Mr. LANGER, from the Committee on the Judiciary, Subcommittee on Monoply and Antitrust Legislation, submitted the following

INTERIM REPORT

INTRODUCTION-CONCLUSIONS AND RECOMMENDATIONS The Subcommittee on Antitrust and Monopoly Legislation has been increasingly aware of new trends in our economy which raise serious questions as to the adequacy of the Nation's antitrust and monopoly laws and their enforcement. Much of this legislation has now been on the statute books for more than half a century and needs to be carefully reviewed in terms of the realities of our contemporary economic life.

New outbreak of corporate mergers

The attention of the country has been focused more and more on the gathering momentum of the corporate merger movement. Our economy was subjected to its first great merger movement in the two decades 1885-1905. A second significant wave of corporate mergers took place in the latter part of the 1920's. Both of these earlier trends toward bigger business were regarded with considerable alarm by the people and, in turn, by Congress and both were followed by devastating business collapses.

Against this background, it is understandable that the third great corporate merger movement in our history, now in progress, should be the subject of widespread public, governmental, and congressional concern. This concern was shown as early as 1950, when a farsighted Congress, seeking to arrest this new trend in its incipiency, enacted the 1950 amendment to section 7 of the Clayton Act, known as the Kefauver-Celler Act.

Since 1950, the rate of acquisitions and mergers of manufacturing and mining concerns has nearly quadrupled, and recent figures in this respect closely parallel those of the years leading to the 1929 debacle. This is unquestionably behind the emphasis on the merger situation in an address by Attorney General Herbert Brownell, Jr., before the New York chapter of the Public Relations Society of America, September 30, 1954, where he said:

Now merger activity has long been recognized as having a major impact on the competitive structure of American economy. The high degree of industrial

concentration which has characterized and still characterizes certain segments of our economy stems largely from waves of merger activity.

There are indications that this merger movement has extended to the field of banking, with an increasing number of small, single-office banks being converted into branches of larger institutions, and larger banks merging into still bigger systems. The Wall Street Journal of December 28, 1954, states that, in the year ended June 30, 1954, the number of banks in the United States dropped by 83, compared with an annual average decline of 41 in the previous 13 years; while the number of branches rose by 450 against an annual average gain of 166 during the same 13-year period.

New form of merger in power field

During the last few years a new form of merger has appeared in the electric power field, where extension of monopoly over wide areas of the country may have serious consequences, not only to the vigor of all private enterprise but also to the vitality of our democratic processes. These mergers are taking the form of the combination of as many as 15 electric utilities in a region to set up another company set up to supply wholesale power. There are at least four major instances of this new form of merger, which creates a community of interest in the field of electric power that may well circumvent the laws presently on the books to protect the true elements of a competitive economy.

Because of the vital relationship of unrestricted supplies of electric power at the lowest possible rates to the maintenance of a dynamic free enterprise economy with full employment, this committee decided to explore first monopolistic trends toward suppression of competition in the power industry, with the intention to expand the study to other phases of the country's economic life.

The electric power field is commonly recognized as an area of "natural monopoly." All this means, however, is that it is uneconomic to have more than one company serve a given area. It does not mean that what might be termed "unnatural monopoly," with all the evils flowing from lack of competition, may not arise in the power industry. In other words, the "natural monopoly" concept was never intended to sanction a situation, to take an extreme example, where one private utility system would control all the electricity in the United States, or where a number of utility systems joined together would have such control. Thus, it is perfectly possible to have "natural monopoly" stimulated by very effective competition, either through neighboring systems rivaling each other in offering their respective areas lower rates and expanded service, or through public and cooperative power "yardsticks," discussed below.

Complaints of monopoly abuses in the power industry

Since the latter half of 1953 the committee has been receiving an increasing number of complaints calling attention to the extension and abuse of monopoly in the business of supplying the Nation's electric power. Requests for investigation have come from the Missouri River Basin, the Pacific Northwest, the Southwest, the Tennessee Valley, the Southeast, and the Niagara-St Lawrence region.

