The acquisitions by Bethlehem Steel during this period followed somewhat this same pattern, with the exception that Bethlehem has been more active in purchasing firms engaged in the fabrication of structural steel. Since 1930, Bethlehem Steel has acquired the following producers of fabricated and finished goods:

1. McClintic-Marshall Corp., a large firm engaged in the fabrication of bridges, buildings, tanks, river barges, and so forth.

2. Levering and Garrigues Co., another firm engaged in the fabrication of structural steel and the erection of buildings.

3. Hay Foundry & Iron Works, a third firm engaged in the fabrication and erection of iron and steel.

4. Hedden Iron Construction Co., a fourth firm engaged in the same field.

5. Taubman Supply Co., a firm engaged in manufacturing and selling oil-company supplies.

6. International Supply Co., another producer of oil-well equip

ment.

7. American Well & Prospecting Co., a third firm engaged in the same field.

8. The Buffalo Tank Corp., a manufacturer of steel storage tanks and other welded plate products.

9. Rheem Manufacturing Co., one of the Nation's largest manufacturers of steel drums.

10. Atlas Steel Barrel Corp., another producer in the same field. 11. United Shipyards, Inc., a large firm engaged in the business of building, repairing, and drydocking vessels in New York Harbor. 12. Union Shipbuilding Corp., another company in the same field. 13. Pennsylvania Shipyards, Inc., a third shipbuilding company. 14. Pacific Coast Forge Co., a manufacturer of bolts, nuts, spikes, rivets, and similar products.

15. Shoemaker Bridge Co.

The CHAIRMAN. Commissioner, it might be well to state that many of these companies acquired either by Bethlehem or United States Steel, were consolidations, or the result of many mergers. To give one example of many: The Consolidated Steel Corp., which you stated was the largest steel fabricator on the west coast, comprised of, I think, four or five companies in and of itself before it was taken over.

Mr. MEAD. Before they were taken over, that is right, Mr. Chairman. They were the outgrowth of several mergers prior to their being taken

over.

The CHAIRMAN. That applies to a number of these others who were taken over either by Bethlehem or United States Steel.

Mr. MEAD. You are quite right.

In some industries the effect of these forward acquisitions has been to give the steel companies almost complete dominance over the fabricating field. Such is the case of steel drums, which, since the war, has been absorbed almost in its entirety by the large steel producers, a movement which was succinctly described by Iron Age as follows:

Long, long ago, in 1939, before the words "postwar" and "planning" were wedded, the manufacture of heavy steel barrels and drums was a rather volatile business firmly in the hands of a large number of highly individualistic entrepreneurs. Most of these fabricators had started on a precarious shoestring and were justifiably vocal in their pride of success in the classical "Horatio Alger, pluck and luck tradition."

A few weeks ago, the purchase of Bennett Mfg. Co., Chicago, by the United States Steel Corp. pretty well completed the capture of the entire barrel and drum business by major steel producers. Some 87 percent of the business, representing about 435,500 tons of steel consumption yearly has been corralled by the mills and the remaining 64,500 tons of independent capacity will probably remain so for a variety of reasons.

That is the end of the quote, and the date is September 21, 1944, page 103.

Today, the country's leading steel producer is also the leading steel drum producer. In the steel drum industry, United States Steel shares the Pacific coast region on a 50-50 basis with Bethlehem Steel. It is the leading steel drum producer in the Houston-New Orleans area; and it is one of the leading producers in the Chicago-ClevelandPittsburgh region. Bethlehem, through Rheem Manufacturing Co., of which it owns 28.9 percent of the stock, not only divides the Pacific coast region with United States Steel, but also is a leading producer in the important Atlantic coast region, where it accounts for more than 40 percent of the steel drum industry. In adidtion, it is an important factor in the Houston-New Orleans region. All told, six leading steel companies now own more than 80 percent of the heavy steel drum capacity of the United States.

There are, of course, many other fabricating fields in which the effect of the forward acquisitions by the steel firms has not been as complete as in the steel drum industry. Among these is the steel stamping industry in which the steel companies have also entered to a significant though lesser extent. The steel stamping industry provides an example of what might be called partial absorption by the steel companies, as compared to virtually complete absorption, represented by the steel drum industry. But even in these areas, the competitive position of the smaller firms which continue to operate has been seriously undermined by the effect of the acquisitions.

