United States Steel Corporation

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IN THE LATTER OF ET AL. UNITED STATES STEEL CORPORATIO CONSENT ORDER , ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE lfEDER.\L TRADE COMMISSION ACT Docket 6078. C01np aint, Jan. 1953-Decision, Ap1' 28, 1955 Consent order requiring the manufacturers controllng 75% of the domestic steel drum bnsines' , to cease cooperating in fixing prices for steel drums including the base price for a "standard" drum and extras added to and deductions from any base price for ,variations, etc. Before M T. Abner E. Lipscomb hearing examiner. lift. .1amesl. Rooney, lift. .lames S. Kelaher, 1lir. Fle(che1' G. Cohn and 3Ii'. E' ve1'ette jJl aci ntY'l'e for the Commission. ilfT. Thomas Lynch of New York City, and Mr. L. L. Lewis, Mr. ilierril Russell, JlfT. .1ohn C. Bane, .11'. and Reed, Smith, Shaw & McClay, of Pittsburgh, Pa., for United States Steel Corp. and United States Steel Co.

lli1'. J. Theodo1" Ross of Pittsburgh, P.., for Jones & Laughlin Steel Corp, and.Jones & Laughlin Barrel Co. cG Platt of Chicago il/a.ye'/ , Froedlich, Spiess, TieJ'ney, Brown 11., for Inland Steel Co. and Inland Steel Container Co. Dickler lJa16e1,t of ew York City, for Rheem Manufacturing Co.

and 3fT. William.1. 3fT. Thomas F. Patton, Mr. llw' old C. Lurnb De Lancey, of Cleyeland, Ohio, for Republic Steel Corp. COl\PLAIKT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the parties named in the caption hereof, and more particularly described and referred to hereinafter as respondents have violated the provisions of Section 5 of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint: stating its charges as follows: PARAGRAPH 1. Respondent United States Steel Corporation is a New .Jersey corporation with its offce and principal place of business located at 71 Broa,cl"ay: New York, Kmv York, and through its subsidiaries is the leading steel producer in the Unit.ed States. 922 FEDERAL 'l'RADBCOMMISSIOX DECISroXS Complaint 31 F. T. C.

Respondent United States Steel Company is a. New Jersey corporation and is doing business under the trade name and st.yle of ;'United States Steel Products Division, United States Steel Company," with its offce and principal place of business located at 30 Rockefeller Plaza, New York, 1\ ew York, and is a wholly-owned subsidiary and under the immediate direction and control of respondent Lnitcd States Steel Corporation. Said respondents are hereinafter referred to as "'G. S.

Hesponclent Jones & Laughlin Steel Corporation is a Pennsylvania corporation with its offce and principal place of business located in the Jones & Laughlin Building, Pittsburgh, Pennsylvania, and is the fourth largest steel producer in the United States. Respondent Jones & Laughlin Steel Barrel Company is a ew Tersey corporation whh its offce and principal place of business located at 70 Bast 45th St., Xew York, New York, and is a wholly-mmed ,subsidiary and under the immediate direction and control of respondent Jones & Laughlin Steel Corporation. Respondents T ones &: Laughlin Steel Corporation and Jones &. Laughlin Steel Barrel Company are hereinafter referred t.o as "J & L. Respondent Inland Steel Company is a Delaware corporation with its offce and principal place of business located at 38 South Dearborn St., Chicago, Illinois, and is the seventh largest steel producer in the United States.

Respondent Inland Steel Container Company is an Illinois Corporation with it.s offce and principal place of business located at 6332 South !vIenaI'd Ave. , Chicago, Illinois, and is a wholly-owned subsidiary anc111nder the immediate direction and c.control of respondent Inland Steel Company. Respondents Inland Steel Company "ndlnland Steel Container Company are hereinafter referred to as "Inland.

Respondent R.heem 31manufacturing Company is a California corporation with its offce and principal place of business located in the Russ Bujlding, San Francisco, California. Saiel respondent is hereinafter reien.eel to as " Rheem.

