ANTITRUST ENFORCEMENT (PART 1) THURSDAY, JULY 20, 1978 HOUSE OF REPRESENTATIVES, CONSUMERS AND EMPLOYMENT OF THE COMMITTEE ON SMALL BUSINESS, Washington, D.C. The subcommittee met, pursuant to notice, at 9:36 a.m., in room 2359, Rayburn House Office Building, Hon. John Breckinridge (chairman of the subcommittee) presiding. OPENING STATEMENT OF CHAIRMAN BRECKINRIDGE Mr. BRECKINRIDGE. The subcommittee will come to order. Today the Subcommittee on Antitrust, Consumers and Employment begins the fourth in a series of hearings on the future of small business in America. In earlier hearings we focused our attention on the historic and declining status of small business in the American economy. We were concerned to assess the contributions of small business to our economic and our social life and in particular we wanted to understand the problems small businesses face in establishing themselves and surviving in a world dominated by giant corporations, labor, and Government. Representatives of national small business organizations, the Chamber of Commerce, the Small Business Legislative Council, and Government agencies and some of the Nation's leading economists have appeared before this subcommittee and testified on the current state of small business and on its future. The picture of small business that has emerged from their testimony is a paradox. On the one hand, small business was shown to be a vital force in the economy. Data presented during these earlier hearings demonstrate the fact that small business has been and continues to be the primary source of new jobs in our economy. My recollection is very simply that between the years 1969 and 1976 we created 14.5 million new jobs in this country, and 99 percent of them came from businesses other than those to be found in the Fortune 1,000 list. Data presented indicated that nearly 98 percent of all new jobs created in the economy were to be found in firms not included in the Fortune 1,000. The Fortune 1,000 largest corporations were responsible for less than 2 percent of these newly created jobs. Again drawing on my recollection, that is to say, that as 77,000 jobs is to 14.5 million, that was their contribution to new employment. Stating that fact is in no way intended to detract from their significant and major contribution to our economy because they do (1) happen to employ just about that number of individuals on a direct payroll basis. As they expand and grow and enlarge product lines and increase sales, they also enlarge their employment rates and constitute a stabilizing factor that insures our position in international competition. But the point remains that if we hope on a private-sector, anti-inflationary basis to whip the combined evils of inflation and unemployment, the record shows, whether we like it or not, we will do it only through the small business sector. So our problem is how to stabilize, strengthen and expand that segment of our economy. In regard to technological innovation, small business was shown to be a major impetus to the development of new and better ways to produce the goods upon which we depend for our daily survival. Here again my recollection is to the effect that the testimony adduced indicated that over the history of this Nation roughly some two-thirds of the innovative development that has given this Nation its cutting edge in technology, both domestically and abroad, originated with small business. Yet, on the other hand, the witnesses and the data which they presented have forecast a bleak future for the small businessman. In every sector of the economy, be it in manufacturing, wholesaling or retailing, the trend is the same. Small business is rapidly losing its ground and declining in importance as appears from the charts in your right foreground there. The factors that underlie this trend are clear. In their drive to secure greater and greater control of the market, the giant corporations, the huge conglomerates have deployed such anticompetitive forces as massive advertising, selective price cutting, and large acquisitions, all of which work to the complete detriment of the small business community. According to Prof. John K. Galbraith, whom we had the pleasure of hearing from on May 17 of this year, the increased merger activity undertaken by the major corporate structures is the primary culprit behind the gradual erosion of the healthy competitive environment which small business needs to survive. Prof. Willard F. Mueller testified that, and I quote, "Vigorous enforcement continues to be essential to create an environment in which all business is given a fair opportunity to compete." So today the committee will be concentrating on the question of why it is alleged that the antitrust laws have not been effective in protecting small business. We want to discover what, if anything, is correct in the allegation, what has been done and left undone, and what can be done to assist those charged with the responsibility of creating the environment in which small business can live and prosper. Our first witness today is Mr. A. G. W. Biddle, the president of Computer and Communities Industries Association. Mr. Biddle, if I might just digress for a moment, has appeared before the progenitive committee to this committee, the Ad Hoc Committee on Robinson-Patman antitrust and related matters, which my friend the Honorable Henry Gonzalez chaired. I was privileged to hear Mr. Biddle's testimony at that time, as I indicated earlier. We are delighted to have you here with us today. TESTIMONY OF A. G. W. BIDDLE, PRESIDENT, COMPUTER AND COMMUNICATIONS INDUSTRY ASSOCIATION Mr. BIDDLE. I appreciate it, sir; glad to be back. Mr. BRECKINRIDGE. Let me say, Mr. Biddle, the committee has your prepared testimony. You may proceed as you see fit, including, if you prefer, summarizing the pertinent points and making such additional remarks as you may care to make in view of the time you will save thereby. But I want you to proceed as you choose. Mr. BIDDLE. If I could, Mr. Breckinridge, I would like to summarize and extemporize. I would appreciate it if the complete statement would be made a portion of the record. [Prepared statement of Mr. Biddle follows:] PREPARED STATEMENT of A. G. W. Biddle, President, ComPUTER & "We must not make a scarecrow of the law, ་་ --Shakespeare, Measure for Measure Good morning Mr. Chairman, members of the Committee. My name is Jack Biddle, and I am the President of the Computer & Communications Industry Association. I appreciate the opportunity to appear before this Committee to present testimony on an issue of critical importance to the data processing and communications industries and, I believe, to our nation and its system of justice. The Association represents 50 member companies with combined annual revenues in excess of $2.5 billion and employing more than 100,000 people. Our individual member firms range in size from under $1 million in annual sales to something in excess of $300 million. Their products and services cover a wide range of goods and services in the data processing and data communications industries mainframes, memories, tape and disk drives, printers, terminals, data entry devices, software, and services such as time-sharing, third party leasing, systems consulting, and data communications services. Approximately 25% of our member companies are privately held, and about that same number have annual revenues of less than $10 million. The Association was formed six years ago this week, in many respects out of the founders' frustration with existing at the sufferance of an industry giant. Today that sense of frustration persists, for the antitrust laws have not effectively controlled the power a monopolist corporation exercises against its small competitors. Two blatant examples of the breakdown of the antitrust statutes are the federal government's suits against IBM and AT&T. To date, the "endless" IBM case has had no effect but to make our nation's antitrust laws the laughing |