


Producing area ' 


On all 
basing 
points 


On 

nearest 
basing 
point 


On 
other 
than 
nearest 
basing 
point 


Per- 
cent 
sold on 
nearest 
basing 
point 


Per- 
cent 
sold on 
other 
than 
nearest 
basing 
point 


All producing areas 




&6,44a 

27, 885 

24,863 

15,088 

12,836 

10, 821 

1,783 

1,259 

967 

941 


60,175 

14, 709 

8,404 

13,909 

7,973 

2,284 

298 

1,062 

702 

834 


46,268 

13, 176 

16, 459 

1,179 

4,863 

8,537 

1,485 

197 

265 

107 


52.0 

62.7 
33.8 
92.2 
62.1 
21.1 
16.7 
84.4 
72.6 
88.6 


48.0 


Eastern Pennsylvania, Philadel- 
phia, Delaware 

Pittsburgh, North Ohio River.. 


Coatesville-Claymont. . . 
Pittsburgh 


47.3 
66.2 


Chicago 


Chicago-Gary..'. 

Birmingham.. J. _. 


7.8 


Birminghnni 


37.9 


Baltimore 


78.9 


Youngstown... 


Yniingstown 


83.3 


St. Louis 




15.6 


Cleveland 


Cleveland 

Cleveland... 


27.4 


Detroit .. . . 


11.4 









Producing area ' 



Nearest basing point 



Mill net less extras 
per net ton 



' "On 
sales 
on all 
basing 
points 



On 

sales 

on 

nearest 

basing 

point 



On 

sales 
on 
other 
than 
nearest 
basing 
point 



Freight absorption 
per net ton 



On 

sales 

on all 

basing 

points' 



On 

sales 

on 

nearest 

basing 

point 



On 
sales 
on 
other 
than 
nearest 
basing 
point ' 



All producing areas 

Eastern Pennsylvania, Phila- 
delphia, Delaware. 

Pittsburgh, North Ohio 
River. 

Chicago 



Birmingham. 

Baltimore 

Youngstown. 

St. Louis 

Cleveland 

Detroit 



Coatesville-Claymont. 

Pittsburgh 

Chicago-Gary 

Birmingham... 

Sparrows Point 

Youngstown 

Chicago-Gary 

Cleveland 

Cleveland 



39.58 
41.75 
37.92 
39.12 
38.08 
39.91 
38.40 
37.80 
40.60 
47.27 



40.56 
43.41 
38.24 
39.20 
39.20 
43.08 
38.83 
37.16 
41.98 
46.08 



38.53 
39.91 
37.76 
38.15 
36.24 
39.07 
38.32 
41.24 
36.68 
56.59 



2.57 
(1.54) 

2.46 
(L56) 

,3.23 
(2.49) 

0.48 
(0.40) 

3.91 
(1.64) 

3.39 
(1. 12) 

3.52 
(3.45) 

1.26 
(1. 14) 

0.62 

(0. 62) 

-3.61 

(-3.61) 



e.26 

0.28 

.0.68 

0.19 

ae4 

-0.42 

0.09 

L29 

.04 

-3.81 



5.08 
(2. 94) 

4.89 
(2. 98) 

4.59 

3.46 

3.95 
(2. 93) 

9.42 
(3.42) 

4.41 
(1. 53) 

4.22 
(4. 13) 

1.12 
(0. 34) 

2.15 

(2. 16) 

-2.06 

(-2.06) 



' Producing areas conform to Form B consuming areas. 

' Figures in parentheses are adjusted by correcting for price diflerentials of $7.00 per ton on sales on Gulf 
Port basing points and $10.00 on sales on Pacific Port basing points. 

Sonce: Compiled from Temporary National Economic Committee Questionnaire Form B, February 19S0 



14374 



CONCENTRATION OF ECONOMIC POWER 



Table 13. — Plates: Shipments Rece ^ Compared to Shipments Made by Producing 

Areas, February 19S9 



Producing Area i 



Toial 
Shipments 
Made By 
Plants in 
Producing 

Area 



Shipments received in producing areas 



Total Re- 

celTed in 

Producing 

Area 



Received 

from Plants 

in Identi 

cal Area 



Percent Re 

ceived from 

Plants in 

Identical 

Area 



Total re- 
ceived in 
area as a 
Percent of 
Total Ship- 
ments from 
the area 



All producing areas 

Eastern Area ' 

Pittsburgh, North Ohio River, Youngs- 
town 

Chicago 

Birmingham 

St. Louis - - 

Cleveland 

Detroit 



96,443 
38,706 

26,646 

16,088 

12, 836 

1,259 

967 

941 



46,808 
19, 379 

10, 369 
8,320 
3,262 
1,105 
1,752 
2,621 



35, 496 
16, 316 

9,073 

6,276 

3,262 

474 

192 

903 



76.8 
84.2 

87.6 
63.4 
100.0 
42.9 
11.0' 
34.5 



48. t 
60.1 

38.9 
66.1 
26.4 
87.8 
181.2 
278.6 



> Producing areas conform to Form B, consuming areas except: "Eastern" which here includes East- 
em Pennsylvania, Philadelphia, Delaware, Baltimore, Maryland-other, and Metropolitan New York. 

Source: Compiled from the Temporary National Economic Committee Questionnaire Form B, Febru- 
ary 1939. 



CONCENTRATION OF ECONOMIC POWER 



14375 



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CONCENTRATION OF ECONOMIC POWER 






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CONCENTRATION OF ECONOMIC POWER 



14377 





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CONCENTRATION OF ECONOMIC POWER 




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CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC l"OWEIt 14385 

Part 3 
Table 1. — Hul Rolled Shect.f: Basing Points and Basing Point Prices, February 1939 

{Prices per net ton] 



Basing Toints 



Pittsburgh 

Chicago-Gary '. 
Birmingham... 

Buffalo.. 

Sparrows Point 

Cleveland 

Youngstown... 

Mlddletown 

Granite City. . 
Pacific Ports... 
Detroit* 



May 1938 



Base 
price ' 



$48.00 
50.00 
51.00 
(') 
(») 

(») 

(') 

52.00 

59.00 

52.00 



Differential 

over 
Pittsburgh 



2.00 
3.00 



4.00 
11.00 
4.00 



February 1939 



Base 
price 



$43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
43.00 
4.'5. 00 
53.00 
45.00 



Differential 

over 
Pittsburgh 



0.00 
0.00 
0.00 
0.00 
0.00 
0.00 
0.00 
2.00 
10.00 
2.00 



I 10 gage, hot rolled— 24 gage were $15 higher at all points except Pacific Ports where they were $17 higher. 

J Not listed as a basing point by thp. Iron Age. 

3 Chicago not listed as a basing point in May 1938 (Gary only). 

* Not a basing point. Prices quoted are delivered prices. 

Source: Iron Age, February 1939, all issues and May 1938 all issued prior to revision of extras and base 
prices. 

Table 2. — Hot Rolled Sheets: Distribution of Capacity by Distance from Nearest 

Basing Point 



Distance from nearest basing point (air Miles) ' 


Capacity 

(1,000 gross 

tons) 2 


Percent of 

total 
capacity 


Total United States .- 


» 11, 167. 45 


100.0 






0-25 .. -. 


« 6, 440. 85 

2. 255. 8 

1. 905. 9 
664.9 


57.7 


26-50 - 


20.2 


51-100 


17.1 


Over 100 


5.0 







' Includes all basing points listed in the Iron Age after the change in basing points in June, 1938. 

» Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the 
Iron Age. 

' Includes capacity at Dravosburg, Pennsylvania as reported by the United States Steel Corporation in 
addition to capacity listed by the Directory. 

* Includes 82,300 gross tons on the Pacific Coast. 



14386 CONCENTRATION OF ECONOMIC TOWER 

Table 3. — Hot Rolled Sheets:^ Distribution of Total anc Sampled Capacity 



Producisg area ' 



Total United States 

Integrated « 

Semi-integrated 

Non-integ. , fd ----- 

Pittsburgh- - - 

Chicago.. -.- 

Cleveland - 

Youngstown 

Detroit - 

North Ohio River 

Canton, Masillon, Mansfield. 

Buffalo .- 

Mlddletown-Newport -. .-- 

Portsmouth-Ashland -- 

Baltimore --- - 

Birmingham 

Indiana, all other - 

Eastern Pennsylvania, Philadelphia, Delaware 

St. Louis 

Areas Not in the Sample: 

California (northern and southern).- 

West Virginia, other 

Kansas City.. — - ... 

Eastern and Central New York 



Total U. S. Capacity ' 



Capacity sampled 



1,000 gross 
tons 


Percent of 
total 


1,000 gross 
tons 


Percent oi 
total capac- 
ity sampled 


2 11,167.45 


100.0 


3 8, 806. 3 


78.9 


(9, 581. 10) 


'* (85. 8) 


(7i 846. 30) 


(81.9) 


(1, 089. 65) 


(9.8) 


689.00 


(63. 2) 


(496. 70) 


(4.4) 


(271.00) 


(54.6) 


1, 46.3. 55 


13.1 


1.407.60 


96.2 


1, 286. 40 


11.5 


1,093.90 


85.0 


1, 199. 20 
1, 163. 86 


10.7 


1, 104. 00 


92.1 


10.4 


826. 00 


71.0 


1, 067. 70 


9.6 


5.^3. 00 


51.8 


977. 00 


8.8 


788.00 


80.7 


718. 10 


6.4 


179. OB 


24.8 


703. 20 


6.3 


700. 00 


99.5 


658.00 


5.9 


658.00 


100.0 


630.00 


4.7 


446.00 


84.2 


498. 00 


4.5 


418. 


83.9 


319.80 


2.9 


319. 80 


100.0 


166. 00 


1.5 


70.00 


42.2 


141. 50 


1.3 


108.00 


76.3 


135. 00 


1.2 


135. 00 


100.0 


82.30 
32.10 
23.00 


0.7 
0.3 
0,2 














2.80 


(") 







' Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth- 
Ashland. These areas include only the capacity at these respective points. 

> Compiled from the Iron and Steel WorKs Directory of the United States and Canada, 1938, plus the 
capacity reported by the United States Steel Corporation at Dravosburg, Pennsylvania. 

• Of the capacity sampled 89.2 percent represented integrated companies, 7.8 percent, semi-integrated 
companies and 3.0 percent non-integrated companies. 

* Degree of integration here used is company integration. (Not plant). 
» Less than .05 percent. 

Table 4. — Hot Rolled Sheets: Sampled Capacity by Producing Areas, and Ship- 
ments by Producing Area 



Producing areas i 



Total United States. 

Pittsburgh- -• - 

Chicago - - - 

Cleveland 

Youngstown .-, 

North Ohio River 

Buffalo 

Middletown-Newport -• 

Detroit- --- --. 

Portsmouth-Ashland 

Baltimore.. . 

Birmingham - 

Canton-MassiUon-Mansfield .-- 

St. Louis. - 

Eastern Pennsylvanla-Philadelphia-Delaware 
Indiana-other. 



Capacity Sampled * 



1000 gross 
tons 



6.3 



1407.6 

1093. 9 

1104.0 

826.0 

788.0 

700.0 

658.0 

553.0 

446.0 

418.0 

319.8 

179.0 

135.0 

108.0 

70.0 



Percent- 



100.0 



16.0 
12.4 
12.5 
9.4 
9.0 
7.9 
7.5 
6.3 
5.1 
4.8 
3.6 
2.0 
1.5 
1.2 
0.8 



February 1939 ship- 
ments ' 



Tonnage 
(Net tons) 



190, 910 



21,912 

41, 401 

20,811 

14, 891 

14, 836 

8,246 

8,566 

2^,792 

4,299 

13, 878 

6,752 

1,009 

2,677 

1,277 

563 



Percent- 
age 



100.0 



11.5 

21.7 

10.9 

7.8 

7.8 

4.3 

4.5 

15.6 

2.2 

7.3 

3.5 

.."i 

1.4 

.7 

.3 



' Producing areas conform to Form B consuming areas except: Middletown-Newport and Portsmouth- 
Ashland which include capacity in those cities only. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938, plus ca- 
pacity at Dravosburg, Pennsylvania. 

' Compiled from Temporary National Economic Committee Form B, February 1939. 



CONCENTRATION OF ECONOMIC POWER 



14387 



Table 5. 



-Hot Rolled Sheets: Distribution of Total Capacity and Form A Sampled 
Capacity by Producing Area (District Sample) 



Producing area ' 



Total United States 

Pittsburgh - — 

Chicago — 

Cleveland --- 

Youngstown 

Detroit - - 

North Ohio River 

Canton, Massillon, Mansfield 

Buffalo 

Middletown-Newport - 

Portsmouth-Ashland 

Baltimore.-. - -_ 

Birmingham - - 

Indiana-other 

Eastern Pennsylvania, Philadelphia, and Claymont 

St. Louis -. 

California (northern and southern) 

West Virginia, other - 

Kansas City 

Eastern and Central New York 



Total II. S. 

capacity 

Tonnage ' 

nOOO gross 

tons) 



1,463. 

1,286. 

1,199. 

1,163. 

1, 067. 

977. 

718. 

703. 

658. 

630. 

498. 

319. 

166. 

141. 

135. 

82. 

32. 

23. 

2. 



Capacity sampled 



Tonnage 

(1000 gross 

tons) 



5360.3 



1108.4 
863.9 



915.8 



700.0 
478.0 
446.0 
418.0 
193.8 



135.0 
82.3 



Percent 

sampled by 

producing 

area 



48.0 



75.7 
67.2 



78.7 
"2.0 



99.5 
72.6 
84.2 
83.9 
60.6 



100.0 
100.0 



• Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth 
Ashland which include capacity at these points only. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938, plus ca- 
pacity reported by the U. S. Steel Corporation at Dravosburg, Pa. 



Table 5A. 



-Hot Rolled Sheets: Distribution of Total Capacity and Form A Sampled 
Capacity by States (State Sample) 1938 



State 



Total United States 

Ohio. 

Pennsylvania 

Indiana 

Michigan 

New York 

Kentucky 

Maryland 

West Virginia 

Alabama 

Illinois 

California 

Delaware 

Missouri - 



Total U. S. 

capacity 

tonnage ' 

(1000 gross 

tons) 



11,167.45 



4, 144. 2 

1,645.85 

1, 309. 9 

1,067.7 

706.0 

626.0 

498.0 

443. 2 

319.8 

277.5 

82.3 

24.0 

23.0 



Capacity sampled 



Tonnage 

(1000 gross 

tons) 



9, 185. 9 



3, 579. 6 

1, 373. 2 
859.9 

'717.0 
700.0 
446.0 
418.0 

'411.1 
319.8 
255.0 
82.3 
24.0 



Percent 

sampled by 

State 



82.3 



86.4 
83.4 
65.6 
ti7. 2 
99.2 
71.2 
83.9 
92.8 
100.0 
91.9 
100.0 
100.0 



' Compiled from the Iron and Steel Works Director of the United States and Canada, 1938 plus capacity 
reported by the U. S. Steel Corporation at Dravosburg, Pa. 
' 553,000 gross tons of this capacity is not included in calculations for tables 6 and 7. 
» 296,000 gross tons of this capacity is not included in calculations for tables 6 and 7. 



14388 



OOxNfCENTRATION (JF ECONOMIC POWER 



Table 6. — Hot Rolled Sheets: Relative Stability of Tonnage Distribution by Con- 
suming Region, 1936, 1937, 1938 and February 1939 



A 11 regions (net tons) 

Percent _ 

North Eastern'.- 

North Central « 

West Central » 

South Eastern'..- 

Southern and Southwestern « 
Mountain & Western ' 



Form A distribution by 


Form A distribution by 


states 


consuming districts 


1936 


1937 


1938 


1936 


1937 


1938 


1, 242, 929 


2, 323, 066 


1, 322, .106 


1, 010, 706 


1, 952, 608 


1, 073, 369 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 


25.1 


23.8 


24.7 


24.5 


23.6 


23.8 


57.2 


59.5 


55.7 


64.0 


67.4 


53.5 


3.5 


3.2 


3.5 


4.7 


3.8 


4,1 


3.8 


2.7 


2.9 


4.3 


2.9 


3.3 


6.2 


6.6 


6.8 


7.7 


6.5 


8.0 


4.2 


6.2 


6.4 


4.8 


5.8 


7.3 




' Includes following states and consuming districts: Maine, New Hampshire, Vermont, Massachusetts, 
Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, New York City, Eastern & Central 
New York, Buflalo, Philadelphia, Eastern Pennsylvania, Pittsburgh. 

' Includes following states and consuming districts: Ohio, Indiana, Illinois, Michigan, Wisconsin, Minne- 
sota, Cleveland. Youngstown, North Ohio River, Canton-Mansfield, South Ohio River, Ohio-other, 
Indiana-other, Chicago, Illinois-other, Detroit, Michigan-other. 

'Includes following states and "consuming districts: Iowa, Missouri, North Dakota, South Dakota, 
Nebraska, Kansas, St. Louis, Kansas City, Missouri-other. 

< Includes following states and consuming districts: Maryland, District of Columbia, Virginia, West 
Virginia, North Carolina, South Carolina, Georgia, Florida, Baltimore, Maryland-other. 

' Includes following states and consuming districts: Kentucky, Tennessee, Alabama, Mississippi, Arkan- 
sas, Louisiana, Oklahoma, Texas, Birmingham, Alabama-other. 

» Includes following states and consuming districts: Montana, Idaho, Wyoming, Colorado, New Mexico, 
Arizona, Utah, Washington, Oregon, Calijornia, Northern California, Southern Calijornia. 

Note.— Each region is defined by the areas listed, eliminating duplications. The most important states 
and consuming districts in each region have been underlined. 

