That is an epitomization of the volume by Brookings Institution entitled "Consumers' Power."

Senator O'MAHONEY. You are reading from an article which appeared in what?

Senator BORAH. In Fortune of November 1935.

Senator KING. Who epitomized it?

Senator BORAH. Mr. Moulton.

Senator O'MAHONEY. I wonder if it would not be a good plan to include in the record those figures in the chart on page 79 which show the savings?

Senator AUSTIN. That looks like a possibility.

Senator O'MAHONEY. It shows, for example, that there are no savings whatever in the income group below $1,200 a year.

Senator KING. I am wondering if that is not wrong.

Senator O'MAHONEY. Of course, that refers to the group as a whole. It shows, as the Senator has just pointed out, that the great bulk were held by families having an income of $4,600 or over. Senator BORAH. From $4,600 to $10,000.

Senator O'MAHONEY. Two-thirds of the entire savings were made. by a minority having incomes in excess of $10,000.

STATEMENT OF SINCLAIR WEEKS, BOSTON, MASS.

Senator O'MAHONEY. Will you please give your name and residence?

Mr. WEEKS. My name is Sinclair Weeks, of Boston. I reside at West Newton, Mass. I am president of the Reed & Barton Corporation, of Taunton, Mass., and of the United Carr Fastener Corporation of Cambridge, Mass.

Senator BORAH. Are you any relation to the late Senator Weeks? Mr. WEEKS. I am his son.

Shall I proceed?

Senator O'MAHONEY. You may proceed.

Mr. WEEKS. My purpose in requesting an opportunity to appear before your committee this morning is to endeavor to bring forward my reasons for believing that the proposed act, to be known as the Corporation Licensing Act of 1938, will, if adopted, be unfair and detrimental to the business of the country, and further, that because of present business conditions, it is extremely untimely, coming as it does for discussion at a period when everything should be done to take the brakes off business rather than to place on it additional handicaps and restrictions.

I represent here no one but myself and the two companies with which I am associated in each case as president: The Reed & Barton Corporation, of Taunton, Mass., manufacturers of sterling and plated silverware for 114 years, and the United Carr Fastener Corporation of Cambridge, Mass., manufacturers of fasteners and small metal stampings.

May I first comment on specific features of the proposed act, understanding that the specific act under consideration is a revision of S. 3072 and is identical to H. R. 9589, introduced in the House on February 21 by Representative Mead.

Section 1, paragraph 6: Here, it appears to me self-evident that the particular purpose cited, namely, to prevent interstate commerce

from being utilized to promote unfair methods of competition, is amply covered by the Sherman, Clayton, and related acts, and that the passage of the particular act under review is not necessary to reach this objective.

Senator O'MAHONEY. You acknowledge that it is a good objective? Mr. WEEKS. I do, so far as antitrust and monopolistic practices are concerned.

Section 3 (a): This says that it shall be unlawful for any corporation to engage in commerce without a license. In view of the requirements involved for obtaining a license, this seems to me an unnecessary, arbitrary, and drastic prohibition, the result of which might very possibly put certain corporations actually out of business. The paragraph continuing, exempts corporations with gross assets under $100,000; but this exemption is largely, if not completely, nullified by section 7, which under certain conditions gives the Commission unlimited authority to bring these smaller businesses into the licensing scheme. Section 7 actually provides that these smaller corporations conform to the requirements specified in the licensing conditions, stated in section 5 of this act, and thus by indirection, the exemption herein before referred to is, as I read it, completely wiped out for all practical purposes. If there is a sound reason for exempting smaller corporations, even though the exemption is qualified, it seems to me unfair to make fish of one and fowl of the other, and the burdens and restrictions entailed by the bill should not be arbitrarily placed on one class to their detriment in competition with another which, by the terms of the bill is exempt.

Senator AUSTIN. Before you leave that I want to ask you a question, if you do not object to it.

Mr. WEEKS. Certainly not.

Senator AUSTIN. That thought never occurred to me. I have examined section 7 with great care, but it never occurred to me before that the limitation of bigness had been either overlooked or willfully and intentionally omitted. I am inclined to believe you are right. In the present bill section 7, apparently, provides that competition shall be eliminated; that is, competition by those corporations that are not licensed. If they are enjoying a substantial advantage by virtue of their geographical location, for example, supposing they are so near to raw materials that they have an advantage over licensees who are remote from their sources of supply, then this law descends on them and wipes out that competitive advantage.

