1950 CONGRESSIONAL RECORD-SENATE 1'6423

The SPEAKE~. Under the rule, the 1777. A letter from the Attorney General, By Mr. KENNEDY: previous question is ordered. transmitting a letter relative to the case of H. R. 9896. A bill for the relief of Elias Maria Tome Da Silva Lawver, file No. A- Miltiades Iordanopoulos; to the Committee Is a separate vote demanded on any 6008146 CR 25896, requesting that it be with­ on the Judiciary. amendment? If not, t~e Chair will put drawn from those before the Congress and By Mr. LYNCH: them in gross. returned to the jurisdiction of the Depart­ H. R. 9897. A bill for the relief of the Balti­ The amendments were agreed to. ment of Justice; to the Committee on the more & Ohio Railroad Co.; to the Committee The SPEAKER. The question is on Judiciary. on the Judiciary. the engrossment and third- reading of 1778. A letter from the Attorney General, By Mr. RODINO: the bill. transmitting a letter relative to the case of H. R. 9898. A bill for the relief of Sumiko The bill was ordered to be engrossed Henryk Oselka, file No. A-6802109 CR 26013, Yamamoto; to the Committee on the Judi­ requesting that it be withdrawn from those ciary. and read a third time and was read the befor~ the Congress and returned to the third time. jurisdiction of the Department of Justice; The SPEAKER. The question is on to the Committee on the Judiciary. the passage of the bill. 1779. A letter from the Assistant Secre­ SENATE The question was taken; and on a di­ tary of Defense, transmitting a draft of pro­ vision

both to the producer and to the consumer State Governments are not able to provide XX VII and we will work toward achieving the goal of pupils with .an opportunity for education We urge that the surfacing of mail routes receiving such prices in the free market place equal to that in other States. provided by the mail route surfacing law be with a minimum of Government interven­ XX III executed according to the written law. · tion. We further believe that support prices should be flexible to allow supply · and de­ Nebraska Farm Bureau Federation favors XX'.'III m and to at least partially determine price. legislation in favor of a uniform course of We urge that a uniform detailed audit Neither agriculture nor industry nor labor study throughout all schools in the State . be made of all county commissioner and should look to the Government for guaran­ of Nebraska for the elementary grades one supervisor financial records showing costs teed profitable incomes, a condition which through eight. by items and purposes. Continuation of would ultimately result in a deterioration of ROADS such a procedure with required compilation, individual initiative and a lower standard of XXIV publication, and dissemination to all other living for all. Rlalizing that Nebraska's roads are one of counties of the information received would We favor support prices on farm products her great problems, we desire an efficiency provide valuable information 'to compare on a variable scale from 75 to 90 percent of program within the highway department. costs of equipment, m aintenance, and ma­ parity as being a reasonable insurance This includes the questions of business man­ terials for county boards in bringing down against a disastrous price decline in agricul­ agement methods, a State highway commis­ . costs of county government. ture which would· seriously affect the sion, division of responsibilities ( 1. policy XXIX economy of the entire Nation. m aking, 2. administration, and 3. technical We recommend that section 39-703, Re­ We look upon any program which fosters fields) , separation of nonhighway activity vised Statutes _of Nebraska be strengthened the philosophy of high prices to farmers and from the department, and a more complete to protect our highway and roads from wa­ cheap food to the consumer or one whereby analysis of costs and disposition of funds. ter being diverted into the road ditch due agricultural producers must look .to Con­ We desire a highway plan that includes State to leveling and terracing land in any place gressional appropriations for a substantial roads, city and village streets, and county except the natural flow of water. Water part of his farm income as being unsound in roadi;. Such a plan is necessary before flinds now being diverted should be put back into principle and a long step down the road to are macle available, in order to arrive at the the natural channel that enters the high­ socialism. proper ratio of finances and development in way. Adequate penalty for failure to com­ XIV the priorities of future expansion of Nebras- ply with the law should be provided. Nebraska Farm Bureau urges any improve­ ka's road system. · ment in the quality of dairy and poultry (a) We recommend the division of the De­ xxx products marketed by the producer. We be- . partment of Roads and Irrigation into three We favor uniform per-axle truckloads lieve any cream law or regulation should be parts: (1) Department of Roads, (2) Depart­ over the State and Nation and · that severe based on a premium paid for a premium ment of Irrigation, (3) Safety Patrol and penalties be invoked for violations. We fur­ product. We feel that creameries, processors, Motor Vehicle License. ther urge that portable and local private and carriers are just as responsible for poor (b) We recommend that the State high­ scales be used for checking such loads. quality cream as the producer, therefore we way department be reorganized on a busi­ XXXI ness-like basis, preferably under a five-man urge our cream stations and creameries to We urge the standardization of traffic reg­ comply with our State cream regulations. commission selected by districts. The Com­ mission should be appointed for staggered ulations, traffic signals, and road markers xv terms by the Governor, approved by and over the United States. We recommend that legislation revising responsible to the legislature. Such com­ :xxu the Nebraska seed law be enacted to reduce mission shall employ a business manager for We endorse the principle of the installa­ the amount of tolerance of noxious weed the administration of the policy of such com­ tion of drop inlets through roads where seeds allowed in lots of field seeds offered for mission. We further urge that the legisla­ needed as a sound method of conserving sale. ture or its legislative council cause a private soil .and water as well as effecting large sav- SCHOOLS a·1dit to be made of the highway department . ings in bridge and road construction and XVI by the time the business manager takes office. maintenance cost. We further urge our Such audit shall show breakdown of costs We recommend an investigation into the State and local road officials and engineers by items and purposes and a system of record in consultation with SCS technicians to leasing of school lands with special emphasis keeping installed such that the breakdown on the fact that school lands should not be thoroughly study the terrain and determine of costs can be easily secured and summa­ where such drop inlets may be feasibly used subleased. rized and made available periodically. XVII and install them in the.light of such deter­ (c) We request that the Governor appoint mination. Realizing that the Nebraska school reor­ a peoples road· c0mmittee to formulate a XXXIII ganization law (L. B. 27) has been in effect long-time road program cognizant of the We believe that all purchases and con­ such a short time we recommend that it needs of both rural and urban people whose be given a fair trial before any major changes tracts for supplies and contractual services livelihood is vitally dependent on adequate and all sales of such personal property which are made. roads. XVIII has become obsolete and unusable by coun­ Each organized farm group shall be repre­ ty governments in amounts exceeding $500 We wish to commend the State Depart­ sented on the committee with the represent­ should be subject to competitive bidding in ment of Education for the encouragement ative picked from a list of n ames submitted all counties. · of teaching conservation in our schools. by the organization itself. Rural people shall TAXES XIX be represented on the committee in approxi­ mate proport ton to their percentage of the XXXIV We feel that normal training should be total population. We do not believe the practice of ex­ encouraged in our high schools. .. With approximately 90 percent of the roads empting charitable institutions from taxa­ xx in the State classed as rural roads any pro­ tion on property owned and used for mone­ We feel that where the salaries of county gram developed should give adequate atten­ tary gain is sound policy and are concerned superint endents of · schools are inadequate tion to the problem of getting the farmer out about the effect such exempt ion h as on lo­ that county boards should investigate the of the mud as well as to the development of cal districts and competing business. We possibility of increasin g the salary of the village and city streets and State highways. urge a serious study be given to the problem county superintendent of schools in order We feel the committee in the study of types and favor the taxation of any such property to attract better qualified personnel. of roads needed and in the specifications rec­ used for monetary gain. ommended for each type; should consider xxxv XXI the Nebraska _taxpayer's ability to pay. We are opposed to any additional St ate Gasoline used for agricultural purposes is xxv aid to schools except such as may be nec­ a product used in agricultural production. essary to relieve the present inequalities of The resolutions committee requests that We do not believe in production t axat ion on· agriculture when ot her indµ stry of this our present t ax system. the President of the Nebraska Farm Bureau Federation and the State Farm Bureau Board State h as none. Therefore we favor the XXII call a special meeting of the voting delegates continuation of the principle of the pre ~ent We do not favor the principle of Federal when ever advisable during the session of the law providing for gas t ax refunds for agri­ aid to schools. We feel that schools are legislature for the purpose of studying the cultural purposes. primarily the responsibilit y of local an d progress . made by the legislature in reor­ XXXVI State Government s. In the event that said ganizing the highway department and the We insist there be no licensing of farm legislation should be enacted, we strongly road program. t ractors. t :'ieve that such disbursements should ·be XXVI ., XXXVII m ade on a grant-in-aid basis through State We request legislation making it neces­ We feel that Federal matching of funds is and county governments to insure a m axi­ sary for the legislature to approve any wasteful and request that the Nebraslca and mum of local control, also such aid sh ould money spent by the highway department for American Farm Bureau take action toward be m ade available on ly where county a n d ctr-high way const ruction. reducing Federal m atching .

