I think a few words could be added to that section to make it completely workable. Section 3 of the Clayton Act, I think, should be amended to read as follows:

That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods or other commodities, whether patented or unpatented, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding, or with the effect that the lessee or purchaser thereof shall not use or deal in the goods or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

Mr. Chairman, I have added to existing law these words, "or with the effect," and for this reason: If I am making soda-water sirups and go to Mr. Dyer, who runs a soda-water fountain, and put my price list before him, he is induced to deal exclusively with me because my price list recites that if he buys 1 barrel of my stuff it shall be at so much per gallon, 10 cents a gallon; if he buys 2 barrels, it shall be 9 cents; if he buys 3 barrels, it shall be at 8 cents, and so on down the scale, so that as the quantity purchased ascends the price he pays drops. Now, that is in the nature of a rebate, but it is very difficult to prove under our law that it is, and I thought by the inclusion of the words, "with the effect," that we might cover those cases.

Mr. YATES. Do you not think that where a man buys in very large quantities he ought to be permitted to buy at a lower rate?

Mr. MURDOCK. Yes; I think the quantity

Mr. YATES. If there is no dishonest intent?

Mr. MURDOCK. I think the quantity discount is a perfectly justifiable discount within limits, but this cumulative quantity discount is not a simple quantity discount, in fact, because the quantity is not delivered at once. A small quantity, 1 barrel is delivered, title passes, the deal is closed, the money is paid, but by reason of the fact that I have bought 1 barrel previously I can get a lower price on the next barrel, and I, as the manufacturer of the soda sirup, force my full line upon Mr. Dyer, at the expense of my competitor. Mr. YATES. I think I see the distinction.

Mr. MURDOCK. Mr. Colver states that I should correct the record and the impression I gave you gentlemen in my recital of how the cumulative quantity discount works. Mr. Colver says that in many instances the cumulative quantity discount carries the price clear back to the lowest price of the last barrel purchased.

Mr. YATES. It is ex post facto, retroactive?

Mr. COLVER. The reason we call it cumulative is because they have one price on 1 barrel, and a lower price on 2, and a still lower price on 3, and a continuing lower price on more. When the second barrel is bought it is bought at the price of 2 barrels, and that price relates back then to the first barrel which was bought on the 1-barrel price. When a third barrel is bought, it is bought on the basis of a 3-barrel purchase, and the discount relates back to the second barrel and the first barrel, so that the effect is the tying of the customer to that particular seller. Having used 5 barrels, and wanting a sixth, he can either start in on a competitor at the 1-barrel price, or he can buy his sixth barrel from the man he bought 5 from, and get not only the sixth barrel price for the 1 barrel, but for the other 5 barrels, so it is clearly an arrangement to tie the customer to his purveyor.

Mr. GOODYKOONTZ. What is unfair about this practice, legally or morally? Has not every other manufacturer the same privilege?

Mr. MURDOCK. Now, in section 7, Clayton Act, Mr. Chairman, Congress provided against a corporation's acquisition of stock in competing companies. I think at the time Congress passed that act it was a wise piece of legislation. But section 7 of the Clayton Act certainly needs strengthening now, because section 7 does not include the word "property." The corporation will now buy not the stock of the competing concern, but its physical property, and the absence of the word "property" in that section permits the merger which Congress sought to prevent. I saw a case last week from Wisconsin which shows you how subtle an acquisition can be, even of stock. A Wisconsin manufacturer sold his interest in his business to a great concern in this way: The manager of the Wisconsin concern turned over to the big company two notes. One, as I recollect it, was to run five years and one was to run seven years. The note which was to run seven years was for a small amount; the other was for a large amount. The Wisconsin man put up in the hands of the big concern as collateral for these loans his stock. While it was not a majority, it gave control in his company. The voting power of that stock was placed in the hands of the concern which made the loan, and an option to purchase the stock was given, and the stock was not returnable to the Wisconsin man until the longer term note, the note for the small amount, was paid. The big concern came into control of the Wisconsin company. I think before the courts of the land in the case of a device of that kind the Government can win. But the Government can not win where there is an acquisition of property instead of an acquisition of stock as the law stands to-day.

Mr. STEELE. Does your amendment prohibit the merger and consolidation of corporations?

Mr. MURDOCK. Section 7 prohibits the acquisition of stock in a competing company, a merger to that extent.

