# United States v. United States Steel Corp.

> District Court, D. New Jersey · June 3, 1915 · 223 F. 55

URL: https://www.frixlaw.com/law-library/cases/8795751

## Case

- **Full name:** UNITED STATES v. UNITED STATES STEEL CORPORATION
- **Court:** District Court, D. New Jersey
- **Decided:** June 3, 1915
- **Citations:** 223 F. 55; 1915 U.S. Dist. LEXIS 1428
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Buffington
- **Judges:** Buffington, Hunt, McPherson, Woolley
- **Cited by:** 12 later opinions in the Frix Law Library

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## Opinion text

BUFFINGTON, Circuit Judge.
We may say in advance that all the members of this court are in agreement as to the decree that will be entered in this case, although we are not in complete accord concerning every step by which that result is reached.
*58 The subject-matter of the litigation is of such magnitude and complexity, and the record is of such size, that the effort to set bounds to this discussion has not been easy. So many questions, large or small, were laid before us in the oral argument, and so many are considered in the extended briefs of counsel, that we cannot hope to give them all a-place in such discussion. But we trust that one or other of the two following opinions will pay adequate attention to the most_ important, with the result of avoiding repetition as far as possible, while presenting somewhat different aspects of the controlling principles by which the case must be decided. Without a needless expansion of the discussion, it would scarcely be practicable to take up each detail for the purpose of pointing out just where we are in complete agreement, and where certain divergencies of view exist. We have thought it best, therefore, to adopt the course referred to, believing that the two opinions will cover the whole case, and will also sufficiently indicate the reasons that have led us to a common conclusion.
This case — a proceeding under the Sherman Anti-Trust Taw — is largely one of business facts. The construction of that statute has been settled by the Supreme .Court. Standard Oil Co. v. United States, 221 U. S. 1 , 31 Sup. Ct. 502, 55 L. Ed. 619 , 34 T. R. A. (N. S.) 834, Ann. Cas. 1912D, 734; United States, v. American Tobacco Co., 221 U. S. 106 , 31 Sup. Ct. 632, 55 L. Ed. 663 . That construction has been applied in this circuit in the Keystone Watch Case (D. C.) 218 Fed. 502 , and the Powder Trust Case (C. C.) 188 Fed. 127 . It follows, therefore, that our duty is largely one of finding the facts and to those facts applying settled law. The act in question provides:
“Section 1. Every contract, combination in the .form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract, or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.” Comp. St. 1913, § 8820.
’“See. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the trade or commerce among the several states or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction, thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.” Section 8821.
“Sec. 4. The several Circuit Courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.” Section 8823.
“Sec. 7. Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any Circuit Court of the United *59 States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorney’s fee.” Section S829.
When the Constitution of the United States conferred on Congress the right “to regulate commerce with foreign nations and among the several states,” its purpose was not to fetter, but to further and foster, trade. This constitutional purpose to promote lawful trade by protecting it from unlawful restraint is avowed in the title of the act, viz., “An act to protect trade and commerce against unlawful restraints and monopolies,” and, as held by the Supreme Court (Standard Oil Case, supra), “one of the fundamental purposes of the statute is to protect, not to destroy, rights of property.”
[1] Now unlawful restraints of trade are of three kinds, past, present, and future. As to present and future restraints, Congress by section 4 empowered “the Attorney General to institute proceedings in equity to prevent and restrain such violations,” and to that end invested the courts “with jurisdiction to prevent and restrain violations of this act.” The jurisdiction here conferred is the chancery power of injunction, a power which is used to restrain present wrongs or prevent threatened ones. This is shown by the act providing even for temporary preliminary restraining orders while the case is being heard. “The function of an injunction is to afford preventive relief, not to redress alleged wrongs which have been committed already.” Lacassagne v. Chapuis, 144 U. S. 119 , 12 Sup. Ct. 659, 36 L. Ed. 368 , cited in Black v. Jackson, 177 U. S. 360 , 20 Sup. Ct. 648, 44 L. Ed. 801 . Applying that general principle, the Supreme Court of the United States, in the Standard Oil Case, supra, citing Swift v. United States, 196 U. S. 375 , on page 377, 25 Sup. Ct. 276, 49 L. Ed. 518 , said:
“It may be conceded that ordinarily, where it was found that acts had been done in violation of the statute, adequate measure of relief would result from restraining the doing of such acts in the future.”
In view of what was held by this court: in the Powder Case, supra, it scarcely need be again said by us that where the evil effects of past undue restraint or monopoly continue to he effective and harmful when the proceeding is begun — that is, where “the inherent nature of the contemplated acts” is such as to bring about their continuance and repetition, or where, to use the expressive language of the Supreme Court in the Standard Oil Case, 221 U. S. 75 , 31 Sup. Ct. 502, 55 L. Ed. 619 , 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734, a “perennial violation” of the act exists — the jurisdiction to restrain present and prevent future violations vests under this section, and if, to prevent continuance of such continuing wrongs, a dissolution of the unlawful combination is necessary to make the relief effective, the original combination will be dissolved. That power was exercised by this court in the Powder Case, supra, and by the Supreme Court in the Standard Oil Case, supra, and the Tobacco Case, supra. In the Keystone Watch Case, supra, this power to dissolve was not-exercised, the court there saying at page 519 of 218 Fed.:
“But we see no sufficient evidence that the public interest requires us to break up the existing corporate entity. United States v. Great Lakes Towing *60 Co. (D. C.) 208 Fed. 746 . The record satisfies us that tlie watch, case business; is not suffering from the absence of live and healthy competition, and except in the directions already mentioned — namely, the retail sales of the Howard 'watch, and the policy of boycotting — rwe think the court is not called upon to interfere.”
The reason why the power to dissolve was exercised in the Standard Oil Case, namely, that it was a violation continuing up to the filing of the petition, is pointed out by the Supreme Court in these words:
“But in a case like this, where the condition which has been brought about in violation of the statute in, and of itself, is not only a continued attempt to monopolize, but also a monopolization, the duty to enforce the statute requires the application of broader ai}d more controlling remedies,” and is justified because “the acts and dealings established by the proof operated to destroy the ‘potentiality of competition,’ * s: * but also to be an attempt to monopolize and a monopolization bringing about a perennial violation of the second section.”
To this we may add that, while the power to dissolve was for the same reason exercised by us in the Powder Case, yet it will be observed there was in that case a refusal to enjoin as to certain defendants, the court saying:
_ “As the only relief we can grant in this proceeding is injunctive, the petition must be dismissed as to any defendant who was not violating the law, or threatening to violate it, when the suit was commenced.”
Indeed in each of the cases, the injunction was granted, not to enjoin past violations, or because there had been violations in the past, but because such violations were continuing when the bill was filed. It will therefore appear that by this act a comprehensive plan of relief .was mapped out, “to protect trade and commerce against unlawful restraints and monopolies”: First, a criminal prosecution by the government under sections 1 and 2 for all violations, past and present; second, "an injunction in equity, on complaint of the'Attorney General, under section 4, against all present or threatened violations of the act; and, third, a civil suit under section '7 by any one injured against any violator of this act.
In pursuance of the power vested in him by section 4 above quoted, George W. Wickersham, then Attorney General of the United States, on October 26, 1-911, filed this petition. Without entering'into detail, we may say it prays that the Federal Steel Company, organized in 1898; the Carnegie Ste.el Company, organized in 1900; the Carnegie Company of New Jersey, organized in 1900, which held the stock of the Carnegie Steel Company of Pennsylvania; the American Steel & Wire Company, organized in 1899; the National Tube Company, organized in 1899; the National Steel Company, organized in 1899; the American Tin Plate Company, organized in 1898; the American Steel Hoop Company, organized in 1899; the American Sheet Steel Company, organized in 1900; and the United States Steel Corporation, which acquired the stocks of said companies — be held unlawful monopolies, and that the United States Steel Corporation, and each and all the said units composing it, be decreed to be illegal and be dissolved, and that their officers and stockholders be perpetually enjoined.
Seeing, then, that the remedy here sought is that of both dissolution *61 and injunction, we turn to the statute to ascertain on what state of facts dissolution should be decreed or injunction awarded.
The words of the statute are few and clear. Manifestly the trade which it seeks to protect is the natural and normal buying and selling of property, and the protection it gives is by preserving to all engaged in such trade this trade right of natural and normal buying and selling, free from unlawful restraints and monopolies. For it will be observed the statute is not directed against all restraints and monopolies, hut “against unlawful restraints and monopolies.” This naturally raises the practical question: What are the lawful restraints and monopolies which the statute impliedly does not forbid, and what are the unlawful restraints and monopolies which it not only expressly forbids, but enjoins and indeed makes criminal? ' In the late case of Nash v. United States, 229 U. S. 373 , 33 Sup. Ct. 781, 57 L. Ed. 1232 , the Supreme Court, referring to its former decisions, clearly defines what the statute forbids and does not forbid as follows:
“Tliose cases may be taken to have established that only such contracts and combinations are within the act as, by reason of intent or the inherent nature of the contemplated acts, prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade.”
The present case involves the legality, not of a contract, but of a combination; that is, the legality of the United States Steel Corporation, which the petition asks to have dissolved. 'Therefore, applying the foregoing definition of the Supreme Court to the case in hand, the basic question for us to decide is one of fact, namely, whether the union of the several defendant companies in the United States Steel Corporation “prejudices the public interests by unduly restricting competition or unduly obstructing the course of trade.” The public interests thus prejudiced consist of — First, competitors in trade; second, the purchasing public; and, third, the general public. For example, if this Steel Company was in any way guilty of unfair business competition, if it was guilty of such conduct as to unfairly force a competitor out of the steel business, or if it unfairly prevented those who wanted to go into the steel business from doing so, then the Steel Company was, in the judgment of the Supreme Court, prejudicing the public interests by unfairly driving individuals out of business or preventing them from entering it, and it was also injuring the public by unduly restraining trade. So, also, if this Steel Company was restricting output in order to exact unfair prices; if it was buying up competing plants and dismantling them to needlessly restrict output; if it was by reason of its controlling power furnishing the public with inferior goods; if it was using its power to needlessly and unfairly reduce wages; if it was seeking to deceive purchasers by a false appearance of competition, when in fact it owned or controlled such seeming competition — ■ then it was prejudicing, not only that portion of the public* which desired to buy steel, but the public interests generally by unduly obstructing the course of trade and thereby preventing the steel business from moving in its natural and normal channel.
A study of the various anti-trust cases shows that such unfair, prejudicial acts as we have thus instanced have been found where the Shei *62 mán Law has been held to have been violated. Thus, in the Standard Oil Case, supra, 221 U. S. at page 76, 31 Sup. Ct. at page 521 ( 55 L. Ed. 619 , 34 L. R. A. [N. S.] 834, Ann. Cas. 1912D, 734), the Supreme Court, referring to the conduct of that company toward its competitors, says:
“We think no disinterested mind can survey the period in question without being irresistibly driven to the conclusion that the very genius for commercial development and organization which it would seem was manifested from the beginning soon begot an intent and purpose to exclude others, which was» frequently manifested by acts and dealings wholly, inconsistent with the theory that they were made with the single conception of advancing the development of business power by usual methods, but which, on the contrary, necessarily involved the intent to drive others from the field and to exclude them from their right to trade, and thus accomplish the mastery which was the end in view. * * * The exercise of the power which resulted from that organization fortifies the foregoing conclusions, since the development which came, the acquisition here and there which eusued of every efficient means by which competition could have been asserted, the slow, but resistless, methods which followed, by which means of transportation were absorbed and brought under control, the system of marketing which was adopted by which the country was divided into districts and the trade in each district in oil was turned over to a designated corporation within the combination, and all others were excluded, all lead the mind up to a conviction of a purpose and intent which we think is so certain as practically to cause the subject not to be within the domain of reasonable contention.”
