A '< ■ \ ■ ' , :. ?■■ ^:': ■ |:v-:-::- ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^m I,. '.',■■ ■ [III 1 ^^^^^^^^^^^B '' ^^^^^H|:>:;'' -''; 11 ^^^^^^Kt\''- l^^^^^^^^M 1 Northeastern University SS27^333SSS35SS; School of Law Library £g;VVVV9VVVVVVVVV9VV^^N^vVVVVVV^ INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER HEARINGS BEFORE THE TEMPOKAEY NATIONAL ECONOMIC COMMITTEE CONGEESS OF THE UNITED STATES SEVENTY-SIXTH CONGRESS THIRD SESSION PURSUANT TO Public Resolution No. 113 (Seventy-fifth Congress) AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- TION WITH RESPECT TO THE CONCENTRATION OF ECONOMIC POWER IN, AND FINANCIAL CONTROL OVER, PRODUCTION AND DISTRIBUTION OF GOODS AND SERVICES PART 27 IRON AND STEEL INDUSTRY DISTRIBUTION AND PRICING OF SELECTED STEEL PRODUCTS THE BASING POINT SYSTEM JANUARY 26, 27, 29, AND 30, 1940 Printed ^or the use of the Temporary National Economic Committee UNITED STATES GOVERNMENT PRINTING OFFICE 124491 WASHINGTON : 1940 NORTHEASTERN A" ^ •Alternates. TEMPORARY NATIONAL ECONOMIC COMMITTEE (Created pursuant to Public Res. 113, 75th Cong.) JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman HATTON W. SUMNERS, Representative from Texas, Vice Chairman WILLIAM H. KINO, Senator from Utah WILLIAM E. BORAH, Senator from Idaho CLYDE WILLIAMS, Representative from Missouri B. CARROLL REECE, Representative from Tennessee THURMAN W. ARNOLD, Assistant Attorney General •WENDELL BERGE, Special Assistant to the Attorney General Representing the Department of Justice JEROME N. FRANK, Chairman •LEON HENDERSON, Commissioner Representing the Securities and Exchange Commission ..i GARLAND S. FERGUSON, Commissioner ^31 •EWIN L. DAVIS, Commissioner VH Representing the Federal Trade Commission ^~^ ISADOR LUBIN, Commissioner of Labor Statistics •A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics "-^ Representing the Department of Labor JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel .^^ •CHARLES L. KADES, Special Assistant to the General Counsel QM Representing the Department of the Treasury j™»J CLARENCE C. AVILDSEN, Special Adviser to the Secretary XStS Representing the Department of Commerce "^ JAMES R. BRACKETT, Executive Secretary REPRINTED BY WILLIAM S. HEIN & CO , INC BUFFALO N. Y. 1968 CONTENTS Testimony of — Page Adams, Avery C, vice president, United States Steel Corporation, Pittsburgh, Pa 14157-14230, 14234-14261 Custer, A. B., administrative officer, Purchase Division, Bureau of Supplies and Accounts, Navy Department, Washington, D. C. 14307-14312 de Chazeau, Melvin G., professor of economics, University of Virginia, Charlottesville, Va 14130-14149 Dorenbusch, A. A., general sales manager, Newport Rolling Mill Co., Newport, Ky 14279-14288 Ezekiel, Mordecai, economic adviser to the Secretary, Department of Agriculture, Washington, D. C--, 14154-14156 Fairless, Benjamin F., president, United States Steel Corporation, New York City 14157-14230, 14232-14278 White, Hugh E., examiner. Federal Trade Commission, Washington, D. C 14231, 14293-14307 Widmann, Edward T., attorney. Federal Tradt Commission, Wash- ington, D. C-. 14289-14293 Wooden, Walter B., assistant chief counsel, Fedcal Trade Com- mission, Washington, D. C 14313-14329 Yntema, Theodore Otte, professor of economics, Univer^ty of Chicago, Chicago, 111 14150-14153 Form A questionnaire. 14130 Form B questionnaire 14133 Analysis of distribution of selected steel products 14134 Fabrication-in-transit rates and price cutting 14142 Relationship between steel prices and production and general activity 14150 Federal Trade Commission's analysis of United States SteeL Corporation's report on the basing point system ' 14lt'>6 The basing point system in the steel industryand deviations from it Hlb' Effectiveness of commercial resolutions since N. R. A -.. 14211 Policy of price announcement since spring of 1 936 142 15 Freight rate book of the Iron and Steel Institute 14222 N. R. A. code provisions continued after N. R. A. invahdation 14232 Freight rate compilations by the Iron and Steel Institute 14246 Comparison of Pacific coast and Birmingham prices 14255 Prices in the Detroit area 14259 Development of the Pittsburgh-plus system 14261 Price discussions among competitors 14280 Identical bids in the steel industry 14289 Excess capacity in production of sheets and hot-rolled strip 14301 Comparison of costs and prices at Pittsburgh, Chicago, and Birmingham. 14304 Identical bids received by the Navy Department 14308 Federal Trade Commission's summation of the monopolistic characteristics of the basing point system . 14312 Schedule of exhibits iv Friday, January 26, 1940 14129 Saturday, January 27, 1940 , 14187 Monday, January 29, 1940.-.' 14229 Tuesday, January 30, 1940 ^ 14279 Appendix . 14331 Supplemental data 140 ly Index ^ IV CONTENTS SCHEDULE OF EXHIBITS Number and summary of exhibits 2189. Form A, data on the distnoution of selected carbon steel products, and letter of instruction from Thurman Arnold 2190. Form B, data on the distribution and pricing of selected steel products, and letter of instruction from Thurman Arnold 2191. Companies reporting. Forms A and B 2192. Affidavit and verification 2193. Form A or B, consuming districts of the United States 2194. Supplement to Form B tables 2195. Table: Form B summary — February 1939 2196. Table: Published base prices, February 1939 2197. Tables: Heavy Structural Shapes; Plates; Hot Rolled Sheets; Hot Rolled Strip 2198. Tables: Summary of analysis of Form B distribu- tion of selected steel products, February 1939 2199. Chart: Dispelling the Fog, 1938, compilation of basing points classified by products issued by Republic Steel 2200. Letter from Carnegie-Illinois Steel Corporation to its sales managers announcing price program 2201. Letter from Carnegie-Illinois Steel Corporation to its sales managers re : price announcement 2202. Article from Iron Age, "Steel Buyers Overwhelm- ingly Opposed to F. T. C. Plan of Steel Pricing"... 2203. Circular letter of Walter S. Tower, executive secre- tary of the American Iron and Steel Institute 2204. Copy of draft of preamble and resolutions adopted by the board of directors of the American Iron and Steel Institute . 2205. Resolution adopted by members of the iron and steel industry assembled, at American Iron and Steel Institute, June 6, 1935... 2206. Commercial resolution adopted by the board of directors of the American Iron and Steel Insti-- tute as amended June 14, 1934 2207. Commercial resolution adopted by the board of directors of the American Iron and Steel Insti- tute, June 14, 1934-. 2208. Iron and Steel Industry Code of Fair Competition regulations as amended Oct. 11, 1934 2209. Table: Freight tariff, American Iron and Steel Institute 2210. Table: Government tonnage record, 1939 2211. Table: Government tonnage record, 1938 2212. Excerpt from a price announcement of the Carnegie- Illinois Steel Corporation on June 4, 1936 2213. No exhibit. 2214. Letter from A. A. Dorenbusch to A. K. Andrews, president, Newport Rolling Mill Co 2215. N. R. A. code of fair competition for the iron and steel industry as approved by President Roose- velt on Aug. 19, 1933 2216. Supplemental commercial resolutions adopted by the board of directors of the American Iron and Steel Institute Intro- duced at page 14129 14129 14129 14129 14130 14130 14130 14130 14130 14130 14192 14219 14219 14229 14231 14231 14231 14233 14236 14246 14247 14275 14275 14257 14280 14288 14288 Appears on page 14331-14335 14336-14339 14339-14341 14341 14341-14343 14343-14347 14347 14348 14348-14423 14423-14428 Facing 14428 14428 14429-14430 14430-14434 14434 14434 14435 14435 14436 14437-14441 14442-14443 14444-14457 14458-14505 14506 14506 14506-14530 (0 ' On file with committee. CONTENTS SCHEDULE OF EXHIBITS— Continued Number and summary of exhibits 2217. Letter from American Iron and Steel Institute to Lukens Steel Co., July 12, 1935 2218. No exhibit. 2219. No exhibit. 2220. Letter from Lukens Steel Co. to American Iron and Steel Institute, Oct. 15, 1935 222i. Letter from American Iron and Steel Institute to St. Louis-Southwestern Railway Lines, Oct. 15, 1935 2222. Letter from American Iron and Steel Institute to Boston and Maine Pailroad, July 18, 1935 2223. Letter from American Iron and Steel Institute to Lockhart Iron and Steel Co., Sept. 9, 1935 2224. No exhibit. 2225. Letter from Lockhart Iron and Steel Co. to Amer- ican Iron and Steel Co.,- Sept. 4, 1935 2226. Letter from American Iron and Steel Institute Traffic Committee, to chairman of Commercial Committee, Jan. 29, 1934 2227. No exhibit. 2228. Letter from Reading Iron Co. to American Iron & Steel Institute, Nov. 27, 1935 2229. Letter from Bethlehem Steel Co. to American Iron & Steel Institute, Dec. 2, 1935 2230. Letter from the Youngstown Sheet and Tube Co. to the Bethlehem Steel Co., April 11, 1935 2231. Table: Analysis of "Government Tonnage, 1938" and "Government Tonnage, First Quarter 1939". 2232. Table: Numerical measurement of awards for rolling mill products and all other steel products _ 2233. Chart: Total steel ingot capacity. United States; ingot capacity, United States Steel Corporation; total ingot production, United States 2234. Table : United States capacity for the production of hot rolled sheet and hot rolled strip steel; indi- vidual and total capacities of the 16 principal producers of sheet and strip steel and ratio of production to total capacity 2235. Chart: Total capacity United States for produc- tion of hot rolled sheet and liot rolled strip steel; annual capacity of the 16 principal producers of hot rolled sheets and hot rolled strip; produc- tion, United States, hot rolled sheets and hot rolled strip 2236. Excerpts from "Financial Analysis of the Steel Industry," purporting to show certain facts re- specting certain producers of rolled steel having a rated annual ingot capacity in excess of one million tons 2237. Tables: Relative mill cost of manufacturing struc- tural shapes, plates, merchant bars and black sheets in the Pittsburgh, Chicago, Duluth, and Birmingham districts, for the 2 months' period of January and Februarv 1921, and the year 1920 2238. Table: Statement of relative mill costs of finished steel and the sales prices thereof at various pro- ducing points 2239. Chart: Showing comparative margins between cost of producing steel and the selling prices thereof at Pittsburgh, Chicago, Birmingham, and Duluth. _ Intro- duced at page 14290 14290 14290 14290 14291 14291 14291 14292 14292 14293 14295 14296 14299 14302 1430S 14304 14305 14305 14305 I Appears on page 14530-14532 14532 14532-14533 14533 14534 14535 14535 14536 14536 14536-14537 14538 14539 14539 14540 14541 14542-14543 14544-14545 14546 Facing 14546 VI CONTENTS SCHEDULE OF EXHIBITS— Continued Number and summary of exhibits Intro- duced at page Appears on page 2240. Invitation for bids issued by Navy Department, Bureau of Supplies and Accounts, opened Nov. 19, 1935 2241. Invitation for bids issued by Navy Department, Bureau of Supplies and Accounts, opened May 26, 1936 2242. An arialysis of the basing point system of delivered prices 14307 14307 14329 SUPPLEMENTAL DATA Exhibit introduced in Hearings, Part 20 1418. The basing point method of quoting delivered prices in the steel industry 14547 14548 14548-14618 14619-14694 INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER FRIDAY, JANUARY 26, 1940 United States Senate, Temporary National Economic Committee, Washington, D. C. The committee met at 10:40 a. m., pursuant to adjournment on Thursday, January 25, 1940, in the Caucus Room, Senate OflSce Building, Senator William H. King, Utah, presiding. Present: Senator King (acting chairman); Representative Williams; Messrs. O'Connell and Davis. Present also: Walter B. Wooden, Assistant Chief Counsel, and Willis Ballinger, Director of Studies for the Federal Trade Commis- sion, representing the Federal Trade Commission; Frank P. Smith, representing the Securities and Exchange Commission; A. H. Feller, special assistant to the Attorney General, Department of Justice; W. A. Janssen and John V. W. Reynders, representing the Depart- ment of Commerce. Acting Chairman King. The committee will be in order. Mr. Feller. Dr. deChazeau, please. Acting Chairman King. I suppose Dr. Yntema ought to be aroujid? ' Mr. Feller. He will be called later. Mr. Chairman, I offer for the record a series of tables and docu- ments prepared by the Departmient of Justice. I shall read the list of documents. Acting Chairman King. Are they all to be placed in the record? Mr. Feller. Yes, sir. Acting Chairman King. All right, but I am not sure as to the materiality of this. Mr. Feller. Letters of instruction sent to various steel companies, covering Form A and a copy of Form A. (The documents referred to were marked "Exhibit No. 2189" and are included in the appendix on pp. 14331-14335.) Mr. Feller. Letters of instruction covering Form B and a copy of Form B. (The documents referred to were marked "Exhibit No. 2190" and are included in the appendix on pp. 14336-14339.) Mr. Feller. A list of companies on Form A and Form B. (The list referred to was marked "Exhibit No. 2191" and is mcluded in the appendix on pp. 14339-14341.) Mr. Feller. Copy of the affidavits executed by each of the com- panies for Form A and for Form B. (The document referred to was marked "Exhibit No. 2192 ' and is included in the appendix on p. 14341.) 1 Dr.Theodore Otte Yntema, whose tesCfmony for the U. S. Steel Corporation appears In hearings, Part 28. 14129 14i30 CONCENTRATION OF ECONOMIC POWER Mr. Feller. An outline of consuming districts for Form A and Form B. (The document referred to was marked "Exhibit No. 2193" and is included in the appendix on pp. 14341-14343.) Mr. Feller. Supplement to the Form B tables. (The document referred to was marked "Exhibit No. 2194" and is included in the appendix on pp. 14343-14347.) Mr. Feller. A summary of the results obtained from the answers on Form B. (The document referred to was marked "Exhibit No. 2195" and is included in the appendix on p. 14347.) Mr. Feller. A list of the published base prices for reported prod- ucts Form B for February 1939. (The dDcument referred to was marked "Exhibit No. 2196" and is included in the appendix on p. 14348.) Mr. Feller. Eighteen Form B tables, on each of the following products: Heavy shapes, plates, hot rolled sheets, and hot rolled strip. (The documents referred to were marked "Exhibit No. 2197" and are included in the appendix on pp. 14348-14423.) Mr. Feller. Lastly, summary of analysis of Form B, distribution of selected products, February 1939. (The document referred to was marked "Exhibit No. 2198" and is included in the appendix on pp. 14423-14428.) TESTIMONY OF MELVIN G. deCHAZEAU, UNIVERSITY OF VIRGINIA, CHARL0TTE3VILLE, VA.— Resumed Dr. deChazeau. As part of its investigation of the iron and steel industry for this committee, the Department of Justice with the cooperation of the Federal Trade Commission undertook a study of the distribution of shipments of certain selected steel products and a more detailed examination of certain pricing characteristics for some of them. I need not point out that this project was under- taken because there were no data available for any recent period showing the geographical distribution of steel products nor the magni- tude of such pricing phenomena under a basing-point system as freight absorption, phantom freight, mill-net prices received, the extent to which the basing-point formula of pricing was observed, or the relative importance of extras in the price of steel. To obtain these data two questionnaire forms were devised, known as Form A and Form B. THE FORM A QUESTIONNAIRE" Dr. deChazeau. Form A was restricted to tonnage of shipments only, on 18 products in each of the years 1936, 1937, and 1938. To preclude the burden of an invoice analysis, it was first ascertained from most companies of any size in the industr}^, some 57 in all, how these shipments were recorded, if at all. Twelve of the large companies, which maintained machine tabulating systems using punch cards on which both State and county of destination were punched, reported shipments by States and also by the 64 consuming districts used for Form B analysis. These districts are defined in CONCENTRATION OP ECONOMIC POWER 14131 the mimeographed sheets before you entitled "Form A or B : Consum- ing districts of the United States." I should say that these districts were not devised by us, but were taken from a report of the National Recovery Administration on the operation of the basing-point system in the iron and steel industry, November 30, 1934, in which they had been developed for purposes of that study in cooperation with the Code Authority of the American Iron and Steel Institute. Acting Chairman King. Had there been any departures from the situation revealed in the documents to which you refer? Dr. deChazeau. The document at that time did not break down the analysis by products, but covered all products, and, secondly, it did not break it down by producing areas but covered only ship- ments from the Pittsburgh area, plants within 50 miles of Pittsburgh. It covered the second quarter of 1934. Acting Chairman King. Do you tliink a document of the vintage of 1933 ^ Dr. deChazeau (interposing). 1934, second quarter. Acting Chairman King. Of 1934 would be a fair standard for now? Dr. deChazeau. If the analysis in 1934 had enabled one to compare producing areas, and if it had broken down individual products, then I should agree with you that there would be no point in getting a more recent record, except of course, that there has been a change in the basing-point structure of considerable magnitude, namely, in June 1938. Mr. O'Connell. With reference to 1934 you referred only to the breaking down of the districts? Dr. deChazeau. That's right. Mr. O'Connell. You are not introducing anything that has to do with that? Dr. deChazeau. Nothing of that sort. I understood the Senator to question why we should make another analysis in view of the fact that that study had been made. My answer was responsive to such a question. All we took from that study was the delineation of consum- ing districts. These were defined in terms of counties. Actmg Chairman King. Are the consuming districts the same now? Dr. deChazeau'. The consuming districts which we have used in this analysis are identical with those consuming districts; yes, sir. Through the courtesy of the United States Steel Corporation, I call your attention to this map, prepared by its staff, in which the consum- ing districts which transgress State lines are blocked in colors. "With the exception of those that are blocked in colors, the consuming districts are states, or, in cases where the consuming districts overlap a State line, the remainder of such States. In the western part of the United States, only California is shown on this map. In the western area separate States were used as consuming districts with the excep- tion of California, which was divided into two areas, northern and southern. It is of particular interest in connection with this map to note the size of the consuming districts with relation to the location of mills. For example, in the so-called Pittsburgh area, which you will note overlaps certain counties in West Virginia, Ohio, and Maryland, Alle- gheny County, here, is of course the primary location of steel mills. 14132 CONCENTRATION OF ECONOMIC POWER But the consuming district is rather broad with relation to such mill location. Confusion, therefore, is likely to occur in analyzing ship- ments in this area in which you have high concentration of mills. Mr. Wooden. Mr. deChazeau, does that map purport to sho\v that no shipments are made outside of the districts that are shown in the respective colors by the mills within those districts? Dr. deChazeau. No, sir. This map implies nothing about ship- ments; otherwise I would not use it. It merely indicates visually the various districts which were in fact used in this analj^sis. In all cases in which color is not blocked in, the consuming districts are bounded, by State lines, such as Massachusetts, Rhode Island, Vermont, New Hampshire. Acting Chairman King. Well, of course that color map represents consuming districts as well as producing districts, as I understand you, at least some of the consuming districts — — Dr. deChazeau. (interposing). For purposes of this analysis we considered consuming districts or combinations of consuming districts as producing areas, since it was not practical to take individual mills. Mr. Reynders. I don't think we understand the significance of the particular areas. Perlbaps you will '"^'n that a little bit so we will understand what it is all about. Dr. deChazeau. I am not sure that I get the import of the question. The basis of the division of the various consuming districts was, of course, their relative importance as consuming areas for steel. This leads, for example, to setting off a district here called Metropolitan New York as contrasted, say, with this district here called Phila- delphia. You will find no New Jersey area. These two metropolitan areas absorb the state. Mr. Reynders. Tak« the area around Chicago. Why do you limit it to that extent, or why don't you go beyond the area that is indicated? Dr. deChazeau. With the details which were considered by the National Recovery Administration and by the Code Authority in delimiting these districts, I am not familiar. There were two reasons for adopting their district break-down: first, I have faith in those who worked on it, particularly Prof. J. M. Clark of Columbia University; and second, some companies have used these areas for the break-down of their own shipment records. Therefore, if we were to use any definition of areas less than States, these seemed appropriate. Now one other thing. It is obvious, of course, that markets for steel do not conform necessarily with State lines. Hence areas which extend beyond State lines often give a far better picture of distribution with relation to a given mill or group of mills. On the other hand it is quite clear that, no matter how one breaks down distribution with a single group of districts one cannot delimit the most important market areas for every group of mills and for each product. Selection of districts must be made on an average basis. It must be arbitrary; but it permits a more significant study than state areas alone would provide. Sixteen companies, the records of which would permit a report by States only — I am still talking about Form A — reported on that basis, and 1 1 other companies reported by sales districts. All reports were made separately for each plant in each year — 1936, 1937, 1938. Minor adjustments made to facilitate reporting need not be discussed at this time. CONCENTRATION OF ECONOMIC POWER 14133 FORM B QUESTIONNAIRE Dr. deChazeau. Form B, on the other hand, required an invoice analysis. In addition to tonnage shipped into each consuming dis- trict, each reporting company recorded— for shipments into each district— total delivered value, total freight from basing point to destination, total freight paid or allowed from point of shipment to destination, and total extras included in the delivered value. I should note in passing that such data enable one to compute "phantom freight" as opposed to '-freight absorption," that is the freight from the basing point to destination, minus the freight allowed from the mill to destination. It likewise enables one to determine a computed base price— i. e., the deHvered value less the freight added from the basing point, less the extras — which, per ton, should be comparable to the pubhshed base price. There are other relations that may be worked out. Separate, reports were required for each plant and for each of 10 products as well as for each basing point on which price was computed. To minimize the burden of the work, reporting plants were selected independently for each product on the basis of their location and their importance in terms of capacity. That is, each plant did not report on every one of the 10 selected products for which it had capac- ity, but only on a selected number for which it was judged especially important. For all 10 products, there were roughly 175 "plant product" reports made by 55 companies in all. Most of these companies reported on a single product for a single plant. Again, to render the project feasible, a single current month. February 1939, was selected as the period for which reports were required. Acting Chairman King. Was there any significance in the selection of those 2 months? Dr. deChazeau. In the selection of February 1939? Acting Chairman King. Yes. Dr. deChazeau. We wanted a month for which we could expect, returns as soon as possible; but the reason for choosing February rather than January was that it is a middle of the quarter month. These two questionnaires were sent to the industry on December 23, 1938 (Form B), and January 19, 1939 (Form A). The last repHes were received by the department during the latter part of August 1939. February was preferable to January because the probability of shipments at past-quarter prices is reduced. It is not eliminated, but to the extent that it is reduced, the middle of the quarter month would permit less ambiguous conclusions. Of course, we took a risk that prices might be altered during the month. Fortunately, this did not occur so far as pubhshed prices were concerned, or so far as we have been able to check the actual prices published by the companies during that period. Mr. Wooden. What proportion of all shipments during the month of February do you think this covers? Dr. deChazeau. I am going to take that up, Mr. Wooden. The burden of the task shouldered by reporting companies was great, especially for the large integrated companies, and I want publicly to acknowledge the splendid cooperation evidenced by them. 14134 CONCENTRATION ol' StJONOMIC POWER ANALYSIS OF DISTRIBUTION OF SELECTED STEEL PRODUCTS Dr. deChazeau. The analysis of these data is not complete. A machine tabulation of both Form A (with the exception of reports by sales districts) and Form B was made to permit an analysis of the data by a series of classifications for each product; for example, by grouped plants in each consuming area, by grouped plants within 25 miles of basing point and within 50 miles of basing point; by grouped plants according to degree of plant integration and company integra- tion; by basing points on which products were priced, and by various other combinations. Because of a grave limitation of staff, it has been possible to complete the analysis for selected classifications of only 6 out of the 10 products reported on Form B. Two of these, sheet and tin-plate bars and cold-rolled sheets, have not been finally checked and therefore are not presented this mornmg. The distri- bution of products under Form A (i. e., tonnage distribution in the 3 years 1936-38) has been analyzed only to the extent of providing a check on the representative character of the distribution during the month of February 1939 for the Form B products studied. The presentation this morning therefore is in the nature of an interim report. The primary object of the Form B study of distribution was to provide a factual answer to many questions which have been raised with regard to the effects of the basing-point system of pricing in the steel industry. From this point of view, it was considered both un- necessary and unwise that the Department of Justice should encroach on that part of the investigation reserved to the Federal Trade Com- mission, namely, the social or economic desirability of a basing-point system of pricing as contrasted with any other pricing system. In the construction of tables for summary presentation of results before this committee, therefore, no attempt has been made to delimit the economic market of any mill or group of mills either under a basing-point system of prices or any other pricing system, nor is any judgment implied as to the desirability of any given pricing system. Rather, we have tried to present these data in as many alternative ways as time and staff would permit to the end that they might be most useful for tliis committee and the various parties in interest in this investigation. Finally, although this study provides a more accurate statistical measure of the relative importance of certain con- tentions with respect to pricing practices of the steel industry under the basmg-point system, the underlying conditions in the industry are so complex that it cannot be considered definitive. In fact, I doubt whether one could ever arrive at a definitive conclusion in the statisti- cal sense. Acting Chairman King. Permit an inquiry: In your study for the presentation data, did you have before you the investigations which were made and the conclusions reached and the action taken by the government during the N. R. A. period? Dr. deChazeau. I have made an extended study of those, Senator. The analysis which I present to you this morning covers four hot- rolled steel products: heavy structural shapes, plates, sheets, and strip. Two heavy steel products, both of primary importance in construction (including shipbuilding) and two light steel products, for which the automobile industry is the most important user, al- CONCENTRATION OF ECONOMIC POWER 14135 though there are many otlier uses. This study is incorporated in 18 tables for each product wiiich, I hasten to add, I do not intend to discuss in detail.' I call your attention, first, to the table before you entitled "Form B Summary." In this table is shown for each of the 10 products re- ported on Form B the total tonnage of shipments analyzed. This figure of tonnage shipped is substantially lower than the actual total of each product sliipped by reporting companies in the period. F. o. b. mill sales, shipments to plants or warehouses of the same or affiliated companies (includmg fabricators of the same or affiliated companies), shipments to jobbers' warehouses, and exports were excluded from the detailed analysis of shipments to consuming districts. Some of these, obviously, were not shipped to consuming districts as we have defined them, while others presented complications in the compilation and also in the evaluation of price information which would have confused the other shipments. Shipments in these categories excluded from the distribution analysis are shown separately in table 4a. ^ In addi- tion to tonnage in this summary table are shown various over-all averages per ton including delivered value, calculated base price, mill net, extras, and freight absorption. For comparison with computed base prices the published base prices during February 1939 are shown in an accompanying table. Neglecting plates, cold-rolled strip and tin plate for the moment, the over-all computed base price for cold-rolled sheets was slightly over $5 per ton less than published base price, those for sheet and tin bars and hot-rolled sheets were $4.62 and $4.22 below published base price; wire rods and hot-rolled strip were $3.63 and $3.76 below. All prices are for net tons. Heavy shapes and wire averaged lower by $1.68 and $1.46. The reduction below base of 70 cents for plates is undoubtedly an understatement. From the detail tables, it is clear that some com- panies must have included floor plates in their reported shipments of plates. Floor plates take a much higher price, $67 as contrasted with $42 for regular plates. With cold-rolled strip, a similar error has occurred. That is, commodity strip, a higher priced product ($62 as contrasted with $59 for a cold-rolled strip) has been included by some companies. These can be eliminated by going back to individual records, but they have not been eliminated in this over-all presentation. The effect, in cold-rolled strip, is an average computed base price of $1.18 in excess of published price. V/ith tin plate, the anomaly is only apparent. This product is priced per base box of a given number and dimension of plates. Pu^blished base prices are per 100-pound base box while the 95-pound box (a lighter gage product), for which data were requested, takes a negative extra of 10 cents. Thus the equiva- lent base price of a 95-pound box for comparative purposes would be $4.90 per box, or $103.16 per net ton. An apparent excess of 36 ..mts per ton in the computed over the published base price becomes m fact a reduction of $2.80 below equivalent base price per ton. I call attention, especially, to average freight absorption as a percent of delivered value. Mr. Feller. May I just see- if I get that point made clear to the committee? What you have just been pomting out is the calculation ' "Exhibit No. 2197," appendix, pp. 14348-14421. > Of "Exhibit No. 2197"; appendix, pp. 14421-14423. 14136 CONCENTRATION OF ECONOMIC POWER which has been made on the basis of the questionnaire by the com- panies, to indicate the extent to which these products were sold on price which deviated from the published base price. Dr. deChazeau. That is right. Mr. Feller. You have shown that in each of the products listed here the product was sold by the industry generally at less than the published base price. In some places the deviation was large, in some places it was relatively small. Dr. deChazeau. Yes, with the exception of cold-rolled strip, in which commodity strip is undoubtedly included, and with the ap- parent exception of tin plate, which is not a true exception because we have taken a 95-pound box rather than a 100-pound box. I should point out that tin plate is sold on the base box, which is defined in terms of a given number of sheets of given dimension. Therefore with changes in the weight you get differentials above or below the published price per 100-pound box. Acting Chairman King. There is no uniformity, then, in the size of all the tin plates. Dr. deChazeau. There is no uniformity in gage (weight per unit of area) and for that reason we took a single category, a 95-pound box after discussion of the matter with the officials of the United States Steel Corporation and Carnegie Illinois Steel Corporation. Acting Chairman King. As I understand your testimony with re- spect to the point that you are now discussing in reply to the question propounded by Mr. Feller, there were deviations from the posted price by the vendors of steel products above and below the posted price. Dr. deChazeau. The only average deviation above published price which we found in these 10 products is in cold-rolled strip, and in that product we know it to be a fact that, in some cases, com- modity strip was unfortunately included. Commodity strip takes a higher base price. That would affect the height of the average computed base price. Acting Chairman King. Those departures from the reported price were made by various reporting companies? Dr. deChazeau. That is right. Acting Chairman King. And their prices were not exactly uniform, not uniform? Dr. deChazeau. That is right. This, Senator, is the over-all average on all shipments priced on basing points between wliich there was no price differential. One couldn't make an over-all statement of this kind where a differential was involved; rather, one could only after corrections which have not been made here. These averages apply to shipments priced on basing points at which there was no price differential. The computed base price is derived from the delivered value less the freight from basing point to destination less the extras divided by tonnage shipped. One has to deduct the extras, of course, to get a figure comparable to published base price. Mr. Wooden. Does not the amount above base price and below base price reflect the range, so to speak, of the mill-net? Dr. deChazeau. Not directly, Mr. Wooden. Obviously with a range you would get variation in the mill-net. We have shown the mill-net less extras per ton. Mr. Feller. Is your question this: le this figure which we have just been discussing the equivalent of mill-net? OONCENTRATION OF ECONOMIC POWER 14137 Mr. Wooden. Does it reflect the range of mill-net above the base price and below? Dr. deChazeau. No. Mr. Wooden. What does it reflect in that regard? Dr. deChazeau. The computed base price will have no direct relation to the mill-net. To get at the computed base price one deducts from the delivered value the freight from the basing point, whereas to get at the mill-net one deducts from the delivered value the freight allowed or paid from the mill to the destination. They are two quite different figures. Mr. Wooden. If more freight is allowed than actually incurred, then the mill-net falls below the base price. Is that right? Dr. deChazeau. If more freight is allowed? Mr. Wooden. Than is actually paid. Dr. deChazeau. I'm sorry. That would depend upon whether or not there was a differential. Mr. Wooden. Yes. Dr. deChazeau. If there were no differential among basing points, then with freight allowed in excess of freight from basing point you would have a reduction -in the mill-net. Mr. Wooden. If the freight charged is less than the actual freight, then the mill-net is less than the base price. Dr. deChazeau. If I get your question now, you are suggesting that the freight allowed to the customer is less than the actual freight? Mr. Wooden. Yes. That decreases the mill-net by that much, doesn't it? Dr. deChazeau. If such a situation existed that would be true. Generally speaking, the freight allowed is the actual freight from mill to destination, since the freight allowed is in fact paid in that case by the customer to the railroad company. Mr. Wooden. I am talking about where the freight figured on the invoice is less than the freight from the basing point, then the mill-net is increased by that much. Dr. deChazeau. Oh, than the freight from the basing point. That depends upon whether there is a differential or not. Mr. Wooden. Assuming there is no differential. Dr. deChazeau. Assuming there is no differential, then to the ex- tent that the freight allowed from mill to destination is greater than freight from basing point, there is freight absorption. To the extent that it is less there is Mr. Wooden (interposing). I think we understand each other. We may be talking at cross-purposes by using slightly different language, but one is a converse of the other, and that is why I asked my question as to whether the range of mill-net was not reflected by the amount above base price that you speak of here and the arnbunt below. Dr. deChazeau. No ; because you are dealing with more than one phenomenon. For example, if you have a price cut at a given destina- tion, Mr. Wooden, it itself will affect the delivered value and will have nothing to do with the freight from basing point or the freight allowed to destination. Therefore, your mill-net will be reduced in that area when you have phantom freight as well as when you have freight absorption. Now those two are just two different things entirely. Mr. Wooden. But you do have phantom freight and freight absorp- tion even though the delivered price is identical, don't, you? 14138 CONCENTRATION OF ECONOMIC POWER Dr. deChazeau. Even though the delivered price is identical from v^arious points? Mr. Wooden. Yes. Dr. deChazeau. Quite right. Acting Chairman King. You use the word "differential." That word was employed frequently when we were discussing the situation in Birmingham. Do you use it in the same sense? Dr. deChazeau. In the same sense; that is, it is a published price at a given basing point which is other than that at the lowest basing point. Todaj, it would apply primarily to Gulf ports and Pacific ports, since most of the differentials have been eliminated. That isn't entirely true; there are still some differentials in certain products. I call attention especially to average freight absorption as a percent of delivered value, in this case adjusted for interrbasing-point price differentials. This percentage is, roughly, 1 percent or less for sheet and tin bars, cold-rolled strip, and tin plate. It is approximately 2 to 3 percent for all other products shown ; that is, it varies within that range. I have noted percentages on the adjusted basis. When sales are made into areas in which there is a price differential, from the point of view of the mill, the adjusted basis as contrasted with the unadjusted indicates whether the "freight absorption" is real or whether it is nominal (i .e., its effect on the mill net.). Already submitted for the record is an illustration of the method of adjustment presented by the Steel Corporation, which I refer to merely as an illustration. If, for example, we deal with Acting Chairman King (interposing). You had better identify it if it is in the record. * Dr. deChazeau. It is entitled "Explanation of Unadjusted and Adjusted Freight Absorption." ' I understand it is in the record. I wish to call your attention merely to the way in which the adjust- ment is made. If we assume, for example, that the actual freight paid on a shipment to destination — ^from Chicago, say, into Texas' — is $17.60 and that the freight from the nearest basing point, which is Houston, to this particular destination is $8.40, that would show on the unadjusted basis, a freight absorption of $9.20, that is, the "differ- ence between these two items. The basing-point price at Houston, however, is $49 whereas that at Chicago is $42, providing a differential of $7. Now, from the point of view of the mill, that freight absorption of $9.20 is a purely nominal matter. The actual adjusted freight absorption is that amount less the basing-point price differential, or $2.20 per ton. This is what is meant by the adjusted basis. I want to add that so long as one is dealing with a basing point at which there is no capacity and a price differential exists, or so long as the price differential is purely nominal (i. e., it does not measure a difference in cost), then the comparative advantage of various mills shipping into that area will be indicated correctly either by the adjusted figures or by the unadjusted figures. But from the point of view of a given mill, and particularly if you are relating freight absorption to delivered value, the adjusted figure is the real and the unadjusted is the nominal figure. Now, this summary, of course Mr. Feller (interposing). Have you concluded the discussion on freight absorption? 1 "Exhibit No. 1418." . CONCENTRATION OF ECONOMIC POWER 14139 Dr. deChazeau. I have concluded the explanation of the adjusted basis for freight absorption used in this summary. Air. Feller. Well, I just again wanted to summarize. . You have been explaining the results which have been obtained to show the importance of. freight absorption and the result which you have obtained is that it varies from product to product from about 1 per- cent of the delivered value to about 3 percent of the delivered value? Dr. deChazeau. That is right. Mr. Wooden. Doctor, what is the reason for comparing the per- centage of freight absorption to the delivered value? Dr. deChazeau. I consider that the significant basis for comparison because the delivered value represents what the buyer pays. Mr. Wooden. What is the reason for comparing the extras to the delivered value? Are they not expressed in terms of base price plus or minus? Dr. deChazeau. Yes. You can compare them in any way you like, but again my reason for comparing them to the delivered value is because that is the price which is paid. You could compare them to the mill net yield if you liked; you could compare them to the pub- lished price)^ although there are some difficulties in that; or you could compare them to delivered value. You can change the percentage depending on what basis you use. Mr. Wooden. Ordinarily your percentage would be higher figured on the mill net? Dr. deChazeau. It would be higher on the published base and it would be still higher on the mill net. That is right. This summary, of course, is an inadequate basis for the evaluation of the effects of the basing-point system under consideration. The figures in the table do provide an approximation to the order of magnitude of the items considered. As an over-all average, however, they may conceal important disparities among consuming regions and producing areas which are of crucial significance from certain points of view. It is to supply a basis for evaluation of these more detailed questions that the 18 tables on each product have been constructed. May I interpolate at this point that many of these tables are in a fundamental sense not final but working tables. By that I mean that they do not at the moment make a part of a finished memorandum on distribution from which final conclusions have been drawn and policy recommendations made. This work of evaluation in which tables may be derived from these data but not necessarily identical with the tables here used, is a function, undoubtedly, of a final report. Not only staff limitations but also considerations of fairness to the industry hp,ve dictated the procedure used here. Obviously, in summarizing these data, unless we present the basic material, the industry would have no way of checking up on the conclusions that we have drawn. The data presented in the 18 tables submitted on each product ' give the following information. (I propose merely just to characterize the kind of information.) The first two tables describe the basing- point structure, the changes in price and in number of basing points that took place in June 1938, and the location of plant capacity, according to the 1938 Iron and Steel Works Directory of the United States and Canada, with respect to such basing points. I "Exhibit No. 2197." ■ 124491— 41 ^pt 27 2 14140 CONCENTRATION OF ECONOMIC POWER The second group of tables (3 through 7, inclusive) is concerned primarily with the stability of geographic distribution of products and the representative character of the actual distribution analyzed in February 1939. The third group (tables 8 through 11 and table 13) analyzes in detail the shipments made to all areas receiving 2 percent or more of the total shipments in the period. Shipments from grouped plants in producing areas are analyzed in terms of the extent to which they supplied the receipts of consuming areas into which they shipped at the lowest average freight absorption for any producing area. In other words, the ability to reach a consuming area with a lower freight absorption per ton than any other producing area has been employed as a criterion of the so-called natural market of that pro- ducing area. Computed base prices on shipments of each producing area into each consuming area according to the basing point on which they were priced are also compared with the published base price in order to give a very rough measure of the extent to which the basing- point formula of pricing was observed. This measure was likewise applied to total shipments, irrespective of source, priced on each basing point. Finally, the extent to which each producing area sup- plied the requirements of its own immediate consuming district (iden- tical with the producing area in most cases), was analyzed. Four possible ways of delimiting the "natural" market of each producing area were analyzed in tables 12 and 14 through 16. The four measures applied to all sales of each producing area — shipped into all consuming districts in this case; not merely the most im- portant, but all consuming districts — were respectively: 1, ship- ments priced on the nearest basing point; 2, shipments into areas in which average freight absorption per ton was equal to or less than that on all shipments by that producing area priced on the nearest basingpoint; 3 is identical with 2 except that we have used as the cri- terion the average mill net On such shipments and finally, 4, ship- ments to areas in which the average freight paid or allowed from a given producing area was lower than that from all other producing areas. Tables 17 and 18 merely list all instances in which shipments re- ported as priced on a given basing point were shipped into areas which could not have been "governed" by the basing point reported (in terms of published freight schedules and basing-point prices). These tables list all out-of-line results for which there may be many possible explanations, some of which I have indicated on the sup- plement to those tables. All instances in which computed base prices were in excess of published base prices are likewise listed. To permit a ready comparison of results obtained for these four products, a table has been prepared which contrasts in parallel col- umns the data and computations from the data for each. This is the large table which you have before you. Acting Chairman King. That is the summary of analysis of Form B, distribution of selected steel products, February 1939? Dr. deChazeau. That is right, sir. Acting Chairman King. That is the document to which you are now referring? Dr. deChazeau. Yes, sir. Acting Chairman King. Has it been identified? Mr. Fellep ^' !:as been admitted. CONCENTRATION OF ECONOMIC POWER 14141 Dr. i>eChazeau. It is meant to be no more than an aid for the study of the more detailed tables and is entitled, as the Senator just noted, "Summary of Analysis of Form B Distribution of Selected Steel Products, February 1939." The comparisons are segregated in eight groups, identified A to H, inclusive, in conformity with the classification just discussed. To discuss the preliminary conclusions reached, together with supporting evidence and limitations would be an imposition on the courtesy of the members of tliis committee, since it would take a very extended period of time. To indicate no conclusions would be unfair to ourselves and to others who are interested in this analysis. Subject, therefore, to limitations with the detail of which I shall not burden the committee at this time, I will venture nine generalizations. 1. With the change in the basing-point structure in June 1938, it may be said that, for these four products, basing points, generally speaking, are well adapted to the location of capacity in the industry, especially so for shapes and plates, less so for sheets and strips. Lo- cated at base or within 25 miles of base is capacity varjdng from 58 percent for sheets to 85 percent for shapes; within 50 miles, from 78 percent for sheets to 96 percent for shapes. 2. The geographical distribution of the products in February 1939, may be considered fairly typical for the industry as indicated by similar distribution during the calendar years 1936, 1937, and 1938. Total shipments of reporting plants in that month varied in general con- formity with their relative capacities for the product in question. 3. Out of the 64 consuming districts, those receiving 2 percent or more of total shipments varied from 12 for strip to 18 for plates but accounted for from 66 percent of all shipments in the case of shapes to 89 percent in strip. This shows not only a concentration of ship- ments but justified the use of such selected areas for more detailed analysis. 4. Producing areas for which shipments to selected consuming dis- tricts averaged the lowest freight absorption per ton accounted for a substantial proportion of the total receipts of those consuming dis- tricts, 62 and 50 percent for shapes and plates, but Only 34 and 41 percent for sheets and strips at an adjusted freight absorption varying from 14 cents per ton for plates to a "phantom" freight of 92 cents for strip. "Phantom" freight appears when the freight from basing point to destination is greater than the freight allowed from mill to destination. The percentage of the market thus served is probably understated, because of the large size of consuming districts with reference to the location of mills and the small volume of shipments by some of the producing areas showing lowest freight absorption. What I have in mind is this : A given plant or plant group, over a part of the consuming area may have an apparent advantage in freight absorption which would disappear if it tried to serve the entire area. Therefore, the 62 to 34 percent estimated percentage participation of "governing" mills in such markets is on the low side. 5. A comparison of computed base prices with published base prices indicates that, notwithstanding possible error in the averages, the basing-point formula of pricing was honored more in the breach than in the observance during the,period. (a) Price cutting, thus revealed, appeared to be more prevalent and more drastic in sheets and strips than in plates and shapes, perhaps 14142 CONCENTRATION OF ECONOMIC POWER partly because of uncompleted contracts for the former made when prices were slashed for a short time during the fall of^938. Acting Chairman King. When yoii say "price cutting" you mean departures from the posted prices? Dr. deChazeau. Departures from the posted prices; yes, sir. Mr. Wooden. That completion of unfinished orders, you wouldn't call thatvprice cutting, would you? That would be simply carrying out of contracts made at another level of prices? Dr. deChazeau. That is quite right. That is why I inserted the qualification. To the extent that there were shipments on contracts wJiich overlapped the previous quarter and which were made at a price quoted during the price cut, such shipments would tend to reduce the computed base price during the sample period. (b) Especially noteworthy for shapes and plates was a tendency for the home plants in important producing areas to be responsible for the lowest computed base'prices in their own areas, even when they did not cut prices drastically in each other's areas. Again I wish to state that by "cut prices" I mean computed base prices lower than published base price. Examples are Chicago, Pittsburgh, eastern rennsylvania for shapes. fabrication-in-transit rates and price cutting Dr. deChazeau. The explanation of this phenomenon, I believe is probably to be found in part in- the fabrication-in-transit rate structure applicable to these structural materials. Thefee so-called f-i-t rates on structural products permit steel to move out of line, from the steel plant to the fabricator's shop and, as fabricated material, to final destination, at the through rate from the steel mill to final destination, plus a slight charge for stop-over which varies among freight areas and railroads but is about 3 cents per hundredweight. That is on the order of 60 cents per net ton. Acting Chairman King. If yoii will pardon me for interrupting Dr. deChazeua. Yes, sir. Acting Chairman King. The rise and fall in our business barometer, if I may use that expression, is not uniform. That is to say, there may be great activity in certain manufacturing lines and domestic undertakings in certain sections of the United States, whereas in other sections of the United States there may be but little activity In other words, business is spotted. Now with those variations resulting from causes which it isn't necessary to inquire about now, it would seem to me— and I am asking your opinion — that that would necessitate or, at any rate, result in considerable variations in prices, whether posted or not — variations much to the disadvantage of the company, sometimes to its advantage, much to the advantage of the consumer, and at other times of dis- advantage to the consumer. In other words, you can't apply a rule, can you, or a formula which determines exactly the price of a com- modity at all times in all parts of the United States? Dr. deChazeau. I should agree with you, Senator. Perhaps you misunderstand the implication of the presentation here. Acting Chairman King. Oh, no; perhaps what I inquired about was not germane to your presentation, which I am listening to with CONCENTRATION OF ECONOMIC POWER 14143 a good deal of interest. But as a sort of practical matter it occurred to me to ask that question now. Dr. deChazeau. It did not surprise me Acting Chairman King. I beg your pardon. Dr. deChazeau. It did not surpise me to find this variation in computed base prices with relation tq published base prices. It was somewhat surprising for me, and it might be for others, to find that the computed base price for a mill, say, in Chicago, on sales in its own (i. e., Chicago) area was lower than that for any other producing area selling in the Chicago area. Again, for example in eastern Pennsyl- vania, the computed base price for shipments into that area was lowest for the home'plants, the plants located in that area and quoting on their nearest basing point. The computed base price was lower for those home plants quoting on their nearest basing point than for their quotations on any other base and it was also lower than those for any other plants shipping into the Eastern Pennsylvania market. It is that phenomenon which I think requires some additional ex- planation. The fabrication-in-transit rate structure is a possible, or partial source of price cutting in one's own immediate market. In shapes, for example, it was particularly interesting that Chicago was responsible for the low quotation in the Chicago area, Pittsburgh was second lowest in the Pittsburgh area. North Ohio being lowest. But these two latter areas are, as you can see, contiguous. Despite that fact, on all shipments made by Pittsburgh into Chicago, the computed base price was considerably higher than that of other mills in the market, and vice versa for Chicago shipments into Pitts- burgh. It is that phenomenon which calls for some explanation. Mr. Wooden. There were shipments by Chicago mills into Pitts- burgh of the same products and shipments by Pittsburgh mills of the same products into Chicago? Dr. deChazeau. Yes, sir. Mr. Wooden. To what extent did that occur? Dr. deChazeau. Of course it varies with products. It was not very important, but the interesting thing to me was that the computed base price in those instances was not lower than the computed base price on shipments from other areas or even on shipments from the home producing area. Incoming waybills (i. e., waybills on the shipment from mill to fabricating plant) may be accumulated by the fabricating plant and used on outgoing shipments of equal tonnage which permit the greatest saving to the fabricator. So long as foreign mills are willing to quote him, therefore, it is profitable for the fabricator to purchase his steel from the foreign rather than from the home mill. For example, through the application of incoming way-bills on shipments to par- ticular areas, the fabricator may save up to five or six dollars a ton. Obviously the saving depends entirely on the destination, on the freight rate structure, and on the source of supply; but the advantage (for purposes of f-i-t) in buying from a contiguous mill is very small. The price to the fabricator at his plant is the same from both mills. But if he is at Neville Island, say (within the switching limits of Pitts- burgh), and he bm^s from a Pittsburgh plant, there is no advantage in f-i-t. The maximum difference between the through rate from the Pittsburgh mill to destination *of the fabricated material and the sum 14144 CONCENTRATION OF ECONOMIC POWER of the two local rates is not more than a few cents. However, if he can get his steel from Chicago in shipments to certain destinations the difference will be substantial and effects a reduction in the cost of steel to him at ultimate destination. The saving varies up to about five or six dollars a ton. I don't assume that is the average; the average is likely to be considerably less. Thus, if the home mill is to retain its business, it must cut the price to compensate the fabri- cator for foregoing his f-i-t privilege. This explanation is consistent with the small proportion of the total receipts of the home consuming district supplied by the local plants in plates and shapes (roughly 49 percent for each) as contrasted with the high proportion supplied in sheets and strip (82 and 78 percent). On the latter there are no fabrication-in-transit rates. 6. Using shipments priced on the nearest basing point as a criterion of natural market, then for strips, sheets, and plates slightly more than 50 percent of receipts in those markets were supplied by the "governing" producing area. Over two-thirds of this market was supplied by "governing" producing areas in the case of shapes. The advantage in mill-net yield for producing areas on sales within this market as contrasted with outside sales averaged $1.57 per ton for strip and around $2.00 for the other three products. The advantage in average freight absorption on shipments to the former areas was sub- stantially higher than that in mill-nets for every product. This fact indicates relatively greater price cutting in the home market by home miUs than in outside markets. 7. Using average freight absorption on shipments priced on the nearest basing point by each producing area as a criterion of its market, then roughly 27 percent of shipments of shapes and plates by producing areas were made into their markets so defined; 34 percent of sheet and only 14 percent of strip shipments. But it is interesting to observe that many of the most important producing areas are excluded en- tirely from their home consuming areas on such a criterion. That is, freight absorption on shipments by such producing areas into their home consuming areas W8s greater than the average on all sales. One reason for that is, of course, shipping across the basing point within one's own area. If the area is large, one may expect a fairly high proportion of such sales. 8. Using average mill-nets received on sales priced on the nearest basing point as a criterion, the percentage of total shipments by pro- ducing areas shipped into their markets, so defined, is increased sub- stantially for all products except sheets. That is, for shapes it be- comes 33 percent, plates 49 percent, sheets 36 percent, and strip 34 percent. Average advantage in mill-net to producing areas selling within rather than outside this market ranges from roughly $2.50 for strip to $3.66 for sheets. 9. Using the lowest average freight paid or allowed from steel plant to destination as the criterion of the natural market, producing areas sold 58 percent of their total shipments of shapes into such markets, 67 percent of their plates, 43 percent of their sheets, and 44 percent of their strip. This measure of market area conforms most closely, although very crudely, to that defined in terms of an f. o. b. mill price, if such mill prices were equal for all mills. _ It is interesting to note that if all shipments received by consuming ^stri(^s in each^ such market, irrespective of source, were in fact sup- CONCENTRATION OF ECONOMIC POWER 14145 plied by the governing producing area (i. e., that producing area closest freight-wise), some of the most important producing areas could not have confined themselves to that market without dras- tically curtailing, their total shipments. For example, such markets would have provided an outlet in shapes for only 23 percent of ship- ments made by Buffalo; 41 percent of those by Colorado; 62 percent for Pittsburgh-North Ohio River Plants; 94 percent for Chicago. In plates, a larger producing area had to be employed (e. g., Pittsburgh, Youngstown, North Ohio River plants were grouped). For the group, the percentage was 61 percent; for Birmingham 63 percent. Producing areas not mentioned were areas for which the total require- ments of consuming districts "governed" were equal to or greater than total shipments actually made by such producing areas. In sheets, Pittsburgh- Youngstown-North Ohio River plants could have shipped only 14 percent of their actual shipments; Middletown- Newport- Ashland, 77 percent; Chicago, 79 percent; Buffalo, 85 percent. In strip, Pittsburgh- Youngstown-North Ohio River, 30 percent; St. Louis, 68 percent; Chicago, 82 percent. In presenting these percentages I emphasize that the ability or the inability of mills in a given producing area to market their output in areas most cheaply reached in terms of freight costs constitutes, by itself, an argument neither for nor against a basing point system of pricing or any other pricing system. What I have presented here, within the limits of the type of data available, is a market fact. As such, it must be reckoned with. Given the actual location of mills with respect to areas of important consumption, some mills and groups of mills must seek business farther afield than lowest trans- portation costs permit. This situation may be consistent with maxi- mum efficiency and lowest over-all cost, or it may represent a funda- mental maladjustment of capacity. The judgment must rest on other evidence, and that is, as I see it, a problem for the Federal Trade Commission hearings. Mr. Wooden. Do I understand. Dr. deChazeau, that you think your presentation on the facts outlined by you does not tend either to establish or to disestablish the degirability of the so-called basing point system? (Mr. O'Connell assumed the Chair.) Dr. deChazeau. That is my statement. I have attempted to give in terms of relative magnitudes some answer to questions with regard to freight absorption, to mill nets and to price cutting. I have indi- cated the extent to which producing areas do or may supply — and still maintain their shipments — the requirements of certain areas or certain markets defined in different ways. I do not say, and I certainly am not to be understood to imply, that these data are irrelevant to the issue. I consider them very vital to the question. My contention is that they constitute market facts, and before reaching a final judgment as to the economic or social desirability of the basing point system, other considerations must be taken into account. Mr. Wooden. Do you mean that this freight absorption and phantorn freight, so-called, are market facts just like the basing-point system itself may be a market fact? Dr. deChazeau. They are facts in the actual market; yes, sir. 14146 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. And assuming the existence and continuance of the basing point system, these market facts that you referred to should be taken into account? Dr. deChazeau. Most certainly. Mr. Wooden. Would you say that the amount of freight absorbed represents the amount that the shipper is willing to take less than the base price? Dr. deChazeau. Under the conditions which exist at that particu- lar moment for that pai"ticular shipment. Mr. Wooden. That's right; that is what I mean. Dr. deChazeau. Yes, quite right; otherwise, he would not do it. Mr. Wooden. And on the other hand, would you also say Dr. deChazeau (interposing). Pardon me, but may I make just one qualification to that? Business is not usually conducted one little job at a time. One has customers and those customers take a variety of products. For that reason, a mill might at a given time take a loss on a particular shipment which it would not take if that were a new customer, but being a good customer and a continuing customer, certain losses are taken in that way. Mr. Wooden. Would you also say that the amount of phantom freight, so-called, would represent how much more than the base price the shipper can get in a particular Dr. deChazeau (interposing). 'Given a particular pricing situation, it does not represent how much more he can get because it does not determine his mill net. It represents the extent to which the actual transportation costs are lower than the transportation costs from the basing point to destination. Mr. Wooden. He gets an increase Dr. deChazeau (interposing). My reason for saying that — may I add, if you will pardon me? — is-,that, as I pointed out before, what he gets (his mill net), is primarily determined by the delivered price if there is price cutting. Now, if you ask your question on the assumption that the basing-point formula is always followed by all mUls, I could give you a definite answer, and it would be "Yes." Mr. Wooden. Well, assume that -it is followed in some particular case, the answer would be "Yes"? Dr. deChazeau. My answer would be "Yes." Mr. Wooden. I see. If freight absorption, then, represents how much less than the base price the shipper is willing to take in his mill net, and the phantom freight, so-called, represents how much more than the base price, which, in other cases, he can get, why isn't the logical thing to do to figure the percentage on both "those items against the base price rather than against the delivered price? Dr. deChazeau. It depends entirely on what you want to do. In the first place, I should say that you have set up a situation which is significant only so long as the basing, point formula is in fact followed. The result of our analysis is, that it is honored in the breach. I should say, for that reason, that that sort of computation would be of academic interest only. Mr. Wooden. Well, every system is departed from at times, I take It? Dr. deChazeau. I beg you pardon? CONCENTRATION OF ECONOMIC POWEIl 14147 Mr. Wooden. Are we considering a system as a system' or the extent and nature of departures from it? Dr. deChazeau. We were concerned not with the system as a theoretical system, but with the system as an operating system. Mr. Wooden. As for the month of February, 1939? Dr. deChazeau. That is right. Of course, you reahze yourself that our first objective was to have not a single month, on which I recognize limitations, but a month in a quarter of very high produc- tion in the industry, prior to the basing-point change, namely, May, 1937, and a month during a period in wliich there was very low utiliza- tion, and therefore possibly much greater price-cutting, namely. May, 1938. It was only the large amount of work involved that Mr. Wooden (interposing). I may have overlooked it in your statement, but I still do not have any idea of what percentage of all shipments made during February, 1939, is represented by your tabulations. Dr. deChazeau. You mean made by all mills? Mr. Wooden. Made even by the mills that are excluded in your survey. What percentage of all shipments during that month? Mr. Feller. All shipments of all steel products? Mr. Wooden. Yes; and what percentage of all shipments for these particular products? Dr. deChazeau. Well, that would have to be answered for each product separately. In tables 4 and 4-A for each product,' you will find figures wliich provide an answer to your question. For example, I am looking at tables 4 for shapes. The total toimage shipped (i. e., analyzed by us), which represents, with the exception of f. o. b. mill sales, exports, shipments to plants of the same or affiliated com- panies (which are often merely changes in inventories), and shipments to jobbers' warehouses, all of the shipments distributed by the sample group of companies, was 79,921 tons, as contrasted with aggregate shipments of 144,184 tons. Mr. Wooden. And do those represent shipments into all territories or shipments only into these districts that you have outlined? Dr. deChazeau. The 144,184 tons is the total shipment of heavy shapes by all reporting plants to any place in the world. Mr. Wooden. And your 79,000 is into these districts only, is that right? Mr. Feller. No; I think there may be some misunderstanding here. Mr. Wooden. Well, I just want to clear it up. Mr. Feller. The districts include the entire continental United States. Those colored districts on that chart are merely those districts which are smaller than a State. All other points of the United States were included within a State. Now the reason for the difference between the 79,000 tons, which is the amount of shipments included in this analysis, and the 140,000 tons, which was .the total shipment, was this, that there was excluded from this analysis exports, f. o. b. sales, their f. o. b. mill sales, of which there may be some, and shipments to jobbers' warehouses. Now, all those types of sales, like exports, shipments to jobbers' warehouses, are sales which are not made on any bosing Dr. deChazeau (interposmg). T think I can give you that. 1 Appendix, pp. 14c(49, 14365, 14380, 14406, 14421-M423. 14148 CONCENTRATION OF ECONOMIC POWER Mr. Feller. They are out of the basing-pomt system. There- fore, in shapes, all those Dr. deChazeau (interposing). No; that isn't entirely so. I give you actual totals for shapes in table 4-A.^ Our domestic shipments to consuming districts which were analyzed, is 79,921, about 80,000. F. o. b. mill sales were 3,702. Clearly, those may be distributed but they are sold f. o. b. mills. Shipments to plants or warehouses of the same or affiliated companies are 49,346. That is the largest item. Shipments to jobbers' warehouses are 5,030 — giving total domestic shipments of 137,999, plus exports of 6,185, which gives you your total figure. Now, you understand, I am sure, that in excluding shipments to plants or warehouses of the same or affiliated companies, we were primarily interested in making our results meaningful. Those shipments, if included, would so increase our tonnage — often they are mere inventory transfers — that they would be meaningless from a price basis. Therefore our computations as to computed base price would be completely thrown out, and utterly valueless. The same considerations or similar considerations led us to exclude sliipments to jobbers' warehouses, since often there are special jobber discounts which, if excluded, would again make our figures less significant when reduced to a tonnage basis. Mr. Wooden. Do you understand that shipments to jobbers' warehouses are not figured on a basing point? Dr. deChazeau. They are figured on a basing point so far as I know, but in addition to the regular extras, there are special jobbers' discounts. The jobber item is a relatively small item in all these products. It would be especially small in shapes, as contrasted with other products. I believe that the real answer to the point which you have raised, Mr. Wooden, is provided by comparison 6f total ship- ments by area on our Form A analysis for these products, in which many of these items were included, with our Form B distri- bution. Making that comparison, we find that we can use the February '39 figures as quite typical; that is, with very few exceptions the percentage distribution in February '39 falls witnin the range of the distribution over the 3 years on the Form A sample. Since there is great stability in the relative distribution on Form A, we can conclude that the February distribution is not atypical. Mr. Wooden. What inferences would you draw from the fact that on some shipments there are certain amounts of so-called phantom freight and on other shipments there are certain amounts of so-called freight absorption, by the same shipper? Dr. deChazeau. What inference would I draw? Mr. Wooden. Yes. In other words, what is the significance of there being phantom freight consisting of a difference above the base price and freight absorption consisting of a difference below the base price? What is the significance of it? Dr. deChazeau. For one thing, it represents the direction in which the shipment moves with relation to the location of the mill and the basing point. I take it that isn't the answer that you want. What you want me to discuss is what conditions lead a mill to make a vari- able price on its products. 2 Appendix, p. 14421. CONCENTRATION OF ECONOMIC POWER 14149 Mr. Wooden. You mean a variable mill-net. Dr. deChazeau. A variable mill-net. Mr. Wooden. Yes; that is what I meant to ask. Dr. deChazeau. In a general way I think I can answer that without getting too far into the subject matter, as I understand it, of your own hearing; and I have tried to avoid that. In the production of steel, unlike the production of certain agricultural products, one produces to order, and, therefore, the additional cost involved for an additional shipment of a particular specification imder a given set of conditions will differ, depending upon the level of output at that time. Hence, the variations in the mill-net with relation to that variable cost may make profitable a given shipment — by profitable, I don't mean a return on total investment, but a, return in excess of the variable cost — which would not be profitable for the entire business. I have already indicated another source of such variation in miU-net ; namely , that business is not carried on from moment to moment but from year to year and over a period of years. Therefore, one meets, the require- ments of a given customer for a particular product, even at a disad- vantage to oneself, rather than to incur ill will and lose business. Mr. Wooden. Assuming that the basing point system is in opera- tion, wouldn't you expect to find these phenomena of so-called phan- tom freight and so-called freight absorption? Dr. deChazeau. Now you are asking a question whicli I can answer very briefly. To the extent that the basing-point system exists, some "phantom" freight, (that is variation of the mill-net) is a necessary condition of the operation of that system as a formula. Mr. Wooden. Both freight absorption and phantom freight. Dr. deChazeau. That is right. Mill-net will vary and one may have freight absorption. Mr. Wooden. Was the participation of the Federal Trade Com- mission in this study anything more than cooperation with regard to the form of the questionnaires to be sent out? Dr. deChazeau. Well, in that I hope I have not given the Federal Trade Conunission too little credit. The whole project was discussed- with the Federal Trade Commission. I may say that the Federal Trade Commission was primarily interested in the Form A distribu- tion and the Department of Justice was primarily interested in the Form B distribution. Mr. Wooden. Did the Commission do anything more than coop- erate with the preparation of forms of the questionnaire? Dr. deChazeau. That is right. The analysis has been entirely by the Department, which has handled all phases. Acting Chairman O'Connell. Are there other questions? Thank you very much. Dr. deChazeau. I think your presentation has been very, very interesting. The committee will recess untU 2 o'clock. (Whereupon, at 12:15 p. m., the committee recessed until 2 p. m. of the same day.) after recess The committee resumed at 2:05 p. m. on the expiration of the recess. Acting Chairman McConnell. Dr. Yntema, are you ready? The conmiittee will please be in order. 14150 CONCENTPvATTON OF ECONOIMIC TOWER Mr. Feller. Mr. Chairman, may I just say that the program is for Dr. Yntema to make a brief statement with relation to Dr. Ezekiel's testimony of the other day, and Dr. Ezekiel may desire to reply briefly to that. Subsequent to that, I shall turn the counsel's chair over to Mr. Ballinger, who shall proceed with the basing point inquiry. Acting Chairman O'Connell. Will you proceed, please? TESTIMONY BY DR. THEODORE OTTE YNTEMA, UNIVERSITY OF CHICAGO, CHICAGO, ILL.— Resumed RELATIONSHIP BETWEEN STEEL PRICES AND PRODUCTION AND GENERAL INDUSTRIAL ACTIVITY Dr. Yntema. In his testimony before this committee on January 24, Dr. Ezekiel undertook to evaluate the effects of a reduction in steel prices upon the general level of business activity and also upon the cost of producing steel. He then attempted to show the possi- bilities of concerted price reductions by many industries. In an effort to estimate the effect of a reduction in the price of steel upon general industrial activity, Dr. Ezekiel argued that any increase in the production of steel resulting from such price reduc- tion must be paralleled by a general rise in business activity. To make liis point, he presented this chart, "Exhibit No. 2183,"^ showing that there has in the past been a very close relation between fluctuations in steel production, industrial steel sliipments, and iii- dus trial production excluding iron and steel. In fact he said that this chart "shows how absurd it is to assume that steel output could change without a corresponding change in the level of industrial activities as a whole." From this, if I understood liim correctly, he inferred that the effect of steel prices on steel consumption would spread out to cause a corresponding increase in other industrial ac- tivity, and argued that this general increase in business activity would in turn further increase the demand for steel. I submit that this is erroneous reasoning. In homely but adequate terms I believe it may be described as a case of the tail wagging the dog. Now there is no question at all that in the past steel production has been very closely related to other industrial activity. That's the relation exhibited in this chart. There have, however, been from year to year small deviations in this average relationship, and in one or two years large deviations. The general relation shown in this chart affords no basis whatsoever for assuming that an increase in domestic steel shipments causes an increase in general industrial activity. Wlien questioned specifically on the point, Dr. Ezekiel recognized that either might be cause and either might be effect. In liis testimony, if I understood him, I think he did make use of an assumed causal relationship of domestic steel shipments upon other business activity. I submit, however, that there is good reason ^o suppose that the dog can wag the tail, and that general business activity does determine the amount of steel produced. Furthermore, the effects of changes in the price of steel are reflected in small deviations of steel production ' Included in Hearings, Part 20. CONCENTRATION OF ECONOMIC P0^^ EU 14151 from the levels which would normally be associated with given levels of general business activity. Dr. Ezekiel has failed completely to establish the magnitude of the secondary effects on general business activity, due to reductions in the price of steel. By his confusion of cause and effect he has reached the implausible inference that sales would increase so rapidly that the gross income of steel producers would rise as the price of steel fell or was reduced. There would, of course, be some secondary effects on general business activity resulting from a reduction in the price of steel. The magni- tude 01 these, however, cannot be estimated from the evidence which Dr. Ezekiel has introduced, and I repeat that I should still be grateful to Dr. Ezekiel or to anyone else who would show me how we might make a reasonable approximation of these secondary effects. We know, however, that in comparison with the direct effect of a reduction in the price of steel on steel production, which is itself not large, that the secondary effects must be still smaller because the steel industry proper constitutes only a small fraction of all business. The total value of its products is only about 4 or 5 percent of the total value of all goods and services produced in boom times and considerably less than that in time of depression. To establish his second point, that reductions in the price of steel would decrease the cost of producing steel, Dr. Ezekiel attempted to demonstrate that a reduction in the price of steel would cause scrap prices to go down. Observing that in the past scrap prices and steel prices tended to move in the same direction, Dr. Ezekiel concluded therefrom that cheaper steel would mean probably less expensive scrap. Had he considered the matter more carefully I am inclined to think that he would have recognized his mistake. The significant relationship is that between steel production and scrap prices. Wlien steel production has been high, scrap prices have been high; when steel production has been low, scrap prices have been low. As steel operations rise the demand for scrap rises, but without a corresponding increase in supply the price naturally goes up. Therefore, insofar as a reduction in the price of steel would cause steel operations to rise, it would also cause the price of scrap to rise. Tliis would increase, not reduce, the costs of producing steel. For the short-run period in which we are interested the effects of a reduction in steel prices upon the prices of other commodities in the economic system and ultimately, then, upon the prices of goods and services which the steel industry buys are too small to affect substan- tially the results of our cost analysis. In fact, they may not even be sufficient to offset the increased cost of scrap. I use, as Dr. Ezekiel has, the words "may" and "might" in this connection, because neither he nor I can predict with accuracy what would happen. Dr. Ezekiel has, I fear, created a fictitious dilemma by reading into our statements ideas which are not there. While it is true that in the short run the steel industry would sustain a reduction in profits or an increase in losses by reducing its prices and would obtain an increase in profits and a reduction of losses by increasing its prices, within moderate limits, we did not suggest tnat all industries could make more money by producing less product and selling it at a higher price. If this dilemma has existed in the mind of anyone 14152 CONCENTRATION OF ECONOMIC POWER besides Dr. Ezekiel, because of preconceptions in approaching the problf-m or because of our mifortunate terminology, I hope that this statement may dissipate the misapprehension which has existed. Dr. Ezekiel fails entirely to recogniz"fe that individual companies in the steel industry are not able to charge any price which they choose, but are limited by competitive forces in the market. Without recognition of this fact, the low profits in the industry and the evidence submitted in our studies do indeed constitute a real dilemma. With recognition of the facts, the dilemma evaporates. Finally, Dr. Ezekiel points out that we did not consider in the documents submitted to the committee, the effects of general reduc- tions in the prices of a large range of commodities. As I said in my first statement to the committee, we undertook seriously to study this problem but we were unable to reach conclusions of sufficient scientific value to warrant a presentation of them before this com- mittee. I might say that we abandoned our plans to submit a statement on this subject only after consultation with economists whom we considered to be" among those best qualified to deal ade- quately with the subject. At the conclusion of his statement. Dr. Ezekiel presented his plan for concerted action to reduce prices in a large number of industries. I have already said that I do not feel competent, and I have not been able to find anyone else whom I regard as competent, to evaluate with reasonable certainty the economic consequences of such a program. That, of course, is a personal opinion and I offer it as such. I doubt that we possess, much less would use the collective wisdom necessary to decide when, where, -and how to reduce prices. The com- plexities of the administrative problems which would be involved in such a plan are almost beyond comprehension. Nor is it realistic to assume that a great number of business enterprises would voluntarily engage upon a concerted program of price reduction. Even though such a plan might have desirable economic effects, if it would work, I am inclined to think that it is not only administratively unworklable, but fraught with grave social and political consequences, to our demo- cratic way of life. Before I leave the stand, I want to express my thanks for the court- esy whicK has been extended to me by Dr. Kreps and by the commit- tee. (Senator King assumed the Chair.) Acting Chairman King. Do I imderstand your statement which you made just a moment ago, that you are rather apprehensive, and I know I am, of trying to repeal the law of supply and demanti, and to set up a sort of super-government in industry to fix prices and to regu- late jDroduction? I don't want a totalitarian state, I don't want to superimpose upon industry and upon the American people any form of Federal control which would interfere with private initiative and with those fine qualities which have made this the greatest country in the world. Proceed. Mr. Feller. I should like to ask you just one question. Assuming that it were found that in a number of important industries, there were artificial restraints on competition which, while not entirely eliminat- ing competition, had the effect of diminishing its area, and thereby sustaining the price above the level that it would reach in the event CONCENTRATION OF ECONOMIC POWER 14153 that competition could be restored to the fullest extent consistent with the structure of the industry, do you think that the removal by action under the antitrust laws, simultaneous removal, of such artificial restraint, would have the effect of increasing production through a decrease in price? Dr. Yntema. Well, Mr. Feller, that is a very general question and a very large question. I am no lawyer; I have not had experience with the antitrust laws. I should, after some study, be willing to comment on some particular situation, but I am very hesitant to generalize on subjects as diverse as those to which you refer, Mr. Feller. I should just like to make the purport of my question clear, although perhaps your answer is sufficient. Dr. Ezekiel advo- 3ated the plan which is chiefly associated with the name of Dr. Owen W. Sprague, of concerted action by industries to reduce prices. You are apprehensive, as a good many people are, of the effects that that sort of concert might have on the democratic system. Now, assuming that the same effect could be achieved, not through this concerted action by industry, but through enforcement of the anti- trust laws, you would have presented squarely the problem which both Dr. Ezekiel and Dr. Sprague raise, namely, whether simultaneous re- duction in price, assuming it could be brought about by the enforce- ment of the antitrust laws, would have such an effect on volume that it would result in greater profits for industry. Dr. Yntema. I don't believe economists are able to give a con- clusive answer to that question. Mr. Feller. Again, my question was somewliat narrowing. I take it there are two parts to the problem. The first part is, can we bring about simultaneous reductions in price? The second is, assun- ing that you did have a simultaneous reduction in price, would it have this important economic effect that both Dr. Ezekiel and Dr. Sprague claim for it? Dr. Yntema. That's correct; there are these two aspects to the problem. Mr. Feller. It seemed to me that you had answered by casting doubt on the feasibility of the first part. Dr. Yntema. No; I don't think that you got the full import of the statement I made earlier and the statement I have just made. I said that we recognized that problem and that we have attempted seriously to study it. There is in this problem a sufficient area of difference of opinion so that we at least hi.av6 not been able to reach conclusions which we think can be established with satisfactory validity. As a matter of fact, if you want my personal opinion I am quite willing to offer it. I don't think that we can eliminate busi- ness cycles through flexibility in prices. Now there are situations, I • have no doubt, in which we should improve our economic situation through price reductions. I don't think anyone would deny that. Finally, may I say that I greatly appreciate the criticisms and the suggestions we have received, and particularly the opportunity for open discussion of these studies which has been afforded us by the committee. Acting Chairman King. I think the committee is indebted to you for a very clear exposition of the views that you entertain and the views of the organization for whom you have testified. Mr. Feller, Dr. Ezekiel would like to make a brief comment. 