other materials from the primary producers and the Government. The hearings will then be reconvened at a date which we estimate to be approximately the middle of June.

The first witness to appear before our committee will be the Honorable Donald L. O'Toole, who is the director of commerce and industry of the State of New York.

Mr. O'Toole, we will be glad to receive any statement that you have to offer.

STATEMENT OF HON. DONALD L. O'TOOLE, DIRECTOR OF COMMERCE AND INDUSTRY, NEW YORK STATE

Mr. O'TOOLE. Mr. Chairman and members of the committee, we have no statement.

Mr. YATES. Let me state, speaking personally on my own behalf, and I am sure I speak for Mr. Steed and Mr. Sheehan, the pleasure that we have in again welcoming you back to Capitol Hill. We enjoyed very much our association with you during the previous Congress, and we are glad to see you back at this time as a witness.

Mr. O'TOOLE. I thank you for your gracious remarks.

The Department of Commerce and Industry of the State of New York is interested in the question before this committee, as a result of numerous telegrams, telephone calls, and other complaints that we have received from hundreds of our small industrialists in the State of New York.

Most people when they think of New York think in terms of magnitude, but truthfully in New York we have very small-large business. We have the General Electric and the Western Electric, it the economy of our State is founded princially on the efforts and the energy of hundreds and thousands of small-business men. Our smallbusiness men, as I said before, who find aluminum necessary for the progress of their business are protesting. I can cite one instance.

In the town of Ellenville, a city of less than 10,000 people, just a few years ago, 1948, several brothers got together and started what is known as Channel Master, Inc. Since 1948 they have built this business from nothing up to a point where they employed as many as 1,700 people.

The whole countryside and the town itself is dependent on the economic prosperity of that concern, but today Channel Master, together with hundreds of others of our manufacturers, find that they cannot continue. In the case of Channel Master, because of a lack of aluminum, it has been necessary to reduce the force to 750 people. If the situation continues, it will be necessary for them to close down and for many others to close down.

Our department is interested in business, whether it is big or small, but we must take things in New York as we find them. We must take cognizance of the fact that it is the small-business men and the small industrialists who are responsible for the prosperity of the State.

The Governor, the department of commerce, and myself, do not feel that the present system is a just or equitable one. We feel that the Big Three has entirely too much to say, not only in the distribution of aluminum, but they have too much to say, by their control of aluminum, in the success and the prosperity of these smaller men.

The Department of Commerce of the State of New York is cognizant of the many fine things that the Commitee on Small Business has done. We realize your intelligent approach has done much to create prosperity not only in New York, but in the other 47 States, and we are very, very happy that this subcommittee and the committee itself is taking cognizance of the plight in which these small independents find themselves.

We do think that there is a tendency today toward big business. We not not charge that it is political. We think it is something that came with the times. And it is our sincere hope that this committee, as a result of deliberations and findings, will take positive steps to alleviate the conditions that are existing in all of the States affecting these people who are in the aluminum busines.

I thank you.

Mr. YATES. Thank you for your statement, Mr. O'Toole. Do you have any questions?

Mr. STEED. The type of material that your small plants are unable to get, do you have any information as to the nature of it? At what stage of its processing do most of them use it?

Mr. O'TOOLE. Mr. Steed, we have at the present time a great number of concerns in the State of New York who have not been able to get anything for their third and fourth quarters to produce the articles that they are making.

We do not know what the solution is, but we, to use the old catch phrase, say that we do face it with alarm. We are concerned about it. I believe Mr. Flemming is holding hearings on the 20th.

I have not elaborated-I have not gone into the reasons for this shortage, because I think Senator Murray in the Record of May 3, on page 4625, elaborates at great length. I know that the entire committee has taken cognizance of this.

Mr. STEED. What I was getting at was this-I suppose you call it pig aluminum--is it the pig aluminum supply that is short, or whether at some stages of processing certain types of material, like bar and sheet aluminum, something of that sort is hard to get.

Do you have any information as to whether or not it is a general shortage, or is it in some specific field of processing?

