law. Even though the Government lost that case, as you know-the loss resulted in an amendment of the anti-merger provisions of the Clayton Act, which strengthened the anti-merger law immeasurably. Mr. SMITH. What years were you with the Antitrust Division of the Justice Department?

Mr. WRIGHT. I was there as a trial lawyer from 1938 to 1949 and then I came back as first assistant from 1961 to 1965; but I must say as far as any impact on antitrust policy is concerned, I had much more as a trial lawyer than as first assistant because trials are where antitrust policy is made, by cases and court decisions. All the top brass may occasionally keep people from making a mistake but if you really want to make antitrust law, you have to do it through the trial of

cases.

Mr. SMITH. What did the Interstate Commerce Commission have to do with the Elkins Act consent decree?

Mr. WRIGHT. I do not know. I know from reading the decree that there is not anybody from the Commission staff on the decree-I do not know what the relationship of the Commission was to that decree at all. I would assume that they were probably consulted because, after all, the Elkins Act-this is an Elkins Act case; this is not a Sherman Act case is a remedy that the Commerce Commission has primarily for penalizing illegal common carrier rebates.

Mr. SMITH. Does the ICC have authority to enforce the Elkins Act? Mr. WRIGHT. I believe they do. Yes-they have primary responsibility for the enforcement of all common carrier regulatory statutes and the Elkins Act is one of them.

Mr. SMITH. From your experience in the Justice Department, was there ever any question about that?

Mr. WRIGHT. Well, no. You understand, when I was there I was in the division when this decree was entered but I had nothing to do with it. I was engaged in other matters and I really have no idea what, if anything, was discussed between the Department and the ICC as to that particular lawsuit, that decree. I would be very much surprisedit would seem to me very odd if there was no consultation because after all, this is a statute which the Commission has primary responsibility to enforce.

Mr. SMITH. You seem to be saying that you think that it needs to be litigated and settled in that manner. Does that mean that you do not think the law is clear?

Mr. WRIGHT. Oh, I think that there is doubt, of course. You understand, there is an enormous literature on this problem. It has been written about in law review articles, congressional committees, even books, and I think it is fair to say that there is a substantial controversy as to whether or not this ownership is or is not legal in the literature but the only way you will ever find out is to litigate it.

Mr. SMITH. You seem to establish some relationship between World War II and the Mother Hubbard case. Is this an indication that you think that but for the fact that World War II came on, it would have been litigated? What do you mean by that?

Mr. WRIGHT. Well, I think there is great doubt whether the Mother Hubbard case was a triable case anyway. Certainly, the framework of that case was not the way to get the pipeline question resolved.

If you want to determine whether or not major oil company ownership of pipelines is or is not illegal you do not mix it up with a dozen other anticompetitive practices. You present that question cleanly and sharply on what you think are essentially undisputed facts by itself. For that reason we would never have been able to do it in the Mother Hubbard case, war or no war.

Mr. SMITH. How do you account for the fact that the theory of the consent decree in the Elkins Act case which regulated dividends is different from the theory of the original complaint which claimed that any dividend in effect would be a rebate?

Mr. WRIGHT. Well, it is very odd. Usually when you find a complaint and consent decree filed on the same day, one tracks the other. Why does this complaint here charge that all-any pipeline dividends to the major oil companies are illegal rebates and the decree say that the matter should be solved by restricting the pipeline dividends to 7 percent.

It is very difficult. I can only guess at this point. I know nothing about what happened. I would assume that the reason the complaint is framed this way, which does not really correspond at all to what is in the decree may be that the complaint is consistent with the Elkins Act theory and the Sherman Act theory-that the Antitrust Division was then pressing on the court in the Mother Hubbard case. And I suppose in order to protect the Antitrust Division's position, the complaint was made in that fashion.

Why the Justice Department decided that they just would forego the penalties and put in this dividend restriction I do not know. I would assume that probably it had something to do with the fact that certainly during World War II cooperation of the oil companies and the pipelines was essential to fight the war. I presume they concluded that this was no time to soak them with the hundreds of millions of dollars in penalties that would have resulted had the penalties in the Elkins Act been applied.

