After hearing the foregoing reports, counsel attending the meeting in Chicago, authorized Mr. Thompson to read the following message by telephone to Mr. Asbill of the antitrust staff.

"We are authorized to say that Mr. Arnold's invitation to negotiate has been reported to and sympathetically received by counsel for a majority of the defendants; that counsel have agreed immediately to convey the invitation to their respective principals with the request that they give it serious consideration and that a prompt decision be made and communicated to the Department; that an extension of time for 60 days to move, plead or answer is requested in both antitrust and pipeline suits to give opportunity for consideration by their principals."

After consultation with his associates, Mr. Asbill telephoned in reply that an order would be entered in the antitrust suit extending the time for answering, pleading, and moving to March 1, but that no such order would be made in the pipeline suits. He authorized Mr. Thompson to state, however, that Mr. Arnold had not changed his previous declared intention; namely, not to press for trial of the pipeline suits while negotiations are in progress for settlement of the antitrust suit.

Mr. Thompson reported this reply to the meeting of counsel, and was authorized to accept by telephone the Government's proposal. This he did.

COUNSEL FOR DEFENDANT OIL COMPANIES WHO ATTENDED CHICAGO MEETING ON WEDNESDAY, JANUARY 8, 1941

(U. S. v. A. P. I.)

Barnes, Walter L., Esq., Phillips Petroleum Co., Bartlesville, Okla.

Beedy, Carroll L., Esq., Standard Oil Company of Kentucky, Washington, D. C. Broome, Y. P., Esq., Tide Water Associated Oil Co., Box 731, Tulsa, Okla. Cochran, Charles B., Esq., American Petroleum Co., 50 West 50th Street, New York City

Cooke, Thomas T., Esq., 15 Broad Street, New York, N. Y.

Culton, D. H., Esq., Room 1758, McCormick Building, Chicago, Ill.

Denton, J. C., Esq., care of Mid-Continent Petroleum Corp., Tulsa, Okla.

Emery, Don, Esq., Phillips Petroleum Co., Bartlesville, Okla.

Fletcher, Thomas, Esq., Vinson, Elkins, Weems & Francis, Esperson Building, Houston, Tex.

Gately, Charles E., Esq., 60 Wall Street, New York, N. Y.

Gee, A. M., Esq., 539 South Main Street, Findlay, Ohio.

Gentry, Cyrus S., Esq., care of Shell Oil Co., Inc., 50 West 50th Street, New York City.

Hall, Edwin S., Esq., Standard Oil Company of New Jersey, 26 Broadway, New York City.

Hanning, Maurice F., Esq., 1503 Midland Building, Cleveland, Ohio.

Hayes, James H., Esq., 30 Rockefeller Plaza, New York, N. Y.

Holton, George V., Esq., 26 Broadway, New York City.

Horsky, Charles A., Esq., Union Trust Building, Washington, D. C.

Jones, Buell F., Esq., Standard Oil Company of Maryland, 910 South Michigan Avenue, Chicago.

Jones, Nelson, Esq., care of Humble Oil & Refining Co., Houston, Tex.

Keiser, Carl E., Esq., 26 Broadway, New York City.

Lee, Gentry, Esq., care of Barnsdall Oil Co., Post Office Box 2039, Tulsa, Okla.

Loucks, William D., Esq., 120 Broadway, New York City.

Marshutz, J. H., Esq., 324 East Wisconsin Avenue, Milwaukee, Wis.

Mason, R. O., Esq., Cities Service Oil Co., Bartlesville, Okla.

McAfee, William A., Esq., 1503 Midland Building, Cleveland, Ohio.

McGinnis, W. P., Esq., Post Office Box 1251, Bartlesville, Okla.

McGuire, Harold F., Esq., Gardner, Morrison, Rogers & McGuire, Woodward Building, Washington, D. C.

Middleton, Thomas G., Esq., Standard Oil Company of Kentucky, Kentucky Home Life Building, Louisville, Ky.

Molony, Alvin F., Esq., Skelly Oil Co., Tulsa, Okla.

Montgomery, J. A., 2228 Land Title Building, Philadelphia, Pa.

Morgan, Samuel, Esq., care of Natural Gas Pipeline Co., 20 North Wacker Drive, Chicago.

Ray, Geo. W., Jr., Esq., The Texas Co., 135 East 42d Street, New York City.

Searls, David T., Esq., care of Pure Oil Co., 35 East Wacker Drive, Chicago, III Smith. Felix T., Esq., 225 Bush Street. San Francisco, Calif.