The CHAIRMAN. It does not prohibit the merger of the physical property itself?

Mr. MURDOCK. No; it does not; and I propose here, Mr. Chairman, this amendment to section 7:

That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the property or of the stock or other share capital of another corporation, partnership, or individual where the effect of such acquisition may be to substantially lessen competition between them, or to restrain such commerce in any section or community, or tend to create a monopoly in any line of commerce. No corporation shall acquire, directly or indirectly, the whole or any part of the property or of the stock or other share capital of two or more persons, partnerships, or corporations engaged in commerce, where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise may be to substantially lessen competition between them, or any of them, whose property or stock or other share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.

I have inserted the word "property" in addition to the word "stock." I think the addition necessary. The absence of the word 'property" from the law is driving these corporations seeking mergers, as Mr. Steele calls them, between competitors, but more properly absorptions, into the actual purchase of the property, not the acquisition of stock. Even as I instanced, where the acquisition of stock is made, it is subtle.

Mr. STEELE. You stated, in the beginning, that the tendency of all business in these days is toward larger business, larger units, but if those larger units are under Government regulation in some way, does it make any difference to the public whether consolidation or purchase takes place, as long as they are under Government regulation or direction?

Mr. MURDOCK. Mr. Steele, no man within my acquaintance can fix a limit upon the magnitude of a unit and say how big it shall get without injury to society.

Mr. STEELE. The Supreme Court has said that mere bigness is no offense.

Mr. MURDOCK. I know that is true. Speaking only for myself, without bringing the others of the commission into it, I believe that there is a legitimate economic limit to beneficial magnitude. As a Government, we are, perhaps, not prepared as yet to take that proposition on, but as an alternative to action along that line, I am convinced as an American citizen that every effort that the Congress, that the executive branch, and, most of all, the courts can employ to keep competition alive, the better for this country. The more competition you can have within fair lines, within decent lines, the safer our journey through tempestuous seas. I think that any normal, human being who will serve as long as one year on the Federal Trade Commission, will, at the end of the year come out of it devoted to the principle of competition. It is not only the life of trade; it is trade itself. You never fully eliminate it, even when your units are large. Competition is still there even when monopoly is stifling it. Now, whether or not, in answer to that question, we have come to the point where, as a government, we shall say to a unit, "Thus far and no farther in magnitude," I am not prepared to say, but, on the other hand, I am prepared to say that every device that the Government can employ to win men to compete and keep them in competition, it should employ. When Congress, in its wisdom, decreed that a corporation in interstate commerce may not acquire the stock of a corporation in interstate commerce, where the effect of the acquisition was to lessen competition, I believe that was a beneficial law. It is not as beneficial, as it should be, because these big companies are not buying the stock, they are buying the property. The effect is the same. Our law in that respect is a short ladder.

Now, you asked me whether or not the big unit is more serviceable to society. My answer is, with my present lights, no, it is not more serviceable. I think the tendency of the big unit in commerce, either through combination or otherwise, wherever it approaches the realm of monopoly, is to exact an unjust toll from the community. In this connection just a superficial survey of the commerce and industry of this country will convince the wayfaring citizen that the concentration of wealth through various channels is still in progress, and always at an accelerated rate, and not to the advantage of the people.

Take this general discussion throughout the country about the high cost of living. There are many ills, many doctors, many remedies offered. No man, perhaps, can catalogue them all. A man on the Federal Trade Commission, however, becomes aware of certain industrial tendencies, tendencies which are guiding control in industry back to basic materials. If you want a complete survey of

the United States and its industries to-day, you can not get a survey that is intimate and illuminating, unless you go back to the point of basic materials and the control of those basic materials, fuel, lumber, steel, cereals, meats, leather, and textiles.

The CHAIRMAN. And oil?

Mr. MURDOCK. Well, oil is fuel. You can take all of those basic materials, you can take coal and petroleum, that is fuel, you can take lumber, you can take steel, cereals, meats, textiles and leather, and you have covered everything that goes on a man's back, over his head in the shape of a roof, and into his stomach as food. Every one of these industries, gentlemen, deals in basic things, and in each one of these industries there is an accelerated concentration of wealth and control. For that reason, I believe, Mr. Steel, that the time will come when this Nation will stand face to face with the problem of mere magnitude alone.

Mr. STEELE. Was there any real benefit to the public caused by the dissolution of the Standard Oil Co., either by a reduction of price or in any other way?

