« PreviousContinue »
We have not specified how much the appropriations for the Antitrust Division and the Federal Trade Commission should be increased. This is the prerogative of the Senate and House Appropriations Committees who can judge not only the need, but the amount of increase which each agency can use most effectively. It is urged however, that the appropriations for the next fiscal year devoted to antimerger work be substantially increased over the current rate of expenditures for that purpose. This will not necessitate a like increase in the agency's total budget, if operating efficiency can be increased and less important work postponed.
3. The final recommendation is that the Attorney General and the Secretary of the Treasury order a joint study of the tax laws to determine how these laws can be brought into harmony with the policy of the antitrust laws in respect to mergers. When such a study is completed it is suggested that a report of it, together with recommendations, be transinitted to Congress for appropriate action. We also urge the Treasury Department to examine its rulings and administration of the tax laws for the purpose of taking such action within present authority to accomplish the objective of harmonizing antimerger policy with tax policy.
We are mindful of the difficulty this task presents because of the need for tax revenues to support Government expenditures and balance the budget. Sound fiscal policy is essential to national welfare, but so is a sound economic competitive system which produces the revenue the Government needs. It is illogical and wasteful for one governmental agency to spend public funds to prevent harmful mergers while another encourages such mergers. Today, tax implications play an important role in whether parties merge their resources. It is not practical to ignore this fact in carrying out the national policy against harmful mergers.
Respectfully submitted by National Association of Retail Grocers, 360 North Michigan Avenue, Chicago 1, Ill.
Officers and directors: A. V. Hokanson, president, Chesterton, Ind. ;
Ray Cowperthwait, treasurer, Bushnell, Ill. V. L. Browner, past president, Des Moines, Iowa ; W. H. Crawford, director, El Monte, Calif.; Scott Detrick, director, Louisville, Ky.; R. C. Houlihan, director, Fort Worth, Tex.; F. N. McCowan, director, Moscow, Idaho; 0. A. Swaringen, director, Concord, N. C.; Henry Bison, associate counsel, Washington, D. C.; Marie Kiefer, seröretary
manager, Chicago, Ill. Mr. Bison. It covers all the important and significant acquisitions taking place in this industry in 1955, and shows that in that year alone 9 firms acquired 1,422 food stores operated by some 20 local concerns. The estimated annual sales volume of these 1,422 stores is $1.2 billion.
The economic effects of harmful mergers in the retail food field, and suggested steps for preventing substantial injuries to competition are presented in this report. Since this statement referred to covers some 25 pages, I will not read it, but request that you give it your attention.
Mergers in retail food distribution dropped from over 1,400 stores acquired in 1955 to almost 400 stores in 1956. The principal reason for this drop is that in 1956, there was no acquistion of the magnitude that took place in 1955 when W. Garfield Weston and Associates purchased 23 percent interest in the National Tea Co. National Tea at that time operated approximately 769 stores in almost 400 cities in 13 States across the central part of the United States. At any time another large acquisition similar to that between Weston and National Tea can take place. There is no reason to conclude that the threat of harmful mergers in this industry has diminished because of the decrease of markets acquired in 1956 as compared to the year earlier.
I should like to comment very briefly on the fact that the Federal Trade Commission does not, under the Clayton Act, have the power to stay a merger until administrative proceedings are terminated.
The Commission does not have the power under the Clayton Act to ask the court for interluctory relief by way of an injunction to preserve the status quo until it can be decided whether the merger violates the law.
Yet, the startling fact is that a private person can--by appealing to the courts of equity-obtain injunctive relief against threatened loss or damage arising out of a violation of the Clayton Act. If a private person protecting his private rights has such power, it is inconceivable that an agency of the Federal Government charged with the enforcement of the antitrust laws should remain without this power in the performance of its duties to protect the public interest. As we stated in the report just handed to you:
The wisdom in giving the Federal Trade Commission this additional power is obvious. The intent of the law is to prevent injuries to competition that arise out of harmful mergers. Once the acquired company is swallowed up and disappears, it is practically impossible to restore preexisting competitive conditions. Pending a determination of their illegality, the Commission should have the power to prevent harmful mergers from taking place, or where they have taken place, to prevent insofar as possible the competitive injury that will result. At present, the Department of Justice has authority similar to that which is recommended here for the Commission. Because of the divided responsibility in preventing harmful mergers between these two agencies, it is desirable that the Commission have as much authority in this field as the Department of Justice does.
A second point worthy of consideration is the recommendation that the Clayton Act 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.
