Your study of monopoly power might well begin with a consideration of the economic concentration resulting from a wartime economy. Among the casualties of the war were thousands and thousands of small and independent manufacturing plants. The total number began declining precipitously immediately after Pearl Harbor, according to a study made by the Department of Commerce. Despite increased production during the war, approximately 17 business firms out of every 100 disappeared during those years.

Moreover,

there was a drift of workers from the small to the large corporations; 95 percent of the manufacturing firms lost 23 percent of their workers whereas 5 percent of the manufacturing firms gained 22 percent.

The exigencies of war production played into the hands of the big corporations. In 1941 less than one-half of 1 percent of our manufacturing firms had 75 percent of all defense contracts.

These are only a few examples to emphasize the seriousness of this trend toward economic concentration.

President Truman called attention to the situation in a message to Congress on January 6, 1947, in these words:

"During the war this long-standing tendency toward economic concentration was accelerated. As a consequence, we now find that to a greater extent than ever before, whole industries are dominated by one or a few large organizations which can restrict production in the interest of higher profits and thus reduce employment and purchasing power."

Although the generally accepted meaning of monopoly may be bigness, monopoly power, within the meaning of the antitrust laws, is the ability to impose unreasonable restraints on competition. Bigness in itself may not be unlawful. Bigness to be unlawful must include the power to determine prices without substantial regard to those pressures which normally affect price in a competitive market; artificially to allocate and limit production; to divide markets and fields of production; and, to exclude competitors. "The material consideration in determing whether a monopoly exists," according to the Supreme Court, "is not that prices are raised and that competition actually is excluded but that power exists to raise prices or to exclude competition when it is desired to do so."

Today monopoly power in this Nation seldom shows up in the form of one huge corporation dominating an entire industry. Instead, it is to be found in those industries controlled by a few large companies-the Big Three's or the Big Four's-following policies and practices which avoid any real competition among themselves and which at the same time enable them to maintain their dominant positions.

In those industries dominated by three or four companies, monopoly power may be exerted in many ways. The managers of those companies can operate largely on principles of monopoly secure in the knowledge that within reasonable limits the others will do likewise. If one company makes a price cut or increase, the others follow. If a company manager catches himself thinking about increasing production in a way that might threaten the comfortable and carefully nurtured price structure of the industry, that thought is followed by the more persuasive thought the others might retaliate.

In an industry in which monopoly power exists, those possessing that power can control prices by regulating production. When the price level in the industry produces satisfactory profits, there is no incentive to increase production. In a falling market, profits may be maintained by cutting production and employment rather than prices. In either situation, the American people, and the vast majority of American businessmen, suffer.

In such an industry smaller producers may exist only by sufferance of those possessing monopoly power. Their position in the industry is fixed and growing pains are quickly deadened by fear of antagonizing the Big Three or the Big Four. Any attempt by a smaller producer to cut the established price may be dealt with summarily. Sources of raw materials may be closed to him and purchasers forced to boycott him. In many instances, new producers dare not take the risk of entering the industry. For as the late President Franklin D. Roosevelt said, "Men will compete against men but not against giants."

On the other hand, in an industry in which there is no monopoly power, a manager who sees a profitable opportunity to expand production is not concerned about the effect of his prices on the price structure of the industry. Being unable to prop a falling price or to enhance a rising price by cutting production, he is ever watchful for an opportunity to reduce costs, expand production, and seek new markets. As a result, new techniques of production are evolved and the public benefits by more, better, and less expensive products.

I need not tell you that small business is the backbone of our economic democracy. It is usually the small-business man who is willing to take a chance, who dares to try something new, and thereby provides us with the development and advances which have characterized this country.

But, important as these material contributions of small business are, they are completely overshadowed by the significance of the small-business man as an essential element of our democratic way of life. We all have in us the inherent desire to avoid big government. We do not always recognize, however, that the main barrier against such controls are the economic influences that arise out of a well-balanced, healthy, competitive system.

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The antitrust laws are an economic force designed to enhance the social welfare. Judge Learned Hand aptly expressed this concept when he said in the opinion in the Aluminum case, “(In passing the Sherman Act) Congress was not necessarily actuated by economic motives alone. It is possible, because of its indirect social or moral effect, to prefer a system of small producers, each dependent for his success upon his own skill and character, to one in which the great mass of those engaged must accept the direction of a few.”