Like unfair conduct toward competitors marked the Tobacco Case, 221 U. S. 106 , 31 Sup. Ct. 632, 55 L. Ed. 663 . It was there said:
“The history of the combination is so replete with the doing of acts which it was the obvious purpose of the statute to forbid, so demonstrative of the existence from the beginning of a purpose to acquire dominion and control of the tobacco trade, not by the mere exertion of the ordinary right to contract and to trade, but by methods devised in order to monopolize the trade by driving competitors out of business, which were ruthlessly carried out upon the assumption that tq work upon the fears or play upon the cupidity of competitors would make success possible. We say these conclusions are inevitable, not because of the vast amount of property aggregated by the combination, not because alone of the many corporations which the proofs show were united by resort to one device or another. Again, not alone because of the dominion and control over the tobacco trade which actually exists, but because we think the conclusion of wrongful purpose and illegal combination is overwhelmingly established by the following considerations: (a) By the fact that the very first organization or combination was impelled by a previously existing fierce trade war, evidently inspired by one or more of the minds xohich brought about and became parties to that combination, (b) Because, immediately after that combination and the increase of capital which followed, the acts which ensued justify the inference that the intention existed to use the power of the combination as a vantage ground to further monopolize the trade in tobacco by means of trade conflicts designed to injure others, either by driving competitors out of the business or compelling them to become parties to a combination.’’
It will also be seen the evidence of intended monopoly and throttling of competition was found in the buying up of plants not commercially needed and then dismantling them. Thus in the Tobacco’ Case, supra, 221 U. S. at pages 182, 183, 31 Sup. Ct. at page 649 ( 55 L. Ed. 663 ), it was said:
“We think the conclusion of wrongful purpose and illegal combination is overwhelmingly established by the following considerations: * * * By *63 persistent expenditure of millions upon millions of dollars im buying our plants, not /or the purpose of utilizing them, bul im order lo close them, up and render them useless for the purposes of trade.”
Taking steps to keep others from entering the business is also recited as a violation of the act:
“The conclusion of wrongful purpose and illegal combination is overwhelmingly established by the following considerations: * * * By the gradual absorption of control over all the elements essential to the successful manufacture of tobacco products, and planing such control in the hands of seemingly independent corporations serving as perpetual barriers lo the entry of others into the tobacco trade.”
So, also, in the Keystone Watch Case, supra, pages 510 to 512 of 218 Fed., unfair conduct toward competitors constituted the Violation of the statute. Speaking for this court Judge McPherson there said:
“Beginning in 1904, or thereabouts, it made several attempts — perhaps not very numerous, but numerous enough — that showed a definite purpose to restrain trade by attempting to fix and maintain prices, and by using a species of boycott or blacklisting in order to lessen, the trade of its rivals. We shall not stop to detail the attempts of this character that were made during the period from 1904 to 1910, because the policy and system to which we refer were manifested with unmistakable distinctness in the latter year, and were carried on with vigor and persistence. * * * Now, what the defendant company did was either to close these already existing and already utilized outlets, or to narrow them materially, so far as the [watch] cases of its competitors were concerned; and we think the proposition need not bo discussed that this was pro tanto a direct and unlawful restraint of trade.”
So, also, amongst other factors which tended to show a violation of the statute, reference was made in the Tobacco Case, 221 U. S. at page 174, 31 Sup. Ct. at page 646 ( 55 L. Ed. 663 ), to the maintenance of a false appearance of competition:
“The record indisputably discloses that after this merger the same methods which were used from the beginning continued to be employed. Thus, it is beyond dispute * * * that the new company has besides acquired control of eight additional concerns, the business of such concerns being now carried on by four separate corporations, all absolutely controlled by the American Tobacco Company, although the connection as to two of these companies with that corporation was long and persistently denied.”
In the Powder Case, oppression of competitors existed and was thus referred to at page 140 of 188 Fed.; Judge Panning speaking for this court:
“The association of manufacturers of powder and other explosives had probably never been stronger than it was in February, 1902, when the change in the management of the Dupont works took place. It had for years arbitrarily fixed prices in the different parts of the United States, waging a disastrous warfare against competitors until they were coerced into terms satisfactory to the association or brought into the association. * * * Measures were often devised to limit the output of the members of the association and to crush competition by manufacturers not members of the association.”
[2] The tests of the violation of this statute having then, as we have seen, been adjudged by the Supreme Court (Nash v. United States, supra), namely, whether the acts in question “prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade,” it would appear the questions of fact for us to determine from the evidence are these:
*64 First. Was the Steel Corporation, when this bill was filed in 1911, prejudicing the public interests by unduly restricting competition, or unduly obstructing the course of the steel and iron trade, between the states, or with foreign nations? If this question be answered “Yes,” the law was then being violated, and an injunction should issue to restrain present and future violations.
Second. Did the Steel Corporation, when it was formed in 1901, either by the intent of-those forming it, or by the-inherent nature of that company’s contemplated acts, prejudice the public interests by unduly restricting competition or unduly obstructing the course of the steel and iron trade, interstate or foreign? If this question be answered “Yes,” then the law was violated, and the Steel Corporation must be adjudged originally illegal. If illegal, it must be dissolved, because only thus can its inherent nature be prevented from continuing to work further violations of the statute. On the other hand, if these questions are negatived, then the Steel Corporation should not be dissolved, but permitted to pursue that usual course of tradé, which it was the purpose, as we have seen, of this statute to protect. It will thus be seen that, as stated at the outset, this case is practically one of business facts.
Turning, then, to the first question, let us address ourselves, first, to the iron and steel trade here in the United States, and inquire whether the evidence satisfies us that the Steel Corporation, when this bill was filed in 1911, was then prejudicing the public interests by unduly restricting or unduly obstructing the steel and iron business of the United States. In considering that question, a number of fields of inquiry naturally suggest themselves. Had this company In 1911 a monopoly of the steel and iron trade of the country? What had been and was' then its business conduct towards its competitors? Was it fair or unfair? Had it forced or was it forcing others out of the steel trade by unfair conduct? Had it prevented others from entering it? Was it then exacting or had it exacted from the public undue prices for its products? Had it lowered the character of its product? Had it cut down or was it cutting down, its output so' as to restrict proper supply ? Had it taken advantage of its power to unduly reduce wages? All these, as we have seen from the Standard Oil, the Tobacco, the Powr der, and Keystone Watch Cases, were inquiries by which the question could be determined whether the Steel Corporation was acting, as the Supreme Court said in the Standard Oil Case, 221 U. S. at page 58, 31 Sup. Ct. at page 515 ( 55 L. Ed. 619 , 34 L. R. A. [N. S.] 834, Ann. Cas. 1912D, 734), with “the legitimate purpose of reasonably forwarding personal interest and developing trade,” or, on the other hand, “with the intent to do wrong to- the general public and to limit the right of individuals.”
Now as trade is a contest for it between different persons, and the gain of that trade by one means the loss of it to another, it follows that the person who best knows whether the man who gained it, gained it fairly, is the man who lost it. If there is monopoly, if unfair business methods exist, if the course of trade and fair trading is throttled, we. can find proof of it from business competitors. Trade competitors are the first to feel the pinch of unequal, unfair, and undue restraint of the *65 natural and normal course of trade. Being the first to suffer, they are the keenest to condemn. Turning, then, to this Steel Corporation’s competitors, let us decide from the proofs whether the Steel Corporation had, when this bill was filed, a monopoly of the iron and steel business of the United States.
We turn, first, to finished rolled products, because they are the basic supply to the vast number of varied industries throughout the country dependent thereon. If all these minor industries are dependent on a monopolized source of an indispensable base, we can say, without going further, that not only such industries, but the general public, are prejudiced ; for, as said and held by the Supreme Court in the Tobacco Case, wrongful purpose and illegal combination are established “by the gradual absorption of control over all the elements essential to the successful manufacture of tobacco (steel) products.” Indeed, the importance of such basic supply in the dependent steel trade is shown by the fact that in the congressional investigation of the Steel Corporation, made by Congress by resolution of January 28, 1905, hereafter referred to, the second inquiry there ordered was:
“To what extent said corporation and its associates control the output and prices of tlie finished products made by independent companies, dependent upon it for their raw materials?”
What, then, are the facts in reference to finished rolled products ? In that regard, the evidence (see summary in Statement of Case, page 412) is that in 1911 the finished rolled product — which excludes pig iron, steel castings, and ingots — of the United States (using in this opinion, when quoting figures, round numbers, and by the term “Steel Company,” or “Steel Corporation,” meaning the United States Steel Corporation) was 19,000,000 tons. Of this tonnage the competitors of the Steel Corporation produced 54 per cent., or 10,300,000 tons, while the Steel Corporation made 8,700,000 tons; but not only did its competitors produce in 1911 the major part of the country’s finished rolled product, as above, but judging from the past, the present proportionate lead of the competitors bids fair to increase. In 1901, when the Steel Company was formed, the total finished roll product of the United States was 13,000,000 tons. This was substantially divided between 49.9 per cent, made by its competitors, and 50.1 per cent, by the Steel Company. While both together have since increased the nation’s product from 13,-000,000 to 19,000,000 tons, yet of this 6,000,000 increase its competitors produced 3,400,000 tons to the Steel Company’s 2,600,000 tons.
Taking steel ingots, another basic supply on which great numbers of finishing industries are ultimately dependent, we find (Statement of Case, page 406) that while in 1901, of the 13,000,000 tons of the total American ingot production, the competitors of the Steel Company only made 4,500,000 tons, as against the Steel Company’s 8,500,000, yet by 1911, in the country’s vast increase from 13,000,000 to 24,000,000 tons, the competitors had increased their production by 6,500,000 tons, while the Steel Company had only increased 4,500,000. In other words, while the Steel Company produced in 1901, 66 per cent, of the country’s ingot production, it was producing but 54 per cent, in 1911.
In pig iron, the basic supply of foundries, finishing mills, and other *66 dependent industries, the relations were slightly the other way. In 1911, out of a total cast of .22,000,000 tons of pig iron (S. C. page 405), only 12,000,000, or 54.8 per cent., were made by competitors of the Steel Company, as against 9,000,000, or 56.8 per cent., made by such competitors in 1901, out of a total of 16,000,000 — a decrease of 2 per cent.
These facts and figures bearing on basic supplies of the country’s dependent iron and steel industries satisfy us. that there is no monopolistic control anywhere of such basic factors as ingots, pig iron, and finished rolled products, and the testimony hereafter referred to satisfies us that any substantial producer of such basic articles can, by selling such products at' such lower price as he sees fit, compel all producers of such supplies, including the Steel Corporation, to also- lower their prices. So, also, monopolistic control of finished steel articles in wide use would be a matter of grave public prejudice. Taking, for example, wire production, in which, through fencing, nails, and the great range of articles made from wire products, so many people are interested. When the Steel Corporation was formed in 1901, of the 9,000,000 keg's of wire nails then made in the United States, the competitors of the Steel Corporation made 3,000,000 kegs, and the Steel Corporation 6,000,000. By 1911, the country’s production had grown to 13,000,000, but of the 3,500,000 of increase the Steel Corporation made 1,000,000 as against its competitors making 2,500,000. The net result was that, when this bill was filed, the Steel Corporation’s competitors had 6,500,-000 and the Steel Corporation 7,000,000 of the country’s total production of 13,500,000 kegs. So of wire netting, fencing, and other wire products in general use. The general average of the nation’s total production made by competitors when this bill was filed was 78 per cent. It will be seen that in this particular respect, due, no doubt, as we shall see, to the growth of its foreign trade in wire products, the Steel Corporation had slightly increased its proportion from 20 per cent, of the total product in 1901 to 22 per cent, in 1911. But at the same time it will be noted that, as thé very large part of the Steel -Corporation’s increase in wire products was made in foreign trade — the proofs (volume 10, p. 3902) show that only 42 per cent, of the Steel Corporation’s wire product of 1911 was sold in the United States — it was in 1911 making relatively much less of the wire products consumed in the United States than it was in 1901.
