The bill included in the July 21, 1944 report of the Surplus Property Committee of the Special Committee on Small Business comes closer to being desirable legislation but still contains objectionable provisions of the type which I discussed at length in my testimony on June 16, 1944, at a joint hearing of interested Senate and House committees presided over by Senator George.

I am strongly of the view that the proposed legislation which we recommended and which I explained at length and in detail at the joint hearing referred to above is greatly preferable to either of the bills which you sent me with your letter of August 4.

The proposed legislation which we recommended was the result of an intensive study of the matter by a legislative committee of which I was chairman and on which 10 or 11 interested Government agencies were represented.

I believe with one possible exception all these Government agencies testified on June 20 before Senator George's committee as being in favor of our proposed legislation.

Sincerely yours,

W. L. CLAYTON,
Administrator.

JUNE 29, 1944.

Hon. ED C. JOHNSON,

Senate Office Building, Washington, D. C.

DEAR SENATOR JOHNSON: Referring to S. 2045 and your letter of June 26, 1944, requesting my comments with respect thereto and my suggestions as to possible changes therein:

As you know, a committee on legislation representing a number of executive agencies, acting under my chairmanship, has prepared a proposed bill on the subject of property disposal. I believe you are familiar with that bill, and with the testimony concerning it. A number of the provisions of S. 2045 are identical with provisions which we recommended. To the extent, however, that S. 2045 departs from our recommendations, and particularly in sections 6, 7, and 9, I feel strongly that it would greatly impede the disposal of surpluses.

I feel, and I think the country feels, that surpluses are a national asset which must be realized on, and that to hold them off the market when they could be usefully sold would be a major mistake.

I shall deal first briefly with matters of basic substance, and thereafter with a few matters which, while not so fundamental, are still essential in my opinion:

(1) Many types of property, if they are to be sold at all, will bring far less than either cost of production or current replacement cost. The price restrictions of sections 7 and 9 (a) (1) thus in effect prohibit the sale of a major portion of all surpluses.

(2) Section 9 (a) (2) is a flat prohibition on the sale of scrap or obsolete material. This would require a mountainous accumulation of material which should be put back into the stream of production just as fast as it can be economically absorbed.

(3) The rigid requirements of sections 7 and 9 (a) (1) for sales through established trade channels, and the added provision of section 9 (a) (1) for a first offer of all durable property to the manufacturer, would give existing trade groups a stranglehold. The Administration would have to sell to them or not sell at all. Since 98534-44-pt. 13- -3

under those circumstances those groups would seldom offer the high prices required by the statute, there would be few sales.

(4) The limitation of sales of durable goods to 20 percent per year, in section 9 (a) (1), seems to me to be an arbitrary provision directly contrary to the public interest. The administrator already has a mandate not to disrupt the economy, and the faster he can sell surpluses without such disruption, the better. Conditions in some years may permit much more than 20 percent to be sold at good prices, while in other years much less than that amount might be salable. Perhaps less important, but still essential, are the following points: (a) S. 2045 contains no clear grant of power to sell any property, such as that contained in sections 11 (a) and (d) of our proposal. One of the most pressing reasons for legislation is to have, in a single act, a clear grant of power to pass title upon which a purchaser can rely. While S. 2045 implies such a power as to some types of property, it might exclude others by implication, and in any event the power should be clearly stated. This is particularly true since S. 2045 omits any statement of the effect it is intended to have on existing laws.

(b) I think, that, whether or not the distinctions intended to be made are valid, the definitions of the three different classes of property to which S. 2045 refers are not clear enough to enable an Administrator to carry out its provisions. I refer particularly to the definition of "common supplies."

(c) The elimination of all references to disposal agencies seems to me highly undesirable, since it creates the possibility of a large separate disposal organization directly under the Administrator.

(d) I see no justification for giving away all surplus perishable property.

At your convenience, I would be very glad to come to your office and discuss these points with you.

Sincerely yours,

W. L. CLAYTON,
Administrator.

Hon. JAMES E. MURRAY,

DEPARTMENT OF JUSTICE, Washington, D. C., August 14, 1944.

