Decorah public opinion. (Decorah, Winneshiek County [Iowa]) 1895-1928, 1911-07-19
THE U. S. STEEL TRUST
l.epOrt of Investigation of Commits
sion on Corporations Made
Public.
COMBINE DOUBLED VALU f.
Organizers Had Property Worth
S6S2, 100000 and Capitalized
at $1,4O2, 100000.

| at SI.fV-.OVO,OOOs
Washington, July 17.-Restriction
of competition is declared to have
been the prime object of the organ
izers of the United States Steel Cor
poration which capitalized at ST.
402, 100000, had tangible property
worth only $6S2, 100000; the cor
poration, having concentrated its ef-
forts to secure ore properties, now
owns 10 per cent of the lake ores,
upon which the present steel indus
try is based these are some of the
conclusions reached in the long ex-
pected report of Commissioner of
Corporations Herbert Knox Smith
on the steel industry.
Discussing in detail how "the i'm
pending struggle of the giants was
averted almost over night by the
formation of the great combination
of combinations, taking in 250 sub
sidiary companies controlling sixty
per cent of the total crude and fin
ished steel production of the country,
the report says:
| Until 1898 the bulk of the busi-
ness was distributed among a very
considerable number of concerns.
There was sharp competition, modi-
| fed by frequent pools of greater or
4 I,,r of ~
| Then came an era of great COM
binations, the report continues, with
capitalizations ranging from $780,
900, 600 to $100, 100000, mergers Of
many smaller companies, which in
stead of eliminating competition
threatened to bring price cutting on
larger scale than ever before. In
1S99-1900 there We're three great
companies-the Carnegie Company,
Federal steel and National Steel
dominating the production of crude
and semi-finished products, and six
concerns-the American Steel and
Wire, American Tin Plate, American
Steel Hoop, American Sheet Steel,
National Tube and American Bridge
controlling the lighter, finished
products.
2.h.s was the period when the
li'struggle of the giants was impend-
ing and when the formation of the
United States Steel Corporation was
conceived and brought about. All
nine of the companies named were
combined, and later the Union Steel
Company, the Clarion Steel Com
pany and, in 1907, the Tennessee
Coal, Iron and Railroad Company
were taken over The promoting syn
dicate putting the deal through net
ted $62, 900 in cash.
During the ten years OF its opera
tion, the report says, the steel trust
has paid average annual profits or
IL per cent on the money invested.
In this connection attention is called
to the fact that a considerable part
of the investment is in undeveloped
or unworked properties, showing
that dividends from paying proper
ties must be much larger than the
average would indicate. Insisting
upon computing profits upon tan
gible property value basis, the re-
port says that the steel corporation
in defending its book valuation un-
doubtedly would claim that there
was merger value. AS 10 tnls,
the commissioner says:
1T is probably true that the var
ious properties acquired by the steel
corporation, taken together with the
organization Of this company as
going concern, do have value in ex-
cess of the sum of their values as
separate entities. The coordination
and integratiOn made possible by the
combination of such properties un-
! der a single control undoubtedly
tend to reduce costs either through
economies or through moving the
necessity of paying profits to others.
Further, in so far as the concen-
| tration of the industry under con-
troll of single concern gives to 1T
monopolistic power over prices and
!. production, this may result in an in
crease in its earning power and con-
sequently in an increase in its val
lie as going concern. This in
wolves, however, the reduction OF
actual or potential competition. To
allow a single company, which has
secured the bulk of a given industry,
credit for such merger value as a
basis on which to earn profits raises,
therefore, question of far reaching
public policy. To regard valuation
so arrived at as justifying such prof
its under these conditions would be
reasoning in circle, because the
real question is whether the profits
themselves, used TO determine the
capitalization were reasonable.
Since the corporation has been di-
recting its efforts particularly toward
acquiring and extending complete
control over ore properties, its per-
centage of production has decreased
AS against 60 per cent of all crude
and finished production in 1907, says
the report the corporation now has
not much over 80 per cent, indicat-
ing conclusively the continuous pres
ence of strong and increasing inde'
pendent production"
However, the commissioner finds
that competition. so far as prices
are concerned, has been modified b!
tho nolicv of .co-OneratiOn" inaug