APPENDIX 3 MATERIAL RELATING TO TESTIMONY OF APPENDIX A DECLINE IN PROPORTION OF CAPACITY HELD BY BIG FOUR IN EARLIEST YEARCHEMICAL INDUSTRY Table 1 summarized the changes in the proportion of total capacity for, the Big Four between the earliest year shown and in 1963 or 1964. It also shows what happened to the share of the four companies which had been the largest companies in the first year of the survey. For 14 products, one or more of the largest companies had been replaced in the Big Four at the terminal date. The companies which lost their top position and those which replaced them and the effect upon concentration ratios for each product are summarized below: Acetone.-Hercules Powder replaced Publicker. The Big Four in 1959 accounted for 70.8 percent of the 1964 capacity or 5.1 percentage points lower than reported for the new Big Four on that date. Acrylonitrile.-Du Pont and Sohio replaced Union Carbide and Goodrich. The four largest companies in 1959 accounted for 58.6 percent of the 1964 capacity or 23.3 percentage points less than reported by the current Big Four. Benzene (petroleum base).-Humble replaced Shell as the largest company. Monsanto and Dow replaced Gulf Oil and Delhi-Taylor in the Big Four. The four largest companies in 1960 accounted for only 33.8 percent of the capacity in 1964 or 4.2 percentage points less than reported by the new Big Four. Bromine.-Arkansas Chemical replaced Great Lakes and Michigan-Murphy who had been tied for fourth place. The four largest companies in 1960 accounted for 87.8 percent of the 1964 capacity or 9 percentage points less than reported by the new Big Four. Epoxy.-Union Carbide replaced the Jones-Dabney division of Devoe and Reynolds. The Big Four in 1958 accounted for 83.3 percent of the i. capacity or 3.6 percentage points lower than reported by the present Big Four. Ethylene.-Monsanto replaced Gulf Oil. The four largest companies in 1959 accounted for 58.9 percent of the 1963 capacity or 3.1 percentage points lower than reported for the new Big Four in that year. Ethylene dichloride.-Goodrich replaced Pittsburgh Plate Glass and Monsanto which had been tied for fourth place. The Big Four in 1964 accounted for 55.7 percent of the 1964 capacity or 15.2 percentage points less than reported by the new Big Four on that date. Maleic anhydride.-Petro-Tex was replaced by Pittsburgh Chemical, California Chemical, and Koppers who were tied for fourth place. The Big Four in 1962 accounted for 59.7 percent of the 1964 capacity or 2.8 percentage points less than reported by the current Big Four. Methanol-Allied and Borden tied for fourth place and replaced MonsantoHayden. The Big Four in 1960 accounted for 69.5 percent of the March 1963 capacity or two-tenths of 1 percentage point lower than reported for the new Big Four on that date. Orthoxylene.-Sinclair replaced Suntide. The Big Four in 1960 accounted for 63.5 percent of 1963 capacity or 7.5 percentage points lower than reported for the new Big Four on that date. Phosgene.-Allied Chemical replaced National Airline which discontinued production. The remaining three members of the 1960 group accounted for 61.4 percent of the 1964 capacity or 14.4 percentage points lower than reported by the new Big Four. Phthalic anhydride.-Koppers and Union Carbide replaced American Cyanamid and Reichhold. American Cyanamid, one of the Big Four in 1960, withdrew from the industry. The remaining three members of the 1960 group accounted for only 44 percent of the 1964 capacity or 12 percentage points lower than the new Big Four. Polyvinyl chloride.-Cary Chemicals replaced Borden. The Big Four in 1960 accounted for 47.2 percent of the 1963 capacity or eight-tenths of 1 percentage point lower than the Big Four on that date. Synthetic phenol.-Hooker replaced Allied in the Big Four. The Big Four in 1960 accounted for 59.4 percent of the 1963 capacity or 1.3 percentage points lower than the new Big Four on that date. APPENDIX B PRICE LEADERS WHO WERE NOT FOLLOWED, 1961-1964 * Acrylonitrila.