These complaints have consistently alleged that monopolistic abuses and new administrative interpretations of the power policy established by Congress threaten the disruption of competition in the

electric power industry and the ultimate creation of an all-embracing power monopoly. Special emphasis was given to the monopoly aspects of the so-called Dixon-Yates contract, as the start of an all-out attack on the Tennessee Valley Authority yardstick and the creation of new and stronger monopolistic trends.

Such a power monopoly has been recognized for nearly half a century as a threat to the best interests of the Nation. The following words of a farsighted President of the United States, Theodore Roosevelt, therefore, have a contemporaneous ring:

The great corporations are acting with foresight, singleness of purpose, and vigor to control the water power of this country ***. I esteem it my duty to use every endeavor to prevent this growing monopoly, the most threatening which has ever appeared, from being fastened upon the people of this Nation.

This warning of President Theodore Roosevelt accompanied his veto of a bill giving away a hydroelectric power site on the James River in Virginia. It was written in 1906.

In response to the complaints, the committee has held a series of hearings to determine whether the facts warrant a broad investigation of the matter, as a basis for further action by Congress to check the development of monopolistic abuses and tendencies in the private electric industry.

This interim report has been prepared to furnish Congress with the facts thus far developed and it is the opinion of the committee that these facts show a clear-cut need for further investigation. Hearings on monopoly abuses in power industry 1

The committee held hearings on December 7-10, 1953, and January 21, March 2 and 4, 1954, to consider complaints that the new Federal administration power policy and revised rules for marketing power from Federal dams in the Missouri River Basin, adopted by the Department of the Interior, abrogated the provisions of Federal power legislation, designed to foster public and cooperative competition in the distribution of electric energy and so tended to favor private monopoly. At the hearings, full opportunity was given responsible officials of the Department of the Interior to explain its new policy pronouncements, answer the charges, and respond to questions.

On May 13, 1954, the committee held hearings to consider complaints that, through abrogation of the Southwestern Power Administration-REA cooperative partnership contract, the new Federal administration interpretation of power policy was undermining competition in that region.

The committee held hearings again on July 1-2, 1954, to consider complaints that the long hand of private power monopoly had reached out to cause the withdrawal of an important power engineering firm from participation in the Von Tresckow syndicate proposal, which was competitive with the Dixon-Yates holding company offer to supply power to the Tennessee Valley Authority, and that the whole handling of the competitive proposal reveals the possibility of monopoly abuses.

1 The record of the hearings has been printed in 5 volumes as follows: Power Policy, pt. 1, December 7-10, 1953; pt. 2, January 21, March 2 and 4, 1954-cited in this report as RPP, for record, power policy hearings; Power Policy (Southwestern Area), May 13, 1954-cited in this report as RSW, for record, power policy, Southwestern area hearings; Power Policy (Dixon-Yates Contract, pt. 1, July 1-2, 1954; pt. 2, September 28, 30, October 1, 5-7, 21-22, and 30, 1954-cited in this report as RDY, for record, power policy, Dixon-Yates hearings.

The committee held further hearings on September 28-30, October 1, 5–7, 21, 22, 29, and 30, 1954, to consider complaints concerning Wall Street domination and monopolistic practices of subsidiary power companies of Middle South Utilities, Inc., major participant in the Dixon-Yates contract.

On October 29-30, 1954, the committee heard Gordon R. Clapp, former Chairman of the Tennessee Valley Authority, testify concerning the TVA as a modern means of dealing with private monopoly in the field of electric power, and the Dixon-Yates contract as an instrument of private monopoly's drive to eliminate the only effective form of competition.