The steel stamping industry, which produces a great variety of parts for other industries such as automobiles, farm machinery, refrigerators, radios, and even kitchen utensils and toys, developed almost entirely in the hands of independent stampers. In recent years, however, the large steel companies have entered the field through forward acquisitions. In speaking before a meeting of the Cleveland District Pressed Metal Institute, Mr. Tom Smith, president of the Pressed Metal Institute, was reported in Iron Age (April 29, 1949) to have stated that

the most serious problem facing the stamping industry is the accelerated encroachment through subsidiary organizations of a majority of metal producers into the stamping business.

And a year later, on May 5, 1949, Iron Age, after noting that there was a general slump in the buying of stampings, stated that some captive plants of steel producers were reverting to the

prewar practice of letting out the tough jobs (to independent stampers hungry for business) and keeping simple work that takes a lot of steel.

The effect of this policy on the small independent stamper is obvious. His field of operation tends to be narrowed to the difficult jobs and even there he must compete sharply with the large stamper perhaps becoming only a subcontractor dependent on such scraps of business as his larger competitors may turn over to him.

This problem of forward expansion by the steel companies becomes particularly acute when supplies are short. During such periods, it is only to be expected that the steel companies will channel supplies of steel to their fabricating subsidiaries, which are in competition with independent fabricators who frequently are unable to obtain steel. During the recent postwar period when steel has been in tight supply, many independent fabricators have complained that there has been an increasing flow of steel to the fabricating subsidiaries of the steel companies: that, consequently the proportion of the total steel supply available for small business has been correspondingly reduced: and that this development has been one of the principal factors behind the inability of small business to obtain steel. Typical of these complaint was the statement made by Mr. Frank A. Duerr, general manager. Troop Water Heater Co., Pittsburgh, Pa., who testified before the Senate Small Business Committee of the Eightieth Congress as follows:

Senator MARTIN. You state that you were informed by Jones & Laughlin last fall that they could not retain their contract with you?

Mr. DUZAR. Yes, sir. That was in their office, in their sales department. Senator MARTIN. And you state that it later developed, you learned, that the steel was to go to one of their own subsidiaries?

Mr. DUERR. That is correct.

Senator MARTIN. When did they acquire this subsidiary?

Mr. DUF. As far as I know they told we during that conversation that they had acquired some of these plants in 1939 and others in the last year or two. Senator MARTIN. What does this particular plant produce?

Mr. DUERR. Steel drums.

That is the hearings, part 6, page 909, the Senate Small Business Committee of the Eightieth Congress.

Similar testimony was offered by Mr. Arthur Boehm, secretarytreasurer, the Boehm Pressed Steel Co., Cleveland, Ohio, who stated:

While I was talking to Mr. Boyd, of J. & L., I inquired whether it has been a matter of policy with J. & L., and the other big mills-not Jones & Laughlin exclusively—to limit production capacity. During the war, I recall that there was quite a bit of pressure from the Senate and the Government for increased capacity of the mills. In other words, steel capacity had been critical all through the war years, and the Government wanted the steel mills to put in additional production facilities.

The answer then, by the big basic producers, was to the effect that no additional production facilities were needed. Existing capacity sufficed before the war. Why increase capacity now and have it idle after the war? Boyd said, at that time, J. & L. didn't anticipate the fact that it would take on additional subsidiaries of its own to supply. J. & L. had purchased the Draper barrel works at Cleveland, and a good bit of their hot-rolled pickled is going into the barrel works.

That is from the hearings, part 6, on page $46.

Mr. Frank R. Nichols, president, Nichols Wire & Steel Co., Davenport, Iowa, implied that the steel companies have shipped steel to their own subsidiaries in excess of the amounts permitted by the use of the so-called historical quota method:

Mr. WIMER. Have you had any indication that the large integrated companies favor their own subsidiaries who produce wire and nails?

Mr. N CHOLS. They most naturally would do so.

Mr. WIER. As far as tonnage quotas go?

Mr. NICHOLS. Naturally.

Mr. DICKEY. In other words, Mr. Nichols, you mean that the historical quota that ther› has been testimony about here, agreed to by the steel companies when

96347-50-ser. 14, pt. 4a-11

allocations were lifted, hasn't necessarily held true in the wire and nail business?

Mr. NICHOLS. It hasn't held true at all.

Mr. DICKEY. And is it your opinion, or is it a fact, as far as you know, that they are channeling more into their own subsidiaries?

Mr. NICHOLS. It is a definite fact, into their own subsidiaries and into their own finishing departments.

Mr. DICKEY. Either a subsidiary or part of their own business?
Mr. NICHOLS. Yes.

Those are the hearings, part 17, page 1897.

