Charges Filed in Wire Trust Case

Indictments were handed down yesterday in New York against nine wire industry associations.  They have been charged with violating sections one and two of the Sherman Anti-Trust Act.  Eighty-three men from thirty-five companies were named in the indictments, officers in the alleged illegal pools and combinations said to have the power to fix prices.  Included among them are Edwin Johnson, Jr. of New York who was named in each of the nine indictments as a supervisor and treasurer in the combinations, and William Palmer, who was named in seven of the indictments.  Palmer is the President of the American Steel and Wire Company, a subsidiary of the United States Steel Corporation, and is a director in the Steel Trust.  Herbert Satteriee, a son-in-law of J. P. Morgan, was also indicted, along with Frank Gould, president of the Old Dominion Iron and Nail Works, and Charles Morgan, a Republican Party Committee member from Connecticut.

The associations named in the indictments are: the Bare Copper Wire Association, the Wire Rope Manufacturers, the Underground Power Cable Association, the Weatherproof and Magnet Wire Association, the Horse Shoe Manufacturers' Association, the Telephone Cable Association, the Fine Magnet Wire Association, the Rubber Covered Wire Association, and the Lead Encased Rubber Wire Association.

The defendants have been charged with:

Entering into an unlawful combination and conspiracy to wrongfully and unduly restrain business, trade, and commerce in violation of Sections 1 and 2 of the Sherman Anti-Trust Law...

That all the times mentioned in this indictment the aforesaid corporations produced at their various factories in the aggregate 95 per cent of the entire amount of . . . steel wire product . . . consumed in the United States, and by association and co-operation they possessed the power to control and fix the price therefor within the United States;

That because said corporations, all such times, have been and, in fact, now are separate and distinct from each other, their said interstate business, trade, and commerce should have been and should now be conducted by each of them strictly on a competitive basis, and would have been and would so be conducted but for the unlawful combination and conspiracy by and among the aforesaid individuals . . .

As an example of the types of arrangements had, the New York Tribune looked at the case against the Bare Copper Wire Association. The Feds allege that on June 1, 1908, the defendants met in New York to form an illegal combination, which they used to conspire to restrict business and trade until the association was disbanded in November 1909.  The Feds allege that the association were to cause and procure the corporation to purchase, at arbitrary and non-competitive prices to be fixed and determined by the defendants, the raw material from which to make bare copper wire.  The prices were lower than they would otherwise have to pay or that corporations not in the association had to pay.  The bare wire that was manufactured was then sold at non-competitive prices that were higher than what it would otherwise had been sold for.

The Tribune had some reaction to the indictments from the defendents.  The supposed supervisor of the combinations, Edwin Johnson, is in Europe and could not be reached for comment but a person close to him at his office in New York said that Johnson was just the supervisor, and not the originator.  The counsels for the various companies involved signed off on the agreements and it wasn't until work had reached them that the government was investigating their associations that they began to be dissolved.  He went on to say that the associations were nothing more than social gatherings and no business was discussed at these parties among business associates.

The penalty provided by the Sherman Law is imprisonment not to exceed one year, $5,000, or both.

Link: U. S. Jury Indicts 83 Men, Officials of "Wire Trust" [The New York Tribune]
Link: Wire Trust Men Indicted by Jury in Combine Pact [The Washington Herald]
Link: Wire Trust Charged with Big Conspiracy [The Bisbee Daily Review]

Upcoming Smith Report to Show Extent of Steel Trust

It is expected that on Saturday, President Taft will submit a report to Congress by the Commission of Corporations, Herbert Knox Smith, on the extent of the Steel Trust and its effect on the steel industry. The expansive report is the culmination of a 5-6 year investigation conducted by the Bureau of Corporations.  The Washington Times suspects that the timing of the report's publication and submission to Congress is intended to allow it to share some of the public credit for dealing with the massive corporation.

According to the Times, the report will detail the business practices of the $1.4 Billion trust, how it has stifled competition within the steel industry, and how it has affected related industries such as coke, railroad transportation, and cement.  For example, the steel trust has bought up cement companies in order to prevent it from seriously competing against steel as a building material.  The Times compared this to the buying up of the beet sugar industry by the Sugar Trust.