This recommendation was made by the President's Cabinet Committee on Small Business in a progress report issued on August 7, 1956. It was strongly endorsed in the Republican platform approved by the party at its national convention last August. The Democratic platform covered the same matter when it pledged affirmative action to curb corporate mergers contributing to growth of economic concentration.
A great many of the mergers that have taken place in this industry involve the acquisition of local concerns operating retail food markets. Whether the provisions of the Clayton Act cover such mergers is not clear. This doubt should be cleared up. The power of the Federal Trade Commission and the Department of Justice to take appropriate action in mergers where either party is engaged in interstate commerce should be made explicit. Otherwise many mergers in the retail food industry may be permitted, despite their harmful effects on competition. When Congress passed the Celler Act in 1950, it amended the Clayton Act to prohibit harmful effects on competition in any line of commerce in any section of the country.". If the words “ "in any section of the country," are to be given full force and effect as intended by Congress, an acquisition by an interstate concern of a local or intrastate business must clearly come under the jurisdiction purview of the Clayton Act.
I should like to comment on the fact that despite the large number of mergers that have taken place in retail food distribution, the Department of Justice and the Federal Trade Commission have yet to file the first action to restrain an acquisition in this field. Several possible conclusions may be drawn from this fact : (a) None of the mergers involve either a probable or an actual substantial injury to competition and hence not even a prima facie case can be made out proving that any of them violate the law; (b) the jurisdiction of the law is not broad enough to cover some mergers of potentially harmful competitive effects where the business acquired, although of considerable importance in a particular market, is 'nevertheless operated within a single State and not in the course of interstate commerce; (c) both the Department of Justice and the Federal Trade Commission have failed to do a good job in enforcing the Clayton Act.
Frankly, we cannot say which of these conclusions is correct. Perhaps to some extent all three have an application. But this much is certain. The fact that no suit has been filed by the Government to stop a merger in retail food distribution, even though within the last 2 years almost 1,800 food markets have been acquired through merger acquisitions, has led many people in the industry to conclude that none of these acquisitions has had or will have harmful competitive effects.
You gentlemen of the committee acquained as you are with the administration of the antitrust laws and the practical problems connected with their enforcement, know full well that the failure of the Government to file a merger case in retail food distribution can mean any number of things.
However, since the lack of action by the antitrust enforcement agencies is interpreted as giving the distribution branch of the food industry a clean bill of health, the climate is conducive to an increase in merger acquisitions of retail food markets across the country. This is a good sign that the worst is yet to come. For this reason there is an urgent need for legislation strengthening the law preventing harmful mergers as well as for better enforcement of the law.
I cannot conclude my statement without saying that one essential element of an effective program to prevent harmful mergers in retail food distribution is passage of legislation to strengthen the RobinsonPatman Act. A bill, H. R. 11, which will do this is pending before your committee now.
Today harmful discriminatory practices are rampant within the food distribution industry. The weapon used by large coercive buyers to obtain preferential-discriminatory prices from suppliers is buying power. It is the abuse of this power that makes it possible for buyers to extract special preferential treatment from manufacturers and processors. The threat by buyers of taking their business elsewhere or throwing the supplier's products out of their stores is what makes for harmful discriminations.
The prevalence of such practice in the distribution of food and groceries puts a premium on increasing buying power by food retailers. Without that they cannot very easily force concessions from their suppliers. Unfortunately the Robinson-Patman Act, as interpreted today, permits discriminations to meet competition irrespective of the fact that they may tend to create a monopoly: For this reason, among others, the act is ineffective in preventing harmful discriminations, and results in encouraging mergers by food retailers who know that with the discriminations going on today, the retailer who does not have substantial sales and a considerable number of stores will be
handicapped in pressuring suppliers to give him discriminatory price preferences in line with those other competitors are receiving.
In other words, one of the causes of the merger trend in retail food distribution today is the necessity to increase purchasing power as a defense against competitors coercing price advantages from suppliers. This is why we urge a strengthening of the Clayton Act to prevent both mergers and discriminations that tend to injure competition substantially and create a monopoly.
If there are any other organizations or individuals that wish to present their views they may do so and the record will be kept open for a brief period for that purpose.
The committee will meet Wednesday next for preliminary consideration on this bill and we will welcome every organization that wishes to submit any suggested changes.