Table 7. — Hot Rolled Sheets: Range of Variation of Tonnage Distribution in 
Consuming States and Consuming Districts, 1936, 1937, 1938 & February 1939 



[Range of distribution of percentages by areas] 





Form A: 1936-1938 inclusive 


FormsA&B:1936— 
1938 inclusive 


Range 


By 49 states: 
Number 
of states ' 


By 64 districts: 
Number 
of districts 


and February 

1939-By 64 

districts: Number 

of districts 


Over 5.0 




1 
4 
9 
5 
45 


2 


2.1-6.0 


3 
5 
3 
38 


8 


1.1-2.0 


10 


.6-1.0 


5 




39 






Total 


49 


64 


64 







' Includes the District of Columbia. 

Source: Compiled from the Temporary National Economic Committee questionnaire Forms A and B. 



CONCKNTKATION OF ECONOMIC POWEJl 



14389 



Table 8. — Hot Rolled Sheets: Selected Consuming Areas for Detailed Analysis, 

February 1989 



Producing area ' 



All producing areas. 
Chicago 



St. Louis- 



Detroit. 



Cleveland- 



Youngstown. 



Pittsburgh. 



Buffalo. 



Philadelphia. 
Baltimore 



Basing point ' 



All basing points.. 

All basing points.. 

Pittsburgh 

Sparrows Point... 

Chicago-Oary 

Birmingham 

Buffalo 

Cleveland 

Middletown 

Detroit* 

All basing points.. 

Chicago-Oary 

Birmingham 

Granite City 

All basing points.. 

Pittsburgh 

Sparrows Point. . . 

Cfhicago-Oary 

Cleveland 

Middletown 

Detroit' 

All basing ponits. 

Pittsburgh 

Sparrows Point... 

Chicago-Gary 

Buffalo 

Cleveland 

Youngstown 

Middletown 

Detroit' 

All basing points. 

Pittsburgh 

Sparrows Point... 

Chicago-Gary 

Birmingham 

Buffalo 

Cleveland 

Youngstown 

Middletown 

Claymont *. 

All basins points. 

Pittsburgh. - 

Sparrows Point... 

Chicago- Gary 

Birmingham 

Buffalo 

Cleveland 

Youngstown 

Middletown 

Detroit' 

All bfising points. 

Pittsburgh 

Sparrows Point. . 

Chicago-Gary 

Buffalo 

Cleveland 

Middletown 

All basing points. 
Sparrows Point- . 

Birmingham 

All basing points- 
Pittsburgh. 

Sparrows Point-. 

Chicago-Gary 

Birmineham 

Buffalo 



All con- 
suming 
areas (net 
tons) 



190, 910 



41, 401 

402 

321 

27,580 

212 

351 

1,689 

2,372 

6,854 

2,677 

1,631 

194 

852 

29,792 

14 

2,100 

5,774 

1,178 

1,060 

19, 435 

20,811 

461 

776 

1,181 

1,599 

6,474 

493 

1,139 

8,321 

14, 891 

3,104 

1,109 

2,564 

345 

760 

2,239 

3,412 

954 

11 

21,912 

7,820 

2,018 

1,077 

2,647 

1,470 

2,326 

3,219 

572 

689 

8,246 

86 

1,262 

1,070 

2,021 

3, 505 

131 

1,277 

1,065 

67 

13, 878 

51 

11,293 

165 

2,104 

194 



Selected 

consuming 

areas (net 

tons) 3 



161, 035 



36,729 

379 

151 

25,269 

96 

26 

1,689 

2,265 

6,854 

1,205 

1,119 

75 

11 

27, 979 

14 

833 

6,459 

1,178 

1,060 

19, 435 

18, 461 

461 

776 

1,076 

1 

6,295 

408 

1,123 

8,321 

12, 757 

3,035 

826 

2,441 

13 

16 

2,183 

3,379 

864 

11 

16, 853 

6,001 

1,640 

883 

2,611 

16 

2,084 

2,370 

660 

689 

5,590 

86 

1,203 

761 

13 

3,397 

130 

1,066 

999 

67 

12, 099 

44 

10,629 

124 

2,091 

21 



Percent 



' Producing areas conform to Form B consuming Areas except Middletown-Ncvvport and Ashland. 
These areas include only the points listed. 

' Lists only basing points governing selected consuming areas. 

' Consuming areas taking 2% or more of total shipments. Areas selected were: Metropolitan New York, 
Philadelphia, Eastern Pennsylvania, Pittsburgh, Cleveland, Youngstown, Ohio-other, Indiana, Chicago, 
Illinois-other, Detroit, Michigan-other, Texas. 

* Not listed as a basing point by the Iron Age. 

» A delivered price. 



14390 



CONCEN'JHiATION OF ECONOMIC POWER 



Table 8. — Hot Rolled Sheets: Selected Consuming Areas for Detailed Analysis, 
February 1939 — Continued 



Producing area 



Birmingham. 



M Iddletown-Ne wport . 



Ashland. 



Indiana— other. 

Canton, Massillon, Mansfield. 



North Ohio River. 



All producing areas. 



Basing point 



All basing points 

Pittsburgh 

Sparrows Point.. 

Chicago-Gary 

Birmingham 

Middletown 

All basing points 

Pittsburgh 

Sparrows Point.. 

Chicago-Gary 

Birmingham 

Cleveland 

Youngstown 

Middletown 

All basing points 

Pittsburgh 

Sparrows Point.. 

Chicago- Gary 

Buflalo 

Cleveland 

Middletown 

All basing points 
Sparrows Point.. 

Chicago-Gary 

All basing points. 

Pittsburgh 

Sparrows Point. . 

Chicago-Gary 

Cleveland 

Youngstown 

Middletown 

All basing points. 

Pittsburgh 

Sparrows Point. . 

Chicago-Gary 

Cleveland^ 

Youngstown 

Middletown 

Detroit = 

Pittsburgh 

Sparrows Point.. 

Chicago-Gary 

Birmingham 

Granite City 

Buffalo 

Cleveland-- 

Youngstown 

Middletown 

Claymont 

Detroit' 

Pacific Ports 

Gulf Ports < 



All con- 


Selected 




suming 


consummg 


Percent 


areas (net 


areas (net 


tons) 


tons) 




6,752 


2,714 


40.2 


2 


2 


100.0 


122 


6 


4.9 


28 


28 


100.0 


6,114 


2.673 


43.7 


5 


5 


100.0 


8,566 


7,543 


88.1 


471 


471 


100.0 


822 


709 


86.3 


1,973 


1,762 


89.3 


265 


200 


75.5 


1,662 


1,500 


90.8 


47 


47 


100.0 


3,058 


2,584 


93.3 


4,299 


3,569 


83.0 


6 


' 6 


100.0 


522 


388 


64.7 


969 


874 


90.2 


308 


12 


3.9 


1,096 


1,096 


100.0 


1,245 


1,243 


99. S 


563 


453 


80.5 


2 


2 


100.0 


509 


451 


88.6 


1,009 


932 


92.4 


87 


80 


91.9 


12 


7 


58.3 


28 


27 


96.4 


803 


741 


92.3 


3 


3 


100.0 


74 


74 


100.0 


14, 836 


12, 264 


82.7 


2,676 


2,604 


97.3 


3,119 


2,071 


66.4 


2,282 


1,278 


56.0 


1,276 


1,086 


85.1 


796 


606 


76.1 


1,861 


1,861 


100.0 


2,758 


2,758 


100.0 


15, 180 


13, 183 


86.8 


24, 543 


20,190 


81.9 


45, 831 


41, 552 


90.7 


12, 670 


7,826 


61.8 


3,576 


11 


0.3 


7,600 


104 


1.4 


22, 098 


21, 249 


96.2 


7,980 


6,813 


85.4 


12,497 


12,039 


96.3 


11 


11 


100.0 


38, 057 


38, 057 


100.0 


857 





0.0 


10 





0.0 



Source: Compiled from the Temporary National Economic Committee questionnaire Form B, February, 
1939. 



CONCENTRATION OF ECONOMIC POWER 



14391 



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14392 



CONCENTRATION OF ECONOMIC POWER 





















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GONCENTKATION OF K(X)NOMlC POWER 



14393 






88 



Si 

II 

ja.i5 



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•z 

a 
'a 
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14394 



OONCKNTKA'IMON OF KCIONOMIC POWER 



Table 11. — Hot Rolled Sheets: Published Base Prices and Calculated Base Prices 
by Basing Points February 1939 



Basing point 


Published 

base price 

per net 

ton ' 


-Calculated 

base price 

per net 

ton 2 


Basing point 


Published 

base price 

per net 

ton> 


Calculated 

base price 

per net 

ton 2 




$43. 00 
43.00 
43.00 
43.00 
43.00 
43.00 


$38. 51 
3S.71 
37.20 
.39. 38 
38.81 
38.38 


Youngstown 


$43.00 
43.00 

4S.00 
45.00 
53.00 


$39.21 


Chicago-Gary 

Birmingham 

Buffalo 


Middlctown 


40.97 


Detroit' 


41.80 


Granite City 

Pacific Ports 


42.57 




51.58 













' Listed by all February 1939 issues of the Iron Ape. 

' Compiled from Temporary National Economic Committee questionnaire Form B, February 19 i9. 

3 Delivered price (not a basing point). 



CONCENTRATION OF ECONOMIC POWER 



14395 



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124401 — 41 — pt. 27- 



■< D Pk Q 
—18 



W-SWWoap40M 



S ° 



s 

•3 
S 

a 

u 
be 

.5 



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14396 



CONCENTllATION Ob' ECONOMIC 1'0W1<:R 



Table 13. — Hot Rolled Sheets: Shipments Received Compared to Shipments Made by 
Producing Areas, February 19S9 



Froduciiig area ' 



All producing areas 

Chicago, Indiana, othor, Illinois, other. _ 

JMUsburgh, North Ohio River 

Youngstown, Cleveland, Canton-Massillon-Mans 

field ~ .— - 

Detroit _ 

Baltimore, Philadelphia, Eastern Pennsylvania 

Metropolitan New York__ 

Kentucky, Ohio, other. _ 

Buffalo -.- 

Birmingham, Alabama, other 

St. Louis ...1 



Total 
shipments 
made by 
produc- 
ing area 



190, 910 



41, 9G4 

36, 7-18 

3C,711 
29,792 

iCiss 

12, 865 
8,246 
6,752 
2,677 



Shipments receivOT in producing area 



Total re- 
ceived in 
produc- 
ing area 



1S5, 881 



40, 114 
6,044 

23, 295 
46, 153 

22,921 
9,844 
3,287 
1,038 
3, 185 



Received 
from, iden- 
tical area 



81, 203 



25, 738 
4,441 

12, 573 
19, 435 

11,774 

4,378 

1,109 

992 

763 



Percent 
received 
from iden- 
tical area 



64.2 
73.5 



54.0 
42 1 



51.4 
44.5 
33.7 
95.6 
24.0 



Total re- 
ceived in 
area as a 
percent 
of total 
shipments 
from the 
area 



81.7 



95.6 
16.4 

63. .5 

154.9 

151.2 
76.5 
39.9 
15.4 

119.0 



' Producing areas conform to Form B consuming areas. Major consuming areas contiguous to produciuir 
areas which have been included are indicated in the stub. 

Source: Compiled from Temporary National Economic Committee questionnaire Form B, February 
1939. 



CX)NCENTRAT10N OF ECONOMIC POWER 



14397 



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5 ® o Si's <s ff o .2 o-'= O O g O a; O £ 

Br^lStl"*^? 03 

o »*i F«^ r^ T <H (^ fc^ > — »j^ 



14398 



CONCENTRATION OF ECONOMIC POWER 




»j ^ -. »j - --^ »! £ « O ' 

*n /c ' 'u "^/n fl ? « '5 * 

D- 03 G. O D."^ O.*^ 0-*± ft-g 

ggBSBTB-gESII 






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SoS oSoloSog/Og 

■"cJie"5 >5! .>£ a- cs « 
WmPS.s i^< <; S I, ^ ^- 



CONCENTRATION OF ECONOMIC I^OWER 



14399 



^•^t^Wt^W^^-ttOOiiO^^C 







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iM « - 

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14400 



CONCEJSTltATlON OF ECONUMIO POWEll 












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CONCENTRATION OF ECONOMIC POWER 



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14402 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



14403 



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C< )NOENTR5.TION OF E(J(^N()IVI1C POWh^ll 



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CONCKNTllATION OF ECONOMIC POWER 14405 

Part 4 

Table 1 .—Hot Rolled Strip: Basing Points and Basing Point Prices 
IPrices per net ton] 



Basing point 



Pittsburgh 

Chicago-Gary ' 
Binningham... 

Cleveland 

Middletown--. 
Youngstown... 
Granite City... 
Detroit' 



May 1938 


February 1939 


Base price 


Differential 
over Pitts- 
burgh 


Base price 


Differential 
over Pitts- 
burgh 


$48.00 




$43.00 
43.00 
43.00 
43.00 
43.00 
43.00 

45.00 




50.00 
51.00 


2.00 
3.00 


6.66 

0.00 
0.00 


m 




0.00 


(-') 




0.00 


52.00 


4.00 
4.00 




52.00 


2.00 



' Gary was not listed as a basing point by the Iron Age during May 1938. 
2 Not listed as a basing point by the Iron Age during the period covered. 
' A delivered price (not a basing point). 

Source: All May 1938 issues prior to the extra revisions and base price change and all February 1939 issues 
of the Iron Age. 



Table 2.— Hot Rolled Strip: 



Distribution of Capacity by Distance from t 
Basing Point, 19S8 



Nearest 



Distance from the nearest basing point (air miles) ' 


Capacity 

(1,000 gross 

tons)' 


Percent of 
total capacity 


Total United States 


4,286.3 


100.0 






1-25 


'2,807.0 
596.7 
482.4 
400.2 


65.5 


26-50 


13.9 


51-100 - 


11.3 


Over 100 . . 


9.3 







' Includes all ba.sing points listed in the Iron Age after the change in basing points, June 1938. 
2 Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the Iron 
Age. 
' Includes 2,800 gross tons on the Pacific Coast. 



14406 CONCENTRATION OF ECONOMIC POWER 

Table 3. — Hot Rolled Strip: Distribution of Total and Sampled Capacity 



Producing area i 



TotalU.S. Capacity' 



1,000 gross 
tons 



Percent 
of total 



Capacity Sampled 



1,000 gross 
tons 



Percent of 
total capac- 
ity sampled 



Total United States - --- - 

Integrated ' 

Semi-integrated -.. 

Non-integrated -. 

Youngstown 

Chicago - 

Pittsburgh 

Detroit 

North Ohio River 

Cleveland 

Metropolitan New York, Rhode Island, Massachusetts 

St. Louis - - 

Georgia.- - 

Areas outside the sample: 

Canton, Massillon, Mansfield _ 

Indiana-other, Illinois-other 

Eastern Pennsylvania, Philadelphia.-- - 

Birmingham - 

Colorado.- -.- - 

Minnesota 

Buffalo... 

California (northern & southern) 

Tennessee _ 



4,286.3 



100.0 



3, 674. 3 



85.7 



(2, 979. 3) 

(659. 6) 

(647. 4) 

1, 275. 4 

1, 032. 1 

620.0 

477.4 

268.0 

250.0 

167.0 

95.0 

36.0 

56.0 
50.5 
32.7 
7.2 
5.0 
5.0 
4.7 
2.8 
1.5 



(69. 5) 
(15. 4) 

(!•■;. 1) 

29.8 
24.1 
12.1 
11.1 
6.3 
5.8 
3.9 
2.2 
0.8 

1.3 
1.2 
0.8 
0.2 
0.1 
0.1 
0.1 
0.1 
(«) 



< (2, 492.8) 

(556. 0) 

(625. 5) 

1, 275. 4 

779.4 

468.5 

397.0 

268.0 

200.0 

155.0 

95.0. 

36.0 



(83. 7) 
(84.3) 
(96. 6) 
100.0 
75.5 
90.1 
83.2 
100.0 
80.0 
92.8 
100.0 
100.0 



• Producing areas conform to Form B consuming areas. 

• Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. 

• Degree of company integration (not plant). 

< Of the capacity sampled, 67.9 percent represented integrated companies, 15.1 percent, semi-integrated 
companies, and 17.0 percent, non-integrated companies. 
' Less than .05 percent. 

Table 4. — Hot Rolled Strip: Distribution of Sampled Capacity by Producing 
Areas and Shipments by Producing Areas 



Producing Area ' 



Sampled Capacity ' 



1,000 gross 
tons 



Percent of 
sampled 
capacity 



February 1939 ship- 
ments ' 



Net tons 



Percent of 
total ship- 
ments 



Total United States 

Youngstown.. 

Chicago 

Pittsburgh 

Detroit- 

North Ohio River 

Cleveland 

Metropolitan New York, Rhode Island 

St. Louis 

Georgia 



3, 674. 3 



, 275. 4 
779.4 
468.5 
397.0 
268.0 
200.0 
156.0 
96.0 
36.0 



34.7 
21.2 
12.8 
10.8 
7.3 
6.4 
4.2 
2.6 
1.0 



67, 896 



26,271 
11,903 
4.516 
9,215 
8,792 
3,777 
2,566 
1,328 
528 



100.0 



37.2 
17.6 
6.7 
13.6 
12.9 
6.6 
3.8 
1.9 



' Producing areas conform to Form B consuming areas. 

« Source: The Iron and Steel Works Directory of the United States and Canada, 1938. 

» Source: Temporary National Economic Committee Form B questionnaire, February 1939. 



CONCENTRATION OF ECONOMIC POWER 14407 

Table 5. — Hot Rolled Strip: Distribution of Total Capacity and Form A Sampled 
Capacity by Producing Area {District Sample), 1938 



Producing area ' 



Total United States 

Youngstown 

Chicago 

Pittsburgh - 

Detroit 

North Ohio River - 

Cleveland _ 

Metropolitan New York, Rhode Island, Massachusetts 

St. Louis - 

Indiana — other, Illinois — other 

Canton, Massillon, Mansfield- 

Georgia.-- - - 

Eastern Pennsylvania, Philadelphia - 

Birmingham — -- 

Colorado.- 

Minnesota 

Buffalo --- 

California (northern and southern) --. 