It is crucially important that the small-business man, who operates under our economic laws, maintains a dominant position in our economy and not knuckle under monopolies, who by manipulation control the economic laws instead of being controlled by such laws.

By the same degree in which the world has grown smaller in a military and political sense, so has it grown smaller in a business sense. Monopolistic tendencies are no longer confined to the boundaries of any one Nation. And just as they thwart the progress of the common man in one country so will they thwart his progress throughout the world.

The deadening influence of economic concentration is not new to our generation. Nation after nation throughout civilized history has reached its peak of glory only to fall again under the weight of its economic concentration. It was called by many names but the condition was always the same-too much power in the hands of too few people.

Now the United States has risen to the pinnacle of its might and glory. It has attained this position through the sweat and toil of its citizens. Its people have supplied not only the ceaseless toil but the inspired leadership as well. Whenever the necessities required the emergence of a great leader, one has been supplied from the ranks-and often the lowest ranks of our democracy, If we have demonstrated any single fact to the point of universal acceptance, we have demonstrated that there is nothing sacrosanct about inherent leadership. It is inconceivable that any system other than the democratic system could have given us a Jefferson or a Jackson or an Abraham Lincoln. We develop leaders only because we are a strong Nation and a free people. We must remain that way. The American system of free enterprise has been the backbone of our strength.

There is too much recent and tragic world history not to impress upon us the dangers in failing to meet the monopoly problem. In Italy, in Germany, in Japan the same disastrous cycle of events transpired. The forces of monopoly became so entangled in their own web of greed that they were forced to turn to a Mussolini, and a Hitler, and a Tojo to extricate them.

Surely history would record this as our blindest hour if we failed to learn those lessons which have been shown to us in the blood and suffering of all the world.

We, as a Nation, need not fear strength from without so long as we avoid weakness from within. Internal decay is our greatest foe. That was the hope of the fifth columns; it is again the hope of the proletarian dictatorship. We are expected to succumb suddenly to our own capitalistic system. And we cannot afford to close our eyes to the dangerous symptoms now apparent. Weakness from within is the real economic cancer which attacks and destroys great nations. As President Truman said in his inaugural address, "If we are to be successful we must keep ourselves strong."

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We have witnessed this spectacle in other countries and we must be alert to the possibility of the pattern forming within our own gate. The first symptom is unhealthy economic concentration which if allowed to progress, furnishes a fertile field for Communist doctrine.

A most effective way to fight communism is by removing the injustices upon which communism feeds.

Resolution cannot be manufactured alone by a Politburo in Moscow. Revolution springs from an ever-present sense of economic and social injustice-an absence of hope and of faith.

When these conditions of unrest are present, the philosophy of the alternative makes little difference. Infectious insecurity will find expression in whatever demagogic doctrine is handiest-be it communism or something else.

The answer to these threats is not found in denying the existence of injustices nor by denouncing those who offer an alternative. A peoples' aspiration toward justice, freedom, and opportunity cannot be curbed in this way. The answerand the only effective answer-is to assure justice, freedom, and oportunity to all. This the American system guarantees. Our strength still rests largely in the fact that our Government is established for the benefit of all the people. We believe in human dignity. Monopoly handcuffs the individual and enchains democracy. It is a tool of totalitarianism.

We must have vision-hindsight combined with foresight.

Some people saw the inevitable approach of World War II, and as we read certain books today and see there the clear warning they gave us we cannot refrain from wondering at the world's blindness. We also have similar warning concerning our domestic situation.

The members of the Temporary National Economic Committee, in making their final report in March 1941, said:

"It is quite conceivable that the democracies might attain a military victory over the aggressors only to find themselves under the domination of economic authority far more concentrated and influential than that which existed prior to the war."

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And again that committee warned us that there was "No hope of preventing the increase of evils directly attributable to monopoly unless our efforts are redoubled to cope with the gigantic aggregations of capital which have become so dominant in our economic life." Surely no warning could be more clear. And we must heed this warning if we are to survive.

The people of this country have a right to expect that a sincere and vigorous effort will be made to reverse the trend toward concentration of economic power. Americans must have free and unrestricted economic opportunity.

