Page 542

543

544

545

546

547

STATEMENT OF MILTON HANDLER, PROFESSOR, COLUMBIA LAW
SCHOOL Continued

Keeps Sherman Act test of restraint of trade, monopoly; keeps Clavton Act test of lessening competition; adds a finding before acquisition occurs that acquisition is in public interest.

Would not be an advisory opinion, but permission to merge; refusa! would be subject to judicial review. Should expedite appeals and whole procedure. Mr. Celler announces that amendment to section 7 included suggestion just indicated by Mr. Handler, but Rules Committee demanded that provision be stricken.

If we don't strengthen antitrust, we can look forward to decades of disappearance of small-business man. Order of FTC approving merger would be final order exempt thereafter from future prosecutions. Would have to except mergers of small businesses and bankruptcy sales.

New standards are necessary; nothing more important for committee to investigate than problem just outlined. Unless this done, this phase of antitrust is failure and can anticipate growing concentration of economic power. Vital that all mergers be scrutinized before and not after they occur. This is one phase where declaratory rulings are possible without detriment to enforcement, though he agrees with Department of Justice in opposition to declaratory rulings in case of agreements among competitors.

New law will apply to future absorptions; apply prospectively only. Committee will want to study thoroughly what should be done in regard to past acquisitions. Unfair to apply new rules retroactively, but equally unfair to deprive people of benefits of competition in those fields where it has disappeared.

May want present law to apply to past accretions of power; or may set up special rules for past: or provide a period of grace to enable voluntary dissolution. Problem of integration serious; it is unsound to hold all vertical integration unlawful or to sanction vertical integrations solely because no elimination of competition. Should not be permitted where acquiring company dominates one of fields in which it operates as it can employ its power in one field as a lever to dominate prior or succeeding stages in industry. Nor should it be allowed where withholds supplies from competitors. (Cf. movie industry.) In movie industry, Court rejected contention of Government that vertical integration unlawful and returned the case to trial court to consider problem of divestiture. Two companies have entered into consent decrees. Statutory court has handed down its opinion ordering divorcement. Vertical integration should be prohibited where company is sole source for important supplies or principal user of raw materials produced by others.

Committee should draft legislation rather than leave matter for courts. Third branch of substantive antitrust law has to do with use of patents to suppress competition. Courts have not permitted patent monopoly to be projected beyond the boundaries of the governmental grant. Job done so well that doubts whether any legislative change is indicated except to overrule General Electric case permitting patentee to set prices of his manufacturing licensees.

Distinctions of G. E. case have deprived it of most of its effect and it should be overruled by statute.

Most important problem is formulating new standards for corporate
integrations.

Latest trend has been that where interest of holder of patent mixed
with interest of public, former must yield. "From January 1, 1940,
to April 15, 1948, the Supreme Court denied protection to patents
in 27 cases and upheld the patentee in but 4 cases."
Must be careful not to discourage invention by not granting patents
and also not to encourage monopoly by granting patents where
unwarranted. Patent Office would err more generously in granting
patents. Courts invalidate patents in accordance with statutes of
Congress.

Alternative would be to consider decision of Patent Office as final.

Page 547

548

549

550

551

552

553

STATEMENT OF MILTON HANDLER, PROFESSOR, COLUMBIA LAW

SCHOOL-Continued

Cites the Morton Salt case, Mercoid case, applying doctrine of clean hands to patent litigation in the Supreme Court.

If patent used to project monopoly from the field of proper use. Court
holds that is improper use of monopoly and denies patent all protec-
tion. Patentee has right to come in after he has purged himself and
seek protection of his patent.

Patent confers a monopoly within metes and bounds of its grant;
but if patentee goes beyond that, he is subject to doctrine of unclean
hands; this is potent sanction to antitrust. Patentees have much
to lose by departing from limits of patent monopoly.
Discourages patentees from engaging in violations of antitrust laws;
does not discourage them from proper exploitation of their patent.
Instead of proceeding via suit by Department of Justice, courts
enforce trust laws in normal private infringement action.

4. Elimination of business competition by combinations in which
labor participates. Before Apex Hosiery case, antitrust laws used
to police labor disputes. Trust laws ill suited for this and led to
injustice. Legitimate activities curbed. Labor relations should
be governed by statutes dealing specifically with subject. However,
combinations between employers and employees, Court has properly
held, violate trust laws.

However, Court has held in such cases that labor must be free to engage in activities allowed by Norris-LaGuardia and Clayton Acts. He says participation in illegal scheme should result in forfeiture of rights and privileges.

"It is not a legitimate activity of a union to conspire with industry in stifling business competition, and when it steps out of role it must, like every other wrongdoer, accept the consequences. Labor union does not without collusion fix management prices or control management's production."