. - ~ 16428 CONGRESSIONAL RECORD-SENATE DECEMBER 12 LVI XX XVIII services, \.e feei that agriculture, industry, we favor the continuation of the practice ·and labor should all produce to the limit of We feel that bringing DP's into the United of earmarking State funds for specified pur- their aQility. States is a worthy cause. However, we ask With our young farmers in the· service, it that there be better screening of the DP's, poses. will be necessary to work long hours and no their employers and sponsors. We also ask XXXIX possibility of special overtime compensation. that there be more and better supervision We recommend that the Nebraska Farm We recommend that labor return to a 48· from their sponsors after they have been Bureau Federation go on record in favor of . hour week during the emergency. located in the United States, both as to a. sales and/or income tax. This tax to be a. position and suitability of the individual. partial replacement tax for personal prop­ XLVIJ erty tax and real-estate tax. We believe that steps should be taken to­ LVII MISCELLANEOUS ward balancing the bud~et by less duplica­ We the Associated Women's Committee of tion of governmental bureaus, less waste of the Nebraska Farm Bureau wish to express XL material and money. our deep and sincere thanks to the following Philosopies of communism and other isms We also recollllD.end consolidation of all persons who so greatly contributed to the are far closer to the American people than agencies and departments, resulting in more success of our convention: To Mrs. Herman they sometimes realize. Those individuals efficient management. Kayser for the floral arrangements; and fur­ that support these philosophies prey upon XL VIII thermore to the Reverend McCamley for tlie and infiltrate our governmental, educational, music; and to Mrs. Gilbert Erickson, who spiritual, and organizational institutions of The last two sessions of the legislature has acted as pianist. There are the wishes of the this Nation under the guise of exercising suspended the school mill levy limit on per­ Associated Women's Committee. sonal and real property as an emergency freedom of speech and movement. Such in­ .Lvm dividuals exe~cising these constitutional measure. We feel that it is no longer an privileges ignore another constitutional pro­ emergency, and we ask that the mm levy We reaJfirm the policies expressed in reso­ vision providing for the general welfare or limit be restored and we face the school sit­ lutions adopted in previous annual meetings the country. uation as a permanent condition. At the that are now in effect except insofar as they - In view of this cunning but deliberate at­ same time we request the excessive property have been modified or supplemented by the tempt to sell den.ocracy and the American tax levy be replaced by some other form of resolutions adopted at this annual meeting. system short, we urge all citiz~ns, all organ­ taxation. '· REPORTS OF COMMITTEES izations, all institutions, and all. branches of XLIX Government t9 appraise themselves of this Under present world conditions there is an The following reports of committees condition; do all that they can to determine indication we may have compulsory military ·were submitted: who these individuals are; and upon this training. If this condition comes about, we By Mr. GEORGE, from the Committee on determination, we further urge each accord­ urge that the training be coordinated with Finance: ing to his or its own ability to combat the further education by being given in our col­ H. R. 9840. A bill to exempt furlough travel evils of this philosophy by exposing their leges under supervision of the Armed Forces. of service personnel from the tax on trans­ identity .and bringing to the attention of portation of persons; with an amendment everyone the advantages of the American L Dumping of rubbish, beer cans and bottles (R~pt. No. 2620). way of life. By Mr. IDLL, from th~ Committee on Labor XLI on our highways has been causing unsightly highways and a great deal of damage. we and Public Welfare: · We favor retention of and extension of the feel this cannot be controlled by law, but is S. 4229. A bill to extend to certain persons principle of a free medical profession and rather a matter of pride and education. Con­ who served in the military, naval, or air will continue to actively oppose any move· sequently we recommend that the Associated service on or after June 25, 1950, the benefits toward socialized medicine. Women make this highway beautification one of Public Law No. 16, Seventy-eighth Con­ As a means to prevent the appearance of of their 1951 projects. gress, as amended; with amendments (Rept. socialized medicine, we recommend that No. 2621). means be provided to educate more men and LI By Mr. O'CONOR, from the Committee on women into the medical profession. We feel We do not approve of the present social the Judiciary: this will provide more competition for prac­ security for farm laborers in its present form s. 4240. A bill to amend the act incorpo­ tice which will have a tendency to provide for the reason that it cal!_ be avoided easily rating the American Legion so as to redefine more doctors for rural areas and reduce the and that the laborer can lose his equity so eligibility for membership therein; without burden of overcharging for services. We feel easily. We also do not favor social security amendment (Rept. No. 2623); and that this in turn will relieve the pressure for for farm opera~ors. S. 4241. A bill to amend the act incorpo­ socialized medicine caused by the high cost rating the American Legion so as to redefine of medical service. LU (a) the powers of said corporation, (b) the XLII We feel that the Postal Department should right to the use of the name "The American We again recommend that each county se­ pay its own way, but we do not favor any in­ Legion" and "American Legion"; without lect a person who is interested in legisla­ crease in rates until the abuses of the frank­ amendment (Rept. No .. 2624). ing privilege be_rectified. If increase in rates tion and send him or her to Lincoln some­ INVESTIGATION OF FIELD OF LABOR- time during the coming legislative session are made, we suggest the first raise would be to become acquainted with legislative pro­ in third class bulk mail to decrease the mall MANAGEMENT RELATIONS-REPORT OF cedure and aid the Nebraska Farm Bureau that is notiread. We oppose any decrease in A COMMITTEE Federation i;i carrying out its legislative pro­ the size of parcel post packages, for it would Mr. MURRAY. Mr. President, from gram. work a hardship on rural people: the Committee on Labor and Public Wel­ XLill LIII fare, I eport favorably, without amend­ We feel that there is a great deal to be We recommend a Missouri Valley Commis­ ment, the resolution

The retreat in Korea would be unmiti­ rlg:):lts and brutal persecution of religion LIKINJ. I now ask unanimous consent gated disaster only if it meant retreat from in Yugoslg.via, demands that aid be given that the Boeing letter, by Mr. Yeasting, the principle we have been trying to estab­ only on basis of proven need and with in­ be made a part of m.y remarks at this lish on that heroic battlefield. The free sistahce on reestablishment of decency and world and the United States above all has justice as sole moral justification for any point, in order that its provocative com­ now invested blood in the United Nations; present or future aid. Otherwise shall be ments may become available to every it will be spent in vain unless this first sacri­ parties to another betrayal of the real and Senator. fice to international patriotism impels us to trustworthy friends and allies we have be­ There being no objection, the letter strengthen the instrument forged _for the hind iron curtain. was ordered to be printed in the RECORD, purpose of stopping aggression forever. Mrs. THOMAS R. PATl'ERSON, as follows: Mao Tse-tung ls said to have a 500-year . President, Superior Diocesan BOEING AIRPLANE Co., plan, representing the stages and ages it Council of Catholic Women. Seattle, Wash., December 11, 1.950. will take- to achieve real communism in The VICE PRESIDENT. Are there Hon. HARRY P. CAIN, · China. By any reckoning the 5 years of the United States Senate. United Nations is a short time in which to any further routine matters? If not, Hon. FRANK CARLSON, - realize an idea more revolutionary than the Senate has before it the bill of unusual interest be­ the average for industry generally through­ There being no objection, the telegram cause it presents some of the extremely out the last 8 years (aircraft 1.3 percent as was ordered to be printed in the RECORD, complex problems which confront and compared to 5.4 percent for industry in as follows: involve the aircraft industry, and it offers general). · 2. The base period of 1946-49 was a SUPERIOR, WIS., December 11, 1950. several solutions. I have forwarded a copy of the Boeing period of severe depression for the aircraft Senator ALEXANDER WILEY, industry (while th~ same period is generally Washington, D. C.: letter to the chairman of the Senate recognized as having been a prosperous one This organization, appalled by indispu­ Finance Committee [Mr. GEORGE] and to for industry in general). Instead of having table facts of widespread violation of human its rank ~ ng- minority member [Mr. MIL- a profit for the 4-year period the 15 com- 1950 CONGRESSIONAL RECORD-SENATE 16431 panies had an average annual loss_ of gested relief provisiQns consist of three We do earnestly believe, however, that the $1,200,000. ' points, namely: recommendations of the Aircraft Industries 3. The aircraft industry is extremely com­ 1. The recent 103s adjustment provision Association for a relief provision based on plex. What was a good airplane yesterday in H. R. 9827. the t axpayer's percentage of average net is totally inadequate today. Speed of flight 2. The growth formula. income to gross receipts during the 14-year has doubled, altitude accessibility has in­ 3. The World War II credit for the year period 19.36-49, provides a more logical, creased tremendously, the jet engine has in­ 1945 plus 50 percent thereof. and consistent approach to the problem and creased power availability and the construc­ Each of these provisions, if adopted, would is fairer and more equitable throughout the tion of airplanes for high speeds and alti­ do some good for some companies. None entire aircraft industry. tudes has created enormously difficult prob­ of them would give relief for all companies We think it sound and consistent with the lems extremely expensive to solve. and of necessity all three must be incor­ excess-profits-tax-law theory to give consid­ 4. The im")erative need for research and porated or extreme injustice will be done. eration to the taxpayers earning record. In plant improvement require adequate funds The recent loss adjustment provision pro­ the aircraft industry, equitable consideration from profit. Without extensive research we vides limited relief for some companies but requires that a relatively long period be used canno"t hope to provide the Nation with su­ it follows the unsound principle of placing in establishing such a record because of the perior aviation leadership; without adequate the companies with the poorest earnings rec­ long-term contracts involved, the many years funds for necessary plant improvement we ord in the 1946-49 period in a favored posi­ required to design and develop new models cannot hope to produce new and needed air­ tion. For example, assume that two compa­ and bring . them to production stage, and craft with the kind of efficiency and at a cost nies had equal net worth at J anuary 1, 1946. because of the violent fluctuations in earn­ fair to the Government and the taxpayers. Assume the first company sustained sub­ ings as between years. We think the 14-year Present-day machinery must be purchased at stantial losses during 1946 and 1947 and period selected is fair and equitable. We do a cost much higher than the original cost of broke even during 1948 and 1949. For com­ feel that perhaps it would be wise to estab­ machinery being replaced. parison, assum".l the second company broke lish minimum- and maximum-profit per­ We are not alone in our recognition of the even in all 4 years. The first company, sus­ centages. First, this would protect the in­ need for reasonable relief for the aircraft taining the heavy losses, ends up with a sub­ terests of the Government from percentages indust ry. In the public hearings before the stantially higher excess profits tax credit than considered too high, and second, it would _House Way s and Means Committee the Sec­ does the second company, which broke even. be fairer to any companies whose past diffi­ retary of th·e Treasury stated as follows (p. 77 This assumes that the first company had culties had created percentages abnormally of the committee report) : substantial earnings in 1945 (all aircraft low. "Mr. MARTIN. I have a question or two here