Tennessee-- — 



Total United 
States Ca- 
pacity, 
1,000 Gross 
tons' 



4,286.3 



1, 276. 4 

1, 032. 1 

520.0 

477.4 

268.0 

250.0 

167.0 

95.0 

50.5 

56.0 

36.0 

32.7 

7.2 

5.0 

5.0 

4.7 

2.8 

1.5 



Capacity Sampled 



1,000 gross 
tons 



1, 103. 5 



569.0 
351.4 
118.0 
75.0 



60.0 
12.0 



7.2 
5.0 
5.0 



0.9 



Percent sam- 
pled by pro- 
ducing area 



27.8 



44.6 
34.0 
22.7 
15.7 



20.0 
7.2 



100.0 
100.0 
100.0 



32.1 



< Producing areas conform to Form B consuming areas. 

> Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. 

Table 5A. — Hot Rolled Strip: Distribution of Total Capacity and Form Sampled 
Capacity by States {State Sample), 1938 





Total United 
States Ca- 
pacity, 
1,000 gross 
tons ' 


Capacity sampled 


State 


1,000 gross 
tons 


Percent sam- 
pled by 
state 


Total United States 


4, 286. 3 


2, 789. 9 


65.1 






Ohio V 


1, 256. 

863.1 

634.7 

535.2 

477.4 

268.0 

120.0 

36.0 

35.0 

16.0 

12.0 

7.7 

7.2 

5.0 

5.0 

4.7 

2.8 

L5 


1,050.0 
713.4 


83.6 


Pennsylvania - 


82.7 


Illinois . . - 






351.4 
'377.0 
'268.0 


65.7 


Michigan -- - 


79.0 


West Virginia - 


100.0 
























Massachusetts .. . . 


12.0 


100.0 






Alabama . .. ....... 


7.2 
5.0 
6.0 


100.0 


Colorado -- - 


100.0 


Minnesota - - 


100.0 


New York . 




California . . . ... 


0.9 


32.1 


Tennessee . .. . ... . 











' Source: The Iron and Steel Works Directory of the United States and Canada, 1938. 
< 322,000 gross tons of this capacity not included in calculations for tables 6 and 7. 
' Not included in calculations for tables 6 and 7. 



14408 



CONCIONTIIATION OF ECONOMIC POWER 



Ta.bi,b B. — Hoi Rolled Strip: Relative Stability of Tonnage Distribution By Con- 
sum.ing Region, 1936, 1937, 1938, and February 1939. 



Regions 



Form A : Distribution by 


Form A: Distribution by 




states 




consuming districts 


1936 


1937 


1938 


1936 


1937 


1938 


890, 032 


1, 190,987 


489, 204 


818, 816 


860,223 


309,223 


100.0 


100. 


100.0 


100.0 


100.0 


100.0 


20.7 


20 5 


26.1 


15.0 


16.8 


24.5 


72.2 


74.0 


64.8 


78.0 


76.3 


63.4 


1.4 


1.3 


1.8 


1.1 


L2 


1.8 


1.0 


1.3 


2.3 


0.8 


1.3 


2.7 


2.8 


l.I 


2.6 


3.0 


2.2 


4.0 


1.9 


1-8 


2.4 


2.1 


2.2 


3.5 



Form B: 
Distribu- 
tion Feb- 
ruary 1939 



All regions (net tons). 

Percent - -- 

North Eastern ' 

North Central' 

West Central » 

South Eastern ♦ 

Southern and South Western ' 

Mountain and Western* 



67, 896 

100.0 

20.6 

75.7 

1.4 

0.7 

L2 

0.4 



1 Includes the following states and consuming districts: Me., N. H., Vt., Mass., R. I., Conn., N. Y., 
N. J., Penna., Met. N. Y., Eastern and Central N. Y., Bufl., Phila., Ea. Pa., Pgh. 

* Includes the following states and consuming districts: Ohio, Ind., 111., Mich., Wis., Minn., Cleve., 
Yst., N. Ohio R., Cant.-Mans., S. Ohio R., Ohio-other, Chi., Ill.-other, DetroU, Mich.,-other. 

'Includes the following states and consuming districts: Iowa, Mo., N. Dak., S. Dak., Neb., Kans., 
St. Louis, Kansas City, Mo.-other. ' 

* Includes the following states and consuming districts; Md., D. C, Va., W. Va., N. Carolina, S. Caro- 
lina, Georgia, Fla., Bait., Md.-other. 

* Includes the following states and consuming districts: Kentucky, Tennessee, Alabama, Mississippi, 
Arkansas, Louisiana, Oklahoma, Texas, Birmingham, Alabama-other. 

6 Includes the following states and consuming districts: Montana, Idaho, Wyoming, Colorado, New 
Mexico, Arizona, Utah, Nevada, Washington, Oregon, California, Southern California, Northern California. 

Note: Each region is defined by the areas listed, eliminating duplications. The most important states 
and consuming districts have been italicized. 



Table 7. — Hot Rolled Strip: Range of Variation of .Tonnage Distribution in 
Consuming States and Consuming Districts, 1936, 1937, 1938 & February 1939 

[Range of distribution of percentages by areas] 



Range 


Forms A: 0936-1938 
inclusive 


Forms A & B dis- 
tribution 193fr-1938 
inclusive and Feb- 
ruary 1939 


By 49 states: 

Number of 

states ■* 


By 64 dis- 
tricts: Num- 
ber of 
districts 


By 64 districts: 
Number of distri6ts 


Over 5.0 


1 
3 
2 
6 
37 


3 
2 
2 
9 
48 


3 

5 
9 
7 
40 


2.1-5.0 


1.1-2.0 


0.6-1.0 


0.5-or under 


Total 


49 


64 


64 





' Includes the District of Columbia. 

Source: Compiled from Temporary National Economic Committee Forms A and B. 



CONOENTUATION OF ECONOMIC POWER 



14409 



Table 8. — Hot Rolled Strip: Selected Consuming Areas for Detailed Analysis, 

February 1939 



TroduciTig area ' 


Basing point ^ 


All con- 
suming 
areas 

(net 
tons) 


Selected 
consum- 
ing areas ' 

(Net 
tons) 


Percent 

of all 
consum- 
ing areas 


All producing areas 


All basing points 


67,896 


60,364 


88.9 


Chicago - 


All basing points 

Pittsburgh 


U,903 


11, 480 


96.4 




3,480 

6,751 

54 

1,422 

104 


3,395 

6,514 

49 

1,419 

103 


97.6 




Chicago-Qary 


96.5 






90.7 






99.8 




Detroit* .. 


00.0 




All basing points 

Chicago-Qary 




St. Louis - - 


1,328 


697 


52.5 




1,084 
54 
126 


517 
54 
126 


47.7 






100.0 




Detroit < 


100.0 




All basing points 

Pittsburgh , _ 

Chicago-Qary 




Detroit - 


9,215 


9,166 


99.5 




214 

662 

95 

51 

105 

8,088 


204 
625 
93 
51 
105 
8,088 


95.3 
94.4 






97.9 






100.0 






100.0 




Detroit* - 


100.0 




All basing points 

Pittsburgh ._. 




Cleveland. — 


3,777 


3,615 


95.7 




54 

39 

2,936 

10 

213 

525 


3 

8 

2,888 

5 

213 

'498 


0.6 






20.5 






98.4 






50.0 






100.0 




Detroit* . 


94.9 




All basing points 

Pittsburgh 






25, 271 


22,346 


88.4 








5,161 
4, 121 
5,836 
6,041 
1,310 
1,881 


3,654 
3,305 
5,821 
6,465 
1,220 
1,881 


70.8 




Chicago-Gary . 


80.2 






99.7 






97.3 






93.1 




Detroit * . . ... 


100.0 




All basing points 

Pittsburgh 






4,516 


3,598 


79.7 








1,994 
602 

1,031 
648 
241 


1,604 
485 
789 
479 
241 


80.4 






80.6 




Cleveland 


76.5 






73.9 






100.0 




All basing points 

Chicago-Gary 






528 


57 


10.8 




4 
152 


2 

55 


50.0 




Middletown 


36.2 




All basing points 

Pittsburgh 






2,566 


1,780 


69.4 








2,393 

10 

'39 

% 


1,709 
10 
38 
23 


71.4 




Buffalo 5 - 


100.0 




Cleveland -. 


97.4 




Youngstowa 


24.0 



' Producing areas conform to Form B consuming areas. 

' Lists only basing points governing selected consuming areas. 

s Consuming areas receiving 2 percent or more of total shipments. Areas selected were: Massachusetts, 
Metropolitan New York, Buffalo, Pittsburgh, Cleveland, Youngstown, Canton-Mansfield, Ohio-other, 
Indiana-other, Chicago, Illinois-other, Detroit. 

* A delivered price (not a basing point). 

» Not listed as a basing point by the Iron Age. 



CONCENTRATION OF ECONOMIC POWER 

v: Selected Consuming Ar 
'ebruary 1939 — Continued 



14410 

Table 8. — Hot Rolled Strip: Selected Consuming Areas for Detailed Analysis, 
Pel ~ " 



Producing area 


Basing point 


All con- 
suming 
areas 
(net 
tons) 


Selected 
consum- 
ing areas 
(Net 
tons) 


Percent 

of all 
consum- 
ing areas 


North Ohio River ., 


AH basing points. 

Pittsburgh... 


8,792 


7,625 


86.7 








1,918 
553 

1,262 
843 
414 

3,799 


1,065 
447 

1,261 
817 
414 

3,621 


65.5 




Chicago-Gary 

Cleveland 


80.8 
99.9 




Youngstown 


96.9 




Middletown . . 


100.0 




Detroit < 


95.3 




Pittsburgh 






15, 298 

14,523 

13,844 

11,253 

8,289 

3,911 

10 

3 

703 

62 


11,634 

14,317 

11,903 

10,939 

7,840 

3,721 

10 








76.0 




Detroit < 


98.0 




Chicago-Gary. 

Cleveland 


86.0 
97.2 




Youngstown 


94.6 




Middletown ... 


95.1 




BuiTalo* 


100.0 




Granite City 


0.0 




Birmingham ... .. 


0,0 




Pacific Ports 


0.0 









< A delivered price (not a basing point). 

> Not listed as a basing point by the Iron Age. 

Source: Temporary National E conomic Committee Form B questioimaire February 1939. 



CONCENTRATION OF ECONOMIC POWER 



14411 






Cl W Q> 

s|a 



C'O 



^^f^ 



Q <^ 0} 



^- 



bj)*-> fV <S Q OS 

« -a & a S £ 



13 9 d a a -.'O 

w O o S S TO 5s 

o at) a £*;5 



«.-*i-«cO-O^OSNC 









1^ f^i-« |-*C0'«J*'«J*CC)»O00COI^U5CO 
■ - > to CD .-» -^ CO Ci CO 



cDTt<CiCMQt^OOO>'-HOt-^<OOOl 



cceotDooN >-"^t«- eoc^GOO 



00Q0OS»«»OiO»OCDtOC^»O.-tM«C0 
OOOOC^Clh-COcO<—CSC'-i-«J-00> 

ooc^icot^c<icscoooc^t^"*cor^ 
00 00 lo CO i-TrH i-T 






3S 



O u. 



, o tj)^ a-? o^ i-^ o 

i Sf b^S — "oJ o W)-5 W) g* S bc 



00 00 



OCbOO'^Q000CDC4OCO0»^*-t 



W IrHCSWN C4i-i I T-< ^w 



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Qoogccoaoioocoo'^cooo'^ 
oooooOr-ieoeoccos^oco.-iooiO'^ 



(DeDr--^COCOfONC)C^»C^r-(i-i^ 



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1124491 — il— pt. 27- 



-19 



CIS o o 

Pa** 



m O O 

s « ° 









c.£'a 



<° a u 
c g d 
So* 



14412 



CONCENTRATION OF ECONOMIC POWER 



^ ' 






Ph^ 



t^OiCOOO 



825 

S3 












CJtCO 
■*MO 

aoOQ 



tC'^O—'O 
OC0O-«("S 



ICO «0.-< CO 



8S2 



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'S55< 






gs 



ooo 
toco 



ooQoopopoooogoQoooooQpoopoooooooo 
ooooooooooooooooooooooooooooooooo 









3COCOfOCOfOCOCOCOCOCOCO»OfO«COCOCOCOCOCOCOCO»0 













m oa o 

—. a ^ ^ 



<^ O m 



t, fl o 



£•2 a 

C^ o ^ 

<0 t>>03 ® 






bOT3 ' 

as] 



B 



HO H 

0<;p, 5 



CONCENTRATION OF ECONOMIC POWER 



14413 



Table U. —Hot Rolled Strtp—CompaHson oj Published and Calculated Base 
Pncesfor (hven Basing Points, February 19S9 



Pittsburgh.... 
Chicago-Gary. 
Birmingham.. 

Cleveland 

Mlddletown. 



Youngstown. 
Detroit' 



Basing point 



Published 


Calculated 


base price ' 


base price > 


(per net ton) 


(per net ton) 


$43.00 


$39.50 


43.00 


37.64 


43.00 


37.47 


43.00 


40.97 


43.00 


41.85 


43.00 


38.02 


45.00 


42.18 



I Source: All February 1930 issues of the Iron Age 

' I'^^ti^'^Xl'X^^o^'^' ^">°<''°'° ^°°'°^"- ^»- B questionnaire. February 193». 



14414 



CONCENTRATION OF ECONOMIC POWER 



05 



5^ 



(23 



05 



O 03 oS Hj 

=5 o3 S D. 

oog.a 



to a) g o 

afl-ci ft 
O 



cig|o 
o ■^ ft 



9 BS 
o « « 

Oog 






o 



a 9 S 2 



ci ci c4 -H c4 (N •>»• TO «■ ci (H •-< -H .-i id •^ •* TiJ 



'X'' 


^ 


§ 


si' ; ' 


to 

r 


f 



«3 t* OS .-H 



CO CO CO 



OT .-I CO ■* .-< 



CO CO CO w 



a S M °"<J 
S O S C3^ 

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. M 






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» o o S^ ft 



* <D 



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02S 



te 



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CD M CO 



lO 00 U3 0» «H 



00 P) « 1-1 



to »-< CO 00 "O 

cs r^ o o r-* 



to CO ■-< .-I 



t* to OQ 

t>. to fH 

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CO Cf -H 



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>HOPHOOfi(OeQ 



< Jh y 



K fi 5 S 



•S 3 

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ll"! « 

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H <» -S. 
ogft S' 

E flo "^ 

O ftO >; 



■nip 8 

,&< 5 
~ CO 






CONCENTRATION OF ECONOMIC POWER 



14415 



Table 13. — Hot Rolled Strip; Shipments Received Compared to Shipments Made in 
Producing Areas, February 19S9 



Producing Areas ' 



All Areas 

Youngstown 

Chicago 

Pittsburgh, North Ohio River, 

Detroit 

Cleveland 

New England, New York ' 

St. Louis 

Georgia..- 



Total 
shipments 
made by 
plants in 
producing 
areas 



67, 896 



25, 271 
11,903 
13, 308 
9,215 
3,777 
2,566 
1,328 
528 



Shipments received in producing areas 



Total 
received in 
producing 

area 



52, 824 



4,192 

7,860 

3,881 

26, 885 

2,340 

> 6,966 

657 

43 



Received 
from plants 
in identi- 
cal area 



22, 082 



3,625 

5,229 

2,065 

8,088 

202 

" 2. 457 

409 

7 



Percent 
received 
from plants 
in identi- 
cal area 



41.8 



86.5 
66.5 
53.2 
30.1 
8.6 
35.3 
62.3 
16.3 



Total 
receipts as 
percent of 
total ship- 
ments 



77.8 



16.6 
66.0 
29.2 

291.8 
62.0 

271.5 
49.6 
8.1 



' Producing areas conform to Form B consuming areas except New England, New York (see note 2). 
' Includes Maine, Massachusetts, Rhode Island, Connecticut, Metropolitan New York, and Eastern 
and Central New York. 

Source: Compiled from the Temporary National Economic Committee questionnaire form B, February 
1939. 



Table 14. — Hot Rolled Strip; Analysis of the Market Areas of Grouped Plants as 
Measured by the Freight Absorption on Shipments Priced on the Nearest Basing 
Point, February 1939 





Nearest basing 
point 


Total ship- 
ments 


Shipments 
priced on 

nearest bas- 
ing point 


Shipments to all areas in which 
freight absorption is: 


Producing area • 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Equal to or 
less than 
standard ■ 


Greater than 
standard ' 




Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Per- 
cent ol 
total 
ship- 
ments 


Freight 
absorp- 
tion 
per 
ton 


Youngstown 

Chicago 


Youngstown. -- 
Chicago-Gary.. 
Pittsburgh 

Cleveland, De- 
troit. 11 

Cleveland 

Pittsburgh 

Chicago-Gary.. 
Birmingham... 


25,271 
11,903 
13, 308 

9,215 

3,777 
2,566 

1,328 
528 


1.55 
1.33 
3.33 

.69 

-.34 
-5.80 

.46 
1.15 


6,641 
6,751 
3,912 

8,183 

2,936 
2,393 

1,084 
317 


-.15 
.21 
.92 

.40 

-1.24 
-6.13 

-.63 
• -.74 


2 3,625 
3 1, 704 
* 2, 670 

»3 

(10) 

«590 

7 517 

8 145 


-.32 

-.15 

.32 

-.33 

""-7.04 

-3.06 
-3.10 


21,646 
10, 199 
10,638 

9,212 

3,777 
1,976 

811 
383 


85.7 
85.7 
79.9 

99.9 

100.0 
77.0 

61.1 
72.5 


1.86 
1.57 


Pittsburgh, North 

Ohio River. 
Detroit 


4.09 
.69 


Cleveland... 


-.34 


Metropolitan New 
York, Rhode 
Island. 


-5.42 
2.69 


Georgia 


2.7« 








Total 


67, 896 


1. 34 32. 217 


-.37 


9,254 


-0.73 


58,642 


86.4 


1.66 








' 





' standard freight absorption for each producing area is the freight absorption of sales made on the near- 
est basing point. 

