JOHN LORD O'BRIAN, ESQ., APRIL 29, 1941. General Counsel, Office of Production Management, Washington, D. C. DEAR JOHN: The marshaling of the Nation's industrial assets for a maximum productive effort in the national defense will doubtless require the allocation of orders, the curtailment of some kinds of production so as to increase production in defense fields, and the establishment of priorities and price ceilings. Furthermore, many of these steps must necessarily affect the production of goods used to satisfy our normal needs, as well as the production of materials and implements used directly in our defense effort. Some of these acts, if accomplished by private contract or arrange ment within an industry and carried on for private advantage, would probably constitute violations of the antitrust laws. On the other hand, it is obvious that in the present emergency acts performed by industry under the direction of public authority, and designed to promote public interest and not to achieve private ends, do not constitute violations of the antitrust laws. In these circumstances, the Department of Justice recognizes that business interests which are asked to comply with public plans for increasing production and preventing inflation are entitled to the cooperation of agencies of the Government in eliminating any uncertainties which may exist as to the application of the antitrust laws to their activities. Accordingly, this Department has formulated a policy which it proposes to follow in its relations with the Office of Production Management and the Office of Price Administration and Civilian Supply and with all industries or contractors acting in compliance with the orders or requests of either of these organizations. The important points of this policy are: Meetings of the industry with the Office of Production Management and the Office of Price Administration and Civilian Supply or their representatives are not illegal. Industrial committees may be formed at the request of the Office of Production Management or the Office of Price Administration and Civilian Supply, to work with representatives of such offices on problems involving defense. There will be nothing unlawful in the industry cooperating in the selection of its representatives or in selecting members for committees, or in the activities of such committees provided they are kept within the scope of this letter. Questions as to whether there is need for such a committee, and if so, how it shall be chosen, and by whom constituted, shall be the sole responsibility of the Office of Production Management nor the Office of Price Administration and Civilian Supply. This Department will not participate in these decisions beyond the suggestion now made that any such committee should be generally representative of the entire industry and satisfactory to the Office of Production Management or the Office of Price Administration and Civilian Supply. Each industry committee shall confine itself to collecting and analyzing information and making recommendations to the Office of Production Management or the Office of Price Administration and Civilian Supply, and shall not undertake to determine policies for the industry, nor shall it attempt to compel or to coerce any one to comply with any request or order made by a public authority. All requests for action on the part of any unit of an industry shall be made to such unit by the Office of Production Management or the Office of Price Administration and Civilian Supply and not by the industry committee. That is to say, the function of determining what steps should be taken in the public interest should in each case be exercised by the public authority which may seek the individual or collective advice of the industry. But the determination shall not be made by the industry itself or by its representatives. Requests for action within a given field, such as the field of allocation of orders, shall be made only after the general character of the action has been cleared with the Department of Justice. If the general plan is approved, thereafter each request for specific action in carrying out such plan shall be made in writing and shall be approved by the office of the general counsel of the Office of Production Management or the office of the general counsel of the Office of Price Administration and Civilian Supply, but need not be submitted to the Department of Justice. In the case of any change in the personnel of such offices or if serious practical difficulties arise, this latter arrangement may be revoked upon notice from me. Acts done in complaince with the specific requests made by the Office of Production Management or the Office of Price Administration and Civilian Supply and approved by their general counsel in accordance with the procedure described in this letter will not be viewed by the Department of Justice as constituting a violation of the antitrust laws and no prosecutions will be instituted for acts performed in good faith and within the fair intendment of instructions given by the Office of Production Management or the Office of Price Administration and Civilian Supply pursuant to this procedure. In the case of all plans or procedure, however, the Department reserves complete freedom to institute civil actions to enjoin the continuing of acts or practices found not to be in the public interest and persisted in after notice to desist. With kind personal regards, DEAR MR. O'BRIAN; In your letter of June 27, 1944, you ask for my views concerning utilization of industry advisory committees to consult with the War Production Board on matters relating to industrial demobilization and reconversion. Conditions during industrial demobilization will, of course, differ considerably from those under which the war production program was initiated and is being carried on. But consultation such as you describe by members of industry advisory committees with the War Production Board while hostilities continue does not constitute violation of the antitrust laws. Consultation, of course, does not involve the determination by the industry advisory committee itself of policies, the administration of programs, or the formulation of problems which should be the responsibility of the War Production Board. The carrying out of consultations should not be considered as implying that members of such committees are authorized to get together and reach an agreed position in anticipation of such consultations. If the members of the committees should themselves privately agree on any plan or program or take part in any such private plan or program involving, directly or indirectly, the production or distribution of commodities, such a plan or program would be subject to the antitrust laws. Sincerely yours, FRANCIS BIDDLE, Attorney General. JUNE 27, 1944. The Honorable The ATTORNEY GENERAL, Washington, D. C. DEAR MR. ATTORNEY GENERAL: On April 29, 1941, the Attorney General advised me that meetings of industry with the Office of Production Management, predecessor to the War Production Board, were not illegal under the antitrust laws and that industrial committees might be formed at the request of this agency to consult with it on problems involving defense. The Attorney General stated that there would be nothing unlawful in the activities of such committees