The Commission is now authorized to accept a simple notification statement in lieu of the full registration statement on issues of securities that do not exceed $300,000 in amount. This limit has been in effect since 1945, and should be raised in recognition of the substantial increase in the price level that has occurred in the intervening years.

As a rule, the notification statement substantially reduces the legal, engineering, and accounting costs that are involved in filing a registration statement. By raising to $500,000 the amount of an issue of securities that is exempted from registration, more small and medium-sized firms would find it practical to utilize the public markets for capital. In order to prevent the proposed change from reducing protection to investors, the Commission should limit the exemption privilege to seasoned businesses and should withhold it from issuers of so-called "penny stocks."

10. That the President call a Conference on technical research, development and distribution, for the benefit of small business.

The broad purpose of the Conference would be to formulate a program under which small firms can avail themselves of up-to-date technological and managerial knowledge in this era of rapid scientific progress. The conferees should include outstanding businessmen, heads of technological institutions, heads of engineering and business administration schools, and directors of economic and business research agencies. One of the Conference's tasks would be to assess research and development aids currently available to small businesses through Government departments, State and private universities, and other private agencies. Another task would be to recommend measures for extending such aids to small firms over the whole range of management, including product selection and development, manufacturing processes, market measurement, sales promotion, cost control, etc. It would be desirable to hold the Conference early in 1957.

COMPETITION

The vitality of the American economy has depended in the past, and may be expected to depend in the future, upon the continuous infusion of new firms, new entrepreneurs, and new ideas.

In the interest of maintaining and extending free competitive enterprise, the Committee recommends:

11. That legislation be enacted to enable closer Federal scrutiny of mergers.

Some mergers serve the public interest, as when two weak firms are joined in an enterprise that can offer vigorous competition. Other mergers, however, place obstacles in the path of effective competition. For this reason, continuous and close scrutiny by the Federal Government is desirable.

The Economic Report of the President, transmitted to the Congress on January 24, 1956, contained several important recommendations with regard to proposed mergers, which require legislative action. They are as follows: "First, all firms of significant size that are engaging in interstate commerce and plan to merge should be required to give advance notice of the proposed merger to the antitrust agencies, and to supply the information needed to assess its probable impact on competition. Second, Federal regulation should be extended to all mergers of banking institutions. Combined with the requirement for advance notice, this extension of the law would give the Government an opportunity to prevent mergers that are likely to result in undue restraint of banking competition. Third, . . . the Clayton Act should be amended to make explicit the Federal Government's authority to take action in merger transactions in which either party is engaged in interstate commerce." Another helpful measure would be to empower the Federal Trade Commission to seek an injunction before filing a formal complaint, when it seems likely that a proposed merger would result in a substantial impairment of competition.

12. That procedural changes be made in the antitrust laws to facilitate their enforcement.

Two recommendations in the Economic Report of the President, cited above, are particularly urged: first, that the Clayton Act be amended so as to make the cease-and-desist orders of the Federal Trade Commission final when issued, unless appealed to the courts; second, that when civil rather than criminal proceedings are contemplated, the Attorney General be empowered to issue a civil investigative demand, compelling the production of relevant documents before the filing of a complaint, and without having to invoke grand jury proceedings.

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PAPERWORK

With regard to the burdens of paperwork the Committee recommends:

13. That wage reporting by employers for purposes of social security records and income tax withholding be simplified.

At present an employer must file five reports a year with the Internal Revenue Service on the earnings of his employees. Four are quarterly statements that are used in the administration of the social security system. Still another is used in the administration of the individual income tax. Since the latter report would suffice to meet the needs of both the Old Age and Survivors Insurance System and of the Internal Revenue Service, the quarterly reports should be eliminated.

This proposal has previously been advanced by the Internal Revenue Service, the Social Security Administration, the Hoover Commission, and the President's Budget Message. Its adoption would produce substantial savings for employers, most of whom are small businessmen. This reform would also reduce the paper work of the Government, and it would facilitate better accounting for taxable incomes.

