Page 241 242 243 244 245 246 247 248 249 250 251 STATEMENT OF ADOLPH BERLE, PROFESSOR OF LAW-Continued If section 7 is amended, it would naturally restrict certain potential buyers namely those so powerful that a new purchase would be a merger "substantially lessening competition" within meaning of act. Berle says there are many small family corporations. Discussion of section 7 and effect on sale of small business to large concern. It is silly, however, to bar sale of stock and permit sale of assets at the same time. But law should state what we are aiming at. Mr. Celler reads cases to show that acquisition of small company not condemned under new section 7 or old, as act deals only with lessening competition to a substantial degree. Mr. Wilson again emphasizes hardship in that section 7 under proposed amendment would restrict sale of middle-sized business to any very large corporation. Mr. Celler admits the problem; but all equities should be weighed, and Congress should determine tax incidence problem. Mr. Denton points out that the little men were in favor of amending section 7 and perhaps concern over hardship is excessive. Mr. Celler says that the little men know all about this bill. Berle says there is twofold problem: 1. Of large company which is selling to large concern with which FTC is concerned, 2. the small independent wishing to sell that can only sell to big company. Berle says that only where small business sells to large one which approaches maximum point of concentration would section 7 be involved. Even if we adopt a policy against concentration, may be frustrated by executive branches of the Government. There was a cartel agreement between American concerns and N. V. Philips, a Dutch concern, with regard to electronics. Philips established American concern, North American Phillips. Judge Forman found old cartel agreement illegal and is framing an injunction directing competition. But armed services refuse to allow Philips to compete. Navy Department set out list of proscribed corporations with whom no orders placed. The North American Philips Co. received a citation for war production by Navy. Armed services requested other firms not to deal with some of these Berle helped get Philips people here. Stock is owned by Hartford District court says they ought to compete. At the same time, executive Mr. Celler suggests that the law forbids procurement divisions of the Berle says hard to supply armed forces if eliminate concerns that Berle reads from forthcoming study by Stocking and Watkins pointing Page 251 252 253 254 255 265 STATEMENT OF Adolph BerLE, PROFESSOR OF LAW-Continued Directors of du Pont and AT&T had no idea they were violating the There are two theories-one is that bigness legally acquired is not Top limit would differ in each industry; point where it threatened to Except in public utilities which are natural monopolies, there is a top Compare geographical limit on public utility holding companies under Quasi-public regulation should occur in industries where high degree of United States itself should channel its own buying power in the course of the policy adopted by the legislature. Alternatives-1. Can leave present law as is and let courts determine results. 2. Empower FTC to inquire whether size or degree of concentration in any industry restrains trade, results in unduly high prices, etc., with power to find a top limit on percentage of control and allowing Government to require dissolution in case concern transcended that size. 3. After finding of FTC, Congress might permit commission to impose public utility responsibility upon the industry. He prefers to allow choice of company to break up or to assume responsibility. 4. If capital market is unable to provide credit and equity capital for 5. Study should be made of measures giving tax advantage of relief Mr. Berle's prepared statement substantially as given above appears STATEMENT OF ELLIS ARNALl, Former Governor of Georgia Surest way to preserve free competition is to smash monopoly. Trend has been toward monopoly As soon as railways were forced into corner, Congress passed Reed- Railroads have power to discriminate. Fallacy of Reed Act is that the 266 ICC does not pass on each rate. Thirty to forty thousand rates They are approved without action of even subordinate employees. Unless shipper objects, rate is never reviewed. Railroads now have carte blanche to violate spirit and purpose of antitrust laws. Page 267 268 269 270 271 272 273 274 275 276 STATEMENT OF ELLIS ARNALL, FORMER GOVERNOR OF GEORGIA-Con. This act was passed just at the time they had the railroads cornered in the Supreme Court. In last session of Congress, bills were introduced to exempt insurance companies from the antitrust laws. Also bills to exempt oil companies, AP wire services, from trust laws. If trend is not reversed no one will be left to violate trust laws. Mr. Celler tells anecdote regarding putting water in the wine barrel. ICC, etc. were designed to protect the public against certain type of enterprise. Now many of the regulatory bodies stand as a bulwark against the public to protect the people they regulate. Does not suggest abolishing ICC; has no answer to problem. However, Mr. Keating suggests that regulatory body, familiar with problems Jefferson If trend continues, will have a drive for nationalization. South has