Page 625 627 Specific policy for handling problem of cutbacks was never developed. The problem never developed. Public speculation (in committee) about the difficulties that might have arisen if cutbacks had been necessary would be "unwise." Is Mr. Moline's personal opinion that problems involved in the oil lift and the operation of MEEC played no part in bringing about the Eisenhower Doctrine. List of WOC employees of the Gas and Oil Division, Department of the Interior, inserted at this point in the record. Action on rearrangement of pipelines in this country, as proposed under schedule No. 4, has in effect been suspended. This action was suspended because Mr. Wormser "discovered there was some feeling that putting this schedule into operation would spill over into the domestic area to the detriment of the domestic independents," and if it were true they did not want to use the schedule. The action proposed under schedule No. 4 would have involved an arrangement among competitors that would have been in violation of the antitrust laws, and it was this that the independents thought would have had an adverse effect on them. The individual companies had entered into some arrangements for oil shipments previous to the time schedule No. 4 was adopted, however. 629 It is Mr. Armstrong's opinion that there have been no concerted actions taken along the lines just mentioned; nor is he sure that if there had been they would have been in violation of the antitrust laws. Knows none of the details. 632 633 635 636 637 Cited plan of action as authority for drafting schedule No. 4, which would affect oil production or distribution in the United States. This authority was contained in an amendment to the plan of action dated August 10, 1956; the amendment was dated December 3. Senator O'Mahoney again raised the question of the propriety of the Government's interpretation of the Defense Production Act in establishing the MEEC and granting the members immunity from the antitrust laws. Mr. Armstrong cited section 6 and paragraph 1 of the amended voluntary agreement as authority for the actions taken. If Mr. Wormser found that schedule No. 4 would affect adversely any domestic producer or refiner he would issue an order countermanding it. Senator O'Mahoney said, "The time is ripe for such an order. ***" A memorandum subpenaed from the files of Standard Oil of New Jersey, dated January 3, reported that most of the increased shipments abroad came from withdrawals from stocks on hand. January allowables in Texas were decreased. "For example crude oil from the United States gulf for export is shown as only about 150,000 barrels a day, compared with an average of about 300,000 barrels a day during November and December." At that time, Mr. Wormser said, they were "getting apprehensive" about meeting their goal, especially in crude oil. The outlook has improved considerably since then, but there is still "an emergency abroad that indicates that we must carry on the work that we are doing so as to make sure that Europe gets through the winter season without too much impairment not only in its industrial capacity, but also in assisting NATO with the defense.' Mr. Stewart is satisfied that the information given him in January was correct. Had just received the information that Texas had increased the allowables for the month of March. Thinks there is no connection between decrease of stocks on hand and the price increase. MEEC made no representations to the Government to provide justification for price increase. Four months prior to nationalization of the Suez Canal there was concern in the Office of Oil and Gas about matters in the Middle East, and planning was begun. They had conferred with Earl Beckner in the Fuel Division of the Department of State at that time. Page 640 641 643 647 651 653 654 655 656 as Mr. Moline said the Secretary, at the high level of State, “was concerned with this particular problem. ***" Also, "Mr. Hoover, the Under Secretary and with a known competence in the field, was certainly deeply concerned. The actual direction of our interest in it in those days was left to the Counselor, Mr. MacArthur." Mr. Hoover knows oil, probably, better than anyone else in State. However, he did not participate in formulation or discussion of oil policies. State relied on Interior for necessary basic information. Senator Carroll thought it worth noting that during 1956, when there had been "so much talk of peace," there was planning for problems that might arise if there were trouble in the Middle East. Senator O'Mahoney expressed the view that the legislative power of Congress is being bypassed in the establishment and operation of MEEC and in the Middle East resolution. Discussion of methods other countries use in paying for oil. WEDNESDAY, FEBRUARY 20, 1957 Senator O'Mahoney read from the Senate report on the 1955 amendments to the Defense Production Act the section of the report dealing with exemptions from the antitrust laws. Commented on the contents of this report. Statement of Victor R. Hansen, Assistant Attorney General, Antitrust Statement of introduction. The Department's "concern with this problem stems from [its] dual responsibility: On the one hand, we are charged with enforcing our Nation's antitrust laws; on the other, we are obliged, at least since the 1955 Defense Production Act amendments, to, first, carefully review all voluntary agreements under that act; second to approve any new voluntary agreements under that act; and, finally, to withdraw approval for any agreement's antitrust exemption when, to the Attorney General's view, any agreement's anticompetitive consequences outweigh its defense benefits." Section 808 (b) of the Defense Production Act authorizes the Attorney General to approve the Voluntary Agreement for Foreign Petroleum Supply and the plan of action under it. "The basic Voluntary Agreement for Foreign Petroleum Supply, with the Attorney General's approval, has been effective since July 20, 1953-long before the 1955 amendments. ***" Remarks of Senator Frear on Senate floor highlighted "the Senate Banking and Currency Committee's intent to continue authority for this agreement." "Beyond that 1955 history, even more specific reiteration of authority for the plan of action phases of this voluntary agreement is found in the background of the 1956 DPA reenactment. ***" He also cited the original agreement as authority