-On March 11, 1963, Union Carbide announced a price increase because price was "unrealistically low." American Cyanamid, the largest merchant producer, refused to raise prices because of the threatened loss of the industry's exports which had increased from 15 million pounds in 1961 to almost 90 million in 1962. In May 1963, it was estimated that "* * demand approximates 365 million pounds annually whereas capacity is about 560 million pounds.” Against this background of overcapacity and possible loss of expert markets, other companies did not raise prices. Union Carbide rescinded the price increase ten days after it had announced the rise (Chemical and Engineering News, Apr. 29, 1963, p. 63; Standard and Poor's Chemicals, Mar. 9, 1963, pp. C-15–16; and the Wall Street Journal, Mar. 23, 1963). Aluminum.-Early in December 1963, Kaiser Steel increased the price of aluminum ingot by 1 cent a pound. Alcoa refused to follow the higher price. Its chairman, Lawrence Litchfield, Jr., noted that such an advance at present would be "untimely and ineffective." He further pointed out that "the present world supply of the metal is too abundant to make such an increase realistic" and "until prices of aluminum fabricated products attain a more adequate costprice relationship, we regard an increase in the *** price of ingot as an action that would not be in the best interests of the aluminum industry." As a result, Kaiser cancelled the price rise. In addition, to the advance in the price of ingot Kaiser increased prices on extrusion and foundry ingots as well as fabricated soft alloy extrusions. These increases also were rescinded. On January 16, 1964, Reynolds increased the price of aluminum ingot by 1 cent a pound effective January 20. Kaiser followed suit. Again, Alcoa decided to hold the line.. Similar reasons for not following the increase were noted by Alcoa. However, greater emphasis was placed on the world market situation and they noted that there had been no advance in the price of aluminum in other countries (the Wall Street Journal, Dec. 16, 1963, and Jan. 17, 21, 22, 1964, and the the New York Times, Dec. 7, 1963). In March 1964, Aluminum, Ltd., increased the world price of aluminum (excluding North America) by 1 cent to 24 cents a pound Alcoa then increased the price here and abroad by one-half of 1 cent to 23% cents a pound. Kaiser and Reynolds followed the 2-cent increase in the United States but raised their world price by 1 cent. A short time later, Alcoa raised its world price by one-half cent a pound to the level charged by other companies because the 24-cent price appears "to be holding firm." In June 1964, the domestic price was raised to 24 cents a pound by Olin Mathieson and the other companies followed suit (the Wall Street Journal, Mar. 20, 1964, and June 9, 1964). Aluminum cans.-On October 16, 1963, Continental Can indicated that it planned "nominal" increases on its aluminum can products. Other concerns did not immediately follow the price advance. As a result, price rise was canceled (the Wall Street Journal, Oct. 18, 1963). Aluminum sheet.-On September 27, 1962, Alcoa increased the price of uncoiled aluminum residential siding sheet by 1 cent a pound although prices were below list price at the time. The higher price was rescinded on October 19 because no other company followed the rise. For example, Reynolds Metals indicated that it would not advance its price since "most of our competitors have been offering this product at the lower price" (the Wall Street Journal, Oct. 29, 1962). Aluminum sulfate.-Allied Chemical increased the price by $1.90 a ton in the Michigan territory effective August 15, 1962. When competitors failed to follow the increase. Allied reversed the price rise. Allied Chemical increased the price by $1.90 per ton for the Southern territory effective December 1, 1962. When competitors raised price by only $1, allied cut back its increase to that amount. Ball bearings.-Miniature Precision Bearings increased prices by 13 percent on grade ABEC 3 standard miniature and instrument ball bearings effective March 16, 1964. However, when a competitive firm, New Hampshire Ball Bearings refused to change its prices this rise was canceled before it was scheduled to go into effect. However, for other grades of bearings prices were increased by both firms (the Wall Street Journal, Feb. 24, 1964, Feb. 27, 1964, and Mar. 16, 1964). Brass rods. In April 1964, Cerro Copper & Brass Co., a division of Cerro Corp., increased prices by 2 cents a pound in free-cutting brass rods and other shapes and alloys. When other firms did not follow the higher price, Cerro withdrew the price rise. It was pointed out that the market could not absorb such a large increase. Cerro then joined other firms in a much smaller increase, namely only about one-fourth cent a pound (the Wall Street Journal, Apr. 17, 1964). On November 12, 1964 Mueller Brass increased prices on free-cutting brass rods. Less than 2 weeks later the company rescinded the increase since other concerns refused to follow suit (the Wall Street Journal, Nov. 24, 1964). Chloride acetate copolymer.