Chairman, War Contracts Subcommittee,

United States Senate, Washington, D. C.

MY DEAR SENATOR: In your letter dated August 4, 1944, you requested the views of the Attorney General on two surplus war property legislative proposals now being considered by the War Contracts Subcommittee:

(1) the substitute version of S. 2045, introduced by Senator Edwin C. Johnson,

(2) the draft bill included, without subcommittee commitment, in the July 21, 1944, report of the Surplus Property Subcommittee of the Special Committee on Small Business.

I shall discuss each of these proposals briefly.

The substitute version of S. 2045.-The purpose of this bill is to create a central administrative agency to carry out its provisions with

respect to surplus war property. I invite your attention to the following aspects of the bill:

1. The bill does not contain any provision expressly conferring legal authority upon the Government agencies to dispose of, to transfer and otherwise handle property as contemplated in the bill. It is necessary to find that authority by implication from other provisions in the bill. As the Attorney General pointed out in his testimony before the War Contracts Subcommittee on April 18, 1944, a matter of this importance should not be left to implication. In my view, it is essential that any bill on surplus property should contain a provision which clearly confers requisite authority upon the appropriate Government agencies.

2. Section 11 of the bill, with certain exceptions that need not be noted here, is designed to freeze the sale of surplus property for a period of 5 years. In his testimony before the War Contracts Subcommittee, the Attorney General discussed the reasons why he did not favor any legislation which arbitrarily freezes the sales of surplus property. To remove any doubts as to our views in this matter, I would like to add, that in my opinion, the enactment of legislation enabling the Government agencies to adopt and carry out a wellconsidered program for the management and disposal of surplus property would bring the greatest return to the Government, facilititate the reconversion of industry and would reduce the dangers of dumping and speculation. Much of the surplus property may be urgently needed to enable industry to reconvert rapidly and it could be absorbed readily without disorganizing the domestic economy. A market exists at the present time for a great deal of this property but may not exist in the future. These commments are applicable also to other sections of the bill which would freeze the sale of property. 3. Section 12 of this bill appears to be identical with section 13 in the original draft legislation prepared by Mr. Clayton, the Surplus War Property Administrator. In its present form the section may create doubt as to the effect of the statute on the administration of the antitrust laws. I suggest that section 12 be eliminated and that section 16 of S. 2065, a bill prepared by the Senate Small Business Subcommittee, be substituted. I have attached a copy of this section to this letter.

4. Section 9 of the bill in its present form may cause serious administrative difficulties. Although the definition of the term "common supplies" has been modified in the substitute bill, it will be difficult to determine what kinds of property are included within the definition. It may not be possible to fix the replacement cost of many articles of surplus property as required by this section. An artificial restriction on price such as that incorporated in this section may prevent sales of much surplus material, particularly used surplus property. Finally, I wish to point out that the requirement that goods be sold through regular trade channels might be construed as preventing new concerns from dealing in surplus property. If such a restraint is intended, it would, of course, place a serious obstacle in the way of any person including a veteran who wished to establish his own business enterprise.

5. Section 13 provides that no Government agency shall produce articles for civilian use in competition with private industry or produce articles for military use in facilities acquired by the Defense

Plant Corporation. In a letter to Senator Johnson, dated August 7, 1944, the Attorney General pointed out that this provision is in the nature of general legislation, almost wholly unrelated to the disposition of surplus Government property. Further, in its present form, the section is ambiguous and might be construed to prevent many Government operations authorized by statute in which various products are made available to the public by sale or otherwise. An example of a Government agency carrying on this kind of operation is the Tennessee Valley Authority.

The draft bill included in the subcommittee reported dated December 21, 1944. The purpose of this bill is to set up an administrative organization for the disposition and management of surplus property. I have the following comments to make on this bill:

1. The bill, like S. 2045, does not contain any provision expressly conferring authority upon the Government agencies charged with the administration of the act. The comments I made on S. 2045 are applicable here.

