Mr. KEATING. Oh, the Eightieth Congress gave them $100,000 more than they ever had in their lives. Mr. Clark here on the stand thanked us for it.

Mr. ARNALL. Well, that is very fine, but I will tell you distinguished gentlemen that that is not a drop in the bucket toward enforcing antitrust laws.

Mr. KEATING. They have 300 lawyers down there, when a few years ago they only had 7, and it is the same old thing. I am sorry to hear the former Governor of Georgia giving voice to it, because he must have encountered the other side of it. It is the same old thing we always hear, that they cannot do a job because they do not have the appropriations.

The gentleman is not convincing to me when he gives that as a reason for not doing a job in the Justice Department.

Mr. DENTON. To keep the record straight, we ought to point out the Eighty-first Congress gave them even more than the Eightieth Congress did.

Mr. KEATING. The Eighty-first Congress has not given them anything until they get their appropriations through.

The CHAIRMAN. I do not think the reporter got what Mr. Denton said. The House did.

Mr. KEATING. The House did and the Senate is holding it up. That is also a part of the Eighty-first Congress.

Mr. ARNALL. Reverting back to the contempt-of-court provision that could be inserted in decrees, perhaps it could be. There might be some doubt about the effectiveness of it. It seems to me that that would perhaps offer some deterrent in that jail sentences, penitentiary or imprisonment, could be instituted under contempt-ofcourt procedures.

Mr. KEATING. Well, is that possible now?

Mr. ARNALL. Yes; but as I understand it-and I hope the gentleman will correct me if I am wrong, any of the gentlemen of the subcommittee, if you know-I doubt if anyone has ever gone to prio in this country for violating the Sherman Act.

Mr. KEATING. Only in two cases.

Mr. ARNALL. Eugene V. Debs in contempt.

Mr. ARNALL. Eugene V. Debbs in contempt.

Mr. KEATING. Are you talking now about contempt of court or violation of the Sherman Act?

Mr. ARNALL. Violation of the Sherman Act.

Mr. KEATING. You are talking my language. In other words, you think if you are going to make it a crime and if you carefully select the cases that are proceeded against criminally as against those civilly-and there is a distinction-then we ought to tighten up the penalties.

Mr. ARNALL. That is right.

Mr. KEATING. And not send some fellow that violates some other criminal statute to jail for 10 or 15 years and let a businessman that ought to know better when he violates a criminal statute, get off with a $5 COO fine which does not mean anything to him.

Mr. ARNALL. And I think that is correct, that no one has ever gone to prison for violating the Sherman Act.

The CHAIRMAN. What would you recommend with reference to tightening and increasing the penalty?

Mr. ARNALL. Well of course, Mr. Chairman, to me the penalties of the Sherman Act are utterly ridiculous today. They are not deterrents.

For example, when the Fertilizer Trust, when the A & P Tea Co. was convicted in court for violation and fined some $25,000 or $30,000, they in effect could make that much the next morning before breakfast. Well, now, whether there is any deterrent involved in that, I do not know, but certainly there should be severe penalties. As a matter of fact, I think that the officers of corporations that are judged in violation of the Sherman Act should be dealt with ruthlessly by reason of their violation.

Mr. KEATING. I agree. Mr. Clark, the Attorney General, told us of a case where some judge fined the corporation and let the officers-and a corporation only acts through its officers-who really had the black hearts, get off with dollar fines.

Now, of course, that strikes me as being indefensible. Of course, in that case, it was discretionary on the part of the court to do more. There may have been elements in it that we do not understand.

Mr. ARNALL. I would not hazard at the moment a guess on the constitutionality of it, but it seems to me it might be drafted where it would be constitutional.

The CHAIRMAN. Why would it be unconstitutional to provide for penalties?

Mr. ARNALL. There would not be in that, but I am referring to something else.

Mr. DENTON. A mandatory jail sentence?

Mr. ARNALL. No; well, I am all for that.

