filing of complaints, to encumber the exercise of prosecutor's discretion with novel internal administrative reviews on request of a defendant, to expand the use of the consent decree in a manner calculated to remove the last possibility of public scrutiny of this useful but dangerous practice which, among other things, shields the defendants from damage suits by private parties, to water down the threat of treble damage recovery, etc. [There is not space here for a full analysis and rebuttal of all these neat proposals. I shall discuss a few whose significance might otherwise elude the uninitiated, together with some proposals for strengthening the enforcement which the Committee declined to support.

[A prominent feature of the report is the recommendation of the Civil Investigative Demand, a kind of subpoena that the Attorney General would use to secure information in antitrust investigations. On its face this sounds like an increase in the powers of the Department. That is not what some of the proponents of this measure have in mind and that will not be its effect. The whole debate about the Department's investigative powers arose not from a Department complaint that it had inadequate power, but from defendants' complaints that the Department's power to command information by grand jury subpoena was too extensive and untrammeled. Although the Report does not specifically recommend against the grand jury investigation, what is contemplated is the gradual displacement of the effective and expeditious procedure by the relatively ineffective Civil Investigative Demand. The attack on the grand jury subpoena procedure would hardly succeed so long as there was no alternative device for compelling defendants to disclose facts prior to the filing of a complaint. Now one is offered.] (P. 349:) Unlike the grand jury subpoena it cannot be used to require persons to testify, but only to produce documents. [Moreover, a person may disregard the Civil Investigative Demand without risk until the Department of Justice obtains a court order requiring compliance. The burden of justifying the demand for information is significantly shifted to the prosecution.]

(Pp. 345 and 348:) What are the objections to the grand jury subpoena? We are told that it "debases the law by tarring respectable citizens with the brush of crime when their deeds involve no criminality," and that criminal procedures should not be invoked where the Department of Justice does not initially contemplate indictment. This view entirely misapprehends the nature of Sherman Act violations, the investigative process, and the historic role of the grand jury. The Sherman Act does not have two categories of violation, one civil and one criminal. All Sherman Act violations are both civil and criminal. Until the facts are fully disclosed neither the grand jury nor the prosecutor can intelligently decide whether to exercise the discretion not to indict. A grand jury subpoena not followed by indictment does not tar anybody with crime. It is well known that grand juries subpoena witnesses as well as suspects. [Moreover,] (pp. 348-349:) the historic functions of grand juries have extended to civil matters regarded as of exceptional importance, e. g., the conduct of public office, the state of public institutions. The grand jury was simply the investigating arm of the Crown and a device for screening out criminal complaints so insubstantial as not to warrant prosecution. Nothing could be more appropriate than the cxistence and exercise of this sovereign jurisdiction to compel great corporations, whose activities affect the public interest, to disclose the facts as to their acquisition and use of economic power.

I would have no objections to the Civil Investigative Demand if it were proposed as a supplement to existing enforcement powers. But in the light of the background of the proposal and the Report's animadversions on the grand jury subpoena in "civil" cases, I can only regard this as a step to curtail the Department's most effective investigative device.

[The Majority's proposal "to take some account for inflation" by increasing the maximum fine for criminal violation of the antitrust law from $5,000 to $10,000 is another case where the Report appears to be tightening up while actually adopting the least rigorous of available alternatives. Except for a few people who would like to see the criminal penalties abolished altogether, there is practically unanimous agreement that the 1890 fine level must be raised.] (P. 352:) $10,000 is the lowest suggestion made by any responsible person. emphatically does not compensate even for the dollar inflation since 1890. [The purchasing value of the consumer dollar stood at 184 in 1890 and has been approximately 60 in recent years." $10,000 today would be equivalent to about $3,300 in 1890. In effect, therefore, the Majority recommend a 33% decrease in the maxi

It

Source: Graphic Facts: Institute of Life Insurance, based on Bureau of Labor Statistics.

