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spected mercantile device even prior to the adoption of the Constitution. If this Congress were to decree the termination of fair trade today, resale price maintenance would still continue to be a characteristic of our economy. The giant retail chains with their private brands would be completely unaffected by the demise of fair trade, and Life magazine would still sell for 20 cents at every newsstand. It is amusing to note in passing that the blue-covered book that contains the report of the Attorney General's committee has a price tag on its first page, price $1. Are citizens being deprived of the opportunity to purchase this report in a competitive distribution system at 90 cents per copy?

We carefully refrain from imputing any malice to the committee or any of its members in making what we are sure is a sincere recommendation. We regret that the committee did not have the opportunity to consider the effect of the recently introduced fair-play amendment, S. 2055. We understand that Assistant Attorney General Barnes has commented on the unfair practice of some manufacturers in engaging in a dual system of distribution: Fair trading to the bulk of its trade, and at the same time selling and shipping to discount houses. The proposed fair-play amendment will, if adopted, terminate this abuse. It will be interesting to know the reaction of the antitrust division and the Federal Trade Commission to this proposed legislation.

In closing, it is appropriate to point out that on page 66 of the report the committee acknowledged that it "has made no independent factual study to provide any basis*** for generalizing about the effect of antitrust on any related Governmental policy."

Mr. BRENNEN. I would like to make though just a very, very statement of my own or at least an explanation of this.

brief

The American Fair Trade Council is an association of manufacturers of several hundred. We cover between 35 and 40 different industries, depending which year our membership is examined, and all of our members have one thing in common: That is, that they fair trade one or more of their products.

It is not our purpose here, as Mr. Anderson states in his statement, to go into a lengthy discussion necessary to show the merits of fair trade.

I believe this committee has held extensive hearings in the past on that very point, at least 4 or 5 or 6 other committees in both Houses of Congress having done that many times in the past, and the legislatures about a hundred houses in various States, have held hearings all on the same subject.

It is not our purpose here to go into that in detail.

We would, however, like to call your attention to Mr. Anderson's statement in reference to the Attorney General's committee.

As you know, they have recommended repeal not only of the Maguire Act but of the Miller-Tydings Act, which are the underlying Federal enabling acts on fair trade, and although we do not take exception to the motives or to the individual considerations of the committee, we do feel that their conclusion was probably based on the fact that the subject is so large, as I mentioned before, where committees have spent months and months and months of hearings on that, and we feel that the subject was just so large that the committee could not adequately on a part-time basis examine the entire subject.

Other than that we have very little to say at this time, but in closing I would like to call attention to the next to the last paragraph of Mr. Anderson's statement which makes reference to what has been referred to as the fair trade amendment which is now in the Senate, S. 2055.

The purpose of this amendment, which the American Fair Trade Council endorses and supports, is to prevent manufacturers fair trading their product and thus holding one large segment of the retailers to

price maintenance and, at the same time, selling either directly or indirectly, with knowledge, to discount houses who will thus cut the price and grab the existing market from the more normal retailers who are forced to abide by that price.

As I say, we do not go into detail in this presentation. This is not the time.

We would like to call your committee's attention to it. We feel it is a step forward in reducing this unfair competition that is sometimes produced under fair trade. That will be all.

Mr. RODINO. Thank you very much.

The committee will adjourn until Monday, June 27, for hearings on H. R. 5948, the Celler bank merger bill.

(Whereupon, at 1 p. m., the committee adjourned subject to call of the Chair.)

(Documents referred to on p. 1919 follow :)

HIGHLIGHTS OF THE FINAL REPORT OF THE ATTORNEY GENERAL'S NATIONAL COMMITTEE TO STUDY THE ANTITRUST LAWS1

By S. Chesterfield Oppenheim, cochairman, professor of law,
University of Michigan

UNANIMOUS ADHERENCE TO ANTITRUST FUNDAMENTALS

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Perhaps the most notable feature of the report is the Committee's unanimous affirmation of the basic principles of antitrust policy. At the outset, the report states: "The Committee unanimously adheres to antitrust fundamentals with full vigor. Although many forces and other Government policies have materially promoted our creative American economy, we believe the antitrust laws remain one of the most important." 2 As a corollary, the report asserts that "a backward look across the 64 years since the Sherman Act reveals on the whole a healthy process of growth through which antitrust fundamentals have gained in strength and effectiveness." In a later chapter the Committee again proclaims in unequivocal terms that "the basic philosophy of the Sherman Act today remains above partisan controversy as a 'charter of freedom,' a constitution governing the economy of the United States."

