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ment agencies in your report of last year, and part of which was quoted in our statement.

I may say that I share very sincerely Congressman Keating's fears in this area of granting the Federal Trade Commission injunctive processes.

The CHAIRMAN. Well, we were not altogether critical of the liaison relations between the Federal Trade Commission and the Justice Department. On the contrary we have expressed frequently favorable comment as to the liaison between the departments.

As a matter of fact, the Chairman of the Federal Trade Commission was formerly one of the distinguished Members of Congress and a member of this committee. He testified that they have a fine working arrangement with the Department of Justice.

Mr. McCULLOCH. If I may comment, Mr. Chairman, I would like to say I am impressed by the written statement of the witness or that part of his written statement on page 7 as it applies to real-estate transactions.

If you would develop that further by letter, I would be glad if you would do that, because there is an ever-increasing tendency for business in this country to acquire mineral rights of all kinds and to sell and lease back real estate. I do not think that all of those details should necessarily be subject to the activities of these Government agencies. I would be glad if you would develop that at greater length. Mr. FARLEY. We will go into that.

The CHAIRMAN. I will state to the gentleman from Ohio, that we do have a section in there dealing primarily with office space or residential use

Mr. McCulloch. Yes; I saw that, but that is a very restrictive exception. There are so many transactions going on in business now, that involve real estate, that is much above this exemption, and then there is, for example, the iron-ore business and there are office buildings and manufacturing plants, and I think it is well to explore that.

Mr. MILLER. In other words, if I may interject, an insurance company might buy a building for investment purposes only.

The CHAIRMAN. And we have another exemption involving $2 million for real estate.

Mr. McCULLOCH. But if it involved real estate beyond that amount, then the bill as drawn would have to do with that.

The CHAIRMAN. I think, of course, the Attorney General would advise the Federal Trade Commission in these matters and he would indicate that he would not want to go into certain types of transactions. We will spell that out very carefully in detail in the report.

Mr. McCULLOCH, I like Mr. Miller's suggestion. Mr. MILLER. May I ask a question? First, I should like to concur with my colleague, Mr. Keating, in his observations.

Now, I think that it would be very valuable to the committee if you would give a memorandum on this question of the dual authority of the Federal Trade Commisison and the Attorney General's Office.

We have had all kinds of recommendations from the Hoover reports recommending the elimination of duplication and I think that the committee, in view of the economy mindedness temporarily prevailing in the country, would certainly be interested in eliminating any legislation that would create a duplication of effort on the part of Government agencies.

But now, getting back to just one part of your testimony, Mr. Crow, you

said you thought that, as a matter of fact, under the present practice, procedure, rules, and regulations and statutes, that probably there was no merger of any consequence in the country today, that the Attorney General did not already have knowledge of.

Did I understand your statement?
Mr. Crow. Yes, sir.

Mr. MILLER. Would you be willing, perhaps, to amend that statement to state that there is no merger of any consequence in the country today that the Attorney General does not know of, or could not easily ascertain or find out about?

Mr. Crow. Well, that was implicit in my statement.

Mr. MILLER. In other words, because of the notice already required by the Securities and Exchange Commission on financial matters, and the publications and so forth, it could be well said that without any legislation like this, the Attorney General's Office with any sort of diligence and inquiry could certainly ascertain the existence and contemplation of any merger of any great amount?

The CHAIRMAN. How about the Attorney General?
Mr. MILLER. I said the Attorney General.

The CHAIRMAN. As I said, there is liaison between the Federal Trade Commission and the Department of Justice

Mr. MILLER. I was talking about injunction.

One last question: I realize your association and, according to your testimony has gone on record pointblank against any premerger notification legislation or the principle involved therein; but also you have dedicated a great portion of your statement toward the waiting period, toward whatever this committee may determine is the waiting period and the authority of the Attorney General's Office to request additional relevant information within that period and so forth and so on.

Would a great part of the objections to the bill be eliminated if we attempted here to pass a bill which required upon consummation of a merger, the submission of even greater information than is now required under this bill and then put a period in the bill, and require no waiting period or no authority in the Attorney General's Office to request such additional information. Simply give the Attorney General all this information so it can be of some help to him in his future actions concerning this particular merger. If, as a matter of fact, he feels it would be in restraint of trade or tending to create monopoly, then allow the parties to proceed after the filing of the notice at their own risk with the merger?

Mr. Crow. That would be a great improvement.

The CHAIRMAN. Of course, I would emphatically oppose such a proposal. One of the purposes of the bill is to obviate the necessity of the Attorney General going in, trying to disassemble something that is thrown together. It is very difficult to divest or to separate--and the courts have been loathe to do that.

And if, according to that suggestion, a corporation could go right ahead and give the information and then take its chances with the courts, they would have a great advantage, because the courts would

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be loathe, and are loathe, at times, to create separations or divestitures. I think it would kill the very purpose of the bill.

Mr. Crow. Well, of course there, it seems to me, Mr. Chairman

The CHAIRMAN. Well, we are not the subcommittee now, and I don't think we ought to get into these details. We would be very glad to receive your statement, Mr. Crow, particularly on the revised bill and we are very grateful to you gentlemen for your contribution this morning, and we thank you very much.