In the important item of structural steel, used in bridges, steel framed buildings, steel car frames, etc., the steel corporation’s competitors produced about 67 per cent., and the Steel Corporation 33 per cent. And for the same reason as shown above, in the growth of the foreign trade, it will be seen by an analysis of Defendant’s Exhibit (volume 3, page 317, and volume 2, page 204) that in structural shapes, as in wire products, the Steel Company was in 1911 making relatively less structural articles of this country’s consumption than it was in 1901.
So, also, in steel rails. In 1901, the competitors of the Steel Company made 1,100,000 tons of steel rails, and the Steel Company 1,700,000. In 1911, its competitors made 1,200,000 tons, an increase of 100,000 tons, while the Steel Company made 1,600,000 tons, a decrease of 100,000 tons.
*67 Summarizing our study of the proofs of this general subject, of the relative part of the Steel Company and its competitors in the total iron and steel production of the country, and their relative part in the home market, we-find that, taking the ten years from 1901, when the Steel Company was formed, until 1911, when the Attorney General filed this bill to dissolve it, its competitors, starting in 1901, with making 49.9 per cent, of the nation’s production of finished rolled product, including structural materials, rails, sheets, rods, and bars, had by 1911 so increased their relative proportion that they were then producing 54.3 per cent, of the nation’s iron and steel output. And confining ourselves for the present to the production of 1911, used in the trade of the United States, which alone we are now considering, we find that, of the total amount of such iron and steel products in the whole market in that year, nearly 60 per cent, was produced by the competitors of the Steel Company. These conclusions, based as they are on proven, practical business facts and figures, show a strong trend away from any monopolistic absorption or trade-restraining control of iron and steel manufacture or markets of the United States by the Steel Corporation. On the contrary, these figures show a strong trend in that manufacture and market toward an even greater absorption thereof by the virile and growing competitors of the Steel Company.. And this leads us, in an adequate discussion of the case, to at this point take up the character of the competition in the steel and iron business in this country; for we may rest assured of the practical fact that where in any business there exists a healthy, normal, unrestrained, and virile competition, which all are free to enter, the individual has full freedom of business opportunity and the public is in no danger of prejudice from monopoly or trade restraint.
When the steel business of the United States is referred to, one thinks of it as practically being in the hands of the United States Steel Corporation. Circumstances have made this natural. The manufacture of iron and steel in their basic form is confined to local districts. Outside of these localities and outside of those engaged in the steel business, there was, prior to 1901, but little general knowledge or appreciation of its magnitude and its basic relation to the general business of the country. When, therefore, this great steel company was quickly formed in that year and became at once the largest corporate capitalization known, it naturally and at once became associated in the general mind with absolute monopolistic control. But the fact that the Steel Corporation after due selection by it of such lines of finishing mills as were deemed necessary to carry out its plans left outside of it a most strenuous body of strong competitors was not then generally recognized. The names, location, and resources of those competitors were not then, and indeed are not now, known to those outside the steel and iron business. Nor was the significance of the anti-monopoly competitive powers and policies of such competitors appreciated. Indeed, the business fact above found, namely, that in 1911, when this bill was filed, the competitors of the Steel Company were making and marketing nearly 60 per cent, of the steel and iron produced in the United States, would surprise many. Since therefore *68 the gist of monopoly is the suppression of competition, we deem it pertinent to ascertain from the proofs the character and steady increase of competition in the iron and steel business since the Steel Corporation was, formed. In doing this, we here note of its great competitors such only as have, in the ten years of competition between them and the Steel Corporation, made a higher proportionate gain of business than the Steel Corporation itself.
Taking the Steel Corporation as the basis of comparison, we-may say that while the proofs show a very material increase of 40-odd per cent, in the Steel Corporation’s business from 1901 to 1911, yet this very substantial increased percentage of the Steel Corporation’s own business was less than that made by each of eight of its great competitors as follows:
Company.
T___,. „ Location.
Increase of Pro- ... ,. ductionfrom
Percentage of Increase.
Bethlehem Steel Co. So. Bethlehem, Pa. 1901 to 1913 3779.7
Inland Steel Co. Indiana Harbor, Ind. 1901 to 1913 1495.9
La Belle Wheeling, W. Va. 1901 to 1913 463.4
Jones & Laughlin Pittsburgh, Pa. 19Ó1 to 1912 206.7
Cambria Steel Johnstown, Pa. 1901 to 1913 155.5
Colorado Co. Pueblo, Colo. 1901 to 1912 152.8
Republic Iron & Steel Co. Youngstown, Ohio 1901 to 1912 90.8
Lackawanna Steel Co. Buffalo, N. Y. 1901 to 1911 63.2
Taking up these companies one by one, it will be seen that in location, facilities, capital, and basic supplies, they show such strong past, present, and prospective competition as affords just ground for concluding that the steel and iron business of this country is not being, and indeed cannot be, monopolized by the Steel Corporation. For the real test of monopoly is not the size of that which is acquired, but the trade power of that which is not acquired.
Turning, first, to the Atlantic seaboard, we find there is a competitive group composed of the Bethlehem Steel Company, the Pennsylvania Steel Company and its subsidiary, the Maryland Steel Company. The two latter companies are additional to the above list, and are here referred to only to note their tidewater location as an advantage which the Steel Corporation with its inwardly located works does not possess. The works of the Pennsylvania Steel Company are .near Harrisburg, Pa., and those of the Maryland Steel Company at Sparrows'Point near Baltimore. These two companies have a combined capital and surplus of some $66,000,000 and with large extensions (volume 20, p. 7978) in view. Their ore supplies are drawn from the great Cornwall ore beds of Eastern Pennsylvania, and from Cuba, where they have inexhaustible supplies of Bessemer ore, which can be worked by steam shovels and are close to tidewater. Three matters have impressed us in reference to this seaboard competition: First, that the eastern seaboard iron and steel competition of the Steel Corporation has an ore supply wholly independent of Lake Superior; second, that their location near the seaboard gives' in many cases substantial freight advantage over the Steel Corporation; and, thirdly, that the greatest advance in ore and steel production in the past ten years -has been made by a seaboard competitor of the Steel Corporation, the Bethlehem *69 Steel Company. And as bearing on the question of the alleged object of those who originally formed the Steel Corporation to monopolize and unduly restrain competition and obstruct trade, it is to be noted that the striking growth and development of the Bethlehem Company was undertaken by one who helped form the Steel Corporation, who served as its first president, and who, if the object for which the Steel Corporation was formed was to monopolize the iron and steel business or to restrain trade, was warned of that intent. That such a man should attempt to build up a competitive business and succeed in expanding it as has been done shows that he at least was convinced that the field of fair, free, and full competition was open to him and others who desired to enter the steel business, and that the Steel Corporation had neither the business purpose nor the business power to monopolize the steel business or to throttle the growth of competition.
As we shall see later, the market reach of basic iron and steel plants is measurably restricted to its- own district by freight limitations. Stevenson, volume 3, p. 1084; Gary, volume 12, p. 4834; King, volume 6, p. 2076; Thompson, volume 22, p. 9141. The supplies from which steel is made and the basic articles into which it is turned are of such bulk and weight as to thus localize or restrict their markets. Freight forbids such heavy product being hauled to far-removed markets. The existence and maintenance of strong competitive steel production on the seaboard is therefore a matter of grave import to the great section of the United States immediately tributary to the Atlantic Coast. Into this seaboard region the Steel Corporation enters under freight burden, its bulk mills being substantially in the Chicago and Pittsburgh districts. The proofs show that its seaboard competitors named have, as noted, abundant ore supplies, cheap water freights, and a great accessible surrounding market. Without entering into detail, we refer to some suggestive facts in the proofs. For example, the proofs (volume 10, p. 4028) show that the Maryland Steel Company, through its coast line water freight of $2.50 per ton, so covers the territory supplied by Mobile, Galveston, and other Gulf of Mexico distributing points as to exclude from that territory even the product of the Tennessee Coal & Iron Company, now owned by the Steel Corporation, which pays a railroad freight of $3.40 per ton. The proofs (volume 18, p. 7248) further show that, with the enlargement of the Erie Canal system, Take Superior ore will be canal freighted from Buffalo to New York Harbor at 28 cents a ton less than the same ore is rail freighted from Take Erie Ports to the Pittsburgh district. With the enlargement of that canal, the proofs are (volume 18, p. 7283) that blast furnaces are now planned for location on seaboard waters in New York Harbor limits. And'it should be here noted that the proof is (volume 11, p. 4182) that the whole steel industry of the United States could be duplicated on the Atlantic seaboard and inland (volume 11, p. 4178) as far as Pittsburgh, and could be run on ores brought from Chili and Brazil alone. Take Superior ores of the same metallic unit grade as the Brazilian would, in the view of the Michigan Tax Commission (Government Exhibits, volume 10, p. 2435), cost $7 a ton delivered at the Atlantic seaboard, as against ore of $3 from Brazil, which the report *70 states has “a tremendous field of high grade Bessemer iron ores running 65 to 68 per cent, metallic iron.” As to the Cuban ore, the proof (volume 17, p. 6862) is:
“The total cost will not in any case exceed $2.25 per ton, and in ordinary shipping seasons will probably not exceed $2.10 per ton. This means that the ore reaches Philadelphia at a net cost of 4 cents per unit of iron. It is the cheapest ore supply in the world delivered at eastern Atlantic ports or in German or English ports. * * * In normal years, Lake Superior ores at the extreme eastern point at which they could possibly be shipped to meet eastern or foreign ores would have to get a price of 9 cents a unit in order to compete.”
These facts and figures show that there is no basis on which to attempt ore monopoly. The proofs further show that, to adequately enter this seaboard territory and meet the competition of those located on the seaboard, the Steel Corporation was forced to establish large local distributing warehouses on the seaboard. For example (volume 10, p. 4060), the Corporation had established, amongst several others, warehouses on the Atlantic Coast near New York carrying $2,000,000, and one at San Francisco carrying $4,000,000 of diversified steel products.
Proof of the strength and growth of this seaboard competition is found in the record of the Bethlehem Steel Company. That company in 1901, its first year of competition with the Steel Corporation, made 18,000 tons of'finished steel product, which was largely confined to rails. By 1913, it had increased its product to 700,000 tons. During that time it had also (King, vol. 6, p. 2120) entered into competition in structural steel, armor plate, and varied steel products. Indeed, its chief products, structural steel (volume 11, p. 4149), and open-hearth rails (volume 11, p. 4150), of which it is making 200,000 tons, have been developed since 1908. From 4,000 employés it has grown to 15,000; it has in view (volume 11, p. 4336) further integration to the extent of making all the finished products made by the Steel Corporation. Its ore supply of a million and a half tons a year comes from Sweden, from the Adirondack regions in New York, from Chili, and from Cuba, where it has practically inexhaustible reserves. The proofs as to these Chilean ore fields show that this corporation and other tidewater steel plants are wholly independent of Lake Superior reserves. The Chilean beds outcrop; they are stripped instead of mined; they are within a short distance of the coast to which they are gravity dropped. They are magnetic, hematite, and dry — a great saving in transportation, as will be appreciated by those familiar with the wetness of Lake Superior ores which necessitate the carrying of thousands of tons of water. The proofs show the substantial character of this competitor with a surplus and capital of $55,000,000 and further integration in view.
