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to take a certain tonnage of tin-plate bars, and even to compensate the Germans with so much per box for tin-plate tonnage lost through such a deal. He could not have gone further than this, and although he did not give evidence of it at the time he was thoroughly annoyed and disappointed at the final trend of the negotiations.

Personally, I do not think that Dr. Poensgen is bluffing and making this proposal with a view to obtaining some unreasonable concession in quota. He said that he would discuss Sir William's bar offer with his directors and will revert to the matter in the course of the next 10 days. Therefore, the next move is up to them and in all probability a further meeting will be held in London to explore the situation.

You might be interested to know that the Germans themselves stated that they are losing money on every box of tin plate which they are selling. Their costs range between reichsmarks 14.50 and 15 per base box. They went through their costs in the most elaborate manner for our benefit and although their losses are clearly tremendous at a price equivalent to reichsmarks 12 per box they stated that in view of the necessity of maintaining employment and to the greatest possible extent shipping finished products now the markets on semifinished were closed to them, they are sparing no effort to mak these sales, and are rather proud of the fact. They are running at about 150,000 tons annually.

In conclusion we might mention that Sir William suggested an interim agreement of 6 to 9 months while the British-German semifinished situation could be developed, but I said that for obvious reasons you were not interested in this at the present time but would gladly enter into an agreement provided it was for a period of years, as it must have been clear to them that we were not anxious to tie our hands while holding such a weapon as the depreciated dollar.

It might also be well to mention that Mr. Goldberger has been sounded out and that he is agreeable to an agreement on "very reasonable terms." Yours very truly,

S/ J. O. OUTWATER.

EXHIBIT S-66
Dr. ERNST POENSGEN,

Dusseldorf.
DEAR DR. POENSGEN: Many thanks for your letter of the 19th.
Quota.—I do not quite understand your attitude in this respect.

I beg that you will realize the unemployment question in the tin-plate trade is certainly more serious in England than in Germany, and is even serious in America, and the quotas America and Wales have agreed to, definitely involve keeping idle a great number of their mills and their work people.

If pending negotiations with France, Dillingen, and Italy, you do not observe the 16 percent quota, it would be quite impossible for me to persuade America, and my Welsh friends, to observe their quota, and the result will be a scramble for available demand.

(Handwriting: How can they "observe quota” when no one knows what sales are? J. 0. O.)

At the moment, America and England are not only observing the quota, but are holding to a minimum price of the equivalent of 17 s. 3d. f. o. b. Swansea.

Meanwhile, the Americans are repeatedly cabling to the effect that you are underquoting them in Sweden, and in Japan, and are becoming very restless.

It would be immensely helpful if for at least 2 weeks you would conform to the higher price and restrict your sales to within quota limits, while I make a special effort to setlle ! ! with Dillingen, France, and Italy. (Underscoring (italics) and exclamation points in ink.)

Am I to understand quite definitely that if we fail to come to terms with the three latter friends, the whole project must be abandoned, and we must all fight

for the business, i, e. do you find it impossible to entertain my suggestion that · it would be to the advantage of Germany, America, and England to remain

bound by the quotas already arranged, and to agree to a minimum price and take the risk of the Dillingen, France, and Italy underquoting us?

Do you fear with this freedom they would make substantial ! ! inroads into available demand? [Exclamation points in ink.]

I shall be glad of your definite reply on this point, because negotiations have now been so protracted (most certainly through no fault of yours) and the situation is consequently so sensitive in Wales, that unless I can get a favorable

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reply on the above point within the next few days, I am afraid I will not be able to hold either America or Wales to the existing price of 17s. 3d., which we could so easily increase to 17s. 9d. if we were in agreement.

I shall be grateful to you for a definite reply and shall take your advice in this matter feeling you know so much better than I do the potential competitive strength, and possibility of expansion of competition from France and Dillingen. I believe we shall get the Italians in, but I am very uncertain about the Dillingen and French. They leave me with the impression they would like to play with the situation, and if you are of opinion we cannot afford to let them play with it, the sooner we abandon the effort and resort to free prices, the more peaceful, if less profitable, will my life be.

You speak of a possible meeting in London on June 15 with the French and Mr. Roger-23 days hence. It is not possible to do something before then? I cannot hold the fort so long.

Norway.This is a simple problem, which I suggest can be left for discussion after the more difficult problems referred to above have been settled.

