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The empowering section for administrative agencies is in section 11 of the statute where, after exempting many of the other agencies everything is left that the Federal Trade Commission will enforce. In section 15 the law doesn't say "you might," or "maybe," it says the Attorney General"shall” enforce section so-and-so.
Well, historically the Federal Trade Commission undertook to enforce section 2 as amended by the Robinson-Patman Act. I spent a whole day up here recently explaining our view of that law and the work we had done, and what was wrong with us now. There hasn't been a case brought by the Department of Justice under Robinson-Patman because they simply don't believe in the law that the Congress wrote.
Now, I think that anybody who gets appointed to one of these jobs ought to have to hold his hand up and swear--and they ought to take a good picture of him while he's asked: “Are you going down there to enforce the law as it's written, or the way you think it should have been written ?” I recommend that to anybody.
Now, I tell you, I like to be free and independent. And remember this, it's the responsibility of the Congress to regulate commerce. We are an arm, an extension of this Congress, of the Congress as a vital part, a coequal part of this Government. We are independent, as independent, I guess, as anybody could expect to be, or should be in present day life, as we live in. It's very difficult for somebody to tell me that I shouldn't come up here and tell you what I honestly think, if you ask me to come up here.
Mr. HUTCHINSON. Well, I'll ask you the same thing that I asked Mr. Kauper. Do you think that the record would show that the Federal Trade Commission with its broader investigative powers is more successful in section 7 cases than the Department of Justice?
Mr. Dixon. Well, I think we'd have a difficult time deciding this because we start off being sure that we are utilizing the accumulated expertise in whatever industry we are in, and by dividing authority and yielding to the one with the greatest expertise when a case is brought. So, if we waive or defer to justice and let them take a case forward, I think they can be about as successful as we would have been.
I might say, in the early days, in the early 1960's I used to get a little "browned off because through our liaison, when a horizontal case came up and we got to talking about which one of us would take it, they demanded it because they could do something we couldn't. They could
go to court and seek a stay order, and we had to send these cases over. So, this kind of left us with what I consider tougher cases to bring. We were out, trying to find the outer limits of what the law really meant in conglomerate market extensions and product extension mergers; yet we have been just as successful as they.
But the main thing I wanted to leave with you is that I think it took the combined efforts of both to really dent the merger movement.
Mr. HUTCHINSON. Before you start in on a case in any form, do you get together with the Justice Department to decide which one of you is going to take it on?
Mr. Dixon. Well, as a practical matter, the way it works is either as a result of our rule, requiring notification of corporations under our $250 million and $10 million test, if they give us that notice, we may get it before we read it in the paper, or we may not; but we may have it. Well, some of them are on their face important enough so that we should have more information, and we start at this stage.
Now, when we start, we will ask the Department of Justice-we have a liaison officer and they have one—that we intend to investigate this matter thoroughly, and do they have any comments or objections to it. And, within 24 hours, the agreement says, we have to be told. If they waive, then we go ahead, and once we start, we stay with it.
Mr. HUTCHINSON. Well, how about actions on their part? Do they send over and ask you for a waiver?
Mr. Dixon. They do the same thing.
Now, if on the operational level–Mr. Johnson here is our expert in the Bureau of Competition level—if he says, “Well, we've got expertise, we'd like to have the case that Justice has got." Well, if Mr. Kauper doesn't agree with him, then they start up the line to try to work out an agreement. But only on very rare occasions does it get to the point of the Attorney General and the Commission having a fight on which is the most expert.
Mr. HUTCHINSON. And, of course, if they can't agree, then what happens ?
Mr. Dixon. If they wouldn't agree then, it would be some mess; I've never reached that.
Mr. HUTCHINSON. You never got that far.
Mr. Dixon. I never got that far. My interest has always been that the matter should be challenged and it's going to be challenged. There is plenty for us both to do with the amount of money and
personnel we have; it isn't necessary to have such a fight.
Mr. HUTCHINSON. Thank you, Mr. Dixon.
Mr. Dixon, in connection with the testimony of Mr. Kauper a question was raised about the use of the words "affecting commerce,” in overruling legislatively the American Building and Maintenance case, which you recommend we do, and which I happen to think would be a good move.
But, the point was raised as to whether this created a presumption against any merger "affecting commerce," and I would like to get your views as to whether this creates any presumption, or merely extends Congress' power to its constitutional limits, as is the case with the Sherman Act.
