WASHINGTON, Feb. 27, 1912 (UP) - That the social functions known as "Gary dinners" control absolutely the prices in the steel industry and that United States Steel Corporation is in restraint of trade through this price control and its domination of raw material, were the conclusions reported to the Stanley steel committee of the House to-day by Farquhar J. MacRae, the committee's expert accountant.
MacRae's report was the result of a detailed examination of the books of the steel trust made while the records were under subpoena by the committee. In several particulars the report contradicts testimony given by officials of the trust before the committee.
The Gary dinners, the report says, operate to maintain prices and exclude competition.
"The arrangement is designed and intended so to operate," it continues, "and it does so operate, as to steel rails, although it is claimed that the so-called independent companies can cut prices without fear of penalty, except the dishonor of declaring in favor of a named price and then selling at some other price."
At the Gary dinners representatives of the Steel Corporation and its independent concerns meet and agree "to produce their production conformably to their estimate of the demand existing."
"It can be no justification of the co-operation of the participants in the Gary dinners that no penalty attaches to a violation of the declarations mutually exchanged," the report commented, "because perforce the anti-trust act would prevent the enforcement of any penalty for reducing prices or exceeding one share of the business."
The report drew the conclusion that the Gary dinner agreements were in reality just as binding on steel manufacturers as the pool agreements of the old days which were legislated against in the Sherman act.
A fabulous profit was made out of the formation of the Steel Trust by J. P. Morgan & Company which framed the combination, the report says the Steel Trust books show. A total of $69,300,000 was paid the Morgan concern for financing the syndicate that organized the trust. Of this, $62,500,000 was a promoters' profit, while the remaining $6,800,000 was the profit on a bond conversion scheme. In the first nine years of its existence the corporation earned net, the report said, $1,029,685,389, instead of $980,000,311 as is set forth in the reports of the corporation officials. This amounts to a net profit of $13 a ton on finished steel products.
Eighty per cent of the steel producing properties of the country are dominated by the corporation, the report says, although E. H. Gary and H. C. Frick told President Roosevelt when they absorbed the Tennessee Coal & Iron Company in 1907 that the trust controlled and desired to control less than sixty per cent of the steel business.
Even in making its profits, the report charges, the steel corporation restrains competition by concentrating the greater part of its profits in its operations on raw materials and semi-finished products, while confining the finished product plants to a low profit. This operates, according to the report, to keep the price of raw materials up to the advantage of the corporation, and the detriment of independent competitors.
The report showed in detail the dividends paid by the subsidiary companies of the Steel Trust during the first nine years of its existence. The total amount was $753,124,386,53.
The fact that the subsidiary companies operating in raw material made greater dividends than the finished products concerns was cited to show that the corporations kept the price of raw material up to the embarrassment of competitors.
A voluminous argument in 14 sections to prove the Steel Trust a combination in restraint of trade was presented in the conclusions of the report.
"One hundred and eighty-one previously competing corporations were concentrated under the control of a single holding security company known as the United States Steel Corporation. "Among these concerns the report sets forth ore owning and mining companies now restrained from competition in the sale of ore, railroads, combined to prevent competition, blast furnace plants, the combination of which eliminated competition in the sale of pig iron, coal and coke companies, and other formerly competing concerns.
The greater concern in the iron and steel trade, the report said, were acquired at vastly inflated rates due to the superior effect given the merger by the elimination of the competition of these companies.
"Other acquisitions were made in related lines of business," the report said, "for which no explanation appears except the visible consequence, the removal of such concerns from the independent field."
This was the case, according to the report, in the absorption of the Tennessee Coal & Iron Company.
In discussing the corporation's control of ore the report asserts that 2,500,000 tons out of 4,462,940,000 tons of available ore in the country is under the control of the trust.