Mr. SMITH. Sort of brush it under the carpet temporarily, then. Mr. WRIGHT. Yes. It was, I suppose, an effective way to sweep under the rug this problem which was undoubtedly exacerbating pipelineoil company relationships with the Government at the time.

Mr. SMITH. Why did the Antitrust Division conclude in 1957 that the Elkins Act consent decree was ineffective?

Mr. WRIGHT. Well, the decree provided that reports were to be made regularly to the Department by the pipelines as to what dividends they were paying, what their earnings were, what the evaluations were, et cetera, and from observing those reports the Department could see that actually this 7-percent limitation really was not effective at all to limit dividends to the investment that the oil companies had in the pipelines.

It appeared that pipeline construction was being financed 90 percent by loans based on the assurances of the owners that they would use the pipeline and the investment-the actual oil company investment in the construction of the line was a very small figure. I suppose one theory of this decree might have been that you could not call these dividends rebates if after all they were only a reasonable return on the money that had to be put up to build the line. Well, if that theory were thought to be the theory of the decree, then, of course, percentage of

actual investment, not a percentage of total value which, of course, is 9 or 10 times in many cases what the investment is.

Mr. SMITH. In terms of the purposes of the law that was thought to be a kind of useless gesture?

Mr. WRIGHT. The Elkins Act is a straight prohibition against rebates and says nothing about dividends. But if you view this Elkins Act as applying to dividends I think it would make more sense to have a decree that read the way the Justice Department wanted it to read. The total value is fixed by the ICC. It is always easy to second guess these cases but it is surprising to me that the Antitrust Division thought that they could persuade either the district court or the Supreme Court to construe that decree in a manner that the language simply will not support, just because that would have been a desirable thing to do.

If they really wanted to achieve that result, they could have, and it seems to me should have, proceeded for modification under Clause X of the decree. They should not have said, well, you can just leave the language as it is and by construing it give us the same result. The court told them they could not do it and I think rightly so. They cannot do it that way. You have to reopen and really make your case with proof. To make this decree conform to the Elkins Act you have to write it another way.

Mr. SMITH. Now, you said on page 2 that everyone knows that joint ownership of a pipeline by two or more major oil companies has two anticompetitive effects. Then you set them forth. What specific antitrust violations would be involved?

Mr. WRIGHT. Well, in this joint ownership, you are talking about joint ownership between competitors. These joint owners are generally oil companies which are engaged in producing, in marketing oil in the same markets, and the more of them you put together in this joint ownership, the more you inhibit the kind of competition you would otherwise expect from them in marketing their product. That is one aspect.

A good deal of joint venture law has been made in the Supreme Court and while it may not be too clear in all its implications, certainly you know that when you have the principal competitors in a market owning the principal transportation facility jointly, you are seriously inhibiting competition between those joint owners.

The other aspect, of course, is the rebate aspect. Pipelines are supposed to serve the public as common carriers, and that means at published rates and only at published rates. But when shippers are joint owners, even though they pay the published rate to ship the oil, they actually receive very large sums in the form of dividends and profits from the operation of the line that in effect, give them a net transportation cost that is far below that of the published tariff rates.

This, of course, is a rank discrimination against the outsider, nonowner shippers who have no opportunity to receive such rebates and must pay the published rates.

Mr. SMITH. Well, we were talking about two joint ventures here yesterday, Colonial and Explorer, and we will again today. I assume, then, from your statement and your answer to the question I just propounded that you would say that a successful antitrust action could be taken against those kinds of cases?

Mr. WRIGHT. I would think that you would select as your case, if not one of those, at least one like it, where you had a large number of oil companies involved in joint ownership and where you had the joint owners providing the principal patronage of the line and dividing up the ownership pretty much along the ratios of the patronage. That is your ideal case.

I do not really know enough about the facts of those cases to know which one would be better.

Mr. SMITH. And then you would bring an action for declaratory judgment or injunction.

Mr. WRIGHT. Yes, surely. You would bring-I think the Sherman Act is the proper vehicle, although in the action I think you would also allege that Elkins Act policy is also being violated by the way in which these pipelines operate.

Mr. HUNGATE. I wonder if you think that Chairman Celler's announcement of hearings on the consent decree in April of 1957 played any part in the Justice decision to seek to modify the decree later in the fall of 1957.