Mr. KEATING. We do not have that where we have a fine or imprisonment. Do we have mandatory

Mr. ARNALL. Perhaps some such provision could be enacted into law whereby the officers of the corporation-I am passing on now from the criminal side-should be in effect denied the right to serve as officers of corporations for a certain period of time, or draw salaries therefor. Now that is the point I make. I do not hazard an opinion. Mr. DENTON. Take an affidavit that they have not violated any antitrust laws before they could be

The CHAIRMAN. You get around the constitutionality, if I may be so bold to suggest, in this way. You can put anything you want in a consent decree if the respondents consent, and naturally you can force them to consent to anything you want to put in that decree. You have got them over a barrel.

You can say, "All right, one of the conditions or two of the conditions are that first for a certain designated period Mr. A, who is your president, shall not serve as president of the company, and second, Mr. B, who is your secretary, shall be deprived of his salary for a certain period of time.”

That is the way to get around the constitutionality of it. Otherwise you will proceed criminally or civilly against them.

Mr. ARNALL. Surely something drastic must be done to create deterrents in this law, and as long as you let a corporation which is actually a legal fiction in that it is a creature of law operating only through people, as long as you make it subject to the law and let the people who actually bring about the violation of the law through that corporation go scot-free, there is no deterrent there, and the stock

holders, let me say, in these corporations that engage in conspiracies and monopolies, are not responsible. The stockholders are not. Actually they never know what goes on.

Mr. KEATING. You are really penalizing the innocent parties to the transaction and letting the guilty ones go scot-free.

Mr. ARNALL. Under the present operation of the antitrust laws.

Mr. KEATING. I agree with that, with this qualification; that great care must be exercised-perhaps it is an administrative problem rather than one for legislation-in the selective process of determining whether a corporation will be proceeded against criminally or civilly, because you should not send to jail a businessman any more than anyone else who is guilty of doing something technically, which he never realized was a crime, or did not have any reasonable ground to believe it was a crime. There is great uncertainty and confusion in certain phases of the antitrust field.

Mr. ARNALL. Mr. Keating, let me say this: that actually in most criminal laws the deterrent from crime is the certainty of the punishment. Generally that is recognized, but in this particular instancenow the antitrust laws-I say that the certainty of the punishment is not a deterrent because the punishment does not amount to anything, so the deterrent here must be the severity of the punishment, it seems to me.

The CHAIRMAN. You would make guilt personal, and punishment personal.

Mr. ARNALL. There is no question about that.

The CHAIRMAN. Now in addition, would you not increase the present penalty which is only $5,000?

Mr. ARNALL. Oh, yes, I think that that is utterly too low.
The CHAIRMAN. What would you make it?

Mr. ARNALL. Well, I hope the Chairman will not pin me down to an amount.

The CHAIRMAN. We have got sort of a prosecution complex today. Mr. ARNALL. But surely $5,000 is utterly absurd.

The CHAIRMAN. You did not give the amount, though.

Mr. ARNALL. What did the Attorney General say, $10,000?
The CHAIRMAN. Well, he made some statement like that.

body else suggested $50,000. What would you make it?
Mr. ARNALL. What is the highest that has been suggested?
The CHAIRMAN. What are we offered?

Some

Mr. ARNALL. Well, if I would name a figure, I would say, if I must, $50,000, something to make them think about it, and actually I would like to go this far: to provide the corporations, individuals, partnerships, convicted of violating the antitrust laws, surely for the second time-perhaps for the first time but surely for the second time-should be denied access to interstate commerce in the shipment of their goods, wares, and merchandise, and that all carriers shall be prohibited by law from transporting goods, wares and merchandise of those

Mr. KEATING. That might drive them out of business, of course. That is what you are seeking.

Mr. ARNALL. Yes, certainly, the second time.

Mr. KEATING. Well, just so long as we understand it.

Mr. ARNALL. That is right. I think the penalties must be made

severe.

Now I want to talk just for a moment about another form of monopoly in the motion picture business. That has to do with exhibition monopolies.

We have talked generally about the producer, distributor, exhibitor monopolies. We have found that over the country there have sprung up a number of circuits, theaters owned by corporations or individuals, firms, and that those circuits in effect, by reason of their economic position based on monopoly power, can control actually the price to be paid for films shown in those theaters.

They put it on a take-it-or-leave-it basis, where either you meet what they say shall be paid, or you do not get to show your pictures. Those are local monopolies, State monopolies, regional monoplies. I would like to point out to the committee, if I may, an illustration of that.

