unduly short or waited an unduly long time because orders had been concentrated in the large companies beyond their capacity while the productive facilities of the smaller companies were less fully utilized. The failure to use the resources of small business is most striking in the smaller communities that ofttimes depend upon a single enterprise or, at most, upon a few enterprises. During the Second World War, small cities came to my attention while a member of the Truman committee whose few factories had been engaged in industries that are shut down or severely cut back in wartime. No one saw to it that these factories should be converted to war production, and relatively few of the persons who had been employed there left their homes to find employment elsewhere. The towns withered away. Not only their productive equipment but also their productive labor remained unused to a large extent in the war effort. Unless we take steps to prevent it, there will be similar pools of idle labor and idle machines in neglected communities throughout the United States during the present emergency. The easy way of organizing industrial mobilization so that it depends chiefly upon large enterprises is not the efficient way of getting full production. The small companies are a part of our national capacity. Their output is a part of our national strength. An equal opportunity for them to produce is essential if we are to use all our muscle. Thus there is harmony rather than conflict between the immediate needs of industrial mobilization and the longer-run needs of a free-enterprise economy. Competitive private enterprise is regarded by all of us as one of the fundamental expressions of our freedom and one of the fundamental supports as well. While we may differ among ourselves from time to time about whether a large company has acquired monopoly power that needs to be curbed, I think most of us agree that to keep private competitive enterprise we must preserve small business along with large business. We must avoid a long-run trend toward even greater concentration of economic power. If the Nation's industrial strength grew with each increase in concentration, we would face a serious dilemma because to keep our strength at its maximum for a decade or two we might find it necessary to jeopardize the survival of competitive private enterprise. Fortunately, this is Strength now and healthy institutions in the future call for the same not so. policies. We can mobilize the maximum resources of small business if we want to do it and if we take the necessary steps soon enough. I shall not attempt to offer you a complete program for this purpose. I shall merely mention a few of the more obvious means by which we can, if we wish, counteract the tendency toward undue reliance upon large business alone. We should make, and bring up to date from time to time, a study of the idle capacity available in the United States, particularly that in the hands of small business. We should also study the idle manpower that is available, particularly in the smaller communities. In the light of these studies, we should review the distribution of Government procurement, of industrial subcontracts, and of order backlogs for the sake of shifting orders from the overused to the underused facilities and from localities where labor is short to localities where it is more plentiful. We should examine the size of inventories and revise allocations of scarce materials to avoid tying up such materials in congested establishments where their turn-over will be slow. We should avoid withholding such materials from plants which could use idle facilities and idle labor if the materials were available. We should set up special machinery for placing Government contracts directly with small enterprises. We should use that machinery also to assure so far as possible that the subcontracts placed by large concerns shall go to small enterprises. The Smaller War Plants Corporation performed such functions well during the last World War. We should make every effort to simplify Government purchasing specifications so that they correspond as nearly as possible to ordinary commercial specifications for similar goods. There is now an interagency committee responsible for reviewing Federal specifications. It could very well be used for this purpose. If it is used the inactive advisory committee attached to it should be revived, with a substantial new representation of small business alongside the representatives of large enterprises who are already included on the committee. We should encourage expansion by small enterprises as well as by large ones. We should take steps to make available to small concerns loans and tax-amortization privileges comparable to those that are extended to large companies that undertake strategically desirable expansion. Wherever practical we should encourage expansion in dispersed small units capable of being built and operated by small companies rather than in large concentrated units which, aside from promoting concentration of economic power, are more vulnerable to attack in this atomic age. We should make production methods and techniques available to small companies as fully as possible. We should consider a policy of making research grants to small companies that have appropriate research facilities. We should consider requiring that technology that has strategic value and has been financed by the Government be made available on reasonable terms without undue restrictions to concerns that will use it for mobilization purposes. Steps such as these require exercise of judgment day by day in many varying