defendants United States Steel Corporation and others.

Action brought under the Sherman antitrust law of 1890 online

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reasonable price, and has since proven to be a very low price,
we decided to acquire it. We needed all those ores and more
at that time, for the manufacturing plants.

Q. How do you know that! That is, upon what do you
base that statement, if on anything besides your own indi-
vidual judgment?

A. I know it by the reports of all our experts and by the
general statistics with which I am pretty familiar, and by
comparing the quantity of ore which the Steel Corporation
has as compared with our competitors, our manufacturing
competitors, and the years or time supply of ore which we
have as compared with theirs. I know from my own general
knowledge, from my connection with the business, my knowl-
edge of the properties, that it was necessary in order to round
out the properties, as I have termed it over and over again,
that it was essential that we have a supply of ore as large
as we would have with the Rockefeller ores included, and
larger, for that matter.

Q. Were those matters that you have now told us about
with this detail canvassed between you and your associates
in the enterprise and with your expert men?



4750 ELiBERT H. GABY.

A. They were. Yon see, Mr. Porter and various other
members of the directorate of the Minnesota Iron Company-
were very familiar with the ore properties, and it was very
easy to become acquainted with all the facts relating to ore.
In fact from month to month and almost day by day we were
in discussion amongst ourselves and consultation concerning
the general ore properties in the Xorthwest, and were buying
ores occasionally, the Federal Steel, not very much, because
we did not have the money; that is the truth about it; and
we would have bought more if we had had money, but the
properties were offered to us and we had our ore experts
examining them, and we always kaew when the Rockefellers
bought any ore. In fact we were pretty well informed, and
my associates in the Federal Steel who were leading men,
hke Mr. Porter for instance, were particularly anxious to
get more ore, and they were insisting upon getting the Eocke-
f eller ore if we could get it on a fair basis ; and not only the
Minnesota Iron people felt that way, but the Federal Steel
people, the manufacturing people who had in previous years
been buying their ores from the Minnesota Iron Company
and the Rockefeller people both ; they knew all about the ores
of the United States, the manufacturing companies, so that
I was well fortified in my opinion, by the opinion of my asso-
ciates in the Federal Steel.

Q. That is what I wanted. How about the purchase of the
American Bridge Company stock?

A. That came on a little later. The structural business
was an important branch of the business, and with that I
would include of course the fabricating and erecting depart-
ment. We had more or less conversation with Mr. Percival
Roberts, Jr., who was president of the American Bridge Com-
pany, and the leading man in that company. He had previ-
ously been a dominant factor in the Pencoyd, and was a man
of large experience, and I would say of great ability, if he
were not in the room.

I will say this, that Mr. Roberts' statement in regard to
the Bridge Company's properties, and his opinion concern-
ing them, would be accepted by any one who knew him well ;
and we needed those properties, and if we could get them at
a fair price we decided to take them over.



ELBERT H. GARY. 4751

Q. What was the particular need you had for those prop-
erties, or, putting it in another way, what particular use did
you see for those properties in your organization?

A. Well, to add to our finishing capacity, take over a com-
pany that was buying steel of other companies, secure plants
located near the seaboard, and utilize particularly to good ad-
vantage in our export trade.

Q. What other companies did you allude to as companies
from which the Bridge Company was buying; your own or
others ?

A. The Carnegie.

Q. You mean they were buying from your companies
within the organization; not from competitors!

A. No, I mean from the Carnegie Company, largely. You
see, in this whole plan, Mr. Lindabury, there was an effort
made to acquire properties that would be useful to each other,
and by that I mean to acquire a plant that furnished certain
commodities to another plant which we were acquiring, and
to acquire the latter because it could, at good advantage, se-
cure the products which it needed for its uses, and so all
through the line, from the ore down to the conversion from
one product into another, and the final distribution of the
finished product.

Q. Yes. That pretty well answers the question, but what
I was going to ask in particular was how the acquisition of
the Bridge Company's properties rounded out your scheme
or plan of organization. Perhaps you can add something
to what you have said; I do not know. What defect, if you
please, in the rounded out propositin, was supplied by the
taking over of the Bridge Company?

A. I should say the structural business, the fabrication
of structural material, and also the erection of the fabricated
material; it was another branch of business.