Mr. FARLEY. Thank you very much.

(Subsequently, the National Association of Manufacturers submitted the following:)

APRIL 1, 1957. Hon. KENNETH B. KEATING, House of Representatives,

House Office Building, Washington, D. C. DEAR CONGRESSMAN KEATING : At the March 20, 1957, hearings on H. R. 2143, before the Antitrust Subcommittee of the House Judiciary Committee, you expressed concern with that part of the bill which proposes to grant the Federal Trade Cominission authority to seek injunctions whenever it has reason to be liere that an actual or contemplated merger might be violative of section 7 of the Clayton Act.

You indicated doubt as to "whether there is any real need, * * * for granting this injunctive power to the Federal Trade Commission.” In this regard Congressman Miller subsequently stated his desire “to concur with my colleague, Mr. Keating, in his observations.” Mr. Miller added that the committee would welcome a memorandum from me “on this question of the dual authority of the Federal Trade Commission and the Attorney General's Office." Your statement indicated a concern that, if the authority be granted, “it does not result in a race between the Justice Department and the Federal Trade Commission."

H. R. 2143, of course, has a built-in racetrack, if the agencies choose to run, since parties to contemplated mergers must notify and supply information to both the FTC and the Attorney General and since both agencies have jurisdiction.

The potential dangers of a race to the courthouse, it seems to me, are well illustrated by your subcommittee's 1955 Interim Report on Corporate and Bank Mergers. Therein, beginning on page 11, it is stated :

"Failure to invoke premerger injunctive remedies more frequently cannot be attributed to lack of legal authority. On the contrary, section 15 of the Clayton Act anthorizes the Attorney General to institute legal proceedings to prevent and restrain violations including consummation of mergers which may be in violation of the Antimerger Act ***

"The Federal Trade Commission does seem to lack express legal authority to issue a stay or to apply to the court directly for an injunction. But that does not mean the Government's hands are tied. The Commission, if it were 80 inclined, could turn over the entire case to the Department of Justice which could institute the necessary legal action to block the merger. This course the Federal Trade Commission has been unwilling to folloro because it would then have to relinquish further jurisdiction over the case. In sum, the Commission's position seems to come down to this: That it is more important that the Commission cling tightly to every case it gets its hands on than to participate with the Department of Justice in a unified coordinated effort to prevent mergers from being completed which do great harm to the competitive structure. Such zealous and jealous insistence upon maintaining agency prerogatives can hardly be justified.(Emphasis supplied.] That report was signed by Messrs. Celler, Rodino, Rogers, and Fine. Presumably it was based upon information available to the subcommittee but which is not normally available to persons outside of Government circles. In any event, it seems clear that “zealous and jealous insistence upon maintaining agency prerogatives" will inevitably trigger the starter's pistol in a race to the courthouse. To state it differently, if Congress hands the Trade Commission the gun we may rest assured it will be fired.

As indicated earlier, section 15 of the Clayton Act presently authorizes the Attorney General to seek injunctions "to prevent and restrain” violations of the act, including section 7. Section 7, of course, applies not only to mergers and acquisitions which have actual adverse competitive effects, but also to

such transactions the effect of which "may be" substantially to lessen competition or tend to create a monopoly. In this regard it is important to keep in mind that section 15 of the Clayton Act also provides :

"When the parties complained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition, and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.” (Emphasis supplied.]

Two points in regard to the above provision should be stressed :

First, is that the parties complained of "shall have been duly notified" ; and, second, that the court shall proceed "to the hearing and determination of the case.” Thus when the Attorney General moves for an injunction, or similar relief, the matter proceeds to a trial and decision on the merits “as soon as may be."

H. R. 2143, on the other hand, proposes to authorize the Trade Commission to seek injunctions or restraining orders “to prevent or restrain” violation of section 7, whenever the Commission “has reason to believe,” (1) that a violation has or is about to take place, and (2) that an injunction against the acquisition or to maintain the status quo pending administrative determination of the issues "would be in the public interest."

As distinguished from section 15, therefore, H. R. 2143 does not require notice or provide a hearing to the parties to acquisitions thus raising the clear possibility that temporary injunctions or restraining orders may issue as a result of ex parte proceedings.

Another distinguishing feature of H. R. 2143 is that the court does not hear and decide the legality of the questioned transaction. This still remains the function of the Trade Commission in any proceeding it inaugurates. Crucial to the proposal, therefore, is the kind of showing the Commission would be required to make in order to secure an injunction or restraining order.

On the one hand, if H. R. 2143 is to be read literally, an injunction would issue on the basis of a bare showing, (1) that the transaction involved more than $10 million, (2) that the Commission has reason to believe th effect thereof may be substantially to lessen competition or tend to create a monopoly, and (3) that an injunction or restraining order "would be to the interest of the public.”

