incumbent upon these two agencies to work as they have in the past. I think the liaison has worked very well in the past. There may have been an occasional breakdown, but every effort has been made to keep them from duplicating efforts. That is what I am talking about.

Senator COTTON. I want to ask you two or three more questions and they have to do with the report of the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary to S. 231.

The record should show as a compliment to you that in the letter of transmittal the distinguished Senator from Tennessee, the chairman of the subcommittee, complimented you for your splendid work and for your work in helping to prepare this report. He said:

I want to acknowledge with appreciation the efforts beyond the ordinary call of duty of Paul Rand Dixon, chief counsel, and Dr. John Blair, chief economist, both in the work of the hearing on which the report is based and in the assistance they rendered the committee in the preparation of this report.

As one who helped prepare the report, I feel that I must ask you a couple of questions about it. The report states, on page 168

Mr. DIXON. Which report is that, sir?

Senator COTTON. That is the "Administered Prices of Automobiles." I am reading from the report:

The U.S. Steel and International Harvester cases state the traditional and familiar legal proposition that size alone is not enough to violate the Sherman Act. In any intelligent approach, with the exception of the law, such a proposition would be attacked as absurd and without merit.

Do you believe that in the field of the law the proposition that size alone is not enough to violate the Sherman Act should be "attacked as absurd and without merit," in the words of this report?

Mr. DIXON. We had before us there, when that report was written, some of the best economic brains, scholars, that we called before that subcommittee.

When the Sherman Act was passed in 1890, section 2 of the report challenged monopolies or attempts to monopoly. I think that what is meant there, sir, is this: If you were the only manufacturer in the United States of a product which was widely used and sold to the consuming public, it would be rather absurd to say that you did not have the monopoly. It would be rather absurb to say that you did not. But, although section 2 actually challenged that, when the United States Steel case was brought and the Harvester case was brought after that, as I recall it the Justice Department decided to test the Steel case on size alone, just as the law had stated it. The court rendered its opinion and said size alone was not enough; in effect you had to show abuse. And this has been confirmed to where I say to you that the state of the law is just about as we have stated there, although if you read it by itself, and if you view it separately, it would lead one, I think, perhaps to say that.

Senator COTTON. Have you finished?

Mr. DIXON. Yes, sir.

Senator COTTON. I was interested in your own philosophy in connection with this. Do you believe, regardless of what the law is or is not, that size alone can constitute a violation of section 5 of the Federal Trade Commission Act as an incipient violation of section 2 of the Sherman Act?

Mr. DIXON. I do not, sir. I think this: That it is well founded in our way of life that today we must show, under the Federal Trade Commission Act, that there is an abuse. It would have to fall within one of those tests: unfair methods of competition or unfair. And if you could not make a record showing why it is unfair, it would not withstand judicial review which must have substantial evidence behind the finding before it will stand up.

Senator COTTON. Thank you, Mr. Dixon. That very plain statement of yours anticipates the next point I was going to raise, and saves time, because on page 169 of the same report, the next page, I find the words:

It would appear that the courts have extended the classic abuse theory to where a recognition of size and power may be the abuse in themselves.

Do you believe that the court decisions have reached the point of so extending the abuse theory?

Mr. DIXON. They are approaching it, sir. When it is viewed in all of its ramifications-I don't know whether that is quite an accurate statement or not because you can't just walk into the court and say, "Look here, this company has got every bit of this business; therefore, it is dangerous, there is no competition; therefore, this is not good for the public; break them up." Or restrain them someway.

I think that if they are challenged whatever theory you challenge them under, you have to illustrate where this harm comes from, the set of circumstances you are talking about. It has to be harmful to some of the stream of commerce or to the public somewhere. And if you can't prove it, you are not going to do anything about it, unless the Congress changes the law.

Senator COTTON. You have stated your conception about the matter of size alone. Just to make the record complete, may I ask this question: Do you believe that size and power should be held to be a violation of section 5 of the Federal Trade Commission Act as an incipient. violation of section 2 of the Sherman Act?