mum fine. The proposal takes no account of the much greater size of modern enterprises. It is utterly unrelated to the extent to which defendant may have profited from its violations. The argument in the Report] (p. 352:) that the small fines which have usually been imposed in the past show that a modest maximum will suffice misses the whole point of fixing a maximum. A maximum fine should be calculated for the worst conceivable case. The judge can exercise discretion within that range. [If, then, the judge sees $5,000 as the maximum fixed by the legislative for the most aggravated violations, he will understandably impose lesser fines in the ordinary violation. A maximum of $100,000, limited perhaps to wilful offenses, would give the judges as well as defendants a better sense of the gravity of antitrust violations. If there were] (p. 380:) added a provision for assessment of damages in favor of all alleged victims in one proceeding following conviction of the defendant [a rational set of sanctions would be in sight. At this writing the Judiciary Committee of the House of Representatives has reported favorably a bill to increase criminal penalties to a $50,000 maximum. It is easy to see which side of the antitrust controversy can derive comfort from this Committee's proposed $10,000 maximum.

[The Report recommends that the Department of Justice enter into negotiations with prospective defendants for consent decrees. Such a practice will certainly have the advantage claimed for it in the Majority Report, namely, "increased cooperation between business and Government," saving time and money. What it will also do is] whittle away the last remnants of judicial control and public scrutiny in this area, and involve [the government in bargaining with a law violator not only as to the relief but also as to the nature of the accusation to be made against him. The proposal obviously contemplates that the Govern ment's complaint shall be modified so as to be consistent with the relief that defendant is prepared to consent to. But the settlement of an antitrust case ought not to be a simple matter of bargain between the Department and the defendant. [It results in a court order, enforcible by contempt proceedings. No judge should abdicate his own responsibility in this field, although admittedly he must rely to a considerable extent on the prosecutor's willingness to accept the relief embodied in the tendered decree. This judicial function is undermined if the Government does not state its case independently and in advance of the settlement. Furthermore, not only the court but also Congress and the public are excluded from any basis for exercising a critical judgment regarding the compromise embodied in the decree.]

(P. 360:) Instead of urging the Department to broaden its use of the consent decree, the Committee ought to have considered certain proposals made to it, but not reflected in the Report, for greater safeguards on the present consent decree procedure. One of these proposals would have required the Department to publish an opinion accompanying each consent decree, stating the Department's case, the defendant's position, and the reasons for the Department's acceptance of the particular compromise. [It is well known that the necessity to give reasons for disposition help to assure that they will be reasonable. The other proposal would have made it a matter for the judge's discretion whether or not a consent judgment should constitute prima facie evidence in subsequent private antitrust suits. Present law provides that in no case shall a consent decree, entered before the testimony is taken, be available to help the private victims recover antitrust damages from the defendant. Few victims are financially able to assemble the evidence required to prove an antitrust violation against a great combine. One would think it a proper part of the Government's responsibility to see that private victims are made whole. But in practice in the majority of antitrust cases which are settled by consent decree the Government is, in effect, bargaining away all real possibility of recovery by private victims.

[The Majority Report is not only content to leave that situation undisturbed; it makes] (p. 380:) a direct attack on private damage suits [by proposing that the trebling of damages be made discretionary instead of mandatory. It is difficult to see what public exigency led to this proposal. Certainly the Committee made no finding of any adverse effect of the mandatory treble damage provision on the public interest. [That provision has been in the law for sixty-five years and has been part of the British Statute of Monopolies for more than three hundred. A real showing of public disadvantage should be forthcoming before this relief for antitrust violators should be enacted into law. If the proposal had been linked to the suggestion discussed above, that consent judgments should ordinarily be given prima facie force against the defendant, something might be said for it in relation to a plaintiff who rides to recovery on the Government's proof. Surely an antitrust victim who is about to launch his own expensive investigation and lawsuit should not have to speculate whether years later a

judge, in unfettered discretion, will limit recovery to actual damages. But the Majority Report is not even willing to permit recovery of actual damage in all cases.] (Pp. 384–385:) Coupled with a proper proposal to enact a uniform federal statute of limitations is an extraordinary provision to limit the damage period to four years even though the monopolistic conspiracy may have lasted for 10 years before the victim even knew of its existence.

