Mr. SIMON. In your opinion is the practical effect of the Commission's order in the Pittsburgh Plus case such that it has the practical effect of requiring those sellers to sell at f. o. b. mill prices?

Mr. DAWKINS No.

Mr. SIMON. You did not by any chance hear Mr. Wooden at the United States Chamber of Commerce on December 9, did you? Mr. DAWKINS. No, I did not, Mr. Simon.

Mr. SIMON. You do not know whether you could agree with his statement that the steel companies were obligated to go to f. o. b. as a result of the Pittsburgh Plus case?

Mr. DAWKINS. I do not know that I could agree with it. I can only answer in terms of the order. And as I construe that order it does not require them to sell f. o. b.

Mr. SIMON. Does f. o. b. mill pricing required of everybody in an industry tend to bring about price rigidity in the industry?

Mr. DAWKINS. I am not sure, Mr. Simon, but I would not like to see required f. o. b. mill selling by all members of an industry.

Mr. SIMON. In your opinion would the decisions, not including the dicta, in the Corn Products, Staley, and Cement Institute cases, or any other Supreme Court case on this subject, have been different if S. 236 had been the law at the time those cases were decided?

Mr. DAWKINS. I am not sure, Mr. Simon. I think perhaps not. Mr. SIMON. I gathered from your prepared statement that your primary concern over section 2 (a) of this bill is the word "because." Mr. DAWKINS. That is correct.

Mr. SIMON. May I ask you what word you would substitute for the word "because" to remedy the worry that you expressed? It appears in line 22 of page 3.

Mr. DAWKINS. This is not necessarily fully considered, but I can say that if you inserted the word "solely" before the word "because," and struck, at the end of the clause, "or results in delivered prices similar or identical to those charged by any other seller for goods of like grade and quality," and substituted

whether or not any such pricing practice results in delivered prices identical to those charged by any other seller, but any of these facts when relevant may be introduced in evidence and considered with other evidentiary facts in reaching a decision upon the allegation of conspiracy

and added at the end of your proviso the words

or where the effect may be substantially to lessen competition or tend to create a monopoly within the line of commerce

I would not feel as nearly concerned or worried as I do now.

Mr. SIMON. If Congress were to pass this bill, Mr. Dawkins, would you recommend that section 2 (b) be eliminated?

Mr. DAWKINS. In its present form it is useful. If it were amended so that it were capable of effective use, it may provide an additional remedy to what the Commission now has.

Mr. SIMON. Would your objection be met if the words "bona fide" were inserted before the words "f. o. b. mill price," on page 5, line 5? Mr. DAWKINS. I do not know that that would fully cure the difficulty that I think I see, Mr. Simon. If the portion that precedes the numbered paragraphs 1 and 2 said, in substance, this, which is very close to your present language:

Whenever the Commission shall find, pursuant to this section, that any two or more sellers are conspiring or agreeing, or that within such time prior to the

issuance of its complaint as would permit the institution of civil proceedings der the Sherman Act have conspired or agreed to employ any pricing system volving any form of delivered pricing, or absorption, allowance, or averaging of transportation costs, the Commission may, in addition to other remedies available to it, issue an order requiring each seller to take such steps as may be reasonably necessary to dissipate the effects of such agreement or conspiracy— and if you then wished, add

and in appropriate circumstances may require each seller—

then your 1 and 2, with the addition at the end of 2

in any instance a buyer may select any available means of transportation

I think perhaps it might add an additional and usable remedy to what the Commission now has.

Mr. SIMON. In its present form you would rather have Congress leave it out?

Mr. DAWKINS. I do not think, Mr. Simon, it is usable, speaking personally. For that reason I do not know that it would be of any real utility.

Mr. SIMON. Do you know that it is the precise language used by the Department of Justice in Sherman Act cases?

Mr. DAWKINS. I did not know that it was precise. I knew that the language was very similar, at least, to one portion of the decree in the Allegheny Ludlum Steel case.

The CHAIRMAN. Any other questions, Senator?

Senator MCMAHON. No, sir; I have none.

The CHAIRMAN. We thank you very much, Mr. Dawkins.

Mr. DAWKINS. Thank you.

The CHAIRMAN. Mr. Joseph Sheehy, attorney, Federal Trade Commission, will be our last witness today.