The facts revealed in a report of the Senate Small Business Committee completely corroborate this type of complaint by small business. The facts clearly indicate that the proportion of steel output which was channeled to the fabricating subsidiaries definitely increased between 1940 and 1947. In the case of hot-rolled sheets, which is the principal steel product consumed by the fabricating companies that have been acquired, the share of the output going into the fabricating subsidiaries rose from 5.7 percent in 1940 to 10.5 percent in 1947.

That is from "Changes in the Distribution of Steel," a report of the Senate Small Business Commitee of the Eightieth Congress, page 10. But even in so-called normal times, when steel is not tight, the expansion by the steel companies into fabricating fields constitutes a serious, potential danger to the maintenance of competion. It is only to be expected that the fabricating subsidiaries will be able to secure their steel at a lower price than their independent competitors. This would be particularly true in the event that vigorous price competition broke out between the independents and the fabricating subsidiaries.

Thus, whether steel is in tight or in normal supply, a serious problem is presented by the expansion of the steel producers into the fabricating fields. If the loophole is plugged in section 7 of the Clayton Act, that is, if H. R. 2734, which has already passed the House and is now before the Senate Judiciary Committee, is finally enacted into law, the Commission will be able to prevent certain types of acquisitions. Whether it will be able to prevent all of the types which create the particular problem that I have been discussing remains to be seen.

The CHAIRMAN. Commissioner, of course H. R. 2734, which incidentally bears my own name, would only apply to future acquistions and would not reach backward to cover past acquisitions.

Mr. MEAD. That is correct. At any event, however, as a result of the acquisitions which have already taken place, a problem now exists which must be regarded as a serious danger to the competitive system.

The third problem which I wish to discuss is what appears to be a persistent shortage of the supply of steel. As I have already mentioned, steel was in extremely tight supply for several years following the end of World War II. Many firms, particularly smaller concerns, were unable to secure anything like an adequate supply of steel. A gray market developed in which steel sold for as high as four to five times its normal market price. There was literally a parade of small-business men appearing before the House and Senate Small Business Committees describing their inability to obtain steel.

But just as the problem appeared to be approaching a climax, the demand for steel which had been so extremely acute began to decline

in the spring of 1949. Supplies became more available; the gray market virtually disappeared; the complaints of small-business men subsided; and it appeared that at long last the sellers' market had ended. The opinion was widely advanced that the shortage of steel which had plagued the Nation since practically the end of hostilities had apparently been only a temporary matter.

But is it only a temporary matter? This question is raised, first, by the gradual resurgence of demand in the summer of 1949 and, second, by the extremely tight supply conditions which prevail in the industry at this very moment. It is no exaggeration to state that the supply of certain types of steel is almost as tight today as it has been at any time during the postwar period. Do we face the future prospect of a continuing, long-term shortage of steel! Such a condition could only lead to a substantial lessening of competition and thus ultimately to higher prices for consumers.

It would lead to a lessening of competition in the metal-fabricating industries for the simple and obvious reason that certain firms, particularly the smaller companies, would be unable to secure steel. It would also lead to a lessening of competition within the steel industry itself. Among the competitive forces in the steel industry are the nonintegrated mills. These small companies purchase their basic steel requirements-billets, sheet bars, et cetera from their large integrated competitors, and roll and process those basic shapes into the finished products of the steel industry-bars, sheets, et cetera.

During the past several years some of these nonintegrated companies have apparently experienced considerable difficulty in securing an adequate supply of basic steel. If the over-all supply of basic steel is short, it is only to be expected that the large integrated companies would tend to channel their production of billets, sheet bars, and other forms of basic steel into their own rolling mills instead of selling these basic shapes and forms to their nonintegrated competitors. Consequently, the greater is the shortage of basic steel, the less will be the amount flowing to the nonintegrated companies, and thus the less will be their effectiveness as a competitive influence in the steel industry.

That this is not merely an imaginary danger is indicated by the fact that several of the large integrated steel producers, including United States Steel's subsidiary, Carnegie-Illinois, have, according to the trade press, already stopped supplying their smaller nonintegrated competitors with certain types of basic steel. According to the magazine Steel, issue of May 23, 1949:

It is stated that the larger integrated mills have tended to drop out of the sheet-bar market as sellers. Republic Steel withdrew some years ago; Jones & Laughlin and Carnegie-Illinois are out of the market and indicate no intention of returning.

A study of the history of steel supply during the past 4 years, voluminuously documented in the reports of congressional committees and in the trade press, provides grounds for at least the suspicion that perhaps the shortages of iron and steel during the postwar period are not of the same nature nor so readily cured as those of previous sellers' markets which the country has experienced from time to time. The record shows that from early reconversion days in 1946 through the first quarter of 1949 the demand for practically all kinds of steel