According to the report, the Steel Trust was formed by a collection of iron, steel, coke, coal, and railroad companies that were combined by J. P. Morgan at the request of the owners of those companies.  Faced with intense competition from Andrew Carnegie who planned to build his own railroad to the Atlantic tide line, which would have made his Carnegie Steel Company as powerful as US Steel is today.  Carnegie would sell his company to US Steel in 1901.

Link: Steel Trust Mightest of All Combines [The Washington Times]
Link: Report of the commissioner of corporations on the Steel industry [Google Books]

Administration To Move Against Steel Trust

Following the successful prosecution of the cases against Standard Oil and the Tobacco Trust in the Supreme Court last month, it is looking increasingly likely that the Taft administration will move against the Steel Trust next. According to an article in today's Bisbee Daily Review, the Department of Justice and the Bureau of Corporations are finishing up their investigations into possible Sherman anti-trust law violations by the steel trust and could send the report to Taft within ten days. Attorney General Wickersham and the head of the Bureau of Corporations, Herbert Smith, have already visited the President to explain the substance of the report, but Taft is unlikely to take action, such as sending the report on to the Stanley Committee in the House.

In this matter, the Republican White House and the Democratic House seem to be in accord on taking action against U.S. Steel. The Stanley Committee has also been investigating the allegations that the Steel Trust has violated the Sherman Anti-Trust Act and have so far heard testimony from two executives on the board, Elbert Gary and John Gates. Elbert Gary is one of the key founders of U.S. Steel, along with J. P. Morgan, Andrew Carnegie, and Charles Schwab.

The report from the Justice Department was held back in order to incorporate lessons learned from the Standard Oil and Tobacco Trust cases. The decisions in those cases were delivered last month, and both the Justice Department and the White House have been reading the decision carefully. The federal government in the case of Standard Oil succeeded in having the trust declared an unlawful monopoly, and the Supreme Court ordered the company to be broken up and dissolved within six months. However, the Supreme Court also inserted a "rule of reason" into their decision, declaring that the intent of the Sherman Law was to go after unreasonable monopolies, opening up a subjective element into future cases prosecuted under the anti-trust act.  A similar decision was handed out against the American Tobacco Company.

There is one potential hitch in the government's case. During testimony given to the Stanley committee on June 2, Gary testified that U.S. Steel and then President Roosevelt and Secretary of State Elijah Root had a "gentleman's agreement" regarding the formation of the current massive monopoly. During the banking crisis of 1907, U.S. Steel agreed, at the behest of J. P. Morgan, to buy the Tennessee Coal & Iron Company at a price higher than it was worth in order to stop a growing financial meltdown. Roosevelt consented to the purchase, even though it would make U.S. Steel a virtual monopoly, in order to save the United States financial system. He also stated that the American Iron&Steel Institute was attempting to steer a course between the "archaic" Sherman anti-trust law and "the old-time method of destructive competition, in order to operate for the public welfare."

Link: Three Forces Move Against the Combines [The Bisbee Daily Review]
Link: Sensational Roosevelt Exposure by Gary [The Bisbee Daily Review]

Reyes Stopped at Havana

General Bernardo Reyes, respected by the Mexican Federal Army but despised by the rebels and their leader, Francisco I. Madero, has been halted at Havana under orders from President Porfirio Diaz.  Reyes has been suspected to be the pick to be the country's next War Minister, but Madero has ordered a detachment of his rebel army to prevent his landing at Vera Cruz and, if necessary, to place him under arrest.  Reyes had been returning from Europe where Diaz sent him to prevent him from causing problems in Mexico.  Reyes was a candidate last year for the Mexican Presidency.

According to the Bisbee Daily Review, they have a source in Mexico that says that the names of three generals have been submitted to Madero for the War Ministry post and Reyes is not among them.

Meanwhile, back in his home country, Madero has halted plans to travel to Mexico City to meet with President Diaz after reports that his life may be in danger there.  Reports of such a plan have caused great consternation in the capital and there are worries that Madero may resume the war if he and his rebels give more credence to the possibility that the government would try to capture him or have him killed.