Senator O'MAHONEY. You would not build up a straw man, would you?

Senator AUSTIN. I certainly would not take away his strength. Senator O'MAHONEY. You would not build up a straw man and knock him down.

Senator AUSTIN. Oh, you say a "straw" man?

Senator O'MAHONEY. Yes.

Senator AUSTIN. I thought you said a "strong" man. I think that tends to tear down a strong man, who may have his strength because of his position.

Senator O'MAHONEY. There is no intention to do that. If you or anybody else can show it will have such effect, you probably will not have any difficulty in changing it, if it becomes necessary. My feeling

is that it is not necessary, and that you see a ghost where a ghost does not exist.

Senator AUSTIN. I do not think you can laugh this off in that way. Listen to this:

Whenever the Commission shall have reason to believe that any corporation— I understand clearly that means any corporation below $100,000— engaged in commerce, which is not licensed under this Act, is not conforming to the conditions of fair competition above required, and that any article or commodity is being produced, manufactured, processed, or distributed to retail dealers by such corporation in such manner as to interfere with the effective handling of similar articles or commodities by any licensee, or in such manner as to give to the articles or commodities so produced, manufactured, procesfed, or distributed competitive advantages over similar articles or commodities handled by licensees, thereby tending to defeat the purposes of this Act, and if it shall appear to the Commission that a proceeding by it in respect thereof would be in the interest of the public, it shall issue and serve upon such corporation a complaint stating its charges in that respect, and containing a notice of a hearing upon the day and at a place therein fixed, at least thirty days after the service of such complaint. As I understand it-and I ask the witness if he understands it that way that brings in every corporation that produces any articles, and if the Commission believes it to be in the public interest, it shall subject it to the penalties of this act, provided it is not complying with the terms of the act, and provided it has a competitive advantage over those who are doing so, does it not?

Mr. WEEKS. It seems to me it does, sir. If the small company exempted under section 3 (a) has a competitive advantage and is not conforming to the licensing conditions stated in section 5, it seems to me, if that can be shown, that it is obligatory upon the Commission to bring that small company under the provisions of the licensing act.

Senator O'MAHONEY. Of course, it is perfectly obvious that section. 7 is tied absolutely to section 5, and that the powers of the Commission are limited to the enforcement of the conditions laid down in section 5. To state it this way, taking one of the conditions that corporations are required to obey the antitrust laws, if a corporation which is exempt from the operations of this bill does violate the antitrust laws, then it obtains a competitive advantage over the corporations which are licensed. You do not mean to testify, do you, that a corporation should be permitted to retain a competitive advantage which arises from a violation of the antitrust law?

Mr. WEEKS. Certainly not.

Senator O'MAHONEY. If that were the effect of section 7, assuming for the purposes of the argument that that is the effect, as it is intended to be, you would have no objection to it, would you?

Mr. WEEKS. I say that section 3 (a) and section 7 conflict.

Senator O'MAHONEY. I understand that; but I am trying to get the logical basis of the understanding between the witness and the committee. So I say, assuming for the sake of argument that that were the effect of the bill, as it is intended to be, you would not have any objection to it, would you?

Mr. WEEKS. As I understand the question

Senator O'MAHONEY (interposing). Perhaps it would be well to have the reporter read the question, so that you may be sure you understand it.

Senator AUSTIN. I think the witness ought to know the facts. There is one difficulty inherent in the question. You have to assume that the witness concurs in the theory of section 5.

Senator O'MAHONEY. Let us have the question read. I think the witness is amply able to take care of himself.

Senator AUSTIN. Believe me, I know he is.

Senator BORAH. What we want to know is what the meaning of section 7 is.

Senator AUSTIN. That is right.

Senator BORAH. If section 7 conflicts with the other section, then it ought to be reconsidered.

Senator O'MAHONEY. Let us have the question read.

(Whereupon, the following was read by the reporter:)

Senator O'MAHONEY. Of course, it is perfectly obvious that section 7 is tied absolutely to section 5, and that the powers of the Commission are limited to the enforcement of the conditions laid down in section 5. To state it this way, taking one of the conditions, that corporations are required to obey the antitrust laws, if a corporation which is exempt from the operations of this bill does violate the antitrust laws, then it obtains a competitive advantage over the corporations which are licensed. You do not mean to testify, do you, that a corporation should be permitted to retain a competitive advantage which arises from a violation of the antitrust law?