Q. That is what I wanted to bring out.

A. An additional branch of business.

Q. Did you, up to that time, have any concern which put
structural material in final form for use by the consumer?

A. We did not; certainly to any extent. It has been men-
tioned that the Illinois Steel Company had a, small fabricating
plant at the North Works in Chicago ; that was not of very



4752 ELBEET H. GAKT.

much importance; it was a good business, there was enough
of it to show that it was a splendid business, but I think those
works secured their shapes largely from the Carnegie Steel
Company and fabricated them to some extent, and did some
little erecting, but that was a plant of very little importance
by comparison. But we needed the American Bridge Com-
pany to round out and establish ourselves in this important
branch of the business.

Q. You had no fabricating mills whatever in the East,
did you?

A. We did not.

Q. And the one in the "West was small?

A. Yes; really not large enough to be mentioned except
for the purpose of trying to be accurate.

Q. Judge, did you reach an agreement with the owners
of the Bridge Company?

A. We did.

Q. As well as with the Eockefellers, as you have told us?

A. Yes.

Q. And did you offer the terms that you agreed upon with
them to the minority stockholders?

A. We did.

Mr. Dickinson : I object to the testimony of the witness in
respect to the terms offered the Eockefeller interests and the
minority stockholders, on the ground that the witness has not
been shown to have been present or to have been familiar with
the agreements reached between the Morgan interests and the
Rockefeller interests in respect to the sale of the Rockefeller
holdings in the Consolidated Ifon Mines.

Q. I show you the Morgan circular letter of April 2, 1901,
addressed to the stockholders of the American Bridge Com-
pany and the Lake Superior Consolidated Iron Mines, and
ask if you recognize that. (Handing paper.)

A. I do.

Q. Do you know whether this was published in the news-
papers and given considerable circulation or not?

A. It was like all the rest, very extensively published.

Q. And at the time?

A. And at the time.



ELBERT H. GARY.



4753



Q. In the press.
A. In the press.



Me. Lindabury : I offer that in evidence and ask to have it
marked as an exhibit.

(The paper referred to was thereupon marked "Defend-
ants' Exhibit (Gary) No. 56, May 28, 1913," and will be found
in the volume of exhibits.)

Mr. Dickinson : Defendants ' Exhibit Gary No. 56, being a
circular of April 2, 1901, is excepted to as incompetent, irre-
levant, and containing self-serving statements, and the state-
ment in respect to the terms upon which the holdings of the
Rockefeller interests in the Lake Superior Consolidated Iron
Mines were to be acquired is especially excepted to as self-
serving and hearsay.

Thu Witness: If anything was ever extensively adver-
tised throughout the United States, it was the organization
of the United States Steel Corporation, and every step.

By Mr. Lindabury :

Q. Judge, in your conferences with your associates of the
Federal Board of Directors and with Mr. Morgan prior to the
resolution to go ahead and accept the offer of Mr. Carnegie,
was the matter of obtaining an advantage by suppressing
competition or acquiring a monopoly alluded to or discussed
in any way?

A. It was not.

Q. Was that suggested by anybody as a reason or motive
for putting these companies together, or buying the Carnegie
Company?

A. It was not.

Q. Was the matter of suppressing future or threatened
or not yet developed competition on the part of any of these
concerns taken over mentioned or considered as a reason for
your scheme?

A. It was not.

Q. Was the purpose of Mr. Carnegie, if he had such a pur-
pose, to go into the tube business, discussed or considered
in that connection?

A. It was not.

Q. Was it alluded to in the deliberations that you have
told us of?



4754 ELBERT H. GABY.

A. No, sir.

Q. By anybody?

A. No, sir.

Q. Was it ever mentioned to you by Mr. Morgan as a
reason for Ms going into the matter and financing it?

A. It was not.

Q. Or by anybody else whom you met and who went in
with you into the matter?

A. No, sir.

Q. Had you, or had any of your associates, so far as you
know, any purpose in organizing the United States Steel Cor-
poration of suppressing competition, restraining trade or ac-
quiring a monopoly?

A. No.

Q. Was anything said or done in that connection by the
others that came to your knowledge, indicating that that mo-
tive or purpose actuated anybody who went into this venture
with you ?