for the amendment to the agreement which would permit certain actions to be taken within the United States, even though there is no specific reference to it. Senator O'Mahoney believes that if the MEEC "is allowed to continue to exist, [it] should be under the strictest supervision to make it certain that these corporations which make it up shall not be permitted to employ monopolistic practices against the independent segments of the petroleum industry within the United States." Mr. Hansen, agreeing with the Senator, said, "I will cover many of the matters that you have in mind, and also the safeguards that we have included in the agreement, the plan of action, and schedules under it." It is his understanding that during the Iranian crisis actions were taken pursuant to the voluntary agreement that affected domestic operations. This was prior to the Defense Production Act amendments of 1955. Memorandum submitted by Mr. Bicks, setting forth details of these actions, inserted at this point in the record. Gave brief history of the voluntary agreement, beginning with the basic agreement effectuated in 1953, including the safeguards provided in it "at the insistence of the Attorney General." Page 657 660 661 662 666 669 670 671 675 676 XLI Exchange of correspondence between Director Flemming and Secretary Seaton, July 31, and August 1, 1956, regarding impending crisis, inserted at this point in the record. No one from the Antitrust Division of the Department of Justice had been present at the meetings between Government and industry representatives in New York in August, 1956. The proposed plan had been brought to the attention of the Attorney General's office some time prior to July 31, 1956. The Attorney General's office participated in Washington conferences on the plan. There was "almost daily contact on that matter *** from approximately July 31 until the plan was put into effect." There ensued a discussion of the part played by the Attorney General's office in the voluntary agreement and the plan of action. Judge Hansen, Mr. Bicks, and others from Justice participated in the drawing up of the plan of action, working from about August 1 to August 10. Representatives of oil companies also participated in these conferences. A report submitted to Congress by the Attorney General dated August 10, said: "In accordance with the amended plan a permanent staff of full-time Government employees is being gathered for the new Washington office. In the meantime, some of the staff formerly employed by the oil company members have been put on the Government payroll as fulltime employees. Of the two pending committee reports, one has been completed and the other is three-quarters finished." Their participation in the almost continuous consultation between August 1 and 10 "was substantially eased by the fact that our work earlier in the year on the May 8 amendments to the basic agreement had given us a close working familiarity with the problems." time, "all agencies agreed on the need for the maintenance of adequate During this safeguards.' Correspondence from Dr. Flemming and Acting Secretary of the Interior Clarence A. Davis, pertaining to the plan of action, inserted at this point in the record. would participate. Attached was a list of companies it was thought "Because of the intensive consultation during almost 2 weeks that preceded submission of the plan on August 10, the Attorney General was able to approve the plan on that same date.' " Attorney General's letter approving the plan quoted from and inserted at this point in the record. Could not mention the plan in the report to the Banking and Currency Committee because it had not been "finally formalized" at that time. Mr. Hansen knows of no letter in which the Attorney General expressed reluctant approval of the plan. However, the report of the Attorney General dated November 9, 1956, contains the following statement: "While the plan, as adopted, contains features which I might well deem objectionable in other circumstances, I have given full consideration to these anticompetitive possibilities as against the urgency of the defense considerations, and I reluctantly concluded that this plan of action should be approved." Text of the plan of action of August 10, 1956, inserted at this point in the record. List of companies that are members of MEEC and those that participated in the Voluntary Agreement Committee inserted at this point in the record. The "competitive safeguard on discussion of information embodied in the basic agreement by the May 8 amendments was carried over into the August 10 plan of action." Sales, exchanges and joint use of transport facilities among MEEC members was to be "dependent on, according to section 2 of the plan, a finding by the Administrator that: 'a substantial Middle East Petroleum stoppage' has occurred." Page 677 679 681 682 685 686 687 Secretary Wormser's first request for information from MEEC inserted at this point in the record. Letter from Secretary Wormser to the Attorney General, dated August 14, 1956, asking for his approval of the Secretary's "determination that the limitations on information-gathering set forth in section 11 of the plan 'no longer serve the national interest"" inserted at this point in the record. Letter to the Attorney General from the Director of Interior's Oil and Gas Division dated August 20, 1956, supplementing Secretary Wormser's letter, inserted at this point in the record. Letter of August 20, 1956 from the Attorney General to Assistant Secretary of the Interior Wormser approving the Secretary's "determination that the limitation of section 11 of the August 10 plan of action no longer served the national interest" inserted at this point in the record. As the plan has operated, there is free exchange of information on subjects such as production and capacity between MEEC members. Judge Hansen agreed that this could lead to what in effect would be agreements to maintain production quotas, but they had to make the decision "as to whether the national defense and national interests outweighed antitrust dangers inherent in such discussion. We have taken every possible safeguard we can to protect against this sort of thing. MEEC could not have functioned without exchange of this type of information. On November 30, after the events of late October and early November, Secretary Wormser, "as Administrator under the plan