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Table of corporate bonds placed privately and offered publicly,
1934-49

476

Statement of Hon. Sumner Pike before Temporary National Economic
Committee...

Appendix

RECAPITULATION OF TESTIMONY IN THIS VOLUME

Summarization of statements and recommendations of the following witnesses: Walter Adams, assistant professor of economics, Michigan State College; Ellis Arnall, former Governor of Georgia and president of the Society of Independent Motion Picture Producers; Thurman Arnold, attorney at law, Washington, D. C.; Herbert A. Bergson, Assistant Attorney General in Charge of the Antitrust Division, Department of Justice; Adolph Berle, Jr., professor of corporation law, Columbia Law School, Columbia University, New York City, N. Y.; John M. Blair, Chief, Division of Economics, Bureau of Industrial Economics, Federal Trade Commission; Hon. Charles F. Brannan, Secretary of Agriculture; John D. Clark, member of Council of Economic Advisers; Hon. Tom C. Clark, the Attorney General of the United States; Morris L. Ernst, attorney at law, New York City, N. Y.; Walton H. Hamilton, attorney at law, Washington, D. C.; Milton Handler, attorney at law and professor of law, Columbia University, New York City, N. Y.; Edward R. Johnston, attorney at law, Chicago, Ill.; Everett N. Kassalow, associate director of research, Congress of Industrial Organizations; Leroy Lincoln, president, Metropolitan Life Insurance Co., New York City, N. Y.; Hon. Francis P. Matthews, Secretary, Department of the Navy; Hon. Joseph C. O'Mahoney, United States Senator from the State of Wyoming; Donald R. Richberg, attorney at law, Washington, D. C.; Lazar Teper, director of research, International Ladies' Garment Workers' Union, New York City, N. Y.; H. A. Toulmin, Jr., attorney at law, Dayton, Ohio.

SUMMARY OF TESTIMONY GIVEN AT HEARINGS

The first series of hearings, July 11 to August 5, 1949, was planned to explore the subject of monopoly power, and to indicate points at which changes in the antitrust laws might be advisable. The subcommittee plans to hold further hearings in October on the general subject and on proposals for specific bills that may be introduced early in 1950, followed by a reexamination of the antitrust laws as a whole during the second session of the Eighty-first Congress.

The conclusions hereinafter presented are those of the witnesses who testified and are not those of the members of the subcommittee. The list of witnesses for the first series of hearings does not include representatives of all important viewpoints, since about half of those who were invited to appear were unavailable until a later date. The majority of those whose opinions are summarized below are lawyers or economists, in either private practice or Government service. The position of business, therefore, is shown here mainly as it appears to legal counsel on both sides in antitrust proceedings, except for the testimony of Mr. Lincoln, Mr. Berle, Dr. Teper, the latter speaking for the ladies' garment industry, and some of the Government officials with business backgrounds.

NEED FOR REEXAMINATION OF ANTITRUST LAWS

The witnesses were generally in agreement that the antitrust laws are more or less unsatisfactory in their present form. The most frequent reason given for dissatisfaction was that economic concentration has not been prevented or sufficiently slowed down. The majority of the witnesses expressed the opinion that business concentration is politically dangerous, leading inevitably to increasing Government control. As Attorney General Clark said on July 11There 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.

Similar statements were made by Senator O'Mahoney, Mr. Ernst, Secretary Matthews, Mr. Berle, Mr. Kassalow, Dr. Adams, Mr. Richberg, and Professor Handler, and as in the TNEC hearings, there was no expression of doubt as to the necessity of effective antitrust laws for maintenance of the American type of free institutions. Many of the witnesses also criticized the laws granting special exemptions from the antitrust laws, especially the Reed-Bulwinkle, Miller-Tydings, and Webb-Pomerene Acts, which will be further considered by the subcommittee. The necessity for strengthening section 7 of the Clayton Act was also stressed. A bill for this purpose has already been passed by the House (H. R. 2734).

