Second, it is not our intention to argue with the Commission concerning the type or character of the net fixed assets of the Armstrong Cork Co. outside the linoleum field. We know what these assets are and the Commission has received our statement as to this point. While it is true that the largest single activity of the Armstrong Cork Co. is the manufacture and sale of floor covering products, taken as a whole, our manufacturing operations predominantly relate to cork products or to substitutes for cork products. For example, we manufacture corkboard insulation for refrigerating plants and several other competing heat insulation materials; we make cork stoppers and metal crowns, screw caps, and other types of closures for bottles and jars, as well as glass containers; we manufacture acoustical materials, shoe components, textile cots, gasketing materials for automobiles, and industrial machines; some 350 products in all. It will not suffice for the Commission to merely say that a large part of our net fixed assets may technically not be in the "linoleum universe." The fact is two-thirds of our entire net fixed assets are not related in any way whatever to the production of linoleum or felt base. These outside assets are represented by factories and machinery which are not convertible to the manufacture of linoleum and felt base. These outside products are sold by separate operating divisions of the company to altogether different customers in other industries. The Commission's criteria for determining whether all of the assets of a multiproduct company should be related to one industry are explicitly stated in its report on page 11. This part of the report reads: "There are, however, a number of other cases in which this procedure was not applicable and in which the large corporation's net capital assets engaged in 'outside' fields are (1) significant in relation to the size of the corporation, (2) contribute only indirectly to the corporation's position in the industry, and (3) are not convertible to the industry in which the corporation is classified. such cases, there has been only one alternative, that of excluding the industry from the report." In It is extremely disappointing, therefore, to learn that a Government agency which has been given the facts will continue to insist that the Armstrong Cork Co.'s production of these outside lines is "sufficiently relevant to its power in the manufacture of linoleum to justify inclusion of the industry in that report." This is completely at variance with the standards which the Commission itself has enunciated in its report. These outside assets have far less relation to the production and sale of floor coverings than that represented by the relationship of retail outlets of major oil companies to their investment in petroleum refining— which retail outlets, according to the Commission, were considered to be outside the scope of its study. Third, the Commission's letter of October 27 says that the Armstrong Cork Co. has overstated the amount of its competitors' assets by from 33 to 52 percent. Our estimates were based on our knowledge of the industry and on the published reports of our competitors. It is difficult to understand how the percentage of error can be as great as the Commission reports. We wonder whether the phrasing of the Commission's staff in eliciting this information may not have been misinterpreted by our competitors. We do know that the Armstrong Cork Co. figures include not only our facilities engaged directly in the manufacture of linoleum and felt base, but also proportionate shares of the administration buildings and engineering and research laboratories. Fourth, one of the conclusions stated in the Commission's letter is that with respect to only those facilities which are employed by the Armstrong Cork Co. in the linoleum field-"Armstrong Cork Co. holds nearly as much facilities as all the other companies put together." Since the Commission's letter of October 27 places Armstrong's percentage of the total facilities at 36.6 percent-leaving 63.4 as the percentage of net fixed assets owned by the other members of the industry this statement is obviously in error and therefore misleading. One other observation should be made. The number of companies manufacturing linoleum is greater now than before the war. Competition in the industry is keen and vigorous-which we welcome. We take a justifiable pride in the record of the Armstrong Cork Co. and the contribution that it has made to our domestic economy. Yours sincerely, H. W. PRENTIS, Jr., President, Armstrong Cork Co. INTRODUCTION The Subcommittee on Study of Monopoly Power has felt that any inquiry which anticipates as its result tangible legislative recommendations must be thoroughly prefaced by a study of existing antitrust laws. Accordingly, the subcommittee staff has prepared a collation of all statutes dealing directly with the preservation of the American competitive economy. While this compilation was designed, originally, only for the use of the subcommittee, I have deemed it so significant that it is being included in the publication of our hearings and it will be published separately as a committee print for its permanent value. A casual reading of the statutes which appear herein will reveal with singular clarity why the Sherman Act has so often been called a "Charter of Freedom." Such auxiliary legislation as the Clayton Act and the Federal Trade Commission Act have only served to reinforce the basic premise laid down