Accounting and distribution of orders. The proposal is to start off on the assumption that world exports will be no bigger than last year, and to calculate our tonnages in accordance with percentages of that figure, such figure to be modified from time to time in accordance with experience for example-since the Paris meeting, we know that world exports for the 3 months ending March 31, 1934, approximate 207,000 tons as against 169,000 tons for the same period last year.

(Handwriting: This is sheer nonsense. J. 0. O.)

On this basis, during the 3 months Germany would not have exceeded her quota if her shipments approximated 33,000 tons, i. e. about 11,000 tons per month, but if the same expansion is not disclosed in the April June figures, which would have to be watched from month to month, Germany would have to !! slightly reduce her shipments. (Exclamation points in ink.]

The idea was to exchange with each other our current commitment figures, and forward sales figures and current sales weekly and monthly, so that we could, as far as possible, keep our respective selling positions within our quotas.

To enable us to do this, the Americans have formed a central association to control their exports, and the Welsh trade have agreed to form a central association to control their exports, and this association will control all the sales that are at present being made by individual merchants, enforcing them to observe the minimum prices fixed from time to time by the parties to the agreement.

Record of Paris negotiations.-I enclose copy herewith. I regret it has not been sent you sooner. Kind regards, Yours sincerely,

W. J. FIRTH. (Line drawn in and following in handwriting: The Germans simply cannot understand this as they take a certain knowledge for granted. J. 0. O.)

EXHIBIT S-67

OFFICE OF THE ASSISTANT TO THE ATTORNEY GENERAL

WASHINGTON

Re investigation-Price of steel rails

FEBRUARY 24, 1933. MEMORANDUM FOR THE ATTORNEY GENERAL

It is recommended that a bill in equity be filed against the Steel Export Association of America, United States Steel Corp., Bethlehem Steel Corp. and the several subsidiaries of the last two corporations concerned in the facts below stated, charging these defendants with having entered into a combination und conspiracy to fix and maintain the price of steel rails in the United States in violation of the provisions of the Sherman Anti-trust Act. The allegations of this bill should be sufficient in law to support a decree enjoining these defendants from every kind of an agreement or understanding entered into either in this country or abroad which would have the effect of fixing or maintaining prices in violation of the Sherman Act.

I. HISTORY OF INVESTIGATION

On February 11, 1931, the Interstate Commerce Commission wrote to the Attorney General stating that pursuant to the provisions of the Clayton Act carriers had been submitting to the Commission bids received by them in response to their advertisements for various kinds of supplies. For several years past these reports relating to the purchase of steel rails disclosed “almost complete uniformity in the base bid prices quoted to the railways by bidders in the same region.” The Commission did not express the view that the Federal antitrust statutes had been violated but transmitted to the Attorney General this information accompanied by certain annexed schedules of data, which "suggests that such violations may have occurred.”

In March 1931 the Attorney General also received a letter from Senator Couzens, Chairman of the Senate Committee on Interstate Commerce, culing attention to the fact that there had been no variation in the price of steel rails for many years. At about the same time Leonard S. Ayres, statistician for the Union Trust Co. of Cleveland, published a historical statement embodying his views on this subject, intimating that a combination existed and Professor Ripley of Harvard conferred with Mr. O'Brian informally on several occasions emphasizing the same point. An investigation was immediately set on foot. Mr. Fassett first made a compilation of data; shortly thereafter the whole subject was assigned to Mr. Amen who has since conducted the work on behalf of this Department.

The data transmitted by the Commission showed that during 1929 purchases of new rails made by class I steam railroads amounted to $92,000,000. The average monthly price of steel rails was $30 in 1914 and 1915; but, commencing with the price of $34 in 1916, it fluctuated continuously until October 1923, when the quoted price for the manufacturers became $43. The highest price was $57 in 1918; the price for 1922 was $40.75. Commencing with October 1923, the price bid by all companies remained fixed at $43 for 9 years until October 1932, when the quotations were changed to $40. The Commission pointed out that certain accessories for rails, namely, angle bars, track bolts, and railroad spikes, also remained at relatively the same prices from 1923 to 1930. On the other hand, the prices of open-hearth steel billets steadily declined year by year from $41.75 in 1923 to $31.84 in 1930. During the same period tank plates similarly declined per pound from $2.43 to $1.69; structural shapes from $2.43 to $1.69; automobile body sheets from $5.19 to $3.64; and the composite price of finished steel from $2.73 to $2.20. The memorandum of the Commission further stated :

"From 1923, the year in which the price of steel rail was stabilized at $13, to 1930, the price of steel billets fell from $41.75 to $31.84, or 23.74 percent. If there had been a proportionate decrease in the price of rail, the $43 price w.vuld Dow be $32.79. If this percent of reduction in price had applied to a quantity equal to the new rail charged into their accounts by the class I railways in 1929 ($92,084,249), the reduction would have been $21,860,800 for 1 year."