In other news, in its first anti-trust suit since Monday's Standard Oil Decision, the Justice Department has filed suit against more than 150 individuals and 10 trade organizations that are alleged to be part of what has become popularly known as the "lumber trust."  The government alleges that these organizations conspired to constrain the trade of lumber in this country.  Attorney General Wickersham alleges that the organizations conspired to maintain high prices by maintaining agreements between the constituents of the "lumber trust" and blacklisting any retailer not in their organizations.

Link: Reyes Halted At Havana by Diaz -- Madero Calls Off His Trip [The Bisbee Daily Review]
Link: Lumber Trust Attacked by Government [The Bisbee Daily Review]

New York City and Washington React to Standard Oil Decision

On Monday, the Supreme Court issued a ruling in the Standard Oil case, declaring it a monopoly and ordering it to be dissolved within six months. Yesterday, with the ruling being the top story in all the major papers, official Washington and businessmen in New York reacted.

In New York, leading stocks rose between 1 and 3.5 points as much of the uncertainty appeared to have been lifted for many major corporations. Officials at these companies believe the settlement favors them in the long run as they can now decide how to proceed now that a distinction between "reasonable" and "unreasonable" restraint of trade has been made the law of land thanks to the Supreme Court and the legality of many of the trusts has been settled along the lines that a trust is only illegal if it was setup with the purpose of creating a monopoly of a market. Standard Oil itself initially rose 6 points to $685 a share before slipping to $665 during a reaction in heavy trading, a drop on the day of 2%.

The general counsel for the Standard Oil Company, M. F. Elliott, issued the following statement yesterday:

It may be now said that the Standard Oil Company will obey the decree of the court and that all the companies embraced in the court's decree will carry on business as usual under the direction of their own officers and through the their own organization. Having before us only the press reports of Chief Justice White's oral opinion and the remarks of Justice Harlan, and not yet having seen the opinion of the court in full, it is impossible to make any lengthy statement. The full opinion has to be read by my associates and myself before it can be intelligently dealt with.

William Rockefeller told reporters yesterday that any statements regarding the case would come from Elliot. The Board of Directors met in New York yesterday to discuss the ruling but none spoke with reporters about details of the meeting. Among those attending were John D. Archbold, vice president of Standard Oil of New Jersey, H. C. Folger, Jr., James A. Moffatt, Charles M. Pratt, Walter Jennings, brothers Alfred Bedford and Edward Bedford, and John G. Milburn, one of the special counsel for Standard during the oral arguments at the Court.

On Capitol Hill, lawmakers are expressing their opinions on the case. Wisconsin Senator Robert La Follette shared the opinion of Justice Harlan that the majority opinion went too far, "usurping the functions of the legislative branch of the government by writing into the statute a differentiation between "reasonable" and "unreasonable." La Follette brought up the message to Congress submitted by the President in January 1910 on anti-trust laws:

It has been proposed, however, that the word "reasonable" should be made a part of the statute, and then that it should be left to the court to say what is a reasonable restraint of trade, what is a reasonable suppression of competition, what is a reasonable monopoly. I venture to think that this is to put into the hands of the court a power impossible to exercise on any consistent principle which will insure the uniformity of decision essential to just judgment. It is to thrust on the courts a burden that they have no precedents to enable them to carry, and to give them a power approaching the arbitrary, the abuse of which might involve our whole justice system in disaster.

The White House in a statement yesterday expressed its disappointment that the Court reversed its rulings on two previous occasions and included a "reasonableness" standard.  However, the New York Tribune have pointed out that Attorney General Wickersham's statement seemed to suggest that the administration concurred with the ruling, but he could have just been restating what the court ruled.  Taft, in his January 1910 message, also may have agreed with the Court's current ruling, stating "a mere incidental restraint of trade and competition is not within the prohibition of the [Sherman Anti-Trust] Act."

Link: Stock Goes Up as Suspense is Ended [The New York Tribune]
Link: Mr Taft Long Favored Reasonable Regulation [The New York Tribune]
Link: Court Arouses Progressives Everywhere [The Bisbee Daily Review]
Link: Oil Trust Plan is to Obey Law as Interpreted [The Washington Herald]