steadily throughout 1899, the average for the year being $2.32 per keg, or nearly 75 per cent higher.' By January, 1900, the price had reached $3.20 per keg, but it did not long remain at this height. The outbreak of competition during the middle of 1900 brought the price down to $2.20 per keg, yet this was much above the price that had prevailed prior to the formation of the trust, and more than the trust was able to get in the years that followed. The price of plain wire at Pittsburg followed the same general movement. From a figure of $1.13 per hundred pounds in December, 1898, it rose to $3.05 in January, 1900, and then declined to $2.15 in May. During the same period the price of barbed wire advanced from $1.75 per hundred pounds to $3.80 per hundred pounds.2 Mr. Gates, the chairman of the company, testified in November, 1899, that the rapid advance in the price of barbed wire was no doubt due to the fact that the company had a complete monopoly.3

The National Tube Company was organized in June, 1899. The year previous to its formation the price of tubes was $30.00 per gross ton; the year of its formation, $67.00 per ton; and early in the year after its formation, as high as $89.00 per ton.*

But it is not at all clear to what degree the trusts were responsible for these increases in prices. These early steel trusts were formed during a period of prosperity, which would have led to higher prices even in the entire absence of artificial inflation. Costs, moreover, were advancing, since the prices of raw materials likewise responded to the heavy demand. The prices of the finished products, however, increased more rapidly than costs, and as a result profits were unusually large. Whether prices and thus profits were higher than they would have been had it not been for the trusts is a question that can not be answered with certainty. However, such would appear to have been the case;

1 The advance in prices was greater than the increase in raw material costs. See Jenks, Bulletin of the Department of Labor, vol. V, no. 29,

p. 744.

2 Brief for the United States (no. 481), vol. II,

3 Industrial Commission, I, p. 1009.

4 See p. 196.

p. 161.

and certainly the trust organizers in enormously overcapitalizing the properties anticipated such an outcome.

As is indicated by the table on page 203, the formation of the United States Steel Corporation was not followed by as considerable an advance in the prices of steel products as was the case on the formation of the earlier steel trusts. The prices in May, 1901 (the first month after the organization of the Corporation) were higher than the prices in October, 1900 (the last month in which competition was active) for every product shown except tin plates, yet the increase was not so noteworthy as in the case of the earlier trusts. No doubt a partial explanation is the fact that the combination and trust movement in this industry during 1898 to 1900 had already established prices on a high level. It would appear also that the managers of the Corporation, profiting by the experience of the earlier trusts, had chosen to charge more moderate prices in order to discourage potential competitors. The real influence of the organization of the Steel Corporation would be best shown, of course, by a comparison of the prices that prevailed in 1901 with those that would have prevailed in 1901 (and subsequent years) had the battle of giants been allowed to proceed; but this comparison obviously cannot be made.

The extent of the control exercised over prices by the Steel Corporation is well shown by the movement (or lack of movement) of steel rail prices. This matter is discussed on page 229. The Corporation's practice of maintaining the same prices over comparatively long periods was employed also in the case of billets, plates, structural steel, tin plates, wire, wire nails, bars, and black sheets, though by no means to the same degree.1 The policy was possible, however, only because of coöperation with its competitors as arranged through the so-called Gary dinners and other devices. That these prices were highly profitable is proven by the enormous profits obtained by the Corporation, enabling it within fifteen years more or less to squeeze out the water from its stock, which at the beginning had little behind it but the hope of monopoly gains.

1 See Brief for the United States (no. 481), vol. II, pp. 1038-1047.

The tobacco trust was fully investigated by the Bureau of Corporations, and a volume dealing particularly with prices, costs, and profits was issued. Nevertheless for several reasons it is difficult to speak positively concerning the effect of the trust on prices. Thus, the American Tobacco Company when organized in 1890 secured control of the cigarette business, yet detailed data covering prices of cigarettes are not available for the years prior to 1893. After 1893 the net price of cigarettes less taxes steadily declined until 1899, and then rapidly advanced almost uniformly down to 1910.1 However, these price movements were roughly in harmony with costs; the profit per thousand remained fairly steady throughout the whole period. That the prices were highly remunerative is shown by the analysis of profits on pages 161 seq.