The investigation began with inquiries made from executives and the purchasing agents of the various railroads for explanations of uniformity in price, whether the present price was reasonable, etc. Some of the agents and executives interviewed believed the price excessive; others seemed reluctant to express the opinion that it was unreasonable. At first no one could explain why the price was uniform beyond the generally voiced opinion that some arrangement existed between the makers of the rails.

In the course of this preliminary investigation, it was found that the Boston & Maine and the Southern Railway being dissatisfied with the high price had endea vored to buy rails abroad. On March 2, 1926, the Boston & Maine closed with the Krupps a contract for 11,000 tons of No. 1 rails at $31.40 and 4,000 tons of No. 2 rails at $30, including in both cases transportation and delivery. These rails proved satisfactory in quality. Shortly afterwards the Boston & Maine sought to place another order through Ferrostaal, Inc. of Essen, a sales agent, but were advised that under the new international agreement their principals were not allowed to ship rails or accessories to the United States. (Vid below agreement of March 12, 1926.) In September 1926 the Boston & Maine wrote to Krupps for quotations. After receiving an evasive reply, Krupps on November 1926 quoted them a prohibitive price. Again in the autumn of 1928 the Krupps, in reply to a request from the Boston & Maine, quoted a prohibitive price. The Southern Railway were informed by their foreign brokers that they could obtain no quotations from Belgian railmakers because the provisions of a rail-makers agreement made abroad, prohibited

the foreigners from selling steel rails in America. These facts brought the first intimation of the existence of any foreign agreement to which Americans were parties. Only four corporations manufactured and sold these rails, viz: The Steel Corp. produced 51 percent; Bethlehem 34 percent (together 85 percent); Inland 10 percent; and Colorado Fuel & Iron 5 percent. The sales by the last-named corporation were confined, by reason of freight rates, chiefly to the Rocky Mountain territory. Between 1923 and 1931 there had been a wide variation in the cost of the raw materials. Pig iron composes about 98 percent of the steel rail ; ferro manganese about 2 percent. The price of pig iron varied from the high point of $30.79 in May 1923 to the low point of $15.71 in March 1931. The price of ferro manganese varied from the high point of $128.75 in June 1923, to the low point of $80 in the year 1931. The prices of these ingredients in the year 1932 were no higher, but throughout the period of more than 8 years the prices of the steel rails quoted by the Steel Corp. and Bethlehem remained fixed at $43; did not vary through the worst of the depression when all steel companies were advertising vainly for business; and from October 1932, to this date the quoted price remains at $40.

The manufacturers are unwilling to give cost figures. Cyrus Eaton, testifying in regard to the so-called Bethlehem-Youngstown merger gave the profit on steel rails as one of his reasons for promoting this merger. He asserted that the cost of steel rails was about $28 per ton, making the profit $15 per ton upon the $43 price. This would mean a gross profit of 50 percent over cost. That the cost has not been probably in excess of $28 per ton is indicated by a transaction described below in which the Colorado Fuel & Iron in 1930 sold steel rails in Chile at a net delivered price of $28 per metric ton, breaking even on this transaction, and counsel for both Bethlehem and the Steel Corp. have admitted at conferences with Mr. O'Brian that their companies from time to time have sold rails in South America at a net price of $28 per ton during the period that the price of $ 13 was maintained in this country.

Further inquiry in this country failed to disclose additional information about arrangements with foreign makers; but, while in England in September 1931, Mr. Amen learned that some kind of an agreement had been entered into with the foreign rail makers by either the Steel Corp. or Bethlehem, or both, as early as 1926; that in 1929, the Steel Export Association, controlled by Bethlehem and the Steel Corp., had entered into a written agreement of some kind with the foreigners; and that in some way these two agreements had operated to prevent foreign rail makers from shipping rails into the United States subsequent to March 1926, and from the United States into the home domestic markets of the foreign rail makers. A request was immediately made of the officials of the Export Association at New York for permission to examine their files. Detailed contemporaneous memoranda in our files show the difficulties and impediments placed in the way of this investigation. More than a thousand letters or cables were missing from their appropriate places in the files of the Export Association and a great many of these letters and cables are still missing. The Attorney General in a conference between him and its chairman, May 1932, asked informally for the assistance of the Interstate Commerce Commission in the hope that through its inspection of the files of the carriers additional light might be obtained which would disclose sufficient information about these foreign agreements and their effect in this country. The Commission thereupon took over for the time being the active work of pursuing this investigation further.