There has been pending in the courts now, a decree has been entered recently in the Schine Circuit case, in two cases, the Schine and the Griffith Circuits. I want to show you how these things work.

The Schine Circuit is a circuit of theaters that owns 148 motion picture houses in 76 towns and cities in 6 Eastern States. Now, of these 76 towns, 60 are absolutely closed towns where Schine has either the only theater or all the theaters in the town, while in 161 other towns there are other theaters, although Schine dominates the market.

The CHAIRMAN. What is meant by "dominates the market"? Is it preference with the large producers?

Mr. ARNALL. He controls it. He controls not only what pictures he shall show, but he in effect negotiates for his competitors by saying what pictures they can get.

The CHAIRMAN. He gets the first-run or A pictures, and the others have to do without.

Mr. KEATING. Well, then, there are other cities where Schine does not control. In other words, you do not claim that Schine dominates or is the exclusive operator in all of the places where it operates?

Mr. ARNALL. No, sir; but he dominates the market even where there is competition, by reason of his position.

Mr. KEATING. Not in all the cities where he operates.

Mr. ARNALL. He operates 148 theaters in 76 cities, and in 60 of these cities he completely dominates the field because they are closed situations.

Mr. KEATING. But I understood you to say that he dominated it because he controlled enough of it to be able to control the market. Mr. ARNALL. That is right.

Mr. KEATING. Well, I do not think, Governor, that that is accurate. There are some Schine theaters in my city, but there are only two or three out of many scores. I do not think they have any such control as that.

Mr. ARNALL. Well, I point to the record, and that is now in the courts. The decree, I think, has been recently entered.

Mr. KEATING. Is that found in the record?

Mr. ARNALL. Yes, sir. The Griffith Circuit in the Southwest operates in 85 towns, out of which 53 are completely closed without even a semblance of competition.

Now, it seems to me that something has got to be done in the motionpicture industry to open up competition within the ranks, and I talk

about the motion-picture industry here simply because I have been connected with it and know something about the disastrous effects being felt by reason of these monopolies.

Actually, even though I am president of the Independent Motion Picture Producers, I want no special privilege for them. All that I use the motion-picture industry for is to point up again the privilege of monopoly in certain phases of industry and enterprise in our country.

Now, there is another angle of the antitrust laws I want to touch on, if I may, and that is the Webb-Pomerene Act. I realize that the purpose of that act was to enable small business in this country to compete wtih European monopolies, cartels, and combines, and yet that act lends itself very well not only as a shield against foreign competitors, but as a sword against domestic competitors here at home. For example, there is a case that was in the district court and in the circuit court, the Alkali case, in which it was pointed out that the Webb-Pomerene Act could be used very effectively under certain circumstances for that purpose.

In the motion-picture industry recently there was a conference between certain British film people and American film people in which, working under the Webb-Pomerene Act, there were certain suggestions made which, if effectuated, would have virtually placed in control of the British business the Webb Act corporation. There are evidences that this same situation is applicable to the American Motion Picture Export Association.

The CHAIRMAN. At that point, Governor, I hand you a communication which is unsigned, addressed to Mr. J. Arthur Rank, Sir Henry French, and Sir Alexander Korda. The communication is undated, but as I read the communication it contains suggestions for an agreement as a result of a conference that was held in Washington on April 21 and 22, 1949, which violates the antitrust laws as well as the Webb-Pomerene Act. I show that to you, and I ask you whether or not that is the agreement that you have just made reference to?

Mr. ARNALL. Yes; that was a proposed agreement marked "confidential," to Mr. J. Arthur Rank, Sir Henry French, and Sir Alexander Korda.

While it is unsigned, it actually was addressed to these gentlemen, I am informed, by Mr. Eric Johnston, who is president of the Motion Picture Export Association.

Mr. KEATING. Where did it come from, the Atomic Energy Commission? [Laughter.]

Mr. ARNALL. Now let me say, Mr. Chairman, to the credit of the Motion Picture Export Association, that they have abandoned this proposal. It has not been effectuated, nor will it be effectuated. The CHAIRMAN. Do you care to have that put in the record? Mr. ARNALL. I would like for it to be inserted in the record. The CHAIRMAN. It is so ordered.