Mr. BOWMAN. It substantially departs from the notion of competition of the kind where you have 20, 30, or 100 firms. Now, "competition," of course, is a relative term, and when you have that kind of situation, the arrangement between automobile companies and their dealers and the kind of contractual arrangement that they have and the kind of part-buying arrangements they have, when you have one company that makes a very great amount of the parts not only for its own corporation but for its competitors; it is a different sort of situation than when you have a larger number of independent companies. That is all I mean.

The CHAIRMAN. You see, it is easier for Chrysler to ship, easier for administered prices, if there are 3 companies or 4 companies than 100 companies.

Mr. BOWMAN. Other things being equal, it is better to have the hundred. The efficiency is the key point.

The CHAIRMAN. Do you know whether United States Steel Corp. employs economists?

Mr. BOWMAN. I know very well there is one whom they employ. I think undoubtedly he has a staff.

The CHAIRMAN. Is that particular one a professor of any college? Mr. BOWMAN. I don't know that he is.

Mr. MICHENER. I assumed that he probably was. I think that was brought out by a question of counsel or the chairman. That was apparently the criticism of United States Steel when Mr. Fairless was on the stand, that the company didn't follow the recommendation of the engineers entirely.

Now, the engineers worked out a plan that should be followed, according to the papers, but apparently it wouldn't work.

Mr. BOWMAN. I understand Mr. Fairless feels about engineers a good deal the way you feel about economists. [Laughter.]

Mr. MICHENER. Maybe he does. I plead guilty to that. I say the economist has a place in the picture, but not the last word.

Mr. BOWMAN. Surely, that is right.

Mr. MICHENER. I think, Professor, you are doing a good job teaching, but when you get through, why, you are the architect; he is the professor. He figures out the plans to build a house but when we come to put down the foundation and all of that, then, the contractor comes in and he is the practical man. He wants to know how to apply the work to fit the architect's plan to reality. That is what I mean.

You say there is no competition. You talk about automobile parts. There is at Monroe, Mich., the Monroe Equipment Co., that makes most of the shock absorbers that go on automobiles today. They started since I have been in Congress, in a garage, and they are competing against all other shock absorbers made by the big companies. Today they are making a profit and employing men. I am buying a better shock absorber and a cheaper car because of the competition that was made possible by the big automobile manufacturers.

Mr. BOWMAN. We are both for that. I like competition too.

Mr. KEATING. Mr. Bowman, we are concerned, as you know, with the question (a) whether monopoly exists in various industries; (b) whether new legislation should be recommended to meet the problem. Now, in order that I may understand your position, do you feel that legislation should be enacted which would condemn, by legislative

fiat, the existence of the power to monopolize, in a similar manner to the way in which we now condemn, legislatively, actual acts, overt acts to monopolize?

Mr. BOWMAN. I would answer that this way: If you would take Justice Learned Hand's decision in the Alcoa case, for example, where 90 percent certainly constitutes monopoly control, 66 percent maybe. I have forgotten what the actual percentages were. I think it would be a healthy thing for the country if this power were illegal when we got those percentages substantially below the figures that the Antitrust Division has to prove up in order to be effective in a section 2 case, yes.

Mr. KEATING. Well, then, I would think that your answer to my question is "Yes.”

Mr. BOWMAN. Yes.

Mr. KEATING. Now, you do, as I understand it, place an exception on that subject by saying that if it could affirmatively be shown that a particular industry, where the power to monopolize existed, required the existence of that power in order to operate efficiently, you would make the exception?

Mr. BOWMAN. That is right, and that would be a problem very largely of determining economies of scale.

Mr. KEATING. Now, would it be some Government bureau, or someone else who would determine whether in that particular industry efficiency existed?

Mr. BOWMAN. I don't know. When I got to a point where there was substantial power of the kind you have supposed in your case, I would like to have the burden of proof on the companies that had the power, that they had to be big to be efficient.

Mr. KEATING. They would have to prove that to whom, a Government bureau?

Mr. BOWMAN. I don't know whether you are talking about a law, or what is involved.

Mr. KEATING. I am talking about what you have in mind.

Mr. BOWMAN. What I have in mind is, I would like it better if, when there were this kind of power you were talking about, that it was up to the people that had it to establish that they had to be that big to be efficient.

Mr. KEATING. To establish to whom?

Mr. BOWMAN. To the court.