Republic Steel Corporation is a New Jersey corporation ,,-ith its offce and principal place of business located in the Republic Building, Cleveland, Ohio, and is doing business under the trade name and style of "Kiles Steel Products Division, Hcpublic Steel Corporation. " Hepublic Steel Corporation, hereinafter referred to as " Republic " js the third largest steel prodncer in the United States. PAR. 2. Respondents U. S. J & L, Inland, Hheem and Republic are engaged in the manufacture and sale, among other products, of steel _ UNITED STATES STEEL CORP. ET AL. 923 921 Complaint shipping contained.rs, including steel drums. A steel drum is any single walled cylindrical or bilged container of 13 gallons to 110 gallons capacity, inclusive, constructed of sieel sheet and inclusive of an gauges. Steel drums are essential for the transportation of food petroleum, chemical, paint, and other products, many of which are vital in the defense mobilization program of the United States Gov ernment.

Pall S. Respondents e. S., J "" L, Inland, Rheem and HepubJic manufadure steel drums in twenty follr plants, located throughout the 17united States as follo,,' ResjJondent Plant Location Rheem (7 vlants)__ - Bayonne, Xe\v ,Jersey; Sparrows Point, ::\lary lllnd; Chicago, DUnois; I\Tew Orleans, Louisiana; Houston, Texas; San Francisco, California; and Los Angeles, Califorlia.

r. S. (6 plants)__ - Sh:llon, Pennsylvania; Cbicngo, Illinois; New Orleans, LouisiaJlI1; Beaumont, Texas; San Frd.Jleisco, California; aml L(\s Angeles. C;"llifornia.

J & L (6 plants)_n_ -_n- Bayonlle, ::ew Jersey; Philadelphia, Pennsylvania; Cleveland, Ohio; X. KUlisns City, :Missouri; \Yest Port Arthur, Texas; and Xew Ol'lenllS , Louislamt.

Inland (3 plants)- --__n__- .Jersey City, Ke\v Jersey; Chiul'c,"1. Illinois; and Xcw Orleans, r.onisiana.

Republic (2 IJlauts) - -- :Kites. Ohiu. In the course and conduct of the, ir respecti\'e businesses, all of said respondents for many years last past (responrlenl: United States Steel Corporation through its wholly-owned subsidiary United States Steel Products Company until December 31, 1951 and thereafter through its wholly-owned subsidiary United States Steel Company, United States Steel Products Division) have caused and still cause their products, when sold by them, to be transported from the State of origin of the shipment to purchasers thereof located in various other States of the L:united States and in the District of Columbia in a regulllr current and flo\v of COlmnerce, as commerce" is defined in the Fede",) Trade Commission Act.

PAR. 4. Respondent 17. S., J "" L, and Inland began the manufacture of steel drums about 1939, at which time respondents Hheem and Republie ere already engaged in the manufacture of said product. Prior to 19:18, the steel drum industry was regarded as it "small business" industry. Since 183n, respondents L"7. S., J &, L, Inland, Rheenl and Hepublic have acquired a major portion of the steel drum business , 924 FEDERAL TRADE CO:MISSION DECISIOXS 51 F. T. C. Complaint in the United States, and they now control, and for many years past have controlled, at least 75 percent thereof. Said respondents have the power to dominate and manipulate the market in which purchasers must buy steel drums and other shipping containers, and to frustrate, destroy, suppress, and eliminate competi tion between themselves.

PAR. 5. Each or said respondents has been and is in competition with the others in making or seeking to make sales in commerce within the United States of their stecl drums, except insofar as said competition has been adversely aiIected as hereinafter alleged. PAR. 6. Steel drums are classified by said respondents into various product types according to construction and use. Said types are manufactured in various sizes and gauges.

For many years past and continuing to the prese.nt time, said respondents have desigmtted and described a specific drum of each product type as "standard." The specifications for said "standard" drums are uniform among respondents and are descriptive of a finished product, including such components thereof as type or head, size and location of openings, type or flanges, plugs and gaskets to be inserted aud type of paint to be applied.

Said respondents quote " base prices" lor the various sizes and gauges of drums described as "standard. Prices for drums other than those designated as "standard" are calculated through use of pricing factors for "extras" to be added to and "deductions" to be made from the "base prices " of standard" drums. The "base prices" of respondents, or adjustments thereto due to extras" or "deductions " constituie the minimum prices charged by said respondents and generally apply to purchases of ZOO steel drums or more. Said respondents charge higher than minimum prices for purchases in lesser quantities, pursuant to published "quantity differential" schedules.

The "standard" drum specifications base prices extras, deductions quantity differentials " as well as prices for replacement parts terms and conditions of sale and delivery, and any and all other elements of the pricing structure for steel drums of said respondents have been and now are substantially the same.