STATEMENT OF JOSEPH E. SHEEHY, ASSOCIATE DIRECTOR, BUREAU OF LEGAL INVESTIGATION, CHAIRMAN, PLANNING COUNCIL, FEDERAL TRADE COMMISSION, WASHINGTON, D. C.

Mr. SHEEHY. Mr. Chairman, Senator McMahon, my name is Joseph E. Sheehy. I am the Associate Director of the Bureau of Legal Invesgation of the Federal Trade Commission and also serve as chairman of its planning council.

My appearance here is in response to a letter dated January 10, 49, from the general counsel for the Subcommittee on Trade Policies of the Committee on Interstate and Foreign Commerce of the United States Senate inviting me to appear and express my views as to S. 26 and the manner in which it does or does not change existing law of the subject treated therein. The views expressed are my own and should not be construed as an indirect expression of Commission

news.

Section 2 (a) of the bill provides for amendment of section 5 (a) of the Federal Trade Commission Act by inserting after the first sentence thereof the following language, and I shall not repeat that language since it is already in the bill.

The opening statement in this amendment consists of a definition of a specific unfair method of competition; namely, any pricing practice employed pursuant to an agreement or conspiracy among two or more sellers. This is the first legislative attempt, so far as I know, to define

precisely what constitutes an unfair method of competition as that term is used in the Federal Trade Commission Act.

The Congress and the courts have taken the position that the Federal Trade Commission, as a body of experts, should be free to decide in the first instance upon the facts in each individual case, whether or not those facts warrant a finding that the practice involved is an unfair method of competition. This initial determination of the Commission is, of course, subject to review by the courts, which may affirm, modify, or set aside the Commission's action.

The opening statement in the amendment is a partial restatement of the law as it has been judicially interpreted and well recognized for a generation. The term "pricing practice" as here used, however, is broad enough to cover any kind of price fixing or price manipulation by conspiracy or agreement. It is limited, however, to sellers, although sellers are not the only ones who have engaged in such activities.

Where the buyers are powerful, they are able through agreement to fix prices and rig a market, as for instance has been done in some of the major cheese markets.

To the extent that the specific definition of an unfair method of competition may tend to limit the general provisions of the present statute which declare all unfair methods of competition in commerce to be unlawful, it effects what could be a serious revision of the present law. The minimum that may be anticipated from the conflict between the general terms of the existing law and the specific terms of the amendment is a new round of litigation with resultant confusion and uncertainty pending judicial interpretation.

It is apparently proposed in this amendment to legalize three specific types of practices regardless of the monopolistic effects that may flow from their use. I have difficulty, however, in determining to what extent it is intended to exclude these practices from consideration.

If it merely means that a seller may select the pricing practice best suited to his individual needs, then in my opinion it does not alter existing law as expressed in section 5 of the Federal Trade Commission Act and in the judicial interpretations of that section.

If this correctly interprets the meaning of the language, however, the provisions would be unnecessary and meaningless. In my opinion, therefore, it must be interpreted as meaning that the Commission may not give consideration to any of the three excluded items in arriving at a determination as to whether or not a conspiracy exists.

In such event it would be necessary to establish by the greater weight of the evidence, other than evidence on these three items, that there was in fact an agreement or conspiracy.

Senator MCMAHON. What are those three items? Have you named them.

Mr. SHEEHY. They are at page 3 of the bill, Senator. I do name them later on in my statement. The first is

The charging of uniform delivered prices for goods of like grade and quality to all purchasers without regard to the place of delivery; or

(2) The charging of uniform delivered prices for goods of like grade and quality to all purchasers for delivery within any geographical zone; or

(3) The absorption (in whole or in part), allowance (in whole or in part), or averaging (in whole or in part) by such seller of transportation charges for the delivery of any goods, or results in delivered prices similar or identical to those charged by any other seller for goods of like grade and quality.

Senator MCMAHON. I gather what you object to is the fact that you believe that regardless of other evidence of conspiracy that might appear. and if it did appear you could not revert to the fact that identical pricing existed, to add that as an additional item of evidence? Mr. SHEEHY. You might be able to do it, Senator, provided you established by other evidence that there was a conspiracy. But my thought is that in these very things themselves that are excluded here you might have the very things that you would need to tie in with the other evidence to make out your conspiracy in the first instance.

