United States Steel: A Corporation with a Soul

by Arundel Cotter

But the management of the big company had the foresight to realize that a new day was dawning and, to help to make the morning of that day brighter, it adopted the policy of candid treatment of competitors, the principle of coöperation. Possibly its motives were not entirely altruistic. The Corporation itself benefited, as appeared later, from its course of action. However this may be, it sought to make friends rather than enemies of its competitors.

In this it had no easy task, for the trade had too long been used to fear gift-bringing Greeks, to view with suspicion every unhostile act of a competitor, to believe that business could possibly be done on the higher plane adopted by the new consolidation. “Live and let live” was then unknown in business, or, at least, in the steel trade. But gradually the fears alluded to were overcome and the steel trade changed, or its methods did.

The Steel Corporation was an evolution, the natural result of the integration in the industry that had been going on for many years. In it were concentrated into a single organization all the processes of steel making from ore mining to the manufacture of the most highly finished products of all kinds, including transportation. And the evolution was not merely a physical one. The new company stood for development along the lines of modern thought of business methods and practices.

It was a fortunate thing that the Corporation from its organization had as its chief executive officer a man far-sighted enough to see that so vast an enterprise must avoid unfair practices and methods that, even if fair legally, were hardly so morally, if it would live itself; a man with sufficient acumen to realize that the Corporation’s very strength contained the germ of weakness, and to guide it clear of the dangers to which it might otherwise easily have fallen prey.

In formulating its policies governing competition the Corporation had a difficult course to steer. The laws governing the actions of big business in the United States were by no means clear and for that matter, are not so to-day. On one side was Scylla and on the other Charybdis. To obey the law, the Corporation was bound to engage in active and sustained competition with other steel makers; at the same time, it had equally to refrain from any act which might be interpreted as an attempt to take advantage of its great size and resources and to overdo this competition.

In endeavoring to avoid the legal rocks, the Corporation, perhaps naturally, did not meet with the most complete success. Indeed, to do so would have been impossible, as there is no true middle course between competition and coöperation—the best that can be hoped for is a compromise.

It is interesting to note that the Government, in attacking the great company, charged it with doing both the apparently forbidden things, drawing from the Supreme Court the suggestion that these charges were paradoxical and presented contradictions. Said the Court: “In one, competitors (the independents) are represented as oppressed by the superior power of the Corporation; in the other, they are represented as ascending to opulence by imitating that power’s prices, which they could not do if at disadvantage from the other conditions of competition.” And the Court naturally asks, respecting competition: “Are the activities to be encouraged when militant and suppressed or regulated when triumphant, because of the dominance attained?”

This same idea was suggested by Judge Gary in his testimony before the Stanley Committee, where he said:

It has seemed to me that the Sherman Law, so-called, has two different provisions that, in their application, are more or less antagonistic one to the other. One provision is against monopoly and the other is against restraint of trade. If one manufacturer should undertake to enter into any combination or agreement, expressed or implied, to fix prices, to restrict output, to divide territory, it would be considered an arrangement in restraint of trade and inimical to that provision. On the other hand, except for some basis whereby destructive competition could be avoided, whereby the old methods of doing business under which, as you probably know, a few only of the steel companies were allowed to survive and do business, and a large majority were wrecked; if we should enter into that kind of competition, it would mean that a large percentage at least of the manufacturers of steel would be wrecked; and that would secure to the survivors, to a greater or less extent, a monopoly; and our effort was to find a position between those two extremes and what we have done has been open and aboveboard, whether right or wrong. We have met and laid our business on the table, so to speak, telling one another frankly and freely just what we were doing, and while that has not maintained prices, that has not prevented a good deal of cutting by different ones at different places and times; while it has not controlled the business in any sense of the word, yet it has had a very steadying influence, and has prevented the destructive competition to which I have adverted. That is the frank and honest statement of facts, whether they are justified or not.

In its answer to the Government’s charges, the Corporation claimed that, far from restraining competition, it had fostered it, and the majority of its competitors themselves swore to the truth of this defense. The United States District Court, before which the suit was first tried, pointed, in summing up, to facts and figures of the growth of competitors which fully and completely substantiated the Corporation’s claims. These figures showed that the Corporation’s business from 1901 to 1911, in which year the suit was brought, had increased over 40 per cent., but that in the same time the Bethlehem Steel Co. had shown a gain of 3,780 per cent. in business, the La Belle Iron Works of 463 per cent., Jones & Laughlin Steel Co. of 206 per cent., the Cambria Steel Co. of 155 per cent., the Colorado Fuel & Iron Co. of 153 per cent., the Republic Iron & Steel Co. of 91 per cent., and the Lackawanna Steel Co. of 63 per cent., to say nothing of the rise and expansion of entirely new companies, such as the Youngstown Sheet & Tube Co., during the same period.