provided they were kept within the scope of his letter. Some problems of industrial demobilization and resumption of civilian production are presently arising to the solution of which industry advisory committees will be able to make a substantial contribution. The question has arisen as to whether the policy of the Department of Justice as expressed in the letter of April 29, 1941, was intended to extend, or may now be extended, to consultations with such committees on demobilization and reconversion problems while hostilities continue in this war. In connection with the utilization of the committees for these purposes, I may state that the limitations expressed by the Attorney General in his letter of April 29, 1941, will in all respects apply to such activities. Of course, the War Production Board may seek the advice of persons not on the committees, and the committees will not operate to foreclose in any way the access of businessmen or others to the War Production Board. Your views would be appreciated as to the application of the antitrust laws to the utilization by this agency of industry advisory committees on demobilization and reconversion problems. Yours sincerely, JOHN LORD O'BRIAN, General Counsel. FEDERAL TRADE COMMISSION, In re post-war utilization and disposition of Government-owned war property. Hon. JAMES E. MURRAY, Chairman, War Contracts Subcommittee, * * DEAR SENATOR MURRAY: In your letter dated June 1, 1944, you requested us by June 10 to "* list those aspects of this problem on which congressional action is, or will be, essential or desirable * * * without necessarily indicating the views" which we might believe "Congress should take on such questions," and to make “at the same time, any specific comments or recommendations with regard to congressional policy on the subjects listed." You appreciate, of course, that the problems of charting a wise legislative course to govern a reconversion from a wartime to a peacetime economy and the more specific problem of "post-war utilization and disposition of Government-owned war property, so complex and of such huge dimensions and such fateful import that it is difficult to offer any very helpful suggestions in the short time available. Subject to that difficulty, however, we shall endeavor to comply with your request. It is assumed that you would not care for our comment on the numerous matters and details of the problem that are unrelated to the work of the Federal Trade Commission, but only for comment upon the broad questions of public policy inhering in the functions delegated to the Commission by Congress and looking toward maintenance of the competitive system of free enterprise. It is gratifying to note, therefore, that most of the bills providing for disposal of Government-owned surplus property declare that the general and ultimate objective to be pursued is that of maintaining such system. Some of the bills provide for competitive bidding among prospective purchasers of Government surplus property while others would permit the price to be fixed by Government representatives without any such safeguards. In the event the latter policy were to be adopted appropriate provision should be made for special care in the selection of such representatives. For the attitude of such representatives would be crucial. Obviously no person entrusted with such a responsibility should have any connection, affiliation, or interest of any kind in the industry into which the surplus property is to be absorbed. Otherwise, the opportunities for selling it at a fraction of its value with unnecessary loss to the Government and with corresponding gain to favored private parties, would be greatly enhanced. If collusion in bidding were resorted to it would presumably be subject to punishment under the fraud statutes and 98534-44-pt. 13- 4 possibly under the antitrust laws as well. All proposed sales of surplus property should be widely publicized in order to attract the largest possible number of bidders. To the same end precautions should be taken where feasible to see that surpluses are not offered for sale in such large lots as would automatically limit the bidding to a, few. In order to prevent monopolistic conditions in an industry being accentuated, it might become advisable to prevent established concerns having an unduly preponderant position from either directly or indirectly bidding on or acquiring Government-owned surplus plants or other property. This would be no more than recognition or extension of the principle embodied in section 7 of the Clayton Act with reference to capital stock acquisitions when they adversely affect competition. In the event that no bidder willing to pay a reasonable or competitive price were to come forward, a situation would be created under which the Government would either have to postpone sale of the property until such conditions change, sell for whatever it can get, or consider whether the circumstances would then warrant either operating a plant itself or disposing of surplus consumer goods direct to the consumer. Assuming, however, that the Government would under no circumstances compete directly with private industry, the question arises whether the principles of the antitrust laws may or should be implemented by attaching appropriate conditions to the acquisition and subsequent disposition of surplus property. So far as movable goods and merchandise are concerned, the Government could readily prevent speculation and speculative profits by fixing the permissible margin between what it receives for such goods and merchandise and what the purchaser may resell them for. And just as private interests are now permitted by the laws of many States to fix that margin by contract all the way down from the manufacturer to the consumer on the theory that the manufacturer has some continuing interest in his product after he has sold it, so the Government representing the public interest should be allowed to protect that interest in the same way. Such protection of its interest as owner and seller of goods would be free from the objection frequently made to the Miller-Tydings Act and to the numerous State fairtrade acts, in that it would give members of the general consuming public some voice in the prices to be paid by them individually for the goods they already own collectively. Even though such acts were not in existence the Government would be warranted under existing circumstances in taking such steps to prevent speculation and unconscionable margins of profit in the resale of surplus goods. The relation between prices and margins so fixed and the ceiling prices of Office of Price Administration would, of course, have to be taken into account. Some of the bills would permit or require the protection of existing investments or channels of distribution and by implication the existing price structures which have grown out of them. Some would authorize even the physical destruction of surplus plants or goods in order to avoid substantial injury to the industry or industries concerned arising from the operation of such plants or the sale of such goods. It may be expected that such provisions would be taken as overriding merely general expressions of a desire to maintain or restore competitive conditions. And yet potential competition has always been regarded as |