manufacturing companies did) and was, The industry recommendation further pro­ with reference to the national defense. I therefore, able to take advantage of the net vides that the percentage profits should be am,particularly interested in a program that loss carry-back privilege. We are not critical applied to a volume of gross receipts not ex­ will avoid crippling essential defense indus­ of the relief thus granted for so far as we ceeding one-half of the highest annual gross tries. Do you have any suggestions for spe­ are aware no company in the aircraft in­ receipts of the taxpayer during the 14-year cial relief in the case of the aircraft industry, dustry even with this provision will have period. We agree that some proper limita­ which suffered a lQss in the period· 1946-48? adequate relief, but it is our belief that this tion on volume to which the full percentage "Secretary SNYDER. That has been among is not a sound approach to the problem. is applied is in order. Study ot this point our worst cases that we have had to consider, The second relief provision. enumerated this past week has convinced me that there and we think that special consideration must above provides for making the growth for­ is a more equitable means of establishing be given. mula ::'.. S contained in H. R. 9827 available limits. The 50-percent limit may work un­ "Mr. MARTIN. Have you any suggestions re­ to the aircraft industry. If this provision due hardship on a company · that previously garding that point? I have not found any were included in the law Boeing would ob­ never had large volume but has recently or in your statement. tain some relief thereunder as we would be in the future does develop a new model or a "Secretary SNYDER. We did not put that in able to use 85 percent of our 1949 earnings product which is outstanding in perfprmance there because it is a matter that we will have as a base. Again, we are not critical of the Our tax laws should encourage, not dis­ to talk out with you as a special case. relief so granted but we do not believe it is courage, such developments. Also, in this "Mr. MARTIN. It is very essential that we a truly sound and equitable approach to the industry during a period of emergency every give that consideration; is it not? excess profits tax credit to which Boeing or encouragement should be given to increasing "Secretary SNYDER. There is no question other companies are entitled, primarily for volume of output. Some continuing increase two reasons: in excess-profits-tax credit with increasing about it. We are fully in accord with that." (a) Very few in the aircraft industry actu­ Admiral Ramsey's testimony further estab­ -volume will offer such encouragement. On ally come within the concept of what we lished the fact that aircraft-industry profits, the other hand, we think the increase in resulting from Government business, · are believe is intended as the basic principle of credit should not continue in direct rela­ the growth formula. Historically, the air­ tion to increasing volume. The taxpayers controlled by the Government through rene­ craft industry is subject to severe peaks gotiation, price redetermination, and the requirement for research, for privately fi­ and valleys. At the present time the indus­ nanced facilities, etc., will tend to increase Vinson-Trammel Act. Just as utility profits try is coming out of a depression valley and are controlled, in the public interest, by State with increasing volume but probably not in and Federal regulatory bodies, so are air­ on the upswing of the cycle. direct ratio, particularly as extremely high craft-industry profits controlled, also in the (b) Within the industry, the cycle varies volumes are reached. public interest, by the methods mentioned. by several years as between various com­ It is, .therefore, our belief that the most As to whether the testimony completely panies. The merl.} fact that this provision equitable approach from the standpoint of established the relative soundness, fairness, would only give some of the companies relief the industry and from the standpoint of our and equity of the suggested alternate meth­ indicates that it is somewhat a happen­ national interests would be to provide for ods for relief I am not so certain. The time stance if a company obtains relief therefrom. an excess-profits-tax credit based on using limit for the presentation of the actual testi­ The third relief provision enumerated the taxpayer's profit ratio based on the 14- lnony itself, and the limited time available above permits use of the World War II credit, year period 1936-49 (with minimum and for preparation thereof, are undoubtedly plus 50 percent thereof. As with the _ot:t:er maximum limits) applied to the volume of largely responsible for this. It is our opin­ provisions, there are some arguments in its business during the taxable year on a re­ ion, however, and I believe the industry gen­ favor. But here it must be remembered ducing basis as such volume increases. erally agrees, that the first suggested relief that the World War II earnings credit was For purposes of illustration, the forego­ provision, based on the application of a 14· based on the years 1936-39. During the ing is reduced to a specific proposal using year average percentage of net income to intervening years there have been inevitable percentages and figures which are considered gross receipts, is more sound and equitable changes in the industry structure. New fair aRd reasonable. than the alternate suggestions. companies h ave entered the picture and PROPOSED BASIS FOR COMPUTING EXCESS-PROFITS• 1 I wish to develop this premise briefiy. Per­ some of the older companies have had va:r;y­ TAX CREDIT FOR AIRCRAFT INDUSTRY haps the simplest way to do this is to com­ ing records.' An arbitrary increase in the World War II credit simply perpetuates any Apply to taxpayer's gross receipts during pare the percentage of net income to gross the ta,xable year the percentages set forth be­ receipts approach with the other suggested injustices done under that law and fails to recognize changes in the interim. low and to the gross receipts as so adjusted relief provisions now before the Senate Fi­ apply the t axpayer's percentage of average nance Committee for their consideration. Let All of us in the aircraft industry are con­ vinced that some relief is vitally necessary. taxable net incom_e to gross receipts in the me say, at the outset, that I favor the per­ 14-year period 1936-49 provided that such centage of net income to sales approach sug­ It is our understanding that with respect to the 15 major companies, referred to by later percentages shall not be less than 4 gested by the aircraft industry not because . nor more than 7: it benefits Boeing more as against the other Admiral Ramsey on page 3 of his t estimony, companies, nor because Boeing would fail if each company were· allowed a choice be-· Gross receipts: Percentage tween any of the three relief provisions dis­ First $100,000,000______100 to receive some benefit, probably in line with Next $150,000,000______· 85 the average of the industry, from the other cussed above they would obtain some bene­ relief methods. I favor this approach be­ fit, from one or other. Certainly it would be Next $250,000,000______60 better to be granted some such relief than Next $500,000,000______25 cause, aft er much study, I sincerely believe Over_ $1,000,000,000______5 it to be the most equitable throughout the no relief at all, even if that relief, in our industry and to be premised on by far the opinion at least, is inadequate as we face the The minimum and maximum credits for soundest basic principles. The other sug- problems ahead r - us. ·specific volumes of gross receipts resulting 16432 CONGRESSIONAL RECORD-SENATE DECEMBER 12 from application of the above are set forth It will be noted that with sales of $286,- we have deferred the acquisition of an ad­ below: 000,000 in 1949 our taxable income was only ditional $10,000,000 of facilities urgently $9,376,000. This abnormally low margin was needed because of the dr~in on our working­ primarily due to the fa;ct that we were still capital position and the ·uncertainty as to Total gross Minimum Maximum receipts credit credit writing off losses on the Stratocruiser project the future. This $10,000,000 covers ·princi­ ($7,850,000 in 1949). During the year 1950, pally our need for a flight-test hangar, addi· based on a projection of our puIDlshed earn­ tional engineering and office area, and addi­ $100, 000, 000 $4,000,000 $7, 000, 000 ings statement for the first 9 months, our tional warehousing area. At the present 250, 000, 000 9, 100, 000 15, 92-5, 000 500, 000, 000 15, 100, 000 26,425, 000 sales volume should approximate that of 1949 time it further appears that within the next 1, 000, 000, 000 20, 100, 000 35, 175, 000 whereas our taxable income should be a lit­ 2 years we will be re_quired to expend an 2, 000, 000, 000 22, 100,000 38, 675, 000 tle more than double that of 1949. -in this additional $10,000,000 to $15,000,000 for newer connection it is significant to point out that and heavier equipment to handle the job The Boeing Co. had sales of $286,000,000 very little if any of our income in 1950 is at­ ahead. in 1949 and should approximate this figure tributable to business obtained since the This means that in a period of 2 or 3 years in 19c0. our average profit rate for the start of the Korean situation. The profits we should spend upward of $25,000,01>0 for 14 years 1936-49 was 5.66 percent. With a on such business will not be reflected to any new plant facilities. While aircraft plant sales volume of $280,000,000 our credit under substantial degree until late 1951. improvements are subject to certification the above formula would be $13,895,300 For purposes of further illustration we will and 5-year amortization, they are likewise whereas under the growth formula our assume then a sale't volume of $280,000,000 for subject to rapid obsolescence and may be credit would be a little under $8,000,000. 1950 and income before taxes of $19,000,000. rendered useless overnight by contract ter­ I . wish to point out that we consider the The net income after taxes under several of minations. You will note that Boeing's sales larger credit not only equitable but also the excess profits tax credits mentioned above dropped from $421,000,000 to $14,000,000 in necessary if we are to do the job ahead (assuming the_ excess profits tax was in ef­ 1 year. Furthermore, certification does not of us in the best possible manner. None­ fect for the full year at rates provided in provide the funds with which to acquire · theless, if in tbe judgment of those writing H. R. 9827) would be as folfows: the facilities. Adequate profits . will help the tax law a credit of $8,000,000 or any provide the needed cash and justify the risk. other amount is all that Boeing is entitled involved. Witl:out adequate profits, some Effec· of the needed facilities cannot be acquired to, we still think that it should be arrived Excess profits Taxab:e To-ta! tax Net in- tive at by a fair and logical approach through tax credit income come tax and our efficiency will sufier thereby. This the application of a formula such as that rate will be the taxpayers' loss since our contracts suggested above, on a more restrictive basis. ----- are subject to price redetermination and We believe you gentlemen are entitled to Percent renegotiation. The higher our efficiency, the $4,005,672 _____ $19, 000, 000 $12, 730, 000 $6, 270, 000 67.0 more money the taxpayers save. know more specifically how the various pro­ $7,!>70,140 _____ posals would affect Boeing. You are also 19, 000, 000 11, 859, 000 7, 141, 000 62.4 In light of the foregoing, we believe you $13,470,800_ - -- 19, 000, 000 10, 209, 000 8, 791, 000 53. 7 will agree that an excess-profits-tax credit entitled to know what we consider Boeing's $13,895,300_ - -- 19, 000, 000 10, 081, 000 8, 919, 000 53.1 minimum needs to be for the years immedi­ for Boeing of $4,000,000 or even $8,000,000 Is ately ahead: To this end we are setting forth . not only inequitable in view of the job being below certain basic information and com­ When considering our contention that done and the problems ahead of us but also putations made therefrom. wHh a sales volume of $280,000,000 we need a would not be for the best interests of the credit of upwards of $13,000,000 we must first Nation. Further, we do not believe that Boeing Airplane Co. (and component corpo­ rememb3r that the above figures are repre­ Boeing's position in the industry is peculiar, rations )--ex~ess profits tax data ·sentative of -a high level earnings period. but is, in fact, quite typical of the industry. As previoqsly pointed out the aircraft in­ Sincerely yours, Excess dustry is subject to violent fluctuations. J. 0. YEASTING, Gross receipts Taxable in- profits Obviously we must strengthen our financial Vice President-Controller. Year (sales) come tax position in good periods of business so that - credit we can withstand the shock when the period Mr. CAIN. Mr. President, our chief of emergency is over, drastically reduce our hope is that any new tax legislation will output, stay in business in order to be ready 1936. ------$2, 292, 772 $241, 091 stimulate production and will make 1937 _ ------5, 545, 439 355, 199 ------­ for the next emergency should it come, and greater achievements possible. ·I am 2,006,345 19391938______------_ (68, 855) ------­ continue the caliber of research and develop­ satisfied that the Boeing point of view 11, 846,894 (1, 775, 225) ------­ ment that will always assure the United 1940 __ ------19,390, 718 (1, 164, 468) $1, 298, 471 m~ght to be and will be explored and con­ 194L ______97, 210, 314 20, 874, 994 1, 506, 177 States of America of being the No. 1 air power sidered before any final action on tax 1942_ ------372, 108, 863 35, 920, 518 1, 775, 878 in the world. 