Mr. O'TOOLE. We find, as far as our independents are concerned, the small men, there is a terrific shortage all over the State. It is a dangerous shortage. It is dangerous, also, as far as its political philosophy is concerned, because these small independents produce many things that are in direct competition with the Big Three, and the Big Three seem to have a hold on the entire production and how it shall be distributed, whether that control is direct or indirect.

We are finding-we have been advised-and when I say "we," I mean the small-business men-to go out and buy in foreign markets, but we find that the prices there are 4 and 5 cents a pound higher. And the competition is so keen that the small man cannot go into that market. He cannot go in because of the price differential. He cannot go in because he has not the credit, nor the facilities to engage in a foreign market.

Mr. STEED. Thank you. That is all.

Mr. YATES. Mr. Sheehan?

Mr. SHEEHAN. Mr. O'Toole, you state that the Big Three seem to have a hold on this situation. I understand that one of the main pur

poses of our committee hearings is to find out just what the facts are, because besides the Big Three the Government also controls it with defense buying and stockpiling. I also know that this year we are going to export an estimated seventy-odd million pounds of aluminum scrap to foreign countries.

Every pound of scrap that is exported from this country means the small-business man has that same number of pounds less to work with.

So it is the purpose of our committe to find out whether it is the Big Three-whether it is our own Government policy-or whether it is the fabricators and the people within the industry who are disposing of the material.

Mr. O'TOOLE. Well, we find this, too, Mr. Sheehan: we find that it is very hard to find the line of demarcation as to where the Big Three begin or end, and where the Government begins or ends on this aluminum question.

Anybody who served in this Congress during the war years recalls that in bodies like the OPA, big business sent men down here, supposedly on a dollar-a-year basis. I am not attacking the dollar-ayear men, but many of those who were here on a dollar-a-year basis were serving two masters. They were serving the big corporation that loaned them, and also serving the Government. And no man can serve two masters.

This is a serious problem. Something must be done.

As I said before, we are very, very grateful-you people are attacking it. We do hope that you will get to the bottom of it.

Mr. YATES. Thank you, Mr. O'Toole.

Mr. O'TOOLE. Thank you.

Mr. YATES. Our second witness is Prof. Leonard Emmerglick, of Georgetown University Law School, Washington, D. C. He is an expert on the aluminum industry. We have called him to give us the necessary background for the proper consideration of the testimony which will follow later.

Prior to his present position as a professor of law at Georgetown University, Mr. Emmerglick was special assistant to the Attorney General in the Antitrust Division for 10 years. He was in charge of and tried the Government's antitrust action a gainst Alcoa. He was also in charge of various other antitrust cases.

He is the author of many books in the legal field. He is active in the American Bar Association, the American Law Institute, the Federal Bar Association, and has been president of his local county bar association in New Jersey.

I am informed that Professor Emmerglick has an outline of a statement, but is perfectly willing to be interrupted and to answer any questions of the subcommittee during the course of his testimony. Will you take the stand, please, and proceed?

STATEMENT OF PROF. LEONARD EMMERGLICK, GEORGETOWN UNIVERSITY LAW SCHOOL, WASHINGTON, D. C.

Mr. EMMERGLICK. Mr. Chairman and members of the committee, I appreciate the invitation to appear and to endeavor to make a contribution to the work upon which the committee is embarking today.

The current problems of the nonintegrated aluminum users-some 20,000 small- and medium-sized businessmen-are not temporary or transient. They have been constantly recurring. They will continue to do So, because they are the result of unresolved monopoly power and an industrial structure which precludes these businessmen from exerting their abilities under competitive conditions.

To make this clear requires a rather extensive historical review of the monopoly litigation against the Aluminum Company of America, and a review of the expansion of the aluminum industry since 1950 following the outbreak of the Korean hostilities.

The aluminum case was instituted in 1937 against Alcoa, against a Canadian company known as Aluminium, Ltd., and against a number of the principal officers and directors of both companies.

The complaint charged that the Aluminum Company of America had monopolized the aluminum industry of the United States; that its monopoly embraced the production and sale of ingot; water power, alumina, the product which precedes aluminum; and that in various other respects the operations of the company were in violation of the Sherman Antitrust Act.

