with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the Commission, Authority, or Board. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person, and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the Commission, Authority, or Board. The findings of the Commission, Authority, or Board as to the facts, if supported by substantial evidence, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the Commission, Authority, or Board, the court may order such additional evidence to be taken before the Commission, Authority, or Board and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission, Authority, or Board may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by substantial evidence, shall be conclusive, and its recommendations, if any, for the modification or setting aside of its original order, with the return of such additional evidence. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided in section 1254 of title 28, United States Code.

"Any party required by such order of the Commission, Authority, or Board to cease and desist from a violation charged may obtain a review of such order in said United States court of appeals by filing in the court a written petition praying that the order of the Commission, Authority, or Board be set aside. A copy of such petition shall be forthwith served upon the Commission, Authority, or Board, and thereupon the Commission, Authority, or Board forthwith shall certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court shall have the same jurisdiction to affirm, set aside, or modify the order of the Commission, Authority, or Board as in the case of an application by the Commission, Authority, or Board for the enforcement of its order, and the findings of the Commission, Authority, or Board as to the facts, if supported by substantial evidence, shall in like manner be conclusive.

"The jurisdiction of the United States court of appeals to enforce, set aside, or modify orders of the Commission, Authority, or Board shall be exclusive.

"Such proceedings in the United States court of appeals shall be given precedence over cases pending therein, and shall be in every way expedited. No order of the Commission, Authority, or Board or the judgment of the court to enforce the same shall in anywise relieve or absolve any person from any liability under the antitrust Acts.

"Complaints, orders, and other processes of the Commission, Authority, or Board under this section may be served by anyone duly authorized by the Commission, Authority, or Board, either (a) by delivering a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served; or (b) by leaving a copy thereof at the principal office or place of business of such person; or (c) by registering and mailing a copy thereof addressed to such person at his principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same." Passed the House of Representatives August 15, 1949.

Attest:

RALPH R. ROBERTS, Clerk.

STATEMENT OF HON. HERBERT R. O'CONOR, UNITED STATES SENATOR FROM THE STATE OF MARYLAND

Senator O'CONOR. At the outset I desire to read a statement by me and then there will be other statements made by members of the committe and by one or more Members of the Senate, who, although

not being members of the committee are vitally concerned with this legislation. The statement that I desire to make is as follows:

In opening hearings on the proposed bill to amend sections 7 and 11 of the Clayton Act, H. R. 2734, I desire to indicate what is the purpose and attitude of the subcommittee as it affords this opportunity to proponents and to opponents of this legislation to be heard.

We will maintain open minds until the conclusion of these sessions, welcoming any constructive suggestions or criticism. Doubtless a brief review of the history will enable us to gain a better perspective of the development and character of this legislation.

The original idea of enacting legislation modeled along the lines of the present section 7 of the Clayton Act apparently came largely from two principal causes:

First. The great consolidation and merger movement which saw the creation of many enormous trusts and monopolies and aroused great public concern and interest in the problem; and

Second. The dissatisfaction of Congress with the rather cumbersome procedure of antitrust enforcement represented by the dissolution of the so-called trusts.

Congress obviously felt that if an effective antitrust policy was to be followed, it made much more sense to prevent a monopoly from ever being created in the first place, than to wait until the monopoly had developed and then trying to break it up.

The debates in Congress on the means of preventing the creation of monopolies represents an extremely significant chapter in the history of the attempts by the representatives of the American people to preserve freedom in the economic world. In passing the Clayton Act in 1914, containing section 7, Congress made quite clear the purpose it had in mind.

Regardless of how clearly this intent was expressed, the hard fact remains that it has never been achieved. Shortly after the passage of the Clayton Act in 1914, it was discovered that there existed a wideopen loophole in section 7.

Although Congress had given the Federal Trade Commission the power to prohibit monopolistic mergers which took place through the purchase of stock, the act said nothing about assets. Accordingly, in the early twenties, corporations found a way to avoid the intent of the act by buying up assets rather than, or in addition to, stock.