Mr. KEATING. In other words, you would throw all these cases into the court; you wouldn't advocate some Government board or bureau? Mr. BOWMAN. I really haven't given that a lot of consideration. I don't want to be evasive, but I haven't considered it from that point of view.

Mr. KEATING. You appreciate that is a practical matter that would be basic in our determination; we would have to know that before we could recommend legislation.

Mr. BOWMAN. But my purpose is to testify to the kind of thing I think warrants the attention.

The CHAIRMAN. Professor Bowman, our present antitrust laws are merely a set of general principles, are they not?

Mr. BOWMAN. Well, they are written in that form; of course, they have been interpreted over a time by the courts to give them more precise meaning.

The CHAIRMAN. And if we amend the Sherman law or the Clayton law, we would amend, I presume-at least, I would-by continuing those laws as a general set of principles and then, the Department of Justice would initiate any proceedings that might involve interpretation of those laws, and the test, the crucible upon which they would be tested, would be in the courts.

Mr. BOWMAN. That sounds reasonable to me.

Mr. KEATING. And you would place the burden of establishing the fact of efficiency or nonefficiency on the defendant?

Mr. BOWMAN. When the power existed, yes.

Mr. KEATING. Don't you realize that to require the accused to prove his innocence is contrary to all principles of the criminal law?

Mr. BOWMAN. I am not a lawyer, Mr. Chairman, and if I am making unlawyerlike propositions, I stand to be corrected. My only point is that that kind of power is a dangerous thing, and something should be done about it.

Mr. KEATING. You don't question the general principles of criminal law that the thing accused, whether it be an individual or a corporation or others, is entitled to the benefit of the rule that the prosecution must prove his guilt beyond a reasonable doubt?

Mr. BOWMAN. As I say, again, I am not a lawyer, but I understand there is a difference between civil and criminal action.

Mr. KEATING. Oh, you don't advocate an amendment to the Sherman Act?

Mr. BOWMAN. I don't advocate that you apply penalties or put people in jail; all I am saying is that under those circumstances relief is required.

Mr. KEATING. In other words, you don't advocate any amendment of the criminal statutes?

Mr. BOWMAN. No; I don't believe I had mentioned that.

Mr. KEATING. Just the Clayton Act, or some civil statute, to endeavor to bring proceedings to end such type of operations?

Mr. BOWMAN. Yes; I think by and large that is the basic problem, what can be done about this, not only with future laws, but under the existing law.

The CHAIRMAN. Professor Bowman, it is called generally, the three D's, divorce, divesture, and dissolution, which is applied in many cases, such as the Standard Oil case, the Alcoa case, and I could name, if I had time, many more cases brought on the civil side. Mr. BOWMAN. That is right.

The CHAIRMAN. So that even under the present statute you can bring an action to divide companies because of divorce, divesture or dissolution.

Mr. MCCULLOCH. Professor, do you believe that there should be legislation effectuating the three D's, as described by the chairman, although there has been no overt act or no violation of existing laws in the matter of monopoly?

Mr. BOWMAN. I think I answered that question when I said I thought the power itself was dangerous.

Mr. McCULLOCH. Yes; I just wanted to get an answer clear and

concise.

Mr. BOWMAN. The answer is "Yes."

Mr. McCULLOCH. I know nothing about this except very brief statements that I read in the press from time to time, and this is away

from the Steel Corp. I understand that General Motors had a very large profit in 1949, and I understand that their profit in the first quarter of 1950 will be as large, if not larger, and that very possibly their profit for the entire year of 1950 will be largely measured by the profit in past years.

I also read in the papers that Kaiser-Frazer, in 1949, lost some 30 millions of dollars in its automobile business; that Packard Motor Car Corp. made a comparatively small profit; that Willys Overland made a comparatively small profit; that Hudson made a comparatively small profit; that Studebaker made a very substantial profit and that Chrysler made a very substantial profit.

I am inclined to believe, and I know nothing about this, now, in view of the record that the prices of automobiles could probably be reduced by some of the producers thereof, but I am of the opinion from the information that I have which I again say is very limited—that if that were done, it might very materially reduce the number of competitive automobile-producing concerns in America.

Said in another way, probably our three largest producers of automobiles appear to be able to operate more efficiently under present conditions than those of lesser size. Do you think what I have said is generally in accordance with the facts over the last year or two, and some of my conclusions, at least, are correct?

