The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1912-02-29
TRUST CONTROLS
STEEL BUSINESS
EXPERTA ASSERTS
McRae Finds Corporation Re-
strains Trade and ThrOt-
ties Competition
Earned a Billion in 9 Years
Morgan Got S7O,OOO,OOO for
Organizing Concern
"Gary Dinners" Controlled Out
put, Enabling Operators to
Maintain Set Prices

AsHINGToN, Feb. 2S.-The
Va 1 house steel trust Investigating
" committee today made public
the result of the inquiry into
the books and minutes of the United
States steel corporation conducted by
Farquhar ]. MeRae. an expert ac-
countant.
The MeRae report reaches the con-
clusion that the steel corporation oper-
ates in restraint of trade and prevents
competition through a manipulation of
prices, through the influence of the So
called Gary dinners" by control of
raw materials and through system
companies. It also tends to contradict
some of the testimony given by steel
trust officials.
Startling Disclosures
Some of the figures dealt with in the
report are startling. Salient features
of MeRaes reports are:
That J. p. Morgan & Co., heading the
syndicate which organized the steel
corporation. received a cash profit of
s6s.30O,OOO of which s62.500,OOO was for
promotion. with an additional commits
sion of $500, 900 for bond conversion
scheme.
That the net earnings of the cor
poration for a period OF nine years
were $1,O2e,6s5,3S9, or an equivalent of
approximately SIS a ton on finished
product. instead of ssSoooo.s11 as
claimed by the corporation. This is
equivalent to an earning of 40 pei. cent
on cost.
Thats the steel corporation. contrary
to the. statement made by Judge Gary
and H. C. Frick to President Roosevelt
in 1907 that it did not control more
than 60 per cent of steel properties
in the country, controls about so per
cent of the steel holdings.
"Gary Dinner" Scheme
The section of the report dealing
with the Gary dinners where inde-
pendent as we'll as corporation steel
men assembled to discuss conditions
in the trade, contains an analysis of
the legal effect of the golden rule"
policy prepared by Anthony ]. Ernest,
New York lawyer, in which it is
declared that the conventions agreed
TO and enforced would be objection
able as regards their effect upon COM
petition"
The Gary dinner arrangement says
the report. lis Objectionable as far as
it operates TO exclude free competition.
The arrangement is designed and in
tended TO operate. and has operated,
admittedly, as to standard steel rails,
although it is claimed that the socalled
independent participants can cut prices
without fear of penalty, except the
dishonor of declaring in favor of a
snamed price and then selling at some
other price.
Lacks Justification
1T can be no justification of the CO.
operation of the participants in the
Gary dinners that no penalty attaches
to violation of the declarations mu-
tuaIly exchanged. because perforce the
antitrust act would prevent the en-
AS+EN-A-~t+ " any pNld4ty 1Ot 1tQuClHS
prices or exceeding ones share of the
business. Previous p ol agreements
may have been broken and penalties
inflicted by the members themselves,
although this was soon discontinued
ANY contract may be broken; any
conspiracy may be upset by recalci-
trants. 1t is surely no excuse for the
Illegally of any arrangement in re-
straint of trade that it can be departed
from by the participants
Stress is laid in the financial section
of the report upon the demonstration
by figures that the steel corporation
restrains competition by making the
greater portion of its profits in raw
materials and in plants producing semi
finished materials. while the finished
product plants make low profits. This
operates, it is declared, to keep the
price of raw materials on a high plane.
to the advantage of the corporation
and the disadvantage of the independ-
ents
Dividend Paid
AS SuOWluR the result u the pOlcy
of the steel corporation to make the
bulk Of its profits in the raw and semi
finished material, McRae submitted a
condensed statement of the dividends
paid by the subsidiary companies to
the steel corporation and the interest
paid by the Carnegie company on its
collateral trust bonds from April i.
1901, to April !, 1910. showing total
of s75s.124,sss.5s.
The income from the Carnegie COM
pany in dividends and bond interest. "
he says. amounted TO ss05 ,2sa. .537. 40,
or about 40 per cent of the total. The
American Bridge company paid the