Specific criticisms of the present state of the antitrust laws were voiced by most of the witnesses. Examples were given of conflict with other laws and other Government practices, especially in taxation and in procurement. The relation between patent law and antitrust was criticized, especially by Mr. Toulmin. Lawyers for private business were critical of uncertainty in the law and of what they regarded as excessive lawmaking by the courts. Others, however, were fearful that too much detail in legislation would open loopholes through which the general purpose of avoiding undue concentration might be frustrated.

Enforcement officials were dissatisfied with the fact that though the law against conspiracy among separate firms has been effective, the escape by merger of previously competing companies has been thereby encouraged. They also complained that failure of competition because of price leadership is not adequately met by existing law, and several witnesses suggested that a Government agency be directed to diagnose and prescribe treatment for industries where price competition fails to operate, or where concentration appears to require some types of intervention in the public interest.

DESCRIPTION OF MONOPOLY SITUATIONS

Various witnesses gave expert testimony or general information on the forms and methods of economic concentration. Dr. Blair described the continued merger movements and showed typical cases of horizontal, vertical, and conglomerate integration. Senator O'Mahoney, Mr. Ernst, Dr. Adams, and Professor Handler emphasized the dangers of concentration by merger. The Attorney General and Senator O'Mahoney stressed also the effects of cartels.

The loss of price competition where three or four large concerns are able to administer the prices for an industry, or where one con

cern is the price leader, was described by several witnesses, including Attorney General Clark, Dr. John D. Člark, Dr. Blair, Dr. Adams, Mr. Kassalow, and Mr. Bergson.

Testimony was given relating to some of the methods by which economic controls are concentrated. Mr. Berle pointed out that most of the funds available for equity capital investment appear in the form of undistributed income of large corporations, which can then choose either to expand internally or to buy up smaller concerns. Messrs. Ernst, Berle, and Kassalow discussed the growth of lifeinsurance assets, and the fact that these funds, which originate in small savings, are almost inevitably loaned to business only in large units. Mr. Bergson pointed out some of the other means of control, such as monopoly of raw materials, illegal use of patents and trademarks, or control over market outlets. He also noted the common excuse that concentration is required as a protection in dealing with other concentrated organizations, commenting:

I do not believe, however, that the cancerous growth of concentration can be effectively combatted by developing other cancerous cultures.

Mr. Berle and Mr. Lincoln testified from different points of view, as to the methods by which the management of a large corporation is chosen, and the practical difficulties of effective voting by stockholders or policyholders. The subcommittee also discussed with Mr. Lincoln the interlocking directorates involved in the Metropolitan Life Insurance Co. Mr. Lincoln said, "There is no secret about it. We brag about it," and denied the TNEC inference that interlocking is used for purposes of influence.

The relation between patent monopoly and illegal forms of concentration was mentioned by several witnesses. Mr. Toulmin complained of allowing attacks on the validity of patents as an incident in an antitrust suit. He also opposed compulsory licensing, and cited the loss of value when enemy patents were freely offered at $15 by the Alien Property Custodian. Dr. Adams recommended compulsory licensing of patents abused or suppressed by large concerns. The Attorney General testified that patent abuses such as tie-in contracts, illegal price-fixing, and so forth, have now been largely eliminated. Professor Handler agreed, but suggested legislation to forbid a patent owner setting the price of goods manufactured by others under his license. The subject of patents will be further investigated by the subcommittee.

The relation of monopoly to agriculture was discussed by Secretary Brannan. Mr. Brannan listed the various laws under which the Department regulates certain industries affecting farm income. He cited the Rural Electrification Administration as an example of Government intervention where a monopoly refused adequate service. Mr. Brannan suggested investigation of marketing charges, openprice quotations, stability of pulpwood prices, and the fertilizer industry.

Labor monopoly was discussed by several of the witnesses. The Attorney General stated that the present law brings a labor union under antitrust law when it conspires with employers to restrain trade. Dr. John D. Clark noted that the restriction of coal output without the express agreement of the operators was exempt from antitrust action, and the practice might be extended to other industries

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