' Comprises shipments to Youngstown. (aggregate tons received in area 4192) 

' Comprises shipments to Indiana— other, Illinois — other, Michigan— other, Wisconsin, Minnesota, St. 
Louis, Kansas City, Arizona, Colorado, (aggregate tons received in area 5493) 

< Comprises shipments to Massachusetts, Rliode Island, Metropolitan New York, Eastern and Cen- 
tral New York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, North Ohio River, Baltimore, 
Virginia, West Virginia, North Carolina, Southern California, (aggregate tons received in area 13,785) 
* Comprises shipments to Michigan — other, (aggregate tons received in area 834) 
« Comprises shipments to Rhode Island, Connecticut, (aggregate tons received in area 1635) 
' Comprises shipments to St. Louis, Kansas City, Missouri, Nebraska, Arkansas, (aggregate tops re- 
ceived in area 814) 

' Comprises shipments to North Carolina, South Carolina, Georgia, Florida, (aggregate tons received 
in area 197) < 

' Producing areas indicated conform to Form B consuming areas. 

'" There are no shipments lower than standard in this instance because shipments from given plant loca- 
tions to given consuming areas have been aggregated irre^spective of basing point. The weight of sales on 
foreign basing points raises the average. 
" A delivered price'(not a basing point). 

Source: Compiled from the Temporary National Economic Committee Form B questionnaire, February 
1939. 



14416 



CONCENTRATION OF ECONOMIC POWER 



Table 14A. — Hot Rolled Strip: Analysis of the Market Areas of Grouped Plants 
as Measured by the Freight Absorption on Shipments Priced on the Neares 
Basing Point {Adjusted for Basing Point Price Differentials), February 19S9 





Nearest basing 
point 


Total ship- 
ments 


Shipments 
priced on 

nearest bas- 
ing point 


Shipments to all areas in which 
freight absorption is: 


Producing area • 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Equal to or 
less than 
standard ' 


Greater than 
standard ' 




Net 
tons 


Freight 
absorp- 
tion 
per 
ton 


Net 
tons 


Per- 
cent 
of 
total 
ship- 
ments 


Freight 
absorp- 
tion 
per 
ton 


Youngstown _ 

Chicago 


Youngstown... 

Chicago. 

Pittsburgh 

Cleveland-De- 
troit.'!) 

Cleveland 

Pittsburgh 

Chicago 

Birmingham... 


25,271 
11,903 
13, 308 

9,216 

3,777 
2,566 

1,328 

528 


1.38 
1.31 
2.76 

-1.07 

-0.62 
-5.80 

0.27 
1.15 


6,641 
6,751 
3,912 

8,813 

2,936 
2,393 

1.084 
317 


-.15 
.21 
.92 

-1.58 

, -1.24 
-6.13 

-.63 
-.74 


2 3,630 

3 1,704 
< 2,670 

w 
(») 

«590 

'517 
> 145 


-.33 

-.15 

.32 

""-7." 04 

-3.06 
-3.10 


21, 641 
10, 199 
10,638 

9,215 

3,777 
1,976 

811 
383 


85.6 
85.7 
79.9 

100.0 

100.0 
77.0 

61.1 
72.5 


1.66 
1.55 


Pittsburgh, North 

Ohio River. 
Detriot 


3.38 
-1.07 


Cleveland- 


-0.62 


Metropolitan New 
York-Rhode Is- 
land. 

St. Louis 


-5.42 
2.38 


Georgia 


2.76 






Total 


67, 896 


o.flo 


32, 217 


-0.37 


9,256 


-.73 


58,640 


86.4 


1.16 













' standard freight absorption for each producing area is the freight absorption on sales on the nearest 

basing point. 
» Consists of shipments to Youngstown, Washington. (Aggregate tons leceived in area — 4,197.) 
3 Consists of shipments to Indiana-other, Illinois-other, Michigan-other, Wisconsin, Minnesota, St. 

Louis, Kansas City, Arizona, Colorado (aggregate tons received in areas listed — 5,493). 

• Consists of shipments to Massachusetts, Rhode Island, Metropolitan New York, Eastern and Central 
New York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, North Ohio River, Baltimore, 
Virginia, West Virginia, North Carolina, Southern California (aggregate tons received in areas listed — 
13,785). 

» There are no shipments lower than standard in this instance because shipments from given plant loca- 
tions to given consuming areas have been aggregated irrespective of basing point. The weight of sales on 
foreign basing points raises the average with the effect shown. 

• Consists of shipments to Rhode Island, Connecticut (aggregate tons received in areas listed— 1,635). 

" Consists of shipments to St. Louis, Kansas City, Missouri, Nebraska, Arkansas (aggregate tons re- 
ceived in area— 814). 

' Consists of shipments to North Carolina, South Carolina, Georgia, Florida (aggregate tons received in 
area 197). 

• All producing areas conform to Form B consuming areas. 
1° A delivered price (not a basing point). 



CONCENTRATION OF ECONOMIC POWER 



14417 



Table 15. — Hot Rolled Strip: Analysis of the Market Areas of Grouped Plants as 
Measured by the Mill Net on Shipments Priced on the Nearest Basing Point 
February 1939 



Producing area <° 



Nearest basing 
point 



Total ship- 
ments 



Net 
tons 



Mill 
net 
per 
ton 



Shipments 

priced on 

nearest 

basing 

point 



Net 
tons 



Mill 
net 
per 
ton 



Shipments to all areas in which 
mm net is: 



Less than 
standard > 



Net 
tons 



Per- 
cent 
of 
total 
ship- 
ments 



Mill 
net 
per 
ton 



Net 
tons 



Mill 
net 
per 
ton 



Youngstown 

Chicago 

Pittsburgh, North Ohio 

River. 
Detroit 



Youngstown... 
Chicago-Gary.. 
Pittsburgh 



Cleveland 

Metropolitan New 
York, Rhode Island. 

St. Louis -. 

Georgia 



Cleveland-De- 
troit." 

Cleveland 

Pittsburgh 



Chicago-Gary.. 
Birmingham... 



25,271 
11, 903 

13, 308 

9,215 

3,777 
2,566 

1,328 
628 



36.90 
37.89 
38.05 



41.90 
43.84 



40.11 
34.70 



6,641 
6,751 
3,912 

8,183 

2,936 
2,393 

1,084 
317 



38.22 
36.45 
39.17 

41.99 

42.91 
44.34 

41.35 
37.71 



14, 831 
5,285 
9,657 

9,167 

3,727 
714 

840 
451 



58.7 
44.4 
72.6 



98.7 
27.8 



63.3 
85.4 



35.37 
35.31 
37.06 



41.88 
42.13 



37.30 
32.87 



2 10,440 
' 6, 618 
< 3, 651 



5 50 

7:,«52 



8 488 
977 



39.07 
39.95 
40.65 



43.76 
44.51 



14.96 
45.42 



Total. 



38. 55 32, 217 



44,672 



37.70 



23,224 



40.18 



' Standard mill net for each producing area is the mill net on sales on the nearest basing point. 

> Comprises shipments to: Maine, Connecticut, Eastern and Central New York, Eastern Pennsylvania 
Pittsburgh, Cleveland, Youngstown, North Ohio River, Canton-MassUlon-Mansfield, South Ohio River, 
Ohio-other, Indiana-other, Iowa, Kansas City, Delaware, Baltimore, District of Columbia, Virginia, 
West Virginia, North Carohna, South Carolina, Oklahoma, Washington, Southern California, Northern 
California. (Aggregate tons received in area 20,126.) 

3 Comprises shipments to: Massachusetts, Metropolitan New York, Eastern and Central New York, 
Philadelphia, Eastern Pennsylvania, Pittsburgh, Cleveland, Youngstown, Ohio-other, Indiana-other, 
Illinois-other, Detroit, Michigan-other, Wisconsin, Minnesota, St. Louis, Kansas City, Baltimore, Georgia, 
Kentucky, Tennessee, Colorado, Arizona, Southern California, Northern California. (Aggregate tons 
received 63,218.) 

< Comprises shipments to: Massachusetts, Connecticut, Rhode Island, Metropolitan New York, East- 
ern and Central New York, Buffalo, Philadelphia, Eastern Pennsylvania, Cleveland, Canton-MassUlon- 
Mansfied, Baltimore, Virginia, West Virginia, Southern California, Indiana-other, St. Louis, Georgia. 
(Aggregate tons received in area 17,738.) 

' Comprises shipments to: Youngstown. (Aggregate tons received in area 4,192.) 

» Comprises shipments to: Buffalo, Eastern Pennsylvania, Youngstown. (Aggregate tons received in 
area 6,920.) 

' Comprises shipments to: Connecticut, Metropolitan New York, Eastern Pennsylvania. (Aggregate 
tons received in area 4,271.) 

' Comprises shipments to: Indiana-other, Iowa, St. Louis, Kansas City, Nebraska, Kansas, Arkansas, 
Louisiana. (Aggregate tons received in area 3,039.) 

» Comprises shipments to: South Carohna and Georgia. (Aggregate tons received in area 120.) 

'" A\\ producing areas indicated are in conformity with Form B Consuming areas. 

" Quoted delivered price at Detroit. 

Source: Compiled from the Temporary National Economic Committee questionnaire Form B for 
February 1939. 



14418 



CONCENTRATION OF ECONOMIC POWER 



Table 16. — Hot Rolled Strip: Market Areas for Plant Groups as Determined by 
Actual Freight Paid or Allowed from Plant to Destination — Producing Areas ^ 
February 19S9 



Pitts- 




burgh, 




Youngs- 




town, 


Chicago 


North 




Ohio 




River 




" 38, 579 


11,903 


56.8 


17.5 


'1,584 


9,749 


17.1 


14.4 


11,296 


6,203 


97.5 


63.6 


29.3 


52.1 


30.0 


81.9 



Detroit 



Cleve- 
land 



Metro- 






politan 






New 
York, 


St. 
Louis 


Georgia 


Rhode 






Island 






2,5Cfi 


1,328 


528 


3.8 


1.9 


.8 


7,995 


902 


628 


11.8 


1.3 


.9 


2,514 


536 


326 


31.4 


59.4 


51.8 


98.0 


40.4 


61.6 


311.6 


67.9 


118.9 



Total 



1. Net tons shipped 

Percent of total shipments 

2. Shipments received from all 

sources in consuming areas 
governed by each producing 

area » (nettons) 

Percent of tot^l shipments 

3. Shipments by producing areas 

to go verE ed consuming areas ' 
(net tons) 

4. Line 3 divided by line 2 

6. Lire 3 divided by line 1 

6. Line 2 divided by line 1 



9,215 
13.6 



27,7!"' 
40. 



29.2 
87.8 
300.8 



3,777 
5.6 



9,319 
13.7 



7.5 
18.5 
246.7 



67, 896 
100.0 



67, 896 
100.0 



29,664 
43.7 
43.7 
100.0 



> Producing areas listed correspond to Form B consuming areas. 

' Governed areas are those consuming areas into which the producing area has an actual freight advantage 
over all other producing areas as measured by average freiglrt actually paid or allowed. See Table 16A. 

Source: Computed from Temporary National Economic Committee Form B questionnaire, February 
1039. 



w. 



CONCENTRATION OF ECONOMIC I'OWER 



14419 















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14420 



CONCENTRATION OF ECONOMIC POWER 







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CONCENTRATION OF ECONOMIC POWER 



14421 



Table 18.- 



-Hot Rolled Strip: Shipments Sold at a Calculated Base Price which 
Exceeds the Published Base Price,^ February 1939 





Basing Points 






Consuming area 


Pitts- 
burgh 


Chicago- 
Gary 


Cleve- 
land 


Middle- 
town 


Youngs- 
town 


Birming- 
ham 


Total 


1 




o 


s 

S o 


1 


a 

M 


1 


a 


1 
o 


a 


1 


a 
il 

HI 


1 

1 


a 

S O 

l2 


Maine 


3 


$•033 


























Rhode Island 






•1 

32 

1 


$•6.00 
•1.19 
27.00 






7 


$M4 











Buffalo. 


15 


22.80 


















Youngstown 






















Canton, Massillon, 
Mansfield 










2 


$•7.50 














Ohio, other 


11 
23 


•1.00 
•.52 






















Indiana, other.. 


























Kansas City... 


53 

1 


$1.08 
•17.00 






















Nebraska. 


























West Virginia 


15 
3 


•.27 
•1.67 






















South Carolina 


























Kentucliy 


















1 


$•8.00 
•.33 






Arkansas 


























Oklahoma 






4 
6 
1 


•.75 
12.50 
•7.00 




















Colorado 


























Arizona 


























Southern California .. 


















6 
^2 


6.00 
3.16 






Northern California.. 




















































Total.. 


28 

1.8% 


13.75 


59 
4.3% 


2.24 


33 

2.9% 


1.97 










68 
9.7% 


3.41 


188 
0.3% 


$4.33 


Percent of all ship- 
ments... 



























•Excess may be accounted for by rounding of fractional tons to nearest whole number and has not been 
included in the total. Variation of $0.05 or less in addition to such excess from rounding is also excluded 
from table. 

' Calculated Base Price is the invoiced delivered value less freight and less extras charged divided by the 
number of tons sold. 

Published Base Prices are those listed by February 1939 "Iron Age." (all issues). 

Note: Pacific Ports are not listed as basing points in the Iron Age. A total of 62 tons of Hot Rolled Strip 
was sold on Pacific Port basing points, 39 tons of which calculated to a base price $1.66 per ton higher than 
$53.00 (the Pacific Port price published for Hot Rolled Sheets). . 

Source: Compiled from Temporary National Economic Committee Form B questionnaire, February 
1939. 



Table 4A. — Heavy structural shape shipments February 1939 (net tons) 



Producing area i 


Domestic 
shipments 
to con- 
suming 
districts 
(basing 
point 
sales) • 


F.O.B. 
mill 
sales 


Shipments 
to plants 
or ware- 
houses of 
the same 
or affili- 
ated com- 
panies » 


Ship- 
ments to 
jobbers 

ware- 
houses 


Total 
domestic 
ship- 
ments 


Exports 


Total 
ship- 
ments 


Percent 
of total 
ship- 
ments 


Total.. 


79,921 


3 702 


49,346 


5,030 


137, 999 


6,185 


144, 184 


100.0 






Eastern Pennsylva- 
nia, Philadelphia.. 
Chicago 


22 957 
20,355 
15, 437 
10,260 
2,550 
1,151 
4,240 
2,971 


2,414 


17, 727 
7,386 

17, 147 
6,036 


2,115 
812 
188 
826 
675 
169 
102 
143 


45, 213 
28,553 
33,603 
17, 122 
3,587 
1,320 
5,392 
3209 


1,710 
141 

3,762 
496 

76' 


46,923 

28,694 

37,365 

17,618 

3,587 

1,320 

5,468 

3,209 


32.5 
19.9 


Pittsburgh . 


831 


25.9 


Buffalo 


12.2 


North Ohio River... 


362 


2.6 


St. Louis 




0.9 


Birmingham.. 




1,050 


3.9 


Colorado 


95 


2.2 











' Producing areas conform to Form B consuming areas. 

' These shipments are those from which the Form B analysis has been prpared, others are excluded. 

• Includes shipments to fabricators of the same or affiliated companies. 



Source: Com, : 
193Q 



3d from the Tempora 



e1 Economic Committee questionnaire Form B, February 



14422 CONCENTRATION OF ECONOMIC POWER 

Table 4A. — Plate shipments February 1939 {net tons) 



Producing area » 


Domestic 
shipments 
to con- 
suming 
districts 
(basing 
point 
sales) ' 


"F. O.B. 

mill 
sales 


Shipments 
to plants 
or ware- 
houses of 
the same 
or affili- 
ated com- 
panies ' 


Ship- 
ments to 
jobbers 

ware- 
houses 


Total 
domestic 
ship- 
ments 


Exports 


Total 
ship- 
ments 


Percent 
of total 
ship- 
ments 


Total — 


96, 443 


869 


28,670 


3,466 


129. 347 


21,062 


150, 409 


100.0 






Pittsburgh 


24,381 

27,885 

15,088 

941 

10 821 

12.836 

967 

482 

1,783 

1,259 


493 

251 
7 


16,898 

278 
4,058 


1,254 

532 

344 

27 

1,024 

224 

14 

1 

1 

44 


43,026 

28,946 

19,497 

968 

17,390 

14, 469 

981 

483 

2,099 

1,488 


8,511 

5,929 
166 

"5,' 978" 
386 

92' 


51 637 

34, 875 

19, 663 

968 

23,368 

14 855 

981 

483 

2,191 

1,488 


34.2 


Eastern Pennsylva- 
nia, Philadelphia, 


23.2 


Chicago 


13.1 




0.6 






6,546 
1,409 


15.5 


Birmingham 




9.9 




.7 


North Ohio River 






.3 


Youngstown 


118 


197 
185 


1.5 
1.0 









1 Producing areas conform to Form B consuming areas. 

2 These shipments are those from which Form B analysis has been prepared, others have been excluded. 
> Includes shipments to fabricators of the same or affiliated companies. 

Source: Compiled from the Temporary National Economic Committee questionnaire. Form B, February 
1939. 

Table 4A. — Hot rolled sheet shipments, February 1939 {net tons) 



Producing area i 


Domestic 
shipments 
to con- 
suming 
districts 
(basing 
point 
sales) » 


F. O.B. 

mill 
sales 


Shipments 
to plants 
or ware- 
houses of 

same 
or affili- 
ated com- 
panies 


Ship- 
ments to 
jobbers' 
ware- 
houses 


Total 
domestic 
ship- 
ments 


Exports 


Total 
ship- 
ments 


Percent 
of total 
ship- 
ments 


Total._ 


190,910 


1,153 


15,227 


4,094 


211, 384 


16, 383 


227, 767 


100.0 






Pittsburgh . 