Stanford. G. T., Esq., Consolidated Oil Corp., 630 Fifth Avenue, New York City. Tappen. C. M. Esq, 120 Broadway, New York City.

Treadwell. Louis M., Esq., 26 Broadway, New York City.

Walker. H. C., Jr. Esq, 424 First National Bank Building. Shreveport, La Watkins, James K.. Esq., 10222 Ford Building. Detroit, Mich.

Whippie. Taggart, Esq., 15 Broad Street, New York City.

Wills. R. H... Esq., legal department, Mid-Continent Petroleum Corp. Tulsa, Okla. Woodward, Guy H. Esq. care of Standard Oil Company of Indiana, 910 South Michigan Avenue, Chicago.

Zwick, Wm. H.. Esq., care of Continental Oil Co., Ponca City, Okla.

MEMORANDUM FOR MR. COLLEY

1. We attach a summary of reasons for accepting the Government's invitation to negotiate.

2. We suggest that the proposed committee be appointed by a resolation substantially as follows:

"Resired. That a committee be appointed to discuss with the Government is offer to negotiate a settlement of pending litigation, and upon being satisfed that the Government's intended basis of negotiation is substantially as reported to this meeting, thereafter to open and continue negotiations in such manner. 2004 such terms and for such length of time as it may deem advisable, bar with at authority to commit any company to acceptance of any settlement or adjustment of any of the matters now in Brization"

3 We suggest that when this committee frst meets Mr. Armeld it ask him to restate the basis upon which he proposes to negotiate and that his statement should be particularly checked on as respects the Government's objectives: (5) that his procedural method of making a settlement will invive deither confession of guilt ner an indexible plan of future operation, as in the typical "consent_decree"; and (e) his intentions as respects current Stigta Upon the last point Mr. Arnold should be committed:

To belding the antitrust and several pipeline suits in status quo: (5) To cooperating in securing extensions of time from the Federal Trade Commission with respect to its pending Robinson-Patman complaints entials to exclusive dealers):

To cooperating in securing extensions of time from the Interstate merce Commission with respect to its pending crade pipeline order. Assuming that all of these matters are stated to the satisfactora of de committee, it would then be in order for it to disenss and settle wit Arnoid a procedure for handling the negotiations.

BALLARD, SPAHR, AVIEWS & IN PERSOLL

JAUNARY 11, 1941.

PETROLEUM ANTITRUST SUIT-REASONS FOR ACCEPTING GOVERNMENT'S INVRAT TO NEGOTIATE

1. Considering present trends of decisions, the Government should be expected to win on at least some of its peints if the antitrust suit is cricaned aft and however one may rate the Government's chances in the pipeline-ZEREK SIE'S the possible damages are so heary that the risk of an adverse densia siec be avoided if reasonably possitie. Delay in commencing beats respect to the antitrust suit may make it messible to amoi a decision in prečne strits. Prečnitary necens in the Great Lakes and Phir 10 m dismissed on Thursday, January à answers on the merits are the wika a days and the rases may be fieved to trul in Formary and then deenbe stipulated facts mess peresedings are suspended because of penting ses ca tas to settle the antitrust stit

2. Both the Department of Justice and the 100 make substancat sal demands as resteers the ende ces Necation offers the SSÜLJ setting both demands at one time and tova a derbie beSTS TEMELT IT L anier içen ireed terms the attrist staf has stated that there and the after be me antitrist question is respects these Ines, and I savai be poss ? dispose of questions afecting the product lines y a lie przestrze.

3. The Government is now in a mood to settle, whether because of defense pressure or otherwise, and this being so, the present should be a good time for us to negotiate.

4. The publicity which litigation would receive could be especially prejudicial to the industry at this time and during the next few years.

5. The industry should be better able to combat legislative proposals looking to Government control if its current record is one of willingness to negotiate with the Government instead of the reverse.

6. War years magnify the industry's importance to the country and should be availed of by the industry to put its house in order against attacks in later years; results in this direction should be more possible by negotiation than by litigation.

INDUSTRY MEETING HELD IN NEW YORK, JANUARY 22, 1941

Following the meeting of attorneys held in Chicago on January 8, leading executives of the industry met at a luncheon held in New York on January 22, at which time it was concluded that Mr. Arnold's invitation for a preliminary meeting in Washington should be accepted. The attached memorandum for Mr. Colley dated January 11, 1941, indicates the matters discussed.

