QUESTION 20

20. Would the cost of providing the type of information which you have outlined on Page 4 of your statement be relatively greater for small steel companies than for large ones? In other words, would this impose a relatively heavier burden on Wheeling-Pittsburgh than on U.S. Steel?

Answer to Question 20

I do not know, but I submit that Wheeling-Pittsburgh as well as U.S. Steel ought to be collecting such information in the normal course of operation in order to assess their performance for internal management purposes and corporate planning purposes.

QUESTION 21

21. Would you think it advisable to undertake reporting requirements that would in fact impose a relatively greater burden on small companies than on large ones?

Answer to Question 21

I would not want to do anything to further complicate the life of small, struggling firms trying to stay alive in industries dominated by industrial giants. However, this does not gainsay the desirability, as I suggest in my testimony, of subjecting industrial giants to reporting requirements which are in the public interest.

QUESTION 22

22. Do you believe that in economic terms there is such a thing as "natural monopoly market"? Answer to Question 22

Yes. Like other such terms, of course, it has to be carefully defined.

QUESTION 23

23. Do you believe that it should be lawful for a firm to capture a dominant market share solely because of offering better products or services to the public, and so long as it does not undertake conduct proscribed by Section 1 of the Sherman Act, Section 3 of the Clayton Act or the Robinson-Patman Act?

Answer to Question 23

Barring conduct proscribed by the antitrust laws and other trade regulations, I agree with the "thrust upon" exception in monopoly cases under Section 2 of the Sherman Act as articulated by Judge Learned Hand in the Aluminum case of 1945.

QUESTION 24

24. Is General Motors market share attributable to factors other than product excellence?

Yes.

Answer to Question 24

QUESTION 25

25. Has General Motors acquired its market share by virtue of conduct which you deem to be unlawful under the antitrust laws? If so, please specify the specific nature of the conduct which you deem to be unlawful.

Answer to Question 25

This question, I respectfully submit, is best answered by the Attorney General and his Antitrust Division which, I assume, must have files literally bulging with information on that score. I would make only two observations in passing: (a) legality of a corporation's status under the antitrust laws is a matter of structure as well as conduct ever since the courts have renounced reliance on the "rule of reason" articulated in the U.S. Steel case of 1920; (b) my views on competition in the automobile industry are, generally speaking, consistent with the analysis recently published by Professor Lawrence White of Princeton in a book brought out by Harvard University Press, 1971.

Mr. RAYMOND D. WATTS,

U.S. SENATE, Washington, D.C., Mar. 30, 1972.

Counsel, Senate Select Committee on Small Business, Senate Office Building, Washington, D.C.

DEAR MR. WATTS: I am enclosing a statement which I would like to have appear in the main body of the hearing record following the questions which I submitted to Professor Adams, and his replies thereto. I would hope that his answers could follow each of my questions, rather than having all of the questions printed initially and all of the answers printed thereafter.

I appreciate your kind assistance in this matter.
Sincerely,

Enclosure.

ROBERT TAFT, Jr.

STATEMENT OF SENATOR TAFT RELATIVE TO THE ANSWERS SUPPLIED BY DR. WALTER ADAMS

I am dismayed that the answers supplied by Dr. Walter Adams to my questions indicate that he is unable to support the sweeping generalities of his testimony. He has testified that industrial giants are "the amalgam of horizontal, vertical, and conglomerate consolidation . . ." But in question number one, I made specific inquiry about 37 of America's largest corporations. As to those corporations I asked how many large acquisitions each has made since 1955, the names of the acquired companies, and the percentage of current assets so acquired. If Professor Adams is correct that industrial giants are the amalgam of horizontal, vertical, and conglomerate consolidations, then he surely should have had ample information as to their merger activities. In his answer, however, Professor Adams states that he does not have the necessary resources at his disposal to examine their corporate history in depth since 1955.

A research report from The Conference Board entitled, "Statistical Games and the 200 Largest Industrials: 1954 and 1968", prepared by Betty Bock, shows that of these 37 corporations only three-Caterpillar Tractor Company, IBM, and U.S. Steel, have undertaken any "large acquisitions". In each case, the acquired corporation represents a very small part of the assets of the surviving corporation. The figures demonstrate that these large corporations have not used mergers since 1955 to acquire their market positions.

Unquestionably, there is a trend toward the concentration of economic power in America. We must examine that concentration, however, in order to determine whether it is in fact generating monopoly markets. In question twelve I set forth a list of America's most active conglomerates: Litton Industries, Gulf and Western Industries, Indian Head, U.S. Industries, Textron, ITT, StudebakerWorthington, Kearney National, LTV.