1943 __ ------493, 188, 161 31, 921, 408 2, 359, 798 Secondly we , must consider the need for legislz,tion is taken. 1944 __ ------608, 082, 413 27, 083, 408 2, 443, 563 protecting our equity capital. The airci:aft The Boeing Aitplane Co. is a great in­ 1945_ ------420, 979, 217 22, 695, 796 2, 787, 311 13, 984, 063 industry cannot afford to fall too far behind stitution in its own right. Its first con­ 1947_1946_ -_____------______(8, 610, 174) ------21, 701, 852 561, 769 ------industry in general in the matter of dividend cern is with the Nation's need. It has 1948 _ ------126, 931, 453 3, 006, 900 ------286, 751, 519 payments. Boeing has just over 1,000,000 tried to be helpful to all Members of the 1949. ------9, 376, 636 ' ------shares of stock outstanding and the dividend Senate. I believe that it has been con­ TotaL_____ 2, 482, 020, 023 140, 418, 997 payments per share since the formation of structively helpful. the present Boeing Airplane Co. in 1934 are ANNOUNCEMENT OF CALL OF THE Percent taxable income to gross set forth below: 1934 ______CALENDAR ON FRIDAY receipts 1936-49 (percent)--- 5. 66 1935 ______Net worth Dec. 31, 1949 ______$46, 320, 898 Mr. LUCAS. Mr. President, .I desire Excess profits tax credit up.der 1936------1937 ______0.40 ·to announce to the Senate, for the pur­ H. R. 9827 (as passed by pose of the RECORD, that on Friday of House): 1938------this week the calendar will be called Average earnings ( 85 per­ 19391940 ______~- --·------_ cent of 3 best ·years 1946- from the beginning, This was agreed 49) ------$3,667,836 1941------~------upon this mornin5 at the Democratic Invested capital method___ $4, 005, 672 19431942------~------______1. 00 conference. I thought I should make Excess profits tax credit under 2.00 the announcement at this time. various relief . provisions as 1944------1945 ______2.00 Mr. WHERRY. Mr. President, I . am proposed: . 1. 00 wondering whether it would make a World War II (1945) credit 1946------1947 ______1. 00 plus 50 percent thereoL_ $4, 180, 966 1948 ______1. 00 great deal of difference to the Senate Growth formula (85 percent 1. 00 and to the majority leader whether the 2.00 of 1949 income)------$7,970,140 1949----~------calendar were called on Friday or on 3.00 Pro:tlt ratio to gross receipts 1950------Monday. I make the inquiry for the as proposed in Admiral The $3 dividend in 1950 represents approxi­ reason that we have on this side of the Ramsey's testimony with mately 6 percent on our present net worth aisle our so-called calendar committee, assumed gross receipts of and can certainly not be considered "lush" and that committee is not up with the $28J,OOO,OOO (85 percent in light of industry payme:µts in general and calendar. There are certain reports they of 5.66 percent of $280,- further in light of the substandard return would like to study. 000,000) ------$13,470,800 received by our stockholders throughout the Profit ratio to gross receipts years. Mr. LUCAS. I can only say to the ·as proposed herein with Thirdly, we must consider our needs for Srmator from Nebraska that we went on assumed gross receipts of capital equipment. As pointed .out in the record this morning in the conference, $280,000,000 (5.66 percent testimony of Admiral Ramsey, the Boeing and I would have to call anotner confer­ of adjusted gross receipts Co. in 1950 has committed over $7,500,000 ence in order to undo what was done this Of $:45,500,000) -'------$13, 895, 300 for new capital equipment. Furthermore, morning, It was agreed upon tnis morn- 1950 CONGRESSIONAL RECORD-SENATE 16433 ing in conference. I may say I do not in prohibiting the purchase of stock, it 2734 stems from the widespread merger th~nk the calendar is too heavy, said nothing about assets. activity which has been taking place Mr. WHERRY. I was about to ask - Shortly after the end of World War I since World War II. During the period in regard to that. corporations began to take advantage of 1940-47 more than 2,500 formerly inde­ Mr.. LUCAS. I feel sure that the two this loophole. If they purchased assets pendent manufacturing and mining Senators on . the Republican side, who in the first instance, dispensing entirely companies disappeared as a result of are always looking after the interests of with the acquisition of stock, they were mergers and acquisitions. It should be the taxpayers, will be ready by that time. obviously acting with perfect legality, emphasized that this is a minimum esti­ Mr. WHERRY. My reason for sug­ free from any action by the Federal mate since it is based upon a sample gesting that it be postponed until Mon­ Trade Commission. Many large corpo­ drawn principally from reports of acqui­ day was that the"' two Senators in ques­ rations adopted the deliberate policy of sitions of the larger corporations, as tion are not ready, and one of them Will purchasing assets when interstate com­ published in the leading financial man­ be absent Friday. It would even be a merce, and thus the Federal law, were uals. The asset value of these 2,500 little difficult for us to be ready by Mon­ involved, and of making stock acquisi­ firms amounted to $5,200,000,000, or day. If, however, the majority leader tions only when the transaction was con­ roughly 5.5 percent of the total of all insists upon a call of the calendar on fined within the borders of a single State manufacturing corporations in the coun­ Friday, we shall do the best we can to and haa no effect on interstate com­ try., Although data for the last 2 years be ready. I merely made the suggestion merce. are not available, there has been no in order to let the Senator know that · In some cases, however, acquisitions apparent decrease in the intensity of the if it would not cause too great incon­ of assets , were not feasible, unless the movement. _ venience, it would be greatly appreciated stock could be purchased first; and this These mergers have had the effect of on this side if the call of the calendar raised a problem. If a firm went through strengthening the position of big busi­ · could be postponed until Monday. this double play, buying up the stock ness in several ways. In the first place, · Mr. LUCAS. I may say to the Senator first and then using the stock to obtain several of the traditionally small-busi­ that we seldom take up matters of this the assets, was it not violating the law? ness industries have been affected. The kind in conference, but we did so this The Federal Trade Commission thought two leading industries, in terms of num­ morning, and it was unanimously agreed so. ber of acquisitions, have been.textiles and that we should have the call on Friday; The law certainly did not specify that apparel, and food and kindred prod­ so I presume we shall have to go through those who broke its provisions could gain ucts-both · predominantly small-busi­ with it. Then, too, I think an appro­ immunity from its penalties by subse­ ness fields. Moreover, in certain small· priation bill will be before the Senate quently purchasing something else not business industries, notably steel drums, probably on Monday. mentioned in the law. Yet, in a 5-to-4 tight cooperage, and wines, virtually all decision, with Justices . Brandeis, Taft, or a substantial part of the industry has Mr. WHERRY. Very well. Holmes, and Stone dissenting, the Court been taken over by large corporations. PREVENTION OF CORPORATIONS FROM held, in 1926, that where a corporation Finally, the outstanding characteristic ACQUIRING ANOTHER CORPORATION had gone through this double play the of the movement has been that of large BY MEANS OF ACQUISITION OF ITS Commission was powerless to take effec­ corporations buying out small com· · ASSETS tive action. Specifically, the Court held panies. · The Senate resumed the consideration that the Commission's only authority in Thus, the preponderant number of of the bill

EFFECTS OF MERGERS ON ECONOMIC Another series shows the percentage ment and creating of monopoly. Thus, CONCENTRATIONS of all working capital of manufacturing in a report dated. July 2, 1914, which ac­ In appraising the over-all effect of corporations held by 316 large manufac-­ companied the Clayton Act, the Senate mergers on economic concentration, it. turers. This provides a useful link-to the Judiciary Committee said: must be kept in mind that they tend other series and confirms the general up­ Broadly stated, the bill, in its treatment of to become cumulative over a period of ward trend in concentration. In 1926 unlawful restraints and monopolies, seeks time. Each year's mergers are super­ these large manufacturing corporations to prohibit ..md make unlawful certain trade imposed upon an economic structure held 35 percent of the total working cap­ practices which, as a rule, singly and in ital By 1938 the figure had1risen to 47 themselves, are not covered by the act of of concentration which has been built July 2, 1890 [the Sherman Act] or other up over many years. In other words, percent. existing antitrust acts and thus, by making insofar as the long-range impact on Mr. President, the extent to which the -these practices illegal, to arrest the creation. concentration is concerned, the 2,500 American economy has become concen­ of trusts, conspiracies, and monopolies in industrial mergers which have taken trated and centralized in the hands of a. their incipiency and before consummation. place between 1940 and 1947 are additive few giant corporations was -strikingly re­ to the mergers which had tak_en place vealed before this committee in figures This intent to stop practices which re­ in previous years. In the preceding 20- presented by Dr. Wilfred I. King, pro­ sult in monopoly is also evident from the year period, from 1919 through 1939, fessor emeritus of economics at New congressional debates on the bill. Thus, approximately 9,000 formerly independ­ York University. The figures wq.ich he former Senator Walsh, of Montana. ent manufacturing concerns had dis­ presented reveal an e~traordinary lever stated on the Senate floor: appeared as a result of mergers and ac­ of concentration. Thus, his fig11res show It was intended [in this bill] to reach the quisitions, making a total of 11,500 that in 1946, the latest year for which practices that were not the practices of things that have developed into trusts and disappearances between 1919 and 1947. such data are available, one-tenth of 1 monopolies, but were practices of trade, The long-range increase in economic percent of th-e total number of all Amer­ which 1! persevered in and continued and concentration which has taken place in ican .corporations-the giant firms with developed, would eventually result in the · this country can be attributed in con­ assets of $100,000,000 and over-owned creation of I\ monopoly or trust. siderable part to this great number of 49 percent of the assets of all American mergers and acquisitions. The steel in­ corporations; 2 percent of the number In 1914 President Wilson, in speaking dustry constitutes one of the few fields of corporations own-ed-78 percent; 8 per­ of the passage of the Federal Trade Com­ in which it has been possible to estimate cent of the number owned 89 percent of mission Act and the Clayton Act, stated the extent to which long-term growth the assets; and 12 percent owned 92 per­ that their purpose was to kill monopoly of large corporations has been due to cent of the assets. They are, of course, in the seed. this cause. Between 1915 and 1945, ap­ the giant corporations. .At the other end Shortly after World War I, the proximately two-thirds of the growth of of the scale, thinking now, of small con­ Supreme Coµrt itself gave expression to one company was due to mergers and cerns, 45 percent of the number of car-· this point of view by referring to the acquisitions. The corresponding figures porations-the small firms with assets of unsatisfactory results of dissolving com­ for other leading steel companies are as $50,000 or less-owned less than 1 per- binations under the Sherman Act, "so follows: One ~ompany, one-third; an­ cent of the assets. . far as the purpose to maintain free other company, one-sixth; another com­ The figures presented by Dr. King also competition was concerned," and in that pany, one-fourth; another company, show that in the field of manufacturing connection said that "the Clayton Act one-fifth; another company, one-tenth; alone, the 25 largest corporations in 1948 sought to reach the agreements em­ another company, two-fifths; and .still owned 27 percent of the total assets of braced in its sphere in their incipiency." another company was the product of· all manufacturing corporations, or a lit­ It also said that "the Clayton Act, as its the greatest merger in history, involv­ tle more than an average of i ·percent of title and the history of its enactment ing the consolidation at one fell swoop the assets for each of the 25 e,orpora­ shows, was intended to supplement the of more than 180 formerly independent tions. That is, each company owned ap­ purpose and effect of other antitrust companies. proximately f percent of all assets. legislation, principally the Sherman Act As would be expected, the concentra­ The enactment of the bill will limit of 1890." tion level in the steel industry has further growth of monopoly and thereby Examples of the present ineffective­ steadily risen. Back in 1860 the four aid in preserving small business as ,an ness of the law: A typical instance of largest producers in the iron and steel important .competitive factor in the the futility of attempting to enforce industry owned 25 percent of -the rolling American economy. · section 7 -as it now stands is the case one mill capacity in the country. At the In order that a full understanding firm which the Federal Trade Commis­ end of World War I, the top four steel may be had of the background existing sion -in 1944 charged with violating sec­ producers held more than 55 percent of when the Congress felt comp_elled to en­ tion 7 by purchasing the stock of a com­ the steel capacity, and by 1945 the figure act antitrust legislation, certain facts petitor. During the ·course of hear­ had risen to slightly more than 64 should be recited. ings-which, of course, are the consti­ percent. Original purpose of the Clayton· Act: tutional right of any accused firm-the The long-term increase in concentra­ The action by the Supreme Court in ac­ attorneys announced on November 21, tion in the steel industry is by no means tually breaking up the Standard Oil and 1945, that their firm had just purchased an isolated case. The economy as a Tobacco Trusts in 1911 had convinced the assets of the competitor and accord­ whole has also shown a similar increase Congress that the Government was al­ ingly requested the Commission to dis­ also due in considerable part to mergers ready armed under the Sherman Act miss the complaint. Since the Commis­ and acquisitions. This long-term in­ with the power to break up existing mo­ sion had no alternative but t~ comply, crease is revealed by several independent nopolies. But this was not sUfiicient for it dismissed the complaint in March measures of concentration compiled by the legislative temper of those earlier 1946. various authorities, covering the period days. Congress wanted to go one step Another recent example is provided 1909-42. further and prevent the very creation of by the case of another corporation. Thus, the 200 largest nonfinancial car. monopoly. Instead of waiting until a Through a number of stock acqui-sitions porations increased. their relative im- monopoly had been formed and then try­ in competing corporations it had be­ . portance from ownership of one-third ing to dissolve it under the Sherman Act, come in 1945 the largest wholesale gro­ of the assets of all nonfinancial corpora­ Congress wanted to prevent the develop­ cery in the country, with assets of $20,- tions in 1909 to 48 percent in 1929 and to ment of monopoly in the first place--=-to 000,000 and an:QU· 1 sales of $100,000,000. 55 percent in the early thirties. The nip it in the bud. It occupied a leading position in the sharp upward sweep in the 20 years be­ Whatever the reasons for the ultimate wholesale grocery trade in numerous fore the crash of 1929 is confirmed by shortcomings of these provisions of law, important trade areas, including Chica­ another series showing that the percen­ the intent of Congress in passing them go, Baltimore, and Canton, Ohio. Since tage of the total net incomes of all non­ was quite clear. It was dissatisfied with its acquisitions took the form of the pur­ financial corporations earned by the 200 the Sherman Act and intended that chase of stock, the Commission issued a largest nonfinancial corporations in­ these new powers should supplement complaint in 1946, charging a violation creased from 33 percent in 1920 to 43 that aet in such a way as to enable the of section 7. But while the case was in percent in 1929. Government to prevent the very develop- th_e process of being tried, the corpora- .1950 CONGRESSIONAL EECORD-SENATE 16435 tion acquired the assets of its subsidiary believe that the proposed bill will prevent tion 7, even in the case of stock acquisi­ concerns, which it had previously con­ sales of this type (p. 7). . tions, to large transactions which would trolled only through stock ownership, We then go on to point out that deci­ substantially lessen competition, or tend and dissolved the subsidiaries. Again sions of the Supreme Court have made to create a monopoly. In the case of the Commission had no alternative but it abundantly clear that the Clayton International Shoe Company against to dismiss the case, which it did in Feb­ Act does not apply in bankruptcy or re­ F.ederal Trade Commission, supra, de­ ruary 1947. ceivership cases. , Moreover, the Court cided January 26, 1930, the International Reasons for original failure of Con­ has held, with respect to this specific Shoe Co., having a Nation-wide business gress to include assets: The present im­ section, that a company does not have purchased the stack of a smaller sho~ potence of section 7 raises the question to be actually in a state of bankruptcy company also having a Nation-wide as to why Congress, in granting the to be exempt frNn" its provisions; it is business. As to a part of the business Commission power to prevent purchases sufficient that it is heading in that direc­ of the two corporations, they were not of stock, did not also give it the power tion with the probability that bank­ in direct competition. The Federal to move against acquisitions of assets. ruptcy will ensue. On this specific point Trade Commission sought to order a di­ Inasmuch as purchases of assets are the Supreme Court, in the case of Inter­ vestiture of the stock and prevent the more binding and lasting, and thus more national Shoe Co. v. Federal Trade Com­ merger., The Supreme Court held 'that destructive to competition, the omission mission (280 U. s. 281) said: the merger was not of sufficient size or seems particularly paradoxical. The an­ A corporation with resources so depleted importance, even thougli there was some swer lies in the fact that at the time and the prospect of rehabilitation so re­ competition between the two corpora­ when Congress enacted the Clayton Act, mote that it faced the grave probability of tions, to substantially lessen competition most acqu.isitions took the form of stock a business failure with resulting loss to its or to create a monopoly. The Court purchases. By comparison, acquisitions stockholders and injury to the communities has this to say: of assets were almost unknown. where its plants were operated, we hold that Mere acquisition by one corporation of The economic background behind the the purchase of its capital stock by a com­ the stock of a competitor even though it re­ passage of the Clayton Act in 1914 was petitor (there being no other prospective sults in some lessening of competition, is not purchaser), not with a purpose to lessen forbidden; the act deals only with such ac-1 the great merger movement which be­ competition, but to facilitate the accumu­ quisitions as probably will result in lessening gan at the very end of the nineteenth la.ted business of the purchaser and with the competition to a substantial degree, Standard century and extended through 1907. effect of mitigating seriously injurious con­ Fashion Co. v. Magrane-Houston Co. (258 During this period, which wit:nessed the sequences otherwise probably, is not in con­ U. S. 346, 357); that is to say, to such a birth of such huge consolidations, most templation of law prejudicial to the public, degree as will injuriously affect the public. antt does not substantially (303) lessen com­ mergers were effected through the pur­ petition . or restrain commerce within the .The language in the amendment, it chase of stock. intent of the Clayton Act . . To regard such a will be noted, follows closely the purpose Effect of the loophole on antitrust transaction as a violation of law, as this of the Clayton Act as defined by the Su­ policies: The antitrust laws condemn at­ Court suggested in United States v. U. S. :preme Court in the International Shoe tempts to control the market by means Steel Corp. (251 U. S. 417, 446-447), would case. of mutual understanding or agreement "seem a distempered view of purchase and among competitors; but if the same ob­ result." See also Press Ass'n v. United States Fifth. The bill modifies the present law (245. Fed. 91, 93-94) (Id. pp. 302-303). so as to remove any possibility of an jective is achieved through the purchase interpretation that would prohibit in­ of physical property, it is lawful in the Some might fear that the passage of consequential acquisitions of stock or absence of monopoly, and the antitrust House bill 2734 would have the effect of assets. Section 7, as it now stands, pro­ agencies are powerless to act. The ex­ stopping all mergers and acquisitions. hibits a corporation engaged in com­ istence of the loophole thus places a pre­ Such is not the case. House bill 2734 merce from acquiring the stock of an­ mium upon the attainment of monop­ would not put an end to all future merg­ other corporation engaged also in com­ olistic ends by the completely final ers and acquisitions. Its applicability is merce "where the effect of such acquisi­ method of consolidation, as against the limited in several ways: tion may be to substantially lessen com­ more vulnerable method of conspiracies First. It applies only to corporations petition between the corporation whose among independent firms. In other in interstate commerce. stock is so acquired and the corporation· ·words, the weaker, less effective, co­ Second. The bill applies only to acqui­ making the acquisition." oper~tive methods of eliminating compe­ sitions which substantially lessen com­ Since acquisition of a controlling stock tition are prohibited, but the permanent petition or tend to create a monopoly. interest in a rival company necessarily and·more effective method of consolida­ In other words their effect upon compe­ eliminates effective competition between tion under a single mal).agement is per­ tition must be substantial. Any action the acquirin& and the acquired corpora­ missible. Moreover, the more effective by the Federal Trade Commission de­ tions, this language, but for limiting in­ is the enforcement of the law against signed to halt mergers of an inconse­ terpretations by the courts, might have collusion among competitors, the greater quential nature would not be in accord­ prevented any use of stock purchases to is the incentive to achieve the same ends ance with the language of the bill and unite small corporations engaged in the through purchase, consolidation, and would not he' upheld by the courts. same line of business even though these merger. Third. · As already mentioned, the bill corporations were so small and their Any antitrust policy, to be effective, would not apply to a company in a failing other competitors so numerous that the .must ,prohibit the achievement of mo­ or banluupt condition. acquisition would have made no per­ nopolistic ends, regardless of whether Fourth. The present language of sec­ ceptible change in the intensity of com­ they are attained by collusive agreement tion 7 as it relates to mergers by sale of petition in any. line of commerce in among independent firms or by consoli­ stock is more restrictive than the lan­ which such corporations were engaged. dation, acquisition, and merger. To guage in the amended bill. Yet no case The. present bill eliminates the test of block off one of these two roads to has been found where a small corpora­ the lessening of competition between the monopoly, while leaving the other open, tion had any difficulty or was criticized acquiring and the acquired_corporations merely increases the traffic on the latter. by the Federal Trade Commission for retaining only the test of the generai Inapplicability to companies in a fail­ selling its business by s~lling its stock to effect on competition. ing or bankrupt condition: The argu­ another small corporation. The small corporations have not had to avoid the Owing in considerable part. to mergers ment has been made that the proposed and acquisit10ns, the Nation is now con­ bill, if passed, would have the effect of present language of section 7 by selling their assets in place of their stock, when fronted with an extraordinary level of preventing a company which is in a fail­ economic concentr~t i on. In a report on ing or bankrupt condition from selling they wanted to dispose of their business. Furthermore, the Supreme Court and the concentration of productive facili­ out. Of- course, that would be a serious ties the Federal Trade Commission situation, and it is entitled to our con­ the Federal courts have not applied the sideration. In our report accompanying present·strict language of section 7; even found that in 1947 the 113 largest manu- i H. R. 2734, the committee states: · in cases of stock acquisition, so as to pre­ facturing corporations owned 46 percent The commit tee are in full ·accord wit h the vent a small corporation from selling its of the net capital assets of all manufac- \ proposit ion that any firm in such a condi­ business or of merging with another turing enterprises, both corporate and tion should be free to dispose of · its stock small business. The Supreme Court has noncorporate. The three largest firms

