I am afraid this type of legislation, while its purpose is excellent, is going to do more harm than good. Most of monopolies exist more in the minds of the people than actually. Many times there is a change in the point of view of the public. We continue to talk about monopoly when we are still uncertain as to what is monopoly. We are still uncertain as to what makes monopoly, if it is bad. And we are still uncertain as to whether it is good or bad. We Having in mind the present situation, might it not be just as well to let this go for a while? There is another factor that enters into it. You can do more damage to business by continuing the uncertainty that now exists than in almost any other way you can think of. want to increase employment, and raise the standard of living. Can we not afford to take a chance a little while longer with the system as it is? Make a pretty careful study of some of these agencies before we start regulating something which we do not yet really understand. I would even question the ability of Senator Borah, with all his years of devoted service to the country, I will say "consecrated" service-I would frankly doubt whether Senator Borah today could actually write the ticket for what is a good monopoly and what is a bad monopoly; whether he himself, perhaps the greatest authority among us, is qualified to draw up definite rules and regulations to control monopoly. I do not think there is a man in the. United States I respect more than Senator Borah. I do not think any human being can do it. I still believe that somewhere in the world there is a power that controls this whole business, and that through the forces of competition, through human beings striving with each other, the net result of all those forces is far more likely to bring about the best form of improvement than the efforts of any man or group of men who, with an inadequate understanding, imperfect judgment, presume to write a ticket for either agriculture or industry. That approaches being a religion. We have not done so badly in this country, with all the trouble that has developed over monopoly. With 7 percent of the population we own 50 percent of the wealth of the world. It is the only country in the world where people are driving up to the relief station in their own automobiles to collect relief. I am only afraid that in this case we are taking a step that will result in more harm than good. Senator O'MAHONEY. I wonder if it is your opinion that the framers of the Constitution did the right thing when they gave Congress the power to regulate commerce among the States and with foreign nations. Mr. HAAKE. I think they did the only thing they could have done. If I had been given the privilege, I think I would have done it the same way. I think it was the only reasonable thing they could do. Senator O'MAHONEY. You do think there ought to be some regulation? Mr. HAAKE. Yes. Senator O'MAHONEY. But not in this particular form? Mr. HAAKE. No. Senator O'MAHONEY. Will you give us some suggestion of the form the regulations should take? Mr. HAAKE. Yes. I can almost tell you now. I would suggest that the best form of regulation is to lay down definite outside limits, 121861-38-pt. 4—17 not to try to come too close to the disease, come close enough to insure fair play. I would let nature take its course within those limits. Senator O'MAHONEY. Limits as to what? Mr. HAAKE. In a congested district we have got to have red and green lights. The fellow who controls those lights sometimes thinks that traffic could be better controlled if he had hold of the wheel. I would make a distinction between the lights by which he controls the cars and one where some bureau or individual sits alongside. Senator O'MAHONEY. What are the lights you would have? Mr. HAAKE. I am not a lawyer, and I am at a disadvantage when I say this. Senator O'MAHONEY. You may not be. Mr. HAAKE. I am willing to admit that I am, perhaps for technical reasons. I think if the antitrust laws were clarified a little bit, perhaps by defining monopoly, and then set out to enforce those laws with even the crude instrumentalities we have now, we could learn a lot. We are leaning a good many things all the time as to what is monopoly and what is not monopoly, and some of the things we have thought were monopolies we found were not monopolies, and some of the things we thought were monopolies we found were beneficial. Perhaps we need that sort of education before we take a further step toward regulation. There are a number of other laws that have been introduced or passed. Mr. Patman wants to separate retail and wholesale manufacturing. That is done not because, with all due respect to him, Mr. Patman is an authority on economic production or distribution. He does it because influential people in his community want him to do it. They are the people he works for. I would do it if I had to. I would try to pull it a little bit my way, but I would probably do it. It is not because he is an authority on the subject. The people who are asking for it are not qualified to judge whether it is a good thing or not. I am afraid this legislation is subject to that criticism. I think Congress would render a tremendous service to the country if it would adjourn and go home. At this stage of the game, with the frame of mind the people are in, it is not more legislation we want. We want to get back on our feet, get hold of ourselves, get ourselves oriented again, and when we get a little stronger it is time enough to perform the operation. I would like to see the patient in better condition before we have another operation. Senator O'MAHONEY. Thank you very much for your statement. The committee will recess until tomorrow at 10:30. (Whereupon, at 12:30 p. m. a recess was taken until the following day, Wednesday, March 16, 1938, at 10:30 a. m.) FEDERAL LICENSING OF CORPORATIONS UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY, Washington, D. C. The committee met, pursuant to recess, in room 212, Senate Office Building, at 10:30 a. m., Senator Joseph C. O'Mahoney (chairman) presiding.. Present: Senators O'Mahoney (chairman), Logan, Borah, and Austin. STATEMENT OF JAMES A. EMERY, GENERAL COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS Senator O'MAHONEY. Mr. Emery, you may begin by giving your. name and occupation. Mr. EMERY. My name is James A. Emery, Investment Building, Washington, D. C., and 14 West Forty-ninth Street, New York City. I am general counsel for the National Association of Manufacturers of the United States. Senator O'MAHONEY. How long has the association maintained offices in Washington? Mr. EMERY. Since about 1909. Senator O'MAHONEY. For almost 30 years the National Association of Manufacturers has maintained offices in Washington? Mr. EMERY. Yes. Senator O'MAHONEY. Primarily because there is so much Federal legislation which affects the interests of the members of the association? Mr. EMERY. Yes; and the operation of the courts and administrative bodies, all the departments of the Government, in relation to various matters, particularly rules and regulations which are of great importance, to all of which has been added the interesting field of taxation. Senator O'MAHONEY. That scope