The full advantage of a shift to annual wage reporting will be obtained only when parallel changes are made to simplify employer reports for unemployment insurance purposes. Of course, such technical changes should be carried out without modifying the standards of benefits under unemployment insurance.

14. That the Office of Statistical Standards of the Bureau of the Budget undertake a comprehensive review of the reports and statistics required of small businesses.

There are grounds for believing that some of the paperwork required of small businesses, apart from that noted above, may be superfluous, while information of great potential usefulness is not now being gathered. It would therefore be desirable to review all forms that small businesses are now required to fill out by governmental agencies. This should be done from the viewpoint of the need for such forms and the possibility of simplifying them. The importance of improving statistics on the economic position of small businesses should also be kept in mind. Such information is vital to a proper appraisal of small-business problems. Existing

statistics on the employment provided by small firms and their profits are especially inadequate. There is also a need for detailed information on governmental procurement from firms classified according to size.

IMPACT ON FEDERAL BUDGET

Apart from the tax proposals, the adoption of the recommendations presented in this Report would have very little impact on the Federal Budget.

The loss of revenue entailed by the tax proposals is estimated at about $600 million in the first year, at about $740 million in the second year, and at somewhat reduced figures in later years. It is doubtful, however, whether there need be any loss to the Treasury in the long run. For, in the first place, some of the tax proposals involve merely a deferral of taxes and, in the second place, the proposed measures would tend to enlarge the national income which is the ultimate source of all tax revenues.

FUTURE ACTIVITIES OF THE COMMITTEE

The preceding recommendations express the Committee's conclusions concerning the legislative and administrative actions that are needed to enable small businesses to improve their competitive positions and their chances of survival and growth in our evolving economy.

The Committee is continuing to investigate the economic problems of small business and to examine additional proposals for action by the Government. Among other suggestions, the Committee is studying a proposal to help small concerns attract capital by allowing investors to deduct from their ordinary incomes a limited amount of losses, in the event that losses are sustained from investments in small businesses. While much remains to be learned, the Committee has reached some firm conclusions. The evidence varies for different types of business, but it does not reveal any decline in the over-all economic significance of small business in the American economy. Nor has there been any diminution in the importance of the small entrepreneur in the maintenance of our democracy. The four million small business enterprises are serving as a dynamic influence in our system of free and competitive enterprise. They are making a vital contribution to the success of our economy. The adoption of the Committee's recommendations can be expected to enlarge this contribution.

Appendix

The President's letter of May 31, 1956, to Chairman Arthur F. Burns, establishing the Cabinet Committee on Small Business:

DEAR MR. CHAIRMAN: The important contributions made by small business concerns to the progressive spirit and vitality of the American economy have repeatedly been stressed in my Economic Reports to the Congress and on various other occasions. Such enterprises, of which there are some four million currently in operation, serve continuously as a dynamic influence in our enterprise system. It is often through them that new products and new processes are first brought into use. Equally important, it is in small concerns that many men and women find an opportunity to demonstrate their ability to serve constructively in the business world. For these and related reasons, government policies that make it easier for new businesses to be established and that foster the growth of small concerns enhance the welfare of the whole economy. The Federal Government has a number of programs now in operation that are significantly helpful to small businesses.

The Department of Commerce helps constantly in the solution of management problems for small businesses through its Office of Technical Services, Office of Area Development, Business and Defense Services Administration and Office of Business Economics.

Financial assistance is available to small concerns through the Small Business Administration.

Jointly with the Department of Defense and with other Federal departments and agencies, the Small Business Administration assists small concerns in obtaining government procurement contracts.

Many small construction companies and related businesses benefit from the home financing programs administered by the Housing and Home Finance Agency.

The Office of Defense Mobilization seeks to strengthen the production potential of small firms in our defense programs.

Through its enforcement of the antitrust laws, the Department of Justice helps maintain the competitive environment that is essential to the Nation's economic welfare.