MEMORANDUM OF CONFERENCE

Between the Antitrust Bureau of the Department of Justice and a committee of the oil industry

The conference convened in Mr. Arnold's private office promptly at 11 a. m. January 29, 1941. There were present on behalf of the Department of Justice Messrs. Arnold, Asbill, Snyder, Berquist, Cook, Weaver, and Knapp.

There were present from the industry, Messrs. Thompson, Vanderwaude, Brown, Holton, Colley, Andrews, Pew, Hall, Boyd, France, Denton, Cosgrove, Emery, Smith, Adams, Subert, Klein, and Reed.

Without any introduction Mr. Arnold opened the conversation. He talked without interruption from members of the industry for about 40 minutes. Rather generally he covered the problems presented by the Pipeline and "Mother Hubbard" suits, in much the same way he had done in the earlier conference with Mr. Andrews and associates, so excellently reported in Mr. Andrews' memorandum heretofore distributed. There were a few rather notable differences between Mr. Arnold's approach at the Andrews conference and his approach at the conference being reported.

The most significant difference was Mr. Arnold's statement that he had to approach the Pipeline Elkins Act suits from the standpoint that the Elkins Act does not permit the shipper to receive any dividends from the carrier. Mr. Arnold admits that the law is not yet settled to this conclusion, and immediately observes that anyone during the course of negotiations can change his views with respect to a position previously taken. Mr. Arnold also observed that the problem of waiving Elkins Act penalties already accrued really did not rest with his department. He intimated that was a problem for the Assistant Solicitor General.

The rather clear inference to be drawn from Mr. Arnold's observations with respect to the pipelines is that he will start negotiations from the premise that pipeline owners who are shippers over those lines are not entitled to receive any dividends from the lines. It is possible that as negotiations proceed Mr. Arnold will admit that the pipeline owners, be they shippers or nonshippers. are entitled to receive reasonable interest on the capital invested in the pipelines. It may be he will insist that the return be in the nature of interest rather than dividends.

Mr. Arnold stated at least twice that the economic objective of the pipeline suits was not to recover Elkins Act penalties. He did not say what was his economic objective.

Mr. Arnold devoted considerable time to discussion of dissolution of an industry. He observed that dissolution was perhaps about all a court could order, but that different results could be accomplished by the means of agreement with the industry. He pointed out his belief that dissolution was difficult to accomplish and perhaps did not yield the type of remedy which appealed to him. The difficulty of accomplishing dissolution he illustrated by a reference to the packers' suits, observing that the sale of the properties had not yet been fully accom

plished. His remarks strongly indicated that the dissolution of the industry e any of the companies in the industry or any facility of the industry was net hy prime objective and was an objective to be avoided if possible. He emphasiÁ the opportunity for new companies or new investments in the industry as ber more desirable than the dissolution of the present structure.

Mr. Arnoid merely mentioned the marketing processes of the industry, te observed he had no comment to make at the present time. Mr. Armoed emptesized "the enormous amount of public resentment" against the industry and nee tioned the demands operating on him from Senators and Representatives. Be mentioned the approaching hearings on the Gillette divorcement bulis and otser el that it was the view of the Department of Justice that divorcement is the las remedy; and it may be reasonably inferred from Mr. Arnold's remarks that he possibly could be induced to make some representation to that effect to the Senate committee holding hearings on the Gillette bills.

Mr. Arnold indicated a preference for having the negotiations continued between a small committee or several small committees representing the industry and the gentlemen of his staff. He expressed a favor for the smallest possible cum mittee and the smallest number of committees. The reference to the possibility of several committees grew out of the possibility that one committee might he charged with negotiation about one phase of the industry-for instance, pipe lines and another committee charged with negotiations about another phase of the industry-for instance, marketing.

INDUSTRY MEETING HELD IN WASHINGTON, JANUARY 29, 1941

Immediately following the meeting with Mr. Arnold which was held on the morning of January 29, the industry representatives adjourned to a luncheon meeting at which Mr. Colley acted as chairman. At this time it was decided to commence exploratory discussions with the Department of Justice and the Industry Committee, consisting of Colonel Klein, chairman, and Messrs. Hall. Green, Jones, Emery, Cosgrove, and Thompson, was appointed.

JANUARY 30, 1941.

Col. HARRY KLEIN,

Vice President, The Teras Co.,

New York, N. Y.

DEAR COLONEL KLEIN: This will confirm our telephone conversation of this afternoon.

Mr. Colley today obtained the approval of all the companies not represented at yesterday's Washington meeting of the acceptance of the Government's invitation to negotiate and of the membership and functions of the so-called Exploratory Committee. In addition, Mr. Hall has just telephoned confirming approval by Standard Oil Company of New Jersey.

