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 bank mergers; second, to afford enforcement officials a reasonable period of time in which to study the competitive implications of a merger; and, third, to give the Federal Trade Commission coordinate power with the Attorney General in merger cases to seek a court injunction preventing the commingling of assets, management, and productive facilities to a point where they cannot be effectively unscrambled. It will be observed that the President has submitted recommendations to the Congress in his Economic Report of 1956 and in his Economic Report of 1957 for legislation embodying principles contained in these bills. As the President stated (Economic Report, January 23, 1956, pp. 78–79):

"*** mergers have become more numerous of late and an eye, at once vigilant and discriminating, must be kept on such developments. Many mergers have a solid economic justification and serve the general interest by increasing competition; others have neutral effects; while still others place obstacles in the path of effective competition. Over the years Americans have wisely viewed excessive business concentration, or any other undue concentration of economic power, with uneasiness. To serve the basic American desire for an economy in which business opportunities are increasing and in which economic control is widely diffused, it is desirable to strengthen our antitrust laws and provide larger appropriations for their enforcement.

"Toward this end, the following revisions of antitrust legislation are recommended. 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."

Again, in the Economic Report of January 23, 1957, the President declared (p. 51):

"To perform their purpose fully, the antitrust laws require not only vigorous enforcement but adaptation to changing economic conditions***. The Congress is urged to take favorable action on these proposals * * *. [A] series of interrelated measures would strengthen the Government's ability to deal specifically with mergers: Requirement of advance notification of proposed mergers that are likely to have significant effect on competition; extension of Federal regulation to cover bank mergers by asset as well as by stock acquisition; application of the Clayton Act to mergers where either party is in interstate commerce; and authorization of the Federal Trade Commission, in merger cases where it believes violation is likely, to seek a preliminary injunction before a complaint is filed."

We now have before us three distinguished representatives of the administration.

Mr. KEATING. Mr. Chairman, may I make a short statement before we proceed?

The CHAIRMAN. Certainly.

Mr. KEATING. Since 1949 the number of corporate mergers each year has been generally increasing. This trend of mergers, however, may or may not be harmful to private competitive enterprise. I would like to read two or three sentences from the report of Attorney General Brownell's National Committee To Study the Antitrust Laws:

mergers are a common form of growth; they may lessen, increase, or have no effect upon competition. A merger as such involves no necessary con

4 The President in his budget message for fiscal 1958 said (p. M19): “*** The Congress should enact legislation providing for notification to the Federal Government of proposed business mergers, and should amend the procedural provisions of the antitrust laws to facilitate their enforcement."

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 agencies 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. Han

sen.

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

TESTIMONY OF HON. HERBERT BROWNELL, JR., ATTORNEY GENERAL OF THE UNITED STATES; ACCOMPANIED BY VICTOR R. HANSEN, HEAD OF THE ANTITRUST DIVISION, DEPARTMENT OF JUSTICE

Mr. BROWNELL. 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.

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. BROWNELL. 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. BROWNELL. 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. BROWNELL. 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 te to merge?

Mr. BROWNELL. Almost all of them now are done that way. The CHAIRMAN. I think Judge Barnes testified before this mittee that that investigation was under the Sherman Act. I wond 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 misdemeanor

and so forth.

The CHAIRMAN. Under the first section, would it not have been sufficient for you to prove the restraint mentioned there

conspiracy 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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perhaps some disagreement over means, is endorsed in principle by the President, the Department of Justice, the Federal Trade Commission, and the appropriate banking agencies.

To meet this agreed-upon need for effective, but reasonable, restraints on bank mergers, I would urge this committee to proceed with enactment of this, reporting favorably on this particular legislation, without, as some people have suggested should be done, without waiting any final action on the so-called omnibus banking bill which was reported out last Monday by the Senate Banking and Currency Committee.

There is some interrelation here between these two proposals that I would like to discuss before the subcommittee this morning. The CHAIRMAN. You are referring, I think, in connection with the Omnibus Banking Bill to section 23, chapter 6, title III. Mr. BROWNELL. That is right.

The CHAIRMAN. We might put that right in the record at this point.

Mr. BROWNELL. I think it would be helpful because I want to refer to it a number of times.

(The document referred to is as follows:)

§ 23. Mergers and consolidations.

Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate with any noninsured bank or institution or convert into a noninsured bank or institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution or (3) transfer assets to any noninsured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank. No insured bank shall convert into an insured State bank if its capital stock or its surplus will be less than the capital stock or surplus, respectively, of the converting bank at the time of the shareholders' meeting approving such conversion, without prior written consent by the Comptroller of the Currency if the resulting bank is to be a District bank, or by the Board of Governors of the Federal Reserve System if the resulting bank is to be a State member bank (except a District bank), or by the Corporation if the resulting bank is to be a State nonmember insured bank (except a District bank). No insured bank shall merge or consolidate with any other insured bank or, either directly or indirectly, acquire the assets of, or assume liability to pay any deposits made in, any other insured bank without the prior written consent (i) of the Comptroller of the Currency if the acquiring, assuming, or resulting bank is to be a national bank or a district bank, or (ii) of the Board of Governors of the Federal Reserve System if the acquiring, assuming, or resulting bank is to be a State member bank (except a District bank), or (iii) of the Corporation if the acquiring, assuming, or resulting bank is to be a nonmember insured bank (except a District bank). In granting or withholding consent under this section, the Comptroller, the Board of Governors of the Federal Reserve System, or the Corporation, as the case may be, shall consider the factors enumerated in section 15 of this Act. In the case of a merger, consolidation, acquisition of assets, or assumption of liabilities, the appropriate agency shall also take into consideration whether the effect thereof may be to lessen competition unduly or to tend unduly to create a monopoly, and, in the interests of uniform standards, it shall not take action as to any such transaction without first seeking the views of each of the other two banking agencies referred to herein with respect to such question; and in such a case the appropriate agency may also request the opinion of the Attorney General with respect to such question. No insured State nonmember bank (except a District bank) shall, without the prior consent of the Corporation, reduce the amount or retire any part of its common or preferred capital stock, or retire any part of its capital notes or debentures. The CHAIRMAN. I do not think we need read it.

We will just put it in the record at this point.