Mr. MONTAGUE. I do. I think section 4 is absolutely unnecessary. I think that the Federal Trade Commission already reached it, but to make absolutely sure that everybody would understand that it did, section appears to have been put in.

Now, the question was raised by Senator Brandegee yesterday as to the public policy of permitting an association to be organized, as an association may be under this act, which might conceivably gather into itself a very substantial amount-as he described it, a monopoly-of the export trade in its particular line; as to whether that should be allowed. It seems to me that question has been faced and a solution of that has been attempted in section 4. In so far as the association gathers together a large amount of export trade, without in any way prejudicing a man on the outside who is an independent exporter, there is no harm. The considerations which, in our own domestic trade, have led us to view with alarm-justified alarm in many instances that kind of aggregation of trade, because of its social and political results, do not obtain as to trade which is outside of our borders, provided always that there is protection afforded to the independent American exporter who is outside this aggregation. And that I take to be the solution which the draftsmen of this act attempted for that particular problem.

Senator BRANDEGEE. You admit, by saying that, that it would not be against public policy to have something approaching a monopoly in the export trade?

Mr. MONTAGUE. Provided always that there was freedom for an independent exporter to come in and an assurance that he would not be oppressed by the association having this great proportion.

Senator ROBINSON. In that event there would be no monopoly, though.

Mr. MONTAGUE. In that event there would be no monopoly, because, as Senator Robinson has well said, monopoly may not exist, even when at a given moment a hundred per cent of the trade is in one association, if there is always freedom for an independent to enter that trade, and an assurance in the law that if he does enter it he shall not be oppressed by the present incumbent in that trade. And that I take to be the way they solved it.

Senator BRANDEGEE. My idea was that there might be no conspiracy to oppress, but that the exporting association might, by its efficiency, simply occupy the field so that, in fact, the freedom of some possible competitor to enter it would be merely theoretical, and that he could not possibly enter it.

Mr. MONTAGUE. I take it that there is nothing in our laws, either regarding foreign trade or domestic trade, which in any way is going to penalize any concern on account of efficiency. If there is one thing which may be said to the glory of our antitrust laws, if I may use the expression, it is the fact that we have proceeded further than any other nation in accomplishing protection to the independent competitor without bringing about a paternalistic control of all industry.

Senator BRANDEGEE. But you get right back there to the old vicious circle, that while you are in favor of competition. if competition becomes so efficient that one competitor crowds everybody else out of the field, therefore it is beneficial.

Mr. MONTAGUE. But how and by what means does he crowd them out? That is the whole gist of it.

Senator BRANDEGEE. By efficiency.

Mr. MONTAGUE. Mere efficiency is something which the laws of this country are never going to interfere with.

Senator BRANDEGEE. Well, I do not know about that. [Laughter.] Senator CUMMINS. At least we never have tried to interfere with it. The antitrust law does not declare illegal a monopoly that is brought about by mere efficiency, as I understand it.

Senator ROBINSON. I think the Senator from Connecticut is more or less sarcastic. [Laughter.]

Senator CUMMINS. Mr. Montague, again calling your attention to section 3, has your statement about it been made upon the assumption that the act of 1914, the Clayton law, forbids in and of itself one corporation from holding the stock of another?

Mr. MONTAGUE. If the corporations which are thus bound together by the holding corporation are or might be competitive

Senator CUMMINS. No: but this is one corporation holding all the stock of another. Suppose the United States Steel Corporation. as an illustration, were to organize an export company and own all the capital stock of that company. That would be no combination.

Mr. MONTAGUE. I take it that would not be a violation of the act. Senator CUMMINS. But that is just what is provided for here, in part.

Mr. MONTAGUE. I do not think that specific instance you give would be a violation of section 7: but if the United States Steel Cor poration and the Lackawanna Steel Corporation should desire to form a corporation as an association for export trade, then would be presented a violation of section 7, which could only be avoided, I take it, by section 3 of this act.

Senator Pomerene raised a question yesterday which a mere lawyer has no right to discuss, and that is as to the effect on prices. Years ago, when I was teaching economics at Harvard College, I used to feel more certain on these questions than I do now, but several obser vations did occur to me yesterday in respect of that question which I now submit with great deference. I only wish he were here to follow up the discussion.