Mr. WEEKS. Certainly not.

Senator O'MAHONEY. If that were the effect of section 7, assuming for the purposes of the argument that that is the effect, as it is intended to be, you would have no objection to it, would you?

Mr. WEEKS. I say that section 3 (a) and section 7 conflict.

Senator O'MAHONEY. I understand that; but I am trying to get the logical basis of the understanding between the witness and the committee. So I say, assuming for the sake of argument that that were the effect of the bill, as it is intended to be, you would not have any objections to it, would you?

Senator O'MAHONEY. Is the question clear to you?

Mr. WEEKS. I think so.

Senator O'MAHONEY. What is your answer?

Mr. WEEKS. I think my answer was given in the statement I have already made that you should not make fish of one and fowl of another; that you should not give the corporation exempt under section 3 (a) a competitive advantage by placing arbitrary restrictions on corporations not so favorably situated.

Senator O'MAHONEY. How do you get that from the bill?

Mr. WEEKS. A corporation exempted might quite conceivably obtain a competitive advantage by not having to conform to one of the provisions of section 5.

Senator O'MAHONEY. Of course, it is the purpose of section 7 to make sure that they will conform to those conditions set forth in section 5. It all resolves itself down to the question of whether or not the conditions set forth in section 5 are such conditions that they ought to be applied to all corporations. May I take this opportunity to state my views with respect to this bill? I probably have repeated this several times, and may have to repeat it several times in the future.

Senator KING. Why not let the witness give his testimony?

Senator O'MAHONEY. I want him to understand it. I know this witness, like other witnesses who have been before the committee, is testifying under a misconception of the purpose of the bill, just as some Senators talk about it with a misconception of its purpose.

121861-38-pt. 4- -10

A corporation is a creature of government. It has only the power that the Government gives it. Corporations engaged in interstate commerce derive their powers from States. The purpose of this bill is merely to set forth the fundamental conditions of corporate existence, which must be recognized by all corporations engaged in interstate commerce. It is not the purpose of the bill to give the Federal Trade Commission discretionary power to enforce upon corporations conditions which the Federal Trade Commission deems to be advisable. The power of the Commission is limited exclusively to the conditions laid down in the bill. Do I make that clear?

Mr. WEEKS. Yes.

Senator O'MAHONEY. All right. Proceed.

Mr. WEEKS. May I beg to disagree, however, with that statement. I do not see the need of taking your time further on section 5. think there are 10 of those provisions. It seems to me that only 1 of the 10 has a direct bearing on interstate commerce. I shall point out as I go along that I think the commerce is not restricted, as you have pointed out, but that it has a great latitude.

Senator O'MAHONEY. Of course, what you are saying is that we have not succeeded in writing into the bill what we intended to write in it.

I will not interrupt you any more.

Mr. WEEKS. Section 3 (b): Here I find the bill provides that before a license shall be issued, a vast amount of detail, a good deal of which must already be filed with other governmental agencies, must be supplied. But the particular feature which disturbs me appears in page 8, lines 1 to 4, where the Government bureau named by the act— the Federal Trade Commission-is given, as I read it, an absolutely free hand, without any restrictions whatsoever, to secure and publicize any and all information concerning the corporations' affairs which it sees fit to acquire. Under this paragraph, substantially all the information required by the S. E. C., and even more, is called for, with the further unlimited authority granted the Commission to require any additional information they may see fit to ask for.

The point I would bring out here is that under this act you are not confronted with a situation covering the sale of securities to the public, but are solely concerned with the operation of a business itself and, in effect, are opening wide the doors of every business in this country to the inspection of competitors, customers, and prospective competitors. The same paragraph 8, lines 5 to 10, further requires a corporation to agree to operate, as I read it, subject to all present and future acts of Congress, affecting the rights, powers, or duties of corporations. I am not, of course, legally qualified to comment on this specific provision, but as a layman it appears to me that individuals and corporations must expect to operate in obedience to the laws of the land, but to expect an individual or corporation to prejudice their future standing in court in connection with a law the terms of which may be subject to judicial reveiw as to constitutionality in whole or in part, is less to expect such an individual or corporation to make a commitment in advance which is neither reasonable nor fair.

Section 3 (e): This provision, as I read it, requires a corporation to conform to the act-the law of any State or the decision or order of any State authority to the contrary notwithstanding. As a layman, this seems to me an invasion of State rights which is quite unwarranted and very possibly unconstitutional.