21,912 
41,401 
20,811 
14,891 
14, 836 
8,246 

8,666 
29, 792 

4,299 
13,878 
6,752 

1,009 
2,677 

1,277 
563 


89 


490 
2,141 

999 

591 
6,763 

211 

80 


67 
1,060 
372 
27 
108 
1,198 

322 
250 

17 
123 
334 


22,558 
44, 602 
22, 182 
15,913 
22, 319 
9,655 

8,968 
30,044 

4,316 
17,855 
7,138 

1,0H) 
■2,804 

1,438 
582 


3,899 

820 

77 

58 

625 

834 

1,911 
141 

301 
3,267 
1,737 

2,713 


26, 457 
45, 422 
22, 259 
15,971 
22,944 
10,489 

10,879 
30, 185 

4,617 
21,122 
8,875 

1,010 
2,804 

4,151 
582 


11.6 


Chicago 


19.9 


Cleveland 




9.8 




404 
612 


7.0 


North Ohio River... 
Buffalo 


10 1 
4.6 


Middletown- 
Newport 




4.8 




2 


13.3 


Ports mouth- 
Ashland 




2.0 


Baltimore 




3,854 
62 


9.3 


Birmingham 




3.9 


Canton - Massillon 
Mansfield . 


1 


0.4 


St. Louis 


27 


ioo 

116 


1.2 


Eastern Pennsylva- 
nia, Philadelphia, 


46 


1.8 




19 


0.3 













■ Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth - 
Ashland which include these cities only. 
> These shipments are those from which the Form B analysis has been prepared, others have been excluded . 

Source: Compiled from the Temporary National Edonomic Committee questionnaire, Form B, February 
1939. 



CONCENTRATION OF ECONOMIC POWER 14423 

Table 4A. — Hot rolled strip shipments, February 1939 (net tons) 



Producing area ' 


Domestic 
shipments 
to con- 
suming 
districts 
(basing 
point 
sales) ' 


F.O. B. 

mill 
sales 


Shipments 
to plants 
or ware- 
liouses of 
the same 
or affili- 
ated com- 
panies 


Ship- 
ments to 
jobbers' 

ware- 
houses 


Total 
domestic 
ship- 
ments 


Exports 


Total 
ship- 
ments 


Percent 
of total 
ship- 
ments 


Total 


67, 896 


27 


7,705 


149 


75, 777 


1,671 


77, 448 


100.0 






Youngstown 


25, 271 
11,903 
4,516 
9,215 
8,792 
3,777 

2,566 

1,328 

528 




3,101 

303 

28 

15 


73 
4 
28 


28,445 
12, 210 
4,572 
9,230 
8,836 
3,777 

6,824 

1,355 

628 


584 

12 

71 

413 

428 

1 
162 


29, 029 
12, 222 
4,643 
9,643 
9,264 
3,777 

6,825 

1,617 

528 


37.5 


Chicago 




15 8 


Pittsburgh 




6.0 


Detroit 




12.4 


North Ohio River... 


27 


17 


12.0 


Cleveland 




4.9 


Metropolitan New 
York Rhode Is- 
land. 




4,258 




8.8 


St. Louis 




27 


1.9 


Georgia 






7 













' Producing areas conform to Form B consuming areas. 

' These shipments are those from which the Form B analysis has been prepared, others have been excluded . 

Source: Compiled from the Temporary National Economic Committee questionnaire,' Form B, February 
1939. 



Exhibit No. 2198 

Summary of Analysis of Form B Distribution of Pc-lected Steel Products, 

February 1939 

In analyzing the attached table the following shotild be noted: 

1. When prices are quoted such prices are in dollars per net ton. 

2. Table references indicated refer to the 18 Form B analysis tables from which 
this summary has been prepared. Where no table nuniber appears the table 
number immediately preceding applies. 

3. Figures in the body of the table which are in brackets have been adjusted 
for basing point price differentials. 

4. All minus figures regarding "freight absorption" indicate "phantom freight." 

Summary of Analysis of Form B Distribution of Selected Steel Products, February 

1939 

A. BASING POINT STRUCTURE AND LOCATION OF CAPACITY (TABLES 1 AND 2) 



Heavy Struc- 
tural Shapes 



Plates 



Hot Rolled 
Sheets 



Hot Rolled 
Strip 



Table 1 

- 1. Published base price per ton at Pitts- 
burgh, February, 1939 

2. Change in number of published 

basing points in June, 1938: 

Increases , 

Decreases 

Number of Basing Points, Feb- 
ruary, 1939 

3. Range in differentials over Pitts- 

burgh which were eliminated 

June, 1938 

-1. Range of base price declines 

Table S 

5. Percent of capacity 0-25 miles from 

nearest basing point (after the 
above changes) 

6. Percent of capacity 0-50 miles from 

nearest basing point 

7. Percent of capacity over 100 miles 

'■•in rr^rnst basing point 



$42. 00 



$42. 00 



$43. 00 



$43. 00 



$1.00 to $3.00, 
inclusive 

$2.00 to .$6.00, 
inclusive 



85. 1% 

96.1% 

3.5% 



$1.00 to $4.00, 
inclusive 

$3.00 to $7.00, 
inclusive 



76. 7% 
78. 5% 
2.0% 



$2.00 to $3.00, 
inclusive 

$5.00 to $8.00, 
inclusive 



57. 7% 
77. 9% 
5.0% 



$2.00 to $3.00, 
inclusive 

$5.00 to $8.00, 
inclusive 



65. 5% 
79. 4% 
9.3% 



14424 



CONCENTRATION OF ECONOMIC POWER 



Summary of Analysis of Form B Distribution of Selected Steel Products, February 

19S9 — Continued 

B. REPRESENTATIVE CHARACTER OF THE SAMPLE (TABLES 3 TO 7, INCLUSIVE) 



Heavy Struo 
tural Shapes 



Plates 



Hot Rolled 
Sheets 



Hot Rolled 
Strip 



Table S 

1. Percent of capacity sampled in Form 

B .... 

2. Percent of Integrated company ca- 

pacity 

Percent sampled in Form B which 
represents integrated companies... 

Table A 

3. Producing areas from which per- 

centage of total shipments differed 
substantially from percent of total 
capacity sampled: 

Capacity ._ 

Shipments 



Capacity... 
Shipments. 



Capacity... 
Shipments. 



Table 5 

4. Percent of capacity sampled in 

Form A by districts 

5. Percent of capacity sampled in 

Form A by states 



: jble 6 

Range of. pert sntage distribution of 
shipments by con.suming regions 
1936-38 incl. and February, 1939: 

N.E 

N. C ... 

W. C - 

S E 

9\ and S\W^y "/"////.'.'.'.'/.'""'. 
MT. and W 



TabU7 

7. Number of states in which the per- 

centage distribution of shipments 

varies less than 0.5 (Form A by 

states) - 

8. Number of districts in which the 

percentage distribution of ship- 
ments varies less than 0.5: 

(Forin A by districts only) 

(Form A by districts and Form 
B combined) 



79.9% 
95. 9% 
94.9% 



Chicago 



26.7% 
19. 9% 

Buffalo 

7.3% 
12. 2% 



81. 0% 
84.0% 



4.9 
11.9 
3.2 
4.2 
3.0 
1.8 



85. 3% 
80. 9% 
80. 0% 



10. 7% 
0.6% 

Baltimore 

9.4% 
15. 5% 

Birmingham 
5. 3% 



58. 4% 
77.2% 



13.3 
13.9 
2.1 
4.4 
5.6 
3.2 



78.9% 
85. 8% 
89. 2% 



Detroit 



6.3% 
13. 3% 

Chicago 
12. 4% 
19. 9% 

Baltimore 

4.8% 
&.3% 



48. 0% 
82. 3% 



5.3 
15.6 
1.6 
3.5 
2.4 



38 



85. 7% 
69.5% 
67.9% 



Pittsburgh 



12. 8% 
6.0% 

No. Ohio R. 
7.3% 
12. 0% 

Met. N. Y.-R. I. 
4.2% 



27. 8% 
65. 1% 



11.1 
14.6 
0.7 
2.0 
2.9 
8.1 



37 



C. DETAILED ANALYSIS BY SELECTED CONSUMING AREAS (TABLES 8 TO 11 INCLU- 
SIVE AND TABLE 13) 



Tabus 

1. Average of shipments taken by areas 
receiving 2 percent or more of total 
shipments... 


65. 6% 

14. 
Birmingham 
35.7% 

Ea. Pa.-Phila. 

74.4% 


79. 3% 

18. 
St. Louis 
45.4% 

Detroit 
100.0% 


84.4% 

13. 
Birmingham 
40. 2% 

Detroit 
93.9% 


88.9% 


2. Number of consuming areas receiv- 
ing 2 percent or more of total ship- 
ments - . . . ... 


12. 


3. Range of percentages of shipments to 
selected areas among producing 
areas 


Georgia 
10.8% 

Detroit 




99. 5% 



' Variation in a large part e.tplained by the fact that the return of a major Detroit producer was not 
included in Form A but was included in Form B. 



CONCENTRATION OF ECONOMIC POWER 



14425 



Summary of Analysis of Form B Distribution of Selected Steel Products, February 

iSSP— Continued 

C. DETAILED ANALYSIS BY SELECTED CONSUMING AREAS (TABLES 8 TO 11 INCLU- 
SIVE AND TABLE 12)— Continuefl 



Heavy Struc- 
tural Shapes 



Plates 



Hot Rolled 
Sheets 



Hot Rolled 
Strip 



Table 9 

4. Percentage of shipments received in 

selected consuming areas supplied 
from producing areas showing low- 
est freight absorption 

5. Over-all average freight absorption 

for shipments supplied to selected 
consuming areas from "governing" 
producing areas .- 

6. Range of freight absorption for ship- 

ments to consuming areas from 
"governing" areas ($0.43) 

7. Range of percentages of shipments 

received in selected areas from 
producing areas with lowest freight 
absorption 

8. Average freight absorption on total 

shipments to selected consuming 
areas from all sources 

Table 10 

9. Number of reported cases in which 

computed base prices exceed the 
published base price 

10. Number of reported cases in which 

computed base prices are equal 
to or below published base prices 

by less than $2.00 

Same— $2.00 to $5.00 below 

Same — more than $5.00 below 

11. Consuming area having maximum 

variation below base price 

12. Consuming areas in which vari- 

ation below the base price was 
outstanding 

Table 11 

13. Basing points on which sales were 

made in excess of published base 
prices (excess) 

14. Range of deviation among basing 

pomts of sales made at a com- 
puted base price below published 
base price •_ 

Table IS 

15. Rates of requirements of producing 

areas to the shipments from those 
areas, (over -all average) 

16. Range of ratios of requirements of 

producing areas to shipments 
from those areas by areas 

20. Proportion of requirements of areas 
supplied by home plants 



21. Range of proportions of require- 
ments of areas supplied by home 
plants, (plants in identical areas) - 



(61. 6%) 
61. 6% 



($0. 06) 
0.06 

—$4.42 

to 

0.43 

(0. 6 to 93. 7%) 
0. 6 to 93. 7% 

(1. 16) 
$1.62- 



21 out of i 



46 

14 
7 

Detroit 

1.05 to 0.18 



Pacific Ports 
$0.38 

Buffalo 
-$1. 08 

Pittsburgh 
-$2.41 



49. 2% 

Buffalo 
9.9% 

St. Louis 
147. 9% 

75.0% 

St. Louis 
25.5% 

Ea. Pa.-Phila. 

—Met. N. Y. 

84.0% 



(50. 2%) 
48.5 



($0. 14) 
0.24 



to 

($10.67) 10.41 

(0. 7 to 100. 0%) 
0. 7 to 100. 0% 

(1.45) 
$2.61 



56 out of 155 



72 
22 

5 

Texas 
1.33 to -0.21 



Clay... $1.03 
Coates. .41 

Yst 79 

Sparrows Pt. 
-$0.22 

Qulf Ports 
-$3.22 



48.5% 

Birmingham 
25. '.% 

Detroit 
278. 5% 

75.8% 

Cleveland 
11.0% 

Birmingham 

100.0% 



(33. 6%) 
34. 8% 



(-$0. 69) 
0.04 

— $2. 92 

to 

($0. 50) 0. 50 

(0. 3 to 73. 9%) 
0. 8 to 73. 9% 

(1.13) 
$1.60 



33 out of 195 



55 
62 
45 

Cleveland 
-$3.79to-15.98 



(') 



None 



Pacific Ports 
-$1.42 



Birmingham 
$-5.80 



71. 7% 

Birmingham 
15.4% 

Detroit 
154.9% 

52. 1% 

St. Louis 
24.0% 

Birmingham 

95. 6% 



(40. 7%) 
40. 7% 



(—$0. 92) 
—0.26 

— $6. 59 
to 
). 60) 0. 60 

. to 86. 5%) 
. to 86. 5% 

(0. 95) 
$1.42 



32 out of 100 



30 
24 
14 

Detroit 
-$1.046to-0.85 



(0 



None 



Middletown 
-$1.15 



Birmingham 
-$5.53 



77. 8% 



Georgia 
8.1% 



DetroU 
291. 8% 



41.8% 



Cleveland 
8.6% 



Youngttown 
86.6% 



• Birmingham, Detroit, Indiana, Pittsburgh, Texas. 

• Youngstown, So. California, Illinois— other, Virginia, Texas. 

' Philadelphia, Cleveland, Youngstown, Ohio— other, Chicago, Indiana— other, Detroit, Michigan- 
other, Texas. 

• Massachusetts, Buffalo, Pittsburgh, Chicago, Canton-Mass.-Mans., Detroit. 



14426 



CONCENTRATION OF ECONOMIC POWER 



Summary of Ai^alysis of Form B Distribution of Selected Steel Products, February 

/555— Continued 

D. "GOVERNED" AREAS DEFINED BY SHIPMENTS PRICED ON THE NEAREST BASING 

POINTS (TABLE 12) 



I Heavy Stiuc- 
tural Shapes 



Plates 



Hot Rolled 

Sheets 



Hot Rolled 
Strip 



1. Average peicpntage of shipments 

priced on the nearest basing point.. 

2. Average advantage in mill net to 

mills from pricing on nearest bas- 
ing point 

3. Average advantage in freight ab- 

sorption to mills from pricing on 
nearest basing point-. 

4. Producing area receiving the least 

advantage in mill net by piicing 
on nearest basing point as com- 
pared to pricing on all other basing 
points - 

5. Producing area receiving the great- 

est advantage in mill net by pric- 
ing on nearest basing point 



6. Range of freight absorption between 
producing areas on sales prices on 
the nearest basing point 



Range of percentages of sales priced 
on the nearest basing point by pro- 
ducing areas.. 



8. Range of mill nets on total sales by 
producing areas 



67. 7% 

$2.17 

$5.52 (3.33) 



Birmingham 
' $0. 04 



Colorado 



Colorado 
$-2. 48 



Birmingham 
$0. 91 



Buffalo 

20.3% 



St. Louis 

94. 1% 



52. 0% 

$2.03 

.82 (2.68) 



Detroit 
$-10.51 

Clevdand 

$5.40 

Detroit 
$-3.81 

St. Louis 

$1.29 

Youn^stown 
16. 7% 

Chicago 

92.2% 



$2.44 



$9.47 



50.3% 

$1.93 

$2.45 (2.33) 



Canton-Massil- 

lon-Mansfield 

$-1.84 

Buffalo 



Philadelp^iia 

$-2.01 ($-:.ci) 

Pittsburgh 
$2.34 ($2.34) 

Youngstown 
22.9% 

Birmingham 
96. 5% 

$6.90 



52. 5% 

$1. 57 

$3.25 (3.37) 



Chicago 

$-3.34 



Georgia 



$7.53 



Met. N. Y. -R. I. 
$-b. 13 ($-6.13; 



Pittsburgh 
$0.92 ($0.92) 



Younastoiim 
26. 3% 



Met. N. Y. -R. T. 
93. 3% 



$9.14 



E. "GOVERNED" AREAS DEFINED BY SHIPMENTS TO AREAS IN WHICH FREIGHT 
ABSORPTION IS EQUAL TO OR LESS THAN THE AVERAGE FOR SHIPMENTS PRICED 
ON THE NEAREST BASING POINT (TABLE 14) 



1. Average percentage of shipments by 
producing areas to "governed" 
market areas as defined by freight 
absorption on sales priced on the 
nearest basing point . . 


$(26.9%) 25.8% 

$(-0.45) -4.43 

$(1.71) 2.63 

Eastern Pa. 
$(0.88) 1.38 

Colorado 
$(12.32) 15.96 

Buffalo 
(9.9%) 9.9% 

Chicago 
(44.6) 41.6 

$(1.67) 2.26 


$(27.3%) 25.4% 

$(-0.04) -0.04 

$(2.14) 3.46 

Cleveland 
$(1.24) 1.24 

Detroit 
$(6-85) 6.85 

(Youngstovm) 
Baltimore 
(2.6%) 1.0% 

Detroit 
(96.0) 96.0 

$(1.58) 2.61 


$(34.3%) 34.6% 

$(-0.52) 0.10 

$(2.11) ?.53 

(Chicago) 
St. Lo%iis 
$(0.92) 1.09 

(Youngstown) 

Buffalo 

$(6.48) 3.54 

Youngstown 
(0.2%) 0.0%, 

Detroit 
(69.8) 69.8 

$(1.73) 1.59 


$(13. C%) 13.6% 


2. Average frei-'ht absorption on sales 
to "governed" areas 


$(-0.73) -0.73 


3. Average freight absorption on sales to 

other than "governed" areas 

4. Range of advantage in freight ab- 

sorption from sales to "governed" 
areas over other sales 


$(1.16) 1.66 

(Detroit) 

Cleveland 

$(-1.07) -0.34 


5. Range of percentages of shipments 
to "governed" market areas by 
producing areas. 


Georgia 
$(5.86) 5. SO 

(Detroit) 
Cleveland 
(0.0%) 0.0% 

Georgia 
(27.5) 27.5 

$(1.63) 2.07 


6. Advantage in freight absorption on 

ii sales to "governed" areas over 

freight absorption on all sales 



CONCENTRATION OF ECONOMIC POWER 14427 

Summary of Analysis of Form B Distribution of Selected Steel Products, February 

19S9— Continued 

F. "GOVERNED" AREAS DEFINED BY SHIPMENTS TO AREAS IN WHICH MILL NET IS 
EQUAL TO OR GREATER THAN THE AVERAGE FOR ALL SHIPMENTS PRICED ON 
THE NEAREST BASING POINT (TABLE 15). 