[Returning to consent decrees, the Report admonishes the Department not to seek relief "deemed" by the Supreme Court to be unconstitutional, nor relief "which could not reasonably be expected after litigation."] (P. 361:) If the Department had observed these seemingly fair precepts, it would have cut the heart out of a number of consent decrees that powerful and excellently advised defendants have been willing to sign in recent years. Obviously no admonition is required with regard to asking relief that is clearly unconstitutional. [Practicality and professional ethics would bar that.] It is on the close questions of constitutionality that the Majority Report asks the Government to give up in advance. (Pp. 258-259:) As appears from another section of the Report, the constitutional issue referred to here is royalty-free licensing. A divided Supreme Court held such a requirement unconstitutional in one case. A subsequent Supreme Court decision indicated that the question was regarded as unsettled. At least one district court in a well reasoned opinion decreed royalty-free licensing in a contested case, and numerous consent decrees have incorporated this provision. Royaltyfree licensing may in some situations bear much less harshly on defendant than alternative relief. [Why, under these circumstances, should this Committee take it upon itself to impugn the propriety of the Department's asking for such relief in the course of decree negotiation? The worst that can happen to defendant is that he will have to litigate his case before a judge who will assuredly protect his rights. But see the effect on the prosecution of the combination of procedural and relief standards proposed in the Majority Report: The Government is encouraged to negotiate with defendant, even before filing a complaint, on the ground that this will save money and time. It is empowered to make settlement very attractive to the defendant inasmuch as private complaintants will be left out in the cold, which would not be so if the case went to litigation. The prosecutor is told that his maximum goal in the bargaining is such relief of unquestionable constitutionality as can probably be gotten in litigation. Finally, he is assured that any concessions he makes will be substantially immune from judicial or other criticism. In this kind of stacked bargaining the Government will never get all the relief to which it is entitled. The only question is how much short of that the prosecutor is willing to settle for. [One more illustration of the tendency of the Administration and Enforcement proposals to blunt the edge of antitrust enforcement while undertaking merely to expedite disposal of cases: In the simple and apparently reasonable recommendation that "where the validity of patents is in issue, that issue should be segregated" lurks a formidable barrier to effective antitrust prosecution of patent pools, especially by private complainants. The proposition would have been entirely unobjectionable and worthwhile if there had been added to it a clause requiring the segregated patent issue to be tried after the antitrust issues. Without that clause the recomendation is] (p. 365:) an implied endorsement of the decision of the District Court of Delaware in Zenith v. R. C. A. that the patent issues will be tried first: The licensee of a patent pool refuses to accept package licenses and declines to pay further royalties on the ground that the licensor is violating the antitrust law by a monopolistic aggregation of many patents, good, bad and indifferent. The licensor counters with a suit for royalties, which of course, he should win if he has some valid patents and if licensee's monopoly theory fails. The Zenith rule requires the patent suit to be determined before the court takes up the antitrust issue, even though the validity of some of the included patents is not inconsistent with the theory of the licensee's complaint. In other words the licensee may be worn down with protracted and expensive patent litigation, before he ever gets a chance to show that even good patents cannot be enforced against him because of illegal monopolization. Meanwhile his contingent liability for royalties mounts. It will soon be clear to a licensee in this position that it is easier and safer to join the combine than to fight it.