That this interpretation of H. R. 2143 is not pure speculation is, in my judgment, demonstrated by Federal Trade Commission v. Rhodes Pharmacal Co. (191 F. 2d 744) (CA 7, 1951), brought under section 13 of the Federal Trade Commission Act respecting false advertisements of food, drugs, and cosmetics. Because of the importance of the meaning of H. R. 2143 as to what would be a proper showing for a court to act, I ask you to consider the following essential elements of that court of appeals decision. In the Rhodes cases, the court held :

“It is true that there is nothing in the [Wheeler-Lea amendments to the Federal Trade Commission) Act or in its legislative history to indicate what should be considered as a 'proper showing.' We think, however, that it is fair to say that all the Commission had to show was a justifiable basis for believing, derived from reasonable inquiry or other credible information, that such a state of facts probably existed as reasonably would lead the Commission to believe that the defendants were engaged in the dissemination of false advertisements of a drug in violation of the act *** The district court was not required to find the charges made to be true, but to find reasonable cause to believe them to be

*This is to say, in the instant case, the court had only to resolve the narrow issue of whether there was reasonable cause to believe that the alleged violation had taken place.” (Emphasis supplied.]

The question of "proper showing" came to the court of appeals from a denial of a temporary injunction by the district court. The lower court felt that where there were substantial issues of fact involved, the court had no power to grant the temporary injunction. In commenting on this the court of appeals stated :

"The trial judge denied the injunction and dismissed the complaint because he was of the opinion that the verified pleadings and affidavits presented debatable questions which were not resolved by the supporting affidavits, and adjudged that “where the equities of the complaint are fully and explicitly met by denial under oath, a preliminary injunction will not be granted. While that may be the rule in private disputes which do not involve the public interest,

true *

we think that in the instant case the court failed to apply the proper applicable legal principles.” [Emphasis added.]

It is thus evident from the Rhodes case that where, as proposed in H. R. 2143, injunctive relief is provided to assist the Trade Commission in carrying out its functions, the courts have no authority to inquire into the probable outcome of a proceeding on the Commission's complaint but are limited to considering whether there is reasonable basis for the FTC's reason to believe an injunction would be to the interest of the public. Under the notice and information requirements of H. R. 2143, the Commission would have little difficulty in showing that it has reason to believe that any merger meeting those requirements might violate section 7 contrary to the interest of the public.

If H. R. 2143 is applied literally by the courts, and if the view taken by the court of appeals in the Rhodes case ultimately prevails, applications for injunctions under H. R. 2143 will be a mere formality. In practical effect the bill would transform a court of equity into a rubberstamp for an administrative agency. Moreover, in view of the well-known delay in administrative adjudications, any temporary injunction would, in most instances, preclude consummation of any proposed transaction despite the fact that it may eventually be concluded that no violation resulted. As to those transactions posing a real threat of violating section 7, the public interest would seem adequately protected if the Commission, as pointed out in this committee's interim report, supra, “could turn over the entire case to the Department of Justice which could institute the necessary legal action to block the merger."

Let us assume, however, which I cannot, that H. R. 2143 will be interpreted as (1) requiring notice and hearing, and (2) requiring the Commission, in seeking injunctive relief, to make a showing appropriate to enable the court to ascertain whether there is a reasonable probability (rather than possibility) that the merger is illegal.

Such an interpretation would result in double litigation since the Commission, to secure the injunction, would have to adduce in court the very evidence that it would use in its own proceeding to support a conclusion that the effect of the challenged transaction may be substantially to lessen competition or tend to create a monopoly. Yet the trial on the merits would have to await the convenience of the Commission since the court has jurisdiction to determine the issue only on petition by the Attorney General.

Second, this interpretation would put the Commission in the role of an advocate before the court, whether in adversary or ex parte proceedings. This would not only be in conflict with the concept that the Commission should be impartial in its own proceedings dealing with the same subject matter but would also conflict with the spirit of the Administrative Procedure Act of 1946.

To repeat, where the Commission is in possession of sufficient information to lead it to believe that a proposed transaction posed a real threat of violating section 7, we believe the public interest would be adequately protected by the Commission voluntarily turning the entire case over to the Department of Justice “to institute the necessary legal action to block the merger." Such coop eration between enforcement agencies, in addition to protecting the public interest, would not only get a prompt judicial determination of the issues but should serve to save money for both the Government and taxpayers who are parties to the litigation.

I should like to express our appreciation of your invitation to submit these additional points to supplement the views expressed in the March 20 hearings. I regret the length of this letter but felt it to be warranted by the importance of that part of H. R. 2143 discussed herein. It would be appreciated if you would cause this letter to be placed in the record of the hearings on H. R. 2143.

If we can be of further assistance in this regard, we are at your service or that of the subcommittee staff. Very sincerely yours,

HARVEY M. CROW,

Associate General Counsel. The CHAIRMAN. Our next witness is Mr. Charles R. Howell, commissioner of banking and insurance of New Jersey, representating the National Association of Supervisors of State Banks. I might say that Mr. Howell is a former Member of the House and a

a very distinguished former Member and we always look upon him as a Member of the House-once a Member always a Member.

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