INVESTIGATION OF REGULATORY COMMISSIONS AND AGENCIES WEDNESDAY, APRIL 23, 1958 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON LEGISLATIVE OVERSIGHT OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, The special subcommittee met, pursuant to recess, at 10 a.m., in the caucus room, Old House Office Building, Hon. Oren Harris (chairman of the full committee) presiding. Present: Representatives Harris, Mack, Wolverton, O'Hara, Heselton, and Bennett. Also present: Mr. Robert W. Lishman, counsel to the subcommittee. The CHAIRMAN. The committee will come to order. When the committee adjourned at the last session, Mr. McConnaughey, the former Chairman of the Federal Communications concluded his testimony at that time. Mr. McConnaughey advised me that there was some clarification that he would like to make with reference to a part of his testimony. I told him that he could have the privilege of submitting additional statements if he desired in further explaining what he had to say at that time. Mr. McConnaughey has submitted a letter to the committee with reference to that matter. As a matter of fact, we have two letters in connection with that testimony, which will be included in the record. The two letters referred to will be included in the record as heretofore agreed to with Mr. McConnaughey. (The letter referred to follows:) LAW OFFICES, MCCONNAUGHEY, SUTTON & L'HEUREUX, ROBERT W. LISHMAN, Esq., DEAR MR. LISHMAN: On page 4199 of the transcript of April 2, 1958, of the hearings of the Special Committee on Legislative Oversight of the House Committee on Interstate and Foreign Commerce, I have at line 6 added the words "while I was a member of the Commission" to conform my testimony to what I had intended to say, as I told you immediately after said hearing. On page 4245 at lines 14 and 19, I have made similar clarifying statements, as you will see from the attached transcript of the hearings. Sincerely yours, GEORGE C. MCCONNAUGHEY. LAW OFFICES, MCCONNAUGHEY, SUTTON & L'HEUREUX, Washington, D.C., April 8, 1958. ROBERT W. LISHMAN, Esq., Chief Counsel, Subcommittee on Legislative Oversight, House Interstate and Foreign Commerce Committee, Washington, D.C. DEAR MR. LISHMAN: Please insert at page 4130 of the transcript of April 2, 1958, of the hearings of the Special Committee on Legislative Oversight of the House Committee on Interstate and Foreign Commerce the following remark: "On April 2, 1958, I was asked by you whether I had attended a luncheon at the Sheraton-Carleton Hotel at which Mr. Stanton, Mr. Paley, and Mr. Rabb were present. The newspapers reported that I was mystified by the question and that characterization is accurate. Since the date of said hearing, I have checked my recollection, and I can now definitely state that there was no such luncheon." Sincerely, GEORGE C. MCCONNAUGHEY. The CHAIRMAN. Also, we have a letter from Messrs. Thomas H. Wall and Frank U. Fletcher, counsel for WHEC-TV, Rochester, which became the subject of testimony during the course of former Commissioner Hennock's testimony, the letter calling attention to the committee information with reference to that case and requesting that such letter, together with certain information from the decision of the court of appeals in connection therewith, be included in the record. So, in order that the record may contain this information for the benefit of the committee, it will be included at this point. It is not necessary to print the entire case. I think it would not be of interest to the committee to have it in the record. It will, of course, be available in the file. (The letter referred to follows:) Hon. OREN HARRIS, SPEARMAN & ROBERSON, Chairman, Interstate and Foreign Commerce Committee, MY DEAR MR. HARRIS: Reference is made to the appearance of former FCC Commissioner Frieda B. Hennock before the Legislative Oversight Subcommittee on Thursday, April 3, 1958, and to the transcript of record in connection therewith, at pages 4288 through 4303. At this portion of the record Miss Hennock was interrogated concerning an order of the Commission entered in March 1953 granting share-time applications for WHEC-TV and WVET-TV on channel 10 in Rochester, N.Y. The thrust of the questions and the scope of the answers tend to give rise to an apparently unresolved question as to the legality of the action of the Commission granting these two applications. It is desired to call to the committee's attention the fact that this question was raised by Federal Broadcasting System, Inc., in an appeal to the U.S. Court of Appeals for the District of Columbia Circuit, Docket No. 12252, and was resolved unanimously by that court in favor of the action of the Commission being a valid, legal action. A copy of this decision of the court of appeals is enclosed herewith (Federal Broadcasting System, Inc. v. Federal Communications Commission, 96 App. D.C. 260; 255 Fed. 2d 560). It is respectfully requested that this letter and the decision of the U.S. Court of Appeals for the District of Columbia Circuit referred to, be incorporated as part of the record of the proceedings of this subcommittee. Respectfully yours, THOMAS H. WALL, Counsel for WHEC-TV. FRANK U. FLETCHER, Counsel for WVET-TV. (The following letter, dated subsequent to the last published volume of these hearings, was submitted for the record by Chairman Harris:) HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Hon. WILLIAM P. ROGERS, Washington, D.C., April 14, 1958. MY DEAR MR. ROGERS: As you are aware, the Subcommittee on Legislative Oversight of the Committee on Interstate and Foreign Commerce, House of Representatives, has been making a study of and conducting hearings on the administration of the laws by the Federal Communications Commission. The investigation is pursuant to the direction of the House of Representatives for our committee to make a study of the administration of laws by the various regulatory agencies within our jurisdiction. On April 4, 1958, the subcommittee submitted an interim report of its activities to date and recommendations for legislative action. The subcommittee also directed that the record of the hearings be referred to the Department of Justice for "appropriate action with respect to the violations of law thus far disclosed." I enclose copy of the report with this letter of referral. Under previous arrangements with your department you have been receiving copy of the transcript of the hearings each day. If there are further records of the committee which you