1. Average percentage of shipments 

from producing areas to "gov- 
erned" cousuming areas as dfined 
by mill nets on the nearest basing 
point 

2. Average mill net on sales to "gov- 

erned" areas_ 

■3. Average advantage in mill nets on 
sales to "governed" areas over 
other areas.- _ 

4. Range of advantage in mill nets from 

sales to "governed" areas over 
other sales 

5. Range of percentages of sales to 

"governed" areas by "governing" 
areas 

6. Average advantage in mill net on 

sales to "governed" areas over all 



Heavy Struc- 
tural Shapes 



Plates 



32.8% 
$41.13 

$2.78 

Chicago 
$1.64 

Colorado 
$12. 85 

Buffalo 

8.0% 

Bhmingham 
57.9% 



$1.87 



48.8% 
$41.25 

$3.26 

Pittshvrgh 
$2.76 

Detroit 
$13.01 

Baliimore 

19.8% 

Detroit 

96.0% 

$1.67 



Hot Rolled 

Sheets 



36.8% 
$40.17 

$3.66 

Birmingham 
$1.06 

C. M. & M. 

$7.40 

Clereland 

1.4% 

Detroit 

69.6% 

$2.35 



Hot Rolled 
Strip 



34.2% 
$40.18 

$2.48 

Cleveland 

$1.88 

Georgia 

$12.55 

Detroit 



0.5% 



Mel.N.Y.&R.J 

72.2% 



$1.63 



'GOVERNED" AREAS DEFINED BY SHIPMENTS AT LOWEST FREIGHT ALLOWED 
FROM PRODUCING AREAS (TABLE 16) 



1. Percent of total shipments by all 
producing areas shipped to "gov- 
erned" areas .'. 



2. Range in ratias of sales by producing 
areas into "governed" areas to 
total receipts in "governed" areas.. 



3. Range in ratios of sales by producing 
areas to total shipments by pro- 
ducing area 



Range in the ratio of total receipts of 
"governed" areas to total ship- 
ments by "governing" areas 



5. Total "governed" area receipts that 
were less than total shipments of 
"governing" areas ("Governed" 
receipts as percent of "governing" 
area shipment by producing area) . . 



57.7% 

St. Louis 

13.6% 

Ea. Pa.-Phila. 
Del. 

74.6% 

Buffalo 

21. 1% 

■ St. Louis 

90.1% 

Buffalo 

22.9% 

St. Louis 

662. 6% 

Buffalo 

22.9% 
Colorado 

41.3% 

Pgh.-N. O. R. 

61. 8% 

Chicago 

93. 7% 



66. 7% 

St. Louis 

1.8% 

Birmingham 
80.1% 
St.Louia 

3.5% 

Detrmt 

96.0% 

Pgh.-Yst.- 
N. 0. R. 

60.9% 

Cleveland 
397. 3% 

Pgh.-Yst.- 
N. O. R. 

60.9% 

Birmingham 

63.0% 



43. 1% 

Indiana-ether 
3.0% 

Pgh.-Yst.- 
N. O. R. 

83.4% 

Pgh.'Yst.- 
N. O. R. 

11.6% 

Phila.-Balt. 

82.8% 

Pgh.-Yst.- 
N. 0. R. 

13.9% 

Indiana-other 
1624. 3% 

Pgh.-Yst.- 
N. O. R. 

13.9% 

Mdl-Newpt.- 
Ashland 

76. 8% 

Chicago 

79.1% 

Buffalo 

84.7% 



43.7% 

Cleveland 

7.5% 

Pgh.-Yst.- 
N. O. R. 

97. 6% 

Cleveland 

18. 5% 

Met.-N. Y.-R. I. 
98.0% 

Pgh.-Yst.- 
N. O. R. 

30.0% 

Met. N. Y.-R. I. 
311.6% 

Pgh.-Yst.- 
N. 0. R. 

30.0% 

St. Louis 

67.9% 

Chicago 

81.9% 



124491 — 41— pt. 27- 



-20 



14428 



CONCENTRATION OF ECONOMIC POWER 



Summary of Analysis of Form B Distribution of Selected Steel Products, February 

1939— Continued 

H. REPORTED SHIPMENTS NOT EXPLAJNABLE BY AVAILABLE DATA (TABLES 17-18) 



Table 17 

1. Ratio of reported shipments priced 

on basing points whicii could not 
govern according to published 
freight rates to total shipments 
analyzed 

Table 18 

2. Percentage of sales at a calculated 

base price exceeding the published 

base price 

Percentage of shipments by all pro- 
ducing areas to "governed" areas 
defined as in: 

Section D 

Section E.._ 

Section F. 

Section Q - ,.. 



Heavy Struc- 
tural Shapes 



2.4% 



3.7% 



67. 7% 

(26. 9%)2,5. 8% 

32. 8% 

57.7% 



Plates 



1.6% 



39. 8% 



52. 0% 

(27. 3%) 25. 4% 

48. 8% 

66. 7% 



Hot Rolled 
Sheets 



6.2% 



Less than 0.05% 



50. 3% 

(34. 3%) 34. 6% 

35. 7% 

43. 1% 



Hot Rolled 
Strip 



5.6% 



0.3% 



^2. 5% 

(13.6%) 13.6% 

34.2% 

43. 7% 



Exhibit No. 2200 

Carnegie-Illinois Steel Corporation 

united states steel corporation subsidiary 

General Offices: Carnegie Building 

Pittsburgh, Pa., 

Clement V. McKaio 

Vice President and General Manager of Sales 
.T. Halset McKown 

Assistant \'ice President and Assistant General Manager of Sales 



Personal and Confidential 
To all Managers of Sales: 



May 21, 1936. 



Price Announcement Program 

Gentlemen: We will begin our price announcement program by announcing 
prices on Bars and Small Shapes, later Strip, then Sheets, and our other com- 
modities will be given consideration as promptly as possible. We hope to mail 
to you an initial supply of the Price Announcement forms so that you will have 
these Saturday, May 23rd, and we will then let you know the basis on which to 
arrange the announcement on Hot Rolled Carbon Steel Bars and Small Shapes. 

We are enclosing as an itom of advance information one of the early proofs of 
this announcement which will have a slight change in the first paragraph, modify- 
ing the last part of the sentence to read "for shipment during the calendar quarter 
year ending September 30, 1936." This will then mean that we can complete 
obligations that were incurred prior to this announcement date, or that we 
can, where we are able to make shipments by June 30th, continue after the 
announcement date to take business at the prices that were in efifect prior to 
this announcement. 

It is going to be necessary in making our price announcement to insert the 
delivered price on the commodity involved. The simplest way to handle this 
will be for each District Sales Office to insert on one of these blanks the price 
delivered at the point at which their particular customer wishes to take delivery, 
mailing this blank with that delivered price to that customer. 

The delivered prices will be made in accordance with our usual custom, and 
further details will be passed along to you as quickly as possible. 

We are giving you this advance information, however, so that you can organize 
your program for sending out this announcement. 
Yours very truly, 

J. H. McKowN, 
Assistant Vice President and Assistayit General Manager of Sales. 



CONCENTRATION OF ECONOMIC POWER 
Exhibit No. 2201 



14429 



Caknegie-Illinois Steel Corporation 

united states steel corporation subsidiary 

General Offices: Carnegie Building 

Pittsburgh, Pa., 

Clement V. McKaig 

Vice President and General Manager of Sales 
3. Halsey McKown 

Assistant Vice President and Assistant General Manager of Sales 



To All Managers of Sales: 



Mat 23rd, 1936. 



Price Announcement 



Referring to our letter of May 21st, we are having sent to you today an initia 
supply of the following price announcement forms: 

Hot rolled carbon steel, with the commodity column left blank so that 
the commodity or commodities you are announcing to an individual customer 
can be inserted. 

Hot rolled carbon steel, with Structural Shapes and Plates, printed 
under "Commodity", on which the delivery point and price can be inserted, and 
to which can be added, as required, other commodities. 

Hot rolled carbon steel; two copies each of our form with the delivered 
prices at Pittsburgh and Chicago on Structural Shapes and Plates. 

It wiU, as stated in our letter of May 21st, be necessary for you to announce 
prices to your individual customers, combining commodities where you find it is 
appropriate. In figuring these prices the usual practice of adding the published 
all-rail rate of freight, or using arbitrary rates as estabUshed, will be followed. 

We will in the future, however, always quote delivered prices, and where you 
in turn quote your customer a delivered price at another point, the freight rate 
will be added after deducting from the delivered prices quoted herein, the delivery 
charges of 2}^^ or 30 per 100 lbs., or 50(4 or 600 per gross ton, as the case may be. 

We have today sent you a wire stating for business to be shipp>ed during the 
Third Calendar Quarter year, ending September 30th, 1936, the prices on Re- 
Rolling and Forging Billets, Blooms and Slabs, Sheet Bars, Structural Shapes and 
Plates would be advanced $2.00 a ton, which will result in the following delivered 
prices: 



Pittsburgh 



Youngstown 



Chicago 



Oary 



Duluth 



Re-Rolling Billets ....GT.. 

Forging Billets - ..OT.. 

Sheets Bars X}T.. 

Structural Shapes .100#-. 

Plates 100#.. 



$30.50 
37.60 
30.50 
1.925 
1.925 



$30.50 
37.50 
30.50 



$30.60 

37.60 

30.60 

1.98 

1.98 



$30.60 
37.60 



$3Z50 
39.60 



1.98 
1.98 



This will result in the following delivered prices at the points noted: 





BUIets 


Sheet 
bars 


Shapes 


Plates 




Re-RoUing 


Forging 




O.T. 

$33.00 
34.00 


G.T. 

$40.00 
41.00 


O.T. 


lOOi 


100* 


Eastern Michigan Points . . .--■ 








Oulf Ports „ 




$2,326 
2.475 


$2,325 


Pacific Coast Ports. 








2.476 













There will be no change in the price of Skelp and advices will be supplied you 
later in> the day, or early next week, regarding other commodities. 

In using this method of naming delivered prices in our announcements^ it is 
obvious it would not be appropriate to include many of the factors previously 
made a part of our quotations, but, nevertheless, all of our established practices 
will be followed in arriving at such delivered prices. 



14430 



CONCENTRATION OF ECONOMIC POWER 



If there are any questions whatever, we ask that you confer with us freely as 
we do not wish to make a mistake in proceeding in this manner, owing to the 
fact that when such price announcements are made to the trade we are obligated 
under the Clayton Act to abide by these prices without any deviation. 
Very truly yours, 

J. H. McKowN, 
Atsistant Vice President and Assistant General Manager of Sales. 



Exhibit No. 2202 

STEEL BUYERS OVERWHELMINGLY OPPOSED TO FTC PLAN OF 

STEEL PRICING 

[The Iron Age, April 20, 1939] 

By C. E. Wright, Managing Editor, The Iron Age 

Results of Iron Age Poll On Steel Basing Point System 

Up to the time of going to press 304 votes had been received from steel buyers 
on the ques+'on shown in an adjoining column. On Question No. 1, there were 
268 "yes" /tes and 22 "no" votes. On Question No. 2 there were 37 "yes" 
votes and 233 "no" votes. 

The difference in the number of votes on the two questions is due to the fact 
that some voted only on one question. 

Geographically, the votes were recorded as follows: 



Alabama..' 3 

California 6 

Colorado 1 

Connecticut 12 

Florida 2 

Georgia 2 

Illinois 17 

Indiana 10 

Iowa 4 

Kansas. > 4 

Kentucky 4 



Maine 1 

Maryland 2 

Massachusetts 18 

Michigan 31 

Minnesota 3 

Missouri 9 

Nebraska 3 

New Jersey 13 

New York 25 

North Carolina 1 

Ohio 51 



Oklahoma 2 

Pennsylvania 43 

Rhode Island 3 

Texas 3 

Vermont 1 

Virginia 2 

Washington 1 

West Virginia 4 

Wisconsin 15 

Scattered 8 



The results of this poll seem to poiht conclusively to widespread opposition 
among steel buyers to any change in the steel basing point system which would 
deprive steel sellers of the right to equalize freight rates, a method of selling which 
a majority of buyers declare gives them the opportunity to buy from a number of 
■different sources at no difiference in delivered cost. 

If further returns are received, they will be tabulated in subsequent issues. 

That the steel buyers of the country are overwhelmingly opposed to the Federal 
Trade Commission's plan of steel pricing as proposed in its recent memorandum 
to the Temporary National Economic Committee is indicated by a survey made 
by The Iron Age, results of which are shown in the above box. 

(The complete report of the Federal Trade Commission was published in 
The Iron Age of March 16, page 49.) 

In order to test the opinion of steel consumers and distributors on the Federal 
Trade Commission's proposal, The Iron Age has taken a sampling poll by mail. 
Two questions were asked: 

1. Do you feel that your ability to buy steel from a number of different sources at no 
difference in the delivered cost to you is an advantage in the economical operation of 
your business? 

2. Do you agree with the contention of the Federal Trade Commission that the 
abolition of freight rate equalization on steel shipments would be a good thing for 
the steel consuming industry? 

These questions were sent to 1000 buyers of steel. The names were selected 
at random from directories, but care was taken that all sections of the metal- 
working industry covering a wide variety of products should be represented and 
that the names should include large, medium and small companies. The geo- 
graphical distribution was such as to include all states. 

Opportunity was given to vote anonymously, but a great many voted without 
concealment of their names," and some took the occasion to send in comments, 



CONCENTRATION OF ECONOMIC POWER 14431 

some of which criticised the Federal Trade Commission's plan severely as lacking 
in "plain common sense," as "silly," and as likely to bring "disaster to some units." 
The present system was described as "the most equitable" for all buyers. Some 
sentiment was expressed by steel buyers that every mill should be a basing point 
for the products it makes, but the opinion seems to be almost unanimous that the 
abolition of freight rate equalization would deprive buyers of the opportunity 
which now exists to buy from any one or more of a number of different sources of 
supply without difference in cost. 

Only in the structural steel fabricating industry is there a serious complaint 
against the present system, and that complaint is not primarily a result of the 
basing point system but arises partly from the fact that fabrication-in-transit 
rates frequently operate disadvantageously for some localities. 

COMMENTS OP STEEL USERS ON FTC PRICING PLAN 

A Manufacturer of Machine Parts. 

Our company is a very substantial consumer of cold drawn bar steel and 
we are located away from any basing point. We have occasion to i:)urchase 
steel from several different producers located in different sections of the country, 
and there are several good reasons why we do so, viz., we find that one producer 
may have one type or grade of product which is preferred for one reason or 
another as compared with any other producer of this same product, whereas 
another type or grade of another producer may be found advantageous for us 
to use. 

Our company manufactures a specialty line of machine parts to order on which 
it is, of course, necessary for us to predetermine our exact delivered cost of raw 
material. When it comes to placing our raw material orders, the matter of de- 
livery from the steel mill may be vital'y imporcant to us; and this being the case, 
we are, under the present practice of basing point sales, able to purchase our re- 
quirements from any one of many sources on exactly the same delivered price 
cost, thereby enabling ourselves to place our business where we can obtain the 
best delivery, which oftentimes is vitally essential, and without having to pay 
any increased price due to difference in freight rates from different mills. This 
difference in freight costs might easily represent a loss ot $3.00 or more per ton 
were it necessary for us to purchase from a distant mill in order to secure the 
delivery required. 

The adoption of f. o. b. mill practice of selling would, we believe, result in a 
very chaotic condition both to the producer and consumer. 

There are so many objectionable features to such a change in practice, which 
would very seriously affect both producer and consumer, that we would consider 
it ridiculous on the part of the Federal Trade Commission to give any very serious 
consideration to such a change. 

The f. o. b. practice would be very advantageous to large producers with pro- 
ducing mills scattered around the country and it \ ould certainly inflict a terrible 
hardship on the small independent producer. It is difficult to see just how the 
small independent producer could survive if it became necessary to sell f. o. b. 
mill without freight equalization, and we are very definitely interested in their 
future inasmuch as we find them to be entirely satisfactory sources, especially so 
from a service standpoint. 

We would prefer not to write anonymously on this subject, but at the present 
moment we have reasons for so doing. But we do desire to again emphasize the 
point that we are a very substantial consumer of steel. 

An Ohio Machinery Builder. 

We are interested in this subject and have from time to time given the question 
of pricing careful consideration. We think we can see many reasons for and 
against the present system of pricing, but we are quite certain it would be a 
mistake to make any more arbitrary changes affecting industrial operation at the 
present time. 

It seems to us that the deplorable condition of employment, finance, and 
business in general is largely due to the fact that so many changes have been 
made by the New Deal Government during the last few years. If we are ever to 
get back to a normal and sound condition we will have to stop making changes 
and place more reliance upon the play of natural influences. 

A Missouri Manufacturer. 

We have of course been familiar with the attempts which have been made 
toward prohibiting the equalisfttion of freight rates on eteeli and, while we have 



14432 CONCENTRATION OF ECONOMIC POWER 

tried to see advantages which migjht result from a definite f. o. b. mill price basing 
system, we cannot see any advantages that would arise out of such a system and 
we believe the present method is best. 

A New England Tool Manufacturer. 

If the basing point system is abolished, it might mean disaster to some units. 
A Western Pennsylvania Spring and Axle Manufacturer. 

The mills in our district do not furnish all the products nor the prompt service 
we need. 

A Central New York Steel Jobber. 

Would like to see the old Pittsburgh Plus restored. 
Purchasing Agent of a Large New Jersey Manufacturer of Automobile Parts. 

The present set-up to me is most equitable because if otherwise it would mean 
that freight would be charged from actual point of shipment rather than from 
centralized point which is going to considerably penalize the users. I can see no 
advantages, whatsoever in making the change but rather to the contrary. And 
when I say that, I am speaking of industry as a whole or users of steel. Con- 
siderable of our wants are purchased in Ohio, therefore if basing point other than 
now in existence would apply, you can readily calculate as to how we would be 
penalized. 