-On December 16, 1963, Diamond Alkali posted a 1-cent a pound increase on phonograph-record grade chloride acetate copolymers. Monsanto did not follow the higher price until March 1964 but other companies increased the price by only one-half cent. In nearly April 1964 Diamond Alkali lowered its prices by one-half cent. According to a company spokesman the reduction was "made to meet lower competitive quotations" (the Wall Street Journal, Apr. 6, 1964). Fabricated copper products.-On July 27, 1964, Scovill Manufacturing increased prices for a number of fabricated copper products. However, when Bridgeport Brass, a division of National Distillers, advanced its charges by lesser amounts, Scovill cut back its increases to the Bridgeport Brass prices (the Wall Street Journal, Aug. 5, 1964). Early in June 1963, Wolverine Tube Division of Calumet & Hecla, Inc., increased the price of copper water tube and pipe effective July 1, 1963. It was reported that despite the increase, prices were "still 15 to 25 percent below those that prevailed in 1959." Costs during this period continued to advance. Increased consumption of these items since 1961 had taken place. A spokesman said that "handling such volume should be made profitable for manufacturer and wholesaler." However, severe price discounting continued. As a result, Chase Brass & Copper Co., fabricating subsidiary of Kennecott Copper Corp., cut the price to meet competition. The higher price did not hold because of the substantial price cutting (the Wall Street Journal, June 10, 1963 and Aug. 5, 1963). The Wolverine Tube Division of Calumet & Hecla increased the price of tubular copper goods by 3.22 cents a pound for the copper content on its products, effective October 16, 1964. Mueller Brass announced a straight price hike of the same amount. Both concerns reduced the price by 1.22 cents a pound a short while later to bring their quotations in line with the smaller increases by some of their competitors (the Wall Street Journal, Oct. 20, 21, and Nov. 27, 1964). Corrugated containers.-On March 29, 1963, Bathurst Containers, Ltd., of Montreal increased the price, effective May 1, of corrugated paper shipping containers by 7 percent. Since competitors increased prices only 3 percent Bathurst cut back its own increase. L. D. Richardson, president of Bathurst, said that his concern went along with the more modest increase "because the market is so competitive." On April 1, 1963, Weyerhaeuser announced a 10-percent rise in the price of corrugated containers west of the Rocky Mountains. The advance was scheduled to go into effect on some items on May 1 and on others prior to June 30. In response to an inquiry from the Wall Street Journal as to the state of the proposed increase the company indicated that: "In view of current competitive conditions, it is now apparent that we will not be able to sustain a full 10-percent price increase. However, we will increase prices on selected commodity and miscellaneous items prior to June 30" (the Wall Street Journal, May 6, 1963, news release, Apr. 1, 1963, and Weyerhaeuser reply to the Wall Street Journal, May 1, 1963). Glass fiber roving.-On October 1, 1963, Pittsburgh Plate Glass raised the price of glass fiber roving effective October 16, 1963. It was indicated that the higher price was necessary because of "deteriorating glass fiber roving prices and rising production costs in the past few years." The increase was canceled when Owen-Corning Fiberglas refused to raise prices. Pittsburgh Plate Glass said that it "had no alternative except to rescind the earlier price increase." Owens-Corning did not increase price because it intended "to help make Fiberglas reinforced plastics more broadly competitive with steel, aluminum, and the thermoplastics as basic engineering materials" (the Wall Street Journal, Oct. 1, 1963, Oct. 15, 1963, and Oct. 16, 1963). Grocery bags and wrapping paper.