Senator MCMAHON. Nevertheless, Mr. Sheehy, as I understand it, you are not prohibited, in weighing your evidence, from looking at the fact that there is identical pricing, if you have, let us assume evidence of an agreement in a hotel room that that should exist.

Mr. SHEEHY. If you have that evidence; yes; then you may consider the other. But if you have not that evidence, Senator, as I read this statute you could not consider any one of these three unless you have first proved the existence of your conspiracy by some other direct evidence.

And you do not catch them in a hotel room very often.

Senator MCMAHON. You do not prove the existence of a conspiracy by other evidence. You have other evidence that a conspiracy exists, and then, together with that evidence, you have identity of pricing which you can use to complete your burden of proof.

Mr. SHEEHY. I do not see how you could bring in any one of these three, Senator, until you had first proved the existence of the conspiray under the language in this section.

Senator MCMAHON. Let me assume that you are trying a case, and you put in evidence that here there is identity of pricing. Now you rest at that point, and an order would be entered against the Governent for not having sustained its burden of proof. Let us assume, however, that after having put in your evidence of identity of price you come up with a memorandum that has been found in the files of te of the companies which indicates a conversation between the offiers of company A and company B.

This memorandum, while not in and of itself sufficient to sustain that charge, together with the identity of price would sustain the harge. Is it your contention that I am wrong in my interpretation of The proposed bill?

Mr. SHEEHY. No, Senator; but I do not read it that way.

Senator MCMAHON. I thought that was the intention, Senator. Is not that the intention?

Mr. SIMON. Yes, sir.

Senator MCMAHON. I want to make it clear. I do not know whether you were here the day that I went pretty far afield, maybe, to give an analogy, when I suggested that we might with profit take a look at The perjury law on the Federal statute on perjury, where you cannot onvict on the testimony of one man against another, that you must orroborate it with either testimony of a second witness or something in writing.

That was the situation I thought we were trying to get at here, that while identity of pricing might be a witness, you have to add to that Witness either the testimony of another witness, if you please, or Something in writing. But certainly it is not to be disregarded as a factor when the case is tried.

Am I right about that Mr. Simon?

Mr. SIMON. Absolutely, Senator.

Mr. SHEEHY. When I read the statement, Senator

but no pricing practice employed by any seller in the absence of any agreement or conspiracy—

these practices are employed in the absence of agreement or conspiracy of any other seller

shall be deemed an unfair method of competition or an unfair act or practice in commerce within the meaning of this section because it involves

any one of these three things.

It seems to me the first thing you have to do is prove the presence of a conspiracy. I may be misinterpreting it. That is the impression I get.

Senator MCMAHON. Maybe it is not so written as to conform with my thought on the matter either. I do not know. I have not given it enough detailed study.

You know what I want to do.

Mr. SHEEHY. I appreciate fully what you want, Senator.

Senator MCMAHON. In other words, in and of itself, no. But certainly it will have probative and evidential value, combined with something else. And there is no intention to say, "You must go out and prove a conspiracy independently before you can bring in as evidence of that conspiracy identity of price."

Mr. SHEEY. As I read the statute, Senator, it says that.

Senator MCMAHON. That is what would happen. We will not change that. At least I would not want to.

Mr. SHEEHY. If the Commission were successful in adducing evidence relative to practices, other than those excluded here, upon which it might base a finding of conspiracy, then presumably consideration might be given to evidence with regard to the items specifically excluded. This would seem to place greater restriction around proving an unfair method of competition under section 5 of the Federal Trade Commission Act than would be encountered in proving a conspiracy under the Sherman Act.

It is well recognized by the courts that conspiracy can seldom be proved by direct evidence. It is also a well-recognized principle of law that an act harmless when done by one may become a public wrong when done by many acting in concert.

Under the above interpretation of the proposed section, however, the Commission would be precluded from considering as an element of the proof of collusion the action of a seller in charging uniform delivered prices everywhere, in charging uniform delivered prices within any geographical zone, or in charging similar or identical delivered prices as the result of the absorption, allowance, or averaging of transportation charges.

Senator MCMAHON. You and Mr. Simon are in exact conflict on the intent, at least, of this language.

Mr. SHEEHY. I was not attempting to interpret the intent, Senator. Senator MCMAHON. I mean of what it means.

Mr. SHEEHY. It seems obvious that in many instances the existence of identical delivered prices achieved through the use of one or more of these methods would of itself be persuasive evidence of the existence