Where there is not collusion between management and labor, you enter field where workers use economic power for promotion of own interests-strike. Strike can take several forms-complete stoppage of work, partial stoppage. There are difficulties here. Labor should not dictate price, production, and allocation of customers or right to enter into a field; in most such cases, you will find collusion between union and employer and antitrust laws will be adequate to deal with the problem.

In Allen Bradley case, there was collusion among employers and employees.

Urges clarification of the Robinson-Patman Act.

Principal deterrent today is cost of defending antitrust actions. Unsound to rely on that as deterrent. Criminal sanctions are notoriously ineffective.

Moderate fines are feeble anticlimax. Difficult to appraise efficacy of consent judgments. Decrees are in stereotyped language; reasons for provisions are unexplained; some provisions apparently are harsh and oppressive but actually may be ineffective; others look innocuous but may fetter legitimate operations.

Hit and miss prosecutions may not rid industry of economic restraints. The business curbed may not be of public significance and may place restrained defendants at disadvantage in competing with those against whom the Government has not proceeded. Sherman Act allows suits by private parties, who rarely have financial resources; rarely successful; cannot marshal facts, procedural obstacles; inability to establish legal damage.

Waste of time of litigants and courts to compel retrial of complex issues every time a private suit is brought. Suggests following administrative and procedural reforms: 1. Increases in appropriations to Antitrust Department and Federal Trade Commission.

(Mr. Celler interrupts briefly to explain agenda of the committee, forthcoming progress report, etc.)

Page 553

554

555

556

557

558

559

560

STATEMENT OF MILTON HANDLER, PROFESSOR, COLUMBIA LAW
SCHOOL-Continued

Mr. Celler indicates that President Truman gave words of encouragement to him and the committee. He said to stand firm and not to allow anything to deter the committee.

Mr. Celler continues to explain what this committee will do and how it will procede.

Handler continues: 2. Maximum fines for violations should be changed. $50,000 would provide a deterrent.

He disagrees with his old recommendation in TNEC that offending
corporation forfeit illegal profits from violations.

Thinks it would be too difficult to prove what profits were attributable
to violation. 3. Should no longer be necessary for injured parties to
bring separate suits. After court has determined that antitrust laws
have been violated, court should be authorized to designate special
master to hear and determine claims of those injured.
Only issues should be causal relation between violation and injury and
damage sustained. Should not re-prove the violation itself. Appeals
should go directly to court of appeals. Might not be necessary to
have triple damages, though could be left in discretion of master
where violation flagrant. 4. "Declaratory rulings by the Federal
Trade Commission in cases of mergers and other acquisitions will
greatly facilitate antitrust enforcement."

Discusses difficulty of private suits. If it cost $100,000 for Government
to sue under act, few private suitors have the finances. Now, too,
after Government brings suit and wins, many separate suits are
subsequently brought.

Also prima facie case of Government may be rebutted by defendant
and plaintiff must be prepared with facts. Courts are cluttered up
for considerable periods of time. Once Government has proved
case, only two questions remain and they are: Is there causal relation
between wrongdoing and harm sustained by claimant; extent of
injury. Need for special master.

Appeal should be directly to circuit court, as in analogous situation in
State courts of New York.

Would not cause undue apprehension to business but would be a
powerful deterrent. Courts have aready laid out clearly in some
areas what is permissible. Congress should define what is permissible
in area of corporate concentration.

With new responsibility assigned to FTC, no need for overlapping, in
field of collusive restraints. Reluctance to impose prison sentences
might be overcome by declaration in committee report favoring
sentences in cases of flagrant and deliberate violation. Novel
questions should be reserved for equity proceedings.
Careful selective process in deciding between civil and criminal prosecu-
tion; the criminal penalties of fines should be increased; deliberate
violation should be met with prison term. 6. Department should
be encouraged to simplify antitrust proceedings. 7. Procedures
should be developed for prompt disposition of minor complaints
without necessity for formal suits.

Many businessmen want to comply with law and many issues can be
settled by conference without all the formalities. Not in cases of
serious violation. 8. Department of Justice should be required to
present statement of underlying facts and reasons for consent
decrees, which should be available to the public.
Committee should set up permanent watchdog subcommittee to keep
informed on all current developments in antitrust enforcement.
Should review all pending legislation and Government action to
determine if consistent with antitrust. Antitrust has never been a
partisan issue. Both parties have planks in their platform.
Would oppose amending antitrust laws to permit patentee to limit
quantity of goods produced; would not oppose permitting geographic
limits.