Mr. DIXON. There is very little difference between size and power. Monopoly is power in and of itself. Power is the power exercised. So I think the facts must be looked at. That could only be determined upon how the power was used. Was the power abused?

Senator COTTON. In other words, mere size and power would not be enough?

Mr. DIXON. I do not think so, sir.

Senator COTTON. What are your views as to the propriety of bringing so-called test cases to attempt to extend the present limits of the Federal Trade Commission Act to cover situations which are not unlawful under existing precedents which are criticized by economic theorists?

Mr. DIXON. I am very cognizant of many theorists. I also try to be practical along with it. I say this, sir: During the 4 years that I have sat as counsel for the Antitrust and Monopoly Subcommittee, many, many very learned people have been before us; many of our principal enforcement officers, various Chairmen of the Federal Trade Commis-sion, the Commissioners, the Assistant Attorney General in Charge of Antitrust and his assistant, and I have asked many of them this question: Could they suggest a manner of strengthening section 5 of the Federal Trade Commission Act, other than perhaps changing the

68026-61

words "in commerce" to "affecting commerce" and no expert has ever been able to improve upon that law.

So far as saying do I intend to bring test cases, do I intend this, I think that you, the Members of Congress, are fully aware of the problems of our free competitive enterprise, and certainly I think it is practically not very honorable to say that we have got a free enterprise system if we don't have competition.

In other words, freedom, there can be no freedom unless there is competition or a chance for competition. We are, and do have, a realistic problem. Concentration is growing every year. The last report that was based upon the 1954 census figures showed it. Another one is going to be issued shortly based on the 1958 census.

These do bring problems to America, as do a lot of other things bring problems to America. But you can't just go off on slogans and things and say this is wrong and this is good. These things must be veiwed, Senator.

On the other hand, the Federal Trade Commission does have the basic authority to question many of these things that must be troubling the Congress.

If you call them a test case, if it is a new theory or something, certainly the law is there. The responsibility is there. If a majority of the Federal Trade Commission, as it will ultimately be constituted, believes or has reason to believe a law that they are sworn to enforce is being violated, they are dutybound to issue a complaint and test it. Every case they bring is a test. It is a test until it is won or lost.

I do quite succinctly and honestly say to you that I am not sure that the full powers of the Federal Trade Commission have been tested. Unfair method of competition was tested for a number of years until they found out it wasn't very effective because you could be the only seller and you could do anything you wanted to and you couldn't harm anybody because you didn't have competition.

Nor was there any test of how it affected the public. And so in 1938 Congress amended this law and you added those other tests in there: Unfair or deceptive acts or practices.

What is unfair, sir. Congress very wisely, in my opinion, followed the American way rather than just saying this is unfair and this is and this is. Congress passed a law in the general language, leaving it to an orderly development of the court system under the doctrine of inclusion and exclusion where we built up a body of law. What is unfair will have to be developed by trial and error.

Senator COTTON. Mr. Dixon, my question was just this simple: You are going into a new job with a big challenge. You have very wisely said to the staff of this committee that you have some real concepts of the job that has to be done at the Federal Trade Commission to make it more effective and so on. I thing it is highly proper that members of the committee should find out and be told some of the specific things you aim to do. I think it is not only our province but your duty.

What I am getting at is just this: You and I know, as simple men of ordinary experience in life, a man will go into the Commission, and this is perhaps what you should do. You may have in your mind some fields in which the Commission should accomplish some things, expand its power, and use that power for the public good.

We all know that you expand power by test cases in any kind of a Commission of this kind. It may well be that you should do this, or perhaps you shouldn't. All I am asking is just this plain, simple question: do you, today, before you enter upon your duties, have in mind some specific directions in which you wish to expand the power of the Federal Trade Commission by test cases and by directing your attention to doing that very thing? It seems to me that is a perfectly simple question. If you have some specific direction or avenues in mind, I wish you would tell us about them. I might be thoroughly in accord with them. But I want to know if you do have some definite aims in mind of that kind, and if so, what.