Shortly after the assets loophole had been discovered, a number of cases in which the Federal Trade Commission had acted to prevent stock acquisitions were taken into court. The Supreme Court in 1926 decided against the Commission by a 5 to 4 vote. The practical effect of these decisions, which were supplemented by a further decision in 1934, was to deprive the Commission of its powers to prevent stock acquisitions which were followed by asset acquisitions.

In effect, the Supreme Court held that the Commission had no power to order a divestiture of assets even though the Commission has issued its complaint but not concluded its case before the merger of assets had been effected (Federal Trade Commission v. Western Meat Co.; Thatcher Mfg. Co. v. Federal Trade Commission; Swith & Co. v. Federal Trade Commission, 272 U. S. 554 (1928); ArrowHart & Hegeman Electric Co. v. Federal Trade Commission, 291 U. S. 587-598 (1934).

The Federal Trade Commission's answer to these decisions was to come to Congress in 1927 and seek a new law which would close the assets loophole. The Commission has regularly repeated its request until 1947, nearly a quarter of a century.

It is important to note the distinction which the Commission made between indirect and direct acquisitions of assets. The former are those in which stock is acquired first and the stock so acquired is then used to effect a transfer of assets. The latter are those in which assets are acquired in the first instance, without the stock being touched at all.

It is important to note that any reversal of the unfavorable Supreme Court decisions would only have corrected the situation insofar as indirect acquisitions are concerned. In no way would it have altered the situation with respect to the direct purchase of assets. It is not contended that the Commission under any possible construction of section 7 has the power to prohibit asset acquisitions which are not accompanied by stock acquisitions.

Thus, if there had been a reversal of the Supreme Court decisions, the acquiring companies would presumably have dispensed almost entirely with the purchase of stock and would have made practically all of their mergers through the direct acquisition of assets, with the result that the law would have remained a nullity. Consequently, it can be seen that the problem can be met only by legislative, not judicial action.

In recent years the importance of this matter has been repeatedly stressed by the Federal Trade Commission in calling the attention of Congress to the facts that between 1940 and 1947 some 2,500 formerly independent industrial firms disappeared as a result of mergers and acquisitions; that the asset value of these firms amounted to some 5.2 billion dollars, or roughly 5.5 percent of the total assets of all manufacturing corporations; and that by far the great bulk of these mergers has consisted not of the combining together of small companies but rather of the purchase of small companies by large corporations.

On this last point it is pointed out that more than 70 percent of the total number of firms acquired during this period have been absorbed by larger corporations with assets of $5,000,000 or over. The other half of this picture of large corporations taking over small firms is revealed by the fact that 71 percent of all the firms bought out since 1941 were smaller companies with assets of less than $1,000,000. Some 33 of the Nation's top 200 corporations have bought out an average of more than 5 companies, each, during this period, and 13 have purchased more than 10 companies, each.

Owing in considerable part to mergers and acquisitions, the Nation is now confronted with an extraordinary level of economic concentration. In a report on the concentration of productive facilities issued a few weeks ago, the Federal Trade Commission found that in 1947 the 113 largest manufacturing corporations owned 46 percent of the net capital assets of all manufacturing enterprises, both corporate and noncorporate.

The three largest firms held 100 percent of the net capital assets in the aluminum industry; 95 percent in the tin-can industry; 92 percent in linoleum; 88 percent in copper smelting and refining; 78 percent in

cigarettes; 72 percent in distilled liquors; 71 percent in plumbing equipment and supplies; 70 percent in rubber tires; 68 percent in biscuits and crackers; 67 percent in agriculture material and machinery; 64 percent in meat products; 57 percent in glass and glassware; 56 percent in dairy products; and similar high proportions in other industries.

In concluding this brief résumé of the history of the legislation, there is one particular point which I think warrants comment. Concerning that point, we might also have the benefit of the thinking of well-informed persons who are present and who, I am sure, will participate in this hearing.

I have received a number of letters, as also has Senator Donnell and others, from small concerns objecting to this bill on the grounds that it would prevent two small firms from merging together.

On this point I think it is worth bearing in mind the following considerations. First, as I have already indicated, the facts reveal that the great bulk of the mergers which have taken place in recent years have consisted of the absorption of a small company by a large company; the cases of two small companies merging together are few and far between.

