Mr. KEATING. If the interest rate were less than the amount which the Government has to pay to borrow the money to do that, it would obviously not then be a self-liquidating project; would it? Secretary BRANNAN. Well, self-liquidating in that sense means a return of the amount of money which the Government advanced for the construction of a particular project, with a reasonable rate of interest. Mr. KEATING. With interest at the rate which the Government is required to pay to borrow the money to do it; is that not a fair conclusion? Secretary BRANNAN. Yes, the Government borrows that money for a lot less than 3 percent, of course. Mr. KEATING. And it is upon that basis that you made the conclusion which you did? Secretary BRANNAN. I think that it right, sir. Mr. KEATING. And the same would apply to the telephone; is that correct? Secretary BRANNAN. That is right, sir. Mr. KEATING. If the interest rate were 2 percent, which the Government was charging for the installation of telephones, and the Government was paying 2.8 percent or 3 percent to borrow that money, it Would not be a self-liquidating project. Secretary BRANNAN. In the broad sense of the word, I guess it would not; but that is not the case, as I understand it. Mr. KEATING. Your understanding is at variance with the testimony introduced during the debate on the telephone bill. I note, on page 9 of your statement, that from 1935 to 1947 the generating capacity at Federal installations for electricity increased 1.600 percent, and that controlled by private companies 62 percent. Do I understand you to state that as a desirable objective in our economy? Is that a wholesome thing? Secretary BRANNAN. Well, I think, Mr. Keating, we start with the premise that we need a great deal more electric power in this country than is now available. If private industry can and will supply it, I am perfectly in accord with their doing so. If they will not or cannot for any reason, then I do not think the American people should be deprived of power. They should get it by whatever devices are at their command. Mr. KEATING. However, where private industry can supply and expresses a willingness and ability to supply power or telephones or any of the other amenities or necessities of life, would you favor the furnishing of that by private enterprise rather than by the Government? Secretary BRANNAN. They should be encouraged to do so, certainly. Mr. KEATING. Private industry. Secretary BRANNAN. Should be encouraged to do so. (Supplemental statement supplied the record by Hon. Charles F. Brannan, Secretary of Agriculture:) To clarify the record, I should like to state that the 3 percent rate of interest charged by REA for its loans to borrowers was the rate originally established when REA was operating by virtue of its establishment under Executive Order No. 7037. When the Rural Electrification Act of 1936 was enacted, it provided for a rate of interest equal to the average rate of interest payable by the United States on its obligations having a maturity in 10 or more years This formula was in effect from July 1, 1937, to September 21, 1944, during which period REA loans to its borrowers carried interest rates ranging from 2.46 to 2.88 percent per annum. When the Department of Agriculture Organic Act of 1944 was enacted, title 5 amended the 1936 Rural Electrification Act to provide a flat 2 percent interest rate to be charged by REA to its borrowers, and REA was required to pay Reconstruction Finance Corporation 14 percent for its loan funds. The Department of Agriculture Appropriation Act, 1948, further amended the 1936 act by transferring from RFC to the Treasury the authority to make loan funds available to REA. That act directed the Secretary of the Treasury to make such loan funds available to REA with or without interest as the Secretary of the Treasury might determine. The interest rate charged by the Secretary of the Treasury for fiscal 1948 was 14 percent, and for fiscal 1949 was 1% percent. This rate was based on a formula prescribed by the Secretary of the Treasury, which was in turn based on the average rate of interest at the beginning of each fiscal year on outstanding interest-bearing, marketable-debt obligations of the United States. These rates on June 30, 1947, and June 30, 1948, were 1.871 and 1.942, respectively. The Secretary of the Treasury, pursuant to the formula adopted, charged a rate based on the multiple of 1.8 of 1 percent lower than such average rate. On June 30, 1949, the average rate was 2.001. As a result, the rate paid by REA to the Treasury on its loans in the current fiscal year has been established at 2 percent, which is the maximum prescribed under the Department of Agriculture Appropriation Act, 1948. It would appear from the foregoing figures that REA loans to its borrowers, carrying an interest rate of 2 percent, are made at a rate which is now almost exactly the cost of the money to the Treasury. In my reference to the self-liquidating character of REA loans, I had reference, of course, to the return of the principal to the Government. An examination of section 4 of the Rural Electrification Act will disclose that the language used is that "all such loans shall be self-liquidating within a period of not to exceed thirty-five years and shall bear interest at the rate of 2 per centum per annum." I believe that this specific