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notations of coercion, dominance, or lack of effective competitive pressures.

In addition, mergers may ease from the market companies which have failed in the competitive struggle and thus prevent potential bankruptcies. Finally, they may spur operating economies by spreading overhead costs or enabling improved technology or management.

That is the end of the quotation from the Attorney General's Committee's report. The problem, therefore, is not what to do about the number of mergers per se. Rather, it is how to prevent those mergers which will probably substantially lessen competition or tend to create a monopoly

At present, agencies charged with the responsibility of ferreting out mergers with potential anticompetitive effects, before they occur, encounter the obstacle that corporations are under no legal obligation to inform the Government of their intent to merge. Consequently, considerable time, effort, and money are spent by these ageneies in searching newspapers and trade journals to find out whether mergers are about to occur and in collecting economic data to determine whether full-scale investigations should be undertaken. Such a system is at best imperfect and, at times, these agencies are unable to uncover an illegal merger before its consummation. When this happens, the Government is faced with the very difficult task of trying to unscramble that which has already been scrambled.

It is certainly not to my purpose in the consideration of this legislation to unduly harass corporations by requiring them to give premerger notification and other information to Government agencies in those transactions having no competitive effect. In this regard, I would like to make it perfectly clear that I intend to support amendments to this legislation which will relieve business and government of unnecessary paperwork without, at the same time, destroying the fundamental objectives of the legislation which I feel are sound.

Thank you, Mr. Chairman.

The CHAIRMAN. I just want to state, in that latter connection, that before the bill was offered that bears my name, conferences were had with the Attorney General, with the Federal Trade Commission and other responsible agencies, and many exceptions were provided for in the new bill which would cover the situations adverted to by the distinguished gentleman from New York.

We have before us several distinguished representatives of the administration, Mr. Brownell, Attorney General; a former colleague, Mr. Gwynne, Chairman of the Federal Trade Commission; and the General Counsel of the Department of Commerce, Frederick C. Nash; and accompanying Mr. Brownell we have the distinguished head of the Antitrust Division of the Department of Justice, Victor R. Hansen.

Mr. Brownell, we will be very glad to hear from you.

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Mr. BROW NELL. Mr. Chairman, members of the subcommittee, I am very glad to have this opportunity to present to you Justice Department views on two substantially similar pending bills-H. R.

"(8) Acquisition, solely for the purpose of investment of assets, other than voting stock or other voting share capital, by any bank, banking association, trust company or insurance company, in the ordinary course of its business;

“(9) Acquisition of stock, other share capital, or assets of any corporation, if the acquiring corporation, prior to such auquisition, owned directly or indirectly, more than 50 per centum of the outstanding voting stock of the corporation whose stock, other share capital, or assets are acquired, or if more than 50 per centum of the outstanding voting stock of the acquiring corporation is owned, directly or indirectly, by a corporation which, prior to such acquisition, owned, directly or indirectly, more than 50 per centum of the outstanding voting stock of the corporation whose stock, other share capital, or assets are acquired ;

"(10) Any acquisition of stock or assets which, under any specific provision of law, requires the approval in advance of a commission or board or other agency of the United States, and when so approved is exempt under any specific provision of law from the provisions of this section : Provided, however, That any commission, board, or agency of the United States which is authorized by law to approve the acquisition by one corporation of the stock or assets of another corporation where by virtue of such approval such acquisition is exempted from the provisions of this section shall promptly notify the Attorney General of any application or request for such approval.

"Except for the provisions of the two preceding paragraphs this section shall not apply to corporations purchasing stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not substantially to lessen competition.”

SEC. 2. The second and third paragraphs of section 1 of this Act shall take effect one hundred and twenty days after their enactment. The procedures for the waiver by the appropriate commission or board and the Attorney General of all or part of the notification and waiting requirements in appropriate cases and categories of cases required by the second paragraph of section 1 of this Act shall be established within one hundred and twenty days after enactment of this Act.