Mr. DIXON. The Federal Trade Commission, by the edict of Congress is one of those rare administrative agencies where we are both investigator or eventually judge. I say to you in all honesty, I go there with no preconceived notions that anyone is today violating the law. I have reasons to believe, I could say, that when I view a set of facts that I have the competency to say as to whether it will violate one of the laws that we have, at least to the point of challenging it. But challenging, sir, is far removed from final judgment because once you challenge and it goes to adversary proceedings, the theory must withstand the contest. Then I think I will be able to answer your question a little more fully.

All I can say to you is that I believe I am cognizant of the responsibility; I believe I understand the law. I intend, to the best of my ability, to honorably enforce it, honestly, where the facts are, and let the chips fall where they may, sir.

Senator COTTON. Very well, sir.

Very quickly-this report also states, on page 94:

In its early days advertising undoubtedly performed for this industry-— the automobile industry

its socially desirable function of expanding the market.

It goes on to say after the automobile had been established and accepted, it is doubtful whether advertising expanded the market, but it was just used in the contest in splitting up the existing market. But it uses the term "socially desirable."

Do you consider it proper for members of the Federal Trade Commission to decide cases on the basis of their opinions as to what is socially desirable?

Mr. DIXON. Socially desirable?

The Federal Trade Commission decides them on law, and not on what might be socially desirable. What is in the public interest might have some bearing on that.

Senator COTTON. You were one of the authors of this report?
Mr. DIXON. Yes.

Senator COTTON. It is in this report that this is set up, this discussion about dealing with it on the basis of what is socially desirable. That is why I asked you the question.

Mr. DIXON. That sentence doesn't read the way that I understood the question, Senator.

Senator COTTON. I beg your pardon. I read it from the report. Mr. DIXON. Yes, sir. But I didn't understand it when I tried to answer it [reads]:

In its early days advertising undoubtedly performed for this industry its socially desirable function of expanding the market.

As I understand what is meant there by socially desirable, I would think it is desirable in our whole society to expand and grow in any industry in America. I don't believe that without advertising much of our mass media would have been able to have been accomplished. I mean by this that if you made the best mousetrap in America, if you didn't tell somebody about it you might not sell it.

On this particular thing that you are talking about here, I think this caused the subcommittee a great deal of trouble. It was written; and I participated in it because I reviewed it and I accepted the responsibility once I had reviewed it as the subcommittee did when they issued it.

The industry, I believe, got the impression, and much of the advertising community, that advertising itself was being questioned. That was not the intention, and I believe the chairman of the committee must have written maybe 40 or 50 letters stating that to various people. Certainly I share that view.

What had been illustrated here in these automobile hearings was this: That automobile market sharers were very sensitive to price; not so much to promotion. Every hundred-dollar difference in the price had been proven to be reflected in a number of automobiles. And what was being talked about here was advertising in that vein.

But this certainly does not apply to advertising as such and it was not so intended.

Senator COTTON. The purpose of my question has nothing to do with automobiles and isn't confined to advertising. In this report it was indicated-and you were one of the authors of the report-in the discussion it said in the past automobile advertising was socially desirable in that it was expanding the market, which is a good thing. Then it goes on to say that apparently that time has ceased and advertising has become a mere matter of dividing up existing markets between automobile manufacturers.

The point I am trying to make and what I am trying to get at is this: In my understanding the Federal Trade Commission is charged with the duty of preventing false and misleading advertising, to keep advertising honest. But whether advertising is designed to effect a social improvement by expanding the market, or whether it is just promoting competition and dividing up the market, wouldn't seem to me to be a concern of the Federal Trade Commission whether it is the automobile field or some other field. And more, I am interested to know whether you, as a participant in this kind of language, I would like to get into the record whether you consider it proper for the Federal Trade Commission to decide cases on the basis of what they think is socially desirable, or whether it should be confined to the strict enforcement of the law on fair trade practices, on honest advertising, and so forth down the line.

Mr. DIXON. I can answer that quite succinctly for you-only in accordance to the law, sir. Socially desirable has nothing to do with it, and that complete paragraph, where that sentence applies there, I think spells it out a little bit more.