Senator O'MAHONEY. You have to assume that the bill provides for a future law. Attention should be called to the fact that that provision is similar to the provision written into practically evey State corporation law after the Dartmouth College case. In that case the Supreme Court of the United States ruled that the legislature of New Hampshire did not have the power to change the terms of the charter of Dartmouth College. When the Supreme Court laid down that rule the States immediately changed their corporation laws and wrote into them special provisions relating to the right of States to change the corporation charters.

Mr. HAAKE. The section to which Senator Austin just referred is particularly significant. It seems to me it broadens the aspect of the bill and practically means that the signature of the corporation must be attached to a blank check, so far as any future rules or regulations are concerned. I wish I could share your-I will not say "complacency," but your lack of fear with respect to what the Federal Trade Commission might do. I have seen it often. It is because human beings must interpret the degree of power and just how far they shall go. I have seen them adopt rules and make rulings that were not in the best of judgment. There was one in the rayon industry, and they said it must also apply to the furniture industry. They told us to obey them without any idea of the consequences, if we tried to do it. I am not sure that any of our practices are really bad.

Senator O'MAHONEY. That implies that you think some are bad, does it not?

Mr. HAAKE. In their results; yes. For example, selling below cost. From the point of view of where I stand, that is a terrible situation. In the case of the man I was talking about a while ago, the rest of the fellows were coming to me and asking me to do something about it. Senator O'MAHONEY. Did you have power or authority to do something about it?

Mr. HAAKE. I did not want to.

Senator O'MAHONEY. Did you have the power?

Mr. HAAKE. No.

Senator O'MAHONEY. Why did they come to you and ask you to do something about it?

Mr. HAAKE. I do not think anyone should have that power.

Senator O'MAHONEY. Why did your members ask you to do something about, it, if you did not have the power?

Mr. HAAKE. For the same reason that one of my children at home comes to me, when he cannot get his lessons, and wants me to do it for him.

Senator O'MAHONEY. What power do you have as executive director of that association?

Mr. HAAKE. I have no power. I have a good deal of influence. I might call it educational influence. I say to these people who complain about selling below cost that the answer is not to bring this fellow's costs up. I am not so sure he is selling below cost. I found many cases where it developed that goods were not being sold below cost. I say to them: "If he is selling below cost, he is selling below your cost, because of his efficiency. The answer is to make yourselves efficient, and not to bring his prices up but to bring your prices down." The effect was to bring the prices up by showing the man he was simply putting himself out of business. We do not do that any

more. I have been for several years bringing to our people improved methods of control of costs, especially people who claimed they were losing money. The net result of that is that the cry about selling below cost has almost disappeared. When a man feels bad about it now, he soon learns that it is due to his inability to compete with the others.

We had a good deal of that in the furniture business a few years ago. We are starting out now with the retailers. We very often find that a retailer could take 20 percent off his prices if we could show him how to run his business more efficiently. That is far more effective, and it is the only basis on which you can really justify its operation, because the net result is to give the public more for its

money.

Senator O'MAHONEY. And you do that on a national scale?

Mr. HAAKE. Yes. It is not as effective as I would like. Some of them are as difficult to deal with as some of the people you are trying to convince, but it does work. I do not think selling below cost is a bad thing. It may be a splendid thing. It has improved conditions in our industry.

The thing that some people thought was a bad trade practice is forcing the inefficient fellow to become more efficient. We do not look on it as a bad practice any more. We had a tremendous number of provisions in the code. If we had been satisfied with one or two provisions in the code it might have lasted longer. The thing that looks like a bad practice may be an excellent practice. It is, in the last analysis, if it brings more goods to the people for a given amount of money. I know as a fact that no group of men can sit down today in any industry and say specifically and certainly that this practice is good and that practice is bad. It may look very bad at the present moment, but whether or not it actually is may be open to question.

Senator O'MAHONEY. You will not find any disagreement on my part with that statement.

Mr. HAAKE. I wondered at first what to do about it. I helped write a book once on industrial government. I thought I had done a wonderful thing. I thought as Henry George did about his book "Progress and Poverty", that if only our businessmen would read that book all their problems would be solved. I knew it then. Now, if my hat does not fit me, I read the book and it fits again.

I do not think anyone of us can sit down and draw a picture of what business should or should not do. In the last analysis, it is the consumer that writes the ticket. If the monopoly is what some people think of as a monopoly, an aggregation of power with capital that brings about mass production and gives us a $3,000 automobile for $500, if it does a good job for the public and creates a lot of other jobs, as many of them do, it certainly is not a bad thing. The percentage of our gainfully employed population has increased with all technological improvement.

If it becomes a bad monopoly and charges more than it should, the public will correct that. I am willing to trust it. I would rather take what unhappy consequences might come from monopoly we can control than to destroy the benefits of the whole system. It is something like the farmer who finds a rat in his flock of chickens. He gets his gun and lets both barrels go right into the flock. He may or may not hit the rat, but he kills a whale of a lot of chickens.

I am afraid this type of legislation, while its purpose is excellent, is going to do more harm than good. Most of monopolies exist more in the minds of the people than actually. Many times there is a change in the point of view of the public. We continue to talk about monopoly when we are still uncertain as to what is monopoly. We are still uncertain as to what makes monopoly, if it is bad. And we are still uncertain as to whether it is good or bad.