A. Nothing whatever.

Q. Were you aware, at the time you purchased these vari-
ous companies, by the purchase of their stocks, — I mean the
companies that came to be the subsidiaries of the United
States Steel Corporation — that they had been originally or-
ganized, if they had been, or that they were then, if they
were, monopolies or concerns engaged in restraining trade?

A. I was not. I must add there that I had some personal
knowledge of the fact that some of the wire companies which
had been consolidated had to some extent been in competition.
I do not desire to deny that. I had some knowledge in regard
to the wire business ; not very much.

Q. Did you know or did you consider at the time that
the American Steel & Wire Company, which was what you
took over, was a monopoly or existent in restraint of trade, or
was engaged in restraining trade ?

A. I did not.

Q. Do you remember that these companies, all or any of
them, had been investigated by authority of Congress, by
some committee, a year or two before?

A. Do you refer to the Industrial Commission?

Q. Yes.



ELBEKT H. GARY. 4755

A. I knew something about that, yes ; because I appeared
before it.

Q. The Federal Steel was investigated with the others,
was it not?

A. Well, if you call it an investigation.

Q. Its organization was inquired into and publicly de-
veloped, was it not?

A. Yes, it was.

Q. And was that true of others of them?

A. Yes, sir.

Q. The hearings were public?

A. They were.

Q. And the organization and plan and scope and capital-
ization of each of them was gone into publicly, was it not?

A. Yes, sir.

Q. No complaint, so far as you know, against any of these
had been entered by the Department of Justice, or any other
Department of the Federal Government at the time, had
there?

A. No, sir.

Q; Did you or did your associates, so far as you know, take
over any of these subsidiary companies upon the idea or
theory that they had a monopoly?

A. We did not.

Q. Were they, any of them, acquired upon the theory
that they then were restraining trade, or that through their
instrumentality you might be able to restrain trade in any
steel products ?

A. I should say no ; quite the contrary.

Q. Were any of those concerns bought at a price in excess
of what it was necessary for you to pay in order to get them?

A. No, sir.

Q. Was the price of each negotiated down as far as it was
possible to do?

A. It was.

Q. Were or were not these companies, taking them all to-
gether, according to your judgment at that time and now
worth to the Corporation the price that it paid for them in
its stock?

A. Yes.



4756 ELBERT H. GAE.T.

Q. I will ask you separately now with respect to the Lake
Superior Consolidated Iron Mines and the American Bridge
Company?

A. The same answer.

Mb. Dickinson: In addition to the objection previously
reserved in respect to any declarations of m'otive or purpose,
or conversations that passed between the Morgan interests
and the various other parties concerned in the formation of
the United States Steel Corporation and its subsidiaries, I
except to the foregoing testimony, on the ground that it is
not shown that the witness was present at all of the foregoing
negotiations, nor to have had knowledge of what passed be-
tween the various parties.

I further except to all statements of reasons or purpose
as self-serving.

Q. Judge, there were other steel companies in business
at the time the United States Steel Corporation was formed
that were not taken over, were there not?

A. There were a good many.

Q. Will you give the names of the principal ones that
occur to you?

A. I can give the names of some of them ; Jones & Laugh-
lin, the Lackawanna Steel, the Eepublic Iron & Steel, the
Cambria Steel, the Pennsylvania Steel, the Maryland Steel,
the Bethlehem Steel; I think the Inland Steel was started;
Ihat has grown to be a big company since ; the Ashland Steel.

Q. I think that is enough, Judge, unless you have some-
thing in mind you want to add. Did you make any attempt
to acquire these?

A. We did not.

Q. Mr. Severance suggests that the Colorado was a con-
siderable concern ?

A. Yes ; the Colorado Fuel & Iron, located at Pueblo, Colo-
rado. There were a good many others.

Q. There were a great many others?

A. Yes.

Q. We have the representative ones. Some of the others
were the Worth, Lukens, and others.

A. Yes. I am not talking of companies like that. There
were lots of them.



ELBEET H. GARY. 4757

Q. I did not mean to include those in my question.

Mr. Dickinson: Your question was as to the principal
ones.

Mk. Lindabxjry : Yes; the principal ones that came to his
mind.

The Witness : I have mentioned the leading ones that now
come to my mind.