situations. The first essential is a policy determination that the facilities of small business shall be fully used. But such a policy is not self-executing. The second essential, therefore, is a specific assignment of responsibility to one or more appropriate agencies to see to it that the policy is carried out by measures, among them those I have just suggested. Harnessed together for the duration small and large enterprise will make an unbeatable team. If this be accomplished we will emerge from this gigantic undertaking without injury to our free enterprise system. Hon. BURNET R. MAYBANK, CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, Chairman, Joint Committee on Defense Production, DEAR SENATOR MAYBANK: I acknowledge with appreciation your letter of May 8 (JC-mw) enclosing copy of a letter to Mr. Michael V. DiSalle, Director of the Office of Price Stabilization. You invite my comments with reference to the subject matter involved in the letter to Mr. DiŠalle. In view of the fact that the first three questions raised in the letter appear to concern matters with which the Director and his staff would have intimate knowledge, I doubt that I am in a position to make any helpful suggestions with respect thereto. As to question 4, it is my understanding that, with respect to the industry advisory committees organized by OPS and NPA, trade-association executives are not appointed to serve as members of such committees. A somewhat different rule applies, I believe, in the case of the Munitions Board and possibly one or two other Government agencies. Whether it would be feasible to have association executives sit in at meetings of industry committees merely as observers is a matter on which opinion within the trade-association field has been rather sharply divided. My own point of view, for whatever value it may have, is that an advisory committee, to be of the utmost benefit to the respective agencies, should be free to invite to any meeting trade-association executives, business experts of one kind or another, or any other individuals who may possess information that the committee desires or should have if it is to function properly and intelligently. Without question, the industry's trade association has more complete data regarding the industry and its products than has any other source and the association executive is the one person best qualified to make this information available. Consequently, any general ruling or regulation which would tend to bar the executive from all meetings would prove detrimental to the best interests of the Government and make more difficult the cooperation which the industry was attempting to extend to the Government agency through its respective committee. I am encouraged to note that consideration is being given to trade associations from the standpoint of their representation of small-business interests. Unquestionably, small-business men constitute the rank and file of trade associations of the country. It is only through their trade association that they are able to obtain the information and assistance which is necessary to enable them to maintain their place in a competitive economy. There have been suggestions from time to time that a rather rigorous rule forbidding contact between an advisory committee and the trade-association executive was made necessary as a result of opinions rendered from within the Department of Justice. Informal discussions with representatives of the Department which I have had have failed to substantiate these suggestions. It would be distinctly helpful, in my judgment, if your committee would seek to ascertain whether the Department of Justice or the Federal Trade Commission has had occasion to advise OPS or other agencies respecting this subject and, if so, as to the precise nature of the advice which has been rendered. If I can be of further assistance, please let me know. Sincerely yours, HENRY P. FOWLER NATIONAL ASSOCIATION OF MANUFACTURERS, Reference: JC-mw. Senator BURNET R. MAYBANK, Chairman, Joint Committee on Defense Production, Senate Office Building, Washington, D. C. DEAR SENATOR MAYBANK: This is in reply to your letter of May 5, 1951, in which you request our comments with regard to a series of six questions posed by you in a letter to Mr. DiSalle, Director of the Office of Price Stabilization. You will appreciate, I am sure, that the National Association of Manufacturers is made up of companies engaged in all types of manufacturing. As a result, we have had no specific practical experience with any particular industry advisory committee. We do, however, have affiliated with us, through our national industrial council, a large number of manufacturing trade associations and through our contacts with these organizations, we are somewhat familiar with the problems outlined in your letter. I trust, therefore, that you will accept the views expressed herein in the light of the somewhat limited actual experience indicated above. It is our understanding that the Office of Price Stabilization has thus far made only a limited start in the field of special tailor-made regulations applying to single industries or products. Thus, it is likely that the real worth of industry's advisory groups, as an effective functioning organization, is not yet determinable. Generally speaking, it is my judgment that a properly constituted industry advisory committee, broadly representative of the industry involved, not only from the geographical standpoint but also from the standpoint of size of the businesses represented, can make a real contribution if properly utilized by the administrative agency. There are, of