14154 (lONCENTT'vATTON OF ECONOMIC POWER TESTIMONY OF DR. MORDECAI EZEKIEL, ECONOMIC ADVISER TO THE SECRETARY, DEPARTMENT OF AGRICULTURE, WASH- INGTON, D. C— Resumed Dr. EzEKiEL. If the committee is willing, I woiild like to refer just very briefly to two or three of the points Dr. Yntema has just discussed. First, in presenting the statistical evidence which I did in the chart that Dr. Yntema has already called your attention to, "Exhibit No. 2183," I made no attempt to measure bow much mcrease in general industrial production could be expected to follow a given increase in steel production. I merely pointed out that if a reduction in steel prices did materially increase the output of steel, it was inconceivable that that would take place in view of the past experience without some corresponding increase in activity through other associated industries, and that if you did have the increase in activity in other associated industries, that would produce a secondary increase in the demand for steel in addition to that for which Dr. Yntema made measurement. I made no attempt to measure how much that in- crease might be, but simply pointed out that the failure to allow for it left one factor which the analysis presented by Dr. Yntema had failed to take into account. Likewise, in referring to the relation of steel prices to scrap prices, Dr. Yntema is correct in his criticism in one sense. I used the phrase "steel prices" in my testimony when I should have used the phrase "products of the iron and steel industry." I assumed that a reduction in steel price and a reduction in pig-iron price would occm' as part of a general reduction in prices of the products of the industry, both semifinished and finished, and that a reduction in pig-iron price in general was associated with a reduction in scrap prices. Dr. Yntema questioned some of my conclusions at that point, but neither he nor I have made any effort to introduce testimony as to how far changes in steel or in iron prices are associated with scrap prices; without such material we are both rather conjecturing as to the exact relationship. Acting Chairman King. In the realm of speculation or conjecture? Dr. EzEKiEL. Conjecture based on examination of data in both cases, but without an attempt, I believe, to measure the exact nature of the relationship. As far as Dr. Yntema's comments on the general proposal for concerted expansion in production, I take it that he is criticizing more the possibility of bringing such operations intb action rather than the economist's view as to whether, if taken, they would work or not. I believe he as an economist would agree that assum- ing the administrativ ^^ problems could be solved, a general increase in production and increase in employment secured through reductions in prices, if properly brought about, would aid very greatly in solving the problem of unemployment. He, several times, has referred to the possibility of eliminating business cycles; My testimony was directed on that point not so much to business cycles but to the fact that we have had heavy un- employment ranging around a quarter of the entire city potential working population, over most of the last decade, and that continuous heavy unemployment is a chronic problem far beyqnd business cycles, so-called. The price policy of city industry, where organized in large CONCENTRATION OF ECONOMIC POWER 14155 units, is believed by most economists who have studied that problem to have a great deal to do with the problem of continuing heavy un- employment. Acting Chairman King. Thank you very much, Doctor. Dr. EzEKiEL. Might I make one other comment, sir? Acting Chairman King. Certainly. Dr. EzEKiEL. As a professional student of price statistics and pro- duction and price behavior, I would like to express a word of appre- ciation both to Dr, Yntema and to the Steel Corporation for the material they have made available in these studies. So far as I am aware, it is the most thorough study' ever made of the facts pertaining to industrial behavior in a single great industry and will lead, I believe, to a great deal of new information and new light on these problems of industrial price behavior. Acting Chairman King. May I ask one question. Doctor? Do you not think that economists, as well, as businessmen and all American citizens, in their formulation of plans for development and for industry and for employment, ought to take into account the fact, or recognize the fact, that we have a dual form of government? We are a democ- racy; we are not in Germany; we are not in Russia; we are, as I have stated, a dual form of government, and there are limitations upon the power of the Federal Government. The Federal Government may not superimpose its power in violation of the written Constitution and of the rights which belong under our written Constitution to individuals as well as to States. Dr. EzEKiEL. Yes, Senator, I certainly agree that any economic plans should be so constituted as to preserve democracy. In my statement I believe I pointed out how coordination of production could use democratic procedures, and evidenced some illustrations from AAA experience. Might I also sdy that I also am very much worried- about the abUity of democratic forms to be maintained if we are to continue to have one-quai-ter of all our people unable to find means of providing for themselves. I beUeve that the continuing unsolved problem of work for our people in the cities is also a threat to democracy, and we need very intensive studies as to how that may be solved through democratic procedures. Acting Chairman King. Thank you very much. Are you through, Mr. Feller? Mr. Feller. I am through with Dr. Ezekiel. I just wanted to make one statement to clarify the record a bit. I made a rather flippant comment yesterday concluding the hearing. I hope no one takes it too seriously. I do want to point out this, that the testimony which the committee has heard the last 3 days constitutes the most important effort to state in measurable terms some of the most difficult problems of industry, the relation between price and volume, concepts of cost; and while it may be that the results at this timd seem inconclusive, I am confident that the material here presented will become of increasing importance as time goes on and as more and more students have access to it. I should like also to state that the area ot agreement among the gentlemen who have testified is perhaps larger than the committee has appreciated, and I understand that Dr. Kreps and Dr. Yntema are attempting to work out a statement that they would like to present 124491—41 — pt. 27 3 14156 CONCENTRATION OF ECONOMIC POWER for the record at some other time, which will indicate just exactly how far they do disagree and how far they agree. Thanli you. Acting Chairman King. When they present it we may want to interrogate them. FEDERAL TRADE COMMISSION'S ANALYSIS OF UNITED STATES STEEL corporation's REPORT ON THE BASING POINT SYSTEM Mr. Ballinger. Mr. Chairman, on March 6, 7, and 8 of 1939, the Federal Trade Commission introduced expert testimony before the Temporary National Economic Committee to show that producers of steel in the United States were operatmg under a pricing system which we. observed eliminates price competition in the steel industry.^ It was the opmion of the experts who appeared on the Federal Trade Commission program that the steel industry was therefore monopo- listic. At the conclusion of- the Commission's testimony there was offered for the record a document entitled "Monopoly and Compe- tition in Steel," which described how the basing point system in the steel industry operated to-suppress price competition in this industry. Subsequently the United States Steel Corporation asked and obtained leave of the Temporary National Economic Committee to reply to the expert testimony offered by the Federal Trade Commission in March of last year. The Corporation has prepared a document entitled "The Basing Point Method of Quoting Delivered Prices in the Steel Industry, Exhibit No. 1418." ^ This document has been analyzed by the staff of the Federal Trade Commission.' It is now my desire, Mr. Chairman, to have Mr. Walter B. Wooden, Assistant Chief Counsel of the Commission, question some of the parties respon- sible for the Corporation's document on the conclusions reached therein. Mr. Wooden is one of the veteran experts of the Com- mission on the basing point system. Inquiry by the Commissioli as^ to the authorship of this document elicited the information from the Corporation that it had been pre- pared by a great many people, including officials of the Corporation, lawyers, and economists. For the purpose, therefore, of questioning those responsible for the document, I request that Mr. Wooden be permitted to examine Mr. Fairless, President of the Corporation, and Mr. Adams, Vice President of the United States Steel Corporation of Delaware. Acting Chairman King. Proceed. Mr. Adams, you were sworn, weren't you ? Mr. Adams. Yes. Acting Chairman King. Mr. Fairless was sworn. 1 See Hearings, Part 5, pp. 1657-1680, 1861-1894, 1903-1946, 1951-1982; "Exhibit No. 358," a Federal Trade Commission report on Monopoly and Competition in Steel, appendix, p. 2192. ' Appendix, p. 14619ff. CONCENTRATION OF ECONOMIC POWER 14157 TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT UNITED STATES STEEL CORPORATION, NEW YORK CITY— Resumed ' AND AVERY C. ADAMS, VICE PRESIDENT UNITED STATES STEEL CORPORATION OF DELAWARE, PITTSBURGH, PA.— Resumed Mr. Wooden. Mr. Chairman and members of the committee, in taking up this subject of the basing point system in the steel industry I want the committee to understand that every effort will be made to confine the presentation -to tangible, concrete matters of fact, and to avoid, so far as possible, abstruse or abstract criteria and abstruse theoretical considerations. After having gone into the subject from a factual standpoint, however, it will be necessary to pay some atten- tion to the theoretical considerations because the Corporation in sub- mittiiig its documents on the basing pomt system has made use of a great many of these theoretical abstractions which we have beard for the last few days. There are only two fundamental factual issues involved: First, whether the basing point system in the steel industry is the embodiment of some form of collusive methods of price control, and if so what forms and methods; and, secondly, whether the objections to the basing point system are based, as the Corporation contends, upon abstract criteria or whether they are based upon tangible, concrete evidence. Only after that factual exposition has been made will any attempt be made to go into the theoretical side of the subject. The theoretical aspect of the basing point system in the steel industry is likewise two-fold: First, whether the use of that system is consistent with the economic concepts of a competitive economy or conforms to the economic concepts of a monopolistic situation; the second theoretical question is simply whether or not the basing- point system in the steel industry should be permitted to continue as a matter of pubUc interest. Now, I should like to approach this subject further from a common groimd, which the Corporation itself states in one of the exhibits presented, namely, "Exhibit No. 1410," entitled "Some Factors in the Pricing of Steel," ^ in which it states: "Price competition is neces- sary in any industry operating in a capitalistic system. Is the steel industry competitive? Efforts at such determination too easily lead into the realms of economic sophistry. Criticism and defense of competition in the industry should not be based on abstract criteria which fail to take into account the fundamental phenomena involved ; it should be based on tangible evidence." As I say, that is a common ground on which the Corporation and we can approach the subject. And now I should like to ask some questions of Mr. Fairless. Mr. Fairless, will you state for the information of the committee, in as few words as possible, just what are the mefchanical or physical features of the basing-point system in the steel industry? Mr. Fairless. Mr. Chairman, I should like all questions that have to do with basing-point matters, particularly as they pertain to the 1 For Mr. Fairless' previous testimony see Hearings, Parts, 19 and 20. 'Included in Hearings, Part 26, appendix, p. 13893. 14158 CONCENTRATION OF ECONOMIC POWER studj which we have presented to this committee, to be directed to Mr. Adams. In respect to policies and poUcy questions and matters pertaining to the United States Steel Corporation, I should prefer that those questions be directed to me. At the same time, I offer myself at any time for any question and will attempt, to the best of my limijbed ability, to answer it. Mr. Wooden, Before we go ahead then on that basis, which is at least partially acceptable to me, I should like to ask a few questions about the preparation of the Corporation's pamphlets which are in the record as "Exhibits Nos. 1418 and 1410." ' You have already stated, I believe, Mr. Fairless, that quite a group of persons worked together on the preparation of those pamphlets? Mr. Fairless. You are referring nov^ to the basing-point pamphlet, are you, or all the pamphlets? Mr. Wooden. No. I am talking only about these two, one, "Exhibit No. 1418", "The Basing-Point Method of Quoting Dehvered Prices in the Steel Industry," and, two, "Exhibit No. 1410", "Some Factors in the Pricing of Steel." Mr. Fairless. You are correct in your statement. Mr. Wooden. And this latter pamphlet, "Some Factors in the Pricing of Steel," contains a section on the basing-point system, does it not? Mr. Fairless. I believe that it does. Mr. Wooden. Will you state just how those two pamphlets that I have referred to were prepared? Mr. Fairless. On the basing-point pamphlet, a man by the name of Becht, Amo C. Becht, was the leader in the preparation of this particular study. Mr. Becht at the present time is an instructor at the University of Georgia, and is no longer connected with this particular activity. In addition to Mr. Becht, various members of the U. S. Steel Corporation's official family and subsidiary companies, together with members of the firm of Governor Miller, and Irving S. Olds, together with outside economists, all participated to some extent in the preparation of the pamphlets that you have referred to. ■ I might, for further clarification, make the statement that Mr. Becht worked approximately 1 year iu the preparation of the data and information that is contained in the basing-point study which has been presented to this committee. Mr. Wooden. You mean "Exhibit No. 1418"? Mr. Fairless. Well, yes, if that is the proper number. It is the basmg-point study. There isn't any mystery about it. Mr. Wooden. Yes, and what about "Exhibit No. 1410"? How was that prepared? Mr. Fairless. It was prepared largely in the same manner by the same group, supplemented by Corporation people, of the subsidiaries and the Corporation itself, and was headed, I believe, by Mr. Edward T. Dickinson, Jr. Mr. Wooden. Were there any other economists beside this Dr. Becht who participated in the preparation of these two pamphlets? Mr. Fairless. I said yes. Mr. Wooden. Can you name any other? ' "Exhibit No. 1410" is included in Hearings, Part 26, appendix, p. 13893; "Exhibit No. 1418" is included in this Part, appendix, p. 14619 S. OONCBNTRATION OF ECQNiOMIC POWER 14159 Mr. Fairless. Well, Dr. Yntema had a place in these studies. When they referred to economic problems, he was consulted. Mr. Wooden. Did he review or participate in the final preparation of the pamplilets as they were submitted? Mr. Fairless. I can't answer that. Dr. Yntema is here and he can answer that for himself. Mr. Wooden. Any other economist besides the two that you have named? Mr. Fairless. Bradford Smith, who happens to be an economist, and is directly associated with the United States Steel Corporation at 71 Broadway. He participated in these studies and conclusions. Mr. Wooden. Did you have any other outside economist? Mr. Fairless. I don't believe so. Mr, Wooden. Do I understand that after the first draft of the pamphlets was prepared, it was then reviewed by various officials of the Steel Corporation? Mr. Fairless. Well, I wouldn't put it in just those words. Various officials of the United States Steel Corporation and subsidiary com- panies were consulted all through the preparation of this particular study or studies. Mr. Wooden. And who made the final review and approval of the pamphlets? Mr. Fairless. You mean as an individual? Mr. Wooden. Individuals, if there were more than one. Mr. Fairless. Why, the T. N. E. C. group who have been working now for [a year and a half, in conjunction, of course, with the official family of the United States Steel Corporation. Mr. Wooden. Well, the pamphlets are submitted as the statements of the Steel Corporation? Mr. Fairless. Definitely so, yes. Mr. Wooden. And you would assume responsibility for any of the statements contained therein? Mr. Fairless. Any of the statements? Mr. Wooden. Yes. Mr. Fairless. Yes; certainly. Otherwise, we would not have presented them to the committee. Mr. Wooden. Mr. Fairless, can you tell me whether or not these pamphlets on the basing-point system were submitted to any other companies or representatives of companies in the steel industry? Mr. Fairless. To the best of my knowledge; no. Mr. Wooden. They do not then represent the statements even inferentially or indirectly of any part of the steel industry, other than the United States Steel Corporation and its subsidiaries, is that correct? Mr. Fairless. This is tllie statement of the United States Steel Corporation. Mr. Wooden. I beheve you are the president of the Corporation? Mr. Fairless. That is correct. Mr. Wooden. How long since? Mr. Fairless. Since January 1, 1938. Mr. Wooden. And prior to that time, you were? Mr. FA.IRLESS. President of the Carnegie Illinois Steel Corporation. Mr. Wooden. And how long had you been with the Carnegie Illinois? Mr. Fairless. Since 1935; October 1st. 14160 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. And prior to that time you were in the steel industry? Mr. Fairless. Twenty-five years, all together. Mr. Wooden. In what connection? Mr. Fairless. I was executive vice president of the Republic Steel Corporation at the time I came up to the United States Steel Corpora- tion. Mr. Wooden. Have you held any ofl&cial place in the American Iron and Steel Institute? Mr, Fairless. Yes, sir. Mr. Wooden. What? Mr. Fairless. Vice president. Mr. Wooden. When? Mr. Fairless. Now. Mr. Wooden. And were you at one time, chairman of the Institute's , committee on commercial matters? Mr. Fairless. No; not the Institute's. I was chairman of the commercial committee under the Code Authority during the N. R. A Mr. Wooden. Now during your experience in the industry, have you been in the sales end of the business? Mr. Fairless. In an official capacity? Mr. Wooden. Yes. Mr. Fairless. Never; I never held a sales position. Mr. Wooden. Mr. Adams, may I ask you how long have you been connected with the Corporation and in what capacity? Mr. Adams. October 1, 1939; vice president of sales of the United States Steel Corporation of Delaware. Mr. Wooden. And before that time you were? Mr. Adams. With the Inland Steel Co., as vice president and assistant general manager of sales. Mr. Wooden. And how long have you been in the industry in a sales capacity? Mr. Adams. Since 1923, with the exception of 8 years during which I was vice president in charge of sales of the General Fire-proofing Co., at Youngstown, Ohio. Mr. Wooden. You had occasion during your sales experience in the steel industry to become familiar w ith what sometimes is referred to as the basing-point system? Mr. Adams. From a practical standpoint, yes, sir. Mr. Wooden. Will you tell the CommitlBC, in as few words as you can, what are the main features — physical and mechanical features — of the basing-point system? Mr. Adams. It is a method which we use in calculating our deUvered prices which we quote to our customers. We have found that in dealing with perhaps some 500,000 customers, who are users of steel, they prefer to have us quote delivered prices. Mr. WoodejJ. Will you — I don't mind your enlarging upon the point, but I want the physical aspects, and mechanics, of the system, rather than the reasons for it. Just a skeleton outline of what the system" is. Mr. Adams. If I understand your question cor ectly, we follow a method of arriving at delivered prices wliich is '^Jiown as the basing- point system. We publish base delivered prices at our points of production. OONGBNTRATION OF ECONOMIC POWER 14161 Mr. Wooden. That means delivered at the point of production, doesn't it? Mr. Adams. Yes, sir. Acting Chairnian King. May I ask a question there? Is that system one which has been approved by your customers and by the consumers of steel throughout the United States, if you know? Mr. Adams. I would say very definitely, Senator, that our customers favor this method of quoting prices, the delivered-price method — and as evidence of that I would like to offer for the record an article from Iron Age of April 1939, which is the result of a survey made by Iron Age and conclusions reached by Iron Age. Acting Chairman King. It will be exhibited to counsel and we will take the views of counsel before it is admitted. Personally, I see no objection to it but I think counsel ought to have a chance to examine it, if he cares to. Mr. Wooden. Well, of course, we are familiar with the general situation that in the basing-point system customers who are in com- petition with each other naturally do not want their competing rivals to buy any more cheaply than they do, and that may account for such desire or such favoritism as there is on the part of customers toward the system, because it does put them on an equality as to the delivered price. Acting Chairman King. Well, Judge, do you object to it? If you do Mr. Wooden (interposing). I haven't any objection but it is sub- ject to Acting Chairman King (interposing). Perhaps it can be put in at the conclusion of the testimony. Mr. Wooden. I think that would be better; yes.^ Mr. Davis. Mr. Chairman, I would like to ask a question in this connection. With respect to your assertion that it is definitely de- sired by the customers, I want to ask you if it isn't a fact that your organization has on numerous occasions refused to grant a miU price when it was requested? Mr. Adams. I wouldn't say that we had done that on numerous occasions, because we have not had numerous requests for mill prices in that sense of the word. Mr. Davis. You have invariably refused to give such a price when it was requested, have you not? Mr. Adams. I would say that we have not refused in every case. There may be exceptions to every policy, but the policy of the United States Steel Corporation is to quote delivered prices. Mr. Davis. Only? That is true, is it not? Mr. Adams. No, sir. I won't say that because there have been exceptions to our policy, in connection with instances where condi- tions justified making that exception. Mr. Davis. Will you state one of the recent exceptions? Mr. Adams. I think one of the recent exceptions was where a cer- tain oil company asked for an f. o. b. mill price and we refused to devi 'te from our policy and quote on that basis. Our policy, how- ever, is to quote delivered prices at the point of consumption where we believe competition exists; in other words, we think that that is the market for our product. ' Introduced Infra, p. 14229, as "Exhibit No. 2202"; appears In appendix, p. 14430. 14162 CONCENTRATION OF ECONOMIC POWER Now if you want to go into exceptions at this time, that would invoke our pohcy regarding various products and methods of trans- portation, but I didn't realize that that was what you Mr. Davis (interposing). Well, I will refrain from developing it further, with this additional question: Is it not a fact that you have expressly refused to grant mill prices to the Federal Government, when requested to do so? Mr. Adams. Is that the exception you have reference to, in con- nection with our negotiations with the Government? Is that it? Mr. Davis. Yes; where they have asked for bids or prices. Mr. Adams. On the contrary, we do grant mill prices to the Gov- ernment, and have in a great many cases. The Government does, however, in appraising their bids, appraise them on the basis of the delivered" price value, , because the United States Government, like all the rest of our customers, is interested in the cost of the material delivered at the point where it will be used. Acting Chairman King. Proceed, Judge. Mr. Wooden. I understand that your general practice and poUcy, however, is to quote only in terms of delivered prices? Mr. Adams. That is correct. Mr. Wooden. Now you spoke of quoting base prices at your points of production. Are all your points of production known or recognized as basing points? Mr. Adams. No, sir; there are a few exceptions. We have a few small mills located at what might be called nonbasing points, insofar as the operation of the Steel Corporation is concerned, but the total tonnage produced at those nonbasing points is very small. Mr. Wooden. Now, there are a number of other producing points in the industry, are there ijiot, that are not basing points? Mr. Adams. There are a few. According to my information, there are 52 published basing-point prices in the United States today and when you multiply that number by the number of products involved, that list of 52 may be expanded up to 125 or 150. Mr. Wooden. Isn't it true that for some products, there are a comparatively small number of basing points compared with the total number of producing points? Mr. Adams. Will you repeat that question? (The question was read.) Mr. F airless. For example? Mr. Wooden. Well, how about structural shapes? How many basing points are- there for structural shapes and how many producing points? Mr. Adams. We have no nonbasing points for structural shapes, Mr. Wooden. I am not referring only to the Steel Corporation's points but to the industry's. Mr. Fairless. Well, this is the U. S. Steel Corporation hearing, not the steel industry hearing. Mr. Wooden. I understood it was to be about the basing-point system in the industry. Mr. Fairless. As applied to the United States Steel Corporation. Mr. Wooden. Well, I don't understand it that Mr. Fairless (interposing). We certainly didn't have any idea that we were here representing the steel industry at any time or point during these hearings. CON€.BNTRATION OF ECONOMIC POWEK 14163 Mr. Wooden. You brought out that you do not represent the steel industry in presenting these statements, but the title of your "Exhibit No. 1418" is, "The Basing Point Method of Quoting Delivered Prices in the Steel Industry." Mr. Fairless. That's right. Mr. Wooden. And you describe it from the industry standpoint as well as the Corporation standpoint. Mr. Fairless. Well, from the standpoint that we must brmg out, in presenting our evidence, the basing points which we are confronted with in transaction of our daily business. Mr. Adams. Mr. Wooden, we would be glad to present a map at this time, if you care to have us do so, to show the basing points for structural shapes and the nonbasing points, so that we can determine here and now just how many nonbasing points thsre are on structural shapes. Mr. Wooden. Well, it is already in evidence before the Committee, I think — the number of basing points and the location ojf the basing points and the products to which each applies. Now from the general knowledge that you have of the system in the industry don't you know that as to some products there may be only five or six basing points, as to a given product? Mr. Adams. Well, we have scattered through the steel industry a range of products and a range of mills. There are some products that are made by 4 or 5 mills, there are other products that are made by 30 mills; so that with that as a premise, you would naturally find a varying number of basing points published in this industry. Actmg Chairman King. May I ask a question there? Are there basing points — and I assume there are, as far as the steel industry as a whole is concerned^that are not the basing points of your company? Mr. Adams. Yes, sir. Acting Chairman King. I am asking this for my own information. Judge, I don't want to interfere with you; but for my own informa- tion, are you testifying with respect to basing points alone or ex- clusively, which are used or employed by your company or by all of' the steel industry? Mr. Adams. When the question is asked as to the number of non- basing-point mills' there are m the country, we answer in terms of United States Steel Corporation and we make the statement that practically all of our tonnage is sold at producing points where prices are published, delivered prices are published, at our points of pro- duction. Mr. Wooden. And which are basing points. Mr. Adams. And which are basing points. Acting Chairman King. Are there basing points that other com- panies use which j^ou do not recognize or employ in determining prices? Mr. Adams. We do not publish delivered prices at competitors' basing points, but, because of the prices that exist at those points, we find it necessary to compete with the mills located at those points, and when we have to reduce our delivered price at the point of delivery by an amount necessary to meet that competition, then our mill net return is reduced and the amount that it is reduced is so-called freight absorption. We don't recognize that as a term; it is an evi- dence of competition that exists in this industry. 14164 CJONCENTRATION OF ECONOMIC POWER Mr. Wooden. In your pricing you sometimes base your delivered price, do you not, upon the basing point prices of competitors? Mr. Adams. We try to guess as to what the delivered price will be at the point of consumption. If a competitor is quoting in accordance with his published price we will try to ascertain what that price is by guesswork and beat that particular price at the point of consumption. In many cases that means that we have to reduce our price. Mr. Wooden. But after you ascertain the competitor's base price and that base price happens to control the destination price where you happen to be figuring, then you figure on that competitor's base price plus the freight from that basing point, do you not? Mr. Adams. No, sir; we do not. Mr. Wooden. How do you do it? Mr. Adams. The price that we quote is a delivered price and that is dependent upon the competition that exists at that particular point. Mr. Wooden. Well, do you not know what the competitor's base price is? Mr. Adams. No, sir. Mr. Wooden. You have no knowledge of Mr. Adams (interposing). What his base price or his delivered price is? Mr. Wooden. His base price. Mr. Adams. We think in terms of delivered price. Mr. Wooden. But don't you know what his base price is? Mr. Adams. We might know what his published base price is. Mr. Wooden. You publish your base prices and competitors publish theirs? Mr. Adams. We publish base delivered prices at our points of production. Mr. Wooden. And competitors publish theirs? Mr. Adams. Yes, sir. Mr. Wooden. Your principal competitors publish theirs? Mr. Adams. They notify their trade; I don't know whether they publish their prices each quarter on all products. Mr. Wooden. There are some territories, are there not, where your base prices govern or control the delivered prices? Mr. Adams. If our problem is predicated entirely upon the question of published base prices and transportation costs involved, we might arrive at that assumption, but that presupposes the absence of com- petition. Mr. Wooden. Yes, but it is a fact that your base price plus the freight from your basing point controls the delivered price in some territories? Mr. Adams. I wouldn't say that it controls the delivered price, no, sir, because we have competition in the territories located close to our mills just as we have competition in territories located closer to a competitor's mill. Mr. Wooden. Of course you have competitors coming in there, but if they follow the basing point system they come in there at your base price plus freight from your basing point, do they not? Mr. Adams. They might assume, and the assumption would be predicated upon the fact that we publish a base delivered price, that the price that we might quote at a point near our mill would be the sum total of our published base price plus the actual freight to destina- CONCENTRATION OF ECONOMIC POWER 14165 tion, but they would assume then that we never deviated from our published delivered prices, and that, of course, is not the fact in the picture, because we do deviate. Mr. Wooden. Have you deviated from your base prices as a con- sistent policy, or has it been an exception for you to deviate from your base prices? Mr. Adams. Our policy is to be competitive naturally. Now the records will show that our average price over a long period of time, with the exception of the code period, was lower than our published price. Mr. Wooden. Well, that includes the item of freight absorption, does it not? Mr. Adams. Again I must say that the term "freight absorption" is a term that has been coined by the critics of the basing-point method. Freight absorption from a steelman's standpoint is a transportation cost that is included in our delivered prices. Someone has to pay that freight. The railroads publish tariffs and rates of freight. Now someone has to pay that freight, so there is no technical absorption of freight. If we reduce our delivered price in competing for a piece of business at a point closer to a competitor's mill than ours, then we have to meet that competition by reducing our mill net return. Mr. Wooden. That's what I meant. Mr. Adams. And that in itself is an evidence of the competition that exists in the steel industry today. Mr. Wooden. Do you reduce yom* mill net by the amount neces- sary to make your delivered price the same as that of the competitor? Is that right? Mr. Adams. We do that and in a great many cases reduce it still further in order to meet what is known as price absorption, or price rediiction, in order to be competitive beyond the competition that develops from difference in transportation costs. Now I would like to make this point in connection with transporta- tion costs. When we build a steel mill and select a location for that mill, we have to bring in 4 tons of raw materials for every ton of steel' produced. The transportation costs in assembling those raw materi- als is a figure that exceeds the average transportation cost on finished products, so that transportation cost can be compared with the trans- portation cost involved in transporting our finished steel products to the points of consumption. Mr. Wooden. Do you make it a practice to cut your base prices, published prices, without making a public announcement of your change? Mr. Adams. We find it necessary to reduce our base prices in order to meet competition. Mr. Wooden. Without publishing the change? Mr. Adams. Yes, sir. Mr. Wooden. Do you attempt, however, to meet such things at times by republishing the base prices to meet the situation that you refer to? Mr. Adams. Certainly. If competition breaks out at a certain point where one instance or two instances or a limited number of cases are involved, we will deviate from our published price in order to meet that competition. If it becomes general — we make a study of the use of that word "general" — then we do reduce our published prices. 14166 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Will you tell me in what respects, if any, the state- ment or description that I give now of the basing-point system in steel is maccurate or inadequate? There are a number, let us assume, of producing points and some points not of production known as basing points, and at those points so-called base prices apply. There are a number of other producing points that are not basing points for the particular products that are produced at other basing points. In figuring prices, ordinarily de- livered prices are quoted. The delivered price quotation is made up of the base price on the particular product, plus the all-rail freight ordinarily to destination, and which base price controls the delivered price depends upon wliich one makes the lowest delivered price when the freight is added. Is that correct so far? Mr. Adams. That is generally correct, assuming the absence of com- petition from the standpoint of price reductions in the base price. Mr. Wooden. Well, I'm not going into that; I am trying to get at these physical, mechanical aspects of the system. Further, when one basing-point mill goes into a territory where another basing-point price plus freight from that basing point to the destination makes a lower delivered price, then the first basing-point mill meets that delivered price, does it not? Mr. Adams. Yes, sir. Mr. Wooden. And in doing that it adopts, for the purpose of that transaction, the basing-point price of the other mill plus the freight, all-rail freight, from that basing point to destination. Is that correct? Mr. Adams. We don't look at it from that viewpoint, Mr. Wooden. We consider that in a case like that we reduce our mill net return in order to meet competition at that point of delivery. Mr. Wooden. But in essence your delivered price is made up of the other basing-point price plus freight from that other basing point, is it not? Mr. Adams. I don't see how you can arrive at that conclusion, because as I said before, the freight in your delivered price is a trans- portation cost wliich has to be assumed by the successful bidder, so that the actual freight in that particular case from the standpoint of the Corporation is the freight from our producing mill to the point of consumption. Mr. Wooden. Yes; but that is deducted from the delivered price, leaving you a smaller mill net. Isn't that correct? Mr. Adams. That is correct. It reduces our mill net return. Mr. Wooden. And the delivered price in that instance is the equivalent mathematically of the other basing-point mill's base price plus freight from it to destination, isn't it? Mr. Adams. That is correct, providing our competitor doesn't reduce his published base price in order to meet some other competitor. Mr. Reynders. Is it correct to say that that constitutes a ceiling at that point? Mr. Adams. That is correct, Mr. Reynders. Acting Chairman King. May I ask a question? Assume that a producer finds a market within a radius, say, of 100 miles, and another producer who is perhaps four or five hundred miles away but desires to ship into that area where the area is small, and the freight rate, of course, would be a great deal higher from the four- or five-hundred- CONCENTRATION OF ECONOMIC POWER 141j67 mile producer than that of the producer that was within the small area, what would be the basing point there? Mr. Adams. Well, there would be two basing points involved as such. The man located farthest away from the point of consumption would receive a lower mill net return. Acting Chairman King. He would have to pay more freight? Mr. Adams. His transportation costs would be higher; yes, sir. Acting Chairman King. That would necessitate, if he competed with the producer witliin the small area, a reduction in his profits if profits are made, at least a reduction in the price? Mr. Adams. Yes, sir, in the mill net return. Mr. Wooden. If each mill should calculate its delivered price in terms of a basirg-point price on the particular product from the basing point to any particular destination on an all-rail freight basis, the result would be that the mills would get into that particular destination at an identical delivered price, would it not? Mr. Adams. That would depend entirely upon the, relation of their published base prices and the relation of the transportation costs. If two mills published identical prices and were quoting to a consumer who was exactly 200 miles from each mill and neither mill deviated from their published base prices, the delivered prices would be identical. Mr. Wooden. But even if the consumer were 50 miles from one mill and 150 miles from the other, the delivered price would be identical if the same base price was used by both and both added the same freight element from the base price to the destination, would it not? Mr. Adams. Well, I think you are assuming something, Mr. Wooden, that is a little different from our practical analysis in the situation that exists. We still think in terms of delivered prices because our customers prefer to have us quote the delivered price. Now when we reduce our delivered price so as to be competitive in that market, the result is a reduction in our mill-net return. We don't take a competitor's basing-point price and add his freight. That isn't the freight that interests us. The freight that interests us is our actual transportation cost, and we analyze our actual trans- portation cost just like we analyze our costs of labor and materials and other things that go into the build-up of our delivered prices to determine whether or not we want to be competitive at the point of delivery. We may have a level of prices, in the steel industry such that we would not want to compete in that market. Mr. Wooden. By beiiig competitive do you mean making your delivered price at a given df^stination the same as that of your, com- petitors? Mr. Adams. We believe that delivered prices are an indication of fair competition in a great many cases. Mr. Wooden. Can you answer my question? (The question was read.) Mr. Adams. In our negotiations with our customers, if the customer should say to us, "We have a delivered price which is $2 a ton below the price that you have quoted, we will place that business with you if you reduce your price $2 a ton and be competitive," then we normally, under a normal set of conditions, would reduce our price 14168 CONCENTRATION OP ECONOMIC POWER to a price equal to his. We would assume that after we had made that reduction we were then competitive from a price standpoint. Other things enter into the consideration, quality, service, factors of that kind. Mr. Wooden. Do you consider that unless your delivered price is the same as that of your competitors there is a noncompetitive situation there? Mr. Adams. That question has to be broken down into two parts. If our price is higher we are noncompetitive from the price stand- point; if our price is Mr. Wooden (interposing). The others are noncompetitive? You are noncompetitive; yes, that is right. Mr. Adams. If our price is higher at the point of delivery than our competitors we would be noncompetitive from a price standpoint. If we went through a series of negotiations which resulted m our reducing our delivered price to a competitor's level we would assume that we were competitive. If our reduction exceeded the price quoted by competition we would assume, too, that we were highly competitive. Mr. Wooden. What if you went below the delivered price of your competitors? Would that be competitive? Mr. Adams. Well, I would say that in that case we would be in a very competitive position from a price standpoint. Mr. Wooden. In other words, you are in a competitive position when your delivered price is the same as that of competitors and also competitive when it is below that of competitors. Is that right? Mr. Adams. Yes, sir. Mr. Wooden. As to other physical aspects of the basing point system, does it not result that frequently when you are selling in the territory of another basing point mill and meeting the delivered price at destination there, that you are absorbing substantial amounts of freight, so-called, meaning by that that you realize a mill-net return that is less than your own base price? Mr. Adams. We still don't talk or think in terms of absorbing freight, because the freight is constant. If we do meet competition at a point of delivery and the result is to reduce our mUl-net return, then we njight have a mill-net return which is lower than the mill -net return reflected by quoting in a nearby territory where that type of competition did not exist. Mr. Wooden. And that is a very frequent and day-to-day occur- rence, isn't it. Your realizing smaller mill-nets when you go into territory of other basing point mills? Mr. Adams. That is true ; yes, sir. Mr. Wooden. And assuming that your delivered price in such a case is the same as that of your competitors, the reduction in your, null-net return is just the amount needed to meet that delivered price of the competitor, isn't it? Mr. Adams. Unless our delivered price should be below that of our competitor, unless we have the other factor in the pictm-e, which is price absorption, price reduction. Mr. Wooden. Then it would be reversed, if your base price was the controlling base and a competitor came in he would absorb freight in the same way and to the same extent, wouldn't he? Mr. Adams. Yes, sir. dONCENTRATION 01' ECONOMIC POWER 14169 Mr. Wooden. Then another point. Even as a base mill, figuring your delivered price, as you do, in terms of all-rail freight, ordinarily, if you make an actual delivery by some cheaper mode of transportation such as water or truck, you have there, do you not, an increment in your base price represented by the amount of the difference between the transportation element that you figure and the transportation element that you actually use for the shipment. Mr. Adams. You mean that our mill-net return might be increased? Mr. WooDEisr. Yes. Mr. Adams. That, of course, as you know, Mr. Wooden, breaks itself down into several different cases. Mr. Wooden. All right. Mr. O'CoNNELL. If you use a means of transportation which is less expensive than rail transportation and your delivered price is on a basis of all-rail freight, I take it then that it would invariably result in higher mill-net, would it not? Mr. Fairless. If you did. Mr. O'CoNNELL. That is what I understood his question to be. Mr. Adams. The answer is yes, but again we are talking In terms of an occasional exception,, because that question raises the question of our over-all policy regarding water shipments, truck shipments, and methods of transportation which in some instances might be less than the aU-rail freight. It also raises the question as to whether or not we charge the rail rate or charge the water rate. Mr. Wooden. But assuming you charge the rail rate in the quo- tation of the delivered price and ship by a cheaper mode of transpor- tation, you thereby increase your miU-net return above the base price, do you not? Mr. Adams. That is correct, but I want to make the poLcrt in passing that the few cases that we have been able to find on our books cover a very, very limited amount of tonnage. When we reach the ques- tion of water transportation I would like to have the opportunity of going into that further so that we can get down to facts. Mr. Wooden. I want to go into it further also. Referring to section C in "Exhibit No. 1409" ' which is the Cor- poration's exhibit of charts, I note that in a number of instances the mUl-net yield, for instance for bars at Chicago, exceeded the base price by a substantial amount. For instance, take the month of June, 1935. Do you have that? Mr. Adams. I have it now, Mr. Wooden. - It is Chart C-6 in "Exhibit No. 1409." 2 Mr. Wooden. Does that show that for the month of June, 1935, your mill-net on bars at Chicago exceeded your base price by 18 cents per hundredweight? Mr. Adams. We believe that these figures are accurate. The period that you have pointed out in the first place is the code period. In the second place, these charts are predicated upon a comparison between the mill-net yield, which includes extras, and the reported base price, so that when the mill-net yield is below the reported base price in periods other than duricg the code period, we have made reductions in our base prices which exceed the amount of the extras involved. ' Included in Hearings, Part 26, appendix, p. 13743. » Ibid, p. 13805. 14170 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Is it your explanation, then, that that 18 cents per hundredweight excess over the base price, or $3.60 a ton excess over base price, is the result of extras being- included? Mr. Adams. That would be my explanation of it now without going into the detailed data which we're used in connection with the preparation of the charts. Mr. Wooden. Are you sure that none of such excess of mill-net over base price could be the result of shipments by water? Mr. Adams. When you use the word "none", Mr. Wooden, of course that means that there might be a few cents involved, or more likely fractions of cents involved, that can be traced to that. Mr. Wooden. I should add also by truck or any cheaper mode of transportation than all rail. Mr. Adams. Yes, sir; my reply would be the same. Mr. Wooden. Isn't it possible, also, that such excesses of mill-net yield over the base price at a place like Chicago would be the result of your use of an arbitrary switching charge there, which would be in excess of the actual switfchihg charge? Mr. Adams. That is perfectly possible. Mr. Wooden. As a matter of fact, you do have these arbitrary switching charges at certain basing points, do you not? Mr. Adams. We include in our published base delivered price at Chicago a charge of 3 cents per hundred pounds. Now you mentioned trucks a ninute ago. The actual trucking charge in the Chicago area is 12}^ cjnts, and we charge 3 cents, so our mill-net return in that particular case would be reduced rather than increased. I think that with your permission, inasmuch as we are talking about the possibilities that exist in the steel industry of raising mill-net returns by methods of transportation wliich cost less than the rail rate and charging the rail rate, I would like to say that we made a study for the benefit of this Committee of our shipments in 1937, and we found that we shipped 12,700,000 tons of finished products by all means of transportation. We actually shipped 1,200,000 tons by water and charged the water rates. There were 18,000 tons out of a total of 12,700,000 tons that we shipped by water and charged the rail rate. Now when you break that down you find that the subject we are taljdng about amounts to a very, very infinitesimal amount. Mr. Wooden. These figures that were put in this morning by Dr. deChazeau showed amounts of several dollars per ton representing so- called phantom freight and several dollars per ton representing so-called freight absorption, did they not? Mr. Adams. I don't know what figure he might have mentioned. I would like to take any particular figure that you have in mind, any particular case, and break it down. Mr, Wooden. Well, are there not frequent instances where you do reduce your mill-net return by the amount of the difference between the actual freight from your shipping point and the freight calculated from another basing point to destination? Mr. Adams. It is the approach that you follow to that subject that draws the distinction. We still quote delivered prices, and whien we find it necessary to reduce those delivered prices in order to meet competition at point of delivery our mill-net return goes down. Mr. Wooden. By the amount necessary to make your price com- petitive at destination. CONCENTRATION OF ECONOMIC POWER 14171 Mr. Adams. To make our price competitive at destination ; yes, sir, Mr. Wooden. We will come later on to some of those subjects in more detail. I just wanted to get the general picture. Mr. Fairless, it is the stated opinion of the Corporation in "Exhibit No. 1418" ^ that the purpose of the pamphlet is to establish that the basing-pouit method is the natural result of basic economic conditions in the steel industry and does not result in the absence of price com- petition.^ Is that correct substantially? Mr. Fairless. That is right. Mr. Wooden. And it is also the position taken, I believe, that the delivered price competition natm^ally takes" the form of meeting the delivered prices of competitors, is that correct? Mr. Fairless. That is in the only definition of being competitive that I know. There may be others. Mr. Wooden. Mr. Gregg, I believe, is the vice president of U. S. Steel Corporation? Mr. Fairless. He is president of one of our leading subsidiaries, the Tennessee Coal, Iron, Railroad Co., and was at one time, vice president of the Corporation. Mr. Wooden. Mr. Chairman, I have here a printed transcript of testimony given by Mr. Gregg in hearings before the Senate Com- mittee on Interstate Commerce in 1936, and I should like to read a portion of it, if I may? Acting Chairman King. Proceed. Mr. Wooden. This was in hearings before the Senate Committee on Interstate Commerce in March of 1936, on Senate bill 4055. - Mr. Gregg was being questioned about the basing-point system. He testified : That has been the general merchandising plan in the industry. The Chairman. So that if the plan is followed, there is no competition so far as price is concerned? Mr. Gregg. On the contrary, there is competition. To answer your questio^n specifically, if that plan were universally followed, there would be no competition in so far as one element of competition is concerned, namely, price. That is on page 207 of the record that I referred to. Now, Mr. Fairless, do you think Mr. Gregg was right in saying that if the basing-point system were followed, there would be no competition in price? Mr. Fairless. It seems to me that it would be perfectly obvious that if every steel producing company in this great industry posted their prices applying to their particular basing points, and that they and all their competition in quoting prices to consumers of steel used the nearest basing point and quoted the base price which had been published by the producer for that particular basing point, and added to that price the extras that applied to the products involved, and added to that the transportation cost to the point of consumption, obviously there would be a one-price set-up in the steel industry. Now, the results that we have previously prodilced, I would think and I hope, are suJB&cierit, of course, to prove that that is a theory and in practice it does not result, and never has resulted, to the best of my knowledge, except at one time, and I think you all know tjie period, and that happens to be the period when the realized price of bars at Chicago was higher than the announced vprice. ' Appendix, p. 14619fl. ' Further testimony on this subject appears infra, p. 14174 et seq. 124491— 41— pt. 27 4 14172 CJONCENTRATION OF EC50N0MIC POWER Acting Chairman King. Was that under the N. R. A.? Mr. Fairless. That is right. Mr. Wooden. Well, is it your position, Mr. Fairless, that the result of an identical delivered price at a given destination, arrived at by using a base price plus extras, plus freight from the base to the destination, is price competition or is not? Mr. Fairless. The basing-point system of arriving at delivered prices is only a method by which the U. S. Steel Corporation, and to a great extent the steel industry, merchandises its products. Now, so far as the actual operation of the multiple basing-point system is concerned, it is purel;^, highly competitive. Why? Because any producer can name at his particular basing point any price he chooses, and even after naming his price, he still reserves the right to use it or not use it as he sees fit. It seems to me that for all practical purposes and for the conserva- tion of time, which I believe is important to all of us, we will concede, if that is the point that you are trying to make, that if base prices as announced were followed in every transaction, and that the nearest basing point to the consumer governed, and that the rail freight was added from that point, and the delivered price arrived at in that manner, there wouldn't be any competition in the steel industry. It would be a one-price industry, pure and simple. Mr. Wooden. Well, then, do you mean to say Mr. Fairless (Interposing). What I do mean to say is that prac- tically speaking, and this is after spending 25 years in this industry, that does not exist except in theory. Mr. Wooden. You mean to say Mr. Fairless (Interposing). Practically every company is out fighting for business and it is attempting to get business on a com- petitive basis. Mr. ^ Wooden. Do you mean to say that competition in price exists when the system is departed from and when the system is adhered to there is no competition in price? Mr. Fairless. Well, I only know one way to state the things and that is in the simple and direct manner. Mr. Wooden. That isn't answering my question. Mr. Fairless. I know that if my price of bars is $40 and I get only $38 for them, I know that my price has been reduced $2. I also know, and the exhibits that we have presented here conclusively show, not from any theory standpoint, but actual developments of our business, that we do not realize, and this industry, I am sure, does not realize its announced prices. I say, "Why?" or somebody says "Why?" It is due to conapetition. Now, when we quote our prices, Mr. Wooden, in the newspapr^rs, the trade papers, those are the prices we want to get. We think they are fair, and my previous testimony has shown how our prices were arrived at. They are not picked out of the air on the basis of how much profit we can exact from an unsuspecting public; they are based on our costs and a reasonable profit that we think we sifiould get for those goods. Mr. Wooden. I wanted to ask you- Mr. Fairless (Interposing). But when we find — pardon me, but when we find that we cannot get those prices, even as fair as they are, due to competition, we reduce them. We reduce them how far? It CONCENTRATION OF ECONOMIC POWEH 14173 is dependent upon the conditions involved in the particular trans- action. Mr. WooDE^r. I take it, Mr. Fairless, that you are in agreement with Mr. Gre^g to the effect that if the system is followed, and to the extent that it is followed, there is no competition in price ; is that right? Mr. Fairless. Well, I thought I had made myself clear. Mr. O'CoNNELL. Well, the answer is "Yes," but you say that as a practical matter, the system is not followed? Mr. Fairless. I have answered it that way. All the things you said, Mr. Wooden, if they were true, then your conclusion or the conclusion I assume that you are striking for, would be true. Mr. O'CoNNELL. May I interrupt? So that as one who looks with favor on price competition, I can be thankful that the system which the steel industry has set up does not work, is that right? Mr. Fairless. Well, although I wasn't present at the time the basing-point system was devised, I still think it is a good method for merchandising steel products, but I say that the United States Steel Corporation would welcome a better method for merchandising its products. It would welcome it. Now, the fact is that we have this plan. When you stop to con- sider that here is an industry, and you are talking about sixty or sixty- five millions of tons of steel capacity, how in the world could these products — and there is a multipUcity of them — how could they be merchandised without a plan? How could the architect who was trying to arrive at the possible cost of a business buUdmg, structure or bridge, do it if he didn't have any basis for knowing how steel was sold? When it comes to the actual transaction, that becomes a matter between buyer and seller, and if there ia any man seated at these tables who ever bought steel in any ciuantitj, and who isn't convinced that there is definite competition in this mdustry, I would be very much surprised. Likewise, if there is anyone who doubts that there is competition in the industry, I would suggest that he put himself in a position to buy, either for himself or someone else, a reasonable quantity of steel. Mr. O'CoNNELL. Well, my comment was merely that, as it appears to be the fact, we can be a little bit encouraged about price com- petition because the basing-point system doesn't work to perfection. Mr. Wooden. Mr. Fairless, as a matter of fact^ haven't there been periods of time when the basing-point system did work exactly to bring about the identical deUvered prices which it is normally cal- culated to produce? Mr. Fairless. It didn't work, you say? Mr. Wooden. Haven't there been periods when it did work? Mr. Fairless. Did work? Mr. Wooden. Yes. Mr. Fairless. It worked beautifully imder the N. R. A. Steel Code. Mr. Wooden. And as a matter of fact, the basiiig-point system was incorporated in the N. R. A. code, was it not? Mr. Fairless. The Code Authority accepted it, yes; definitely. Mr. Ballinger. Mr. Fairless, if the system does not work and the system of pricing in steel is therefore competitive, because ot depar- tures from the system, would you be willing to endorse legislation to outlaw the basing-point system? Mr. Fairless. Well, why? 14174 CONCENTRATION OP ECONOMIC POWER Mr. Ballinger. Well, it doesn't work; why have it around? Some day you might make it work. Mr. Fairless. It does work. The basing-point system was never designed to prevent competition, Mr. Ballinger. It was not so designed and it isn't so used today. Mr. Wooden. It was designed, however, to Mr. Fairless. It is only a method of merchandising our products. Mr. Wooden. It was designed, was it not, Mr. Fairless, ^according to your own testimony, to produce an identical delivered price when followed? Mr. Fairless. My testimony? Mr. Wooden. Yes. In other words, I thought you agreed with Mr. Gregg that if it were followed you would not have any competition in price. Mr. Fairless. On the one hand you are asking me how the system is designed ; then you go from that to how the system works. I would like to answer either question. Mr. Wooden. I don't mean originally intended by design, but I mean calculated to produce certain results. Mr. Fairless. Well, it is definitely my opinion that the multiple basing point system for the distribution of steel products was not designed to prevent or preclude competition. Acting Chairman King. Sort of a merchandising formula? Mr. Fairless. That's right. Mr. Wooden. And yet it produced the effect, as Mr. Gregg said, that if it works, in other words an identical delivered ptice and no competition in price. Mr. Fairless. I should like to clear up Mr. Gregg's testimony — which, of course, I am not responsible for. Acting Chairman King. He was testifying under the N. R. A., was he not? Mr. Wooden. No ; subsequent to that. Mr. Fairless. As I read from'the record, Mr. Gregg said substan- tially what I have just said. Mr. Wooden. That's what I thought. As a matter of fact, do you not, in your pamphlet, "Exhibit No. 1418,"' quote from the N. R. A. report with approval, to. the effect, that '"The outstanding characteris- tic of the basing point system is the fact that it puts rival producers on a footing of price equality with each other in all the consuming points over a wide area"? Mr. Fairless. That's a true statement, but it still doesn't preclude competition in those areas. Mr. Wooden. Are you intending to defend the system itself by show ing that there are departures from it? Mr. Fairless. Well, I didn't know that I was here particularly to defend the system at all. I am here to answer any questions about it. My greatest defense for the multiple basing-point system in this in- dustry would be that I have yet to see any substitute for it that is equal to it, let alone better. Mr. Wooden. As a means of doing what? Mr. Fairless. Of transacting our business in an orderly manner. Acting Chairman King. What are the widest fluctuations in prices of steel during the past 10 or 15 years? • Appendix, p. 14619ff. CONCENTRATION OF ECONOMIC POWER 14175 Mr. Fairless. You mean as between the prices of a certain product? Acting Chairman King. Yes. Have there been very wide fluctuations? Mr. Fairless. Oh, yes. In a 10-year period? Yes. Acting Chairman King. Have there been fluctuations within a year among the producers of steel? Mr. Fairless. There have been some, but substantially the prices that are in effect today, Senator, are those announced June 24, 1938, substantially. So far as announced prices are concerned, that is. Now the realized prices fluctuate. Obviously with the industry operating at almost capacity, as it did in the fourth quarter of 1939, the more nearly were those announced prices realized insofar as the United States Steel Corporation was concerned, but even in that period our records will show that the announced prices were not realized. Mr. Wooden. Mr. Fairless, in that connection, even when the basing point system is working 100 percent and producing an identical delivered price, your mill net realizations fluctuate even then, do they not? Mr. Fairless. The basing point system works 100 percent every day, 24 hours of every day, but it doesn't result in uniform prices, because that isn't the reason that the system is in vogue or practice. Mr. Wooden. Would you say that the present purposes of it are different from what they were when it was originated? Mr. Fairless. I haven^t any idea when it was originated — I wasn't in the picture at that time. But I do know, from 25 years experience, how it works. Acting Chairman King. During your connection with the steel industry, have the prices in various parts of the United States at the same time, same day, same month, same week, same year, varied with respect to steel commodities? Mr. Fairless. Yes. Acting Chairman King. So that the costs for instance in San Fran- cisco for steel would be different fr6m the costs for steel, say, in Pittsburgh or New York? Mr. Fairless. Yes. Mr. Wooden. The delivered price, of course, varies according to the delivery charge, does it not? Mr. Fairless. We announce Mr. Wooden (interposing). You have different delivered prices at an innumerable number of destinations? Mr. Fairless. Certainly. Mr. Wooden. Depending on differences in freight? Mr. Fairless. Well, freight and other considerations. Not en- tirely freight. Mr. Wooden. But freight alone would produce innumerable variations? Mr. Fairless. Certainly. Acting Chairman King. And the cost of production, aside from the freight, would be different, would it not, in the various parts of the United States? Mr. Fairless. Yes. 14176 CJONCENTRATION OF BOONOMIO POWER Acting Chairman King. A steel mill in Provo, Utah, the cost of producing steel there might be very much different from the cost of producing steel in some other parts of the United States? Mr. Fairless. Certainly. Acting Chairman King. And, of course, the transportation costs from Provo to San Francisco or Sacramento or Los Angeles, where probably the greater part of the steel is consumed, would be greater than the transportation costs from Pittsburgh to some of the consum- ing areas nearby Pittsburgh? Mr. Fairless. Steel could be — can be produced in Provo, Utah. It is one of the lowest-cost spots in the United States. Acting Chairman King. That's because of the proximity of coal? Mr. Fairless. And ore. Acting 'Chairman Kjng. And what? Mr. Fairless. And iron ore. Acting Chairman King. The iron ore being a little more than 150 miles away, with fine railroad communications? Mr. Fairless. That's right. Acting Chairman King. So that that's an element then? Mr. Fairless. That's right. Acting Chairman King. The cost of ore, then, is quite an impor- tant factor in determining the price of the finished product? Mr. Fairless. Definitely. Mr. Davis. Mr. Fairless, what percentage of total tonnage is sold at quoted prices and what percentage at lower than quoted prices? Mr. Fairless. What percentage? Mr. Davis. Yes, sir. Mr. Fairless. Do you have some particular period in mind? Mr. Davis. You can take any period you want to. Mr. Fairless. I wouldn't have that information available. Do you have it, Mr. Adams? Mr. Adams. We don't have those statistics available. It depends upon your approach to the subject. Mr. Wooden raised the question as to whether there is competition under the basing-point system, if it works perfectly. From a sales standpoint I would like to say that under Mr. Wooden's definition of the perfect functioning of the basing-point method of calculating delivered prices, that we have competition. Mr. Wooden. You mean that the delivered price is different even under the perfect functioning of the basing-point system? Mr. Adams. I would say that even if we had identical delivered prices at the point of consumption, that there is still competition in the picture by the amount that we would have to' reduce our mill-net return in order to compete in a territory farther removed from our market. Mr. Wooden. But so far as the buyers are concerned at that particular point, the delivered price is the same? Mr. Adams. It might be, but by the same token, under any method of calculating prices you are apt to have identical prices, or uniform prices at the point of consumption, because in your negotiations with a buyer, if he tells you that a competitor has reduced his price and gives you an opportunity to meet that price and take the business, then you have two identical prices. CONCENTRATION OF ECONOMIC POWER 14177 Mr. Davis. There is no competition in price so far as the buyer is concerned, is there, in your industry? Mr. Adams. Our industry is full of competition from the buyer's standpoint. We^are constantly calling upon the larger buyers of steel and we are constantly being told that our prices are not low enough. We have breaks in the market, had one a short time ago where the price went off $8 a ton. Mr. Wooden. A good deal depends upon the general conditions of demand and supply in that connection, I suppose, whether business is active and plenty of it, whether the prices are well maintained or not? Mr. Adams. Well, of course the elements of supply and demand enter into any competitive situation from a practical standpoint. Mr. Wooden. Have there not been instances even during such per- iods as you refer to, where the basing point system wasn't working and prices were being cut, where some buyers continued to pay the full basing point price plus freight from the basing point? Mr. Fairless. Mr. Chairman, can I answer that question? Acting Chairman King. Yes. Mr. Fairless. I would like most emphatically, if I have that ability, once and for all to state our position insofar as the basing point system is concerned. Our contention is that breaks in prices are not a break- down to any degree of the so-called basing point system. We contend that the basing point system was in effect and worked just as well when sheets and other flat rglled products sold for $8 a ton under the market as it did when they sold definitely on the market. There is no relationship, and constantly to be asking us the question about the break-down of the basing point system we don't believe is a fair presen- tation. Everybody, of course, is entitled to his own opinion of the basing point system, but we contend that the basing point system is only a vehicle which we use to merchandise our products. We have told you we use it because we know of no better method to merchan- dise our products. There might be, and if out of these hearings could come that, we would be the first to welcome it. Now so far as competition is concerned, the fact that you have bas- ing points and that prices are quoted as applying to those basing points for various products, and the fact that those prices are not maintained or are maintained or are reduced, so many dollars one time and more or less dollars at another time, are in no way in relationship to the basing point system. That is our contention, and I would like to make that clear if I can, Mr. Wooden. But is it not true, Mr. Fairless, that if price reduc- tions are made that are made, say, secretly, that they constitute a reduction from the delivered price that would be effective if the basing point system were followed? Mr. Fairless. Well, in the first place there are no secrets in the steel industry. Mr. Wooden. No secret price cutting? Mr. Fairless. No, no secrets. When we talk about the prices of flat rolled products being reduced $6 or $8, whatever they were last year, that apphes to the United States of America. Mr. Ballinger. In other words, there is no chance for somebody to slip one over on you in the steel industry? There is no chance for someone to slip one over and cut the price without your knowing it? 14178 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. I didn't say that. I didn't say that. Of course a seller of steel could go to you today, if you happen to be in the market to buy steel, and reduce his price. I don't claim that I would know anything about that. But I do claim that if prices are being reduced on that particular product or products which might be involved for any period of time, I think our people in the field, I think they would know about it. That's what they are engaged for. Mr. Ballinger. Well, at any point where you are selling steel there do the prices differ? I mean have they differed, one producer got a lower price than another one? Mr. Fairless. Certainly. Mr. Ballinger. Many times? Mr. Fairless. Yes; daily. Mr. Ballinger. Tl^ey aren't the same price at destination generally? Mr. Fairless. Generally? WTiat is generally? Mr. Ballinger. I mean all producers are offering at the same price at destination, practically, in general. Mr. Fairless. I don't like to answer that question generally. I don't know; I couldn't answer that. I wouldn't know. Obviously, if markets are not reasonably maintained, then we have new markets, don't we? Mr. Wooden. Is it your position, Mr. Fairless, that unless the delivered prices at given destinations are the same from various com- petitors, that there is not a competitive situation? Mr. Fairless. Well — repeat the question, please. (The question was read by the stenographer.) Mr. Fairless. Well, I really do not know what you mean by that question. What is your poijit? Mr. Wooden. It's simply whether prices at destination have to be the same in order to be competitive from your point of view. Mr. Fairless. No; they don't have to be the same. I have jio control over whether they are the same. Mr. Wooden. Are they competitive at given destinations when they are not the same? Mr. Fairless. What is your question? Mr. Wooden. Are they competitive at given destinations when the prices are not the same? Mr. Fairless. Why certainly. Mr. Wooden. And competitive also when they are the same? Mr. Fairless. They could be. Mr. Wooden. .Yes; all right. Haven't you advanced the theory in your pamphlets that they should be the same at destination in order to be competitive? Mr. Fairless. I don't think so. Mr. Wooden. You quoted from N. R. A. to the effect that that was the outstanding characteristic of the basing point system, didn't you? Mr. Fairless. Generally speaking, the general policy was that if we are selling a group of steel consumers an identical product that we should charge each of those consumers the same delivered price in that particular locality. As a matter of fact, the law also says we should. Mr. Wooden. Do you mean by the same delivered price the same as the delivered price of competitors? Mr. Fairless. Well, it may or may not be. I tried to make that point. I will be very glad to repeat it if you choose. CONCENTRATION OF ECONOMIC POWER 14179 Mr. Wooden. That is all right. Acting Chairman King. If you fix the price at which you would sell, for instance, in Pennsylvania, in Philadelphia, that wouldn't preclude a competitor from selling at a higher or lower price. Mr. Fairless. No, sir; not at all. However, at no point and at no time do we ever attempt to get higher than our announced price. Mr. Davis. Mr. Fairless, was there any variation in delivered prices quoted by the different steel companies under the operation of the N. R. A. code? Mr. Fairless. I couldn't answer that. I couldn't answer that. Obviously I couldn't myself know. Mr. Davis. Can you answer that, Mr. Adams? Mr. Adams. No, I can't answer that. I wasn't in the steel in- dustry then. Mr. Wooden. Mr. Fairless, in that connection I believe you testified here in November, referring to the Birmingham differential, that it was a rare instance when you got the full Birmingham differ- ential in a period of the last 7 years. Do you recall that? Mr. Fairless. I don't think I made that statement in my testi- mony. Seven years? I said that generally speaking the differential had been eliminated prior to the abolition by our announcement of June 24, 1938. Mr. Wooden. If you did make such a statement did you intend to include in it the N. R. A. Code period? Mr. Fairless. No, I did not. Mr. Wooden. Seven years would have included it. Mr. Fairless. Did I make a definite 7-year statement? Mr. Wooden. I so read it myself. Mr. Fairless. Myself? Mr.. Wooden. Yes, that's the way I read it. I believe you said the basing point system was incorporated in the N. R. A. Code. That code, did it not, specified the basing points for various products and provided that the delivered prices should be fixed according to basing points plus all rail freight to destination. Mr. Fairless. Correct. Mr. Wooden. And were you chairman of the Committee on Commercial Matters that functioned during that period? Mr. Fairless. Part of tbe time. Mr. Wooden. Did that committee have to do with implementing the code by promulgating or preparing a series of rules and regulations or recommending such a series of rules and regulations? Mr. Fairless. Well, that committee which was appointed by the Code Authority and was responsible to the Code Authority dealt with all commercial matters pertaining to the steel industry during the duration of the steel code. Mr. Wooden. Didn't that Code Authority you refer to cpnsist of the Board of Directors of the American Iron and Steel Institute? Mr. Fairless. And others. Mr. Wooden. What others? Mr. Fairless. Government officials. Mr. Wooden. Didn't the code itself provide that the Institute Board of Directors should be the Code Authority? Mr. Fairless. Yes, but the Board of Directors was augmented in order to provide a place for certain Government representation. 14180 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. When the code passed out under the Supreme Court decision in the Schechter case in May 1935, the industry, did it not, passed a resolution to continue the commercial provisions of the code in effect as well as some other provisions? Mr. Fairless. I can't answer that. I was not a director of the institute at that time. Mr. Wooden. Were you not in a position in the industry to know whether or not the industry did adopt such a formal resolution to con- tinue the code after June 1935? Mr. Fairless. Continue the code? Mr. Wooden. Continue the Standards of Fair Competition which are described in the Steel Code? Mr. Fairless. As I say, I was not a director of the institute and I am not familiar with what happened at that time. I became a director in 1937. Mr. Wooden. Are you without knowledge on that subject? Mr. Fairless. Well, I'm certainly not without practical knowledge. I know, and the performance of the industry will certainly show, that immediately upon the abolition of the Steel Code and the N. I. R. A. that steel prices became highly competitive almost overnight, and the results as shown in our charts will prove iust that assertion. Mr. Wooden. Do you recall working as chairman of the Committee on Commercial Matters on various resolutions or regulations to sup- plement and implement and make more effective the working of the code? Mr. Fairless. Yes, sir. Mr. Wooden. One of those resolutions related, did it not, to the charging of certain arbitrary switching charges at certain basing points? Mr. Fairless. Arbitrary? Mr. Wooden. Yes. Mr. Fairless. Well, I recall, that a switching charge of 50 cents was established for Pittsburgh and 60 cents for CI '^ago. Mr. Wooden. Those arbitrary switching charges "^^e promulgated in the form of a commercial resolution, were they not.'' Mr. Fairless. I believe they were. Mr. Wooden. And was that a matter that you handled as chairman of this Committee on Commercial Matters? Mr. Fairless. I don't remember whether that came up at the time I was chairman or not. I was a member of the committee and later, in the latter days of the code, became its chairman. Mr. Wooden. Those arbitrary switching charges that were included in that resolution have continued in effect, have they not? Mr. Fairless. Yes, sir. Mr. Wooden. You state that, I believe, in your Exhibit 1418, page 64, footnote. You state that that practice has generally been followed dince the code. Mr. Fairless. That is right. Mr. Wooden. That, I take it, means that not only you but ypur competitors follow that practice? Mr. Fairless. Generally speaking. Mr. Wooden. And those arbitrary switching charges are in some cases more and in some cases less than the actual switching charges, are they not? C50NCENTRATI0N OF ECONOMIC POWER 14181 Mr. Fairless. In most cases less. Mr, Wooden, Yes; but they run both ways to some extent. Mr. Fairless. In most cases the actual switching charge is higher than the rate charged. Mr, Wooden. But there are some cases where it is lower. Mr. Fairless. There might be, undoubtedly are. Mr. Wooden. What is the purpose of having a switching charge added to the base price which is not the actual switching charge? Mr. Fairless, In our case it is the desire to treat all of our cus- tomers in a given territory on the same basis and reflect in their deUvered prices a constant charge for transportation within the basing zone. Many times those customers are competing one against the other. Mr. Wooden. And isn't it true that the producers at some of these basing points where the arbitrary switching charges apply have vary- ing actual switching charges? Mr. Fairless. Have actual? Mr. Wooden. Yes. Mr. Fairless. I would assume so. Mr. Wooden, And does not this arbitrary switching charge unify the switching charge which the various producers in' that area may use, rather than using their own actual and varying switching charge? Mr. Fairless. Well, there isn't any mystery about ii, it is simply a standard charge that is made for switching in these big switching areas as represented in Chicago and Pittsburgh. It was designed to be fair to the consumers of steel in those particular territories. It was designed so that on the average it would actually cost the steel pro- ducers in their territories more than they received for transportation in order to make it 100-percent fair. Mr. Reynders. If there were different switching charges in that area, wouldn't automatically all the producers assume the low one, whatever it might be? There would be uniformity as a matter of automatic conditions. Mr. Fairless. That is right. Mr. Wooden. But under this rule or regulation or resolution whatever one calls it, the switching charge was standardized on this arbitrarv basis, was it not? Mr. Fairless. I have answered that, yes. Mr. Wooden. Do you recall the resolution which set up that arbitrary switching charge and the reasons given in the preamble to it? Mr, Fairless. No, I can't remember that. Mr. Wooden. It is Resolution No. 20. Do you recall that it was cited that there was a great diversity in the switching charges at various basing points? Mr. Fairless. I don't recall. I am wilhng to accept it if you have the resolution; we can save a lot of time, Mr. Wooden. Do you recall that the resolution stated that the reason for making an arbitrary switching charge was to insure uniform practice? Mr. Fairless. Well, that would be a very good reason, if given. We have all these customers in the same territory, buying the same steel, using it for the same purposes in many cases. It certainly would be a proper reason for bringing about uniformity in their ^osts. 14182 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Unless you had a standardized switching charge you would not be able to have an identical deHvered price in that switching area, would you, with the actual switching charges varying? Mr. Fairless. Obviously, obviously. Mr. Wooden. There was another of those commercial resolutions under the code which I understand your pamphlet to state represents the general practice, and that is with reference to the figuring of delivered prices when dehvery is taken by truck.' Under the code the resolution provided that where the buyer took delivery by truck, in his own truck, that he should be allowed 65 percent off of the rail trans- portation, did it not? Mr. Fairless. He would be quoted a delivered price and then he would be credited with 65 percent of the all-rail transportation charge involved in the transaction. Mr. Wooden. Meaning that he would be quoted a delivered price on all-rail delivery and then when he brought his own truck to take delivery he would be allowed 65 percent off the all-rail delivery, mean- ing that he paid a premium or an excess of 35 percent in order to take delivery in his own truck? Is that correct? Mr. Fairless. Do you want me now to explain all about this? Mr. Wooden. I want you to tell me if that is correct. Mr. Fairless. Again there isn't any mystery about handling our truck deliveries. Mr. Wooden. Is my statement of it correct? Mr. Fairless. No; it wasn't correct. The inference behind your statement isn't correct. Mr. Wooden. Will you tell me what the factual situation is? Mr. Fairless. That is what we would like to do. Mr. Adams can do that very hurriedly .- Mr. Adams. On truck deliveries where we contract with a common carrier, the truck company, to deliver our products to destination, we charge the all-rail rate of freight. We do that because in our analysis of rail rates versus truck rates we find that there is practically no difference. There may be a difference of a few cents here or there, but generally speaking they are approximately the same. If we sell our material on a delivered-price basis, as we always do, and a buyer wants to send his truck to our mill to pick up that mate- rial, we quote the delivered price predicated upon a transportation cost which is equal to the rail rate and we deduct from that 65 percent of that rate. Our object in doing that is something that we do not attempt to conceal. We are attempting to discourage the use of trucks in the transportation of our products for many reasons. In the first place, our production facilities are not laid out to haul all of our products by truck, small truck loads. We couldn't possibly ship 12 to 15 million tons of finished products throughout this coun- try each year and use trucks. There is not enough space in our plants to handle trucks on that basis, so it is an attempt on our part to dis- courage the use of trucks in the handling of steel products. Also there is the question of the material being damaged in transit, and other items of that character. Mr. Wooden. If a buyer takes delivery in his own truck, why should you worry about damage in transit? ' Further testimony on this subject appears infra, p. 14184 et seq. CONCENTRATION OF ECONOMIC POWER 14183 Mr. Adams. Well, we don't worry about that, Mr. Wooden, to much of an extent. Our main objective is to discourage the use of trucks because our investment in production facilities is an invest- ment which does not provide for the use of trucking facilities in and out of our plants. Our costs of loading into trucks exceed the cost of loading into freight cars, not only the actual cost but the indirect cost. We can call upon a railroad to deliver a car to our siding and we can be sure that that car will be there at a certain time, but if a buyer sends his own truck to our plant, that truck might arrive at 10 o'clock one morning or at 10 o'clock the next morning, and we have to change our loading programs all around to accommodate that situation. Now, we do it in certain instances as a convenience to our customers, but again, going back to our records for the year 1937, we actually did ship 313,000 tons of steel by trucks in 1937. Mr. Wooden. Charging the 35 percent additional or the 65 percent allowance, depending on how you look at it? Mr. Adams. We haven't that, statistical data available, Mr. Wooden. Mr. Wooden. Well, this practice of adding 35 percent or deducting 65 percent from the all-rail, just according to how you look at it, is a practice that originated by rule under the code, is it not? Mr. Adams. Well, I can't answer that. Mr. Faieless. I can answer, that. It wasn't so much by rule as it was by a study that was made by various producing companies of the actual differences in cost to the steel companies in handling truck shipments versus rail shipments. Also, as I remember, the results of the study established the 65 percent figure, and also it established a saving within, I believe, 200-mile limits, which the steel industry lelt were about the economical limits for trucking. Mr. Davis. Are you talking about your own companies or about your own companies and competing companies? Are you talking about your cost of production? Mr. Fairless. At the moment, we are talking about a matter that came up in the industry during the application of the Steel Code; therefore, it was an industry matter and it was an industry study at that time. Mr. Adams. The fact is, gentlemen, that there are very few of our customers who own their own trucks and want to send those trucks to our mills to pick up steel. On the other, hand, we try to discourage that practice. Mr. Wooden. You would do the same, would you not, in case he hired a truck to come and get his own purchase? Mr. Adams. That is true, but here again, we are dealing with a relatively small portion of our business. The man who owns his truck and sends it to our mills to pick up steel is competing against his competitor at the point of delivery. One man is charged the all- rail freight; the other man who owns his own truck, if he doesn't own it, he hires one and sends it in, whichever the case may be, is charged the all-rail freight, less 65 percent of that delivered transporta- tion cost. In that way, insofar as our own company is concerned, there is apparently no discrimination as between customers, because we are seUmg our products on a delivered price basis, and we try to 14184 CONCENTRATION OF ECONOMIC POWER avoid discrimination in dealing with our diflFerent customers at the point of delivery, who are competing in their markets. Mr. Wooden. Didn't the use of trucks by some buyers who were in competition with buyers who bought all-rail, tend to unsettle the price between those buyers; in other words, didn't the truck buyer own his purchase at destination cheaper than the one who bought all-rail? Mr. Adams. There might be that tendency, of course, but we have a Robinson-Patman bill in this coimtry. Mr. Wooden. Isn't the disturbing effect upon that delivered price figured on the all-rail basis, one of the reasons that you adopted this truck rule — this 35-65 percent? Mr. Adams. I would say the first reason was the few requests that we have had from our customers who come to our mill and pick up material with their own trucks. Now, naturally, it follows that we are interested in the delivered price level at the point of delivery. Mr. Wooden. And the truck delivery tended to disturb or upset that deUvered price, didn't it? Mr. Adams. I would say that it might tend to do that. I wouldn't say that it does, because when you avoid discrimination at the point of consumption by allowing 65 percent of the rail rate, then our deliv- ered prices to the two customers involved, one taking his merchandise by all-rail and the other taking it by his own truck, are approximately the same, taking into consideration the costs involved in the picture. Acting Chairman O'Connell. You used the word "discrimina- tion." There is an element of discrimination- as against trucks in comparison with railroads, isn't that a fact? In other words, in order to compete with the railroads in trucking steel, the truck has to operate on 35 percent less, is that right? Mr. Adams. It would be infinitesimal. It would be very small. We tried to avoid — when I used the word "discrimination," I used it in connection with two customers competing against each other at point of delivery so that we would Acting Chairman O'Connell (interposing). I understand. I was raising a httle different question, because as I understand it, for a truck to compete with a raihoad in trucking steel, it has to be able to operate on 35 percent less revenues for any given job; isn't that right? Mr. Ad.ams. Well, we would allow the buyer who owns his own truck, and there are relatively few of those, 65 percent of the rail rate if he used his own truck. Acting Chairman O'Connell. And that same 65 percent would be all that would be available to him if he were to hire a truck? Mr. Adams. That is right. Mr. Reynders. And as a practical matter, I will ask, your shipping yards are rarely equipped with roads on which a truck could get admission under traveling cranes and so forth, and moreover, in loadr ing a truck, you would be dealing with 5- to 10- ton quantities, whereas with a railroad car, you are deahng with 50- or 100-ton quantities, which must affect the situation in your shipping yard very materially, I should think. Mr. Adams. That is absolutely correct. Our direct and indirect costs involved in loading trucks versus cars Mr. Reynders (interposing). For instance, dropping a 5- or 10-ton load on a truck might injure that truck very seriously, but in the case of a railroad car, that wouldn't be the same situation. OONCENTRATION OF ECONOMIC POWER 14185 Mr. Adams. That is correct, Mr. Reynders. Mr. Wooden. As a matter of fact, though, Mr. Adams, there are some products that are shipped rather heavily by truck, are there not? Mr. Adams. Well, I can only answer that by saying Mr. Wooden (interposing). Your pamphlets say so. Mr. Adams. That in the boom year of 1937, we shipped 313,000 tons by truck, out of a total of roughly 12,700,000 tons of finished products. Now, that is a relatively small percentage of the total. You might say that a large volume of one single product was shipped, when you com- pare that volume to any one customer's total requirements, but from an over-all picture, the percentage /actor is low. Acting Chairman O'Connell. Would this be a convenient place to recess? Mr. Wooden. Any time would be all right. Acting Chairman O'Connell. Several members of the committee want to leave, and as Senator King said, we have only one session tomorrow. We will try to start it at 10 o'clock and continue until we are all in a mood to stop for the week end. We will recess now until 10 o'clock tomorrow morning. (Whereupon, at 4:30- p. m., a recess was taken until Saturday, January 27, 1940, at 10 a. m.) INVESTIGATION OF CONCENTKATIONOE ECONOMIC POWER SATURDAY, JANUARY 27, 1940 United States Senate, Temporary National Economic Committee, Washington, D. G. The committee met at 10:05 a. m., pursuant to .adjomnment on Friday, January 26, 1940, in the Caucus Room, Senate Office Building, Mr. Joseph J. O'Connell presiding. Present: Mr. O'Connell (acting chairman), Senator King, Mr. Davis. Present also: John V. W. Reynders, representing the Department of Commerce ; WiUis Balhnger, Director of Studies for the Federal Trade Commission, and Walter B. Wooden, assistant chief counsel, repre- senting the Federal Trade Commission. Acting Chairman O'Connell. The committee will be in order. Mr. Wooden. TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED STATES STEEL, CORPORATION, NEW YORK CITY— Resumed AND OF AVERY C. ADAMS, VICE PRESIDENT, UNITED STATES STEEL CORPORATION OF DELAWARE, PITTSBURGH, PA. — Resumed the basing point system in the steel industry and deviations FROM IT Mr. Wooden. Mr. Fairless, you testified yesterday afternoon that when one competitor made a lower dehvered price than another com- petitor, that that was a competitive situation. Is that correct ? Mr. Fairless. It certainly indicates that price competition exists. Mr: Wooden. Then why, in your pamphlet ["Exhibit No. 1418"'] did you quote from the N. R. A. to the effect that if a competitor with lower freight costs gives his customer any benefit "he is giving a lower price than competition forces him to give. In other words, he is following some sort of a noncompetitive principle rather than a competitive one"? Mr. Fairless. That isn't my quotation. Mr. Wooden. But the Corporation quoted it from the N. R. A. report, didn't it? Mr. Fairless. If it is in the report I assume we did. Mr. Wooden. Well, how do you reconcile your putting forward that quotation in your pamphlet with the statement that you have just made, that for one competitor to make a lower dehvered price than another is a competitive condition? > Appendix, pp. 14619 fl. 14187 124491—41 — pt. 27 5 14188 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. Mr. Chairman, I believe that this particular quotation is clothed in the language of the economists, and I think I have testified before this committee previously that I am not an economist and I don't at any time pose as one, and therefore I have no comments to make on this particular quotation. Mr. Wooden. But that's the statement of the Corporation, isn't it, by quotiug the N. R. A. report to that effect? Mr. Fairless. I am not questioning the statement if it is in our exhibit — and I assume it is. I haven't read it completely. Mr. WoornN. Now I also recall that you testified yesterday after- noon that you agreed with Mr. Gregg, vice president of your company, when he testified that L' the basing point system were fully operative there would be no competition in price. Is that correct? Mi". Fairless. That is not correct. Mr. Wooden. What is your position with reference to that? Mr. Fairless. My position in respect to Mr. Gregg's testimony, is first, that I am not responsible for his testimony. I haven't it before me, and I don't believe it's fair, and I think the committee will agree that it is decidedly unfair to take from any witness' testimony just a part or a paragraph or a phrase that you care to use in anjr way that you choose, and it seems to me that if this committee is going to pass any opinion in respect to Mr. Gregg's testimony, it should have Mr. Gregg's entire testimony. In respect to my agreeing, agreeing to what? Mr. Wooden. Here is what I read from the Gregg testimony before the Senate Committee on Interstate Commerce in 1936. The chair- man asked the question: "So that if the plan is followed," referring to the basing pomt system, "there is no competition so far as price is concerned." "Mr. Gregg. On the contrary there is competition. To answer your question specifically, if that plan were universally followed there would be no competition insofar as one element of competition is concerned, namely, price." Mr. Fairless. My contention is that competition exists even although two or more companies arrive at the same price or have identical bids, providing, of course, that the conclusion is arrived at legallj^. It seems to me that when two or more companies are inter- ested in getting a piece of business, tonnage, a contract, that has to do with steel, you immediately have competitioji. The fact that each of those companies has announced prices to the public certainly prevents them from charging any price that they might choose to charge. Mr. Wooden. Didn't you Mr. Fairless. Pardon me while I answer. Therefore, the ceiling has been established. Now competition begins. Competition is a very broad term, gentlemen, as you know. We steel people, probably wrongly, but simply because it has been the practice, generally refer to competition as meaning price and refer to it in that manner. Competition, of course, has many factors other than price. To begin with, these various companies are in competi- tion when they name their base prices. United vStates Steel Corpora- tion can't name as a base price for steel products in Chicago or Pitts- burgh or Birmingham any price Mr. Wooden. Pardon me- Mr. Fairless. I am trying to answer your question. (X)NNCENTRATION OF ECONOMIC POWER 14195 products. Now those lines are broken down again by various items. When you say pipe you are speaking about innumerable different types of pipe. Now this advertisement was dated August 1, 1938. We have found two mistakes in it, Birmingham and Worcester, and since that date unquestionably there have been some basing points added. We can testify that— — Mr. Davis (interposing). When? Mr. Adams. — that we have basing point prices at all of our pro- duction points with the exception of a few, and we can name those exceptions. Mr. Davis. When was Birmingham made a basing point, when you eliminated that $3 differential? Mr. Adams. The differential itself was eliminated June 24, 1938. Mr. Davis. And that was when Birmingham was made a basing pouit? Mr. Adams. On what? Mr. Davis. On what you are talking about. You. raised the question. Mr. Wooden. Nails and barbed wire. When did Birmingham become a basing point on nails and barbed wire? Mr. Fairless. I believe it became a basing point on those products at the time they began to manufacture them. Mr. Wooden. When was that? Mr. Fairless. I haven't the definite date. Mr. Wooden. Has it been since July 1938? Mr. Fairless. I haven't the definite date. Mr. Wooden. Can't you say whether it has been since then? Mr. Fairless. I can't say unless I know. Mr. Wooden. What are the basing points on tin plate? Either of you. Mr. Adams. Pittsburgh and Gary where we produce tin plate. Mr. Wooden. What about Granite City? There is one there? Mr. Adams. In the spring of 1937 Granite City announced or noti- fied their trade that on their products there would be a differential' of 10 cents above the published base prices of Carnegie-Illinois at Gary and at Pittsburgh. Mr. Wooden. Then becoming a basing point? Mr. Adams. Sir? Mr. Wooden. And by that becoming a basing point? Mr. Adams. If you want to look at it in that way, yes; there is a differential above the Pittsburgh and Chicago base prices of our com- pany. That is an example of a company announcing a lower base price. Mr. Wooden. Now there are only three basing points on tin plate. Is that right? Mr. Adams. If you consider Granite City a basing point on tin plate Mr. Wooden (interposing). And only two otherwise. Mr. Adams. The answer is yes. Mr. Wooden. There are oth^- points of production of tin plate that are not basing points, are there not? Mr. Adams. Yes. Mr. Wooden. What companies, and where? 