SEC. 3. That section 15 of said Act is amended by inserting after the first paragraph thereof the following paragraph : “Whenever the Federal Trade Commission has reason to believe

“(1) that any corporation subject to its jurisdiction is acquiring or has acquired stock or assets of another corporation in violation of the provisions of section 7 of this Act; and

“(2) that the enjoining of such acquisition or the naintenance of the status quo after acquisition pending the issuance of a complaint or the completion of proceedings pursuant to a complaint by the Commission under this section and until such complaint is dismissed by the Commission or set aside by the court on review, would be to the interest of the

public. the Commission, by any of its attorneys designated by it for such purpose, may bring suit in a district court of the United States to prevent and restrain violation of section 7 of this Act or to require maintenance of the status quo. Any such suit may be brought in any district in which the acquiring or the acquired corporation resides or transacts business. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited, and the court may make such temporary restraining order or prohibition as shall be deemed just in the premises. In any case where injunction or restraining order is granted under this paragraph, the Federal Trade Commission shall proceed as soon as may be to the issuance of the complaint and to the hearing and determination of the case."

The CHAIRMAN. Present corporate and bank merger activity constitutes one of the most ominous clouds on the economic horizon. It is playing a significant role in hastening the reduction of competition in many areas and concentrating economic power in the hands of increasingly small groups.


To illustrate the extent of the merger trend, in the industrial segment of the economy from 1951 through 1956 there took place 4,686 mergers. Of this number 2,267 comprised corporate mergers and acquisitions in manufacturing and mining alone. Not only that, in 1956, the number of mergers in manufacturing and mining set a 26-year record and proceeded at a rate of four times that of 1949. Thus, as the New York Times concluded, “the wave of industrial mergers is now more like a floodtide, so wide and pervasive has it become.”

While in a number of instances corporate consolidations have helped promote competition, many have frustrated the basic objective of the antitrust laws in the preservation of a free competitive enterprise system where economic activity is controlled so far as possible by the market and not by men.

In banking, there is also a rapidly accelerating merger trend which stands out as a major development. During the period from 1950 through 1956, for example, some 1,017 of the country's commercial banks have disappeared by way of mergers or consolidations.

Indeed, largely as a result of bank merger activity, the 100 largest, banks in the Nation today control over 46 percent of all commercial banks and more than 48 percent of all commercial bank deposits.

Furthermore, in each of a majority of the leading financial centers, a handful of banks control a predominant share of banking resources.

It is against this background that our Antitrust Subcommittee is holding hearings on the two pending bills which are similar in purpose.

In the course of these hearings all interested parties are being given opportunity to present their point of view.

The bills now to be considered combine substantially the provisions of bills introduced during the last Congress—H. R. 5948 and H. R. 9424—which passed the house of Representatives without dissent and were pending in the Senate when Congress adjourned.

The first purpose of each is to close a gap in section 7 of the Clayton Act as amended by the Celler-Kefauver Act and provide Federal enforcement agencies with the same authority to move against bank mergers accomplished by asset acquisitions as by stock acquisitions.

The second objective is to require parties to a proposed merger, whose capitalization exceeds $10 million, to notify the Attorney General and the Federal Trade Commission or other appropriate board in advance of the transaction so as to afford the agencies opportunity to assess the merger's probable impact on competition. The bills do not require advance agency approval of a merger.

Procedures are to be established by enforcement agencies for waiving all or part of the notification of waiting requirements in categories of cases where notification and a waiting period is deemed unnecessary to effectuate enforcement of the antimerger law.

The third purpose is to provide the Federal Trade Commission with authority similar to that of the Attorney General, to seek a court order to prevent consummation of a merger pending the issuance of a complaint and the completion of the Commission's administrative proceedings.

In summary, my bill, H. R. 2143, is deemed particularly important, first, to close a loophole in present antitrust legislation pertaining to

264, introduced by Congressman Keating, and H. R. 2143, by Chairman Celler.

As I understand the statements which the sponsors have just completed, both of these proposals have at least two major goals, the first one being to plug a loophole in the Clayton Act, section 7, by specifying coverage of bank assets as well as stock acquisitions; and second, to require notification to the Department of Justice or to the Federal Trade Commission or to the appropriate regulatory agency, by certain corporations before they actually enter into a merger or acquisition.

