maintain prices." Mr. Gary, during the course of the dinner, called on practically all of the leading steel manufacturers, and each, almost without exception, expressed himself as in favor of maintaining the existing prices, or as ready to support the coöperative movement with respect to prices.

Whether as a result of the investigation of the Stanley Committee of the House of Representatives or in anticipation of the government suit, the Gary dinners came to an end in 1911, and judging from the movement of prices, the coöperative arrangement was given up. With respect to these dinners the Stanley Committee said:

"We think the conclusion is irresistible that the Gary dinners were instituted as a means of conveying to the entire iron and steel industry information as to what the attitude of the United States Steel Corporation was upon the questions of output and prices and of impressing upon all engaged in the industry that it was the part of wisdom and prudence to govern, themselves accordingly. We further believe that by this means prices were maintained, output restricted, competition stifled, and trade restrained, just as certainly, just as effectively, and just as unlawfully as had been done under the discarded pooling agreements of former years.'

Perhaps the best evidence of the success of the policy of coöperation, promoted by pools and dinners, is the course of the price of Bessemer steel rails. From 1867 to 1900 (the year before the formation of the steel trust) the price of steel rails varied every year; in no two years during all this period did it continue the same. Prior to the formation of the Steel Corporation there was severe competition in steel rails, and the price fell from $28 per ton in 1896 to $17 per ton in 1898. A combination then raised the price for a time to $35, but early in 1901 it went as low as $26. In April, 1901, the Steel Corporation began operations; in May the price of rails was fixed at $28 per ton; and the price remained at that figure up to the date of the government suit,

1 Brief for the United States (no. 481), vol. II, p. 998.

2 Stanley Committee Report, p. 126.

Brief for the United States (no. 6214), part I, p. 13.

having been effectively controlled by the Steel Corporation in coöperation with the independent steel manufacturers. This price of $28, it may be noted, was some $10 per ton higher than the prices that prevailed during 1897-1898, when there was competition between the Carnegie Steel Company and the Illinois Steel Company; though the prices of 1897-1898 yielded these companies a substantial profit.1 The ability of the Steel Corporation to maintain the price of steel rails at an arbitrary figure, despite marked fluctuations in demand 2 and in manufacturing costs, abundantly testifies to the tremendous power of this mammoth organization.

1 Brief for the United States (no. 481), vol. I, p. 169.

2 In 1901, 99.9 per cent of the rails sold were Bessemer rails. Since than date Bessemer rails have been largely superseded by open-hearth rails. In 1912 only one-third of the rails sold were Bessemer rails. Brief for the Steel Corporation (no. 481), p. 215.

CHAPTER X

1

THE INTERNATIONAL HARVESTER COMPANY 1

The International Harvester Company-the harvester trust— was organized in New Jersey on August 12, 1902. It represented a consolidation of the five leading manufacturers of harvesting machines, the McCormick Harvesting Machine Company (with a factory at Chicago), the Deering Harvester Company (with a factory at Chicago), the Warder, Bushnell and Glessner Company (with a factory at Springfield, Ohio), the Plano Manufacturing Company with a factory at Plano, Illinois (near Chicago), and the Milwaukee Harvester Company (with a factory at Milwaukee).2 The five plants of these companies, according to an official statement, were the largest and most complete of their kind in the world. Among them they produced approximately 85 per cent of the total output of harvesting machines in the United States.4 Their control of the harvester trade in the territory adjacent to them (the great grain growing states of the country) was even greater than 85 per cent, since the leading competitors of the trust were located in New York

1 On the International Harvester Company see: Report of the Commissioner of Corporations on the International Harvester Company, March 3, 1913; Report of the Federal Trade Commission on the Causes of High Prices of Farm Implements, May 4, 1920; Brief for the United States in International Harvester Company v. United States (no. 757); Brief for the International Harvester Company (no. 757); Brief for the United States in International Harvester Company v. United States (no. 56); Brief for the International Harvester Company (no. 56); Appendix to defendant's brief in United States v. International Harvester Company (no. 624); 237 Missouri Reports 369-424; 234 U. S. 199-215; 214 Fed. Rep. 987-1012.

2 Report of the Commissioner of Corporations on the International Harvester Company, p. 67. Hereafter referred to as Report on the International Harvester Company.

'Chron., 75, p. 345 (August 16, 1902).

Report on the International Harvester Company, p. 67.

state, with a market largely confined to the North Atlantic states and to foreign countries.

Prior to the organization of the International Harvester Company competitive conditions had prevailed in the manufacture of harvesting machines. Notable improvements in the manufacturing processes, combined with a steady increase in the size of the factories, had led to marked economies in production; and these in turn, owing to competition, had led to considerable price reductions. At various periods during the eighties the manufacturers had endeavored, through price agreements, to hold competition in check, but without marked success. In 1887 and again in 1890 attempts had been made to form a combination of the leading manufacturers, and in 1890 a company had actually been chartered for that purpose; but in both instances the plan had fallen through. From 1890 until the organization of the International Harvester Company in 1902 apparently no attempt had been made to effect a consolidation. Competition, generally speaking, had been quite active. In fact the organizers of the International Harvester Company subsequently claimed that it was the severity of competition that made a combination necessary. The president of the International Harvester Company characterized the competition as fierce; list prices could not be maintained.1 Mr. Glessner, of Warder, Bushnell and Glessner, expressed the opinion that "in the harvester business there was a competition never known in any other business in the world." 2 Mr. Jones, of the Plano Manufacturing Company, testified that competition was so severe that neither the manufacturers nor the dealers were making anything.3 Moreover, the Commissioner who heard the testimony in a suit in a Missouri court described the competition as "active, persistent, strenuous, and fierce." 4

The claim that the formation of a harvester trust was necessary to avoid ruinous competition was analyzed by the Bureau of

1

Report on the International Harvester Company, p. 59.

2 Ibid., p. 60.

3 Ibid., p. 61.

4 237 Missouri Reports 384.

Corporations in its investigation of the International Harvester Company. "There is no doubt" said the Bureau, "that the principal motive for the formation of the International Harvester Co. was to eliminate competition and to secure a dominant position in the trade." Though the desire to eliminate competition led to the organization of the trust, yet competition was not so severe, in the opinion of the Bureau, as to make the formation of a trust necessary. Most of the larger companies, it reported, had been making considerable profits, and sometimes very large profits. Specific information as to the profits of the harvester companies prior to 1902 was difficult to obtain, and such data as was gathered by the Bureau related only to the five companies which united to form the trust. But these five companies, as has been pointed out, included the five leading manufacturers, and produced over four-fifths of the total output. Such data as was available showed that in general the profits of the large companies had been quite high during the five years preceding the organization of the International Harvester Company. The Plano Manufacturing Company, it is true, had sustained a deficit in both 1900 and 1901, and the profits of the Milwaukee Company had been low in 1901; but the profits of the McCormick and Deering companies had been high in every one of the five years, and the profits of the Milwaukee Company and of Warder, Bushnell and Glessner (the Champion Company) had generally been high.3 It is significant that in three of the five years for which the profits were shown the aggregate annual profit of the five competing companies was greater than the reported profit of the trust during any one of the first six years of its existence, and this notwithstanding the fact that the period after 1902 was one of great prosperity. It is also significant that a committee appointed to consider the taking over of

1 Report on the International Harvester Company, p. 70.

2 Ibid., p. 62.

Ibid., p. 63.

Ibid., p. 64. A possible explanation of the low "reported" profit of the trust is the large amount of earnings put back into the business, especially in new lines and in plants abroad.