Unless that can be done, our way of life is in grave and increasing danger. Just 20 years ago we stood by helplessly and watched what your illustrious former chairman, Hatton Sumners, of Texas, called these voluntary guides who professed to know the way, as they led us into the most disastrous depression the world has ever known. It was serious then. We shall not permit a repetition now for that might be calamitous.

The strength of the world today depends to a major extent on the strength of the United States.

And the strength of the United States depends on the maintenance of a vigorous economy, free from the domination either of private greed or political dictatorship, but resting firmly on equality of opportunity in a competitive market. This committee in the course of its study will undoubtedly inquire into the history and causes of economic concentration in the United States, and the extent and effects of that concentration. We should also know if the same forces which are supporting monopolistic trends in the United States are the supporters of the cartels of Europe. Monopolies and cartels don't just happen. They are carefully conceived and nourished by those who would substitute private control for competition.

A question you also will probably ask is, Are the antitrust laws effective; have they succeeded? A most significant fact, which in part answers this question, is that your committee is examining our economic practices within the framework of competitive principles. To my mind that is a clear demonstration that the Sherman Act has succeeded and is succeeding.

This success I am sure exceeds the expectations of those who enacted these laws. Certainly it is beyond the expectations of those critics who continually point to areas where competition is sluggish. Year after year they have made doleful predictions that our competitive system was riding to destruction. They are being made today. Nevertheless, I repeat, here we are, 60 years after the antitrust laws were passed, reexamining a system which is still fundamentally competitive. To my mind that spells out success, not failure.

The success of the antitrust laws is all the more significant when it is realized that, by comparison to the last 10 years, the first 50 years of their operation was largely a matter of sporadic and limited enforcement. There have, of course, always been in this country and in the Government individuals and groups who strongly urged more effective administration of the antitrust laws. I need not

point out to you the direct relationship between effective enforcement of a law and adequate personnel and budget for its enforcement.

Even during the so-called trust-busting days of Theodore Roosevelt, a period which until about 10 years ago had reached the high-water mark of anti-trustlaw enforcement, there were only six lawyers assigned to the enforcement of this law. At the present time the Antitrust Division has almost 300 lawyers. We have received generous support from Congress, and this support is reflected in the results.

That antitrust enforcement is in direct proportion to the money allocated for it has been demonstrated by the record of the Antitrust Division during the past 2 years. During fiscal year 1948 we filed 34 antitrust cases. For the fiscal year 1949 we received an increase in our appropriation of approximately $1,000,000 and were thus able to file 57 antitrust cases, many of which are among the most important cases ever prosecuted under the antitrust laws.

Through the first 50 years of the antitrust laws, in other words, up until 1940, 479 antitrust actions were instituted by the Government. In the last 10 years, from 1940 to date, 508 cases have been filed. In other words, more antitrust actions have been brought in the last 10 years than were brought in the entire preceding 50 years.

You will be interested to know that our attention has been especially directed at the huge concentrations of economic power that threaten the economic democracy of this country. The heart of our antimonopoly program is the protection of the businessman and the consumer through the dispersion of monopoly power where it already exists, and the dissipation of restraints of trade that lead to that monopoly power.

The restraints of trade-price fixing, patent and trade-mark abuses, cartelsare being attacked by seeking court injunctions which assure the end of such restraints, or by invoking the criminal penalties authorized by the Sherman Act. When monopoly power actually is present and competition cannot be restored by less drastic methods, that power must be dissipated and rendered impotent. This can be accomplished only by the application of the remedies of divestiture, dissolution, or divorcement.

These remedies do not have as their aim the destruction of an industry. On the contrary, their aim is to restore active and vigorous competition to an industry that has become, in effect, under such centralized control as to have substantially eliminated any real competition. In seeking to split up monopoly power, it is the policy of the Antitrust Division to have each of the parts remain a strong, independent enterprise, capable of competing and of holding its own in the struggle for business.

We are proceeding actively with our actions to break up the aluminum monopoly; open up the channels of trade in the shoe machinery industry and break up the combines and integrations found in the movie industry.

During 1949 we have brought action to compel the divorcement of American Telephone & Telegraph and its manufacturing subsidiary, Western Electric, which manufactures over 90 percent of all telephones, telephone apparatus, and equipment sold in the United States. The suit further calls for the break-up of Western Electric itself into three competing concerns.

