I think you are going to have evaporation of retail outlets by big people if you abolish the Miller-Tydings Act. Moreover, do not forget that all of the giants in America have price maintenance without the act. What would happen to the newsstand that cuts the price of a magazine? What would happen to an electrical store that cut the price of General Electric products? They would not get any more. The giants have got the power of price maintenance. The little fellows are getting it The CHAIRMAN. Mr. Ernst, before you finish it, I am very much interested in what you say about insurance, because your views parallel mine, but how can we get at insurance companies and their piling up and their developing an accretion of huge assets? How can we, the Federal Government, get at it? Mr. ERNST. Oh, the United States Supreme Court reversed its old opinion that insurance was not interstate commerce. The CHAIRMAN. Still how can we get at it? Mr. ERNST. I would suggest The CHAIRMAN. What can the Federal Government do? Control insurance companies? Mr. ERNST. That is all right. You can have the control, because it is now held to be interstate commerce. The CHAIRMAN. I know we have that power to control under that Southeastern Underwriters decision. Mr. ERNST. Yes. The CHAIRMAN. The question is: How shall we effect control? Shall we effect Federal control? Mr. ERNST. Well, my theory would be that there be an exploration just as we lived through with the divorce of the banks and the security companies. The CHAIRMAN. The insurance companies Mr. ERNST. Wait a minute. The CHAIRMAN. Just a moment. The insurance companies will not let us investigate. There is pending a joint resolution offered by the chairman of the Senate Judiciary Committee, together with myself as chairman of the House Judiciary Committee, and through the machinations of the lobby of insurance companies that resolution is stymied in the Rules Committee of the Senate. Mr. ERNST. I am not saying you can do any one of these things quickly. Of course, they are going to block you. Of course, they prefer this power of sitting on top of $5,000,000,000. I do not know why they do, because they have not got time to think, these fellows. The CHAIRMAN. They are sitting on $50,000,000,000; they are not sitting on $5,000,000,000, but $50,000,000,000. Mr. ERNST. May I spend the few remaining moments to make the point I really want to make? I would like you to consider passing at this session of Congress, without any criticism, implied or direct, of previous Congresses or previous or present Secretaries of Commerce, to get embedded into the folkways of the people that the Secretary of Commerce has the duty to set forward programs for free enterprise. I gave you samples of 10 or 15 of them. He would say to the Congress, to the Treasury Department preparing a new act in relation to capital gains, "These are the effects on free enterprise; these are the people who are in peril; these are the guys you are going to wipe out." He would be here, and he would put up a defense for the chainstore tax which I am strongly in favor of, et cetera, et cetera. The CHAIRMAN. Did you discuss this with the Secretary of Commerce, Mr. Sawyer? Mr. ERNST. No; I have not. The CHAIRMAN. Do you not think it would be advisable? Mr. ERNST. I am just a private citizen. The CHAIRMAN. I think he would welcome a discussion. I assure you that I am going to send him a copy of your statement, Mr. Ernst, and your comments. Mr. ERNST. Mind you, I do not think any of the committees of Congress by the reports you will issue and months of hearings can get any information on this subject or any value to the public. I tell you that I have put it repeatedly-I put it into the record at every hearing. I did it in the Eightieth Congress where I was counsel to Senator Murray's Committee on Small Business in the Senate on the evaporation of newsprint in the local press. Nothing is carried; do not kid yourselves. If it is, it is bedded away. The Secretary of Commerce comes in, in time-and it will not be in a year-and he will finally have a stature as advocate for free enterprise, for small business; you do not have to worry about the big boys; they can take care of themselves. He will get a stature in the American mind equivalent to the Secretary of Agriculture and the Secretary of Labor. The Department of Commerce was established as a little place where big boys could get some information. It has done great jobs. It has a Bureau on Small Business. That is not what I am talking about. I am talking