provision of the statute clearly states the congressional intent that self-liquidation refers to repayment of principal. The provisions of H. R. 2960, the rural telephone bill, which passed the House of Representatives on July 13, 1949, speak for themselves. The rate of interest and the provision with respect to self-liquidation of loans for rural telephones are specifically made the same as those for rural electrification loans. Mr. KEATING. Just a couple of other questions: Is the enforcement of the Packers and Stockyards Act handled by the FTC or by the Department of Agriculture? Secretary BRANNAN. By the Department of Agriculture, sir. Mr. KEATING. Do they bring a court proceeding for its enforcement? Secretary BRANNAN. No, sir; we bring no court proceedings. The Department of Justice is our lawyer, so to speak. Mr. KEATING. You have your own legal department? Mr. KEATING. But when it is necessary to go into court the Department of Justice is called in? Secretary BRANNAN. That is right, sir. Mr. KEATING. And the proceedings under this act are in a court, not before the Federal Trade Commission? Secretary BRANNAN. They are in a court, although there are some precourt proceedings, before what are known as the judicial officers, which are in existence in several departments of Government. Mr. KEATING. Just one final question: Is there a concentration of production in agriculture which should be the subject of our investigation? Secretary BRANNAN. Other than those to which I have made reference, sir? Mr. KEATING. Yes. Secretary BRANNAN. Well, I think those are the main ones to which I have reference. Mr. KEATING. All right. The CHAIRMAN. We are very grateful to you, Mr. Secretary. You have been an alert and a very sagacious witness. You will be very helpful to the committee in what you have stated. Thank you, Mr. Secretary. Secretary BRANNAN. Thank you, Mr. Chairman. The CHAIRMAN. The Chair wishes to announce that he has sent communications by way of invitations to the president of the United States Chamber of Commerce, Mr. Herman W. Steinkraus, and to the managing director of the National Association of Manufacturers, Mr. Earl Bunting, and both of those organizations have declined to send witnesses to us at this time, stating they prefer to wait until later in the year before they will express their views. The Chair is rather disappointed, because he wanted to get the views presently of those two important organizations in connection with this study. In that connection, I desire to place in the record the communications which I sent to Mr. Earl Bunting, and his reply, and the communication which I sent to Mr. Steinkraus. (The documents referred to follow :) Mr. HERMAN W. STEINKRAUS, President, United States Chamber of Commerce, Washington, D. C. JULY 15, 1949. DEAR MR. STEINKRAUS: AS you know, on July 11 our special Subcommitee on Study of Monopoly Power commenced initial hearings on the subject of the antitrust laws. Because of the essential relationship between the objects of our subcommittee and the interests of the chamber, prior to the commencement of the hearings the general counsel for the subcommittee conferred with Mr. Milton Smith of your organization and suggested to him that we would be pleased to have a winess representing the chamber to appear during the first 3 or 4 weeks of hearings. It was with regret that I later learned through our counsel that the chamber has elected to defer its appearance at this time, for it is my earnest desire that this study shall be conducted along strictly impartial lines, with all segments of the economy given an opportunity to address the subcommittee. I sincerely hope that it will be possible for your organization to be represented at a later date and cordially invite you to confer with our counsel in order to set the proper time. Very truly yours, EMANUEL CELLER, Chairman. Mr. C. MURRAY BERNHARDT, NATIONAL ASSOCIATION OF MANUFACTURERS, Clerk, House Judiciary Committee, United States House of Representatives, Washington, D. C. DEAR MR. BERNHARDT: We appreciate the invitation extended to the National Association of Manufacturers through our Washington office to testify at the current hearings on monopoly power being held by the Special Subcommittee on Study of Monopoly Power of the House Judiciary Committee. As you know, the NAM is vitally interested in the operations and welfare of companies of all sizes, and especially of small companies; 83 percent of its members have 500 or less employees. Because of our interest in the continuing growth and development of business structure, we scheduled some time ago a comprehensive and objective study of concentration of economic power. Unfortunately, this study will not be completed until the latter part of August. When our research work is completed, we feel we shall be in a position to make a mu better contribution to the hearings than at the present time. Consequently, w› would prefer not to testify at the current hearings but to appear in the fall when they are resumed. DEAR MR. BUNTING: While I regret the inability of the NAM to have a representative address the Subcommittee on Study of Monopoly Power during the first phase of its hearings, I can understand your natural preference to reserve comment until the completion of the study that your mention in your letter of July 14. Rest assured that the subcommittee will