What is going to be the effect on prices of enabling associations under this act to be organized to go into export trade and to increase our exports?

If such associations are organized, and they do begin to develop an increased demand in export trade, it is my belief that their effect on domestic prices will be nothing more and nothing less than what would be the effect on domestic prices if within this country there should suddenly arise somewhere an increased demand for that particular product. In some cases the prices might rise. They would rise in the event that the supply could not be increased commensurate with the demand. It is conceivable that in respect of the inexhaustible resources of this country that this occasionally might be the result. But is that a reason against permitting associations of this kind to exist? What happens now? The demand comes in in the form of export trade; and, as we know from the report submitted by the Federal Trade Commission, from the facts which are already familiar to

• PROMOTION OF EXPORT TRADE.

117 you, the result of our not being able to cooperate in respect of handling that is that the same diminution of the supply occurs, but at much less favorable prices abroad than would be the case if we had this association.

To carry out Senator Pomerene's point he, logically, to my mind, ought to be opposed to any export of that particular commodity, for that would be the only really logical way of meeting the objection which he raises; because, wherever that demand comes from, its effect upon prices is going to be felt; and by simply refraining from passing this act there will be-to a less extent perhaps, but still to some extent a demand coming in through export trade which we are satisfying, but on terms much less favorable to the producer than would be possible here.

Now, there is one other point. Senator Pomerene's question applied to a commodity in the nature of a resource, and I was somewhat surprised, in the answer given by Mr. McMicken, to find that even though it related to a natural resource, still such were conditions in the lumber industry that it did actually, in respect of byproducts, yield an increased supply here. Perhaps the facts also are that if there were a reforestation to some extent-in other words, some way of replenishing the supply-the increased demand would be met without any ultimate increase in the price.

This leads me to an illustration which is much closer to what I am more familiar with, and that is, What will be the effect on the prices of manufactured goods? Here we get clear beyond considerations which make the complications that Senator Pomerene had in mind: because in the case of manufactured goods generally the effect of an increased demand is to enable a greater amount to be produced with a falling of cost of production, and there the natural tendency is a lowering of the cost, and therefore of the price, which is a positive benefit to the domestic producer. I think it is the general consensus of opinion that in respect of manufactured goods, which do not sell themselves abroad, but which do require actual effort to sell, there will be the most remarkable stimulus conferred by this bill.

I would call your attention to the fact that the circumstances of production of that kind of goods are that the more they are produced, and the more our manufacturers can run at full capacity in the production, the lower falls the cost, and therefore the lower must be the ultimate price to the domestic producer.

We have to bear in mind, I think, in the whole discussion of export trade, that illustrations which puzzle us in connection with exhaustible resources-things which are to a certain extent limited in quantity-do not apply when we take the case of manufactured goods. And so, in connection with a number of questions which I noticed the Senators were asking of various witnesses, it was obvious that the Senator had in mind the former class of goods, and his question was directed on that line, while the witness had in mind the other.

Now, those differences between various classes of commodities necessarily exist; and if we are afraid of the remote possibility of an increase in the price here at home of our exhaustible resources, the logical way is absolutely to forbid that they be exported at all. and not to get around it by the illogical and unfair way of refraining from passing this bill merely because it might increase our exports.

Personally, I believe this bill would not increase exports of our exhaustible resources, as Senator Pomerene fears, but would merely stabilize exports of this class and enable us to get a better price from the foreigner, with absolutely no increase in domestic prices, but in most cases a more stable and perhaps also a lower price to our domestic consumer.

Senator CUMMINS. Mr. Montague, one question more. You have thought a good deal about the subject; you have heard the testimony. Do you know of any need of the export trade that would not be met by legalizing if it needs to be legalized the formation of a corporation in which different producers can become stockholders, or any form of contract through which there is accomplished a common selling agency? Would that not cover the entire case?