might need we shall be glad to make them available. The action of the subcommittee in referring the record will be found on page 2, subparagraph 2, of the report. Public hearings were started by the subcommittee January 27, 1958, and continued through February and March. These hearings have developed information which the subcommittee feels are violations of the law and should be dealt with accordingly. Even though the department has been receiving the record each day and is familiar with these revelations the subcommittee feels that there are some matters that should be specifically pointed out for your consideration. In connection with the channel 10 award of a TV station in Miami, Fla., we would point out that there are undoubtedly a number of violations of Federal law. We would call to your attention that there is serious question of perjury having been committed and the record should be carefully reviewed accordingly. The record also reveals that violations occurred in the payment of money to a public official by those interested in the channel award. It is replete with attempted bribery, if not actual, pressure and undue influence on both sides of the controversy. We would also call to your attention apparent violation of subsection (b) of section 4, of the Communications Act of 1934 as amended and which the transcript shows was fully disclosed during the course of the hearings. We also wish to point out apparent violation of section 409 (c) (2) of the act which provides that in any case of adjudication no person who has participated in the presentation or preparation for presentation of such case before the Examiner, or the Commission, shall directly or indirectly made additional presentation respecting such case unless upon notice and opportunity for all parties to participate. This was an amendment to the act of 1952 and was for the purpose of prohibiting ex-parte representations. Section 501 of the act provides for a penalty in such violations. We would also point out the apparent violation of section 1505 of the Criminal Code which provides that whoever corruptly influences or endeavors to influence due and proper administration of the law or any proceedings pending before any department or agency of the United States shall be fined not more than $5,000 or imprisonment of not more than 5 years, or both. Furthermore, we point out the possible violation of section 371 of the Criminal Code which provides that if two or more persons conspire to defraud the United States or any agency thereof, etc., shall be fined or imprisoned, etc. The subcommittee also calls attention to the obvious violation of section 2071 of the Criminal Code. The transcript of hearings reveal that the former Chief Counsel, Bernard Schwartz, deliberately carried away the records of the committee following the termination of his services. The act was admitted. The section of the code provides that whoever having custody of any records, etc., and willfully and unlawfully removes, etc., the same shall be fined not more than $2,000 or imprisoned not more than 3 years, or both. The subcommittee further points out the question of law violations in connection with honorarium, expenses and per diem of some commissioners. There is a serious question as to this violation, however, in view of the fact that the 1952 amendment authorizing honorarium, and the Comptroller General's issuance of what we think are conflicting opinions. The first opinion which is included in the record is to the effect that such acts are in violation of the law. He fur ther attempts to clarify his opinion when he appeared before the subcommittee and subsequently confused the issue by submitting additional letters which are in the record for your consideration. The subcommittee respectfully presents to the department the facts it has developed and points out the provisions of law which may have been transgressed, for your consideration. Sincerely yours, OREN HARRIS, Member of Congress. The CHAIRMAN. On January 30, 1958, the subcommittee in executive session adopted as a subject matter for hearings under item E, "The Federal Communications and Patent Misuse." The committee, in meeting today resumes hearings in pursuance of the subcommittee resolution and will center on the legislative and administrative history of the technical standards of FCC relating to the manufacture and sale of transmitters and receivers for FM and TV broadcast stations and whether these standards are conducive, because of their lack of flexibility to the establishment and continuation of an alleged patent monopoly. The problem of formulating technical standards so as to avoid tieing the standards to patents owned or controlled by a single manufacturer has long been recognized. Report No. 72, dated February 18, 1957, of the Senate Committee on the Judiciary, 85th Congress, 1st session, pursuant to S. Res. 167, states at page 13 that it has received many complaints concerning: (d) The problems arising out of the adoption by a regulatory agency of standards with which only patented devices will apply. At page 14 of its report the Senate Judiciary Committee sets forth the particularly serious problem connected with the so-called electronics patent pool and states the committee's intention of making further inquiry into such matter. Staff report, dated October 15, 1956, to Subcommittee No. 5 of the House Committee on the Judiciary is entitled "Antitrust Problems in the Exploitation of Patents." The House report at page 23 defines patent misuse in terms of various court decisions and particularly refers to the "clean hands" doctrine of the Morton Salt case, 314 U.S. 488. The Communications Act of 1934, as amended, 48 Stat. 1082, 47 U.S.C. 303 provides that the Federal Communications Commission shall license, regulate, and supervise telecommunications facilities "as public convenience, interest, or necessity requires." In implementing the "public interest" criterion the Communications Act in section 314 provides for the "preservation of competition in commerce." In this respect the section provides that no person shall acquire, own, or control any communications facilities or stock interest therein if the purpose is and/or the effect thereof may be to substantially lessen competition or to restrain commerce between any place in any State, Territory, or possession of the United States, or in the District of Columbia, and any place in any foreign country, or unlawfully to create monopoly in any line of commerce. |