You therefore may not regulate prices, allocate customers or have a monopoly position which will enable you to charge higher prices; the overall theory being that high prices and restrictions on production and entry are contrary to the public interest.

There is another important point to be made, and that is, that the competitive rivalry insured by the antitrust laws is not only impaired or eliminated by agreements among competitors, but also by the very fact that the number of competitors may be reduced to one or very few. A reduction in the number of independent centers of initiative and decision is harmful because it tends to reduce the responsiveness of the economy to the shifting needs of the population. Accordingly, the antitrust law opposes excessive concentration of economic power as well as agreements in restraint of trade.

But if competition is the general rule of trade, nevertheless Congress has decided that trade rivalry is not to be the sole reliance for protection of the public interest in certain important sections of the economy, notably the transportation industry. Here direct official intervention in the form of regulation of rates, practices, and other aspects of the business is undertaken in exchange for antitrust exemption.

What this means is that the regulatory agency has the power to curtail ordinary competition and, I would emphasize, to sanction activity that would otherwise constitute a per se violation of the antitrust laws. And the regulatory agency is given this enormous power without a significant check by the courts. The courts increasingly defer to the expertise of the agency in reviewing its decisions; and the courts have traditionally accorded the agency "primary jurisdiction" to initially hear and decide issues which fall generally within the regulatory ambit of the agency.

I propose to discuss the effect of the container revolution on this concept of limited competition through Government regulation. To some extent, I will comment on the work of the Federal Maritime Commission. The central and recurrent problem, as I see it, is this: What weight is to be accorded to the policy of maintaining competition in an industry which by hypothesis is to be governed by competition only to a limited extent?

Now, what is this container revolution?

The term containerization is so often used and abused by people both inside and outside the transportation industry that its definition continually varies.

My understanding of the term containerization is as follows:

Containerization contemplates the movement of goods from the shipper's door to the receiver's place of delivery in a packing box which is integrated into the transportation system. The packing box may consist of a conventional highway trailer, with wheels attached or demountable, or it may be a container of another sort designed so that it can readily be secured to a chassis or flatcar or lifted or rolled aboard a ship or other media of transport.

I quote Morris Forgash.

You have heard in past lectures of the almost limitless range of containerization. In its simplest form, it may be provided by a single carrier and confined to points on its own line or route. The advantages of containerization are greatly enhanced if arrangements can be made with connecting lines for the through movement of the containers to points served by other carriers of the same mode. Still greater advan

tages accrue if arrangements can be worked out to provide for the through movement of the containers over the routes of any combination of carriers-rail, motor, air, or water-at a single rate or charge and without physical interchange.

If perfected and advanced to the ultimate extent of its potential usefulness, containerization could afford the basis for completely integrated, worldwide door-to-door transportation, in all-purpose, readily interchangeable equipment acceptable to substantially all types of cargo, thus forming a transit pipeline by all modes of transport-rail, highway, water, and air-separately or in any combination.

What is so revolutionary about containerization? Is it the concept of through transportation as such? I think not. This concept has been in the making for a long time. In my opinion the most revolutionary aspect of containerization is in its vast potential for increasing concentration in the transportation industry. Without doubt containerization will bring about major changes in the organizational structure of this industry and lead, if there is no effective regulation-either by the antitrust laws or by a regulatory agency, be it the ICC, CAB, FMC, or some new kind of agency-to the creation of supersize transportation organizations, all in the name of efficiency and progress.

The great potential for concentration arises from these facts: First, everything about containerization is expensive. The containers themselves cost at least $2,000 apiece; and "reefers" for refrigerated products can run as high as $12,000. Specially fitted ships under construction in U.S. yards may run as high as $25 million each with a full complement of containers. And each berthing space at a modern container terminal may require an investment of $15 million. These are dollar sums far beyond the capacity of a small company.

Second, the speed and size of containerized vessels demand a high degree of cargo concentration. With the container vessel one can discharge and receive cargo and turn around in one day. And apparently there is no difficulty in building a container ship of the size ultimately to carry as many as 5,000 containers.