about a new point of view, because I think we are in peril. I think now that we are off the seller's market, you are going to find terrific political and economic consequences among the little people. Mr. KEATING. I would be very much interested, Mr. Chairman, in hearing, after he has had a chance to digest the remarks of Mr. Ernst, of hearing the Secretary of Commerce present his views on the very suggestion that has been made, the very interesting suggestion that has been made. The CHAIRMAN. I wish to state to the members of the committee that I did have a conference with the Secretary of Commerce, Mr. Sawyer, and he said at this juncture he would be disinclined to appear before the committee. But Mr. Ernst's remarks are so provocative that, perhaps, he might change his mind even at this juncture, and, as I said, Mr. Ernst, I will certainly send a copy of your statement to him. Mr. ERNST. May I make one other comment on this subject? You probably know that Louis Johnson, in his first speech, when he became Secretary of Defense, spoke before the Chamber of Commerce, and it is a great speech on this subject and it is an important speech because the United States Government in the Defense Department is a buyer, I think, of five or six billion dollars worth of goods, Army, Navy, Air Forces-$6,000,000,000. Now, you know better than I do that the policy of the military historically has been the policy that you or I would adopt. It has been the trickle-down method. It is much easier to pick a hundred big fellows and let them subcontract. That is not good for the little guys. The little guys are given a little part of an article to make. They become economic slaves; they are loaned money. It is more expensive for the Government of the United States to buy from little guys as well as big ones. If you have not read it, read Louis Johnson's great speech; read it. The department of the Government that buys can have a terrific impact on the survival of free enterprise in the conflict. The CHAIRMAN. Thank you very much, Mr. Ernst. We are very grateful to you for your remarks here today. The next witness will be one of the Assistant Secretaries to Mr. Johnson. He will be here Friday, and he will be Assistant Secretary of the Navy Matthews. Mr. Ernst, we have to leave now, unless there are some more questions. (Whereupon, at 12:20 p. m., an adjournment was taken until 10 a. m., Friday, July 15, 1949.) STUDY OF MONOPOLY POWER FRIDAY, JULY 15, 1949 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON THE STUDY OF MONOPOLY The special committee met, pursuant to adjournment, at 10:05 a. m., in room 346, Old House Office Building, Hon. Emanuel Celler (chairman) presiding. Present: Representatives Celler, Bryson, Denton, Michener, and Keating. The CHAIRMAN. The meeting of this committee will come to order. We have with us the Honorable Francis P. Matthews, Secretary of the Navy, and I am sure that he will have a very, very important message for us. We will be very happy to hear you at this time, Mr. Matthews. STATEMENT OF HON. FRANCIS P. MATTHEWS, SECRETARY, DEPARTMENT OF THE NAVY; ACCOMPANIED BY REAR ADM. J. D. BOYLE, ASSISTANT CHIEF, OFFICE OF NAVAL MATERIAL, DIRECTOR, PROCUREMENT POLICY DIVISION; REAR ADM. GEORGE L. RUSSELL, JUDGE ADVOCATE GENERAL; AND LEONARD NIEDERLEHNER, COUNSEL, MUNITIONS BOARD Secretary MATTHEWS. Mr. Chairman and members of the committee, I have a prepared statement that I would like to present, to begin with, and then if there are any questions, we will do the best we can to answer them. It is a privilege indeed to appear before your committee in response to the invitation to the Secretary of Defense, Louis Johnson, who, because of urgent prior commitments, is unable to appear today. My statement represents the views of the National Military Establishment, and I speak for all three of the military departments. Recognizing the breadth of your present study, I believe that, in keeping with your invitation, I should confine myself to those areas in which the problems of small business and big business affect the military departments-principally in the area of procurement of supplies, in many cases in rather large quantities. I believe that the broader aspects of your study, particularly the relations between business and government generally, and the particular topics set forth in your invitation-the history, causes, extent, effects, and remedies of monopoly power-can be discussed better by other agencies of the Government, and no doubt have been covered to your satisfaction by |