Referring at this point to the existence of a fair and open competitive field, as sensed by practical men in the iron and steel industry, we gain light from the proofs in reference to the Youngstown Sheet & Tube Company of Youngstown, Ohio. That company does not appear in the foregoing list because it came into existence after the Steel Corporation was formed. It is an inland company. Its ore supply is from Lake Superior. It started the year after the Steel *71 Corporation was formed. It purchased its reserve ore supply in 1903. It began with an investment of $600,000, which in the succeeding years has been increased to over $29,000,000. By 1913, it had an annual capacity of 1,000,000 tons of ingots and sold that year over 800,000 tons. This, company is cited as evidencing three things: First, that the men in the steel and iron trade immediately after the Steel Corporation was formed felt they had an opportunity to enter and prosper in the steel and iron business, both in the home and (Manning, volume 19, p. 7968) foreign markets; second, they felt secure about their basic ore supply; and, third, they were free to and did build up a great business in making steel ingots, one of the primary products or bases.
Coming next to the Pittsburgh district, we find a strong competitor of the Steel Corporation in the Jones & Faughlin Company, which, at the time of the Steel Company’s formation, the proofs show (Government Exhibit, volume 4, p. 1513) was then so integrated as to make “a greater variety of product than any other steel or iron company in the country.” In 1901, its finished product alone was nearly one-half million tons. By 1912, it had increased that production to one and a half million tons. During that time it had integrat-ed still further by building large additional works and had (King, volume 6, p. 2120) entered into competition with the Steel Company and others in the manufacture of tin plate and wire rods. Fike all these other competitors mentioned, the Jones & Faughlin Company is thoroughly “integrated”; that is, it has its own basic supplies and carries on its work in continuous process from ore to diversified finished steel products. It has large reserve holdings of ore in the Fake Superior region and an ore fleet on the Great Fakes with a carrying capacity of 40,000 tons. It has over $50,000,000 capital and a large surplus.
Going east, we find at Johnstown, Pa., the Cambria Steel Company, a strong company also thoroughly integrated, and with an investment of nearly $70,000,000. From 400,000 tons finished product in 1901, the Cambria increased to nearly 1,200,000 tons in 1913, and it has (volume 6, p. 2199) further improvements in view looking to a large increase in its output. It has a 50-years’ supply of Fake Superior ore and a Fake fleet of a capacity of 50,000 tons. At this point, the president of this company might be quoted. He was called as a witness both by the government and the Steel Company. His testimony is enlightening, as showing that his and other companies in the steel business feel the Steel Corporation has no power, even if so disposed, to monopolize, restrict, or stop their business. We quote (volume 28, p. 12034) from his testimony:
“Q. Have or not the leading competitors of the Steel Corporation, since 1901, increased their capacity or further integrated or added .to their holdings of ore or coke?
“A. Oh, yes, sir; there have been a great many new properties secured by the other companies, and a large number of developments in both the coking regions and the ore regions.
“Q. And what would you say as to their progress, if they have made any, in the matter of integration and diversification of products?
*72 “A. I think all of the companies have expanded and improved their plants and strengthened their holdings of raw material.
“Q. In your testimony for the government, referring to Jones & Laughlin, the Lackawanna, Cambria, the Republic, and perhaps others, you stated as follows: ‘I do not think that there is any one of those companies that could not compete with the United States Steel Corporation and compete successfully.’ You were not then asked to give your reasons for that opinion; be good enough to give them now.
“A. It is a very simple proposition to build a furnace and steel plant, or finishing mills fully the equal of the Steel Corporation’s and labor can be employed at exactly the same price, and there is absolutely no difficulty in producing the various products at practically the same cost.
“Q. Has the Steel Corporation any such advantage owing either to its size, the extent of its integration, or any other circumstance, as would enable it to put its competitors out of business, did it choose to do so?
“A. No, sir. It would be. impossible for it to do so without committing suicide.
“Q. Why?
“A. Well, their product is practically sold in this country. Of course, they do a small export business, but they sell to the same people that we do, and we sell to the same people that they do; and, if they would make prices so low that we could make no profit on it, there would be nothing left for the Steel Corporation; and, if they would undertake to -put us out of business by selling below our cost, they would be selling below their cost, so that I cannot see how it would be possible for them to put a well-managed concern out of business.
“Q. Could the Steel Corporation confine any destructive warfare which it might undertake to any one competitor? In other words, could they wage a warfare against the Cambria or Jones & Laughlin, or any of the other considerable concerns, without involving the rest of their competitors?
“A. No, sir; that would be impossible.
“Q. Could they confine any warfare that they might undertake either against a single competitor or against all other competitors to any particular locality?
“A. No, sir; because the markets are all affected in sympathy, and, if the price was made below cost in one market only, we would go to the other; we would seek other markets.
“Q. Why do you say that the Steel Corporation could not make war against one competitor only without involving the rest of them?
“A. Because, for instance, we all sell to practically the same class of trade, to the same customers. We sell to many people whd buy from Jones & Laughlin and the Steel Corporation and the Republic and the Inland Steel Company, and various other1 companies, so that it would be impossible to pick out the customers of any one manufacturer, and you cannot affect the price in one market without affecting it in all the other markets in the country.
“Q. Has the ability of the Steel Corporation to resist any such warfare increased since 1901? Are they any better able to take care of themselves in such a warfare now than they were in 1901?
“A. No, sir; I would say that they are not. I do not fear the Steel Corporation as much as I fear other competition.”
Without going into detail as to other companies in the foregoing list, we may refer to-the Colorado Company, whose market, the proofs show (volume 26, p. 10935), covers the United States west of the Mississippi. This company is integrated, is independent of the Uake Superior ore, has more than, 60 years’ supply of its own ores in Wyoming, New Mexico, and Utah, and has largely expanded its plant since 1901. It has resources of $80,000,000, and its finished product has increased from 200,000 tons in 1901 to about 500,000 tons in 1912. This company has by its western location (volume 26, p. 10937) a freight advantage over the United States Steel Corporation and all other eastern *73 competitors in selling rails to most of the .railroads west of the Mississippi.
The history of the next company is illustrative of the feeling of confidence and security among practical steel men, which warranted them in making since the Steel Corporation was formed large expenditures and entering into competition in the steel business. The Republic .Iron & Steel Company of Youngstown, Ohio, was in 1901, engaged principally in making iron. Its finished product that year was some 500,000 tons. It has since expended $25,000,000 in changing its business from iron to an exclusively steel one. Like all other steel makers, the Republic Company’s policy has been one of simply following the progressive and universal practice of integration incident to the development of the use of steel. The Republic Company’s process of integration its president (volume 2, p. 731) well describes:
“We have practically eliminated all our scattered iron mills, have concentrated them in the operation at a few points of production. So, to-day we produce practically but little iron and are manufacturing about 1,000,000 tons of steel per annum. This is what we call an integrating process; that was part of it, the addition of the mineral and coke and blast furnaces, and balancing up operations generally, completing the integrating process. * * « This integrating process that I speak of attended our development of the steel end of our business. We did not need it so much when we were simply manufacturing iron. It was done for economic and trade reasons, on account of the increased demand for steel and the decreased demand for iron.”
The Republic has increased the range of its product and production until it is now a million and a quarter tons and extends (volume 28, p. 11999), all over the United States and Canada. It has gone into the Birmingham, Ala., field, where it has plants, as well as in Pennsylvania, Missouri, Illinois, Indiana, Iowa, and Michigan. It has acquired 40,-000,000 tons of Lake Superior ore reserve and 80,000,000 in the Birmingham district, and has a lake fleet of 18,000 tons. Its growth during this time was such (Topping, volume 2, p. 735), that it is producing one twenty-fifth of all the steel produced in the United States and one thirtieth of all the iron. From a study of the testimony there is no doubt that the men who made these large expenditures in 1906 were satisfied that the field of fair business competition in the iron and steel business was open to them. These expenditures were made in completely integrating its manufacturing facilities. This integration consisted (volume 22, p. 9131) in increasing its blast and open hearth furnaces and ore supply and carrying their basic product-forward to completion by additional plants which included finishing mills for merchant bar, for sheet bar, for billets, and for plate in addition to galvanizing works, rivet, spike, bolt, and nut departments, and by-product coke works. They have no more to fear from the competition of the S'teel Corporation than they have from that of any other of their other competitors. The testimony of this company’s president, who like the Cambria’s president, was called as a witness both by the government and the Steel Company, is instructive, on that point. It is:
“Q. Where is the market for your product?
“A. All over the United Stales and Canada.
“Q. Has llie Steel Corporation In your opinion power to put the Republic out of business?
*74 “A. I. think not.
“Q. Has it the power to put its competitors generally,' or any of its principal competitors, out of business?
“A. I would say not. .
“Q. What is your reason for thinking that they have not that power?
“A. I would have two reasons: One, that they have not the physical ability to do it; and, secondly, if they attempted it, they would involve their own market to such an extent that they would suffer equally with us. What I mean by physical is this: Their principal competition, companies like ourselves and others as strong as we are, are properly integrated; in other words, being self-contained on raw material, well equipped, and at least fairly well managed and properly financed, so that a combination of that kind would give us as much power to produce within somewhere a close approximation of their cost; at least their difference would not be so great that they could put us out of business. They have some advantages, and so have we.
“Q. Now, as to your second reason, that it would involve them in loss as well as jmu, what do you mean by that?
“A. Well, to illustrate, we might have a customer, we will say, in Michigan, engaged in the manufacture of agricultural implements, and another one in Illinois or Indiana. If we should sell in Michigan steel bars and plates that enter into the cost of production of a machine at a less price to A. in Michigan than we do to B. in Illinois, we would probably soon hear from B. in Illinois, because those two men would naturally compete in the general market of the United States with their machinery. So it would be with all other fabricated products made from steel, the markets are inter-related and interlaced to such an extent that you cannot reduce prices, in my judgment, in one market, without affecting in a short time the market elsewhere for the same commodity. i
“Q. Could the Steel Corporation localize a destructive warfare against its competitors?
“A. Not in my opinion.
“Q. Why not, if there is any other reason than you have already indicated?
“A. I should say that the reason I have already indicated would be a complete answer to that thought. There is a sympathetic relationship existing between all markets that is so close that my experience would compel me to say that you could not affect the price in Chicago without affecting the price in New Xork. As a matter of fact, that is the experience that we have had.
“Q. And could the Steel Corporation wage a destructive warfare against any one of its competitors without involving all of them?
“A. No; I would say not.”
The same confidence to enter into competition thus evidenced in the Republic Company was also shown by the Inland Steel Company of Indiana. That company had expanded its investment from some $4,000,000 to $20,000,000. It has acquired Lake Superior ores and a lake fleet of considerable capacity. Asked the question (volume 22, p. 9144):
“From your knowledge of the iron and steel business, the relative capacities of those engaged in it, the capitalization of the United States Steel Corporation, its ownership of railroads, its connection with financial interests, state whether or not in your judgment, it has the potentiality, if it uses it, to destroy its competitors?”