What the evidence shows

The evidence presented in the hearings leads to two important conclusions: First, that there is a two-pronged drive by private monopoly to destroy public competition in the power business, and that the Dixon-Yates contract is a part of that drive; and second, that Wall Street domination of the power industry has revived many of the holding company evils which Congress sought by legislation to suppress, particularly the extension of monopoly control over very wide regions. This evidence may be summarized as follows: Two-pronged drive of monopoly

The first prong of the drive to eliminate public and cooperative competition in the electric power business is being conducted by the private power companies in their own States, and includes:

(1) Political activities to defeat local community undertaking of public or cooperative electric service in competition with the local private monopoly;

(2) Construction of "spite lines" and establishment of discriminatory local competitive rates to undermine and bankrupt rural electric cooperatives, with a view to ultimately taking them over;

(3) Attempts to bring about a complete monopoly of wholesale power supply by blocking the construction of Federal or cooperative generating stations or by securing the output of Federal generating stations, in spite of the preference provision of Federal power marketing laws;

(4) Political and public-relations activity to bring about the leasing to the power company of municipal electric systems so as to eliminate all vestige of competition in the distribution of electric

energy;

(5) A whole range of political and public-relations activities, including retaining of local lawyers in communities throughout the powercompany service area and at the State capital; distribution of contracts for services and supplies, with the understanding that helpful political activity is expected; financial contributions and other assistance to candidates favorable to State executive and administrative activity in support of monopoly objectives; direct efforts to influence the policy and conduct of State administrations, State legislative bodies, and State regulatory agencies, insofar as the interests of the private power monopoly are involved; and the distribution of advertising and mat service to the daily and weekly newspapers throughout the State.

The second prong of the drive, to eliminate public and cooperative competition in the electric power business, is being conducted through

the organized activity of private power interests at the national level, directed at the reinterpretation and altered administration of Federal power policy. During the last 2 years, it has found expression in the following changes in the Federal power program:

(1) Denial of Federal responsibility for maximum use of its resources programs to assure adequate low-cost power supply to meet expanding needs of public and cooperative systems, where those nonprofit systems have been encouraged to depend upon this source of supply, not only as a basis for their financing but also to enable them to exercise a competitive yardstick influence on private power monopoly.

(2) Repudiation of Federal partnership with local public and cooperative electric systems, forcing many of them to the practical choice between bankruptcy and accepting the terms of their private competitors, with the certainty that the result in any case will be higher rates and more restricted service.

(3) Practical repeal by administrative action of the preference provision for marketing power to nonprofit community systems, through freezing further hydroelectric developments; refusing to purchase enough off-peak steam-electric energy to fully firm up Federal hydro; selling the output of Federal power projects, under long-term contracts without withdrawal privilege, where such power will be needed to meet the growing demands of public and cooperative electric systems; and direct suggestion that such systems make terms with adjacent private systems for their needed power supply.

(4) Refusal of funds for necessary construction by the Tennessee Valley Authority of additional steam capacity for meeting its utility responsibility to its 148 municipal and cooperative partner distribution systems and the substitution of an awkward arrangement through which private power systems would gradually take over TVA's power supply function.

Dixon-Yates contract

The Dixon-Yates contract provides a clean-cut example of the second prong of the private monopoly drive to eliminate public and cooperative competition in the electric power business, and reveals a close parallel at the national level with activities of operating subsidiaries of the chief participating holding company within their own States. The evidence concerning the background and purpose of the contract shows that:

(1) The TVA has proved itself one of the most effective public instruments for breaking the restrictive influence of private monopoly over the necessary expansion of the country's power supply and the rates charged for electricity, with wide influence over the private power companies, not only adjacent to it but throughout the country. (2) The effect of the new kind of competition on the private power companies in its neighborhood has been to cause the companies to achieve lower rates, greater expansion in generating capacity, and greater expansion in profits for their stockholders than other private power systems throughout the country, thereby demonstrating the effectiveness of competitive influence on monopoly;

(3) The Dixon-Yates contract was worked out by the Bureau of the Budget and the Atomic Energy Commission in collaboration with TVA's "worst enemies," "behind TVA's back." Representatives of