course, limitations beyond, which such groups cannot and should not go and I am sure that industry representatives would be as anxious to observe these limitations as would the administrative agency responsible for their functioning. Your second question asked for comment with regard to ways in which section 404 of the Defense Production Act might be altered in order to facilitate industry consultations. The present language of section 404 is quite broad and generally leaves the matter of its interpretation and execution to the discretion of the administrative agency. For the most part this is believed to be a sound procedure and I have heard discussion of only one suggestion for possible changes in this section of the present act. This would be to specifically provide that association executives be permitted to attend industry advisory committee meetings, at least as an observer, and at the request of the industry members involved. At the present time, I believe there is some difference of opinion among various agencies as to how far they should go in utilizing the services of association staff executives in connection with industry advisory group meetings. It should be noted here that opinion among association executives is somewhat mixed as to whether or not they care to participate in such activities. There are those who would, under no circumstances, participate even as an observer. On the other hand, there are those who feel they could perform a real service for their industry and be of assistance to the Government in following such developments and keeping the industry as a whole advised. It is my own feeling that there would be times when it would be helpful to have an association executive present in such meetings for reasons indicated above. In my judgment, however, this should be a discretionary matter with the individuals involved on the industry advisory group and also with the association executive. Associations and their full-time staffs are normally well-informed on all essential facts regarding their industries. They either have readily available, or can obtain information believed necessary or desirable in connection with any problems which may be faced by an industry advisory group. Obviously, such assistance could serve as a valuable supplement to factual data otherwise available to an administrative agency and should, in the long run, lead to accurate and adequate principles and policies in the administration of any Federal regulatory controls. I believe that the foregoing is responsive to those of your questions on which we have any information and I trust you will find them to be of assistance. If there is further information with which you think we can assist you, I hope you will communicate with us at any time. Very truly yours, LAMBERT H. MILLER, General Counsel. Hon. BURNET R. MAYBANK, OFFICE OF PRICE STABILIZATION, Chairman, Banking and Currency Committee, FDEAR SENATOR MAYBANK: I am forwarding to you herewith certain memoranda which I suggest should be included in the record of the Banking and Currency Committee's hearings on renewal of the Defense Production Act of 1950. It appears that during the course of the hearing, and subsequent to my testimony, questions arose which produced considerable interest and discussion on the part of members of the committee. These various memoranda contain information which I feel is pertinent to such questions and which may be helpful to the committee in its deliberations with regard to the legislation. We of course will provide such additional memoranda as you may desire or consider appropriate. With kindest personal regards, I am, Very truly yours, MICHAEL V. DISALLE. MEMORANDUM ON LICENSING This memorandum is designed to clarify the purpose and applicability of the licensing amendment, and to correct certain misunderstandings that have arisen regarding its scope and effect. 1. Everyone has an absolute right to a license.-OPS would not be given the power to keep persons from going into business. This amendment, which is offered as a general enforcement device for price control only, provides that a license must be given as an absolute right to anyone engaged or desiring to engage in business. No license can be required under the amendment of (a) farmers and fishermen, or (b) newspapers, radio and television stations. 2. Only a court would be enabled to suspend a license.—The licensing amendment provides specifically that suspension would be determined only by the courts and not by Government officials. Only after a legal proceeding which is designed to give the licensee every safeguard could a license be suspended. (a) Full court hearing and requirements of warning notice after violation: The procedure spelled out in the amendment grants the price violator every opportunity to avoid a court proceeding. After the first violation, a warning notice only would be sent. If a person continues flagrantly to violate price regulations after a warning has been issued, the Director of Price Stabilization would have the right to petition a court for suspension of the license. After a full judicial hearing, the court could suspend the license for any period up to 1 year, after taking into consideration any extenuating circumstances. Furthermore, a license which has been suspended by the court may be restored upon such terms and conditions as the court finds reasonable. The right of appeal is guaranteed and a stay may be granted pending appeal. 