or assets. The committee, however, do not only appl ~ ed the present language of sec- held 100 percent of the net capital assets 1 16436 CONGRESSIONAL RECORD-SENATE DECEMBER 12. in the aluminum industry; 95 percent in been most active in seeking to -correct Mr. DONNELL. Mr. President, will the tin-can industry; 92 percent in lino­ this glaring loophole in the law. Both the Senator yield for a few questions? leum; 88 percent in copper smelting and Senators have- consistently n.rgued for Mr. O'CONOR. I am very pleased to refining; 78 percent in cigarettes; 72 per­ such legislation in ·the interest of small yield to the Senator from Missouri. · cent in distilled liquors; 71 percent in business,' and in order to thwart the Mr. DONWLL. First, I should like to plumbing equipment and supplies; 70 growth of monopoly. express my appreciation of the great percent in rubber tires; 68 percent in As would be expecteu from this lengthy care which has been ~videpced by the .biscuits arid crackers; 67 percent in agri­ legislative history, the record on this bill distinguished Senator in the presenta­ culture machinery; 64 percent in meat is voluminous, consisting of three printed tion of this extremely important ques­ products; 57 percent in glass and glass­ volumes of hearings before subcommit­ tion. As he recalls, there was a differ­ ·ware; 56 percent in dairy products; and tees of the House Jtldiciary Committee ence of opinion in the Judiciary Com­ similar high proportions in other in the Seventy-ninth, Eightieth, and mittee, and I had the privilege of sub­ industries. Eighty-first Congresses; approximately mitting minority views, which appear In concluding this brief resume of the 700 typewritten pages of transcript of alongside the report of the committee history of the legislation there is one hearings before.the subcommittee of the itself. · particular point which I think warrants Senate Judiciary Committee of the I should like to ask the Senator a few comment. Some may be concerned over Eightieth Congress; a printed volume of questions so as to develop his views its effect on small business that it might hearings before the subcommittee of the somewhat further. · pre.vent two small firms from merging. Senate Judiciary Committee of the I am correct, am I not, in stating that On this point I think it is worth while Eighty-first Congress; three printed re­ the majority report, on page 2, states to bear in mind the fallowing considera­ ports of the House Judiciary Committee; that- tions: First, as I have already indicated, one printed report of the Senate Judi­ The purpose of the proposed legislation is the facts reveal that the great bulk of ciary Committee; and very important to prevent corporations from acquiring an­ the mergers which have taken place in material printed before· the Temporary other corporation by means of the acquisi­ recent years have consisted of the ab­ National Economic Committee in the tion of its assets, where under the present sorption of a small company by a large form of printed hearings and mimeo- law it is prohibited frotr acquiring the stock company; ~he cases of two small com­ graphs. ' . of said cor!Joration. panies merging are few and far between. Finally, Mr. President, in addition to Mr. O'CONOR. The report so states. Second, the bill is aimed at preventing its repeated approval by congressional Mr. DONNELL. That is the purpose only those mergers which substantially committees, the bill has received wi~­ of the bill; is it not? lessen competition or tend to create a spread support from other sources. Mr. O'CONOR. Yes; monopoly. Obviously, those mergers President Truman has specifically rec­ Mr. DONNELL. Or, as stated else­ which enable small companies to com­ ommended its enactment. In the eco­ where in the report, at page 3: pete more effectively with giant corpora­ nomic report of the President of January The purpose • • • is to limit future tions generally do not reduce competi­ 8, 1947, the President, in speaking for increases in the level of economic concen­ tion but rather intensify it. the need in strengthening of the anti­ tration resulting from corporate mergers Third, by a specific action, Congress trust laws, stated that-- and acquisitions. has made it abundantly clear that it is Among the steps to be taken ls the exten­ not the purpose of this law to prevent sion of section 7 of the Clayton Act to pro­ Mr. O'CONOR. The Senator has, of mergers of this type. Thus, the original hibit mergers by the acquisition of assets as course, correctly read from the report. wording of section 7 of the Clayton Act, well as by the acquisition of stock control. The excerpts, of course, should be read in which, with ·regard to stock, is now on connection with the entire report, which the statute books, prohibits a corpora­ Similarly, President E,oosevelt, in a emphasiz~~ the fact that the bill is aimed tion from acquiring a competitor "where message to the Congress on April 29, only at acquisitions which substantially the effect may be to substantially lessen 1938, recommended "more rigid scrutiny lessen competition or tend to create a competition between the corporation thro-qgh the Federal Trade Commission monopoly. Witb that qualiflcation the .whose stock is acquired and the corpo­ of corporate mergers, consolidations, and Senator is entirely correct. ration making the acquisition." Had acquisitions than that now provided by Mr. DONNELL. I agree with the Sen­ this language been rigidly interpreted, the Clayton Act.'' ator's statement. it would have had the effect of prevent­ In addition, the measure was unani­ May I ask the Senator whether or not ing any company from buying the stock mously recommended by the Temporary the majority report at any point asserts, of any competitor, since the acquisition National Economic Committee. Finally, either in haec verba or in substance by one firm of a competitor not only the Federal Trade Commission has been that acquisitions· by one corporation of "substantially lessens" but completely recommending its passage since 1927, assets of another corporation or of other eliminates the competition which had now almost a quarter of a century ago. corporations have caused any great in­ formerly existed between them. The most recent report of the Federal crease in the level of concentration? In the bill before us this stringent pro­ . Trade Commission on this ,subject-The Mr. O'CONOR. It does so state, I may hibition has been completely deleted. Merger Movement: A Summary R~port­ say to the Senator from Missouri, in this Instead of making the test of the law the concludes with - the following words, way: The report showg..:_and charts are effect of an acquisition on competition which· should be constantly borne in available which later on I might, if de­ between the acquired and the acquiring mind in its consideration: sired, display to the Senate-a trend companies, the proposed bill substitutes No .great stretch of the imagination is re­ upward in the number of mergers and quired to foresee that if nothing ls done to acquisitions. Such a trend is attributa­ the more general test of the effect on check the growth Jn concentration, either competition generally in any line of com­ the giant corporations will ultimately take ble to the fact that the Clayton Act has merce in any section of the country. over the country or the Government will be had this luophole in it for the past 36 And to come within the prohibition of impelled to step in and impose some form years. the bill the effect on that competition of direct regulation. in the public interest. Mr. DONNELL. Mr. President, I call must be "substantial." In either event, collectivism will have tri­ the ::ittention of the distinguished Sen­ Lest it be thought that this bill is the umphed over free enterprise and the theory ator to page 3 of the report. The page of competition will have been relegated to contains a portion entitled "The Level result of snap judgment or hurried con­ the limbo of well-intentioned but ineffective sideration, let me say that over a period ideals. This is a warning which the Com­ of Economic Concentration." I ask the of years attempts have ·been made to mission has repeated time and again, and Senator whether or not that is the por­ remedy the existing defect in the law. one which some of those who have the most tion of the report w.hich discusses both Most active in this endeavor have been to gain by the preservation of competition the level of economic concentration and the senior Senator from Wyoming [Mr. seem determined to ignore. the cause, or the facts out of which such O'MAHONEYJ and the junior Senator The Commission believes that the eco­ economic concentration has arisen? from Tennessee [Mr. KEFAUVER], the lat­ nomic forces on which it has been basing.its warnings' require that a definite choice be Mr. O'CONOR. That is the section ter having striven for the passage of made. Eit her this country is going down where the point is principally empha­ amendatory legislation while a member the road to collectivism or it must stand and sized; yes. of the House of Representatives. Over fight for competition as the protector of all Mr; DONNELL. Would the Senator the years the Senator from Wyoming has that is embodied11n free enterprise. have any objection if I asked leave at

• 1950 CONGRESSIONAL RECORD-SENATE 16437 this time for unanimous consent that the Mr. DONNELL. But if the Senator nomic Committee, as I recall, there was portion of the report appearing on page will permit me to inquire further, there considerable testimony with respect ·to 3, beginning with the words, "The level is no express statement in the portion of the progress of mergers. My mind of economic concentration" and ending the report which I have placed in the carries me back to the evidence of the at the conclusion of page 3, be inserted RECORD to the effect that the acquisitions merger that was going on in the distil­ in the RECORD? by one corporation of assets of another lery industry. My recollection is, and Mr. O'CONOR. I would be delighted corporation or of other corporations it is borne out by a chart which I find to have the Senator do so. have caused any great injuries in the in the report of the Federal Trade Com­ Mr. DONNELL. Mr. President, I ask level of economic concentrations? mission on the merger movement, the unanimous consent that the matter re­ Mr. O'CONOR. I may qualify or ma!rn report being dated 1948. The chart f erred to may be printed in the RECORD this additional observation, which is that shows the acquisitions since 1933 by the at this point. the report is not very lengthy, that it Schenley Distilleries Cqrp. This mo­ The PRESIDING OFFICER. Without covers only a little more than seven nopoly was established almos-:; com­ objection, that course will be followed. pages, and obviously, with the hundreds pletely by mergers of the kind which The matter referred to is as follows: of pages of testimony that have been the pending bill wo:ild prohibit. I am THE LEVEL OF ECONOMIC CONCENTRATION taken, we could not put everything in sure there are other instances. The purpose of the proposed bill, H. R. 2734, the report. Of coun:e, the history of the concen­ is to limit future increases in the level of Mr. DONNELL. I now ask the Sena­ trat:on in the steel industry, not at all economic concentration resulting from cor­ tor whether or not included in the testi­ confined to the earlier years, has been porate mergers and acquisitions. The bill mony before the committee was the history of acquisition by the United would accomplish this purpose by enabling article by Drs. John Lintner and J. Keith States Steel Corp. when it started, and the Federal Trade Commission to prevent Butters entitled "Effect of Mergers