The Bureau of Inquiry on September 27, 1932, formally reported to Commissioner Aitchison the results of its investigation. This memorandum, while containng corroborative data, did not add any new information of importance, and the Attorney General in October sent Mr. Amen to England to interview English rail makers and English railroad executives to obtain, if possible, the full story of these agreements and more particularly to obtain the names of persons who could be subpenaed to testify on deposition to all of the facts surrounding the agreements of 1926 and 1929. It was expected that Mr. Amen would complete his work in November but he did not return to this country until late December after Mr. O'Brian had resigned and left the Department. At the request of the Attorney General, Mr. O'Brian resumed contact with Mr. Amen and also with the Attorney General in January, with the result that on January 28, 1933, a letter was sent to the representatives of the Steel Corp., Bethlenem Steel Corp., and the Export Association of America formally notifying them that it was the present intention of the Attorney General to file in near future a bill of complaint charging these corporations with having fixed

and maintained prices of steel rails in violation of the Sherman Antitrust Act. These representatives immediately asked a hearing, which was delayed for several weeks due to the absence in the South of Governor Miller. At the two conferences subsequently held, Governor Miller represented the Steel Corp. and the Export Association of America and Mr. Alexander Moore represented Bethlehem. The upshot of these negotiations was that these counsel on February 16 tentatively offered to consent to the entry of a decree of injunction against their clients, provided, however, that the bill of petition and the decree were strictly limited to allegations and restraints confined to the existence and operation of the so-called foreign export agreement. They declined to consent to any decree based on allegations of a bill which "even by implication" should suggest that these two corporations had at any time entered into any understanding between themselves to fix and maintain prices of steel rails in this country.

Upon a further review of the facts in detail Mr. O'Brian told them that, so far as the attitude of the Antitrust Division was concerned, it would not recommend to the Attorney General any decree which did not enjoin all price-fixing activities of these corporations in regard to steel rails whether made in this country or abroad. (Messrs. Amen, Hardy, and Weston concurred in this view.) In addition to the other reasons herein outlined, Mr. O'Brian felt that at this late day he should not tie the hands of his successor or embarrass his successor by consenting in the last days of his administration to a decree which would have only a limited effect. He expressed the view to Messrs. Miller and Moore that so far as he personally was concerned he thought the whole matter might well go over and be dealt with by the new administration.

II. THE FACTS

Prior to October 1, 1923, the price quoted by the makers of steel rails, whether uniform or not, had varied continuously from $30 in 1914 and 1915 to $40 in 1922. From October 1, 1923, down to at least June 1931, the price of raw materials had fluctuated greatly —pig iron (98 percent ingredient) from $30.86 in 1923 to $15.71 in 1931 and ferro-manganese (2 percent ingredient) from $128 in 1923 to $80 in 1931. The price of other leading steel commodities had seriously declined-sheet billets (21 percent from $41.75 in 1923 to $31.84 in 1930; tank plates, structural shapes, accordingly. The prices of all marketable commodities had fluctuated greatly and in 1930 and 1931 had in many cases collapsed. The production of the steel industry from 1929 to the fall of 1932 had suffered the greatest decline in its history. During these last years railroads had all but ceased their purchases. During these years the defendant corporations were selling the same steel rails in foreign markets as low as a price netting them not more than $28 per ton.

In response to an inquiry the Department of Commerce advised the Attorney General that no facts are known to it with reference to prices of manufacture which would show any serious variation increasing or decreasing the price of production. Carriers since 1923 have been using the same methods of bidding for their requirements which they used prior to 1923, and the habit of ordering rails from steel plants in accordance with the transportation orders given the carries long antedates 1923.

The American carriers purchased about 2,000,000 tons of rails annually. Since March 1926, there have been no substantial shipments of rails into the United States from abroad. The memorandum of the Interstate Commerce Commission gives these figures :

Gross tons 1926_

55, 212 1927

15, 450 1928_

14, 020 1929.

6, 236 1930_

8, 307 1931.

5, 008 1 This includes the last order obtained by the Boston & Maine.

The above totals include articles accessory to rails such as fish plates, sole plates, splice bars, etc. The figures also include second-hand scrap rails, streetrailway rail, crane rail, etc., so that the importations of steel rails proper were undoubtedly considerably less than these totals.

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1 fluctuations have not been checked since that date.

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