—its president testified:
“A. No; that is absurd. ' They cannot do it. I think it is a physical impossibility. I cannot imagine how they could do it.
“Q. Is there any possible doubt in your mind of the ability of the Inland Steel Company to maintain itself in any kind of competition?
“A. Well, that is what we are aiming to do. We think so. We think we are getting as well prepared as most of our competitors by the money that we have *75 spent there; and I believe it has been spent on the right lines. I know that we would not change any of it if we had it to do over again, as far as we havo gone.
“Q. And yon are very well integrated, as you have stated?
“A. Yes; we did the best that it was possible to do.
“Q. Mr. Thompson, you stated in answer to my question a short time ago, that the competition between the Inland Steel Company and these other companies had been active in the territory that you serve?
“A. Yes, sir.
•‘Q. What do you mean by ‘active’?
“A. Always at it. We were always trying to get business. I don’t know how to express it any stronger than to say that we were all looking for trade in an active way, all the time, keeping ourselves posted on conditions and soliciting business from just such men as the witness who was examined here this morning and from other railroads; I say it is active because we, are always at it — all of us.”
We have referred above to competitive steel conditions on the Atlantic seaboard as shown by the proofs. Those proofs also show (Pigott, vol. 26, p. 11066) how competition to the Cambria, Jones & Taughlin and the Steel Corporation has grown on the Pacific Coast. ' This competition has increased since the Steel Corporation was formed. Mr. Pigott testifies his company has built at San Francisco open hearth furnaces with a capacity of 30,000 tons; bar mills, with 30,000 tons capacity; and at Seattle a rail re-rolling mill with a capacity of 30,000 tons. For its basic supply this company is wholly independent of the Steel Company, Jones & Taughlin, the Cambria Steel and all eastern companies doing business on the Pacific Coast. This is clearly shown by the proofs. This company gets one-half of its pig iron from China and the balance from the Republic Company and the Tennessee Coal & Iron Company. The proof is (volume 10, p. 3887) that the freight paid to deliver the Tennessee Company pig iron from Birmingham, Ala., to San Francisco is $10.08 per ton. The proofs further show (page 3889) that the Chinese pig iron is delivered at Pacific points at a freight rate of $3.70 per ton. If to this $3.70 be added the price of the pig iron, $6.20 per ton, it will be seen that the Chinese pig iron at S6.20, plus freight $3.70, $9.90, can be paid for and delivered on the Pacific Coast for about the amount, $10.08^ the Republic and the Tennessee Company pay for freight alone. As the proofs (page 3887) further show the pig iron from India is being delivéred in San Francisco from Calcutta at an expense of $12.38 per ton, namely, price of pig iron $5.40 plus freight $6.98, it will be seen that the future basic supply of this and other companies that may spring up on the Pacific Coast can be had of Asiatic pig metal wholly independent of the Steel Corporation and other eastern competitors. In view of the further proof (volume 11, p. 4182), that the ores on the western coast of Mexico, and necessarily those of Chili, are also available, and that the improved practice in steel making (volume 3, p. 992) makes ores now usable which were formerly not so, the conclusion is warranted that the field for all possible development on the Pacific Coast in the steel business is wholly free from any monopolistic control whatever. It will thus be seen that a substantial steel industry in rails, bars, and open hearth steel has in fact grown up on the Pacific Coast, while in competition with the Steel Company, a competition which Mr. Pigott (volume *76 11, p. 11074) describes, “from the standpoint both of a customer and a competitor,” “has been beneficial.”
As we have said, we have, as throwing light on the substantial character of the strong and increasing competitive forces in the steel business, referred only to those above named. It is proper, however, to add that the proofs in the case (Defendant’s Exhibits, volume 1, p. 137; volume 2, pp. 209, 210; and volume 3, p. 374) show the Steel Company has eight competitors in rolling structural shapes, that is, beams, etc., for bridges, skyscrapers, etc., and in the fabrication of such structural material over 300 competitors. In the rolling of merchant bars it has very considerably over a hundred competitive mills.
Later, we shall note the testimony of competitors as to their relation to the Steel Corporation, but before referring to individual relations, we deem it proper to here refer to some general phases of monopoly which affect all competitors. One of these was the practice by large companies of exacting freight rebates from railroads under threat of diverting shipments elsewhere. .These practices were common up to the time of the ending of the old era of freights unregulated by the government (Government Exhibit, volume 3, p. 1120; volume 2, p. 441; volume 3, p. 1031; volume 3, p. 1035, and the discussion in volume 3, pp. 956, 957). In Swift & Co. v. United States, 196 U. S. 402 , 25 Sup. Ct. 276, 49 L. Ed. 518 , the Supreme Court said: '
“It is obvious that no more powerful instrument of monopoly could be used than an advantage in tbe cost of transportation.”
And in the Standard Oil Case, supra, this subject was again referred to as—
“the acquisition here and there which ensued of every efficient means by which competition could have been asserted, the slow, but resistless, methods which followed, by which means of transportation were absorbed and brought under control * * * all lead the mind up to a conviction of a purpose and intent which we think is so certain as practically to cause the subject not to be within the domain of reasonable contention.”
On January 28, 1905, Congress directed (Government Exhibit No. 206, volume 5, p. Í615) the Secretary of Commerce and Labor to investigate the steel and iron industry of the country with a view to ascertaining to what extent the United States Steel Corporation controlled the output and prices of finished product made by independent companies dependent upon it for their raw material and to report any restraints by it of commerce, foreign or domestic. James R. Garfield, who as Secretary of Commerce and Labor, made this examination, was called as a,witness. He testifies (volume 14, p. 6190) he had made an investigation and examination of the railways in a similar manner to that made in the Standard .Oil, and found no rebating whatever by the railroads to the Steel Corporation. That he was justified in h-is conclusion is strengthened by the fact that at a meeting of the Steel Corporation’s executive committee in 1901, called to consider the policy of the company towards railroads, the minutes (Government Exhibit, volume 3, p. 957) show the position taken the first year of the corporation’s formation by its chairman and there recorded, was “that we cannot afford to *77 take the position of asking any railroad, directly or indirectly, to discriminate in our favor.” This policy was later emphasized (volume 12, p. 4790) in a letter sent to the presidents of the railroads (Defendant’s Exhibit, volume 3, p. 295), handling the Steel Corporation’s freight, as follows:
“Personal. Sept. 20, 1905.
“Dear Sir: As you know, this corporation long since adopted the unalterable policy of recommending to subsidiary companies in which it is interested, that under no circumstances should x’ebates be solicited or received contrary to law. This policy will be strictly adhered to and it is hoped and expected your subordinates will be advised and instructed accordingly. It' any one should at any time violate his instructions in this respect, notice of the same should bo promptly given to the president of the subsidiary company interested and also to the undersigned.
“Tours very truly, W. E. Corey, President.”
In view of this announced policy of the Corporation of the investigation made by the Department of Commerce and Labor, of the. absence of any complaints by any competitor, and of no proof of any freiglit rebate being given, we are justified in concluding that the Steel Corporation has not used, or sought to use, freight rebates as a means of undermining its competitors, or of monopolizing business.
We next turn to ruinous trade wars against competitors which, as we have seen, was one of the features of attempted monopoly denounced by the Supreme Court. In that connection it is to be noted that under conditions incident to the steel trade the power oí a large steel company to carry on a ruinous trade war against any particular competitor does not exist in the iron and steel industry. The customers of the great steel companies are large jobbers and the purchasing agents of other companies, who are in the closest touch with every fluctuation of the steel market. The result is that any effort on the part of any one of these great steel companies to inaugurate a trade war by ruinously underselling a competitor would at once, owing to the sensitiveness and inter-related character of the steel market, result in forcing the company that was thus ruinously selling in any particular market or locality to in the same way ruinously lower its prices in every other community. In that respect, the president of the Youngstown Sheet & Tube Company, a competitor, testified (volume 22, p. 9144) that, if the steel corporation attempted such a course, “they would involve their own market to such an extent that they would suffer equally with us.” The testimony of the president of the Cambria Steel Company, already quoted (volume 28, p. 12036), is to the same effect, as well as that of the president of the Republic Iron & Steel Company (volume 28, p. 11999). And the practical impossibility of such a course is shown by Judge Gary (volume 14, p. 5378), where he testifies:
“I feel certain that by reason of our integrated proposition we had the advantage in cost of production over our competitors generally. If any one having advantage in any business is willing to sell down to his cost price, of course he would live while his competitors would starve; but that is a most unnatural position for any producer to take and long continue.”
*78 In view, therefore, of the uncontradicted'proof of those familiar with the steel business that no such ruinous trade war could with profit to itself be carried on by the Steel Company against a competitor, and in the absence of proof of any effort by it to harass them by such conduct, we are warranted in concluding there has been no attempt by the Steel Corporation to monopolize or restrain trade through ruinous trade wars against its competitors. For of the conduct of the Steel Corporation, the views of its competitors is the best gauge. Monopoly and unreasonable restraint of trade are, after all, not questions of law, but questions of hard-headed business rivalry, and whether there is monopoly of an industry, whether trade is subjected to unreasonable restraint, whether there is unfair competition, are facts about which business competitors best know and are best qualified to speak. And it may be accepted as a fact that where no competitor complains, and much more so, where they unite in testifying (Campbell, volume 5, p. 1857; Smith, volume 19, p. 7942; King, volume 6, p. 2121; Bowron, volume 25, p. 10247; Pigott, volume 26, p. 11075; Manning, volume 19, p. 7701) that the business conduct of the Steel Corporation has been fair, we can rest assured there has been neither monopoly nor restraint. Indeed, the significant fact should be noted that no such testimony of acts of oppression is found in this record as was given by the competitors of the Tobacco or Standard Companies in the suits against those companies. We have carefully examined all the evidence given by competitors of the Steel Corporation, We have read the testimony of customers who purchased both from it and from its competitors. Its length precludes its recital here, but we may say its volume, the wide range of location from which such witnesses came, and their evidently substantial character in their several communities make an inevitable conclusion that the field of business enterprise in the steel business is as open to, and is being as fully filled by the competitors of the Steel Corporation as it is by that company.
Taking as fair samples of the views of the competitors, we note, first, the testimony of James Bowron, president of the Gulf States Steel Company, who says: “Their competition is strictly 'fair.” Herbert S. Smith, vice-president of the Standard Steel Company of Alabama, and formerly general sales agent of the Lackawanna Steel Company of Buffalo, who says: “I have always regarded the competition of the Steel Company’s subsidiaries as the fairest competition that we have.” Of western manufacturers, we note that of William Pigou, president of the Pacific Coast Steel Company, who says:
“I have always found the competition of the United States Steel Company and its subsidiaries fair; its existence has been beneficial to the steel and iron trade of the country.”
We have noted above the remarkable growth of the Youngstown Sheet & Tube Company, which came into existence in 1905, and in the meantime has grown to be a very important competitor of the Steel Company. The testimony of James A. Campbell, its present president, who was called as a witness by the government (volume *79 5, p. 1857), so fully covers the subject of the attitude of the corporation toward its competitors and the purchasing public that we quote it at length:
■‘A. My experience is that it is the best competition we have; that they are open and. above board in all of their dealings. Their prices are either published, or we get direct information from them or through our customers as to what their price is, and we find that their price is practically the same to everybody. With other competition chal we have, with the independents, for instance, the independents vary more in their prices, and we never quite know what their price is. It may bo one thing to-day and another to-morrow, and they do not conduct their business in the same way, because it is a smaller business and more of an individual business; and they will make prices according to the class of material pretty largely and the class of orders. So we were not as capable of guaging how they are conducting their business as we are in regard to the subsidiary companies of the Steel Corporation.
