Transcriber’s Note
This file uses underscores to indicate italic text. Small capitals changed to all capitals.
CARTELS
Challenge to a Free World
By WENDELL BERGE Assistant Attorney General of the United States
Public Affairs Press WASHINGTON, D. C.
To My Father
GEORGE W. BERGE
_who throughout his life and in his public career was guided by the conviction that the people’s rights are not won without struggle and will not be maintained without vigilance_.
Public Affairs Press, 2153 Florida Ave., Washington, D. C. Copyright, 1946, by American Council on Public Affairs M. B. Schnapper, Executive Secretary and Editor
Preface
Plastics, television, new chemical and electrical techniques are but a few of the instruments which will furnish the stuff for the pioneers of a new age. The challenge of housing will excite bold minds to action, on a scale never before attempted, to wipe out slums and give dwellers in country and city alike a new and higher standard of living. Not only at home, but also abroad, the opportunities for daring enterprise which will be offered by the needs of world reconstruction will surpass anything ever before known.
How are we going to meet this challenge? At the outset, we must face frankly the greatest obstacle to making the most of our opportunity. It is the threat of cartel control of major world industries. Unless this threat is understood and dealt with decisively, our opportunity to realize the great potential benefits of a free economy will be lost. And worse still, the hope of maintaining democratic political institutions will be seriously impaired.
The pattern of cartel operations has been clearly revealed in recent years by antitrust investigations. From public records in antitrust proceedings and congressional hearings, information about cartel operations is now available. The public should be familiar with the facts. As head of the Antitrust Division of the Department of Justice, I have frequently been called upon to discuss cartel problems before congressional committees, trade associations and civic groups. Since my testimony and speeches received varying degrees of public notice at the time they were given, the casual reader of newspaper reports necessarily obtained only an impressionistic picture of the far-flung ramifications of the subject. Something more is needed for thorough understanding.
With this thought in mind, a number of friends and associates have suggested from time to time that my material should be woven together in book form. This I have undertaken to do in the present volume.
Merely to make assertions about the evil effect of cartels is a simple matter. But I believe that the real usefulness of this book will depend upon its fairly detailed explanation of the operation of particular cartels, with direct quotations from letters, memoranda and other documents.
While I have not tried to compile a complete source-book, I have striven to make this discussion as non-technical as possible. The factual material is drawn largely from the documents of the Kilgore, Truman and Bone Senate Committees, and from the public records of antitrust cases.
The investigations which unearthed the facts cited in this book were, of course, the work of a great many men and women in the Antitrust Division extending over a period of years. Acknowledgment of credit to all of them would be impossible. Many of the men who have developed these facts are now serving their country in the armed forces.
I cannot praise too highly the ability, energy and devotion to public service of the men and women of the Antitrust Division. It is a privilege to head such a splendid staff, as it is to serve under such an able and distinguished Attorney General as Francis Biddle, who has maintained at all times an extremely deep interest in our cartel work and has given it his fullest support. Attorney General Biddle has repeatedly impressed upon me his own conviction that the vigorous enforcement of the antitrust laws against cartels is an indispensable condition to the maintenance of a free competitive economy in this country.
In the preparation of this book I am particularly indebted to Joseph Borkin of my staff, who is in my opinion one of the best informed men in America on the activities of international cartels. For more than five years Mr. Borkin has devoted his great resourcefulness and energy to investigation and study of cartel problems. His contribution in this field has been invaluable.
I also want to acknowledge my deep obligation to my First Assistant, Edward H. Levi, with whom I have spent many hours discussing the legal and economic problems of cartels, and on whom I have relied so heavily in the practical administration of the Antitrust Division. And I am greatly indebted to Myron W. Watkins, Charles A. Welsh, Ernest S. Meyers, George P. Comer, Herbert A. Berman, Bartholomew Diggins, Robert Hunter, and Heinrich Kronstein of the Antitrust Division staff, all of whom have been of great assistance in the preparation of this book and in the cartel work of the Division. Professor Walton Hamilton of Yale, who has been a part-time member of the staff, has also worked closely with me on these matters and has made a signal contribution to our work.
Mr. M. B. Schnapper, Executive Secretary of the American Council of Public Affairs, has been of greatest assistance in the planning of this book and in the editorial work which it has involved.
WENDELL BERGE
CONTENTS
1: Trusts to Cartels 1
2: Enterprise Eclipsed 10
3: Technology 19
4: Patents 36
5: Medicines 52
6: Synthetic Hormones 58
7: Vitamins 82
8: Quebracho Extract 112
9: Titanium 124
10: Optical Instruments 142
11: Miscellaneous Products 176
12: The Webb Act 192
13: Private Governments 208
14: Freedom or Control? 233
Appendix I: Recent Cases 250
Appendix II: Bibliography 257
Index 261
1
Trusts to Cartels
The problem of monopoly is no longer a distinctively domestic and national phenomenon. It has come to encompass the wide world. Like a parasite upon its host, monopoly has grown with the marketplace. Today hardly a corner of the world remains free from the malignant influence of its latest and most sinister form, the cartel. Diamonds discovered in Arkansas may prompt agitated conferences within 48 hours in London and the Belgian Congo; a lawsuit in New York challenging the aluminum monopoly brings simultaneous outbursts of oratory in the House of Lords and of vituperation on the Axis radio.
For over half a century, the Sherman Act has stood as a positive expression of the inflexible will of the American people to preserve freedom of economic opportunity. When this measure was enacted the oil, whiskey, and sugar trusts had placed barriers directly athwart the arteries of commerce and were exacting tolls for every gallon or pound of product permitted to pass. Since nation-wide industrial monopoly of a comparatively stable character first took the form of a simple trust agreement the Sherman Act came to be designated an antitrust statute. But its thrust was positive: the maintenance of free, competitive markets and a democratic system of industrial control.
If such an Act were passed today, I am quite sure it would be called an “Anti-Cartel Act.” For our attention is at the present time focused on industrial monopoly in a different form, operating in a wider orbit. But our basic concern is the same. We are as determined today as were our grandfathers, two generations ago--indeed, as were the founders of the republic--to countenance no infringement of the right to engage in any legitimate enterprise and to conduct business without let or hindrance from any self-constituted group presuming to monopolize trade or industry.
The Sherman Act has proved an effective instrument no less for dealing with the cartel problem than for curbing the trusts. It must be conceded, however, that, in default of proper implementation and appropriate supplementation, it has not fully realized the salutary object for which it was designed. In particular, our policies with regard to patents, trademarks, the tariff, monetary and credit matters, interstate commerce, and foreign trade, all have a direct bearing upon competition and the pattern of industrial organization. They are important factors conditioning the efficacy of a free market for performing its basic economic functions. To our comparative neglect of the incidence of these policies on the problem of maintaining healthful competitive conditions in industry must be attributed a large share of the responsibility for the difference between antitrust goal and business practice.
In these circumstances, cartels--which, in effect, are trusts magnified to an international scale--have been able by clandestine means to impress their sinister mark upon our economy. In mobilizing for war, we discovered, almost too late, that they were responsible for shortage after shortage of vital materials. The fact is that they have retarded technological advance and the introduction of improved devices and products, whenever such developments seemed to threaten their vested interests despite the fact that thereby national security might be jeopardized. They have, indeed, obstructed and in no small measure thwarted the declared foreign policies of the American government, placing their own business interests above the public interests.