General of the United States, to prosecute for the recovery of the forfeiture. Hon. FRANCIS G. NEWLANDS, United States Senate, Washington, D. C. NEW YORK, January 16, 1917. MY DEAR SIR: After carefully studying the possibilities of American export trade, this association believes that Congress can effectively aid such trade by immediately passing the Webb bill (H. R. 17350) when amended in two particulars. The views of the association are fully set forth in the pamphlet which we are sending you under separate cover and by to-day's mail, which we trust will receive your careful attention. We request you to support the Webb bill and the two proposed amendments. THE MERCHANTS' ASSOCIATION OF NEW YORK, THE MERCHANTS' ASSOCIATION OF NEW YORK-URGING IMMEDIATE PASSAGE OF THE WEBB BILL (H. R. 17350) WITH CERTAIN SUGGESTED MODIFICATIONS. RESOLUTIONS. The board of directors of the Merchants' Association of New York, at a meeting held January 11, 1917, received and, by a unanimous vote, approved the following report on the Webb bill (H. R. 17350), submitted by the association's committee on Federal Trade Commission; and adopted the following preambles and resolutions in relation thereto : Whereas the Webb bill "to promote export trade, and for other purposes " (H. R. 17350), now pending in the Senate of the United States will, when modified in the respects suggested in the accompanying report, permit cooperative action in the American export trade under safeguards that will adequately protect the American public and every individual American exporter, producer, and consumer; and Whereas the Webb bill, when so modified, will accord with, and respond to the recommendations of the President and of the Federal Trade Commission and of the Chamber of Commerce of the United States and of many trade and commercial organizations, including our own, which have strongly urged such legislation; and Whereas the Webb bill, with the modifications suggested in the accompanying report, will fulfill the purposes expressed by these officials and unofficial bodies in respect of American export trade, and by removing the handicaps now imposed by American antitrust laws upon American export trade will permit American exporters to utilize the advantages of cooperative action in selling the products of American labor against the competition of foreign combinations in the markets of the world: Now, therefore be it Resolved, That the Merchants' Association of New York, having upwards of 5,000 members drawn from every branch of the commercial, industrial, professional, and civic life of New York City, and through its membership representing many thousands of American employers and employees whose welfare depends upon the success of American export trade, renews its indorsement of the Webb bill, with the modifications of detail suggested in the resolution unanimously adopted by its executive committee at a meeting held July 17, 1916, and hereby adopts the accompanying report upon the Webb bill, and heartily indorses the bill with the modifications suggested in the accompanying report, and strongly urges upon the President and upon the congressional committees having the bill in charge and upon the members of both branches of Congress the importance of promptly passing the bill with these modifications. And be it further 76164-17- -10 Resolved, That copies of this resolution and the accompanying report be sent to the President of the United States, to the Members of both branches of Congress, and to the various trade and commercial organizations with which we are affiliated or in correspondence, and that they be respectfully requested to urge as earnestly as possible the prompt passage of the Webb bill with these modifications of detail. THE MERCHANTS' ASSOCIATION OF NEW YORK, By S. C. MEAD, Secretary. REPORT OF THE COMMITTEE. JANUARY 10, 1917. To the Board of Directors of the Merchants' Association of New York. GENTLEMEN: The Webb bill to promote export trade, and for other purposes," which was introduced in Congress as H. R. 16707 on June 28, 1916, by Chairman Webb, of the House Judiciary Committee, was made the subject of a report by the committee on Federal Trade Commission of the Merchants' Association of New York, which report was approved by unanimous vote of the executive committee of the association at a meeting held July 17, 1916. The association thereby indorsed the Webb bill with the modifications of detail suggested in the report above mentioned, and adopted preambles and resolutions urging upon the President, the congressional committees having the bill in charge, and the Members of both branches of Congress the importance of promptly passing the bill with those modifications. On August 8, 1916, the Webb bill was reintroduced as H. R. 17350, containing the modifications that had been urged by the association. On August 15, 1916, the bill was favorably reported by the House Judiciary Committee to the House of Representatives, and on September 2, 1916, it was passed with several amendments by the House, and is now pending in the Senate. The Federal Trade Commission, meanwhile, has published a report of nearly a thousand pages on Cooperation in the American export trade," in which the commission has fully set forth the overwhelming