Publication: The Chicago Tribune
Chicago, IL, United States
RATE SCHEME TO
More Light on Workings of
the Electrical Supply
PROFIT KEPT ON "INSIDE."
Various Discriminations Charged
Against the Latest So-Called
"Preferential" discounts and an ironclad system of freight rates are two of the methods which the National Electrical Supply Dealers' association is charged with using to stamp out competition.
An independent dealer, once a member of this latest so-called trust, declared yesterday that he had documentary proof of these two charges, and much more convincing evidence which he would present soon to Federal Attorney Bethea. This dealer declares that his evidence is more conclusive than that on which the government based its legal attack on the packers. Contracts held to contrary to law and details of secrete rebates, as well as letters showing refusals to sell goods to firms outside the compact form part of the evidence, it is declared. A charge of conspiracy, this man says, could be proved readily in court.
These so-called "preferential" rebates, it is charged, are such a power in the hands of the combine that competition is soon crushed out, and rival firms reduced to a state of helplessness, to be absorbed into the combine or left to quit business.
Letter Shows the System.
President P. J. Burnes of the American Electrical Telephone company, which withdrew from the combine some time ago, has a letter showing clearly the workings of these "preferential" rates. It was written while the company was in "good standing," and is from a manufacturer of electrical goods in Newark, N. J. It states:
"To jobbers who are members of the National Electrical Supply Dealers' association, like yourself, we offer a preferential discount of 10 per cent additional to the above named discounts, it being agreed that such jobbers will, in consideration of this preferential discount, strictly maintain the above schedule of discounts in the resale of this material."
The Chicago concern, being no longer a member of the combine, has to struggle along without this "additional 10 per cent" now. Never, by any chance, it is declared, do outsiders get this additional discount. Thus they pay 10 percent more for goods than their combine competitors. Under this condition, it is declared, it is impossible for outsiders to meet "combine" rates and make a little profit out of the business.
Another Example Given.
Another experience of this same company is related as follows:
President Burnes of the Electrical Telephone company wrote to the Hemingray Glass company of Covington, Ky., for a supply of glass insulators. There are only two other firms making these goods - both members of the association - and they are the Brookfield Glass company of New York and the C. S. Knowles company of Boston. In reply came a letter, as follows:
"Gentlemen: We have been waiting since April 21 for a list of purchases from C. S. Knowles that were subject to premium. This we have not obtained up to date (May 12, 1902). The Brookfield Glass company's list was here on the 23d. We do not care to wait any longer for Mr. Knowles' list, and if you will inform us whether or not you have bought any goods from C. S. Knowles during the year ending April 21 that are subject to premium, we will be pleased to send you premium based on your purchase from ourselves and the Brookfield Glass company."
The American company has been buying much of its glass and porcelain goods from the Hemingray company, and their relations have always been of the most cordial kind, but the extractions of the combine are so strict that all favors had to be cut off.
Some time ago the Chicago house sent out an order for 5,000 insulators of a certain kind and asked for conditions and terms, which the manufacturers, in replying, said it could not comply with. The customer at once answered and wanted to know the reason why.
Non-Members Must Suffer.
The note he received in reply among other things said:
"You know well enough what the reason is. Your company is not a member of the Electrical Supply Dealers' association."
But for this fact the order would have been filled quickly, it is held, and that, too, in accordance with the purchaser's wishes.
How Competition Is Treated.
Asked whether it would not be profitable for an independent factory to start up and make insulators, Mr. Burns said the combine would fight it to the extent of supplying the demand for this class of goods for nothing if necessary.
"The exactions of the combine," he continued, "would simply be taken off insulators and the association manufacturers could do as they pleased in selling them so long as the outside competition remained."
Glass factories at Perue [sic] Peru and Muncie, Ind.; East Liverpool, O., and Trenton, N. J., that make the electrical supplies are all in the combine.
As to Freight Rates.
As in the case against the beef packers much stress is laid on freight rates made by the combine. In localities where there is no competition the so-called "trust" has dealt harshly with the consumer using the railroads as a club. Here are the printed instructions in regard to freight rates:
"Actual freight may be prepaid or allowed to all points on or east of the Mississippi River. To all points in the States of Tennessee, Kentucky, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, and Louisiana east of Mississippi River, actual freight not exceeding 50 cents per 100 pounds may be prepaid or allowed."
"To all points west of the Mississippi River excepting the States of California, Washington, Oregon, and Nevada freight may be allowed to the point on the river in direct line of shipment."
"The local freight rates from the nearest one of these terminal points to the destination to be paid by the buyer."
These rates, independent dealers charge, add about 10 per cent to the cost of goods. In the Southern and Western States where they apply there are practically no firms opposing the association, and consumers are at its mercy. Even the "big six" were never accused of going so far as to refuse to ship direct to the town of the buyer.
In the printed instructions the matter of breaking the rules and regulations is treated as follows:
"Complaints - Members should report in writing at once to the secretary or supervisor of their respective associations any violation of the rules by other members or any case wherein a manufacturer does not give full support, and any member against whom a complaint may be made shall be considered as violating the rules of the association should he disclose to the purchaser benefiting by the infraction of rules, the fact that complaint has been made."
But this point is not the only one along the same line. It is said, and the charge is borne out by the book of instructions of the association, that the shippers charge for boxing and carting. This rate, it is held, applies in reality only when the goods are shipped to merchants who are not members of the association. This expense, coupled with the extra cost made necessary by payment of freight charges "from the nearest competitive point," makes the business a losing one to non-member houses.
Says It's More Than a Trust.
When seen yesterday the men known to be connected with or cognizant of the inner workings of the combine refused to talk, but Mr. Burnes spoke without reserve.
"It is more than a trust for the control and restraint of commerce," he said. "It deliberately seeks to drive every non-member out of business by refusing to sell him supplies direct and preventing him, if possible, from securing goods indirectly. If this is not conspiracy, then I have no understanding of the meaning of the term. After months of almost daily solicitation and constantly increasing difficulties to obtain certain kinds of supplies, we went into the association."
"As represented to us by G. A. Overbaugh, the secretary, who assisted President Lowe in the organization, the objects seemed to be fair and reasonable. But we soon discovered that these representations were not in accordance with the association's methods and operations."
"On the grounds that it does business in open violation of the letter and spirit of the Sherman law, and that it is a menace to the life and prosperity of the independent telephone movement throughout this country, we canceled our membership and got out. I think our withdrawal dates from the first of the year."
"Whenever it possibly could, the combine has, since that time, made us all the trouble in its power. Fortunately, however, it controls only a few of the supplies we are obliged to use. But for all such supplies we have to pay consumer's prices, even in carload lots. We do not get the benefits of the discounts and rebates which are given members, and which we got regularly when we were in the association. What is known among the combine concerns as preferentials are denied to us now."