A New York State Manufacturer of Factory Equipment. 

We feel the Federal Trade Commission plan on this is not at all practical; in 
fact in our opinion it lacks plain common sense. 

President of a Rhode Island Bolt and Nut Manufacturer. 

We have been buyers of steel for a good many years and it would be nothing 
short of a tragedy to return to the old system of f. o. b. mill. Being manufac- 
turers of bolts and nuts, a good many of our products are also sold on the same 
basing system as our sources oi supply of steel, and we have found that our 
customers generally accept and believe in it. The present system of freight 
charges tends to steady the market and in our line of business this is a very im- 
portant factor. 

A New Jersey Steel Jobber. 

The change proposed by the Federal Trade Commission would make many 
hundreds of basing points instead of a few as every destination would be a basing 
point. 

A West Virginia Manufacturer of Tools. 

Let us all endeavor to keep the steel industry and all other industries as far 
from Government control as possible. Look at the railroads and weep. Our 
country has grown and become great, our steel industry has prospered under a 
system of free enterprise and competition. Why change? 

A Maine Steel Jobber. 

We believe the old Pittsburgh basis was for the best interests of all, including 
both dealers and consumers. 

Purchasing Agent of a Rochester, N. Y., Manufacturer. 

I do not agree with the Federal Trade Commission. 
A St. Louis Sheet Metal Fabricator. 

Most important is to have the Government stop agitatmg and let business 
alone for awhile. 

A Missouri Sheet Metal Manufacturer. 

Why is it that the type of man on these committees know nothing of the steel 
business or any other business — merely theorists, lawyers or college profcssors,- 
and do not know our problems. Are we to continually place these political ex- 
pediency examinations at the expense of business and the cost to the taxpayers 
with no results in stimulating prices instead of political control goals. 

A West Virginia Manufacturer. 

The jnore I hear of the continual agitation of the Federal Trade Commission 
for abandonment of the basing point figures in the steel business the more I am 
convinced the whole issue-is a political skeleton in the closet to be brought out at 
convenient intervals ahd wAved before the steel industry. If the basing point 



CONCENTRATION OF ECONOMIC POWER 14433 

system were to be totally abandoned, the very nature of the rolling mill business 
would automatically keep the system in effect. I am inclined to believe that the 
Federal Trade Commission knows this fact. 

A Texas Steel Jobber. 

Any business man ^hat needs the help of the Federal Trade Commission in the 
conduct of his business will be out of business anyhow, so he does not need much 
sympathy. It is my opinion that negotiations between producers and buyers 
should be unrestricted by any Government agency. I recognize that it is neces- 
sary to have certain legislation to protect the weak from the strong, but I do not 
believe in regimentation of all industry by Government bodies who are only 
politically minded and absolutely without experience or practical knowledge. 

A Texas Machinery Manufacturer. 

Proposal (of Federal Trade Commission) is ridiculous; as insane and impractical 
as most Federal regulations for the past several years. 

A Michigan Manufacturer. 

The old Pittsburgh basing point was best for everyone. We have lost business 
ever since the change was made. 

A Philadelphia Steel Jobber. 

They (the Federal Trade Commission) are all wet. It would cause ruinous 
competition in selling our products. 

An Omaha, Neb., Company. 

We believe the best thing to do would be to make every mill a basing point on 
every product they make (not limited to the few basing points they now have) 
and then equalizing the freight rates. We do not object to the basing point 
system with freight equalization, what we object to is that we must buy sheets 
from a mill in Kansas City on a Chicago-Gary base, and the mill adds the differ- 
ence in freight. Make every mill a basing point on every product they make, 
then go ahead and allow the mills farther away to equalize the freight. 

President of a Structural Fabricating Company. 

I think the Federal Trade Commission can cure a lot of the present trouble so 
far as the structural steel business is concerned if it would make it impossible for 
the mills to compete with their own customers. I have reference to the fabricating 
units of the two larger mills. It is just as reasonable that these mills make auto- 
mobiles, tin cans, etc., etc., as it is for them to compete with independent fabri- 
cators on barges, bridges and buildings. Structural steel is a ver}' small percentage 
of their total tonnage, still they permit that particular part of their business to 
upset the general market. There could be less objection if the mills' fabricating 
units used all the elements of cost in their fabricated structural prices, but this 
they do not do which I attribute to the animosity between these two companies. 

A Wisconsin Structural Steel Fabricator. 

The small consumer of steel is in a very much improved condition if he is able 
to buy steel from a number of dififerent sources without freight disadvantages. 

And that is true even though milling-in-transit in some instances would prac- 
tically offset freight rate equalization. 

The small consumer of structural steel, whenever his plant is located at some 
distance from the mills and in territory somewhat restricted as to milling-in- 
transit, will find his potential market tremendously curtailed, perhaps even to the 
extent of making it unreasonable for him lo continue his business in that particular 
locality. 

Plants, large and small, located in favorable milling-in-transit territory on mul 
towns, will have absolutely no restrictions or handicaps over anybody in' the 
entire country, whereas the country in a great many instances will have handicaps. 

To a very large extent equalization of freight rates on steel shipments will 
segregate territories east and west, and north and south, depending upon plant 
location and mill ranges, but unfortunately in this upheaval as to territory there 
will also be many a casualty, 98 per cent of them small steel fabricators and 
consumers. 

.4 New York State Structural Steel Fabricator. 

The largest tonnage we buy consists of wide flanged beams. Source of supply, 
two places: Bethlehem at Buffalo, Carnegie at Pittsburgh. We object to having 
only one source. . Wo must have both sources and the prices mMst be alike f. o. b. 
liorhfs.hr. 



14434 CONCENTRATION OF ECONOMIC POWER 

If there is no way to accomplish that, the result in the steel industry will be 
disastrous to labor and owners and customers. 

I have read every word you have printed on the subject. The statement of 
the commission "To fulfill this purpose, however, there must be no obligation to 
maintain any announced price for any time whatsoever," sounds absolutely silly 
to an experienced steel buyer or seller. In fact, a mill by taking technical advan- 
tage of this can meet any competition anywhere. It really permits a mill to quote 
a new price to every different inquiry and can quote a thousand different prices 
every day, allowing the destination point of shipment to govern the price so as 
to meet competition. 

I am not satisfied, however, with present system. In connection with "fab- 
rication-in-transit" system "the Buffalo fabricator can deliver steel in Rochester 
and in our market just east of Rochester at a cost of $1.50 plus or minus per ton 
less than ours. This for the plain steel including freight. To do this the Buffalo 
fabricator must buy in Pittsburgh. It is an odd situation. We are asking for the 
restoration of the system used prior to last June. The mills then quoted f. o. b. 
final destination of job. We were then on equal basis. Of course the system 
was abused. The mills themselves used it to chisel. 



Exhibit No. 2203 

[Copy] 

American Iron and Steel Institute, 
350 Fifth Avenue, New York, June S, 1935. 
Important 

Dear Sir: Your attention is earnestly directed to the enclosed copy of a 
preamble and resolutions that were adopted at a meeting of the Board of Directors, 
held today, for the purpose of considering the policy to be followed by members 
of the Industry during the present period of uncertainty. 
Yours very truly, 

Walter S. Tower, 

Executive Secretary. 
Enclosure 



Exhibit No. 2204 

[Copy] 

Copy of Draft of Preamble and Resolutions Adopted by the Board of 
Directors of American Iron and Steel Institute at a Meeting Thereof, 
Held June 3, 1935 

Whereas the Chairman of the National Industrial Recovery Board has issued a 
statement with regard to the decision of the United States Supreme Court in the 
Schechter Poultry Corporation case in which he expressed the hope "that all 
employers heretofore operating under approved codes and all their employes will 
cooperate in maintaining those standards of fair competition in commercial and 
labor relations which have been written into the codes with practically universal 
sanction, and which represent a united effort to eliminate dishonest, fraudulent 
trade practices and unfair competition in J^'erwo^king and underpaying labor."; 

Resolved, That it is hereby declared to be the sentiment of the Board of Directors 
of the American Iron and Steel Institute that the individual members of the Iron 
and Steel Industry, acting voluntarily, during the present "uncertainty, maintain 
the present rates of pay and maximum hours of labor and the standards of fair 
competition which are set forth in the Steel Code, and that the members of the 
Industry continue to protect the employes' rights of collective bargaining; and 

Resolved, That the Executive Secretary of the Institute be, and he hereby is, 
authorized and directed to send a copy of these resolutions to each member of the 
Industry. 



CONCENTRATION OF ECONOMIC POWER 14435 

Exhibit No. 2205 

[Copy] 

Resolution Adopted by Members of Iron and Steel Industry Assembled 
AT American Iron and Steel Institute, June 6, 1935 

Resolved, That the members of the Iron and Steel Industry in General Meeting 
assembled this sixth day of June, 1935, hereby unanimously ratify the resolution 
of the Board of Directors of American Iron and Steel Institute, adopted June 3, 
1935, and each of us hereby declares that the Company which he represents is in 
favor of supporting the position taken by such resolution and that it is the inten- 
tion of such Company, acting individually and voluntarily, in so far as it may do 
so, during the present uncertainty to maintain the present rates of pay and 
maximum hours of labor and the standards of fair competition which are described 
in the Steel Code, and thai such Company will continue to protect the employees' 
rights of collective bargaining. 



Exhibit No. 2206 

Commercial Resolution No. A4 ' 

As Amended June 14, 1934 

Effective June 21, 1934 

preamble and resolution duly adopted by the board of directors as 

amended on JUNE 14, 1934, WITH RESPECT TO SWITCHING CHARGES TO BE ADDED 
to BASE PRICES FOR PRODUCTS DELIVERED AT BASING POINTS 

Whereas it is provided in Section 4 of Schedule E of the Code that when switch- 
ing charges for the delivery of a product at a basing point are required to be added 
in determining the delivered price of such product pursuant to the provisions of 
said Section 4 the Board of Directors may by resolution fix such an arbitrary 
switching charge or such arbitrary switching charges for the delivery of such 
product as the Board shall deem proper with a view to preventing unequal com- 
petitive conditions in respect of the sale of such product for delivery at such basing 
point; and 

Whereas a great diversity in the switching charges exists at the various basing 
points and on that account it is practically impossible in most cases for members 
of the Code to ascertain in advance of the sale of any product for delivery at any 
basing point the correct published tariff switching charges chargeable thereon 
pursuant to the provisions of said Section 4; and 

Whereas the Board has been advised that the arbitrary rates prescribed in the 
following resolution are fair averages of the actual switching rates now in effect 
in the switching areas of the respective basing points at which such rates are to 
be applied; 

Resolved That the Board of Directors hereby fixes, for the purposes of the pro- 
visions of Section 4 of Schedule E of the Code, arbitrary switching charges for the 
delivery of any product at any basing point for such product named in Schedule 
F of the Code, except pig iron sold for delivery in Jefferson County, Alabama, 
from any furnace located in that County, as follows: 

(a) for deliveries in carload lots (minimum thirty tons) at Chicago, Illinois, 
and Gary, Indiana, and for deliveries in such carload lots from either of such 
places to the other, sixty cents per net ton, or, if the published base price for such 
product at such basing point is stated per gross ton, then sixty cents per gross ton; 

(b) for deliveries in carload lots (minimum twenty-five tons) at all other basing 
points named in Schedule F of the Code, fifty cents per net ton, or, if the pub- 
lished base price for such product at such basing point is stated per gross ton, then, 
fifty cents per gross ton; and 

(c) for deliveries in less-than-carload lots at all basing points named in Schedule 
F of the Code, and for deliveries in less-than-carload lots from either Chicago, 
Illinois, or Gary, Indiana, to the other of such places, ten cents per hundred 
pounds, but not in any case exceeding on any one shipment the charge per carload 
at the carload rate hereinabove specified for the basing point in question. 

' Notk: This Commercial Resolution supersedes Commercial Resolution No. 20 as amended December 
14, 1933, and Commercial Resolution No. 52 adopted on March 15, 1934. 



14436 CONCJi^NTllATiON OF ECONOMIC POWER 

Exhibit No. 2207 
Commercial Resolution No. A18 ' 

PREAMBLE AND RESOLUTION DULY ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 
14, 1934, AUTHORIZING REDUCTIONS IN THE DELIVERED PRICES FOR PRODUCTS DE- 
LIVERED BY THE TRUCK PROVIDED BY THE PURCHASER 

Whereas it is provided in Section 4 of Schedule E of the Code that in any case 
in which a product shall be delivered by other than all-rail transportation the 
member of the Code selling such product may allow to the purchaser a reduction 
in the delivered price otherwise chargeable under the provisions of said Section at 
such rate previously approved by the Board of Directors and filed with the Secre- 
tary as the Board of Directors shall deem equitable and necessary, in order that 
competitive opportunity to producers and consumers of products shall be main- 
tained; and 

Whereas on recommendations heretofore made to the Board of Directors it 
approved rates of such reductions by members of the Code to purchasers of prod- 
ucts delivered by truck provided directly or indirectly by such purchasers and for 
their account which the Board deemed and now deems to be equitable and neces- 
sary, in order that competitive opportunity to producers and consumers of prod- 
ucts shall be maintained; 

Resolved That in any case in which any purchaser shall require that any prod- 
uct purchased by him from a member of the Code be delivered by truck and such 
truck is provided, directly or indirectly, by such purchaser and for his account, 
such member of the Code may allow a reduction in the delivered price for such 
product otherwise chargeable under Section 4 of Schedule E of the Code and the 
regulations prescribed by, and the resolutions adopted by, the Board of Directors 
thereunder and then in effect (a) at a rate equal to 65% of the carload all-rail 
published tariff freight rate on such product from the point at which transporta- 
tion of such product by truck began to the place of delivery of such product by 
truck to such purchaser (if such freight rate be published on a per car basis, the 
rate per ton shall be determined by dividing such charge per car by 25), or (6), if 
the transportation by such truck be at a basing point for such product, then at a 
rate equal to 65% of the rate of the applicable arbitrary carload switching charges, 
f any, at such basing point theretofore approved by the Board of Directors, or, if 
such Board shall not have approved a rate of arbitrary carload switching charges 
for such basing point, 65% of the rate per ton of the actual switching charges 
(computed on the basis of the minimum carload quantity to which such charges 
apply) applicable on the delivery of such product at such basing point under the 
provisions of said Section 4, from the point at which transportation of such prod 
uct by truck began to the place of delivery of such product by truck to such pur- 
chaser; provided, however, that a sale of any product or products by a member of 
the Code for such delivery by truck may be deemed to be a sale of a carload or 
greater than carload quantity of such product or products only in case such sale 
covers not less than a carload quantity of such product or products for delivery 
at one time and the loading of such quantity thereof on the truck or trucks so 
provided by such purchaser and for his account shall have been completed not later 
than during tlie next working day after the day on which such loading of such 
quantity of such product or products began. 

' Note: This Commercial Resolution supersedes paragraph (e) of Part I of Commercial Resolutions No. 
8, as amended Marcli ITi, 1934. 



CONCENTRATION OP ECONOMIC POWER 14437 

Exhibit No. 2208 

Ieon and Steel iNDtrsTET 

CODE OF FAIR COMPETITION 

REGULATIONS NO. 4 ' AS AMENDED OCTOBER 11, 1934 

Regulations under Section 4 of Schedule E of the Code of Fair Competition of 
the iron and Steel Industry 

Re Reductions in the Delivered Prices of Products Delivered in Whole or in Part 
by Water Transportation and Reductions in the Delivered Prices of Products 
Sold for Delivery in the South Atlantic, Gulf or Pacific Coast States and 
Transportation Charges on Products Sold for Delivery at Places in the Canal 
Zone or at Ports in Alaska 

Effective October 18, 1984 

Wherever hereinafter used, unless the context shall otherwise clearly indicate, 
the terms which are defined in Article I of the Code of Fair Competition of the 
Iron and Steel Industry, approved on August 19, 1933, by the President of the 
United States of America, as amended on May 30, 1934, and in Section 1 of 
Schedule E thereof shall have the respective meanings therein set forth. 

It is provided in Section 4 of Schedule E of the Code that, in any case in which 
a product shall be dehvered by other than all-rail transportation, the member of 
the Code selling such product may allow to the purchaser a reduction in the de- 
livered price otherwise chargeable under the provisions of such Section 4 at such 
rate previously approved by the Board of Directors and filed with the Secretary 
as the Board of Directors shall deem equitable and necessary, in order that com- 
petitive opportunity to producers and consumers of products shall be maintained. 

On recommendations heretofore made to the Board of Directors it approved 
rates of such reductions in certain cases which it deemed and now deems to be 
equitable and necessary, in order that competitive opportunity to producers and 
consumers of products shall be maintained. 

Such reductions might tend to create conditions of unfair competition between 
producers that can and those that cannot take advantage thereof. Therefore, 
the Board of Directors has determined that it is in the interest of the Iron and 
Steel Industry and of other branches of industry and that it will not tend to 
defeat the policy of Title I of the National Industrial Recovery Act to permit 
members of the Code, in the cases and to the extent hereinafter in these Regula- 
tions provided, to sell or contract for the sale of products produced by them, 
respectively, at delivered prices which shall be less than the delivered prices other- 
wise chargeable by such members, respectively, for such products under the pro- 
visions of such Section 4. 

It is provided in such Section 4 that, in the case of a product destined for de- 
livery at a place in the Canal Zone or at a port in Alaska, the member of the 
Code selling such product, in determining its delivered price therefor, shall add 
to its pubhshed base price for such product effective at the time of and for the sale 
thereof such charges in respect of transportation as shall have been previously 
approved by the Board of Directors and filed with the Secretary. 