on by the Republic Steel Corp. and other those acquisitions which substantially lessen Industrial Concentration, 1940-47"? l~ter wrporations, of competing con­ competition or tend to create a monopoly. Mr. O'CONOR. There was such an Since 1914 the Commission has had the power cerns, so that today in the steel indus­ to prevent such acquisitions whe? they are article. try there has been built up what amounts effected through the purchase of stock. The Mr. DONNELL. May I inquire of the to a monopolistic situation by which objective of Congress in passing section 7 of Senator from Maryland whether I am the entire production and distribution the Clayton Act has been circumvented by correct in stating that the material in of steel in the United States are directed the acquisition of assets rather than, or in that article was originally prepared as by common consent. addition to, the purchase of stock. The pro­ a part of the background for a mono­ Mr. O'C'-'NOR. I may say in fur­ posed bill would eliminate this practice by graph which is one part of the study of therance of the very pertinent statement extending the application of the Clayton Act Effects of Federal Taxation on Business to acquisitions of assets. by the Senator from Wyoming, that While there exist many differences of opin­ Mergers, which has been conducted by everything we heard bore out that state­ ion on other aspects of the monopoly prob­ the Harvard Graduate School of Busi­ ment; and, further, that it was not con­ lem, there is substantial agreement that the ness Administration under a grant from fined to any one particular industry. level of economic concentration is extremely the Merrill Foundation for the Advance­ The example cited by the Senator deals high. . ment of Financial Knowledge? with the distilled spirits industry. We The extent to which the American economy Mr. O'CONOR. The Senator is cor­ took typical cases of companies in vari­ has become concentrated and centralized in rect. the hands of a few giant corporations was ous other lines, such as farm imple­ strikingly revealed before this Committee in Mr. DONNELL. I call to the Sena­ ments, manufacturing, steel, and dairy figures presented by Dr. Wilfred I. King, pro­ tor's attention, for his conveni~nce at products, and found that the situation fessor emeritus of economics at New York this point, the first page of the minority in those industries was roughly similar University. The figures which he presented views submitted by myself, and ask the to that described by the Senator from reveal an extraordinary level of concentra­ Senator whether the· authors of the Wyoming. tion. Thus, his figures show that in 1946, article referred to, namely, Drs. Lintner Mr. O'MAHONEY. May I ask the the latest year for which such data are avail­ · and Butters, point out the general rec­ able, one-tenth of 1 percent of the total Senator what has been going on in the number of all American corporations--the ognition qf the fact that- retail-grocery business, what has been giant firms with assets of $100,000,000 and The high degree of industrial concen­ going on in the bakery industry, what over-owned 49 percent of the assets of all tration which characterizes our economy to­ has been going on in retail distribution American corporations; 2 percent of the day stems largely from the two waves of of various kinds? Is not the record be­ number of corporations owned 78 percent; merger activity in the late nineteenth cen­ fore the committee and the record before 8 percent of the number owned 89 percent of tury which were typified by the formation of the assets; and 12 percent owned 92 percent the Standard Oil trust in 1879 and, later, of the Federal Trade Commission conclu­ of the assets. At the other end of the scale, the billion-dollar United States Steel Corp. sive upon the point that mergers are still 45 percent of the number of corporations­ at the turn of the century. continuing? I take it that those of us the small firn:s with assets of $50,000 or less­ who sponsor the bill-and I introduced owned less than 1 percent of the assets. Does the Senator coincide with what a similar bill, in several Congresses-do The figures presented by Dr. King also show I have therein described as the general not contend that mergers constitute the that in the field of manufacturing alone, th~ recognition of the language set forth in sole cause· of concentration of economic 25 largest corporations in 1948 owned 27 per­ the article by Drs. Lintner and Butters? power. They constitute only one cause. cent of the total assets of all manufacturing Mr. O'CONOR. I quite agree with corporations, or a little more than an aver­ but they constitute so important a cause the Senator from Missouri that that was that the gaping hole in the Clayton Act, age of 1 percent of the assets for each of the the viewpoint expressed by the gentle­ 25 corporations. in my judgment, should be plugged to The enactment of the bill will limit further men to whom the Senator from Missouri prevent mergers which are designed or· growth of monopoly and thereby aid in pre­ has referred. which have a tendency to create monop• serving small business as an important com­ Mr. DONNELL. May I inquire fur­ oly, and which do substantially lessen petitive factor in the American economy. ther of the Senator whether the article competition; and it should be within the Mr. DONNELL. I · ask the Senator by these gentlemen further points out jurisdiction of the Federal Trade Com ..; from Maryland if in that portion of page that- mission to prohibit such mergers. 3 which is entitled ''The Level of Eco:­ The major merger movement of the 1920's Mr. DONNELL. Mr. President, will nomic Concentration," there is anywhere still · further increased prevailing levels of the Senator from Maryland yield? set forth any assertion to the effect that concentration. Mr. O'CONOR I am very glad to acquisitions by one corporation of an­ That appears in the article, does it yield. other corporation or of other corpora­ not? Mr. DONNELL. Before posing the tions have caused any great injuries in Mr. O'CONOR. Yes. question, let me state that I wish it dis ... the level of economic' concentration? Mr. O'MAHONEY. Mr. President, tinctly understood that in my minority Mr. O'CONOR. I will say to the Sen­ may I interrupt to make an observation views I am stating that- ator from Missouri that mergers are one at this point? It is true that (a) since 1940 there has of the principal causes of the long-term Mr. DONNELL. Certainly. occurred what Drs. Lintner and Butters term upward trend in concentration which Mr. O'MAHONEY. During the hear­ "the resurgence of large-scale merger activ­ has taken place in our economy. ings of the Temporary National Eco- ity in the United St.ates"; (b) according t.o 16438 CONGRESSIONAL RECORD-SENATE DECEMBER 12 them, in "manufacturing and mining alone over $100,000,000 at the time of acquisition played an important role in the extraordi­ the· :financial manuals list approximately amount to $780,000,000, or only 2.1 percent of narily active merger movement of the 1920's. 2,000 formerly independent companies which the total assets of all firms with assets of over In striking contrast, in the recent merger disappeared as a result of mergers and acqui­ $100,000,000 at the end of 1946. movement combinations between very large sitions by other companies in the 8-year (b) The corresponding figure .for aJl firms companies have been negligible in number. period, 1940-47"; and (c) to quote further with assets ot over $50,000,000 at the end of from th'e above-mentioned article: "The 19.46 is 2.8 percent. I have correctly quoted, have I not, companies so absorbed held assets, at the (c) The ratio generally used to measure from the article by those two gentlemen? date of sale or merger, estimated by the Fed­ relative concentration or inequality-when Mr. O'CONOR. The Senator has cor­ eral Trade Commission to amount to approx­ computed for the asset distribution of all rectly quoted it. imately $5,000,000,000." companies-increased, on account of .mer­ Mr. DONNELL. I may state that if gers, by less than 1 percent during the 1940- the Official Reporter per chance should Before posing the question I should 47 period. also like to state that, indeed, the Fed­ (d) When computed separately for both use, in making his report of this ques- eral Trade Commission, in its 1948 re­ the 500 and the 1,000 largest manufacturing - tioning, certain words which appear in port on the merger movement, says: companies, however, the index was actually the minority views, I call to the attention reduced by the merger activity of these firms. of the Official Reporter, most respect­ The importance of external expansion in fully, that where certain italization ap­ promoting concentration has never been Does the Senator agr~e that is the more clearly revealed than in the acquisition pears, it is noted in the minority views statement by those gentlemen, regard­ that the emphasis is supplied by me. movement that is taking place at the present less .of whether he agr_ees with it? time-a movement which is strengthening Let me ask, finally, in regard to the ar­ the position of big business in several ways. Mr. O'CONOR. That is their state­ ticle by Drs. Lintner and Butters, wheth­ ment. However, I may say again that a I desire to ask the Senator, if I may, er the Senator will inform us whether statement in rebuttal of that article will those two gentlemen say: whether he observed that Messrs. Lint­ be made. · ner and Butters developed iJoints, how­ Mr. DONNELL. Does the Senator To sum up, mergers have been responsible ever, which seem to them "to essentially· for such a small percentage of the total agree that these two gentlemen, Messrs. growth of large firms since 1940 that their reverse the major conclusion on the con­ Lintner and Bu~ters, furtr~er state in effect on over-all levels of industrial concen­ tribution of mergers to increasing gen­ their article : tration has been ·very small. (Senate sub­ eral concentration." Since particular importance attaches to committee hearings on H. R. 2734, p. 374.) Mr. O'CONOR. I quite agree with the distribution of assets among the largest Mr. O'CONOR. That is the conclu­ the Senator's statement that that was companies we also compute~ the index of their individual view. concentration for the 500 and the 'l,000 sion reached by the gentlemen in ques­ ' Mr. DONNELL. Does the Senator largest manufacturing companies as of the tion; yes. agree with this statement: end of 1946. In both instances relative con­ Mr. DONNELL. Now I should like to The apparent contradiction between many centration was reduced a-s a result of all the ask the Senator another question, Mr. of the findings of MesErs. Lintner and But­ acquisitions of these companies over the 8- President. We have, of course, the ters and those of the Federal Trade Commis­ year period. The index fer the 1,000 largest Sherman Act, which was passed in 1890. was reduced from 0.639 to 0.632. For the 500 That is correct; is it not? sion is explained, so Messrs. Lintner and But­ largest the decrease was substantially ters inform us, for the most part "by the fact greater, from 0.550 to 0.534, or by about 3.. Mr. O'CONOR. That is correct. that the Commission anaiyzed primarily data percent as compared to the-increases oI about Mr. DONNELL. July 2, 1890, as I note on the numbers of mergers whereas our [i.e., 1 percent for all manufacturing and mining from the book, is the date of that act. Messrs. Lintner and Butters'] "analysis also as a whole. It is a fact, is it not, that there has been takes full account of the size of the merged expanding interpretation of the Sher­ companies." · That appears in their article, does it man Act during many years of the deci­ Mr. O'CONOR. I must answer in the not? sions of the Supreme Court of the United negative on that point. The junior Sen­ Mr. O'CONOR.· It does. States? ator from Illinois has some observation Mr. DONNELL. Let me also ask the Mr. O'CONOR. That is true. to make concerning that article. Senator this further question. Do not · Mr. DONNELL. I am wondering Mr. DONNELL. However, will the these two gentlemen say in their article: whether the Senator would care to ex­ Senator agree that I have correctly In gener-al, our findings indicate that, be­ press an opinion as to the correctness of quoted those gentlemen? cause of their large absolute size, other _this brief and succinct statement by Mr. factors, such as retained earnings and the . Mr. O'CONOR. Undoubtedly. relative availability of outside capital, have Gilbert Montague; who appeared before Mr. DONNELL. I also ask whether potentially much greater effects on concen­ the committee, his testimony being re­ the article by those two gentlemen points _ trations than mergers have had since 1940. ported, so far as this point is concerned, out that-- at page 198: For all manufacturing and mining com­ Mr. O'CONOR. The statement is cor­ For many years the Supreme Court has panies during the 8-year period, 1940-47, mer­ rectly read by the Senator. been expanding its interpretation of the gers were a much less important source of Mr. DONNELL. Is it not correct that Sherman Act. Today that act empowers the growth for large companies than for smaller the concluding two paragraphs of the Attorney General to apply to the court for companies. article by Messrs. Lintner and Butters an injunction ab initio, or criminal sen­ read as follows?