STUDY OF MONOPOLY POWER

MONDAY, JULY 11, 1949

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON THE STUDY OF MONOPOLY POWER,
OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The special committee met, pursuant to call, at 10 a. m., in room 346, Old House Office Building, Hon. Emanuel Celler (chairman) presiding.

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

Also present: Senator Joseph C. O'Mahoney; Representative James B. Frazier, Jr. (of Tennessee), Representative Michael A. Feighan (of Ohio), and Representative Clifford P. Case (of New Jersey). The CHAIRMAN. The meeting will come to order.

Prior to hearing our distinguished witnesses this morning, the Chair wishes to make a brief statement:

Today we undertake an inquiry into the conditions of our laws dealing with monopolies. Our purpose is to determine whether the laws are able to cope with the problems of concentration of economic power that we find on all sides in our national life. Times have changed; the economic system of this country has grown beyond anything we imagined even 20 years ago in the boom of 1929. The free enterprise that we have cherished in this country is challenged by alternative systems. We propose to find out whether our laws give all possible protection to American competitive free enterprise, and if necessary, to propose amendments to bring the laws up to date so that they will serve the needs and purposes of the American people.

Before the war, the Congress set up the Temporary National Economic Committee to survey the condition of our economy. That committee gathered a prodigious array of facts, more exhaustive than any previously brought together. The proceedings of the TNEC, including its final report and recommendations, have ever since constituted a library of priceless information.

The onset of the war prevented Congress from profiting from the findings of TNEC by fashioning new laws to meet the conditions there disclosed. There is reason to believe that, while in the meantime vast new changes have occurred, the problems of those times are essentially the problems of our own times with differences only in degree, or in the emphasis supplied by recent decisions of the courts.

Today we are faced with a challenge. We know that our tangled skein of antitrust laws contains fundamental conflicts and falls far short of perfection. It is our sober task to discover the legislative requirements for a new era of national growth that was not anticipated

by the authors of earlier laws on the subject. We believe this must and can be done. For, if it is not done, we shall find ourselves inevitably on the brink of a social order alien to our traditional free-enterprise society. That is our present drift. All the indications of recent history point toward the conclusion that heavily monopolized industries in time fall into government control or government ownership. If it is, as we believe, the will of the American people to avoid such an outcome as far as possible, we have to consider how monopoly can be kept to a minimum.

We undertake this study objectively, except for our general belief that the free-enterprise system is best for the United States and should be preserved so far as possible. But we have no preconceptions of what is right or wrong about particular methods of doing business. Those questions, we hope, will be answered by the evidence we bring out in this investigation.

This evidence will be garnered judiciously from all walks of our economy, from those public officials entrusted with the enforcement of the law against monopolies, from official and private fact-finding organizations, from lawyers and economists skilled in these special fields, from industry and from labor, and from consumer groups.

The opening phase of our hearings will last for 3 weeks and will, we expect, provide us with a broad view of this complex subject sufficient to direct the course of future proceedings. Thereafter, the subcommittee and its staff will devote itself for an indefinite period to detailed study. At a future date, possibly in the autumn of this year, more definite hearings will be held and these hearings may be broken down into certain phases, each dealing with a major aspect of the study. It is too early to predict the duration of the subcommittee's activities, but we plan to be able, during the second session of the Eighty-first Congress, to produce a tentative bill or bills as a tangible starting point for legislative recommendations.

I have received this morning a very important communication from our distinguished President, and I should like the general counsel of the committee, Mr. Bernhardt, to read that communication from the Chief Executive of the Nation.

Mr. BERNHARDT. Under date of July 8, 1949:

DEAR MR. CHAIRMAN: I was glad to get your letter of June 30 about the special subcommittee you have appointed to undertake a broad inquiry into the antitrust

laws.

I am wholeheartedly in favor of your subcommittee's objectives as you have outlined them to me.

Since the end of the war, other matters, both foreign and domestic, have at times appeared to overshadow the monopoly problem, or at least have been the subject of greater public preoccupation. But it is my conviction that year in and year out, there is no more serious problem affecting our country and its free institutions than the distortions and abuses of our economic system which result when unenlightened free enterprise turns to monopoly. I have watched this situation carefully and I have made sure that the agencies in the executive branch with responsibilities in this field have discharged them as effectively as their statutory powers and appropriations would permit. Moreover, I have repeatedly called to the attention of the Congress the need for stronger powers and more active measures with which to wage the never-ending fight against monopoly. Thus in my State of the Union Message in January 1947, I said: "The second major policy I desire to lay before you has to do with the growing concentration of economic power and the threat to free competition in private enterprise. In 1941 the Temporary National Economic Committee completed a comprehensive investigation into the workings of the national economy. The committee's study showed that, despite half a century of antitrust law enforce