-Early in August 1962 Continental Can increased the prices of kraft grocery bags and wrapping paper effective September 10. However, the increase was rescinded later in August 1962. A Continental Can official stated: "It is unfortunate that other companies were not wise enough to follow our increases." A spokesman for Union Bag-Camp said that higher prices were justified but they were "illogical" in light of current conditions in the market (the Wall Street Journal, Aug. 23, 1962 and Paper Trade Journal, Sept. 3, 1962, p. 42). On October 4, 1962, Olin Mathieson announced an increase of 10 percent for grocery bags and $10 a ton for wrapping paper, effective November 1, 1962. The increase was rescinded on November 1 when other firms failed to follow it (the Wall Street Journal, Nov. 2, 1962). Hydrofluoric acid.-In August 1962, Dixon Chemical Industries, a relative newcomer, raised the price because of higher operating costs. Because of competitive conditions, none of the larger firms followed the increase (Chemical Week, Aug. 25, 1962, p. 65; Oil, Paint and Drug Reporter, Sept. 24, 1962, p. 30, and Chemical and Engineering News, Oct. 29, 1962, p. 56). Early in 1964 a price increase announced by hydrofluoric acid producers was rescinded when Stauffer Chemical refused to go along. Allied Chemical, with 25 percent of the capacity, raised the price in February and other concerns soon followed. However, Stauffer, with only slightly more than 1 percent of industry capacity, did not advance its price. The other firms started to pull back and finally Allied Chemical withdrew the price hike (the Wall Street Journal, Dec. 14, 1964). Loudspeaker magnets.-In June 1963 General Magnetic increased the price of loudspeaker magnets used for radio and television sets by 10 percent. However, competitors did not advance their prices. In July General Magnetic canceled the higher price (the Wall Street Journal, Oct. 23, 1963). Nitrogen products.-In December 1961 Allied Chemical raised the prices of a number of nitrogen products (anhydrous ammonia, ammonia liquor, ammonium nitrate fertilizer, sodium nitrate, urea fertilizer, and ammonium sulfate). Allied rescinded the price rise because it found "great reluctance" by consumers to pay the higher price and because other producers had not followed its lead (Nitrogen Division Allied Chemical Corp., News Release, Dec. 12, 1961; Chemical and Engineering News, Dec. 18, 1961, p. 19 and Jan. 8, 1962, p. 21). Outdoor oil circuit breakers.-In May 1963 I-T-E Circuit Breaker Co. increased prices by from 7 to 31 percent on many of its outdoor oil circuit breakers. Late in May, General Electric announced price reduction 8 to 30 percent on oil and air-blast transmission-class of circuit breakers. Price cutting by other concerns was prevalent at this time. Finally in July 1963 the price advance was rescinded by I-T-E Circuit Breaker (the Wall Street Journal, July 15, 1963). Perchloroethylene.-An increase was announced by Dow Chemical on August 29, 1962, and after some delay was followed by Stauffer Chemical Co., Pittsburgh Plate Glass Co., and Hooker Chemical Co. However, Du Pont raised prices west of the Rockies but would not raise prices east of the Rockies. As a result, the price increase was rescinded by the other producers. Although demand for the product (a major drycleaning chemical and solvent) was strong because of “a booming demand in coin operated drycleaners", there was concern over "further inroads by imported material" (the Wall Street Journal, Sept. 18, 1962 and Chemical and Engineering News, Oct. 29, 1962, p. 56). On November 20, 1962, Du Pont announced a price increase effective January 1, 1963. A company spokesman was quoted as saying: "We think the marketing and competitive situation has changed." Other domestic producers followed this price increase (the Wall Street Journal, Nov. 28, 1962, and Chemical Week, Jan. 5, 1963, p. 61). Plasticizer alcohols.-In December 1964, Union Carbide raised the prices of several plasticizer alcohols by one-half cent a pound, effective January 1, 1965. However, when Emjay Chemical Co. refused to increase its prices, Union Carbide rescinded the increase "to meet competitive offers being made in the market." In addition, it announced a 1-cent-a-pound allowance on these products-which represented a price cut-for the month of January 1963. The Wall Street Journal reported "The company's move is the latest in a skirmish that has seen prices in this field go up and down several times in the past 6 months" (the Wall Street Journal, December 15, 1964 and December 21, 1964). Plate glass.