TVA were called in, belatedly, simply to provide technical advice. The private power companies invited to participate in decisions involving TVA's future expansion included those whose demonstrated shortsightedness in planning future power supply would have held back economic development of the region.

(4) The Bureau of the Budget-AEC combination, that was working out this deal with private power monopoly, took steps to muzzle the Chairman of the TVA to keep him from discussing the Dixon-Yates negotiations when he was to appear before the Senate Appropriations Committee, thus deliberately keeping important information from Congress. This was consistent with their later refusal to respond to the request of this committee for a copy of the Dixon-Yates contract draft.

(5) The Dixon-Yates contract provides private power monopoly with an entering wedge for gaining control of TVA's expanding power supply, tending to undermine the unity of its power supply management and thus to bring about higher and higher costs, ultimately strangling the country's most effective electric rate and service yardstick.

Wall Street domination and revival of holding company evils

The influence of large banks, insurance companies, and other Wall Street financial institutions behind the two-pronged drive to eliminate competition and extend the grip of monopoly over the country's electric power business is suggested by evidence of the following:

(1) The Dixon and Yates combination of two holding company systems for the purpose of joint ownership of a great generating company, with their systems integrated to provide reserves and secondary delivery points to the Tennessee Valley Authority, points to the possibility that new superholding companies are coming into being which will accentuate monopoly problems in the industry. Middle South Utilities, Inc., the Dixon part of Dixon and Yates, with its additional participation in Electric Energy, Inc., a similar setup in the Ohio Valley, appears to tie together operating power-company combinations extending from the State of Georgia to Illinois.

(2) A community of great banks, insurance companies, and investment trusts, with interlocking directorates among themselves, is shown with large stockholder and director ties into both Electric Bond & Share Co., sole owner of Ebasco Services, Inc., and Middle South Utilities, with Ebasco Services rendering a wide range of management, engineering, and other technical services to Middle South's subsidiaries in a manner suggesting that it represents holding company control. The fact that Ebasco Services has similar relations with most, if not all, of former Electric Bond & Share subsidiary power companies suggests that, in the new holding company setup, there is substantial Wall Street control.

(3) Centralization of large blocks of voting stocks of private power systems throughout the United States in financial houses located largely in the East, which appear in the 10 largest stockholder lists reported by many such companies to the Federal Power Commission.

(4) Domination of the subsidiaries of Middle South Utilities, especially Mississippi Power & Light and Arkansas Power & Light, by holding company interests located at No. 2 Rector Street, New York City, headquarters of Electric Bond & Share Co., with the local boards of directors and officers virtually appointed by the Middle South

president and functioning as little more than puppets to give color to the claim of local management.

Revival of holding company evils is suggested by evidence of the following practices of Middle South Utilities and subsidiaries:

(1) Engineering and accounting firms, closely associated and probably tied in with the holding companies, used to implement the absentee control of operating companies, make essential decisions involving construction, operating, accounting, and ratemaking policy, while extracting profits from supposedly arm's-length service contracts. (2) Rendering State and local regulation of electric rates largely ineffectual through the handling of accounting adjustments, including reserves for taxes, in such a way as to reveal the least possible grounds for the cutting of rates.

(3) Milking of operating companies through overaccrual of taxes, such overaccruals being later transferred to surplus profits where they become available for the equivalent of stock dividends, increasing the basis for 9-percent cash dividends which, in turn, are dictated by the holding company.

(4) Engaging through operating companies in questionable practices in State and local politics, coupled with support of nationwide power monopoly organizations, generously financed to conduct public relations and lobbying activities designed to influence legislative and administrative action at the national level.

In this connection, the committee's attention has been called to a press interview with a Washington correspondent for the Nashville Tennessean, in which Purcell Smith, chief of the National Association of Electric Companies, principal lobbying organization of the private power industry, boasted that his clients were getting their money's worth. Among other things, Smith claimed credit for stopping the appropriation for the TVA's Fulton steam station. This opened the way for Dixon-Yates.

The committee notes the recent public statement of the National Association of Electric Companies, representing 100 electric utility companies, seeking to justify the Dixon-Yates proposal.

