Yet, whatever this committee does about the pass-on issue, must be done in light of the problems previously mentioned. Again, my precept is that the shortness of human life should enter into our discussion, by which I mean that speedy justice is the best justice in antitrust cases. To give my conclusion first and my explanation later, it is my opinion that the rules of Hanover Shoe and Illinois Brick are good ones, first, because they do not tend to encourage the number of separate lawsuits which will be filed in any given piece of litigation. Second, they restrict the number and size of the plaintiff's class in most cases to a merely enormous, but hopefully manageable size. Third, they make it more, rather than less, likely that the jury will be able to fathom the case put before it.

However, I would like to direct this committee's attention to two factors which I believe to be of enormous significance to this committee's action on the bill. The first factor has not, I believe, been drawn to the committee's attention before. Simply stated, it is that there is no demonstrated need at this time for this bill. The second factor relates to the overlong introduction above: The specific "pass-on" problem should not be addressed in a vacuum but should be considered only in the light of an overall study of where the antitrust laws sit today, what objectives we are seeking to attain and how we should go about it to effect perhaps fundamental changes in the law.

There was a great hue and cry after the Supreme Court's decisions in Brick in June of last year. Prophets of doom, primarily from the offices of the various Attorneys General, indicated that the Supreme Court's decision left it free for antitrust violators to pocket their ill-gotten gains and thumb their nose at the world. The decision, according to these alarmists, had the effect of keeping consumers from getting their just rewards.

This is not a provable assertion. All existing indicia are to the contrary. In short, the prophets of doom underestimated their own ingeunity and fleetness of foot. One mechanism, utilized by the States, is to charge that the manufacturers conspired with the middleman to increase prices to public entities. Another is to claim that the manufacturers "coerce" the middleman to increase prices to consumers. It is thought, in each one of these situations, that there is a high likelihood that Brick will not be deemed to foreclose such actions.

The Third Circuit's recent decision in Amstar has also done much to get around the rule articulated in Brick. Judge Samuel King in Hawaii has recently provisionally certified a consumer class in the Hawaiian Beer antitrust litigation. The States' Attorneys General who are seeking to break up the major oil companies have thus far escaped any Brick problems in MDL-150 (the Petroleum Products litigation). Of course, we do not yet have a clear appellate reading on all aspects of Brick. We probably will not have such a clear reading until the Supreme Court resolves a conflict which will probably develop among the Circuits. The evidence thus far, however, indicates that the ingenuity of the plaintiffs' bar, coupled with the reluctance of Federal judges to reach other than equitable results, may well achieve the objects of this bill without any of the concomitant uncertainties and complexityengendering features of the bill. Why then must a bill be passed now? There is no need to act until the courts have shown an inability to surmount the "perceived" problems.

I do not perceive either the present proposed Senate bill, or the proposed House bill, as mere matters of overruling Illinois Brick or Hanover Shoe. In other words, they will not simply put antitrust back on a course which it had been confortably and merrily following prior to Illinois Brick. Instead, they are themselves the breeding ground for a host of new decisions. This may not be bad, but it certainly should not be unanticipated by this committee.

Hanover Shoe, for instance, did not bar the defensive use of passing-on. It only said that a pass-on could not be asserted by a defendant, when the subject good (shoe machinery) was itself not passed-on, but rather only the effects of the alleged over-charge were passed on. I understand the House bill to adhere to this decision, although it is not perfectly clear. I believe the Senate bill would permit the Hanover Shoe defendant to assert a passing-on.

Second, one of the benefits of Illinois Brick was to simplify in part the complex issue of standing which has troubled antitrust practice for many years. If only direct purchasers have a cause of action at all, then, of course, the standing issue can arise only in the context of direct purchases. In that context, it is generally not an issue at all. By overruling Illinois Brick, Congress will bring back in its fullbloom muddiness the standing problem.

You must understand that as I see these problems looming on the horizon, I am not glum. There is nothing more unbelievable than a lawyer who complains about a statute which creates legal problems. But all the legal problems I anticipate in the

proposed legislation are nothing compared to the complexity of the class problems, multidistrict problems, and jury trial problems, which necessarily will result from permitting offensive and defensive use of pass-ons antitrust litigation. For each economic level in the chain of distribution, there will be a class. Each member of the class will have to have notice. Each member of the class will have to prove damage, or even if the bills proposed succeed in simplifying this issue, still each class will have to prove damage, and that will be no mean feat. What I see happening is a loss in the ability of the State and Federal Governments and the private plaintiffs' bar to enforce the antitrust laws and a loss in the ability of any lawyer anywhere to try more than one antitrust case in the course of his or her lifetime. If I exaggerate, attribute it to my advocative tendency. But I don't think I exaggerate too much.

I certainly, in some situations, the principles of Brick will direct that a recovery be made on behalf of a so-called middleman, as opposed to a consumer. However, before the determination is made that in all cases we are to be faced with the enormous complex problems of passing-on or no passing-on, I respectfully suggest that the subject should be covered in the overview of the antitrust laws which the Senate subcommittee started to undertake last spring.