The substance of both proposals, I emphasize, was embodied in H. R. 9424, passed by the House almost unanimously last session. Enactment of both proposals, moreover, was urged by President Eisenhower in his January 1957 Economic Report to the Congress.

Therefore I come before you this morning to urge most strongly that this subcommittee and the Congress act favorably on the substance of the Celler-Keating bills.

I would like to skip, and I know you would be glad to have me skip, material that has already been considered at length by this committee, and just roughly sketch an outline of the need for the proposals that are before you, and also make some comments on arguments that have been advanced against the bills.

First, the pending bill closes a loophole which is left by the present section 7, because it fails to cover asset acquisitions by banks, so that it is, as a matter of practice, useless to cope with a situation that the Comptroller of the Currency for example has described as “this recent trend of bank mergers, consolidations, and sales."

The Chairman of the Board of Governors of the Federal Reserve System has pointed out that bank mergers “have gone up steadily.” As a result, he has stated that, the current trend of bank mergers and consolidations is a matter which deserves careful consideration and one to which the Board of Governors has given a great deal of thought.

Some mention was made of the fact that perhaps the Sherman Act is sufficient to curb this rising tide of bank mergers, but I think it has been demonstrated quite clearly in the prior hearings which you have had that the standards of the Sherman Act are less stringent and would not do the job.

The CHAIRMAN. May I ask this, Mr. Attorney General? You had an investigation of the Chase-Manhattan merger. Would it be possible for you to tell us something about that?

Mr. BROW NELL. We found we were practically helpless to do anything in that situation. That is just the nub of it.

The CHAIRMAN. Because the law as it was written was imperfect and that is why you need these changes!

Mr. BROW NELL. That is right; and the standards of the Sherman Act were not stringent enough to cover a situation of that kind.

Mr. KEATING. You mean that that merger was consummated by the acquisition of

Mr. BROW NELL. Of assets.
Mr. KEATING. Of assets ?
Mr. BROWNELL. That is right.
Mr. KEATING. Rather than by stock?

Mr. BROWNELL. That is right.

Mr. KEATING. Is that the common way now that banks use to merge?

Mr. BROW NELL. Almost all of them now are done that way.

The CHAIRMAN. I think Judge Barnes testified before this committee that that investigation was under the Sherman Act. I would like to know, if you can tell us, what happened to that investigation.

Mr. BROWNELL. It was technically under the Sherman Act; but, as I recollect, the results of the investigation by the Antitrust Division in that particular case indicated that there was not enough of a tendency to monopoly under the Sherman Act standards for us to successfully take action.

However, we think that if the proposal which is before the subcommittee this morning had been in effect, it would have given us a chance to review it with some chance of taking action.

The CHAIRMAN. If I remember correctly, under the Sherman Act all you need to prove is an unreasonable restraint of trade or restraint of trade. Isn't that all that is necessary for you to prove?

Mr. BROWNELL. I would be inclined to say that that is somewhat of an oversimplification. I think that under the Sherman Act standards, you would have to show something more than stopping monopoly in its incipiency, which is more or less the standard under the Clayton Act, and the Court decisions have been pretty clear on the fact that that was not enough for us to take action under the Sherman Act.

The CHAIRMAN. May I have read into the record that portion of the Sherman Act which I think is applicable?

Mr. MalETz. Section 1 of the Sherman Act reads in part as follows:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations is hereby declared to be illegal.

Section 2, Mr. Chairman, reads in part as follows:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanorand so forth.

The CHAIRMAN. Under the first section, would it not have been sufficient for you to prove the restraint mentioned thereconspiracy in restraint of trade or commerce among the several States.

Mr. BROWNELL. Our staff people and head of the Antitrust Division and I felt that on the facts in that particular case there was not enough on which we could proceed under either section 1 or section 2 of the Sherman Act.

So perhaps to repeat, the very objective that we have in mind this morning in asking for the amendment to section 7 of the Clayton Act is to strike at mergers which are beyond the reach of the Sherman Act.

To apply such stricter competitive standard to bank asset acquisitions, as it now does to bank stock mergers, is the first clear aim of these bills. This broad general aim I am glad to say, apart from



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