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President, Metropolitan Life Insurance Co.,

New York, N. Y.

DEAR MR. LINCOLN: I have your letter of August 25, addressed to committee counsel, enclosing the corrected transcript of your August 1 testimony before our Subcommittee on Study of Monopoly Power, and a 12-page printed memorandum. The corrections you have indicated in the transcript have been transposed to our master copy for printing, as well as those set forth in sections 2 and 3 of your memorandum. In addition, I have made corrections in my remarks on pages 1034, 1040, 1045, 1049, and 1053 of the transcript, and indicate those changes in pencil on the corresponding pages of your transcript which I return herewith.

The points you make in section 4 of your memorandum are largely met by the penciled corrections of my remarks. I must take exception to your remark at that point, however, to the effect that the insurance companies were not given an opportunity to publish rebuttal material in the same documents referred to. I call your attention to TNEC Monograph No. 28-A ertitled, "Statement on Life Insurance," which was published as part of the series t the request of five life insurance company officials, including yourself, and constitutes your rejoinder to Monograph No. 28.

The December 9, 1926, speech of the late Honorable Charles Evans Hughes to the Association of Life Insurance Presidents will also be inserted in full in the record. I am endeavoring to trace origin of the remarks attributed him in 1906 and shall inform you later of the results.

As to this, I may point out to you a passage on page 285 of Morris Ernst's book, Too Big, where he says:

"Certainly as a first item in any overhauling we should limit the dollar size of insurance companies along the lines indicated by Charles Evans Hughes in 1906, with similar approaches to savings and commercial banks, trust companies, and other institutions which together dominate the capital funds of the Nation." However, I cannot spell out from Mr. Hughes' remarks in 1926 any endorsement by him of the principle of expansion in life-insurance companies. At most it could be construed as a stamp of approval on the growth of the industry as a whole, but I doubt if Mr. Hughes, were he here to tell us, would applaud the huge concentrations of wealth in the control of a mere handful of insurance companies. Nor do I.

I have no objection whatsoever to including your memorandum as part of your testimony and shall so instruct our counsel. Perhaps, though, you may wish to make changes in the memorandum so that your points would respond more directly to the corrections in my remarks.

I shall also have sent to you copies of the galley proofs of the transcript when printed, together with any additional material which may be inserted.

Very truly yours,



New York 10, N. Y., September 15, 1949.

House of Representatives, Washington, D. C.

DEAR MR. CELLER: This is to acknowledge receipt of your letter of September 9 in reference to the record of my testimony during the proceedings on August 1, 1949, before the Special Subcommittee on the Study of Monopoly Power of the Committee on the Judiciary.

I note the changes you have made on pages 1034, 1045, 1049, and 1053. During the hearing of the Subcommittee on Monopoly Power, the Temporary National Economic Committee itself was credited erroneously with the responsibility for the statements quoted on these pages.

The corrections on the foregoing pages now refer to the TNEC Monograph 28 as the authority for all but one of the quotations. This may be misleading because the reader quite properly can imply that the quotations represent the findings of the Temporary National Economic Committee itself. This is not the fact as is evident from the foreword of Monograph 28 by the Honorable Joseph C.

O'Mahoney, Chairman of the Temporary National Economic Committee, and the letter of transmittal from Mr. Sumner T. Pike, one of the Commissioners on the Securities and Exchange Commission at the time of the investigation. He emphasized that the contents of this monograph represent the work of the Insurance Section of the Commission.

The change on page 1049 is incorrect. Monograph 28, and not to Monograph 17.

Reference should be made to page 17 in

Now, as to the change on page 1053, the final report and recommendations of the TNEC do not refer to Mr. Pike as the Chairman of the Securities and Exchange Commission as this indicates. As Mr. Pike is quoted as the authority for the statement on this page, it is to be noted that he said that the recommendations and suggestions were "my own" and one of his associates, and "not those of the Commission." Furthermore, in the brief interpretation of Mr. Pike's views, as set forth on page 1053, the fact is omitted that he also specifically stated that the life-insurance business was not only "generally healthy," but that the recommendations he submitted "are not an attack on the life-insurance business."

The first paragraph appearing on page 1045 alludes to “Monograph No. 28 at page 14" as the source of the statement by "the Chairman" respecting directors. There is no such statement on page 14 referring to directors as "holding responsibility neither to the Government nor policyholders."

