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competition among American firms at home and thus, ultimately, on American consumers. Between the two extremes necessarily lies a “grey area" subject to a "rule of reason"-even in situations which would call for strict application of per se rules in a domestic setting.
In the final analysis, antitrust law is basic consumer protection legislation. We should not weaken our law as a protection for our consumers, even in the name of a fashionable issue like "export promotion." Rather, we should apply the law firmly and rationally to all who limit competition within our markets. By the same token, we should expect that other nations and communities will use their antitrust laws to protect their consumers against those who restrain competition in their markets.
EXCHANGE OF CORESPONDENCE BETWEEN SUBCOMMITTEE C ́AIRMAN NIX AND COMMISSIONER PHILIP A. LOOMIS, SECURITIES AND EXCHANGE COMMISSION ON POSSIBLE LIMITATIONS OF PUBLIC DISCLOSURE OF INFORMATION TO FOREIGN OFFICIALS
Hon. PHILIP A. LOOMIS, JR.,
JULY 28, 1975.
Commissioner, Securities and Exchange Commission, Washington, D.C.
DEAR COMMISSIONER: A July 23rd, 1975 United Press International story printed in the Washington Star refers to a possible limitation of public disclosure of information regarding payments to foreign officials or the use of funds in foreign countries. The article refers to your testimony and a speech by a Commissioner A. A. Sommer.
I would like to know what is the basis for the seeming retreat in policy at the Commission. The limitations are on amounts, countries, and identities of agents, as I read the article.
Please forward a copy of your reply to Mr. Thomas R. Kennedy, Counsel, Room 606 Congressional Hotel, International Economic Policy Subcommittee, Committee on International Relations, Washington, D.C. 20515
ROBERT N. C. NIX,
Chairman, Subcommittee on International Economic Policy.
SECURITIES AND EXCHANGE COMMISSION,
Hon. ROBERT N. C. NIX,
Chairman, Subcommittee on International Economic Policy, House of Representatives, Washington, D.C.
DEAR MR. NIX: This is in reply to your letter of July 28th, in which you refer to a story which appeared in the Washington Star on July 23rd, with respect to possible limitations of public disclosure regarding payments to foreign officials. This article refers to my testimony and to a speech by Commissioner Sommer. I did not in terms mention any such limitation in my testimony before the Subcommittee, but Mr. Sommer did refer to this as a possibility in his speech.
As I attempted to point out in my testimony particularly my testimony dated June 17, 1975, which was put into the record of the July hearings, our responsibility is to elicit material information about publicly-held companies, and for that purpose material information is defined as information which would be considered important by investors in arriving at their investment decisions. This, incidentally, is the definition which has been stated by the Supreme Court.
There is, I believe, a significant question as to how much detail with respect to foreign payments is material for investment purposes. There is also a serious question as to whether or not it would be proper for us to compel disclosure beyond that needed for investment purposes simply because it might be useful to other persons for other purposes.
We have reached no final decision as to the extent of disclosure in this area which is required under the Federal securities laws. In that connection, as I pointed out in my July 17th testimony, there is a basis for distinguishing between activities which occurred in the past, at a time when the Commission had no specific disclosure requirements addressed to this purpose, and disclosure of future activities as to which we can and, I believe should, prescribe more definite requirements.
I do not believe that consideration of whether there are limitations as to the required disclosure of past activities with respect to amounts, countries and identities of agents would constitute a retreat in policy by the Commission, since we have never determined that such disclosure is generally required, particularly as to past transactions. We have required such disclosure only in one case where there was a single transaction which was clearly material. We appreciate your interest in this difficult and important question. PHILIP A. LOOMIS, Jr.,
EXCHANGE OF CORRESPONDENCE BETWEEN SUBCOMMITTEE CHAIRMAN NIX AND HON. JAMES R. SCHLESINGER, SECRETARY OF DEFENSE, REQUESTING DECLASSIFICATION OF CERTAIN DOCUMENTS RELATING TO AGENTS FEES
Hon. JAMES R. SCHLESINGER
CONGRESS OF THE UNITED STATES,
The Secretary of Defense, Department of Defense, Pentagon, 3E880,
Dear Mr. Secretary: News accounts of the actions of officials of the Northrop Corporation regarding the payment of gratuities and/or consultant fees supported by allegations in part by the Securities Exchange Commission and the statements of Northrop Inc., Accountants, are a cause for concern in the Congress.