2. Section 7 requires each agency charged with the responsibility of disposing of surplus property to organize advisory committees with which it shall consult regarding the disposal of property under the act. It provides that the committees shall be representative of large and small business units, labor, farm, consumer and other interested groups. A provision of this kind with respect to advisory committees appears to me to be unnecessary. As you know, a number of agencies have organized advisory committees pursuant to arrangements with this Department. I am enclosing copies of letters dated April 29, 1941, June 27, 1944, and July 5, 1944, exchanged between this Department and the War Production Board which describe the arrangement under which the War Production Board advisory committees are operating. Similar arrangements have been effected with every agency using advisory committees. The requirements with respect to the use of advisory committees described in these letters are intended to enable the committees to consult with the agencies desiring advice without violating the antitrust laws and at the same time to prevent abuses that might arise from their use. These arrangements which have existed since 1941 have, I believe, worked very satisfactorily.

If, however, it is determined that section 7 should be retained in the bill, there are a number of objections to the provision in its present form. A mandatory provision requiring each agency to use advisory committees appears to be inadvisable. The use of these committees should be left to the discretion of the disposal agencies. I see no reason to compel an agency to organize an advisory committee unless the committee would serve a useful function. In order that it be clear that these committees would perform only advisory and consultative functions, I suggest that in addition to the requirement that the committees be representative, language be added to provide that the Government agencies and not the committees shall formulate and carry out all policies and procedures, and that the organization of these committees shall not impede in any way the opportunity of any other person to present his views to the Government agency. I

would favor also the insertion, with appropriate modification, of the following language taken from section 103 (e) (1) of S. 2061:

Provided. That full information on all such councils shall be submitted to the Attorney General and no such councils shall continue any operations or activities which the Attorney General finds and certifies to the Director tend to promote the restraint of trade or the extension of monopoly;

The reasons why I believe these safeguards are necessary are discussed in the letters referred to above exchanged between this Department and the War Production Board. It is my view that any legislation relating to advisory committees should contain these safeguards in order to eliminate any possibility of abuse resulting from the establishment or use of advisory committees.

3. The meaning of section 8 in this bill is not clear. It is not possible to determine whether the agencies named will act as disposal agencies subject to the authority and direction of the Administrator, or whether these agencies will, in fact, act independent of the Administrator's control. If the latter construction is correct, the divided responsibility for the management and disposition of surplus property may cause serious difficulties. In any event, this ambiguity should be eliminated.

4. I suggest that section 16 of S. 2065, a copy of which is attached to this letter, be substituted for section 10 (b) of this bill.

In view of the urgency of your request, it has not been possible to determine from the Bureau of the Budget if there would be any objection to the submission of this report.

Sincerely yours,

CHARLES FAHY, Acting Attorney General.

SECTION PROPOSED TO BE SUBSTITUTED FOR SECTION 12 OF S. 2045

SEC. -. Whenever the Administrator or any disposal agency shall begin negotiations for the sale or transfer to private interests of a plant or plants or other property representing an original cost to the Government of $1,000,000 or more, the Administrator or disposal agency shall promptly notify the Attorney General of the proposed sale or transfer and the probable terms or conditions thereof. Within a reasonable time after receiving such notification the Attorney General shall advise the Administrator or disposal agency whether the proposed sale or transfer will either violate the antitrust laws, or encourage monopoly or undue concentration of industry or commerce or restrain competition substantially. Upon the request of the Attorney General, the Administrator or other Government agency shall furnish or cause to be furnished such information as the Administrator or any such agency may possess which the Attorney General determines to be appropriate or necessary to enable him to give the advice called for by this section or to determine whether any other sale or transfer of surplus property violates the antitrust laws. Nothing in this Act shall impair, amend, or modify the antitrust laws or limit and prevent their application to persons who buy or otherwise acquire property under the provisions of the Act. As used in this section, the term "antitrust laws" includes the Act of July 2, 1890 (ch. 647, 26 Stat. 209), as amended; the Act of October 15, 1914 (ch. 323, 38 Stat. 730), as amended; the Federal Trade Commission Act; and the Act of August 27, 1894 (ch. 349, sec. 73, 74, 28 Stat. 570), as amended.