Another pending case is the investment banking case in which we are seeking to eliminate a variety of restraints which have stifled competition in that field. We have also instituted an action against the four major meat packers in which we seek to restore competition to the industry by dividing these defendants into 14 separate and competing companies.

Only 10 days ago we filed what we consider one of the most important cases in the history of the Sherman Act when we instituted action to bring to an end the integration between three of the giants in their respective fields, namely, du Pont, General Motors, and United States Rubber Co.

I could name many other examples in which we are currently attacking the monopolistic concentrations that threaten this country.

These are big cases. They will take time to try. It will cost money to try them. But they are of tremendous importance and significance to the welfare of this country. The issue in each is whether the economy of the United States shall come under the control of the few or whether it shall remain under the control of the many, operating democratically through the laws of competition.

The number of cases filed does not tell the whole story. During the fiscal year which ended on June 30, the Antitrust Division won 41 cases in the courts. Among these were the case against the Standard Oil of California in which the Supreme Court held to be illegal exclusive dealing contracts which the company

had with some 6,000 independent filling station operators; the criminal case in which the court of appeals held that A & P had abused its monopoly power; and the General Electric case in which a district court held that company together with two others had a monopoly of the incandescent lamp business in the United States.

I do not want to suggest that the effectiveness of the antitrust laws is to be found solely in the cases prosecuted, any more than the effectiveness of a law against burglary is to be determined by the number of burglars who are apprehended and jailed. Like an iceberg, the antitrust laws are seven-eighths under water. For every case in which an individual violates the law and is punished for it, there are hundreds of cases in which individuals who might otherwise engage in certain practices refrain from doing so because they are against the law. There are many others who amend their practices to conform to the law as it is developed through our cases.

There is no way, of course, of evaluating the benefit to our economy from this aspect of antitrust law enforcement. We are ever vigilant to keep the channels of trade open so that every citizen may have the opportunity to enter the business of his choice without being subjected to an economic blackjack.

As a believer in democracy, I am greatly concerned by these current trends toward concentration and the increasing threats of monopoly. I am taken aback by the equanimity with which too many persons view these serious threats. It may be that they do not realize the seriousness of the situation. If that is so, this committee can perform a great service by letting the country know that it is, indeed, serious. Or it may be that the great majority of the people, including many in public life, are the victims of three assumptions-assumptions which, I am afraid, are as commonly held as they are erroneous.

First, it is too often assumed that competition continues to thrive as long as there are at least two or three or four in the field. As I have indicated, in my opinion, this is not so.

Secondly, it is assumed that the bigger the producer the better the quality of goods and the cheaper the price to the public.

Thirdly, it is assumed that companies become big because they deserve to be big; in other words, that they outdistance their competitors because they do a better job, render greater service, or furnish better goods.

It may be that in some instances these assumptions are correct. Personally, I doubt if this is often true. In any event, this committee will have made a great contribution to the understanding of our economy if it can examine these matters and let the country know the truth.

It would be premature for me, at the outset of your investigation, to discuss in detail the suggestions that I might have or others might make, for legislation to implement the antitrust laws. Later on, you may desire to have the Department of Justice go into this phase of your investigation.

I wish to emphasize again the great service that your committee can render to this country by examining thoroughly the operation of the antitrust laws with particular reference to how they may be further strengthened. I shall follow your investigation with the greatest interest.

I know the American people are equally concerned. The long-run welfare of this country will be very much in your hands during the next several weeks. I am being neither flattering nor overoptimistic when I say that I believe these difficult problems are in safe hands and that the responsibilities which your committee will shoulder-and they are, I am sure you will agree, great responsibilities will be discharged well.

The CHAIRMAN. Our next witness will be the distinguished Senator from Wyoming, Senator O'Mahoney.

I wish to state at the outset that we are very grateful, Senator, for your coming here this morning to enlighten us on this subject.

STATEMENT OF HON. JOSEPH C. O'MAHONEY, UNITED STATES SENATOR FROM THE STATE OF WYOMING

Senator O'MAHONEY. Mr. Chairman, I want to say that in my opinion this committee has tackled the biggest question in the world. By fostering of economic freedom we may prevent wars and regain the peace of the world, in my opinion.