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I. A POLICY AGAINST "UNDUE LIMITATIONS ON COMPETITIVE CONDITIONS" Rule of reason semantics clarified.-One controversial issue has been an asserted conflict between the rule of reason and the so-called per se violations. The report seeks to remove semantic barriers to a proper understanding of the role of "unreasonable per se" violations within the overall rule of reason. To this end, the report endorses the rationale of the Supreme Court's opinions in the Standard Oil case of 1911. Guided by the Court's pronouncement of the dominant Sherman Act policy against "undue limitations on competitive conditions," the report explains that "the rule of reason as the general rule of construction in all Sherman Act cases requires interpreting the act in the light of a broad public policy favoring competition and condemning monopoly.

This judicial discretion is "confined to consideration of whether in each case the conduct being reviewed under the act constitutes an undue restraint of competitive conditions, or a monopolization, or an attempt to monopolize." The

1 This is intended only as a summary of the basic analysis, conclusions, and recommendations in the report. Except for my personal comments at the end of this paper, this presentation adheres closely to the words of the report since I do not presume to act as the single interpreter of those words in behalf of the some 60 members of the Committee.

In this summary I have followed the sequence of the chapters and topics within chapters as set forth in the report. The chapter contents are as follows: I. A Policy Against "Undue Limitations on Competitive Conditions"-sections 1 and 2 of the Sherman Act generally; II, "Trade or Commerce *** With Foreign Nations"; III. Mergers; IV. Antitrust Policy in Distribution (principally under secs. 2 and 3 of the Clayton Act); V. Patent-Antitrust Problems; VI. Exemptions From Antitrust Coverage; VII. Economic Indicia of Competition and Monopoly; VIII. Antitrust Administration and Enforcement. These chapter headings are repeated in this summary. All quotations in the text, unless otherwise indicated, are from the report. Page references to the report are cited in the footnotes only where there is a deviation from the order of the report's treatment or where the citation appeared to be especially needed. Otherwise it is assumed that the interested reader has ready access to the report copies which are available for purchase from the Superintendent of Documents, United States Government Printing Office, Washington 25, D. C., at $1 per copy. Citations to cases are given only when the case is mentioned in the text of this summary.

2 Report, p. 2.

3 Report, p. 3.

4 Report, p. 132.

5 Standard Oil Co. of New Jersey v. United States, 221 U. S. 1, 52 (1911).

rule of reason "permits the courts to decide whether conduct is significantly and unreasonably anticompetitive in character or effect." This recognizes that "certain forms of conduct, such as agreements among competitors to fix market price or control production, are 'conclusively presumed to be illegal, by reason of their nature or their necessary effect,' so that they can quickly and positively be adjudged violations of the Sherman Act." Group boycotts are also placed in this category. Inquiry under the rule of reason is ended once it is found that in fact these forms of conduct exist. For them "the effect on competition is known to be so adverse that the conduct is unreasonable per se."

Conversely, "practices which are not unreasonable per se are those from which a fixed set of effects do not necessarily follow. They are subject to more extensive market inquiry under the standards of the antitrust laws." Their "actual or probable market consequences must be determined as a part of the test of their legality. Such determination, in turn, involves resort to economic analysis."

In these broad strokes, the Committee accepts the rule of reason as the general rule of construction in sections 1 and 2 Sherman Act cases without repudiating the unreasonable per se offenses within the contours of this overall standard. At the same time, the report subscribes to this "essential standard of reasonableness" as consonant with the need for general standards of antitrust prohibition adaptable to the dynamic competitive process. Thus, no amendment is proposed to the substantive standards of the Sherman Act.

SECTION 1 OF THE SHERMAN ACT GENERALLY

With respect to Sherman Act, section 1, a variety of devices may require varying degrees of inquiry. The report points out that two difficult questions arise. "First, does defendant's conduct constitute price fixing in purpose or effect?" In the case of outright market price fixing by agreement among competitors, as in Trenton Potteries," "the answer is easy." But the report notes that "often, however, where the character or effect of the conduct is equivocal, broader view of the way the market functions is required before a court can decide whether given behavior in fact amounts to price fixing." Second, "where price fixing is not found, but the practices reviewed may affect price formation," then "reasonableness or unreasonableness turns on the relative significance of the competition eliminated as compared with their other purposes or effects." Then the court's task is "to determine (1) whether the defendants have enough market power to make the restriction on price competition an 'undue restraint' and (2) whether they currently exercise the power or intend to do so.""

Regarding market division by agreement among competitors, the report concludes that "While in no Supreme Court case have the facts been limited exclusively to simple market division among competitors, there is little doubt, either as a matter of principle or of precedent, that agreements among competitors for market division should be and are treated like price-control arrangements."