“Q. Is your competition with these subsidiary companies of the United States Steel Corporation active and energetic and vigorous competition?
“A. It is — very, at times. We sell to many of the same people that they do, the same class of material.
“Q. Have you ever known of their having made low prices in a limited section of the country for the sake of attempting to put a competitor out of business?
•‘A. I think not. I do not recall any time, with any company.
“Q. Have they, in your experience, been guilty of any unfair methods to suppress competition?
“A. I think in the early days — I did think in the first two or three years we were in business that there were some things done, and I think done without the knowledge of the higher olficials, that were unfair; but those disappeared promptly, and there has been nothing of that kind, nothing bnt the fairest competition in every respect for the last seven or eight years.
“Q. When the market has been falling, what has been your experience as to the prices which they have maintained as compared with those of the independents?
“A. In depressed times, when there Is not nearly enough business to keep all of the mills operating to their full capacity, their prices are usually higher than the independents. In good times, when the mills are all working to capacity, their prices are usually lower than the independents, The independents will accept bonuses and do things of that kind that I do not think the corporation will do. So that I think the general effect is for the steadying of prices and making them better for the country at large, and of; course in dull times, it is a great protection to the smaller manufacturers to have them keep their prices up, when business is slack, than it would be if they went out like the Carnegie Steel Company did in the early days and took all the business and shut the other people down.”
To this may be added the testimony of Charles M. Schwab, who knew the conduct of the company as one of its original officers and later, as one of its competitors, felt the effects of its policy. We quote from his testimony (volume 11, pp. 4154, 4155) at length:
“A. In the beginning of the Steel Corporation, during my presidency, the policy of the corporation towards its competitors was not ‘one of endeavoring to hurt, not one of endeavoring to stifle, or to destroy, but the policy of naming a price for our products, not only to bur customers, but openly through the trade journals, if you will, because I used to give it to the Iron Age and the Iron Trade Review each week, and the sticking to these prices throughout the trade; there probably were exceptions of a minor character to very large consumers, but as a rule, during my presidency of the corporation, the prices of its products were fixed and published, and they were what were charged the customers. Is that clear?
“Q. You say you gáve these prices to the public, as a rule, once a week?
“A. I did.
*80 “Q. To tlae trade journals?
“A. To the Iron Trade Review and the Iron Age.
“Q. Are they the principal trade journals in the steel industry?
“A. They are the principal trade journals.
“Q. What has been the practice of the corporation in those respects or along those lines since you left the presidency, as you have observed it, from the point of view of a competitor?
“A. So far as I know, from the point of view of a competitor, they have adopted since that time practically the same policy.
“Q. Have you ever known of the Steel Corporation to have a published price and a secret price differing from the public one?
“A. So far as I am concerned personally, I do not know of any.
“Q. Have you ever known or heard of a case where the corporation has sold at a less price in a particular market to drive out a competitor?
“A. Never.
“Q. Or has sought to obtain á customer of a competitor by secret rebates or departures from these open published prices ?
“A. I have never heard of such a thing.
“Q. Either while you were president or since you have been a competitor?
“A. Never.”
We next turn to that most injurious feature of monopoly’s wrong to the public, to -wit, increase in the price of its product or a deterioration in quality. Turning, first, to the basic question of quality, no dispute arises under the proofs. They are simply uniform that both with independents and the Steel Corporation, there has been a steady bettering of quality in steel products. This factor of improving its product has been recognized by the Steel Corporation, and a study of the testimony of its buyers satisfies us that this progressive growth in quality by the Steel Corporation has been the principal means by which it has acquired and held its business.
Turning next to the increase, in price, we are met by two aspects of the case. Two learned experts have been called, one by the government, and one by the Steel Corporation, who draw different conclusions as to whether there was an increase or decrease in the price of iron and steel products. The deductions of both are supported by weighty contentions and numerous enlightening charts. The able reasoning of both has had the thoughtful .consideration the standing of the two men challenges. We may note that the different ranges of time they have taken, as the basis of their reasoning really makes them reason about two different things, but apart from that, we think whatever may have been the range of iron and steel prices during the periods of consideration selected by each, the proof is (volume 28, p. 12000) that in these days of quick communication the general price of steel and iron products cannot be localized, but is interdependent in this country and, indeed (volume 28, p. 12013), internationally so. That proof is that when there is an oversupply, even in the European steel and iron market, that market tends to unload on the American steel market, and on the other hand, when there is an oversupply here, this country seeks to dump on their markets at any price. Without citing the proof in that regard, we may refer to Corrigan, volume 26, pp. 11096, 11102; Holler, volume 19, p. 7666; Topping, volume 28, p. 12013; Kahn, volume 23, p. 9483. It will also be observed that so sensitive and inter-related is the price of steel and iron that a drop in price of any particular branch of steel leads to a drop in all other branches. King, volume 6, *81 p. 2114; Schwab, volume 11, p. 4387; Kennedy, volume 5, p. 1873; Topping, volume 2, p. 682.
No evidence is produced showing that there has been at any time an arbitrary or unreasonable increase in price of any of the numerous products of the Steel Corporation. On the contrary, the proofs (Government Exhibit, vol. 14, pp. 2912-2922) show decreases in important steel products, among which we may refer to wire nails which from selling in 1901 at $51, when the Steel Corporation was formed, were, in 1911, when this petition was filed, selling at $36. During the same time, steel bars receded in price from $33 to $25. Steel beams dropped from $36 to $27; billets from $27 to $24; and a statement taken from the Steel Corporation’s accounts (Defendant’s Exhibit, volume 2, p. 203) shows there was between 190d — a date when the Steel Corporation may be said to have been fairly systematized and under way — and 1912, a decrease in fabricated prices received by the company of 19 per cent., and of all other products, of 11 per cent. Summing up the business result, the president of the corporation (volume 10, p. 3854) testified the Steel Corporation was in 1912 getting about $8 a ton less for materials in the domestic market than they were receiving in 1904. Moreover, it should not be overlooked that during these years there were substantial factors of increased expense in the cost of manufacture. The freight on coke (volume 10, p. 3781), of which the corporation uses some forty thousand tons a day, has increased 12 per cent, since 1901; the freight on limestone, which constitutes one-third of a furnace’s burden, has increased 10 per cent, since 1901; and iron and steel wages (volume 10, p. 3895) have increased 281/a per cent.
Standing aside for later discussion the matter of the Gary dinners and the meetings following them, through which it is alleged the Steel Corporation in co-operation with its competitors unduly restrained and obstructed the normal course of the steel trade, and confining ourselves to the fixation or control of prices, by the Steel Corporation itself, or its subsidiaries, we may say we have found in this record no proof by any witness showing any instance in which the Steel Corporation or its subsidiary companies has set either an arbitrary, exorbitant, unfair, or controlling price on any one of its numerous products. It is a mere truism to say that the fixing and maintaining by a manufacturer of a fair price above cost is not only a right but a commercial necessity, and any other course, must end in his bankruptcy. When such fair prices are deported from and they arc unreasonably raised and exacted from the purchasing public, the public is prejudiced thereby. On the other hand, when that price is so unreasonably lowered as to drive others out of business, with a view of stifling competition, not only is that wronged competitor individually injured, but the public is prejudiced by the stifling of competition. Between these two price extremes, there must, in, the nature of things, be a considerable zone of reasonable price variation, and what is a fair price is a question which can only be determined by a careful ascertainment from cost sheets and other data of such fair price. In the present case neither side has furnished this court with proof from which we could intelligently determine whether the prices charged by the Steel Corporation for any *82 of the numerous articles here involved, beginning for example with pig iron and ending with rails, was unfair, exorbitant, or unreasonable. In the absence of such testimony, it is manifest that for this court to assume that the prices at which any of these articles were sold by the Steel Corporation and its competitors were unfair would be. to base such conclusion on surmise instead of proof. But there is not only this absence of testimony in regard to the prices received being unfair and exorbitant, but there is, on the other hand, affirmative testimony, which we cannot disregard, and which, as it seems to us, constrains us to conclude that the prices of the product sold by the Steel Corporation have been the result of the joint action of the law of supply and demand and of that vigorous rivalry which has at all times existed between the. Steel Corporation and its competitors. In that respect we have the testimony of the Steel Corporation’s great competitors, of large and small manufacturers, over the whole country who purchased basic steel products and put them through other stages in their mills, and factories; of jobbers and warehousemen who 'buy and hold for sale large stocks of steel products. The testimony pf these men — and there is no testimony to the contrary — is that the iron and steel trade in the various products of -the Steel Corporation is and has been open, competitive, and uncontrolled, and that all engaged therein have free will control in selling at their own prices. This important fact we shall not leave to here stand as a statement of a conclusion reached by us from a study of the testimony in volumes 18 to 28 inclusive; but, at the risk of unduly prolonging this opinion, we shall here spread of record the testimony of a few witnesses on that subject so that he who runs'may read.
In taking, up that question, we have, in the first place, the proof that so far as the prices charged by the Steel Company are concerned its practice has uniformly been to give the utmost publicity to such prices. In that regard, Charles M. Schwab, a former president, testified (volume 11, p. 4154), as already noted above:
“In the beginning of the Steel Corporation, during my presidency, the policy of the corporation (was) * * * of naming a price for our product not only to our customers, but openly through the trade journals, if you will, because I used to give it to the Iron Age and the Iron Trade Review each week, and the sticking to these prices throughout the trade; there probably were exceptions of a minor character to very large consumers, but as a rule, during my presidency of the corporation, the prices of its product were fixed and published and they were what were charged the customers. * * * So far as I know, from the point of view of a competitor (the witness is now president of the Bethlehem Steel Company) they have adopted since that time practically the same policy.”
That these published prices are met in vigorous competition the proofs show. President Campbell of the Youngstown Company, speaking of his company, says,,in substance, that their (volume 5, p. 1857) competition with the subsidiary companies of the United States Steel Corporation is active and energetic and vigorous, very at times. We sell to many of the same people that they do — the same class of material.
The sales manager of that company (volume 19, p. 7701) testified that the subsidiaries of the United States Steel Corporation have been *83 our competitors in these various lines of production and sales in every line we manufacture and throughout the country. The competition has been very severe.
The president of the Colorado Company (volume 26, p. 10940) says that, in the bar mill products, they meet Jones & Laughlin, the plants of the Steel Corporation that make these products, the Cambria Steel Company in some of them. The competition has been vigorous and independent and unrestricted, so far as it affected them. He thinks the competition has increased in extent. There are two or three new elements in the field and that has made all the old ones a little more active, including themselves.