economic and legal arguments in favor of such legislation. In its annual report, dated November 15, 1916, the commission has called attention to two amendments, adopted while the bill was being passed in the House, which amendments, the commission has stated. might "entirely nullify" the purpose of the bill. And in his annual address to Congress on December 5, 1916, the President has urged that this legislation be promptly passed because, as he has stated, "the opportunity is here and may escape us if we hesitate or delay." In the light of these developments, the association's committee on Federal Trade Commission has continued its study of the Webb bill (H. R. 17350) in the form in which it passed the House of Representatives and is now pending in the Senate; and as the result of its study the committee recommends that the association indorse the bill with the modifications hereinafter suggested. and that it adopt preambles and resolutions, hereto appended, urging upon the President, the congressional committees having the bill in charge, and the Members of both branches of Congress the importance of promptly passing the bill with these modifications. GIST OF THE WEBB BILL. The Webb bill (H. R. 17350) as reported by the House Judiciary Committee to the House of Representatives provides that nothing in the Sherman Antitrust Act shall be construed as declaring to be illegal an association entered into for the sole purpose of engaging in export trade and actually engaged solely in such trade, or an agreement made or act done in the course of export trade by such association, provided such agreement or act is not in restraint of trade within the United States." (Sec. 2.) "Association" as here used was defined as “any corporation or combination, by contract or otherwise, of two or more persons, partnerships, or corporations." (Sec. 1.) These provisions, with the provision that "export trade" shall mean "solely trade or commerce in goods, wares, or merchandise exported or in the course of being exported from the United States or any Territory thereof to any foreign nation; but shall not be deemed to include the production or * ** manufacture within the United States or any Territory thereof of such goods, wares, or merchandise or any act in the course of such production or manufacture (sec. 1), carefully limited the operation of the Webb bill to transactions that were solely in the course of export trade, and effectually excluded from the benefits of the bill any transactions that in any wise were in the course of production, manufacture, or trade within the United States. Sections 1 and 2 above quoted were, however, unfortunately amended in the course of passage through the House of Representatives by inserting in section 1, before the words "within the United States" above quoted, the words "trading in, or marketing," and by inserting in section 2, after the words "within the United States" above quoted, the words "and does not restrain the export trade of the United States." That these amendments entirely nullify" the purpose of the Webb bill is stated by the Federal Trade Commission in its annual report, dated November 15, 1916, hereinafter quoted. 66 To accomplish any of the purposes of the Webb bill, therefore, the two amendments above criticized must be dropped and the bill, in these particulars at least, must be restored to its form as reported by the House Judiciary Committee to the House of Representatives, which has been outlined above. If the two amendments above criticized be dropped from the bill it will be possible for any concern desiring to enter the American export trade to obtain the benefits of the bill, either by incorporating singly a subsidiary corporation for the sole purpose of carrying on export trade, or by joining with other concerns and taking stock or membership in a corporation or unincorporated association organized for the sole purpose of carrying on export trade. To facilitate the ownership by corporations of stock or capital of any such incorporated or unincorporated" associations," it is further provided that section 7 of the Clayton Act, restricting intercorporate stock ownership under certain conditions, shall have no application to such "associations" unless the effect of such acquisition or ownership may be to restrain trade or substantially lessen competition within the United States (sec. 3). Every such "association" is required forthwith to file with the Federal Trade Commission a statement of its place of business, the names and addresses of its officers, stockholders, or members, and copies of its certificate of incorporation or articles of association, as the case may be, and a statement of "all contracts, agreements, and understandings had with any foreign or domestic association in regard to the conduct of or practices in foreign trade." The procedure for the prevention of "unfair methods of competition " now contained in the Federal Trade Commission act is extended to "unfair methods of competition used in export trade against competitors engaged in export, trade, even though the acts constituting such unfair methods are done without the territorial jurisdiction of the United States." This absolutely insures fair treatment to every concern in the American export trade with which the "association" competes; and it will be observed, by referring to the definition of “export trade" above set forth, that by limiting the protection to concerns in export trade" complaints under this section can be lodged only by concerns that are exporting from the United States to a foreign country. 