14196 CONCENTRATION OP ECONOMIC POWER Mr. Adams. One of our subsidiaries, the Tennessee Coal, Iron & Railroad Co., produces tin plate at Birmingham. Mr. Wooden. What competitive companies produce tin plate and where? Mr. Adams. Well, there are a number of companies that produce tin plate. We are testifying for our own company. Mr. Wooden. You know the industry well enough to know what companies produce tin plate besides yourself, don't you? Mr. Adams. Well, we know that Bethlehem produces tin plate. Also Republic. Mr. Wooden. Tell us where? Mr. Adams. Bethlehem and Republic. Acting Chairman O 'Conn ell. W^here do those two companies produce tin plate, do you happen to know? Mr. Fairless. Republic at Warren, Ohio, and Bethlehem at Sparrows Point. Mr. Wooden. Pittsburgh is the only basmg point for tin plate, then, in the eastern section of the country, isn't it? Mr. Adams. That is correct. Mr. Wooden., The prices for tin plate in the eastern part of the country are all based on Pittsburgh as a basing point, are they not? Mr. Adams. Well, we quote delivered prices. Mr. Wooden. Based on Pittsburgh. Mr. Adams. We announce a price at Pittsburgh, base delivered price at Pittsburgh. Mr. Wooden. And the delivered prices in the eastern part of the country are the equivalent of Pittsburgh plus freight, all rail freight, to destination, are they not? Mr. Adams. Our price is composed of our published base delivered price plus our transportation cost to destination, providing we don't have to deviate from that price level. Mr. Wooden. And the Bethlehem Co. producing tin plate at Sparrows Point, if and when it follows the basing point system, adds the freight from Pittsburgh right to Sparrows Point or Baltimore when it is selling in that locality, does it not? Mr. Adams. I can't testify for the Bethlehem Steel Co. as to what prices they would quote on tin plate. Mr. Wooden. Don't you know that the basing point system con- templates that it v.'ill do so? Mr. Adams. We have testified that the basing point system is a vehicle for merchandising our products, that it works every hour of the day, and that it does not promote uniform prices. Mr. Davis. Mr. Adams, regardless of how you acquire them, as a matter of fact does your company not acquire the price quotations of your competitors and have them on hand all the time? Mr. Adams. We would not be doing our job if we were not famihar with the published prices of our competitors.' Mr. Davis. Well, in fact you are familiar with them, are you not? You know what their published prices are. Mr. Adams. Why, certainly. Mr. Davis. And don't you know when they deviate from them unless they are secret rebates? Don't you keep up with that? ' Further testimony on this subject appears infra, p. 14197 et seq. CONCENTRATION OF ECONOMIC POWER 14197 Mr. Adams. We don't believe that there are any secret rebates in the steel industry, but it is certainly the responsibility of our salesmen to keep us informed regarding variations in price in the field, at the points of consumption. Mr. Davis. In other words, as a matter of fact in actual practice you have on hand and keep up with the quoted prices of your com- petitors and whether or not they are deviating from those quoted prices, as I understand it. Mr. Adams. As nearly as we can keep up to date, with reference to the prices which our competitors quote at points of delivery, we do that, and certainly make every eflPort to do it every day of the week. Mr. Wooden. Then you know whether or not Bethlehem Corpo- ration, for instance, is maintaining the price in the eastern part of the country, don't you? Mr. Adams. Within our ability to ascertain that fact we do. Mr. Wooden. And don't you find that the price is ordinarily main- tained on the basis oi Pittsburgh base price plus freight to destination? Mr. Adams. Are you talking tin plate now? Mr. Wooden. Yes, yes. Mr, Adams. I don't know that one can answer that in terms of "ordinarily." We know that the prices of tin plate have fluctuated over a period of time. We have alreadv testified as to the^ deviations or the fluctuations in the price of tin plate over the last 3 years. Mr. Wooden. Didn't you hear Mr. Grace's testimony here before this committee that he followed the prices of the Steel Corporation subsidiaries on tin plate? Mr. Adams. I didn't hear Mr. Grace's testimony. I wasn't in the room that particular day. I would say that when the subsidiary companies of the United States Steel Coropration puhlish a price that that is t'je ceiling price and that the BetJilehem Steel Co. couldn't expect to make a serious attempt to get that business at any higher price. Now I can't testify as to. the extent that the Bethlehem Steel Co. would reduce their prices below our published prices. Mr. Wooden. Did you read Mr. Grace's testimony? Mr. Fairless. I did, Mr Wooden. Mr. Wooden. Didn't he testify that he followed the prices, the base prices of the Steel Corporation subsidiaries as announced? Mr. Fatrless. We are discussing tin-plate, I believe. Mr. Grace made the statement — it so reads in his testimony — that his company did vary from their announced prices in respect to tin plate. It is a matter of record. Mr. Wooden. Didn't he also testify, and didn't the American Can Co. officials testify, that the other companies followed the announced prices of the Steel Corporation's subsidiaries on tin plate? Mr. Fairless. In about 2 minutes I believe I could unfold the entire method of selling tin plate. Mr. Wooden. I am directing your attention to what you heard and what you read. Mr. Fairless. If the committee is interested. You have it, of course; it is all a matter of record. Mr. Wooden. I am asking your recollection of the testimony. Mr. Fairless. Well, I am not going to attempt to recall the testi- mony. I am here to give testimony and answer any questions you ask me if I can. 14198 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. What is the difference between the way tin plate delivered prices are calculated on Pittsburgh for the eastern part of the United States and the way various steel products were calculated on a Pittsburgh plus basis back some years ago? Mr. Fairless. Well, I can't answer that except to tell you and tell the committee, rather, how our tin plate sales are handled. We produce tin plate at three points, at four points in the United States, Pittsburgh, Chicago, Birmingham, and Pittsburg, Calif. Our pro- duction at Pittsburg, Calif, is very small. It is largely at the other three points.- We have basing points in Chicago and Pittsburgh. We have not as yet established a basing point in Birmingham, for this reason: We began the operation of that plant just a year ago, there is very little tin plate business in the Birmingham district except that which is controlled by the two large can companies. The Carnegie- Illinois Steel Corporation had contracts and has contracts with both of those companies, so in order to get Birmingham under production and under way and give it an opportunity to prove its quality and the many other things that are involved in the manufacture of this very sensitive product, the Carnegie-Illinois Steel Corporation with the consent of these two companies with which it had contracts, allocated to Birmingham a certain amount of that business for production, and that is the only business that has been produced at Birmingham since the mill went into operation. Therefore, no basing point has been established and our policy in respect to that has not definitely been established as yet. Mr. Wooden. Is the price of tin plate in Birmingham based on Pittsburgh plus freight from Pittsburgh? (Senator King assumed the Chair.) Mr. Fairless. Well,- 1 don't believe there is any tin plate sold in Birmingham, or used in Birmingham. If there is, it is just a very few base boxes. Mr. Wooden. Is there any tin plate sold or used in the southeastern part of the United States? Mr. Fairless. Yes. Mr. Wooden. Are the prices on tin plate delivered to those places in the southeastern part of the country the equivalent of Pittsburgh base price plus freight from Pittsburgh? Mr. Fairless. All-rail freight? Mr. Wooden, Yes. Mr. Fairless. No, sir ; not in all cases. Mr. Wooden. Are they the equivalent of Pittsburgh base price plus rail and water freight in some cases? Mr. Fairless. And water in others. Mr. Wooden. Yes. Is that right? Mr. Fairless. That is right. Mr. Wooden. Pittsburgh is the single basing point for tin plate in the eastern part of the United States. Isn't that correct? Mr. Fairless, It is the only point at which we make tin plate in the eastern part of the United States. Mr. Wooden. And isn't it the only basing point for the whole industry in the eastern part of the United States? Mr. Fairless. I can't answer that. Mr. Wooden. Can you answer it, Mr, Adams? CONCENTRATION OF ECONOMIC POWER 14199 Mr. Adams. I can only testify for our company. Mr. Wooden. And do you mean to say that you don't know whether Pittsburgh is the only basing point for the quotation of tin plate in the eastern part of the United States? Mr. Fairless. Well, I can answer that, Mr. Adams, So far as any other public announcement of any basing point for tin plate in the eastern United States, Pittsburgh is the only one. But that does not mean, Mr. Chairman, that mills producing tin plate do not sell tin plate on the basis of their own production point, and we wouldn't know, we have no way of knowing that. Most of our tin plate is sold to two customers, except for export plate, and sales to those two are made on a contractual basis, and the conditions and terms of those contracts are known to this Committee. Mr. Davis. Didn't you gentlemen say that you received and kept up with and observed the price quotations of your competitors and did your best to keep up with whether or not they deviated from them? Isn't that correct? ^ Mr. Fairless. No; it is not correct. Mr. Davis. Didn't you say that, Mr, Adams? Mr. Adams. I made the statement Mr. Davis. Didn't you make that statement in substance? Mr. Adams. I made the statement that it is our job to ascertain what the published base prices are of our competitors, and further than that I said that it was our job to ascertain to what extent the delivered prices fluctuated from time to time. That is a measure- ment of competition. That's part of a salesman's job. Now when Mr. Wooden asks a question as to whether or not there are any other base prices in the eastern part of the United States on tin plate, we have. to say that we don't know, to make an honest statement covering all situations. Now if he asks a question as to whether there are any published base prices in the eastern part of the United States other than Pittsburgh, we have to reply that we publish a base delivered price on tin plate in Pittsburgh. We don't know of any other pub- lished base prices on tin plate in the eastern part of the United States, but as Mr. Fairless testified, we don't know accurately. We can't speak for the Bethlehem Steel Corporation, or any other corporation here, right down to the last transaction, as to whether or not they are quotiug prices on their own producing points or prices that approxi- mate that. Mr. Wooden. Well, you know Mr. Davis (interposing). Do you have in your files the Bethlehem quotations on prices on tin plate? Mr. Adams. We wouldn't have in our file the Bethlehem quotations on tin plate. No. Mr. Fairless Certainly not. Mr, Adams. How would we secure such quotations? Mr. Davis. Their price list? Mr. Fairless. We might wish we had, Judge Davis. Mr. Wooden. You know their published prices, do you not? Mr. Davis. Their pubhshed prices, if you want to quibble over terms. Mr. Adams. Judge Davis, we don't want to quibble over terms. 1 See p. 14196, supra. 14200 CONCENTRATION OF ECONOMIC POWEB Mr. Davis. I think that you are- Acting Chairman King (interposing). Let's ask the question and proceed. Mr. Davis. I will refrain from saying-what I think. Acting Chairman King. Proceed. Mr. Davis. Haven't you already admitted that you did obtain, we'll say, the published price quotations of your competitors? Mr. Adams. Certainly, Mr. Davis. And kept them and observed them? Mr. Fairless. No, we didn't say that. Mr. Adams. Let us get this straiglit. We try to secure it. Let us say that we do secure a list, if you please, by some method, of all of the published prices of our competitors. Now we secure that from trade journals if they are published in trade journals. Mr. Davis. Are they not always published in trade journals? Do not the companies? always publish — are there not published in the trade journals in the industry the prices? Mr. Adams. If there ar6 3^0 companies manufacturing sheets, I would say that their prices are certainly not all published in trade journals. There are a few of the larger companies that do publish their prices and those publications get in the trade journals, but there is a vast distinction between a published base price and a quotation, Judge Davis, and when you ask me if we have a record of the Bethle- hem Steel Co.'s quotations, I certainly must answer in the negative. Mr. Davis Do you ever see any of their quot-ations? Mr. Adam j. Certainly we see some of their quotations. Mr. Davis. You s6e those and you see their prices pubhshed in the trade journals, do you not? Mr. Adams. We see their published prices in the trade journals. Mr. Davis. Now Mr. Adams (interposing). Let me answer your question so that it won't be misinterpreted. WTien I say we receive quotations of the Bethlehem Steel Co., I have to restrict that to a very, very few cases where we become so friendly with the buyer that he says, "Here is the quotation that the Bethlehem Steel Corporation has made. " Now are you seriously interested in securing our business, and if so, will you reduce your price level to a point where you would take that business?" — if the quotation is below our quotation. Now we have no large list of any quotations of the Bethlehem Steel Corporation. We probably secure one every 3 months or something like it to that e.xtent, but we do know what their published prices are. Mr. Davis. All of that is preliminary to an effort to get an answer to Mr. Wooden's question. Now have you ever observed in any of these trade journal publication of prices or any of the trade quotations that have come to your notice from the public, where they have not made a quotation on Pittsburgh plus freight from Pittsburgh to the point of delivery in the eastern United States? Mr. Fairless. Still talking tin plate. Judge Davis? Mr. Davis. Yes. Mr. Adams. We have testified for the record that the price Mr. Davis (interposing). I would like for you to first answer my question and then you can make your explanation. Mr. Adams. Well, I can't very well answer it without stating our position. We have testified that the prices of tin plate have deviated CONCENTRATION OF ECONOMIC POWEK 14201 or fluctuated over the period of the last few years. There have been reductions in the price of tin plate. Mr. Wooden. Take some particular quarter when an announced price is out. Haven't you found, haven't you made it a business to find out whether the delivered prices in the eastern part of the United States are the equivalent of Pittsburgh plus freight to destination? Mr. Adams' We have made it a part of our job to ascertain, yes, what the delivered prices were, Mr. Wooden. And aren't the delivered prices of tin plate in the eastern United States the equivalent of Pittsburgh base price plus freight to destination? Mr. Adams. Not in all cases; no, sir. Mr. Wooden. In most cases? Mr. Fairless. Absolutely not. Mr. Adams. No, sir; we can't make a statement to that effect. Mr. Wooden. Is it true in some cases? Mr. Adams. Why, I assume that it would be true in some cases that the price on tin plate in the eastern part of the United States would be equal to our published price at Pittsburgh plus our transportation costs but by the same, token I want to make the point that that covers a few cases or some cases Mr. Wooden (interposing). And you don't know what proportion of the business it applies to? Mr. Adams. No, sir; I do not know what proportion of the business it applies to. Mr. Davis. Will you prepare and present for the record a detailed explanation of any deviations within the past 12 months by your company or any other company from the Pittsburgh plus prices in the eastern United States?- Acting Chairman Ktng. Just for my own information, how would he ascertain from other companies Mr. Davis (interposing). Any of which he has knowledge, his own company or subsidiaries, or any of his competitors of which he has knowledge. Mr. Wooden. He says he makes a business of finding out what com- petitors do. Mr. Fairless. Mr. Chairman, we are given credit for knowing entirely too much about what goes on in the steel business. Mr. Ballinger. You said there are no secrets in the steel business. Mr. Fairless. Mr. Chairman, I wish that we did know exactly the basis upon which every base box of tin plate was sold in the eastern part of the United Stateis Mr. Wooden (mterposing). Or any other part of the United States. Mr. Davis. Mr. Fairless, I said of which you had knowledge. I restricted it to your own company and its subsidiaries, and affiliates. Mr. Fairless. Well, I can answer Mr. Davis (interposing). And of your competitors which has come to your knowledge, and the reason I put that in was because Mr. Adams suggested that there had been deviations. Mr. Fairless. Well, Judge Davis, I would have to answer that question for our Corporation in this way. We know exactly how we sell our tin plate in the eastern part of the United States — we know exactly. We have no definite information in respect to how any other 14202 CONCENTRATION OF ECONOMIC POWER company sells its tin plate. Our salesmen hear that a customer is buying tin plate for such and such a price, and it may or may not be true. To make a statement as defimte-as you are asking for in respect to the prices at which competitors of the-United States Steel Corpora- tion sell their products is just asking for something we can't give you. Mr. Davis. Will you prepare and file that information with respect to your own company and its own subsidiaries? Mr. Fairless. File it? File what? Acting Chairman King. The statement, as I understand it, of deviations Mr. Davis (interposing). Showing any deviations within the past 12 months from the Pittsburgh price Mr. Fairless (interposing). Plus all rail freight to destination. Is that your question? Mr. Davis. All rail or rail and water, transportation to point of delivery in the eastern United States. Mr. Fairless. Can we furnish that information? Mr. Davis. Yes, and will you? I know you can do it. Will you? Mr. Fairless. What is the point? Does the committee want this information? Mr. Reynders. Isn't that giving out a lot of trade information in regard to their own company without corresponding information from competitors? It seems to me that is going far afield when you ask them to give out all their quotations. Mr. Davis. These gentlemen are insisting -that there are many deviations from the application of the basing point system, and I think that this comiiiittee is entitled to know to what extent there are exceptions. They are the ones that persist in stating the ex- ceptions, and I think the committee has a right to know the^extent of those exceptions, and I don't think that prices made upon goods that have been sold is any trade secret, and that they are entitled to keep it from this committee or the public generally. Mr. Fairless. Mr. Chairman, in respect to tin plate the United States Steel Corporation sells, exclusive of export, a very high per- centage, a very high percentage of its plate to two people, to two customers, the American Can Co. and the Continental Can Co. Our transactions with both of those companies are governed by contracts. All the terms and conditions having to do with price, delivery, cash discount and all the features of sale, are parts of those contracts, and Government representatives in getting information relative to these hearings saw those contracts and read them. Now, I don't know what further information we can give. You talk about delivery of tin plate by the United States Steel Corporation in the eastern part of the United States. It is largely to those two customers. Mr. Wooden. How many other customers do you have? * Mr. Fairless. Very few. Mr. Wooden. How many? Mr. Fairl^ess. I don't know. Mr. Wooden. How many, approximately. As against two, do you "have as many as ten others? Mr. Fairless. My answer is, I don't know the number of custo- mers. The tonnage that we sell to customers other than these two is a very, very small percentage of our total. CfONCBNTRATION OF ECONOMIC POWEiR 14203 Mr, Wooden. Do you sell tin plate to jobbers? Mr. Fairless. Some. Mr. Wooden. You have a good many jobber customers en tin plate in the eas*-em part of the United States, don't you? Mr. Fairless. No; we do not. Mr. Adams. Very few. Mr; Wooden. What do you mean by very few. Do you have 100? Mr. Adams. No, sir. Mr. Wooden. Fifty? Mr. Adams. No, sir. Mr. Wooden. Twenty? Mr. Adams. We might have sold a few boxes of tin plate. Mr. Wooden. Do you have many tin plate jobbers in the eastern part of the United States? Mr. Adams. I don't think so. Mr. Wooden. Do you have as ipiany as 10? Mr. Adams. I don't think we have 10. Mr. Wooden. How many do you have? Mr. Adams. I would say offhand perhaps four or five jobbers of tin plate in the eastern part of the country. Mr. Wooden. Do you deviate from Pittsburgh plus on sales to those customers? Mr. Adams. We don't sell on Pittsburgh plus, we sell on a delivered price basis. Mp. Wooden. Which is the equivalent, plus freight to the desti- nation, isn't it? Mr. Adams. It is our publfehed delivered price Mr. Wooden. At Pittsburgh, plus the freight to destination. Mr. Adams. Plus our transportation cost to destination, providing we don't change that price on account t)f a competitive situation. I have testified here that there have been deviations in tin plate, and Judge Davis said, "Will you file the list of deviations over a period of twelve months?" My testimony was that we have had deviations, and then Judge Davis said, "Then to that extent the basing-point system hasn't worked. In other words, will you file a record pointing out where the basing-point system has not worked?" We still contend that the basing-point system is working every day, that it is simply a vehicle for merchandising our products, and that deviations in price or fluctuations in price, or a raising and lower- ing of the price level at the point of delivery, does not constitute a change in the basing-point system insofar as whether it works or whether it does not. The basing-point system is still a vehicle for nierchandising our products, and it is working all the time. Mr. Wooden. Even when the delivered prices are not identical under it, do you say it is still working? Mr. Adams. Certainly. Mr. Wooden. Does that mean that the base price is being cut or that some element in the delivery price is being cut? Mr. Adams. We tried to explain that yesterday. Now, we have a chart here which we would be glad to introduce to show how we arrive at our delivered prices, to show to what extent we change those delivered prices due to the necessity to reduce them to get a piece of business in a territory closer to a competing mill than our production point. We also have on that chart figures which show that our 124491 — 41— pt. 27 6 14204 CONCENTRATION OF ECONOMIC POWER reductions in price on certain products exceed the reductions necessary to reduce our price to the level of the price quoted. Mr. Wooden. You are talking about mill net yields now, are you not? Mr. Adams. Yes, sir. Mr. Wooden. Mill net yields are continually varying, are they not? Mr. Adams. I am talking about a reduction in our delivered price. Mr. Wooden. Yes. Mr. Adams. Brought about by two factors, and those factors in eflFect make it necessary for us to reduce our mill net returns. Mr. Wooden. You have to reduce your mill net return when you go into the territory of another basing point, do you not? You have to absorb freight and reduce your mill net return, is that correct? Mr. Adams. In a great many cases that is true. Mr. Wooden. And you absorb the freight just to the exact amount necessary to equalize your delivered price, do you not? Mr. Adams. We do not- absorb freight. Freight, as I testified yesterday, has to be paid, nobody absorbs it. Mr. Wooden. That is a quibble, if I ^^ay say so. I agree that freight is not absorbed, but isn't that i\.^ expression that is used in the industry? Mr. Adams. I think you are so familiar with this subject, Mr. Wooden, that you know that nobody absorbs any freight. Mr. Wooden. The freight has to be paid and it is paid by the purchaser, is it not, and deducted from the face of the invoice? Mr. Adams. It depends upon the procedure followed, yts. Mr. Wooden. Ordinarily isn't that the case, that freight is not prepaid ordinarily by the shipper of plate? Mr. Adams. That is correct. Acting Chairman King. And is added to the price the customer pays? iVIr. Adams. Yes; it is a transportation cost like the transportation cost involved in assembling our "raw materials, except that this last transportation cost exceeds the transportation cost on the finished product. Mr. Wooden. The customer deducts the freight from the invoice and pays the railroad the full freight and remits to you the balance, does he not? Mr. Adams. The customer pays the freight that is added in the transaction. Mr. Wooden. He pays it to the railroad. Mr. Adams. We are interested — our company is interested — in the actual transportation cost. Mr. Wooden. The customer pays the freight to the railroad and deducts it from the face of the invoice and remits the balance to you. That is your mill net, isn't it? Mr. Adams. No; our mill net is the — well, you have got adjusted freight absorption and unadjusted freight absorption which were explained yesterday. Mr. Wooden. Your mill net is what you get for your commodity after the freight is taken off and paid by the purchaser. Mr. Adams. After the freight is taken off and after any reduction in price. Mr. Fairless. Cash discount allowance. CONCEN^'RATION OF ECONOMIC POWER 14205 Mr. Adams. After cash discount allowance, that is the mill net. Mr. Wooden. The mill net represents the actual price received for the commodity. Mr. Adams. Yes, sir. Mr. Fairless. That is correct. Mr. Wooden. I still don't understand whether we are going to have the statement of deviations from Pittsburgh plus freight to destination on tin plate for a 12-month period. Acting Chairman King. I understood, Mr. Fairless, that the con- tracts with those two large patrons would show the exact transactions between them, and you have shown those contracts. Would that answer the question or the requirement which was made by Judge Davis? Would those contracts show the deviation? Mr. Fairless. I have already stated here, Senator, that we do not in the distribution of our tin plate charge our — keep in mind that we do not make tin plate except in Pittsburgh in the East, so we begin with our producing point and our basing point in Pittsburgh. Now, one of the questions asked, I believe, was, Do we charge our posted price for tin plate plus the all-rail charge, transportation charge, to destination in every case? My answer is "No, we do not." Mr. Davis. Yes; but I modified it by saying all-rail or rail and water. Mr. Fairless. Eventually you did. Acting Chairman King. Make your statement, and then let him answer you. Mr. Fairless. Another question was, Do we sell any tin plate on our Pittsburgh price plus our all-rail? Certainly. Certainly we do. Then the question was asked. What percentage? I would have to go through, or cause someone to go through, all our records to develop that. In other words, we do not have that information available. I will say that a very great percentage of our eastern tin-plate sales are sold on the basis of our announced price on tin plate. Mr. Wooden. Now then Mr. Fairless (interposing). Pardon me. Now another question was asked, and much time spent on it: How do your competitors sell? I don't know. That is my answer. Mr. Wooden. You do know, do you not, Mr. Fairless, that Mr. Grace testified,^ and Mr. Pfeltz, of the American Can Co., testified ^ that the tin-plate price announced by the Carnegie Steel Co. and the Carnegie-Illinois Steel Corp., was followed and adopted by the other tin-plate manufacturers, and that the tin-plate contract of the Ameri- can Can Co. provided that it would be so accepted; isn't that a fact? Mr. Fairless. I don't believe I should be asked to review the testimony of other witnesses who appeared before this committee last November. As far as I am concerned, my own testimony is a matter of record, and I assume theirs is also. Mr. Wooden. Don't you know the facts to be as I stated, not what the testimony is, but aren't those the facts in the industry? Mr. Fairless. I shall relate again, if you want me to repeat, the facts pertaining to how the United States Steel Corporation subsidiary companies merchandise their tin plate. 1 Mr. drace's testimony appears in Hearings, Part 19. • Mr. Pfeltz' testimony appears in Hearings, Part 20. 14206 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. I don't want that as far as I am concerned. I do want to ask whether what I say is a fact. Acting Chairman King. What is the question you ask? If you can answer it categorically, do so ; if you can't, say so. Mr. Wooden. Whether it isn't a fact that the other producers of tin plate competitive with the Corporation subsidiaries for years made contracts with the American Can Co. or other can companies pro- viding that their price to the can companies would be the price announced by the subsidiaries of the United States Steel Corporation. Mr. Fairless. My answer to that question is, I do not know. Mr. Wooden. Do you know, Mr. Adams? Mr. Adams. No. Mr. O'Connell. Mr. Wooden, may I interrupt for a moment? It seems to me the committee being fairly familiar with the testimony of Mr. Grace and some of the other people who testified here in November, does recall that Mr. Grace did say that in general his com- pany felt that the price announced by Carnegie-Illinois after nego- tiating a price with the various can companies was acceptable to his company and was what as a matter of general practice they followed. I think the committee knows that and I don't see any real reason for pressing Mr. Fairless on it. I think it is general custom in the industry with which we are familiar. Mr. Davis. I wish to observe in that connection that the United States Steel Corporation has filed a large volume of material with this committee, which they asked to be received by the committee, and regardless of what Mr. Grace or any other member of the industry may have testified, that Mr. Wooden has a right to question him, the president of the largest unit in the steel industry, as to what the facts are as he knows them. Acting Chairman King. There is no one denying that, and I think the witness has answered, but the question as Mr. Wooden just stated it was to ask him to state his recollection of the testimony of other witnesses. He may or may noi have been here. If Mr. Wooden wants to ask any other question/ he may proceed. Mr. Wooden. The witness said he didn't know. Mr. Davis. He asked him whether he agreed with the correctness of the statement. That was simply a basic question which is certainly absolutely legitimate, I submit, especially when we are having as much difficulty as we are. Mr. O'Connell. As I understood Mr. Fairless, his answer was that he didn't know. I was merely indicating that the committee does know what Mr. Grace testified an4 Mr. Grace did indicate that was the custom in the industry. Mr. Wooden. I asked Mr. Fairless if that wasn't a fact in the industry. Mr. O'Connell. And he said he didn't know. Mr. Wooden. That is correct. Actmg Chairman King. Proceed. Mr. Wooden. Mr. Adams, how many basing points in the industry are there on rivets? Mr. Adams. I can't answer that, Mr. Wooden. I wouldn't have the slightest idea. CONCENTRATION OF ECONOMIC POWER 14207 Mr. Wooden. This exhibit, the adverti. 3ment of Repubhc Steel,' shows only four. Mr. Fairless. It might interest you to know we don't manufacture them. Mr. Wooden. All right, I am asking about the basing points in the industry, not merely what the Steel Corporation manufactures. Mr. Adams. I can't answer that because there are too many prod- ucts and too many basing points involved to be able to answer that. We can supply that information. Mr. Wooden. About how many are there on washers? Mr. Adams. I couldn't answer that. Mr. Wooden. Don't you know tliere are only three basing points on washers? Mr. Adams. I don't know whether there are three or thirty. Mr. Fairless. Mr. Wooden, I believe that you are getting into the fabricator's field rather than the steel man's field. We feel that our particular function in respect to rivets, bolts and nuts and washers, etc., is to sell steel to those who manufacture these products, and that is the extent of our participation. Now when you get into the basing points of those more or less finished products, you would have to call in the industry that manufactures them, and it doesn't happen to be the steel industry. Mr. Wooden. Are they rolling mill products? Mr. Fairless, The raw material is, but not the finished product. Mr. Wooden. Not the finished product. Do you have such products in mind, Mr. Adams, when you talk about the number of basing points there are in the country? Mr. Adams. No, sir; I only had in mind the number of basing points on products that the United States Steel Corporation manu- factures, really tonnage products from that standpoint. Mr. Wooden. Now I would like to come back to the matter we touched on yesterday afternoon regarding the continuation of the resolution adopted during the Code period which related to the charging of 35 percent of the all-rail rate on truck deliveries, deUvered in the purchaser's own truck. Mr. Adams, you testified that you imposed that 35 percent addition to the base price on truck deliveries. Mr. Adams. Mr. Wooden, I don't believe I testified in that way. Mr. Wooden. I know you put it as a 65 percent deduction but isn't that equivalent to a 35 percent addition? Mr. Adams. I set forth yesterday the fact that the Steel Corpora- tion shipped 12,700,000 tons of finished products in 1937, that we shipped 313,000 tons by truck, that in those truck shipments we contracted with common carriers to deliver certain products and cer- tain tonnages to customers, and that in connection with that trans- action we added transportation equal to the railroad rate of freight to destination from our producing point. Now that covered one part of the shipment of 313,000 tons. I further testified that there were very few of our customers who owned their own trucks and wanted to deliver steel to their plants by their trucks. When they did ask us to deliver steel by way of their own ' "Exhibit No. 2199," appendix, facing p. 14428. 14208 CONCENTRATION OF ECONOMIC POWER trucks, we charged the all-rail rate of freight and allowed 65 percent, feeling that the customer was entitled to some credit for the use of his own truck in that connection, and that we had two objectives in mind in following that policy, the first being that in the market at the point of delivery we would have two or maybe a dozen customers in the same line of business competing one against the other. One would own his own trucks and maybe the balance of a dozen would have shipments come in by rail. We felt that it was a fair policy, because it placed our customers who were competing against each other in the market at the point of delivery on a comparable footing insofar as their cost of raw material was concerned. The second point I made in connection with our policy was the added cost that accrued to our company at our producing points in loading oiir steel into trucks when the plants were laid out to load steel into railroad cars. Now that is our policy, we think it is a fair policy. Mr. Wooden. And it is the industrjr policy too, isn't it? Mr. Adams. I can't speak for the industry, Mr. Wooden. I can only speak for the Steel Corporation, and I say that with all sincerity because we believe — I have reason to believe from reports that I receive from salesmen — that there have been a good many deviations from that policy. Mr. Wooden. I refer you to ^age 71 of your pamphlet, "Exhibit No. 1418," where you say that the practice generally exists in the in- dustry of doing what you say you have been doing here. Mr. Adams. I will accept that. Mr^ Wooden. You state that in your own pamphlet, that that is the general practice. Mr. Adams. I will accept that. I would like to have the members of the committee remember that, in compiling these pamphlets, there were a number of people employed to secure as much information as we possibly could secure for the benefit of this committee. Now if there are a few statements which are not entirely accurate, there might have been an error in the preparation of the pamphlet, and when we use the word "general," there are always exceptions. There have been exceptions to this policy. To what extent, I don't know. I am only setting forth the fact that it is our policy when a customer owns his own truck, and sends it to our plant, that we add to our px^o- ducing-point price the railroad transportation cost and allow him 65 percent. Acting Chairman King. You have read the paragraph to which Mr. Wooden refers, have you not, Mr. Adams? I will read it: A practice generally eiists in the steel industry of including in the delivered price to a buyer, who accepts delivery by sending his own truck to the mill, the rail freight from applicable basing point to destination, and allowing ^^m a credit equal to 65% of the rail freight from mill to destination. This might be construed to mean that the buyer always pays one-third of the rail freight used in calculating the delivered price for the privilege of taking delivery by his own truck. This is true, however, only when the mill is at the basing point freightwise nearest to the buyers' destination. If the mill is not at any basing point, the effect of this practice will be either to increase the amount realized by such mill in excess of the base price at the basing point as a result of its geographical location, or merely to decrease the freight absorption which would result from a rail shipment. CONCENTRATION OF ECONOMIC POWEOR 14209 And then examples are given. Do you wish to modify that statement or do you accept that generally? Mr. Adams. I think if we accept the word "general" to mean what it was meant to imply, that we should accept that; yes, sir. Acting Chairman King. You accept that statement, do you, with the explanation you have made? Mr. Adams. With the proper explanation of the word "general"; yes, sir. Mr. Fairless. Mr. Chairman, I would like to clarify one phase that I don't beheve has been cleared in respect to trucking. Here is a customer and here is a steel i)lant. For the product that the cus- tomer uses, the governing basing point is this producer's. Here is our steel plant, 150 miles away. This customer sends trucks into our plant. Keep in mind that we are governed pricewise by this basing point here, not by our basing point, but the allowance freight- wise is the allowance from our plant to the consumer, not from the basing point. Mr. Wooden. Mr. Adams, thiii 35-percent addition to the base price, which you say is equivalent to 65 percent reduction from the all-rail freight, that has no relation to the cost of loading on trucks, has it? Mr. Adams. I think we are talking about approximately the same thing, Mr. Wooden, but we look at it from the standpoint of allowing 65 percent. Now that is 65 percent of the Mr. Wooden (interposing). Didn't the Chairman just get through reading the Corporation's own statement that that might be construed to mean that the buyer pays one-tliird, but that it wasn't always true he did, and giving the qualifications? Mr. Adams. Yes; and the example was cited and carried on through the rest of the paragraph. Mr. Wooden. Now the 35-percent is applied to the all-rail freight, isn't it? Mr. Adams. The 65 percent. Mr. Wooden. All right, the 65 percent is applied to the all-rail freight. Mr. Adams. Is allowed. Mr. Wooden. The cost, or the amount added there, would be varying according to the amount of the freight, being in a percentage. Mr. Adams. Yes, sir. Mr. Wooden. That varying percentage could have no relation to the cost, could it, the cost of loading or things of that sort? It would be the same all the time? Mr. Adams. We think that it strikes an average, although you can't say that it is predicated exactly on costs any more than you can say that extras are constantly predicated on costs because of changing cost conditions. Mr. Wooden. You said yesterday afternoon that you used this method in part to discourage truck delivery, is that correct? Mr. Adams. That is correct; yes, sir. Mr. Wooden. Now you state on page 70 of Exhibit No. 1418 that manjT^ types of wire products also can be carried economically by 14210 ^ CONCENTRATION OF ECONOMIC POWER truck. 1$id you want to discourage tlie economical delivery of wire products by truck? Acting Chairman King. Answer it if you can and make any explana- tion you care to make. Mr. Adams. We don't try to discourage any economic procedure if it is found to be economical when all factors are analyzed. Mr. Wooden. Do you charge the 35 percent on deliveries by truck of wire products? Mr. Adams. I think we allow 65 percent of the delivery cost on wire products, Mr. Wooden. Mr. Wooden. Which can be carried economically by truck accord- ing to your own statement on page 70 of your Exhibit No. 1418. Mr. Adams. We have already testified that we have shipped 313,000 tons by truck. Now the assumption is that that would not have taken place if it was not an economical procedure. Mr. Wooden. Did you two gentlemen, or either of you, ever read the report of the Federal Trade Commission to the Senate on the operation of the Steel Code with reference .to this truck-delivery matter? Acting Chairman King. Under the N. R. A.? Mr. Wooden. Yes; but the practice is still in effect. Acting Chairman King. Did either of you witnesses read that report? Mr. Fairless. No; I haven't. Mr. Adams. I haven't read it. Mr. Wooden. That report, on pages 32 to 35, describes this truck matter and quotes the written complaints and objections of various concerns who were adversely affected by it. The names of the con- cerns were given, the addresses were given, quotations from their complaiuts to the N. R. A. were given. They included shippers of steel, they included purchasers of steel, they included trucking companies, all complaining of the adverse effect, the damaging effect of that 65 percent or 35 percent matter, on their business. (Mr. O'Connell assumed the Chair.) Mr. Fairless. Shippers of steel complained? Mr. Wooden. Some. Mr. Fairless. Why didn't they change it? Mr. Wooden. It was under the code. Mr. Fairless. Under the code? Mr. Wooden. Yes. Mr. Fairless. . There aren't any complaints now, are there, Mr. Wooden? Mr. Wooden. I am just going iuto this matter that there were. And I would just like to ask you whether you think, in view of the complaint from concerns like that, that the objection or criticism of this aspect of the pricing methods of the industry are in the field of mere abstract criteria and abstruse theory? Mr. Fairless. I should like to attempt to reply to that question, broad as it is. It seems to me, Mr. Chairman, that it would be impossible to have any merchandising plan in any industry approach- ing the size of the steel industry without having some complaints, justified and unjustified. Now this trucking problem that is up for discussion — I really shouldn't have referred to it as a problem because it isn't a problem CONCENTRATION OF ECONOMIC POWER 14211 between the United States Steel Corporation and its customers. It is impossible for the United States Steel Corporation to establish a principle for handling this particular phase of our business and have it apply 100 percent in all cases. On the other hand, it would be impossible for us to conduct our business day by day without having some general over-all policy that dealt with this important subject. Now when we say that we charge the customer the all-rail freight from our producing plant to his consuming plant, and then allow him 65 percent of the all-rail freight involved, that is our general overall poHcy. And in administering that policy we have found cases— a very small percentage of the total — where it works an in- justice to certain peoi)le, due to their peculiar location, due to the peculiarity of their business; and in each and every one of those cases, to the best of my laiowledge, we have made adjustments in this over- all policy to satisfy the customer completely. Now I cite you an outstanding example. In the southwestern part of the United States there is a great market for so-called oil-country goods. The United States Steel Corporation's leading subsidiary in respect to the manufacture of tubular products, the National Tube Co., maintains a stock in Houston, Tex. That is our own stock. We sell that to our various customers in that district, and in many cases — as a matter of fact most cases — they send their trucks, be- cause trucking lends itself satisfactorily to that particular part of the country, and to that particular business, because an oil well is not located adjacent to a railroad siding. In that case we charge those customers simply a handling charge for placing the material out of our stock into their trucks, so there is a big deviation from this so- called principle. But m defense of it in respect to this particular part of the country, in the East and the Middlewest, this particular policy of ours appUes, generally speaking, very satisfactorily, and while we still have some cases that cjme up that we have to deal with on a special basis, they are very small; and we do deal with them on a special basis. Mr. Wooden. Are you now trying to say that it is not the genera practice in the industry, as the pamphlet said it was? Mr. Fairless. I am perfectly willing to have the reporter read what I have just said. Mr. Wooden. Well, what you mean by it is what I am getting »l. Mr. Fairless. Just what I said. EFFECTIVENESS OF COMMERCIAL RESOLUTIONS SINCE N. R. A. Mr. Wooden. Well, Mr. Fairless, there are a number of other com- mercial resolutions that were adopted during the code period, were there not, besides these two that are discussed in your pamphlet? Mr. Fairless. I assume so; yes, sir. Mr. Wooden. I understand that a number of those resolutions are still in effect in the industry. Is that correct? Mr. Fairless. I would have to answer "no" to that question, to give a "yes" or "no "answer. Mr. .Wooden. Do you mean to say that none of the others, none except these two that we have been discussing, are still in effect? Mr. Fairless. Well, I should hke to deal with specific matters. Now what is it you want me to answer? 14212 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Tell us whether or not any other of the commercial resolutions adopted under the code besides these two that we have been discussing, such as the allowance on truck deUveries and the matter of arbitrary switching charges, whether any others are still in effect. Mr. Fairless. Mr. Chairman, it seems to me that before I answer any question that Has to do with the steel Code under N. I, R. A. days, that I should know what we are talking about. I am only asking for the particular resolution, if there is such a thing in evidence. What is it? Mr. WooE»-.N. Well, you said yesterday you did not know that there was a resolution of the industry continuing the standards of fair competition provided for in the Code. Mr. Faipless. I did, sir, and I gave my reasons. I was not a Director of the Institute and how would I know? Mr. WcoDEN. The trade press gave it out that ninety percent of the industry joined in those resolutions, and you weren't aware of it. Is that right? Mr. Fairless. I have answered the question. Mr. Wooden. I have here a letter, dated December 18, 1939, from Mr. Irving S. Olds to James R. Brackett, Executive Secretary of the Committee, in which he states in reply to a question as to the matter of these commercial resolutions- I am informed that the officials oi Jnited States Steel Corporation know of no amendments or modifications since June 1935 of commercial resolutions and regu- lations adopted during the NRA Code period, or similar statements or announce- ments of commercial practice made since June 1935. Was that matter taken up with either of you gentlemen before that answer was made? Mr. Olds. Don't you think I had better answer that question, Mr, Wooden? I discussed that matter with Mr. Fairless before I wrote that letter. Mr. Wooden. Yes. Well then, Mr. Fairless, with that to aid you, can you tell us whether some of these other commercial resolutions of the code period are still in effect? Mr. Fairless. There are no resolutions of the code period or any- thing having to do with the code officially in effect in the United States Steel Corporation. Mr. Wooden. Are they in practical effect in the industry? Mr. Fairless. Well, Mr. Chairman, I again appeal to you. I want to be just as helpful as I can, but I can't answer these questions that are put here for the obvious purpose of confusing the issue. Now I am perfectly willing to answer Mr. Wooden, but I cannot answer — he asked me a question about something that I don't know what he is talking about. He has some particular thing in mind. Now what is it? Mr. Wooden. You were chairman of the committee that handled those matters during the code period? Mr. Fairless. Part of it; yes. Mr. Wooden. And you can't tell me whether any particular ones other than these two are still in effect? Acting Chairman C'Connell. Mr. "Wooden, I think that Mr. Fairless' point is fairly well taken. He apparently is not cognizant in detail of the situation to which you are referring. I think that if CONCENTRATION OP ECONOMIC POWER 14213 there are particular commercial practices which were put into eflFeot in that period that you have reason to believe are still in effect, that we might address ourselves more precisely to them. Mr. Wooden. Can you tell us, Mr. Fairless, whether the resolution, number ten, which fixed the maximum deduction of 38 cents per ton from the base price that could be made on Southern foundry pig iron of a certain quality is still in effect? Mr. Fairless. I can't answer it. Mr Wooden. Can you tell us, Mr. Adams? Ml. Adams. I never heard of it, Mr. Wooden. I don't think it is in effect. Mr. Wooden. As a matter of fact, isn't the differential 38 cents a ton between Southern pig iron of certain quality for shipment to Northern points? Isn't it 38 cents stUl? Mr. Adams. I can't answer that. Mr. Wooden. I direct your attention to the Iron Age for January 13, 1938, which carried a note to the effect that that is the differ- ential between Southern foundry pig iron for shipment to Northern points. Mr. Fairless. It might be helpful, Mr. Wooden, and also to the committee, to clarify our position in respect to shipments of Southern pig iron to so-called Northern points. Acting Chairman King. Can you answer that question yes or no? Mr. Fairless. I don't know. I wanted to ^ive a reason why I wouldn't know. We do not ship Southern pig iron to Northern points; we serve our Northern customers from Northern production and our Southern customers from Southiern production. Mr. Wooden. You don't know enough about the industry to know whether a differential of 38 cents per ton is recognized still between Southern foundry pig iron of certain quality and Northern pig iron? Mr. Fairless. I do not. Acting Chairman King. Mr. Fairless, do you know whether there is any difference between the prices in the Northern field and in the Soutliern field? Mr. Fairless. Oh, yes; definitely. Acting Chairman King. Do you know what the differentials are? Mr. Fairless. You mean the schedule of prices, Northern pig iron versus Southern pig iron? Acting Chairman King. Yes. Mr. Fairless. Mr. Adams has them or can get them. I don't know what it is exactly but there is a differential, there is a difference of quality, of course. Acting Chairman King. Judge Wooden, is it material — I express no opinion — to show what was done under the N. R. A. with a view to determining what is being done or what ought to be done now? It may be relevant. Mr. Wooden. I am inquiring to find out if it isn't being done now. That is the purpose. Acting Chairman King. Would that be for the purpose of ratifying the conduct of the N. R. A. or approving it or disapproving it? Mr. Wooden. I wouldn't attempt to state any purpose in it, but simply to show what the facts are, whether or not the N. R. A. arrangements have continued since the N. R. A., and the resolutions 14214 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. Well, the answer to that, just what you have ex- pressed, is definitely no. Mr. Wooden. I am asking you about particular resolutions. Mr. Fairless. My answer covers any or all resolutions. Every one of the resolutions that you are referring to went out with the code. Mr. O'CoNNELL. Then the point is that subsequent to the invali- dation of the N. R. A. there was a voluntary move on the part of the industry to continue Mr. Fairless (interposing). That was the question that Mr. Wooden put up to me and my answer was that I was not a director at that time and I therefore am not qualified to say. Mr. Wooden. Can you tell me whether or not the regulation or resolution that was specified under the code with regard to shipments for structural use in an identified structure is stUl the practice? Mr. Fairless. No, sir; it is not now the practice. Mr. Wooden. Didn't it continue to be the practice after the code for some time? Mr. Fairless. Well, to be very specific in my answer, the provision of that particular resolution didn't exist during the code. Mr. Wooden. Weren't you aware of complaints being made by fabricators of the deleterious and damaging effect of that upon their business? Mr. Fairless. I have answered with the statement that the resolu- lution was never effective, even during the code. Mr. Wooden. Haven't you seen announcements of companies in the industry as late as 1936 specifying that condition with regard to shipments for an identified structure? Mr. Fairless. What condition? Mr. Wooden. That the place of erection or the nearest place to it should be considered the destination point, rather than the place of fabrication. Mr. Fairless. You are talking about f. i. t. privileges now, aren't you? Mr. Wooden. Yes. Mr. Fairless. That is a big subject. Mr. Wooden. I don't want to go into the whole subject. 1 was asking about that particular phase of it. Mr. Fairless. I should Hke to clear up that phase. Acting Chairman King. Answer it as compactly as you can. Mr. Fairless. I should like to clear up the phase I think Mr. Wooden is trying to develop, whether or not the steel industrj^ is carrying on in effect the resolution having to do with the f. i. t. privi- leges during the code, and my answer to that question is short and very definite, and the answer is no, they are not. Acting Chairman King. Generally speaking — I use the word "gen- erally" because it is so frequently used — were any of the activities or proceedings under the code continued after its abrogation, after it ceased to be effective as a legal organization, if it ever was? Can you answer that, were the practices under the code continued after its invalidation? Mr. Fairless. I can answer that question probably better, Senator, by telling you that many of the practices that were made compulsory und er the code were practices that were already in existence for a long time in the industry before there was a code or an N. I. R. A., and CONCENTRATION OF ECONOMIC POWER 14215 they existed because they were fair, they were reasonable, and they were accepted by both producer and seller. For example, we spent much time yesterday afternoon in discussion of the freight rate within various switching districts such as Chicago and Pittsburgh. I think I have developed the information in respect to that. Now the mini- mum freight rate in the Pittsburgh district to any plant^ anybody that we do business with, is 55 cents. The raaximum freight rate is 99 cents. Our charge is 50 cents. In Chicago the minimum is 65 cents — these are actual figures taken from our records — and the maximum is 90 cents. Our charge is 60 cents. In Birmingham, the minimum charge is 70 cents, the maximum is $1.80. Our charge is 50 cents. In Cleveland the minimum is 42 cents, the maximum is 84 cents. Our charge is 50 cents. That had to do with a provision of fair practices, trade practices, during the steel code and it has con- tinued. Here is a very good reason why it has continued, because in each case, with the exception of Cleveland, and to what extent there I am not familiar enough with to give you the exact percentage, but in every other case our charge is less than the minimum freight rate to any customer in the district. POLICY OF PRICE ANNOUNCEMENT SINCE SPRING OF 1936 Mr. Wooden. In the spring of 1936, Mr. Adams^ did the Cori)ora- tion begin some new policy with regard to publication of base prices? Mr. Adams. I didn't come with the Corporation until June 1936. Mr. Fairless. I was there. Mr. Wooden. Will you answer, then? Mr. Fairless. What is the question? Mr. Wooden. Whetiber or not the Corporation or its subsidiaries began a new policy of price announcement in the spring of 1936. Mr. Fairless. To the best of my knowledge; no. Mr. Wooden. Did they at that time put out announcements saying that the price for the particular quarter would be certain amounts at particular basing points or points of production of the Corporation? Mr. Fairless. I think that had been the practice in vogue for a long time. Your question was a departure or change. Mr. Wooden. Yes. Mr. Fairless. No change so far as I know. Mr. Wooden. Are you aware of any change in the policy or practice of other companies about that same time, on the same subject? Mr. Fairless. No, sir. Mr. Wooden. I ask you whether or not there wasn't some dis- cussion among leaders of the industry during the early part of 1936 with regard to instituting a poUcy, a practice, of published announce- ments of base prices. Mr. Fairless. No, sir. Mr. Wooden. Didn't the subsidiaries of the Corporation put out announcements in the spring of 1936 stating that only deliv.ered prices would be quoted? Mr. Fairless. It has been the practice, and still is, quarterly for the subsidiary companies to announce their prices for the ensuing quarter. There was no change in respect to that. Mr. Wooden. Hasn't the practice been to quote only delivered prices? 14216 CONOENTRATION OF ECONOMIC POWER Mr. Faikless. That is our method of selling our products. Mr. Wooden. And that is also the method of selling that is followed by the industry generally, isn't it, only- delivered prices? Mr. Fairless. I can't answer that, I^on't know. Mr. Wooden. WeU, aren't these pamphlets that you offer here, "Exhibit No. 1418",' based on the admission that that is the practice in the industry to quote only delivered prices? Mr. Fairless. I don't know, I can't tell you what this industry does, how they conduct their business in individual companies. Mr. Wooden. Doesn't this pamphlet, 1418, undertake to describe how the industry conducts its business with regard to making dehvered prices? Mr. Fairless. I think it does in a general way, yes. Mr. Wooden. WeU, then, you do know that that is the practice, the general practice of the industry, to quote dehvered prices only? Mr. Fairless. Generally speaking I believe the industry quotes dehvered prices, but I have no way of knowing that that method is covered completely, or is uSed completely. Mr. Wooden. You have reviewed this pamphlet, have you not, before it was submitted? Mr. Fairless. In a general way, yeS, sir. Mr. Wooden. Do you understand it to be an explanation or an analysis of the delivered price system with the use of basing points to calculate dehvered prices? Mr. Fairless. Certainly with respect to the United States Steel Corporation and its subsidiaries. Mr. Wooden. And also for the, industry? Mr. Fairi sss. Mr. Wooden, it seems to me that we could save a lot of time, x know you are busy and I certainly am; I would like to put aside, once and for all, the question of what our competitors do in all cases. I don't know. Mr. Adams. I think Mr. Wooden has the answer to his own question if he accepts the Form B returns. The industry went to a great deal of trouble and expense in attempting to give the committee through the Form B returns a cross-section of just what takes place. All the dehvered prices are in there, the question of transportation costs, and all of those factors, so you can determine fron those returns just what our competitors are doing, and we can't testify to that. Mr. Wooden. I call your attention to a publication in the Iron Age of January 7, 1937, summarizing the conditions in the industry for the year 1936 and characterizing a certain program of open-price announcement as being the most successfid price stabilizing move- ment the steel industry had experienced other than the steel code. Can you teU me what that has reference to? Mr. Fairless. I cannot. I don't recall the article. I would assume it would be an opinion of some writer for Iron Age. Mr. Wooden. It is further stated in that article that Mr. Girdler, president of Republic, initiated the movement at the beginning of the second quarter, making his announcements for the second quarter Does that recall anything to your mind? Mr. Fairless. Not a thing. 1 Appendix, pp. 14619 ff. CONCENTRATION OF ECONOMIC POWER 14217 Mr. Wooden. The Iron Age article also says that other steel com- panies followed the RepubUc's example and announced openly their seUing prices. Mr. Fairless. When? Mr. Wooden. 1936. Mr. Fairless. My dear sir, we have been announcing openly our selling prices for years. We didn't begin in 1936. Mr. Wooden. That is why I am asking about it. Mr. Fairless. The answer is, as far as United States Steel Cor- poration is concerned, we have not adopted any new selling policies as rumored by Iron Age or anybody. Mr. Wooden. The Iron Age also says that other companies followed the Republic's example. Do you know anything about that? Mr. Fairless. I know one that didn't. Mr. Wooden. You continued the policy you had before? Mr. Fairless. That is right. Mr. Wooden. As a matter of fact, didn't your company send out announcements to its sales managers that some price announcement program was going to be begun in May 1936? Mr. Fairless. I haven't any idea what you are driviijg at. Why don't you give me just exactly what you have in your mind and we could save a lot of time? Acting Chairman King. I think the question is proper. Answer if if you can. Mr. Wooden. I might say in this general connection that I have certain extracts and portions of documents on which my questions are based and I understand that without formal identification of them, which I am not prepared to make at this time, I cannot oflFer them, so I am somewhat handicapped and I am asking the questions as I do for that reason. Will you produce the letters to sales managers dated May 21 and May 23, 1936? Do you have them? Mr. Fairless. Mr. Chairman, representatives of this committee visited many of our subsidiary companies and have gone through our files, everything that they asked for has been presented, and if this committee has any letters written by any of our people of which some explanation is necessary or deemed advisable, we will be very happy to give it. Acting Chairman King. The judge asked if you had those letters. Mr. Fairless. To ask us just for a letter written May 21, 1936, I imagine there were many letters written May 21 having to do with sales matters and sales poHcies. Mr. Wooden. Announcing the beginning of your price announce- ment program. Acting Chairman King. If you have the letters here will you ex- hibit them? If you haven't, say so. Mr. Fairless. We have a letter of that date. Of course, I don't know whether that is the letter. Mr. Adams. If you have a letter, Mr. Wooden^ Mr, Wooden. I have a portion of such a letter purporting to have been written to all managers of sales by J. H. McKown, assistant vice president and assistant general manager of sales, Carnegie- 14218 CONCENTRATION OF ECONOMIC POWER Illinois Steel Corporation, dated May 21, 1936, and it contains these statements (reading from "Exhibit No. 2200"): We will begin our price announcement program by announcing prices on bars and small shapes, later strip, then sheets, and oTir other commodities will be given consideration as promptly as possible. Do you recall such an annoimcement being sent out to your man- agers of sales? Mr. Adams. Again I will have to say, Mr. Wooden, I wasn't with the company at that time. Mr. Fairless. I really don't know anything about it. Mr. Wooden. You don't have anything in mind as to what the beginning of your price announcement program was at that time? Mr. Fairless. I do not, sir. The only change that I can think of in respect to price announcements that has been made by our Cor- poration since my connection with it had to do with deHveries during a quarter. Now the poHcy in vogue in our Corporation for a long time was to announce prices for a quarter, which meant that business could be taken during that 3 months at the prices announced. Now we have varied from that in respect to one feature, and that is that we announce our prices for deUvery within that quarter. If that is what you are referring to, Mr. Wooden, I can clarify it, otherwise I can't. That was to clarify our deUveries, otherwise we would be shipping into second and third and maybe fourth quarters, material at the first quarter price. Mr. Adams. I think, Mr. Wooden, that perhaps I can answer your question. , Mr. Wooden. My question was whether that meant anything to you and you said you weren't with the company. Mr. Adams. I said I wasn't with the company, but since you asked me that question I have located the letter involved and it brings back Mr. Wooden. May 21? Mr. Adams. May 21, 1936, signed by Mr. J. H. McKown, assist- ant vice president and assistant general manager of sales, Carnegie- Illinois Steel Corporation. Mr. Wooden. Might we have a copy of it? Mr. Ad^ams. Certainly, sir. Do you want me to read it? Mr. Wooden. I would Uke to offer it for the record. Acting Chairman King. You give us a copy. Mr. Adams. Certainly; I will be glad to d6 that. Mr. Wooden. You have also a circular letter to the sales nlanagers by the same writer dated May 23, 1936? Mr. Adams. Yes, sir. Mr. Wooden. Will you supply a copj of that also? Mr. Adams. Certainly. I think this is the letter you have reference to, Mr. Wooden. Let me explain the change that took place, if I can. Mr. Wooden. WeU, what do you know about it if you weren't with the company then? Mr. Adams. It simply indicates a change in the formal method that was followed. Prior to that time, as I understand it, the writers for the trade journals would ask us what our price was going to be for a quarter. We would tell them and our prices would be published in the trade journals. About this time in 1936 we decided to not only tell CONCENTRATION OF ECONOMIC POWER 14219 the trade journals but to advise our district sales offices in the way of a formal letter and a ^ormal announcement, so that each of our customers at the various points of delivery would have a definite written formal notice from us regarding the delivered prices that we were amiouncing for the quarter. It is just a technical change of procedure, as I understand it. Now beyond that I can't go, Mr. Wooden. Mr. Fairless. You will also find that representatives of the T. N. E. C. already have copies of this letter. Mr. Wooden. Is it in evidence? Mr. Fairless. You have copies. Whether it was offered in evi- dence I can't answer. Mr. Adams. All of these letters are in your file. Mr. Wooden. I would like to offer them in evidence. Mr. O'Connell. They are not in the record so far as I know, so we might as well get them in. Mr. Wooden. I offer them for the record. Acting Chairman King. If on examination it i& found that they have been introduced there will be no necessity of reproducing them. (The letters referred to were marked "Exhibits Nos. 2200 and 2201," respectively, and are included in the appendix on pp. 14428 and 14429-14430.) Mr. Adams. I understand these letters were given to the Depart- ment of Justice. They are not in the record of the proceedings. Acting Chairman King. The Department of Justice has copies of these letters, has it? Mr. Adams. Yes, sir. Mr. W^ooden. Referring to the letter of May 21, 1936, which is in the record as "Exhibit No. 2200," ^ what does it mean, Mr. Fairless, about the statement that "We will begin our price announcement program"? Mr. Fairless. I believe Mr. Adams can answer the question more fully than I can. Mr. Wooden. He wasn't with you then. Mr. Fairless. He is with us now, he knows our practices, obviously. Mr. Adams. As I miderstand it, that language was simply used to describe a change in our procedure. As I have said, the prior pro- cedure was to notify the trade journals or if they came to us and asked us on or about 30 or 45 days prior to the beginning of the calendar quarter what our price would be for the quarter, we would tell them and they would publish it. That was one method of notifying our customers in general. Then we decided to change that procedure to the extent of actually having printed, having sheets of paper printed, which we sent out to our district sales offices and they in turn dis- tributed them to the buyers of steel in their territory. In other words surrounding Detroit you would have Lansing and Flint and so on, and we would want to be sure that there was a formal notice from Carnegie-Illinois Steel Co. setting forth just what our published prices were, and that was considered, as I understand it, a change in our published announcement program. We all know that in that way we could accurately inform our customers what our delivered prices would be, and they would be sure of knowing what their costs of steel were going to be. > Appendix, t5. 14428. 124491— 41— pt. 27 7 14220 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. What was the difference between what you did then and what you had done previously? Mr. Adams. I think I have explained that. As far as I know, one method was to notify the trade journals; the second method was to notify each customer individually on a written form exactly what his delivered price would be on each of the products that he used or purchased and which we manufactured. Mr. Wooden. So you began a price announcement at that time, May 1936, of announcing base prices on products at the base point, didn't you? Mr. Adams. Well, those were base delivered prices. Mr. Wooden. Did you distribute those? Mr. Adams. Just a minute, Mr. Wooden. In the change in the announcement program we not only announced our base deUvered prices at the point of production, but we carried that through to a point where each customer would have a record from us as to what our base deUvered prices in his town were on each of the products that he was interested in. Mr. Wooden. How did you pubUsh the base prices? Did you publish them in trade journals? Mr. Adams. They still appeared in the trade journals; yes, sir. This was just an extra step taken to make sure that we had made it as convenient as possible for our customers to know during each quarter what our delivered prices would be. Acting Chairman King. Would the letters sent to the customers be in harmony with the prices appearing in the trade jourhals? Mr. Adams. Yes, sir. Mr. Wooden. Did you send these price announcements to any of your competitors? Mr. Adams. Not to my knowledge ; no, sir. Mr. Wooden. Do you know, Mr. Fairless? Mr. Fairless. No, I don't. Mr. Wooden. Wasn't it understood they would receive them? Mr. Adams. There would be no Mr. Fairless (interposing). Understood by whom? Mr. Wooden. By you. Mr. Fairless. No, sir. Mr. Wooden. Did you receive price announcements of a similar character from other companies? Mr. Adams. No, sir; not to my knowledge. Mr. Wooden. You saw them printed in the trade journals? Mr. Adams. We saw them printed in the trade journals if they published them in that maimer. Mr. Wooden. And how many companies did publish them? Mr. Adams. Again I can't answer. As I have said, there are 30 of them and some of them publish their prices and others don't. Mr. Fairless. A few. Mr. Wooden. Now the Iron Age to which I referred, January 7, 1937, describing this movement in the steel industry, for a program of price announcement, stated that after the Republic took this lead and others followed, the last three-quarters of the year 1936 were re- markably free from price cutting. Does that register in your mind as to what the conditions were? CONCENTRATION OF ECONOMIC POWER 14221 Mr. Fairless. It doesn't register in my mind and it doesn't register on the charts of information which we have turned over to this committee. Mr. Wooden. Did you have an understanding with any of your competitors that any change in pubUshed prices that were put out in May 1936 would be similarly pubhshed? Mr. Fairless. No, sir.- Mr. Wooden. Had they been published as comprehensively prior to that time by other companies as they were after the spring of 1936? Mr. Fairless. I can't answer that; I don't know. Mr. Wooden. Do you know, Mr. Adams? Mr. Adams. No, sir. Mr. Wooden. Where were you at that time? Mr. Adams. In the spring of Mr. Wooden (interposing). 1936. Mr. Adams. What date? Mr. Wooden. May 1936. Mr. Adams. In May 1936 I was vice-president of the General Fire- proofing Company at Youngstown, Ohio. Mr. Wooden. Is Mr. Walter Tower here? Acting Chairman King. Is the gentleman present? Mr. Wooden. He was here yesterday. Mr. Chairman, I have copies of letters, portions of letters, that only Mr. Tower could identify, or some other witness — certainly not the gentlemen present. Acting Chairman King. Were they letters taken from the files of the Mr. Wooden (interposing) . Not of the Steel Corporation, but from either the files of the institute or concerns corresponding with the institute. I will not try to offer any of them in the absence of more formal identification. Acting Chairman King. I am interested in one question, if either of you gentlemen cares to answer it or can answer it. During the years which you have been identified with the steel business, and particularly with the United States Steel Corporation, has there been active competition, genuine competition among aU of the steel companies? Mr. Fairless. Definite and severe competition most of that time. Acting Chairman King. Have their annual sheets which were filed for publication, or their returns to the Government, as far as you are familiar witu their returns if you are familiar with any, indicated deficits or losses or lack of profits during those years? Mr. Fairless. Yes, sir. Acting Chairman King. Was that general or Mr. Fairless (interposing). Very general. Acting Chairman King. Or just spasmodic? Mr. Fairless. Very general. Acting Chairman King. Have there been years, when United States Steel Corporation has had losses rather than profits? Mr. Fairless. Yes, sir. Acting Chairman King. My recollection is that you or some wit- ness has testified here to information of the large deficits during a given period, and if that went into the record, those figures, I don't care to recur to them now. 14222 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. Do you want these figures? Acting Chairman King. Were they put in the record? Mr. Fairless. Yes, sir. Acting Chairman King. That is my recollection. You need not reproduce them. Mr. Adams. They are in the record, Senator, and during the last decade we have had something like 4 years of losses and 6 years of profits, reasonable or otherwise. Over the last decade I think they will show that we have made less than 2 percent return on our invest- ment,^ Acting Chairman King. Those figures are in the record ; there is no need Mr. Adams (interposing). Of course when we talk about price changes upwards and downwards, we wonder how anyone could conceive that there isn't severe price competition in our industry from the practical man's standpoint, because you can't operate on a narrower margin than that -and exist. Acting Chairman King. Proceed, Judge. freight rate book of the iron and steel institute Mr. Wooden. Now when it comes to a question or a matter of calculating the delivery or transportation element in the dehvered price, the American Iron and Steel Institute has put out for some time, has it not, compilations of freight rates? Mr. Fairless. Yes, sir. Mr. Wooden. Those compilations were instituted during the code period, were they? Mr. Fairless. Yes, sir. Mr. Wooden. And the iustitute still puts out compilations of freight rates, both by rail and by water and rail? Mr. Fairless. I believe I can save time by giving Acting Chairman King (interposing). Answer yes or no, if you can, and then make your explanation. Mr. Fairless. Yes; but I can give the complete history of this rate book Mr. Wooden (interposing). The answer is yes. I don't care for any more than that. I would like to pursue my line of questioning, if I may. I have no objection to a statement being made at some later time or when I am through with the subject, but just to throw the thing open for anything he may care to say about the subject Mr. Fairless (interposing). It is only a history, Mr. Wooden, of just exactly what happens in respect to this rate book to which you are referring; that's all. It is not my opinion or — Mr. Wooden (interposing). All right. Mr. Fairless. The American Iron and Steel Institute has a trafiic committee composed of traffic managers of 10 different steel com- panies. This committee supervises the institute's Freight Rate Book. There are 4 sections to the Institute's Rate Book, and the responsibility of keeping these sections up to date is assigned to different members of the committee. When corrections are necessary — and b}'- necessary I mean when rate changes take place — these committee members have the changes made on supplementary sections or pages, sending these section? or pages to the institute for distribu- CONCENTRATION OF ECONOMIC POWER 14223 tion to holders of the rate book. The rate book, is available to anyone interested in the steel business, but, peculiarly, it is not used by all of the steel companies and is used by some manufacturing concerns not classed as steel companies. There is a nominal charge made for this service and thcindividual holders of the book pay these charges to the institute. Mr. Wooden. The freight rates are figured from the various basing points to the various destinations, are they not, in the institute book? Mr. Fairless. You are talking about the construction of the book? Mr. Wooden. I am talking about the Institute's Freight Rate Book, whether they do not show the freight rates from the basing points to various destinations. Mr. Adams. The freight rates in the book, Mr. Wooden, are all rates which are secured from the railroads governing transportation costs from various places to various destinations. Mr. Wooden. Do they not show the freight rates from the various basing points to various destinations? Mr. Adams. Why, certainly, they would have to. And they also show rates from nonbasing points to other destinations, and numerous freight rates that are involved and are required by people not actually producing steel. Mr. Wooden. You say they show the freight rates from nonbasing points as well? Mr. Adams. I would say so; yes. It is a convenience — and that's all — for the steel industry and for people who fabricate steel. The rates are published by the railroads, and we are constantly checking with our large traflBc department to determine just what those rates are. Mr. Wooden. Isn't it a fact that the determination of the correct rate between one point and another is a matter on which even freight or traffic experts will differ? Mr. Adams. Well, I am not a traffic expert, Mr. Wooden. Mr. Wooden. Don't you know that to be a fact? Mr. Adams. No; I don't know that to be a fact. As a salesman I have always secured freight rates froni our traffic department. Now, the rate that they give me may be published in that freight-rate book or it may not be published in that freight-rate book. It takes time for any organization — and when I say organization I mean this com- mittee that Mr. Fairless has talked about, composed of certain traffic managers in the steel industry — to accumiilate that information. Acting Chairman King. Where does this committee get its infor- niation? Mr. Adams. Direct from the railroads. Senator, and Acting Chairman King (interposing). From basing points to the consumers? Mr. Adams. They collect all their rates from all points between cities where the shipment of steel, or alhed products made from steel, might be involved. Acting Chairman King. They don't attempt to project rates or to speculate as to what the rates are? Mr. Adams. There is no speculation as to rates. It is public in- formation and as Mr. Fairless just said, pecuhariy enough, all of the steel companies do not use that freight-rate book, and also peculiarly, other companies use it. 14224 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Mr. Chairman, I have documents which show that the calculation of freight rates does likely produce errors, that it is important to have uniformity in the calculation of freight rates in order to have the delivered prices equalized. I have documents which will show that it was understood that the published freight rates of the institute would be recognized and used until after a correction sheet was published. Mr. Fairless. I object to that statement. Mr. Wooden. And it is simply because of my inability under the program of this committee regarding formal identification of these documents that I am not able to use them right now. Mr. Fairless. I object to the statement. Acting Chairman King. Your objection doesn't determine our course. Mr. Wooden. I don't know just how I am going to go about the matter of formalizing the identification of such documents. Mr. Fairless. My objection is that it is not a true statement. Acting Chairman King. I think before the hearing concludes, if you deem that testimony relevant, it would seem that ample oppor- tunity will be afforded for presenting the same to the committee. Mr. Fairless. For further clarification I should like to make this statement to the committee. It is of no importance whatsoever to the United States Steel Corporation whether we use this book- or not, and as a matter of fact any time that a rate change is made — and most rate changes, as we know from our experience, are downward, not upward — whether they be downward or upward they are immediately put into effect through the offices and functions of the various traflSc departments of the United States Steel Corporation. Many times these supplements to this book are distributed 2 or 3 months after a rate change has happened. • Acting Chairman King. I presume that freight rates change fre- quently, do they not? Mr. Fairless. Yes. Acting Chairman King. I know in the pe -ding bill which is in Congress now, the railroad bill, there is a provision for the filing of tariffs, that is for rates, changes from time to time, various applications were made. Mr. Fairless. Yes. And I should like to point out that this book does serve a very useful purpose to small steel companies, particularly nonintegrated companies, companies that do not and cannot afford trafl&c departments such as those of the larger companies. As far as we are concerned, this cannot be any issue with us because it doesn't make any difference whether we have it or not. Acting Chairman King. Proceed, Judge. Mr. Wooden. I have to decide whether or not it will be necessary to provide the formal identification of the documents to which I refer. Acting Chairman King. The committee is not going to be very exacting. Judge. Mr. Wooden. I had supposed that unless the authenticity of the documents were challenged that they might be received subject to such challenge. Mr. O'CoNNELL. Senator, you weren't here when the question came up this morning as to whether certain documents Mr. Wooden had could be introduced and I took the position which I believe is coti- CONCENTRATION OF ECONOMIC POWER 14225 sisteiit with tlie position the committee has heretofore taken— I know- it is in line with the decision the chairman marie in connection with the investment banking hearing — that in the absejice of the witness who could testify^to the authenticity of the document that we would not permit it in evidence unless it was obtained from some published source. That is the situation with which Mr. Wooden is confronted. It seems to me it is one he can meet but I didn't feel it would be con- sistent with what we have done before to permit the introduction of those things at that time. Acting Chairman King. The Senator will not overrule a member of the committee who comes from a great department of the Govern- ment, so we will adhere to it for the time being. Proceed. Mr. Wooden. Under the code, during the code rather, it was provided that the freight rates compilations put out by the American Iron and Steel Institute should be used, was it not? Mr. Fairless. I can't answer thatdefinitely. You probably have the complete and full information. 1 don't have. Your question is whether it was compulsory? Mr. Wooden. Yes. Mr. Fairless. My answer is: I don't know. Mr. Wooden. Now with, regard to the all-rail basis of calculation of delivered prices, you and your companies use in actual shipments a cheaper method at times consisting of truck delivery and of water transportation. Mr. Adams. Yes, sir. Mr. Wooden. Under the code it was compulsory to use the aU-rail basis, was it not? Mr. Adams. I don't know,^Mr. Wooden. I don't think so. Mr. Wooden. With certain exceptions which the board of directors took care of by special regulation. Mr. Fairless. Tliat's correct, but those certain exceptions covered the very large bulk of steel that moved by water. I want to emphasise rather than minimize the exceptions. Mr, Wooden. And the institute put out compilations of freight rates which showed those rail and watep rates as well as the rail rates, did it not? Mr. Fairless. Yes, sir. Mr. Wooden. And it has continued ' to put out rail and water compilations of freight? Mr, Fairless. I can't answer that. You mean as a part of the traffic book? Mr, Wooden. Yes. Mr, Fairless. I can't answer that. Mr, Wooden. Or part of the traffic service, rather. Now during the code period, efforts were made to get the industry to change from the all-rail basis of freight computation, were there not? Mr. Fairless. Made by whom? Mr. Wooden. Various persons and concerns who said they were adversely affected by the maintenance of the all-rail basis of com- putation. Mr. Fairless. Do you meaa officially? Are you talking about officials, or what is your point? 14226 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Isn't it a fact that there were many commercial interests Acting Chairman King (interposing). Did you say "commercial," pardon me? Mr. Wooden. Commercial interests consisting of shippers, pur- chasers located on waterways and chambers of commerce, and many similar groups that urged the abandonment of the all-rail basis of computation of steel prices. Mr. Fairless. I don't Icnow of such. Mr. Adams. Mr. Wooden, if you want to Acting Chairman King (interposing). I think you ought to wait until Mr. Wooden asks you a question. If he asks you that, I have no objection to your answering. Mr. Fairless. I have stated before that almost any merchandising policy of an over-all nature would create some dissatisfaction and some compla-ints. (Further discussion of this point was off the record.) Mr. Wooden. The point is that the all-rail basis of computing deUvered prices from basing points still 'continues in the industry. Mr. Adams. That is not a fair statement. Mr. Wooden. I appreciate very well that there are other compila- tions of rail and water rates and even of water rates that make excep- tions to that. Acting Chairman King. Would you care to make a statement now, or will you wait until the Judge offers proof of that? Mr. Fairless. Well, he has said that it still exists and it doesn't exist. Mr. Wood EN. I didn't say it existed to the exclusion of everything else. Isn't it a fact that at a meeting of the members of the industry that the protests of commercial interests that wanted the all-rail freight basis of computation discontinued, that their requests, were rejected by a vote of the members of the industry present? Mr. Fairless. I attended no such meeting. Mr. Wooden. Do you know anything about such a meeting? Mr. Fairless. No; I do not. I take it you are going back to the code now. Mr. Wooden. That is right, yes, during 1934. Did you read the report, either of you gentlemen, of the Federal Trade Commission on the practices of the steel industry under the code made to the United States Senate with reference to the subject of the all raU base method of calculation? Mr. Fairless. I am just thinking, trying to recall; I am not certain whether I did or not. Thechancesareldid. I followed it pretty closely. V-:. 'Vooden. Did you note there the quoted objections made by various o. mmercial interests such as local chambers of commerce and individual industries located on the rivers and water transportation agencies protesting against the use of the aU-rail basis of freight computation? Mr. Fairless. I don't recall. We do have, we believe, a very satis- factory record in respect to our dealings with the so-called water movements of steel. Mr. Wooden. Those statements appear on pages 27-35 of the Com- mission's report to the Senate and on page 23 of its report to the CONCENTRATION OF ECONOMIC POWER 14227 President in November 1934. Summarizing them, there were 72 protestants. Twenty-eight of them were industrial concerns, 8 were water transportation agencies, 4 were associations devoted to improve- ment of rivers and canals, 4 were local chambers of commerce, and 12 were United States Senators and 14 were Members of the House of Representatives. Would you say in view of those facts that the objections to that phase of the basing point system are based on abstract criteria? Mr. Fairless. I can only repeat, Mr. Chairman, that the United States Steel Corporation's subsidiary companies have various plants located on the inland waterways or adjacent thereto, and we believe that we have a very clear understanding of the method of dealing with water deliveries, and we do not charge, as has been inferred, the full rail freight. We do give the customer the benefit of water shipments' where it is justified in our opinion, and where it isn't justified we think we have very definite reasons for not allowing it. Where it is, we give due allowance for water dehveries or rail and water deliveries, and do not charge the all rail freight, and we have the record here to prove that statement. This is just our own record. This hasn't anything to do with the industry; this is just the United States Steel Corporation's record. It is important, I believe. Total water shipments in 1937, 1,129,884 tons. Actual water rate charged, 344,622 tons. Rail rate from nearest' basing point less-than-water rate from mill, 725,584 tons. That is an important point. Many people, who are not familiar with the steel business, are of the opinion that any time steel moves by steamers and barges from Pittsburgh down the Ohio River that it represents a savmg in trans- portation costs, but that isn't true because of the workings of the multiple basing point system. For example, for sheets, strip and ot^er produ^:,s delivered to Cincinnati, which is an important con- sammg poin from the base point of the American Rolling Mill at Middletown, vrhich is the nearest basing pomt to Cincinnati, the rail freight rate is less than the published water rate from Pittsburgh. While we deliver, while we avail ourselves of the water transportation facilities which we own and avaU ourselves of the saving, yet it is just a matter of that much less freight absorption, and that tonnage amounts to 725,584 tons. Price concessions made equal to water transportation saving, 41,513 tons. By that we mean even where we are in competition with a competitor who cannot serve a customer by water and we can, we may make price concessions in our base prices to cause ourselves to be competitive. The tonnage out of that total where we actually charged the all rail freight and delivered by water, for that year was 18,165 tons, or 1.6 percent of a total tonnage moved by water of 1,129,884 tons. You might say, "Why?" The reasons, we believe, are very obvious and very understandable. There are some people, some customers, who can talce water shipments. They are located on the water, but they have competitors whom we also serve who are located 50 miles inland , or X miles inland. We feel that we would not be fair to the inland customer if we put his competitor in an advantageous position by furnishing the same products in the same locality at a lower price. Therefore, we charged the rail freight in those cases, out of that total tonnage which I have given you for that year, covering 18,165 tons for the whole United States Steel Corporation. 14228 CONCENTRATION OP ECONOMIC POWER Mr. Wooden. You state in your pamphlet, do you not, "Exhibit No. 1418," ' that there are occasions when by using a lower or cheaper mode of transportation than all-rail you get an increment above your base price? Mr. Fairless. That would be true in these 18,165 tons to the extent represented by transportation. It doesn't necessarily mean, however, that we received in excess of our announced price including the trans- portation charges. Mr. Wooden. But doesn't your pamphlet describe how so-called phantom freight arises out of a situation where the mode of transporta- tion actually used is cheaper than the all-rail basis? Mr. Fairless. Well, again I believe that you are dealing with theories and I am dealing with facts. Now I have given you the facts. Mr. Wooden. Is your pamphlet dealing with theories also or is it dealing with facts? Doesn't your pamphlet show that you get what is called phantom freight by using a mode of transportation that is cheaper than the all-rail basis? Mr. Fairless. It doesn't. We have issued no pamphlet showing how we secure phantom freight. Mr. Wooden. I am referring to Exhibit 1418 which is in evidence here. Don't you show that very thing in that pamphlet? Mr. Fairless. Well, anything that is in that pamphlet I will stand back of. Mr. Wooden. Don't you laiow whether that is in it or not? Mr. Fairless. Not as you put it I wouldn't know. Mr. Wooden. Do you know if there is anything in there discussing phantom freight arising out of the use of cheaper .'^' odes of tranpn*- -• tion than all-rail? Mr. Fairless. Well," discussing it, I imagine, yes, of course. It discusses every phase of the so-called multiple-basing-point system. Mr. Wooden. And that is one phase of it. Mr. Fairless. That is one of your phrases. It is not one of oiu* phrases. We did not coin the name ''phantom freight." Acting Chairman King. The committee wiU recess until Monday morning at 10:30. (Whereupon, at 12:50 p. m., an adjournment was taken until Mon- day, January 29, 1940, at 10:30 a. m.) I Appendix, pp. 14619 S. INYESTIGATION OF CONCENTEATION OF ECONOMIC POWER MONDAY, JANUARY 29, 1940 United States Senate, Temporary National Economic Committee, Washington, D. C. The committee met at 10:35 a. m., pursuant to adjournment on Saturday, January 27, 1940, in the Caucus Room, Senate Office Building, Mr. Joseph J. O'ConneU presiding. Present: Mr. O'ConneU (acting chairman), Senator King, Messrs. Davis and Ferguson. Present also: Sumner T. Pike and John V. W. Reynders, repre- senting the Department of Commerce; Walter B. Wooden, Assistant Chief Counsel, Willis J. Ballinger, Director of Studies for the Federal Trade Commission; and Hugh E. White^ economist, representing the Federal Trade Commission. TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED STATES STEEL CORPORATION, NEW YORK CITY, AND AVERY C. ADAMS, VICE PRESIDENT, UNITED STATES STEEL COR- PORATION, PITTSBURGH, PA.— Resumed Mr. Fairless. Mr. Chairman, I have a matter I would like to call to the attention of the committee. You will recall on Friday afternoon we offered for the record an article from the April issue, 1939, of Iron Age.^ The clerk now has this article, but so far it has not been received into the record. You will recall that Acting Chairman King then suggested that this article might be put in later. If agreeable to the committee, I suggest at this time that the Iron Age article be now received into the record. Acting Chairman O'Connell. It will be received in the record and inserted at the close of your testimony toda;v. That was the under- standing that I had with Senator King. I think Mr. Wooden has the article. Mr. Wooden. There is no objection to receiving it in that way Mr. Chairman, except I might make this observation, that it seems to me those who are responsible for the making of the statements that are referred to in the article should make the statement here rather than in this indirect way through the channels of a trade magazine. Acting Chairman O'Connell. We discussed this when Senator King was here last week and I believe it was his judgment that it should be included in the record, and it will be. (The article referred to was marked "Exhibit No. 2202" and is included in the appendix on p. 14430.) p. 14161, supra. 14229 14230 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Mr. Fairless, I am showing you what purports to be a mimeographed circular letter issued by the Executive Secretary of the American Iron and Steel Institute under date of June 3, 1935, and enclosing a copy of a draft of preamble and resolutions adopted by the Board of Directors at a meeting held on June 3, 1935. You said the other day that you didn't know anything about such a resolution. Are you willing to accept the documents that I show you as containing the text of such resolution? Mr. Fairless. Judge, the only point that I was making was that I was not a director of the Institute at that particular time and there- fore I couldn't personally be acquainted with the transactions of the board of directors. Mr. Wooden. But you knew such a resolution had been adopted, I presume, at the time. Mr. Fairless. No; I did not, sir. If I did, at the moment I don't recall it. Mr. Wooden. I believe you said you didn't know anything about a resolution of the industry ratifying the resolution of the board of directors. Mr. Fairless. That is correct; I did not. Mr. Wooden. And I called your attention to the fact that the trade press said 90 percent of the industry joined in those resolutions. Didn't the Republic Co., with which you were then connected, join in them? Mr. Fairless. I can't answer, I wasn't President of the Republic Steel Corporation. Mr. Wooden. What were you in June 1935? Mr. Fairless. Executive vice president of RepubUc. Mr. Wooden. Yet you don't know of any resolutions extending the code by voluntary resolutions? Mr. Fairless. I have answered your question, Judg6. Mr. Wooden. Mr. Chairman, I am ready to establish the source of those resolutions by another witness unless the present witness is willing to accept them as being authentic. Mr. Fairless. I am perfectly willing to accept them; I don't question them. I just simply answered the question. Acting Chairman O'Connell. I take it that I am responsible for the difficulty that you are having because it was my view that docu- ments like that would, in accordance with the procedure of the Com- mittee, have to be identified by someone in position to do so. It isn't a question of whether Mr. Fairless will accept them or not. I think that if you have a witness who can be called to testify to the authen- ticity that is the way to do it and it shouldn't take more than a minute. Mr. Wooden. I will then call Mr. White. Acting Chairman O'Connell. Do you solemnly swear that the tes- timony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr White. I do. CONCENTRATION OF ECONOMIC POWER 14231 TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, WASHINGTON, D. C. Mr, Wooden. Mr. White, you are an employee of the Federal Trade Commission? Mr. White. I am. Mr. Wooden. How long have you been such employee? Mr. White. Since April 1922. Mr. Wooden. Will you state whether you had occasion during 1934, '35, or '36 to visit the offices of the American Iron and Steel Institute? Mr. White. I did. Mr. Wooden. Did you examine files there and obtain documents from their files? Mr. White. Yes. Mr. WoodbSn. I am showing you two papers, one purporting to be a circular letter of Walter S. Tower, Executive Secretary of the American Iron and Steel Institute, June 3, 1935, and attached copy of draft of preamble and resolutions adopted by the Board of Directors of the American Iron and Steel Institute, marked "Exhibits Nos. 2203 and 2204" for identification. Have you examined those papers? Mr. White. Yes, sir. Mr. Wooden. Will you teU us what you know about them? Mr. White. These papers were secured during the progress of an investigation into the practices of the steel industry in respect to merchandising steel sheet piling and was made in response to the direction of the President. Whether they were given to me by Mr. Tower personally or by his office manager I don't recall. They were taken from the file of the Federal Trade Commission, File 1-9268, which is the investigation file covering the subject. They were marked by me shortly thereafter. Mr. Wooden. Mr. Chairman, I offer them in evidence for the record. Acting Chairman O'Connell. They may be received. (The documents referred to were marked "Exhibits Nos. 2203 and 2204," respectively, and are included in the appendix on p. 14434. Mr. Wooden. Mr. White, I show you a paper entitled, "Resolution adopted by members of Iron and Steel industry assembled at American Iron and Steel Institute, June 6, 1935," and ask you to state what you know about it. Mr. White. This exhibit was received under similar circumstances and purports to be a resolution adopted by members of the iron and steel industry assembled at the American Iron and Steel Institute, June 6, 1935. Mr. Wooden. What do you know about the paper itself? Where did it come from? Mr. White. It was received under similar circumstances, whether from Mr. Tower personally or from h.s office manager I do not recall. It was marked by me at that time. Mr. Wooden. I ofTer that document in evidence. Acting Chairman O'Connell. It may be received. (The document referred to was marked "Exhibit No. 2205" and is included in the appendix on p. 14435.) 14232 CONCENTRATION OF ECONOMIC POWER N. R. A. CODE PROVISIONS CONTINUED AFTER N. R. A, INVALIDATION Mr. Wooden. Those resolutions ("Exhibits Nos. 2204 and 2205") show action of the industry by the Board of Directors of the Iron and Steel Institute continuing in effect the provisions of the Code of Fair Competition after the code itself had been declared invahd as a result of the Schechter decision, and I call the committee's attention to the fact that in so continuing the code it included the so-called Standards of Fair Competition of the code and in turn that included the opera- tion of the basing point system of delivered prices, and we have already in evidence the fact that some of these so-called commercial resolu- tions implementing the code and the basing point system under the code have been continued in effect to the present time. I refer to the resolutions relating to the use of arbitrary switching charges at certain basing points and I should like to. offer the resolution which is in question about the use of arbitrary switching charges. (Senator King assumed the Chair.) Acting Chairman King. Where does that appear? Mr. Wooden. It is in a volume composed of all the so-caUed com- mercial resolutions which the board of directors of the Institute adopted during the code period. May the reporter number this resolution? Acting Chairman King. Have you a separate copy? Mr. Wooden. No. Mr. Fairless. Mr. Chairman, I should like simply to inention, ahd I am sure the judge will agree, that rather than refer to the American Iron and Steel Institute board of directors during the operation of the code, it really should be the Code Authority. It so happened that the Code Authority was comprised of the Directors of the American Iron and Steel Institute augmented by certain Government people, but it functioned as a Code Authority rather than the American Iron and Steel Institute. Acting Chairman King. Is there any controversy as to the per- sonnel? Mr. Wooden. I brought this out the other day, that the board of directors was the Code Authority and so constituted by the code itself. Mr. ReVnders. With the addition of several Government officials. Mr. Wooden. They sat in on some of the operations and meetings of the Code Authority, but at no time that I am aware was the code amended to make them members of the Code Authority. Acting Chairman King. Wlio were the members of the Code Au- thority, Mr. Fairless? Mr. Fairless. As I understand the operation, the American Iron and Steel Institute board of directors, augmented by a certain number of Government officials, the exact number of whom I don't remember, functioned as the Code Authority. Now independent of the Code Authority, the Board of Directors of the American Iron and Steel Institute continued to function as such in respect to any matters per- taining to the Institute that were not a part of the functions of the Code Authority. I think I am correct in that. Mr. Wooden. Mr. Fairless, are you willing to accept the document under discussion as being a copy of the resolution of the board of CONCENTRATION OF ECONOMIC POWER 14233 directors regarding the use of arbitrary switching charges at certain basing points? Mr. Fairless. During the code? Mr. Wooden. Yes. Mr. Fairless. I will accept any of the commercial resolutions that were adopted by the Code Authority. Mr. Wooden. You accept this one? Mr. Fairless. I do. Mr. Wooden; Then, Mr. Chairman, I will offer it as it stands. Acting Chairman King. It may be received. Proceed. (The document referred to was marked "Exliibit No. 2206" and is included in the appendix on p. 14435.) Mr. Wooden. I should like to read for the committee's information the text of this resolution which we have ascertained is still in effect, and the pamphlet of the Corporation so states. This is Commercial Resolution A-4 as amended June 14, 1934, effective June 31, 1934, preamble and resolution duly adopted by the Board of Directors as amended on June 14, 1934, with respect to switching charges to be- added to base prices for products delivered at basing points. You see, this is an implement of the basing-point system. Whereas it is provided in Section 4, Schedule E of the Code that when switching charges for the delivery of the product at a basing point are required to be added in determining the delivered price of such product pursuant to the provisions of said Section 4 the Board cf Directors may by resolution fix such an arbitrary switching charge or such arbitrary switching charges for the delivery of such product as the Board shall deem proper with a view to preventing unequal com- petitive conditions in respect of the sale of such product for delivery at such basing point; and Whereas a great diversity in the switching charges exists at the various basing points and on that account it is practically impossible in most cases for members of the code to ascertain in advance of the sale of any product for delivery at any basing point, the correct published tariff switching charges chargeable thereon pursuant to the provisions of said Section 4 ; and Whereas the Board has been advised that the arbitrary rates prescribed in the following resolution are fair averages of the actual switching rates now in effect in the switching areas of the respective basing points at which such rates are to be applied; Resolved that the Board of Directors hereby fixes, for the purposes of the pro- visions of Section 4 of Schedule E of the code, arbitrary switching charges for the delivery of any product at any basing point for such product named in Schedule F of the code, except pig iron sold for delivery in Jefferson County, Alabama, from any furnace located in that county, as follows: (a) for deliveries in carload lots (minimum thirty tons) at Chicago, Illinois, and Gary, Indiana, and for deliveries in such carload lots from either of such places to the other, sixty cents per net ton, or, if the published base price for such product at such basing point is stated per gross ton, then sixty cents per gross ton; (b) for deliveries in carload lots (minimum twenty-five tons) at all other basing points named in Schedule F of the Code, fifty cents per net ton, or if the published base price for such product at such basing point is stated per gross ton, then fifty cents per gross ton; and (c) for deliveries in less-than-carload lots at all basing points named in Schedule F of the Code, and for deliveries in less-than-carload lots from either Chicago, Illinois, or Gary, Indiana, to the other of such places, ten cents per hundred pounds, but not in any case exceeding on any one shipment the charge per carload at the carload rate hereinabove specified for the basing point in question. What is the switching area, Mr. Adams, of the Chicago basing point? 14234 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. You mean in respect to areas, Judge? Mr. Wooden. Yes; I mean what area is covered by the Chicago switching district. Mr. Fairless. We can't answer that. It is defined by the railroads, not by the steel industry. I can give you the rates that apply. Mr. Wooden. No; I want to know what the area covered by the switching district is. Can you tell us, Mr. Adams? Mr. Adams. I can't tell you exactly. Mr. Wooden. Approximately. Does it go around to Gary on the south of Chicago? Mr. Adams. No; it doesn't extend down to Gary. Mr. Wooden. Can't you tell us what area it does cover? Mr. Adams. I can't tell you specifically ; no ; because it is established by the railroads. Mr. Wooden. You know what it is, don't you? Mr. Adams. I know approximately. Mr. Wooden. Tell us approximately. Mr. Adams. Well, I would say an area of within 15 miles of Chicago, the center of Chicago, would be my approximate guess, Mr. Wooden. Mr. Wooden. Are you guessing? Mr. Adams. I am guessing; yes, sir. I don't know exactly. Mr. Wooden. Do you know what the switching area of the Pitts- burgh distr'ct is? Mr. Ad/ ms. I can't tell you exactly. Mr, Wooden. What is your approximate answer on that? Mr. Adams. It is slightly smaller than the Chicago area. Mr. Wooden. But they cover the area of a number of producing plants, do they not? Mr. Adams. Yes; they will take in a number of producing plants. Mr. Wooden. They take in a number of competitive producing plants, competitive with your own mills, do they not? Mr. Adams. I would say "Yes." Mr. Wooden. Mr. Chairman, I just want the committee to under- stand that here is an instance where the basing point system of delivered prices in the switching areas of the various members have been fixed by the action of the Board of Directors of the Institute, and those particular switching charges are still in effect. As the resolu- tion cites ("Exhibit No. 2206") the actual switching charges of the different mills in those areas differ, and this resolution, standardizes by an arbitrary imposition of what the arbitrary charge shall be in being added to the basing point price to get the delivered prices in those switching areas, and if the basing point price is the same for the various mills in that area, the delivered price within those switching areas must become identical, because here is a prescription of the amount that must be charged, regardless of the actual switching charges . Mr. O'CoNNELL. Mr. Wooden, if I understand your point, the, discussion had on Saturday relative to whether or not the arbitrary prices were below or above the actual on the average, makes no difference. In other words, whether the arbitrary switching charge be lower or higher than the actual, your point is that it is for the pur- pose of establishiiig one of the elements of the selling price. Mr. Wooden. Right, but it is higher than some actual and lower than other actual. It is an arbitrary standardization of the switching charge, regardless of what the actuaUty is. CONCENTRATION OF ECONOMIC POWER 14235 Mr. O'CoNNELL. But you would think your point was well taken if the switching charge were lower than average. It doesn't make any difference. The point is, to stabilize one of the elements of cost. That is your point. Mr. Wooden. Except this: Where the arbitrary charge is higher than the actual, as Corporation statement admits, that results in so-called phantom freight by the amount of that difference and an increment above the base price. Mr. Wooden. Mr. Fairless, will you accept the document I show you for identification as an authentic document of the Board of Directors of the Institute, known as Commercial A-18, effective June 1, 1934? Mr. Fairless. I am perfectly wUling to accept any resolution that you have to offer that has to do with the steel code. However, I wish to state in respect to all these resolutions, and anything that has to do with the operaton of the steel code, that they are now not in effect as such in the United States Steel Corporation. Mr. Wooden. But they are in effect in the industry, as your pam- phlet states, and as you have testified — the one I have showed you. Mr. Fairless. Our pamphlet does not state that anything haying to do with the steel code is in effect. Mr. Wooden. But the practice involved in this resolution is still carried on, is it not? Mr. Fairless. I should like simply to make a very simple statement to the committee. When the steel code was formed, and built, irre- spective of what any of us might think of the situation then existing, past practices of the industry were very carefully considered and those that were felt to be in harmony with the best interests of the pubUc in general were adopted as principles of "the code. Also during the building of the code and its functioning, from time to time certain weaknesses developed and those weaknesses were covered, or cor- rected rather, by certain resolutions, and these are the resolutions, some of them commercial and some of them with respect to other features. Mr. Ferguson. Mr. Fairless, coimsel asked you whether this par- ticular practice was stUl, in "effect, being carried out. Mr, Fairless. Mr. Ferguson, I am just coming to explaining exactly how it operates. Now these new resolutions covered various weaknesses, or apparent weaknesses, and they came up for adoption and were adopted, and they were put into effect. Now some of the practices have been continued and I have no argument with the judge in^ respect to this so-called arbitrary switching charge, I have no argument about it at all, but I do say that the reason it has been continued, and any features that have been continued — they have been continued because they have been proven to be fair and adcept- able to the buyers ai;d the sellers of steel, and they are not continued in any respect on the basis of a continuation of the steel code or any resolutions pertaining thereto. Mr. Wooden. Not even the resolution continuing the code in effect which you were shown a while ago? ^ You say the thing that has been done, and continues to be done, has not been done pursuant to the resolution that was to continue the code in effect. > "Exhibit No. 2204," appendix, p. 14434. 124491— 41— pt. 27 8 14236 CONCENTRATION OF ECONOMIC POWER Mr. Fairless. Is that your statement? My answer is that the steel code is not in effect. Mr. Wooden. But these particular outgrowths and developments of the steel code are still in effect. Mr. Fairless. I believe I have made my position clear, Mr. Wooden. Mr, Chairman, I would like to offer for the record, this exhibit, which is commercial resolution A-18, effective June 21, 1934. We have been over the subject matter but I want to bring out the text of this resolution for the committee's information. Acting Chairman King. It may be admitted. (The document referred to was marked "Exhibit No. 2207" and is included in the appendix on p. 14436.) Mr. Wooden. Preamble and resolution duly adopted by the board of directors on June 14, 1934, authorizing reductions in the delivered prices for products delivered by truck provided by the purchaser: Whereas it is provided in Section 4 of Schedule E of the Code that in any case in which a product shall be delivered by other than all-rail transportation the member of the Code selling si^ch product may allow to the purchaser a reduction in the delivered price otherwise chargeable under the provisions of said Section at: such rate previously approved by the Board of Directors and filed with the Secretary as the Board of Directors shall deem equitable and necessary, in order that competitive opportunity to producers and consumers of products shall be maintained; and Whereas on recommendations heretofore made to the Board of Directors it approved rates of such reductions by members of the Code to purchasers of products delivered by truck provided directly or indirectly by such purchasers and for their account which the iSoard deemed and now deems to be equitable and necessary, in order that competitive opportunity to producers and consumers of products shall be maintained; Resolved that in any case in which any purchaser shall require that any product purchased by him from a member of the Code be delivered by truck and such truck is provided, directly or indirectly, by such purchaser and for his account, such member of the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Schedule E of the Code and the regulations .prescribed by, and the resolutions adopted by, the Board of Directors thereunder and then in effect (a) at rate equal to 65% of the carload all-rail published tariff freight rate on such product from the point at which transporta- tion of such product by truck began to the place of delivery of such product by truck to such purchaser (if such freight rate be published on a per car basis, the ja'te per ton shall be determined by dividing such charge per car by 2.^), or (b), if the transportation by such truck be at a basing point for such product, then at a rate equal to 65% of the rate 'of the applicable arbitrary carload switching charges, if any, at such basing point theretofore approved by the Board of Directors, or, if such Board shall not have approved a rate of arbitrary carload switching charges for such basing point, 65% of the rate per ton of the actual switching charges (computed on the basis of the minimum carload quantity to which such charges apply) applicable on the delivery of such product at such basing point under the provisions of said Section 4, from the point at which transportation of such product by truck began to the place of delivery of such product by truck to such purchaser. There is a further proviso that I will not read, but it further requires that the truck must be loaded within 24 hours after it has begun to be loaded, and so on. Acting Chairman King. Do you desire that incorporated in the record, I mean the last? Mr. Wooden. I offered the entire document but I don't think I need read the balance of it. Mr. Wooden. I would just like to have the committee understand that here is a practice admittedly still in effect by the Corpora- tion's own pamphlet and by the testimony that we have had. There is an arbitrary addition of 35 percent of the all-rail freight to a destina- CONCENTRATION OF ECONOMIC POWER 14237 tion, even when the buyer provides his own truck or hires a truck to take it away. I have brought out for the committee's information hitherto that shippers of steel, buyers of steel and trucking companies, have gone on record in written protests to the effect of such a provision upon their business, and I would like to call the committee's attention to the fact that the amount involved in that 35 percent addition to the basing point price, when it is figured as 35 percent in terms of the all-rail freight, amounted in some instances to $2.50, $3.50, $3.90 per ton. The amount of it is substantial, and important. Mr. Fairless. Mr. Chairman, could I say a word in respect to that? Acting Chairman King. Proceed. Mr. Fairless. I have no differences with the Judge in respect to this particular resolution, but again I wish to state to the Committee that this practice referred to in this resolution was a compulsory one under the code. Any member of the code who did not conform in every transaction to that resolution was subject to fine as provided by the code. Now the difference in today's practice in the United States Steel Corporation and that provided by the resolution which Judge Wooden has just read, and I have no quarrel with it at all, is simply this: To begin with, during the code that so-called arbitrary allowance given to the customer when he sent a truck provided by himself or others, was one that was arrived at after very careful study, very careful study, not by just one company, but by several companies reviewing their own experiences having to do with truck dehveries over a reason- able period of time. Naturally, to take that situation and apply it to every condition all over the United States of America brought protests, and many of them were justified. There is no question about it. But when you were dealihg, as we were under the code — where you had to have a definite set-up and comply with it — naturally the big percentage, the majority, had to be taken into consideration, and that was the basis for arriving at this set-up. The code went out, and with it went this resolution. The thing that continued was the practice where it prop- erly applied, and it continues today with respect to our particular business where it is proper. I cited to this Committee, I gave you an example Saturday, of Houston, Tex. This particular practice does not apply there, it doesn't lend itself, it would be decidedly un- fair, so we do not practice it. Down there we deUver oil country goods from our Pittsburgh and our Lorain plants. We carry them in stock, and the customers, and they are many, come with iheir own trucks or send trucking companies to get the goods and we charge them only the handling charge, and it is a nominal handling charge, covering the cost. Many of our wire and sheet products in various parts of the country are handled on that same basis, but as a general policy— and we say "general" because it does apply fairly to a very large percentage of our products — this 65 percent credit as appHed to. the all-rail freight rate is fair and is practiced by the United States Steel Corporation, and we have no apologies for it because it is accepted by our customers. Any time that any customer or group of customers feels that an injus- tice has been done or is being done, he can come to the proper oj£cials 14238 CONCENTRATION OF ECONOMIC POWER of the subsidiary company of the United States Steel Corporation and I ana sure he will go away a happy man. Acting Chairman King. Were there inequalities among the con- sumers, purchasers, under the code with respect to the switching charge to which the Judge has just referred? Mr. Fairless. The switching charge? No, I don't think so with respect to the switching charge, for this reason. As I read here Saturday, in the Pittsburgh district the minimum switching charge is 55 cents, and the maximum is 99 cents. The charge that we make for switching in that Pittsburgh district is 50 cents, so therefore it is under even the minimum charge. In Chicago the minimum charge is 65 cents and the maximum is 90 cents. Our charge is 60 cents. Acting Chairman King. I recall those figures. Mr. Fairless. In one district — and as I stated in my earUer testi- mony, I do not have the facts to know to what extent — our charge is greater than the minimum. In other words, in Cleveland it is 42 cents versus our charge of 50, but the maximum, however, is 84 cents. Where the average would fall I don't know. Acting Chairman King. To what extent has there been a departure by your company, and so far as you know by other producing com- panies of steel, from the provisions of the code * to which the Judge has just called our attention? Mr. Fairless. The trucking provisions? Acting Chairman King. Yes. Mr. Fairless. Tremendous departures. Mr. Wooden. Why then Acting Chairman King (interposing). One moment, Juage. Mr. Fairless. I have cited the Houston situation and it applies to the Columbia Steel Co. on the Pacific coast. There are exceptions all over this country. Acting Chairman King. Then. you would say that the letter and the spirit of that resolution is not adhered to now by your company? Mr. Fairless. It is only adhered to now where it is a fair situation in respect to the consumers of our products. Acting Chairman King. Where it is practical — and of course we have to accept your view as to what is practical, I suppose, that is, you have given your view, you determine whether it is practical or not — does that work any injustice to the pubhc or to the consumer? Mr. Fairless. In our opinion it does not. Acting Chairman King. Is it a fair rate to be charged, is it com- mensurate with the responsibihties and the duties performed by the company? Mr. Fairless. We think so. Acting Chairman King. You do not believe it to be an unjust charge? Mr. Fairless. No, in other words, we are not trying to make any profits through trucking or nontrucking of our products by cus- tomers. Mr. Wooden. Senator, I would like to point out with regard to the arbitrary switching rates, it isn't a question of their fairness but the effect is to make the delivered prices within the switching areas identical to all buyers within those switching areas. • "Exhibit No. 2207," appendix, p. 14436. CONCENTRATION OP ECONOMIC POWER 14239 Mr. Fairless. And we are proud of that. Mr. Wooden. Not only for you but for the industry. Now you make yours identical with the delivered prices of your competitors in that industry by use of that resolution, or the principle involved in that resolution. Mr. Fairless. We do not admit that. Mr. Wooden. That is the effect. Why do you say, Mr. Fairless, that you make exceptions and departures from this when you say in "Exhibit No. 1418"^ your pamphlet, that this practice has been generally followed since the code, in referring to these arbitrary switching rates? Mr. Fairless. In referring to the arbitrary switching rates? Mr. Wooden. Yes, you say the practice has been generally fol- lowed. Now you say it isn't generally followed. Mr. Fairless. No, I didn't say that with respect to the switching rates. I admit they are followed. Mr. Wooden. All right, you say the Corporation doesn't follow them. Mr. Fairless. We are talking about trucking. Mr. Wooden. I am talking about switching now. Mr. Fairless. My answer here has been on trucking. Did I make it clear? Mr. Pike. It was very clear to me. Mr. Wooden. The Senator was talking about switching charges. Mr. Fairless. No. Mr. Wooden. Yes; he did at first. Acting Chairman King. I was about to call attention, if the judge will permit me, to "Exhibit No. 1418," and I read: Undoubtedly the additional cost and inconvenience of loading trucks justifies an extra charge, particuarly at older mills which were planned exclusively for car- loading, and offer little possibility for installation of truckloading facilities. In summary, the answers to the criticism of "phantom freight" supposedly realized by steel mills on truck deliveries may be summarized in the following points: first, only an extremely small proportion of steel tonnage is delivered by trucks, partly because many products cannot be economically hauled by truck, and partly because large consumers prefer rail delivery. Secondly, truck move- ments frequently result in freight absorptions, sometimes because of the 65% allowance for shipments in buyers' own trucks, and also, because of deliveries within the switching limits of basing points, where only the "switching arbi- traries" Mr. Fairless (interposing). We admit they are arbitrary. Acting Chairman King. [Reading further from "Exhibit No. 1418":] are included in the delivered price. Third, the rates of common carrier trucks, regulated by governmental agencies, are seldom much lower than rail freight rates, and sometimes are higher. Fourth, at the majority of mills it costs more to load steel into trucks than to load into railroad cars, and furthermore delivery to trucks involves inccnvenience, loss of time, and other similar considerations which cannot easily be translated into dollars and cents. It seems clear that the mills are not profiting as a result of truck deliveries. The criticisms on this score are more cheoretical than real. Does that substantially reveal the situation now with respect to the matter indicated in the sentences which I have just read? Mr. Fairless. Yes, sir. 1 Appendix, p. 14619. 14240 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Senator, I. would like to point out the fact that if some mill made an allowance of 66 percent instead of 65 percent, it would throw off the delivered price to that 'extent, and this resolution, still in effect, and according to the corporation's own statement in "Exhibit No. 1418," says that generally exists in the industry. As to the matter of cost, Mr. Adams has testified that it had some relation to cost, but the obvious fact is that the costs of various mills differ and this is at least a 35 percent standardization; and furthermore the 35 percent applies to the all-rail freight rate, which means if you apply a fixed percentage to a varying base figure, you get all sorts of variations in actuality. It can, therefore, have no real relation to the actual costs of any particular mill. Mr. Reynders. Was it not brought out on Saturday, where you arrived at a disproportionate charge, that an adjustment was made in that allowance in case of falling prices? Mr. Wooden. I don't know just what you mean. Do you refer to freight absorption? Mr. Reynders. I refer to the fact, as I remember it, that the steel corporation, where the charge — this remnant of 35 percent, became unreasonable, that then the corporation made an adjustment. Mr. Wooden. I don't know about that, but the statement in the pamphlet is that that practice of using the 35 or 65 percent, as you view it, is generally practiced in the industry. This resolution ^ regarding thcf arbitrary switching charges recites that it was impossible to ascertain in advance of the sale the correct published tariff switching charges. Why was it important to ascer- tain that in advance of the sale unless you wanted to make the sale at a delivered price and make it according to a stated figure for the switching charge? Mr. Fairless. I don't believe I understand your question. Judge. Mr. Wooden. Read it, please. (The reporter read the question.) Mr. Pike. That is not the question. I think you have "important" where the Judge said "impossible." Mr. Wooden. Important is right. Mr. Pike. I thought you said impossible. Mr. Fairless. The answer, I believe, to your question is that we sell our steel products on a delivered-price basis; we quote on that basis. Naturally we must know the transportation costs involved or we could not quote the delivered price. Mr. Wooden. You don't have to know an arbitrary charge. Why don't you use your actual charge and be done with it? Mr. Fairless. I have given our reason. The record is complete so far as I am concerned; Mr. Wooden. If you used your actual switching charge, you would have different delivered prices, would you not, from competitors using a different switching charge rate? Mr. Fairless. More important than that, we would have Mr. Wooden (interposing). Is not that a fact? Mr. Fairless. As you stated it, it is absolutely a fact, but more important than the way you put the question is that also we would have customers, actual customers competing with each other in the same switching area, that we would be (^harging various prices for steel. « "Exhibit No. 2206". appendix, p. 14435. CONCENTRATION OF ECONOMIC POWER 14241 Our only difference, as I see it, is the basis for uniformity. Your con- tention is that it is from a competitive standpoint, and my contention is that it is to treat all our customers within a single area on the same basis. Mr. Wooden. Did not the resolution itself ("Exhibit No. 2206") recite that it was from a competitive standpoint that this arbitrary switching charge was to be imposed? Mr. Fairless. During the code, when it was compulsory to arrive at uniform prices; you must liaye some basis. Mr. Wooden. But this practice, you state in your pamphlet, is still generally in effect. Mr. Ballinger. Mr. Fairless, why should j^ou be very anxious to put the buyers of steel on the plane of eguality if for instance they have unequal costs in transportation. For instance, I am a buyer of steel, and I enjoy a natural advantage in transportation, namely it is cheaper to ship to me than to ship to my competitor; why should you be anxious to penalize me for my advantage? Mr. Fairless. We are not, Mr. Ballinger, but the thing we attempt to do is to treat all customers alike price-wise in their respective terri- tories. There may be every reason, and there are, why a manufac- turer located in Boston might not expect to realize the same delivered price as one located in Chicago, but our policy is that all of our customers in Boston and particularly those that are in competition in Boston, should receive the same delivered price from us, and all those in Chicago should receive the same delivered price from us. Mr. Ballinger. Even if they enjoy an advantage, one buyer, namely, that his switching charge in actuality should iie less; that is one of the advantages he enjoys in business? Mr. Fairless. When you get into a switching area, the advantage is not very big, and the practical workings of this industry would bring about a uniform charge. In other words, to make my point clear, if we did not have this so-called arbitrary switching charge in Pitts- burgh, my opinion and judgment — knowing the workings of this industry — are that the charge would be 55 cents, because that happens to be the minimum charge in the district. That is where competition would finally finish. The minimum charge in a particular district would be the practical charge. Mr. Ballinger. But the maximum charge might throw you off; wouldn't it? Mr. Fairless. You wouldn't charge, in a practical way, that maximum charge. Mr. Ballinger. I thought switching charges varied with the actual transaction, an actual switching charge for a transaction. Mr. Fairless. Not within the switching limits. You see, this Pittsburgh c-istrict is defined by the railroads. Your question is, if you happen to be a buyer there, as I understand it, you have this minimum, and a competitor of yours has ine 99, the maximum; why should you not enjoy that advantage? Well, my answer to that is competition. You might be my customer, at least I hope you would be if you wore there, and the 99-cent fellow might be X company's customer; the 99-cent fellow would ^o to his source of supply, >and I am sure, knowing the workings of this industry, that he would finish at the 55-ceijt charge, so your so-called advantage would vanish. 14242 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Why is it jiecessary to have a resolution defining this with such great exactitude in that event? Mr. Fairless. Well, Judge Wooden, I don't know why I should keep explaining the code. You know the code, you knew the N. I. R. A. Mr. Ballinger. Why wouldn't competition work it out? Why have a resolution about it? Mr. Fairless. Every transaction, every commercial transaction, in the steel industry during the code was handled in that manner. Mr. Ballinger. You give a beautiful point that competition would work this out, but then you give an arbitrary resolution about it. This would be a beautiful chance for the industry to prove it is competitive, let it alone, let competition settle it. Why have an arbitrary resolution? Mr. Fairless. It isn't a resolution. We could name, or any sub- sidiary of the United States Steel Corporation could name, any de- livery charge in any of these districts they choose; we are not bound by any resolution. Mr. Wooden. But the practice continues according to the principles stated in the resolution. Mr. Fairless. It does, and it does so because it is fair and because it is practical, because it is reasonable and because it is accepted by the buyers of steel. Mr. Ballinger. Switching to Another point, this question of truck- ing, if trucking is more economical, after you make allowance for all cost and the fellow owns his own trucks, you say you don't want to let him take his material away in trucks because it wouldn't put all buyers on an equal plane. This raises the point a little more force- fully because there might be genuine economies in this illustration of considerably greater magnitude than switching charges. I ask you why is it that you want to put a man who buys for delivery by truck and a man who buys for delivery by rail on a parity, when there may be an economy from trucking. You don't get the transportation charge anyway, and if he wants to elect a cheaper method of transportation, isn't he exhibiting what we call capitalistic initiative, and you are sort of penalizing him at that point and saying he can't do it. Mr. Fairless. We are not penaliziag him at all and we are not trying to dictate to him the type of transportation that he might select. We are only pointing out to this committee that our mills were built and laid out, designed, to transport steel through the rail- road method. That was the only method in existence at that time. We are also pointing out to this committee that in respect to our delivered prices in any particular locality, if it is cheaper for the delivery to be made by truck it is perfectly, of course, perfectly all right with us that delivery be made in that manner, but we do want a method of handling that transaction that will insure imiformity to aU buyers of our product in that locality, and if he chooses not to use trucks it is all right. Acting Chairman King. That is to say, if I understand you, if you circumscribe an area, say 100 miles in diameter, and if you sell to half a dozen plants in that field of operation, some of the purchasers would prefer to haul from your plant by truck, others would utilize the rails, and your view is that you should see that all of your purchasers would have the same price for steel within that area. CONCENTRATION OF ECONOMIC POWER 14243 Mr. Fairless. Yes. Acting Chairman King. And that one who hauled b^r truck might not have advantage over the man who obtained his by rail. Mr. Fairless. Yes; and also that we would be compensated for the extra costs that we have in handling truck shipments versus rail- road shipments. There is an invoice for every truckload of steel just the same as there is for every carload of steel; in one case you are dealing with 5 tons, 3 tons, 10 tons, versus 50 or 70 tons. We would have trucks coming in at all hours of the night disturbing our schedules of loading. It would entail keeping billing clerks and loading forces out waiting for a truck to arrive that had been scheduled. The customer wants the material, and there are many additional costs. I wouldn't testify before this committee and say that in each and every single transaction the 65 percent allowance was perfectly adequate and we didn't gain or we didn't lose, or that it was a break- even in every case; it isn't, but to the best of our judgment and to the extent to which our studies have provided the information, it is the best reasonable average where it can be applied. There are points, and many of them, where it can't be applied at all, and there we negotiated with the user of steel and we arrive at a satisfactory basis. Acting Chairman King. I assume from your statement just made that in some cases it costs more to the company, to the mill, to take care of the trucking exports, and so on, than it would if you shipped by rail. Mr. Fairless. Oh, yes. Acting Chairman King. It is a disadvantage to the company to ship by trucks? Mr. Fairless. It is a disadvantage, yes, cost-wise. Then there is a safety factor. Keep in mind if you take a plant like Gary, of course we are all reas )nable men and we know that we are not talking about all of Gary's production shipped by truck, no one is, but imagine if you had to handle through the Gary works of the Carnegie-Illinois Steel Corporation, say, 10,000 tons of steel in 24 hours and handle it by truck. You just have a physical impossibility to deal with, it just couldn't be done. Mr. Reynders. Mr. Chairman, I think that they will usually have to load the material first on a flat car in many instances and then in another part of the plant they wiU handle that material with the locomotive freight. Mr. Fairless. Well, our mills are laid out in line and the steel is finished on the finishing end and there is space provided there for bundling and the various preparations for shipment, such as oiling, wrapping, whatever the case might be. Mr. Wooden. Some mills Acting Chairman King. Let him finish his statement. Mr. Fairless. Pardon me, and here is your railroad track, your car is provided, it is a continuous operation. You interpose trucks and you have quite a different problem, unless it is limited to a reason- ably small percentage of your production. If we took our bar mills and had to ship the complete production of the Gary bar mills — they are all laid out, as any of you who have seen them Imow, in a row, all feeding into a common finishing department and likewise a common loading department; if the production of those mills running as they happen to be running now had to be handled by truck we would nr.PT.Qff> T would sav ohr^■•^^■ 9 r^o-r-" r. ^-op]^ That would be rav s'uess. 14244 CONCENTRATION OF ECONOMIC POWER Mr. O'CoNNELL. Eefcrring again to the IN. R. A. period, as 1 understood the testimony, the purpose, at least one of the purposes, of having an arbitrary switching charge and a fixed percentage reduc- tion or addition, as the case may be, for truck transportation, and so forth, was to arrive at uniformity in price during that period. That was the i)ohcy with the N. R. A. philosophy, as I would understand it, and you indicated that at that time it was a compulsory arrangement. Mr. Fairless. It was compulsory. Mr. O'CoNNELL. But these particular elements that we have been discussing were for the purpose of arriving at uniformity in price. It is no longer compulsory, but is it not fair to say that to the extent that these practices exist in the industry today they result in the same uniformity in price that you tried to get under N. R. A.? Mr. Fairless. Well, in respect to that one factor in price. Mr. O'CoNNELL. That is right. Mr. Fairless. But keep in mind that under the N. I. R. A. it wasn't just uniformity in respect to the switching charge or the allowance for trucking, it also went back to the base price. Mr. O'CoNNELL. So as of today you have a base price, you have a uniform freight rate book, you have an arbitrary switching charge, which is generally used in the industry, and you have a 35 percent addition for truckage, which is ordinarily generally used in the in- dustry, and those are about all the elements that go to make up the price, plus the extras which are also uniform in the industry. Is that not true? All the elements that I have mentioned Mr. Fairless (interposing). That isn't all, there are many others, but that is Mr. O'CoNNELL (interposing). To the extent that the practices are generally used it would result in the same kind of uniformity of price that you had in the N. R. A., wouldn't it? Mr. Fairless. I don't want to be technical, but I am not going to admit that there is uniformity of the base price — start there, there is no uniformity of base price in this industry today as compared with the code. Mr. O'CoNNELL. As compared with N. R. A.? Mr. Fairless. Yes; so we have our competition beginning in the first transaction that you mentioned, base price. Mr. Ballinger. All these uniformities plus a uniform base price would bring you out exactly where the N. R. A. was. Mr. Fairless. Mr. Ballinger, it is my opinion — this is just a steel man's opinion — that it would be impossible to set up rules and regula- tions that this industry wouldn't find some way to change and be highly competitive. Mr. Wooden. In other words, there would be no danger, in your opinion, in permitting the industry to get together and make any kind of regulation and resolution it wanted to because you feel they wouldn't follow it. Is that right? Mr. Fairless. Certainly not. I certainly didn't say that and I certainly don't expect to let that statement stand as coming from me. That would be illegal. Now if we are operating this industry illegally, why, prosecute us and put us in jail where we would belong. Mr. Wooden. As a matter of fact, Mr. Fairless, some mills are much better located than others or much better equipped for handhng truck deliveries than others, are they not? CONCENTRATION OF ECONOMIC POWER 14245 Mr. Fairless. Yes; in respect to markets. Mr. Wooden. Some of them more or less cater to truck delivery, do they not? Mr. Fairless. Cater to it? Mr. Wooden. Yes. Mr. Fairless. They might, they might. Mr. Wooden. When you charge 35 percent of the all-raU rate on delivery by truck, you have there an addition, have you not, of that amount to your base price in the form of your mill-net on that trans- action? Mr. Fairless. In answer to your question, Judge, the first part of your question — I would like to answer the entire question — if I were the owner of a mill where delivery of my product by truck was more advantageous to me than by rail, I would certainly cater to trucking delivery and I would sell my goods on a basis that would produce all the sales for deUvery by truck that I could get. Mr, Wooden. But my question is, when you charge 35 percent of the all-rail freight for delivery by truck, that 35 percent goes to increase or swell your base price by that much, doesn't it? Mr. Fairless. Less the costs involved. Mr. Wooden. Yes; but costs are involved in your base price as well. Mr. Fairless. Certainly. We can't run our business on the basis of giving emphasis to everything except the cost. We must consider costs in running this business. Mr. Wooden. The purchaser by truck who is charged this 35 per- cent of the all-rail freight pays you more by that amount than the rail purchaser who takes rail delivery, doesn't he? Mr. Fairless. Well, the delivered price is the same. Mr. Wooden. Yes; but I am talking about what you get. You get that 35 percent in your mill-net yield, don't you, that you don't get from the rail purchaser? Mr. Fairless. No, we don't get it in our mill-net yield because to the extent that higher costs are involved it is absorbed to that extent. That is the constant consideration. Mr. Wooden. Outside of that factor of costs in the loading for truck delivery. Less your cost of loading for truck delivery that 35 percent goes as an increment to your base price, doesn't it? Mr. Fairless. Do you want me to say yes? I'll say yes. Mr. Wooden. Do you have available here price announcements, I think, of the Carnegie-Illinois Co. in the early summer of 1936 regard- ing the terms on which products sold for identified structures and fabricated-in-transit may be sold? Will you produce them? Mr, Fairless, I believe that is one of the exhibits the Federal Trade Commission asked for and was sent to you. Mr. Wooden. Well, I would like to use it here. I will ask you to produce a copy. Acting Chairman King. Haven't you a copy? Mr. Wooden. I have an excerpt from it. I don't have the original. Acting Chairman King. Do you desu*e to put the excerpt in the record? I assume there is no dispute as to the text. Put the excerpt in subject to correction when you get the original copy, if that is agreeable. Mr. Wooden. I will pass on. 14246 CONCENTRATION OF ECONOMIC POWER I submit this document for the record. Acting Chairman King. It may be received. (The document referred to was marked "Exhibit No. 2208" and is included in the appendix on pp. 14437-14441.) Mr. Wooden. Mr. Fairless, I am showing you a document marked for identification Exhibit No. 2208. Do you recognize it and accept it as a copy of the resolution adopted by the Board of Directors with regard to the use of Freight Tariff No. 1 and known as Regulation No. 4 of the code? (Mr. O'Connell assumed the Chair.) Mr. Fairless. Yes, I accept all these code resolutions on the basis that I have outlined. Acting Chairman O'Connell. If you have any more of those you may just identify them as resolutions of the code and they may be identOied by Mr. Fairless subject to check if there are errors in them. FREIGHT RATE COMPILATIONS BY THE IRt)N AND STEEL INSTITUTE Mr. Wooden. All right. The Institute has continued to keep up to date, has it not, the freight tariffs which were compiled pursuant to and referred to in this resolution that I have just called your atten- tion to? Mr. Fairless. Well, not pursuant to that resolution. They do keep up as I have already testified, this so-called freight book. Mr. Wooden. It does continue to put out freight rates, freight-rate compilations, showing all-rail freights from various basing points to destinations, and not only all-rail rates but rail and water rates to certain portions of the country? Mr. Fairless. To the best of my knowledge it is an up-to-date pamphlet, or kept up to date as near as it is reasonably possible to do so, of all transportation charges and changes, all on the basis of actual, factual information. Mr. Wooden. Is that the work of the traffic committee of the Institute? Mr. Fairless. I so testified Saturday morning. Mr. Wooden. Mr. Adams, you said that the Institute freight books include freight from points that are not basing points for particular products. Are you sure of that? Mr. Adams. That was my recollection, Mr. Wooden. I can't say, I am not positive. Mr. Wooden. You are not real sure? Mr. Adams. No. Mr. Wooden. As a matter of fact, don't the Institute compilations show the rates only from basing points on particular products? Mr. Adams. I said I am not quite sure of that point. I know that the freight rate book does show the freight rates from basing points to innumerable destinations. Mr. Wooden. Why did you testify the other day so readily and volunteer that it includes freight rates from nonbasing points? Mr. Adams. That was my opinion, Mr. Wooden. Mr. Wooden. Do you want to stand on it now? Mr. Adams. I will say I don't know definitely regarding that one point. CONCENTRATION OF ECONOMIC POWER 14247 Mr. Wooden. Don't you know as a matter of fact that the Institute freight books show freight rates only from basing points? Mr. Adams. No, I don't know that definitely either. The Institute freight rate book is the record, as we have testified, of the freight rates which are public property and obtained from railroads. We don't always use that freight rate book because you might say that is not up to date, it takes time to get the rates back from the Institute. Mr. Wooden. As a matter of fact, are there not a lot of producing points that are not shown in the Institute freight books? Mr. Adams. Well, again you are asking me a question, Mr. Wooden, that I thought I answered. I can't say specifically just how many basing points are shown in the freight rate book. Mr. Fairless. Obviously Mr. Adams and myself wouldn't be as familiar with the details of that book as our traffic people. Acting Chairman O'Connell. You were trying to develop from Mr. Adams if he knew whether the freight hook as compiled included freight from points other than basing points and apparently neither of you people are in position to say dogmatically whether that is so or not. Mr. Adams. I don't think we as individuals ever refer to the freight rate book because our traffic department always supplies us with that information as to a specific rate on a specific transaction. Acting Chairman O'Connell. I think the question is one you might very well have known the answer to inasmuch as it is a com- pilation by the Institute, you are familiar with the operations of the Institute generally, and I think the question is one you might have known the answer to, but proceed, Mr. Wooden. Mr. Fairless. Mr. Chairman, I don't imagine that I. have seen the freight book more than two or three times in its existence. I don't use it. Acting Chairman O'Connell. But the general question as to what would be mcluded in the rate book might very well come to your attention as a member of the Institute, I take it. Mr. Fairless. Not necessarily. When the book came into being I was not a director of the Institute. Our traffic department would be able to answer any question pertaining to it. Mr. Wooden. I submit these tables for the record. Acting Chairman O'Connell. They may be admitted. (The data referred to were marked "Exhibit No. 2209" and are included in the appendix on pp. 14442-14443.) Mr. Wooden. Mr. Adams, wiU you look at the sheets marked "Exhibit 2209" and which are sample sheets or some sheets taken from the freight rate book of the Institute? Do you recognize them as being in the form and substance of what the Institute puts out? Mr. Adams. I think that is correct, Mr. Wooden. Mr. Wooden. Will you look at those sheets and tell us whether there are not a .number of producing points in the shipping area of the destinations shown there that are not shown as the place from which the rates are calculated? Mr. Adams. Well, in glancing quickly through this list of towns it is apparent that most of them are producing points and basing points. Mr. Wooden. I beg your pardon? 14248 CONCENTRATION OF ECONOMIC POWER Mr. Adams. Iu glancing quickly through this list of towns I woula say that most of them are basing points and producing points, Mr. Wooden. That is the list across the top of this page citing Chicago, Gary, Cleveland, Detroit, Lorain. Mr. Wooden. Are there not a number of shipping points in the shipping area, so to speak, of Connecticut, to which these sheets relate that are not shown on those sheets, a number of places of production and shipment? Mr. Adams. Do you mean a number of points where steel is not produced? Mr. Wooden. Wliere it is produced and yet not shown on those sheets. Mr. Adams. Well, I don't know that I can answer that question specifically because I couldn't tell you just how many locations there are in Connecticut where various grades of products Mr. Wooden (interposing). I am not speaking about shipments in Connecticut but to Connecticut which those sheets give the rates for. I am talking about places of production between Chicago and running easward that are not shown on those sheets and yet which produce steel for shipment into Connecticut. Mr. Adams. Yes, there would be some such cases. Mr. Wooden. There are quite a number of them in fact, are there not? Mr. Adams. I don't know honestly how many there are. Mr. Wooden. You know the location of plants and the physical set-up and distribution of the steel plants in the country, don't you? Mr. Adams. Yes; generally speaking. Mr. Wooden. Then tell us some plants between Chicago and the east that are not shown as shipping points on those sheets. Mr. Adams. Well, speaking for the Steel Corporation I don't see Allentown listed there. That is a plant where we produce plain wire. It is not a basing point plant. Mr. Wooden. It bases on Pittsbm-gh, doesn't it? Mr. Adams. The nearest basing point on plain wire for shipment to certain points in the metropolitan area is Mr. Wooden (interposing) . It bases on Pittsburgh? Mr. Adams. The nearest basing point is Pittsburgh there. Now let me explain that, please, Mr. Wooden. That plant is a small plant, it manufactures plain wire only. The Form B returns for February showed that that plant produced roughly 700 tons, only 700 tons during the month of February 1939. Mr. Wooden. Doesn't it produce naUs also? Mr. Adams, I have it listed here as wire products only. Of that 700 tons, 650 tons were shipped abroad for export, 54 tons went into the metropolitan area. That is not a basing point mill. Mr. Wooden. I want to know some of the competitive mills east of Chicago that ship into Connecticut and whose locations are not shown as shipping points on these Institute freight sheets. Mr. Adams. Have you any in mind, Mr. Wooden? Mr. Wooden. You know the industry. You have only about 12 or 15 shipping points there; there are many more places of production east of Chicago for shipment into Connecticut, are there not? Mr. Adams. Yes. CONCENTRATION OF ECONOMIC POWER 14249 Mr. Wooden. Can't you give us the names of some of them and the location of their plants? Mr. Adams. Well, you might say Niles, Ohio, Niles Rolling Mills. I don't see Niles listed here. That is a point of production, Niles Rolling Mill Co. manufacturing sheets. Mr. Wooden. How about Middletown? Is that there? Mr. Adams. That is a basing point, I don't see it listed here. Mr. Wooden. For some products? Mr. Adams, On sheets. Mr. Wooden. What about Indianapolis? Is Indianapolis on there? Indianapolis is a producing point, isn't it? Mr. Adams. Not a producing point for any of our mills. Mr. Wooden. Isn't it a producing point for Continental Steel Cor- poration? Mr. Adams. Yes. Mr. Wooden. The Continental Steel Corporation couldn't use that sheet for getting the freight rate from its own plant at Kokomo. could it? Of course, it also has an IndianapoUs plant. Mr. Adams. No; it couldn't use this sheet for that purpose, Mr. Wooden. It couldn't use that sheet for any purpose except to figure the delivered price according to the basing points that are shown on that sheet, could it? Mr. Adams. Well, it could use this sheet to ascertain the published tariff from one point to a destination. Mr. Wooden. From points at which it has no shipments to make. Mr. Adams. That is correct. Of course, we have testified that we don't use the freight book exclusively ourselves. Actmg Chairman O'Connell. Are there freight rates, shown for other than basing points in that freight-rate book, assuming that the industry uses the basing-point system? Mr. Fairless. Not for the general use of the steel industry. Of course, there isn't any mystery about the actual freight rates from any 'producing point. It is available, I would imagine; I know it is in our traffic departments, various traffic departments; I assume it is in the offices of other companies. Acting Chairman O'Connell. But this book to be useful in con- nection with a basing-point system would need no rates other than rates for basing points? Mr. Fairless. It is an instrument that is very useful in our present method of merchandising steel products. Now it is particularly use- ful to smaller companies, as I testified before. Mr. Wooden. Providing they want to quote on the basis of basing point plus freight. We just had some cases here where the shipping points of some companies were not included and could serve no other purpose. Acting Chairman O'Connell. You were trjdng to develop whether or not there were freight rates for points other than basing points and if, as I understand it, this freight-rate book is intended to im- plement the basing-point system for prices it seemed to me reasonable to conclude that there were no freight rates shown in the book other than freight rates from basing points. Mr. Wooden. I wouldn't want to say necessarily that there is nothing l)ut basing-point places of shipment shown. That is pos- 14250 CONCENTRATION OF ECONOMIC POWER sibly too wide and sweeping an assertion, but there are many places of production and shipment that are not shown. Mr. Chairman, I would like to read Jor the record at this time a portion of the testimony of W. A. Il-vin, president of the United States Steel Corporation, in 1936, from his testimony before the Sen- ate Committee on Interstate Commerce, page 596 of the printed record of those hearings on Senate Bill 4055. This question was asked: The Chairman. Do not representatives of your companies participate in meetings with other steel companies at which market conditions and prices are discussed? Mr. Irvin. We talk of market conditions. That is one of the functions of the Institute when we get together. We talk of market conditions, what the possibil- ities are, and the prices in various localities, foreign competition, how much is coming in at this port or that port, and at what price it is coming in; at which price foreign materials are being sold at the various seaports, and anything that would naturally arise in connection with the steel industry, and other industries as well. I also would like to read from a portion of his testimony on the same occasion from page 595 of that same document; being questioned as to how the base prices were determined : Mr. Irvin. I would say we generally make the prices. The Chairman. You generally make the prices? Mr. Irvin. Yes, sir. We generally make the prices, unless some of the other members of the industry think that that price may be too high, and they make the price. The Chairman. You lead off, then, with a price charg'ed, either up or down, at Gary. Is that correct? Mr. Irvin Yes. The Chai tMAN. I notice the price on March 19 at Chicago for soft steel bars was $1.90, ^ hile at Pittsburgh the price was $1.85. Mr. Irvin. Yes. The Chairman. When the Iron Age printed that announcement, did they ask Bethlehem or did they ask you, or from what company did they receive that information? Mr. Irvin. I do not think I can answer that. The Chairman. At any rate, you were the one that fixed it? Mr. Irvin. We fixed our own price at $1.90 and $1.85'; we always notify the trade papers; I think our commercial people always notify the trade papers and others interested as to what our prices are. The Chairman. Then the rest of them follow that? Mr. Irvin. I think they do. That is, I say they do generally. They may quote the same prices, but maybe they need some business and make a better price. We do not always know that until it is over. The Chairman. Those are the exceptions, are they not? Mr. Irvin. Yes. The Chairman. Those are looked upon as the price-cutters in the industry? Mr. Irvin. Yes; and we have them with us always. The Chairman. They represent a comparativley small percentage, do they not? Mr. Irvin. It depends. Senator, on business conditions. I would say that when we are going at 30 or 40 per cent, we have more of them with us than when we are going at 60 or 70 per cent. And also from page 607 of that same document. Acting Chairman O'Connell. Do you intend to examine Mr. Fairless about this? Mr. Wooden. No; I am putting it in at this time, Mr. Chairman, because of Mr. Fairless' testimony that representatives of his company and subsidiaries did not discuss prices with competitors. Acting Chairman O'Connell. When was that testimony given? Mr. Wooden. Saturday morning, I believe. Acting Chairman O'Connell. I mean that which you are reading. Mr. Wooden. 1936. CONCIlNTtlATlON OF ECONOMIC POWER 14251 Acting Chairman O'Connell. What was your position at that time, Mr. Fairless? Mr. Wooden. He wasn't with the Corporation. Mr, Fairless. In 1936? Oh yes; I was with the Corporation. Mr. Wooden. What was your position? Mr. Fairless. In respect to what? Mr. Wooden. In the company, your ofl&cial position. Mr. Fairless. President of Carnegie-Illinois Steel Corporation. Mr. Wooden. That is the most important subsidiary of the United States Steel Corporation, isn't it? Mr. Fairless. Yes; it is the largest. Mr. Wooden. The testimony of Mr. Irvin was given in March or April 1936. Mr. Fairless. Are you asking me a question? I haven't the question. Acting Chairman O'CoNNEtL. I don't believe he has asked a question. Mr. Wooden. On page 607 of that same document, Mr, Irvin testified with regard to concessions: I think by and large that a very large percentage of the steel or other commodi- ties that are sold in that way are sold on a fair price basis to most of the users. The customers who are apt to get concessions are those having larger orders to place, and the ones who utilize steel in their own production. On page 592 of the same document: The Chairman. You spoke of these prices. Let me ask you this: If they followed the system or the method of using the base price plus the all-rail freight, then they would all sell at the same, price, would they not? Mr. Irvin. If everyone would use that, without deviation, it would be the same. They would all be the same. The Chairman. When they do not use that system, and there is a lowering, the man that does it is looked upon as a price cutter, is he not? Mr. Irvin. Yes, sir. Mr. Wooden. Will dne of you gentlemen representing the Corpo- ration here identify these documents? Mr. Fairless. We identify them. Mr. Wooden. As being the tabulations underlying the statement made in "Exhibit No. 1418" regarding the result of an examination of records on bids to the Federal Government? Mr. Fairless. That is correct. Mr. Wooden. Mr. Chairman, I offer for the record these two volumes of tabulations on Government Tonnage Records, just identi- fied by the witness. Acting Chairman O'Connell. They may be admitted. Mr. Wooden. Mr. Chairman, it will be necessary through another witness to go into these documents, but I don't know that it is nec- essary while the present witnessess are here. We have analyzed the showing rilade in those exhibits and we propose to show that the statement made in "Exhibit No. 1418" is quite wide of the facts, based upon their own underlying data which they have produced. Acting Chairman O'Connell. I don't think it is necessary to mcke any comment on that at this time. You intend to produce a witness later who will analyze the material underlying this material? Mr. Wooden. That is right. Acting Chairman O'Connell. I am a little at a loss. 124491 -41 — |.f. 27 — n 14252 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. The statement in "Exhibit No. 1418," to which I refer, reads: Identical quotations probably occur more frequently in sealed bids to govern- mental bodies than in private sales of steel products. There are two reasons for this: (1) The sealed bid practice required by statute prevents public agencies from bargaining individually with producers as is usually done by private buyers; (2) Sealed bids are eventually pubhshed and although a producer may be willing to quote a lower price on a private sale he is reluctant to do so when he knows that such lower price will soon be published and possibly may have to be made applicable to every similar ton of steel sold by him in the future. Nevertheless, in spite of this tendency, identical bids on governmental contracts are by no means the general rule. An examination of records covering Federal Government awards for steel products made at Washington, D. C, during 1938 and the first quarter of 1939, indicates that such awards aggregated approximately $10,500,000, of which about 80 per cent in value went to the lowest bidder and only about l6.5 per cent in value by lot on account of identical bids. The balance of 3.5 per cent was awarded on a basis other than of price. Acting Chauman O'Connell. As I understand, it is yoitr desire to have this testimony that you have just referred to at a later time so that we may complete our examination of Mr. Fairless as soon as possible?' Mr. Wooden. Yes; that is right. I want to get through. Mr. Fairless. This is our record and we let it stand. Acting Chairman O'Connell. These are the documents just identi- fied which are the underlying data also from your records, are they not? Mr. Fairless. We identified these records. Acting Chairman O'Connell. As I understand it, Mr. ^Wooden is going to have another witness make an analysis of that data. Mr. Fairless. These were prepared by us and submitted to Judge Wooden at his request. Mr. Wooden. The Corporation takes the position, does it not, Mr. Fairless, in "Exhibit No. 1418," that the basing-point system was a natural- result of basic economic conditions and that it evolved over a long period of time to meet th6 peculiar characteristics of the industry? Mr. Fairless. I don't recall just the exact wording but I assume that you are quoting from the pamphlet. Mr. Wooden. In substance, yes. I refer to the foreword of "Ex- «hibit No. 1418" and page 26 of "Exhibit No. 1410."' I believe you said the other day that as far as you were concerned you didn't know how the system originated. Is that correct? Mr. Fairless. Yes, or when. I understand it has been in effect about 50 years. Mr. Wooden. Do you agree that the same principle in effect, or the basing-point system in principle has been in effect that length of time? Mr. Fairless. It is a simple statement that the basing-point system or rather the multiple-basing-point system is in effect, it began and grew with the industry, it developed with the industry, I believe. Mr. Wooden. Have you gone into the history of it? Have you made any study of the history of it? Mr. Fairless. With respect to what? Mr. Wooden. As to how the basing-point system originated? Mr. Fairless. Well, I have read a lot about the basing point, naturally. Mr. Wooden. Did you ever read the testimony in the Pittsburgh Plus Case before the Federal Trade Commission? ' Both exhibits arc included in Hearings, Part 2G. CONCENTRATION OF ECONOMIC POWER 14253 Mr. Fairless. Not in its complete form. Mr. Wooden. In what form did you read it? Mr. Fairless. I don't know. If you want to discuss the Pitts- burgh Plus Case — I am not a lawyer, it seems to me we are getting on legal groimds when you start discussing the Pittsburgh Plus Case. Mr. Wooden. No; I merely want to know whether the Corporation in making the statements that it did about the natural economic origin of the basing point system took into account the evidence in the Pittsburgh Plus Case or the findings of fact made by the Federal Trade Commission in that case. Mr. Fairless. Here is a footnote on page 15, section B, entitled "Historical Material." The footnote reads Mr. Wooden. My question was not that. Mr. Fairless. I believe it is. Material in this section was largely drawn from the Trial Examiner's report on the facts in the Pittsburgh Plus Case before the Federal Trade Commission of 1924. Mr. Wooden. Did you take into account the findings of fact of the Federal Trade Commission itself as distinguished from the trial examiner's findings? Mr. Fairless. Judge Wooden, I did not prepare this pamphlet. As I explained to you, in your original question, the man who was largely responsible for its preparation is not here. I couldn't under- take to discuss intelligently before this committee every statemeijt made in this pamphlet. Mr. Ballinger. Well, before the pamphlet was pubHshed you undoubtedly went over it with the expert who prepared it and he rather convinced you that it was all .right, didn't he; that is, he showed you all of his evidence in making those statements. Mr. Fairless. I went over it not with the man himself but with Mr. Olds and other members of our special group. This is fully documented here. Mr. Wooden. Did it come to your attention that the Federal Trade Commission found in its findings of fact in the Pittsburgh Plus Case that the system originated in an early form among the beam producers away back about 1880 and that it was for the purpose of fixing identical delivered prices? Mr. Fairless. No, sir. Mr. Wooden. Was it brought to your attention that the findings of fact of the Commission were to the effect that until after 1900 the basing-point system was not in effect except sporadically and on a very limited number of products? Mr. Fairless. I can't discuss that. Mr. Wooden. WeU, the Corporation says this is a natural economic evolution. I am directing your attention and asking you if you' have considered some of these other things that don't quite square with that contention. Mr. Fairless. WeU, to make our position perfectly clear, we have submitted for the record this pamphlet having to do with this impor- tant subject and that is our testimony. This particular Pittsburgh Plus Case you refer to I understand is under appeal at the moment; in other words, it is ill the counts, so I am not a lawyer and I couldn't go into the legal phases. 14254 CONOEN'I'RATION OF ECONOMIC POWER Mr. Wooden. I am merely discussing matters of fact. Isn't it a fact that until the N. R. A. code put it into effect that there was no basing-point system on pig iron? Mr. Fairless. Pig iron, Judge, has in my experience Mr. Wooden (interposing). Can't you answer my question? Mr. Fairless. I am going to answer it, but some of these questions can't be answered by "yes" or "no." Mr. Wooden. That can. Mr. Fairless. By me it can't, so I have to answer the question as I know it and understand it. It has been my experience in the steel industry that generally speaking pig iron has been sold f. o. b, pro- ducing furnace, generally speaking. Mr. Wooden. Until when? Mr. Fairless. I said generally speaking, that is forever as far as I am concerned. Mr. Wooden. Isn't it a fact that pig iron was put under the basing- point system at the time the N. R. A. code went into effect? Mr. Fairless. Well, the merchandising of pig iron was put under the Steel Code it was a product under the Steel Code. Mr. WooDEiN. Weren't the various producing points for pig iron specified as basing points under the code? Mr. Fairless. They were for iron and steel. Mr. Wooden. And prior to that time pig iron had been priced and sold f. o. b. furnace, hadn't it? Mr. Fairless. Not entirely, but generally speaking; not entirely, I bought a lot of pig iron that wasn't purchased on the basis o' the producing furnace, but rather the producing area. Mr. Wooden. You have a basing point on pig iron at Provo, you say? Mr. Fairless. Do we have? Mr. Wooden. Yes. Mr. Fairless. I believe we haye. We sell very little iron, as you know. Mr. Wooden. But you do sell some? Mr. Fairless. We sell some. We consume most of our iron. Mr, Wooden. You sell some from Provo? Mr. Fairless. Some; a small percentage of the production. Mr. Wooden. And some other points from which you sell pig iron? Mr. Fairless. We sell pig iron in Cleveland, Pittsburgh, and Birmingham. Mr. Wooden. I thought you testified Saturday that you did not sell any pig iron. Mr. Fairless. I don't think I gave any such testimony. Mr. Wooden. All right, the record will show. Acting Chairman O'Connell. He diti not testify to that? Did hel Mr. Wooden. It was my understanding. Acting Chairman O'Connell. My recollection was Mr. Wooden. I asked about pig iron differential and he said, "I can't tell because we don't sell it." Mr. Fairless. I said the reason I could not answer your question was because any pig iron we sold in the South was from our Southern production, and in the North from our Northern production; there- CONCENTRATION OF ECONOMIC POWER 14255 fore, if there was a differential for Southern iron deHvery in the North it didn't register with me; that was my testimony. Mr. Wooden. The record will show. COMPARISON OF PACIFIC COAST AND BIRMINGHAM PRICES Mr. Wooden. Is it not a fact that the price of bars on the Pacific coast at the Pacific coast ports is equivalent to the Birmingham base price on bars, plus the freight out there? Mr. Adams. I cannot say exactly; I don't think, it is. A^r. Wooden, I said the freight; I did not say all-rail freight, but I said the freight from Birmingham by water. Mr. Fairless. Yes; by water. It is an arbitrary delivered price on the Pacific coast ports; whether it represents the all-water, published rate from Birmingham or not, I cannot answer. Mr. Adams. Here appears the actual freight. Acting Chairman O'Connell. Did not we have testimony about that in November? My recollection was that the freight on these items delivered on the West coast was in amomit the Birmingham price plus the amount which was slightly less than that. Mr. Wooden. On different products. In some cases it was less and others it was slightly more. Actmg Chairman O'Connell. But it varied from the Birmingham price; that is in .he record. Mr. Adams. Here are the actual figures. The rail and ocean rate from Birmingham to San Francisco is 69 cents per hundred pounds. Our San Francisco basing point price is 50 cents higher than our an- nounced published Birmingham price. Mr. Wooden. Fifty cents higher? Mr. Adams. Yes, sir. So the actual rail and ocean rate from Bir- mmgham is 19 cents per hundred pounds higher than the rate or the transportation cost that we use in arriving at our delivered prices on the Pacific coast. Mr. Wooden. Is not the Pacific port price on bars based on Bir- mingham, plus, rather than on Pittsburgh? Mr. Adams. It is not based on either, from that standpoint. We announce a price on the Pacific coast covering several ports. It has, you might say, a relationship to our Birmingham prices or Pittsburgh prices, but it is a relationship which I define here insofar as Birming- ham is concerned as being 19 cents lower than the actual rail and ocean rate from Birmingham to the Pacific coast. Now we have done that, of course, because of foreign competition. We have the same problem at the Gulf coast ports. Mr. Wooden. You add a considerable amount of freight, do you not, from Birmingham in order to arrive at your Pacific coast port base price? Mr. Adams. No, sir; I don't think I can say that, because we an- nounce delivered prices at certain points on the Pacific coast and de- livered prices at cer.tam points on the Gulf coast. Now the prices that we announce are less than the base prices plus the actual trans- portation costs, and the reason they are less is l)ecause of this fereign competition. Mr. Wooden. Are they not built up witli reference to the eastern base prices, plus transportation? 14256 CONCENTRATION OF ECONOMIC POWER Mr. Adams. I have just cited an example, Judge Wooden, and I don't know how you can say that you arrive at 50 cents as a transpor- tation cost when it is actually part of a published base price and the actual transportation cost is 69 cents. Mr. Wooden. On some products it is more than the actual trans- portation cost from the East, is it not? Mr. Adams. I don't know of any. If that is so I would like to know about it. Mr. Fairless. It could not be, Judge. Mr. Wooden. Well, you produce bars on the Pacific coast, do you not? Mr. Fairless. Yes, sir. Mr. Wooden. And you have in your Pacific coast base price an element that is pretty close to the freight or transportation cost from the eastern producmg points, do you not? Mr. Fairless. It is less than the actual transportation cost, Judge Wooden, but our assembly costs of course, on the West coast, that is the actual transportation cost involved in assembling our raw materials on the West coast, is higher than it is on the East coast, and of course the demand on the West coast is less than it is in the East. So you can't develop economies from the standpoint of having a large, completely integrated plant on the West coast, and when I say integrated I moan a plant which would produce all of the products that are produced in some of the large integrated plants in the eastern part of the country. Mr. Wooden. Did there come to your attention in connection with your statement that the basing point system evolved out of the natural economic conditions — did there come to your attention the findings of the Federal Trade Commission to the effect that the basing pomt system was not applied to the sale of tin plate until 1903? Mr. Fairless. I am not familiar with it. Mr. Wooden. That did not come to your attention? Did it come to your attention Mr. Fairless (interposhig). I would imagine there were very few producers of tin plate in the United States in 1903. Mr. Wooden. Did it come to your attention that prior to 1903 the corporation subsidiaries sold tin plate f. o. b. mill and not on a basing point system? Mr. Fairless. The corporation was formed in 1901, so you are speakhig about a 2-year period there that I am not familiar with. Mr. Wooden. Did it come to your attention that the Conxmis- sion's findings of .fact showed that the Pittsburgh plus system was adopted in 1900 by the National Tube Co. and that its competitors also adopted it about that time? Mr. Fairless. I am not familiar with that historic review. Mr. Wooden. Did it come to your attention that the Commission found that plate and structural shape producers met and agreed upon the Pittsburgh plus system in September 1903 and 1904; that the large wire producers, including one of your corporation subsidiaries, agreed on the Pittsburgh plus system as a method of maintaining uniform prices? Mr. Fairless. One answer, I think, would cover all of these (|ues- tions. I am not familiar with this particular historical review that you are giving. CONCENTIIATION OF ECONOMIC TOWER 14257 Mr. Wooden. As a matter of fact, so far as you are concerned, you don't know whether the basing point system originated as a natural result of economic conditions or just how it originated, do you? Mr. Fairless. I am very confident that its development was due to the economic development of the United States. Acting Chairman O'Connell. We will recess now until 2 o'clock. (Whereupon at 12:35 o'clock the committee recessed until 2 p. m.) AFTERNOON SESSION The hearing was resumed at 2:20 p. m. upon expiration of the recess. Acting Chairman O'Connell. The committee will be in order. All right, Mr. Wooden. TESTIMONY OF BENJAMIN F. FAIRLESS, PRESIDENT, UNITED STATES STEEL CORPORATION, NEW YORK CITY, AND AVERY C. ADAMS, VICE PRESIDENT, UNITED STATES STEEL CORPO- RATION OF DELAWARE, PITTSBURGH— Resumed Mr. Wooden. I was asking this morning for a copy of the Carnegie- Illinois Steel Corporation price announcement of June 4, 1936, cover- ing concrete reinforcing bars, and I believe it was suggested that if the excerpt which I have here were presented, it might be received and conceded to be an authentic statement of a price announcement of that corporation. Acting Chairman O'Connell. I think it can be received on that basis. Mr. Olds.^ I will be glad to send Mr. Wooden one tomorrow when I get back to New York. Acting Chairman O'Connell. Let's introduce the excerpt now, and if it is inaccurate we can correct it. I assume it is accurate." Mr. Wooden. I have a copy of the excerpt. Do you recognize that statement as one that appeared in your price announcement of Carnegie-Illinois? Mr. Adams. I don't recognize it; no. Mr. Fairless. I don't recognize it as such, but I am willing to assume that it was a part of the announcement. Acting Chairman O'Connell. Is it satisfactory to you that we proceed on that assumption, and we will have a complete copy of the price announcement put in the record tomorrow? I don't know what line of questions Mr. Wooden means to pursue. Mr. Olds. I don't know whether I can get it here tomorrow. I w ill mail it tomorrow when I get back to New York. Mr. Fairless. On that assumption, I am willing to proceed. Mr. Wooden. Now this relates to the method of making dehvered prices on products sold for fabrication for an identified structure, does it not, Mr. Fairless? Mr. Fairless. Apparently ; yes. Mr. Wooden. And provides that the place of delivery shall be con- sidered to be the railroad station nearest to the place where the struc- ture is to be assembled or erected; that is correct, isn't it? Mr. Fairless. It so states. •Irving S. Gids, counsel, U. S. Steel Corpoialion. 2 Admitted infra, p. 14259, as "Exhit)it No. 22)2"; included in the appendix on p. Hr^rtfi. 14258 CONCENTRATION OF ECONOMIC I'OWEll Mr. Wooden. The alteriiq.tive to that would be to make the price effective at the point of fabrication, not at the point of the erection of the structure, or to make the price f. o. b. mill? Mr. Fairless. The reason for the announcementfis that many times these structures are not located on any railroad siding, and also that the fabricatioQ takes place at that point. I really have to explain what is involved. Mr. Wooden. Can't you answer my question before you proceed to give the reasons for the practice? Mr. Fairless. I can^t answer just as you put it; there may be other alternatives; you have named two possible alternatives; there might be others. Mr. Wooden. Can you name any others? Mr, Fairless. Offhand, no- 1 cannot. Mr. Wooden. This practice originated under the N. R. A. Code, did it not? Mr. Fairless. I can't answer that specifically. In our method of selling our products, which is at a delivered price, we have to have some basis for calculating that delivered price, and we are simply stating our method in respect to concreN<'KN rilATlON OF lOCONOMK.' I'OWlOIl 14275 Mr. Fairless. All I can say is that at that tune — and the product I was confronted with happened to be chrome vanadium steel, because Ford used chrome vanadium steel and we were large manufacturers— that automatically became the price of chrome vanadium steel to anyone who cared to use it. Mr. Ballinger. So he didn't get a special concession? Mr. Fairless. No; he secured a lower price and at the same time the price for the product moved down to that level, because obviously we couldn't sell another automobile company at some higher price, and it was largely the automobile companies that used that product. Mr. Wooden. Is it not a fact, Mr. Fairless, that Government pur- chases on sealed bids have continued to reflect quite largely the full base price, plus the freight; in other words, to be based on the basing- point system? Mr. Fairless. We have the figures. Do you want them? They are presented here. Mr. Wooden. We are going into those, too, but is it not a fact that your policy has been to quote the full base price on Government bids? Mr. Fairless. Our policy is to secure our published prices every- where we can, and any time we do not secure those prices it is because of competitive conditions that prevent us from doing so. Mr. Wooden. You found the competitive conditions such that they permitted you to quote and get your full base price on Government bids? Mr. Fairless. In some instances; in many instances, no. Mr. Wooden. Those instances you refer to are covered by these compilations which you referred to a moment ago? ' Mr. Fairless. They are. Well, we may have been successful in some of those. We only refer to the transactions for that period. In Washington, too. We are not talking about Federal purchases otherwise. Mr. Wooden. Do you know how that compilation was made up? Mr. Fairless. Yes; it is an accurate record, so I am told, that w j made by our Waslungton office, which follows all the lettings and all the biddings in Federal work. Mr. Wooden. It is based on page 34 of your statement on a basis of value, is it not? Mr. Fairless. That is right. Mr. Wooden. Not upon the number of cases of bidding? Mr. Fairless. Well, obviously many of these items are for a very small amount, as you know. Mr. Wooden. But you based it upon value? Mr. Fairless. We state how we value it, and I might add it does not include, because we thought it would be unfair to include, big tonnage items such as armor plate and protective deck plates. Mr. Wooden. As a matter of fact, do you not ha-ve in there many items that are not rolling-mill products? ^ Mr. Fairless. Well, I can't answer as to the detail. The informa- tion was furnished to our special T. N. E. C. group by our Washington office. Mr. Wooden. Don't you have in there many items involving quota- tions by jobbers as distinguished from producers? ' "Exhibits Nos. 2210 and 2211," appendix, pp. 14444-14457 and 14458-H.'>n5. 14276 CONOENTRATION OF ECONOMIC POWER Mr. Fairless. I can't answer that. Mr. Wooden. Now, beginning on page 86 and running for a number of pages, you devote a great deal of attention to the claim that the ending of the basing-point system and the substitution of a mill-pricing system would dislocate and disrupt the industiy and result in creation of a lot of local monopolies. Is that not correct? Mr. Fairless. That is right. Mr. Wooden. How do you reconcile that statement made on those pages with your statement in "Exhibit No. 1418," reading as follows: It is' impossible to measure quantitatively the amount of transportation costs which might be considered unnecessary from any point of view, and it is equally impossible to measure the economic costs which would result from any interference with present practices, or more specifically, from any direct or indirect limitation of selling territories. Mr. Fairless. I don't believe we could accurately measure it, but we think it would be tremendous. Mr. Wooden. Do you think it is impossible to measure? Mr. Fairless. I think it is impossible accurately to measure the results of any untried theories. Mr. Wooden. You went ahead to attempt to measure the impos- sible, is that right? Mr. Fairless. All we are tiying to do, and if I am correct, all we tried to do was to make a very careful study of these various problems and present our findings and our opinions to this committee. We take the position that they are not perfect; we don't take the position, and never have, that everything we have said in every one of these pamph- lets is 100-percent correct, that there are no errors. Undoubtedly there are many errors, but this is the best that we could do ; we did it honestly; we spent much time, and I might add much money, in pre- paring it and it is submitted to this committee for whatever it is worth. Mr. Wooden. You also stated on page 47 of "Exhibit 1418," "There is no way by which the present steel-producing facilities can be compared scientifically with those which would have existed under other conditions." Yet you attempt to demonstrate that a change in the system wUl produce a lot of local monopolies and cause an economic disaster, is that correct? Mr. Fairless. Yes, sir; definitely. That is what we contend, and that, of course, is based upon the facts as we present them, and without any definite system, with its details all developed to replace our present system. Mr. Wooden. You make the statement in' your pamphlet that the Federal Trade Commission has proposed to impose by law or mandate an f. o. b. mill price that is uniform to all customers of a given mill. Do you mean to say that the Federal Trade Commission proposes to ignore the exceptions and provisos of the statute, the -Robinson- Patman Act, that provides exceptions where the price to various customers need not be uniform? Mr. Fairless. Well, I would assume that the Federal Trade Commission would at all times attempt to obey all the statutes the same as the United States Steel Corporation. Mr. Wooden. Then you don't mean to say that the Federal Trade Commission proposes to impose by law or mandate a price at the mill - that is uniform to every customer? Mr. Fairless. To be perfectly frank, Judge, and not with any attempt at being flippant, I really don't know what you do propose. CONCENTRATION OF ECONOMIC POWER 14277 Mr. Wooden. Well, you state in here at quite some length what the Commission proposes. Mr. Fairless. There have been statements that that was your answer to the present multiple basing point problems as you found them. Now you may be incorrectly quoted. Mr. Wooden. You don't know as to that? Mr. Fairless. You have never told me personally. Mr. Wooden. Would you think that to impose by law or mandate a mill price absolutely uniform to every customer would be without regard to the provisos of the law which permit differences in price to different customers under certain conditions? Acting Chairman King. Are you asking whether he believes in a law of that character? Mr. Wooden. I am asking whether he is charging in this pamphlet the Federal Trade Commission with seeking to impose by law or man- date the imposition of a mill price that is uniform to all customers, when the law itself does not so provide. Mr. Fairless. I have not suggested any such thing and have no intention of doing so. Mr. Wooden. Well, your pamphlet suggests it, does it not? Mr. Fairless. Not my interpretation of it. Mr, Wooden. Does it not say that the Federal Trade Commission proposes by law or mandate to establish a price at thiS mill that is uniform to all customers? Acting Chairman King. You can't answer that question? Mr. Fairless. I don't know. I really don't know. I beg your pardon. Mr. Wooden. Look at page 37 of "Exhibit No. 1418." Do you find there the statement that the "Federal Trade Commission pro- poses to impose by law or mandate"? Mr. Fairless. I shall read it if you will give me time. Mr. Wooden. Right at the top of the page. Mr. Fairless. What is your question? Mr. Wooden. I am asking you why you say on that page that the Federal Trade Commission proposes to impose a uniform f. o. b. mill price system with, the elimination of freight absorption by law or mandate? You have said, I understood, that you did not know what the Commission proposes. Mr. Fairless. Well, it is generally understood that that is your theory. Now if it is not we stand corrected, and I would like you to tell me what your theory is Mr. Wooden. I cannot speak for the Commission. Mr. Fairless. Since we are looking for facts. Mr. Wooden. I am' not speaking for the Commission; I can only say, and I do say, that the Commission has never taken that position that you say they have taken . Mr. Fairless. If we are wrong it is one of the many mistakes that we expected to make when we prepared all these articles. Mr. Wooden. I am making that statement on the basis of his- torical fact only, without any regard to what the Commission's posi- tion is or may be in the future, but only as to what it has been in the past, and 1 should like to go into that in another comiection a little bit more fully. I am not able to locate it just now — but I want to offer for the record another of the commercial resolutions which orig- ' 14278 CONCENTRATION OF ECONOMIC POWER inated under the code with reference to this quoting of prices regarding an identified structure. Acting Chairman King. The witness having stated that those reso- lutions are not of his Icnowledge, there would be no objection to offer- ing it, and if Mr. Fairless wishes to make comment on it later, he will have the opportunity. Mr. Wooden. I can't locate it right now. Mr. Ballinger. From the testimony read here into the record per- taining to the Pittsbm-gh plus case, there have been periods in the steel industry with respect to certain products when they did have an f. o. b. mill system, did they not, on certain products? Have you not sold products at the mill? Mr. Fairless. That is right. Mr. Ballinger. Well, the industry did not go to pieces, did it, under that system? I mean there was no great catastrophe and calamity? Mr. Fairless. Well, Mr. Ballinger, my reply to that would be that you can't judge the entire steel industry by one or more of its products. Mr. Ballinger. Well, I am taking a product Uke pig iron. It took you from 1870 to 1934 to decide you needed a basing point in that product, did it not? Mr. Fairless. Distribution of pig iron, of course, is not nearly as widely spread as steel products. Pig iron normally is produced for use by the producer. Mr. Ballinger. That is all. Acting Chairman King. Judge, have you any other questions of the witness? Mr. Wooden. I think not. Acting Chairman King. Have you any observations to make, Mr. Fairless, or Mr. Adams?" Judge Miller, have you any questions to ask? Mr. Miller. No ; I have no questions. Mr. Fairless. In respect to the letter that will be submitted sub- ject to identification tomorrow, the letter does not refer to U. S. Steel Corporation ; it was not written or received by anyone connected with our company, and I wish to leave the observation with the committee that we know nothing about it and are not prepared to comment upon it or discuss it. Mr. O'CoNNELL. It is intended that it will be offered for the record tomorrow so it can be identified^ and that is all you care to say in connection with it? Mr. Miller. I don't think I can add anything, except to express the appreciation of aU of us of the very great courtesy that has been extended to us by the chairman and by every member of the commit- tee and by counsel. Acting Chairman King. All the committee desires is to have the representatives of the Government or the others present such facts as they deem relevant and material and we are very patient, and I hope intelligent, listeners. Is that all for today? Mr. Wooden. I want to identify some papers, but could do it tomorrow morning. Acting Chairman King. The committee will stand adjourned until 10:30 tomorrow "morning. (Whereupon at 3:45 p. m. the committee stood in lecess until 10:30 Tuesday morning.) [NYESTIGATION OF CONCENTEATION OF ECONOMIC POWER TUESDAY, JANUARY 30, 1940 United States Senate, Temporary National Economic Committee, Washington, D. C. The committee met at 11 a. m., pursuant to adjournment on Monday. January 29, 1940, in the Caucus Room, Senate Office Build- ing, Senator Joseph C. O'Mahoney, Wyoming, the chairman, presiding. Present: Senators O'Mahoney (chairman) and King; Representa- tive WilHams; Messrs. O'Connell and Hinrichs. Present also: Willis J. Ballmger, Director of Studies for the Fed- eral Trade Commission, Walter B. Wooden, Assistant Chief Counsel, and Hugh E. White, economist, representmg the Federal Trade Commission. The Chairman. The committee will come to order. You may proceed. Judge Wooden. Mr, Wooden. Mr. Chairman, I should like to call to the witness stand Mr. A. A. Dorenbusch. The Chairman. Do you solemnly swear that the testimony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. Dorenbusch. I do. TESTIMONY OF A. A. DORENBUSCH, GENERAL SALES MANAGER, NEWPORT ROLLING MILL CO., NEWPORT, KY. Mr. Wooden. Your name, I believe, is A. A. Dorenbusch. Mr. Dorenbusch. That is right. Mr. Wooden. And where do you live? Mr. Dorenbusch. I live in Newport, Ky. Mr. Wooden. What is your business? Mr. Dorenbusch. Steel business, rolling of sheets. Mr. Wooden, With what company are you connected? Mr. Dorenbusch. The Newport Rolling Mill Co. Mr. Wooden, Is there some affiliated company also? Mr, Dorenbusch, We have the Andrews Steel Ca:, which is really the parent company of our business, which produces the raw steel. We in turn roll the sheets, but it is all one company, Mr. Wooden. What are the products produced by the Newport Rollmg Mill Co.? Mr, Dorenbusch. They are principally sheets. In fact, the Newport RoUmg Mill Co, produces nothing but sheet steel. Mr, Wooden. Is there any particular kind of sheets or various kinds? 14279 14280 OONOENTRATION OF ECONOMIC POWER Mr. DoRENBUscH. Well, of course we start with what is known as ordinary hot rolled sheets and any subsequent treatment that they get produces different grades, pickled sheets, galvanized sheets; we make electrical sheets, sheets that are known to the trade as gal- vannealed ; long ternes. Mr. Wooden. What is your position with the company? Mr. DoRENBuscH. General sales manager. Mr. Wooden. How long have you held that position? Mr. DoRENBuscH. I have held that position about 12 years, although I have been with the company for 25 years. Mr. Wooden. Do you have a Mr. A. K. Andrews who is connected with the company? And if so, what is his connection? Mr. Dorenbusch. Mr. A. K. Andrews is the president of the Newport Rolling Mill Co. Mr. Wooden. Who are the principal competitors of the Newport RoUing MiU Co.? Mr. Dorenbusch. Well, 'I would say that everyone in the steel sheet busiuess was a competitor of the Newport RoUing Mill Co., because of the diversified line of our products, Mr. Wooden. Who are your competitors on galvanized sheets? Mr. Dorenbusch. Well, there would be Carnegie Illinois, Conti- nental, Wheeling, Inland, Great Lakes, Jones & Laughlin. Mr, Wooden, Weirton? Mr, Dorenbusch. Weirton. All galvanized, sheet producers. I don't know whether I have named all of them or not, but those are the princij al ones. Mr. Wc ODEN. Does your Newport Rolling Mill Co. sell galvanized sheets over a wide territory, and if so, what? Mr. Dorenbusch. Yes, we sell galvanized sheets most anjrwhere in the United States. Mr. Wooden. You mean you actually carry on business throughout the country on galvanized sheets? Mr. Dorenbusch. We do. That's right, sir. Mr. Wooden. Referring to a copy of a letter dated August 17, 1935, addressed to Mr. A. K. Andrews, Footes Bay, Ontario, Canada, and bearing the initials at the lower left-hand corner of A. A. D., did you write the letter of which that is a copy? Mr. Dorenbusch. Yes, I did write the letter. Mr. Wooden, And Mr. Andrews, I believe you said, was president of the company, your company? Mr. Dorenbusch. He is president of our company; yes, sir, Mr. Wooden. At the time the letter was written was he on vacation? Mr. Dorenbusch. Apparently he was on vacation at his home in Canada, his summer home. Mr. Wooden. Mr. Chairman, I would like to offer the letter in evidence. . The Chairman. The letter may be received. (The letter referred to was marked "Exhibit No. 2214" and is included in the appendix on p. 14506.) price discussions among competitors Mr. Wooden. I should like to read it for the information of the committee. The letter was written by the witness under date of CONCENTRATION OF ECONOMIC POWER 14281 Mr. A. K. Andrews, Fooles Bay, Ontario, Canada. Dear Mr. A. K.: It was not definitely decided until late last evening to put into effect for fourth quarter a one-price policy allowing the galvanized sheet price to remain at $3.10 per 100 lb. for No. 24 gauge base f. o. b. Pittsburgh. A few of the larger interests such as Weirton and Inland were in favor of reducing the price to $3 base for No. 24 gauge f. o. b. Pittsburgh but this was finally defeated and it was agreed to allow all prices to remain the same as now in effect. The announcement of no further jobber allowance after October 1 will be made by Continental on Tuesday of next week after which all mills can announce likewise. We, of course, in the meantime will notify our people which no doubt will be conducive of causing an influx of jobber business for shipment prior to October 1st. "It is my intention to discuss this with Mr. Little this morning so that we wiU be prepared to take care of the rush that we like others will no doubt have during the month of September. "I discussed the automotive situation with Neil Flora last evening and he informed me that while some little tonnage was placed several weeks ago, nothing more has been done and that all the mills are holding firmly to their prices and are expecting that additional tonnages will have to be placed soon." May I digress there and ask you, Mr. Dorenbusch, who was Neil Flora? Mr. Dorenbusch. Mr. Flora is the secretary of the National Association of Flat Rolled Steel Manufacturers. Mr. Wooden. Including galvanized sheets? Mr. Dorenbusch, Yes, that would include galvanized sheets. Mr. Wooden. And where was he located? Mr. Dorenbusch. In Pittsburgh. Mr. Wooden. I continue with the letter: I find that our tonnage booked up to last night (Friday) amounted to 2812 tons and this morning's mail brought several additional cars so we are hoping at least to have 3000 tons for this week. Do hope that your stay in Canada will be pleasant and that you will be greatly benefitted by your vacation. Sincerely yours, AAD:GRK. Tliat is all I wish to ask this witness. Mr. O'Connell. I should like to ask a question or two. Mr. Dorenbusch, you say in the letter that "it was not definitely decided until late last night to put into effect for fourth quarter a one price policy." By whom was it not decided? Mr. Dorenbusch. By whom was it not decided? Mr. O'Connell. By whom was it decided the night before? Mr. Dorenbusch. Well, naturally, of course, when there is a contemplated change in price which had been talked of in all our trade papers, and so forth, and we were naturally interested in the announcement of whatever quarter prices that was, we were in confid- ence among ourselves at the office trying to [determine from various sources around through our different offices what information they might be able to gather on the streets, and so forth, as to when the price would be put into efffect and what it would be. Mr. O'Connell. That doesn't really answer my question, does it? Mr. Dorenbusch. I am sorry. Mr. O'Connell. By whom was it decided? Mr. Dorenbusch. It was decided by our people, our meeting at Lome. Mr. O'Connell. You mean a meeting at which your company only was represented? 14282 CONCENTltATION OF ECONOMIC POWER Mr. DoRENBuscH. Yes, our inner company. Mr. O'CoNNELL. The next sentence says, "A few of the larger interests such as Weirton and Inland were in favor of reducing the price to $3 base but this was finally defeated and it was agreed to allow all prices to remain the same as now in effect." Could you elaborate a little on what you meant by that? Mr. DoRENBUscH. We may get information, of course. For instance, our Chicago representative may be in touch with the various offices of the various other companies and get their viewpoint and get information like this which flows very freely at a time when we are looking for this sort of information. So that is where that may have come from. Mr. O'CoNNELL. But the letter says "this was finally defeated and it was agreed to allow all prices to remain, the same." Mr. DoRENBuscH. That word "defeated" may of course be rather ambiguous. Mr. O'CoNNELL. Would you say the word "agreed" was also a little ambiguous? You said it was agreed to let the fourth quarter prices remain the same. Mr. DoRENBuscH. Yes, that may be, also, putting it in that light. Mr. O'CoNNELL. How did you loiow that Inland and Weirton wanted to have lower prices? Mr. DoRENBUSCH. Well, that may be common talk on the street. Our district managers in Chicago of course are in touch with these offices and they exchange information as to what they each know. Mr. O'CoNNELL. The next paragraph starts — The announcement of no further jobber allowance after October 1 will be made by Continental on Tuesday of next week after which all mills can announce likewise. WTiat did you mean by that? Mr. DoRENBUscH. We may have picked up that same information, that they were going to announce such a thing and we naturally would follows. Mr. O'CoNNELL. You naturally would follow? Mr. DoRENBUscH. Well, yes, that is about the only system we have, being located as we are down in Kentucky. We are t<5o small to lead. Mr. O'CoNNELL. But at this time you knew that the following Tuesday Continental was going to announce no further jobber dis- counts, and that aU other mills, including your own, would adopt a similar practice at the same time. Mr. DoRENBUSCH. Yes; we may have picked that information up. Mr. O'CoNNELL. How would you pick that information up? Mr. DoRENBUscH. Well, if our men in the field would hear that that was the case, that they were going to discontinue it, and others would also, they would convey it to us, of course, and then also the trade papers usually carry information to that effect. The Chairman. May I suggest that that is a conditional answer. The question has to do with the facts as they existed. Mr. DoRENBUscH. Well, the facts would be the same, as I see it. That is, the means we have of getting that information, of course, is just through contact and asking questions. The Chairman. Of course your letter is very definite, there is nothing conditional about it at all. "The announcement of no further CONCENTKATION OF ECONOMIC POWER 14283 jobber allowance after October 1 will be made by Continental on Tuesday of next week after which all mills can announce likewise." Now that sentence indicates specific knowledge, not only as to what Continental is to do, but as to the date, the precise day on wliich is is going to do, it. Now do you want the committee to understand that you just picked this up out of the air in some vague manner, but then when you wrote your letter conveyed it to the person to whom you were writing as a clear and definite statement? Mr, DoRENBUSCH. Well, we may have determined that at the time by getting some information. The Chairman. You say you may have. Did you or did you not? Mr. DoRENBUscH. Of course I don't just remember the exact details. That has been so long ago that I just don't know. Mr. Wooden. You say, Mr. Dorenbusch, that after Continental announced withdrawal of jobber allowances the following Tuesday, that other mills, all mills can amiounce likewise. Couldn't they do it before? Mr. Dorenbusch. Oh, they probably could, yes, but of course they all try to be competitive. Mr. Wooden. What do you mean by being competitive, having the same policy at the same time and changing it at the same time? Mr. Dorenbusch. Not necessarily the same time, I think. We never Icnow the detail of these things until we see them pub- lished and then we do follow them. Mr. Wooden. Where was it you discussed the automotive situation with Mr. Neil Flora? Mr. Dorenbusch. I discussed that over the telephone, no doubt. Mr. Wooden. Didn't you get the information over the telephone from Mr. Flora that you put into this IStter? Mr. Dorenbusch. You mean about the automotive situation? Mr. Wooden. No, about the first paragraph, about leaving prices unchanged. Mr. Dorenbusch. No; I don't suppose I got that from him. Mr. Wooden. You don't suppose? Mr. Dorenbusch. Well, I never discussed prices with Mr. Flora. Mr. Wooden. You say in your letter that you discussed prices with him about the automotive situation and he advised you that the mills were all holding firmly to prices. Mr. Dorenbusch. I don't believe that letter says that I duscussed the prices in the automotive industry; I discussed the automotive industry with him and that may be with regard to tonnages that had b^en placed. Mr. Wooden. You say that Mr. Flora told you that all the mills are holding firmly to their prices. Mr. Dorenbusch. Well, he may have. There may have been a specific instance that I would have had at that time where one of the automobile buyers would have said to either our salesman or to me that they had placed a certain piece of business at a certain price, and in that event I may have asked Mr. Flora if he knew anything about it. Naturally we seek that information, and he is closer to the heart of the industry than we are down our way. I may have asked him that. 124401 — 41 — pt •?.~- 14284 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Do you mean that when you get a report of a cut price that you take it up with Mr. Flora to find out whether he can ver- ify it of not? Mr. DoRENBUscH. No; I don't mean that. I mean that in seeking or casting about for information of that kind, if there had been a definite sale made I may ask Mr. Flora if he had heard anything about it and as he did in this instance, according to that letter, he told me that he hadn't heard anything about it, that everything was all right. Senator King. Was the N. R. A. in force at that time? Mr. Wooden. No; N. R. A. went out with the Schechter decision on May 27, 1935. This was nearly 3 months later. Mr. O'CoNNELL. A few moments ago yoii indicated in discussing this question of the withdrawal of jobber allowances, that of course your company had to be competitive. I take it that a withdrawal of jobber allowances is in effect a price increase, isn't it? Mr. DoRENBUscH. Well, it may mean a greater return to the mill, that is right. Mr. O'CoNNELL. That would mean a price increase. Is it your conception of competition that whatever one of your competitors in- creases prices that you, in order to be competitive, have likewise to increase your prices? Mr. DoRENBUscH. Yes; we do, because we are so small down there that we certainly couldn't get a higher Mr. O'CoNNELL (interposing). You are so small that you can't be competitive. Mr. DoRENBUSCH. Well, no; we wouldn't get a higher price. Mr. O'CoNNELL. In this case you followed on a price increase. Had you not followed Continental you would have been selling at a lower price. Mr. DoRENBUscH. That is right. Mr. O'CoNNELL. Would that not have been competitive? Mr. DoRENBUSCH. I don't get the question. Mr. O'CoNNELL. Wouldn't that have been competitive to sell at a lower price? You indicated that it was competition that required you to some extent at least to follow Continental on the way up on 'the price increase. Would you not have been competitive had you either reduced your prices or kept them lower than Continental prices after this increase? Mr. DoRENBUscH. I don't think so. Mr. O'CoNNELL. You don't? Mr. DoRENBUscH. No. Mr. O'CoNNELL. Then competition to your mind is following some- one else's prices. Mr. DoRENBUSCH. Well, that is the system that is in effect. Mr. O'CoNNELL. I know, I understand that is the system that is in effect, I have no doubt of that, but you used that system as being synonymous with competition and I was curious to get your idea of what competition involved. Mr. DoRENBUscH. Well, I just don't quite get you, I guess. Mr. O'CoNNELL. No ; T think we are pretty far apart on competition. The Chairman. It might be a very practical question so far as you are concerned. Let me ask you, do you believe that competitors should be permitted to consult with one another with respect to the OONCENTKATlON OF ECONOMIC POWER 14285 price to be charged the pubUc for the goods the competitors both produce? Mr. DoRENBUscH. No; I don't think so. The Chairman. You don't think that they should be permitted to confer with one another and find out what prices are hkely to be, for example? Mr. DoRENBTTSCH. Well, it may be my own personal opinion that it would be all right to confer on it, but not to agree on a price. The Chairman. Well, has it been the practice, so far as your exper- ience goes, for competitors to confer? Mr. DoRENBUscH. No; it never has. I never have conferred with any of our competitors. The Chairman. But you have attempted to find out what your competitors are going to do? Mr. Dorenbusch. Very definitely; yes, sir. The Chairman. And how do you do that? Mr. Dorenbusch. Well, by contacts on the street. We have cer- tain customers, of course, that have been loyal to us for years, that 'when they are approached by another company and led .to believe there is going to be a change in price this way or the other, they will pass the information on to us quite readily. We also get it through contacts of our salesmen on the street. The Chairman. Well, do you ever get it by conferences with the heads of other firms and companies? Mr. Dorenbusch. No, sir. The Chairman. Who was this Mr. Flora that you mentioned? Mr. Dorenbusch. Mr. Flora, as I mentioned a while ago, is the Secretary of the National Association of Flat Rolled Steel Manufac- turers, which takes in sheets, of course*; that is a flat-rolled product. The Chairman. Well, you wouldn't object to conferring with a man holding such a position with respect to prices? Mr. Dorenbusch. Well, I never have. I've never conferred with him on prices, only that I may ask him if he had heard of anything of any lower — any business being placed at lower prices, where I had information of a specific order having been placed at a price. The Chairman. Now do I understand that you want the committee to get the impression, from your testimony, that the conference to which your first paragraph in this letter refers, was a conference solely of your own officials and employees? Mr. Dorenbusch. That's right. Senator King. Let me ask the judge a question: Judge, didn't the Sypreme Court of the United States, in the Sugar Institute case, say that there was no objection to meeting and conferring if they didn't fix prices? They could exchange their views. Mr. Wooden. I think that's been the opinion of the Supreme Court in other cases, particularly the Cement and Michigan Hardwood cases, going back prior to the Sugar Institute case. In the Sugar Institute case a basing-point system was involved, and the Supreme Court allowed the injunction of the lower court to stand against it. Senator King. The case to which I have just invited attention has not been overruled by the Supreme Court. That is the law now, isn't it, so far as the Suprenie Court of the United States may announce what the law is? 14286 c;(>.\("i:N'in{A'j'JON of kco.nomjc rowEU Mr. Wooden. So far as I laiow, the mere conference in itself may not constitute an agreement. It may be evidence, however, from which an agreement may be inferred with other circumstances. Senator King. The point I am trying to get at, the Supreme Court of the United States — persons engaged in the manufacture of shoes or hnens or tobacco or anytJiing else may confer, exchange views, biii, they may not fix prices. , Mr. Wooden. I think that's Senator King (interposing). May not enter into an agreement for the fixing of prices, but may exchange views with respect to the in- dustry and its condition, and probably the denjand in the industry. Mr. Wooden. I think that was . announced by the Court in the Cement case and Michigan Hardwood case,' back in 1925, both decided on the same day. ^ The Chairman. In these particular questions which I am directing to the witness now, I am not trying to imply that there was any violation of the law or that the witness or his company jWas doing anything which has been condemned by the law, or whether as a matter of fact there was any violation at all. 1 am just curious to know how the price fixing— and I am using that now merely in the sense of determining — the price-determining arrangement actually works. Now you tell us that you were referring solely to a meeting of your own employees and associates. It is difficult for me, therefore, to interpret this first paragraph which I will read for you again: It was not definitely decided until late last evening to put into effect for fourth quarter a one price policy allowing the galvanized sheet price to remain at $3.10 per 100 lb. for No. 24 gauge base f. o. b. Pittsburgh. A few of the larger interests such as Weirton and Inland were in favor of reducing the price to $3 base for No. 24 gauge f. o. b. Pittsburgh but this was finally defeated and it was agreed to allow all prices to remain the same as now in effect. ■ • ' - Now would a person reading that paragraph not be justified in in- ferring that a few of the larger interests were represented at the meeting where the decision was re'ached? Mr. DoRENBuscH. Well, it may give you the inference, of course, but just where we got that information, as I say, gathered here, there, .and other places, why The Chairman (interposing). But you are telling us that they were not represented at that meeting? Mr. DoRENBUscH. Not at our meeting; no, definitely not. The Chairman. And you are telling us that it was not your in- tention at that meeting to decide upon a price which had already been discussed and agreed upon by other competing companies? Mr. DoRENBUscH. W^ill you repeat that? I didn't get that. The Chairman. Well, at the time you wrote this letter, did you know what the other companies were going to do with respect to price? Mr. DoRENBuscH.,i_Well, we evidently did from the tone of things there. The Chairman. And did you luiow that merely because you picked it up on the street corner, or because you had pretty good official information from the executives of your competitors? Mr. DoRENBtrscH. No; we didn't have that sort of information from the executives of our coir peti tors. CONCENTRATION OF ECONOMIC POWER 14287. The Chairman. Well now, what sort of information did you have actually? You see, what I am trying to do is find out how you came to this conclusion. There is no question of law violation involved, and I am not trying to trap you. I am just trying to find out how this system worked, in order to make clear in my own mind how it ought to work. Mr. DoRENBUscH. WcU, I don't know exactly how I got the in- formation. I recall the letter and I get your inference there all right, but just how we got it, through our various offices or men, through theu* contacts, where it may have been let out here, there, and the other place. Whenever a price is ready to be aimounced, really before it is announced, usually some of the men on the street or in these various offices arc out with it ahead of time and they pass it on to customers and in that way our men pick it up, and naturally they convey it to us immediately. Mr. Wooden. Mr. Dorenbusch The Chairman (interposing). Mr. Wooden, would you ])crmit me? Mr, Wooden. I beg your pardon. The Chairman. Let me read the whole of that last sentence: A few of the larger interests such as Weirton and Inland were in favor of reducing the price to $3 base for #24 gauge f. o. b. Pittsburgh but this was finally defeated and it was agreed to allow all prices to remain the same as now in effect. Now don't you think that a person reading that sentence would be justified in the inference that there was a debate? Why did you use the word "finally"? Mr. Dorenbusch. Well, I don't know. The Chairman. Now you are telling me that there was no debate, there was no discussion, and there was no final defeat for anybod}^? Mr. Dorenbusch. Only as we gathered that. The Chairman. Where were they defeated and how? Mr. Dorenbusch. Well, I don't know that. The Chairman. You wrote it. Mr. Dorenbusch. I know I wrote it. The Chairman. All right. Mr. Wooden. Mr. Dorenbusch, can you tell us whether your own rtien picked this information up on the street late at nigJit? You said that it was not definitely decided until late in the evening. Were they out on the street picking up information late in the evening? Mr. Dorenbusch. Our people, they may have heard it tlie next morning. Mr. Wooden. Well, but you said it wan't decided until "late last evening." Mr. Dorenbusch. Yes; I said that. Mr. Wooden. Well, now, you wrote the letter the next morning, didn't you? Mr. Dorenbusch. That's right. Mr. Wooden. Do you now say that you got the iufornuitiou tlio next morning? Mr. Dorenbusch. Yes; probably got it the next morning. Mr. Wooden. But you talked to Mr. Neil Flora the evening before? Mr. Dorenbusch. No; not necessarily. I nuiy liavo talked to him that morning. 14288 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Well, you paid in the letter that you discussed it with Neil Flora last evening. Mr. DoREKBuscH. Well, that was on another subject. Mr. Wooden. But you said in the same paragraph that Mr. Flora told you that aU the mills were holding firmly to their prices. Mr. DoRENBuscH. WeU, of course that is a different subject en- tirely than involved in the first paragraph. Mr. Wooden. Were holding firmly to the prices? Mr. DoRENBUscH. Prices that were in effect at that time. Mr. Wooden. And that's what the paragraph says, that they were going to continue to be held at the same prices instead of being re- duced. That's correct, isn't it? The Chairman. Any other questions? Mr. Wooden. Nothing further. The Chairman. You may stand aside. Any other witness? Mr. Wooden. It was established yesterday, Mr. Chairman, by testimony, that certain resolutions establishing certain commercial practices with reference to the method of figuring delivered prices had been continued in operation since the code, and that they con- tinued in operation, so far as now shown, down to the present time. Since the code itself, as has been testified, and as is apparent on the face of the code, provided for the incorporation of the basing point system in the code, and since it was shown yesterday that the industry adopted resolutions continuing the fair competition provisions of the code in effect after the Schechter case, I think it would be in order to have a copy of the code itself in the record, and I submit one of the publicly printed and distributed copies for that purpose. The Chairman. Without objection the code may be received for printing in the record. (Tlie document referred to was marked "Exhibit No. 2215" and is included in the appendix on pp. 14506-14530.) The Chairman. Anything else, Mr. Wooden? Mr. Wooden. I should like to caU attention to section 4, schedule E of the code which has just gone in evidence, for the provision regarding the method of quoting prices for delivery on an identified structure, where the material was being fabricated m transit. Yesterday I had the impression that it was a separate resolution, but I find it is a part of the code itself and it was shown yesterday that that particular provision continued in effect for quite some time after the code itself was held invalid bythe Supreme Court. I offered yesterday also certain of the commercial resolutions adopted by the Board of Directors ' which were continued m effect, specifically, according to the testimony, and I should like to offer in supplementaton of those particular resolutions the remaining commercial resolutions that were adopted by the Board of Directors of the American Iron and Steel lastitute during the code period. I make that offer of the other resolutions on the basis of the letter of the United States Steel Corporation vice president, Mr. Olds, which I read into the record, I think on Saturday, to the effect that the Corporation officials knew of no amendments or modifications of those commercial resolutions since June 1935. The volumfe which I have contains several of the resolutions to which reference was 1 "Exhibits Nos. 2206, 2207, and 2208," appendix, pp. 1443.'i, 14436 and 14437-14441. CONCENTKATION OF ECONOMIC POWER 14289 made ou the record yesterday aud which -were received yesterday. T am offering the remainder of the resolutions. The CHA-tRMAN. You are offonTie; tbeni to be filed with the com- mittee? Mr. Wooden. To be filed. I should like to make some arrange- ment by which at least a duplicate may be provided and the original copy retained in the files of the Federal Trade Commission. The Chairman. The committee will be very glad to accept that to file with the records. Mr. Wooden. I may say the volume contains some so-called commercial regulations which are of the same general nature as the commercial resolutions and adopted under the same auspices. The Chairman. Very well. (The resolutions referred to were marked "Exhibit No. 2216" and are on file with the coromittee,) Mr. Wooden. I should also like to add a small additional portion of the testimony given by W. A. Irvin, president of the United States Steel Corporation, before the Senate Committee on Interstate Commerce in March 1936, just a few lines. It appears on page 607 of the printed record of the hearings before that committee on S. 4055. The Chairman. Now you were here yesterday when Mr. Grace was testifying. Mr. Irvin. Yes. The Chairman. He stated there were occasions when you came into his terri- tory and underbid his base price. Have you anj' specific examples of that? Mr. Irvin. I think I stated this morning that I thought he made that in a rather facetious way. If I thought he intended it I would have resented it very much. I would like to call Mr. Widmann to the stand. The Chairman. Do you solemnly swear that the testimony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. Widmann. I do. TESTIMONY OF EDWARD T. WIDMANN, ATTORNEY, FEDERAL TRADE COMMISSION, WASHINGTON, D. C. Mr. Wooden. Mr. Widmann, wUl you state your full name and business? Mr. Widmann. Edward T. Widmann. I am an attorney with the Federal Trade Commission. Mr. Wooden. How long have you been there? Mr. Widmann. Since 1934. Mr. Wooden. Will you state whether or not you had occasion as part of your oflBcial duties of the Commission to make any investiga- tion of conditions m the steel industry? Mr. Widmann. I did. Mr. Wooden. When, on what occasion, and under what circum- stances? IDENTICAL BIDS IN THE STEEL INDUSTRY Mr. Widmann. In 1936, the Federal Trade Commission undertook an investigation of identical bids submitted by the steel producers^op, steel sheet piling, wliich bids were submitted on piling to be used in certain P. W. A. projects. 14290 CON( !]ONT11ATION OF ECONOMIC 1•0\^•K1^ Mr. Wooden. In that connection will you state whether or not yon made any examination of the files and records of the American Iron and Steel Institute? Mr. WiDMANN. I did. Mr. Wooden. Did you select and obtain copies of documents from their files? Mr. WiDMANN. I did. Mr. Wooden. I show you certain documents. Will you state what they are? Mr. WiDMANN. These are copies of certain letters and documents which we obtained from the American Iron and Steel Institute, The Chairman. Which who obtained? Mr. WiDMANN. Which I obtained from the American Iron and Steel Institute. The Chairman. In what manner? Mr. WiDMANN. Pursuant to the investigation which I was making of alleged collusive bidding on steel sheet piling by steel producers. The Chairman. Did you get them from their files? Mr. WiDMANN. Yes. Mr. Wooden. Were the copies provided for you there or how were the copies made? Mr. WiDMANN. Some of the exhibits which we obtained were in the nature of duplicate copies of letters of which they had extra copies. They, the American Iron and Steel Institute, prepared copies of certain other letters concerning which they did not have extra copies in the files. Those copies which they made and submitted to us were, however, compared with the original exhibits. Mr. Wooden. Do you vouch for the correctness of the copies that you have identified here? Mr. WiDMANN. I do. Mr. Wooden. I would like to offer them for the record, Mr. Chairman. The Chairman. The letters may be received. Mr. WiDMANN. Letter, dated July 12, 1935, from the American Iron and Steel Institute to the Lukens Steel Co. (The letter referred to was marked "Exhibit No. 2217" and is in- cluded in the appendix on pp. 14530-14532.) Mr. WiDMANN. A letter, dated July 6, 1935, from J. Frederic Wiese, assistant to vice president of the Lukens Steel Co., to R. K. Keas, Secretary, Traffic Committee, American Iron and Steel Institute. (The "letter referred to was marked "Exhibit No. 2220" and is included in the appendix on p. 14532.) Mr. WiDMANN. A letter, dated October 15, 1935, from the American Iron and Steel Institute to H. C. Devine, purchasing agent of the St. Louis-Southwestern Railway Lines. (The letter referred to was marked "Exliibit No. 2221" and is included in the appendix on pp. 14532-14533.) Mr. WiDMANN. A letter, dated July, 18, 1935, from the American Iron and Steel Institute to J. W. Rimmer, vice president of the Boston and Maine Railroad. (The letter referred to was marked "Exhibit No. 2222" and is included in the appendix on p. 14533.) Mr. WiDMANN. A letter, dated September 9, 1935, from the Ameri- can Iron and Steel Institute to the Lockhart Iron and Steel Co. CONCENTRATION OP ECONOMIC POWER 14291 (The letter referred to was marked "Exhibit No. 2223" and is included in the appendix on p. 14534.) Mr. WiDMANN. A letter, dated September 4, 1935, from the Lock- hart Iron and Steel Co. to R. K. Keas, secretary, Traffic Committee, the American Iron and Steel Institute. (The letter referred to was marked "Exhibit No. 2225" and is included in the appendix on p. 14535.) Mr. WiDMANN. A letter, dated January 29, 1934, from the chairman of the traffic committee. Iron and Steel Institute, to S. E. Hackett, chairman. Commercial Committee of the American Iron and Steel Institute. Mr. Wooden. I would like to call attention to several pertinent matters in them. I would like to call attention to "Exhibit No. 2226," which is a letter from the chairman of the traffic committee of the Institute, one H. C. Crawford. Is that correct? Mr. WiDMANN. That is right. Mr. Wooden. H. C. C. are the initials — to S. E. Hackett, chairman of the commercial committee of the Institute, written on January 29, 1934, while the code was still in operation. Mr. Crawford states: The Traffic Committee recommends the passing of a resolution making the use of Tariff No. 2 mandatory in the figuring of prices under the Code. While every effort has been made to figure minimum rates, it is not humanly possible to obtain accuracy in each and every instance, bearing in mind that the half million rates published have been compiled by some hundred and fifty men'. As errors are discovered the incorrect rate will be changed, but until the change appears in a supplement to the tariff it is our opinion it should not be used for sales purposes. Certain branches of the industry have for years followed such a practice. We urge that, if possible, it be generally adopted. The pomt there I think is clear, that the Institute publication of the freight rates was to remain in effect until a supplement to it was issued making any necessary corrections. In other words, even if a rate were found to be incorrect the incorrect rate as published by the Institute should be used until there was opportunity to change it by a supplement to the tariff of the Institute. Mr. O'CoNNELL. In that connection I take it it is your point that the purpose of doing that was to insure imiformity in that element of price by all steel producer's. Mr. Wooden. Yes. As a matter of fact, the recitation of the resolution ' putting into effect these freight tarifis compiled by the Institute so recited, that it was to implement and make effective the calculation of delivered prices which were fixed under the code in the basing-point system, plus all-rail freight to destination. I think it was the testimony of Mr. Fairless that they used the freight book of the Institute during that period. I mean by that period the period of the code, although I believe that they haven't found it necessary to use it, according to his testimony, since. Mr. O'Connell. i\.ccording to his testimony they did not always use it. Mr. Wooden. The record will show; I am not perfectly clear on it myself. 1 would hke to call attention also to "Exhibit No. 2220," dated July 6, 1935, which is after the code wns invalidated, a letter by the 1 "KNliibit No. 1!208," ap|ipii(.li\, r'. I44:i7-!U1I. 14292 CONCENTRATION OF ECONOMIC POWER Lukens Steel Co, to R. K. Keas, secretary of the traffic committee of the Institute, July 6, 1935. It says: As you know, we sell Locomotive Firebox and Boiler Steel to most of the railroads in the country. From time to time the Institute has sent us figures representing divisions and mileages incident to quoting the railroads under the provisions of A-8. A-8 was one of the commercial resolutions. However, of the total railroads purchasing Lukens' steel a very few have sub- mitted the necessary figures. Can't you possibly furnish us with the figures pertaining to the balance of the railroads? Certainly these figures must be available by this time as the practice of quoting under the stipulations of A-8 has been followed for a good many months. It is most difficult to figure the proper prices and freight allowances now since the emergency rate became eS'ective. This is after the code. So many individual problems come up; for instance, you have furnished us with figures relative to the CJiicago & P^astern Illinois Railroad. That tabulation of figures shows a 20 switching charge for Dalton, 111. This means that the balance of the through rate from Coatesville to Dalton was considered as prorate. Has the emergency charge increased this switching charge by 10% or has that rate remained constant, thereby increasing the prorate by 20? Anything you can do for us in this connection will certainly be appreciated. I merely say that there are other letters among these exhibits re- lating to the method of figuring freight in the Institute freight-rate book, and which call attention to errors in them and make reference to the necessity or the practice of getting the Institute fre^ight-rate books corrected before the correct rates themselves were used. Mr. Wooden. Do you identify these as obtained by you from the same source under similar circumstances? Mr. WiDMANN. I do. Mr. Wooden. I offer them in evidence. The Chairman. They may be received. Mr. Wooden. The first is a latter, dated November 27, 1935, from Arthur C. Garvey, general traffic manager of the Readmg Iron Co., to E. T. Butler, secretary of the Traffic Committee of the American Iron and Steel Institute. (The letter referred to was marked "Exhibit No. 2228" and is in- cluded in the appendix on p. 14536.) Mr. Wooden. The next letter, dated December 2, 1935, is from W. H. Gantt, assistant traffic manager of the Bethlehem Steel Co., to E. T. Butler, American Iron and Steel Institute. (The letter referred to was marked "Exhibit No. 2229" and is in- cluded in the appendix on p. 14536.) Mr. Wooden. Now- "Exhibit No. 2228" is a copy of a letter from the General Traffic Manager of the Reading Iron Co. to E. T. Butler, the secretary of the traffic committee of the Institute, dated Novem- ber 27, 1935, which is 6 months or more after the code was invalidated. The writer says; Tariff No. 3 shows LCL rate, Coatesville, Pa. to Albemarle, N. C, 680. In Eastern Points-Carolina Tariff I. C. C. 646, the LCL rate from Coatesville to Albemarle, N. C. is 57..50. You doubtless will desire to have the lower rate pnljlished in lieu of the 680 I'ate. "Exhibit No. 2229" is a letter from W. H. Gantt, assistant traffic manager of the Bethlehem Steel Company, to E. T. Butler, American Iron and Steel Institute, dated December 2, 1935, and saying: COJSrKNTlJATlON OF EOONOMIC rowEu 14293 In reply io your letter o[ November 29th, in connection witli which you sub- joined a letterfrom a subscriber with reference to the proper rate on less carload shipments from Coatesville, Pa., to Albemarle, N. C. The less carload freight rate of 68 cents per 100 pounds, as shown in Institute Freight Tariff No. 3, is in error. The correct basis is 57^2 cents. We are taking the necessary steps to have this erroneous rate rectified in next supplement to tariff in question. In that general connection, I should like to call the committee's attention to one of the findings of fact made by the Federal Trade Commission in the Pittsburgh Plus Case, regarding freight tariflFs in use at that time. It is in paragraph 14 (n) of the findings: The freight tariffs are complicated and oft times there are two or more different freight rates between two points given in the different tariffs. The freight traffic expert's duty under the Pittsburgh plus system is to find the lowest rate existing from Pittsburgh to every consuming point. Different traffic experts might not arrive at the same results, and therefore a uniform freight rate book is absolutely necessary in order that the steel producers may reach absolutely uniform Pitts- burgh plus prices. I have nothing further to ask Mr. Widmann. The Chairman. You may stand aside. Mr. Wooden. Mr. White. The Chairman. Mr. "WTiite, you have already been sworn, haven't you? Mr. White. Yes, Mr. Chairman. TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, WASHINGTON, D. C— Resumed Mr. Wooden. Mr. White, in the course of your duties with the Federal Trade Commission did you also have occasion to examine the files of the American Iron and Steel Institute in connection with the same investigation that Mr. Widmann has just testified about? Mr. White. Yes; I was designated by the Commission as the exam- iner in charge of that investigation. Together we made the investiga- tion to which Mr. Widmann referred. Mr. Wooden. Mr. White, I show you a letter addressed to H. C. Crawford, chairman of the traffic committee of the Bethlehem Steel Co. and ask you to tell us what it is. Mr. White. It is a copy of a letter, or rather a copy of a copy of a letter which appeared in Investigation File 1-9268, which was secured from the files of the American Iron and Steel Institute on or about April 6, 1936. Mr. Wooden. I should like to offer it for the record now. The Chairman. It may be received. (The letter referred to was marked ''Exhibit No. 2230" and is included in the appendix on pp. 14536-14537.) Mr. Wooden. I should like to direct the committee's attention to the nature of this letter, the substance of it. It is dated April 11, 1935, which was just about a month before the invalidation of the N. R. A. It is a letter from the Youngstown Sheet and Tube Com- pany to H. C. Crawford, chairman of the traffic committee, care of Bethlehem Steel Company. • On February 22 we replied to your letter of February 12 relating to the disposi- tion of fractions in the quoting of delivered prices. This proposal, as we under- stand it, is concerned only with delivered prices, but in view of the recent develop- ment at Canton, Mississippi, we believe that there should be included in this 14294 CONClONTJtATION OF ECONOMIC POWEU proposal a ruling to the effect that where it is necessary to name a basing point price for discount purposes, the same rule regarding fractions should apply. We are sure that your Pipe Department is familiar with the Canton, Mississippi, job, to which we refer. There was involved on a PWA project approximately $60,000.00 of pipe, on which all bidders named a uniform delivered price, decimals being carried in two places, in accordance with usual practice. It was necessary to name a basing point price for discount purposes, and two concerns carried the basing point price to three places, one concern, however, making a mistake in figuring the price, but the successful bidder, which was Republic, has been awarded the business because carrying the basing point price to three places resulted in their bid being 12 cents low — 12 cents low on $60,000 by using three decimal places instead of two. Unless you include a ruling on basing point i)rice, as well as delivered price, this will no doubt happen again. Now, Mr. White, I call your attention to a statement that appears in "Exhibit No. 1418" on page 34. The statement on page 34 to which I refer is as follows. It is a statement made by the United States Steel Corporation in its pamphlet. It says in brief that in spite of the tendency toward uniformity or identity of bids on Govern- ment business, identical bids on governmental contracts are by no means the general rule. An examination of records covering Federal Government awards for steel prod- ucts made at Washington, D. C, during 1938 and the first quarter of 1939, indi- cates that such awards aggregated approximately $10,550,000, of which about 80 per cent in value went to the lowest bidder and only about 16.5 per cent in value by lot on account of identical bids. The balance of 3.5 per cent was awarded on a basis other than price. Air. "White, have you analyzed the underlying data which the Cor- poration provided and submitted as the basis for that statement which I have just read? Air. White. I have, and I think by way of explanation it should be said that those data were submitted in two volumes, one for the year 1938, which appears in the record as "Exhibit No. 2211," and those contained in another volume, captioned "Government Tonnage Record, First Quarter, 1939," and appearing in the record under "Exhibit No. 2210." We have examined these data and in order to make absolutely cer- tain that no errors occurred in the amounts, we balanced the pages of each of the exhibits, treated the years separately, and then treated them in their entirety. Air. Wooden. Will you state the results of your analysis? Air. White. Let me say first it was observed that there were a number of commodities here which were recognized as being other than steel products. I believe the statement to which you referred in "Exhibit No. 1418," page 34, referred to or mentioned only steel and products of steel. Air. Wooden. The statement on page 34 is as to steel products. Air. White. First it was noticed that there were a considerable number of other than steel products, among them being such com- modities as cement and various others which were clearly distin- guishable from steel. Next it was observed that there were a considerable number of bidders who were not listed in the Iron and Steel Works Directory of the I"^nited States and Canada, published by the Iron and Steel Institute as steel producers. We first indicated by symbols, in order to bring these diflPerent categories together, those that were producers CONCENTRATION OF ECONOMIC POWEIl 14295 of rolled steel and those that were not, then we segregated the com- modities" that were recognized as rolled-steel products and those that were not, and again segregated commodities that were products of these rolled forms. All of that has been expressed in tabular fonn on the sheets which you have before you. Mr. Wooden. I would suggest, Mr. Chairman, that the tabulation made by Mr. White, to which he refers, be admitted to the record, and that the Steel Corporation have an opportunity to examine it. The Chairman. It may be admitted. (The tabulation referred to was marked "Exhibit No. 2231" and is included in the appendix on p. 14538.) Mr. Wooden. Will you proceed, Mr. White, with your statement of the results of your analysis? Air. White. The tabulation which has just been received is made by using the same measurements that the Corporation used, that is tlie volume of business in dollars and cents. I have a memorandum here which for brevity might be ofFej'.d foj- the record, showing the number — or rather the percentage — of the total rolled products on which bids were made by producers of those forms which were alike and on which award was'made by lot, and the percentage ^v^hich were unlike.-. Mr. Wooden. Mr. White, the figures given in the Corporation pamphlet, "Exhibit No. 1418," show the total of $10,550,000 for steel products. What was the total amount of rolling mill steel prod- ucts that you were able to find in the underlying material that the Corporation submitted? Mr. White. The total value of the rolling mill products, both years, was $4,193,926.55. Mr. Wooden. Were you able to account for the remainder of $6,000,000 in the $10,550,000 figure? Mr. White. No; I didn't recognize any additional items as being in the form of rolling mill products. Mr. Wooden. Do the underlying data contain, however, a number of other steel products than rolling mill products? Mr. White. Yes; the aggregate amount of which is shown as $16,080,635.26. Mr. Wooden. What kind f^i products are included other than rolling mill products that you found in this tabulation? Mr. White. Well, there are large quantities of armor plate, which to the best of my information is rather a forged product than a rolled product. Then there are -car wheels, or truck wheels — I have forgot- ten just exactly' how they are expressed — which may be rolled by a different process than the rolling mill. Then there are, I believe, listed cranes and cable; cable especially is made in a large variety, of forms, and where the cable was not distinctly recognized as copper cable, of which there is a considerable quantity, that was put into the category of steel products, without any definite knowledge whether they were entirety steel or cable with a steel center. Mr. Wooden. You mean you put them m your analysis? Mr. White. Yes. Mr. Wooden. In other words, you gave the Corporation the benefit of the doubt on th.^t point? Mr. White. Yes. I might say hi that respect, too, that the symbols here have been carried throughout the tabulation so if it is desireH to check them it may be done. 14296 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. Do I understand, then, that you can Jfind m this underlying data only some four million dollars' worth of rolling mill products as against the $10,550,000 siated on page 34 of "Exhibit No. 1418"? Mr. White. Yes; something less than four and a quarter millions. Mr. Wooden. Now did your analysis go to the point of ascertaining the percentage of identical bids on the rolling mill products, considered separately? Mr. White. Yes, sir. They are not shown on the tabulation, but in a separate memorandum here which is somewhat detailed. Mr. Wooden. I would suggest, Mr. Chairman, that this separate tabidation, to which Mr. White refers, be admitted to the record. The Chairman. It may be admitted. (The tabulation referred to was marked "Exhibit No. 2232" and is included in the appendix on p. 14539.) Mr. Wooden. Will you proceed to state, Mr. White, what your analysis showed or shows as to the percentage of identical bids on rolling mill products in the underlying data which the Corporation submitted? Mr. White. Referring first to the rolling mill products and the awards made to producers of those products, the tabulation shows that there were 514 bids, of which 138 were tie bids, or a percentage of 26.85. Mr. Wooden. You mean by tie bids that they were identical in every respect? Mr. Wh^ te. I am using the language that was used in the tabula- tion. I assume that's what is meant. Mr. Wooden. All right. Mr. O'Connell. You say 514 bids. Do you mean 514 bid openings or that many bids? Mr. White. There were that many awards. Mr. O'Connell. So that the number of bidders would be many more than that? Mr. White. Yes, sir. Mr. Wooden. You gave the percentage. Mr. White. Yes, the balance of course were 376, or a percentage of 73.15. Mr. Wooden. That fs for the producers of rolling mill products? Mr. White. Yes. Mr. Wooden. Now did you analyze separately the underlying data with reference to bids by nonproducers? Mr. White. Yes. Now these nonproducers, it will be understood, of course, are those that are not specifically listed as producers of rolled steel shown in the Iron & Steel Works Directory of the United States and Canada. The number of awards to nonproducers was 182, of which 16 were tie bids, a percentage of 8.79. The unlike bids were 166, which is a percentage of 91.21. Now taking the total of bids on rolling mill products, we find there were 696, of which 154 or 22.13 percent were tie bids. Mr. Wooden. Now what did you find with reference to your analysis of the bids contained in this underlying data for steel products other thau rolling mill products? Mr. White. For all other steel products, number of awards to pro(hicers of rolling mill products wns 421, of which 55 were tie bids, CONCENTRATION OF ECONOMIC POWER 14297 or a percentage of 13.06. The number of awards to uonproducers of those products was 784, of which 104 were tie bids, or a percentage of 13.27. The Chairman. As I understand this testimony, Mr. Wooden, Mr. White is testifying that he has examined the underlying data prepared by the United States Steel Corporation.' Mr. Wooden. Yes, sir. The Chairman. From which whoever prepared this memorandum on the basing point system for the United States Steel Corporation drew the conclusion that [reading]: an examination of records covering Federal Government awards for steel products made at Washington, D. C, during 1938 and the first quarter of 1939, indicates that such awards aggregated approximately $10,550,000, of which eighty percent in value went to the lowest bidder and only about 16.5% in value by lot on account of identical bids. The balance of 3.5% was awarded on a basis other than of price. Mr. Wooden. That's right.2 The Chairman. Mr. White's testimony, then, is that this data which he has examined does not appear to support this statement. Mr. Wooden. That's -correct. The Chairman. May I ask whether the Federal Trade Commission has had any of its representatives examine the original data of Governmental awards? Mr. Wooden. Not with reference to these particular transactions. The entire data on which Mr. White bases his analysis are the data furnished by the Corporation as the underlying data for its general statement. The Chairman. Well, of course, the facts, I suppose, could be easily ascertained by examining the actual awards by the Federal Government. Mr. Wooden. It could be, yes. The Chairman. That would determine from those awards whether or not there were identical prices in only the proportion indicated in this memorandum. Mr. Wooden. Yes. The Chairman. It is conceivable to the Chairman that there might be an error in the compilation of this data. There might also be an error in the examination of it, unless Mr. White and the person who prepared the data were in agreement with respect to the meaning of particular figures. Mr. Wooden. That's true. Did you make your analysis, ]Mr. White, on the basis of dollar volume or upon the number of biddings, separate bids and lettings? Mr. White. The analysis which has been referred to is on the basis of volume entirely. Mr. Wooden. In other wofds, the same basis that the Corporation used? Mr. White. Yes. Mr. Wooden. Dollars and cents? Mr. White. That's right. M'-. Wooden. Is it entirely possible or even probable that a differ- ent ] —rcentage would be shown if based upon the number of bid 1 "Exh. lits Nos. 2210 and 22n", appendix, pp. 14444-14457 and 14458-14505. 2 Aftei necessary corrections were made in Mr. White's testimony upon his recheck of tho un 'erlyinn data it appears that the Corporation's statement just quoted was subsfsntially rorrcet. 1429S C().Nt;ENTUATlON OF ECONOMK" I'OWKK invitations rather than upon the value involved in the particular invitations? Mr. White. A quite different showing on percent, Mr. Wooden. I am a httle embarrassed by not having before me the facts in that respect. I thought they had been prepared and were included with these which came up since we arrived here, but they have not apparently. Mr. Wooden. Well, can you state from recollection approximately what the difference was? Mr. White. No; I don't thmk I should do that, Mr. Wooden. There should be a strictly accurate reply made to that question. Mr. Wooden. Can you say whether it was less or more than the percentages shown on the basis of volume? Mr. White. No; I don't think I should say they are f^ more or less. Mr. Wooden. You will have that material soon, will you? Mr. White. Gladly. It will be ready for submittal this afternoon if it is desired to have it. Mr. Wooden, Have you finished with your statement regarding the percentage of awards for these steel products other than rolling mill products? Mr. White. 1 think so. I don't think anything can be added to what is already said. Mr. Wooden. Can you say whether or not. these steel products other than rolling mill products are sold on a basing point system or whether they are sold at delivered prices, or do you know anything about that? Mr. White. Well, I distinctly recognize one, perhaps more, as being sold on that basis, and I think there are one or two more which I am a little hesitant about specifying. ^ Mr. Wooden. Will you state, if you can, how you can account for the fact that the corporation says the value involved in these biddings on steel products is $10,550,000 approximately, while you were unable to find more than $4,193,000 of rolling mill products? Where would the difference come in? Mr. White. Well, their designation, you will notice, their category consists Mr. Wooden (interposing). Page 34 ^ refers to steel products only. Mr. White. Steel products. Well, I undertook to segregate what I recognized as rolling mill products from other steel products, and since there is a total of only a little over four millions of rolling mill products, they must have been referring to fabricated products as well. Mr. Wooden. Do you know whether any of these products other than rolling mill products are priced on a basing point system? Mr. White. No; I don't think I should say that I know that defi- nitely, Mr. Wooden. I suspect some '^f them are. Mr. Wooden. Mr. White, I direcu your attention to a statement that appears on page 99 of "Exhibit No. 1418," the corporation's pamphlet on the basing point system, reading as follows: The capacity of the industry, inchiding reserve capacity, is not more than suflB- cient to supplv tlie needs of the country during periods of high demand such as 1929, 1937 and the present time. 1 Of "Exhibit No. 1418." CONrKNTKATION OF ECONOMIC PO^^•EIl 14299 RELATION OF PRODUCTION TO CAPACITY, 1901-38 Mr. WooBEN. I will ask you if you have made any compilation or showing of the relation of capacity to production, based upon the data supplied by the Corporation itself in "Exhibit No. 1409." Mr. White. I have. Mr. Wooden. TeU us what you did, please. Mr. White. I plotted the figures with respect to total ingot capac- ity shown Mr. Wooden. Pardon me, before you do that I would like to direct your attention at the same time to the statement on page 45 of "Exhibit No. 1418," that the total capacity of the industry "includes reserve capacity barely sufficient to supply peak demands." Mr. White. Well, the best answer to that, Mr. Wooden Mr. Wooden (interposing). Just go ahead with your statement regarding what you did. Mr. White. 1 would say that we have plotted total capacity shown in Exhibit 1409, ingot capacity, for the years Mr. Wooden (interposing). Is that for the entire industry? Mr. White. For the entire industry. It shows both the entire in- dustry, total United States as expressed here, and also United States Steel separately. What I have done is merely to repeat what I notice to be substantially the graph shown in that same exhibit, page 191. Mr. Wooden. By same exibit you mean "Exhibit No. 1409"? Mr. White. That is correct, and added thereto a production line which is plotted from total ingot production appearing on page 198 of that exhibit. Mr. Wooden. I offer for the record this chart entitled "Total ingot capacity. United States (gross tons), years 1901-38." The Chairman. It may be admitted. (The chart referred to was marked "Exhibit No. 2233" and is in- cluded in the appendix. on facing p. 14539.) Mr. Wooden. Now, Mr. White, on the basis of this exhibit can you find any support for the statements in the corporation's pamphlet * to which I directed your attention, to the effect that the capacity is not more than sufficient to supply the needs of the country during periods of high demand and that it includes reserve capacity barely sufficient to supply peak demands? Mr. White. Assuming the needs of the country to be the produc- tion, or the amount produced, I can't find a basis for the statement Mr. W^ooDEN. Take the year 1929, to wliich the corporation refers, what was the approximate percentage relation of production to capac- ity in that year? Mr. White. I haven't the result expressed in percentages, Mr. Wooden. Mr. Wooden. Well, the chart shows that it was a fairly substantial amount below the capacity, does it not? Mr. White. Yes; somewhat. Mr. Wooden. The percentage could be worked out from the under- lying figures, could they not? Mr., White. Somewhat less. • "Exhibit No. 1418." 12'149i— 41— pt. 27 -14300 CONCENTRATION OF ECONOMIC POWER Mr. Wooden. What about 1937, to which the corporation also refers as saying that the capacity is not more than sufficient to supply the needs of the country during 1937? Mr. White. That shows there was a considerable excess. Mr. Wooden. Much more than 1929? Mr. White. A production of approximately 52,000,000 tons whereas the capacity was in excess of 70,000,000. Mr. Wooden. Does this chart show any periods when the capacity of the United States Steel Corporation alone was equal to supplying the entire demand or production at certain periods? Mr. White. Yes ; it shows five occasions in which that might be so. Mr. Wooden. What were those years? Mr. White. 1908, 1921, 1932, '33, and '34. The Chairman. In other words, during the entire period from 1901-38 the capacity of the United States Steel Corporation by this exhibit is shown with the exception of these years which you have just mentioned to have been considerably less than the actual total pro- duction of the United States during those periods. Mr. White. That is true. The Chairman. It is also to be observed from this exhibit that in 1901, the United States Steel capacity was slightly under 10 and the total capacity of the United States was sHghtly over 20, so that at that time in 1901, United States Steel's capacity was approximately 50 percent of the total capacity of the United States, and that that pro- portion remained somewhat stable until about 1907 or 1908 and that since that time the total capacity of the United States has grown much more rapidly than the capacity of the steel corporation. That is correct, is it not? Mr. White. Yes, sir. The Chairman. So that today the United States Steel Corporation has the power to produce a considerably smaller proportion of the output than the United States as a whole can produce. Mr. White. That is true, there has been a declining percentage. The Chairman. And in these years of 1927, '28 and '29, and in 1936 and '37, the total production of the United States was apJDarently approximately twice as great as the capacity of the United States Steel Corporation. Mr. White. Yes; more than that. It wiU probably be noticed in this graph that there has been a continuous increase from 1901 to 1938 in the total capacity of the country with the exception of the year 1926. Now it may be worth noting that there is an explanation con- tained on page 191 of "Exhibit No. 1409" which says that that was due to a readjustment of capacity data by the American Iron and Steel Institute rather than an abandonment of facilities to produce steel. That statement was corroborated by the press and it is pretty well known what happened at that time. There was a committee of the American Iron and Steel Institute appointed to survey or resurvey the total ingot capacity, with the result that there was a temporary reduction shown here in 1926. Mr. Wooden. That showing is for the total ingot capacity. Would there be a different showing if you took it by various products? Mr. White. This showing is only as to ingots of which the rolled products are made. CONCENTRATION OF ECONOMIC POWER 14301 Mr, Wooden. Have you made any study of the situation regarding excess capacity as to any particular product, rolling mill product? Mr. White. Yes. Mr. Wooden. What? Mr. White. On hot rolled sheets and hot rolled strip. Mr. Wooden. Will you state what you did in that connection? Mr. White. I have listed the capacities of the p oducers of hot- rolled sheets and hot-rolled strip, 16 of them individually, showing each capacity for sheets and strip and the total as given in the Ameri- can Iron & Steel Works Directory for the United States and Canada published by the American Iron & Steel Institute for the year 1938. Mr. Wooden. Did you plot the results of that study in chart form, in graph form? Mr. White. I first compiled the capacities of these 16 producers and Mr. Wooden (interposing). What 16 producers? Mr. White. Sixteen producers of hot-rolled strip and hot-rolled sheets showing that their capacity for both forms was 12,862,500 gross tons. The Chairman. The committee will stand in recess now until 2 o'clock. (Whereupon, at 12:40 p. m., the committee recessed until 2 p. m. of the same day.) afternoon session The hearing was resumed at 2:20 p. m., upon the expiration of the recess. The Chairman. Are you ready to proceed, Mr. Wooden? Mr. Wooden. Yes, sir. The Chairman. The committee will be in order, TESTIMONY OF HUGH E. WHITE, FEDERAL TRADE COMMISSION, WASHINGTON, D. C— Resumed EXCESS CAPACITY IN PRODUCTION OF SHEETS AND HOT-ROLLED STRIP Mr. Wooden. Mr. White, when we recessed at noon you were just on the point of making a statement with regard to your study of the conditions as to excess capacity in the production of sheets and hot rolled strip, I believe, is that right? Mr. White. Yes, sir. Mr. Wooden. Will you proceed with your description of what you did and what you found in the course of that study? Mr. White. I prepared a tabulation showing the total capacities for hot-rolled sheets and hot-rolled strip as shown by the Iron and, Steel Works Directory of the United States and Canada, published by the American Iron and Steel Institute for the year 1938. I have also shown the capacities of 16 of those principal producers. Mr. Wooden. How many producers in all did you find listed in the directory for the industry? Mr., White. Fifty-two. Mr. Wooden. And what did the figures show for the 16 that you listed? 14302 CONCENTRATION OF ECONOMIC POWER Mr. White. They showed a combined capacity of 12,862,500 tons for 16 companies and a total capacity of the United States for 52 companies of 14,949,950 tons. Mr. Wooden. Do you mean to say that 16 out of 52 companies had a combined capacity that was six-sevenths, approximately, of that of the entire sheet production, sheet and hot-rolled strip production? Mr. W^HiTE. That is correct. Mr. Wooden. Did you put your figures in the form of a chart or graph? Mr. White. I did. Mr. Wooden. Will you let me have that, please? Mr. Chairman, I offer for the record a table entitled "Total United States Capacity for the Production of Hot-Rolled Sheet and Hot- Rolled Strip Steel, 1938" and a graph entitled "Total Capacity, United States, for Production of Hot-Rolled Sheet and Hot-Rolled Strip Steel; Annual Capacity of the 16 principal Producers; and Production, United States." The Chairman. They may be admitted. (The table and graph referred to were marked "Exhibits Nos. 2234 and 2235," respectively, and are included in the appendix on pp. 14540 and 14541.) (Mr. O'Connell assumed the chair.) Mr. Wooden. Mr. White, referring to "Exhibits Nos. 2234 and 2235," can you tell me whether those figures show that the 16 principal producers of sheets and hot-rolled strip have a capacity ,to produce more than twice what was needed during 1938? Mr. White. That is correct. The tabulation shows production ratio to capacity to have been 45.3 percent. That is of the 16 com- panies. Total production to total capacity was 39 percent. Mr. Wooden. In other words, there was about two and a half times as much capacity to produce sheets and hot-rolled strip ais there was need for during 1938. Is that cgrrect? Mr. White. That is what the figures contained in the Iron and Steel Works Directory and the production figures contained in the annual statistical reports of the American Iron and Steel Institute 'for 1938 showed. Acting Chairman O'Connell. You refer to need as synonymous with production? Mr. Wooden. Yes; I intended to say that, need as shown by the amount of production. Mr. Wooden. Now Mr. White, you were unable to state before noon what the results of your analysis of "Exhibits Nos. 2210 and were 2211" were when figured on the basis of number of invitations rather than on the basis of value — total value. Mr. White. Mr. Wooden, the figures given just before the luncheon adjournment were, I find, for the number of bids received, and not for Mr. Wooden (interposing). You now have it for value, then? Mr. White. Yes. The percentage of identical bids by the pro- ducers of rolled products received on the rolled products was 12.67; that is, column 6 divided by colurmi 2 of the tabulation shows that ratio. Mr. Wooden. Do I understand that 12 — what was the decimal point figure? CONCENTRATION OF lOOONOMlC POWKIt 14303 Mr. White. 12.67. Mr. Wooden. 12.67 percent of the rolled steel products on » value basis were identical. Is that right? Mr. White. That is of tltose bids made by the rolled steel pro- ducers. Acting Chairman O'Connell. I am not clear. The 12.67 is that on a basis of value of the commodity or on the basis of number of bids?. Mr. White. That is on the basis of value. Acting Chairman O'Connell. And the figure this morning of 26 poipt something was based on the number of bid openings. Is that conect? Mr. White. That's correct. Acting Chairman O'Connell. And that in turn is based upon a break-down of the $10,500,000 figure shown in "Exhibit No. 1418" submitted by the Steel Corporation as showing Mr. White (interposing). No, its Acting Chairman O'Connell. (interposing). Percentage of Gov- ernment purchases of steel during a given period with purchases- Mr. White (interposing). That is not quite correct, Mr. Chairman. It was the break-down of data furnished in response to request for data which underlies that statement to which vou refer. Mr. Wooden. Now Mr. White, I want to bring your attention to a statement made by the corporation in "Exliibit No. 1418" on page 95, to the effect that "the capital investment per ton of steel is high and the annual turnover is relatively low compared with many other industries." Have you made any compilation with reference to the subject of capital investment per ton of steel? Mr. White. I have made only a limited and rather hurried examina- tion in response to the question asked by Senator King the other day, and from Mr. Wooden (interposing). Will you state what you did and what results you have? Mr. White. I took the financial analysis of the steel industry for the past 11 years as published in the magazine Steel, various annual issues of the magazine Steel for those years, 1928 to 1938 inclusive, and I selected nine of the companies, or all of those companies having ingot capacity in excess of 1,000,000 tons. This tabulation purports to show the rated ingot capacity of those companies for the respective years, the capitalization per ton of ingot capacity, total earnings per ton of ingot capacity, and percent of total earnings on capitalization. Of course I don't vouch for these figures; they are merely indications and submitted just in response to that quesion by Senator King. Acting Chairman O'Connell. Can you tell me in a general way what this indicates? The Senator's question was rather general. Mr. White. The Senator asked, I believe, something about the returns upon Acting Chairman O'Connell (interposing). About the what? Mr. White. The percentage of return on invested capital, or upon capitalization rather, and this table purports to show that. Mr. Wooden. It shows, does it not, Mr. YvHute, a rather wide variation among the nine principal producers of their capitalization on the basis of per ton ingot capacity? Mr. White. Yes. 14304 CONC^ENTRATION OF ECONOMIC l^OVVER Mr. Wooden. It shows quite a wide variation on their earnings per ton of ingot capacity, does it not? Mr. White. It does, with a noticeable difference in rate of return to the rather smaller companies. Acting Chairman O'Connell. Do you wish this offered for the record? Mr. Wooden. Yes. Acting Chairman O'Connell. Let it be admitted. (The tabulation referred to was marked "Exhibit No. 2236" and is included in the appendix on pp. 14542-14543.) Mr. Wooden. Now Mr. White, I believe you were connected with the trial of the Pittsburgh Plus case before the Federal Trade Com- mission. Is that correct? Mr. White. That is correct. Mr. Wooden. Did you make compilations and submit tabulations and graphs in that case? Mr. White. I did. Mr. Wooden. Did you mfike any study of the manner in which the price load and the cost load, cost of production load in the industry, was distributed in various sections of the country? Mr. White. I made a limited study to the extent that data, reliable data, were available. Mr. Wooden. WiU you state what the data were and what you did with them? COMPARISON OF COSTS AND PRICES AT PITTSBURGH, CHICAGO, AND BIRMINGHAM Mr. White. The United States Steel Corporation, in response to a request, submitted what purported to be a statement of the relative mill cost figures of certain of the principal forms of rolled steel, that is plates, shapes, bars, and black sheets, for the year 1920, and I think for two months of 1921. Nineteen twenty was a year of rather high production, part of which time the mills were running at practical capacity, some of them at least. At that time the prices of steel in every part of the country, at least of these forms, except in the Birmingham district, were based upon the Pittsburgh price plus the then current freight rate from Pittsburgh to destiiiation. That was the general situation. The complaint in this Pittsburgh plus case, so-called, grew out of the fact that there was a feeling on the part of some of the western consumers of these products that they were being saddled with an undue proportion of the total burden of steel prices. They based that largely upon the fact that they had some competition, in the Chicago district in the shape of a sub- sidiary company of the International Harvester Co., who as I recall produced about 340,000 tons a year, a proportion of which was used in their own producti'^n — about 50 percent it was estimated — and the balance of it was sold to the trade or to their competitors on a Pitts- burgh plus basis. That is, the Pittsburgh price plus the equivalent of the freight rate to destination. That, it was thought, gave Interna- tional Harvester a rather clean-cut advantage over its competitors in that district. After these figures were received from the United States Steel Cor- poration, these cost figures, they were put in evidence and I computed CONCENTRATION OF ECONOMIC POWER 14305 from those figures a table put in as exhibit No. 6852 in that case, a copy of which you have before you, Mr. Wooden, which resolved the production costs of the corporation at the various points on various forms, PittsburghjT. Chicago, and Birmingham, into a net ton price, and resolved that again into a hundredweight base price, the unit basis on which those rolled forms were sold. From the Pittsburgh base price was subtracted the mill costs of producing bars, and that was found to be $2 per net ton. , From the Pittsburgh plus price on those same forms at Chicago was deducted the production cost at Chicago as shown by the statement furnished by the corporation, and we found there a margin of $13.80 per ton. The same thing was done with respect to the other forms. Specifically on plates, the margin between production costs and sales prices at Pittsburgh was found to be $9.60 per net ton, and the spread between the same elements at Chicago was $17.80 per ton. (Senator O'Mahoney, resumed the Chair.) Mr. Wooden. Is that summed up in the statement that the prices are higher at Chicago although the cost of production at Chicago was lower than at Pittsburgh? Mr. White. Yes, that is what it means. I have referred to the cost statement which was put in as Commission's Exhibit 6851, which you may want. Mr. Wooden. Did you make a chart for use in that case represent- ing graphically the statement that you have just made? Mr. White. I did. Mr. Wooden. Mr. Chairman, I would like to have these three charts in the record. (The charts referred to were marked "Exhibits Nos. 2237, 2238, and 2239" and are included in the appendix on pp. 14544-14546.) Mr. Wooden. You were telling us, Mr. White, about the dispro- portion between cost and price compared between Pittsburgh and Chicago on what products? Mr. White. Shapes, plates, bars, and black sheets. Mr. Wooden, What about the disproportion between prices and costs at Birmingham compared to Pittsburgh? Mr. White. The spread between production costs at Birmingham and the Birmingham price was $8 per ton, on bars. Mr. Wooden. Does that mean that the cost at Birmingham was lower but the price higher? Mr. White. Yes. The net ton mill cost of bars at Birmingham resolved into $44 per net ton, whereas the cost of the same product at Pittsburgh was $45. I think it should be noted here that Birming- ham at that time had a price that was not the full Pittsburgh price plus the rate to Birmingham on any of these products. Mr. Wooden. It was known as the Birmingham differential? Mr. White. Known as the Birmingham differential. Mr. Wooden. That was what, $3? Mr. White. Five dollars, as I recall it. Mr. Wooden. Mr. Chairman, I would like to state that we have no present information as to the cost of production of any particular product in any particular, plant. It is information that is rather jealously guarded by the industry, but I would like to ask Mr. White whether assuming that there are differences in cost of production per 14306 CONCENTRATION OP ECONOMIC POWER ton on given products today, would the same showing in principle result that you have shown in these exhibits? Mr. White. Assuming the same differences of cost exist. Mr. Wooden. Assuming some differences in cost exist — I am not trying to get you to measure what the situation would be today because you don't have the factors, but if there were some differences in cost today, would this disproportion exist as between the cost and price burden in different sections of the country? Mr. White. Some difference would exist, but not to this extent because since that time equal base prices have been announced at all of these producing points. Mr. Wooden. Was a considerable part of tliat disproportionate showing referred to in those exhibits the result of so-called phantom freight, in other words adding freight from the basing point when in fact there'was no actuail freight to be paid? Mr. White. Yes; of course that was true. Mr. Wooden. Would you say that wherever and to whatever extent there is phantom freight added today under the basing point system, consisting of a freight charge where there is no freight or a freight charge that is greater than the actual* freight, then you have that same disproportionate distribution of the price and cost burden? Mr. White. Yes; of course. What I have here is merely illustrating this opportunity under this method of merchandising for somebody arbitrarily to decide as a substitute for competitive processes how much of this burden of total steel prices is to be assessed on any particular part of the country at any point. That is an outstanding fact. Mr. HiNRiCHS. Mr. White, I take it that you are indicating that this lack of relationship between cost and price is a possible indication of a lack of competitive price fixing. Mr. White. That together with some other facts which of course are not shown. Mr. HiNRiCHS. Well, have you indicated in the record whether or not Chicago, for example, is a steel export or a steel import market? Mr. White. That was developed very exhaustively in the Pitts- burgh basing case. I might say the defense in that case was that the cost of steel to the Chicago consumer would be the cost of material at Pittsburgh plus the cost of shipping into Chicago. All of that assumption would be nullified by what they did. Numerous ship- ments were shown out of Chicago to a point halfway between Pitts- burgh and Chicago, specifically Cincinnati. It was shown that a certain number of large concerns purchased 95 percent of their re- quirements from the Corporation and the Corporation put in ex- hibits showdng that in some cases 100 percent of that supply came from Chicago rather than Pittsburgh. Mr. HiNRiCHS. Well, that evidence with reference to where goods originate needs to be tied in as you have just done to your discussion of cost and price; does it not? Mr. White. Yes. AU I was attempting to show by these exhibits was the fact as to production cost, relative production cost, and how it illustrates that one who has the power can arbitarily substitute for the competitive processes his judgment as to how much different sec- tions of the country should pay of the total burden of steel prices. CONCKNTItATlON OF KN().MIC i-OVVKR 14307 Mr. Wooden. I might say that Dr. deChazeau in testifying the other day pointed out tliat a recent study by the Department of Justice showed tluit sliipmonts of the same pi-ochict were being made between Pittsl)urgli and Chicago, in other words shipments from Pittsburgh to Chicago and shipments by Chicago mills to Pittsburgh of the same product. I liave nothing further to ask Mr. "Wliite. The Chairman. Do the members of tlie conmiittee desire to ask Mr. Wliite any additional questions? (The witness, Mr. White, was excused.) Mr. Wooden. I would like to call Mr. Custer for a very short examination. The Chairman. Do you solemnly swear that the testimony you are about to give in this proceedhig shall be the truth, the whole truth, and nothing but the truth so help you God? Mr. Custer. I do. TESTIMONY OF A. B. CUSTER, ADMINISTRATIVE OFFICER, PURCHASE DIVISION, BUREAU OF SUPPLIES AND ACCOUNTS, NAVY DEPARTMENT, WASHINGTON, D. C. Mr. Wooden. Will you state your occupation, Mr. Custer? Mr. Custer. Administrative officer in the Purchase Division of the Bureau of Supplies and Accounts, Navy Department. Mr. Wooden. How long have you held that position? Mr. Custer. About 20 years. Mr. Wooden. In the course of your duties have you had to do with the buying and obtaining of bids on rolled steel products? Mr. Custer. Yes, sir. Mr. Wooden. Do you obtain sealed bids on such products? Mr. Custer. All bids are sealed bids. Mr. Wooden. Is that required by statute? Mr. Custer. It is required by law. Mr. Wooden. I show you two documents. Will you state what they are? Mr. Custer. Those are abstracts of records of bids received in the Bureau of SuppUes and Accounts. Mr. Wooden. And were they handled under your supervision and in your office? Mr, Custer. They were. Mr. Wooden. WiU you vouch for the correctness of these papers as representing the bid figures actually received on sealed bids on those two occasions? Mr. Custer. I can. Mr, Wooden. I would like to offer the tables for the record. (Mr. O'Connell assumed the Chair.) Acting Chairman O'Connell. They may be admitted. (The documents referred to were marked "Exhibits Nos. 2240 and 2241" and are included in the appendix on pp. 14547-14548.) Mr. Wooden. Referring to the bid opening of November 19 and which is represented by "Exhibit No. 2240," can you state, Mr. Custer, just so that we get an over-all picture of it, how many bidders participated there and what their bids were? I don't think you have to give many figures. 14308 CONCENTRATION OF ECONOMIC POWER IDENTICAL BIDS RECEIVED BY THE NAVY DEPARTMENT Mr. Custer. Fifty bidders put in a uniform price of $45,683.48. Mr. Wooden. Were tliere some bidders who didn't quote exactly that figure? Mr. Custer. There are several exceptions. Mr. Wooden. How many? Mr. Custer. Seven, 1 find. Mr. Wooden. Seven out of the number you gave or seven in addition? Mr. Custer. Seven out of the number. Mr. Wooden. Now referring to the abstract covering the bids opened May 26, 1936, "Exhibit No. 2241," I believe, how many bidders were there, and what were their bids? Mr. Custer. Thirty-one bidders quoted a uniform price. of $20,- 727.26. Mr. Wooden. Were there any exceptions to the quoting of that figure? Mr. Custer. There are no exceptions in this list. Mr. Wooden. Are these two cases that you have testiiied about typical? Have you received many bids of a similar nature so far as the degree of identity in the bid price is concerned? Mr. CusTEP. We have received a number of identical bids. This is comparatively a large list. It is a long list of bidders, longer than the average. Acting Chairman O'Connell. To what use is the type of steel .covered in those invitations put, is it armor plate or what is it? Mr. Custer. It is not armor plate, it is for general purposes. Not being a technician, I am not prepared to give you the details. Acting Chairman O'Connell. You say you oftentimes receive identical bids though often not with as many bidders as there indi- cated. Do you have any general understanding as to how often you receive that t,ype of bids in connection with steel products? We were discussmg steel products primarily. Mr. Custer. Including within that group those classes or lots where there are some tie bids and some that are not tie bids, approxi- mately 60 to 70 percent fall in that group. Acting Chairman O'Connell. Sixty to seventy percent of bid openings involving steel? Mr. Custer. Yes. Acting Chairman O'Connell. And I take, it that where you get not all tie bids but where the low bids are tied, you have to resort to that matter of drawing lots, is that the way you make the award? Mr. Custer. That is correct. Acting Chairman O'Connell. In a situation such as appeared in that later bid opening where you had 31 bidders, in that particular case would you merely put the 31 names in a hat and draw out the successful bidder? Mr. Custer. In substance that^we have a system of putting names or numbers in uniform capsules to guard against the possibility of a selection, and then draw from the group. Mr. HiNRiCHS. Don't you think it would be more appropriate to use loaded dice against the Treasury? CONCENTRATION OF ECONOMIC POWER 14309 Mr. Custer. We have used other methods of drawing which give exactly the same results as the system of enclosing the names in capsules. Mr. Wooden. Mr. Custer, can you tell us whether or not these seven exceptions in "Exhibit No. 2240," seven exceptions from the identity of bids put in by others, includes any producers or whether some of them were jobbers? Mr. Custer. I recognize all, with the possible exception of one as jobbers or dealers. Mr. Wooden. Each of the seven, you mean. You recognize each of the seven except possibly one? Mr. Custer. Yes. Mr. Wooden. And that one is what? Mr. Custer. The Wheatland Tube Co. is a manufacturer, but I am under the impression that they also handle some materials in the capacity of a dealer. Representative Williams. What variation was there in the price of those seven that were exceptions? Mr. Custer. These variations are slightly under the uniform prices bid by the larger group, except in the case of Wheatland Tube. Acting Chairman O'Connell. In that case, then, you did not have to resort to drawing lots, or did you? Mr. Custer. We would not in that case, assuming that the bids were unmodified. If they were responsive to the advertisement, that is, offering material according to specifications it would not be nec- essary to resort to drawing lots. Mr. Wooden. Did you ever have any experience with jobbers who were awarded a contract on the basis of a low bid being imable to furnish you with the goods after you had awarded the contract? Mr. Custer. We have had some experience, but as a general rule the jobbers are able to fulfill the contracts. Mr. Wooden. I call your attention to the bid of the Pahner Supply Co., $45,682.38. How much off is that from the identical bid put in by most of the others? Mr. Custer. $45,682.38 agamst $45,683.48— $1.10. Mr. Wooden. I think there is nothing further I have for Mr. Custer. Representative Williams. That was the point I had in mmd. Wliat was the range in those prices, what was the difference, whether they were all just practically the same thing or whether there was any material difference in any of them. Mr. Custer. The lowest bid under the group is $43,188.46 as agamst $45,683.48. Representative Williams. Well, there would be a right substantial difference. Mr. Custer. That is a substantial difference. This bid of $45,- 682.38 is very probably accounted for by adding or dropping fractions. One bidder will add on the half cent, another may drop it off. The unit prices are probably identical. But the other bids, I think, the differences are accounted for otherwise, other than by the adding or dropping of fractions. Mr. HiNRicHS. Mr. Custer, do you handle the bids on commodities other than steel? 14310 (:;oNO>Iil^:'^UATroN of econoimic poweh Mr. Custer. All materials, Mr. HiNRiCHS. All materials? Mr. Custer. Yes. Mr. HiNRicHS. Does that include the apparel purchases that are made as well, purchases of apparel? Mr. Custer. Power? Mr. Hjnrichs. Apparel, clothing of one sort or another. Mr. Custer. Yes, sir, it does. Mr. HiNuiCHS. Now it's an old economic maxim, of course, that under con.petitive conditions only a single price can prevail in market at any one tiine, and that maxim is very frequently misquoted as justifying this kind of identical sealed bid. That is, the single price does in fact prevail, therefore by reference to all autliority it becomes apparently competitive. Now in the purchase of clothing, is it your experience that you receive identical bids if you advertise for articles of clothing? Is it common to receive identical bids? Mr. Custer. When you say clothing, there are not a great many articles of clothing purchased. The materials are purchased and made into clothing. Mr. HiNRiCHS. Well, let'^ take the materials. Do you buy cotton textiles? Mr. Custer. Yes. Mr. HiNRiCHS. Do you frequently receive an identical bid for rotton textiles? Mr. Custer. That I would answer only from general observation. Over a period of time wo do receive identical bids in almost every line of material, which would include textiles. Mr. HiNRicHS. In almost all lines where bids are advertised for? Mr. Custer. At some time or other. Mr. HiNRiCHS. Well, now, are those identical bids in a case of that sort apparently the result of chance or the result of — is it customary to have identical bids in cotton, cotton textiles? Mr. Custer. That would be largely a matter of opinion. I would have no way to determing that as a fact. It does appear rather strange that identical bids would appear frequently by chance. That I have no way of verifying or determining. Mr. HiNRiCHS. What lines do you expect to find different bids in if you advertise, or do you expect as a matter of course to have the differences only a matter of typographical error? Mr. Custer. Well, from the standpoint of expectation we would expect competitive bids in all lines. Mr. HiNRiCHS. Well, but obviously that expectation you have to entertain because it would be a violation of the law; but just as a human being you must have gotten rather used to seeing bids come in in identical form in the case of steel. You say 60 or 70 percent of your cases come in with identical bids. There you would hardly open up an envelope in the normal expectation of seeing different bids. Mr. Custer. We would expect some tie bids generally in steel. Mr. HiNRicHS. And you would expect tie bids in almost every instance where bidding occurs, or are there any lines in which yOu expect when you look at an envelope, you open the thing with a certain curiosity not to see just what level is being bid but what the differences in bids are. CONClON'rilATlON OF ECONUMKJ l*OVVKll 14311 Mr. Custer. That expectation would be present in most any class of steel. Mr. HiNuicHS. Even steel? Mr. Custer. In steel. Acting Chairman O'Connell. Wiiat ^xpeptation do you mean? Mr. Custer. That there would be tie bids. Mr. HiNRiCHS. And in almost any line you would expect to find tie bids, that the majority of the bids would be tie? Mr. Custer. I wouldn't want to say just that. Steel, of course, is an item which is bought for Navy purposes in large quantities and frequently, and it is an item which is more often before the eye. The occasional purchase would not attract much attention. Well, I might mention plumbing fixtures, merely as it comes to mind. I am not in a position to say whether plumbing fixtures would come within the tie bid group or not. (Senator O'Mahoney resumed the Chair.) Mr. HiNRiCHS. They very well might. Do you ever buy socks? Mr. Custer. Yes. Mr. HiNRiCHS. Do those ordinarily come to you as tie bidfe? Mr. Custer. I think they are more often competitive. Mr. HiNRicHS. Well, are there other items of that sort that ordinarily come to you with differentiated bids? Mr. Custer. I would hesitate to answer that without making a survey or a review of some examples, and I haven't had occasion to check outside of the larger and more frequent purchases for some time. Representative Williams. Is there an}'' reason that you can think of why there should be identical bids on one article an}'-, more than on another that your department buys? Mr. Custer. I would answer that as it has been answered generally to me, that the items of materials which have published prices, prices of common knowledge to the industry and the trade, are more likely to be tie bids, such as steel. Any trade paper will give you the market quotation of steel; there are any number of trade papers. Representative Williams. Did you ever get a bid from the steel companies or on any article of steel that was below the published price? Mr. Custer. That's rather difficult to answer. The pubhshed prices are based on Pittsburgh or some other basing rate. Our prices are all quoted on a delivered price at our navy yards, and the only way to determin.e that would be to deduct freight to arrive at the base price. Our prices generally are very close to the published prices, allowing for the differentials in the quoted market prices. Mr. Wooden. Published prices? Mr. Custer. On the published prices. They are more often under than over. Representative Williams. It seems to me we had some evidence here that there were a great deal of sales in the steel industry that were decidedly below the i^ublished price to everybody except the Government, is that true? Mr. Custer. Well, only to tlie extent that I just answered. Our prices when reduced to the same basis are more often lower than the published prices, market prices, than higher. 14312 OONCKNTRATION OF ECONOMIC POWER Mr. Wooden. Are you aware, Mr. Custer, that the mill net return at various mills, even though figured on the base price, the full base price, frequently comes out less than the base price because of the fact that their actual freight is greater than the freight rate on which the delivered price is figured? Mr. Custer. I would not be in a position to give the reason for it. Mr. Wooden. How do you account for the fact that these various concerns located at various widely scattered points of production and shipment get such a close identity of delivered price when their actual freight rates must differ substantially ^ Mr. Custer. I am not in a position to give that answer. Mr. Wooden. Does that factor in the situation have any bearing upon your conclusion as to whether or not the tie bids in such a situa- tion are competitive? Mr. Custer. From our standpoint, we are concerned with a de- termination only of what is a fair and reasonable price, not so much the cause for that price, and we do not go beyond the reasonableness of the price. Mr. Wooden. The only basis upon which you have to consider the reasonableness is whether it is competitive or not, isn't it? Mr. Custer. Competitive, or in the range of published market prices. Mr. Wooden, You assume the pubUshed market quotations are competitive, is that it? How do you know that-? Mr. Custer. I would say that we do not know. We assume it. Mr. Woo )EN. You have to assume it, don't you? Mr. CusiER. We have to assume it. Mr. Wooden. In order to get your steel. Mr. Custer. That is right. The Chairman. Are there any other questions? If not, you may stand aside. Thank you so much. (The witness, Mr. Custer, was excused.) FEDERAL TRADE COMMISSION'S SUMMATION OF THE MONOPOLISTIC CHARACTERISTICS OF THE BASING POINT SYSTEM Mr. Ballinger. Mr. Chairman, at this point I want to offer for the record a document which has been prepared by Mr. Wooden and Mr. Hugh White of the Federal Trade Commission who have been associated with the Commission's activities for many years with respect to the basing-point system in the steel industry. This docu- ment is addressed to a detailed consideration of the documents pre- pared by the Corporation, including some additional factual matter relating to the basing-point system. In my opinion, Mr. Chairman, this document, prepared by Mr. Wooden and his associates, is perhaps the most complete and compre- hensive document that has been prepared by the Governinent on the monopolistic nature of the basing-point system in the steel industry. Mr. Wooden is going to take the stand very briefly, Senator, just to point out some of the high lights in this pamphlet, but before Mr. Wooden starts in ^o tell you about that I want, if possible, to sum- marize very briefly what we think this hearing has shown from the standpoint of the Federal Trade Commission, where this hearing has taken us, because we made the charge that the basing-point system CONCENTRATION OF ECONOMIC 1'<:)WER 14313 was monopolistic, and we would like to point out to the conmiittee that we don't think that conclusion has been upset. I will start in this way. Back in 1924 the trial staff of the Federal Trade Commission contended in the Pittsburgh plus case that the basing-point system was a monopolistic device in that it repressed price competition in the steel industry. The steel industry stoutly denied this, and, of course, the Commission made a decision and issued a cease and desist order against the system. There was no appeal from that order for 15 years. Then the industry went into the multiple basing-pomt system. The Chairman. There was no appeal for 15 years. What hap- pened during that 15 years? Mr. Ballinger. The industry went over into what is known as the multiple basing-point system. The Chairman. Then the industry abandoned the basing-point system? Mr. Ballinger. No; multiple basing-point systems are many Pitts- burgh plus systems, I mean operating in certain territories, the way we see it. Mr. O'CoNNELL. Do I understand that the cease and desist order of the Federal Trade Commission merely prohibited a Pittsburgh plus system based on destination prices? Do you know the answer to that? Mr. Wooden. The answer is that the order ran against the making of prices or quoting of prices on any other base than the point of production and shipment. The Chairman. Pardon me, Mr. Wooden, I suppose you ought to be sworn, according to pur proceeding. Do you solemnly swear the -testimony you are about to give in this proceeding will be the truth, the whole truth and nothing but the truth, so help you God? Mr. Wooden. I do. ^ TESTIMONY OF WALTER B. WOODEN, ASSISTANT CHIEF COUNSEL, FEDERAL TRADE COMMISSION, WASHINGTON, D. C. Mr. O'Connell. To pursue that just a little further — — M£. White (interposing). It is understood that order was against the United States Steel Corporation. Mr. O'Connell. It was against the United States Steel Corporation and its subsidiaries, is that all? Mr. Wooden. That is correct. Mr. O'Connell. Under the tenns of the cease and desist order, the multiple basing point system was prohibited by the order of 1924, so long as the basing prints included points other than points of production. Mr. Wooden. Yes. Of course the more multiple basing points there are, the more points of production there are included. Mr. O'Connell. Do you understand that the United States Steel Corporation and its subsidiaries obeyed or complied with the cease and desist order from 1924 until they appealed from the order? Mr. Wooden, Their report of compliance was to the effect that they would obey the order so far as practicable. How far that was practicable and how far it was obeyed, I am not able to state. 14314 CONCENTRATION OF ECONOMIC POWER Mr. O'CoNNELL. The Commission took no action pursuant to 1924? Mr. Wooden. Meantime the N. R. A. came along and incorporated the basing point system as it then existed into the code. The Chairman. What was the date of the original order to which Mr. Ballinger referred? Mr. Wooden. I think it was July 1924. The Chairman. From 1924 to 1933, when the N. R. A. was passed, what did the Federal Trade Commission do to supervise the enforce- ment of its cease and desist order? Mr. Wooden. 1 am not able to answer that. I wasn't handling that phase of the business, in fact I was not connected with the Pittsburgh plus case. The Chairman. How about you, Mr. White, were you familiar with it? Mr. White. In a general way. The Chairman. What did the Trade Commission do to supervise the enforcement of its cease^ and desist order? Mr. White. Mr. Chairman, I don't think it is appropriate for me to make any statement as to what they did. I am just an employee of the Commission and I am not familiar in all respects with what they did. The Chairman. I think it is perfectly appropriate if you know. Mr. White. Well, it had under investigation the merger of the Betlileham, Lackawanna, and Midvaie properties, and the question was somewhat involved in that case. That case was never decided, and whUe the Commission made some supplemental investigations and ascertained what was being done generally in the trade, there were no complaints about the multiple basing-point system. The Chairman. Perhaps these questions are a little premature. Mr. Ballinger was making a statement. Mr. White. In other words, Senator, the system was somewhat modified. They had abandoned the so-called Pittsburgh basing sys- tem by which the single origin at Pittsburgh as a basing point was used. The Chairman. As I understood the statement of Mr. Ballinger, it was that the Pittsburgh basing plan was abandoned after the issu- ance of this order in 1924, and that a multiple basing system, which is from the point of view of the Trade Commission equally objection- able, wos adopted. Mr. White. It made no comprehensive investigation along that line. There were people connected with the Federal Trade Commission who toolv that view but the Commission made no comprehensive investigation and didn't find out what the effects of that practice were. Mr. Wooden. I might add this, that the Pittsburgh plus case arose out of complaints of a certain group of Western rolled steel-consumers who were being injured, they felt, by the Pittsburgh plus practice. The adoption of the multiple basing point system served to allay and satisfy in large part those injured Western rolled steel-consumers. The Chairman. Those particular complaints were satisfied and the Federal Trade Commission was not acting as a complainant. Mr. Wooden. The Pittsburgh plus case was a formal case and in all formal cases tlie Commission does appear as the formal complainant. The Chairman. Yes; technically; but I am referring now to the initiation of complaints. CONCENTRATION OF ECONOMIC POWER 14315 Mr. Wooden. In other words, that complaint did not originate out of any abstract theories and criteria, but out of the cry of complaint from definitely injured business mterests, very strongly organized business interests. Mr. O'CoNNELL. I don't want to pursue this too far, maybe we are far afield, but I would hke to get clear in my own mind what the Pittsburgh plus order did and what it was supposed to do. As I understood you just then, it was my understanding of the order that it prohibited a pricing system based upon any other than points of production or shipment. Now I understand also that in 1938, the United States Steel Corporation appealed from the cease and desist order of the Federal Trade Commission issued in 1924. Between 1924 and 1938, as I understand it, another system, although with some characteristics somewhat similar, grew up in the industry and it is now what we call a multiple basing point system, so there are various systems rather than the one that existed in the Pittsburgh plus case. Now at the present time I understand the Steel Corporation is challenging the order of the Federal Trade Commission in the Pitts- burgh plus case, is that correct? Mr. Wooden. That is right. Mr. O'CoNNELL. And now it is before the circuit court of appeals? Mr. Wooden. That is right. Mr. O'CoNNELL. I had an opportunity to glance at a brief, and you may correct me in this if I am wrong, but I was under the impression one of the grounds advanced by the Steel Corporation in their pro- ceeding before the circuit court of appeals for requesting that the order be set aside was that the order had never been complied with anyway. Mr. Wooden. I believe such a contention is made. Mr. O'Connell. If the steel company takes that position, wouldn't it be fair for us to assume that the order was not complied with in fact after 1924? Mr. Wooden. Well, speaking personally I think that is a fair inference. It is my own inference anyway. Representative Williams. After all, is there any difference in the principle of the system? Mr. Wooden. I think the multiple basing point system is in principle the same thing as a single basing point system, as illustrated by the fact, as brought out by testimony of Mr. Fairless and Mr. Adams within the last few days, that on tin plate there are only three basing points at present in the country. Pittsburgh is one of them, and for the entire eastern United States there is a single basing point system in effect with Pittsburgh as the only basing point for that whole area. Formerly the Pittsburgh plus system applied to the #hole country. Mr. White. Mr. Wooden, might I ask if the Corporation or the industry hasn't itself said that they were the same in principle? Mr. Wooden. The American Iron & Steel Institute in a published statement made in March 1935 stated that the multiple basing point system was the same m principle as the pricing system used by the industry for the past 40 years. Mr. Ballinger. When the industry went over, Mr. Chairman, to the multiple basing point system, it wasn't long before the Federal 124491 — 41— pt. 27 13 14316 CONCENTRATION OF ECONOMIC POWER Trade Commission said that this system, too, repressed price com- petition m the steel industry. Last March when we put on our hear- mg before this committee we charged that the multiple basing point system repressed price competition in the steel industry. Then in the interim the Corporation prepared two documents in which it said that the basing point system did not repress price competition. Then when Mr. Fairless came before this committee he made some very astonishing admissions, at least they seem very happy to us because they seem to clear up the controversy that has existed between the Federal Trade Commission and some of the experts in the steel industry. Mr. Fairless admitted that when the basing point system was followed, that it eliminated price competition in the steel industry. That was a very significant admission. Now with that admission, I want to show just how that was brought about. Mr. Wooden brought into the record a statement of Mr. Gregg, vice president of the United States Steel Corporation, m which Mr. Gregg admitted when the basing point system worked, it did repress price competition in the steel industry. Mr. Gregg. To answer your question specifically, if that plan were univer- sally followed there would be no competition in so far as one element of com- petition is concerned, namely, price. Then Mr. Wooden asked Mr. Fairless: I take it, Mr. Fairless, that you are in agreement with Mr. Gregg to the effect that if the system is followed, and to the extent that it is followed, there is no competition in price; is that right? Mr. Fairless. Well, I thought I had made myself clear. Mr. O'CoNNELL. Well, the answer is "Yes," but you say that, as a practical matter, the system is not followed? Mr. Fairless. I have answered it that way. All the things you said, Mr. Wooden, if they were true, then your conclusion, or the conclusion I assume that you are Striking for, would be true. So he conceded the point, and. we think that is a very significant admission. Now it becomes a question of how much the basing point system is followed in the steel industry, as Mr. Fairless' whole defense was that 'the basing point system is sort of a shadowy thing that stands there and nobody takes advantage of it, they are always departing from it, and naturally that suggests, why have it in the first place? The Chairman. The committee is aware that I was necessarily away all last week while the presentation was being made by the steel industry. Am I to understand from what you say now that the steel industry defended the basing point system but said at the same time that it was not followed? Mr. Ballinger. Apparently, as I get it, they did not defend the basing point system. They said competition existed in the industry because of departures from it. Mr. Wooden. They defended, of course, the basing point system. They put in these two pamphlets Mr. Ballinger (interposing). I say Mr. Fairless' testimony. The Chairman. I am talking about the industry. This pamphlet which was offered for the record by the industry was a defense of the basing point system, was it? Mr. BALLif>fGER. Yes, of the basing point system. CX)NCENTRATION OF ECONOMIC POWER 14317 Mr. Wooden. It was not offered by the industry, Mr. Fairless was careful to emphasize, but by the Corporation; but it is a defense of the system from the industry standpoint, not from the Corporation standpoint. The Chairman. But at the same time, the testimony was that the basing point system thus- defended is not followed, is that right? Mr. Wooden. That is true. Mr. Ballinger. It is this way. They said in the pamphlet which they prepared ^ when the basing point system worked that a system of identical delivered prices was still a competitive price situation in the steel industry. Th^n Mr. Fairless testified that if the basing point system were fol tved, it eliminated price com- petition. In other words, Mr. Fairless' testimony was in direct opposition to what the document had said. He had taken an entirely new position in defense of the basing point system, maintaining it did not repress price competition because it was departed from, not because it was adhered to, conceding if it was adhered to it was monopolistic in that it eliminated price competition. If we had known Mr. Fairless was going to say that, we wouldn't have taken all the trouble we did to prepare Mr. Wooden's document and Mr. White's document, trying to prove when the basing point system operates, it represses price competition. We got that con- cession from Mr. Fairless. We think that is significant because it brings the Steel Corporation and the Federal Trade Commission into agreement on the theory of the system. Now the question is how far the system is departed from in actuality. I think some significant things have been introduced here. First Mr. Fairless admitted during the N. R. A. period the basing point system worked beautifully, so we may 'assume from that that, price competition was eliminated in the steel industry during the N. R. A. days. Then Mr. Wooden read a statement into the record by Mr, Irvin where he said as late as 1936 that Mr. GracCj president of the Bethlehem Steel Corporation, must have been speaking facetiously when he said that U. S. Steel would cut below the base prices of Bjthlehem Steel Corporation. I think that is rather significant, be- cause it shows it would be rather a joke in the steel industry if anybody did that. Then Mr. Wooden showed that many of the provisions of the N. R. A. code which are absolutely necessary if you are going to make the basing point system work, that there are certain things that you have to have standardized if you are going to get identical delivered prices, ar^e still in existence. You have to have standard switching charges and you have to prevent trucks from breaking up the price structure, and you have to implement it various other ways. Mr. Wooden showed many of those provisions were carried on after the expii-ation of the code and many of them are still in force today. Finally, we come down to identical bids on Government business and I think Mr. Wooden showed this morning in the case of the figures used by the United States Steel Corporation, that about 90 percent'^ of the bids were identical delivered prices, showing I think that the basing -point system was working very well on those bids. The question remaining, therefore, is, how serious and how numer- ous are the departures in private business? We can't answer that ' "Exhibit No. 1418", appendix, p. 14619. ' Mr. Ballinger subsequently submitted a letter and memorandum for inclusion in the record in con- nection with his statement, see p. 14330. 14318 CONCENTRATION OF ECONOMIC POWER question, but if the basing point system works as well in private busi- ness as it does when the steel industry does business with the Govern- ment, you might say the steel industry is 90 percent monopohstic and 10 percent competitive. I will let Mr. Wooden go on and explain the high lights of this pamphlet. Mr. Wooden. Mr. Chairman and members of the committee: I think really the fundamental issue is not so much what the actual results at any given time of the system are, but what its potentiaUties are, what its intentions are, and what it normally works out to if permitted to function and if favored by conditions of general trade and business that are conducive to the proper working out of the system. On the question of how far the basing point system is adhered to and how far it is departed from, I would say that there is no method of determining that question short of an examination of sales records of the members of the industry, with the particular idea in mind of ascertaining the answer to that question. To take mere general assertions and opinions of members of the industry, who when the system is called in question merely say, "Why, it is more honored in the breach than in the observance," the inevitable psychological tendency is to exaggerate the degree and extent of departures from the system, and there is no check on it unless you go to the sales records. Each competitor has to base his opinion as to others departing or adhering to the system largely on rumor and hearsay and suspicion. He IS inclined probably to minimize the extent of his own departures and to exaggerate the extent of the departures of his competitors, and so I think it is an onerous task to undertake to answer that particular question. It seems to me the question really has to be decided upon the potentialities and natural tendencies and natural results, and to a large' extent the actual results, which have worked out over the years, and not as of any particular limited period of time, such as the depression years. Any kind of a system, no matter how well organized, no matter how powerful the forces back of it, may have to yield at times to the pres- "sure of adverse business conditions. If the demand totally fails, even a strong monopoly will have to yield to it in its prices at times. In this industry we have, as the corporation shows itself, about 81 percent of the total production controlled by nine companies, and the steel corporation itself is the largest among them with probably a control of 35 percent or mpre of the total possible output. I would like to say that the subject of the basing point system in steel has been debated for years and to my mind, my personal mind, it has been debated long enough. If debate on the subject can be pro- longed indefinitely we can expect the system itself to be prolonged just as long as those who employ it find it profitable to employ it. I should hope that the last word on the subject might be said before this committee and that the only thing remaining to decide is whether the Government will continue to tolerate the basing point system in steel or take some steps to substitute a better condition for it. I would like to say in just a very few woids what the basing point system is like — in my own words. It is a formula method of pricing which when appropriately observed and implemented by certain methods, which have been brought out here, automatically produces CONCENTRATION OF ECONOMIC POWER 14319 identical delivered prices for all sellers at any given destination. The success of the system depends in the first place upon a common require- ment that each seller sell only at delivered prices and a common refusal to quote or sell f.-.o. b. mill and allow the purchaser to take his pur- chased anywhere he likes and in -any mode of conveyance he likes. Ordinarily, except as otherwise provided by arrangement in the in- dustry, the all-rail freight basis is the basis of calculating the delivered price. The delivered price is not calculated from the actual shipping point as such, but from a number of basing points. Some of these basing points m^y not even be producing points; most of them are. For each product there is a basing point. The numbier of basing points in total may be considerable, but it does not follow that the basing points for any particular product are considerable in number. As to many of them they are quite limited, as I cited in the case of tin plate in which there are only three I believe; on pipe there are only a few, and on other products there are only a few. Of course on pig iron there are a great number because they went directly under the code from the f. o. b. furnace system to a basing point system with almost every point of production a basing point. But that makes no differ- ence in the ultimate result. It sunply means that if every producing point were a basing point there would be no so-called phantom freight but there would be the so-called freight absorption. When each pro- ducing point went into the sales territory of another producing point they could still match their deUvered prices by absorbing the freight necessary to put them in there at the identical delivered price. The actual cost of transportation of course may be greater or less than the cost of transportation figured from the basing point. For a number of non-basing-point mills their actual shipping charges for transportation might be either greater or less. If they charged more in the delivered price than the basing point rate of freight, they have what is called phantom freight. It is an increment and increase in their actual mill-net realization. If their actual freight from the particular shipping point at a non-basing mill is more than the imputed rate, then there is freight absorption — they net less than the base price by the amount of the difference between the actual and the imputed rate of freight. Mr. O'CoNNELL. You don't think there is anything necessarily wrong with freight absorption or phantom freight in all situations, do you? Mr. Wooden. No; the question here immediately before the com- mittee in the basing-point system is one of a systematic pattern of freight absorption and phantom freight with the end and result of matching the delivered price and making it identical. In that process freight absorption arises and phantom freight arises. Mr. O'CoNNELL. Let us suppose I were in a highly competitive industry and it happened to be steel, there would be nothing wrong with my using a formula for arriving at a deUvered price which would in effect cause stoie of my customers to pay less than the actual freight and some c^f them to pay more. In an industry, it seems to rate, that sells its commodities on a dehvered price basis it necessarily giv V jome of its customers the benefit of freight allowance and some customers it charges more. Mr. Wooden. That gets into a field of economics that I would prefer not to get into, but I would say that the basing point system is- ' 14320 CONCENTRATION OF ECONOMIC POWER not that kind of a situation, ]t>ecause it represents a systematic pattern of freight absorption and phantom freight with the result and intent of making the deUvered price identical. Mr. O'CoNNELL. Well, it is a formula adopted by an industry which results in identical prices rather than some customers having a freight advantage and some a disadvantage. Mr. Wooden. I think that is true. On this phantom freight matter, the corporation freely admits in its phamphlets that there is phantom freight and takes great pains to point out the types of phantom freight and how it may arise. They freely admit the existence of freight absorption and point out how it arises, but they do not give very much space or attention to the importance of those two complementary phases of the de- Uvered price. They are just the alter ego of the delivered prices themselves, the freight absorption on the one hand and the phantom freight on the other. The corporation does not give much idea of the extent or importance of those items, but this report which I am presenting here shows many cases where it is extremely important as to the quantity or the amomit in dollars and cents that is added to or deducted from the base price by those two things, phantom freight and freight absorption. The corporation makes it plain in their pamphlets, if it hadn't been made plain by Mr. Fairless, and it quotes N. R. A. reports to the effect, that the outstanding characteristic of the basing-point system is the fact that it does put rival producers on a footing of price equality with each other in all the consuming points over a wide area. That is openly defended as a means of putting competition on a basis that would yield higher prices than would result without it. You will find those statements quoted on pages 30 and 37 of the corporation pamphlet "Exhibit No. 1418." These pamphlets, "Exhibits Nos. 1410-1418," take the position throughout that the critics of the basing-point system in the steel industry are basmg their criticisms largely if not wholly upon abstruse and abstract criteria and theoretical considerations rather than tangible evidence. To meet that contention, which is repeated over and over again and is impHcit throughout the pamphlets of the cor- poration, I would suggest that the committee take into account the facts developed here in the last few days showing that the basing- point system was made a matter of formal agreement under the N. R. A. code. It was incorporated in the code itself, the basing pomts were named, and very detailed and elaborate provisions were set up for implementing that basing-point system, so that the delivered prices would be identical to the nth degree. It has been fehown here in the last 2 days that, the basing point system has .continued since the code, that the industry after the code was invalidated adopted resolu- tions to the effect that they would continue the provisions of the code including the basing-point system as a voluntary agreement ("Ex- hibits Nos. 2204 and 2205"), and the evidence is that they have con- tinued to do that and the basing-point system still exists. It has been shown here in the last few days that some of the detailed methods of implementing and making more effective the basing- point system of the code period have been continued in effect. I refer, for illustration, to the matter of an arbitrary switching charge at basing points which was put in under the code by resolution of the CONCENTKATION OF ECONOMIC POWER 14321 board of directors of the institute ("Exhibit No. 2206"), and which the corporation itself says in its pamphlet is the general practice in the industry, yet. I refer also to the resolution relating to the charging of 35 percent of the all-rail freight rate upon shipments or sales made for truck delivery ("Exhibit No. 2207"). A man bringing his own truck or hiring a truck to go to the mill to buy steel — they will figure the carload freight rate to the place of his destination and then although his own truck is at the mill, charge him 35 percent of that all-rail freight rate to the destination and load it on his truck. But he gets it. And it was testified, too, that that was for the purpose, or at least that one of the things they meant to correct by it was the use of truck delivery that interferred with the identity of price figured on the all-rail basis. It is admitted in the corpora- tion pamphlet that for many products the delivery by truck is most economical and yet Mr. Adams testified that they put this into effect, so far as his company was concerned, in order to discourage truck transportation of steel. There are any number of these commercial resolutions. Another one has to do with the method of figuring the freight. The board of directors approved definitely under the code a compilation of freight rates which the traffic committee of the institute has compiled and formulated ("Exhibit No. 2208"), and under the code the industry was definitely required, compelled, to obey it. Well, that compilation of freight rates is still being put out by the Institute, and we have put in evidence here today showing that after the code was invalidated they carried on the same understanding that that compilation was to be used in figuring the delivered prices. That's very important, because the matter of interpretation of freight tariffs is a matter on which even freight experts will differ, and when you have some standardized compilation that puts down the figure to be used — whether correct or not doesn't matter, just so it's uniform — then you get your identical delivered price. The evidence put in here today shows that they were to use this institute compilation, even though a particular rate might be in error, until they could correct it through the institute book. Sometimes if the correct rate were lower than the published rate in the institute book anyone who used the correct rate would get a lower delivered price than his competitors. But to prevent that they made this rule or understanding that until the corrections were put out through the compilation itself, the Institute compilation, they should foUow that Institute compilation and not the correct freight rate. The effect of this 35 percent addition — you may call it a 65 percent reduction, but it's the same thing, just using different words for it — the obvious effect of that is that if some mill added only 34 percent of the all-rail freight to the base price it would be giving the purchaser the advantage of a lower delivered price. So 35 percent is the rule for all members of the Institute. The Corporation says in its pam- phlet that that practice is still being generally followed. We had this morning an example of how base prices themselves can be and are arrived at, in the letter from Mr. Dorenbusch to the president of his own company ("Exhibit No. 2214"), describing how it was decided to continue the base price on a certain product in effect for the next quarter, and stating definitely in that respect that some of the interests in the industry wanted a lower price, but that that was finally defeated and it was agreed to let the base price continue. 14322 CONCENTRATION OF ECONOMIC POWER Representative Williams^ Does the evidence show how many- were in on that conference mentioned in that letter? That was the most remarkable letter I have seen yet, I think. Mr. Wooden. The witness' memory was rather meager on that subject. As a matter of fact, he testified that the conference referred to was one among the members of his own organization. The Chairman. The witness denied the implication of the letter. Representative Williams. I was not here. That was the reason I was asking. I wondered if the evidence showed the men of the organizations that were" in on. that conference.. Mr. Wooden. Now there was another provision adopted imder the code requiring that on sales made for use in the erection of an identified structure and on which work was to be done on the products in transit, known as fabrication in transit, that you had to figure the delivered price according to the nearest place to the structure rather than the place of the fabrication. The commission pointed out the effect of that rule in its report to the Senate in 1934. It pointed out that the effect was to give information to the integrated producers who also operated fabricating plants, as to where a particular structure was going to be erected and enable them to Well, I should like to say that the freight absorption likewise is just the natural, automatic reflection of the identical delivered price, and that both of them together, freight, absorption and phantom freight, reflect the range of the mill nets which the mills receive under the basing point system. I should like to point out, as I do in the pre- pared statement, that the Corporation throughout its pamphlets and in its testimony of its ofiicials here, recognized that these mill net yields are the actual prices obtained; that the base price is not the real price and that the delivered price is not the real price, but that the real price is what the mill net yield returns to the seller. And it admits expressly in the pamphlets that this mill net yield is a system- atic pattern of variation that is the reflection of the identical delivered price under the basing point system. It might be thought that it is not in keeping to discuss the econ- omic aspects of the basing point system in this statement, but the Corporation brought into these pamphlets defending the basing point system a great many economic theories, drawing upon the conclusions and facts set up by their expert economists such as Dr. Yntema and others, which were put in as separate exhibits. They claim, for instance, that identical delivered prices result from perfect competition in a free market, and they cite the classical economic concept of a free market to sustain that position. At the same time they contend that perfect competition is an abstraction and exists nowhere, and yet they seek to take advantage of that theory of perfect competition and its effect upon uniformity of price by saying, "That's what we have in the steel industry." To do that they postulate the market as being at destination, and of course under the basing point system they won't permit it to be anywhere else. The fact of the matter is, the im- portant issue is whether in requiring sales to be made only at destina- tion they do not thereby close all the markets at the mill and even close the market entirely in the sense that economists use the word market. The Corporation in its pamphlet makes its argument that there is such a contrast between the physical conditions of the steel industry and the concepts of the economists of perfect competition that the rules regarding competition should not be applied, citing in that connection such matters as the limited number of producers and the limited number, relatively, of large buyers of steel. My only com- ment in that connection would be that the fewer the number of pro- ducers the greater care ought to be exercised in seeing that a competi- tive condition among them is maintained, rather than relaxing any., rules because of that small number of producers. The Corporation makes claims that the demand for steel is inelastic and that the price has no relation to demand. I would say in that connection that if it be trtie that price and demand for steel are unre- lated, it simply means that one-half of the law of supply and demand has thereby been repealed. If there is no relation between demand and price, and that half of the law of supply and demand has been re- pealed, then it indicates the existence of some form of artificial control. Yet the Corporation expressly says and goes to great length to prove ^ through its economists and studies of prices and costs and everything cx)Ncentration op economic power 14327 of that, sort, that it is not feasible to reduce the price of steel because to do so would not increase the demand. The record is against them on that, and I think the Government economists disposed of that issue very nicely in the last week. The Corporation also makes quite an argument to the effect that prices and profits are reasonable in the industry. There is a section of this statement which is devoted to that contention. Since my . time is so limited, I will not stop to analyze that contention of the Corporation, but I would like to make this particular point, that a great deal depends on whether you consider the prices and profits off the industry as a whole, as a collective entity, or whether you take the profits of particular members of the industry. If you take them collectively, you thereby forget that it is supposed to be a competitive industry. If you take them separately you will find that some ojf the more eflacient concerns have been able, even through the depres- sion, to make satisfactory profits. The whole question of prices and profits can't be determined, as a matter of fact, imless you adhere to the principle that only competi- tion can determine what price is fair and reasonable. If you depart from that standard somebody has to determine it, and then it simply becomes a question of 'determination by interested members of the industry through the use of such a thing as the basing-point system. The Corporation also defends some of the uneconomic results of the system, such as excess capacity. It takes various positions re- garding excess capacity. It argues in the first place that it doesn't exist; in the second place that if it does exist there is no way of meas- uring it; third, that there is no feasible way of eliminating it; and fourth, that it has certain economic advantages which justify it. You will find all those positions taken in its pamphlet. I put in here today a chart showing the relation between production and capacity of the industry for a number of years past ("Exhibit No. 2233"), and which contradicts these statements of the Corporation to the effect that the capacity of the industry was not more than suflficient to supply the needs of the country during periods of high demand, such as 1929, 1937, and the present time. As a matter of fact, by decades you can carry the industry back to 1901, when the Steel Corporation was formed, and if you take it by decades you will find that from 1901 to 1910 the percentage of production to capacity was 68.26 percent; 1910 to 1920, 77.65 percent; 1920 to 1930, 70.54 per- cent; 1930 to 1939, 44.55 percent. So instead of there being no excess capacity, it has existed in the industry ever since the Steel Corporation was formed. There is nothing novel about the thought of excess capacity of the industry. The magazine "Steel" had an editorial in July 1938, which I cite in this statement, concerning excess capacity and discussing the relation of it to capitalization. It pointed out that for the period between 1926 and 1937 the production was only 60 percent of the capacity, and that the entire capacity earned during that period, 3.49 percent on the capital invested in the entire capacity, after absorbing depreciation and overhead on the idle 40 percent; and they suggested that steel, instead of being a $4,281,000,000 mdustry actually would be capitalized at considerably less if much excess capacity whose future usefulness is problematical were scrapped. 14328 CONCENTRATION OF ECONOMIC POWER The Corporation also defends the existing location of mills. It was brought out here yesterday that- the pamphlet shows — and I quoted the page, quoted the language — that the location of mills cannot be attributed to any pricing system. Then they switch around and they go over to the point that if you bother the system or disturb it in any way it just puts all these plants out of business. It says that it would be an exception if any mill could satisfactorily survive under a change in the system to an f. o. b, mill system. The Corporation goes into the argument that the overhead and capital costs justify the basing point system, and I put in here today a statement which showed how much variation there was between the capital costs of the different companies ("Exhibit 2236")- Nowhere, however, does the Corporation do a better job at what they sometimes refer to as economic sophistry than in the argument that if you substitute another system, a mill price system, for the basing price system, you will disrupt and dislocate industry and cause economic disaster. They take about, I think, 12 pages and present maps with aji elaborate showing as to how mills would be restricted to a very limited territory and simply could not do business under any mill system. But in doing that they employ a technique which they elsewhere say in the pamphlet is simply impossible. They say it can't be done, you can't measure what would happen — and then they go ahead and try to measure it. Even in trying to measure it, though, they make a lot of assumptions which are gratui- tous and unfounded. They assume so many things about it that there is no ground for assuming. In the last place I would like to mention tnat in making its argu- ment in these pamphlets, the Corporation has misstated the position of the Federal Trade Commission regarding alternatives to the basing point system. They contend — and devote a large part of their pamphlet to the argument based upon the contention — that the Federal Trade Commission proposes to impose by law or mandate a mill system of pricing that would prevent any seller making any different price to one customer than to another. The Commission has not taken that position, and there is no evi- dence to support the claim that it has. As a matter of fact, if it had taken that position it would have taken the position that it was above the law, because the law itself specifies the conditions under which different prices may be made to different customers. Acting Chairman O'Connell. You are speaking of the Robinson- Patman Act? Mr. Wooden. And its predecessor, the Clayton Act. Acting Chairman O'Connell. Of course, the Commission might propose to change those laws. Mr. Wooden. Yes; but the Corporation says what the Commission has done, and it has done no such thing. What it might do in the future, I can't say. Acting Chairman O'Connell. But I am merely pointing out that the Federal Trade Commission might propose legislation which would be inconsistent with some provisions of any existing statute such as the Robinson-Patman or the Clayton Act. Mr. Wooden. Surely. I wouldn't attempt to say what the Com- mission would do in the future, but I direct attention to the fpct that the Corporation has misstated what it has done and said in the past. CONCENTRATION OF ECONOMIC POWER 14329 In the last analysis, the question is whether this system should be allowed to continue. The Corporation itself agrees that price com- petition is necessary in an industry operating in a capitalistic system. So, if the conclusion be that this is not a competitive system and that price competition is suppressed by the system, then the Corporation would have to follow the logic of its own position and say, "You have got to get rid of it or else the capitalistic system itself is menaced." In closing, I would merely like to say that it seems to me the peculiar province of this committee is to consider whether legislation outlawing the basing-point system should' not be recommended. As the situation is now, with the outcome of any basing-point case depend- ing upon the interpretation of the law and the facts under theories of conspiracy and concerted action which, I think, are necessary to make the law applicable, it requires an enormous expenditure of time and effort and labor in establishing that condition in an adversary proceed- ing for each particular industry and what the facts are in that industry regarding the basing-point system. I would say that no more vitally needed legislation within the scope of this committee can be suggested than that of directly prohibiting tli^ basing-point system by congres- sional mandate. The constitutional power of Congress to regulate interstate commerce could find no more appropriate exercise, assum- ing that our long-established public policy of preserving competition and free enterprise is to be something more than an abstraction. Thank you. Acting Chairman O'Connell. Do you wish to ofler this document for the record? Mr. Wooden. Yes. Acting Chairman O'Connell. It may be admitted. (The document referred to was marked "Exhibit No. 2242" and is included iii the appendix on p. 14548.) Acting Chairman O'Connell. Thankyou very much, Mr. Wooden. If there is nothing more to come before the committee we will stand in recess subject to the call of the chairman. (Whereupon, at 4:25 p. m., the committee adjourned subject to the call of the chairman.) 14330 CONCENTUATION OF ECONOMIC POWER The following letter is included at this point in connection with Mr. Ballinger's statement on p. 14317, supra. (See footnote reference 2 on that page.) Federal Trade Commission, Washington, December 11, 1940. Mr. William Heflin, Temporary National Economic Committee, The Capitol, Washington, D. C. Dear Mb. Heflin: Enclosed herewith is a memorandum to be inserted in the record in connection with my statement relative to identical bids on govern- ment business, during the Commission's steel hearings on January 30, 1940. Sincerely yours, Willis J. Ballinger, Executive Assistant to the Commission, T. N. E. C. Inquiry. WJB:FG End. The percentages in this and the following paragraphs were materially changed, the percentages above stated being found to be in error. The fact appears to be that during the particular limited period of time involved, there waj, according to the data submitted by the Corporation, no notable uniformity in bids to the Government such as characterizes the system when it is adhered to. As shown by the Department of Justice in their "Exhibit No. 1349," ' part of the period cov- ered by Corporation's a:.'ta was one of "price confusion," "exceptional weaknesses in the prices of many steel products", and marked by "many companies" begin- ning the "quotation of base prices, especially for flat rolled products like strip, sheet, or plates at their own mills'." The situation during more typical periods is shown in bids to the Navy Depart- ment during 1935 and 1936. (See "Exhibits Nos. 2240, 2241",2 and testimony of A. B. Custer of the Navy Department.) In one case there were 43 bids, iden- tical to the oenn}^ in the amount of $45,683.48, and in another there were 31 bids, identical tc the penny, in the amount of $20,727.20. The whole matter of the significance of the percentage errors referred to is covered by the letter of Mr. Irving S. Olds, Chairman of the Board of the Corporation, tc Chairman O' Ma- honey, dated October 4, 1940, and the letter of Walter B. Wooden in comment thereon dated November 29, 1940, both of which are in the record.^ In any event, it should be obvious that the merits and demerits of any system cannot be deter- mined by the extent of temporary departures from it. The argument advanced in the paragraphs covered by this memorandum is that the high percentage of identical bids on Government orders from the steel industry is a refutation of the contention of the representatives of the Steel Cor- poration before the Temporary National Economic Committee that the "basing point system is a "shadowy thing," which is practically disregarded in the deter- mination of steel prices. The staff of the Commission feels that this argument is not invalidated, because the United States Steel Corporation submitted data to the Committee whichapplied to a very limited period, and a period during which the basing point system in the steel industry was temporarily abandoned because of price-cutting. The staff of the Commission is of the opinion that there is ample evidence in a number of previous studies conducted both by the Federal Trade Commission and other governmental agencies, such as the National Recovery Administration, to show convincingly that observance of the basing point system in the steel industry is the general rule rather than the exception, with the result that a very high percentage of bids on Government purchases have been identical to the penny. ' Included in Hearings, Part 18, appendix, p. 10391. » Pp. 14547 and 14548, supra. s Supra, pp. 14691 and 14693, respectively. APPENDIX Exhibit 2189 Address reply to "The Attorney General" and refer to initials and number 60-138-M Re Form A Department of Justice, Washington, D. C, January 19, 1939. Gentlemen: As part of the investigation of the iron and steel industry for the Temporary National Economic Committee, the Department of Justice and the Federal Trade Commission have prepared a questionnaire on the distribution of certain selected steel products. You will find enclosed (a) instructions for the compilation of the data requested; (b) copies of the form (Form A) on which spaces are provided for the recording of the figures reported; and (c) a form of affidavit and verification. Form A and the instructions accompanying Form A have been designed in conformity with reported company methods of recording tonnage shipment data from manufacturing plant to destination. It is contemplated that the data re- quested will be a matter of record with your company or that they may be readily derived from existing records without resort to original invoices. Inquiries with respect to any part of the questionnaire or any problem raised by it should be addressed to this, Department, with the file reference as indicated. There is also enclosed an affidavit to be executed by that oflScer of the reporting company ultimately responsible for the preparation of the questionnaire. Execu- tion of Form A will not be deemed complete unless the verified afl^davit is properly made and returned. It will assist the Committee if each reporting company as soon as possible will advise the Department of the ai»proximate date when final reports on Form A for the periods selected can be submitted. Very truly yours, Thurman Arnold, Thurman Arnold Assistant Attorney General. Form a 60-138-M Data Reqihred for the Temi-orary National Economic Committee on the Distribution of Selected Carbon Steel Products instructions 1. AU tonnage data required are indicated on the accompanying sheets, labeled Form A. Spaces are provided at the head of each sheet for the insertion ,of the following information: (a) the names of the company; (b) the name and location of each works or group of works from which shipments are reported; and (c) the year during which shipments reported were made. 2. Separate sheets should be used for each works and for each of the three calendar years (1936, 1937 and 1938) for which data are required. For example, if the company operated two separate works during each of the three calendar years, its final report will be made on six sheets ; if only one works, on three. Addi- tional copies of Form A will be supplied on request. (a) If the company operates more than one works and if it is impracticable to derive these data from its records for each works separately, give the name 124491— 41— pt. 27 14 14331 14332 CONCENTRATION OF ECONOMIC POWER and location of each works for which these data are aggregated and indicate tlie distance between works and the ways in which integrated operations are effected. (b) Under no circumstances must the data combine the operations of works if different basing-point areas. 3. In reporting tonnage shipped, indicate for each product whether the weights are gross or net tons. 4. All data requested are for carbon steel. Special products such as alloy steels and high carbon wire are excluded. 5. Your company is understood to record tonnage shipments of steel products from works to destination by States and by counties on punch cards for machine tabulation. You are requested, therefore, to report tonnage shipments for the products listed on Form A both by States and by certain important sub-division of States and metropolitan consuming areas, listed in the first column of Form A under "By other consuming districts" and defined in the schedule of consuming districts enclosed. 6. In addition to the information requested on Form A, please give, on a separate sheet, the name and, if available, the most important destination-plant location of each of the company's four largest customers for each of the selected products for which shipment data are required. 7. There is enclosed an affidavit to be executed by that officer of the reporting company ultimately responsible for the preparation of this questionnaire. Exe- cution of Form A will not be deemed complete unless the verified affidavit is properly made and returned. CONCENTRATION OF ECONOMIC POWER 14333 o w o3 O a Q 03 ^ ,2 ti el 03 a 03 a 03 & a o O I.s1 Pipes and tube; seamless, lap-weld, butt-weld only So 1"! c > gJ Sheets, H. R. and H. R. annealed Con- crete reen- forcing bars ^, o £ 11^ Heavy struc- tural shapes f 1 Rails (over 60 pounds) III 11 ft Sheet and tin plate bars Blooms, billets, and slabs Domestic shipments by geo- graphic area ' Is 1 c t w 1 0 o a 1 1^ ■c a a « o a (4 g O O o 1 p C O s.a 53 0 c 1 o 5 c c % "u a c 1 5 o 0 o o •a 0 3 o GQ M 3 c OS M e: z o O 0 > « > 1 .a e CS O J3 1 a-s is O o na «^ J3 >» O ft «§ pO o g :^a o s ■Si S esc e.9 !a II ft« 3 '2 14334 CX)NCENTRATION OF ECONOMIC POWER O « Pipes and tube; seamless, lap-weld, butt-weld only So a> t- g |1« Sheets, n. R. and H. R. annealed • Con- crete reen- forcing bars lis Heavy struc- tural shapes 1 Rails (over 60 pounds) Steel sheet piling Wire rods Q, s CO Sheet and tin plate bars Blooms, billets, and slabs o tc >, If i o ■6 L HA H O 1- n « "S a c 1 c c a 1 1 i 01 c 03 a c a 'S 3 a £ o x: a O ol 1 0! C a c o o 03 c E o c ■c a! u c o O 1 ft a c < 1 a 03 Z c c c o: c o bi O .9 'S "3 O Ed ■< 03 Q u 5 § « 1 1 g^ 8 IS gggS o ^; 1 1 o & C c CL, 3 P a > CONCENTRATION OF ECONOMIC POWER 14335 14336 C50NCENTRATI0N OF ECONOMIC POWER Exhibit No. 2190 Address reply to "The Attorney General" and refer to initials and number 60-138-M Department op Justice, Washington, D. C, December 2S, 1938. Re Form B Gentlemen: As part of the investigation of the iron and steel industry for the Temporary National Economic Committee, the Department of Justice and the Federal Trade Commission have prepared a questionnaire on the distribution and pricing of certain selected steel products. You will find enclosed (a) instructions for the compilation of the data requested; (b) copies of the form (Form B) on which spaces are provided for the recording of the figures reported; (c) a list of the works and the products selected for report; (d) a detailed definicion of the con- suming districts listed on Form B; and (e) a form of affidavit and verification. It is contemplated that these reports be filled out from records currently prepared by companies during the month of February, 1939. The forms are selt-explan- atory. These data are requested at this time only for the month of February, 1939. At a later date, when seasonal pressure upon clerical personnel of reporting com- panies has lifted, similar information will be required for a single month in each of the years 1937 and 1938. The reports call for records of shipments only of selected products from certain specified works, of each company. In the case of each reporting company the works and products included are listed on the enclosed sheet. Inquiries with respect to any part of the questionnaire should be addressed to this Department, with the file reference as indicated. There is also enclosed an affidavit to be executed by that officer of the reporting company ultimately responsible for the preparation of the questionnaire. Execu- tion of Form B will not be deemed complete unless the verified affidavit is properly made and returned. It will assist the Committee if each reporting company as soon as possible will advise the Department of the approximate date when reports for the month of February, 1939 can be submitted. Very truly yours, (Signed) Thurman Arnold, Assistant Attorney General. Form B 60-1 38-M Data Required for the Temporary National Economic Committee on the Distribution and Pricing of Selected Steel Products instructions 1. AU data required are indicated on the accompanjfing sheets, labeled Form B. Spaces are provided at the head of each sheet for the- insertion of the following information: (a) the name of the company; (b) the name and location of each works or group of works, listed on the enclosed sheet, from which shipments are reported; (c) the name of each product, listed on the enclosed sheet, shipped from such works during the period covered; (d) the month and year during which ship- ments reported were made (i. e., for purposes of this questionnaire, February, 1939); (e) the basing point on which delivered price was computed. 2. Separate sheets should be used for each works, each product, and each basing point on which delivered price was computed. For example, if the company operates two separate works, produces and ships from eacK of those works three of the selected products, and prices each of those products on three basing points, its final report will be made on eighteen separate sheets of Form B. With one works, nine sheets would be required; with one works and one product, three sheets. Additional copies of Form B will be supplied on request. (a) If it is impracticable to provide the information requested separately for each of the works indicated, give the name and location of each of the works for which these data are aggregated, and indicate the distance between works and the ways in which integrated operations are effected. (b) Under no circumstances must the dita combine the operations of works in different basing-point areas. CONCENTRATION OF ECONOMIC POWER 14337 3. Data are requested for the period February 1-28, inclusive, 1939. 4. In the case of products which are quoted Gulf Ports or Pacific Coast Ports without price differentials among ports, Gulf Ports or Pacific Coast Ports will be considered a single basing point in each case respectively. 5. Special attention is called to the detailed definition (in terms of counties) of the consuming districts listed on Form P. 6. The data requested in this questionnaire are for carbon steel only. Special products such as alloy steels and high-carbon wire are omitted. 7. There is also enclosed an affidavit to be executed by that officer of the reporting company ultimately responsible for the preparation of the questionnaire. Execution of Form B will not be deemed complete unless the verified affidavit is properly made and returned. Address reply to "The Attorney General" and refer to initials and number 60-138-M DEPARTMENT OF JuSTICE, Washington, D. C, January 27, 1939. Re Form B. Gentlemen: You are referred to the questionnaire (i. e., Form B) which was sent to you by this Department under date of December 23, 1938. Several questions of interpretation have been raised by representatives of the industry and, to insure uniformity in reporting, you are requested to consider the follow- ing determinations an integral part of the instructions which accon^panied Form B. 1. Column (4) which is now headed "Freight charges added to base prices to arrive at invoiced value per column (3)" should be interpreted to mean "Freight charges from nearest basing point, freightwise, to point of delivery" in all in- stances in which the delivered price is not computed directly from a base price plus freight. 2. In the case of shipments to third parties, including fabrication-in-transit shipments, consuming district means district of ultimate destination. 3. All direct shipments, including shipments for the account of affiliated com- panies and shipments for the account of jobbers or other distributors, are to be tabulated by consuming districts. Such shipments are not to be included under "Other shipments." 4. In the case of "Exports", it will be sufficient to report total tonnage snipped and the aggregate value at the mill of such shipments leaving columns ("3) to (6) inclusive blank. 5. In the case of "F. O. B. mill sales", columns (4) and (5) should be blanked out, since no freight is involved. 6. In the case of "Shipments to plants or warehouses of the same or afiSliated companies", please observe the following: (a) Shipments to warehouses (i. e., for resale) of the same or aflSliated companies may be reported in tonnage only, columns (3) to (6) inclusive being left blank. (b) Shipments to fabricating plants of the same or affiliated companies, however, should be reported in all six columns. A fabricating plant means a plant engaged in the further processing of steel into such products as ships, all forms of structures, fence, posts, and other wire products, oipe and tubes, etc. If shipments to warehouses are reported in tonnage only, they shoula be re- ported separately and not aggregated with shipments to fabricating plants. 7. "Shipments to jobbers' warehouses" means shipments which are outright sales but which are made for resale, whether the buyer be classified as a jobber, retailer, or distributor. For these shipments, column (4) may be blanked out but the data in the other columns (2) to (6) inclusive are required. 8. Companies requested to report data on Form B for "Plain wire, drawn" will please observe the following definition of this product: Plain wire, drawn, means wire which is sold in the bright state only, excluding all wire receiving special treatment after drawing. Very truly yours, (Signed) Thurman Arnold, Assistant Attorney General. 14338 CONCENTRATION OF ECONOMIC POWER Products Selected for Form B Analysis: 1. Sheet and Tin Plate Bars 2. Wire Rods 3. Plates 4. Heavy Structural Shapes 5. Hot Rolled Sheets 6. Hot Rolled Strip 7. Cold Rolled Sheets 8. Cold Rolled Strip 9. Tin Plate (95 lb. base boxes) 10. Plain Drawn Wire Temporary National Economic Committee Form B Distribution and pricing of selected steel products Company.... p^^.^] 'Month [Year Name and location of works Basing point on which delivered Product price was computed Domestic shipments to consuming districts ' (1) Tonnage shipped, net or gross tons (state which) (2) Total invoiced delivered value ^3) Freight charges ^ded to base prices to arrive at invoiced value per column (3) (4) Actual freight paid or allowed on shipments from mill to destination (5) Total extras included in Invoice de- livered value per col- umn (S) (6) District Maine _ _. Tons Amount in dollars Amount in dollars Amount in dollars Amount in dollars New Hampshire Vermont Rhode Island Connecticut (except Fairfield Eastern and Central New York,.. Buffalo Philadelphia Pittsburgh.-. North Ohio River. Detroit ... .. -... Michigan — all other Iowa St. Louis Kansas City North Dakota South Dakota- Nebraska Kansas Delaware . Baltimore.. Maryland— all other except 2 coun- ties South Carolina ' Distribution of selected steel product's by consuming districts is requested for all shipments direct to consumers excluding exports, f. o. h. mill sales, shipments to other plants or warehouses of the same or affiliated companies, and shipments to jobbers' warehouses. Consuming districts are defined in schedule enclosed with this form. CONCENTRATION OF ECONOMIC POWER 14339 Distribution and pricing of selected steel products — Continued Domestic shipments to consuming districts ' (1) Tonnage shipped, net or gross tons 1 (state which) (2) Total invoiced delivered value (3) Freight charges added to base prices to arrive at 'nvoiced value per column (S) (4) Actual freight paid or allowed on shipments from mill to destination (5) Total extras included in invoice de- livered value per col- umn (S) (6) District Tons Amount in dollars Amount in dollars Amount in dollars Amount in dollars Florida Texas Utah California — southern California— northern Other shipments: ' Exports F. 0. b. mill sales' Shipments to plants or ware- houses of same or affiliated Shipments to jobbers' ware- > These items need not be repeated on reports for each basing point. It is understood that they are not to be included in the distribution of shipments by consuming districts within the United States. " ' "F. o. b. mill sale" means a sale priced at the mill and delivered to the customer at the mill without freight allowance. * "Affiliated company" means any company described as a parent, subsidiary, or affiliated company in the reporting company's annual reports or in any registration statement filed by it with the Securities and Exchange Commission. Exhibit No. 2191 Companies Reporting, Fo«m A 1. By states and consuming districts: Colorado Fuel and Iron Corporation Keystone Steel and Wire Company Youngstown Sheet and Tube Company Bethlehem Steel Company American Rolling Mill Company Granite City Steel Company Jones and Laughlin Steel Corporation Carnegie-Illinois Steel Corporation National Tube Company American Steel and Wire Company Tennessee Coal Iron and Railroad Company Columbia Steel Company 2. By states only: Andrews Steel Company Wheeling Steel Corporation Continental Steel Corporation Allegheny-Ludlum Steel Corporation 14340 CONCENTRATION OF ECONOMIC POWER Pittsburgh Steel Company Weirton Steel Company Republic Steel Corporation Sharon Steel Corporation Great Lakes Steel Corporation Follansbee Bros. Company Worth Steel Company Cohoes Rolling Mill Company Detroit Steel Corporation McKeesport Tin Plate Corporation Empire Sheet and Tin Plate Company Lukens Steel Company 3. By sales districts only: Otis Steel Company Mid-States Steel and Wire Company Superior Steel Corporation Greer Steel Company Acme Steel Company The Eastern Rolling Mill Company J. A. Roebling's Sons Company Alan Wood Steel Company Inland Steel Company McLouth Steel Corporation Phoenix Iron Company Companies Reporting, Form B Acme Steel Company Alan Wood Steel Company Allegheny-Ludlum Steel Corporation American Chain & Cable Company, Inc. American Rolling Mill Company American Steel & Wire Company Andrews Steel Company Apollo Steel Company Atlantic Steel Company .\tlantic Wire Company Bethlehem Steel Company Carnegie-Illinois Steel Corporation Central Iron & Steel Company Cold Metal Prodes Company Colorado Fuel & Iron Corporation Continental Steel Corporation W. H. Davey Steel Company Detroit Steel Corporation Empire Sheet & Tin Plate Company Follansbee Bros. Company Greer Steel Company Granite City Steel Company Great Lakes Steel Corporation Inland Steel Company Jones & Laughlin Steel Corporation Keystone Steel & Wire Company Laclede Steel Company Lukens Steel Company McKeesport Tin Plate Corporation McLouth Steel Corporation Mid-States Steel & Wire Company Niles RolUng Mill Company Northwestern Steel & Wire Company Otis Steel Company Phoenix Iron Company Pittsburgh Steel Company Reeves Steel & Manufacturing Company Republic Steel Corporation J. A. Roeblings Sons Company Seneca Wire and Manufacturing Company Sharon Steel Corporetion CONCENTRATION OF ECONOMIC POWER 14341 Sheffield Steel Corporation Stanley Works, The Superior Steel Corporation Tenn. Coal Iron & R. R. Company Thomas Steel Company Washburn Wire Company Washington Tin Plate Company Weirton Steel Company Wheeling Steel Corporation Wickwire Bros., The Wickwire-Spencer Steel Company Wilson Steel & Wire Company Worth Steel Company Youngstown Sheet & Tube Company Exhibit No. 2192 Form A or B 60-138-M Affidavit State of \„„ . County of T*" On this day of , 1939, personally appeared before me ,to me known and known to me to be the of the gZ^Sy?" -d who by me be- ing duly sworn deposed and acknowledged that he is of the said corporation ^j^^^^ ^-^q accompanying form sheets issued under the authority of the Temporary National Economic Committee, each of which is designated "Form A," were executed under his authority and by his direction, that to the best of his knowledge and belief the statements and figures contained therein, and each of them, are true and accurate and that they were prepared from the records of the said pomnanv " regularly made and kept by it in good faith in the conduct of its affaiis. and for its own use. [seal] Notary Public. verification State of \ . County oj J " , being duly sworn, deposes and says that he is an officer, to wit th6 of the Company°° and that he is authorized to execute and has this day executed the foregoing affidavit and that the averments contained therein, and each of them, are in all respects true. Corporation! Company . Signed and sworn to before me this day of , 1939. [seal] Notary Public. Exhibit No. 2193 Form A or B. Consuming Districts of the United States A. Consuming districts coincident with State boundaries: Maine, New Hamp- shire, Vermont, Massachusetts, Rhode Island, Minnesota, Iowa, North Dakota, South Dakota, Nebraska, Delaware, District of Columbia, Virginia, West Vir- ginia, North Carolina, South Carolina, Georgia, Florida, Kentucky, Tennessee, Mississippi, Arkansas, Louisiana, Oklahoma, Texas, Montana, Idaho, Wyoming,? Colorado, New Mexico, Arizona, Utah, Nevada, Washington, Oregon. 