It is noted that you take exception to a sentence in my memorandum to the effect

that "* * * the insurance companies were not given an opportunity to publish rebuttal material in the same documents referred to." This quotation does not contain several words which may be found in the following sentence which is copied from my memorandum and reads, "the life-insurance companies were not allowed to * * have rebuttal material published in the same public documents which contained the foregoing statements." The italicising is ours and relates to certain quotations which were specifically referred to by you during the hearing of the Subcommittee on Monopoly Power.

You refer to TNEC Monograph 28-A for the purpose of indicating that the institution of life insurance was permitted to not only submit rebuttal material but also to have it published in a Government document. We are thoroughly familiar with Monograph 28-A and the events which ultimately led to its publication. It was only after repeated and persistent efforts by representatives of the life-insurance companies to get "their day in court" that even this publication was finally authorized-and only then after prolonged opposition. With the support of the Honorable Joseph C. O'Mahoney, Chairman of the Temporary National Eeconomic Committee, the printing of Monograph 28-A was finally authorized. So much time had elapsed before it was available for distribution that such final recommendations and conclusions as were made by the TNEC on life insurance had long since been a matter of public record.

It is clear from the foregoing that Monograph 28-A had little or no rebuttal value with respect to the statements contained in Monograph 28, to which you made somewhat inaccurate reference during the hearing of the Subcommittee on Monopoly Power. It is equally clear that if our corrections to the statements in Monograph 28 had been printed in that publication, much misunderstanding would have been eliminated. It is with this in mind that my memorandum stated that the insurance companies were not allowed to "* * * have rebuttal material published in the same public documents which contained the foregoing statements"-and by the latter we had in mind the purported quotations you inserted in the record. We believe that the public should have had all the necessary facts to appraise promtly and fully the statements released for public information by those associated with the investigation of life insurance during the TNEC.

I do not believe that the situation arising from the corrections which you have suggested can be satisfied effectively by my making changes in my memorandum to meet such corrections. Instead, I request that your letter of September 9 and this present letter be inserted in the record.

We shall look forward to receiving the galley proofs of the transcript of the hearing.

Very truly yours,

LEROY A. LINCOLN, President.





Washington, D. C.

The special subcommittee met, pursuant to adjournment, at 10:05 a. m., in room 346, Old House Office Building, Hon. Emanuel Celler (chairman) presiding.

Present: Representatives Celler (chairman), Bryson, Denton, Wilson, Michener, Keating, and McCulloch.

The CHAIRMAN. The meeting of this subcommittee will come to order.

Our first order of business today is to hear from Mr. Edward R. Johnston, a member of the law firm of Poppenhusen, Johnston, Thompson & Raymond, of Chicago.

Mr. Johnston, we are happy to hear you at this time.


Mr. JOHNSTON. Mr. Chairman, in the interest of saving time I have reduced my statement to writing, which I will read, with your permission. I will answer any questions which the committee might have at the close thereof.

My name is Edward R. Johnston. I am a member of the law firm of Poppenhusen, Johnston, Thompson & Raymond, 11 South La Salle Street, Chicago, Ill. I have been actively engaged in the practice of law for the past 42 years. During the last 25 years of that period much of my time has been devoted to the defense of antitrust cases, both civil and criminal, and the counseling of trade groups and individual clients on the antitrust laws.

Incidentally, I might state that I am chairman of the American Bar Association committee on trade associations, and a member of the so-called commerce committee.

The CHAIRMAN. Do you speak for the American Bar Association this morning?

Mr. JOHNSTON. No, sir; I have not been delegated so to do.

I realize the danger of generalizations based upon personal experiience. From my contact over the years with the application of the antitrust laws to the conduct of many and varied types of business, I have, however, arrived at certain rather definite conclusions which I venture to submit for the consideration of this committee.

During the quarter of a century that I have been intimately connected with this field of law, I have observed a marked change in the attitude of businessmen generally toward the enforcement of the antitrust laws. Today, as contrasted with 20 or 25 years ago, there is an earnest desire on the part of most corporate officials to operate strictly within legal limits. What those limits are has become increasingly dif ficult to define. The last 10 years has witnessed a greater expansion of the antitrust laws by judicial decision than occurred during the entire period of 50 years following the enactment of the Sherman Act. Many of the cases decided during this decade involved activities which the antitrust bar had theretofore regarded as lawful. It would be unwise to assume, therefore, that because of the number of cases brought during this period or the outcome of such cases, we have been experiencing a waive of antitrust violations. The greatly enlarged Antitrust Division of the Attorney General's Office together with the tendency to reach out into unexplored fields for possible violations accounts, I believe, for the increase in this type of litigation.