The testimony of the sales manager of the La Belle Iron Works of Wheeling, W. Va., may be taken as typical of the existence of an open steel market in competition with the Steel Corporation. That company had, during the ten years following the organization of the Steel Corporation, increased its finished product of billets, sheet bars, nails, tubes, plates, skelp, and sheets largely over 400 per cent., and its market covered the entire country, Mexico and Canada. Its sales manager (volume 19, p. 7876) said that their competitors are all the leading steel companies, pretty near, take the Lackawanna, Cambria, Republic, the Youngstown Sheet and Tube, the Wheeling Steel & 1 ron, and the various constituents of the Steel Corporation. The prices which they obtain for their steel products are not fixed in agreement with their competitors. That is true of each and every year of the ten years that he had been general manager of sales. It is true of each and every article they have produced and sold in the market. There has been no time during the ten years when the price of any article they have produced and sold has been fixed by agreement with any competitor. He is able to say that because the chances are that if it had been done in his company he would have known it. That is his business. The prices have sometimes been fixed in a general way in consultation with their president. No price has ever been suggested by the president or anybody else in any of these conferences, as a price agreed upon by any competitor. The considerations that controlled him in these conferences, or when he acted independently of them in fixing prices, were competitive conditions and cost of manufacture. The state of their order book affects the question of prices. When the order book is lean, they probably make lower prices. When full of orders the chances are they will advance prices. That is always the case. It is observable that competition is keener and competitors more active when times are dull and order books are lean. Prices usually rule higher when business is active, and when ^business is dull they rule lower. The prices obtained by them have fluctuated. Pie would say the prices obtained by their competitors have fluctuated. The trade or competition in these various articles manufactured has been nearly always active during the period he has had charge of the sales. The competition has been what you would term keen. They met three or four or more competitors in every article they manufacture. The competitors are numerous. They have grown in numbers and output.
The testimony of the chairman of the Republic Iron & Steel (volume *84 26, p. 12019) shows how that large company arrives 'at its prices; they do not have uniform prices. They sell to some customers at one price and to other customers at another, varying with the size of the order, 'the quality and- the character of the service they are expected to render naturally. They have traveling men and their own branch sales offices. As a general rule, they send out to them prices at various times at which they are to sell their various products. They give minimum prices below which they shall not go, and allow them to use their intelligence in getting all above they can. That minimum would naturally be the same for all of them. Generally speaking, it would be the same based on cost. They give them the samé latitude; in other words, the same general base, which represents a minimum below which they must not go as it might involve a loss.
The general sales agent of the Lackawanna from 1905 to 1910 testifies (volume 19, p. 7905) as to the competitive prices of that company other than rails, to which special subject we refer later. He says: That he had entire charge of the sale of the output of that company, making prices. Their market covered practically the entire United States. Their product was always sold in competition with the product of other manufacturers of steel. The competition was always keen and a great many times aggressive. The leading competitors were the mills of the Steel Corporation, the Carnegie Steel Company, the Jones & Laughlin Steel Company, the Inland Steel Company, the Cambria Steel Company, the Pennsylvania Steel Company, the Eastern Steel Company, the Carbon Steel Company, the Maryland Steel Company; there were some others that he does not remember for the moment. In general, and in almost every case, he had the fixing of the prices. The prices were not fixed in agreement with competitors, always independently. That holds for the whole period/ of five years that he managed the sales. There was no time during that period when the prices he'either quoted or fixed were quoted or fixed in agreement with any of theif competitors as to any article that they sold. The prices were both uniform and variant. They might have been uniform on steel rails in some cases, and they might have been uniform on steel plates and shapes in some cases; but not necessarily so. They were following (referring to the uniformity on plates) at that time what they called the market price, and as a rule they tried to obtain the so-called market price. It was a matter of pride with a steel manufacturer to sell his goods at as high a price as that of any other manufacturer, and, if the leading makers were getting $1.60, they felt it was up to them to get the same price; hence the uniformity of price. They were not always able to get the price they tried to get. They found some means of shading it. The extent of their order book or list was a great factor in making prices, the terms of payment and delivery. If the mill was short of orders in any one line, special efforts were made to get business in that particular line, and in such cases the seller is inclined to be rather more moderate in his demands as to price, terms of payment, and all that. The prices varied considerably both ways during the period mentioned. That is true of everything except rails. When he went with the Lackawanna Steel Com- *85 party, he found that the price of standard Bessemer steel rails was $28 a ton at the mill. It had been fixed for some time, lie did not know 'how long a time. That price he adopted and never varied from it. It was tacitly understood that that was the price of their steel rails as fixed by the Lackawanna Company. lie testified that no statement (referring to conferences with the president on the prices of other products) was ever made in any of these conferences by the president of a price agreed on with competitors which would be adopted or maintained by the Lackawanna. He did not recall any instance in which lie was ever interfered with by an officer of the Lackawanna during the time he was there in quoting such price as seemed best in his judgment to be warranted by business conditions. He does not recall any price ever named by him based on any other consideration than competitive business conditions.
As to tlie Jones & Laughlin competition, the testimony of the man in charge of the sales (volume 20, p. 8029) is that Jones & Laughlin make steel billets, slabs, and blooms, and convert these into finished products, principally structural material, plates, bars, shafting, chains, spikes, wire, wire nails, tin plate, and black sheets in tin mill sizes. These different products that they have are sold in competition with other makers of similar products. The competition is unlimited. He means unlimited by agreements as to prices. That is true of everything he has mentioned. He says that this has been so to his knowledge for about nine years. The competition has been keen. It extends to competition in the matter of prices.
Turning from fellow competitive makers of the same general products as the Steel Corporation, we naturally turn to the testimony oí millowners who use as their basic supplies the products made by these large companies and inquire whether, as buyers, they have found any price fixation by these basic manufacturers. As a type of that character, we note the testimony of the president of such a company (volume 20, p. 8050), who, in substance, says:
I should say we were using about 25,000 to 80,000 tons a year in 1901. It lias been growing each year. I think last year we purchased something in the neighborhood oí 100,000 tons. I know of no other single customer for bar mill products in the TJniied States that buys as much as 100,000 tons. We buy from the Carnegie Steel, the Cambria Steel, the Republic Iron & Steel, the Youngstown Sheet & Tube, and others. We have always found competition for our purchases of bars. Very keen most generally. Of coarse, there are times in normal business when it is not so keen, times when the consumers of bars are competing to got them. We can generally purchase at a less price than the quotation. That is, the quotations published in the Iron Age or the Iron Trade Review. I have never observed any indication of a combination or agreement among bar makers to fix prices. We have always been able to buy on fair competition. I think we have always been able to get the benefit of fair competition.
The general manager of the next largest company of this character in the country (volume 20, p. 7999), speaking of the purchases of his company, in substance, says:
The competition is mainly between the Carnegie and the Republic. Price is one kind of that competition; the ability to handle our particular class of business and sufficient capacity on account of our enormous consumption of bars. We generally contract for our tonnage, and we take bids on that con *86 tract. There is competition in the matter of price; in the matter of delivery; and, to some extent, in quality. So far as we know or can find, there is no-evidence of price fixing between the companies. We believe there is genuine, competition for our business.
The president of' a large boiler works and a purchaser of both plates and tubes (volume 20, p. 8015), in substance, says:
We.receive quotations on, plates from I/ukens Iron & Steel Company,. Worth Bros., Carnegie Steel Company, Cambria, Carbon, and occasionally Allegheny Steel. They vary. There is a difference in the quotations from the different concerns. There is a range from one to three dollars a ton. We have never observed any evidence of a combination to fix prices among - the different concerns that make quotations to us. We feel we get the benefit of a genuine and unrestricted competition for our purchases.
The president of a large bolt and nut industry, the basis of which' is rod and bat steel (volume 20, p. 8042), says:
We have been buying from the Carnegie Steel Company, Jones & Laughlin, and the Republic Steel & Iron Company. Before buying bars and rods it is our custom to ask quotations from different makers. We buy two or' three times in a year. The quotations on rods vary somewhat in price, about 50 cents a ton. They have been varying in that way to my knowledge since 1904. I never saw any evidence since 1904 of any combination to fix prices on our purchases. We have always got the benefit of competition on both of them.
The manager, since 1901,. of the largest single gas company in. the country (volume 20, p. 8085), says in substance:
I am familiar with the purchases of iron and steel pipe made by that company since 1901. I decide which bidder shall be awarded the contract. During that period we have got quotations from 13 different companies — there are 11 at the present time we get them from. We let our contracts and award our orders on the competitive basis all the time. The quotations vary, and. have done so ever since I have been connected with the company.
The president of: a considerable '.tank manufacturing company (volume 20, p. 8l27) testifies as to competition for his purchases, saying in substance:
We buy from the Carnegie Steel Company, Cambria Steel Company, Jones & Laughlin, and have bought some from the Eastern Steel Company, also from La Belle Iron Works. We find prices are nearly uniform from all companies in busy seasons when the mills are busy. When the mills are not busy, we get little concessions from most ahy of them, not to exceed $1.00 a ton, or something of that kind. I would consider it keen competition. I think we have had the benefit of the genuine, aggressive competition for our business. We have had a range of prices — take three years past, or for ten years— ranging from $1.10 to $1.50, and that I think is competition.
The same open competitive seeking after business of a steel' spring company that buys for its basic supplies large quantities of steel bars and billets is shown. Referring to the period from-1902' to 1913, its purchasing agent, in substance, says:
We buy bars from the Carnegie Steel Company, the Inland Steel Company, the Cambria, and the Pennsylvania. The quotations vary. There has-been competition ever since I have been connected with my business. We- buy billets from most any one that sells — New York State Steel, Carnegie Steel, La pany, and the Tin Plate Company, and some other companies.”
*131 The matter was actively taken up by the Federal Company, but eventually fell through (volume 12, p. 4723), because “Mr. Frick was not willing to agree that the whole Carnegie organization, including himself, would remain in the company and assist in carrying on the business.” The proofs further show that early in 1900 Mr. Schwab, the president of the Carnegie Company (volume 12, pp. 4724, 4725), urged the buying of that company by the Federal, and efforts were again made to have Mr. Morgan, who was a member of the board of the Federal Steel Company take it up, which he declined to do (volume 12, p. 4723).
This demand for integration which thus evidenced itself in these two leading companies, each attempting to integrate back to the base of supply and also into more extended and diversified finished product, also evidenced itself in other branches of the steel trade. This was the integration of mills which were large consumers of plates, ingots, billets, sheets, rods, structural iron, and other semibasic products. Without specifying all, we may refer to the steady integration of these various subdivisions of the steel trade. This began in December, 1*898, when the principal tin plate manufactories integrated by consolidation into the American Tin Plate Company. In January, 1899, the American Steel & Wire was formed by a consolidation of all the leading wire product manufacturers. This was followed in February, 1899, by the consolidation into the National Steel Company of 12 per cent, of the ingot production of the country, which was located on the eastern side of Chicago and the western side of the Pittsburgh district. The same month saw the National Tube Company formed by great concerns making various kinds of tubes and pipes. In Maxell of the same year, sheet steelmakers in large tonnage combined to form the American Sheet Steel Company, and in April of the same year, the American Steel Hoop Company was formed by the leading makers of hoops, bands, and cotton ties. While .the American Sheet, the American Hoop, and the National Steel were separate' companies, yet for integrated, continuous working, they were in effect (Topping, volume 2, pp. 636, 684, also volume 12, p. 4764) necessary to each other, Mr. Topping testifying:
“You will remember there was formed the Steel Hoop and the American Sheet Steel. The formation of those companies, as I understood at the time intended, was to balance up National Steel so as to make it more nearly self-sustaining. In other words, the National Steel was the raw producing steel company to supply the crude material to the Sheet Steal and Steel Hoop and Tin Plate Companies.”