14342 CONCENTRATION OF ECONOMIC POWER B. Other consuming districts (Counties included in each district are listed below) : Connecticut: all counties except Fairfield County. Metropolitan New York: New York State: Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk, Westchester. New Jersey: Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Passaic, Somerset, Union. Connecticut: Fairfield. Eastern and central New York: New York State: Orange, Putnam, Sullivan, Ulster, Dutchess, Columbia, Renssalaer, Broome, Washmgton, Saratoga, Warren, Essex, Clinton, Cortland, Onondaga, Tompkins, Cayuga, Tioga, Chemung, Schuyler, Yates, Seneca, Albany, Schnectady, Scho- harie, Delaware, Otsego, Madison, Chenango, Green, Franklin, Hamilton, Fulton, Montgomery, Oswego, Ontario, Wayne, Steuben, Herkimer, St. Lawrence, Oneida, Lewis, Jefferson. Buffalo: New York State: Niagara, Erie, Catteraugus, Chautauqua, Genesee, Monroe, Orleans, Livingston, Wyoming, Allegany. Pennsylvania: Erie. Philadelphia: Pennsylvania: Bucks, Philadelphia, Montgomery, Chester, Dela- ware. New Jersey: Mercer, Hunterdon, Burlington, Camden, Atlantic, Gloucester, Salem, Cumberland, Cape May, Ocean. Eastern Pennsylvania: Pennsylvania: Northampton, Monroe, Pike, Wayne, Susque- hanna, Lackawanna, Wyoming, Luzerne, Carbon, Columbia, Perry, Dauphin, Northumberland, Snyder, Montour, Union, Lycoming, Sullivan, Bradford, Tioga, Schuylkill, Lehigh, Berks, Lebanon, Lancaster, York, Adams, Potter, Cumberland, Clinton, Center, Mifflin, Juniata, Huntington, Fulton, Franklin, New Jersey: Sussex, Warren. Pittsburgh: Pennsylvania: McKean, Elk, Cameron, Clearfield, Jefferson, Clarion, Bxitler, Armstrong, Bedford, Blair, Venango, Indiana, Cambria, Beaver, Allegheny, Westmoreland, Somerset, Wash- ington, Green, Fayette, Forest, Warren. Maryland: Allegany, Garrett. West Virginia: Preston, Monongalia, Marion, Wetzel. Cleveland: Ohio: Lorain, Cuyahoga, Lake, Erie, Geauga, Ashtabula, Portage, Summit, Medina, Huron. Youngstown: Ohio: Trumbull, Mahoning, Columbiana. Pennsylvania: Crawford, Mercer, Lawrence. North Ohio River: Ohio: Jefferson, Belmont, Monroe, Washington, Noble, Morgan. West Virginia: Hancock, Brooke, Ohio, Marshall, Tyler, Pleasants, Wood. Canton-Massillon-Mansfield: Ohio: Guernsey, Muskingum, Stark, Carroll, Wayne, Ashland, Richland, Harrison, Tuscarawas, Coshocton, Holmes. South Ohio River: Ohio: Meigs, Gallia, Lawrence, Athens. West Virginia: Jackson, Mason, Cabell. Ohio: All counties in Ohio other than those listed under Cleveland, Youngstown, North Ohio River, Canton-Massillon-Mansfield, and South Ohio River districts. Indiana: All counties except Lake County. Chicago: Illinois: Cook, Du Page, Lake, Kane, Will. Wisconsin: Kenosha, Racine, Milwaukee. Indiana: Lake. Illinois: All counties except Madison and St. Clair Counties and those included under Chicago district. CONCENTRATION OF ECONOMIC POWER 14343 Detroit: Michigan: Saint Clair, Macomb, Oakland, Livingston, Lapeer, Ingham, Jackson, Washtenaw, Wayne, Genesee, Hillsdale, Lenawee, Monroe, Shiawassee. Michigan: All counties except those listed under Detroit district. Wisconsin: All counties except Kenosha, Racine, and Milwaukee Coun- ties. St. Louis: Missouri: St. Louis, St. Louis City> St. Charles. Illinois: St. Clair, Madison. Kansas City: Missouri: Jackson. Kansas: Wyandotte. Missouri: All counties except St. Louis, St. Louis City, St. Charles, and Jackson Counties. Kansas: All counties except Wyandotte County. Baltimore: Maryland: Calvert, Anne Arundel, Howard, Carroll, Baltimore, Baltimore City, Harford, Cecile, Kent, Queen Anne, Caroline, Talbot, Dorchester, Wicomico, Somerset, Worcester. Maryland: All counties except Allegany and Garrett Counties and those listed under Baltimore district. Birmingham: Alabama: Jefferson, Etowah, Bibb, Calhoun, St. Clair, Shelby, Tuscaloosa, Blount, Walker. Alabama: All counties except those listed under Birmingham district. California, southern: California: Inyo, San Luis Obispo, Orange, Santa Barbara, Kern, San Bernardino, Ventura, Los Angeles, Riverside, San Diego, Imperial. California, northern: All counties in California except those listed under California, southern district. Exhibit No. 2194 Supplement to Form B Tables Caution. — For Convenience of the Press Only. Not to be Released Until Introduced in the Record. This table is presented to indicate the broad outlines of the formal pricing structure for each product analyzed and to indicate how that pricing pattern was altered by the changes in June, 1938. In general, the elimination of most inter-basing-point price differentials, the reduction of others and the establishment of new basing points may be expected to increase the amount of freight absorption and reduce the amount of so-called phantom freight in the distribution of products thus affected as contrasted with what these items would have been prior to June, 1938. This table is presented to indicate the extent to which the present basing-point system corresponds with the distribution of capacity. This table indicates the distribution by producing areas and by degree of company intergration of the total capacity for each product analyzed, together with the corresponding capacities of plants for which distribution of shipments was reported on Form B. It shows the representativeness of the sample taken. tables 4 AND 4a On the assumption -hat shipments will tend to conform to capacity overtime, this table indicates the extent to which relative shipments, by producing areas in February, 1939, may be considered characteristic. The "norm", probably 14344 CONCENTRATION OF ECONOMIC POWER never attained in a dynamic situation, would be indicated by identical percentages of capacity and of shipments for each producing area. It ia not implied that such a norm would be ideal in any economic sense! TABLES 6 AND 6A In addition to the more detailed information requested for shipments during February, 1939 on Form B, tonnage distribution of selected products in each of the three years 1936-38 were requested from companies which maintained usable records of such shipments. These tables indicate the relative coverage of the sample of companies reporting (a) by defined districts and (b) by States in terms of~1938 capacity. TABLES 6 AND 7 The purpose of these tables is to indicate the extent to which the geographic distribution of the product analyzed (i. e., the Form B distribution) in February, 1939 may be considered typical of its usual distribution. The sample of companies and plants reporting on Form A by states differs- from that reporting on Form A by districts and both differ from that reporting on Form B. It should also be noted that by reason of the definition of consuming districts, the regions defined by States in Table 6 are not completely identical with those same regions defined by consuming districts (Form A and Form B). Greater stability in geographic distribution might be expected were it possible to remove these sources of vari- ation. The range of variation is indicated in Table 7. The difference between the maximum percentage of total shipments received by a given consuming ai'aft (state or district) in any one of the four periods (1936, 1937, 1938, and February, 1939) and the minimum percentage received in any such period constitutes the range of distribution for the purposes of this table. Because of ' mited staff, it has not been possible to make all the computations necessary for a, complete analysis of Form B in each of the 64 consuming districts defined therein. For some purposes, therefore, it has been necessary to sample consuming districts for detailed analysis. This was done on the basis of their importance as measured by tonnage received. This table shows the percentage of total shipments accounted for by this selection of consuming districts on the following bases: (a) all shipments reported, (b) all shipments reported by plants in producing areas, (c) shipments made by plants in producing areas priced on the various basing points reported by them, (d) all shipments priced on each basing point irrespective of location 'of source. This, table indicates the extent to which the shipments received in each of the most important consuming areas were derived from those producing areas which could best serve them as measured by average freight absorption. In areas in which the lowest delivered price was computed from a basing-point at which the quoted lirice was at a differential above other basing points, freight absorption has been indicated in two ways; (a) unadjusted (that is, the difference between "freight added" and freight allowed), and (b) adjusted (that is, the unadjusted figure minus the diflFerential) . If the quoted base price be considered the true market price of a steel product and the criterion of a fair price for steel for both buyer and seller, it is obvious that so-called "freight absorption" or "phantom freight" (i. e., nagative freight absorption) are concepts of nominal importance only. Where an inter-basing-point price diflFerential exists, the unadjusted freight absorption is nominal whatever one's attitude toward the significance of the base price. Since each plant reported aggregates only for shipments priced on a given basing point into a given consuming district, it is not possible to show what proportion of such shipments involved an equality between freight added and freight paid, what proportion a freight absorption, and what proportion a phantom freight. The net figure, even for a given reporting plant, is an average. This table indicates roughly the extent to which the basing-point formula of pricing was observed on shipments made by each producing area into selected CONCENTRATION OF ECONOMIC POWER 14345 consuming areas during the month of February, 1939. As such it is a measure of price competition during that period. In interpreting this table, Iiowever, several imponderables which may account for the results without questioning the dominance of the formula should be borne in mind: (1) Although February is a middle-of-the-quarter month and there were no announced price changes during the period, some shipments may have been made under long-term contracts at other than current prices; (2) some companies rounded off the tonnage of ship- ments made to given districts thereby distorting per ton computations where total tonnage shipped was small; (3) errors made in reporting the extras included in the delivered value would throw the computed base price out of line (as, of course, would an error in reporting freight added or delivered value). On the other hand, it should be remembered that these figures are averages and therefore conceal much wider variations in the reports of individual companies. Since each plant reported its total shipments priced on a given basing point into a given consuming district, together with aggregates for that tonnage of delivered value, extras, etc., it is not possible to show what percentage of the total shipments into a given area were priced in accordance with the formula. TABLE 11 This table presents the same comparison as that made in Table 10 but on a more general basis. It averages all shipments irrespective of source in accordance with the basing point from which delivered price was computed. It is, of course, subject to the same limitations as Table 10. Sales priced on the basing point nearest the location of the mill provide a rough approximation to one concept of the economic market of that mill or group of mills. This conclusion is qualified by the following limitations. (1) It does not apply to mills located away from a basing point although so long as mills are relatively close to a basing point, it may be used as a rough approximation. (See Table 2 above.) (2) It does not strictly define the market for a mill with access to transportation facilities which are cheaper than the all-rail or arbitrary rates employed in computing destination prices. (3) It does not allocate areas which are governed by non-producing basing points or by basing points at which price differentials are maintained over other bases. With these reservations in mind, Table 12 may be considered a rough indication of the extent to which mills in each producing area sold in their home markets. Average mill nets and average freight absorption (on both an adjusted and an unadjusted basis) are likewise contrasted for sales on the nearest base and sales on ail other basing points. TABLE 13 This table indicates the extent to which plants in a given area supplied the •requirements of customers within that same area together with the extent to which those customer requirements could have been supplied by such plants, total shipments remaining unchanged. This table has only limited significance. The more important reservations are the following: (1) Because of the location of plants within any given consuming area, its best market (in terms of distance, freight or mill net) will often be partially in another consuming area in preference to some portions of its own area. Only an adjustment of areas to suit each plant could eliminate this ambiguity. (2) Although a product may be properly classi- fied in a given category, some plants produce special sizes, sections or qualities which are not in direct competition with those of other mills. The natural market for these products is in no sense defined by the districts established in Form B. (3) By reason of peculiarities in the freight-rate structure and the possibilities of cheaper than all-rail transportation, a plant sometimes finds its most advan- tageous market, in terms of mill net under a delivered price system, at a distance from the mill. It is not implied that the economic market of a producing area is defined by the consuming area with which it is made to coincide in this table. TABLES 14 AND 14A Using the average freight absorption per ton on saleh\priced on the nearest basing point as a criterion of market areas governed by a given producing area, this table represents the allocation of market areas that would result and the relative participation of each producing area in those market areas. Table 14 14346 CONCENTRATION OF ECONOMIC POWER is constructed on unadjusted freight absorption, Table 14a on freight absorption adjusted to take into account inter-basing-point price differentials. Aggregate shipments received from all sources by these" "governed" areas are indicated in the notes. The criterion applied in this table is admittedly arbitrary and suffers from defects already noted in connection with Tables 13 and 9. Since average freight absorption on sales priced on the nearest basing point constitutes the minimum freight absorption for the purpose of defining the market area of each producing area, many consuming districts are eliminated entirely from the category of markets for existing producing areas. Most notable is the exclusion of important consuming areas from the markets of the mills located within those areas respec- tively. In each instance, average freight absorption within these home areas was greater than the average for all sales priced on the nearest basing point. On the other hand there is duplication of certain consuming districts in the market areas of certain producing areas. This phenomenon results from the following circumstances. (1) Consuming districts are in some instances quite large as measured in freight rates from any given outside point to destinations within that area. (2) Reported shipments to each area are averages of each plant's total shipments to that area priced on a given basing point. (3) Special sizes, sections or qualities produced by a single mill may be priced only on the basing point nearest to that mill irrespective of destination. Thus shipments may be made from Pittsburgh or Bethlehem into Chicago or Birmingham without any freight absorption. TABLE 15 This table is similar to Table 14 except that the criterion of market area for each producing area is the average mill net per ton received on all shipments priced on the nearest basing point. Aside from defects peculiar to the concept of freight absorption, it is subject to the same reservations as those noted for the former table; notably, duplication of consuming districts in the market areas of some producing areas; and elimination of important cortsuming areas as marketing areas for plants located in these districts respectively. TABLES 16 AND 16A As a measure of one concept of the economic market areas of given producing areas, this table is less subject to ambiguities than those already described. The criterion here applied is the lowest actual freight allowed on shipments from any producing area into a given consuming area. In this sense it is an approximation to a market delineation in terms of actual freight rates from each producing area. It fails to achieve this ideal to the extent that the boundaries of consuming dis- tricts do not coincide with the lowest freight rates from any given producing area. Parts of a consuming district, therefore, may be served more economically from a given producing area although the greater portion of that district is more economically supplied from a second producing area even though at an average freight allowance higher than that reported on actual shipments from the former producing area. Nevertheless, in this table, the entire consuming district would have .to be allocated to the first area. This criterion has been followed strictly although flagrant instances of probably erroneous allocations have been noted. The actual allocation of consuming districts on this basis is shown in Table 16a. Percentages indicate the participation of each producing area in the total business of its economic market so defined, the extent to which each producing area concentrated its business within that market, and the extent to which it could have done so, other things equal. The latter percentage assumes that the shipments actually received within the "governed" consuming district were of a type and specification which the producing area was capable of rolling and in a position to roll economically to consumer's requirements with regard to delivery dates. TABLE 17 This ti We lists all instances in which shipments into consuming districts were reported i is priced on a basing point which could not have governed any portion of that diVitrict on the basis of relative freight rates available to the Department of Justice. There are several possible explanations of these exceptional instances: 1. Errors in reporting might arise in several ways: (a) Although the data shown may be accurate for the shipments involved, they may have been erroneously reported under the wrong basing point. CONCENTRATION OF ECONOMIC POWER 14347 (b) Actual shipments may have been made out of mill warehouses and freight items computed from that source although the basing point indicated was that governing the original shipment to warehouse. (c) For products subject to fabrication-in-transit, shipment may have been classified by ultimate destination although all other data were reported as if it were a shipment to fabricator's shop. (d) Delivered value may have been accepted as the going price and, without checking the freight rate fromi the governing base, freight from the basing point nearest the mill may have been reported as freight added to arrive at delivered price. 2. Without error in reporting, the shipment may have represented special specifications manufactured only by a given mill and priced by that mill on its own nearest basing point, irrespective of destination. Were this the explanation, the delivered value would be lil Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the Iron Age. (The directory did not list Carnegie-Illinois Steel Corporation capacity separately by product for each plant. Thus an estimate was required for capacity at Pencoyd, Pennsylvania. This capacity was esti- .mated at 140,000 gross tons.) ' Includes 68,700 gross tons on the Pacific Coast. Table 3. — Heavy Structural Shapes: Distribution of Total Capacity in the United States and Form B Sampled Capacity by Producing Areas Producing area ' Total United States Integrated* Semi-integrated Non-integrated Eastern Pennsylvania and Philadelphia. Pittsburgh Chicago Buflalo. North Ohio River St. Louis Birmingham Colorado,. Areas not in the sample: YoungstowD California (northern and southern)... Washington -. Total U. S. Capacity » (1,000 gross tons) 3667.4 3517. 4 150.0 » 1, 090. 0 1,018.7 927.6 215.0 113.0 110.0 -91.0 20.0 13.5 46.7 22.0 Percent of total 95.9 4.1 29.7 27.8 25.3 5.8 3.1 3.0 2.5 0.5 0.4 1.3 0.6 Estimated Capacity Sampled (1,000 gross tons) 2782. 0 150. 950.0 550. 0 783.0 215.0 113.0 no. 0 91.0 20.0 Percent of total capac- ity sampled 79.9 79.1 100.0 87.2 63.8 84.4 100.0 100.0 100.0 100.0 100.0 ' Producing areas conform to Form B consuming areas. > Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 ' Of the capacity sarqpled 94.9 percent represented integrated companies and 5.1 percent semi-integrated companies. * Degree of integration here used is company integration (not plant). • Includes 140,000 gross tons estimated capacity at Pencoyd, Pennsylvania, (not listed separately in the directory) « Estimated capacity at Munhall, Pennsylvania, (not listed separately in the Directory) Table 4. — Heavy Structural Shapes: Estimated Sampled Capacity by Producing Area and Shipments by Producing Area Capacity Sampled ' February 1939 Shipments ' Producing area » Tonnage (1 ,000 gross tons) Percent of sampled capacity Tonnage (Net tons) Percent of total shipments Total 2, 932. n 100.0 79, 921 100.0 Eastern Pennsylvania and Philadelphia. ! Chicago . 950.0 783.0 650.0 215.0 113.0 110.0 91.0 32.4 26.7 22.2 7.3 3.8 3.8 SI 22,957 20,355 45, 437 10,260 2,550 1,151 4,240 2,971 28.3 25.5 Pittsburgh 19.3 Bufialo.. . 12.8 North Ohio River 3.2 St. Louis . 1.4 Birmingham 5.3 Colorado 20 0 n. 7 3.7 ' Producing areas conform to Form B consuming areas. ' Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. • Compiled from the Temporary National Economic Committee qdcstionnairc Form B, Feb. 1939. ♦ Estimated capacity at Munhall, Pa. (not listed separately in the Directory). 14350 CONCENTRATION OF ECONOMIC POWER Table 5. — Heavy Structural Shapes: Distribution of Total Capacity and Form A Sampled Capacity by Producing Area (District Sample) 1938 Producing Area ' Total United States Eastern Pennsylvania and Philadelphia Pittsburgh Chicago - — Buffalo - North Ohio River - -- St. Louis... Birmingham California' Washington -.. Colorado -- Youngstown ---. Total U. S. Capacity ' Tonnage (1,000 a. T.) 3, 667. 4 * 1,090.0 1,018.7 927.5 215.0 113.0 110.0 91.0 46.7 22.0 20.0 13.5 Capacity Sampled Tonnage (1,000 a. T.) 2, 969. 4 800.0 1,018.7 742.5 215.0 91.0 46.7 22.0 20.0 •13.5 Percent Sampled by Producing Area 81.0 73.4 100.0 80.1 100.0 100.0 100.0 100.0 100.0 100.0 ' Producing areas conform to Form B Consuming Areas. > Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. ' Includes Northern and Southern California. < Includes 140,000 Q. T. estimated capacity at Pencoyd, Pennsylvania. ' Company sampled but no shipments were reported for this product. Table 5A. — Heavy Structural Shapes: Distribution of Total Capacity and Form A Sampled Capacity by States (State Sample) 19SS Total U. S. Capacity (1,000 gross tons) ' Capacity Sampled state (1,000 gross tons) Percent Sam- pied by state Total United States 3, 667. 4 3, 082. 4 84.0 Pennsylvania ... .... 2, 018. 7 628.0 299.5 215.0 113.0 110.0 91.0 46.7 22.0 20.0 13.5 1, 818. 7 613.0 129.5 215.0 > 113. 0 86.2 97.6 43.2 100.0 West Virginia 100.0 Alabama . . 91.0 46.7 22.0 20.0 13.5 100.0 California - . . . . ... ..-.. 100.0 Washington 100.0 Colorado 100.0 Ohio '... 100.0 ' Iron and Steel Works Directory of the United States and Canada, 1938r • Report is not included in calculations for tables 6 & 7. ' Company was sampled but no shipments were reported for this product. CONCENTRATION OF ECONOMIC POWER 14351 Table 6.- -Heavy Structural Shapes: Relative Stability of Tonnage Distribution by Consuming Region, 1936, 1937, 1938 and February 1939 Regiop Form A distribution by states Form A distribution by con- suming district Form B distribu- tion 1936 1937 1938 1936 1937 1938 Feb. 1939 All regions (net tons) 1,661,615 1, 853, 461 956, 214 1,727,984 1, 941, 706 984, 428 79, 921 Percent 100.0 100.0 100.0 100.0 100.0 100.0 100.0 North Eastern' 35.7 34.2 6.0 6.2 10.7 7.2 35.3 35.3 6.3 6.3 11.4 6.4 37.4 27.0 5.9 10.1 13.3 6.3 34,0 36.7 6.3 5.9 10.3 6.8 32.5 38.9 5.6 6.1 10.9 6.0 34.9 30.0 6.3 9.9 12.8 6.1 35.0 North Central ' 30.8 West Centrals... 8.5 South Eastern * _ 7.4 South & Southwestern '.. Mountain & Western '... 12.9 6.4 ' Includes following states and consuming districts: Maine, N. H., Vt., Mass., R. I., Conn., N. Y., N. J., Pa., Metropolitan N. Y., Eastern & Central N. Y., Buffalo, Phila., Eastern Pa., Pittsburgh. ' Includes following states and consuming districts: Ohio, Ind., III., Mich., Wis., Minn., Cleve., Youngs- town, N. Ohio River, Cant. -Mans., S. Ohio River, Ohio — other, Chicago, Ill.-other, Detroit, Mich, other. ' Includes following states and consuming districts: Iowa, Mo., N. Dak., S. Dak., Nebr., Kans., St. Louis, Kans. City, Mo.-other. < Includes following states and consuming districts: Md., D. C, Va., W. Va., N. C, S. C, Ga., Fla., Baltimore, Md. -other, Delaware. » Includes following states and consuming districts: Ky., Tenn., Ala., Miss., Ark., La., Okla., Tex., Birmingham, Ala.-other. •Includes following states and consuming districts: Mont., Idaho, Wyo., Col., N. Mex., Ariz., Utah, Nev., Wash., Ore., California, Northern California, Southern California. Note: Each region is defined by the areas listed, eliminating duplications, and consuming districts have been italicized. The most important states Table 7. — Heavy Structural Shapes: Range of Variation of Tonnage Distribution in Consuming States and Consuming Districts, 1936, 1937, 1938 and February 1939 [Range of distribution of percentages by areas] Range Form A: 1936-1938 inclusive Forms A &' B: 1936-1938 Inclu- sive and Feb- ruary 1939 By 49 states: ' Number of states By 64 districts: Number of districts By 64 districts: Number of districts Over 5.0 2 6 9 10 36 2.1-5.0 . 2 5 6 36 6 2 5 51 1.1-2.0 _ 0.6-1.0 0.5 or under. Total 49 64 64 ' Includes the District of Columbia. Source: Compiled from Temporary National Economic Committee Forms A and B. 14352 CONCENTRATION OF ECONOMIC POWER Table 8.— Heavy Structural Shapes: Selected Consuming Areas for Detailed Analysis, February 1939 Producing Area ' Basing Point 2 All Con- suming Areas (net tons re- ceived) Selected Consum- ing Areas (net tons received ') Percent of all Consum- ing Areas Receipts All basing points All basing points. Pittsburgh. Chicago-Gary. Birmingham Buffalo.. Gulf Ports All basing points Chicago-Gary Birmingham All basing points Pittsburgh 79,921 52, 467 65.6 20,355 12, 683 62.2 472 18, 157 83 207 1,173 439 12, 209 15 207 979 93.0 67.2 18.1 100.0 83.5 1,151 823 71.5 1,083 68 801 22 74.0 32.4 Pittsburgh 15, 437 9.832 63.7 5,499 2,524 51 959 4,738 414 3,531 2,270 9 889 2,730 403 64.2 Chicago-Gary Birmingham Buffalo- < 89.9 17.3 92.7 Bethlehem 57.6 Gulf Ports 97.3 All basing points... Pfittsburgh.. . Buffalo . . - . — - 10, 260 6,555 63.0 2,693 4,764 ^,084 171 282 1,195 3,084 1,852 142 282 44.4 Chicago-Gary Buffalo . 64.7 88.9 Bethlehem . . 83.0 Gulf Ports 100.0 All basing points Pittsburgh. Eastern Pennsylvania and Philadelphia 22,957 17, 081 74.4 675 400 299 449 20,244 427 212 194 1 349 15, 765 427 31.4 Chicago-Gary Birmingham Buffalo. 48.5 0.3 77.7 Bethlehem 77.9 Gulf Ports 100.0 All basing points... Chicago-Gary. Birmingham Gulf Ports. 4,240 1,515 35.7 96 3,337 424 35 1,056 424 36.5 31.6 100.0 All basing points Birmingham Gulf Ports Colorado 2,971 1,175 39.5 199 976 199 976 100.0 100.0 All basing points Pittsburgh. -.. North Ohio River 2,550 1,770 69.4 2,072 93 211 125 1,405 56 199 110 67.8 Chicago-Gary Buffalo. 60.2 94.3 Bethlehem 88.0 Pittsburgh All producing areas 11,411 6,782 59.4 Chicago-Gary.. Birmingham Buffalo Bethlehem... _. Gulf Ports... 28, 753 4,213 3,910 25, 385 3,696 2,553 18,649 1,302 3,496 18, 747 3,491 0 64.9 30.9 89.4 73.9 94.5 Pacific Points 0.0 ' Producing areas conform to Form B consuming areas. ' Lists only those basing points reported as governing the selected consuming areas. ' Consuming areas receiving 2% or more of total shipments. Areas selected were: Metropolitan New York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, Ohio— other, Indiana — other, Chicago, Illinois — other, Detroit, Iowa, St. Louis, Birmingham, Texas. Source: Compiled from Temporary National Economic Committee questionnaire Form B for February 1939. CONCENTRATION OF ECONOMIC POWER 14353 0£ at--eoooQOQa)» t^toobt~t-SS!oco->»>«Oi eoe6ccMc4oc^»o»r5o>Oi-HOoic4 e^oa ' 0>t>»C^'d*COt^COWCOOO»OffO'^'^ -H CO C5 i-H -H* 00 »0 CO CDC^t^COOiOS OS00"^"<**CO(NC^CO«O'^<^00COCOCD ^©r^oiTP^c^r^ocsocoococp W5COQO»OC»3--Hr-CO'-'CO»OC^COt^t^ I -a P-Q aC-ftO fe ass a I fl CO . ■" . 00 -^ OS CO Q r^ CJ COC^^l^NOOCOCO ffO'-'O'tfOCDCO WCO00CO-^COo6l--^»OIN'oO 00 CO r^ 00 lO ^ ■* CO 05 CO r-. c* CD — ' OO-^J-COCOOOC^C^OC^C^C^-^t^C^C^J O'-'>OiOt^rt > a a , _ P-iPiHsija , , , O o o o a o o o 3 o o -: o -g °f -g 'g S^£S-°-'3cae3«M(a9'd'?9 S 3 ce cs.tioxixixi aj3 ^.h-^ Freight absorp- tion on all ship- ments to area COCOCO»0(NCO-^— 'irt— <»oasc<)(Nr^ COTf- cmS CO -I o-H<=o-io-HMod-2J. "-^ Total net tons shipped to con- suming area r^c^oor-^r^^cocccor-fC^icoooQO C^00Si)"C^>00JC0t-.f-^O(N«0C C-)COCO^00COi?lcOCO(NC CI to CO St?S3J3 pm owe th otj ya otal sh gthel ere less ted is r rned b ^1 ^ § > sSg°a £-c££^ 2co « CO b S£."jMa ntor hat a in th umin is in o~a § a ftgiSa,^ fJ'^S-o receivin oducing made b Id serve er select en b ,„ = J3 § 0.^ o"S £Ma'S° trgiMi .as.S'SaS a>^.2='& o.d 0.2 05 CO - " " a" .M ■ 14354 CONCENTRATION OF ECONOMIC POWER Table 10. — Heavy Structural Shqpes: Comparison of Computed Base Prices with Published Base Price in Selected Areas, February 1939 Reported bas- ing points Pub- lished base price ' Computed base prices on shipments from producing areas • Selected Consum- ing Areas ' Eastern Penn- sylva- nia and Phila- delphia Chi- cago Pitts- burgh Buf- falo Bir- ming- ham Colo- rado North Ohio River St. Louis Metropolitan New York. Bethlehem Chicago-Gary. Pittsburgh Pittsburgh Buffalo. Bethlehem Bethlehem Bethlehem..^. Buffalo Pittsburgh Gulf Ports Chicago-Gary. Birmingham.. Bethlehem Chicago-Gary. Pittsburgh Pittsburgh Chicago-Gary. Chicago-Gary. Buflalo Chicago-Gary. Pittsburgh Chicago-Gary. Pittsburgh Buffalo Bethlehem Chicago-Gary. Birmingham. - Pittsburgh Chicago-Gary. 42.0 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 49.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 40.30 43.45 •43. 50 42.02 39.86 41.53 42.09 40.73 40.89 40.22 43.25 39.08 40.19 42.07 46.20 42.18 41.25 41. 30 39.84 •37. 50 ""'48.03' 41.40 Philadelphia.. Eastern Pennsyl- 40.82 41.92 40.62 41.35 40.48 48.'94' 41.40 41.73 44.16 48.98 Texas 49.26 46.70 •40. 50 45.26 43.88 42.11 40.85 38.41 •42. 75 43.43 41.14 •50. 50 40.20 40.17 41.45 42.56 43.08 43.15 41.09 42 72 39.63 36.08 40.69 I 41.97 40.89 41.06 33. 95 36. 05 41.54 41.72 40.27 40.80 41.04 40.63 37.82 39.96 39. SO 46.62" 39.80 40.35 40.68 42.91 42.57 41.29 41.82 Iowa 38.94 41.71 37.66 39.00 Rnffnln 41.32 42.21 41.05 40.30 Illinois, all other 40.64 42.04 42.31 42.30 Birmingham. •65.00 38.13 35.04 40.20 33.38 I Consuming areas receiving 2 percent or more of the total shipment''. ' As listed by all February 1939 issues of the Iron Age. ' Producing areas conform to Form B Consuming Areas, February 1939. •Represents shipments of less than 5 net tons. Source: Compiled from Temporary National Ecconomic Committee Form B Questionnaire, February 1939. Table 11.- -Heavy Structural Shapes: Published Base Prices and Calculated Form, B Base Prices By Basing Points, February 1939 Basing. Point I'ublished base price' Calculated ba.se price' Basing Point Published base price' Calculated base price' Pittsburgh Per net ton $42.00 42.00 42.00 42.00 Per net ton $39. 50 40.09 40.92 40.78 Birmingham Per net '■m $42. 00 49,00 ^••.00 Per net ton $40.47 Chicago-Gary... Gulf Ports 47.30 Buffalo.. Pacific Pi^'ts 54.38 Bethlehem ' Source: AU February '939 issues of the Iron Age. ' Computed from Temporary National Economic ComUiiitee Form B questionnaire, February 1939. CONCENTRATION OF ECONOMIC POWER 14355 05 !i) CO (i:- Et3 g i 2 o «J t^ - to 6«~ a oii Comprises shipments to: Philadlephia, Delaware, Baltimore, District of Columbia, Virginia, (aggregate tons received in areas listed — 7,185) 3 Comprises shipments to: South Ohio River, Illinois-other, Detroit, Michigan-other, Wisconsin, Iowa, St. Louis, Kansas City, North Dakota, South Dakota, Nebraska, Kansas, Kentucky, Birmingham, Alabama-other, Oklahoma, Montana, Idaho, Colorado, Utah, Nevada, (aggregate tons received in areas listed— 17,080) < Comprises shipments to: Cleveland, North Ohio River, Canton-Mansfield, Ohio-other, West Virginia, Kentucky, Birmingham, Youngstown, Detroit, (aggregate tons received in areas listed — 10,419) ' Comprises shipments to: Buffalo only, (aggregate tons received in area listed — 1,682) « Comprises shipments to: Kentucky, Tennessee, Birmingham, (aggregate tons received in areas listed— 2,987) ' Comprises shipments to: Montana, Wyoming, Colorado, New Mexico, Utah, (aggregate tons received in areas hsted— 913) ' Comprises shipments to: St. Louis, Missouri-other, (aggregate tons received in areas listed — 2,210) » Producing areas indicated are the same as Form B consuming areas. Source: Compiled from the Temporary National Economic Committee questionnaire Form B for Feb- ruary 1939. CHDNCENTRATION OF ECONOMIC POWER 14357 Table 14 A. — Heavy Structural Shapes: Analysis of the Market Areas of Grouped Plants as Measured by the Freight Absorption on Shipments Priced on the Nearest Basing Point {Adjusted for Basing Point Price Differentials) February 1989 Nearest basing point Total ship- . ments Shipments priced on nearest bas- Shipments to all areas in which freight absorption is: ing point Equal to or less than standard i Greater than standard • Producing areas » Net tons Freight absorp- tion per ton Net tons Freight absorp- tion per ton Net tons Freight absorp- tion Net tons Per- cent of total ship- ments Freight absorp- tion Eastern Penn- sylvania, Phil- adelphia. Chicago P ittsburgh, Youngstown, N. Ohio River. Buffalo Bethlehem Chicago-Gary Pittsburgh.... Buffalo Birmingham.. Chieago-Qary Chicago-Gary- 22, 957 20, 355 17, 987 10,260 4,240 2,971 1,151 79, 921 0.33 0.63 2.22 2.90 1.43 -0.54 -2.31 1.12 20,244 18, 157 7,571 2,084 3,337 1,636 1,083 54,112 -0.01 0.19 0.40 0.01 .91 -2.48 -2.37 0.05 5,925 9,061 2,873 1,014 1,543 638 446 J-.32 3 0.01 <0. 11 s-0. 04 8 0.20 7-10.21 8 -4.38 17, 032 11,294 15, 114 9,246 2,697 2,333 705 74.2 55.5 84.0 90.1 63.6 78.5 .56 .96 2.62 3 22 Birmingham Colorado 2.13 ■> 11 St. Louis..- 61.31 -0.10 All producing 21,500' —0.4.') 58, 421i 73. l! 1 71 areas. > standard freight absorption for each producing area is the freight absorption on sales on the nearest basing point. J Comprises shipments to:— Philadelphia, Delaware, Baltimore, D. C, Virginia, Southern California, (aggregate tons received in areas listed — 8201) 3 Comprises shipments to:— South Ohio River, Illinois, other, Detroit, Michigan, other, Wisconsin, Iowa, St. Louis, Kansas City, North Daliota, South Dakota, Nebraska, Kansas, Kentucky, Birmingham, Alabama, other, Oklahoma, Montana, Idaho, Colorado, Utah, Nevada, Washington, Mississippi, (aggre- gate tons received in areas listed — 18,103) < Comprises shipments to: — Cleveland, North Ohio Rivej, Canton-Mansfield, Ohio, other. West Vir- ginia, Kentucky, Birmingham, Youngstown, Detroit, (aggregate tons received in areas listed— 10,419) • Comprises shipments to:— Buffalo only, (aggregate tons received in areas listed— 1,682) « Comprises shipments to: — Kentucky, Tennessee, Birmingham, (aggregate tons received in areas listed — 2,987) ' Comprises shipments to: — Montana, Wyoming, Colorado, New Mexico, Utah, (aggregate tons received in areas listed— 913) ' Comprises shipments to: — St. Louis, Missouri, other, Arizona, (aggregate tons received in areas listed — 2,345) » Producing areas indicated are the same as Form B consuming areas. Source: Compiled from the Temporary National Economic Committee questionnaire Form B for Feb- ruary 1939. 14358 CONCENTRATION OF ECONOMIC POWER Table 15. — Heavy Structural Shapes: Analysis of the Market Areas of Grouped Plants as Measured by the Mill Net on Shipments Priced on the nearest Basing Point* February 1939 Nearest basing point Total shipments Shipments priced on nearest Shipments to all areas In which mill net is: Net tons MUl net per ton basing point Less than standard i Equal to or greater than Producing area • Net tons Mill net per ton standard ' Net tons Per- cent of total ship- ments MiU net per ton Net tons MiU net per ton Eastern Pennsylvania, Philadelphia. Bethlehem — Chicago-Gary Pittsburgh,... Buffalo Birmingham . Chicago-Gary Chicago-Gary 22,967 20, 355 17,987 10,260 4,240 2,971 1,151 $40.36 39.62 38.17 37.92 39.48 38. 85 40.25 20,244 J 8, 157 7,571 2,08^ 3,337 1,636 1,083 $40. 60 39.75 39.07 40.95 39.49 41.08 40.31 14,687 11,566 13,450 9,246 1,785 2,333 669 64.0 56.8 74.8 90.1 42.1 78.5 58.1 $39. 74 38.91 37.29 37.57 38.32 36.09 37.99 »8,270 3 8, 789 M,537 « 1, 014 « 2, 455 '638 8 482 $41. 45 40.55 Pittsburgh, Youngs- town, North Ohio River. Buffalo 40.75 4L09 40.33 Colorado 48.94 St Louis -- 43.38 Total 79, 921 39.26 64,112 40.05 53, 736 67.2 38.35 26,185 41.13 1 standard mill net for each producing area is the mill net received on sales on nearest basing point. ' Comprises shipments to: Maine, New Hampshire, Massachusetts, Connecticut, Eastern & Central New York, Philadelphia, Missouri-other, Delaware, Baltimore, Maryland-other, District of Columbia, Virginia, North Carolina, Southern California, (aggregate tons received in areas named, 12,826) 3 Comprises shipments to: North Ohio River, South Ohio River, Ohio-other, Indiana-other, Illinois- other, Michigan-other, Minnesota, St. Louis, Kansas City, Missouri-other, North Dakota, South Dakota, Nebraska, Kansas, Georgia, Florida, Kentucky, Tennessee, Alabama-other, Arkansas, Montana, Idaho, Colorado, Arizona, Utah, Nevada, Washington, Northern California, (aggregate tons received in areas listed, 20,798) < Comprises shipments to: New Hampshire, Massachusetts, Eastern & Central New York, Cleveland, North Ohio River, Canton-Mansfieljl, etc.. South Ohio River, Ohio, Baltimore, Maryland-other. District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Kentucky, Tennessee, Alabama-other, OklaJioma, Colorado, (aggregate tons received in areas listed — 19,402) » Comprises shipments to: Buffalo, (aggregate tons received in area — 1,682) ' Comprises shipments to: Missouri-other, North Carolina, South Carolina, Georgia, Florida, Kentucky, Tennessee, Birmingham, Alavama-other, Arkansas, Louisiana, Oregon, Northern CaJifornia. (aggregate tons received in area— 9,380) ' Comprises shipments to; Montana. Colorado, Wyoming, Arizona, New Mexico, Utah, (aggregate tons received in areas listed — 1,049) * Comprises shipments to: Indiana, Illtnois, other, Kansas City, Nebraska, Kansas, Arkansas, Texas, (aggregate tons received in areas listed — 11,029) ' Producing areas listed are the same as Form B consuming areas. •Mill net as used here is mill net less extras. Source: Compiled from the Temporarv National Economic Committee questionnaire Form B for Feb- ruary 1939. CONCENTRATION OF ECONOMIC POWER 14359 TS OS g* OS s Si fc. ^ « gfe. - ^ Si if 0,0 CO CQ ,921 00.0 ,921 00.0 ,078 67.7 57.7 00.0 _ 01 OS •-! Oi ,-t «0 »-* o E-i t~ t~ •* a ^•T co>nt^ o — o O . CJ . CO g -- oco « g g S r-l t- -H <0 ^ CO o rth- 00U500 lO 00 M t^ . c< .to . . a! »« b£> ■* . ITS .O . . ■5 a el eM«ooi>oo> NM -H 1 ^- ^"„' « » g <; m be a 'S 3 o t3 "3 .r-l . . lO rt O 2 W O N r-1 Pm 3 n €.2 t^ lO <00> J3 t» ^ ^ ""^ |:^iS E«3 O "-S °?5". S S § S S S 2 ,a O JjOO JJWgJ to CO 00 OiookOcooo -^'td »o l^«A-| .C» - -co - t~ 00 —i East Penn van Phi delpl ?3 S 2 i i-s ■'■§" a i§" i i is ! 1 >> o am «3« total shi ine 1)... ming are it) (Line 1 ifrt o m o E a o 3 : to by 1 nsu rcer 1 1 (» Six 2 Q OJ 1 • 1 o £«•.>-'■ 1 . U) i is ; ;£ , r 03 0SC8 3 bc~ 5 " > 0) 0) 1 lis g CO t» to ; : 1 bn o> d) 0 a 1 • 1 a > p t^'S ' i is 1 . 3 8£S " o ,9 to go ) (Li es in rodu ^ w iii s C33 0 » * .Ha 2°- ; .. 0 3 ho > £ 0 areas (perc all so emini 1 < 3 n 5si ucmg areas from B gov ed total shipmcn iived from all ea, (net tons), total shipmen producing are lents by prod uch governed lents by prod ch producing ents received ments by thi nel) et tons shipp Percent of lipments rec< producing ari Percent of lipments by atio of shipm received by s by line 2) .. atio of shipm ments by sui atio of shipm to total ship divided by li Z ai oitf tf Ph 1 . -H ei CC**!** •d 0 1 o a 5m S^ p a^ 8 fQ.9S "3 5a« ;>. •0 a ^ 0 aS "> ^8g y H a •T3Ja a .a 2=3 2 — OS ffl §62 .. - - S? ra 14360 CONCENTRATION OF ECONOMIC POWER «2^ 2"o ^ ^ a ° •OS — - ri^M OQ 2 ® I Sl'^isSz^ ea 2 .S-2 rS-soo, ^ 2a.&nO os-M ■2^B.2g^T^H S§ 'E-iOPn- a> C3 OT — ©•" o" S og-JE S g-Sa > a CO- o— OS ' fc^ a boo O d £ bum ■So o O.S S SCO ■^ r* ^^ O CO »-< t^ CO 00 CJ C^ CO M OS 06 00 00 ^' 01 Q O O^ CO ^ ^ 8Et ,-.' o O C) co' •-* ^* -^' SCOOC 88§ 00 1-1 •-iOi-iC^OOOOt-'W -^'^j'.-iNOcoeo'* N ^' Ci f- Oi Ci r-i i-H eoQO CO-*** 00 O 1001 CO "^ 00 r-' c4 CO ■^ ** CC *C Tt* »CCD^O0<-''a'I^O0 OOWt*i- oi Sooo Sooco OiO too 10 ■*-.J<«0'* ON 00 3 lis "it^ r-» ^^^fcj 5T3 CC «D CO r* C5 '^ tn 611 e OS tX g 03 O 3^, O P-(PkWaiAHP5cQ S; o o o o "^ M 3 6C be 61) bC.g oj H •TT OT rt CC C8 *-- '^ ',— f-t r-» 0 o t^ o' i^' CO ■* o t^ O PS t^ooeo^o t^ 06 CO f-< 1^ ^ CO 8Jh OOs' oQNt>-Neor^ weoc^Ncoos »c CO t^ "^ oi 06 OS Q.CS dsBo te .cc ►- cr,-- bcJiSr' CO 03 .SPh O a 02 I.S2 .a a I ■2.2 a w bcCl. o. a o = .s«sa ■I'Sa-S ■^s 3 ® .: « o h ° & 0*^11 03 O C.*^ t^ j; _bD CO O a ■"" ce _ CO cj -u .S ^ j5 c3 M ;^ 14362 CONCENTRATION OF ECONOMIC POWER wS S2 ^2 Wn 4, p hS, S2 Wft 2;s C I '5| 1-* W^« OOOOO CJOOO 8100.-I V lO O -H rt' o u ?5S? 01.2 fl p SS-n gS §S S5 ffS S_§ g.a go B-^ g^ 0^5 B a.ti o oja-rj S 0,0^ «•£ 5 SiSjCjST:^ 2 go > 2 2 o 2 £ro- Px £ " ^s a ^ 4) " 1 "■« 1:^ c " c .S oj -o-is s >> for by from is the e thos 1 'g'2"oS H a 3'o£-i §2 «Pk •0 Capacity (1.000 gross tons)' Percent of total capacity Total United States.. - 5,604.8 100.0 0-26.- • 4,224.06 100.0 1,070.0 110. 76 76.7 26-50-. 1.8 51-100- -. - ' - 19.6 Over 100 I 2.0 ' Includes all basing points listed in the Iron Age, after the change in basing points in June 1938. ' Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and tjbe Iron Age. » Includes 14,500 gross tons on the Pacific Coast. 124491 — 41— pt. 27- IG 14364 CONCENTRATION OF ECONOMIC POWER [Adding machine tabulation] S88.0 10.00 12.86 4.2(1 6.25 3. 5U 14.00 22.00 I.'-). .% 4.00 . 10 15.50 10.50 20.00 18.00 26.50 .60 16.55 2.50 5.36 10.00 5.40 .13 13.00 10.50 .30 l.fiO 12.50 14.40 7.50 16.50 2.80 29.40 29.00 .20 St 00 10.80 4358. 5 [Italic Indicates pencil notations. Asterisk indicates red figures.] CONCENTRATION OF ECONOMIC POWER 14365 Table 3. -Plates: Distribution of Total Capacity in the United States and Form B Sampled Capacity by Producing Areas Producing Area i Total U. S. Capacity « 1,000 O. T. Percent of total Estimated Capacity Sampled 1,000 0. T. Percent of total capacity sampled Total United States Integrated * Semi-integrated Non-integrated Pittsburgh. Eastern Pennsylvania, Philadelphia, Delaware Chicago Detroit Baltimore Youngstown Birmingham Cleveland North Ohio River St. Louis Areas outside the sample: Colorado Kansas City Buffalo Washington... Tennessee 5, 504. 8 100.0 ' 4, 693. 3 (4, 453. 5) (1, 028. 4) (22. 9) (80.9) (18.7) (0.4) (3, 755. 3) (938. 0) (84.3) (91.2) 626. 45 035.0 995.3 500.0 440.0 311.0 251.8 120.0 100.0 60.0 8.0 11.5 30.35 14.5 0.9 (•) 29.5 18.8 18.1 9.1 8.0 5.7 4.6 2.2 1.8 1.1 0.1 0.2 0.5 0.3 1, 524. 5 1,008.0 617.0 500.0 440.0 72.0 251.8 120.0 100.0 60.0 93.7 97.4 62.0 100.0 100.0 23.2 100.0 100.0 100.0 100.0 ' Producing areas conform to Form B Consuming Areas. ' Compiled from the Iron and Steel Works Directory of the United States and Canada 1938. ' Of the capacity sampled 80.0 percent represented integrated companies, 20.0 percent semi-integrated companies. ^ * Degree of integration here used is company integration (not plant). •Less than 0.05 percent. Table 4. — Plates: Estimated Sampled Capacity ty Producing Areas and Distribution of Shipments by Producing Areas Producing Area ' Sampled Capacity « 1,000 gross tons Percent of sampled capacity February 1939 ship- ments' Net tons Percent of total ship- , ments Total U. S. Pittsburgh. ._ Eastern Pennsylvania, Philadelphia & Delaware Chicago ^ Detroit _ Baltimore Birmingham Cleveland North Ohio River Youngstown St. Louis 4, 693. 3 100.0 96,443 100.0 1,524.5 1, 008. 0 617.0 500.0 440.0 251.8 120.0 100.0 72.0 60.0 32.5 21.5 13.1 10.7 9.4 5.3 2.6 2.1 1.5 1.3 24, 381 27,885 15,088 941 10, 821 12,836 967 482 1,783 1,259 25.3 28.9 15.6 1.0 11.2 13.3 1.0 .5 1.9 1.3 ' Producing areas conform to Form B consuming areas. » Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. ' Compiled from the Temporary National Economic Committee Questionnaire Form B, February 1939. 14366 CONCENTRATION OF ECONOMIC POWER Table 5. — Plates: Distribution of Total Capacity and Form A Sampled Capacity by Producing Area {District Sample), 1938 Producing Area • Total United States. Pittsbureh — Eastern Pennsylvania, Philadelphia, Delaware. Chicago , Detroit - - Baltimore.- i.-- Youngstown.,.' Birmingham Cleveland North Ohio River ; - - St. Louis. Buffalo .-..: Washington.- - — - Kansas City , Colorado Tennessee Total V. 8. Capacity Tonnage (1,000 gross tons)' 6,604.8 626.45 036.00 995.3 600.0 440.0 311.0 251.8 120.0 100.0 60. e 30.36 14.5 11.5 8.0 0.9 Capacity Sampled Tonnage (1,000 gross tons) 3, 216. 1 Percent sampled by pro- ducing area 58.4 1, 524. 6 93.7 705.3 70.9 440.0 261.0 171.8 100.0 83.9 68.2 60.0 - 30.0 14.5 100.0 98.8 100.0 8.0 100.0 ' Producing areas conform to Form B consuming areas. « Compiled from the Iron and Steel Works Directory of the United States and Canada. 1938. Table 5A. — Plates: Distribution of Total Capacity and Form A Sampled Capacity by States (State Sample), 1938 Total U. S. Capacity Tonnage (1,000 gross tons)' Capacity Sampled State Tonnage (1,000 gross tons) Percent sampled by state Total United States 6,504.8 4,248.7 77.2 2, 608. 46 688.3 500.0 467.0 440.0 356.0 251.8 228.0 100.0 30.36 14.6 11.5 8.0 0.9 1,676.1 338.3 800. a 427.0 440.0 236.0 251.8 228.0 » 100.0 30.0 14.5 66.8 67.6 100.0 Illinois - ... -. 91.4 100.0 'Ohio 100. 0 Delaware . 100.0 West Virginia 100.0 98.8 100.0 8.0 100. e 1 ' Source: The Iron and Steel Works Directory of the United States and Canada, 1938. t Company was sampled but no shipments were reported for this product. CONCENTRATION OF ECONOMIC POWER 14367 Table 6. — Plates: Relative Stability of Tonnage Distribution by Consuming Region 19S6, 19S7, 19S8 and February 1939 Region Form A Distribution by States Form A Distribution by Con- consuming District FormB Distri- bution 1936 1937 1938 1936 1937 1938 Feb. 1939 Ail regions (net tons) 1,691,356 2,154,866 834,200 1,447,092 1,839,877 779, 571 96,443 Percent 100.0 100.0 100.0 100.0 100.0 100.0 100.0 North Esstern ' 42.7 31.1 3.0 4.8 42.6 31.8 3.8 6.1 9.7 7.1 36.8 27.7 4.2 8.4 14.8 8.1 30.1 40.3 3.8 4.9 10.6 10.3 29.4 41.6 4.9 6.3 11.2 7.6 29.6 34.8 4.3 8.6 14.7 8.1 35.1 29.7 2.8 9.2 13.6 9.7 North Central « West Central * South Eastern < . . Southern & South Western '. Mountain and Western • 9.2 9.2 « Includes following states and consuming districts: Maine, N. H., Vt., Mass., R. I., Conn N Y N J Pa., Metropolitan N. Y., Eastern & Central N. Y., Buflfalo, Phila., Eastern Pa., Pittsburgh. ' • Includes following states and consuminK districts: Ohio, Ind., III., Mich., Wis., Minn., Cleveland Youngstown, North Ohio River, Canton-Mansfield, South Ohio River, Ohio-other, Chicago, 111 -other' Detroit, Michigan-other. ' > Includes following states and CQnoUming districts: Iowa, Mo., N. Dak., S. Dak., Nebr., Kans St Louis Kans. City, Mo.-other. < Includes following states and consuming districts: Delaware, Md., D. C, Va., W. Va., N. C , S 0 Oa., Fla., Baltimore, Md.-other. ' ' '' ' Includes following states and consuming districts: Ky., Tenn., Ala., Mi.ss., Ark., La., Okla., Tex Birmingham, Ala.-other. '' • Includes following states and consuming districts: Mont., Idaho, Wyo., Colo., N. Mex. Ariz., Utah, Nev., Wash., Ore., California, So. California, No. California. Note: Each region is defined by the areas listed, eliminating duplications. The most important states and consuming districts have been italicized. Table 7. — Plates: Range of Variation of Tonnage Distribution in Consuming States and Consuming Districts, 1936, 1937, 1938 and February 1939 {Range of dis- tribution of percentages by areas) Range Form A: 1936-1938 inclusive Form A & B: 1936-1938 inclu- sive and Feb. 1939 By 49 states: Number of states ' By 64 dis- tricts: Num- ber of districts By 64 districts: Number of dis- tricts Over 5.0 L 1 4 6 6 32 1 5 6 13 40 3 7 8 13 33 2.1-5.0 1.1-2.0 1. .6-1.0. -■- 0.5 or under Total. . 49 64 64 ' Includes the District of Columbia. 14S68 CONCENTRATION OF ECONOMIC POWER Table 8. — Plates: Selected Consuming Areas for Detailed Analysis, February 1939 Producing area ' Basing point » Vll consum- ing areas (net tons received) Selected consuming areas (net tons re- ceived ») Per cent of all consum- ing areas receipts All producing areas All basing points 96,443 ■ 76, 447 79.3 Chicago - All basing points 15. 088 10 634 70.6 Pittsburgh 387 13,909 • 146 300 204 74 68 240 9,818 80 213 204 ' 68 21 62.0 Chicago-Gary " 70.6 Birmingham 54.8 71.0 Coatesville . - 100.0 Gulf Ports 78.3 Pacific Ports 30.8 All basing points --- - . 1.259 1,062 175 22 572 419 13] %22 45.4 39.5 74.3 Gulf Ports 100.0 All basing points-- Detroit - 941 941 100.0 Sparrows Point . - 2g 73 6 834 28 73 6 834 100.0 100.0 Buffalo*--- --- Cleveland -.. 100.0 100.0 All basing ■ wintS- 967 743 76.8 Chicag )-Gary . . 89 702 12 162 89 480 12 162 100.0 Cleve); nd . . 68.3 100.0 Coates ?ille..- - 100.0 All basing . joints. Youngstown 1,783 1,409 79.0 Pittsburgh 205 80 522 67 422 298 4 12 156 13 203 74 442 51 201 253 4 12 1.56- 13 99.0 Sparro\vs Point Chicago-Gary 92.5 84.7 '76.1 Cleveland Youngstown 47.6 84.8 Middle own *.. 100.0 Coatesville 100.0 Claymont Gulf Ports 100.0 100.0 All basing points - 24,381 20, 701 84.9 Pittsburgh Sparrows Point Chicago-Gary 8,349 760 3,784 1,101 2,848 2,818 973 1,888 46 1.814 7,232 6fi0 3,183 833 1.993 2,672 872 1.615 46 1,595 86.6 86.8 84.0 Birmingham Cleveland . . 75.6 69.9 Youngstown . 94.8 Coatesville - Claymont Gulf Ports 89.6 85.5 100.0 Pacific Ports 87.9 All basing points Eastern Pennsylvania, Philadelphia, 27, 885 22,382 80.2 Delaware. Pittsburgh 509 3,813 1,603 1,190 1,813 1,414 4,446 10,.263 1,045 1,789 •322 2.552 689 77 1,024 1,402 4,250 9,400 1,044 1,632 63.2 Sparrows Point Chicago-Gary 66.9 43.0 Birmingham 6.5 Cleveland 56.5 Youngstipwn 99.1 CoatesviUi! 95.6 91.6 Gulf Pori:, 99.9 Pacific P..i-ts.-. 91.2 ' Producing ari as conform to Form B Pon Includes onlv oasing points govc^rr.'.ng sele« led consi ming areas. ' Con.sumingai i as receiving two pel coiit ortnoreof toi .1 shipments. Area-; selected -vere: Mass., Metrop. N. Y.. Bu«., Phila., Ka. Pa., Pgh., Yst., Ohi)— other -Ind., Chi., IB. o^her, DecroH, Va., Ky., Birm., Tex.So. Cal., N. Cnl. / , < Shown in the icports but not listed us a ba ing poin by tbe Iron Agr. CONCENTRATION OF ECONOMIC POWER 14369 Table 8. — Plates: Selected Consulting Areas for Detailed Analysis, February 19S9 — Continued Producing area Basing point All consum- ing areas (net tons received) Selected consuming areas (net tons re- ceived) Per cent of all consum- ing areaf" receipt; All basing points. 10, 821 9,176 84.8 Pittsburgh 43 2,2S4 292 271 130 1,292 3. 975 16fi 2,342 43 2,140 140 198 128 1,292 3.188 166 1,881 100 0 Sparrows Point--. .. Chicago-Gary. 93.7 47.9 '^'flveland . . 73 1 .ngstown.. - 98.5 atesville . ■ 100 0 Claymont 80 2 Gulf Ports 100 0 Pacific Ports 80.3 All basing pijints BirmiDgham 12,836 8,964 69.8 Sparrows Point _ - Chicago-Gary 288 371 7,973 18 612 466 627 2,481 26 135 4,970 18 280 466 627 2,442 9.0 36.4 62.3 Cleveland 100.0 Coatesville 46.8 Claymont - 100. 0 Gulf Ports 100.0 Pacific Ports 98.4 All basing points . ... North Ohio River 482 456 94.0 Pittsburgh 55 214 69 46 25 28 55 50 214 59 26 25 28 55 90.9 Chicago- Gary. 100.0 Birmingham - 100 0 Cleveland.- 54.3 Youngstown 100.0 100.0 Detroit* .-. 100.0 Pittsburgh 9,550 7,253 21,919 10, 737 6 7,254 4,697 4 7.70! 16,776 55 1,993 8,498 8,090 5,480 15.202 6,201 6 4,986 4,492 4 7,072 !4, 853 56 84.7 75.6 Chicago-Gary 69.4 57.8 Buffalo* 100.0 Cleveland 68.7 Youngstown - . . 95.6 Middletown *. 100.0 Coatesville . . 91.8 Claymont . . . 88.5 Detroit * 100 n Gulf Ports .... 1,976 99.1 Pacific Ports . 7, 671 88. 4 * Shown in the reports but not listed as a basing point by the Iron Age. Source: Compiled from the Temporary National Economic Committee, Form B questionnaire, Febru- arjr 1939. 14370 CONCENTRATION OF ECONOMIC POWER cc 8 as a a P III: f^ 082 I ri gos; rH ri >Q CO a> Q oo >o o -- ci'^ e4 « N oi » ■* -i CO CO CO C4 CD a> O) »^ OQ fc ^ '^ oo ^ "^o »o ^ O ^ »o 1-1 55 »o ^ c^co ^ *-«c CO <-4^« -ooo ^ "^r:; OO 00 ^ CD 0% A 0% O) CO ^■*00 ^-^t^ t* IOC COC^CO CO cocs ^ js, •-< CO N CO a& C0 1-^ o M »o r^ ci'tftH -^ r*co o . CD CD CO 00 fH CO CD t^ CO O C^ C^ »0 CO ^-^ CO CS CD »H >OC Ph Ph ■Ph ^ ^ oojBjaij- , , , , o o ja M M^^ 6 m ■ ■ 6f Mbts aaa_g a s « a g s 523 15 g §.§sS a ^-a^ S-& a ^3 s s ^a^assa •3 S Q m » « o ao S "to &S J:;SS lOOC^J 1-iCOO 1-iCOOOOt- t^ ,-4 CO 10 00 C4 00 l«-iO ^ OOS w^ tO^ 00 »0 O .-* O W5 1-1 CO 01 (N CO CO « '^ CJ^iCOCO-^CDClOC^OOO -^ t^cfc^odcoc^'Mco'cococO'-r ■* »o c lOC^*-. coco 0*0 ?3 a,oSoHQwi>-fQEieH2 >W 3 a gg •2 "2 ."§ S o o 00 s 9 es « a> .a .a o o la 35 is "OS a osc> a) 60 a bcja o S'S-W pL, ° - a « S lis I ^ ga-S a o.a ;5o " ;i|.95|| § al-ia-oi!*. B •a T,, M fl " M a ■s oia P P5 o O .M 1^ Ui V m O O ja^ O m . M P ""S*^ m ® o •^asS pa ^ illaai 1 a< O (n k. «> _ •• •! • 14372 CONCENTRATION OF ECONOMIC POWER < a 3 1 1 4) a ft 3 03 a o £ a a PQ 1 3 ft s o o 5.2 S S ' oooo ^ rO 1 g CO 1 > o S § ■^ 58 5S o .3 a CO to-* o g2 cia6 ^ g8?S 5 £ o a pq ^ O 8 ^ Tf Tj« be a| 5 8 cU o '3 o S? — O>00 M-4o ■«<■<»'■* $39.60 41.46 44.80 42.67 40.6a 44.75 41.77 41.90 41.96 35T)<00 COOOl Oh-'-J tOCB -HOO CO I^ COO •^ ■* TJH -TJ* Eastern Pennsyl- vania, Phila- delphia, Delaware ?5g COO 46.23 •23.00 43.54 41.76 60.77 59.00 J5S?S 85! 1 c»t^o . uiiooo »0 ■'T CO Published base price $42. 00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 Reported basing points J3 S B 0^ 9 o O a a > 3 > q 6 b/ !£ o O > o c 3 o > o t X O E n > i 3 o c o a O X bl 1 o a 3 o a > c o a « o 'o Pl. o ft m 1 o a > o O c o a >> a 5 X X 1 > 5 s s a 3 .2 J > o 1^ CO Producing areas conform to Form B, consuming areas except: "Eastern" which here includes East- em Pennsylvania, Philadelphia, Delaware, Baltimore, Maryland-other, and Metropolitan New York. Source: Compiled from the Temporary National Economic Committee Questionnaire Form B, Febru- ary 1939. CONCENTRATION OF ECONOMIC POWER 14375 §.1-1 M -I ws St! o< Ah 02 ONNMCOWi-teO**- . '^■^O'^ Tj«0>0 ^coeotdo*" ^ t^oo to*^ > 3 03 2 to tJ » S .• ^£3S -■a <|, mob .£;£; 3 881 C«o •52 p a rr^» £■£: ^ o o >> oo'J; Sill llig III! i^^f ar-O-2 ' a 9 M (S3 Ma O o!~ a>-< a s -g .atf«55^-a^W^-S2 H °"S Oasis'^ oW -S» b >- a-a s5 . oc.a .q o r t. (^ - gS«ogom^:SoQ| ^ U2 a a a rt a a a a a g a £ ■saaaf^aaaaals ■« •a a a Q. ^ „ .„ ._ [SiS'S-aiaSSiaia ^.a .2^0.2 .a .22 .2 .2 -c^ gaaa«BQaaai^ t»oooJooooo^;f 14376 s n. •r* rfS 02 e C^l © BO jj Oi Q ift M- 1^ l>. « 00 s k, ^ ^ o> C I*- • l~ s u (? Oj .'? S a, T^ as CO a. 2 1 5 o) S 2 9 M ^o a 'a o — CONCENTRATION OF ECONOMIC POWER 3S w5 H OJ g .-J c^ ^' ci 1-H CO ci --H ci coh-'" 00 CO 00 CO C2 oo lO 50 ; )C<«^ '-H <-> t;i2 " S is 3.2 > >■ ^ij':3fc-cCSS4'a; o.ti ja-— c.,"^ •'-' -^ "^ ^> nO >5 a . ee.- !c .— "S © ♦J ■— ^ s .50 S -si a a qO a'Si flic CS.? 5 a feci "^ > S 3^5 S tx'3 '^ — ■ k. tj Ei 0) N ?^> S« 3.? 05 O £W ■^ a £•0 CO o •S^O 2 ««.„-« CD CO flrt^^g 5 2-- " OPH -^ C3 03 9 0.2 o w ^ O .a a So ■^ -" M.Sg S » !s S5 ^ O 05 ti> £ S Ot3 6f •|S§i5g§§s2 '^■so33'2^t|2't:bco •a .9 £ flS'*,'5Q->1 fl a-feoj'=ioW .2.U aw Mfcii ©2 -fe o PSO gOP^ZmO'-'to oo^ooboo. oaloariciagga sBc=aea00g,s a a _- a a a a ft-S" ^. !'§ a S.S.oS.B.B.fe.fe.g'^ aso>0 0aaaia o o d o o o o oX'Z OOi'OOOQO"-'^ . «. » 2 3 00 ^ "^ CONCENTRATION OF ECONOMIC POWER 14377 2^ q S2S823S§S (N •H 2^1 ^ ^ § 1 2 m -53 q o i ■g §5 ■£ cOTno'^'ci 3 a w'" :? 1 CDTfOOOi-HOOOOOOS 8 ^cococococccoww 00 ^ — i3 m < S < fl o D. r^OiOOic«t^«;DO a 03 o 2 i !o a 0 i (SS a CDCCrCQOCDCOOOOOO ^ Q. Ot^iO^t-35iOc00Q r^ Iq ►^ o r- cc u^ t^ CD as »OTr^ CO 1 •«t*'o'^''adco''~ «. » - s Is ^ 3 O 5:j58S§S3S§g >o •o ■c« ^ ■«-> cooc5cic»coo6r-^^co o ■^eococo-^cow^-^ •W" f^-S * IJ'S q o OSTfOiCO-^OOfNC^-^ »c I^ •151 ■g ■9>" q '3 c J br q O O § 0 >> .Q _2 1 jj 1 1 1 1 ^ 5 >; ;.9 : >; ; ; 2 O^moO-o-o OPMOfPM^^OOO 0) l-l CO ^ ^ "3 P .2 5 ^ o. S3 a, . bfi f'S _g ^g g ee!q •9 ■qO o to ,-, Ui > -^ He 0 . S 'f ' ' ' ' S^ * <,; p '— '■ X! i" O „. - 5 IIIjIpii _o [ijpii o mm^HOjOP i ■g'S 0.9 5 a 9 q II O is S2 "q-Q *^C0 ^.-r'r^ ^ fi S q H qt; "S 9 w -a £■« "".2 2 a O a-9'S-§ rf o £fta^, § -»*■ £ cS ■O *j 6i S 3 q w be > 5 > . o a q 3'^ ca oE-i !>> M ^■^ 9 P !3-g j3 ^^ ^15 q"^ . S ^r 0? >>•- ^ a § M C3 H .5 1^ 3 j= o a |.2§feS)g S :2g2^§w Q £^2.2;2cf fe «S'|a-2'i^o <«SJ= ES >; C3'-' °K-a3^0' ^ StSiS^'S 2'^ S" a^^r*q^>-'5 SOOq'g'rrqB a^-a|.5°2| ,„ a u >- •- o - •-a a^'SQ&i-S ■gSS-gtf goo sS'lle-iog ^a3?a22;a- s -p *j p -p cu .2 •= -o 5m°2 S^S/?; c-S"^- - 3.22!^ ■2 PQ> „' q -'^ c3 "& "^S^ > ^5^. !S S q a 03 ':3 ^ 03 W 2os - qSiO g >'Ci^ « & i:.2 ^ !^2fe s 11 § „ ci.;a'3 SoSl=lo go » o 'J .SiTi 323 3«.^CO O > C .M J ~ g c - CO ; 5 9 m-qO « •3 o so s 2 S '5 J3 s ta M o ti 9 C CO o 'q .2 So'bi ^03 -^-iS OqqO> J5S E o a 03 a^cq ■30> " O -o ofe — g •!« 3 3 SpSoS J' -ac9 c 2 S kI n o o o5^g a a cw'^ =? q . q ""■o'^'O w j; t< ~ a ID _ p gJ3 0, §^ MW^ 03 = S5 i; " c. • 2 o a'ZZK'C.ca'Z'9 5£qga.iaaT 9-c CCO.SJOO Si Cc .Si C .2: ~ — ." — c i ' a =39 1^ Q, O S « O £> » 4> « o«)pTia>gmMC^ "Sep CONCENTRATION OF ECONOMIC POWER 14379 % 3 o S| So "o I; P30 §a: <»■?, e « » o "SvS c2B.Sso2s S c-t; o 3— •>! I* .t- a, M S 54.it: « mU-^Oh:io<;:z; o9 o.S§ O ftps 5 ss 9 ^ E a I o » c J i-^M 3 1 o .25 •bosS •C B O r T 03 O »■ .25 g.9o 1 Mir iH&a 124491— 41— pt. 27- •oog £610 i a s -17 14380 CONCENTRATION OF ECONOMIC POWER as a o O s^ ;2 lOO Sg^ : 't^oo 1 '0> gsg ; ;5S ; SIS i-HC»5t«-OOOOS cdoie2osQor^co.-H ss §g fa Q,a> O Q. o J3 ^--^ C3 S8 to to ■«)■■* 82 CO o oo to iC 0)^2 p. SOI^cCir^0aOc000C0c0«03 ooc^crf 38 ^co»ooooooooo^»- (N t^ CS t^ CO p •-< fH t-H (NO »jOO»-' O' •^r^i-icDt^ooi^' 000M«'«0OO •a > a 00 'C2^* S?S2g CO •-< p •-<■ , bobccn >.9.9o o2|t S8 C0i-(<0<-'010SOr-»-HCl0CC(0OC0 .. _j - »o lO ■* »o •<*«'*■<*' ^ H oocs»o A. o 8.9 2 ■»5 O u M^C^eOOQOOOTfO Ti< CO t» « e o o O 3 gtZ b & > O 3M £o5+iai2+jc35o3ij2 ■ ' J3 *^ - •g,-o-a0TJ|00T) Ox) h S h o 9 m 6 o 9 6 9 ■£2 >i2 « > a § 2 > 2 > a c:)o^o>hPhcodopli>< (i,oi1(00>» « M !B a a a -=£ 5 o •a: Bo-S^g asoSoal *j «3 oS Qs O.S o 14381 14382 CONCENTRATION OF ECONOMIC POWER "o PL, a PQ a & 1 a 3 o S 60- o d a 2 e» mo " T3 a 1 6 II g dm S2 o o d s o Tl> sg -* 05 a "o P-. o a o. CO 11 8 • d 00 to O-h' S 1 ^ 2g 3§ s e 1 5 >> o s o 05^ t^ oot~e-i S o to s:-? d d • •<»• oom -hO oi to d d d * * * CO to d "5 d a o « I? « CO OOtO CO t-H 00 5> ■a 3 11 8 3 o 00 r^ o CO i a a 3 a O D c 8 2 B 1 1 \ \ > •o c 1 c a C O 0 1 a 1 1 2 a (- c 1.0 a c 1 P5 a i Oh 1 > C a a 0 bj 1 1 — "a a O c 1 c c >< o '■£ 12 c ? a _o ? a c c « •4-3 c o '^ O c d 1 1 1 o ii a c C c i c 0 o 0 s e o ca P c & ■1 P X c c c E "o O o _c. "c to U s: 1 C8 > % 't 1 1 •4-3 C (9 S 1 S c s O X o C3 CONCENTRATION OF ECONOMIC POWER 14383 14384 CONCENTRATION OF ECONOMIC POWER 03 CQ c^ S° ?§ 00 6n S!^ H ,?. a a 53 2 -§2 ^ ® Sf ■S ys u "§ S S^ § CONCENTRATION OF ECONOMIC l"OWEIt 14385 Part 3 Table 1. — Hul Rolled Shect.f: Basing Points and Basing Point Prices, February 1939 {Prices per net ton] Basing Toints Pittsburgh Chicago-Gary '. Birmingham... Buffalo.. Sparrows Point Cleveland Youngstown... Mlddletown Granite City. . Pacific Ports... Detroit* May 1938 Base price ' $48.00 50.00 51.00 (') (») (») (') 52.00 59.00 52.00 Differential over Pittsburgh 2.00 3.00 4.00 11.00 4.00 February 1939 Base price $43.00 43.00 43.00 43.00 43.00 43.00 43.00 43.00 4.'5. 00 53.00 45.00 Differential over Pittsburgh 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00 10.00 2.00 I 10 gage, hot rolled— 24 gage were $15 higher at all points except Pacific Ports where they were $17 higher. J Not listed as a basing point by thp. Iron Age. 3 Chicago not listed as a basing point in May 1938 (Gary only). * Not a basing point. Prices quoted are delivered prices. Source: Iron Age, February 1939, all issues and May 1938 all issued prior to revision of extras and base prices. Table 2. — Hot Rolled Sheets: Distribution of Capacity by Distance from Nearest Basing Point Distance from nearest basing point (air Miles) ' Capacity (1,000 gross tons) 2 Percent of total capacity Total United States .- » 11, 167. 45 100.0 0-25 .. -. « 6, 440. 85 2. 255. 8 1. 905. 9 664.9 57.7 26-50 - 20.2 51-100 17.1 Over 100 5.0 ' Includes all basing points listed in the Iron Age after the change in basing points in June, 1938. » Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the Iron Age. ' Includes capacity at Dravosburg, Pennsylvania as reported by the United States Steel Corporation in addition to capacity listed by the Directory. * Includes 82,300 gross tons on the Pacific Coast. 14386 CONCENTRATION OF ECONOMIC TOWER Table 3. — Hot Rolled Sheets:^ Distribution of Total anc Sampled Capacity Producisg area ' Total United States Integrated « Semi-integrated Non-integ. , fd ----- Pittsburgh- - - Chicago.. -.- Cleveland - Youngstown Detroit - North Ohio River Canton, Masillon, Mansfield. Buffalo .- Mlddletown-Newport -. .-- Portsmouth-Ashland -- Baltimore --- - Birmingham Indiana, all other - Eastern Pennsylvania, Philadelphia, Delaware St. Louis Areas Not in the Sample: California (northern and southern).- West Virginia, other Kansas City.. — - ... Eastern and Central New York Total U. S. Capacity ' Capacity sampled 1,000 gross tons Percent of total 1,000 gross tons Percent oi total capac- ity sampled 2 11,167.45 100.0 3 8, 806. 3 78.9 (9, 581. 10) '* (85. 8) (7i 846. 30) (81.9) (1, 089. 65) (9.8) 689.00 (63. 2) (496. 70) (4.4) (271.00) (54.6) 1, 46.3. 55 13.1 1.407.60 96.2 1, 286. 40 11.5 1,093.90 85.0 1, 199. 20 1, 163. 86 10.7 1, 104. 00 92.1 10.4 826. 00 71.0 1, 067. 70 9.6 5.^3. 00 51.8 977. 00 8.8 788.00 80.7 718. 10 6.4 179. OB 24.8 703. 20 6.3 700. 00 99.5 658.00 5.9 658.00 100.0 630.00 4.7 446.00 84.2 498. 00 4.5 418. 83.9 319.80 2.9 319. 80 100.0 166. 00 1.5 70.00 42.2 141. 50 1.3 108.00 76.3 135. 00 1.2 135. 00 100.0 82.30 32.10 23.00 0.7 0.3 0,2 2.80 (") ' Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth- Ashland. These areas include only the capacity at these respective points. > Compiled from the Iron and Steel WorKs Directory of the United States and Canada, 1938, plus the capacity reported by the United States Steel Corporation at Dravosburg, Pennsylvania. • Of the capacity sampled 89.2 percent represented integrated companies, 7.8 percent, semi-integrated companies and 3.0 percent non-integrated companies. * Degree of integration here used is company integration. (Not plant). » Less than .05 percent. Table 4. — Hot Rolled Sheets: Sampled Capacity by Producing Areas, and Ship- ments by Producing Area Producing areas i Total United States. Pittsburgh- -• - Chicago - - - Cleveland Youngstown .-, North Ohio River Buffalo Middletown-Newport -• Detroit- --- --. Portsmouth-Ashland Baltimore.. . Birmingham - Canton-MassiUon-Mansfield .-- St. Louis. - Eastern Pennsylvanla-Philadelphia-Delaware Indiana-other. Capacity Sampled * 1000 gross tons 6.3 1407.6 1093. 9 1104.0 826.0 788.0 700.0 658.0 553.0 446.0 418.0 319.8 179.0 135.0 108.0 70.0 Percent- 100.0 16.0 12.4 12.5 9.4 9.0 7.9 7.5 6.3 5.1 4.8 3.6 2.0 1.5 1.2 0.8 February 1939 ship- ments' Tonnage (Net tons) 190, 910 21,912 41, 401 20,811 14, 891 14, 836 8,246 8,566 2^,792 4,299 13, 878 6,752 1,009 2,677 1,277 563 Percent- age 100.0 11.5 21.7 10.9 7.8 7.8 4.3 4.5 15.6 2.2 7.3 3.5 .."i 1.4 .7 .3 ' Producing areas conform to Form B consuming areas except: Middletown-Newport and Portsmouth- Ashland which include capacity in those cities only. > Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938, plus ca- pacity at Dravosburg, Pennsylvania. ' Compiled from Temporary National Economic Committee Form B, February 1939. CONCENTRATION OF ECONOMIC POWER 14387 Table 5. -Hot Rolled Sheets: Distribution of Total Capacity and Form A Sampled Capacity by Producing Area (District Sample) Producing area ' Total United States Pittsburgh - — Chicago — Cleveland --- Youngstown Detroit - - North Ohio River Canton, Massillon, Mansfield Buffalo Middletown-Newport - Portsmouth-Ashland Baltimore.-. - -_ Birmingham - - Indiana-other Eastern Pennsylvania, Philadelphia, and Claymont St. Louis -. California (northern and southern) West Virginia, other - Kansas City Eastern and Central New York Total II. S. capacity Tonnage ' nOOO gross tons) 1,463. 1,286. 1,199. 1,163. 1, 067. 977. 718. 703. 658. 630. 498. 319. 166. 141. 135. 82. 32. 23. 2. Capacity sampled Tonnage (1000 gross tons) 5360.3 1108.4 863.9 915.8 700.0 478.0 446.0 418.0 193.8 135.0 82.3 Percent sampled by producing area 48.0 75.7 67.2 78.7 "2.0 99.5 72.6 84.2 83.9 60.6 100.0 100.0 • Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth Ashland which include capacity at these points only. > Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938, plus ca- pacity reported by the U. S. Steel Corporation at Dravosburg, Pa. Table 5A. -Hot Rolled Sheets: Distribution of Total Capacity and Form A Sampled Capacity by States (State Sample) 1938 State Total United States Ohio. Pennsylvania Indiana Michigan New York Kentucky Maryland West Virginia Alabama Illinois California Delaware Missouri - Total U. S. capacity tonnage ' (1000 gross tons) 11,167.45 4, 144. 2 1,645.85 1, 309. 9 1,067.7 706.0 626.0 498.0 443. 2 319.8 277.5 82.3 24.0 23.0 Capacity sampled Tonnage (1000 gross tons) 9, 185. 9 3, 579. 6 1, 373. 2 859.9 '717.0 700.0 446.0 418.0 '411.1 319.8 255.0 82.3 24.0 Percent sampled by State 82.3 86.4 83.4 65.6 ti7. 2 99.2 71.2 83.9 92.8 100.0 91.9 100.0 100.0 ' Compiled from the Iron and Steel Works Director of the United States and Canada, 1938 plus capacity reported by the U. S. Steel Corporation at Dravosburg, Pa. ' 553,000 gross tons of this capacity is not included in calculations for tables 6 and 7. » 296,000 gross tons of this capacity is not included in calculations for tables 6 and 7. 14388 OOxNfCENTRATION (JF ECONOMIC POWER Table 6. — Hot Rolled Sheets: Relative Stability of Tonnage Distribution by Con- suming Region, 1936, 1937, 1938 and February 1939 A 11 regions (net tons) Percent _ North Eastern'.- North Central « West Central » South Eastern'..- Southern and Southwestern « Mountain & Western ' Form A distribution by Form A distribution by states consuming districts 1936 1937 1938 1936 1937 1938 1, 242, 929 2, 323, 066 1, 322, .106 1, 010, 706 1, 952, 608 1, 073, 369 100.0 100.0 100.0 100.0 100.0 100.0 25.1 23.8 24.7 24.5 23.6 23.8 57.2 59.5 55.7 64.0 67.4 53.5 3.5 3.2 3.5 4.7 3.8 4,1 3.8 2.7 2.9 4.3 2.9 3.3 6.2 6.6 6.8 7.7 6.5 8.0 4.2 6.2 6.4 4.8 5.8 7.3 ' Includes following states and consuming districts: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, New York City, Eastern & Central New York, Buflalo, Philadelphia, Eastern Pennsylvania, Pittsburgh. ' Includes following states and consuming districts: Ohio, Indiana, Illinois, Michigan, Wisconsin, Minne- sota, Cleveland. Youngstown, North Ohio River, Canton-Mansfield, South Ohio River, Ohio-other, Indiana-other, Chicago, Illinois-other, Detroit, Michigan-other. 'Includes following states and "consuming districts: Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas, St. Louis, Kansas City, Missouri-other. < Includes following states and consuming districts: Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida, Baltimore, Maryland-other. ' Includes following states and consuming districts: Kentucky, Tennessee, Alabama, Mississippi, Arkan- sas, Louisiana, Oklahoma, Texas, Birmingham, Alabama-other. » Includes following states and consuming districts: Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Washington, Oregon, Calijornia, Northern California, Southern Calijornia. Note.— Each region is defined by the areas listed, eliminating duplications. The most important states and consuming districts in each region have been underlined. Table 7. — Hot Rolled Sheets: Range of Variation of Tonnage Distribution in Consuming States and Consuming Districts, 1936, 1937, 1938 & February 1939 [Range of distribution of percentages by areas] Form A: 1936-1938 inclusive FormsA&B:1936— 1938 inclusive Range By 49 states: Number of states ' By 64 districts: Number of districts and February 1939-By 64 districts: Number of districts Over 5.0 1 4 9 5 45 2 2.1-6.0 3 5 3 38 8 1.1-2.0 10 .6-1.0 5 39 Total 49 64 64 ' Includes the District of Columbia. Source: Compiled from the Temporary National Economic Committee questionnaire Forms A and B. CONCKNTKATION OF ECONOMIC POWEJl 14389 Table 8. — Hot Rolled Sheets: Selected Consuming Areas for Detailed Analysis, February 1989 Producing area ' All producing areas. Chicago St. Louis- Detroit. Cleveland- Youngstown. Pittsburgh. Buffalo. Philadelphia. Baltimore Basing point ' All basing points.. All basing points.. Pittsburgh Sparrows Point... Chicago-Oary Birmingham Buffalo Cleveland Middletown Detroit* All basing points.. Chicago-Oary Birmingham Granite City All basing points.. Pittsburgh Sparrows Point. . . Cfhicago-Oary Cleveland Middletown Detroit' All basing ponits. Pittsburgh Sparrows Point... Chicago-Gary Buffalo Cleveland Youngstown Middletown Detroit' All basing points. Pittsburgh Sparrows Point... Chicago-Gary Birmingham Buffalo Cleveland Youngstown Middletown Claymont *. All basins points. Pittsburgh. - Sparrows Point... Chicago- Gary Birmingham Buffalo Cleveland Youngstown Middletown Detroit' All bfising points. Pittsburgh Sparrows Point. . Chicago-Gary Buffalo Cleveland Middletown All basing points. Sparrows Point- . Birmingham All basing points- Pittsburgh. Sparrows Point-. Chicago-Gary Birmineham Buffalo All con- suming areas (net tons) 190, 910 41, 401 402 321 27,580 212 351 1,689 2,372 6,854 2,677 1,631 194 852 29,792 14 2,100 5,774 1,178 1,060 19, 435 20,811 461 776 1,181 1,599 6,474 493 1,139 8,321 14, 891 3,104 1,109 2,564 345 760 2,239 3,412 954 11 21,912 7,820 2,018 1,077 2,647 1,470 2,326 3,219 572 689 8,246 86 1,262 1,070 2,021 3, 505 131 1,277 1,065 67 13, 878 51 11,293 165 2,104 194 Selected consuming areas (net tons) 3 161, 035 36,729 379 151 25,269 96 26 1,689 2,265 6,854 1,205 1,119 75 11 27, 979 14 833 6,459 1,178 1,060 19, 435 18, 461 461 776 1,076 1 6,295 408 1,123 8,321 12, 757 3,035 826 2,441 13 16 2,183 3,379 864 11 16, 853 6,001 1,640 883 2,611 16 2,084 2,370 660 689 5,590 86 1,203 761 13 3,397 130 1,066 999 67 12, 099 44 10,629 124 2,091 21 Percent ' Producing areas conform to Form B consuming Areas except Middletown-Ncvvport and Ashland. These areas include only the points listed. ' Lists only basing points governing selected consuming areas. ' Consuming areas taking 2% or more of total shipments. Areas selected were: Metropolitan New York, Philadelphia, Eastern Pennsylvania, Pittsburgh, Cleveland, Youngstown, Ohio-other, Indiana, Chicago, Illinois-other, Detroit, Michigan-other, Texas. * Not listed as a basing point by the Iron Age. » A delivered price. 14390 CONCEN'JHiATION OF ECONOMIC POWER Table 8. — Hot Rolled Sheets: Selected Consuming Areas for Detailed Analysis, February 1939 — Continued Producing area Birmingham. M Iddletown-Ne wport . Ashland. Indiana— other. Canton, Massillon, Mansfield. North Ohio River. All producing areas. Basing point All basing points Pittsburgh Sparrows Point.. Chicago-Gary Birmingham Middletown All basing points Pittsburgh Sparrows Point.. Chicago-Gary Birmingham Cleveland Youngstown Middletown All basing points Pittsburgh Sparrows Point.. Chicago- Gary Buflalo Cleveland Middletown All basing points Sparrows Point.. Chicago-Gary All basing points. Pittsburgh Sparrows Point. . Chicago-Gary Cleveland Youngstown Middletown All basing points. Pittsburgh Sparrows Point. . Chicago-Gary Cleveland^ Youngstown Middletown Detroit = Pittsburgh Sparrows Point.. Chicago-Gary Birmingham Granite City Buffalo Cleveland-- Youngstown Middletown Claymont Detroit' Pacific Ports Gulf Ports < All con- Selected suming consummg Percent areas (net areas (net tons) tons) 6,752 2,714 40.2 2 2 100.0 122 6 4.9 28 28 100.0 6,114 2.673 43.7 5 5 100.0 8,566 7,543 88.1 471 471 100.0 822 709 86.3 1,973 1,762 89.3 265 200 75.5 1,662 1,500 90.8 47 47 100.0 3,058 2,584 93.3 4,299 3,569 83.0 6 ' 6 100.0 522 388 64.7 969 874 90.2 308 12 3.9 1,096 1,096 100.0 1,245 1,243 99. S 563 453 80.5 2 2 100.0 509 451 88.6 1,009 932 92.4 87 80 91.9 12 7 58.3 28 27 96.4 803 741 92.3 3 3 100.0 74 74 100.0 14, 836 12, 264 82.7 2,676 2,604 97.3 3,119 2,071 66.4 2,282 1,278 56.0 1,276 1,086 85.1 796 606 76.1 1,861 1,861 100.0 2,758 2,758 100.0 15, 180 13, 183 86.8 24, 543 20,190 81.9 45, 831 41, 552 90.7 12, 670 7,826 61.8 3,576 11 0.3 7,600 104 1.4 22, 098 21, 249 96.2 7,980 6,813 85.4 12,497 12,039 96.3 11 11 100.0 38, 057 38, 057 100.0 857 0 0.0 10 0 0.0 Source: Compiled from the Temporary National Economic Committee questionnaire Form B, February, 1939. CONCENTRATION OF ECONOMIC POWER 14391 J3 be a s o o »C000l^0i lOicr-ooocsci'^TfO'-'Oos—'^oi'— tc^f cofoHpL,SOra •E IT o •- ■" « S « fl »3 Q> * ^n.2— g o ^ lO C^l 05 CO «0 "3 ^ • OB p^^ ; ^ .2 1 leo 1 co^ , .Tjirr Til 1 a> m ■vS S ! 1 iwt* 'csPl-<«f lO«-H 03 •S'H <15 »c ooo .« w £ 1 N t^ IN 1 •!>• sg •i s : $ ■^ ■^ 1 t iccco i-^coeo tw* TO-W i^s SS S ig i "O i3 n 03 oo ?. m-"-a a ^ 5 ; S £; isss i : is is?gs isJ 18 i^ 2^ S5g w 1 00 o> Oiwrn 1 . .CO 1 Pi i>: oi 1 r^ ! r-< I o a o P m 1 C4 ^ 1 :§S § isg is is ig?: 1 o : ^ gl ■* s i ■^ Igsco T^ ' ^ OQ t ""^ 1 ^H ■ CO 00 ""^ s; S i |p s£ eg •«. _H.-< rt rtg ■* oooioiod t^ cj ! ;S Ipi ', •a S s o. mS CO r ; .Tfl 1 ', o> eioi i ;^ 1 loi Sr^So Itt loo I MO f^ 1 o o c4 ! t-i CO o «5 i^=i : S ■fllCO Tf 1 . .« CO S? i' oa PI ■fji t^-^ji iCD co«oot^ lO lOor^cDoo sl CO e4 uiaci lOO odeooooi lo IcSf-icJc^ copocoeo 1 -^ 1 -^ ^ -^ ^ ^ '^ c6 aa ei t^'ui ', a» ■«* nn-v •<(<-fl<-9> Ijl*'* rtO CO-* 1 g i § S3 s S ! is toto 1q 1 — «0 -< lO lOO CO— 1 fe s J.^ i»iN ,eo i«o *-l CO ^ Q ■ «» a i SSSEo l ss^ s coo cj : b^f-i ^ J3 1 cotcm-* ■5t '* ! leo CO "^ 1 CO 1 ^ ■*•*•* O I ; i> ® m S 8 gSSSg S8SS§gi gg§SSS88S8g8§88SSSSS§Sg 3 cocccc«cccoco»ococoeccceoecu5eocccoiocoeoco*o P^ ^■°& TJ< Tt< -Tfl -^ -^ •<»< ■«< r)< •«< ■«• •»• -ai Tt bc 1 ■•-» *A • i J i !*. i ; i i i i i i a ; a a ; ; c .■►>»■. >>>>k: ^ ! >> • ffl o ' a c a a y Mm < C V s gs §1 ?s 215^:1 ssg^ 8 g?e ■Sot3 ; 1.1 > 2 (§ o,3.tJa3 oc i 0 : "S ; t-i ii i::^^ «s 3 a a u OJ X] t4 1 1 ■O OS la 03 •-fe 1== 03 a Xi CM a OS >• .a 1 1 c 0 1 §.2 :2§ o i 03 1 g 1 r O 1 1 a OS i GONCENTKATION OF K(X)NOMlC POWER 14393 88 Si II ja.i5 a •z a 'a o 5f c o S o s a a 5S2 o o S » ^•c i a s •S > >> n r s-9f^«a 2 S,a S.9- '3 s "o .5 a O O W l^ QJ » C* CO ^ • I 14394 OONCKNTKA'IMON OF KCIONOMIC POWER Table 11. — Hot Rolled Sheets: Published Base Prices and Calculated Base Prices by Basing Points February 1939 Basing point Published base price per net ton ' -Calculated base price per net ton 2 Basing point Published base price per net ton> Calculated base price per net ton 2 $43. 00 43.00 43.00 43.00 43.00 43.00 $38. 51 3S.71 37.20 .39. 38 38.81 38.38 Youngstown $43.00 43.00 4S.00 45.00 53.00 $39.21 Chicago-Gary Birmingham Buffalo Middlctown 40.97 Detroit' 41.80 Granite City Pacific Ports 42.57 51.58 ' Listed by all February 1939 issues of the Iron Ape. ' Compiled from Temporary National Economic Committee questionnaire Form B, February 19 i9. 3 Delivered price (not a basing point). CONCENTRATION OF ECONOMIC POWER 14395 Ho— » S 2 S° ® S 2 0Xi a « 5 rt §-S c oi 5 o w fc- *^ a O ojs « t^ »C C*J ** 0> O 1-H O Q Ol Q »0 CC-^i-H CO to ■^ o --H ec tnc^rp ^ 2b cc cS c^ c^h-o o eo OOO C4 O'-^O O O O O i-I Oi-HCi rn c5 M M* CO 2 I' O a Q3 O «1 V M CO CO « rt «o S; 2 s ■I ■* « -3 bii w Oj2 O, ^ 00 M t-H f-i go U5 O ^ OS ^^ 05 r* CD ■» r~ t-. 00 00 oo 00 8 8 S 2 S CT l-I rH ^ f^ fe •^ -^ ei m 2 W 1 1 S P5 « O 124401 — 41 — pt. 27- ■< D Pk Q —18 W-SWWoap40M S ° s •3 S a u be .5 I l^ -a i c ^ i .2 o£ CO « G ^^£° I _ » n 3 OQ 14396 CONCENTllATION Ob' ECONOMIC 1'0W1<:R Table 13. — Hot Rolled Sheets: Shipments Received Compared to Shipments Made by Producing Areas, February 19S9 Froduciiig area ' All producing areas Chicago, Indiana, othor, Illinois, other. _ JMUsburgh, North Ohio River Youngstown, Cleveland, Canton-Massillon-Mans field ~ .— - Detroit _ Baltimore, Philadelphia, Eastern Pennsylvania Metropolitan New York__ Kentucky, Ohio, other. _ Buffalo -.- Birmingham, Alabama, other St. Louis ...1 Total shipments made by produc- ing area 190, 910 41, 9G4 36, 7-18 3C,711 29,792 iCiss 12, 865 8,246 6,752 2,677 Shipments receivOT in producing area Total re- ceived in produc- ing area 1S5, 881 40, 114 6,044 23, 295 46, 153 22,921 9,844 3,287 1,038 3, 185 Received from, iden- tical area 81, 203 25, 738 4,441 12, 573 19, 435 11,774 4,378 1,109 992 763 Percent received from iden- tical area 64.2 73.5 54.0 42 1 51.4 44.5 33.7 95.6 24.0 Total re- ceived in area as a percent of total shipments from the area 81.7 95.6 16.4 63. .5 154.9 151.2 76.5 39.9 15.4 119.0 ' Producing areas conform to Form B consuming areas. Major consuming areas contiguous to produciuir areas which have been included are indicated in the stub. Source: Compiled from Temporary National Economic Committee questionnaire Form B, February 1939. CX)NCENTRAT10N OF ECONOMIC POWER 14397 ■w ^ 90 CO 05 C^ S» -=5 e CO » W fc. .o 00 «i s &. -a a, s s Gi CO =^3 w2 o a ■o'o s..g £J ft*' ■SSa° O 03 I «2 tic J- fta t(10CDO'O«£>«O g'h^OodQOCOOOOJt^-iidN «oooSc5e-»t^oo^eoOoo»o Si O O C-5 00 •-< > t^^O>^^W50t^Ct3»-l COM ^^ ^ t-w CO O > O ^^ 00 05 d 1— * t* OS OO'wfS i>BMOCO-0 OOQOSO W>«OO^J«CM ^OOO C5 50 00 00 O CD CO -^ t^ 0> "^ t^ aseot^io,^^r^co05'0 »-*C0»0-^r-*0SC0C^C^C^OOC^ ^co-*-^cco w-t-» M >>m lll.lllg.l 5. 03 ^ a a &.<5 ftoo ft d ® H o cS o S'S ft"2a« fe^ a-S Ss " &5 gS 2 ;g a'" CI m 03 ►7

T3rr •— i:» M £ 2 ^ a m2 ^ t* (O o rv**^ M O 3 CO _ ec eo r* -^ OS ^ o O 52 ^ CO f2^ O «^o bl"3 o; P^? cm, .9" !i^>.>> "7 >.■■ 5 oJ OS oJ « 01 :z; '2 2, n ■2.2 'N a* O O 03 O 05.S ri c^ -^ 5 (D M eOC3 I 90* .OC3 c^ — (N 10 (D ^ ■ CC Ci CC O: CO O M 40 — « w U5 ^ CD W o SIoOhk* o o . M I "« I • • " ee^ oj a 0! eS 03 o =i 2 z;z;h 0800 , > > > > >M-l ^ g > za;z;z;;z;o^ ez I' = O H 1-1 -hM rt m C^ 0» -^ CO »0 O to CO « C^CCOO t- « CO ■^ -^ CO 01 ^^ iC» -~.N N " M ^"' J« S' S" f? CONCENTRATION OF ECONOMIC POWER 14451 0^ ^ a» 0^ I .a-§.H.si-J Oi ■- Oh Cl, • oOooSoooo 00 ^^ O O eo t^ c*5 ^ o o 5 .2 8.2 SEE gg.2 &H ^-d, ^£p^ Si'^ is, =f e fc ^ fete o * * &^l hJ ►J°J ^^3 33-' ^ S?!iS ft-c^ MIMcS ca .m ca .§- gs- ice. rice rice Tie ice. Tie ice. (1. PhCL. ^- ts &: : i^ll-^&tfe o o c3^:^«3ffl3 hJ IJJ *-5 o . s a v E » o ca s^ ^ i » o i o H « 0 « o 1-. ® £ c«t^ £ cu o en g_« own o 4>C tfO-cr» 1 «o. cst^o OS ^ ^ oocosi' csoc»3 0*0- iC*-HCO »OCOCD CD'-'CC iCti3i— I r.-i'S ;fafa ;cocO C3 CO I t t^ ■ .■3d -2 £5 Ui U C QOj 0) ^ |f^o£§fe I c9 as z. •z i_ I. o 000 o o " 20 o o pr^z ^zz zz^ (SoZ z o5!5^ >.>.!>> >.>.>. a. H >.:>.>> g g > > b. >• > > t» g Js > > >- ££o3 oJoSol (jjcoal £ * ta a! «- f-HZ IZ^Z IZZZ E-SZ ZZ »'5 > >^ > •" « a « . OS £SZZOZ OS — ««coa -^ < o -< — 40t^« _0-H t.h.t> .*T|; «-.-< — ^^ OSCIC^ ^^^ ^C494 NNj ffjj^ fJ^eJ eJef^ Mcfci" ??«■ 14452 CONCENTRATION OF ECONOMIC POWER I St. » 1 fcgfe I o g o MCQCO I k. k. Ui J^PhPLiOi £2 I PhPl,Ph pHpH o o t>: ; oo S»3 , <» o) a> fc- o O O O o QJ <» U 1> O O t. o o >>o coco « CO cocoeceo coco cocococo co cocoeo <>1 O o:i 1 00 ■< Ph e >. rfS o i~ t) ^ e ^ s «a ►J C/J C/7 IZ -*! b U _ « o O |- J-3 OOtfo o p oja r-) »- t- b£ OS OOOOO OOt^^r «-J od c*i cc — < od o « < »0 COOO « C£)C .23 a 3 , coco 1 a s^ E-H i CO fl o CO 1-H ,-r»-< a aa, o o o- copgco '"■go •* W5 *-" CT t^ Tt< CO 04-^ e%%% =» x"*"* i9 tuc'O O. OT J3 « S O. " — o as 2 e-b::^ 0-9 o£3 3Pl,Ph aj QT.T^-s ^-S .a ! ; ^ ! : ■« o o 05. o ■ 0 3^"^ Pi CO <»coS<»co ooTcoS S . 4. QOeo 15^ 7W ■^ »C qO to qD t>» M^^ CO 10 CC CO 00 s > > t>; o o ce < = : Z< AZ oz I. o o o o zz I « o O O o og>> > > (^ > > > *