On the 19th of June, at 2:00 p.m. in Room H-236 of the Capitol, my Subcommittee requests that a representative of the Department of Defense appear as a witness and testify on the posture of the Department of Defense regarding these matters.
I ask that such witness testify as to what action, if any, the Department of Defense has taken in relation to a judgement entered into a class action lawsuit in which the presiding judge directed the Northrop Corporation to request the Department of Defense to examine "present rules applying to the use of foreign agents to ensure Northrop practices are consistent with the law." (18 May, 1975, Sunday, Business and Finance, The New York Times, Sec. 3, p. 12, last column.)
I would like to receive testimony from such witness as to what actions have been taken by the Department of Defense to ascertain whether or not the $30 million in funding for foreign consultants by Northrop was regained by Northop Inc. by overcharges in United States contracts with that company.
We would like to know whether or not the Department of Defense or any of its employees advised American Corporations on the subject of the payment of gratuities or fees or the issuance of stock to foreign officials in order to obtain arms business.
If such advice was given, we would like to have in the record of the hearing what that advice was.
Of course, we would expect the Department witness to give us some background information on the adverse impact of recent disclosures on our relations with other countries in the military field. General Paul Stehlin's situation is one that would have adverse impact, as well as charges in relation to military officials of other lands.
The main thrust of our hearings on this subject which began on the 5th of June is to obtain information as to what legal remedies are available to the United States Government, the American people and shareholders on this issue. It appears that the Securities Exchange Commission, the Overseas Private Investment Corporation and the Internal Revenue Service as well as the AntiTrust Division of the Department of Justice may have remedies available to protect the public.
The questions we will have to face is whether or not new legislation is necessary and whether or not the agencies of Government can, or are providing protection for the public at present?
The cooperation of your agency will be most appreciated.
ROBERT N. C. NIX,
Chairman, Subcommittee on
This world is thoroughly documented in the Peterson study, and it exists, like it or not. It seems to serve little analytic purpose to equate the international business world of hard-nosed competition and protectionism with bombing Cambodian villages. Moreover, nothing prevents a foreign government, if it chooses, from applying its own antitrust laws to the activities of foreign (including American) enterprises which allocate markets or fix prices in that country. In other words, there is no reason why the European Common Market should not treat an American Webb-Pomerene association as an illegal price fixing conspiracy. Nor is there any reason why the United States should not treat a European export cartel the same way under the Sherman Act. This approach has great merit over what one might call vague internationalism: it throws the burden of enforcing antitrust law, and protecting consumers, on the governments of the affected consumers. Government rarely works effectively unless it has an affirmative interest, and enforcement in this area is no exception.
Dean Rahl's second criticism might be labelled "legal." In Rahl's words:
Personally, I would stick to what I consider to be the only reliable guide to the scope of the Act—that is, that the Act is concerned with restraints of competition which occur in, or which substantially affect any of the commerce, interstate or foreign, which Congress regulates. This is what I think the Supreme Court decided in the Timken case, and it is what antitrust policy is all about. From there on out, it is a question of the particular substantive rules of effect on competition to be applied to determine the ultimate legality of the conduct.31
The simple answer to this point is that it is not what was decided in the Timken case—nor in any other case that I can find. At the very least, it implies a great deal less flexibility in the Sherman Act than is reasonably present in it.
In Timken, the Supreme Court was dealing with an American firm which was overwhelmingly dominant in its field. The company controlled 70-80 percent of the American output of tapered roller bearings, and its 1947 sales were over $77 million. These bearings competed for many uses with other antifriction bearings and, in the broader total market, the defendants still accounted for some 25 percent of all United States sales. 52 The defendant was charged with a long-term international allocation of markets with a British and a French firm. Under these agreements, each of the parties had allocated trade territories, fixed prices on sales into each other's territories, cooperated
51. Id. (citation omitted).
52. 341 U.S. at 603-04 (Reed, J., concurring).