Accordingly, the Board of Directors hereby prescribes the following regulations 
with regard to (a) reductions in the delivered prices of products delivered in whole 
or in part by water transportation, (b) reductions in the delivered prices of 
products sold for delivery in the South Atlantic, Gulf or Pacific Coast states and 
(c) the transportation charges on products sold for delivery at places in the Canal 
Zone or at ports in Alaska: 

1. In any case in which any purchaser shall require that any product purchased 
by him from a member of the Code delivered by ocean or rail-and-ocean or 
rail-ocean-and-rail transportation from the plant of such member to the place of 
delivery of such product at a South Atlantic port or through a South Atlantic 
port to a place of delivery in a South Atlantic state, such member ^f the Code 
may allow a reduction in the delivered price for such product otherwise chargeable 
under Section 4 of Schedule E of the Code that shall not be greater than the 

'Note: These Regwlations No. 4 supersede Commercial Resolutions No 8 as amended March 15, 1934 
Cexcept paragraph (e) of Part I of such Commercial Resolutions, which is superseded by a new Commercial 
Resolution No. A18 adopted on June 14, 1934), Commercial Resolution No. 18 adopted on September 20, 
1933, Commercial Resolution No. 37 adopted on December 14, 1933, Commercial Resolution No. 43 adopted 
on January 11, 1934, and Commercial Resolution No. 56 adopted on April 12, 1934, all of which Commercial 
Resolutions have been rescinded effective June 21, 1934. 



14438 CONCENTRATION OF ECONOMIC POWER 

amount, if any, by which (1) the lowest dehvered price that could then be charged 
under the Code by such member for such product delivered by all-rail transpor- 
tation to such place of delivery shall exceed (2) the lowest delivered price for such 
product which could then be obtained by adding to the pubhshed base price 
(plus any extras required to be added thereto or less any deductions permitted 
to be made therefrom under Section 6 of such Schedule E) of such member for 
such product effective at the time of and for the sale thereof at any basing point 
the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, 
as the case may be, that would be applicable on the shipment of such product 
from such basing point to such place of delivery. 

2. In any case in which any purchaser shaU require that any product purchased 
by him from a member of the Code be delivered by ocean or rail-and-ocean or rail- 
ocean-and-rail transportation from the plant of such member to the place of de- 
livery of such product at a Gulf port or through a Gulf port to a place of delivery in 
a Gulf state, such member of the Code may, subject to the proviso hereinafter 
in this paragraph 2 set forth, allow a reduction in the delivered price for such pro- 
duct otherwise chargeable under Section 4 of Schedule E of the Code that shall not 
be greater than the amount, if any, by which (1) the lowest delivered price that 
could then be charged under the Code by such member for such product delivered 
by all-rail transportation to such place of delivery shall exceed (2) the lowest 
delivered price for such product which could then be obtained by adding to the 
published base price (plus any extras required to be added thereto or less any 
deductions permitted to be made therefrom under Section 6 of such Schedule E) 
of such member for such product effective at the time of and for the sale thereof at 
any basing point the lowest published ocean or rail-and-ocean or rail-ocean-and- 
rail freight charges, as the case may be, that would be applicable on the shipment 
of such product from such basing point to such place of delivery; provided, however, 
that, if any Gulf port is named in Schedule F of the Code as a basing point for such 
product, then (1), if such product be delivered as aforesaid at a Gulf port, except as 
otherwise provided in Section 3 of Schedule E of the Code, the delivered price 
which such, member may charge for such product as such place of delivery shall 
not be less than the lowest published base price for such product effective at the 
time of and for the sale thereof at any such basing point plus the switching charges 
thereon at such basing point theretofore approved by the Board of Directors, and 
(2), if such product be delivered as aforesaid through a Gulf port to a place of 
delivery in a Gulf state, except as aforesaid, such delivered price shall not be less 
than the lowest published base price for such product effective at the time of and 
for the sale thereof at any such basing point plus the all-rail published tariff freight 
charges that would be applicable on the shipment of such product from such 
basing point to such place of delivery. 

3. In any case in which any purchaser shall require that any product purchased 
by him from a member of the Code be delivered by ocean or rail-and-ocean or 
rail-ocean-and-rail transportation from the plant of such member to the place of 
delivery of such product at a Pacific Coast port that is not a basing point for such 
product or through a Pacific Coast port to a place of delivery in a Pacific Coast 
state and a Pacific Coast port is named in Schedule F of the Code as a basing 
point for such product, such member of the Code may allow a reduction in the 
delivered price for such product otherwise chargeable under Section 4 of Section E 
of the Code that shall not be greater than the amount, if any, by which (1) the 
all-rail published tariff freight charges to such place of delivery from the basing 
point for such product nearest in terms of all-rail published tariff ireight charges to 
such place of delivery shall exceed (2) the lowest published ocean or rail-and-ocean 
or rail-ocean-and-rail freight charges, as the case may be, that would be applicable 
on the shipment of such product from such basing point to such place of delivery. 

4. In any case in which any purchaser shall require that any product purchased 
by him from a member of the Code be delivered by ocean or rail-and-ocean or 
rail-ocean-and-rail transportation from the plant of such member to the place of 
delivery of such product at a Pacific Coast port or through a Pacific Coast port to a 
place of deliver}' in a Pacific Coast state and none of the Pacific Coast ports Is 
named in Schedule F of the Code as a basing point for such product, such member 
of the Code may allow a reduction in the delivered price for such product otherwise 
chargeable under Section 4 of Schedule E of the Code that shall not be grealer 
than the amount, if any, by which (1) the lowest delivered price that could then be 
charged under the. Code by such member for such product delivered by all-rail 
transportation to such place of delivery shall exceed (2) the lowest delivered price 
for such product which could then be obtained by adding to the pubhshed base 
price (plusi any extras required to be added thereto or less any deductions permitted 
to be made therefrom under Section 6 of such Schedule E) of such moAiber for 



CONCENTRATION OP ECONOMIC POWER 14439 

such product effective at the time of and for the sale thereof at any basing point 
the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, 
as the case may be, that would be applicable on the shipment of such product from 
such basing point to such place of delivery. 

5. In any case in which any purchaser shall require that any product purchased 
by him from a member of the Code be dehvered from the plant of such member by 
continuous water or rail-and-water or rail-water-and-rail transportation to the 
place of delivery of such product at a South Atlantic, Gulf or Pacific Coast port, or 
through any such port or through any port on that part of the Mississippi River 
extending from Vicksburg to New Orleans, both inclusive, to the place of delivery 
in any of the South Atlantic, Gulf or Pacific Coast states, such member of the Code 
may allow a reduction in the delivered price for such product otherwise chargeable 
under Section 4 of Schedule E of the Code which will make the delivered price for 
such product at such place of delivery as low as that permitted by paragraph 
1, 2, 3, or 4, as the case may be, of these Regulations. 

6. In the case of a sale by any member of the Code of any product for delivery 
in any of the South Atlantic, Gulf or Pacific Coast states from a plant of such mem- 
ber located m any of such states, if an available water or rail-and-water or rail- 
water-and-rail route and service from such plant to the place of delivery of such 
fjroduct does not then exist, the member of the Code selling such product may 
allow to the purchaser thereof a reduction in the delivered price therefor otherwise 

. chargeable under the provisions of Section 4'of Schedule E of the Code in an amount 
,which will result in a delivered price for such product sold or contracted to be sold 
by such member for delivery at such place of delivery as low as that permitted by 
paragraph 1, 2, 3, or 4, as the case may be, of these Regulations. 

7. In any case in which any purchaser shall purchase from any member of 
the Code pig iron in an amount of 400 gross tons or more^and shall require that 
such pig iron be delivered by water or rail-and-water transportation in a lot or 
lots of 400 gross tons or more f. o. b. barge alongside the dock of such purchaser 
at any port on the Ohio River, the Monongahela River or the Allegheny River 
between and including Wheeling, West Virginia, on the Ohio River, Monessen, 
Pennsylvania, on the Monongahela River and Ford City, Pennsylvania, on the 
Allegheny River, such member of the Code may allow a reduction in the delivered 
price of such pig iron otherwise chargeable under Section 4 of Schedule E of the 
Code in an amount which shall not exceed 60 cents per gross toQ of such pig 
iron so delivered; provided, however, that, except as otherwise provided in Section 
3 of Schedule E of the Code, the delivered price of such pig iron so delivered shall 
not in any case be less than the published base price of such member of the Code 
for such pig iron effective at the time of and for the sale thereof at the basing 
point nearest in terms of all-rail freight charges to the place of delivery of such 
pig iron plus 50 cents per gross ton of such pig iron. 

8. In any case in which any purchaser shall purchase from any member of the 
Code pig iron in an amount of 1,500 gross tons or more and shall require that 
such pig iron be delivered by water or rail-and-water transportation in a lot or 
lots of 1,500 gross tons or more f. o. b. barge or vessel alongside the dock of such 
purchaser at Saginaw, Holland, Muskegon or South Haven, Michigan, such 
member of the Code may allow a reduction in the delivered price of such pig 
iron otherwise chargeable under Section 4 of Schedule E of the Code in an amount 
which shall not exceed $1.30 per gross ton of such pig iron so delivered at Holland, 
Michigan, or $1.35 per gross ton of such pig iron so delivered at Saginaw, Michi- 
gan, or $1.50 per gross ton of such pig iron so delivered at Muskegon or South 
Haven, Michigan; and, if such purchaser shall require that such pig iron be 
delivered from the plant of such member of the Code at any of such places by 
barge or vessel which shall be provided by such purchaser and for his account, 
such member of the Code may allow a reduction in the delivered price of such 
pig iron otherwise chargeable under Section 4 of Schedule E of the Code in an 
amount (in addition to the amount of the reduction hereinbefore in this paragraph 
S provided for) which shall not exceed 50 cents per gross ton of such pig iron so 
delivered at Saginaw, Michigan, or $1.15 per gross ton ot such pig iron so de- 
livered at Holland, Muskegon or South Haven, Michigan. 

9. In any case in which any purchaser shall purchase from any member of the 
Code pig iron in an amount of 400 gross tons or more and shall require that teuch 
pig iron be delivered by water or rail-and-water transportation in a lot or lots of 
400 gross tons or more f . o. b. barge or vessel alongside the dock of such purchaser 
at Phillipsdale, R. 1., Branford, Conn., Bridgeport, Conn., Yonkers, N. Y,, 
Brooklyn, N. Y., Elizabethport, N. J., Bayonne, N. J., Roebling, N. J., Burling- 
ton, N. J., or Florence, N. J., such member of the Code may allow a reduction 
in the delivered price of such pig iron otherwise chargeable under Section 4 of 



14440 CONCENTRATION OF ECONOMIC POWER 

Schedule E of the Code in an amount which shall no1; exceed 60 cents per gross 
ton of such pig iron so delivered. 

10. In the case of a sale by any menaber of the Code of any product for delivery 
at any place m the Canal Zone, the transportation charges which such member 
or the Code shall be required, pursuant to the provisions of Section 4 of Schedule 
E of the Code, to use in determining the delivered price of such product at such 
place shall be the lowest published ocean or rail-and-ocean or rail-ocean-and-raii 
freight charges, as the case may be, that would be applicable on the shipment 
of such product from the basing point on which the base price therefor is based 
to such place. 

11. In the case of a sale by any member of the Code of any product for de- 
livery at any port in Alaska, if a Pacific Coast port is not named in Schedule F 
of the Code as a basing point for such product, the Transportation charges which 
such member of the Code shall be required, pursuant to the provisions of Section 
4 of Schedule E of the Code, to use in determining the delivered price of such 
product at such port in Alaska shall be the lowest published ocean or rail-and- 
ocean freight charges, as the case may be, that would be applicable on the ship- 
ment of such product from the basing point on which the base price therefor is 
based to such port in Alaska; provided, however, that, if there shall not then be 
any published ocean or rail-and-ocean freight charges, as the case may be, on 
such product from such basing point to such port, then such member of the Code 
may sell such product for delivery to such purchaser f. o. b. dock at any Pacific 
Coast port to which there is a published ocean or rail-and-ocean freight charge, 
as the case may be, on such product from such basing point and the shipment 
of such product from such Pacific Coast port to such purchaser at such port in 
Alaska shall be at his risk and expense. 

12. In the case of a sale by any member of the Code of any product for de- 
livery at any port in Alaska, if a Pacific Coast port is named in Schedule F of 
the Code as a basing point for such product, the delivered price at such port in 
Alaska which (except as otherwise provided in Section* 3 of Schedule E of the 
Code) such m^ember of the Code shall quote and bill for such product shall be not 
less than the s' m of (1) the lowest published base price (plus any extras required 
to be added th reto or less any deductions permitted to be made therefrom under 
Section 6 of Schedule E of the Code) of such member for such product effective 
at the time of and for the sale thereof at any Pacific Coast port which is a basing 
point for such product and (2) the lowest published ocean or rail-and-ocean freight 
charges, as the case may be, that would be applicable on the shipment of such 
product from such basing point to such port in Alaska; provided, however, that, 
if such freight charges shall be unreasonably high, or if there shall not then be in 
effect any published ocean or rail-and-ocean freight charges, as the case may be, 
on such product from such basing point to such port in Alaska, then such member 
of the Code may sell such product for delivery to such purchaser f. o. b. dock at 
such basing point and the shipment of such product from such ba&ing i)oiiifc to 
such purchaser at such port in Alaska shall be at his risk and expense. 

13. For the purpose of determining under any provision of these Regulations 
the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, 
as the case may be, that would be applicable on the shipment of any product 
from any basing point for such product to any place of delivery such freight charges 
shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean- 
and-rail freight charges, as the case may be, from such basing point to such place 
of delivery applicable to the quantity of such product shipped at one time and in 
effect at the time of the shipment thereof; provided, however, that, in the case of a 
sale by a member of the Code at one time of any quantity of any product for use 
in the construction of an identified structure, such freight charges shall be deemed 
to be the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight 
charges, as the case may be, from such basing point to the place of delivery thereof 
applicable to such quantity of such product and in effect at the time of such sale; 
and provided, further, that in case any member of the Code shall sell or contract 
to sell a carload or more of various products for shipment in mixed carload lots, 
whether the respective base prices for such products be based on the same or 
diflferent basing points, such freight charges shall be deemed to be the lowest 
published ocean or rail-and-ocean or rail-ocean-and-rail carload freight charges 
per gross ton, per net ton or per hundred pounds, as the case may be, applicable 
to the respective quantities of such products so sold from the basing point or 
basing points on which the respective base prices of such products are based to 
the place of delivery thereof. 



CONCENTRATION OF ECONOMIC' POWER 14441 

Except as otherwise provided in paragraph 3 of these Regulations, for the pur- 
pose of determining the lowest delivered price for any product that shall be sold 
by any member of the Code for delivery at any place of delivery pursuant to any 
provision of these Regulations, if the tariff book entitled "Freight Tariff No. 1. 
American Iron and Steel Institute" issued under date of November 15, 1933, or 
any rp vision or amendment thereof, as at the time in effect, shall show ocean or 
rail-and-ocean or rail-ocean-and-rail freight charges that would be applicable on 
the shipment of such product to the place of delivery thereof from any basing 
point or basing points therefor, such delivered price for such product at such place 
of delivery shall be computed on the basis of the published base price of such 
member for such product efifective at the time of and for the sale thereof at a 
basing point therefor from which such ocean or rail-and-ocean or rail-ocean-and- 
rail freight charges on such product to such place of delivery shall be shown in 
such Freight Tariflf No. 1, or any such revision or amendment thereof, and of such 
ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may 
be. If the freight charges shown in such Freight Tariff No. 1, or any such revision 
or amendment thereof, for the transportation of any product by ocean or rail- 
and-ocean transportation from any basing point for such product to any port 
shall include track delivery of such product within the switching limits of such 
port, such freight charges shall also be deemed to be the lowest published freight 
charges for such transportation of such product and delivery thereof f. o. b. 
dock or f. o. b. cars dock at such port; provided, however, that, if such Freight 
Tariff No. 1, or any such revision or amendment thereof, shall also show the 
freight charges for such transportation of such product and delivery thereof 
f. o. b. cars dock at such port, such freight charges shall be deemed to be the 
lowest published freight charges for such transportation of such product and de- 
livery thereof f. o. b. cars dock at such port or f. o. b. dock at such port. If such 
Freight Tariff No. 1 shall show^ ocean or rail-and-ocean or rail-ocean-and-rail freight 
charges that would be applicable on the shipment of any product to the place of 
delivery thereof from the Pacific Coast port named in Schedule F of the Code as 
a basing point for such product that is nearest in terms of all-rail published 
tariff freight charges to such place of delivery, then, for the purpose of determin- 
ing the amount of any reduction in the delivered price of such product permitted 
under the provisions of paragraph 3 of these Regulations, such freight charges 
shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean- 
and-rail freight charges, as the case may be, that would be applicable on the 
shipment of such product from such basing point to such place of delivery. 

14. For all purposes of these Regulations any place in the Pa ific Coast states 
to which published tariff ocean transportation charges on any product from At- 
lantic Coast ports shall apply and to which ocean or rail-and-ocean freight 
charges on such product from any basing point for such product shall be shown in 
said Freight Tariff No. 1 shall be deemed to be a Pacific Coast port. 

15. In any case in which any purchaser shall purchase from any member of the 
Code steel billets in an amount of 1,000 gross tons or more and shall require that 
such billets be delivered by water or rail-and-water transportation in a lot or 
lots of 1,000 gross tons or more f. o. b. barge or vessel alongside the dock of such 
purchaser at South Portland, Maine, such member of the Code may allow a 
reduction in the delivered price of such billets otherwise chargeable under Section 
4 of Schedule E of the Code in an amount which shall not exceed $2.00 per gross 
ton of such billets so delivered. 

Prescribed by the Board of Directors on June 14, 1934, effective June 21, 1934. 



14442 



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14449 



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14453 



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CONCENTRATION OF ECONOMIC POWER 



14455 



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CONCENTRATION OF ECONOMIC POWER 



14463 



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14465 



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CONCENTRATION OF ECONOMIC POWER 





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14467 



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CONCENTRATION OF ECONOMIC POWER 



14469 






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CONCENTRATION OP ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



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14493 



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14495 



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