What this means is that the cargo-carrying capacity and earning capability of the container vessel will be many times that of the standard cargo vessel. More important, it means that concentration of cargo will be needed to insure the most efficient use of this expensive container equipment.

Third, the introduction of larger and faster container vessels will necessarily result in a substantially reduced fleet size, given projected rates of growth for international trade. This will lead to consolidation in the industry to cut overhead and share facilities. At the same time, the trend toward consolidation will be accelerated by the fact that efficiency demands that there be extensive route networks under unified control. If there are natural imbalances which exist in certain trades, one can predict the dire consequences of uneconomic empty container hauls.

Fourth, in addition to horizontal consolidation, containerization will lead to vertical integration of land, port, and sea transport operations. The investment in containers is so large that owners of the containers will strive to control their use from point to point to insure generation of the maximum return. The need for concentration of

cargo will make it economic for large organizations to integrate all or most phases of the container movement. Specifically, large shipping groups will attempt to acquire inland transportation facilities, or large inland transportation facilities will attempt to acquire shipping companies. And the container operator, be it the inland facility or the shipping company, will no doubt attempt to secure exclusive use of container berths through long-term leases and operational control. In sum, the large investment in container equipment and containerhandling facilities, being fixed within limits irrespective of volume of cargo, and the characteristics of a container vessel in terms of speed and size, will inevitably lead, in the absence of countervailing regulation, to the creation of supersize transportation organizations.

The impact of containerization on the size of transport companies is already being felt. Shipowners abroad are combining in cartels to equip themselves for the container age. We have the example of Atlantic Container Line which began operations in the North Atlantic this fall. We read that nine major British lines have put over $150 million into consortia: Overseas Containers, Ltd., and Associated Container Transportation, Ltd., which have themselves combined in a consortium for the Australian trade. In Japan the Ministry of Transportation has forecast that $300 million will be spent on ships and containers by 1970. Recently there has been talk about the formation of a second major international consortium on the Atlantic trade. This one will be somewhat different from the Atlantic Container Line group, apparently, in that its membership might include foreign as well as U.S. steamship operators.

And only this past week we have learned that American Export Industries, the parent of American Export Isbrandtsen Lines, has contracted to acquire National Carloading Corp., a forwarding concern; and that United States Lines will acquire all the stock of Waterman Steamship Corp., jointly owned by the Waterman Industries Corp. and the United States Freight Co. Waterman's operations are known to you. United States Freight is a holding company, which, in addition to owning the Nation's major freight forwarding system, has more than 35 subsidiaries in truck operations, trailer and container manufacturing, intercontinental container services and other related activities.

In short, the concentration predicted is already happening and happening quickly. The next step will be the attempted merging of consortia or the joining of consortia in super organizations or super conferences in order to replace loose associations with strong central management.

What does the antitrust law have to say about the problem of size as such?

The antitrust laws do not act to limit the competitive aggressiveness and free business choice of the giant corporations. Mere size alone is not an offense against the Sherman Act unless magnified to a point at which it amounts to a monopoly. However-and this is an important "however" giant size carries with it an opportunity for abuse that suggests inhibitions not generally applicable to all competitors. To begin with, as to practices which are intrinsically unreasonable, such as exclusionary activity, price-fixing-these are equally forbidden

to all groups, whether large or small, except to the extent that an antitrust exemption covers the particular activity.

On the other hand, as to the far wider range of practices which are prohibited by the antitrust laws only to the extent that they appear unreasonable in the context of the economic circumstances in which they occur, both the relative and absolute size of the enterprise involved is a significant factor. To pose an obvious example: An acquisition or merger by a company which is already very large is far more likely substantially to lessen competition or tend to create a monopoly in violation of the Clayton Act than a similar transaction by a company that is small in relation to its market. Moreover, tying arrangements, requirements contracts, and exclusive dealing agreements may be far less available to a giant corporation than to smaller competitors, because when such devices are used by giants, they have a greater potential effect on competition.