66 STRONGLY URGED BY THE PRESIDENT. The necessity for immediate legislation of this character is fully recognized by the administration. In his brief annual address to Congress on December 5, 1916, President Wilson singled out the Webb bill for particular mention in the following passage: Three matters of capital importance await the action of the Senate which have already been acted upon by the House of Representatives-the bill which seeks to extend greater freedom of combination to those engaged in promoting the foreign commerce of the country than is now thought by some to be legal under the terms of the laws against monopoly. * ** "I shall not argue at length the desirability of giving a freer hand in the matter of combined and concerted effort to those who shall undertake the essential enterprise of building up our export trade. That enterprise will presently, will immediately, assume, has indeed already assumed, a magnitude unprecedented in our experience. We have not the necessary instrumentalities for its prosecution; it is deemed to be doubtful whether they could be created upon an adequate scale under our present laws. We should clear away all legal obstacles and create a basis of undoubted law for it which will give freedom without permitting unregulated license. The thing must be done now, because the opportunity is here and may escape us if we hesitate or delay." INDORSED BY THE TRADE COMMISSION. Summarizing in a letter to the Senate the results of its investigation of competitive conditions affecting Americans in international trade, the Federal Trade Commission on May 2, 1916, declared that "other nations enjoy marked advantages in foreign trade from superior facilities and more effective organizations," and that "doubt and fear as to legal restrictions prevent Americans from developing equally effective organizations for over-seas business, and that the foreign trade of our manufacturers and producers, particularly the smaller concerns, suffers in consequence." Moved by these considerations, the commission earnestly recommended "the immediate clarification of the law to permit cooperation among Americans for export trade." In conclusion, the commission impressively stated: "The commission feels that it would fail of its duty if it did not urge the pressing need of such action immediately. If American business men are to make the most of the great opportunities now before them, are to build securely in foreign trade, and are to avoid disaster in the shock of the stern and determined competition that will doubtless follow the war, they must at once perfect the organization demanded by the conditions of international trade." Since sending this letter to the Senate the commission has published in a report of nearly a thousand pages, entitled "Report on Cooperation in American Export Trade," the information it has collected on this subject from special reports for the commission from the United States consuls, from public hearings by the commission, from research by the commission in published material, from inquiry cards and formal schedules sent to more than 25,000 American business and professional men, and from investigations in this country and abroad by the commission's field agents. The final recommendations of the commission, based on this extraordinarily comprehensive study, emphatically indorse the principle of the Webb bill. Says the report: "The commission believes that American exporters should be enabled to compete in foreign markets on more nearly equal terms with foreign competitors. It also believes that the smaller manufacturers and producers, so far as they desire, should be enabled to share in such foreign business. It is convinced that for these purposes cooperation in export trade should be permitted. It knows that doubt as to the application of the antitrust laws now prevents any marked development of such cooperation. It does not believe that Congress intended by the antitrust laws to prevent Americans from cooperating in export trade for the purpose of competing effectively with foreigners where such cooperation does not restrain trade within the United States and where no effort is made to hinder American competitors from freely engaging in export trade. It is not reasonable to suppose that Congress meant to obstruct the development of foreign commerce by forbidding the use in export trade of methods of organization which do not operate to the prejudice of the American public, which are lawful in the countries where the trade is to be carried on, and which are necessary if greater equality of opportunity is to be afforded Americans in meeting foreign competitors. The commission, therefore, respectfully recommends that Congress enact declaratory and permissive legislation to remove the present doubt as to the law and to establish clearly the legality of such cooperation. "The commission is confident that the enactment of such legislation as that outlined