THE STRANGLING POWER OF CORPORATE GAINTS
Quinn, T. K.
The Strangling Power of Corporate Giants by T. K. QUINN 'T'HE General Motors Corpora-ation, world's biggest manufacturer, owner of the world's largest finance company, world's greatest shipper of...
...In precisely this way the Hilton Hotel syndicate, the American Telephone and Telegraph Company, and International Business Machines Corporation were given immunity at negligible cost to them...
...This, in effect, creates the alarming situation in which the big corporations are handed a virtual monopoly on new patents in such fields as electronics and synthetics...
...But Mr...
...Giant power combinations need to be decentralized...
...If the present rate of increase in the concentration of assets is allowed to continue unchecked, the largest corporations will control all manufacturing assets within two decades...
...Professor S. Chesterfield Oppenheim was made chairman...
...Six years later, in 1952, this Council made a report to the Department of Commerce entitled "Effective Competition"—from the very people who have done the most to strangle effective competition in America and are most responsible for the rule of uniform prices in our basic industries...
...Attorney General Brownell made something of a show of his appointment of a special committee to study the anti-trust laws...
...Under these conditions it is hardly surprising that small and independent business is suffering severely...
...production war has changed our minds...
...What outcome of the suit may the country expect...
...The result was to save A.T...
...The result would have been effectively to stop many other illegal mergers and combinations...
...He overlooks the Corporation's influence on the banks of the country as their largest customer...
...Apparently he sees no danger in the fact that because General Motors spends more than a hundred million dollars a year in advertising, directly and through its dealers, countless magazines, newspapers, and radio and television stations are dependent upon this giant for a considerable part of their income and may not, therefore, feel free to take an objective view of its practices...
...Its treatment of dealers and suppliers, notoriously arbitrary, is not questioned...
...A few months later the government announced its consent decree under which Hilton retained five of the nine hotels...
...But I.B.M., in its substantially monopolistic position, will decide what to charge and whom it will help...
...Bigger in influence on a national way of life that "lets any man be his own master...
...The government brought suit charging that the result verged on monopoly and placed competitors in jeopardy...
...that it is socially desirable and "efficient...
...Through patents, A.T...
...Hilton Hotels, with fifteen first T. K. QUINN, formerly senior vice president of the General Electric Company, is the author of "Giant Business: Threat to Democracy," and "Giant Corporations: Challenge to Freedom...
...The "masses," it is felt, can be made content with gadgets, but they must rely on the guardianship of "men of affairs" when it comes to the exercise of political and economic power...
...Statler had nine hotels...
...Had the government pursued and won on its original complaint, every independent local operating company could have gone to court with every expectation of recovering three times its damages...
...By implication, at least, all of its other policies and practices are vindicated...
...Our patent laws should be rewritten to encourage the small and independent inventor who historically has always been the principal creator of useful new ideas, all of the self-praise publicity of the giant research laboratories to the contrary notwithstanding...
...From 1953 to 1955 there were 1,207 major mergers or acquisitions in manufacturing and mining, or 63 per cent more than for the 1950 to 1952 period...
...The Truman Administration brought suit against A.T...
...The small firm need only prove it has been injured...
...Only its monopoly in the bus business is regarded as suspect by the Justice Department...
...The trend toward the further concentration of power must be reversed...
...Blackwell Smith, principal author of the report, testified before the House Small Business Committee that prior to his employment by Humphrey's Committee, he had been associated with a New York advertising agency, whose principal industrial account was the General Motors Corporation...
...Words like "reasonable" and "necessary technical information" leave the decision ambiguous and almost entirely in the hands of I.B.M...
...he is well known for being "soft" on anti-trust enforcement, to put it politely...
...The government withdrew its plea to separate Western Electric in exchange for A.T...
...We can judge only by the results in similar suits where giant corporation violators of the law have received gentle slaps on the wrist and given consent decrees which have the effect of protecting the violators from future government and private civil suits...
...In this way the Brownell concession is everlasting...
...With this background of recent developments it is not hard to forecast the course of the General Motors case...
...Hilton gained a perpetual immunity for its merger of the two chains...
...Anti-trust enforcement has had to withstand further adroit resistance from this Administration...
...Last January Brownell announced another consent decree...
...The firm made a practice of renting rights to its patents at a gross annual rental of more than $250,000,000...
...The government can never bring suit against it for keeping the other five...
...every aggrieved equipment manufacturer could have done likewise...
...The attitude of the Administration was revealed in the personnel chosen for membership on the committee...
...It would not sell, but licensed its machines...
...Moreover, we would be afforded an opportunity to know something of the exorbitant profit rates in bread and butter industries like electrical incandescent lamps, that happen to be departmental operations of big companies...
...T.'s agreement to open up its patent pool to royalty-free licensing...
...It is variously maintained that this trend toward bigger units and the concentration of economic power is "natural...