-In September 1963 Pittsburgh Plate Glass increased the prices of certain grades of plate glass by 7 percent. However, Libbey-Owens-Ford Glass refused to advance its prices because "imports of foreign plate glass are in very substantial volume" and a higher price "by adding to the existing price differential wouldn't improve L-O-F's competitive position." However, in March 1964, Libbey-Owens raised prices by 5 percent and Pittsburgh Plate Glass followed the increase (the Wall Street Journal, September 26, 1963 and March 20, 1964). Plywood.-In November 1962 Georgia-Pacific, the largest plywood producer, announced price increases effective the first week of January 1963. A vice president of the concern said: "The price increase follows a steady decline in field inventories of plywood since midsummer in most major U.S. marketing areas and seasonal demand is far greater than normal." A company spokesman said that they are taking some business at the new price "but not much since the higher price wasn't met by other important producers." It appears that the higher prices will be rescinded since the prevailing prices are "pretty much like they were." The tendency in the industry was toward lower prices. Effective December 31, 1962, U.S. Plywood reduced its price (the Wall Street Journal, November 9, 1962 and January 4, 1963). Polyethylene.-On January 9, 1961, Du Pont raised the price of conventional low-density Alathon polyethylene effective February 1, 1961. The proposed higher price was designed "to meet rising production costs and to cover intensive development work ***." Union Carbide, the largest producer, indicated in a letter to its customers that it was not advancing its prices because "We believe that our current prices, coupled with our long-range marketing plan to broaden the use of polyethylene, offer the best opportunities for improving your growth and profit position and for utilizing the capacity of the industry." The second largest producer, U.S. Industrial Chemicals, although agreeing with Du Pont's reasons for advancing prices, also decided against following the rise. At that time, Union Carbide was reported to have the largest capacity (600 million pounds); U.S. Industrial Chemicals had 400 million pounds; and Du Pont 300 to 400 million pounds. Du Pont rescinded the higher price on January 12, 1961 (Du Pont, News Release, January 9, 1961; Union Carbide Plastics Co., Letter to Purchasing Agents from R. M. Joslin, vice president sales, January 11, 1961; Journal of Commerce, January 13, 1961 and ibid., January 12, 1961, p. 1). Allied Chemical announced a price rise effective August 1, 1962, on low density, low molecular weight nonemulsifiable grades of polyethylene that account for a relatively small segment of the polyethylene market. Eastman Chemical announced that it was going to increase its prices by a like amount. However, Union Carbide, the only oher producer, decided to hold its price and as a result the other two firms rescinded the advance (Chemical and Engineering News, October 29, 1962, p. 56). Again, in March 1964, price increases for polyethylene film resin had to be rescinded. Dow Chemical increased the prices for polyethylene molding resins and for film resins. Although Du Pont, Monsanto and several other companies followed Dow's lead, Union Carbide refused to increase its price for film resins because "market conditions aren't conducive." Monsanto then canceled its price increase and three days later Dow and Du Pont followed suit (The Wall Street Journal, March 6, 1964, March 10, 1964 and March 13, 1964). Polystyrene.-In December 1960 Dow Chemical raised the price for general purpose resin. "When nobody else wanted to jump, Dow 'reluctantly' returned to the old listing to meet competition." (Chemical and Engineering News, Jauary 22, 1963, p. 63 and Chemical Week, January 7, 1961, pp. 31-2 and January 21, 1961, p. 69). Rexall Chemical Co. (a division of Rexall Drug & Chemical Co.), a small producer, increased the price on general purpose crystal polystyrene effective September 15, 1961. Dow Chemical, an important producer, soon followed suit with its price increase to be effective October 1, 1961. Monsanto decided to hold the price on this item because of overcapacity. However, it announced higher prices on volume color general-purpose polystyrene. |