PAR. 7. For many years past and continuing to the present time respondents have been engaged in unfair methods of competition and nnfajr acts and practices in commerce, as "commerce" is defined in the Federal Trade Commission Act, in that they have acted, and are still acting unlawfully to hinder, suppress, and prevent competition by cooperating; combining, agreeing, and entering into and carrying out an W\ITED STATES STEEL CORP. ET AL. 925 921 Complaint understanding and planned common course of action between and among themselves with respect to prices, terms and conditions of sale and other pricing practices, in connection with the offering for sale sale and distribution in commerce of steel drums. PAR. 8. Pursuant to, as part t.hereof, in furtherance of, and in order to make enective the purposes and objectives of the aforesaid cooperation, combination, agreement, understanding and planned common course of action, respondents have formulated, adopted, performed and put into eifeet, among other things, the following acts, practices methods, and policies in connection 1with the offering for sale, sale and distribution in commerce of steel drmlls:

1. A.greed to adopt and maintain, and have adopted and maintained uniform "standards " or specifications, for pricing purposes. 2. Agreed to fix and maintain and have fixed and maintained uni form "base prices:' for "standard" steel drums. 3. Agreed to fix and maintain, and have fixed and maintained uniform pricing factors for "extras" to be added to and "deductions" to be made from " base prices ' with respect to variations of "standard" steel drums.

4. Agreed to fix and maintain and have fixed and maintained uniform price diflerentials for specified quantity purchases of steel ell' ums. 5. Agreed to fix and maintain, and have fixed and lnaintained uniform rorms and conditions of sale and delivery for steel dnuns. 6. Agreed to fix and maintain, and have fixed and maintained uniform prices for replace1llcnt parts for steel drums. 7. Agreed to adopt and maintain, and have adopted and maintained the same pricing formula, or mathematical device, for uniformly rigging prices for steel drums in the manner more particularly set forth and alleged hereinafter in Paragraph Kine.

S. Agreed to utilize, and have utilized said pricing formula, or mathematical device, described hereinafter in PRragraph Nine to arbitrarily and uniformly enhance, fix and maintain prices for steel drnms.

PAR. D. For many years past and continuing to the present time r-cspondents have used an arbitrary formula, or mathematical device for raising ancllowering "base prices': for "standard" steel drums. As an integral part thereof, respondents publish and llse arbitrary differentials " or pricing factors, ranging from two cents (2 ) per drum to twenty cents (20 ) per drum dependent upon the size and gauge of each steel drnm.

Respondents utilize These "differentials " or pricing factors, to calculate revisions, either upward or down ward, in "base prices." The 926 FEDERAL . TRADE COMMISSION DECISIOXS Decision ;)1 F, T. C. amounts of said revisions are computed in terms of "differentials; Thus, 11 revision of one (1) "differentlar' results in changes in " base prices" by the amounts of the published ;'diflerentials. Hevisions of ore or less than one "cliiIel'entiul" are readily calculated by multiplying the published "differentials ': or pricing factors by any desired nmnber. For example, n priec revision or one-half (. 5) a "difl'erentiar' is ealclliated by multiplying the published "diIrerentials" by .5 and a price revision of five and one- half (5. 5 ) " cliffcl'cnt.ials " is calculated by Inultiplying the published ;;dift'erentials " by 5. 5. Under' said formula or mathematical device, the eX lct amount of a price revision for any pnrticlliar steel drum is readily ascertainable. R.espollllents are thus eluLblecl, through the cornrnon use of the aforesaid formula, or mathematical device, to control the price level on steel drums by arbitrarily and nnifonnly fixing and adjusting "base prices " which form the keystone of the pricing structure for said drums, and to ,yhieh all other elements of price, sneh as ;;extras dedudions" and ':quantity elj il'erentials: ilr,e related, as heretofore described in Paragraph Six.

PAIL 10. The aforesaid acts, practices, methods, agreements and understandings of respondents as hereinbe.iore alleged, aD and singularly, arc to the prejUllic.e of the public; have a dangerous tenclcncy and capacity to hinder, lessen, restrain and eliminate compet.ition between and among respondents in the sale of steel drums in commerce and actually have hindered; lessened, restrained and eliminated such cOlnpet.ition; have a dangerous tendency to create and have actually created in respondents a monopoly in the sale and cljstriblltioll of said product, and constitute unfair methods of competition and unfair acts and practices in commerce wit.hin the intent and meaning of Sect.ion 5 of the I, ederal Trade Commis ion Act.