of action, found a substantial Middle East petroleum transport stoppage.' Letter from Secretary Wormser to Director Flemming, dated November 30, 1956, making this finding, inserted at this point in the record. Letters received by the Attorney General on November 30, 1956, from the Deputy Secretary of Defense, the Acting Secretary of State, the Secretary of the Interior, and the Director of ODM inserted at this point in the record. Letter from the Attorney General to the Director of ODM, dated December 3, 1956, "repeating assertions of the urgent defense need for the plan and concurring in certain amendments to the plan" inserted at this point in the record. The amendments to the plan "intended in essence that: (1) the schedules under the plan would consist of broad programs, but all individual transactions carried out thereunder would be reported in detail; (2) participation in the plan and membership on the Committee would not be limited to oil companies with foreign operations; (3) cooperative action might be taken within the United States when it was necessary to effectuate the plan and schedules issued under it; (4) the Committee and its members could participate in actions or programs requested by foreign governments or agencies designated by the Administrator subject to a requirement of full report as to the acts involved in such participation." At first "the bulk of the voluntary agreement's safeguards was carried over into the plan." Set forth those provisions. Inasmuch as Justice representatives are permitted to attend all meetings, they "have been able to conduct a day-to-day watch over the functioning of the industry groups formed under the plan.' "*** the Attorney General holds the most potent safeguard of all. The plan, as the agreement under which it is drawn, can survive only if he continues to regard its benefits as outweighing the possibility of anticompetitive consequences. And approval of this plan will be withdrawn at the first real showing that the participants are misusing the immunities from antitrust prosecution given by the agreement. In any event, approval will be withdrawn as soon as the emergency need for the plan of action ends. Page 688 689 690 691 691 693 694 694 696 697 "Another important safeguard stems from the limitation of the Administrator's designation of foreign liaison groups to those acting at the request of foreign governments and under the direction of the requesting governments." The plan permits MEEC or its members to participate "in programs requested by foreign governments or agencies of foreign governments." In Europe the problems are handled by the intergovernmental agency OEEC, not the industry committee. Outlined the steps taken to assure that there would be no domestic shortage of petroleum products and how the Attorney General has "met his enforcement responsibility to insure that any crude oil product price rise did not involve collusion or other antitrust violation." An agreement to stabilize domestic oil prices would have been without legal basis. They have received complaints that the recent price rises resulted from collusive action. If this is true, "the various investigations that the Department is now undertaking will provide an adequate basis for normal remedial action via antitrust proceeding." Stressed that "the investigation now being undertaken by the Department has not stemmed solely from the recent price rise. Long before that price rise, our concern with the status of this industry had led to an investigation of the major oil companies." Grand jury action began in early February. **** In addition to continued vigorous prosecution of our oil cartel suit, and our west coast oil proceeding, as you may know, section 2 of the joint resolution of July 28, 1955, consenting to the interstate compact to conserve oil and gas, directs the Attorney General to investigate and report annually on anticompetitive practices in the guise of oil conservation *** it should be possible from the materials assembled in connection with this investigation, to report in the future to the Congress meaningfully concerning the problems thus assigned." At the beginning their "choice of machinery to solve this problem was necessarily limited. Alternatives were considered." After consideration of alternatives, it was decided this plan was "the only feasible method to meet the emergency." The apparent success of the plan of action in meeting the European shortages "justifies, in our opinion, the limited antitrust immunity granted to the participants for the joint action taken under the Government's supervision.' The Federal Trade Commission was not included in the discussions on the December 3, 1956, amendments to the plan. Judge Hansen said FTC was not bypassed, even though Chairman Gwynne had said in a letter approving the amendment that they had not had "the benefit of participation in the preliminary conferences on the amendments." Judge Hansen said the responsibility is with ODM, not the Attorney General. Members of his staff had two telephone conferences with FTC. Senator O'Mahoney questioned their not consulting with FTC, referring to the language of section 708 (e) of the Defense Production Act. Judge Hansen said: "I want to assure you that they certainly had knowledge of it, and I know of no objection to any procedure that was taken. And my understanding is that the responsibility rests right with the Attorney General for the decision in this regards, not with the Federal Trade Commission." Senator Kefauver asked if there were any reason why an appeal to voluntarily hold down prices could not be made legally. Mr. Hansen replied: "We would be in this position. In one instance we would indict them for agreeing to fix prices. In the next instance we would be asking them to agree to fix prices or to retain prices." However, the President had asked both business in general and labor to hold the price and wage line as much as possible. The President's request was proper. Assumes the oil companies had heard of this request, "and if they were cooperative, I assume they could well have followed the suggestion and recommendation." In his statement, however, Judge Hansen had said safeguards "governing action under all schedules must be considered as written into the Plan of Action. They are designed to insure that no domestic shortage and resulting price rise stems from operations of this plan." |