- tence, or divestiture decree in respect of any Mr. O'CONOR. The Senator has cor­ ~conomic concentration, be it existing or in­ rectly quoted the article. In conclusion, the Federal Trade Commis­ cipient, whether a person, firm, or corpora­ Mr. DONNELL. Does the Senator sion correctly appraised the recent ~ merger tion, or group of them, which has power to movement in describing its outstanding raise prices, or to exclude competition, in from Maryland agree with that state­ characteristic insofar as its impact on con· . ment of fact by those two gentlemen? any section of the country, even though it centration is concerned as "• • • the ab· is only incipient, and never exercises such Mr. O'CONOR. No; I do not. sorption of s~aller, independent enterprises power. Mr. DONNELL. Let me ask -the Sen­ by larger concerns." But it drew an This was the unanimous decision of the ator also whether those two gentlemen, erroneous inference as to -the significance Supreme Court in American Tobacco Co. v. Messrs. Lintner and Butters, in their of this characteristic. Rather than promot­ United States (328 U. S. 781 (1946)), which article also state: ing concentration, this very .characteristic ex­ reiteratecj the rule that was unanimously plains why the recent merger movement has stated in the final decision of United States · Technical measures of concentration in had such slight effect on over-all levels of the asset holdings of manufacturing· and v. Aluminum Co. of America (148 F. 2d 416 concentration. . (1945)). mining companies show only a slif;ht increase The same characteristic a:lso distinguishes in concentration as a result of merger ac­ .the recent merger movement from its major Does the Senator care to express him­ tivity during 1940-47. predecessors, which were characterized by self, either as being in agreement, in Mr. O'CONOR. The article so stated. combinations in which very large corpora­ whole or in part, or in disagreement with tions acquired other very large corporations. the quoted statement of Mr. Montague? Mr. DONNELL. Let me also ask In fact, the combination of very large com­ whether the article further states as panies was the dominant characteristic of Mr. O'CONO~. I do not, of course, follows: the great waves of mergers of from 50 to 75 wish to challenge the accuracy of the (a) The total assets"' acquired through years ago which gave ••American industry its statement, but I cannot agree entirely T;:1erger or purchase during the 1940-47 period characteristic twentieth century concentra· with the conclusions reached by Mr. b V all manufacturing firms with assets of tion of control." Such combinations also Montague. It is true that in recent 1950 CONGRESSIONAL RECORD-SEN.ATE 16439 years the Supreme Court has amplified law of the land, there is, generally speak­ might do if he were not connected with the law; but it is also true that the ing, no justification for so enlarging the such a commission. I mean no reflec­ Court has pointed out on a number of powers of an administrative body to en­ tion upon Mr. Kelley in so stating. occasions, as the President of the United able it to perform the duties of the court. Mr. President, will the Senator from States l:as pointed out, and as the Sen- So, Mr. President, in answer to the Maryland yield for a further question? ator from Wyoming and other Senators Senator from Wyoming, I may say, first, Mr. O'CONOR. I am very pleased to have pointed out, that it is desirable- that the powers of the law under the yield. and that is the aim of this bill-to strike Sherman Act should be invoked, when­ Mr. DONNELL. I ask the Senator at impending combinations in their in- ever there is either an actual or an in­ whether, in the Sherman Act, there are cipiency, rather than to wait until a cipient or a threatened violation of law; two se.ctions, one of which, section 1, monopoly has been established and then and, in the second place, in answer to reads m part: · , attempt to break it up. the second question of the Senator from Every contract, combination in the form Mr. DONNELL. Mr. President, will Wyoming, there is every reason to rely of trust or other, or conspiracy, or restraint the Senator yield further? upon the courts, rather than to vest in of trade or commerce among the several Mr. O'CONOR. I am very glad to an administrative body this vast power, States or with foreign nations, is declared to yield. which to my mind, in the cases cited, be illegal. Mr. DONNELL. Does not the Senator can be administered properly by the Mr. O'CONOR. That language ap­ agree with Mr. Montague that today the courts. pears in the act. Sherman Act, under the existing deci- Mr. President, will the Senator from Mr. DONNELL. Does not the Sena­ sions, I may say, empowers the Attorney · Maryland yield for a further question? tor take the view that the provision of General to apply to the Court for an in- Mr. O'CONOR. I am very glad to section 1, which I have read, declaring junction ab initio, in respect of any eco- yield. illegal every contract, and so forth, in nomic concentration, be it existing or Mr. DONNELL. I .ask the Senator restraint of trade or commerce among incipient? whether .we had the privilege also of the several States or with foreign na­ Mi. O'CONOR. The Sherman Act, as hearing from Hon. William T. Kelley, tions, includes within its scope any tend­ it stands today, is not an effective in- general counsel of the Federal Trade ency toward the acquisition of assets strument against mergers and acquisi- Commission, during the hearing before tending to substantially lessen, hinder, tions, unless the merger brings into the our committee. or prevent competition? hands of one company virtually com- Mr. O'CONOR. We did. plete control over an industry, and even Mr. DONNELL. Referring to page 21 Mr. O'CONOR. I find it difficult to there its effectiveness is doubtful. of the hearings, I ask the Senator agree with the Senator. In the Sher­ Mr. O'~AHONEY. Mr. President, will whether Mr. Kelley said this: man Act cases to which the Senator has referred an essential element of the ille­ the Senator from Maryland yield so that It was more than 20 years after the pas­ ! may ask a question of the Sena- sage of the Sherman Act before the Supreme gal monopoly or monopolization charged tor from Missouri, who quoted from Mr. Court fashioned it into an effective instru­ in these cases is the existence of a com­ Montague? ment for ,the physical dissolution of indus- bination or conspiracy to acquire and Mr. O'CONOR. I am glad to yield for trial monopoly which had taken the form maintain the power. to exclude competi­ that purpose. ' of consolidated corporate power. tors to a substantial extent. Mr. O'MAHONEY. Does the Senator Mr. O'CONOR. That is a correct For example, in the Tobacco case, the from Missouri believe that it was the reading of Mr. Kelley's testimony. Court stated that "an indispensable in­ opinion of Mr. Montague that the power Mr. DONNELL. In other words, I take gredient of each of the offenses charged of the Supreme Court to issue injunc- it the Senator would agree with me and in the formation is a combination or tions to prevent ab initio monopolistic with the statement of Mr. Montague as conspiracy." combinations should be used? to the expanding interpretation of the But while the offense of combination Mr. DONNELL. I have no means of Sherman Act which has been in progress .or conspiracy can, of course, be reached knowing the intent or desire of Mr. during these years, and would agree with under the Sherman Act, that law is in­ Montague. All I know is what he has Mr. Kelley, whose experience has been effective with respect to mergers and stated as to the effect of decisions; and very vast, I have no doubt, that it was acquisitions. Moreover, I wish again to I was very much struck by the clarity more than 20 years after passage of the emphasize that the method proposed by of thought of Mr. Montague as he gave Sherman Act before the Supreme Court the pending bill is preferable in that it his statement upon the stand. fashioned it into the effective instrument will reach incipient combinations before Mr. O'MAHONEY. He is a very good to which Mr. Kelley refers. they achieve the stature of a monopoly. lawyer. I have known him for many Mr. O'CONOR. In answer to the Sen­ Mr. DONNELL. :But if the Senator years. I have engaged in debate with ator, I may say that that is a correct will yield further, he does agree, does he him upon occasion. So, may I now, statement of Mr. Kelley's experience not, that the Sherman Act, under the with the indulgence of the Senator from and of his knowledge of the subject. I construction of the Court in these vari­ Maryland, ask the Senator whether it may add that Mr. Kelley testified very ous cases over the years, would enable is his belief that the power of the strongly in favor of this bill. He does an asset acquisition if it involved any Supreme Court described by Mr. Monta- not feel that the Sherman Act, as it substantial lessening or· hindering or gue should be used to prevent monopo- stands, will halt mergers, even though suppression of competition to be re­ listic mergers? they substantially lessen competition. In strained by injunction or to be punished · l\ir. DONNELL. In my judgment, it other words, the gentleman to whom the if consummated? should. • Senator refers is a stanch advocate of Mr. O'CONOR. Again I find it diffi­ Mr. O'MAHONEY. Then, if the Sen- this proposed change in the law, and, as cult to agree with the Senator. ator believes that monopolistic mergers he is general counsel for the Federal Mr. DONNELL. Will the Senator state should be prevented by such injunction, Trade Commission, we think he is in whether or not in the case of Shotkin v. what objection can there be to providing excellent position to voice an opinion as Company <0 71 Fed. the people with the additional protection to the need of improvement of the law. 2d) 230 U. S.) the Circuit Court of contained in the pending bill? Mr. DONNELL. I may say, if the Sen­ Appeals of the Tenth ·circuit, decided . Mr. DONNELL. Mr. President, if the ator will permit, that I thoroughly con­ December 30, 1948, the defendants were Senator from Maryland will permit me, cur in his observation as to the oppor­ charged under sections 1, 2, 3, 7, and 15 my answer to that, in part, is that the tunity which Mr~ Kelley has of forming of the Sherman Antitrust Act, and the Sherman Act proceeds through the ar: opinion; and I may say that Mr. court said: courts. Injunction is a remedy given by Kelley's. vast experience, of course, is Regardless of the intent of the parties, if a court of equity. The bill at hand very impressive. I might, if I may do so the inherent tendency of the combination, l,mdertakes, however, to enlarge the pow- without presumption, say that I think agreement, or concert is to lessen, hinder, or ers, not of a court but of an adminis- there is a natural human tendency on suppress competition in interstate commerce, trative bqdy, namely, the Federal Trade the part of a person who is connected 1t comes within the sweep of the act. Commission. I have endeavored in my with a governmental commission to look Mr. O'CONOR. That is one of the minority views to point out that where with more favor upon an extension of cases referred to by the Senator from a court can effectively administer the the powei: of the commission than he Missouri which was emphasiz.ed during 16440 CONGRESSIONAL RECORD-_ SENATE DECEMBER 12 the hearings on the bill, and I am confi­ Missouri do not give any cause f Ol' alarm, Missouri I should like to ]."ef er to the dent that the exact language, which, of because until and unless the sale of charts which I have before me. course, I do not have before me, is as read assets would have the effect of substan­ Mr. DONNELL. If the Senator would by the Senator from Missouri. tial~y · lessening competition or tending permit me to continue for only a -moment Mr. DONNELL. I assure the Senator to create a monopoly, the provisions of with the particular point to which I re­ that it is. the proposed measure would not apply f erred, I think it would be more con­ Mr. President, may I at this point have and the Federal Trade Commission nected in the reading of the RECORD unanimous consent to insert in the REC­ would not interfere. in other words, the than if it were to follow the line of in­ ORD certain language from the minority individual, such as has been described by formation which. the Senator , from views which I have filed? the Senator from Missouri, should have Maryland is about to give us. The PRESIDING OFFICER