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company that secured the work was not in a position to do it cheaper than other competitors; on the contrary, as regards certain items of cost, it was in a position of some disadvantage.
The competition quickly narrowed down to two companies, each backed by a mill.
The purchaser negotiated openly with the bidders to get still lower figures, pitting one against the other.
As the figures dropped below $36.00 per ton most bidders were out of the race; they could not pay $22.00 a ton for material and get out even. It was no longer a contest between independent fabricating companies as to which could do the work the cheaper, but a competition between two rolling mills as to which was willing to sell the raw material the cheaper, and it was evident that the fabricating company which finally secured the contract must have had an understanding whereby it secured the steel at not to exceed .90, or $18.00 per ton; otherwise it will lose heavily on the building and if it pays .90 it can not hope to do better than come out even-in other words at $18.00 per ton for material the company doing the work makes little or nothing and the profit, if any, goes to the mill; there is probably no profit to either in the contract.
But whether there is or is not a profit is not material in this connection; the point here is that the combination between mill and fabricating company shut out absolutely the competition of independent companies; they had no chance.
So far as competition and the public and fair prices are concerned it makes little difference whether a rolling mill gives a rebate on price paid for steel or whether the railroads give a rebate on the freight on the steel, the net result is a secret and an unfair advantage to the favored company as against others.
The above is not an exceptional instance; on the contrary, in the demoralized condition of all branches of the steel industry that prevailed in the latter half of 1911, the contract cited was simply one of many taken under like conditions. In their eagerness to get tonnage, the mills resorted to every device known to the old competition, and, naturally, each helped the company allied to it as against independents.
To every protest the mills replied:
"Isn't this the competition the people want? Suppose we do sell particular companies material at cost and charge others a profit, isn't that old-fashioned, cut-throat competition?"
That is old-fashioned cut-throat competition, but it is death to the independent and, in the long run, detrimental to the community, for if logically extended it means monopoly of this and that branch of the industry by the few powerful survivors.
Furthermore it must not be overlooked that between certain letters in the perpendicular line there is the big item of freight, especially important between A and B-mine and blast furnace. A combination in this line that also owns carrying facilities may save or make enough on transportation to enable it to sell all its products at competitors' cost and still make money.
The independent fabricators are caught between the upper and nether mill-stones, between the rolling mills from which they are obliged to buy and the structural steel companies owned by the mills, with which they have to compete.
A prominent lawyer connected with a large company was asked:
"Given a corporation that controls two or more units of product, has it the right to sell one unit at cost to beat its competitors in that particular line?"
"I mean, has a steel company that owns mines, furnaces, rolling mills, and—say—a fabricating company, the right to do fabricated work at less than cost to beat independent fabricators that have no connection with mills?"
"That is competition."
"Are you sure?"
"If the purchaser gets his building at less than cost, who is going to complain?"
"How about the independent that stands no show at all and is forced out of business?"
"That's his look-out; if the people want 'cut-throat' competition the company that has no mill back of it is going to get hurt."
"But does not that mean monopoly in the end by the few big companies that own both mills and fabricating companies ?"
"That can't be helped. If the big company can do the work cheaper then it is bound to survive."
"But it can't do fabricated work any cheaper, not so cheaply as the independent who is well situated locally; the big company can show a profit in its structural department only by charging against that department a low price for its steel."
"What if it does?"
"That means it charges its own subsidiary company one price and charges the independents so much more they are forced out of business. The big company uses the profits it makes in other lines to get control of the structural business."
"Isn't that competition?"
"Not the sort of competition the people will tolerate when they understand."
"Ha! it is the sort of competition every merchant indulges in when he makes a run on a particular line of goods at less than cost to drive out some competitor."
"Perhaps the day of that kind of competition is passing -furthermore all that the individual does the corporation may not do."
"What is your remedy?"
"Segregate the departments of every large corporation in such a way that every competitor against any department may know exactly what he is up against."
"Segregation that is ridiculous."
Let us make the point clearer.
2. Saw mills
3. Planing mills
insists he has the right to sell the product of any one factor at cost or less than cost if he pleases and make his profit from the other units, that his right to do so is the very foundation of competition, and if he does so and drives competitors of the particular unit out of business that is their misfortune, not his fault.
On first impression nearly everyone will agree with these notions for they not only prevail at the present time, but they have been accepted as orthodox by economists since the
days of Adam Smith, and by commercial peoples the world over so long as we have any record of commercial conduct.
This rule of commercial conduct-like many another equally "brutal"-had its origin in times and conditions when the hand of each man was raised against his brother, when trade was almost entirely a matter of gaining and pressing every advantage, of winning by fair means or foul; it was never a just rule, but so long as the contest was between individual and individual, and only the individual trader was ruined, the interest of the community was not aroused to the relentless and oppressive character of the practice.
It is the unparalleled development of organized trade and industry, the growth of what is termed "big business,” which followed inevitably the use of steam and electricity, that has demonstrated the vicious nature of many ancient trade maxims.
The people feel, and it is beginning to be clearly perceived by many thinkers, that the large corporation cannot be permitted to do things individuals have done from time immemorial, not because what is wrong in the conduct of a corporation is right in the conduct of an individual-not at all; but because the consequences of the acts of the one are so far-reaching; the individual kills off only his neighbor in trade, the corporation kills off an army of traders.
In earlier days the influence of a very rich man or a powerful association for either good or bad did not extend far, means of communication and transportation were too slow; nowadays it is different, what a rich man or powerful company does in London is felt in New York; a merchant in St. Petersburg may upset the market in Paris; men are no longer free to do what they like because what they do affects so many more that the many protest and make their protests heard.