Mr. WRIGHT. I have no idea. I was not with the division at the time and I really did not follow those hearings too closely. I know there was a great deal of criticism of consent decree practice and I suppose the division may have thought that they ought to at least try to make a good decree out of a bad one but they certainly made the wrong kind of try. You do not make a good decree out of a bad one by asking the court to construe the language the way you want to construe it. If it is a bad decree you have to move to modify it.

Mr. HUNGATE. As I understood your earlier testimony, you feel the most effective way to proceed in these antitrust matters is through litigation.

Mr. WRIGHT. Yes. That is the only way you make antitrust policy. The Supreme Court makes it. Not what some Assistant Attorney General says. That does not make policy.

Mr. HUNGATE. In the 15 years you were at Justice how many antitrust matters would you estimate you tried?

Mr. WRIGHT. Not very many. Trial lawyers is one thing we did not produce in the division. We produced pretrial lawyers because the number of cases that go to trial is very small-I tried a number of motion picture cases and steel cases and I do not know-I suppose I did not try more than half a dozen cases myself.

Mr. HUNGATE. Thank you.

Mr. CONTE. I gather from reading your statement that you feel that a successful antitrust case could be brought against a joint venture like Colonial Pipeline.

Mr. WRIGHT. I would not go so far as to predict the outcome of the case. I think you could make a prima facie case on the evidence that is now in the files of the ICC. The case should be brought. No question about it. There is enough of a probability of success, it seems to me, to require the bringing of the case.

Mr. CONTE. Do you know whether such a suit was ever proposed by the Justice Department?

Mr. WRIGHT. No; I do not. All I know about that is what I saw in Bruce Wilson's testimony before the Senate. As I read it, he said a

recommendation had been made 6 years ago, which would be a year after I left. I do not know.

Mr. CONTE. Do you know whether it ever moved over to the evaluation section of Justice? I understand it was.

Mr. WRIGHT. I really do not know. What happened while I was there, insofar as I had anything to do with it, I am sure is a matter of internal record but the people who would tell you about that would be Wilson or whoever has charge of those files. I do not have any independent recollection.

Mr. CONTE. I gather from the thrust of your remarks you feel that the mere structure of the joint venture pipeline provides a solid base for antitrust action against them. But since we also have a record of operations here, I would like to ask your opinion whether certain facts are or appear to be further violations.

First, we have had evidence suggesting, in the case of Colonial, that it charges disproportionately more for its inland route to Atlanta than from Atlanta to the east coast. What section of the Sherman Act could that violate?

Mr. WRIGHT. Well, as a Sherman Act violation, of course, if you use predatory pricing to achieve or maintain a monopoly, that is a violation of section 2. However, when it comes to this matter of discriminatory rates, you do have common carrier regulation here and I would suppose that discriminatory rates are primarily a matter for the Commission to take action about rather than the Antitrust Division. I think it is really kind of a ridiculous situation to have these people regulated both by the Commission and by this decree that the Antitrust Division administers. This to me is nonsensical. You have a regulatory agency set up. You have a common carrier status given to the pipeline. That kind of thing ought to be handled by the Commission.

Where the Justice Department-the role it can play is where there is a gap in the Commission's authority. That is, on the question of whether or not, as you say, this structure is legal or not legal. The Commission does not have any authority to determine that. They do not have any control over who owns a pipeline, where one gets built or how it is built or anything like that. But Justice could move in and fill that regulatory gap with an antitrust suit which would determine the legality of the structure which in and of itself, I think, tends to prevent these pipelines from acting as common carriers.

It is an utterly anomalous situation to have a common carrier owned by shippers instead of by someone who can render impartial service to shippers.

Mr. CONTE. If the charges from Atlanta up to New York were actually below cost, if it was proven they were below cost, this would be a violation of the law would it not?

Mr. WRIGHT. I would think so, but that really--I supose what you suggest is that where the pipeline encounters competition it charges a lower rate than where it has no competition. That is the kind of problem that the Interstate Commerce Commission, however, is already dealing with and has dealt with. Railroad rates, rates that are set below cost or near cost to discriminate against barge lines, for example, that kind of discrimination when it is practiced by a common carrier, is much more in the field of ICC regulations than it is antitrust. It is an