so clearly in 1890 by the Sherman Act itself that economic freedom can coexist with political freedom only in an atmosphere free from monopolistic restraints. This thesis is brought home with emphasis when legislative policy, directed at ends other than the preservation of competition, is considered. Thus part II of this collection of laws contains statutes which demonstrate how pervasive throughout our statutory scheme of things is the fundamental notion that, whatever legislative policy Congress may choose to adopt, under no circumstances should such program foster the growth of monopoly. The Alaska Roads and Trails Act, for instance, as well as other laws designed to develop the resources of Alaska, contains prohibitions designed to prevent subsidization of monopoly. So, too, in allowing for contracts for the carrying of mail, in establishing a procurement policy for the National Military Establishment, and in disposing of surplus Government property, the fundamental tenet that a competitive economy must not be constrained clearly appears. This concept has also taken on an extraterritorial complexion, as in the Reciprocal Trade Agreements Act, where the Fresident is empowered to suspend the application of reduced tariffs undeer reciprocal trade agreements when American commerce has been discriminated against by the operations of international cartels. Of special significance is the avowed policy in the Atomic Energy Act contained in the provision which empowers the Atomic Energy Commission to refuse to license activities which "might serve to maintain or to foster the growth of monopoly, restraint of trade, unlawful competition, or other trade position inimical to the entry of new, freely competitive enterprises in the field * * * "9 Many observers have recently charged that Congress has abandoned the basic principles enunciated by the antitrust laws. They point with special concern to the exceptions which have been engrossed onto those statutes designed to preserve competition. A closer scrutiny of these special enactments, however, reveals a congressional policy not entirely inconsistent with the basic premises underlying the Sherman Act. Exemptions from the antitrust laws may largely be classified into two separate categories: First, those exemptions granted to industries of public utility stature; and second, exemptions accorded to small groups that might otherwise find it impossible to exist in an atmosphere dominated by larger economic units. Of the former, one must consider the Interstate Commerce Act (including the Reed-Bulwinkle Act), the Civil Aeronautics Act of 1938, and the Shipping Act of 1916. In these instances, close administrative supervision has been substituted for policing by the Attorney General. On the other hand, where small businesses are faced with the unremitting competition of large aggregations which have developed despite the sanctions of the Sherman law, Congress has sought to bestow the favor of limited exceptions from the prescriptions of the antitrust acts. Thus in foreign trade, as Judge Kaufman recently indicated in his decision in the case of United States v. U. S. Alkali Export Association (S. D. N. Y., August 12, 1949), the Webb-Pomerene Act was specifically passed in order to enable smaller domestic units to compete with international cartels in markets abroad. Perhaps no better example of this type of legislation exists than those laws permitting certain agreements, combinations, and associations in the field of agriculture. As Secretary Brannan emphasized at our recent hearings, the farmer, as the only entrepreneur who still must operate in the realm of perfect competition, cannot survive in an industrial economy unless certain cooperative practices are permitted him. Even the anomolous Miller-Tydings Act is designed as a legislative support for small business enterprise. But in these limited instances, the exemptions from the trust laws are narrowly drawn and generally practices are subject to administrative review. Thus, for example, the Federal Trade Commission investigates associations registered under the Webb-Pomerene Act, while the Secretary of Agriculture is granted certain supervisory powers under the Capper-Volstead Act, the AntiHog-Cholera-Serum Act, and the Agricultural Marketing Agreement Act. In summary, then, the synthesis of the antitrust laws contained in this publication is clear. The Sherman Act, prohibiting all restraints of trade and monopoly, augmented by the Clayton Act and the Federal Trade Commission Act, lays down a basic and fundamental policy which has permeated the entire fabric of Federal legislation. Far from being abandoned, this faith in a free economy has been repeatedly reaffirmed by congressional pronouncement. Where industry has attained utility status, or where growth of business despite the prescriptions of the trust laws has rendered effective competition by smaller entities impracticable, Congress has reluctantly abandoned the rule of competition for one of either governmental control or administrative surveillance. I feel that the task of this subcommittee investigating monopoly power has been made immeasurably clearer through this analysis of the present antitrust acts. The Sherman Act and its concomitant statutes have indicated an abiding belief and purpose in the Congress and in the people of this country in the preservation of a free and competitive society. The function of this subcommittee is to aid in the better attainment of this goal. EMANUEL CELLER. |