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face the future and retain the 40 percent of their peak market if they are confronted with an increase in price.
They are also of the opinion that it would be a fatal mistake at this time to make it impossible for the industry to go forward with its own stabilization. They believe that, as has been pointed out in the Appalachian case and with slight adjustments to existing laws, notably that of the Federal Trade Commission Act, every sound and constructive purpose could be gained without subjecting this industry to domination by the Federal Government; because that is what it means. It means the surrender of the functions of management, because the bill cannot be interpreted in any other sense.
They are not here without some suggestions as to what may be done to facilitate the objective which all have in mind, but before proceeding definitely into that, I wish to assure this committee that there is no emergency condition, so far as the distribution area represented by division 3 is concerned, which would warrant, in any sense
Mr. Hill (interposing). What is embraced within division 3?
Mr. JOHNSTON. Division 3 embraces Alabama, and generally southeastern and southern Tennessee and Georgia.
It cannot be said that the public there is confronted with any shortage in coal. The public has never suffered from a lack of continuous flow of coal.
The suggestion that the public interest demands or that the service of bituminous coal demands that any such extraordinary action be taken as is contemplated by this bill, cannot be justified, so far as that area is concerned.
The market has never been other than fully supplied. The difficulty has been overproduction. The difficulty has been, not overproduction of coal, because coal is not produced except as orders are obtained, except to the extent of a minor margin of stocks--but there is no public emergency there. There is no public emergency even temporarily threatening, as a result of the conditions with which you are now confronted.
I think it is fair to say that that small percentage of the utilities which now generate its electricity through coal is well supplied. The railroads have from 60 to 90 days of coal stocked.
not confronted with any such situation as confronted you at the time of the Adamson Act in 1916, with relation to the instrumentalities of commerce.
There is no public emergency. There is no reason why this committee should not carefully and deliberately take cognizance of the entire stiuation obtaining in the industry.
And so, with that predicate, that this is not an emergency matter so far as that district is concerned, I shall proceed.
My understanding of the statistics is that the indications are that throughout the Nation there are stocks of coal. So that in the event that there should be an unfortunate and an unwarranted and an unnecessary cessation of work in the coal mines, there are sufficient mines which, under any circumstances, would continue in operation which, together with the existing stocks, would relieve this proceeding of the aspect
any emergency status. I think that is fair to say, because the Supreme Court, in the construction of the Adamson case, has marked the effect of it as exceptional and explosive, and to be restricted to a condition such as confronted the Congress at that time. So that I say that that decision is a matter for consideration by this committee, as to whether any such unprecedented emergency with relation to the instrumentalities of commerce itself, or a complete break-down of commerce itself, exists, that could be regarded as authorizing even temporary legislation; and this legislation is not temporary in character. While it has now been, as I understand the present draft, limited to a period of 4 years, it is essentially permanent in its character, and from it there would be no retreat without extraordinary demoralization in the industry.
So I think we may pass aside, certainly so far as the validity of the legislation is concerned, with relation to division 3, the question of emergency characteristics.
I also wish to say in that connection that even from the standpoint of labor there is no emergency within the State of Alabama. All except one of the commercial operators shipping and selling their product within the State have amicable arrangements with the United Mine Workers of America. All had contracts which have proceeded on a provisional basis, as elsewhere, with the United Mine Workers of America. The operators have unanimously agreed, those having that relationship, to extend the existing wage scales, the existing wage agreements, for another year, although, as I have stated, month by month, under the existing scale, there has been a red result in their operations.
So if there should be conceivably any possible interruptions as a result of failure to agree, it would be of the most arbitrary and artificial nature, and one which I respectfully subirit should not give this committee any ground for expediting action on a matter from which, as I said, there can be no retreat.
Mr. COOPER. On that point, as I recall now, Mr. Francis stated yesterday that the proposition had been submitted that, as I understood it, he and the operators for whom he spoke were ready to agree to extend their present contracts on the basis of the present wages and hours, until April 1.
Mr. JOHNSTON. Next year; that is correct.
Mr. Cooper. I understood from your statement, just made, that the operators for whom you speak are ready to extend their contracts for a year?
Mr. JOHNSTON. Until April 1. That is the contract period. There would be not the slightest objection to the extension of a year, but the contracts run from April to April.