As a private practitioner, I was delighted that Senator Kennedy had set up a mechanism for such an overview last spring. I have followed the hearings with some interest. I hope that such an inquiry will continue and that it will give close scrutiny to the impact of all of the recent legislation, including the parens patriae legislation, and Brick and other decisions, in determining whether changes should be effected in our antitrust laws. The Congress may well decide that all recovery for private treble damages should adhere to the benefit of consumers. Certainly it has always been true, and will always be true, that the man who bears the expense of illegal activities (as well as the judicial and administrative expense involved in vindicating the laws) is the man on the street. It may well be that Congress in its wisdom will see fit to give all recovery to consumers. However, this should be done as a result of a very thoughtful overview of the entire law and that which the law seeks to accomplish. It should be done in the light of the recommendations of the soon-to-be-appointed Presidential Commission on Procedures. It should be done in the light of the reforms that are currently under way in the Criminal Code as well as the reforms that are under way in connection with the structure and operation of Federal antitrust grand juries. It should not be done hastily.

I beseech this committee to fulfill the role which has always been attributed to the Senate, that of "thoughtful deliberation." To act in haste now may create decades of repentance. I can assure this committee that I, acting in the role of a plaintiff's advocate, would much prefer that this bill not be on the books. It is frightening to think that a perfectly good claim of a Section 1 violation could be subject to the interminable claim of "pass-on," asserted either by defendants or by lawyers representing another "class" of purchaser.

A class action is not the only way to vindicate the purpose of the Sherman Act. The individual action has been the rule rather than the exception, in my experience. The man most closely impacted by the violation is the one, in my experience, most likely to sue and the one most likely to be able to present a simple and convincing case to a jury. I would be very surprised if the more thoughtful members of the plaintiffs' bar, who do not owe their living to class action windfall fees, would support this bill.

I recognize that the "pride" of Congress has been stung by what it regards as the Supreme Court's "callous" disregard of statements in the legislative history of the parens patriae bill. Yet, is it too much to ask that the Senate act in a statesmanlike manner and forego taking action? I think not. The remedy need not do more than cure the problem. Indeed, no remedy should be prescribed until its need is truly evident and until all of its consequences on "uninfected" areas have been thought through.

STATEMENT OF PERRY GOLDBERG, ATTORNEY, SPECKS & GOLDBERG, CHICAGO, ILL., ACCOMPANIED BY JAMES SLOAN, PARTNER, SLOAN & CONNELLY, CHICAGO

Mr. GOLDBERG. I thank you, Mr. Chairman.

Mr. Chairman, I would like to thank the subcommittee for the opportunity to appear before you today. I have submitted a written statement, which I presume you will read or already have read. I will not attempt to recite it.

Senator ALLEN. Without objection, your written statement, in its entirety, will be inserted in the record.

Mr. GOLDBERG. Basically I would like to state a very few things in my statement. The first is that I am a plaintiff's lawyer as Mr. Gillam has pointed out to this subcommittee. We certainly do not agree on anything. We probably do not even agree on our disagreement about the vices of the proposal before this subcommittee today. But in any event we are both opposed to it. That may force me, at least, to question my opposition. It may even perhaps force him to reconsider his opposition. [Laughter.]

Mr. GOLDBERG. On the other hand, I represent primarily direct purchasers currently in litigation. I am lead counsel in the Folding Carton antitrust litigation in Chicago where we recently have submitted the class numbers totaling 30,000 in number of small businesses, primarily throughout the United States, who, in our judgment, have been victimized by part of the overall price fixing in the paper industry.

We are also involved in some litigation with Mr. Gillam, I believe, in Philadelphia, where my partner, who was with him earlier this week, and in which we are seeking a class of people who are victimized by other aspects of the price fixing in what we regard as the worst price fixing since the electrical equipment industry. We have some litigation also, I guess, in which we are involved in Texas in the same industry.

These purchasers have pursued and are pursuing actively their rights under current law. That is the only one case in which we are involved.

Senator ALLEN. We are not prohibited in current law—

Mr. GOLDBERG. They are uninhibited by current law, that is, these direct purchasers. In fact, they are rather active.

To take an example, the Folding Carton antitrust litigation, we are hopefully about to commence, with the assistance of the Department of Justice, a program of about 34 depositions of former employees and present employees of these malfactors throughout the United States.

Mr. GILLAM. I will I get equal time, Senator Allen? [Laughter.] Mr. GOLDBERG. You are not in that case. [Laughter.]

That is one set of litigation in which 30,000 people's rights could be dramatically affected if this bill would pass in its present form. Another piece of litigation in which I have had a somewhat active role, and still do, for that matter, is the Western Sugar antitrust litigation.

Senator ALLEN. What would be the effect of this legislation on pending direct purchaser suits?

Mr. GOLDBERG. Mr. Chairman, I really cannot tell you.

First of all, I think both the House bill and the Senate bill are drafted in such a way that nobody understands them. I think that is one of the major vices. I have spent about 20 years in this area, and I do not understand them. I think they are poorly drafted, technically deficient, and they are probably the worst bills that I have seen proposed in a long time of bad bills being proposed. I am really disturbed by them. In fact, I was so disturbed that I started calling up all of my friends in the plaintiff's bar throughout the United States. We are organizing a committee to actively oppose

them. This is somewhat unique since most plaintiff lawyers do not talk to one another over the years. They mostly talk with defense lawyers, or hopefully they do.