Mr. MONTAGUE. I am glad you raised that point. I have on my desk in my office four or five plans for possible associations, all of comparatively small interests, which may perhaps be availed of if this act goes through. The form that you have suggested-of a common selling agent-is, in my opinion, best adapted for staples in the nature of cotton, for example, wool, or lumber, such as Mr. McMicken described. But, in connection with most manufactured commodities, and particularly with manufactured commodities which only recently have been specialties and are now only just becoming standard commodities-I refer to typewriters and things of that kind, of which there are a number of brands that mode that you have suggested is not commercially sufficient. So far as I have been able to analyze it in my own mind, it runs something like this: That. in respect of staple commodities which are easily classified, an informal organization of a mere selling agent would probably handle the situation, because there the chief difficulty arises from the fact that the producers are competing against themselves as against united foreign buyer. But when you come to a situation such as in the case, we will say, of typewriters-I speak of that because that is one of the cases that I have in my office-where the things do not sell themselves, but have to be pushed, and our people have got to develop a selling organization over there, you can not get along with anything as simple as a mere common agent; and in one particular instance that I know of I have recommended that, in the event that the law is cleared up so that we can be absolutely safe. the form of association they should have would be a corporation which would be absolutely on its own feet, in which the cooperative companies would merely be stockholders, and that corporation would make contracts, a year at a time, to cover a certain supply of goods. That would not be strictly a common selling agent on a commission basis, because they would absolutely pay for them outright; they would decide where they would purchase; they would be almost autonomous, except as the directors might control it.

Senator CUMMINS. That is one of the instances I put-either a corporation in which the various producers would be stockholders or a contract which would establish a common selling agency. Mr. MONTAGUE. Yes, sir.

Senator CUMMINS. I put those two things.

Mr. MONTAGUE. But the variations which are presented by different industries and by different markets that they enter are legion in

number, and nothing but a very considerable latitude in that respect can satisfy; and that is why I have thought that it was a very fortunate fact that under this bill this association, in respect of the mode in which it would bring these companies together, was left in the form that it is; because the degree of autonomy in the association will have to vary very considerably with the different industries and with the different markets that they are going to enter.

Senator CUMMINS. It might have some advantages, of course; but on our part it is rather a leap in the dark. I wondered why we could not be fairly definite with regard to the latitude that we are giving, and thus give the producers an opportunity which they want, without taking the chances which always come in the employment of such general and indefinite language as we have employed here.

Mr. MONTAGUE. Now, let us see whether that really is so indefinite, Senator. You do not prescribe the form of the association, but you do insure that that association when formed shall be absolutely under the supervision of a branch of the Federal Government to a degree to which our own domestic corporations never are. The Federal Trade Commission will always be able to tell you, on the same day that you make the inquiry, as to what particular associations are in any line of export trade. They will know them all.

Senator CUMMINS. But that is mere publicity, nothing more.

Mr. MONTAGUE. It is not publicity only, for, as I can assure you, you have only to take a complaint up now with Chairman Hurley to see with what extreme promptness that is followed up by action on the complaint by the Federal Trade Commission.

Senator CUMMINS. But there must be some law condemning a thing if it is to be punished or prevented.

Mr. MONTAGUE. Yes.

Senator CUMMINS. The mere fact that it is made known to the Federal Trade Commission will not be sufficient to stop it unless there is a law that makes it illegal.

Mr. MONTAGUE. Yes; but this is the way it will work: Under section 4 of the bill, any American exporter, any American citizen, who feels that that association is doing anything which is unfair in the only place in which it can be unfair-namely, against somebody outside of that association-can bring it to the attention of the Federal Trade Commission by a postal.

Senator CUMMINS. I hardly think you mean that. You do not mean that this section 4 brings everything that is unfair in a high moral sense within the jurisdiction of the Trade Commission for punishment?

Mr. MONTAGUE. You are now bringing me to the definition of "unfair methods of competition." Would you like to have me give my views on that, since they seem to be applicable here? They are already in print. Senator.

Senator CUMMINS. I did not want to get into that field.

Mr. MONTAGUE. It seemed to me that the remedy which was afforded by section 4 of the bill was adequate. Very briefly, I believe that everything in the antitrust laws which comprises any restriction of competition directed against a competitor is covered by the phrase "unfair methods of competition." The Federal Trade Commission believes it covers a great deal more. That is one of my