O le-o ) -^^ 1J ^^ o )3^^ ft^ 3 "—CO ■ftS t) « oa.9a aS.£ •32te8 go.s« u ^-.9 g a> ^5 ^ « .2 2 ^ o ESS" (fl S3 S|§| I as so © o m2 . V p r==i oo a o! aoO a> of ^ g 2,-^a 5 ■9 .sing 9-- "3 ^ -a W o a S ^ ftO ^-.2 -is oig>S X-SSgoyo ogog a^aa flag's i:^„SoW coSm Sm mot" a w a T)Sga'"-°E: s5S^SSggS«-2 IsEfSs^ ■Rof&aB,'&-'S.SS.§ 5 ® o Si's — »j^ 14398 CONCENTRATION OF ECONOMIC POWER »j ^ -. »j - --^ »! £ « O ' *n /c ' 'u "^/n fl ? « '5 * D- 03 G. O D."^ O.*^ 0-*± ft-g ggBSBTB-gESII '-—CI SoS oSoloSog/Og ■"cJie"5 >5! .>£ a- cs « WmPS.s i^< <; S I, ^ ^- CONCENTRATION OF ECONOMIC I^OWER 14399 ^•^t^Wt^W^^-ttOOiiO^^C M 00* iM « - & »»^ g 013! cOoD't' ^ce o a SI O) .« 15- 2 ei§ :^I|22' OS o 09^"-" 3 rt 5 03 (/) Q •SI 3 5^1 g ..•a 3 ai SP3 o S '^ J2 "D r . rO CT' r^ irT go Sra-o 1^- 5Sg a o oWo"-- I:s.s I. 'CS g'C « &o,;^ o..> 6*3 n S . o-a o o dj o a* .is g.§2s§ •- « V ** « Sola's £ g i i'l m a b: P 'bo « ?„ E S iH w two t ^^ ;-• la dJ O M llllt t; C o' 9 a* 3 -S S " S ~ 5 9S t S 0 2--S— •« " -.Kfq 03-" p'o ) O S IJS^ 3 oS ow • •>2 s s >» 'z.s 2 *< t* t* 0 S '-' 2; *S *5-i oj 03 o3 •'^ t>.r~) 9 ."r-S^O -m'^S 5 :3.£ 0) Sax ~ P Sr25 T30 SO 9S« p o o^ OS P gpT-" O aj«-i a>3 ccoc^os ♦^ S5 o3"f-' o ^'"^-rm o o_c O =3 - Pi? P ES 5 0£-,p^ :2-S°^ P « , P r/T O i-""o "9 "^ a3 03 ^ « a£ C o o « n '^ 03 M ^fT -2 - '-'oajp ar.2 03 S-^ o p ".a .h o ^ .c S Sa.2-9°'» p^-rtS S__3a>'*'.2j20c3j3 . w o o J2 -— 7, P t? §5|g 32 -a> £•0 o'S S.2^^ 5Efo2 i.sgi .Sc a ■ |g|„-||g|^J| a-2Es^fi'2sf g« oPoS- .ogoVoo Om0 3.20-sO.SOS .!:" op" cj>-j:«> ><-G- £i O O 3 '"'^M 14400 CONCEJSTltATlON OF ECONUMIO POWEll OQ oo go 00 -< — 0 >. "3 ^-S "-S '^-SSS ■3 o S "^ §""00 "^ s H 1 Is coco woo .^ot--eo tu 100 ,-t rr iMrtOOTj: £ .sS . ^ cs ■So '^ hH _ s > t^T)< O-H «OC(NOO a 5 o-i «-o5 mtdoim >. 3 tC ^-"■'gj ,0 .T3 ■O a> CO _ 2S be gie> r-o egc^M->)« •2i .2 a t~eo icio Stogjjo |a <0 0 TT .-. *o S X^a 5 _ ?3 _o tore ot- cooot^ '* . 00 . 0 . . . ll *« C* Tj< Oi CO 50CC0>'«J' >>bKi a . W — 00 oo «0 " 1-i m — -a 0 < bo Middle- town, Ashland, Newport 12, 865 6.8 9,883 5.2 4,381 44.3 34.1 76.8 It IS "a 3 - -a^ u !r! o ..-2 *ooa os«o -^.— 00*0 »C . 0 . W3 . . . i-ir* 00M< iCiCMco J. "* o -1 g £ :23 a .r-H .-^OOCO PUS'S &I t: ^m _ « > a !^'S £ n n o CD O-* lOCJ tOOOdOO c^ . o> . 00 . . . 00« f>c» rtOMtO and ghti Feb 523S ^.r-i -,^ -reroc Cleve Can Mass Mam M (N ""* 1 n-Ashl lal freii rmB, ^ e«>oooc^ "o ^.12 *g "f^SS ^ .S n u o S !g S -^ 2* « o 1 gt- to— g«(N-H a£ 1 §* 1 TjN ^.-" -i> « r. '-' S 2? M be <7 xt .^ re CI »_H a, O ■g g S ;burgh, ungs- iwn, h Ohio iver 61, 639 27.1 7,155 3.7 5,965 83.4 11.6 13.9 Bl a so. a Z^ S Ph Z ati cj 11 a ill l2 ~ St i :«><9 '0 mo „ :5" ;2 Form areas! ationa i-f§ G and to uming rary N lg.a , ea ei « 0 a£* •-^1 M > c '1 0 ii Is ^ is «i is -o ■" ^?^ ■^1 I u. JS |a o o 03 Sj=" M ~30 -c fl. 1 ■3 M ^ B MO I-] 3 m 2 o K w ■" O 5d C3 r3 CO CO C m • S !* OS^ « O' t- Se.5«ow^;< a CO J3 n a 5 il|8||ll|| a Z. OJ > S ca D. =51 § :5-o c •ti cS c o is «£ QS ^ * o' tx.2 o g as « - „ CO^C^Bm-*- „ — o ^ t. .S .2 = o i. f^l« ■a ■^ ^n -2^ 2 ■o hL-c fcZ oQ Km ^0 22; o X] IS "oxJ n c:aj ■o 'r 3 .°-J2 t>, Go sa 3 oja *m f^ 2^ « fa a 5^z ^ :i "3 □ s-a i; a c A< sa ■J^ .s « a 3 3 =3^ 03 C c Ct3 S=5 a •a SiS 03 3 § a listc proc cept gare prod erfro o a ? 2 J1 >= *ga3 '5^ o a o c o W 3 > .H •- §•§£55- o «^ o g g >,» a X! t ;z 5a§- ■Oj= >. ed to next rm B ipped eportc (whic o c ^¥^^ >- C3 •i°2o il H C s-Ibo JJ *i 3 b Etj:: C >.X'0 o .S.H'Sc E^y ii £ cr O 'C 151! S5 '£. gffl.a^ojg t3 o a 3 2 o o .. B-o £ a 3a t OoJPhOOO c . » « . ^ « CAj 14402 CONCENTRATION OF ECONOMIC POWER a i:S f-H »o^ c*«co r^ to^^ CO ocsos-c^'^r^OMoocoo^»oo CO ^ CO ^^^pQ^co^^^cOeO'^^ o&i 3."4i' 6.33" 0.00 2.36' rS .Q ft -Hr-lO-HN --• O t^ t^ •<*• i rt-Hrt^rt^NMrtOO'0-9'i--l oSi ^ss ?s§ OOOSO ■i-'O l-9l< co-^ h* lOCO^ CO »0*0 0>coc^ocor-or^^u5Tj^Tf5cpificotpcoeo ■^Tt<»0«5»C'3'»OiO'^»OCO»5o»OiC(»CD O H t. S bom ^ •a 2 o 22 's o o> cx> t^ ^ •-< lO CO 00 ^H oi **! ^ ^ o d do 3 2° WPnOraP-iOcQ I- I- u - S > ~ aicoOcQPQOcn a CSJS X3 ta a a '3 '3 P-Ph *i CO 05 .w A, oOCOm i o 0) Et •S o! n p 0 .t; 3 0.2 o t:S-go-Soo5.ucS^«OOaifc *^0^T3^T3C303^O030^O"^'?3''3'T5».< i^ OJ .il, *3 ,ii "2 3 0^ ^ ^ 4j 'S !2 5 iai 02 OQ jM^ > CONCENTRATION OF ECONOMIC POWER 14403 §5 s CJ 00 ceo § to ssg >o ■o 5 o 1 i 0 - E c 61 'e 1 ■a i c o O > c 3 1 =3 H s s is- s « 3 -S i& « "S a 3 11 l-t o Ofe Sm ««s IP, - «» s fe |sa S^§ CO dP-> A oOS >> ^ ^ f^gg a •^il £ 03 fl £ oc 0*± flS o a "Sfe .So ^.2 g S S as ° fl CV3.S55 g a bfi^ "■§ ®S •^- •5:— * csS-SjO ^^u.ZZPi^ P-2 • - -- -^ - 05; o 14404 C< )NOENTR5.TION OF E(J(^N()IVI1C POWh^ll fiq s -S Kl Ci? Total :- ,- : £ is lo II Irt - — o S 1 II - '-S - - i ES 1 S*^ II "S Ph a a Is S8 .a2 5 S 1 1 II « 5 iai » «« ?3 (M II OV 00 t~00 CO ill § ° ; •«5 1 i ^2 •^ ■ l« |g« S59 > a , 9 S 1.1 H « 6 iS o !S o ■E o 5 s: <^ c o 1 d o e O fc o 'o fc o c s 1 1 o 1 O J m "o 1-4 CO O o CO c ^2 1 4 a o X d 5 1 o o a s CO "5 o o c O '-' ss S -eS =) T3 . •^ P be .£ '^< -§ «g s :§! to ^ o a '3 o bJO T3 fell fl-O 5 m O 05 0) ^^PQ OS a boos 01 9-. a'fflx:-^ ' o 3 i: O CONCKNTllATION OF ECONOMIC POWER 14405 Part 4 Table 1 .—Hot Rolled Strip: Basing Points and Basing Point Prices IPrices per net ton] Basing point Pittsburgh Chicago-Gary ' Binningham... Cleveland Middletown--. Youngstown... Granite City... Detroit' May 1938 February 1939 Base price Differential over Pitts- burgh Base price Differential over Pitts- burgh $48.00 $43.00 43.00 43.00 43.00 43.00 43.00 45.00 50.00 51.00 2.00 3.00 6.66 0.00 0.00 m 0.00 (-') 0.00 52.00 4.00 4.00 52.00 2.00 ' Gary was not listed as a basing point by the Iron Age during May 1938. 2 Not listed as a basing point by the Iron Age during the period covered. ' A delivered price (not a basing point). Source: All May 1938 issues prior to the extra revisions and base price change and all February 1939 issues of the Iron Age. Table 2.— Hot Rolled Strip: Distribution of Capacity by Distance from t Basing Point, 19S8 Nearest Distance from the nearest basing point (air miles) ' Capacity (1,000 gross tons)' Percent of total capacity Total United States 4,286.3 100.0 1-25 '2,807.0 596.7 482.4 400.2 65.5 26-50 13.9 51-100 - 11.3 Over 100 . . 9.3 ' Includes all ba.sing points listed in the Iron Age after the change in basing points, June 1938. 2 Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938 and the Iron Age. ' Includes 2,800 gross tons on the Pacific Coast. 14406 CONCENTRATION OF ECONOMIC POWER Table 3. — Hot Rolled Strip: Distribution of Total and Sampled Capacity Producing area i TotalU.S. Capacity' 1,000 gross tons Percent of total Capacity Sampled 1,000 gross tons Percent of total capac- ity sampled Total United States - --- - Integrated ' Semi-integrated -.. Non-integrated -. Youngstown Chicago - Pittsburgh Detroit North Ohio River Cleveland Metropolitan New York, Rhode Island, Massachusetts St. Louis - - Georgia.- - Areas outside the sample: Canton, Massillon, Mansfield _ Indiana-other, Illinois-other Eastern Pennsylvania, Philadelphia.-- - Birmingham - Colorado.- -.- - Minnesota Buffalo... California (northern & southern) Tennessee _ 4,286.3 100.0 3, 674. 3 85.7 (2, 979. 3) (659. 6) (647. 4) 1, 275. 4 1, 032. 1 620.0 477.4 268.0 250.0 167.0 95.0 36.0 56.0 50.5 32.7 7.2 5.0 5.0 4.7 2.8 1.5 (69. 5) (15. 4) (!•■;. 1) 29.8 24.1 12.1 11.1 6.3 5.8 3.9 2.2 0.8 1.3 1.2 0.8 0.2 0.1 0.1 0.1 0.1 («) < (2, 492.8) (556. 0) (625. 5) 1, 275. 4 779.4 468.5 397.0 268.0 200.0 155.0 95.0. 36.0 (83. 7) (84.3) (96. 6) 100.0 75.5 90.1 83.2 100.0 80.0 92.8 100.0 100.0 • Producing areas conform to Form B consuming areas. • Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. • Degree of company integration (not plant). < Of the capacity sampled, 67.9 percent represented integrated companies, 15.1 percent, semi-integrated companies, and 17.0 percent, non-integrated companies. ' Less than .05 percent. Table 4. — Hot Rolled Strip: Distribution of Sampled Capacity by Producing Areas and Shipments by Producing Areas Producing Area ' Sampled Capacity ' 1,000 gross tons Percent of sampled capacity February 1939 ship- ments' Net tons Percent of total ship- ments Total United States Youngstown.. Chicago Pittsburgh Detroit- North Ohio River Cleveland Metropolitan New York, Rhode Island St. Louis Georgia 3, 674. 3 , 275. 4 779.4 468.5 397.0 268.0 200.0 156.0 96.0 36.0 34.7 21.2 12.8 10.8 7.3 6.4 4.2 2.6 1.0 67, 896 26,271 11,903 4.516 9,215 8,792 3,777 2,566 1,328 528 100.0 37.2 17.6 6.7 13.6 12.9 6.6 3.8 1.9 ' Producing areas conform to Form B consuming areas. « Source: The Iron and Steel Works Directory of the United States and Canada, 1938. » Source: Temporary National Economic Committee Form B questionnaire, February 1939. CONCENTRATION OF ECONOMIC POWER 14407 Table 5. — Hot Rolled Strip: Distribution of Total Capacity and Form A Sampled Capacity by Producing Area {District Sample), 1938 Producing area ' Total United States Youngstown Chicago Pittsburgh - Detroit North Ohio River - Cleveland _ Metropolitan New York, Rhode Island, Massachusetts St. Louis - Indiana — other, Illinois — other Canton, Massillon, Mansfield- Georgia.-- - - Eastern Pennsylvania, Philadelphia - Birmingham — -- Colorado.- Minnesota Buffalo --- California (northern and southern) --. Tennessee-- — Total United States Ca- pacity, 1,000 Gross tons' 4,286.3 1, 276. 4 1, 032. 1 520.0 477.4 268.0 250.0 167.0 95.0 50.5 56.0 36.0 32.7 7.2 5.0 5.0 4.7 2.8 1.5 Capacity Sampled 1,000 gross tons 1, 103. 5 569.0 351.4 118.0 75.0 60.0 12.0 7.2 5.0 5.0 0.9 Percent sam- pled by pro- ducing area 27.8 44.6 34.0 22.7 15.7 20.0 7.2 100.0 100.0 100.0 32.1 < Producing areas conform to Form B consuming areas. > Compiled from the Iron and Steel Works Directory of the United States and Canada, 1938. Table 5A. — Hot Rolled Strip: Distribution of Total Capacity and Form Sampled Capacity by States {State Sample), 1938 Total United States Ca- pacity, 1,000 gross tons ' Capacity sampled State 1,000 gross tons Percent sam- pled by state Total United States 4, 286. 3 2, 789. 9 65.1 Ohio V 1, 256. 0 863.1 634.7 535.2 477.4 268.0 120.0 36.0 35.0 16.0 12.0 7.7 7.2 5.0 5.0 4.7 2.8 L5 1,050.0 713.4 83.6 Pennsylvania - 82.7 Illinois . . - 351.4 '377.0 '268.0 65.7 Michigan -- - 79.0 West Virginia - 100.0 Massachusetts .. . . 12.0 100.0 Alabama . .. ....... 7.2 5.0 6.0 100.0 Colorado -- - 100.0 Minnesota - - 100.0 New York . California . . . ... 0.9 32.1 Tennessee . .. . ... . ' Source: The Iron and Steel Works Directory of the United States and Canada, 1938. < 322,000 gross tons of this capacity not included in calculations for tables 6 and 7. ' Not included in calculations for tables 6 and 7. 14408 CONCIONTIIATION OF ECONOMIC POWER Ta.bi,b B. — Hoi Rolled Strip: Relative Stability of Tonnage Distribution By Con- sum.ing Region, 1936, 1937, 1938, and February 1939. Regions Form A : Distribution by Form A: Distribution by states consuming districts 1936 1937 1938 1936 1937 1938 890, 032 1, 190,987 489, 204 818, 816 860,223 309,223 100.0 100. 0 100.0 100.0 100.0 100.0 20.7 20 5 26.1 15.0 16.8 24.5 72.2 74.0 64.8 78.0 76.3 63.4 1.4 1.3 1.8 1.1 L2 1.8 1.0 1.3 2.3 0.8 1.3 2.7 2.8 l.I 2.6 3.0 2.2 4.0 1.9 1-8 2.4 2.1 2.2 3.5 Form B: Distribu- tion Feb- ruary 1939 All regions (net tons). Percent - -- North Eastern ' North Central' West Central » South Eastern ♦ Southern and South Western ' Mountain and Western* 67, 896 100.0 20.6 75.7 1.4 0.7 L2 0.4 1 Includes the following states and consuming districts: Me., N. H., Vt., Mass., R. I., Conn., N. Y., N. J., Penna., Met. N. Y., Eastern and Central N. Y., Bufl., Phila., Ea. Pa., Pgh. * Includes the following states and consuming districts: Ohio, Ind., 111., Mich., Wis., Minn., Cleve., Yst., N. Ohio R., Cant.-Mans., S. Ohio R., Ohio-other, Chi., Ill.-other, DetroU, Mich.,-other. 'Includes the following states and consuming districts: Iowa, Mo., N. Dak., S. Dak., Neb., Kans., St. Louis, Kansas City, Mo.-other. ' * Includes the following states and consuming districts; Md., D. C, Va., W. Va., N. Carolina, S. Caro- lina, Georgia, Fla., Bait., Md.-other. * Includes the following states and consuming districts: Kentucky, Tennessee, Alabama, Mississippi, Arkansas, Louisiana, Oklahoma, Texas, Birmingham, Alabama-other. 6 Includes the following states and consuming districts: Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada, Washington, Oregon, California, Southern California, Northern California. Note: Each region is defined by the areas listed, eliminating duplications. The most important states and consuming districts have been italicized. Table 7. — Hot Rolled Strip: Range of Variation of .Tonnage Distribution in Consuming States and Consuming Districts, 1936, 1937, 1938 & February 1939 [Range of distribution of percentages by areas] Range Forms A: 0936-1938 inclusive Forms A & B dis- tribution 193fr-1938 inclusive and Feb- ruary 1939 By 49 states: Number of states ■* By 64 dis- tricts: Num- ber of districts By 64 districts: Number of distri6ts Over 5.0 1 3 2 6 37 3 2 2 9 48 3 5 9 7 40 2.1-5.0 1.1-2.0 0.6-1.0 0.5-or under Total 49 64 64 ' Includes the District of Columbia. Source: Compiled from Temporary National Economic Committee Forms A and B. CONOENTUATION OF ECONOMIC POWER 14409 Table 8. — Hot Rolled Strip: Selected Consuming Areas for Detailed Analysis, February 1939 TroduciTig area ' Basing point ^ All con- suming areas (net tons) Selected consum- ing areas ' (Net tons) Percent of all consum- ing areas All producing areas All basing points 67,896 60,364 88.9 Chicago - All basing points Pittsburgh U,903 11, 480 96.4 3,480 6,751 54 1,422 104 3,395 6,514 49 1,419 103 97.6 Chicago-Qary 96.5 90.7 99.8 Detroit* .. 00.0 All basing points Chicago-Qary St. Louis - - 1,328 697 52.5 1,084 54 126 517 54 126 47.7 100.0 Detroit < 100.0 All basing points Pittsburgh , _ Chicago-Qary Detroit - 9,215 9,166 99.5 214 662 95 51 105 8,088 204 625 93 51 105 8,088 95.3 94.4 97.9 100.0 100.0 Detroit* - 100.0 All basing points Pittsburgh ._. Cleveland. — 3,777 3,615 95.7 54 39 2,936 10 213 525 3 8 2,888 5 213 '498 0.6 20.5 98.4 50.0 100.0 Detroit* . 94.9 All basing points Pittsburgh 25, 271 22,346 88.4 5,161 4, 121 5,836 6,041 1,310 1,881 3,654 3,305 5,821 6,465 1,220 1,881 70.8 Chicago-Gary . 80.2 99.7 97.3 93.1 Detroit * . . ... 100.0 All basing points Pittsburgh 4,516 3,598 79.7 1,994 602 1,031 648 241 1,604 485 789 479 241 80.4 80.6 Cleveland 76.5 73.9 100.0 All basing points Chicago-Gary 528 57 10.8 4 152 2 55 50.0 Middletown 36.2 All basing points Pittsburgh 2,566 1,780 69.4 2,393 10 '39 % 1,709 10 38 23 71.4 Buffalo 5 - 100.0 Cleveland -. 97.4 Youngstowa 24.0 ' Producing areas conform to Form B consuming areas. ' Lists only basing points governing selected consuming areas. s Consuming areas receiving 2 percent or more of total shipments. Areas selected were: Massachusetts, Metropolitan New York, Buffalo, Pittsburgh, Cleveland, Youngstown, Canton-Mansfield, Ohio-other, Indiana-other, Chicago, Illinois-other, Detroit. * A delivered price (not a basing point). » Not listed as a basing point by the Iron Age. CONCENTRATION OF ECONOMIC POWER v: Selected Consuming Ar 'ebruary 1939 — Continued 14410 Table 8. — Hot Rolled Strip: Selected Consuming Areas for Detailed Analysis, Pel ~ " Producing area Basing point All con- suming areas (net tons) Selected consum- ing areas (Net tons) Percent of all consum- ing areas North Ohio River ., AH basing points. Pittsburgh... 8,792 7,625 86.7 1,918 553 1,262 843 414 3,799 1,065 447 1,261 817 414 3,621 65.5 Chicago-Gary Cleveland 80.8 99.9 Youngstown 96.9 Middletown . . 100.0 Detroit < 95.3 Pittsburgh 15, 298 14,523 13,844 11,253 8,289 3,911 10 3 703 62 11,634 14,317 11,903 10,939 7,840 3,721 10 0 0 0 76.0 Detroit < 98.0 Chicago-Gary. Cleveland 86.0 97.2 Youngstown 94.6 Middletown ... 95.1 BuiTalo* 100.0 Granite City 0.0 Birmingham ... .. 0,0 Pacific Ports 0.0 < A delivered price (not a basing point). > Not listed as a basing point by the Iron Age. Source: Temporary National E conomic Committee Form B questioimaire February 1939. CONCENTRATION OF ECONOMIC POWER 14411 Cl W Q> s|a C'O ^^f^ Q <^ 0} ^- bj)*-> fV to CD .-» -^ CO Ci CO cDTt'-HOt-^-"^t«- eoc^GOO 00Q0OS»«»OiO»OCDtOC^»O.-tM«C0 OOOOC^Clh-COcO<—CSC'-i-«J-00> ooc^icot^c>03 ® bOT3 ' as] B HO H 0<;p, 5 CONCENTRATION OF ECONOMIC POWER 14413 Table U. —Hot Rolled Strtp—CompaHson oj Published and Calculated Base Pncesfor (hven Basing Points, February 19S9 Pittsburgh.... Chicago-Gary. Birmingham.. Cleveland Mlddletown. Youngstown. Detroit' Basing point Published Calculated base price ' base price > (per net ton) (per net ton) $43.00 $39.50 43.00 37.64 43.00 37.47 43.00 40.97 43.00 41.85 43.00 38.02 45.00 42.18 I Source: All February 1930 issues of the Iron Age ' I'^^ti^'^Xl'X^^o^'^' ^">°<''°'° ^°°'°^"- ^»- B questionnaire. February 193». 14414 CONCENTRATION OF ECONOMIC POWER 05 5^ (23 05 O 03 oS Hj =5 o3 S D. oog.a to a) g o afl-ci ft O cig|o o ■^ ft 9 BS o « « Oog o a 9 S 2 ci ci c4 -H c4 (N •>»• TO «■ ci (H •-< -H .-i id •^ •* TiJ 'X'' ^ § si' ; ' to r f «3 t* OS .-H CO CO CO OT .-I CO ■* .-< CO CO CO w a S M °". to fH «^ >0 CO CO Cf -H _o w .2 .2 S >HOPHOOfi(OeQ < Jh y K fi 5 S •S 3 ■•o S o^ o 2 ® O £s~ i ll"! « a™ § 9 U 2 ° 3 H <» -S. ogft S' E flo "^ O ftO >; ■nip 8 ,&< 5 ~ CO CONCENTRATION OF ECONOMIC POWER 14415 Table 13. — Hot Rolled Strip; Shipments Received Compared to Shipments Made in Producing Areas, February 19S9 Producing Areas ' All Areas Youngstown Chicago Pittsburgh, North Ohio River, Detroit Cleveland New England, New York ' St. Louis Georgia..- Total shipments made by plants in producing areas 67, 896 25, 271 11,903 13, 308 9,215 3,777 2,566 1,328 528 Shipments received in producing areas Total received in producing area 52, 824 4,192 7,860 3,881 26, 885 2,340 > 6,966 657 43 Received from plants in identi- cal area 22, 082 3,625 5,229 2,065 8,088 202 " 2. 457 409 7 Percent received from plants in identi- cal area 41.8 86.5 66.5 53.2 30.1 8.6 35.3 62.3 16.3 Total receipts as percent of total ship- ments 77.8 16.6 66.0 29.2 291.8 62.0 271.5 49.6 8.1 ' Producing areas conform to Form B consuming areas except New England, New York (see note 2). ' Includes Maine, Massachusetts, Rhode Island, Connecticut, Metropolitan New York, and Eastern and Central New York. Source: Compiled from the Temporary National Economic Committee questionnaire form B, February 1939. Table 14. — Hot Rolled Strip; Analysis of the Market Areas of Grouped Plants as Measured by the Freight Absorption on Shipments Priced on the Nearest Basing Point, February 1939 Nearest basing point Total ship- ments Shipments priced on nearest bas- ing point Shipments to all areas in which freight absorption is: Producing area • Net tons Freight absorp- tion per ton Net tons Freight absorp- tion per ton Equal to or less than standard ■ Greater than standard ' Net tons Freight absorp- tion per ton Net tons Per- cent ol total ship- ments Freight absorp- tion per ton Youngstown Chicago Youngstown. -- Chicago-Gary.. Pittsburgh Cleveland, De- troit. 11 Cleveland Pittsburgh Chicago-Gary.. Birmingham... 25,271 11,903 13, 308 9,215 3,777 2,566 1,328 528 1.55 1.33 3.33 .69 -.34 -5.80 .46 1.15 6,641 6,751 3,912 8,183 2,936 2,393 1,084 317 -.15 .21 .92 .40 -1.24 -6.13 -.63 • -.74 2 3,625 3 1, 704 * 2, 670 »3 (10) «590 7 517 8 145 -.32 -.15 .32 -.33 ""-7.04 -3.06 -3.10 21,646 10, 199 10,638 9,212 3,777 1,976 811 383 85.7 85.7 79.9 99.9 100.0 77.0 61.1 72.5 1.86 1.57 Pittsburgh, North Ohio River. Detroit 4.09 .69 Cleveland... -.34 Metropolitan New York, Rhode Island. -5.42 2.69 Georgia 2.7« Total 67, 896 1. 34 32. 217 -.37 9,254 -0.73 58,642 86.4 1.66 ' ' standard freight absorption for each producing area is the freight absorption of sales made on the near- est basing point. ' Comprises shipments to Youngstown. (aggregate tons received in area 4192) ' Comprises shipments to Indiana— other, Illinois — other, Michigan— other, Wisconsin, Minnesota, St. Louis, Kansas City, Arizona, Colorado, (aggregate tons received in area 5493) < Comprises shipments to Massachusetts, Rliode Island, Metropolitan New York, Eastern and Cen- tral New York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, North Ohio River, Baltimore, Virginia, West Virginia, North Carolina, Southern California, (aggregate tons received in area 13,785) * Comprises shipments to Michigan — other, (aggregate tons received in area 834) « Comprises shipments to Rhode Island, Connecticut, (aggregate tons received in area 1635) ' Comprises shipments to St. Louis, Kansas City, Missouri, Nebraska, Arkansas, (aggregate tops re- ceived in area 814) ' Comprises shipments to North Carolina, South Carolina, Georgia, Florida, (aggregate tons received in area 197) < ' Producing areas indicated conform to Form B consuming areas. '" There are no shipments lower than standard in this instance because shipments from given plant loca- tions to given consuming areas have been aggregated irre^spective of basing point. The weight of sales on foreign basing points raises the average. " A delivered price'(not a basing point). Source: Compiled from the Temporary National Economic Committee Form B questionnaire, February 1939. 14416 CONCENTRATION OF ECONOMIC POWER Table 14A. — Hot Rolled Strip: Analysis of the Market Areas of Grouped Plants as Measured by the Freight Absorption on Shipments Priced on the Neares Basing Point {Adjusted for Basing Point Price Differentials), February 19S9 Nearest basing point Total ship- ments Shipments priced on nearest bas- ing point Shipments to all areas in which freight absorption is: Producing area • Net tons Freight absorp- tion per ton Net tons Freight absorp- tion per ton Equal to or less than standard ' Greater than standard ' Net tons Freight absorp- tion per ton Net tons Per- cent of total ship- ments Freight absorp- tion per ton Youngstown _ Chicago Youngstown... Chicago. Pittsburgh Cleveland-De- troit.'!) Cleveland Pittsburgh Chicago Birmingham... 25,271 11,903 13, 308 9,216 3,777 2,566 1,328 528 1.38 1.31 2.76 -1.07 -0.62 -5.80 0.27 1.15 6,641 6,751 3,912 8,813 2,936 2,393 1.084 317 -.15 .21 .92 -1.58 , -1.24 -6.13 -.63 -.74 2 3,630 3 1,704 < 2,670 w (») «590 '517 > 145 -.33 -.15 .32 ""-7." 04 -3.06 -3.10 21, 641 10, 199 10,638 9,215 3,777 1,976 811 383 85.6 85.7 79.9 100.0 100.0 77.0 61.1 72.5 1.66 1.55 Pittsburgh, North Ohio River. Detriot 3.38 -1.07 Cleveland- -0.62 Metropolitan New York-Rhode Is- land. St. Louis -5.42 2.38 Georgia 2.76 Total 67, 896 o.flo 32, 217 -0.37 9,256 -.73 58,640 86.4 1.16 ' standard freight absorption for each producing area is the freight absorption on sales on the nearest basing point. » Consists of shipments to Youngstown, Washington. (Aggregate tons leceived in area — 4,197.) 3 Consists of shipments to Indiana-other, Illinois-other, Michigan-other, Wisconsin, Minnesota, St. Louis, Kansas City, Arizona, Colorado (aggregate tons received in areas listed — 5,493). • Consists of shipments to Massachusetts, Rhode Island, Metropolitan New York, Eastern and Central New York, Buffalo, Philadelphia, Eastern Pennsylvania, Pittsburgh, North Ohio River, Baltimore, Virginia, West Virginia, North Carolina, Southern California (aggregate tons received in areas listed — 13,785). » There are no shipments lower than standard in this instance because shipments from given plant loca- tions to given consuming areas have been aggregated irrespective of basing point. The weight of sales on foreign basing points raises the average with the effect shown. • Consists of shipments to Rhode Island, Connecticut (aggregate tons received in areas listed— 1,635). " Consists of shipments to St. Louis, Kansas City, Missouri, Nebraska, Arkansas (aggregate tons re- ceived in area— 814). ' Consists of shipments to North Carolina, South Carolina, Georgia, Florida (aggregate tons received in area 197). • All producing areas conform to Form B consuming areas. 1° A delivered price (not a basing point). CONCENTRATION OF ECONOMIC POWER 14417 Table 15. — Hot Rolled Strip: Analysis of the Market Areas of Grouped Plants as Measured by the Mill Net on Shipments Priced on the Nearest Basing Point February 1939 Producing area <° Nearest basing point Total ship- ments Net tons Mill net per ton Shipments priced on nearest basing point Net tons Mill net per ton Shipments to all areas in which mm net is: Less than standard > Net tons Per- cent of total ship- ments Mill net per ton Net tons Mill net per ton Youngstown Chicago Pittsburgh, North Ohio River. Detroit Youngstown... Chicago-Gary.. Pittsburgh Cleveland Metropolitan New York, Rhode Island. St. Louis -. Georgia Cleveland-De- troit." Cleveland Pittsburgh Chicago-Gary.. Birmingham... 25,271 11, 903 13, 308 9,215 3,777 2,566 1,328 628 36.90 37.89 38.05 41.90 43.84 40.11 34.70 6,641 6,751 3,912 8,183 2,936 2,393 1,084 317 38.22 36.45 39.17 41.99 42.91 44.34 41.35 37.71 14, 831 5,285 9,657 9,167 3,727 714 840 451 58.7 44.4 72.6 98.7 27.8 63.3 85.4 35.37 35.31 37.06 41.88 42.13 37.30 32.87 2 10,440 ' 6, 618 < 3, 651 5 50 7:,«52 8 488 977 39.07 39.95 40.65 43.76 44.51 14.96 45.42 Total. 38. 55 32, 217 44,672 37.70 23,224 40.18 ' Standard mill net for each producing area is the mill net on sales on the nearest basing point. > Comprises shipments to: Maine, Connecticut, Eastern and Central New York, Eastern Pennsylvania Pittsburgh, Cleveland, Youngstown, North Ohio River, Canton-MassUlon-Mansfield, South Ohio River, Ohio-other, Indiana-other, Iowa, Kansas City, Delaware, Baltimore, District of Columbia, Virginia, West Virginia, North Carohna, South Carolina, Oklahoma, Washington, Southern California, Northern California. (Aggregate tons received in area 20,126.) 3 Comprises shipments to: Massachusetts, Metropolitan New York, Eastern and Central New York, Philadelphia, Eastern Pennsylvania, Pittsburgh, Cleveland, Youngstown, Ohio-other, Indiana-other, Illinois-other, Detroit, Michigan-other, Wisconsin, Minnesota, St. Louis, Kansas City, Baltimore, Georgia, Kentucky, Tennessee, Colorado, Arizona, Southern California, Northern California. (Aggregate tons received 63,218.) < Comprises shipments to: Massachusetts, Connecticut, Rhode Island, Metropolitan New York, East- ern and Central New York, Buffalo, Philadelphia, Eastern Pennsylvania, Cleveland, Canton-MassUlon- Mansfied, Baltimore, Virginia, West Virginia, Southern California, Indiana-other, St. Louis, Georgia. (Aggregate tons received in area 17,738.) ' Comprises shipments to: Youngstown. (Aggregate tons received in area 4,192.) » Comprises shipments to: Buffalo, Eastern Pennsylvania, Youngstown. (Aggregate tons received in area 6,920.) ' Comprises shipments to: Connecticut, Metropolitan New York, Eastern Pennsylvania. (Aggregate tons received in area 4,271.) ' Comprises shipments to: Indiana-other, Iowa, St. Louis, Kansas City, Nebraska, Kansas, Arkansas, Louisiana. (Aggregate tons received in area 3,039.) » Comprises shipments to: South Carohna and Georgia. (Aggregate tons received in area 120.) '" A\\ producing areas indicated are in conformity with Form B Consuming areas. " Quoted delivered price at Detroit. Source: Compiled from the Temporary National Economic Committee questionnaire Form B for February 1939. 14418 CONCENTRATION OF ECONOMIC POWER Table 16. — Hot Rolled Strip: Market Areas for Plant Groups as Determined by Actual Freight Paid or Allowed from Plant to Destination — Producing Areas ^ February 19S9 Pitts- burgh, Youngs- town, Chicago North Ohio River " 38, 579 11,903 56.8 17.5 '1,584 9,749 17.1 14.4 11,296 6,203 97.5 63.6 29.3 52.1 30.0 81.9 Detroit Cleve- land Metro- politan New York, St. Louis Georgia Rhode Island 2,5Cfi 1,328 528 3.8 1.9 .8 7,995 902 628 11.8 1.3 .9 2,514 536 326 31.4 59.4 51.8 98.0 40.4 61.6 311.6 67.9 118.9 Total 1. Net tons shipped Percent of total shipments 2. Shipments received from all sources in consuming areas governed by each producing area » (nettons) Percent of tot^l shipments 3. Shipments by producing areas to go verE ed consuming areas ' (net tons) 4. Line 3 divided by line 2 6. Lire 3 divided by line 1 6. Line 2 divided by line 1 9,215 13.6 27,7!"' 40. 29.2 87.8 300.8 3,777 5.6 9,319 13.7 7.5 18.5 246.7 67, 896 100.0 67, 896 100.0 29,664 43.7 43.7 100.0 > Producing areas listed correspond to Form B consuming areas. ' Governed areas are those consuming areas into which the producing area has an actual freight advantage over all other producing areas as measured by average freiglrt actually paid or allowed. See Table 16A. Source: Computed from Temporary National Economic Committee Form B questionnaire, February 1039. w. CONCENTRATION OF ECONOMIC I'OWER 14419 1 _ S OS 03 as •a ^ o£i "£-3. 2 0 hO^^iSeE^jMlS Ui ■5 X3 ^ 05°-- ■2o-cS5 m siiS<2 0 ^ " ■n 0 0 J3 >- M ^ M At 5 g s z i» ^ -3 33 ffl otS-S-o a„ ■t; !2 S^a a c3 " •~* s 3.H aca-s £ a &§SlS»Bs s t, tn a a ^-a-H a ■S S as w OS'S ,2i2 0x5 CSJ3 135 a 0 ■o a cs C8 SJ-n 0 -O) 0 5 a -a« o«goS j3^^o3<; oo5o w « .^ fl 0 0 Ih a Q *j ts "o^ '*^-— Q§ • 2 'a k. 0 £ « Ui r3 ,0 S C3 f,, 0 S3 0§ 0.9 abo- ja ;= C £ = ,03 0 c a ^ 5 S3 03 - ■5? >■ •a 03 |2 03.2 - XI is > a !- a 0.2 > >>o t> 3 >^5 Ch as' 5 .S° .0 a 0 «r1 0 3o „ a ■as lfj|||.-jiii,il S 32(o"a-^t;t£"i±««-sa^a 03 m a 3 Mbo bD a 11 i b2 '^ o" m o*» pi, ,w ^ a o 0.53-, a 03 -So o wjj:: a« ■3 __2 a> aSg-9 o a g § ax! oi c; sa -I |o a. 2 -3 O gf^ o o 00 z^ 14420 CONCENTRATION OF ECONOMIC POWER S ;§ ;oS2? I : iiO ■<}< O ' ■•-' ■ itoot-— 1 ■o ^. itOCM O 1 .-< . irf ototo S 0.03 O « IS ! -^fCOTT 1 1 loid 'CO'; 1 1 OS t 1 ^ to f-J (N* N 1 ici 1 1^ co-'t' oi 73° Ut •S 1^ fell t-cotooooioNmo !ss 1— 'O500C^O300^'~'C?'O lOOO-J-OOtOOOTfOlSl- as. a o O '^CDCOCOCONcO-'J'-^ «rta;<3it-^-*tdco--0«00 ' ' .■ooo »0 1 IIO 1 iCOOCD CO ft St.ss «^ lO lOOtD-^ t 1 i^^ S3 i 5i i \ttt'^ CO it^ .>OC0t)i . . 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Kansas City... 53 1 $1.08 •17.00 Nebraska. West Virginia 15 3 •.27 •1.67 South Carolina Kentucliy 1 $•8.00 •.33 Arkansas Oklahoma 4 6 1 •.75 12.50 •7.00 Colorado Arizona Southern California .. 6 ^2 6.00 3.16 Northern California.. Total.. 28 1.8% 13.75 59 4.3% 2.24 33 2.9% 1.97 68 9.7% 3.41 188 0.3% $4.33 Percent of all ship- ments... •Excess may be accounted for by rounding of fractional tons to nearest whole number and has not been included in the total. Variation of $0.05 or less in addition to such excess from rounding is also excluded from table. ' Calculated Base Price is the invoiced delivered value less freight and less extras charged divided by the number of tons sold. Published Base Prices are those listed by February 1939 "Iron Age." (all issues). Note: Pacific Ports are not listed as basing points in the Iron Age. A total of 62 tons of Hot Rolled Strip was sold on Pacific Port basing points, 39 tons of which calculated to a base price $1.66 per ton higher than $53.00 (the Pacific Port price published for Hot Rolled Sheets). . Source: Compiled from Temporary National Economic Committee Form B questionnaire, February 1939. Table 4A. — Heavy structural shape shipments February 1939 (net tons) Producing area i Domestic shipments to con- suming districts (basing point sales) • F.O.B. mill sales Shipments to plants or ware- houses of the same or affili- ated com- panies » Ship- ments to jobbers ware- houses Total domestic ship- ments Exports Total ship- ments Percent of total ship- ments Total.. 79,921 3 702 49,346 5,030 137, 999 6,185 144, 184 100.0 Eastern Pennsylva- nia, Philadelphia.. Chicago 22 957 20,355 15, 437 10,260 2,550 1,151 4,240 2,971 2,414 17, 727 7,386 17, 147 6,036 2,115 812 188 826 675 169 102 143 45, 213 28,553 33,603 17, 122 3,587 1,320 5,392 3209 1,710 141 3,762 496 76' 46,923 28,694 37,365 17,618 3,587 1,320 5,468 3,209 32.5 19.9 Pittsburgh . 831 25.9 Buffalo 12.2 North Ohio River... 362 2.6 St. Louis 0.9 Birmingham.. 1,050 3.9 Colorado 95 2.2 ' Producing areas conform to Form B consuming areas. ' These shipments are those from which the Form B analysis has been prpared, others are excluded. • Includes shipments to fabricators of the same or affiliated companies. Source: Com, : 193Q 3d from the Tempora e1 Economic Committee questionnaire Form B, February 14422 CONCENTRATION OF ECONOMIC POWER Table 4A. — Plate shipments February 1939 {net tons) Producing area » Domestic shipments to con- suming districts (basing point sales) ' "F. O.B. mill sales Shipments to plants or ware- houses of the same or affili- ated com- panies ' Ship- ments to jobbers ware- houses Total domestic ship- ments Exports Total ship- ments Percent of total ship- ments Total — 96, 443 869 28,670 3,466 129. 347 21,062 150, 409 100.0 Pittsburgh 24,381 27,885 15,088 941 10 821 12.836 967 482 1,783 1,259 493 251 7 16,898 278 4,058 1,254 532 344 27 1,024 224 14 1 1 44 43,026 28,946 19,497 968 17,390 14, 469 981 483 2,099 1,488 8,511 5,929 166 "5,' 978" 386 92' 51 637 34, 875 19, 663 968 23,368 14 855 981 483 2,191 1,488 34.2 Eastern Pennsylva- nia, Philadelphia, 23.2 Chicago 13.1 0.6 6,546 1,409 15.5 Birmingham 9.9 .7 North Ohio River .3 Youngstown 118 197 185 1.5 1.0 1 Producing areas conform to Form B consuming areas. 2 These shipments are those from which Form B analysis has been prepared, others have been excluded. > Includes shipments to fabricators of the same or affiliated companies. Source: Compiled from the Temporary National Economic Committee questionnaire. Form B, February 1939. Table 4A. — Hot rolled sheet shipments, February 1939 {net tons) Producing area i Domestic shipments to con- suming districts (basing point sales) » F. O.B. mill sales Shipments to plants or ware- houses of same or affili- ated com- panies Ship- ments to jobbers' ware- houses Total domestic ship- ments Exports Total ship- ments Percent of total ship- ments Total._ 190,910 1,153 15,227 4,094 211, 384 16, 383 227, 767 100.0 Pittsburgh . 21,912 41,401 20,811 14,891 14, 836 8,246 8,666 29, 792 4,299 13,878 6,752 1,009 2,677 1,277 563 89 490 2,141 999 591 6,763 211 80 67 1,060 372 27 108 1,198 322 250 17 123 334 22,558 44, 602 22, 182 15,913 22, 319 9,655 8,968 30,044 4,316 17,855 7,138 1,0H) ■2,804 1,438 582 3,899 820 77 58 625 834 1,911 141 301 3,267 1,737 2,713 26, 457 45, 422 22, 259 15,971 22,944 10,489 10,879 30, 185 4,617 21,122 8,875 1,010 2,804 4,151 582 11.6 Chicago 19.9 Cleveland 9.8 404 612 7.0 North Ohio River... Buffalo 10 1 4.6 Middletown- Newport 4.8 2 13.3 Ports mouth- Ashland 2.0 Baltimore 3,854 62 9.3 Birmingham 3.9 Canton - Massillon Mansfield . 1 0.4 St. Louis 27 ioo 116 1.2 Eastern Pennsylva- nia, Philadelphia, 46 1.8 19 0.3 ■ Producing areas conform to Form B consuming areas except Middletown-Newport and Portsmouth - Ashland which include these cities only. > These shipments are those from which the Form B analysis has been prepared, others have been excluded . Source: Compiled from the Temporary National Edonomic Committee questionnaire, Form B, February 1939. CONCENTRATION OF ECONOMIC POWER 14423 Table 4A. — Hot rolled strip shipments, February 1939 (net tons) Producing area ' Domestic shipments to con- suming districts (basing point sales) ' F.O. B. mill sales Shipments to plants or ware- liouses of the same or affili- ated com- panies Ship- ments to jobbers' ware- houses Total domestic ship- ments Exports Total ship- ments Percent of total ship- ments Total 67, 896 27 7,705 149 75, 777 1,671 77, 448 100.0 Youngstown 25, 271 11,903 4,516 9,215 8,792 3,777 2,566 1,328 528 3,101 303 28 15 73 4 28 28,445 12, 210 4,572 9,230 8,836 3,777 6,824 1,355 628 584 12 71 413 428 1 162 29, 029 12, 222 4,643 9,643 9,264 3,777 6,825 1,617 528 37.5 Chicago 15 8 Pittsburgh 6.0 Detroit 12.4 North Ohio River... 27 17 12.0 Cleveland 4.9 Metropolitan New York Rhode Is- land. 4,258 8.8 St. Louis 27 1.9 Georgia 7 ' Producing areas conform to Form B consuming areas. ' These shipments are those from which the Form B analysis has been prepared, others have been excluded . Source: Compiled from the Temporary National Economic Committee questionnaire,' Form B, February 1939. Exhibit No. 2198 Summary of Analysis of Form B Distribution of Pc-lected Steel Products, February 1939 In analyzing the attached table the following shotild be noted: 1. When prices are quoted such prices are in dollars per net ton. 2. Table references indicated refer to the 18 Form B analysis tables from which this summary has been prepared. Where no table nuniber appears the table number immediately preceding applies. 3. Figures in the body of the table which are in brackets have been adjusted for basing point price differentials. 4. All minus figures regarding "freight absorption" indicate "phantom freight." Summary of Analysis of Form B Distribution of Selected Steel Products, February 1939 A. BASING POINT STRUCTURE AND LOCATION OF CAPACITY (TABLES 1 AND 2) Heavy Struc- tural Shapes Plates Hot Rolled Sheets Hot Rolled Strip Table 1 - 1. Published base price per ton at Pitts- burgh, February, 1939 2. Change in number of published basing points in June, 1938: Increases , Decreases Number of Basing Points, Feb- ruary, 1939 3. Range in differentials over Pitts- burgh which were eliminated June, 1938 -1. Range of base price declines Table S 5. Percent of capacity 0-25 miles from nearest basing point (after the above changes) 6. Percent of capacity 0-50 miles from nearest basing point 7. Percent of capacity over 100 miles '■•in rr^rnst basing point $42. 00 $42. 00 $43. 00 $43. 00 $1.00 to $3.00, inclusive $2.00 to .$6.00, inclusive 85. 1% 96.1% 3.5% $1.00 to $4.00, inclusive $3.00 to $7.00, inclusive 76. 7% 78. 5% 2.0% $2.00 to $3.00, inclusive $5.00 to $8.00, inclusive 57. 7% 77. 9% 5.0% $2.00 to $3.00, inclusive $5.00 to $8.00, inclusive 65. 5% 79. 4% 9.3% 14424 CONCENTRATION OF ECONOMIC POWER Summary of Analysis of Form B Distribution of Selected Steel Products, February 19S9 — Continued B. REPRESENTATIVE CHARACTER OF THE SAMPLE (TABLES 3 TO 7, INCLUSIVE) Heavy Struo tural Shapes Plates Hot Rolled Sheets Hot Rolled Strip Table S 1. Percent of capacity sampled in Form B .... 2. Percent of Integrated company ca- pacity Percent sampled in Form B which represents integrated companies... Table A 3. Producing areas from which per- centage of total shipments differed substantially from percent of total capacity sampled: Capacity ._ Shipments Capacity... Shipments. Capacity... Shipments. Table 5 4. Percent of capacity sampled in Form A by districts 5. Percent of capacity sampled in Form A by states : jble 6 Range of. pert sntage distribution of shipments by con.suming regions 1936-38 incl. and February, 1939: N.E N. C ... W. C - S E 9\ and S\W^y "/"////.'.'.'.'/.'""'. MT. and W TabU7 7. Number of states in which the per- centage distribution of shipments varies less than 0.5 (Form A by states) - 8. Number of districts in which the percentage distribution of ship- ments varies less than 0.5: (Forin A by districts only) (Form A by districts and Form B combined) 79.9% 95. 9% 94.9% Chicago 26.7% 19. 9% Buffalo 7.3% 12. 2% 81. 0% 84.0% 4.9 11.9 3.2 4.2 3.0 1.8 85. 3% 80. 9% 80. 0% 10. 7% 0.6% Baltimore 9.4% 15. 5% Birmingham 5. 3% 58. 4% 77.2% 13.3 13.9 2.1 4.4 5.6 3.2 78.9% 85. 8% 89. 2% Detroit 6.3% 13. 3% Chicago 12. 4% 19. 9% Baltimore 4.8% &.3% 48. 0% 82. 3% 5.3 15.6 1.6 3.5 2.4 38 85. 7% 69.5% 67.9% Pittsburgh 12. 8% 6.0% No. Ohio R. 7.3% 12. 0% Met. N. Y.-R. I. 4.2% 27. 8% 65. 1% 11.1 14.6 0.7 2.0 2.9 8.1 37 C. DETAILED ANALYSIS BY SELECTED CONSUMING AREAS (TABLES 8 TO 11 INCLU- SIVE AND TABLE 13) Tabus 1. Average of shipments taken by areas receiving 2 percent or more of total shipments... 65. 6% 14. Birmingham 35.7% Ea. Pa.-Phila. 74.4% 79. 3% 18. St. Louis 45.4% Detroit 100.0% 84.4% 13. Birmingham 40. 2% Detroit 93.9% 88.9% 2. Number of consuming areas receiv- ing 2 percent or more of total ship- ments - . . . ... 12. 3. Range of percentages of shipments to selected areas among producing areas Georgia 10.8% Detroit 99. 5% ' Variation in a large part e.tplained by the fact that the return of a major Detroit producer was not included in Form A but was included in Form B. CONCENTRATION OF ECONOMIC POWER 14425 Summary of Analysis of Form B Distribution of Selected Steel Products, February iSSP— Continued C. DETAILED ANALYSIS BY SELECTED CONSUMING AREAS (TABLES 8 TO 11 INCLU- SIVE AND TABLE 12)— Continuefl Heavy Struc- tural Shapes Plates Hot Rolled Sheets Hot Rolled Strip Table 9 4. Percentage of shipments received in selected consuming areas supplied from producing areas showing low- est freight absorption 5. Over-all average freight absorption for shipments supplied to selected consuming areas from "governing" producing areas .- 6. Range of freight absorption for ship- ments to consuming areas from "governing" areas ($0.43) 7. Range of percentages of shipments received in selected areas from producing areas with lowest freight absorption 8. Average freight absorption on total shipments to selected consuming areas from all sources Table 10 9. Number of reported cases in which computed base prices exceed the published base price 10. Number of reported cases in which computed base prices are equal to or below published base prices by less than $2.00 Same— $2.00 to $5.00 below Same — more than $5.00 below 11. Consuming area having maximum variation below base price 12. Consuming areas in which vari- ation below the base price was outstanding Table 11 13. Basing points on which sales were made in excess of published base prices (excess) 14. Range of deviation among basing pomts of sales made at a com- puted base price below published base price •_ Table IS 15. Rates of requirements of producing areas to the shipments from those areas, (over -all average) 16. Range of ratios of requirements of producing areas to shipments from those areas by areas 20. Proportion of requirements of areas supplied by home plants 21. Range of proportions of require- ments of areas supplied by home plants, (plants in identical areas) - (61. 6%) 61. 6% ($0. 06) 0.06 —$4.42 to 0.43 (0. 6 to 93. 7%) 0. 6 to 93. 7% (1. 16) $1.62- 21 out of i 46 14 7 Detroit 1.05 to 0.18 Pacific Ports $0.38 Buffalo -$1. 08 Pittsburgh -$2.41 49. 2% Buffalo 9.9% St. Louis 147. 9% 75.0% St. Louis 25.5% Ea. Pa.-Phila. —Met. N. Y. 84.0% (50. 2%) 48.5 ($0. 14) 0.24 to ($10.67) 10.41 (0. 7 to 100. 0%) 0. 7 to 100. 0% (1.45) $2.61 56 out of 155 72 22 5 Texas 1.33 to -0.21 Clay... $1.03 Coates. .41 Yst 79 Sparrows Pt. -$0.22 Qulf Ports -$3.22 48.5% Birmingham 25. '.% Detroit 278. 5% 75.8% Cleveland 11.0% Birmingham 100.0% (33. 6%) 34. 8% (-$0. 69) 0.04 — $2. 92 to ($0. 50) 0. 50 (0. 3 to 73. 9%) 0. 8 to 73. 9% (1.13) $1.60 33 out of 195 55 62 45 Cleveland -$3.79to-15.98 (') None Pacific Ports -$1.42 Birmingham $-5.80 71. 7% Birmingham 15.4% Detroit 154.9% 52. 1% St. Louis 24.0% Birmingham 95. 6% (40. 7%) 40. 7% (—$0. 92) —0.26 — $6. 59 to ). 60) 0. 60 . 0 to 86. 5%) . 0 to 86. 5% (0. 95) $1.42 32 out of 100 30 24 14 Detroit -$1.046to-0.85 (0 None Middletown -$1.15 Birmingham -$5.53 77. 8% Georgia 8.1% DetroU 291. 8% 41.8% Cleveland 8.6% Youngttown 86.6% • Birmingham, Detroit, Indiana, Pittsburgh, Texas. • Youngstown, So. California, Illinois— other, Virginia, Texas. ' Philadelphia, Cleveland, Youngstown, Ohio— other, Chicago, Indiana— other, Detroit, Michigan- other, Texas. • Massachusetts, Buffalo, Pittsburgh, Chicago, Canton-Mass.-Mans., Detroit. 14426 CONCENTRATION OF ECONOMIC POWER Summary of Ai^alysis of Form B Distribution of Selected Steel Products, February /555— Continued D. "GOVERNED" AREAS DEFINED BY SHIPMENTS PRICED ON THE NEAREST BASING POINTS (TABLE 12) I Heavy Stiuc- tural Shapes Plates Hot Rolled Sheets Hot Rolled Strip 1. Average peicpntage of shipments priced on the nearest basing point.. 2. Average advantage in mill net to mills from pricing on nearest bas- ing point 3. Average advantage in freight ab- sorption to mills from pricing on nearest basing point-. 4. Producing area receiving the least advantage in mill net by piicing on nearest basing point as com- pared to pricing on all other basing points - 5. Producing area receiving the great- est advantage in mill net by pric- ing on nearest basing point 6. Range of freight absorption between producing areas on sales prices on the nearest basing point Range of percentages of sales priced on the nearest basing point by pro- ducing areas.. 8. Range of mill nets on total sales by producing areas 67. 7% $2.17 $5.52 (3.33) Birmingham ' $0. 04 Colorado Colorado $-2. 48 Birmingham $0. 91 Buffalo 20.3% St. Louis 94. 1% 52. 0% $2.03 .82 (2.68) Detroit $-10.51 Clevdand $5.40 Detroit $-3.81 St. Louis $1.29 Youn^stown 16. 7% Chicago 92.2% $2.44 $9.47 50.3% $1.93 $2.45 (2.33) Canton-Massil- lon-Mansfield $-1.84 Buffalo Philadelp^iia $-2.01 ($-:.ci) Pittsburgh $2.34 ($2.34) Youngstown 22.9% Birmingham 96. 5% $6.90 52. 5% $1. 57 $3.25 (3.37) Chicago $-3.34 Georgia $7.53 Met. N. Y. -R. I. $-b. 13 ($-6.13; Pittsburgh $0.92 ($0.92) Younastoiim 26. 3% Met. N. Y. -R. T. 93. 3% $9.14 E. "GOVERNED" AREAS DEFINED BY SHIPMENTS TO AREAS IN WHICH FREIGHT ABSORPTION IS EQUAL TO OR LESS THAN THE AVERAGE FOR SHIPMENTS PRICED ON THE NEAREST BASING POINT (TABLE 14) 1. Average percentage of shipments by producing areas to "governed" market areas as defined by freight absorption on sales priced on the nearest basing point . . $(26.9%) 25.8% $(-0.45) -4.43 $(1.71) 2.63 Eastern Pa. $(0.88) 1.38 Colorado $(12.32) 15.96 Buffalo (9.9%) 9.9% Chicago (44.6) 41.6 $(1.67) 2.26 $(27.3%) 25.4% $(-0.04) -0.04 $(2.14) 3.46 Cleveland $(1.24) 1.24 Detroit $(6-85) 6.85 (Youngstovm) Baltimore (2.6%) 1.0% Detroit (96.0) 96.0 $(1.58) 2.61 $(34.3%) 34.6% $(-0.52) 0.10 $(2.11) ?.53 (Chicago) St. Lo%iis $(0.92) 1.09 (Youngstown) Buffalo $(6.48) 3.54 Youngstown (0.2%) 0.0%, Detroit (69.8) 69.8 $(1.73) 1.59 $(13. C%) 13.6% 2. Average frei-'ht absorption on sales to "governed" areas $(-0.73) -0.73 3. Average freight absorption on sales to other than "governed" areas 4. Range of advantage in freight ab- sorption from sales to "governed" areas over other sales $(1.16) 1.66 (Detroit) Cleveland $(-1.07) -0.34 5. Range of percentages of shipments to "governed" market areas by producing areas. Georgia $(5.86) 5. SO (Detroit) Cleveland (0.0%) 0.0% Georgia (27.5) 27.5 $(1.63) 2.07 6. Advantage in freight absorption on ii sales to "governed" areas over freight absorption on all sales CONCENTRATION OF ECONOMIC POWER 14427 Summary of Analysis of Form B Distribution of Selected Steel Products, February 19S9— Continued F. "GOVERNED" AREAS DEFINED BY SHIPMENTS TO AREAS IN WHICH MILL NET IS EQUAL TO OR GREATER THAN THE AVERAGE FOR ALL SHIPMENTS PRICED ON THE NEAREST BASING POINT (TABLE 15). 1. Average percentage of shipments from producing areas to "gov- erned" cousuming areas as dfined by mill nets on the nearest basing point 2. Average mill net on sales to "gov- erned" areas_ ■3. Average advantage in mill nets on sales to "governed" areas over other areas.- _ 4. Range of advantage in mill nets from sales to "governed" areas over other sales 5. Range of percentages of sales to "governed" areas by "governing" areas 6. Average advantage in mill net on sales to "governed" areas over all Heavy Struc- tural Shapes Plates 32.8% $41.13 $2.78 Chicago $1.64 Colorado $12. 85 Buffalo 8.0% Bhmingham 57.9% $1.87 48.8% $41.25 $3.26 Pittshvrgh $2.76 Detroit $13.01 Baliimore 19.8% Detroit 96.0% $1.67 Hot Rolled Sheets 36.8% $40.17 $3.66 Birmingham $1.06 C. M. & M. $7.40 Clereland 1.4% Detroit 69.6% $2.35 Hot Rolled Strip 34.2% $40.18 $2.48 Cleveland $1.88 Georgia $12.55 Detroit 0.5% Mel.N.Y.&R.J 72.2% $1.63 'GOVERNED" AREAS DEFINED BY SHIPMENTS AT LOWEST FREIGHT ALLOWED FROM PRODUCING AREAS (TABLE 16) 1. Percent of total shipments by all producing areas shipped to "gov- erned" areas .'. 2. Range in ratias of sales by producing areas into "governed" areas to total receipts in "governed" areas.. 3. Range in ratios of sales by producing areas to total shipments by pro- ducing area Range in the ratio of total receipts of "governed" areas to total ship- ments by "governing" areas 5. Total "governed" area receipts that were less than total shipments of "governing" areas ("Governed" receipts as percent of "governing" area shipment by producing area) . . 57.7% St. Louis 13.6% Ea. Pa.-Phila. Del. 74.6% Buffalo 21. 1% ■ St. Louis 90.1% Buffalo 22.9% St. Louis 662. 6% Buffalo 22.9% Colorado 41.3% Pgh.-N. O. R. 61. 8% Chicago 93. 7% 66. 7% St. Louis 1.8% Birmingham 80.1% St.Louia 3.5% Detrmt 96.0% Pgh.-Yst.- N. 0. R. 60.9% Cleveland 397. 3% Pgh.-Yst.- N. O. R. 60.9% Birmingham 63.0% 43. 1% Indiana-ether 3.0% Pgh.-Yst.- N. O. R. 83.4% Pgh.'Yst.- N. O. R. 11.6% Phila.-Balt. 82.8% Pgh.-Yst.- N. 0. R. 13.9% Indiana-other 1624. 3% Pgh.-Yst.- N. O. R. 13.9% Mdl-Newpt.- Ashland 76. 8% Chicago 79.1% Buffalo 84.7% 43.7% Cleveland 7.5% Pgh.-Yst.- N. O. R. 97. 6% Cleveland 18. 5% Met.-N. Y.-R. I. 98.0% Pgh.-Yst.- N. O. R. 30.0% Met. N. Y.-R. I. 311.6% Pgh.-Yst.- N. 0. R. 30.0% St. Louis 67.9% Chicago 81.9% 124491 — 41— pt. 27- -20 14428 CONCENTRATION OF ECONOMIC POWER Summary of Analysis of Form B Distribution of Selected Steel Products, February 1939— Continued H. REPORTED SHIPMENTS NOT EXPLAJNABLE BY AVAILABLE DATA (TABLES 17-18) Table 17 1. Ratio of reported shipments priced on basing points whicii could not govern according to published freight rates to total shipments analyzed Table 18 2. Percentage of sales at a calculated base price exceeding the published base price Percentage of shipments by all pro- ducing areas to "governed" areas defined as in: Section D Section E.._ Section F. Section Q - ,.. Heavy Struc- tural Shapes 2.4% 3.7% 67. 7% (26. 9%)2,5. 8% 32. 8% 57.7% Plates 1.6% 39. 8% 52. 0% (27. 3%) 25. 4% 48. 8% 66. 7% Hot Rolled Sheets 6.2% Less than 0.05% 50. 3% (34. 3%) 34. 6% 35. 7% 43. 1% Hot Rolled Strip 5.6% 0.3% ^2. 5% (13.6%) 13.6% 34.2% 43. 7% Exhibit No. 2200 Carnegie-Illinois Steel Corporation united states steel corporation subsidiary General Offices: Carnegie Building Pittsburgh, Pa., Clement V. McKaio Vice President and General Manager of Sales .T. Halset McKown Assistant \'ice President and Assistant General Manager of Sales Personal and Confidential To all Managers of Sales: May 21, 1936. Price Announcement Program Gentlemen: We will begin our price announcement program by announcing prices on Bars and Small Shapes, later Strip, then Sheets, and our other com- modities will be given consideration as promptly as possible. We hope to mail to you an initial supply of the Price Announcement forms so that you will have these Saturday, May 23rd, and we will then let you know the basis on which to arrange the announcement on Hot Rolled Carbon Steel Bars and Small Shapes. We are enclosing as an itom of advance information one of the early proofs of this announcement which will have a slight change in the first paragraph, modify- ing the last part of the sentence to read "for shipment during the calendar quarter year ending September 30, 1936." This will then mean that we can complete obligations that were incurred prior to this announcement date, or that we can, where we are able to make shipments by June 30th, continue after the announcement date to take business at the prices that were in efifect prior to this announcement. It is going to be necessary in making our price announcement to insert the delivered price on the commodity involved. The simplest way to handle this will be for each District Sales Office to insert on one of these blanks the price delivered at the point at which their particular customer wishes to take delivery, mailing this blank with that delivered price to that customer. The delivered prices will be made in accordance with our usual custom, and further details will be passed along to you as quickly as possible. We are giving you this advance information, however, so that you can organize your program for sending out this announcement. Yours very truly, J. H. McKowN, Assistant Vice President and Assistayit General Manager of Sales. CONCENTRATION OF ECONOMIC POWER Exhibit No. 2201 14429 Caknegie-Illinois Steel Corporation united states steel corporation subsidiary General Offices: Carnegie Building Pittsburgh, Pa., Clement V. McKaig Vice President and General Manager of Sales 3. Halsey McKown Assistant Vice President and Assistant General Manager of Sales To All Managers of Sales: Mat 23rd, 1936. Price Announcement Referring to our letter of May 21st, we are having sent to you today an initia supply of the following price announcement forms: Hot rolled carbon steel, with the commodity column left blank so that the commodity or commodities you are announcing to an individual customer can be inserted. Hot rolled carbon steel, with Structural Shapes and Plates, printed under "Commodity", on which the delivery point and price can be inserted, and to which can be added, as required, other commodities. Hot rolled carbon steel; two copies each of our form with the delivered prices at Pittsburgh and Chicago on Structural Shapes and Plates. It wiU, as stated in our letter of May 21st, be necessary for you to announce prices to your individual customers, combining commodities where you find it is appropriate. In figuring these prices the usual practice of adding the published all-rail rate of freight, or using arbitrary rates as estabUshed, will be followed. We will in the future, however, always quote delivered prices, and where you in turn quote your customer a delivered price at another point, the freight rate will be added after deducting from the delivered prices quoted herein, the delivery charges of 2}^^ or 30 per 100 lbs., or 50(4 or 600 per gross ton, as the case may be. We have today sent you a wire stating for business to be shipp>ed during the Third Calendar Quarter year, ending September 30th, 1936, the prices on Re- Rolling and Forging Billets, Blooms and Slabs, Sheet Bars, Structural Shapes and Plates would be advanced $2.00 a ton, which will result in the following delivered prices: Pittsburgh Youngstown Chicago Oary Duluth Re-Rolling Billets ....GT.. Forging Billets - ..OT.. Sheets Bars X}T.. Structural Shapes .100#-. Plates 100#.. $30.50 37.60 30.50 1.925 1.925 $30.50 37.50 30.50 $30.60 37.60 30.60 1.98 1.98 $30.60 37.60 $3Z50 39.60 1.98 1.98 This will result in the following delivered prices at the points noted: BUIets Sheet bars Shapes Plates Re-RoUing Forging O.T. $33.00 34.00 G.T. $40.00 41.00 O.T. lOOi 100* Eastern Michigan Points . . .--■ Oulf Ports „ $2,326 2.475 $2,325 Pacific Coast Ports. 2.476 There will be no change in the price of Skelp and advices will be supplied you later in> the day, or early next week, regarding other commodities. In using this method of naming delivered prices in our announcements^ it is obvious it would not be appropriate to include many of the factors previously made a part of our quotations, but, nevertheless, all of our established practices will be followed in arriving at such delivered prices. 14430 CONCENTRATION OF ECONOMIC POWER If there are any questions whatever, we ask that you confer with us freely as we do not wish to make a mistake in proceeding in this manner, owing to the fact that when such price announcements are made to the trade we are obligated under the Clayton Act to abide by these prices without any deviation. Very truly yours, J. H. McKowN, Atsistant Vice President and Assistant General Manager of Sales. Exhibit No. 2202 STEEL BUYERS OVERWHELMINGLY OPPOSED TO FTC PLAN OF STEEL PRICING [The Iron Age, April 20, 1939] By C. E. Wright, Managing Editor, The Iron Age Results of Iron Age Poll On Steel Basing Point System Up to the time of going to press 304 votes had been received from steel buyers on the ques+'on shown in an adjoining column. On Question No. 1, there were 268 "yes" /tes and 22 "no" votes. On Question No. 2 there were 37 "yes" votes and 233 "no" votes. The difference in the number of votes on the two questions is due to the fact that some voted only on one question. Geographically, the votes were recorded as follows: Alabama..' 3 California 6 Colorado 1 Connecticut 12 Florida 2 Georgia 2 Illinois 17 Indiana 10 Iowa 4 Kansas. > 4 Kentucky 4 Maine 1 Maryland 2 Massachusetts 18 Michigan 31 Minnesota 3 Missouri 9 Nebraska 3 New Jersey 13 New York 25 North Carolina 1 Ohio 51 Oklahoma 2 Pennsylvania 43 Rhode Island 3 Texas 3 Vermont 1 Virginia 2 Washington 1 West Virginia 4 Wisconsin 15 Scattered 8 The results of this poll seem to poiht conclusively to widespread opposition among steel buyers to any change in the steel basing point system which would deprive steel sellers of the right to equalize freight rates, a method of selling which a majority of buyers declare gives them the opportunity to buy from a number of ■different sources at no difiference in delivered cost. If further returns are received, they will be tabulated in subsequent issues. That the steel buyers of the country are overwhelmingly opposed to the Federal Trade Commission's plan of steel pricing as proposed in its recent memorandum to the Temporary National Economic Committee is indicated by a survey made by The Iron Age, results of which are shown in the above box. (The complete report of the Federal Trade Commission was published in The Iron Age of March 16, page 49.) In order to test the opinion of steel consumers and distributors on the Federal Trade Commission's proposal, The Iron Age has taken a sampling poll by mail. Two questions were asked: 1. Do you feel that your ability to buy steel from a number of different sources at no difference in the delivered cost to you is an advantage in the economical operation of your business? 2. Do you agree with the contention of the Federal Trade Commission that the abolition of freight rate equalization on steel shipments would be a good thing for the steel consuming industry? These questions were sent to 1000 buyers of steel. The names were selected at random from directories, but care was taken that all sections of the metal- working industry covering a wide variety of products should be represented and that the names should include large, medium and small companies. The geo- graphical distribution was such as to include all states. Opportunity was given to vote anonymously, but a great many voted without concealment of their names," and some took the occasion to send in comments, CONCENTRATION OF ECONOMIC POWER 14431 some of which criticised the Federal Trade Commission's plan severely as lacking in "plain common sense," as "silly," and as likely to bring "disaster to some units." The present system was described as "the most equitable" for all buyers. Some sentiment was expressed by steel buyers that every mill should be a basing point for the products it makes, but the opinion seems to be almost unanimous that the abolition of freight rate equalization would deprive buyers of the opportunity which now exists to buy from any one or more of a number of different sources of supply without difference in cost. Only in the structural steel fabricating industry is there a serious complaint against the present system, and that complaint is not primarily a result of the basing point system but arises partly from the fact that fabrication-in-transit rates frequently operate disadvantageously for some localities. COMMENTS OP STEEL USERS ON FTC PRICING PLAN A Manufacturer of Machine Parts. Our company is a very substantial consumer of cold drawn bar steel and we are located away from any basing point. We have occasion to i:)urchase steel from several different producers located in different sections of the country, and there are several good reasons why we do so, viz., we find that one producer may have one type or grade of product which is preferred for one reason or another as compared with any other producer of this same product, whereas another type or grade of another producer may be found advantageous for us to use. Our company manufactures a specialty line of machine parts to order on which it is, of course, necessary for us to predetermine our exact delivered cost of raw material. When it comes to placing our raw material orders, the matter of de- livery from the steel mill may be vital'y imporcant to us; and this being the case, we are, under the present practice of basing point sales, able to purchase our re- quirements from any one of many sources on exactly the same delivered price cost, thereby enabling ourselves to place our business where we can obtain the best delivery, which oftentimes is vitally essential, and without having to pay any increased price due to difference in freight rates from different mills. This difference in freight costs might easily represent a loss ot $3.00 or more per ton were it necessary for us to purchase from a distant mill in order to secure the delivery required. The adoption of f. o. b. mill practice of selling would, we believe, result in a very chaotic condition both to the producer and consumer. There are so many objectionable features to such a change in practice, which would very seriously affect both producer and consumer, that we would consider it ridiculous on the part of the Federal Trade Commission to give any very serious consideration to such a change. The f. o. b. practice would be very advantageous to large producers with pro- ducing mills scattered around the country and it \ ould certainly inflict a terrible hardship on the small independent producer. It is difficult to see just how the small independent producer could survive if it became necessary to sell f. o. b. mill without freight equalization, and we are very definitely interested in their future inasmuch as we find them to be entirely satisfactory sources, especially so from a service standpoint. We would prefer not to write anonymously on this subject, but at the present moment we have reasons for so doing. But we do desire to again emphasize the point that we are a very substantial consumer of steel. An Ohio Machinery Builder. We are interested in this subject and have from time to time given the question of pricing careful consideration. We think we can see many reasons for and against the present system of pricing, but we are quite certain it would be a mistake to make any more arbitrary changes affecting industrial operation at the present time. It seems to us that the deplorable condition of employment, finance, and business in general is largely due to the fact that so many changes have been made by the New Deal Government during the last few years. If we are ever to get back to a normal and sound condition we will have to stop making changes and place more reliance upon the play of natural influences. A Missouri Manufacturer. We have of course been familiar with the attempts which have been made toward prohibiting the equalisfttion of freight rates on eteeli and, while we have 14432 CONCENTRATION OF ECONOMIC POWER tried to see advantages which migjht result from a definite f. o. b. mill price basing system, we cannot see any advantages that would arise out of such a system and we believe the present method is best. A New England Tool Manufacturer. If the basing point system is abolished, it might mean disaster to some units. A Western Pennsylvania Spring and Axle Manufacturer. The mills in our district do not furnish all the products nor the prompt service we need. A Central New York Steel Jobber. Would like to see the old Pittsburgh Plus restored. Purchasing Agent of a Large New Jersey Manufacturer of Automobile Parts. The present set-up to me is most equitable because if otherwise it would mean that freight would be charged from actual point of shipment rather than from centralized point which is going to considerably penalize the users. I can see no advantages, whatsoever in making the change but rather to the contrary. And when I say that, I am speaking of industry as a whole or users of steel. Con- siderable of our wants are purchased in Ohio, therefore if basing point other than now in existence would apply, you can readily calculate as to how we would be penalized. A New York State Manufacturer of Factory Equipment. We feel the Federal Trade Commission plan on this is not at all practical; in fact in our opinion it lacks plain common sense. President of a Rhode Island Bolt and Nut Manufacturer. We have been buyers of steel for a good many years and it would be nothing short of a tragedy to return to the old system of f. o. b. mill. Being manufac- turers of bolts and nuts, a good many of our products are also sold on the same basing system as our sources oi supply of steel, and we have found that our customers generally accept and believe in it. The present system of freight charges tends to steady the market and in our line of business this is a very im- portant factor. A New Jersey Steel Jobber. The change proposed by the Federal Trade Commission would make many hundreds of basing points instead of a few as every destination would be a basing point. A West Virginia Manufacturer of Tools. Let us all endeavor to keep the steel industry and all other industries as far from Government control as possible. Look at the railroads and weep. Our country has grown and become great, our steel industry has prospered under a system of free enterprise and competition. Why change? A Maine Steel Jobber. We believe the old Pittsburgh basis was for the best interests of all, including both dealers and consumers. Purchasing Agent of a Rochester, N. Y., Manufacturer. I do not agree with the Federal Trade Commission. A St. Louis Sheet Metal Fabricator. Most important is to have the Government stop agitatmg and let business alone for awhile. A Missouri Sheet Metal Manufacturer. Why is it that the type of man on these committees know nothing of the steel business or any other business — merely theorists, lawyers or college profcssors,- and do not know our problems. Are we to continually place these political ex- pediency examinations at the expense of business and the cost to the taxpayers with no results in stimulating prices instead of political control goals. A West Virginia Manufacturer. The jnore I hear of the continual agitation of the Federal Trade Commission for abandonment of the basing point figures in the steel business the more I am convinced the whole issue-is a political skeleton in the closet to be brought out at convenient intervals ahd wAved before the steel industry. If the basing point CONCENTRATION OF ECONOMIC POWER 14433 system were to be totally abandoned, the very nature of the rolling mill business would automatically keep the system in effect. I am inclined to believe that the Federal Trade Commission knows this fact. A Texas Steel Jobber. Any business man ^hat needs the help of the Federal Trade Commission in the conduct of his business will be out of business anyhow, so he does not need much sympathy. It is my opinion that negotiations between producers and buyers should be unrestricted by any Government agency. I recognize that it is neces- sary to have certain legislation to protect the weak from the strong, but I do not believe in regimentation of all industry by Government bodies who are only politically minded and absolutely without experience or practical knowledge. A Texas Machinery Manufacturer. Proposal (of Federal Trade Commission) is ridiculous; as insane and impractical as most Federal regulations for the past several years. A Michigan Manufacturer. The old Pittsburgh basing point was best for everyone. We have lost business ever since the change was made. A Philadelphia Steel Jobber. They (the Federal Trade Commission) are all wet. It would cause ruinous competition in selling our products. An Omaha, Neb., Company. We believe the best thing to do would be to make every mill a basing point on every product they make (not limited to the few basing points they now have) and then equalizing the freight rates. We do not object to the basing point system with freight equalization, what we object to is that we must buy sheets from a mill in Kansas City on a Chicago-Gary base, and the mill adds the differ- ence in freight. Make every mill a basing point on every product they make, then go ahead and allow the mills farther away to equalize the freight. President of a Structural Fabricating Company. I think the Federal Trade Commission can cure a lot of the present trouble so far as the structural steel business is concerned if it would make it impossible for the mills to compete with their own customers. I have reference to the fabricating units of the two larger mills. It is just as reasonable that these mills make auto- mobiles, tin cans, etc., etc., as it is for them to compete with independent fabri- cators on barges, bridges and buildings. Structural steel is a ver}' small percentage of their total tonnage, still they permit that particular part of their business to upset the general market. There could be less objection if the mills' fabricating units used all the elements of cost in their fabricated structural prices, but this they do not do which I attribute to the animosity between these two companies. A Wisconsin Structural Steel Fabricator. The small consumer of steel is in a very much improved condition if he is able to buy steel from a number of dififerent sources without freight disadvantages. And that is true even though milling-in-transit in some instances would prac- tically offset freight rate equalization. The small consumer of structural steel, whenever his plant is located at some distance from the mills and in territory somewhat restricted as to milling-in- transit, will find his potential market tremendously curtailed, perhaps even to the extent of making it unreasonable for him lo continue his business in that particular locality. Plants, large and small, located in favorable milling-in-transit territory on mul towns, will have absolutely no restrictions or handicaps over anybody in' the entire country, whereas the country in a great many instances will have handicaps. To a very large extent equalization of freight rates on steel shipments will segregate territories east and west, and north and south, depending upon plant location and mill ranges, but unfortunately in this upheaval as to territory there will also be many a casualty, 98 per cent of them small steel fabricators and consumers. .4 New York State Structural Steel Fabricator. The largest tonnage we buy consists of wide flanged beams. Source of supply, two places: Bethlehem at Buffalo, Carnegie at Pittsburgh. We object to having only one source. . Wo must have both sources and the prices mMst be alike f. o. b. liorhfs.hr. 14434 CONCENTRATION OF ECONOMIC POWER If there is no way to accomplish that, the result in the steel industry will be disastrous to labor and owners and customers. I have read every word you have printed on the subject. The statement of the commission "To fulfill this purpose, however, there must be no obligation to maintain any announced price for any time whatsoever," sounds absolutely silly to an experienced steel buyer or seller. In fact, a mill by taking technical advan- tage of this can meet any competition anywhere. It really permits a mill to quote a new price to every different inquiry and can quote a thousand different prices every day, allowing the destination point of shipment to govern the price so as to meet competition. I am not satisfied, however, with present system. In connection with "fab- rication-in-transit" system "the Buffalo fabricator can deliver steel in Rochester and in our market just east of Rochester at a cost of $1.50 plus or minus per ton less than ours. This for the plain steel including freight. To do this the Buffalo fabricator must buy in Pittsburgh. It is an odd situation. We are asking for the restoration of the system used prior to last June. The mills then quoted f. o. b. final destination of job. We were then on equal basis. Of course the system was abused. The mills themselves used it to chisel. Exhibit No. 2203 [Copy] American Iron and Steel Institute, 350 Fifth Avenue, New York, June S, 1935. Important Dear Sir: Your attention is earnestly directed to the enclosed copy of a preamble and resolutions that were adopted at a meeting of the Board of Directors, held today, for the purpose of considering the policy to be followed by members of the Industry during the present period of uncertainty. Yours very truly, Walter S. Tower, Executive Secretary. Enclosure Exhibit No. 2204 [Copy] Copy of Draft of Preamble and Resolutions Adopted by the Board of Directors of American Iron and Steel Institute at a Meeting Thereof, Held June 3, 1935 Whereas the Chairman of the National Industrial Recovery Board has issued a statement with regard to the decision of the United States Supreme Court in the Schechter Poultry Corporation case in which he expressed the hope "that all employers heretofore operating under approved codes and all their employes will cooperate in maintaining those standards of fair competition in commercial and labor relations which have been written into the codes with practically universal sanction, and which represent a united effort to eliminate dishonest, fraudulent trade practices and unfair competition in J^'erwo^king and underpaying labor."; Resolved, That it is hereby declared to be the sentiment of the Board of Directors of the American Iron and Steel Institute that the individual members of the Iron and Steel Industry, acting voluntarily, during the present "uncertainty, maintain the present rates of pay and maximum hours of labor and the standards of fair competition which are set forth in the Steel Code, and that the members of the Industry continue to protect the employes' rights of collective bargaining; and Resolved, That the Executive Secretary of the Institute be, and he hereby is, authorized and directed to send a copy of these resolutions to each member of the Industry. CONCENTRATION OF ECONOMIC POWER 14435 Exhibit No. 2205 [Copy] Resolution Adopted by Members of Iron and Steel Industry Assembled AT American Iron and Steel Institute, June 6, 1935 Resolved, That the members of the Iron and Steel Industry in General Meeting assembled this sixth day of June, 1935, hereby unanimously ratify the resolution of the Board of Directors of American Iron and Steel Institute, adopted June 3, 1935, and each of us hereby declares that the Company which he represents is in favor of supporting the position taken by such resolution and that it is the inten- tion of such Company, acting individually and voluntarily, in so far as it may do so, during the present uncertainty to maintain the present rates of pay and maximum hours of labor and the standards of fair competition which are described in the Steel Code, and thai such Company will continue to protect the employees' rights of collective bargaining. Exhibit No. 2206 Commercial Resolution No. A4 ' As Amended June 14, 1934 Effective June 21, 1934 preamble and resolution duly adopted by the board of directors as amended on JUNE 14, 1934, WITH RESPECT TO SWITCHING CHARGES TO BE ADDED to BASE PRICES FOR PRODUCTS DELIVERED AT BASING POINTS Whereas it is provided in Section 4 of Schedule E of the Code that when switch- ing charges for the delivery of a product at a basing point are required to be added in determining the delivered price of such product pursuant to the provisions of said Section 4 the Board of Directors may by resolution fix such an arbitrary switching charge or such arbitrary switching charges for the delivery of such product as the Board shall deem proper with a view to preventing unequal com- petitive conditions in respect of the sale of such product for delivery at such basing point; and Whereas a great diversity in the switching charges exists at the various basing points and on that account it is practically impossible in most cases for members of the Code to ascertain in advance of the sale of any product for delivery at any basing point the correct published tariff switching charges chargeable thereon pursuant to the provisions of said Section 4; and Whereas the Board has been advised that the arbitrary rates prescribed in the following resolution are fair averages of the actual switching rates now in effect in the switching areas of the respective basing points at which such rates are to be applied; Resolved That the Board of Directors hereby fixes, for the purposes of the pro- visions of Section 4 of Schedule E of the Code, arbitrary switching charges for the delivery of any product at any basing point for such product named in Schedule F of the Code, except pig iron sold for delivery in Jefferson County, Alabama, from any furnace located in that County, as follows: (a) for deliveries in carload lots (minimum thirty tons) at Chicago, Illinois, and Gary, Indiana, and for deliveries in such carload lots from either of such places to the other, sixty cents per net ton, or, if the published base price for such product at such basing point is stated per gross ton, then sixty cents per gross ton; (b) for deliveries in carload lots (minimum twenty-five tons) at all other basing points named in Schedule F of the Code, fifty cents per net ton, or, if the pub- lished base price for such product at such basing point is stated per gross ton, then, fifty cents per gross ton; and (c) for deliveries in less-than-carload lots at all basing points named in Schedule F of the Code, and for deliveries in less-than-carload lots from either Chicago, Illinois, or Gary, Indiana, to the other of such places, ten cents per hundred pounds, but not in any case exceeding on any one shipment the charge per carload at the carload rate hereinabove specified for the basing point in question. ' Notk: This Commercial Resolution supersedes Commercial Resolution No. 20 as amended December 14, 1933, and Commercial Resolution No. 52 adopted on March 15, 1934. 14436 CONCJi^NTllATiON OF ECONOMIC POWER Exhibit No. 2207 Commercial Resolution No. A18 ' PREAMBLE AND RESOLUTION DULY ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 14, 1934, AUTHORIZING REDUCTIONS IN THE DELIVERED PRICES FOR PRODUCTS DE- LIVERED BY THE TRUCK PROVIDED BY THE PURCHASER Whereas it is provided in Section 4 of Schedule E of the Code that in any case in which a product shall be delivered by other than all-rail transportation the member of the Code selling such product may allow to the purchaser a reduction in the delivered price otherwise chargeable under the provisions of said Section at such rate previously approved by the Board of Directors and filed with the Secre- tary as the Board of Directors shall deem equitable and necessary, in order that competitive opportunity to producers and consumers of products shall be main- tained; and Whereas on recommendations heretofore made to the Board of Directors it approved rates of such reductions by members of the Code to purchasers of prod- ucts delivered by truck provided directly or indirectly by such purchasers and for their account which the Board deemed and now deems to be equitable and neces- sary, in order that competitive opportunity to producers and consumers of prod- ucts shall be maintained; Resolved That in any case in which any purchaser shall require that any prod- uct purchased by him from a member of the Code be delivered by truck and such truck is provided, directly or indirectly, by such purchaser and for his account, such member of the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Schedule E of the Code and the regulations prescribed by, and the resolutions adopted by, the Board of Directors thereunder and then in effect (a) at a rate equal to 65% of the carload all-rail published tariff freight rate on such product from the point at which transporta- tion of such product by truck began to the place of delivery of such product by truck to such purchaser (if such freight rate be published on a per car basis, the rate per ton shall be determined by dividing such charge per car by 25), or (6), if the transportation by such truck be at a basing point for such product, then at a rate equal to 65% of the rate of the applicable arbitrary carload switching charges, f any, at such basing point theretofore approved by the Board of Directors, or, if such Board shall not have approved a rate of arbitrary carload switching charges for such basing point, 65% of the rate per ton of the actual switching charges (computed on the basis of the minimum carload quantity to which such charges apply) applicable on the delivery of such product at such basing point under the provisions of said Section 4, from the point at which transportation of such prod uct by truck began to the place of delivery of such product by truck to such pur- chaser; provided, however, that a sale of any product or products by a member of the Code for such delivery by truck may be deemed to be a sale of a carload or greater than carload quantity of such product or products only in case such sale covers not less than a carload quantity of such product or products for delivery at one time and the loading of such quantity thereof on the truck or trucks so provided by such purchaser and for his account shall have been completed not later than during tlie next working day after the day on which such loading of such quantity of such product or products began. ' Note: This Commercial Resolution supersedes paragraph (e) of Part I of Commercial Resolutions No. 8, as amended Marcli ITi, 1934. CONCENTRATION OP ECONOMIC POWER 14437 Exhibit No. 2208 Ieon and Steel iNDtrsTET CODE OF FAIR COMPETITION REGULATIONS NO. 4 ' AS AMENDED OCTOBER 11, 1934 Regulations under Section 4 of Schedule E of the Code of Fair Competition of the iron and Steel Industry Re Reductions in the Delivered Prices of Products Delivered in Whole or in Part by Water Transportation and Reductions in the Delivered Prices of Products Sold for Delivery in the South Atlantic, Gulf or Pacific Coast States and Transportation Charges on Products Sold for Delivery at Places in the Canal Zone or at Ports in Alaska Effective October 18, 1984 Wherever hereinafter used, unless the context shall otherwise clearly indicate, the terms which are defined in Article I of the Code of Fair Competition of the Iron and Steel Industry, approved on August 19, 1933, by the President of the United States of America, as amended on May 30, 1934, and in Section 1 of Schedule E thereof shall have the respective meanings therein set forth. It is provided in Section 4 of Schedule E of the Code that, in any case in which a product shall be dehvered by other than all-rail transportation, the member of the Code selling such product may allow to the purchaser a reduction in the de- livered price otherwise chargeable under the provisions of such Section 4 at such rate previously approved by the Board of Directors and filed with the Secretary as the Board of Directors shall deem equitable and necessary, in order that com- petitive opportunity to producers and consumers of products shall be maintained. On recommendations heretofore made to the Board of Directors it approved rates of such reductions in certain cases which it deemed and now deems to be equitable and necessary, in order that competitive opportunity to producers and consumers of products shall be maintained. Such reductions might tend to create conditions of unfair competition between producers that can and those that cannot take advantage thereof. Therefore, the Board of Directors has determined that it is in the interest of the Iron and Steel Industry and of other branches of industry and that it will not tend to defeat the policy of Title I of the National Industrial Recovery Act to permit members of the Code, in the cases and to the extent hereinafter in these Regula- tions provided, to sell or contract for the sale of products produced by them, respectively, at delivered prices which shall be less than the delivered prices other- wise chargeable by such members, respectively, for such products under the pro- visions of such Section 4. It is provided in such Section 4 that, in the case of a product destined for de- livery at a place in the Canal Zone or at a port in Alaska, the member of the Code selling such product, in determining its delivered price therefor, shall add to its pubhshed base price for such product effective at the time of and for the sale thereof such charges in respect of transportation as shall have been previously approved by the Board of Directors and filed with the Secretary. Accordingly, the Board of Directors hereby prescribes the following regulations with regard to (a) reductions in the delivered prices of products delivered in whole or in part by water transportation, (b) reductions in the delivered prices of products sold for delivery in the South Atlantic, Gulf or Pacific Coast states and (c) the transportation charges on products sold for delivery at places in the Canal Zone or at ports in Alaska: 1. In any case in which any purchaser shall require that any product purchased by him from a member of the Code delivered by ocean or rail-and-ocean or rail-ocean-and-rail transportation from the plant of such member to the place of delivery of such product at a South Atlantic port or through a South Atlantic port to a place of delivery in a South Atlantic state, such member ^f the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Schedule E of the Code that shall not be greater than the 'Note: These Regwlations No. 4 supersede Commercial Resolutions No 8 as amended March 15, 1934 Cexcept paragraph (e) of Part I of such Commercial Resolutions, which is superseded by a new Commercial Resolution No. A18 adopted on June 14, 1934), Commercial Resolution No. 18 adopted on September 20, 1933, Commercial Resolution No. 37 adopted on December 14, 1933, Commercial Resolution No. 43 adopted on January 11, 1934, and Commercial Resolution No. 56 adopted on April 12, 1934, all of which Commercial Resolutions have been rescinded effective June 21, 1934. 14438 CONCENTRATION OF ECONOMIC POWER amount, if any, by which (1) the lowest dehvered price that could then be charged under the Code by such member for such product delivered by all-rail transpor- tation to such place of delivery shall exceed (2) the lowest delivered price for such product which could then be obtained by adding to the pubhshed base price (plus any extras required to be added thereto or less any deductions permitted to be made therefrom under Section 6 of such Schedule E) of such member for such product effective at the time of and for the sale thereof at any basing point the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such place of delivery. 2. In any case in which any purchaser shaU require that any product purchased by him from a member of the Code be delivered by ocean or rail-and-ocean or rail- ocean-and-rail transportation from the plant of such member to the place of de- livery of such product at a Gulf port or through a Gulf port to a place of delivery in a Gulf state, such member of the Code may, subject to the proviso hereinafter in this paragraph 2 set forth, allow a reduction in the delivered price for such pro- duct otherwise chargeable under Section 4 of Schedule E of the Code that shall not be greater than the amount, if any, by which (1) the lowest delivered price that could then be charged under the Code by such member for such product delivered by all-rail transportation to such place of delivery shall exceed (2) the lowest delivered price for such product which could then be obtained by adding to the published base price (plus any extras required to be added thereto or less any deductions permitted to be made therefrom under Section 6 of such Schedule E) of such member for such product effective at the time of and for the sale thereof at any basing point the lowest published ocean or rail-and-ocean or rail-ocean-and- rail freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such place of delivery; provided, however, that, if any Gulf port is named in Schedule F of the Code as a basing point for such product, then (1), if such product be delivered as aforesaid at a Gulf port, except as otherwise provided in Section 3 of Schedule E of the Code, the delivered price which such, member may charge for such product as such place of delivery shall not be less than the lowest published base price for such product effective at the time of and for the sale thereof at any such basing point plus the switching charges thereon at such basing point theretofore approved by the Board of Directors, and (2), if such product be delivered as aforesaid through a Gulf port to a place of delivery in a Gulf state, except as aforesaid, such delivered price shall not be less than the lowest published base price for such product effective at the time of and for the sale thereof at any such basing point plus the all-rail published tariff freight charges that would be applicable on the shipment of such product from such basing point to such place of delivery. 3. In any case in which any purchaser shall require that any product purchased by him from a member of the Code be delivered by ocean or rail-and-ocean or rail-ocean-and-rail transportation from the plant of such member to the place of delivery of such product at a Pacific Coast port that is not a basing point for such product or through a Pacific Coast port to a place of delivery in a Pacific Coast state and a Pacific Coast port is named in Schedule F of the Code as a basing point for such product, such member of the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Section E of the Code that shall not be greater than the amount, if any, by which (1) the all-rail published tariff freight charges to such place of delivery from the basing point for such product nearest in terms of all-rail published tariff ireight charges to such place of delivery shall exceed (2) the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such place of delivery. 4. In any case in which any purchaser shall require that any product purchased by him from a member of the Code be delivered by ocean or rail-and-ocean or rail-ocean-and-rail transportation from the plant of such member to the place of delivery of such product at a Pacific Coast port or through a Pacific Coast port to a place of deliver}' in a Pacific Coast state and none of the Pacific Coast ports Is named in Schedule F of the Code as a basing point for such product, such member of the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Schedule E of the Code that shall not be grealer than the amount, if any, by which (1) the lowest delivered price that could then be charged under the. Code by such member for such product delivered by all-rail transportation to such place of delivery shall exceed (2) the lowest delivered price for such product which could then be obtained by adding to the pubhshed base price (plusi any extras required to be added thereto or less any deductions permitted to be made therefrom under Section 6 of such Schedule E) of such moAiber for CONCENTRATION OP ECONOMIC POWER 14439 such product effective at the time of and for the sale thereof at any basing point the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such place of delivery. 5. In any case in which any purchaser shall require that any product purchased by him from a member of the Code be dehvered from the plant of such member by continuous water or rail-and-water or rail-water-and-rail transportation to the place of delivery of such product at a South Atlantic, Gulf or Pacific Coast port, or through any such port or through any port on that part of the Mississippi River extending from Vicksburg to New Orleans, both inclusive, to the place of delivery in any of the South Atlantic, Gulf or Pacific Coast states, such member of the Code may allow a reduction in the delivered price for such product otherwise chargeable under Section 4 of Schedule E of the Code which will make the delivered price for such product at such place of delivery as low as that permitted by paragraph 1, 2, 3, or 4, as the case may be, of these Regulations. 6. In the case of a sale by any member of the Code of any product for delivery in any of the South Atlantic, Gulf or Pacific Coast states from a plant of such mem- ber located m any of such states, if an available water or rail-and-water or rail- water-and-rail route and service from such plant to the place of delivery of such fjroduct does not then exist, the member of the Code selling such product may allow to the purchaser thereof a reduction in the delivered price therefor otherwise . chargeable under the provisions of Section 4'of Schedule E of the Code in an amount ,which will result in a delivered price for such product sold or contracted to be sold by such member for delivery at such place of delivery as low as that permitted by paragraph 1, 2, 3, or 4, as the case may be, of these Regulations. 7. In any case in which any purchaser shall purchase from any member of the Code pig iron in an amount of 400 gross tons or more^and shall require that such pig iron be delivered by water or rail-and-water transportation in a lot or lots of 400 gross tons or more f. o. b. barge alongside the dock of such purchaser at any port on the Ohio River, the Monongahela River or the Allegheny River between and including Wheeling, West Virginia, on the Ohio River, Monessen, Pennsylvania, on the Monongahela River and Ford City, Pennsylvania, on the Allegheny River, such member of the Code may allow a reduction in the delivered price of such pig iron otherwise chargeable under Section 4 of Schedule E of the Code in an amount which shall not exceed 60 cents per gross toQ of such pig iron so delivered; provided, however, that, except as otherwise provided in Section 3 of Schedule E of the Code, the delivered price of such pig iron so delivered shall not in any case be less than the published base price of such member of the Code for such pig iron effective at the time of and for the sale thereof at the basing point nearest in terms of all-rail freight charges to the place of delivery of such pig iron plus 50 cents per gross ton of such pig iron. 8. In any case in which any purchaser shall purchase from any member of the Code pig iron in an amount of 1,500 gross tons or more and shall require that such pig iron be delivered by water or rail-and-water transportation in a lot or lots of 1,500 gross tons or more f. o. b. barge or vessel alongside the dock of such purchaser at Saginaw, Holland, Muskegon or South Haven, Michigan, such member of the Code may allow a reduction in the delivered price of such pig iron otherwise chargeable under Section 4 of Schedule E of the Code in an amount which shall not exceed $1.30 per gross ton of such pig iron so delivered at Holland, Michigan, or $1.35 per gross ton of such pig iron so delivered at Saginaw, Michi- gan, or $1.50 per gross ton of such pig iron so delivered at Muskegon or South Haven, Michigan; and, if such purchaser shall require that such pig iron be delivered from the plant of such member of the Code at any of such places by barge or vessel which shall be provided by such purchaser and for his account, such member of the Code may allow a reduction in the delivered price of such pig iron otherwise chargeable under Section 4 of Schedule E of the Code in an amount (in addition to the amount of the reduction hereinbefore in this paragraph S provided for) which shall not exceed 50 cents per gross ton of such pig iron so delivered at Saginaw, Michigan, or $1.15 per gross ton ot such pig iron so de- livered at Holland, Muskegon or South Haven, Michigan. 9. In any case in which any purchaser shall purchase from any member of the Code pig iron in an amount of 400 gross tons or more and shall require that teuch pig iron be delivered by water or rail-and-water transportation in a lot or lots of 400 gross tons or more f . o. b. barge or vessel alongside the dock of such purchaser at Phillipsdale, R. 1., Branford, Conn., Bridgeport, Conn., Yonkers, N. Y,, Brooklyn, N. Y., Elizabethport, N. J., Bayonne, N. J., Roebling, N. J., Burling- ton, N. J., or Florence, N. J., such member of the Code may allow a reduction in the delivered price of such pig iron otherwise chargeable under Section 4 of 14440 CONCENTRATION OF ECONOMIC POWER Schedule E of the Code in an amount which shall no1; exceed 60 cents per gross ton of such pig iron so delivered. 10. In the case of a sale by any menaber of the Code of any product for delivery at any place m the Canal Zone, the transportation charges which such member or the Code shall be required, pursuant to the provisions of Section 4 of Schedule E of the Code, to use in determining the delivered price of such product at such place shall be the lowest published ocean or rail-and-ocean or rail-ocean-and-raii freight charges, as the case may be, that would be applicable on the shipment of such product from the basing point on which the base price therefor is based to such place. 11. In the case of a sale by any member of the Code of any product for de- livery at any port in Alaska, if a Pacific Coast port is not named in Schedule F of the Code as a basing point for such product, the Transportation charges which such member of the Code shall be required, pursuant to the provisions of Section 4 of Schedule E of the Code, to use in determining the delivered price of such product at such port in Alaska shall be the lowest published ocean or rail-and- ocean freight charges, as the case may be, that would be applicable on the ship- ment of such product from the basing point on which the base price therefor is based to such port in Alaska; provided, however, that, if there shall not then be any published ocean or rail-and-ocean freight charges, as the case may be, on such product from such basing point to such port, then such member of the Code may sell such product for delivery to such purchaser f. o. b. dock at any Pacific Coast port to which there is a published ocean or rail-and-ocean freight charge, as the case may be, on such product from such basing point and the shipment of such product from such Pacific Coast port to such purchaser at such port in Alaska shall be at his risk and expense. 12. In the case of a sale by any member of the Code of any product for de- livery at any port in Alaska, if a Pacific Coast port is named in Schedule F of the Code as a basing point for such product, the delivered price at such port in Alaska which (except as otherwise provided in Section* 3 of Schedule E of the Code) such m^ember of the Code shall quote and bill for such product shall be not less than the s' m of (1) the lowest published base price (plus any extras required to be added th reto or less any deductions permitted to be made therefrom under Section 6 of Schedule E of the Code) of such member for such product effective at the time of and for the sale thereof at any Pacific Coast port which is a basing point for such product and (2) the lowest published ocean or rail-and-ocean freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such port in Alaska; provided, however, that, if such freight charges shall be unreasonably high, or if there shall not then be in effect any published ocean or rail-and-ocean freight charges, as the case may be, on such product from such basing point to such port in Alaska, then such member of the Code may sell such product for delivery to such purchaser f. o. b. dock at such basing point and the shipment of such product from such ba&ing i)oiiifc to such purchaser at such port in Alaska shall be at his risk and expense. 13. For the purpose of determining under any provision of these Regulations the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be, that would be applicable on the shipment of any product from any basing point for such product to any place of delivery such freight charges shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean- and-rail freight charges, as the case may be, from such basing point to such place of delivery applicable to the quantity of such product shipped at one time and in effect at the time of the shipment thereof; provided, however, that, in the case of a sale by a member of the Code at one time of any quantity of any product for use in the construction of an identified structure, such freight charges shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be, from such basing point to the place of delivery thereof applicable to such quantity of such product and in effect at the time of such sale; and provided, further, that in case any member of the Code shall sell or contract to sell a carload or more of various products for shipment in mixed carload lots, whether the respective base prices for such products be based on the same or diflferent basing points, such freight charges shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean-and-rail carload freight charges per gross ton, per net ton or per hundred pounds, as the case may be, applicable to the respective quantities of such products so sold from the basing point or basing points on which the respective base prices of such products are based to the place of delivery thereof. CONCENTRATION OF ECONOMIC' POWER 14441 Except as otherwise provided in paragraph 3 of these Regulations, for the pur- pose of determining the lowest delivered price for any product that shall be sold by any member of the Code for delivery at any place of delivery pursuant to any provision of these Regulations, if the tariff book entitled "Freight Tariff No. 1. American Iron and Steel Institute" issued under date of November 15, 1933, or any rp vision or amendment thereof, as at the time in effect, shall show ocean or rail-and-ocean or rail-ocean-and-rail freight charges that would be applicable on the shipment of such product to the place of delivery thereof from any basing point or basing points therefor, such delivered price for such product at such place of delivery shall be computed on the basis of the published base price of such member for such product efifective at the time of and for the sale thereof at a basing point therefor from which such ocean or rail-and-ocean or rail-ocean-and- rail freight charges on such product to such place of delivery shall be shown in such Freight Tariflf No. 1, or any such revision or amendment thereof, and of such ocean or rail-and-ocean or rail-ocean-and-rail freight charges, as the case may be. If the freight charges shown in such Freight Tariff No. 1, or any such revision or amendment thereof, for the transportation of any product by ocean or rail- and-ocean transportation from any basing point for such product to any port shall include track delivery of such product within the switching limits of such port, such freight charges shall also be deemed to be the lowest published freight charges for such transportation of such product and delivery thereof f. o. b. dock or f. o. b. cars dock at such port; provided, however, that, if such Freight Tariff No. 1, or any such revision or amendment thereof, shall also show the freight charges for such transportation of such product and delivery thereof f. o. b. cars dock at such port, such freight charges shall be deemed to be the lowest published freight charges for such transportation of such product and de- livery thereof f. o. b. cars dock at such port or f. o. b. dock at such port. If such Freight Tariff No. 1 shall show^ ocean or rail-and-ocean or rail-ocean-and-rail freight charges that would be applicable on the shipment of any product to the place of delivery thereof from the Pacific Coast port named in Schedule F of the Code as a basing point for such product that is nearest in terms of all-rail published tariff freight charges to such place of delivery, then, for the purpose of determin- ing the amount of any reduction in the delivered price of such product permitted under the provisions of paragraph 3 of these Regulations, such freight charges shall be deemed to be the lowest published ocean or rail-and-ocean or rail-ocean- and-rail freight charges, as the case may be, that would be applicable on the shipment of such product from such basing point to such place of delivery. 14. For all purposes of these Regulations any place in the Pa ific Coast states to which published tariff ocean transportation charges on any product from At- lantic Coast ports shall apply and to which ocean or rail-and-ocean freight charges on such product from any basing point for such product shall be shown in said Freight Tariff No. 1 shall be deemed to be a Pacific Coast port. 15. In any case in which any purchaser shall purchase from any member of the Code steel billets in an amount of 1,000 gross tons or more and shall require that such billets be delivered by water or rail-and-water transportation in a lot or lots of 1,000 gross tons or more f. o. b. barge or vessel alongside the dock of such purchaser at South Portland, Maine, such member of the Code may allow a reduction in the delivered price of such billets otherwise chargeable under Section 4 of Schedule E of the Code in an amount which shall not exceed $2.00 per gross ton of such billets so delivered. 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