above will permit the development of the cooperative organization which must take place if the manufacturers and producers of the United States are to compete with foreigners on more equal terms in export trade. It is also confident that this essential development can be obtained without harmful effects on the domestic market, and without prejudice to the interests of American concerns which conduct their export business outside of any combination." FOREIGN TRADE NEEDS DIFFERENT LAWS. Laws which are fair and even, when enforced in domestic commerce against all competitors, become unfair, uneven, and well-nigh intolerable in foreign commerce, where they necessarily can not be enforced against combinations of foreign competitors and foreign consumers, and can only be enforced against American exporters. Throughout the markets of the world our competitors are being encouraged by their Governments to unite in highly organized combinations. Overwhelming proofs of the advantages enjoyed by foreign exporters, by foreign combina tions competing with American exporters, and by foreign buying combinations which depress American export prices, and of the resulting sacrifice of our natural resources, have been published by the commission. Meanwhile our antitrust laws, though powerless to forbid any foreign combinations against us, nevertheless purport to regulate our entire foreign commerce, and apparently deny to our exporters every advantage of cooperative action to meet the conditions of foreign trade. How different legislating for foreign commerce is from legislating for domestic commerce has been appreciated by Congress. The Clayton Act, prohibiting certain kinds of price discriminations and tying contracts, scrupulously excluded from the operation of these provisions the foreign trade of the United States. Our national banks have recently been permitted to cooperate in the conduct of banking business in foreign countries. Steamship lines in foreign trade also are now permitted, under the supervision of the Shipping Board, to form combinations without violating the laws against restraint of trade and monopolies. These are each clear recognition of the fact that prohibitions intended for the protection of our own citizens should not be extended to our foreign trade, and that if such practices, when carried on in foreign trade, should adversely affect our foreign trade the laws governing our domestic trade are adequate to deal with the situation. SAFEGUARDS AGAINST ABUSE OF COOPERATIVE ACTION. 66 "Two chief dangers," declared the Federal Trade Commission in its letter to the Senate, from cooperative export organizations of American manufacturers and producers are apparent. They may be used to exploit the home market and they may be used unfairly against individual American exporters in foreign trade. The dangers in cooperative action must be faced frankly and provided against fully. 66 'The commission is confident that this can be done without sacrificing the essential advantages of joint action and without altering the policy of the antitrust laws or interfering with their enforcement. This specific extension of the law prohibiting unfair methods of competition to export trade and requirement of full reports to the Federal Trade Commission from cooperative export organizations will protect the individual exporter, while the enforcement of the antitrust laws will prevent the use of such organizations to effect restraint of trade or monopoly in the domestic market." The Webb bill completely satisfies these requirements of the commission. Cooperative action under the provisions of the bill can not possibly be abused. Everything tending to restrain trade within the United States is expressly left subject to the Sherman Act. Only "associations" specially organized to engage exclusively in the export trade can enjoy the provisions of the bill. Full information regarding all such "associations" will always be in the possession of the Federal Trade Commission. Americans competing in the export trade against such "associations" are expressly protected against all unfair methods of competition. Greater protection to the public and to individual American competitors of such "associations" can not be asked. RECOMMENDED BY THE CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA. Legislation for the relief of the export trade has been repeatedly recommended by the Chamber of Commerce of the United States of America. On March 31, 1914, the special committee on trust legislation appointed by the chamber recommended that Congress should direct the commission to investigate and report to Congress at the earliest practicable date on the advisability of amending the Sherman Act to allow a greater degree of cooperation in the conduct, and for the protection, of the foreign trade.” Upon a referendum on April 14, 1914, of this recommendation to the vote of the constituent organizations of the Chamber of Commerce of the United States of America, this particular recommendation received 538 votes in favor, as against only 67 opposed. Following this referendum the act creating the Federal Trade Commission became law, in which the commission was empowered to investigate “trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress |