The Price-Fixing Charges
The price of steel is a vital factor in the economy of every industrialized nation, and few nations have kept a closer watch on that price than the U.S. Whenever steelmen even talk about raising prices, a storm rises over official Washington. Congress has investigated almost every steel price rise since Robert Taft led an angry probe into one of the first postwar hikes in 1948, and federal authorities have long grumbled that steel prices seem to have little regard for the law of supply and demand. Last week a federal grand jury made that charge official by indicting the nation's biggest steelmakers on charges of rigging some prices of the basic grade of steel.
The indictment was one more legacy of John F. Kennedy's price fight against the steel industry, which began just two years ago. That dispute has led to seven indictments charging the industry with fixing prices on a broad variety of products. Last week's was not only the biggest of that lot, but the most important case of its kind since 29 electrical equipment companies were brought to court on similar charges three years ago. But where the electrical case concerned multimillion-dollar tur bine generators that seemed remote from the everyday consumer, the new indictment covered the commonest grade of steel--the carbon sheets that go into almost every car, refrigerator and washing machine made in the U.S.
A Charge on Extras. Swept up by the charges were the industry's six largest companies--U.S. Steel, Bethlehem, Republic, Armco, National and Jones & Laughlin--as well as Wheeling Steel and National's Great Lakes Steel sub sidiary. Conspicuously not charged were Inland Steel and Kaiser Steel, two major producers that are generally shut out of the industry's Establishment because they often buck the prices set by bigger companies--as they did in 1962.
The grand jurors also indicted two upstanding steelmen: James P. Barton, 61, a plain-talking, conservative middle manager for U.S. Steel, and William J. Stephens, 57, Jones & Laughlin's gregarious, hard-selling president. Stephens, who worked for rival Bethlehem at the time of the alleged conspiracy, is the most important executive ever to be singled out in price-fixing charges. If convicted, the two men could be sent to prison for up to one year and fined $50,000; the eight companies also could be fined $50,000 each and be sued by injured customers for uncounted millions in triple damages.
According to the Government, the steelmen did not try to fix the basic price of sheets but subtly rigged the thousands of "extras" that they charge for processing the sheets to certain sizes, shapes and strengths. These extras account for about 16% of the $2 billion-a-year carbon-sheet business done by the eight companies. The scheme to fix these extras, according to the indictment, was forged in a spylike atmosphere reminiscent of the electrical price-fixing case. The grand jury charged that the steelmen conspired in secret many times between 1955 and 1961, meeting in Manhattan hotels where the steel companies have permanent suites, including the Sheraton East and the Biltmore--which happened to be the scene of many electrical ; price-fixing sessions. Government trustbusters believe that the steelmen broke off their sessions only after some of the electrical executives were convicted and sent to prison.
Politics & Prices. Although it has pleaded nolo contendere (no contest) to one of the lesser price-fixing charges handed down in the same investigation, U.S. Steel denied the latest accusations, planned to plead not guilty at this week's arraignment. Bethlehem also issued a denial, countercharged the trustbusters with disinterring "ancient history" and "harassing" the steelmen. Many executives viewed the indictment as the latest phase in what they deem to be a continuing vendetta against steel led by Attorney General Robert Kennedy. But they absolved Lyndon Johnson of any blame, on the grounds that the charges did not originate in his Administration.
Johnson has nonetheless been kept informed of the politically explosive steel case ever since he became President. He could have done little to stop the grand jury even if he had tried. But since Johnson is eager to continue his remarkably long honeymoon with the business community, he may well be less inclined than ever to confer the Democratic vice-presidential nomination upon the Attorney General. Beyond its political implications, the bind that steel is in is sure to cause many businessmen to think more carefully before raising any prices in the near future.
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