Mr. Dixon. I don't think that it creates any presumption. I just think it puts it right in the same ball park with the Sherman Act, so to speak. And the Federal Trade Commission Act was recently amended in the same way. Our limitation had always been “in commerce," up until the law was changed. Now we can deal under section 5 with practices “affecting commerce."
Mr. SEIBERLING. Right.
Mr. Dixon. I think it would be well that you carry this thought through for Clayton section 7 by legislation.
Mr. SEIBERLING. Well, I think it would make for a more consistent pattern of enforcement across the board.
Doesn't the fact that the FTC and the Department of Justice both have jurisdiction in section 7 cases sometimes lead to confusion which merging parties take advantage of?
Mr. Dixon. Well, I'll put it this way, we both have premerger clearances. If anybody wishes to get clearance, he can come down
to one agency or another. He may sometimes play one against the other because if he went over to the Department of Justice to get clearance, and they gave him such a clearance, I'll assure you, I'll never vote for the same matter over here even though some people would argue we could. I think we have to have that kind of consistency.
I think, as Mr. Hutchinson asked me, when we have this liaison, we must respect each other's actions, and not try to cover the same ground.
Mr. SEIBERLING. Aren't there situations sometimes where originally FTC, or Justice, took an interest in a particular merger, and then the other agency asked to have it referred to them for consideration; and while the thing was sitting between the chairs, so to speak, the merging parties went ahead and pulled off their merger and presented everybody with a fait accompli?
Mr. Dixon. Well, the only time I remember this happening was with Consolidated Coal, which had been waived on. But when Congress asked us to make some energy studies, and the staff asked us to ask Justice to refer the matter over to us, and they did it with no caveats. But I tell you one thing, as a member of the Federal Trade Commission, if either one of these fellows comes up to me now and asks me to institute a suit going back to that merger, I'm not going to vote for it because the Department of Justice has the same degree of responsibility. If they made a mistake, they made it, and I think the businessman is entitled to rely on one agency or the other,
Mr. SEIBERLING. Well, I'm thinking about the situation where there wasn't any approval by either agency.
Mr. Dixon. Then it's still open. Mr. SEIBERLING. But, let's say, FTC started to investigate a merger, and at that point Justice said it was interested and asked FTC to send the file over to Justice, so it could look at it; and while Justice was looking at it, the parties could go ahead and move ahead. Wouldn't that create sort of
Mr. Dixon. If they told us they were interested we would say, “Send your attorney over here, and we'll let him look at the file.” That doesn't mean we'll quit.
Mr. SEIBERLING. But if Justice said it was interested, wouldn't you sort of suspend?
Mr. Dixon. If they said, “We wish you would waive the matter over here," then we'd decide why they would wish us to get out, and look into the reasons why they think they could do a better job than we would.
Mr. SEIBERLING. Now, you mentioned how corporate counsel drag their feet in trying to avoid giving information you want, and I'm sure that's the case sometimes. Isn't it also true that corporate counsel block a lot of mergers ?
Mr. Dixon. I would hope so, sir; I think they can read the law as well as Government lawyers can. I dare say they may be doing a very good job on the whole because God knows how many thousands they have advised against.
Mr. SEIBERLING. Well, I know I have personally blocked some mergers that my clients wanted very much to carry through, and I simply pointed out to them that on the basis of the cases they would just assure themselves of action against the merger; and they took my advice and
didn't go through with it. In fact, I can't recall a single time when, as a corporate lawyer, I told my clients they couldn't go ahead with a merger without violating the law, or taking the risk of it, that they went ahead with the merger.
Mr. Dixon. But if your client went out shopping for a lawyer that would say yes, they could find one.
Mr. SEIBERLING. My client was perhaps a little smarter than some.
Mr. SEIBERLING. Now, what I'm getting at is whether or not, without some clear guidelines and the fact that corporate lawyers are advising their clients, the FTC and Justice Department could possibly ride herd on all of the mergers that are taking place.
Mr. Dixon. Well, you know, I have tried to answer that question before. When the figures were put out—and we are largely responsible for them--there were 3,000 this year, and 2,700 that year, and they would go up and down. I think mistakes may have been made in putting those figures out because if we had 2,500 mergers in the past year, I would estimate that of that number, only 150, or 200 at the most would deserve real attention under section 7.