By Mr. Lindabury :

Q. Yes. Upon what principle did you make your selec-
tions?

A. On the principle of securing what seemed to us to be
the best located companies, with good facilities for carrying
on their respective branches of the iron and steel industry
in such a way as to accommodate one another and to form
and complete an organization which would give us a self-con-
tained, complete, rounded-out business proposition that would
enable us to manufacture at the lowest cost all of the prin-
cipal forms of finished steel for sale in all parts of the world.
We did not secure or attempt to secure any of the other com-
panies, although we might have done so ; we might have se-
cured them; because, in our opinion, we did not need them
for the business purposes which I have stated.

Q. In so far as any of these companies' plants were dupli-
cations was that purely incidental or with a purpose 1

Mr. Dickinson : Objected to as leading and indefinite.

A. That was incidental. I say conscientiously there was
no effort or disposition on our part to secure a monopoly or
to restrain trade. Our intention and our effort was, and has
been, to extend trade and to foster competition ; and we have
done that.

Q. And how far, anyhow, did this duplication extend?
Perhaps others can give it more in detail, but you, I imagine,
can give it pretty generally.

A. I can do it to some extent. For instance, the Carnegie
Company and the Illinois Steel Company each manufactured
large quantities of rails.

Q. And therefore had duplicate rail plants ?

A. And therefore had rail plants.

Q. Excuse me for interrupting you.



4758 EI/BEKT H. GARY.

A. They were to some extent in competition; but it is
difficult to define competition in its natural and general sense.
The Carnegie Company, for instance, could and did at times
in previous years sell steel in small quantities in the Chicago
district at a price lower than the Illinois Steel could make
those rails for if proper charges and proper accounting were
made. To that extent there was a competition. The Car-
negie Company could sell a majority of rails perhaps else-
where at a different price if they wanted to, but sell their
rails out in that district, as a matter of retaliation, or for any
other reason, and could do what they came very near doing
at one time, namely, force the Illinois Steel Company into the
hands of a receiver. In 1896, if I am not mistaken, the Illinois
Steel Company came very near going into the hands of a
receiver. The papers were drawn, in fact.

Now, the Illinois Steel could retaliate, but I do not think
that kind of competition is such competition as I ought to
consider in answering the previous question. These respect-
ive companies had a natural territory, and so far as the bulk
of their products was concerned, they were not in competition.
I cannot conscientiously say that there was no competition
between these companies. There was some, but that kind of
competition was incidental to the general business purpose
and manufacturing idea of the different companies.

Q. So what you would term the normal competition be-
tween them on rails was not very great?

A. That is true. There is a great market in and about
Pittsburgh, and east of Pittsburgh, and in foreign countries,
for the Carnegie steel. At one time the Illinois Steel Com-
pany had a little foreign business, particularly in rails, be-
cause in those days the freight rates were so very low that
they could send their rails to San Francisco and thence by
water to Japan, and perhaps some other countries. It was
comparatively small, but the Illinois Steel Company did not
have many opportunities for doing export business. On the
other hand, the West, Southwest and Northwest from Chicago
is a very great and growing market for steel products, and it
is essential to a successful manufacturing company to have
plants in those various districts, and so in our opinion it was
desirable and necessary to have them both, because that



ELBEET H. GARY. 4759

was the best way, the most economical, from an economical
standpoint, the right thing to do in forming a corporation with
the plants and for the purposes which I have named. As I
have stated, there was some competition, and we had to pur-
chase plants, if we could, that had some competition. Such
competition was incidental to the project.

(After the latter part of the above answer was read by the
.^enographer:)

The Witness: That does not correctly represent exactly
what I intended to say. I intended to say that in purchasing
plants which we needed for the purposes I have stated, we
secured those which had some competition; but that was in-
cidental.

Q. "Was it possible for you to find plants having the facili-
ties that you needed for your scheme without getting plants
that were to some extent in competition with some of the
others ?

Me. Colton : I object to that question as leading.

The Witness: I do not think it was. We secured the
plants which were obtainable on a fair basis, and which were
the best fitted for the purposes I have named; and although
this included the purchase of plants with some competition,
that was incidental and slight by comparison; that is, slight
when the whole proposition was considered. In saying that,
I do not intend to modify anything I have previously said,
or change the facts in any regard concerning particularly the
question of rails, which I have already referred to.