has been increasing year by year since you opened your office, has it not? Mr. EMERY. Oh, yes. Senator O'MAHONEY. In other words, the relationship of the Federal Government toward the individual manufacturers or individual corporations throughout the United States has been constantly expanding? Mr. EMERY. Constantly. Senator O'MAHONEY. Very good, sir. You may proceed with your statement. Mr. EMERY. Mr. Chairman, the National Association of Manufacturers is an organization of men engaged in the various forms of the manufacturing industry in substantially all the States of the Union. It is interested in all matters that are of general interest to manufacturers. To the subject matter of this bill it has given a great deal of attention, not only since its introduction by you in January of 1937, but prior to that time it had given much attention at different times during the course of discussion of many problems under consideration during the years that preceded your own particular expression of interest in the subject. I am expressing views now that have been endorsed and approved by the association, not only through its board of directors, but in the convention of the association assembled last December, which had before it the second edition of your proposal, which has now reached the third edition not yet ready for popular distribution. Senator O'MAHONEY. It has been very widely distributed. Mr. EMERY. I want to say, in connection with the matter, that the membership of the association is not composed, as is often the thought, merely of large employers of very large corporations. It includes individual firms and corporations of all sizes, and between 68 and 70 percent of its members are employers of 500 men or less. Senator O'MAHONEY. What percentage of the membership are corporations? Mr. EMERY. I could not say that offhand, but I should say a very large percentage, because the manufacturing industry is largely carried forward in corporate form. There are very small and very large manufacturers. Many specialties are carried forward by small operations. The reports of the Bureau of Internal Revenue illustrate that very effectively when you take the total comparison of all corporations engaged in manufacturing, particularly those which show a net profit and those which show a deficit. The Bureau says the deficit has a very large majority. We are deeply concerned about this proposal, because we believe that, in the first place-and I shall not go into the economic side, except so far as it may be incidental to the discussion of the legal phases, since that has been covered in the discussion of many businessmen before you who speak with more authority than I could--but it does seem to me that in the course of this discussion it is worthy of note that corporations have been referred to critically, in terms which might be designated as epithets rather than instrumentalities of production in commerce. I do not think that view is shared by the members of the committee, but I have observed something of that nature in the course of the hearings. A corporation is as much a tool of modern industry or commerce as any major invention that has been developed in our industrial progress. Without it, it would have been impossible to put together, either the capital essential to the operation of industry upon the scale which is necessary in the modern world, nor would it have been possible to secure the opportunity for the individual investment of millions of citizens who have put their savings into, not only the forms of production, distribution, merchandising, transportation, and communication through corporations which represent the collective savings of millions of people, but it would have been impossible to provide the capital essential to develop the operations of these industries. There are but two ways of accumulating capital. One is by the savings of individuals, the other by collective savings through business enterprises. The new capital which is essential to sustain and expand existing enterprise is obtained from reinvestment of profits in the business, or through the sale of securities, and these often represent the investments of great institutions like the insurance corporations. The whole business structure of the United States today rests upon a corporate foundation. Senator O'MAHONEY. That, of course, goes without saying. It has been one of the principal contentions which I personally have been making ever since this bill was introduced. The problem is how to make these corporate enterprises best serve the public welfare. Mr. EMERY. With that no one will disagree. The association has always taken a position in support of the rational regulation of corporate enterprise. It has throughout its existence resisted every attempt to weaken the terms or enforcement of the anti-trust acts. I refer to that matter because the corporation has given such a stimulating touch that we find that not only the future of industry, but the opportunities for employment and the savings of millions of our fellow citizens are wrapped up in the future activities and successful operations of corporate enterprises. When you undertake to regulate corporations, you must bear in mind the character of the regulation proposed, as well as the penalty that may be inflicted upon a particular industry which may result in great hardships. The punishment of the corporation itself by fine or imprisonment, or both, may result in the punishment of thousands of innocent citizens as well as millions of innocent employees. So that when we discuss the question of corporate regulation, we must take into consideration the particular economic situation, now perhaps the most serious in all business history; as the background against which this proposal is presented. For that reason, not only its economic, but the legal effect of the idea incorporated here, will greatly affect the future of this country, and, in my opinion, is a matter of the utmost importance. By the findings of fact and declaration of policy, as well as by the terms of the proposed regulation, this bill undertakes to regulate, quoting from the last sentence of the preamble, "the terms and conditions on which corporations may produce and distribute commodities for the purposes of interstate commerce.' The apparent effect of that is to compel the transformation of State into Federal corporations as a condition to engaging in interstate. commerce. To assert the bill does not compel a reorganization of existing corporations, it seems to me, cannot be sustained, because it is apparent that it does compel a reorganization. The licensing of a State corporation, under terms fixed by a Federal control in the form of a statute, which changes the fundamental form and conditions. under which it operates, is in effect a reorganization of the corporation. When the corporation is reorganized the Commission will approve what the Federal Government substitutes for what the State government has granted, as a condition of its right to engage in commerce among the States; that is, compulsory reorganization of the corporate entity. The effect produced is therefore a compulsory reorganization of State-incorporated forms of business. |