...The respected American Institute of Management defended Big Business three years ago...
...they channel the investments, direct the production of goods, seek to shape public opinion and influence our political parties...
...In 1947 the top executives of 41 industrial corporations (among the largest 100 in the country) now serving as members of the Department of Commerce pro-Big Business Advisory Council, contributed $25,500 to a "special anti-trust study fund...
...There was, however, one important difference...
...The consent decree Was not a victory for the people but blessing to the A.T...
...FTC economists stated that 1955 mergers were at a 25-year peak, and still the rate increased in 1956...
...Administration favoritism toward the giants of industry is shown again in the overwhelming concentration of defense research contracts in a few corporations...
...Of this sum, 94 per cent went to the big corporations...
...Bigness can crush the small producer . . . huge corporations may well have tipped the scales [on the question of] retention of our freedom . . . they must not become destructive of that freedom by gaining so much monopoly as to restrict freedom of choice, gain undue political power or even too large a share of the national product...
...to interpret...
...One of its first administrative agency appointments was a new chairman to head the Federal Trade Commission—Edward F. Howrey, a Washington attorney, who for many years had represented accused corporations in FTC and other proceedings...
...Some 70 per cent of the acquiring corporations in the 1955 overall acquisition and merger movement among major companies had assets of $10 millionor-more, and 33.2 per cent were in the $50 million-and-over asset class...
...Both the number and the rate of small business failures in 1954 and 1955 substantially exceeded other postwar years...
...Under Mead the corporations charged with violations were, on the average, approximately eight times as big as the companies charged with violations under Howrey...
...Again Brownell announced a consent decree under which the Corporation is to sell, not lease, hereafter...
...Big firms are only waiting now to rush in and file their patents in the atomic energy field to close off the competition they pretend to favor...
...Efficiency should not be narrowly regarded as a mere matter of return on private investment without regard to what is good for the country...
...In the first half of 1956 business failures totaled 6,496, or 15 per cent higher than the 5,626 failures for the similar 1955 period...
...tk T. has long monopolized the long distance facilities and has forced 85 per cent of the local telephone operating companies to join its system on its terms...
...Almost all of them had been defendants in suits brought by the government for violation of the anti-trust laws...
...Many Americans fear that our government may become too big, but they do not count the consequences as they watch a corporation like General Motors, in private hands, become richer than a score of states in the union combined...
...The new technology financed with public funds will be available exclusively to a relatively few large corporations in the absence of compulsory licensing, which ought to be a major order of business for the new Congress despite the expected opposition or indifference of the Administration...
...Not suprisingly, the report urged the very things that have made a mockery of anti-trust enforcement...
...It is this warning from intelligent management that Americans need to ponder as monopoly becomes ever moi c powerful and as our government pursues such wrist-tapping practices as moving in only one area of a corporation's activities and concluding its legal actions with a consent decree...
...That is what is said in his praise while he is made the victim of a great economic steamroller by big business and of fatal neglect by the government...
...The absurd assumption is made that the bigger a company the more competent the executive...
...Along with this backward movement we are witnessing a resurgence of the discredited, un-American notion that the only persons qualified to counsel and conduct our government are those who have executive control of the biggest stakes in industrial enterprise...
...The present trend toward giant corporations in industry and in farming is a trend away from basic American ideals—a trend toward an unwholesome, impersonal economic society in which young men and women have no greater ambition than to become officers in a vast corporate hierarchy...
...More often than not, when the federal government grants a contract for research and development it agrees to give the private contractor patent rights on any resulting invention...
...It set up a system of instruction and service that bound every user to I.B.M...
...According to the Federal Trade Commission, major corporate mergers rose to 846 in 1955, an increase of 37 per cent over the 1954 total of 617 mergers...
...They decide, largely, what people may read or see...
...In this way the rulers of big business become, if not the masters, the most effective influence in government...
...fc T. whose position remains unaffected...
...The committee was loaded with representatives of the big business side of the conflict...
...T. from a deluge of private damage suits...
...The Department of Defense awarded a total of $2.3 billion in research and development contracts in fiscal 1956...
...There is nothing to indicate that General Motors will not be similarly favored while the present Administration is in office, as a safeguard against some future Administration that may not be quite so enamoured of that corporate giant...
...This seems to be the position of the present Department of Justice...
...Internally, the greatest threat to American democracy is the concentration of power in the hands of a few thousand men...
...The Strangling Power of Corporate Giants by T. K. QUINN 'T'HE General Motors Corpora-ation, world's biggest manufacturer, owner of the world's largest finance company, world's greatest shipper of freight, with controlling or influential interest in a score of major industries, doing a business of over twelve billion dollars annually, with profits in relation to investment of 65 per cent before taxes and 31 per cent after taxes (1955), is currently being sued by Attorney General Herbert Brownell's Department of Justice under the anti-trust laws...