be delighted to make whatever arrangements are agreeable to you in order to provide the association with an opportunity to convey its views on this vitally important subject. In every sense of the word the study which we are conducting is objective and impartial, and we want and need to hear from representatives of all parts of business and professional life concerned with the problem of monopoly. Sincerely yours, C. MURRAY BERNHARDT, The CHAIRMAN. We had scheduled this morning Mr. Robert Nathan, economist, as a witness, but unfortunately he cannot be here. We now have, however, a very distinguished economist, who is connected with the Federal Trade Commission, and one who has givenhas rendered-splendid service, particularly to the study I previously referred to, made by the Temporary National Economic Committee. I refer to Dr. Blair. We will be glad to hear you, Dr. Blair. STATEMENT OF DR. JOHN M. BLAIR, CHIEF, DIVISION OF ECONOMICS, BUREAU OF INDUSTRIAL ECONOMICS, FEDERAL TRADE COMMISSION Mr. BLAIR. Mr. Chairman, will it be permissible for me to place the charts I have here? The CHAIRMAN. Yes; that is all right. I want to state here to the members of the committee that the Chair must be on the floor at 12; he has a bill coming up at that time, soon after 12. Would it be convenient to reassemble, say, at 2:30, or would you prefer to continue with Dr. Blair on Wednesday? Well, Dr. Blair, it seems the consensus of the members' opinion is that we will hear you until 12, and then you might continue again on Wednesday morning at 10 o'clock. Mr. BLAIR. Thank you very much, sir. Mr. Chairman, there are two major aspects to the monopoly problem: There are two forms in which monopolistic control of the market is attained. The first is through cooperative action among independent producers. This form of cooperative activity is generally referred to by such terms as "collusion," "conspiracy," "agreement," and, more recently, by the term "planned common course of action." The second form or means by which monopoly control over the market is obtained is through what is generally referred to as the concentration of economic power, through great size, through great power, through the consolidation of the different independent firms into one or a few large corporations. Those are the two forms of the monopoly problem, or the two forms by which the monopoly control over the market is attained which, for purposes of brevity, we may refer to as the form by collusion and the form through the combine or the giant corporation. The antitrust acts of this country in their conception were directed against both forms. The Sherman Act and the Federal Trade Commission Act both relate and pertain to the collusive, conspiratorial forms of action, the first form. The Sherman Act also relates to the second form of monopoly control, that is, the form through the combine or the giant corporation. But this use of the Sherman Act has been quite ineffective. Proceedings under the Sherman Act against the second form of monopoly control are what are generally referred to as dissolution cases, or as the Attorney General stated, cases of divorce, divestiture and dissolution, or as one attorney of the Department of Justice termed them once to me, after being on a case of that type for 11 years and accomplishing very little as cases of divorce, divestiture, and disillusionment. It is this second type of action which was typified by the cases against the Standard Oil Trust, against the Tobacco Trust, back in 1911, and which has been used, owing largely to judicial interpretations of the law, very sparingly since the beginning of the 1920's. An attempt was made by Congress in 1914 to shore up the antitrust lavs relating and pertaining to this second form of monopoly control, in the passage of section 7 of the Clayton Act. Unfortunately, as you gentlemen all know, that act contained a fatal loophole. It was soon found by the lawyers of corporate business that the intent of the act could be easily evaded by buying up not the stock of the acquired firm which, if it tended to lessen competition or pro mote a monopoly, was prohibited under section 7 of the Clayton Act, but rather by buying up the assets. To be more precise, there are two loopholes in this law, which was itself an attempt, in effect, to shore up that phase of the antitrust acts directed against monopoly control through size and power. Under the first loophole, the stock of the acquired company is bought up. Then, when the Federal Trade Commission tries to effectuate a divestiture of that stock, the acquiring company simply buys up the assets and informs the Commission that, in effect, the action is thus removed from the Commission's jurisdiction. The CHAIRMAN. What happens when you have a case of where the assets are purchased, and then the stock, the corporate stock of the enterprise or the empty shell, is purchased? Mr. BLAIR. I have never heard of such a case, sir. The CHAIRMAN. They do not have to buy the stock. Mr. BLAIR. When they buy the assets, there is no real incentive for them to buy the then worthless stock. Under the second loophole the acquiring company dispenses entirely with the purchase of stock, and instead just goes in and buys up the assets. Mr. BRYSON. Now, Doctor, we have passed a bill through this committee several times to cure the defect of the Clayton Act. |