DECLSIOX OF THE CO::DIlSSIOX Pursuant to Rule XXII of the Commission s R.ules of Practice and as set forth in the Commission s "Decision of the Commission and Order to File Report of Compliance, dated April 28, 1955, the initial decision in the instant matter of hearing examiner Abner E. Lipscomb as set out as follows, became on that date the decisjon of the Commission.

INITIAL lJECISIOX BY ABXER )'; , LIPSCOMB , HE.\Into EX.,DIIXER On J annary 21 1D53 the Federal Trade Commission issued its complaint in this proceeding, charging the Respondents with unfair UNITED S'lA'fES S'TEEL CORP. ET AL. 927 921 Decision methods. oJ competition and unfair acts and practices in commerce by cooperating, combining, agreeing, and entering into and carrying out an understanding and planned COllllIlon course of action bel.Yl"een and among themselves ,,,ith respect to prices, terms and conditions of sale, and. other pricing practices, in the offering for sale, sale and distribution in commerce of steel drums, in violation of the Federal Trade Commission Act.

Thereafter, on ::Iarch 8, 1955, Respondents, by their duly authorized attorneys, entered into an agreement with counsel supporting the complaint and, pursuant thereto, submitted to the lIem-jng Examiner a Stipulation For Consent Order for the purpose of disposing of all the issues involved in this proceeding.

Respondent United States Steel Corporation is identified in the stipulation as a corporation, organized, existing and doing business under and by virtue of the laws of the State of New .Jersey, with its once and principal place of business located at 1\Y o. 71 Bl'oachnlY, New York, Xew Y 01'11.

Respondent Jones &: Laughlin Steel Corporation is identified in the stipulation as a corporation, organized, existing and doing business under and by virtue of the la,yS of the State of Pennsylvania 'ith its offce and principal place 01 business located at '101 Liberly ATenue, Gateway Center, Pitt burgh, Pennsylvania. Respondent Inland Steel Company is identified in the stipulation as a corporation, organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its offce and principal place of business located at 38 South Dearborn Street, Chicago l1linois.

Respondent Rheem J\1manufacturing Company is identified in the stipulation as a corporation, organized, existing and doing business under and by virtue of the laws of the State of California, with its ofiice and principal place of business located at 801 Chesley Avenue Richmond, California.

Respondent Republic Steel Corporation is identified in the stipulation as it corporation, organized, existing and doing business under and by virtue of the laws of the State of Kew ,Jersey, with ils offce and principal place of business located in the Hepublic Building, Cleveland, Ohio.

Respondents admit all the jurisdictional aHegations set forth in the complaint, and agree that the record herein lnay be taken as if the Commission had made findings of jurisdictional facts in lccordance therewith.

4.2g7S; :iS- 928 FEDERAL TRADE CO:MISSION DECISIOXS Decision 51 F. T. C.

The stipulation contains a statement that Respondents withdraw their ans\vers to the complaint, and, accordingly, their answers shall hereafter be considered as withdrawn.

Respondents also expressly -waive the right to file answer herein. In addition, they expressly waive hearing before a hearing examiner or the Commission, the making of findings as to the facts or conclusions of law by the Hearing Examiner or the Conunission, the filing of exceptions and oral argument before the Commission, and an further proceedings before the Hearing Examiner and the Commission to which llespondents may be entitled under the provisions of the Federal Trade Commission Act or the Rules of Practice of the Commission. Respondents agree that the order contained in the stipulation shan have the same force and effect as if it were made after full hearing, presentation of evidence, and findings and conclusions thereon. Respondents specifically waive any and all right, power, or privilege to challenge or contest the validity of such order. It is agreed that said Stipulation For Consent Order, together with tho complaint, shall constitute the entire record in this proceeding, upon which the initial decision shall be based. The stipulation sets forth that the complaint herein may be used in construing the terms of the aforesaid order, which may be altered, modified, or set aside in the manIler provided by statute for orders of the Commission. The stipulation further provides that the signing of the Stipulation For Consent Order is for settlement purposes only, and does not cons6tute an admission by Hespondents of any violation of la\y alleged in the complaint.

Counsel supporting the complaint states, in his memorandum submitting the Stipulation For Consent Order to the hearing Examiner that the order contained in the stipulation differs from the order accompanying the complaint. He avers, however, that the order agreed upon provides adequate relief from all the violations charged in the complaint.