The plaint of the average businessman ever since I can remember has been: "Why doesn't the law tell me in plain, understandable English what I can and what I cannot do?" I sympathize with his position. However, there is very little that the lawyer or the legislator can do about it as long as our antitrust laws are couched in general terms having, as the Supreme Court has said, the broad sweep of a constitutional provision. And I quite agree that generality is inevitable when dealing with such problems as restraints of trade and monopolization.

The businessman must be reconciled to the fact that his liability must depend upon the construction placed by a court upon the broad language of the statute, as applied to the particular facts of his case. When, however, the court so interprets the antitrust laws as to place the honest industrialist in peril of violating the law when conducting his business in a normal, competitive manner corrective legislation is indicated. There are several such situations today.

One results from the absurd interpretation placed by the Supreme Court on the meaning of "price" as used in the Robinson-Patman Act. It is defined by the Court as the seller's "mill net" and not the price which the buyer actually pays or agrees to pay for the goods. The effect of this strained construction is to preclude the seller from absorbing freight in order to meet competition in markets where the seller is at a disadvantage freightwise.

The CHAIRMAN. Do you mind interruptions, Mr. Johnston, or would your prefer to wait until you have concluded?

Mr. JOHNSTON. That is entirely at your pleasure, sir.

The CHAIRMAN. When you say "mill net" is that the same as f. o. b.


Mr. JOHNSTON. It means the same in substance, yes; what the price is at the mill, disregarding all items of freight and carriage. They use the term "mill net" in the decision, and that was the term that was originated by counsel for the Federal Trade Commission.

Here competition is restricted and monopoly fostered by favoring the large manufacturers with numerous mill outlets over the manufacturer with a single mill. The Congress is attempting to deal with this problem by the O'Mahoney bill. As amended in the House, how

ever, that bill does not, it seems to me, relieve the seller of the threat of violating section 2 of the Clayton Act when he absorbs freight to enter a competitive market and thus varies his mill net between actual or prospective competitors.

Mr. MCCULLOCH. Then, is it your opinion, Mr. Johnston, that if a manufacturer in good faith would quote you prices, delivered prices, and to me the delivered price, and I was a thousand miles beyond your place of business, then there might be a violation even under the bill as we passed it in the House?

Mr. JOHNSTON. Yes, sir; there would be a violation if there is prospective competition, possible competition between the purchasers. In other words, if you come within the purview-as you do of the Robinson-Patman Act in selling at the different price to possible competitors they may not be actual competitors-there is the mere possibility that they might be in competition, according to the Supreme Court's interpretation.

Mr. McCULLOCH. Then I judge that it is your definite opinion that the law, as it is now, fosters monopoly by reason of the fact that it is more and more difficult for a small individual plant to compete with large plants that may have manufacturing outlets over wide territories.

Mr. JOHNSTON. I think that interpretation, sir, has that effect, because, as you can see, a large corporation, with outlets scattered all over the country, having the advantage of being able freight wise to compete in each area, has a tremendous advantage over the man with one plant who, in order to go into those markets, must absorb freightI am talking now, of course, of a product which is of a homogeneous or standardized character which normally takes the same price-he must absorb freight in order to get into those markets.

If you do not allow him to absorb freight then he is restricted to his freight territory, to his disadvantage, to the disadvantage of the buyers generally, and certainly enhancing the competitive position of the large competitor.

Mr. WILSON. You think that is made so by the so-called Kefauver amendment or Carroll amendment, as adopted by the House, or do


Mr. JOHNSTON. I think the effect of the Carroll amendment, sir, is to throw it right back where it was before the adoption of the act. In other words, when you throw in that general language in the Carroll amendment "provided it does not violate the provisions of the Robinson-Patman Act," then you are right back under the Supreme Court decision in the Cement case and other cases. In other words, they say it does, as I interpret those decisions

Mr. WILSON. How would the bill be without the Carroll amendment?

Mr. JOHNSTON. It would be very good. I think it was an excellent piece of legislation, and very timely.

The CHAIRMAN. I would like to get your thought on this matter. Mr. JOHNSTON. Pardon me, sir? I did not hear the first part of your question.

The CHAIRMAN. I would like to get your thought on the following: Is it your opinion that Judge Black's decision in the Cement case gave the right to any manufacturer to absorb freight charges?

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