This integrated relation is no doubt the manufacturing feature on which it was (volume 12, p. 4747) insisted that the finishing companies would not sell to t-he Steel Corporation unless the National was also purchased, as Mr. Carnegie (volume 12, p. 4747) insisted should be done. In the same month we find the principal structural and bridge erectors and producers forming the American Bridge Company. In connection with this consolidating and integration of structural manufacturers and fabricators, it is but just to note, as illustrative of compelling forces outside that industry, the demands which the business world was making upon the structural steel industry. Thus in re *132 ferring to the American Bridge Company, and its carrying forward at a later date this policy of expansion and local integrating of its works, the proofs (volume 10, p. 3961) show that such great operations as the tall buildings of recent origin, such railroad work as the Hell Gate Bridge, and such national work as the Panama Canal, practically necessitate the existence'of such companies. In that respect the proof is railroad bridges are—
“confined to those companies having the largest plants and those equipped for that sort of work. There are very few companies, for example, that could build a bridge like the Hell Gate Bridge, involving 40,000 tons of material and an incidental- expense of perhaps $300,000 to get the falsework together. When we secured that contract we had to expend immediately $160,000 for tools. While we were a very large concern and had a very well-equipped plant, we were obliged to buy $160,000 worth of tools for that particular work.
“Q. Has there been any change in the style and size of the structures in the last 12 or 15 years which affected the size of the plants that are necessary in order to execute the contracts?
“A. Yes. * * * Since that time buildings ranging from 18 and 20 stories up bo 36 stories have been built. * * * We fabricate the steel and deliver it to the site and erect it.”
• The proofs also show it is necessary to have structural plants in different localities. In that regard (page 3961), and referring only to the Middle West equipment, the proof is that the American Bridge Company has in the'West—
“a plant at Toledo, one at Ambridge (Pittsburgh), one at Gary, Ind., a large plant and a comparatively new plant; one at Chicago, one in Minneapolis, one in St. Louis, and one in Detroit. * * * It is a zone business more or less.” A zone business is a “business within 300 or 400 miles of where the plant is located. It is a question of freight rates.
“Q. You mean by that, bridge business or structural business for buildings?
“A. Both.”
They further show that it requires a large plant to deliver such contract requirements so'3s to co-ordinate with other parts of the work. The proof is (page 3961), referring to the work done by the American Bridge Company along the Panama Canal:
“We have done about $8,000,000 worth of work there for the government so far. * * * We are building the emergency dams, building the transmission towers and the administration building and the machine shops, involving about 6,000 tons, and we have been doing a great deal of work outside of the lock gates which were furnished by McGlintic-Marshall Company. I think we have done the major portion of the work, and it has always been work that we had to get out pretty promptly, and sometimes have to set aside other work to accomplish the deliveries required.”
It will thus be seen that these large modern operations practically necessitate correspondingly large manufacturing facilities and financial resources to adequately and successfully meet such product demands. These rapid, widespread, and isolated integrations of different subdivisions of the steel trade cannot be reasonably explained on the sole theory of a widespread, dominating purpose in each of these aggregations to monopolize or restrain trade. In the first place, the proof is simply one-sided that they did not control trade, and that in spite of their size and large proportions of then existing trade, their competitors, as we have already seen, have increased more *133 rapidly than they. So that, while there may have been in the minds of those who formed them the possibility of monopoly and increase of price, we are inclined, from a study of the proofs in this case, to' the belief that the real underlying influence was the economy of management, the locality of production and market, and the continuity of process which resulted from such integration. Take, lor example, the last one formed, the American Bridge Company. During the years it has been a subsidiary of the United' States Steel Corporation its business has increased 42 per cent. In that time, its competitors have increased their business 164 per cent. During that time the American Company has had the help of all the associated subsidiary companies of the Steel Company, it has shared in all the economies of management, co-operation and financial help rendered by the parent company, yet with all these aids, its competitors have increased their business four times as fast as its own. It would seem, therefore, that the American Bridge Company had even less hope or power to monopolize when it was originally formed and stood alone, when it could not, when bought by the Steel Corporation, so monopolize the steel structural business of the country. In view of such facts, we have been impressed with the view that these consolidations and integrations, accomplished or in view at the close of 1900, yrere more largely made with a view to meeting the changing conditions in the steel trade in its transition from iron to steel and in its adjusting itself to the progress, improvement, and development in that industry rather than with monopolistic intent. The proof in regard to the reasons for the formation of the American Bridge Company fairly states, as it seems to us, the basic reasons which led to the unifying of the separate branches of the steel industry. Thus in volume 2, page' 874, it is testified, with respect to that company’s formation, as follows:
“A. The purpose of the formation of the American Bridge Company was simply along the lines of economical shop management, and had no reference whatever to any monopoly or to securing the entire industry of the country. The plants which became a part of the American Bridge Company were believed to be in a position to be operated more economically as a combined whole than as independent units, and the foundation of that company was the securing of a steelworks whereby they could obtain, to a large extent, the control of their raw material for fabrication, the basis of practically all structural contracts being- one of time; the time of delivery being the most important factor in practically 90 per cent, of all contracts taken. These independent units found themselves at that time in a very disadvantageous position, due to the fact that the large steel plants wore commencing to do their own fabricating, whereby they were enabled to control their rolling mill suppilies and make such deliveries as these independent fabricating shops, having no control over the raw material, could not do.
“There was also another reason for it, namely, that contracts were increasing so rapidly in magnitude that as independent units they were unable to secure sufficient working capital to enable them to fabricate these large ton nages.
“You can trace from the very beginning of the securing and assembling of their raw material through the designing, fabrication, transportation, and erection work, and the increase in their working capital, the reasons for putting together those plants, which were of two principal characters: First, they were partly competitive, I might say, by reason of a greater or less similarity of output and by reason of a common territory into which the transportation *134 rates enabled them to ship the material; and, second, plants absolutely noncompetitive, due, (a) by reason of an entirely dissimilar output, and (b) by! reason of their geographical location.
“The whole scheme was one to decrease cost of production and to operate along the lines of what, at the present time is termed ‘scientific shop management.’ As a matter of fact, any advance in prices was not discussed to my knowledge; nor did any such enhancement ever take place. Competition at all times was extremely severe, and the profit on the output decreased from the time of the formation of that company until the present day. A number of concerns were offered to the American Bridge Company at the time of its formation, which were declined for various reasons, because they did not seem to be essential in the rounding out of the proposition that I have referred to.”
As we have said above, it may have been the fact that, apart from the operative necessity that led to many manufacturers putting their works into these consolidations,-there was probably a purpose also to monopolize and restrain trade, yet by the time the Steel Corporation was formed the inability of these prior combinations to so monopolize trade was provén to those who gave heed to facts and figures. For example, Government Exhibit, vol. 7, p. 2017, shows that the production in 1898 of the pig iron plants subsequently acquired by the Steel Corporation had been 46 per cent, of the country’s total production of 1898; in 1900, the proportion of these plants had fallen to 41 per cent. In the same way, Bessemer plants afterwards acquired by the Steel Corporation had fallen from 73 per cent, in 1898 to 70 per'cent, in 1900. The Bessemer rail plants had fallen from 63 per cent, in 1898 to 61 per cent, in 1900; wire rod plants had fallen from 97 per cent, in 1898 to 82 per cent, in 1900; structural shape plants had fallen from 66 per cent, in 1898 to 61 per cent, in 1900; plate and sheet plants had fallen from 67 per cent, in 1898 to 66 per cent, in 1900; while the wire nail plants subsequently acquired by the Steel Corporation, which had in'1898 produced 89 per cent, of the country’s total production, had by 1900 dropped off to 73 per cent. Indeed, as we gather the net results of these different plants in varied steel lines, the acquisition of which (1901) by the Steel Corporation is alleged to evidence a purpose to monopolize, the facts and figures show that in only one product, namely, that of ingots and castings, had.there been an increase of proportion in the three preceding years by these plants and in nine other branches, the plants which the Steel Company subsequently acquired, had in point of fact in those three years clearly shown their inability to monopolize by a decrease of relative percentage ranging from 1 per cent, in the case of plates and sheets to 16 per cent, in wire nails. And that this three years’ decrease in actual monopolistic control was the normal trend of the steel business-is shown by the fact that such proportions continued to decrease after the Steel Corporation was formed. As an example of this tendency we may cite the wire plants subsequently acquired by the Steel Corporation, which in 1898 had 88 per cent, of the country’s production and in 1890 had fallen to 72 per cent., had by 1911 so continued to lessen their proportion of the part sold in the American market that it was then but 42 per cent, of the country’s production.'
. Moreover, these combinations were the subject of Congressional investigation from 1898 forward, and the proof (volume 28; p. 11760) *135 is that while the results of that investigation were published (they are not in evidence before us) they have resulted (volume 12, p. 4755) in no adverse action by the government. From all which we find support for our conclusion that these former combinations were largely the result of economic and manufacturing plans for the production of product rather than for monopolistic plans for selling product. At any rate, the proof is that, as- a practical business experience, these combinations which existed prior to the Steel Corporation had, in the three years preceding the formation of the Steel Corporation, shown a walling power to monopolize, if any such power existed when they were1 formed.
We have thus seen the unifying, integrating, and rounding-up influences which were irresistibly forcing those engaged in the practical work of making steel to form these prior combinations of integrating units. The proofs show that Mr. Morgan was a director in the Federal Steel Company (volume 12, p. 4724), but that he personally knew nothing of the steel business. His firm had taken part in some of these consolidations, but the suggestion of the absorption by the Federal of' the Carnegie Company had not appealed to him. The proof is (volume 12, p. 4274) that while he was a member of the board of directors of the Federal Steel Company and was financially interested in it, he had probably never attended a meeting of the board and taken no part in its management and knew nothing of the practical steel business. The conditions in the steel trade being such as we have shown above, Mr. Morgan, in December, 1900, attended a dinner in New York where some 80 men, prominent in steel manufacturing and the banking business, were present. This dinner was given to Mr. Schwab, the president of the Carnegie Steel Company. Whether the dinner was given for the purpose of affording an opportunity of interesting Mr. Morgan in buying the Carnegie Steel Company, which the bitter differences between the partners in that company (volume 6, p. 2189; volume 14, pp. 5655, 5656) and the desire of Mr. Carnegie to retire from business then made possible, there can be no doubt, in view of the outcome, that Mr. Schwab then gave to the bankers present, and particularly to Mr. Morgan, who was seated beside him, such a comprehensive view of the steel trade as was well calculated to show the possibility of carrying integration to its logical manufacturing and merchandising efficiency, and afforded the Federal Company, of which Mr. Morgan was a director, the opportunity to carry out, on a large scale, the policy of integration that company had planned and had (volume 12, p. 4719) attempted to carry out. And there can be no doubt that Mr. Schwab realized that if a sale of the Carnegie Company could be made the grave discord among the partners of the Carnegie Company (volume 14, pp. 5655, 5656) which had arisen, could be ended, and the policy of integration on which, as noted, that company had also embarked, could be carried out- by some larger organization. Indeed, the evidence is clear that there was an earnest desire on the part of the owners of the Carnegie Company for several reasons to sell. The situation was summed up by James H. Reed, who (volume 14, p. 5655) testified:
“Q. The Carnegie management was originally a partnership, I pelieve, wáá it not?
*136 “A. A limited partnership.
“Q. When was it turned into a corporation?
“A. In the spring of 1900, turned into two corporations.
“Q. What is that?
“A. Two corporations were formed at that time.
“Q. What were they?
“A. The Carnegie Company was the holding company of the stocks of the' Carnegie Steel Company, the Frick Coke Company, and the Bessemer and Lake Erie Railroad Company; the Carnegie Steel Company was organized under the 'laws of Pennsylvania and was the operating company.
“Q. What do you know of the desire of the stockholders of the Carnegie Company to sell out in the year 1900?
“A. I think they were all desirous to make some permanent disposition of the property, for several reasons.
“Q. There had been dissensions among the partners a year or two before, had there not?
“A. Yes; that is the mild word for it; there had been quite serious dissensions between Mr. Frick and Mr. Carnegie

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8795751. Public record. Not legal advice.