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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
JULY 31, 1975.
Hon. JAMES R. SCHLESINGER,
The Secretary of Defense, Department of Defense,
DEAR MR. SECRETARY: On July 29, 1975 the Subcommittee on International Economic Policy of the House Committee on International Relations held hearings on the activities of U.S. multi-national corporations abroad. At those hearings, in response to our written request of 9 June 1975, Lt. General Howard M. Fish, USAF, Deputy Assistant Secretary for Security Assistance testified on behalf of the Defense Department about arms sales. He submitted for the information of the Subcommittee members additional classified material which had been furnished previously to the Subcommittee on Multinational Corporations chaired by Senator Frank Church.
It is our sincere belief that this classified material, and in particular its listing of agents and fees, should be declassified, and we hereby request you to take such action immediately. It is our opinion, and that of various government agencies which have testified before our Subcommittee, that disclosure of such payments, significant portions of which may have gone to foreign government officials, is beneficial and in the public interest.
The cover letter to the Church Subcommittee included with the confidential documents stresses the proprietary nature of information contained in them. Members of our Subcommittee intend to introduce an amendment to the Foreign Military Sales Act which will not only require the Defense Department to routinely provide Congress with agent and fee information on letters of offer of $25,000,000 or more and on licenses granted for sales in excess of $100,000 on the Munitions List, but will also exempt all information supplied on arms contracts from 18 USC 1905 provisions.
Awaiting your reply to our declassification request, I am,
ROBERT N. C. NIX,
STEPHEN J. SOLARZ.
OFFICE OF THE DIRECTOR DEFENSE SECURITY ASSISTANCE AGENCY,
Hon. ROBERT N. C. NIX,
DEAR MR. CHAIRMAN: Secretary Schlesinger has asked me to reply to your letter of July 31, 1975, requesting declassification of certain documents relating to agents fees which had been furnished to the Subcommittee by me in connection with the Subcommittee's hearings on the activities of U.S. multi-national corporations abroad.
As you know, section 2(b) of the Foreign Military Sales Act vests in the Secretary of State the responsibility for the continuous supervision and general direction of sales under the Act. In exercising that responsibility, the Secretary of State prescribes security classification guidelines for Foreign Military Sales information. These guidelines are published in Chapter G of Part I of the Military Assistance and Sales Manual. The classified portions of the documents in question were classified pursuant to those guidelines. Inasmuch as we are bound to follow those guidelines unless a deviation is authorized by the Department of State, I am accordingly referring your request for declassification to Mr. Carlyle E. Maw, Under Secretary of State for Security Assistance.
As I indicated during my testimony on July 29, 1975 that part of the documents identifying agents who received fees and the amount of such fees is not classified. However, it is our understanding that such information is proprietary within the meaning of 18 U.S.C. 1905, and, hence, the Department of Defense has no authority to release such information for publication.
With respect to the proposed amendment which members of the Subcommittee intend to introduce which would require the Department of Defense routinely to provide Congress with agent and fee information on letters of offer of $25 million or more, we would have no objection to such a requirement. We think it doubtful, however, that such disclosure would solve the problem of the potential abuse of