We will put in the record at this point statements submitted by the following organizations : Allied States Association of Motion Picture Exhibitors American Merchant Marine Institute American Hotel Association American Research & Development Corp. Arthur A. Burck, Esq. California State Chamber of Commerce The Chicago Bar Association Commerce and Industry Association of New York Committee on Corporate Law of the Association of the Bar of the City
of New York
ALLIED STATES ASSOCIATION
Washington 6, D. C., March 13, 1957. Re hearing on H. R. 2143, to amend the Clayton Act by requiring prior notification
of corporate mergers, etc. Hon. EMANUEL CELLER, Chairman, Committee on the Judiciary,
House of Representatives, Washington, D, C. DEAR MR. CHAIRMAN: I regret that the postponement of the hearing on this bill until March 22 will deprive me of the privilege of appearing before the Antitrust Subcommittee to endorse the bill's objective and to propose one important amendment.
Your staff has indicated over the telephone that it will be proper for me to submit a statement for inclusion in the record and such statement is attached hereto.
It is fortunate for the country that the Judiciary Committee is headed by one who has given such extensive study to and has such a thorough grasp of the antitrust laws as yourself. This bill is a salutary one and it reflects your anxiety over the trend toward concentration in finance and industry which threatens the competitive system.
I know that you want the legislation to be as effective as it is possible to make it and I hope, therefore, that my suggestion that the bill be amended to include acquisitions of businesses as well as acquisitions of capital stocks and physical assets, will have your personal attention. With high regard, Yours very truly,
ABRAM F. MYERS.
STATEMENT BY ABRAM F. MYERS, CHAIRMAN OF THE BOARD AND GENERAL COUNSEL,
ALLIED STATES ASSOCIATION OF MOTION PICTURE EXHIBITORS
This statement is submitted by authority of the board of directors of Allied States Association of Motion Picture Exhibitors, a national trade association of independent motion picture theater owners and operators, with an office in the Dupont Circle Building, Washington, D. C.
WE FAVOR THE BILL'S OBJECTIVE
As shown by the resolution attached hereto, the board of Allied States Association, disturbed by the recent acquisition by Universal Pictures Co., Inc. of the film distributing business of RKO Radio Pictures, is anxious that all possible efforts be made to prevent further transactions between corporations engaged in the production or distribution of motion-picture films involving the acquisition by one of the capital stock, physical assets or business of another.
It goes without saying, therefore, that the association I represent strongly favors the objective of H. R. 2143, which is to head off unlawful consolidations before they can be consummated. Based on what happened in the case of RKO and Universal we fear that the bill, unless amended, will be subject to evasion,
ACQUISITIONS OF BUSINESSES ALSO SHOULD BE PREVENTED Section 7 of the Clayton Act as originally enacted applied only to the acquisition by one corporation engaged in interstate commerce of the whole or any part of the capital stock of another corporation similarly engaged, where the effect might be to substantially lessen competition or to tend to create a monopoly.
Corporations desiring to merge took advantage of the obvious loophole in the section and, instead of acquisitions or exchanges of stock, one would simply buy the physical assets of the other.
Thirty-four years elapsed before Congress, in 1950, finally remedied this defect by making the section applicable to purchases of physical assets as well as acquisitions of shares of stock (Historical Note, 15 U.S. C. A. 18).
The transaction between RKO and Universal constitutes ample warning that unless H. R. 2143 is amended as herein suggested business consolidations will merely assume a different form and continue to be consummated in the future as in the past.
Bear in mind that Universal did not acquire a share of RKO's stock, neither did it take over that company's physical assets. It merely took over the distribution of RKO's pictures. The RKO film exchanges throughout the country were closed and hundreds of men and women who had served RKO faithfully for many years, many of whom were acquainted with no other business, were suddenly thrown out of employment.
The important result, from the standpoint of the antitrust laws, was that whereas only a few weeks ago a motion-picture exhibitor, if he could not license a picture he desired from Universal at what he thought was a proper rental, could apply to RKO to see what it had to offer. Today, so far as the exhibitors are concerned, there is no RKO.
We respectfully recommend, therefore, that the bill be amended by inserting in line 5 on page 2, after the word "assets” the words "or business” and that a similar insertion be made at other appropriate places in the bill.
AS SO AMENDED, THE BILL SHOULD BE ENACTED Amended as herein recommended so as to forestall all conceivable devices for evading its provisions, H. R. 2143 will greatly strengthen the antitrust laws without imposing undue hardships and will constitute much needed remedial legis. lation. We earnestly hope that the bill will be so amended and passed at the present session.
ABRAM F. MYERS. 90675---5---28