...The number of new businesses started in 1955 exceeded the number started in 1952 by less than three per cent, but the number of business failures increased 44 per cent...
...The government brought suit under the anti-trust laws...
...The partiality of the present Administration toward giant business is revealed in still another way—its "open season" attitude toward the rising tide of mergers and acquisitions...
...Several such bills have already been introduced in Congress—the most realistic by Representative Wright Patman of Texas...
...or that it owns insurance companies and is a leading producer of refrigerators, washing machines, ranges, food freezers, electric kitchens, air conditioning, lighting, heating, and water systems, and many other products...
...In the manufacturing and mining industries there were 525 mergers in 1955, the largest number in any postwar year and a 38 per cent increase over 1954...
...T. in 1949, seeking to break up its relationship to Western Electric and to split up the latter company so that there could be real competition in the manufacture of telephones...
...The chairman of that group was the charming George M. Humphrey, President Eisenhower's Secretary of the Treasury, who was then head of M. A. Hanna Company, a large corporation with iron ore, steel, shipping, and other interests...
...It does not bother Brownell that General Motors is the world's biggest producer of passenger cars, trucks, locomotives, automotive parts, and an important producer of gas engines, bulldozers, and earth moving machinery...
...They run our giant corporations, banks, and insurance companies, command capital, publish the newspapers and magazines of mass circulation, and control the radio and television stations of the country...
...All these facts are conveniently overlooked in the government suit which is based completely on the single charge that General Motors now has about 80 per cent of the bus business of the country—a practical monopoly in buses—but a phase of CM operations that represents less than only five per cent of its total business...
...class hotels in this country, bought out the second largest chain, Statler, in 1954...
...However, consent decrees are not admissible in subsequent private suits, so that every consent decree is a protection to the defendant...
...But today it reports, "The utterly irresponsible Ford-G.M...
...Between 1952 and 1955, manufacturing corporations with assets of $100 million-and-over increased their share of the total assets of all manufacturing corporations from 51.5 per cent to 57.1 per cent...
...Its position as a dominant force remains unchanged...
...Companies with incomes of less than $25,000 should not be required to pay the present high tax rates, while those in the ten, one hundred million, and billion dollar gross profit brackets should certainly be required to pay more than the rate that prevails on a $100,000 profit...
...Bigger in usefulness to his neighbors...
...It's the kind of control that sent the price of its stock soaring to unprecedented heights on the stock exchange...
...A special provision of the antitrust laws permits injured small firms to introduce the judgment in a government case as prima-facie evidence that the defendant is guilty of an illegal conspiracy to restrain trade...
...We are being lulled into a complacent acceptance of these shibboleths by the smooth and widespread publicity of the self-serving, giant corporations and by the unconscious hangover of the Marxian dialectic that it's inevitable...
...Brownell evinces no concern over the Corporation's dominance in the gigantic automobile industry...
...In this way, the public could at least know whether they are crushing competitors by subsidizing losses in one part of their business out of the profits on another...
...The challenge can be met only by courageously moving forward with a program that meets the aspirations of all our people for equality of opportunity and the preservation of democracy...
...A great challenge confronts our country—one that cannot be met if we yield to the voices of selfish interests that cry "socialism" to conceal the fact that they are bent on preventing sound public control over their private power...
...Under this gentleman, the same number of complaints were issued and the same number of companies were charged by FTC with violations under the Clayton Anti-Trust Act in the 33 months he was in office as in the preceding 33 months under his predecessor, former Senator James Mead...
...The executives of the big corporations are those most often consulted today...
...The political orators and the advertising hucksters like to tell us there is no bigger man than the Small Businessman...
...The chairman went so far as to deny the request of two members of the cornmittee, Dean Eugene V. Rostov of the Yale University Law School and Professor Louis B. Schwartz of the University of Pennsylvania, who had asked that their dissenting report be published in full and not "edited, dispersed, and dismembered" throughout the 350 pages of the final report...
...Its influence on the American economy, its unprecedented representation in President Eisenhower's Cabinet are overlooked...
...Through a pool of electronic patents the International Business Machines Corporation has a tight grip on the push-button brains of industry...
...In the preceding six-year period 65.5 per cent had been in the $10 million-and-over category and 29.4 per cent were in the $50 million-and-over asset group...
...A good start could be made by the present Congress if it would proceed to adopt a new graduated income tax bill for corporations similar to that now in force on individual incomes...
...Bigger in self-respect...
...Brownell's Department of Justice favors this approach...
...Another step forward would be to require the large corporations to publish, at least once a year, complete profit and loss statements and balance sheets on each ot their departments...
...Interlocking directorships among corporations with more than a hundred million dollars in gross assets should be prohibited...
...The two chains were not divorced...
Vol. 21 • March 1957 • No. 3