The proportion of the little cigar business done by the trust is not known for the years prior to 1898. In that year it produced less than 50 per cent of the little cigar output of the country. Its share of the business steadily increased until by 1910 it amounted to over 90 per cent of the total. Likewise the profit per thousand steadily increased, being 41 cents per thousand in 1898, and $1.03 per thousand in 1910.2 Net prices (less tax) were no higher in 1910 than in 1898, but costs were very much lower. The trust thus kept for itself all the benefits of declining costs.

For plug tobacco the statistics are more complete. In 1894 the net price of plug tobacco less taxes amounted to 29.1 cents per pound. At that time no one company dominated the industry. During 1894 the American Tobacco Company instituted a campaign for the domination of the plug business, and prices were severely cut, falling to 12.2 cents per pound in 1897. Early in 1898 a combination was agreed upon, and the price for the year rose to 16.7 cents per pound. During the following year the Liggett and Myers Tobacco Company was

1 See p. 155.

2 Report of the Commissioner of Corporations on the Tobacco Industry, part III, p. 182.

3 See pp. 157-159.

acquired, and the price averaged 21.0 cents, and in 1900, 22.8 cents. In the years that followed control was made effective, and prices and profits increased. By 1908 (the high-water mark for prices down to 1910) the price had reached 30.3 cents, and the profit 8.0 cents, as compared with a loss during each year from 1895 to 1898. The appropriation by the trust of the benefits of the remission of the Spanish-American war taxes also testifies to the power and workings of trusts.

Similar results appear upon an examination of the prices and profits obtained in the smoking tobacco and snuff branches. A comparison of the latter business (the most highly monopolized branch of the tobacco industry) with the cigar business (the least monopolized branch) is unusually instructive in its bearing on the comparative results of monopoly and competition. On this point the reader is referred to page 159.

The data are not available to determine what influence has been exerted on prices by the harvester and shoe machinery trusts, the two remaining trusts of those described in some detail. So far as the harvester trust is concerned,1 it does not appear that it has increased prices to an appreciable degree. The Department of Justice made the allegation that while the circular prices of harvesting machines were not increased upon the organization of the trust in 1902, the prices actually received did increase through the abandonment of price cutting. However, the government introduced no evidence to support this allegation, and the company unequivocally denied it. The Bureau of Corporations in its report on the International Harvester Company devoted comparatively little space to the subject of prices, but concluded that the company had taken advantage of its monopolistic position in harvesters to increase both prices and margins, while reducing prices in those outside lines in which it had to meet keen competition. It is easy to show, of course, that there was a general advance in the price of harvesters during 1903 to 1911, yet this was a period of rising prices and costs, and hence it would not be fair in the absence of complete information

1 See pp. 254-257.

2 Report on the International Harvester Company, p. 255.

to attribute the advance to the trust, particularly since the price of some agricultural implements that were subject to competition likewise advanced. The fact is that the International Harvester Company during the period from 1903 to 1911 earned a comparatively moderate return on a capitalization singularly free from water. In part, of course, this low rate of return resulted from the fact that its profits on the competitive lines were combined with its profits on the monopolized lines, thus tending to obscure the influence of monopoly on prices and profits.

1

The whisky trust is not one of the concerns described in detail in the preceding chapters. However, the prices charged by it have been carefully investigated by Professor Jenks; 1 and we may summarize his conclusions. Professor Jenks points out that immediately after the organization of the whisky "trust" in 1887 the prices of spirits were reduced rather than advanced. However, this reduction in prices was designed to force the remaining competitors into the "trust"; and when this purpose had been accomplished prices were increased, and the profits became very large. The profits were so good in fact that new distilleries were constructed, and accordingly in 1889 prices had to be cut to crush the new competition. In 1890 the "trust" reorganized under the corporate form; and during the middle of 1891 acquired its principal rival. Prices and margins thereupon increased. Early in 1893 the price and the margin were at a very high point, but by the middle of 1894, because of competition, speculation, and poor management on the part of the trust officials, the price had fallen very low, and the margin had entirely disappeared. In January, 1895, the trust went into the hands of a receiver.

We need not follow the whisky trust through its checkered career. It will suffice to state Professor Jenks' conclusion that the trust was able to control the price of spirits rather effectively for comparatively short periods after each reorganization; and that at times it used this control to increase prices and margins, and at other times it reduced prices to injure its competitors. On

1 See The Trust Problem (1917), pp. 141-149; Bulletin of the Department of Labor, vol. V, pp. 726-731; Political Science Quarterly, 4, pp. 309-314, and 5, pp. 495-497.