I asked Professor Adams as to each of these, if he could list any relevant product market which he considers that they control or dominate and their percentage shares of each such market. While Professor Adams has supplied us with his article entitled, "Financial Razzle-Dazzle Powers Conglomerates,' and alludes to the power and influence exercised by conglomerates such as ITT, he has completely failed to answer my question. He merely asserts that the conglomerate need not have a preponderant or dominant market share in any of the industries in which it operates, in order to exercise its clout." This merely begs the question. While I strongly share the concern of many Americans about the concentration of economic power in this country, I believe that the blunderbuss statements of Professor Adams are not factually supported and retard rather than assist a meaningful inquiry into the functioning of the American marketplace. What we need is a more precise analysis of our relevant product markets rather than a rhetorical assault upon big business per se.

(Whereupon, at 2 p.m., the committee recessed, to reconvene at 10 a.m., Tuesday, November 23, 1971.)

APPENDIXES

APPENDIX I

GROSS NATIONAL PRODUCTS OF COUNTRIES AND NET SALES OF COMPANIES INTERSPERSED: TOP 100, BY RANK, 1960, 1965, 1970

THE LIBRARY OF CONGRESS, CONGRESSIONAL RESEARCH SERVICE, Washington, D.C., Oct. 8, 1971.

To: The Senate Subcommittee on Monopoly; Attention: Mr. Raymond Watts. From: Economics Division.

Subject: GNPs of Countries and Net Sales of Companies.

The attached material is in response to your request concerning GNPs of countries and net sales of companies. The first table lists the top 100 countries and companies for 1960, the second for 1965, and the third for 1970. The final table lists all countries and companies previously cited, and their rank for each time period. This table also includes the percentage change of the GNP and net sales. Because of the existence of multiple exchange rates in 1956 for many of the countries, meaningful GNP figures expressed in U.S. dollars could not be calculated. Please do not hesitate to contact us concerning this point if the enclosed is not adequate.

MARGARET BRADY,
Economic Analyst.

GROSS NATIONAL PRODUCTS OF COUNTRIES AND NET SALES OF COMPANIES INTERSPERSED: TOP 100, BY RANK-1960

GROSS NATIONAL PRODUCTS OF COUNTRIES AND NET SALES OF COMPANIES INTERSPERSED-TOP 100, BY RANK, 1960-Continued

1 GNP's for the non-Communist countries were given in 1960 current market prices. AID used official exchange rates in most instances to convert the GNP figures into U.S. dollars; where official rates were not appropriate, more realistic exchange rates were used. Because of purchasing power disparities, precise intercountry comparisons of GNP cannot be made. It should be emphasized that all figures are in current dollars; no adjustments have been made for price changes. Data for the Communist countries are in purchasing power equavilent of 1970 dollars as estimated by the U.S. Department of State. These countries are Soviet Union, People's Republic of China, Poland, East Germany, Czechoslovakia, Romania, Bulgaria, Yugoslavia, North Vietnam.

2 Net sales include service and rental revenues. All figures are for the year ending Dec. 31, 1960, unless otherwise noted. Sales of subsidiaries are included when they are consolidated. Sales figures given here do not include excise taxes collected by the corporation, and so the figures may be much lower than those published by the corporations themselves. When they are at least 5 percent lower for this reason, there is an asterisk (*) by the sales figure.

3 Name changed to Mobil Oil in May 1966.

4 Does not include excise taxes collected by the company; see footnote 2.

Includes South-West Africa and the High Commission Territories (Basutoland, Bechuanaland and Swaziland).

6 Fortune estimate.

(c) Companies.

Note: Total number of countries in list, 59; total number of companies in list, 41; total amount of GNP's, $1,433,400,000,000; total amount of company sales, $119,600,000,000; company sales as percent of GNP's, 8.34 percent.

Sources: Non-Communist Countries: "Estimated of Gross National Product-Calendar Year 1960 in Current Market Prices." Statistics and Reports Division. Agency for International Development. Mar. 22, 1962. Communist countries: Estimated by the Bureau of Intelligence and Research, Department of State. Companies: Fortune directories. Hearings before the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary U.S. Senate, 89th and 90th Cong. Pt. 5A. pp. 2364-2394.

GROSS NATIONAL PRODUCTS OF COUNTRIES AND NET SALES OF COMPANIES INTERSPERSED-TOP 100, BY RANK, 1965

[Total number of countries in list, 57; total number of companies in list, 43; total amount of GNPs, $2,045,900,000,000 total amount of company sales, $177,300,000,000; company sales as percent of GNPS: 8.66 percent]