Having in mind the present situation, might it not be just as well to let this go for a while? There is another factor that enters into it. You can do more damage to business by continuing the uncertainty that now exists than in almost any other way you can think of. We want to increase employment, and raise the standard of living. Can we not afford to take a chance a little while longer with the system as it is? Make a pretty careful study of some of these agencies before we start regulating something which we do not yet really understand. I would even question the ability of Senator Borah, with all his years of devoted service to the country, I will say "consecrated" service-I would frankly doubt whether Senator Borah today could actually write the ticket for what is a good monopoly and what is a bad monopoly; whether he himself, perhaps the greatest authority among us, is qualified to draw up definite rules and regulations to control monopoly. I do not think there is a man in the United States I respect more than Senator Borah. I do not think any human being can do it.

I still believe that somewhere in the world there is a power that controls this whole business, and that through the forces of competition, through human beings striving with each other, the net result of all those forces is far more likely to bring about the best form of improvement than the efforts of any man or group of men who, with an inadequate understanding, imperfect judgment, presume to write a ticket for either agriculture or industry. That approaches being a religion. We have not done so badly in this country, with all the trouble that has developed over monopoly. With 7 percent of the population we own 50 percent of the wealth of the world. It is the only country in the world where people are driving up to the relief station in their own automobiles to collect relief. I am only afraid that in this case we are taking a step that will result in more harm than good.

Senator O'MAHONEY. I wonder if it is your opinion that the framers of the Constitution did the right thing when they gave Congress the power to regulate commerce among the States and with foreign nations. Mr. HAAKE. I think they did the only thing they could have done. If I had been given the privilege, I think I would have done it the same way. I think it was the only reasonable thing they could do.

Šenator O'MAHONEY. You do think there ought to be some regulation?

Mr. HAAKE. Yes.

Senator O'MAHONEY. But not in this particular form?

Mr. HAAKE. No.

Senator O'MAHONEY. Will you give us some suggestion of the form the regulations should take?

Mr. HAAKE. Yes. I can almost tell you now. I would suggest that the best form of regulation is to lay down definite outside limits,

121861-38-pt. 4-17

not to try to come too close to the disease, come close enough to insure fair play. I would let nature take its course within those limits. Senator O'MAHONEY. Limits as to what?

Mr. HAAKE. In a congested district we have got to have red and green lights. The fellow who controls those lights sometimes thinks that traffic could be better controlled if he had hold of the wheel. I would make a distinction between the lights by which he controls. the cars and one where some bureau or individual sits alongside. Senator O'MAHONEY. What are the lights you would have?

Mr. HAAKE. I am not a lawyer, and I am at a disadvantage when I say this.

Senator O'MAHONEY. You may not be.

Mr. HAAKE. I am willing to admit that I am, perhaps for technical reasons. I think if the antitrust laws were clarified a little bit, perhaps by defining monopoly, and then set out to enforce those laws with even the crude instrumentalities we have now, we could learn a lot. We are leaning a good many things all the time as to what is monopoly and what is not monopoly, and some of the things we have thought were monopolies we found were not monopolies, and some of the things we thought were monopolies we found were beneficial. Perhaps we need that sort of education before we take a further step toward regulation. There are a number of other laws that have been introduced or passed. Mr. Patman wants to separate retail and wholesale manufacturing. That is done not because, with all due respect to him, Mr. Patman is an authority on economic production or distribution. He does it because influential people in his community want him to do it. They are the people he works for. I would do it if I had to. I would try to pull it a little bit my way, but I would probably do it. It is not because he is an authority on the subject. The people who are asking for it are not qualified to judge whether it is a good thing or not.

I am afraid this legislation is subject to that criticism. I think Congress would render a tremendous service to the country if it would adjourn and go home. At this stage of the game, with the frame of mind the people are in, it is not more legislation we want. We want to get back on our feet, get hold of ourselves, get ourselves oriented again, and when we get a little stronger it is time enough to perform the operation. I would like to see the patient in better condition before we have another operation.

Senator O'MAHONEY. Thank you very much for your statement. The committee will recess until tomorrow at 10:30.

(Whereupon, at 12:30 p. m. a recess was taken until the following day, Wednesday, March 16, 1938, at 10:30 a. m.)

FEDERAL LICENSING OF CORPORATIONS

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,
Washington, D. C.

The committee met, pursuant to recess, in room 212, Senate Office Building, at 10:30 a. m., Senator Joseph C. O'Mahoney (chairman) presiding.

Present: Senators O'Mahoney (chairman), Logan, Borah, and Austin.

STATEMENT OF JAMES A. EMERY, GENERAL COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS

Senator O'MAHONEY. Mr. Emery, you may begin by giving your name and occupation.

Mr. EMERY. My name is James A. Emery, Investment Building, Washington, D. C., and 14 West Forty-ninth Street, New York City. I am general counsel for the National Association of Manufacturers of the United States.

Senator O'MAHONEY. How long has the association maintained offices in Washington?

Mr. EMERY. Since about 1909.

Senator O'MAHONEY. For almost 30 years the National Association of Manufacturers has maintained offices in Washington? Mr. EMERY. Yes.

Senator O'MAHONEY. Primarily because there is so much Federal legislation which affects the interests of the members of the association? Mr. EMERY. Yes; and the operation of the courts and administrative bodies, all the departments of the Government, in relation to various matters, particularly rules and regulations which are of great importance, to all of which has been added the interesting field of

taxation.

Senator O'MAHONEY. That scope has been increasing year by year since you opened your office, has it not?

Mr. EMERY. Oh, yes.

Senator O'MAHONEY. In other words, the relationship of the Federal Government toward the individual manufacturers or individual corporations throughout the United States has been constantly expanding?

Mr. EMERY. Constantly.

Senator O'MAHONEY. Very good, sir. You may proceed with your

statement.

Mr. EMERY. Mr. Chairman, the National Association of Manufacturers is an organization of men engaged in the various forms of the manufacturing industry in substantially all the States of the Union.