Mr. MURDOCK. No; and for the reason that the Standard Oil dissolution is not visible to the naked eye. You can not see it. The Standard Oil Co., under the decree of dissolution, divided into different companies, the idea being to have a common stock interest and control. I remember that Herbert Knox Smith, then director of the Bureau of Corporations, after the Standard Oil decision, said that that was precisely what would happen that they would divide among the holders of the Standard Oil stock fractional stock in the different companies, and the same men would control all the companies instead of of the same men controlling one company,

The CHAIRMAN. The same thing happened in the Great Northern dissolution.

Mr. DYER. And in the American Tobacco Co. case.

Mr. MURDOCK. I think the word "property" should go in section 7, Clayton Act, and I do not think it is going to work a hardship upon anyone and that it will benefit the community.

Now, section 8. I do not care to press this to any great extent, but section 8 limits us in interlocking directorates to corporations of $1,000,000. It has been suggested in the commission that that be reduced to $500,000.

Now, Mr. Chairman, coming back to your proposition, refusal to sell, and then I am through. Here is your idea, expressed in a proposed amendment:

That it shall be unlawful for any person, partnership, or corporation engaged in commerce, directly or indirectly, to fix or attempt to fix or maintain a price for which its goods or other commodities shall be resold by the first or any subsequent purchaser thereof, or to refuse to sell same on account of a refusal or failure by any purchaser to maintain a resale price.

Now, the above is suggested only on condition that Congress does not adopt the plan for price maintenance, which the commission has already recommended to it. Some restraint in trade is due, Mr. Chairman, to the fact that the manufacturer tries to make the retailer maintain a resale price, by refusal to sell.

The CHAIRMAN. As long as the wholesaler can refuse to sell to any one that does not maintain it, this statute will be void.

Mr. MURDOCK. The commission proposed to Congress some time back that the resale price could be maintained if a governmental

body like the Federal Trade Commission were authorized to pass upon the fairness of that price if challenged by any party at interest. The CHAIRMAN. But that is still eliminating competition??

Mr. MURDOCK. Yes; but I subscribe personally to that-and I am speaking purely personally-because the manufacturer with a trademarked ware does have a moral right in that ware after it has left him, he has a right in its good name. He has no legal property right, after the title passes; I realize that.

The CHAIRMAN. It is true, Mr. Murdock, that anybody can get a trade-mark, and that every article in trade, if you pass that law, would naturally become trade-marked, and that would allow the fixing of the price for everything that is sold in commerce.

Mr. MURDOCK. Well, I think not, Mr. Chairman.

The CHAIRMAN. Flour, butter, and I guess even eggs, could be trade-marked.

Mr. MURDOCK. I suppose they could.

The CHAIRMAN. They may trade-mark practically everything. Mr. MURDOCK. It is perfectly plain to my mind that when goods pass from the manufacturer to the dealer, and the title in them has passed, that the goods belong to the dealer; they are his goods, and he ought to have the right to do with them as he pleases, but not to the injury of the good name of the ware. But as the community is organized at present, if you are the retailer, Mr. Dyer, and you do not maintain the price on the goods that you have bought, and in which you have title, you will probably get no more of those goods. Now, since the Miles medical case, which you mentioned, was decided, there has been another case. This went up from the district of Virginia to the Supreme Court on a demurrer to an indict ment. It was a criminal proceeding, the Colgate case, and the Supreme Court held, in effect, that a man had a right to choose his own customer.

The CHAIRMAN. I made some comments on that provision when the thing passed this committee.

Mr. MURDOCK. Now, if Congress is not going to give the commission or some other governmental body the duty to umpire prices maintained on resold goods, then Congress ought to give us the amendment that I have suggested, which will give supervision over this proposition, because trade is restrained at times, as the chairman suggests, by this device as at present employed.

There is another further suggestion of amendment which I will not discuss. Congress, through an oversight, did not give us jurisdiction over commerce between this country and the Philippine Islands. We did not discover that until very recently, and I would suggest this amendment to section 4 of the Federal Trade Commission act. At the conclusion of the paragraph defining commerce add the following:

or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State of the United States or the District of Columbia or any foreign nation.

The only change in that being that it gives jurisdiction over commerce between the United States and the Philippine Islands. We have not that now. The law was so framed that it left the Philippines out.