felt effect of transportation monopoly, interest rates, and Suit against latter association was instituted 11 years ago. Divestiture There is still pending the case against Loew's, Warner Bros., Fox, United To expedite antitrust trials, suggests procedural changes, and that all State of Georgia case versus railways cost over $1,000,000 and has been Preference should be given to antitrust suits-though not ahead of criminal cases. Huge section of motion-picture industry has violated laws. Victims have been small independent operators. More than a year since decision, yet only two companies have indicated an intention of complying. Even if producers are finally divorced from theater holdings, will not reach the root of the evil, if they dispose of holdings to confederates. In order to prove contempt of court, would again have to prove mo- Arnall says Department of Justice operates on a limited budget. Mr. Keating expressed sympathy with this point of view-if one makes Page 277 278 279 280 281 282 283 284 285 286 Statement of Ellis Arnall, Former Governor of Georgia—Con. Arnall says penalties today are ridiculous. When A & P convicted, not fined more than $25,000 or $30,000. He thinks violators should be dealt with ruthlessly. Perhaps some provision barring officers from corporations and depriving them of their salary as penalty. Celler points out this could be done in consent decree. Under present law, corporation is penalized, actual people doing acts go free. Stockholders are not responsible. Keating agrees as to stricter penalties, but great care in determining whether to proceed criminally. Fine of $5,000 is absurd as a deterrent. Arnall would fix sum of $50,000. For at least the second violation, would exclude from interstate commerce. Speaks about exhibition monopolies where exhibitors must sell at fixed price or be denied films. Schine circuit, for example, owns 148 motion-picture houses in 76 towns and cities. Sixty are closed towns belonging to Schine; 16 towns there is competition, but Schine controls market. Griffith circuit in Southwest operates 85 towns, out of which 53 are completely closed. Something must be done here. Webb-Pomerene Act permits unlawful practices against competitors here at home. He also mentions proposed cartel between American Motion Picture Export Association and British. Cartel agreement proposed between export association and British put into record. The agreement has been abandoned, perhaps because of disagreement or complaint lodged with Justice Department. Part of the agreement would have empowered export associations to determine which British pictures were to come into this country. Webb-Pomerene Act is immoral. Summary: 1. All existing exemptions from Sherman law be repealed. 3. In civil suit, all damages proved shall be presumed to flow from 4. All corporations convicted of violating the Antitrust Act be deprived of right to ship goods in interstate commerce after second offense. 5. Officers be deprived of office if corporation convicted, and punished severely so the law will be a deterrent. 6. More adequate provision for Antitrust Division in Justice Department. He does not believe bigness itself should be prohibited. If bigness may be judged by ability rather than illegal activities, then bigness is all right. Also would suggest more Government financing for small business. There is little difference between extreme left and extreme right. Both would destroy individual dignity and liberty. HEARINGS, FRIDAY, JULY 22, 1949 STATEMENT OF WALTON HAMILTON, ATTORNEY Proposes to discuss enforcement measures. History of Sherman Antitrust Act. Bills referred to Finance Committee, of which Sherman was chairman. A bill reported out of the committee. Senator Ragen, of Texas, objected because it was too mild. Ingalls, of Kansas, also introduced a bill. Ragen and Ingalls both added their bills to Sherman bill as amendments. Everyone then amended the bill, which was referred to the Judiciary Committee. The original bill was killed entirely. Final bill spoke not in terms of antitrust or in terms of protection to the consumer, as Sherman had planned but was in language of the common law and put some new penalties onto the old remedies. Page 287 288 289 290 291 292 STATEMENT OF WALTON HAMILTON, ATTORNEY-Continued In old days, all courts did was to refuse to enforce contracts that were Disposition of judges to disregard criminal penalties and difficult to In U. S. v, American Medical Society, jury returned verdict against the Increasing tendency, therefor to plead nolo contendere and take fines Equity remedy is not punitive and measures are modest. The real Second case is where small business sues large corporation. Corpora- There was a suit brought by United States Government. Hamilton asked: "What about the case on the merits?" Reply: "Oh, I am hoping we will never reach that question." Other instance where attorney told him he was sure practices were illegal but matter could be kept in court for 5 years, and by that time, new set of practices could be discovered. No reason why either private or public lawsuit should hang around courts for 6 or 7 years. Story about adjournments in Aluminum Co. because of successive births of children. Refers to O'Mahoney bill which made violation of Antitrust Act a This leads to "establishment" which is not good either in industry, |