But in any event, this is really a situation that we regard as unprecedented threat to the enforcement of antitrust throughout the United States. Quite frankly, we were surprised that the business community is taking the same position that we are taking. Normally we think the business community would be in favor of minimal antitrust enforcement. Perhaps they have finally come to recognize that if they do not have antitrust enforcement, they may be facing somewhat more severe, like nationalization or something of that character in the future. In any event, we are opposed to this bill in its current form. On Illinois Brick itself, I think I have stated my position fairly consistently. I do not regard it as the world's greatest calamity. It is a poor piece of writing by the Supreme Court. It is something, from a fireside equity viewpoint, that I have no sympathy with. I am sure no one does.

In fact, more defense counsels than I would care to discuss have told me that they think it is bad law. Well, it is bad law, but it is here and there is not much that this body can do about that. This is unfortunate but true because that bad law is read into perhaps 40 other pieces of legislation, the State antitrust laws. Many of those States, by rules of decision, will follow Illinois Brick no matter what this body does about it. Therefore, the first purchaser will have a right of action under State antitrust laws or, at least, this is an arguable position, no matter what Congress does about this matter.

Perhaps by passing this bill we will have more antitrust enforcement. If that is the result, I am in favor of it. In that case, you will have the wrongdoer having to pay the overcharge, both to the first purchaser, the second purchaser, to the third purchaser, and anybody along the way. I do not really care if it is nine times recovery, but let us not kid ourselves about it-that may well be the result of this bill.

In conclusion, our view is to please not throw out the baby with the water: to wit, do not throw out Hanover Shoe. We like it; We think it is a good law. If you have got to do something about Illinois Brick, please do not throw out Hanover Shoe.

Senator ALLEN. Thank you very much. Your testimony is most interesting. I think it will be most persuasive.

As you know, most legislation of this nature, or of a consumer nature pending in Congress, has an attractive label. Any legislation have to do with antitrust activity has got a substantial vote in either House just by its name.

So, I think the testimony of you three gentlemen has been most interesting and most persuasive. I am very much pleased that we have had this opportunity to hear from you all.

Mr. Goldberg, if this legislation should be passed in its present form, which would more or less outlaw suits by direct purchasers, would you then drop down to the next level in your practice and start representing indirect purchasers? [Laughter.]

Mr. GOLDBERG. Mr. Chairman, over the years, I have represented far more indirect purchasers than I have represented direct purchasers.

Primarily I have represented indirect purchasers, but there was no problem with those cases. We managed to do them in a pragmatic way when the law was the way it was before, or at least the way we thought it was before.

The Supreme Court, in its undue wisdom, enlightened us. Well, we are living with that. The defendants will pay. They have always paid. That is the primary effect of antitrust. It is to raise the marginal cost of violating the law. So long as you have vigorous private enforcement, which we are just really beginning to achieve now, you will find there will be less violations of the law.

You do away with that by putting on the books some sort of a questionable bill over here, a bill which will, at the very least, cause 10 years of interpretative delays. A delay which will allow defendants to get away with 10 years more of stealing. That is what this bill would do. Then there is no doubt in my mind that you will have accomplished 10 years of delay in effective antitrust enforcement. If that is what this committee wants to achieve, then pass this bill by all means. You will have achieved it.

Senator ALLEN. When you speak of delay, are you talking about the delay in the ultimate and final decision of the class action suit, the delay in court, or the delay in asserting claims?

Mr. GOLDBERG. I think I am talking about even the delay in interpreting the bill itself. I think that this bill is so poorly drafted that if I were defending, I would have no difficulty in tying up any case for at least 10 years. In fact, I would enjoy that.

Senator ALLEN. I suspect that remark will be used on the floor in discussing this issue. [Laughter.]

Mr. GOLDBERG. I would find it rather enjoyable to defend, under the circumstances, instead of being a plaintiff.

Senator ALLEN. Do you regard the holding in the Hanover case as being a landmark decision aiding the enforcement of antitrust claims of price fixing?

Mr. GOLDBERG. Yes, sir. Not only do I regard it as a landmark decision, but I can well understand the business community's desire that if they are going to get Illinois Brick thrown out, then they have to get Hanover Shoe thrown out. I am not very sympathetic with that view.

I have to say that the important thing to me is Hanover Shoe. Illinois Brick is something that appeals to my heart in the sense that I am opposed to Illinois Brick because there is something wrong by not allowing a person who has been hurt to collect in the courts.

But if I have to choose between my heart and my head, in this case, I will take my head. My head is Hanover Shoe. Hanover Shoe says: "We are going to get antitrust enforcement." Illinois Brick says: "The wrong guy may collect." That is unfortunate.

But I would rather throw the money down the cesspool than not collect it from the wrongdoer.

I think that this bill very much risks that result in the real world.

Senator ALLEN. As a distinguished antitrust attorney, do you feel that the cause of antitrust litigation would be harmed by S. 1874, the bill before us?