Mr. BOWMAN. I think generally I would agree with what you said. As I think I indicated before, I don't know how much the profits are due to greater efficiency; if they are due to the greater efficiency, then we have exactly the kind of problem Mr. Keating was questioning me about, and it is a tough problem; that is, if you have three companies of that size which are more efficient than the others in the industry, then you have a different problem than the steel industry, where one corporation has a great many different plants.

Mr. McCULLOCH. Then, again by way of repetition, so I might understand exactly what your basic conclusions are and your philosophy is, do you believe that by reason of the fact that X corporation produces, we will say, 60 percent of the output in a certain field, and notwithstanding the fact that it has not engaged in monopolistic prac tices, it should be immediately subjected to the three D's, as mentioned by the chairman.

Mr. BOWMAN. The three D's, with the efficiency proviso, yes. But there again I am not willing to say that just because a plant has 60 percent you should immediately cut it up into little bitty pieces. I am not in favor-and I never will say before this committee or any other committee that you should divest just because something is big. I say when the efficiency factors are such you don't lose anything by efficiency, then by all means do it, but you have a tougher problem when it is the other way.

Mr. LEVI. Your understanding of the law today is that given monop oly power that there is illegality just because of the power itself? Mr. BOWMAN. I would say if there were that power, it is illegal today.

Mr. LEVI. Under the present statutes?

Mr. BOWMAN. That is right.

Mr. LEVI. And secondly, under the present statute, the burden of showing efficiency is placed upon the defendant in that case by the decision in the Alcoa case?

Mr. BOWMAN. That is right.

Mr. KEATING. When did you reach that understanding, which is contrary to the answer to my question?

Mr. BOWMAN. I understand that Mr. Levi's question was under the Alcoa case, that the burden of proof in that case was the way I indicated, and if I answered you differently, I am sorry, but that case speaks for itself, sir.

Mr. KEATING. Exactly. I agree with you, and your understanding

Mr. BOWMAN. I don't understand that what I said was inconsistent with my answer here.

Mr. KEATING. Your understanding of that case was that the Court said the burden was on the defendant of proving his innocence in that he must prove that efficiency required that there be the extent of monopolization in that industry which existed?

Mr. BOWMAN. I don't know that that is the particular language of that, but I get the impression

Mr. KEATING. Well, that is the answer you were giving to counsel. Mr. BOWMAN. I get the impression that the language of that case, that that, in effect, is what happened. Now, I will be refreshed; I don't mean to answer differently to different people. I am trying to be as objective and honest about this as I can.

Mr. LEVI. Given your view of the Alcoa case, then, the problem is what is meant by monopoly power. That is to say, is it percentage control, or whatever other evidence there might be?

Mr. BOWMAN. Exactly, and that is what I have been trying to answer to Mr. Keating and Mr. Michener and Mr. McCulloch.

Mr. MICHENER. If one has an opportunity to be sinful, you would presume, because he has the opportunity that he has sinned unless he proved to the contrary?

Mr. BOWMAN. I will let the record stand.

(At this point, the subcommittee has inserted the following material, furnished subsequently to the testimony of the witness, Mr. Bowman.)

COMMENTS ON THE TESTIMONY OF WARD BOWMAN

(By Bradford B. Smith, economist, United States Steel Corp.)

In accord with the chairman's invitation to comment on testimony offered by others respecting United States Steel, we respectfully submit the following comments:

We are not entirely clear as to what unprejudiced purpose Mr. Bowman had in mind in attempting to measure the relative profitability of the various operations involved in digging materials out of the ground and turning them into useful products of steel. We do note that having improperly attempted to find one department of steel making to be more profitable than other departments, he concludes that the profitable department, simply because it is profitable, might be monopolistic. In this connection, we compliment Mr. Bowman on having the good grace to concede that profits might be attributable to efficiency in operation. In this regard we feel compelled to point out that in the testimony of Mr. Bowman, on the one hand, and in the testimony of other witnesses on the other hand, the subcommittee has been presented with a complete and well-perfected double standard of judgment, which double standard we sincerely hope the subcommittee will not feel that it is compelled to adopt. The double standard is of this sort: If a company or, in Mr. Bowman's case even a department of a company, earns a large profit ("large profit" being undefined) then that is "proof" that it is monopolistic; if, on the other hand, a company or, in Mr. Bowman's case, a department of a company, makes a small ("small" being undefined) profit or loss, then it is per se monopolistically inefficient and should be