There is a further reason why giant organizations, more than others, may have to regard themselves as specifically inhibited. Even where the law today does not prohibit a certain course of action, self-restraint may be dictated by considerations of vulnerability to political action, congressional investigation, and subsequent legislation. The giant corporation is faced with a greater burden in establishing a legitimate business motivation for any course of action it takes. It must, therefore, operate within prospective legal prohibitions as well as within existing law.

In the transportation common carrier area we cannot look principally to the antitrust laws to preserve competition. We must look to the regulatory agency where the policy imbedded in the antitrust laws is considered traditionally as but a facet of the broader public convenience and necessity.

The question here is: What importance is the regulatory agency to attach to antitrust policy as it meets the threat of concentration posed by the container revolution? To turn the question somewhat around: Is the objective of securing the degree of competition that is best for the regulated industry, and at the same time produce the best service to the public at the lowest reasonable rates, to be achieved by reliance solely upon the regulatory process; or should regulated operations, particularly in the area of mergers and consolidations, be tested both against the standards of public interest and the standards of the antitrust laws?

I would like to deal with this question briefly by focusing on the Maritime Commission and two aspects of its regulations-the regulation of anticompetitive agreements under section 15, and the regulation of rates in foreign commerce under section 18(b) (5) of the 1916 Shipping Act.

First, as to section 15, the two basic questions are: To what extent does the Commission, in passing on section 15 agreements either limiting competition, or effectively ending it by merger, follow antitrust principles? And, second, to what extent may the Department of Justice or a private litigant (on appeal as distinguished from in a separate action) question the failure of the Commission to follow antitrust doctrine?

As to the first point, the very fact that an exemption from the anti

trust laws was considered necessary indicates that antitrust principles are not to be controlling in determining which interlocks and cooperative working arrangements are to be approved. However, there is a question as to burden of proof. If a section 15 agreement is seriously repugnant to established antitrust principles, then certainly a serious transportation need must be shown to justify approval. And where the antitrust vice is more than the elimination of intercarrier competition, that is, where exclusionary activity is involved, there is no doubt in my mind that the Commission should refuse approval.

The Commission has held, in what I consider to be a landmark case (which may be tested in the courts), the American Mail-American President Line case, that it has jurisdiction pursuant to section 15 over agreements to merge among competing carriers subject to the Act. Presumably, this decision will apply to merger agreements between or among all carriers or other persons subject to the 1916 Act. Should the Commission favor mergers as a general proposition, as it apparently does with respect to other section 15 agreements?

The first point that should be made is that such a presumption in favor of mergers would be completely at odds with the policy of the antitrust law and the policy particularly of the Clayton Act, which bars stock or asset acquisitions where the effect... may be substantially to lessen competition, or to tend to create a monopoly."

A presumption in favor of mergers would also, in my view, be completely unwarranted at this stage in the development of containerization.

In administering the antitrust laws, policy in the last analysis is made by the courts. However, the courts function without the benefit of economic staffs, extensive data collected over a period of time, long experience with the industry, and, most important, the opportunity to manage and supervise the postapproval anticompetitive effects of a merger. The courts must, therefore, look for broad rules of thumb and easily applied criteria by which to decide merger cases arising in a broad range of widely divergent industries, and by which to monitor economic concentration in these industries.

The Commission, on the other hand-this would apply not only to the Maritime Commission but to the ICC and the CAB-need not decide merger cases on the basis of general rules of thumb or presumptions in favor of or against mergers. The Commission may focus its analysis on what is likely to happen in an industry with which it is thoroughly familiar, as the result of a particular merger. And in reaching this determination, the Commission can consider its continuing power to see to it that undesirable consequences do not follow the merger. Indeed, the Commission may find it appropriate, in the kinds of merger cases with which it will be dealing in the future, to attach specific conditions to its approval to insure that the merger will not produce undesirable results.

While not advocating that any presumptions be applied to mergers, I would suggest that the following considerations are relevant :

On the one side, the argument against mergers, against concentration:

Increasing concentration restricts markets, raw materials, and financing for small business. As giant producers gain control of various