Now, that's what's taking place in our screening. We will look at maybe 300, really cases of moment; and out of those we keep active maybe a hundred. The staffs work very closely together. Here arises the necessity to marry a lawyer and an economist, when you get into this field. It took me 10 years to get them to speak to each other, but they get along pretty well now. But you paint with gray brushes when you talk about evidence in a merger case, not just black and white. My God, Congress put a subjective test in sections 2, 3, 7, and then they changed it to 8, and it's the same test: "may substantially lessen competition and tend to create a monopoly." Well, a citizen could say "What in God's name did Congress have in mind, they must have been able to define that test a little better than that." But it's a very good test. We now have beginning in 1915, all kinds of factual situations to which you can look for guidance. So, I think it's easier now for a practicing lawyer to give a client advice as to whether or not he is going to be challenged if he buys company A, or B, or something.
Mr. SEIBERLING. Now, wouldn't premerger notification with a mandatory waiting period block most mergers because of the fact, if the competitors of the acquiring company find out about it, why, then you've got a thing that tends to fall apart.
Mr. Dixon. You know, in 1958, when this was being considered by the Senate Antitrust and Monopoly Subcommittee, one of the problems I had was, what dollar limitation; and they got into an agreement whereby they put it up to $5 million. One way or the other "in commerce” was going to be all right, but the acquiring company had to have $5 million before it was important.
Now, you've got some limitations in this bill that have been mentioned here today, namely, $100 million and $10 million. Now, when you say there are 3,000 mergers, that would eliminate all but several hundred, at the most.
Congress has always maintained—and I think wisely--that all mergers were not intended to be questioned, there are some very wise
mergers that make things more competitive, and they were always protected when the Celler-Kefauver amendment was passed. They blocked
that business about stock. You can make a stock acquisition now, and it can be converted to an investment, and it's perfectly legal. There are many corporations which are willing to build up a portfolio like that and they can do that. They can convert the stock, even though it may be enough to take the company over, they can convert that amount of stock to nonvoting stock and there isn't anything illegal about that.
Mr. SEIBERLING. Well, what you are saying is, if it is above a certain size, there should be a public opportunity to look at it on the part of the FTC, and if confidentiality is so important that with publicity the thing would fail, that that's a risk society should take. Is that what you think?
Mr. Dixon. In my lifetime, I think the biggest problem facing this country today is, what are we going to do about increased concentration, multinational corporations, and what have you. What is the Congress going to do; are you going to have to manage them?
The one thing that stands between us and the dangers of monopoly are the antitrust laws. Now, our antitrust laws haven't worked very Tell with respect to monopolies; that's my judgment.
Of course, I fortunately spent my life in a career at the Federal Trade Commission, which was created to go after violations in their incipient stage; that's what our FTC Act and our enforcement of the Clayton Act are primarily aimed at, to halt practices before they reach a full-scale monopoly problem.
Mr. SEIBERLING. Well, let me just ask one other question, and that relates to what you just said. We had hearings here on the effect of joint ventures in the oil industry, and we had some pretty strong testimony that the whole pattern of the oil industry, even though the number of firms in the industry would not indicate that it is an oligopolistic situation, that nevertheless, because of the pattern of joint activity and interrelationship, that the industry is far less competitive than the number of firms would indicate.
What I'm wondering is, whether under section 7 you really have an opportunity, and if you do, whether you take the opportunity, to analyze the structure of an entire industry and determine that the joint venture patterns, for example, have produced a very substantial lessening of competition. And if so, what can you do about it?
Mr. Dixon. I think I'd better not attempt to answer that because the Federal Trade Commission of which I'm a member, sued the big eight oil companies. You all did go into that. We sent the staff up to answer for us sometimes because in the past, when I said even, “Yes, we have a complaint against a certain company,” darned if the outșide lawyers didn't have me disqualified three times from participating in the case. Mr. SEIBERLING. Well, that is not a section 7 case.
Mr. Dixon. This is a section 5 case. And section 5 is just about the greatest dream that Congress ever produced, in my opinion.
Mr. SEIBERLING. Well, my question is, and maybe you can answer this. Does section 7 give you an effective remedy in this type of situa
Mr. Dixon. A joint venture is another way that someone might describe a section 7 case-it's a marriage.
Mr. SEIBERLING. I think it is, but the trouble is, if you just look at that particular joint venture, maybe you don't see any problem;