Mr. Cooper. The point of my inquiry was to see whether the date, April 1, was in the minds of some, while in the minds of others there was the period of a year. I wanted to clear that up.
Mr. Johnston. I said April, merely because the existing contracts expire in April. They have been provisionally extended. That is simply the contract period.
There is, as I say, confronting our industry, nothing but the certainty that an interurption or an increase in the cost of production would mean the immediate curtailment of markets. They have one apprehension of this bill aside from its general aspects, and before I go into the details of that, let me urge the committee not to repeat the mistake that was made years ago in connection with the railroads., At the first session of the Interstate Commerce Commission, after the creation of the Interstate Commerce Commission, headed probably by the most distinguished personnel the Commission has ever had-although I have had the greatest respect for the personnel of the Commission from the time of its inception to the present dayheaded by Judge Cooley, when the question came up of the consideration which one carrier should have for those competitors who are not so favorably situated, such as in the case of the short-line haul or one having a more economical cost of transportation, in an opinion by Judge Cooley, the Commission asserted that it was plainly a case where there should be reasonable forbearance by one railroad for its competitors; and that that should be worked out by an accommodation among the carriers themselves.
Responding to that, the railroads entered into the joint-traffic agreement, which was annulled as being violative of the Sherman Act.
The Supreme Court of the United States, in the Appalachian case, has pointed out unmistakably that there is nothing in the antitrust law that prohibits any industry from relieving that industry of unfair practices.
Why, the mere statement of it now, after it has been so significantly stated by the court, makes it appear that it should have been å matter of common knowledge; that as a matter of certainty, an antitrust act intended to facilitate and to be a charter of industrial freedom should not prevent the members of the industry from entering into those reasonable adjustments and accommodations and understandings that are necessary to relieve it of unfair practices.
Mr. TREADWAY. Mr. Chairman, would Mr. Johnston kindly cite that case and give an extract from the decision itself for our record?
Mr. JOHNSTON. I shall be glad to. It is reported in 288 U. S. at
Mr. TREADWAY. I think it would be very illuminating. I understand you to say, based on that decision, that you see no reason why the coal operators and the miners cannot enter into some form of agreement that would be legal and not violative of the antitrust act?
Mr. JOHNSTON. It was so stated in unmistakable terms.
Mr. TREADWAY. I think it would be very valuable to the committee if we had the exact language of that decision for our record, in connection with your statement, Mr. Johnston.
Mr. JOHNSTON. I shall be only too glad to provide it, Mr. Treadway.
A cooperative enterprise, otherwise free from objection, which carries with it no monopolistic menace, is not to be condemned as an undue restraint merely because it may effect a change in market conditions, where the change would be in mitigation of recognized evils and would not impair, but rather foster, fair competitive opportunities. Voluntary action to rescue and preserve these opportunities, and thus to aid in relieving a depressed industry and in reviving commerce by placing competition upon a sounder basis, may be more efficacious than an attempt to provide remedies through legal processes. The fact that the correction of abuses may tend to stabilize a business, or to produce fairer price levels, does not mean that the abuses should go uncorrected or that cooperative endeavor to correct them necessarily constitutes an unreasonable restraint of trade. * * *
Defendants insist that on the evidence adduced as to their competitive position in the consuming markets, and in the absence of proof of actual operations showing an injurious effect upon competition, either through possession or abuse of power, no valid objection could have been interposed under the Sherman Act if the defendants had eliminated competition between themselves by a complete integration of their mining properties in a single ownership. that there is no ground for holding defendants' plan illegal merely because they
have not integrated their properties and have chosen to maintain their independent plants, seeking not to limit but rather to facilitate production. We know of no public policy, and none is suggested by the terms of the Sherman Act, that in order to comply with the law those engaged in industry should be driven to unify their properties and businesses in order to correct abuses which may be corrected by less drastic measures. Public policy might indeed be deemed to point in a different direction. If the mere size of a single, embracing entity is not enough to bring a combination in corporate form within the statutory inhibition, the mere number and extent of the production of those engaged in a cooperative endeavor to remedy evils which may exist in an industry, and to improve competitive conditions, should not be regarded as producing illegality.
Mr. TREADWAY. Before you proceed to other phases of your argument, I should like to ask you a question. You spoke of there being no public emergency at the present time. That position is, of course, contrary to the attitude of the proponents of the measure. We have been told here by the proponents of the measure, those favorable to the bill, that a great public emergency arises in that under existing conditions there can be no stabilization and that you cannot, using plain language, tell from day to day what is going to happen in the coal industry.