The charge against Aluminium, Ltd., was that it had joined an aluminum cartel existing abroad with the avowed purpose of aiding Alcoa in keeping out of the United States imports of aluminum from Europe.

It was charged also that Alcoa was effectively a member of the cartel because of the close relationship between Alcoa and Aluminium, Ltd.

Further charges were that Alcoa had exerted a price squeeze against rollers of aluminum sheet. This charge was in essence that Alcoa would sell aluminum sheet which it had rolled at a specific price and aluminum ingot at a specific price and that between those two prices there was a spread.

The aluminum sheet rollers in the United States who bought their aluminum ingot from Alcoa found that when Alcoa raised the price of ingot and lowered its market price of sheet, they were squeezed between these two price jaws, so to speak. This was another charge of the Government's complaint, that such a squeeze had been carried on for a number of years.

The case came on to be tried before United States District Court Judge Caffey, and the trial proceeded over a period of more than 2 years. At the end of the trial, Judge Caffey delivered an oral opinion from the bench which took him many days to deliver and which completely absolved Alcoa of all of the charges made by the Government. Thereupon the Government appealed to the United States Supreme Court. That Court found itself without a quorum of judges able to hear this case, since 4 of the 9 Justices disqualified themselves because they had been Attorney General or Solicitor General while the case was pending in the Department of Justice. Five were not a quorum. And so the Congress enacted legislation which was approved by the President, constituting, as it was then called, the Circuit Court of Appeals for the Second Circuit, sitting in New York, as a court of last resort to hear the appeal in lieu of the Supreme Court.

Well, the appeal was heard by that court, composed of Judges Learned Hand, Augustus Hand, and Swan, the three senior judges of the court.

In its decision the court reversed Judge Caffey on a number of the major issues in the case. The court found that Alcoa had monopolized the aluminum-ingot industry, and that its monopoly was a 90percent control of the industry, the other 10 percent being made up of imports, Alcoa, of course, then being the sole producer of primary aluminum in the United States. It was in 1945 that the decision came down.

The court further held that Aluminium, Ltd., had become a member of an international cartel agreement, the purpose and effect of which was to prevent the importation into the United States of aluminum ingot. The court held that Alcoa was not chargeable with participation in that cartel. The Government strongly urged that Alcoa was so chargeable, because a small group of stockholders controlled both Alcoa and the Canadian company.

The control came about in this way: In 1928 Alcoa owned its properties in the United States and its properties in Canada and in other parts of the world, mainly in Europe and South America. In 1928 Alcoa caused the Canadian company to be organized and transferred to the Canadian company most of its properties outside of the United States, retaining very few of them itself.

All of the stock of the Canadian company was turned over to Alcoa and immediately distributed to the stockholders of Alcoa. The controlling stockholders were to be found in four closely united families, so that in the hands of a few people there was this control of both Alcoa and the Canadian company. It was upon that ground that the Government urged that Alcoa should be held to be chargeable with participation in this cartel.

The court, however, refused so to find, but held that the Canadian company was chargeable with participation in that cartel.

Now, as to the remedial action that the court then took, the Canadian company was enjoined from further participation in the cartel agreement and from entering into any other cartel in the future.

Mr. SHEEHAN. May I interrupt there?

Mr. EMMERGLICK. Yes.

Mr. SHEEHAN. How can the United States court tell the Canadian corporation what to do?

Mr. EMMERGLICK. The Canadian company came into the United States and did business here. It had an office here and conducted business regularly from an office in New York City. It was found there even as a Mississippi corporation doing business in the District of Columbia might be found suable here. So this Canadian corporation was found in the United States doing business here.

At this time the Canadian corporation, it must be remembered, was owned to the extent of more than 85 percent of its stock by American citizens. The principal officers for the most part lived in the United States.

Mr. SHEEHAN. Still a foreign corporation.

Mr. EMMERGLICK. But it was a foreign corporation and was subject to our jurisdiction, because it was found here doing business and enjoying the protection of our laws. This is not a new principle. It is quite an old and common one, the subjecting of a foreign corporation to our laws if it comes here.

Mr. SHEEHAN. But only insofar as the business it does in the United States.