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Exclusive territorial dealerships is a topic given particular consideration. A manufacturer's marketing plan may involve an agreement with one distributor not to locate or commission another within a prescribed area. This arrangement may be made to assure sources of supply or market outlets. It may include restrictive covenants which, if ancillary to the legitimate business purpose of the distribution plan, would be tested by the standard in Judge Taft's Addyston Pipe & Steel 10 opinion: "by considering whether the restraint is such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interests of the public."

The report reviews the meager precedents on these arrangements and concludes that "where an exclusive dealership forms part of an attempt to monopolize prohibited by section 2, or the lesser degree of unreasonable restraint prohibited by section 1, it should be held a violation. On the other hand, where an exclusive dealership is merely an ancillary restraint, reasonably necessary to protect the parties' main lawful business purposes, such a dealership should be upheld where its effect is not unreasonably to foreclose competition from the dealer's market.'

Report, p. 11.

United States v. Trenton Potteries Co., 273 U. S. 392 (1927).

s Report, p. 14.

Report, p. 26.

10 United States v. Addington Pipe and Steel Co., 85 Fed. 271, 282 (6th Cir. 1898). 11 Report, p. 29.

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Apart from these general problems under section 1, the report highlights two issues involving proof of conspiracy. First, may conduct by corporations linked by common ties of ownership and control, or actions by officers and employees of the same corporation, constitute a conspiracy? Second, to what extent may "consciously parallel" behavior by two or more legally independent and separately controlled business enterprises evidence that their action stems from conspiracy?

Intraenterprise conspiracy."-The Committee notes that restraining trade is not as such illegal and that section 1 of the Sherman Act, unlike section 2, requires a plurality of actors for its violation." It approves the doctrine that "concerted action of corporate officers acting on the corporation's behalf, or of subsidiaries acting on behalf of their parent" is not a conspiracy in violation of section 1. "Subsidiary" is defined in the report as "a corporation wholly or virtually wholly owned by a parent or a corporation with a majority of voting capital stock owned by a parent and a minority held by noncompetitors of the parent only for investment."

After reviewing the leading Supreme Court decisions, the Committee declares that "Nothing in these opinions should be interpreted as justifying the conclusion that concerted action solely between a parent and subsidiary or subsidiaries, the purpose and effect of which is not coercive restraint of the trade of strangers to the corporate family, violates section 1." All members agree that "It seems indeed inconceivable to hold per se illegal the mere fixing by a parent of a subsidiary's price or production, or the selection by the parent of those persons with whom its subsidiary may or may not deal." As a limitation, most members, in addition, believe that "when a parent and its subsidiary, though short of an attempt to monopolize, nonetheless plan to drive out a competitor, section 1 may be transgressed." Some members feel, however, that "in no instance can a parent and subsidiary be guilty of an offense that must be committed by more than one person," as in the case where the company does business through unincorporated branches, divisions, or departments.

"Conscious parallelism.” 13-Regarding "consciously parallel" behavior, the Committee adopts the following language of the Supreme Court in the Theatre Enterprises case:

14

"The crucial question is whether the respondents' conduct *** stemmed from independent decision or from an agreement, tacit or express. To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. *** But this Court has never held that proof of parallel business behavior conclusively establishes agreement or, phrased differently, that such behavior itself constitutes a Sherman Act offense. Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but 'conscious parallelism' has not yet read conspiracy out of the Sherman Act entirely."

Interpreting this language, the committee asserts that the probative value of "conscious parallelism" in "establishing the ultimate fact of conspiracy will vary case by case," dependent upon a variety of factors in the particular business setting (as illustrated in the report at p. 39). Proof of independent business justification for the parallel action is always important evidence to rebut an agreement.

15 SECTION 2 OF THE SHERMAN ACT GENERALLY

First dealing with the offense of "to monopolize," the report states that "Monopolizing under section 2 consists of monopoly in the economic sensethat is, power to fix prices or exclude competition-plus a carefully limited ingredient of purpose to use or preserve such power." Thus, it is pointed out that the existence of monopoly power "does not by itself prove the offense of monopolization." There must also be "the purpose or intent to exercise that power." This intent, distinguishable from a "specific" intent to monopolize, is "a conclusion based on how the monopoly power was acquired, maintained, or used." The additional element of "deliberateness" is supplied if the monopoly power "was achieved or preserved by conduct violating section 1" or "if it was, even by restrictions not prohibited by section 1, deliberately obtained or maintained." This requires inquiry into the history and business policy of a monopoly.

12 Report, pp. 30-36.

13 Report, pp. 36-42.

14 Theatre Enterprises, Inc. v. Paramount Film Distributing Corp. (346 U. S. 537, 540– 541 (1954)).

15 Report, pp. 43-62.

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