[Two other proposals on enforcement policy which the Committee ignored may be mentioned here. One would call upon the Federal Trade Commission to turn over to the Department of Justice for criminal prosecution the surprising number of price-fixing cases that continue to turn up. The administrative slap on the wrist is no answer to this kind of willful violation of the clearest mandate of the law. The second proposal would] (p. 369:) call upon the Antitrust Division to activate the United States District Attorneys in the fight against trade restraint. The Sherman Act expressly put the responsibility on the district attorneys, al63478-55-pt. 3- -5

though it also contemplates supervision by the Attorney General. The complete centralization of Antitrust enforcement in Washington and a few field offices has had two unfortunate consequences: (1) Local, but quite effective, restraint of interstate trade goes unpunished because of staff limitation at Washington; and (2) The antitrust laws have lost the kind of grass roots support that would be forthcoming if the district attorneys were enlisted in its enforcement and educated in its significance. These district attorneys become judges and senators. The antitrust program cannot help but suffer if they develop the attitude that this law is an esoteric regulation dear only to a group of specialists in Washington,

DISTRIBUTION PRACTICES

[Chapter IV of the Report dealing with distribution practices is so workmanlike an analysis of present law that it seems almost ungracious to point out that, with one notable exception, the changes it recommends are in the direction of retreat rather than advance for the antitrust laws. The exception of course is the recommended repeal of resale price maintenance laws, with which I enthusiastically concur.

[1] (p. 149:) dissent from "actual foreclosure" test [which this Chapter deduces from the cases and supports. It is] inconsistent with the Clayton Act conception of stopping restrictive practices before they do demonstrable harm. Where a dominant company begins to require its distributors to deal exclusively with it, I would strike the practice down without waiting for the company to sign up so many distributors that competitors experience difficulty reaching the consumer market. [The suggestion at one point that a manufacturer might lawfully "preempt" all intermediate distributors if rivals "may easily cultivate their own channels of distribution” seems to me a gratuitous invitation to restrain trade.] (P. 166:) I dissent from the Majority's espousal of the proposition that charging different prices to purchasers of the same product, who compete in its resale, does not establish a prima facie violation of the Robinson-Patman Act. The Majority would follow the Seventh rather than the Second Circuit in this regard, and require proof of injury to competition. The vice of this rule is best illustrated by the Seventh Circuit decision which adopted it: The dominant producer of switches sold them at grossly discriminatory prices to various furnace manufacturers. Upon proof that the furnace manufacturers who paid the highest prices for switches nevertheless sold furnaces at lower prices than their furnace competitors, the Seventh Circuit concluded that price discrimination in switches had not injured furnace competition. I do not see the virtues of a rule that legalizes price discrimination against one's most efficient customers, those who are able by virtue of superiority in other branches of their business to overcome the disadvantage imposed by the price discrimination. [Moreover, the] (pp. 166-167:) Majority conceive that proof of injury fails if the buyer can be shown to have "alternative means of access to goods at the lower price." Supplying proof of injury according to these standards will prove expensive if not impossible for the Federal Trade Commission. To require it is once more to revert to inappropriate Sherman Act standards in interpreting the Clayton Act.

(P. 170:) I dissent from the proposition that FTC orders directing RobinsonPatman Act violators to cease and desist from discrimination should automatically lose their force whenever the company bound by the order faces "a new competitive situation" or "responds to a new business development." Under this proposal violation of the order can only be established by the same evidence as would be necessary to establish an original violation of the Act.

[1] (p. 177:) dissent from the attack on the quantity limits proviso, not because I am convinced that the proviso is useful, but because the pending case on this subject is the first time in the eighteen years of the Act's existence that the rule has been invoked. In the absence of real experience [this would appear to be] unseemly haste in urging Congress to repeal a law that small businessmen regard as important protection against price discrimination.

(P. 185:) I join in Walter Adams' dissent as to the modification of the defense of "good faith," particularly in view of the stated purpose of the Majority to make this defense good for any meeting of a competitor's price that is not “an incidental by-product of a scheme to monopolize ***" Again a Clayton Act practice is being treated as a Sherman Act restraint problem.

