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Recommendation of committee

New uncertainties

Addition to Sherman Act

THE COMMITTEE RECOMMENDS THAT THERE SHOULD BE NO ATTEMPT BY STATUTE TO FORBID DISCRIMINATIONS IN PRICES OF COMMODITIES.

So far as discriminations in price are used as means to eftect monopoly or lo restrain irade they are already within the inhibitions of the Sherman Act. Attempt at specific detinitions of such practices gives 110 new criterion or unlawlulness and instead of affording opportunity for understanding the law with cerlamy causes uneasiness which is warranteu because of new elements introduced. The provision of the House bull relating 10 discrimination in price has caused uneasiness among business men of large and of small affairs who believe that legislation in the form proposed would interfere with their ordinary business relations, and in fact their doubts would have to continue unails ered until in the course of years the Supreme Court of the United States had decided what differences in quantity made differences in price legal, what evidence would be taken as sufficient to show an intent to destroy or wrongfully 10 injure a competitor, and had passed upon other like questions. After enactment of the proposal all business men would reasonably believe that discriminations iil price which did not amount to means used for monopoly or for restraint of trade were interdicted and that thus the legislation reached situations clearly outside the operation of the Sherman Act.

To compensate the serious disadvantages of such an enactment it is not enough that nineteen States have passed legislation on the subject. Conditions within the area of a State may be so similar as to justify uniformity of prices, but there cannot be said to be any such uniformity of conditions throughout the area of the United States. In thirteen of the States the laws have been adopted since 1910, and there has not yet been such enforcement of these statutes as to alford convincing evidence of their usefulness even in the restricted areas of individual States.

State legislation

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House bill

See page 19

Discrimination in Selling Products of Mines Concerning the products of mines of all kinds the House bill contains a proposal which it enacted would initiate a new policy. Cnder penalties of fine and imprisonment, any person controlling the product of a mine which is sold in interstate or foreign commerce would be compelled to make sales to any responsible applicant who wished to make purchases for use in domestic trade. In other words, owners of mines would not be entirely free to choose their own customers.

The President in the programme outlined in his address of January 20 made no mention of this subject. The Senate bill contains no provision.

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THE COMMITTEE RECOMMENDS THAT A PROPOSAL TO COMPEL PERSONS CONTROLLING THE PRODUCT OF MINES TO SELL TO ALL APPLICANTS “WHO MAY BE RESPONSIBLE” IS WRONG IN PRINCIPLE AND UNWORKABLE IN PRAC. TICE.

No relation to Sherman Act

Such a proposal, applying to all mines regardless of size and of the nature of product, has no relation to monopoly or restraint of trade, which are the subjects of the Sherman Act. If in interstate trade a monopoly of any natural resource, such as iron ore, is created, there is already an offense under the Sherman Act.

The proposal not only goes beyond the Sherman Act but it begins a policy in which fixing of prices for commodities by governmental authority is a part.

Fixing of prices for com

modities

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Any such policy in efiect requires that all persons selling goods in interstate trade be treateu like persons who have undertaken a public service, dealing with all applicants, charging reasonable and uniform prices, and offering adequate supplies. Before any part of such a policy is undertaken, its need should be demonstrated, its effect upon small as well as large businesses should be weighed, and its validity under the limitations of the Constitution should be considered. As reports of the Geological Survey indicate that the annual product of mines approaches one billion dollars in value, the interests involved require careful deliberation before the policy is put into effect even in regard to this one branch of industry.

If the present proposal were enacted it would be provocative of much litigation and of great uncertainty. Questions would at once be made whether or not prices had to be uniform, a point on which the bill is silent. Until the courts in a protracted series of decisions had formulated tests for the responsibility of an applicant, mine-owners would run the hazard of fine and imprisonment if they refused any applicant. Even a definition of a mine would have to be judicially settled.

Effect of enactment

III

See page 19

Exclusive Contracts With reference to conditions attached by manufacturers to sales and leases of their merchandise or machines the President made no express statement in his address of January 20. The House bill provides, however, that under the penalties of the Sherman Act no sales can be made or leases entered into upon condition that the buyer or the lessee is not to buy or use the products of a competitor. The Senate bill contains no analogous proposal.

Recommendation of committee

THE COMMITTEE RECOMMENDS THAT THERE SHOULD NOT BE STATU. TORY PROHIBITION OF CONDITIONS ACCOMPANYING SALES AND LEASES TO THE EFFECT THAT BUYERS OR LESSEES CANNOT HANDLE OR USE THE PRODUCTS OF COMPETITORS.

Broader than Sherman Act

Promotion of competition

Practical effect

Exclusive-sales arrangements with middlemen are widely used by manufacturers. These arrangements can be detrimental to the public interest only when they are used as means of obtaining monopoly; when so used they now come under the prohibitions of the Sherman Act. In ordinary business practice they are not a means of monopoly, they afford manufacturers of limited resources an opportunity for representation of their goods in distant markets, and they encourage effective competition. There should be no legislative denunciation of a settled business custom used generally in situations where there is no suggestion of attempt at monopoly. If the proposal should be enacted, manufacturers would be harassed and put to added expense to the extent of ascertaining if dealers who sell their goods are in fact selling competitors' goods, and refusing to sell more goods to such dealers as in fact handle competitors' merchandise.

As to conditions attached to leases, proceedings now pending in Federal courts may be expected to result in an interpretation of the Sherman Act. (United States v. United Shoe Machinery Co. et al.) Legislation should at least await the result of this case.

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