3. Licensing provisions afford enforcement flexibility. The proposed amendment which follows almost word for word provisions contained in section 205 (f) of the Emergency Price Control Act of 1942, affords an opportunity for tailoring enforcement to the needs of each particular case. Just as, because of the complex nature of the American economy, price regulations must be flexible in order to fit the divergent needs of individual industries, enforcement measures must also be flexible in order that substantial justice be achieved in each case and hardship be minimized wherever possible. The present criminal and civil sanctions of the act do not by themselves provide a sufficient degree of flexibility. Where there are initial infractions of law, in some cases wholly innocent, criminal penalties 1 Even in the absence of wartime stresses, Congress has recognized that licensing is necessary in many cases to secure compliance with regulatory legislation. Indeed, more than 20 Federal statutes, which are listed in appendix A, having no relationship to wartime emergencies contain licensing provisions as a necessary aid to securing compliance. Under these statutes a license can be suspended by administrative action. The proposed amendment, on the other hand, allows suspension only by order of a court. may be too harsh. On the other hand, resort to treble damage actions or injunctive proceedings may likewise be inappropriate. The proposed licensing system provides a method whereby there can be taken into account in connection with each violation the degree of willfulness involved, the seriousness of the violation, the nature of the violator's business, and the importance of his business to the community as a whole. As the Senate Banking and Currency Committee stated in 1942, in approving licensing provisions similar to those recommended here: * * * "Nor are criminal prosecutions or injunction suits sufficiently flexible to assure substantial justice in the particular case. Licensing, on the other hand, in many cases, will provide the flexibility which is essential to avoid hardship to the law-abiding businessman. American experience during the last war shows that both compliance and flexibility are attainable goals. That experience arose primarily out of the licensing provisions of the Lever Act. Under that statute, Mr. Herbert Hoover, as Food Administrator, was given broad licensing power which was extensively and effectively used. On the other hand, the Fuel Administration did not at first have the powers to license, but it was soon discovered that such power was necessary; the result again was enforcement which, though highly effective, caused no hardship to business." In 1917, when he was Food Administrator, Mr. Herbert Hoover said: "The licensing system, however, is the backbone of all control. Without compulsion there will always be a few slackers in every trade who will profit by the patriotism of the majority and prevent any effective control." 4. Licensing serves as an effective deterrent to price violations. The licensing system which is requested is not designed to punish the initial violator. Its purpose rather is to restrain the persistent violator. The mere existence of a sanction to suspend a seller's right to sell a commodity or commodities for a limited period of time would have great deterrent effect upon persistent violations. This would be especially true in the case of a small group of willful businessmen who regard financial penalties as merely "taxes" to be paid for a continuing unlawful profit. The effective nature of licensing is evident from the experience of the Office of Price Administration. From the inception of price control in 1942, through March 31, 1945, there were issued 32,118 license warning notices. However, as of May 1, 1945, only 325 license suspension suits had been filed in court. Out of 116 suits completed on that date, 101 resulted in orders of suspension varying from 2 days to 1 year, depending on the nature of the violation. The fact that resort was had to the courts in so small a percentage of the cases is a clear indication that the warning notices had their intended effect-to prevent recurrence of violations. This conformed with the experience of the Food and Fuel Administrations during World War I. The reports of these agencies reveal that it was rarely necessary to suspend a license. The threat of suspension was a sufficient deterrent in substantially all instances in obtaining compliance. APPENDIX A The following statutes contain licensing provision: The "Hot Oil" Act (15) U. S. C., secs. 715-715 (1)); the Natural Gas Act (15 U. S. C., sec. 717 (b)); the Federal Fire Arms Act (16 U. S. C., secs. 901-909); the Federal Alcohol Administration Act (27 U. S. C. 203-204 (e)); the Federal Communications Act (47 U. S. C., secs. 151, 303, 309, 319, 402); the Motor Carrier Act (49 U. S. C., secs. 301-327); the Civil Aeronautics Act (49 U. S. C., secs. 401-682); the Gold Reserve Act (31 U. S. C., secs. 440, 446); the Commodity Exchange Act (7 U. S. C., secs. 1-17); the Cotton Standards Act (7 U. S. C., secs. 51-65); the Packers and Stockyards Act (7 U. S. C., secs. 181-231); the United States Warehouse Act (7 U. S. C., secs. 341-373); the Perishable Agricultural Commodities Act (7 U. S. C., sec. 499); the Tobacco Control Act (7 U. S. C., secs. 515-516); the Securities Act of 1933 (15 U. S. C., sec. 77); the Securities Exchange Act of 1934 (15 U. S. C., sec. 78); the Public Utilities Holding Company Act (15 U. S. C., sec. 79); the Trust Indenture Act (15 U. S. C., secs. 77 (aaa)-77 (bbb)); at least two other statutes administered by the Secretary of the Treasury (19 U. S. C., sec. 1641, and 31 U. S. C., sec. 316 (b)); and at least two other statutes administered by the Secretary of Agriculture (21 U. S. C., secs. 151 and 344). |