[1] dissent [finally from the] disavowal of the Rigid Conduit case, in which the FTC issued a cease and desist order against dominant firms in an industry where all were doing business at delivered prices. The Majority believes that it should be necessary for the Commission to prove conspiracy among the firms, [and that by more than "conscious parallel action." The Theatre Enterprises case upon

which the Report relies was a Sherman Act proceeding, and the Supreme Court held only that conscious parallel action did not require an inference of conspiracy. Conspiracy is not a necessary element of a violation of the Clayton Act or of Section 5 of the Federal Trade Commission Act. The significance of parallelism under these sections is not conspiracy, but probability of injury to competition. If only one firm in an industry is selling on a delivered price basis some buyers may be able to gain from proximity to another producer; but if all sellers use the same system, buyer choice is foreclosed. In this case, as in others, the Committee seems too eager to retreat from existing law against which there is little pragmatic evidence.

PATENT RECOMMENDATIONS OF THE REPORT

[If this Committee had been assembled to restate existing law, there could be little quarrel with most of Chapter V on Patent-Antitrust Problems. But the Attorney General needed no Committee like this to tell him what the law is. He and the nation would like to know whether this law is working satisfactorily or whether it should be changed. The Majority Report meticulously reviews the cases attempting to reconcile patent and antitrust principles, and finds little to criticize in the series of landmark decisions favoring the patentee at the expense of competition. Since it is common knowledge that the law has not prevented the growth of comprehensive patent pools that dominate important sectors of technology, I cannot join in a judgment that the antitrust laws as presently construed are adequately dealing with the problem.

[The first of the landmark decisions on which the present pattern of restraint of trade by patent has been built is Justice Taft's decision, in the old General Electric case, that so long as GE held the dominant lamp patents it might require Westinghouse not only to pay royalties for the use of the invention, but also to avoid price competition with GE. It is difficult to see why a power to fix prices is a necessary or proper part of an inventor's reward.] (Pp. 235236:) It has never been shown that this dangerous power must be added to the other benefits of a patent in order to provide adequate incentives for invention, disclosure or licensing. A patentee obtains the exact value of his lawful monopoly on the invention when he exacts all the traffic will bear in the way of royalties, or by exercising his privilege to be the sole maker or seller. When the patentee seeks, in addition, to control his licensee's prices it must be because he fears that the advantage which he has in technology is more than overbalanced by his competitor's advantage in plant efficiency, management, labor relations, and cost of materials, so that whatever he charges in the way of royalties will still leave his competitor in a position to sell for less. But there is no justification for depriving the public of the benefits of competition in all these other aspects of production and distribution merely because the patentee is entitled to a protected price for his inventive contribution. Stated another way, a Westinghouse lamp employing GE's invention might have embodied two cents worth of GE inventive contribution and twenty cents worth of unpatented material and workmanship furnished by Westinghouse. The Majority Report recognizes that a patentee of some small device, e. g., a radio switch, may not fix the price at which a licensed manufacturer sells radio sets incorporating the patented switch. This is on the ground that the patentee would be controlling the price of more than his inven tion. The same principle should apply where the patentee endeavors to control not merely the price of his idea, but the price of a much more valuable object that somebody else manufactures and owns. Finally, even if something can be said in favor of price-fixing of manufacturing licensees by an inventor who is not himself competing with his licensees, or who together with his licensees is a small factor in his industry, it would planly be unnecessary and dangerous to permit dominant firms in an industry to play this game of “I fix your price on this product under Patent A, and you fix my price on that product under Patent B."

[The vice of the actual decision in the General Electric case goes even further in a respect which has been little observed, although it was brought to the notice of the Committee. GE was not only allowed to fix the price at which Westinghouse so'd lamps; it was also allowed to compel Westinghouse to imitate GE's resale price maintenance policy. The essence of this policy was to maintain a resale price at the consumer level by dealing only through distributors and subdistributors who would agree to function technically as "agents." In short, Westinghouse was compelled to abjure selling lamps to independent distributors. How such dictation to one's competitor can be regarded as a normal reward of invention eludes me. Yet the GE case stands as a bastion of the Majority Report.