Pursuant to your suggestion, I talked to Mr. Asbill and have arranged Monday morning. February 10, at 11 o'clock, as the time for the first meeting between the committee and the antitrust staff.

Mr. Asbill is arranging to make available one of the Department of Justice conference rooms for a preliminary meeting of the Exploratory Committee to be held at 10 o'clock on the same morning.

Mr. Asbill asked me to express to the committee and through them to the industry the staff's gratification at the speed with which the matter was handled. During the course of the conversation he stated that there would be no objection on the part of the Government if the committee desires to have a stenographer present for the purpose of making such notes as any of the conmittee should, from time to time, desire to dictate.

You will recall that you suggested to me yesterday that I might be able to persuade Mr. Asbill to grant an extension of time for filing the answers in the Great Lakes and Phillips cases. I took this matter up over the telephone. Mr. Asbill said that he was reluctant to refuse, but that he had specific instructions from Mr. Arnold to grant no extensions in these cases; that he would find an opportunity to discuss the matter with Mr. Arnold within the next few days.

and would let me know the latter's reaction. I of course made it clear that, in making this suggestion, I was acting as a volunteer at your suggestion and not speaking for the pipelines.

Mr. Asbill promised immediately to get to work with his staff on an agenda for the meeting scheduled for the 10th and stated that he would telephone me early next week any suggestions which occurred to him respecting preliminary work which might be done by individual members of the committee in advance of the meeting.

I offered to come to Washington tomorrow, or on any other convenient day, to receive any such suggestions in person, and he stated that he would advise me during the early part of next week whether any useful purpose would be served by such a trip.

I will report by letter or wire, as early as possible next week, any suggestions which may be made by Mr. Asbill, as well as the precise number of the room in the Department of Justice Building in which the preliminary meeting of the Exploratory Committee will be held.

Very truly yours,

FEBRUARY 1941

MEETING OF THE EXPLORATION COMMITTEE HELD IN ROOM 4525 IN THE OFFICE OF THE DEPARTMENT OF JUSTICE, WASHINGTON, D. C., ON MONDAY, FEBRUARY 10, 1941

Present: Messrs. Green, Hall, Cosgrove, Thompson, and Klein.

The representatives of the Department of Justice present were: Messrs. Arnold, Asbill, Snyder, Berkquist, Cook, and Knapp.

Mr. Arnold made a statement of about 10 or 15 minutes, taking most of the time to comment upon the recent decision of the United States Supreme Court in the Carpenter Labor case. He stated that, generally, he did not believe in the Department of Justice submitting an agenda to defendants in cases in which negotiations for settlement are being conducted; that, however, Mr. Asbill had tentatively prepared a plan for our consideration and submitted it to Mr. Arnold for approval and, although he (Mr. Arnold) had not read it, he had approved of Mr. Asbill's suggestion to submit it for our consideration. Mr. Arnold stated that, in view of the complicated nature of the litigation pending against the oil companies and the pipeline companies, and despite the fact that several of Mr. Asbill's associates were not in accord, he had decided to approve Mr. Asbill's suggestion to submit the plan to the Exploration Committee for consideration. Mr. Arnold added that, inasmuch as the rebate issue involved a substantial sum of money, he would not have authority to approve any settlement unless and until the Solicitor General and the Attorney General had passed upon it, with whom these matters had not yet been discussed.

At the conclusion of Mr. Arnold's remarks, Mr. Asbill read a prepared statement of 3 or 4 pages, the effect of which was that our negotiations, so far as the Department of Justice was concerned, were to be without publicity; that any matter that might be tentatively agreed upon beween the Exploration Committee and the Department could, at any fuure meeting, be disapproved by either group. He also stated that the proposed plan he was submitting to us for consideration was the extreme position of the Department, and that we were not to be frightened by its terms, but that he would be glad, with his associates, to discuss the plan fully with us as soon as he had examined it.

Thereupon, the Department of Justice representatives withdrew and the Exploration Committee read the proposed plan, paragraph by paragraph. At the conclusion of its reading, we decided to go back to the Shoreham Hotel and discuss our further procedure, after making an arrangement with the Department of Justice to meet with them again on Tuesday morning, February 11, 1941, at 10 o'clock.

Mr. Emery having been delayed by reason of a derailment of his train coming East, arrived at the Shoreham after our conference with the Department of Justice representatives and in time for a discussion in the afternoon of Mr. Asbill's proposed plan.