EXCLUSIVE CONTRACT 119 



mills at South Chicago ; timber lands in Missouri and Mississippi ; 

 saw mills in Arkansas and Missouri; 27.18 miles of trackage of the 

 Illinois Northern Railway, serving the McCormick works; 24.75 

 miles of trackage of the Chicago, West Pullman and Southern 

 Railroad Company which serves the company's steel mills and 

 the Piano Works at West Pullman. In 1905 the International 

 Flax & Twine Company of Minnesota was organized as a subsidiary 

 company of the International Harvester Company, for the purpose 

 of manufacturing binder twine from flax straw, so as to substitute 

 in large measure fiber from American-grown flax straw for the 

 sisal and manila fibers imported from Yucatan and the Philippine 

 Islands. In addition to the foregoing steps, the company developed 

 an important export trade in harvesting machinery. Over 30,000 

 local dealers handle the machinery of this company outside the 

 United States. Agencies have been established throughout the 

 various countries of Europe, in Northern and Southern Africa, in 

 South and Central America, and in Siberia. For instance, the branch 

 house at Omsk, Central Siberia, did a business for the company 

 in the year 1912 amounting to more than three million dollars. 



Investment and Capitalization. The extraordinary overcapi- 

 talization which characterized most of the large industrial con- 

 solidations formed in the period of combines (1898-1902) was 

 absent in the case of the International Harvester Company. The 

 original capital stock was $120,000,000. The cash stock of 

 $60,000,000 appears to have been paid up in full. The appraisal 

 value of the plants, inventories, etc., for which the remaining 

 $60,000,000 of stock was issued was $67,000,000. The bankers 

 and promoters received $3,700,000 stock for their expenses and 

 services. In 1910 the capital stock was increased to $140,000,000, 

 by the issue of a common stock dividend of $20,000,000. The 

 purpose of the merger, according to the company's testimony, 

 was "to reduce operating expenses and decrease competition." 

 The federal government, reporting on this company, summarized 

 its conclusions in these words: "It appears therefore, that the 

 International Harvester Company's position in the industry is 

 chiefly attributable to a monopolistic combination in the harvesting 

 machine business, certain unfair competitive methods, and superior 

 command of capital." 



Exclusive Contract. An objectionable competitive method 

 was the use of the so-called " exclusive contract," or exclusive 

 clause in agency contracts. This practice was discontinued 

 after 1905. 