The pattern of monopolistic abuse

The pattern which emerges from our hearings is one of fairly consistent abuse of the monopoly position which private electric utilities enjoy. It indicates the difficulties, and often impossibilities, of effective State regulation. Regulation of such companies is supposed to supplant what would normally be the factor of competition. Just as the forces of competition operating in our free competitive economic system tend to protect the consumer and stabilize the operations of the monopoly at the most economic level, so the factor of regulation by Government commissions is intended to protect the general welfare against abuses by monopolies which have been freed of the regulators of competition. The hearings dramatically demonstrate the failure of such regulation, at least in the areas thus far examined.

The hearings further developed alarming evidences of the failure of the Public Utility Holding Company Act to accomplish its purpose, e. g., to protect the public against the domination of operating companies by holding companies, excessive service charges, and all the monopolistic devices which tend to increase rates and restrict service. With regard to the controversial Dixon-Yates proposals which apparently have come to symbolize the trend toward monopoly and

monopolistic abuse in the power industry, the evidence tends to emphasize three significant factors:

(1) That the President had personally directed that this contract be negotiated without regard to the customary requirements of competitive bidding and, further, that there had been a positive attempt to suppress a competing bid.

(2) That the effect of the Dixon-Yates proposal would be seriously to threaten the position of TVA and perhaps impair its integrity as a national yardstick, which has helped greatly in making possible effective regulation of private utility monopolies. The result of this, of course, would be to enhance the possibility of monopolistic abuse. (3) That there is evidence that the dominant private power combination involved in this contract conducts its affairs in such reprehensible ways that it should not be the beneficiary of this kind of Government contract.

Need for Congress to take new look

Clearly, it is urgent that Congress take a new look at the entire utility field in order to halt further development of a gigantic monopoly controlling the energy which makes possible the living standards and security of the Nation.

The importance of a thorough review of monopoly developments in the power industry is emphasized in the testimony of Arthur E. McLean, president of the Commercial National Bank of Little Rock, Ark. Pointing out that he was no opponent of private utilities, he stated that his sole purpose "is to stop the greed of a few of the utilities who will destroy themselves if they do not act with moderation." He added:

I do not want to see a return to some of the things that took place 20 years ago. He went on:

Some of you here may remember back in 1929 when shares of the Electric Bond & Share went to over $600. You probably will recall the days that followed. There were days when people were ruined, when they jumped from tall buildings, and when they committed suicide ***; and in my opinion moderation should come in, and those days should be avoided again.

The United States cannot take another period of that kind. I do not even indicate, or I don't hint that we are facing such a situation but, in turn, in my opinion, the public utility business which exercises a monopoly in turn is not entitled to create earning power stocks, and that it is not in the best interests. A reasonable return is what they are entitled to.

When McLean said he did not want to see a return to some of the things that took place 20 years ago, he was referring to the practices in the utility industry exposed by the Federal Trade Commission investigation. As already indicated, we find ample evidence to support the conclusion that private monopoly in the power business has reverted to many of these practices.

Broad monopoly inquiry necessary

On the basis of evidence outlined above and elaborated in subsequent pages of this report, the committee recommends that it be provided with adequate funds to undertake a full investigation of monopolistic trends and abuses in the power industry as a basis for recommending changes in existing laws or in the administration of existing laws to protect the country against the threat of an unlimited private power combine of such gigantic proportions as to be inconsistent with the survival of genuine private enterprise or the successful

functioning of democracy itself. The committee should investigate and report on the following:

(1) The interrelations between public-utility companies supplying and distributing electric energy, together with (a) the extent to which nonutility corporations own or control the voting stock of such publicutility corporations or exercise direct or indirect influence over the management of such corporations by any other means; (b) the relationship of any other nonutility corporations providing services, supplies, or equipment to such electric utility corporations, whether affiliated or not; and (c) any financial or other practices of such companies which may directly or indirectly affect the public interest in control of monopoly or concentration of economic power or the political influence associated therewith;