By Mr. Lindabury :

Q. Roughly speaking, Judge, what percentage of the
Illinois Steel Company's trade was west of the Indiana and
Ohio line?

A. Well, I would say from 95 per cent upwards. That
would be my estimate.

Q. Substantially all of it?

A. Yes.

Q. What percentage of the Carnegie Company's trade was
east of that line?

A. East of the Illinois line?

Q. The Ohio-Indiana line.



4760 ELBEKT H. GARY.

A. I should say a very large percentage of it, certainly.

Q. So that each company had in effect a separate field for
its activity?

A. Largely so, of course.

Q. A substantial part of the business of each was in differ-
ent territory?

A. Yes ; they lapped over, as I have stated, and some times
extended beyond any reasonable boundary. Of course I
haven't the figures before me, and I may be in error; I am
giving you my best impression.

Q. And did this product of the Carnegie Company which
went west of the Ohio-Indiana line consist in part of things
that the Illinois did not make?

A. Yes, it certainly did ; the Carnegie Company.

(By request, the stenographer repeated the pending ques-
tion and answer.)

The Witness : I was going to add to my other answer, if
I might, that the Carnegie Company owns a railroad from
Pittsburgh to the Lakes, and may have, and quite likely did,
in that way, during certain seasons when the water naviga-
tion was open, sell some products to the Northwest ; also they
did at times, when the water in the rivers was very high,
which was for a limited period, sell some commodities in the
Southwest that went by river, and therefore to some extent my
answer previously given might be modified, but its market
largely, I should say, was in the vicinity of Pittsburgh and
east of Ohio and Indiana, certainly east of Illinois.

Q. What I was desiring to know was simply whether or
not the substantial markets for the two companies were in
different territories.

A. I should say yes.

(Whereupon an adjournment was taken until tomorrow,
Thursday, May 29, 1913, at 10:30 o'clock a. m.)



ELBERT H, GABY, 4761

SIXTY-SIXTH DAY.

Empiee Building,

71 Beoadway, Neiw Yoek City.

Thuesday, May 29, 1913.

Before Special Examiner John Arthur Brown.

Present on behalf of the United States, Mr. Colton.
Present on behalf of the Defendants, Me. Lindabury, Mb.
Severance, Mr. Bousing and Mr. Reed.

ELBERT H. GARY,

the witness under examination at the taking of the adjourn-
ment, resumed the stand.

DIRECT EXAMINATION (Continued) :

By Mr. Lindabury :

Q. You testified yesterday to the competition between the
Carnegie Company and the Illinois Steel Company as to rails.
I do not remember whether you spoke further or not, as to
whether there was competition in addition to those, and if so,
its extent or character. I think you did not.

A. I would prefer to leave the question of exact tonnages
of competition to others who can give the figures and who
have given the figures; but I feel certain that there were
many lines of business in which the Carnegie Company was
engaged that the Illinois Steel Company was not engaged in
manufacturing; and the Illinois Steel Company was manu-
facturing lines that the Carnegie Company was not manu-
facturing. I can mention those in detail more or less if it
is desired, but I would rather refresh my recollection. I was
very clear with reference to all those facts at the time of the
organization of the United States Steel Corporation. I have
given the reasons why there was not so very much competition.
Take the subject of rails, for instance, that I referred to
yesterday. The Carnegie Steel Company was prepared to



4762 ELBEET H. GARY.

make, and was making, a very large quantity of open lieartli
steel, which, was coming more and more into use. The Illinois
Steel Company made very little open hearth steel, compara-
tively speaking. The railroads were beginning to demand
open hearth steel for rails, and it was being demanded for
other uses. The Carnegie plant had a big start in that re-
spect. The Illinois Steel Company did not have the money
to extend its open hearth steel capacity as it needed to do.
Perhaps in another connection, if I am inquired of and go
into that question at all, I will state something in a general
way as to the growth of the manufacture of open hearth steel,
with which I am acquainted in a general way.

Me. Colton : I object to so much of the answer as states
his feeling or opinion, and not stating facts, which are called
for.

By Me. Lindabuey :

Q. Was the Lorain Company in competition with any of



Online Librarydefendants United States Steel Corporation and othersAction brought under the Sherman antitrust law of 1890 → online text (page 16 of 30)