Out of its funds it has also built large new steel manufacturing plants, especially at Gary, Indiana, the largest steel plant in the world. The tract contains about 9,000 acres, with some ten miles' frontage on Lake Michigan, and is immediately adjacent to five front lines of railways.

The best idea, perhaps, that one can obtain easily of the size and importance of the Steel Corporation's work is shown by giving the consolidated general balance-sheet of the Corporation and subsidiary companies of December 31, 1916.

The causes of the consolidation of the Steel Corporation were probably much the same as those of the other great consolidations. The Carnegie Company, besides making steel rails and the heavier kinds of steel, was planning to extend its field of operations into the manufacture of wire nails and similar products; while, on the other hand, the American Steel and Wire Company, the National Tube Company, and others, were finding it necessary to build their own furnaces for the production of iron ore and the basic steel for their more highly finished products. Moreover, several of these larger establishments had already purchased ore and coal properties and lake ore vessels so that they were rapidly becoming integrated companies which would no longer appear as purchasers of one another's products.

Again, from the financial viewpoint there were several important groups interested not only in these various manufacturing corporations, but also in the railroads, and a trade war among these large corporations would be certain to result in a depreciation of many of the securities and ultimately, quite probably, in the bankruptcy of some of them.

The movement toward consolidation in the years immediately preceding had been very rapid, and had been also apparently successful both as regards the profits that the companies were making and, what was perhaps of greater importance, as regards the real savings effected. Savings in

freight, in the better use of skilled executives, in the division of labor among the different plants, in the ability to close the more poorly situated plants concentrating the work to better advantage in those best situated—all these and other advantages were so apparent that consolidation of these many companies seemed a natural further step to take. By bringing together all of these companies there was doubtless more or less of a lessening of competition in some branches of the industry, although in no field did competition cease. Where it was least the Corporation controlled patents, giving it a legal monopoly. But probably of distinctly greater importance was the fact that through the integration of the various kinds of industries from the ore and coal mines to the highly finished products there was a greater opportunity of making savings than would otherwise have been possible.

At the beginning there was a large increase in stockholdings, and much was said with reference to the large amount of watered stock issued. In later years, it seems to be generally agreed that, owing in part to the increased demand for steel, which has affected vitally the value of the properties, but still more to the fact that the large amounts of ore and coal properties that had been secured have increased enormously in value, the actual cash value of the properties now held probably is equal to, or exceeds the value of the total capitalization.

The United States Government brought suit against the Steel Corporation in 1911. The case was tried in the district court of the United States for the district of New Jersey; and after the taking of voluminous evidence on both sides, and arguments by the ablest counsel, a decision was rendered (June 3, 1915) in favor of the Corporation. The most important point in the decision has to do with the question whether the size of a corporation or the percentage of its output in the market renders the combination illegal; or

whether the acts of the corporation itself as promotive of the public welfare, or antagonistic thereto, is to be considered the decisive point. On this point, the court, referring to the Standard Oil and Tobacco Companies cases previously decided, said:

"These cases may be taken to have established that only such combinations are within the Act (the Sherman AntiTrust Act) as by reason of intent or the inherent nature of the contemplated acts prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade." And again: "It will be seen that this case is practically one of business facts. It will be seen that in location, facilities, capital, and basic supplies they show such past, present, and prospective competition as affords just grounds for concluding that the steel and iron business of this country is not being, and indeed, cannot be monopolized, that the real test of monopoly is not the size of that which is acquired, but the trade power of that which is not acquired." And further: "We dismiss once and for all the question of the mere volume or bigness of business. The question before us is not how much business was done, or how large the company that did it, the vital question is: 'How was the business, whether big or little, done? Was it, in the test of the Supreme Court, done without prejudicing the public interests, by unduly restricting or unduly obstructing trade? The question is one of undue restriction or obstruction, and not one of undue volume of trade." These statements put the case squarely on the issues, not of verbal quibbles, or of legal technicalities, but of the public interest as shown by the actual facts.

The case was appealed by the government, and is now pending in the United States Supreme Court. Upon its decision depends not merely to a considerable degree the welfare of the Corporation itself, but what is of far greater importance,

the status of large industrial companies in the United States, presumably for many years to come. This case and that of the International Harvester Company seem to contain the necessary elements for settling definitely the position of the United States Supreme Court regarding the great corporations. When that issue is settled, the law will be known. If the Supreme Court sustains this decision of the lower court, business men may follow their consciences and fear no ill if they do not harm the community, competitors, dealers, or the public; and not only the courts, but public opinion will approve.

5.

INTERNATIONAL HARVESTER COMPANY*

A PETITION was filed, April 30, 1912, in the District Court of Minnesota, against the International Harvester Company, alleging that it had acquired and maintained a monopoly, contrary to the Sherman Act, in harvesting and agricultural machinery and implements and twine. August 15, 1914, the court sustained the contentions of the government and decreed the dissolution of the combination. The case was appealed to the Supreme Court, where it has been argued and reargued and decision is now awaited.

This case is of particular interest because in the course of this trial as well as through the report of the Bureau of Corporations on the International Harvester Company, this combination is shown to be a "good" trust. The facts indicate that it is not over-capitalized, does not use clearly predatory methods of competition, does not sell abroad more cheaply than at home, is not in monopolistic control of basic patents, does not make exorbitant profits and does not charge excessive prices. Yet the District Court decreed its

*This story of the International Harvester Company has been compiled from the government and the Company briefs in hearings before the U. S. Supreme Court in October, 1914, from the U. S. Bureau of Corporations Report on The International Harvester Co. (1913) and from Moody's and Poor's Manuals of Industrials.

dissolution. Mere extent of control in an industry, if, in the court's judgment, it approximates monopoly, seems to insure dissolution decree under the Federal Anti-Trust Acts. If the Harvester combination be dissolved by the decree of the Supreme Court it will be clear, that as the law will then stand interpreted, approach toward monopoly will not be permitted in industry of the United States, regardless of the fair methods by which the monopoly may be approached and regardless of any advantages, such as cost-cheapening or bettered development of foreign trade, that may flow from the more centralized control. At least the central issue of the anti-trust fight in the United States will then be made clear.

A brief outline statement of the history of the Harvester combination is given by the United States Commissioner of Corporations, Luther Conant, Jr., in transmitting to the Secretary of the Department of Labor his report on "The International Harvester Co." That statement, which summarized the findings of this detailed 250-page report, is here given in full:*

"The International Harvester Company was organized in 1902 as a consolidation of the five principal manufacturers of harvesting machines in the United States, namely, the McCormick Harvesting Machine Co., Deering Harvester Co., Plano Manufacturing Co., the Warder, Bushnell & Glessner Co., and the Milwaukee Harvester Co. The companies thus consolidated had in 1902 about 90 per cent. of the total production of grain binders in the United States, and about 80 per cent. of the total production of mowers, the two chief kinds of harvesting machines. The principal outside makers of harvesting machines were located in New

*U. S. Bureau of Corporations Report on The International Harvester Co., (March 3, 1913) pp. XVII to XXIII inclusive.