(2) The relations, financial or otherwise, between banks, insurance companies, fiduciary institutions, investment trusts, endowments, foundations, stockbrokers, underwriters, or any other corporate or institutional owners of or dealers in or agents for the owners of securities, and public-utility corporations supplying or distributing electrical energy or holding companies owning the stocks of such corporations, or corporations, partnerships, or persons providing services, supplies, or equipment to such electrical utilities; and the practices of such corporations, partnerships, or persons insofar as they may directly or indirectly affect the public interest in control of monopoly or concentration of economic power in the power industry or in other industries. (3) Whether, and to what extent, the corporations and other agencies noted above, or any of the officers or employees thereof, or anyone on their behalf or on behalf of any organization of which any such corporations may be a member, through the expenditure of money or through control of the avenues of publicity, have made any, and what effort to influence or control public opinion in the interest of establishing or maintaining private monopoly as against Federal, municipal, or other public, or cooperative ownership of the means by which power is developed and electric energy is generated, transmitted, or distributed; or to influence or control the election of the President, Vice President, or members of the United States Congress; or to influence or control any other elections or referenda which involve issues of monopoly in the business of supplying and distributing electricity to residential, farm, commercial, or industrial consumers.

(4) The effectiveness of the exercise by local communities of the right to choose public or cooperative electric service as a supplement to utility regulation in controlling monopolistic practices in the electric power business; and the function or responsibility of the Federal Government in enabling such local communities to introduce public or cooperative competition into what might otherwise become a field dominated by giant private monopolies.

Subject of the inquiry must be monopoly in all its aspects

Finally, the committee emphasizes the fact that such an investigation constitutes just the first stage in an overall monopoly study which must help to shed light on the direction of the American economy. Perhaps the most significant byproduct of World War II, in terms of long-range effect upon our economy, was the impetus it gave to increasing concentration of economic power. This tendency has been reinforced and accelerated during the last 4 years. Fundamental changes in our economic organization are increasingly visible, and

it has not yet been possible to evaluate and assess the full effects of this trend to bigness.

The history of the past 60 years has seen the development of monopoly, from trusts, to holding companies, to corporate mergers, with an ever-increasing concentration of financial control in the background. As we have already noted, we seem to be in the throes of the third great forward surge of monopoly in the history of our country. The last two such movements ended in catastrophe for the Nation, accompanied by serious loss of our national wealth and grave waste of our human resources, consequences that are not lightly to be dismissed. And the last great merger movement was characterized particularly by the pyramiding of control through public utility holding companies.

The daily press tells us that American business is today combining, uniting, grouping and regrouping, merging, remerging and merging again. Competition as a way of life is under constant attack and small, independent business is on the decline. We, therefore, recommend that this investigation develop facts concerning the scope of the merger movement, the extent and strength of the thrust toward monopoly, and the decline of competition in our economic life.

With all these facts before us, we feel that it is necessary, and, indeed, long overdue, for Congress to make an examination into: (1) changing concepts of competition and monopoly experience in the light of recent economic developments; (2) the rise of new financial and industrial oligarchies, and highly integrated forms of business and management; (3) business practices aimed at limiting or eliminating competition; and (4) methods of Government regulation to control all these in the public interest.

The foundation of our antitrust laws, designed to deal with this very problem, the Sherman Act, is now almost 65 years old. On that foundation has been erected a jerry-built structure of supplementary, confusing, and sometimes conflicting laws, spread over a long period of time, and encrusted with a gloss of judicial interpretations. These sometimes obscure the original purposes and intent of congressional antimonopoly policy, and often defy the efforts of the most capable judge to enforce, or able lawyer to understand them.

Perhaps codification of all our multitudinous antitrust laws is in order. Certainly revisions are badly needed, if only for the sake of clarification and bringing our antitrust laws into consonance with our changing economic system. And perhaps new and better tools and policies of enforcement are called for. For this reason Congress must concern itself not only with its important policy-making function in the field of monopoly but also with enforcement of these policies by the executive branch of the Government. For this will determine, in large measure, whether the congressional intent is being carried out or frustrated. The investigation, which we here recommend, is, therefore not only necessary to the work of Congress, but also uniquely a function of Congress itself. Furthermore, because these issues squarely involve the problems of monopoly, such an investigation is the direct responsibility of the Subcommittee on Antitrust Monopoly and Legislation.