I judge from your remarks that you take a different attitude.
Mr. JOHNSTON. I take an absolutely different view as to that. I do not think the question is debatable so far as the southern area is concerned. The difficulty is solely the question of holding the existing market and of the necessity of adjusting the price of coal so that it will be competitive with fuel oil and with natural gas.
Mr. TREADWAY. That brings in the thought that you also express relative to curtailment. If the price of coal, for any reason whatever, reaches a point where industry will turn to oil or hydroelectric power or other means of securing power, it will curtail the use of bituminous coal, will it not?
Mr. Johnston. It will curtail it substantially. It will begin the day when it is generally understood that there is to be an increase in price as a result of the adoption of this act.
Mr. TREADWAY. So far as beginning, it is away beyond that stage now; not as a result of this act, of course, but oil has been substituted in industry quite a good deal, has it not?
Mr. JOHNSTON. Oh; yes. I refer to the business now held for coal.
Mr. TREADWAY. And there are industries which have plants that can convert their power-producing machinery from the use of one to the use of the other; oil or coal can be used according to the advantage to be gained in the market by the purchase of one or the other, by the industry involved.
Mr. JOHNSTON. Certainly, sir. Take the case of the New Orleans Water Board. It can switch overnight from steam electric to oil or gas.
Mr. TREADWAY. Just one more question, and then I shall try not to interrupt you again.
Mr. JOHNSTON. I am glad to have you do it, Mr. Treadway.
Mr. TREADWAY. What objective do you see that the proponents expect to reach by urging this legislation?
Mr. Johnston. Mr. Treadway, I believe this bill started under a misconception.
I regret that I did not hear Judge Warrum's testimony, but I read it most attentively; and I must now, lest my comment later on be misconstrued, say in advance that I hesitate to take exception to work
showing such great sincerity of effort and in a great many ways, so far as the mechanism based on the theory on which it was proposed is concerned, showing such a great deal of intelligent effort.
We are not here for the purpose of opposing something that is regarded by its proponents as being very definitely in the public interest. But I believe it was started under a misconception.
It began in 1928, according to the statement made by Judge Warrum. It began before the Appalachian decision. It began at a time when there was a growing misapprehension of the power of Congress with reference to the matters involved in this legislation. They have simply proceeded on their own momentum, under a mistaken theory of the law and a mistaken theory of the economic necessity of going to any such extraordinary situation as Government regulation of a productive industry. There is the difficulty. It is for that reason that we wish to say that the suggestion that the Supreme Court of the United States would say that there was an emergency is untenable, when they have pointed out the means at hand to avoid every single abuse, and so forth, on which an emergency situation is sought to be predicated.
What is it that is an emergency? An emergency for what? An emergency for the public? Is there a public interest in increasing the profits to the coal industry when they are unable to get together and work out their own problem? Do they say that the Government must intervene in order to increase their own returns? That is not ap emergency from a public standpoint. That is not a function of interstate commerce. That does not have to do with the channels of commerce, to see to it that the results of improvident action by those engaged in commerce, where it does not affect adversely a public interest, be remedied. That is not the function of Congress.
I challenge the assertion that there is any such public emergency confronting the service of bituminous coal, if you treat it as a service, as would warrant intervention by the Congress of the United States in connection with the matter.
I do not know of any purchaser of coal-certainly since the warwho has not been served. The public has been served. The trouble about it is that it has had too great a facility for service open to it. The trouble is, as has been suggested, that the price has been too low to the public.
It is not that there is an exhaustion in sight of fuel. With 7,000 years ahead, to say that there is an emergency, that they are so rapidly encroaching upon the existing reserves of coal, is a mere combination of words. It is an assertion that cannot be sustained.
There is no public emergency. There is every reason why this industry should square its shoulders and lash out, lion fashion, in its own stabilization. But to assert that the situation confronting it authorizes the Government of the United States to step in and assume the functions of management and wet-nurse this industry is to make an assertion that cannot be sustained.
I say, on the basis of the Appalachian decision and the Federal Trade Commission Act as it now stands, that the Supreme Court of the United States must of necessity say that the suggestion of an emergency is a misconception of that term so far as the intervention of extraordinary power on the part of the Congress to deal with an