Second, the bill is aimed at preventing only those mergers which substantially lessen competition or tend to create a monopoly. Obviously, those mergers which enable small companies to compete more effectively with giant corporations generally do not reduce competition but rather intensify it.

Third, by a specific action, Congress has made it abundantly clear it is not the purpose of this law to prevent mergers of this type. Thus the original wording of section 7 of the Clayton Act which, with regard to stock, is now on the statute books prohibits a corporation from acquiring a competitor

Where the effect may be to substantially lessen competition between the corporation whose stock is acquired and the corporation making the acquisition.

Had this language been rigidly interpreted, it would have had the effect of preventing any company from buying the stock of any competitor since the acquisition by one firm of a competitor not only "substantially lessens" but completely eliminates the competition which had formerly existed between them.

In the bill before us, this stringent prohibition has been completely deleted. Instead of making the test of the law the effect of an acquísition on competition between the acquired and the acquiring com panies, the proposed bill substitutes the more general test of the effect: on competition generally in any line of commerce in any section of the country. And to come within the prohibition of the bill, the effect on that competition must be "substantial."

In view of the stringent wording of the law relating to stock acquisitions now on the statute books, I can certainly understand the fears and apprehensions on the part of small-business men that the same test might be applied to asset acquisitions. But the action of Congress, as contained in the proposed bill, of specifically eliminating this stringent test in respect to both stock and asset acquisitions, assuming, of course, that that is to occur, and basing our statement on what is intended-should have the conclusive effect of placing mergers of small companies with each other outside the prohibition of this bill,

thus eliminating entirely the basis for apprehension among smallbusiness men.

That is my statement.

Noting the presence of the distinguished senior Senator from Wyoming, who is so outstanding on this as well as other matters, matters of legislation, we would be most happy to have the benefit of the counsel and advice of Senator O'Mahoney.

STATEMENT OF HON. JOSEPH C. O'MAHONEY, UNITED STATES SENATOR FROM THE STATE OF WYOMING

Senator O'MAHONEY. Thank you, Mr. Chairman, for those kind words.

May I say that after listening to your statement I feel that you have adequately covered this problem. However, I wish to make a statement, because I have been interested in this legislation for many years. I was Chairman of the Temporary National Economic Committee which conducted the study of the concentration of economic power beginning back in 1937, and which filed its report on March 31, 1941, making certain recommendations for the preservation, as we thought, of the American system of free private, competitive enterprise. That report was filed on March 31, 1941. We were moving then into the war when the TNEC final report was filed, and the attention of Congress and the country was then confined largely to the problems of preparation for war and shortly thereafter by the actual conduct of So the recommendations of that committee were pushed aside in 1941, and they have not been enacted into law.

the war.

Because those recommendations have not been enacted into law, the progress of economic concentration has gone on until, as you stated just a moment ago, Mr. Chairman, the Federal Trade Commission has been able to report that 113 manufacturing corporations now control 46 percent of the manufacturing assets of the whole United States. That is not surprising when you consider some of the other facts which have been presented to the attention of the public and the Congress.

The TNEC made its findings of concentration almost 10 years ago. I do not want to refer to those findings now, but I do want to call attention to the fact that the Committee on Economic Development, which is a private organization of private businessmen, which has nothing to do with the Government but is composed of men who are interested in the preservation of the free-enterprise system, procured the services of Dr. A. D. H. Kaplan, of Brookings Institution, who prepared a book on small business. It was published by McGraw-Hill, and I think it is well worth the attention of any person who is at all interested in our problem of economic development.

On page 25 of that book, as I recall it, there is presented a table which shows that out of something like more than 3,000,000 business enterprises in the United States, some 26,900, which constitute less than eight-tenths of 1 percent of the total number of business enterprises, employ 52 percent of all the workers. It seems to me that the inference is clear from that statement of facts, which comes not from any Government agency, or from any committee of Congress, but from an author who is associated with the Brookings Institution and with the Committee on Economic Development, that economic power is alarmingly concentrated in a few hands in the United States.