Included as part of the order presented in the stipulation is a provision requiring a report of compliance with the order to cease and desist within sixty days from the service thereof upon respondents. According to the Commission s present practice, such orders of compliance are issued by the Commission itself as a part of its notification to a respondent that the initial decision of the Hearing Examiner has become the decision of the Commission. Observance of this practice avoids confusion as to the expiration date of the sixty-day period allm\ed for submission of reports of compliance. Accordingly, no L"UNITED STATES STEEL CORP. ET AL. 929 '921 Order provision conc.erning the requirement of a report of compliance is in dllded in the order hereinafter issued in this initial decision. In view of the above facts, and in the light of the statement presented by counsel supporting the complaint, it appears that the order to cease and desist contained in the stipulation will safeguard the public interest to the same extent as if it had been issued after the completion of hearings and all other adjudicative procedure waived in said stipulation. Accordingly, in consonance with the terms of the aforesaid stipulation: the Hearing Examiner accepts the Stipulation For Consent Order submitted herein; finds that this proceeding is in the public jnterest; and issues the following order:

Itis ordered That Respondents, United States Steel Corporation, a corporation, Jones & Laughlin Steel Corporation, a corporation, Inland Steel Company, a corporation, Rheem Jlanufacturing Company, a corporation, and Republic Steel Corporation, a corporation, and their respective ofiicers, agents, representatives, and employees, in, or in connection ,with, the oflering for sale, sale, and distribution in interstate commerce of the steel drums involved in this proceeding, do forthwith cease and desist from entering into any planned common ,course of action, understanding or agreement between any two or more of said respondents, or between anyone or more of said respondents and others not parties hereto, and from cooperating in, carrying out or continuing any such planned C011110n course of action, understanding, or agreement, to do or perform any of t.he follmving things: (1) Adopting, esta,blishil1g, fixing, or maintaining prices or any ,e.element thereof at \which steel drums shall be quoted or sold, including but not limited to base prices, the extras which shall be added to, or the deductiolls w,which shall be made from, any base price for any specified characteristic, or other conditions of sale; (2) Collecting, compiling, circulating, or exchanging between or a.among respondents, or any of them, any pricing factor, statement of pricing method, or extra charges thereto or deductions therefrom for any specified characteristic or quantity of steel drums or services connected therewith used or to be used in computing prices or price quotations of steel drums; or using, directly or indirectly, as a factor in computing price quotations or in making, quoting, or charging prices, any such factor or method so collected, compiled, circulated, or exchanged; (3) Quoting or selling steel drums at prices calculated or determined pursuant to, or in accordance with, any system or formula which produces identical price quotations or prices or delivered costs which establishes a fixed relationship among price quotations or prices or delivered costs, or which prevents purchasers from securing any 930 FEDERAL , TRADE CO::IMISSION DECISIO Order G1 F. T. C.

advantage in price in dealing with one or 110re of the respondents as against any of the other respondents.

It is fUTthe1' ordered That each of the respondents do forthwith cease and c1esi t from acting, incli vidually or otherwise, so as knowingly to contribute to the maintenance 01' operation of any planned common course of action, understanding, or agreement be, Yeen and among any two or more of the respondents or between anyone or more of them and others not parties hereto through the commission of any of the acts, practices, or things prohibited by subparagraphs (1) through (3) of paragraph I of this order.

Provided, lwweve1' That in interpreting and construing the fore going provisions of this order, it is understood that: (1) The Federal Trade Commission is not considering evidence of uniformit.y of prices or any clement thereof of two or more sellers at any destination or destinations alone. and without more as showing a violation of law;

(2) The Federal Trade Commission construes the phrase Hplanncd " eontainecl in thiscommon course of action" and the word ':continuing order as interpreted by the Supreme Court in FTO Y. Oement Instit1de :333 lJ. S. 683, at page 728 , and by the court in AmeTlcan Chain & Cable Co. v. FTC (CA 4th lD44), 13D F. 2d 622: (3) Tbe Federal Trade Commission is not acting to prohibit or interfere with delivered pricing or freight absorption as such when innocently and independently pursued, regularly or otherwise, with the result of promoting competition.

ORDER TO FILE REPORT OF COMPLIANCE It is ordered That respondents United States Steel Corporation Jones & Laughlin Steel Corporation, Inland Steel Company, Hheem Manufacturing Company, and Republic Steel Corporation, corporations, shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in -which they have complied with the order to cease and desist I:as required by said declaratory decision and order of Aprij 28, lD55j.

2'dOOG INDUSTRIES , INC. 931 Decision